Volume 33 — Board of Tax Appeals

Where the petitioner sold his interest in a partnership in order to avoid further personal losses, taking the notes of the surviving partners therefor, secured by the assignment of their partnership interests, and he claimed a deduction in the year of such sale upon the disposition of his partnership interest, which deduction was allowed, the further loss sustained in the following taxable period by reason of such notes becoming worthless is not a net loss within the meaning…

Petitioner claimed and was allowed a loss resulting from liquidation of a corporation in 1929. In this proceeding he claims the liquidation occurred and the loss was sustained in 1930. Held that the evidence is insufficient to show that liquidation did not occur in 1929.

Where the petitioner under a plan of reorganization exchanged 2,534.38 shares of the common stock of the Peerless Explosives Co. for 1,344 shares of common stock and 625 shares of the preferred stock of the Atlas Powder Co., 2,720.08 shares of common stock of the Peerless-Union Explosives Corporation, and $25,306.67 in cash, the market value of the Atlas Powder Co. common and preferred stock was not taxable as income, as the reorganization was a tax-free transaction with the…

The right acquired by a purchaser of space in a mausoleum is realty and the vendor of such space may elect to report on the installment basis where the initial payment does not exceed 40 percent of the selling price. In such sales the portion of the sales price to be collected by a trustee and held as a perpetual care fund should be excluded from both contract price and gross profit.

Prior to 1931 petitioner purchased from the vendor of houses the contracts for the sale of a number of the houses and lots. In 1931 the purchasers defaulted and petitioner canceled the contracts and took over the houses and lots. The fair market value of the realty so acquired by petitioner was less than the amount of petitioner's unrecovered cost of the sale contracts, and it is held that that difference represented a deductible loss to the petitioner.

The basis for computing taxable gain to petitioner upon the sale of certain shares of stock of Von's Inc., which were acquired from the Grocers Securities Co., an ephemeral corporation, was the same as that of the transferor, which in turn was the same as the basis of the sales in the hands of Charles Von Der Ahe.

1. Pending the determination of litigation the proceeds from the sale of oil and gas produced by the petitioner and others from certain oil and gas property owned by them were held in an escrow account with a bank, the greater portion of the amount of such account to be invested in bonds of the United States Government.

- Portions of property transferred in trust in 1924 were sold in 1930 and 1931. Held that under the Revenue Act of 1928 the basis is the same as it would be in the hands of the grantors. Basic dates and values determined.

Proceeds of a contract entered into in a prior year by petitioner's decedent for attorney fees for carrying on certain litigation, paid in the taxable years to a trust which petitioner's decedent had created in a prior year, held taxable as the income of petitioner's decedent notwithstanding the prior assignments to the trust of decedent's interest therein.

1. Joint will of husband and wife held to have created two trusts rather than one as determined by respondent. 2. Payments by trustee to decedent's widow and daughter held to be annuities and not deductible from trust income.

Taxpayer owned a patent expiring in 1916, license to use which had been granted to another party by contract providing for royalties. Held: taxpayer is not taxable on such part of the judgment as represented damages and interest for the period prior to March 1, 1913.

1. Petitioner corporation was availed of during the taxable years for the purpose of preventing the imposition of the surtax on its stockholders through the medium of permitting the gains and profits to accumulate instead of being divided or distributed. 2.

By reason of oral agreement between petitioner and his wife, who were residents of California, their various properties were not owned in community, but each had an undivided one-half separate interest in them, and the petitioner is liable for income tax upon only one half of the income therefrom.

1. GIFTS MADE IN CONTEMPLATION OF DEATH. - Certain gifts of securities, held not made in contemplation of death within the meaning of section 302(c) of the Revenue Act of 1926. 2. Value of securities for estate tax purposes, determined.

Petitioner, during the taxable years, was employed by four firemen's and policemen's annuity and benefit funds as an actuary. Held: services were rendered by petitioner as an independent contractor rather than an employee, and compensation received was not exempt from Federal income tax. Metcalf & Eddy v. Mitchell,269 U.S. 514, followed.

1. A return signed and filed by a husband, determined by the Commissioner to be a joint return of husband and wife and so pleaded, held a joint return upon which both are jointly and severally liable. 2. The provision for an unlimited period for assessment in the case of a false or fraudulent return with intent to evade tax is an impersonal provision, and the tax may be assessed at any time against either party to a joint return, irrespective of the existence of a waiver signed by only one. 3. Gross understatement of net taxable income through numerous incorrect items both of gross income and of deductions held fraudulent.

Held, the evidence does not establish that a claim for refund was ever filed by petitioner.

A cooperative association which declared stock dividends out of its accumulated earnings and during the taxable year paid cash dividends of 8 percent upon its entire outstanding capital stock is not entitled to exemption from income tax.

A citizen of the United States receiving dividends from a corporation chartered under the laws of the United Kingdom of Great Britain and Ireland is not entitled under section 131 of the Revenue Act of 1928 to a credit of the amount of United Kingdom income taxes appropriate to the dividends received, nor is such taxpayer required to include in gross income as part of the dividends received from foreign corporations the amount of United Kingdom income tax appropriate to the…

1. REVENUE ACT OF 1928, SEC. 104(a). - Corporation, taxpayer, held, formed and availed of for the purpose of preventing the imposition of the surtax upon its shareholders through the medium of… Held: formed and availed of for the purpose of preventing the imposition of the surtax upon its shareholders through the medium of permitting its gains and profits to accumulate instead of being divided or distributed. 2.

The taxpayer corporation transferred substantially all of its assets to another corporation in exchange for a stated principal amount of the… Held: that while the bonds were securities within the meaning of section 112(b)(4), Revenue Act of 1928, they did not give the necessary continuity of interest to the transferor to make the transfer partake of the nature of a merger or consolidation, and hence the transaction was not a reorganization within the meaning of section…

The word securities in section 112(b)(3), Revenue Act of 1928, which provides that no gain or loss shall be recognized if stock or securities in a corporation a party to a reorganization are, in pursuance of the plan of reorganization, exchanged solely for stock or securities in such corporation or in another corporation a party to the reorganization, includes unsecured, confess-judgment promissory notes of a corporation, due on or before ten years after date, which were…

Where a bondholders' committee bought in the assets of the defunct corporation at a foreclosure sale, paying therefor $400,000 in deposited bonds and $140,000 in cash, and thereafter organized… Held: the transaction did not amount to a reorganization under the provisions of the Revenue Act of 1928.

The decedent created an irrevocable trust providing for payment of the net income from the estate to her for life and, upon the termination of the trust at the death of the survivor of two named… Held: that the corpus constitutes part of the gross estate of the decedent.

1. Where assets are sold at a price equal to their cost, and losses are claimed on the theory that the proper basis for determining… Held: The petitioner never owned any of the shares of the transferor banks, and the stockholders of such banks in no real sense were ever owners of the shares of the resulting bank; hence, an interest or control in the property transferred to the resulting bank of 80 per centum or more did not remain in the same persons, within the meaning…

A realtor, employed by the Board of Local Improvements of Chicago as a chief real estate valuator, was paid on a per diem basis upon vouchers submitted by him for expert services rendered in… Held: that petitioner was not an officer or employee of a political subdivision and the compensation so received is not exempt from the Federal income tax. Edgar N. Finn,31 B.T.A. 439, and Metcalf & Eddy v. Mitchell,269 U.S. 514, followed.

