*1056 Petitioner assigned on December 18, 1931, for $10,500 all his interest in fees to become payable in the future to a dissolved law partnership in connection with matters of one client pursuant to an agreement of the same date made with one of his former law partners. On June 17, 1932, petitioner received the $10,500. Petitioner did not receive this amount as a recovery of capital contribution to the partnership or as compensation for his share of good will of the partnership. The amount represented payment to petitioner of his share of fees to be received for services he had performed while a member of the partnership. Held, the entire amount is taxable as ordinary income and not as capital gain under section 101, Revenue Act of 1932. It is further held that the amount was not a "capital asset" as defined in section 101(c)(8).
*323 The Commissioner determined a deficiency of $2,177.20 in income tax of this petitioner for the year 1932. The only issue is whether $10,500 received by the petitioner in the taxable year is ordinary income as has been determined*1057 by respondent.
FINDINGS OF FACT.
Petitioner resides in Bethesda, Maryland, and is an attorney practicing in Washington, D.C. He filed his income tax return with the collector in Baltimore, Maryland. He was on the cash receipts and disbursements basis.
The petitioner on June 17, 1932, received $10,500 from a former law partner, Charles D. Hamel, pursuant to the terms of a contract entered into on December 18, 1931, between the petitioner as party of the first part and Hamel as party of the second part, which provided as follows:
WHEREAS, the first party hereby is willing to assign to the second party, or to the nominees of the second party, all of the first party's right, title and interest in and to fees represented by the claims of the dissolved firm of Hamel, Doyle, Park & Saunders, and/or any of the partners thereof, in connection with tax matters handled by the aforesaid firm and/or any of the partners thereof for F. W. Woolworth Company, including claim to $50,000 in possession of the firm of Davies, Auerbach & Cornell, now impounded under attachment proceedings in the suit of Hamel et al. v. Rusch et al. in the Supreme Court of New York County, State of New*1058 York, and also including fees sought to be recovered in a suit, Hamel v. F. W. Woolworth Company, now pending the State Court at Newark, New Jersey:
* * *
(4) The second party agrees that he will pay, or cause to be paid, to the first party, Ten Thousand Five Hundred ($10,500) Dollars in cash payment *324 to be made either out of first amounts collected, without any deduction for attorneys' fees in connection with such collection, of the $50,000 claim of the firm of Hamel, Doyle, Park & Saunders against Rusch and Jackson in connection with which claim $50,000 has been attached in the hands of Davies, Auerbach and Cornell, or, in the event said amount of $10,500 is not collected on said claim within six (6) months from the date hereof, then immediately after the termination of six (6) months from the date hereof, the second party will pay, or cause to be paid to the first party, the said sum of $10,500, and the first party will have no claim to the aforesaid fund of $50,000 or any part thereof.
On the same day that the foregoing contract was executed, the petitioner also executed a formal assignment to Hamel as follows:
FOR AND IN CONSIDERATION of the sum of*1059 Ten ( $10) Dollars, and other valuable considerations, the receipt of which is hereby acknowledged, I hereby sell, assign, transfer and set over unto CHARLES D. HAMEL, of Washington, D.C., the following:
1. All of ny right, title and interest in and to the fees payable or to become payable to the dissolved firm of Hamel, Doyle, Park &Saunders, and/or any of the partners thereof, for services performed by the aforesaid firm and/or any of the partners thereof, in connection with the tax matters of F. W. WOOLWORTH COMPANY in connection with the employment by Messrs. Rusch & Jackson, of Washington, D.C., and which fee is now the subject of litigation in the State of New York;
2. All of my right, title and interest in and to the fees payable or to become payable to the dissolved firm of Hamel, Doyle, Park & Saunders, and/or any of the partners thereof, for services performed by the aforesaid firm and/or any of the partners thereof, in connection with the tax matters of F. W. Woolworth Company, which fees are the subject of litigation in the State of New Jersey.
