Wm. P. Stuart, Collector of Internal Revenue for the District of Arizona v. J. E. Willis and King-Hoover Construction Co.

This is an appeal from the judgment of the District Court permitting recovery by appellees against the Collector of Internal Revenue for taxes found by the trial court to be improperly collected.

John E. and Edith P. Willis and the King-Hoover Construction Company, Harry C. King and Claude E. Hoover entered into a contract on November 16, 1950, which recited that the parties became joint venturers. King-Hoover, a corporation, was in a preferred position to obtain a construction contract with the government. However, sufficient funds to finance the venture were lacking. By the contract above mentioned, Willis was to provide $50,000 additional financing for the construction project. As consideration, the corporation and King and Hoover guaranteed the return of this amount of capital, together with a profit, from funds held back by the government. This profit was to be interest at eight per cent per annum for the time the money was in use or twenty-five per cent of the net profits of the venture if that sum exceeded the agreed interest. Further, Lowell Monsees was by the contract appointed agent of Willis, to have joint control of all funds going into the project and to countersign…