Volume 25 — Tax Court Reports

Respondent determined that petitioner, a farmer, reporting on the accrual basis, overstated his opening inventory for 1947 in computing his gross farm profits. Held: respondent's determination is correct and section 275 (c) of the 1939 Code is applicable since an overstatement of an item of cost in the computation of gross income is an omission from gross income of an amount properly includible, within the meaning of that section.

Petitioner Donald B. Jones purchased contingent remainder interests in certain trust estates from remaindermen. Held: the respondent's determination that the life insurance premiums thus paid by petitioner in 1950 are not deductible, is sustained.

1. Estimated Tax -- Failure to File Declaration -- Reasonable Cause -- Sec. 294 (d) (1) (A). -- No reasonable cause having been established for failure to file declarations of estimated tax, held,… Held: Commissioner's addition to tax proper. 2. Deductions -- Depreciation -- Partial Use of Family Car for Business Purposes. -- Deduction allowed on Court's determination of reasonable allowance for depreciation. (Cohan v. Commissioner, 39 F. 2d 540.)

Decedent, during the years 1935 through 1944, received $ 29,250 for services rendered as a trustee; and of this sum he received $ 22,500… Held: that the benefits of section 107 (a) are not available for the reasons that (1) section 107 provides for allocation of compensation included in the gross income without making provision for any deduction of expenses; (2) the expenses claimed were not those of the decedent, but rather reimbursable advances on behalf of the trust for…

The decedent transferred property in trust in 1938 whereby he was to receive $ 100 per month for life and the balance of the income was distributable to him in the discretion of the trustee. Held: as the decedent's creditors under Indiana law could have reached the full amount of the trust income, the decedent could have obtained through his creditors the full beneficial use and enjoyment of such income.

Petitioners underestimated their income tax liability for 1950 by more than 20 per cent. Held: petitioners' declaration of estimated tax for 1950 was not computed on the basis of facts shown on their return for 1949 and petitioners are liable for the addition to tax of 6 per cent for substantial underestimation of tax imposed by section 294 (d) (2), 1939 code.

At the date of his death, January 15, 1951, D. Byrd Gwinn owned 360 shares of the common stock of Gwinn Bros. & Co. He also owned life insurance policy No. 235883 issued by the New England Life… Held: the fair market value of Gwinn's stock owned by decedent at his death was $ 21,600 or $ 60 per share. Held, further, the proceeds of policy No. 235883 qualify for the marital deduction afforded by section 812 (e), Internal Revenue Code of 1939.

1. Gross premiums received by petitioner from automobile dealers under oral agreements wherein petitioner agreed to pay dealers a percentage of its commission in consideration for their services in soliciting and sending to it applications for personal liability and property damage insurance held to be includible in gross income. 2.

1. A personal holding company is not entitled to elect to pay the alternative tax on capital gains in lieu of income taxes and personal holding company surtaxes unless the effective normal tax and surtax rate produces a tax which, standing alone, is greater than 25 per cent of net long-term capital gains. Clarence Co., 21 T. C. 615, followed. 2.

Personal Holding Company Income -- Rents -- Sec. 502(g), I. R. C. 1939. -- Income derived from farms owned by the petitioners and managed by them through a supervising agent who engaged farmers to operate the properties under a crop-sharing arrangement was not rent within the meaning of section 502(g) of the Internal Revenue Code of 1939, and the petitioners were not liable for personal holding company surtaxes for their fiscal years ended May 31 of 1945 through 1949.

Petitioner held to have realized rental income during 1948, 1949, and 1950 when it furnished occupancy to a sublessee pursuant to a previous agreement with its lessee, rather than in 1943 when petitioner executed and delivered a nonnegotiable instrument to its lessee and the lessee, in turn, satisfied a judgment outstanding against petitioner.

1. Held, that from July 1, 1943, to March 31, 1946, the petitioner and Louis Friedlander & Sons, a partnership, were owned or controlled directly or indirectly… Held: that from July 1, 1943, to March 31, 1946, the petitioner and Louis Friedlander & Sons, a partnership, were owned or controlled directly or indirectly by the same interests. 2. Amounts of petitioner's general and administrative expenses incurred in 1943, 1944, and 1945 allocable to the partnership determined.

Petitioners, on September 30, 1949, executed a contract with the City of Phoenix, Arizona, effective October 10, 1949, by which they sold some of… Held: section 29.44-2 of Regulations 111, implementing section 44 (b), is not inconsistent with the statute and is reasonable in its requirement that a taxpayer electing to report profit of a sale on installment basis must have received some payment, other than evidences of indebtedness, of the purchaser during the taxable period.

Held, on the facts, sales of used motor vehicles by petitioner through its agent were sales of property held by petitioner primarily for sale to customers in the ordinary… Held: on the facts, sales of used motor vehicles by petitioner through its agent were sales of property held by petitioner primarily for sale to customers in the ordinary course of petitioner's trade or business, and gains from such sales are taxable as ordinary income. Sec. 117 (j) (1) (B), I. R. C. 1939.

Petitioner is an entertainer and has been so engaged in business since 1932. In 1942 he was the subject of certain unfavorable publicity while serving with the Armed Forces. Held: petitioner sustained a loss from a business bad debt deductible in full in the year of the loss.

Estimated Tax -- Failure to File Declaration -- Reasonable Cause -- Sec. 294 (d) (1) (A). -- No reasonable cause having been established for failure to file declarations of estimated tax, held,… Held: Commissioner's addition to tax proper. It is no excuse that the taxpayer's principal source of income is a partnership on a calendar year basis.

Held, where taxpayer in his return elected to take the standard deduction in lieu of specific deductions and on audit respondent added certain gambling gains to gross… Held: where taxpayer in his return elected to take the standard deduction in lieu of specific deductions and on audit respondent added certain gambling gains to gross income, the election being irrevocable by statute, taxpayer may not revoke his election and claim specific deductions including gambling losses.

A breeder and seller of standard-bred trotting racehorses was attempting to build up the quality of his breeding herd. Held: 3 of the 11 horses were held primarily for breeding purposes and were property used in the trade or business within the purview of section 117 (j) (1), Internal Revenue Code of 1939. It was not shown that the other 8 horses, including the 3 partially owned by the petitioner, were not held primarily for sale.

In 1942, petitioner Alfred Meurlin, M. D., purchased the medical practice of Richard J. Brown, M. D., deceased, from the executrix of his estate for $ 13,500, payable in annual installments of $… Held: the Commissioner is sustained. The payments were capital expenditures and are not deductible as ordinary and necessary business expenses.

Amounts withheld by finance companies out of sums due on purchase of notes from petitioner, an accrual basis trailer dealer, which amounts were held as dealer's reserves and credited to petitioner's… Held: includible in petitioner's taxable income.

