Heifetz v. Commissioner , 15 B.T.A. 410 ( 1929 )

JASCHA HEIFETZ, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Heifetz v. Commissioner

Docket No. 9237.

United States Board of Tax Appeals

15 B.T.A. 410; 1929 BTA LEXIS 2859;

February 14, 1929, Promulgated

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">*2859 Reasonable allowance as compensation for personal services determined.

Mark Eisner, Esq., for the petitioner.

Maxwell E. McDowell, Esq., and Frank B. Schlosser, Esq., for the respondent.

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GREEN

">*410 In this proceeding the petitioner seeks a redetermination of his income-tax liability for the years 1919 to 1924, inclusive, for which years the respondent has determined the following deficiencies:

1919	$17,950.63
1920	19,065.06
1921	21,919.97
1922	$32,461.85
1923	2,925.48
1924	19,085.34

In each of the taxable years the petitioner on his return deducted substantial amounts as compensation paid to his father and to his mother for services rendered. The respondent disallowed these deductions and his action in this respect is alleged as error.

FINDINGS OF FACT.

Jascha Heifetz, the petitioner herein, is a professional concert violinist. He was born in Russia and is now about 29 years of age. The petitioner's father, Ruvin Heifetz, is also a skilled violinist. While in Russia the father played in operas in the various large cities in Russia and acted as a violin instructor. During this time he was a student">*2860 of the literature of music and of concert programs. When the petitioner was three years old his father began giving him lessons and continued to instruct him until he was 7 1/2 years old, after which time he took lessons from Professor Auer of Petrograd for several years. At the age of 10 1/2 years the petitioner began concert work in Europe, performing in the cities of Berlin, Dresden, Munich, Budapest, Vienna, and in the Scandanavian counties.

Anna Heifetz, the petitioner's mother, was born and educated in Russia and when the petitioner started his concert work in Europe she and her husband accompanied him on all of his tours. During the early part of this concert work she employed a professional manager for him, with whom she worked in the management of the concert tours. She gave careful attention to the services rendered by the manager and familiarized herself with the work which he did. Later she became her son's manager and for a number of years acted ">*411 in this capacity for him in Europe. As manager she negotiated with the various persons who sought to enter into contracts for entertainments, selected the halls in which he was to play, arranged for and supervised">*2861 the publicity and cared for all receipts and expenditures, and it was she who carried on the negotiations which ultimately led to her son's coming to America in 1917. After they came to America she continued to act as her son's business manager until the fall of 1922, and during this period rendered the same service she had in Europe. After the fall of 1922 she acted largely in an advisory capacity.

Both before and after the petitioner came to the United States, his father chose the music for all concerts which he was to give, carefully selected the parts which most readily lent themselves to concert work, and in most instances arranged the piano or orchestra accompaniment. This work the petitioner at that time was not qualified to do for himself. The father and mother accompanied their son on all tours except those made in the fall of the year 1923 and the year 1924, and during that time the father supervised the selection of music and carried on all other duties which he had been accustomed to perform.

The son devoted a considerable time each day to practice on the violin. On the days when he gave concerts he spent an hour and a half practicing and on other days he spent">*2862 three hours. Except when his son was on tour in the fall of 1923 and 1924, the father was constantly with the son while he was practicing and supervised and instructed him in all of his work.

The petitioner's mother negotiated contracts with the Victor Talking Machine Co., as the result of which the petitioner played many pieces which were reproduced on talking-machine records. The petitioner's father supervised all of this work, selecting the pieces, arranging the music, shortening the pieces to the appropriate length and passing upon all master records to the end that a satisfactory reproduction be obtained.

At the present time the petitioner's father is giving lessons on the violin, having among his pupils the son of Zimbalist, the noted violinist. He receives $25 and $30 per lesson. In 1919 the petitioner employed a private secretary, who was with him constantly until 1922. He assisted in checking the receipts and acted as interpreter. His salary for 1919 was $12,000, and for 1920, 1921, and 1922, $13,000 per year. In 1923 he employed as his business manager Charles N. Drake, who in the preceding years had traveled with him as the representative of the musical bureau. ">*2863 Drake was paid $7,042 in 1923 and $6,500 in 1924.

">*412 The amounts of compensation paid to Ruvin Heifetz, the father of the petitioner, in the years 1919 to 1924, inclusive, and which were entirely disallowed by the respondent, are as follows:

1919	$16,600.28
1920	18,606.14
1921	21,620.88
1922	$25,000.00
1923	17,500.00
1924	25,000.00

The amounts of compensation paid to Anna Heifetz, the mother of the petitioner, and which were entirely disallowed by the respondent, for the same years are as follows:

1919	$15,000
1920	16,500
1921	16,500
1922	$20,000
1923	17,500
1924	25,000

The petitioner's gross income averaged approximately $150,000 per year for the taxable years.

OPINION.

GREEN: Under the Revenue Acts of 1918, 1921, and 1924 [sec. 214(a)(1)], a taxpayer, in the computation of his net income, is permitted to deduct "a reasonable allowance for salaries or other compensation for personal services actually rendered." It is conceded that the amounts which the petitioner seeks to deduct were actually paid and there is but little dispute as to the nature of the services rendered. The petitioner contends that the">*2864 services were worth the amounts paid and the respondent contends that they were of little value and that the payments were in fact gifts.

The petitioner's career as a convert violinist in America began in 1917, at which time he was 17 years of age. His success is a matter of common knowledge, the practical evidence of which is to be found in his gross income. It is clear that, except for such services as were rendered by the private secretary, the petitioner's father and mother guided and instructed him and managed his affairs until he employed a manager in the fall of 1923, and that they were constantly in touch with all his affairs and assisted and aided him during the remainder of that year and the succeeding one. It is natural that as the petitioner grew older and more experienced he should take over the management of his own affairs and that his need for professional supervision and instruction should become less.

It is necessary for us to put a value on the services rendered to the end that the petitioner be permitted to deduct the "reasonable allowance" prescribed in the statutes. After a careful consideration of all of the evidence, we have determined that the petitioner">*2865 should be allowed to deduct the following amounts for the services rendered in the various years:

Year	Ruvin Heifetz	Anna Heifetz
1919	$12,000	$12,000
1920	15,000	15,000
1921	15,000	15,000
1922	$12,000	$10,000
1923	10,000	5,000
1924	8,000	5,000

">*413 Judgment will be entered under Rule 50.