Volume 14 — Board of Tax Appeals

A corporation upon organization issued part of its capital stock to one who was in a position to furnish business to the company, upon his written agreement to furnish such business. Held: such subsequent earnings might be corroborative of an actually existing value, if any were shown, but could not form the sole basis for fixing such value.

1. Reasonableness of salaries determined. 2. Bonus paid by petitioner to its stockholders held to constitute a distribution of profits.

Certain purchase-money notes taken by petitioner in 1920 held to have had no fair market value, and should not be included in income for that year.

The petitioner did not sustain any loss in the year 1920 on the transaction involved herein.

SPECIAL ASSESSMENT. - Prior to the taxable year the petitioner expended large sums of money in the development and extension of trade routes, acquiring trade-marks, and for advertising special brands of merchandise, all of which expenditures were concurrently charged to operating expense. Some portion of said expenditures constituted capital investment, the balance being properly chargeable to expense, but the portion allocable to capital can not now be determined. Said expenditures materially contributed to the production of the taxable income. Held, that said facts bring petitioner within the scope of section 327(a) of the Revenue Act of 1921.

Petitioner, an advertising agency, held to have been a personal service corporation in 1919.

Transaction held to be completed sale in 1920, not 1921.

1. Taxable gain determined on an exchange of real estate for stock. 2. Held: that the evidence submitted by the petitioners is insufficient to overcome the presumption that certain shares of stock transferred to relatives of the decedent and his wife were gifts made in contemplation of death. 6.

1. Actual cash value of tangible property paid in to petitioner for shares of stock at date of incorporation determined. 2. Proceeding dismissed as to year 1621, as to which no deficiency has been asserted by the Commissioner. Cornelius Cotton Mills,4 B.T.A. 255.

The evidence does not establish that petitioner is entitled to include in invested capital any greater amount than allowed by the respondent.

Amounts sought to be deducted as bad debts or losses disallowed.

No error was committed by respondent in transferring a claimed deduction from the taxable year to the following fiscal year.

Rates of depreciation on machinery, buildings, auto trucks, and office furniture and fixtures, determined.

1. Petitioner held not a building and loan association entitled to exemption from taxation during the year 1923 within the meaning of section 231(4) of the Revenue Act of 1921. 2. Amounts paid by the petitioner (as dividends) to owners of its withdrawable stock held not allowable as interest or expense deductions from income.

Held, that in the taxable year and period here involved the petitioner derived no income from interest on the bonds of a certain railway company owned by it and that the amounts thereof were… Held: that in the taxable year and period here involved the petitioner derived no income from interest on the bonds of a certain railway company owned by it and that the amounts thereof were improperly accrued by the respondent in computing the deficiencies herein.

1. Where no partnership income or excess-profits-tax returns were filed by a partnership for the year 1917, the statute of limitations does not apply to any deficiency that may be determined against the partnership for such year. 2. Inventory adjustment made by the Commissioner disallowed and the amount thereof restored to the cost of goods purchased in the taxable year on a showing that the goods in such inventory were the property of the petitioner and were inventoried at cost.

Under section 234(a)(2) of the Revenue Act of 1921, held, a debtor may not deduct charges for interest on trade balance in years prior to the taxable year, although such interest charges were first… Held: a debtor may not deduct charges for interest on trade balance in years prior to the taxable year, although such interest charges were first billed to him during the taxable year.

The fair market value of property paid in to the petitioner for its capital stock, determined.

Evidence held insufficient to show any amount to be excluded from the petitioner's income representing profits carried on its books on consignment accounts which was not realized by sale by the consignee during the taxable year.

Petitioner has failed to show abnormalties to entitle it to special assessment.

1. Where decedent in 1922 created a trust the income of which was payable to him during his life and at his death the corpus vested in his children and the trust was irrevocable without the consent of all the beneficiaries, held that, since the trust was created prior to the enactment of the Revenue Act of 1924, the corpus is not subject to the estate tax imposed by that Act. 2.

1. Notice of a deficiency as to one of two affiliated corporations whose officers are the same is not notice to the other company as contemplated by the statute. 2. The filing of an appeal by the corporation to which no notice of a deficiency was sent or a joinder by it in the appeal of the corporation which received such notice, does not confer jurisdiction upon the Board to consider the appeal of the first company. 3.

1. Where a company sold trucks on a basis of 25 per cent cash and accepted for the balance a note secured by a chattel mortgage providing for ten or twelve monthly payments, and immediately assigned and transferred the note and sold, assigned and transferred the chattel mortgage to a financing company, receiving from it the full remaining unpaid amount of the purchase price, it should report as income the entire amount of cash so received in the taxable year. 2.

Petitioner and his wife with two others formed a partnership to engage in the real estate business, the profits from which were divided equally between the four partners. Held: that the profits belonged to the wife and should not have been included in petitioner's income. L. F. Sunlin,6 B.T.A. 1232, and Earle L. Crossman,10 B.T.A. 248.

The transfer of corporate stock by the decedent to his wife in December, 1918, was not a gift in contemplation of death, and therefore the value in controversy should not be included as a part of the gross estate.

Taxes assessed by the States of Oregon and Washington and by subdivisions thereof accrue in the year for which they are assessed, and where a taxpayer keeps his books of account on the accrual basis, such taxes are proper deductions in computing net income for that year, although they did not become due and payable until a subsequent year.

1. Claim for deduction of cost-price of alcohol liquor distributed among petitioner's customers, disallowed. 2. The profits from the Lincoln Market lease for the years 1919 to 1922, inclusive, were not income to the petitioner.

Invested capital of a corporation may not be reduced, in determining the extent to which a dividend is paid from current earnings of a year, by a tentative tax theoretically set aside out of such earnings pro rata over such year, because the income and profits tax does not become due and payable and, therefore, does not accrue until the following year.

Deduction allowed of loss sustained upon the sale of certain shares of stock in the year 1923.

Respondent's action in reducing invested capital approved for failure to adduce sufficient evidence of the acquisition of good will in the amount alleged.

Evidence held insufficient to overthrow respondent's determination.

Held, on the evidence, that so-called interest payments on individual profits were in fact distributions of profits. Held: on the evidence, that so-called interest payments on individual profits were in fact distributions of profits.

The right of petitioner and wife to report in separate returns the income derived from a partnership in the State of Oregon, in which the petitioner had invested certain funds belonging to himself and wife by virtue of the community property laws of the State of Washington, denied where the evidence does not afford any basis for allocation of the partnership income from capital investment and from personal services of the petitioner and others.

The petitioner and allied companies held to have been affiliated for the years 1917, 1918, and 1921.