Petitioners organized Jack & Heintz, Inc., in 1940, and thereafter held all its outstanding common stock. Such stock had a basis to them of $ 112,000 in 1946. Held: petitioners' exchange of their stock in Jack & Heintz, Inc., for cash plus preferred stock in the purchasing corporation was a sale rather than an exchange pursuant to a plan of reorganization. Such exchange, therefore, fails to qualify as a statutory reorganization under section 112 of the 1939 Code.

Taxpayer is income beneficiary of two separate testamentary trusts established by her father, the same trustees being named for such trusts. One of the trusts sustained a net loss. Held: the net loss of that trust may not be offset by taxpayer against income distributable to her from the other trust, notwithstanding that the trustees filed a single amended return on Form 1041 consolidating the operations of both trusts pursuant to section 29.142-3, Regulations 111.

In part consideration for the cancellation of an exclusive agency agreement, petitioner assumed the liability of its agent to repay to the stockholders of petitioner the amount of the issued price of… Held: no part of the payments by petitioner pursuant to the obligation thus assumed by it can qualify as an ordinary and necessary business expense within section 23 (a) (1) of the Internal Revenue Code of 1939.

1. The decedent and petitioner Howard F. Knipp were on the calendar year basis for reporting income, and the partnership, of which they were the sole members with equal rights to share in profits,… Held: that the death of decedent on November 21, 1947, terminated the partnership's taxable year.

1. Inventory. -- The Commissioner was justified in using the taxpayer's own suggested theory of evaluating opening cattle inventory for 1944 in the absence of books, records, or other evidence. 2. Ordinary Income -- Capital Gain -- Breeding Herd. -- The taxpayer failed to establish that any cattle sold in 1945, 1947, and 1948 were being held as breeding stock, and all the gain from cattle sales in those years was ordinary income. 3.

In computing the deduction for taxes paid or accrued (sec. 505 (a) (1), I. R. C. 1939) in determining subchapter A net income for purpose of the holding company surtax on undistributed net income, a cash basis taxpayer which deducted taxes accrued during the tax year may not also deduct taxes paid during that year with respect to income of previous years.

Petitioner Foundation purchased the stock of petitioner Furnace Company, for which it gave the sellers a series of notes. Held: that the petitioner Foundation was organized and operated exclusively for educational purposes and is thus exempt from income tax under section 101 (6) of the Internal Revenue Code of 1939. 2.

Prior to 1947, petitioner, Jack Benny, produced a complete radio show for the American Tobacco Company. Held: the entire amount paid by CBS to Amusement's stockholders was solely in payment for stock and no part thereof was paid as compensation for petitioner's services subsequent to the sale or for any agreement as to what he would do to effect a switch of networks by American after the sale.

X corporation, of which petitioner was transferee, was formed in 1945 for the purpose of acquiring title to certain real estate and selling it at a profit after obtaining tenants in the improved… Held: the interest on the purchase money bond received by X in 1947 did not constitute rents within the meaning of section 502 (g) of the Internal Revenue Code of 1939.

Pension received by policeman by reason of retirement for disability, held not exempt under section 22 (b) (5), I. R. C. (1939), where the disability resulted from 5 causes, of which 4 were not shown to have been incurred in the line of duty.

Amounts received by petitioner pursuant to an agreement transferring rights to remove sand and gravel over a 5-year period and fixing the payments by reference to a price per unit, subject to advance… Held: taxable as ordinary income, and held, further, not subject to an allowance for discovery depletion.

1. Debentures, together with interest accrued but unpaid, were exchanged in 1947, pursuant to a reorganization, for new securities in an amount less than the cost of the old debentures. Held: Interest accrued but unpaid is an integral part of a debenture and such debenture, together with the interest accrued, constitutes a security within the meaning of section 112 (b) (3) of the Internal Revenue Code of 1939.

A $ 3,000 payment was made to petitioner in 1951 out of a fund comprised of the surrender value of an endowment contract and an annuity contract and accumulated interest thereon. Held: the payment was not exempt from taxation under section 22 (b) (2) (A), Internal Revenue Code of 1939, but was taxable to the extent of the interest credited under section 22 (a).

Excess Profits Tax -- Sec. 711 (b) (1) (K) (1939 Code) -- Abnormal Deductions. -- Held, abnormality or excess of royalty payments was not proven to be not a consequence of an increase in gross… Held: abnormality or excess of royalty payments was not proven to be not a consequence of an increase in gross income, and hence disallowed as a deduction.

Petitioner in March 1951 borrowed $ 900,000 from the Metropolitan Life Insurance Company, and used $ 300,000 of the proceeds of the loan to pay the unpaid… Held: the $ 600,000 additional indebtedness was not incurred by petitioner in good faith for the purposes of its business and was not, therefore, borrowed capital within the meaning of section 439 (b) (1) of the Internal Revenue Code of 1939 for the purpose of computing its invested capital and excess profits credit.

Petitioner's husband suffered from generalized arteriosclerosis and the summer and winter climate in St. Louis was detrimental to his health, causing increased vascular deterioration. Held: on the facts the amounts expended for transportation, food, and lodgings while on the trips to the South in the winter and to the North in the summer were primarily personal expenses and were not deductible as medical expenses under section 23 (x) of the Internal Revenue Code of 1939.

Petitioner filed excess profits tax returns for 1944 and 1945 computing the taxes by the invested capital method, and at the same time filed applications for relief under section 722, Internal… Held: Refund claimed in 1949 of taxes paid in 1945 and 1946 is barred by the statute of limitations. 2. Carryover of unused excess profits credit is likewise barred.

Petitioner constructed an open-air theatre on sloping land formerly covered with vegetation without including in the construction any drainage system. Held: the cost of the drainage system was a capital expenditure and was not deductible either as an ordinary and necessary business expense or as a loss.

Held, certain payments in redemption of stock were distributions in partial liquidation within section 115 (c) of the 1939 Code and not essentially equivalent to a taxable dividend within section 115… Held: certain payments in redemption of stock were distributions in partial liquidation within section 115 (c) of the 1939 Code and not essentially equivalent to a taxable dividend within section 115 (g) of the 1939 Code.

Petitioner commenced publishing a new trade magazine in 1938 from which it derives advertising and subscription income. Its advertising income for 1945 was abnormal in amount. Held: Assuming that petitioner had a class of income as described in section 721(a)(2)(C) and that petitioner established the amount of net abnormal income derived therefrom, petitioner is not entitled to relief.

Petitioner held, on the facts, to have been domiciled in Arizona during all the years in controversy; held, further, returns for certain years are to be treated as… Held: on the facts, to have been domiciled in Arizona during all the years in controversy; held, further, returns for certain years are to be treated as separate returns of the income of petitioner and his wife, they being clearly intended as such, notwithstanding they were combined on a single return form.

