a taxpayer can spread contributions over a period of several taxable years to take fullest advantage of the deductions allowable by the provisions of section 170. Rather, respondent argues that petitioners intended to and made a completed gift of the entire $45,194.68 in 1955 when they advanced the money, and that no true indebtedness was created in 1955 which petitioners could forgive in that and subsequent years. With respect to respondent's first point, we would have to ignore the testimony of all the witnesses, as well as the note itself, to find that petitioners intended to make a gift of the entire amount in 1955. We find no justification for doing so. We have based our Findings of Fact on the stipulated facts and a consideration of all the evidence presented, including the oral testimony of Nelson, Reverend Onstad, Howard, and Roy Keister, the attorney for Soldiers Chapel who organized the corporation, drafted all the pertinent legal documents, and advised the incorporators and officers of the corporation on legal matters, these being the only witnesses presented at the trial. Our conclusions from this evidence are reflected in our Findings of Fact and they are dispositive of respondent's first point. The fact that Nelson indicated he would probably not collect on the note and would cancel portions of it from time to time if business conditions continued to be good, and the fact that the officers and incorporators of Soldiers Chapel did not think they would be called upon to pay the note, do not support a conclusion that Nelson intended to make a completed gift of the entire amount in 1955 or that any of the parties considered it a completed gift in that year. We think the testimony of the witnesses and their actions thereafter prove to the contrary, and we have so found. Respondent also argues that no true obligation on the part of Soldiers Chapel to repay the amount advanced by Nelson arose in 1955; consequently, Nelson lost all dominion and control over the money advanced in 1955 and gave nothing by canceling portions of the principal of the note at the end of 1955 and in subsequent years. The notes, on their faces, evidenced a binding obligation to pay a sum certain, and there is no evidence upon which to conclude that they were without consideration, invalid, unreal, or otherwise than what • Respondent ruled in Rev. Rul. 58-261, 1958-1 C.B. 143, that a taxpayer, conveying an undivided two-fifths interest in realty in 1956 to a qualified organization, is entitled to a deduction therefor measured by the fair market value of the two-fifths interest. In the ruling it was noted that "it is the intention of the taxpayer to make a gift to the same organization of the remaining undivided three-fifths interest in the property, a part thereof to be so conveyed in 1958 and the remainder in 1959, although he is in no way obligated to do so." It was further ruled that he would be entitled to a deduction under section 170 when he makes a gift of all or a part of the remaining three-fifths interest. In Mustard v. United States, 155 F. Supp. 325 (Ct. Cl. 1957), it was assumed that taxpayer could make a charitable contribution of a one-tenth interest in a promissory note of which he was the holder, in each of 2 years. they purported to be. So far as we can determine they were valid negotiable instruments, however collectible they might have been. The mere fact that the original payee indicated he might or might not attempt to collect on the notes, or that he might forgive all or portions of them in the future, makes the notes no less binding obligations until the events occurred which would relieve the obligation. The evidence indicates that petitioners had a good reason other than for gift tax purposes for advancing the money in the form of a loan rather than an outright gift and demanding the notes as evidence of the indebtedness. Petitioners' primary objective was to create a memorial for their son and the notes gave them some measure of influence and control to see that the chapel was operated in a manner they thought fitting. Respondent points to the fact that the income of Soldiers Chapel only slightly exceeded its expenditures from 1955 through 1960 and argues that this, coupled with the fact that the corporation had no other assets, requires the conclusion that the parties never intended to create a true debt. The facts do not support the argument. In addition to the chapel itself, the corporation owned the land contributed by Velma, which had a value of $15,000, and some other assets contributed by others. In addition, the evidence indicates that had it been necessary to pay off the note, the funds could have been raised from contributions by interested citizens. Were all charitable organizations required to exhibit operating statements for the past sufficient to permit amortization of construction loans in the future there would be far less churches, hospitals, and other charitable structures in this country than there are now. Furthermore, the question here is not whether petitioners intended to collect the debt, but whether they intended to make a gift of the amount advanced when it was advanced, or to create an obligation portions of which could be forgiven from time to time as gifts in the future. We think the latter was the case here. And we see no reason why a taxpayer cannot advance money to a charity when it is needed and arrange the transaction in such a manner that he can take full advantage of the charitable deduction provisions of the income tax statutes over a period of years, provided he does not actually part with all dominion and control over the property contributed at the time it is advanced, and truly intends to make a contribution of the property advanced over a period of years rather than all at one time. Respondent relies heavily on the opinion of the Board of Tax Appeals in John E. Andrus, Jr., 15 B.T.A. 479 (1929), revd. 50 F. 2d 332 (C.A.D.C. 1931). That case is readily distinguishable because there it was found that there was not sufficient evidence in the record to convince the Board that it was not the purpose and intention of the taxpayers to make an outright gift of the land conveyed at the time of the conveyance. Minnie E. Deal, 29 T.C. 730 (1958), also relied on by respondent, is likewise factually distinguishable. The other cases cited by respondent, concerned mostly with deductions for bad debts, are inapposite. In order to reflect concessions made by the parties, Decision will be entered under Rule 50. J. W. GADDY AND RUTH GADDY, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Docket No. 90213. Filed September 26, 1962. 1. Held, funds constituting overpayments made in 1957 under a rental agreement made in 1956 are not includible in gross income within the meaning of section 61(a) of the Internal Revenue Code of 1954, where in the year of overpayment the recipient discovers the overpayments, renounces his claim of right to the overpayments, and provides for their repayment under a new contract. 2. Held, further, where, under the second rental agreement executed October 1, 1957, the recipient does not discover that an overpayment was made until after the close of the taxable year, the recipient has not had the opportunity to renounce his claim of right and recognize his obligation to repay in the same taxable year and the funds are includible in gross income in the year of receipt under the claim-of-right doctrine announced by the Supreme Court in North American Oil Consolidated v. Burnet, 286 U.S. 417. 3. Held, further, even though petitioners' counsel conceded in their Brooks L. Harman, Esq., for the petitioners. The respondent determined a deficiency in the income tax of petitioners for the year 1957 in the amount of $29,928.57. The adjustments to taxable income are as follows: Only adjustment (a) is in issue. It is explained in the deficiency notice as follows: (a) It is determined that you received transport income of $39,401.90 from the El Paso Natural Gas Products Company in the taxable year 1957 which was not reported on your return for that year. Therefore, your taxable income is increased $39,401.90. Petitioners assign error as to adjustment (a) as follows: (a) Respondent erroneously determined that petitioners received transport income of Thirty-nine thousand four hundred one and 90/100 ($39,401.90) Dollars from the El Paso Natural Gas Products Company in the taxable year 1957, which was not reported on petitioners' return for that year, and, thereby increased petitioners' taxable income by Thirty-nine thousand four hundred one and 90/100 ($39,401.90) Dollars. FINDINGS OF FACT. Most of the facts have been stipulated and a stipulation of facts, together with exhibits attached thereto, was filed by the parties and is incorporated herein by this reference. Only such facts as seem necessary to an understanding of the issue will be recited herein. Petitioners J. W. Gaddy (sometimes hereinafter referred to as Gaddy) and Ruth Gaddy, husband and wife, reside in Odessa, Ector County, Texas. They filed a timely joint income tax return for the calendar year 1957 on the cash receipts and expenditures method of accounting with the district director of internal revenue, Dallas, Texas. The income of the petitioners for the year in question was community income. Gaddy was engaged in truck transport hauling during the years 1956, 1957, and 1958 for El Paso Natural Gas Products Company (hereinafter referred to as El Paso). He was also engaged in the production of oil and gas as an independent operator, and in the pipe-coating business. In 1956 El Paso needed trucks to haul petroleum and petroleum products. It desired to have full control over the trucks, including the assignment of drivers and dispatchers, but it was not interested in purchasing such equipment. Sometime during the month of June 1956 El Paso and Gaddy entered into an oral agree ment whereby El Paso leased certain tank truck equipment from Gaddy at a rental rate which, when added to the operating and maintenance costs, would not exceed the amount El Paso would have to pay if the hauling was done by a contract hauler. Pursuant to that oral agreement, the parties entered into a written contract dated July 1, 1956. The contract provided for a rental rate of 23 cents per mile for certain equipment for hauling such petroleum and petroleum products. Both Gaddy and El Paso understood that this rental rate would be checked at regular intervals and adjusted either by an amendment to such contract or by writing a new contract in the event such rental rate, plus the costs of operating such equipment, proved to be too high or too low in comparison with the rate El Paso would have to pay if the hauling had been done by a contract hauler. The parties agreed that the rate of 23 cents per mile should constitute the proper rate for the rental of such equipment to meet the orally agreed level of total costs. The rate of 23 cents per mile specified in the contract of July 1, 1956, proved to be too high. However, due to changes in El Paso's accounting personnel who were not familiar with the agreement to review and adjust the contract rate, the contract price was not adjusted until October 1, 1957. Sometime during the month of September 1957 El Paso discovered and informed Gaddy that from July 1, 1956, through July 31, 1957, Gaddy had been paid $15,434.41 more than the contract hauling rate would have been for the same work by contract hauler and consequently $15,434.41 more than the parties had agreed upon. Of this amount, $14,990.01 had been paid to Gaddy during the calendar year 1956. Sometime prior to October 1, 1957, the parties agreed that the overpayment figure was correct and a new contract was negotiated and executed on October 1, 1957, at a rental rate of 18 cents per mile for such equipment. It was agreed at the time that Gaddy would return such overpayment to El Paso. The new contract was designed to recover the excess funds by reducing the rental to 18 cents per mile and it was intended that the overpayment would be returned by Gaddy in that manner. A review of the facts in February 1958 revealed that the rental rate specified in the contract of October 1, 1957, was still too high. This was mainly due to changes in the transportation needs of El Paso, and the parties agreed that Gaddy had been overpaid in the amount of $24,411.89 during the entire calendar year of 1957, which, added to the overpayment of $14,990.01 during 1956, resulted in a total overpayment as of December 31, 1957, in the amount of $39,401.90. A third contract was negotiated and executed on March 1, 1958. The March 1, 1958, contract contained a rental provision calling for a rate of 12.5 cents per mile until such equipment had been driven a total of 1,128,800 miles, and a rate of 16 cents per mile thereafter. It was estimated that the rate of 16 cents per mile, plus the operating and maintenance costs of such equipment, would be equivalent to the contract carrier rate. The differential of 3.5 cents per mile (the difference between the 12.5 and the 16 cent rates per mile) for the first 1,128,800 miles would recover the overpayment of $39,401.90 and it |