Stone
v.
Comm'r of Internal Revenue

Tax Court of the United States.Nov 17, 1954
23 T.C. 254 (U.S.T.C. 1954)
23 T.C. 254T.C.

Docket No. 42788.

1954-11-17

GEORGE WINCHESTER STONE, JR., AND HELLEN DEAN STONE, PETITIONERS, V. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Roswell Magill, Esq., and Albert Rosenblum, Esq., for the petitioners. George E. Grimball, Jr., Esq., for the respondent.


Roswell Magill, Esq., and Albert Rosenblum, Esq., for the petitioners. George E. Grimball, Jr., Esq., for the respondent.

Petitioner, a professor of English literature, was granted a fellowship by the John Simon Guggenheim Foundation to enable him to devote his full time for a year to a research project on which he had worked in his spare time for several years. Held, the grant constitutes a gift and taxable income.

The proceeding involves a deficiency of $178.04 in income tax for the calendar year 1950. The sole issue is whether the amount of $1,000 received by the petitioner George Winchester Stone, Jr., from the John Simon Guggenheim Foundation is taxable income or a gift. The petitioners filed a joint return for 1950 with the collector of internal revenue at Baltimore, Maryland.

FINDINGS OF FACT.

The petitioners reside in McLean, Virginia. George Winchester Stone, jr., hereinafter referred to as the petitioner, is, and for several years has been a professor of English literature at George Washington University. He holds the degrees of A.B., A.M., and Ph. D. which were conferred prior to 1950. He is especially interested in 18th century drama. In addition to teaching, he has worked in his spare time for many years upon a study of dramatic performances given in London in the period 1660 to 1800.

The John Simon Guggenheim Foundation was incorporated by special act of the New York State Legislature on March 16, 1925 (Laws 1925, ch. 133). The act provides in part:

Section 1. Simon Guggenheim, Olga Hirsh Guggenheim, Francis H. Brownell, Carroll A. Wilson, Charles D. Hilles, Roger W. Straus and Charles Earl, together with such other persons as they may associate with themselves, and their successors, are hereby constituted a body corporate by the name of John Simon Guggenheim Memorial Foundation, for the purpose of receiving and maintaining a fund or funds and applying the same or the income thereof to promote the advancement and diffusion of knowledge and understanding and the appreciation of beauty, by aiding without distinction on account of race, color or creed, scholars, scientists and artists of either sex in the prosecution of their labors and by such other lawful means as the trustees shall from time to time deem appropriate.

Sec. 2. The corporation hereby formed shall have power to * * * deal with and expend the income or principal of the corporation in such manner as in the judgment of the trustees will best promote its objects. * * *

The foundation was established in 1925 by the last Senator Simon Guggenheim and his wife. The foundation's original capital fund of $3,000,000 came from Senator Guggenheim. By gifts inter vivos and by will, the original capital fund has been increased, so that the foundation's balance sheet as of the beginning of 1953 showed assets in excess of $31,700,000.

In his March 26, 1925, Letter of Gift to the trustees of the foundation and their successors, the late Senator Guggenheim states in part as follows:

The name John Simon Guggenheim embodied in the title is that of a dearly loved son who was cut off by death on April 26, 1922, just as he had completed his preparation for college. In this great sorrow, there came to Mrs. Guggenheim and myself a desire in some sense to continue the influence of the young life of eager aspiration by establishing a foundation which in his name should, in the words of the charter, ‘promote the advancement and diffusion of knowledge and understanding, and the appreciation of beauty, by aiding without distinction on account of race, color or creed, scholars, scientists and artists of either sex in the prosecution of their labors.’

