The profits available for credit to the capital accounts, as shown by the books, were such as remained after salaries and bonuses to the brothers West and Wiggins had been fixed by ‘the majority in value of the partners‘ or, as actually occurred with respect to the special bonus in 1948, by the majority partners with J. A. West and Wiggins. The arrangement here is in substance comparable to those which existed in Scherf v. Commissioner, 161 F.2d 495, affirming 7 T.C. 346; Stanback v. Robertson, 183 F.2d 889; Feldman v. Commissioner, 186 F.2d 87, affirming 14 T.C. 17; and Toor v. Westover, 94 F.Supp. 860, affirmed 200 F.2d 713, and we think that what the courts said in those cases indicates the correct decision in the instant case. See also Batman v. Commissioner, 189 F.2d 107, affirming a Memorandum Opinion of this Court, and Meier v. Commissioner, 199 F.2d 392, affirming a Memorandum Opinion of this Court.
Respondent argues that petitioners have misconstrued the rule of the Tower case. He cites the Tower case in support of his determination, and other cases where it has been applied, namely, John G. Scherf, 7 T.C. 346; affd., 161 Fed.(2d) 495; certiorari denied, 332 U.S. 810; M. M. Monroe, 7 T.C. 278; Jacob De Korse, 5 T.C. 94; affd., 158 Fed.(2d) 801; W. M. Mauldin 5 T.C. 743; affd., 155 Fed. (2d) 666; and O. William Lowry, 3 T.C. 730; affd., 154 Fed.(2d) 448; certiorari denied, 329 U.S. 725.
In the instant case we do not have the type of family partnership where the interest of a wife or minor child in a purported partnership arrangement originates solely as a gift from the husband or father in the capital assets of his business enterprise and thereafter the donee of such interest does not contribute substantially to the management of the business and renders no vital additional services thereto, which type of arrangement is not recognized for Federal tax purposes. See Commissioner v. Tower, 327 U.S. 280; Lusthaus v. Commissioner, 327 U.S. 293; Ed Dubinsky Durwood, 6 T.C. 682; Floyd D. Akers, 6 T.C. 693; Abe Schreiber, 6 T.C. 707; W. A. Belcher, 7 T.C. 182; and John G. Scherf, 7 T.C. 346. At the time the two partnership agreements here involved were entered into petitioner's son Walter, Jr., was a minor 18 years old and he became 19 years old in the spring of the taxable year 1941, but under the laws of Arkansas, Walter, Jr., was a competent person, in that his agreement was avoidable only at his own instance.
The question to be decided is whether, for Federal tax purposes, the Forcum-James Construction Co. was a partnership composed of R. M. Ford, Vern Forcum, C. B. Ford, Wade E. Moore, Gladys B. Ford, C. F. Moore as trustee for William K. and Jere B. Ford, and Madge M. Moore throughout 1941, with additional partners in the persons of Harry Moultrie as trustee for Marion Moore from February 1, 1941, and Donald Forcum from April 1, 1941, to the end of the year. Under the facts above set forth, the disposition of this partnership question in favor of respondent is, in our opinion, controlled by the principles applied in Commissioner v. Tower, 327 U.S. 280; Lusthaus v. Commissioner, 327 U.S. 293; Abe Schreiber, 6 T.C. 707; Floyd D. Akers, 6 T.C. 748; Howard B. Lawton, 6 T.C. 1093; John Lang, 7 T.C. 6; W. A. Belcher, 7 T.C. 182; and John G. Scherf, 7 T.C. 346. In the Tower case the Court said: