participated with Lemm in the acquisition. Gaston represented some experienced restaurant operators who were interested in establishing a restaurant on the first floor of such building and who deposited $2,300 as security for rent. A prospective tenant for the second floor deposited $500, making a total of $2,800. The purchase price was about $32,000, of which $1,100 or $1,200 was paid in cash and the remainder was covered by a first and a second mortgage. An additional loan of $8,280 was made to finance the construction of the building. Upon completion of the building, the first floor was occupied by the above mentioned restaurant operators, who provided all of their own fixtures and equipment. No janitor or maintenance services were required, each tenant taking care of his own. Management of the building was turned over to a rental agency. No services of any kind in connection with the property were required of the coowners thereof. Upon acquisition of title, Gaston received an undivided one-third interest, which was later purchased by the other coowners. The petitioner, at the time of his marriage, was a bricklayer and made subcontracts in that connection. The buildings on the three above mentioned properties were erected and completed by subcontractors other than petitioner.

It was the practice of Lemm and petitioner and their transferees to keep record title to the various properties in the name of a "straw" or nominee, who in turn would give deeds to the coowners evidencing their interest, which deeds were not recorded. When any change occurred in the ownership, or a new mortgage was made, new deeds were executed and given to the coowners to bring their interests up to date. The prior deeds were surrendered and marked canceled on the face thereof. Thus the contract of purchase of the Wisconsin Avenue property was made in the name of James Y. Wilson, a straw, who had no actual interest in the contract. Title was taken in the names of Heine and McGarry and the deed to them was recorded. However, in the latter part of April 1941, Heine requested Lemm to prepare a deed from him to a straw, as he did not want to hold record title to the property in his name. On May 19, 1941, Heine and McGarry and their respective wives conveyed the property to petitioner, which conveyance was recorded on June 12, 1941. On June 19, 1941, petitioner and his wife conveyed by deed a one-fifth undivided interest in the property and rental income thereof to his wife as trustee of the four trusts hereinbefore mentioned, and an undivided one-fourth interest to Lemm, Cecelia E. Goodman, Mathilda M. Kirchner, and Lemm's mother, which deeds were not recorded. On October 14, 1943, Heine and his wife conveyed their undivided one-half interest in the property to

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petitioner, which conveyance was recorded on October 20, 1943. On October 19, 1943, petitioner and his wife conveyed an undivided twofifths interest in the property to petitioner's wife, as trustee, and an undivided one-half interest to Lemm, Cecelia E. Goodman, Mathilda M. Kirchner, and Lemm's mother, each taking an undivided one-eighth interest as a tenant in common, which two conveyances were not recorded. The deeds of June 19, 1941, were surrendered to Lemm and across the face thereof was written the following: "This deed cancelled October 19, 1943, by the execution of new deed dated October 19, 1943, to bring it up to date." The deed of October 19, 1943, to petitioner's wife as trustee was similarly canceled on June 12, 1947, when a new deed from petitioner conveying an undivided two-fifths interest (one-tenth for each trust) in the 3130 Wisconsin Avenue and 2501 Q Street properties, and other properties, was given in place of the prior deed. The deed of June 12, 1947, contained the following provision:

This deed may be withheld from record to facilitate execution of necessary papers by a single record title holder; it being agreed that all leases and rental arrangements from time to time affecting any and all of said real estate, heretofore or herefter executed or made by grantor (including trusts signed and moneys received from refinancing), were and will also be for the proportionate benefit of grantee; and grantor therefor hereby assigns an undivided one-tenth interest therein to the aforesaid grantee under each trust, making a total of twofifths under the four trusts.

Record title to the 1359 Connecticut Avenue property was in the name of Mary Jane Hovis, who had no interest in the property. She conveyed on May 9, 1942, a four-fifteenths undivided interest in the property to petitioner's wife as trustee, which conveyance was not recorded. It was canceled on October 19, 1943, when a new deed conveying to such trustee an undivided two-fifths interest in the property was executed. This latter deed was not recorded and was subsequently canceled upon the sale of the property.

Record title to the 2501 Q Street property was in petitioner's name. As to this property, petitioner and his wife executed two deeds on June 19, 1941, one, conveying a two-fifths undivided interest to his wife as trustee and the other conveying a one-half undivided interest to Lemm and his transferees, as of which date prior deeds held by them were canceled. The June 19, 1941, deeds were canceled as of October 19, 1943, and new deeds executed on October 19, 1943, which deeds were canceled on June 12, 1947, and new deeds executed. None of the deeds, except the original deed to petitioner, was recorded.

Keeping record title in the name of a straw or nominee is a practice generally followed in the District of Columbia where property is owned by more than one person. It facilitates dealing with the property in

that the signature of only one person and his spouse, if any, is required. It also facilitates title searches. Another reason for the practice is that some owners do not wish their interests in real property to be of record. Lemm did not want his interest to be disclosed of record.

Books of account were set up and kept by Lemm. Petitioner knew very little about the books of account. Capital accounts were set up for each one of the parties to the agreement of January 11, 1941, in which their respective interests in the properties were credited. The net income in their respective shares was also credited to each account. During the years 1941 to 1943, payments out of income aggregating $93,300 were made on the principal of loans outstanding on the properties involved.

Petitioner and Lemm each received a salary of $3,600 for each of the years 1942 and 1943. In most instances, Lemm, who represented all the parties to the agreement of January 11, 1941, made final decisions. He did most of the work required in connection with the properties. Lemm entered into contracts with subcontractors, which contracts were signed by petitioner as record owner.