It is Mrs. Guggenheim's and my desire, in memory of our son, through the agency of this Foundation, to add to the educational, literary, artists and scientific power of this country, and also to provide for the cause of better international understanding. Our thought was that the income of the fund devoted to these purposes should be used to provide opportunities for both men and women to carry on advanced study in any field of knowledge, or in any of the fine arts, including music; and that systematic arrangements should be made to assure these opportunities under the freest possible conditions, and to make available for the public benefit the results of such studies. Believing as we do that such opportunities may be found in every country of the world, we purposely make no specification of locality, domestic or foreign, for the pursuit of these aims. * * *

We strongly hope that this Foundation will advance human achievement by aiding students to push forward the boundaries of understanding, and will enrich human life by aiding them in the cultivation of beauty and taste. If at the close of our lives, looking both backward and forward, we can envision an endless succession of scholars, scientists, and artists aided by the John Simon Guggenheim Memorial Foundation, devoting themselves to these purposes, we shall feel that, with the help of our associates, we shall have accomplished the aim which we had set before us, in memory of our son.

The foundation is exempt, under section 101 (6) of the Internal Revenue Code of 1939, from income tax.

The foundation is directed by a board of 9 trustees. The trustees appoint an educational board of 24 members. A committee of 5 of these members, appointed annually by such board, selects the persons to be awarded fellowships in each year.

In furtherance of the purposes of the founders the Educational Advisory Board recommended the establishment of a system of fellowships offering to promising scholars opportunities under freest possible conditions to carry on advanced study and research in any field of knowledge, or opportunities for the development of unusual talent in any of the fine arts.

The bylaws of the foundation provide in part:

The Corporation will provide a number of Fellowships for advanced study or research, abroad or in the United States, in various fields of knowledge or in the fine arts, including music.

The granting and holding of these Fellowships shall be governed by Rules which shall be promulgated from time to time by the Board of Trustees.

The foundation has granted fellowship awards in some 60 fields, or groups of fields. Among these painting, sculpture, music, creative writing, and research in medicine, chemistry, physics, history, anthropology, and literature. The individual to whom a fellowship is awarded works upon a project of his own selection and by methods of his own devising. The grants are made primarily to assist scholars and creative artists to carry on their own works of research and artistic creation. Occasionally, where commercial publication of the fruits of the work is not feasible, grants will be made to assist in publication, in order that the public benefit of the work is not lost and that the fellow may have the educational benefit of criticism from other persons. The foundation derives no economic benefits from any publication of the results of work by fellows.

Each year the foundation receives more applications than it awards fellowships. In 1950 the foundation received 1192 applications and awarded 156 fellowships. In 1952 about 1600 applications were received and 224 fellowships were awarded.

The committee of selection chooses among the applicants for fellowships seeking to assist the ablest people who apply in any year. Awards are based upon the applicants' present abilities to do creative work or advanced research in the fields of their particular interests as revealed by their past achievements.

The petitioner applied to the foundation for a fellowship for the year 1947-48. The application was not granted. In 1949 the petitioner made another application for the year 1950-51.

The application form for a Guggenheim fellowship makes the following request of an applicant:

PLANS FOR WORK:

Submit a statement giving detailed plans for the work you would pursue during your tenure of a Fellowship. This statement should include, inter alia: a description of the project, including its character and scope, and the significance of its presumable contribution to knowledge, or to art; the present state of the project, time of commencement, progress to date, and expectation as to completion; the place or places where the work would be carried on, and the authorities, if any, with whom it would be done; your expectation as to publication of the results of your work; and your ultimate purpose as a scholar or artist. * * *

The application also asks information as to the applicant's abilities and prospects for educational development. Inquiry is made as to personal history, education, accomplishments, and references concerning the applicant's abilities.

The petitioner stated in the application as to his project:

Volumes V-VIII of an eight-volume History of Dramatic Performances in London, 1600-1800. A chronological presentation of what went on each evening at each London theatre, with casts, incidental entertainments of singing and dancing, box receipts, and significant contemporary comment, properly annotated and indexed. Each volume to be introduced by a comprehensive essay synthesizing the findings for the period covered by the volume.

In his application the petitioner stated:

In 1933, shortly after the Folger Shakespeare Library opened, I was invited by the Director to catalogue the Garrick Collection, as the 2,000 items of manuscript and printed material were unpacked. There I found Dr. D. M. Little, editor of the monumental edition of Garrick Letters just now in the press, 300 unpublished Garrick Letters. I also discovered Garrick's long lost alteration of Hamlet, his Journal of a trip to France and Italy, 1763, and the Cross-Hopkins Diaries. I have published information on the first two items. The last one will supply much unpublished contemporary comment on stage performances at Drury Lane (1747-1776). It forms the core of one volume in my present research.

