Brief Fact Summary. Respondent was an elderly rancher who wanted to sell his cattle business. He entered into a partnership arrangement where his four sons bought a portion of the heard. There was an issue of who the ranch income should be attributed to because the sons did not contribute much in the way of capital or services to the partnership.
Synopsis of Rule of Law. Income must be taxed to the one who earns it.
The issue is who earned the income and that issue depends on whether this husband and wife really intended to carry on business as a partnership.View Full Point of Law
Issue. Is the intention to contribute capital or services sometime in the future is sufficient to satisfy the concepts of a partnership?
Held. Chief Justice Vinson issued the opinion for the Supreme Court of the United States in remanding to the Tax Court and holding that the Tax Court should determine if there was a bona fide intent for the partnership, and not just consider whether services or capital were contributed.
Concurrence. Justices Black, Rutledge, Burton, Jackson, and Frankfurter issued concurring opinions but they are omitted from the text.
Discussion. The test is whether the parties in good faith and acting with a business purposes intended to join together for the partnership. The intent of the parties must be examined based on the facts and the services or capital being furnished by the alleged partner.