Partner profit-share reallocation can be a taxable gift when the right to profits is transferred without consideration.

A partner's right to share in firm profits is property capable of transfer, and a voluntary re-allocation of that profit share among the other partners without consideration constitutes a transfer under gift-tax law. The assessee's one-third profit share was diminished and the other partners' interests increased, so the redistribution was treated as a taxable gift. The argument that only a right to profits on dissolution was involved was rejected, and valuation or goodwill issues were not decisive on liability.

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Issues: Whether redistribution of a partner's one-third share in the profits of a firm among other partners amounted to a transfer of property constituting a taxable gift.

Analysis: The right of a partner to share in the profits of a firm is property capable of transfer. When the assessee's profit share was re-allotted so that a part of it was taken by the other partners, there was a diminution of the assessee's interest and a corresponding increase in the interests of the others. Such re-alignment of profit shares, even if made by mutual consent and without any change in the firm's capital, involved a transfer of property within the meaning of the gift-tax law. The contention that only a right to profits at dissolution was involved was rejected. The discussion on valuation and goodwill was not treated as decisive of liability.

Conclusion: The redistribution of the profit share was a gift chargeable to tax, and the assessee was liable to gift-tax.

Ratio Decidendi: A partner's right to share in the profits of a firm is property, and its voluntary redistribution among partners for no consideration constitutes a transfer of property amounting to a gift under the gift-tax law.

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