Petitioners entered into an agreement with a construction company for the erection of a dwelling on land previously purchased by petitioners. Held: that petitioners did not receive taxable income attributable either to the excess of the fair market value of the dwelling or to the excess of the cost of construction thereof over the agreed price paid to the contractor therefor.

Petitioner entered into a contract for the strip mining of coal, under which he advanced moneys to contractors for payroll and other operating expenses. Held: respondent did not err in disallowing the partial bad debt deduction for 1948, since in that year there was no change in the contractors' ability to repay the advances in the manner provided in the contract and no abandonment or charge-off of any part of the obligation as an asset.

1. Petitioner made certain payments to Best Yeast in 1943 and 1944 pursuant to a contract between petitioner and Best Yeast, under which Best… Held: that the payments constituted a capital expenditure and that petitioner could not elect to expense or capitalize the expenditure as one for research and development. Held, further, that petitioner failed to establish a loss thereon in either 1945 or 1946. 2. Petitioner's plant was located on a bluff adjacent to Lake Michigan.

The Commissioner held that the principal purpose for which American Pipe and Steel Corporation acquired the capital stock of Palos Verdes Estates, Inc., was the evasion or avoidance of income or… Held: the petitioner has not proved the respondent's holding to be erroneous.

The proceeds of insurance policies on the life of the decedent were payable in equal installments to the surviving spouse for life. Held: the right to all of the installments was one property within the purview of section 812 (e) (1) (B), Internal Revenue Code of 1939, and therefore, as persons other than the surviving spouse might possess or enjoy some part of the property after the termination of the interest of the surviving spouse, no part of the property qualifies…

Held, where one activity carried on by petitioner prevents it from satisfying the requirements of section 101 (9), and petitioner's other… Held: where one activity carried on by petitioner prevents it from satisfying the requirements of section 101 (9), and petitioner's other principal activity is inconsistent with section 101 (10), petitioner is not an exempt organization notwithstanding that an organization carrying on as its sole activity either of the two principal…

1. In 1943, Pat O'Brien and three others formed a corporation, Terneen Productions, Inc., all of whose stock they owned, to produce a motion picture in which O'Brien was the star. Held: Terneen was a bona fide corporation for Federal tax purposes. Held, further, it ceased doing business, liquidated, and commenced dissolution for Federal tax purposes in August 1944, and was not thereafter taxable on any profits realized from the picture which it produced.

Prior to and during the taxable years 1947 to 1951, inclusive, petitioners William C. Baird and Harold J. Baird, as officers and minority shareholders of a… Held: That the amounts so withdrawn were not bona fide loans, but were informal distributions of taxable dividends to William C. and Harold J. Baird within the meaning of section 115 (a) Internal Revenue Code of 1939. No part of such withdrawals were chargeable as dividends to the wife of petitioner William C. Baird.

Petitioner Samuel J. Chase was an executor of the estate of a California decedent, whose widow denied the claim of Chase as executor to the possession of certain property. Held: section 107 (a), I. R. C. 1939, not applicable to compensation received by Chase during taxable year, but is applicable to compensation received by Irving under rationale of Estate of Marion B. Pierce, 24 T. C. 95.

1. The notice of deficiency was sent by registered mail to petitioner and her former husband at their last known address. Accordingly, the requirements of section 272 (a) and (k), Internal Revenue Code of 1939, are satisfied. 2. Petitioner did not file a joint return with her husband in 1947, nor did she intend to file a joint return with him in that year.

As steps in the acquisition of the assets of two corporations, petitioner, in one instance, acquired all of the outstanding securities, and in the other, all of the outstanding stock, and pursuant to… Held: that the liquidations were not liquidations under section 112 (b) (6) of the Internal Revenue Code of 1939, and section 113 (a) (15) is not applicable in arriving at the bases to petitioner of the various corporate properties acquired.

Petitioner, in 1950, sold to the issuing corporation 364 five per cent interest bonds having a face value of $ 100 each for $ 150 flat per… Held: upon the facts, that the transaction was a sale of the bonds in which the purchaser, the issuing corporation, made payment of accrued interest as well as payment for the bonds; that a proportionate amount of the proceeds represented realization of interest which is taxable under section 22 (a), 1939 Code, and is not part of the…

In June 1946, the general partner of a going business consulted a tax attorney in regard to the possible sale of the business then being… Held: In substance what occurred in October 1946 was a single transaction wherein the partners transferred their partnership property, including their subscriptions for stock, to a corporation solely in exchange for stock and notes. 2. In substance the notes constituted a proprietary interest in the corporation rather than indebtedness. 3.

Each of two brothers who were equal partners subscribed and paid $ 1,000 in cash for all the stock of a new corporation. The two brothers then transferred a portion of the partnership assets valued at $ 1,026,951.32 to the corporation which assumed partnership liabilities of $ 53,862.52 and agreed to pay the partners $ 973,088.80 in four installments, with interest on the last three installments at 3 per cent.

Petitioner's wife brought suit against him for divorce asking, among other things, that the court make such division of their real and personal property that is just and reasonable. Held: attorney's fees not deductible.

1. Two stockholders owned all the stock of petitioner. Held: the rental income was personal holding company income under section 502 (f) of the 1939 Internal Revenue Code and petitioner, for the year 1944, was a personal holding company within the meaning of section 501. 2. Petitioner failed to file timely personal holding company income tax returns for the year 1944.

Ordinary and Necessary Expense -- Advertising -- Cost of African Safari to Dairy. -- The cost to a dairy of sending two of its principal officers to Africa on a big game hunt was an ordinary and necessary expense of the petitioner's business.

1. Held, lots sold by petitioner during 1950 and 1951 were held by him primarily for sale to customers in the ordinary course of his trade or business and the gains derived from such sales are… Held: lots sold by petitioner during 1950 and 1951 were held by him primarily for sale to customers in the ordinary course of his trade or business and the gains derived from such sales are taxable as ordinary income. 2.

Held, where a constructive average base period net income is determined under the excess profits tax relief provisions of section 722, such constructive income is to be used in computing the credit… Held: where a constructive average base period net income is determined under the excess profits tax relief provisions of section 722, such constructive income is to be used in computing the credit for income tax purposes under section 26 (e).

1. A partnership of which petitioners were members transferred certain patent rights by agreement conveying an exclusive license * * * for the manufacture and… Held: amounts received pursuant to the agreement are royalties derived from a licensing agreement and not long-term capital gain from the sale of a capital asset, since the contract did not effect a transfer of all of the rights of the patentee, i. e., the right to make, the right to use, and the right to vend. 2.

Petitioner, George W. Johnson, and three other individuals, who together constituted the sole officers, stockholders, and board of directors of a corporation, on October 14, 1949, received salary… Held: that the amount credited to petitioner's account in 1949 but not withdrawn by him was not taxable income constructively received by him in that year.

