Volume 16 — Tax Court Reports

Where the petitioner, a resident of Texas, was both independent executrix and sole beneficiary under the decedent's will and the decedent's estate was not subject to and its administration was not… Held: further, that in the instant case the period of administration of the decedent's estate was terminated some time prior to December 31, 1941.

In the taxable year 1948, petitioner received $ 7,000.08 as the designated dependent of her deceased husband, William J. Higgs, under the provisions of Group Contract No. 103 between his employer,… Held: the entire $ 7,000.08 is includible in petitioner's gross income under section 22 (a) and/or section 22 (b) (2), I. R. C.Held, further, section 126 (c), I. R. C., has no application to the facts of the instant case.

Petitioner is a member of the Sisters of the Holy Cross whose headquarters is at Notre Dame, Indiana. She is one of the nine beneficiaries of a trust established by her father. Held: that under section 23 (o) (2), I. R. C., payment of the contributions was made in 1946 and denial of deduction of the amounts in that year was error. Estate of Modie J. Spiegel, 12 T. C. 524, followed.

Partnership A was in business from January 1 to February 28, 1945, when one of the partners withdrew from the partnership. Held: since the fiscal years of both partnerships were fractional parts of 12 months within the meaning of section 403 (c) (6), the $ 500,000 amount was properly reducible to a fractional part thereof.

1. Respondent's disallowance of deductions for additions to a reserve for bad debts for the years 1942 and 1944, approved. 2. Held: excess of credits over charges to these accounts during each of the years 1942, 1943, and 1944 is includible in taxable income of corporation.

On remand from the United States Court of Appeals for the Ninth Circuit, held: 1. Held: Back pay of $ 10,000 received by decedent R. L. Langer in 1944, and of $ 10,000 and $ 11,500 received by petitioner C. Abbott Lindsey in 1944 and 1945, respectively, was paid pursuant to prior agreement and legal obligation within the meaning of Regulations 111, section 29.107-3. 2.

The petitioner had unused excess profits credits in 1942, 1943, and 1944 which it could apply as carry-over or carry-back credits in computing its excess profits tax for other years under the… Held: that there is no equitable estoppel of the respondent barring his determination for 1945. Petitioner has not been misled at any time by any previous determination of the respondent with respect to the carry-over or carry-back of an unused credit. The deficiency is sustained.

Upon original trial the petitioner argued that the determination of deficiency was arbitrary and capricious, in that the Commissioner had determined that an insurance policy was transferred to… Held: also, that interest included in the collection, less proportionate part of cost of collection, is a part of the petitioner's taxable income.

In 1938 petitioner entered into a partnership with B for the purpose of operating a gas field. The agreement was that they were equal partners in any profits. Held: petitioner is taxable on his distributive share of the partnership profits in the amounts of $ 12,582.65, $ 15,739.80, and $ 2,164.48 in 1942, 1943, and 1944, respectively.

King Grocery Company for many years operated five wholesale grocery houses in five different towns in Mississippi. Held: the principal purpose of the reorganization was a business purpose and was not, within the meaning of section 129 of the Code, the evasion or avoidance of Federal income or excess profits tax, and petitioners are entitled in 1944 and 1945 to the separate excess profits tax exemptions claimed by them.

1. Petitioner Ruth V. Bair, one of the shareholders and bondholders of the F. & H. G. Corporation, was in 1938 indebted to F. & H. G. by reason of her previous borrowings from it. Held: as the grantor beneficiary of a revocable trust petitioner received interest of $ 1,109.14 and an actual payment of that amount was made to her. 2.

Petitioner, one of the shareholders and bondholders of a corporation, was in 1938 indebted to the corporation by reason of prior borrowing from the corporation. Held: the $ 3,327.41 representing interest on indebtedness of petitioner is deductible by her.

Petitioner Pat N. Fahey is a member of a law firm in Houston, Texas. Held: the gain realized by petitioner in 1945 by the collection and settlement of the interest which he owned in the fee was not capital gain because in the collection of the amount which petitioner received he did not sell or exchange anything. Hale v. Helvering, 85 Fed. (2d) 819, affirming 32 B. T. A. 356, followed.

Decedent was a member of the New York Stock Exchange and as such participated in the operation and benefits of the Exchange Gratuity Fund. The members were required to pay $ 15 to the trustees of the Gratuity Fund upon being admitted to membership and to pay a similar amount upon the death of any member.

1. Where the taxpayer on the accrual basis intentionally claimed an unallowable deduction on its state and Federal tax returns and did not accrue the added tax which would otherwise have been due on… Held: that the added tax and interest resulting from the subsequent elimination of the deduction was accruable and deductible only in the taxable year in which the taxpayer finally recognized and admitted its liability for such tax and interest. 2.

Income -- Meals and Lodging -- Regulations 111, Section 29.22 (a)-3. -- A partner, who manages a hotel for his partnership and lives at the hotel as a part of his job, has no taxable income from meals and lodging had by him at the hotel.

Petitioners' partnership, on an accrual basis, had leases for strip mining. Held: deduction in 1945 properly denied.

Petitioner and his wife owned real estate in Pennsylvania by the entireties, and prior to 1946 he reported half of the income, and claimed half of the deduction for taxes and mortgage interest. Held: no agreement dividing property or bank account was shown, and the Commissioner did not err in disallowing the deduction to the extent of one-half thereof.

Loss on the sale of stock in limited cooperative apartment development held deductible in part as a long term capital loss, to the extent allocable to business investment.

Prior to the taxable year petitioner, a bank, had charged off, with tax benefit to a certain extent, certain corporate bonds held by it; and in the taxable year the bonds were redeemed and the… Held: that to the extent of the tax benefit the recovery was taxable as ordinary income and not capital gain and that the recovery above petitioner's basis in the bonds is capital gain.

1. Expenses for legal fees and costs incurred in a Court Martial proceeding against petitioner were deductible from income of petitioner. 2. Held: not allowable as a business deduction.

Circumstances surrounding the loss of petitioner's diamond brooch, held, not to justify a finding of fact that the loss was due to theft. No loss is deductible under section 23 (e) (3), I. R. C. Held: not to justify a finding of fact that the loss was due to theft. No loss is deductible under section 23 (e) (3), I. R. C.

In 1933 petitioner made a transfer in trust for the benefit of his first wife in pursuance of a separation agreement. Held: under authority of Commissioner v. Barnard, 176 Fed. (2d) 233, that the interests received by petitioner's first and second wives from the 1933 and 1942 transfers in trust were taxable as gifts to the extent they exceeded the value of their respective support rights in the trusts.

Berlands operates a chain of retail shoe stores. Held: the petitioners were not organized principally for the purpose of avoiding Federal income or excess profits tax within the meaning of section 129, I. R. C., and petitioners should, therefore, not be denied the specific exemption of section 710 (b) (1), I. R. C.

1. Petitioner entered into a financing agreement with nine lending institutions to acquire funds necessary for financing its performance under war contracts with the War and Navy Departments, and… Held: The primary obligation to pay the principal and interest rested with petitioner, and not with the Government. Accordingly, the amounts received by petitioner under the V-Loan arrangement constituted borrowed invested capital within the purview of section 719, I. R. C. 2.

In 1947 and 1948, petitioners paid, as transferees of a corporation, the tax deficiencies resulting from excessive compensation received by them in 1945 from the transferor corporation. Held: that such excessive compensation, to the extent that petitioners incurred a transferee liability, is not includible in petitioners' income for 1945. Hall C. Smith, 11 T. C. 174, followed.

