*244 Decision will be entered under Rule 50.
The taxpayer's wife advanced to him funds on three occasions for use in a business of renting automobiles and adjusting insurance claims conducted by him. She also assisted at times in the business and made unrecorded withdrawals of its funds for household and living expenses. Prior to the signing of a partnership agreement with her in 1944 at an accountant's suggestion, the taxpayer had never represented the business as a partnership and no agreement to divide profits and losses with his wife can be inferred from documents or acts prior to the accountant's suggestion. On the evidence, held, that no partnership existed in 1943 and that all profits of the business are income of the taxpayer.
*423 The Commissioner determined a deficiency of $ 11,020.65 in petitioner's income and victory tax for 1943, in part by including in income $ 17,652.93 representing one-half of the profits of a business which his wife had reported as her share of partnership profits and an amount of $ 635.80 described as oil *245 royalties. Petitioner contends that the business was conducted as a partnership to which his wife had contributed capital and vital services and that he is not taxable on her half of the profits. He denies receipt of any oil royalties, alleging that they were income of his wife.
FINDINGS OF FACT.
Petitioner, an individual residing at Columbia, South Carolina, filed his income and victory tax return for 1943 with the collector of internal revenue for the district of South Carolina. He is the husband of Clarinda Stella Olinger, who filed a separate return for 1943 with the same collector. Petitioner also filed for 1943 a partnership return for L. C. Olinger & Co., declaring that he and his wife were equal partners and that the partnership's business was "'U-Drive-It' cars, taxis, Claim adjuster." For 1942 he and his wife filed a joint return in which he described his occupation as "Ins. Adjuster, Taxi Operator, & Rent Cars."
Petitioner and his wife were married at Chelsea, Oklahoma, in 1919. He was then without property, and she had about $ 10,000 in cash and bonds. They later resided at Tulsa, Oklahoma; Boston, Massachusetts; Buffalo, New York; Toronto, Ontario; and Dallas, Texas. *246 Petitioner was employed most of the time as a claim adjuster by companies insuring automobiles, and sometimes as a salesman. His *424 earnings have always been adequate for the support of his wife and children. His wife, partly of Indian descent, in 1904 received an allotment of land in Oklahoma which was leased to oil companies for development, and produced oil. Since 1908 she has received monthly remittances of royalties, varying from $ 15 to $ 400; during the years 1919-1943 her royalty receipts aggregated $ 22,965.96. She saved or used this money as she wished.
In 1935 petitioner and his family moved from Toronto to Dallas, where a home was bought and recorded in his name in 1937. He was then employed as a claim adjuster by National Lloyds Insurance Co., at a salary of $ 250 a month. In 1939 the company transferred him to its office at Columbia, South Carolina, but his family remained at the home in Dallas. In the spring of 1940 he procured $ 500 from his wife, left the company's employ and independently began an insurance adjustment business under the trade name of L. C. Olinger & Co. Noting the increased demand for taxicabs in Columbia because of the nearby army*247 camp, he, Edward Jolliff, and William Timmons decided to conduct a taxi business, and to divide the profits equally. In the summer of 1940 each contributed $ 2,500; Timmons and petitioner borrowed $ 2,500 from a local bank on their joint note; and, with the $ 10,000, they purchased 23 used cars in Washington and Baltimore, having them driven to Columbia and reconditioned. Petitioner's wife supplied the $ 2,500 contributed by him. Upon application of petitioner, Jolliff, and Timmons to the Secretary of State of South Carolina, a certificate of incorporation was issued for the Diamond Trading Co. to operate taxicabs, but organization was never completed, as the city council of Columbia refused to grant the necessary business permit. Becoming discouraged, Jolliff sold his interest to the other two, petitioner paying him $ 250. Petitioner and Timmons then instituted suit to force the council to grant the permit, but the case was decided adversely, and on May 27, 1941, Timmons sold his interest in the corporation and the automobiles (including what he had acquired from Jolliff) for $ 3,000, giving a formal bill of sale to "L. C. Olinger and Stella Olinger." Petitioner's wife furnished*248 the $ 3,000. Petitioner assumed and later paid the joint note to the bank.
On July 4, 1941, petitioner began to rent cars, receiving a deposit of $ 50 from the customer on delivery of the automobile. He also opened a gasoline filling station for service to the cars operated in the business. He has since been actively engaged in this business and from the same office has continued his work as a claim adjuster to a limited extent.
