
    HARRY J. GOODWIN AND KATHRYN G. GOODWIN; RICHARD C. GOODWIN AND ELAINE GOODWIN; AND HOWARD G. GOODWIN AND MARGOT GOODWIN v. THE UNITED STATES
    [No. 187-60.
    Decided July 12, 1963]
    
      Converse Murdoch for plaintiffs. Samuel Kalikman on the briefs.
    
      Theodore D. Peyser, Jr., with whom was Assistant Attorney General Louis F. Oberdorfer, for defendant. Edward S. Smith and Philip R. Miller on the brief.
    
      Before Jones, Chief Judge, Whitaker, Laramore, Durfee, and Davis, Judges.
    
   Laramore, Judge,

delivered the opinion of the court:

This is an action to recover income tax and assessed interest paid for the year 1951, plus statutory interest.

The taxpayers in this case are Harry Goodwin, his sons Richard and Howard and their respective spouses. In the fall of 1949, Harry Goodwin (hereinafter referred to as “Goodwin”) and one Bernard Weinberg decided to construct a garden apartment project in Barrington, New Jersey. To carry out this project two corporations were formed. Bar-rington Manor Construction Corporation (hereinafter referred to as “Construction”), was organized on October 4, 1949, and it issued 200 shares of common stock, 150 shares to Weinberg and his wife and 50 shares to Goodwin.

Barrington Manor Apartments Corporation (hereinafter referred to as “Apartments”), was organized on November 7, 1949. Except for special stock issued to the Federal Housing Authority (hereinafter referred to as “FHA”) for security purposes, Apartments was a wholly owned subsidiary of Construction.

A mortgage loan of $2,262,200, guaranteed by FHA, was obtained to finance construction of the Barrington Manor project. On or about November 9, 1949, Apartments and Construction entered into a construction agreement whereby Construction agreed to build the project for Apartments for $2,262,200, an amount equal to the full amount of the loan referred to above.

Weinberg was a stockholder, director, president and treasurer of Construction. Until July 25, 1951, Goodwin was vice-president, secretary, and project manager of Construction. Goodwin and Weinberg worked together on the Bar-rington Manor project and had practically daily contacts regarding the affairs of Construction.

During the years 1950 and 1951 Goodwin and Weinberg were also associated in a number of construction projects in addition to Barrington Manor. Sometime during the winter of 1950-1951, Goodwin and Weinberg decided to dissolve their association in most of their various, common, business ventures. The major factor leading to this dissolution was the numerous discussions and disagreements between them. Transfer of Goodwin’s stock back to the corporation was not made effective until July 25, 1951. Construction of the project was then complete. Notwithstanding this dissolution, Goodwin and Weinberg did not at that time terminate all their association. It is not clear when, in the course of the discussions relative to the dissolution, Weinberg first proposed, or when Goodwin finally agreed, that, as one element of the readjustment of their interests and their working relationship, Goodwin’s 50 shares of Construction stock should be turned back to Construction. Nor is it clear whether that proposal was either first made, or finally agreed to, before or after physical construction of the Barrington Manor project was completed. It is clear, however, that the redemption or sale of the stock by Goodwin was attributable to circumstances present during construction.

During its fiscal year ended August 31,1951, Construction received from Apartments $448,061.75. This amount was Construction’s profit from building the Barrington Manor project.

In April of 1951, after Goodwin and Weinberg had agreed to separate their interests, Goodwin formed a partnership with his sons, the plaintiffs Richard C. and Howard G. Goodwin. The partnership was known as “Goodwin Organization.” The partnership was recognized by the Internal Revenue Service for tax purposes for the year 1951 and later years. Each partner had a one-third interest. In June of 1951, Goodwin transferred his 50 shares of Construction stock to the partnership as a capital contribution.

As a result of the sale of the 50 shares of Construction stock on July 25, 1951, the Goodwin Organization realized a gain of $106,900. In each of the three income tax returns filed by the partners for 1951, $35,633.33, or one-third of the $106,900, was reported as long-term capital gain.

