*2174 The petitioner was an employee of the Norborne Land Drainage District Co. of Carroll County, Missouri, and his compensation is exempt from taxation under section 1211 of the Revenue Act of 1926.
*1131 The respondent has asserted a deficiency in income tax for the year 1922, in the amount of $582.32. The only issue presented for determination is whether an amount of $4,834.46, which represents petitioner's share of certain income received by S. J. and G. C. Jones, a *1132 law partnership, for professional services rendered to the Norborne Land Drainage District Co. of Carroll County, Missouri, is exempt from taxation under section 1211 of the Revenue Act of 1926.
FINDINGS OF FACT.
The petitioner is an individual, residing at Carrollton, Mo., where he has been engaged in the practice of law for more than 35 years.
In the spring of 1917 petitioner entered into an agreement with the Norborne Land Drainage District Co. of Carroll County, Missouri, hereinafter called the drainage district, whereby he was*2175 engaged to perform certain legal services. The agreement provides:
THIS AGREEMENT, made and entered into this 19 day of March, 1917, by and between The Norborne Land Drainage District Company, of Carroll CountyMissouri, Party of the First Part, and S. J. Jones, of Carroll County, Missouri, Party of the Second Part,
WITNESSETH: That the said Party of the First Part does hereby employ the said Party of the Second Part as Attorney for Party of the First Part, to do and perform the legal services hereinafter mentioned.
The said Party of the Second Part is to do, perform and look after all legal matters connected with the organization of said Drainage District and the sale of the bonds of said District, and, in the event that the Board of Supervisors of said District decide to extend the boundaries of said District, the said Party of the Second Part is to do and perform the legal services connected therewith, and is to appear for and represent said Party of the First Part in all Court or Courts which may have or acquire jurisdiction of said cause or any issue growing out of the organization extending the boundaries or other matter connected therewith.
As compensation for his*2176 services, the said Party of the Second Part is to be paid as follows:
Four (4) per cent on the first hundred thousand dollars or less of the amount of the bond issue of said District, but in case the amount of bonds issued by said District should exceed One Hundred Thousand Dollars ($100,000.00) then said compensation shall be fixed at Three and One-half (3 1/2) per cent of the bond issue of said District, it being understood that the compensation of said Party of the Second Part shall be based and paid upon the entire bond issue of said District as boundaries are now fixed and defined or as may hereafter be established and defined, said compensation to be due and payable when the bonds of said District are sold.
EXECUTED IN DUPLICATE, this 19th day of March, 1917.
The above contract was amended in March, 1920, as follows:
SUPPLEMENTAL CONTRACT.
This supplemental contract made and entered into this 1st day of March, 1920, by and between the Norborne Land Drainage District Company of Carroll County, Missouri, Party of the First part, and S. J. Jones, of Carrollton, Carroll County, Missouri, party of the Second Part,
WITNESSETH: Whereas the Parties hereto, on the 19th*2177 day of March, 1917, entered into a contract whereby the Party of the Second Part agreed to perform *1133 certain services on behalf of the Party of the First Part as specified in said contract, and Whereas said Contract does not express clearly the understanding between the parties hereto at the time said Contract was entered into, and Whereas it is the desire of the Parties hereto to make clear and define the understanding had at the time said contract was made it is contracted and agreed as follows, to-wit:
That as compensation for the services of the Party of the Second Part which have already been performed, and which are to be performed in connection with the organization of the Norborne Land Drainage District Company of Carrollton, Missouri, and the sale of the bonds of said District, and the extension of the boundaries of said District, and for representing the said District in all Courts which, have, or may acquire jurisdiction of said cause or any issue growing out of the organization of extending the boundaries, or other matter connected therewith the Party of the Second Part is to receive Four (4) per cent of the amount of the principal of the bonds issued and sold, *2178 and a like per cent of the amount paid in cash by the landowners electing to pay in cash in lieu of having bonds issued, as provided by Section 51 at page 292 of the Laws of Missouri, 1913, provided, however, that if the amount of the principal of the bonds issued and sold and the amount paid by land owners in lieu of bonds as aforesaid, exceeds One Hundred Thousand Dollars ($100,000), then the Party of the Second Part is to receive as compensation for said services Three and One Half (3 1/2) per cent of the amount of the principal of said Bonds issued and sold plus a like per cent of the amount paid in cash by land owners in lieu of the issuance of bonds, as provided by Section 51, said compensation to be due and payable when the bonds of said District are sold.
Executed in duplicate this 1st day of March, 1920.
