Case Name: Arthur T. Schmidt, Petitioner, v. Commissioner of Internal Revenue, Respondent
Court: United States Tax Court
Jurisdiction: United States
Decision Date: 1948-04-30
Citations: 10 T.C. 746
Docket Number: Docket No. 9398
Parties: Arthur T. Schmidt, Petitioner, v. Commissioner of Internal Revenue, Respondent.
Judges: Turner and Leech, //., agree with this dissent.
Reporter: Reports of the Tax Court of the United States
Volume: 10
Pages: 746–750

Head Matter:
Arthur T. Schmidt, Petitioner, v. Commissioner of Internal Revenue, Respondent.
Docket No. 9398.
Promulgated April 30, 1948.
Arthur T. Schmidt, pro se.
John E. Mahoney, Esq., for the respondent.

Opinion:
OPINION.
Opper, Judge-.
Respondent determined a deficiency in petitioner's income and victory tax liability for the year 1943 in the amount of $5,888.11.
The only litigated issue involves the interrelated effect of section 107 (a) of the Internal Revenue Code and the so-called "forgiveness" features (section 6) of the Current Tax Payment Act of 1943 upon income received in lump sums in 1943 for services rendered over a period of years including 1942 and 1943.
All of the facts have been stipulated and are hereby found accordingly. For purposes of this proceeding, they may be summarized as follows:
Petitioner resides at 29 Afterglow Way, Montclair, New Jersey. He is engaged in the practice of law, with offices at 92 Liberty Street, New York, New York.
During 1943 petitioner received two fees, hereinafter referred to as section 107 income, the services for which were attributable in part to previous periods in accordance with section 107, Internal Revenue Code. One of these fees in the amount of $18,000 was paid to petitioner by the Wyandotte Worsted Co. The services rendered for that fee were performed by petitioner during the period beginning October 1,1940, and ending November 7,1943, and were attributable under section 107 to the following periods and in the following amounts:
The other fee in the amount of $9,850 was paid to petitioner for professional services in In the Matter of the Estate of William H. Gilmore. The services rendered for that fee were performed by petitioner during the period beginning June 24, 1940, and ending December 1, 1943, and were attributable under section 107 to the following periods and in the following amounts:
The total amount of the above fees attributable under section 107 to the taxable year 1942 was $8,720.76.
The tax attributable to the section 107 income for the periods to which the services were allocated was for the years indicated as follows:
1940 $213.17
1941 3,344. 28
1942 3, 391.85
1943 2, 765. 71
Total _9,715. 01.
Petitioner's income tax liability for the year 1942 prior to the discharge thereof under the Current Tax Payment Act of 1943 was $1,675.51.
Petitioner's net income and victory tax for 1943, before addition of tax on section 107 income, was $1,468.70. His total income and victory tax for 1943, computed without regard to the provisions of section 6 of the Current Tax Payment Act, was $11,183.71. Respondent determined that petitioner's tax for 1943, computed under such act, was $11,602.59. The items involved in such determination are as follows:
Net income and victory tax before addition of tax on section 107 income_:_$1,468.70
Tax on section 107 income_ 9,715.01
Tax for 1943 prior to application of Current Tax Payment Act_11,183. 71
One-fourth of amount of 1942 tax ($1,675.51), added as required by Current Tax Payment Act_ 418. 88
Total - 11,602.59
Petitioner computed his tax for 1943 as $9,058.70 instead of $11,602.59, as determined by respondent. In his computation petitioner excluded from his 1943 income $8,720.76 which was that part of his section 107 income received in 1943 attributable to the year 1942, and added such amount to his 1942 income in computing what would have been his 1942 tax for the purpose of the application thereto of section 107 and section 6 (a) of the Current Tax Payment Act. The 1943 tax on such excluded income computed under the provisions of section 107 was $3,391.85. Petitioner added his 1942 tax of $1,675.51, and arrived at a total tax for 1943 of $9,058.70.
The items involved in petitioner's summation of his income and victory tax liability for 1943 are as follows:
Net-income and victory tax before addition of tax on section 107 income_$1, 468. 70
Additional tax under section 107 — 1940_ $213.17
1941_ 3,344. 28
1942_ 0. 00
1943_ 2, 765.71 6,323.16
Assumed tax for 1942 $6,067.36, composed of:
1942 tax before 107 addition_$1,675. 61
Additional tax under 107_ 3,391.85
One-fourth of amount of assumed 1942 tax added as required by Current Tax Payment Act_$1, 266, 84
Total income and victory tax liability_9,058. 70
The decision in William F. Knox, 10 T. C. 550, is controlling on the sole contested issue here. Respondent's determination must be overruled.
Reviewed by the Court.
Decision will be entered under Bule 50.