Volume 36 — Tax Court Reports

In 1955, all of the stock of Baton Rouge Supply Company, Inc., a loss corporation, was acquired by Barksdale and LeBlanc. Held: the acquisition was not made for the principal purpose of evading or avoiding Federal income tax.

Amounts received by an employee pursuant to a pension plan by reason of disability held excludible from gross income under section 105(d), I.R.C. 1954, where employee had not yet attained the age at which other employees of the same corporation customarily retired, even though he might have retired voluntarily during the year in issue.

The petitioners formed two corporations for the purpose of constructing apartment houses which were to be financed under section 608 of the National Housing Act, and in each instance there was… Held: that the corporations were collapsible corporations within the meaning of section 117(m) of the Internal Revenue Code of 1939 and the gain from the distributions and from the sale of stock are to be considered as gain on the sale or exchange of property and not a capital asset.

Petitioner was organized in 1951 to operate an automobile agency under a franchise. Held: the principal purpose of the trusts for acquiring control of petitioner was to evade or avoid Federal income tax by securing, as petitioner's stockholders, the benefit of petitioner's loss deductions which they would not otherwise have enjoyed, and petitioner cannot carry over its previous net operating losses from its fiscal years…

Petitioner, an exempt employees' trust created by the Cooper Tire & Rubber Company, purchased 20 tire-manufacturing machines and a press at a total cost of $ 344,830. Held: the petitioner was engaged in an unrelated trade or business within the meaning of section 513 and consequently the rental payments received by it in the years 1956 and 1957 under the lease were taxable as unrelated business taxable income within the meaning of sections 511 and 512.

On December 29, 1955, the petitioner and the other stockholders of a corporation executed a contract to sell all of their stock. Held: in accordance with the true intention of the parties, the petitioner did not receive payment in the year of sale in excess of 30 percent of the selling price of his stock and, therefore, the sale qualifies under section 453, I.R.C. 1954.

Petitioner Basil F. Basila was president, general manager, and principal shareholder of a company. Held: that the balance of the bonus payable account which was credited to petitioner in 1952 was not constructively received by him in 1952 because it was not unqualifiedly subject to his demand.

Widow's interest in lump sum of $ 25,000 allowed to widow and minor child for year's support under Georgia statutes is a terminable interest and does not qualify for marital deduction under sec. 2056, I.R.C. 1954.

Capital Gain or Ordinary Income -- Sale of Accrued Interest on Indebtedness. -- Petitioners bought flat, bonds on which there was accrued interest in default and later sold the same bonds flat for an amount in excess of the face amount of the bonds plus the remaining balance of the unpaid defaulted interest at the time of purchase.

Petitioner, a corporate executive, purchased in 1953 from his corporate employer 300 shares of its treasury stock, which had a fair market value of $ 9,487.50, for $ 8,400. Held: the excess of the fair market value of the stock over the amount paid by the petitioner is includible in his income for 1953 as additional compensation from his employer.

Petitioner, a foreign correspondent for Life magazine, maintained a base of operations in the Crown Colony of Singapore from November 1953 through December 1955, while covering news events… Held: petitioner has not established that he was a bona fide resident of Singapore or of any other foreign country during the entire taxable year 1954, and, therefore, is not entitled to the exclusion from taxation of his income earned abroad under section 911(a)(1) of the Code of 1954.

In its 1942 return the petitioner elected to change its method of pricing goods for inventory purposes from the first-in, first-out method to the dollar-value last-in, first-out method, using a… Held: that respondent was in error in his determination of deficiencies for the taxable years by the use of multiple pools for pricing the taxpayer's inventoriable goods.

Held, payments made by petitioner to his former wife pursuant to a divorce decree which incorporated a prior separation agreement, and… Held: payments made by petitioner to his former wife pursuant to a divorce decree which incorporated a prior separation agreement, and was subsequently amended nunc pro tunc by an order of the decreeing court, were payments fixed by the original decree and agreement as a sum payable for the support of the husband's minor children and were…

Severance Damage or Income -- Sale Under Threat of Condemnation. -- A portion of the payment received by the petitioners for a right-of-way cutting diagonally through their farm, sold to the State under threat of condemnation, was attributable to the damage resulting to the retained portion of their farm.

Petitioner, the sole stockholder of a company, in 1953 transferred all of its assets to a new sole proprietorship which continued to… Held: That petitioner did not receive the corporate assets in trust, or as an assignee for the benefit of creditors, or in a representative or fiduciary capacity (rather than a stockholder-transferee), and is not liable as a fiduciary under sec. 311(a)(2) of the 1939 Code. Transferee liability is barred by limitations under sec. 311(b)(1).

