Full opinion text
GRAVEN, District Judge. A partnership income tax case in which the plaintiff seeks refund of federal income taxes for the calendar years 1943, 1944, and 1945 in the respective amounts of $17,-854.36, $11.877.85, and $13,607.63. The plaintiff made timely request for a jury trial as to those issues properly triable to a jury. The parties stipulated that there were certain issues having to do with the relation of a trust to the partnership in question and the matter of consent to the admission of a claimed partner, which- should be determined by the Court in advance of the trial. of any issues to a jury. The parties stipulated to, the facts .that they deemed relevant to the issues involved. For several years prior to January 1, 1920, one S. Hanson, of Boone, Iowa, had been engaged as sole owner in the whole-, sale and retail lumber business in the City of Boone and in a number of other cities and towns in the State of Iowa under the name of S. Hanson Lumber Company. On January 1, 1920, S. Hanson transferred a 54 interest in that business to his wife, Emma Hanson; a }4 interest*to his son, R. M. Hanson, and a J4 interest to his daughter, Elsie Hanson. He retained a }4 interest for himself. A partnership was then formed composed of S. Hanson, Emma Hanson, R. M. Hanson and Elsie Hanson. Elsie Hanson subsequently married one William L. Olson. That partnership with those partners carried on the business of the partnership under the name of S. Hanson Lumber Company until February 23, 1923. The partnership agreement provided for an equal sharing in the profits and ■losses; that the active management of the business should be by S. Hanson and R. M. Hanson and that it should continue until dissolved by the mutual agreement of the parties. On February 23, 1923, S. Hanson died testate a resident of the State of Iowa. In his will he devised and bequeathed the property belonging to him as follows: To Emma Hanson, his wife, an undivided Va > To. R.. M. Hanson, his son, a life estate in an undivided 54 with remainder over; To Elsie Hanson Olson, his daughter, a life estate in an undivided 54 with remainder over; To Emma Hanson and R. M. Hanson, as Trustees, an undivided 54 to be held by them in trust for the benefit of Sigrid Hanson, a mentally incompetent daughter, during her lifetime with remainder over. In his will S. Hanson referred to his 54 interest in the partnership and expressed the will and desire that the business of the partnership be continued in the same manner as theretofore and that his -54 interest which he had devised and bequeathed, as set out above, should remain in the business. The will of S. Hanson was duly admitted to probate. Following the probate thereof, the interests in the partnership assets of S. Hanson Lumber Company were as follows: Emma Hanson, an undivided 5/16 interest ; R. M. Hanson, an undivided 5/16 interest (1/16 as' life tenant) ; Elsie Hanson Olson, an undivided 5/16 interest (1/16 as life tenant); R. M. Hanson and Emma Hanson, as Trustees for Sigrid Hanson, an undivided 1/16 interest therein. The business of the partnership was carried on following the death of, S. Hanson in the same manner as theretofore. In 1927 Emma Hanson and R. M. Hanson,, executors of the estate of S. Hanson, made application to the District Court of Iowa in connection with the estate. The applicants, after stating that the business of the partnership had been carried on as desired by the testator in his will, indicated that questions had been raised by proposed purchasers of real estate from the partnership as to who might make proper conveyance thereof. On April 17, 1927, that Court entered an order declaring that the surviving partners of the S. Hanson Lumber Company and the legatees under his will who were then in esse had the right to convey and execute proper conveyances of any of the real estate owned by the S. Hanson Lumber Company. Sometime following April 13, 1927, Emma Hanson died testate. Her will was duly admitted to probate. She willed and devised all her property to her ■ son, R. M. Hanson, and her daughter, Elsie Hanson Olson, share and share alike. Thereupon the interests in the partnership assets of the S. Hanson Lumber Company were as follows: R. M. Hanson, an undivided 15/32 interest (2/32 as life tenant) ; Elsie Hanson Olson, an undivided 15/32 interest (2/32 as life tenant) ; R. M. Hanson, as Trustee for Sigrid Hanson, an undivided 1/16 or 2/32 interest. On December 30, 1941, R. M. Hanson executed the following Indenture of Trust: “INDENTURE OF TRUST “KNOW ALL MEN BY THESE PRESENTS : “That I, Reinhold M. Hanson (sometimes known as R. M. Hanson), of Boone County, State of Iowa, in order to provide for the security and general welfare of my two children, do hereby give, convey, transfer, assign and set over unto R. M. Hanson, 'Stella C. Hanson and F. L. Mackey of Boone County, State of Iowa, as Trustees, for benefit of my son Reinhold Melvin Hanson and daughter Joreen Ann Hanson, an undivided THIRTEEN-SIXTY-FOURTHS (13/64) interest in and to the partnership of S. Hanson Lumber Company; said property to be held by said Trustees and managed, controlled, used and disposed of in accordance with the following provisions made for their government : “First. That the said Trustees shall hold all of the property (hereinafter called the Trust Fund) conveyed to them by this instrument, in trust for the purposes, with the powers and subject to the limitations hereinafter declared, for the benefit of my son Reinhold Melvin Hanson and my daughter Joreen Ann-Hanson, and it is expressly declared that, as between the Trustees and beneficiaries herein, a trust, and not a partnership, is hereby created and neither the Trustees nor Reinhold Melvin Hanson and Joreen Ann Hanson shall ever be personally liable hereunder as partners of the S. Hanson Lumber Company, all such personal liability being retained and assumed by the Grantor herein and as an individual only. “Second. The title of this trust shall be ‘R. M. Hanson Trust’ and the term ‘Trustees’ shall be .deemed to include the original and all successor trustees. “Third. The Trustees, shall, during the period of this trust, pay to, or for the benefit of, each of the beneficiaries thereof, such portion of the income therefrom as they shall deem necessary and proper for the support, education and maintenance of each of the beneficiaries in the comforts and! sphere of life which is rightfully theirs. And in so doing, the Trustees shall have wide discretionary powers. “Fourth. When Reinhold Melvin Hanson shall arrive at the age of Thirty years, the Trustees herein shall assign, transfer, and set over unto him one-half of the then Trust Fund and this trust, as to said Reinhold Melvin Hanson, shall cease and terminate. “When Joreen Ann Hanson shall arrive at the age of Thirty years, the Trustees herein shall assign, transfer and set over unto her the remaining one-half of said Trust Fund and the trust, as to said Joreen Ann Hanson, shall cease and terminate. “Should either Reinhold Melvin Hanson or Joreen Ann Hanson die before reaching the age of Thirty years, leaving no child or children surviving, then and in that event, the share of the one so dying shall go to the survivor of them, but if a child or children survive the one so dying, the otherwise share of the one so dying shall go to the -child or children surviving, in equal shares, with right of survivorship, and this trust shall