Volume 30 — Board of Tax Appeals

Where commissions due trustees for receiving and distributing the corpus of a trust are by order of the court paid out of the principal of the fund and not out of income and the income of thb fund is paid to the beneficiary without diminution for such commissions, the beneficiary is liable to income tax upon the full amount of the income received by her.

Petitioner's residence was destroyed by fire in 1930 and the net cost basis exceeded the proceeds of insurance received. Held: that part of petitioner's property in the destroyed residence not compensated for by insurance was not compulsorily converted into money which was forthwith expended in the acquisition of similar property, and such loss does not come within section 112(f) of the Revenue Act of 1928, but is an allowable deduction under section…

Dividends distributed pursuant to informal action of directors on December 31, 1930, the checks representing the same being received by petitioners as stockholders on January 2, 1931, are taxable in 1930.

1. A promissory note and certain shares of stock held to have had a readily realizable market value. 2. The fair market value of the note and stock determined. 3.

Petitioner, appointed and employed as engineer by eight villages and one city in Ohio; compensated on a basis of percentage of cost of construction projects; furnishing, at his own expense, supplies, equipment, and necessary assistants, was not an officer of these municipalities but an independent contractor, and his earnings are subject to tax.

Following Provident Trust Co. of Philadelphia, Executor, of Estate of Owen Osborne,29 B.T.A. 374, held, that upon transmission of installment obligations, occasioned by the death of the owner, gain… Held: that upon transmission of installment obligations, occasioned by the death of the owner, gain arises under section 44(d) of the Revenue Act of 1928; held, further, that such gain is a capital gain, the property sold having been a capital asset.

Joint return including income of husband and wife may not be filed for the year in which the husband died.

Upon retirement of petitioner's debentures at a premium with funds realized from the sale of additional stock, petitioner is entitled to deduct the premium paid and also the unamortized discount and expenses incurred in connection with the issue and sale of the debentures.

Where petitioner offered through a securities auctioneer to dispose of certain stock, which on December 26, 1929, was bid for and procured by a partnership of which her husband was a member holding a… Held: the transaction did not constitute a bona fide sale resulting in a deductible loss to petitioner, without proof, lacking here, of a mutual intention to transfer absolute ownership without any condition for its later return.

The stock brokerage firm with which petitioner dealt on marginal account went into bankruptcy in 1928, at which time petitioner's account showed a credit balance. It was not known until 1929 that creditors of the firm would sustain any loss.

Petitioner claimed title to certain corporate stock and in 1928 sold the stock as his own. The consideration was paid to a trustee. A portion of the purchase price was delivered to petitioner by the trustee. The remainder was held by the trustee to protect the buyer against defects in petitioner's title. Held to constitute receipt by petitioner of entire amount of consideration in 1928.

1. In 1930 each of the petitioners sold to the other certain shares of stock of the General Capital Corporation at a price less than cost. Held: that the petitioners are entitled to deduct from gross income losses sustained upon the sales. 2. In 1930 petitioner Marie G. Dennett was the owner of certain bonds which became worthless in that year. Held, that the investment in such bonds is a deductible loss of the year 1930.

On account of the provisions of section 118, Revenue Act of 1928, a sale of voting trust certificates for common stock at less than cost and the purchase of an equal number of shares of common stock on the same day, does not give rise to a deductible loss.

The sale of real estate for taxes in Florida does not divest the owner of the title as long as the right of redemption exists and does not constitute abandonment, nor is it such an event as to give rise to a deductible loss.

The decedent died November 25, 1922, owning property under a tenancy by the entirety, which property was acquired in 1915. Held, that the value of such property is includable in the gross estate. Held: that the value of such property is includable in the gross estate. Luman W. Goodenough, Executor,29 B.T.A. 211, modified.

The decedent, a nonresident alien, exercised a power of appointment by will over a one-eighth share of a foreign trust fund. Held: that no part of the value of the appointive estate is includable in the gross estate of the decedent for estate tax.

1. The petitioner made certain payments to its officers designated as bonus or additional compensation for services rendered. Held: the alleged bonuses were in fact distributions of earnings and so not deductible from petitioner's gross income as and when made.

The C corporation formulated a plan for the purchase of all of the capital stock of B corporation. Held: notwithstanding the petitioner knew nothing of the plan of reorganization until she negotiated for the exchange of her stock, the sale and exchange were both made pursuant to the same plan of reorganization, and constituted a disposition, pursuant to the plan of reorganization, of her entire stockholdings for stock and cash, the gain…

1. The petitioner in 1927 leased certain property to a corporation for 20 years. Held: no deductible loss was sustained by the petitioner on account of the demolition of the old building in the taxable year and the respondent did not err in exhausting its unextinguished value over the 20-year term of the lease. 2.

Pursuant to an informal agreement with the executive officers of a trust company, which was not authorized by the board of directors of that… Held: that the third corporation in acquiring the stock of the bank was not acting an agent of the trust company, that the transactions in controversy did not result in a reorganization, and that the profit realized by the petitioners in the exchange of their stock in the bank for money and stock in the trust company is subject to tax.

1. A trustee is not a beneficiary and, therefore, not an adverse party in interest in relation to the grantor. Reinecke v. Smith,289 U.S. 172. 2. Held: the sipulated value of the trust property at decedent's death was properly included in determining the value of the gross estate, under section 302(d), Revenue Act of 1926. Porter v. Commissioner,288 U.S. 436.

The decedent's husband exchanged property used in his business for stock of a corporation formed by him to take over the business, and caused the… Held: under the circumstances, that the transfer did not establish a resulting trust of the stock in favor of the husband. Held, further, that dividends paid on the stock in 1925 and 1926, the amount received in 1926 from the sale thereof, and other sums paid after the death of the decedent constitute a part of her gross estate.

1. Deduction allowed for amount paid for cancellation of a contract. 2. Petitioner loaned money on open account to a corporation the stock of which was owned by its stockholders. Held: the evidence does not establish an ascertainment of worthlessness which will support a claim for a bad debt deduction.

Petitioner borrowed money from his father's estate with the consent of his brother, who imposed a condition that he share in any profit from the ownership of the stock exchange seat which petitioner… Held: the interest so paid is deductible.

During 1928 and for many years prior thereto the petitioner's only business was that of acting as trustee, executor, and administrator. Held: that the loss was not sustained in the operation of a trade or business regularly carried on by the taxpayer and hence not a legal deduction from the gross income of 1928.

Where petitioner instructs a broker to sell 1,075 shares of certain stock owned by him and at the same time instructs the broker to purchase the same number of shares in the name of petitioner's wife… Held: such transaction does not constitute a sale resulting in a deductible loss to petitioner.

1. A testamentary trust directed the trustees to maintain a certain residence for a beneficiary, son of the testator, so long as the son desired to occupy it. Held: expenditures so made by the trustees are not income to the son and not taxable against him. 2. A corporation having a surplus on March 1, 1913, to which donations by the stockholders were added, had operating losses, less than the surplus and donations but in excess of the total earnings and surplus.

Upon further hearings had in accordance with the opinion and mandate of the United States Circuit Court of Appeals for the Seventh Circuit, the petitioner has failed to show that it could not have… Held: therefore, in accordance with the opinion and mandate of the court, that the entire amount of $50,000, representing a deposit made by the lessee which was released in 1923 to the petitioner as lessor, should be included in the petitioner's income of that year.

During the taxable years the petitioner received the income of certain trust funds which be the trust instruments was payable to him for the support, maintenance, and education of his children and… Held: that the petitioner is liable to income tax in respect of the income thus received.

