Feldman v. Commissioner

Herman Feldman, Petitioner, v. Commissioner of Internal Revenue, Respondent Feldman v. Commissioner Docket No. 18837 United States Tax Court 14 T.C. 17; 1950 U.S. Tax Ct. LEXIS 302; January 11, 1950, Promulgated *302 Decision will be entered under Rule 50. Trust created by petitioner for his minor son held on all facts not a true partner in partnership composed of petitioner and his brothers. Simon E. Sobeloff, Esq., and Eugene M. Feinblatt, Esq., for the petitioner. E. M. Woolf, Esq., for the respondent. Opper, Judge. Kern, Judge, concurring. Black, J., dissenting. OPPER *17 Petitioner challenges respondent's determination of deficiencies in income tax for the years 1944, 1945, and 1946 in the respective amounts of $ 17,085.07, $ 49,566.69, and $ 28,727.64. Respondent has conceded error in attempting to tax*303 to petitioner all the income of a certain trust for benefit of Samuel Feldman, petitioner's son. The only issue in contest is whether respondent was correct in refusing to recognize the trust as a partner in the firm of Brooks Clothes and taxing to petitioner that portion of the firm income credited to the trust. FINDINGS OF FACT. Petitioner resides in Baltimore, Maryland, and he filed his income tax returns for 1944, 1945, and 1946 with the collector for the district of Maryland. In 1934 petitioner opened a business in Norfolk, Virginia. Later in that year the business was incorporated, and petitioner's brothers, Jack, Al, Edward, and Julius Feldman, became corporate officers. The original business consisted of several retail clothing stores. Within two years factories were acquired and subsequently the retail business expanded. On December 1, 1941, the five brothers executed a written partnership agreement, continuing the business under the name of Brooks Clothes. At that date the capital of the partnership was $ 250,000, to which contributions were made in the following proportions: Petitioner, 35 per cent; Jack, 20 per cent; Al, Edward, and Julius, 15 per cent each. The*304 agreement provided, among other matters, that profits were to be shared and losses borne in proportions equal to the capital contributed. Each of the partners was to be delegated certain duties. Only Jack had authority to sign checks or contracts. The agreement provided that the concurring vote of four partners was necessary to determine whether the profits of the business should be withdrawn or credited to capital. The agreement further provided that upon the death of any one of the partners the legal representatives of the deceased partner should sell to the partnership, and the partnership should purchase, the interest of the deceased *18 partner in the partnership; each of the surviving partners to be obligated to purchase and pay for such portion of the interest of the deceased partner as the value of his interest might bear to the total value of the interest of all the surviving partners. In addition, the instrument provided that, notwithstanding any other provisions of the agreement, upon the death of petitioner and Jack Feldman the partnership business should be liquidated as promptly as possible. Petitioner's son, Samuel Feldman, was born on May 30, 1929. In 1938*305 or 1939 Samuel started to work at the Baltimore store, engaging in tasks such as wrapping packages, delivering clothes to customers, and running errands. From that time Samuel worked regularly in the Baltimore store on Saturdays, in the evenings after school hours and before the store closing time of 9 p. m., and during the summer vacation months. In 1942 Samuel began to take on the duties of a salesman and cashier. Samuel was encouraged by all the partners to take an active part in the business. His education and activities were directed towards that end. In 1942 petitioner proposed that he give to Samuel part of his interest in the business. At that time the only other male child of the Feldman brothers was one infant. The brothers were interested in taking in members of the younger male generation. However, they would not have accepted as a partner an individual outside of the family. Petitioner was aware of the tax advantages which he might gain. On July 1, 1942, petitioner executed a declaration purporting to assign an interest in the partnership to Maurice Feldman, as trustee, for the benefit of petitioner's son, Samuel. Maurice Feldman, petitioner's brother, was a*306 physician and had not previously been associated with the business. He agreed to serve as trustee. The following are the provisions of the trust instrument: Whereas, I, the undersigned Herman Feldman, of Baltimore City, State of Maryland, have this day caused the transfer of a certain portion of my interest in the partnership business known as Brooks Clothes, to my brother, Maurice Feldman, as Trustee, for the benefit of my son, Samuel Feldman, as hereinafter provided, I do by these presents make known and declare the terms of the said transfer and trust. 