*168 Decision will be entered under Rule 50.
1. The taxpayer purchased all the shares of a corporation which acquired two farms and he thereafter made loans and advances to the corporation. Prior to 1932 the corporation had divested itself of the farms, retaining no assets, and mortgages on the farms, securing the taxpayer's loans, had been extinguished. The cost of the shares and the amount of the loans, held, not deductible in 1932 because shares and loans became worthless in prior years.
2. The taxpayer, a lawyer, was appointed special counsel for a state railroad commission at an annual salary. He continued his private law practice and, in handling cases assigned him by the state, exercised independent judgment. Held, the taxpayer was an independent contractor, not an officer or employee of the state, and his compensation for services as special counsel was not exempt from Federal income tax under the interpretation of the law prevailing in 1932.
3. Expenses claimed by the taxpayer as incurred and paid in connection with his practice of law, held, deductible as to some proved paid in 1932 and nondeductible as to others not so proved.
4. The taxpayer prepared his*169 1932 income tax return a few days after expiration of the period for filing, as extended, and prepared a check in the amount shown due and a statement explanatory of the delay. He left these papers with his secretary for mailing. The collector has no record of receiving them, and the check was never returned cashed. Held, that petitioner has failed to prove the filing of an income tax return for 1932, and imposition of the 25 per cent penalty for failure to file is approved. Sec. 291, Revenue Act of 1932.
*1032 The Commissioner determined a deficiency of $ 3,974.08 in petitioner's income tax for 1932 and a penalty of $ 993.52 for failure to file a return. Petitioner charges that the Commissioner erred (1) *170 in failing to deduct $ 24,000 from gross income on account of the alleged worthlessness of petitioner's shares in and loans to a corporation of which he was sole shareholder; (2) by including in taxable income compensation for services rendered as special attorney to the Railroad Commission of South Carolina; (3) by failing to deduct estimated business expenses; and (4) by asserting the 25 per cent delinquency penalty. Petitioner alleges that he mailed his 1932 tax return and adequately explained a delay in filing it. The Commissioner denies receipt.
FINDINGS OF FACT.
Petitioner, a resident of Columbia, South Carolina, normally files his income tax returns with the collector of internal revenue for the district of South Carolina. He reports income on the cash basis. He has been engaged in the practice of law at Columbia since 1915, and in 1932 received fees aggregating about $ 40,000. He was married in 1914 to May H. Belser, who died in 1942.
1. In August 1919 petitioner contracted to purchase 331 acres of farm land from W. W. DePriest for $ 20,000, and 424.05 acres from John W. Stewart for $ 21,202.50. In making these contracts he acted for R. B. Herbert, W. M. Manning, John*171 T. Sloan, and himself, who had agreed to and did organize the Fairview Farming Co. (hereinafter called the company) as a South Carolina corporation on December 11, 1919, to take title to these lands. The purpose of the company, as stated in its charter, was "to do a general farming business with power to sell, buy and mortgage real estate." Each of the 4 incorporators subscribed for 50 shares of stock of a par value of $ 100 a share, and each paid to the company $ 3,600 cash and gave his note for $ 1,400.
On January 6, 1920, DePriest conveyed the 331-acre tract to the company, *1033 which paid him $ 6,666.67 cash and gave him a mortgage on the property to secure payment of the remaining $ 13,333.33. On March 12, 1920, Stewart conveyed the 424-acre tract to the company, which paid him the $ 21,202.50 in cash. The funds needed beyond the company's capital were supplied by a loan of $ 10,000 from a Winnsboro, South Carolina, bank, secured by a mortgage on the Stewart tract, and by petitioner, who borrowed $ 12,000 from the Homestead Building & Loan Co., securing repayment by a mortgage on his home. Of the authorized capital of $ 25,000 represented by 250 shares, the company *172 issued a certificate for 50 shares to each of the four incorporators on March 25, 1920, and on the same day Herbert and Sloan assigned their shares to petitioner, and Manning assigned his to petitioner's wife, but petitioner was beneficial owner. Each transferee received from petitioner $ 3,600 in cash and petitioner's note for $ 1,500 as consideration for the assignment, but because of petitioner's subsequent financial difficulties payment of the notes was forgiven by the creditors. The two tracts of land were the only assets that the company ever owned.