In 1940 and 1941 his wife spent the summer months in Columbia, and in March 1942 she and a daughter moved there, occupying with petitioner a residence across the street from the office and car lot. She assisted in the car-renting business during the summer of 1941, and *425 after moving to Columbia continued to assist, being often present in the office to answer the telephone, driving cars to exercise new or reconditioned motors, ordering and sometimes fetching parts needed for repairs, occasionally driving back to Columbia cars which had been abandoned by renters, making bank deposits, and handling correspondence. She was rather active in 1942, but as the business prospered assistants were employed, and in 1943 and thereafter she stayed at home *249 much of the time, but was subject to call. Early in 1943 she spent ten weeks with a daughter in California. Petitioner himself devoted his entire time and attention to the business of renting cars and adjusting claims. He employed a mechanic, three colored attendants, and a secretary for office work.
During 1940-1943 petitioner maintained an individual bank account in Columbia and a bank account in the joint names of himself and wife in Dallas. The Columbia account was made joint in 1944. Prior to the autumn of 1943 petitioner kept no formal business accounts. Cash receipts of the business were held in a box at the office or deposited in the bank account, and, as petitioner needed funds, he made withdrawals from the account by check. His wife withdrew cash needed by her for household and living expenses from the office box, making no record whatever. After an internal revenue agent had interviewed petitioner and examined such records as were available, petitioner employed William Lasley, a certified public accountant, in October 1943, to open books for the business and to set up an accounting system. In the course of conversation petitioner told Lasley that his wife had advanced*250 him $ 500 in 1940, $ 2,500 when he decided to begin a taxicab business in 1941, and $ 3,000 when he bought Timmons' interest in the same year. He did not tell the revenue agent or Lasley that he and his wife were partners, but Lasley treated the business as a partnership on the basis of petitioner's disclosures about capital, and set up a capital account as of January 1, 1943, in which one-half of the net worth, as computed in the revenue agent's report and accepted by Lasley, was credited to petitioner and one-half to his wife, and he also set up a personal drawing account for each. He charged petitioner's account with the amounts of checks which petitioner had drawn during the year, and charged the wife's account with the amount of cash receipts which could not be traced. With receipts of the business petitioner purchased series E Government bonds for $ 900 in 1942 and for $ 8,600 in 1943, having them issued to "LeRoy C. Olinger or Stella Olinger." Lasley recorded these bonds as assets of the business. He advised that petitioner and his wife should prepare and sign a written agreement of partnership, but they did not do so until Lasley again suggested it when he returned in *251 February 1944 to prepare income tax returns. Thereafter Lasley *426 prepared a partnership return for 1943 and prepared separate individual returns for the same year, in which petitioner and his wife each reported a share of partnership income for 1943. The partnership agreement was not produced at the hearing nor introduced in evidence.
The first automobiles purchased were registered in the name of the Diamond Trading Co., and they have remained so registered. Those later acquired were registered in petitioner's name. The name of petitioner's wife did not appear on the application for incorporation of Diamond Trading Co., or the application for a license to operate taxicabs, or as a party in the ensuing litigation. She did not sign the note for the $ 2,500 borrowed to purchase cars, or the application for a license to rent cars. In registering as an employer with the Federal Social Security Office in 1941, petitioner signed his name only, describing himself as "owner" and leaving unchecked the bracket indicating a partnership. He alone signed as "owner" employer's tax returns filed during the period March 25, 1941 to January 28, 1944, and withholding tax returns for 1943. *252 On joint income tax returns filed by petitioner and his wife for 1940, 1941, and 1942, no partnership or partnership income is mentioned. Petitioner and his wife had no understanding or agreement about a division of profits and losses of the business prior to March 1944.
In 1943 petitioner was sole owner of the business conducted by him as L. C. Olinger & Co. Petitioner owned no interest in oil-bearing lands and received no royalties in 1943.
OPINION.