He also stated that he had received a Summer Fellowship from the Folger Library in 1948 in the amount of $500 for work at Folger on the History of London Dramatic Performances.

The petitioner made the following detailed statement as to his project:

Problem: For the past 117 years John Genest's Some Account of the English Stage (Bath, 1832) has had to serve as the register of dramatic performances in London from 1660 to 1830. But his Account is inadequate for modern scholars. A ten-volume monument of industry in its time, it is not only poorly indexed, but fails to record 40 per cent of the performances each year for each theatre. It is incomplete in listing casts, and records little contemporary comment about the reception of the plays. Although three scholars in recent years have provided fuller information for three specific areas within the age, the task of recording all performances of the period still needs to be done.

Proposed Solution: For a dozen years Dr. W. B. Van Lennep (Curator of the Harvard Theatre Collection) and I have been working at the task of preparing the full account needed— an account which will supersede Genest's work. We plan to publish a History of London Dramatic Performances, 1660-1800, in eight volumes, (I II, 1660-1700; III, IV, 1700-1740; V, VI, 1740-1776; VII, VIII, 1776-1800). We have invited Professor A. H. Scouten (University of Pennsylvania) and Dr. Emmett L. Avery (Washington State) to join us. In the division of labor Dr. Van Lennep will undertake the first period, Drs. Scouten and Avery the second, plus performances in the minor theatres to the end of the century, and I am undertaking the records of Drury Lane and Covent Garden during the last two periods (1740-1800).

Content: The publication will be so arranged that the reader may see in chronological order what went on each evening at all the London theatres. Every recorded performances of a play in London is being noted, together with the afterpieces, the casts, the incidental entertainment of singing and dancing and, where available, the box receipts. See attached data card.

The notes include a brief resume of the plot and main ideas of any available manuscript or contemporary account of an unpublished play. Contemporary comment, now for the first time available, in diaries, letters, journals and periodicals, is also being included. Each volume is being equipped with an index of the plays, playwrights and characters.

Each volume will be published separately when the material is in hand. Each will be introduced by a comprehensive essay synthesizing the findings in the period and relating them to the wider aspects of the intellectual milieu.

Value: I believe this study is significant because, over and above the conclusions presented in the introductory essays, future scholars will be able by use of it to project any play, author, or type of play against the whole background of the 18th-century drama. Through it isolated treatments of narrow specialities will receive a total context in which their actual importance may be readily judged. What, for example, was Dryden's reputation on the 18th-century stage? I have discovered for the editors of the new W. a. Clark Memorial Edition (U.C.L.A.) of Dryden 307 performances of seven Dryden plays from 1740-1800. Dr. Avery will doubtless turn up 300 more for the preceding period, 1700-1740. Six hundred performances massed together argue considerable popularity, but when projected against the total offerings for any single year, not to mention the whole century, or when projected against the 5,278 performances of 34 Shakespearian plays for the period, they appear to be less significant. Critics must be able to make this evaluation.

This study will provide the basic means for scholarship in 18th-century drama to be as broad as possible in scope.

The study will do more. It will give facts for the social historian, for the historian of taste, and for the historian of ideas in this stimulating period. It will indicate in its introductory essays and appendices the significance of the theatre (1) in the economics of small business in London (the number of trades that supported the theatre and were supported by it— chandlers, carpenters, glovers, tailors, wine-merchants, painters, porters, oil-sellers, and numerous concessionaires), (2) in the municipal taxation program, (3) in the social and religious obligations of the theatrical group (benefit performances for public hospitals and charitable societies, and religious oratorios for the Lenten season), (4) in the book trade, author-contract and copyright field, and (5) in theatrical biography.

These ramifications, in carefully indexed volumes, indicate the added usefulness of the work as a general reference for readers other than the scholar of 18th-century drama.