In 1921 the company borrowed $ 1,000 from petitioner, giving him a second mortgage on the DePriest tract, and petitioner borrowed $ 5,000 from his brother-in-law, which loan was secured by a third mortgage on the DePriest tract. The money procured was applied by the company to partial payment of the first mortgage note held by DePriest. When a further installment of the purchase price became due in 1922, petitioner and his wife, as sole directors and stockholders of the company, by resolution approved a sale of the tract to petitioner for $ 5 "for the purpose of facilitating a loan to take up the purchase money mortgage" and in*173 view of the company's indebtedness to petitioner. The company conveyed the tract to petitioner by deed dated July 27, 1922, and on July 31, 1922, he conveyed it by mortgage deed to the First Carolinas Joint Stock Land Bank, to secure a loan of $ 7,200, which was used to pay off the purchase price.
When the $ 10,000 note due the Winnsboro bank matured, the company paid off the debt by a $ 10,000 loan from the Fidelity Mutual Life Insurance Co., conveying the Stewart tract to the latter by a mortgage deed of December 4, 1920, to secure payment. On December 15, 1920, the company gave petitioner a second mortgage deed to this property to secure a $ 5,000 loan from him, and on January 27, 1923, gave petitioner a third mortgage deed to this property to secure a $ 3,500 loan from him.
While the company was borrowing money secured by mortgages on the two tracts, petitioner was using its shares as collateral for loans to him, individually. On November 30, 1921, he gave to the National Loan & Exchange Bank his notes for $ 14,350, $ 5,000, $ 1,661.04, and $ 150, respectively, all payable in one year and secured by 100 shares *1034 of the company, 125 shares of Clarendon Farms, Inc., *174 the $ 5,000 note, due him, covered by a second mortgage on the Stewart tract, and certain share-cropping agreements. While the 100 shares of the corporation were thus pledged as collateral, petitioner on March 14, 1922, had its authorized capital reduced to $ 5,000, but he neither notified the bank of this act nor canceled any certificates. He defaulted on payment of all the notes, the bank sued, and on June 27, 1923, the court gave judgment against him for principal of $ 21,161.04, interest of $ 963.48, attorney's fees of $ 250, and costs of $ 7.40, or a total of $ 22,381.92, and ordered that if the judgment were unsatisfied within 90 days the collateral be sold. On January 15, 1924, the company deeded to the bank the Stewart tract, subject to the $ 10,000 first mortgage, the $ 5,000 second mortgage, which latter the bank held as collateral, and the $ 3,500 third mortgage.
On December 22, 1926, the corporation's charter was canceled by the Secretary of State of South Carolina for nonpayment of the capital stock tax.
On July 6, 1929, petitioner paid the bank $ 1,000 on the judgment and the bank agreed that if he should pay $ 500 more by November 1, 1929, it would convey the Stewart*175 tract to any person or corporation designated by him for the grantee's note of $ 18,500, secured by a first mortgage on the tract. The agreement contemplated removal of other mortgage liens; referred to the total payments involved ($ 1,000, $ 500, and $ 18,500), or $ 20,000, as "the purchase price" of the tract, and provided further that if petitioner should pay the bank $ 5,000 (inclusive of the $ 1,000 and $ 500 referred to) by November 1, 1933, the bank, at petitioner's election, would either satisfy its judgment or assign the judgment to any person or corporation designated by petitioner. In order that the bank could secure a first mortgage on the tract, the parties agreed that petitioner either cancel or postpone the lien of the third mortgage, securing payment of the note for $ 3,500, and that the bank cancel and satisfy the first mortgage securing the $ 10,000 loan of the Fidelity Mutual Life Insurance Co., "as well as the mortgage of Fairview Farming Company to Irvine F. Belser, dated December 15, 1920," which secured petitioner's $ 5,000 loan to the company and which had been assigned to the bank. Petitioner formally declared the indebtedness of $ 3,500 satisfied and the*176 third mortgage discharged by instrument dated February 28, 1930.