1. Together with my brothers, Jack Feldman, Al Feldman, Julius Feldman, and Edward Feldman, I am a member of a partnership engaged in the clothing business in Baltimore City under the firm name of Brooks Clothes. My share in the said partnership has until this date been a thirty-five per cent (35%) interest in its capital and net profits. In order to provide an independent estate for my son, Samuel Feldman, I have this day, with the consent of my partners, caused to be assigned on the books of the partnership thirteen per cent (13%) interest in the capital of the said business (and the same has been charged to my thirty-five *307 per cent (35%) interest) to my brother, Maurice Feldman, in special trust and confidence, nevertheless, to hold the said interest for the use and benefit of my son, Samuel Feldman, until he shall have attained the age of twenty-one (21) years. *19 2. (a) The said Trustee is hereby specifically authorized to engage in the clothing business as a partner in Brooks Clothes; or in the event of the termination of the said partnership or his withdrawal therefrom, in his sole discretion to invest, and from time to time to reinvest, the proceeds in any other business, or to purchase stocks, bonds or other securities of any form, or real or personal property, and he is hereby authorized to mortgage, lease, sell or otherwise deal in such property to the fullest extent. (b) The said Trustee shall pay all necessary expenses of the trust, including taxes, and shall retain and add to the corpus of the estate any net income or profits from his investment in the said partnership, or from any reinvestment of the trust property, and shall make no distribution to my said son during the period of his minority for any cause whatsoever. Any share of the profits of the business that may, under the partnership*308 agreement, be credited to the said Trustee in excess of the necessary expenses, including taxes, may in his discretion and with the consent of the other partners be permitted to remain with the partnership as an account payable to the Trustee, or may be reinvested by him in the said partnership business, or may be otherwise invested. Any deficiency which may be charged against the Trustee by reason of losses of the partnership shall be considered as an account receivable, or may be charged to the Trustee's capital account, as he and the other partners may agree. The Trustee may repay any such deficiency out of any funds in his possession, and he is authorized for this purpose to raise cash by the sale of any investments or assets in his hands. In selling assets of the trust estate, the Trustee is hereby given full power and authority, and persons dealing with him shall not be required to look to the application of the purchase money. After the said beneficiary shall have attained the age of twenty-one (21) years, the trust shall terminate and the Trustee shall turn over and deliver all of the trust property, both principal and income then remaining in his hands, unto my said son, *309 free, clear, and discharged of all trusts. (c) In the event of my death before my son has attained the age of twenty-one years, the Trustee may, in his sole discretion, expand for the use and benefit of my son any income or profits which may have accrued, or may thereafter accrue, upon the trust property. 3. Any payment made by the Trustee to the beneficiary shall be made into the hands of the said beneficiary personally and not unto any other person whatsoever, whether claiming by his authority or otherwise, so that the said property may not be liable for the debts, contracts, or engagements of such beneficiary, or be taken in execution, attachment or garnishment or other legal or equitable proceedings while in the hands of the Trustee; nor shall any payments of principal or interest be subject to anticipation during the minority of my said son. 4. In the event of the resignation or inability of the said Trustee to serve, my wife, Fannie Feldman, shall become trustee in his stead, and if for any reason she is unavailable then such other person as the said Trustee may designate in writing shall succeed him as Trustee. In the event of the death of the above named Trustee, my wife, *310 Fannie Feldman, shall succeed him in the trust, and if she is unavailable the new trustee shall be such other person as the above named trustee, Maurice Feldman, may appoint in his last will and testament. Any successor trustee shall be clothed with the same power, authority and discretion as the original trustee, and both the original trustee and any successor shall be excused from the necessity of furnishing bond and shall not be liable for mistake of judgment or negligence but only for wilful breach of trust committed mala fide. 5. If my said son, Samuel Feldman, should die before the entire trust property, including principal and income, shall have been distributed to him in *20 accordance with the terms of this Declaration of Trust, then the trust property shall pass to such person as he may appoint in his will; and if he leaves no will or fails to make such designation the trust property shall pass free, clear and discharged of the trust to his mother, if living, otherwise to his sister, Shirley Ann Katz. 6. The Trustee above named and any successor trustee shall serve without compensation. 