- 96 -
McKee et al. go on to discuss the characteristics of proprietary
profits interests, and other factors evidencing proprietary
interests, such as agreement to share losses, ownership of a
capital interest, participation in management, performance of
substantial services, and the intention to be a partnership,
which includes not only the intention to share profits as
coproprietors, but can also be evidenced by more mundane factors,
such as entry into a partnership agreement and the filing of
partnership returns. See Commissioner v. Culbertson, 337 U.S.
733 (1949); Luna v. Commissioner, supra at 1077-1078; Estate of
Smith v. Commissioner, supra.
McKee et al. at par. 5.03[2] n.120 again cite Estate of
Smith and other cases for the proposition that, if a service
provider obtains only an interest in future profits, the courts
have been reluctant to recognize the service provider as a
partner; instead they treat him as an employee or independent
contractor who has received nothing more than a promise of
contingent compensation in the future. Given the nature of the
attorney-client relationship, independent contractor is the
relationship that obtains under the contingent fee agreement.
Under this arrangement, as in Estate of Smith v. Commissioner,
supra, the profits are divided between the parties in the agreed
upon percentages. But the decision not to treat the arrangement
as a partnership assures that the income of the service provider
Page: Previous 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 NextLast modified: May 25, 2011