OPINION
RENFREW, District Judge:The United States appeals from a decision permitting taxpayers recovery of additional taxes assessed and paid in two companion cases. The taxpayers transferred interests in a limited partnership to themselves as trustees for the benefit of their children and to a corporation owned solely by one of the taxpayers. The basic issue is whether income paid to the trusts and corporation may be taxed to these entities or should properly be considered income to the respective taxpayers. Having carefully considered the points raised by the government, we affirm.
Ray and Dow Bateman1 were general partners in Bateman Brokerage Company (BBC), a California limited partnership. BBC is a food broker, representing and distributing the products of food processors and manufacturers. In the tax years in question, 1963, 1964 and 1965,2 BBC employed between 38 and 40 persons, 10 of whom were general or limited partners, and had gross receipts averaging approximately $574,000 per year and annual income varying between $74,007 and $101,158. Both Ray and Dow Bateman were employees as well as partners, and the court found their salaries as employees to be reasonable.
Prior to the tax years in question, Ray and Dow Bateman both created trusts for the benefit of their children and Ray Bateman acquired, as sole owner, a corporate shell, Group Administrators, Inc. (GAI). The trusts and corporation were then assigned limited partnership interests in BBC and received partnership income. The government contends that the trusts were not real partners for tax purposes under the family partnership provisions of the Internal Revenue Code, 26 U.S.C. § 704(e), and further contends that the corporation was a sham and should be disregarded.
We first consider the trusts as partners. Section 704(e)(1), the family partnership .section of the Code (26 U. S.C. § 704(e) (1)), provides:
“A person 3 shall be recognized as a partner for purposes of this subtitle if he owns a capital interest in a partnership in which capital is a material income-producing factor * * *.”
BBC maintained its books on the cash basis method of accounting which did not reflect accounts receivable and good will owned by the partnership. Based upon prices paid by unrelated third parties for the purchase of partnership in*552terests, the court below found the good will of BBC to have a value of between $405,00.0 and $463,200 during the fiscal years ending 1963, 1964 and 1965. The court also found that the trusts and GAI were valid under California law, that each owned a capital interest in BBC during the relevant time period, and that capital was a material income-producing factor in BBC during that period.
The government challenges the court’s finding on two grounds. First, it urges that the good will was personal to the taxpayers and merely represented the present value of their future earnings. Thus the good will of BBC was not capital within the meaning of 26 U. S.C. § 704(e)(1), and therefore any transfer of a partnership interest in BBC would be an anticipatory assignment of income condemned under Helvering v. Horst, 311 U.S. 112, 61 S.Ct. 144, 85 L.Ed. 75.(1940). Second, it urges that the trusts were not partners since the taxpayers remained true owners of the partnership interests assigned to the trusts.
As to whether good will here belonged to BBC, we must accept the finding below unless we are persuaded that it was “clearly erroneous”. Rule 52(a) of Federal Rules of Civil Procedure. We have reviewed the record below, including the reporter’s transcript of the testimony of the witnesses, and are not so persuaded. Whether we would have reached the same conclusion were the matter tried to us is not the issue before us. It is not the function of an appellate court to review evidence de novo. Zenith Corp. v. Hazeltine, 395 U.S. 100, 123, 89 S.Ct. 1562, 23 L.Ed.2d 129 (1969). There was evidence of record to support the finding,4 and it is not clearly erroneous as a matter of law.
There is no question that for a non-family personal service partnership, good will may be treated as a capital asset. See 26 U.S.C. § 736(b)(2)(B); Rees v. United States, 187 F.Supp. 924 (D.Or.1960), affirmed per curiam, 295 F.2d 817 (9 Cir. 1961). The government urges, however, that good will should be treated differently in a personal service family partnership than in a personal service non-family partnership. Such a distinction has neither a basis in law nor in logic and we reject it. The government failed to point out any legislative history of the family partnership section (§ 704 (e)(1)), which supports its contention nor do we find any. Indeed, both § 704(e)(1) and the applicable regulations 5 indicate that by reference to all the facts of each case a personal service family partnership may have capital which is a material income-producing factor. Here, there was evidence of the value of the good will of BBC based upon unrelated third party purchases of partnership interests. In addition, the donor-taxpayers’ salaries in the years in question were found to be *553reasonable, a factor emphasized in the regulations and § 704(e)(2).6 We agree with Judge Wright’s dissent to the extent that had the good will been personal to the Batemans, the transfers of interest to the trusts would not have received tax recognition. Under those circumstances, without the very substantial good will owned by BBC, the partnership would not have been one in which capital was a material income-producing factor. However, under the facts here, the court below found that BBC owned substantial good will which in effect constituted a capital asset. Based upon these facts, it appears that the Batemans were not transferring personal income to the trusts. There being no basis for treating good will differently in family partnerships than in non-family partnerships, we find no error as a matter of law in the findings of the court below.
