*243 Decision will be entered for the respondent.
1. In observance of the one-hundredth anniversary of the founding of its business a business corporation, late in 1943, by paid advertisement, offered 17 awards totaling $ 50,000 to the persons submitting the best and most constructive 17 plans for postwar employment in the United States. The plan submitted by the petitioner was adjudged the best of more than 35,000 entries and in May, 1944, he received $ 25,000 as payment of the first award. All manuscripts and plans became the property of the corporation, with the right to publish and distribute them. After announcement of the awards the corporation copyrighted and published the 17 plans in booklet form, which it distributed to Government officials and offered, by paid advertisement, to send to anyone writing for it. The corporation's name appeared prominently and frequently in its advertisements and literature relating to the awards and the amount of the awards was treated by the corporation as a business expense for its current taxable year. Held, that the amount received by the petitioner constituted compensation and was taxable income to him.
2. On the facts presented, *244 held, that no portion of the petitioner's award may be allocated to his wife as her earnings, and that no amount is deductible by the petitioner as compensation paid for her services.
*494 The respondent determined*245 a deficiency of $ 1,715.16 in the petitioner's income tax for 1944. The issues presented by the pleadings are (1) whether an amount of $ 25,000 received by the petitioner during the taxable year as an award for a plan submitted by him in a competition conducted by a business corporation was compensation or a gift, and (2) whether deductions of $ 2,500, $ 150, and $ 67.50 taken by the petitioner as expenses incurred for editorial assistance, travel, and a clipping service, respectively, constituted allowable deductions. At the hearing the petitioner abandoned his claim for allowance of the deductions of $ 150 and $ 67.50.
*495 FINDINGS OF FACT.
During 1944 the petitioner resided in Takoma Park, Maryland, and filed his income tax return for that year with the collector for the second district of New York. The petitioner's return was prepared on the cash receipts and disbursements basis.
In December, 1943, Pabst Brewing Co., Milwaukee, Wisconsin, sometimes hereinafter referred to as Pabst, made public announcement of its offering of 17 awards totaling $ 50,000 (purchase price) in United States war bonds for postwar employment plans. The first award was $ 25,000, the second $ *246 10,000, and 15 additional awards of $ 1,000 each. The announcement, in the form of paid advertisements by Pabst, appeared in the Washington Post, the Washington Star, Time, News Week, and other publications.
The petitioner learned of the offering of the awards and around the first of January, 1944, decided to submit a plan. At that time he was chief of the Economic Analysis Section, Munitions Branch, Statistics Division, of the War Production Board. During his college course he had majored in economics and afterwards had done approximately three years of graduate work in that field.
The announcement of the awards stated that they were being offered by Pabst in observance of the one-hundredth anniversary of the founding of its business. As stated in the announcement the purpose of the awards was:
To bring about universal recognition of the critical importance of the Post-War Employment question; to stimulate intelligent planning for the lives and futures of Americans everywhere; to foster and encourage constructive thinking for the fullest measure of employment after Victory.
Through these Awards, we hope to provoke mature and responsible discussion, and thus to develop and assemble*247 practical and workable plans and ideas for meeting one of the greatest problems of the peace to come * * * and to make these plans and ideas available, when they are needed, for the benefit of all Americans.
Respecting the basis on which the awards would be made the announcement stated:
The Awards will be made solely on the basis of the value of the plans presented * * * not on literary merit. Manuscripts submitted should present a workable and practical basis for the solution of the broad problems of Post-War Employment in America. The winning entries will be those which, in the opinion of the Board of Judges, offer the best and most constructive plans for Post-War Employment in the United States.
As to the use to be made of the winning plans, the announcement stated:
At the close of the competition, copies of the winning plans will be turned over to responsible officials of the Government. In addition, copies will be made available for study by any other agency -- public or private -- which concerns itself *496 with the problems of Post-War Employment; and may be published, in booklet or other form, for distribution to the public.
The board of judges consisted*248 of four members, who served without compensation. They were assisted in the preliminary judging by members of the faculty of the Economics Department of Columbia University. The competition closed February 7, 1944.