Upon audit of plaintiffs’ 1951 returns, the Internal Revenue Service determined that the gain on the sale of Construction stock was ordinary income on the ground that Construction was a collapsible corporation within the meaning of section 117 (m) of the Internal Revenue Code of 1939. Deficiencies were assessed on the basis of this determination and later paid by plaintiffs.

Timely claims for refund were filed for the year 1951 on the ground that the gain should be treated as long-term capital gain. These claims were disallowed and this suit was timely commenced on May 19,1960.

The single question presented in this case is whether or not plaintiffs were entitled to treat the gain from the sale of the stock in Barrington Manor Construction Corporation as long-term capital gain or whether it should be treated as ordinary income. A determination that the gain should be treated as ordinary income would carry the necessary implication that Construction was a collapsible corporation.

The problem in this case was dealt with by the Tax Court in two recent cases. The facts in each of the Tax Court cases are almost identical to those involved in the case at bar.

In the case of Sylvester J. Lowery and Rosemary P. Lowery v. Commissioner, 39 T.C. 959, the Commissioner of Internal Revenue sought to impose the collapsible corporation rules in a situation in which the taxpayers were minority stockholders in several corporations. In the case of two of the corporations, only the minority taxpayer’s stock was redeemed. In this situation the Tax Court held that the collapsible corporation provisions were not applicable because of the taxpayer’s minority position, coupled with a continuation of ownership by the then majority stockholders. The Tax Court, in its opinion, stated as follows:

Thus, in many respects, the transactions which took place with respect to Parkway and Baleigh are similar to those which occurred with respect to Carver and Duval. One material distinction exists, however. In both Parkway and Baleigh, those owning the majority of the stock and who were not only in a position to, but did, in fact, control their policies, did not sell their stock but continued to operate the corporations. Neither corporation was availed of “with a view to” the action described in section 117(m) (2) (A), by those owning a majority of the stock and controlling its policies. It necessarily follows that petitioner did not “share” in such a view. Neither corporation was “collapsible” or was ever in fact collapsed. The situation here presented is distinguishable from those cases in which corporations have been held collapsible even though the corporation as such continued in existence since, in those cases, all shareholders sold their stock with a view, shared by all, to the realization of gain prior to the realization by the corporation of a substantial part of the net income to be derived from the property constructed. Cf. Burge v. Commissioner, [253 F. 2d 765 (C.A. 4, 1958)]; Glickman v. Commissioner, [256 F. 2d 108 (C.A. 2, 1958)]. *****
In our opinion section 117(m) was not intended to apply where, as here, a minority shareholder is compelled, because of circumstances over which he had no control, to dispose of his investment in a corporation which is thereafter continued in operation by the majority shareholders. The legislative history does not indicate it was so intended and we are aware of no case which has held otherwise. Accordingly, it is our opinion, and we so hold, that neither Parkway nor Ealeigh was a collapsible corporation within the meaning of section 117 (m) and that the gain derived by petitioner from the sale of his stock in each of these corporations did not constitute ordinary income but was capital gain.

Again, in Ralph J. Solow and Celia O. Solow v. Commissioner, T.C. Memo. 1963-87 (Docket No. 75595), March 27, 1963, the Tax Court held the collapsible corporation provisions were not applicable in the case of a minority stockholder whose stock was redeemed at a time when the majority interest was not redeemed. The Tax Court concluded as follows:

The record indicates that some of the 13 Linwood Park Section projects were completed before an actual view to sell existed and that others were not. But we need not make these determinations, for Sarner never contemplated selling his shares or liquidating the corporations, and we have found as a fact that petitioner was never in a position to determine the policies of any of the 16 corporations, whether by reason of owning a majority of voting stock or otherwise. Indeed, the record supports the proposition that Sarner was the active and dominant shareholder, with petitioner’s role that of a “silent partner.” We therefore must rely on Sylvester J. Lowery, 39 T.C. 959 (March 21,1963), and hold that petitioner’s gain on the sale of his relevant shares was not within the purview of section 117(m) and the corresponding regulations.