* * * By June 1950 I expect to have completed the data for Drury Lane for the first of my volumes (1740-1776). I need a year's uninterrupted time to work up the parallel information for Covent Garden. By the time I have finished that, Drs. Scouten and Avery will have the pertinent facts on the minor theatres during that period; so, if I can concentrate for a year we should have a publication, and a significant one I hope, in hand.

One has to live with this sort of task twenty-four hours a day if the result is to be accurate and exhaustive. I need that uninterrupted time. All the information I require is available in this country (in the Folger Library, Harvard Library, Yale Library, Huntington Library) or can be obtained from England by microfilm. But I cannot take the time to do the task without fellowship aid.

I could conveniently take off the academic year 1950-1951, so I am particularly desirous of a Guggenheim Fellowship for that year.

In a ‘Suggested Form of Estimated Budget for Period of Fellowship’ the petitioner submitted the following:

+-------------------------------------------------------------+ ¦Estimated Expenditures: ¦ ¦ +---------------------------------------------------+---------¦ ¦Traveling expenses for yourself (and family if any)¦$75.00 ¦ +---------------------------------------------------+---------¦ ¦Living expenses ¦6,350.00 ¦ +---------------------------------------------------+---------¦ ¦Supplies necessary to work ¦75.00 ¦ +---------------------------------------------------+---------¦ ¦All other expenses ¦100.00 ¦ +---------------------------------------------------+---------¦ ¦Total ¦$6,600.00¦ +---------------------------------------------------+---------¦ ¦Estimated Resources: ¦ ¦ +---------------------------------------------------+---------¦ ¦Sabbatical, or other leave, salary ¦$2,550.00¦ +---------------------------------------------------+---------¦ ¦Other income ¦1,050.00 ¦ +---------------------------------------------------+---------¦ ¦Fellowship stipend applied for ¦3,000.00 ¦ +---------------------------------------------------+---------¦ ¦Total ¦$6,600.00¦ +-------------------------------------------------------------+

In March 1950 the petitioner received a letter from the Guggenheim Foundation informing him that his appointment to a fellowship had been approved for 12 months from September 1, 1950, at a stipend of $3,000, for the purpose of the preparation of a calendar of dramatic performances in London, 1660-1800, upon certain conditions stated in an attached document.

The document attached to the letter informing the petitioner of his fellowship award stated in part as follows:

IT shall be a condition of every Fellowship that the holder agrees to retain his Fellowship throughout the period for which he is appointed, unless compelled to withdraw for urgent reasons, and to engage in no other occupation during this period than the scholarly or creative activities specified in the statement of project, except with the special permission of the Board of Trustees. Fellows are expected to use their Fellowships in the years for which they are appointed. If any Fellow resigns or withdraws from his Fellowship during the period for which he was appointed, for urgent reasons satisfactory to the Trustees of the Foundation, the Trustees reserve the right in every such case to adjust the stipend to any amount which in their judgment is equitable in the circumstances. Fellows shall receive letters of appointment, bearing the seal of the Foundation, specifying the terms for which they are appointed, stating the fields of study in which they are to occupy themselves, and recommending them as distinguished students to the esteem, confidence, and friendly consideration of all persons to whom they may present their letters.

Every holder of a Fellowship, from the date upon which he accepts his appointment, until its termination, must at all times have on file at the office of the Foundation an address at which he can be reached promptly.

The term of the fellowship applied for by the petitioner was from September 1950 to August 1951. During that college year he was on sabbatical leave from the university and received half salary. He requested that the fellowship awarded be paid him at the rate of $250 per month beginning with September 1950. He received $1,000 of this during 1950. In the summer of 1951 he taught classes during the summer school session. Otherwise he devoted his full time to the project. The work he undertook was not completed during the year of the fellowship and he has continued it subsequently in his spare time.

As a consequence of this research the petitioner is qualified to give various graduate seminars in 18th century drama for which he was not qualified before he embarked upon the fellowship.

The petitioner carried out his work according to his own plan. The foundation exercised no supervision over his work, made no suggestions concerning it, and did not request or receive any report upon its progress or completion. No accounting was made of the fellowship funds received. The amount of time spent upon the project was determined by the petitioner. He performed no services for the foundation and was not in its employ. The foundation intended the fellowship award as a gift.

