Glensder Textile Co. v. Commissioner , 46 B.T.A. 176 ( 1942 )

GLENSDER TEXTILE CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Glensder Textile Co. v. Commissioner

Docket No. 102729.

United States Board of Tax Appeals

46 B.T.A. 176; 1942 BTA LEXIS 893;

January 27, 1942, Promulgated

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Petitioner is a limited partnership organized under the Uniform Partnership Law of New York, under which limited partners have a limited liability but have no part in the management of the partnership. The general partners had admitted as limited partners their respective wives and, through trustees, their infant children. In the partnership certificate filed as required by the local statute, they had reserved the power to increase the limited partners at will and to continue the partnership on the death or retirement of a general partner, and the limited partners had the right to confer all their powers as such on their assignees. Held, notwithstanding petitioner's resemblance in some particulars to a joint stock association, on the whole it is more like an ordinary partnership and taxable as such, the line of determination being one of fact, dependent upon the particular powers conferred, as required by Treasury Regulations 94, art. 1001-5, as amended by T.D. 4894.

David A. Goodkind, C.P.A., and George H. Engelhard, Esq., for the petitioner.

George R. Sherriff, Esq., and William G. Ruymann, Esq., for the respondent.

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KERN

This case comes up on respondent's determination of a deficiency in petitioner's income tax for the last quarter of 1936 and the calendar year 1937 in the amounts of $35,821.12 and $47,466.28, respectively, and raises the sole question of whether petitioner, which is a limited partnership under New York law, is an association taxable as a corporation under the statutory defintion of section 1001(a)(2) of the Revenue Act of 1936. The pertinent part of this section and the applicable Treasury regulations are given in the margin. ¹

None of the essential facts is in dispute except the ultimate fact, which is a question of law, of the taxable category of the petitioner. They are as follows:

FINDINGS OF FACT.

The returns of the petitioner were filed with the collector of internal revenue for the third district of New York.

Edwin Rosenberg, Louis Grossman, Arthur Klein, and Sidney Nathan operated the Glensder Textile Co. as an ordinary partnership (hereinafter referred to as the old firm) to sell handkerchiefs, scarfs, laces, etc., from 1919 to October 1, 1936, when the partnership was dissolved pursuant to a dissolution agreement effective "as of the close of business of September 30, 1936." By the terms of this agreement the interest of each of the four general partners in the net worth of the old firm, $300,395.21, was stated as follows:

Edwin Rosenberg	$71,606.16
Louis Grossman	81,975.67
Arthur Klein	74,314.09
Sidney Nathan	72,499.29

No liquidation of the assets was to be made, but they were to be transferred to a limited partnership "for the purpose of carrying on jointly with the limited partners named in said agreement a business of a similar nature * * *."

On the same day as the old firm was dissolved the new firm was created under the following agreement; the four limited partners for whom trustees were to act being at that time, and since, minors:

AGREEMENT made this 30th day of September 1936, between

LOUIS GROSSMAN, first party;

EDWIN ROSENBERG, second party;

SIDNEY NATHAN, third party;

ARTHUR KLEIN, fourth party;

HATTIE GROSSMAN, fifth party;

BERTHA L. ROSENBERG, sixth party;

ROSE NATHAN, seventh party;

HELEN KLEIN, eighth party;

HATTIE GROSSMAN and LOUIS GROSSMAN, as Trustees for Marilyn S. Grossman under agreement dated September 30, 1936, ninth parties;

HATTIE GROSSMAN and LOUIS GROSSMAN, as Trustees for Samuel M. Grossman under agreement dated September 30, 1936, tenth parties;

BERTHA L. ROSENBERG and EDWIN ROSENBERG, as Trustees for Frederick Rosenberg under agreement dated September 30, 1936, eleventh parties;

BERTHA L. ROSENBERG and EDWIN ROSENBERG, as Trustees for Edwin A. Rosenberg under agreement dated September 30, 1936, twelfth parties;

ROSE NATHAN and SIDNEY NATHAN, as Trustees for Marjorie Nathan, under agreement dated September 30, 1936, thirteenth parties;

all of the Borough of Manhattan, City of New York, except Edwin Rosenberg and Bertha L. Rosenberg, who reside at New Rochelle, New York.

