Carriage Square, Inc. v. Commissioner
United States Tax Court
Petitioner was the only general partner of Sonoma and, as such, it provided all the services necessary for the conduct of the partnership business, contributed $ 556 to capital, assumed substantially all risk of loss, and utilized its business contacts in obtaining large loans required by the partnership business. Each of five trusts contributed $ 1,000 to Sonoma's capital in return for 18 percent each of its profits.
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Petitioner was the only general partner of Sonoma and, as such, it provided all the services necessary for the conduct of the partnership business, contributed $ 556 to capital, assumed substantially all risk of loss, and utilized its business contacts in obtaining large loans required by the partnership business. Each of five trusts contributed $ 1,000 to Sonoma's capital in return for 18 percent each of its profits. Sonoma was able to borrow, and did borrow, substantially all the capital it needed for the conduct of its business, because a nonpartner guaranteed its debts. Held, Sonoma was…
1ConcurrenceGoffe, J.
I concur in the result that the trusts should not be recognized as limited partners but I cannot agree with the approach used by the majority. The majority holds that borrowed capital was not a material income-producing factor in the Sonoma limited partnership. There is an attempt to limit such holding to the facts of this case; nevertheless it places a qualification on the concept of “capital as a material income-producing factor” which concept is found in other areas of the tax law; i.e., e.g., definition of earned income from sources without the United States (sec. 911); income subject to…
2Cases cited5 opinions
- Commissioner v. CulbertsonSupreme Court of the United States · 1949
- Commissioner v. TowerSupreme Court of the United States · 1946
- Krause v. CommissionerUnited States Tax Court · 1972
- Adolph K. Krause and Janet S. Krause v. Commissioner of Internal RevenueCourt of Appeals for the Sixth Circuit · 1974
- Morton v. CommissionerUnited States Tax Court · 1966