Court Opinion

ID: 4631257
Source: CourtListenerOpinion
Date Created: 2020-11-21 03:09:16.21509+00
Date Added: 2024-06-11T07:57:41.502489
License: Public Domain

Ray S. Robinson and Edna Mae Robinson, Petitioners, v. Commissioner of Internal Revenue, RespondentRobinson v. CommissionerDocket No. 89128United States Tax Court44 T.C. 20; 1965 U.S. Tax Ct. LEXIS 104; April 6, 1965, Filed *104 Decision will be entered under Rule 50.  1. Held, T, a professional boxer who filed 1957 income tax return on cash basis, was not chargeable with any greater amount of income in 1957 from a certain championship match than was actually received by him or paid out for his benefit from his contractual share of the receipts.  He was not a member of a joint venture in respect of that match; nor was the contract providing for deferred payments a sham. There was no constructive receipt of any amount in excess of that reported.2. Held, a cash payment of $ 10,000 to or in behalf of T to open his training camp represented unreported income.3. As to various deductions, (a) expenditure by T for fight tickets distributed to various persons held to represent in part a nondeductible personal outlay and in part a deductible business expense; allocation made; (b) a certain payment made to one of T's managers held not shown to have been connected with T's trade or business and therefore not deductible as business expense; (c) claimed expense for use of training facilities held deductible; (d) amount of theft loss held not proved in excess of amount allowed.4. Addition*105  to tax under section 6654, I.R.C. 1954, approved.  Arnold Broser, George V. Delson, and Joseph B. Franklin, for the petitioners.Robert D. Whoriskey and Marie L. Garibaldi, for the respondent.  Raum, Judge.  RAUM*21  Respondent determined a deficiency in petitioners' income tax for the year 1957, and additions to tax, as follows:Additions to taxDeficiencySec. 6654Sec. 6651(a)I.R.C. 1954I.R.C. 1954$ 313,449.82$ 1,043.56$ 17,543.33In amendments to his answer, respondent claims an increased deficiency in the amount of $ 38,690.23, based upon two amounts which he failed to include as unreported income of petitioners in his determination of the deficiency of $ 313,449.82, and concedes that petitioners are not liable for the addition to tax of $ 17,543.33 determined by him under section 6651(a).The principal question for decision involves the determination of the amount includable in petitioner Ray S. Robinson's 1957 gross*107  income pursuant to contractual arrangements in connection with his participation in the Robinson-Basilio world middleweight championship fight. This question turns upon whether Robinson was a member of a joint venture or partnership in respect of this fight so as to be chargeable with his share of the earnings even though not distributed to him in 1957 and whether he in any event was chargeable by reason of constructive receipt with a greater amount of earnings therefrom than actually reported by him for 1957.Other questions presented are (1) whether petitioner Robinson received $ 10,000 in cash in 1957 in connection with opening his training camp for the Basilio fight; (2) whether a $ 7,600 expenditure for fight tickets was an ordinary and necessary business expense; (3) whether $ 7,331.91 paid to Ernie Bracca was an ordinary and necessary business expense; (4) whether petitioner paid $ 2,000 in 1957 for training camp facilities; (5) whether the Commissioner erred in reducing a claimed $ 4,300 embezzlement loss to the extent of $ 2,000; and (6) whether petitioners are liable for an addition to tax in the amount of $ 1,043.56 for underpayment of estimated tax in 1957.FINDINGS OF*108  FACTSome of the facts have been stipulated, and, as stipulated, are incorporated herein by reference.Petitioners Ray S. Robinson and Edna Mae Robinson were, during 1957, husband and wife.  Their address was 2076 Seventh Avenue, New York, N.Y.  Petitioners filed their joint Federal income tax return for 1957 with the director of internal revenue, New York, N.Y., on the basis of a calendar year, using the cash receipts and disbursements method of accounting.*22  Ray S. Robinson (hereinafter sometimes referred to as petitioner) was and is a well-known prizefighter, professionally and publicly known as Sugar Ray Robinson.  During the year 1957, he was the world middleweight boxing champion. He has been a professional prizefighter for more than 20 years; has engaged in approximately 170 professional fights of which 10 or 12 were championship contests; and was the world middleweight champion five times.  He has always been a substantial "gate attraction" and has established records for attendance at contests throughout the country.Professional boxing is a legalized sport which has become a business and which is conducted as a form of public entertainment.  All who engage in it, *109  either as boxer participants, managers, or promoters, are, generally speaking, motivated by the desire of profit or monetary gain.  Contestants are matched according to weight classes.  In each weight class there is at any one time, ordinarily, one recognized world champion. Recognition as a world champion places the individual so recognized in a position to obtain more for his services.  Contests in which champions participate have great box office appeal, arouse great public interest, have large audience participation, and bring in more revenues from sales of admission tickets, or "gate," and sales of radio and television rights, motion-picture rights, and closed-circuit telecast admissions, than do nonchampionship contests.Promoting professional boxing contests includes the negotiation and execution of contracts with the boxers; the arranging of details necessary to the exhibition of the contest; the selling of tickets of admission; the staging of the contest; the sale of rights to broadcast and to telecast for home television consumption and/or closed-circuit theater television consumption; and the sale or distribution of motion pictures.  The promotion of a championship bout*110  involves the outlay and/or commitment of substantial sums of money on the part of the promoting corporation.Professional boxing is conducted in most States under rules and regulations administered by a State governmental authority.  In many instances professional boxing is administered under a licensing system by which control and supervision is exercised over the boxers, their managers, promoting corporations, referees, judges, matchmakers, timekeepers, and those in charge of the sale and distribution of admission tickets. In New York, the governing authority is the State Athletic Commission (hereinafter referred to as the commission) which is a division of the Department of State.Petitioner during the year 1957 was a professional boxer licensed by, among others, the commission.International Boxing Club of New York, Inc. (hereinafter referred to as IBC), was, during 1957, a promoting corporation licensed by the commission.  