Volume 36 — Tax Court Memorandum

1. Petitioner failed to prove that she suffered theft losses deductible under sec. 165 in the years 1972 and 1973. 2. Petitioner offered no evidence at trial to support her allegations of error in respondent's determination of additional alimony income and disallowance of various deductions and head-of-household status; respondent's determinations on these issues affirmed. 3.

Petitioner was a Ph.D. candidate in clinical psychology.In order to fulfill one of the degree requirements he participated in a pre-doctoral internship program in clinical psychology. Held: the stipend does not qualify as a fellowship within the meaning of sec. 117.

Held, there is no merit to the petitioners' contention that they were not required to file an income tax return because Federal Reserve Notes are not dollars; nor in their… Held: there is no merit to the petitioners' contention that they were not required to file an income tax return because Federal Reserve Notes are not dollars; nor in their contention that their constitutional privileges relieve them of the responsibility of proving their right to income tax deductions.

Held: On the facts, petitioners' horse breeding activities, carried on through their Subchapter S corporation, were conducted with a bona fide intent to make a profit. Held: On the facts, petitioners' horse breeding activities, carried on through their Subchapter S corporation, were conducted with a bona fide intent to make a profit.

Held, withdrawals made by P were corporate distributions and not bona fide loans; held, further, P is a transferee of Air Charters, Inc., and is liable under State law for such corporation's income… Held: withdrawals made by P were corporate distributions and not bona fide loans; held, further, P is a transferee of Air Charters, Inc., and is liable under State law for such corporation's income tax deficiencies to the extent of the property he received.

Held: Values of patents on various types of lawn and garden equipment and packaging devices determined. Held: Values of patents on various types of lawn and garden equipment and packaging devices determined. Held,further: Petitioner failed to prove that the failure of petitioner's liquidated subsidiary corporation to report depreciation recapture on its final return was not due to negligence or intentional disregard of rules and regulations.

In 1971, P received $10,560 in payment of a $12,000 note which had been issued to him as compensation in 1962. P did not report receipt of such amount on his 1971 return. Held: P failed to prove that any amount was included or includable in his gross income in 1962 by reason of the receipt of the note in that year; therefore, the $10,560 payment received in 1971 was properly includable in gross income for such year.

Held, Petitioner has failed to demonstrate that the debt in question became worthless during the year in issue. Held: Petitioner has failed to demonstrate that the debt in question became worthless during the year in issue. Held further, Petitioner has failed to show that he sustained a loss during the year in issue as evidenced by a closed transaction in connection with a transaction entered into for profit.

Petitioner made a daily trip 65 miles each way between his home and place of employment. Held: the expenses incurred in connection therewith are nondeductible commuting expenses. Held: the expenses incurred in connection therewith are nondeductible commuting expenses.

Petitioner's transferor sold all of its assets in a sec.337 sale. Held, The portion of the sales price allocable to the sec. 1245 assets is less than the adjusted basis thereof. Held: The portion of the sales price allocable to the sec. 1245 assets is less than the adjusted basis thereof. Hence no depreciation is required to be recaptured pursuant to sec. 1245.

Petitioner and Silber, another lawyer with whom he shared office space, each owned undivided one-half interests in law books and office furnishings used by them in their practice. Held: the books and furnishings in the hands of the partnership qualified as used section 38 property under sec. 48(c), I.R.C. 1954, for purposes of the investment credit. Edward A. Moradian,53 T.C. 207 (1969), followed.

Held, The debt in issue was a nonbusiness bad debt. Held further, Petitioners' rental expense deduction is denied. Held: The debt in issue was a nonbusiness bad debt. Held further, Petitioners' rental expense deduction is denied. Held further, Petitioners did not own the aircraft at issue and their claimed depreciation deduction and investment credit with respect thereto are denied.

Petitioner, successor to Powers Wire Products Co., Inc. (Products), is principally engaged in the business of manufacturing staples and staple guns. Held: the purpose of Products' acquisition of control of SEI was not the evasion or avoidance of tax contemplated by sec. 269(a).

Held, the term gainfully employed in sec. 214 means that a taxpayer be currently occupied with monetary producing work. Held: the term gainfully employed in sec. 214 means that a taxpayer be currently occupied with monetary producing work.