On July 2, 1934, decedent purchased a single premium combination annuity and life insurance policy for a premium of $ 15,000, of which decedent's wife paid $ 3,000. Held: the payment of one-fifth of the premium of one of the policies by decedent's wife does not reduce the value of the policy includible in decedent's estate.

1. Petitioner, trading in whiskey warehouse receipts for his own account, is entitled to capital gains treatment under section 117 (a) of the Internal Revenue Code. 2. Held: lots were not held primarily for sale to customers in the ordinary course of petitioner's trade or business and he is entitled to capital gains treatment under section 117 (a) of the Internal Revenue Code.

Petitioner owned property which she caused to be conveyed to the Red Cross in 1942 for the duration of the war or until it should cease to be used as the headquarters for its Manchester, New… Held: petitioner made a single irrevocable gift to the Red Cross in 1942, in the nature of a determinable fee in the property, and is entitled to deduct as a charitable contribution in that year, under section 23 (o), I. R. C., the value of the gift.

Petitioner left the United States in 1938 in order to take a position as the managing director of all the subsidiaries of Paramount Pictures, Inc., in the United Kingdom. Held: Petitioner was a bona fide resident of Great Britain during the entire taxable year in 1943, 1944, and 1945, and during 1946 until September 30 of that year.

Petitioner, in certain years earlier than the taxable years, claimed and was allowed certain deductions for depreciation. Held: The earlier deductions not shown to be incorrect under the law and facts known or reasonably to be anticipated during the years when taken and that the Commissioner did not err in disallowing claim for recomputation of the early depreciation deductions under sections 718 (a) (4) and 734, Internal Revenue Code, also, therefore, that…

A corporation paid over to a trustee in 1945 the sum of $ 10,500 as compensation for past services rendered by petitioner. Held: the entire trust fund was income to petitioner in 1945.

1. The petitioner, a citizen of the United States, went to Iran under a contract of employment for an indefinite period, the employment being subject to termination at the will of the employer. Held: that the petitioner was not a resident of Iran so as to warrant exclusion of the income he received for services performed there, from his gross income, under section 116 (a), I. R. C.Downs v. Commissioner, 166 Fed. (2d) 504, followed. 2.

Petitioner exercised an option offered him by Northwestern Mutual Life Insurance Company and exchanged all of his life insurance policies, endowment in form, for ordinary and limited payment life… Held: For the purpose of determining the taxable gain derived by petitioner the fair market value of the single premium life insurance policy on the date the transaction took place was its cost, $ 6,541.40.

Petitioner is held to be not entitled to deductions for amortization of war facilities under section 124, Internal Revenue Code, where no application for certificate of necessity was timely filed and no certificate of necessity was issued.

In 1943, the petitioner entered into a final renegotiation agreement in which it was agreed that it realized excessive profits in 1942 in the amount of $ 260,000. Held: the Commissioner erred in revising petitioner's 1942 excess profits taxes by including this amount in the taxable income of the petitioner for the year 1942.

Petitioners are trustees of the assets of a corporation which dissolved in the taxable year. It was on an accrual basis. In the next year services were performed, and paid for by petitioners, for salaries of trustees and officers, directors' fees, rent, legal and accounting fees, taxes, and general expenses. Held: The Commissioner did not err in denying deduction of such expenses.

Petitioners on March 2, 1937, acquired an oil and gas lease providing conveyance of the property for oil and gas mining purposes, for a period of 10 years or as long as oil or gas was produced,… Held: that the property sold was acquired on March 2, 1937, and not when oil was discovered in September 1938; therefore gain on the sale was long term gain excludible under section 711 (b) (1) (B) in the computation of excess profits net income.

Held: 1. The respondent's action in including in petitioner's gross income in the taxable year involved the amount of $ 5,865.50, allegedly representing 4 per cent interest on sums borrowed by its parent corporation on non-interest-bearing demand notes, was an improper exercise of the authority conferred by section 45 of the Internal Revenue Code. 2.

1. Petitioner, a dealer and broker in securities, carried all securities in inventory prior to March 20, 1943, whether they were owned by it and held for sale to customers, owned by it and held for… Held: that certain of above mentioned securities owned by petitioner were held for sale to customers during the taxable years and thus did not constitute capital assets within section 117 (a) (1) of the Internal Revenue Code.

Fair market value of decedent's interest in a partnership determined as of December 31, 1947.

Petitioner, who resided with his family in a house owned by him in Worcester, Massachusetts, was employed during 1945 and for several years prior thereto as production manager… Held: the petitioner's home for tax purposes was in Worcester and he is entitled to deduct his expenses for travel to and from New York City, for meals and lodging while there, and certain expenditures made in carrying on his New York business under the provisions of section 23 (a) (1) (A), I. R. C.

1. Held, that renegotiation of petitioner's war contracts completed during its fiscal year ended December 31, 1942, was commenced within one year thereafter within the meaning of section 403 (c) (6)… Held: that renegotiation of petitioner's war contracts completed during its fiscal year ended December 31, 1942, was commenced within one year thereafter within the meaning of section 403 (c) (6) of the Renegotiation Act of 1942. 2.

Petitioner, a corporation, under a Sale and Lease Agreement sold equipment to a partnership composed of its sole stockholders and simultaneously leased it back. Held: amounts paid as alleged rentals to the partnership were not deductible under section 23 (a) (1) (A) of the Internal Revenue Code.

Husband and wife separated, discussed divorce, and entered into a written agreement providing for maintenance of wife and child. Held: payments made, under the agreement, were under a written agreement incident to divorce and deductible by the husband under sections 23 (u) and 22 (k), Internal Revenue Code.

1. Income, Capital Gains. -- Held, that assignments of letters patent and an invention constituted a sale of capital assets, and payments denominated royalties… Held: that assignments of letters patent and an invention constituted a sale of capital assets, and payments denominated royalties constituted the purchase price in periodic payments and, further, that the payment received in the taxable year constituted a long-term capital gain, taxable at capital gain rates. 2.

Where a corporation in 1919 conveyed all of its assets to independent assignees for liquidation pursuant to a court order obtained in a… Held: that under the circumstances here shown the time consumed by the assignees in liquidating the corporation was not excessive and a distribution received by the decedent in 1942 as a shareholder of the corporation was taxable as a distribution in complete liquidation within the meaning of section 115 (c) of the Internal Revenue Code.

Wash Sales -- Securities -- Substantially Identical -- Commodity Futures -- Section 118. -- Contracts for the delivery of corn for a stated price at a stated future time are not securities within the meaning of section 118 and one such contract is not substantially identical with another where the date for delivery is different and the contract price and the other contracting party may be different.

Entertainment expenses are deductible only if they are in fact ordinary and necessary expenses for carrying on a trade or business and, to the extent that they are primarily social and personal in nature and bear no direct relation to the operation of a business, such expenditures may not be deducted.

Cash payment by motion picture company for release of part of petitioner's rights against it resulting from royalty contract covering play of which petitioner in the course of his business had been… Held: ordinary income not capital gain; held, further, deduction for expenses incurred in petitioner's business as a theatrical producer allowed.

1. Income -- Abnormal. -- Whether profit realized by petitioner from sale of equipment manufactured to order of one customer but sold to… Held: further, that the gain resulted from a sale of capital assets held for more than 6 months, section 117 (j). 2. Equity Invested Capital. -- Claimed increases in equity invested capital held properly disallowed except for sum paid in settlement of second mortgage judgment against plant acquired by predecessor. Section 718 (a) (2).

