Volume 26 — Tax Court Memorandum

Held, petitioner's payment in discharge of his obligation as coguarantor gave rise to a business bad debt inasmuch as the guaranty was proximately related to his trade or business, that of rendering… Held: petitioner's payment in discharge of his obligation as coguarantor gave rise to a business bad debt inasmuch as the guaranty was proximately related to his trade or business, that of rendering services for pay.

Held: Petitioners were engaged in the business of cattle ranching and are entitled to deduct losses sustained in the operation of their ranch as trade or business… Held: Petitioners were engaged in the business of cattle ranching and are entitled to deduct losses sustained in the operation of their ranch as trade or business expenses under section 162 of the I.R.C. of 1954. [The taxpayers were entitled to an investment credit for depreciable property acquired for the ranch.]

Held, that petitioner has failed to establish error in the Commissioner's determination that he had unreported income for each of the 3 taxable years involved. Held: that petitioner has failed to establish error in the Commissioner's determination that he had unreported income for each of the 3 taxable years involved.

Held: That respondent's deficiency determination was not arbitrary and unreasonable. Held, further: That respondent's disallowance of certain business expenses claimed by a real estate partnership in the amount of $39,597.50 is sustained to the extent of $30,229.67. Held, further: That respondent's disallowance of certain unreimbursed business expenses claimed by William G. Tankoos in the total amount of $1,200 is sustained.

Petitioner subdivided property acquired in 1955 and prior years and sold lots in the subdivision, under an arrangement with a realtor, in the years 1956, 1957, and subsequent years. Held: the lots in the subdivision sold by petitioner in 1957 were property held by petitioner primarily for sale to customers in the ordinary course of his trade or business and the gain realized thereon is taxable as ordinary income.

Held: Petitioners' substantial understatement of their adjusted gross income on their Federal income tax returns for 5 years was due to fraud with intent to evade tax. Held: Petitioners' substantial understatement of their adjusted gross income on their Federal income tax returns for 5 years was due to fraud with intent to evade tax.

Held: Petitioner is liable for income tax deficiencies based upon embezzlements perpetrated by his wife during taxable years in which joint returns were filed. Held: Petitioner is liable for income tax deficiencies based upon embezzlements perpetrated by his wife during taxable years in which joint returns were filed.

1. The amount of charitable contributions deductible under section 170(a)(1), I.R.C. 1954, during the taxable year 1962, determined. 2. The amount of a casualty loss resulting from a hurricane, deductible under section 165(c)(3), I.R.C. 1954, during the taxable year 1962, determined.

For approximately 20 years prior to December 1961, petitioners lived in a large house in Arcadia, California, which was near Los Angeles. Held: during the taxable years 1962 and 1963 the Arcadia property was held for the production of income as that phrase is used in sections 167(a)(2) and 212(2), I.R.C. 1954, thus entitling petitioners to deductions in both taxable years for depreciation and for the amounts expended for maintenance and repair.

The Commissioner, under date of June 8, 1962, determined deficiencies in income and additions to tax for fraud, in respect of the income taxes of Edward E. McLean, deceased, and his wife Edna R. McLean, for the years 1950, 1951 and 1952. Said taxpayers had filed a timely joint return for each of said years; and no waiver or extension of any statute of limitations had ever been filed or agreed upon. The petitioners pleaded the statute of limitations as a complete defense; and the respondent took the position that the statute of limitations is inapplicable, on the ground that all the returns were false or fraudulent with intent to evade tax, within the meaning of section 276(a) of the 1939 Code. Held, that the respondent has failed to establish that any of the above-mentioned returns was false or fraudulent with intent to evade tax. Accordingly, assessment and collection of all the deficiencies and additions to tax here involved are barred by the statute of limitations.

The petitioner in 1956 and 1957 was engaged in both the legal practice of medicine and the illegal performance of abortions, and maintained several savings accounts under assumed names in which he… Held: that petitioners have failed to show error in the respondent's determination that the deposits so made constituted taxable income earned in such years.