Petitioner made the payments required by this agreement, and on February 28, 1930, organized the Fairview Co. (hereinafter called Fairview), as a South Carolina corporation to take title to the Stewart tract. He acquired all of its 100 shares of stock, having an aggregate par value of $ 1,000. On February 28, 1930, the bank conveyed to Fairview the Stewart tract, and on March 15, 1930, petitioner conveyed *1035 to Fairview the DePriest tract. Fairview's charter was canceled on December 10, 1930, for nonpayment of the capital stock tax.
In 1932 petitioner paid off the note secured by the Stewart tract; the bank released its mortgage, and on January 20, 1932, the bank assigned its judgment against petitioner to petitioner's brother, who acknowledged satisfaction and discharged the lien on June 14, 1939. The bank returned to petitioner the certificates for 100 shares of the corporation's stock. About 1934 Fairview conveyed the DePriest tract to petitioner's wife, and petitioner acquired it by devise upon her death in 1942. The $ 7,200 note, secured by a first mortgage on it, was assigned by the bank to petitioner's*177 brother on July 3, 1941, when the bank's note was paid, and by the brother to petitioner on September 14, 1942. On July 22, 1937, Fairview conveyed the Stewart tract to petitioner.
The corporation filed income tax returns for 1920, 1921, and 1922, reporting little income and no tax for 1920 and losses for 1921 and 1922. It filed a form for 1923 on which was written: "This company has entirely ceased to do business." Fairview filed a return for 1931, reporting $ 100 gross income and deducting $ 600 interest and $ 100 taxes.
The DePriest and Stewart tracts produce a good grade of upland cotton, which was being sold in 1919 at about 40 cents a pound, and all four organizers of the company expected to profit from their investment. But in 1920 the boll weevil attacked the area, with disastrous consequences to crops and the value of farm land, and in addition the price of cotton began to fall, dropping to about 11 cents a pound by the middle of 1921. The price rose slowly to a high of 34.39 cents in December 1923; in and after 1926 it fluctuated below 20 cents; and during 1932 it fell to a low of 5 cents. The market value of land underwent corresponding fluctuations. The DePriest *178 and Stewart tracts in 1922 were worth about $ 10 an acre and in 1932 between $ 5 and $ 10 an acre.
On an "amended income tax return" for 1932, tendered to the collector on July 12, 1937, petitioner deducted a loss of $ 24,000 on his investment in the corporation. The Commissioner disallowed any deduction, on the ground that the corporation's stock "became worthless prior to the year 1932."
2. In May 1932 petitioner was appointed special counsel for the Railroad Commission of South Carolina, to serve one year at a salary of $ 2,400. This appointment was made by the State's Attorney General under section 4 (n), Power Regulatory Act, Act No. 871 or 1932 (Code of Laws of South Carolina, 1934 Supplement, para. 8555-4, § 14). His duties were to advise the commission on any matters arising; to prepare cases for it and represent it in court on litigation pending or that might arise during his employment; and to work in cooperation and *1036 harmony with the Attorney General, who had general supervision, but as a lawyer petitioner exercised his own judgment in handling cases assigned to him. During 1932 he received for his services compensation of $ 1,666.64. The Commissioner included*179 this compensation in petitioner's taxable income.
3. In 1927 petitioner was engaged by the State of South Carolina, the city of Columbia, and several other municipalities to force a street railway company to resume transportation service in Columbia and vicinity, which service it had discontinued because of alleged insolvency and inability to operate with profit. Petitioner associated with him in this case H. N. Edmunds, C. T. Graydon, and the firm of Nelson & Mullins. The litigation was protracted and involved many hearings and appeals, and the principal issues were decided by the Supreme Court of South Carolina in favor of petitioner's clients in July 1929 ( State v. Broad River Power Co., 157 S. C. 1; 153 S.E. 537">153 S. E. 537) and petition for writ of certiorari was dismissed by the United States Supreme Court in 1930 (281 U.S. 537">281 U.S. 537; 282 U.S. 187">282 U.S. 187), but corollary issues remained in litigation until some time in 1933. In a decision rendered December 16, 1931 ( State v. Broad River Power Co., 164 S. C. 208; 162 S. E. 74)*180 the State Supreme Court awarded $ 60,000 as the proper fee for the state's counsel payable by the defendant. The attorneys claimed expenses aggregating $ 5,608.24, of which the court approved a part and disapproved others aggregating about $ 2,500. The fee was paid in January 1932. As the city of Columbia had previously advanced $ 5,000 on account of fees, that amount was returned to it. The remaining $ 55,000 was divided by agreement among counsel, petitioner's share being 55 per cent, or $ 30,250, of which he paid to his brother $ 2,000, leaving $ 28,250 received by him.