Respondent defends his determination that all income of L. C. Olinger & Co. is taxable to petitioner in 1943, contending that no bona fide partnership existed between petitioner and his wife because there was no agreement of partnership, petitioner conducted the business as sole owner, and the wife contributed no vital services or capital. He regards the partnership alleged as a theory advanced solely for tax avoidance and unsupported by the evidence. Petitioner admits that no written agreement was signed until March 1944 (and even that was not introduced in evidence), but he contends that the evidence supports a finding that his wife contributed $ 6,000 capital and rendered vital services to the business, thereby participating *253 to a degree which requires the recognition of a partnership for tax purposes under the doctrine set forth in Commissioner v. Tower, 327 U.S. 280">327 U.S. 280, and Lusthaus v. Commissioner, 327 U.S. 293">327 U.S. 293.
With some hesitation we have found that the wife did contribute $ 6,000 as petitioner alleges. This finding is supported directly only by their own oral testimony that the wife hoarded in cash all or nearly all the royalties received by her over the years, keeping bills of large *427 denominations in a deposit box at a bank or at home, although she maintained a bank account. In Toronto she rented a safe deposit box at a bank and kept her money therein, but in Dallas she claims to have kept bills aggregating as much as $ 25,000 in an iron box hidden in a hole in the basement of her residence. This cache was known only to herself and husband, and the funds remained there even when she was absent, as in spending the summers of 1940 and 1941 in Columbia. Petitioner testified that, after acquiring the home in Dallas in 1937, or two years after they had moved there to reside, he returned to Toronto, removed the bills, which*254 he vaguely estimates at $ 15,000, and personally brought them to Dallas for hiding in the basement. The increase to $ 25,000, which his wife gave as the maximum accumulation in Dallas, we note, can not be explained by receipts of royalties for two years. Although petitioner and wife maintained a joint bank account in Dallas, their testimony is that she brought $ 500 in bills from Dallas to Columbia when petitioner opened his own claim adjustment office in 1940; that in the summer of 1941 he accompanied her from Columbia to Dallas, took $ 2,500 from the basement box, and returned with the bills to Columbia, where he invested it in the taxicab venture; that on coming to Columbia to spend the summer of 1941, she brought in bills the $ 3,000 used to purchase Timmons' interest. No receipts were given for these funds, and neither witness disclosed much assurance about the amount in the box at any time or what has since happened to the remainder of the hoard. They still have the box, but there is little in it, and the wife's royalties are now deposited in a bank.
This unusual handling of currency and the wife's alleged contributions rest almost entirely on the oral testimony of petitioner*255 and the wife. That she did make contributions to the business, however, derives some additional support from petitioner's secretary, who was employed by National Lloyds Insurance Co. when he arrived in Columbia and who remained with him after he had established an independent business. He discussed his plans with her and she attended to his banking matters, and on this background she testified that he was unable to furnish the required cash for independent ventures and that she knew that he had gotten it from his wife, although she did not explain how she knew it. We also attach some significance to Timmons' statement that in paying for his interest petitioner paid the $ 3,000 in bills, "most of them $ 20 bills," and the bill of sale, signed by him and introduced in evidence, is made "to L. C. Olinger and Stella Olinger." Weighing this evidence in the light of petitioner's failure to keep any adequate records for three years after he had initiated his own business, we have found, although not without some doubt, that $ 6,000 was contributed by the wife, and we have also found that the wife rendered certain services to the car-renting business. We have *428 not found them *256 to be vital, however, because she appears rather to have "helped out" in meeting emergencies, particularly in 1942, when the business was in its initial stages and petitioner could not afford to employ assistants, but she performed very little service in 1943, the taxable year.
Petitioner stresses, however, the contribution of capital is sufficient to support recognition of a partner wife for tax purposes, and we agree. But, while this finding would warrant recognition of the wife as a partner taxwise if a partnership existed, we are unable to find that one did, for nothing in the record indicates that petitioner and his wife ever had any agreement, oral or written, express or implied, to enter into a partnership relation prior to their signing of the written agreement in 1944. In Commissioner v. Tower, supra, the Supreme Court, purporting to deal with a partnership valid under state law, gave the following definition as the background of its approach to the issue presented:
* * * 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*257 and when there is community of interest in the profits and losses. * * * whether the partners really and truly intended to join together for the purpose of carrying on business and sharing in the profits or losses or both * * * is a question of fact, to be determined from testimony disclosed by their "agreement, considered as a whole, and by their conduct in execution of its provisions." Drennen v. London Assurance Company, 113 U.S. 51">113 U.S. 51, 56; Cox v. Hickman, 8 H. L. Cas. 268. * * *
This definition and commentary, we believe, hold good for the meaning of partnership as expanded by section 3797, Internal Revenue Code, to include "a syndicate, group, pool, joint venture, or other unincorporated organization, through or by means of which any business, financial operation, or venture is carried on."
