Court Opinion

ID: 4590715
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:04:13.311958+00
Date Added: 2024-06-11T07:50:31.706974
License: Public Domain

W. W. SUTTON, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Sutton v. CommissionerDocket No. 76946.United States Board of Tax Appeals35 B.T.A. 348; 1937 BTA LEXIS 888; January 27, 1937, Promulgated 1937 BTA LEXIS 888">*888  In 1921 petitioner, an attorney at law, entered into a contract to institute and prosecute a suit for the cancellation of an oil and gas lease.  In the event of cancellation of the lease as a result of the litigation, petitioner was to receive a 3/32 interest in the mineral production as compensation for his services; otherwise, he was to receive no compensation.  In 1923 petitioner entered into a supplemental agreement with his clients whereby he was to receive 25 percent of any sum recovered through suit for an accounting.  The litigation was settled in 1930 by compromise agreement of the parties.  Prior to such settlement petitioner, on October 11, 1930, entered into another contract with his clients in which he agreed to cancel the contracts of 1921 and 1923 in consideration of the payment to him of $150,000 out of the settlement fund, which amount was received by petitioner in cash during the year 1930.  Held, petitioner is not entitled to the statutory deduction for depletion, for the reason that the sum of $150,000 did not represent income derived by petitioner from an economic interest in the oil and gas production, under the prior contracts which were canceled by the1937 BTA LEXIS 888">*889  agreement of October 11, 1930.  Held, further, said sum constituted compensation for personal services, and, since petitioner kept his books and filed his tax return on a cash basis, the entire amount is taxable as ordinary income for 1930.  Walter G. Moyle, Esq., and Ralph P. Wanlass, Esq., for the petitioner.  John H. Pigg, Esq., for the respondent.  HILL35 B.T.A. 348">*349  This proceeding involves a deficiency in income tax for the year 1930 in the amount of $9,819.87.  The issues raised by the pleadings are (1) whether respondent erred in treating the sum of $150,000 received by petitioner in 1930 as compensation for personal services rendered, subject to tax at both normal and surtax rates; (2) whether said sum so received by petitioner is taxable as capital net gain; (3) whether respondent erred in disallowing a deduction for depletion in the amount of 27 1/2 percent of said sum of $150,000; and (4) whether said sum should be prorated over the years 1920 to 1930, inclusive, when it was earned.  FINDINGS OF FACT.  The petitioner is an attorney at law, with his residence at Oklahoma City, oklahoma.  Ralph W., Robert E., Charles, Everett J. 1937 BTA LEXIS 888">*890  , Mary, and Amy Crews were the six children and heirs at law of James A. Crews and his wife, Lula Crews, who died in 1909 and 1910, respectively.  The six children, all minors at the time of the deaths of their parents, acquired by inheritance from their parents 240 acres of land situated in Garfield County, Oklahoma, in what is now known as the Garber Oil Field.  No actual division of the land was made to the children, each of whom was entitled to one-sixth, but in 1912 Laura E. Crews, their aunt, was duly appointed guardian during their minority.  On February 21, 1916, Laura E. Crews, in her capacity as guardian as aforesaid, executed an oil and gas lease covering the above mentioned property, to one G. A. Garber.  By various assignments such lease passed in turn to the Chanute Refining Co. on May 18, 1916; to the Garfield Oil Co. on the same date; to the Exchange Oil Co.  35 B.T.A. 348">*350  on December 19, 1918; and finally to the Sinclair Oil & Gas Co. on January 9, 1922.  A certain written contract dated September 5, 1921, was made and entered into by and between Laura E. Crews, in her capacity as guardian of the then minor Crews children, and Ralph W. and Charles Crews, the then1937 BTA LEXIS 888">*891  adult heirs, as parties of the first part, and W. W. Sutton, petitioner herein, as party of the second part, reading in material part as follows: That parties of the first part have this day employed party of the second part as an attorney at law to institute and prosecute a suit in behalf of parties of the first part against the Exchange Oil Company, for the purpose of canceling and setting aside the undeveloped portion of an oil and gas lease which covers the following described real estate, to-wit: [240 acres situated in Garfield County, Oklahoma.  Description by metes and bounds omitted as immaterial.] The terms of said employment are as follows: The parties of the first part agree to pay all costs of litigation including the personal expenses of the party of the second part incurred in the prosecution of said suit or in looking after said case.  That in the event the lease or any portion thereof is canceled through the effect of this suit, the parties of the first part as consideratin to the party of the second part for his services in said prosecution hereby agree to convey to party of the second part a Three-Thirty-Seconds (3/32) undivided interest in and to all oil, 1937 BTA LEXIS 888">*892  gas and other mineral production upon said land free and clear of all expenses and encumbrance.  