Volume 13 — Tax Court Reports

Upon the facts, held (1) petitioner has not established that he had any home within the meaning of section 23 (a) (1) (A), Internal Revenue Code, and his traveling expenses for the years 1942, 1943, and 1944, therefore, were personal expenses and not deductible, and (2) petitioner has not sustained his burden of proof as to other expenses for which he claimed deductions for those years.

Estate Tax -- Jointly Held Property -- Money Consideration -- Section 811 (e) (1). -- A wife did not acquire her interest in jointly held property from her husband for a full and adequate consideration in money or money's worth within the meaning of section 811 (e) (1), where she nursed her husband for 48 years and he had agreed she should have $ 12.50 per week for her services to him.

Petitioner Nelson A. Farry, who for a good many years has been in the insurance and real estate business, developed certain subdivisions in the city… Held: that petitioner was not holding these rental properties primarily for sale to customers in the ordinary course of his trade or business, but was holding them primarily for investment purposes, and the gains from the sale thereof are taxable as capital gains under the provisions of section 117 (j), Internal Revenue Code.

In determining the value of a revocable trust includible in the gross estate for estate tax purposes under section 811 (c), I. R. C., held,… Held: attorney fees and other miscellaneous expenses attributable to the administration of the trust which were not shown to be liabilities at death of decedent are not proper reductions; held, further, none of the above items are deductible from the gross estate as administration expenses of the estate under section 812 (b), I. R. C.

Where trustees of a testamentary trust made unauthorized loans totaling $ 202,500 from the trust corpus to the life beneficiary, and the beneficiary repaid only $ 163,500 of the advances during her… Held: upon the facts, that the trustees had a valid claim under local law to recover the balance of $ 39,000 from the life beneficiary's estate, which was deductible under section 812 (b) of the Internal Revenue Code in computing her estate tax.

Deduction -- Alimony -- Sections 23 (u) and 22 (k), I. R. C. -- A divorced husband agreed to pay and paid premiums on insurance on his own life, from the avails of which his ex-wife was to receive up… Held: the amount of the premiums was not deductible by the husband under section 23 (u).

Petitioner corporation, on the accrual basis, credited the account of its sole stockholder, who was on the cash basis, with certain amounts for rents, salary, and interest over a period of years up to and including 1943 and part of 1944 and, after the stockholder's death in 1944, credited the account of the stockholder's estate, which respondent determined to be on the cash basis, with further items.

1. Two individuals, engaged for many years in the junk business, signed a partnership agreement in 1928, giving to the wife of each a one-fourth interest. Held: That the status of the wives as partners recognizable for tax purposes, is not res judicata by virtue of the decision in the prior proceeding, and, as the question was not there put in issue, the Commissioner is not collaterally estopped to raise it here. Commissioner v. Sunnen, 333 U.S. 591.

Since 1935 the petitioner, in computing depreciation for tax purposes, has divided its rolling stock into separate groups and has applied… Held: That with the exception of its Miscellaneous Equipment account, the method and rates prescribed by the Interstate Commerce Commission and used by the petitioner in computing its deductions for depreciation on its various groups of equipment for the years 1942 to 1944, inclusive, result in a reasonable allowance for depreciation in…

Share of community income reported for 1942 by wife, not in the armed forces, but which resulted from personal services in that year of petitioner-husband who was in active naval service during… Held: in applying section 6 (b), Current Tax Payment Act, not excluded from taxable income by section 6 (d) (1), referring to a taxpayer * * * in active service.

Petitioner, a personal holding company, filing its Federal tax returns on a cash receipts and disbursements basis, in computing subchapter A net income, deducted the amount of income tax shown on its… Held: the Commissioner did not err in allowing deduction of only the amount of Federal income tax paid during the taxable year.

The letter on which this proceeding is based and which it is alleged constituted a statutory notice of disallowance of a claim for the refund of excess profits tax under section 722 of the Internal… Held: the letter was not a statutory notice of disallowance of claim within the meaning of section 732 (a) of the Internal Revenue Code, and this Court is without jurisdiction in the matter.

1. Petitioner, a general insurance agency, wrote insurance policies on a large number of properties owned or controlled by Farm Security Administration. Held: that the petitioner, reporting on an accrual basis, is taxable in each year on only that portion of the commissions which it became entitled to receive during the year. 2. Reasonable compensation for services rendered to petitioner by its two principal officers determined. 3.

Petitioner claims error in the determination of deficiencies in income and excess profits taxes for its fiscal year 1942 and claims, under… Held: The period from February 1 to April 30, 1942, inclusive, was a tax year of less than twelve months within the meaning of section 711 (a) (3) (A) and, accordingly, the excess profits net income of such short year should be annualized for the application thereto of the excess profits credit for the fiscal year ended January 31, 1943.

Stockholders of corporation received distributions in complete liquidation in 1941 and each reported his pro rata share in his income tax return for that year as a long term capital gain. Held: losses sustained by stockholders as a result of payments made in 1944 are deductible in that year as ordinary losses and not as capital losses.

Deduction -- Traveling Expense -- Away From Home. -- A woman who worked in Lowell for more than two years is not entitled to deduct as traveling expenses (including the entire amount expended for meals and lodging) while away from home in pursuit of a trade or business amounts spent for meals and lodging in Lowell or for railroad or automobile transportation between Lowell and Gloucester, where she resided with her husband (apparently unemployed) and young son.

Decedent, who was granted under her husband's will the income for life from his residuary estate, was also the executrix of his estate. Held: the $ 10,000 was not includible in decedent's gross estate under section 811 (a), I. R. C., because it had no value at the time of decedent's death, being barred by the statute of limitations; held, further, the $ 10,000 is not includible in decedent's gross estate under section 811 (c), I. R. C., as a transfer to her daughter to…

On December 19, 1935, decedent created an irrevocable insurance trust, the corpus of which consisted of five insurance policies issued… Held: under this trust instrument and the Connecticut law there existed a possibility of reverter by operation of law requiring the corpus of the trust to be included in the gross estate of decedent as a transfer intended to take effect at or after the death of the decedent within the purview of section 811 (c) of the Internal Revenue Code.

Sale by sole proprietor of an accounting business, including files showing who were the clients of the business, copies of audit records and work papers for the clients, and good will, accompanied by… Held: further, that the part of the payments allocable to the covenant not to compete is taxable as ordinary income.

Petitioner was organized under section 5 of the New York Cooperative Corporation law for the distribution to consumers of milk and other products. Held: that petitioner does not qualify as a tax exempt corporation.

Decedent was a member of the New York Stock Exchange. Held: since there was no element of risk-distributing or risk-shifting present in the provisions for the gratuity fund the amount received by decedent's widow is not insurance within the scope of section 811 (g), Internal Revenue Code. Helvering v. Le Gierse, 312 U.S. 531.

Retirement pay received by a former officer of the U. S. Army for length of service under section 5, ch. 422 (July 31, 1935), 49 Stat. 507, in 1944 and 1945 does not constitute amounts received as a pension, annuity, or similar allowance for personal injuries or sickness resulting from active service in the armed forces of any country and, therefore, is not exempt from taxation under section 22 (b) (5), I. R. C.

Executor's commissions, although neither awarded by decree nor paid, held, deductible from gross estate, the amount claimed being a reasonable estimate of the amount allowable by the laws of the… Held: deductible from gross estate, the amount claimed being a reasonable estimate of the amount allowable by the laws of the jurisdiction in which the estate is being administered.

Petitioner J. D. Amend is a wheat farmer and his custom since 1942 has been to sell his wheat in the year when produced, for delivery and payment in January of the following year. Held: that the contracts of sale were bona fide arm's-length transactions and petitioner had no legal right to demand and receive payment for his wheat until in January of the year following the contract of sale and the doctrine of constructive receipt is not applicable.

In 1942 petitioner, a pilot employed by United Air Lines in Seattle, accepted employment with a firm in Cleveland, which employment was thought at first to be temporary but continued until November… Held: That the petitioner's living expenses during 1942 and 1943 while residing in Cleveland, which was his principal place of employment, are not deductible as traveling expenses away from home within the meaning of section 23 (a) (1) (A) of the Internal Revenue Code.

1. In computing equity invested capital for excess profits tax purposes, basis of property received by petitioner in 1930 liquidation of wholly owned subsidiary with which petitioner had filed a consolidated return held determinable under Internal Revenue Code, Supplement C. 2.

The mere transfer of shares of stock on the books of the corporation, without any delivery of the new certificates and without any intention on the part of the transferor to make present gifts of the… Held: not to evidence completed gifts.

1. Petitioner was continuously employed during the taxable year 1944 at the Navy Yard in Charleston, South Carolina, and lived there during that time. Held: nondeductible because not incurred in pursuit of his employer's business. Commissioner v. Flowers, 326 U.S. 465 (1946); rehearing denied, 326 U.S. 812 (1946) followed. 2.

1. Amount expended by corporation in successful effort to defeat jurisdiction over it and related corporations as parties defendant in suit against principal shareholder, held, deductible as… Held: deductible as reasonable and necessary business expense. 2. Corporation which paid total amount of litigation expense, arising from litigation involving it and related corporations, held, entitled to deduct amount paid in full as business expense.

1. Act of Legislature of Philippine Islands barring claims against a decedent's estate not filed with probate court within specified period does not bar claims for income taxes due the United States from residents of Philippine Islands under revenue acts of Congress. The general power delegated by Congress to Philippine Legislature extended only to regulation of domestic affairs and not to matters contravening the revenue acts of the United States. 2.

1. Petitioner corporation is held not taxable on commissions received by Berger pursuant to illegal agreements between Biehl and seven firms to secure preferences in amounts, allocations, and deliveries of goods manufactured by the corporation, Berger having been paid 90 per cent of such commissions, as agreed by him and Biehl. 2. Petitioner Berger filed a false and fraudulent return for the year 1941, omitting therefrom the amounts so received from Biehl.

1. Capital Expenditure or Expense. -- Periodic payments made by the petitioner and his new partners to his former partners pursuant to an agreement constituted capital expenditures to acquire assets and not ordinary and necessary expenses of carrying on the business of the new partnership, where the former partnership had been operating at a loss, the payments were based upon the gross income of the new partnership, it acquired certain assets to which it would not otherwise…

1. The exchange by petitioner of notes of the Gair Co. purchased by petitioner on the open market at less than their par value, for petitioner's own bonds owned by Gair on the basis of note for bond of equal par value, resulted in taxable income to petitioner, the transaction not being a gift, but to the mutual advantage and benefit of petitioner and Gair. 2. Petitioner failed to file with its return for the taxable year a consent required by section 22 (b) (9), I. R.