1. Where the president of a corporation in 1925 took possession of its certificates of deposit and held them unendorsed until 1926, when he returned them and received the corporation's check to his… Held: that the amount thereof is within his income of 1926 and not of 1925. 2. Payment received by petitioner under an unambiguous contract, held, within ordinary income as consideration for an option and not as sale price.

1. The petitioner in contemplation of the sale of certain stock made an irrevocable gift on trust of part of his shares to his wife for life, with reversion to himself on her death, naming himself as… Held: that a bona fide trust of the shares was created and the capital gain on the sale was not income taxable to the petitioner under section 166 or 167 of the Revenue Act of 1928. 2.

Corporation A acquired in excess of 60 percent of the outstanding voting stock of corporation B in exchange for cash and bonds of… Held: that there was no reorganization of corporation B within the meaning of section 203(h)(1) of the Revenue Act of 1926; held, further, that the taxable gain derived by the shareholders of common stock of corporation B, upon the exchange of their shares for cash and bonds of corporation A, is recognizable for tax purposes to the full…

A decedent provided in his will that the payment of certain amounts annually to two persons should be a charge upon his Lake Mohonk property. Held: that that part of the income from the operation of the hotel used to make the two annual payments should not be included in the income of the petitioners.

The petitioner, a private corporation furnishing water to the city of Litchfield, Illinois, and its inhabitants and industries, under its contract with the city dated March 20, 1924, is not exempt from Federal taxation for the years 1929, 1930, and 1931.

1. Where the petitioners, as grantors of irrevocable trusts, conveyed certain shares of stock to the trustee named in the trust instruments and these shares were subsequently sold by the trustee, the profits realized from the sale thereof are not taxable to the petitioners. 2. Value of shares of stock determined as of March 1, 1913, and on December 9, 1915, on which latter date the shares were distributed to three of the petitioners.

In a trust created for the benefit of certain sisters and a brother it was provided that each beneficiary might by will dispose of his or her interest in the trust property, but in default of the… Held: respondent committed no error in including such interest in the gross estate of the deceased.

Where a cooperative company under the laws of Nebraska has extensive dealings with nonstockholders and provides in its bylaws that patronage dividends shall be paid only to stockholders and to them in proportion to the amount of business they have done with corporation during business year, the company is not exempt from income tax.

Petitioner, as legal guardian for his children, sold in 1927 certain shares of stock belonging to them and in 1927 and 1928 invested the proceeds in shares of stock of Deere & Co., which he sold for… Held: that the petitioner is not liable to income tax upon the profits as income of his own.

Where petitioner received compensation for services rendered as an assistant attorney for the Sanitary District of Chicago in making investigations and recommendations with reference to pending… Held: that the compensation so received is not exempt from Federal taxation.

1. TRUSTS - INCOME FOR BENEFIT OF GRANTOR. - Where the taxpayer created certain trusts, making himself one of the two trustees, and such part of the income of each trust as the trustees, in the exercise of their discretion, might decide upon, was payable thereunder to the primary beneficiaries, and the corpus of the trust in each case was to be reconveyed to the taxpayer upon termination of the trust period, it is held that income arising from sales of the trust corpus, and…

The stock of six domestic corporations which were taxable under section 13 of the Revenue Act of 1928 was owned by a domestic insurance company which was taxable under section 204 of the same act. Held: that the six corporations, having as their common parent a domestic fire insurance company, were affiliated within the meaning of section 141(d), Revenue Act of 1928, and had the right to file a consolidated return.

The petitioners and another owned stock of the T corporation. Held: that section 112(b)(5) of the Revenue Act of 1928 does not apply, because there was not a transfer of property (stock) solely in exchange for stock of A, but a sale of stock to A for cash; and (2) that the petitioners were entitled to deduct as a loss the difference between the amount realized and the basis of the stock sold, because…

1. Where in the State of Texas decedent died January 19, 1929, and left a will bequeathing and devising to his wife all of his property and appointing her independent executrix without bond and directing that no action should be had in any court except to probate the will and return an inventory appraisement and list of claims of the estate, and the executrix duly qualified under the laws of the state, and at the time of decedent's death there were certain lawsuits pending…

1. The entire amount of gain upon the sale or exchange of property must be first determined under section 111 of the Revenue Act of 1928, but if the transaction falls within subdivision (c) of section 112 of the act, that is, if stock, in addition to money and other property, is received then the gain shall be recognized only in an amount not in excess of the sum of money and the fair market value of property other than the stock so received. 2.

Profit which was derived by a member of an affiliated group from the sale of stock of another member of the group, where the stock in question was acquired in the form of stock dividends and the sale of the same did not break the affiliation, is liable to income tax.

Payments made by petitioner, Foye Lumber & Tie Co., pursuant to an agreement with a bank to reimburse it for losses suffered by the bank in a prior year consequent upon the liquidation of another lumber company bearing the name of W. J. Foye Lumber Co., are held not to be ordinary expenses within the meaning of section 23(a), Revenue Act of 1928, although under the circumstances it was necessary for petitioner to make the payments. Welch v. Helvering,290 U.S. 111.

The functions exercised by the Board of Local Improvements of the city of Chicago with respect to streets are essentially governmental, and the salary of its chief street engineer is exempt from Federal income tax.

1. In settlement of a controversy between them as to the ownership of 248 of the 250 shares of outstanding stock of a corporation, petitioner Mann purchased the stock from his wife for $165,000 in… Held: under the circumstances, that of the amount of the bonds only the sum of $9,200 constituted a taxable dividend to Mann in 1928. 2. The amount paid in the same way by the corporation for petitioner Mann in the year 1929 included interest in the amount of $7,853.44.

1. Trusts created under the dominating motive of placing funds beyond the control of the settlor, to protect his family against financial worries and to reduce income taxes, are not made in contemplation of death and are not includable in gross estate. 2.

1. A commission received by petitioner was ordinary income and not capital gain. 2. Reporting of ordinary income as a capital gain, under the circumstances in this case, held to have been fraudulent with intent to evade tax and assertion of fraud penalty sustained.

1. The whole amount of award to petitioner for property condemned and taken by the city for public use should be considered as received by him in the taxable year, where a part of it is offset against assessments for improvements. 2. Benefit assessments paid by such award may be added to the cost of the property for the purpose of determining taxable gain from the award received for the taking of a portion thereof.

1. In computing the 15 percent deduction allowable for charitable contributions, capital gains as well as ordinary income should be included in making the computation. Held: that the broker was the taxpayer's agent and that the shares sold were those actually delivered rather than those which the taxpayer intended to sell and deliver.

1. A trustee may not deduct, under section 162(b) Revenue Act of 1928, amounts paid to annuitants in the taxable year pursuant to a deed of trust by the terms of which the annuities are charges upon both the income and the corpus at any time when payment of them becomes due. 2.

Fees charged by a title insurance company for title searches, appraisals of property, and other services, which fees were paid by applicants whether insurance policies were issued or not and were received under contracts separate and distinct from the insurance policies issued by the petitioner, are held not to be premiums and are not to be included in underwriting income under section 204, Revenue Act of 1928.

- Petitioner and his corporate employer agreed that in addition to a cash salary petitioner was to receive compensation based on the income of the corporation. Held: that the additional compensation for 1929 was not constructively received by petitioner in 1931 and was not income to him for that year.

A new corporation which bid $450,000 at foreclosure for property mortgaged by its predecessor, payment being made in the defaulted bonds of the predecessor, for which the new corporation issued its shares to the bondholders, held to have a depreciation basis for the property amounting to the value of the bonds, such value being held upon the evidence to be equal to the bid.