Parties of the first part to have free use of gas for development purposes.  In case no portion of said lease is canceled, set aside or released through the effects of said suit, it is then agreed between the parties hereto that parties of the first part are not obligated to pay party of the second part anything for his service in said case.  Subsequent to the execution of the contract of September 5, 1921, the aforesaid lease was the subject of extensive litigation.  The principal basis of the litigation, as originally instituted, was that the Exchange Oil Co., the then operating company, which was then also operating on all of the contiguous acreage, had violated the implied covenant to drill offset wells, with the result that the Crews heirs were being deprived of their proper share of income through their one-eighth royalty which was reserved under the lease.  On September 10, 1921, the petitioner, on behalf of Laura E. Crews, as guardian of the four children who had not reached their majority, and the two children who had become of age, acting under and pursuant to the contract1937 BTA LEXIS 888">*893  of September 5, 1921, instituted suit in the District Court of Garfield County, Oklahoma, against the Exchange Oil Co., the then assignee of the lease, to have the lease canceled.  Subsequently, and prior to June 7, 1923, the Garfield Oil Co. and the Sinclair Oil & Gas Co. were, by appropriate amended pleadings, made parties defendant with the Exchange Oil Co.  By the pleadings, as so amended, in addition to the matters theretofore litigated, 35 B.T.A. 348">*351  recovery was sought by way of an accounting by the Exchange Oil Co., the Garfield Oil Co. and the Sinclair Oil & Gas Co., to the Crews heirs, for the value of the oil and gas taken by those companies from the premises hereinabove referred to.  On June 7, 1923, a written supplemental agreement was made and entered into by and between Laura E. Crews, in her capacity as guardian of the then minor Crews children, and Ralph W., Robert E., and Charles Crews, the then adult heirs, as parties of the first part, and W. W. Sutton, petitioner herein, as party of the second part, reading in material part as follows: Whereas, on 5th day of September, 1921, the parties hereto entered into a written contract, whereby the party of the second part1937 BTA LEXIS 888">*894  was employed to prosecute a suit against the Exchange Oil Company, for the cancellation of a certain oil and gas lease, upon certain terms contained in said contract: That whereas since the institution of said suit against the said Exchange Oil Company, it became apparent that the Garfield Oil Company, Exchange Oil Company and Sinclair Oil and Gas Company were legally liable for such oil and gas that they took from the premises of parties of the first part under a void lease.  That it was advisable to file an amended petition joining with the said Exchange Oil Company the additional defendants, Garfield Oil Company and Sinclair Oil and Gas Company and seek the recovery or collection from the defendant Companies the value of the oil and gas so taken from the said premises less the cost of production.  That at the time of filing the amended petition against the three defendants, it was orally agreed between the parties hereto, that as compensation to the party of the second part for his extra services as to the additional defendants and the accounting feature of the case that he was to have Twenty-five 25% of the amount so collected if any, from said defendant Companies.  That said1937 BTA LEXIS 888">*895  oral agreement is hereby reduced to writing, for the purpose that there will be no mis-understanding in reference to the matter: That it is mutually agreed by and between said parties, that the party of the second part is to have and receive twenty-five (25%) of the total amount so collected, if any, from the defendants, Garfield Oil Company, Exchange Oil Company, and Sinclair Oil and Gas Company, * * * That the said 25% of the amount, sum or sums so collected if any, from said companies or any of them is to go to the party of the second part in addition to the compensation stated in said written contract bearing date of Sept. 5th, 1921, for party of the second part additional services.  On July 26, 1924, the District Court of Garfield County, Oklahoma, held that the law of Oklahoma relative to the execution of leases by guardians with respect to property of their wards had not been complied with.  Among other things, the court adjudged the lease void in its entirety and canceled it.  The Sinclair Oil & Gas Co. and its associated defendant companies in the suit appealed the case to the Supreme Court of Oklahoma, with the result that it was remanded to the District Court with instructions1937 BTA LEXIS 888">*896  that the lease was to be considered void only in so far as it referred to Laura Crews, as guardian of the three children who were still minors, and valid in so far as it 35 B.T.A. 348">*352  referred to the remaining three Crews heirs, who had reached their majority, since they had subsequently accepted royalties under the lease.  