1. Mere incorporation of a long-established business immediately prior to the base period without any showing of any change of control or ownership of the enterprise is not a ground for relief under section 722 (b) (4), I. R. C. 1939. Victory Glass, Inc., 17 T. C. 381, distinguished. 2.

1. Petitioner operated an illegal bookmaking business in 1946. His records and income tax return for that year disclose a gross profit of 5 1/2 per cent on the total bets received. Held: the gross profit earned by petitioner bears no relation to the percentage retained out of amounts bet at parimutuel machines, and respondent's determination is excessive.

Petitioner was incorporated on September 20, 1940, for the purpose of furnishing guards to California industrial plants whose products were important to the… Held: even assuming that petitioner established the existence of the qualifying conditions for relief under such section, it failed to establish a basis for reconstruction of normal base period earnings which would allow greater excess profits credits than those allowed by the respondent on the invested capital basis.

Petitioner, in his return for 1947, claimed a bad debt deduction of $ 7,000 against a corporation of which petitioner and his wife were the sole stockholders. Held: petitioner's debt of $ 7,000 against the corporation did not become worthless in 1947. It had become worthless in a year prior thereto. The Commissioner's disallowance of the claimed deduction is sustained.

War Contracts Price Adjustment Board determined that petitioner, a manufacturer's representative, realized excessive profits of $ 65,000… Held: That salary allowance should be made for one person who negotiated sales in 1943 and that the petitioner's profits for that year were excessive to the extent of $ 55,000; (2) that the Board did not err in refusing to make allowance for compensation to the petitioner in lieu of salary; (3) that no error has been shown in the Board's…

Held, amounts received in 1951 by petitioner Vincent A. Marco, an inventor, who in a prior year had transferred his patents to a… Held: amounts received in 1951 by petitioner Vincent A. Marco, an inventor, who in a prior year had transferred his patents to a corporation for its sole and exclusive right to manufacture, use, and sell devices embodying the inventions disclosed or claimed in the Marco patents, in that portion of the United States west of the Mississippi…

Petitioner, organized in 1913, is engaged in a general millwork business. It also sells various other building materials for use in the construction and repair of buildings. Held: that with respect to the Insulite and Andersen products, petitioner has failed to prove the necessary facts to show that its average base period net income with respect thereto was an inadequate standard of normal earnings for that period. 2.

Where a husband and wife, holding property as tenants by the entireties, transferred such property to an irrevocable trust, reserving the income to… Held: such property was includible in the husband's gross estate under section 811 (c) of the 1939 Code, both as a transfer in contemplation of death and a transfer in trust with the right to income reserved for life, and held, further, that only one-half the value of such property is includible in decedent's gross estate.

Rules of Practice, Rule 23 -- Substitution of Parties. -- Where petitioner dies after filing petition, is not represented at the hearing, and there has been no substitution of parties, held, Tax… Held: Tax Court is not divested of jurisdiction to decide case. Held, further, deficiencies and additions to tax for fraud were properly determined.

1. Petitioner, a close corporation, became a party litigant in two court proceedings brought by its former president, who was also a substantial stockholder, one suit having to do with the management… Held: that the fees so paid were, in part, ordinary and necessary expenses, deductible under section 23 (a) (1) (A) of the Internal Revenue Code of 1939, and in part expenditures capital in character, and not deductible. The amount of deduction determined. 2.

1. Held, the estate is entitled to a deduction of $ 23,000 as support allowance under former section 812 (b) (5), I. R. C. 1939. 2. Held: the estate is entitled to a deduction of $ 23,000 as support allowance under former section 812 (b) (5), I. R. C. 1939. 2.

1. Husband, residing with wife in Texas, created an inter vivos trust out of community property, reserving the income to himself for life, then to his wife for life, the corpus to be distributed… Held: upon the husband's death, the wife had a community property interest in the corpus, which she could have asserted, and her acquiescence in the trust constituted a gift by her of her one-half interest minus the value of her life estate. 2.

1. Petitioners were stockholders of Park & Tilford, Inc., in 1945, which, in turn, owned all the outstanding stock of Park & Tilford Import Corporation. Held: the whiskey purchase agreements entered into by petitioners constituted capital assets, and petitioners realized long-term capital gains on their sale. 2. Petitioner Lehman was a director of Pan American Airways Corporation in 1943.

1. Basis of Property Acquired FromAnother Corporation. -- The receipt of all of the assets of another corporation in a statutory merger held to be a receipt in complete liquidation under section 112 (b) (6) of the Internal Revenue Code of 1939, and the basis is the same as in the hands of the merged corporation under section 113 (a) (15). 2.

In 1950 the petitioners subscribed for and made payments of certain sums to the trustees for the building fund of a college fraternity under a trust agreement whereby the trustees purchased certain… Held: that during 1950 nothing vested in, or for the use of, the charitable organizations designated by petitioners and that no deduction is allowable for 1950 on account of a gift or contribution resulting from the payments made by petitioners.

Where a husband and wife transferred securities from themselves as tenants by the entireties to themselves individually in equal shares, held, the husband's interest in the entirety property at the… Held: the husband's interest in the entirety property at the time of the transfer was one-half and, since the transfer placed one-half of the entirety property in him outright, no additional share would be includible in his estate under section 811 (c) 1939 Code.

1. Petitioner was a minority stockholder in X corporation. Held: the payment to petitioner was in substance a distribution in liquidation; it was one of a series of such distributions which ultimately rendered the corporation insolvent; and she is therefore liable as transferee for the corporate taxes to the extent of the cash which she thus received. 2.

Held that the value of the residuary trust to decedent's wife, and therefore the value of the marital deduction, under sections 812 (e) (1) (A) and 812 (e) (1) (E) (i), Internal Revenue Code of 1939, is to be computed after deduction for the Federal estate tax chargeable to decedent's estate.

Held, no marital deduction under section 812 (e) (1) (A) (1939 Code) when will gave property to widow and in next paragraph provided the property was to go to others if widow predecease distribution… Held: no marital deduction under section 812 (e) (1) (A) (1939 Code) when will gave property to widow and in next paragraph provided the property was to go to others if widow predecease distribution to her.

1. Joint Venture -- Division of Profits. -- Petitioner's sons and son-in-law each owned a bona fide 20 per cent interest in an undivided one-third interest in hoists which were sold, and petitioner's inclusion in his reported income of 40 per cent of the gross receipts represented by such undivided one-third interest in the hoists was proper. 2.

Petitioner, and three other men who were engaged in the real estate business, jointly purchased 68 improved residential lots which were heavily encumbered with liens for delinquent… Held: that petitioner and his associates were members of a joint venture; that the lots were held primarily for sale to customers in the ordinary course of the business of such venture and were not capital assets; and that petitioner's share of the net profits is taxable as ordinary income.