During 1942 petitioner's wife, as trustee, received $3,000 and during 1943 she received two payments of $1,600 each from the net rentals. The amounts were used for the payment of income taxes for the trusts and insurance of the beneficiaries. None of it was used for household expenses, for the support of petitioner and his wife, or for the payment of any of their obligations.

The petitioner's wife visited the Wisconsin Avenue premises during the construction of the building thereon on the average of about twice a week. At such times, she talked with the superintendent. She recommended the painting subcontractor for that building, who had done similar work on the 2501 Q Street property and in petitioner's home. She also recommended the plastering, painting, and roofing subcontractors for the 2501 Q Street building. During the construction of that building she also visited there from time to time. She made some objections as to the proposed plans for and use of the second floor of the building on 1359 Connecticut Avenue. It was later rented to another tenant, who remodeled the second floor to suit himself.

On or about March 16, 1942, petitioner filed a gift tax return for 1941 in which he reported gifts of the aggregate stated value of $12,801.50, including a gift on January 2, 1941, in trust to his four minor children in the aggregate stated value of $3,144, and a gift to his wife as of June 3, 1941, of a one-half interest in the equity in an apartment house known as 1916 R Street, Northwest, Washington, D. C., of the stated value of $9,657.50.

Fiduciary income tax returns were filed for 1941, 1942, and 1943 for each of the four trusts involved herein.

Partnership returns (Form 1065) for the years 1938 to 1943, inclusive, were filed in the name of "Jerry Maiatico." In the returns for 1938 and 1939 the partners were stated to be the petitioner, Grace Burnap Everett, and Lemm. In the 1940 return the partners consisted of petitioner and Lemm. The partners designated in the 1941 return were the same as reported in the 1942 and 1943 returns. The income reported in the partnership returns for 1942 and 1943 consisted of rentals received from the 2501 Q Street, 1359 Connecticut Avenue, and 3130 Wisconsin Avenue properties. The net income reported for 1942 and 1943 was $47,771.90 and $80,601.09, respectively. The share of each partner in that net income and the time devoted to the business of the partnership by each partner are stated in the returns for 1942 and 1943 as follows:

The address of Cecelia E. Goodman was given on the returns as Columbia, Missouri, and the addresses of both Katheryn E. Lemm and Mathilda M. Kirchner were given as Minneapolis, Minnesota.

The reported distributions to petitioner and Lemm in 1942 and 1943 included a salary of $3,600.

In his returns for 1942 and 1943 the petitioner reported the respective amounts of $7,657.19 and $10,940.44 as received from the "Jerry Maiatico" partnership. In determining the tax liability of petitioner for 1943, the Commissioner included in petitioner's taxable income for 1942 the amount of $16,105.60 and for 1943 the amount of $29,360.11, the amounts distributable to petitioner's wife as trustee for their four children as shown in the partnership returns. The Commissioner's explanation for such adjustments as given in the notice of deficiency was as follows:

It is held that no part of the rental income distributed on the partnership return filed under the name of Jerry Maiatico, Woodward Building, Washington, D. C., to the trusts created for the benefit of Mary Rose Maiatico, Michael Maiatico,

Rose Marie Maiatico, and Anna Maiatico is taxable to the beneficiaries of the trusts but is taxable in full to you.

OPINION.

VAN FOSSAN, Judge: The respondent contends that the net rental income reported in the 1942 and 1943 partnership returns as distributable to petitioner's wife as trustee for each of their four minor children is taxable to petitioner under section 22 (a) of the Internal Revenue Code and the rule enunciated in Helvering v. Clifford, 309 U. S. 331, and Harrison v. Schaffner, 312 U. S. 579. He further contends that the agreement of January 11, 1941, was ineffective to constitute Rose Maiatico, as trustee, a partner with the owners of the other fractional interests in the various properties held by them.

Although the petitioner maintains that the January 11, 1941, agreement created a valid partnership for income tax purposes, his contention, upon which most of his argument is based is that income derived from a fractional interest in real property owned absolutely by petitioner's wife, as trustee, is not taxable to petitioner, citing George K. Brennen, 4 T. C. 1260; Paul G. Greene, 7 T. C. 142; and Edwin F. Sandberg, 8 T. C. 423. In those cases it was held that income derived from real property held by husband and wife as tenants by the entirety was taxable one-half to each spouse. The petitioner concedes that the tenancy of the petitioner and his wife, as trustee, is a tenancy in common. He contends, however, that the rule is the same with respect to the income therefrom.

It is well settled that, in order to sustain a family partnership for tax purposes, it must be shown that the members of the family taken into the partnership either invested capital originating with them or substantially contributed to the control and management of the business, or otherwise performed vital additional services, or did all of these things. Commissioner v. Tower, 327 U. S. 280; Lusthaus v. Commissioner, 327 U. S. 293. The capital contributed to the partnership was transferred by petitioner to his wife, as trustee, as a gift, except for the fractional interest in the 2501 Q Street property, for which the wife as trustee gave her note in the amount of $20,973.20. The trust estate provided no income and presumably the note was to be paid out of the income or proceeds of the property if and when improved and rented or disposed of.

The children, beneficiaries of the trusts, were minors and there is no evidence that they contributed any services whatsoever. As to the services performed by petitioner's wife, the evidence is somewhat contradictory. The evidence does not disclose that she substantially contributed to the control and management of the business, or otherwise