The petitioner had been a member successively of two law partnerships. The second of the two, viz., Hamel, Doyle, Park*1060 & Saunders, had been dissolved by mutual agreement of July 7, 1931. This partnership had been organized on July 21, 1929, under the firm name of Hamel & Doyle and its name was changed on June 1, 1930, to Hamel, Doyle, Park & Saunders. The preceding law partnership of which the petitioner was a member was the firm of Hopkins, Starr, Hopkins & Hamel, which was dissolved by mutual agreement on July 20, 1929.
The petitioner's interest in the two Woolworth cases arose as follows: In the early part of 1928 the firm of Hopkins, Starr, Hopkins & Hamel, of which the petitioner was a member, was retained by a firm of accountants of Washington, D.C., Rusch & Jackson, to handle, along with other cases, a claim for Federal tax refunds for the F. W. Woolworth Co. for the taxable years 1918 and 1919. Rusch & Jackson had been retained by the New York law firm of Davies. Auerbach & Cornell, attorneys for F. W. Woolworth Co., and had filed claims for refund in the Woolworth cases which had been rejected by the Bureau; petitioner's partnership was retained to seek *325 a reopening and reconsideration of these claims. The fee agreement between petitioner's partnership and Rusch & Jackson*1061 was oral but the partnership understood that it was to receive one-half of the fee which Rusch & Jackson should receive from Davies, Auerbach & Cornell, which fee was contingent on successful conclusion of the claim for refund.
In the early part of 1929 Hamel understood that he was employed by Davies, Auerbach & Cornell directly for the Woolworth Co. to handle claims for Federal tax refunds for the taxable years 1920 to 1926, inclusive. This case was accepted by Hamel as a partnership matter. The Woolworth claims were considered by petitioner's partnership as two cases, one covering the tax years 1918 and 1919 and the other covering the tax years 1920 to 1926. Work was begun on the 1918-1919 case on March 8, 1928, and on the 1920-1926 case on January 16, 1929. From the beginning almost all of the work on these cases was done by Hamel and Lee I. Park who was associated with the original firm and was a partner in the succeeding firm of Hamel & Doyle.
Upon the dissolution of the firm of Hopkins, Starr, Hopkins & Hamel on July 20, 1929, the pending cases of the firm were divided between the Chicago and Washington partners. In that division Hamel and the petitioner who were the*1062 Washington partners received all of the pending Washington cases of the firm, numbering about 125, among which were the two Woolworth cases. All these cases were evaluated by mutual agreement for the purposes of the division, as were the furniture and fixtures of the Washington office which the petitioner and Hamel received in the division. The Woolworth cases were assigned a value totaling $5,500 for both cases on the basis of the time spent thereon. Because of the excess of the appraised value of the Washington cases and the office furniture and fixtures over the Washington partners' proportionate share of the dissolving partnership, the petitioner and Hamel paid to the other members of the partnership $30,000 in cash in the settlement.
When the firm of Hamel & Doyle was formed on July 21, 1929, composed of the petitioner, Hamel, Park, Saunders, and Enrietto, the Woolworth cases along with the rest of the Washington cases received in the prior dissolution were turned over to the new partnership by the petitioner and Hamel personally. Out of the first year's receipts of the new partnership the petitioner and Hamel were completely reimbursed for the $30,000 which they had expended*1063 in the dissolution of the prior partnership. No asset value for the pending cases was set up on the books of either this or the prior partnership. The petitioner had a 25 percent interest in the profits of the new partnership; when the firm name was changed on June 1, 1930, to *326 Hamel, Doyle, Park & Saunders the petitioner's share in the partnership profits was reduced to 21 percent. This partnership, as well as the prior one, kept its books on a cash receipts and disbursements basis.