In the course of the litigation petitioner incurred expenses, not approved by the court for reimbursement, on account of printing, travel, investigation, and extra stenographic work. Because of public interest in the case, he had judicial opinions and arguments printed for general distribution. He kept no precise record of all amounts and dates of payment, but recalls expenditures in 1932 of $ 133.50 and $ 364 for printing, at least $ 100 paid his secretary for overtime work, and $ 571.90 paid to the Legare Engineering Co. for professional services. He estimates that traveling expenses alone amounted to about*181 $ 1,800. Most of the travel was prior to 1932, and expenses connected with it were paid when incurred.
On an amended income tax return for 1932 filed July 12, 1937, petitioner reported gross income of $ 36,107.20 from law practice. This amount includes $ 26,500 representing his portion of the awarded fee, $ 28,250, which he reduced by $ 1,750, an estimate of the expenses paid by him and not approved for reimbursement by the court. He did not claim the full amount not approved because the city of Columbia *1037 "helped us in the payment of one of these bills." The Commissioner included in taxable income $ 28,950 as his share of the fee.
4. On March 14, 1933, petitioner requested in writing an extension of time for the filing of his income tax return for 1932. An extension to May 15 was granted by the collector at Columbia, and on subsequent requests the period was extended to September 15. Before September 15 petitioner requested by telephone a further extension, but the revenue agent in charge explained that no more time could be granted and suggested that petitioner submit an explanatory affidavit on filing the return late.
On September 27, 1933, petitioner prepared a return*182 for 1932, indicating a tax due of $ 59.92, and a letter of transmittal in which he stated that delay was due to his preparation and trial of an important case for the Railroad Commission; that he enclosed his check for $ 62.05, covering the tax due, and $ 2.10 interest. A notation on his check stubs, made by his secretary, indicates that a check for $ 62.05, payable to the collector of internal revenue, was drawn on September 27, 1933. Petitioner left the return and enclosures with his secretary for mailing. The check was never returned to him by the bank as cashed, and the Commissioner has no record of receipt of the return, letter, or check. On October 30, 1933, petitioner prepared a state income tax return, using the same figures and accompanied by the same explanations of deductions that were attached to his Federal return. The state return was received, and the enclosed check for the tax shown due was cashed.
In May 1935 a revenue agent called on petitioner to inquire why he had not filed a return for 1932. Petitioner insisted that he had filed one. In view of this attachment the collector's office procured from him successive consents, extending the period of assessment*183 until June 30, 1939. On July 12, 1937, petitioner tendered to the collector a copy of the return which he had prepared on September 27, 1933, and at the same time tendered an amended return for 1932, which, by excluding from taxable income the $ 1,664.64 compensation received as attorney for the Railroad Commission, indicated no tax due.
On January 11, 1939, the Commissioner mailed to petitioner notice of a determined deficiency of $ 3,974.08 in income tax for 1932 and of $ 993.52 penalty for failure to file a return within the time prescribed by law. The computation is based on the premise that no income was reported and no return filed, but because of conferences and correspondence with petitioner the Commissioner was fully aware of his deduction claims, and in the deficiency notice took cognizance thereof. In determining the deficiency, the Commissioner did not allow a deduction of $ 24,000 because of the worthlessness of the company's stock; he did allow deduction of a fee of $ 571.90 paid to the Legare Engineering Co.
*1038 OPINION.
1. Petitioner charges the Commissioner with error in failing to allow as a deduction "a loss sustained or bad debt obligations determined*184 to be worthless in the amount of $ 24,000, due to petitioner's investments in stock of the Fairview Farming Company and/or indebtedness due to him from the said corporation or growing out of certain real estate transactions involving the purchase of two tracts of land known as DePriest and Stewart tracts." He computes the $ 24,000 as follows:
| Investment in 200 shares of stock | $ 14,400 |
| Loan secured by second mortgage on Stewart tract | 5,000 |
| Loan secured by third mortgage on Stewart tract | 3,500 |
| Loan secured by second mortgage on DePriest tract | 1,000 |
| Advance on open account | 100 |
| Total invested and loaned | 24,000 |
The computation would appear to be an oversimplification of petitioner's investment in and loans to the company, but if the impact of numerous complicated transactions on the investment and loans is ignored, the record supports and we have found that, in acquiring the entire 200 shares issued, petitioner did pay for each 50 share certificate $ 3,600, or a total of $ 14,400, and he did make the three loans secured by mortgages, aggregating $ 9,500. There is no evidence regarding the $ 100 on open account.