terminate when said child, or the youngest of them, if more than one, reaches the age of Thirty years, or, at the death of such a child, or the survivor of them if more than one, prior to attaining the age of Thirty years, in which case the administrators or- executors of the deceased one shall be entitled to receive, forthwith, that portion of the Trust fund that would have gone to such a one had he or she lived to attain said age of Thirty years. “Fifth. The Trustees herein shall have as full power and discretion, as if absolute owners, to invest and re-invest the Trust Fund, or any part thereof, including income therefrom, in real estate or personal property, including bonds and notes or obligations secured upon real estate; said Trustees shall also have full power and discretion to sell, transfer and convey, from time to time, any part or all of said Trust Fund, upon such terms and conditions as they see fit; said Trustees shall also have power, should the occasion arise, to borrow money, for such time and upon such conditions as they see fit and give security therefor. In general, said Trustees shall have full power to do all acts and things, which in their judgment, are necessary, proper, advantageous or expedient to promote the complete and successful execution of this trust and the interest of the beneficiaries thereunder; the Trustees having for all of the aforesaid purposes and for all purposes of sale, lease, mortgage, exchange, investment and reinvestment and any and all arrangements, contracts and. dispositions of the trust property, or any part thereof, all and as full and discretionary powers and authority as if they were themselves the sole and absolute beneficial owners thereof in fee simple. The naming of any specific duties and powers herein shall not, however, be construed as limiting in any way the general powers of the Trustees. “Sixth. The execution of all contracts, conveyances, transfers and all other instruments relating to the Trust Fund, or any part thereof, shall be made by all of the Trustees herein. “Seventh. No purchaser from, or lender to the Trustees, shall be bound to make any inquiry concerning the validity of any sale, pledge, mortgage, loan or purchase purporting to be made by the Trustees, or be liable for the application of money paid or loaned. “Eighth. The Trustees may act with or without a meeting and the action of a majority of the Trustees shall be valid and binding. The Trustees may adopt, for their conduct, such reasonable rules and regulations as are not inconsistent with the terms of this instrument. “Ninth. The Trustees may employ such agents and attorneys as they may think proper and find expedient, and shall not be personally responsible for any misconduct, errors or omissions of such agents or attorneys employed and retained with reasonable care. “Tenth. The Trustees shall keep full and proper books of account and records of their proceedings and doings and shall render an account of the trust at all reasonable and necessary times, and no trustee serving hereunder shall be obliged to give any bond, or have any liability except for the results of his own gross negligence or_ bad faith. Each Trustee hereunder shall receive such reasonable pay for services rendered, as the majority of the Trustees shall see fit to allow. “Eleventh.' Any Trustee hereunder may resign at any time by written instrument duly acknowledged and delivered to the remaining Trustees and such resignation shall thereupon become effective. “Any vacancy in the office of Trustee, however occasioned, shall be filled by the remaining Trustees in office by an instrument in writing, signed and acknowledged and attached to the original of this instrument; such Trustee thus chosen shall signify acceptance by a written instrument duly acknowledged, and shall thereupon have all the rights, powers and duties of an original Trustee. “The title of any outgoing Trustee shall vest in the remaining Trustees, and upon the filling of any vacancy, the title to the whole Trust Fund shall vest jointly in those who shall then be Trustees hereunder. “Twelfth. Without in any manner limiting the powers, duties and discretions given to the Trustees by this instrument, this Trust shall be considered as being within the jurisdiction of the proper court, and should changed conditions or circumstances arise during the period of this trust of such a nature as to create doubt in the minds of the Trustees as to the best manner of carrying out this trust, said Trustees may apply to a court of equity for direction as to their powers, duties and obligations. “Thirteenth. The assets of the S. Hanson Lumber Company, for the purpose of this’ transfer in trust, shall be as evidenced by the Inventory of the S. Hanson Lumber Company as of date December 31, 1941, and the real estate so owned by it on said date, less any and all debts and liabilities owing by the said S. Hanson Lumber Company at the close of business on December 31, 1941. “Fourteenth. The Trustees shall, in the administration of this trust, be ever mindful of the manner in, and purpose for, which the partnership of S. Hanson Lumber Company was created so that the intent of its founder, S. Hanson, deceased, as expressed in the Partnership Contract and his Last Will and Testament, shall prevail so long as practicable; said intent being that the interests of all the parties composing said partnership be kept together in said business and said business continued. Therefore, so much of the Trust Fund that shall now, or hereafter be, an interest in the business of S. Hanson Lumber Company, shall be allowed to remain in said business subject to the same management control and use as are the other interests in said partnership and all acts of said partnership, in the conduct of its business shall be binding upon the Trustees herein and the Trust Fund herein created, except as otherwise provided herein. “Fifteenth. It is intended hereby that title to every item of property now, or hereafter, constituting the Trust Fund shall be vested solely in the Trustees, and the beneficiaries shall have no legal or equitable title, right or interest in or to any item thereof. The right of each beneficiary, his or her administrators, executors or heirs being, during the administration of the trust, limited to the income distributable hereunder and on the termination of the trust limited to the distributable proceeds of the Trust Fund itself. “Sixteenth. This indenture is executed in six counterparts, each of which so executed shall be deemed to be an original and such counterparts, shall together constitute but one and the same instrument. “And Stella C. Hanson, wife of Reinhold M. Hanson, joins in the execution of this instrument for the purpose of waiving any right of dower, or other interest, she might otherwise have in the property covered by this conveyance. “Signed and sealed at Boone, Boone County, Iowa, this 30th day of December, A. D., 1941. R. M. Hanson Stella C. Hanson” The Trust Indenture was duly acknowledged. The trustees named therein accepted their appointments and since have been the duly qualified and acting trustees of that trust, which is referred to in the complaint and in the stipulation as the R. M. Hanson Trust. Stella C. Hanson, named therein as a Trustee, was and is the wife of R. M. Hanson. R. M. Hanson at all times since the death of S. Hanson has had the sole responsibility for the management of