OPINION.
Murdock, Judge:The Commissioner determined a deficiency of $6,018.20 for 1944. The issues for decision are whether an annual payment of $5,000 to the mother of the petitioner’s divorced wife is deductible under section 23 (u) and whether a partnership in which the petitioner had an interest realized ordinary income on January 1, 1944, when some restrictions terminated on stock theretofore received by the partnership. The parties filed a stipulation of facts which is adopted as the findings of fact.
The petitioner filed his individual return for 1944 with the collector of internal revenue for the second district of New Tork.
The petitioner and Ruth Lamar were married in 1929. They had no children. They entered into a separation and property settlement agreement on March 10, 1934, providing that they would live separately, the petitioner would pay Ruth $20,000 annually as long as she lives and remains unmarried and would pay Ruth’s mother $5,000 annually for life “for and in behalf of” Ruth, and the payments to Ruth and “for her benefit pursuant to the provisions hereof, shall be for her full and complete maintenance, support, * * * and for the full satisfaction • of the duty of support by the Husband.” The agreement contains a recital that Riuth is the sole support of her mother and “desires hereby to make provision for her support.”
Ruth obtained a divorce from the petitioner in Nevada on May 1, 1934, and the agreement of March 10,1934, was approved in the decree.
The petitioner paid Ruth $20,000 and her mother $5,000 in 1944, pursuant to the agreement. The Commissioner, in determining the deficiency, allowed a deduction under section 23 (u) of $20,000 but disallowed the additional deduction of $5,000 claimed.
The petitioner did not testify but introduced a deposition of one of the attorneys who represented him in the 1934 transactions in which the attorney stated that the provisions relating to the payment of $5,000 annually for life to Ruth’s mother were inserted at the in-sistance of an attorney, now deceased, who represented Ruth in those transactions. Ruth, her mother, and an attorney who assisted in representing Ruth in the 1934 transactions gave testimony indicating that the provision for the payments to Ruth’s mother originated with the petitioner and was inserted in the agreement because he knew the situation, was fond of his mother-in-law, and wanted to provide for her. However, the origin of the provision is not determinative of the present issue. The contract was prepared and the parties made it their agreement. The terms of that agreement, entered into long before sections 22 (k) and 23 (u) were enacted, must now be regarded as expressing the agreement of the parties. Ruth felt obligated to support her mother. The petitioner and Ruth agreed that the petitioner would pay $5,000 annually for the mother’s life directly to the mother “for and in behalf of” Ruth and that the payments to be made to Ruth and “for her benefit pursuant to the provisions hereof, shall be for her full and complete maintenance, support, * * * and for full satisfaction of the duty of support by the Husband.” If the payments had been to a landlord, a grocer, or the like, there would be no question of their being taxable to Ruth. Cf. Anita Q. Stewart, 9 T. C. 195; Estate of Boies C. Hart, 11 T. C. 16. The payments discharged Ruth’s obligation to support her mother. The $5,000 was constructively received by Ruth in discharge of a legal obligation imposed on the petitioner because of the marital or family relationship under a written instrument incident to the divorce. It is therefore taxable to Ruth under section 22 (k) along with the $20,000 and likewise is deductible by the petitioner under section 23 (u).
The petitioner was a partner in Lehman Brothers. Another partner, for services performed on behalf of the firm, received options to buy stock of' The Fair, Inc., and Kresge Department Stores, Inc. The partnership bought and received shares under the option on February 1,1943, at a cost of $17,215.29, and thereafter received all dividends on the shares. The shares were subject to restrictions and the parties hereto agree that the acquisition of the shares did not give rise to any income (compensation for services) in 1943 because they had no ascertainable fair market value due to the restrictions.
The restrictions terminated at midnight December 31, 1943. Lehman Brothers sold the stock in February and March 1944 for $69,928.32 and reported $52,713.03, the excess of the amount realized over cost, as a long term capital gain. The petitioner reported his share of the gain as a partner of the firm.
The Commissioner, in determining the deficiency, held that the firm realized ordinary income of $39,255.46, the excess of the fair market value of the stock on January 1, 1944, over its cost, and reduced the reported capital gain accordingly.
The Commissioner’s theory is that, since the shares were purchased at a bargain price under an option received for services but had no ascertainable fair market value at the time received because of the restrictions, compensation for services was derived on January 1,1944, immediately after the restrictions terminated, to the extent of the excess of the fair market value of the shares on that day over their cost. He cites a number of cases holding that no income is realized when the shares are received subject to restrictions which preclude ascertainment of fair market value but none holding that compensation is received or a taxable event takes place when the restrictions terminate and fair market value can be determined. Termination of the restrictions was not a taxable event such as the receipt of compensation for services or the disposition of property. Values fluctuate from time to time and the value on a later date might be out of all proportion to the compensation involved in the original acquisition of the shares. The gain was properly reported as a long term capital gain from the subsequent sale of the shares.
Reviewed by the Court.
Decision will be entered v/nder Bule 50.