Petitioners owned a substantial amount of tax-exempt securities which were purchased for cash, not used as collateral, and held for safe-keeping in bank accounts maintained solely for such securities… Held: petitioners have failed to prove that they did not incur or continue indebtedness to purchase or carry tax-exempt securities within the meaning of sec. 265(2); accordingly, a portion of petitioners' interest expense is disallowed.

Held, the amount of income realized by petitioner, Ronald Jones upon the cashing of certain checks determined. Held: the amount of income realized by petitioner, Ronald Jones upon the cashing of certain checks determined. Held, the amount of gain realized by petitioner Ronald Jones on the sale of his club determined. Held further, petitioner Marjorie Jones qualifies for relief of tax liability under sec. 6013(e).

After extensive arm's-length negotiations petitioners sold their insurance agency for a lump sum. Held: there is no evidence that in the negotiated agreement the parties attached any independent significance to the covenant not to compete or intended that any part of the purchase price should be allocated thereto. Respondent may not allocate any part of the purchase price to the covenant not to compete.

Held: 1. Value, on decedent's death, of 226,800 shares of BF stock determined. 2. Held: Value, on decedent's death, of 226,800 shares of BF stock determined. 2. Value, on decedent's death, of 53,760 shares of CFC stock determined. 3. An underwriting discount in a firm commitment underwriting of stock is not an administrative expense deductible from decedent's gross estate under sec. 2053(a)(2), I.R.C. 1954.

Held: Petitioner made a bona fide sale of its contract (short sale) to deliver British pounds to a third party and the resulting gain is taxable as a long-term capital gain.

Held, Federal reserve notes are dollars for purposes of the Internal Revenue Code. Held further, petitioner's constitutional rights have not been violated. Held: Federal reserve notes are dollars for purposes of the Internal Revenue Code. Held further, petitioner's constitutional rights have not been violated. Held further, respondent's reconstruction of petitioner's income and the additions to tax sustained.

Held, Federal reserve notes are dollars for purposes of the Internal Revenue Code. Held further, petitioner's constitutional rights have not been violated. Held: Federal reserve notes are dollars for purposes of the Internal Revenue Code. Held further, petitioner's constitutional rights have not been violated. Held further, respondent's reconstruction of petitioner's income and the additions to tax sustained.

Held: 1. Petitioners were equal partners, and each, therefore, should be taxed for half of their partnership income. 2. Respondent failed to make proper allowance for certain non-income items in determining petitioners' income tax liability under the bank deposits method; accordingly, petitioners should receive additional credit for non-income items. 3. Petitioners are entitled to deduct certain ordinary and necessary business expenses. 4. Petitioners are entitled to an ordinary loss arising from the sale of real property used in their trade or business. 5. Petitioner Woodrow W. Lashley, Sr., has failed to establish his income for 1963, and petitioner Claire A. Ryza has failed to establish her income for 1961 and 1963. Since petitioners must establish their base period incomes for the purpose of income averaging and since 1961 and 1963 constitute base period years for petitioners, they may not average their income.

1. The Commissioner determined that Frank E. Sellers and Norpaco Builders, Inc., were the principals in several real estate sales during 1965 and 1966 and that Frank E. Sellers is liable as a… Held: the taxpayers failed to establish that they were acting only as agents or nominees for another in their connection with the pertinent real estate sales. Accordingly, amounts of income determined, additions to tax sustained, and transferee liability established. 2.

Petitioner was a surgical resident at Charity Hospital, New Orleans, Louisiana and two other local hospitals. Held: payments to petitioner do not constitute a scholarship or fellowship grant excludable under sec. 117, I.R.C. 1954. Held further, the resolution of the issue of whether petitioner was paid to work or study is not determined by local legislation but is based upon all the facts and circumstances of the particular case.

H and W filed joint income tax returns for the taxable years 1961 through 1964 which substantially understated their gross income for… Held: For 1961, W has failed to prove that there was a 25-percent omission of income attributable to H as required by sec. 6013(e)(1)(A), I.R.C. 1954; (2) for 1962, she has failed to prove that she lacked knowledge of the omitted income as required by sec. 6013(e)(1)(B); and (3) for 1963 and 1964, she has failed to prove that she did not…

During the trial of this case, P refused to adduce any evidence to refute the Commissioner's determination that he did not report all of his income during the years in issue; instead, P asserted that… Held: there is no merit to P's constitutional arguments; held,further, because of P's failure to adduce any evidence, the Commissioner's determinations are sustained.

