Carter v. Commissioner ( 1937 )

W. FRANK CARTER, PETITIONER, ET AL., ¹v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Carter v. Commissioner

Docket Nos. 78878, 78879, 78880, 78881.

United States Board of Tax Appeals

36 B.T.A. 60; 1937 BTA LEXIS 781;

June 8, 1937, Promulgated

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1. Members of a law partnership, including petitioners, entered into an agreement which provided that in case of the death of any member his estate should receive a sum equal to one-half of the amount actually received by the deceased partner during the two calendar years nest preceding his death, in full payment of his interest in the firm and its assets. Held, the transaction thereunder was a sale, and the income out of which payments were made to the deceased member's estate constituted distributive income to the surviving partners. Such income is taxable to petitioners according to their respective proportionate interests. Hill v. Commissioner, 38 Fed.(2d) 165.

2. Petitioner Emmet T. Carter and decedent Robert Burkham during the taxable year were attorneys for the board of education of the city of St. Louis, Missouri. Held, said individuals were officers or employees of a political subdivision of the State of Missouri, performing essential governmental functions, and salaries received therefor by them are not subject to the Federal income tax. Burnet v. Livezey, 48 Fed.(2d) 159.

David Baer, Esq., for the petitioners.

William E. Davis, Esq., for the respondent.

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HILL

These are consolidated proceedings for the redetermination of deficiencies in income tax as follows:

Docket No.	Petitioner	Year	Deficiency
78878	W. Frank Carter	1932	$433.78
78879	Emmet T. Carter	1932	495.84
78880	Estate of Robert Burkham, Deceased	Jan. 1 to Aug. 12, 1932	360.08
78881	Harold R. Small	1932	72.00

The issues are (1) whether respondent erred in changing the distributable income of a law partnership of which the petitioners (other than the estate of Robert Burkham, deceased) were members by reason of the deduction of the sum of $5,271.92 which was paid by the partnership during the taxable year to the estate of a deceased member pursuant to a partnership agreement; and (2) whether respondent erred in including in taxable income of petitioners Emmet T. Carter and the Estate of Robert Burkham, deceased, certain amounts received from the board of education of St. Louis, Missouri, as compensation for legal services.

For a number of years the petitioners, W. Frank Carter, Emmet T. Carter, and Harold R. Small, have been engaged in the practice of law in the city of St. Louis, Missouri, and at the present time are members of the copartnership of Carter & Jones, engaged in the practice of law in that city, the partners comprising such copartnership now being the three petitioners above mentioned and William T. Jones.

On January 1, 1927, said three petitioners and William T. Jones, John R. Turney, Robert Burkham, James Campbell, and Claude K. Rowland, constituting the copartnership of Carter, Jones & Turney, entered into a valid agreement under the laws of Missouri, providing for a definite sum to be paid upon (a) the death of a partner, (b) the disability of a partner, and (c) the retirement of a partner, the agreement reading in part material here as follows:

The undersigned members of the law firm of Carter, Jones and Turney hereby agree each for himself, his heirs, executors or administrators, that in the event of the death of any menber of the firm, his heirs, executor or administrator shall receive from the firm a sum equal to one-half of the amount actually received by such deceased partner during the two calendar years next preceding such death, said sum to be paid in equal monthly installments without interest, for a period of twelve months, the first installment to be due and payable on the first of the next month after such death. Such payment shall be in lieu of all interest which the heirs, executors or administrators of such deceased partner may have in any fees received by the firm subsequent to the date of such death (whether the services for the rendition of which such fees were received were performed either prior or subsequent to such death) and in full payment of the interst of such deceased partner in the library and office equipment of the firm.

Each member of the firm hereby agrees in the event of his death that no administration of the firm or its assets shall be required, and waives all right thereto and agrees that the payment made to his heirs, executors or administrators by the survivors as above provided, shall be taken and received by them in full payment for his interest in the firm and its assets.

In the event that any member of the firm shall become physically disabled through disease or injury, rendering it imposible for him to perform his duties as a member of the firm, he shall receive during the continuance of such disability and for a period not longer than one year after the beginning of such disability the same share in the profits of the firm as he would be entitled to receive had he been able to perform his duties as a member of the firm. If any member of the firm so becoming disabled shall die before the expiration of one year after the beginning of such disability, his heirs, executors or administrators shall receive the monthly sums hereinabove provided in the event of death only however from the date of his death until one year after the beginning of such disability. If any member of the firm so becoming disabled shall so remain for a period of one year he shall thereupon cease to be a member of the firm and, the payments therefor made to him shall be in complete satisfaction of all of his rights as a member of the firm, of all rights to share in any fees thereafter received (whether the services for the rendition of which such fees were received were performed either prior to or subsequent to the date on which he ceased to be a member of the firm) and of his interest in the library and office equipment of the firm.

