Robert Azevedo, Irene Kershaw, and Paul Kershaw, J. v. Commissioner of Internal Revenue

The Commissioner of Internal Revenue determined that Robert Azevedo, Paul Kershaw, Jr., and Irene Kershaw were deficient in their income tax payments for 1946, in the aggregate amount of $118,071.22. These determinations were sustained by the Tax Court of the United States.

Asking us to review the decision of the tax court, petitioners contend that the findings of fact are not supported by the evidence. They also argue that the assessment of the asserted deficiency is barred by the applicable statute of limitations.

The 1946 income in question resulted from the sale, in that year, of wine produced in the fall of 1945 at Mills Winery, located near Sacramento, California. The tax court held that the wine was the property of John Azevedo, and that, under an agreement with his son, Robert Azevedo, and Paul Kershaw, Jr., the net profits of the sale were paid to the latter as compensation for their services in managing the business. The court therefore concluded that Robert and Paul should have paid a personal income tax thereon. Irene Kershaw, Paul’s wife, is a party only because of the tax effect of California’s community property law.

It is petitioners’ position that the wine,…