Work on the 1918-1919 Woolworth case was completed on January 16, 1930. Recommendations by the appropriate division of the Bureau of Internal Revenue for the allowance of the refunds for those years were made on that date, as a part of a refund recommendation covering the years 1917 through 1921. Similar recommendations were made two days later, on January18, 1930, for the allowance of refunds for the years 1922 through 1926. Under the procedure then existent, such recommendations were directed to a Joint Congressional Committee in claims of the magnitude involved in these cases. The Congressional Committee had the power to disapprove such allowances or require additional conferences. *1064 For the Woolworth tax years 1920-1926 extensive additional legal work was required before the approval of the Joint Congressional Committee was obtained on or about October 28, 1930. On December 6, 1930, the refunds in all the Woolworth cases were for the first time listed on the schedule of overassessments and approved by the Commissioner of Internal Revenue. The refund checks were issued on December 30, 1930, and were received by the Woolworth Co. a few days later in January of 1931.
No formal bill was rendered by the petitioner's partnership for its legal services in the Woolworth cases, but demand for payment was made and the demand was refused. A dispute had arisen in April 1930 as to the amount of the fee to be paid to the petitioner's partnership in case of a successful conclusion of the 1918-1919 Woolworth case, Rusch & Jackson claiming that the petitioner's partnership was entitled to less than one-half of the fee which Rusch & Jackson should obtain. A conference was held at that time between representatives of petitioner's partnership, Rusch & Jackson, and Davies, Auerbach & Cornell, but no settlement of the controversy was reached. Having failed to arrive at an*1065 agreement in subsequent negotiations, the petitioner's partnership instituted suit in the Supreme Court of New York on or about January 3, 1931, against both Rusch & Jackson and Davies, Auerbach & Cornell, for the fee claimed in the 1918-1919 Woolworth case. In an examination of Cornell, a member of the latter firm, it was revealed that the Woolworth Co. had paid the firm of which he was a member $184,500 as fees in the 1918-1919 tax matter of which $100,000 was for the services of Rusch & Jackson and their attorneys, including the petitioner's firm, and that Cornell had paid Rusch & Jackson $50,000 and was holding the balance of $50,000 pending the settlement of the dispute between Rusch & Jackson and the petitioner's firm. Thereupon *327 a new suit was begun by the petitioner's firm against Rusch & Jackson alone on March 18, 1931, to recover the sum of $50,000 claimed to be due under the contract of employment with Rusch & Jackson. Attachment was levied in this suit March 23, 1931, against the $50,000 held by Davies, Auerbach & Cornell for the account of Rusch & Jackson. There was likewise a dispute as to the liability of the Woolworth Co. to the petitioner's firm on account*1066 of the 1920-1926 case, it being the position of Davies, Auerbach & Cornell that the petitioner's firm had not been employed by them but rather by Rusch & Jackson as a part of the employment for the 1918-1919 case, or in the alternative that Hamel had merely been selected by a group of attorneys and accountants handling the Woolworth matters to be the sole spokesman in presenting the claims. Therefore, suit was instituted against the Woolworth Co. in the Supreme Court of New Jersey by Hamel acting for himself and the other former partners, on August 8, 1931 (shortly after the dissolution of the partnership on July 7, 1931), covering the claim for fees for services in the case involving the tax years 1920-1926.
On July 7, 1931, the firm of Hamel, Doyle, Park & Saunders had been dissolved by mutual agreement which recited "the desire of the partners that an agreement be reached among them for an accounting and settlement of the affairs of said partnership." The dissolution agreement provided that in the cases in which bills were rendered prior to June 1, 1930, the distributable share of the petitioner would be 25 percent, after payment of certain enumerated expenses, while in the*1067 cases in which bills were rendered between June 1, 1930, and the dissolution date his distributable share would be 21 percent, after the payment of enumerated expenses. The expenses to be paid out of the proceeds of each case were collection expenses, forwarding fees, and charges for engineering or accounting services in connection with the particular case. While as stated above no bills were actually rendered in the Woolworth case, both of those cases were listed in the dissolution agreement in the category of cases in which bills were rendered after June 1, 1930, so that the petitioner's interest in both cases was 21 percent of the fee. Two of the partners were appointed liquidators of the partnership and their function was to collect the outstanding fees and distribute them to the various former members of the partnership on the agreed basis. Hamel took over the partnership furniture and fixtures at their appraised value on July 7, 1931, and also assumed the lease on the law officer of the former partnership.