Under the rules of the competition every citizen of the United States was eligible to compete for the awards except the officers and employees of Pabst, its subsidiaries, and its advertising agency; the instructors, administrators, and students in the Economics Department of Columbia University; and members of the immediate families of the foregoing groups. The rules provided for the submission of an entry jointly by more than one person, in which case if the entry won an award the amount of the award would be divided equally among those persons. By submitting an entry in the competition the entrant agreed to be bound by all provisions of the rules. All manuscripts and plans submitted became the property of Pabst, which had the right to publish the manuscript and the author's name, but not to the exclusion of the author. The decision of the majority of the judges constituted the decision of the board of judges and was final, conclusive, and binding upon all persons*249 entering the competition. The board of judges had the right to require any entrant to furnish satisfactory proof that he was the author of the manuscript and plan submitted by him.
A total of 35,767 manuscripts were entered in the competition. The plan submitted by petitioner was selected by the judges for the first award and petitioner was officially so notified on May 17, 1944. The following week those whose plans had been selected for awards received their awards at a dinner given by Pabst at the Hotel Biltmore in New York City. Further public announcement of those receiving awards was made in the public press in the form of a paid advertisement by Pabst showing, among other things, pictures of the judges and of those who received the first and second awards, as well as a brief description of the background of those two recipients.
The 17 plans selected for awards were published by Pabst in a copyrighted booklet which it distributed to responsible Government officials and made available for study by any agency, public or private, that concerned itself with postwar employment plans. By paid advertisement Pabst offered a copy of the booklet to anyone writing for it. The petitioner's*250 plan was also published in a financial publication, the Congressional Record, and a number of daily newspapers. There was general interest in the public press in the outcome of the competition and immediately following the announcement of the awards there were a great many news stories and editorials respecting them. Two professors at Columbia University wrote a book in which, for the *497 purpose of reflecting a cross section of opinion on the subject, an analysis was made of several hundred of the entries that did not receive awards. The journal of the American Economics Association and the Royal Economic Journal of England each published an article based on the entries in the competition.
The petitioner spent about 80 hours in formulating his plan and preparing his manuscript. In the preparation of the manuscript petitioner was given some assistance by his wife several evenings, totaling approximately 15 hours. This assistance was of an editorial nature and dealt with the organization and presentation of petitioner's ideas for purposes of clarity. She had majored in economics in college and after graduation had been employed in the field of economics.
In formulating *251 the plan and preparing the manuscript petitioner and his wife had no agreement about who would own any award that might be received. While they had a general understanding that all property owned by either was owned jointly, that is, "that the family property is common," the petitioner submitted his manuscript and plan in the competition exclusively in his own name. The war bonds of a cash value of $ 25,000 which were issued in payment of petitioner's award were, upon his instructions, issued in the joint names of himself and his wife.
In 1944 the petitioner and his wife had a joint checking account, a joint saving account, a joint account in a savings and loan association, and a joint safety deposit box, all of which had been maintained theretofore. Salary checks of petitioner and his wife were deposited in the joint checking account and each drew on it as he or she desired. The bonds received as the award were, upon receipt, placed in the joint safety deposit box. In 1944 bonds having a cash value of approximately $ 6,600 were cashed, of which $ 4,000 was deposited in the joint account in the savings and loan association, thereby bringing that account up to the insured maximum*252 of $ 5,000. The remaining $ 2,600 was placed in a separate savings and loan account in Mrs. Stein's name. Other bonds were cashed in 1945, the proceeds of which, together with the $ 2,600 in the separate account, were used to pay income tax. Other bonds were cashed in 1946 and the proceeds used to purchase real estate.
In its Federal income tax return for the taxable year 1944 Pabst treated the $ 50,000 in awards, including the $ 25,000 received by the petitioner, as deductible expense of carrying on its business. Pabst made no withholding of income tax with respect to the award made to the petitioner.
Upon the advice of the Bureau of Internal Revenue that the amount of the award received by him from Pabst constituted taxable income, and despite his own view to the contrary, petitioner reported the *498 $ 25,000 as income in his 1944 income tax return, showing it as income received from his business or profession of "Economic Counsel." He deducted therefrom an amount of $ 2,500 which he explained in his return was "a payment" for editorial assistance rendered by his wife in connection with his receipt of the award. In her 1944 income tax return petitioner's wife, Mildred*253 F. Stein, reported the $ 2,500 as income received by her from petitioner as her employer.
