Giannini v. Commissioner , 42 B.T.A. 546 ( 1940 )

A. P. GIANNINI, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

CLORINDA A. GIANNINI, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Giannini v. Commissioner

Docket Nos. 87128, 87127.

United States Board of Tax Appeals

42 B.T.A. 546; 1940 BTA LEXIS 985;

August 15, 1940, Promulgated

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1. Petitioner refused to accept a certain amount declared by resolution to be due to him from the Bancitaly Corporation as compensation for services performed from January 1, 1927, to January 20, 1928, inclusive. After the later date, the corporation donated the amount to the University of California to establish the Giannini Foundation of Agricultural Economics. All negotiations and details relating to the gift were carried on between the corporation and the regents of the University of California. Held, the amount of the donation was not income to petitioner.

2. The inclusion of $78,739.50 in petitioner's income, reported by him as earned under a profit-sharing contract with the A. P. Giannini Co. and approved by the Commissioner as a proper item of income, raises no issue to be decided by the Board since the purpose of presenting it was to obtain a construction of the contract as it may be applicable to losses sustained in later years, which years are not before us.

Andrew F. Burke, Esq., Harry Friedman, Esq., and George H. Koster, Esq., for the petitioners.

T. M. Mather, Esq., for the respondent.

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VAN FOSSAN

These proceedings were brought to redetermine deficiencies in the income taxes of the petitioners, A. P. Giannini and Clorinda A. Giannini, for the year 1928 in the sums of $137,343.50 and $123,402.71, respectively.

The primary issue is whether or not, under the circumstances of the transaction, a donation of $1,357,607.40 made by the Bancitaly Corporation to the regents of the University of California constituted compensation to petitioner A. P. Giannini.

A subsidiary question, termed an issue by both the petitioner and the respondent, is whether or not the sum of $78,739.50, credited to petitioner A. P. Giannini by the A. P. Giannini Co., pursuant to an alleged profit-sharing agreement between him and the company, was properly included in his income. In effect, the petitioner requests a construction of that agreement applicable to losses sustained in subsequent years.

FINDINGS OF FACT.

Certain facts were stipulated substantially as follows:

A. P. Giannini and Clorinda A. Giannini, the petitioners, are and at all times hereinafter mentioned, were husband and wife and live in San Francisco, California. For the year 1928, the petitioners filed their respective Federal income tax returns on a community property basis and each of them reported income and deductions on a cash receipts and disbursements basis. The return of each of the petitioners for that year was filed with the United States collector of internal revenue at San Francisco, California.

Prior to October 17, 1924, A. P. Giannini, hereinafter called the petitioner, was president of the Bank of Italy, a corporation organized and existing under and by virtue of the laws of the State of California. He resigned as president of that corporation on October 17, 1924. The petitioner was one of the organizers of Bancitaly Corporation, hereinafter called Bancitaly, a corporation formed under the laws of the State of New York in 1919, and was the president of that corporation from 1919 until its dissolution in the year 1929.

At a meeting of the board of directors of Bancitaly, duly and regularly called and held on January 22, 1925, the following motion was adopted:

Upon motion duly made and seconded, P. C. Hale, J. J. Fagan and H. C. Capwell were appointed a committee to devise a plan to compensate A. P. Giannini for his services, as President, based upon a share or percentage of the net earnings of the Corporation, it being understood, pending decision of the committee, that Mr. Giannini is to have the privilege of drawing his current expenditures and having same charged to himself on the books of the Corporation.

The committee appointed, pursuant to such motion, made the following report to the corporation at a meeting of its board of directors held on June 27, 1927:

The committee as above met on Wednesday, April 13, 1927, at 2:00 o'clock, in Mr. Fagan's office, in the Crocker First National Bank, San Francisco, and unanimously agreed to, and hereby do, recommend to the directors of the Bancitaly Corporation that Mr. A. P. Giannini, for his services as President of your Corporation, be given 5% of the net profits each year, with a guaranteed minimum of $100,000 per year, commencing January 1, 1927, in lieu of salary.