Several other suits were instituted for collection of the fees claimed in the Woolworth matters. The petitioner was of the opinion that the claim for $50,000 against*1068 Rusch & Jackson covering the 1918-1919 Woolworth case was a good claim and that the other claim involving *328 the 1920-1926 tax years was not worth pursuing. He was unable to agree with the other former members of the partnership as to the most desirable legal procedure or as to the acceptance of a certain proposed settlement. He therefore, in December 1931, made the proposition to Hamel that he would sell his claim to any and all fees in the Woolworth cases for $10,500 which was 21 percent of the $50,000 which he deemed to be recoverable inn the suit against Rusch & Jackson. This proposition was accepted by Hamel and put into the form of the contract and assignment set out above. Since nothing was collected on the claim against Rusch & Jackson within six months after that contract and assignment, Hamel, on June 17, 1932, pursuant thereto, paid to the petitioner $10,500 by his personal check.
Respondent determined a deficiency of $2,177.20 for the year 1932 after making certain adjustments which petitioner concedes are correct in themselves.
OPINION.
HARRON: The issue is whether $10,500 received by the petitioner in the year 1932 constituted capital gain or ordinary*1069 income. Petitioner contends that he erred in reporting in his gross income the amount of $10,500 as ordinary income along with other fees for professional services, so that petitioner alleges that the deficiency determined does not represent his true tax liability. During the taxable year petitioner had capital net losses aggregating $14,252.93. In his petition, petitioner claims that the $10,500 received in 1932 represents a capital net gain which should be applied against his capital net losses pursuant to section 101 of the Revenue Act of 1932. Respondent denies that the $10,500 received was capital net gain.
The petitioner claims that the $10,500 constitutes capital gain because it resulted from the "sale" of a "capital asset", the statutory definition of which is "property held by the taxpayer for more than two years" (section 101(c)(8), Revenue Act of 1932). He claims that the property sold was a part of his "interest in a partnership", and that he had owned his interest in the partnership for more than two years. Even though the actual assignment purports to convey and release his proportionate share in specific claims for fees which were in litigation subsequent to*1070 the dissolution of the partnership, he argues that the assignment could only have the effect of conveying his share in the surplus of the partnership which might arise from the collection of those fees, since as a matter of general partnership law the partners do not own undivided interests in the specific assets of the firm but only have a right to proportionate shares of the earnings and surplus of the partnership, citing ; *329 ; ; ; and other cases. He relies on the case of , which applied this doctrine of partnership law to a sale by a partner of his entire interest in a partnership which had been held for more than two years, and argues that the same rule should apply in the case of an assignment of only part of a partner's interest in the partnership. He argues in reply to the respondent that dissolution of a partnership does not*1071 change the nature of the partner's interest so long as the partnership is in process of liquidation. He claims that the case of , is distinguishable from the case at bar because in that case the transaction upon the retirement of a partner was held not to constitute a "sale" and furthermore the partner involved there had made no capital contribution to the partnership. Although urging primarily his position that a partner has no claim to specific partnership assets and therefore that petitioner merely sold part of his "interest in a partnership", the petitioner argues alternatively that even if the petitioner be assumed to have had an individual interest specifically in the two Woolworth cases those two cases were partnership assets purchased by the firm for $5,500 in July 1929, more than three years prior to his assignment, and therefore the profit realized constitutes capital gain to the petitioner under the statute.
