6 T.C. 974">*974 The Commissioner has determined deficiencies in petitioner's income tax of $ 13,738.63 for the year 1940 and $ 19,466.53 for the year 1941. These deficiencies are mainly due to a determination made by the Commissioner expressed in his deficiency notice as follows:

It is held1946 U.S. Tax Ct. LEXIS 202">*205 that the entire income of the alleged partnership, shown in the partnership returns filed for years 1940 and 1941 under the name of Francis A. Parker and Irene M. Parker, Co-Partners d/b/a/ Frank A. Parker, is taxable to you.

6 T.C. 974">*975 For 1941 the deficiency is due in part to the disallowance by the Commissioner of a partnership deduction of $ 1,450 expended for attorney fees.

The petitioner contests by appropriate assignments of error the foregoing adjustments made by the Commissioner. Other minor adjustments made by the Commissioner are not contested.

FINDINGS OF FACT.

The petitioner is an individual residing in Auburndale, Massachusetts. For both of the taxable years he filed his income tax returns with the collector for the district of Massachusetts.

Facts with Reference to Partnership.

From about 1934 on, Irene M. Parker, his wife, assisted petitioner in carrying on a business from their residence in Auburndale, Massachusetts. The petitioner was employed as a salesman for certain companies and was paid on a salary and commission basis and was away from home for long periods, thereby requiring that Mrs. Parker, practically alone except for the assistance of a salesman 1946 U.S. Tax Ct. LEXIS 202">*206 other than the taxpayer, carry on a small trading business in tools and machine parts which were kept in a room in their home. The sales of these tools and machine parts which were kept in stock and sold direct to customers amounted to about $ 10,000 or $ 11,000 in each of the years 1940 and 1941. The stock of these tools and machine parts carried varied in value from as low as $ 100 at times to as high as $ 7,000 at other times. Mrs. Parker had had general office and secretarial experience before her marriage and was, therefore, qualified to carry on in this manner. She was also a joint owner of the two-family Fern Street house from which the small tools and machine parts business was operated, and had actually contributed substantially toward the purchase of the property with her own funds inherited from her father. Rents received from the portion of the premises unoccupied by the Parkers were used to pay business expenses.

Shortly prior to 1940 the petitioner and his wife agreed that if he would cease his employment for others, obtain the representation of three or four major machine tool manufacturers, and go out on the road selling, Mrs. Parker, now that her four sons had1946 U.S. Tax Ct. LEXIS 202">*207 grown up, would work full time in the business. The contracts under which the petitioner became the representative of four machine tool manufacturers were signed by the petitioner as Frank A. Parker, the name under which the business in question has always been and still is conducted, Mrs. Parker did not sign the contracts. The machines which were sold by the petitioner under these contracts were billed direct to the 6 T.C. 974">*976 purchaser by the manufacturer and the petitioner was credited with commissions on the sales. Later checks were sent to petitioner in payment of these commissions. He endorsed these checks and they were deposited in the joint bank account of Francis A. and Irene Parker.

They agreed how the net profit was to be divided between them. Mrs. Parker was to receive 20 percent for her share of the profits, while Parker was to receive 80 percent. Neither was paid a salary. No written agreement was drawn up and none existed in the taxable years we have before us. She agreed to devote her time to managing the office, which included answering the telephone, handling the correspondence, securing orders from customers who came into the store or telephoned in, writing1946 U.S. Tax Ct. LEXIS 202">*208 up orders, shipping material from the inventory on hand, invoicing sales of materials and purchases of materials from manufacturers to replenish the inventory, taking care of orders obtained by the other salesman, as well as those obtained by the petitioner, and other details usual to office management, including the operation of a photostat machine.

During the taxable years 1940 and 1941, following this agreement, Mrs. Parker contributed her full-time services to the business. Included in her duties, in addition to those mentioned above, where the making of a record of all checks received in payment of sales, depositing them in a joint bank account in the name of herself and Parker, drawing checks to pay bills of the partnership, handling customers' complaints on shipments and deliveries, discussing business matters directly with the various manufacturers by telephone, and handling all matters of Government priorities on goods sold by the firm.

In addition to contributing her share of the joint bank account used in commencing the new business, she contributed her share for the first five months of 1940 of the office space at 20 Fern Street, which was owned jointly with Parker, without1946 U.S. Tax Ct. LEXIS 202">*209 charge to the business. From June 1940 and all of 1941 she provided office space at 19 Oakland Avenue which she owned solely. No rent was charged the partnership for this business space.