In June 1933, petitioner's mother created a trust naming herself as sole beneficiary during her lifetime. After her death the income was to be distributed between her two daughters. Held: respondent did not err. Petitioner does not exercise such control over the trust corpus as to constitute her the virtual owner and, therefore, taxable on all of the income received by the trustee. Accordingly, she would not be entitled to a deduction for any loss chargeable to corpus. 2.

Amounts to be subtracted from sales as necessary for redemption of proportion of cigarette coupons issued by petitioner during taxable years which would eventually be redeemed determined from evidence. Regulations 111, section 29.42-5.

1. The petitioner's business consisted of the operation of motion picture theatres in Alexandria, Virginia. Petitioner had only two theatres prior to April 7, 1937. Held: the petitioner is not entitled to relief under section 722 (b) (4) since it had over 2 1/2 years to develop its business after the addition of the third theatre and it has not shown that its earning level at 1939 would have been substantially greater if the change had been made 2 years earlier. 2.

Petitioner is engaged primarily in the business of installing pipes to carry steam, water, and oil in nonresidential buildings. Held: petitioner failed to establish that its excess profits tax for the calendar years 1941, 1942, 1943, and 1945, computed without the benefit of section 722, as amended, was excessive and discriminatory because of the factors mentioned in section 722 (b) (2), 722 (b) (3), and 722 (b) (5).

Since petitioner has not shown that the loss was incurred in a trade or business or a transaction entered into for profit, it is held that the petitioner may not deduct the amount of the loss claimed under the provisions of section 23 (e) of the Internal Revenue Code.

1. Deductions -- Depreciation -- Amortization of Leasehold. -- The transaction in which the taxpayer purchased a leasehold from its principal stockholder was bona fide so that thereafter the taxpayer was entitled to deductions for depreciation of the leasehold. 2.

1. Relief is asked under section 722 (b) (1) and ( 5) of the Internal Revenue Code. Held: on the facts, that normal production, output or operation was not interrupted or diminished within section 722 (b) (1) and that it is not shown that average base period net income was an inadequate standard of earnings, under either subsection (b) (1) or (b) (5). Relief denied. 2.

Income -- Ordinary or Capital Gain. -- Petitioner gave an option providing for the sale to an individual of stock in a corporation at a cash price, and also providing for a contract of employment by… Held: that the contract of employment was not part of the consideration for the sale of stock and the commission as well as the salary received during 1947 was compensation for services rendered and taxable as ordinary income.

1. Charitable contribution made subject to donee's compliance with certain conditions held deductible in year donee agreed to so comply and accepted the contribution. 2. The tax for the year 1943 imposed by Chapter 1 of the Internal Revenue Code includes the increase in tax for that year occasioned by section 6 of the Current Tax Payment Act of 1943 for the purpose of computing the 90 per cent victory tax limitation prescribed by section 456 of the Code.

In 1945, petitioner paid a final judgment entered in a Florida State Court which assessed damages of $ 16,500 against him for breach of his obligation to pay a real… Held: that $ 5,500 representing petitioner's proportionate share of the judgment expenditure was an ordinary and necessary expense paid during the taxable year for the management, conservation or maintenance of property held for the production of income under section 23 (a) (2) of the Internal Revenue Code.

1. Fraud. -- The Commissioner sustained his burden of proof and showed that a part of the deficiency against each taxpayer for each year was due to fraud with intent to evade tax. 2. Fraud -- Addition under Section 293 (b). -- The addition to the tax under section 293 (b) is 50 per cent of any deficiency and is not dependent upon the determination of a deficiency by the Commissioner. 3.

1. The petitioner's father created a trust of which the petitioner was one of the two trustees. Held: that, in effect, the trust income was, through exercise of the trustee's discretion, distributed to petitioner and that she is taxable thereon, under section 162 (c) of the Internal Revenue Code. 2. The petitioner's mother created a trust of which the petitioner was one of the two trustees.

1. At his death, Daniel F. Crilly, father of petitioner Edgar Crilly, left in trust, to pay the income to his five children for life, a… Held: that the petitioner is entitled to deduct as a loss, in 1945, $ 15,000, that amount being his pro rata part of the $ 75,000 paid in satisfaction of the above judgment. 2. Petitioner Erminnie M. Hettler was the granddaughter of Daniel F. Crilly, and was the beneficiary of her mother's estate, the mother having died in 1939.

The decedent created two trusts in 1928 and died in 1937. The decedent had the first of two life estates in one trust and a secondary life estate in the other. Held: under the provisions of section 811 (c) prior to its amendment in 1949, the respondent, on whom rested the burden of proof by reason of affirmative pleadings, has not sustained the burden of showing that there was a possibility of a reversion or a resulting trust in the estate of the decedent.

Petitioner, as part of one transaction, irrevocably conveyed real estate for cash and a mortgage and bond to secure payment of the deferred purchase price, and took back a lease on the property for a… Held: under the circumstances, that there was a bona fide sale of the property within the meaning of the statute, section 23 (f) of the Internal Revenue Code.

A jury rendered judgment against the petitioner in 1944, because of injury by one of petitioner's busses to a minor child. Held: that the amount paid was not accruable in 1945.

The decedent taxpayer held preferred stock in a corporation, the ordinary and liquidating dividends thereon being guaranteed by another… Held: there was an exchange of the taxpayer's preferred stock at the time of corporate liquidation in 1939 and the basis of decedent's capital asset which he acquired in the liquidation is the value of the guaranty claim distributed upon liquidation of the corporation, as provided by section 115 (c), I. R. C.Held, further, the value of the…

Where a corporation, engaged in the telegraph business, in 1883 entered into an agreement whereby it leased all of its lines and properties to another… Held: that the stockholders of the lessor corporation are liable as transferees under section 311 of the Revenue Act of 1928 for the lessor's unpaid income tax for 1930 to the extent of rentals received by each from the lessee during that year. Commissioner v. Western Union Telegraph Co., 141 Fed. (2d) 774, followed.

Petitioner, in 1942, repurchased its bonds in the open market. It paid less for the repurchased bonds than their face value, realizing a profit in the amount of the difference. Held: petitioner's 1942 bond profit was not includible, under section 718 (a) (4) of the Code, in its equity invested capital as part of its accumulated earnings and profits as of the beginning of 1943.

The petitioner filed claim for relief as to excess profits taxes under section 721 (a) (2) (C) of the Internal Revenue Code, on the ground that income for 1941 was abnormal in amount. Held: claim denied for the reason that the claimed net abnormal income for 1941 was the result of increased physical volume of sales due to increased demand, and therefore under Regulations 112, section 35.721-3, was not attributable to earlier years.

Petitioner kept books for his sole proprietorship on an accrual basis. Held: The Commissioner, in changing petitioner to the accrual basis for 1945, erred in adding to petitioner's income for 1945 the debit balance of accounts receivable shown on the books of account of the proprietorship at the beginning of the year. Commissioner v. Mnookin's Estate, 184 Fed. (2d) 89; Greene Motor Co., 5 T. C. 314.

The petitioner, a newly organized corporation, acquired ownership of the assets of American Wire Fabrics Company in 1922, at the same time that Wickwire Spencer Steel Corporation acquired… Held: Petitioner did not acquire the assets of the American Wire Fabrics Company as the result of a tax-free reorganization in 1922, and the basis of the assets is the cost to petitioner of such properties. Held, further: The cost to petitioner of the assets in question was $ 3,953,887.47.

