*2480 1. Where one agreed to reimburse a taxapyer for attention, care and nursing, and especially to do so by last will and testament and where he failed to pay and to keep the promise to provide by will, and where taxpayer, after his death, filed her action at common law to recover upon such promise the value of such services, and recovered thereon, held that the amount recovered is income within the meaning of the Sixteenth Amendment to the Constitution and is taxable income within the meaning of section 213 of the Revenue Act of 1921.
2. Where the period during which such services were alleged to have been rendered began in April, 1911, and ended in November, 1921, and where the recovery was in a lump sum and where petitioner has not shown what part, if any, of the recovery is attributable to the period prior to March 1, 1913, and where the Commissioner has determined that the whole amount is taxable income, held that in the absence of evidence upon which a segregation can be made, the determination of the respondent is affirmed.
3. Where petitioners kept their accounts and made their returns on a cash receipts and disbursements basis, held that the whole amount*2481 recovered by the judgment is taxable in the year received.
*973 This proceeding involves the redetermination of a deficiency in income tax for the calendar year 1923 in the amount of $1,614.23. It is alleged in the petition that respondent erred (1) in holding that the amount of a verdict obtained in an action to enforce a contract to devise property is taxable income in the year received; (2) in failing to hold that a verdict in an action to enforce a contract to bequeath property is not taxable but stands in lieu of a bequest or devise; (3) in holding that the verdict, if taxable, is taxable during the year 1923, error being that if taxable at all, it should be distributed over the period of 1911 to 1921; (4) in failing to hold that the value of the services rendered prior to February 28, 1913, which was included in the verdict, was nontaxable, and (5) in holding that the total amount of the verdict, less attorney's fee, to wit, $19,937, constitutes taxable income for the year 1923.
This proceeding was submitted on the*2482 pleadings and an exhibit filed by petitioners, which consisted of copies of the complaint and summons in the case of Lillie S. Blease v. John R. Abney, Exr. of Benjamin L. Abney, of a copy of the answer in the same cause and of a copy of a judgment rendered therein, and an exhibit filed by respondent which consisted of the original income-tax return filed by petitioners for the calendar year 1923. From the pleadings and exhibits we make the following finding of fact.
FINDINGS OF FACT.
Petitioners are citizens and residents of Columbia, County of Richland, State of South Carolina.
*974 The complaint and summons in the action Lillie S. Blease v. John R. Abney, Exr. of Benjamin L. Abney, read:
STATE OF SOUTH CAROLINA COUNTY OF RICHLAND
IN THE COURT OF COMMON PLEAS.
Lillie S. Blease, Plaintiff, vs. John R. Abney, Exr. of Benjamin L. Abney, Defendant.
COMPLAINT L. Abney, Defendant. COMPLAINT
Plaintiff above named, complaining of the above named defendant, alleges:
1. That Benjamin L. Abney died in the County of Richland, State of South Carolina, on or about the 11th day of November, A.D. 1921; and upon information and belief, that the defendant*2483 John R. Abney is the duly appointed and qualified executor of said Benjamin L. Abney, deceased, having been so appointed by the Probate Judge of Richland County, State aforesaid.
2. That on or about the day of April, 1911, the said Benjamin L. Abney came to the home of plaintiff and resided at and made his home with said plaintiff from said time to the date of his death, in November, 1921.
3. That during the same time the plaintiff, at the request of said Benjamin L. Abney, deceased, rendered and furnished to him constant, arduous and exacting attention, care, labor and services.
4. That a considerable part of said time the said decedent was sick, nervous and irritable; demanded and required tactful, difficult and constant care, attention, service and nursing; and plaintiff rendered to said decedent (at much personal sacrifice to herself, use and expenditure of bodily health, strength and vigor) the attentions and care necessary to meet his needs and demands, and to make his home and life comfortable, to relieve as far as possible his nervous, irritable nature and condition.
5. That said decedent promised and agreed (constantly repeating and renewing said promises and*2484 agreement from time to time) to pay and compensate plaintiff for such services, and especially to make ample provision at his death by Will, to compensate her for such services, the legal and moral obligation of which he constantly recognized and highly valued and appreciated.