A sale of stocks to an irrevocable trust created by the seller and of which he was a trustee, held, under the circumstances, to result in a deductible loss. Held: under the circumstances, to result in a deductible loss.

Debts arose prior to March 1, 1913, and later were ascertained to be worthless. Held, the basis for determining the amount deductible is the March 1, 1913, value of such debts. Held: the basis for determining the amount deductible is the March 1, 1913, value of such debts. Ayer v. Commissioner, 26 Fed.(2d) 547, followed.

1. Respondent's action in including in gross income the amount of exempt interest in approved. 2. Petitioner is entitled to a deduction in computing net income under section 245(a)(2) of the Revenue Act of 1924 in the amount of 4 per cent of the mean of the reserve funds required by law and held at the beginning and end of the taxable year, undiminished by the amount of exempt interest. National Life Insurance Co. v. United States,277 U.S. 508. 3.

The petitioner worked in California for a California corporation, but lived in Nevada. Held: under the Nevada law the wife had a vested interest in such income at the moment it was received, and the tax is properly to be computed on the basis of separate returns.

1. A contract to purchase unascertained goods which were to remain the property of the seller until the goods were certified by the seller, checked by both parties and actually loaded on the cars,… Held: not to pass title to the goods when the goods were ascertained as specific goods by certification. 2.

Held, that the petitioner is not an exempt corporation under the provisions of section 231(11) of the Revenue Act of 1921. Held: that the petitioner is not an exempt corporation under the provisions of section 231(11) of the Revenue Act of 1921.

1. Reduction of closing inventory taken by the petitioner in computing net income for the year 1920 on account of certain goods claimed to have been obsolete at the close of that year, disallowed. 2. The petitioner is entitled to have its profits-tax liability for the year 1920 computed under section 328 of the Revenue Act of 1918.

1. Certain gifts made by decedent within two years of his death held to have been made in contemplation of death. 2. Value of certain assets at the date of decedent's death determined. 3. In computing the net estate of a decedent subject to estate tax, deductions should be allowed for such charges, such as commissions, expenses and attorney's fees as will ultimately be allowed by the laws of the jurisdiction under which the estate is being administered, whether or not such amounts have been allowed by order of court or paid at the time of the hearing before the Board. Samuel E. A. Stern,2 B.T.A. 102, followed. 4. It is the duty of the Board to determine the amount of all deductions, so far as the evidence will permit, whether or not the amounts claimed have been paid.

Petitioner, an advertising agency serving a few large advertisers, all of whom were procured and serviced by petitioner's stockholders, held to be entitled to classification as a personal service corporation.

Petitioner, an advertising agency, held to be entitled to classification as a personal service corporation. H. K. McCann Co., 14 B.T.A. 234, cited and followed.

1. Deduction, under the loss provision of the statute, disallowed of an amount paid out by a corporation in 1920 to a surety on certain of its trust notes to compensate him for an alleged loss of the amount of the enhancement in value, after its sale by the trustee, of certain shares of stock which the surety had pledged as collateral on the trust notes and which were sold by the trustee under the terms of the trust agreement upon default of the principal in the payment of…

1. Held that the cost of assets to corporations, and not the cost to an individual who later owned a majority of the stock in such corporations, is the basis for calculating depreciation. 2. Value of assets at date of acquisition by the corporation determined. 3. A note paid in for capital stock held to be worth its face value and includable in invested capital. 4.

1. Petitioner denied special assessment for the year 1921. 2. Respondent's determination of invested capital for that year upheld.

1. The total amount expended by the petitioner for the reconstruction of a building destroyed by fire, which it occupied as lessee, is not deductible in the computation of net income for 1920, but may be amortized, and an aliquot part thereof, less amounts recovered on fire insurance and salvage, may be deducted in each of the remaining years of the lease beginning with February 14, 1920. 2.

1. ESTATE TAX - GIFT - CONTEMPLATION OF DEATH. - On the facts, held, that a gift inter vivos by decedent to his daughter of certain securities was not made in contemplation of death and accordingly… Held: that a gift inter vivos by decedent to his daughter of certain securities was not made in contemplation of death and accordingly is not to be included in his gross estate under section 402 of the Revenue Act of 1921. 2.

Control of shares of one corporation which were held by a third person is not established by another corporation by a showing of economic unity, an option to purchase such outstanding shares, dictation of business policies, and the fact that such third person, through his bank, held a mortgage on the property of the subsidiary corporation.

Basis for loss on sale of stock in 1921 determined to be 1902 value of stock exchanged in 1902 for stock sold in 1921 reduced by cash received on the exchange.

Deficiencies computed by use of percentage method approved in absence of evidence permitting determination by another method.

- The petitioner, prior to the reorganization, was a minority stockholder in each of three associated corporations. Held: that the transaction is not one upon which loss or gain could be predicated as of the time of reorganization.

1. In 1906 the petitioner acquired all the assets of another corporation and as part payment therefor assumed the vendor corporation's indebtedness other than… Held: that it derived no taxable income from such transaction. 2. The tax liability for a previous year as determined by the Board in an earlier proceeding under the Revenue Act of 1924 is, until set aside by a proceeding in court, the correct amount to be used in determining invested capital for the year in question.

Rate of depreciation on mechanical amusement devices, determined.

1. Collection of the additional taxes involved herein is not barred by the statute of limitations. 2. The petitioner is entitled to have its excess-profits taxes for the year 1917 computed under section 209 of the Revenue Act of 1917.

1. March 1, 1913, value of petitioner's buildings, determined. 2. Rates for computing allowances for the exhaustion, wear and tear of petitioner's buildings, machinery, and equipment determined.

A composite March 1, 1913, value determined for license contracts.

At date of the deficiency letter the Commissioner had authority to assess or collect additional tax.

1. Held, That the petitioner is not an exempt corporation under the provisions of section 231(7) of the Revenue Act of 1926. 2. Held: That the petitioner is not an exempt corporation under the provisions of section 231(7) of the Revenue Act of 1926. 2.

The taxpayer filed a return for the fiscal year ending March 31, 1921, on June 15, 1921. The Revenue Act of 1921 was approved on November 23, 1921, and thereafter the taxpayer filed another return for the above period, which because of the elimination of an exemption previously claimed but not allowed under the new Act, showed a larger tax due than was shown on the earlier return. Held, that the four-year period of limitation did not start to operate from the filing of the first return.

1. Lease of a manufacturing plant which had never been operated commercially, and was a new venture, nothing being paid for the lease except an agreement to share in future profits if any were realized, held to have no value as invested capital. 2. Options to buy capital stock of a corporation which was bankrupt and had never operated commercially held to have no value as invested capital.

