11 T.C. 111">*111 Respondent determined a deficiency in Federal income and victory taxes against petitioners for the calendar year 1943 in the amount of $ 17.75. The petitioners, who1948 U.S. Tax Ct. LEXIS 116">*117 filed a joint Federal income tax return for that year with the collector of internal revenue for the district of Florida, contest error in that determination and, moreover, ask a finding of overpayment in the amount of $ 229.69.

The issue is whether an item of $ 2,000 paid during the tax year to petitioner Charles Schall by the Wayne Presbyterian Church was a gift or was compensation for past services. We make the following findings of fact.

FINDINGS OF FACT.

The petitioner, Dr. Charles Schall, became pastor of the Wayne Presbyterian Church of Wayne, Pennsylvania, in October 1921, and continuously served in that capacity until 1939, when he resigned on account of ill health. Pursuant to his contract of employment with the church, which he accepted when he became its pastor in 1921, the church paid him throughout his employment, in monthly installments, 11 T.C. 111">*112 an annual salary of $ 6,000, furnished him with free use of the manse as a residence with his wife, gave him six weeks' vacation each year, and made provisions so that he would receive the usual pension from the church upon his retirement, which in his case amounted to approximately $ 600 per year. In 1938 petitioner suffered1948 U.S. Tax Ct. LEXIS 116">*118 a severe heart attack, and, upon his physician's advice, entered the U. S. Naval Hospital at Philadelphia, Pennsylvania, which was quite close to the Wayne Presbyterian Church. After extended treatment there for a period of about eight months, his physician advised him to resign as pastor of the church, take a long and complete rest, and go to Florida, because he "must not be exposed to the winter" in the rigorous climate of Pennsylvania. He was not able financially to go to Florida. The congregation of the Wayne Presbyterian Church knew of his condition and his financial inability to move to Florida.

Dr. Schall submitted his resignation to the congregation of Wayne Presbyterian Church by the following letter, dated June 16, 1939:

Philadelphia, Pennsylvania,

June 16, 1939.

My Beloved Congregation: The time has arrived when I find it necessary to request the members of this Church to unite with me in petition to the Presbytery of Chester at its next meeting for a dissolution of the pastoral relationship existing between this Church and myself. I have been very reluctant to reach the conclusion that I must lay aside the work to which you invited me eighteen1948 U.S. Tax Ct. LEXIS 116">*119 years ago, but it cannot be avoided now. Four months ago the warning came to me in the form of a heart afflication. [sic] Since the first shock of illness I have been under hospitalization in which I have strong confidence, and the advice from this source is that I must have complete rest, which is the only remedy for winning back my health. So I have no choice but to resign the Pastoral Charge.

Therefore, I have asked the Session to issue the necessary call for a meeting of the Church and Congregation to be held on Wednesday, June 28, 1939, for the purpose of taking action upon this resignation and for the transaction of any business relating thereto.

I desire to take this opportunity to thank the members of the Congregation for the many kindnesses shown me at all times, especially for the nurture, support, and love bestowed upon me during this present illness. Plans for the future have not been made but wherever God in His Wisdom may lead, the distance between us will be spanned by a bridge of love.

With earnest prayers for God's richest grace upon every heart, I am,

Faithfully yours,

[Signed] Charles Schall.

At a meeting held on June 28, 1939, the congregation of the Wayne1948 U.S. Tax Ct. LEXIS 116">*120 Presbyterian Church recommended that Dr. Schall's resignation be accepted and, upon a motion duly made, seconded and carried, the following resolution was unanimously adopted:

Whereas the pastor of this Church, Rev. Dr. Charles Schall, has become incapacitated for further service as pastor and has requested the Congregation to join in a petition to Chester Presbytery to dissolve the pastoral relation; and

11 T.C. 111">*113 Whereas the Congregation, moved by affectionate regard for him and gratitude for his long and valued ministry among them, desire that he should continue to be associated with them in an honorary relation;

Now, Therefore, Be It Resolved that, effective upon formal dissolution by Presbytery, Rev. Charles Schall be constituted Pastor Emeritus of this church with salary or honorarium amounting to Two Thousand Dollars (2000.) annually, payable in monthly instalments, with no pastoral authority or duty, and that the Session of this Church be requested to report this action to Presbytery.

Dr. Schall had not requested that the above or any other amount be paid to him and he had no previous intimation that the above mentioned resolution would be adopted. During his pastorate his1948 U.S. Tax Ct. LEXIS 116">*121 congregation made him substantial gifts, sometimes on the occasion of his birthdays, at Christmas, and at other times. These gifts amounted in a few instances to as much as $ 200. Most of these gifts, however, were made to Dr. Schall for distribution to needy persons in the congregation. After the petitioners, Dr. Schall and his wife, went to Florida, members of the congregation corresponded with him regularly and some of them continued from time to time to send him similar gifts. He did not agree to render any services in consideration of the payment in controversy and, since his resignation, he has performed no service for the Wayne Presbyterian Church. He has received the monthly installments to the amount of $ 2,000 annually ever since his resignation, and he and his wife reported this amount in each of their joint tax returns for each year to and including 1943. In preparing the return for the year 1943, Dr. Schall consulted an auditor, who advised him that the item was not taxable, but was a gift. An agent for the Bureau of Internal Revenue advised him, on the other hand, that it was income and not a gift. Petitioners paid, on the basis of their joint return for 1943, 1948 U.S. Tax Ct. LEXIS 116">*122 $ 480.74 as income and victory taxes.

OPINION.

