Cohan v. Commissioner of Internal Revenue

L. HAND, Circuit Judge.

In the year 1918 Cohan was a theatrical manager and producer, doing business in partnership with one Harris. He had originally been an actor like his father and mother, with whom while a boy he had begun to act in vaudeville. After 1899 the parents with their two children, Cohan and his sister, divided their earnings, one quarter to each of the children and a half to the parents, the petitioner collecting for all and distributing. In that year they employed a manager and after his death another, who married the daughter in 1905 and with her left the group. The other three then employed Harris as their manager, and made a change in the distribution. Cohan had begun to write plays, on which he was getting royalties, which he first withdrew from the net earnings. The parents next took out five hundred dollars a week, and the four divided what was left, half to Harris, a quarter to Cohan, and the rest to the parents. > Before 1914 Cohan and his father had left the stage and spent their time in directing their plays, until the father died on July 31, 1917.

On his father’s birthday, in January, 1914, Cohan as an expression of affection wrote a letter to him, the only relevant parts of which declared that the two were, and had for years been, partners in all Cohan’s enterprises. The mother had left the stage and was not engaged in helping her son when the father died. Shortly afterwards Cohan told her that his father’s estate “was to be hers, that he wanted her to remain interested in their business affairs and that these affairs would be. conducted as they had been in the past.” Thereafter he always divided equally with her his profits from the firm of Cohan & Harris, as he had done with his father. On June thirtieth, 1920, he and Harris separated and Cohan continued alone, continuing to give her half his net profits. [*542] The first question is whether upon the foregoing facts the Board was right in fixing Cohan’s income as the whole of what he received from the firm of Cohan & Harris, while it lasted, and later as the whole of his own profits. He maintains that his mother was always his partner, and that he is entitled to deduct from his receipts the sums which hé paid to her. If the father was a partner at the time of his death, that partnership ended and Cohan, the survivor, had to account to the legatees or next of kin. We do not know whether there was a will, but we may assume that there was none, as no mention is made of one. If so, the widow and each child took a third, but we are left in the dark as to what were the assets. They could not have included those of the firm of Cohan & Harris, of which the father was not a member, because although he helped Cohan in writing his plays, there is nothing in the findings to show that Harris was privy to this, or that he recognized him as an associate.' The assets of the supposed firm of Cohan & Cohan were not therefore shown to have been more than such profits as might come to hand out of Cohan’s share from Cohan & Harris, and of these the daughter had a third. Therefore, when Cohan told his mother that his father’s estate “was to be hers,” at most he did no more than increase her share of his undistributed profits from one to two thirds. There is no evidence that any part of these entered into his income for 1918, and the later years; or, if so, what that part was. The petitioner has therefore on any theory failed in his proof pro tanto.