On February 28, 1929, and subsequent to the receipt of the mandate from the Supreme Court of Oklahoma, the District Court of Garfield County rendered a second judgment, holding that the Exchange Oil Co. and its codefendants, the Garfield Oil Co. and the Sinclair Oil & Gas Co. should pay to Laura E. Crews, as guardian of the then three minor Crews heirs, the aggregate sum of $559,094.34, plus costs, and interest from July 26, 1924.  An appeal was taken to the Supreme Court of Oklahoma from the second judgment so entered by the District Court of Garfield County.  While the appeal was thus pending, a compromise settlement of the litigation was effected on October 18, 1930.  Pending the outcome of the litigation begun in 1921, as aforesaid, the Crews heirs in 1922 entered upon the undeveloped portion of the land covered by the lease and began operations as the Crews1937 BTA LEXIS 888">*897  Estate Oil & Gas Producers, claiming that the property was not being properly developed, with the result that the oil was being drained by offset wells on the adjoining property.  The Sinclair Oil & Gas Co., which was then operating on the developed portion of the property, as assignee of the lease, continued its operations and served notice on the purchasers of the oil and gas produced by the Crews heirs that it and its associated companies claimed the income from such production as might be obtained by the heirs.  In order to provide an outlet for their production and to protect the purchasers of the oil and gas produced by them, the Crews heirs entered into an escrow agreement with the Garber Refining Co. and the Farmers State Bank, both of Garber, Oklahoma, dated June 13, 1922, which provided that the purchase price of the oil should be paid one-eighth thereof to the Crews heirs as soon as the oil was received by the purchaser and seven-eighths thereof to be deposited in escrow in the Farmers State Bank.  The escrow agreement further provided that such sums of said money representing seven-eighths of the purchase price as might be necessary for use in further development of the1937 BTA LEXIS 888">*898  land should be paid to the Crews heirs, all vouchers and bills therefor to be deposited with the bank.  Also, the heirs agreed to deposit with the bank a bond or bonds sufficient to indemnify the purchaser of the oil against any claim or claims made by the Sinclair Oil & Gas Co. to the seven-eighths of the purchase price of the oil, and the funds deposited in escrow were to be released to the heirs upon final termination of the litigation by judgment or settlement in their favor.  Following the sale of the first oil runs from the well operated by the Crews heirs under the trade name of Crews Estate Oil & Gas 35 B.T.A. 348">*353  Producers, prior to the execution of the escrow agreement above referred to, statements were rendered by the heirs to petitioner on June 6 and June 15, 1922, showing his three thirty-seconds interest in the said runs, and payments were made to him in accordance with such statements in the amounts of $384.40 and $1,069.59, respectively.  During the period from 1922 to October 1930, the Crews Estate Gas & Oil Producers, operating under and in accordance with the escrow agreement of June 13, 1922, produced and sold oil and gas from the aforesaid premises in the gross1937 BTA LEXIS 888">*899  amount of $1,462,504.02.  On October 18, 1930, the escrow account on the books of the Farmers State Bank showed a credit balance of $708,449.63.  Under date of July 10, 1930, the Crews heirs and Laura E. Crews, as parties of the first part, and petitioner herein, as party of the second part, entered into a certain written agreement of settlement, acknowledged before a notary public on July 14, 1930, providing in material part as follows: 1 - That the terms and conditions of this contract are to be binding only upon the happening of the expressed conditions and each of them hereinafter set out: (a) That case No. 5464 in the District Court of Garfield County, Oklahoma, and the appeals therefrom to the Supreme Court of Oklahoma are mutually settled out of court, within thirty days (30) from this date; * * * (c) That the sum of One Hundred Fifty Thousand ($150,000.00) Dollars in cash or drafts hereinafter designated is actually paid to the second party, within thirty days from this date; and all papers hereinafter designated are turned over to the party of the second part within said time; * * * 3 - That in further consideration of this agreement and promises herein contained1937 BTA LEXIS 888">*900  and a full, complete and final settlement between the parties hereto and each of them, the parties of the first part and each of them hereby relinquish and cancels each and all claims, debts, or controversies in their favor and against the party of the second part, and are to return to the party of the second part all his papers including notes and mortgages * * * That in consideration of the above the party of the second part hereby relinquishes and cancels all debts, claims or controversies in his favor and against the parties of the first part and each of them, except the money payment to be made to the party of the second part hereinafter designated, which is upon the conditions set out in paragraph 1 of this agreement.  