1. Where no records were made available to Commissioner's agent engaged in auditing taxpayer's returns, Commissioner was justified in using the net worth method in determining a deficiency in taxes.… Held: taxpayer's conduct evidences a purpose and intent to file fraudulent returns.

1. Where the communication relied on by petitioner as the statutory deficiency notice is not shown to have been sent to him by registered mail, the Tax Court is without jurisdiction of a proceeding grounded thereon. 2. The jurisdiction of the Tax Court does not include matters relating to the enforcement of warrants for distraint. Accordingly, a motion for the entry of an order to stay the enforcement of such a warrant will be dismissed for lack of jurisdiction.

1. Shares of stock in a closely held corporation valued for estate tax purposes. 2. Held: that the previously taxed property has been identified and the amount thereof is deductible under section 812 (c) of the Internal Revenue Code.

The taxpayers, owners of gas and oil leases, assigned the leases to a corporation under a contract whereby they received a cash payment and the right to a fifth of the oil produced and to a fifth of… Held: that under the terms of the assignment contracts the taxpayers retained an economic interest in the minerals in place and that payments received by them under the contracts are taxable as ordinary income, subject to depletion allowances.

Commissions received by petitioner from his principals for services as manufacturers' agent under contracts to sell or attempt to sell products to the Navy Department during 1943, held, subject to… Held: subject to renegotiation under section 403 (a) (5) (B) (ii) of the Renegotiation Act of 1942, as amended.

1. The petitioners and their sister, equal partners in a chain grocery business, admitted petitioners' wives as partners, each petitioner contributing two-fifths of his interest to his wife and the… Held: that the partnership was formed for a valid business purpose with a bona fide intention to form a business partnership. 2. Held, further, that partnership earnings are taxable to the partners in accordance with the partnership agreement.

1. Capital Expenditure or Expense -- Commission -- Cost of Stock -- Section 23 (a) (2). -- A commission paid in the acquisition of additional shares needed for control of a corporation is a part of the cost of the shares and is not deductible from current income under section 23 (a) (2). 2.

Under the facts, held, petitioner, a public school teacher, is not entitled to deduct as ordinary and necessary business expense amounts expended in attending summer school. Held: petitioner, a public school teacher, is not entitled to deduct as ordinary and necessary business expense amounts expended in attending summer school.

1. During the base period years petitioner, a glass container manufacturer, paid royalties to Hartford-Empire Co. under a contract which it had with that company. Held: petitioner's payments of these royalties during the base period years were made under contract and not in settlement of any liability created by a court judgment or decree and do not come within the provisions of section 711 (b) (1) (H), I. R.

Held that during the taxable years 1942, 1943, and 1944 petitioner was an association taxable as a corporation within the purview of section 3797 (a) (3) of the Internal Revenue Code.

Estate Tax -- Gross Estate -- Value -- Unrecognized Interest. -- Full value of an interest included in gross estate, although existence not recognized at date of death, where never disputed although Orphans' Court had not recognized it in prior accountings but the courts recognized it when later first brought to their attention.

Petitioner, president and majority stockholder of Wigton-Abbott Corporation, in 1931 directed its treasurer to purchase for the corporation… Held: The indemnity agreement was merely a gratuitous gesture of petitioner, made for other purposes than the procuring of profit, and petitioner's payment thereunder was not deductible under section 23 (e) (2), I. R. C. (2) The possibility of petitioner obtaining profit through increased dividends in Wigton-Abbott Corporation was too…

In 1943 petitioner's employees entered into an agreement with one another establishing the Erie Times Employees Benefit and Pension Fund. Held: petitioner is not permitted to deduct these contributions from its gross income.

1. Petitioner, computing its excess-profits tax credit by use of base period income, held entitled to adjustment for excessive depreciation improperly deducted during base period years. Leonard Refineries, Inc., 11 T. C. 1000, followed. 2. Similar adjustments held proper for losses on long term contracts under N. I. R. A. improperly deducted in base period. Byus-Mankin Lumber Co., 46 B. T. A. 698, followed. 3.

1. Under the facts, various deductions taken by petitioner from gross income in computing her business loss for 1945 approved. 2. Held: the expense of the automobile operation is a deductible item in computing petitioner's adjusted gross income under the provisions of section 22 (n) (1), I. R. C.

In the taxable year petitioner received partial payments on certificates of indebtedness issued by the Maple Grove Cemetery Association, in registered form. Held: the gain realized is taxable as capital gain under section 117 (f) of the Internal Revenue Code, and not as ordinary income.

Since each of the respondent's two contested determinations of petitioner's excessive profits for two fiscal periods, each less than its taxable year, was without statutory authority, respondent's determinations are both expunged. Maguire Industries, Inc., 12 T. C. 75 (on appeal, App. D. C.), distinguished.

During the years of separation the taxpayer paid $ 1,200 monthly for his wife's support and pursuant to an agreement made preliminary to divorce he continued to pay $ 1,200 monthly (plus some extra… Held: deductible under section 23 (u), Internal Revenue Code, because incurred under a written instrument made in discharge of a preceding legal obligation of support, within the meaning of section 22 (k). Tuckie G. Hesse, 7 T. C. 700, followed.

Where petitioner partially charged off two sets of demand notes and then sold both sets later in the same taxable year at a price equal to their reduced value, held, that petitioner was entitled to… Held: that petitioner was entitled to capital loss deductions on the sales rather than partial bad debt deductions on the notes.

