Court Opinion

ID: 6904372
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:58:18.160515+00
Date Added: 2024-06-11T16:06:17.242626
License: Public Domain

- WALLER, Circuit Judge
(dissenting in part).
I agree that there is evidence to support the District Court’s conclusions that the partnership between the father and his daughters was not a bona fide arrangement entered into for the benefit of the partnership, but I dissent to the opinion of the *883majority as to the son, Arthur Ginsburg, who had been rendering highly valuable and skilled services to the business for a long time before the Army called him, and since.
When he was called into service, it was doubtless necessary to hire somebody to serve in his place, and without doubt he paid, out of his share of the partnership income, his part of the expense of hiring someone to take his place, thereby lessening his proportion of the profits of the partnership. What one can do through himself he may do through an agent or servant, and if one is employing, or contributing substantially to the employment of, a servant to take his place, I hardly see how it can be said that he is rendering no service to the business. This should be reexamined by the District Court on another hearing.
Assuredly the partnership is valid under the common law and the laws of the State of Texas. The son owned an indivisible interest in the res of the partnership. I think we can judicially know that oil field pipe, along with everything else, increased in value and demand during the tax period. Such increases in selling prices over cost prices were doubtless the chief sources by which the income was produced, rather than the services of the father. Notwithstanding the fact that this increase was the “fruit of the tree”, owned in part by young Ginsburg, the extent of such increase in value of stock on hand at the time of the formation of the partnership and which became taxable income, not produced by the father but by increase in the res, does not appear to have been considered either by the District Court or by us. This should be examined by the District Court on another hearing.
The Supreme Court agreed with the holdings of this Court in the case of Culbertson v. Commissioner1 that the real test of tax-ability of family partnerships is the actuality, reality, and bona lides of the partnership. It did not hold, nor has it ever held, that the sole tests were the contribution of capital or the rendition of services in person by the incoming partner. These two tests are considered merely as pertinent circumstances along with other factors. There seems to be no question that as to the son there was a genuine partnership entered into for the benefit of the business. It being genuine, the Government should not — using the language of The Tax Court in Blumberg v. Commissioner, 11 T. C. 663, — say to the son: “I will not recognize you as a partner even though you in good faith entered into it. I took you into the Army to fight a war and you did not' perform services for the partnership as you had agreed to do.”
The decision of the Supreme Court in the Culbertson case confirms my conviction that the main test in these family partnership cases is whether or not a real, genuine, bona fide partnership was entered into for the benefit of the business as distinguished from an arrangement entered into for the relief of the taxpayer in the distribution of family income.
In this case, I think the evidence shows without the slightest dispute that there was a genuine, bona fide partnership entered into between the father and the son which had been — and in due course would again be — highly helpful to, and for the benefit of, the business. It was in recognition of past valuable, vital, and important services rendered by the son, and of those expected to be rendered when, and if, he returned from the armed service of his country. To say that the son cannot be recognized as a partner in his father’s business in such cases is so shocking to my sense of justice that I will not willingly join in so saying. The fact that one’s son is in the armed service is no reason why a father should not — but a good reason why he should — make a gift to that son of an interest in his business so that the son, like other men returning, may come back to a means of making a living— to a “nest egg”, so to speak. It is still permissible in this country for a father to make a gift to his son, provided he pays the gift tax, as was done in this case.
The Congress went to great lengths in the enactment of the Selective Service Law. 50 U.S.C.A.Appendix, § 301 et seq., to *884protect the rights of service men in providing that they should have their same employment when they were returned from the service, and I do not believe that Congress ever intended to penalize a father who, like Congress, had sought, lawfully and irrevocably, to provide his son with an 'interest in a business to which the son might hopefully return.
“The power to tax is the power to destroy” if the courts, instead of protecting against destruction, aid and abet it by putting into the law weapons of death with instructions as to how to use them.
Neither the common law, the statutes of Texas, nor the statutes of Congress ever fashioned the weapons for destroying bona fide father and son partnerships.

 Culbertson v. Commissioner, 5 Cir., 168 F.2d 979.