*351OPINION.
Ivins:The taxpayer contended that the arrangement in July, 1920, was not really a partnership; but it appears that he brought action in the Supreme Court of the State of New York, Queens County, against Eugene Suter, his senior partner, in .which he claimed that it was a partnership and in which it was so adjudicated. His testimony at the hearing indicated that the arrangement had all the indicia of a partnership except a written agreement. He is, therefore, liable for the tax upon his share of the earnings of the partnership from the time he became a partner.
At the end of 1920 he was credited on the books of the partnership with the difference between what he had actually drawn during the year and 10 per cent of what appeared by those books to be the profits of the firm for the year. The fact that subsequent disagreement with his partner, and litigation, has precluded him from ever receiving any of this money does not lessen his taxability. See Appeal of Fred Truempy, 1 B. T. A. 349.
In 1921 a readjustment was made and a written partnership agreement signed. At that time adjustments were made upon the books as of January i, 1921, and among them was a transfer of $5,000 from the account of the senior partner to the account of the taxpayer. This item was treated by the Commissioner as additional income to the taxpayer for the year 1920. This is in error. The taxpayer had expressed dissatisfaction with the arrangement, and the senior partner, to satisfy him, made him a gift of $5,000 upon the books of the firm in order to vest in him a larger capital interest than that represented by his other credits. This item can not properly be included as income to the taxpayer.