7. I hereby declare that I have retained and shall have no beneficial interest *311 whatsoever in the said trust property, the said transfer being made in consideration of natural love and affection, and I hereby relinquish all power to revoke or modify this trust or to exercise any control over its administration. On July 1, 1942, the six Feldman brothers, petitioner, Jack, Al, Julius, Edward, and Maurice as trustee, executed an agreement stated to be supplemental to the original partnership agreement. That supplemental agreement provided as follows: Jack Feldman, Al Feldman, Julius Feldman and Edward Feldman, co-partners with Herman Feldman in the partnership business conducted in Baltimore City under the firm name of Brooks Clothes, do hereby agree with Maurice Feldman, Trustee for Samuel Feldman, as follows: 1. The said co-partners consent to the transfer by Herman Feldman to Maurice Feldman, as trustee under the Declaration of Trust of this date, of thirteen per cent (13%) of the capital of the said partnership, and hereby accept the said trustee as an additional partner in Brooks Clothes; and they agree that thirteen per cent (13%) of the net profits thereof shall be payable to Maurice Feldman, Trustee, as distribution of profits may from time to time be made*312 to the partners, as hereinafter provided in paragraph 5 of the original partnership agreement of December 1, 1941, as amended; and it is understood and agreed that neither the said Trustee nor the beneficiary named in the trust shall receive any salary or drawing account from the said partnership independent of services rendered merely on account of the fact that the Trustee is a partner hereunder. 2. The Trustee shall not participate in the purchase of any deceased or withdrawing partner's interest, but Herman Feldman shall participate in such purchase to the extent provided in the original partnership agreement of December 1, 1941, as though no trust had been created. 3. Paragraph 5 of the partnership agreement of December 1, 1941, is hereby amended to read as follows: 5. The partners shall be entitled to share in the profits of the business, and shall bear all losses happening in the course thereof, in the following proportions: Out of the first $ 20,800.00 of net profits in each of the periods, January 1 to June 30 and July 1 to December 31, in each year, the partners shall receive as their respective shares the following: Jack Feldman $ 4,160.00 per 6 months Al Feldman 3,120.00 per 6 months Julius Feldman 3,120.00 per 6 months Herman Feldman 7,280.00 per 6 months Ed Feldman 3,120.00 per 6 months Maurice Feldman, trustee for Samuel Feldman none $ 20,800.00 *313 *21 The remaining profits for the half year shall be shared as follows: Jack Feldman 20% Al Feldman 15% Julius Feldman 15% Herman Feldman 22% Ed Feldman 15% Maurice Feldman, trustee for Samuel Feldman 13% In the event that the net profits for the half year are less than $ 20,800.00, the profits are to be shared as follows: Jack Feldman 20% Al Feldman 15% Julius Feldman 15% Herman Feldman 35% Ed Feldman 15% Maurice Feldman, trustee for Samuel Feldman none In the event that there is a net loss for the half year, the loss is to be shared as follows: Jack Feldman 20% Al Feldman 15% Julius Feldman 15% Herman Feldman 22% Ed Feldman 15% Maurice Feldman, trustee for Samuel Feldman 13% 4. In all other respects the said Trustee shall be entitled to the same rights as the other partners. 5. The Trustee's interest shall be computed from the statement as furnished by Leonard B. Rowles, C. P. A. as at June 30, 1942. The interest as so computed is $ 49,815.52, as evidenced by the attached memorandum. Petitioner paid a gift tax on the assignment, evaluating a 13 per cent interest in the partnership at $ 49,815.52. Subsequently*314 revenue agents asserted a greater value for that interest on the basis of the business good will, and petitioner paid an additional gift tax. The change was made public to the business world. The banks, the firm suppliers, Dun & Bradstreet, and the National Credit Office were notified of the change. Thereafter all papers signed by the partners bore the signature of the trustee as partner. Maurice Feldman served as trustee until May 26, 1944, when he resigned. Fannie Feldman declined to act as trustee. Maurice then appointed Jack Feldman, who has continued to serve in that capacity and to act as a partner in his own behalf. After July 1, 1942, Samuel Feldman continued to work in the business. During the three years here involved, 1944, 1945, and 1946, Samuel was aged 15, 16, and 17. During 1944, in the evenings and week ends, and during the Christmas and Easter holidays and the summer months, he worked in the Baltimore store as salesman and cashier. In 1945 he continued to work at the Baltimore store in evenings, on week ends, and during holidays. During the summer of 1945 Samuel worked in the office, learning the general accounting procedure *22 and engaging in the tasks*315 of an office worker. In 1946 Samuel worked in the store during evenings, holidays, and one month in the summer. He spent the remainder of the summer in camp. In September, 1946, Samuel left Baltimore to attend the Wharton School of Finance in Philadelphia to study business administration. During week ends and holidays he returned to Baltimore and spent time working in the same store. On October 1, 1946, the partnership was dissolved and the business was