Harold M. Koch, Bessie Koch, William L. Koch, Rose Koch, Rebecca Koch Abel, Maurice P. Koch and Daisy Koch v. United States

The members of the Koch family here involved are a copartnership entitled II. Koch & Sons, engaged in the business of the manufacture of luggage. On October 23, 1944, the partnership agreement was amended, and in addition thereto the partnership was permitted to engage in the business of financing motion pictures through direct participation by way of loans or investment in stock. This amendment was considered neces sary in order to eliminate provisions of the original agreement that the partners must devote all their time to the luggage business and could not remain away from that business for sixty days or more.

In April, 1946, a corporation, named “Beacon Pictures Corporation,” was formed to engage in the production of motion pictures, but the partnership did not engage in the organization of such corporation.

H. Koch & Sons and the individuals filed income tax returns for the years 1945 and 1947. Thereafter, these returns were amended to claim a deductible loss for the year 1947 and a net operating loss carry-back for the year 1945, claimed to arise from an alleged loss of $90,-000. 00 on loans made to Beacon Pictures, including an alleged loss of $15,000.00 to the same…