* * *

No disabled or retiring member of the firm or the heirs, executors, administrators or assigns of any deceased member shall hve the right to any accounting from the firm.

James Campbell and Claude K. Rowland severed their connections with the firm of Carter, Jones & Turney subsequent to January 1, 1927, and prior to December 31, 1931, and on December 1, 1931, Robert Burkham, by reason of being physically disabled, severed his active connection with the copartnership, and received during his lifetime the compensation provided under the terms of the agreement dated January 1, 1927, from the date of his retirement to August 12, 1932, the date of his death.

The copartnership of Carter, Jones & Turney was dissolved on August 12, 1932, by the death of Robert Burkham, and on his death a new partnership bearing the same name was created, and the surviving partners continued the practice of law under the name of Carter, Jones & Turney.

After Robert Burkham's death, the remaining members operated the law partnership under the name of Carter, Jones & Turney until the withdrawal on May 1, 1933, of John R. Turney as one of the partners, since which time the partners have been the three individual petitioners hereinabove mentioned and William T. Jones, who since July 13, 1933, have operated as a law firm, under the name of Carter & Jones and under the agreement of January 1, 1927. That agreement has been the applicable agreement throught the various partnerships above described since its date, Jamuary 1, 1927.

The name of Robert Brukham was not carried in the firm name either prior or subsequent to his death, and was removed from the firm letterhead immediately after his death.

The income of the individual petitioners herein was increased by respondent as follows: W. Frank Carter, $2,070.40; Emmet T. Carter, $993.71; and Harold R. Small, $19.91, as their respective proportionate interests in the sum of $5,271.92, the amount paid by the copartnership of Carter, Jones & Turney to the estate of Robert Burkham, deceased, the amount being credited in four installments of $1,317.98 and paid during the year 1932.

The sum of $5,271.92 so paid to the estate of Robert Burkham, deceased, was four-twelfths of one-half of the income of Robert Burkham, deceased, for a period of two years immediately prior to his death on August 12, 1932, the two-year period being determined as ending July 31, 1932, the eitht-twelfths thereof pursuant to the agreement having been paid to Robert Burkham for his disability period during his lifetime for the interim between December 1, 1931, and July 31, 1932.

The agreement of January 1, 1927, was entered into for the purpose of eliminating a partnership administration upon the death of a partner, to eliminate the necessity of an accounting over a long period of time by the surviving partners of the firm to the decedent's personal representatives, and to fix at death a definite sum for payment to the estate of any deceased partner as the only obligation from the surviving members to his estate, and regardless of whether, in the absence of such agreement the amount payable to the deceased partner's estate for his interest in the copartnership would have been greater or less than the amount fixed by the agreement.

In the absence of the agreement of January 1, 1927, a partnership administration under the laws of the State of Missouri would have been required upon the death of any member of the copartnership of Carter, Jones & Turney; and any sum found to be due the deceased member would have been paid to the decedent's estate by the administrator of the partnership estate.

The sole source of income of the copartnership was and is from fees paid for work done in connection with legal matters handled by the firm.

Ada Davis Burkham is the duly qualified and acting executrix of the estate of Robert Burkham, deceased, who died a resident of the city of St. Louis, Missouri, on August 12, 1932.

For a number of years prior to his death, Robert Burkham had been engaged in the practice of law in the city of St. Louis, and at the time of his death was a member of the copartnership of Carter, Jones & Turney.

For a number of years prior to and up to the time of his death, Robert Brukham was an attorney for the board of education of the city of St. Louis.

Respondent increased the taxable income of Robert Burkham for the period January 1 to August 12, 1932, in the sum of $3,588.03, of which $3,392.10 represented salary received from the board of education of the city of St. Louis as its attorney, which latter sum was not reported as taxable income by the deceased.

Petitioner Emmet T. Carter was assistant attorney for the board of education prior to the death of Robert Burkham on August 12, 1932, and on that date was appointed acting attorney for the board and continued to act as such attorney through the taxable year 1932 and until his election as attorney on February 14, 1933, since which time he has continued as attorney for the board of education.