1. Petitioner was to receive income from certain property placed n a testamentary trust, to be paid by the executor until such time as the property was distributed to the trustee. Held: income from such property during the taxable years in question in amounts equal to the family allowance paid to petitioner was not distributable to petitioner and, under section 162 (b) of the Internal Revenue Code, is not taxable to petitioner. 2.

Petitioner Floyd H. Brown, a resident of Louisiana, filed a petition for divorce from Daisy E. Brown in June 1938. Held: under the facts, payments of $ 500 monthly made by petitioner to Daisy E. Brown in 1943, 1945 and 1946, pursuant to the agreement, were consideration for the waiver of support rights by Daisy E. Brown and were deductible by petitioners under section 23 (u), Internal Revenue Code. Thomas E. Hogg, 13 T. C. 361, followed. 2.

Decedent inherited from her husband, in 1936, a house and lot which had by them been used as homestead. She removed from the property within a few days, and told her son to rent or sell it. Held: the property was a capital asset and the Commissioner did not err in limiting the loss under section 117 (a) (1) and (d) ( 2) of the Internal Revenue Code.

During the pendency of divorce proceedings in 1937, an agreement was entered into for the payment of $ 1,000 per month to petitioner by her husband for the support of petitioner and… Held: The payment of $ 5,000 by the husband in 1948 under the terms of the 1944 agreement was received by petitioner in discharge of a legal obligation which, because of the marital relationship, was incurred by the husband under a written instrument incident to the final decree of divorce.

Petitioner accrued and deducted from its income for the year ended June 30, 1940, interest of $ 8,627.03 paid on a Federal income tax deficiency. Held: because of the limiting provisions of section 711 (b) (1) (K) (iii), petitioner may not restore any part of that interest payment to income for fiscal 1940 because it was of the same class of deduction taken for interest in the amount of $ 9,234.23 for petitioner's fiscal year ended June 30 1945.

Various mortgages were placed on a commercial property in the years 1922 through 1931 by petitioner or its transferor. Petitioner acquired the property in a tax free exchange. Held: The foreclosure was a disposition of the property and the amount realized was the amount of the mortgage, resulting in a gain to petitioner of the difference between the mortgage and petitioner's adjusted basis.

Petitioners, during the taxable year, received cash constituting the payment of a bonus owing decedent at the time of his death. Held: section 126 is a remedial provision enacted for the benefit of a decedent in connection with his final income tax return, and relates to income earned by a decedent but not as yet received at the time of his death; while section 162 refers to income earned by an estate during its administration, and does not apply to items which are…

Petitioner husband suffered a loss from sale of property owned by him in fee. The sale was made to his step-grandson, the grandson of his wife through a former marriage. Held: the deduction is proper in a joint return and is not barred by section 24 (b) (1) (A) of the Internal Revenue Code.

A partnership, in which the senior partners, the petitioners herein, contributed the capital and the junior partners services and… Held: that the compromise settlement was a capital transaction involving a readjustment of partnership interests between the partners and the determination of whether the senior partners incurred a gain or loss therefrom, and the amount thereof, must be postponed until such time as the partnership is liquidated or the partnership interests…

1. Petitioners, who as stockholders of a corporation received rental-dividends in 1930, held liable as transferees for the unpaid income taxes of the transferor corporation for the year 1930. Held: petitioner is liable as transferee to the extent of such distributions for the unpaid tax liability of the corporation for 1930. 3.

Capital Asset -- Real Property Used in the Trade or Business. -- A property acquired by a widow partly by devise from her husband and later partly by purchase which she had abandoned as a residence immediately after her husband's death and unsuccessfully attempted to rent over a long period was real property used in her business within the meaning of section 117 (a) (1), as amended by section 151 (a), Revenue Act of 1942, so that the loss therefrom was deductible for income…

Petitioner acted as a broker and commission seller of cotton yarn during the years 1922 to 1942. It claims that it is entitled to relief under section 722 (b) (2) and (b) (4), I. R. Held: Petitioner has not shown that its business was depressed within the meaning of section 722 (b) (2) during the base period by reason of a record cotton crop in 1937 or the effect of that crop on cotton yarn prices. 2.

Petitioner, a California corporation, was engaged after the base period in the construction of aircraft assembly jigs on a subcontracting basis. Held: petitioner is not entitled to any relief.

In 1920, petitioner purchased 160 acres of land approximately one mile from the business center of Clovis, New Mexico, and approximately one-half mile from the city limits. Held: that the lots sold by petitioner in 1944 and 1945 were lots held by him primarily for sale to customers in the ordinary course of his business, within the meaning of section 117 (a) of the Internal Revenue Code, and the gain realized is includible in full in his gross income.

Petitioner claiming relief under section 722 (c), I. R. C., held not qualified because it has not proved a constructive average base period net income within the framework of section 722 (a).

Held, under the facts presented, respondent was not barred from determining a deficiency for the years in question within the statutory period even though he had previously determined overassessments… Held: under the facts presented, respondent was not barred from determining a deficiency for the years in question within the statutory period even though he had previously determined overassessments for those same years.

Decedent, who died on July 20, 1932, received distributions of rental-dividends from a corporation in 1930. Held: that the decedent's estate is liable as a transferee to the extent of the distributions received by the decedent in 1930 for the unpaid tax liability of the transferor corporation for 1930.

1. Petitioner was a subcontractor under United States war contracts. Held: These refunds were properly accruable in 1943 and respondent correctly disallowed a deduction of the payments made in 1944. 2. Petitioner computed and paid its New York State franchise taxes in 1944 based on its 1943 and 1944 income, unadjusted by the refunds referred to above.

1. The decedent in her will appointed remainders after life estates to the issue of five of her children who were born after the death of the donor of the power of appointment. Held: that under the laws of Pennsylvania, the limitation attempting to create remainder interests violated the rule against perpetuities and the remainders are void. 2.

Petitioner corporation is a race track in California. Held: petitioner is entitled to relief under section 722 (a) and (b) (4) but not under (b) (2) or (b) (5), and reconstructed average base period net income determined for excess profits credit purposes for a decision to be entered under Rule 50.

Petitioner, a national banking corporation, in its regular course of business issued interest bearing nonnegotiable certificates of deposit which were not subject to… Held: petitioner's outstanding indebtedness evidenced by the certificates of deposit and savings passbooks is not includible in borrowed capital under section 719 (a) (1) of the Internal Revenue Code and section 35.719-1 of Regulations 112. Commissioner v. Ames Trust & Savings Bank, 185 F. 2d 47, followed.

Petitioners were the owners of a certain oil and gas lease in Texas on which had been developed 19 producing oil wells and one gas well. Held: the amount in question was a capital expenditure and must be recovered through depletion and is not deductible as ordinary and necessary business expense.

Petitioners are husband and wife. In 1934 the husband organized a corporation and acquired 60 of the 65 shares. The paid-in capital of the corporation was $ 6,500. Held: petitioners' advances of funds to the corporation were contributions to capital, not loans, and petitioners' losses thereon were capital losses.

1. Petitioner sold its tipple tracks and its delivery tracks to the Norfolk & Western Railway in 1945. Held: The sale of the tracks constituted two separate transactions. Held: The sale of the tracks constituted two separate transactions. Petitioner has not proven that it sustained a deductible loss on the transaction involving its tipple tracks. Taxable gain derived from the sale of its delivery tracks determined. 2.