1. Conclusion reached in V. J. Bulleit,3 B.T.A. 631, to the effect that a transaction, in which the petitioner, along with other stockholders in the Old Dominion Oil Co. paid in certain amounts under an agreement for the acquisition of certain leases and upon the fulfillment of the terms of the agreement received stock which had a greater value than the amount of cash paid in, was a transaction which gave rise to profit, is affirmed, and also the market value of the stock there established. 2. Petitioner, as a member of a committee appointed to liquidate the affairs of a corporation, received from this committee a certain amount in 1920 as his share of the profits from a pipe-line venture to which he was a party. Subsequent to this payment, other stockholders objected to the payment and suits were instituted to settle the controversy, but the amount received was still retained by the petitioner at the time of the hearing in this proceeding. Under an agreement reached between the parties, which at the time of the hearing in this proceeding was awaiting the approval of the court, the greater amount of that received by the petitioner was to be retained by him. Petitioner reported his income on the receipts and disbursements basis. Commissioner's action in considering the entire amount received as taxable income in 1920 sustained. 3. Statute of limitations held not to have run against the assessment of the deficiencies here in question. 4. The evidence is insufficient to establish the allegations of fraud with respect to the preparation of the returns for 1919 and 1920. 5. Negligence is likewise not established as to the return for 1919, but the evidence is sufficient to justify the imposition of the negligence penalty on account of the omission of certain items in 1920.

1. Conclusion reached in the case of R. V. Board,14 B.T.A. 374, with respect to the profit realized on a certain lease-acquisition transaction followed for the purpose of determining the profit to the petitioner from this same transaction. 2.

1. Conclusion reached in the case of R. V. Board,14 B.T.A. 374, with respect to the profit realized on a certain lease-acquisition transaction followed for the… Held: that the profit was properly returned as taxable income for 1919. 4. The fact that a single man maintains a home in which his sister lives and keeps house for him does not make the man the head of a family and thus entitled to the exemption of $2,000 provided by section 216(c) of the Revenue Act of 1918.

Respondent's valuation of stock for estate-tax purposes sustained for lack of evidence to show error.

1. Where persons agree to purchase property for their joint benefit and one advances sufficient money to meet taxes and interest charges, such amounts when repaid to him by his coadventurers, it having been agreed that interest on such advances was to be paid, are not deductible by them as taxes and interest as they constitute repayments of a loan rather than taxes and interest as such. 2.

1. Pursuant to agreements entered into by the principal stockholder of a corporation, having control of all the stock, with the corporation and with investment bankers, a new corporation was… Held: the transaction was not an exchange of stock in the old corporation for cash and stock in the new corporation; it was not an exchange of property for other property within the meaning of section 202(b) of the Revenue Act of 1918. 2.

1. Where an employee who had contracted with the employer corporation to pay back purported salary payments at once for stock never received cash, but was transferred stock, held, under the 1921 Act,… Held: under the 1921 Act, his income on account thereof was measured by the realizable market value of the stock. 2. Market value of stock received as compensation for services determined from evidence of sales, opinion testimony, and the condition of the employer corporation.

1. Petitioners seek deductions of proportionate parts of losses sustained upon two pieces of property in the taxable year, claiming absolute ownership, a vested legal and equitable title to their… Held: the evidence fails to establish that the several trusts created in these properties had been terminated and that the petitioners' legal title to their respective shares therein had vested at the time the losses were sustained. 2.

Persons associating themselves together without definite organization for the development of oil and gas lands held not to constitute a corporation within the meaning of section 2 of the Revenue Acts of 1918, 1921, and 1924.

1. Joint returns of community income of petitioner and his wife, residents of Texas, having been filed for the years 1920, 1921, and 1922, the petitioner may not now have the income divided between them and taxed separately. Following R. Downes, Jr.,5 B.T.A. 1029, and other cases cited. 2.

Held, that the petitioner transferred its business and part of its property to a partnership; that such transfer was effective from January 2, 1920; and that the income thereof is taxable to its members in proportion to their interests therein.

1. The petitioner paid the capital stock taxes assessed against it by the State of Minnesota on the outstanding shares of its capital stock in the hands of its shareholders,… Held: that in the circumstance herein the failure of the bank to collect the payments in question from dividends due its shareholders is in effect a distribution of surplus to such shareholders and is not an allowable deduction from petitioner's gross income, in either of the taxable years involved. 2.

1. The will of the decedent provided that his executors should continue his busienss, the net profits thereof to be paid to my wife for the support of herself and my children during her natural life. Held: that under the laws of Pennsylvania, the widow was entitled to receive the net profits of the business. Such profits are taxable as her income whether distributed or not. 2.

1. The March 1, 1913, value of patents determined from expert testimony supported by evidence of advancement in the arts, the secure position attained in the class of machinery covered by the patents, growth and financial history of the business to the basic date, and the future prospects at that time. 2. Annual depreciation deduction determined by prorating March 1, 1913, value over the average remaining life of the patents on the basic date. 3.

The deficiency for 1921 is not barred by the statute of limitations.

Under the facts in these proceedings it is held that the Commissioner erred in holding the petitioner to be an association taxable as a corporation.

- The petitioner was engaged in business as a real estate, rental, insurance, and loan agent during the year 1920, and is entitled to be classified as a personal service corporation pursuant to section 200 of the Revenue Act of 1918.

Contributions by petitioner corporation to the civic fund of a city held, under the particular facts of the case, not to have been ordinary and necessary expense of the year in which paid or incurred.

1. Held, that assessment and collection of deficiencies are not barred by expiration of the period of limitations. 2. Held: that assessment and collection of deficiencies are not barred by expiration of the period of limitations. 2. Action of the respondent in reducing invested capital on account of tax assessed for prior years approved. 3.

1. The action of the respondent in reducing the amount of deductions taken for officers' salaries for the fiscal years 1920 and 1921 approved because of insufficient evidence. 2. Held: that under section 277(d) of the Revenue Acts of 1924 and 1926 the respondent had 6 years from the time of assessment within which to make collection of the unpaid installments of 1920 and 1921 tax. Art Metal Works,9 B.T.A. 491. 5.

At the date of the deficiency letter the Commissioner had authority to determine the deficiency in controversy in this proceeding.

