Paul W. Trousdale v. Commissioner of Internal Revenue, Marguerite R. Trousdale v. Commissioner of Internal Revenue

Petitioners are husband and wife, residents of California, who filed their income tax returns for the calendar year 1945 on a community property basis. The controversy present here arises out of the claim of Paul W. Trousdale, here called the petitioner, that a sum of $112,-000, realized by him from a purported “assignment” of his interest in a partnership, represented income from the sale of a capital asset. These income tax returns reported the gain mentioned as one from the sale of a capital asset held for a period of more than six months. The respondent Commissioner determined that this gain was taxable as ordinary income. The Tax Court upheld this determination which resulted in a finding of a deficiency in respect to each taxpayer.

About August 1, 1943, the petitioner and one Dehn formed a partnership which they called Housing Construction Company for the stated purpose of “carrying on and conducting a residential construction contracting business in Southern California.” Actually the only business which the partnership did was to supervise the construction of defense housing projects for which the partners were paid on a per housing unit fee basis. They entered into…