24 T.C. 916">*917 This proceeding involves a deficiency of $ 10,742.42 for the year 1952 determined by the1955 U.S. Tax Ct. LEXIS 115">*116 respondent against the Estate of Arthur W. Hellstrom and his surviving spouse, Selma M. Hellstrom (hereinafter referred to as the petitioner). The estate is involved in this proceeding only because a joint return was filed for that year.

The only issue is whether the amount of $ 28,933.32, paid to petitioner in 1952 by the corporation of which her deceased husband had been president and a director, was a gift and, hence, excludible from her gross income for such year pursuant to section 22 (b) (3) of the 1939 Code. ¹

1955 U.S. Tax Ct. LEXIS 115">*117 The petitioner claimed an overpayment in tax for the year in question by virtue of the fact that the corporation had withheld tax in the amount of $ 815.30 on wages which her husband received prior to his death, and the total tax liability disclosed on the return for the year showed actual liability of $ 701.76.

Some of the facts were stipulated.

FINDINGS OF FACT.

The stipulated facts are so found and are incorporated herein by this reference.

During the year in issue, petitioner was a resident of Chicago, Illinois. Petitioner's husband died on February 20, 1952. She filed a timely joint income tax return for the year 1952 with the collector of internal revenue for the first district of Illinois.

Petitioner's husband, together with others, organized the Hellstrom Corporation under the laws of the State of Illinois in 1944. The corporation was engaged in the manufacture and sale of steel forgings. Petitioner's husband held 250 of the original 505 shares of 24 T.C. 916">*918 the corporation's stock. From the time of its incorporation until his death, he was president and a director of the corporation. At the time of his death, he owned 426 of the 1,685 outstanding shares of the corporation's1955 U.S. Tax Ct. LEXIS 115">*118 stock. Petitioner owned 175 such shares. Decedent's salary as president of the corporation for the year 1952 would have been $ 33,600. From January 1 until the date of his death, he received $ 4,666.68 of such sum, on which the corporation withheld tax in the amount of $ 815.30.

On March 1, 1952, ten days after the death of Arthur W. Hellstrom, the board of directors of Hellstrom Corporation met and passed the following resolution:

Resolved, that in recognition of the services rendered to this corporation for many years by Arthur W. Hellstrom, its founder and late president, and in conformity with the policy of this corporation to make reasonable provision for the surviving dependents of its deceased officers and employees, although it is under no obligation so to do, this Board of Directors does hereby authorize and direct the Treasurer of this corporation to pay monthly to Selma M. Hellstrom, the surviving wife of said Aurthur W. Hellstrom, a sum equal to his last salary per month, said monthly salary to continue until this Board of Directors shall require the reduction or discontinuance of such payments.

At a subsequent meeting of the board of directors of Hellstrom Corporation, 1955 U.S. Tax Ct. LEXIS 115">*119 held on October 11, 1952, the question was raised as to the period for which such payments should continue. It was agreed by the directors that such payments should continue only until the end of the year 1952, and the following resolution was thereupon adopted:

Resolved, that the payments heretofore on March 1, 1952 directed to be made by the Treasurer of this corporation to Mrs. Selma Hellstrom in recognition of the services of Arthur W. Hellstrom be continued to include all payments due on and prior to December 31, 1952.

Hellstrom Corporation, pursuant to such resolutions, paid to petitioner during the calendar year 1952 the sum of $ 28,933.32. This sum represented the salary which petitioner's husband would have received for the remainder of 1952 had he lived. On its Federal income tax returns filed for its fiscal years ending July 31, 1952, and July 31, 1953, Hellstrom Corporation claimed as a deduction the amounts paid to petitioner in each respective fiscal year.

On the joint return which petitioner filed for the calendar year 1952, she reported the receipt of $ 28,933.32 "as gratuitous recognition of deceased Arthur W. Hellstrom's services. Said sum is not taxable."

Respondent1955 U.S. Tax Ct. LEXIS 115">*120 determined that such sum constituted taxable income to petitioner under section 22 (a).

The payments made to petitioner by the Hellstrom Corporation were a gift to her. Petitioner overpaid the joint tax liability of herself and her deceased husband in the amount of $ 113,54 for the year 1952.

24 T.C. 916">*919 OPINION.

Petitioner claims that the sums paid to her by the Hellstrom Corporation in 1952 were a gift. As indicated by our findings, we agree that such sums were a gift and, hence, excludible from her gross income in that year.

The substance of the respondent's argument and the basis of his determination is his Ruling I. T. 4027, 1950-2 C. B. 9, 11, which states "that payments made by an employer to the widow of a deceased officer or employee, in consideration of services rendered by the officer or employee, are includible in the gross income of the widow for Federal tax purposes." He argues that the intent of the board of directors of the corporation was that the payments in question were "in recognition for the services rendered to this corporation for many years" by petitioner's husband, and that the words, "in recognition" are equivalent to "in consideration" 1955 U.S. Tax Ct. LEXIS 115">*121 within the meaning of his regulation. We think this argument is nothing more than an argument in semantics. Obviously, where a voluntary payment is made by a corporation to the widow of a deceased employee, the basic reason for the payment is because of the deceased employee's past association with the corporation. We think it makes little difference how the corporation formally expresses its motives for the payment. Where such payment is a gift, as the whole record here establishes that the payments in question were, it remains a gift regardless of the fact that the corporation may state its reasons for making the payment were "because of" or "in recognition of" or "in consideration of" the services of the deceased employee. This seems to us the only sensible construction of the Supreme Court's language in Bogardus v. Commissioner, 302 U.S. 34">302 U.S. 34, 302 U.S. 34">44 (1937), wherein it said that a gift is none the less a gift because inspired by gratitude for past faithful services.

We think the result reached herein is amply supported by our previous holdings in Louise K. Aprill, 13 T.C. 707 (1949), and Alice M. MacFarlane, 19 T.C. 9 (1952).1955 U.S. Tax Ct. LEXIS 115">*122 The respondent argues that the above-cited cases are not controlling here because decided prior to his promulgation of I. T. 4027, supra. We, however, do not ascribe the far-reaching effect to that ruling which he does. We understand his ruling to mean that if the amounts paid to a deceased employee's widow were not a gift, but were payment for his past services, they constitute ordinary income to the widow. The respondent, obviously, cannot by administrative ruling tax as ordinary income a payment which the payor made and intended as a gift.

In view of the other evidence in the record, we attach no particular significance to the fact that the corporation claimed deductions on its returns for the amount paid to petitioner. Nor do we attach any significance to the fact that the amount paid to her was the amount 24 T.C. 916">*920 of salary her husband would have drawn had he lived. Alice M. MacFarlane, supra.Gifts to widows of deceased employees are frequently determined by the amount of salary which the employee drew or would have drawn.

We think the controlling facts here which establish the payment in question as a gift are that the payment was made1955 U.S. Tax Ct. LEXIS 115">*123 to petitioner and not to her husband's estate; that there was no obligation on the part of the corporation to pay any additional compensation to petitioner's husband; it derived no benefit from the payment; petitioner performed no services for the corporation and, as heretofore noted, those of her husband had been fully compensated for. We think the principal motive of the corporation in making the payment was its desire to do an act of kindness for petitioner. The payment, therefore, was a gift to her and not taxable income.

Decision will be entered that there is no deficiency and that there is an overpayment of tax in the amount of $ 113.54 for the year 1952.