The essence of the Tax Court’s rulings is that the collapsible corporation provisions are not applicable in a case in which a minority stockholder has his stock redeemed and the majority stockholder continues to own the corporation. This ruling was based on facts exactly like those present here. Since we agree with the Tax Court’s rulings, we hold that plaintiffs’ gain should have been treated as long-term capital gain. Consequently, plaintiffs are entitled to recover the amount of the deficiencies assessed and collected, together with interest as provided by law, and judgment is entered to that effect. The exact amount of recovery will be determined pursuant to Buie 38(c) of the Buies of this court.

FINDINGS OF FACT

The court, having considered the evidence, the report of Trial Commissioner Bobert K. McConnaughey, and the briefs and argument of counsel, makes findings of fact as follows:

1. Plaintiffs Harry J. Goodwin and Kathryn G. Goodwin, of Elkins Park, Pennsylvania, are, and, at the end of the calendar year 1951, were, husband and wife.

2. Plaintiffs Bichard C. Goodwin and Elaine Goodwin, of Elkins Park, Pennsylvania, are, and, at the end of the calendar year 1951, were, husband and wife.

3. Plaintiffs Howard G. Goodwin and Margot Goodwin, of Philadelphia, Pennsylvania, are, and, at the end of the calendar year 1951, were, husband and wife.

4. All of the plaintiffs are citizens of the United States.

5. Plaintiffs Bichard and Howard Goodwin are the sons of plaintiffs Harry and Kathryn Goodwin.

6. In the fall of 1949', Goodwin and one Bernard Weinberg decided to construct a garden apartment project in Barrington, New Jersey.

7. To carry out the Barrington Manor project, two corporations were formed:

(a) Barrington Manor Construction (hereafter referred to as “Construction”) was organized under the laws of New Jersey on October 4, 1949. Two hundred shares of common stock were issued. Goodwin paid $500 for 50 of the shares. The remaining 150 shares were issued — 149.9 shares to Weinberg and 0.1 share to Etta Weinberg, his wife. Neither Weinberg nor his wife was related to any of the plaintiffs. Construction continued in existence as a corporation until December 8, 1958, when it was liquidated and dissolved. From July 25, 1951, until its dissolution, all the outstanding stock was registered in the names of Bernard Weinberg, 149.9 shares, and Etta Weinberg, 0.1 share.
(b) Barrington Manor Apartments (hereafter referred to as “Apartments”) was organized under the laws of New Jersey on November 7, 1949. Except for special stock issued to the Federal Housing Authority (hereafter referred to as “FHA”) for security purposes, Apartments was a wholly owned subsidiary of Construction.

8. A mortgage loan of $2,262,200, guaranteed by FHA, was procured to finance the construction of the Barrington Manor project.

9. On or about November 9, 1949, Apartments and Construction entered into a construction agreement, on Form 2442-W of FHA, and a supplemental agreement, whereby Construction agreed to build the Barrington Manor project for $2,262,200, an amount equal to the full amount of the loan referred to in finding 8.

10. From October 4, 1949, through December 81, 1951, Weinberg was a stockholder, director, president, and treasurer of Construction. Until July 25, 1951, Goodwin was vice president, secretary, and project manager of Construction. Goodwin and Weinberg worked together on the Bar-rington Manor project, and had practically daily contacts regarding the affairs of Construction.

11. During the years 1950 and 1951, Goodwin and Weinberg were also associated in a number of other construction projects. These were known as Maple Shade, Chelsea Estates, Haddon Hills, and Pleasantville, and are summarily described hereafter.