Thereupon the board of directors unanimously approved the report. The following directors were present:

J. A. Bacigalupi H. Cartan L. M. Giannini N. A. Pellerano R. B. Teefy O. J. Woodward H. C. Capwell

Joseph P. Grace

J. A. Lagomarsino J. A. Migliavacca

Throughout the year 1927 and both before and after the adoption of the report, the petitioner withdrew various sums of money from Bancitaly for his services to that corporation and such moneys were charged to his account on the books of the corporation. On November 30, 1927, the account of the petitioner with the corporation showed an indebtedness on his part to the corporation of $215,603.76. On that date his account was credited and the salary account in the books of the corporation was debited with the amount of $445,704.20, a sum equivalent to 5 percent of the net profits of Bancitaly from January 1 to July 22, 1927.

As of December 31, 1927, the books of Bancitaly showed an indebtedness of the corporation to the petitioner in the sum of $199,797.50. No sums of money were credited to the petitioner on the books of Bancitaly in the year ended December 31, 1927, except those above mentioned.

On January 20, 1928, a meeting of the board of directors of Bancitaly was duly and regularly called and held, at which more than a quorum of the directors were present. At that meeting the following resolution was unanimously adopted:

WHEREAS, this Corporation is prepared now to pay to Mr. A. P. GIANNINI for his services as its President and General Manager five per cent (5%) of the net profits of this Corporation computed from July 23, 1927 to the close of business January 20, 1928, which five per cent (5%) amounts to the sum of One Million Five Hundred Thousand Dollars ($1,500,000.00); and

WHEREAS, Mr. A. P. GIANNINI refuses to accept any part of said sum but has indicated that if the Corporation is so minded he would find keen satisfaction in seeing it devote such a sum or any lesser adequate sum to the objects below enumerated or kindred purposes: and

WHEREAS, we believe that this Corporation would do a great good and derive a great benefit from the establishment of a Foundation of Agricultural Economics at the University of California, and we believe that something should be done by this Corporation to evidence its appreciation of the fact that without the general confidence and hearty cooperation of the people of the State of California the great success of this Corporation would not have been possible; and

WHEREAS, we believe that untold good will flow to this Corporation as well as to all the people of the State of California by a sustained and disinterested study of ways and means of insuring a fair return to the farmers and fruit growers of our State for their products:

NOW, THEREFORE, BE IT RESOLVED, by the Board of Directors of this Corporation, that the aforesaid sum of One Million Five Hundred Thousand Dollars ($1,500,000.00) be set apart from the undivided profits of this Corporation in a Special Reserve Account for the purpose hereinafter described, and the whole of said sum be donated to the Regents of the University of California for the purpose of establishing a Foundation of Agricultural Economics; and

BE IT FURTHER RESOLVED, that said donation be made in honor of Mr. A. P. GIANNINI, and that said Foundation shall be named after him; and

BE IT FURTHER RESOLVED, that a Committee consisting of James A. Bacigalupi, P. C. Hale and A. Pedrini be appointed to confer with the President of the University of California, for the purpose of discussing and determining upon the general scope of said Foundation, and with full power of settling all details in connection therewith; and

BE IT FURTHER RESOLVED, that said Committee is hereby vested with full power and authority to expend all of the moneys in the Special Reserve Account aforesaid in the matter of the establishment of said Foundation, in the manner that the majority of said Committee may hereafter determine.

On February 10, 1928, Bancitaly submitted a written offer to the regents of the University of California, in part as follows:

TO THE REGENTS OF THE UNIVERSITY OF CALIFORNIA:

Bancitaly Corporation, headquarters in the City and County of San Francisco, State of California, by virtue of action taken by the Board of Directors of Bancitaly Corporation on Friday, January 20, 1928, herewith offers to your honorable body, in tribute to A. P. Giannini, of San Francisco, and to be named after him, a gift of One Million Five Hundred Thousand ($1,500,000) Dollars, the proceeds of said gift to be used for the purposes described and on the general terms specified in the following paragraphs.