4 - That parties of the first part and each of them do hereby consent and agree to by and with party of second part, that the party of the second part is to have in cash or good bank draft the sum of One Hundred Fifty Thousand ($150,000.00) Dollars as his share of the funds received in the contemplated settlement of the litigation out of court, within thirty days from this date, in addition to the provisions contained in paragraph "3" and upon the conditions1937 BTA LEXIS 888">*901  set out in paragraph "1" of this agreement, as a full, complete and final settlement of all matters, claims or controversies between the parties and each of them.  That the Sinclair Oil & Gas Company, a corporation, in pursuance of this stipulation, be and is hereby authorized and directed to pay direct to the said W. W. Sutton, the sum of One Hundred Fifty Thousand ($150,000.00) 35 B.T.A. 348">*354  Dollars out of the funds of settlement between the plaintiffs and their attorneys and the defendants in said case and the appeals.  5 - It is further mutually agreed between the parties hereto that upon the completion of the settlement of this litigation according to the terms and conditions of this contract, that when the party of the second part receives the said One Hundred Fifty Thousand ($150,000.00) Dollars as aforesaid, and receives the papers designated in paragraph "3" of this contract, * * * that he will release his interest in the oil and gas lease and in the oil, gas and other mineral production upon the land in question for the nominal sum of One Dollar ($1.00).  The compromise or settlement of the litigation, contemplated by the above agreement of July 10, 1930, was not consummated1937 BTA LEXIS 888">*902  or completed within the 30-day period specified therein, but by a written contract between the same parties, dated October 11, 1930, they entered into a substantially identical agreement, effective for a period of 30 days from that date, during which period the compromise or settlement of the litigation was consummated and completed under and pursuant to a certain "Escrow Contract" dated October 18, 1930, hereinbelow referred to.  On October 17, 1930, petitioner herein executed a certain written instrument entitled "release of Contracts", in which it was stated that "I, W. W. Sutton, for and in consideration of One Dollar * * * do hereby release, cancel, assign and quitclaim unto" the Crews heirs "all my right, title and interest in under or through two certain written contracts * * * bearing the dates of September 5th, 1921 and June the 7th 1923." The instrument further provided that the land hereinabove referred to "is hereby released and discharged from the provisions of said contracts", and the attorney's lien "based upon said contracts is hereby released and discharged." Under date of October 18, 1930, a certain written instrument entitled "Escrow Contract" was made and entered1937 BTA LEXIS 888">*903  into by and between the Sinclair Oil & Gas Co., as party of the first part, and the six Crews heirs and W. W. Sutton, petitioner herein, as parties of the second part, which provided that in final settlement of the litigation the Sinclair Oil & Gas Co. would deposit in the Exchange National Bank at Tulsa, Oklahoma, the sum of $375,000, to be distributed to the Crews heirs and to petitioner in accordance with a letter dated October 18, 1930, addressed to the bank and signed by the heirs and petitioner, upon the satisfactory execution and delivery to the bank in escrow of certain contracts, stipulations and other instruments.  Under the provisions of this settlement the oil and gas mining lease, the cancellation of which was primarily the object of the litigation, was continued in effect and Sinclair Oil & Gas Co. was recognized as the owner thereof.  The terms and conditions of the escrow contract of October 18, 1930, have in all respects been complied with and performed by the parties thereto.  35 B.T.A. 348">*355  The sum of $150,000, the receipt of which was acknowledged by petitioner herein in the letter dated October 18, 1930, was received by him during the year 1930.  During the1937 BTA LEXIS 888">*904  entire period from the date the aforesaid litigation was instituted until it was terminated by the escrow contract of October 19, 1930, petitioner was one of the attorneys of record ofr the Crews heirs, and was actively engaged in prosecution of the litigation and negotiations which resulted in the settlement thereof.  The original and amended petitions filed by petitioner in the District Court of Garfield County, Oklahoma, in connection with the litigation hereinabove mentioned bore endorsements to the effect that a lien was claimed by W. W. Sutton.  The books of the petitioner for the year 1930 were kept, and his income tax return for that year was filed, on the basis of cash receipts and disbursements.  OPINION.  