Volume 28 — Tax Court Reports

Petitioner, who had knowledge of and experience in prospecting phosphate-bearing land and who at the time was conducting such… Held: that petitioner at all times owned and held his interests in properties comprising the assembly primarily for sale to a customer or customers; that his activities in acquiring, holding, and selling his interests in such properties constituted the carrying on of a business; that he sold his interests in the properties in the ordinary…

Jurisdiction -- Deficiency -- Definition -- Tax Imposed By Chapter 1, I. R. C. 1939 -- Secs. 271 and 294 (d). -- The tax imposed by chapter 1, for the purpose of the definition of a deficiency in determining jurisdiction of the Tax Court, includes both the tax imposed by subchapter B and any additions to the tax imposed by section 294 (d); and if the Commissioner in his notice of deficiency separately indicated an overassessment in one part and a deficiency in the other, the…

Petitioner, a domestic corporation, purchased products in the United States and resold them to purchasers in Venezuela during 1948, 1949, and 1950. Held: less than 95 per cent of petitioner's gross income was derived from sources in Venezuela and it therefore does not qualify as a Western Hemisphere trade corporation within the meaning of section 109 of the 1939 Code.

During the taxable year a corporation, of which Joseph and Henry were substantially the sole stockholders, paid premiums on policies of insurance totaling $ 45,000 on their… Held: that the corporation was not a beneficiary of the policies of insurance but that Joseph and Henry were the beneficiaries. Held, further, that the respondent properly included in the taxable income of each the amount of the insurance premiums paid by the corporation on the policies on his life.

Premium paid by petitioner to its bondholders upon the repurchase of its outstanding first mortgage bonds and interest paid to a trustee under bond indenture are deductions which must be allocated between income from mining operations and income from other activities in computing the 50 per cent of net income limitation on petitioner's coal depletion deduction under section 114 (b) (4), I. R. C. 1939.

Petitioner retired as a result of permanent and total disability. Held: amounts received by petitioner pursuant to the disability retirement provisions of the plan were excludible from gross income. Sec. 22 (b) (5), I. R. C. 1939. Haynes v. United States, 353 U.S. 81, 1 L. Ed. 2d 671, 77 S. Ct. 649 (1957), followed.

Exclusion of Income -- Workmen's Compensation -- Health Insurance -- Retirement Pay -- Sec. 22 (b) (5). -- Retirement pay pursuant to State law for retirement of employees after 10 years' service, not based upon incapacity arising out of performance of duties, health insurance, or workmen's compensation laws, is excluded from gross income. Haynes v. United States, 353 U.S. 81, followed.

1. Petitioner, an automobile dealer, assigned from its new car inventory certain automobiles, each year, to company officials, new car salesmen, and department heads. Held: that the cars in question were held by petitioner primarily for sale to customers in the ordinary course of its business, and it was not entitled, under section 117 (j), I. R. C. 1939, to capital gains treatment of the gain realized on their sale. 2.

1. During the years 1949, 1950, and 1951, petitioner was engaged in the activity of transporting untaxed cigarettes from Maryland into Canada, where he sold them. He admitted that he failed to report certain income derived from that activity on his 1950 and 1951 returns. In 1956, he entered a plea of guilty to a charge of criminal evasion of tax for the year 1950. By amended answer, respondent claimed a net worth statement disclosed petitioner had unreported income which approximated 19 per cent of reported income for 1949, 740 per cent of reported income for 1950, and 2,247 per cent of reported income for 1951. Petitioner offered no evidence by way of rebuttal. Held, the net worth statement properly established respondent's claim for deficiencies in tax. Held, further, the deficiencies for 1949, 1950, and 1951 were due to fraud with the intent to evade tax. 2. On November 19, 1951, Leon Papineau purchased a farm for $ 31,000, title to which was taken in the name of his sister, Viola L. Papineau. Other than a loan to Leon of $ 2,000, Viola gave no consideration for her interest in the property. Respondent established the transfer was made when Leon was indebted, and hence it was presumptively fraudulent under New York law as to creditors. Held, respondent's determination that Viola L. Papineau is liable as transferee of the property of Leon Papineau to the extent of $ 29,000 is sustained.

Held, the value of property transferred in trust where settlor retained a secondary life income, is properly includible in settlor's estate, under… Held: the value of property transferred in trust where settlor retained a secondary life income, is properly includible in settlor's estate, under section 811 (c), I. R. C. 1939, and the doctrine of crossed trusts will not be applied, even though it was applied with respect to a similar trust in the estate of the decedent's wife.

1. On July 2, 1948, Cunningham-Ortmayer Company issued 750 shares of $ 1-par-value common stock (having a market value of $ 350 per… Held: the basic transaction did not constitute a recapitalization-reorganization within the meaning of section 112(g)(1)(E), I. R. C. 1939, and the pro rata distribution of the new stock and debentures to petitioners in exchange for the old stock (which old stock was then canceled) and $ 1 per share constituted a distribution essentially…

1. Estate of Eleanor G. Plessen, 25 T. C. 1301, followed in determining amount of deduction for property previously taxed with respect to property held jointly by decedent and his deceased wife which had previously been included in her gross estate. Sec. 812 (c), I. R. C. 1939. 2.

Petitioner held Stockpiled Iron Ore Mining Leases for more than 6 months. Held: the transaction was a sale of the leases and the profits realized were taxable as capital gains.

As part of his contract of employment, petitioner received an unassignable option to purchase stock of his employer corporation at a bargain price. Held: that the exercise of the option on December 29, 1945, bound petitioner and the employer corporation, and that petitioner received the economic benefit of the option as of its exercise in 1945.

Certain amounts withdrawn from a corporation by three of its stockholders held on the facts to be loans and not dividends.

Petitioner was chartered in 1843 as a mutual fire insurance company under the laws of Massachusetts. Since 1873 it has had a guaranty fund of $ 100,000 divided into 1,000 shares. Held: the petitioner is taxable under section 207, I. R. C. 1939, as a mutual insurance company.

1. Petitioners, in 1936, purchased a tract of land upon a portion of which they constructed their residence. Held: petitioners were engaged in the real estate business, and the gain on the sale of the lots in 1951 and 1952 is taxable as ordinary income. 2. Petitioners failed to file a declaration of estimated tax for 1952.

1. Where individual petitioners at all times acted as agents or representatives of certain corporations existing or to be formed, they were not liable personally or in their individual capacity for income arising from the bargain purchase of stock of one corporation by a second corporation. 2.

