Wattley v. Commissioner

Ralph B. Wattley and Josephine R. Wattley, Petitioners, v. Commissioner of Internal Revenue, Respondent Wattley v. Commissioner Docket No. 62297 United States Tax Court 31 T.C. 510; 1958 U.S. Tax Ct. LEXIS 21; December 11, 1958, Filed *21 Decision will be entered under Rule 50. Petitioner, the owner of all of the stock of a corporation, conducted a real estate brokerage business in its name. In 1951 he received from it a commission which it earned, through services rendered by him as its representative, for negotiating a lease. The commission received did not represent at least 80 per centum of the total compensation for personal services received by petitioner from the corporation during the period covered by the services. Held, the entire commission is taxable income of petitioner for 1951, and section 107 (a) of the Internal Revenue Code of 1939 is not applicable. Ralph B. Wattley, pro se. Clarence P. Brazill, Jr., Esq., for the respondent. Raum, Judge. RAUM *510 Respondent determined a deficiency in income tax of petitioners for the calendar year 1951*22 in the amount of $ 3,439.66. The principal issue is whether petitioner Ralph B. Wattley is entitled to the benefits of section 107 (a) of the Internal Revenue Code of 1939 with respect to a payment of $ 30,666.67 received by him in 1951. FINDINGS OF FACT. Petitioners, husband and wife, are residents of New York City. They filed joint income tax returns for the calendar years 1951 and 1952 with the collector of internal revenue for the first district of *511 New York. Petitioner Josephine Wattley is involved in this proceeding only because she filed a joint return with her husband. Petitioner Ralph B. Wattley will hereinafter be referred to as the petitioner. Merchants Realty Service, Inc., was incorporated November 3, 1930, with Charles Rex Stoddard, S. Michael Ress, and Lillian Goodkind as president, treasurer, and secretary, respectively, each of them being a director and subscribing for 2 shares of the corporation's stock. Petitioner purchased such subscription stock January 6, 1931, or shortly thereafter. On January 8, 1931, Merchants Realty Service, Inc., changed its name to R. B. Wattley Co. Inc. Petitioner became president, treasurer, and a director of the corporation*23 on January 13, 1931, and was authorized to open bank accounts in its name. On February 7, 1931, petitioner paid $ 1,000 for 10 shares of the corporation's capital stock. He was the sole stockholder from 1931 throughout all the years in controversy. The purposes for which the corporation was formed were stated in its certificate of incorporation to be, in part, as follows: As principal, agent or broker, and on commission or otherwise: to buy, sell, exchange, lease, let, grant or take licenses in respect of, improve, develop, repair, manage, maintain and operate real property of every kind, * * *. To act as loan broker. Generally to do everything suitable, proper and conducive to the successful conduct of a real estate and real estate agency and brokerage business in all its branches and departments. One of the objects petitioner had in mind in acquiring Merchants Realty Service, Inc., and forming R. B. Wattley Co. Inc. was to "limit his liability as to possible acts of his associates." At a meeting of the board of directors of the corporation held on January 13, 1931, a motion was adopted authorizing petitioner to take such proceedings as might be necessary to have himself designated*24 "as the representative of the company in the company's real estate brokerage license." Petitioner retained the position of president, treasurer, and director of the corporation from January 13, 1931, until its dissolution sometime after 1951. Other officers and directors between 1930 and 1952 were the following: Michael Ress, director. Lillian Goodkind, secretary and director. Nell Wattley, assistant secretary, secretary, or assistant treasurer. M. Vincent Brady, vice president. Harry G. Hart, vice president. Fabyan R. Saxe, vice president. Josephine Wattley, director. Howard B. Kavelin, secretary. R. B. Wattley Co. Inc. was held out to the public as a corporation. It transacted business in its corporate name; hired employees; had a *512 telephone listed in its name; entered into contracts signed by petitioner as its president; authorized petitioner "for and on behalf of this corporation" to borrow from the Bank of Manhattan on April 1, 1937, the amount of $ 2,500, November 1, 1937, the amount of $ 2,000, September 16, 1938, the amount of $ 1,300, November 20, 1938, the amount of $ 300, and February 9, 1940, the amount of $ 3,500; endorsed a note in the amount of $ 3,000 on*25 September 2, 1948, to which it confessed judgment March 4, 1949, and