6. That said decedent failed and neglected to carry out his contract, and to compensate plaintiff for said services.
7. That said services, labors and attentions so furnished by plaintiff to the said Benjamin L. Abney were of the value of and reasonably worth the sum of One Hundred Thousand ($100,000.00) Dollars.
8. That a verified bill and account for said services has been duly presented to the defendant, John R. Abney, as Executor of Benjamin L. Abney, and payment of same has been refused before the commencement of this action.
WHEREFORE plaintiff prays judgment against defendant for said sum of One Hundred Thousand ($100,000.00) Dollars, for costs and other and further relief.
(Signed) D. W. ROBINSON,
Attorney for Plaintiff.
STATE OF SOUTH CAROLINA, COUNTY OF RICHLAND.
IN THE COURT OF COMMON PLEAS.
Lillie S. Blease, Plaintiff, vs. John R. Abney, Exr. of Benjamin L. Abney, Defendant.
*2485 SUMMONS.
To the defendant above named:
You are hereby summoned and required to answer the complaint herein, a copy of which is herewith served upon you, and to serve a copy of your answer *975 to said complaint, upon the subscriber, D. W. Robinson, at his office, 908 Palmetto Building, Columbia, S.C., within twenty days after the service hereof, exclusive of the day of such service, and if you fail to answer the complaint within the time aforesaid plaintiff will apply to the Court for the relief demanded in the complaint.
D. W. ROBINSON,Attorney for Plaintiff.
November 18, 1922.
The said answer reads:
STATE OF SOUTH CAROLINA, COUNTY OF RICHLAND.
IN THE COURT OF COMMON PLEAS.
Lillie S. Blease, Plaintiff, vs. John R. Abney, Exr. of Benjamin L. Abney, Defendant.
ANSWER.
The amended answer of the above named defendant to the complaint of the above named plaintiff respectfully shows to the Court, on information and belief:
1. That said defendant admits the allegations contained in the paragraph of the complaint numbered "1" and with reference thereto he avers that he was qualified as executor of the will of Benjamin L. Abney, deceased, *2486 by the Probate Judge of Richland County, on the 10th day of January, 1922;
2. That he denies each and every of the allegations contained in the paragraphs of the complaint numbered "2," "3," "4," "5," "6" and "7."
For a second and separate defense.
3. That defendant reiterates and repeats the denials contained in the above paragraph of the amended answer numbered "2."
4. That in 1910 the plaintiff and her husband, Cole L. Blease, were residents of Newberry County; and defendant's testator, Benjamin L. Abney, who was then an eminent lawyer in the State resident at Columbia, rendered said husband and the plaintiff valuable services in supporting said husband as a candidate for the position of Governor of the State of South Carolina and helping to elevate him to that position, which said husband attained in the general election of that year.
5. That on or about the day of 1911, the plaintiff came to Columbia with her said husband to reside in the mansion known as the Governor's Mansion, which was the property of the State of South Carolina and was used as the residence of its Governors during their respective terms of office.
6. That at said last named time, the defendant's*2487 said testator resided in a comfortable residence owned by him, about one mile from Columbia, called by him "Abney Park," with a supply of servants and vehicles adequate to the place; and he also had in the City, at Wright's Hotel, a bed room and a bath room for his occasional use when he wished to stop in town, and at the northwest corner of Washington and Bull Streets a residence which he was renting out.
7. That on or about the day of 1911, the said Cole L. Blease and the plaintiff were desirous of having the benefit of the knowledge, opinions and advice of defendant's testator during said Cole L. Blease's administration as Governor of the State, and to that end they induced said testator to become an occupant of said Governor's Mansion with said Cole L. Blease.
8. That during said administration of said Cole L. Blease, and during a succeeding administration of his, the defendant's testator rendered valuable *976 services to and benefited said Cole L. Blease and plaintiff by way of counsel, advice and otherwise; and during the second administration of said Blease said testator rendered such services and benefits to said Blease and plaintiff, and in addition thereto*2488 said testator paid to the plaintiff sums of money for his board more than was usually charged for board in Columbia, and he paid other expenses; and he otherwise aided and benefited her and her family by lending money to her mother and deferring the payment of interest on a mortgage of $5,000.00 given therefor on the 3rd day of April, 1913, on a piece of land which has belonged to plaintiff and her two brothers since the death of the mother.
