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regarding the total gross revenues from foreign trade shows
during the periods at issue and the 10 percent thereof received
by Crocus from exhibitors located in the former Soviet Union that
Crocus retained fees collected from such exhibitors as
compensation for its services in operating the foreign trade
shows.
The owner of a business may agree to compensate a hired
manager or key employee with a percentage of the income of the
business, or a broker may be retained to sell property for a
commission based on the net or gross sales price. Even though
both arrangements may culminate in a division of profits, neither
constitutes a partnership unless the arrangement results in the
parties’ becoming coproprietors.
In Luna v. Commissioner, 42 T.C. 1067 (1964), we held there
was no partnership where the taxpayer was to receive a percentage
of the renewal commissions from an insurance policy he had
designed in exchange for his management services to the insurance
company. In so holding, we focused on the following: That
neither the taxpayer nor the insurance company in any way
indicated, prior to the suit, an intent to join together as
partners; partnership tax returns were not filed, and neither
party held itself out to others as a joint venturer with the
other party; the taxpayer was not authorized to engage in the
insurance business except as an agent selling insurance policies;
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