Where the petitioners as executors of a decedent's estate permitted title to corporate stock to remain in their names as executors and in 1930 received, administered, and distributed the rental-dividends therefrom as executors of the decedent's estate rather than as trustees, held that the Commissioner did not err in determining that the petitioners as executors were liable as transferees for the unpaid income taxes of the corporation for 1930 under the provisions of section…

Petitioner's decedent held powers of appointment by will, under two trusts, created prior to the amendment of section 811 of the Internal Revenue Code in 1942. Held: that, within the intendment of section 403 (d) of the Revenue Act of 1942, the power need not be effectively exercised so as to pass the property to persons renouncing under the exercise, but that it was effectively exercised by the decedent's will.

Where a corporation in 1942 transferred a ranch to a newly organized corporation, Realty, in exchange for 2,312 shares of Realty's stock and immediately thereafter distributed to its stockholders,… Held: further, that as a result of the transaction in issue, petitioner in 1942 received a dividend distribution taxable as ordinary income in the total amount of $ 109,373.94.

Petitioner is a manufacturing company which manufactures fans and blowers and for several years sold its products through its own officers and… Held: the sales companies were organized and operated for business purposes and must be recognized as separate corporate entities, and their income is not that of petitioner. National Carbide Corp. v. Commissioner, 336 U.S. 422. Held, further, section 45, I. R. C., as the Commissioner seeks to apply it is not applicable.

Portion of cattle sold during the taxable years 1944 to 1946, inclusive, classified as having been a part of a breeding herd and gain on their sale held taxable at capital gains rates. Remainder of cattle sold was property held primarily for sale to customers in the ordinary course of trade or business and gain on the sale held taxable as ordinary income.

Jurisdiction -- Mailing -- Section 272 (k). -- The petitioners moved from their former residence and gave the Commissioner their address as in care of a C. P. A. Deficiency notices sent in care of the C. P. A. and duly received were sufficient within section 272 (k) even though a new residence address was stated to and used by a representative of the Commissioner for another communication 4 days before the deficiency notices were mailed.

1. Where title to corporate stock remained registered in the name of a decedent's estate and the executors in 1930 received, administered and distributed the rental-dividends therefrom in their fiduciary capacities, held that the estate and the petitioners as executors are liable as transferees for the unpaid income taxes of the corporation for 1930 under the provisions of section 311 of the Revenue Act of 1928.

1. Income -- Partnership Recognized as Separate Entity -- Section 22 (a) -- Section 45. -- Partnership net income was not properly includible in the income of a corporation under section 22 (a) or 45 where the principal stockholder of the taxpayer corporation formed a partnership with his son and a third person which carried on a business of importing, bottling, and selling distilled spirits at wholesale and the spirits were imported under the corporation's permit and…

1. Petitioner took certain deductions for interest for the years ending June 30, 1940 and 1941, in amounts limited to 1 per cent of principal as provided by the laws of Cuba. Held: petitioner is entitled to deductions for interest only in the amount of $ 87,016.29. Security Flour Mills Co. v.

1. The father of petitioners, a resident of Texas, died in 1934, leaving a will appointing executors. Held: decedent's estate was not in process of administration in the years 1944, 1945, and 1946, and the net income was taxable to petitioners as the Commissioner has determined. 2.

Held, since petitioner was using the property in question in a trade or business, the loss from its sale in 1944 is deductible in full under section 23 (e) of the Internal Revenue Code. Held: since petitioner was using the property in question in a trade or business, the loss from its sale in 1944 is deductible in full under section 23 (e) of the Internal Revenue Code.

1. Petitioner, a citizen of the United States, worked in China for UNRRA from March 1946 to September 1947. Held: assuming petitioner's residence in China, it is not shown to have lasted until the end of 1947.

Held that petitioner is not entitled to a deduction under section 23 (u) of the Internal Revenue Code for the payments in question because they do not come within the provisions of section 22 (k) of the Code.

Estate Tax -- Transfers -- Retained Reversions -- Section 811 (c) (2) -- Express Terms v. Operation of Law. -- A reversionary interest in a grantor-decedent was not within section 811 (c) where it arose under a trust providing that the trust property after a life estate in his wife should be distributed to those who would take had she died intestate while seized of the trust property even though had she died immediately after the trust was created he would have taken…

Petitioner was engaged in a general banking and trust business in addition to its title insurance business. The insurance business accounted for 9.44 per cent of its gross income. Held: Petitioner is not an insurance company for tax purposes. Held, further, the premiums collected by it for its title insurance policies were not impressed with a trust when received and constituted a part of petitioner's gross income within the meaning of section 22 (a).

On August 1, 1945, petitioners Edward C. James, L. L. Gerdes, and Harry P. Wayman, Jr., entered into an agreement wherein James purported to sell and Gerdes and Wayman each purported to buy for $… Held: during the period from August 1, 1945, to July 31, 1947, petitioners James, Wayman, and Gerdes did not operate a business as a partnership and the entire income of the Consolidated Venetian Blind Co. is taxable to James on a community property basis.

In 1936 petitioner in settlement of litigation brought by Hartford for infringement of patents surrendered certain patents, equipment, and cash to Hartford and agreed to pay royalties to Hartford as licensee of such property. In 1939 action was filed by the United States against Hartford for violation of the anti-trust laws. A receiver was appointed and royalties payable from 1942 from petitioner and many other licensees from Hartford were impounded. In the course of the litigation evidence indicated that petitioner's settlement with Hartford in 1936 was induced by fraud. In 1945 the anti-trust litigation was settled pursuant to opinion therein by the Supreme Court, and Hartford was released from liability by many but not all of the licensees, each participating licensee, including petitioner, receiving an amount equal to 60 per cent of the impounded royalties paid in by it. Held the money was received by petitioner in settlement of claim for royalties, and not in settlement of claim for restitution because of fraud in the 1936 settlement, and is taxable as ordinary income, not capital gain.

Petitioner was settlor and life beneficiary of a trust with remainders over. Held: The source from which these dividends were paid constituted income only for the purposes of Subchapter A and not for the purpose of determining the proper allocation to be made as between corpus and distributable income.

Petitioner acquired a mortgage by gift in 1930. In 1935 the mortgagor deeded the property to him on his agreement to pay taxes on the property then in arrears. Held: that the basis for determining gain or loss on the sale is the fair market value of the property when acquired by the petitioner in 1935, with proper adjustment for depreciation to the date of sale.

Gift Tax: Income of trust held to represent gift of future interest. Held: that the gift of trust income is a gift of a future interest under section 1003 (b) (3), Internal Revenue Code. Fondren v. Commissioner, 324 U.S. 18; Commissioner v. Disston, 325 U.S. 442. Commissioner v. Sharp, 153 F. 2d 163, distinguished.

Alimony Payments, Sections 22 (k) and 23 (u). Where an agreement between spouses which respondent concedes was incident to a divorce under… Held: that no ambiguity resulted; that the clause requiring wife's support payments is controlling; that the proper construction of the clause relating to savings provides distinction between respective rights of wife and of children in any fund which may be saved in proportion to their respective rights in total payments for their…

Petitioner, in his income tax return for 1944, reported the sale of certain shares of stock but reported no gain on such sale claiming such shares were a gift. Held: that petitioner acquired the shares of stock for an adequate consideration and their basis for tax purposes, as determined by respondent, will not be disturbed.

