Court Opinion

ID: 4633531
Source: CourtListenerOpinion
Date Created: 2020-11-21 03:14:07.024653+00
Date Added: 2024-06-11T07:58:04.118541
License: Public Domain

Estate of Marion B. Pierce, Deceased, Asbury Park National Bank and Trust Company, Administrator, Petitioner, v. Commissioner of Internal Revenue, RespondentPierce v. CommissionerDocket No. 34006United States Tax Court24 T.C. 95; 1955 U.S. Tax Ct. LEXIS 194; April 29, 1955, Filed *194 Decision will be entered under Rule 50.  Sec. 107(a), as Amended, 1939 Code.  -- (1) Upon the facts, held, that services of Marion B. Pierce, deceased, as general counsel for Missouri Pacific Railroad were separate and distinct from his services as an attorney appointed by the District Court to represent the railroad, a party to a reorganization under section 77 of the Bankruptcy Act, and the fee of $ 3,800 received in 1945 for such services is not to be lumped with other compensation received for services rendered in connection with a plan of reorganization.(2) Upon the facts, held, that the sum of $ 25,000 which was awarded to Pierce by the District Court by its orders issued in 1945 and 1946 constituted total compensation for completed services, and section 107(a), as amended, of the 1939 Code applies to $ 20,000 received in 1945.  Smart v. Commissioner, 152 F.2d 333">152 F. 2d 333, followed and distinguished.  James D. Carton, Jr., Esq., for the petitioner.Norman A. Peil, Jr., Esq., for the respondent.  Harron, Judge.  Withey, J., concurs in the result.  Kern, Van Fossan, Turner, Opper, Tietjens, Bruce, and Pierce, JJ., dissent.  HARRON *95  The Commissioner determined a deficiency in the income tax liability of Marion B. Pierce, deceased, for 1945, in the amount of $ 12,855.03.  Part of the deficiency is uncontested.  There are two questions for decision which arise under section 107(a), as amended, of the 1939 Code: (1) Whether services of Pierce as general counsel of MissouriPacific Railroad Company, a corporation in reorganization under section 77 of the Bankruptcy Act, were separate from his services as an attorney representing the corporation in reorganization proceedings, for the purpose of considering the application of section *196  107(a); (2) whether $ 25,000 which was awarded to Pierce by the District Court under orders entered in 1945 and 1946 constituted total compensation for completed services in connection with a plan of reorganization.FINDINGS OF FACT.Marion B. Pierce, sometimes referred to hereinafter as the decedent, died on June 8, 1953, a resident of New Jersey.  He filed his return for 1945 with the collector of internal revenue for the first district of New Jersey.  In his return, income was reported for the calendar year on a cash basis.In 1945 the decedent received fees for legal services in the amount of $ 20,000 (which is involved in this proceeding) but he did not report any of this sum in his return for 1945.*96  The statutory notice of deficiency from which this proceeding arises was mailed to the decedent more than 3 years but less than 5 years after the filing of the 1945 return.At some time before 1936, the MissouriPacific Railroad Company (hereinafter referred to as M. P. R.) and other railroad corporations became parties to a section 77 reorganization under the Bankruptcy Act which proceeding was before the United States District Court for the Eastern District of Missouri and*197 the Interstate Commerce Commission (hereinafter referred to as the I. C. C.).On July 11, 1941, the District Court entered its order appointing Marion B. Pierce as attorney for M. P. R., to succeed and in the place of E. S. Ballard, another attorney.On November 6, 1941, the board of directors of M. P. R., elected Pierce to the position of general counsel of the corporation, and to serve as a director, and to serve as a member of the executive committee.  Subsequently, the board reelected Pierce to the position of general counsel of the corporation for each of the years 1942-1946, inclusive.The position of general counsel of the corporation was a separate position from that of attorney in connection with the reorganization proceedings in which capacity Pierce had been appointed by the District Court on July 11, 1941, and involved different duties and additional and separate services.  The duties of the position of general counsel of the M. P. R. corporation related to matters pertaining to the maintenance of the corporate entity, and, in general, advising upon questions about the corporate organization.  Fees for services of Pierce as general counsel of the corporation were distinct*198  from and in addition to fees for his services in connection with a plan for the reorganization of M. P. R. and the other railroads which were involved in the reorganization.By its reports and orders of January 10, 1940, and April 9, 1940 (239 I. C. C. 7; 240 I. C. C. 15), the I. C. C. approved a plan of reorganization for the M. P. R. and the other railroads. The reports and orders of the I. C. C. were filed in the District Court on January 19, 1940, and April 22, 1940.  