paid on April 24, 1951; and filed Federal income tax returns from 1931 through 1952. It maintained a bank account with the Corn Exchange Bank and Trust Company, New York, in which corporate income was deposited and amounts were withdrawn for rent, salaries, commissions, and other expenses. Petitioner was authorized to make withdrawals from this account by checks signed by him in the name of the corporation as president or treasurer. Employees of the corporation received a percentage of commissions earned on transactions handled by them. The amounts due them were paid by checks drawn on the bank account of the corporation. Petitioner received income from R. B. Wattley Co. Inc. in the following amounts: Year Amount [1931] $ 11,550.00 [1932] 6,625.00 [1933] 7,181.25 1934 1 [1935] 7,842.50 [1936] 5,490.36 [1937] 6,892.35 [1938] 5,078.25 [1939] 8,167.73 [1940] 3,306.76 [1941] 2,186.25 [1942] 50.15 [1943] 3,952.85 68,323.45 *26 This income was reported by petitioner in income tax returns filed for the years 1931 to 1943 inclusive. The corporate income tax returns of R. B. Wattley Co. Inc. for the years 1944 to 1952 inclusive, filed on behalf of the corporation by petitioner as its president and treasurer, contained notations that the corporation was inactive and had no income. Schulte Real Estate Co., Inc., the owner of the fee in property located at 508-514 Fifth Avenue at the southwest corner of 43rd Street, New York, New York (hereinafter sometimes called the Fifth Avenue property), offered such property for sale on May 21, 1931, and again on April 7, 1937. R. B. Wattley Co. Inc. did not have an exclusive right to sell the property as the offer was a general offer to hundreds of licensed real estate brokers. Mutual Life Insurance Company (hereinafter referred to as Mutual) held a $ 3,000,000 first mortgage *513 due April 1, 1934, on the Fifth Avenue property. This mortgage was foreclosed and, in February 1941, Mutual acquired title. Petitioner, acting as the representative of R. B. Wattley Co. Inc., made the following contacts with respect to the Fifth Avenue property during the years 1931 to*27 1940 inclusive: [1931] June 26 Frederick Brown July 6 W. J. Salmon October 13 R. Wurlitzer Co. October 15 Henry Phipps Estates [1932] April 5 W. J. Salmon May 5 Continental Bank & Trust Co. May 9 Emigrant Industrial Savings Bank June 29 Savarin Restaurant November 18 Citizens Savings Bank [1933] February 7 Brill Bros. February 14 Wallach Bros. February 14 Eastman Kodak Stores April 10 Continental Bank & Trust Co. June 22 Continental Bank & Trust Co. [1934] March 28 Eastman Kodak Stores July 10 Chemical Bank July 11 Bank of Manhattan [1935] April 8 Manufacturers Trust September 10 W. J. Salmon October 17 Oppenheim Collins [1936] February 5 R. Wurlitzer Co. May 28 Savarin Restaurant [1937] April 28 Frederick Brown June 2 Manufacturers Trust 1 September 16 W. J. Salmon September 28 Gotham Silk Hosiery September 29 Charles C. Nicholls October 22 Harry G. Hart [1938] February 8 Hamburg Am. North German Lloyd November 14 S. S. Kresge [1939] July 12 Samuel Rugof Drugs [1940] May 27 Chemical Bank *514 In March 1941 petitioner, acting as the representative of R. B. Wattley*28 Co. Inc., made his first contacts with both Mutual and Manufacturers Trust Co. (hereinafter referred to as Manufacturers) with reference to the construction of a new bank building on the Fifth Avenue property of Mutual and the lease of this building to Manufacturers. During March 1941 and continuing through the early part of 1942, a number of letters were written by petitioner on the letterhead of R. B. Wattley Co. Inc. to both Manufacturers and Mutual attempting to bring about the consummation of this transaction. On September 10, 1941, R. B. Wattley Co. Inc. and Charles F. Noyes Company, Inc., agreed in writing that when and if a commission was received by "Wattley" in connection with this transaction, it would pay one-third of such commission to "Noyes," and that "Wattley" would include the name of "Noyes" as cobroker in any publicity given to the "deal." Shortly after the commencement of World War II "it was decided best to postpone the matter until the steel situation cleared up," and Manufacturers renewed its lease on the Postal Life Building, which it was then occupying, for a period of 5 years. Between July 1942 and April 1943, Manufacturers and Mutual were not contacted*29 with reference to the proposed lease of the Fifth Avenue property. Between April 7, 1943, and April 10, 1944, however, there were numerous contacts between representatives of R. B. Wattley Co. Inc. and Charles F. Noyes Company, Inc., and Manufacturers and Mutual. On October 20, 1943, petitioner wrote a letter to Mutual on the letterhead of R. B. Wattley