Giustina

Appellees’ partnership entered into a “Timber Sale Agreement” with the United States Forest Service with respect to the timber on one hundred ninety acres of government land. The timber was ultimately cut and removed by a corporation pursuant to a contract with the partnership. In their income tax returns the partners reported payments received from the corporation as capital gains. The Commissioner of Internal Revenue determined that these receipts were taxable as ordinary income; appellees paid the additional tax and sued to recover. The District Court *712 entéred judgment for the taxpayers and the government appealed.

The taxpayers are entitled to prevail if the receipts arose from a “disposal of timber * * * held for more than 6 months prior to such disposal, by the owner thereof under any form or type of contract by virtue of which the owner retains an economic interest in such timber * * Internal Revenue Code of 1939, Section 117(k) (2).

The government contends that: (1) the partnership did not become the “owner” of the timber under the Timber Sale Agreement with the Forest Service; (2) the arrangement between the partnership and the corporation did not constitute a…