To support the claimed deduction, petitioner must prove*185 that the shares and loans became worthless in 1932, and not in some prior year, as respondent argues. The question is one of fact, and the facts established, in our opinion, indicate conclusively that the shares and loans not only became worthless in a year prior to 1932, but also that the company had been effectively liquidated some time before the revocation of its charter in 1926. The only assets that it ever owned were the DePriest and Stewart tracts acquired by purchase in 1920 and encumbered by mortgages for $ 13,333.33 and $ 10,000, respectively, or over half of their aggregate price of $ 41,202.50. As only $ 14,400 cash is shown to have been paid into the company as capital (there being no evidence that the four stock subscribers' notes for $ 1,400 each were ever paid), it is to be inferred that petitioner advanced the approximate $ 3,500 additional paid for the tracts.
To hold the tracts, the company for a short time continued to borrow, mortgaging them as security. Then on July 27, 1922, it conveyed the DePriest tract to petitioner. It was then subject to a second mortgage to him, securing the $ 1,000 loan here in controversy, and to a third mortgage, securing a $ 5,000*186 loan. But on July 31, 1922, petitioner conveyed the tract by a first mortgage deed to a bank to secure *1039 a $ 7,200 loan used to pay off the balance of the purchase price. He conveyed it, still mortgaged, to Fairview in 1930; Fairview (after revocation of its charter) conveyed it to his wife in 1934; and petitioner acquired it by devise upon his wife's death in 1942.
The Stewart tract was the subject of similar shifts. Prior to 1924 it had been encumbered by a first mortgage to secure a $ 10,000 bank loan and to second and third mortgages to petitioner, securing the $ 5,000 and $ 3,500 loans here in controversy. After a judgment for $ 22,381.92 had been entered against petitioner in favor of the National Loan & Exchange Bank, which held the company's shares as collateral, petitioner had the company convey the Stewart tract to the bank on January 15, 1924, and there title remained until February 28, 1930, when, pursuant to the terms of petitioner's general settlement with the bank as judgment creditor, the bank conveyed the tract to Fairview on petitioner's undertaking to pay $ 20,000 to the bank "as purchase price," secured as to $ 18,500 by a first mortgage on the tract, *187 other mortgage liens on it being removed. On July 22, 1937, Fairview conveyed it to petitioner.
From this review of the facts, it is obvious that since January 15, 1924, the company has owned no assets whatever. When its charter was revoked in 1926, there was nothing to liquidate; the shares had no value, and no liquidator has since acquired anything for the payment of creditors as for liquidation. Recognizing these facts, petitioner argues that he "held lands and assets as trustee for the corporation's stockholders and creditors down to 1932," as is required of directors, after a corporation has been dissolved, by section 7710 of the Code of South Carolina, 1932. But obviously petitioner was not holding any lands or assets in 1932 as trustee or otherwise for the corporation. Both tracts were then held by Fairview, which had acquired one from petitioner and the other from a bank to which it had been transferred in consequence of a judgment not against the company, but against petitioner. We could believe that initially the conveyance of the DePriest tract to petitioner for facilitating a mortgage loan was in furtherance of the company's interest, but any inference that a fiduciary*188 character attached to his title is rebutted by the subsequent conveyance to Fairview. The tract was never reconveyed to the company, and petitioner did not again get title to it until his wife's death in 1942. The Stewart tract was conveyed to the bank, which obviously did not take title for the company's benefit, and the bank conveyed it to Fairview for a cash consideration paid by petitioner and described as "purchase price."
