*234 Decision will be entered under Rule 50.
Held, petitioner, the author of "American Guerrilla in the Philippines," spent more than 36 months in the preparation of such book and is entitled to compute the tax on his income in accordance with the provisions of section 107 (b), I. R. C.
*547 The respondent determined a deficiency in income tax for the taxable year 1945 in the amount of $ 21,264.63. The principal question is whether or not petitioner, as an author, is entitled to the benefit of section 107 (b) of the Internal Revenue Code.
FINDINGS OF FACT.
Petitioner, even as a child, was much interested in reading books based on travel and adventure. While attending high school and *548 college he was active as a writer for publications sponsored by the schools which he attended and he took courses which he believed would assist him in a literary career.
While in college he sought and was granted personal interviews with two writers, Delbert Harter and Richard Halliburton. They*235 advised him that, in attempting to write a book based on personal experiences, one should make daily memoranda of such experiences and should write, if possible, not less than 1,000 words each day.
During the years 1938, 1939, and 1940, petitioner traveled in Europe and, following the above advice, made daily memoranda of his experiences, which he incorporated in letters to his mother. Upon his return from Europe, petitioner sought unsuccessfully to have a book published based on the daily memoranda of his travels.
Petitioner enlisted in the United States Navy in July, 1940, and in January, 1941, was sent to Manila, Philippine Islands, where he was first assigned to duty on a mine sweeper. About the middle of October, 1941, he was assigned to duty in Motor Torpedo Boat Squadron Three, commanded by Lieutenant Bulkely. Shortly thereafter petitioner determined to write a book based on his war experiences. This decision was reached by him not later than November 1, 1941.
Immediately after deciding to write a book based on his war experiences, petitioner began to make periodical written memoranda of his experiences and those of his associates, it being his aim to write 1,000 words *236 (2 1/2 pages) per day. These memoranda were not required of petitioner by his military duties, but were prepared by him to assist later in the preparation of a book of his war experiences.
On April 9, 1942, the torpedo boat to which petitioner was assigned was destroyed by enemy action. He was "boat-based" at the time and all his possessions, including the memoranda prepared by him since November 1, 1941, were on the boat and were lost.
On May 10, 1942, at a time when the surrender of the Philippines to the Japanese armed forces appeared imminent, petitioner and 11 other members of the United States armed forces, with the tacit permission of petitioner's commanding officer, undertook to escape to Australia in a 40-foot outrigger sailing canoe. On May 18, 1942, after covering 200 miles, the canoe was capsized 8 or 10 miles off the coast of Mindanao, one of the Philippine Islands, and petitioner, with two associates, swam to shore, thereafter rescuing all but one of their associates. The rewritten memoranda or manuscript of his experiences which petitioner had prepared since April 9, 1942, were lost when the canoe capsized.
After two or three weeks' recuperation from the ordeal of*237 swimming to Mindanao, petitioner began, between June 1, 1942, and June 15, 1942, to rewrite the account of his experiences since November 1, 1941. He obtained a typewriter with no ribbon and, using carbon *549 paper in place of a ribbon, replaced his lost memoranda and manuscript. He was able to remember much of what had gone into his original memoranda and endeavored, in rewriting same, to put them into a more condensed and usable form. He completed the rewriting of such experiences in November or December, 1942.
Petitioner did not regard the manuscript which resulted from the above rewriting of his experiences as a completed literary work, but expected to put it into more finished form later.
During the period while rewriting his earlier experiences he continued his practice of making periodical memoranda of current events and experiences, still being motivated by the purpose of writing a book based on his war experiences. This practice was continued for the remainder of his service in the Philippine Islands.
Petitioner was engaged in guerrilla warfare with the Japanese armed forces and in espionage activities for the United States armed forces in the Philippine Islands*238 from shortly after May 18, 1942, until the area was retaken by the United States under General Douglas MacArthur in October, 1944. Shortly after such date, petitioner, with official approval, returned to the United States, carrying with him his manuscript and pencil notes.
About November 30, 1944, petitioner and Ira Wolfert, an experienced writer, as coauthors, entered into an agreement with Simon & Schuster, Inc., book publishers, pursuant to which petitioner and Wolfert agreed to furnish a manuscript to Simon & Schuster, Inc., and they in turn agreed to publish same as a book.