HILL: The principal and basic issue in this case is whether or not petitioner acquired, under the contracts of September 5, 1921, and June 7, 1923, a presently vested economic interest in the proceeds of the oil and gas derived from the land owned by the Crews heirs.  As petitioner succinctly states in his brief, the real issue is whether the sum of $150,000 paid to and received by petitioner in 1930 represented his share of the oil and gas proceeds arising out1937 BTA LEXIS 888">*905  of such economic interest, or whether it represented attorney's fees.  Petitioner reported the amount of $150,000 in his income tax return for 1930, and claimed a deduction for depletion of 27 1/2 percent thereof.  In computing the deficiency respondent disallowed the deduction for depletion, and treated the entire amount as attorney's fees or compensation for personal services, taxable as ordinary income at both normal and surtax rates.  Petitioner's contention that by the contracts in question he obtained a then vested economic interest in the oil and gas production, and that the $150,000 paid to him in 1930 in the compromise settlement of the litigation represented his share of the proceeds arising out of such economic interest, we think, can not be sustained.  The contracts did not vest in petitioner a present economic interest in the proceeds of production, subject to defeasance by a condition subsequent, but the vesting of such an interest was by the express terms of the contracts dependent upon a condition precedent.  The contract of September 5, 1921, specifically provided that only in the event the lease or a part thereof should be canceled through the "effect" 1937 BTA LEXIS 888">*906  of the suit to be instituted and prosecuted by petitioner, the Crews heirs agreed to convey to petitioner an undivided interest in the oil and gas production for his services.  The contract further 35 B.T.A. 348">*356  stipulated that "In case no portion of said lease is canceled, set aside or released through the effects of said suit, it is then agreed between the parties hereto that the parties of the first part are not obligated to pay party of the second part anything for his services in said case." The contract of June 7, 1923, likewise gave petitioner a right to receive the additional compensation therein provided only upon the happening of a future event, namely, the recovery or collection of some amount from the defendants in the accounting sued for.  If no amount was so collected, petitioner was to receive no additional compensation.  Thus, the plainly stated provisions of the contracts, in our opinion, negative the idea that petitioner acquired a present vested economic interest of any kind either in the land, proceeds of production, or funds sought to be recovered through the suit for an accounting.  The interests agreed to be conveyed to petitioner would have become vested1937 BTA LEXIS 888">*907  economic interests only in the event of the termination of the litigation in favor of petitioner's clients by final judgment of the court or a settlement by the parties out of court.  Prior to the happening of such event, petitioner's interest was contingent and amounted to no more than that of a lienholder, which, while recognizable in equity, is not a vested economic interest.  Section 4100, chapter 23, Compiled Oklahoma Statutes, Annotated, 1921, provides that an attorney who files a pleading for a client and endorses thereon his name, together with the words "lien claimed" shall have a lien upon such cause of action and same shall attach to any verdict, decision or judgment in his client's favor and the proceeds thereof, and that no settlement between the parties without the approval of the attorney shall affect or destroy such lien.  Petitioner so endorsed the petition and amended petition filed in the litigation involved in this proceeding, and contends that such endorsement, under Oklahoma law, gave him an enforceable economic interest in the production of the oil and gas from the Crews' property.  In support of this contention, petitioner cites decisions by the courts1937 BTA LEXIS 888">*908  of Oklahoma, which, for reasons presently to be stated, we deem it unnecessary to discuss beyond pointing out that, whatever may be the correct interpretation of those decisions, they do not affect the conclusion we reach under the facts in the instant case.  Whether or not the contracts of employment dated September 5, 1921, and June 7, 1923, under the views of the Oklahoma courts, operated as an equitable conveyance to petitioner of an interest in the land or the oil and gas production, subject to the condition subsequent of performance by petitioner of his obligations under the 35 B.T.A. 348">*357  contracts, the evidence establishes, we think, that prior to such performance by petitioner or fulfillment of the condition subsequent, petitioner on October 11, 1930, agreed to the cancellation of the contracts and released all of his rights thereunder, accepting in place and in lieu thereof another and different consideration as compensation for his services, to wit, $150,000 in cash to be paid to him, which was paid to him under the escrow contract of October 18, 1930.  