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FINDINGS OF FACT
On June 1, 1969, Nathaniel Garfield and Thomas McSherry
formed McSherry Associates, LP (the partnership), a New York
limited partnership. The purpose of the partnership was to
finance, research, and develop a variety of mechanical patents.
Mr. McSherry, the general partner, had a 51-percent equity
interest, and Mr. Garfield, after making an initial $25,000
contribution, was a limited partner with the remaining 49-percent
equity interest. On July 10, 1969, Thomas McSherry filed an
application with the U.S. Patent Office for his invention, the
expansible fastener. At the time of his application, Mr.
McSherry also recorded an assignment to the partnership of all
patent rights relating to the expansible fastener.
On September 18, 1970, Mr. McSherry and Mr. Garfield
incorporated Mechanical Plastics Corp. (MPC). Upon formation of
the corporation, the partnership owned 74 shares of MPC stock,
and J. Wolfe Golden, another investor, owned the remaining 26
shares. On September 22, 1970, Mr. McSherry signed an employment
agreement with MPC providing him with an annual salary and
royalties relating to his inventions. Also on that date, MPC’s
board of directors held a special meeting at which they executed
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the Internal Revenue Code in effect for the years in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
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Last modified: May 25, 2011