*4 Decision will be entered for the respondent.
In a national competition petitioner won the award of a contract to decorate the exterior of a new Federal building with a sculpture relief comprising a group of 14 figures. His payments in the taxable year were more than 80 per cent of the total he received under the contract. Held, the term "artistic composition" used in section 107 (b), Internal Revenue Code, has reference to an entirety, a unitary composition as a whole, and not to a mere aggregation of parts; held, further, in determining whether petitioner's work on the "artistic composition" covered a period of 36 calendar months or more, work done on sketches or models of individual figures may not be counted, where such work antedated both the announcement of the competition and petitioner's conception of the specific design or composition as an entirety.
*1188 The respondent determined an income tax deficiency for 1942 in the amount of $ 2,023.61. The question is whether petitioner is entitled to the benefits of section 107 of the Internal Revenue Code in connection with income he received in the taxable year from an artistic work or composition.
Petitioner makes no contention that it was improper to determine the deficiency for the year 1942 rather than for 1943, nor does he raise any issue with respect to the statute of limitations. In these circumstances, we assume that the discharge of tax liability for 1942 generally granted to individuals by the Current Tax Payment Act of 1943 is not applicable in this case.
FINDINGS OF FACT.
Petitioner is a resident of New York City. His return for the year involved was filed with the collector of internal revenue for the second district of New York.
Petitioner has been a sculptor for approximately 30 years, and since 1937 he has specialized in sculpturing for public buildings constructed by the Federal Government. During the years 1937*6 to 1940 he submitted *1189 designs in a number of competitions for the selection of sculpturing to decorate various Federal buildings. In three of the six competitions which he entered he received honorable mention and consolation awards.
In July 1940 petitioner received a letter from the Public Buildings Administration announcing a competition for various sculpturing projects to decorate the new War Department building in Washington, D. C. Thereupon, he began to make notes and sketches and to work up ideas in preparation for the final competition. The specifications of the designs were not set out in the original announcement.
In September 1940 petitioner received a bulletin from the section of Fine Arts, Public Buildings Administration, giving the exact terms of the competition and the specifications of the design to be submitted. This called for a sculpture relief, 37 feet wide by 11 1/2 feet high, to be carved in stone upon the east facade of the War Department building. Petitioner then began active work upon the design and preparation of the actual 1-inch scale model which he submitted in the competition. Petitioner's theme for the relief which he submitted was "The*7 Peaceful Pursuits of American Life" which, in his opinion, the War Department was designed to safeguard. Petitioner's composition contained some 14 figures. The figures were grouped around a central figure entitled "Liberty." Several of the figures in the composition resembled and were derived from figures in sketches or models or panels made by petitioner in the period from 1937 to 1940, some of which he had entered in other competitions.
Petitioner won the competition for the War Department building and on September 2, 1941, he entered into a contract with the Government, acting through the Commissioner of Public Buildings. This contract provided for a total payment of $ 22,250 to be paid in installments as the work progressed. Twenty-five hundred dollars was to be paid when the 1-inch scale model was furnished complete, $ 4,500 when the 3-inch scale model was done, $ 3,500 when half the work on the 6-inch scale model was done, and $ 3,500 when the 6-inch model was completed. The remaining $ 8,250 was to be paid in quarterly installments as the actual work of carving on the building progressed. All the models and the final sculpture and all rights of the artist therein were*8 to become the property of the Government, but the artist might copy them, with the written permission of the Commissioner or his duly authorized representative. It was further provided that the Commissioner of Public Buildings could abandon or indefinitely defer work under the contract before completion, if he deemed it expedient or it became necessary on behalf of the United States.
Pursuant to the contract, petitioner submitted the 1-inch, 3-inch, and 6-inch models and received therefor a payment of $ 2,500 in 1941 and payments of $ 4,500 and $ 7,000 in 1942. The latter payment was *1190 made on September 8, 1942, shortly after the submission of the 6-inch model, and was the last payment made under the contract.