9. That during said two administrations, said testator had his own man servant to attend him; he had his own chauffeur to take him to his law office and to the trains, as he had need to travel in his large law practice, and to his said country place, which he continued to maintain and keep open for his use in entertaining his friends; and whenever he was sick and needed nursing he paid trained nurses for attending him.
10. That on the 22nd day of April, 1914, defendant's testator, out of his bounty, made a will which was his last will and testament and has been probated as such, wherein he devised to the plaintiff said house on the northwest corner of Washington and Bull Streets, in the City of Columbia, and the lot on which it stood being*2489 about 60 feet on Washington Street and about 146 feet on Bull Street.
11. That on the expiration of said administrations of said Cole L. Blease, said testator took said Blease and the plaintiff to live with him in said last named house and gave them shelter, and he paid plaintiff a higher rate for his board than was usual in the City; he paid at least a part of the expenses of the house, such as repairs, lighting, coal and wood; he continued to have his own man servant; and he lent plaintiff money and gave her presents until the 20th day of June, 1917.
12. That on or about the 20th day of June, 1917, the plaintiff caused defendant's testator to convey to her the said last named house and lot before his death by a deed thereof to her on said day, without paying him anything therefor; and she now owns the same both by deed and will.
13. That thereafter the same arrangements between defendant's testator and the plaintiff continued to exist as before, until the death of defendant's testator; he paid for trained nurses, extra servants, and doctors on the different occasions when he was ill, and other expenses of illness; he loaned her money and made her presents; and said testator*2490 paid plaintiff for his board and other expenses monthly until October 4, 1921, when he paid her for the month of September, 1921, and on October 17, 1921, he paid her for coal, wood and kinding the sum of $80.00.
14. That after said testator's death and the probate of said will on the 10th day of January, 1922, the plaintiff's husband, Cole L. Blease, in his own name, and with her knowledge presented to defendant a bill for board of said testator for the month of October, 1921, and the expenses of servants during said testator's illness, and of Renovating his bed room, and refused to receive defendant's check for more, which was tendered him, and he said to defendant that if defendant paid the amount of the bill rendered, everything would be satisfactory and all right; and thereupon defendant paid him the amount charged, to-wit, the sum of $321.15, which was $115.00 less than the amount sent him by defendant.
15. That a few months prior to the death of said testator, to-wit, on or about the 29th day of August, 1921, plaintiff caused him to convey to her a *977 strip of land about 10 feet wide on Bull Street, running by and along the line of said lot on the north-west*2491 corner of Washington and Bull Streets, a distance of about 62 1/2 feet, by a deed therefor, without paying him anything therefor.
16. That defendant's testator had a widowed sister, partially dependent upon him for a support, a niece and nephew, daughter and son of a predeceased sister, who were invalids and almost entirely dependent upon him for support, and also two other nieces and nephews, daughters and son of said last named sister interested, and also three nieces, daughters of a predeceased brother, who were objects of donations from him, all of which the plaintiff well knew.
17. That said testator continued his practice as a lawyer until the 30th day of October, 1921, when his last illness began, and he died on the 11th day of November, 1921.
18. That by reason of all the foregoing facts, the plaintiff is estopped from claiming that said testator broke any contract with her, express or implied, and from bringing this action.
For a third and separate defense.
19. That defendant repeats and reiterates the denials contained in the above paragraph numbered "2."
20. That on the 20th day of June, 1917, the defendant's testator conveyed by deed to plaintiff a*2492 house and lot about 60 feet wide by about 146 feet deep, on the north-west corner of Washington and Bull Streets, in the City of Columbia, worth from $20,000.00 to $30,000.00, for and in consideration of the sum of $10,000.00, which conveyance constituted an accord and satisfaction of all the claim or claims that plaintiff had or might have against defendant's testator.
For a fourth and separate defense.
21. That defendant repeats and reiterates the denials contained in the above paragraph of this amended answer numbered "2."