(1) There shall be established in the University of California

THE GIANNINI FOUNDATION OF AGRICULTURAL ECONOMICS

The activities of this FOUNDATION shall be embraced by the great field of Agricultural Economics, and relate to such subjects as: (a) the economic consequences of increased production which result from improved seed grains, improved nursery stock, improved live stock, improved machinery, and improved methods of farming; (b) the economic consequences of overproduction arising from unusually favorable seasons or unusually unfavorable seasons as to weather and other conditions in the producing nations; (c) the relations between conditions existing in the farming industry and the general economic conditions prevailing in the nation, and internationally; (d) the acquiring of such knowledge concerning soil qualities and climatic and other conditions in any or all parts of the State of California, and of such knowledge concerning existing or prospective supply and demand conditions for the various agricultural products of this State, as will enable the appropriate representatives of the FOUNDATION to advise the farmers of California as to wise plantings, sowings, breedings, etc., in relation to areas and kinds; (e) the methods and problems of disposing of farm products on terms or conditions giving maximum degree of satisfaction to the producers; (f) any economic questions which concern the individual farmer and the members of his family, and affect their living conditions; and so on. However, it should be understood that the activities of the FOUNDATION are to be regarded as chiefly: (a) those of research, with purpose to find the facts and conditions which will promise or threaten to affect the economic status of California agriculturalists; and (b) those of formulating ways and means of enabling the agriculturalists of California to profit from the existence of favorable facts and conditions, and to protect themselves as well as possible from adverse facts and conditions. Teaching activities will undoubtedly be called for, certainly to prepare promising students to assist in carrying on the work of this FOUNDATION, and also for service in wider spheres; but it is understood that said teaching service will be conducted largely and if practicable wholly upon the basis of funds made available to the College of Agriculture from other sources.

The offer also specified that the foundation and its principal activities should be housed on the campus in a building to be named "Giannini Hall" and costing approximately $500,000. Provision was made for periodic payments of the various portions of the donation and other immaterial suggestions were added.

On February 14, 1928, the regents of the University of California adopted the following resolution:

WHEREAS, Bancitaly Corporation, headquarters in the City and County of San Francisco, has recently offered to the Regents of the University of California, in tribute to Mr. A. P. Giannini, and to be named after him, a gift of One Million Five Hundred Thousand ($1,500,000) Dollars, the proceeds of said gift to be used to establish and administer

THE GIANNINI FOUNDATION OF AGRICULTURAL ECONOMICS

in the University of California, as follows:

(A) Two-thirds of the total gift, or $1,000,000, to constitute the endowment fund of the Foundation, the income therefrom to be expended, under the direction of The Regents, in the field of Agricultural Economics, for the benefit of the agriculturalists of California, as described in the letter of gift dated February 10, 1928, and signed by James A. Bacigalupi, Vice-President Bancitaly Corporation, and Edward C. Aldwell, Assistant Secretary Bancitaly Corporation; and

(B) One-third of the total gift, or $500,000, to be expended, under the direction of The Regents, in constructing and furnishing a building on the campus of the University of Berkeley, to be known as Giannini Hall, said Hall to house the activities of THE GIANNINI FOUNDATION OF AGRICULTURAL ECONOMICS, this Hall to be erected as the third structure in the main College-Agriculture group of buildings; therefore,

We, The Regents of the University of California, herewith accept the gift made by Bancitaly Corporation in tribute to A. P. Giannini, with great pleasure and pride, and we undertake to administer the trust in accordance with the terms thereof.