Co. Inc. which reads, in part, as follows: The Manufacturers Trust Company have decided to take the thirty year lease of your entire property * * * at the southwest corner of Fifth Avenue and 43rd Street, New York on the terms you and I have discussed. They request that you have the lease written at your earliest convenience and upon receipt they will at once put it in their lawyer's hands for checking and approval. On November 23, 1943, petitioner again wrote Mutual on the letterhead of R. B. Wattley Co. Inc. This letter reads, in part, as follows: I advised Manufacturers Trust Company of your rental terms for 508 to 514 Fifth Avenue which you gave me on Friday, namely: Based on a cost of $ 850,000 for the new building, the net annual rent for a 30 year lease is to be $ 90,000 for the first 21 years and $ 107,500 for the last 9*30 years. * * * * Manufacturers Trust Company have instructed me to advise you of their acceptance of your terms and to request that you proceed with the drawing of the lease, which they will submit to their counsel for checking and approval immediately upon its receipt. Correspondence and other contacts between R. B. Wattley Co. Inc. and Mutual, between November 23, 1943, and April 10, 1944, were directed *515 principally to reaching an agreement as to the commission to be paid to R. B. Wattley Co. Inc. and Charles F. Noyes Co., Inc., for their services in negotiating the lease. On December 17, 1943, petitioner wrote a letter to R. B. Wattley Co. Inc. in which he informed the corporation that commencing January 3, 1944, he would engage in the real estate brokerage business on his own account under the name of R. B. Wattley Company. The letter also read, in part, as follows: I understand that you are considering engaging in the business of real estate operators and for the time being not to undertake new brokerage business and wish to minimize and definitize your business overhead. As there are some rental negotiations pending in which you are acting as broker, originated and *31 conducted by me, I agree to continue my services in connection with said negotiations and use my best efforts to successfully consummate these negotiations on the following terms and conditions: * * * * 3. You are to receive as and when earned and paid one half of the fees or commissions in the following matters: (a) Matter of endeavoring to obtain for Cohen-Goldman & Co., 45 West 18th Street, New York City, renewal of lease of their present premises or other suitable premises for them. (b) Matter of endeavoring to obtain for Goodstein Bros. & Co., 45 West 18th Street, New York City, renewal of lease of their present premises or other suitable premises for them. I am to receive the other half of said commissions or fees * * * 4. I shall be entitled to the full amount of brokerage fees or commissions earned in any and all other pending brokerage negotiations, heretofore initiated through me in which I continue to participate and carry on, * * *. You are to assign and transfer to me any and all right to such commissions or fees and to execute any and all papers necessary to evidence my full right to said entire commissions or fees and shall turn over to me all sums received by you on*32 account thereof, * * * 5. The aforesaid pending negotiations or transactions shall be continued in your name as broker, but I have the option of re-instituting them in my name as broker. * * * Except as aforesaid, I agree not to institute any new brokerage negotiations or transactions in your name. 6. I shall have no further claims against you for my services as your representative in said real estate brokerage transactions, except as herein set forth. * * * * 8. You are to consent to my use of the name R. B. Wattley Company as a trade name and to the issuance of a real estate broker's license in New York to me in my name or in said trade name. If the foregoing meets with your approval, please indicate your acceptance on the duplicate and return same to me. Acceptance was indicated at the bottom of the carbon copy of this letter as follows: Accepted: December 17th, 1943 R. B. Wattley Co. Inc. By [signed] N. W. Donnocker, Secretary *516 At a special meeting of the board of directors of R. B. Wattley Co. Inc., held on December 17, 1943, resolutions were adopted that the proposal of petitioner in his letter of that date be accepted and approved in all respects; that the corporation*33 do all things necessary or required to be done by the terms and provisions of the agreement; and that the corporation give its consent to the issuance to Ralph B. Wattley of a real estate broker's license in the State of New York "in addition to the real estate broker's license he now holds as representative of this