It promoted most of petitioner's professional fights.*23  At no time was petitioner an officer, director, or stockholder of IBC, nor did he ever have a financial interest therein other than claims for moneys due him as a boxer. Petitioner was in no way*111  related to any officer, director, or stockholder of IBC.IBC was during the years 1957 and 1958 a wholly owned subsidiary of Madison Square Garden Corp. (hereinafter referred to as The Garden), a corporation organized and existing under the laws of the State of New York, whose stock was traded on the over-the-counter securities market.Petitioner was never an officer, director, or stockholder of The Garden and never had a financial interest therein.James D. Norris during the year 1957 was president of both IBC and The Garden.  He and an associate "owned control" of The Garden.Sometime prior to July 31, 1957, petitioner and IBC conducted negotiations with respect to a proposed title bout to be held at the Yankee Stadium in New York City in September 1957 between petitioner and one Carmen Basilio.  Petitioner at the time was the world middleweight champion and Carmen Basilio was the world welterweight champion. The contest was to be for the middleweight "crown," with petitioner as the defending champion and Basilio the contender.As a result of such negotiations, IBC and petitioner agreed to the terms of a contest to be staged on September 23, 1957, between petitioner and Carmen *112  Basilio, or on September 24, 1957, in the event of rain.  The terms were evidenced by two instruments executed by the parties and each dated July 31, 1957.  One of the instruments was on a standard printed form; the other instrument was in typewritten form.The rules of the commission require, among other things, that contracts with boxers be executed on a printed form approved by the commission and that such contracts be filed with the commission within 48 hours after execution.  Rule B, subdivs. 1 and 13.The standard printed form of contract, with blank spaces filled in by typewriter, covered many of the regulatory details with respect to the conduct of the contest and contained provisions to the following effect:a. The contest was to be for the middleweight crown between Ray Robinson and Carmen Basilio;b. The contest was to be held on September 23, 1957, at the Yankee Stadium in Bronx, N.Y.;c. The match was to be for 15 rounds to a decision; and at a weight not to exceed 160 pounds;d. IBC agreed to pay after said contest and Ray Robinson agreed to accept, "as in full payment for all his claims and demands for and on account of the performance by him of this contract * * * 45*113  percent *24  of the gross receipts derived from the sale of tickets of admission less the Federal and/or State Admission Taxes and compensation for ring officials plus 45 percent of radio, theatre-television, and motion picture receipts, as per agreement presented to the [Commission] this day";e. Details with respect to rules of the contest were contained in the printed body of the contract form including the right of IBC to rescind the contract if Robinson meanwhile entered into another contest and was defeated or did anything calculated to lessen his present value as an attraction.The instrument in typewritten form was the "agreement" referred to in an insertion in the printed form contract incorporated in the quotation in d, above.  That instrument in typewritten form will hereinafter be referred to as the deferred-payment contract.  It provided as follows:Agreement made this 31 day of July 1957 by and between INTERNATIONAL BOXING CLUB OF NEW YORK, INC., a New York corporation having its principal place of business at 304 West 50th Street, New York, N.Y. (hereinafter called the "Club") and SUGAR RAY ROBINSON of 2076 -- 7 Ave. Borough of Manhattan, City of New York (hereinafter*114  called "Robinson").WITNESSETH:Whereas Robinson is recognized as the world champion in the middleweight class among professional boxers and the New York State Athletic Commission and National Boxing Association; andWhereas Robinson has requested the Club to promote a boxing match for the middleweight championship of the world between himself and one Carmen Basilio to take place in or about the month of September, 1957; andWhereas Robinson insists that the site of the bout be at Yankee Stadium; andWhereas Robinson insists upon receiving forty-five percent of the gross receipts derived by the Club; andWhereas the promoting of such an outdoor boxing match involves great hazards and financial risk by reason of the uncertainty of the elements and of the very substantial expenses attendant upon such promotion; andWhereas the promoting of such boxing match as Robinson requests might, in view of the financial risk involved, jeopardize the ability of the Club to promote future boxing matches; andWhereas Robinson in recognition of the substantial financial risks to the Club, is agreeable and willing that this forty-five percent participation in the proceeds of the match be paid to him, *115  not immediately thereafter, but over a period of years as hereinafter set forth; andWhereas the Club is willing in consideration of Robinson's consent to accept payment over a period of years, to pay the forty-five percent of the proceeds of the match allocable to him over that which might otherwise be payable; andWhereas the parties will simultaneously with the execution of this Agreement execute a contract on the official form of the New York State Athletic Commission; andWhereas the New York State Athletic Commission has recently approved and adopted the following regulation which provides among other provisions: "Rule B 15 [14] All compensation to boxers and wrestlers shall be made by check payable to the participating athlete personally who shall sign a *25  receipt for such payment.  