Paul E. Dorman and Wineta E. Dorman v. United States

This case arises upon a claim for refund of taxes paid. The district court had jurisdiction under 28 U.S.C. § 1346 , while this court’s jurisdiction over the appeal rests upon 28 U.S.C. §§ 1291 and 1294. Although this case involves both Paul and Wineta Dorman, as husband and wife, the controlling facts involve only Paul Dorman; thus references below will be in the singular to Dorman or “appellant.”

In January 1952 appellant Dorman and William Holmes became associated with each other for the purpose of acquiring a livestock ranch in Nevada. On January 24, 1952, they took an option to purchase a cattle ranch. Two days later they exercised the option, Holmes paying $150,-000 into escrow. On the same day, appellant entered into an agreement with Holmes which provided for the formation of a partnership to commence on April 1, 1952. On February 25,1952, Holmes paid $350,000 more into escrow, and title to the realty involved passed to the prospective partners on March 1, 1952.

Appellant Dorman contributed no cash to the partnership. His “capital contribution” of $300,000 was lent to him by Holmes and was evidenced by six promissory notes payable to Holmes. The notes were payable only…