1. Accrued mortgage interest held to be income to the mortgagee upon its bidding in the property on foreclosure at a price equal to the debt pous interest. 2. Properties on which petitioner had made loans were conveyed to it by the mortgagors in satisfaction of the principal of the debts and unpaid interest.

The evidence does not establish that the relationship of debtor and creditor arose out of advances of money by petitioner's wife to the petitioner, and the transfer of stock by petitioner to his wife was not a sale and did not result in a deductible loss.

1. Where, under the laws of Ohio, testamentary trustees made a return for taxation of personal property in their hands in April 1928, the taxes subsequently paid are the taxes of the trustees and not those of the beneficiary, who on June 8, 1928, became entitled to the property under the terms of the will. 2. Under Ohio law as it stood in 1928, the day preceding the second Monday in April is the date of local tax incidence.

In the merger of a state bank under the charter of petitioner, a national bank, each bank contributed an agreed amount of the increased capital, surplus, and undivided profits of petitioner, and… Held: that the existence of the state bank was not continued in the petitioner, and not being the grantor of the trust to which assets of the state bank were transferred, the petitioner may not deduct from its income losses or bad debts of such trust.

An individual transferred to the petitioner corporation in exchange for all of the petitioner's stock certain shares of stock and a contract entitling it to certain payments based upon the amount of… Held: the gains and profits were permitted to accumulate beyond the reasonable needs of the business. That fact is prima facie evidence of a purpose to escape surtaxes. Sec. 220(b), Revenue Act of 1926.

1. Petitioner contracted for the purchase of certain stock of a corporation publishing a newspaper which contract also provided a salary to the… Held: payments made under the contract are not deductible as ordinary and necessary business expense. 2. Contributions, not for business reasons nor calculated to produce commensurate returns, made by a corporation publishing a newspaper to charitable organizations are not deductible as ordinary and necessary business expense.

1. Capital gains should be included in other income in determining the amount of net income for the purpose of applying the 15 percent limitation on charitable contributions prescribed in section 23(n) of the Revenue Act of 1928. Helvering v. Bliss,293 U.S. 144. 2.

CAPITAL GAIN. - Where certain stock, through the sale of which petitioner realized a gain in 1928, had been acquired by him through the exercise, in that year, of an option for its purchase, and, consequently, such stock, not having been held by him for two years, did not constitute capital assets within section 101(c)(8) of the Revenue Act of 1928, such realized gain is subject to normal and surtax and not the rate for capital gain.

In the absence of evidence that the value of wet gas at the mouth of the well purchased under casinghead gasoline contracts was in excess of the royalties paid therefor it is held that the petitioner is not entitled to any deduction from gross income representing an allowance for depletion.

1. Where a parent corporation received a dividend from its wholly owned subsidiary which was paid in stock of a third corporation acquired by the subsidiary in a nontaxable exchange for stock… Held: the dividend is a distribution in property made out of earnings accumulated after February 28, 1931, and is taxable to the stockholders of the parent corporation to the amount of the fair market value of the property when receivable by the stockholders.

1. Issues relating to the book value of petitioner's home office building at the end of the taxable year and the rental value of the space occupied therein by it were presented… Held: that the term book value as used in section 245(b) of the Revenue Act of 1926 with respect to petitioner's home office building, which was occupied in part by it, means cost less the depreciation accrued thereon during the period of petitioner's ownership down to the end of the taxable year. 3.

Where a contract is acquired solely in exchange for all of its stock, the basis of such contract in the hands of a transferee, for purposes of exhaustion deductions, is the same as in the hands of the transferor, under applicable provisions of the 1928 Act. There being no evidence that there was any cost of such contract to the transferor, the transferee is not entitled to deductions for exhaustion of such contract.

1. On the evidence, held that certain gifts inter vivos and certain transfers in trust made by decedent during his lifetime were not made in contemplation of death within the meaning of section… Held: petitioner is entitled to a deduction in the amount so paid, and not in the amount computed by deducting from the claim allowed by the probate court the fair market value of the collateral security at decedent's death.

1. The taxpayer and others made a contract to build a tunnel and agreed among themselves to share the profits and losses in stated proportions. Held: that neither the corporate entity of the construction company, the acts and circumstances surrounding its creation and existence, nor the fact that the taxpayer was not the owner of its stock when the loss was sustained, can be disregarded in determining whether the taxpayer sustained a deductible loss in the transaction. 2.

1. AFFILIATION - CONSOLIDATED RETURNS - REVENUE ACTS OF 1924, 1926 AND 1928. - Where no change in the parent of an affiliated group occurred in the taxable years, no right of election between the consolidated and separate basis of return accrued to petitioner because of the addition, in those years, of other companies to that group.

Petitioners contributed money to a syndicate organized to trade in a certain stock. Upon dissolution of the syndicate in 1929 it distributed cash and stock to petitioners. Held: that under the terms of the syndicate agreement the syndicate was an entity separate from the participants and that gain was realized by petitioners on the date of such distribution measured by the cash plus stock at its fair market value on date of distribution to petitioners, less cash contributed.

In 1929 the petitioner contributed $16,000 to a pool which was to buy and sell shares of stock of the American Seating Co. The pool was unsuccessful. Held: that the petitioner's loss of $16,000 was a legal deduction from gross income of 1930.

1. A corporation which retires an outstanding issue of bounds at a callable price above par in accordance with the trust agreement is entitled to a deduction for the unexhausted discount and expense on the old bond issue and for the difference between par and the amount paid to retire them, even though it had borrowed money to retire the bonds and promptly repaid the amount borrowed from the proceeds of a new bond issue. 2.

1. BONUSES - OIL AND GAS LEASES - DEPLETION. - Sums received as bonuses for the execution of oil and gas leases are payments in advance for oil and gas to be extracted and are therefore depletable. (Herring v. Commissioner,293 U.S. 322, followed.) 2. DELAY RENTALS - OIL AND GAS LEASES - DEPLETION. - Sums received as delay rentals distinguished from bonuses and royalties.

Corporation A acquired all the shares of stock of corporations B and C in exchange for a majority of its own shares, all the shares of corporations D and E (newly created by corporation A) and cash. Held: that corporations D and E were not parties to a reorganization.

1. REORGANIZATION. - No statutory reorganization occurred where there was no continuity of interest on the part of the old corporation or its stockholders in a new corporation, which acquired… Held: taxpayer is entitled to deduct, in that year, the amount by which his basis exceeds such partial recovery.

As the Revenue Act of 1928 does not allow deductions for reserves to insurance companies other than life or mutual, a company writing workmen's compensation and liability insurance may not take as a deduction for unpaid losses a reserve based on the amount of premiums. The deduction allowable is the amount computed as its probable liability on claims filed.

Held, the compensation received by petitioner as director of a municipal playground of Los Angeles, California, is exempt from Federal income tax. Held: the compensation received by petitioner as director of a municipal playground of Los Angeles, California, is exempt from Federal income tax.

1. Premiums paid by petitioner's corporate employer on insurance surance on petitioner's life applied for by petitioner and payable to his family or estate held to be income to petitioner. 2. Premiums paid by the employer on policies applied for by the corporation, some of which were originally payable to the corporation but in the taxable year were payable to petitioner's wife and sons, held not income to the petitioner.