We, The Regents, are firmly of the opinion that THE GIANNINI FOUNDATION represents in investment of enormous potential value to the farmers of the State of California. We regard it as a significant and gratifying circumstance that a native son of California should have his name borne by a foundation destined to provide benefits of great value, in perpetuity, to millions of his fellow citizens in this commonwealth, and we congratulate Mr. Giannini most heartily upon the remarkable investment in behalf of others which has been made in his honor by Bancitaly Corporation.

On February 15, 1928, the board of regents of the University of California, by L. A. Nichols, its assistant secretary, wrote the petitioner, president of Bancitaly, as follows:

At the meeting of The Regents of the University of California held on February 14, 1928, President Campbell reported the gift of the Bancitaly Corporation of One Million Five Hundred Thousand Dollars to establish and administer the Giannini Foundation and to construct and furnish a building to be known as Giannini Hall. The Regents voted to accept the gift and adopted the following resolution of appreciation: [Here follows a copy of the resolution of February 14, 1928.]

On February 15, 1928, the regents of the University of California wrote to James A. Bacigalupi, vice president of Bancitaly, a letter in all respects similar to the above letter written by it to petitioner on the same date.

Subsequent to the adoption of the resolution of January 20, 1928, and on the same day, Bancitaly charged the said sum of $1,500,000 to its undivided profits account and credited the same sum to an account on its books designated as "Foundation of Agricultural Economics, University of California."

The said sum of $1,500,000 was paid to the University of California by checks as follows:

Date of payment	Payor	Amount
February 10, 1928	Bancitaly Corporation	$25,000
September 17, 1928	Bancitaly Corporation	350,000
November 14, 1928	Bancitaly Corporation	300,000
January 29, 1929	Americommercial Corporation	325,000
October 11, 1929	Americommercial Corporation	300,000
June 25, 1931	Transamerica Service Co	200,000
Total
1,500,000

The Americommercial Corporation and Transamerica Service Co. were successors or affiliates of Bancitaly.

Five percent of the amount of the net profits of Bancitaly for the period January 1, 1927, to January 20, 1928, less the sum of $445,704.20 which was credited on the books of the corporation to the account of the petitioner on November 30, 1927, amounted to $1,357,607.40. The difference between the latter amount and $1,500,000, or $142,392.60, was charged to suspense on the books of Bancitaly on January 28, 1928, and on the same date the undivided profits account of the corporation was credited with the sum of $142,392.60.

On July 19, 1928, the sum of $142,392.60 was credited to the suspense account on the books of Bancitaly and on the same date was charged to the personal account of petitioner on the books of the corporation.

No part of the said sum of $1,357,607.40 paid to the University of California was claimed as a deduction on the income tax return of Bancitaly for the year 1928, but such sum was reported in its return as an unallowable deduction in the analysis of surplus schedule in the return.

On subsequent audits of Federal tax returns of Bancitaly the Commissioner of Internal Revenue has made no adjustment of the item of $1,357,607.40 so listed by the corporation as an "unallowable deduction" in its income tax return for the year 1928.

The record discloses the following additional facts:

The action of June 27, 1927, by Bancitaly's board of directors authorizing the payment of 5 percent of the yearly net profits to the petitioner for his services was his only arrangement of that character with Bancitaly.

No part of the $1,357,607.40 heretofore described was ever received by or set apart for the use of either petitioner nor credited in any way to either of them. That sum, together with the $142,392.60 needed to make up the $1,500,000 donated to the University of California, was the property of Bancitaly and the petitioner had no right, title, or interest therein. Sometime in the fall of 1928 it was apparent that 5 percent of the net profits of Bancitaly would not amount to the $1,500,000 estimated by the petitioner, but Bancitaly paid the University of California the full amount of the donation and was thereafter reimbursed by the petitioner for the amount of the shortage, or $142,392.60.

In 1927 and prior to December 31 thereof, the petitioner definitely and absolutely refused to accept for his services for that year more than the $445,704.20 credited to him on the books of Bancitaly on November 30, 1927. In 1928 the petitioner, the members of his immediate family, and the A. P. Giannini Co. owned in the aggregate 10,446 shares of the capital stock of Bancitaly out of 5,200,000 such shares then outstanding.