The amount of $1,000 received by the petitioner in 1950 from the foundation was a gift.

OPINION.

TIETJENS, Judge:

The issue is whether the amount received by the petitioner from the John Simon Guggenheim Foundation is taxable income under section 22 (a) or a gift excludible under section 22 (b) (3), Internal Revenue Code of 1939.

We have found that the fellowship payment to the petitioner was a gift. On this issue the controlling factor is the intent of the payor. Bogardus v. Commissioner, 302 U.S. 34 (1937). It is obvious that the foundation intended it as a gift. The object of the foundation is to aid scholars, scientists, and artists in the prosecution of their labors. The donor of the capital fund stated that the income was to be used to provide opportunities for men and women to carry on advanced study. The secretary of the foundation testified that the fellowship awards were intended as gifts.

The respondent argues that the award was paid as compensation for services to be rendered by the petitioner, saying that it was granted on the basis of the petitioner's qualifications to do the work required by his project, which project was approved by the foundation with the expectation of results consistent with the petitioner's qualifications, and that to the extent there is any donative intent in making the award the beneficiary is society at large and not the petitioner whose services were expected in return for the grant. It is pointed out that the application showed the potential value of the results of the project to future scholars and historians, and that the amount of the award was in approximately the amount of the salary loss to the petitioner in taking sabbatical leave. It is argued that the purpose of the foundation is to promote the advancement of knowledge and to add to the literary and scientific power of the country and that the fulfillment of this purpose depends upon the selection of projects from which results can be expected, and hence it is not unreasonable to conclude that the foundation adopts as its own the projects proposed by the fellows it selects.

This argument misconceives the motives of both the petitioner and the foundation. The foundation does not accomplish its purposes by employing scholars or scientists to carry out projects. Its method is to make gifts to persons whose past achievements and present abilities, as shown by the foundation's investigation, merit financial assistance to enable them to carry out their own projects of creative work or self-improvement.

The foundation has no program of projects, and does not select fellows entirely on the basis of their proposed projects. Since the foundation is a corporation exempt from income tax, it cannot give away money indiscriminately, but must exercise some selectivity in choosing the recipients of its aid. Accordingly, it asks for a statement of the work proposed to be done by each applicant and it investigates his qualifications and capabilities. The secretary of the foundation testified that the objective is to choose the most meritorious individuals, those who can best advance their training or creative achievements, rather than the projects considered most beneficial to the public. The emphasis, he said, was upon individuals, not projects. In providing funds to qualified persons to carry out their own projects of creative work or self-advancement the foundation is carrying out the desires of its founders to give others educational opportunities such as their son would have had if he had lived. Here it made a gift to aid a worthy scholar that he might accomplish more readily a self-imposed task which would add to his professional standing. As an incidental result of the research the petitioner has since been able ti give graduate seminars in 18th century English drama.

The petitioner, on his part, did not offer his services to the foundation to do research under its direction upon a subject selected by it, nor was he seeking to sell or realize upon the prospective result of his labors. What he sought was a gift for the support of his family while he devoted his time to this project of his own intense interest. While benefit to future scholars and historians might result from the work his primary motive was to fulfill the task that had aroused his enthusiasm and commanded his attention since 1933.

The award in this case bears no resemblance to the payments for a research fellowship in Ephraim Banks, 17 T.C. 1386. Banks was appointed a research fellow by the Polytechnic Institute of Brooklyn. The institute was carrying out a research project under a contract with the Navy and appointed fellows to do certain work in the Department of Chemistry under directions of Professor Ward. Banks' work included making stereoscopic measurements of the light output and light absorption of various materials and studying the structure of materials by X-ray techniques. He described his work in a paper which was accepted in partial satisfaction of the requirements for a doctor's degree which he subsequently received. In the cited case the work was performed to carry out a contract between the institute and the Government. It was assigned by and done under the orders of supervisors, reports were required, and the relation between the fellow and the institute was that of employee and employer. The same situation existed in Ti Li Loo, 22 T.C. 220. In the present case no such relationship existed. The grant was in the nature of a scholarship to facilitate the further education or training of the recipient even though in this case he held several degrees. His research was in a field of his own selection. He was under no obligation to perform services for the foundation or any other person. The arrangement between the foundation and the fellow is not an employment contract. The foundation does not assume or stipulate for authority to direct and control the fellow as to the details and means by which the project is carried out, to require conformity with a schedule of working hours, to supervise the work to see that it is satisfactorily done, or to require reports on the progress of or the completion of the task. The payments are not for services.

