## Facts

- Elia Marinos and Robert Brodie entered into a written agreement concerning a recorded-music venture.
- Under the agreement, the parties agreed to lease a master audio recording from Entertainment Marketing Co., Inc.
- Marinos agreed to advance the lease costs and to contract with Signal Records, Ltd., for production and distribution of the record.
- The agreement provided that Marinos and Brodie would each contribute one-half to the venture and would split income 50–50.
- The agreement described the parties as “tenants in common” and stated the arrangement was not to be considered a partnership.
- The IRS assessed additional taxes against Marinos, and the assessment depended on whether the arrangement was a partnership (as the IRS asserted) or mere co-ownership of property (as Marinos asserted).
- Marinos petitioned the U.S. Tax Court, disputing the IRS’s partnership characterization.

## Issues

1. Whether Marinos and Brodie’s master-recording venture was a partnership for federal income tax purposes, notwithstanding contractual language describing the parties as tenants in common and disclaiming any partnership.

## Decision

- The Tax Court held that Marinos and Brodie formed a partnership (or joint venture taxable as a partnership) for federal tax purposes.
- The court treated the tax consequences of the venture under the partnership provisions, rather than as deductions and income from simple co-ownership.
- The court sustained the IRS’s position to the extent it depended on classifying the arrangement as a partnership.

## Legal Principles

- For federal tax purposes, a “partnership” includes a joint venture or other unincorporated arrangement through which parties carry on an activity and divide its resulting income.
- Whether an arrangement is a partnership depends on the parties’ relationship in substance (their agreement and conduct), not solely on labels such as “tenants in common” or a clause stating “this is not a partnership.”
- Mere co-ownership of property, standing alone, does not create a partnership; however, combining capital or efforts to pursue an income-producing venture and agreeing to share the results can support partnership status.
- When a venture is classified as a partnership for tax purposes, the venture’s income and deductions are determined and allocated under the partnership tax rules rather than being reported as if each participant independently owned and operated the activity.

## Conclusion

In *Marinos v. Commissioner*, the Tax Court concluded that Marinos and Brodie’s arrangement to lease, produce, and distribute a master recording functioned as a joint venture taxable as a partnership, despite contractual language calling them tenants in common and disclaiming any partnership, so the IRS could apply partnership tax treatment in computing Marinos’s liability.


Marinos v. Commissioner, T.C. Memo 1989-492 (1989)