1. Value of certain corporate stocks determined. 2. Held: the donor was a voluntary trustee for the donee.

Where corporations are affiliated, whether on the basis of the ownership or control of stock of one or more corporations by another corporation, or on the basis of ownership or control of the stock of two or more corporations by the same interests, or where a combination of the two classes of affiliation is involved, the limitation prescribed by the Revenue Acts of 1917, 1918, and 1921 as to the amount of intangibles acquired for stock which may be included in invested…

A partnership was formed under an agreement which provided, among other things, that upon the death of any one of the partners there should be paid to his estate for a period of years the share of… Held: that the partnership agreement provided for the sale of the interest of a deceased partner to the surviving partners.

A practicing physician who had built up a large private practice, desiring to withdraw from active practice and to provide for the continuation of said business along his established lines,… Held: the transaction constituted a sale of the business, and the payments made in accordance therewith to the widow of the founder were a part of the purchase price, and not income to her.

1. PARTNERSHIP - PROFITS DISTRIBUTIVE TO NONPARTNERS. - Two members of a partnership of four died. Thereupon a new partnership was organized by the two remaining, together with three new parties. Held: that the partnership agreement provided for the sale of the interests of the deceased partners to the surviving partnership.

Determination of the deficiency herein asserted was not barred by the statute of limitations at the date of the deficiency notice.

Certain additional royalties provided for in a license contract held to be ordinary and necessary business expenses of the licensee in the years in which obligation to pay was incurred.

Compensation received by the petitioner for professional services rendered as architect for the State Board of Control of Minnesotaheld not to be exempt from taxation under section 1211 of the Revenue Act of 1926.

1. The R. L. Brown Coal & Coke Co. received a charter from the State of Kentucky in 1919. Organization was not fully completed. Held: that it was liable to income tax as a corporation for those years. 2. In 1921 the petitioners sold certain property which was owned by R. L. Brown individually. Payments for property were made to the latter. Held, that any profit realized upon the sale was taxable income of R. L. Brown. 3.

The American Refrigerator Transit Co. and the Missouri Pacific Railroad Co.held to have been affiliated for the years 1920 and 1921.

In the taxable year petitioner recovered, and reported in income, almost all of a bad debt item which had been charged off and allowed as a deduction in the previous year. The amount so recovered and returned was greater than the net income determined by respondent. These facts held to result in abnormalities sufficient to entitle petitioner to special assessments.

1. Certain corporations held affiliated. 2. Held: that payments made to the Krause & Managan Lumber Co. thereafter and entered on the books as dividends were in fact dividends, and not capital payments made on the purchase price of the timber rights. 3. A tentative tax computed in the determination of invested capital of the Peavy-Byrnes Lumber Co. for 1920 and 1921 was improper.

The petitioner disposed of substantially all of its physical properties to the Central Illinois Public Service Co. and received from the latter in exchange therefor stock and securities, which stock… Held: that the transaction constituted an exchange of property for other property having a readily realizable market value and resulted in a gain to the petitioner.

- Where an assessment was made in 1919 within the five-year period of limitation provided for by section 250(d) of the Revenue Act of 1918, and the Revenue Act of 1924 was enacted prior to the… Held: that the Commissioner had six years from date of assessment within which to begin suit or other proceeding for the collection of the tax under section 278(d) of the Revenue Act of 1924, under authority of Art Metal Works,9 B.T.A. 491.

- Petitioner, on a cash basis, as shipping agent, collected freights and charges for its principal upon which it was due, under its contract of employment, certain fixed percentage commissions. Held: that the sum of these commissions was income to petitioner for its fiscal year 1921 in which they were drawn.

1. Taxpayer owned land comprising a prospective, though unproven oil field. An oil lease was granted on that land in consideration of a royalty and part of the capital stock of the lessee corporation. On the evidence, held, that the capital stock so received by the taxpayer had no market value; hence, no gain was realized on that deal. 2. In 1919, the capital stock of the corporation lessee was increased and in consideration of an enlargement of the acreage of the leasehold, the taxpayer was granted a part of the increased capital stock. Prior to the actual issuance and delivery of said stock, its issuance and delivery was enjoined by a temporary writ. That writ was dissolved in 1920, and the certificates then issued and delivered. Held, that deal was a closed transaction in 1919, and the right to the stock then accrued.

1. Actual cash value of property acquired by petitioner for its stock held to have been that at which the transferor had contracted to purchase such property. 2.

1. Evidence found insufficient to establish that a contract assigned to petitioner upon its organization in exchange for its capital stock had any actual cash value. 2. No abnormalities of capital or income existing, assessment under section 328, Revenue Act of 1918, denied.

1. At the beginning of the calendar year 1921, the petitioner had on hand contracts totaling $59,896.38, representing 20 different orders for its products. Held: that no part of the amount thereof may be included in invested capital. 2. Held, further, that the petitioner is not entitled to have its tax determined under the provisions of section 328 of the Revenue Act of 1921.

To avoid a contest of her father's will, petitioner agreed in writing to pay to her sister, and a trustee, in trust, principally for the benefit of the sister's children, a certain portion of the income she received from two trusts created by the will. Held that the amount of $12,506.58 paid by petitioner in 1924 under the terms of said agreement is taxable income to her.

Respondent affirmed for lack of proof of error.

Advances drawn by petitioner in excess of salary and commissions earned during the taxable year and repaid in subsequent years do not constitute income.

Previous action of the Board held to be final determination of applicability of the statute of limitations.

1. Petitioner acquired certain patents under an agreement to pay for them such an amount each year as its board of directors should deem proper, based upon sales and profits of the patented articles,… Held: that the value of such patents should not be included in the petitioner's invested capital. Sneath Glass Co.,1 B.T.A. 736. 2. Petitioner's claim for depreciation on the value of the patents rejected for lack of evidence.

1. Where petitioner filed her petition within the time prescribed by section 274(a) of the Revenue Act of 1926, and therein referred to a letter which was not a final determination of a deficiency,… Held: that the Board has jurisdiction. The Peruna Company,11 B.T.A. 1180. 2.

1. SPECIAL ASSESSMENT - ABNORMALITY. - Where the petitioner was the holder of a valuable contract, and also developed a paint-printing process subsequently patented, which were the principal factors contributing to the production of income, and the contract can be included in invested capital at only a nominal figure, and the patent was not included at all, an abnormality results which entitles petitioner to a special assessment under section 328 of the Revenue Acts of 1918…

Where husband and wife, living together and residents of Washington, file separate returns, the husband reporting all of the community income in addition to the income on his separate property, and the wife reporting the income on her separate property, the Commissioner may not include in the wife's return one-half of the community income. United States v. Robbins,269 U.S. 315, followed.