1. Held, respondent failed to prove that petitioners (corporate and individual) were guilty of fraud with intent to evade tax for the taxable years here in question. 2. Held: respondent failed to prove that petitioners (corporate and individual) were guilty of fraud with intent to evade tax for the taxable years here in question. 2. Held, the statute of limitations bars the assessments of deficiencies against the petitioners for the taxable years 1953 through 1955.

A partnership in which petitioners were partners transferred its business and most of its business assets to a newly formed corporation in exchange for all the corporation's stock. At the same time it also transferred an excess of its accounts receivable to the corporation for collection purposes until it could be determined by audit how much of the accounts receivable were required to make the net value of the assets equal the par value of the stock received in the exchange. At the same time the partnership also loaned the corporation $100,000 in cash for which it received a demand note bearing interest at 5 percent. Held, the liability of the corporation to the partnership for the excess of accounts receivable transferred to the corporation for collection, and the note received by the corporation as evidence of the loan, were not "other property" received by the partnership in the exchange, within the meaning of section 351(b), I.R.C. 1954, and the exchange of assets solely for stock qualifies for nonrecognition of gain under section 351(a).

Held, petitioner has failed to prove she supplied over one-half of the support of her minor daughter in the taxable year 1963. Held: petitioner has failed to prove she supplied over one-half of the support of her minor daughter in the taxable year 1963.

Held, petitioner must depreciate a building which it constructed on leased premises over the estimated useful life of the building rather than amortize its cost over the original term of a lease… Held: petitioner must depreciate a building which it constructed on leased premises over the estimated useful life of the building rather than amortize its cost over the original term of a lease between petitioner's two principal stockholders and the parents of one of them.

Distributions in redemption of all issued and outstanding shares of preferred stock which did not result in pro rata distributions to the common stockholders held not essentially equivalent to a dividend within the meaning of sec. 302(b)(1), I.R.C. 1954.

1. Amounts of accounting fees determined. 2. Amount of unreported income represented by unexplained bank deposits determined. 3. Amount of deductible travel expenses determined. 4. Held, cashier's check received by petitioner was a loan rather than income to petitioner. 5. Gain realized on exercise and/or sale of stock options was compensatory and taxable as ordinary income - amount thereof determined.

Held, petitioners failed to carry their burden of proving that they are entitled to deduct (1) amounts purportedly withheld by insurance… Held: petitioners failed to carry their burden of proving that they are entitled to deduct (1) amounts purportedly withheld by insurance company, from commissions due petitioners, as reimbursement for shortages in petitioner's accounts with insurance company, (2) certain amounts of interest claimed on returns, and (3) business rent…

Held, that profits realized by a partnership under contractual arrangements with other parties, which gave such parties the right to… Held: that profits realized by a partnership under contractual arrangements with other parties, which gave such parties the right to excavate and remove indefinite quantities of sand, gravel and related materials from the former's property in consideration of agreed per cubic yard payments on amounts of material actually removed - are…

Held, that the respondent's computation, by the percentage markup method, of the petitioner's gross receipts from the operation of a retail liquor store was proper, subject to certain adjustments. Held: that the respondent's computation, by the percentage markup method, of the petitioner's gross receipts from the operation of a retail liquor store was proper, subject to certain adjustments.

Held: Petitioner was not entitled to credit social security taxes withheld from his salary against income taxes since the social security taxes were not shown to be improperly withheld. Held, further: Expenses attributable to scientific research on "shadow bands" were not related to a trade or business, nor was the research a condition of or directly connected with petitioner's employment; the expenses were therefore not deductible. Held, further: A donation for flood victims did not qualify as a charitable contribution since it was not shown that the recipient of the donation qualified as a charitable organization. Held, further: Petitioner was not entitled to deduct from gross income money given for the support of two cousins; they did not qualify as his dependents.

