*156 Decision will be entered under Rule 50.
1. Held, petitioner is entitled to dependency credits for the years 1942 and 1943 for the support of his sister-in-law during those years.
2. Held, petitioner is not entitled to benefits of section 107, Internal Revenue Code, since amount he received in 1943 was payment for personal services which covered a period of less than 36 months.
*1267 The respondent determined a deficiency in income tax in the amount of $ 2,787.46 against petitioner for the calendar year 1943. The questions presented are:
(1) Is petitioner entitled to a credit of $ 350 for dependency of Ludie Jones, sister of his wife, in computing his tax liability for 1942 and 1943?
(2) Is petitioner entitled to the benefits of section 107, Internal Revenue Code, in computing the tax on an item of $ 8,419.16 received in 1943 from the trust estate of Henry D. Lee in payment of services rendered as trustee of that estate?
Although the deficiency was determined for only the year 1943, 1942 is also involved because of the Current Tax Payment Act of 1943.
The income tax return for the year involved was filed with the collector of internal revenue for the sixth district of Missouri at Kansas City.
*1268 FINDINGS OF FACT.
Petitioner is an individual, residing in Johnson County, Kansas. During 1942 and 1943 Ludie Jones, sister of petitioner's wife, lived in petitioner's home. Petitioner contributed all of Ludie Jones' support during those years. She had no means of support and was unable to work because of ill health. She was a dependent of*158 petitioner during the taxable years involved. Petitioner took no dependency credit on account of the support furnished Ludie Jones in his returns for 1942 and 1943. However, he assigned as error in his petition the failure of the Commissioner to allow such credit.
Petitioner became a certified public accountant in 1918. He has been employed by H. D. Lee, Inc., since 1920. His present capacity with that company is treasurer. Prior to being made treasurer in 1947, he served as auditor and assistant treasurer. He worked on a full time basis in those positions and his salary has ranged from $ 5,000 to $ 7,000 per annum.
H. D. Lee, president of H. D. Lee, Inc., died March 15, 1928. Just before Lee's death the other officers of H. D. Lee, Inc., were Leonard C. Staples, vice president, and Frank W. Irvin, treasurer. After Lee's death Staples was made president and Irvin, vice president.
In his will Lee provided that the residue of his estate be placed in trust for a period of 15 years. He named as executors of his estate Staples, Irvin, and Fred S. Abel. He designated as trustees of his residuary estate the same three individuals. Fred S. Abel was treasurer of Lee Hardware Co., *159 which was owned by H. D. Lee. The will was filed for probate in 1928 and the trust was also set up during that year. All of the trustees named qualified and accepted the trust in that year.
Immediately after the death of Lee, petitioner made up an itemized inventory of his assets as of the time of his death and turned it over to the executors. He designed and opened a separate set of records for the trustees, into which all of the assets that were in the hands of the executors were transferred.
In 1935 petitioner was deputized by the trustees with authority to enter the safe deposit box of the trust estate in the City Safe Deposit Co. of the City National Bank & Trust Co. of Kansas City, Missouri, and the Commercial Safe Deposit Co. of Kansas City, Kansas, if accompanied by any one of the trustees. This was done so that he could better perform his duties as accountant for the trust. No additional pay was authorized upon his being made deputy and, in fact, he received none.
On November 6, 1942, petitioner was made trustee of the estate.
*1269 For his services to the estate petitioner was paid the following amounts on the dates indicated:
| 1930 | $ 2,000.00 |
| 1931 | 500.00 |
| 1932 | 500.00 |
| 1933 | 500.00 |
| 1934 | 500.00 |
| 1935 | 500.00 |
| 1936 | 750.00 |
| 1937 | 1,000.00 |
| 1938 | 1,000.00 |
| 1939 | 1,000.00 |
| 1940 | 1,000.00 |
| 1941 | 1,000.00 |
| 1942 | 1,000.00 |
| 1943 | 8,149.16 |
| 1943 | 1,000.00 |
| 1943 | 258.04 |
| 1943 | 489.47 |
| Total | 21,146.67 |
*160 No specific amount was ever set aside or paid to petitioner for services rendered to the trustees except the amounts shown above. Petitioner considered that he should be paid additional amounts for his services, but no amount was ever agreed upon or paid. Upon accepting the trusteeship in 1942 petitioner gave up all possibility of presenting a statement for his services as an accountant. When he accepted the trusteeship he knew it would prevent him from asking any further compensation. At the time of his appointment as trustee petitioner did not know what amount of compensation he would receive, although he knew there would be fees paid for his services as trustee.
The only amounts paid by the trust estate to petitioner for services prior to November 6, 1942, were paid for accounting fees. The amounts of $ 8,149.16, $ 258.04, and $ 489.47 were paid as trustee fees. The $ 1,000 paid to petitioner in 1943 was for his accounting services. Petitioner's services as trustee began on November 6, 1942. Petitioner did not participate in any trustees' fees prior to that date.