incorporated. Stock in the new corporation was received by the trustee for Samuel Feldman in proportion to the amount allocated to the trust on the partnership books. During 1947 and 1948 Samuel continued to spend week ends and holidays working in the Baltimore store. In the summer of 1947 he spent one month working in the company's factory in Hampstead, Maryland; two weeks in Atlanta, Georgia; and two weeks in Asheville, North Carolina, where he assumed the duties of manager of local stores while the managers were on vacation. He had complete charge of the stores, supervised and paid the personnel, and made out the daily reports for the home office. In the summer of 1948 Samuel performed similar managerial duties in local*316 stores in Asheville, North Carolina; Lexington, Kentucky; Oklahoma City, Oklahoma; and Indianapolis, Indiana. During the years in question there were various discussions between the partners regarding business affairs. On some occasions there were disagreements. However, all differences were harmoniously resolved. The partners never had occasion to take a vote. The books of account of the business reflected the assignment to the trust. From July 1, 1942, to September 30, 1946, the profits credited to the trust amounted to $ 168,978.13, of which $ 152,843.64 was withdrawn. During the years 1944, 1945, and 1946 the partnership profits credited to the trust amounted to $ 109,383.81. During these years a total of $ 132,036.94 was withdrawn. The withdrawals were made by the trustees, Maurice and Jack Feldman, in the exercise of their own discretion. During those three years a total of $ 47,269.92 was spent by the trust estate for taxes and other expenses. The remaining $ 84,767.02 was invested in building associations, securities, and Government bonds. These investments were made by Jack Feldman, trustee, in the exercise of his own discretion. At all times petitioner continued*317 to support his son. The partnership earned the following profits during the years in question: Six months ended 6/30/44 $ 99,056.80 12/31/44 102,896.66 6/30/45 152,019.25 12/31/45 305,434.13 6/30/46 246,637.91 Three months ended 9/30/46 57,461.55 *39 The total capital of the partnership at the beginning and the end of those six-month intervals was as follows: 12/31/43 $ 500,000 6/30/44 500,000 12/31/44 500,000 6/31/44 500,000 12/31/45 550,000 6/30/46 250,000 9/30/46 250,000 The parties did not, acting in good faith and with a business purpose, actually intend that the trust join together with petitioner and his brothers as a partner in carrying on business. OPINION. Although it is clear that no one factual element may suffice to determine the question, Commissioner v. Culbertson, 337 U.S. 733, our conclusion here from all the circumstances as incorporated in the foregoing ultimate finding of fact is that the parties did not intend in good faith and for a business purpose to conduct the business of Brooks Clothes in partnership with the trust for petitioner's minor son. We recognize, of course, that *318 the contribution of capital originating with a donee is not an essential for a valid partnership, even in the absence of managerial or vital additional services. But the mere legal title to capital acquired by gift is likewise not alone sufficient within the doctrine of the Culbertson case. 1 To our mind, that is the sole indication of the existence here of the intention to conduct a business partnership. *319 As the Supreme Court said in the Culbertson case (p. 744): Unquestionably a court's determination that the services contributed by a partner are not "vital" and that he has not participated in "management and control of the business" or contributed "original capital" has the effect of placing a heavy burden on the taxpayer to show the bona fide intent of the parties to join together as partners. * * * We take this to mean that in discerning the purpose of the arrangement and whether there exists the necessary intent of "carrying on business in partnership," 2Internal Revenue Code, sec. 181, the contribution *24 of needed capital which does not already exist in the business or at the disposal of the partners, the participation in management, or the rendering of vital services, would tend to furnish the evidence of a business purpose and an intent to conduct a business; and that accordingly, the absence of all of these factors places a correspondingly heavy burden upon one who would show that notwithstanding the lack of these elements some other evidence exists from which the requisite intent and business purpose may be gathered. In the case before us we are unable to*320 find that petitioner has sustained that burden or furnished that missing evidence. The trustee did not perform services for the partnership as trustee which can be segregated from his services in his individual capacity as a partner. Samuel Friedman, 10 T. C. 1145.