Wisdom v. United States, 13172.
| Decision Date | 29 May 1953 |
| Docket Number | No. 13172.,13172. |
| Citation | 205 F.2d 30 |
| Parties | WISDOM et ux. v. UNITED STATES. |
| Court | U.S. Court of Appeals — Ninth Circuit |
George Bouchard, Prentiss Moore, Los Angeles, Cal., for appellants.
Ellis N. Slack, Acting Asst. Atty. Gen., S. Dee Hanson, Sp. Asst. to Atty. Gen., Walter S. Binns, U. S. Atty., Paul Magasin, Asst. U. S. Atty. Los Angeles, Cal., H. P. Zarky, Sp. Asst. to Atty. Gen., for appellee.
Before STEPHENS and POPE, Circuit Judges, and McCORMICK, District Judge.
In the years 1943, 1944 and 1945, the Blatz Brewing Company of Milwaukee, Wisconsin, was represented in the States of California, Arizona and Nevada, and the Territory of Hawaii, by a wholesale commission broker known as P. W. Wisdom, of Los Angeles. The taxpayer, Paul W. Wisdom, one of the appellants here, asserts that the "P. W. Wisdom", broker for Blatz, was for tax purposes a partnership composed of himself, his wife, and his two married daughters. The income of the business for those years was returned in separate tax returns in which the two appellants, Paul W. Wisdom and his wife, Evelyn F. Wisdom, each included one-third of the income from the operation of the business for those years. Each of the two daughters included in her income, as returned, one-sixth of the income from the business. The Commissioner of Internal Revenue made a determination that the business was exclusively that of Paul W. Wisdom, and that the income from the business for those years should be equally divided between Wisdom and his wife, the latter participating by reason of her community property interest.
The appellants paid all taxes thus assessed against them and brought actions below, which were consolidated for trial, to recover the claimed overpayment. This appeal is from a judgment against them, following findings by the trial court that the plaintiffs had not established that in the years in question the two daughters were partners for tax purposes or that during the years in question the plaintiffs and their daughters in good faith and acting with a business purpose intended to join together in the conduct of the enterprise as partners. The appeal presents another family partnership controversy.
The record shows that from 1934 until 1949, the appellant Paul W. Wisdom was selling in the States and Territory mentioned, and on a commission basis, the products of certain Milwaukee brewing companies. In 1934, as an individual, he entered into a written contract with Miller Brewing Company. This contract expired early in 1941. On July 10, 1941, again in his own name, he entered into a similar written agreement with Blatz Brewing Company. That arrangement, with the modifications hereafter mentioned, continued until 1949.
January 1, 1939, while the Miller contract was in effect, the appellants executed a document reciting: "We hereby sell and convey to Anita F. Wisdom, a one-sixth interest in our brokerage business." Anita was one of the two daughters here mentioned. A similar document was simultaneously executed to the other daughter, Barbara. At that time Anita was not quite twenty years of age and Barbara was seventeen. The appellants, claiming to have entered into an oral agreement of partnership with their daughters on January 1, 1939, filed partnership income tax returns for the year 1939. In 1940 a revenue agent advised Wisdom that he intended to disallow the partnership because the agreement was not in writing and because the above mentioned assignments were not assignments of property rights. Following this, on January 1, 1941, the appellants and their two daughters entered into a written partnership agreement purporting to confirm the oral partnership agreement of January 1, 1939. It recited that the partnership should be conducted under the name of "P. W. Wisdom"; that each party "should contribute such time and effort as might be required", and that the interests should be P. W. Wisdom, one-third, Evelyn F. Wisdom, one-third, and each of the daughters, one-sixth. At that time Anita had married and was Anita Foley; Barbara was married in July, 1941; and in the years in question both daughters were in their own homes and away from the residence of the taxpayers. This written agreement of January 1, 1941 made reference only to the current Miller Brewing Company contract and future contracts that might be entered into with that Company. Five days later, on January 5, the appellants and the daughters made a supplemental partnership agreement which referred to "any future contract entered into for the promotion and sale of beer or any other commodities, by any of the parties hereto". On May 14, 1941, there was filed in the office of the County Recorder of Los Angles County, a "Certificate of Business-Fictitious Firm Name" reciting that the appellants and their two daughters were conducting a brokerage business under the "fictitious firm name of P. W. Wisdom".
As indicated, Wisdom's first written agreement with Blatz Brewing Company executed July 10, 1941, was taken in his own name. The contract prohibited any assignment of his interest without the consent of the Brewing Company. On October 7, 1941, he requested consent to assign an interest in this contract to his wife and two daughters but with the understanding that all commissions payable under the contract should be payable to him. After the Company had indicated is willingness to give consent, he requested that the contract be rewritten, making as the only change the recital that the contract was with the partnership. His letter making this request, dated November 7, 1941, stated: Following this, the agreement was rewritten and dated back to bear the date of the original agreement between the Company and Wisdom, namely, July 10, 1941.
Throughout the period during which these various contracts with the two brewing companies were in existence, the manner of conducting the brokerage business was substantially the same. The business was as a matter of fact carried on exclusively by the appellant Paul W. Wisdom. The record discloses that it was his work, his contacts with the trade, and his know-how which produced business and profits and which caused the brewing companies to seek his services. The evidence discloses, and the court found that, "the entire income from the business was from commissions resulting from the sale of beer products as a result of the personal efforts of the plaintiff, Paul W. Wisdom". During the earlier periods following 1934, the daughters were attending school and living at home. During that time, when they were not required to be in school, these daughters, then 16 and 14 years of age, and then studying typing in high school, did some typing and mailing of letters for their father. Those were in the years before there was any purported partnership.
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