The petitioner exchanged investment property and cash for investment property. Held: the payment of the cash did not take the transaction out of the provisions of section 112(b)(1) of the Revenue Act of 1928, and no gain or loss can be recognized.

The stockholders of B agreed with Bassick to sell all of the common stock of B for a stated price payable at their option in cash, or half in cash and half in stock of a new corporation which… Held: That immediately after the delivery of the 147,500 shares, the stockholders of B were not in control of the new corporation within section 202(c)(3)(B), Revenue Act of 1921, so as to provent the recognition of gain or loss on the exchange of their original stock for such shares.

The petitioner exchanged notes costing it $1,500,000 for second mortgage bonds of the value of $900,000, and claims to have thereby sustained a loss of $600,000. Held, such loss is allowable. Held: such loss is allowable.

1. Wages of employees accrued and deducted from income but unclaimed by the employees, held properly restored to income in the year in which petitioner filed certificate of dissolution and made… Held: that the balance in the account after settlement of the claim, if income in any year, was income in the year of settlement and not in 1927 when petitioner was dissolved.

1. JURISDICTION. - Where a deficiency notice was mailed to a taxpayer more than two years before the executrix of her estate included her estate in an appeal which the transferee was making from a transferee notice of deficiency, the Board has no jurisdiction to hear the appeal of the executrix because it was filed long after the statutory period had expired. 2.

1. Pursuant to the terms of a contract providing for the relocation of certain tracks without expense to it, a subsidiary of the petitioner received a sum representing the capitalized increased cost… Held: that the amount represents prepayment of ordinary and necessary business expenses and constitutes taxable income. 2.

Fees received by this petitioner for services rendered by him as a receiver, under appointment by the Common Pleas Court for Cuyahoga County, Ohio, are not exempt from taxation, Edward H. Wright,29 B.T.A. 1267, followed, nor may such fees, when surrendered by him to the law firm, a copartnership, of which he was a member, be deducted from his gross income as an ordinary and necessary business expense in the computation of his net taxable income.

The petitioner, being on the cash receipts and disbursements basis, should include in its gross income for 1929 and 1930 amounts of interest and discount collected in those years although included in gross income and subjected to tax for 1928. Chatham & Phenix Nat. Bank,1 B.T.A. 460, followed.

1. DEPLETION AND GAIN OR LOSS - BASIS. - March 1, 1913, value of five blocks of timber determined for depletion (Issue 1); as basis for gain or loss on sales (Issue 3); also March 1, 1913,… Held: the legal right to vote the 15.1 percent common constituted control thereof, and ownership and control of 98.8 percent of voting stock constituted substantially all within sec. 240(c), Act of 1921. Held, further, these companies were affiliated from May 15 to December 31, 1923. 4.

1. Property over which a decedent had a general power of appointment is not relieved from the Federal estate tax (sec. 302(f), Revenue Act of 1926) either because it is not part of the decedent's estate under local law and the appointee takes from the donor, or because the donee exercised the power in favor of one who would have taken the property under the donor's will if the power had not been exercised. 2.

The petitioner, a practicing attorney in New York City, made a contribution in 1929 to the Association of the Bar of the City of New York, of which he was a member, to be used by the association in… Held: that the amount is not deductible either as a contribution to one of the classes of corporations enumerated in section 23(n)(2) of the Revenue Act of 1928, or as an ordinary and necessary business expense under section 23(a) of the act.

Petitioner's decedent sold two large blocks of corporate stocks to different individuals, one of whom had been a business associate, the other being a relative, at one dollar for each block, for the… Held: the respondent's denial of the alleged loss should be approved.

Petitioner contracted to purchase corporate stock, pledging the stock with the vendor as security for the purchase price. Held: the gift of a one half interest in the stock was effective prior to the taxable years and petitioner was taxable on only one half of the dividends.

BASIS FOR DETERMINING GAIN ON SALE OF PROPERTY ACQUIRED PRIOR TO MARCH 1, 1913, UNDER 1926 ACT. - In determining gain on the sale of property sold in 1926, acquired prior to March 1, 1913, the basis… Held: not applicable because decided under the 1918 Act.

Where petitioner exercised its option under article 223 of Regulations 69, and article 243 of Regulations 74, by deducting as expense costs of footage drilling, and filed its returns on that basis for its fiscal years from 1925 to 1928, inclusive, it may not capitalize such costs to determine the basis of gain or loss on sale of the properties in 1929.

1. The fundamental principle of law that no person can take advantage of his own wrong applies in cases before the Board. 2. A taxpayer will not be heard to assert as a defense against additional taxes the illegality of a contract entered into by it, where the contract is not illegal on its face and the determination of the deficiency in taxes is predicated on the apparent legality and effectiveness of such contract.

Since realty vests in the devisees under the will immediately upon the death of the decedent under the law of New York, the rents therefrom collected by the executor of the estate, petitioner, and the expenses incurred in connection therewith and paid by it were not taxable income nor deductible expenses of the estate.

Petitioner was a member of a syndicate, all of whose assets were sold under a plan whereby petitioner had an option of receiving cash or stock for his interest in the syndicate. Held: petitioner constructively received his portion of the syndicate profits in 1928.

A trade-mark is not such property as is susceptible to exhaustion by the passage of time, nor wear and tear by use in the business, and respondent's action in disallowing deductions for depreciation or trade-marks is approved.

1. Held, that rights to subscribe to bonds of the American Telephone & Telegraph Co. issued to stockholders of that company are not income. T. I. Hare Powel,27 B.T.A. 55. 2. Held: that rights to subscribe to bonds of the American Telephone & Telegraph Co. issued to stockholders of that company are not income. T. I. Hare Powel,27 B.T.A. 55. 2.

An instrument issued by the petitioner corporation and denominated a debenture bond, which contains a promise to pay a particular sum to a named obligee or registered assigns at a specified time of maturity, which is stated to be subordinate, both as to principal and interest, to the claims of all creditors, but which does not confer upon the holder a part ownership of the assets and gives him no right to participate in the management of the corporation or to share in the…

1. The executors of the estate filed their return on December 15, 1925. The Commissioner determined a deficiency and on July 5, 1927, mailed a notice of deficiency to the executors. Held: that under section 402, Revenue Act of 1928, the statute of limitations was suspended during the pendency before this Board of the appeal of the estate's trustees. American Equitable Assurance Co. v. Helvering, 68 Fed.(2d) 46. 2.

In July 1925 a domestic corporation keeping its accounts on the accrual basis filed a capital stock tax return in which it claimed exemption from the tax as not being engaged in business. Held: the tax accrued in 1925 and was not a proper deduction from income in 1929.

On the evidence, held, that the liability of the petitioners, as transferees, under section 280, Revenue Act of 1926, is not barred under section 277(a)(4), Revenue Act of 1926, as amended by section… Held: that the liability of the petitioners, as transferees, under section 280, Revenue Act of 1926, is not barred under section 277(a)(4), Revenue Act of 1926, as amended by section 503, Revenue Act of 1928.

Held, that losses sustained by the petitioner in 1927 and 1928 as guarantor of obligations of two corporations, from loans made to one… Held: that losses sustained by the petitioner in 1927 and 1928 as guarantor of obligations of two corporations, from loans made to one corporation, from his investment in the second mortgage of one corporation, and by virtue of the fact that the stock he held in one corporation became worthless, did not result in net losses within the…

1. In the absence of evidence showing that the fair market value of securities received by the petitioners from the executors of the estate of John I. Beggs was other than the prices at which the… Held: that the petitioners sustained no deductible loss from the sale of them in 1929 for a nominal consideration.