At all times during the negotiations for publication of the book, subsequently given the title "American Guerrilla in the Philippines," and during the preparation of the final manuscript to be submitted to the publisher, petitioner was a member of the United States Navy, and the notes and memoranda which he had made and which he retained were classed as secret and their use restricted. When permission was given to release a publication based on the same, the Navy Department required that an experienced writer collaborate with petitioner in such work, and Ira Wolfert was selected for this purpose. As between*239 petitioner and Wolfert, it was agreed that Wolfert should have final authority as to editing the manuscript prepared by petitioner and determine what parts of the same should go into the final manuscript to be submitted to the publisher. Due to a commitment made prior to the then present engagement, Wolfert was obliged to be absent from New York for a few days, during which time he carried with him for study the manuscript prepared by petitioner on Mindanao Island which covered petitioner's experiences.
After Wolfert returned to New York, petitioner, using notes and memoranda which he had made as above related, dictated for some *550 eight days on a manuscript covering his experiences not contained in the manuscript which had been prepared on Mindanao Island. This manuscript was also turned over to Wolfert, who, with petitioner's aid, edited and condensed the material therein and the earlier manuscript to produce the final manuscript submitted to Simon & Schuster, Inc., for publication about January 15, 1945.
About February 15, 1945, petitioner assisted in the preparation of a map, which appears as a frontispiece in the book "American Guerrilla in the Philippines."
In April, *240 1945, Simon & Schuster, Inc., published the book styled "American Guerrilla in the Philippines," based on the manuscript submitted by petitioner and Wolfert, pursuant to their contract of November 30, 1944.
Annie Laurie Williams was engaged to act as agent for petitioner and Wolfert for the sale of moving picture and related rights in "American Guerrilla in the Philippines" and carried on negotiations for such sale for a considerable period of time prior to April 6, 1945.
During the negotiations made with Twentieth Century-Fox Film Corporation for the sale of moving picture rights, it was understood that if such corporation purchased the rights petitioner would be employed by it in making a moving picture based on the book.
About April 6, 1945, petitioner and Wolfert entered into an agreement with Twentieth Century-Fox Film Corporation, whereby the corporation acquired the moving picture rights to the book "American Guerrilla in the Philippines."
Petitioner was employed by Twentieth Century-Fox Film Corporation in the latter part of March, 1945, and thereafter executed an employment contract with that corporation dated as of April 6, 1945, which required that petitioner, in addition*241 to other duties set out therein, would render services to the corporation as a writer.
While employed by the film corporation, petitioner collaborated with Lamar Trotti, a screen writer employed by such corporation, in writing a screen play or movie script based on the book "American Guerrilla in the Philippines" and bearing the same name. The final revision of the screen play was completed by petitioner and Trotti about June 28, 1945.
Prior to January 1, 1947, petitioner received the following amounts on the dates indicated from Simon & Schuster, Inc., pursuant to his agreement with that corporation dated November 30, 1944:
| Dec. 8, 1944 | $ 1,000.00 |
| Jan. 17, 1945 | 1,000.00 |
| Mar. 26, 1945 | 2,000.00 |
| Oct. 15, 1945 | 2,000.00 |
| Dec. 4, 1945 | 2,500.00 |
| Dec. 26, 1945 | 17,000.00 |
| During 1946 | 2,055.28 |
| Total | 27,555.28 |
*551 Petitioner also received from Twentieth Century-Fox Film Corporation during the year 1945, pursuant to his agreement with that corporation dated April 6, 1945, the sum of $ 25,000 and the sum of $ 3,791.66 by reason of his employment by that corporation, of which amount $ 735.52 income tax was withheld by said corporation and paid over to the collector of *242 internal revenue for the sixth collection district of California. Six hundred dollars represented payments made to him prior to his marriage on May 8, 1949, and the balance of $ 3,191.33, payments made to him subsequent to his marriage.