12. Sometime during the winter of 1950-1951, for reasons which are the subject of subsequent findings, Goodwin and Weinberg decided to dissolve their association in most of their various, common, business ventures. Discussion of means of accomplishing the separation continued for some months, perhaps as much as 6 or 8 months, before all details were settled. The separation was accomplished piecemeal, not as one simultaneous transaction. To a large extent, the terms of the separation were dictated by Weinberg. In the course of the discussions about the terms of the separation, Weinberg told Goodwin that he was to sell his stock in Construction back to the corporation and Goodwin agreed to do so. The record does not show exactly when Weinberg first made this proposal, or when Goodwin agreed to it. Goodwin made no effort to dispose of his Construction stock to other, outside interests, and there is no indication that serious consideration was given to a sale of the stock by Goodwin to Weinberg.

13. During construction of the Barrington Manor project, Goodwin and Weinberg kept a careful watch on the costs being incurred. On completion of the project, Construction realized a profit of $448,061.75 — about 20 percent of the $2,262,200 Apartments agreed to pay Construction for the project.

14. In April 1951, after Goodwin and Weinberg had agreed to separate their interests, Goodwin formed a partnership with his sons, the plaintiffs Bichard C. and Howard G. Goodwin. The partnership was known as “Goodwin Organization.” It was recognized by the Internal Bevenue Service for tax purposes for the year 1951 and later years. Each partner had a one-third interest. No written partnership agreement was ever executed.

In June 1951, Goodwin transferred his 50 shares of Construction stock to the partnership as a capital contribution. The only capital contributions made by Bichard and Howard during 1951 were their notes.

15. Although it is clear that construction of the Barring-ton Manor project had been completed by July 1951, the evidence is far from clear as to exactly when, before that, the work was finished. Goodwin’s recollection was vague and uncertain. He could not remember when the first tenants moved in. He did recall that, during April and May 1951, they were still “cleaning up,” landscaping, planting, and attending to “a number of problems that were carried over.” Weinberg’s testimony added no significant information concerning the time when construction was completed. The record, as a whole, supports the inference that, except for minor details, construction was completed by April 1951.

16. Pursuant to the construction agreement, as supplemented, during the fiscal year ended August 31, 1951, Construction received from Apartments $448,061.75. This amount was Construction’s profit from building of the Bar-rington Manor project.

17. For the fiscal year ended August 31, 1951, Construction and Apartments filed a consolidated corporate Federal income tax return. In that return, $448,061.75 was included as a part of Construction’s income and identified, in a supporting schedule, as “Inter-company profit eliminated net income per Barrington Manor Construction Corporation’s books $448,061.75.”

18. On July 25, 1951, Construction purchased from Goodwin Organization, for $107,400, the 50 shares of Construction stock which Goodwin had contributed to Goodwin Organization in June of 1951. This was somewhat less than one-fourth of the profit of $448,061.75 Construction realized on the Barrington Manor project. The purchase was approved at a meeting of Construction’s directors on July 25, 1951, at which both Weinberg and Goodwin were present. Weinberg voted in favor of the purchase, Goodwin did not vote, and resigned as a director of Construction on that day.

19. As a result of the sale of the 50 shares of Construction stock on July 25, 1951, the Goodwin Organization realized a gain of $106,900. In each of the three income tax returns filed by the partners for 1951, $35,633.33, or one-third of the $106,900, was reported as long-term capital gain.

20. Upon audit of plaintiffs’ 1951 returns, the Internal Kevenue Service determined tbat the gain on the sale of the Construction stock was ordinary income on the ground that Construction was a collapsible corporation within the meaning of § 117 (m) of the Internal Kevenue Code of 1989. Deficiencies were assessed on the basis of this determination and later paid by the plaintiffs.

21. Thereafter, plaintiffs filed timely claims for refund for the year 1951 on the ground that the gain should' be treated as long-term capital gain. On January 20, 1960, statutory notices of disallowance were issued with respect to these claims and this suit was timely commenced on May 19, 1960.