We do not agree with all of the contentions of the petitioner and conclude that the $10,500 received by him in 1932 constitutes ordinary income rather than capital gain. We will discuss first the contention*1072 last mentioned above to which most of the respondent's argument is addressed. The respondent contends that at no time did the Woolworth cases become capital assets. He argues that they were not capital but merely income items; that if fees for the services rendered therein had been received in the ordinary course of collection they would have constituted ordinary income items, and that neither the assignment of the claim for fees nor the fact that suit was filed thereon served to convert the claims or the cases into capital assets. He further argues that the claims for fees were not held for more than two years since they did not come into existence until the tax refunds were approved by the Commissioner of Internal Revenue in December 1930 and paid by checks which were received in January of 1931.
These arguments thus summarized present several questions both of fact and of law. It may be noted at the outset that there appears to be a factual misstatement in the petitioner's argument that the partnership paid $5,500 for the Woolworth cases when it was organized in July 1929. That was only the valuation placed on the cases by the members of a prior partnership for the purposes*1073 of *330 liquidation of that partnership. That sum was not paid for those cases by the new partnership; the new partnership only repaid to Hamel and the petitioner the $30,000 which they had paid out as a part of the settlement of the prior partnership and these two individuals turned over to the new partnership approximately 125 cases in all with no particular values assigned to any of them. Furthermore no sum was ever set up on the books of either partnership purporting to assign an asset value to any of these cases.
A clear distinction must be drawn between the Woolworth cases themselves and the claims for fees arising out of them. The cases themselves, before any right to fees arose, were merely contracts of employment which only gave the partnership the right to perform services and to receive compensation which in the 1918-1919 case at least was contingent on the success of the refund claims. A mere contract of employment has been held not to be a capital asset even though it be assigned after being held for more than two years. *1074 . Therefore the contracts here, or the "cases" as they are referred to, could not become capital assets no matter how long they were held. When the refunds were made rights of a different nature arose, namely, claims for fees. It was these latter rights rather than the contracts of employment which were assigned. To determine whether the property assigned was held for two years therefore depends on when the claims for fees arose rather than on when the contracts of employment were acquired by the partnership.
Without passing on the question of whether in any event a claim for compensation for services which has accrued can become a capital asset by being held for two years after its accrual, it is of course true as respondent argues that the mere fact that the claim is assigned or that suit is instituted for its collection does not convert it into a capital asset. The nature of the claim remains the same. The only significant inquiry is whether as required by the statute the claim was held for more than two years. It is apparent as the respondent argues, that the claims in the instant case were not held for as much as two years*1075 after they accrued before they were assigned. The assignment occurred on December 18, 1931, although payment for that assignment was deferred until June 17, 1932.
The 1918-1919 case had definitely been taken on a contingent fee basis so that no claim for fees in any amount arose until the refunds were made. The refund checks were issued on December 30, 1930, and received by the Woolworth Co. in January 1931, both less than two years before the assignment of petitioner's interest on December 18, 1931. There is no evidence in the record as to what fee understanding existed regarding the 1920-1926 case. From the fact that there was a dispute as to whether the petitioner's partnership through *331 Hamel had even been employed in that case, it may be inferred that there was no very definite understanding fees. In such case if the partnership established that it was employed in the 1920-1926 matter it would presumably be entitled to "reasonable fees." The claim for reasonable fees would certainly not arise before the work on the case was completed which was in October of 1930 which was less than two years before the assignment of the claim by petitioner on December 18, 1931.
