A partnership owned by the taxpayers admitted a third party ("Woodward") as a member of the -partnership with a view to selling an apartment building of the partnership and allocating 80% of the resulting gain for tax purposes to Woodward with Woodward also receiving 80% of the net proceeds of sale of the property (which was to be a substantiated lower amount due to the leveraging of the property) and would cease to be a partner.
The allocation of 80% of the income to Woodward was found to be unreasonable given that "Woodwards' contribution was both ephemeral and for all practical purposes risk free". The reasonable treatment of the arrangement under s. 103 would be to treat Woodward's share of the income as the amount of income it actually received.