No payment shall be made to any person or party other than such participating athlete, etc.andWhereas pursuant to such regulation, this Agreement will be submitted to said Commission, for approval, together with the contract hereinabove mentioned.Now, Therefore, in consideration of their respective undertakings hereinafter contained, the Club and Robinson agree as follows:(a) *116  Robinson's participation in the proceeds of the boxing match shall be paid to him as follows:Forty percent thereof, as an initial payment, to be made not later than two weeks after the bout takes place;Twenty percent thereof during the year 1958 in equal quarter-annual installments, the first of which shall be payable on January 10, 1958;Twenty percent thereof during the year 1959 in equal quarter-annual installments, the first of which shall be payable on January 10, 1959;Twenty percent thereof during the year 1960 in equal quarter-annual installments, the first of which shall be payable on January 10, 1960;(b) Robinson, and/or his associates shall have access to the books and records of the Corporation on reasonable notice during business hours for the purpose of ascertaining the correctness of the amounts due him under the provisions of this Agreement.Except as herein supplemented, the aforesaid New York State Athletic Commission form of contract is and shall be in full force and effect.Wherever the term "gross receipts" is mentioned and referred to in this Agreement or in the Agreement on the official form of the New York State Athletic Commission, it shall be defined to*117  mean the following:"The gross proceeds from; the sale of seats of admission to the bout, the sale of theatre television rights, the sale of radio rights, the sale of the motion picture theatre rights, and any and all other proceeds received by the Club in connection or in conjunction with the promotion of the bout. The only deductions allowable shall be for State and Federal admission taxes and commission charges for ring officials as set out in the New York State Athletic Commission contract."In the case of motion pictures the Club may deduct from the gross receipts from motion pictures their actual cost for the actual production of the negative turned over to the theatrical distribution firm, which shall not exceed $ 30,000.  under any circumstances.The parties agree that neither one shall permit or authorize any firm, individual, or corporation the use or permission to use the film for any package deal or free television usage.  The proceeds from any authorized usage of the film at a later date for television or otherwise shall become part of the gross receipts.In conjunction with the sale of the ancillary rights it is agreed that no sale shall be actually consummated without*118  the written consent of Robinson or his duly authorized representative which consent shall not be arbitrarily withheld.  In addition the Club agrees to place a clause in all agreements for the sale of ancillary rights providing that Robinson can inspect the books at reasonable times and on proper notice of the purchaser to make true and correct accountings with respect to such sale.  A copy of each such agreement will be furnished to Robinson by the purchaser.In Witness Whereof this Agreement has been duly executed the day and year first above written.International Boxing Club of New York, Inc.By (S) James D. Norris(S) Ray S. Robinson*26  In order to induce Ray Robinson to execute and in consideration of his execution of the foregoing Agreement, MADISON SQUARE GARDEN CORPORATION hereby undertakes and agrees to cause the INTERNATIONAL BOXING CLUB OF NEW YORK, INC., a wholly owned subsidiary to perform, comply with and adhere to all the conditions in the said Agreement and expressly guarantees payment to Ray Robinson of any and all the sums therein set out.Madison Square Garden CorporationBy (S) Edward S. Irish.Vice PresidentIn order to induce Ray Robinson*119  to execute and in consideration of his execution of the foregoing Agreement, JAMES D. NORRIS personally undertakes and agrees to the guaranty of performance by the INTERNATIONAL BOXING CLUB OF NEW YORK, INC and the MADISON SQUARE GARDEN CORPORATION.(S) James D. NorrisJames D. NorrisOn July 31, 1957, a meeting of the commission was held which was attended by petitioner and Basilio, their representatives, and representatives of IBC.  At that meeting the two contracts with petitioner were filed with the commission as required by law.  When the commission was asked by petitioner's attorney during the course of the meeting to approve the contract in typewritten form, its chairman made the following statement:We have neither the jurisdiction or power to approve or disapprove what may be a legal method of payment.  I will say this, however, Ray Robinson, the boxer, and the promoting club, the International Boxing Club of New York, Inc., has submitted to the Commission today simultaneously with the official form of club contract of the Commission, a contract between the parties aforementioned setting forth the method of payment to be made to the boxer, Ray Robinson.  The Commission*120  has taken notice of this contract concerning the method of payment in accordance with Rule "B", Contracts, Subdivision 14 of the Commission's rules and regulations.  The Commission, however, does not approve or disapprove of this contract because it has no power to do so.  The question of whether payment can be made as set forth in this agreement is for the federal government to decide.  This may present a question for the Internal Revenue Bureau as to the legality of this method of payment and a question of interpretation with respect to payment for taxable fiscal years.  It is plain to see that it is a matter for the Internal Revenue Bureau to decide and not this Commission.  This is to be filed with the other papers.On the same date, July 31, 1957, a contract was entered into between IBC and Basilio wherein the parties agreed that Basilio would receive 20 percent of the gross receipts derived from the sale of tickets of admission plus 20 percent of radio, theater-TV, and motion-picture receipts.During the negotiations which preceded the preparation and signing of the contracts between IBC and petitioner and Basilio, James D. Norris, who was at that time the president of IBC and*121  The Garden, originally proposed to give 25 percent of the gross receipts to Basilio and 40 percent to petitioner.  Petitioner, however, insisted that he be given 45 percent of the gross receipts. Norris considered petitioner *27  to be the more important of the two contestants and told Basilio that, in view of petitioner's insistence on 45 percent, he would have to accept 20 percent if the fight were to be staged at all.  Subsequently, Basilio accepted 20 percent.  Sixty-five percent of the gross proceeds was an unusually high amount for IBC to pay to two participants in a championship fight, but a match between these two contestants had an unusually high box office appeal.During the year 1957, and prior to the execution of the deferred payment contract on July 31, 1957, petitioner had realized gross earnings of approximately $ 200,000 from two championship boxing contests with Gene Fullmer.There is no requirement by the commission that payment to the boxer participants be made immediately after the fight. IBC had in the past executed deferred-payment agreements with two other fighters, Rocky Marciano and Carmen Basilio.  