Goodwill in partnership estate valuation: retired firm share excluded, continuing firm share included in principal value of estate.

Under the Estate Duty Act, the deceased's share in goodwill of a firm from which he had retired before death was not property passing on death, so it was not includible in the principal value of the estate; the alternative attempt to support inclusion on a gift theory was not open on the record. By contrast, where the partnership continued, goodwill formed part of the firm's total assets and could not be isolated for separate exclusion, because a partner has no defined share in individual assets and goodwill enters the valuation of the partner's interest on dissolution. Accordingly, the retired firm's goodwill was excluded, but the continuing firm's goodwill was included.

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Issues: Whether the deceased's share in the goodwill of the two partnership firms was liable to be included in the principal value of the estate.

Analysis: In relation to the firm from which the deceased had retired before death, the share in goodwill could not be treated as property passing on death under the Estate Duty Act, and the attempt to sustain inclusion on a new gift theory was not open on the record. In relation to the continuing partnership, goodwill was part of the firm's total assets and could not be isolated as a separate item for exclusion from valuation; a partner has no defined share in individual assets, and the value of goodwill forms part of the hotchpotch for arriving at the partner's share on dissolution.

Conclusion: The deceased's share in the goodwill of the retired firm was not includible, but the share in the goodwill of the continuing firm was includible in the principal value of the estate.

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