In 1948, the Internal Revenue Service issued an order to show cause to Sun Goon Shing for tax liability for the years 1944 and 1945. The IRS suspected that Sun Goon Shing was not a partnership because Sun Goon Shing had many "partners".
During four days of administrative hearings held between May and December 1949, Chun defense attorney Joseph T. Higgins relied on the Chinese Exclusion Act (in effect from 1882 until 1943) to support his argument that Sun Goon Shing was a partnership. The reason why Sun Goon Shing had a seemingly excessive number of partners was because merchants belonged to one of three groups exempted from exclusion pursuant to Section Six of the Exclusion Act.
In a brief written letter decision, the IRS hearing officer agreed with the defense position, stating that the defense argument was "accepted as presented". This decision may have prevented other Chinese merchants from losing their "partnership" tax status.