Petitioner failed to divide and distribute accumulated earnings or profits during a taxable year when, as the record shows, such an… Held: There is no expression of intent in the applicable 1954 Code sections or in the legislative history to alter or revise existing law relative to burden of proof under section 102, 1939 Code, except with respect to accumulations of profits beyond the reasonable needs of the corporation, and then only if the requirements of section 534…

Excess Profits Tax Credit. -- An inventory adjustment at the close of 1949 to reflect a reduction from cost to recoverable value of component parts of a mill produced by the petitioner, which it was unable to deliver because of inability to procure an export license, is not a deduction as contemplated by section 23 of the Internal Revenue Code of 1939 and is therefore not a disallowable abnormal deduction under section 433 (b) (9) for the purpose of computing the excess…

During the taxable years involved petitioner was engaged in mining gilsonite at Bonanza, Utah. 1. Held: that in computing the percentage depletion of petitioner under sections 23(m) and 114(b)(4)(A)(iii) and (b)(4)(B), I. R. C. 1939, the respondent erred in determining that pulverizing and sacking the gilsonite were not ordinary treatment processes. 2.

Petitioner is held to have made a change in the character of its business under section 722 (b) (4), I. R. C. 1939, by reason of a difference in the products (hosiery) furnished, a difference in the capacity for production or operation both installed during the base period and consummated during 1940 as a result of a commitment therefor prior to January 1, 1940, and to have established under section 722 (a) a constructive average base period net income to be used in lieu of…

Petitioner filed timely claims for relief for the fiscal years 1942 to 1946, inclusive, under section 722, referring specifically therein to subsections (b) (2), (b) (3) (A), and (b) (5). Held: since respondent considered such claim on its merits he waived noncompliance with his regulations and cannot now deny relief to petitioner.

Held, that a portion of the deficiency determined by the respondent, undisputed by the parties and due to standard issue adjustments, is not barred by the statute of limitations. Held: that a portion of the deficiency determined by the respondent, undisputed by the parties and due to standard issue adjustments, is not barred by the statute of limitations. Held, further, petitioner has failed to establish any right to relief under either section 721 or 722 (b) (4).

Sec. 117 (m), I. R. C. 1939 -- Collapsible Corporations. -- The petitioner and others formed a corporation to construct an apartment building and obtained a loan guaranteed by the Federal Housing Administration in an amount in excess of the cost of construction.

By agreement dated September 20, 1947, between petitioner Henry J. Tully and Carson C. Potter and wife, the latter, in consideration of petitioner's agreeing not to sell his stock in a certain… Held: the amount received by petitioner represented long-term capital gain as that term is defined in section 117 (a) (4), Internal Revenue Code of 1939, rather than ordinary income under section 22 (a) of the same Code.

A consolidated return was filed by petitioner's parent corporation, which included the income of petitioner together with the form of consent required by the appropriate regulations. Held: such determination invalid.

Respondent allowed petitioner's claim in part for relief under section 722 (b) (4), I. R. C. 1939. Held: that even if we assume that petitioner had been granted the certificate of convenience and necessity prior to December 31, 1939, it would not have reached the level of earnings by December 31, 1939, for which it contends. Held, further, petitioner is entitled to a CABPNI somewhat higher than the Commissioner has determined.

During 1929 and 1930, petitioner acquired more than half of the common stock of the MissouriPacific Railroad Company. Held: petitioner is entitled to deduct in the taxable years 1948 through 1952 the $ 541,113.64 as ordinary and necessary business expenses under section 23 (a) (1) (A), I. R. C. 1939.

The taxpayer is engaged in the wholesale baking business in Denver, Colorado. Its principal product is bread of various sizes and kinds. Held: The depression in taxpayer's earnings caused by increasing the weight of its bread loaf was not the result of a temporary economic circumstance unusual to it within the meaning of section 722 (b) (2). 2.

All of the stock of a corporation, 50 shares, was owned by L. and his 2 sons in 1947 when L. transferred 23 shares into the names of each son. Held: L. did not make a gift of 46 shares of stock in 1947 to his sons; they were only his nominees. (2) L. sold 48 shares of stock in 1950, and the profit realized is taxable as capital gain.

Held, the transactions by and between petitioner corporation and Horace A. Held: the transactions by and between petitioner corporation and Horace A. Gray, Jr., resulted in the creation of a corporation-stockholder relationship instead of a debtor-creditor relationship; therefore, the sums paid out by the petitioner in the taxable year were nondeductible dividends and premium on the retirement of preferred stock.

During the taxable year 1950 the petitioners, who were then husband and wife, engaged in certain gambling and rental operations. Held: that petitioner Louise Dixon has not established that in swearing to the petition in March 1952 she was acting under duress from petitioner Roy Dixon; (2) that since the duplicate copy of the return filed with the collector was not verified as required by section 51 (a), I. R. C. 1939, it was not a joint return of petitioners or a…

Held, respondent's determinations that deficiencies in income tax for the years 1941-1950, inclusive, were due to fraud with intent to evade tax not sustained where the evidence shows only ignorance… Held: respondent's determinations that deficiencies in income tax for the years 1941-1950, inclusive, were due to fraud with intent to evade tax not sustained where the evidence shows only ignorance and negligence on the part of the taxpayer.

The petitioner and his wife were divorced in 1944. Held: that the cash payments of $ 6,200 and $ 2,000 and the cash surrender value of the insurance policy are not periodic payments under section 22 (k), I. R. C. 1939, and are not deductible by petitioner under section 23 (u).

1. Excess Profits Tax (Korean War) -- Excess Profits Net Income Computation -- Sec. 435 (d) (1). -- The petitioner's excess profits net income for the 12 months of 1946 under section 435 (d) (1) is the same as its actual excess profits net income for that calendar year; and the second sentence of that provision is inapplicable despite the fact that the petitioner was affiliated with Kaiser from September 21 through December 18, 1946, filed two separate returns for the…

1. Petitioner's overpayment of 1944 estimated tax taken as credit against 1945 tax liability, held, to afford no occasion for determination by Tax Court as to either 1944 which was not placed in… Held: to afford no occasion for determination by Tax Court as to either 1944 which was not placed in issue, nor as to 1945, as to which deficiency is conceded and no amount in excess of admitted tax liability is shown to have been paid. 2.

Held, taxpayers acquired the right to receive oil payments under the provisions of a unitization agreement equalizing development costs; therefore the sum received as oil payments is ordinary income… Held: taxpayers acquired the right to receive oil payments under the provisions of a unitization agreement equalizing development costs; therefore the sum received as oil payments is ordinary income subject to depletion.

1. Petitioner was in the business of selling television sets. Held: the entire amounts received in each year should be reported as income in the year of receipt. Automobile Club of Michigan v. Commissioner, 353 U.S. 180. 2.