For the year 1940 Mrs. Parker received $ 20,027.33 from the business as her share of the partnership profits. Part of this sum was paid by checks drawn by herself on the joint account and made payable to herself. Other checks were drawn by her, made payable to investment brokers or Government fiscal agents when buying war bonds. In 1940 Mrs. Parker withdrew sums from the partnership which she used to purchase in her own name individually 10 shares of American Telephone & Telegraph Co. stock for $ 1,723.40, and to make deposits in her own name of $ 5,000 in the Waltham Federal Savings 6 T.C. 974">*977 & Loan Association, $ 5,000 in the First Federal Savings & Loan Association of Boston, and $ 869.81 in the Newton Trust Co., and to buy a home costing $ 9,187.71, title to which is in her own name. The securities and bank accounts were subsequently treated as her own, she being able to do with them as she wanted. Her husband, the petitioner, made no attempt to exercise ownership or control over any of1946 U.S. Tax Ct. LEXIS 202">*210 the foregoing property.

For the year 1941 Mrs. Parker received $ 26,762.34 from the business as her share of the partnership profits. Part of this sum was paid to her by a check drawn by the petitioner in the sum of $ 12,224.69, bearing an endorsement reading "20 per cent of business profits less amount paid during the year." With these funds Mrs. Parker purchased a $ 10,000 U.S. Savings bond in her own name and deposited a substantial part of the balance in the Newton Trust Co. in the name of "Irene M. Parker, Special Account." Only Mrs. Parker could draw on this fund. The petitioner drew out of the business his share of the profits remaining for the year 1941 and he likewise opened an individual checking account in the Newton Trust Co., in the name of "Francis A. Parker, Special Account."

On January 21, 1942, a joint account was opened in the name of Francis A. Parker and Irene M. Parker. The taxpayer contributed $ 16,000 from his own personal checking account and Mrs. Parker contributed $ 4,000 from her own personal account. This was an 80 percent and 20 percent contribution, consistent with their interests in the net profits of the business.

On March 25, 1942, Mrs. Parker 1946 U.S. Tax Ct. LEXIS 202">*211 purchased 20 shares of American Telephone & Telegraph stock in her own name from the proceeds received on account of 1941 profits. At all times she is free to spend her money as she wishes, and she collects dividends on her securities and deposits them in her own individual bank account.

In the year 1939, which is not before us, petitioner and his wife filed a joint return. This was done upon the advice of employees in the office of the collector of internal revenue, Boston, Massachusetts.

For the year 1940 a partnership return was filed in the name of "Francis A. Parker and Irene M. Parker, partners d/b/a Frank A. Parker." This return showed ordinary net income of $ 116,681.85, of which $ 96,654.52 was listed as being distributable to Francis A. Parker and $ 20,027.33 distributable to Irene M. Parker. Francis A. Parker included the above amount of $ 96,654.52 in his individual income tax return for 1940 and paid tax thereon. Irene M. Parker included the above $ 20,027.33 in her individual income tax return which she filed for 1940 and paid tax thereon.

For the year 1941 a partnership return was filed in the name of 6 T.C. 974">*978 "Francis A. and Irene M. Parker, partners, d/b/a Frank1946 U.S. Tax Ct. LEXIS 202">*212 A. Parker." This return showed ordinary net income of $ 133,841.17, of which $ 107,078.83 was listed as being distributable to Francis A. Parker and $ 26,762.34 distributable to Irene M. Parker. Francis A. Parker included the above $ 107,078.83 in his individual income tax return for 1941 and paid tax thereon. Irene M. Parker included the above $ 26,762.34 in her individual income tax return which she filed for 1941 and paid tax thereon.

Item of Attorney Fees.