The Resthaven Memorial Trust transferred in 1928 all its assets to the petitioner in exchange for petitioner's capital stock and its contract… Held: petitioner is liable as a transferee for the unpaid Federal income tax of the trust for the taxable year 1927; held, further, that, in determining the profits of the Resthaven Memorial Trust on its sales of cemetery lots in the taxable year 1927, there may not be added to the cost thereof anything more than the amount actually…

The decedent by will left the residuary portion of his estate in trust to two grandchildren, share and share alike, for a certain specified period. Held: that only one trust was created by the will and that the income thereof accumulated and held by the trustee pursuant to the provisions of the will is taxable to the trust estate.

1. All deductions to which either husband or wife filing a joint return is entitled may be deducted from their aggregate gross income. Frank B. Gummey,26 B.T.A. 894, followed. 2. A loss sustained by a husband upon the sale of stock to his wife, with the mutual intention in good faith of transferring ownership, the wife having a substantial estate of her own and having paid therefor with her own money, is deductible by the husband.

1. Where certain stock purchased on margin by the petitioner was sold in 1929 through his broker, and at the same time a like amount of the same stock was, upon order of petitioner, purchased on… Held: under all the circumstances, such transaction did not constitute a bona fide sale in 1929 resulting in a deductible loss to petitioner. 2. Held, further, deductions to which either husband or wife filing a joint return is entitled may be made from aggregate income.

In computing net losses by the separate corporations filing a consolidated return under the provisions of the Revenue Act of 1926, all intercompany transactions should be eliminated both for the year in which the net losses were sustained and in the succeeding year or years for which the different members were entitled to carry forward the net losses.

A corporation, which in 1930 purchased from a wholly owned subsidiary securities at a price greatly in excess of the market price thereof and immediately thereafter sold them at a price to net less than the market price when acquired, is entitled to deduct from gross income the difference between the fair market value of the securities at the date acquired and the price at which sold, but is not entitled to deduct a loss based upon the price paid to the subsidiary for such…

Petitioner acquired corporate stock partly for cash and partly in exchange for other property. He was not a dealer insecurities. He traded property extensively, but it is not shown that he engaged in such trading with intent to make a profit so as to make it a trade or business. Held that a loss sustained by reason of the worthlessness of the stock is not a statutory net loss.

Where advance mining royalties are not included in gross income in the years in which received by reason of the fact that they were credited to a reserve account, and the statute of limitations has operated against the assessment and collection of the deficiencies for such years, and they are taken into the profit and loss account of the taxable year, held that the taxpayer is estopped to deny that they constitute taxable income of the year in which credited to the profit…

Petitioner's right to receive corporate stock was initiated while he was domiciled in the State of Oregon. His removal to the State of Washington before receipt of the stock did not change the character of it from separate to community property, and the income represented by the proceeds of the sale of the stock was taxable to petitioner as his separate income.

The amount paid by this petitioner in connection with a transaction in which a corporation procured the loan of money and in which he became the owner of one half of its capital stock is not deductible as an ordinary and necessary business expense, but such payment is in the nature of additional cost of the capital stock so acquired, and, furthermore, there is a failure to show that the expenditure, if an expense at all, was one connected with the petitioner's individual…

1. A transaction purporting to be a sale of stock with an option to buy back held, under all the circumstances, not to be a loan but a sale, the gain being taxable. 2. Held: under all the circumstances, not to be a loan but a sale, the gain being taxable. 2. Loss on similar sales held not deductible because of option to repurchase. 3. Basis for percentage limitation of deduction for charitable contributions held to include capital gain. 4.

Where, under a trust created by will which makes no provision that the trustee shall deduct depreciation, the entire income is payable to the beneficiary, such beneficiary is entitled under section 23(k) of the Revenue Act of 1928 to take deduction of the depreciation suffered by the trust property, regardless of the fact that in the particular year there was no income from the trust property.

The petitioner owned all of the capital stock of a corporation which owned and operated an apartment house. He was vice president of the corporation. Held: that the fair rental value of the apartment constituted taxable income of the petitioner for 1929.

Where a building was erected by a corporation on its own property and at its own cost for the purpose of supplying a residence to its president and sole stockholder, held, that the reasonable value… Held: that the reasonable value of the use of the residence was taxable income to the president as additional compensation, but was not income to the corporation as rental.

Where petitioner, pursuant to a plan, exchanged substantially all of its assets for stock in another corporation and thereafter dissolved and distributed such stock among its stockholders, held,… Held: there was a statutory reorganization within section 112(i)(1)(A) of the Revenue Act of 1928, and the exchange constituted a nontaxable transaction within the meaning of section 112(b)(4) of that act.

1. Where a widow elects to become beneficiary of a trust created by the will of her deceased husband, in lieu of her statutory rights in his estate, the income paid to her from such trust is taxable to her as ordinary income without regard to the value of her marital interests surrendered. Commissioner v. Butterworth,290 U.S. 365. 2. Held, that payments made to decedent taxpayer by a trust established by a will were not, in view of the terms of the will, impressed with any further or additional trust requiring her to share them with minor children, but that they constituted sole and separate income, taxable to her as such. 3. Payments made by decedent to a daughter in consideration of the latter's agreement not to contest a will creating a trust of which both were beneficiaries, held not to constitute legal deductions from the taxable income of decedent. 4. Claims for income tax deductions representing depreciation of trust assets, made by a life beneficiary who drew income only and owned no remainder interest in its corpus, disallowed.

Liability of petitioner, as a distributee, for the unpaid Federal income taxes of the estate of Ivor O'Connor Drake determined.

1. Held, that petitioner was domiciled in Louisiana during the taxable year 1929. 2. Petitioner sold during the taxable year certain corporate stock which he had owned for more than two years. Held: that petitioner was domiciled in Louisiana during the taxable year 1929. 2. Petitioner sold during the taxable year certain corporate stock which he had owned for more than two years.

1. The deficiency notice in the case of petitioner William L. James was mailed more than two years after his return for the year 1928 was filed. Respondent failed to prove fraud and it is held that assessment and collection of the proposed deficiency are barred. 2. The evidence in the case of the Peerless Investment Co. does not establish that contracts acquired for stock had any greater value at the time of acquisition than that determined by respondent.

1. The petitioner entered into a contract in 1922 whereby he was to receive certain stipulated sums with interest semiannually until 1943, and kept his accounts and made his tax returns on a cash receipts and disbursements basis. In 1922 petitioner did not return the contract or its value as income subject to taxation, but returned in that year and in subsequent years only the amounts of cash received by him during each year.

1. Where a bond issue is retired before maturity by redemption of the bonds for cash, a taxpayer is entitled to a deduction from income of the amount of unamortized discount and other financing costs in the year of such redemption and retirement. 2.

In March 1917 the petitioner, a contractor engaged in the building construction business, agreed to build an Elks Lodge in the city of New Orleans, Louisiana, which building was completed in 1919. Held: that the petitioner sustained a deductible loss in 1928 and the resulting net loss for 1928 should be allowed as a deduction in computing petitioner's net income for 1929.

1. A husband and wife in California agreed in writing, October 9, 1930, to separate their properties and income. Held: the husband's salary for 1930 was to the extent received prior to the separation agreement taxable as community income, one half to each, and in the absence of evidence of how much of salary was received before such agreement and how much after, all is taxable as community income, as the Commissioner determined. 2.

1. On April 6, 1917, large amounts were due the petitioner, a citizen of the United States, by banks and bankers in Germany. Held: following Burnet v. Logan,283 U.S. 404, that the petitioner is entitled to recover his cost or other basis for each award before paying a tax on amounts received allocable thereto.