1. Stock control of this petitioner was in the residuary trustees under the will of Morton F. Plant, deceased, on August 1, 1923, on which… Held: the foregoing was a nontaxable exchange under paragraph (3), subdivision (c) of section 202 of the Revenue Act of 1921, therefore, the basis for the determination of the loss occasioned by worthlessness of value at the date of the death of Plant, adopting the principle of Rewster v. Gage,280 U.S. 327. of Brewster v. Gage,280 U.S.…

1. Petitioner received $20,000 from employer corporation as a Christmas remembrance. Held: the payment made to petitioner was a bonus or additional compensation for services rendered and should have been reported as income. 2. For lack of proof, deductions claimed for club, traveling and entertaining expenses, are denied.

SECTION 44(d), REVENUE ACT OF 1932 - TRANSMISSION OF INSTALLMENT OBLIGATIONS AT DEATH. - At the time of filing the 1932 return of the decedent, who died owning installment obligations, the form for… Held: that under circumstances here the treatment of the installment obligations as resulting in gain to the decedent under section 44(d) is unwarranted.

Where a taxpayer makes short sales of stock and thereafter covers such sales by delivering shares out of a quantity of the same stock which he has held for more than two years at the date of the short sale, section 23(s) of the Revenue Act of 1932, providing that gains or losses from short sales of stocks shall be considered as gains or losses from sales or exchanges of stocks which are not capital assets, applies and the entire gain is taxable as ordinary income.

Where respondent sent by registered mail to the taxpayer a notice of deficiency for the taxable year 1926 and the period ended June 30, 1927, the Board on appeal therefrom is without jurisdiction to redetermine petitioner's tax liability for the calendar year 1927.

Where taxpayer, because of the provisions of a certain underwriting agreement in which he participated as a principal, actually purchased his allocable part of the underwritten stock from the issuing… Held: the transaction was a mere purchase of the stock by the taxpayer and no loss was sustained upon such acquisition.

1. Petitioner, in order to enable a holding company, to be formed by him and his associate, to borrow $1,000,000, contracted to form a new corporation which would issue $1,000,000 of its debentures… Held: that the contract is entire and not severable; that the cash received by petitioner was not the sole consideration for the transfer of the stock and his loss is not the difference between the cost of the stock and the amount of cash so received. 2.

A taxpayer on the accrual basis of accounting, accrued taxes due the State of Ohio in each taxable year, 1928, 1929, and 1930. Held: taxpayer was entitled to deduct the amount accrued on its books in each year.

1. DIVIDENDS TO STOCKHOLDERS. - A corporation, organized prior to March 1, 1913, and having on hand earnings and profits accumulated prior to that date, sustained a net loss in 1927, followed by… Held: such distributions constituted taxable income to the stockholders. Helvering v. Canfield,291 U.S. 163. 2.

Held, that respondent, having failed to show that at the time of the transfers of certain property to petitioner the transferor was insolvent… Held: that respondent, having failed to show that at the time of the transfers of certain property to petitioner the transferor was insolvent or that such transfers rendered the transferor insolvent, has failed to meet his burden of providing that petitioner is liable, as transferee, for taxes, penalties or interest of the transferor.

1. Where income tax returns for 1927 are stamped as having been filed in the deputy collector's office on April 14, 1928, and the evidence before the Board indubitably shows that the returns were… Held: that the deficiencies were are barred by the statute of limitations. 2.

Where by the terms of a will stock is placed in trust to pay the income to three beneficiaries and to distribute the stock equally among them or their estates upon the death of one of them, and before the contingency happens, the beneficiaries, who are also executors and trustees, pursuant to authority expressly granted in the will, decide to dispose of the stock, and as executors, trustees and individuals, sell to each of themselves as individuals at par one third of the…

Income paid to a divorced wife by a trust created in contemplation of the divorce in settlement of her claims for dower, maintenance, support or otherwise against the husband, and so recognized in… Held: not taxable to the wife.

1. Petitioner, whose services were performed under the direction of the corporation counsel and attorney for the board of local improvements, who maintained no private law office and could not engage in private law practice or any other business which would interfere with the duties he performed for the city, held to be an employee and not an independent contractor. 2.

A California water company, a public utility, kept its accounts in accord with the rules of the railroad commission of that state, which… Held: that in determining the amounts of earnings available for dividend distributions the Commissioner correctly used the amounts of depreciation allowed to the corporation in computing its Federal income taxes for the several years in question; held further, that the Commissioner is not estopped from making this determination because…

The respondent determined that the petitioners and the Air Reduction Co. were liable as transferees for deficiency in tax of the Western Oxygen Co., a dissolved corporation, and issued to each of… Held: that the amount of the deficiency in tax of the Oxygen Co. can be collected only once, and, since the respondent has collected it from the Air Reduction Co., the liability of the petitioners as transferees has been extinguished.

In 1912 petitioner acquired title to certain real property from the Creek Indian Nation. Held: further, that the portion which had come into the hands of the receiver after the beginning of 1918 was taxable to the petitioner in 1928 when received by him.

A grantor transferred certain stock in trust, and, after providing for payment of 75 percent of the income to charitable uses, directed as follows: That the remaining 25 percent of the income shall… Held: that the trust agreement created one and not five separate trusts, and all of the income, except the 75 percent paid to charities, is taxable to the trustees.

Losses from betting on horse racing in the State of Maryland, where such betting is legal, are deductible in computing taxable income.

1. A transfer in trust made solely to avoid annual state property taxes, held, not made in contemplation of death. 2. Held: not made in contemplation of death. 2. A transfer in trust in which the settlor reserved the right to income for life and a contingent right to appoint in case of her survival of a beneficiary, which did not occur, held, not one to take effect in possession or enjoyment at or after death and not within section 302(d), Revenue Act of…

1. Compensation received by the taxpayer for the year 1924, to the extent retained by him and not distributed to his partner, is exempt from Federal income tax under section 1211 of the Revenue Act of 1926 for the reason that he was an employee of a political subdivision of the State of California. 2.

Petitioner sold to a corporation certain land for cash and stock. Held: the stock acquired by petitioner for the land had a fair market value of $100 per share.

Upon the evidence, respondent's holding that the petitioner corporation, rather than its stockholders, sold assets, is approved.

A corporation increased its common capital stock and distributed a stock dividend. Held: that amounts distributed in redemption of the preferred stock were not to be treated as taxable dividends under section 115(g), Revenue Act of 1928.

Interest received in 1931 on a refund of excessive tax payments for years prior to 1921, may not be decreased by interest paid under protest in 1926 on a balance due for 1921 tax, irrespective of the fact that the return for 1921 was accompanied by a credit claim alleging overpayment of taxes for prior years equal to the unpaid tax for 1921.

1. Petitioner, pursuant to state laws, maintained a reserve in respect to its noncancellable accident and health policies, the purpose of… Held: that the reserve is a reserve required by law within the meaning of section 245(a)(2) of the Revenue Acts of 1924 and 1926 and section 203(a)(2) of the Revenue Act of 1928, and that petitioner is entitled to a deduction for each of the taxable years of 4 percent of the mean of the reserve fund held at the beginning and end of the…

Upon the evidence, held that decedent did not, in his return, willfully or otherwise misrepresent material facts regarding his 1927 income; and, therefore, respondent's action in setting aside a closing agreement as to decedent's 1927 tax liability must be disapproved.