The determination of the Commissioner in respect of deficiencies in income tax for the years 1921, 1922, and 1923, and for the assessment and collection of fraud penalities for failure to include in income-tax returns filed for those years income from an illegal liquor business carried on during those years, sustained.

Amounts claimed in 1921 and 1922 as deductions for bad debts disallowed for failure to show when such debts were ascertained to be worthless.

Cost of buildings determined.

Alternative claims for personal service classification, special assessment, or additional invested capital on account of assets alleged to have been erroneously excluded, rejected by reason of insufficiency of evidence.

The Commissioner's denial of the right to inventory securities as a dealer approved.

The disallowance of deductions for obsolescence of good will due to prohibition legislation and the reduction of invested capital by inadmissible assets create no such abnormality as to entitle petitioner to special assessment. Russel Wheel & Foundry Co.,3 B.T.A. 1168, followed.

1. Held, that no value for invested capital for years 1919, 1920, and 1921 is allowable for applications for patents acquired by petitioner for capital stock where the date of acquisition is not shown and the amount of the par value of the total stock or shares outstanding at the beginning of the taxable years is not shown. 2. Patent acquired for cash allowed in invested capital in the amount paid therefor.

Reduction of opening inventory of a business purchased by reason of assigning a part of the purported purchase price of the stock of merchandise to cost of good will of the business held error, where the evidence established that no good will asset in fact existed, or was considered in appraising the stock in trade.

Depreciation deductions determined.

The respondent's disallowance of a part of a claimed deduction for depreciation of machinery upheld where the petitioner failed to establish the cost of such assets at the date of acquisition.

Petitioner intending to take its inventory on the basis of cost or market, whichever was lower, erroneously inventoried a part of its goods at cost. The market value at the time of inventory is found to be less than the cost and the petitioner is entitled to have its tax liability computed upon the basis of the inventory at market value.

1. Held that petitioner's books of account were kept upon the accrual basis during the years 1921 and 1922. 2. An item of cash received by petitioner in 1922 in part payment of income earned and entered upon the books of the preceding year, is not income during the year 1922, since petitioner was on the accrual basis in 1921.

The entire amount claimed as a deduction from income disallowed where the evidence discloses that a part of this amount constituted a capital expenditure and the amount thereof is not shown.

Invested capital determined upon the basis of the value at the time acquired of real estate paid in without consideration by a predecessor corporation in 1906.

A liability to respond in damages for breach of contract is not a proper deduction in the taxable year, where the defects in the goods giving rise to the liability were not, and could not have been, discovered, and no claim was made against petitioner or paid by it until the next year.

1. Deduction by respondent of $9,600 from petitioner's inventory as of January 1, 1920, disapproved. 2. Inclusion by respondent of $1,010.57 in petitioner's income for January, 1920, disapproved. 3. Deduction of an alleged bad debt of $4,361.57 disallowed.

The evidence fails to overcome the presumption that the Commissioner's computation of gain from the sale of certain shares of stock and his determination of tax liability on such gain are correct.

1. A letter dated August 10, 1925, from the Commissioner of Internal Revenue, advising petitioner that its claim for abatement of assessments made on its tax return for the year 1918 had been both allowed and rejected in part and asserting new deficiencies accordingly, is such a determination of a deficiency by the Commissioner after June 2, 1924, as to give the Board jurisdiction to hear and determine an appeal therefrom. Appeal of Matteawan Mfg. Co.,4 B.T.A. 953. 2.

1. The cost of goods sold by petitioner in its first taxable year should be computed by using as an opening inventory the cost of merchandise to individuals who transferred it to petitioner in exchange for stock. Sections 203(b)(4) and 204(a)(8) of the Revenue Act of 1924. 2. The basis for computing depreciation on property paid in for stock in a corporation is the cost to the transferor. Section 204(c) of the Revenue Act of 1924. 3.

1. The petitioner's income from commission notes should be recomputed upon the basis of the fair market value of said notes when received in order to more clearly reflect its net income. 2. For failure on the part of the petitioner to adduce sufficient evidence in support of its allegation that capital stock of the Benton Land Co., its subsidiary, should be included in the computation of its invested capital, the findings of the respondent are approved.

1. The petitioner's income from commission notes should be recomputed upon the basis of the fair market value of said notes when received in order to more clearly reflect its income. Brinkerhoff-Faris Trust & Savings Co.,14 B.T.A. 797. 2.

Those losses sustained and expenses incurred in the conduct of a general speculation and investment business which are satisfactorily proven are deductible in the computation of net income for 1920.

Respondent's determination of the amount of petitioner's income from a partnership approved.

The respondent's determination that certain payments received by petitioner in 1921, which were made out of corporate funds, were dividends within the meaning of section 201(a) of the Revenue Act of 1921, approved.

- A partnership organized for a term of years was dissolved by limitation on December 31, 1918, and another partnership organized to take over and continue the business beginning January 1, 1919. Held: that the transfer of merchandise by the old partnership to the new constituted a sale at cost less the allowance agreed upon and the profits of the new partnership for the calendar year 1919 should be computed on such basis.

1. A company owned a one-half interest in fee of an iron mine which was operated by another company under an operating agreement. Held: that the fee owner was engaged in the operation of an iron mine and its income would not be properly reflected by its own book alone and should also be based upon the books and records kept by the operating company on the accrual basis. 2.

1. FAIR MARKET VALUE. - The March 1, 1913, fair market value of certain coal lands determined. 2. Held: that the two businesses being separate and distinct, the use of a different system of accounting for each was proper, as the system used reflected accurately, in each case, the income received.

Held that petitioner was not an employee of a political subdivision of the State of Illinois and his compensation was not exempt.

1. On the facts in the case, a certain instrument issued by the petitioner and denominated a certificate of preferred stock, held to be stock and not a certificate of indebtedness. 2. Held: that quarterly payments made in accordance with the terms of such stock, were dividends and do not constitute allowable deductions in computing net income. 3. Held, that the discount on the sale of said preferred stock can not be amortized over the life of the issue.

Corporations A, B and C were affiliated. The president and treasurer of corporation A was also the president and treasurer of corporation B, which owned all the stock of corporation A. Upon the evidence, held that a withdrawal of funds by the individual from corporation A constituted a loan and not a taxable distribution, and that the amount should be included in the invested capital of the affiliated corporations.

1. A patent application is an assignable property right capable of being valued as evidence of the value of stock of a corporation for which it was exchanged. 2. Costs of development incurred subsequent to the filing of the application for a patent must be shown to add to the capital value of that patent before they can be added to the depreciable base of such patent. 3. A patent application is not a depreciable asset.

