Loveness v. State Tax Commission

ON THE MERITS

Edward H. Howell, Judge.

Plaintiff Vinton Loveness, together with his brothers, Loyal and Eonald, are partners in a logging and sawmill partnership which they formed in 1958. During the taxable years involved Vinton resided in California and the other two brothers lived in Malin, Oregon.

The partnership owned certain logging and construction equipment .and in 1959 sold some of the heavy equipment to Nacon Company, Inc., a newly organized Nevada corporation. Nacon paid the partnership $111,500 in cash and 117,000 shares of Nacon stock having a par value of $1.00 per share.

The gain on the sale was reported on the partnership return and the plaintiff Vinton Loveness reported and paid taxes on his Oregon income.

In 1961 the federal district court of Nevada ordered the liquidation of Nacon, Inc., and the parties agree the stock became worthless in 1961. The plaintiffs reported their share of the loss in 1961, carried it forward to 1962 and secured a refund for 1962. The defendant allowed the refund but upon a reaudit the commission disallowed the loss. The defendant contends that the plaintiff individually owned and held his interest in the Nacon stock and as he was a nonresident of Oregon the loss from an intangible was not allowable.

The factual issue is whether the stock was owned by the partnership and acquired an Oregon business situs or whether plaintiff’s interest in the stock was individually owned in which event the situs of plaintiff’s interest would be in California.

The plaintiff is entitled to claim the loss because the stock was owned by the partnership and acquired a business situs in Oregon. The evidence at the trial was to the effect that the stock was acquired from the sale of the partnership’s logging and construction equipment to Nacon. The stock certificates were issued in the partnership name, carried on the financial statements of the partnership, remained at all times in the partnership office in Malin, Oregon, and none of the partners ever exercised any control over the stock as an individual. There is no evidence whatsoever that the plaintiff’s interest in the stock was an individual interest. On the contrary, the evidence clearly shows that the stock was partnership stock.

The order of the tax commission is set aside. Plaintiffs are entitled to the refund.