equipment and arranging for improvements for the theater building.
17. On an average of once a week, her duties required her to be in Pittsburgh interviewing exhibitors or bookers, ascertaining what pictures were available and the prices at which they could be obtained, and determining what pictures should be booked.
18. Oliver A. Kihchel and Bessie E. Kihchel joined together in making all policy decisions with reference to the conduct of the business, with reference to the acquisition of the theater building, and with reference to the improving of the property from time to time.
19. All of the money which was used to pay the principal on the $ 25,000 mortgage on the Princess Theater building and to pay large notes which were subsequently executed by both parties from time to time to make improvements thereon and all the money paid for the purchase of the Princess Theater business was paid from the account carried in the name of Bessie E. Kihchel alone.
20. On occasions when there were losses and when the income from the business was not sufficient to pay ordinary operating expenses, Mrs. Kihchel paid from the account standing in her name alone the wages of the moving picture operators and other employees, and such other expenses as could not be met from the income from the business.
21. Virtually all checks from all accounts used in connection with the business were drawn by Bessie E. Kihchel.
22. In 1917 when Bessie E. Kihchel and Oliver A. Kihchel purchased August Schmidt's interest in the Eagle Theater, they did intend, in good faith, to enter into a partnership agreement whereby they would each be equal partners, and they did, at that time, create a partnership relation.
23. This partnership continued from that time until the death of Oliver A. Kihchel on September 3, 1946.
24. At the time of the death of Oliver A. Kihchel, the business carried on under the name of 'Princess Theater', including real estate, bank accounts, equipment, etc. had a clear value of $ 64,528.59.
25. After the death of Oliver A. Kihchel, Bessie E. Kihchel, as executrix of his estate, reported the sum of $ 32,264.29, or one-half of the total, as the value of the decedent's interest in the business.
26. The Commissioner of Internal Revenue, notwithstanding the protest of the plaintiff, determined that the business was not owned and operated by the decedent and Bessie E. Kihchel as equal partners, but that it was owned and operated by the decedent, Oliver A. Kihchel, individually or as a sole proprietorship, and assessed an estate tax based on the full value of the business.
27. The decedent, Oliver A. Kihchel, and Bessie E. Kihchel, at the time of the death of Oliver A. Kihchel, were possessed of United States Savings Bonds Series E, in the amount of $ 4,163.50; the bonds were issued and registered in the names of Oliver A. Kihchel and Bessie E. Kihchel and at the time of the death of Oliver A. Kihchel were in a safe deposit box in the Glass City Bank, Jeannette, Pennsylvania, held jointly by Oliver A. Kihchel and Bessie E. Kihchel; they were paid for in part from funds which had been sent to Bessie E. Kihchel by one of her sons who was serving overseas in the United States Army, and in part from funds earned by Bessie E. Kihchel from the sale of candy in the theater.
28. After the death of Oliver A. Kihchel, Bessie E. Kihchel, as executrix of his estate, reported one-half the value of the bonds or $ 2,081.75, as the property of the decedent, Oliver A. Kihchel. The Commissioner of Internal Revenue, notwithstanding the protest of Bessie E. Kihchel, determined that she had not contributed one-half the purchase price of the bonds and determined that the entire value thereof, $ 4,163.50, should be included in the decedent's gross estate.
29. Following these determinations, the plaintiff, Bessie E. Kihchel, Executrix of the Estate of Oliver A. Kihchel, on April 28, 1950, paid the additional tax assessed on the partnership property and on the bonds under protest, and filed with the Commissioner, on the same date, on Form 843, a claim for refund of the sum of $ 5,435.27, being the amount of the estate tax deficiency together with interest thereon.
30. The Commissioner of Internal Revenue, on September 15, 1950, disallowed the claim.
Conclusions of Law
1. This matter arises under the Internal Revenue Laws of the United States and this Court has jurisdiction under Section 1340 of Title 28 of the United States Code.
2. Section 811(a) of Title 26 of the United States Code provides that
'The value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated, except real property situated outside of the United States-
'(a) Decedent's interest. To the extent of the interest therein of the decedent at the time of his death'.
3. The test to be applied in determining whether a partnership exists for tax purposes is 'whether, considering all the facts- the agreement, the conduct of the parties in execution of its provisions, their statements, the testimony of disinterested persons, the relationship of the parties, their respective abilities and capital contributions, the actual control of income and the purposes for which it is used, and any other facts throwing light on their true intent- the parties in good faith and acting with a business purpose intended to join together in the present conduct of the enterprise': Commissioner of Internal Revenue v. Culbertson, 1949, 337 U.S. 733 at page 742, 69 S. Ct. 1210, 1214, 93 L. Ed. 1659.
4. Applying this test to the evidence in this case, we found, as a fact, that Bessie E. Kihchel and Oliver A. Kihchel intended, in good faith, to enter into a partnership agreement.
5. At the time of the death of Oliver A. Kihchel, a partnership existed composed of Bessie E. Kihchel and Oliver A. Kihchel in which each had an equal interest.
6. The interest of the decedent in the partnership at the date of his death had a value of $ 32,264.29.
7. The Government concedes that if, in fact, a partnership existed, then only one-half of the value of the bonds in question, being an amount of $ 2,081.75, should have been included in determining the gross estate of the decedent for estate tax purposes.
8. Therefore, Bessie E. Kihchel correctly reported one-half the value of the business ($ 32,264.29) carried on under the name of 'Princess Theater' as the value of the interest of the decedent, Oliver A. Kihchel, and correctly reported one-half the value of the bonds ($ 2,081.75) as the value of the interest of the decedent, Oliver A. Kihchel, therein, and the Commissioner of Internal Revenue erred in determining that the business and the bonds were the sole property of Oliver A. Kihchel.
9. The plaintiff, Bessie E. Kihchel, Executrix of the Estate of Oliver A. Kihchel, is entitled to judgment in the amount of $ 5,435.27 with interest thereon from April 28, 1950, and, accordingly, an order directing the entry of judgment in that amount will be filed.
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