1. BUSINESS EXPENSE. - Contributions made to an association for the purpose of preventing strikes and promoting industrial peace are allowable deductions. 2. IDEM. - Contributions made to an association for the purpose of encouraging location of industries and residents by advertising are business expenses and deductible. 3. IDEM. - Contribution made to a citizens' committee to exercise surveillance over public works is too remote and not a business expense. 4.

Petitioner's property was damaged by a flood in 1920. In 1924 petitioner secured judgment against the party responsible for the damage in the amount of damage shown to have been suffered. Held: that a deductible loss was sustained in 1920 under the provisions of section 234(a)(4), Revenue Act of 1918.

1. Payments under agreements between charitable corporations and one who had transferred them stocks and bonds, reserving the income therefrom for his life and the lives of others, held taxable to the transferor as income from trusts. 2. Whether such transfer represented deductible contributions need not be decided in absence of evidence permitting the valuation of the remainder interest after life estates, the only interest transferred.

Expenses for experimental work which do not result in the acquisition, development or improvement of a capital asset are deductible in computing net income.

Petitioner sold certain securities to one of its affiliated companies; subsequently and during the same calendar year, the affiliation was dissolved. Held: that the sale was an intercompany transaction with neither loss nor gain resulting. Gould Coupler Co.,5 B.T.A. 499.

Respondent affirmed for lack of proof of error.

Held that payments made for legal services for necessary services in the operation of petitioner's business are deductible as ordinary and necessary expenses.

1. INVESTED CAPITAL. - The original paid-in capital of this petitioner, which was incorporated in 1874, can not now be determined, and due to successive reorganizations adjustments of such invested… Held: that under the provisions of sections 326 of the Revenue Acts of 1918 and 1921 petitioner's invested capital can not be determined and assessment of profits taxes should be made pursuant to section 328 of said Revenue Acts. 2.

- By the will of petitioners' father an annuity of $6,000 a year was given their mother, directed to be paid by petitioners. Held: that the annuity was a charge first against the income from the property and as to any arrearage against the corpus, and the income in the several years in question being less than the amount of the annuity, none of it represented income taxable to petitioners.

1. The fair market value of certain lands on March 1, 1913, and at the time they were acquired by the petitioner, determined. 2. The sale of certain lands involved herein, held, to have been made in 1921, not in 1920.

- Amounts due decedent for salary and bonus, covering periods prior to this death, held not to be income to his estate when collected by the administrator.

- The assessment of the deficiency in taxes for fiscal year ended January 31, 1919, is not barred by the statute of limitations.

The petitioners were not affiliated with each other or with any other corporations during the tax years involved.

1. Value of certain mill property acquired for stock determined for invested capital and depreciation purposes. 2. Special assessment denied for lack of sufficient evidence showing abnormality.

1. Respondent's determination of fraud held to be erroneous. 2. Net income of the several petitioners redetermined.

1. Evidence found insufficient to disturb the findings of the Commissioner that a certain sale should be reported as an installment sale. 2. Evidence found insufficient to overcome the determination of the Commissioner that certain losses were not sustained in the taxable year. 3. Amount of gain derived from the sale of petitioner's business to a corporation determined.

1. Nonnegotiable notes, the payment of which is contingent, are not the equivalent of cash. 2. Where no payment was made on such notes in the year in which they were issued, the recipient, on a cash receipts and disbursements basis, need not include any part of such notes as income for that year.

In 1906, prior to the discovery of any oil thereon, petitioner and his wife acquired by purchase the fee simple title to certain lands. Held: the entire amount received from the sale of such portion was income under section 202 of the Revenue Act of 1921. Appeal of Anna Taylor,3 B.T.A. 1201.

In 1906, prior to the discovery of any oil thereon, petitioner and her husband acquired by purchase the fee simple title to certain lands. Held: the entire amount received from the sale of such portion was income under section 202 of the Revenue Act of 1921. Appeal of Anna Taylor,3 B.T.A. 1201.

Evidence held insufficient to determine that respondent erred in any of the particulars alleged.

Having priced its inventory as of December 31, 1920 at cost, the petitioner, in order to reduce the value of shop worn, obsolete, and damaged pictures, frames and mirrors, deducted from the total a… Held: for failure to adduce sufficient evidence to overcome the prima facie correctness of the respondent's determination his findings are approved.

Substantially all of the stock of the petitioner and of the Norborne Fuel, Ice & Light Co. was owned or controlled throughout 1920 by the same interests and, therefore, the two companies were affiliated for that year.

The year in which certain real property was sold determined.

1. Disallowance of a reserve to meet a contingent liability approved. Apportionment of expense in accordance with Producers Fuel Co.,1 B.T.A. 202, approved. 2. Respondent erred in restoring to income $12,492.38 written off by petitioner on account of repudiation of a contract of sale by the purchaser. Florence Mills, Inc.,9 B.T.A. 579.

Personal service classification denied.

Unpaid executors' commissions allowed as a deduction from the gross estate for estate-tax purposes where it appears that such commissions are allowed by the law of the jurisdiction under which the estate is being administered. John A. Loetscher,14 B.T.A. 228, followed.

Capital stock of the petitioner, a corporation, paid to its officers and directors in 1923, held to have been paid for services in promoting the corporation in 1919, and is not a proper deduction from income of 1923 under section 214 of the Revenue Act of 1921.

Premiums paid on insurance taken to secure loan to taxpayer held not deductible.

- Where state officials laid out and proposed to construct a public highway through taxpayer's orchard that would have damaged and caused the abandonment of part of it and injured its irrigation system, and the taxpayer paid $5,000 to obtain the removal of the road to another location where such damage did not result, said payment of $5,000 was a capital expenditure and not an ordinary and necessary business expense for the year in which payment was made.

- Petitioner entered into a contract for purchase and sale of certain timber, and more than one year elapsing between date of commencement of work under the contract and completion, held that true income for each of the years would not be reflected by reporting income on the long-term-contract basis.

1. Where the settlor of a trust who had reserved to himself the net income for life makes a valid enforcible transfer or conveyance of his interest in the estate or the income therefrom, except an annuity of $20,000, to trustees for the benefit of certain beneficiaries named in the original trust instrument, it is held that such distributable income is taxable to the beneficiaries and should not be included as income to the settlor. 2.

Profits collected by the president of a corporation from contracts entered into between it and certain counties which it was at all times under bonds to complete, and which were performed by the president and secretary of the corporation without notice to said counties, held income to the corporation for the year in which paid.