*321 Even laying to one side a possible distinction between the trust which owned the "partnership" interest and its beneficiary, the latter -- who was but thirteen at the time the trust was created -- performed no services in the years before us which are indicated as being of any real value to the partnership business. Such effort as there is to demonstrate a "business purpose" is confined entirely to anticipations for the future. But the definite teaching of the Culbertson case is that regard must be had to the circumstances in the taxable years and not to some future development for the examination of this phase of partnership situations. "* * * The intent to provide money, goods, labor, or skill sometime in the future can not meet the demands of §§ 11 and 22 (a) of the Code that he who presently earns the income through his own labor and skill and the utilization of his own capital be taxed therefor. The vagaries of human experience preclude reliance upon even good faith intent as to future conduct as a basis for the present taxation of income." 3 These observations are pointed up by the fact that in 1946, when the son was seventeen years of age, the partnership was dissolved*322 and the business reorganized as a corporation, and that it was not until the following years that the son performed any services which could possibly be regarded as of significance. Nor do the situations of the parties before and after the so-called partnership, the domination of the business by petitioner, or the aspect of actual earnings of the income support petitioner's contentions. See Economos v. Commissioner (C. C. A., 4th Cir.), 167 Fed. (2d) 165. Whatever capital was donated by petitioner to the trust was in the business *323 before the trust was created. It remained there. The combined *25 share of the profits allocated to petitioner and to the trust after July 1, 1942, equaled precisely the petitioner's share before that time. The only change was that a part of petitioner's profits was then to be distributed to and retained by the trust. It is not even suggested in the trust instrument that this transfer was made for any purpose connected with the business. The stated motivation was "to provide an independent estate for my son Samuel Feldman," a personal objective of petitioner which, praiseworthy as it may be, can not have been of benefit even prospectively to the business of Brooks Clothes. The trust income was to be accumulated throughout the minority of the son. He could not secure any part of it in the meantime, regardless of the value to the business which his services might ultimately assume. If the son died before he could secure these accumulations, they were to go to the presumable recipients of petitioner's bounty, petitioner's wife and his daughter, unless in the meantime the son made a will. The latter was largely illusory, since in the state of the son's domicile -- which we take*324 to be that selected for him by petitioner -- the son, being only thirteen at the time, was legally incapable of executing a valid will. 4 Prior to majority he could not will real property, 5*325 and in many jurisdictions he could not make a valid will. 6 Thus, if petitioner thought it important enough to change the family domicile, or the trustee invested in real estate, destination of the partnership income for the instant tax years would be that selected by petitioner exclusively. The business was created and apparently brought to its successful position largely through the efforts of petitioner. There is no reason to assume that the establishment of the trust would change this situation. Yet petitioner's designated salary was but $ 14,560 out of a business which in the years before us earned from $ 200,000 to over $ 400,000. Assuming that capital was a vital income-producing factor, no showing is made of what function that capital performed. No aid is thereby furnished in solving the dilemma that, if the capital transferred to the trust was an essential element of the earning power of the business, the gift could not have anticipated its withdrawal by the *26 trustee, since that would have destroyed or crippled the enterprise; whereas if it was not, no essential contribution was made by the trust. We are not able in the face of these facts to assess the realities of the*326 gift apart from an implied condition that, if it made any contribution, it must remain in the business in which both petitioner and, ultimately, the substituted trustee were large participants. It suffices to say that nothing in the conduct of the parties indicates that anything more was intended by the gift than that a part of petitioner's income should be set aside for the future benefit of his son, or of the other members of his family. As if to underscore the control which petitioner felt it essential to retain, the "partnership" agreement provided that if a partner withdrew or died, rights to participate in the purchase of the interest thus made available, conferred originally by an earlier partnership agreement, were not to pass to the trust, but were to remain in petitioner. Based upon all of the facts and in the light of the considerations held to be appropriate in cases of this character, we conclude that it was not intended that the trust was to be a bona fide partner in the carrying on of the business and that respondent properly found that the income in question was taxable to petitioner. Decision will be entered under Rule 50. KERN Kern, Judge, concurring: I*327 concur in the result, in spite of the very slight variances between the facts here present and