Petitioner's subcontractor on two highway construction projects became unable to meet payments for taxes, labor, supplies, materials and for equipment and, in order to avoid any interruption on… Held: under these facts the parties intended a debtor-creditor relationship in connection with the expenditures made by petitioner on the subcontractor's behalf and the outstanding obligations of the subcontractor to petitioner did not become worthless to any extent prior to 1962.

Held, that assessment and collection of deficiencies are not barred by the statute of limitations. Held: that assessment and collection of deficiencies are not barred by the statute of limitations. Held, further, that the petitioners have failed to show error in the respondent's determination of the deficiencies.

1. Held: Petitioner failed to prove that during the taxable year 1959 he incurred expenses in excess of the amount allowed by respondent in the operation of his landscaping proprietorship. Held: Petitioner failed to prove that during the taxable year 1959 he incurred expenses in excess of the amount allowed by respondent in the operation of his landscaping proprietorship.

Petitioner purchased a trade name including any goodwill attached thereto, and as a sole proprietor doing business under that name promoted the sales of a device for blending colors of paint. Held: The installment payments made in 1961 and 1962 for the trade name were for acquiring a capital asset and are not deductible as ordinary and necessary business expenses, nor as depreciation.

Respondent determined a deficiency in income tax, plus a 5 percent addition for negligence, for the calendar year 1964 against petitioner and his wife, Sue E. Barkley. The latter is not before us. Held: this Court is not the appropriate forum for airing such grievances and, since petitioner has adduced no evidence of error on the part of respondent, his determination stands approved.

Held: Petitioners are not entitled to a deduction for subsistence expenses; they were not away from home in the pursuit of a trade or business during… Held: Petitioners are not entitled to a deduction for subsistence expenses; they were not away from home in the pursuit of a trade or business during the taxable year, within the purview of sec. 162(a)(2), I.R.C. 1954; held, further, respondent's determination of allowable depreciation deduction sustained for failure of proof.

Petitioners purchased from a building contractor a 2-family house, on or about June 10, 1959, for $31,000. The contractor guaranteed the basement against water seepage. Held: under the objective rather than the subjective test, the debts, assuming they were debts, became worthless in 1961 and petitioners are not entitled to the deductions claimed.

Held, premiums paid by petitioners on accident and health insurance policies for the years 1962 through 1964, are deductible as medical expenses under section 213 of the 1954 Code as it existed… Held: premiums paid by petitioners on accident and health insurance policies for the years 1962 through 1964, are deductible as medical expenses under section 213 of the 1954 Code as it existed during said years.

Held, petitioner's experimental activities at home did not constitute a trade or business during the years involved and expenses incurred in connection therewith are not deductible under secs.… Held: petitioner's experimental activities at home did not constitute a trade or business during the years involved and expenses incurred in connection therewith are not deductible under secs. 162(a), 212(1), or 165(a) and (c)(1) and (2), I.R.C. 1954.

Held, that an amount which the petitioner-husband received from his employer as reimbursement for part of the loss sustained on sale of his former residence, following the employer's… Held: that an amount which the petitioner-husband received from his employer as reimbursement for part of the loss sustained on sale of his former residence, following the employer's transfer to said petitioner's place of employment to another city, is includable in the latter's taxable income.

Held: Petitioner, the father of a boy and a girl, established that he provided over one half his daughter's total support during the year 1960. Held: Petitioner, the father of a boy and a girl, established that he provided over one half his daughter's total support during the year 1960. He failed to establish that he provided over one half the total support afforded his son during 1960, or that he provided over one half the total support furnished either child during 1961.

During the taxable year 1958, petitioners were employed by Pan American World Airways, Inc., Guided Missiles Range Division, in connection with the performance of its… Held: that during the taxable year involved petitioners were not bona fide residents of a foreign country or countries within the meaning of section 91(a)(1), I.R.C. 1954, and are not entitled to exclude from gross income amounts received in those years for services performed at the down range missile site.