1. Section 3801. -- Adjustment on Account of Taxes Paid by Others -- Related Taxpayer. -- The taxpayers are not entitled to adjustments under section 3801 to their own tax liabilities for reimbursements made to dummies on account of taxes paid by dummies who, under a scheme of deception, reported and paid taxes on income realized by the taxpayers since the dummies were not related taxpayers within the meaning of the section and since the section was never intended to apply…

Petitioner is a non-profit membership corporation whose members are the National Association of Broadcasters, the Association of… Held: Petitioner did not realize any income in the fiscal year ended June 30, 1946, because the subscription fees it received in that year constituted a fund in the nature of a trust fund in its hands conditioned that the permissible use thereof be confined to expenditures for certain specified purposes and that the excess thereof, if any,…

Since its organization in 1930 petitioner has been engaged in the business as owner-lessor of real estate in San Antonio, Texas. Held: such property was not held by petitioner for sale to customers in the ordinary course of its business within the meaning of section 117, I. R. C., and that the gain from such sales is taxable as capital gain.

Income -- Agreement Incident to Divorce -- Section 22 (k). -- Where all but some relatively unimportant provisions of a property settlement had been agreed upon during the time when the wife had no intention of obtaining a divorce, the agreement is not incident to a divorce within the meaning of section 22 (k), I. R. C., merely because the wife, prior to the actual signing of the agreement, decided that she would try to obtain a divorce and her husband learned of her change…

1. Section 107 (a) -- Compensation for Personal Services -- Building and Selling Houses. -- Section 107 (a) does not apply to the distributive shares of partnership income of partners who contributed only services to the partnership engaged in subdividing land and building thereon and selling low cost houses. 2.

Petitioner, on an accrual basis, issued 30-year 6 per cent income debenture notes to its stockholders. Interest was cumulative and dependent on income. Held: said notes constituted a liability of petitioner and interest paid thereon is deductible but only in the amount due during the taxable year.

The partnership of which petitioners were members was a trader as to securities held by it for more than 6 months. Such securities were not held primarily for sale to customers in the ordinary course of trade or business. The gain on their sale or exchange is taxable at capital gains rates pursuant to section 117 (b) of the Internal Revenue Code.

Gift Tax: Value of a charitable gift of a future interest for deduction. Held: The respondent correctly computed the gross value of the gifts as of the date of the gift under section 1005 by determining the present worth of the donor's retained right to income and subtracting such value from the value of the securities given to the trust on the date of the gift.

The income of a trust created by petitioner which remained after the payment of the expenses of administering and managing the properties which comprised the trust corpus was to be used to pay… Held: The income of the trust which remained after the payment of the expenses of administering and operating the trust properties was distributable for the benefit of petitioner and is includible in her net income under section 167 (a).

Where petitioner, in violation of O. P. A. regulations, knowingly, and not innocently and unintentionally, overcharged its customers, held, respondent did not err in disallowing as a business expense… Held: respondent did not err in disallowing as a business expense petitioner's payment to O. P. A. of the amounts overcharged.

Petitioner, Paul W. Trousdale, was a partner in Housing Construction Co. The business of the partnership consisted of supervising the construction of defense housing projects for various construction… Held: The partnership was in a state of liquidation at the time of the assignment. Held, further: The gain realized by Trousdale from the transaction, over and above his original investment, constituted ordinary income and will be taxed as such, one-half to each petitioner.

1. In 1944 and 1945, the petitioner received certain payments under contracts entered into during those years for the sale of burial space in a mausoleum unit it planned to construct. Held: that in 1945 the contracts for space were not completed sales but were executory and contingent and that the respondent erred in including in the petitioner's taxable income for that year any portion of the amounts received in 1944 and 1945. 2.

1. Under Massachusetts law petitioner was in effect guaranteed a level of income sufficient to meet its operating costs and to pay dividends to its stockholders at a specified rate.

During the taxable year 1946 petitioner transferred $ 17,271.42 from its deposit liability account to its miscellaneous income account. Held: section 112 (f), Internal Revenue Code, relating to recognition of gain or loss on involuntary conversions, does not apply and the gain resulting from the transfer must be recognized. Held further, the gain realized is ordinary income and not capital gain under section 117 (j), Internal Revenue Code.

Petitioner, a manufacturer of gray iron castings, operated at a loss in each of the years 1936, 1937, 1938, and 1939. Held: that petitioner has not shown that its business was depressed in the base period so as to qualify for relief under section 722 (b) (2) or (b) (3) (A), I. R. C.; and held further, that a change in general managers in 1935 which did not result in any significant change in basic management policies or earnings fails to establish…

Petitioner Gaius G. Gannon as a partner in the law firm of Baker, Botts, Andrews and Wharton, owned a 6.2 per cent interest in the firm for which he paid $ 10,770.42 and which sum represents the… Held: petitioners sustained a loss of $ 10,770.42 not occasioned by the sale or exchange of a capital asset and this loss is deductible under section 23 (e) of the Internal Revenue Code.

Reduction of liabilities on petitioner's books upon running of statute of limitations against indebtedness incurred contemporaneously with acquisition of ship, held, as case was presented, not… Held: as case was presented, not sufficient to justify reduction of ship's basis for depreciation.

Credit for Dependents -- Support -- Brother's Children -- Section 25 (b) (1) (C) and (3) (F). -- A taxpayer, who supplied about two-thirds of the support of his brother's family, including his wife and six minor children, is entitled to claim at least four of the children as dependents for the purpose of the credits allowed by section 25 (b).

On May 31, 1945, the respondent's delegatee sent a letter to petitioner which stated, in part, This notice, * * * constitutes commencement of the renegotiation proceedings in conformity… Held: the renegotiation proceedings were timely commenced by the letter of May 31, 1945, and the tentative cancellation of the original date of the conference (which was later rescheduled for a mutually satisfactory date) did not nullify the effect of the commencement letter of May 31, 1945.

1. United States Treasury bonds issued after March 1, 1941, and held in trust for a nonresident alien, held, includible in her gross estate for estate tax purposes, following Estate of Karl Jandorf,… Held: includible in her gross estate for estate tax purposes, following Estate of Karl Jandorf, 9 T. C. 338, and Estate of Irene de Guebriant, 14 T. C. 611. 2.

An amended declaration of estimated tax was timely filed 2 months before due date of income tax returns (Form 1040), but petitioners failed to pay their… Held: the 1 per cent monthly addition to tax (as provided under section 294 (d) (1) (B), I. R. C., for failure to pay installments of estimated tax declared) is not discontinued by the filing of an income tax return, but continues as long as the estimated tax is unpaid, or until the 10 per cent maximum is attained.

During the taxable year the petitioner transferred a citrus grove with the growing crop of fruit on the trees and all of its other assets, except cash, to its stockholders, receiving therefor a cash… Held: that neither the issues raised, nor the record as made, affords any basis for the application of section 45 of the Internal Revenue Code.

Income -- Compensation for War Contract Termination. -- Upon cancellation and termination of a war subcontract in 1942 petitioner filed… Held: that both prior and subsequent to the enactment of the Contract Settlement Act of 1944 petitioner had no fixed right to receive payment on its claim; that any amount it might receive was not reasonably ascertainable prior to final settlement in 1947; and that the claim did not represent an account receivable properly accruable in…

Petitioners were members of a partnership which owned a resort hotel in Miami Beach, Florida. Held: that the petitioners have not shown that the partnership was not at all times fully indemnified by reason of the restoration provision of the lease for all added or abnormal wear and tear due to Army occupancy, and is not, therefore, entitled to the deduction of any amount as accelerated depreciation.

