Volume 20 — Tax Court Memorandum

Reconstruction of income: Net-worth method: Fraud: Additions to tax: Burden of proof: Limitations. - 1. Held: that petitioner David M. Roberson was the actual owner and operator of Roberson's Slaughter House during all the taxable years involved; and that the assets, liabilities and income for each of said years are properly attributable to said petitioner. 2.

John Joseph Cranley, Jr., a vascular surgeon, together with his father and a third individual, executed a trust agreement under date of… Held: That petitioner has failed to prove the Foundation, at the time or times the contributions in question were made, was operated exclusively for any or all of the purposes set forth in section 170(c)(2)(B) of the Code of 1954 and that no part of the net earnings of the Foundation inured to the benefit of any individual within the…

Petitioners' books and records were not adequate to reflect correctly the income of their small rural grocery business, and respondent was justified in reconstructing gross sales by the percentage markup method. However, percentage used by respondent was found to be too high and his determination excessive and invalid. Gross sales of business redetermined by Court.

Held: 1. Where petitioner, an agent of the Internal Revenue Service, could, under Service policy, obtain reimbursement for his automobile expenses and no showing was made… Held: Where petitioner, an agent of the Internal Revenue Service, could, under Service policy, obtain reimbursement for his automobile expenses and no showing was made that such expenses were greater than the amount reimbursable, deduction of such expenses under section 23(a)(1)(A), I.R.C. of 1939, denied.

Decedent died testate March 8, 1955. The executor of the estate filed an estate tax return on September 26, 1956. Held: Respondent's determination as to the value of the real property and household furnishings in question sustained except as to one parcel of real estate the value of which was stipulated to be of a lesser amount. (2) Deductions for funeral expenses, administration expenses and claims against the estate determined.

Petitioner, a traveling salesman, recorded his traveling expenses daily in a diary. Held: the diary was substantiation for some of the expenditures and other expenditures were substantiated by his testimony as to mileage traveled.

Leo Melnik was a certified public accountant and a partner with Max B. Karan in the accounting partnership of Melnik and Karan. Held: That the payments received by Melnik in 1954 and 1955 for his interest in the good will represent long-term capital gain. Held, further, that section 736 of the 1954 Code applies only to payments made by a partnership and not to transactions between the partners.

1. Cost of installing a new permanent alternating current electrical system in a building originally wired for direct current to which had been added some temporary wiring for alternating current is a capital expenditure. 2. Amounts paid as commissions for procuring leases extending over a period of more than 1 year held to be capital expenditures, amortizable over the terms of the leases to which applicable. 3. Amount paid as premium for fire insurance policy for 3-year term held to be amortizable over the term of the policy. 4. Amounts allowable as deductions for charitable contributions, taxes, and miscellaneous expenses for the production of income determined from the evidence. 5. Amounts claimed as deductions for travel expenses disallowed for failure of proof that such amounts constituted ordinary and necessary business expenses or ordinary and necessary expenses in the management, conservation, or maintenance of income-producing property.

1. Held, that a 1950 transaction wherein the Langeloth Townsite Company transferred to Barbush, its sole stockholder, all of the… Held: that a 1950 transaction wherein the Langeloth Townsite Company transferred to Barbush, its sole stockholder, all of the outstanding capital stock of its wholly-owned subsidiary Langeloth Water Company, was a distribution from capital within the meaning of section 115(d) of the 1939 Code, and that accordingly, the Townsite Company…

1. Amounts advanced by petitioners to corporations in which they owned stock held to be nonbusiness bad debts in the years the corporations became insolvent. 2. Amounts paid by one of petitioners as guarantor of notes of a corporation in which he was a stockholder held to be nonbusiness bad debt in year the corporation became insolvent. 3.

Held, that an amount received by the petitioner upon the redemption of preferred stock constituted a taxable dividend under sections 301 and 302 of the Internal Revenue Code of 1954. Held: that an amount received by the petitioner upon the redemption of preferred stock constituted a taxable dividend under sections 301 and 302 of the Internal Revenue Code of 1954.

Petitioner, in purchasing realty to expand its facilities, paid $10,000 to the lessee thereof for the cancellation of the lease so that petitioner could obtain immediate possession. Held: that this payment is a capital expenditure and hence neither deductible, nor amortizable over the remaining life of the lease.

1. In May 1954 petitioner, a resident of Savannah, was sent by his regular employer as paymaster on a construction job at St. Marys, which was 166 miles from Savannah, Georgia. Held: petitioner's expenditures for food and lodgings at St. Marys during this period were not deductible as travel expenses away from home. 2.

1. Held, upon the facts, that petitioner received salary payments in 1949 and 1950 from Commercial Insurance Agency, Inc., in the amounts determined. 2. Held: upon the facts, that petitioner received salary payments in 1949 and 1950 from Commercial Insurance Agency, Inc., in the amounts determined. 2. Held, upon the facts, that petitioner received as his share of so-called commissions, which constituted ordinary income, $29,000 in 1950, and $13,500 in 1951.

Held, Respondent's determination of deficiencies in accordance with net worth computation sustained with adjustments. Held further, Additions to tax under sections 294(d)(1)(B) and 294(d)(2), I.R.C. 1939, for the years 1945, 1946, and 1947 are sustained. Held further, Returns for the years 1943, 1945, 1946, and 1947 were false or fraudulent with intent to evade tax, and a part of the deficiency for each of these years was due to fraud with intent to evade tax. Held further, Returns for the years 1942 and 1944 were not false or fraudulent with intent to evade tax, and no part of the deficiency for either of these years was due to fraud with intent to evade tax.

1. Petitioner, Harry A. Worth, a licensed real estate broker, sold 28 parcels of unimproved land in two years through a real estate company of which he was president. Held: That except with respect to one strip, the parcels of unimproved land were held primarily for sale to customers in the ordinary course of business. 2. Interest in certain unimproved lots alleged to be the property of petitioner Helen Worth held to be the property of petitioner Harry Worth. 3.

1. Pursuant to a property settlement agreement between decedent and his then wife, the Eldorado Apartments were transferred by the McCoy Realty Company, a corporation controlled by decedent, to the… Held: the transfer of the Eldorado Apartments was made for an adequate and full consideration in money or money's worth and, accordingly, the value thereof is not includible in decedent's gross estate under sec. 2036(a)(1), I.R.C. 1954. 2.

Held, petitioners did not hold the lots sold in 1955 primarily for sale to customers in the ordinary course of a trade or business. Held: petitioners did not hold the lots sold in 1955 primarily for sale to customers in the ordinary course of a trade or business.

Petitioner, Hildegard Scheuber, purchased numerous parcels and interests in parcels of improved and unimproved real estate, and title thereto was taken in her name. Held: That all of the unimproved parcels sold, except for the 98-acre tract, were held primarily for sale to customers in the ordinary course of business.

