1931 BTA LEXIS 2003 | B.T.A. | 1931
Lead Opinion
The petitioners contend that the $5,500. payments received by each of them in 1922 from S. Chester Crobaugh were in part payment of compensation for services under the agreement dated November 1, 1920. The respondent maintains that the said sums did not become the property of the petitioners during 1922, but constituted taxable income for the year 1923, when the petitioners became vested with the absolute ownership of the cash with no conditions or contingencies as to repayment.
We are of the opinion that by the execution of the memorandum of agreement of November 1, 1920, the four parties thereto became joint venturers, and that their subsequent actions are to be viewed accordingly.
We are of the further opinion that the offer to purchase, dated September 26, 1922, and the acceptance thereof the following day, limited as they were by their terms, constituted an executory contract of sale under which unconditional liability was not created until final compliance with the terms in April, 1923. Lucas v. North Texas Lumber Co., 281 U. S. 11; affirming 7 B. T. A. 1193.
The decision in Boston American League Base Ball Club, 3 B. T. A. 149, relied on by petitioners, is clearly distinguishable. In that case we dealt not with an executory contract of sale, but with a completed sale subject only to a possible future condition. There the parties to the contract had fully performed all conditions. The only reservation was the possibility of certain adverse action by a third party. As between the parties the contract was complete. In the instant case a very different situation is presented. Here the parties to the agreement had not completed their obligations in 1922 and might never fully perform them.
It follows that petitioners did not receive income until April, 1923, when the unconditional liability of the vendee was created.
Decision will be entered for the respondent.