In 1929 the petitioner, an alien residing in the United States, went to Russia under a contract to perform services there for a period of two years. He returned to the United States on his vacation in 1930. At the expiration of his vacation he went again to Russia, where, because of an extension of his contract shortly before its termination he remained until his next vacation in 1932, when he returned to the United States.

1. A motion picture corporation in 1925 loaned $11,000 to petitioner, an actor employed by it, to be repaid in 1926 in the event that the corporation did not… Held: that the $11,000 was income to petitioner in 1926. 2. The cost to petitioner of dental bridge work to replace teeth knocked out in making a prize fight picture, held, deductible as a business expense. 3. Petitioner purchased an airplane for personal use in 1924. It was converted to commercial use in 1925.

Proceeds of life insurance issued by the Veterans' Administration constitute a part of the decedent's gross estate for estate tax purposes, irrespective of a provision in the World War Veterans' Act of 1924, as amended, that payments made to a beneficiary under any of the laws relating to veterans shall be exempt from taxation.

1. Defaulted bonds of debtors in receivership, owned by a national bank and ascertained by the bank's president and a national bank examiner to be recoverable only in part, held, upon the evidence,… Held: upon the evidence, recoverable only in part under section 23(j), Revenue Act of 1928. 2. Nondefaulted bonds, depreciated in market value, held not ascertained to be recoverable only in part. 3.

1. Bonds, charged off in part by a bank in 1931, held, upon the evidence, not ascertained to be recoverable only in part under section 23(j),… Held: upon the evidence, not ascertained to be recoverable only in part under section 23(j), Revenue Act of 1928. 2. A part of the value of a bank's bonds, charged off in 1932 as of December 31, 1931 pursuant to the direction of a national bank examiner in 1932, held, not deductible in 1931 under section 23(j), Revenue Act of 1928. 3.

In 1928 the decedent was carrying in a margin account with his broker 2,500 shares of a public utility stock, some of which he had owned for more than two years and some for less than two years. Held: that the securities sold must be deemed to be those first purchased.

1. On May 14, 1919, the decedent created six trusts the income from which was to be paid to her grandchildren, nieces and enphews for life and upon their deaths to their children in being at the date of the trust instrument, the principal of each trust to be distributed to Clarence H. Mackay, one of the trustees, upon the death of each of said children. Each of the trusts was revocable by the grantor with the joint consent of the trustees.

An individual entered into a contract with a corporation wherein it was agreed that the corporation transfer to him certain oil leases which he was to operate, and out of the… Held: that the proceeds of the oil collected and applied by the taxpayer on account of the above mentioned $130,000 loan and $120,000 payment, to be used in paying the corporation's debts, were taxable to the individual and, a fortiori, the taxpayer, corporation, which succeeded him as assignee.

The petitioners are members of a partnership, each owning a one-half interest, which, in 1924, operated a jewelry store. Held: that the disallowance by the respondent was correct.

Where the petitioner delivered certain stock to another corporation subject to a repurchase agreement, exercisable at the demand of either party, and the proof establishes that the intention was to place the stock with the other corporation as security for a loan of money or credit, the transaction is not a sale resulting in taxable gain to petitioner, but is a mortgage.

Where the petitioner, pursuant to the terms of a written instrument, transferred to himself as sole trustee certain securities and soon thereafter the securities were sold at a profit, held, that the… Held: that the gain from the sale of the securities is taxable to the petitioner in his individual income tax return.

1. A partnership transferred its assets to a new partnership composed of the members of the old firm and another who contributed new capital. Held: that the transactions made to carry out this plan did not result in losses sustained in trade or business within the meaning of section 23(e)(1) of the Revenue Act of 1928.

The evidence establishes that stock and debentures of a new corporation, acquired in exchange for stock of an old corporation in a nontaxable reorganization, had no… Held: that because of the lack of market value, no allocation of basis can be made between the new stock and debentures and no gain is to be recognized on a transaction whereby the petitioners exchanged part of their new stock for the cancellation of indebtedness in amounts less than the basis of the old stock.

1. Certain syndicates held not to be associations but to be joint ventures, the members of which are taxable as individuals and, being so taxable, have the right each year to deduct their proportionate share of the operating losses of such syndicates. 2. The demolition of buildings held not to constitute a deductible loss where such demolition enhanced the value of the property.

1. A syndicate was formed in 1928 for the purpose of supplying cash to a corporation to enable it to buy certain assets. The syndicate acquired stock of the corporation and sold it at a profit and and before the close of the year had substantially completed its agreement to supply cash. The balance of the cash owing was covered by a dividend declared before the end of the year. Within the year the corporation released to the syndicate the remaining stock, which had been held in escrow. Held, that the syndicate was a joint venture and dividends received and the profit realized on on the sale of stock in 1928 are income to the syndicate members for that year. 2. Dividends declared in 1928, payable in stock of another corporation, held, following Elvira Sectena,32 B.T.A. 675, to be income in 1928.

Petitioner, having filed an original return for the taxable year 1929 and included therein the entire gain resulting from the sale of real estate, is not entitled to have her tax liability computed upon the installment sales basis as shown by an amended return subsequently filed. Having made an election, she is bound by it.

1. Revenue Act of 1928, sec. 104(a). - Corporation, taxpayer, held, availed of for the purpose of preventing the imposition of the surtax upon its shareholders through the medium of permitting its… Held: availed of for the purpose of preventing the imposition of the surtax upon its shareholders through the medium of permitting its gains and profits to accumulate instead of being divided or distributed. 2.

Income of a trust set up by a husband during the pendency of a divorce proceeding, to settle claims of the wife for alimony, suit money, etc., and accepted by her in lieu of alimony, held, taxable to… Held: taxable to the husband, notwithstanding the contemporaneous divorce decree is silent as to alimony.

Where the respondent fails to show that property of an ancestor received by heirs has any value above encumbrances, there is no transferee liability of the heirs.

Respondent concedes a depletion deduction for 1924 equal to 50 percent of the net income from an entire tract which embraces oil property proven at March 1, 1913, and subsequent discoveries. A claim for depletion deduction based on March 1, 1913, value plus discovery value is not made out where there is no segregation of the income from the March 1, 1913, proven area and the discovery property.

1. The petitioner, a German corporation, through an American representative, sold merchandise to American purchasers. Held: that the sales, being made f.o.b. Houston, Texas, were made in the United States and that the petitioner is taxable on income derived therefrom. Held, further, that the petitioner has failed to show that respondent's computation of net income is erroneous. 2.

By his mother's will the petitioner was bequeathed a contingent interest in one half of her residuary estate which vested in him upon the… Held: that November 23, 1929, was the date of the distribution of the property to the petitioner; that the total amount so distributed to him constituted his inheritance from his mother's estate; and that he neither realized a gain nor sustained a loss on the sale of a portion of the property by the trust company prior to the date of…

1. Under the terms of a trust created by the petitioner five sixths of the expenses of maintaining the family home and of supporting his wife were payable from the income of the trust. Held: that the trust income used for the purposes stated is taxable to the petitioner. 2. Capital net losses should be deducted in determining net income which forms the basis for the computation of the allowable deduction for charitable contributions.

Petitioner corporation, duly authorized, issued guaranteed stock secured by mortgage and having priority over general creditors. Held: that the fixed periodic payments, although denominated dividends, were in reality interest, deductible as such from income.

The gain realized by petitioner upon the surrender of two combined annuity and insurance policies is taxable as ordinary income and may not be treated as capital gain under the provisions of section 101 of the Revenue Act of 1928.