1. Expenses for petitioner's wife in accompanying him to conventions were personal in nature and served no bona fide business purpose. 2. Determined from the facts that petitioners intended to occupy a residence as their home and that, therefore, certain expenditures made in connection with it were personal and nondeductible. 3.

Held that oil and gas leases sold in the years in question by the petitioner and the partnerships of which he was a member did not constitute property held primarily for sale to customers in the ordinary course of a trade or business, but constituted property used in the trade or business of development of oil properties and production of oil and that the gains from the sales are to be considered as gains from the sale of capital assets held for more than 6 months under…

The evidence establishing that the principal purpose for the acquisition of control of petitioner was the avoidance of income tax, held, net operating loss carryover and interest deductions are… Held: net operating loss carryover and interest deductions are disallowed. Sec. 129, 1939 Code; Sec. 269, 1954 Code.

Under the will of the president and principal stockholder of a corporation by whom they had been employed for many years, petitioners were granted an option to purchase certain shares of the corporation's stock at prices which the president of the corporation regarded as favorable to petitioners. Petitioners exercised the option to purchase the stock after the death in 1952 of the maker of the will. In 1954, the corporation was liquidated and petitioners received for their stock considerably in excess of the amount which they paid to the executors of the estate. Held, that the basis for the determination of the long-term capital gain upon the liquidation of their stock is the amount which petitioners paid to the estate in the exercise of their option to purchase under the will. J. Gordon Mack, 3 T.C. 390, affd. 148 F. 2d 62 (C.A. 3), certiorari denied 326 U.S. 719, followed.

Held, respondent did not err in disallowing $88,609.54 of the net operating loss deduction of $195,506.11 claimed in petitioner's return for the fiscal year ending August 31, 1956, as a net operating… Held: respondent did not err in disallowing $88,609.54 of the net operating loss deduction of $195,506.11 claimed in petitioner's return for the fiscal year ending August 31, 1956, as a net operating loss carryover from the fiscal year ending August 31, 1955.

Taxpayer performed services in Greenland under an off-continent employment contract that also contemplated some duties in the United States. Held: taxpayer was not a resident of Greenland within the meaning of section 911(a)(1), Internal Revenue Code of 1954, during any of the three years.

Petitioner J. Kirby Reppell has been for a good many years engaged in the business of purchasing real estate subdivisions and constructing on the lots residential property and selling these… Held: the lots in question were being held by petitioner at the time of sale for investment purposes and not primarily for sale to customers in the ordinary course of his business, and the gain from such sale was long-term capital gain.

Income of taxicab driver from tips determined.

Held, payments to widows by the employer of their deceased husbands pursuant to a resolution, adopted prior to the husbands' deaths,… Held: payments to widows by the employer of their deceased husbands pursuant to a resolution, adopted prior to the husbands' deaths, which increased the husbands' compensation for services rendered and hereafter to be rendered by them * * * to include the payment of a pension to their respective widows, were not intended or made as gifts,…

Held, the fair market value of Class B preferred stock of Behrend Bros., Inc., when donated by petitioners to a charitable foundation, on September 15, 1954, and December 21, 1955, was $57 and $63… Held: the fair market value of Class B preferred stock of Behrend Bros., Inc., when donated by petitioners to a charitable foundation, on September 15, 1954, and December 21, 1955, was $57 and $63 per share, respectively.

Petitioner, owner of hotel property, paid the lessees a sum of money for cancellation of the lease and for certain improvements on the leasehold premises for the sole purpose of enabling him to enter into a new lease with a different tenant which lease provided for the making of extensive improvements on the leasehold premises by the petitioner. Held, the amount paid to the prior lessees is a capital expenditure to be amortized over the life of the new lease rather than the remaining unexpired term of the cancelled lease.

The only issue under the pleadings was whether purchases and sales of shares of a particular stock by the petitioners pursuant to call options and incident thereto were bona fide transactions having… Held: respondent erred in the determinations which gave rise to the issue pleaded. Held, further, that questions not raised by the pleadings, concerning the fair market values of call option contracts and other matters, cannot be considered.

Held, petitioner's deductible loss resulting from a fire to his residence cannot exceed the cost of repairs that restored the property to its condition before the fire, less fire insurance recovery. Held: petitioner's deductible loss resulting from a fire to his residence cannot exceed the cost of repairs that restored the property to its condition before the fire, less fire insurance recovery.

The cost of a new furnace and heating system installed in petitioner's rental property held to be a capital expenditure and not an ordinary and necessary repair expense. Sec. 263(a)(2), I.R.C. 1954, applied.

Redler Conveyor Company held certain patents. It entered into agreements with other corporations concerning these patents. Held: the agreements were licenses and the amounts received thereunder constituted royalty and, therefore, personal holding company income.

Sale of earth fill by landowner pursuant to contract occurred from time to time as fill was removed. The contract did not by itself effect a sale of the fill "in place", and therefore did not represent a sale of a portion of the real estate. Accordingly, the profit realized upon such sales did not represent capital gain. Samuel L. Green, 35 T.C. -, decided this day, followed.

1. Held, petitioners are entitled to deduct net loss from inherited rental property even though will provided net rentals should be paid to petitioner's aunt for life if she needed it. Held: petitioners are entitled to deduct net loss from inherited rental property even though will provided net rentals should be paid to petitioner's aunt for life if she needed it. Deductible expenditures determined. 2. Held, additions to tax under sec. 6653(a), I.R.C. 1954, not imposed.

I. Arithmetic mistake in Issue 25 corrected. II. Value of cause of action in petitioner's favor redetermined (Issue 12).

Held, the joint returns filed by petitioners for the years 1948, 1949, and 1950 were false and fraudulent and part of the deficiency in petitioners' income tax for each of the years 1948, 1949, and… Held: the joint returns filed by petitioners for the years 1948, 1949, and 1950 were false and fraudulent and part of the deficiency in petitioners' income tax for each of the years 1948, 1949, and 1950 is due to fraud with intent to evade tax.

Held, expenses incurred by petitioner during 1957 in Chicago, Illinois, and the vicinity thereof, for travel, meals, and lodging are not deductible as away from home traveling expenses under section… Held: expenses incurred by petitioner during 1957 in Chicago, Illinois, and the vicinity thereof, for travel, meals, and lodging are not deductible as away from home traveling expenses under section 62(2)(B) or 162(a)(2), I.R.C. 1954. Floyd Garlock, 34 T.C. 611, followed.

Held, that respondent has not established by clear and convincing evidence that the returns for the taxable years involved were false or fraudulent with intent to evade tax within the meaning of… Held: that respondent has not established by clear and convincing evidence that the returns for the taxable years involved were false or fraudulent with intent to evade tax within the meaning of section 276(a) of the 1939 Code.

Petitioner subscribed for shares of new common stock of a corporation and paid $1 per share, the par value. Held: that the fair market value of the stock at the date of purchase was not more than its then book value of $1 per share.

