Pratt v. Commissioner
United States Court of Appeals for the Fifth Circuit
550 F.2d 1023 (1977)
- Written by Heather Whittemore, JD
Facts
Three Pratt brothers (the brothers) (plaintiffs) were partners in a partnership created to build, own, and manage two shopping centers. The partnership agreement stipulated that the brothers would manage the shopping centers in exchange for a management fee equal to 5 percent of the rents received from tenants of the shopping centers. The management fees were the only compensation that the brothers received from the partnership. The partnership reported the fees it paid to the brothers as tax-deductible business expenses. The Commissioner of Internal Revenue (the Commissioner) (defendant) determined that the management fees were not business expenses but income paid to the brothers in their capacities as partners. The United States Tax Court upheld the Commissioner’s determination, and the brothers appealed.
Rule of Law
Issue
Holding and Reasoning (Tuttle, J.)
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