During the years 1925 to 1934, inclusive, the petitioner was an officer of the A. P. Giannini Co., a California corporation, hereinafter called the Giannini Co. The mintes of a meeting of the directors of the Giannini Co. held on January 25, 1926, show the following action:

President L. M. Giannini then stated that during the past year this corporation has purchased and sold stock on the open market and that all of said purchases and sales were made on the advice of A. P. Giannini and that without his advice the profits resulting from such transactions would have been considerably less than shown by the records of this corporation. He stated that he had directed the treasurer to pay unto A. P. Giannini a sum amounting to approximately fifty percent of the profits derived from the purchase and sale of such trading stocks and he stated that in his opinion the amount thus paid was a fair and reasonable compensation for the services rendered by A. P. Giannini.

Thereupon the following resolutions were introduced and unanimously adopted:

WHEREAS A. P. Giannini has during the past year performed extra services for and on behalf of this corporation through the medium of which said services, particularly in the purchase and sale of stocks and securities, this corporation has been enabled to earn large profits; and

WHEREAS the president of this corporation has fixed the value of said services thus performed by said A. P. Giannini at the total sum of twenty three thousand one hundred thirty and 85/100 and has authorized the payment of the same to said A. P. Giannini for services performed during the year 1925; now therefore

BE IT RESOLVED that the action of the president of this corporation in authorizing the payment unto said A. P. Giannini of the sum of twenty three thousand one hundred thirty and 85/100 dollars for services rendered, as hereinabove set forth, be and the same is hereby ratified, confirmed and approved.

BE IT FURTHER RESOLVED that this corporation shall during the year 1926 and thereafter until these resolutions shall have been rescinded pay unto said A. P. Giannini a sum equivalent to fifty percent of the net profits derived from the purchase and sale of trading stocks and securities.

The following resolution was passed on January 28, 1929:

The president next stated that pursuant to the terms of a resolution duly passed at a meeting of the board of directors held on the 25th day of January, 1926, the sum of seventy eight thousand seven hundred thirty nine and 50/100 dollars had been credited to the account of A. P. Giannini being equivalent to fifty percent of the net profits derived from the purchase and sale of trading stocks and securities during the year 1928, now therefore,

BE IT RESOLVED that the action of the president in authorizing the payment unto A. P. Giannini of the sum of seventy eight thousand seven hundred thirty nine and 50/100 dollars for services rendered, be and the same is hereby ratified, confirmed and approved.

The following resolution was passed on January 26, 1931, and similar resolutions were adopted on January 25, 1932, January 30, 1933, and January 29, 1934, relating to losses sustained during those years, one-half of which was charged to the petitioner:

WHEREAS this corporation has heretofore entered into an agreement with A. P. Giannini, under the terms of which said A. P. Giannini is to receive from this corporation as compensation for services rendered one-half of all profits earned from the purchase, sale and trading in of stocks, bonds and other securities and is to reimburse this corporation for one-half of all losses sustained in such trading transactions; and

WHEREAS pursuant to said agreement said A. P. Giannini has received from this corporation one-half of such net profits earned by this corporation; and

WHEREAS the loss sustained from such trading operations during the year 1929 amount to the sum of $18,519.39, one-half of which has been charged to the personal account of A. P. Giannini with this corporation; now therefore,

BE IT RESOLVED that the charging of the sum of $9,259.66, being one-half of the loss sustained by this corporation in its stock and security trading operations during the year 1929, to the account of A. P. Giannini be and the same is hereby approved and confirmed.