the business of the S. Hanson Lumber Company. Attached to the Trust Indenture is the following: “Consent and Acceptance by Partnership “The S. Hanson Lumber Company, a partnership heretofore composed of R. M. Hanson and Elsie Olson, hereby acknowledges receipt of a copy of a Trust Inden-i ture of date December 30, 1941, wherein R. M. Hanson conveys, in trust, an undivided THIRTEEN-SIXTY-FOURTHS (13/g4) interest in and to the S. Hanson Lumber Company for the benefit of his two childdren, Reinhold Melvin Hanson and Joreen Ann Hanson, and said S. Hanson Lumber Company hereby consents to said transfer of interest and agrees to recognize the terms and conditions thereof and to so change its books and records to show such new ownership of interest. It is hereby agreed that such transfer of interest by R. M. Hanson shall not be construed as in manner terminating the partnership of S. Hanson Lumber Company but only as an enlargement of -the ownership thereof for the benefit of additional descendants of its founder S. Hanson. “Dated at Boone, Iowa, this - day of January, 1942. S. HANSON LUMBER COMPANY By R. M. Hanson There was attached to the Trust Indenture an instrument entitled “Consent of Partner” prepared for the signature of ■Elsie Hanson Olson but not signed by her. The plaintiff claimed, and does claim, that for the years in question, 1943, 1944, and 1945, the net income of the partnership should be credited as follows: R. M. Hanson, individually, 17Aí; Elsie Hanson Olson, individually, a%i; R. M. Hanson, Trustee for Sigrid Hanson, %6 or %é; R. M. Hanson Trust, Wei. The Commissioner of • Internal Revenue determined that the R. M. Hanson Trust was not a valid partner in the S. Hanson Lumber Company for federal income tax purposes during the years in question' and held the plaintiff, R. M. Hanson, taxable on the share of partnership income (Wei) attributable to the R. M. Hanson Trust. This determination by the Commissioner resulted in deficiency assessments against the plaintiff in the respective amounts of $17,854.36 for the year of 1943, $11,877.85 for the year of 1944, and $13,607.63. for the year ■of 1945. The plaintiff paid those deficiencies with interest thereon, and on or about August 9, 1949, filed timely claims for refund. By letters dated February 10, 1950, the Internal Revenue Agent in Charge notified plaintiff that he proposed to recommend that said claims for refund be disallowed. Plaintiff brought this action on May 4, 1950, for refund of $43,339.84, with interest and costs as provided by law. It is undisputed that a valid partnership known as the S. Hanson Lumber Company was formed in 1920 and that a valid partnership known as the S. Hanson Lumber Company has been in existence ever since and that during all of that time R. M. Hanson and Elsie Hanson Olson have been valid members of that partnership. The parties are in dispute as to whether the R. M. Hanson Trust became a valid member of that partnership for federal income tax purposes. The issues between the parties are both factual and legal. The factual issue is as to the bona fides of the transaction under which Wei of the net income of the S. Hanson Lumber Company is allegedly taxable to the R. M. Hanson Trust under the rules laid down in the so-called family partnership cases. That factual issue is one properly triable to a jury and is not here involved. The legal issues are two in number. The defendant Collector asserts that the R. M. Hanson Trust was not, and is not, legally capable of being a valid member of the partnership and that, therefore, the trustees of that Trust could not enter into a valid partnership arrangement for and in behalf of the Trust. The defendant Collector further contends that even if the R. M. Hanson Trust were capable of so being it could not do so without the consent of all of the parties then comprising the partnership and that express consent of the trustee of the Sigrid Hanson Trust was lacking. The plaintiff asserts that the trustees had the power to, and could, make the R. M. Hanson Trust a valid partner in the S. Hanson Lumber Company for federal income tax purposes. The plaintiff further contends that the other parties to the partnership arrangement did impliedly consent to the R. M. Hanson Trust becoming a member of the partnership. In his complaint the plaintiff states that, “The R. M. Hanson Trust in the years of 1943, 1944, and 1945 was a partner in the S. Hanson Lumber Co.” The parties stipulated that the Court should determine as a matter of law whether the R. M. Hanson Trust was, or could be during the years in question, a valid partner, in the S. Hanson Lumber Company and whether the express consent of the trustee for Sigrid Hanson was necessary to the R. M. Hanson Trust becoming a member of the partnership. On the question of the capacity of the R. M. Hanson Trust to be a partner, it would seem desirable to first consider some of the general rules of common law relating to trusts and trustees. A trust has been defined as a fiduciary relationship with respect to property, subjecting the person by whom the property is held to equitable duties to deal with the property for the benefit of another person, which arises as a result of a manifestation of an intention to create it. Restatement, Trusts, Section 2, p. 6. A trust relationship involves three elements: (1) a trustee; (2) a beneficiary; and (3) trust property. Restatement, Trusts, Section 2, p. 13. The plaintiff does not contend that the intangible “fiduciary relationship” created by the trust indenture is the partner. His position in the matter of the R. M. Hanson Trust being a partner is that it is the trust property or trust estate which is the partner. The word “trust” is frequently used interchangeably with the words “trust estate” or “trust property” and such use sometimes gives rise to uncertainty. Therefore the word "trust” when used hereafter with reference to a partnership will refer to the trust estate or trust property. The United States Supreme Court in the case of Taylor v. Davis, 1884, 110 U.S. 330, 334, 335, 4 S.Ct. 147, 150, 28 L.Ed. 163, stated: “A trustee is not an agent. An agent represents and acts for his principal, who may be either a natural or artificial person. A trustee may be defined generally as a person in whom some estate, interest, or power in. or affecting property is vested for the benefit of another. When an agent contracts in the name of his principal, the principal contracts and is bound, but the agent is not. When a trustee contracts as such, unless he is bound no one is bound, for he has no principal. The trust estate cannot promise; the contract is therefore the personal undertaking of the trustee. As a trustee holds the estate, although only with the power and for the purpose of managing it, he is personally bound by the contracts he makes as trustee, even when designating himself as such. The mere use by the promisor of the name of trustee or any other name of office or employment will not discharge him. Of course, when a trustee acts in good faith for the benefit of the trust, he is entitled to indemnify himself for his engagements out of the estate in his hands * * The United States Supreme Court recently referred to and quoted the foregoing quotation. Green-ough v. Tax Assessors, 1947, 331 U.S. 486, 494, 67 S.Ct. 1400, 1404, 91 L.Ed. 1621, 172 A.L.R. 329. In Bogert on Trusts and Trustees, 2d Ed., 1942, § 113, pp. 374, 375, in discussing