1. LOSS - EMBEZZLEMENT. - Where an officer of the petitioner misappropriated some of its bonds prior to 1915, which was not discovered until a year or two later, and where said officer gave his note in 1921 to make good the shortage, and went into bankruptcy in 1922 and nothing was paid on said note, the loss occurred at the time of the misappropriation and is not deductible as a bad debt in 1922. 2.

A corporation of California had forfeited its charter in 1917 under the California statute of 1915, and under California law its affairs thereafter were in the hands of the former directors as… Held: since the stockholders are not the person against whom the deficiency has been determined and have no authority to represent such person, the Board has no jurisdiction.

1. The Revenue Act having given the Commissioner the power to make regulations with respect to inventories, such regulations must be accepted unless contrary to the Act. 2. Supplies for the repair, maintenance and operation of a plant, which do not form a part of the manufactured article, held not subject to the inventory provisions of the law and regulations.

1. Value of petitioner's interest in certain shares of stock surrendered to employees of a corporation in which he was a shareholder was a capital expenditure. 2. Held: that such payments were not deductible from the income of the estate in the respective taxable years in which they were made.

Held that the Board of Tax Appeals is without jurisdiction to hear and determine a proceeding instituted and prosecuted by a corporation whose existence is for any and all purposes wholly terminated.

Petitioner held entitled to exemption under section 231(4) of the Revenue Act of 1924.

In 1920 the petitioners consented to the dissolution of a corporation of which they were stockholders and to the receipt of a given number of shares of common stock of another corporation in exchange… Held: that the petitioners did not sustain a deductible loss upon the exchange of shares made in 1921.

1. Where a taxpayer received an initial payment on a contract for the construction of ships and where thereafter suit was filed against him to cancel the contract, and where the final judgment left… Held: the Commissioner was in error in imposing the negligence penalty.

1. Where the petitioner sold stock in 1919 for $30,000, receiving $10,000 cash in that year and 2 notes for $10,000 each, which were due and paid in 1920, held that any amount of gain that may have been realized from the transaction was not derived in 1920. 2. There having been no tax liability resulting from the transaction, petitioner is not guilty of having filed a false and fraudulent return with intent to evade the tax. 3. Collection of tax for the year 1920 held barred by the statute of limitations.

1. Value of trade-marks, trade names and good will paid in for and with interest or shares in a partnership determined for invested capital purposes. 2. From the evidence determined that respondent computed the excess-profits tax for a fiscal year ended in 1917 rather than for a fiscal period ended in 1917. 3.

Commissioner's disallowance of deductions sustained, where petitioners in the year 1921 charged off and deducted as bad debts amounts owing from a corporation and in the same year deducted as losses the amounts invested by them in stock in such corporation, though the corporation continued to operate for over five years and additional advances were made by some of the petitioners.

Where the Commissioner has asserted a deficiency against a taxpayer, the Board acquires no jurisdiction to redetermine the amount thereof upon petition filed by one other than the taxpayer.

The Bank of Kampsville, Bank of Richwoods, and Bank of Brussels were not associations during the years 1919 and 1920 within the meaning of the Revenue Act of 1918, but were partnerships, the income of which was taxable to the persons comprising the partnerships.

In the year 1921 the petitioner exchanged certain real estate in Pasadena, Calif., which he held for investment, for a ranch near Hanford, Calif.Held that the transaction was a nontaxable exchange of property within the meaning of section 202(c)(1) of the Revenue Act of 1921.

1. Certain promissory notes held to have been bona fide paid in to the petitioner for shares of its capital stock and to have been of the actual cash value of $350,000, which amount should be included in invested capital for 1920 and 1921. 2. Rate of depreciation of the petitioner's factory, determined.

The petitioner in computing its net income for the year 1921 is not entitled to deduct the amount of $89,152.83 involved herein either as a loss or as a debt ascertained to be worthless and charged off within the taxable year.

1. Voluntary unincorporated association of employees held taxable. 2. Amounts of dues or contributions paid to association by members held taxable income.

1. A new corporation was formed by the consolidation of two other corporations. Upon the evidence, held that the stockholders of the old corporations received stock in the new corporations in exchange for stock of the old corporations in 1919 instead of 1918. 2. The common stock so received by petitioners held to have had no fair market value at the time received. 3.

The petitioner, who kept his books on the cash basis, filed a return for the first 10 months of 1918 on that basis, and subsequently, after abandoning his intention to change his accounting period to… Held: that tax may not be assessed after the limitations period has expired, under the theory that the return equired by the statute had not been filed.

1. Value of patents acquired for stock disallowed in computing invested capital on account of lack of proof of value. 2. Exhaustion of patents based on March 1, 1913, value disallowed for lack of proof of value.

Held, that the petitioner is entitled to inventory his goods on hand at the end of 1920 on the basis of cost or market, whichever was less, although at the beginning of the year he inventoried them… Held: that the petitioner is entitled to inventory his goods on hand at the end of 1920 on the basis of cost or market, whichever was less, although at the beginning of the year he inventoried them at cost.

There being no agreement between the petitioner and its affiliated corporation as to the assessment of the tax, it should be assessed in accordance with the net income of the corporations as provided in section 240(b) of the Revenue Acts of 1918 and 1921.

1. Rate of depreciation on buildings and machinery used in a manufacturing business determined. 2. Under the facts, held that the petitioner is not entitled to assessment under section 328 of the Revenue Act of 1918.

1. INCOME - LEASE - EXEMPTION - GOVERNMENT INSTRUMENTALITY. - Petitioner's income derived from the sale of oil and gas produced by it from school lands owned by the State of Oklahoma and leased by petitioner for oil and gas purposes, held, not exempt from Federal income and profits taxes as, under the facts proven, petitioner is not shown to be such an instrumentality of the State of Oklahoma in its performance of a governmental function, that a tax upon its income constitutes an interference with the exercise by that State of a sovereign power. 2. INVESTED CAPITAL. - Upon the evidence, held, petitioner is entitled to include in invested capital $58,538 as a paid-in surplus, and further, that it is entitled to depletion upon that additional capital asset. 3. Id. - Held, that respondent erred in reducing invested capital by a tentative tax.

- Petitioner's income derived from the sale of coal mined by it from school lands owned by the State of Colorado and leased by petitioner for coal-mining purposes, held, not exempt from Federal… Held: not exempt from Federal income and profits taxes, under authority of Coronado Oil & Gas Co.,14 B.T.A. 1214.

Income derived by a member of the Osage Tribe of Indians by way of royalties and bonuses from the lease and sale of oil and gas under allotted lands is taxable. Leah Brunt, Administratrix,5 B.T.A. 134, followed.

