The opinion
J. HOWLAND AUCHINCLOSS, EXECUTOR, ESTATE OF CHARLES H. RUSSELL, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
Auchincloss v. Commissioner
Docket No. 24312.
United States Board of Tax Appeals
11 B.T.A. 947 ; 1928 BTA LEXIS 3679 ;
May 2, 1928 , Promulgated
*3679 Claims for compensation for services rendered by decedent prior to his death are not taxable income when collected by his estate.
Blount Ralls, Esq., for the petitioner.
M. N. Fisher, Esq., for the respondent.
LITTLETON
*947 The Commissioner determined a deficiency in income tax of $3,145.34 for 1922. The question is whether an amount collected by *948 the petitioner as executor during 1922 on claims of the decedent arising prior to his death represents taxable income to the estate for 1922. The facts are not in dispute, either being admitted in the answer of the respondent or covered by stipulation.
FINDINGS OF FACT.
Petitioner is the executor of the estate of Charles Howland Russell, who died on February 19, 1921. For many years prior to his death Russell was a partner in the law firm of Stetson, Jennings & Russell, at New York City. This partnership at all times kept its accounts and rendered its income-tax returns on the cash receipts and disbursements basis. The same method of accounting was always employed by the decedent and by the executor of his estate.
At the date of his death Russell had rendered various legal *3680 services as a partner in the firm, but his fees therefor had not been collected at the time of his death. Upon his death a valuation was placed on the legal claims due the decedent for such fees. This valuation was shown in the estate-tax return as $65,048.70. The Commissioner increased this valuation to $116,453.53, resulting in an increased estate tax liability of $17,235.19. The increased market value of these claims by the Commissioner was concurred in by the estate and on October 26, 1923, the estate paid an additional estate tax of $9,803.13. The remainder of the additional estate tax is accounted for by the fact that a claim for the abatement of $7,432.06 thereof was allowed by the Commissioner on other grounds.
The fair market value at the time of the decedent's death of the said claims was $116,453.53, as determined by the Commissioner.
February 19 to December 31, 1921, the estate collected $71,688.98 on account of the aforementioned claims.
The total of all amounts collected during the years 1921 and 1922 on account of the claims was less than the fair market value of such claims at the time of decedent's death.
In 1922 the estate collected on account of *3681 these claims $11,364.03, which amount was added by the Commissioner to the gross income shown on the income-tax return of the estate for 1922, resulting in a deficiency of $3,145.34, the amount here in controversy.
The parties have stipulated that if the Board finds that $11,364.03 collected by the estate in 1922 does not represent taxable income to the estate, there will be no deficiency.
OPINION.
LITTLETON: It is contended by the petitioner that amounts collected by him as the executor on account of services rendered prior *949 to the decedent's death, represented capital in the hands of the estate at decedent's death, and, therefore, were not taxable income when received by the estate. On the other hand, Commissioner contends that amounts collected constituted taxable income when received by the estate.
The claim of the executor is correct. Nichols v. United States, (Ct. Cls.), 6 Am.Fed. Tax Rep. 6592; ; .
Judgment of no deficiency will be entered.