Thereafter, hearings were held before the court on objections.  The court, on July 12, 1941, rendered a decision approving the plan approved by the I. C. C.  Pierce did not represent M. P. R. in the proceedings before the I. C. C. and the court which culminated in the approval by the I. C. C. on January 10, 1940, and April 9, 1940, and in the court's approval on July 12, 1941, of a plan for reorganization. That plan is known as the Commission plan, or the 1940 plan for reorganization.M. P. R. filed a petition for the modification of the 1940 plan, and Pierce, when he was first appointed, worked on the preparation of *97  that petition.  An appeal to the*199  Court of Appeals for the Eighth Circuit was filed, from the District Court's decision approving the 1940 plan.  Pierce devoted time to familiarizing himself with the completed record of the hearings on the 1940 plan, and he appeared in the Court of Appeals.  The Court of Appeals, because of intervening decisions of the United States Supreme Court in other railroad reorganization proceedings, remanded the 1940 plan to the District Court on May 8, 1943, without rendering a decision, and the District Court referred the plan back to the I. C. C. on July 29, 1943, for further proceedings.  The I. C. C. then considered a new plan for reorganization.Pierce rendered services to M. P. R. in connection with a new plan for reorganization throughout the period it was under consideration.  The I. C. C. approved a new plan on October 1, 1944 (257 I. C. C. 479, 745; 275 I. C. C. 203), and certified it to the District Court for hearing and for approval.  This plan is known as the compromise plan, or the 1944 plan.  The District Court set the hearing for January 8, 1945.  The District Court approved the compromise plan on January 22, 1946, by *200  its order, No. 2604-B.The only way Pierce (or anyone else having claims for fees and expenses) could receive payment for his services, as either attorney for M. P. R. in the reorganization proceedings, or M. P. R.'s general counsel in its corporate organization matters, was under an order of the United States District Court which was empowered to make awards by section 77 (c) (12) of the Bankruptcy Act after a maximum amount had been fixed by the I. C. C.  Under section 77 (c) (12), it was necessary for Pierce to file a petition for the payment of fees and expenses with the District Court, but he could not file such petition until the court issued an order to file petitions and fixed the date for the filing thereof.  If he failed to file a petition for fees within the time fixed by the order, he could not obtain payment of his fees and expenses.On October 31, 1944, the District Court issued an order, No. 2604, for the filing of petitions for fees and allowances for services and expenses, which petitions were to be filed by January 8, 1945.  In accordance with this order, Pierce filed a petition on November 22, 1944, for fees and for reimbursement of expenses, which was the first *201  petition for fees which he filed, or could have filed.  Up to the time he filed his petition, he had not received, and could not receive, any payment for services rendered or expenses incurred from the time of the beginning of his services under the court's appointment.Pierce, in his petition to the court, asked for payment for (a) services rendered in connection with the reorganization proceedings; (b) services as general counsel of M. P. R.; and (c) reimbursement of *98  expenses.  He asked for (a) $ 48,650, for his services in connection with the reorganization proceedings; (b) $ 7,500 for his services as M. P. R.'s general counsel, and (c) $ 12,817.32, expenses.  Pierce's petition was referred by the court to the I. C. C.The I. C. C., after hearing the petition, fixed the maximum allowance by its order of August 10, 1945, which was referred to the court.  The I. C. C. fixed as the maximum allowance for Pierce's services in connection with the compromise plan, the sum of $ 20,000; and as the maximum allowance for expenses, the sum of $ 7,855.21.  It did not make any award to Pierce for his services as M. P. R.'s general counsel.The District Court, by its order No. 2827, *202  dated September 21, 1945, awarded Pierce the above-stated amounts fixed by the I. C. C.  It reserved jurisdiction, however, to make a further allowance to Pierce for the fees and expenses claimed in his petition of November 22, 1944, in the event the I. C. C. should issue a supplemental order increasing the "maximum limits of final allowances" with respect to Pierce's petition.The I. C. C. granted Pierce a rehearing on his petition of November 22, 1944, at which it reconsidered all of his claims, after which it entered a supplemental report, on July 2, 1946, in which it increased the maximum limit for the final allowance for compensation for services in connection with the compromise plan to $ 25,000, an increase of $ 5,000; it increased the allowance for expenses to $ 8,645.13, an increase of $ 789.92; and it allowed (for the first time) the sum of $ 3,800 as compensation for services rendered to M. P. R. as its general counsel.The I. C. C. in its supplemental report of July 2, 1946, held that there was precedent for its fixing a maximum allowance for Pierce's services in connection with the maintenance of the corporate entity of M. P. R., thereby concluding that such expense should*203  be paid out of the debtor's estate.  