OPINION.
Black, Judge:Issue 1.
This issue raises the following question: Are the petitioners entitled to apply the provisions of section 107(d) of the Code to the fair market value of certain shares of stock received from their employer in 1946 pursuant to the terms of a previous contract with said employer, or is such amount all taxable as income in the year when received? The applicable section of the statute and Treasury regulations are printed in the margin.1
There can be no doubt from the facts which have been stipulated that the shares of stock in the newly organized corporation which were distributed to Bavis, Bell, and Giangiulio in 1946 were distributed to them as additional compensation for remaining in the employ of the Company from the date of the agreement in 1928 to the final accounting which was had in 1946. Whether petitioners are entitled to treat for income tax purposes the fair market value of the shares of stock which they received in 1946 as back pay depends upon whether the distribution of stock in 1946 falls within the statutory definition of “back pay.” The applicable statute carries its own definition of “back pay” and we have printed that definition in the margin. It says:
* * * For the purposes of this subsection, “back pay” means (A) remuneration, including wages, salaries, retirement pay, and other similar compensation, which is received or accrued during the taxable year by an employee for services performed prior to the taxable year for his employer and which would have been paid prior to the taxable year except for the intervention of one of the following events: * * * [emphasis added].
We do not think the payments here involved meet the conditions prescribed in the language which we have emphasized above. Begula-tions 111, section 29.107-3 provides, in part, as follows:
An event will be considered similar in nature to those events specified in section 107 (d) (2) (A) (i), (ii), and (iii) only if the circumstances are unusual, if they are of the type specified therein, if they operate to defer payment of the remuneration for the services performed, and if payment, except for such circumstances, would have been made prior to the taxable year in which received or accrued. * * *
It seems clear to us that the operation of the Chichester Chemical Company under the arrangement with the creditors’ committee did not operate to defer payment to petitioners of the shares of stock which were issued to them in 1946. In fact, the very condition which entitled them to the shares of stock in 1946 was that they remain with the Company until all creditors were paid. That was what entitled them to receive the extra compensation. The facts show that under the agreement of February 15, 1928, the petitioners were to receive certain definite salaries plus additional compensation fixed on a percentage of gross sales. That is shown in paragraph 1 of the agreement wherein it says:
1. The parties of the third part shall retain their respective positions and perform the duties heretofore performed by them in connection with the business of the Chichester Chemical Company at the same fixed salaries as those received during the year 1927. The additional compensation for 1928 shall be paid to them in equal shares on the basis of six per cent, of the gross sales of the Company. * * *
So far as the records show these regular salaries plus the additional compensation agreed upon out of gross sales were paid to Bavis, Bell, and Giangiulio over the intervening years from 1928 to 1945, inclusive, and these amounts are not here in controversy. So far as we can see that was all they were entitled to receive in those prior years irrespective of whether the operation of the business under the creditors’ agreement was similar in nature to bankruptcy or a receivership. Under the provisions of paragraphs 3, 4, and 5 of the agreement these key employees, including Bavis, Bell, and Giangiulio were to receive an interest in the business provided that they remained with the Company until all the creditors were paid and the administration ended. If any key employee died in the meantime his estate was to receive the part to which he would have been entitled had he lived out the term. We fail to see where any of the petitioners herein could have demanded in any year prior to 1946 that any of the stock should be issued to them regardless of how solvent and able to pay the Company might have been. Thus, we do not think that one of the vital requirements prescribed in the definition of “back pay” has been met and petitioners cannot be sustained in their contention that the amounts represented by the fair market value of these shares of stock should be taxed as “back pay” under the provisions of section 107 (d), I. R. C.
Petitioners in their brief strongly rely on Langer's Estate v. Commissioner, 183 F. 2d 758. We think that case is distinguishable on its facts. In the Langer case, supra, R. L. Langer and his associate, C. A. Lindsey, were officers and employees of Commodore Hotel Co., Ltd., and although claiming to be entitled by corporate action to compensation of $600 per month each, neither received any salary during the years 1938 through 1942. In each of those years through 1941, Commodore suffered operating losses, its balance sheets showing continuing deficits, and it was unable to pay Langer and Lindsey their accrued salaries because it had to use its available funds to prevent foreclosure of a mortgage on its hotel building, furnishings, and fixtures. However, in January 1943, for the first time Commodore had become financially able 'to resume payment of salaries to Langer and Lindsey, and in January 1944, the board of directors ordered payment of the accrued ~baclc salaries as rapidly as the corporation’s financial condition would warrant. Pursuant to this action, Langer and Lindsey each received in addition to current salaries, $10,000 in 1944 and $11,500 in 1945. In their income tax returns for those years Langer and Lindsey treated the $10,000 and $11,500 as “back pay” under the provisions of section 107 (d) of the Code. The Commissioner determined the amounts were not back pay within the meaning of the applicable statute because Commodore had not been prevented from paying these salaries in the years when due because of an event similar in nature to bankruptcy or receivership, and treated the amounts as income taxable in the years when received. We affirmed the Commissioner, see 13 T. C. 419. The Ninth Circuit reversed us in hanger's Estate v. Commissioner, supra. The court in reversing us, among other things, said:
Under these findings, it is quite clear to us that the event which operated to defer the payment of the salaries of Langer and Lindsey was an event similar in nature to bankruptcy or receivership, for Commodore, during the years in question, was admittedly insolvent and was operating only at the sufferance of Pacific, which was, at all times, in a position to foreclose its deed of trust and mortgage on the hotel and its furnishings and, in fact, refrained from doing so inasmuch as it appeared that all available revenues were being applied by Commodore toward the payment of its indebtedness to Pacific rather than toward the payment of salaries to the corporate officers. If the situation in which Commodore found itself was not one similar to “bankruptcy or receivership” within the meaning of the Code, Section 107 (d) (2), and the Regulations, * * * then those statutory words have no meaning, for the only element of legal bankruptcy lacking was a formal judicial declaration, — a determination which the corporation or its creditors could have procured at any time, — and it is obvious that to require such an official determination would be equivalent to saying that the only event similar to bankruptcy is bankruptcy itself.