the general rules applicable to a contract entered into by a trustee, it is stated: “The question then arises as to the liability on' such a contract and the remedies of the creditor. The question is decided by careful consideration of the identity of the person who made the promise. The only legal person recognized by the court of law in which the promise will be enforced is the trustee as an individual, and not in his representative capacity. ■ If Henry Smith is trustee under the will of John’ Brown, and Smith contracts for work and materials and promises to pay a certain sum therefor, the court of law regards Henry Smith as the person making the promise and liable upon it. It does not recognize Henry Smith, as trustee, as a distinct legal person at all. The trust estate or trust is certainly not a person in the eye of the law, and the beneficiaries of the trust did not make the contract. The trustee is not their agent. They are not liable as principals. Smith is the only legal entity making the promise and liable upon it. Whether his liability is permanent or will finally be shifted to the trust is of no concern to the law court. It leaves that matter to a court of equity. * * * An action at law cannot be maintained against the trustee as such, or in his representative capacity, and collection cannot be had out of the trust property after judgment obtained.” Trusts were developed by courts of equity. 54 Am.Jur., Trusts, Sec. 3. They are regarded as derivifig their existence from these courts. McCoy v. McCoy, 1911, 30 Okl. 379, 121 P. 176, Ann.Cas.1913C, 146. It has been said that, “Trusts are children of equity; and in a Court of Equity they are at home, under the family roof tree, and around the hearth of their ancestors.” Bleckley, J., 52 Case and Comment 20 (November-December 1947). In cases in which tort liability is asserted against a trustee the general rule is that any judgment obtained is collectible out of his private property and not out of the trust estate or trust assets. 26 R.C.L., Trusts, Sec. 178; 3 Bogert, Trusts and Trustees, 1935, § 731, p. 527; Kirchner v. Muller, 1939, 280 N.Y. 23, 19 N.E.2d 665, 127 A.L.R. 681. The courts are in conflict as to the right of a trustee to reimbursement for tort liability and the extent of the reimbursement. See 23 Iowa Law Review (1938) 669, 670. It is well recognized law that where there is more than one trustee they form but one collective trustee. 26 R.C.L., Trusts, Sec. 196; Nichols v. Pospiech, 1939, 289 Mich. 324, 286 N.W. 633. It is held that a trustee is presumed to know the obligations and limitations connected with his office. In re Trusteeship of Stone, 1941, 138 Ohio St. 293, 34 N.E.2d 755, 760, 134 A.L.R. 1306, 1319. It is a general rule that a trustee cannot delegate his duties and his power to contract to third persons. 2 Scott on Trusts (1939) Sec. 184; Underhill, The Law Relating to Trusts and Trustees (9th Ed. 1939) p. 331. Unbridled discretionary powers in' a trustee negative the existence of a trust relationship. Ponzelino v. Ponzelino, 1947, 238 Iowa 201, 26 N.W.2d 330, 331. The beneficiaries of a trust are not personally subject to liabilities incurred in connection with the administration of the trust. Restatement, Trusts, Secs. 274-277; 2 Scott on Trusts (1939) Secs. 175, 176. In cases where parties designated as beneficiaries of a trust have been held personally liable for such obligations it is usually on the ground that the arrangement between the parties was notoa trust but a partnership and it is often stated in such cases that the so-called trustees are “mere agents” of the beneficiaries. 2 Bogert, Trusts and Trustees, 1942, § 300, p. 991. In 2 C.J.S., Agency, § 3, p. 1035, it is stated as follows: “The agent represents and acts for his principal, and his acts are binding on the principal, but a trustee has no principal and cannot render the creator or beneficiary of the trust liable for his contracts.” In the Indenture of Trust in the present case it was expressly stated that the relation between the trustees and the beneficiaries was “a trust, and not a partnership.” The nature of the interest of a beneficiary in a trust has been the subject of frequent judicial consideration. In the fairly recent case of First & American Nat. Bank of Duluth v. Higgins, 1940, 208 Minn. 295, 293 N.W. 585, 594, it is stated: “The beneficiary may have a vested interest in the trust without having title, legal or equitable, to any specific property held in trust. The question has been argued whether the right of a beneficiary is a mere chose in action consisting of a right in personam -against the trustee to compel him to perform the trust or whether his rights are of a proprietary equitable interest in the corpus itself. The authorities are arrayed in hopeless conflict. I Bogert, Trusts and Trustees, § 183, [p. 515]; 1 Scott on Trusts, § 130.” It would seem desirable next to consider some of the general rules Of common law relating to partnerships. A partnership is contractual in nature, a contract ■being essential to the formation of a partnership. 40 Am.Jur., Partnership, Sec. 20; 20 R.C.L., Partnership, Sec. 4. Every partner has a fiduciary relationship with every other partner. 40 Am.Jur., Partnership; Sec. 128. Partnership involves co-ownership as contrasted with the representative ownership which is a feature of trust relationships. 1 Bogert, Trusts & Trustees, 1935, § 17, p. 65. In the case of Commissioner of Internal Revenue v. Tower, 1946, 327 U.S. 280, 66 S.Ct. 532, 90 L.Ed. 670, 164 A.L.R. 1135, the United States Supreme Court defined a partnership as follows, page 286 of 327 U.S., page 535 of 66 S.Ct.: “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 and when there is community of interest in the profits and losses.” ' The Court cited Ward v. Thompson, 22 How. 330, 333, 334, 16 L.Ed. 249; Meehan v. Valentine, 145 U.S. 611, 618, 12 S.Ct. 972, 36 L.Ed. 835 in support of this definition. This definition of a partnership was cited with approval in the majority opinion in Commissioner of I. R. v. Culbertson, 1949, 337 U.S. 733, 740, 69 S.Ct. 1210, 1213, 93 L.Ed. 1659. See also, Lusthaus v. Commissioner, 1946, 327 U.S. 293, 66 S.Ct. 539, 90 L.Ed. 679. There are numerous definitions of partnership but the definition contained in the Supreme Court cases referred to above would seem to be in accord with the usual definitions of partnership. 40 Am.Jur., Partnership, Sec. 2; 20 R.C.L., Partnership, Sec. 2. A contract of partnership is. in effect one of mutual agency, each party acting as principal in his own behalf and as agent for his co-partner. 40 Am.Jur., Partnership, Sec. 136; 20 R.C.L., Partnership, Sec. 94; Latta v. Kilbourn, 1893, 150 U.S. 524, 543, 14 S.Ct. 201, 37 L.Ed. 1169; Schumann-Heink v. Folsom, 1927, 328 Ill. 321, 159 N.E. 250, 253, 58 A.L.R. 485. In 1 Mechem, Agency (2d Ed. 1914) Sec. 185, it is stated: “It is one of the fundamental principles in the law of partnership, that, within the scope of the partnership business, each partner is the agent of all the other partners for the transaction of the partnership affairs, and his acts are the acts of all.” Each partner possesses equal and general power and authority in partnership matters. Kimbro v. Bullitt, 1860, 22 How. 256, 63 U.S. 256, 266, 16 L.Ed. 313. In many cases there are substantial benefits and advantages in carrying on business by means of a partnership and the rights of a partner in and to the fruits of the partnership are substantial and valuable. However, being a partner can also have its disadvantages. Since a partnership agreement is in effect a contract of mutual agency, each partner is made jointly, and generally, severally, liable for the contractual obligations assumed and the tort liabilities incurred by the other partners in the course of, and within the scope of, the partnership business. 