22. That on or about the 29th day of August, 1921, the defendant's testator conveyed by deed to plaintiff a strip of land on Bull Street, in the City of Columbia, and adjoining the house and lot at the north-west corner of Washington and Bull Streets, about 10 feet wide on Bull Street, running along and adjoining plaintiff's said lot a depth of about 62 1/2 feet, without plaintiff paying anything therefor which conveyance constituted an accord and satisfaction of all the claim or claims that plaintiff had or might have against defendant's testator.
For a fifth and separate defense.
23. That defendant repeats and reiterates the denials contained*2493 in the above paragraph of this amended answer numbered "2."
24. That defendant's testator, Benjamin L. Abney, before his death, paid to plaintiff the full value of all services rendered by her to him up to the 30th day of September, 1921; and on or about the 16th day of January, 1922, this defendant paid the full amount of the claim presented to him as executor of the estate of said testator for the balance due and owing by said testator after said 30th day of September, 1922, which was the full value of the plaintiff's services.
For a sixth and separate defense.
25. That defendant repeats and reiterates the denials contained in the above paragraph of this amended answer numbered "2."
26. That this action was not commenced within six years after the alleged cause of action accrued; and it is barred by the Statute of Limitations in such case made and provided.
For a seventh and separate defense.
27. That defendant repeats and reiterates the denials contained in the above paragraph of this amended answer numbered "2."
*978 28. That this action was not commenced within ten years after the alleged cause of action accrued; and it is barred by the Statute of*2494 Limitations in such case made and provided.
WHEREFORE the defendant prays judgment that the complaint be dismissed with costs to the defendant.
(Signed) JOHN R. ABNEY
Execr. of Benjamin L. Abney.
Defendant in Person.
The said judgment reads:
STATE OF SOUTH CAROLINA
COURT OF COMMON PLEAS.
Lillie S. Blease, Plaintiff, vs. John R. Abney, Exr. of Benjamin L. Abney, Defendant.
JUDGMENT
A verdict having been rendered in this case on the 26th day of April, 1923, in favor of the plaintiff and against the defendant for the sum of Twenty-five Thousand ($25,000.00) Dollars, and the costs having been taxed herein May 3rd, 1923, it is, in accordance with said verdict and taxation of costs.
ADJUDGED
That the plaintiff, Lillie S. Blease, have judgment against the defendant John R. Abney, Executor of Benjamin L. Abney, for the sum of Twenty-five Thousand ($25,000.00) Dollars, together with the further sum of One Hundred and 65/100 ($100.65) Dollars, total amount of judgment Twenty-five Thousand One Hundred and 65/100 ($25,100.65) Dollars, with interest thereon from April 26th, 1923, at the legal rate of seven per cent. (7%).
(Signed) D. W. ROBINSON,
*2495 Attorney for Plaintiff.
Signed, sealed, entered and enrolled May 4th, 1923 (Signed) C. E. HINNANT, C.C.C.P. & G.S.
(Roll No. 15531)
The amount of the above judgment was paid in the year 1923 by the Executor of Benjamin L. Abney, deceased, to petitioner Lillie S. Blease.
On March 15, 1924, petitioner Cole L. Blease and his wife, petitioner Lillie S. Blease, made and filed with the Collector of Internal Revenue for the District of South Carolina, their joint income-tax returns for the calendar year 1923, in which it was stated that the profession of petitioner Cole L. Blease was that of a lawyer. In said return, petitioners returned as gross income only income from business or profession and income from interest on bank deposits, notes, mortgages and corporation bonds. From this amount petitioners took deductions for interest paid, taxes paid (state, county and city) and contributions made during the year. Respondent determined that the net amount of $19,937 received on the judgment *979 above set forth was additional gross income for the year 1923. The amount of $19,937 was computed by deducting from the total amount of the judgment, to wit, $25,100.65, costs*2496 amounting to $163.65, and attorney's fee amounting to $5,000.
Petitioners made their returns and reported their income on a cash receipts and disbursements basis.
OPINION.