corporation." On January 12, 1944, and January 20, 1944, letters were written to Mutual by R. B. Wattley Co. Inc. and Charles F. Noyes Company, Inc., in which they stated, in substance, that they were the procuring brokers who were entitled to the commission, when payable, and directed that any commission payable in the matter of the lease of the Fifth Avenue property be paid by Mutual to them, or their nominees, in the following proportions: Two-thirds to R. B. Wattley Co. Inc.; one-third to Charles F. Noyes Company, Inc. On April 10, 1944, the manager of real estate of Mutual wrote a letter to R. B. Wattley Co. Inc. and Charles F. Noyes Company, Inc., which read in part as follows: I expect shortly to hand Mr. Ralph B. Wattley a draft of lease to carry out a proposed leasing transaction of the sort I would be willing to recommend to our Trustees for their approval. *34 Before doing so, I wish to have a clear confirmation on our records of the understanding respecting brokers and brokers' commissions. Therefore, would you please, by notation at the foot of the attached carbon copy of this letter, represent to us that R. B. Wattley Co. Inc. and Charles F. Noyes Company, Inc. to the best of your knowledge and belief are the sole brokers in any way involved in the proposed leasing to Manufacturers Trust Company. Will you further indicate by your signatures upon the attached carbon copy of this letter that you agree that brokerage commission with respect to such transaction shall be earned and payable if and when, and only if and when, a duly executed lease shall have been consummated through your efforts and Manufacturers Trust Company shall have actually taken possession of the premises under such lease, in which event there shall be payable to you jointly (or as directed by you), and as full compensation, a commission of Forty-six Thousand Dollars ($ 46,000); provided, however, that if the net rent for the first twenty-one years of the term shall be $ 95,000 or more per year, the amount of the commission shall be Forty-eight Thousand Dollars ($ 48,000). *35 * * * * In the event that because the tenant has not actually become engaged in demolishing the old buildings upon the premises within whatever period may be specified in the lease, the landlord shall exercise an option to cancel the lease, no compensation shall be earned or payable. No services are authorized in our behalf except upon the terms specified in this letter, which express the entire understanding. *517 The following notation appears on the carbon copy of this letter: ACCEPTED: [Signed] R. B. Wattley R. B. Wattley, Inc. [Signed] C. L. Wegefarth Charles F. Noyes Co. Inc. A lease, dated October 1, 1944, was signed by Mutual and Manufacturers on December 26, 1944. It provided for a fixed annual net rent of $ 90,000 for each of the first 2 1/2 years of the term and of $ 107,500 for each of the last 9 years of the term. It also provided, in part, as follows: The Tenant covenants that as soon as governmental war-emergency restrictions which now prohibit the construction of the new building hereafter described are sufficiently relaxed to permit construction to proceed, the Tenant will in writing, call upon the Landlord to fix the beginning date of the term of this letting, *36 whereupon the Landlord shall, within twenty days after receipt of the Tenant's notice, specify in writing to the Tenant, a date which shall either be July 1, 1945 or a day within 120 days of the date of the Landlord's notification to the Tenant, whichever is the later, and the date so specified by the Landlord shall be the beginning date of the term of this letting. On the beginning date, the leased premises are to be turned over to the Tenant free of occupants. Any occupant who remains in possession beyond the beginning date shall be removed with all reasonable dispatch by the Landlord, and at the Landlord's sole expense * * * In a letter dated November 1, 1945, Manufacturers called upon Mutual to fix the beginning date of the term of the lease, and February 1, 1946, was fixed, as that date in a letter dated November 20, 1945, from Mutual to Manufacturers. On several occasions between December 30, 1946, and September 3, 1948, petitioner discussed with officials of Mutual the payment of the commission on the lease transaction, but they refused to make payment until the occupants of the building at 512 Fifth Avenue had been ousted and possession of the leased premises had been *37 turned over to Manufacturers. On June 7, 1948, R. B. Wattley Co. Inc. executed an assignment in writing to petitioner of the amount due or to become due the corporation for brokerage commission in connection with the lease of the Fifth Avenue property. This assignment, which