1. Under the principles enunciated in Commissioner v. Culbertson, 337 U.S. 733, and under the facts, held, petitioner's wife and her alleged copartners in a two-family partnership had no intent, in… Held: petitioner's wife and her alleged copartners in a two-family partnership had no intent, in good faith and acting with a business purpose, at the time of formation of the partnership that she join together with them in the present conduct of the enterprise.

Petitioner as of May 11, 1938, owned 455 shares of the 500 outstanding shares of stock of Metropolitan Buick Co. On July 12, 1938, he… Held: that petitioner's wife, having made a contribution of capital to the partnership of which she was the owner at the time she made it and having rendered vital and important services for the business, and it having been the bona fide intention of the partners to carry on a partnership business, she was a partner for tax purposes; held,…

1. Income -- Alimony -- Agreement Incident to Divorce. -- Where, incident to a divorce, parties amend an old agreement, not incident to a divorce, the whole agreement, as amended, is incident to a divorce within section 22 (k), I. R. C. 2. Income -- Alimony -- Agreement to Pay Taxes on Payments. -- An agreement by the husband to pay Federal taxes on payments to his wife is not binding upon Commissioner in applying section 22 (k). 3.

Hotel Holding Co. defaulted on its bonds and the indenture trustee took possession in 1931 for the bondholders. Held: petitioner acquired substantially all the property of Hotel Holding Co. pursuant to a plan of reorganization and solely for voting stock, within the meaning of section 112 (g), Internal Revenue Code, and is entitled to use its predecessor's basis.

Petitioner Theodore Wilson was a partner of the Hanlon & Wilson Co., a partnership composed of petitioner, his brother, Richard, and his father, A. G. Wilson, from August 1, 1942, to July 5, 1945. Held: the Commissioner erred in determining that A. G. Wilson was not a bona fide partner of Hanlon & Wilson Co. during the period in controversy.

1. Deductions -- Loss -- Cancellation of Lease. -- A corporation is entitled to deduct as a loss in 1939 the unrecovered cost of a mining lease canceled in that year, where the corporation purchased the lease and eleven other leases in 1914 for a single sum and treated them separately on its books for the purposes of computing the purchase price and depletion. 2.

An insolvent corporation, wholly owned by its officers and their families, was in default in the payment of a note secured by deed of trust on its principal asset, a hotel, and,… Held: on the evidence not due to an event similar in nature to a receivership within the meaning of section 107 (d) (2) (A) (iv), Internal Revenue Code, there being no legally enforceable control of the corporation in any one other than its own officers. Norbert J. Kenny, 4 T. C. 750, distinguished.

1. Corporation A, on its own behalf and as a member of joint ventures, entered into long term construction contracts. Held: that under the circumstances it was proper for the Commissioner to allocate to corporation A, under section 41 of the code, income earned under the contracts based upon the percentage of completion thereof at the time of the reorganization. 2.

1. Taxpayer, an operator of coal mines for many years, in June 1940 leased certain property for the purpose of developing a coal mine thereon. Held: that the property under the two leases constituted a property and that a part of taxpayer's gross income from the sale of coal from such property, known as the Maxton Coal Mine, received in 1943, is a separate class of income as defined in section 721 (a) (2) (C), I. R. C. 2.

Under the facts, a valid partnership for purposes of taxation held to have been in existence in the taxable year between Frederick A. Depue, now deceased, and his wife.

Petitioner is entitled to a deduction of the amount of $ 1,000 in the taxable year 1944, as a capital loss carry-over of a nonbusiness bad debt loss sustained in 1943.

1. Merger under Illinois statute held not to entitle resulting corporation to its predecessor's equity invested capital for purposes of excess profits tax. 2. Held: further, that pursuant to Internal Revenue Code, sections 718, 728, 729, and 113 (a) (8), petitioner's equity invested capital was the basis of petitioner's property to its transferors. 3.

1. Excess Profits Tax -- Invested Capital -- Section 751. -- A syndicate, not taxable as a corporation, the principal creditor and sole… Held: the taxpayer's property paid in for stock and borrowed capital for the purposes of its excess profits credit based on invested capital for 1940 and 1941 are to be determined under sections 718 (a) and 719, I. R. C., rather than under section 751, I. R. C., applicable to certain exchanges between corporations, since the 1937…

1. For several years prior to December 1, 1945, petitioner was a member of a partnership engaged in the canvas business. Held: under the facts, the petitioner and his wife did not in good faith and acting with a business purpose intend to join together in the conduct of the business as partners, and respondent correctly included the entire income of the business for the years 1945 and 1946 in the gross income of petitioner.

Corporation engaged in the business of managing farms for absentee owners, employing trained agriculturists to do the actual work of surveying and platting the farm, planting the crops, and… Held: not a personal service corporation within the meaning of section 725, I. R. C.

During the taxable years, petitioner was engaged in designing and engineering special machinery to be used in manufacturing airplane wings. Held: petitioner is entitled to personal service classification under the provisions of section 725, I. R. C.

Petitioner claimed credit for three dependents in his income tax return for 1943, and credit for six dependents in his 1944 income tax return. Held: That two of the alleged dependents claimed in 1943 did not meet the requirements of section 25 (b) (2) (A) of the code as amended, because both were over the age of 18 years and both were mentally and physically capable of self-support.