1. During the taxable years 1954, 1955, and 1956, petitioner Walter E. Ditmars was reimbursed by his corporate employer for certain expenses which the respondent determined should be included in… Held: the respondent erred in including in income such substantial part of the reimbursed expenses, the amount of which for each year has been determined under the rule enunciated in Cohan v. Commissioner, 39 F. 2d 540. 2.

Held: 1. Income of taxpayer determined by use of increase in net worth plus expenditures method. 2. Held: Income of taxpayer determined by use of increase in net worth plus expenditures method. 2. Various properties acquired were purchased with funds owned by petitioner. 3. False and fraudulent returns with intent to evade tax were filed for all the taxable years, and part of each deficiency is due to fraud with intent to evade tax.

Petitioner's loss as guarantor of loans made to corporation of which he was principal officer and stockholder is deductible as nonbusiness bad debt under sec. 166(d), I.R.C. 1954.

Held, that an amount paid by petitioner in 1955, purporting to be a finder's fee paid pursuant to a resolution of the board of directors in… Held: that an amount paid by petitioner in 1955, purporting to be a finder's fee paid pursuant to a resolution of the board of directors in 1927 for services rendered in 1927 by its principal stockholders and officers for finding the petitioner's principal asset, a lease, did not represent a payment for services rendered, but, rather,…

The petitioner, Ruth Nicoll, a school teacher in the public school system of the City of New York, was granted, on December 28, 1953, a sabbatical leave "for the purpose of Health" for the period February 1 to July 31, 1954. While the evidence shows that prior to 1954 she was ill and was treated by a doctor at a clinic, there is no evidence as to the nature or duration of her illness. Held, that she has failed to show that her absence from work during the period in question was, in fact, on account of sickness; and the respondent's disallowance of a "sick pay" exclusion claimed under section 105(d) of the Internal Revenue Code of 1954 on account of her wages for that period is approved.

Decedent, G. R. Gowdey, died in 1956. In 1948, while living in Oklahoma, decedent acquired a master Dairy Queen franchise for the entire State of Virginia at a cost of $40,000, plus 4 cents a gallon… Held: the 14 subfranchise agreements were license agreements rather than sales of property and the payments received thereunder (both lump sum and gallonage) were royalties taxable as ordinary income. Theodore E. Moberg, 35 T.C. 773 (Feb. 24, 1961), followed.

1. The taxpayer was a joint venturer and expended certain amounts toward the furtherance of the venture. Held: the sums so expended were not deductible business expenses but were contributions to the capital of the joint venture. 2. The taxpayer sought to deduct the loss suffered on the joint venture in the year in which the joint venture terminated due to friction between the co-ventures.

Held, petitioner did not receive a dividend of $40,000 in the taxable year 1954, when the corporation cancelled an accounts receivable owing from petitioner and authorized the receipt… Held: petitioner did not receive a dividend of $40,000 in the taxable year 1954, when the corporation cancelled an accounts receivable owing from petitioner and authorized the receipt of 400 shares of stock as treasury stock, or in the taxable year 1955, when the stock was actually received.

Held, a part of the deficiency for each of the years 1944, 1946, 1947, 1948 and 1949 was due to fraud with intent to evade tax within the meaning of Sec. 293(b), I.R.C. 1939. Held, where petitioner filed delinquent returns for the years 1948 and 1949 on a joint basis subsequent to the issuance of a notice of deficiency computed on an individual basis, he is not entitled to the split income provisions. Secs. 51(b)(1) and 12(d). Held, petitioner realized partnership income in the amount of $3,053.53 from Great Falls Hosiery Co. in the year 1944. Held, certain expenses allegedly incurred for employees hired to care for petitioner's two children in the years 1946, 1947, 1948 and 1949 are not deductible as medical expenses under Sec. 23(x). Held, certain additional deductions for charitable contributions for the years 1946, 1947 and 1949, allowed. Held, additions to tax under Sec. 294(d)(1)(A) in the years 1947, 1948 and 1949 for failure to file declarations of estimated tax, sustained. Held, additions to tax under Sec. 294(d)(2) for the years 1944 and 1946 for substantial underestimation of estimated tax, sustained. Held, additions to tax for failure to pay estimated tax for the years 1944 and 1946, sustained.

1. A valid plan of liquidation of the Briary, Inc., was adopted at a meeting of the stockholders and directors on March 6, 1951. Section 112(b)(7), I.R.C. 1939, is not applicable to avoid recognition of the gain realized on distribution of the corporation assets in complete liquidation of the corporation because elections to have the benefits of that section were not filed by the qualified electing shareholders within 30 days after adoption of the plan of liquidation. 2.

A storm destroyed trees on petitioners' residential property. Held: under the facts of this case the deductible loss is measured by the permanent decrement in value of the property, plus the expense of cleaning up the storm damage.

Strict enforcement of the Court's Rules of Practice is discretionary with the Court and such discretion will not be exercised in favor of a party lacking in due diligence.

Petitioners owned two parcels of land. One contained 58 acres and the second 12 1/2 acres. The first parcel was acquired before 1921 and sold in 1954. Held: petitioners' adjusted basis in the first parcel determined. Held, further, petitioners have failed to prove erroneous respondent's determination that they realized a gain on the sale of a part of the second parcel in 1955. Held, further, additions to tax under section 294(d)(1)(A), I.R.C. of 1939, approved.

1. Held, respondent did not err in determining that petitioner-husband failed to report specific income items in the years 1942 through 1954. 2. Held: respondent did not err in determining that petitioner-husband failed to report specific income items in the years 1942 through 1954. 2. Held, respondent did not err in his determination of deficiencies in the income tax of petitioner-wife for the years 1948, 1949, 1952, and 1953. 3.

Held, that that part of the profit from the sale of stock and other interests represented by a portion of the purchase price which was, in accordance with the contracts of sale, placed in a depository account at the time of the sales in order to protect the buyer against various contingent liabilities of the corporation the stock of which was being purchased, was not income to the seller on cash basis in the year of sale.

1. Petitioners claimed a deduction on their joint return of $100 as a casualty loss resulting from the breaking of an antique vase by a family cat. Held, the loss in question was not a casualty loss within the meaning of the applicable statute. 2. Petitioner J. Raymond Dyer sold some shares of United Shoe Machinery Corporation common stock in the taxable year. In reporting gain on the sale he used as his basis the fair market value of the stock when it was issued to him in December 1954. The Commissioner determined that the basis for gain or loss on the sale of the stock was its fair market value on March 1, 1913, petitioner having acquired it under the will of his maternal grandmother who died in 1903. Held, the Commissioner is sustained in his determination of the basic date for the valuation of the stock but he erred in his determination of the fair market value of the stock on such date. 3. Held, the Commissioner is sustained in his determination of petitioners' basis to be used in computing petitioners' loss on the sale of a certificate of 100 shares of Interstate Bakeries Corporation stock acquired under the will of petitioner J. Raymond Dyer's father who died in 1954.