Petitioner received from Reader's Digest Association, Inc., in 1945 the sum of $ 3,500 by reason of a condensation of his book which appeared in the March, 1945, issue of Reader's Digest. He also received $ 145 in 1945 by reason of his appearance on "Radio Reader's Digest," a radio program, and the sum of $ 200 in 1946 from Reader's Digest Association, Inc., by reason of a "back-cover" article which appeared in the August, 1945, issue of Reader's Digest.
The above sums of $ 27,555.28, $ 25,000, $ 3,791.66, $ 3,500, $ 145 and $ 200 constituted all of the income which petitioner received or was entitled to receive prior to January 1, 1947, from the book "American Guerrilla in the Philippines."
During 1945, petitioner paid to Annie Laurie Williams the sum of $ 2,500 as commission for procuring the contract between petitioner and Twentieth Century-Fox Film Corporation, dated April 6, 1945, and the sum of $ 9,000 to Rosario Coraminas, who appears as a *243 character in the book, for release of all claims she might have by reason of any moving picture which might be made from the book, such release being required by petitioner's contract with Twentieth Century-Fox Film Corporation.
During all the years 1942, 1943, and 1944, petitioner was in the armed services of the United States and, except for the last two months of 1944, during all of such years, served in the Philippine Islands. Petitioner's military pay for that part of 1944 in which he was not in the Philippine Islands was less than $ 1,500.
During the years 1942, 1943, and 1944, petitioner did not receive any income from any sources other than his military pay and the sum of $ 1,000 received from Simon & Schuster, Inc., on December 8, 1944, and he had no allowable deductions from gross income except his military exemption. He was unmarried and had no dependents. Petitioner's tax returns for such years were filed on the calendar year basis and on the basis of cash receipts and disbursements.
The book entitled "American Guerrilla in the Philippines" is a "literary composition" within the meaning of that term as used in section 107 (b). Petitioner's gross income from "American*244 Guerrilla in the Philippines" was not less than 80 per cent of the gross *552 income in respect of such literary composition in the taxable year, plus the gross income therefrom in previous taxable years and the 12 months immediately succeeding the close of the taxable year.
Petitioner's work on the book published under the name "American Guerrilla in the Philippines" extended over a period of more than 36 months.
On March 20, 1946, petitioner filed with the collector of internal revenue for the sixth collection district of California, his individual income tax returns for the calendar years 1943, 1944, and 1945, while his wife, Coma Noel Richardson, filed her individual income tax return for the year 1945.
Prior to his enlistment in the United States Navy, petitioner was a resident of and domiciled in the State of California. In the determination by respondent of the amount of the deficiency, all items of income and expense which were included by petitioner in returns filed for the years 1943 and 1944 were determined to be applicable to petitioner's year 1945, except certain deductions claimed by petitioner which were determined by respondent not to be allowable.
During the*245 taxable years 1941 to 1944, inclusive, petitioner had no allowable deductions from gross income except his military exemption.
In the statement attached to the statutory notice of deficiency, respondent "held the income involved does not qualify under section 107 (b) and that said income was fully subject to tax in 1945, the year of receipt."
OPINION.
The sole question presented is whether petitioner is entitled to the relief afforded by section 107 (b) of the Internal Revenue Code1 in computing his tax for 1945 on the income received in connection with the book "American Guerrilla in the Philippines" -- or, to state it even more succinctly, Did the petitioner's *553 work in the preparation and publication of the book extend over a period of more than 36 months?
*246 Respondent on brief adds little by way of elucidation or clarification of his position to the cryptic statement accompanying the notice of deficiency that the "income involved does not qualify under section 107 (b)." He indicates that he thinks the basic period extended either from April 9, 1942, the date of the happening of the first experience described in the book, to January 15, 1945, when the completed manuscript was submitted to the publishers, or from January 1, 1943, the date when he first made notes of his guerrilla experiences, to January 15, 1945. He states that the "elapsed time between the date he first made notes of his experiences, on or about January 1, 1943, or April 9, 1942, the date his first experiences were described in the book, and April 6, 1945, the date the contract was signed with the motion picture company, were both less than thirty-six months." However, he confuses the situation and contradicts his basic facts by stating that "Beginning on November 1, 1941, he began keeping notes of his experiences and that of his associates, writing approximately 1,000 words, or two and one-half pages daily, looking towards the day when he could have such notes published*247 in book form."