The petitioner was in arrears in making alimony payments to his former wife under an agreement which was incorporated in a decree of divorce, and the former wife instituted a suit to compel payment… Held: that expenses incurred and paid in contesting the action to compel alimony payments do not come within the scope of section 23 (a) (2), I. R. C., allowing deduction for nonbusiness expense. Lindsay C. Howard, 16 T. C. 157, followed.

1. Petitioner issued time certificates of deposit which were outstanding in 1942 and 1943. Held: The certificates of deposit are not includible in petitioner's borrowed capital for 1942 and 1943. Held: The certificates of deposit are not includible in petitioner's borrowed capital for 1942 and 1943. National Bank of Commerce, 16 T. C. 579, followed. 2.

Wagering losses in excess of wagering gains held not available to offset other income nor to create net operating loss carry-overs or carry-backs, notwithstanding legality and regularity of petitioner's wagering business. Section 23 (h), Internal Revenue Code.

Pending a divorce proceeding brought by the petitioner, but in which his wife cross-petitioned for divorce, they agreed in writing that the petitioner should pay his wife $ 200 a month as alimony… Held: the $ 5,000 was not a periodic payment within the purview of section 22 (k), Internal Revenue Code.

The petitioners, members of a joint venture, were awarded by the United States Government, a negotiated contract to construct part of… Held: That the respondent was without authority to renegotiate profits on an individual, complete contract basis in disregard of the amendment of the Renegotiation Act so as to treat the payment received by petitioners during a fiscal year ended after June 30, 1943, as though petitioners had accrued the payment received on August 16, 1943,…

1. Water in a well on petitioner's residential property became temporarily contaminated, so that it could not be used for four months. Held: that the petitioner has failed to prove that he sustained a loss of property under section 23 (e) (3). 2. While the well was temporarily out of order, the petitioner had a new well drilled at a cost of $ 1,232. The well was not connected with a pump and was not used but was ready for use at any time upon the installation of a pump.

1. Income -- Separate Entities -- Sole Proprietorship and Corporation -- Section 22 (a) -- Section 45. -- Net income reported by principal stockholder of taxpayer corporation from his engineering business not properly includible in the income of the corporation under section 22 (a) or 45 where the principal stockholder took over from the corporation the sales and engineering phases of the business and thereafter operated as a sole proprietorship furnishing sales and…

Deductions -- Bad Debts -- Business or Nonbusiness. -- Petitioner advanced moneys to a corporation of which he was president-general manager. Held: he was not engaged in the business of promoting, organizing and managing business enterprises as claimed, and that the advances were nonbusiness debts within section 23 (k) (4), Internal Revenue Code.

Petitioners' decedent was the owner at the time of his death of a one-half interest in a leasehold which had a remaining term of 25… Held: petitioners acquired a basis under section 113 (a) (5), I. R. C., equal to the fair market value of decedent's interest at the time of his death, and applying the doctrine adhered to in Milton H. Friend et al., Trustees, 40 B. T. A. 768, affd., 119 F. 2d 959, petitioners are entitled to deduct amortization on four-fifths of the value…

In 1940 the agent for two Dutch mortgage loan companies, operating in the United States, contracted to sell the assets of those companies to the petitioner corporation, created by him and other representatives of the Dutch companies for that purpose.

1. Constitutionality of Current Tax Payment Act of 1943. -- Sweeping contentions of petitioner that entire scheme of Current Tax Payment Act, the entire statute, is… Held: that the petitioner has failed to establish that section 6 of the Act is unconstitutional. 2. Reduction of 1942 Income. -- For failure of proof and under a stipulation of the petitioner, held, that respondent did not err in not reducing 1942 income by an amount which was properly deductible in 1943.

1. Petitioner filed applications for relief under sections 722 (a) and 722 (b) (1), (2), (3) (A), and ( 4) of the Internal Revenue Code from excess profits taxes… Held: petitioner has not shown that its profits cycle differed materially in length and amplitude from the general business cycle or that it changed the character of its business during or immediately prior to the base period; hence, petitioner is not entitled to relief under subsections (b) (3) (A) or (b) (4). 2.

1. Petitioner's income from operations conducted through a Canadian branch, held properly accounted for by converting Canadian income into United States dollars at current rate of exchange so as to entitle petitioner to excess profits credit computed by use of same method for other base period years when different and unauthorized methods had been employed. Leonard Refineries, Inc., 11 T. C. 1000, followed. 2.

Deduction -- Wages Paid in Violation of the Emergency Price Control Act of 1942. -- On its tax returns petitioner included as a part of the cost of goods sold the amount of… Held: that whether reported on the return as a part of the cost of goods sold or otherwise as a deduction from gross income, wages constitute compensation for personal services rendered and are allowable as a deduction, under section 23 (a) (1) (A), Internal Revenue Code, only if reasonable in amount. 2.

1. H corporation owned land and a building on which it placed first, second, and third mortgages. After default on the third mortgage, it was foreclosed and the property was sold in April 1928. Held: in computing depreciation on the acquired property, petitioner was not entitled to use H's basis pursuant to sections 113 (a) (22) and 112 (b) (10), I. R. C., since petitioner had not acquired the property from H. 2.

Petitioner is not entitled to the reconstruction of its average base period net income by reason of a change in the character of its business during such period by a difference in the products or services furnished within the purview of section 722 (b) (4), I. R. C.

Trusts -- Income -- Taxable to Grantors -- Grantors as Trustees -- Section 22 (a) -- Section 167. -- The Commissioner did not err in taxing the income of a trust to the grantors in proportion to their contributions to the trust corpus where eight closely related grantors created an irrevocable trust, transferred to it shares of their family corporation which they controlled, named three of the grantors trustees, and provided that the income of the trust could be loaned or…

Meaker owned capital stock of Ivanhoe and for 16 years had leased certain warehouse premises owned by Ivanhoe. Held: the value of the lease was $ 81,000 and the value of the stock was $ 62,718. Held, further, the $ 62,718 was taxable income to Ivanhoe in its fiscal year ending September 30, 1946.

In April 1946 petitioner purchased a home after having it examined and pronounced free from termites. In April 1947 termites were discovered. They had done a small amount of damage. Held: that the damage done by termites is not other casualty within the language of section 23 (e) (3) of the Internal Revenue Code. United States v. Rogers, 120 F. 2d 244 and 122 F. 2d 485; Fay v. Helvering, 120 F. 2d 253.

1. Since the amount of the gain resulting from the requisition for title in 1942 by the War Shipping Administration of one of the vessels of Christenson Steamship Company was not reasonably… Held: further, Christenson Steamship Company, though dissolved, was still in existence during the taxable years for the purpose of winding up its affairs and that it received taxable gain from payments on account of just compensation made in the years 1943 and 1944. 3.

Petitioner successively sold two personal residences in the taxable year, one in Milwaukee, Wisconsin, at a gain, the other in St. Louis,… Held: petitioner's loss on the sale of his St. Louis personal residence being nondeductible under section 23 (e) and 24 (a) (1), I. R. C., and Regulations 111, section 29.23 (e) (1), he is not entitled to offset such loss against the gain from the sale of his Milwaukee personal residence in determining net long term capital gain under…

1. During its base period petitioner made 17 monthly payments of $ 8,000 each in order to operate for a 17-month period under the terms… Held: petitioner failed to establish that the abnormality was not a consequence of an increase in its gross income during the base period or a decrease in the amount of some other deduction in its base period and was not a consequence of a change at any time in the type, manner of operation, size, or condition of the business engaged in by…

Alimony -- Nonresident Alien -- Section 143 (b), I. R. C. -- A husband was obligated by divorce decree to make monthly payments to former wife, a nonresident alien, for her support. Held: the payments were income of the nonresident alien former wife subject to withholding under section 143 (b).

