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The idea of using scented envelopes as a method for the Pseudo-psychometry effect first seems to have been suggested by Roy Walker in George Armstrong's Card Mysteries, 1933. The principle of scent, applied to a Living and Dead test, was done by Tom Sellers and released in Tricks That Work, 1927, p. 9.
Herbert Milton reported using the principle at that time for a card trick, effect unspecified, reported in a news column the The Magic Wand, Vol. 16 No. 134, June-Sept. 1927, p. 105.