Morris S. Schwartz was a research sociologist. On their 1955 income tax return he and his wife claimed a deduction under section 162(a)(2), I.R.C. 1954, for amounts expended by them on a trip to Europe. They also deducted an amount for depreciation on their professional library, and an amount for the portion of their residence used as a study. Respondent disallowed these deductions. Held, Morris S. Schwartz's trade or business was that of an employee and respondent correctly disallowed the amounts expended on the European trip. Held, further, because they failed to show evidence of cost and date of acquisition of their professional library, respondent correctly disallowed the claimed depreciation. Held, further, rental value of office space in their residence determined and allowed as a deduction.

Pension payments received by a policeman by reason of his retirement for disability resulting from injuries incurred in the line of duty, held exempt under section 104(a)(1), Internal Revenue Code of 1954.

Prior to October 31, 1952, petitioner operated a snack bar and beer business in Athens, Georgia, at a loss. Held: Davis' principal purpose in acquiring petitioner's stock was to avoid tax by securing the benefit of a deduction, credit, or allowance which he would not otherwise enjoy and petitioner may not deduct in its fiscal years 1954 and 1955 the net operating losses incurred by petitioner prior to the change in ownership of its stock.

During the periods here in question petitioners Wilgus and Calhoun were the principal stockholders of a corporation referred to as Acme. In 1953, Ame entered into an oral service agreement with a corporation referred to as Allied wherein it was agreed that Acme would loan out Wilgus and Calhoun to Allied for a consideration of $1,000 per week. In July 1954 the consideration was reduced from $1,000 per week to $700 per week but the remainder of the oral agreement continued in full force and effect until the end of February 1955 when it was terminated. From August to December 1954 and for the first two months of 1955, Allied paid Acme as consideration for the services of Wilgus and Calhoun the amounts of $13,700 and $5,100, respectively. The respondent determined that these amounts were taxable to Wilgus and Calhoun and not to Acme. Held, respondent erred in his determination.

1. Held, that petitioner's net income for each of the taxable years is in the amount determined by respondent through use of the so-called net worth method, except for minor revisions with respect to petitioner's personal living expenses for the last three years. 2. Held, that a part of the deficiency for each of the taxable years is due to fraud with intent to evade tax, within the meaning of section 293(b) of the 1939 Code. An addition to tax under said section for each of the taxable years, approved. 3. Held, that the return of the petitioner for each of the taxable years 1941, 1942, 1944 and 1945, was false or fraudulent with intent to evade tax within the meaning of section 276(a) of the 1939 Code; and that accordingly, assessment and collection of the deficiency and addition to tax for each of said years are not barred by the statute of limitation. Petitioner did not plead the bar of the statute for the year 1943.

Petitioners were employed as miners at Idria, California. Meals and lodging were furnished them by their employer at a mining camp, and a part of the cost thereof was withheld from their wages. No facilities for obtaining meals and lodging were available at or near the mine site other than those furnished by petitioners' employer. Held: Petitioners were entitled under section 119, I.R.C. 1954, to exclude from their gross incomes for 1957 the amounts withheld by their employer as part of the cost of food and lodging provided on its premises because: 1. The meals and lodging were furnished for the convenience of the employer. 2. Petitioners were required to accept the lodging so furnished as a condition of their employment.

In 1943, petitioner, a heavy construction contractor, acquired, by purchase, a 61-acre tract of rough, unimproved land as an investment. Held: petitioner did not hold the lots primarily for sale to customers in the ordinary course of his trade or business and the gains realized from the sale thereof are taxable as gains from the sale of capital assets.

Held, that the sum of $5,000 which a corporation paid to the widow of a deceased officer of said corporation, does not constitute a gift within the meaning of… Held: that the sum of $5,000 which a corporation paid to the widow of a deceased officer of said corporation, does not constitute a gift within the meaning of section 102(a) of the 1954 Code. Principles declared in Commissioner v. Duberstein, 363 U.S. 278, and in Estate of Mervin G. Pierpont, 35 T.C. 65, here applied.

1. In 1953 and 1954, petitioner Charles L. Tidwell and another, both full-time executives of a milling company, purchased two unimproved, contiguous tracts of land adjacent to the village formerly owned by the company. Immediately after acquiring the second tract, they had the two tracts subdivided and had streets cut through the property and graded. The subdivided property was turned over to real estate agents for sale. In 1955, 15 lots were sold and by 1960, 38 of the 68 lots had been sold. Held, property was held by petitioner in 1955 primarily for sale to customers in the ordinary course of his trade or business and the gain from the sale of lots was ordinary income. 2. Held, petitioners failed to prove that they are entitled to deduct as expense of operating an automobile used by Charles for both business and pleasure any amount in excess of the amount Charles was reimbursed by his employer for business use of the automobile. 3. The cost of digging a well and installing a water pump on rental property was a capital expenditure and not deductible as rental expense in the year 1955.

1. Petitioner and his wife are the controlling shareholders of a closely held corporation having 2 offices in Illinois and 1 in New York. Held: Under section 22(a), 1939 Code, the petitioner should have included in gross income in his income tax returns all amounts received for expenses of traveling, lodging, and meals during business trips, and all reimbursed expenses in connection with his employment; and then availed himself of the provisions of sections 22(n) and…

Held, that no part of an amount of $7,500 paid in the year in question by the petitioner to his creditor constituted a payment of interest… Held: that no part of an amount of $7,500 paid in the year in question by the petitioner to his creditor constituted a payment of interest entitling the petitioner to a deduction under section 163(a) of the Internal Revenue Code of 1954; that the full amount received by the petitioner in the year in question pursuant to an agreement…

Held, payments made by petitioner during the taxable year 1956 to his wife by a former marriage represent alimony payments deductible under section 215, I.R.C. of 1954. Held: payments made by petitioner during the taxable year 1956 to his wife by a former marriage represent alimony payments deductible under section 215, I.R.C. of 1954. Commissioner v. Lester, 366 U.S. 299 (May 22, 1961) followed.

Business expenses: Compensation v. Dividends: Automobiles purchased for corporate officers. - In 1955, the taxpayer-corporation purchased two automobiles for the personal use of its president and vice-president, who were equal owners of all of the taxpayer's outstanding stock. The Tax Court held that the cost of the automobiles was not deductible as part of the officers' salaries.

Held, that the petitioner has failed to show error in the respondent's determination (1) of the amount of entertainment, yacht maintenance or… Held: that the petitioner has failed to show error in the respondent's determination (1) of the amount of entertainment, yacht maintenance or other expenditures which constitute deductible ordinary and necessary business expense under section 23(a) of the Internal Revenue Code of 1939, (2) that petitioner is not entitled to a claimed…

Petitioner (husband) was ordered by a New York court to pay temporary alimony pendente lite during the pendency of his wife's action for separation. Held: such amount was a payment of alimony pendente lite and not deductible by petitioner under the provisions of sections 22(k) and 23(u), I.R.C. of 1939.