Petitioner duly filed income and excess profits tax returns for its taxable years 1941 and 1942. Held: the statute of limitations bars the assessment and collection of any deficiencies for the years 1941 and 1942.

The decedent and his wife were separated but were not divorced. Held: The value of the corpus of Trust B is includible in decedent's estate under section 811 (c) (1) (B) of the 1939 Code because the income was used to discharge decedent's legal obligation to support his wife and children for a period which in fact did not end before his death, so that the decedent retained the right to and the…

Decedent, in 1941, acquired from her husband's estate, in partial settlement of a claim against it, half the stock in a hotel company and… Held: The present interests in income under decedent's inter vivos trust are incapable of evaluation because of the beneficiaries' qualified power to terminate the trust. Therefore, in computing decedent's gift tax, statutory exclusions under section 1003 (b) (3) of the 1939 Code are not allowable. Sylvia H. Evans, 17 T. C. 206, affd.

Petitioner held entitled to relief under section 722 (b) (4) of the Internal Revenue Code of 1939, and a constructive average base period net income determined.

Petitioner is engaged in the sale at wholesale of a wide variety of plumbing and heating supplies and equipment in a sales area comprising 4 States and parts of 3 other States. Held: petitioner has failed to establish the qualifying factors requisite to relief under any of the above subsections of section 722 (b).

Where an attorney received legal fees in 1948 and 1949 under a contingent fee contract and such fees were held by him under a claim of right with no restriction as to their disposition or use, held,… Held: that such fees are taxable income in the years received.

1. Levi T. Scofield died in 1917. By will he established a testamentary trust whose corpus was the Schofield Building in the city of Cleveland, Ohio. The beneficiaries of the trust were his two sons, a daughter, and two grandchildren. The corpus of the trust was to vest in them on September 14, 1942. From 1917 until 1935, his son William was the trustee of the trust. During such time, William and his brother, Sherman Scofield, diverted large amounts of trust funds for non-trust purposes. Levi's grandson, Douglas F. Schofield, the petitioner trustee herein, discovered such diversions in 1935, and in that year was appointed successor trustee to William. As successor trustee, Douglas brought suit against William and Sherman Scofield and secured judgments against them in 1940, which he was unable to collect because neither possessed any assets and died prior to the time their beneficial interest in the trust corpus vested in them. Douglas also brought suit in 1935 against the Cleveland Trust Company, the depository of the trust funds, for over $ 1,000,000 on the ground that it participated with William and Sherman Scofield in the diversion of trust funds. The final judgment in such suit was rendered by the Supreme Court of Ohio in 1948, and awarded recovery of approximately $ 40,000, plus interest and costs. The testamentary trust continued in existence from 1917 to and throughout the year 1948. It distributed rents from the Schofield Building to its beneficiaries in 1946, 1947, and 1948. On its calendar year income tax return for 1948, it claimed a net operating loss of approximately $ 1,000,000 for diversion of its funds by William and Sherman Scofield which had occurred prior to 1935. It carried such loss back to its two previous taxable years. The respondent determined deficiences against the trust for 1946 and 1947, and for the period January 1 to June 30, 1948, based on the disallowance of such claimed loss and, with respect to 1948, he added to income $ 10,000 recovered by the trust in that year which represented a diversion of trust funds in that amount in 1932. Held, the deficiency determination for the period January 1 to June 30, 1948, was invalid since it was for only a part of the trust's taxable year. Held, further, the testamentary trust failed to prove it sustained a deductible loss in 1948. Held, further, distributions to its beneficiaries in 1946, 1947, and 1948 were distributions of income rather than distributions of corpus as claimed by such beneficiaries on the basis that a net operating loss allegedly had been sustained in 1948. 2. In 1946, 1947, and 1948, petitioner, Douglas F. Schofield, as the successor trustee of the testamentary trust, paid himself trustee fees covering earlier years which had been allowed by the Probate Court. He reported the receipt of such amounts on his returns for 1946, 1947, and 1948 under the provisions of section 107 (d) of the 1939 Code, after deducting from such amounts the sums paid to his sister for assisting him in the conduct of trust business from 1935 to 1944. Held, petitioner is not entitled to the benefits of subsection 107 (d) in reporting accumulated trustee fees since a trustee is not an "employee" within the meaning of such subsection. 3. In 1948, the beneficiaries of the testamentary trust, who held a vested beneficial interest in its corpus, created a land trust to hold title to and operate the Schofield Building for profit. Douglas F. Schofield was the trustee of the land trust. Certificates of beneficial ownership were issued to the beneficiaries of such trust. Held, the land trust agreement created an association of the beneficiaries thereof which is taxable as a corporation.

1. Estate Tax -- Gross Estate -- Sec. 811 (d) (2). -- Decedent in 1929 through a nominee set up a spendthrift trust for her benefit for life, remainder on death to her then heirs at law. Held: the trust was revocable under Missouri law where it was created. Held, further, the power was relinquished in contemplation of death. Accordingly, the value of the corpus was includible in gross estate. 2.

1. The first husband of petitioner Charlotte Leviton Herbert died testate in 1943. Said petitioner was sole legatee. Held: administration of estate was completed in 1948, and net income reported by estate for 1948 and 1949 is properly includible in taxable income of said petitioner for said years. 2. In 1947 distributions were made by the estate to said petitioner in total amounts exceeding the net income reported by the estate.

Petitioner Harold L. Ward was president of a corporation organized in 1937 to acquire timber properties which were largely family holdings but which, because of delinquencies for taxes, had been… Held: that the $ 32,000 so received was not back pay within the meaning of section 107 (a) or 107 (d) of the Internal Revenue Code of 1939.

1. False and Fraudulent Returns -- Statute of Limitations -- Sec. 276 (a). -- The taxpayers filed false and fraudulent returns with intent to evade taxes for each of the years 1944 through 1947. The Commissioner failed to prove that the returns for the years 1942 and 1943 were false and fraudulent with intent to evade tax. The statute of limitations has run for those 2 years and the Commissioner is barred from assessing and collecting any deficiency or addition to the tax. 2.

A railway company paid to one of its officers, who had served it for 4 1/2 years and resigned for reasons of health, a sum equivalent to 6 months' salary, which it called a gift to be paid in two… Held: that the amount received by the officer was compensation subject to income tax under section 22 (a) of the Internal Revenue Code (1939), and not a gift exempt under section 22 (b) (3).

1. A corporation having net earnings during the taxable year made cash distributions to its stockholders pro rata. Held: that the distributions were dividends within the meaning of section 115 (a) (2) of the Internal Revenue Code of 1939 and taxable to the stockholders as such. 2.