Held, presence on a foreign flag vessel does not constitute presence in a foreign country or countries within the meaning of section 911(a)(2) of the 1954 Code. Held: presence on a foreign flag vessel does not constitute presence in a foreign country or countries within the meaning of section 911(a)(2) of the 1954 Code. Held, further, petitioner's failure to file timely 1954 return was not due to reasonable cause.

1. In computing milk company's gross income there must be excluded from its receipts amounts of rebates which it made to its customers pursuant to oral arrangements with them, notwithstanding that such rebates were in violation of State law. Pittsburgh Milk Co., 26 T.C. 707, followed. 2. Amount of disputed cash rebates for 1955 and 1956 determined. 3.

The probate estate of a Minnesota decedent was insufficient, after provision for satisfaction of debts, taxes, and administration… Held: That in such circumstance, the amount of the marital deduction claimed in the estate tax return should be reduced, to reflect the effect on the value of the property passing to the surviving spouse, of State inheritance tax, Federal estate tax, and debts and administration expenses which could not be satisfied out of the residue of…

Monthly payments from trust income were made to petitioner from the estate of her deceased husband in compromise of a suit brought by her contesting his will. Held: the amounts paid were acquired by inheritance and includible in gross income under section 102(b), I.R.C. 1954.

1. Petitioner owned six United States subsidiaries and one wholly owned Canadian subsidiary. Held: the distribution by the Canadian subsidiary to the petitioner was a distribution in partial liquidation and not an ordinary dividend. Held, further, the petitioner is not entitled to the credit for foreign tax deemed to have been paid under sec. 902, I.R.C. 1954, on the receipt of a distribution in partial liquidation. 2.

The petitioners owned an office building in New York City, title to which was taken by the City of New York under condemnation proceedings. Held: that the properties purchased did not constitute property similar or related in service or use to the property so converted, within the meaning of section 1033(a)(3)(A) of the Internal Revenue Code of 1954, and that the petitioners are therefore not entitled to nonrecognition of gain upon the disposition of the office building.

Held, compensation earned by petitioner, a citizen of the United States, as an air navigator based on Guam for flights over international waters was not excludible from gross income under… Held: compensation earned by petitioner, a citizen of the United States, as an air navigator based on Guam for flights over international waters was not excludible from gross income under section 931, I.R.C. 1954, as income derived from sources within a possession of the United States.

Deduction -- Transportation Expense Getting to Work. -- The expense of an electrocardiograph operator in a local hospital on emergency call of getting to work from wherever she happened to be when called is personal and not deductible as ordinary and necessary business expense.

Petitioner and his wife had been resident aliens of the United States, who reported their income on the basis of a calendar year. Held: petitioner and his wife were not entitled to file a joint return for the year 1956 under the provisions of section 6013 of the 1954 Code since they were nonresident aliens for part of that taxable year.

Held, amounts received as royalties by petitioners, as donees of a gift of a royalty right from their son, as donor, where he on July 17,… Held: amounts received as royalties by petitioners, as donees of a gift of a royalty right from their son, as donor, where he on July 17, 1936, and December 4, 1937, had exchanged stock for original royalty interest which was held by a corporation, such exchange being in partial liquidation of the corporation, constitute ordinary income…

Husband was employed in Wilmington, Delaware, where he maintained a residence, and his wife was employed in New York City, where she maintained an apartment. Held: The expenditures of the wife in New York City for rent, food, electricity, and other miscellaneous items, as well as her expenditures for train travel between New York City and Wilmington, are not deductible as ordinary and necessary business expenses on the joint returns.

Petitioner in 1947 obtained a 20-year mortgage loan for $ 800,000. Held: the prepayment penalty is not amortizable over the life of the new mortgage loan but it was properly deductible in full in 1949, the year when it was paid.

Petitioner was a paperboard manufacturer from 1919 until 1944. Held: Petitioner is not entitled to compute its excess profits credit under section 444, I.R.C. 1939, because it had not commenced business on or before the first day of its base period, and, further, because it was not engaged in an active business during 1949. 2.

Petitioner, a domestic corporation, entered into a contract to sell its stock in a Canadian subsidiary to another Canadian corporation. Held: dividend of $ 116,000 is taxable to petitioner. Held, further, for purposes of determining credit for foreign taxes deemed to have been paid (sec. 131(f)(1), I.R.C. 1939), dividend is considered first to be from current year's profits as of date of distribution and remainder from accumulated profits of preceding year.

The petitioner was organized as a wholly owned subsidiary of a United States corporation for the purpose of selling in Western Hemisphere countries goods produced by another company owned by the same… Held: that all of petitioner's income was derived from sources outside the United States and that it qualifies as a Western Hemisphere trade corporation under 109 of the Internal Revenue Code of 1939 and section 921 of the Internal Revenue Code of 1954.

During 1949 petitioners transferred all of their stock in Warwick Center Corporation to Warwick Gardens #2, Inc., in exchange for cash and negotiable interest-bearing promissory notes due in 1 year. Held: that respondent's determination is in error and (2) that petitioners have not established that any change, as to this issue, should be made in the returns filed by them for 1950.