40 Am.Jur., Partnership, Secs. 136, 152, 190. Each partner is individually liable in solidio for the partnership obligations. 40 Am.Jur., Partnership, Sec. 189. Such individual liability is primary and direct. Francis v. McNeal, 1913, 228 U.S. 695, 699, 700, 33 S.Ct. 701, 57 L.Ed. 1029, L.R.A. 1915E, 706. The claim of a partnership creditor for the satisfaction of a claim against the partnership extends to all of the property of all of the members of the firm. Tucker v. Oxley, 1809, 5 Cranch 34, 9 U.S. 34, 40, 3 L.Ed. 29. The United States Supreme Court has stated that the liability of a partner for the obligations of the partnership is, “unlimited personal liability.” Merchants’ National Bank of Cincinnati v. Wehrmann, 1906, 202 U.S. 295, 301, 26 S.Ct. 613, 614, 50 L.Ed. 1036. Such liability being in personam it has no in rem or property limitation and extends to property afterwards acquired by any partner during the legal life of the obligation. The courts -will not sanction arrangements attempting to give persons the advantages and benefits of a partnership without the assumption of the responsibilities connected therewith. 40 Am.Jur., Partnership, Sec. 44. If the parties have the rights of partners, they have the duties imposed by law on partners. Jackson v. Hooper, 1910, 76 N.J.Eq. 592, 599, 75 A. 568, 571, 27 L.R.A.,N.S., 658. In the case of Thompson v. Schmitt, 1925, 115 Tex. 53, 274 S.W. 554, at pages 559, 560, the Court held that it was not legally permissible to set up a partnership composed of non-liable partners save to the extent of their respective capital contributions. A partner may restrict his liability for partnership obligations to his capital contribution by means of a limited partnership arrangement. Such partnerships were unknown to the common law and they are solely creations of local legislative bodies. 40 Am.Jur., Partnership, Sec. 505. Iowa has enacted the Uniform Limited Partnership Act, Chapter 545, Code of Iowa, 1950, I.C.A., but the partnership, in question in this case was not organized under the provisions of that Act. Iowa has not enacted the Uniform Partnership Act. In connection with the problems presented in this case it is necessary to consider who has the capacity to be a partner under the general rules of common law. A partnership is a contractual relation and in order for a person or entity to be a partner he or it must be capable of entering contractual relations. 40 Am.Jur., Partnership, Sec. 22. At common law a married woman could not be a partner. 20 R.C.L., Partnership, Secs. 16, 18; Crane on Partnership (1938) Sec. 8, p. 32. In those states where Married Women’s Enabling Acts have been passed a married woman generally has a right to enter into partnership relations. 40 Am.Jur., Partnership, Sec. 22. Iowa has a Married Women’s Enabling Act. Section 597.18, Code of Iowa, 1950, I.C.A. An infant may be a partner. 43 C.J.S., Infants, § 82, p. 198. His contract of partnership and the liabilities arising thereunder are subject to avoidance or disaffirmance. 40 Am.Jur., Partnership, Sec. 22; 20 R.C.L., Partnership, Sec. 19. An executor or administrator of the estate of a deceased partner may under certain conditions and in certain situations be a partner in the firm of which his decedent was a member. 40 Am. Jur., Partnership, Sec. 287. Such membership is usually permitted only in order to facilitate the sale of the partnership business as a going concern. 3 Bogert, Trusts and Trustees, 1935, § 573, p. 517. Where executors or administrators do become members in the firm of which their decedent was a member, they do so in their personal capacity and they are personally liable for the partnership debts. 40 Am.Jur., Partnership, Sec. 290; 20 R.C.L., Partnership, Sec. 229. In such cases a new partnership is created. Insley v. Shire, 1895, 54 Kan. 793, 801, 39 P. 713, 45 Am.St.Rep. 308. In a few states there are special statutory provisions covering the matter of the substitution of personal representatives of a deceased partner in place of the decedent. See 35 Iowa Law Review (1950) p. 533, footnote 4. In general, the duties of an executor or administrator as contrasted with those of a trustee are limited to the winding up of the estate and are temporary in character. Restatement, Trusts, Sec. 6, p. 23. The carrying on of a partnership business by an executor or administrator is stated to be “fundamentally alien” to his normal functions. 3 Bogert, Trusts and Trustees, 1935, § 574, p. 519. Corporations, including banking corporations, are entities which have capacity to enter into contracts ■within the scope of their corporate activities. While the authorities are not in entire agreement, the more general common law rule is that a corporation may not become a member of a partnership. 13 Am. Jur., Corporations, Sec. 823; 20 R.C.L., Partnership, Sec. 20. Kasishke v. Baker, 10 Cir., 1944, 146 F.2d 113, certiorari denied, 1945, 325 U.S. 856, 65 S.Ct. 1185, 89 L.Ed. 1976. 1 Rowley, The Modern Law of Partnership (1916) 197. The reason frequently given for such exclusion is that the principal-agent and agent-principal relationship of partners is incompatible with control and management of the corporation and its property by its officers and stockholders. 6 Fletcher, Cyclopedia Corporations (Perm.Ed. 1950) Sec. 2520; Mallory v. Hanaur Oil Works, 1888, 86 Tenn. 598, 8 S.W. 396; Hackett v. Multnomah Ry. Co., 1885, 12 Or. 124, 6 P. 659, 53 Am.St. Rep. 327; Whittenton Mills v. Upton, 1858, 76 Mass. 582, 10 Gray 582, 71 Am.Dec. 681. For criticism of this view, see The Corporate Partner by Scott Rowley, 14 Minn. L.Rev. 769 (1930). In the case of Fechteler v. Palm Bros. & Co., 6 Cir., 1904, 133 F. 462, at page 465, the United States Court of Appeals for the Sixth Circuit, in connection with the question of a corporation being a member of a partnership, stated: “The agency of each partner for the partnership is inconsistent with the management of the corporation by its stockholders through directors and officers chosen only by themselves.” It might be noted parenthetically that Section. 2 of-the Uniform Partnership Act provides that the term “Person” includes individuals, partnerships, corporations, and other associations. It is well established that a banking corporation cannot be a member of a partnership. 