Held: (1) Petitioner, Martin Goldfield, realized in 1957 additional long-term capital gain in the amount of $41.98 from the sale in that… Held: Petitioner, Martin Goldfield, realized in 1957 additional long-term capital gain in the amount of $41.98 from the sale in that year of an interest in a partnership; (2) petitioner realized in 1957 and 1959 unreported income of not more than $1,200 in each year from poker playing; and (3) petitioner is entitled in 1959 to additional…

Petitioners made payments on their post-incorporation subscriptions for the stock of a corporation after its incorporation on April 20, 1962. Such payments were made over a period from April 20, 1962, to June 20, 1962. No stock certificates were issued at the time of the payments. In December 1962, after the corporation had ceased the operation of its restaurant business and had become insolvent, the corporation adopted a plan for the issuance of stock within the provisions of section 1244 of the 1954 I.R.C., and, pursuant to such plan, stock certificates for 65 shares of common stock were executed and delivered to each of the petitioners. Held, the 65 shares of stock issued in December 1962 to each of the petitioners do not qualify as "section 1244 stock." Wesley H. Morgan, 46 T.C. 878, followed.

Held, upon the facts that the petitioner is not entitled to the following deductions: (1) A personal exemption of $600 for Mae Dillenburg, his former wife, who filed a separate tax return for 1961. Held: upon the facts that the petitioner is not entitled to the following deductions: (1) A personal exemption of $600 for Mae Dillenburg, his former wife, who filed a separate tax return for 1961. (2) A loss from an alleged theft of farm income in the amount of $9,111.

One of the assets of an insurance business being transferred in a sales transaction was a 5-year covenant not to compete against the selling corporation or an assignee entered into between the selling corporation and its directors. One of the directors was the sole stockholder of the selling corporation. This covenant was not bargained for separately and no value was specifically ascribed to it in the sales contract. Insurance expirations were the most valuable assets transferred by the sale. Held: Although the agreement of purchase and sale was somewhat ambiguous, the covenant not to compete was at most only supplementary to the sale of an insurance business in a general sense. No portion of the purchase price is allocable to the covenant not to compete; the seller is entitled to overall capital gains treatment and the buyer is denied deductions for the amortizable cost of a covenant not to compete. Held, further: The sole stockholder of the selling corporation, upon the corporation's liquidation, must recognize as income a proportionate part of each year's payments received under the agreement of purchase and sale which proportion is deemed in excess of her basis in the assigned contractual right.

Held: Petitioner may properly deduct 90 percent of the costs she incurred in making a trip to Europe. Her expenses are deductible under sec. 162(a), I.R.C. 1954, and section 1.162-5(a)(1), Income Tax Regs.

Held, (1) respondent did not err in determining that the $40,000 paid by Terminal Barber Shops, Inc., pursuant to the agreement entered into with petitioner Estelle Wyler, Inc., constituted long-term capital gain income to the petitioner; and (2) respondent erred in determining that petitioner Estelle Wyler received a constructive dividend of $30,000 from Estelle Wyler, Inc.

Upon the death of the president, founder, and largest shareholder of a corporation, his widow demanded that she be made president and receive an amount equal to his salary for 2 years. Held: Upon the facts, the amounts so received by the widow are includable in her gross income, except for any portion that may be excludable under sec. 101(b), I.R.C. 1954. Held further: The corporation may deduct such amounts in the years they were paid.

Petitioners were corporations, formed and owned either by Cook and Caldwell jointly, or individually, or jointly with their wives, and were all engaged in various phases of the real estate business conducted in the name of Caldwell & Cook, a partnership in which Cook and Caldwell were equal partners. Held, each of the corporations was a viable entity which earned its own income through its own business activities, and the net income of the other 10 corporations for the years here involved is not taxable to corporate petitioner, Caldwell & Cook, Inc., under either sec. 61 or sec. 482, I.R.C. 1954. Held, further, surtax exemptions allowed to 3 of the other 10 corporations and disallowed to the remaining 7 corporations under sec. 269, I.R.C. 1954.