Farms entered into an agreement entitled Agreement of Lease providing for the construction by the lessor of specific improvements on a particular parcel of land and monthly payments by Farms based… Held: the agreement constitutes neither a mere security device nor a conditional sales contract and, therefore, the monthly payments constitute deductible rental payments under sec. 162(a)(3), I.R.C. 1954.

Transaction wherein petitioner gave a deed to real estate and received an option to repurchase for a stated price was a security arrangement rather than a sale. Petitioner incurred a deductible loss in 1972 when she failed to exercise the option to repurchase and the property was sold by the optionor.

A partnership was indebted to the First National Bank in the amount of $15.9 million. This indebtedness was secured, in part, by the partnership's stock of Corporation A and its subsidiaries. Corporation A had no earnings and profits available for distribution as a dividend. Corporation B, a subsidiary of Corporation A, was about to sell property at a gain of $10 million. A plan was evolved whereby Corporation A would obtain a loan of $18 million from the First National Bank, secured by the assets then held to secure the indebtedness of the partnership. Corporation A would thereupon repay an indebtedness of $7.5 million owing to the partnership and distribute an additional $10 million to the partnership as a distribution with respect to the corporation's stock.The partnership would, in turn, use the funds to repay its loan to First National Bank. Upon completion of the sale of the property by Corporation B, immediately following the close of Corporation A's fiscal year, Corporation B would lend $10 million of the proceeds from the sale to Corporation A to enable Corporation A to repay, in part, its $18 million loan to the First National Bank. Thereafter, Corporation A satisfied its indebtedness to Corporation B by transferring assets held by Corporation A, including the stocks of other subsidiaries. Held: The transaction with First National Bank whereby Corporation A borrowed $18 million with the understanding that the proceeds would be used to pay off the indebtedness of the partnership to the bank was entered into primarily for the benefit of the partnership. First National Bank did not make the loan to Corporation A on the faith and credit of that corporation, but on the security and on the credit of the partnership. Accordingly, the indebtedness of Corporation A to First National Bank should be deemed to have been incurred for the benefit of the partnership. Any repayment on account of that loan would be taxable to the partnership as a dividend to the extent of the earnings and profits of Corporation A. Such earnings and profits include the earnings and profits of Corporation B to the extent of the amount paid by Corporation B for the stock of related corporations held by Corporation A.

Held, Federal reserve notes are dollars for tax purposes. Held: Federal reserve notes are dollars for tax purposes. Held further, with the exception of an issue raised by respondent for the first time at trial, petitioners bear the burden of proof which they have failed to carry.

Petitioners owned real property which they leased to their medical partnership. Held: on the facts, the rental expenses paid constitute ordinary and necessary business expenses under sec. 162(a)(3), I.R.C. 1954.

Over a number of years, taxpayer, an accountant, secured funds from a client ostensibly to pay her taxes. The monies received were diverted to his own use. Held: taxpayer received unreported taxable income in the amounts of the money so received each year. Held further, other issues resolved by determination of additional income and taxpayer's failure to meet his burden of proof.

Respondent failed to prove by clear and convincing evidence that any part of any underpayment of taxes by petitioner for the years 1967 through 1971 was due to fraud within the meaning of sec. 6653(b), I.R.C. 1954.

Hennessey and M-K are corporations under common control.In the course of business Hennessey performed services for M-K on credit, made cash advances to M-K, and sold M-K real estate on credit. Held: since this case is appealable to the United States Court of Appeals for the Eighth Circuit, we will follow Kahler Corp. v. Commissioner,486 F. 2d 1 (8th Cir. 1973). Golsen v. Commissioner,54 T.C. 742 (1970), affd. 445 F. 2d 985 (10th Cir. 1971), cert. denied 404 U.S. 940 (1971).

Value of five paintings donated to an art museum determined.