Petitioner was the sole owner of a corporation in which capital was an important and necessary factor. Held: that petitioner's wife, having made a valid contribution of capital to the partnership of which she was the full and legal owner at the time she made it and it having been the bona fide intention of the partners to carry on a partnership under the name of F. A. Marsily & Co., Frances G. Theurkauf, the wife, should be recognized as…

Family Partnership -- Husband and Wife -- Wife Not Recognized. -- The evidence does not support the petitioner's contention that his wife contributed original capital and, furthermore, a consideration of all of the evidence in the case does not indicate that the other partners really intended to join together with the petitioner's wife for the purpose of carrying on the business as partners.

Petitioner, in accordance with the desire of two of its stockholders, each holding one-third of its stock, to eliminate the holder of the other one-third, and pursuant to agreement, transferred to… Held: on the facts, that there was partial liquidation, and not sale of the corporate assets for stock, that the petitioner did not deal in its shares as it might in the shares of another corporation, and that the petitioner sustained no deductible loss from the transaction.

The respondent mailed to a husband and wife, residing together in Florida, a joint notice of deficiency in income tax. Four days later the husband died. Held: that with respect to the husband's estate, this Court does not have the proper party petitioner before it and that as to the said estate the proceeding must be dismissed for lack of jurisdiction.

In 1925 petitioner entered into a transaction whereby it acquired the business and assets of a sole proprietorship for 1,000 shares, or… Held: that the petitioner, in computing the amount of its equity invested capital under section 718 (a) of the Internal Revenue Code, is limited to the amount of the cash, plus the value of the 1,000 shares of its class B stock paid for the business and property acquired, and that any excess amounts realized by the underwriter from the…

The petitioner, an alien, was present in the United States continuously from August 1939 until August 1945. He was admitted under a visitor's visa which allowed him a stay of three months, but the time was extended because of difficulties of returning to Europe, and he was allowed to remain until cessation of hostilities in Europe.

Petitioner during 1943 and 1944 advanced to its wholly owned subsidiary a total of $ 11,334.43. These advances constituted the only capital of the subsidiary during the year involved and they represented an investment by petitioner in the unissued capital stock of the subsidiary.

1. The petitioner organized and controlled a club on a nation-wide scale and obtained from members a large amount of money through transactions called PLs. Held: that the verdict of conviction estops the petitioner to deny that the amounts received were income. 2. Golden Braid, a corporation which sold costumes only to members of the club, was formed in 1936. Petitioner's sister and a Mrs.

Where the purchaser of a $ 175,000 note received as a part of the entire transaction a payment of $ 75,000 on the note, arranged for by… Held: there was in substance a payment of $ 75,000 on the note by the maker to the seller; held, further, there was a bona fide sale of a capital asset to the extent of $ 100,000; held, further, a prior settlement agreement by the Commissioner of Internal Revenue and the taxpayer providing for the treatment of future payments on the note…

By the trust deed of April 4, 1930, it was the settlor's intention, upon the death of his daughter, to create additional separate trusts for the benefit of his other children.

1. Relief under section 721, Internal Revenue Code, denied to manufacturer of piston rings in the absence of proof that petitioner's income for 1942 and 1943 was due in any material part to the development of patents, formulae, and manufacturing processes in prior years, rather than to an increased wartime demand for petitioner's products. 2. Respondent sustained on other issues for lack of proof showing error in his determination.

Reconstruction of base period income by use of results of business for last month of base period, relied on by petitioner in claiming relief from excess profits tax, held, on facts, not sufficient to… Held: on facts, not sufficient to sustain petitioner's burden of meeting requirements of section 722.

Southland Steel Co. is the trade name of an unincorporated business conducted by petitioner Agnes Gillespie. Held: under the facts that petitioner was not under the control of or under common control with the corporation under the provisions of section 403 (c) (6) of the Renegotiation Act of 1943, and its subcontract is not subject to renegotiation because the amounts received for the 10-month period were less than the minimum required for…

Agreement for petitioner's support made with her former husband in contemplation of a Nevada divorce, held incident to subsequent New York divorce so as to make payments thereunder taxable to petitioner under section 22 (k), Internal Revenue Code, notwithstanding intention to institute Nevada proceedings was abandoned.

In 1944 a decree of divorce granted in 1940 was modified by the court so as to award to petitioner an increase in her alimony for the… Held: the sum so received by petitioner in 1944 as increased alimony for prior years represented periodic payments within the meaning of section 22 (k) of the Internal Revenue Code; held, further, that the $ 4,000 expended by petitioner for attorneys' fees in 1944 in securing an increase in her alimony allowance is deductible as ordinary…

Held, that attorneys' fees paid or incurred by the petitioner during the taxable years in connection with securing a financial settlement… Held: that attorneys' fees paid or incurred by the petitioner during the taxable years in connection with securing a financial settlement with her husband incident to separation and divorce are deductible as nonbusiness expenses within the meaning of section 23 (a) (2), in so far as they resulted in the production or collection of income…

Petitioner, an insolvent state bank and stockholder-transferee of the assets of a corporation, held, not exempt under section 3798 of the Internal Revenue Code from transferee liability for the… Held: not exempt under section 3798 of the Internal Revenue Code from transferee liability for the corporation's unpaid income tax.

The taxpayer, owner of mining rights, contracted to let and grant possession of them to a corporation under a lease with option to purchase. Held: that the taxpayer reserved an economic interest in the mining rights. Burton-Sutton Oil Co. v. Commissioner, 328 U.S. 25. (2) The amounts received by the taxpayer in 1942 and 1943 as payments under the contract, held, taxable as royalties and not as sale proceeds.

