Ed Krist and Florine Krist v. Commissioner of Internal Revenue

Petitioners seek review of a decision of The Tax Court.

The following facts are stipulated: Petitioner and Florine Krist were husband and wife during the taxable year in question, residing in Los Angeles, California. They filed separate returns for the calendar year 1944 with the collector of internal revenue for the sixth district of California, at Los Angeles.

On or about October 1,1939, petitioner and one Morris Greenspun formed a partnership known as Ed Krist Company (hereinafter referred to as the partnership). The purpose of the partnership was to purchase and subdivide real estate and to construct homes for sale thereon. Its business was carried on under an oral agreement by which profits and losses were divided equally between petitioner and Morris Greenspun.

The partnership elected to report gains on sales of houses it built on the installment basis, pursuant to the provisions of section 44 of the Internal Revenue Code, 26 U.S.C.A. § 44 . This practice was continued until August 19, 1944.

On January 11, 1943, Morris Green-spun sold his entire interest in the partnership to one William A. Blakley, who, with petitioner, thereafter continued to conduct the business as…