Decedent bequeathed to trustees for the benefit of his wife (she having power of appointment over corpus) a sum equal to one-half (1/2) of… Held: the one-half of the gross estate should be reduced by the value of the life interest of the wife under the annuity and insurance contracts; (2) the valuation of such interest is to be made on the basis of the wife's actual life expectancy; (3) the use of the wife's terminable interest under the annuity and insurance contracts in…

On June 21, 1934, petitioner was indebted to Kurtis R. Froedtert, its founder and owner of more than 50 per cent of its outstanding common… Held: 50 per cent of petitioner's outstanding stock was owned directly or indirectly by or for Kurtis R. Froedtert during the taxable years involved within the meaning of the 1939 Code section 24 (b) for purposes of section 24 (c) (3), and the amounts of accrued but unpaid interest on petitioner's indebtedness to Froedtert were properly…

Petitioner owned securities. Also, she owned all of the stock of three corporations. Held: that all of the transactions represented arrangements whereby petitioner made sales of her securities, indirectly, to each of her three wholly owned corporations, and, therefore, no deductions are allowable in respect of losses from such sales because of the prohibition contained in section 24 (b) (1) (B), 1939 Code.

1. After complete transfers of stock in contemplation of death, stock dividends were paid on the stock out of current earnings. Held: that the shares of stock distributed as stock dividends are includible in the gross estate of the transferor as transfers made in contemplation of death. 2.

Petitioner concedes that for the year 1946 it erroneously deducted from income $ 15,000, which was the credit balance at the end of that year in a reserve account for cargo loss and damage entitled… Held: that petitioner should be allowed a deduction for cargo loss and damage in 1948 to the extent incurred in that year, regardless of the fact that part of the deduction was erroneously taken in prior years.

Petitioner is a corporation engaged in the production of oil. Held: that the 1950 real estate taxes involved accrued in December 1949, when they became a lien on the properties; that petitioner properly took the deduction therefor in its 1949 income tax return; and that no deduction therefor is allowable to it in 1950.

Prior to 1951 the petitioner organized 3 corporations for the purpose of carrying on a single business of producing cinder blocks. Held: the debt was not deductible under section 23 (k) (1), I. R. C. 1939, as a business bad debt because it did not bear a proximate relation to a trade or business of the petitioner. Held, further, that payment of the endorsement liability on a note did not give rise to a loss deduction under section 23 (e) (2).

1. Under Iowa law, where husband and wife execute a joint and mutual will which remains unrevoked at the death of one of the makers, the surviving spouse is estopped to set up any right which tends in whole or in part to defeat the common purpose. 2. Order of District Court of Polk County, Iowa, approving widow's election to take her statutory interest in lieu of the provisions of will, under the facts, is not binding on this Court. 3.

1. Petitioner quarried a limestone which could have been used either in the production of hydrated hydraulic lime or for agricultural purposes. However, because of the existence of other limestone in the agricultural market chemically better suited to the farmers' needs, petitioner could not sell its quarried stone in that market. Petitioner's stone was therefore subjected to certain treatment processes in order to produce hydrated hydraulic lime, a product of which petitioner was the only known producer during the years in issue. Held, hydrated hydraulic lime was the first commercially marketable mineral product arrived at in petitioner's operations, and all the processes utilized in its production were ordinary treatment processes, thereby entitling petitioner to include the total gross income therefrom in its basis for percentage depletion. 2. Petitioner sold hydrated hydraulic lime in both a pure and an admixed state. The sales of the pure product were made at the minimum price of $ 19.20 per ton, and the sales of the admixed product at a price in excess thereof. Held, petitioner properly computed gross income from the property by multiplying the total tonnage of hydrated hydraulic lime sold, whether in a pure or an admixed state, by $ 19.20, and adding thereto the income realized from the sale of waste material.

1. At the beginning of the first taxable year in question, petitioner took over the business of a partnership then being conducted by two individuals on leased premises. Held: the sale of the stock and one-half interest in the leasehold by the retiring stockholder must be viewed on a unitary basis and the total consideration paid by petitioner should be allocated between the stock and leasehold on a reasonable basis.

During a number of years petitioners purchased, as tenants in common, a number of lots in existing developments and 2 tracts of land which they subsequently subdivided. Held: that the lots held by the petitioners as tenants in common and sold by them during the taxable years were property held primarily for sale to customers in the ordinary course of their business of buying and selling real estate in promoting their interest in the lumber company.

Excess profits tax relief under section 722 (b) (4) of the Internal Revenue Code of 1939 denied where the evidence failed to show an acceptable basis for reconstruction of base period earnings which would result in credits in excess of those used by petitioner under the invested capital method.

1. There having been no waiver of regulatory requirements by the Commissioner and no administrative action having been taken on a claim under section 722 (b) (4) first made on August 8, 1952, whereas the notice of disallowance of claims under section 722 had been issued June 9, 1950, this Court has no jurisdiction to consider the subsection (b) (4) claim. 2. Petitioner has not shown that it is entitled to relief under section 722 (b) (1) or (b) (2). 3.

The petitioner has been a manufacturer of infants', children's, misses', and growing girls' shoes since its incorporation in 1934 when it acquired the business of Marathon which had been producing such shoes in the high-quality, high-priced field since 1923. Petitioner claimed relief under section 722 of the Internal Revenue Code of 1939 from excess profits taxes for the fiscal years ended November 30, 1941 to 1946, inclusive, on the grounds that its level of earnings during the base period was an inadequate standard of its normal earnings, largely because of economic circumstances resulting from production and sales policies instituted during the period May 1, 1934, to February 9, 1935, by a management which was eliminated on the latter date. Held: 1. The petitioner is not entitled to relief under section 722 (b) (1) or (b) (2) because the facts fail to establish that the petitioner's low base period net income was due to external physical or economic circumstances unusual in the experience of the petitioner. 2. Assuming petitioner is qualified for relief under section 722 (b) (4) because it changed the character of its business immediately prior to the base period, petitioner is not entitled to relief under section 722 since it has not proved a constructive average base period net income, on the hypothesis that it changed the character of its business 2 years before it did so, which would result in greater benefits than the credits granted under section 714.

Held, petitioner is not entitled to excess profits tax relief under section 722 (b) (1), (b) (2), (b) (3), or (b) (5), I. R. C. 1939. Held: petitioner is not entitled to excess profits tax relief under section 722 (b) (1), (b) (2), (b) (3), or (b) (5), I. R. C. 1939.

1. Excess Profits Tax Relief, Sec. 722 (b) (4) -- Change in Character of Business -- Acquisition of Competing Newspaper. -- The petitioner's acquisition of all the property and assets of two competing newspapers in 1927, in exchange for its stock which was placed in a voting trust agreement terminating in 1940 following litigation by the stockholders, is not a base period change in the character of the business within the terms or intendment of section 722 (b) (4). 2.

Held, gifts in trust to minor grandchildren of taxpayers, where the trustees, the parents of the beneficiaries, were given broad powers to use principal and income for… Held: gifts in trust to minor grandchildren of taxpayers, where the trustees, the parents of the beneficiaries, were given broad powers to use principal and income for the benefit of the beneficiaries, were gifts of future interests and not entitled to the exclusions of section 1003 (b) (3), I. R. C. 1939.