Petitioner contends on brief that his loans to the company were bad debts, deductible in 1932. The $ 1,000 loan was secured by a second mortgage on the DePriest tract, which petitioner acquired in 1922, and conveyed to Fairview eight years later. Under date of July 30, 1937, *1040 he wrote across the face of the bond and mortgage "Cancelled and charged off in 1932," but we have not based a finding on this exhibit, for the notation had no effect. By acquiring the mortgaged land in 1922, petitioner's mortgage interest became presumptively merged in his title to the fee, Thompson v. Hudgins, 161 S. C. 450; 159 S.E. 807">159 S. E. 807, and nothing shown rebuts the presumption. Gainey v. Anderson, 87 S. C. 47;*189 68 S. E. 888. On the contrary, he conveyed full title to the tract in 1930. The record does not disclose any affirmative act of cancellation, and indicates further that in 1932 there was nothing to cancel.
The loan for $ 5,000 was secured by a second mortgage on the Stewart tract, which petitioner in 1937 likewise marked "Redeemed and Cancelled and Charged off in 1932," but we can not find that this was done in 1932. The mortgage note was included in the collateral placed with the bank in 1921 for security of petitioner's personal loans. In the settlement agreement of July 6, 1929, the bank agreed to convey the Stewart tract to petitioner's appointee, subject to a first mortgage in its favor securing payment of $ 18,500, and to cancel and satisfy the first mortgage of the insurance company, dated December 4, 1920, "as well as the mortgage of Fairview Farming Company to Irvine F. Belser, dated December 15, 1920" for $ 5,000. Petitioner in turn agreed to cancel the third mortgage on the tract, securing payment of the company's note to him for $ 3,500, and he did so on February 28, 1930.
It is thus apparent that by February 28, 1930, all three mortgages*190 were canceled or extinguished, and petitioner had no security for his three loans. As the corporation had no property and never acquired any later, petitioner's loans to it and his investment in stock became worthless prior to 1932.
In reaching this conclusion, we find it unnecessary to consider petitioner's evidence to the general effect that the price of cotton and value of real estate were very low in 1932, so that, as he argues, the worthlessness of his shares and mortgage notes occurred in that year. And we find no merit in his contention that the several conveyances by him were void as a breach of trust against creditors and shareholders. He was sole shareholder and, after 1930, so far as shown, there were no creditors except himself.
The Commissioner correctly failed to allow any deduction in 1932 on account of petitioner's investment in and loans to the company.
2. Petitioner assails the Commissioner's inclusion in taxable income of $ 1,666.64 which he received from the State of South Carolina in 1932 as compensation for services rendered as special counsel for the State's Railroad Commission. Prior to the decisions of the Supreme Court in Helvering v. Gerhardt (1938), 304 U.S. 405">304 U.S. 405,*191 and Graves v. People of State of N. Y. ex rel. O'Keefe (1939), 306 U.S. 466">306 U.S. 466, compensation *1041 paid to officers or employees of a state government were not subject to tax by the Federal Government, and vice versa. After those decisions, this limitation on the taxing power was no longer recognized. By Title II, section 201, of the Public Salary Tax Act of 1939, 53 Stat. 574, however, Congress provided for the abatement, credit, or refund of income tax upon "compensation for personal service as an officer or employee of a state," received prior to 1938. But:
* * * The Act did not create an immunity from federal taxation, but merely protected one which had existed under abandoned interpretations of the law. Coates v.United States, supra [11 Fed. (2d) 609 (C. C. A., 2d Cir.)]; Meigs v. United States, 1 Cir., 115 Fed. 2d 13; La Rochelle v. Commissioner, supra [115 Fed. (2d) 878 (C. C. A., 7th Cir.)]. [Lohman v. Commissioner (C. C. A., 8th Cir.), 133 Fed. (2d) 977.]
We shall, therefore, consider whether or not the salary received by petitioner was tax-exempt*192 under the interpretations prevailing in 1932.