WITNESSETH: That, in consideration of the mutual promises hereinafter contained, the said parties have agreed as follows:

FIRST: The parties do hereby form with each other a limited partnership under the Partnership Law of the State of New York (hereinafter referred to as the Partnership) to carry on the business of dealing in handkerchiefs, ladies' scarfs, laces, veilings and such other merchandise as may from time to time be determined by the general partners, under the name of GLENSDER TEXTILE COMPANY, at 417 Fifth Avenue, Borough of Manhattan, City of New York, or such other places as the general partners may from time to time designate.

SECOND: The first to fourth parties, both inclusive (who heretofore constituted a partnership carrying on business under the same name and heretofore dissolved, said partnership being hereinafter referred to as the Old Firm), shall be general partners. Each of them shall contribute to the Partnership the amount set opposite his name, respectively, in cash, or in property formerly belonging to the Old Firm, at the valuations appearing upon the books of the Old Firm at the close of business on September 30, 1936. Each of them shall be entitled to share in the profits and losses of the Partnership in the proportions set opposite his respective name:

Names	Contributions	Share in Profits	Share in Losses
Louis Grossman	$25,000	1/12	1/12
Edwin Rosenberg	25,000	1/12	1/12
Sidney Nathan	25,000	1/12	1/12
Arthur Klein	50,000	1/6	1/6

But after the limited partners' contributions shall have been exhausted by the application of losses, the general partners shall bear one-quarter of all losses occurring thereafter.

THIRD: The fifth to thirteenth parties, both inclusive, shall be limited partners. Each of them shall contribute to the Partnership the amount, and shall share in the profits and losses of the Partnership in the proportion set opposite his, her or their respective name:

Names	Contributions	Share in Profits	Share in Losses
Hattie Grossman	$25,000	1/12	1/12
Bertha L. Rosenberg	25,000	1/12	1/12
Rose Nathan	25,000	1/12	1/12
Helen Klein	25,000	1/12	1/12
Hattie Grossman and Louis Grossman, as Trustees for Marilyn S. Grossman	12,500	1/24	1/24
Hattie Grossman and Louis Grossman, as Trustees for Samuel M. Grossman	12,500	1/24	1/24
Bertha L. Rosenberg and Edwin Rosenberg as Trustees for Edwin A. Rosenberg	12,500	1/24	1/24
Bertha L. Rosenberg and Edwin Rosenberg as Trustees for Frederick Rosenberg	12,500	1/24	1/24
Rose Nathan and Sidney Nathan, as Trustees for Marjorie Nathan	25,000	1/12	1/12

but the share of any of said limited partners in the losses shall in no event exceed in the aggregate the amount of his, her or their respective contribution.

FOURTH: The term for which the Partnership is to exist is the period from the beginning of business on October 1, 1936 until the close of business on December 31, 1937, and thereafter from year to year, unless at least six calendar months before December 31st of any year any one of the general partners shall have delivered at the then principal office of the Partnership a written notice that he desires the Partnership to terminate at the close of business on December 31st of such year, in which event the partnership shall terminate at the time so designated.

FIFTH: The contribution of each limited partner increased by gains credited by [sic] not withdrawn or decreased by losses as determined under paragraph Third hereof, is to be returned upon the termination of the Parnership in accordance with the terms of paragraph Fourth hereof, or upon any earlier dissolution of the Partnership if caused by the death, retirement or insanity of a general partner, provided that at any such time all liabilities of the Partnership, except liabilities to general partners and to limited partners on account of their contributions, shall have been paid, and that there shall then remain property of the Partnership sufficient to make such return. If the property thus remaining shall not be sufficient to repay in full all the partners', general and limited, contributions adjusted to reflect accumulated gains or losses as above provided, then each of the partners shall receive such proportion of such remaining property as his, her or their respective contribution as thus adjusted shall bear to the aggregate of all such adjusted partnership contributions which have not theretofore been repaid. In such event limited partners shall not have any further claim against general partners for the return of the balance of their contributions or credited gains.

