dissent">Black, J.,

dissenting: It seems to me that the written partnership agreement entered into on January 27,1941, among petitioner William Arenson and his wife and L. W. Greenberg and his wife to transact business as a partnership under the name of Toledo Machinery Exchange Co. must be recognized for income tax purposes and taxed as the law provides for individuals carrying on business as partners.

The partnership agreement provides that it shall be retroactive to January 1, 1941. While that provision may be valid as between the parties, the tax effect of the partnership agreement would date from the date of the execution of the agreement and putting it into effect. But as I have already indicated, I think the business of Toledo Machinery Exchange Co. was operated as a partnership from the date of the signing of the partnership agreement and should have been so treated by the Commissioner in his determination of the deficiencies.

It is true that neither Mrs. Arenson nor Mrs. Greenberg contributed any services to the partnership, but they did contribute the share of capital assets which they each acquired by purchase in the giving of their promissory notes. These notes were subsequently paid in full, and the fact that they were paid in part out of profits received from the business and in part by gifts from their husbands, it seems to me, does not make any difference. The payments were legally made. One does not have to contribute services to be a member of a partnership. Many perfectly valid partnerships exist where one or more partners contribute no services at all, their contribution consisting of capital only. See vol. 6, sec. 35.03, Mertens Law of Federal Income Taxation. Cf. Montgomery v. Thomas, 146 Fed. (2d) 76.

As I have already stated, I think the facts show that a valid, legal partnership existed during most of the taxable year 1941 among the four persons named in the partnership agreement. Sections 181, 182, and 183 of the Internal Revenue Code prescribe how partnership income shall be taxed, and these provisions of the law afford no justification for the Commissioner to tax petitioners with the part of the partnership income which belonged to their wives.

It is true that the partnership agreement grants to the two active partners, Arenson and Greenberg, rather large powers of management and control of the partnership business, including the power to determine when partnership profits shall be withdrawn and distributed to the respective partners. See article YII of the partnership agreement. However, I do not think these provisions are so unusual in a partnership agreement as to invalidate it. On this point see Robert P. Scherer, 3 T. C. 776, at page 795, where we said:

* * * While it is true that under the terms of the partnership agreement Scherer, as managing partner, did exercise a large measure of control over the partnership business and had the sole discretion to determine whether the profits of the partnership of any particular year should be distributed to the respective partners or whether such profits should be retained in the partnership business, this discretion did not make him the owner of the shares of income which belonged to the other partners. Any income not distributed had to be credited to the capital accounts of the respective partners and accounted for as such in a final distribution of the partnership assets. * * *

We thereupon held that Scherer was not taxable on the profits which belonged to the other partners but was only taxable on the part which belonged to him. I think we should so hold in the instant case.

What I have said above with reference to the partnership operated as Toledo Machinery Exchange Co. applies with equal force, I think, to the partnership operated under the name of L. W. Chuck Co. There appears to be no essential differences in the two partnership agreements and the majority opinion does not make the point that there are any differences.

For the reasons I have given above, I respectfully record my dissent to the conclusion reached in the majority opinion.

Leech and Tyson, JJ., agree with this dissent.

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