4 Michie, Banks & Banking (Perm.Ed. 1931) Sec. 43, p. 48. A bank may not become a member of a partnership even where it takes over the interest of a partner in satisfaction of a debt owing to it. Merchants’ National Bank of Cinn. v. Wehrmann, 1906, 202 U.S. 295, 26 S.Ct. 613, 50 L.Ed. 1036. The United States Supreme Court was of the view in the case just cited that it was beyond the power of a bank to assume the unlimited personal liability of a partner. Certain other fundamental common law principles regarding partnerships are to the effect that if the essential elements of a partnership are not present, then a partnership will not be declared even though the parties designate their arrangements as such. 40 Am.Jur., Partnership, Sec. 43. Similarly, if a person or entity is not capable of being a partner, then - designating he or it as such would not make such person or entity a valid partner. The plaintiff in the present case does not claim that either the trustees or the beneficiaries of the R. M. Hanson Trust are the partners but rather that the third element of the trust relationship, the trust property, is a member of the partnership known as the S. Hanson Lumber Company. As heretofore noted, under the common law there are a number of recognized legal tests and legal concepts concerning the capacity of persons and entities to become partners. One of those tests is that in order. for a party to be a partner such party must be capable of contracting or promising to assume the relation of a partner and the liabilities growing out of or connected therewith. The United States Supreme Court has recognized that a trust estate cannot promise and therefore a contract entered into by the trustee is his personal undertaking and not that of the trust estate. Taylor v. Davis, supra. Another common law concept of a partner is that he must be capable of being a party to. an agent-principal, principal-agent relationship. A trust estate as such could not be an agent, for it has no principal. Another common law concept in regard to the status of a partner is that of his unlimited personal liability for the partnership obligations which is not in the nature of an in rem liability limited to certain property. The liability of a trust estate as such for partnership obligations would in effect be a limited, in rem liability. A trust estate partner could presumably receive an unlimited share of the profits of the partnership but would only share in the losses to the extent of the property, contained in the trust estate. Thus it would seem that a trust estate partner would in effect be an in rem partner, a status which is unknown to the common law. If trust estate partners are recognized, then it might be possible to form a partnership consisting only of trust estate partners with liability for partnership obligations limited. •to the trust property. Such an arrangement would in effect be an iti rem partnership which is also unknown to the common law. The encyclopediac treatises Corpus Juris, Corpus Juris Secundum, Ruling Case Law and American Jurisprudence in the sections dealing with partnerships and trusts make no reference to the possibility of a trust or a trustee being a member of a partnership. The following text books make no reference to the possibility of, a trust or a trustee being a member of a partnership: Bogert on Trusts, 2d Ed. 1942; Bogert, Trusts and Trustees, 7 vol., 1935; Restatement of The Law of Trusts, 2 vol.; Scott on Trusts, 4 vol. (1939); Underhill, The Law Relating to Trusts and Trustees (9th Ed. 1939) ; Keeton, The Law of Trusts (4th Ed. 1947); Lindley on Partnership (10th Ed. 1935); Gilmore on Partnership (1911); Burdick on Partnership (2d Ed. 1906) ; Teller, Partnership (1949) ; Crane on Partnership (1938); Rowley, The Modern Law of Partnership, 2 vol. (1916). The total absence from legal works purporting to cover the entire field of the common law of partnerships and trusts of any reference to the possibility of a trust being a member of a partnership would be indicative of the fact that a trust as a partner was unknown to the common law. The plaintiff has cited no cases and the authors of the legal works referred to cite no cases dealing with the possibility of a trust being a partner under the common law. The reason for such paucity of authority on this question could be that it was generally assumed that it would be incompatible and inconsistent with and alien to common law concepts for a trust to be a partner. In Mechem, Elements of The Law of Partnership, (2d Ed. 1920), in Sec. 55, the author deals with the general subject of agents as partners. That section contains the following statement: “An agent, trustee, administrator, and the like, may be a partner. Unless he excluded personal liability by the terms of the contract, he would usually be individually liable for the partnership debts, though he would ordinarily have a remedy for reimbursement or indemnity against the parties by whose authority and on whose account he acted as partner.” In connection with that section, the author cites two cases. Those two cases deal with the question of an agent as a partner and not with the question of a trust or trustee as a partner. There are no Iowa statutes and there are no decisions • of the Iowa Supreme Court relating to the capacity of a trust to be a member of a partnership. Therefore, it may be assumed that the Iowa law is in accord with the ' common law. It is the view of the court that under the common law a trust does not have the legal capacity to become a member of a partnership and that the same is true under the Iowa law. Therefore, if there is such a thing as a trust partner, it is peculiar to and indigenous to that field of law which might be termed the Internal Revenue Code field of law and it exists in that field and in no other field. At one time the Board of Tax Appeals was of the view that the Commissioner of Internal Revenue .could not question the validity of a partnership for federal income tax purposes because he was not a party in interest. Isaac W. Frank Trust of 1927 v. Commissioner, 1941, 44 B.T.A. 934, 942. On appeal to the Third Circuit this case was remanded pursuant to stipulation of the'parties. See, 1943, P-H, Par. 61,028. However, the view that the Commissioner can not challenge the validity of partnerships has been authoritatively repudiated, and there is no question in respect to that , matter in the present case. Since the trust here in question could not be a valid partner under the local Iowa law, the question is presented as to the applicability of local state law to the matter of the validity or invalidity of partnerships for federal income tax purposes. That question is not the same as the question of the applicability of the general rules of common law, since a partnership might meet all of the tests and concepts of a partnership under such rules and yet not meet" the requirements of the local state laws. A partnership might also meet the requirements of the local state law and yet not meet the tests and concepts of a partnership under the general rules of common law. See, e. g., Poplar Bluff Printing Co. v. Commissioner, 8 Cir., 1945, 149 F.2d 1016, 1018. It is now well and thoroughly established that -the fact that a partnership might be valid under the local state law is not determinative of its status for federal income tax purposes since Congress may select its own legal and factual criteria for determining the validity of a partnership for that purpose. Commissioner of I. R. v. Tower, 1946, 327 U.S. 280, 287, 288, 66 S. Ct. 532, 90 L.Ed. 670, 164 A.L.R. 1135; Kohl v. Commissioner, 8 Cir., 1948, 170 F. 2d 531, 534, certiorari denied, 1949, 337 U. S. 956, 69 S.Ct. 1528, 93 L.Ed. 1756, rehearing denied, 1949, 338 U.S. 839, 70 S.Ct. 839, 70 S.Ct. 33, 94 L.Ed. 53. While it is clear from the authorities that the fact that a partnership is valid under the local state law is not determinative of its status for. federal income tax purposes, yet it is not clear from the authorities as to what the rule is where a partnership is invalid or not recognized under the local state law. In the case of Commissioner