An agreement whereby an individual promised and agreed to make future payments to the petitioner during the petitioner's life, made in consideration of the transfer by the petitioner to such individual of certain shares of stock, had no fair market value when received by the petitioner, and, as the cash payments received during the year in which the agreement was made did not exceed the basis of the stock, the petitioner realized no taxable gain from the transaction in that year.

The Commissioner raises an affirmative issue and claims an increased deficiency on the ground that the petitioner was not entitled to deductions for depreciation which were allowed in determining the deficiency. The petitioner was a lessee and was not entitled to the deductions. However, the deductions were claimed on a consolidated return. There was affiliation between the petitioner, the lessee, and the lessors through complete stock ownership.

1. Income from a lease between the petitioner and the State of California is taxable under the principle of Burnet v. Jergins Trust,288 U.S. 508. 2. Under the facts of this case petitioner has no depletable interest arising out of casinghead gas contracts. Signal Gasoline Corporation v. Commissioner, 66 Fed.(2d) 886, distinguished.

1. Where a loan is extended, the principal of such extended loan including the unpaid balance of principal, representing in part cost and in part unrealized discount, and, in some instances, an increase in principal, the commission charged for the extension being added thereto or paid in cash, the unrealized discount, a part of the principal of the new loan, is income in the taxable year in which such extension is made, taxpayer's books being on the accrual basis. 2. Where taxpayer purchased mortgage loans through brokers at a discount and kept its books on an accrual basis, only the amount of discount actually earned in each year, whether paid or not, is includable in taxable income. 3. Where taxpayer for a commission endorsed loans of its clients made with banks and a check or time certificate was issued in its name for the amount of the commission, the check or time certificate after endorsement by it being retained by the bank as additional security for the loan, such commission is income in the taxable year in which the endorsement is made. 4. Where certain loans were foreclosed and the evidence merely discloses the amounts of unpaid balances, amounts of unrealized discounts, and prices bid by the petitioner for the properties, the action of respondent in disallowing claimed losses in such transactions must be approved, there being no evidence as to whether the unsatisfied balance could be collected with or without a deficiency judgment, as to whether such judgment had been or could be obtained, and as to other essential facts bearing upon the deductibility of such claimed losses. 5. Where the compensation of an employee is by contract based upon the net income of taxpayer and the taxpayer has failed to show that the respondent erroneously deducted officers' salaries from gross income to determine the net income upon which the employee's compensation is computed, the determination of respondent of the employee's salary, deductible as a business expense, must be approved.

Upon the evidence held that the petitioners have failed to show that respondent erred in his determination of the amount of gain derived by them upon the conveyance by them of their property, which had been condemned, to the city of Seattle.

An employee, receiving a fixed annual salary, entered into a contract whereby at the termination of his employment he was to receive in cash an amount equal to the then book value of certain shares of stock of the employer corporation. Held, that the petitioner was not the owner of shares of stock issued in his name under the plan and realized no gain when class A shares were substituted for class B shares standing in his name.

1. Petitioner was the principal stockholder and president of a corporation, and devoted a large part of his time to the operation and management of its affairs. Held: petitioner did not sustain a statutory net loss by reason of the debt of the corporation becoming worthless, nor on account of the loss of his investment in its stock. 2.

Petitioner and his wife, residents of Missouri, owned corporate stock as tenants by the entirely on which dividends were paid in 1932. Held, that in the absence of an agreement for the dividsion of the dividends, the husband is taxable upon one half thereof. George E. Saulsbury,27 B.T.A. 744, followed.

Petitioner, who was designated county architect by a board of county commissioners, was compensated by the county on the basis of completed work. Held: compensation received from county is not exempt from Federal income tax.

1. State inheritance taxes imposed upon, and paid by, a trustee on account of bequests made in a trust to unknown beneficiaries are deductible in computing net income of the trust. 2.

The petitioner and others purchased the stock of E Corporation for cash. E Corporation then purchased from each of its stockholders shares of M Corporation for cash at its fair market value with no agreement or understanding to return the M stock to the sellers, although in the next year E dissolved and distributed M stock in liquidation. Held, (1) that section 112(b)(5) of the Revenue Act of 1928 does not apply because property was not exchanged solely for the stock of E, but was sold to E for cash, and (2) that section 118 has no application. Therefore, the petitioner is entitled to deduct the loss which he sustained upon the sale of his M stock.

1. Dividends declared by petitioner and paid direct to petitioner's stockholders by petitioner's lessee as an obligation of the lease, held taxable income of petitioner, lessor. Rensselaer & Saratoga Railroad Co. v. Irwin,249 Fed. 726; certiorari denied, 246 U.S. 671; West End Street Railway Co. v. Malley,246 Fed. 625; certiorari denied, 246 U.S. 671; Gold & Stock Telegraph Co.,26 B.T.A. 914, followed. 2. Petitioner's claim for depreciation in the form of exhaustion, wear and tear on the property leased, is denied, as res adjudicata. Tait v. Western Maryland Railway Co.,289 U.S. 620; Cromwell v. County of Sac,94 U.S. 351, followed, and also under the provisions of the lease. Weiss v. Wiener,279 U.S. 333; Terre Haute Electric Co. v. Commissioner, 67 Fed.(2d) 697; certiorari denied, 292 U.S. 624; Atlantic Coast Line Railroad Co.,31 B.T.A. 730, followed. 3. Respondent's plea of res adjudicata to petitioner lessor's assignment of error to inclusion in its income of its income taxes, for the payment of which the lessee was obligated under the lease, is sustained. Tait v. Western Maryland Railway Co., supra; Cromwell v. County of Sac, supra; Weiss v. Wiener, supra; Terre Haute Electric Co. v. Commissioner, Atlantic Coast Line Railroad Co., supra, followed. 4. Claim of petitioner, lessor, for allowance for obsolescence of assets leased for term of 999 years, denied. (a) Alternatively, petitioner's claim of loss on alleged abandonment of leased assets is denied.

In January 1927 decedent endorsed certain stock certificates, naming his several children as transferees therein, and delivered the certificates to his son with the statement that he, the son, could… Held: the transfers were intended to take effect in possession and enjoyment at or after decedent's death, and are taxable as part of the gross estate under section 302(c), Revenue Act of 1926.

Corporation A, with a total outstanding capital stock of 7,540 shares of common stock, caused Corporation B to be organized and on December 18, 1925, transferred to the latter certain assets in… Held: the transaction between A and C constituted a reorganization within the meaning of section 203(h)(1)(A) of the Revenue Act of 1926 and no taxable gain was realized thereon by A. Helvering v. Minnesota Tea Co.,296 U.S. 378.

Where the affiliation of two corporations is terminated in the taxable year by the sale by the parent of all of the stock of the subsidiary, and the two corporations had filed a consolidated return for the preceding year, and had not sought to change to separate returns for the taxable year, their tax liability should be determined on the basis of a consolidated return for that part of the taxable year during which the affiliation existed and separate returns for the remainder of the year; and a loss sustained by the parent upon the sale of the stock may not be deducted in computing the consolidated net income for the period for which the consolidated return is required.

Under a plan to avoid taxes, the husband placed money in the hands of his wife, who placed it with a trustee bank, which, under direction in the trust instrument, lent to the husband on his note, which note the trustee was prohibited from assigning or forcibly collecting; the husband paid to the trustee an amount equal to interest on the money, with which amount the trustee, under the plan, paid premiums on insurance on the busband's life for the benefit of the wife, and a surplus to her. Held, the amount paid the trustee as interest is not deductible by the husband; held, further, no part of said amount is taxable to the wife.

