Podell v. Commissioner
United States Tax Court
55 T.C. 429 (1970)
Attorney Hyman Podell (plaintiff) and real estate operator Cain Young orally agreed to buy, renovate, and resell residential buildings in Brooklyn together. Both contributed property, money, or services and intended the project to make a profit. Young had managerial control and discretion over the day-to-day activities, but Podell approved the steps Young took by continuing to fund the project. The men agreed to share any resulting profits or losses equally. Podell and his wife (plaintiff) listed Podell’s half of the proceeds as capital gains on their joint tax return. The tax commissioner (defendant) disagreed and taxed the profits as ordinary income, arguing that the oral agreements established a partnership or joint venture to operate a business reselling buildings for profit. Podell petitioned the tax court to classify the profits as capital gains, claiming he wanted to help rehabilitate Brooklyn slums, not just make money.
Rule of Law
Holding and Reasoning (Quealy, J.)
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