The only work remaining to be performed under the contract was the actual carving of the design on the exterior of the War Department building. At about the time petitioner submitted the 6-inch model, he had a conference with an official of the section of Fine Arts and was informed that, because of the war and the necessity of immediately using the building, the carving of the scultpure would have to be postponed indefinitely. Thereafter, other than thinking about*9 problems which might be incurred if the carving on the building were begun, petitioner performed no actual work on the project.
The final carving of the sculpture relief on the building was never begun. On March 1, 1943, the Commissioner of Public Buildings wrote petitioner announcing the termination of the contract by the Government because of the exigencies created by the war. The Commissioner also determined that, since the work under the contract had been about 63 per cent completed and $ 14,000 had already been paid the petitioner, no further payments were due or would be made under the contract. Petitioner was requested to sign a copy of the letter, indicating his acquiescence in the termination.
Petitioner was aware that the contract could be terminated by the United States by unilateral action and that he had no further rights under the contract subsequent to the termination. However, he had some correspondence with the Public Buildings Administration after March 1, 1943, stating it was his understanding that the work was merely to be postponed. It was not until October 16, 1943, that he signed the copy of the Government's letter of March 1, 1943.
The $ 11,500 which petitioner*10 received in 1942 from the United States was paid in consideration of work performed by the petitioner prior to September 8, 1942, and no part was paid with respect to any services rendered or work performed after that date.
OPINION.
The $ 11,500 which petitioner received in 1942 constituted more than 80 per cent of the total which he actually received under the Government contract. Petitioner therefore seeks the benefit of section 107 (b), which is set out in the margin. 1 The *1191 question is whether petitioner's work on the project covered a period of 36 calendar months or more.
*11 In determining this question, petitioner contends that he is entitled to go back to certain sketches and models which he made in the period from 1937 to 1940 because, as he argues, several of the figures in his winning design were derived from these earlier sketches or models.
We think there is no merit in this argument of the petitioner. It seems to us that the term "artistic composition" used in the statute has reference to an entirety and not to a mere aggregation of parts. Petitioner's conception lies in the design as a whole. He makes no contention that before the announcement of the War Department competition he had either conceived or embodied in physical form the unitary composition which won the award. In our opinion, July 9, 1940, is the very earliest date which may be taken as the commencement of the work on this artistic composition.
Petitioner also contends that the date of completion was October 16, 1943, but we think the facts are to the contrary. In September 1942, shortly after petitioner submitted and was paid for the 6-inch model, he was orally informed by an official of the Public Buildings Administration that the carving on the building would have to be postponed*12 indefinitely because of the war. On March 1, 1943, the Government, in accordance with its rights under the contract, wrote petitioner that it was necessary to defer the work indefinitely and that his services under the contract were terminated. The payments which were made to petitioner were for work which had been completed prior to September 8, 1942. It is true that petitioner testified that he continued "thinking" about problems which might arise in the actual carving of the sculpture on the building, but we do not think it can fairly be said that petitioner performed any work on the project, within the meaning of the statute, after September 1942. Even if we accept March 1, 1943 (when petitioner's services under the contract were formally terminated) as the final date, we still do not have a period of 36 months.
It follows that petitioner's work on the artistic composition here involved did not cover a period of 36 calendar months or more, and the respondent therefore did not err in denying petitioner the benefits of section 107.
Decision will be entered for the respondent.
Footnotes
1. (b) Patent, Copyright, Etc. -- For the purposes of this subsection, the term "artistic work or invention", in the case of an individual, means a literary, musical, or artistic composition of such individual or a patent or copyright covering an invention of or a literary, musical, or artistic composition of such individual, the work on which by such individual covered a period of thirty-six calendar months or more from the beginning to the completion of such composition or invention. If, in the taxable year, the gross income of any individual from a particular artistic work or invention by him is not less than 80 per centum of the gross income in respect of such artistic work or invention in the taxable year plus the gross income therefrom in previous taxable years and the twelve months immediately succeeding the close of the taxable year, the tax attributable to the part of such gross income of the taxable year which is not taxable as a gain from the sale or exchange of a capital asset held for more than 6 months shall not be greater than the aggregate of the taxes attributable to such part had it been received ratably over that part of the period preceding the close of the taxable year but not more than thirty-six calendar months.↩