Respondent's position is thus summarized: "It is submitted that the period spent on his 'literary work' depicting him as a guerrilla, was less than the thirty-six months provided by Sec. 107 (b)." (Emphasis supplied.)
The gist of the last quoted statement, at least the burden of the argument implicit therein, is that in computing the period of 36 months we should limit the period to the time spent as a guerrilla and exclude the time spent and the work done on the notes and manuscript twice lost, twice recreated, because petitioner did not incorporate all of it as recreated in the final manuscript of the book. We can not agree.
There is nothing unusual in the fact that, in the final form of the book "American Guerrilla in the Philippines," petitioner omitted much material he had collected and perpetuated in the form of notes and manuscript concurrently made with the happening of the several events. The preparation of any "literary composition" is usually a process of writing and rewriting, cutting here and adding there. Even the preparation of so prosaic a thing as an opinion of the Tax Court is cast in the same mold. It has happened in the experience of the *248 writer that a first draft of an opinion reaching one result is entirely discarded and an opinion reaching the opposite result finally arrived at. But who would say that the time spent in drafting and writing the discarded opinion was not part of the total time spent in preparing the final opinion?
*554 Shortly after being assigned to the Pacific theatre, petitioner determined to write a book based on his war experiences. This object was kept constantly in mind thereafter. Thus the notes and the manuscripts which were lost through enemy action, then replaced, and again lost by shipwreck, only to be recreated and supplemented by later data, were all part of the program petitioner had set for himself, to write a book of his war experiences. From the fact that the book, when finally published, covered his experiences over only a part of the total period covered by the notes and manuscripts, it does not follow that the earlier experiences which formed the background of the book and were inextricably interwoven with the later developments and which experiences had been the subject of the earlier notes and manuscript, were not part and parcel of the writing of the final book. The*249 record amply demonstrates petitioner's persistence and determination in pursuit of his goal, i. e., the writing of a book based on his war experiences.
In point of fact, in the book petitioner makes various references to the experiences of the PT-boats, while in the play adapted from it, the action begins early in 1942 and shows the burning of PT-34, the last of Motor Torpedo Boat Squadron Three, this being the occasion of the loss of petitioner's original manuscripts.
The typewritten manuscript prepared on Mindanao Island after its predecessor was lost in the wreck of the sailing canoe, together with personal notes in petitioner's own almost illegible handwriting and the completed book "American Guerrilla in the Philippines," have all been carefully read. From this reading of the source material, together with the finished product, we have gotten a clear impression of the integrated whole of the background, the composition, preparation, and final publication of the book which now bears the title "American Guerrilla in the Philippines."
Whether we choose as the date of completion January 15, 1945, when the final manuscript was turned over to the publishers, or February 15, 1945, *250 when petitioner furnished an original map to the publishers to be used as a frontispiece, or April 6, 1945, the date of the contract with the film company, the end result is the same. Petitioner's work on the book began not later than November 1, 1941, and extended for more than 36 months thereafter. He is, therefore, entitled to the relief afforded by section 107 (b) of the code.
Decision will be entered under Rule 50.
Footnotes
1. SEC. 107. COMPENSATION FOR SERVICES RENDERED FOR A PERIOD OF THIRTY-SIX MONTHS OR MORE AND BACK PAY.
* * * *
(b) Patent, Copyright, Etc. -- For the purposes of this subsection, the term "artistic work or invention", in the case of an individual, means a literary, musical, or artistic composition of such individual or a patent or copyright covering an invention of or a literary, musical, or artistic composition of such individual, the work on which by such individual covered a period of thirty-six calendar months or more from the beginning to the completion of such composition or invention. If, in the taxable year, the gross income of any individual from a particular artistic work or invention by him is not less than 80 per centum of the gross income in respect of such artistic work or invention in the taxable year plus the gross income therefrom in previous taxable years and the twelve months immediately succeeding the close of the taxable year, the tax attributable to the part of such gross income of the taxable year which is not taxable as a gain from the sale or exchange of a capital asset held for more than 6 months shall not be greater than the aggregate of the taxes attributable to such part had it been received ratably over that part of the period preceding the close of the taxable year but not more than thirty-six calendar months.↩