Anderson

Memorandum to Counsel.

It appears to the Court that the basic question in this ease is what the plains-tiffs bought. The Government contends they bought the interest of H. S. Anderson, deceased, in the California and Alaska partnerships; that there has been since no sale or transfer of these insterests they bought, and being thus a capital investment, the amounts paid may not be deducted from their income tax returns. The Government also contends that if the plaintiffs bought such interests of H. S. Anderson, deceased, in the two partnerships, the amounts paid may not be allocated to specific items. It distinguishes the Nathan Blum case, 5 T.C. 702 , where such allocation was made, as being a case where the sole surviving partner bought the interest of the deceased partner with the result that a sole proprietorship and not a partnership resulted.

Plaintiffs contend that they bought specific items: namely, the contracts which the prior partnerships were operating, and that since it was stipulated that such contracts had a life of two years and were completely depleted in 1942 and 1943, plaintiffs should be entitled to deduct what they paid from their incomes and thus recoup their…