This, however, was not the customary method of payment. *122  It was the usual practice of IBC and other promoters to pay fighters soon after the fight in order to preserve their reputation with the fighters.  It made little difference to IBC whether the contract entered into with petitioner provided for immediate or deferred payment of his share of the gross receipts. It did not propose or want the deferred-payment provisions and would have been willing to contract on terms providing for payment immediately after the fight. The inclusion in the contract of the deferred-payment provisions did not result in petitioner receiving a greater percentage of the receipts than he would have received if the contract had provided for payment immediately after the fight.On August 19, 1957, IBC entered into a contract with Theatre Network Television, Inc. (hereinafter referred to as TNT), for the sale to TNT of the right to telecast the fight over closed-circuit theater television. Shortly thereafter a dispute arose between IBC and petitioner with respect to such sale by IBC.  As a result of such dispute, the commission conducted public hearings on August 26 and 29, 1957.  The dispute was resolved on August 29, 1957, by a memorandum of agreement dated*123  August 29, 1957, between TNT and Teleprompter Corp. (hereinafter referred to as Teleprompter), and by an amendment on August 29, 1957, of the August 19, 1957, contract entered into between IBC and TNT with respect to the sale of the closed-circuit television rights.  The memorandum of agreement and the modification of the IBC-TNT contract contained certain provisions that may be summarized as follows:a. TNT licensed the rights in four cities to Teleprompter;b. Teleprompter agreed to pay TNT $ 5,000;c. TNT guaranteed that Robinson's 45 percent share of IBC's receipts from theater television would equal or exceed $ 255,000, and that Basilio's 20 percent share of such receipts would equal or exceed $ 110,000;d. TNT and IBC agreed on a sharing of the minimum amounts to the boxers;*28  e. IBC agreed to turn over one-half of its share of net receipts from the sale of motion-picture rights to TNT.At the hearing conducted by the commission on August 29, 1957, the president of TNT stated that it was offering petitioner a guarantee of $ 255,000 out of closed-circuit television receipts and Robinson stated that the offer was "agreeable" to him.The Robinson-Basilio fight was such an*124  attractive promotion that IBC anticipated a large gate and in selecting the site for the fight considered only an outdoor ball park, rather than an indoor arena such as Madison Square Garden.  The most favorable months for staging an outdoor fight are June and September.  IBC chose September because that month is by tradition the best month for a major fight and the 23d of that month, a Monday, because the beginning of a week is a more favorable time to stage a fight than the end of a week.  After considering such factors as the availability of Yankee Stadium and the Polo Grounds in terms of baseball schedules, the degree of control that could be exercised over persons attending the fight at each of those parks, and its ability to use Madison Square Garden personnel at Yankee Stadium, but not at the Polo Grounds, IBC selected Yankee Stadium as the site for the fight.If a major outdoor prizefight, such as the Robinson-Basilio fight, were canceled a day before it was scheduled, the loss to the promoter might be as high as $ 50,000 to $ 75,000.  If there were a postponement of 24 hours because of bad weather, there would be a limited amount of refunding for tickets. If there were a*125  postponement for 2 days or longer, then refunding by the promoter would be substantial.  There was no more risk to IBC in promoting the Robinson-Basilio fight than in promoting any other championship match held outdoors.The contest for the middleweight championship between petitioner and Basilio was held at the Yankee Stadium on the night of September 23, 1957, at which time Basilio gained the middleweight championship.On the night of the fight, after petitioner entered the ring and during the first round of the contest, IBC was served by respondent with a notice of levy in the amount of $ 514,310.72, with respect to unpaid income taxes of petitioner for the years 1955, 1956, and 1957.  Of the foregoing amount, $ 497,435.29 was assessed under the provisions of section 6851 of the Internal Revenue Code of 1954, representing income taxes for the period January 1 to September 23, 1957, estimated by respondent to be due by petitioner.  This amount included respondent's estimate of the income tax which would be due on petitioner's total share of the proceeds from the Robinson-Basilio fight on September 23, 1957.The notice of levy read, in part, as follows:You are further notified that*126  demand has been made upon the taxpayer for the amount set forth herein, and that such amount is still due, owing, and unpaid from this taxpayer, and that the lien provided for by Section 6321, *29  Internal Revenue Code of 1954, now exists upon all property or rights to property belonging to the aforesaid taxpayer.  Accordingly, you are further notified that all property, rights to property, moneys, credits, and bank deposits now in your possession and belonging to this taxpayer (or with respect to which you are obligated) and all sums of money or other obligations owing from you to this taxpayer are hereby levied upon and seized for satisfaction of the aforesaid tax, together with all additions provided by law, and demand is hereby made upon you for the amount necessary to satisfy the liability set forth herein, or for such lesser sum as you may be indebted to him, to be applied as a payment on his tax liability.At no time during 1957 did respondent know exactly how much was owed by petitioner for income taxes for the year 1957.The notice of levy was served under the provisions of section 6331 of the Internal Revenue Code of 1954, respondent having made a jeopardy assessment*127  after he estimated the amount of taxes which would be due from petitioner by cutting short petitioner's taxable year on September 23, 1957.Petitioner's share of the proceeds from the Robinson-Basilio fight (including broadcasting and theater-TV rights but exclusive of motion-picture rights) totaled $ 483,666.71.  His share of the proceeds realized from the sale of the motion-picture rights in 1957 amounted to $ 32,516.74 and during the period January 1, 1958, through March 31, 1959, amounted to $ 11,302.07.  