Petitioner in the taxable year was chairman of a committee to promote the sale of war bonds. Held: the campaign to sell war bonds did not have any relationship to either of petitioner's businesses and the voluntary payment to make up the shortage is not deductible.

Petitioner's rights to subscribe at a bargain price to stock of his employer, given him in his capacity as an employee for the best interests of the company, held not to result in income on exercise of rights. Delbert B. Geeseman, 38 B. T. A. 258, followed.

Petitioner, his wife, and two others operated a business as a partnership under a name which did not disclose the names of all of the partners. The partnership was licensed to do business as such. Held: the partnership was not intended by the husband and wife to be a functioning partnership as between them and the partnership income is taxable to the petitioner husband.

Deduction -- Depreciation -- Basis -- War Loss. -- An adjustment of the basis for depreciation of property on account of a war loss in 1941 is mandatory under section 127 (a) (2), I. R. C., and no deduction for depreciation of the property is allowable thereafter unless and until the basis of the property is restored through recoveries at or after the end of the war. Abraham Albert Andriesse, 12 T. C. 907, followed.

Payments made to petitioner by the corporation formerly directed by her deceased husband without obligation on the part of the corporation and intended by it, in reliance on I. T. 3329, as a gift to her individually, held not taxable as either compensation for personal services or distribution of profits.

In 1932 petitioners and others, acting under authority of the trust indenture, withdrew property from a trust of which they were beneficiaries, placed a mortgage thereon to secure their liability as… Held: the amount recovered was received by petitioners in their own right and not as distributees of the trust, and the value in 1938 of the property conveyed in discharge of their obligation was the basis for determining gain or loss.

In the taxable years 1943 and 1944, petitioner claimed as deductions payments made to a pension trust established for the benefit of… Held: petitioner's pension plan qualifies as a tax-exempt trust under the provisions of section 165 (a) of the Internal Revenue Code as amended by the Revenue Act of 1942, and the contributions made thereto constitute allowable deductions to the extent provided in section 23 (p) of the Internal Revenue Code as amended by the Revenue Act of…

Held, sections 826 and 827, I. R. C., authorize the collector to recover estate taxes from assets of inter vivos trust before first exhausting assets of decedent's estate in the hands of the executor. Held: sections 826 and 827, I. R. C., authorize the collector to recover estate taxes from assets of inter vivos trust before first exhausting assets of decedent's estate in the hands of the executor.

Held, a bona fide partnership between petitioner and his wife existed during the year previous to the execution of a formal written agreement. Held: a bona fide partnership between petitioner and his wife existed during the year previous to the execution of a formal written agreement.

Decedent's father, as the nominal settlor, created a trust consisting of assets transferred to him by decedent without consideration and for the purpose of enabling him to create such trust for her… Held: that decedent was the real settlor of the trust and that the value of the trust corpus is includible in her gross estate under the provisions of sections 811 (c) and 811 (d) (2), Internal Revenue Code.

1. Petitioner Hamilton filed her 1944 income tax return with the collector for the third district of New York. Held: that the filing of the petition was timely, under section 272 (a) (1) of the Internal Revenue Code. 2. The respondent, on March 7, 1945, by registered mail, sent his notice of deficiency to petitioner Chaqueneau at his last known address, 24 East 94th Street, New York, New York.

Gain from the sale of securities purchased and held as an investment and not for sale to customers in petitioner's regular business as dealer and broker, held, taxable as capital gain rather than… Held: taxable as capital gain rather than ordinary income.

1. An amount of $ 25,000, allowed for one year's support for decedent's widow, paid by the executor of decedent's estate after the death of the widow to the executrix of her estate, without a showing… Held: not allowable as a deduction under section 812 (b), I. R. C. 2.

The taxpayer corporation has operated a rice mill since 1903, purchasing rough rice from farmers, milling it, and selling the milled product through brokers. Held: that the taxpayer has not established any temporary economic circumstances unusual in its case which depressed its business during the base period within the meaning of section 722 (b) (2), Internal Revenue Code.

1. Excess Profits Tax -- Relief Under Section 722 -- Change in the Character of the Business -- A Difference in the Products Furnished. -- The introduction of three new products, which fit into the line constituting the business and do not materially change that business, does not represent a "difference in the products * * * furnished" within the meaning of section 722 (b) (4), I. R. C. 2. Excess Profits Tax -- Relief Under Section 722 -- Push Back -- Reconstruction of Earnings. -- Earnings can not be reconstructed under the "push back" rule in the absence of persuasive reasons supported by adequate evidence.

Deduction -- Interest or Dividends. -- Securities held to be evidence of indebtedness so that required annual payments to holders were deductible as interest.

Income from a sheep-ranching business consisting principally of the proceeds from the sale of wool and lambs, held, taxable to the petitioner, notwithstanding his assignment of a portion of the sheep… Held: taxable to the petitioner, notwithstanding his assignment of a portion of the sheep to his minor children as gifts.

Petitioner, in order to retain tenants, in the taxable year forgave unpaid rents, accrued both in the taxable year and previous years. Held: the amounts forgiven are deductible from gross income as business expenses or as losses. Sec. 23 (a) (1) (A) and (f), I. R. C.

Petitioner, the wife of a Bolivian diplomat accredited to Great Britain, entered the United States, as did her husband and children, as war refugees, in 1940. Held: on the facts, that during 1944 and 1945 she was a resident alien; held, further, that her failure to file an income tax return was with reasonable cause. Basis of stock determined from the evidence.

