United States Steel Corp. v. Commissioner

United States Steel Corporation, Petitioner, v. Commissioner of Internal Revenue, Respondent United States Steel Corp. v. Commissioner Docket No. 109169 United States Tax Court 2 T.C. 430; 1943 U.S. Tax Ct. LEXIS 100; July 20, 1943, Promulgated *100 Decision will be entered for the petitioner. Under the stock subscription plan here involved, where petitioner's employees could make application to purchase a limited number of shares of petitioner's stock and make deferred monthly payments therefor from wages, and petitioner agreed on its part to make certain credits to the employees' stock purchase accounts equaling the dividends paid on the company's common stock and other annual credits in the form of special benefits and additional compensation, which credits and delivery of the stock were specifically conditioned upon the employee remaining in petitioner's service until the stock was fully paid for in the manner provided for in the plan, it is held that the credits to the employees' stock purchase account measured by dividends on the company's common stock were additional compensation paid to employees in the taxable year and are deductible from petitioner's gross income under section 23 (a), Revenue Act of 1928. A. C. Newlin, Esq., for the petitioner. Thomas H. Lewis, Jr., Esq., and Arthur Groman, Esq., for the respondent. Harron, Judge. HARRON *430 The respondent determined a deficiency in income*101 tax for the year ended December 31, 1930, in the amount of $ 120,296.15. The deficiency arises solely from the disallowance of a deduction as a business expense of amounts credited to employees' stock subscription accounts which were terminated by full payment in 1930. FINDINGS OF FACT. The facts are set forth in a stipulation of the parties, which we adopt as our findings of fact. Only such of the facts as seem necessary to a discussion of the issues are stated herein. Petitioner, a New Jersey corporation, filed its return for the year 1930 with the collector for the second district of New York. It keeps its books and makes its returns on the accrual basis. In 1902 petitioner adopted a plan designed to give its employees an opportunity to acquire stock of petitioner. This plan was in *431 effect continuously through 1933. The purpose of the plan was "to accord to employees of the United States Steel Corporation and its subsidiaries, and those actively engaged in the conduct of its or their business, an opportunity to purchase the capital stock of the corporation and to participate in the other benefits of the Plan." Pursuant to the plan petitioner in each of the years 1926, *102 1927, 1928, 1929, and 1930 offered to its employees the opportunity to acquire shares of its stock on certain terms and conditions, the pertinent provisions of which are set forth verbatim: United States Steel Corporation To the Officers and Employes of the United States Steel Corporation and of its Subsidiary Companies: The corporation again offers to those now actually in the employ of the Corporation, or any of its subsidiaries, the opportunity to subscribe for shares of its Common stock, not exceeding an aggregate total of 100,000 shares, under the following terms and conditions: * * * * * * * The following table shows the maximum number of shares which may be subscribed for by employes whose salaries or wages are within the respective limits stated, but employes at their option may subscribe for less than such maximum number of shares. Subscriptions to Common Stock Employees Receiving May Subscribe for a Annual Salaries of Maximum Number of $ 1,360.00 or less 1 share 1,360.01 to 2,266.66 2 shares 2,266.67 to 3,966.66 3 shares 3,966.67 to 6,120.00 4 shares 6,120.01 to 7,480.00 5 shares 7,480.01 to 8,840.00 6 shares 8,840.01 to 12,750.00 7 shares 12,750.01 to 14,450.00 8 shares 14,450.01 to 16,150.00 9 shares 16,150.01 to 17,850.00 10 shares 17,850.01 to 19,550.00 11 shares 19,550.01 to 34,000.00 12 shares 34,000.01 to 36,720.00 13 shares *103 Payment for Stock * * * Payment of subscriptions shall be in monthly installments to be deducted from the salary or wages of the subscriber. The first deduction will be made from March salary or wages. No installment shall be less than $ 3.00 per share and shall not exceed one-quarter of any one month's salary or wages. Installments exceeding the minimum must be in even dollars. Payment for the stock should be completed within three years. Interest at 5% per annum will be charged on deferred payments. *432 Dividends * * * Until payment of the subscription has been completed, any dividends paid on the stock subscribed for will be credited to the account of the subscriber as part of his payment. After the stock is issued to the subscriber future dividends will go direct to him. Cancellations -- Refund of Installments * * * Subscriptions will be cancelled for the following reasons: (1) By request of subscriber. (2) By (a) voluntarily leaving the service, or (b) being discharged for cause, or (c) failing to resume employment when requested. * * * (3) By discontinuing payments without the consent of the Corporation for three consecutive months. The cancellation of a subscription*104 forfeits all interest and benefits which the subscriber would have received if he had continued such subscription. There will then be returned to him the full amount