During the life of the trust, the trustees received fees amounting to 5 per cent of the net income distributed*161 semiannually to the beneficiaries. The trustees were entitled to a payment of 3 per cent of the value of the assets of the trust estate as of the time the trust estate was closed. There was a distribution of principal assets of the estate at the end of 5 years and at the end of 10 years, but no fees were paid to the trustees for the distribution of those assets until the end of the 15-year period. An equal division of the trustees' fees upon the final distribution of principal of the trust estate would have been $ 6,639.16 for each of the then trustees. However, at that time the fees were distributed as follows:
| Fred S. Abel | $ 7,149.16 |
| Roland B. Caywood | 4,649.17 |
| Petitioner | 8,149.16 |
In the notice of deficiency, respondent stated as follows with respect to the amount of $ 8,149.16 involved:
*1270 (a) It is held that the trustee's fee received by you upon the termination of the Henry D. Lee Trust Estate does not qualify for taxation under Section 107 of the Internal Revenue Code and the above amount assigned to prior years in your tax computation is taxable at rates applicable to the taxable year 1943 when received.
OPINION.
With respect to the first question, respondent*162 urges that petitioner is not entitled to dependency credits for his sister-in-law, Ludie Jones, under section 25 (b) (2) (A) of the code 1 applicable to the years in question because "he could not tell, nor did he know what her total expenses were or what amount he expended for her support." He adds:
* * * Whether or not over half of a person's support for the taxable year was received from the taxpayer shall be determined by reference to the amount of expense incurred by him for said support. Petitioner has failed to furnish this proof.
*163 We do not agree with respondent that in the circumstances of this case petitioner must show the actual amount of his expenditures for supporting his sister-in-law. The record clearly establishes that he contributed all of her support during the years involved and that she had no other means of support. The exact amount, therefore, is not of critical importance to petitioner's case. We hold that petitioner is entitled to the credits claimed for 1942 and 1943.
With respect to the second question, it is respondent's contention that petitioner is not entitled to the benefits of section 107 of the code, 2 first, because the $ 8,896.67 which petitioner received in 1943 was paid solely for services as trustee, and that, since those services extended over a period of less than 14 months, the requirement of the statute that the services be performed for 36 months or more has not been met. He contends, in the alternative, that petitioner's services as *1271 accountant, deputy trustee, and trustee may not be separated, in which event at least 80 per cent of the total compensation for personal services was not received in one taxable year, as is also required by section 107.
*164 Petitioner argues, however, that he comes squarely within the provisions of section 107 because the trustee fees which he received in 1943 were for personal services rendered over a period of 15 years as an assistant to the trustees, deputy trustee, and substitute trustee of the Henry D. Lee trust estate.
We hold that respondent's determination on this issue is proper. After careful consideration of the entire record we can not agree with petitioner that his services as assistant to the trustees and as deputy trustee should be tacked to his services as trustee. We think rather that those services were complementary to and a part of his duties as an accountant for the trust estate, for which he received a remuneration separate and additional to that paid for his services as trustee. The facts disclose that his appointment as deputy was for the purpose of facilitating his duties as accountant to the trust and that the appointment was not intended to and, in fact, did not make him a trustee. Petitioner at no time prior to his appointment in 1942 acted as a trustee. He never shared in the 5 per cent trustees' fees allowed for disbursement of income prior to his appointment as trustee*165 on November 6, 1942. No additional income was ever authorized for any duties as a deputy separate and apart from those as accountant.
Petitioner argues that the fact that he received more than the other trustees at the distribution of the trust estate indicates that his remuneration covered a period longer than that during which he served as trustee. We do not agree. It may be true that during the period in which he was a trustee he worked considerably more than the other trustees. But this does not militate against the fact that the amount in question was paid to petitioner as a trustee, in which capacity he served for a period of substantially less than 36 months.
We therefore conclude that the services performed prior to 1942 were those of an accountant and may not be considered together with his duties as trustee. It follows that petitioner does not qualify for any benefits under section 107, since his services as trustee did not cover a period of 36 calendar months or more.
Decision will be entered under Rule 50.
Footnotes
1. SEC. 25. CREDITS OF INDIVIDUAL AGAINST NET INCOME.
* * * *
(b) Credits for Both Normal Tax and Surtax. -- There shall be allowed for the purposes of the normal tax and the surtax the following credits against net income:
* * * *
(2) Credit for dependents. --
(A) Allowance in General. -- $ 350 for each person (other than the husband or wife) dependent upon and receiving his chief support from the taxpayer if such dependent person is under eighteen years of age or is incapable of self-support because mentally or physically defective. * * *↩
2. SEC. 107. COMPENSATION FOR SERVICES RENDERED FOR A PERIOD OF THIRTY-SIX MONTHS OR MORE AND BACK PAY.
(a) Personal Services. -- If at least 80 per centum of the total compensation for personal services covering a period of thirty-six calendar months or more (from the beginning to the completion of such services) is received or accrued in one taxable year by an individual or a partnership, the tax attributable to any part thereof which is included in the gross income of any individual shall not be greater than the aggregate of the taxes attributable to such part had it been included in the gross income of such individual ratably over that part of the period which precedes the date of such receipt or accrual.↩