After the transferor had adopted a plan of complete liquidation, its accounts receivable were sold. Held: the present accounts receivable are installment obligations within the meaning of section 337(b) of the 1954 Code and gain from their sale is recognized.

1. Held, that pursuant to sections 1311-1315 of the 1954 Code (pertaining to mitigation of effect of limitations on assessment and… Held: that pursuant to sections 1311-1315 of the 1954 Code (pertaining to mitigation of effect of limitations on assessment and collection of income taxes), petitioner's 1951 income as previously adjusted, should be corrected to include an additional item of income -- notwithstanding that, except for the above-mentioned sections, both said…

The petitioner was engaged in selling watch bands and other similar items in Canada. Held: That such purchases were not incidental purchases, that all of petitioner's business was not done in countries of the Western Hemisphere, that the petitioner does not qualify as a Western Hemisphere trade corporation within the meaning of section 921 of the Internal Revenue Code of 1954, and that it is not entitled to the special…

1. Husband, the sole owner of property, transferred it to himself and his wife as tenants by the entirety. The wife furnished no consideration for the transfer. Held: that one-half of the property held in the trust at the time of the wife's death is includible in her gross estate under section 811(c)(1)(B), I.R.C. 1939. Estate of A. Carl Borner, 25 T.C. 584 followed. 2.

1. Certain petitioners were members of a partnership which had owned and operated a beef cattle ranch. Prior to the taxable years in issue the partnership had sold the ranch and range rights to M who also "leased" the herd of beef cattle. Under the "lease," M agreed to run the herd as an operating cattle unit and sell cattle from it, dividing the proceeds of the sales equally between M and the partnership. At the close of the agreement, M was to return to the partnership an equal number, by sex and age, of cattle. Held, the income so derived by the partnership constituted the proceeds of sales of cattle and not the payment of rent by M; held, further, the partnership, not M, "held" the cattle during the term of the agreement, as that term is used in section 117(j)(1) of the 1939 Code; held, further, the partnership held all cows, bulls, and heifers over 24 months old for breeding purposes, and all younger heifers primarily for sale to customers in the ordinary course of business. 2. At the termination of the "lease agreement" with M in 1951, the partnership was unable to find suitable facilities for continued operations. It sold most of the animals which had been the subject of the agreement and which were returned to it upon the termination of the agreement. Held, none of the heifers so sold by the partnership were held by it for breeding purposes, inasmuch as none of them were over 24 months old.

Held, a 10-day letter received on September 20, 1958, which informed petitioner that its method of accounting for dealer reserve income was erroneous, was a written notice of a proposed deficiency… Held: a 10-day letter received on September 20, 1958, which informed petitioner that its method of accounting for dealer reserve income was erroneous, was a written notice of a proposed deficiency within the meaning of section 3(b), Pub.

1. A, a public utility holding company, and M, an investment banking firm, agreed that M should acquire all of the capital stock of Q, an operating water… Held: That the steps which began with the agreement between A and M and ended with the merger of Q into petitioner were interdependent steps of an integrated transaction. No tax-free reorganization occurred, and the petitioner's basis for the assets acquired from Q is its cost, which is determined to be $ 4,583,556.03.

1. Where an individual (agent) acts on behalf of a corporation in the acquisition of another corporation, the acquiring corporation (principal) is a shareholder for the purposes of section 115(a),… Held: the transfer was a dividend to the extent of earnings and profits of the acquired corporation within the meaning of section 115(a). 2.

Renegotiation -- Jurisdiction -- Sec. 106(a)(6), Renegotiation Act of 1951. -- The extent of the jurisdiction of the Tax Court in renegotiation cases is set forth in section 108 of the Renegotiation Act of 1951, but that jurisdiction is expressly limited by section 106(a)(6) so that it does not include a review or redetermination of a determination of the Renegotiation Board that a contract is or is not exempt under section 106(a), or a review or redetermination of…

Filing by petitioner corporation and its subsidiaries of a consolidated return for its first fiscal year after enactment of 1954 Code but under applicable 1939 Code regulations, held, not to preclude… Held: not to preclude new election to file separate returns for following year after promulgation of new and less favorable regulations under 1954 Code.

Payment of petitioner's prior years' tax liabilities by a corporation of which petitioner was an officer and stockholder constitutes taxable income to petitioner.

Omission of $ 42,000 of gross sales was due to negligence, and addition to tax under section 6653(a), I.R.C. 1954, imposed.

The settlor of a trust transferred all the capital stock of a wholly owned corporation to the trust for the benefit of his four daughters. Held: the trust is liable for tax on the amounts so distributed. Held, further, the beneficiaries are not liable for tax on said amounts because not distributed or distributable to them.