SIXTH: Upon the written consent of all the general partners, and upon terms agreed upon by them in writing, additional limited partners may be admitted at any time.

SEVENTH: The limited partners' interests shall be assignable in whole or in part. Each limited partner shall have the right to confer upon an assignee of his interest or of a part thereof the rights of a substituted limited partner as provided by the Partnership Law.

EIGHTH: Each of the general partners shall render, for the benefit of the Partnership, during its continuance, substantially the same services which he rendered to the Old Firm at the time of its dissolution, and shall devote to the performance of such duties substantially his entire time, except for such periods as he may be prevented by illness or other emergencies, or as the general partners may agree upon.

NINTH: True, just and correct books of account shall be kept, in which there shall be entered all the transactions of or relating to the Partnership or its business.

TENTH: Each of the general partners shall receive as a salary for the services to be rendered by him, the sum of Fifteen Thousand ($15,000) Dollars per annum, payable in semi-monthly instalments, such salaries to be treated as an expense of the business in the ascertainment of profits for distribution among the partners.

ELEVENTH: Each partner, whether general or limited shall receive interest on his contribution adjusted to reflect gains credited and not withdrawn or losses at the rate of 4% per annum, payable at the expiration of each calendar year, such payments to be treated as an expense of the business in the ascertainment of profits for distribution among the partners.

TWELFTH: The general partners do hereby expressly stipulate that they and each of them will not and shall not, during the continuance of the partnership, and until the dissolution or other termination thereof, directly or indirectly, individually or as general or limited partners, or as agent or stockholder, or in any way whatsoever, engage in any business, trade, calling or profession of any name or nature, other than the legitimate business of this partnership; nor will they or any of the them, directly or indirectly, use the partnership name except for the legitimate purposes of the Partnership for the accommodation of any individual, firm or corporation, or make or endorse any note, check, bill of exchange, bond undertaking or other paper that purports to obligate the Partnership in any way, without the express permission of the other general partners in writing first had and obtained; nor will they or any of them, except for the business of the Partnership, during the continuance thereof, individually make, sign, endorse or accept; nor will they or any of them suffer or permit their individual names to be used in making, endorsing or executing any promissory note, check, draft, bill of exchange, bail, bond or undertaking any person, firm or corporation; nor will they or any of the them become in any way individually bound or liable for any firm or corporation, or in any suit, action or proceeding, as bondsman, surety, guarantor, drawer, acceptor, or otherwise, without the like consent of the remaining general partners.

THIRTEENTH: In the event of the death of any of the general partners during the continuance of this agreement or any renewal or extension thereof, an accounting shall forthwith be taken of the assets and liabilities of the Partnership as of the date of death of said partner. If the surviving general partners shall decide to continue the business, then within thirty days of said death, 50% of the interest of the said deceased partner shall be paid over to the personal representatives of the deceased; 50% of the balance (with interest thereon at 4% per annum) shall be paid not later than six months thereafter, and the balance then remaining (with interest as aforesaid) within one year from the date of the first payment. In computing the interest of the deceased partner, assets and liabilities shall be taken up in the same manner as at the last previous periodic accounting. The good will of the business shall be determined as follows: The net profits of this and of the previous business for the five fiscal years last preceding the date of death shall be ascertained, and the yearly average taken. Of the said average 75% shall be regarded for the purpose of this agreement as the good will of said business and the deceased partner's proportionate share thereof shall be added to the amount to be paid; provided, however, that in the event that the net profits for the year preceding the death be less than Twenty-five Thousand ($25,000) Dollars, the good will shall be computed at only 50% of the average for the said five years, and in the event that there shall be a net loss is excess of Twenty-five Thousand ($25,000) Dollars, in such year, nothing shall be added for good will. Until the making of the first payment herein above provided to be made, the legal representative of the deceased partner may request that the periodic drawing in effect at the date of the partner's death, shall continue to make such payments, but the amount thereof shall be charged to the deceased partner's capital, and shall be regarded as payment on account of the first instalment to be made.