Held, petitioners are liable for a tax on self-employment income, pursuant to section 1401, I.R.C. 1954. Held: petitioners are liable for a tax on self-employment income, pursuant to section 1401, I.R.C. 1954.

Held, petitioner Harvey H. Heidelberg is a non-professional gambler; accordingly, he may not take his gambling losses as itemized deductions while also taking the standard deduction. Held: petitioner Harvey H. Heidelberg is a non-professional gambler; accordingly, he may not take his gambling losses as itemized deductions while also taking the standard deduction. Held further, petitioner has not substantiated gambling losses for the year in issue.

Held, petitioner failed to report income from the sale of real property and from interest earned. Held: petitioner failed to report income from the sale of real property and from interest earned. Held further, petitioner is liable for additions to tax, pursuant to sections 6651(a) and 6653(a), I.R.C. 1954.

Petitioner, a resident of Clifton, New Jersey, being unable to find employment there as a civil engineer, took an engineering job in Rome, New York, of two years' expected duration. Held: on the facts, petitioner's tax home was Rome, New York, while his work was there, and petitioner could neither deduct his living expenses while in Rome nor exclude from income his employer's reimbursement of certain of such expenses.

Petitioner organized a United States corporation to mine an iron ore deposit in Venezuela. When the production stage of the mine was reached, petitioner then organized a Liberian shipping corporation to transport the ore from Venezuela to United States and foreign ports. The mining company established a price for the ore F.O.B. Puerto Ordaz, Venezuela, which was available to the petitioner as well as any unrelated customers. The shipping company established rates for the transportation of the ore to United States and foreign ports, which rates were likewise available both to the petitioner and unrelated purchasers of ore. The shipping rates to United States ports were established at levels in order that the sum of the price of the ore F.O.B. Puerto Ordaz and the carrier's charges to deliver the ore to United States ports would be comparable with the price of domestic ores. That price was predicated on the published or announced price of iron ore on lower Lake Erie. The shipping charges exceeded the rates which would have been charged by independent or third party carriers hauling ore from Puerto Ordaz to United States ports under comparable conditions. Held: Respondent is not precluded from invoking section 482 in order to allocate a portion of the shipping charges as between the petitioner and its related carrier by reason of the fact that the delivered cost of the ore did not exceed the published price for domestic ore in the lower Lake Erie market. Further Held: The petitioner was not subject to any legal constraints which would prevent the petitioner from negotiating and obtaining lower rates for the transportation of its ore from Puerto Ordaz to United States ports. The fact that the offering of such ore at a combined cost below the lower Lake Erie price might disrupt or force a reduction in the lower Lake Erie market does not preclude the application of section 482. The amount to be allocated pursuant to section 482 for the taxable years involved was determined by the Court.

P, a physician, grossly understated his income for 8 consecutive years. Held: Some part of the underpayment for each of the years at issue was due to fraud with intent to evade tax within the meaning of sec. 6653(b), I.R.C. 1954; (2) the Commissioner has failed to prove that P's wife is liable under sec. 6653(b) for the fraud penalties; and (3) P's wife has not shown that under sec. 6013(e)(1), I.R.C. 1954,…

Petitioner was engaged in the men's retail clothing business in Laurel, Del. In December of 1970 it entered into a written lease, effective Jan. 1, 1970, with its principal stockholders for rental of the land and store building occupied by petitioner which provided for rental of 5 percent of gross sales with a minimum and maximum. Held: The amounts paid by petitioner for rental pursuant to the terms of the lease for the years 1971 and 1972 were required payments for the continued use of the property and were reasonable. Held,further: The amounts paid by petitioner as rentals for the year 1970 under the terms of the lease which was executed in December of 1970 were not required payments for the continued use of the property.

Petitioner had made 60 loans to various individuals and corporations over a 26-year period. Certain loans made in 1968 and 1970 became worthless in 1971. Held, petitioner was not in the business of lending money during 1968 to 1971, and losses sustained in 1971 are deductible only as nonbusiness bad debts. Held further, attorneys' fees paid by petitioners in 1971 are not allowable as a deduction either under section 162 or section 212, I.R.C. 1954.