The respondent also urges that the case is controlled by Robertson V. United States, 343 U.S. 711 (1952). In that case the taxpayer submitted a symphony work written by a composer native to the Americas. The award was offered in 1945 by Henry H. Reichhold, who was president of the Detroit Orchestra, Inc. The terms of the offer provided that none of the compositions could be published or publicly performed prior to entry, that each composition receiving an award would remain the property of the composer, and that the composer would grant the Detroit Orchestra, Inc., all synchronization rights as applied to motion pictures, all mechanical rights as applied to recordings, the exclusive right to authorize the first performance in each of certain countries, and the right to designate the publisher. The taxpayer had in the years 1936 to 1939 composed a symphony which had not been performed. He submitted it and won the principal award in 1947. He contended that he amount received was a gift and not taxable income. The Court stated (p. 713):

In the legal sense payment of a prize to a winner of a contest is the discharge of a contractual obligation. The acceptance by the contestants of the offer tendered by the sponsor of the contest creates an enforceable contract. See 6 Corbin on Contracts Section 1489; Restatement, Contracts, Section 521. The discharge of legal obligations— the payment for services rendered or consideration paid pursuant to a contract— is in no sense a gift. The case would be different if an award were made in recognition of past achievements or present abilities, or if payment was given not for services, see Old Colony Trust Co. v. Commissioner, 279 U.S. 716, 730, 49 S. Ct. 499, 504, 73 L. Ed 918, but out of affection, respect, admiration, charity or like impulses. Where the payment is in return for services rendered, it is irrelevant that the donor derives no economic benefit from it.

The respondent contends that the payment to the petitioner was similarly in discharge of a contractual obligation, that the foundation's offer for applications for fellowships was open to anyone, and that the petitioner's acceptance for the offer created an enforceable contract under which the foundation was obligated under its charter and the laws of the State wherein it was chartered. The contention is made that the application asked for an award to permit the applicant to work on this project and the letter of notification contained a statement that it was awarded on condition that the petitioner do no other work during the period of the fellowship.

The holding in the Robertson case has no application here. In that case there were certain terms in the offer which the composer accepted in submitting his composition. He agreed to grant to the Detroit Orchestra, Inc., rights as to motion pictures and recordings, the right to authorize the first performance in each of certain countries, and the right to designate the publisher. These were valuable rights. While the donor of the prize did not himself receive these rights, he caused them to be given to the Detroit Orchestra of which he was the president and which he desired to benefit. In the present case the foundation received no rights of value for itself and bargained for no rights for any other person.

Nor did the foundation enter into a contract with the petitioner within the intent of the Robertson case. The offered prize in that case was of a fixed amount payable in any event and was held to be accepted by the contestants when they submitted compositions. In the present case there is no such offer. The foundation made no promise to pay a fixed number of awards or a specified sum of money and might have refused all applications in any year. Although it stood ready to assist worthy applicants who might be chosen by its board of selection, this is no commitment sufficient to create an enforceable contract by the filing of an application proposing a project. Even if an offer can be said to exist, the applications do not amount to acceptances. The application here was for funds to enable the petitioner to do something he wanted to do at the time and in the manner of his own choosing. This is not a sufficient consideration to create an enforceable contract.

The respondent refers to the ‘conditions' stated in the document sent the petitioner with the notification of the award as constituting conditions of the ‘contract,‘ particularly the statement that he should engage in no other occupation during the period of the fellowship than the activities specified in his statement of the project. Conditions such as these do not necessarily convert what is intended as a gift into a contract for services. A gift may be made subject to certain conditions. A payment made subject to a condition is or is not a gift depending upon whether the parties intended compliance with the condition as consideration for the payment. Restatement, Contracts, p. 82; 1 Williston, contracts (rev. ed. 1936),sec. 112; Stelmack v. Glen Alden Coal Co., 14 A.2d 127, 128, 129, (Pa., 1940). Compliance with the conditions stated by the foundation was clearly not intended as consideration for the award.