Thus, the total amount to which petitioner became entitled as a result of the Robinson-Basilio fight was $ 527,485.52, exclusive of an item of $ 10,000, hereinafter described, which he received in cash to open his training camp.Petitioner's unpaid share of the proceeds of the fight held on September 23, 1957, was commingled by IBC with its own funds and was not segregated by IBC nor was there any written escrow, trust, or other arrangement for the benefit of petitioner.  The obligation of IBC to petitioner for his share of the proceeds of the fight was not evidenced by any note executed by IBC in petitioner's favor.  The amount due from IBC to petitioner appeared on its books*128  as a liability, and as payments were made in respect thereof they were charged against this liability account.Prior to the September 23, 1957, fight petitioner had received the following from IBC which were charged against his share of the proceeds of the fight:Advances by check --June 18, 1957$ 7,500July 31, 19572,500July 19, 195710,000August 23, 19575,000$ 25,000190 fight tickets at $ 40 each7,60032,600After the levy of September 23, 1957, the only manner in which petitioner could obtain any of the moneys due him under the July *30  31, 1957, contracts was by consent of respondent to their release from the effects of the levy.During the year 1957 conferences were had by petitioner with representatives of respondent for the release of petitioner's share of the proceeds from the effects of the levy.  Such conferences continued through 1957, and into 1958.  The conferences held in 1957 resulted in the consent by respondent to the release of $ 107,000 in order to permit petitioner to pay expenses incurred by him in connection with the Robinson-Basilio fight. That amount was in fact thus paid out on November 13, 1957.During 1958, *129  1959, and 1960 the following payments were made by IBC to the Internal Revenue Service in behalf of petitioner:Mar. 19, 1958$ 17,349.85Apr. 11, 195842,416.85$ 59,766.70June 4, 1959183,385.47Jan. 11, 196024,183.33Apr. 11, 196024,183.33July 8, 196024,183.33Oct. 4, 196024,183.3696,733.35As a result of a claim against petitioner by Associated Booking Corp., and an action brought by it to secure payment of its claim from IBC, following which the United States was interpleaded, a settlement was arrived at whereby petitioner and the United States consented to the payment by IBC of $ 40,000 to Associated Booking Corp. and $ 8,000 for counsel fees for petitioner's attorney, out of petitioner's share of the proceeds of the fight due from IBC.  Such consent was evidenced by a stipulation of settlement executed June 3, 1959, which further provided for the subsequent payments to the Internal Revenue Service set forth in the preceding paragraph, and contained the statement that "The within settlement and payments made hereunder are not to be construed as an admission by the Government that the installment payments made under the agreement of July 31, 1957, *130  are taxable in 1958-1960 instead of in 1957."In summary, IBC paid out to petitioner or in his behalf, in respect of its total obligation of $ 527,485.52, the following:DateDescriptionAmount1957 (prior to fight)Advances and fight tickets$ 32,600.001957 (after fight)Amount released from levy to pay expenses107,000.00incurred in connection with fight.1958Internal Revenue Service59,766.701959Internal Revenue Service183,385.471959Settlement of Associated Booking Corp.'sclaim against petitioner48,000.001960Internal Revenue Service96,733.35527,485.52*31  Petitioner reported in joint Federal income tax returns which he and his wife filed for the years 1957 to 1960, inclusive, the following amounts from the Robinson-Basilio fight:YearAmount1957$ 139,600.001958(amended)59,766.701959231,384.81196096,733.35In determining the deficiency herein for 1957 the Commissioner charged petitioner with his entire $ 483,666.71 share of the proceeds of the Robinson-Basilio fight, exclusive of motion-picture rights; and by amendments to answer he claimed an increased deficiency as a result in part of including the $ 32,516.74*131  realized in 1957 from the sale of motion-picture rights.The books and records of IBC disclose that IBC realized a net profit of $ 50,897.33 from the Robinson-Basilio fight and that Chicago Stadium Corp., a copromoter, realized $ 16,029.74.  All receipts were paid directly to IBC and all expenses of IBC were paid by IBC.The contracts entered into by IBC and petitioner in connection with the Robinson-Basilio fight were contracts for personal services and did not create a joint venture.$ 10,000 Cash PaymentAt some time prior to the Robinson-Basilio fight, when James D. Norris was negotiating with petitioner in respect of the fight, Norris gave $ 10,000 in cash to or in behalf of petitioner to open his training camp. Norris was subsequently reimbursed for this amount by IBC.  The books and records of IBC list under the expenses of the Robinson-Basilio fight an item of $ 10,000 described as "Training camp expenses -- Ray Robinson." This $ 10,000 item is in addition to all other amounts paid or due to petitioner, as shown in IBC's books and records, and is not included among the other amounts found above as having been paid to or in behalf of petitioner.  This $ 10,000 item represents*132  additional income to petitioner in 1957 and was not reported by him for that year; it was charged to petitioner by the Commissioner in his amendments to answer claiming an increased deficiency attributable in part to this item.Miscellaneous DeductionsIBC customarily gives each contestant a number of free or complimentary tickets to the fight in which he participates for members of his staff, individuals associated with him in training camp, and friends.  The number of complimentary tickets issued must be approved by the commission.*32  Admission to a fight without a ticket of admission may be gained only by the principals, managers, and seconds involved in the fight.In 1957 petitioner purchased from IBC 190 tickets to the Robinson-Basilio fight at $ 40 per ticket and his account with IBC was charged for $ 7,600.  Petitioner gave these tickets to members of his family, friends, and persons employed at his training camp.In their 1957 return petitioners claimed a deduction of $ 7,600 for "Tickets given away for publicity purposes for Basilio Fight." This deduction was disallowed by the respondent.  Fight tickets in the amount of $ 2,000 represent an ordinary and necessary*133  business expense. The remainder was a nondeductible personal expense.Ernie Bracca was one of petitioner's managers in 1957.  