During 1941 the petitioner consulted the law firm of Goodwin, Procter & Hoar relative to the advisibility of setting up a corporation instead of continuing business as a partnership. Consideration was also given as to admitting the salesman, Ellis, into either the partnership or the corporation. For these legal services the business paid $ 1,450 in 1941. Nothing from this sum represented any charge to the petitioner or his wife for preparing their individual income tax returns, because separate bills of $ 25 each were rendered them for that service, which they each paid, and neither one took any deduction in his or her individual income tax returns for such payment. The bill which Goodwin, Procter & Hoar rendered to1946 U.S. Tax Ct. LEXIS 202">*213 the partnership for the $ 1,450 in question reads as follows:

For Professional Services to the partnership as follows:

Conference with Mr. Parker concerning preparation of income tax return of the partnership: consideration of law and facts; further conference with Mr. Parker re additional data for income tax return; preparation of draft of partnership income tax return; conference with Mr. Parker re same and attending to ship income tax return; conference with Mr. Parker re same and attending to

Conference with Mr. Parker re advisability of transferring assets of partnership to corporation; investigation of law re same; further conference with Mr. Parker re additional data for income tax return; preparation of draf t of partnership agreement; going over same with Mr. Parker; redrafting partnership articles and conference with Mr. Parker re execution of the same.

In the 1941 partnership return, a business deduction for legal expenses paid of $ 1,450 was taken. The Commissioner of Internal Revenue refused to recognize the right of the petitioner to file a partnership return and treated all of the income from the business as belonging to the petitioner. The legal fee was disallowed1946 U.S. Tax Ct. LEXIS 202">*214 as a nondeductible expense and added back to petitioner's net income.

OPINION.

The first question presented for our decision in the instant case is whether a partnership existed between the petitioner and his wife, residents of the Commonwealth of Massachusetts, during the years 1940 and 1941, within the meaning of the Federal statutes. The 6 T.C. 974">*979 applicable statutes are printed in the margin. ¹ We think the question must be answered in the affirmative and that the partnership and the members thereof complied in every respect, in both the taxable years, with the statutes printed in the margin. Respondent in his brief lays great stress on the fact that under the laws of Massachusetts a husband and wife can not legally be partners. He cites us to chapter 209 of the General Laws of Massachusetts, section 2 of which reads:

A married woman may make contracts, oral and written, sealed and unsealed, in the same manner as if she were sole, except that she shall not be authorized hereby to make contracts with her husband.

1946 U.S. Tax Ct. LEXIS 202">*215 Respondent seems to overlook that his own regulations point out that the Federal law has its own definition of partnership and that, in determining whether a partnership exists for income tax purposes, state law is not controlling. See the sections of Regulations 111 printed in the margin. ²

1946 U.S. Tax Ct. LEXIS 202">*216 In some prior cases we have had this question as to how the income of a business carried on by husband and wife in Massachusetts shall be taxed. In Warren MacPherson, 19 B. T. A. 651, we had an issue 6 T.C. 974">*980 similar to the one we have here to decide and, in deciding it in favor of the taxpayer, among other things, we said:

Since we are concerned only with the income of the petitioner [husband], it is not necessary to decide whether the amounts in question were the income of the wife and taxable to her. The evidence is clear that the petitioner was the owner of no more than a 30 per cent interest * * *. This contention is also supported by the partnership agreement. Whether valid or not for the purpose of effecting a partnership under the laws of Massachusetts, that instrument is evidence of the relative interest of the parties thereto. * * *

As the petitioner owned only 30 per cent * * * it follows that he is taxable only on that proportion of the distributable net profits thereof unless under the laws of Massachusetts income from property separately owned by the wife is taxable to the husband. As far back as 1842, Massachusetts began to modify1946 U.S. Tax Ct. LEXIS 202">*217 and alleviate the harsh rules of the common law which govern the property relations of husband and wife. * * *

* * * we are of the opinion that the petitioner is taxable * * * on only 30 per cent of the distributive profits * * *.

In Anna E. Riley, 29 B. T. A. 160; petition for review dismissed, 70 Fed. (2d) 1013, we laid down what seems to be the correct rule in such cases coming up from Massachusetts. In that case, among other things, we said:

The disability of the husband and wife to contract with one another is for the protection of the wife. * * * To put them on a par with contracts tainted with fraud or prohibited by positive law as being morally or economically vicious would be logically indefensible. Certainly the protection afforded the wife by the law was not meant to deprive her of the right of protecting her interest in the property or hamper her in the proper conduct of her business. Where contracts of this character have become fully executed and no fraud is apparent, it is the policy of the law not to disturb them. In such cases both this Board and the courts have recognized such contracts and given effect1946 U.S. Tax Ct. LEXIS 202">*218 to the rights of the parties which have been fixed thereby. See Hamilton v. Commissioner, 24 Fed. (2d) 668; Pugh v. United States, 48 Fed. (2d) 600; J. W. Brackman, 24 B. T. A. 259; Lewis E. Tifft, 25 B. T. A. 986; Warren MacPherson, 19 B. T. A. 651; Elizabeth M. Coombs, 25 B. T. A. 1320; L. F. Sunlin, 6 B. T. A. 1232.