Petitioner spent $958.62 for the support of his minor son in 1956. Held, he has failed to prove that this amount constituted over half of the child's support in that year. Held: he has failed to prove that this amount constituted over half of the child's support in that year.

During or prior to 1947, Intelligence Division of the Internal Revenue Service began an investigation of petitioners' income tax returns. Nick J. Spahos was indicted for income tax evasion in 1951. Held: That no part of said amount of $13,375.32 was deductible in 1956.

Respondent's determination disallowing petitioners' deductions in computing adjusted gross income of an alleged $2,250 loss on sale of a trailer home used as a dwelling and $251 of alleged business expenses, sustained.

Held, the amount of $2,200 received by petitioner in 1953 from the University of Minnesota was includible in his gross income for that year as compensation for services rendered by him to the… Held: the amount of $2,200 received by petitioner in 1953 from the University of Minnesota was includible in his gross income for that year as compensation for services rendered by him to the University.

In 1948 petitioner accepted a position with the National Labor Relations Board as a field examiner. Held: the educational expenses incurred and paid by petitioner in 1958 are personal expenses and are not deductible from gross income under section 162(a), I.R.C. 1954.

In 1952 petitioner was employed by DuPont as a research chemist. In 1954 he was informed of an opening at DuPont as a patent chemist. Held: the educational expenses incurred and paid by petitioner in 1957 are personal expenses and not deductible from gross income under section 162(a), I.R.C. 1954. Joseph T. Booth, III, 35 T.C. 1144 (Mar. 31, 1961), followed.

Held, that the $79,846.91 unsecured promissory note issued by petitioner on the day of its formation and before it had issued any… Held: that the $79,846.91 unsecured promissory note issued by petitioner on the day of its formation and before it had issued any capital stock, to two individuals who thereafter became its sole stockholders, in exchange for petitioner's principal asset, did not in reality represent an indebtedness, but rather an equity capital investment;…

Held, respondent erred in determining that petitioners realized taxable long-term capital gains in certain transactions described in our Findings of Fact.

Held: Petitioner has failed to meet the burden of proof of error in respondent's determination of petitioner's income from tips for the years 1956 and 1957.

Held: That payments totaling $19,000 made by petitioner Joseph Kuljis in 1956 as guarantor and endorser of commercial paper of an auto company, which became insolvent in 1956 and in which he and… Held: That payments totaling $19,000 made by petitioner Joseph Kuljis in 1956 as guarantor and endorser of commercial paper of an auto company, which became insolvent in 1956 and in which he and members of his family owned a controlling interest, resulted in a nonbusiness bad debt.

Held, a part of the deficiency for each of the years 1945 to 1954, inclusive, was due to fraud with intent to evade tax within the meaning of section 293(b), I.R.C. 1939, and section 6653(b), I.R.C. 1954. Held, petitioner Martha R. Cirillo is not liable for the additions to tax under section 293(b), I.R.C. 1939, and section 6653(b), I.R.C. 1954. Held, additions to tax under sections 293(b) and 6653(b) are based upon the correct tax liabilities without regard to credit for income taxes withheld. Held, petitioners are not entitled to credit against additions to tax for overpayment for the year 1948.

1. The Berlins, who owned 50 percent of the stock of Vogue, purchased the remaining 50 percent from the Reimers in 1956. Held: the total consideration was for the purchase of stock and the Berlins are taxable on the $10,000 paid by Vogue as a constructive dividend. Held, further, Vogue is not entitled to deductions for amortization of the cost of the lease. 2.

Held, petitions dismissed for lack of prosecution. Held: petitions dismissed for lack of prosecution. Held, further, respondent's burden of proof as to fraud is satisfied as a result of this Court's order under Rule 18, Tax Court Rules of Practice, that material allegations in respondent's answer will be deemed admitted.

Held, that certain expenses incurred by the principal petitioner for lodging and meals while carrying on his carpenter trade in two cities… Held: that certain expenses incurred by the principal petitioner for lodging and meals while carrying on his carpenter trade in two cities other than that of his principal residence, and also for maintaining and operating an automobile used in traveling between said cities and his principal residence on weekends and holidays, do not…

Held, that the commercially marketable mineral product of the petitioner, an integrated granite quarrier and manufacturer of finished… Held: that the commercially marketable mineral product of the petitioner, an integrated granite quarrier and manufacturer of finished granite products, was the rough blocks of granite as extracted from its quarries and loaded for shipment from the quarries, rather than its finished products which were grave monuments and building stone.

Held, petitioner provided more than half the support of his three minor children in the year 1955 and is entitled to dependency exemptions under the provisions of sections 151(e) and 152(a), I.R.C.… Held: petitioner provided more than half the support of his three minor children in the year 1955 and is entitled to dependency exemptions under the provisions of sections 151(e) and 152(a), I.R.C. 1954.

Held, that petitioner has not established error in respondent's determination that she is taxable upon one-half of the community income earned by her former… Held: that petitioner has not established error in respondent's determination that she is taxable upon one-half of the community income earned by her former husband during the period from January 1, 1955, to September 12, 1955, when they entered into a property settlement agreement terminating the marital community.

Held, that petitioner was engaged during each of the taxable years in carrying on a business of breeding, buying, selling, and exhibiting horses, with a view to profit; and accordingly, that the losses which she sustained therefrom are deductible from her gross income for said years.

Petitioner, a closely-held corporate insurance agency, paid the widow of its deceased president $50 a week from the time of his death in 1950 through the end of 1957 and deducted the amounts on its… Held: petitioner failed to establish the payments in 1956 and 1957 were deductible business expenses, either as compensation earned by the widow or as compensation in the nature of salary continuation for past services rendered by her husband.

Held, amounts paid by petitioner to his wife in 1955 and 1956, pursuant to a court order dated January 5, 1953, are not deductible by petitioner under section 215, I.R.C. 1954, because the amounts so paid were not includible in the gross income of his wife under section 71(a)(1), I.R.C. 1954, since under this latter section petitioner and his wife were not "legally separated * * * under a decree of divorce or of separate maintenance" at the time the payments were made.

All of the stock of petitioner and of K & S Corporation was owned 50 percent by the Kruse family and 50 percent by the Slattery family. Due to dissension between the families it was decided the Kruse family would take over petitioner and the Slattery family would take over K & S. The exchange was accomplished by the Slattery family's assigning its 50 percent of petitioner's stock to K & S and the Kruse family assigning its 50 percent of K & S stock to petitioner, and having the corporations execute an agreement whereby petitioner transferred its stock in K & S to the latter and K & S transferred its stock in petitioner to petitioner. The agreement also provided K & S transfer to petitioner the title to 20 knitting machines and petitioner pay K & S a machine rental obligation of $90,000. Held, the capital gain petitioner realized is taxable as the transaction does not qualify as a "reorganization" under section 368, Internal Revenue Code of 1954, and it does not meet the requirements of section 355, I.R.C. of 1954, for a distribution without recognized gain. Held, further, petitioner failed to establish the fair market value of the stock petitioner received in the transaction was less than respondent determined.

