Partnership goodwill is estate-duty property when a partner dies, and private exclusions do not defeat valuation

A deceased partner's interest in the goodwill of a continuing partnership is property for estate duty purposes, because a partner's share extends to the firm's assets, including goodwill. On death, the cessation of that interest confers benefit on the surviving partners, and a private stipulation denying the deceased partner or heirs any right in goodwill does not prevent the property from passing or being deemed to pass on death. Difficulties in apportionment do not make the asset non-taxable. The value of the deceased partner's share in goodwill must therefore be included in the principal value of the estate under the applicable valuation provisions.

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Issues: Whether a deceased partner's share in the goodwill of a continuing partnership formed part of the property passing on death and was liable to estate duty, and whether the value of that interest had to be included in the principal value of the estate.

Analysis: A partner's interest in a running partnership extends to every asset of the firm, including goodwill, even though no partner has a specific proprietary share in any particular asset during the subsistence of the partnership. Goodwill is property within the meaning of the Estate Duty Act. On the death of a partner, the cesser of his interest results in an accrual of benefit to the surviving partners, and the mere stipulation that the deceased partner or his heirs shall have no right in the goodwill does not prevent the property from passing or being deemed to pass on death. The property does not disappear by private agreement, and difficulties in apportionment do not make the asset non-taxable. The value of the deceased's share had therefore to be brought into account under the statutory valuation provisions applicable to property passing on death.

Conclusion: The deceased's share in the goodwill passed on death and was includible in the estate for estate duty purposes; the question was answered in the affirmative and in favour of the Revenue.

Final Conclusion: The appeal succeeded for the Revenue, and the goodwill attributable to the deceased partner's interest remained chargeable to estate duty under the valuation scheme of the Act.

Ratio Decidendi: A deceased partner's interest in partnership goodwill is property that passes or is deemed to pass on death, and private stipulations excluding heirs from that goodwill do not defeat estate duty liability where the statutory valuation provisions can be applied.

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