*1206 INCOME - ACCRUED TO DATE OF DEATH - SECTION 42, REVENUE ACT OF 1934. - A share of a fee, unearned and unpaid at the date of death of a law partner, thereafter paid to his estate as a moral obligation, is not income "accrued up to the date of his death" within the meaning of section 42 of the Revenue Act of 1934.
*1246 The Commissioner determined that the petitioner is liable as transferee for a deficiency in income tax in the amount of $693.51 and *1247 interest thereon due from E. H. Randolph, deceased, for the calendar year 1934. The issues raised by the pleadings and pressed for decision are:
1. Is the petitioner liable as a transferee where the decedent was erroneously described in the notice as "formerly of Colfax, Louisiana"?
2. Is she liable as a transferee where she was a special legatee, the residuary estate went to another, and the estate was solvent after payment of her legacy?
3. Was a fee of $12,500 properly included in income of the decedent under section 42 of the Revenue Act of 1934, as an amount "accrued up to*1207 the date of his death"?
FINDINGS OF FACT.
The petitioner is an individual, residing in Shreveport, Louisiana. She was the widow of E. H. Randolph, who died on February 16, 1934.
An income tax return for the decedent for the period January 1 to February 16, 1934, was filed with the collector of internal revenue for the district of Louisiana on March 9, 1935. The following appears on that return in the space for the name and address of the taxpayer:
E. H. Randolph (Shreveport, La.)% John Randolph
Colfax Grant [County] Louisiana.
The decedent is described in the notice of transferee liability as formerly of Colfax, Louisiana. The notice was mailed on October 17, 1938.
The decedent was an attorney and a member of the firm of Wise, Randolph, Rendall & Freyer of Shreveport. There was reported on his return an amount of $12,500 representing one-half of his share of a fee received by the firm on April 3, 1934, for legal services rendered and to be rendered to Sarah Edenborn under a contract dated April 19, 1933. Suits had been entered against this client to set aside a settlement in a succession proceeding. A temporary restraining order and a rule to show cause*1208 why a preliminary injunction should not issue and a receiver should not be appointed was issued. The firm represented Sarah Edenborn in those preliminary proceedings and was paid a fee therefor which is not involved herein. The fee involved herein was for services in connection with the trial on the merits. The contract of April 19, 1933, provided that the fee for trial on the merits should be in a stated amount "one-half to be paid as soon as the funds are released by the Court so as to be available" and the other one-half upon final determination of the suits. The funds to pay the first one-half were not released by the court and made available until April 2, 1934. The one-half of the fee was received *1248 by the firm on April 3, 1934, and it paid the share due Randolph on that same day. The only work done by the firm on the merits of the case prior to the death of Randolph was the filing of an answer. The portion of the fee allocable to that work was nominal. All of the remaining work on the case was done after Randolph died. A great deal of work was done on the case and it was not closed at the time of the hearing in this case. The firm felt that Randolph had*1209 no legal right to a share in the fee but paid the amount to his estate for moral reasons. No part of the fee was earned at the date of Randolph's death.
The $12,500 was included in the income of the decedent on which the deficiency is based.
Randolph disposed of his property by a will in which he gave to this petitioner $100,000, the use of their home and its contents, and the usufruct of all real estate. He gave $30,000 to others and left the residue of his estate to his brother, John. The estate was completely distributed in May 1934, the specific bequests were paid, and there was an amount left for and distributed to the residuary beneficiary in excess of the tax and interest involved herein.
OPINION.
MURDOCK: The fact that the decedent was described in the notice as formerly of Colfax is of no consequence, since it was mere surplusage and misled no one. Also, it is immaterial here that the petitioner was a special beneficiary and the residuary estate was more than sufficient to pay the income tax. The petitioner and the residuary beneficiary each received a part of the estate and thereby became liable as transferees. The Commissioner could proceed against either*1210 or both. Sec. 311(a)(1) and (f), Revenue Act of 1934. ; ; ; . The Commissioner has shown that the petitioner is liable for whatever tax interest is due.
The net income as adjusted by the Commissioner amounted to $11,664.09 and a personal exemption of $1,250 was allowed. Thus, if all, or a substantial part, of the legal fee of $12,500 is eliminated because it was not "accrued up to the date of his death" within the meaning of section 42, there would be no deficiency. The facts in this case differ from those in the case of . There the fees involved had been earned by the performance of services prior to the death of the partner and, where additional services were to be performed, an appraisal was made upon the basis of the portion of tfhe total fee already earned. The Court said that the portion of the ultimate fees earned during the life of *1249 the deceased partner could be included in his income under*1211 section 42. But the fee here in question was not earned during the life of Randolph. But the fee here in question was not earned during tfhe life of Randolph. It was earned after his death and was received after his death. Thus, it may not be included in his income as an amount "accrued up to the date of his death."
The surviving partners did not regard it as an amount to which the decedent or his estate was legally entitled, but paid it "as a moral responsibility" or obligation. The respondent says it will escape income tax unless it is taxed here. All we need decide is that it is not taxable under section 42.
Decision will be entered for the petitioner.