The I. C. C. found that Pierce's services in connection with the maintenance of its corporate entity covered matters primarily relating to the corporate existence of M. P. R., and that the evidence showed that such services included attending meetings of the corporation's board of directors and meetings of its executive committee; preparing the proxy statements, proxy notices, and proxies for annual stockholders' meetings; rendering opinions with respect to resolutions of the board of directors; participating in the appointment of successor trustees under two mortgages; advising the board on the refinancing of bonds of affiliated companies; advising the board on matters relating to the filing of reports with various Missouri State officials; and, in general, advising frequently on questions connected with the corporate organization of the M. P. R.*99  The above-described services were not rendered in connection with the reorganization proceedings and plan.  They represented services and employment of Pierce which were separate and distinct from his services and employment in connection with reorganization proceedings and compromise plan.  *204  The compensation for these services, in the amount of $ 3,800, was distinct from the compensation which was allowed Pierce, $ 25,000, for his services in connection with the compromise plan of reorganization and other reorganization proceedings matters.The District Court, pursuant to the order of the I. C. C., entered its order on July 12, 1946, awarding Pierce the additional compensation of $ 5,000 for his services in connection with the compromise plan and other reorganization matters, the additional sum of $ 789.92 to reimburse him for expenses, and compensation for his services as general counsel of M. P. R. in the amount of $ 3,800.Pierce received the original award of $ 20,000 in 1945, and the additional sum of $ 5,000 in 1946, for his services in connection with the reorganization proceedings.Pierce received in 1946, the sum of $ 3,800, for his services as general counsel. He received for expenses, $ 7,855.21, in 1945, and $ 789.92, in 1946.M. P. R. and others filed an appeal in the Court of Appeals for the Eighth Circuit from the District Court's order of January 22, 1946, approving the compromise plan of reorganization of M. P. R. and others which had been approved, also, *205  by the I. C. C. on October 9, 1944.  The Court of Appeals did not affirm the District Court's order.  By its mandate of September 13, 1947, the Court of Appeals remanded the compromise plan to the District Court for further consideration by the I. C. C.  Thereafter, on September 19, 1947, the District Court remanded the compromise plan to the I. C. C.The I. C. C. held hearings, and on December 29, 1949, 2 years later, it approved a third plan known as the modified plan of reorganization of M. P. R. and other railroads, which was certified to the District Court.The District Court issued its order fixing February 15, 1950, as the date for the filing of objections to the modified reorganization plan.  It also fixed March 27, 1950, as the date for hearing on the plan and any objections.The District Court approved the modified plan on October 3, 1950.The District Court, also, by its order of January 13, 1950, directed that all petitions for allowances of fees for services in connection with the modified reorganization plan, and for expenses, should be filed by March 20, 1950.Pierce filed his petition, dated March 17, 1950, for maximum allowance for compensation under section 77 (c) *206  (12) of the Bankruptcy *100  Act. Pierce petitioned for, inter alia, a maximum allowance of $ 62,350, as compensation for his services as attorney for M. P. R. in connection with the modified plan of reorganization and other reorganization proceedings matters up to March 27, 1950.The I. C. C. fixed a maximum allowance of $ 35,000 for Pierce's services to March 27, 1950, in connection with the reorganization proceedings and the modified plan.  The District Court awarded Pierce $ 35,000 by its order No. 3571-B on June 21, 1951, which was paid to Pierce in 1951.The stipulated facts which have not been set forth above are incorporated herein by this reference.OPINION.In order to obtain the benefit of section 107 (a) of the Internal Revenue Code of 1939, as amended, the petitioner must show that the sum of $ 20,000 received by Pierce in 1945 represented "at least 80 per centum of the total compensation for personal services covering a period of thirty-six calendar months or more (from the beginning to the completion of such services) * * *." (Italics supplied.) Neither party advances a contention which puts in question the meaning of the provisions of section 107 (a). *207  The questions to be decided, therefore, are fact questions, and the dispute between the parties involves disagreement about the facts to be found from all of the evidence.Whether or not Pierce was entitled to receive application of the provisions of section 107 (a) in computing tax upon the sum of $ 20,000 which he received in 1945 depends upon the facts relating to the nature of the services rendered and the period of time which marks the beginning and the completion of services.  