1. Deduction -- Interest: -- Held, no interest accrued in the taxable year as a liability of petitioner where prior thereto it transferred and conveyed a certain oil and gas royalty interest to its… Held: no interest accrued in the taxable year as a liability of petitioner where prior thereto it transferred and conveyed a certain oil and gas royalty interest to its creditor banks in exchange for release from liability on its debts to those banks. 2.

The property rights of petitioner and his wife held finally determined under the laws of the State of Washington by an interlocutory decree of divorce issued by a court of that State, incorporating a property settlement agreement previously entered into by the parties, and the entire income of a business separately owned by the petitioner from the date of the interlocutory decree to the date of the final decree of divorce held taxable to petitioner.

Petitioner asks a redetermination of an order of the Secretary of the Navy that he realized excessive profits under war contracts during the fiscal year 1942. Held: (1) Petitioner was a subcontractor within the meaning of section 403 (a) (5) (ii) of the Renegotiation Act of 1942 as amended, and subject to renegotiation. (2) This Court therefore lacks jurisdiction to review the order of the Secretary of the Navy under section 403 (e) (2) of the Renegotiation Act of 1943, and the proceeding is dismissed. (3) Petitioner's motion to dismiss his petition with respect to the fiscal year 1943 is granted.

Petitioner inherited an interest in an income-producing building erected prior to the decedent's death by a lessee. Held: the petitioner had a basis for depreciation based on the fair market value of the building at the time she acquired her interest in it by inheritance from her mother. See section 113 (a) (5), I. R. C.Charles Bertram Currier, 7 T. C. 980, followed. Milton H. Friend et al., Trustees, 40 B. T. A. 768; affd., 119 Fed.

1. Held, under the facts, decedent received unreported taxable income in the taxable years in amounts determined herein. 2. Held: under the facts, decedent received unreported taxable income in the taxable years in amounts determined herein. 2. Held, upon failure of proof, respondent did not err in determining that certain dividends were received by decedent in 1939, rather than in 1938. 3.

1. Estate Tax -- Gross Estate -- Contemplation of Death -- Section 811 (c). -- Transfers held not in contemplation of death where purposes of transfers were connected with life rather than death and poor health did not prompt transfers. 2.

Petitioner made annual contributions to an association of its employees which provided sick and disability benefits, medical aid, burial expenses, group life, accident, and hospital insurance, and… Held: the $ 12,000 payment is deductible as an ordinary and necessary business expense paid in 1943.

Upon the facts, held, petitioner's employment in Oak Ridge, Tennessee, was indefinite and, hence, the expenses involved are not deductible under section 23 (a) (1) (A) of the Internal Revenue Code. Held: petitioner's employment in Oak Ridge, Tennessee, was indefinite and, hence, the expenses involved are not deductible under section 23 (a) (1) (A) of the Internal Revenue Code. Commissioner v. Flowers, 326 U.S. 465.

Each of the petitioners is an open end investment trust whose shareholders are entitled at any time, at their option, to surrender their… Held: that the accumulated net earnings distributed by the petitioners during the taxable year on the redemption of shares were not preferential dividends within the meaning of section 27 (h) and the petitioners are entitled to include such sums as dividends paid in determining their basic surtax credits under sections 362 (b) and 27 (b)…

The taxpayer corporation was formed and acquired assets of an insolvent predecessor pursuant to a reorganization plan carried out under section 77-B of the Bankruptcy Act. Held: not a transaction on which no gain or loss was recognizable within the intendment of section 112 (b) (10), Internal Revenue Code, because there was no continuity of interest on the part of owners of the enterprise prior to the reorganization. Section 29.112 (b) (10)-1, Regulations 111, approved.

The petitioner was sole trustee of a trust formed to liquidate a company in which he was the major stockholder. An employee of the trust, a truck driver, struck and fatally injured a third party. Held: that petitioner has failed to show that the payment of $ 2,750, plus an attorney's fee of $ 200, was a loss not compensated for by insurance or otherwise within the meaning of section 23 (e) of the Internal Revenue Code.

1. The taxpayer corporation's two principal stockholders each took out a $ 50,000 insurance policy on his life, designating his estate as beneficiary, and they immediately assigned the policies to… Held: not includible in equity invested capital as defined in section 718 (a), Internal Revenue Code, since under the wording of the assignment the stockholder's estate had no right of subrogation against the taxpayer. Walker v. Penick's Executor, 122 Va. 664; 95 S. E. 428. 2.

Petitioner was assigned by his employer, the Travelers Insurance Co., to act as resident claims representative in Nassau, Bahama Islands, British West Indies. Held: Petitioner was not a bona fide resident of a foreign country within the meaning of section 116 (a) (1) of the Internal Revenue Code, as amended by the Revenue Act of 1942, and his income during 1943 while so employed is taxable as a part of his gross income.

Petitioner, an Army officer, moved his household effects and automobiles from one permanent duty station to another at his own expense. Held: the cost thereof is not an ordinary and necessary business expense within the meaning of section 23 (a) (1) or (2), I. R. C.

Petitioner is the successor to a predecessor corporation which owned certain oil properties in Texas. Held: petitioner acquired its oil properties in a transfer which comes within the reorganization provisions of section 112 (g) (1) (D), I. R. C., and that petitioner's cost basis of its oil properties is that of its predecessor. Respondent's use of percentage depletion is sustained.

The petitioner corporation, which kept its books on the cash basis, owned substantially all land comprised in a California reclamation district. Held: not to estop the Commissioner from defending a subsequent determination that the taxpayer had no net operating loss for the fiscal year 1944 and consequently no carry-back, such determination being based on a disallowance of the deduction of tax payments.