Held, amounts paid monthly to petitioner by her former husband pursuant to a decree of divorce a mensa et thoro as alimony and… Held: amounts paid monthly to petitioner by her former husband pursuant to a decree of divorce a mensa et thoro as alimony and maintenance for herself and the minor child of the parties for the years 1948 through 1950, and amounts paid monthly to petitioner by her former husband pursuant to an order reducing alimony as alimony for herself…

Held, respondent did not err in determining that properties sold by petitioner were held by him primarily for sale to customers in the ordinary course of business. Held: respondent did not err in determining that properties sold by petitioner were held by him primarily for sale to customers in the ordinary course of business.

1. Held, respondent did not err in increasing petitioner's distributive share of partnership income to reflect amounts credited to a dealer's reserve account standing in the partnership's name on the books of a finance company. Commissioner v. Hansen, 360 U.S. 446, followed. 2. Held, addition to tax under section 294(d)(1)(A), I.R.C. 1939, sustained.

Payments made by petitioner to his divorced wife pursuant to a settlement agreement entered into by them preliminary to divorce held to have been solely for the support of petitioner's minor child within the purview of section 71(b), I.R.C. 1954, not includible in the wife's income under section 71(a), and not deductible by petitioner as alimony under section 215(a).

Held: On the record presented, petitioners have failed to establish the adjusted basis as to any of the five tracts sold by them in 1954 and 1955. Held: On the record presented, petitioners have failed to establish the adjusted basis as to any of the five tracts sold by them in 1954 and 1955. Held further: The two sales of jointly owned property, one on December 17, 1954, and one on November 18, 1955, gave rise to taxable gains in those years.

1. Held, on the facts, respondent erred in including in petitioner's community property income one-half of amounts received by her… Held: on the facts, respondent erred in including in petitioner's community property income one-half of amounts received by her husband from illegal sales of cattle and rental of pasture lands which he did not own. 2. Held, petitioner's failure to file income tax returns and declarations of estimated tax were not due to reasonable cause. 3.

The corporate petitioner expended funds in the purchase of a yacht, title to which was taken by the individual petitioner who was its principal… Held: that the individual petitioner was in receipt of a taxable dividend in the amount of the cost of the yacht; that the corporation is not entitled to deduct depreciation on the yacht; that the amounts expended by the corporation for operation of the yacht, and insurance premium thereon, are deductible by the corporation in the…

Fair market value in 1951 of the obligation of lessee under a mineral lease to make bonus payments in 1952 and 1953 determined pursuant to mandate.

Held, petitioner has failed to prove that a corporate note given to the corporation's majority shareholder in payment for his transfer to it of a sole proprietorship did not represent a proprietary… Held: petitioner has failed to prove that a corporate note given to the corporation's majority shareholder in payment for his transfer to it of a sole proprietorship did not represent a proprietary interest in the corporation rather than an indebtedness.

Each of petitioners, in 1949, acquired from the original holder a one-half interest in a mortgage bond for a consideration of less than the face value of the bond. Held: That the assignment by petitioners of their respective interests in the mortgage bond in question to the group on February 15, 1954, was a bona fide sale and not a retirement and that petitioners' gain is taxable as long-term capital gain and not as ordinary income.

During the years ending December 31, 1936, through December 31, 1947, inclusive, petitioner owned an interest in various business ventures, including several… Held: That the deficiencies for the years 1937 through 1940, inclusive, are barred by the statute of limitations. 2. That there is a deficiency in income tax of petitioner for 1941, but respondent has failed to prove that any part of the deficiency for that year was due to fraud with intent to evade income tax.

Held, petitioners failed to prove they are entitled to a net operating loss deduction in the years 1952 and 1953 based on a net… Held: petitioners failed to prove they are entitled to a net operating loss deduction in the years 1952 and 1953 based on a net operating loss carryover from 1951 because: (1) No evidence was offered with respect to petitioners' income for 1950 against which any operating loss for the year 1951 would first have to be carried back and it is…

1. Petitioner, Herman Paster, in 1942, executed three irrevocable trust instruments for the benefit of his wife and two sons which provided, inter alia, that the corpus would be an interest in… Held: That the purported trusts are not to be recognized as valid and subsisting for Federal income tax purposes in the years in question and the asserted trust income is taxable to petitioner. 2.

Held, the Commissioner's adjustment to the loss reported on the partnership return of a partnership of which the petitioners were each 50… Held: the Commissioner's adjustment to the loss reported on the partnership return of a partnership of which the petitioners were each 50 percent owners, by adding as ordinary income $12,600 carried as inventory of raw materials by the partnership when it sold its assets to another corporation and retired from the blacktop business, is…

Tuition paid by petitioners for attendance of their son at a private military school, which provided no special treatment or training for mentally retarded children, held not to be deductible as medical expense under section 213, I.R.C. 1954.

Held, petitioners suffered a casualty loss of $1,000 in 1957 as the result of the destruction of trees, shrubs, flowers and vegetables by rain or flood. Held: petitioners suffered a casualty loss of $1,000 in 1957 as the result of the destruction of trees, shrubs, flowers and vegetables by rain or flood.

Petitioner David Simon, a distributor of coin-operated amusement devices, conceived the idea for a bowling machine that could be played by two people. Held: the property sold was held by David primarily for sale to customers in the ordinary course of his business. Held, further, petitioners have failed to prove that the property sold had been held by them for more than 6 months.

The Las Vegas Jockey Club was incorporated to succeed the Las Vegas Thoroughbred Racing Association, a bankrupt, in establishing a racing plant in Las Vegas. Petitioner was a stockholder, a bondholder, director, officer and member of the executive committee of the Jockey Club. In 1953 he advanced $20,000 to the Jockey Club when it appeared that the Club was headed for financial and organizational difficulties. He deducted the advancement as a business bad debt on his 1953 income tax return. Held, the advancement was a nonbusiness bad debt within the meaning of section 23(k)(4), Internal Revenue Code of 1939. Held, further, petitioner is not entitled to claim deductions of $2,869.89 as travel and living expenses away from home and $1,000 for attorneys' fees because he has not shown that he was engaged in a trade or business to which said amounts related. Section 23(a)(1)(A), Internal Revenue Code of 1939.

1. Held, certain interest-bearing promissory notes, issued in 1953 and 1954 by petitioner corporation to its stockholders and to another individual who later became a… Held: certain interest-bearing promissory notes, issued in 1953 and 1954 by petitioner corporation to its stockholders and to another individual who later became a stockholder, for cash advances to the corporation, constituted bona fide indebtedness, and interest paid with respect thereto is deductible.

