Commissioner v. Culbertson
United States Supreme Court
337 U.S. 733 (1949)
Culbertson (plaintiff) formed a new cattle-ranching partnership with his four adult sons, transferring them a half-interest in the herd in exchange for a note the sons later paid off from ranch profits; the sons' actual contributions of labor and capital varied widely, with one working as foreman, one entirely absent while in college and the army, and two still in school. The Commissioner (defendant) determined the sons weren't true partners because their capital and service contributions were insufficient, and the Tax Court agreed, taxing the entire partnership income to Culbertson; the court of appeals reversed.
Whether a business is taxed as a partnership if the purported partners join together with a bona fide intent to form a partnership through the contribution of services or capital during the taxable year in question.