Even if we assume in the instant case that the operation of the Company under the creditors’ agreement was an event similar to bankruptcy or receivership and that hanger’s Estate v. Commissioner, supra, would be good authority for so holding, petitioners would not win in the instant case because such operation of the business under the creditors’ committee plan did not “operate to defer payment of the remuneration” to petitioners for services performed for the business and payment would not have been made prior to the taxable year 1946. (See Kegs. 111, sec. 29.107-3.) As we have pointed out, it was not until 1946 that petitioners were entitled to be paid this additional compensation in the form of shares of stock in the newly organized corporation. Under these circumstances we fail to see how such amounts can be adjudged “back pay” within the meaning of section 107 (d). The only salaries and other compensation which became due and payable to petitioners by the Company during the years 1928 to 1945, inclusive, were the regular salaries which the Company agreed to pay them, plus their percentage of gross sales. These amounts were paid in the years when due and are not involved here.
For reasons we have already explained, nothing accrued in petitioners’ favor as to the shares of stock which were issued and paid to them in 1946, until 1946. It was in that year that such extra compensation was both accrued and paid. Therefore, we regard the Danger case, supra, as inapplicable and not controlling here.
Issue 2.
With respect to the $2,671.17 received by petitioner Bell from Giangiulio, we are of the opinion that the record here does not show an employer-employee relationship between Bell and Giangiulio which is a prerequisite for the application of section 107 (d). The only fact of record is that Giangiulio, upon his appointment as administrator of the estate of D. D. Chidester, entered into an oral agreement with Bavis and Bell under which he agreed to share his commissions equally with them for services performed for him in connection with the administration of such estate. Certainly Bavis and Bell were not employees of the estate under this oral agreement. There is no showing as to the amount of direction and control Gi-angiulio exercised over Bavis and Bell under such agreement which is one of the basic elements of an employer-employee relationship. On the contrary, the facts tend to indicate that the relationship between the petitioners under the oral agreement was more closely analogous to that of joint adventurers rather than that of employer and employees. The relation of joint adventurers is created, generally speaking, when two or more persons combine their property, money, efforts, skill, or time in some common undertaking. Here we have three men all actively engaged in the management of what was the most important asset of the estate, the Company. The executrix died and Giangiulio was appointed administrator of the estate. After his appointment, he agreed to1 divide his commissions with Bavis and Bell if they would perform certain services for him in connection with the administration of the estate. The record is silent as to what services Bavis and Bell performed but it must be assumed that Gi-angiulio was satisfied since he made payment in accordance with the agreement. They all had an equal stake and an equal reward in its proper administration. However, in any event, it is not necessary to decide whether petitioners were joint adventurers since petitioner Bell has failed to prove that he was an employee of Giangiulio. On this issue we hold for the respondent.
Reviewed by the Court.
Decisions will be entered for the respondent.
SEC. 107. COMPENSATION FOR SERVICES RENDERED FOR A PERIOD OF THIRTX-SIX MONTHS OR MORE AND BACK PAX.
(d) Back Pay.—
(1) IN general. — If the amount of the bach pay received or accrued by an individual during the taxable year exceeds 15 per centum of the gross income of the individual for such year, the part of the tax attributable to the inclusion of such back pay in gross income for the taxable year shall not be greater than the aggregate of the increases in the taxes which would have resulted from the inclusion of the respective portions of such back pay in gross income for the taxable years to which such portions are respectively attributable, as determined under the regulations prescribed by the Commissioner with the approval of the Secretary.
(2) Definition of back pat. — For the purposes of this subsection, “back pay'' means (A) remuneration, including wages, salaries, retirement pay, and other similar compensation, which is received or accrued during the taxable year by an employee for services performed prior to the taxable year for his employer and which would have been paid prior to the taxable year except for the intervention of one of the following events: (i) bankruptcy or receivership of the employer; (ii) dispute as to the liability of the employer to pay such remuneration, which is determined after the commencement of court proceedings; (iii) if the employer is the united States, a State, a Territory, or any political subdivision thereof, or the District of Columbia, or any agency or instrumentality of any of the foregoing, lack of funds appropriated to pay such remuneration; or (iv) any other event determined to be similar in nature under regulations prescribed by the Commissioner with the approval of the Secretary; * * *
Regulations 111, section 29.107-3 (added to the Regulations by T. D. 5855) provides, in part as follows:
An event will be considered similar In nature to those events specified In section 107 (d) (2) (A) (1), (ii), and (iii) only if the circumstances are unusual, if they are of the type specified therein, if they operate to defer payment of the remuneration for the services performed, and if payment, except for such circumstances, would have been made prior to the taxable year in which received or accrued. For the purposes of this section the term “back pay” does not include * * * additional compensation for past services where there was no prior agreement or legal obligation to pay such additional compensation, or any amount which is not includible In gross income under chapter 1.
See also Estate of R. L. Longer, 16 T. C. 41 (1951), affd. (C. A. 9) 194 F. 2d 288.