Respondent, in the notice of deficiency, determined fraud penalties in the amount of 50 percent of the deficiency as to each of the years in controversy. Held: that the respondent has failed to plead and prove that the petitioner is liable for such a penalty, as required by Rules 14 and 30.

1. Dividends declared on corporate stock before, but payable at a time after, the death of a stockholder, held, includable in the gross estate of the deceased stockholder for estate tax purposes.… Held: includable in the gross estate of the deceased stockholder for estate tax purposes. 2.

The distribution of corporate assets by one domestic corporation to another, together with a pro rata portion of the accumulated profits of such corporation, in the cancellation or redemption of its capital stock is, under the facts of this case, a distribution in partial liquidation as defined in subdivision (h) of section 115 of the Revenue Act of 1928.

During the years 1925, 1926, and 1927 the petitioner was an alien domiciled in New York. His income during these years was earned from services performed in different countries of Europe. Held: that his total income is liable to income tax.

The facts revealing no negotiation of an agreement or commitment to sell part of the assets of a corporation to a third party prior to the transfer of the assets to a trustee for the benefit of stockholders to whom the corporation had declared a liquidating dividend in kind, held that the subsequent sale by the trustee was not a sale by the corporation so as to make the profit thereon taxable to the corporation rather than to the stockholders to whom the proceeds of the sale…

The evidence establishes that the transactions in question were purchases by taxpayer of tax-free securities as short-term investments and not loans with the securities as collateral, notwithstanding the fact that repurchase agreements were entered into at the time the securities were purchased by taxpayer.

In his will the decedent, who died in 1921, left the residue of his real estate to his wife for life, with the remainder to his five children, who were not to receive their shares before they reached… Held: that the basis for determining the profit to the children upon such disposition of the property is the value thereof at the time of the testator's death.

The petitioner is the owner of certain contracts under which it purchases casinghead gas from the owners of producing oil and gas properties. Held: that in computing such allowances under the provisions of section 204(c)(2) of the Revenue Act of 1926, the gross income from production under the contracts is the difference between the fair market value of casinghead gasoline at the mouth of the producing wells and the royalty paid therefor.

1. ALLOCATION OF COST - FAILURE OF PROOF TO OVERCOME RESPONDENT'S DETERMINATION. - During 1926 the Boxboard Products Co., of which petitioner Carey was a preferred and common stockholder, redeemed… Held: the most recently accumulated earnings and profits of the subsidiary corporation were not available to the parent corporation for purposes of redeeming its preferred stock, but were available for payment of the 1927 dividend. John B. Stewart,29 B.T.A. 809, distinguished.

1. Section 240(f) of the Revenue Act of 1926 contemplates the consolidation of all the accounts of several related companies. 2. Held: the amount of such dividend may not be excluded from the income of the recipient in the computation of net loss to be forwarded to a subsequent taxable year.

On March 31, 1933, the petitioners filed in the District Court of the United States for the Eastern Division, Eastern Judicial District of Missouri, a petition for the reorganization of their capital… Held: that the Board is not ousted from jurisdiction to hear and determine the proceedings now pending before it. Held, further, that the motion filed in each proceeding should be denied.

1. A taxpayer in debt upon a loan secured by corporate shares pledged as collateral, transfers the shares irrevocably to a trustee with direction that certain income… Held: the taxpayer is a beneficiary of the trust, taxable upon such income as being currently distributable to him when used to pay his debt. 2. A woman transfers corporate shares irrevocably to a trustee with direction that income therefrom shall be used to pay premiums on insurance upon her husband's life.

1. Payment by taxpayer of a judgment for liability for death of another resulting from driving his automobile, held, under the circumstances, too remote to be deductible as a loss sustained in… Held: under the circumstances, too remote to be deductible as a loss sustained in business. 2. Amounts received as consideration for mineral deeds in Oklahomaheld ordinary income and not capital gain.

The petitioner did not sustain a deductible loss (1) upon the sale of real estate which he purchased and used for residential purposes, or (2) upon the sale of certain shares of stock where on the same day his wife repurchased the same number of shares of the same stock from the same broker at the same price with moneys furnished by the petitioner.

A testator directed that certain securities be held in trust for a period of 12 years after his death, with the income payable to his widow and children, in proportions named, during their… Held: at testator's death the widow took an immediate vested remainder interest in the corpus of the trust, which interest was properly invoiced as an asset of her estate at her death, which occurred before termination of the trust. In Re Fair's Estate,122 Cal. 523; 60 Pac. 442.

1. Held, that the sale evidenced by the record in these proceedings shows that corporate assets, and not capital stock owned by its stockholders, were the subject of transfer. 2. Held: that the sale evidenced by the record in these proceedings shows that corporate assets, and not capital stock owned by its stockholders, were the subject of transfer. 2.

Gross income from an interest in oil and gas property, as a basis for depletion under section 114(b)(3) of the Revenue Act of 1928, is the gross amount for which production is sold.

- Petitioner is the survivor of a marital community in the State of Washington, and was sole legatee and executrix of the estate of her… Held: that the partition made between property of the estate and that of the survivor should be recognized, and it was error on the part of respondent to treat the sales as sales of undivided portions of community property and to tax one half the gain on all sales as profit to petitioner as survivor of the community and the other half to…

Petitioners owned stock in a corporation which had an earned surplus on March 1, 1913. Losses which occurred thereafter greater than undistributed earnings of years previous to such losses should be charged to and reduce such earned surplus, but not subsequent earnings. Earnings subsequent to losses so treated are the most recently accumulated earnings, and dividends paid to petitioners therefrom are taxable to them. Helvering v. Canfield,291 U.S. 163.

1. Depreciation allowed on office building increased on account of obsolescence resulting from improvements in the art of constructing such buildings. 2. An amount expended in replacing the electrical system in one of petitioner's buildings held to be a capital expenditure. 3. Certain donations determined not to have been necessary business expenses.

1. The net losses of affiliated corporations for the years 1924 and 1925 may not be used as a consolidated net loss of the affiliated group… Held: a deductible loss was sustained in 1927 by one of the affiliated companies upon the liquidation of its subsidiary in that year, and the amount of the deduction for its investment in the capital stock of the subsidiary should be adjusted on account of the operating losses of the subsidiary for prior years of affiliation which have…

Under an agreement entered into between Corporation A (the petitioner) and Corporation B, Corporation A caused to be organized Corporation C to which it transferred a part of its assets,… Held: that the exchange by Corporation A of the stock of Corporation C for shares of stock of Corporation B did not constitute a reorganization and that the petitioner is taxable upon the gain resulting from the exchange.

1. Attorney fees incurred and paid by the decedent in the defense of a lawsuit brought against him as a director of a corporation may be deducted as ordinary and necessary business expenses under section 214(a)(1) of the Revenue Acts of 1921 and 1924. 2. A loss sustained by the decedent in 1921 by reason of the worthlessness of capital stock of a corporation of which he was the majority stockholder and director does not constitute a net loss under the statute.

The taxpayer, who was president and, by virtue of stock ownership and blanket corporate authorization, in complete control of a corporation, gave instructions to a broker to sell certain personally… Held: the whole transaction showing a persisting intention by taxpayer to hold title and retain dominion over the stocks, it did not amount to a bona fide sale.

- A basalt rock quarry is not a mine and deductions for depletion thereof may not be based on discovery value. Further, the evidence does not establish fair market value at the basic date, which is a necessary element to the allowance of depletion deductions on the basis of discovery value.

1. A loss sustained in 1929 by a corporation through the liquidation, prior to dissolution, of an affiliated corporation of which it owns all the shares is not deductible on consolidated return, Ilfeld Co. v. Hernandez,292 U.S. 62. 2.