1. GAIN OR LOSS - BASIS FOR DETERMINATION. - The acquisition by petitioner in 1923 of certain stock by exchange of its own stock held to constitute a "reorganization", as defined in section 203(h)(1) of the Revenue Act of 1926, and, such exchange not falling within the exceptions set out in section 204(a) of that act, the basis for determining loss or gain to petitioner upon its resale of the stock by the latter in 1925 and 1926 is held to be its cost to petitioner. 2. Id. - Certain other securities acquired by the taxpayer in exchange for its stock, in the same transaction, but not under conditions constituting a reorganization, determined to have been acquired "in connection with a reorganization" and the party from whom such securities were acquired having been shown to be the owner of more than 80 percent of petitioner's stock immediately after the transfer, petitioner's basis for determining gain or loss on resale of these securities is held to be their basis to the transferor as provided by section 204(a)(7) of the Revenue Act of 1926.

1. As to decedent nonresidents, the part of the gross estate used in computing the net estate is confined to property situated in the United States. Revenue Act of 1926, sec. 303(b). 2. The term "resident" as used for estate tax purposes means one whose domicil is in the United States. 3. In the case of an ordinary person who has a home, domicil relates with particularity to a place and not to a country or state in general. 4. A native German, who from 1877 to 1900 was in business in Hawaii and in 1900 became by collective naturalization a citizen of the United States, and soon thereafter, because of his wife's health, removed with his family to Bremen and purchased a home, where he thereafter regularly and habitually lived until his death in 1932, held, upon all the evidence, to be a resident of Bremen at the time of death, notwithstanding business trips to the United States, ownership of property in this country, and statements in passport applications and in support of claims under the Trading With the Enemy Act. 5. Estoppel to claim nonresidence, held, upon all the evidence, not to result from statements made to support passport applications and claims under the Trading With the Enemy Act indicating residence. 6. A Bremen marriage agreement providing that the husband's property be owned in community and governed by the law of Bremen, Germany, relating to community property is effective irrespective of the parties' nationality or place of domicil. 7. A decedent made testamentary disposition of property held in community under German law at variance from the succession prescribed by such law, and the effectiveness of the will was recognized in Germany, New York, and Hawaii. Held that the decedent's property may properly be regarded as passing by will, and all the community munity property so disposed of is in the decedent's gross estate. 8. Money of a nonresident decedent on deposit with banks in the United States is not to be deemed property in the United States where it appears that decedent was not engaged in business in this country at the time of death. Sec. 303(e), Revenue Act of 1926. 9. Stocks and bonds of a nonresident decedent, located in the United States, are properly included within gross estate. 10. Securities of a nonresident decedent, held by a bank in the United States as collateral for a loan made to another to whom the securities had by decedent been loaned, are included in full in gross estate. 11. A claim which is the subject of a proceeding in the Court of Claims, authorized after decedent's death by a Senate resolution, under the Act of March 3, 1911, held not within gross estate.

1. REVENUE ACT OF 1926, SEC. 203(h)(1). - Held, no corporate reorganization, within the intendment of that provision, occurred. Gregory v. Helvering,293 U.S. 465, followed. 2. REVENUE ACT OF 1926, SEC. 201(a) and (b). - But, even in the absence of such a reorganization, the corporate acts of the several corporate entities involved were valid, and effect must be given thereto. Petitioners or their decedents received ordinary dividends, taxable as such, during 1925. Gregory v. Helvering, supra; Royal Marcher,32 B.T.A. 76; Handbird Holding Corporation,32 B.T.A. 238, followed.

Petitioner is a closely held corporation, all of its capital stock having been issued to four brothers who paid in $100,000 in cash and transferred to the petitioner certain oil properties estimated to be woth approximately $7,000,000, subject to the condition that the corporation would indemnify and save harmless the transferors against loss or damage arising out of any litigation or other cause resulting from their former ownership of the properties.

1. One half the profit from a sale of land by a trust from which the grantor could withdraw at discretion for her needs amounts not to exceed half the net value of the corpus, held, taxable to the grantor. Sec. 166, Revenue Act of 1928. 2. The words "title" and "part of the corpus", as used in section 166, Revenue Act of 1928, do not imply an identification of specific property. 3. A trust instrument, reserving to the settlor a power of appointment by will, which had not been exercised, held, to create an adverse present interest in those who would under Maryland law take by intestate succession. 4. The basis for computing the part of gain taxable to the settlor on a trust's sale of land, held, value of the land at time of its acquisition by the trust in 1918 and not its cost or other basis to the settlor. Sec. 113(a)(4), Revenue Act of 1928. 5. Withdrawals from a trust used by the settlor to pay attorney's fees and in compromise of rights asserted by her husband in other proceedings had no effect upon the determination of trust income and the part thereof to be included in petitioner's income.

1. BUSINESS LEAGUE. - A corporation engaging in a regular business of a kind ordinarily carried on for profit is held not a business league within the purview of section 103 of the Revenue Act of 1928, and its earnings and profits are not exempt from taxation. 2. DIVIDENDS. - Distributions of earnings and profits accumulated subsequent to February 28, 1913, are dividends and, under the evidence in this case, are not exempt from taxation as rebates or refunds to customers.

Petitioners entered into a partnership agreement with their wives, which provided for the distribution of earnings upon an agreed basis among the four. The income of the partnership was derived from personal services rendered by the petitioners. The petitioners may not relieve themselves of tax liability on their earnings by such an agreement. Lucas v. Earl,281 U.S. 111.

Petitioner acquired corporate stock at various times and prices prior to 1928. In that year the par value of the stock was reduced from $100 to $25 per share and petitioner surrendered his old certificates and received new certificates for four times the number of old shares. In 1928 employees of petitioner entered on his books a schedule listing the new certificate numbers as each representing shares taking the place of shares represented by old certificates designated therein by number. The schedule was not authorized by the petitioner nor ratified by him. In computing gain on sales of the new shares in 1929 he made an arbitrary designation of shares and did not use the schedule on his books. Held, that the petitioner has not identified the shares sold with any particular lot of old shares; held, further, that, the new and old shares being shares of the same corporation, average cost may not be used. The respondent's determination by applying the first in, first out rule is affirmed.

Federal estate taxes and interest thereon, assessed against the estate of the decedent and paid by the beneficiaries after administration of the estate had been closed and the executors discharged, are not allowable as deductions from income of the beneficiaries.

1. The petitioner, owning the majority of stock in a banking corporation, transferred the stock to a second corporation for cash and stock of the latter. Held: that the provisions of section 112(c)(1) of the Revenue Act of 1928 are applicable and the gain from the transaction is recognized, but only in an amount which does not exceed the cash payment. 2. The petitioner acquired by inheritance a portion of the bank stock so transferred.

Held, that only one half of the net income of a partnership attributable to the partnership interest standing in the name of the… Held: that only one half of the net income of a partnership attributable to the partnership interest standing in the name of the petitioner, a resident of Washington, is taxable to him, since one half thereof belongs to his wife as her community property, it appearing that none of the funds invested by the petitioner in the partnership…

Petitioner in the taxable year was president of two corporations, Miller Printing Machinery Co. and Point Improvement Co. Certain assets and property of the Miller Co. were sold in the taxable year… Held: further, that the omission on the part of petitioner to include the $101,250 in question in his income tax return for 1928 was not due to fraud with intent to evade the payment of the tax.

