Commissioner v. Culbertson case brief

Commissioner v. Culbertson case brief

337 U.S. 733, 69 S. Ct. 1210, 93 L. Ed. 1659, 1949 U.S.

CASE SYNOPSIS: Petitioner Internal Revenue Service commissioner appealed a judgment of the Court of Appeals for the Fifth Circuit reversing petitioner's determination of a deficiency in respondent's income tax for 1940 and 1941, which was sustained by the Tax Court. Petitioner maintained that the entire income from a partnership entered into by respondent and his four sons was taxable to respondent.

FACTS: Respondent entered into an oral partnership agreement with his four sons to join in the operation of a cattle ranch. Respondent sold an undivided one-half interest to the four sons, which was to be paid under a note due one year later. A partnership return was filed for two years, indicating a division of income approximating the capital attributed to each partner. Petitioner Internal Revenue Service commissioner made a determination of a deficiency in respondent's income tax for both years, which was sustained by the Tax Court. Petitioner appealed an appellate court judgment reversing the determination.

ANALYSIS:

On certiorari, the court reversed and remanded the case to the Tax Court for a decision as to which, if any, of respondent's sons were partners during the two tax years because the lower court applied an improper objective standard. The court ruled that under the correct standard, if upon consideration of all the facts, it was found that partners joined together in good faith to conduct a business, having agreed that the services or capital to be contributed by each was of such value that the contributor should participate in the distribution of profits, that was sufficient.

CONCLUSION: The court reversed the judgment and remanded.

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