Respondent increased the taxable income of petitioner Emmet T. Carter for the year 1932 in the sum of $2,672.50, representing salary received for services as attorney from the board of education of the city of St. Louis, which sum was not reported as taxable income by him.

The board of education of the city of St. Louis exists by virtue of the authority contained in chapter 57, article 17, of the Revised Statutes of Missouri, 1929, and is constituted a single school district and body corporate in which are vested the supervision and government of the public schools and public school property. Pursuant to the provision of such statutes the board of education has power to appoint such officers, agents, and employees as it may deem necessary and proper, and to fix their compensation; to fix the time of its meetings; to make, amend, and repeal rules and bylaws for its meetings and proceedings for the government and management of the public schools and school property in the city of St. Louis, and such rules and bylaws of the board are by reason of the statutes binding on the board of education and all parties dealing with it, until formally repealed.

The statutes of Missouri, hereinabove referred to, also provide, among other things, that the board of education shall have the right and power of condemnation; that the members of the board shall be elected from the city at large on a general ticket; that all contracts for the erection, repair, and alteration of school property exceeding a certain amount shall be made by public letting; that the Circuit Court of the City of St. Louis shall have jurisdiction over the members of the board of education and its officers; that the board shall have power to levy and collect all taxes authorized by law to be levied for school purposes in the city of St. Louis, and that any election may be called by the board of education to increase the rate of taxation for school purposes or any other purpose authorized.

The board of education, pursuant to the statutes above mentioned, adopted and promulgated certain rules and regulations, which provided that the officers of the board shall include an attorney elected for a term of four years; that the term and compensation of every salaried officer of the board shall not be reduced during the official term for which he was appointed or elected; that it shall be the duty of the attorney to take charge of the legal business of the board in all courts of the state and of the United States, and to make a report to the board semiannually on the second Tuesday of April and October, on the state of its business in the courts, enumerating in such reports all undecided claims of the board and the disposal of such as have been acted upon during the last half year; that the attorney shall attend the meetings of the board and give his written opinion on all legal questions referred to him by the board or by standing committees, draw all legal instruments, leases and other conveyances of the board, and pay all moneys collected by him for the board to the secretary and treasurer of the board; that he shall also be the legal adviser of the officers of the board touching their official duties, and when necessary call the attention of the board to legislation which may be needed in furtherance of its purposes; that he shall give bond in the sum of ten thousand dollars for the faithful discharge of his duties, with such security as shall be approved by the board.

The rules of the board further provided that it shall be the duty of the attorney to examine the annual report of the auditor of the records of state courts in the city of St. Louis, and to make such recommendations to the board or to take such action thereon as may be required; and that all contracts pertaining to school property shall be drawn and executed in accordance with the forms adopted by the board on the recommendation of the attorney.

Subject to the approval of the board, the attorney was authorized to appoint an assistant to serve during the pleasure of the attorney and of the board. It was provided that the assistant attorney should perform the duties of the attorney during the latter's absence or inability to act, and such other duties as might be delegated to him by the attorney.

It is stipulated that the decedent, Robert Burkham, under the rules of the board of education of the city of St. Louis, was an officer of the board and was listed as an officer in its reports.

It is also stipulated that petitioner Emmet T. Carter, under the rules of the board of education, was an officer of the board and was listed as an officer on the building directory board and in the reports of the board of education.

The salaries of both individuals last above mentioned, were fixed and determined by the board of education on a yearly basis, payable monthly. The services performed by such individuals consisted of the duties prescribed by the rules of the board hereinabove referred to. In the preparation and trial of cases and in the rendering of legal advice and written opinions on legal questions submitted by the board, or any committee thereof, the individuals conferred with the board or the committee as to the facts and policy to be assumed by the board or the committee. Neither Emmet T. Carter nor the decedent was employed from time to time on specific cases or pieces of work, but each was employed to handle and his office provided for the handling of all matters of the board requiring the attention of the attorney for the board during the taxable year 1932. The board reserved at all times the right to disregard the opinion or ruling of the attorney in case of any difference of opinion between the board and the attorney. The compensation paid by the board for the services of the attorney was not regulated or determined by the value of the services performed or to be performed.

The decedent and petitioner Emmet T. Carter, during the respective taxable periods were each free to and did take other employment not in conflict with the interest of the board of education. Under the rules of the board they were not required to nor did they take any oath of office upon assuming their duties.