Under the broad issue there are two questions.Pierce was employed to act as attorney for M. P. R. in matters relating to reorganization proceedings under the Bankruptcy Act. He was also employed as the general counsel of M. P. R.  The first question to be decided is whether the work done by Pierce as general counsel of M. P. R. was separate, distinct, and apart from his duties as attorney for M. P. R. in the reorganization proceedings.In his petition for compensation for services rendered, dated November 22, 1944, Pierce made a separate request for compensation for services rendered as M. P. R.'s general counsel, and the I. C. C., under its report and order of July 2, 1946, allowed Pierce $ 3,800 for*208  his services as general counsel. It is very clear that in its consideration of Pierce's petition for compensation for services as general counsel, the I. C. C. concluded that such services were distinct and separate from Pierce's services in reorganization proceedings matters.  The I. C. C.*101  regarded Pierce's petition as presenting a question of whether his fee for his services as general counsel could be paid out of the debtor's estate as could his fee for services as attorney for the debtor (M. P. R.) in reorganization. If Pierce's services had been general, comprising both functions, no question would have existed.  The I. C. C. took the view that Pierce acted in two distinct capacities.  At first, the I. C. C. considered the cost of Pierce's services as general counsel one which was outside of the classes of expenses which could be paid by the trustee of M. P. R., a debtor, and did not allow Pierce anything for such services.  It was only upon further hearing and a determination by the I. C. C. that there was some precedent for allowing payment out of the debtor's estate of compensation for such services that the I. C. C. allowed Pierce $ 3,800 in its supplemental report*209  of July 2, 1946.Furthermore, the I. C. C., in its supplemental report, made findings as to the nature of the work done by Pierce as general counsel. Briefly, his tasks related to the maintenance of the corporate entity, or organization, of M. P. R. during the period of its reorganization. The evidence shows that the duties of Pierce as general counsel were entirely different and separate from his duties as attorney representing the debtor in the reorganization proceedings. Such separate and distinct duties could have been performed, it appears, by another lawyer.  They certainly required additional time and effort. The I. C. C. treated the allowance of compensation for services rendered as general counsel as separate and distinct from the allowance for compensation for services as attorney in the reorganization proceedings. Upon consideration of all of the evidence, we take the same view, and hold that the services of Pierce as general counsel were sufficiently distinct and separate from his other services as attorney in the bankruptcy proceedings to regard them separately for the purpose of section 107 (a).  See E. A. Terrell, 14 T.C. 572">14 T. C. 572; Leon R. Jillson, 22 T. C. 1101,*210  Issue 2.  The situation under this question is like that in the case of Leon R. Jillson, supra (Issue 2), where (in connection with the Cochran estate) it was considered immaterial that Jillson, who rendered services as attorney to trustees, was also a trustee, because there was sufficient distinction between the services rendered in each capacity "so that the legal services can be considered as entirely severable."Our holding under the first question clears the way for consideration of the second question.  1The second question is whether the sum of $ 20,000 which was awarded *211  to Pierce by the District Court and paid to him in 1945 can *102  be taxed in accordance with the provisions of section 107 (a) of the 1939 code, 2 as amended by section 139 of the Revenue Act of 1942.The pertinent facts are these: Pierce was appointed by the District Court in July 1941, at the request of*212  M. P. R., to represent it as an attorney in the reorganization proceedings which were pending in the court and before the I. C. C.  He represented the railroad in connection with the I. C. C. hearings on a new and second plan for reorganization, the first plan, the 1940 plan, having failed to receive final approval. After protracted hearings by the I. C. C., a second plan, the Commission's plan, or the 1944 plan, or the compromise plan, as it is variously called, was approved by the I. C. C. in the latter part of 1944 and was certified by the I. C. C. to the District Court which then set a date for the presentation of objections to the court.  