Hanna

The Commissioner of Internal Revenue found deficiencies in income tax returns of Byron C. Hanna and his wife, Daisy May Hanna, for the year 1940. They each filed a petition with the Tax Court of the United States, alleging error in the denial of the application of Section 107 of the Internal Revenue Code 1 to a fee re *137 ceived in 1940 by a law partnership of which Mr. Hanna was an equal partner with Mr. Harold Morton and accounted for by Mr. and Mrs. Hanna as community income received over a period in excess of five years by the partnership. The proceedings under the petitions were consolidated for hearing. The Tax Court affirmed the Commissioner’s finding and disallowed the application of Section 107. The Hannas petition this court to review the Tax Court’s decisions.

The case turns on whether or not the facts are within the provisions of Section 107 of the Internal Revenue Act. Specifically, if not less than 95% of the fee earned through five years is paid in any one year after the work has been completed, the tax shall not exceed the total tax that would have been payable had the fee been received in equal annual amounts throughout the work period.

The facts presenting the…