of payments made on the subscription so cancelled with interest at 5% per annum, no credit being given him for dividends or for the special allowance referred to in third paragraph of Section Eighth, and no interest being charged on deferred payments. A subscription may not be cancelled in part, but any open account may be cancelled and payments continue on any remaining open accounts. Payments on any one subscription cannot be deferred in favor of others, without cancelling the former. Minimum payments must be made on all open accounts to avoid cancellation, except as otherwise provided. Special Benefits * * * When the stock is fully paid for, it will be issued in the name of the subscriber. He may sell his certificate, but as an inducement for him to keep it while he remains in the service, the following offer is made, viz.: If he will keep the stock and in January of each year, for five years, commencing with January, 1927, will exhibit the certificate to the Treasurer of his company, together with a statement*105 from a proper official that he has been continuously in the employ of the Corporation or of one or another of its subsidiary companies since the date of his subscription for the stock and during the preceding year, and has shown a proper interest in its welfare and progress he will for the first year receive a cash payment of $ 3.00 per share for each share of Common stock, for the second year $ 4.00 a share, for the third year $ 5.00 a share, for the fourth year $ 6.00 a share, and for the fifth year $ 7.00 a share. Subscribers who may not have fully paid their subscriptions by January in any year, will, if their subscriptions are still in force, and they have otherwise fulfilled all the conditions of continuous and faithful service as provided, be credited in their subscription accounts at the close of the respective years, with the foregoing special allowances per share on their subscriptions for Common stock. Additional Compensation * * * If a subscriber keeps his certificate and remains continuously in the service for five years, the Corporation intends that he shall then receive a still further compensation, which cannot now be ascertained or stated, but which will be derived*106 from the following sources, viz: The special allowances referred to in Section Eight, which, after a subscription is fully paid, are forfeited by: *433 (a) Transfer of certificate from name of a subscriber, whether intentionally or otherwise; (b) Voluntarily leaving the service, or being discharged for cause, or failing to resume employment when requested * * * will be paid by the Corporation into a special fund at the end of each year. This fund will be credited with interest at 5% per annum and at the end of the five years' period the total amount thus accumulated will be divided into as many parts as shall be equal to the number of shares of Common stock subscribed for hereunder and then remaining in the hands of subscribers who shall have continued in such employ for the whole five years. The Corporation will then by its own final determination in its discretion award to each subscriber whom it shall find deserving thereof as many parts of such accumulated fund as he shall be entitled to on basis of the number of shares then held by him under this plan. The plan was not to apply to a pensioner, but it provided that, if the employee were to die, be permanently disabled, *107 or pensioned during the five-year period subsequent to his application for stock, petitioner was to deliver the stock to him or his estate if it was fully paid for, or, if not, petitioner was to return the payments previously made by him with 5 percent interest, plus in both cases the balance of the "Special Benefits" for the entire five-year period and the applicable share of the "Additional Compensation." It further provided that, in the event of suspension of employment by reason of a temporary shutdown or reduced operations, the three-year period for completing payment for the stock was to be correspondingly extended, but a subscribing employee was nevertheless to continue to receive during such suspension the "Special Benefits." It was also provided that the plan could "be recalled, abolished, revised, amended, altered or changed, as provided in Section 3 of Chapter 175 of the Laws of the State of New Jersey for the year 1920." This however was subject to the restoration by the corporation of any moneys contributed by employees for which no stock or other equivalent had been issued. The parties agreed that the prices fixed in the various offers were approximately the then current*108 market prices for the stock. Pursuant to the offers made during the years 1926-1930, shares were subscribed for, a portion of the subscriptions was subsequently canceled, the balance of the subscriptions was paid in full, and stock certificates were issued, as follows: Net original Paid in full and subscriptions Cancellations certificates delivered Year Price Subscribers Shares Subscribers Shares Subscribers Shares [1926] $ 136 36,592 73,869 6,593 11,281 29,999 62,588 [122] 60,929 130,953 12,656 22,988 48,273 107,965 [145] 49,587 94,045 14,060 23,722 35,527 70,323 [165] 48,335 82,973 27,551 45,433 20,784 37,540 [169] 59,881 98,174 48,957 77,479 10,924 20,695 *434 On January 1, 1926, and thereafter throughout each of the years 1926, 1927, 1928, 