OPINION.
HaRROn, Judge:
Prior to the time when petitioners gave consideration to the matter of dissolving the corporation known as the Charles R. Sligh Co., petitioners owned all of the stock of the corporation. They discussed the tax advantages to be derived from conducting the business as a partnership in comparison with the conduct of the business as a corporation, from January 1937 until the fall of 1938. Upon advice of their tax adviser, petitioners delayed making the conversion from the corporate form to the partnership form until 1938, but the matter was discussed and considered during 1937 and 1938, and prior to the making of transfers to the respective wives. A limited partnership was created at the end of 1938, with the arrangement that the wives of petitioners were to be limited partners, but were not to contribute any services. The business which had been conducted through a corporation under the direction of petitioners was continued in exactly the same way under the partnership under the direction of petitioners. The petitioners’ motives in making the formal change were primarily to reduce the amount of tax, and that is admitted.
The question is whether or not petitioners are liable for tax upon the entire income of the business in 1939 and 1940, respectively. Petitioners contend that the partnership must be recognized for purposes of Federal taxation and that, consequently, the income of the business is taxable to the four partners, respectively. Respondent contends that the partnership arrangement should not be recognized for tax purposes because it effected no substantial change in the economic status of the petitioners under the revenue laws. Respondent asserts that the arrangements were without substance, were only a device to reduce taxes, and were without any real business purpose. Respondent contends that this proceeding comes within the rule of Schroder v. Commissioner, 134 Fed. (2d) 346; Mead v. Commissioner, 131 Fed. (2d) 323; certiorari denied, 318 U. S. 777; and Earp v. Jones, 131 Fed. (2d) 292; certiorari denied, 318 U. S. 764. Respondent contends further, that the income of the business is taxable to petitioners under the rule of Helvering v. Clifford, 309 U. S. 331, and he relics also upon Warren v. Commissioner, 133 Fed. (2d) 312, affirming 45 B. T. A. 379; Harry C. Fisher, 29 B. T. A. 1041; affd., 74 Fed. (2d) 1014; Higgins v. Smith, 308 U. S. 473; and Francis Doll, 2 T. C. 276.
We have said that it is essential that a contribution be made by each member of a partnership of either property or services, in order that a partnership may be found to exist. Thomas M. McIntyre, 37 B. T. A. 812. See also Meehan v. Valentine, 145 U. S. 611. In this case the wives of petitioners did not contribute any services to the business. The question to be considered is whether they contributed any capital or property to the business.
It is clear that petitioners made the alleged gifts of stock in the corporation to their wives pursuant to a plan involving the dissolution of the corporation and the transfer of assets to a partnership. The evidence shows that the purpose of the transfer of stock to each wife was to put over to her a share in the assets of the corporation which she was, in turn, to contribute to the partnership. Of course, there was no actual distribution of the assets of the corporation to the stockholders upon the dissolution of the corporation. All steps to effect the change were taken on paper. Petitioners were the owners of all of the stock and, therefore, of all the assets of the corporation, in the beginning. If they made bona fide gifts of interests in part of the assets to their wives, through the medium of transfers of stock, their wives must have received complete dominion and control over property, and petitioners must have divested themselves of such control. Such rule is well established. See Edson v. Lucas, 40 Fed. (2d) 398, and authorities cited therein on the essential elements of a bona fide gift. If the wives received such dominion over property, it will follow that they, individually, made real contributions to the capital of the partnership.
The question whether petitioners made bona fide gifts of interests in property to their wives, divesting themselves of full dominion and control, must be determined by examining the terms of the certificate of partnership and the partnership agreement. The provisions of both agreements lead us to conclude that the wives of petitioners did not receive from them a complete economic interest in the portions, of the property which purportedly went to them out of' the corporation, and from the wives into the partnership. The limited partners, the wives, have no right to receive any property upon dissolution of the partnership, which is to exist for five years only, other than cash, and they have no right to withdraw their “contributions to the firm capital.” Although the value of the “interest” contributed by each wife was said to be $22,500, in* the certificate of partnership, the general partners, petitioners, “shall have full power and authority to establish values upon such books for the assets so contributed to the firm by all the partners. Such values shall not be conclusive as to the value of the interest of any partner upon dissolution of the firm for any cause.” From these provisions it is apparent that, whereas the wives are purported to have contributed to the partnership property having a value of $22,500, it is wholly problematical what they will be allowed by the' general partners upon dissolution of the firm for said contribution to the capital. The wives can not receive property, but only cash, and they are left without any voice in determining, in the end, the cash value of the property they are alleged to have contributed. Petitioners retained the right to determine the book values of the contributions, but whatever values they fix are not conclusive and binding.