The compensation provided for was paid to petitioner in the taxable year and represents services performed by petitioner from 1917 until April 29, 1922, when the following contract, which provides for future compensation and which is still in effect, was executed:
CONTRACT
THIS CONTRACT made and entered into by and between the NORBORNE LAND DRAINAGE DISTRICT*2179 COMPANY OF CARROLL COUNTY, MISSOURI, Party of the First Part, and S. J. & G. C. Jones, Conkling & Withers, and Franken & Timmons, Parties of the Second part,
WITNESSETH: Party of the First Part hereby employs the Parties of the Second Part to act as its attorneys and as such to represent first party and its Board of Supervisors in all litigation now pending against said District and pending by said District against Third Parties and to represent First Party in all litigation in which it is interested and to file all suits that may become necessary for and in behalf of said District and advise the Board of Supervisors of said District and the other officers of said District from time to time and at all times, said employment to continue up to the time that the works provided for in the Plan for Reclamation are finally completed and the Contractors finally settled with and until all litigation commenced by or against said Party of the First Part or its Supervisors, during said period of time, is finally settled or determined.
IN CONSIDERATION of the services performed by Parties of the Second Part as herein above specified the Party of the First Part agrees to pay to Parties of*2180 the Second Part the sum of Six Thousand Dollars ($6,000.00) and all expenses *1134 necessarily incurred by Second Parties on behalf of said District in the prosecution of their said employment, the same to include the expenses of Second Parties while away from Carrollton on the business of First Party or its Supervisors. Said sum of Six Thousand Dollars ($6,000.00) to be payable as follows: Twenty-four Hundred Dollars ($2400.00) upon the signing of this Contract, Eighteen Hundred Dollars ($1800.00) April 1st, 1923, and the balance of said sum when the services provided for by this contract have been fully performed.
IN TESTIMONY WHEREOF the Party of the First Part executes this Contract by its President, attested by the Secretary of the Board of Supervisors of said District and the seal of said District, and said Second Parties have signed their names to this Contract in quadruplicate this the 29 day of April, 1922.
During the year 1922 petitioner received as compensation for services rendered to the drainage district an amount totaling $4,834.46.
The parties have stipulated that the drainage district is a municipal corporation and a political subdivision of the State*2181 of Missouri. It was organized under the statutes of 1899, and reorganized under what is known as the Circuit Court Drainage Act of Missouri, which act appears in Article I, Chapter 28, of the Revised Statutes of Missouri (1919).
The services rendered by petitioner to the drainage district consisted of advising the board of supervisors when requested, preparing or helping to prepare all legal proceedings on behalf of the district, defending all suits brought against it, and performing all other legal duties requested by the board. During the period from 1917 to 1922, inclusive, the petitioner appeared for the drainage district in the Circuit Court of Carroll County, the Circuit Court of Ray County, the Supreme Court of Missouri on three occasions, the Kansas City Court of Appeals, and the Supreme Court of the United States. He attended the weekly meetings of the board of supervisors, which were often held in his office, advising the board on all legal questions.
Throughout the years from 1917 to 1922 the petitioner has maintained his law office in Carrollton, Mo., and has continuously engaged in the general practice of law. He did not take any cases in his private practice*2182 which conflicted with his employment with the drainage district.
In his income-tax return for 1922 the petitioner did not include the sum of $4,834.46. Upon audit the respondent added such amount on the ground that petitioner was neither an officer nor an employee of the State or a political subdivision thereof.
OPINION.
LANSDON: The respondent has agreed that the drainage district is a political subdivision of the State of Missouri, and such has been the holding of the Missouri and Federal courts. ; *1135 ; ; .
The petitioner does not contend that he was an officer of the drainage district, but contends that he was an employee thereof within the meaning of section 1211 of the Revenue Act of 1926, and that his services were so intimately connected with the performance of governmental functions by the drainage district that his compensation is exempt from Federal taxation by implications of the Constitution of the United States.
The petitioner*2183 was not employed for a special transaction, to accomplish a particular result. He was employed to render any legal service desired of him and, together with other attorneys, he was to take care of all the legal work of the drainage district. Though he was not precluded from continuing his private practice, he could not represent clients whose interests were adverse to those of the drainage district. Under the first contract his compensation was fixed at a percentage of the bond issue which is in no way dependent upon the result of services and skill. In 1922 he was given a fixed amount.
We think the petitioner was an employee of the drainage district and that his compensation as such is exempt from income tax under section 1211 of the Revenue Act of 1926. ; ; ; ; ; affd. ; ; and *2184 .
Decision will be entered for the petitioner.