those existing in other cases involving the question of the validity of a family partnership which reached a different result. The decision of a family partnership case necessitates the consideration and the weighing by the trial judge of many factors. Those factors material to such a decision have been enumerated in the Culbertson case. The weight to be given any of those factors must necessarily be a matter for the judicial discretion of the judge presiding over the trial of the case (of course, within limits of reason). In the instant case, the judge writing the majority opinion herein has considered the factors enumerated in the Culbertson case as material to the solution of the problem posed. He has accorded weight to the several factors considered in a manner consistent with reason and sound discretion. I, therefore, concur with his ultimate factual conclusion. BLACK Black, J., dissenting: I am unable to agree with the majority opinion, which holds that the trust for Samuel Feldman, petitioner's minor son, was not a partner in the business partnership known as *27 *328 Brooks Clothes. The holding that the trust for Samuel Feldman was not a partner is based upon an ultimate finding of fact made by the majority as follows: The parties did not, acting in good faith and with a business purpose, actually intend that the trust join together with petitioner and his brothers as a partner in carrying on business. How the majority is able to make such a finding in face of the facts in the record of evidence as disclosed by the findings of fact which immediately precede it, is more than I can see. A trier of facts may not draw inferences which are altogether contrary to the facts proved and have no substantial evidence to support them. To use the language of the United States Court of Appeals for the District of Columbia in the recent case of Wenig v. Commissioner, 177 Fed. (2d) 62, reversing a memorandum opinion of the Tax Court: We neither question nor depart from the findings of basic facts as made by the Tax Court. But we think its conclusions are not within the realm of legitimate inference from the record as a whole or from the specific facts found. * * * Such is my view in the instant case. I have carefully *329 read and examined the findings of fact submitted by Judge Opper, who tried the case, and adopted by the majority, and, with the exception of the ultimate finding to which I have just made reference, these facts seem full and fair. I am unable to find in them a single fact which, in my judgment, justifies the ultimate finding that the parties did not, in good faith, intend to take the trust in as a partner. What are the facts? Briefly, they are these: Petitioner Herman Feldman and four of his brothers were partners together in a clothing business, and Herman owned a 35 per cent interest therein. He decided in 1942 to give his son Samuel a 13 per cent interest in this business, and he did so through the medium of a trust. The provisions of this trust indenture are incorporated in the findings of fact and they seem to me to show a perfectly valid, irrevocable trust by which petitioner conveyed 13 per cent of his interest in Brooks Clothes to the trustee for the benefit of his son Samuel. Of course, it is true that this conveyance of the 13 per cent interest in Brooks Clothes to the trustee did not make the trust a partner in the business. One can not give a part of his interest *330 in a partnership business to someone else and make that other person a partner in the partnership business, especially where there are other partners involved. They have to be consulted and give their consent before the trust can be made a partner. Therefore, if petitioner had stopped with the conveyance of 13 per cent of his interest to the trust, the trust would not have thereby become a partner and it might well be that petitioner would still be taxable on 35 per cent of the profits of the partnership, even though he would have to account to the trust for 13 per cent of the profits. Cf. Lucas v. Earl, *28 281 U.S. 111. But petitioner did not stop there. He and his brothers who were partners in Brooks Clothes got together and agreed to take the trust into the partnership. The findings of fact state: On July 1, 1942, the six Feldman brothers, petitioner, Jack, Al, Julius, Edward, and Maurice as trustee, executed an agreement stated to be supplemental to the original partnership agreement. Then follows the supplemental agreement, which, so far as I can see, was a perfectly good legal agreement whereby Maurice, as trustee, was made a member*331 of the partnership. Thereafter the trust was paid its full share of the profits in accordance with the agreement and on October 1, 1946, when the partnership was dissolved and the business was incorporated, stock in the new corporation was received by the trustee for Samuel Feldman in proportion to the trust's interest in the partnership. What more than the foregoing facts would a taxpayer have to prove in order to establish the bona fides of a partnership? I am at a loss to know. In holding that petitioner has not met his burden of proof to show the bona fides of the partnership, the majority opinion, among other things, says: Assuming that capital