Association of persons for tax purposes: business profits earned through court-appointed receivers were assessable in that character.

Profits from a snuff business continued by court-appointed receivers after dissolution proceedings were treated as income of an association of persons, not of the individual erstwhile partners. The receivers acted only as representatives of the real owners, and the business was carried on under court supervision for their benefit, with the owners acquiescing in that continuation by accepting periodic payments. For income-tax purposes, liability turns on the unit that earns the income, not on how the profits are later distributed. As the owners had joined in a common business purpose through their representatives, assessment in the character of an association of persons was proper.

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Issues: Whether the profits from the snuff business, carried on by court-appointed receivers after dissolution proceedings, were earned by an association of persons or by individuals, and whether such income could be assessed accordingly.

Analysis: The receivers were only representatives of the real owners of the business, namely, the erstwhile partners. The business was continued under the control and management of the receivers pursuant to the court order, and the owners acquiesced in that continuation by accepting monthly payments from the business. For income-tax purposes, liability depends on the unit that earns the profits, not on the ultimate distribution of those profits. An association of persons exists where two or more persons join in a common purpose or common action to produce income, profits, or gains. On the facts, the business was carried on on behalf of all the owners through their representatives, and the existence of specific interests in the profits did not alter the character of the earning unit.

Conclusion: The profits were earned by an association of persons, and the assessment in that character was proper.

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