OPINION.

HILL: Petitioners allege that respondent, in determining the deficiencies, erred in treating as distributable income of the partnership and including in taxable income of each of the petitioners, other than the estate of Robert Burkham, deceased, their respective proportionate interests in the amount paid to the estate of decedent during the taxable year, pursuant to the partnership agreement of January 1, 1927. Substantially, the position of the petitioners is that the sum paid to the deceased partner's estate was that portion of the income from fees received by the partnership which was due the decedent's estate, and was received by the partnership as trustee for such estate.

The facts were stipulated by the parties, and on this issue, among other things, it is stated that neither of the petitioners nor any members then constituting the copartnership "received any part of the sum * * * paid to the estate of Robert Burkham, deceased, but pursuant to the terms of the agreement of January 1, 1927 herein referred to, said sum was received by the co-partnership with the duty imposed to pay the same to the said estate of Robert Burkham, deceased, which duty was duly performed, as aforesaid."

The meaning intended to be expressed in the quoted stipulation (which we have not included in our findings of fact above) is not entirely clear, but we need not construe it. If it was meant to say that the money out of which the sum in controversy was paid to the decedent's estate was not first "received" by the partnership it is contrary to the facts otherwise clearly established by the record and must be rejected. William Ernest Seatree,25 B.T.A. 396; Volunteer State Life Insurance Co.,35 B.T.A. 491. If the parties intended to stipulate that the sum was received by the partnership not as its own property but in trust for the estate of the deceased member, then the stipulation amounts to a legal conclusion and must be disregarded. Unless the fund when received belonged to the partnership, obviously it could not constitute distributable income taxable to the members. This involves the very question which has been submitted to the board for decision. "A stipulation concerning the legal effect of admitted facts is ineffective, and will be treated as a nullity." Swift & Co. v. Hocking Valley Railway Co.,243 U.S. 281, 289. If the parties meant to stipulate that the fund was not actually distributed to the members, it is of no materiality. In any event, therefore, it will be disregarded.

It is conceded by all parties that the death of Robert Burkham dissolved the old partnership, and that the new partnership crganized by the surviving members paid the amount in controversy to the decedent member's estate under and pursuant to the terms of the partnership agreement of January 1, 1927; also that the principal purpose of the agreement was to eliminate a partnership administration upon the death of a partner and an accounting over a long period of time by the surviving partners.

Solution of the problem presented here depends upon whether the sum paid to Burkham's estate represented his share of fees earned by the partnership prior to but uncollected at the time of his death, or whether such payments constituted the consideration paid by the surviving members for Burkham's interest in the old partnership and its assets. Bull v. United States,295 U.S. 247.

The nature of the transaction, we think, is fully disclosed by the terms of the partnership agreement pursuant to which it was carried out, which provided that in the event of death of any member of the firm his heirs, executors, or administrators should receive a sum equal to one-half of the amount actually received by such deceased partner during the two calendar years next preceding such death, "in lieu of all interest which the heirs, executors or administrators of such deceased partner may have in any fees received by the firm subsequent to the date of such death * * * and in full payment of the interest of such deceased partner in the library and office equipment of the firm." The partnership agreement further recited that "each member of the firm hereby agrees in the event of his death that no administration of the firm or its assets shall be required, and waives all right thereto and agrees that the payment made to his heirs, executors or administrators as above provided, shall be taken and received by them in full payment for his interest in the firm and its assets."

The conclusion seems inescapable to us that by the payment of a definitely ascertainable consideration, which is the amount here in controversy, the surviving partners of the old partnership purchased all of the interest of the deceased Burkham in the firm and its assets. The parties have stipulated that one of the purposes of the partnership agreement was to fix at death a definite sum for payment to the estate of a deceased member, regardless of whether, in the absence of such agreement, the amount payable to the deceased partner's estate for his interest in the partnership would have been greater or less than the amount fixed by the agreement.

Whether the interest of the deceased Burkham had in fact a fair value of more or less than the amount paid under the contract, and whether or not the survivors derived a profit from their purchase of his interest for such sum, does not appear from the record. No question is raised on this point. Likewise, it does not appear what assets, if any, the partnership owned other than a library and office equipment of undisclosed value. The petitioners offered no evidence as to these matters. But in the state of the record before us, they are in any event immaterial.