The services of a manager normally involve participation in negotiations for a fight, arrangement of training facilities, and preparation for the fight.During 1957 petitioner paid, in addition to other payments, $ 7,331.91 to Ernie Bracca and petitioners claimed a deduction for that payment in their 1957 return.  The claimed deduction was disallowed by the respondent on the ground that it did not constitute an ordinary and necessary business expense. No evidence was presented to show that the $ 7,331.91 payment was for Bracca's services as a manager; nor was any evidence presented relating to the nature of this payment.Petitioner trained for the Robinson-Basilio fight at Long Pond Inn, Greenwood, N.Y.  He had been using such facilities as a training camp periodically since 1940.  He trained at Long Pond Inn from the early part of August to the latter part of September 1957 and it was used by his staff, his cook, and training partners during this period.  He paid $ 250 a week for 8 weeks for the use of Long Pond Inn as training quarters, and the total amount*134  expended by him for such rental in 1957 was $ 2,000.In petitioners' return for 1957, they claimed a deduction of $ 2,000 for "Long Pond Inn Training Quarters." This deduction was disallowed by the respondent on the ground that no evidence had been submitted in substantiation thereof.Sometime during 1957 petitioner gave his secretary, Gloria Pollard, some money to deposit in his bank account.  The money was not deposited by her.  Petitioner could not find her and never saw her again.  He reported the matter to the police.  He did not recover, by insurance or otherwise, any part of his loss.  In their 1957 return, petitioners claimed a loss from embezzlement in the amount of $ 4,300.  Respondent disallowed the claimed loss to the extent of $ 2,000 for lack of substantiation.On April 21, 1958, petitioners filed their joint return for the year 1957.  The tax shown to be due on that return, $ 37,416.85, was paid on the day the return was filed.  Petitioners did not make any payment of estimated income tax for the year 1957.*33  OPINION1. Taxation of Robinson's Share of Proceeds of Fight.  -- Petitioner's share of the proceeds of his fight with Basilio on September 23, 1957, *135  was $ 483,666.71, exclusive of motion-picture rights, and, by the end of 1957, his share in the proceeds of the sale of the motion-picture rights amounted to $ 32,516.74.  As a result of the events described in our findings, he received or there was paid out in his behalf during 1957 in respect of that fight a total of $ 139,600, which he reported in his 1957 return.  The Commissioner's original determination of deficiency for 1957 charged him with omitting $ 344,066.71 (the difference between $ 483,666.71 and $ 139,600) "of the proceeds earned by you in the Robinson-Basilio fight." 1 And in an amended pleading the Commissioner claimed an additional deficiency attributable in part to Robinson's $ 32,516.74 share of the motion-picture proceeds for 1957.The problem relating to the taxation of petitioner's earnings from the Basilio fight in 1957 arises solely by reason of the fact that *136  he used the cash basis.  If he were on an accrual basis the amounts charged to him by the Commissioner might well be includable in his 1957 income.  But he was not on an accrual basis, and the question before us is whether the amounts that he had not in fact received in 1957 or that were not in fact paid out in his behalf in 1957 may nevertheless be treated as income to him in that year on a theory of constructive receipt or otherwise.  The question is thus not whether the amounts in issue are taxable to petitioner, but when they are to be included in gross income.  At the trial the Government's position appeared to rest mainly upon constructive receipt, but in its brief it states as its "primary contention" that the Robinson-Basilio fight was a "joint venture" in which petitioner was a participant, and that he is therefore taxable on his full distributive share, whether or not it was in fact distributed to him in that year.  It argues alternatively that the deferred-payment contract was a sham, that it did not represent a binding arrangement between IBC and petitioner, that IBC would have paid petitioner in full immediately after the fight despite the deferred-compensation*137  contract, and that petitioner is therefore chargeable with the full amount.  It makes other alternative contentions that even if the deferred-payment contract is valid, petitioner should have reported greater amounts than the $ 139,600 appearing on his return, and that the service of notice of levy on IBC did not prevent petitioner's realization of income in 1957 in accordance with his contractual arrangements.  We reject all of these contentions.*34  (a) Joint Venture.  -- Section 7701(a)(2) of the 1954 Code provides that the "term 'partnership' includes a * * * joint venture, or other unincorporated organization, through or by means of which any business, financial operation, or venture is carried on * * *; and the term 'partner' includes a member in such a * * * joint venture, or organization." And of course, if there is a joint venture, the members, like partners, are chargeable with their respective distributive shares of the income of the joint venture, regardless of whether such income is in fact distributed to them.A joint venture has been defined in general terms to be a "special combination of two or more persons where, in some specific venture, a profit is jointly*138  sought without any actual partnership or corporate designation" and "an association of persons to carry out a single business enterprise for profit." Beck Chemical Equipment Corporation, 27 T.C. 840">27 T.C. 840, 848-849; Estate of L. O. Koen, 14 T.C. 1406">14 T.C. 1406, 1409; Chase S. Osborn, 22 B.T.A. 935">22 B.T.A. 935, 945. Whether a business undertaking entered into by two or more persons constitutes a joint venture depends largely on the terms of their contract and their actions in carrying out its provisions.As was noted in Hubert M. Luna, 42 T.C. 1067">42 T.C. 1067, 1077, "[whether] parties have formed a joint venture is a question of fact to be determined by reference to the same principles that govern the question of whether persons have formed a partnership which is to be accorded recognition for tax purposes.  * * * Therefore, while all circumstances are to be considered, the essential question is whether the parties intended to, and did in fact, join together for the present conduct of an undertaking or enterprise." And the Court further pointed out that the "following factors, none of which is conclusive, *139  bear on the issue" (pp. 1077-1078):The agreement of the parties and their conduct in executing its terms; the contributions, if any, which each party has made to the venture; the parties' control over income and capital and the right of each to make withdrawals; whether each party was a principal and coproprietor, sharing a mutual proprietary interest in the net profits and having an obligation to share losses, or whether one party was the agent or employee of the other, receiving for his services contingent compensation in the form of a percentage of income; whether business was conducted in the joint names of the parties; whether the parties filed Federal partnership returns or otherwise represented to respondent or to persons with whom they dealt that they were joint venturers; whether separate books of account were maintained for the venture; and whether the parties exercised mutual control over and assumed mutual responsibilities for the enterprise.See also Lucia Chase Ewing, 20 T.C. 216">20 T.C. 216, 231-232, affirmed on another issue 213 F. 2d 438 (C.A. 2); J. Roland Brady, 25 T.C. 682">25 T.C. 682, 688; Wm. J. Lemp Brewing Co., 18 T.C. 586">18 T.C. 586, 597;*140 Schermerhorn Oil Corporation, 46 B.T.A. 151">46 B.T.A. 151, 158; Steinbeck v. Gerosa, 4 N.Y. 2d 302, 317, 175 N.Y.S. *35  2d 1, 13. It is not "enough that two parties have agreed to act in concert to achieve some stated economic objective." Mitler v. Friedeberg, 222 N.Y.S. 2d 480, 485. And an agreement to share in the gross receipts of a specific venture merely as a basis of compensation may be a contract of employment rather than a joint venture. Sloane v. United Feature Syndicate, Inc., 238 N.Y.S. 91">238 N.Y.S. 91, 94; La Driere v. Martin, 56 N.Y.S. 2d 436, 437. Cf. United Statesv. Johansson, an unreported case ( S.D. Fla. 1961, 8 A.F.T.R.2d (RIA) 6001">8 A.F.T.R. 2d 6001, 6005-6006, 6007, 62-1U.S.T.C. par. 9130), affirmed 336 F. 2d 809 (C.A. 5).The venture with which we are here concerned involved the promotion of a middleweight championship bout between petitioner and Basilio.  The promoter of that venture was IBC.  It entered into separate contracts with petitioner*141  and Basilio under the terms of which each fighter became entitled for his services to a specified portion of the gross receipts from ticket sales, radio broadcasting, theater-television, and the sale of motion-picture rights.  There is no evidence of any agreement of any kind entered into between petitioner and Basilio.  Nothing was said in the contracts entered into by IBC with petitioner and Basilio about any joint venture, the sharing of any profits that might be realized or losses that might be sustained, or participation by petitioner and Basilio in the control or management of the venture. Contrary to the Government's contention, the portions of the contract giving Robinson access to the books of IBC and those requiring his consent in connection with the sale of the ancillary rights hardly provide for participation in management in the light of all the circumstances involved.  These provisions were clearly intended merely for his own protection, to assure him that he would receive the maximum compensation for his services.The contracts before us provided for personal services by petitioner; they did not, and never were intended to, create a joint venture between IBC and petitioner. *142  Cases cited by respondent in which various elements in combination were held to constitute a joint venture on the particular facts involved, not present here, are distinguishable.(b) Constructive Receipt.  -- The Commissioner makes the alternative contention that petitioner constructively received his full share of the proceeds of the Robinson-Basilio fight in 1957, and not in 1957, 1958, 1959, and 1960.  He urges that the deferred-payment contract was a sham; that it was not, before and after its execution, intended by the parties thereto to be binding as to the manner in which petitioner was to be paid; that IBC was willing at any time after the fight in 1957 to make payment in full; and that petitioner's receipt of his share of the proceeds of the fight in 1957 was not, therefore, subject to substantial limitations or restrictions so as to prevent its inclusion in petitioner's 1957 income under the doctrine of constructive receipt.*36 It is important to note that the Government does not base its constructive-receipt argument upon the fact that IBC was willing to enter into a contract on July 31, 1957, to make payment in full to petitioner immediately after the September*143  23, 1957, fight. Indeed the Government refers to example (3) in Rev. Rul. 60-31, 1 C.B. 174">1960-1 C.B. 174, implying that a bona fide contract providing for deferred payments would be given effect notwithstanding that the obligor might have been willing to contract to make such payments at an earlier time.  And that revenue ruling called attention (p. 180) to the withdrawal of the Commissioner's nonacquiescence in James F. Oates, 18 T.C. 570">18 T.C. 570, affirmed 207 F. 2d 711 (C.A. 7), followed by the substitution of an acquiescence.  1 C.B. 5">1960-1 C.B. 5. Cf.  Howard Veit, 8 T.C. 809">8 T.C. 809; Kay Kimbell, 41 B.T.A. 940">41 B.T.A. 940; J. D. Amend, 13 T.C. 178; James Gould Cozzens, 19 T.C. 663">19 T.C. 663. The essence of the Government's argument here is that the contract was a sham and that the parties never intended to be governed by it.  We do not agree.To be sure, there are a number of misleading statements in the "Whereas" clauses, falsely suggesting that the provisions for deferred payment*144  were included for the benefit and at the request of IBC.  But those whereas clauses were plainly intended as window dressing merely to support an answer to the Government's possible position that constructive receipt might be predicated upon IBC's original pre-July 31 willingness to contract to make payment in full immediately after the fight. We are fully satisfied that once the contract was executed, it was looked upon by both parties as defining their legal rights, and that there was never any collateral understanding, tacit or otherwise, that the parties would not be bound by its terms.The Government relies upon certain testimony of IBC's president that IBC would have paid petitioner immediately after the fight if he had insisted on it.  We heard that testimony and are convinced that the witness meant merely that IBC would have been willing to contract to make immediate payment, not that it would have ignored its stated rights once a different contract had been executed.We find that the contract was not a sham, and that the inclusion of petitioner's full share of the proceeds of the fight in his 1957 income may not be predicated upon the ground that the contract did not in *145  fact represent a binding arrangement between petitioner and IBC.