The corporation of which decedent was an officer paid after his death to his estate the approximate amount of the salary he would have earned from the time of his death to the end of the year. Held: the payment was not compensation for services, but was a gift excludible from gross income under section 22 (b) (3), I. R. C. 1939.

During 1953, petitioner's niece and two nephews lived in institutions. Held: petitioner was not entitled to claim dependency credits for the niece and two nephews in computing her income tax liability for such year.

On May 9, 1947, all of the stock of petitioner's predecessor was owned by Group S. Through purchases made on June 25 and 30, Corporation N acquired a 75 per cent interest in petitioner's predecessor from Group S. On June 30, the predecessor corporation was liquidated, Group S and Corporation N receiving its assets. Petitioner was organized on July 1 and, in exchange for the assets of its predecessor, issued to Group S and Corporation N its stock and bonds. On July 15, Corporation N created a voting trust of those shares of petitioner's stock which it then owned. Held, for the purpose of deciding whether "control" survived the exchange, the acquisition by Corporation N of stock in both the petitioner and its predecessor was a mutually interdependent step in the transaction, while the creation of the voting trust was not and is therefore to be disregarded. Held, further, immediately after the transfer, the transferor corporation's stockholders were in "control" of the transferee corporation, and therefore a tax-free reorganization, within the meaning of section 112 (g) (1) (D), was effected, giving the property acquired by petitioner the same basis in its hands as it had in the hands of its predecessor.

Held, the owner of a one-half interest in income-producing realty is entitled to deduct only one-half of the amount paid by him for necessary repairs on the property during the taxable year, since he is entitled to reimbursement from the co-owner of the property for any payments in excess of one-half.

Held, the five minor children of the petitioners were not bona fide partners in the Spiesman & Sons partnership during the years 1951 and 1952, within the meaning of sections 191 and 3797 (a) (2), I.… Held: the five minor children of the petitioners were not bona fide partners in the Spiesman & Sons partnership during the years 1951 and 1952, within the meaning of sections 191 and 3797 (a) (2), I. R. C. 1939, as amended by section 340 (a) and (b) of the Revenue Act of 1951.

Held, taxpayers who made bank loans on the security of common stock and deposited the proceeds in their separate bank accounts and on the… Held: taxpayers who made bank loans on the security of common stock and deposited the proceeds in their separate bank accounts and on the same day or in some instances a few days later purchased tax-exempt securities in amounts that were for the most part the same as the amount of the indebtedness incurred, had incurred indebtedness to…

While serving as counsel for the receivers of a corporation, petitioner, in 1941 and 1944, purchased 98,000 voting trust certificates of the corporation's stock. Some 60,000 certificates were purchased from the corporation which had held them as security for debts owed it by its deceased president; the other 38,000 certificates were purchased from the administrators of the deceased president's estate. The corporation purchased outstanding judgments against its deceased president, and would have been entitled to resort to the 38,000 certificates, along with his other assets, to satisfy the judgments so purchased. As a result of litigation commenced by stockholders of the corporation, petitioner, in 1952 and in 1954, paid to the corporation's receivers, the amount of the outstanding indebtedness owed by the corporation's deceased president, together with all interest thereon, in order to retain the voting trust certificates. Petitioner claimed the interest on such indebtedness, accruing from the time he originally purchased the certificates up to the time of the court decree awarding him a clear title thereto, as deductible interest on his returns for 1952 and 1954. The respondent disallowed the deductions. Held, such amounts of interest represented an additional cost of the voting trust certificates and were not deductible as "interest paid or accrued" within the meaning of section 23 (b), I. R. C. 1939, and section 163 (a), I. R. C. 1954.

The petitioner, a wholesale liquor dealer, paid sums of money to a corporation organized by nine Arkansas liquor wholesalers for the purpose of persuading Arkansas voters by various advertising… Held: such sums are not deductible either as business expenses under section 23 (a) (1) (A), I. R. C. 1939, or as contributions under section 23 (q), I. R. C. 1939.

Held, under the facts, that petitioner furnished more than one-half the cost of the support of his two minor children during the taxable year 1954, and is entitled to the credit for dependents… Held: under the facts, that petitioner furnished more than one-half the cost of the support of his two minor children during the taxable year 1954, and is entitled to the credit for dependents pursuant to the provisions of sections 151 and 152, I. R. C. 1954.

Held, that sections 294 (d) (1) (A) and 294 (d) (2), I. R. C. 1939, which impose additions to income tax for failure to make and file a declaration of… Held: that sections 294 (d) (1) (A) and 294 (d) (2), I. R. C. 1939, which impose additions to income tax for failure to make and file a declaration of estimated tax and for substantial underestimate of estimated tax, are not repugnant to the due process clause of the Fifth Amendment to the Constitution of the United States.

1. Held, (a) that contracts between petitioner and each of its several principals provided that petitioner would sell or attempt to sell… Held: that contracts between petitioner and each of its several principals provided that petitioner would sell or attempt to sell products of a principal to a department of the Government, and would solicit, attempt to procure, and procure Government contracts for a principal; and (b) that under each of such contracts petitioner's…

Prior to 1938, petitioner had paid some voluntary pensions on a year-to-year basis to a limited number of its retired employees. It did not have any funded group annuity system. Held: under section 711 (b) (1) (J), 1939 Code, the deductions for expenditures by petitioner for voluntary pensions, funded pensions, past service retirement annuities, and future service retirement annuities in the base period years 1936-1939, inclusive, constituted a single class of deductions.

Petitioner's claim for relief under section 722 (b) (4), I. R. C. 1939, on the ground that the character of its business had changed, held, properly disallowed in view of the absence of any… Held: properly disallowed in view of the absence of any permissible reconstruction of normal earnings which would exceed the excess profits credit to which it is entitled in any event under section 713 (f).

1. The petitioner operated a country grocery store for a part of the period involved and a farm for the other part. Held: that the respondent did not exceed the authority granted him in section 41 of the Internal Revenue Code of 1939 in disregarding the petitioner's records and accounting method and that the respondent's net worth statement, after giving effect to oral stipulations and certain other adjustments, is approved. 2.

Improvements by Lessee on Lessor's Property -- Sec. 22 (a) and (b) (11), I. R. C. 1939. -- The owner of real estate leased the property to a corporation of which she was a principal stockholder,… Held: that the petitioners did not realize taxable income as a result of such improvements either at the time of construction thereof or upon termination of the lease.

1. Deduction -- Loss -- Termination of Contracts and Business. -- The taxpayer has not shown its right to deduct in 1952 an alleged loss on contracts which, by their terms, could not survive the death in 1947 of the one man who was to perform the work under those contracts. 2.

Petitioners did not file a declaration of estimated tax for the taxable years 1950 and 1951. Held: no error was committed by respondent.

From 1948 to 1951, inclusive, petitioner was engaged in business as a ship chandler. Held: commission payments to the officers of ships are an ordinary and necessary business expense of a ship chandler. Held, further, commission payments made by petitioner during the years in issue did not exceed 7 1/2 per cent of sales.