Prior to the time the petitioner and his wife prepared their 1944 returns, which were executed on January 14, 1945, and filed on the following day, they had no agreement concerning a division of the $ 25,000 award between them. Aside from the fact that the bonds issued in payment of the award were issued in the joint names of the petitioner and his wife, no payment of the $ 2,500 was ever actually made to her at any time.
On September 25, 1947, the petitioner filed a claim for refund of $ 9,970.30 of his 1944 income tax. The claim was grounded on the contention that the $ 25,000 received by him from Pabst did not constitute taxable income, but was a gift to him.
In determining the deficiency the respondent disallowed the deduction of $ 2,500 taken by the petitioner for editorial assistance and in the deficiency notice advised the petitioner, among other things, that if a petition was filed with the Tax Court the issue presented in the refund claim should be presented in his petition and that if no petition was filed the refund claim would be disallowed.
OPINION.
The question here is whether*254 the $ 25,000 in war bonds awarded to petitioner by Pabst was taxable income within the meaning of the Internal Revenue Code. By the Sixteenth Amendment to the Constitution, Congress was given the power to lay and collect taxes on incomes "from whatever source derived." Thereafter the Supreme Court, in considering the scope of the power of Congress to tax as expanded by the Sixteenth Amendment, said that "income may be defined as the gain derived from capital, from labor, or from both combined." Eisner v. Macomber, 252 U.S. 189">252 U.S. 189. Congress, in the exercise of its power under the Sixteenth Amendment to lay and collect taxes on incomes and in specifying the income subject to tax, prescribed that gross income "includes gains, profits, and income derived from salaries, wages, or compensation for personal service of whatever kind and in whatever form paid, or from professions, vocations, trades, businesses, commerce, or sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in such property; also from interest, rent, dividends, securities, or the transaction of any business carried on for gain or profit, *255 or gains or profits and income derived from any source whatever." Sec. 22 (a), *499 I. R. C. And, in that connection, it has been said that "The broad sweep of this language indicates the purpose of Congress to use the full measure of its taxing power within those definable categories." Helvering v. Clifford, 309 U.S. 331">309 U.S. 331.
That the war bonds received by petitioner from Pabst represented gain to him from labor and therefore income within the Supreme Court's definition of income and represented "gains, profits, and income * * * or compensation for personal service, of whatever kind and in whatever form paid, or from professions, vocations, trades, * * *" may not, it seems to us, reasonably be disputed. The petitioner had studied, worked, and trained to be an economist and he had entered into the exercise and practice of that profession. His attention was directed to an advertised offer by Pabst of awards totaling $ 50,000 for the 17 best plans which might be submitted on postwar employment. The prospect was alluring to petitioner and, whatever his dominant motive might have been, he decided to exercise his skill and knowledge as an economist*256 and to devise, work out, and offer such a plan and enter in the competition. In such work and exercise of his professional knowledge and skill he devoted approximately 80 hours of his time, a period of two standard work weeks. He completed and submitted his plan and in return therefor he received the top award, war bonds of a cash value of $ 25,000. That the petitioner was not a regular employee or an employee at all of Pabst and the endeavor was in the form of a competition where the entries ran into the thousands and his chances of being one of 17 to whom awards were given were quite remote, in no way changes the nature and character of the award when received from gain, compensation, or income from labor or the exercise of his professional training and skill to something else. It would be as reasonable to conclude that the award to the winning architect in a competition for design for a building or to an engineer in a competition for the winning design for a bridge would not be income to them because there would be a very good possibility that they would not be winners and that, except for the benefits derived as experience from working at their profession, they would receive*257 no return for work and labor expended.