1. Petitioner's partner-wife withdrew $30,000 from the partnership bank account in 1951 without petitioner's knowledge and lost it in a subway station in 1952 after petitioner had… Held: petitioner failed to prove that he suffered a loss deductible under section 23(e), I.R.C. 1939, in the year 1952. 2. Amount of deductions for entertainment, etc., expenses determined. 3. Held, petitioner is liable for addition to tax under section 294(d)(2), I.R.C. 1939, for the year 1951.

1. Held, the deficiency for 1949, the year when LaVerne filed no return and no declaration of estimated tax and the additions to tax imposed under sections 291(a) and… Held: the deficiency for 1949, the year when LaVerne filed no return and no declaration of estimated tax and the additions to tax imposed under sections 291(a) and 294(d)(1)(A), I.R.C. 1939, are sustained; held, further, the addition to tax under section 293(b), I.R.C. 1939, for fraud is not sustained. 2.

Petitioner discussed selling his plantation with a prospective buyer, and after some bargaining the parties arrived at a price of $115,000. The prospective buyer, intending to place all of his available cash into permanent improvements on the plantation, was unable to pay any money down on the purchase price. There were no discussions concerning the leasing of the plantation nor its rental price, although the buyer stated that he could pay $25,000 annually for two years before the title would be transferred. The parties thereupon entered into a so-called two-year lease agreement with an option to purchase the property for $115,000. The two annual payments of $25,000 were to be applied in full to the purchase price, and the balance was to be paid by the assumption of any existing mortgages and the creation of an additional mortgage in a total amount equalling the balance of the purchase price. The option could have been exercised at any time upon the payment of $50,000. The lease-option contract was drafted by petitioner's attorney who advised the use of the form to afford petitioner greater security. Held: Upon consideration of all the circumstances including those surrounding the execution of the contract and the economic factors involved, that the parties intended to create in the "lessee" an equity interest in the plantation upon each $25,000 payment. Held, further: That the two payments of $25,000 each were payments on account of option to purchase to be applied to the ultimate purchase price and were not rental payments.

Held, gain from the sale of an annuity policy was ordinary income and not capital gain. Held: gain from the sale of an annuity policy was ordinary income and not capital gain.

Two corporations, Elbeco and Eastern, were wholly-owned subsidiaries of another corporation, Baumann. Held: that the advances did not constitute bona fide debts and that Elbeco is not entitled to a claimed partial bad debt deduction for the year 1953 under section 23(k)(1) of the Internal Revenue Code of 1939.

1. Bonuses paid to petitioner's three officer-stockholders in 1955, when added to their fixed salaries for that year, did not constitute unreasonable compensation for services rendered. 2. Fixed annual salary of petitioner's secretary-treasurer was not unreasonable compensation for the service he rendered. 3.

1. Held, certain advances totaling $24,082.18 made by petitioner John E. Walsh, Jr., during 1953, 1954, and 1955 to EE, a corporation wholly owned by petitioners' son David, constituted a true… Held: certain advances totaling $24,082.18 made by petitioner John E. Walsh, Jr., during 1953, 1954, and 1955 to EE, a corporation wholly owned by petitioners' son David, constituted a true indebtedness between the parties rather than gifts.

Held, petitioners are not entitled to exclude any amount from their gross income as sick pay. Held: petitioners are not entitled to exclude any amount from their gross income as sick pay.

Petitioner, a member of the Kentucky bar, owned and operated a variety store. In 1953 the lessor of the store's premises canceled the lease and petitioner ceased to operate the store. Held: the losses claimed were correctly disallowed. Held, further, expenditures for law library and bar association dues were not deductible in addition to standard deduction as petitioner was a full time employee.

Petitioner pleaded statute of limitations in petition and denied respondent's allegations of fraud in reply, but died before case called for trial and no one… Held: respondent's motion to dismiss for failure to prosecute with respect to tax liability, made before any evidence introduced, denied where respondent proceeded to trial on fraud issue and introduced petitioner's returns in evidence. Held, further, respondent failed to prove fraud by clear and convincing evidence.

Held, decedent's relinquishment on April 16, 1952, approximately 16 1/2 months prior to his death, of the power to alter or amend a trust established by him on… Held: decedent's relinquishment on April 16, 1952, approximately 16 1/2 months prior to his death, of the power to alter or amend a trust established by him on January 25, 1929, was not in contemplation of death, and the corpus of the trust at the time of relinquishment is not includible in decedent's gross estate.

Petitioner failed to prove he provided more than one-half the support of his two children, who were living with his former wife, and is not entitled to dependency exemptions for them for the year 1957.

Petitioner was business agent for a union local. During 1955, 1956, and 1957 he received a salary and reimbursement for alleged expenses. Held: the amounts received by petitioner as reimbursement are includible in gross income and are deductible in arriving at adjusted gross income only to the extent of $4 per day for in-town expenses and $12 per day, plus 6 cents per mile, for days petitioner was out of town on business.

Held, that petitioners' interest in a certain motel was held by them primarily for sale to customers in the ordinary course of a business of constructing and selling motels; and that the gain which… Held: that petitioners' interest in a certain motel was held by them primarily for sale to customers in the ordinary course of a business of constructing and selling motels; and that the gain which they derived from an installment sale of such interest was ordinary income.

The petitioner operated a restaurant and retail merchandise business on premises leased from a corporation which she controlled. She made certain improvements upon the leased premises. After four years of operations resulting in substantial losses, she sold the business, including the leasehold improvements and other business property, to another corporation, 85 percent of the stock of which she owned, the consideration being the assumption by such corporation of indebtedness of the petitioner arising out of the business and consisting principally of indebtedness owing to the lessor corporation. The indebtedness assumed was $100,000 in excess of the adjusted basis of the assets transferred, resulting in gain in that amount. Held: That at the time of sale of the business any goodwill thereof had no fair market value or no more than a nominal value; that therefore no part of the selling price, and hence no portion of the gain, was attributable to goodwill of the business; that such gain was derived from the sale of the leasehold improvements and other tangible assets; that such assets in the hands of the transferee were property of a character subject to the allowance for depreciation; and that the gain is therefore to be considered as ordinary gain under section 1239 of the Internal Revenue Code of 1954.

Held, that the petitioner's failure to file a Federal income tax return for the taxable year ended August 31, 1956, within the time prescribed by law,… Held: that the petitioner's failure to file a Federal income tax return for the taxable year ended August 31, 1956, within the time prescribed by law, was not due to reasonable cause; accordingly, the petitioner is liable for an addition to tax for that year pursuant to section 6651(a) of the Internal Revenue Code of 1954.

Held, that respondent failed to establish that any part of the deficiencies for the years 1952, 1953, and 1954, was due to fraud with intent to evade tax, within the meaning of section 293(b) of the… Held: that respondent failed to establish that any part of the deficiencies for the years 1952, 1953, and 1954, was due to fraud with intent to evade tax, within the meaning of section 293(b) of the 1939 Code and section 6653(b) of the 1954 Code.