1929, and 1930, there were authorized shares not issued nor subscribed for in excess of the number of shares subscribed for during each year. During the year 1930 payments of subscriptions for 79,230 common shares were completed and certificates for such shares were delivered to employees. Said shares were subscribed for during the years 1926 *109 to 1930, as follows: Year Shares [1927] 17,988 [1928] 19,496 [1929] 32,160 [1930] 9,585 Total 79,230 Under the plan, between the time stock was subscribed for by employees and the time stock was fully paid for and certificates were delivered to the employees, dividends were declared in due course on petitioner's common stock. In accordance with the terms and conditions of petitioner's employees' stock subscription plan, the unpaid subscriptions for stock were credited on account of such dividends. With respect to the 79,230 shares of stock, set forth above, for which full payment was made in the taxable year, 1930, credits in the following amounts had been made in each year, measured by dividends declared in each year, as follows: Year of credit Amount credited [1926] $ 7.00 [1927] 63,077.00 [1928] 229,530.00 [1929] 448,644.50 [1930] 261,210.00 Total 1,002,468.50 In its returns for the years set forth in the above table petitioner did not take deductions for the above amounts which were credited to the purchase price of the 79,230 shares on account of dividends which were declared. However, in its return for 1930, the year during which the 79,230 shares*110 became fully paid, petitioner deducted the total sum of $ 1,002,468.50 representing the total of the credits to the purchase price of the stock during 1926 to 1930, inclusive, on account of dividends declared in each of those years. Respondent disallowed the deduction, stating that the total of the credits in the above amount on contracts on which payment was completed in 1930 did not constitute a deductible expense under section 23 of the Revenue Act of 1928. *435 Petitioner from time to time purchased shares of its common stock in the market, intending that such shares should be used to fulfill its obligations under the plan. After acquisition by petitioner and before delivery of certificates to employees, such certificates of stock were held in the names of nominees. However, petitioner did not acquire in this manner enough stock to meet employees' stock subscriptions paid up in full in 1930. Of the 79,230 shares, certificates for which were delivered to employees in 1930, 61,073 shares were represented by certificates purchased by petitioner in the market. The balance, 18,157 shares, was represented by certificates for shares which were authorized but for which no certificates*111 had theretofore been issued. Certificates for these 18,157 shares were issued in the names of employees when their subscription accounts were paid up in full, and no certificates for said shares were theretofore outstanding. At various times during each of the years 1927, 1928, 1929, and 1930 the amount of its common stock owned by petitioner was less than outstanding employees' subscriptions, in amounts varying from 797 shares to 129,321 shares. Between the time the subscriptions for the stock were received and the time the stock was fully paid for, in accordance with the terms of the plan, interest was charged on deferred payments and interest was allowed on credits. The total amount of interest charged was $ 515,507.52, and the total amount of the interest allowed was $ 45,139.21. In its income tax return for 1930 petitioner reported as income from interest the sum of $ 515,507.52, and took as a deduction for interest the sum of $ 45,139.21. Respondent made no adjustments with respect to these interest items, but has let them stand as reported in the return. The parties have agreed that, in the event the Court sustains petitioner's contention that the total sum of $ 1,002,468.50*112 is deductible as compensation to employees in 1930, then such amount plus the regular compensation constitutes reasonable compensation for services rendered. The sum of $ 1,002,468.50 representing credits on employees' unpaid subscription accounts measured by dividends declared was additional compensation to petitioner's employees in the year 1930. OPINION. The only question presented is whether the total of the amounts credited by petitioner to certain employees' stock subscription accounts which became fully paid in 1930, i. e., $ 1,002,468.50, constitutes dividends or additional compensation for services. If said amount constitutes additional compensation for services, the amount is deductible in 1930. With respect to the year of the deduction, *436 no issue is raised. Cf. Electric Storage Battery Co., 39 B. T. A. 121. Petitioner contends that, pursuant to section 23 (a) of the Revenue Act of 1928, 1 it is entitled to deduct from its gross income for 1930 the above amount, which is the aggregate of the credits made by petitioners to its employees' unpaid subscription accounts in the years 1926 to 1930, inclusive. Petitioner contends that*113 these credits were additional compensation to its employees and are deductible as such. Respondent contends that the agreements between petitioner and its employees were subscription agreements as distinguished from contracts to purchase stock, so that the employees became stockholders immediately upon