FOURTEENTH: The books of account of the Partnership shall be open to the legal representative of the deceased general partner, or his duly accredited accountant, at reasonable times and to reasonable extent during business hours, for the purposes of examining the same and making extracts therefrom.

FIFTEENTH: In the event that any controversy shall arise between the legal representative of the deceased general partner, on the one hand, and the surviving partners on the other, such controversy shall be determined by arbitration. The legal representative of the deceased partner shall appoint one arbitrator, and the surviving partners jointly shall appoint an arbitrator, the two thus selected to appoint a third.

The certificate of limited partnership filed with the clerk of the Supreme Court of New York County, New York, contained substantially the same provisions as the agreement except that no reference was made therein to salaries or a fixed return on investment. Specific powers reserved, as allowed by the statute, are set out in our opinion.

All the provisions of the agreement were carried out. The several general partners set up trusts to administer the interests of the children made limited partners.

OPINION.

KERN: Respondent, relying on Morrissey v. Commissioner,296 U.S. 344">296 U.S. 344, and the companion cases decided by the Supreme Court on the same day, contends that the petitioner possesses all the eight elements which were said in those cases to characterize an association in corporate form and hence taxable as a corporation; that it is, in short, a group of persons associated in a joint enterprise to carry on a business, possessing centralized control and continuity of existence; that it has transferable shares and limited liability; that it pays dividends or profits to its members in proportion to their respective interests; and, generally, that it has a substantial resemblance to corporate organization.

The revised regulations, already quoted, provide that a limit partnership organized under the Uniform Limited Partnership Act, such as petitioner, may or may not be an association, depending upon its essential characteristics. The line to be drawn is one of fact. Obviously, two or more persons associated together in a general partnership would fall under that well recognized category in the taxing statutes and, since the entity theory is not recognized by the act, its income would be taxed to the individual partners, but at the rates applicable to natural persons. As was said by the Supreme Court, per Brandeis, J., in Burk-Waggoner Oil Association v. Hopkins,296 U.S. 110">296 U.S. 110, the "term partnership as used in these sections obviously refers only to ordinary partnerships." The Court then went on to point out that joint stock associations, notwithstanding classification as partnerships under the law of several states, could not be considered as such under the Federal revenue acts because they have a fixed capital stock divided into shares which are represented by transferable certificates and have also other indicia of corporate existence and corporate business effectiveness.

The limited partnership appears to hold a middle ground between the joint stock association and the general partnership, and, as the regulations aptly suggest, the powers of the particular limited partnership under the local statute must first be examined before a line can be drawn. The limited partnership in the sense of several general partners associated with several limited partners, the ordinary rules of partnership applying to the general partners, but the limited partners having no liability beyond their money actually embarked in the enterprise, was not known to the common law, see 8 Holdsworth, Hist. Eng. Law 196; but is derived from French law and was introduced by statute in New York as early as 1822, in the days of Chancellor Kent. See 3 Kent Com. 35; Ames v. Downing,1 Bradf. Surr. 321">1 Bradf. 321 (N.Y. 1850); 3 Bouvier, Law Dict. (Rawle's 3d Rev., sub verb. "Partnership".) The limited partners in such a partnership are also silent partners who have no hand in the management of the business. Other types of limited partnerships exist by statute, it is true, as in Pennsylvania, see Bouvier, loc. cit., in which no member incurs any liability beyond the amount of his contribution. This latter form obviously approaches the confines of a corporation, whereas the former form inclines to that of a partnership, for although the Supreme Court has pointed out in Burk-Waggoner v. Hopkins, supra, that the individual liability of a partner for the debts of the partnership or association can not be taken as the sole touchstone of classification, it is nevertheless a very important means of discrimination.