Petitioner purchased his mother's home in order to assist her and with the belief that he could make a profit from its subsequent resale. Petitioner then suffered a loss on such resale. Held: Petitioner has failed to prove that he entered into this transaction primarily for profit.

The petitioner, Geraldine B. Romero, was a checker for Purity Stores, a supermarket in Merced, California, during the years 1955 to 1960, inclusive. In 1959 and 1960, she was also employed as a part-time housekeeper by Walter H. Robinson, an elderly wealthy retired man who lived alone on a five-acre tract located just outside of Merced. He agreed to pay her $100 per week for this employment. During the years 1955 to 1960, inclusive, petitioner received substantial sums of money from Robinson, the amounts received in 1959 being in excess of the agreed wages paid her as housekeeper. Held: (1) The amounts received by Geraldine from Robinson during the years 1955 to 1958, inclusive, were nontaxable gifts within the provisions of section 102(a), I.R.C. 1954; (2) $7,950 of the amounts received by Geraldine from Robinson during the year 1959 was taxable income within the provisions of section 61, I.R.C. 1954; (3) At least a part of the deficiency for the taxable year 1959 was due to neglect or intentional disregard of rules and regulations within the meaning of section 6653(a), I.R.C. 1954.

Held: That net withdrawals of corporate funds by controlling stockholders of two corporations were intended as and were in fact loans and therefore did not constitute taxable distributions of the… Held: That net withdrawals of corporate funds by controlling stockholders of two corporations were intended as and were in fact loans and therefore did not constitute taxable distributions of the corporations' funds to them.

Percentage Depletion: Mining: Gross Income: Treatment Process. - Section 613(a) and (c)(2) and (4). - The cost of the treatment process to uranium ore to produce uranium oxide, U3O8, is not deducted in determining gross income from mining on which 23 percent depletion is based, where the miner owned the ore and the U3O8 or yellow cake until the processor bought the U3O8 from the miner after the processing had been completed.

On January 17, 1959, petitioner, an accrual basis corporation, became indebted to its sole stockholder, a cash basis taxpayer, on a series of notes in the aggregate amount of $108,000. The notes provided for interest at 3 percent per annum, "payable annually," with the right to prepay all or any part of the indebtedness on or after January 17, 1964. At the end of its fiscal year, October 31, 1959, it accrued some 10 months' interest on this debt and claimed a deduction for interest. The amount was not actually paid until July 1960, more than 2 1/2 months after the end of petitioner's fiscal year. Petitioner contends the interest was constructively received by the stockholder. Held: The doctrine of constructive receipt is not applicable and the deduction is prohibited by section 267(a)(2), I.R.C. 1954. Young Door Co., Eastern Division, 40 T.C. 890; Basil F. Basila, 36 T.C. 111, followed.

Payments made by a husband, Harold Goldstein, to his former wife, Betty Yuter, pursuant to a decree of support of a New York court are taxable to the former wife and deductible by the husband under the reciprocal provisions of sections 71(a)(3) and 215 of the Internal Revenue Code of 1954 despite the dissolution of their marriage by a valid ex parte foreign decree of divorce obtained by the husband in Florida wherein no support provision was made for the wife.

Reasonable compensation of principal officer-owner of automobile dealership redetermined.

Petitioner, which was engaged in the business of salvaging and restoring oil storage tanks, sold a number of oil tanks to Ponca Grain Corporation, a corporation formed to store grain. Held: Petitioner has failed to prove that it acquired the Ponca Grain Corporation stock for a purpose other than investment, and therefore, the loss on its sale was a capital loss.

Held, that the petitioner, a married woman who did not obtain a divorce until after the close of the taxable year 1963 is to be considered as married during such taxable year within the meaning of section 214 of the Internal Revenue Code of 1954, despite the fact that she had filed suit for such divorce in 1962, had voluntarily separated from her husband in 1962 pursuant to a written agreement, and had obtained a support order against him in 1963. Accordingly, the petitioner is not entitled to deduct child-care expenses under section 214 because she failed to file a joint return with her husband for the taxable year 1963.

