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Findings of Fact
ment further provided that each of the partners would contribute an equal amount of the capital and that the profits would be divided equally among them annually.
At or about the same time the new partnership was created, Mr. Lieber agreed with Mrs. Rosabel Shavin that he would keep the interests of the Shavins in the Building Service Company in his trusteeship without the knowledge of Harry Fox. On April 2, 1946, Mr. Lieber addressed the following statement to Joseph S. and Mrs. Rosabel L. Shavin:
This will acknowledge that you have paid me a sum of money representing a one-third interest in the capital account which is in my name as trustee on the books of Building Service Company, Shreveport, Louisiana.
This certifies that you are the owner of one-third of one-third of the capital account of Building Service Company, and as such, you will always be entitled to receive one-third of the profits which Philip Lieber, trustee, receives from that company.
At the request of Mr. Fox, Mr. Lieber agreed to and did purchase and own in his individual capacity a one-eighteenth interest in the Building Service Company for the year 1946 only.
12. In its partnership income tax returns for the years 1947 and 1948, the Building Service Company listed the following as partners: Harry Fox; Philip Ben Lieber and Philip Lieber, trustee. Under the heading "Percentage of Time Devoted to Business" with respect to Philip Lieber, trustee, the word "Part" appears on each of these returns. The amounts of the partnership profits distributable to Philip Lieber, trustee, were $19,387.77 for 1947, and $36,881.51 for 1948.
13. Returns were prepared and filed by Philip Lieber, trustee, on Form 1065 "Partnership Return of Income" for the years 1946, 1947, and 1948. In using such forms, Mr. Lieber was unaware of the fact that there were tax forms available for reporting the income of a fiduciary.
In the 1946 return of Philip Lieber, trustee, the following appeared under the heading "Partners' Shares of Income and Credit":
Under the same heading, the 1947 return listed Samuel L. Lieber, Lynn R. and Harriet L. Pomeroy, and Joseph S. and Rosabel Shavin and showed that the total amount distributable to them was $49,387.77. The 1948 return showed Samuel L. Lieber, Lynn R. Pomeroy and Mrs. Harriet L. Pomeroy, with a total of $36,881.51 distributable to them.
During the period in which he was a member of the partnership as a trustee, Mr. Lieber paid to Rosabel and J. S. Shavin their portion of the profits as he received them. He credited to his two minor children Samuel L. Lieber and Harriet L. Pomeroy the amounts shown as their share of the partnership earnings on the returns filed by Philip Lieber, trustee. The amounts so credited to the minor children were used in 1948 to purchase the interests of Joseph S. and Mrs. Rosabel L. Shavin in the Building Service Company for Samuel L. Lieber, Lynn R. Pomeroy and Mrs. Harriet L. Pomeroy.
14. Income tax returns on Form 1065 were prepared and filed by Mr. Lieber for the Philip Lieber Company for the calendar years 1945, 1946, 1947, and 1948. Under the heading "Partners' Shares of Income and Credits", the returns showed the following:
In 1946, 1947, and 1948 under names of Philip Ben and Sherrie L.
Findings of Fact
The above-mentioned return of Philip Lieber Company for the year 1946 showed on the balance sheet as total assets at the beginning of the year $448,167.14, and as of the end of the year $426,205.84. An explanation of these figures was submitted by Mr. Lieber to the Internal Revenue Agent in Charge at New Orleans, Louisiana, on October 21, 1949. This explanation was as follows:
Explanation of increase in trial balance figures of Philip Lieber Company from $280,000.00 when organized in 1943 to $462,000.00 as of December 31, 1946:
(1) The figure of $462,000.00 is the total of the trial
balance BEFORE closing entries. The net worth
(2) Assets taken into Philip Lieber Company when
(8) Items belonging to Philip Lieber and wife not taken by Company, but later kept in same ledger on dif
38, 663. 04
(4) Net earnings of Philip Lieber Company 1943-1946, retained in the Company---
(5) Debit and credit amount showing value of investment in 1946 of Joe S. and Rosabel L. Shavin in Building Service Company (in name of Philip Lieber, trustee).
