128 C. Cls. Findings of Fact the partnership by particular partners and not otherwise fully compensated. A statement of the condition of the affairs of the partnership and of the distribution of the profits by the Managing Partner shall be mailed or delivered to each partner as soon as practicable after the Managing Partner shall have determined the distribution of earnings for the preceding fiscal year; and any partner who may be dissatisfied with such distribution shall within thirty (30) days after the date of delivery to him or of mailing to his last known address of such statement be entitled to file with the Managing Partner a written protest setting forth his objections to the distribution and his reasons therefor. Upon receipt of such protest the Managing Partner shall call a meeting of all of the partners, of the holding of which meeting each and every partner shall be given at least ten (10) days' notice, and the matter shall be submitted to the partners at such meeting, together with such other matters as the Managing Partner or any other partner may desire, provided that if a meeting of the partners shall have already been called at the time when such protest shall be received, then the matter shall be submitted to such meeting and it shall not be necessary to call a special meeting to consider the protest or protests. At all partnership meetings the vote of each partner shall be counted in proportion to his interest in the partnership and the majority in interest of those present at any meeting called as hereinabove provided shall prevail. A quorum at any partnership meeting shall consist of partners owning an aggregate of more than sixty per cent (60%) of the partnership. Article V provided for the termination by death or withdrawal of a partner unless the remaining partners decided to take over the interest of such deceased partner and stated that any partner might withdraw upon giving certain notice to the other partners. Article VI specified that the interest of a partner other than the managing partner should not be transferred in whole or in part without the consent of the managing partner, and Article VIII provided that in the event the partnership was terminated, the managing partner would be the liquidator and would not be required to give bond. 4. Plaintiffs Philip Lieber and Clara L. Lieber contributed $80,000 out of their assets for the formation of the Philip Lieber Company. 128 Findings of Fact By deed dated November 4, 1943, Mrs. Elizabeth Fox and her husband, Harry Fox, Mrs. Rosabel Shavin and her husband, Joseph Shavin, conveyed the property which they had acquired in the deed of November 16, 1942 (Finding 2) to the Philip Lieber Company, an ordinary partnership, for a stated consideration of $20,000 and the assumption of a mortgage for $25,000. By deed dated September 30, 1943, Philip Ben Lieber conveyed his interest in the same property to the Philip Lieber Company for a stated consideration of $5,000 in cash. Actually, no consideration was paid by the Philip Lieber Company for the real estate transferred to it under these deeds. It was agreed between Mr. Lieber and the grantors that the real estate so conveyed constituted the contribution of said grantors to the capital of the partnership. For the contributions of the minor children, Samuel L. Lieber and Harriet C. Lieber, Mr. Lieber made available to the Philip Lieber Company funds which he had accumulated for and regarded as gifts to the minors but which had been retained in his possession. The evidence does not show exactly what amounts were paid to or made available for the use of the Philip Lieber Company in behalf of said minor children, but when the above-described transactions were completed, Mr. Lieber and his children considered that each unmarried child and each married child with spouse had contributed approximately $40,000 to the capital of the Philip Lieber Company. Except as stated above, no member of the partnership except Mr. Lieber made contributions of money, assets, or services to the Philip Lieber Company. 5. In accordance with the terms of the agreement described in Finding 3, the business of the Philip Lieber Company was managed and controlled solely by Mr. Lieber. It was his custom to call family gatherings each week, and these occasions were utilized by him to keep his children and their spouses informed as to the activities and progress of the Company. During the entire period the business of the Philip Lieber Company was conducted, the relations among Mr. Lieber and the other parties to the agreement were har 128 C. Cls. Findings of Fact monious. No objections were made regarding Mr. Lieber's conduct of the business. The venture proved to be very profitable. At the end of each year, Mr. Lieber determined the amount of profits to be distributed under the agreement to each of the persons who was a party thereto. Such determinations as to the amounts to be distributed were generally not made in proportion to their capital interests in the Philip Lieber Company, as set forth in Article III of the agreement of August 2, 1943. Article VII of the agreement provided that Mr. Lieber was not required to make such distributions in proportion to the capital interests of the several partners. He took into consideration the amounts that some of his children were receiving from the Building Service Company, a partnership referred to hereinafter, so that the children who were receiving distributions from the Building Service Company were not allotted as much from the Philip Lieber Company as the other children. 