Upon the facts, held, that in 1946 petitioner acquired assets from another corporation in a tax-free reorganization within the scope of section 112 (b) (4) of the 1939 Code, and,… Held: that in 1946 petitioner acquired assets from another corporation in a tax-free reorganization within the scope of section 112 (b) (4) of the 1939 Code, and, therefore, petitioner's basis for the acquired assets is the same as the basis thereof in the hands of the transferor corporation.

1. On December 8, 1949, petitioner and respondent executed consent agreements (Form 872) which provided that taxes due under petitioner's 1945 and 1946 returns might be assessed at any time on or… Held: that such waivers are properly a part of the record before us for consideration. Held, further, upon consideration of said waivers relating to the year 1946, that the statute of limitations does not bar assessment for that year. 2.

Petitioner as lessor received in May 1946 the sum of $ 10,000 from United Aircraft Corporation as lessee in consideration of the cancellation and termination of a 2-year lease beginning May 1, 1944,… Held: the $ 10,000 paid to petitioner is to be treated as a return of capital and applied in reduction of petitioner's cost basis in the several properties purchased.

1. Definitions -- Trust or Association. -- Beneficiaries of an ancestral trust, to run for 20 years, the corpus of which consisted of rental property, a limited amount of the income being payable to one of the donors for life, the balance to the donors' children, with remainder of the corpus to the children, held not to be associates in a joint enterprise and the trust is not an association taxable as a corporation. 2.

Upon the evidence it is held that the respondent did not err in determining that petitioners are liable for an addition to tax as provided by section 294 (d) (1) (A) of the Internal Revenue Code of 1939 for failure to file a declaration of estimated tax for the taxable year 1950 as provided by section 58 of the Code.

During 1949 and 1950, petitioner contracted with independent contractors to strip mine coal from its property. Held: the independent contractors had an economic interest in the coal which they mined and petitioner must deduct the amounts paid to them from its gross income in computing its percentage depletion allowance under sections 23 (m) and 114 (b) of the 1939 Code.

1. Where capital distributions were made by corporations in an affiliated group, both in years when the distributing corporations were included in the consolidated income tax returns filed for the… Held: the unadjusted basis of such stock shall be reduced by the total amount of such capital distributions. 2.

The beneficiary of a testamentary trust agreed to reimburse the executors of the estate if they would pay a stipulated estate tax deficiency. Held: beneficiary's reimbursement payment pursuant to this agreement constituted the payment of Federal estate tax for which she could receive no deduction from her gross income as ordinary and necessary expense under section 23 (a) (2) of the 1939 Code.

In 1947, petitioner William H. Brown redeemed notes in the total amount of $ 32,500, secured by a deed of trust on a parcel of property which he and his wife owned. Held: no valid debt was owed by petitioner to his children and the respondent properly disallowed the payments made in 1951 and 1952 as deductible interest under section 23 (b) of the 1939 Code.

1. Held, petitioner is not exempt from income taxes as a corporation organized and operated exclusively for charitable purposes. Sec. 101 (6), I. R. C. 1939. 2. Held: petitioner is not exempt from income taxes as a corporation organized and operated exclusively for charitable purposes. Sec. 101 (6), I. R. C. 1939. 2. Petitioner is taxable as a trust, and not as a corporation. 3.

Facts in support of the allegations of error in petition, if accepted as undisputed, would provide no basis for relief to petitioner. Held, respondent's motion for judgment on the pleadings granted. Held: respondent's motion for judgment on the pleadings granted.

A father purchased a ticket at a church bazaar for $ 1 that entitled him or his nominee to a chance to win a prize. Held: that the daughter received $ 750 income, and that the father could not take a dependency credit in respect to the daughter for her income was more than $ 600.

National Thread Company, Inc., (NTC), was organized by the father of Esther M. Stein in 1913. Held: the sales were those of NTC taxable first to it and then, as corporate distributions, to NTC's stockholder. Held, further, certain minor amounts of deposits to Esther's bank accounts in 1942 and 1943 represented unreported income to her.

The minority stockholder of a corporation, holding one-third interest, claimed that the holders of the other two-thirds interest who were partners in two other businesses were conducting their… Held: the fees of attorneys employed to advise the corporation, and who rendered services culminating in an agreement settling the rival claims were properly deductible by the corporation as ordinary and necessary business expense.

1. Held, the liquidation of Crosley Corporation in the fiscal year ended November 30, 1946, was not a tax-free transaction under section 112 (b) (6), I. R. C. 1939, and the loss sustained by… Held: the liquidation of Crosley Corporation in the fiscal year ended November 30, 1946, was not a tax-free transaction under section 112 (b) (6), I. R. C. 1939, and the loss sustained by petitioner thereon is recognizable. 2.

Where a donor made separate gifts to his son and his son's wife, and took $ 3,000 annual exclusion for each gift, and also in the same year made a further gift to them jointly, held, the donor was… Held: the donor was not entitled to a third annual exclusion of $ 3,000 for the gift made to the son and son's wife jointly, even though the gift made in their joint names created, under local law, a tenancy by the entireties.

Secs. 162 (c) and 22 (b) (3), I. R. C. 1939. -- Petitioner in 1951 renounced his wife's will and therefore became entitled to one-half of her estate. Held: Petitioner has not shown that this distribution did not include his share of the income of the estate and he is taxable on such income pursuant to section 162 (c). Nor has petitioner shown this income was received by gift, bequest, devise or inheritance and so exempt from taxation under section 22 (b) (3).

In 1948 inspection of petitioners' residence disclosed no infestation by termites. In February 1952 infestation and substantial damage caused by termites were discovered. Held: that the damage is not shown to have occurred with the degree of suddenness required to support a casualty loss deduction.

1. The decedent's mother paid all of the premiums on 8 policies of insurance on decedent's life. Held: the proceeds of the insurance, $ 61,266.72, are includible in decedent's gross estate under the provisions of section 811 (g) (2) (B) of the 1939 Code. 2. Upon the facts, held that failure to file the estate tax return within the time prescribed by law was due to a reasonable cause and not to willful neglect.

Excess Profits Tax -- Relief Under Sec. 722 (b) (2). -- The petitioner has not shown that its business was depressed during the base period or that it is entitled to a credit based upon constructive average base period net income in excess of the credit allowed it based upon invested capital, even if the adverse effects of free distribution of fresh fruits and vegetables by the Federal Government and the temporary competition of truckers in its trade area during the base…

During the taxable year 1950, the Wisconsin State Department of Public Welfare expended $ 721.14 for support of one of petitioners' children, who was committed as an invalid to a school in Wisconsin. Held: that petitioners are not entitled to a dependency exemption for said child for the year 1950 under the provisions of section 25 (b) of the Internal Revenue Code of 1939.