(c) Constructive Receipt -- Further Alternatives.  -- The Government contends that even if it is wrong as to the sham character of the July 31, 1957, agreement, petitioner became entitled in 1957 under that very agreement to more than the $ 139,600 reported and is chargeable *37  under the doctrine of constructive receipt with at least the amount payable to him in 1957 under the agreement.  2 We hold otherwise.*146  Petitioner in fact received or there was paid out in his behalf a maximum of $ 139,600 in 1957.  Although he was entitled to more in 1957 under the contract, that was all that he got at that time.  And he cannot be charged, even under the doctrine of constructive receipt, with having received anything more in 1957.The proceeds of the fight were not placed in escrow or trust, or set aside in any special fund, or segregated in any way by IBC for petitioner's benefit.  They were commingled with all of IBC's other assets, and petitioner was but an unsecured creditor of IBC.  Had IBC meanwhile been declared bankrupt, petitioner's claim against its assets would have rested on no firmer ground than those of other creditors similarly situated.To be sure, IBC probably would have been willing to pay over to petitioner the full amount due him in 1957, but the fact is that as a result of the notice of levy, it withheld payment beyond the amount permitted by the Commissioner.  In the circumstances, there are not here present the conditions justifying the application of the doctrine of constructive receipt. To be sharply distinguished are such cases as those where payment had in fact been made*147  to the taxpayer, cf.  Kerr v. Bowers, 66 F. 2d 419 (C.A. 2), certiorari denied 291 U.S. 663">291 U.S. 663, or those in which a special fund had been set aside for his benefit, cf.  Dwight A. Ward, 20 T.C. 332">20 T.C. 332, affirmed 224 F. 2d 547 (C.A. 9).2. $ 10,000 Cash Payment.  -- We have found as a fact upon the evidence that IBC paid $ 10,000 in cash to petitioner or in his behalf to open his training camp. This amount represents additional income to petitioner, and should have been reported by him.3. Miscellaneous Deductions.  (a) Fight Tickets.  -- Petitioner purchased 190 tickets for the Basilio fight at $ 40 each, or a total of $ 7,600, which he distributed among various persons.  The Commissioner disapproved a deduction in that amount.  We think that some of those *38  tickets, such as those distributed to sparring partners or training camp employees, may fairly be classified as reasonably connected with petitioner's trade or business as a professional boxer. On the other hand, it seems clear to us that to the extent that tickets were given to members of his family*148  or personal friends, the expenditure therefore was personal and not deductible.  It is not possible on the meager evidence before us to make any scientifically accurate determination as to what portion of the total represents a deductible business expense.  Accordingly, relying upon Cohan v. Commissioner, 39 F. 2d 540, 544 (C.A. 2), we have found that $ 2,000 of the amount involved constitutes an ordinary and necessary business expense.(b) Payment of $ 7,331.91 to Ernie Bracca.  -- The Commissioner disallowed a deduction in the amount of $ 7,331.91 paid to one of petitioner's managers, Ernie Bracca.  The fact that such payment was made was not disputed.  However, the record is utterly devoid of any evidence showing the nature of this payment.  If the payment were for Bracca's services as a manager it would obviously be deductible; on the other hand, it could have been for any one of a variety of purposes unrelated to petitioner's trade or business that would have rendered it nondeductible.  The burden of proof was upon petitioner, and it has not been carried.  The Commissioner must be sustained as to this item.(c) Long Pond Inn Expenses*149  .  -- Petitioner contends that he expended $ 2,000 for use of facilities at Long Pond Inn for training purposes in connection with the Basilio fight. Although the evidence is thin we have found that he spent $ 250 a week for 8 weeks for this purpose.  Accordingly, the Commissioner's disallowance of a deduction in the total amount of $ 2,000 in this respect must be disapproved.(d) Theft Loss.  -- Petitioner claimed a theft loss in the amount of $ 4,300.  The Commissioner disallowed $ 2,000 thereof for lack of substantiation.  The burden was upon petitioner, and we cannot find on this record that the Commissioner erred.  Although we are satisfied that there was an embezzlement we cannot say on the evidence before us that the amount involved was any greater than that allowed by the Commissioner.4. Estimated Tax Penalty.  -- Petitioners did not make any payment of estimated tax for the year 1957.  The joint return filed by them for the year 1957 showed a tax due in the amount of $ 37,416.85 which was paid on April 21, 1958, when the return was filed.  In these circumstances, respondent's determination that they were liable for an addition to tax in the amount of $ 1,043.56 under*150 section 6654 of the 1954 Code for underpayment of their estimated tax for 1957 must be, and is, sustained.  Estate of Barney Ruben, 33 T.C. 1071">33 T.C. 1071.Decision will be entered under Rule 50.  Footnotes1. The Commissioner also added $ 190 in respect of "camp admissions," but this latter item has been conceded by petitioner on brief.↩2. The Government makes alternative contentions as to the amount payable in 1957 under the contract.  (i) Since petitioner was entitled under the contract to receive 40 percent of the proceeds of the fight in 1957, the amount payable in 1957 was therefore at least 40 percent of $ 483,666.71 ($ 193,466.68), plus 40 percent of the $ 32,516.74 ($ 13,006.70), or a total of $ 206,473.38.  (ii) Alternatively, the Government argues that under the contract, as supplemented by the subsequent $ 255,000 guarantee in respect of closed-circuit theater television, petitioner became entitled in 1957 to receive $ 255,000 plus his contractual 40 percent of the remainder of the fight proceeds.  We think that this latter alternative is incorrect in any event, because the $ 255,000 guarantee did not modify the July 31, 1957, contract as to the time of payment, and under that contract petitioner became entitled to only 40 percent of the proceeds in 1957.  However, it is a matter of no moment here as to which computation is accepted, in view of our holding that petitioner is not chargeable with more than $ 139,600 for 1957 in respect of his compensation for participating in the Basilio fight.↩