Joseph J. Tallal, Jr. v. Commissioner of Internal Revenue
Joseph J. TALLAL, Jr., Plaintiff-Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Defendant-Appellee
Opinion
GEE, Circuit Judge.
This is a tax deficiency case. Appellant Tallal argues that the tax court erred in finding that Cumberland, the partnership in which Tallal was a limited partner, was not engaged in coal mining with the primary objective and intent of making a profit and therefore erred in upholding the Commissioner’s assessment of a deficiency in Tallal’s 1976 tax return. We affirm.
All expenses of every business transaction are not necessarily deductible under 26 U.S.C. § 162 (a). Before any such deduction is allowed, it must be shown that the activity or enterprise was undertaken with the dominant hope and intent of realizing a profit.
Louisiana Credit Union League v. United States, 693 F.2d 525, 532 (5th Cir.1982);
Hirsch v. Commissioner, 315 F.2d 731, 736 (9th Cir.1963). When the taxpayer is a member of a partnership, we have interpreted 26 U.S.C. § 702 (b) to require that business purpose must be assessed at the partnership level.
Barham v. United States, 301 F.Supp. 43, 44-47 (M.D.Ga.1969), aff'd per curiam, 429 F.2d 40, 41 (5th Cir.1970). Accordingly, for the purpose of determining whether an expense is deductible under 26 U.S.C. § 162 (a), the partnership’s motive controls, not an individual partner’s motive for joining the partnership.
Brannen v. Commissioner, 722 F.2d 695, 703-704 (11th Cir. 1984);
Goodwin v. Commissioner, 75 T.C. 424, 437 (1980), aff'd, 691 F.2d 490 (3d Cir.1982) (without published opinion);
Madison Gas & Electric Co. v. Commissioner, 633 F.2d 512, 517 (7th Cir.1980).
Using the criteria identified in Treasury Regulation § 1.183-2 for guidance, the tax court in today’s case found that Cumberland lacked a bona fide profit objective. Based on this, the tax court concluded that Tallal’s deduction under § 162(a) was not justified. The tax court’s finding of a lack of a bona fide profit objective is not clearly erroneous.
Pullman-Standard v. Swint, 456 U.S. 273, 285-87 , 102 S.Ct. 1781, 1788-89 , 72 L.Ed.2d 66 (1982);
Byram v. United States, 705 F.2d 1418, 1422-23 (5th Cir.1983).
We AFFIRM.
How later courts describe this case
Explanatory parentheticals written by citing courts — 6 in all; the most informative distinct ones are shown.
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(“When the taxpayer is a member of a partnership, we have interpreted section 702(b) to require that business purpose must be assessed at the partnership level.”)
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(consents were valid and/or unrestricted where taxpayers executed them believing the consents were conditioned upon an event which had or would occur; taxpayers failed to memorialize their understanding in a writing associated with the consents)
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