was a vital income-producing factor, no showing is made of what function that capital performed. No aid is thereby furnished in solving the dilemma that, if the capital transferred to the trust was an essential element of the earning power of the business, the gift could not have anticipated its withdrawal by the trustee, since that would have destroyed or crippled the enterprise; whereas if it was not, no, essential contribution was made by the trust. * * * Just what is meant by the foregoing language is difficult for me*332 to understand. If by it is meant that a trustee of a trust which has received a conveyance of an interest in partnership property can not become a partner in that partnership by proper agreement entered into with the other partners using the interest conveyed to the trust as its contribution to the capital of the partnership, then it seems to me that holding is contrary to the weight of authority and is wrong. Cf. Thompson v. Riggs (CA-8), 175 Fed. (2d) 81. The Thompson v. Riggs case was a case tried before a jury in the United States District Court for the Eastern District of Arkansas. The jury found that the six trusts involved had become, by agreement of the parties, bona fide members of the J. A. Riggs Tractor Co., a partnership. From the judgment of the District Court entered on this verdict, the collector of internal revenue appealed. The United States Court of Appeals affirmed the judgment, holding that there was substantial evidence to support the verdict of the jury. The circumstances as to how the six trusts became members of the partnership in that case were briefly these: Riggs, Sr., owned a 60 per cent interest in the partnership*333 of J. A. Riggs Tractor Co. and his son owned 40 per cent. To use the language of the court: *29 Taxpayer was then in bad health and desired to retire from active management and to have his son take over control. To accomplish these purposes and to provide for his wife and the family of his son (wife and four children), he irrevocably created six separate individual trusts, conveying to each a 5% interest in the partnership business from his 60%. Right after creation of the trusts, a new partnership contract was executed by taxpayer, his son, and the trustees of the six trusts. * * * The court concluded on these facts and other facts in the record that there was a valid partnership for Federal income tax purposes. While there are some differences in the facts of the instant case from the Thompson v. Riggs, case, supra, I would not think these facts are sufficiently different to distinguish the two cases. For the foregoing stated reasons, I respectfully dissent from the majority opinion. Footnotes 1. "* * * The question is not whether the services or capital contributed by a partner are of sufficient importance to meet some objective standard supposedly established by the Tower case, but whether, considering all the facts -- the agreement, the conduct of the parties in execution of its provisions, their statements, the testimony of disinterested persons, the relationship of the parties, their respective abilities and capital contributions, the actual control of income and the purposes for which it is used, and any other facts throwing light on their true intent -- the parties in good faith and acting with a business purpose intended to join together in the present conduct of the enterprise." ( Commissioner v. Culbertson, 337 U.S. 733, 742↩.) 2. "* * * The partnership sections of the Code are, of course, geared to the sections relating to taxation of individual income, since no tax is imposed upon partnership income as such. To hold that 'individuals carrying on business in partnership' include persons who contribute nothing during the tax period would violate the first principle of income taxation: that income must be taxed to him who earns it. Lucas v. Earl, 281 U.S. 111 (1930); Helvering v. Clifford, 309 U.S. 351 (1940); National Carbide Corp. v. Commissioner, 336 U.S. 422 (1940)." ( Commissioner v. Culbertson, supra↩, 739-740.) 3. At that point there is a footnote reading as follows: "8. The reductio ad absurdum of the theory that children may be partners with their parents before they are capable of being entrusted with the disposition of partnership funds or of contributing substantial services occurred in Tinkoff v. Commissioner↩, 120 Fed. (2d) 564, where a taxpayer made his son a partner in his accounting firm the day the son was born." 4. See Holzman v. Wager, 114 Md. 322; 79 Atl. 205, 206↩. 5. "A is trustee of Blackacre and of certain securities for B, an infant. When nineteen years of age B executes a will devising and bequeathing his interest under the trust to C, and dies during the same year. If an infant has not capacity to devise legal interests in land, but has capacity if he is over eighteen years of age to bequeath legal interests in personal property, the devise of B's interest in Blackacre is void but his bequest of his interest in the securities is valid." Restatement of Trusts, 133, illustration 3↩. 6. "Under the statutes of many of the states, however, the right to dispose of property by last will is limited to persons of full age, or to those over eighteen years of age." 57 Am. Jur., sec. 54.↩