Held, petitioner, a woman married and domiciled in the State of Louisiana is required to report, on her separate return, one half of the… Held: petitioner, a woman married and domiciled in the State of Louisiana is required to report, on her separate return, one half of the community income earned by her husband. Bagur v. Commissioner,66 T.C. 817 (1976) followed. Held further, the automatic male mastership of the legal community in Louisiana is not unconstitutional.

1. Held: Petitioner is not entitled to deduct as a loss an amount he believed he would have received in 1971 (but did not receive or report as income) as a pilot for Pan American Airways had he not… Held: Petitioner is not entitled to deduct as a loss an amount he believed he would have received in 1971 (but did not receive or report as income) as a pilot for Pan American Airways had he not been discharged by Pan American Airways in 1960. 2.

Held, petitioner has failed to prove the worthlessness of SWD corporation as of December 31, 1972. Held: petitioner has failed to prove the worthlessness of SWD corporation as of December 31, 1972.

Petitioner owned and maintained three buildings on Ocracoke Island, North Carolina, which it used as hunting and fishing lodges, for the entertainment of employees of its major customers during 1963… Held: the major portion of petitioner's entertainment activity and facility expenses were directly related to the active conduct of its business and substantiated as required by section 274(a) and (d), I.R.C. 1954.

Rule 162. Tax Court Rules of Practice and Procedure.--The parties agreed that there was a deficiency of $1,117.26 in petitioners' income tax for 1973. Held: petitioners' motion to vacate our prior decision is denied.

Held, petitioner sold only a portion of its property under threat or imminence of condemnation, pursuant to sec. 1033, I.R.C. 1954. Held: petitioner sold only a portion of its property under threat or imminence of condemnation, pursuant to sec. 1033, I.R.C. 1954. Other portions of its property were not sold under threat or imminence of condemnation.

Petitioner was the owner of a law firm that provided legal services to union groups and their members, church groups and their members, and ethnic… Held: Case-preparation and litigation costs advanced by petitioner and recoverable only from the proceeds of suit or settlement were not deductible by petitioner in the year advanced unless the case was closed out in that year. Canelo v. Commissioner,53 T.C. 217 (1969), and Herrick v. Commissioner,63 T.C. 562 (1975), followed. 2.

1. Petitioners undertook the development of a condominium complex. When the buildings were nearing completion, the common elements were submitted to condominium ownership. Held: the present value of the rentals under the 99-year recreational lease, to the extent in excess of a fair rental for the recreational facilities, is not taxable to the petitioners as part of the consideration received for the sale of the individual condominium units.

Compensation paid petitioner's founder and chief executive officer in 1969 and 1970 found to be payment for services rendered and reasonable in amount.

Held, payments which petitioner Stonestreet made to petitioner Norma R. Hoeme, his ex-wife, in 1970 and in 1971 were made because of the family or marital relationship in recognition of the general obligation to support.

Petitioner E. Gerald Lackey was the president of Corporation A, Corporation T and Corporation P, and a minority shareholder of the first two corporations. Held: the fair market value of the stock contributions determined. Petitioners were indebted to a bank for over $300,000. In 1970 the bank foreclosed on the collateral securing petitioners' indebtedness. Held, all the property sold by the bank was owned either jointly or severally by petitioners.

Respondent reconstructed petitioners' income using the net worth plus nondeductible expenditures method. Held: petitioners' cash on hand at the close of the years 1966, 1967, 1968, 1969, and 1970 determined.

(1) Held, under sec. 6512(b), I.R.C. 1954, this Court lacks jurisdiction to allow an overpayment to the petitioners for a payment they… Held: under sec. 6512(b), I.R.C. 1954, this Court lacks jurisdiction to allow an overpayment to the petitioners for a payment they made in 1968 with respect to their 1963 taxes because no claim for refund had been filed, and because a claim for refund would not have been timely if filed on the mailing date of the notice of deficiency for…

Held, reasonable compensation for petitioner's president and sole stockholder determined. Held further, a portion of that compensation must be capitalized pursuant to sec. 263, I.R.C. 1954. Held: reasonable compensation for petitioner's president and sole stockholder determined. Held further, a portion of that compensation must be capitalized pursuant to sec. 263, I.R.C. 1954.

