On the advice of his attorney, Dr. Andres, a local pediatrician, contributed several office buildings, which he had previously owned as sole proprietor, to a new Andres Partnership in which he became a one-third general partner. He gave the remaining limited partnership interests to his two sons, Miguel and Esteban. Last year, when the partnership was formed, the boys were 14 and 16. The real estate is well managed and extremely profitable. Dr. Andres regularly consults with a full-time hired manager about the business, but neither of his sons has any dealings with the partnership. Under the terms of the partnership agreement, the boys can sell their partnership interest to no one but their father. Distributions from the partnership have been large, and Dr. Andres has insisted that the boys put all their distributions into savings accounts to pay for their college education.
Last year’s return (the partnership’s first) was filed by Mr. Jones, a partner in the local CPA firm of Wise and Johnson. Mr. Jones, who was Dr. Andres’s accountant for a decade, retired last summer. Dr. Andres’s business is extremely profitable and is an important part of the client base of this small-town CPA firm. Ms. Watson, the young partner who has taken over Dr. Andres’s account, asked John, a second-year staff accountant, to prepare the current year’s partnership return.
John has done considerable research and is positive that the Andres Partnership does not qualify as a partnership at all because the father has retained too much control over the sons’ interests. John has briefly talked to Mr. Jones about his concerns. Mr. Jones said he was really rushed in the prior year when he filed the partnership return and admitted he never looked into the question of whether the arrangement met the requirements for being taxed as a partnership. After hearing more of the details, Mr. Jones stated that John was probably correct in his conclusion. Dr. Andres’s tax bill will be significantly larger if he has to pay tax on all the partnership’s income. When John approached Ms. Watson with his conclusions, her response was, “Oh, no! Dr. Andres already is unhappy because Mr. Jones is no longer preparing his returns. He’ll really be unhappy if we give him a big tax increase, too.” She paused thoughtfully, and then went on. “My first thought is just to leave well enough alone and file the partnership return. Are you positive, John, that this won’t qualify as a partnership? Think about it and let me know tomorrow.”
Required: 
Prepare a list of points you want to go over with the tax partner that would support finding that the business activity is a partnership. Prepare a second list of points that would support finding that the business activity is not a partnership.