The court's holding and decision will be displayed here.

This section contains the nature of the case and procedural background.

Williams (P) and Reynolds were in the hardware business in Corning, New York. They formed a partnership with P getting 2/3rd and Reynolds getting 1/3rd. The capital invested had been $118,082.05 with Reynolds having a credit of $29,029.03 and P with the balance. Their agreement called for compensating balances with interest due from Reynolds to make up for his deficiency in the paid-in capital. The agreement allowed the other partner to purchase a withdrawing partner's share as the share appeared on the books. Reynolds died in 1940 and P made a deal with the executrix to purchase Reynolds' share for $12,187.90. Just a few months later, P sold the business to another for $63,926.28 plus further amounts that brought the total sales price to $70,000. Even with this sale P suffered a loss upon his original investment but he made a small gain on the 1/3rd interest that he purchased from the estate. He filed his tax return based on ordinary income and not as a transaction of capital assets. The IRS was not amused and disallowed this and recomputed his tax accordingly.

The legal issues presented in this case will be displayed here.

Legal analysis from Dean's Law Dictionary will be displayed here.