v. Tenney, 1 Cir., 1941, 120 F.2d 421, a wife purported to enter into an agreement in the nature of a partnership with her husband. Under the local state law a married woman could not contract with her husband. The Court held that the agreement was unenforceable and refused to recognize the partnership for federal income tax purposes. In Ellery v. Commissioner, 1944, 4 T.C. 407, a husband and wife formed a partnership to conduct a business which was illegal under the state law. The Tax Court refused to give the partnership recognition for federal income tax purposes. In Commissioner v. Barnes’ Estate, 1927, 7 B.T.A. 924, affirmed, 3 Cir., 1929, 30 F.2d 289, a family partnership was held valid for federal income tax purposes even though there was no compliance with the local state statutes relating to the registration of the partnership name. In the case of Thompson v. Riggs, 8 Cir., 1949, 175 F.2d 81, 82, the United States Court of Appeals for the Eighth Circuit • stated by way of dictum: “Where a partnership relation does not exist under State law, even though attempted, the- problem of ‘good faith’ is hardly applicable because it is not of importance. The absence of such partnership relation is determinative.” The contention that an organization may have existence only for federal income tax purposes has been repudiated by a number of courts. See, e. g., Slifka v. Commissioner, 2 Cir., 1950, 182 F.2d 345, 346; Zander v. Commissioner, 5 Cir., 1949, 173 F.2d 624, 626, 627; Greene v. Commissioner, 1946, 7 T.C. 142, 150, 151. The United States Supreme Court has not passed upon the question as to what significance is to be given to the matter of invalidity under local state law in determining the validity of a partnership for federal income tax purposes. The United States Supreme Court might hold that a partnership which was illegal or not recognized by the local state law would as a matter of law be given no recognition for federal income tax purposes, or it might hold that the matter of illegality or non-recognition under the local state law was a factual matter to be considered along with other factual matters in determining the question of good faith and bona fide intent. In cases other than those referred to the courts have indicated that local state law may be of assistance in arriving at a determination of the status of a partnership for federal income tax purposes. Belcher v. Commissioner, 5 Cir., 1947, 162 F.2d 974, 976, certiorari denied, 1947, 332 U.S. 824, 68 S.Ct. 165, 92 L.Ed. 399; Montgomery v. Thomas, 5 Cir., 1944, 146 F.2d 76, 80; Larson v. Kraemer, D.C. Conn. 1949, 84 F.Supp. 313, 314; Western Construction Co. v. Commissioner, 1950, 14 T.C. 453, 472. The applicability or the inapplicability of state law in partnership income tax cases is not clear. Note, The Operation of the Entity Concept of Partnership in Federal Income Taxation, 97 University of Pennsylvania Law Review (1948) 52, 66. As noted above, the fact that a trust-partnership relation is not recognized under the Iowa law could be determinative that it is not entitled to. recognition for federal income tax purposes. However, since the relation between the illegality or non-existence of a partnership under the local state law and its status for federal income tax purposes is, not clear, other matters should be considered. There have been a number of cases arising under the Internal Revenue Code involving partnerships composed of individuals on the one hand and the trustees, beneficiaries or the trust corpus of a trust relationship on the other. Since these cases usually involve members of the same family group, there is often involved not only the doctrine of the family partnership cases, but also the doctrine of Helvering v. Clifford, 1940, 309 U.S. 331, 60 S.Ct. 554, 84 L.Ed. 788, relating to the amount of control retained by the settlor of a trust over the trust property or the income from the trust. An example of a case of this type in which the Clifford doctrine was held to be controlling is Eisenberg v. Commissioner, 1945, 5 T.C. 856, affirmed, 3 Cir., 1947, 161 F.2d 506, certiorari denied, 1947, 332 U.S. 767, 68 S.Ct. 76, 92 L.Ed. 352, where several partners conveyed to themselves as trustees for their minor children one-half of their respective interests in a partnership. Apparently the trusts were the purported partners rather than the trustees of said trusts or the beneficiaries, but the Tax Court below made no finding as to the nature of the partnership, 'holding the original partners taxable on the entire income from the business under the Clifford doctrine. The United States Court of Appeals for the Third Circuit affirmed on this ground. See also, Losh v. Commissioner, 1943, 1 T.C. 1019, affirmed, 10 Cir., 1944, 145 F.2d 456; Armstrong v. Commissioner, 1943, 1 T.C. 1008, reversed and remanded 10 Cir., 1944, 143 F.2d 700; Scherer v. Commissioner; 1944, 3 T.C. 776. Cf. Tyson v. Commissioner, 8 Cir., 1944, 146 F.2d 50. The arrangements were upheld in the Armstrong ' and Scherer. cases. The Clifford doctrine is not involved in the present case at this time. In some of the cases hereafter referred to the beneficiaries were regarded as being the members of the partnership. In other cases the trustees were so regarded, and in still others the trust estate was regarded as the partner. In one case, Thompson v. Riggs, infra, the trial court instructed the jury as a matter of law that the trustees ■ were the partners and in the affirming opinion on appeal it was stated that, the trusts were the partners. In accounts of earlier days there is described an activity in which use was made of three half spheres and a small circular object. One of the participants in the activity was to ascertain under which of' the three half spheres the small circular dbject was to be found. It appears that the small circular object possessed the character of elusiveness and that its location frequently presented a matter of some difficulty. In the cases involving a trust relationship being associated in or with a partnership relation the matter as to whether the partner is to be found in the trustee, in the beneficiary or in the trust property has somewhat similar elusiveness. In the cases next referred to family partnership-trust arrangements were held invalid for federal income tax purposes without any discussion as to the matter of the capacity of a “trust” or a trustee to be a partner. Zander v. Commissioner, 5 Cir., 1949, 173 F.2d 624 (father set up a partnership between himself individually and as trustee for his minor children — partnership was held invalid on the ground that the trust was really the alter ego of the father and was just a conduit through which money was transferred from one pocket to the other, with both pockets belonging to the father); Kohl v. Commissioner, 8 Cir., 1948, 170 F.2d 531 (a partnership between a husband and trustees for members of his family was held invalid as the Court found that the grantor completely dominated both the trust estate and the partnership); Economos v. Commissioner, 4 Cir., 1948, 167 F.2d 165, certiorari denied, 1948, 335 U.S. 826, 69 S.Ct. 53, 93 L.Ed. 380, rehearing denied, 1949, 335 U.S. 905, 69 S.Ct. 404, 93 L.Ed. 439 (an alleged partnership between a wife operating a business and her sister as trustee for her children was held invalid on the ground that there was no real change in the economic, situation of the group or in the control