1. On their return petitioners claimed as deductions $ 11,558.52 as business expenses. Held: not all of the $ 10,053.77 disallowed by the Commissioner was for expense incurred in the proxy contest. Held, further, that those expenditures which were so incurred are not deductible under sections 162 or 212, I.R.C. 1954. 2. In the taxable year petitioner J.

In 1951, petitioner and another radiologist formed a partnership to practice radiology. Held: that the interest acquired by petitioner did not have a limited or fixed life but had life of indefinite duration and was not of such character as to bring it within the depreciation provisions of the Code.

Petitioner was engaged as a choker setter in the logging business. Held: the expenses incurred in traveling to the jobsites were nondeductible commuting expenses.

1. Held, that sale of property to petitioner was a transfer of property as that term is used in section 15(c) of the 1939 Code and section 1551 of the 1954 Code. 2. Held: that sale of property to petitioner was a transfer of property as that term is used in section 15(c) of the 1939 Code and section 1551 of the 1954 Code. 2.

Held, that petitioners have established by a clear preponderance of the evidence that transfers of property made to them by another… Held: that petitioners have established by a clear preponderance of the evidence that transfers of property made to them by another corporation at the time of their formation were not made with a major purpose of obtaining the surtax exemptions provided for in section 11(c) of the 1954 Code; and accordingly that respondent erred in denying…

Pursuant to separation agreement and divorce decree H transferred to W (his wife) certain life insurance policies of which she became the absolute owner; thereafter, pursuant to the agreement and… Held: such premiums represented alimony payments to W under section 71(a), I.R.C. 1954. Anita Quinby Stewart, 9 T.C. 195, followed. Florence H. Griffith, 35 T.C. 882, distinguished.

Petitioner, a nonprofit, nonstock corporation, was organized in February 1947 by World War II veterans and others to acquire Lake Forest, a low-rent public housing project in Wilmington, North… Held: petitioner is exempt as a civic league or organization not organized for profit but operated exclusively for the promotion of social welfare pursuant to section 101(8) of the Internal Revenue Code of 1939and section 501(c)(4) of the Internal Revenue Code of 1954.

The petitioner obtained a loan of $ 153,234.24 from the Commodity Credit Corporation and gave as security a chattel mortgage on some 123,000 bushels of barley covered by a warehouse receipt. Held: certain payments made by the bankruptcy trustee to the United States on behalf of petitioner were income to petitioner in 1955.

A State court order granted custody of petitioner's two minor children to their mother, with visitation rights to petitioner and ordered petitioner to pay weekly sums for the support and maintenance… Held: petitioner has failed to prove he supplied over one-half of the support of his two children in 1955, 1956, and 1957.

Payments were made to petitioner by her former husband under a support order by a State court. The order was subsequently amended to apportion the payments between petitioner and the child. Held: the payments were fixed by the original order and are includible in their entirety in petitioner's income for the year in question under section 71 of the Internal Revenue Code of 1954.

Petitioner is the widow of the former president of a family corporation. The corporation, under a directors' resolution, paid her amounts equivalent to her deceased husband's salary for 2 years. Held: petitioner has not shown that the payments received by her from the corporation were gifts. Estate of Mervin G. Pierpont, 35 T.C. 65, followed.

The transferor corporation sold its notes and contracts at less than their face value but at more than their adjusted basis, and… Held: that the corporation is not entitled to deduct any addition to its reserve for bad debts; that the respondent properly restored to the reserve an amount received upon sale of certain of the notes and contracts which had previously been charged against the reserve as being worthless; and that the balance in the reserve is taxable as…

Held: That the money which petitioner received in 1956 from the City of Cincinnati, Ohio, in settlement for the condemnation of an office… Held: That the money which petitioner received in 1956 from the City of Cincinnati, Ohio, in settlement for the condemnation of an office building and ground upon which it was located and which the petitioner held for rental purposes, was not invested in other property similar or related in service or use where petitioner invested the…

Rulings of a Commissioner of the Court Made During the Course of Trial -- Review Thereof. -- A ruling made by a commissioner during the course of a trial in accordance with his authority will not be reviewed while he has not completed his duties with respect to the case and the case has not been assigned to a Judge. See Rule 48.

Having reason to believe that such action would enhance the value of his stock in a corporation, the petitioner in 1953 joined in guaranteeing paper of the corporation's subsidiaries. Held: that the loss sustained by petitioner by reason of the payments was a loss incurred in a transaction entered into for profit and was deductible for 1954 under section 165(c)(2), I.R.C. 1954.

Accrual Basis -- Interest From Subsidiary. -- Petitioner's wholly owned subsidiary, Gulf, was delinquent in payment of interest due from 1931 to 1941 to petitioner on loans. Held: petitioner is not required in 1948 and 1949 to accrue Gulf's net income or a part of it as interest to be applied against arrearages.