Pierce rendered services in connection with the second plan over a period of more than 36 months.  The District Court, after the plan approved by the I. C. C. had been certified to the court, issued its order for the filing of petitions, by all persons having claims, for fees and compensation.  Pierce duly filed his petition, and the court in 1945 awarded him, on the basis of the maximum allowance fixed by the I. C. C., $ 20,000 for his services in connection with the 1944 plan.  The court in 1946 increased the award to $ 25,000, on the basis*213  of further allowance by the I. C. C., and Pierce was paid the additional $ 5,000 in 1946.  Pierce was paid $ 20,000 in 1945.It at once is observed that the sum of $ 20,000, received by Pierce in 1945, the taxable year, is 80 per cent of $ 25,000, the total sum which the court awarded Pierce upon the petition for compensation which he filed on November 22, 1944, pursuant to the court's order; and that the services, compensation for which he petitioned, covered a period of 36 months and more, i. e., from July 1941 to October 1944.  Thus, the requirements of section 107 (a), as amended, are met unless there was not "completion" of the services for which $ 25,000 was awarded and paid, of which $ 20,000 was received in one taxable year.The narrow question to be decided is whether the court's award of $ 25,000 was for completed services.The petitioner contends that the approval by the I. C. C. in 1944 of a plan for reorganization, the 1944 plan, and the court's 1944 order to all concerned to file petitions for compensation for services, marked the completion of services of Pierce, and that the award of $ 25,000 *103  was the total compensation for Pierce's services in connection *214  with that plan.The respondent, on the other hand, argues that the matter is not that simple because Pierce continued to render services to M. P. R. as its attorney in the long reorganization proceedings and in 1951 was paid $ 35,000.  He contends that Pierce rendered continuous services, homogeneous in nature, which were brought to completion only by Pierce's death which occurred before the reorganization proceedings came to an end.  He contends that the approval of a plan for reorganization by the I. C. C., which is the action which brought forth the court's order to file petitions for fees and costs, should not be regarded as marking the completion and separation of services.If respondent's view is correct, Pierce did not receive in one taxable year, namely, 1945, 80 per cent of the total compensation for services, "from the beginning to the completion of such services," because, under such view, the total compensation for all of Pierce's services was $ 60,000, 80 per cent of which is $ 48,000.Upon consideration of all of the evidence and of the nature of the procedure followed under section 77 of the Bankruptcy Act, we conclude that the petitioner's contention is essentially *215  correct, and that respondent errs in treating the performances of Pierce as inseparable and indivisible, and as completely homogeneous and continuous. In the first place, as we understand the procedures which were followed in order to achieve a reorganization of M. P. R. and the other railroads, the objective was to bring to final adoption and approval a single plan of reorganization. But the record before us shows that at least three different and distinct plans were successively approved by the I. C. C. and the District Court, none of which attained final approval up to the time Pierce died.  The 1940 plan failed to receive final approval. The 1944 plan failed to receive final approval. The 1949 plan had been approved by the District Court before Pierce died, but as of that date, even it had not reached the point of finality. Each of these plans emerged out of a proceeding before the I. C. C.  Each plan and each proceeding was separate and distinct from the next plan and the next proceeding, as we understand the general operation.  The 1940 plan failed to go through to finality, and the 1944 plan also failed.  When a plan failed, such as the 1944 plan, another proceeding started*216  in the I. C. C. out of which another plan emerged.  One plan might be the final plan, but whether it would be or would not be, could not be known at the time I. C. C. approved a plan and certified it to the District Court.In the second place, the obtaining of compensation for services and costs by anyone working on a plan was wholly controlled by the District Court which acted pursuant to the provisions of section 77 *104  (c) (12) of the Bankruptcy Act, as amended, and the applicable rules of the General Orders in Bankruptcy of the Supreme Court.  Such fees and costs are paid out of the debtor's estate; they can be paid only upon I. C. C. recommendations fixing maximum allowances, and orders of the District Court; and petitions for fees and costs can be filed by claimants only at such times as the District Court fixes.  It is our understanding, that if a person having a claim for fees and costs fails to file his petition therefor at the time fixed by the court, he loses his opportunity to get compensation for the services to which the court's order relates.  