Thereupon the following resolutions were introduced and unanimously adopted:

WHEREAS this corporation has heretofore entered into an agreement with A. P. Giannini, under the terms of which he is to receive from this corporation one-half of all profits earned or derived from the purchase, sale and trading in of stocks, bonds and other securities, and under the terms of which he is to reimburse this corporation for one-half of the losses sustained from such trading operations, which said agreement now is and for some years last past has been in force and has been carried on and performed by said A. P. Giannini and this corporation; and

WHEREAS the losses incurred in such trading operations during the year 1930 amount to the sum of $330,236.26, one-half of which is to be charged to the account carried in the books of the A. P. Giannini Co., in the name of A. P. and C. A. Giannini; and

WHEREAS said A. P. Giannini during said year of 1930 has performed extraordinary services for and on behalf of this corporation, which services were of great value to this corporation; now therefore

BE IT RESOLVED that in consideration of the said extraordinary services rendered by said A. P. Giannini and other good and valuable consideration received by this corporation that the account carried with this corporation in the name of A. P. and C. A. Giannini shall be charged with one-fifth instead of one-half of the losses sustained in said trading operations.

BE IT FURTHER RESOLVED that these resolutions shall in no way affect, alter or amend the agreement existing between this corporation and said A. P. Giannini except as to the year 1930 and that in the future said A. P. Giannini shall be entitled to receive one-half of all profits earned from the purchase, sale and trading in of stocks, bonds and other securities and is to reimburse this corporation for one-half of all losses sustained in such trading transactions.

The amounts representing the petitioner's share of gains were credited to him on the Giannini Co. books and amounts representing his share of losses were also charged to him for the respective years. In his income tax returns for 1925 to 1928, inclusive, the petitioner reported his gains and paid taxes thereon and in his returns for 1929 to 1934, inclusive, he claimed corresponding losses under the said agreement. The respondent accepted the taxes paid by the petitioner on the gains reported but refused to allow the deductions claimed on losses in the later years.

OPINION.

VAN FOSSAN: The first issue is essentially one of fact. Briefly it may be outlined thus: Early in 1925 a committee was appointed to determine the proper compensation of the petitioner for his services as president of Bancitaly, of whose stock of 5,200,000 outstanding shares he and his family interests owned only 10,446 shares. Prior thereto petitioner had received no compensation for services from Bancitaly. The committee recommended to the directors on June 27, 1927, that from January 1, 1927, the petitioner should receive, in lieu of salary, 5 percent of the yearly net profits, with a guaranteed minimum of $100,000. From January 1 to July 22, 1927, that percentage amounted to the sum of $445,704.20, which, on November 30, 1927, was credited to his account, offset by certain advances and indebtednesses debited to him by Bancitaly.

On repeated occasions during 1927 the petitioner unequivocally refused to accept any compensation for his services rendered during that year in addition to the $445,704.20 already credited, although such further compensation was estimated by petitioner to amount to $1,500,000. Upon his refusal, and adopting a suggestion made by petitioner, the Bancitaly directors decided to donate the $1,500,000 to the University of California for the establishment of the Giannini Foundation of Agricultural Economics, so named in honor of the petitioner. That action was predicated on their belief that the foundation would be of great use to the public in general and would benefit Bancitaly specifically because of the farmers' loans held by its subsidiary, and also on their desire to pay tribute to the petitioner. The regents of the University of California accepted the gift with observations commendatory to the petitioner.

All proposals and negotiations relating to the donation were carried on exclusively between Bancitaly and the regents. The petitioner's participation in the transaction was confined solely to his suggestions relating to the nature and purpose of the contribution and to his expression of satisfaction "if the corporation should be so minded."

In 1928 it was found that the $1,500,000 estimated to be the amount of the petitioner's compensation for 1927 which he had refused to accept, would not be reached from Bancitaly's net profits. However, Bancitaly paid to the regents the full amount of its offer, with the approval of the petitioner, who assumed responsibility for the miscalculation. The deficiency, $142,392.60, at petitioner's suggestion was charged to the petitioner on Bancitaly's books on July 19, 1928, and was paid from compensation from Bancitaly earned by him subsequent to January 20, 1928.