22. The following findings concern various details of the relationship between Goodwin and Weinberg that shed some light on the circumstances that led to the decision to have Construction purchase Goodwin’s 50 shares of Construction stock on July 25,1951, and the motives for that decision.

Apparently, it is the plaintiffs’ position (a) that all steps in the dissolution of Goodwin’s and Weinberg’s association in the Barrington Manor project were motivated by Goodwin’s conclusion that tensions and irritations, resulting from frictions generated by the intimate, almost daily, business contacts he was required to have with Weinberg in the course of their attempted collaboration on administration of the affairs of Construction, were detrimental to his health, and that termination of such close association with Weinberg was essential to recovery of his health, and (b) that, following extended discussions between Goodwin and Weinberg of various means of terminating those of their relationships that caused such tensions, the decision that (among other rearrangements of their affairs) Goodwin’s 50 shares of Construction stock should be transferred to Construction was dictated by Weinberg and acquiesced in, only reluctantly, by Goodwin who would have preferred to retain the stock but was not in a position to reject Weinberg’s proposal.

It is the defendant’s position that the motives for the transfer to Construction of Goodwin’s Construction stock are irrelevant because, according to the defendant’s view, the transfer was decided upon before construction of the Bar-rington Manor project was completed. The defendant asserts, in addition, however, not only that the evidence does not sustain the plaintiffs’ claim that Goodwin’s desire to protect his health by terminating his more intimate associations with Weinberg motivated the transfer, but that (c) the fact that the actual transfer did not occur until after the need for close collaboration on the construction of the Barrington Manor project had ceased, and (d) the fact that Goodwin continued his business association with Weinberg, in other projects after this transaction, tend to show that the termination of Goodwin’s participation with Weinberg as a stockholder and director of Construction was not brought about for the purpose of regaining and protecting Goodwin’s health.

23. Although Goodwin held 25 percent of the stock of Construction until he contributed his stock to Goodwin Organization in June of 1951, and remained a director of Construction until July 25, 1951, it does not appear that he had any substantial influence in determining the business policies of the corporation. Not only did Weinberg have voting control through the ownership (with his wife) of three-fourths of the stock, but it is clear from Weinberg’s testimony, as well as Goodwin’s, that, although Weinberg relied upon Goodwin for engineering advice, and there were numerous discussions and disagreements between them, Weinberg made the business decisions and expected Goodwin to do what he was told. This fact, and Goodwin’s reaction to it, indeed, appears to have been a major source of friction between them, and, on the whole record, it seems clear that Goodwin’s dissatisfaction with this relationship, which Weinberg shared for complementary reasons, was a major factor leading to the decision to terminate their association in some of their common projects, including the Barrington Manor project.

24. Goodwin is a professional engineer and builder. He has a great familiarity with the building business, born of many years of experience in all phases of real estate. He

graduated from the U.S. Naval Academy in 1918 with, a B.S. degree and served for 5 years as a naval officer. Then, he became vice president of a mortgage loan company in Baltimore where his duties included evaluating plans for construction of new homes. In 1928, he built and sold some houses. He then worked as an engineer for a few years. Between 1935 and 1940, he was associated with an organization which built, in Baltimore, 50 or 60 houses and 5 apartment projects, having 250 to 300 apartment units. These houses and apartments were built with FHA financing or assistance. In 1940, he was associated with two others in building 200 apartment units and about 150 houses in Norfolk, Virginia. During World War II, he again served in the Navy.

25. In 1947, Goodwin met Weinberg for the first time and became associated with him in a series of construction projects. The revelant facts concerning these projects, other than the Barrington Manor project, may be summarized as follows:

26. As indicated in finding 25, Goodwin and Weinberg fiad already been associated in two large construction projects, Penn Manor and Monroe Park, before they began the Barrington Manor project in late 1949.

27. The frictions and disagreements between Goodwin and Weinberg were not limited to the Barrington Manor project. They occurred throughout the period from 1948 through 1955, on other enterprises and in their social relationship. Weinberg also had disagreements with business associates other than Goodwin. Goodwin and Weinberg tried many times to iron out their differences, sometimes successfully and sometimes not.