MILLIKEN: In the brief filed in behalf of petitioners, the following contentions are made:
1. Unless the tax here levied is imposed by clear and express words of the statute it can not be sustained.
2. Damages for breach of contract to devise should be considered as a devise and not taxable income for the year in which it was received.
3. In any event the proportionate part of the verdict representing services prior to March 1, 1913, can not be taxed, as the first Income Tax Law and the Sixteenth Amendment are not retroactive.
4. If the verdict in this case is taxable income the income should be distributed over the period of ten years in which the services were rendered and not taxed as a whole for the year 1923.
The first and second contentions will be disposed of together. The material parts of section 213 of the Revenue Act of 1921 read:
SEC. 213. That for the purposes of this title (except as otherwise provided in section 233) the term "gross income" - (a) Includes gains, profits, *2497 and income derived from salaries, wages, or compensation for personal service * * * or gains or profits and income derived from any source whatever. The amount of all such items (except as provided in subdivision (e) of section 201) shall be included in the gross income for the taxable year in which received by the taxpayer, unless under methods of accounting permitted under subdivision (b) of section 212, any such amounts are to be properly accounted for as of a different period; but
(b) Does not include the following items, which shall be exempt from taxation under this title:
* * *
(3) The value of property acquired by gift, bequest, devise, or descent (but the income from such property shall be included in gross income);
In the complaint in Blease v. Abney, Executor, it is alleged that the decedent, Benjamin L. Abney, hereafter referred to as the testator, made his home with petitioner Lillie S. Blease, hereafter referred to as complainant, and while so living with her and at his request she "rendered and furnished to him constant, arduous and exacting attention, care, labor and services" and further that "said services, labors and attentions so furnished by plaintiff*2498 to the said Benjamin L. Abney were of the value of and reasonably worth the sum of One Hundred Thousand ($100,000.00) Dollars." Laying to one side for the moment the petitioners' allegation relative to testator's *980 making provision by will for the payment of this obligation, it is obvious that this proceeding falls within the literal provisions of section 213(a) and that the compensation recovered for the services rendered by complainant to testator constituted gross income as therein defined. Such compensation also falls within the term "income" as defined in Eisner v. Macomber,252 U.S. 189">252 U.S. 189. This brings us to the question whether the amount recovered falls within the exception provided by section 213(b)(3). It is at one apparent that the amount thus recovered was not acquired by gift nor by devise (for no realty is involved) nor by descent. Was it then in the nature of a bequest?
Before discussing the question thus presented, it is proper to state that petitioners in the brief filed in their behalf have referred us to United States v. Merriam,265 U.S. 179">265 U.S. 179, and argue: "If devises in lieu of executors' commissions are not taxable, *2499 then a devise by Mr. Abney in lieu of services already performed by Mrs. Blease would not be taxable." In the Merriam case, the Supreme Court held that certain legatees who were given legacies in varying amounts and who were by another clause of the will appointed executors with the provision that the bequests made to them should be in lieu of compensation as executors, were entitled to their legacies on condition only that they qualify as executors and prove the will. The court said:
* * * The distinction to be drawn is between compensation fixed by will for services to be rendered by the executor and a legacy to one upon the implied condition that he shall clothe himself with the character of executor. In the former case he must perform the service to earn the compensation. In the latter case he need do no more than in good faith comply with the condition in order to receive the bequest; and in that view the further provision that the bequest shall be in lieu of commissions is, in effect, nothing more than an expression of the testator's will that the executor shall not receive statutory allowance for the services he may render.
*2500 In Ream v. Bowers (C.C.A.), 22 Fed.(2d) 465, the facts were that the decedent bequeathed each of his executors the sum of $50,000 "for acting as executors of this my will, * * *." The court, after referring to United States v. Merriam, supra, held that the amounts received by the executors were subject to Federal income tax. To the same effect, see Grant v. Rose (D.C.), 24 Fed.(2d) 115. Cf. Irwin v. Gavit,268 U.S. 161">268 U.S. 161. It might well be contended that if a legacy bequeathed in payment for future services is taxable, so also is a legacy to pay for past services. Without deciding this question, we pass to the facts of this proceeding.