The evidence indicates that he was appointed by the Attorney General to advise the Railroad Commission on any matters arising and to represent it in litigation. He was subject to general supervision of the Attorney General, but, as a lawyer, exercised independent judgment in handling the cases assigned him. He remained engaged in private law practice, and the compensation paid him by the state was only a small part of his professional earnings for the year. On this showing we must deem him not a state officer or employee, but an independent contractor with the state, and as such his compensation was not exempt in 1932. Cf. Metcalf & Eddy v. Mitchell, 269 U.S. 514">269 U.S. 514; Commissioner v. Modjeski (C. C. A., 2d Cir.), 75 Fed. (2d) 468; Register v. Commissioner (C. C. A., 5th Cir.), 69 Fed. (2d) 607; Haight v. Commissioner (C. C. A., 7th Cir.), 52 Fed. (2d) 779; Burnet v. McDonough (C. C. A., 8th Cir.), 46 Fed. (2d) 944; Blair v. Byers (C. C. A., 8th Cir.), 35 Fed. (2d) 326;*193 J. E. Huckabay, 40 B. T. A. 9.
3. Petitioner contests the determination that he derived $ 28,950 as a fee for representing the State of South Carolina, the city of Columbia, and other municipalities in litigation to force a street railway company to resume transportation service, alleging that the correct taxable amount is $ 26,500. He was one of several attorneys engaged; the litigation extended over a period of six years, ending in 1933; it involved many hearings, and corollary issues arose after the principal issue was decided. On December 16, 1931, the State Supreme Court approved a fee of $ 60,000 for legal services rendered to the state and city, chargeable against the defendant, and by agreement among the attorneys petitioner's share was fixed at 55 per cent. The fee was paid in 1932, but as $ 5,000 had been previously advanced by the city, this amount was refunded, leaving $ 55,000 for division and $ 30,250 as *1042 petitioner's share, from which he paid his brother $ 2,000 for services and retained $ 28,250 himself.
He contends, however, that from this amount $ 1,750 should be deducted as representing expenses paid and incurred by him*194 which the court disapproved for reimbursement, although it did approve others. As framed, the issue requires a determination of gross fee rather than deductions for expenses. We have found that the amount which petitioner received in the division of the fee was $ 700 less than the Commissioner determined, but, since all of the amount was awarded as compensation and no part of it as reimbursement for expenses, a disposition of the question presented involves petitioner's right to a deduction. He offered, however, no itemized list of disbursements, but, after specifying two printing bills aggregating $ 497.50, extra compensation of $ 100 to his secretary, and an engineering bill of $ 571.90 (which the deficiency notice shows has in fact been allowed), petitioner estimated that his travel expenses alone amounted to about $ 1,800, and he urges the Court to accept the figure of $ 1,750 as a very modest and conservative claim.
To support the right to a deduction of expenses, the taxpayer should furnish proof as full and definite as is reasonably possible. His mere estimate of amounts claimed and opinion testimony that such amounts are proper business expenses fall short of the full *195 disclosure of facts which is normally requisite to warrant a finding in his favor. Birmbaum v. Commissioner (C. C. A., 7th Cir.), 117 Fed. (2d) 395; O'Laughlin v. Helvering, 65 D. C. App. 135; 81 Fed. (2d) 269; Charles P. Noell, 21 B. T. A. 1107. The rigidity of this rule, however, has been relaxed in many cases wherein the evidence establishes conclusively that a taxpayer did incur and pay business expenses in the taxable year, but has no records to prove the exact amount. Cohan v. Commissioner (C. C. A., 2d Cir.), 39 Fed. (2d) 540; Maurice P. O'Meara, 8 T. C. 622; Lucien I. Yeomans, 5 T. C. 870; John J. Ide, 43 B. T. A. 799. Under such circumstances, the court:
* * * should consider all the evidence in the light of its general experience and make such allowance for the sums expended as it conscientiously feels would represent fair and reasonable expenses for such ordinary and necessary purposes in the circumstances of the taxpayer's*196 business. * * * [Rugel v. Commissioner (C. C. A., 8th Cir.), 127 Fed. (2d) 393.]
We can readily believe that petitioner did incur and pay substantial expenses on account of printing, travel, investigation, and stenographic work in the course of the litigation. But, for estimating the amount or accepting his estimate, we are confronted with the fact that the expenses claimed are only those which the South Carolina Supreme Court did not approve as chargeable against the defendant and which presumably had been at least incurred when its decision *1043 was rendered in December 1931 and hence prior to the taxable year 1932. As petitioner reports income on the cash basis, expenses paid prior to 1932 are not deductible. The litigation had begun in 1927, and by the end of 1931 it was nearing completion. It strains credulity to believe that any substantial part of the expenses remained unpaid for years. Indeed, petitioner admitted that most of the travel expense (estimated at $ 1,800) were incurred and paid before 1932.