The petitioner was not ‘offering the results of his professional skill to win prize money,‘ as in the Robertson case. (See the opinion of the Court of Appeals for the Tenth Circuit, 190 F.2d 680, at p. 683.) Nor was the foundation offering a prize in the sense of other prize cases such as Herbert Stein, 14 T.C. 494 (1950), and Amirikian v. United States, (C.A. 4, 1952) 197 F.2d 442.

The fellowship award was not paid pursuant to a contract and was not a payment for services. It was a gift excludible under section 22 (b) (3) of the 1939 Code.

Reviewed by the Court.

Decision will be entered for the petitioners.

TURNER, J., dissenting: The facts being as they are, I find myself unable to see in the payments made by the foundation to the petitioner the transfer and receipt of a gift, excludible from gross income under section 22 (b) (3) of the Internal Revenue Code of 1939, and not the receipt of compensation for services rendered, which is gross income under section 22 (a).

In making his proposal to the foundation, petitioner made the claim that he had to earn a living for himself and family, and could take time to do the work outlined only if the foundation would agree to make specified payments therefor to supplement his sabbatical salary and other income, and by the terms of the agreement reached, and under which the payments here in question were made, the foundation became obligated to make the payments only when and as the services were performed. Furthermore, the agreement was to run for a period of 12 months from September 1, 1950, at a ‘stipend' of $3,000. Petitioner could engage in no other occupation during that time, and only the foundation had the right to waive the conditions specified. In short, the performance of the services or the doing of the work agreed upon was a prerequisite, or the quid pro quo, for the money received. It falls squarely within the provisions of section 22 (a), wherein it is provided that ‘gross income’ includes ‘income derived from salaries, wages, or compensation for personal service * * * of whatever kind and in whatever form paid, or from professions, vocations,‘ etc.

In Webster's New International Dictionary, the word ‘stipend’ is defined as ‘Settled pay or compensation for services, whether paid daily, monthly, or annually,‘ and under synonyms, the only reference is ‘See Wages.’

Seemingly, there is a natural urge to say that payments which serve to promote the development of literature and art are free of tax burdens. But whether or not they are so free, is a matter which in keeping therewith, Congress has made provision in the Internal Revenue Code for the exemption of corporations, funds, and foundations which are engaged exclusively, and not for profit, in educational and literary work. It has also seen fit to allow to taxpayers, subject to certain limitations, deductions for contributions made to such corporations, funds, or foundations, but at no place has it exempted compensation, salaries, or stipends paid to individuals who are working for or under the foundations in carrying on such educational or literary work. To the contrary, the stipend or compensation of such individuals is included in the broad definition of gross income under section 22 (a). That the net result in a case such as this might be beneficial to the public as a whole is no more ground for exemption of the stipend or compensation from income tax, than in the case of the recompense of a social worker, community chest employee, or teaching fellow at a university, or other paid workers in or under the Guggenheim Foundation itself. It would be quite difficult to imagine any case where the advancement of public interest only was more wholly the sole objective of the work to be done, than in the case of the composer whose compensation as taxable income was in question in Robertson v. United States, 343 U.S. 711. In that case, nevertheless, the Supreme Court held, in language even more forcibly applicable here, that the payment was made under a contract for services rendered and, as such, was taxable income. However strong the feeling or desire may be that the doing of such work as that herein be fostered and promoted, we must leave to Congress the prerogative of saying that compensation for services rendered in the doing of such work is to be free from taxation. In my opinion, Congress has not so provided.

See, however, section 117 of the Internal Revenue Code of 1954, wherein for taxable years beginning after December 31, 1953, Congress has, subject to certain conditions and limitations, specifically excluded from gross income in the case of an individual any amount received as a scholarship at an educational institution, or as a fellowship grant.

MURDOCK, OPPER, LeMIRE, and FISHER, JJ., agree with his dissent.