Upon and subsequent to the petitioner's refusal to accept the $1,357,607.40 representing his percentage of net profits earned from July 23, 1927, to January 20, 1928, neither he nor his wife received any part of that sum by way of cash, credit, or other method of payment or allocation to them and they had no right, title, or interest therein.

The respondent's position seems to be based on the assumption that the petitioner directed and compelled Bancitaly to make the donation, an act which, the respondent asserts, was wholly ultra vires. He argues that in January 1928 the petitioner was entitled to receive the $1,357,607.40 as a part of his compensation and, therefore, the diversion of that sum to the University of California constituted, in reality, a gift by petitioner.

We are of the opinion, and have found as a fact, that the petitioner unqualifiedly refused to accept any compensation for the year 1927 in excess of the $445,704.20 credited to him on November 30, 1927, and covering the period from January 1 to July 22, 1927. His first refusal was made shortly after the net earnings of Bancitaly for that period were tentatively ascertained and he repeated that refusal at numerous times thereafter. His refusal was subject to no condition or contingency and relieved Bancitaly of any obligation to pay petitioner the sum in question. The amount in excess of the $445,704.20, thereafter belonged to Bancitaly to dispose of as it saw fit.

There is nothing in the record in any way impugning or discrediting petitioner's testimony and his exposition of the matter is fully and adequately corroborated by the unrefuted statements of disinterested witnesses and by the records of Bancitaly and of the regents of the University of California. We have no reason to doubt that he declined absolutely to accept the excess compensation for the period from July 23, 1927, to the end of the year. Bancitaly accepted his decision as final and treated the excess as its own on its books and in its subsequent actions.

It is elemental that an individual may refuse to enforce a right, forswear a debt due him, or relinquish a claim. After such action it is equally basic that his debtor retains full possession and ownership of the thing renounced. It is obvious also that no one is compelled to accept compensation or payment for services or goods. When he refuses to do so he can not be charged with the amount so refused and abandoned, as an item of income. Under no theory of constructive receipt can it be compensation within the meaning and definition of income.

It matters not that the suggestion to make the donation to the University of California came from petitioner. The offer was made by Bancitaly and all details were carried on by its officers and agents. The petitioner took no part whatever in the negotiations or in the completion of the gift. The respondent challenges the right of Bancitaly to make such a donation. We are not concerned with that phase of the matter. It has no bearing on our question.

The respondent further argues that there is no difference between the $1,357,607.40 refused by the petitioner and the $142,392.60 required to complete the $1,500,000, the latter sum being charged to him by Bancitaly and ultimately paid by him out of compensation later earned and credited to him on Bancitaly's books.

The two amounts are in wholly different categories and are not comparable. The first was never paid to petitioner but was donated by Bancitaly to the University. The item of $142,392.60 was paid by Bancitaly but was ultimately assumed and paid by petitioner out of other earnings. The petitioner felt morally responsible for his inaccurate calculation or estimate of Bancitaly's probable profits for 1927 and, therefore, personally made good the deficiency. Such sequential action on his part had no effect on that part of the compensation for 1927 which he had previously renounced and in which he had abandoned all interest.

The second issue presents an unusual situation. The petitioner received from the Giannini Co. during the year 1928 the sum of $78,749.50 pursuant to the action of its board of directors dated January 28, 1929, which in turn referred to the original agreement created by its action on January 25, 1926. Both the petitioner and the respondent agree that the amount should be included in the petitioner's income for 1928, but both designate and term the question an issue in the present case. As is frankly stated by the petitioner's counsel, we are asked to construe the so-called "profit-sharing contract," in order that its effect upon the sharing of losses thereunder in subsequent years may be determined.

We do not have the later years before us and, hence, confine ourselves to approving the action of the respondent. There is no controversy over the respondent's determination as to the instant year. Whether or not the petitioner later sustained losses under his agreement with the Giannini Co. and the tax effect of such losses, if sustained, must await decision when, if ever, the later years are before us.

Decision will be entered under Rule 50.