*1076 It is clear that there is no significance in the fact that work on the 1918-1919 case was completed in January of 1930 since that case was on a contingent fee basis and the completion of the work gave rise to no claim for a fee. It was only when that work was crowned with success in the form of a refund claim that any claim for a fee arose. It is also immaterial that the appropriate division of the Bureau of Internal Revenue made recommendations for the allowance of refunds in both cases about the middle of January of 1930. It is apparent that those recommendations had no finality from the fact that the Joint Congressional Committee to which they were directed required a great deal of additional work on the claims for the years 1920-1926 before giving its approval in October of 1930. None of the Woolworth refunds were listed on the Commissioner's schedule of overassessments until December 6, 1930, when they were approved by the Commissioner, and it is the signing of the schedule of overassessments which gives finality to refund claims. See *1077 . But even if the recommendations made in January 1930 were considered final, that date was not as much as two years prior to the assignment on December 18, 1931. The fact that payment on account of the assignment was delayed until June 17, 1932, would not alter the time for which the claims were held, which is the determining factor under the statute. Thus under any view of the question the claim for fees did not come into existence as much as two years prior to the petitioner's assignment of his interest therein, wherefore the claims did not constitute capital assets within the statutory definition.
We come now to a consideration of the petitioner's chief claim that his assignment of December 18, 1931, pursuant to the agreement of the same date did not have the legal effect of transferring his interest in claims to specific fees but rather his interest in that part of the surplus of the partnership which might arise from collection of those fees. From this he argues that it constituted a conveyance of a part of his "interest in a partnership" which, like the conveyance of a partner's entire interest considered*1078 in the case of , constitutes a capital asset if his interest in the partnership has been held for over two years, irrespective of how long the particular assets of the partnership have been held.
*332 At the outset it must be noted as appears in our findings of fact that neither the assignment nor the contract to assign took the form of assignments of a part of a percentage interest in a partnership but rather purported to assign the petitioner's interest in specific fees which were the subject of litigation. As stated by the petitioner in his brief:
By the agreement of December 18, 1931 petitioner intended to sell, transfer and assign to Mr. Hamel all of his right, title and interest in the claim against Rusch & Jackson in the suit instituted for the $50,000 which had been attached in the hands of Davies, Auerbach & Cornell, and to waive and release to Mr. Hamel all of his interest in the suit pending in the Supreme Court in Newark, New Jersey, against Woolworth Company, which he considered of no value.
The petitioner claims however that irrespective of the terms of the assignment its legal effect could only be the*1079 conveyance of his proportionate share in the surplus of the partnership which should arise upon collection of these fees and that this is the equivalent of an assignment of part of his "interest in a partnership."
It is true that as a matter of general partnership law a partner's interest in the partnership is not an interest in specific assets but only in the surplus which will arise upon liquidation of those assets. It also appears to be true that dissolution of the partnership does not of itself serve to change the character of the partner's interest into an interest in specific assets so long as the assets are not liquidated or distributed. However, the partners clearly may contract with one another regarding the disposition of the assets and by such contract can make immediate distribution of the assets or the rights to the proceeds from liquidation of particular assets. In the case at bar the partners did enter into an agreement for the disposition of the various properties of the partnership. The agreement recites "the desire of the partners that an agreement be reached among them for an accounting and settlement of the affairs of said partnership." Two liquidators were*1080 therefore appointed, to have the powers and duties specifically described and no others. The cases of the partnership were divided into four schedules: those in which bills had been rendered prior to June 1, 1930; those in which bills had been rendered between June 1, 1930, and July 7, 1931, the date of dissolution; those to be considered as closed cases as of July 7, 1931; and those on which the work was yet unfinished. The Woolworth cases were listed in the second category although as pointed out in our findings of fact no bills were ever actually rendered in those cases. As to the first three classes of cases it was provided precisely what disposition should be made by the liquidators of the proceeds of collection: (1) Out-of-pocket expenses of collection should be paid (not to include any charge for the time or ordinary office expense of the partner primarily responsible for the collection thereof); (2) forwarding fees and charges for engineering *333 or accounting services in connection with each case should be paid in accordance with the fee contract or understanding in the particular case; (3) any balance should be distributed to the partners on fixed percentages which*1081 for the different schedules of cases represented the basis of sharing partnership profits in existence when bills in the various schedules of cases were rendered or the fees became due. Thus in the schedule of cases in which bills were rendered between June 1, 1930, and July 7, 1931, which is the schedule in which the Woolworth cases were listed, the petitioner pursuant to the agreement was entitled to receive 21 percent of each fee after the two types of expenses enumerated above were paid in connection with such fee. It does not appear that the partnership had any indebtedness other than that in connection with the individual cases provided for above so that it was able to make the agreement for the division of the proceeds of collection set out above.