Held, whether petitioners' capital asset is determined to be real estate or an option to purchase real estate, the holding period of the asset was not more than six months and the sale thereof resulted in short-term capital gain.

Petitioner, an insurance claims adjuster, seeks to deduct the expenses he incurred in attending law school. Held: such school expenses are nondeductible because they were incurred in the pursuit of a program of study which will lead to qualifying him in a new trade or business, sec. 1.162-5(b)(3)(i), Income Tax Regs.

Petitioners carried back net operating losses to years in which they had ordinary income and capital gain, but offset such losses only to the extent of their ordinary income. Held: both capital gain and ordinary income must be included in the taxable income which absorbs net operating loss deductions before any loss excess can be found to be available for carryforward to succeeding taxable years. United States v. Foster Lumber Co., Inc., 97 S. Ct. 204 (1976).

The Treasury Department established a program of conducting tax investigations of those persons suspected of being in the narcotics… Held: P's judgment of acquittal in the criminal case does not collaterally estop the Commissioner from litigating, in this case, the question of P's civil tax deficiencies; (2) the circumstances of the investigation of P do not justify invalidating the notice of deficiency, nor shifting the burden of proof; and (3) P's omitted income and…

Petitioners, husband and wife, deducted the full amount of their child care expenses as an ordinary and necessary business expense. Held: Petitioners' child care expenses are only deductible under section 214, I.R.C. 1954, as amended. The limitations in section 214 are not violative of petitioners' constitutional rights under the Fifth Amendment.

Held: (1) The petitioners' income determined by the cash expenditures method and by use of BLS family budgets; and (2) the addition to tax for negligence under sec. 6653(a), I.R.C. 1954, imposed for… Held: The petitioners' income determined by the cash expenditures method and by use of BLS family budgets; and (2) the addition to tax for negligence under sec. 6653(a), I.R.C. 1954, imposed for 1971.

Respondent notified petitioner of proposed adjustments to his 1973 Federal income taxes. Although petitioner disagreed with the adjustments, on June 17, 1975, he paid the proposed amount due. On July 16, 1975, respondent issued a purported notice of deficiency showing no additional tax due. Held, petitioner cannot invoke the jurisdiction of this Court to redetermine his income tax liability unless the Commissioner has issued a valid notice of deficiency. Since the tax involved was paid prior to the issuance of the purported notice of deficiency, there was no deficiency, and hence, no valid notice of deficiency. Therefore, this Court has no jurisdiction to redetermine petitioner's income tax liability.

Held, useful life of certain improvements to real property determined. Held: useful life of certain improvements to real property determined.

Petitioner was an employee and part owner of an automobile dealership in Gainesville, Fla. Held: the fair rental value of the automobiles is includable in petitioner's income.

P understated his income for the years 1966 and 1967. His 1967 return was filed late, but the delinquency penalty was waived. Held: P's under-statements of income were due to fraud within the meaning of sec. 6653(b), I.R.C. 1954. (2) P's 1967 return was not filed within the prescribed period for purposes of sec. 6653(c), I.R.C. 1954; accordingly, the tax shown therein does not reduce the amount of the underpayment on which the addition to the tax is imposed.

P and his former wife entered into a separation agreement settling all of their property rights and providing for periodic payments to the wife of $1,150 per month. Held: such payments discharged the obligation for support of the minor children imposed by the decree, and therefore under secs. 71 and 215, I.R.C. 1954, they are not deductible by him.

Cecil W. Stevenson received expense allowances, reimbursements, and airline tickets which petitioners failed to report on their Federal income tax returns. Petitioners kept inadequate records of how the amounts received were spent. Petitioners also failed to report income determined. Held further, for each of the years in question petitioners are liable for the negligence penalty imposed by sec. 6653(a), I.R.C. 1954.

Petitioner, a college graduate knowledgeable in accounting, consistently failed to report a substantial part of his income and pay taxes thereon. Held: some part of the underpayment of tax required to be shown on each of petitioner's Federal income tax returns for 1962, 1963, 1964, and 1965, was due to petitioner's fraud with an intent to evade tax. Therefore, the addition to tax for fraud under sec. 6653(b), I.R.C. 1954, is applicable.