1. Under a partnership agreement, one partner was first to receive 5 per cent of the partnership gross sales, and the remaining… Held: that the distributive shares of the partners in the undisputed ordinary net income or ordinary net loss of the partnership should be determined in accordance with the partnership agreement; and that the distributive share of each partner must be included in his gross income for the year in which the taxable year of the partnership…

Loss Sustained on Collapse of Tank -- Year of Deduction. -- Petitioner sustained a loss from the collapse, in the taxable year ended June 30, 1950, of an oil storage tank. Held: that the loss was not compensated for by insurance or otherwise and the loss deduction may not be deferred to the taxable year ended June 30, 1951.

1. In 1948 petitioners formed a corporation for the purpose of constructing a mulitple-unit housing project. Held: the gain to petitioners is taxable at capital gains rates pursuant to the provisions of section 115 (d), 1939 Code. 2. Held, deficiency for the year 1948 in Docket No. 49003 is barred by the statute of limitations. 3.

1. Fair market value of stock which was issued for architectural services by corporations organized by petitioner, and which was immediately transferred by architect to petitioner pursuant to pre-existing agreement, held to be taxable to petitioner as ordinary income. 2. Such stock issued in the years in controversy held to have a basis equal to fair market value. 3.

Held, the revision effected by petitioner in 1945 to reflect its contract sales account in a manner it considered commensurate with services to be rendered under the contracts constituted a… Held: the revision effected by petitioner in 1945 to reflect its contract sales account in a manner it considered commensurate with services to be rendered under the contracts constituted a change in its method of accounting, for which the advance consent of respondent was required.

1. Held, deficiencies as determined by respondent are approved. 2. Held: deficiencies as determined by respondent are approved. 2.

1. Capital Expenditure. -- The cost of replacing a gravel driveway to the taxpayers' plant with a cement driveway constituted a capital expenditure and was not a repair deductible as an expense. 2. Demolition With Intent to Replace -- Capital Expenditure. -- The remaining basis of a building which was demolished to make way for new construction is not a deductible loss but should be included in the cost of the new asset. 3.

The Motion Picture Association of America, Inc., paid the sum of $ 38,270 to Stephen S. Jackson, upon the termination of his employment at the request of members of the association. Held: that said amount was subject to income tax under section 22 (a) of the Internal Revenue Code (1939), and was not a gift exempt under section 22 (b) (3).

An option to purchase stock during periods of the husband's employment was given to the wife by the chief stockholder and chairman of the board of directors of the corporation which employed her… Held: that the option to purchase the stock was intended as additional compensation for the husband's services to the corporation.

Petitioner's late husband, John Russo, died in 1941 possessing a one-seventh interest in one partnership and allegedly possessing a one-half interest in another. Held: since there was no intent that petitioner's children join together with the other partners in the conduct of the enterprises, they cannot be regarded as having become partners in the two enterprises upon the death of their father.

Petitioner operated a wholesale meat business as a sole proprietor. Held: petitioner's payment of $ 5,000 to the Cohens was, in effect, a contribution of additional capital to the corporation.

Where, under Oregon law, there was no lien for taxes attached to real estate at the time of the acquisition of such property in April and there was no personal liability for such taxes, the vendee who purchased the property previous to the lien date, and paid the taxes in November of the taxable year, is entitled to deduct such taxes under section 23 (c), I. R. C. 1939, and is not required to add the amount of such taxes to the cost of the property.

The petitioner, in computing its excess profits tax liability for the fiscal year ended November 30, 1953, used the minimum credit of $ 25,000 allowed under section 431 of the 1939 Internal Revenue… Held: the petitioner must make the adjustment for interest on borrowed capital, provided for in section 433, in computing its excess profits net income for that year.

Under an agreement dated July 16, 1943, between petitioner and respondent, it was agreed that the repricing provided for in paragraph III… Held: The Division Engineer had delegated authority from the Under Secretary of War to reopen renegotiation with a contractor in cases in which the renegotiation agreement permitted such reopening after statement showing the actual results of operations covered by a renegotiation agreement became available, and the Division Engineer…

1. In 1949 and 1950 the petitioner paid his wife $ 4,700 and $ 900, respectively, in weekly payments under a decree entered in a suit by her for limited divorce and/or maintenance… Held: that the decree, pursuant to which the payments were made, was a decree for the enforcement of the husband's obligation arising from the marital relationship to support the wife where a separation in fact had occurred, but where the right to separation had not been determined by a decree.

In 1940, Atlas Corporation owned all the stock of petitioner, which was then operating as an investment company. Held: on the facts, the aforementioned transactions were not undertaken for the sole or principal purpose of avoiding excess profits taxes by making available to Virginia Rubatex Corporation petitioner's high historic equity invested capital.

Held, attorneys' fees and court costs paid by petitioner in the taxable year 1950 in a proceeding to secure his appointment as a trustee of a trust are not deductible as nonbusiness expenses under… Held: attorneys' fees and court costs paid by petitioner in the taxable year 1950 in a proceeding to secure his appointment as a trustee of a trust are not deductible as nonbusiness expenses under section 23 (a) (2), I. R. C. 1939.

Upon the facts as stipulated, held, the execution by both the Commissioner and the taxpayer of a consent fixing the period of limitation upon… Held: the execution by both the Commissioner and the taxpayer of a consent fixing the period of limitation upon assessment of income and profits tax pursuant to section 276 (b), I. R. C. 1939, was not within 3 years from the time the taxpayer's return was filed where the last day for execution fell on a Sunday and the consent was not…

Petitioner, a wholesale liquor distributor, claims relief from excess profits tax under section 722 (b) (2) and (b) (4) of the 1939 Code. Held: petitioner has shown that it commenced business during the base period within the meaning of section 722 (b) (4), but has failed to establish a constructive average base period net income in excess of its invested capital credits for the years in issue.

1. Petitioner, an oil well drilling contractor, seeks qualification to reconstruct average base period net income under section 722 (b) (1) and (2)… Held: petitioner is qualified under subsection (b) (1). Constructive average base period net income determined. 2. Petitioner seeks qualification under section 722 (b) (4) because of a change in its character resulting from a transfer of a portion of its business operation from Wyoming to California during the base period.

Upon the facts as stipulated, held, that a certain cash settlement payment made to the wife in 1949, subsequent to a divorce decree,… Held: that a certain cash settlement payment made to the wife in 1949, subsequent to a divorce decree, under an agreement made incident to the decree, was not a periodic payment includible in the gross income of the wife under section 22 (k) and was not deductible from the gross income of the husband under section 23 (u), Internal Revenue…

A corporation in 1944 credited the accounts receivable account of its controlling stockholder for $ 180,000, and debited its capital… Held: under these circumstances the credit to the accounts receivable account in 1944 worked a corresponding offset in the notes payable account, and a corporate distribution of $ 200,000 in 1947 was a taxable dividend to the extent of earnings and profits in that year, and not, as the stockholder contends, a payment by the corporation on…

In computing its income for 1950, 1951, and 1952, petitioner, a cash basis taxpayer, deducted insurance premiums paid during such years even though the insurance coverage so purchased extended to… Held: a cash basis taxpayer must prorate insurance premiums paid in one year over the term of coverage purchased with such premiums.