The government next contends that the donors were the true owners of the trusts and should be taxed on the trust income. This challenge is based on the Batemans’ positions as donors, trustees, remaindermen and general partners. While the Batemans have gone to the brink of permissible control and ownership, they have not crossed it. Congress has established strict requirements for a valid limited duration trust. The Clifford Regulations (26 U.S.C. § 671 et seq.) provide a framework for proper trust procedure and the Bate-mans have stayed within it. The Bate-man trusts prohibited the trustees from exercising any of the powers enumerated in § 675, which would cause -them to be treated as owners.7 The trustees were directed to exercise their powers in a fiduciary manner, as indeed they were already obligated to do as general partners in dealing with their limited partners. Cal.Corp.Code § 15509(1); Wind v. Herbert, 186 Cal.App.2d 276, 8 Cal. Rptr. 817 (1960); Nelson v. Abraham, 29 Cal.2d 745, 177 P.2d 931 (1947). The trusts’ duration was longer than ten years. Not only were the trusts in question drafted within the permissible framework, but there was no evidence that in fact the Batemans acted outside it. The government contends that while there was no abuse here, there was potential, and therefore the trusts were invalid. However, in the absence of such abuse, the trusts must receive tax recognition.8
Ray Bateman’s corporation, GAI, the owner of a 21 per cent limited partnership interest, presents a closer question than the trusts. The government contends that GAI was a sham. This is a very close question and were we a trial court, we would have been more sympathetic to the government’s view. However, we may not substitute our judgment for that of the court below. The question whether a corporation is genuine or a sham is one of fact. Noonan v. C.I.R., 451 F.2d 992, 993 (9 Cir. 1971), Shaw Construction Company v. C.I.R., 323 F.2d 316, 321 (9 Cir. 1963), and we are limited here by the “clearly erroneous” rule. Ray Bateman testified that GAI was used to build up a cash reserve fund to buy out retiring or deceased partnership interests, not to avoid taxes, and the trial court so found. Even though the parties stipulated that *554other than passive investments, GAI operated no businesses,9 and Bateman testified that he knew the tax bill would be smaller with the corporation, we are not left with a “definite and firm conviction that a mistake has been committed.” United States v. Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 542, 92 L.Ed. 746 (1948).
Affirmed.
. Reference to Ray Bateman and Dow Bate-man as taxpayers includes their respective spouses.
. Dow Bateman sought a refund only for the calendar year 1965.
. Trusts are “persons” for the purposes of § 704(e)(1). See 26 C.F.R. § 1.704-1 (e) (2) (vii).
. BBC was a substantial business entity. During the years in question, it had 8 limited partners other than the Batemans as well as 28 to 30 additional employees. The salaries paid to the Batemans were reasonable and were less than one-third of the amount of the salaries paid to other employees. Finally, the purchase of partnership interests by unrelated third parties supports the finding that the good will of BBC was not personal to the Batemans.
. The regulations for the family partnership section provide:
“For purposes of section 704(e)(1), the determination as to whether capital is a material income-producing factor must be made by reference to all the facts of each case. Capital is a material income-producing factor if a substantial portion of the gross income of the business is attributable to the employment of capital in the business conducted by the i>artnership. In general, capital is not a material income-producing factor where the income of the business consists principally of fees, commissions, or other compensation for personal services performed by members or employees of the partnership. On the other hand, capital is ordinarily a material income-producing factor if the operation of the business requires substantial inventories or a substantial investment in plant, machinery, or other equipment.” 26 C.F.R. § 1.704-1 (e) (1) (iv). (emiphasis supplied)
. § 704(e)(2) provides:
“In the case of any partnership interest created by gift, the distributive share of the donee under the partnership agreement shall be includible in his gross income, except to the extent that such share is determined without allowance of reasonable compensation for services rendered to the partnership by the donor, and except to the extent that the portion of such share attributable to donated capital is proportionately greater than the share of the donor attributable to the donor’s capital. The distributive share of a partner in the earnings of the partnership shall not be diminished because of absence due to military service.”
. The Dow Bateman trusts further prohibited the trustee from exercising any of the powers enumerated in Subpart E, Subehapter J (§ 071 et seq.) of the Code.
. When such abuse is shown, a family trust loses its tax recognition. See Kuney v. Frank, 308 F.2d 719 (9 Cir. 1962).
. The general rule is that to be a separate, taxable entity, a corporation must engage in some substantial business activity. Noonan v. C.I.R., 451 F.2d 992 (9 Cir. 1971) ; National Investors Corporation v. Hoey, 144 F. 2d 466 (2 Cir. 1944) ; Moline Properties v. Coram’r, 319 U.S. 436, 63 S.Ct. 1132, 87 L.Ed. 1499 (1943).