28. During the winter of 1949-1950, Goodwin consulted a doctor about some blistering on his hands. The doctor told Goodwin that the blistering was caused by nervous tension. On April 27,1950, and again in November 1950, Goodwin consulted a dermatologist, Dr. Isadore Zugarman, who testified in this case as a witness for the Government. Dr. Zugarman diagnosed the blistering as an ailment called variously pompholyx, dyshidrosis or vesicular neuroderma-titis, and told Goodwin it was caused by nervousness, tension, aggravation, and worry. He treated Goodwin’s hands with superficial roentgen irradiation, gave him an ointment, and, in accordance with his established practice in such cases, advised him to discontinue stimulating food and drink, to take things easy, relax, cut down on his work, take more vacations, and, if possible, ease up. Goodwin testified that he consulted Dr. Zugarman in 1950 “about a half dozen times, more or less.” In fact, he consulted Dr. Zugarman only twice in 1950, once in April and once in November. When asked about the number of his visits to Dr. Zugarman in the first half of 1951, Goodwin answered, “I don’t recall, but I would say at least a couple times or maybe more.” In fact, he did not consult Dr. Zugarman at any time during 1951. After November 1950, the next visit Goodwin made to Dr. Zugarman was in August 1952. Goodwin testified that he had no recurrence of dermatitis after the fall of 1951, but his August 1952 visit to Dr. Zugarman was occasioned by a skin eruption on his ankle. The cause of this eruption was also diagnosed as nervous tension. Again, in August 1959, Goodwin bad a slight recurrence of the eruption on his right ankle.

29. (a) From all the evidence, it is reasonably clear that personal frictions, accentuated by the close association of Goodwin and Weinberg in the construction of the Barring-ton Manor project, and in other enterprises, were irritating and disturbing to both of them, that the tensions thereby induced contributed to the dermatitis that afflicted Goodwin in 1950, if they did not wholly cause it, and that a desire to be relieved of the dermatitis, or to prevent its recurrence, and to be relieved of the annoyances and tensions he believed caused it, was a substantial factor in inducing Goodwin to take up with Weinberg, during the winter of 1950-1951, the idea of so rearranging their affairs that the frequency of their personal contacts, and the intimacy of their association, would be diminished.

(b) According to the uncontradicted evidence, their discussions of ways and means of disentangling themselves from the activities that required the intimate associations which had become distasteful to both of them continued over a period of 6 to 8 months, and were aided by Weinberg’s attorney and an accountant. Ultimately, Weinberg relinquished his interest in some of the projects and Goodwin got out of others.

(c) It is not clear when, in the course of these discussions, Weinberg first proposed, or when Goodwin finally agreed, that, as one element of the readjustment of their interests and their working relationship, Goodwin’s 50 shares of Construction stock should be turned back to Construction.

Nor is it clear whether that proposal was either first made, or finally agreed to, before or after physical construction of the Barrington Manor project was completed.

(d) Transfer of Goodwin’s Construction stock back to the corporation was not made effective until July 25, 1951. Construction of the project was then complete. Accordingly, any close association between Goodwin and Weinberg that previously might have been necessary in order to deal with problems concerned with construction of the project was no longer requisite.

(e) Goodwin and Weinberg did not terminate all of their associations in the spring and summer of 1951.

During that summer, they continued to work together on the construction of 232 apartment units at Pleasantville, New Jersey, which cost $1,453,000, and were not finished until October 1951. As in the case of the Barrington Manor project, there were two corporations (a parent and a subsidiary), and Goodwin owned 50 shares, and Weinberg and his wife, 150 shares of the stock of the parent.