Respondent in his brief lays great stress on Tenney v. Commissioner, 120 Fed. (2d) 421, which reversed a memorandum opinion of the Board. We think the facts of that case clearly distinguish it from the instant case. In the Tenney case the wife entered into an agreement with her husband whereby she was to supply capital for stock market operations. All capital, so supplied, was to remain her property and losses as well as profits derived from capital gains were to be apportioned equally. The wife retained the right to all dividends and income from the capital. Her husband was to advise as to the purchase1946 U.S. Tax Ct. LEXIS 202">*219 or sale of stocks and bonds, but she was not required to follow his advice. A net capital gain for the year was realized, and the Commissioner held all the gain to be income to the wife. The Board of Tax Appeals held only one-half of it to be income to the wife. The court, in reversing our decision, among other things, said:

6 T.C. 974">*981 In the case at bar the profit of $ 36,384.72 represented net capital gains realized upon the sale of securities owned by the taxpayer alone. Legally, the whole gain accrued to the taxpayer, and any claim which Mr. Tenney might have to a share in the profits necessarily rests upon the unenforceable agreement between himself and his wife. The whole of the gain is taxable to Mrs. Tenney. Turbeville v. Commissioner, 84 F.2d 307. See Lucas v. Earl, 281 U.S. 111">281 U.S. 111, Burnet v. Leinenger, 285 U.S. 136">285 U.S. 136. [Italics supplied.]

In the instant case we have no question of capital gains resulting from the sale of stocks which were owned entirely by one of the spouses. Here we have the question of the taxability of profits from a business jointly carried on1946 U.S. Tax Ct. LEXIS 202">*220 by the husband and wife, and where both the husband and the wife devoted all of their time to the business and the parties had agreed between themselves as to the proportion of profits which each should receive. The proportion of 80 percent to petitioner and 20 percent to Mrs. Parker agreed upon between them seems to be entirely fair and reasonable. We see no reason whatever that we should disturb it.

To the extent that Mrs. Parker received profits from the business carried on by herself and husband, they are under Massachusetts law her own property and consequently are taxable to her under Federal law, even though it be conceded she might have no enforceable right of action against her husband to collect them had she not received them. The point is that she did receive her part of the profits from this business operated jointly by herself and husband; she used these profits as she pleased; and she paid taxes on them. We think she acted correctly under the statutes printed in the margin and that petitioner is not taxable on his wife's share of the profits under the authorities which we have cited above.

The Supreme Court recently decided two husband and wife partnership cases, 1946 U.S. Tax Ct. LEXIS 202">*221 Commissioner v. Tower, 327 U.S. 280">327 U.S. 280, and Lusthaus v. Commissioner, 327 U.S. 293">327 U.S. 293. These cases were decided after briefs were filed in the instant case and, therefore, have not been discussed by the parties in their briefs. It, of course, goes without saying that, if the Supreme Court's decisions in the Tower and Lusthaus cases have in effect overruled such cases as Warren MacPherson, supra, upon which petitioner relies, then we must follow these decisions of the Supreme Court and not our own prior decisions. We do not think, however, that there is anything in either of these two recent decisions of the Supreme Court which overrules our decision in Warren MacPherson, supra, and the other cases which we have cited above.

In 327 U.S. 280">Commissioner v. Tower, supra, the Supreme Court, after stating the determination of the Commissioner and the applicable statutes, stated that the basic question to be decided was:

* * * Was the income attributed to the wife as a partner income from a partnership for which she alone was liable1946 U.S. Tax Ct. LEXIS 202">*222 in her "individual capacity," as provided 6 T.C. 974">*982 by 26 U.S. C. §§ 181 and 182, or did the husband, despite the claimed partnership actually create the right to receive and enjoy the benefit of the income, so as to make it taxable to him under Sections 11 and 22 (a)?