The fact remains that the surviving partners purchased the interest of Burkham in the firm and its assets, for a stated consideration. Thereupon, they became the exclusive owners of all uncollected fees, whether the services for the rendition of which such fees were received were performed either prior or subsequent to his death. It was out of such fees that the amount in question was paid to Burkham's estate. The amount, therefore, constituted distributive income of the new partnership when received, and is taxable to the petitioners to the extent of their respective interests, whether in fact distributed to them or not. (Sec. 182(a), Revenue Act of 1932.)

The partnership did not act in a fiduciary capacity in respect of any of the fees collected after the death of Burkham. His estate had no interest therein. Under the partnership contract it had only the right to demand payment of the stipulated amount. It was not entitled to payment out of fees; and in case no fees had been collected within the time fixed for payment, the estate would still have been entitled to receive the amount agreed upon, and the partnership could have fully discharged its obligation by payment out of any fund, whether or not it embraced fees collected subsequent to Burkham's death.

In Willard C. Hill,14 B.T.A. 572, a partnership was formed under an agreement which provided, among other things, that upon the death of any partner there should be paid to his estate for a period of years the share of partnership earnings to which the deceased partner would have been otherwise entitled, and that upon the completion of such payments the business should become the sole property of the surviving partners. We held that the partnership agreement provided for the sale of the interest of a deceased partner to the surviving partners, and that there should be included in the net income of each surviving partner his distributive share of all amounts paid in accordance with the terms of the partnership agreement, to the estate of the deceased partner. In that connection we said:

A partner may not avoid the income tax under an agreement by which his share or a portion of his share of the profits of the partnership are to be paid to the estate of a deceased partner in the acquiring of such deceased partner's interest in the assets of a prior partnership.

Our decision in the cited case was affirmed in Hill v. Commissioner, 38 Fed.(2d) 165. See also Benedict v. Price, 38 Fed.(2d) 309; Pope v. Commissioner, 39 Fed.(2d) 420; Arthur C. Hilmer , 27 B.T.A. 1165; cf. Lester G. Hathaway,16 B.T.A. 1318.

In Bull v. United States, supra, the Supreme Court stated the applicable rule as follows:

Where the effect of the contract is that the deceased partner's estate shall leave his interest in the business and the surviving partners shall acquire it by payments to the estate, the transaction is a sale, and payments made to the estate are for the account of the survivors. It results that the surviving partners are taxable upon the firm profits and the estate is not [citing with approval Hill v. Commissioner, supra ].

For the reasons indicated respondent's determination in respect of the first issue is approved.

The conclusions reached above are not in conflict with our decision in Gussie K. Barth,35 B.T.A. 546. The latter case is distinguishable on the facts. There the partnership contract provided that "the partnership shall not be immediately dissolved by reason of the death of a partner but his interest therein shall be determined" by payments to his widow for a period of three years of specified percentages of what would have been the deceased partner's distributive share in the proceeds from the business if he had remained alive. The amount received by Barth's widow did not represent payment for capital assets. In the instant case, the old partnership owned tangible assets and the amount paid to the decedent's estate was for his interest in the old partnership, including such assets.

Furthermore, in the Barth case, the question presented was whether the amount paid by the surviving partner constituted income taxable to the widow of the deceased partner. Here the question is whether the amount paid to the decedent's estate by the surviving partners, having been paid out of income (that is, out of fees collected by them), constituted distributive income taxable to the members of the new or succeeding partnership. Since the transaction before us was clearly a purchase and sale of the deceased partner's "interest in the old partnership and its assets", the consideration paid by the new partnership out of income is taxable to the members of that partnership, whether or not the consideration so paid also represents in whole or in part taxable profit to the decedent's estate. In no event, therefore, does the Barth case rule the decision in the instant case.

The second issue involves the question whether the salaries received during the taxable year by Robert Burkham and Emmet T. Carter from the board of education of the city of St. Louis, for their services as "attorney" for said board, are subject to the Federal income tax. That the board of education was a political subdivision of the State of Missouri, engaged in the exercise of essential governmental functions, is conceded. The controversy is whether said individuals were officers or employees of the board, or whether they were independent contractors.

The term "officer" is defined in Netcalf & Eddy v. Mitchell,269 U.S. 514, as follows:

An office is a public station conferred by the appointment of government. The term embraces the idea of tenure, duration, emolument and duties fixed by law. Where an office is created, the law usually fixes its incidents, including its term, its duties and its compensation. * * * The term "officer" is one inseparably connected with an office; * * *

The Missouri courts have also defined the term. In State ex rel. Walker v. Bus,135 Mo. 325; 36 S.W. 636, it is stated that an individual who is invested with the authority and is required to perform the duties incident to an "office" is a "public officer." And again "an officer * * * is one who by the local law enjoys either an annual salary or a definite term of office." State ex rel. Bartraw v. Longfellow,95 Mo.App. 660; 69 S.W. 596.

