Friednash

This case, here on petition to review a decision of the Tax Court, involves the following situation as found by the Court.

During and prior to 1944 the petitioner, Hyman Friednash, was engaged in the operation of a number of retail liquor stores in southern California. For reasons unnecessary to state the properties used in connection with his liquor business were carried in the name of his wife, Geneva Friednash. Petitioner’s brother, Henry Friednash, had worked for him from time to time in one or another of these establishments. While so employed Henry learned that a restaurant and bar known as the Tahiti Cafe was for sale. He urged petitioner and Geneva to buy the property and let him operate it on a partnership basis. The two were reluctant to do that, but they finally agreed to acquire the property and let Henry operate it as an employee. The Tahiti was accordingly purchased at a total cost of $27,500.

As of January 1, 1944, the following agreement, dictated by petitioner, was entered into:

Henry was in complete charge of the Tahiti throughout the year 1944, the tax year in question. He hired and fired the employees (who included seven bartenders), bought the liquor and…