There is considerable ambiguity in the matter of what property the limited partners contributed. At first it appears that each partner contributed one-fourth of all of the assets of every kind, tangible and intangible, formerly owned by the corporation. The certificate of partnership so provides. On the other hand, the partnership agreement provides that the name “Charles IÍ. Sligh Company” is the property of Charles E. Sligh, Jr., and “its use is a valuable privilege.” Also, any trade-mark, trade name, insignia or device containing the above name is the property of Sligh. Upon dissolution of the partnership, Sligh is to receive, without any obligation to make payment therefor, the trade name, etc., and no one except Sligh shall have any right to engage in business under the name of Charles E. Sligh Co., notwithstanding any good will value acquired during past conduct of the^business. The above provisions clearly constitute the retention by one of petitioners of exceedingly valuable property rights in the business of Charles E. Sligh Co. The business had been founded under the name of Sligh Furniture Co. by Sligh’s father; Sligh used his own name when Lowry and Sligh organized the new business in 1933. Obviously, the trade name had value in itself as the name of the business and in the use thereof in trade-marks, yet Sligh’s wife certainly did not acquire any interest in this valuable part of the assets of the business, and neither did Lowry’s wife.
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OPINION.
HaRROn, Judge:
Prior to the time when petitioners gave consideration to the matter of dissolving the corporation known as the Charles R. Sligh Co., petitioners owned all of the stock of the corporation. They discussed the tax advantages to be derived from conducting the business as a partnership in comparison with the conduct of the business as a corporation, from January 1937 until the fall of 1938. Upon advice of their tax adviser, petitioners delayed making the conversion from the corporate form to the partnership form until 1938, but the matter was discussed and considered during 1937 and 1938, and prior to the making of transfers to the respective wives. A limited partnership was created at the end of 1938, with the arrangement that the wives of petitioners were to be limited partners, but were not to contribute any services. The business which had been conducted through a corporation under the direction of petitioners was continued in exactly the same way under the partnership under the direction of petitioners. The petitioners’ motives in making the formal change were primarily to reduce the amount of tax, and that is admitted.
The question is whether or not petitioners are liable for tax upon the entire income of the business in 1939 and 1940, respectively. Petitioners contend that the partnership must be recognized for purposes of Federal taxation and that, consequently, the income of the business is taxable to the four partners, respectively. Respondent contends that the partnership arrangement should not be recognized for tax purposes because it effected no substantial change in the economic status of the petitioners under the revenue laws. Respondent asserts that the arrangements were without substance, were only a device to reduce taxes, and were without any real business purpose. Respondent contends that this proceeding comes within the rule of Schroder v. Commissioner, 134 Fed. (2d) 346; Mead v. Commissioner, 131 Fed. (2d) 323; certiorari denied, 318 U. S. 777; and Earp v. Jones, 131 Fed. (2d) 292; certiorari denied, 318 U. S. 764. Respondent contends further, that the income of the business is taxable to petitioners under the rule of Helvering v. Clifford, 309 U. S. 331, and he relics also upon Warren v. Commissioner, 133 Fed. (2d) 312, affirming 45 B. T. A. 379; Harry C. Fisher, 29 B. T. A. 1041; affd., 74 Fed. (2d) 1014; Higgins v. Smith, 308 U. S. 473; and Francis Doll, 2 T. C. 276.
We have said that it is essential that a contribution be made by each member of a partnership of either property or services, in order that a partnership may be found to exist. Thomas M. McIntyre, 37 B. T. A. 812. See also Meehan v. Valentine, 145 U. S. 611. In this case the wives of petitioners did not contribute any services to the business. The question to be considered is whether they contributed any capital or property to the business.
It is clear that petitioners made the alleged gifts of stock in the corporation to their wives pursuant to a plan involving the dissolution of the corporation and the transfer of assets to a partnership. The evidence shows that the purpose of the transfer of stock to each wife was to put over to her a share in the assets of the corporation which she was, in turn, to contribute to the partnership. Of course, there was no actual distribution of the assets of the corporation to the stockholders upon the dissolution of the corporation. All steps to effect the change were taken on paper. Petitioners were the owners of all of the stock and, therefore, of all the assets of the corporation, in the beginning. If they made bona fide gifts of interests in part of the assets to their wives, through the medium of transfers of stock, their wives must have received complete dominion and control over property, and petitioners must have divested themselves of such control. Such rule is well established. See Edson v. Lucas, 40 Fed. (2d) 398, and authorities cited therein on the essential elements of a bona fide gift. If the wives received such dominion over property, it will follow that they, individually, made real contributions to the capital of the partnership.
The question whether petitioners made bona fide gifts of interests in property to their wives, divesting themselves of full dominion and control, must be determined by examining the terms of the certificate of partnership and the partnership agreement. The provisions of both agreements lead us to conclude that the wives of petitioners did not receive from them a complete economic interest in the portions, of the property which purportedly went to them out of' the corporation, and from the wives into the partnership. The limited partners, the wives, have no right to receive any property upon dissolution of the partnership, which is to exist for five years only, other than cash, and they have no right to withdraw their “contributions to the firm capital.” Although the value of the “interest” contributed by each wife was said to be $22,500, in* the certificate of partnership, the general partners, petitioners, “shall have full power and authority to establish values upon such books for the assets so contributed to the firm by all the partners. Such values shall not be conclusive as to the value of the interest of any partner upon dissolution of the firm for any cause.” From these provisions it is apparent that, whereas the wives are purported to have contributed to the partnership property having a value of $22,500, it is wholly problematical what they will be allowed by the' general partners upon dissolution of the firm for said contribution to the capital. The wives can not receive property, but only cash, and they are left without any voice in determining, in the end, the cash value of the property they are alleged to have contributed. Petitioners retained the right to determine the book values of the contributions, but whatever values they fix are not conclusive and binding.