Even within the form of limited partnership most generally known, in which general and limited partners are associated together, we may still suppose situations where the resemblance to corporate form would be so substantial as to justify classification of the limited partnerships as corporations. If, for instance, the general partners were not men with substantial assets risked in the business, but were mere dummies without real means acting as the agents of the limited partners, whose investments made possible the business, there would be something approaching the corporate form of stockholders and directors. But, as a practical matter, to suppose such a situation we must also suppose that the limited partners were, in reality, not merely silent partners without control of affairs but were empowered to direct the business actively through the general partners. We suggest this possibility merely to show that designating a partnership as of a particular kind involves no more than applying a particular name, and that the really vital thing, the rights and duties of the partners as between themselves and the public, may vary as much as the legislatures of the several states may think fit to allow.

We must, therefore, first look to the statute to see what the law permits and next to the articles of partnership and certificate filed with the county clerk to see what has actually been done within the law.

The petitioner was organized as a limited partnership in 1936 under the Uniform Limited Partnership Act of New York, Laws 1919, ch. 408, art. 8; McKinney's Consol. Laws of N.Y., Ann., bk., 38 (1923), and filed a certificate setting out the information required by section 91 of that act. A limited partnership as defined by the act is one formed by one or more general partners and one or more limited partners, and "the limited partners as such shall not be bound by the obligation of the partnership." Sec. 90. A limited partner is not liable as a general partner unless he takes part in the control of the business, sec. 96; and if he contributes capital erroneously, believing himself a limited partner, he does not become a general partner provided he at once withdraws, sec. 100. A general partner, on the other hand, has all the rights and powers and is subject to all the liabilities of a partner in an ordinary general partnership, except that he may not do certain things without the consent of all the limited partners. Among these powers withheld on condition is that to admit a person as a general partner, or a person as a limited partner unless that right is given in the certificate; or to continue the business with partnership poroperty on the death, retirement or insanity of a general partner, unless that right is given in the certificate. Sec. 98. A limited partner has the full rights of a general partner to inspect the partnership books and to partnership information, and to a share of the profits. Sec. 99. One person may be both a general partner and a limited partner, his latter status giving him in respect of his contributions the rights of a limited partner against the other members. Sec. 101. A limited partner may withdraw his contributions under certain conditions, sec. 105; and his interest is assignable, sec. 108; but his assignee does not become a "substituted limited partner," and as such have access to the partnership books except with the consent of all the members, unless the assignor's power to make him such is set out in the certificate. Sec. 108. Retirement, death, or insanity of a general partner dissolves the partnership, unless it is continued with the consent of all the members or under a right stated in the certificate, sec. 109, but it is not stated that the death of a limited partner has such an effect. Sec. 110. The certificate is canceled on general dissolution of the partnership, and must be amended on admission of either a limited or general partner. Sec. 113.

When we turn to the certificate to ascertain the powers reserved under it as allowed by the statute, we find that:

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IX. Upon the written consent of all the general partners, and upon terms agreed upon by them in writing, additional limited partners may be admitted at any time. X. On the death, retirement or insanity of any one or more of the general partners, the remaining partner or partners shall have the right to continue the business.

XI. A limited partner shall have the right to substitute an assignee of the whole or part of his interest as contributor in his place, on the terms and conditions governing his, the assignor's, interest in the partnership. Such assignee shall have the rights and obligations of a substituted limited partner unde the Partnership Law.

After this survey of statutory limitations on limited partnerships, we are in a position to examine the claims of corporate resemblance made by the respondent. What the four general partners did was to redistribute the net worth of the old ordinary partnership, $300,000, between themselves as general partners and their wives and children as limited partners, Klein's contribution as a general partner being $50,000 as against $25,000 for the three other general partners, for the reason, apparently, that he had no children to make limited partners. The same amount of money, in short, was employed in the new partnership as in the old, and it was devided as before insofar as family ownership was concerned, but limited partners were introduced, with consequent changes in legal relations and status.

