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Teitelbaum v. Commissioner of Internal Revenue

May 25, 1965

ABRAHAM TEITELBAUM, PETITIONER,
v.
COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.



Author: Grubb

Before SCHNACKENBERG and CASTLE, Circuit Judges, and GRUBB, District Judge.

GRUBB, District Judge.

Taxpayer, Abraham Teitelbaum, petitions this court for review of a decision of the Tax Court determining his liability for income taxes for the years 1952 to 1956, inclusive. He challenges particularly the determinations relating to the applicability of the statute of limitations; to partnership status claimed by him; to the amount of capital gain on sale of an interest in a building; and to disallowance of certain deductions.

Statute of Limitations

It is conceded that the Commissioner gave timely notice of assessment of deficiences for the years in issue. Where the original notice of assessment was timely mailed and the petition based thereon was filed within the allowed time, expiration of the statutory period of limitations does not bar assertion of claims for additional deficiencies in the pleadings prior to hearing if, as it appears from the record submitted by Taxpayer on review, the claims could have been asserted in the original notice of deficiency. Liebes v. Commissioner of Internal Revenue, 63 F.2d 870, 871, 872, 92 A.L.R. 938 (9th Cir. 1933); Weaver v. Commissioner of Internal Revenue, 25 T.C. 1067, 1086 (1956); and see Deakman-Wells Co. v. Commissioner of Internal Revenue, 213 F.2d 894, 898 (3rd Cir. 1954).

Partnership Status

Taxpayer contends that he and his former wife, Esther Melnick Teitelbaum, were in partnership under the name of Teitelbaum and Melnick - his wife using her maiden name in this enterprise - for the purpose of conducting the practice of law and operating a date ranch during the years in issue.

It has been determined in other tax proceedings that Taxpayer was a member of said partnership during earlier years up to and including 1951. See Teitelbaum v. Commissioner of Internal Revenue, decided by the Tax Court January 29, 1960 (P - H Memo T.C. par. 60,011), affirmed 294 F.2d 541 (7th Cir. 1961), cert. denied 368 U.S. 987, 82 S. Ct. 603, 7 L. Ed. 2d 525, rehearing denied 369 U.S. 842, 82 S. Ct. 866, 7 L. Ed. 2d 846. Taxpayer submits that this determination is res judicata as to the partnership issue in the instant action, or that it estops the Commissioner from denying a partnership status for the years 1952 through 1956 because no showing has been made of termination of the status. Further, he claims that the evidence of record before the Tax Court requires a finding that he was a member of the partnership during the years in issue.

For purposes of computation of income tax liability, the existence of a partnership rests on a showing of an intent of the parties thereto to join together for the purpose of carrying on a partnership and to share in its profits and its losses. Wellington v. Commissioner of Internal Revenue, 196 F.2d 421, 423 (7th Cir. 1952); Commissioner of Internal Revenue v. Culbertson, 337 U.S. 733, 69 S. Ct. 1210, 93 L. Ed. 1659 (1949). No estoppel arises from a determination of partnership status in other taxable years. Each year gives rise to a separate issue as to status to be decided on the facts as found to exist in that year and the law applicable thereto. Commissioner of Internal Revenue v. Sunnen, 333 U.S. 591, 68 S. Ct. 715, 92 L. Ed. 898 (1948).

The Tax Court based its finding that Taxpayer was not a partner on these facts which are not disputed: Following a separation in 1949, the marriage of Taxpayer and Esther Melnick Teitelbaum was terminated by divorce in March 1952. Shortly thereafter Taxpayer married his present wife, Shyrl Teitelbaum. Petitioner was a resident of Chicago, Illinois, during the years 1944 to 1956, inclusive. Esther Melnick Teitelbaum lived in Chicago until late in 1947 when she moved to California. In 1948 Taxpayer and his former wife purchased a date ranch near Indio, California. His former wife used this property as her personal residence and lived there with her four minor children from the time of acquisition up to and including the year 1956.

Petitioner testified that his former wife and purported partner wrote some briefs, advised clients, and researched law during the years 1952 through 1956. He offered evidence that she drew six checks in the total amount of $5,887 on the account of Teitelbaum and Melnick during a two months' period from April 9, 1953 to June 16, 1953, and that partnership income tax returns were filed for the years 1952 through 1956.

In arriving at the ultimate finding that Taxpayer was not a partner during the years in issue, Judge Dawson of the Tax Court was of the opinion that Taxpayer's testimony on this issue was "scanty, vague, and unconvincing as to any legal services performed by Esther Melnick in the alleged partnership * * *." He characterized the documentary evidence submitted by Taxpayer as subject to varying interpretations.

The filing of partnership returns for the years in issue and withdrawal by Taxpayer's former spouse of almost $6,000 from a joint account in a two months' period in one year do not necessarily tend to show an intent to conduct a joint business and to share equally in its profits and losses in a five year period. This money could have been withdrawn for many purposes other than distribution of profits of the partnership. Consideration of the portions of the record and other documentary evidence submitted on review supports Judge Dawson's opinion. The credibility of the witnesses and the weight of the evidence are for the trier of facts. Wellington v. Commissioner of Internal Revenue, 196 F.2d 421, 424 (7th Cir. 1952); Wisconsin Memorial Park Co. v. Commissioner of Internal Revenue, 255 F.2d 751, 753 (7th Cir. 1958). The determination of the Tax Court that Taxpayer failed to sustain his burden of showing the existence of a partnership by credible, probative evidence was clearly ...


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