It is argued further, however, that the award was a gift from Pabst to petitioner and that, since gifts are specifically excluded from income by section 22 (b) (3), 1 the award in this instance was not income within the statute as enacted. In this connection most of what was offered in the course of the argument on the point above was likewise stressed, and great reliance was placed on the conclusion reached by the Court of *500 Appeals in McDermott v. Commissioner, 150 Fed. (2d) 585. It is pointed out, for instance, that Pabst was in the business of brewing and selling beer and not in the business of working out economic problems such as that which provided the subject for the papers submitted. It is said that the petitioner had no thought or idea of selling anything, either the paper or his services to Pabst. There is the suggestion that possibly the dominating motive was the anticipation of the pleasure and satisfaction of working out some thesis on an intriguing economic problem. There is also a suggestion that the purpose of the competition and the objective sought to be accomplished was in the*258 public interest and for that reason there should be no thought or suggestion of either the money as used by Pabst or the bonds as received by petitioner being subject to a Federal tax; that really and truly the thought and endeavor here was in the field of education and that Congress did not intend to burden such funds with a tax. Some of the statements or thoughts appearing in the Court's opinion in McDermott v. Commissioner, supra, do seem to give color and support to the theories advanced in the petitioner's behalf. With all due respect to the court in that case, we find ourselves unable to follow it to its conclusion that the scope and meaning of income as it appears in the Sixteenth Amendment and in the Congressional enactment is so restricted, but, even if we are wrong in presuming so to conclude, the McDermott case is rather plainly distinguishable from the instant case when certain of the thoughts and pronouncements of the court there are applied to the facts here.
*259 In the first place the court in the McDermott case seemed to have been greatly influenced by the fact that the work done there was in the field of learning and education and that that fact, for some reason, made a difference in the case of an award or compensation received by someone laboring to produce a treatise or discourse on a given subject. The suggestion was also made that Congress had very plainly intended to exempt educational and charitable gifts and to conclude that the recipient of an award or prize for labor and effort along that line would be subject to tax thereon would in some way defeat the will of Congress. In that connection reference was made to section 101 (6) of the Internal Revenue Code. Turning to the code, it is interesting to note, however, that Congress exempted in the religious, charitable, scientific and educational fields only corporations, community chests funds, or foundations. At no place is there any provisions exempting individuals, but, to the contrary, it is plainly shown that where the funds, gifts or donations inure to the benefit of a private shareholder or an individual the exemption does not apply. Any suggestion or thought that the*260 mere fact that the money received by the ultimate recipient was supplied by way of gift or donation is alone sufficient to indicate or supply a basis for holding that as to the recipient the *501 amount received was not income is, in our judgment, clearly outside the statute. One person may, for instance, by way of gift supply the money to pay some needy person for mowing the grass in his friend's yard, but no one would suggest that the money received by the mower of the grass was not to him income. Thousands of people every year make contributions to community funds and foundations and, even though as to the donors they are admittedly gifts, no one, we think, would seriously argue that individuals engaged and employed in administering charity and supervising and directing the recreational activities of others and who are paid from these gifts and donations did not receive income within the meaning of the Constitution and the statute. It is accordingly our view that in the McDermott case, as well as in the argument here, too much importance was placed on the question whether the original furnisher of the money intended to make a gift and too little attention was paid to*261 the question whether there was as to the recipient gain or compensation from labor or work at a business or profession.