The tax clause of decedent's will provided for all taxes to be paid out of the residue of his estate. Held: petitioner has not met either condition of section 2053(d)(2) and therefore respondent correctly disallowed the deduction.

Held, that amounts paid to or on behalf of the principal petitioner by a California firm, to cover expenses incurred by him in moving his… Held: that amounts paid to or on behalf of the principal petitioner by a California firm, to cover expenses incurred by him in moving his family and household effects to California, were paid pursuant to and as part of a new agreement for employment; and accordingly, that such amounts are includible in said petitioner's gross income.

Held, that amounts received by the petitioner in the years 1954 and 1955 pursuant to awards of the Mixed Claims Commission, United States and… Held: that amounts received by the petitioner in the years 1954 and 1955 pursuant to awards of the Mixed Claims Commission, United States and Germany, constituted ordinary income, and not amounts received on retirement of evidences of indebtedness of a government or political subdivision thereof, in registered form, within the…

1. Accounting Method, Change in Method of Reporting Income. -- In accordance with the system of accounting regularly employed by petitioner… Held: petitioner may not change its method of reporting income contrary to the consistent system of keeping its books and without the prior consent of the Commissioner, since under facts of this case such change in system of accounting and reporting was equivalent to a change of method within meaning of section 39.412(c), Regs. 118. 2.

In 1951 Athanasius Y. Samuel transferred the Dead Sea Scrolls in trust reserving to himself all the income therefrom and 90 percent of… Held: The transfer of the Dead Sea Scrolls in trust with the income reserved by the settlor and the subsequent amendment to the trust whereby the settlor was to receive annual $ 10,000 payments from principal or income constitutes a settlor-trust relationship with a reserved life interest in the settlor rather than a sale of the Dead Sea…

Payments of temporary alimony received by a wife pursuant to a State court order during the pendency of an action for legal separation held includible in her gross income. Sec. 71(a)(3), I.R.C. 1954.

1. Petitioner, a savings and loan association, elected to claim its bad debt deductions under the reserve method for the years 1953… Held: that for each of the years in issue, petitioner's allowable bad debt deduction is limited to what it had determined at the end of each year to be a reasonable addition to its bad debt reserve, as evidenced by its actual transfers to bad debt accounts, and petitioner may not retroactively enlarge its reserve accounts for prior years,…

1. Entertainment and other expenses claimed by T, a lawyer, in excess of amounts allowed by the Commissioner, largely unsubstantiated and not convincingly shown to have any proximate relationship to T's business, held not deductible from gross income as ordinary and necessary business expenses. 2.

Petitioner corporation was organized to effectuate a court-approved plan of reorganization in a proceeding involving another corporation… Held: there was sufficient continuity of interest between the two corporations to qualify the plan as a tax-free reorganization under sec. 112(b)(10), I.R.C. 1939, thereby enabling petitioner to use the basis of the insolvent corporation under sec. 113(a)(22) as the basis of the assets which petitioner acquired inasmuch as the second…

1. W and C were equal owners of the stock in G corporation and were its principal officers. Held: respondent erred in determining that payments by G to C in 1955 and 1956 were for W's personal benefit and taxable to him as dividends; held, further, G has failed to prove the respondent erred in disallowing deduction by G of the payments to C for the years 1954 through 1956. 2.

1. Petitioners inherited tract of land in 1948. Held: the property was not held by petitioners during the years 1954, 1955, and 1956 primarily for sale to their customers in the ordinary course of their business, and the gain realized from the sale of lots is taxable to petitioners as capital gain. 2.

Petitioners, shareholders in a closely held family corporation, received as a result of a recapitalization class B first preferred shares, second preferred shares, and new common shares in exchange… Held: that in substance the sale was made directly from the corporation to the investors. Held, further, that the amounts received by petitioners from the corporate investors were essentially equivalent to a dividend constituting ordinary taxable income.

Petitioner Eugene F. Emmons entered into a separation agreement with his then wife Margaret. Held: The alimony payments, to the extent allocated to the daughters, were neither alimony nor in lieu of alimony because Margaret received no economic benefit from the receipt of the $ 5,000 per year which she was legally obligated to spend or preserve for her daughters; therefore the payments were made for and on behalf of the daughters,…

John T. Heyward was president and principal stockholder of Winnsboro Granite Corporation, and Mary B. Heyward, John's sister, was a minority… Held: Homes owned by Winnsboro Granite and fuel oil used therein furnished John and Mary by Winnsboro Granite in 1955 without charge were not lodgings furnished for the convenience of the employer within the meaning of section 119, I.R.C. 1954, and the respective values thereof are includible in the gross incomes of John and Mary.