1. Petitioner was not organized and operated exclusively for any one or more of the purposes which, under the applicable statutes, give a tax-exempt status. Held: petitioner is not exempt from income tax, and dues paid by its members are includable in its gross income. 2. Petitioner failed to file a proper income tax return for 1927 until December 9, 1929.

1. Where partnership agreement provided for life insurance to be carried on lives of general partners, premiums to be paid by partnership, policy to be held by and any… Held: full partnership interest as of date of death is includable in gross estate, but no part of proceeds paid to executors of insured partner is includable as insurance. 2. Decedent during his lifetime offered cash prizes for essays to be written by members of the National Association of Cost Accountants.

1. Losses sustained in certain taxable years through the liquidation of 100 percent owned subsidiaries determined and allowed. 2. Amounts charged to capital as interest on advances for construction of branch lines of railroad are not deductible from petitioner's income in the year in which such advances were written off as losses. 3.

1. Where all income and expense accounts in petitioner's books of account were kept on the cash receipts and disbursements basis, and only one account therein showed discounts charged on loans made… Held: since petitioner employed the cash receipts and disbursements method of accounting, the commissions charged upon such loans, which had not been repaid or disposed of, did not constitute income to the petitioner in the year 1927.

1. Petitioner issued so-called debenture preference stock which is determined to be evidence of indebtedness rather than stock, and the payments made thereon at the rate of 6 percent per annum are held to be deductible as interest paid. 2.

The compensation of an individual as city engineer of certain California cities held to be subject to Federal income tax.

- In 1927 three corporations were affiliated and elected to file separate returns. In January 1928 another corporation came into the affiliation. Held: the four corporations were not entitled to file consolidated returns for the year 1928, not having obtained the permission of the Commissioner so to do.

Where, under the laws of the State of Texas, liability for city, school, state, and county taxes accrued as of January 1, 1928, and is determined by the ownership of the property on that date, and… Held: that the expenditure for the payment of the taxes became a part of the cost of the property and is not deductible under section 23 of the Revenue Act of 1928.

1. Fair market value at March 1, 1913, of cemetery lots sold by the petitioner in the taxable year determined. 2. Held: that petitioner may not treat such deposits as allowable reserve charges and deduct them from its current income in the year made. Acacia Park Cemetery Assn., Inc.,27 B.T.A. 233.

The Union Co. in December 1928 entered into a contract with the stockholders of the Miller Co. to purchase from them all of the stock of the latter company in exchange for cash and the stock of the… Held: that there was no reorganization in 1928 within the meaning of section 112(i)(1) of the Revenue Act of 1928, and following National Iron Works,22 B.T.A. 382, the selling stockholders were not in receipt of the stock of the Union Co. in 1928.

Depreciation rate of certain cargo ships operating between New York and South Africa determined at 4 percent and another at 3 1/2 percent.

A purchase by stockholders of notes of their corporation and a sale by them to bankers of the notes and 80 percent of their stock for a price… Held: under the facts, not to constitute a sale of the stock for one cent per share, but was, in effect, a capital contribution to the corporation and a sale of the notes and part of their stock for a lump sum; and, in the absence of evidence establishing the value of the consideration received by each stockholder through possible…

1. Payments made to American nationals pursuant to an award of the Mixed Claims Commission, United States and Germany, are not gifts. 2. All American national whose property had been sequestered by the German Government and to whom the Mixed Claims Commission, United States and Germany, made an award, may not be taxed on payments made pursuant thereto until his capital has been made whole. James Speyer,30 B.T.A. 517. 3.

Where three corporations were consolidated and the new company took over all their assets and going businesses, which were continued by it, for which the new company issued its capital stock to the former stockholders of the old companies in proportion to their respective holdings, the basis for depreciation and for the determination of gain or loss from the sale of capital assets acquired from the old companies is the same as it was while the property involved was owned and…

The petitioner and his wife, residents of California, jointly executed a declaration of trust on June 24, 1926, which acknowledged receipt from the petitioner of certain certificates of stock which… Held: that the trust thus created is a charitable trust under the laws of California, and the income therefrom is not taxable to the petitioner under the provisions of section 219(g) of the Revenue Act of 1926.

1. Petitioner in writing conveyed to his wife and children a four-fifths interest in a royalty contract he had with a corporation, reserving to himself (1) the right… Held: the royalty fund so received is income taxable to petitioner. 2. Payments made by petitioner in gratitude for services rendered in former years by payee to a corporation of which petitioner was a stockholder are not ordinary and necessary expenses of petitioner deductible from petitioner's gross income.

1. Article 228, Regulations 74, prohibiting revaluation of mineral deposits whose value as of the basic date has been determined and… Held: such testimony does not warrant the conclusion that the value of the deposit as a whole was the fair price per carload multiplied by the number of carloads in the reserve; and, if it was given with the intent that such conclusion should be drawn, it is not persuasive when considered with evidence indicating that probably not more…

1. INCOME - LIQUIDATING DISTRIBUTIONS. - Under section 201(c), Revenue Act of 1926, distributions in liquidation by a corporation, whether made as from surplus or capital, held, chargeable against… Held: chargeable against the cost basis of the stock in the hands of the recipient. Holmby Corp.,28 B.T.A. 1092, followed. 2.

The Golden Gate Bridge and Highway District was organized for the purpose of constructing and maintaining a bridge over the Golden Gate and to that end was granted power to levy taxes and fix tolls. These functions were governmental. During the taxable year the petitioner was an officer of the District and his salary, as such, is exempt from Federal income tax.

The petitioner transferred not more than 85 percent of its properties to a newly formed corporation for cash, most of which was immediately distributed to its stockholders, notes, and preference and… Held: that no reorganization occurred within the meaning of section 203 of the Revenue Act of 1926.

1. In the circumstances of this proceeding the agreement to sell the property of the petitioner was not an executed contract of sale in 1922. 2. An item is accruable as income only when all the facts that assure its receipt at come future date are fixed and certain.

Under the terms of a will creating a trust the income of the trust was to be paid semiannually on June 15 and December 15 to the beneficiaries living on such dates… Held: that the income of the trust for the period December 15 to December 31 constituted income accumulated in trust for the benefit of unascertained persons or persons with contingent interests within the meaning of the provisions of section 161(a)(1) of the Revenue Act of 1928 and was taxable to the trustee.

1. Though the corporation was not formed, or, during its first three years, availed of for the purpose of avoiding surtax on its stockholder, where the facts reveal that in the year 1926 petitioner corporation, which had a surplus of $178,000, borrowed $100,000 and loaned its principal stockholder $195,000, meanwhile distributing only $12,000 in dividends, which loan was not reduced during the subsequent six years although during such time petitioner paid its principal…

In 1923 petitioner's mother created a trust, the income from which was payable to the petitioner and her brother in equal shares. Held: that the petitioner is taxable in 1930 upon the entire income of the trust fund.

Petitioner purchased certain mortgage securities at a discount and sold them at a discount which would net a profit. Held: the transactions constituted sales upon conditions subsequent, and did not create the relation of debtor and creditor.

A lessee of business property for a long term sublets a portion for the remainder of the term and later pays a lump sum for cancellation of the sublease. Held: the amount paid is not deductible as a business expense but is the basis for an annual depreciation deduction over the remainder of the term.

1. In the taxable period 98 percent of the stock of a railway company was owned by a coal company which in turn was 100 percent owned by a second railway company. Held: that the three corporations were affiliated from January 1 to April 1, 1917. 2. Petitioner having failed to show cost or value at March 1, 1913, of certain tangible properties used in the business of its predecessors, the claims for depreciation allowance for the taxable period cannot be allowed. 3.