There is considerable ambiguity in the matter of what property the limited partners contributed. At first it appears that each partner contributed one-fourth of all of the assets of every kind, tangible and intangible, formerly owned by the corporation. The certificate of partnership so provides. On the other hand, the partnership agreement provides that the name “Charles IÍ. Sligh Company” is the property of Charles E. Sligh, Jr., and “its use is a valuable privilege.” Also, any trade-mark, trade name, insignia or device containing the above name is the property of Sligh. Upon dissolution of the partnership, Sligh is to receive, without any obligation to make payment therefor, the trade name, etc., and no one except Sligh shall have any right to engage in business under the name of Charles E. Sligh Co., notwithstanding any good will value acquired during past conduct of the^business. The above provisions clearly constitute the retention by one of petitioners of exceedingly valuable property rights in the business of Charles E. Sligh Co. The business had been founded under the name of Sligh Furniture Co. by Sligh’s father; Sligh used his own name when Lowry and Sligh organized the new business in 1933. Obviously, the trade name had value in itself as the name of the business and in the use thereof in trade-marks, yet Sligh’s wife certainly did not acquire any interest in this valuable part of the assets of the business, and neither did Lowry’s wife.
The general business of the partnership was stated to be the manufacture of furniture, but it was provided in the partnership agreement that the general partners could engage in any other business within the general scope of furniture manufacture, without the consent of the limited partners. Within such broad powers,- the general partners had complete control over the assets of the business, so that they could use the portions allegedly contributed by their wives, without their consent, and venture into unprofitable fields, if it so turned out, free from any liability to the limited partners. Nevertheless, losses are to be borne equally by all of the partners. It is difficult to conceive of a more complete retention of control of business assets than this provision envisages, and it must be kept in mind that petitioners, the alleged donors of interests in the assets to their wives, have in reality retained exceedingly broad control over the use of the property. It would be unreal to view the arrangement as falling into two steps, entirely separate, under which the wives first received full dominion and then, by their own volition, gave all of the control back to petitioners. As far as the record shows, the wives had no voice whatsoever in the drafting of the partnership agreement or the certificate of partnership.
Finally, as a further item in the powers retained by petitioners, they had the sole voice in the matter of distributing the profits of the business. No profit can be distributed until the general partners affirmatively so decide. The right to receive income from property is one of- the most important incidents of ownership. Here, the alleged donees of one-fourth interests in the property, of the business do not have an unfettered right to receive income from^heir alleged interests or property, for they have no voice in deciding what of the profits shall remain-in the business and what shall be distributed. Upon dissolution of the firm, the general partners may purchase the interests of.the limited partners according to values to be determined by appraisers.
The conduct of the parties in the taxable years in the matter of distributions of partnership profits is imporlant. No distributions of profits were made, except for amounts to pay the income taxes of the wives and a small amount to purchase a car for Lowry’s wife.
The question here is whether what was done, apart from the tax motive, was in reality what petitioners contend was done. Cf. Gregory v. Helvering, 293 U. S. 465. Did petitioners divest themselves of ownership in one-quarter, each, of the assets of the corporate business, putting complete ownership of property, or of undivided interests in property, in their respective wives, so that they, in turn, were in a position to contribute capital to the partnership ? Upon the facts, we believe this question can be answered only in the negative. Without question, the alleged gifts were made with full understanding that a plan devised by petitioners would be carried out. The wives could use the interests they received, which are difficult to describe with any certainty, in view of an abundance of restrictions and ambiguities, only as petitioners dictated and prescribed. See George H. Whiteley, Jr., 42 B. T. A. 402; affd., 120 Fed. (2d) 782; certiorari denied, 314 U. S. 657; Empire Trust Co., Executor, 41 B. T. A. 839; affd., 119 Fed. (2d) 421; F. Coit Johnson, 38 B. T. A. 1003; affd., 86 Fed. (2d) 710. Petitioners, it is concluded, did not relinquish their dominion and control over the interests in property which they purportedly gave to their wives by way of transfers of stock in the corporation, and, therefore, they did not make bona fide gifts to the wives. Francis E. Tower, 3 T. C. 396. It follows that the wives did not make contributions to the capital of the partnership, and they were not carrying on a business with petitioners in a partnership within the provisions of section 181 of the Internal Revenue Code.
Respondent’s determinations are sustained.
Reviewed by the Court.
Decision will he entered for the respondent.