That is the same question we have here to decide. In the Tower case, the Supreme Court decided the issue against the taxpayer upon the strength of certain findings of fact which had been made by the Tax Court. In making its decision, the Court pointed out that in the case it had been conceded that the wife had contributed no services to the alleged partnership, but did contend she had made a capital contribution of funds which had been given to her by her husband. The Tax Court had found against this latter contention and the Supreme Court ruled that its findings were amply supported by evidence. In its opinion the Supreme Court quoted the following as an accepted definition of a partnership:

* * * A partnership is generally said to be created when persons join together their money, goods, labor, or skill for the purpose of carrying on a trade, profession, or business and1946 U.S. Tax Ct. LEXIS 202">*223 when there is a community of interest in the profits and losses. * * *

Tested by the foregoing definition, we think petitioner and his wife were clearly carrying on a business partnership in the two taxable years which we have before us. The Supreme Court in the Tower case took pains to point out:

There can be no question that a wife and husband may, under certain circumstances, become partners for tax, as for other purposes. If she either invests capital originating with her or substantially contributes to the control and management of the business, or otherwise performs vital additional services, or does all of these things she may be a partner as contemplated by 26 U.S. C. §§ 181, 182. * * *

In the instant case Mrs. Parker undoubtedly brought some of her own individual capital into the business and it remained in the business. Just how much, the evidence does not clearly show. Cf. Felix Zukaitis, 3 T.C. 814. But even if it be assumed that the evidence does not show that Mrs. Parker made any substantial contribution of capital to the business, yet it is perfectly clear that she did, to use the language 1946 U.S. Tax Ct. LEXIS 202">*224 of the Supreme Court in the Tower case, "substantially contributes to the control and management of the business, or otherwise performs vital additional services, or does all of these things." In our findings of fact we have found that the nature of Mrs. Parker's services to the business included answering the telephone, handling the correspondence, securing orders from customers who came into the store or telephoned in, writing up orders, shipping material from the inventory on hand, invoicing sales of materials and purchases of materials from manufacturers to replenish the business inventory, taking care of orders obtained by the other salesmen, including petitioner, making a record of all checks received in payment of sales, 6 T.C. 974">*983 depositing them in a joint bank account in the names of herself and Parker, drawing checks to pay bills of the partnership, handling customers' complaints on shipments and deliveries, discussing business matters directly with the various manufacturers by telephone, and handling all matters of Government priorities on goods sold by the firm.

The performance of the foregoing duties took all of Mrs. Parker's time during working hours and, therefore, 1946 U.S. Tax Ct. LEXIS 202">*225 the partnership had full-time service from her. Petitioner and Mrs. Parker both testified at the hearing, and we think the foregoing findings are fully justified by their testimony, which was not shaken on cross-examination. There is no evidence to the contrary and there is no evidence from which we would be justified in making contrary inferences. Therefore, we think, applying the tests applied by the Supreme Court in the Tower case, we must decide the main issue in favor of the petitioner. The Supreme Court's decision in 327 U.S. 293">Lusthaus v. Commissioner, supra, was to the same effect as its decision in the Tower case, the Court pointing out that the issue was the same and the facts, in effect, the same. Therefore, we do not enter upon any separate discussion of the Lusthaus case, deeming that unnecessary.

Deduction of Attorney Fees.

The second issue concerns the disallowance of $ 1,450 attorney fees paid out by the partnership in 1941 to the law firm of Goodwin, Procter & Hoar for services rendered. The nature of these services has been detailed in our findings of fact. Respondent cites in support of his contention Motion Pictures Capital Corporation, 32 B. T. A. 339;1946 U.S. Tax Ct. LEXIS 202">*226 affd., 80 Fed. (2d) 872. In that case the legal fees which the taxpayer corporation paid to its attorneys were for their services in consummating a merger between two corporations, and we held that such expenditures were capital expenditures and not deductible as ordinary and necessary business expenses. The situation is different here. The partnership was deliberating in 1941 as to whether it would change from a partnership to a corporation; also consideration was given as to admitting the salesman, Ellis, into either the partnership or the corporation. It was finally decided, after weighing the advice of counsel, not to change the form of the business from a partnership to a corporation, and it was also decided not to take Ellis into the business as a partner. For their services in giving advice on these matters and for making out the partnership income tax return, the partnership paid to the attorneys in 1941 the $ 1,450 in question. We think the expenditure is deductible as an ordinary and necessary business expense by the partnership. See Doernbecher Manufacturing Co., 30 B. T. A. 973. In that case the taxpayer paid1946 U.S. Tax Ct. LEXIS 202">*227 out $ 9,902.58 in 6 T.C. 974">*984 1929 to a committee as its part of the expenses of appraisers and auditors for their services in connection with a proposed merger with other corporations, which plan was abandoned in the taxable year. On the facts in that case we allowed the expenditure as an ordinary and necessary business expense. We think that under the same reasoning we must allow the deduction here. We can not see where it was a capital expenditure, as respondent seems to contend; nor do we think it was a personal expenditure. It had nothing to do with filing the individual income tax returns of petitioner and his wife. The evidence shows that they each paid $ 25 to the same firm of lawyers for preparing their income tax returns and that these amounts were in no way included in the $ 1,450 in question. Also, neither petitioner nor his wife deducted the $ 25 which each paid for the preparation of his individual income tax return. It is true that the $ 1,450 attorney fee included payment to the law firm for making out the partnership income tax return as one of the services performed, but this was clearly a business expense of the partnership and is properly deductible. See 1946 U.S. Tax Ct. LEXIS 202">*228 Mertens Law of Federal Income Taxation, sec. 25.40, vol. 4, and cases there cited.