Under the terms of a trust instrument, petitioner, a married woman resident of the State of Texas, received the income alone from the trust fund for life. Held: the sum thus received constituted community income of husband and wife, and is taxable one half to each.

Shares of corporate stock received by petitioner under the will of his wife, of which he was sole executor and sole legatee, held not to have constituted property acquired by specific bequest. Held: further, that the gain or loss from the sale thereof is, under the provisions of section 113(a)(5) of the Revenue Act of 1928, to be determined on the basis of their fair market value at the time of their distribution to the petitioner.

In determining the ratable part of the expenses, losses, and other deductions of a foreign corporation which can not definitely be allocated to some item or class of gross income for the purpose of computing the net income from sources within the United States, held that the gross income from all sources is not to be reduced by the amount of total losses from the sale of securities and that the gross income from sources within the United States is not to be reduced by the…

In 1917 the petitioner's steamship was sunk by a German submarine, and during the same year the petitioner recovered proceeds of insurance in excess of the cost of the steamer, reporting in its… Held: petitioner does not come within the provisions of section 112(f) of the Revenue Act of 1928, but must report the payments so received as gain.

1. Where petitioner included in income the rental value of the space occupied by it in its home office building, and deducted expenses… Held: the rental value of the space occupied was properly included in income. Helvering v. Independent Life Ins. Co.,292 U.S. 371. 2. Held, deduction for depreciation on the furniture and fixtures of a life insurance company should be limited to those used in its investment department. Rockford Life Ins. Co. v. Commissioner,292 U.S. 382. 3.

1. In 1929 a merger of a number of furniture companies was proposed, and one of petitioners participated in the negotiations and incurred and paid expenses in investigating the feasibility of the proposal. The project was definitely abandoned in 1929. Held petitioner's right to deduct as a loss the amount so paid is not to be denied because it entered into another and different combination in 1930. 2.

Petitioner acquired a 99-year lease, with option to purchase, in 1927 at a cost of $25,000. In 1928 he acquired the remainder interest. In his 1927 return petitioner deducted as amortization of the amount so paid $252.53. He now claims the right to deduct as a loss in 1928 the difference between the cost of the leasehold and the amortization deducted in 1927. Held, the cost of the lease was a capital expenditure, and when the leasehold became merged in the fee, the cost of the property to him became the sum of the unamortized cost of the leasehold plus the amount expended to acquire the lessor's remainder interest, and petitioner sustained no loss in 1928.

1. Petitioner purchased certain shares of corporate stock under a deferred payment contract, and thereafter purported to sell a portion of the stock to various… Held: petitioner is not entitled to deduct losses alleged to have been sutained in such transactions. 2. The deferred payment contract by which petitioner acquired the stock referred to the purchase price as being $322,250 and stated how the purchase price should be paid, but made no reference to payment of interest.

The evidence respecting a transfer of stock to a friend of petitioner's president, the same amount of stock being transferred back to petitioner within two months, does not establish a bona fide sale and respondent's disallowance of a claimed loss is sustained.

The declaration of a preferred stock dividend by a corporation and its later redemption, under the facts here disclosed, was "essentially equivalent to the distribution of a taxable dividend" within the meaning of sections 201(g) and 115(g) of the Revenue Acts of 1926 and 1928, respectively.

Petitioner paid income taxes to the State of Wisconsin under a statute which at that time had been held valid by the highest court of the state, but which has since been declared invalid by the… Held: petitioner is entitled to deduct as taxes paid the full amount paid to the state.

Petitioner acquired a lease of land having a term of 21 years and the privilege of renewal, and erected thereon a building at its expense, which the respondent determined had a useful life of 40… Held: following 353 Lexington Avenue Corp.,27 B.T.A. 762, that the respondent's determination must be sustained in the absence of evidence that the probable useful life of the building to petitioner was shorter than the period determined by the respondent.

A corporation is an entity distinct from its stockholders, and only under exceptional or unusual circumstances can the corporate entity be disregarded. The sale of stock at the market price by a corporation to its stockholder, owning all but two of its shares and controlling those, under all the other facts and circumstances, was a bona fide sale.

On May 22, 1929, the surrogate ordered that certain securities belonging to the estate of Charles R. Huntley, deceased, be distributed to the petitioners herein. Held: the basis for determination of gain or loss upon the sales was the fair market value of the securities at the time of the distribution to the petitioners, which was May 22, 1929, the effective date of the surrogate's decree. Arthur E. Braun, Trustee,29 B.T.A. 1161, followed.

1. A consent in writing extending the statutory period for assessment of taxes executed by the taxpayer and transmitted to the Commissioner, which was not signed or relied upon or acted upon by the latter, but was definitely rejected by him as unacceptable, and under which the taxpayer neither received nor accepted any benefits, is invalid; and the fact that the signature of the Commissioner was placed thereon several years after the expiration of the statutory period for…

A corporation owned all of the stock of eight subsidiary corporations, and operated in foreign trade vessels, owned by the latter, under… Held: that it was not the owner of said vessels within section 23 of the Merchant Marine Act, and therefore was not entitled to deduct, in computing its net income subject to profits taxes under the Revenue Act of 1918, an amount equivalent to the net earnings of such vessels during the taxable year, even though it had invested money in…

A partnership engaged in handling commercial paper and securities in various ways, including the purchase of a relatively small amount of securities for resale, held, upon the evidence, not entitled… Held: upon the evidence, not entitled to the use of an inventory as to such small part of its business.

Petitioner at various times between 1921 and 1928 purchased, for a total consideration of $274,110.16, bonds having a total face value of… Held: that petitioner, being a purchaser of bonds and defaulted interest coupons attached thereto, their cost represented a capital investment, and under such circumstances, the collection of the purchased defaulted coupons was not a collection of interest in so far as the purchaser was concerned within the meaning of the statute, but…

The H corporation transferred all of its assets (except amounts reserved and shortly thereafter paid for taxes, etc.), to the R corporation for preferred shares of the latter, a statutory… Held: that the gain realized by a shareholder of H from the distribution may not be recognized under the provisions of section 112 of the Revenue Act of 1928.

1. SALARIES. - Amounts distributed in addition to salaries as bonuses to employees in substantial proportion to the stock of petitioner which they had… Held: to be distributions of profits and not deductible as compensation. The dropping of the word bonus in later years and the designation as salaries of the sums paid to stockholders does not make the sums paid deductible in the absence of convincing evidence that they were reasonable compensation for services rendered. 2.

a corporation contracted to advance cash and securities to a partnership and in return therefor was to receive all the income of the partnership except amounts paid to… Held: that the amounts received by the corporation under the contract are income to it, there being no evidence that such amounts were return of capital or otherwise nontaxable; held, further, that the sums paid by the partnership to the estate of the deceased partner are not income to the corporation.

Income derived from contracts containing guarantee clauses, guaranteeing work thereunder against imperfections due to faulty workmanship and defective materials, etc., for a period of one or two years after completion of the subject matter of the contract, should be included in grosss income in the year in which received and the work completed and not at the end of the guarantee or maintenance period.

- By an indenture dated in 1923, petitioner created three trust estates, naming his sisters as the beneficiaries thereof. Held: the income received by the trustee for the trust estate for the taxable calendar years 1927 and 1928 is taxable to petitioner, the grantor, under sections 219(g) and 166 of the Revenue Acts of 1926 and 1928, respectively. Clapp v. Heiner, 51 Fed.(2d) 224, followed.