The trouble here is that it is alleged that the testator made no provision in his will for the compensation of complainant. On this point, petitioners, in the brief filed in their behalf, contend:
*981 The verdict in the case of Blease v. Abney had the effect of requiring the Abney estate to specifically perform Mr. Abney's contract to devise. It would seem to follow, therefore that the verdict is no more taxable than the bequest.
The purport of*2501 this argument is that testator agreed to devise or bequeath something to complainant in compensation for her services, that he failed to do so, and that complainant has by proceeding in court compelled testator's executors to specifically perform the contract. In our opinion, what complainant has done was not to sue for specific performance but for breach of contract. The complaint sets forth the character of the services and the fact that they were rendered at the request of testator. The promise and breach are thus alleged:
That said decedent promised and agreed (constantly repeating and renewing said promises and agreement from time to time) to pay and compensate plaintiff for such services, and especially to make ample provision at his death by Will, to compensate her for such services, the legal and moral obligation of which he constantly recognized and highly valued and appreciated.
That said decedent failed and neglected to carry out his contract and to compensate plaintiff for said services.
The prayer is as follows:
WHEREFORE plaintiff prays judgment against defendant for said sum of One Hundred Thousand ($100,000.00) Dollars for costs and other and further relief.
*2502 It is not alleged that testator promised and agreed to devise or bequeath to complainant the whole or any particular part or amount of his estate. For this reason this proceeding is unlike Bruce v. Moon,57 S.C. 60">57 S.C. 60; 35 S.E. 415">35 S.E. 415, and similar cases. In the Moon case, one Moon agreed to devise and bequeath to one Hattie Bruce all that he possessed at the time of his death, in consideration of her caring for him. In violation of his promise he conveyed his farm to his son as a gift, his son having notice of the agreement with Mrs. Bruce. Mrs. Bruce proceeded in equity against the son, praying that he be held to hold the farm in trust for her. This the court decreed, basing its authority on the power of equity to decree specific performance. Here complainant did not proceed in a court of equity but in a court of law. She did not seek specific performance or any other equitable remedy. Complainant proceeded at law and sought and recovered only a money judgment which gave to her a claim, as we believe, superior to that of any legatee or devisee. As we read the complaint, testator's promise to pay was unconditional and the promise to make ample*2503 provision by will had to do only with the time and method of payment. The allegation is that "decedent promised and agreed (constantly repeating and renewing said promise and agreement from time to time) to pay and compensate plaintiff for such services, * * *." This was ample for a complete cause of action. To this allegation complainant added "and especially to make ample provision *982 at his death by will * * *," thus pointing out one or perhaps the only method of payment. From the record before us, it is impossible to discover whether complainant recovered on the general or the specific promise or on both. If petitioners expect to obtain relief in this proceeding on the ground that complainant recovered solely on the promise to provide for her by will, the burden rests upon them to show that such was the case. This burden they have not sustained.
However, admitting for the purpose of this opinion that the recovery was had solely on the ground that testator breached his contract "to make ample provision at his death by will," we are still of opinion that the amount recovered is income within the meaning of the Revenue Act and of the Sixteenth Amendment. Thus in*2504 Exparte Simmons,247 U.S. 231">247 U.S. 231 the Supreme Court granted a mandamus to a United States District Court to compel that court to try at law a certain count in a complaint. In the particular count, it was alleged that a Mrs. Frank Leslie promised that if the plaintiff would perform certain personal services for her she would bequeath plaintiff the sum of $50,000; that plaintiff had performed the services, and that Mrs. Leslie had bequeathed the sum of only $10,000. She prayed judgment for the amount of $40,000. In granting the writ, the court said:
We do not find sufficient ground for the opinion of the judge in the New York decisions. No doubt alleged contracts to make a provision by will must be approached with great caution in the matter of proof, but there is no doubt that if proved they are valid so far as no statute intervenes. So much seems to be assumed by the order of the judge, and is the law we believe of New York as well as of other States and England. But if valid we see no reason why a contract to bequeath a certain sum should not give rise to an action for damages if broken, as certainly as a contract to pay the same sum in the contractor's life, *2505 or at the moment of the contractor's death. Parker v. Coburn, 10 Allen, 82. * * *