As suggested above, however, it is our opinion that this case fails to come within the scope of the McDermott case as decided by the court in that there the court did find on the part of the furnisher of the funds a donative intent and from that concluded that the money as given and as received was a gift specifically excluded by Congress from gross income, while here no such intent is shown. In this case the record does not show specifically the characterization of the expenditures by Pabst on its books, but, however they were denominated, it is clear that Pabst did not regard them as gifts. Unlike the situation in Bogardus v. Commissioner, 302 U.S. 34">302 U.S. 34, where the payor did not treat as expenses the payments held to have been gifts, but charged them directly to surplus, Pabst treated the amount of the awards, including the $ 25,000 paid for the war bonds awarded to petitioner, as an expense of conducting its business for its current taxable year. Such treatment certainly indicates that Pabst did not regard its award as the*262 making of a gift. In that connection the facts and circumstances surrounding the offering of the award and the terms and conditions imposed by Pabst are enlightening. While we think it may reasonably be said that Pabst did regard the scheme as being something which would be in the public interest, Pabst carefully prescribed that it should be the owner of the manuscripts and have all rights to publish and distribute them. The plan was initiated as a part of the activities of Pabst in the observance of the one-hundredth anniversary of the founding of its business. Pabst was seeking to publicize and show to the public its long life and success in a business way and it reserved to itself all rights which to that end would enable it to make the most of the plans submitted. Pabst was a commercial corporation, engaged in business for the purpose of producing income for the benefit of its *502 stockholders. In the literature announcing and publicising the competition, the name "Pabst" or "Pabst Brewing Company" appeared prominently and frequently. In addition the booklet containing the 17 plans for which awards were made, and which appears to have been printed for free distribution, *263 also bore the "Pabst Blue Ribbon" trade name. The entire undertaking seemingly was a part of Pabst's advertising program. Under such circumstances we could not reasonably conclude that Pabst launched the plan with an entirely donative intent or that the scheme was purely for the purpose of the educational development of the participants, particularly the winning entrants or solely for the public benefit. In that situation the case fails in some of the tests applied by the court in the McDermott case. The petitioner did not receive a gift, but realized gain or compensation for labor or in the practice of his profession.
The remaining issue is whether the respondent erred in disallowing the deduction of $ 2,500 taken by the petitioner for editorial assistance rendered by his wife in the preparation of the manuscript embodying his plan. At the hearing and on brief the petitioner took the position that, if the $ 25,000 received by him is held to be taxable income, then it should be held that it was earned by both him and his wife and should be allocated between them and taxed to them on the basis of 10 per cent to her and 90 per cent to him. No contention is made by the petitioner*264 that he employed his wife to assist him in the preparation of his manuscript, agreeing to pay her $ 2,500 or any other amount for her services, and that a deduction of $ 2,500 should be allowed him for having paid her under that employment.
The petitioner's entry in the competition was made as his own and not jointly as his and his wife's, as the rules would have permitted. The award was made to him and to him alone. He testified that at the time his wife was assisting him in the preparation of his manuscript there was no agreement as to who would own the award, should one be received, that there was no thought or agreement between them concerning any division of the award prior to the time they prepared their 1944 income tax returns and the question of a division then became relevant only because of the question of payment of tax. That testimony negatives any thought of a partnership or a joint venture relationship between them respecting the entry and consequent award.
The petitioner further testified that the $ 2,500 deducted by him and reported by his wife, or one-tenth of the amount of the award, was the portion which they, at the time they prepared their income tax returns, *265 decided was attributable to the wife's services in the preparation of the petitioner's manuscript. He did not state the basis on which they reached such a decision or give any explanation as to how that amount was ascertained. The case of Max German, 2 T. C. 474, *503 relied upon by petitioner, is distinguishable. The award having been made in whole to the petitioner for the plan submitted by him and no basis having been shown for attributing any portion thereof to the services of the petitioner's wife, we conclude that the entire $ 25,000 was the income of the petitioner.
If it should be assumed that petitioner owed compensation to his wife for services rendered and the only obstacle to the granting of a deduction therefor was as to amount, then some approximation under the principle of Cohan v. Commissioner, 39 Fed. (2d) 540, might be indicated. Here, however, other obstacles bar the deduction. There is no evidence of any agreement between the petitioner and his wife that she was to receive compensation and, aside from some general understanding that the earnings of both spouses constituted family income, *266 it does not appear that there was any thought that any part of the award was her separate income, as compensation or otherwise, until the time of or for the purpose of reporting and paying income tax. Furthermore, there was never any payment of compensation to her and, even if there had been an agreement to pay compensation, the deduction would not be allowable in the absence of actual payment, under section 24 (c) of the Internal Revenue Code, the petitioner and his wife being persons between whom losses would not be allowed under section 24 (b).
Decision will be entered for the respondent.
Footnotes
1. (b) Exclusions From Gross Income. -- The following items shall not be included in gross income and shall be exempt from taxation under this chapter:
* * * *
(3) Gifts, Bequests, Devises, and Inheritances. -- The value of property acquired by gift, bequest, devise, or inheritance. * * *↩