Herbert Goldsworthy and Nellie L. Goldsworthy v. Commissioner of Internal Revenue

On this review from a tax court decision we are primarily concerned with the income taxes of Herbert Goldsworthy and Nellie L. Goldsworthy, his wife, for the years 1946, 1947 and 1948 and with a loss carry-back from 1952 to 1951. All conclusions of the tax court were adverse to the taxpayer.

The James I. Barnes Construction Company (hereafter Barnes) was an Indiana partnership apparently engaged in heavy construction. Prior to 1944, Barnes had established a Western branch in Santa Monica, California. This branch was under the management of the taxpayer, Herbert Goldsworthy. The agreement of Barnes with taxpayer for his compensation was not reduced to writing until October 28, 1944. The agreement provided:

1. Goldsworthy was to receive one-third of the net profits on contracts completed 2 in each year.

2. Goldsworthy was responsible for no losses directly. But out of the next ensuing profits he first had to suffer a deduction to compensate for one-third of the past losses under his aegis.

3. All equipment was to be bought out of the Santa Monica net earnings. Goldsworthy was to leave in his account “a sum equal to one-third of the amount invested in said assets” (hereafter the…

*439 On Petition for Rehearing

Before CHAMBERS and BARNES, Circuit Judges.

The taxpayer moves for a rehearing particularly with respect to our conclusion number 6 in the opinion. This concerns the refusal of the tax court to accept the accountant’s shifting of completion dates of construction contracts •during the tax years in question.

We are still not prepared to say the tax court should be reversed on this point. However, we do have an abiding •doubt on the present state of the record as to whether justice has been done on these completion dates.

The case must go back and while it is in the tax court it should receive further evidence on the completion dates. Proper development of the facts, independently of the accountant’s bald opinion, ought to point the way to a correct decision. Our decision should be understood as permitting and suggesting such a course.

With the foregoing explanation, the petition for rehearing is denied.

262 F.2d 435 Herbert GOLDSWORTHY and Nellie L. Goldsworthy, Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. No. 15572. United States Court of Appeals Ninth Circuit. December 1, 1958. Rehearing Denied February 12, 1959. Wallace & Wallace, W. W. Wallace, Los Angeles, Cal., for petitioners. Charles K. Rice, Asst. Atty. Gen., Myron C. Baum, Lee A. Jackson, Harry Baum, Attorneys, Department of Justice, Washington, D. C., for respondent. Before LEMMON, CHAMBERS and BARNES, 1 Circuit Judges. CHAMBERS, Circuit Judge. 1 On this review from a tax court decision we are primarily concerned with the income taxes of Herbert Goldsworthy and Nellie L. Goldsworthy, his wife, for the years 1946, 1947 and 1948 and with a loss carry-back from 1952 to 1951. All conclusions of the tax court were adverse to the taxpayer. 2 The James I. Barnes Construction Company (hereafter Barnes) was an Indiana partnership apparently engaged in heavy construction. Prior to 1944, Barnes had established a Western branch in Santa Monica, California. This branch was under the management of the taxpayer, Herbert Goldsworthy. The agreement of Barnes with taxpayer for his compensation was not reduced to…