It thus appears that the court perceived no difference between a contract to pay during life and one to pay by means of a will. The same thought is thus stated in Schwab v. Pierro,43 Minn. 520">43 Minn. 520; 46 N.W. 71">46 N.W. 71, which was an action for breach of agreement to pay for services by will:
But the rule appears to be well established that where it is mutually understood that services are not to be rendered gratuitously, but to be compensated for in a particular way, then the law will permit a recovery of the reasonable value of such services, if the particular compensation contemplated is not made. Martin v. Wright,13 Wend. 463">13 Wend. 463; McRae v. McRae,3 Bradf. Sur. 204; Patterson v. Patterson,13 Johns. 379">13 Johns. 379; Quackenbush v. Ehle,5 Barb. 472">5 Barb. 472; Robinson v. Raynor,28 N.Y. 496">28 N.Y. 496. * * *
To the same effect is *2506 Stone v. Todd,49 N.J.L. 274">49 N.J.L. 274, 8 Atl. 300, where it is said:
*983 In this case the plaintiff came into the employment of the decedent as a stranger, and as his housekeeper. She performed valuable and meritorious services for many years, both in keeping his house and assisting him in farming work. She was industrious, frugal, and aided in the accumulation of his large property. He expressed to others in her presence his gratitude for her kindness and faithfulness, and his purpose to pay her for them. The mere fact that he intended to make a liberal provision for her by will, and so stated, will not defeat her recovery when he failed or neglected so to do. If it was their understanding that she should be paid, the intended will was but the method of paying an existing and admitted obligation to compensate for the services rendered, and, if he failed to pay in the manner indicated, the plaintiff is entitled to recover, as a creditor, for the value of her services. Robinson v. Raynor,28 N.Y. 494">28 N.Y. 494; *2507 Martin v. Wright, 13 Wend, 460; Lisk v. Sherman,25 Barb. 433">25 Barb. 433; Schouler, Ex'rs. 453.
From the foregoing it appears that by the judgment which she recovered complainant was placed upon the plane of a creditor of the estate of testator and as such her claim took precedence over legacies and devises. Such is the decision of the Court of Appeals of New York in Collier v. Rutledge,136 N.Y. 621">136 N.Y. 621; 32 N.E. 626">32 N.E. 626. In holding plaintiff in that case could recover as a creditor, the court said:
The contract between the plaintiff and the decedent, as found by the referee, was that for the additional services to be rendered by the plaintiff "he [the intestate] would provide for her in his will or by a codicil." This must be taken to have been the contract, since the finding is supported by evidence, and no question of variance was raised on the trial. The decedent made no testamentary provision for the plaintiff, and it is well settled that when services were rendered to a testator under a contract to make compensation therefor by will, and he dies, having made no provision therefor, the person rendering the services*2508 stands as a creditor of the estate, and may recover from his representatives the value of the services. Patterson v. Patterson,13 Johns. 379">13 Johns. 379; Martin v. Wright's Adm'rs.,13 Wend. 458">13 Wend. 458; Robinson v. Raynor,28 N.Y. 494">28 N.Y. 494; Reynolds v. Robinson,64 N.Y. 589">64 N.Y. 589. The contract excludes the idea that the services were gratuitous. It, however, fixes no rule by which the damages can be measured in case of default. What should be the extent of the provision is not expressed. It is, however, a reasonable implication that it should be compensatory, and that the provision not only shall be legal in form, but that the estate will be in a situation that in due course the provision made can be satisfied. Where a testator wholly fails to make the promised provision, there seems, in a case like this, to be no other rule of damages practicable except the value of the services. The contention that the plaintiff has lost nothing, because, if the contract had been performed, and provision had been made for her in the will, it would have been ineffectual by reason of the testator's insolvency, and that, therefore, she was*2509 entitled to nominal damages only, proceeds upon the mistaken construction that a mere illusory provision would satisfy the contract. The contract was to make compensation by will, not a mere provision for compensation, which could not be made available. The provision contemplated was an effectual provision, which would secure payment for the services. The main question was, we think, correctly decided.