signing the agreement, and the various credits in 1930 and prior years were dividends to which the employee was entitled as a matter of right rather than additional compensation. Respondent places great emphasis upon the words "subscription" and "subscriber" which appear in the agreement. From these words he argues that the employees became shareholders from the moment*114 of the execution of the agreement, regardless of its conditions. Terminology, however, is not conclusive in the construction of an agreement. As was said in Alger-Sullivan Lumber Co. v. Commissioner, 57 Fed. (2d) 3: The use of the word "sale" in a contract does not necessarily conclusively determine its character. Its meaning may be qualified and the word deprived of its ordinary force by other provisions of the agreement. The same principle of law was enunciated in New Jersey, where the court in construing a so-called subscription agreement, in the case of Kruse v. Hudson County Consumers' Brewing Co., 79 N. J. Eq. 392; 82 Atl. 104, 108, said: * * * It must not be lost sight of that while it is true in many instances that by the contract one who subscribes for stock immediately becomes a shareholder, even though he has only paid a portion of the par value of the stock, which is, however, very different from finding that every subscriber to capital stock immediately, irrespective of the terms of the subscription, becomes a shareholder or share owner or one entitled to a certificate *115 of stock, or entitled to recognition as a stockholder. What the rights are of one who subscribes to capital stock must in each instance be determined by the contract between him and the company; and the words "subscriber to capital stock" cannot be held to have a fixed, definite, and unchangeable meaning. In one case, by the terms of the contract, the so-called "subscriber" may have immediately become a stockholder; in another case, he might not become a stockholder until he had paid certain sums of money; and so through all the variations that contractual relations are subject to as regulated by their terms. Those cases in our courts in which the subscriber to capital stock has been treated as a stockholder are *437 cases in which the contract between him and the corporation showed that he was a stockholder having complied with the terms of his subscription, and that all that was required upon his behalf was a certificate evidencing the same. * * * Petitioner is a New Jersey corporation, and agreements relating to the acquisition of its stock are to be construed and interpreted in accordance with New Jersey law. Fletcher, Cyclopedia of the Law of Private Corporations, vol. *116 4, sec. 1362. It is evident in this case that these agreements were not "subscription agreements" since neither party could have enforced the agreement against the other until all its terms had been complied with. The employees could have canceled their agreements at any time either by request without leaving petitioner's employ, by voluntarily leaving the service, or by discontinuing payments without the consent of petitioner for three consecutive months. They had no unconditional obligation to take and pay for their stock. This alone is indicative that the agreements were not "subscriptions," for if the employees were subscribers they would have been liable to the corporation or its creditors for the unpaid balance of the agreed price. The employer also had the right to cancel the agreements, pursuant to New Jersey statute, by abolishing the plan and returning the payments made by its employees on account of the purchase price. In commenting on this statute, the court in the case of Schaefer v. Bowers, 50 Fed. (2d) 689, said: Second, the right to cancel the plan was reserved in the widest terms allowed by the New Jersey statute; that is, at*117 the pleasure of two-thirds of the shareholders. If it was cancelled, the company need return only the contributions of the employees. * * * The plaintiff argues that, once the trustees bought shares and credited them to an employee the company had no power under the statute to deprive him of them. We do not so read it. Shares are not "issued", whose title remains in the trustees, merely because they are provisionally credited to the employees upon the books. They may never be "issued" at all; it was precisely the purpose of the plan at bar to hold them back until it appeared whether the employee was entitled to receive them at the close of the period. * * * The employer is to be allowed at any time to abandon the venture, if it turns out impracticable, either because the shares fall in value, or for other reasons. The only limitation is that he must always insure his employees against loss. * * * * * * * Therefore, we think that when the shares were distributed at the close of the five-year period, the plaintiff got for the first time the income which had theretofore been accumulating, conditionally upon his continued service and the company's continued purpose to complete. *118 Appeal of Lister, 3 B. T. A. 475. Until then it was uncertain whether he would ever receive the shares; they had become his only provisionally. * * * Here, the credits were not regarded as final and complete until the purchase was completed. Then the stock was turned over to the *438 employee and it was unconditionally his property. Until then the credits