6. During the taxable years involved here, i. e., 1945, 1946, 1947, and 1948, Samuel L. Lieber, Harriet C. Lieber, Elizabeth L. Fox, Harry Fox, Rosabel L. Shavin, Joseph S. Shavin, and Philip Ben Lieber reported their individual incomes from the Philip Lieber Company, as shown in the income tax returns of the Company for the same years. The taxes on the incomes so reported were paid. However, no part of the profits of the Philip Lieber Company were actually paid to or received by any members of the family during the taxable years named, nor until 1952 when the Company was liquidated. Some of the income taxes of the children on the shares of profits of the Philip Lieber Company, which had been reported in the tax returns of the Company as distributions of profit to them, were paid by checks drawn by Mr. Lieber on the bank account of the Philip Lieber Company. 7. The books of the Philip Lieber Company consisted of a cash book and a general ledger kept by Mr. Lieber. He kept his individual accounts in the same books but on separate sheets. He did not set up a separate drawing account for each member of the Company, but in 1946 and thereafter he kept what he described as an over-all capital 128 Findings of Fact account. In the same books but on separate sheets, Mr. Lieber also kept his accounts as trustee for certain partners of the Building Service Company. The Philip Lieber Company had a bank account in the Commercial National Bank in Shreveport and later in the Continental National Bank in that city. No one in the Company had authority to draw on these bank accounts except Mr. Lieber. 8. During the year 1947, Mr. Lieber decided that Elizabeth L. Fox, Harry Fox, Rosabel L. Shavin, and Joseph S. Shavin should withdraw from the Philip Lieber Company because of other business activities in which they were then engaged, and, at his request, the Foxes and Shavins withdrew from the Company. No payments were made to them at that time by the Philip Lieber Company, but Mr. Lieber set aside for them some Government bonds, representing the value of their interests in the Company. The evidence does not show the dates nor the amounts of these bonds, and no payments were made to the Foxes or Shavins for their shares in the Philip Lieber Company until 1952. 9. Sometime during the year 1952, after the tax dispute which resulted in this litigation, Mr. Lieber liquidated the interests of his children in the Philip Lieber Company. Each one received a payment which represented the full value of his interest in the Company, except for certain adjustments which are dependent upon the outcome of this suit. Mr. Lieber has a record of the profits credited to each individual who owned a share in the Company and of the taxes paid by each. Any additional amounts which may be due any of them on the basis of the decision rendered in this action are to be paid by Mr. Lieber. Mr. Lieber is now the sole owner of the assets of the Philip Lieber Company. 10. Sometime prior to 1935, Mr. Lieber had invested $10,000 with a Mr. Segall in a corporation known as Building Service Company, Inc., which dealt in builders' supplies and materials. Since Mr. Segall desired to enter another business, Mr. Lieber bought out Mr. Segall's interest and liquidated the corporation in 1935. At that time, Mr. Lieber suggested to his son-in-law, Harry Fox, that he take over the business. Mr. Lieber agreed to loan Mr. Fox the necessary money for 128 C. Cls. Findings of Fact conducting the business. Mr. Fox accepted the suggestion and has been the manager of the Building Service Company since its existence. Mrs. Rosabel Shavin and Joseph S. Shavin also became partners in the Building Service Company, and Rosabel Shavin served as its bookkeeper from 1935 to 1946. In 1936, Philip Ben Lieber became interested in the Building Service Company and has devoted his full time to the conduct of its business. From time to time as funds were needed, Mr. Lieber loaned money to the Building Service Company, which has never borrowed money from any other source. At the time Mr. Fox assumed the management of the Building Service Company, Mr. Lieber stated that he was unwilling to become a partner in the Company, since he was secretary of a savings and loan association and might be criticized if he engaged in the sale of building materials and supplies. From time to time after 1936, Mr. Lieber made gifts or loans to other members of his family, who purchased interests in the Building Service Company, which was conducted as a partnership. Mr. Lieber has never taken any part in the management of the Building Service Company nor in the keeping of its books or records. 11. The partnership return of the Building Service Company for the year 1945 listed the following as members of the partnership: Harry and Elizabeth Fox, Harriet C. Lieber, Philip Ben Lieber, and Joseph S. and Rosabel Shavin. A short time prior to January 1, 1946, a dispute arose between the Shavins and Harry Fox, who insisted that the Shavins dispose of their interest and withdraw from the partnership. As a result of this dispute, a written agreement was entered into on March 25, 1946, between Harry Fox, Philip Ben Lieber, and Philip Lieber, trustee, reciting that they had formed a new partnership as of January 2, 1946, for the conduct of the business of the Building Service Company. The agreement provided that Harry Fox and Philip Ben Lieber would devote their full time and attention to the business and would have full authority to transact all of the regular business of the partnership. The agree |