Time -- Last Day on Holiday -- Sec. 23 (p) (1) (E), I. R. C. -- Deduction of contribution made to employees' trust by taxpayer on accrual basis, when contribution paid on day following end of 60-day period provided in section 23 (p) (1) (E), allowed when last day of 60-day period was Memorial Day, a legal holiday.

The Tax Court held that in computing depreciation and depletion deductions for the fiscal years ended November 30, 1940 and 1941, on… Held: For the fiscal years 1936 and 1937 the amounts of depreciation and depletion allowable are the amounts the Board of Tax Appeals, in a prior proceeding, held this petitioner was entitled to deduct for those years on the basis it found, and respondent is estopped from now contending that the amounts allowable for those years are to be…

In the taxable year 1946, petitioner's income consisted of salaries received for services rendered as a teacher for the Board of Education, City of Chicago, in its day school and as a teacher for De… Held: during the taxable year petitioner was an employee as defined by section 22 (n) (1) of the Code and was not engaged in a trade or business under the provisions of section 23 (a) (1) of the Code.

Deduction -- Ordinary and Necessary Expense -- Attorney Fee -- Criminal Prosecution. -- Attorneys' fees paid by a gambler in an unsuccessful defense against a criminal charge are not deductible as ordinary and necessary expenses of his business.

1. An agreement between the petitioner and his wife, incident to a decree of divorce, provided for the payment by him of $ 35,000 to purchase a home for her and their daughter, and the payment of her attorneys' fees in the divorce proceeding in the amount of $ 20,000. The agreement further provided for monthly payments to her throughout the lifetime of the parties. He paid the $ 35,000 and the $ 20,000 immediately after the divorce.

Petitioner, a minority stockholder in a close corporation, agreed to the sale of assets of the corporation in 1927 for purposes of liquidation. Stock was surrendered in 1939 by petitioner with reservation rights. Action in the nature of an accounting and for distribution of proportionate share of proceeds from sale of assets was brought against the majority stockholder in 1942. Judgment was obtained in 1943 awarding petitioner proportionate distribution of proceeds from sale of assets less amounts previously distributed as liquidating dividends. Held, net amount of judgment award recovered in taxable year was in the nature of distribution in partial liquidation and as such is treated as an exchange of a capital asset.

Deductions -- Losses -- Whose -- Trust or Remaindermen. -- Losses from the sales of securities made by a trustee in order to distribute the corpus of a trust to fifty remaindermen after the death of the life beneficiary are not losses of the remaindermen for Federal income tax purposes.

Held, where capital rather than labor and services predominates in the production of income, the tax liability for such income follows ownership. Held: where capital rather than labor and services predominates in the production of income, the tax liability for such income follows ownership. Cf. Blair v. Commissioner, 300 U.S. 5; Lyman A. Stanton, 14 T. C. 217, affd.

Payment received by petitioner from corporation in exchange for stock therein in circumstances whereby he no longer retained any beneficial stock interest in the corporation, held not a taxable dividend under section 115 (g), Internal Revenue Code. James F. Boyle, 14 T.C. 1382, distinguished.

Capital Gain -- Cancellation of Lease -- Income to Lessee. -- The amount received by the lessee from the owner for accelerated cancellation of a lease creates a capital gain since use and possession, valuable property rights, are thereby transferred from the lessee to the owner.

Deduction -- Compensation -- Section 23 (a) (1) (A). -- The amount characterized as compensation under a bonus-stock purchasing arrangement adopted by General Motors to obtain and establish dealers is not determinative of reasonable compensation of the same officer after he becomes owner of all of the stock.

Petitioner, a professor of mathematics at Washington University, St. Louis, Missouri, since 1917, has published about nine volumes on… Held: under all the facts, that the manuscripts were property held by the petitioner primarily for sale to customers in the ordinary course of his trade or business, and therefore were not under section 117 (a) (1) of the Internal Revenue Code capital assets, and the income under petitioner's contracts was not properly reported as capital…

1. Section 107 (a) -- Compensation for Personal Services -- Legal Managerial Fees. -- Fees paid in 1943 for personal services in managing a property over a period of years to relieve it of heavy encumbrances and to put it upon a profitable basis, held taxable under section 107 (a). 2. Section 107 (a) -- Compensation for Personal Services -- Legal Services to a Corporation -- Liquidating Distributions. -- Liquidating distributions on stock received for legal services are not within section 107 (a).

Commissions collected by trustee from corpus upon termination of trust and distribution of principal, held not deductible by petitioner remainderman upon receipt of the trust property.

1. Held: Petitioner has not shown that its business was depressed by a temporary economic circumstance (a price war) during the base period within the meaning of section 722 (b) (2), I. R. C. 2. Held: Petitioner has not shown that its business was depressed by a temporary economic circumstance (a price war) during the base period within the meaning of section 722 (b) (2), I. R. C. 2.

Sections 22 (k) and 23 (u) -- Alimony -- Separation Agreement -- Incident to Divorce. -- Petitioner and his wife entered into a separation agreement. Held: that the payments in question were not made under decree of divorce or separate maintenance nor under a written instrument incident to such decree. Payments were not deductible by petitioner.

Income resulting from sale of real property held not taxable to corporation whose only function was to serve as record owner. Archibald R. Watson, 42 B. T. A. 52, followed.

Net worth of decedent's business which passed at his death to an employee pursuant to an agreement for the latter's compensation, held accruable by decedent as a business expense deduction, since it did not accrue only by reason of his death under section 43, Internal Revenue Code.

Petitioner, life tenant of real estate bearing a building largely unproductive, razed it and erected at her own expense an income-producing building. Held: the Commissioner did not err in allowing depreciation deduction on a basis of estimated useful life of the building and disallowing it on basis of petitioner's life expectancy. Caroline T. Kissell, 15 B. T. A. 705, distinguished.

Congress in section 101 (6) of the Internal Revenue Code did not intend to exempt from taxation a corporation not engaged in education work but operating a commercial competitive business for profit, although its earnings inure solely to the benefit of another corporation, an educational institution falling within section 101 (6).

1. Deduction -- Operating Losses -- Cash Basis -- No Payments. -- A taxpayer using the cash receipts and disbursements basis has no right to deduct on his return an operating loss of a business, even though he managed that business, where an associate advanced all of the money lost in the unsuccessful operation of the business and the taxpayer gave his notes to his associate for one-half of the money advanced but never made any payment on the notes. 2.

1. In reporting its income for 1939, 1940, and 1941, petitioner claimed deductions to cover the retirement, due to destruction, demolition or abandonment, of various items of roadway property… Held: that petitioner having failed to show or prove the original costs of the properties retired or that such costs were greater than inventory cost less estimated depreciation to March 1, 1913, the respondent's determination to that extent must be sustained.

Petitioner and her husband had marital difficulties, and on August 31, 1937, petitioner signed a separation agreement. Held: The agreement was incident to the divorce, and the amounts received by petitioner under the agreement in the taxable years are includible in her income under section 22 (k) of the Code.

In 1943 petitioner issued $ 90,000 par value stock for demand notes in that amount. Payments were to be made on the notes only if petitioner's financial condition required. Held: The $ 90,000 covered by notes was not invested capital under section 718 or a capital addition under section 713 for purposes of computing the excess profits credit.