Pincus v. Commissioner ( 1930 )

ALFRED PINCUS, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

NATHANIEL L. SACHS, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Pincus v. Commissioner

Docket Nos. 31938, 31939.

United States Board of Tax Appeals

18 B.T.A. 930; 1930 BTA LEXIS 2568;

January 27, 1930, Promulgated

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An amount paid by his associates to a retiring partner as consideration of his claim on commissions earned before his retirement held to be a capital investment.

Alfred Pincus pro se, and Nathaniel L. Sachs pro se.

T. M. Mather, Esq., for the respondent.

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LANSDON

The respondent asserts deficiencies in income taxes against Alfred Pincus and Nathaniel L. Sachs for the year 1923 in the respective amounts of $714.86 and $401.74. A single issue relating to a claim for a certain deduction from partnership income for the taxable year is common to both proceedings, which have been consolidated for hearing and decision.

FINDINGS OF FACT.

In the taxable year each of the petitioners was a member of a partnership known as Pincus, Sachs & Brown, the sole business of which was to act as sales agents for the Cleveland Worsted Mills Co., and the sole income of which was commissions received on sales. The partnership kept its books on the cash receipts and disbursements basis.

About the close of 1923 Brown decided to retire from the partnership. During the year 1923 the partnership had taken substantial orders for worsted to be delivered and paid for in 1924, and at December 31 the commissions on such sales had not been collected and were not reported as partnership income for such year. At or about December 31, 1923, the petitioners paid $6,000 to Brown, who then relinquished his interests in commissions on goods sold in 1923 for delivery in 1924.

In their respective personal income-tax returns for 1923 each of the petitioners deducted from his gross income a part of the $6,000 paid as above set forth, in proportion to his partnership interest in the respective amounts of $3,372 and $2,628. Upon audit of such returns the Commissioner held that the payment of the $6,000 to Brown was a capital transaction, disallowed the deduction so taken, and determined the deficiency here in controversy.

OPINION.

LANSDON: On the facts as set forth above the determination of the Commissioner must be approved. Prior to December 31, 1923, Pincus, Sachs, and Brown owned interests in a business partnership and on that date Brown sold his share thereof to the other two partners and thereafter had no interest in the good will or other assets of the concern. .

Decision will be entered for the respondent.