were only tentative. If the employee canceled his agreement or left the service of the company, the amounts contributed by petitioner to his account were paid into a special fund which was to be divided between those employees who completed their agreements and held their stock for five years. Under the circumstances, it is held that the agreements were not subscriptions which vested in the employee a shareholder status at the time he signed the agreement. This brings us to the main question, whether the amounts measured by dividends which petitioner credited to its employees' subscription accounts constitute additional compensation to employees in the year in which all the payments were completed. It is necessary to examine the entire plan, and the intent of the parties is of primary importance. *119 O'Brien v. Miller, 168 U.S. 287; Ritter Lumber Co., 30 B. T. A. 231; Delbert B. Geeseman, 38 B. T. A. 258. The substance of the plan rather than its form must be ascertained. Indianapolis Glove Co. v. United States, 96 Fed. (2d) 816, 821. Under the plan the stock was to be paid for by (1) deductions of stated amounts from employees' wages, (2) payments by the employer of amounts measured by dividends paid on its outstanding stock, and (3) payments by the employer of "Special Benefits" consisting of amounts credited each January, starting at the rate of $ 3 per share and increasing by $ 1 each year for the next four years. In addition to this, the employer was to make payments of "additional compensation" at the end of five years to those employees who kept their stock and remained in the service of the company. The only deduction disallowed by respondent is the amounts credited by the employer measured by dividends paid on petitioner's outstanding stock, and this is upon the theory that these amounts were dividends which belonged to the employee as*120 a stockholder. Taking the agreement as a whole, we are of the opinion that the amounts in question were additional compensation to the employees. The plan was open only to employees of the corporation and the benefits of the plan were given to them only for so long as they remained in petitioner's employ. Even pensioners were excluded. The maximum number of shares which an employee could take was limited by the amount of his yearly wages. Thus, the contributions made by petitioner to the purchase price of the shares were directly proportional to the employee's ordinary compensation. See Commissioner v. Texas Pipe Line Co., 87 Fed. (2d) 662 (1937), where the court held that a provision of this nature disclosed an intention on the part of the employer to add to the compensation of the employees. Also, in this case, the employee could not take any pay for stock immediately. By limiting the rate at which he could pay for the shares, he was *439 required to render services for a fixed minimum period. The "Special Benefits" in each year were conditioned upon a showing that the employee had been continuously in petitioner's employ since the*121 date of the agreement, and upon production of a "statement from a proper official that he * * * has shown a proper interest in its [petitioner's] welfare and progress." The "Special Benefits" were credited to the account of a subscribing employee who had not fully paid his subscription if the same was still in force and if the employee had "otherwise fulfilled all the conditions of continuous and faithful service." They were made to the employee "as an inducement for him to keep it [his certificate] while he remains in the service." In addition, employees whose employment was suspended due to a reduction in operations did not lose their rights under the plan as long as they were willing to return to petitioner's employ. All of this is indicative of payment of additional compensation. The employee received something definite to which they would not otherwise have been entitled in consideration for remaining in petitioner's employ and participating in the plan. We held in Chrysler Corporation, 42 B. T. A. 795, 807, that this was an important consideration in determining whether a contribution by the employer was additional compensation. Petietioner *122 relies heavily on several administrative rulings which have never been revoked or modified. One of these is Office Decision 763, 4 C. B. 76, which reads as follows: Where a corporation offers its employees the opportunity to purchase shares of its stock, and the title to the stock remains in the corporation until it is fully paid for, it is held that the so-called dividends credited to the account of the employee purchasing the stock as part payment for the stock are not in fact dividends, as dividends can not legally be declared on unissued or treasury stock. The amounts so credited, which are measured by the dividends declared on the outstanding stock, constitute additional compensation to the employees and taxable as such. Where other amounts in the nature of special allowances are, upon the fulfillment of certain conditions, credited to the account of such subscriber as part of the payment for his stock, and where provision is made for the payment of certain amounts in the event the subscriber does not default in any payment on the stock being purchased and complies with certain other conditions, it is held that such amounts are in the nature of additional*123 compensation. It