Under the provisions of new subsection (d) of section 165 of the Internal Revenue Code, which was added by section 5 (a) of Public Law No. 378 (approved Oct. 25, 1949), held that amounts which the employer of two of the petitioners contributed to an employees' pension trust in 1942 and 1943 shall not be included in the income of the petitioners for those years.

1. In determining earnings or profits accumulated after February 28, 1913, held that capital impaired by pre-March 1, 1913, operating losses must be restored out of… Held: that the earnings or profits of the parent corporation are not absorbed by such impairment of the capital of the dissolved subsidiaries in computing the accumulated earnings or profits of the parent corporation available for distribution as taxable dividends. Commissioner v. Phipps, 336 U.S. 410, followed.

1. Decedent was a member of a Texas marital community. The husband was sole stockholder in a corporation. Held: under the facts, that the corporation was not a fiction and the alter ego of the husband, and that the Commissioner erred in including in the wife's gross estate one-half of the increase in the corporation's surplus during the marriage; held, further, that one-half of the increase during the marriage in the community indebtedness to…

Petitioner made irrevocable gifts of cash and securities to his wife. Held: that under the facts, petitioner's wife was a bona fide partner in the brokerage firm for Federal income tax purposes and that the amounts of $ 8,741.48 of ordinary income and $ 242.65 of net short term capital gain reported by her for the calendar year 1944 as distributable income from the business are properly taxable to her rather…

Petitioner, in the recapitalization of company A, exchanged as of the date of January 1, 1939, A's bonds of a face value of $ 25,000 for bonds and stock of the reorganized company A. As of such date there was accrued unpaid interest on such bonds in the amount of $ 3,590.06. The effective date of the reorganization was January 1, 1939, but the actual exchange of the securities was not made until 1944. On the latter date petitioner also received from the reorganized company A a certain amount of cash, the cash so received representing adjustment payments in lieu of amounts which petitioner presumably would have received as interest and dividends had the securities which he received in 1944 actually been issued to him on January 1, 1939. Held, only the exchange of the securities which were considered as having been exchanged as of January 1, 1939, comes within the provisions of section 112 (b) (3) of the Internal Revenue Code, and as to the securities so exchanged no gain or loss is recognized; held, further, that the accumulated and unpaid interest in the amount above indicated on the old company A $ 25,000 face value bonds exchanged by petitioner was part of such securities and that the securities received in exchange by petitioner included common stock of the reorganized company A in the amount of 116 3/4 shares of the stipulated value equal to the amount of such accumulated unpaid interest on such bonds; held, further, that the adjustment payments in cash were not within the exchange, and they are taxable as ordinary income.

On the facts, held, that when sole proprietorship was converted into a family partnership in 1943, neither petitioners nor their son and daughter intended to join… Held: that when sole proprietorship was converted into a family partnership in 1943, neither petitioners nor their son and daughter intended to join together in the present conduct of the business, and, therefore, the partnership was invalid for tax purposes in that year. Commissioner v. Culbertson, 337 U.S. 733.

Under partnership agreement decedent's estate was bound to pay over to his surviving partner all of his interest in the partnership assets in exchange for the proceeds of certain policies of… Held: that there should be included in the gross estate, under section 811 (c), I. R. C., all of such insurance proceeds, but not the partnership assets which decedent had relinquished in exchange therefor.

On October 31, 1940, Lodwick Lumber Co. entered into an executory contract for the sale of certain timber and lease of certain land to… Held: that (1) Lodwick Lumber Co. realized taxable income in 1941 from the sale of the timber and lease of the land; (2) Lodwick Lumber Co. incurred liability for declared value excess profits tax in 1941; (3) Lodwick Lumber Co. was not liable under section 291 (a) of the Internal Revenue Code for failure to file income tax and declared…

Upon the facts, held, petitioner held the property involved primarily for rental rather than for sale, and hence it is entitled to treat the gains from the sale of such property as capital gains. Held: petitioner held the property involved primarily for rental rather than for sale, and hence it is entitled to treat the gains from the sale of such property as capital gains. Sec. 117 (j), I. R. C.

1. Dividends. -- The extent to which distributions received by petitioners as stockholders of the J. D. & A. B. Spreckels Co. during 1938, 1939, and 1940 constituted taxable dividends is by… Held: the full amount of such distribution is includible in her income, pursuant to section 186 (g) of the 1942 Act and section 115 (a) of the 1938 Act as amended by section 186 (a) (2) of the 1942 Act.

1. Income received and controlled by petitioner's wife as her share of the proceeds of a business in which petitioner had transferred to her a part of his interest and to which neither she nor petitioner contributed services, held not taxable to him. Clifford R. Allen, Jr., 12 T. C. 227. 2. Deductions for losses on oil leases and for business expenses, including automobile maintenance, entertainment, and accounting and advisory services, held on facts partly allowable.

Certain payments made by Floyd W. Jefferson in 1942 and 1943 to his divorced wife for her support and maintenance held deductible by him under section 23 (u) of the Internal Revenue Code.

1. Deficiency -- Definition -- Tax Imposed by Chapter 1 -- Section 271, I. R. C. -- Section 6, C. T. P. A. of 1943. -- The total tax for 1943 under section 6 of the Current Tax Payment Act of 1943 is all imposed under chapter 1, I. R. C., for the purpose of section 271. 2.