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Commissioner of Internal Revenue v. Smith , 173 F.2d 470 ( 1949 )


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  • 173 F.2d 470 (1949)

    COMMISSIONER OF INTERNAL REVENUE
    v.
    SMITH.

    No. 12489.

    United States Court of Appeals Fifth Circuit.

    March 24, 1949.

    Theron Lamar Caudle, Asst. Atty. Gen., George A. Stinson, and Ellis N. Slack, Sp. Assts. to Atty. Gen., and Charles Oliphant, Gen. Counsel Bureau of Internal Revenue, and Charles E. Lowery, Sp. Atty. Bureau of Internal Revenue, both of Washington, D. C., and Hilbert P. Zarky and Helen Goodner, Sp. Assts. to Atty. Gen., for petitioner.

    Robert Ash and Carl F. Bauersfeld, both of Washington, D. C., for respondent.

    Before HUTCHESON, HOLMES, and LEE, Circuit Judges.

    HOLMES, Circuit Judge.

    The taxpayer owned a 65% interest in the partnership business of Hyman Supply Company, a retailer of oil-field supplies in Alice, Texas. On December 31, 1942, he sold his undivided interest in the business to one of the remaining partners and two new persons. The sole question for decision is: Was this sale of the taxpayer's undivided interest the sale of a capital asset?

    It is well settled in Texas that a partner has no separate or exclusive right to any part or portion of the partnership assets, but has a common interest in all of the assets. The ownership of one partner in the property of the firm is not only subject to the rights of creditors, but is subject to the ownership of all the other partners. Warren v. Wallis, Landes & Co., 38 Tex. 225. A partner's only interest in the property of the firm is in a proper proportion of the surplus of the whole after payment of debts, including the amounts due the other partners. Sherk v. First National Bank of Hereford, Tex.Com.App., 206 S.W. 507.

    The taxpayer here sold an intangible asset or chose in action, not his interest in the specific assets of the firm; and, since it had been held by him for more than six months, only 50 per centum of the gain was taxable under Section 117 of the Internal Revenue Code, 26 U.S.C.A. § 117; Commissioner of Internal Revenue v. Shapiro, 6 Cir., 125 F.2d 532, 144 A.L.R. 349; Thornley v. Commissioner, 3 Cir., 147 F.2d 416; United States v. Landreth, 5 Cir., 164 F.2d 340; Commissioner of Internal Revenue v. Lehman, 2 Cir., 165 F.2d 383, certiorari denied, 334 U.S. 819, 68 S.Ct. 1085. Distinguishable: Williams v. McGowan, 2 Cir., 152 F.2d 570, 162 A.L.R. 1036. Contra: City Bank Farmers Trust Co. v. United States, 47 F.Supp. 98, 97 Ct. Cl. 296.

    The judgment appealed from is affirmed.