is held, further, however, that as the interest of the subscriber is merely a contingent interest which may be defeated by failure to execute the terms of the agreement upon which the stock is issued, the so-called dividends and special allowances credited to the account of the subscriber do not constitute taxable income to such subscriber until the terms of the agreement have been completed. The above ruling was recently approved by the Circuit Court of Appeals for the Seventh Circuit in Thurman v. Studebaker Corporation, 88 Fed. (2d) 984 (1937), where the court, in holding that amounts credited to employees' accounts under a stock purchase plan, including *440 amounts measured by dividends, were deductible by the corporation as additional compensation, said, at p. 986: * * * Subsequently, the Department ruled, in Office Decision No. 763, Cumulative Bulletin 4, page 76, that where a corporation permits its employees to purchase stock, retaining title until the purchase price is fully paid, so-called dividends credited to the account of the employee purchasing the stock as part payment shall be treated as additional compensation*124 to the employees and taxable as such, and that any sums paid by the employer upon account of purchases of stock by employees shall be treated as additional compensation. * * * To the same effect were other later decisions of the Department. Thus, in administration of the law, that branch of the government charged with its enforcement and with collection of revenue has by its regulations and decisions put a practical interpretation upon the statute reflecting the same reasoning and sustaining the same conclusions as those of the District Court. This should justify the judgment unless such interpretation is at variance with the law. In this case, the employees were not to receive certificates of stock until completion of payment of the purchase price and upon performance of the terms and conditions of the agreement. The agreement could be canceled at will, not only by the employee, but also by the employer, pursuant to section 3, chapter 175, of the Laws of New Jersey for 1920. This provision of New Jersey law was discussed in Schaefer v. Bowers, supra, where the court held that the employee did not become a stockholder when stock was credited *125 to him because his right to possession was conditional upon future employment and because under the New Jersey statute the employer could cancel the plan. Petitioner's employees took advantage of their right to cancel subscriptions to an extensive degree. The percentage of canceled subscriptions ranged from approximately 15 percent in 1926 to approximately 79 percent in 1930. The facts also indicate that petitioner had at various times considerably less stock in its treasury or held by its nominees than was necessary to meet the requirements of subscriptions then in effect, but which had not matured. All of this indicates that it was not the intention of the parties to consider employees as shareholders upon their acceptance of petitioner's offer. They merely had a right to become stockholders upon the fulfillment of the conditions of the agreement. Albert Russel Erskine, 26 B. T. A. 147, 165. An employees' stock subscription plan which was in many respects similar to petitioner's plan was before this Court in Electric Storage Battery Co., supra. Although the precise issue was not presented, it was held that amounts*126 measured by dividends credited to employees' stock subscription accounts constituted additional compensation and could be deducted in the year when the stock was delivered *441 to the employees. (Respondent acquiesced in this decision, 1939-1 C. B. (Part 1), p. 11. The only case relied upon by respondent is Gardner-Denver Co. v. Commissioner, 75 Fed. (2d) 38; certiorari denied, 295 U.S. 763. In that case, however, the court found that the subscriptions were treated as sales by the employer from the time of acceptance by the employee, and that as a necessary corollary the amounts credited to employees were in fact dividends which belonged to the employee and thus could not be considered additional compensation. There are a number of essential differences between the plan in the Gardner case and the plan here. In the Gardner case, the number of shares to which an employee could subscribe was not limited by the employee's salary; there were no special benefits or additional compensation; and, there was no provision in Illinois law which gave the employer the right to abolish the plan. *127 These elements which are present in petitioner's plan are the factors which the courts have considered important in determining that credits or contributions by an employer to its employees are additional compensation rather than dividends. Upon all the evidence, it is held that the payments made by petitioner in the total sum of $ 1,002,468.50 to its employees in 1930, representing credits on employees' unpaid subscription accounts measured by dividends on its outstanding stock, were additional compensation to its employees. Petitioner is entitled to the claimed deduction. Decision will be entered for the petitioner. Footnotes 1. SEC. 23. DEDUCTIONS FROM GROSS INCOME. In computing net income there shall be allowed as deductions: (a) Expenses. -- All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually rendered; * * *↩