We can make no estimate whatever on this record, for not only do we lack evidence of amount, but doubt is cast on the character*197 of the expenses as ordinary and necessary by the court's disallowance of them, and we are convinced that the greater part, e. g., the travel expense, was paid prior to 1932, despite petitioner's statement that he "actually paid out most of it that same year 1932." We do find and hold, however, that the $ 497.50 for printing and $ 100 extra compensation for his secretary, which he recalled specifically among bills paid in 1932, are deductible, and we further hold that the portion of the $ 60,000 fee received by petitioner was $ 28,250 and not $ 28,950, as determined.
4. Petitioner contests the 25 per cent delinquency penalty which the Commissioner proposes to assess by virtue of section 291, Internal Revenue Code, on the ground that petitioner "failed to file an income tax return within the time prescribed by law." Section 291, Revenue Act of 1932, imposed the penalty in case of a taxpayer's failure to file:
* * * except that when a return is filed after such time and it is shown that the failure to file it was due to reasonable cause and not due to willful neglect no such addition shall be made to the tax. * * *
On March 14, 1933, the day before the final date for filing, petitioner*198 requested and procured from the collector a month's extension of time, and by subsequent requests the period for filing was extended to September 15, 1933. Being then busily engaged in the preparation and trial of an important case, he requested a further extension, which could not be granted, but the revenue agent suggested that he submit an explanatory affidavit on filing the return late.
Petitioner introduced persuasive evidence that he prepared a 1932 return on September 27, 1933. This evidence consisted of rough pencil entries on a return form, said to be the original draft; a work sheet of computations showing figures appearing on the draft; carbon copy of four pages explanatory of deductions claimed, attached to the draft; carbon copy of a letter, addressed to the collector and dated September 27, 1933, referring to the refusal to extend time and the suggestion that an affidavit be filed with a later return. At the bottom of the letter is a form of oath as to the truth of the statements in the letter with provision for notarial service; an entry on a check stub indicates that a check for the amount of the tax shown due plus interest was drawn in *1044 the collector's*199 favor on September 27, 1933, and reference to the check appears in the carbon copy of the letter.
We do not doubt that a return was prepared at the time alleged, but evidence that it was mailed is not convincing. Petitioner's secretary testified that she "probably would have mailed it right away, the same day. In fact, I'm sure I would have." And, while she made an affidavit in 1935 that she had dropped it in a mail box at the National Loan & Exchange Bank, the qualified manner of her testimony on the witness stand indicates rather an inference of mailing based on her custom in the discharge of duties rather than specific recollection in respect of this item. When the revenue agent made inquiry about the 1932 return in 1935, she made a search for the check and inquired at the bank, but found no evidence that the check had been presented or cashed, and petitioner has not produced the canceled check or any bank statement showing a charge of his account in the amount of the check. About two years after the revenue agent's call and in 1937 petitioner tendered a 1932 return, showing the same tax due as indicated on the pencil-filled form offered in evidence, and at the same time an*200 amended return which showed no tax due for 1932 by elimination of the $ 1,666.64 received from the state, as nontaxable income. These tendered returns were stamped received by the collector on July 12, 1937, but were not used as a basis for determination of the deficiency, it being stated in the notice that no return was filed.
In support of his contention that a 1932 return was filed on September 27, 1933, petitioner cites Crude Oil Corporation of America v. Commissioner, 161 Fed. (2d) 809, in which the Circuit Court of Appeals for the Tenth Circuit, reversing 6 T. C. 648, held that the presumption of correctness attaching to the Commissioner's determination was overcome by a presumption that a mailed return had been delivered to the collector. As we can not affirmatively find that petitioner's return was mailed, however, disposition of the issue now before us does not involve the conflict of presumptions therein considered. And, not finding that a 1932 return was filed on September 27, 1933, we need not consider petitioner's further contention that a filing on such date, being a few days after expiration of the statutory*201 period as extended, was due to reasonable cause and not to willful neglect. Imposition of the 25 per cent penalty is, therefore, approved.
Decision will be entered under Rule 50.