The petitioner bank extended a line of credit to a cotton buyer, and as collateral security for advancements made, took warehouse receipts for each bale of cotton purchased. Held: petitioner may not now segregate the advances made for personal expenses from those made for cotton purchases, and claim the persona expense items as a deduction for bad debts.

1. The distribution of corporate assets to the stockholders as partners resulted in taxable gain to the stockholders measured by the excess of the value of such assets over the cost and/or other basis of the stock. 2. Value of assets received in liquidation of a corporation determined from the evidence. 3.

Petitioners, transferees of the assets of a corporation, were notified by respondent that he proposed to assess against them, under section 280 of the Revenue Act of 1926, unpaid taxes assessed… Held: that having invoked section 280 to secure a redetermination, petitioners may not question its validity.

1. A joint adventure is not a taxable entity under the Revenue Act of 1918 and the members thereof derive income therefrom in the year in… Held: that the petitioner is entitled to deduct from his gross income as ordinary and necessary expenses for the clay removed only a reasonable amount for the clay and that the amounts deducted on the petitioner's income-tax returns in excess of 33 1/3 cents per ton burned weight credited and paid to the Ontario Realty Co. was not an…

1. Value of leases at date of acquisition by petitioner determined. 2. Where a deduction for depreciation has been allowed upon the basis of a composite rate for a building and its appurtenances, no error is shown by proving that certain parts depreciate at a greater rate, without establishing that the composite rate is erroneous.

1. The petitioner, under the facts stated, held not to be exempt under section 231(7) of the Revenue Acts of 1918 and 1921. 2. Held: further, that amounts retained by the corporation and included in reserve funds, were a part of its taxable earnings.

The will of the decedent provided that the income from certain property and specific amounts of money should be paid to the widow of the decedent during her lifetime and that at her death such property and specific amounts of money should be paid over to designated corporations, organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes.

Held, that respondent did not err in denying personal service classification. Held: that respondent did not err in denying personal service classification.

- In canceling by agreement with the officers an excess of salaries entered upon the books but never paid, the petitioner is held to have incurred a liability for no more than the amounts actually paid, and the excess is not deductible from income under the provisions of section 234(a)(1) of the Revenue Act of 1924.

Held, that the petitioner's payments to her two sons in the taxable year from income received from property of which she was for the… Held: that the petitioner's payments to her two sons in the taxable year from income received from property of which she was for the most part only a life tenant, had no reasonable relation to the value of services rendered in the operation of a trade or business or to income received therefrom, and are not deductible from her gross income…

Under the laws of California, upon the death of the husband, the wife takes her portion of the community estate as heir of the husband and the whole of the community estate is properly included in the gross estate of the husband for purposes of Federal estate tax. Mary Brent, Executrix,6 B.T.A. 143.

In an exchange of a definite part of petitioners' holdings of stock in a bank, going out of business, for a definite amount of stock in another bank which then had a market value, and for certificates of shares in a liquidating company, which certificates later in the taxable year proved to be worthless and were sold for $1, petitioners suffered a deductible loss to the extent of the cost of their original stock, less the value of stock received plus the $1 received for…

1. A preliminary notice from a collector relative to proposed additional taxes is not a determination of a deficiency and an appeal therefrom does not lie to this Board. 2. Losses claimed are disallowed for lack of evidence of the facts. 3. The respondent erred in including in the income of petitioner an amount which was the income of another.

1. Upon the evidence, held, that the closing inventory of petitioner is acceptable for income and profits-tax purposes. 2. Held: that the closing inventory of petitioner is acceptable for income and profits-tax purposes. 2. Cash value of promissory notes paid in for capital stock of a Texas corporation allowed for invested capital purposes. 3. In view of the evidence, held that petitioner is not liable for the negligence penalty.

The value of a clay deposit paid in for capital stock, determined for purposes of invested capital and of allowances for depletion.

- Held, that assessment of the deficiencies in controversy is not barred by the statute of limitations. Held: that assessment of the deficiencies in controversy is not barred by the statute of limitations.

1. Respondent's determination of amount of loss on stock which became worthless, approved. 2. Certain deductions claimed by the petitioner as ordinary and necessary business expenses, disallowed. 3. Money expended by the petitioner in court proceedings in an effort to uncover property subject to the payment of a judgment owned by the petitioner, held deductible as an ordinary and necessary business expense.

Held, that the corpus of a revocable trust should be included in the gross estate for estate-tax purposes, but that the other trusts involved should be included. Held: that the corpus of a revocable trust should be included in the gross estate for estate-tax purposes, but that the other trusts involved should be included.

Held, that the petitioner's situation as to invested capital in the taxable year brings it within the provisions of section 327(c) of the Revenue Act of 1918, and that it is entitled to have… Held: that the petitioner's situation as to invested capital in the taxable year brings it within the provisions of section 327(c) of the Revenue Act of 1918, and that it is entitled to have its tax liability recomputed for the year 1920, under the provisions of section 328 of such Act.

1. Petitioner held not to be entitled to compute its profits tax under section 328 of the Revenue Act of 1918. 2. A taxpayer does not establish that it is impossible to compute its invested capital by proving that certain items have been improperty excluded. 3.

Held, under the facts presented, the petitioner's sale of stock was not an involuntary conversion thereof within the meaning of section 214(a) 12 of the Revenue Act of 1921. Held: under the facts presented, the petitioner's sale of stock was not an involuntary conversion thereof within the meaning of section 214(a) 12 of the Revenue Act of 1921.

Deductibility of certain contributions made during 1921 determined.

1. Held, under the evidence, that the debts of the petitioners were not ascertained to be worthless in part in 1921. 2. Held: under the evidence, that the debts of the petitioners were not ascertained to be worthless in part in 1921. 2. Held, further, that one of the petitioner's debts due by an individual whose securities were held as collateral was not ascertained to be worthless because the securities during the taxable year fluctuated in value.

1. An admission, by answer, that the present value on March 1, 1913, of anticipated payments under a contract is in amount as alleged in the petition, is a substantial admission that the right on said date to receive such payments was of the value alleged. 2. The meaning of the word anticipated as used in the petition held not to be restricted to mere speculative hope, but to include the treatment of future income as if it had come to hand or were assured. 3.

The amount of taxable gain resulting from the sale of stock and distributions of corporate assets determined.

Held that the petitioner is an association for income-tax purposes.

1. During the taxable years, payments were received upon accounts which had been charged off the books in prior years and deducted in computing net income of such years. Held: in the absence of fraud or misrepresentation in connection with such deductions for prior years, that petitioner is not required to include the amounts collected in the taxable years as income in those years.