Decision will be entered under Rule 50.

Harron, J., dissenting: The majority view is founded upon a conception of the facts which, I am reluctant to observe, appears to be a misconception of the evidence. Many of the facts found are, to me, irrelevant to the question at issue, while the emphasis which I think should be given to some facts is not given. If the Circuit Courts are powerless to substitute their inferences for the ones we make from the evidence, no advantage would follow from any extended discussion by dissenting members of this Court of the reasons why the facts should have been found otherwise. If this were all there were to the instant case, it would be sufficient to note merely dissent. But a fundamental error of law permeates the whole of the majority opinion, which necessitates a somewhat detailed discussion.

Ever since Lucas v. Earl, 281 U.S. 111">281 U.S. 111, it has been the cardinal rule in our tax law that earned income is taxable solely to the person who earns the income. So firmly is the principle entrenched that, regardless of the methods1946 U.S. Tax Ct. LEXIS 202">*229 available to taxpayers to deflect the tax on income other than earned income by anticipatory assignments, the taxpayer who earns his income in the form of commissions paid for personal services performed has no avenue of escape. Helvering v. Eubank, 311 U.S. 122">311 U.S. 122. Until the present decision, we too have kept 6 T.C. 974">*985 the doors closed. See, e. g., Clarence L. Fox, 5 T.C. 242, 245, 249; William G. Harvey, 6 T.C. 653. But just as this Court failed to appreciate the far reaching effect of Lucas v. Earl in the Harmon case (1 T.C. 40) as applied to an elective community property system, and was reversed for it (323 U.S. 44">323 U.S. 44), so the present decision must surely be overturned on appeal.

From the facts as found by the majority, we see that during the taxable years petitioner was the representative of four machine tool manufacturers, selling strictly on a commission basis. He traveled most of the time and the machines which he sold as the factory representative by contact with customers were billed and delivered direct to the1946 U.S. Tax Ct. LEXIS 202">*230 purchaser by the manufacturer. Petitioner was then credited with commissions on the sales. The business of the alleged partnership is held to have been these sales of machines on commission by "the petitioner" (alone) and the sale of tools and machine parts out of inventory stock kept in a room in the home of petitioner and his wife. The majority opinion makes no specific finding of fact that of the gross income reported by petitioner on partnership forms, more than 92 percent in 1940 and 94 percent in 1941 ¹ represented commissions earned solely by petitioner on his sales of machines. Yet the record demands such finding of fact. Even under the findings as made, we see that the sales of tools and machine parts out of stock from the home amounted to only $ 10,000 or $ 11,000 in each of the taxable years, and that the value of the inventory kept on hand varied between $ 100 and $ 7,000. Yet the returns for 1940 and 1941 revealed ordinary net income in the respective amounts of $ 116,681.85 and $ 133,841.17. Hence, out of yearly net income of well over $ 100,000, less than 10 percent only can possibly be attributed to the sales out of the stock at the home.