Subject to performance of the provisions of the agreement of October 11, 1930, which provisions were subsequently carried1937 BTA LEXIS 888">*909  out, petitioner agreed to and thereby did relinguish and cancel "all debts, claims or controversies in his favor and against the parties of the first part", except the money payment of $150,000; and by the instrument entitled "Release of Contracts", dated October 17, 1930, petitioner for a recited consideration of one dollar released, canceled, assigned, and quitclaimed all of his "right, title and interest in under and through" the contracts of September 5, 1921, and June 7, 1923.  Petitioner, therefore, surrendered his rights under the said contracts in consideration of the payment to him of a cash fee of $150,000, which represented the final compensation paid to him for his services to the Crews heirs in the litigation, in lieu of the compensation originally agreed upon.  The fact that the amount was paid directly to petitioner by the Sinclair Co. out of the settlement fund, we think, is immaterial, and does not change the character of the payment as a cash fee for personal services.  While it is true that in the contract of October 11, 1930, it was stated that petitioner was to have in cash $150,000 "as his share of the funds received in the contemplated settlement of the litigation1937 BTA LEXIS 888">*910  out of court", this recital, in the light of the other provisions of the contract and contemporaneous instruments, did not constitute the payment to petitioner a payment of royalties arising out of his original interest in the oil and gas production.  It was a cash fee to be paid out of the funds received in the contemplated settlement.  Indeed, the settlement fund itself had no connection whatever with the payment of royalties, but was merely an amount agreed upon by the parties in the compromise settlement of litigation prosecuted primarily to cancel the original lease.  Nor did the compromise settlement provide for the cancellation of the lease.  On the other hand, it continued the lease in effect and recognized Sinclair Oil & Gas Co. as the owner thereof.  The cancellation of the lease was the condition precedent to the vesting in petitioner of a right to a share of the oil produced from the lands involved.  Since the lease was not canceled either as a result of the litigation or of the compromise settlement, no economic interest in the lands ever vested in petitioner.  35 B.T.A. 348">*358  Having reached the conclusion that the sum of $150,000 received by petitioner in 1930 did not represent1937 BTA LEXIS 888">*911  income derived from an economic interest in the production of oil and gas from the Crews' property, it follows that petitioner is not entitled to a deduction for depletion at the statutory rate, as claimed by him.  There are two additional contentions urged by petitioner, which require but brief notice.  Petitioner argues that if any portion of said sum of $150,000 should be held to represent a consideration for the release and quitclaim of his interest in the oil properties rather than his interest in the mineral production, then such portion of the income is taxable as capital net gain.  This contention is sufficiently answered by what we have said above.  Petitioner canceled the contracts of September 5, 1921, and June 7, 1923, by the agreement of October 11, 1930, under and pursuant to which latter contract he received a cash fee of $150,000 in lieu of the surrendered rights acquired under the old contracts.  The cash fee so received is taxable as ordinary income.  Cf. . Petitioner further contends on brief that the oil and gas proceeds out of which the $150,000 was paid were received in part by the Farmers State Bank1937 BTA LEXIS 888">*912  as a fiduciary, and, under section 161 of the Revenue Act of 1928, were taxable to the fiduciary as and when received by it.  This contention can not be sustained under the facts.  The $150,000 received by petitioner was paid directly to him by the Sinclair Oil & Gas Co. out of the $375,000 settlement fund.  No part of the sum paid to petitioner came out of the fund held in escrow by the bank, nor was petitioner, under the final contract of October 11, 1930, entitled to receive any part of that fund.  The remaining issue raised by the pleadings is whether the sum of $150,000 received by petitioner in 1930 as compensation for personal services should be prorated over the years 1920 to 1930, inclusive, when it was earned.  Petitioner did not argue this issue on brief, and in his reply brief indicates that it has been abandoned.  In any event, the issue must be decided adversely to the petitioner.  The entire amount was received by petitioner during the taxable year 1930.  He kept his books and filed his income tax return on the basis of cash receipts and disbursements.  In such circumstances, compensation for personal services, under section 41 of the Revenue Act of 1928, constitutes1937 BTA LEXIS 888">*913  taxable income for the year in which actually received.  ; ; . The deficiency determined by the respondent is approved.  Reviewed by the Board.  Judgment will be entered for the respondent.