Estate of Taylor v. Commissioner

17 T.C. 627

• Court: United States Tax Court
• Decided: October 8, 1951
• Docket: Docket No. 30236
• Status: Published

Opinions

OPINION.

Van Fossan, Judge:

The sole question is whether the petitioner is entitled to a deduction for depreciation of its right to share in the income of Neare, Gibbs and Company for a period of 2831 days as an inactive partner therein.

Petitioner argues that it is a partner in the partnership by reason of the exercise of the option; that the option has a basis of $140,000 which it is entitled to depreciate over the partnership term of 2831 days; and that the annual allowance for depreciation thus computed is deductible from its net taxable income received from the partnership business.

It is the respondent’s position that petitioner is not entitled to any depreciation. Nor does respondent concede the correctness of the valuation of $140,000 placed upon such option for estate tax purposes.

Petitioner cites no authority and we are entirely unimpressed with its reasoning. On the other hand, the ruling of the Supreme Court in Bull v. United States., 295 U. S. 247, stands as a barrier to the allowance. In order to sustain petitioner we would be obliged to find that this right held by petitioner constituted a capital asset which it received from the decedent. We are unable to make such a finding.

The partnership was a personal service concern requiring no capital or tangible property and to which none of the partners had contributed capital. Bull v. United States, supra, is peculiarly apposite and disposes of petitioner’s contention. We hold that the right inuring to petitioner to receive decedent’s share of the partnership income was not capital. Since this right does not constitute capital, petitioner is not entitled to any depreciation thereon. Gussie K. Barth, 35 B. T. A. 546.

Accordingly, we hold that the respondent did not err in his determination.

Keviewed by the Court.

Decision will be entered for the respondent.