was signed for and on behalf of the corporation by petitioner as president, read in part as follows: That R. B. Wattley Co. Inc. for value received, have sold and by these presents does grant, assign and convey unto Ralph B. Wattley (doing business under the name of R. B. Wattley Company) the amount due or to become due the said R. B. Wattley Co. Inc. for brokerage commission in connection with a certain lease of property situated at 510 to 514 Fifth Avenue, New York City, between the Mutual Life Insurance Company of New York as landlord and Manufacturers Trust Company as tenant, dated October 1, 1944; also all right and *518 interest of said R. B. Wattley Co. Inc. in contract dated April 10, 1944 between The Mutual Life Insurance Company of New York, R. B. Wattley Co. Inc. and Charles F. Noyes Company, Inc. covering brokerage commissions in connection with the above-mentioned lease. It was anticipated that*38 when World War II hostilities ceased, the lease would become effective and the new bank building would be erected on the leased premises. However, tenants of a building on the Fifth Avenue property, which was to be demolished to permit the construction of the new bank building, refused to vacate it and litigation ensued between them and Mutual. As a result Mutual was unable to deliver possession of the Fifth Avenue property in accordance with the terms of the lease, and a dispute arose between Manufacturers and Mutual. On November 22, 1948, Manufacturers instituted an action in the Supreme Court, New York County, wherein it claimed a breach of the lease and demanded judgment against Mutual in an amount in excess of $ 3,000,000. The litigation between Mutual and the tenants was concluded in May of 1949. On November 1, 1949, Mutual notified Manufacturers in writing of the termination of the lease effective December 1, 1949, and during the latter part of 1949 petitioner attempted to lease the Fifth Avenue property to the Irving Trust Company and to the Bank of Manhattan. In November 1949 Mutual and Manufacturers entered into negotiations for proceeding with the lease transaction*39 on terms satisfactory to both parties, and a revised lease dated July 31, 1950, was drafted and signed by Mutual and Manufacturers. By January of 1951 all of the tenants had vacated the Fifth Avenue property and, in February of 1951, Manufacturers acquired possession. On February 14, 1951, Mutual sent to R. B. Wattley Co. Inc. a check, dated February 13, 1951, for $ 30,666.67, the two-thirds of the commission of $ 46,000 mentioned in the letter of April 10, 1944, and informed the corporation that a check for $ 15,333.33 was being sent to Charles F. Noyes Company, Inc. At a special meeting of the board of directors of R. B. Wattley Co. Inc. held on February 15, 1951, the following resolution was adopted: That Industrial Bank of Commerce hereinafter referred to as Bank is hereby authorized to receive from R. B. Wattley (hereinafter referred to as "depositor") any and all checks, notes, drafts or other instruments for the payment of money payable to this corporation or to its order when bearing the apparent endorsement of this corporation either by handwriting, typewriting, stamp impression or by any other means, with or without the signature of any person purporting to be an officer*40 or agent of this corporation. Pursuant to authority conferred upon him at this meeting, the secretary of the corporation certified and delivered to the bank a copy of the resolution and also a statement signed by petitioner, as sole stockholder, that he consented to and approved of the resolution and agreed to be bound thereby. *519 The check for $ 30,666.67 was deposited in the personal bank account of petitioner in the Industrial Bank of Commerce on February 15, 1951. The back of the check bears the endorsement "R. B. Wattley Co. Inc. R. B. Wattley Treasurer" and also the words, in the handwriting of petitioner, "For Deposit R. B. Wattley." The petitioner brought an action against Mutual in August 1951 in the Supreme Court of the State of New York, County of New York, alleging three causes of action. In the first cause of action the petitioner alleged that on or about April 10, 1944, R. B. Wattley Co. Inc. and Mutual entered into an agreement as to commission to be paid in connection with the Fifth Avenue property; that, through the efforts of R. B. Wattley Co. Inc., Mutual and Manufacturers on or before December 26, 1944, entered into a lease; that R. B. Wattley Co. Inc. *41 had ceased doing business on or about January 1, 1944, as a broker and assigned certain of its assets to petitioner including its claim against Mutual; that on or before December 26, 1944, R. B. Wattley Co. Inc. and the petitioner performed all