There was certralized control by the general partners, but this fact did not make them analogous to directors of a corporation. They were acting in their own interest as hitherto, which constituted five-twelfths of the partnership, and not merely in a representative capacity for a body of persons having a limited investment and a limited liability. Nor were the limited partners here able to remove the general partners and control them as agents, as stockholders may control directors. The general partners under powers reserved by the certificates might increase the limited partners, to obtain new money, but the latter, unlike new stockholders in a corporation, acquire no share in control.

A contingent continuity of existence had been provided for by the reservation in the certificate of the power of the surviving general partners to continue the business on the death, retirement, or incapacity of a general partner. We do not think this analogous to the chartered life of a corporation which continues regardless of the death or resignation of its directors or stockholders. A limited partnership is dissolved by death, as an ordinary partnership, unless the right to continue is retained, but continuity is not assured by this power, for it is one vested in the several general partners, apparently, and not in the partnership as an entity. Continuance will be certain only if the remaining general partners agree to it, as would be the case, in substance, in a general partnership. In an ordinary partnership, on the death of a partner a new partnership is formed; here the old partnership continues but receives new life, in effect, from the decision of the members. Moreover, on a general partner's death his interest must be paid over to his personal representative, and the capital of the partnership is to that extent liquidated.

The death of a limited partner apparently has no such effect of dissolving the partnership. A limited partner's interest is transferable but it is obvious from other provisions that the assignee does not thereby become a substituted limited partner, unless that power is reserved. It was reserved here; and some analogy, therefore, does arise between the interest of a limited partner and that of a corporate stockholder in the matter of transferability of interest. It does not appear, however, that such transfers were contemplated, for no mechanics were provided for the ready transfer of interests through certificates representing shares in the partnership. The limited partner had the power to substitute an assignee, but he also might merely assign without substitution. The anomalous class of assignees which would result in the latter case would bear no resemblance to a corporate stockholder's status. The general partner's interest was, of course, not any more transferable than that of a general partner in an ordinary partnership. We do not think that the transferability of the interest of a limited partner, however analogous in itself to the corporate stockholder's right, can be taken as determinative here.

Nor can we believe the limited liability of the limited partner to be a final criterion. Limited liability is, of course, an essential element of doing business in the corporate form, but the persons here actually in control of all business activity of the partnership were the general partners only, and the moment that a limited partner should enter into business activity he would lose his status as a limited partner and become a general partner. We find nothing in the statute that limits the liability of general partners of a limited partnership, but, on the contrary, it is provided that their liability shall be the same as that of partners in an ordinary partnership except in certain matters not here relevant.

We think that the provision in the partnership articles (art. second) to which respondent refers can have no bearing, therefore, on their liability to general creditors, and that it does not go beyond the rights of the partners inter sese. Nor do we regard the provision as to "salaries" of the general partners nor that as to a guaranteed payment of 4 percent on contributions to all members as having any relevance in the present relation. Moreover, it would seem to be immaterial that under New York law a limited partnership may take real estate in the partnership name. For article 2, section 10, paragraph 2, of the General Partnership Law provides that the law of general partnerships shall apply to limited partnerships, except where inconsistent therewith; and article 5, section 51, paragraph 1 provides as follows: "A partner is co-owner with his partners of specific partnership property, holding as a tenant in partnership." This would indicate that the partnership does not hold as an entity. The mere fact that the partnership is given power by implication in section 21 to hold real property in its name is not determinative. Section 21 of the General Partnership Law provides that, where land is so held, any general partner may convey legal title to it by a conveyance executed in the firm name, ibid, par. 1; or equitable title of the whole partnership interest by a conveyance executed in his own name, ibid, par. 2. The partnership agency thus provided for does not, however, constitute the partnership an entity, since the same general principles apply to real as to other property, and any general partner in respect of its acts, as in all other things, as if he owned it both jointly and severally. The general effect of these provisions is that, while the legal title to real property may be held in the name of the partnership, as it might be held in the name of an individual partner, the equitable title is the the several partners as tenants in partnership. (Sec. 51.)