1. The respondent's determination that petitioner William O'Dwyer received $ 10,000 from John P. Crane during the year 1949, and that this amount was includible in the taxable income of petitioners for that year, held not to be erroneous where petitioners introduced no evidence showing either that the amount was not received or that, if received, it was not taxable income under section 22 (a) of the Internal Revenue Code of 1939. 2.

Petitioner lessor, an accrual basis taxpayer, entered into a lease contract in 1949 for a 10-year period, 1950 to 1959, inclusive, with a rental of $ 30,000 per year. Held: respondent's determination upheld. Advance payment was primarily rent and is includible in gross income in the year of receipt rather than in a subsequent year regardless of the fact that the petitioner is on an accrual basis.

1. Deductions -- Insurance Premiums -- Sec. 23 (a) (1) (A) and (a) (2), I. R. C. 1939. -- Petitioner, a doctor, acquired three disability insurance policies which provided that he would receive… Held: that the insurance premiums paid in the taxable year were not ordinary and necessary expenses of petitioner's business, a medical practice.

Prior to a flood in June 1950, petitioner stored all of its banking records in the basement of its building. Held: the alleged decline in the fair market value of the building resulted in no deductible loss in 1950.

Douglas Chandor, a portrait painter of international reputation, now deceased, after the Yalta Conference conceived the idea of painting a group… Held: the study portrait of Churchill which petitioner sold was a capital asset which Chandor had owned for more than 6 months and was not property held by him primarily for sale to customers in the ordinary course of his trade or business and petitioners are entitled to capital gains treatment under section 117 of the 1939 Code.

Held, that petitioner was not an employee of Ozone Metal Products Corp. during the year 1952, within the meaning of section 103 (g) (3) of the Renegotiation Act of 1951, and that, therefore,… Held: that petitioner was not an employee of Ozone Metal Products Corp. during the year 1952, within the meaning of section 103 (g) (3) of the Renegotiation Act of 1951, and that, therefore, petitioner's contract with Ozone is not exempt from renegotiation.

Held, the petitioner has shown that Tankport commenced business during the base period within the meaning of section 722 (b) (4) and that its excess… Held: the petitioner has shown that Tankport commenced business during the base period within the meaning of section 722 (b) (4) and that its excess profits tax computed without the benefit of section 722 results in an excessive and discriminatory tax. Held, further, a constructive average base period net income determined.

Relief under section 722 (b) (4), 1939 Code, denied where changes in the design of certain products were merely routine changes in products already manufactured, and not a substantial departure from the character of the business.

1. Four corporations in which certain of the petitioners were stockholders were engaged in the business of subdividing tracts of land into lots and constructing and selling houses thereon. Held: that payments made by the corporations to the water company for the construction of the waterlines were properly included by corporations in computing the cost of the houses sold. Colony, Inc., 26 T. C. 30.

In 1946, petitioner purchased a tract of land which he intended to subdivide and sell in individual lots. Held: petitioner was not entitled to include the amount of $ 25,000 or any lesser sum supposedly owed to the seller, as a part of his basis for determining the gain realized on the resale of the land, from 1946 to 1949, inclusive, and such gain was taxable to him as ordinary income in the year such lots were sold.

Income -- Unpaid Salary of Deceased Husband Paid to Widow. -- A corporation which employed the husband of the petitioner owed him in excess of $ 100,000 of earned but unpaid commissions on May 23, 1927. He entered into a contract with the corporation on that day whereby the corporation agreed to pay $ 100,000 at the rate of $ 10,000 a year to the employee's wife after his death.

1. Sec. 112 (f), I. R. C. 1939 -- Involuntary Conversion. -- The property of the petitioner was condemned by the State of California under its power of eminent domain. Held: that failure of the petitioner to invest in similar property the portion of the money which was paid to the mortgagee does not justify recognition of gain to the petitioner. Fortee Properties, Inc., 19 T. C. 99, followed. 2.

Held, taxpayer James J. Standing was on an accrual method for reporting business income and held, further, items representing interest… Held: taxpayer James J. Standing was on an accrual method for reporting business income and held, further, items representing interest on income tax deficiencies for prior years and expenses incurred in settling the deficiencies were properly accrued under section 22 (n) (1), I. R. C. 1939, as deductions allowed by section 23 attributable…

1. Corporation owning property with respect to which its stockholders (petitioners) agreed to cause conveyance, to procure F. H. A. commitments, and to have streets… Held: to be collapsible under section 117 (m), I. R. C. 1939, so that gain realized by petitioners is ordinary income, notwithstanding that property was actually conveyed by stockholders after its distribution to them on dissolution, and that construction work was largely performed by independent contractors. 2.

Respondent's determination, in accordance with his regulations, that petitioners' corporation was collapsible under section 117 (m), I. R. C. 1939, and that gain realized in 1950 on sale of its stock… Held: on the facts, to have been properly made where the intention to sell the stock was formed prior to completion of the construction by the corporation.

1. Held, that the deficiencies determined by the respondent for each of the years 1941 through 1944, and also the increased deficiency for 1943 as claimed in… Held: that the deficiencies determined by the respondent for each of the years 1941 through 1944, and also the increased deficiency for 1943 as claimed in amendments to his answer, are barred by the applicable statute of limitations. None of the returns for said years was false or fraudulent with intent to evade tax.

1. Held, that the basic purpose and intent of section 12 (c), I. R. C. 1939, which allows head-of-household status in certain… Held: that the basic purpose and intent of section 12 (c), I. R. C. 1939, which allows head-of-household status in certain situations, is to extend to unmarried householders some of the benefits of the income splitting which is available to married couples -- if the household, in addition to being the taxpayer's home, is also the principal…

1. Petitioner, a corporation, sold heavy machinery and related equipment to political subdivisions in Missouri and Kansas. Held: of the amounts in dispute, the amounts attributable to transactions not evidenced by written obligations which, on their face, provided for the payment of interest, are not tax exempt within the meaning of section 22 (b) (4), 1939 Code.

1. Partnership profits from a gambling casino determined in the light of the applicable burden of proof and evidence in the record. 2. Petitioners are liable for additions to tax for underestimation for 1948 and 1949 pursuant to section 294 (d) (2), I. R. C. 1939, and for failure to file declarations for 1949 pursuant to section 294 (d) (1) (A).

L. H. Carruth died testate August 19, 1949, owning property which he had let for a cash rental. Held: subsequent distribution by the trust of such amounts of rentals was not a distribution of income within the meaning of section 162 (b), I. R. C. 1939, and such distributed amounts are not includible in the gross income of the beneficiary, Ostella Carruth.

During the taxable years involved petitioner was engaged in quarrying and processing limestone. 1. Held: that the first commercially marketable product produced by petitioner was chemical grade limestone within the meaning of section 114 (b) (4) (A) (iii), I. R. C. 1939, thereby entitling petitioner to compute its percentage depletion deduction at the statutory rate of 15 per cent. 2.