The Supreme Court of Missouri, in State ex inf. McKittrick v. Whittle,333 Mo. 705; 63 S.W.(2d) 100, 102, said:

A public office is defined to be "the right, authority, and duty, created and conferred by law, by which, for a given period, either fixed by law or enduring at the pleasure of the creating power, an individual is invested with some portion of the sovereign functions of government, to be exercised by him for the benefit of the public." Mechem, Pub. Off. 1. The individual who is invested with the authority, and is required to perform the duties, is a public officer.

The courts ahve undertaken to give definitions in many cases; and while these have been controlled more or less by laws of the particular jurisdictions, and the powers conferred and duties enjoined thereunder, still all agree substantially that if an officer receives his authority from the law, and discharges some of the functions of government, he will be a public officer [citing among others State ex rel. Walker v. Bus, supra ].

Petitioner Emmet T. Carter and the decedent Burkham, we think, come well within the definitions above given. The school board was empowered by the state legislature to appoint such "officers" as it might deem necessary and proper, and to fix their compensation; also to make rules and regulations for the government and management of the public schools and school property in the city of St. Louis. Pursuant to such authority, the board promulgated rules and regulations which provided that the "officers" of the board should include an "attorney" elected for a term of four years, prescribed the duties of the attorney, and required bond in the sum of $10,000 for the faithful discharge of such duties. The salaries of both Carter and Burkham were fixed by the board on a yearly basis, payable monthly.

However, respondent contends that neither individual mentioned was an "officer" for the reason that he was not required to take an official oath of office and further that the "office" of attorney could be created only by the legislature and not by the board of education.

These contentions are not supported by the weight of authority. In Miller v. Warner,59 N.Y.S. 956, 957, it was pointed out that a public office may be created by the legislature or any municipal board or body authorized by the legislature to create one, and, as indicated by the Missouri decisions hereinabove referred to, although not specifically discussed, the same rule appears to prevail in that state. Our attention has not been called to any contrary decision nor to any decision holding that an official oath of office is necessary in the absence of such requirement by the creating authority. No oath of office was required in the instant case.

In State ex inf. McKittrick v. Whittle, supra, it was held (1) that a school district or board of education in Missouri was a political subdivision of the state, performing the duties of the state in the conduct and maintenance of the public schools, and (2) that Whittle, who was a school director, was a "public officer" within the definition of that term hereinabove quoted from the court's opinion, although neither the definition nor the court's opinion makes any reference to an oath of office.

In State ex rel. Bartraw v. Longfellow, supra, the Court of Appeals at St. Louis held that the relator was an "officer" under his appointment as an inspector of buildings, and remained such until his status was changed to that of an employee by the later enactment of an amendatory ordinance. The appointment was made under authority delegated by the state legislature to the municipality of St. Louis, and under the municipal code which defined the term "officers" as including "all persons holding any situation under the city government or its departments, with an annual salary or for a definite term of office."

The relator in the cited case was required to give a bond for the faithful performance of his duties, but it does not appear that he was required to take any oath of office. Nevertheless, as above stated, he was held by the Missouri court to be an "officer" under his original appointment. The essential facts in that case are strikingly similar to the instant proceedings.

In any event, if the petitioner Emmet T. Carter and the decedent Robert Burkham were not "officers", certainly they were, in our opinion, "employees" of the board of education. In Burnet v. Livezey, 48 Fed.(2d) 159; affirming 15 B.T.A. 806, the qualifications of an "employee" are fully discussed and distinguished from an independent contractor, in relation to facts in all material respects the same as in the case at bar. We need not repeat the discussion here. We hold that Carter and Burkham were "officers or employees" of a political subdivision of the State of Missouri, and the salaries received by them as such are exempt from Federal income tax. Respondent's action on this issue is reversed.

Reviewed by the Board

Judgment will be entered under Rule 50.

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Footnotes

• 1. Proceedings of the following petitioners are consolidated herewith: Emmet T. Carter; Ada Davis Burkham, Executrix of the Estate of Robert Burkham, Deceased; and Harold R. Small. ↩