Held, petitioner's educational expenses are not deductible because the education will lead to qualifying him for a new trade or business. Sec. 1.162-5(b)(3)(i), Income Tax Regs. Held: petitioner's educational expenses are not deductible because the education will lead to qualifying him for a new trade or business. Sec. 1.162-5(b)(3)(i), Income Tax Regs.

Petitioners were in the business of subdividing property owned by them in Madison, Conn., constructing houses thereon, and selling the improved lots. Held: the conveyance of the land was in the nature of a capital outlay and petitioners were not entitled to deduct their basis therein as an ordinary and necessary business expense under sec. 162(a), I.R.C. 1954.

Held: 1. Amount of reasonable compensation paid by Medical Collection Corporation to Robert J. Smith determined. 2. Held: Amount of reasonable compensation paid by Medical Collection Corporation to Robert J. Smith determined. 2.

Held, the stipend petitioner received was not a scholarship or fellowship grant under section 117(a)(1), I.R.C. 1954. Held: the stipend petitioner received was not a scholarship or fellowship grant under section 117(a)(1), I.R.C. 1954.

Petitioners, husband and wife, were employed as high school teachers. In the summer of 1972 they toured Europe for 54 days. Held, petitioners have failed to establish that the major portion of the activities during their European trip was of a nature directly related to their respective teaching duties and which directly maintained or improved skills required of them in their respective employment. Accordingly their travel expenses are not deductible as ordinary and necessary business expenses.

Petitioner incurred no additional expense in transporting his tools to work. Held, petitioner's commuting expenses are therefore not deductible. Held: petitioner's commuting expenses are therefore not deductible.

Held, petitioner's education and related expenses are nondeductible personal expenses. Held: petitioner's education and related expenses are nondeductible personal expenses.

Respondent mailed a notice of deficiency to the address given by petitioner as his current address. Respondent also exercised reasonable diligence in attempting to locate petitioner. Held: respondent properly mailed the notice of deficiency to petitioner's last known address. Held further, the petition herein, mailed 185 days after the notice of deficiency, was not timely filed. Respondent's motion to dismiss for lack of jurisdiction is granted.

Held, payments received by petitioner were not a scholarship or fellowship grant under sec. 117(a)(1), I.R.C. 1954. Held: payments received by petitioner were not a scholarship or fellowship grant under sec. 117(a)(1), I.R.C. 1954.

Held, petitioner has established the worthlessness of Haymac S.A. stock as of December 31, 1967. Held further, petitioner failed to sustain his burden of proving worthlessness of Universal Minerals and Metals, Inc. stock and notes. Held further, petitioner is engaged in the trade or business of lending, endorsing and guaranteeing; and loans to and guarantees made on behalf of Haymac S.A. and Mr. W. Hayden were proximately related to that business. Held further, petitioner is not entitled to a total worthless bad debt deduction as he was holding valuable second mortgages and other collateral securing the debt; petitioner is not entitled to partially worthless bad debt deduction since he failed to sustain his burden of establishing the value of the land securing the mortgages.

In 1971 and 1972, B and S, who were the principal officers and sole shareholders of P, received compensation consisting of modest salaries and substantial bonuses which constituted a predetermined… Held: under all the circumstances, the compensation received by B and S in 1971 and 1972 was reasonable and was for services actually rendered.

The petition herein was delivered by United States mail 92 days after the date respondent's notices of liability were postmarked. The envelope containing the petition bore an illegible postmark. Held: petitioner has established that the envelope containing the petition was postmarked within the 90-day period. Therefore, under sec. 7502(a), I.R.C. 1954, the petition was timely filed. Respondent's motion to dismiss is denied.

Held, petitioner failed to establish that the addition to its reserve for bad debts was reasonable under sec. 166(c), I.R.C. 1954. Held: petitioner failed to establish that the addition to its reserve for bad debts was reasonable under sec. 166(c), I.R.C. 1954.

Porter Rodgers Hospital, Inc. (PRH, Inc.), one of petitioner's subsidiaries, purchased the assets of a sole proprietorship. As part of the purchase price PRH, Inc., assumed debts owed to Medicare. Held: PRH, Inc., received income as a result of the offset. This income should have been reported on petitioner's 1970 consolidated Federal income tax return. Held further, petitioner is not entitled to a corresponding deduction under sec. 162, I.R.C. 1954.

