Wolfson v. Reinecke
| Decision Date | 30 June 1934 |
| Docket Number | No. 5111.,5111. |
| Citation | 72 F.2d 59 |
| Parties | WOLFSON v. REINECKE. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Peter Sissman, of Chicago, Ill., for appellant.
Frank J. Wideman, Asst. Atty. Gen., Sewall Key and Lucius A. Buck, Sp. Assts. to Atty. Gen., and Dwight H. Green, U. S. Atty., of Chicago, Ill., for appellee.
Before EVANS, SPARKS, and FITZHENRY, Circuit Judges.
This appeal involves income taxes for the year 1919, in the amount of $31,289.55, principal, and interest in the amount of $1,668.78, making a total of $32,958.33. Appellant has paid the tax and seeks to recover $19,879.50 thereof. From the judgment of the District Court in favor of appellee, this appeal is prosecuted.
From 1903 to September, 1919, appellant and one Adelman were doing business as a partnership. September 20, 1919, the partnership was dissolved. Appellant sold his entire interest in the partnership business to Adelman for $280,000, to be paid, $150,000 cash, the remainder, $130,000, by two promissory notes, one for $80,000, the other for $50,000, executed by Adelman. The first note, payable March 1, 1920, was indorsed by two persons of good credit standing theretofore designated by the parties, but who were strangers to the transaction. The second note was payable on demand, but it was agreed that no demand should be made prior to March 1, 1920. There was no reason to question Adelman's credit at the time, and both notes were afterward paid by him.
In appellant's income tax return for the year 1919, the amount represented by the two promissory notes was not included. Subsequently a deficiency tax in the amount of $31,289.55 was imposed by the Commissioner. The appeal was prosecuted to the Board of Tax Appeals, which approved the deficiency. After the decision of the Board and the beginning of payment on October 9, 1925, ending July 17, 1928, payments totaling $19,879.50 in cash were made by appellant. The remainder of the deficiency, $11,410.05, was paid by means of abatement credits allowed for subsequent years. Appellant made his income tax returns on the annual "receipt" basis.
March 18, 1928, appellant filed a claim for a refund of all cash payments made on the deficiency to that date. The claim was rejected August 10, 1928, and this suit was instituted September 20th following. The question involved is: Where a taxpayer in 1919 sells and transfers his interest in a partnership business and receives approximately one half of the sale price in cash and the other half in short-term promissory notes, is the entire amount of the sale price including the notes, at their face value, to be considered in arriving at the amount of the taxpayer's taxable gain for the year, under sections 202 and 213 (a) of the Revenue Act of 1918 (40 Stat. 1060, 1065)?
It is the contention of appellant that, because the promissory notes were not...
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