The great preponderance of evidence here adduced indicates affirmatively that petitioner and his wife did not regard themselves as partners, joint venturers or members of a syndicate or pool. They do not appear to have discussed or expressly reached any understanding about a division of profits and losses, control of the *258 business, contributions of capital and services or participating interest. When petitioner needed $ 500 to start his claim adjustment business in 1940, his wife furnished it, and he continued as before to support the family with his earnings. When he needed $ 2,500 and later $ 3,000 in 1941 for his new venture, she furnished those amounts, and when she happened to be in Columbia, she assisted him in the enterprise. But she did not join with him, Jolliff, and Timmons in applying for the incorporation of Diamond Trading Co., or in the petitions and litigation for a permit to operate taxicabs, or in applying for a permit to rent cars. Petitioner became a partner with others, but not with her, *429 Burnet v. Leininger, 285 U.S. 136">285 U.S. 136. Thereafter her name did not appear as employer on declarations to the Social Security Office, or employer's tax returns, or withholding tax returns, and no partnership is mentioned on any income tax return filed prior to 1944. Petitioner on the contrary consistently represented himself as the "owner" of the business, and the cars used in it were registered in his name or that of the dormant corporation which was *259 never completely organized.
Such a showing conceivably would not be incompatible with the existence of a partnership if an agreement between the alleged partners were established or could be inferred from acts of the parties. But it does not indicate any partnership agreement and, with one exception, such further evidence as appears affirmatively rebuts the view that petitioner and his wife had any such agreement. While the wife took money from the cash box of the business when she wished, she explained that most of the profits were reinvested in the business, "I would say all except living expenses from the profits of 1943." No record at all was kept of her withdrawals, which obviously were used to discharge petitioner's duty of support, and hence their purpose and the manner of withdrawal refutes the view of a division of profits on a business basis. More significant still is the testimony of petitioner and of Lasley that petitioner did not mention any partnership when Lasley was engaged to set up an accounting system, and, so far as the record shows, no one had ever thought of the business as a partnership until petitioner informed Lasley that his wife had put in some money. *260 Lasley thereupon suggested a written partnership agreement, but, when he returned in February 1944 to prepare income tax returns, he found that no action had been taken on the suggestion. As petitioner said nothing of a partnership to the revenue agent who had previously examined such records as were available, we infer that the idea of a partnership originated with the accountant and that this was an accountant-inspired "partnership."
We have taken note that Government bonds were bought in the names of "L. C. Olinger or Stella Olinger" with funds of the business and that Timmons' bill of sale of his interest is to petitioner and the wife. The bonds, however, were recorded as business assets by the accountant and hence not distributed, and, while the bill of sale does give slight color to petitioner's claim, we deem it overweighed by a great preponderance of the evidence. Unlike the case considered in Weizer v. Commissioner (C. C. A., 6th Cir.), 165 Fed. (2d) 772, petitioner, so far as shown, never represented his business as a partnership, and, unlike the case considered in Wilson v. Commissioner (C. C. A., 7th Cir.), 161 Fed. (2d) 661,*261 the record discloses no agreement, express or implied by conduct, that petitioner and his wife *430 should share profits equally. Failing such understanding between the parties, we hold that no partnership existed. Cf. Schreiber v. Commissioner (C. C. A., 6th Cir.), 160 Fed. (2d) 108, affirming 6 T. C. 707; Fred W. Ewing, 5 T. C. 1020; affd. (C. C. A., 6th Cir.), 157 Fed. (2d) 679; Felix Zukaitis, 3 T.C. 814">3 T. C. 814.
In a second assignment petitioner charges the Commissioner with error in adding to income for 1943 oil royalties of $ 635.80. Petitioner testified that his wife was the owner of interests in oil-bearing lands, and that he owned no such interests and had received no royalties. As this testimony was not contradicted or weakened, and his wife's right to and receipt of royalties are well established, the Commissioner's determination in this respect is reversed.
Decision will be entered under Rule 50.