DocketNumber： Docket Nos. 10080, 10081
Citation Numbers： 7 T.C. 432, 1946 U.S. Tax Ct. LEXIS 111
Judges： Harlan
Filed Date： 7/31/1946
Status： Precedential
Modified Date： 1/13/2023
*111
Where a physician accumulated charges for his services to a patient over a period in excess of 36 months, payments on account made during the period must be taken into account under
*432 The Commissioner determined deficiencies in income and victory tax against the petitioners for the calendar year 1943, in the respective amounts of $ 279.72 and $ 279.71. The petitioners contest the deficiencies and allege that the respondent erred in failing to give them the benefit of
The case is submitted on a stipulation of facts and exhibits introduced at the hearing. The appeals were consolidated for hearing and opinion.
The only question involved is whether, under the *112 facts of this case, the petitioners are entitled to the benefits of
The facts as stipulated are adopted as our findings of fact.
FINDINGS OF FACT.
Jerome Nast (hereinafter referred to as Nast) and Julia C. Nast are husband and wife; and for the year 1943, filed separate returns on a community basis with the collector of internal revenue for the first district of Texas at Austin, Texas. Nast and his wife reported income on a cash basis and on a calendar year basis.
Nast is a practicing medical doctor, with office in the Medical Professional Building, Corpus Christi, Texas.
Nast, as the family physician for one of his patients, treated the patient and his family at his office for a period beginning in 1924. He also made home calls in the course of his acting as family physician. His services extended to the family servants. He made regular charges on his books of account for the services rendered.
*433 Nast and the patient were and are close personal friends and have been close personal friends for the past twenty-two years; and none of the charges included herein*113 was for any chronic disease nor for any illness extending over a long period of time.
On account of the close personal friendship bills were rendered to the patient intermittently, if at all; and the patient made payments whenever it was convenient for him to do so. The patient was financially responsible and able to pay the amount due at any time.
From July 1, 1934, to April 22, 1939, charges accumulated on Nast's books. On September 13, 1937, the patient paid the sum of $ 150 on account. On April 22, 1939, the balance then due was the sum of $ 990 for services rendered said patient and his family. From April 22, 1939, to September 4, 1943, charges were made against the patient of $ 1,856 1 and on September 4, 1943, a total of $ 1,946 was paid, which balanced the account and paid all accrued charges to that date. On July 8, 1939, the patient paid the sum of $ 500 on the account; and on December 23, 1940, he paid $ 500 on the account.
*114 After said date of September 4, 1943, Nast continued as family physician and accumulated other charges, which are reflected by the exhibits hereto attached.
OPINION.
In their income tax returns for 1943 the petitioners claimed the benefits of
*115 The petitioners contend that the "period" involved began April 22, 1939, and ended September 4, 1943, a period of more than 36 months; that the payment of $ 1,946 made September 4, 1943, covered services for the entire period and that the payments on account made prior to September 4, 1943, were for prior periods and should not be taken into account in determining whether the amount received on that date should be ratably allocated over the period in accordance with
The respondent contends that the "period" began July 1, 1934, and that the charges accumulated from that date to September 4, 1943, *434 amounted to $ 3,096. Therefore, the payment of $ 1,946 received on September 4, 1943, represented less than 80 per cent of the total compensation received during the period and
As we understand the statute, *116 it is the total compensation "from the beginning to the completion" of the services which must be taken into account in determining whether at least 80 per cent thereof is received or accrued in one taxable year. The basic period, therefore, is the entire period involved and it is obvious that payments on account during the period must be considered a part of the total compensation for the services performed.
In order for the petitioners to be entitled to the relief provisions of
It is, in fact, doubtful whether the statutory language "from the beginning to the completion of such services" was intended to cover a portion of a running account where identical services were rendered both before and after the period completed*117 by such portion. We have not found nor have we been referred to any cases so holding. The cases examined by us have all involved services having a definite beginning and completion.
So far as the record shows, nothing happened on April 22, 1939, unless it was the billing of services rendered to that date. To permit an ordinary running account to build up over a period of time and then require payment, which could be allocated for tax purposes over prior years, permits manipulation of income by a taxpayer to avoid high tax rates and to take advantage of more favorable rates. If a taxpayer having a running account with a customer or a client might, by rendering a bill of the amount due, "complete" his services within the meaning of
1. It appears from the facts that this amount as stipulated is in error and should be $ 1,956.↩
2.
(a) Personal Services. -- If at least 80 per centum of the total compensation for personal services covering a period of thirty-six calendar months or more (from the beginning to the completion of such services) is received or accrued in one taxable year by an individual or a partnership, the tax attributable to any part thereof which is included in the gross income of any individual shall not be greater than the aggregate of the taxes attributable to such part had it been included in the gross income of such individual ratably over that part of the period which precedes the date of such receipt or accrual.↩