The decedent owned the stock of the Midland Realty Co., which in turn owned certain real estate. Held: that the distribution of the real estate constituted a dividend to the estate to the extent of the corporate earnings accumulated after February 28, 1913; held, further, the transfer of the real estate to the daughter was not a distribution of income within the meaning of section 162(c) of the Revenue Act of 1928 and the estate is…

Where under the state law capital gain from the sale of stock becomes part of the corpus and is not distributable to the beneficiaries as income from the trust estate, and under the terms of the will corpus is distributable only at the discretion of the trustees, capital gain so realized is taxable to the trust estate whether distributed or not.

1. A contract and agreement of sale entered into by and between petitioner and the Standard Oil Co. of Louisiana in August 1928, held to be a contract for the sale of all the gas to be produced… Held: that petitioner is not entitled to any deduction from income received in the taxable year for estimated expenses of operation or for anticipated depreciation on its plant and equipment in subsequent years.

1. The petitioner, an Ohio corporation, owned, through two New York corporation, except qualifying shares. Held: that petitioner is not entitled to include the New York corporation in its consolidated return, following Commissioner v. Manus-Muller & Co., 79 Fed.(2d) 19; certiorari denied, 296 U.S. 657. 2. A taxpayer on the accrual basis can not be charged with income if there exists good reason for believing that the income can not be collected.

The petitioner and his two brothers were executors of the estate of their father, who died in 1909, and were also trustees and beneficiaries of a trust created by the will of their father. Held: that the basis for gain or loss to the petitioner on the subsequent sale of his portion of the stock is the March 1, 1913, value thereof.

1. During the taxable years the petitioner charged to profit and loss and credited to its president as royalties paid the amount of profits realized from a certain device manufactured by petitioner under a certain license agreement it had with a third party. Held, that the profits, having been income of the petitioner, were taxable to it and were not deductible by it in determining its taxable net income. 2. During the taxable years the petitioner made expenditures for purchases of whiskey from bootleggers. The greater portion of the whiskey was used in entertaining petitioner's customers and prospective customers. The remainder was used by its employees. Held, that such expenditures did not constitute ordinary and necessary expenses in carrying on a trade or business and therefore were not allowable deductions. 3. Held, that the petitioner's returns for the taxable years were fraudulent and made with an intent to evade tax.

EXEMPTION - BUSINESS LEAGUE - REVENUE ACT OF 1928, SECTION 103(7); REGULATIONS 74, ARTICLE 528. - Taxpayer held not entitled to exemption from income tax under that statutory provision.

1. The taxpayer exchanged substantially all its properties for stock of B corporation, which in turn assumed all the liabilities of the taxpayer and agreed to and did furnish the money to pay a certain particular debt of the taxpayer. Held: (a) Such transaction resulted in a reorganization, within the meaning of section 112(i)(1)(A) of the Revenue Act of 1928. (b) The cash furnished to pay the taxpayer's debt was money or other property, within the meaning of section 112(d) of the 1928 Act. (c) The word "distributes" in section 112(d) means a distribution to the stockholders of the conveying corporation. 2. During petitioner's liquidation, petitioner transferred certain B stock it had received in the above exchange to three trustees, with which to liquidate petitioner's preferred stock. These trustees sold some of the stock and with the proceeds of those sales liquidated such preferred stock, the holders of which could and did demand a money redemption. Held: (a) These sales, for tax purposes, were made by the petitioner. Article 71, Regulations 74; Taylor Oil & Gas Co. v. Commissioner, 47 Fed.(2d) 108; certiorari denied, 283 U.S. 862. (b) Since petitioner's inquidation was not essential to consummate a statutory reorganization (Minnesota Tea Co. v. Commissioner, 76 Fed.(2d) 797; affd., 296 U.S. 378; Watts v. Commissioner, 75 Fed.(2d) 981; affd., 296 U.S. 387), such sales were not necessary to such a reorganization and gains resulting therefrom are taxable to petitioner. 3. Petitioner sold, direct, other B stock so received, to pay necessary expenses of its dissolution. Held, since petitioner's dissolution was likewise not essential to consummate a statutory reorganization (Minnesota Tea Co. v. Commissioner, supra; Watts v. Commissioner, supra), the gains on these sales are taxable to petitioner. 4. Commissions paid for the sale of taxpayer's stock are not deductible upon its dissolution or at any other time. 5. Upon dissolution the organization expenses of petitioner constitute a loss and, as such, are deductible in the year in which the corporation is dissolved and surrenders its charter.

1. Held, petitioner is entitled to deduct from gross income in the year of retirement unexhausted bond discount and premium upon the call and retirement of outstanding bonds… Held: petitioner is entitled to deduct from gross income in the year of retirement unexhausted bond discount and premium upon the call and retirement of outstanding bonds of one of several corporations which, prior to such call and petirement, were merged or consolidated into petitioner corporation. 2.

1. Under agreements executed and carried out several years prior to the taxable year, the subsidiaries transferred their properties to the petitioner, which, as part of the consideration for such transfers, agreed to pay the bonds of the subsidiaries. In 1930 the bonds were called and retired. The petitioner paid a premium on some of the bonds and also the fees and expenses of retirement.

1. Where the corporation transferring assets to petitioner received all the stock of petitioner and immediately turned the stock over to the investment bankers promoting the deal… Held: that the transaction must be regarded as a whole and the transferor corporation was not in control of transferee immediately after the transfer within section 113(a)(7) of the Revenue Act of 1928 and section 204(a)(7) of the Revenue Act of 1926. Omaha Coca-Cola Botting Co.,26 B.T.A. 1123.

Where a consolidated return was filed for the calendar year 1929 by petitioner, as parent corporation, for itself and three subsidiary corporations, and where one of the subsidiary corporations did not become a member of the affiliated group until March 26, 1929, and the Commissioner determined the net income of such subsidiary for a period from January 1, 1929, to March 26, 1929, and such subsidiary had net losses for 1927 and 1928, in which years it filed separate returns,…

1. ESTATES - LIFE INSURANCE POLICIES. - Where beneficiary or assignee of policy was designated with proviso, if she survive the insured, held, such designation was not contingent and death of insured did not cause cessation of an interest subject to estate tax. Bingham v. United States,296 U.S. 211. 2. Id. - Where insured did not reserve right to change the assignee, his wife, and under laws of New York, where contract of insurance was executed, her consent was necessary to the insured's exercise of any of the benefits under the policies, held, insured did not have, at death, any incidents of ownership subject to estate tax. 3. Id. - Where the insured's wife was irrevocably designated beneficiary and the policy, a Wisconsin contract, did not provide for loans thereon or the surrender thereof for cash, held, that under the laws of Wisconsin insured did not have, at death, any incidents of ownership subject to estate tax. 4. Id. - Policy made payable to A without reservation of right to change and subsequently the insured and A concurrently assigned the policy to B with specific reservation, to insured, of the right to change the beneficiary designated by the assignment, held, such power to change constituted a legal interest of insured in the policy and the termination, by death, of such incident of ownership is a transfer subject to estate tax.

The petitioners acquired at different times and at different prices shares of stock, for which they held certificates, most of which were for the same number of shares. Held: that such records are sufficient to identify sales of shares represented by the new certificates, as sales of particular lots originally acquired at a particular cost, and the action of the Commissioner in applying the first in, first out rule must be disapproved.