1946 U.S. Tax Ct. LEXIS 202">*231 Although there is a most strong suggestion in the record that petitioner actually conducted two businesses, one consisting of his selling of the machines on commission and the other of the sale of tools and parts from the home, I appreciate that it is the function of this Court, in this case the majority, to determine whether separate transactions shall be integrated for tax purposes into one transaction or retain their separate identity. Dobson v. Commissioner, 320 U.S. 489">320 U.S. 489. Nevertheless, I can not conceive that a traveling salesman, which is really what petitioner was, can reallocate for tax purposes to his wife the commissions earned as a result of his personal efforts, by the formation of a partnership which directs less than 10 percent of its activities 6 T.C. 974">*986 into channels capable of being run as a husband-wife partnership. For it is patent on the face of the findings of the majority that the wife contributed no capital to the "selling on commission" phase of the business, which required none, nor did she contribute to the control and management of petitioner's personal contact with his customers or otherwise perform services vital in 1946 U.S. Tax Ct. LEXIS 202">*232 the production of the commissions earned by petitioner, to meet the tests laid down by the Tower and Lusthaus cases. Amplifying, but not changing the majority's findings, we see that, as to the commission sales phase of the business, the wife, experienced in stenography, took dictation from petitioner over the week-ends when he was at home, typed the dictation during the week, typed and photostated the order forms which petitioner sent to the factories to place orders for machines which he sold, checked to see that War Production Board priority forms were attached to the orders, answered the telephone, and handled correspondence. The shipping of material from inventory at hand and the invoicing sales of materials and purchases of materials from manufacturers to replenish the inventory, obviously can refer only to the 10 percent "sales from the home" phase of the business, since the machine tools petitioner sold on commission were billed and delivered direct to the customer by the manufacturer. The findings do not specify whether the orders the wife secured from customers who telephoned in or who came to the store at the house related to the sales of tools and parts from 1946 U.S. Tax Ct. LEXIS 202">*233 the home, or to the machine tools which petitioner was selling on the road. So, too, with the "taking care of orders obtained by the other salesman." But even if some of petitioner's machine tool customers phoned in an order or came to the house to place an order, which is very unlikely, the fact that the wife was there to take it makes her no more a partner than the typical clerk or secretary. The services she rendered were rendered to petitioner and were not "vital" within the meaning of the Tower case to the earning of his commission income. At most, the value of the wife's services were a business expense incurred in petitioner's earning his commissions and we could no doubt estimate such "expense" and allow petitioner a deduction therefor. See Max German, 2 T.C. 474.

I must admit also that I have grave doubts as to the answer given by the majority opinion to the respondent's argument that no valid partnership could exist between petitioner and his wife under Massachusetts law. It is, of course, true that for purposes of taxation Congress is not limited by the conception of a partnership entertained under state law. See Burke-Waggoner Oil Association v. Hopkins, 269 U.S. 110">269 U.S. 110.1946 U.S. Tax Ct. LEXIS 202">*234 The mere fact, therefore, that the state recognizes the validity for local purposes of the husband-wife partnership does not mean, as shown by the Tower case, that the partnership must be recognized 6 T.C. 974">*987 for tax purposes. But the converse is not necessarily true. If under state law a wife can not contract and be a partner with her husband, to the extent her "partnership" contribution consists of services performed, as here, she would not be entitled to the distributive share of the profits fixed in the partnership agreement, but only, if anything, to a quantum meruit for the reasonable value of her services. The revenue acts would be then guided by the property rights of the parties. See Morgan v. Commissioner, 309 U.S. 78">309 U.S. 78. Under chapter 209, section 2, of the General Laws of Massachusetts a married woman is not authorized to enter into a partnership with her husband. In Edgerly v. Equitable Life Assurance Society, 191 N.E. 415, 417, the Supreme Judicial Court of Massachusetts pointed out that "There is nothing in the uniform partnership statute as adopted by this commonwealth * * * which changed1946 U.S. Tax Ct. LEXIS 202">*235 the previously existing law with respect to the incapacity of a married woman to make a contract a partnership with her husband." Respondent has not cited this case.

In conclusion, the facts that no written partnership agreement was executed, the partnership was conducted in petitioner's own name, and the inability under Massachusetts law for a husband and wife to enter into a valid enforceable partnership make the present arrangement questionable, to say the least. But if a partnership exists here which can be recognized for tax purposes, I can not see how the partnership income can include anything more than the $ 10,000 or $ 11,000 of gross income derived from the sales of tools and parts out of stock kept in the home. The 80-20 percent allocation procedure specified in the "agreement," therefore, could only apply to this income, and petitioner would be taxed in full on all the commissions which he earned on his sales of machine tools as the representative of the four machine tool manufacturers.