Thus it appears that although the petitioner may not have obtained by mere operation of law a percentage interest in specific claims to fees upon the dissolution of the partnership, nevertheless by the contract between the partners he obtained something different from the mere claim to the undivided surplus of the corporation which might arise upon liquidation. He obtained rather the right to a percentage of the proceeds of specific*1082 fees after the enumerated expenses in the case of each fee were discharged. This right to a percentage of the proceeds of specific fees, if not the same thing as a percentage ownership of the fees themselves, was nevertheless a right acquired by the contract of July 7, 1931. It was this right which was assigned on December 18, 1931, and it therefore was not a capital asset within the statutory definition, not having been held for two years before its disposition.
Even if the right conveyed by the petitioner could be held to consist of a part of his claim to a part of the surplus of the partnership upon liquidation we do not think that is equivalent to the conveyance of a part of his "interest in a partnership" such as the conveyance of the entire interest in a partnership which was held to constitute a capital asset in the case of Nor do we think the conveyance here can be said to constitute a "sale" as required by the statute. In Dudley T. Humphrey a retiring partner sold his entire right, title, and interest in a going partnership and in the good will thereof. It appears that he*1083 had contributed one-ninth of the capital of the firm. The payment to him, therefore, represented payment for his interest in the capital and good will of the firm and was truly a sale of his partnership interest. In Helvering v. Smith, on the other hand, the retiring partner under the articles of copartnership had no *334 interest in the future earnings of the partnership and he had made no contribution to the capital of the partnership. The transaction whereby he obtained payment in cash for his estimated share of the proceeds of fees already earned but not yet collected was held not to constitute a "sale" of an "interest in a partnership" because he received nothing which he would not have been entitled to on a partnership accounting or which represented any purchase of his right to future earnings or his interest in the firm assets.
In the instant case the payment to the petitioner did not purport to represent any compensation for his share in good will or future earnings of the partnership. It hardly could have since the partnership had already gone out of business. Furthermore, the payment did not purport to compensate him to any extent for any capital contribution*1084 to the partnership. It does not appear that any capital contribution remained to be recovered by the petitioner. The $30,000 which had been paid out by the petitioner and Hamel in obtaining the cases turned over to the new partnership had been repaid to them within the first year of the new partnership's existence. The record does not show that any other credit had been given them for the cases in their capital accounts, but however that may be the payment here in question did not purport to compensate the petitioner therefor. The payment here was strictly for the purpose of terminating his interest in claims to specific fees. This commutation of payment on account of these fees as truly as in the case of Helvering v. Smith gave the petitioner nothing which was not already his. It is true that the payment does not represent his interest in the exact amount which might actually be received in the litigation for those fees, which might be greater or less than $50,000, but equally in Helvering v. Smith the advance payment on account of uncollected fees was necessarily a mere estimate of the possible collections. In the instant case it is clear that the petitioner*1085 at least thought that the maximum possible collection on both Woolworth claims to be $50,000 and fixed the price of his assignment at $10,500, 21 percent of that sum, the amount (less expenses) to which he would have been entitled upon collection of $50,000. We thus conclude following , that the petitioner's assignment did not amount to the sale of a part of his interest in a partnership.
For all of the foregoing reasons we conclude that the $10,500 received by the petitioner in 1932 was not the profits from the sale of a capital asset and therefore it constitutes ordinary income rather than capital gain.
Decision will be entered for the respondent.