Goodwill in partnership reconstitution was held to involve valuable consideration and not a taxable gift.

Disposition of goodwill on reconstitution of a partnership was not a taxable gift because gift-tax applies only to a voluntary transfer of existing property without consideration in money or money's worth. The partnership deed had to be read as a whole, and the incoming and continuing partners assumed reciprocal obligations, including sharing profits and losses, contributing capital when required, and participating in the business. Those obligations constituted valuable consideration, and the revenue failed to prove a gratuitous transfer. The goodwill arrangement therefore did not attract liability to gift-tax.

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Issues: Whether the disposition of goodwill in the reconstituted partnership attracted liability to gift-tax.

Analysis: Gift-tax under the charging provision arises only where there is a "gift" as defined by the Act. A gift requires a transfer of existing property made voluntarily and without consideration in money or money's worth. On reconstitution of the firm, the incoming and continuing partners undertook reciprocal obligations under the partnership arrangement, including sharing profits and losses, contributing capital when required, and participating in the conduct of the business. The goodwill clause could not be read in isolation from the partnership deed as a whole and the legal incidents of partnership. The arrangement therefore disclosed valuable consideration in money's worth, and the revenue had not discharged the burden of showing a gratuitous transfer.

Conclusion: The disposition of goodwill did not amount to a gift and was not chargeable to gift-tax.

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