When Ernst Zobel died in 1933, his son, Hans Zobel, owed him approximately $ 50,000. This debt was appraised for Federal estate tax purposes as having no value. Held: payments on the debt, having a zero basis in the estate of Ernst, constitute income to the petitioner. Held, further, such income must be taxed as ordinary income since the estate of Ernst did not receive it as a result of a sale or exchange of a capital asset.

Decedent and her husband executed identical trusts, on the same day, and each transferred to them $ 125,000 paid-up insurance. Held: the trusts were reciprocal under the doctrine of Lehman v. Commissioner, 109 F. 2d 99, and the value of the husband's trust was rightly included in decedent's gross estate under section 811 (c) (1) (B) and (c) (1) (C), I. R. C. 1939.

Petitioner, on several separate occasions, borrowed certain sums of money to operate its business. Held: the amounts withheld by the lender or lenders were in reality interest payments on borrowed capital which should be adjusted in accordance with section 433 (a) (1) (O), I. R. C. 1939.

Held, that the payments from a corporation to the petitioner, a stockholder, were not consideration for the letters patent and patent applications transferred by the petitioner to the corporation,… Held: that the payments from a corporation to the petitioner, a stockholder, were not consideration for the letters patent and patent applications transferred by the petitioner to the corporation, but were dividend distributions to the petitioner.

1. Sec. 117 (j) (1) and (k) (1), I. R. C. 1939 -- Capital Gain. -- Held, petitioners' partnership had the right to cut certain timber and sell on its own account, and accordingly petitioners were… Held: petitioners' partnership had the right to cut certain timber and sell on its own account, and accordingly petitioners were entitled to report gains as capital gains rather than as ordinary income. Principles established in Helga Carlen, 20 T. C. 573, applied. 2.

Madison Avenue Corporation, during and prior to the taxable periods involved, was engaged in managing and leasing office space in the Sterick Building, its principal asset,… Held: In the determination of the excess profits tax credit for 1951 and the period January 1 to June 10, 1952, inclusive, respondent did not err in using equity capital in an amount less than zero for the purpose of computing capital reduction. Thomas Paper Stock Co., 22 T. C. 1294, distinguished. 2.

Held: (1) A 99-year leasehold cannot be amortized or depreciated over the shorter estimated life of a building located on the leased property when acquired; (2)… Held: A 99-year leasehold cannot be amortized or depreciated over the shorter estimated life of a building located on the leased property when acquired; (2) a 99-year lease with options to terminate at the end of 25, 50, and 75 years is not the equivalent of a lease for a 25-year original term with options to renew.

1. In each of the taxable years petitioner Franklin S. Speicher received percentage payments from a corporation to which he had transferred complete ownership of an invention which he had… Held: the payments were made as part of the purchase price of an invention which petitioner assigned to the corporation and the payments were properly treated as long-term capital gain under section 117, I. R. C. 1939. 2. In 1951, petitioner did not file a declaration of estimated tax.

In June 1940, petitioner entered into a verbal agreement with Hunter, under which she agreed to quit her employment and to move into an apartment or residence in Mobile, Alabama, and thereafter… Held: The amount of the judgment recovered by petitioner was income, and not a bequest. 2. The amount paid as attorneys' fees was an expense incurred by petitioner in the recovery of income, and not an exclusion from income. 3.

1. At January 1, 1950, petitioner Andre Picard was employed by a lumber company at a fixed salary of $ 10,000 per year, and early in 1950… Held: that petitioner was required to file a declaration of estimated tax for 1950 on or before March 15 of that year, whether such declaration be an individual declaration or a joint declaration with his spouse, since under section 58 (a), I. R. C. 1939, the requirement for filing such declaration applies to every individual whose gross…

Petitioner was a 50 per cent stockholder in a corporation and held an option to purchase the remaining stock. Held: this was a distribution of earnings by the corporation which was essentially equivalent to the constructive distribution to the petitioner of a taxable dividend under section 115 (g), I. R. C. 1939.

Sec. 722 (b) (2) and (3) (A) -- Depressed Business. -- The petitioner does not qualify for relief either under subsection (b) (2) or (3) (A) of section 722 since it has not shown the necessary depressed business.

Sec. 722 (b) (2). -- Petitioner, which made and sold a cough remedy, contends that extensive use of its product as a loss leader by retailers in the years 1932-1935 caused a loss of goodwill,… Held: relief denied as the evidence fails to prove that earnings were depressed as a consequence of the facts alleged.

For several years prior to 1933, petitioner Salvatore Apicella engaged in the sale and manufacture of furniture as a sole proprietor, during which time his wife, Rachel, contributed some capital and… Held: The trust should not be recognized for income tax purposes under the doctrine of Helvering v. Clifford, 309 U.S. 331. 2. Respondent did not err in determining that the long-term capital gain from the liquidation of the corporation was taxable to petitioners. 3.

Jurisdiction -- Notice of Deficiency -- Department of Finance of Virgin Islands. -- There is no showing that the Head of the Tax Division of the Department of Finance of the Government of the Virgin Islands was authorized as a delegate of the Secretary under section 6212 of the I. R. C. 1954 to notify the petitioner of a deficiency in income tax and a notice from such person does not give this Court jurisdiction.

1. Petitioner, a judge of a State court, received reimbursement for certain expenses of travel, meals, and lodging, including a mileage… Held: petitioner has failed to show that the mileage allowance included in income and then deducted did not include a proper share of depreciation; in any event, since he did not prove the actual amount of his deductible costs of travel, meals, and lodging, including automobile depreciation, respondent's disallowance of the additional…

Res Judicata -- Transferee -- Sec. 534, I. R. C. 1954. -- A prior decision on the merits of the tax liability of the transferor for 1948 is res judicata, in its full impact of estoppel by judgment, of the liability of the transferee for those same taxes where the transferee admits its liability as transferee.

Petitioner on May 5, 1951, received an unsecured, non-interest-bearing promissory note, payable 240 days thereafter, as evidence of the indebtedness of the maker. Held: the note was not the equivalent of cash in 1951 and did not constitute income taxable to petitioners in that year.

Held, assets found in possession of decedent at time of death were proceeds of business owned solely by decedent's wife, were her property, and were not includible in decedent's gross estate. Held: assets found in possession of decedent at time of death were proceeds of business owned solely by decedent's wife, were her property, and were not includible in decedent's gross estate.

Petitioner, chartered as a mutual insurance company, held, taxable under section 207, I. R. C. 1939, even though it had guaranty fund certificates outstanding, Citizens Fund Mutual Fire Insurance… Held: taxable under section 207, I. R. C. 1939, even though it had guaranty fund certificates outstanding, Citizens Fund Mutual Fire Insurance Co., 28 T. C. 1017 (decided this day), and had accumulated reasonable reserves. Order of Railway Employees, 2 T. C. 607.