A limited partnership may not sue in its own name. In actions brought by such a partnership, the general partners are the proper parties plaintiff. (See sec. 115.)

We must conclude, therefore, after an examination of the organization and legal powers and liabilities of the members of the limited partnership before us, that it does not bear such a resemblance to an association or operate effectively as such so as to justify our inclusion of it in that category for tax purposes. Although a limited partnership, it was still a partnership, and should be treated as such under the statute. The statute provides a category for individuals doing business in partnership and deriving income thus; and we may not disregard it where the likeness to an association is no plainer than it is here.

Decision will be entered for the petitioner.

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Footnotes

• 1. SEC. 1001. DEFINITIONS.

  (a) When used in this Act -

  (1) The term "person" means an individual, a trust or estate, a partnership, or a corporation.

  (2) The term "corporation" includes associations, joint-stock companies, and insurance companies.

  (3) The term "partnership" includes 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, and which is not, within the meaning of this Act, a trust or estate or a corporation; and the term "partner" includes a member in such a syndicate, group, pool, joint venture, or organization.

  * * *

  (8) The term "stock" includes the share in an association, joint-stock company, or insurance company.

  (9) The term "shareholder" includes a member in an association, joint-stock company, or incurance company.

  * * *

  ART. 1001-5. [Regulations 94.] Limited partnership as corporation. - Limited partnerships of the type of partnerships with limited liability or partnership associations authorized by the statutes of Michigan, Pennsylvania, and a few other States are only nominally partnerships. Such so-called limited partnerships, offering opportunity for limiting the liability of all the members, providing for the transferability of partnership shares, or having other material characteristics of corporate form, must make returns of income and pay the tax as corporations. In all doubtful cases limited partnerships will be treated as corporations unless they submit satisfactory proof that they are not in effect so organized.

  ART. 1001-6. Limited partnership as partnership. - Limited partnerships of the type authorized by the statutes of New York and many other States are ordinarily partnerships and not corporations within the meaning of the Act. Such limited partnerships, which can not limit the liability of the general partners, although the special partners enjoy limited liability so long as they observe the statutory conditions, which are dissolved by the death or attempted transfer of the interest of a general partner, and which can not take real estate or sue in the partnership name, are so like common law partnerships as to render impracticable any differentiation in their treatment for tax purposes. [Italic supplied.]

  ART. 1001-5, as amended by T.D. 4894, 1 C.B. 79">1939-1 C.B. 79:

  "Limited partnerships. - A limited partnership is classified for the purpose of the Act as an ordinary partnership, or, on the other hand, as an association taxable as a corporation, depending upon its character in certain material respects. If the organization is not interrupted by the death of a general partner or by a change in the ownership of his participating interest, and if the management of its affairs is centralized in one or more persons acting in a representative capacity, it is taxable as a corporation. For want of these essential characteristics, a limited partnership is to be considered as an ordinary partnership notwithstanding other characteristics conferred upon it by local law.

  "The Uniform Limited Partnership Act has been adopted in several States. A limited partnership organized under the provisions of that Act may be either an association or a partnership, depending upon whether or not in the particular case the essential characteristics of an association exist."

  ART. 1001-6, as amended by T.D. 4894, 1 C.B. 79">1939-1 C.B. 79:

  "Partnership associations.↩ - A partnership association of the type authorized by the statutes of several States, such, for instance, as those of the State of Pennsylvania (Purdon's Penna. Stat. Ann. (Perm. Ed.), Title 59, ch. 3), having by virtue of the statutory provisions under which it was organized, the characteristics essential to an association within the meaning of the Act, is taxable as a corporation."