Case Name: Estate of John Barnes, Jr., Joseph Barnes, Administrator, Petitioner, v. Commissioner of Internal Revenue, Respondent; Joseph Barnes, Petitioner, v. Commissioner of Internal Revenue, Respondent
Court: United States Board of Tax Appeals
Jurisdiction: United States
Decision Date: 1927-08-01
Citations: 7 B.T.A. 924
Docket Number: Docket Nos. 5266, 9577
Parties: Estate of John Barnes, Jr., Joseph Barnes, Administrator, Petitioner, v. Commissioner of Internal Revenue, Respondent. Joseph Barnes, Petitioner, v. Commissioner of Internal Revenue, Respondent.
Judges: Considered by Smith and Littleton.
Reporter: Reports of the United States Board of Tax Appeals
Volume: 7
Pages: 924–927

Head Matter:
Estate of John Barnes, Jr., Joseph Barnes, Administrator, Petitioner, v. Commissioner of Internal Revenue, Respondent. Joseph Barnes, Petitioner, v. Commissioner of Internal Revenue, Respondent.
Docket Nos. 5266, 9577.
Promulgated August 1, 1927.
George W. Zeigler, Esq., and Edward J. Thompson, Esq., for the petitioners.
John D. Foley, Esq., for the respondent.

Opinion:
OPINION.
Love :
We are convinced that John Barnes, Jr., and Joseph Barnes, in December, 1919, in good faith intended to give and did give to their several wives their several beneficial interests in the partnership of Atherton & Barnes, and that they and the wives thereafter acted upon that basis; hence, there was no fraud. The two women appeared at the hearing as witnesses. Their testimony, though varying in phraseology, was practically identical in substance, and each testified explicitly to the incidents connected with the gift by their respective husbands to themselves.
There remains, however, the question of law, whether or not in view of the facts in the case there was a legal transfer of the interest in the partnership or a gift of the profits, as and when such profits flowed from the partnership to the men, themselves, as partners.
It will be noted in the findings of fact that there was no formal transfer. There was only an informal, oral gift on the part of the husband with no delivery of anything; that the third member of the partnership was not consulted and so far as the record discloses, remained in ignorance of the claim of the women; that the women took no part in the business management, or operations of the mine. They merely claimed and received, each, one-third of the net profits.
The Uniform Partnership Act of Pennsylvania (Act of March 26, 1915), P. L. 18, Part 5, sec. 27 (1), provides:
A conveyance by a partner of bis interest in the partnership does not of itself dissolve the partnership, nor, as against the other, in the absence of agreement, entitle the assignee, during the continuance of the partnership, to interfere in the management or administration of the partnership business or affairs, or to require any information or account of partnership transactions, or to inspect the partnership books; but it merely entitles the assignee to receive, in accordance with hie contract, the profits to which the assigning partner would otherwise be entitled.
Ibid, section 26:
A partner's interest in the partnership is his share of the profits and surplus, and the same is personal property.
It perhaps is needless to point out that the paragraph last quoted deals only with the interest in the partnership, and is not dealing with property, real or personal belonging, as an asset to the partnership. Such property is dealt with in other paragraphs of the Uniform Partnership Act.
In view of the statutes quoted and in view of the facts in this case, it seems apparent that the wives in 1920 were legally entitled in their own right to one-third of the profits which were realized from the operations of the Troy mine and being entitled to such profits, and having received those profits, they are liable for the income tax thereon.
There remains one other point raised by the Commissioner. In view of the provisions of the statute, Act of April 14, 1851, (P. L. 612, sec. 13), and in view of the fact that no statement disclosing the personnel of the partnership in 1920 was filed in the office of the prothonotary, was that partnership rendered void? That paragraph reads thus:
All persons who are now doing business in a partnership capacity in this Commonwealth shall file or cause to be filed in the office of the prothonotary, in the county or counties where the said partnership is carried on, the names and location of the members of such partnership with the style and name of the same; and as often as any change of members in said partnership shall take place, the same shall he certified by the members of such new partnership as aforesaid; and in default or neglect of such partnership so to do, they shall not be permitted, in any suits or actions against them in any court, or before any justice of the peace or alderman in this Commonwealth, to plead any misnomer, or the omission of the name of any member of the partnership, or the inclusion of the names of persons not members of said partnership.
It is obvious from tbe reading of the foregoing statute that its intent was not to render void, and it does not invalidate a partnership the members of which fail to comply with its provisions. See William W. Parshall v. Commissioner, 7 B. T. A. 318.
Judgment will be entered on 10 days' notice, u/nder Rule 50.
Considered by Smith and Littleton.