Petitioner, licensed and doing business as a mutual fire insurance company, held taxable as a mutual company under section 207, Internal Revenue Code of 1939, notwithstanding existence of guaranty fund certificates bearing interest, with principal payable from accumulated surplus, and which entitled the holders to elect one-half of the directors. Holyoke Mutual Fire Insurance Co., 28 T. C. 112, followed.

Petitioner amended its pension plan and trust in 1949 so as to exclude hourly paid employees from benefits for services after 1949. The rights of such persons then became vested and nonforfeitable. Held: the payment in 1950 by petitioner to the trustees on behalf of the hourly paid employees constituted a contribution into a pension plan within the meaning of section 23 (p) (1), and deductibility thereof is subject to the limitations in section 23 (p) (1) (A).

1. Judgment in a prior proceeding which established the value of the closing inventory of a predecessor taxpayer, held, to estop the parties from litigating issues involving items of the same… Held: to estop the parties from litigating issues involving items of the same inventory for the opening of the following year. 2.

Petitioner was a nonresident alien with substantial assets in a custody account in the United States. Held: on the facts of this case petitioner was not engaged in trade or business within the meaning of section 211 (b), I. R. C. 1939.

Travel Expenses of Wife Paid by Husband's Employer -- Income to Husband. -- A corporation paid the traveling expenses of the wife of its vice president who accompanied him on a business trip. Held: The corporation did not make a gift of the cost of the wife's trip. (2) Those costs were petitioners' personal expenses. (3) The husband realized income in the amount of the corporation's disbursement for his wife's trip.

Trust agreements relating to corpora primarily composed of insurance policies on the donor's life interpreted to give beneficiary-wife the right to call for all of the corpora at any time. Held: payments made by the donor to the trustees to be used in payment of the premiums on the policies are not gifts of future interests within the meaning of section 1003 (b) (3), I. R. C. 1939.

In 1950 the North Side Bank was consolidated with the petitioner, and in 1951, the Franklin Bank and Trust Company was consolidated with… Held: petitioner, in computing its excess profits tax for the year 1951, is not entitled to a carry-forward under section 432 (c) (2) of the unused excess profits credit of the Franklin Bank and Trust Company; held, further, the cash and loan items of a bank are not operating assets within the meaning of section 435 (g) (10) (B); held,…

Property taxes on petitioner's property for the year 1951 were levied in December 1950. The taxes were not a lien on the property in 1950 nor did petitioner become personally liable therefor in 1950. Held: respondent upheld. The taxes in question did not accrue in 1950 since they were not imposed for that year, they did not become a lien in 1950, and petitioner did not become personally liable therefor in 1950.

Held, petitioner, who was separated from his spouse under a decree of separation a mensa et thoro in 1951, is not entitled to an… Held: petitioner, who was separated from his spouse under a decree of separation a mensa et thoro in 1951, is not entitled to an exemption credit of $ 600 for his spouse under section 25 (b) (1) (A), I. R. C. 1939, and is not entitled to a deduction under section 23 (x), I. R. C. 1939, for medical expenses incurred by his spouse and paid…

Petitioner derived profits in excess of those allowed by section 3 of the Vinson Act in the performance of naval aircraft contracts. Held: the Vinson Act, as amended, clearly contemplates offsets among all aircraft contracts in computing and paying into the Treasury Department excess profits for a single taxable year.

Held, that the activities of the corporate petitioner in constructing, maintaining, and operating racing boats did not constitute the… Held: that the activities of the corporate petitioner in constructing, maintaining, and operating racing boats did not constitute the carrying on of a trade or business, but were incident to the personal hobby of its sole stockholder, and the corporation is not entitled to deduct amounts expended by it as ordinary and necessary business…

In years prior to 1951, the taxable year in question, petitioners, in the farming and ranching business, included their breeding herd in inventory and reported their income on the… Held: that, under the facts, the case of Elsie SoRelle, 22 T. C. 459 (1954), is controlling, and petitioners improperly took depreciation on their breeding herd for the year 1951.

Petitioner and Cherry Gardens Apartments, Inc., are corporations which were owned equally and controlled by H. F. Van Nieuwenhuyze and W. W. Mink during the period involved. Held: the contracts were not the result of arm's-length negotiations between uncontrolled taxpayers and accordingly petitioner is not entitled to deduct the excess cost as a loss, but the entire cost of construction is allocable to the cost basis of the Cherry Gardens Apartments.

Held, petitioner, a nonprofit corporation, is not entitled to exemption from taxation for the years 1953 and 1954 under the provisions of section 101 (6), I. R. C. 1939, and section 501 (c) (3), I.… Held: petitioner, a nonprofit corporation, is not entitled to exemption from taxation for the years 1953 and 1954 under the provisions of section 101 (6), I. R. C. 1939, and section 501 (c) (3), I. R. C. 1954.

Alimony v. Child Maintenance -- Sec. 22 (k), I. R. C. 1939 -- Fixing Amount of Child Support -- Subsequent Amendment. -- Entire payment is taxable to divorced wife where it was for alimony and maintenance of the child under agreement incorporated in divorce decree, despite a later awarding of a lesser payment to the support of a minor child.

1. Petitioners did not sustain an allowable loss from abandonment of an irrigation system during the taxable year. 2. Certain amounts paid pursuant to a lease-option agreement did not constitute rentals. 3. A part of the deficiency of petitioners W. J. and Leone Beus is due to negligence or to their intentional disregard of rules and regulations within the meaning of section 293 (a), I. R. C. 1939.

Held, amounts received by petitioner as a result of the assignment to the Bank of America of promissory notes and conditional sales contracts do not qualify as borrowed capital within the meaning of… Held: amounts received by petitioner as a result of the assignment to the Bank of America of promissory notes and conditional sales contracts do not qualify as borrowed capital within the meaning of section 439, I. R. C. 1939.

Petitioner and her husband entered into a property settlement agreement limiting and defining their rights under community property law as to the partnership interest in a partnership of which… Held: petitioner is taxable on one-half of said increase.

Held, the sum expended by petitioner, a schoolteacher, in attending summer school was for the purpose of maintaining a present position and is, therefore, deductible under section 23 (a), I. R. C.… Held: the sum expended by petitioner, a schoolteacher, in attending summer school was for the purpose of maintaining a present position and is, therefore, deductible under section 23 (a), I. R. C. 1939.

Upon the liquidation of Huntoon, Paige and Company, Inc., rights to receive future commissions, contingent upon the completion of commitment contracts arranged by the company, were distributed to the… Held: the commissions, when realized, were capital gain to the stockholder-distributees.

There having existed a reasonable requirement of petitioner's business for the accumulation of its surplus, held, on the facts, petitioner was not formed or availed of during the taxable years for… Held: on the facts, petitioner was not formed or availed of during the taxable years for the purpose of avoiding surtax on its shareholder within the meaning of section 102, I. R. C. 1939.