Thus, Pierce could not make an election to file a petition for fees at any time which to him might be convenient.  He *217  was obliged to file his petition at the time prescribed by the court.More specifically, we understand the following to be the situation: The District Court's order of October 31, 1944, was an order which marked the completion of the preparation of a plan for reorganization, and the court determined that all proper expenses in connection with the preparation of the plan, including all proper fees and all proper costs, should then be paid out of the estate of the debtor, or debtors.  Not only Pierce, but all others, filed their petitions for compensation for services and costs in connection with the plan then before the court.  As is stated in the Findings of Fact, Pierce asked for more in his petition, dated November 22, 1944, than the I. C. C. allowed, and the court in its order of September 21, 1945, making the various awards on the various petitions, reserved jurisdiction to make further allowances to Pierce upon his petition of November 22, 1944, if there was any further hearing by the I. C. C. on the petition; there was; and an additional $ 5,000 was allowed and awarded upon Pierce's petition of November 22, 1944.We understand, further, that when the 1944 plan for reorganization*218  failed to reach finality, the I. C. C. then took up another plan at the end of 1947, or the beginning of 1948.  It held hearings on and approved another plan, the 1949 plan.  The District Court's order issued on January 13, 1950, to all concerned, to file petitions for fees and other compensation was an order to file petitions for compensation in connection with the preparation and completion of the 1949 plan, and it marked the completion of another plan for reorganization. The court thereupon determined what properly should be paid by the debtors' estates in connection with the preparation of the 1949 plan.  Pierce, and all others concerned, then filed petitions for compensation for services in connection therewith.  Pierce filed his petition on March 17, 1950, for compensation for his services and costs in connection with the 1949 plan.In this situation, we conclude that the District Court based its orders of October 31, 1944, and January 13, 1950 (to file petitions), and its *105  respective awards following those orders, upon a separation and divisibility of the services of all concerned, including Pierce, into one unit of services rendered in connection with the preparation*219  and completion of the 1944 plan, which was approved by the I. C. C. on October 1, 1944, and into another unit of services rendered in connection with the preparation and completion of another plan, the 1949 plan, which was approved by the I. C. C. on December 29, 1949.  That is to say, the court based its awards of compensation to Pierce, and others, in 1945, and in 1951, upon separate and completed services which were rendered in connection with two different plans for reorganization. 3 Therefore, in the case of Pierce, the awards to him in 1945 and 1946 for his services in connection with the 1944 plan should not "be brought into a hotchpot" with the award of the court to him in 1951 for his services in connection with the 1949 plan, and the prescribed percentage in section 107 (a), as amended, computed accordingly.  Cf.  Smart v. Commissioner, 152 F. 2d 333, 335, affirming 4 T. C. 846.*220  Reference has been made, supra, to section 77 (c) (12) of the Bankruptcy Act, and the respective orders of the District Court, dated October 31, 1944, and January 31, 1950, to interested parties to file petitions for fees.  The court's order of October 31, 1944 (Exhibit 1), ordered the filing of petitions "for final allowance under section 77 (c) (12) of the Act in respect of services rendered and expenses incurred" (italics supplied), including reasonable attorneys' fees, in connection with the approved plan (the 1944 plan) certified by the I. C. C. and pending before the court (see Exhibit 2).  The court's use of the words "final allowance" denotes the completion of all services rendered in connection with the approved 1944 plan, and supports the conclusion that Pierce's services in connection with the 1944 plan constituted "completed" services.Our conclusion is, therefore, that the services of Pierce in connection with the 1944 plan were divisible from his later services in connection with the 1949 plan; that each service was separate and distinct; that each was a unit of service; and that each was completed when each one of two separate plans for reorganization was completed*221  by the I. C. C. and certified to the District Court.  Upon the evidence before us, it is held that the award of $ 25,000 to Pierce was for completed *106  services within the meaning of the condition in section 107 (a), as amended, which is encompassed by the words, "from the beginning to the completion of such services." Since Pierce received in the taxable year 1945, 80 per cent of the total compensation paid for completed services covering 36 calendar months, and more, the tax on the $ 20,000 which he received in 1945 can be computed, properly, under the provisions of section 107 (a).  