or management of the business) ; Dawson v. Commissioner, 6 Cir., 1947, 163 F.2d 664 (partnership between a husband and wife individually and the wife as trustee for their minor children was held to be a superficial arrangement not changing the 'husband’s economic interest in the business); Belcher v. Commissioner, 5 Cir., 1947, 162 F.2d 974 (partnership between a husband and wife individually and the wife as trustee for their minor children held invalid as the arrangement appeared to be one entered into solely for the reduction of income taxes) ; Hash v. Commissioner, 1945, 4 T.C. 878, affirmed, 4 Cir., 1945, 152 F.2d 722, certiorari denied, 1945, 328 U.S. 838, 66 S.Ct. 1013, 90 L.Ed. 1614, rehearing denied, 1946, 328 U.S. 879, 66 S.Ct. 1340, 90 L.Ed. 1647 (a husband and wife as individuals and also as trustees for their minor children attempted to enter into a partnership agreement which was held invalid as there had been no real change in the economic status of the parties) ; Losh v. Commissioner, 10 Cir., 1944, 145 F.2d 456 (trust agreement whereby father was designated trustee of partnership interests for his children was held to have effected no substantial change in the economic status of the parties) ; Moore v. Commissioner (1946) 7 T.C. 1250, remanded pursuant to stipulation of parties 6 Cir., 1949, 176 F.2d 311 (an arrangement whereby partnership interests were conveyed to trustees for the grantor’s children was held to lack reality for federal income tax purposes); Alexander v. Commissioner (1946) 6 T.C. 804 (trust indenture wherein a husband declared himself trustee ■of a interest in his business for his wife was held to have effected no change in the investment, management, or control of the business) ; Benson v. Commissioner (1946) 6 T.C. 748, affirmed, 5 Cir., 1947, 161 F.2d 821 (an alleged partnership between a husband and his wife as trustee for their minor children was held to be merely an arrangement whereby it was sought to divide taxes). A recent case illustrative of some of the confusing language regarding whether the “trust” or the trustee is the partner is that of Feldman v. Commissioner (1950) 14 T.C. 17. In that case the Tax Court held the family partnership-trust arrangement invalid for federal income tax purposes on the ground that the father-' grantor kept control of the business and there was no contribution of services by the trustee for the minor son which could be segregated from the services'of the trustee in his individual capacity as partner. It is not readily apparent from the language used by the Tax Court in this case whether the “trust” or the trustee was the alleged partner. On this point see in particular the dissenting opinion by Judge Black, 14 T.C. pp. 26, 27 et seq. In Maiatico v. Commissioner (1949) 12 T.C. 146, reversed and remanded, D.C.Cir., 183 F.2d 836 a partnership agreement was entered into between a husband, his wife as trustee for their minor children and several third parties. The Tax Court refused to recognize the wife as trustee as a member of the partnership for federal income tax purposes. The United States Court of Appeals for the District of Columbia reversed the Tax Court stating that from an analysis of the trust instruments, the circumstances surrounding their creation, and the operation under them, the “trusts” were valid entities for income tax purposes. The Court of Appeals pointed out that this was not a “family” partnership and the evidence and findings warranted no other conclusion but that this partnership was formed in good faith for purely business purposes and the “trusts” were as valid legal entities as any of the other co-owners. In Woosley v. Commissioner (1946) P-H, T.C.Memo.Dec., Par. 46,283, affirmed on this point, 6 Cir., 1948, 168 F.2d 330, a husband and wife individually, the wife as trustee for their two minor children, and several third parties entered into a partnership agreement. The Tax Court held the husband taxable on the income from the partnership attributable to the “trusts” on the ground that the “trusts” were required to render no services under the partnership agreement and they rendered none in fact through the wife or otherwise, merely participating in the business to the extent of capital which they had received from the husband contemporaneously with the setting up of the partnership arrangement. The Tax Court stated (p. 46,977), “This is not enough to create in the trusts a partnership interest which may be recognized for Federal income tax purposes, * * * ” The United States Court of Appeals for the Sixth Circuit indicated that the Tax Court had correctly resolved the trusteeship issue. In the cases next referred to family partnership-trust arrangements were held to be valid for federal income tax purposes. In most of them there is no discussion as to the capacity of a “trust” or a trustee or a beneficiary to be a partner. In Armstrong v. Commissioner, 10 Cir., 1944, 143 F.2d 700, two minor children who were beneficiaries of a trust were apparently given the status of partners for federal income tax purposes. The controversy in that case was as to the control retained and exercised by their father as settlor-trustee. In Rose v. Commissioner, 1931, 22 B.T.A. 1334, reversed and remanded, 6 Cir., 1933, 65 F.2d 616, one Rose executed a document declaring that he held certain property in trust for his wife and two daughters. Included in that property was his interest in a certain partnership. The United States Court of Appeals for the Sixth Circuit held that “the effect” of the document was to constitute the beneficiaries partners in the partnership. In Thomas v. Feldman, 5 Cir., 1946, 158 F.2d 488, a “trust” was held to be a valid limited partner in two limited partnerships organized with the husband-grantor as the general manager of the business. The dissenting opinion contained a statement that the creation of the trust and the partnership were legal in form but there was no explanation of the basis upon which such statement was made. Cf. Western Construction Co. v. Commissioner, 1950, 14 T.C. 453 (limited family partnership held bona fide partnership and not taxable as a corporation). In the case of Ives v. Commissioner, 1934, 29 B.T.A. 822, there had been a partnership composed of two partners doing business in the State of New York. One partner transferred his interest in the partnership to a trustee for the benefit of his wife and children and the other partner transferred his interest in the partnership to trustees for a similar purpose. The business was then carried by a so-called “partnership of trustees.” The Board of Tax Appeals stated (p. 832) that it had previously recognized, “that in the State of New York a valid partnership may exist with a trustee as one of the partners.” The Board held that the settlors were not taxable on the income from the partnership. It is not clear whether the Board regarded the trustees or the beneficiaries as the partners. A wife as trustee for minor children was held to be a member of a partnership for federal income tax purposes in Scherer v. Commissioner (1944) 3 T.C. 776; Oakley v. Commissioner, 1931, 24 B.T.A. 1082, and in Reeb v. Commissioner, 1927, 8 B.T.A. 759. Cf. Moyer v. Commissioner, 1937, 35 B.T.A. 1155. In Miller v. Commissioner (1949) P-H, T.C.Memo.Dec., Par. 49,001, rev’d in part and remanded, 6 Cir., 183 F.2d 246, a husband, wife and the husband’s father transferred interests in a partners