*119 Decision will be entered under Rule 50.
Income -- Exemption -- Nonresident -- Earned Income -- Sources without the United States -- Section 116 (a) (3). -- An amount received by a nonresident citizen of the United States from the Reader's Digest for foreign rights to an article written while the taxpayer was abroad, which rights were sold in this country after the article had been written, does not constitute earned income within the meaning of section 116 (a) (3) and is not exempt. E. Phillips Oppenheim, 31 B. T. A. 563, followed.
*892 The Commissioner determined a deficiency of $ 1,556.98 in the income tax of the petitioners for 1947. The petitioners contend that the Commissioner erred in including in income*120 $ 1,200 received by Frank allegedly as earned income from sources without the United States, within the meaning of section 116 of the Internal Revenue Code, and in disallowing deductions for travel expense, charitable contributions, taxes, and medical expenses.
FINDINGS OF FACT.
The petitioners, husband and wife, filed a joint return for 1947 with the collector of internal revenue for the district of Minnesota. They were nonresident citizens of the United States living in Argentina from sometime in 1945 until about February of 1947 when they returned to the United States where Frank remained during the rest of 1947. Frank was a newspaper correspondent and writer and June at times assisted him.
Frank, while in Argentina during 1946, wrote an article for the Saturday Evening Post with reference to Peron. He retained the right to sell the article in all countries other than the United States. He received a letter, while in the United States, early in 1947 from the Reader's Digest which made him an offer to reprint the Peron article in foreign countries. Frank accepted the offer and received *893 $ 1,200 in 1947 from the Reader's Digest for the rights which it bought. The petitioners*121 did not report the $ 1,200 as gross income for 1947. The Commissioner, in determining the deficiency, included the $ 1,200 in gross income and thereby committed no error.
Frank, while residing in the United States during 1947, gave four lectures. He failed to report and the Commissioner properly added to his income $ 350 received from lecturing in 1947. The petitioners deducted $ 450 on their return as expenses in connection with the four lectures. The Commissioner allowed $ 225 of that amount and disallowed the remaining $ 225. The traveling expenses of Frank in connection with the lectures, including the amount expended for meals and lodging while away from home giving those lectures, was $ 300.
The petitioners were of the opinion that articles about Australia would be salable and they had considered making a trip to Australia while living in Argentina. No definite plans were made until June's father, who lived in Australia, suffered a heart attack in the spring of 1947. They then decided that June would make the trip for family reasons and also to obtain material for one or more articles to be written by Frank. She left Boston in September 1947 and did not return until *122 February 1948. She gathered information during the trip to be used by Frank, and some of that material was used by him in writing a book and in writing an article. A reasonable portion of the total amount expended by her in connection with this trip during 1947 attributable to the collection of information for use by Frank in his business of writing was $ 700. The petitioners claimed a deduction on their return of $ 2,000, representing expenses of June's trip to Australia. The Commissioner disallowed the entire amount claimed.
The petitioners made contributions to religious and charitable organizations of $ 325 in 1947 deductible under section 23 (o) (2) of the Internal Revenue Code. They claimed a deduction of $ 1,138 for charitable contributions on their return and the Commissioner disallowed the entire amount for lack of substantiation.
The petitioners spent $ 1,000 in 1947 for medical expenses, a part of which were incident to the birth of their child and a part of which were for Frank's mother, his dependent, within the meaning of section 25 (b) (3) (D). They reported on their return medical expenses of $ 1,000 and claimed a deduction of $ 431 which the Commissioner disallowed*123 in determining the deficiency.
The petitioners claimed a deduction of $ 150 for "gasoline, theatre, and incidental" taxes. The Commissioner, in determining the deficiency, disallowed $ 75 of the amount claimed and allowed the remainder. The record does not show that the petitioners are entitled to a larger deduction for these taxes than the amount allowed by the Commissioner.
*894 OPINION.
Section 116 (a) (2) exempts from taxation "earned income" received from sources without the United States by a citizen who has been a bona fide resident of a foreign country or countries for at least two years before changing his residence to the United States. It seems to be conceded that Frank qualified as a bona fide resident of foreign countries for the period required but it is questioned whether the $ 1,200 which he received was from sources without the United States and whether it was "earned income." Earned income is defined in section 116 (a) (3) as "wages, salaries, professional fees, and other amounts received as compensation for personal services actually rendered." The case of E. Phillips Oppenheim, 31 B. T. A. 563, is in point. Oppenheim, a writer, *124 had granted a Boston publisher the exclusive rights in the United States and Canada to the books which he might write, for which rights the publisher was to pay him royalties. The question was whether the royalties constituted earned income for the purposes of the credit under section 31 of the Revenue Act of 1928. The Board of Tax Appeals held that the royalties were not earned income within the statutory definition of "wages, salaries, professional fees, and other amounts received as compensation for personal services actually rendered." It pointed out that wages of one employed to write would qualify, but that the royalties of Oppenheim did not. Frank did not write the Peron article as an employee of Reader's Digest or even at its request. It is held on authority of the Oppenheim case that the Commissioner did not err in including the $ 1,200 received by Frank from the Reader's Digest in his gross income for 1947.
The petitioners were at a disadvantage because certain of their financial records pertaining to 1947 had been lost prior to the hearing. Their evidence in regard to almost all of the deductions claimed is indefinite as to amounts and other details and it has *125 been necessary to make approximations in accordance with the principle announced in Cohan v. Commissioner, 39 F.2d 540">39 F. 2d 540.
They claimed a deduction of $ 450 for traveling expenses, incurred in connection with four lectures given by Frank in 1947, of which the Commissioner allowed one-half. A finding has been made that these expenses amounted to $ 300. They now claim only one-half of the $ 2,000 deducted on their return as expenses of June's trip to Australia. Frank was able to give the cost of the airplane fares but the record is not clear as to how much the 1947 portion of the trip cost. One purpose of the trip was to collect information for Frank's writing and she actually spent about one-half of her time in Australia collecting information which he later used. It does not appear that he profited from *895 his use of the material but that is not important. It seems fair in the light of the entire evidence to allow a deduction of $ 700 in this connection. The testimony in regard to charitable contributions is extremely vague except as to a contribution of $ 300 to a church. Smaller contributions to other charitable organizations were mentioned*126 but without definite amounts. A deduction of $ 325 has been allowed. Frank was allowed a credit for his mother as a dependent. He paid medical expenses for her during 1947 but was unable to state how much. They were paid in connection with an operation which she had for a cataract and included hospital charges for two weeks and a private nurse for a part of that time. The evidence in regard to medical expenses incident to the birth of the petitioners' child in 1947 is more complete. It is fair to conclude that they spent at least the $ 1,000 claimed for medical expenses during 1947. The deduction resulting from this expenditure will be worked out by the parties in their computations to be filed under Rule 50. The petitioners have failed to show that they are entitled to a larger deduction for gasoline, theatre, and incidental taxes than the $ 75 allowed by the Commissioner.
Decision will be entered under Rule 50.