During the taxable year ended June 30, 1952, two of petitioner's plants were destroyed by fire. Held: the insurance proceeds involved herein are not income * * * wholly exempt as that phrase is used in section 24 (a) (5), and respondent erred in applying that section to the facts of this case.

Petitioner and his son, as equal partners, engaged in the business of constructing houses from 1946 to 1950. Held: the Amherst property was held primarily for sale to customers in the ordinary course of trade or business and the gain on the sale of it was ordinary income as determined by the respondent.

On December 20, 1935, Hattie Kaufman transferred the title to certain property to her son, Stanley, in part as a gift, and in part in exchange for… Held: That the annuity payments made by petitioner during the fiscal year ended January 31, 1950, were capital expenditures, and respondent properly disallowed the deduction of $ 4,800 paid in said fiscal year as interest or loss. 2. That respondent's total disallowance of basis of donated interest in property is disapproved. 3.

The owner of a patent assigned all of her interest therein to a corporation owned 50 per cent by her and 50 per cent by her husband in exchange for payments based on net sales. Held: On the record in this case the assignment was a sale or exchange. Edward C. Myers, 6 T. C. 258, followed.

Estate Tax -- Marital Deduction -- Sec. 812 (e) (1) (B). -- No marital deduction is allowable under section 812 (e) (1) (B) where a decedent left all of his property to his wife to be used as she pleases, for her own support, the residue after her life, to go to a son or a grandson, since there was a possibility that the estate to the wife would be terminated and some or all of the property go to another.

1. In July 1946, the petitioners instituted an action against Wilbur F. Denious for an accounting. Held: that the amount of the check was not income to Western Products for 1950. 3. Mrs. Vichey during 1949 and Western Products during 1950 paid certain annual taxes levied by the Moffat Tunnel Improvement District. Held, that the provisions of section 164 (b) (5) (B), I. R. C. 1954, are not retroactive to the years 1949 and 1950.

Husband and wife each owned securities which had declined in value. They wished to establish tax losses without at the same time relinquishing family control over the securities. Held: deduction for losses disallowed under section 24 (b) (1) (A), I. R. C. 1939. McWilliams v. Commissioner, 331 U.S. 694, followed.

1. Petitioner Herman J. Romer was associate manager of the Huntington Hotel during the taxable years 1947, 1949, 1950, and 1951, and with his wife lived at the hotel. Held: that the amount at which petitioner's board and room during the 4 taxable years was so included in his salary was gross income, within the meaning of section 22 (a), I. R. C. 1939. 2. Petitioners filed separate returns, on a community property basis, for 1947 and joint returns for 1949, 1950, and 1951.

Gift Tax -- Splitting Gifts by Spouses -- Timeliness of Signifying Consent -- Sec. 1000 (f) (1) (A) and (2) (B) (i), I. R. C. 1939. -- Consent of a wife to be considered as making one-half of gifts of her husband was timely signified on his return reporting those gifts despite fact that previously her son by a prior marriage had filed for her a return reporting gifts which she had made in the same year but prior to her marriage to the petitioner.

Decedent provided for establishment of a testamentary trust out of the residue of his estate with assets in excess of $ 600,000, to pay an annuity of $ 5,000 to a… Held: unlike Merchants Bank v. Commissioner, 320 U.S. 256, the trust instrument provided measurable standards limiting the power of invasion, and the charitable bequests are therefore deductible to the extent that the possibility of invasion is so remote as to be negligible. Sec. 812 (d), I. R. C. 1939.

Petitioner filed a timely refund claim under section 722, I. R. C. 1939, for the fiscal year 1945. The abbreviated claim made no mention of carryover or carryback credits. Held: barred by the statute of limitations.

Held, legal expenses paid by a partnership for legal services in connection with a divorce action brought by the spouse of one partner were primarily personal expenses of that partner and hence… Held: legal expenses paid by a partnership for legal services in connection with a divorce action brought by the spouse of one partner were primarily personal expenses of that partner and hence not deductible in determining the partners' distributable shares of partnership income.

Petitioner, a person under physical disability, drove a specially designed automobile to and from his job, which was in a plastics plant where he buffed and polished rough plastic products. Held: petitioner's expenses of work clothes and aprons and his expenses of operating the special automobile are personal expenses and therefore not deductible for income tax purposes.

Held, that a transaction between a corporation and its principal stockholder was a sale of debts owed by another stockholder and not a compromise of such… Held: that a transaction between a corporation and its principal stockholder was a sale of debts owed by another stockholder and not a compromise of such debts with the debtor, and any loss sustained was a capital loss which is not deductible in the absence of capital gains. Secs. 23 (g) (1) and 117 (d) (1), I. R. C. 1939.

Held, a transfer of patent rights by petitioner under a License Agreement granting transferee the exclusive rights to manufacture, use… Held: a transfer of patent rights by petitioner under a License Agreement granting transferee the exclusive rights to manufacture, use and sell the patented article, for a royalty of 1 per cent of the wholesale price, effected a sale so the amounts paid thereunder were entitled to capital gains treatment, and held, further, certain clauses…

1. During the taxable years the petitioner was employed in cutting or sawing down timber and sawing it into logs at designated layouts in woods which were 40 miles or more from his home where he… Held: that such use of the automobiles and jeep was for the dual purpose of petitioner's commuting between his home and his work and for transporting tools and equipment used by him in his trade or business.

Jurisdiction -- Filing Date of Petition -- Postmark Date -- Sec. 7502. -- Section 7502, I. R. C. 1954, does not provide that the mailing date is the date of filing of a petition, if no date is postmarked on the envelope or cover in which the petition to this Court is mailed by ordinary mail.

Petitioner, a truck driver who regularly ate all three meals during his daily, turnaround run, is not entitled to deduct their cost because the expense of the meals is not incurred away from home within the meaning of section 23 (a) (1) (A), I. R. C. 1939.

Deductions -- Legal Fees -- Assignment of Cash Bail Bond. -- Petitioner deposited cash bail of $ 5,000 and $ 1,000 in two criminal actions against him in Washington counties. Held: petitioner failed to prove either assignment constituted a deductible item in 1952.

In 1936 American Mond sold the Clearfield Plant to the Clearfield Corporation for $ 15,000. Held: Dumont failed to show that American Mond or the Clearfield Corporation made a gift or contribution to capital to Dumont and its only basis for computing its depreciation and its excess profits credit based on invested capital is its cost of the Clearfield Plant. 2.

In January 1945, petitioner was granted an option by his employer to purchase stock if he was still employed on June 30. Held: petitioner effectively exercised the first option to purchase stock in 1945, a year now barred by the statute of limitation; he exercised the second option when he gave his unconditional promissory note on January 3, 1946; and the gain realized is to be measured by the difference in the option price and the fair market value of the…