## Facts

- In 1947, attorney Victor R. Wolder and client Marguerite K. Boyce entered a written agreement: Wolder would provide legal services during their lifetimes without billing, and Boyce would compensate him by a testamentary transfer of specified securities (or successor securities).
- White Laboratories stock referenced in the agreement later became Schering Corporation stock through corporate transactions; Boyce also realized $15,845 in cash related to stock exchanges.
- Wolder performed substantial legal services for Boyce over many years and did not bill her, relying on the agreement.
- Boyce executed a will and codicil providing Wolder $15,845 in cash and 750 shares of Schering stock, implementing the agreement.
- Boyce died on July 24, 1965; the stock’s value increased between death and January 1966, when the stock was delivered to Wolder.
- Wolder treated the transfer as a nontaxable bequest; the Commissioner determined it was taxable income for services under I.R.C. § 61 and not excluded by § 102(a).
- The Tax Court held the cash and stock were taxable compensation to Wolder and further held the income was constructively received in 1965; it also allowed the Boyce estate to deduct the amount as a debt of the decedent.
- Wolder appealed the income characterization; the Commissioner cross-appealed on the year of inclusion, and separately appealed the estate deduction; the cases were consolidated.

## Issues

1. Whether property received under a will pursuant to a pre-existing, fully performed contract for lifetime legal services is excluded from gross income as a “bequest” under I.R.C. § 102(a) or is taxable compensation under I.R.C. § 61(a).
2. Whether, if taxable to the recipient, the amount is includible upon the decedent’s death under constructive-receipt principles rather than upon later physical delivery.
3. Whether, if the transfer is compensatory, the decedent’s estate may deduct the amount as a debt or expense arising from the contractual obligation.

## Decision

- The court affirmed that the $15,845 and 750 shares transferred to Wolder were taxable compensation for services under § 61 and not excludable as a bequest under § 102(a).
- The court treated the arrangement as contractual compensation—postponed payment of legal fees—implemented through a will.
- The court accepted the Tax Court’s constructive-receipt determination that the income was includible in 1965 when Wolder’s right became fixed at death.
- Because the transfer was compensation, the court affirmed the estate’s deduction of the same amount as a debt of the decedent.

## Legal Principles

- Gross income under I.R.C. § 61(a) is broadly defined; exclusions such as I.R.C. § 102(a) are construed narrowly and do not apply when the transfer is, in substance, compensation.
- A transfer made pursuant to an enforceable, bargained-for obligation to pay for services is taxable compensation even if delivered by will and labeled a “bequest.”
- Gift/bequest characterization turns on the transferor’s intent: payments driven by legal obligation or quid pro quo, rather than detached and disinterested generosity, are not excluded under § 102(a).
- Substance controls over testamentary form: compensation cannot be converted into tax-free status by deferring payment until death and routing it through a will.
- When a contractual right to payment becomes fixed and the taxpayer can demand performance, constructive-receipt principles may require inclusion even if delivery occurs later.
- If a decedent’s will satisfies a binding obligation to pay for services, the estate may treat the satisfied obligation as a deductible debt or expense for estate tax purposes.

## Conclusion

The court held that a testamentary transfer promised as consideration for lifetime legal services is taxable compensation to the recipient under § 61, not an excludable bequest under § 102(a), and that the estate may deduct the satisfied contractual obligation as a debt of the decedent.


Wolder v. Commissioner, 493 F.2d 608 (2d Cir. 1974)