1. Where in prior years a taxpayer deducted and was allowed as an operating expense the entire amount of expenditures made for additions and renewals of furniture and fixtures and the period of limitations has run against the adjustment of the returns for such years, no deduction may be allowed during the taxable year or years on account of depreciation of such property. 2.

1. Where a foreign corporation owns all of the stock of two domestic corporations, the three corporations constitute an affiliated group within the definition of that term in section 141(d), Revenue Act of 1928, and the two domestic corporations have the privilege of making a consolidated return for the calendar year 1929. 2.

Petitioner and two others formed a partnership in which it was agreed that upon its dissolution the increase in the market price of a certain membership in a stock exchange purchased by and held in… Held: amounts paid by petitioner to the other partners in conformity with the agreement are not deductible from gross income of petitioner.

1. Held, upon the evidence, that an extensive deep sinking of land caused by a subterranean disturbance is a casualty within the meaning of section 214(a)(6) of the Revenue Act of 1926. 2. Held: upon the evidence, that an extensive deep sinking of land caused by a subterranean disturbance is a casualty within the meaning of section 214(a)(6) of the Revenue Act of 1926. 2.

1. Where the petitioner was both grantor and trustee under a deed of trust and had the right to deduct and retain annually 3 percent of the gross income of the trust as compensation for services as trustee, but did not make any charge for such services and did not collect anything therefor, and kept his accounts and made his returns on a cash receipts and disbursements basis, the allowable compensation is not taxable income to him. 2.

A charge to reserve for inactive contingencies which includes possible discounts and other subsequent adjustments of prices on sales, held, not to be deductible as such, and no part thereof, upon the… Held: not to be deductible as such, and no part thereof, upon the evidence, to be deductible as an addition to a reserve for bad debts.

1. The Farmers Educational and Cooperative State Union of Nebraska, a cooperative organization under the laws of Nebraska, having no capital stock; its members being members of local cooperative… Held: such association is not entitled to any deduction for patronage dividends, since no such dividends were declared or paid. 3.

1. Where a revocable trust so remained for a portion of the taxable year 1927 and the record does not show that the dividends or any portion thereof arising from the trust and received by the trustee in that year were received after the trust ceased to be revocable within the meaning of section 219(g) of the Revenue Act of 1926, the dividends should be included in computing the net income of the grantor for the taxable year 1927, as determined by the Commissioner. 2.

1. Petitioner relied upon deeds executed by himself to show that he owned less than the whole interest in real estate condemned for public use by a municipality. Held: the burden was upon petitioner to show not only execution, but delivery of the deeds to the grantees named. 2.

Petitioner exchanged its stock for certain assets of an individual, and on the same day, in a separate transaction, exchanged its stock for certain assets of a corporation. Held: that under section 203(i) of the Revenue Act of 1926 the transferors were in control of petitioner immediately after the exchange, and that the amount of stock received by each was substantially in proportion to their interests in the property prior to the exchange.

1. The full value of the community property held by the decedent and his wife is includable in his gross estate for estate tax purposes. 2. By deeds executed and delivered in 1915 the decedent conveyed certain real property to his wife and daughter. Such action, coupled with acceptance by the donees, constituted completed gifts inter vivos of the property conveyed, even though the deeds were not placed on record until 1925. 3.

Evidence held insufficient to overcome the prima facie correctness of respondent's determination that petitioner sustained no deductible loss in 1927 due to an alleged abandonment of certain contractual rights under which petitioner was licensed to sell correspondence school courses of study in Japan and otherwise conduct a correspondence school business there.

A loss, arising from the operation of a loan business prohibited by state statutes, subjecting those violating such statutes to fine or imprisonment, or both, upon conviction thereof, is not deductible under section 214(a)(4) and (5), Revenue Act of 1926.

1. In 1926 one of the affiliated petitioners, as lessee, leased certain railroad properties for a period of approximately 350 years, with options to renew for an additional period of 999 years.

1. The World League Against Alcoholism held not to have been organized and operated exclusively for educational purposes and a contribution made thereto is not deductible under section 23 of of the Revenue Act of 1928. 2. Certain other contributions held not deductible for lack of evidence.

1. Prior to his marriage petitioner's brother conveyed to him an interest in their father's estate, and thereafter petitioner asserted claim thereto in partition proceedings and upon distribution of… Held: the purchase was made after petitioner's marriage, and, under the laws of Texas the lands were community property. 2. Bonuses received in connection with oil and gas leases upon petitioner's separate property are his separate income. 3.

A taxpayer who owned land which had been devoted to farming purposes and which became too valuable for those purposes, through agents employed by him, subdivided and improved it, and after… Held: that the lots were held by the taxpayer primarily for sale in the course of his business and that he is not entitled to the benefits of sections 208 of the Revenue Act of 1926 and 101 of the Revenue Act of 1928.

Where a husband and wife, residents of California, more than six months prior to his death executed an agreement whereby each relinquished to the other all interest in the other's estate, present or… Held: that the separation agreement was a waiver of the restriction contained in the proviso to section 1313 of the Civil Code of California.

Petitioner's decedent died owning a vested remainder interest in 3,000 shares of stock held in trust, subject to a life interest in his mother, which he had acquired under the will of a prior… Held: the entire value of the vested remainder interest at the time of decedent's death is deductible from his gross estate, as it represents the value of property which had been previously taxed within five years as part of the gross estate of a prior decedent.

Where A corporation acquired in excess of 60 percent of the outstanding capital stock of B corporation for cash and bonds, and the latter corporation… Held: there was no reorganization within the meaning of section 203(h)(1) of the Revenue Act of 1926. Held, further, the gain derived by the petitioner upon the exchange of its stock in B corporation for cash and bonds of A corporation is recognizable for tax purposes to the extent of both the cash and the bonds so received.

1. The rule laid down in Burnet v. Logan,283 U.S. 404, is not applicable to an ordinary real estate subdivision trust in the absence of proof of exceptional facts. 2. Section 704(b) of the Revenue Act of 1928, permitting the taxation of the income of certain classes of trusts to the beneficiaries at the option of the trustee, is valid.

1. Amounts of trust income distributed pursuant to will to testator's widow, who took under will in lieu of dower, are deductible from gross income of trust; following Butterworth v. Commissioner,290 U.S. 365. 2.

1. The furniture and fixtures of the petitioner were used in both its investment and underwriting business. Held: that the petitioner is entitled to deduct from gross income only the amount of the depreciation sustained upon the furniture and fixtures used in its investment business. 2.

Corporation A issued a portion of its stock for all of the shares of stock and all of the assets of corporation B. Corporation B was not dissolved although from the time it parted with its assets; it… Held: that the net losses of corporation B may not be deducted from the gross income of corporation A.

The petitioner was created under a syndicate agreement by the stockholders of a corporation for the purpose of acquiring and selling certain securities held by the corporation and liquidating the… Held: that the petitioner was not an association taxable as a corporation.

1. During the taxable year a subsidiary corporation, all of whose outstanding stock was owned by the parent corporation, sold at a profit to employees of the parent corporation certain shares of stock it owned in the parent. Held that the profit on the transaction constitutes taxable income of the subsidiary and should be included in the taxable consolidated income of the group. 2.

1. An insured's personal benefit fund consisting of contributions by policyholders with fixed interest contributed by the insurance company, the fund to be distributed among the surviving persistent policyholders as provided by the insurance policy, sanctioned and required by state law and regulation, held a reserve required by law under the revenue acts. 2. Premium reduction coupon policy reserves held reserves required by law. 3.

Value of certain maineral deposits determined for depletion purposes.

1. During 1926 and 1927 a corporation bought stock on order for its president, who paid for the stock that was issued in his name. Held: that no constructive dividend from the corporation to its president resulted, because the stock was purchased for and belonged to the president. 2.