(6) Income of Philip and Clara L. Lieber,
Income taxes paid_---
Net personal earnings..
421, 038. 71
69, 148. 44
Findings of Fact
Savings of Philip and Clara L. Lieber from above will easily account, during the four-year period, for--(7) Cash value of life insurance policies nearly $50,000.00 in 1946.
Philip Lieber and Clara L. Lieber..
Following objections made by an Internal Revenue agent that: (1) sales of real estate had been reported in 1947 and 1948 as capital assets instead of as current income, and (2) that the shares of profit distributed to the partners were not in proportion to their capital interests as set forth in Article III of the partnership agreement, the Philip Lieber Company filed amended partnership returns for 1947 and 1948, showing a distribution of income as follows:
128 C. Cls.
42, 743. 31
$22, 653. 55 11, 326. 76 11,326. 76 11, 326. 76
15. For the years 1945, 1946, and 1947, Philip Lieber and his wife Clara L. Lieber filed separate income tax returns on a community property basis. For 1948 they filed a joint income tax return. In his income tax return for 1945, Mr. Lieber reported $149.36 as income from the Philip Lieber Company. In his return for 1946, he reported income from the Philip Lieber Company of $7,299.71. This is the sum of $35.12, shown on the return of the Philip Lieber Company as his share of the earnings, plus $7,264.59 shown on the return of the Philip Lieber Company as capital gain but not included in the taxable income on the return of the Philip Lieber Company. On his return for 1947, Mr. Lieber reported $18,876.10 from the Philip Lieber Company. This is the sum of $5,008.88, reported on the return of the Philip Lieber Company as his share of the earnings for that year, and $13,867.22 shown on the return of the Philip Lieber Company as capital gain but not included in the taxable income on that return. Mr. Lieber also filed an amended return for 1947 showing income from the Philip Lieber Company of $17,097.33. The joint income tax return of Mr. and
Findings of Fact
Mrs. Lieber for 1948 showed an amount received from the Philip Lieber Company of $20,974.35 and an amended return filed by them for that same year showed the amount received as $22,653.55.
16. The amounts shown due on the income tax returns of Mr. Lieber and his wife Clara L. Lieber were duly paid. 17. After audit of the returns, deficiencies in income taxes were determined against plaintiffs as follows:
Philip Lieber, 1945-.
Philip Lieber, 1946
Philip Lieber, 1947.
Philip Lieber and Clara L. Lieber, 1948-.
Clara L. Lieber, 1945_.
Clara L. Lieber, 1946_
Clara L. Lieber, 1947--
$6, 779.94 14, 531. 31
23, 532.00 42, 294. 28
Total of deficiencies asserted___.
131, 980. 78
After various protests made by Mr. Lieber and his wife, the deficiencies set forth above were assessed except for the year 1946. The deficiency assessed against each of them for 1946 was $14,031.31 instead of the amount asserted. In arriving at the above deficiencies, the Commissioner of Internal Revenue, in addition to other adjustments, included in the income of Mr. Lieber for each of the years 1945, 1946, 1947 and 1948, the entire net income of the Philip Lieber Company for each of the respective years and also income of the Building Service Company, which was shown on the returns of the Building Service Company as earnings of Philip Lieber,
14, 531. 31
18. Portions of the above deficiencies were satisfied by application or credit of overpayments determined in the names of Samuel L. Lieber, J. S. Shavin, Rosabel L. Shavin, Lynn R. Pomeroy, Harriet C. Pomeroy, Philip Ben Lieber, and Mrs. Sherrie Sternberg Lieber. The totals of these overpayments and the years to which attributable are as follows:
$6, 619. 14
10, 963. 92
21, 894. 49
19, 687. 14
59, 164. 69