In addition, in the fall of 1951 or the winter of 1952, Goodwin suggested to Weinberg that they join in construction of an apartment project at Fort Dix, New Jersey, on which one of Goodwin’s organizations had been the successful bidder. Here, again, Goodwin had 25 percent of the stock and Weinberg 75 percent, although there was some controversy between them about the allocation of their interests before it was finally settled. The Fort Dix enterprise ultimately involved construction of two projects, one costing $2,495,059 and the other, $3,369,281. The work continued from 1952 through 1955.

(f) According to the evidence, Goodwin and Weinberg were able to conduct the Pleasantville and Fort Dix operations without having to be together more than about once a week. They had some disagreements and differences concerning them, including one controversy that was submitted to arbitration, but, by avoiding frequent, personal association, they managed to avoid the more extreme irritations and tensions that had arisen in the course of their work together between 1949 and the termination of their association in the Barrington Manor project in July of 1951.

30. (a) It is a reasonable inference from the evidence that the dermatitis that afflicted Goodwin in 1950 was caused by the tensions generated by his intimate association with Weinberg on their several, common enterprises, and that his desire to eliminate the frictions that he believed were the cause of his ailment was a dominant factor in motivating his proposal to Weinberg that they dissolve their association in those enterprises that required them to work together in daily personal contact.

(b) That proposal initiated a train of events that led ultimately to Goodwin’s transfer of his Construction stock back to tlie corporation, in July of 1951, although. Goodwin did not specifically propose that his Construction stock be transferred back to the corporation, either as a means of relieving the conditions he believed were impairing his health, or for any other reason. On the contrary, it appears that the proposal originated with Weinberg and that Goodwin would have preferred to retain the stock.

(c) It also appears that Goodwin’s objective of dissipating the need for close personal contact between himself and Weinberg in connection with the Barrington Manor project might have been accomplished by various other means than transferring Goodwin’s stock back to Construction.

(d) The evidence does not establish Weinberg’s motives for insisting that Goodwin’s Construction stock be transferred back to Construction.

(e) According to the evidence in this record, Goodwin’s acceptance of the specific proposal that his 50 shares of Construction stock be transferred back to Construction was motivated, primarily, by his belief that his acquiescence in such a transfer was necessary because of Weinberg’s insistence upon it as an essential prerequisite to Weinberg’s acceptance of the overall rearrangement of their interests that had been worked out for the purpose of achieving Goodwin’s basic objective of minimizing the necessity for continued, intimate, personal association with Weinberg in the management of their common enterprises.

CONCLUSION OP LAW

Upon the foregoing findings of fact, which are made a part of the judgment herein, the court concludes as a matter of law that plaintiffs are entitled to recover, and judgment is entered to that effect.

The amount of recovery will be determined pursuant to Buie 38 (c) of the Buies of this court.

In accordance with the opinion of the court and memorandum reports of the commissioner as to the amounts due thereunder, it was ordered on December 6, 1963, that judgment for plaintiffs Bichard C. and Elaine Goodwin be entered for $11,074.32, with, interest as provided by law, and for plaintiffs Howard G. and Margot Goodwin for $10,931.74, with, interest as provided by law. On January 17, 1964, it was ordered that judgment be entered for plaintiffs Harry J. and Kathryn G. Goodwin for $16,619.30, with interest as provided by law on the sum of $16,408.83. 
      
       Defendant cites the recent decision in Braunstein v. Commissioner, 374 U.S. 65, which affirmed the Tax Court, as inconsistent with Lowery and Solow. The Tax Court did not think there was any conflict and neither do we. In Braunstein the issue was whether a transaction which is within the terms of section 117 (m) is taken out because the taxpayer could have conducted his affairs differently so as to achieve capital gains treatment, while in this case the question is whether the transaction is within the terms of section 117 (m) at all.
     
      
       Harry J. Goodwin is referred to hereafter as “Goodwin.” The other plaintiffs are referred to by their full names.
     
      
       Referred to hereafter as the “Barrington Manor project.”
     
      
       The Barrington Manor project is described in findings 6-10 and 18-19.
     