parts of its agreement with Mutual on its part to be performed; that the commencement date of the lease was fixed as of February 1, 1946; that R. B. Wattley Co. Inc. and the petitioner demanded payment of the commission due R. B. Wattley Co. Inc. and that Mutual refused to make payment thereof until February 14, 1951, at which time Mutual paid petitioner the amount of $ 30,666.67; and that there was still due and owing to petitioner the sum of $ 1,333.33 and interest in the amount of $ 9,680 from February 1, 1946, to February 14, 1951. The second and third causes of action related to claims made by petitioner that he was entitled to $ 100,000 for services in settling the $ 3,000,000 lawsuit between Manufacturers and Mutual, and to $ 67,045.52 for services rendered in negotiating the revised lease entered into by Manufacturers and Mutual on or about July 31, 1950. Judgment was entered that petitioner was entitled to recover $ 1,333.33 plus*42 interest in the amount of $ 99.33 on the first cause of action, and in favor of Mutual on the second and third causes of action. The judgment was affirmed on appeal. In the income tax return filed by petitioners for the year 1951, they reported the following: Total receipts from business or profession $ 31,523.34 Less redistributed to previous years (sec. 107) 30,407.87 Receipts applicable to 1951 $ 1,115.47 Business deductions 4,744.27 Loss 3,628.80 In determining the deficiency, the respondent added the amount of $ 30,407.87 to the adjusted gross income reported in the return, and gave the following explanation for this adjustment: *520 In your 1951 return the tax limiting provisions of Section 107 (a) of the Internal Revenue Code of 1939 were applied by you to $ 30,407.87 representing compensation for personal services. It has been determined that Section 107 (a) is inapplicable in determining your tax liability, since the amount of $ 30,666.67 received was less than 80% of your total compensation for such personal services covering a period of 36 or more calendar months from the beginning to the completion of such services. Respondent also*43 made other adjustments in determining petitioners' net income for 1951, one of which was to allow as a deduction the amount of $ 2,962.24 as a net operating loss carryback from 1952. The statutory notice of deficiency in this proceeding was issued by the respondent on February 28, 1956. The petitioner paid the collector of internal revenue $ 98.01 which petitioner determined to be the tax of $ 81 due on self-employment income realized by him in 1951 plus interest of $ 17.01. The $ 98.01 was paid by a check issued by petitioner on his personal bank account dated September 15, 1955. In determining the deficiency in income tax of $ 3,439.66 for the year 1951, the respondent included the amount of $ 81 for "Self-employment tax (2 1/4% of $ 3,600.00)." In the "U. S. Report of Self-Employment Income" attached to petitioners' 1951 return, petitioner reported a loss from self-employment of $ 3,628.80. In their petition, petitioners alleged that the respondent erred in including the $ 81 in his deficiency determination. OPINION. The principal issue relates to the commission of $ 30,666.67 paid by Mutual to R. B. Wattley Co. Inc. in 1951, and distributed by the latter to petitioner during*44 the same year. The petitioner contends that R. B. Wattley Co. Inc. was merely a "dummy" or "front" used by him in carrying on his business as a real estate broker; that the $ 30,666.67 was a commission received by him for services which he rendered over a period of 19 years and 9 months as an individual and not as a representative of his wholly owned corporation; and that under the provisions of section 107 (a) of the Internal Revenue Code of 19391 he is entitled to spread this commission over the period during which the services were rendered. *45 In urging that R. B. Wattley Co. Inc. was merely a "dummy" or "front" used by him in carrying on his individual business as a real estate broker, the petitioner is, in effect, asking this Court to disregard *521 the corporate entity. This we cannot do. It was organized for the purpose of acting as agent or broker and leasing, managing, or selling real property. In 1931 petitioner purchased all of its stock. Thereafter it realized income, maintained a bank account, held corporate meetings, hired employees, paid salaries and other expenses, engaged in the real estate business in its own name; and petitioner, its president, treasurer, and a member of its board of directors, acted as its representative in the conduct of this business. Having elected to conduct a real estate business through the medium of a wholly owned corporation, the petitioner must accept the tax disadvantages of such a choice, and may not now "be heard to disavow the corporate existence" and allege that R. B. Wattley Co. Inc. was merely a "dummy" corporation. Moline Properties, Inc. v. Commissioner, 131 F. 2d 388, 389 (C. A. 5), affirmed 319 U.S. 436.