The only question involved in this proceeding is whether the $ 2,000 received by the petitioner, Dr. Charles Schall, in the taxable year 1943 from the Wayne Presbyterian Church was a "gift," and therefore to be excluded from gross income under section 22 (b) (3) of the Internal Revenue Code, as petitioners contend, or was within the purview of the terms "salaries, wages, or compensation for personal service," and therefore to be included in gross income under section 22 (a), as respondent determined and here argues. Petitioners, of course, have the burden of establishing error in that determination of respondent. Have petitioners discharged that burden? After careful consideration of the present record, we can reach only one reasonable conclusion. They have not met that burden.

Respondent's position is that the payment was salary or compensation for past services. It is conceded that, if this is so, the item is income and not a gift.

11 T.C. 111">*114 The fact that regard, gratitude, or appreciation prompted the payment is not controlling. Whether it was a gift or compensation for past services depends not on the absence or presence of 1948 U.S. Tax Ct. LEXIS 116">*123 consideration, but on the intent of the parties -- particularly the payor. Bogardus v. Commissioner, 302 U.S. 34">302 U.S. 34; Poorman v. Commissioner, 131 Fed. (2d) 946; Willkie v. Commissioner, 127 Fed. (2d) 953. And, in determining this question of intent, although the resolution authorizing the payment in question is highly important, all the surrounding circumstances are relevant. 302 U.S. 34">Bogardus v. Commissioner, supra.

What were the circumstances as revealed in this record? Petitioner had been employed for about 18 years by this church at an annual salary of $ 6,000 plus the free use of the church manse for a home for petitioners, and the regular pension, which amounted in this case to about $ 600 per year. The preamble to the resolution authorizing the payment in dispute after his resignation affirms the "affectionate regard" for their pastor, Dr. Schall. It expressed their "gratitude for his long and valued ministry among them." Yet, despite these emphatic declarations of the value of his long ministry among them, there had been no increase in his salary1948 U.S. Tax Ct. LEXIS 116">*124 or the physical emoluments of his pastorate during that 18-year period. True, there had been gifts to him and his wife -- although mostly for distribution to others -- but no increased salary. At the end of this 18-year period petitioner was compelled to retire because of a serious heart condition. His physician prescribed complete rest in Florida, where he could escape the rigors of a Pennsylvania winter. He and his wife were financially unable to do this. The congregation knew these facts. Is it unreasonable to assume that his congregation, just then realizing the tragedy of the situation and their possible oversight of his salary during the productive period of the petitioner's life which he had spent laboring with them, commendably decided that they must now correct the situation and make up that salary deficiency? So they elected him Pastor Emeritus, "with no pastoral authority or duty," and committed themselves to pay him the annual payment in controversy. The petitioner treated the payments as "salary" or "compensation" on his income tax returns for each year they were received prior to and including the taxable year and, what is more important, there is nothing in 1948 U.S. Tax Ct. LEXIS 116">*125 this record to show that the church, the payor, treated the payments of this item, including those for the taxable year, any differently on their books. Cf. Willkie v. Commissioner, supra.Nor is there any evidence, outside the resolution itself, of the intent of the payor. Cf. 302 U.S. 34">Bogardus v. Commissioner, supra.How does that resolution characterize the payment in question? It described it as "salary or honorarium." Whatever varied meanings the latter term may be said to have, the meaning of the word "salary" is 11 T.C. 111">*115 the antithesis of that conveyed by the word "gift." The very provisions of the Internal Revenue Code which are controlling here ¹ highlight this pointed contradiction. Thus, when the word "honorarium" is used as here in juxtaposition with the term "salary" rather than "gift," as was done in 302 U.S. 34">Bogardus v. Commissioner, supra, and the word "salary" appears first, it is scarcely reasonable to assume that the authors of this obviously carefully drawn resolution would have used a word following "salary" which would have so completely contradicted its meaning. See 1948 U.S. Tax Ct. LEXIS 116">*126 302 U.S. 34">Bogardus v. Commissioner, supra.This case is also distinguishable from the Bogardus case, upon which petitioners largely rely, just as was the situation in Willkie v. Commissioner, supra, where the Court said:

Petitioner relies strongly on Bogardus v. Commissioner of Internal Revenue, supra [302 U.S. 34, 58 S. Ct. 65, 82 L. Ed. 32], where the court held that payments made to present and former employees of a corporation by its former stockholders, acting through a new corporation which had taken over the property of the old, were gifts. The premise for the decision was that no connection existed between the old corporation or the recipient of gifts on the one hand and the makers of the gifts and their new corporation on the other. In the opinion, after reciting the facts, the court said:

"If the disbursements had been made by the Universal Company, or by stockholders of that company still interested in its success and in the maintenance of the good will or loyalty of its employees, there might be ground for the inference they were payments of additional compensation. Compare Noel v. Parrott [4 Cir.], 115 F.2d 669.1948 U.S. Tax Ct. LEXIS 116">*127 * * * There is entirely lacking the constraining force of any moral or legal duty as well as the incentive of anticipated benefit of any kind beyond the satisfaction which flows from the performance of a generous act."

Here, there was a moral duty on the part of the church, and its recognition by the church is, at least, not contradicted. The commitment for the payment in dispute was made in fact by an employer to an employee at the conclusion of his service. It was made to that employee, who thereafter1948 U.S. Tax Ct. LEXIS 116">*128 was "with no pastoral authority or duty." Without more than this record reveals, it may be doubted that the payment in controversy was intended to be or was anything other than compensation. Cora B. Beatty, Executrix, 7 B. T. A. 726. Certainly, as we have decided, the petitioners have failed to sustain their burden of showing error in the determination of the respondent.

Decision will be entered for the respondent.