Gain or loss: Basis of business property: Cost v. fair market value. - For purposes of determining gain or loss to the taxpayer on the sale of the assets of his printing business, the taxpayer's adjusted basis in the assets was their cost less depreciation allowed or allowable, rather than the estimated replacement cost of the assets. Taxpayer had not received the assets by gift or inheritance.

An employee profit-sharing trust established by petitioner leased business property to petitioner for a period of 20 years. Held: The applicability of sec. 1241, I.R.C. 1954, depends upon whether the lessee received a payment for the cancellation of a lease. The decision of such question in this case is based upon the substance of the transaction, not its form.

Upon the facts, held: (1) That the assessment and collection of a deficiency for each taxable year 1950 through 1955 are not barred by the statute of limitations, because for each year the… Held: That the assessment and collection of a deficiency for each taxable year 1950 through 1955 are not barred by the statute of limitations, because for each year the petitioners filed a false and fraudulent return with intent to evade tax.

Held, that the petitioner was, during the taxable years in question, a personal holding company and is subject to the personal holding company tax imposed by section 541 of the Internal Revenue Code… Held: that the petitioner was, during the taxable years in question, a personal holding company and is subject to the personal holding company tax imposed by section 541 of the Internal Revenue Code of 1954.

Petitioner in 1963 was the sole owner of a leasehold of property located in San Jose, California. Held: the amount paid for the 950-66, 952-66, and 953-66. Decision will be entered for the relinquishment of the lease is ordinary income to petitioners pursuant to section 1239, I.R.C. 1954.

Held, losses growing out of loans made by two taxpayers, stockholder-employees, to their wholly owned corporation, as well as losses from… Held: losses growing out of loans made by two taxpayers, stockholder-employees, to their wholly owned corporation, as well as losses from guarantees of loans by a bank to their corporation, were business bad debts, deductible in full under section 166(a), I.R.C. 1954; the loans and guarantees did not result in nonbusiness debts under…

Petitioner, who had been employed as a foreign service officer of the State Department for 17 years, was named as a Fellow at the Harvard Center for International Affairs for the purpose of enabling… Held: no part of salary payments to petitioner by the State Department while he was a Fellow at the Center was excludible as a fellowship grant under section 117, I.R.C. 1954 and section 1.117-4(c), Income Tax Regs.

Guarantee Reserve, an insurance company, had 50,000 shares of issued stock of which 37,500 shares were owned by Jaffe and his family, and 12,500 shares were owned by Kutak and his family. Held: Guarantee's redemption in 1958 of 4,167 shares of its stock and payment of $1,375,110 therefor to X constituted a distribution of a dividend to Jaffe in 1958 in the above amount.

Valley Camp's business includes mining coal. It is a parent corporation having several subsidiaries, including Bethany, which is a holding company to which titles to inactive, reserve coal lands are transferred. Bethany has never had any operating capital. Valley Camp owns some coal lands and mines coal from some of them. In 1948, Wheeling, an unrelated corporation, leased the coal mining rights in the Alexander mine to a subsidiary of Valley Camp from which Valley Camp acquired the lease in 1948. Valley Camp exercised in 1959 an option to extend the end of the term of the lease from December 31, 1962, to December 31, 1967. The royalties under the lease were 7 cents per ton of coal mined, plus a small additional amount. Valley Camp took out over 600,000 tons of coal a year. At the end of 1959, 10,623,933 tons of coal remained in place. At 7 cents per ton, the coal in place would yield total royalty payments of $743,685, plus a small additional amount at one cent per ton, about $14,000. In 1959, Valley Camp completed negotiations with Wheeling to purchase the fee interest in the Alexander mine property. It was arranged that title would be transferred to Bethany. Bethany did not have any capital to use in making such purchase. Wheeling agreed to sell the property for $740,639.65. Valley Camp transferred this amount to Bethany, and Bethany took title to the property. The lease was outstanding and in 1960, Valley Camp paid the lease royalties to Bethany, $48,759.25, on 667,989 tons of coal mined, and deducted that amount from its income. Held: Upon the facts, that Valley Camp was the purchaser of the Alexander property, in substance, as of January 1, 1960; that Bethany was merely a conduit through which Valley Camp paid Wheeling the purchase price; that Bethany was only the nominal holder of the bare legal title; and that Valley Camp was not entitled to a deduction for alleged coal royalty payments to Bethany in 1960, but was entitled to an increase in its depletion deduction, as determined by respondent.