*46 Cf. National Investors Corporation v. Hoey, 144 F. 2d 466-468 (C. A. 2); Paymer v. Commissioner, 150 F. 2d 334, 336-337 (C. A. 2). The evidence does not support petitioner's contention that the commission for the leasing of the Fifth Avenue property was paid for brokerage services rendered by him as an individual. Letters written by petitioner to both Mutual and Manufacturers attempting to negotiate the lease were consistently written on the stationery of R. B. Wattley Co. Inc.; the letter of December 17, 1943, from petitioner to R. B. Wattley Co. Inc. refers to negotiations pending in which the latter was "acting as broker," to pending negotiations or transactions being continued in its name as broker, and to claims of petitioner against it for his services as its representative in these transactions; the letters of January 12, 1944, January 20, 1944, and April 10, 1944, recognize that R. B. Wattley Co. Inc. and Charles F. Noyes Co., Inc., were the sole brokers involved in the lease transaction and entitled to any commission payable by Mutual; the assignment of June 7, 1948, from R. B. Wattley Co. Inc. to petitioner*47 refers to "the amount due or to become due the said R. B. Wattley Co. Inc. for brokerage commission" in connection with the lease of the Fifth Avenue property as the subject matter of the assignment; and the check for the commission of $ 30,666.67 was sent by Mutual to R. B. Wattley Co. Inc. This, and other evidence, convinces us that the commission was paid for services rendered by R. B. Wattley Co. Inc., through the petitioner as its representative. In order for section 107 (a) to be applicable to the $ 30,666.67. received by petitioner in 1951, it was incumbent upon him to prove that this amount represented at least 80 per centum of the total compensation for personal services covering a period of 36 calendar months or more (from the beginning to the completion of such services). In a computation attached to his 1951 return, it is stated that this amount was received "for work in disposing of a real estate *522 property which work was commenced on May 22, 1931, and completed February 15, 1951." The "work," as heretofore noted, consisted of services performed by petitioner as a representative of R. B. Wattley Co. Inc. According to petitioner's income tax returns, he received*48 income from that corporation during the years 1931 to 1943 inclusive totaling not less than $ 68,323.45. With two exceptions, 2 this income was reported in his returns for those years as either "Salary, Wages, and Compensation for Personal Services" or "Salaries, Wages, Commissions, Fees, etc." received from R. B. Wattley Co. Inc. In February 1951, he received from it the $ 30,666.67 here involved. This amount did not represent at least 80 per centum of the total compensation for personal services received by him from R. B. Wattley Co. Inc. during the period 1931 to 1951, inclusive, because in addition thereto he received from it for services performed in its behalf not less than $ 68,323.45. In the circumstances the $ 30,666.67 received in 1951 is not entitled to the benefits of section 107 (a). Cf. J. Mackay Spears, 7 T. C. 1271, affirmed 164 F. 2d 486 (C. A. 3); Smart v. Commissioner, 152 F. 2d 333 (C. A. 2), affirming 4 T. C. 846, certiorari denied 327 U.S. 804; George E. Reynolds, 26 T. C. 1225, 1237,*49 affirmed 249 F. 2d 259 (C. A. 4); Harry Boverman, 10 T. C. 476, 481. In view of the conclusion that we have reached above, it becomes unnecessary to consider other contentions made by the Government as to the inapplicability of section 107 (a). An issue in respect of liability for self-employment tax in the amount of $ 81 has become moot in view of a concession made by the Commissioner on brief. Decision will be entered under Rule 50. Footnotes 1. In petitioner's income tax return for 1934, he reported income from "Salaries, Wages, Commissions, Fees, etc." in the amount of $ 9,711, but did not disclose the source of this income.↩ 1. Contact made by F. R. Saxe, an employee of R. B. Wattley Co. Inc.↩ 1. SEC. 107. COMPENSATION FOR SERVICES RENDERED FOR A PERIOD OF THIRTY-SIX MONTHS OR MORE AND BACK PAY. (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.↩ 2. In his return for 1942, he reported $ 50.15 received from R. B. Wattley Co. Inc. in "Schudule I--Income from partnerships, fiduciaries, and other sources." In his 1934 return, the source of the income of $ 9,711 reported as "Salaries, Wages, Commissions, Fees, ect." is not disclosed.↩