In 1913 the petitioner entered into an agreement to purchase stock in the A. D. Shoup Co. from A. D. Shoup for $21,550. The seller was not obligated to deliver the stock to the petitioner until the purchase price was fully paid out of dividends derived from the same stock and the petitioner was expressly relieved from any liability to pay otherwise. The purchase price was fully paid from dividends in 1914.

1. In 1930 the Lamination Stamping Co., of which petitioners were stockholders, entered into a written agreement with the Allegheny Steel Co., pursuant to which the former corporation transferred its… Held: the transaction constituted a reorganization within the meaning of section 112(i)(1)(A) of the Revenue Act of 1928. 2.

1. The Commissioner included interest from certain obligations of the United States in the decedent's taxable income for the year 1921. Held: that the Commissioner did not err in so doing, the obligations not being particularly described in the record nor the date of their issue shown, and that the interest thereon was exempt by virtue of the provisions of section 213(b)(4) of the Revenue Act of 1921. 2.

Deduction - Loss on Worthless Stock. - Respondent disallowed a claimed loss deduction for 1929 upon a finding that petitioner's stock became worthless in 1928, the year in… Held: the fact that until 1929 petitioner entertained hopes of effecting a reorganization and made unsuccessful efforts to bring those hopes into being, is not a sufficient basis upon which to conclude that the stock was not worthless in 1928 and became worthless when such hopes were abandoned in 1929.

Two of the petitioners, affiliated corporations, purchased stock of the parent and resold it at a price higher than the purchase price, but such stock dealings did not affect the affiliation. Held: that these transactions resulted in taxable gain. Commissioner v. Van Camp Packing Co., 67 Fed.(2d) 596, followed.

Where a taxpayer is engaged in the business of producing gas from wells and also of transporting it to consumers, the allowance for depletion of the gas wells under the Revenue Act of 1928 (27 1/2 per centum of the gross income from the property, which shall not exceed 50 per centum of the net before deducting depletion) must be computed by eliminating all income and deductions properly allocable to its business of transportation.

Petitioner, subsequent to his marriage and while domiciled in Oregon, acquired an interest in a partnership in that state. Held: that the interest in the partnership having been separate property when acquired, it retained its character as such after the change of domicile and the distributive income was his separate income and taxable in whole to him.

Brokerage commissions paid by an investment corporation engaged in the real estate business in connection with two real estate transactions in which larger properties were acquired for cash and other smaller properties, held not deductible when paid.

The income of a trust created in Tennessee by a mother for the education and support of each of her minor children and distributed to their father, one of the trustees, for that purpose, held not within her gross income, notwithstanding the settlor's right to revoke as to principal in a future year.

1. The income of a trust created by a father for his adult child, not revocable as to income but revocable as to principal in a future year, held not within his gross income. 2. The income of a decedent's estate during administration held not within the gross income of the person who was both administrator and sole successor of the personalty, in absence of undue or capricious delay in settlement and distribution of the estate.

In her will the decedent attempted to dispose of certain trust property in respect of which she had been given a power of appointment in the trust agreement. Held: that the trust property did not pass under a general power of appointment exercised by the decedent by will and is not includable in her gross estate under the provisions of section 302(f) of the Revenue Act of 1926. Freuler v. Helvering,291 U.S. 35.

Under the Executive Law of the State of New York and the requirement of the governor pursuant thereto, the attorney-general of the state designated petitioner as a special assistant attorney-general… Held: petitioner was not by reason thereof a state officer, and his compensation is not exempt from Federal income tax.

Where in his petition a petitioner admits receiving an amount in distribution of property of a taxpayer, but makes no admission as to the financial condition of the taxpayer immediately after the distribution or that the Commissioner had exhausted all of his remedies against the taxpayer for the collection of the tax being asserted against him as a transferee, such a petitioner may, under the circumstances present here, at the conclusion of the hearing amend his petition to…

1. A specialist in stocks listed on the New York Stock Exchange, whose operations consist of matching buy and sell orders given to him by other brokers and of buying and selling his specialties on margin as a speculation, is not a dealer in such stocks and may not inventory them under article 105 of Regulations 74.

Where petitioner, a full-blood Quapaw Indian, acquired certain real property prior to March 1, 1913, subject to the restriction that the property should be inalienable for a period of 25 years from September 26, 1896, or until September 26, 1921, and it was sold at a profit in May 1931, the basis for determining the amount of gain under section 113 of the Revenue Act of 1928 is the fair market value of the property as of March 1, 1913, and not as of the date of the removal…

More than two years prior to death, and not in contemplation of death, decedent executed and delivered to her husband, without monetary consideration, a mortgage for $700,000 on certain real estate… Held: the interest of decedent in the property, under the law of Connecticut, which is required to be included in the value of her gross estate by section 302(a) of the Revenue Act of 1926, is the full value of the land at the date of decedent's death.

1. JURISDICTION - SECTIONS 1005(A) OF THE REVENUE ACT OF 1926 AND 1101(A) AND (B) OF THE REVENUE ACT OF 1932. - Where more than three months have elapsed since the entry of a decision of this Board… Held: the Board is not functus officio as to such motion and can vacate or modify such decision. 2.

1. The transfer of securities to a corporation in which petitioner A. S. Eldridge owned all the stock except qualifying shares, which were owned by members of his family, Eldridge receiving a credit to his personal account on the corporate books for the current market price, which was less than cost to him, is held to be a bona fide sale and the resultant loss is an allowable deduction. 2.

Where officers of corporations receive payments during the taxable years from certain corporations under resolutions that such moneys… Held: the correctness of the Commissioner's determination is not overcome by testimony that the amounts received were spent for or donated to Christmas basket funds, labor unions, prize fights, football games, political organizations for campaign expenses, and the like, all for the promotion of business of the companies and for maintaining…

- Held, that section 44(d) of the Revenue Act of 1928 is applicable to unpaid installment obligations under sales made prior to its enactment and when so applied is constitutional. Held: that section 44(d) of the Revenue Act of 1928 is applicable to unpaid installment obligations under sales made prior to its enactment and when so applied is constitutional. Estate of Erskine M. Ross,29 B.T.A. 227, followed.

1. In 1925 the petitioner sold certain stock and bonds received by her upon a distribution in 1920 or a subsequent year of a portion of the assets of a trust estate in which in 1910 she had acquired… Held: that in determining the gain or loss from the sale of the stock and bonds their value on the basic date is to be reduced by a proportional part of the value of the periodical payments applicable to such securities. 2.

1. Where petitioner is engaged in the business of producing natural gas from leased properties and selling the gas to consumers after transporting the same through its distribution system, consisting of gas mains, service pipes, compression stations, and meters, the total proceeds of sales do not constitute the gross income from the property for the purpose of computing an allowance for depletion under section 204(c)(2) of the Revenue Act of 1926, but such gross income is…

Under the principles announced in United States v. Updike,281 U.S. 489, in the present case, where no return was made by transferor company for the year 1918 but an assessment against it was made in 1922, the period of limitations respecting the transferee began to run at the date of assessment and bars enforcement of the liability against transferee on a notice of liability issued October 29, 1929.

Held, the first in, first out rule does not apply to stock received upon an exchange in a reorganization, Christian W. Von Gunten,28… Held: the first in, first out rule does not apply to stock received upon an exchange in a reorganization, Christian W. Von Gunten,28 B.T.A. 702, nor to stock received in an exchange of stock for stock of the same corporation which is a nontaxable exchange (sec. 112(b)(2), Revenue Act of 1928), nor to nontaxable exchange in 1923 of stock…