John M. Friedlander and Corrine Friedlander v. United States

Appellants John and Corrine Friedlander appeal from the district court’s grant of summary judgment for the Government and dismissal of their claim for refund of income taxes. We affirm.

FACTS

In 1975,1976, and 1977, John Friedlander was a partner in P & J Wholesale Jewelry Co. (P & J). P & J was in the business of selling jewelry, but it did not maintain a regular inventory at its place of business. Instead, it negotiated a firm purchase order from a customer, purchased the jewelry in its own name from suppliers based on the customer’s order, on occasion personalized the jewelry, and then delivered it to the customer. The business was operated out of a small office in a building otherwise occupied by Friedlander and Sons Jewelry, a business substantially owned by John Friedlander. Consequently, it paid no rent or other building expenditures.

The price that a customer paid for the jewelry was negotiated at the time an order was placed. The price was based on the expected wholesale cost to P & J plus a 20 percent mark-up. Customers, however, were quoted a single price and were not informed of the supplier’s price or P & J’s mark-up. Because the price was fixed by contract, if the…