The allegation in the complaint in Blease v. Abney, relative to the promise to make provision by will, reads, "and especially to make ample provision at his death by will, to compensate her for said *984 services, * * *." This allegation brings this case within the rule laid down in Collier v. Rutledge, supra. We are clearly of opinion that complainant participated in the estate of testator as a creditor and not as a legatee and that the amount recovered by her was compensation for services rendered and therefore income within the meaning of section 213(a) of the Revenue Act of 1921.
This brings us to petitioners' third contention, which is that "the proportionate part of the verdict representing services prior to March 1, 1913, can not be*2510 taxed, * * *." There is no allegation of fact in the petition relative to this error. Neither is there any evidence in the record bearing thereon. It is true that the copy of the complaint filed contains the allegation that testator on some unidentified day in April, 1911, came to plaintiff's home and remained there until his death in November, 1921, and that during this period the services alleged were rendered. This is denied by the answer, which, in addition to other defenses, contains the plea of the statute of limitations. Complainant recovered judgment for the sum of $25,000, which is precisely one-fourth of the amount sought to be recovered. What caused this reduction we do not know. Was compensation for the earlier services eliminated or was the amount sued for deemed excessive? We do not know. The complaint contains allegations relative to periods when testator was ill and to difficult care and nursing during such periods. When did these periods occur? Were they prior or subsequent to March 1, 1913, or both prior and subsequent thereto, and what, if any, was the amount recovered for such nursing and care, in addition to ordinary care and keep? We do not know. Was*2511 real estate devised and afterwards conveyed to complainant as alleged in the answer and was such devise or conveyance in consideration of services? We do not know. Neither by pleading nor evidence is any segregation made of the compensation recovered. There is no allegation in the complaint to the effect that any fixed or regular charges were made. On the contrary, complainant sued and recovered upon a quantum meruit. To attempt on the facts of this meager record to attribute any particular part of the recovery to the period prior to March 1, 1913, would be to indulge in speculation pure and simple. Thus it abundantly appears we can not make such segregation. This being true, we have presented solely the legal question whether upon the facts of the record any part, if attributable to such period, is or is not taxable. We have consistently refused to pass upon questions of law where the facts presented are insufficient to permit us to dispose of the issues raised. New England Trust Co. Trustee, etc.,13 B.T.A. 380">13 B.T.A. 380; *2512 B. Estes Vaughan,15 B.T.A. 596">15 B.T.A. 596; Ohio Clover Leaf Dairy Co.,8 B.T.A. 1249">8 B.T.A. 1249; and James R. Parkey et al.,16 B.T.A. 441">16 B.T.A. 441. In the absence of proper pleadings and of any evidence bearing on this contention, we are constrained to hold that there are not sufficient *985 facts before us upon which we could base a decision and therefore the action of respondent in this respect must be affirmed.
Petitioners' fourth contention is that, if taxable, the compensation should be distributed over the 10-year period during which it is alleged the services were rendered. Even if petitioners were entitled to this relief, we would be unable to apportion the amount recovered over the period during which it is alleged they were rendered, for the reasons just above set forth. There is no allegation in the complaint nor any evidence before us to the effect that complainant kept her books of account on an accrual basis. Petitioners made a joint return which discloses that the business or profession of petitioner, Cole L. Blease, was that of a lawyer. The only income returned was income from his profession and interest on bank deposits, notes, mortgages*2513 and corporation bonds. Lawyers do not usually keep their accounts on an accrual basis - neither do housewives. At any rate, the burden rests on petitioners to show error in this respect on the part of respondent and we have concluded and so found that petitioners kept their accounts and made their returns on a cash receipts and disbursements basis and therefore their income is taxable only in the year received. To hold otherwise would be to disregard the difference between the two systems of accounting. Cf. Jackson v. Smietanka (C.C.A.), 272 Fed. 970; Holbrook v. Moore,293 Fed. 264, and the unreported decision of Judge Lowell in District Court of the United States for the District of Massachusetts, in Forbes v. Nichols, decided July 28, 1927.
Upon the whole case we are of opinion that the action of respondent should be affirmed.
Reviewed by the Board.
Judgment will be entered for the respondent.