Comm'r of Internal Revenue

This case is not covered by Casetext's citator
Tax Court of the United States.Feb 15, 1952
17 T.C. 1347 (U.S.T.C. 1952)

Docket No. 29639.



Alfred J. Loew, pro se. William G. O'Neill, Esq., for the respondent.

PERSONAL SERVICES— SECTION 107.— Petitioner performed legal services as attorney for the executors of an estate from January 10, 1939, to June 22, 1944. He petitioner for an allowance of fees for services through October 7, 1940, and was allowed and paid $5,000. The estate remained open, petitioner continued to perform services, and on April 4, 1944, he petitioned for fees for services rendered from October 7, 1940, to that date. For such services he was allowed and paid $3,500. Held, the $3,500 not being 80 per cent of the total compensation of $8,500 received for services as such attorney, petitioner is not entitled to the benefits of section 107, Internal Revenue Code. Alfred J. Loew, pro se. William G. O'Neill, Esq., for the respondent.

Petitioner by this proceeding brings in question respondent's determination of a deficiency in income tax for the year 1944 in the amount of $904.07. The deficiency results from respondent's determination that legal fees in the amount of $3,500 received by petitioner as attorney for the estate of a decedent in the taxable year were not subject to section 107(a), Internal Revenue Code.


Some of the facts have been stipulated and are found accordingly.

Petitioner is an individual residing in the village of Floral Park, New York. His income tax return for 1944 was filed with the collector of internal revenue for the first district of New York.

Petitioner is an attorney at law regularly engaged in practice at Floral Park.

Theresa Wicks died a resident of Nassau County, New York, on January 2, 1939. Under her will, which was admitted to probate by the Surrogate of said county on January 10, 1939, petitioner and Clifton R. Engler were appointed executors.

Petitioner also acted as attorney for the executors and rendered various legal services to the estate of Theresa Wicks from January 10, 1939, to June 22, 1944.

By petition dated October 7, 1940, petitioner applied to the Surrogate of Nassau County to determine the compensation to be paid petitioner as attorney for the executors from January 10, 1939, for legal services which were set out generally, but in some detail in the petition and for which petitioner claimed the reasonable value to be $6,000. No separate charges were made for the various items described, but a lump sum was claimed for all.

On February 13, 1941, the Surrogate directed the executors to pay petitioner the sum of $5,000 as compensation for services rendered to and including October 7, 1940. Petitioner received the $5,000 in 1941.

The estate was not closed and petitioner continued to perform legal services for the executors. On April 4, 1944, petitioner filed a second petition for allowance of fees, again setting out generally, but in some detail, the services rendered by him since October 7, 1940, and asking that $3,500 be paid therefor. No specific charges were made for the various items set out. A lump sum was claimed.

Under date of June 22, 1944, the Surrogate decreed that the executors pay petitioner the sum of ‘3500., as and for the balance of his services as attorney for the executors up to and including the decree upon this accounting. ‘ This decree contained a recital preliminary to the above, as follows: ‘the Surrogate having rendered a decision in writing granting the said ALFRED J. LOEW (petitioner here) an allowance of $8500. for all services rendered to the executors to and including this accounting, less $5000. theretofore paid, leaving a balance of $3500.‘ The sum of $3,500 allowed by this decree was paid to petitioner in 1944.

In the statement accompanying his deficiency notice respondent explained ‘that the fee of $3,500.00 received from the Estate of Theresa Wicks, deceased, for legal services, does not constitute income subject to the provisions of Section 107 of the Code.‘



Petitioner's theory in claiming the benefits of section 107 is that his services for the estate during the period October 7, 1940, to April 4, 1944, are to be treated separately from the services for the period beginning with his appointment as attorney and extending through October 7, when he filed his first petitioner for the allowance of fees. The $5,000 he received for the services rendered during the first period, argues petitioner, is not to be added to the $3,500 for the second period services. Thus he would avoid the 80 per cent provision of the statute.

On this theory petitioner hopes to escape the effect of Ralph E. Lum, 12 T.C. 375, and the cases which have followed it. Those decisions, according to petitioner, went the way they did because there was nothing in the records ‘to permit the segregation of any part of the services,‘ quoting William J. Morrison, Jr., 12 T.C. 709, 713.

We do not think those decisions are to be so narrowly interpreted. Here, petitioner was acting as attorney for an estate over a period of four and a half years. He gave attention to s number of legal matters, separate matters to be sure, but all involving the business of the estate. There was nothing in his employment requiring him to file petitions for the allowance of fees at any particular time. So far as the record goes, he could do this at times to suit his own convenience. When he did do so he set out the matters for which he was charging generally, but in some detail, and made a lump sum charge for the aggregate. As stated in the Lum decision, supra, at page 379:

In the case of services of a homogeneous nature and covering a continuous period, it took more in the Nast (Julia C. Nast, 7 0t.c. 432) case than the mere rendering of a bill to mark the beginning of the period of services, just as here it takes more than the rendering of an account to mark their end.

Apparently that would have ended the matter in Lum ‘unless the services themselves were divisible.‘ In considering this phase of the question we think our decisions in William J. Morrison, Jr., supra, and Julia C. Nast, supra, the first involving the fees of attorneys for a receivership and the second fees for medical services extending over a period of years, are controlling. In neither case was the petitioner allowed the benefits of section 107.

Here, petitioner was employed as attorney by the executors in 1939 and continued in that capacity at least through April 4, 1944. He handled whatever legal matters arose during that period involving the estate. On October 7, 1940, he petitioned the Surrogate for an allowance of fees for the aggregate of his services rendered to that date. His employment as attorney for the executors continued, however, and on April 7, 1944, he again petitioned the Surrogate for an allowance of fees, this time for the aggregate of services performed between October 7, 1940, and April 4, 1944. We are of the opinion that in deciding whether section 107 is applicable we must treat his services as extending over the entire period of his employment as attorney for the executors. For this purpose we do not think the period of service is to be broken up by the simple expedient of filing a petition for fees. Accordingly, the amount of $3,500 received in 1944 did not amount to 80 per cent of the total compensation when he received as such attorney and petitioner is not entitled to the benefits of section 107.

Decision will be entered for the respondent.

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