To deny here the application of section 107 (a), as amended, would defeat the purpose of that section.This case is distinguishable on its facts from Civiletti v. Commissioner, 152 F. 2d 332; George J. Hoffmann, Jr., 11 T. C. 1057; Alfred J. Loew, 17 T. C. 1347, affirmed per curiam 201 F. 2d 368; Ralph E. Lum, 12 T. C. 375; and Julia J. Nast, 7 T.C. 432">7 T. C. 432. This case also is distinguishable from Smart v. Commissioner, supra,*222  on the facts, but the rationale of the Court of Appeals in the Smart case is applicable and it has been applied here.  In that respect, the Smart case is followed, and we do not depart here from the rule expressed in the Smart, Hoffmann, Jr., Loew, and other related cases.  Cf., also, W. Harold Warren, 20 T.C. 378">20 T. C. 378, 382.In Alfred J. Loew, supra, it was found that Loew's services were continuous; that they were not divisible and separable.  We pointed out that "the period of service is not to be broken up by the simple expedient of filing a petition for fees," and that with respect to Loew's services --There was nothing in his employment requiring him to file petitions for allowances at any particular time.  * * * he could do this [file petitions] at times to suit his own convenience.In this case, the evidence is clear that Pierce could not file a petition with the District Court for allowance of compensation at a time to suit his own convenience.  We have pointed out at some length above, that the District Court controlled and fixed the time for the filing of petitions for allowance of compensation, costs, *223  and claims; that it acted pursuant to section 77 (c) (12) of the Bankruptcy Act and applicable regulations; that all claimants, including Pierce, had to file their respective petitions at the same time; that the court found the occasion for fixing the time for the filing of petitions for allowances (including a petition of Pierce) to be the completion, approval, and certification to the court of a plan for reorganization by the I. C. C.; and that the court issued its order to file petitions after the I. C. C. had completed and approved a plan.  Pierce, then, could file a petition for allowance of compensation for his services only by leave of the court, and at such time as the court determined.  He had no control over the fixing of the time when he could file a petition, or over the frequency with which he could file petitions.  He could not resort to the filing of a petition for allowance of compensation as a device to *107  break up "services of a homogeneous nature and covering a continuous period" into segments, or units, or to mark the end of services.  Cf.  Ralph E. Lum, supra; and Julia J. Nast, supra.The*224  petitioner no longer contends that the provisions of section 275 (c) of the 1939 Code do not apply.  The petitioner has stipulated that certain adjustments of the respondent are correct.  Effect will be given to the stipulation in the Rule 50 recomputation.Decision will be entered under Rule 50.  Footnotes1. If it were held that Pierce's services as general counsel were not severable from his services as attorney in the reorganization proceedings, it would be proper to lump together all that was awarded to him in payment for services under his petition of November 22, 1944.  Of such total, $ 28,800, the sum of $ 20,000 received in 1945 would be less than 80 per cent, and we would not reach the second question.↩2. SEC. 107. COMPENSATION FOR SERVICES RENDERED FOR A PERIOD OF THIRTY-SIX MONTHS OR MORE AND BACK PAY.(a) Personal Services. -- If at least 80 per centum of the total compensation for personal services covering a period of thirty-six calendar months or more (from the beginning to the completion of such services) is received or accrued in one taxable year by an individual or a partnership, the tax attributable to any part thereof which is included in the gross income of any individual shall not be greater than the aggregate of the taxes attributable to such part had it been included in the gross income of such individual ratably over that part of the period which precedes the date of such receipt or accrual.↩3. It has already been pointed out that the I. C. C. and the District Court approved three plans of reorganization prior to the death of Pierce in 1953.  The first plan, called the 1940 plan, was approved by the I. C. C. on January 10, 1940, and by the District Court on July 12, 1941.  The second plan, referred to as the 1944 plan, was approved by the I. C. C. on October 1, 1944, and by the District Court on January 22, 1946.  The third plan, referred to as the 1949 plan, was approved by the I. C. C. on December 29, 1949, and by the District Court on October 3, 1950.  What happened thereafter is not shown by the record in this case.  We do not know whether the 1949 plan, or some later plan, became the final plan under which a reorganization was effected.↩