The opinion
F. E. MALM, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
P. L. BURKE, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
Malm v. Commissioner
Docket Nos. 8026, 8208.
United States Board of Tax Appeals
11 B.T.A. 859 ; 1928 BTA LEXIS 3705 ;
April 27, 1928 , Promulgated
*3705 Held, that the Commissioner correctly applied the provisions of section 218(a) of the Revenue Acts of 1918 and 1921 in computing the individual incomes of petitioners resulting from their respective shares of the distributive net profits of a partnership of which they were members in the taxable year.
Thomas H. Evans, C.P.A., for the petitioners.
Philip M. Clark, Esq., for the respondent.
LANSDON
*859 The respondent has determined deficiencies as to income tax for the years 1920 and 1921 as to F. E. Malm in the respective amounts of $177.19 and $6.15, and an overassessment for the year 1922 in the amount of $70.63; and as to P. L. Burke deficiencies for the years 1919 and 1920 in the respective amounts of $246.60 and $108.25, and an overassessment for the year 1922 in the amount of $53.53. The only issue relates to the proper method of returning income accruing to partners from the distributive net income of a partnership of which each of the petitioners was a partner in each of the taxable years. By agreement of counsel the two proceedings were consolidated for hearing and decision and submitted on the pleadings.
FINDINGS OF FACT.
*3706 During all the taxable years here involved each of the petitioners was a member of the copartnership of Malm and Burke, with its principal place of business at Norfolk, Nebr. For each year involved the copartnership made the return of income required by law for a fiscal year ended January 31. Each of the petitioners made his income-tax return for the several respective years on the calendar year basis and included therein his distributable share of the net earnings of the partnership for such calendar year. Upon audit of the returns here in question the Commissioner applied the rule laid down in section 218(a) of the Revenue Acts of 1918 and 1921, and determined the deficiencies in controversy.
OPINION.
LANSDON: The only controvery here relates to the proper method of reporting individual income resulting from the receipt by partners *860 of the distributive net earnings of the partnership. The controlling statutory provision, section 218(a) of the Revenue Acts of 1918 and 1921, is as follows:
That individuals carrying on business in partnership shall be liable for income tax only in their individual capacity. There shall be included in computing the net income *3707 of each partner his distributive share, whether distributed or not, of the net income of the partnership for the taxable year, or, if his net income for such taxable year is computed upon the basis of a period different from that upon the basis of which the net income of the partnership is computed, then his distributive share of the net income of the partnership for any accounting period of the partnership ending within the fiscal or calendar year upon the basis of which the partner's net income is computed.
Each of the petitioners made his return of income on a calendar year basis, and ignoring the provision of law above cited, undertook to include therein his share of the net distributive earnings of the partnership for the calendar year which was the basis of his own report. This method obviously is contrary to the provision of the statute. .
The Board has no jurisdiction over the year 1922 as to either petitioner since only an overassessment in each case is determined for that year. *3708 .
The determination of the respondent is approved as to the deficiencies.
Judgment will be entered for the respondent.