1. On August 11, 1949, petitioner, Joseph Maloney, entered into two futures contracts on the Chicago Board of Trade commodity futures market, one for the purchase of 50,000 bushels of May soybeans in… Held: transactions in job lots and round lots on the Chicago Board of Trade were separate and distinct and had economic significance.

Trusts -- Accumulated Income -- Sec. 167, I. R. C. 1939. -- Petitioner when 21 years of age created an irrevocable trust to terminate after 14 years at which time the corpus and accumulated income… Held: the trustees had no substantial interest in the disposition of the income. Held, further, the accumulated income was taxable to petitioner under section 167, I. R. C. 1939.

Where a taxpayer, without the consent of the Commissioner, changed his method of accounting in 1949, held, the Commissioner may make an adjustment in the year of change for accounts receivable… Held: the Commissioner may make an adjustment in the year of change for accounts receivable accrued prior to the year 1949 and unreported as income in the prior year; held, further, bad debt deductions taken by the taxpayer in 1949 and 1950 are allowed.

Held, amounts expended for travel and typing of a thesis in obtaining a doctorate degree are not deductible as ordinary and necessary business expenses. Held: amounts expended for travel and typing of a thesis in obtaining a doctorate degree are not deductible as ordinary and necessary business expenses. Hill v. Commissioner, 181 F. 2d 906, distinguished.

Jeopardy notice demands in the total amount of $ 357,586.23 were served on Meyer and Fanny Fried on March 27, 1952, for income tax, interest, and penalties for the years 1942 to 1949, inclusive. Held: petitioners failed to overcome such prima facie showing and respondent's determination is, therefore, correct.

Hyman Kleinman, the decedent, made provision in his last will for his wife giving her a life interest in two small pieces of improved… Held: that the widow did not renounce the will of the decedent and elect to take her dower interest in the decedent's estate; (2) that the agreement of the executors and trustees to pay the widow $ 50 per week for life did not represent a purchase from her of her dower rights; (3) that the agreement of the executors and trustees amounted…

Held, that apartment furnished by employer was in compensation for services rendered by petitioners, and the value of the use thereof was taxable as income. Held: that apartment furnished by employer was in compensation for services rendered by petitioners, and the value of the use thereof was taxable as income.

1. Property transferred by decedent to a trust, in which he reserved a life estate in one half and a reversionary life estate in the other, held includible in his gross estate, with reduction for the value of the prior income interest. 2. Property transferred to the same trust by decedent in an amount equal to that transferred by another, income to be shared, with a residuary life estate to the survivor, held includible in his gross estate. 3.

Held, royalties from oil and gas leases received by petitioner life insurance company did not constitute rents within the meaning of section 201 (c)… Held: royalties from oil and gas leases received by petitioner life insurance company did not constitute rents within the meaning of section 201 (c) (1). Held, further, penalty payments received by petitioner from mortgagors who prepaid their mortgage indebtedness constituted interest within the meaning of section 201 (c) (1).

1. Petitioner, during the base period years 1936 to 1939, inclusive, was the publisher of four national magazines, namely, Collier's, Woman's Home Companion, The… Held: the discontinuance by petitioner of publication of Country Home and the savings in expenses annually achieved thereby was a change in the character of petitioner's business within the meaning of section 722 (b) (4), Internal Revenue Code of 1939, and entitles petitioner to relief under section 722. 2.

Petitioner, an accrual basis subcontractor, was awarded a contract for certain construction work which covered 2 fiscal years. Held: the petitioner must accrue in each fiscal year the total amount of the billings made in that year where it does not appear that such billings were made in error.

Where a taxpayer, who reported his income on the cash receipts and disbursements basis, sold real estate and received a part of the consideration in cash and the purchaser contracted to make deferred… Held: such contractual obligations were not amounts realized by the taxpayer in the year of the sale.

Petitioner seeks to exclude from his 1950 reported income the amount of $ 1,215.99 which represents sickness benefits paid to him during that year by his employer under a so-called Disability Benefit… Held: the amounts paid petitioner were not health insurance under section 22 (b) (5).

Petitioner is a doctor of medicine and a specialist in pathology. Held: petitioner was an employee of the hospitals and not an independent contractor.

In 1931, decedent's father transferred shares of stock to himself and decedent as joint tenants with the right of survivorship. He died in 1947, and she thereupon became the sole owner of the stock. Held: the deduction for previously taxed property provided by section 812 (c) of the 1939 Code, to which decedent's estate is entitled for the shares of stock, is the value of such shares minus the portion of decedent's father's estate tax attributable thereto.

1. Secs. 15 (c) and 129, I. R. C. 1939 -- Disallowance of Surtax Exemption and Minimum Excess Profits Credit. -- Petitioner acquired storage tanks… Held: further, that in the computation of tentative tax under section 108 (g) (1), relating to the portion of the taxable year before April 1, 1951, to which section 15 (c) does not apply, section 129 does not operate to disallow the exemption and credit since the benefit thereof did not stem from the acquisition of the tanks.

Deductions -- Alimony -- Secs. 22(k) and 23(u), I. R. C. 1939. -- Prior to divorce in 1940 petitioner and his then wife entered into an enforceable oral agreement providing for support payments of $… Held: the written agreement was incident to divorce and payments made by the husband thereunder in the years 1949, 1950, 1951, and 1952 were properly deductible.

Held, that a corporate distribution received by the petitioner in 1950 was a taxable dividend under section 115 (a) of the 1939 Internal Revenue Code, and that… Held: that a corporate distribution received by the petitioner in 1950 was a taxable dividend under section 115 (a) of the 1939 Internal Revenue Code, and that it cannot be regarded, under the facts of this case, as a portion of the consideration received by the petitioner in the sale of his stock to a third party.

Excess profits tax relief under section 722 denied where the evidence fails to show a basis for reconstruction of base period earnings which would result in credits as great as those allowed petitioner under the invested capital method.

In 1945 a trustee which owned 151 shares of stock of a corporation acquired the remaining 1,849 shares in consideration of its promise to pay a total of $ 11,131,000 for the shares when funds became… Held: the assets were not assigned to the trustee as a trustee in liquidation. Held, further, the corporation was in existence during 1949 for Federal tax purposes. Henry Hess Co., 16 T. C. 1363 (revd. (C. A. 9) 210 F. 2d 553), followed.

Petitioner received gambling winnings in the amount of $ 9,000 from a pool in 1949. Held: that net gambling losses sustained during that year in connection with bets on horse races and similar events, determined herein to be in the amount of $ 2,400, are deductible under section 23 (h), I. R. C. 1939.