1. Brokerage commissions paid to sister of petitioner L. B. Whitfield (Louis) by suppliers of raw materials to petitioner Alabama-Georgia Syrup Company (Alaga) do not constitute income to Alaga or… Held: The closing of the estate on January 30, 1956, under the circumstances here present, in substance, constituted a cancellation of the estate's indebtedness to Alaga resulting in income to the estate in the full amount of the indebtedness, $ 331,564.90.

Evidence of indebtedness received by petitioners in 1956 as part of selling price of stock was not evidence of indebtedness of purchaser as provided by section 453(b)(2)(A)(ii) of the 1954 Code so… Held: petitioners are not entitled to report sale of stock on installment method as provided by section 453.

1. In 1949, the area in which petitioner's summer residence was located experienced a severe drought. Held: that petitioner has failed to show that he sustained a loss therefrom, and it is unnecessary to decide whether the drought so experienced was a casualty within the meaning of section 23(e)(3) of the Internal Revenue Code of 1939. 2.

Petitioners, partners in a logging business, entered into an agreement on January 21, 1953, with persons who held option to purchase timber from a company which claimed… Held: petitioners had a contract right to cut timber for sale which they had held for more than 6 months prior to the beginning of each of the taxable years 1954, 1955, and 1956, and having so elected are entitled to have the provisions of sec. 631(a) apply in determining gain or loss from the timber sold.

Shortly prior to their respective maturity dates petitioner assigned two annuity contracts to a third party other than the insurer. Held, petitioner realized ordinary income rather than capital gains. Held: petitioner realized ordinary income rather than capital gains. Held, further, the provisions of section 72(e)(3) are not applicable.

Rudolf Jellinek, a former Czech citizen but stateless during the years involved, was living in Frankfort, Germany, working for Paramount, prior to 1951. Held: Rudolf did not establish residence in the United States and was a nonresident alien during the years 1952 through 1955 so that his income from sources without the United States was excludible from petitioners' gross income under sections 212(a), I.R.C. 1939, and 872(a), I.R.C. 1954.

Loss Carryover -- Deduction -- Sec. 129, 1939 Code. -- The Family Circle, Inc., was a corporation publishing a magazine called The Family Circle which was distributed to and sold… Held: the Family Circle, Inc., a corporation, acquired control of Park Magazine, Inc., after October 8, 1940, for the principal purpose of evading or avoiding Federal income and excess profits taxes by securing the benefit of a deduction and a credit which it would not otherwise have enjoyed.

Held, a medical doctor may not depreciate the entire cost or operating expenses of a business automobile solely because he was constantly on emergency call while using said automobile where some of… Held: a medical doctor may not depreciate the entire cost or operating expenses of a business automobile solely because he was constantly on emergency call while using said automobile where some of such use was for activities personal in nature.

Petitioner held an option to purchase a tract of land. Held: on the facts of the case petitioner was not in the real estate business and his gain from the sale of the option and his half interest in the tract of land is taxable as capital gain.

Held, in determining under section 871(a)(2)(A) or (B) of the Internal Revenue Code of 1954 the number of days that petitioner, a… Held: in determining under section 871(a)(2)(A) or (B) of the Internal Revenue Code of 1954 the number of days that petitioner, a nonresident alien, was present in the United States on two different periods of time during the calendar year 1954, the days of his arrival in the United States are to be excluded in making the computation of…

Petitioner, an accrual basis taxpayer, prior to July of the calendar year in issue (1952), owned all the outstanding stock of Brown-Longyear Motors. Held: Amount of payment to petitioner for 1952 determined. Portion of the 1952 payment which represented payment of dividends previously declared determined by applying the earlier payments on account to debts as they arose. The dividend portion of the payment was income in 1952. 2.

Petitioner, a tax lawyer and accountant, purchased a yacht on which he flew a red, white, and blue pennant with the numerals 1040 on it, purportedly to provoke inquiries and thus promote petitioner's… Held: the cost of insurance and maintenance of the yacht, and depreciation thereon, are not deductible as ordinary and necessary expenses paid or incurred in carrying on petitioner's trade or business for the year 1954.

Deduction -- Ordinary and Necessary Business Expense -- Payments Made To Protect Taxpayer's Trade or Business -- Sec. 23(a) (1)(A), 1939 Code. -- Petitioners were engaged in a partnership organized… Held: the payments are deductible as ordinary and necessary business expenses.

A portion of an amount paid to a tax-exempt institution which operated schools held not deductible as true charitable contribution where taxpayers enrolled their two children in one of the schools and where the amount disallowed was not in excess of the cost of furnishing instruction to two children. Sec. 170, I.R.C. 1954.

Held, decedent's daughter's claim against his estate was based upon adequate and full consideration in money or money's worth ( sec. 2053, I.R.C. 1954), and was deductible from the gross estate; it… Held: decedent's daughter's claim against his estate was based upon adequate and full consideration in money or money's worth ( sec. 2053, I.R.C. 1954), and was deductible from the gross estate; it was not a device for making a testamentary disposition.