1. Petitioner, on October 11, 1954, entered into an agreement with its president, Daugette, whereby for a consideration of $114,180, payable to… Held: That the transfer of the option to petitioner was not a bona fide sale, and that petitioner overstated its cost of land by the amount of $114,180 on its return for the taxable year ending March 31, 1956. Held, further: That petitioner is not entitled to deduct interest payments of $4,059.73 on the alleged option indebtedness.

Held, the gains realized by Louis and Reva Alper during the taxable years 1950 and 1951 upon their stock in the five Manor corporations are taxable as ordinary income under the provisions of section… Held: the gains realized by Louis and Reva Alper during the taxable years 1950 and 1951 upon their stock in the five Manor corporations are taxable as ordinary income under the provisions of section 117(m) of the Internal Revenue Code of 1939.

Petitioners owned a fee simple interest in property and improvements thereon in Chicago, Illinois, which they leased out as a filling… Held: That, whether the property in which the proceeds of the condemnation award was invested is to be deemed vacant land or as land improved by an apartment building, said property or the interest therein acquired by petitioners did not constitute property similar in service or use to the property converted within the meaning of sec.…

Petitioner was sales manager of a branch office in a company engaged in the manufacture and sale of home heating equipment. Held: That with respect to the cashed checks item, the principles announced in Cohan v. Commissioner, 39 F. 2d 540 (C.A. 2, 1930) are applicable, and, in accordance therewith, a deduction of $6,356 is allowable to petitioner as ordinary and necessary expenses.

Petitioner Jesse E. Grimes and his wife Helen E. Grimes filed joint income tax returns for the taxable years 1956 and 1957. Held: respondent has sustained his burden of proving fraud. Held, further, since the returns were jointly filed, petitioner is liable under section 6013(d)(3) of the 1954 Code with respect to the tax including the 50 percent addition thereto for fraud. Myrna S. Howell, 10 T.C. 859, affd. 175 F. 2d 240 (C.A. 6, 1949), followed.

The petitioners are husband and wife. Miron Kroyt, a professional musician, plays the piano. His professional activities in the several years prior to the European trip to be referred to hereafter were largely devoted to teaching music. He had also appeared in concert as a soloist, and in duo with his wife who, on such occasions, played the violin or viola. Claire Kroyt was likewise a professional musician. Prior to said European trip, Claire played the violin and viola. Her professional activities had been in part devoted to teaching, but she had also played concert engagements and had played chamber music both in public and in private gatherings. Petitioners went to Europe in June of 1955 and remained there until November of 1957. The purposes of the trip were to enable Claire to receive training and coaching in order to learn to play the viola d'amore, an instrument differing materially from the violin and viola; to enable Claire and Miron to receive training and coaching to play the viola d'amore and piano in concert as a duo; and to enable petitioners to establish a European reputation as duo performers with the objective of ultimately being accepted as such in the United States and with the anticipation that concert engagements as a duo in the United States would be forthcoming as a result. Held: That the deductions claimed by petitioners for the years 1955 and 1956 in the respective amounts of $3,401.01 and $3,094.80 as expenses in connection with their European trip are not ordinary and necessary expenses paid in carrying on a business or traveling expenses paid in the pursuit of a business, or ordinary and necessary expenses paid in the production of income within the meaning of sec. 162(a) or 212(1) of the Code of 1954.

Petitioners, commission salesmen, held not entitled to deduct cost of meals on business trips which did not involve staying away from home overnight.

Petitioner, the chief executive officer of a Louisville brewing company, withdrew amounts from petty cash and caused the brewing company to pay expenditures he incurred in and… Held: respondent has failed to prove petitioner is liable for additions to tax for fraud in the years 1948 through 1954. Held, further, consideration of deficiencies for 1951 is barred by the statute of limitations. Held, further, correctness of deficiencies for the years 1953 and 1954, determined.

Petitioner and her associates recovered $861,027.45 in 1955 pursuant to a decree entered in 1952 by the Oregon trial court and affirmed in 1955 by the Oregon Supreme Court. This recovery consisted of an amount accepted in settlement from one defendant and the amount petitioner and her associates were able to collect after diligent efforts by execution against the other defendants. The judgment was for the value of stock at the date of liquidation of the corporation which stock had previously been wrongfully acquired by the defendants, dividends paid on the stock between the time it was wrongfully acquired and the date of liquidation of the corporation, and interest on both these amounts. Held, petitioner's total recovery in 1955 should be allocated between the value of the stock at date of liquidation and the dividends and interest in the proportions that each bore to the total judgment, the amount allocated to the value of the stock at the date of liquidation being long-term capital gain and the remainder ordinary income. Petitioner paid legal fees in 1952, 1953, 1955, and 1956 in prosecuting the suit. Held, further, the legal fees are allocable between capital expenditure and ordinary income in the same ratio as the recovery on the judgment, the portions allocated to capital expenditures in 1952, 1953, and 1955 being a reduction in the amount of the recovery allocated to long-term capital gain in 1955 and the remainder deductible in the year paid as nonbusiness expenses. The portion allocated to capital expenditure in 1956 is a reduction in long-term capital gain of that year and the balance deductible as a nonbusiness expense in that year.

Petitioners concede they are liable as transferees for any deficiency, plus interest thereon as provided by law, that might be due from… Held: the corporation, which kept its books and filed its returns on the cash receipts and disbursements method, realized a gain of $37,927.50 in 1955, by reason of the conveyance in that year of certain accounts and notes receivable of the face value of $37,927.50 to a new corporation in return for promissory notes of the new corporation…

Bernard, his son Alvin, and his daughter Ruth were partners during the years 1943-1945 under written partnership agreements in Paramount Hollywood… Held: Respondent failed to prove fraud against Bernard. Assessment and collection of deficiency against Bernard for 1944 barred by statute of limitations. 2. 1944 returns of Bernard, Mae, and Ruth, signed in their names and timely filed by Alvin, pursuant to authority, during their absence from Los Angeles, were valid returns.

Amount of deductible medical expenses determined. Loss on damage to property not proved.

The principal petitioner, during the calendar year 1953, made gifts by transfers in trust of 263 1/3 shares of the common stock of United Properties, Inc., a family investment and holding… Held: Fair market value of the shares of common stock of United Properties, Inc., as of the date of the gifts, determined. 2.

Petitioner Charles F. Allen was a waiter in 1955 and 1956. He kept his tips in a coffee can, counting the deposits therein monthly. He reported total tips of $978.40 for 1955 and $1,005 for 1956. Held: respondent's determination was inaccurate and arbitrary. Held further, petitioner Charles F. Allen's records were inadequate and inaccurate. Held further, petitioner Charles F. Allen received tips of $1,795.95 in 1955 and $1,666.47 in 1956.