Petitioner, a farmer, bought cattle, fed them to increase their weight, and then sold them. Held: The 18 head in 1962 and 14 head in 1963 were property of Sally and the gains upon their sale are not taxable to petitioners. (2) The costs of feeding Sally's cattle were reasonable compensation for her services and are deductible by petitioners. (3) Petitioners have not proved that they are entitled to exemptions claimed for Sally.

1. Held, except for one share of stock of subchapter S corporation in which Sam McIntosh had a basis of $200, petitioners had no basis in… Held: except for one share of stock of subchapter S corporation in which Sam McIntosh had a basis of $200, petitioners had no basis in their shares of stock of, or in any indebtedness owed to them by, the subchapter S corporation as of March 31, 1959; consequently, petitioners are not entitled to deduct their pro rata shares of the net…

Held: On the evidence presented, petitioner did not furnish more than half the support of his minor daughter in 1964 and is not entitled to a dependency exemption for her. Held: On the evidence presented, petitioner did not furnish more than half the support of his minor daughter in 1964 and is not entitled to a dependency exemption for her.

Held: To the extent disallowed by respondent, the salary paid by petitioner to its president, W. Howes Meade, in each of the fiscal years ended in 1957 and 1958 was not reasonable and is not… Held: To the extent disallowed by respondent, the salary paid by petitioner to its president, W. Howes Meade, in each of the fiscal years ended in 1957 and 1958 was not reasonable and is not deductible under the provisions of section 162(a)(1) of the Internal Revenue Code of 1954.

1. Respondent has failed to prove fraud for the taxable years here involved. 2. Reasonable compensation of three officers of petitioner determined from the evidence. 3. Held: $3,000 of the cost of the trip represented a business expense of the petitioner. 4. Compensation paid for services actually rendered by two persons during 3 months of the taxable year ended October 31, 1955, held, deductible by petitioner under section 162, I.R.C. 1954. 5.

Held: 1. Petitioner has failed to prove that its costs of operations for the years 1955 through 1958 exceeded the amounts allowed by the Commissioner. 2. Petitioner has proved that it did not receive income on sales made to other ticket brokers during such years. 3. A withdrawal of funds by Florence M. Barnes from the corporation in 1958 constituted the repayment of funds previously loaned by her to it.

Held, certain fees paid by petitioner, Carson J. Morris, in 1962 and 1963 to a firm of executive recruiters for purposes of seeking employment in an executive capacity are not deductible under either section 162 or section 212 of the Internal Revenue Code of 1954, but constitute nondeductible personal expenses under Code section 262.

Three of petitioner's four equal stockholders and an unrelated fourth party (Preston) entered into negotiations in July and August of 1960 to acquire land and build a… Held: Petitioner did not, in substance, sell a real estate package, consisting of the option, the agreement to lease, and the loan commitment, to Preston for the approximately $100,000 paid by Preston to petitioner's three stockholders. Petitioner is not taxable on the amounts received by its stockholders.

Held: Per diem and mileage allowances received by petitioner Charles J. Jenkins while performing services for the Brotherhood of Railroad Trainmen are includable in gross income. Held: Per diem and mileage allowances received by petitioner Charles J. Jenkins while performing services for the Brotherhood of Railroad Trainmen are includable in gross income.