1. Held, partnership operating a private beach sustained deductible casualty loss as a result of loss of substantially all the sand that was washed away during unusually heavy rains. Held: partnership operating a private beach sustained deductible casualty loss as a result of loss of substantially all the sand that was washed away during unusually heavy rains. Amount of loss determined. 2.

Petitioner purchased monthly payment notes, secured by second deeds of trust, at substantial discounts. Held: petitioner was not required to report a pro rata portion of each payment of principal, measured by the percentage of discount, as ordinary income prior to the recovery of his cost of such notes.

1. Television network affiliation contract for a term of 2 years, automatically renewable an indefinite number of times unless either party gives written notice of intention not to renew, held to… Held: further, subsequent termination does not affect status of contract during the taxable years before the Court. 2. Television spot announcement contracts purchased en masse held to have an indeterminable useful life.

Petitioner is engaged in the mortgage loan business. Federal National Mortgage Association, a Government corporation, is a secondary market for mortgages. Held: said stock was not a capital asset quoad petitioner and petitioner's expenditures for it qualify as business expense.

1. Held, petitioner Robert S. DeHaven did not sell his rice crop produced in 1954 until 1955. He sold it on June 1 of that year and received the purchase price in that year. Held: petitioner Robert S. DeHaven did not sell his rice crop produced in 1954 until 1955. He sold it on June 1 of that year and received the purchase price in that year. Petitioners were on the cash basis. The Commissioner is sustained in taxing the proceeds of the sale in 1955. 2.

The managing partner of a partnership omitted sales receipts in each of the fiscal years ending April 30, 1947 through 1951. Held: no part of the inactive partner's deficiency for the years 1947 through 1951 was due to fraud with intent to evade tax; held, further, a part of the managing partner's deficiency for 1947 was due to fraud with intent to evade tax; held, further, the respondent was correct in increasing the partnership's gross income by certain…

Held, cost-of-living allowances received by petitioner while a United States Attorney in Alaska are exempt from taxation under section 912, I.R.C. 1954. Held: cost-of-living allowances received by petitioner while a United States Attorney in Alaska are exempt from taxation under section 912, I.R.C. 1954.

Held, that principal petitioner, who (in violation of section 556 of the Insurance Code of California) presented false and fraudulent proofs… Held: that principal petitioner, who (in violation of section 556 of the Insurance Code of California) presented false and fraudulent proofs of loss to his insurers in respect of 1949 fire losses, and against whom a judgment was entered in 1952 in favor of said insurers for the repayment of moneys paid to petitioner covering said fire…

A transaction precisely within the terms of sec. 351, I.R.C. 1954, results in nonrecognition of gain and a substituted basis for transferred assets under sec. 362, I.R.C. 1954, regardless of the intention of one of the parties thereto.

Excess profits tax relief sought under sec. 722(b)(2) because of the drought in the Corn Belt in 1936 and under subsection (b)(4) because of a commitment to a change in capacity for production denied, where petitioner's excess profits credit computed under sec. 713(f) does not result in an excessive and discriminatory tax and where a reconstruction of base period income under sec. 722 based on proven qualifications would not produce a greater average base period income than…

Sec. 722(b)(4) -- Change in Character of Business -- Change in Product -- Sec. 711(b)(1)(J) -- Abnormal Deductions in Base Period. -- Held, the petitioner's alteration of its product was an… Held: the petitioner's alteration of its product was an improvement, and not a change in product within the meaning of sec. 722(b) (4). Held, further, the excess in the management fee paid by the petitioner in 1937 may not be disallowed as a deduction under sec. 711(b)(1)(J).

Petitioner is conceded by respondent to be qualified for relief under section 722(b)(4), I.R.C. 1939, from excess profits taxes because of a change in the character of its business resulting from the sale of a small hotel and purchase of a larger hotel during the base period.

Petitioner, a citizen of Canada and a resident of Switzerland, filed a United States nonresident alien income tax return (Form 1040B) for the taxable year 1954. Held: such royalties are not exempt from taxation under article VIII of the income tax convention between the United States and the Swiss Confederation proclaimed by the President of the United States on October 1, 1951, and section 509.110 of the regulations adopted thereunder. See T.D. 6149, 1955-2 C.B. 814.

Decedent, as beneficiary and sole owner of an insurance policy on the life of her husband, executed a settlement option prior to the death of her husband whereby interest on the proceeds of the… Held: the proceeds are includible in decedent's gross estate as a transfer of property under section 2036 of the Internal Revenue Code of 1954.

Held, terminable interest rule applies to widow's allowance generally and specifically in Massachusetts. Held, further, that widow's allowance under Mass. Held: terminable interest rule applies to widow's allowance generally and specifically in Massachusetts. Held, further, that widow's allowance under Mass.

1. Late in September 1956 purchasing corporation purchased all of the capital stock of old corporation for the purpose of dissolving it and immediately taking over its assets. Held: that the market value of an unharvested cotton crop and certain land preparation included in the assets distributed and transferred is not includible in the income of the old corporation. Elsie SoRelle, 22 T.C. 459 (1954), followed. 2.

Petitioner has been an electronic components manufacturer since about 1926. During the years 1941 through 1945 it primarily manufactured condensers, resistors, and filters. Held: on the record presented petitioner has shown that some part of the income received from these items can be attributed to research and development in prior years within the meaning of section 721(a)(2)(C), I.R.C. 1939.

Petitioner George A. Butler, a practicing attorney, in 1951 executed an agreement with another individual whereby a limited partnership, National Housing Company, Ltd.,… Held: that the loans in question were made by petitioner George A. Butler to a business partnership, of which he was a partner, for purposes proximately related to and in furtherance of the business of said partnership and were deductible by petitioners in full under section 23(k) (1) of the Code of 1939.

Corporation was liquidated and was entitled to nonrecognition of gain or loss under section 337(a), 1954 Code. Held: that the Louisiana State income taxes in question are not allocable to a class of income wholly exempt from the taxes imposed by subtitle A, and, therefore, are deductible.

Petitioner is a public utility water corporation. Held: respondent's disallowance of said amount as a deduction is approved because petitioner has failed to show that it qualifies as a business expense deductible under section 162 or an ordinary loss deductible under section 165 of the Internal Revenue Code of 1954.

T, a contractor, owned subdivided property and in 1953 and 1954 sold some of the lots and houses built by him thereon. Held: all of the lots in the subdivided property were held by him primarily for sale to customers in the ordinary course of his trade or business, sec. 1221(1), I.R.C. 1954; and the fact that in 1955 he chose to dispose of the remaining unsold lots in a single transaction without building houses upon them did not convert those lots into…

Held, petitioner may not claim carryovers, as deductions, of net operating losses from prior years to the taxable years. Held: petitioner may not claim carryovers, as deductions, of net operating losses from prior years to the taxable years. Libson Shops, Inc. v. Koehler, 353 U.S. 382, and Thomas E. Snyder Sons Co., 34 T. C. 400, followed.

Brooks sold a clinical orthodontic practice to Bloch for $ 240,000 payable at the rate of $ 1,000 per month for 20 years. Held: $ 5,749.80 in 1955 and $ 11,499.60 in 1956 were proceeds from the sale of goodwill, a capital asset, and Brooks' treatment of these amounts on his tax returns was correct.

Petitioner, who was divorced, received support and maintenance payments from her former husband under the terms of a written predivorce… Held: that such payments received by the wife in the taxable year qualify as periodic payments within the meaning of section 71(a)(1) of the 1954 Code; that the written agreement under which the payments were made, was incident to the divorce, within the meaning of said statute; and that such payments are includible in the wife's gross…

1. Held, that the petitioner may report the gain upon the sale, in 1952, of his stock of Eagle Mount upon the installment basis under section 44 of the Internal Revenue Code of 1939. Held: that the petitioner may report the gain upon the sale, in 1952, of his stock of Eagle Mount upon the installment basis under section 44 of the Internal Revenue Code of 1939.

1. During 1955 petitioner was engaged in mining and selling pumice from a property it had acquired in 1943. Using bulldozers and levers, the pumice was broken into pieces of varied sizes. Held: that the rate of depletion applicable to petitioner's operation is the 5 percent rate provided for pumice in section 613(b)(5)(A) of the Internal Revenue Code of 1954, and not the 15 percent rate provided for dimension stone in section 613(b)(6). 2.

In the determination of the deficiences for 1954 and 1955 the Commissioner determined that petitioner realized taxable income, before deduction for bad debts, in the amounts of $ 9,763.04 and $… Held: on the facts which have been stipulated and section 593, I.R.C. 1954, and the regulations promulgated thereunder the Commissioner is sustained.

Petitioner instituted suit under the Federal antitrust laws against certain optical companies, charging loss of profits and injury to its business and property during the years 1936 to 1943,… Held: that the petitioner has failed to meet his burden of proving error in respondent's determination that the entire amount received in settlement constituted ordinary income under section 22(a) of the Internal Revenue Code of 1939.

Distribution to petitioner purchasing corporate stock, after acquisition by it of beneficial and legal title thereto, held dividend to petitioner notwithstanding… Held: further, to be a personal holding company by reason of its receipt of such dividend; failure to file personal holding company return for such year held, further, on the facts, not to subject petitioner to addition to tax for failure to file. Germantown Trust Co. v. Commissioner, 309 U.S. 304 (1940), followed.

Seizure of petitioner's personal automobile by officials in East Germany held not to be a deductible loss.