P filed a Form 1040 for 1974 which disclosed no information regarding his income or tax liability. Held: Such document does not constitute a return, and the Commissioner properly imposed the addition to tax under sec. 6651(a)(1), I.R.C. 1954; and (2) some part of P's underpayment was due to negligence or intentional disregard of rules and regulations so that the addition to tax under sec. 6653(a), I.R.C. 1954, was properly imposed.

P, an art teacher, traveled to the Caribbean, the Soviet Union, and to Hawaii. Held: the costs of such trips are not deductible as ordinary and necessary business expenses under sec. 162(a), I.R.C. 1954, and sec. 1.162-5(d), Income Tax Regs.

Midwest Applied Science Corporation (MASC) offered stock pursuant to a plan adopted in 1967. The plan made no reference to sec. 1244, I.R.C. 1954, or the benefits thereunder. Held: petitioners are not entitled to treat their loss on the MASC stock as an ordinary loss.

Petitioners purchased a produce brokerage company for $20,000 under a sales contract which did not contain a covenant not to compete. Held: petitioners are not entitled to a deduction for any portion of the purchase price allegedly allocable to such a covenant. Heldfurther, petitioners are not entitled to a deduction under sec. 248, I.R.C. 1954.

Held, petitioner, an insurance agent, has failed to establish his treatment in 1966 of premiums belonging to his underwriter which he… Held: petitioner, an insurance agent, has failed to establish his treatment in 1966 of premiums belonging to his underwriter which he wrongfully retained; the necessary elements to sustain an office-in-home deduction; that he furnished more than one-half of6his mother-in-law's support; and that his mother-in-law was a qualifying individual…

Petitioners, husband and wife, engaged in a number of stock transactions in 1968. Held: petitioners failed to establish that they had acted as commission agents in these transactions. Accordingly, the proceeds received therefrom were income to petitioners in that year. Held further, petitioners failed to show that they had reasonably relied on bookkeeping services in reporting their income.

Petitioners obtained a mortgage loan. Withheld from the proceeds of the loan were points representing additional interest. Held: petitioners are not entitled to deduct the entire amount of the points in the year they received the mortgage proceeds.

Petitioners made cash advances to a contractor to enable him to purchase building materials for the construction of their home. Held: petitioners suffered a deductible theft loss under sec. 165(c)(3), I.R.C. 1954.

This case, originally decided in 61 T.C. 68 (1973), is before us on remand in part from the U.S. Court of Appeals for the Ninth Circuit, Rainier Companies v. Commissioner, an unreported opinion (9th Cir. 1976). Our holding that a transfer to the City of Seattle was in no part a gift due to a lack of donative intent was reversed and we were directed to determine the amount of charitable contribution which petitioner made. Held: while under the valuation procedures utilized to value the land the stadium had no value, there was a bargain element in the sale of the land. Held,further, the value of this bargain element is $100,000.

P was employed by the same employer at different locations away from Winona for 4 consecutive years. During this period, P did not generally seek other employment in Winona, although it was evident he would not be reassigned to the vicinity of Winona. Held, P's living expenses during such period were not incurred while traveling away from home and were not deductible under sec. 162(a)(2), I.R.C. 1954.

Held, the amount of allowable deductions for child care, medical care, business expenses, and personal exemptions, determined. Held: the amount of allowable deductions for child care, medical care, business expenses, and personal exemptions, determined. Held, further, the addition to tax of sec. 6653(a), I.R.C. 1954, for negligence, imposed.

During the trial of this case, P refused to adduce any evidence to substantiate deductions claimed for medical expenses and a loss from rental property. Held: the Commissioner's disallowance of such deductions sustained. Held, further, deductible charitable contributions determined.

P retired from the U.S. Ari Force based upon his length of service. The Veterans' Administration subsequently determined that P was entitled to a 40-percent service-connected disability rating and compensation therefor, but this determination did not result in any change in his Air Force retirement status. Held, no part of the retirement pay received by P from the U.S. Air Force is excludable from gross income under sec. 104(a)(4), I.R.C. 1954.

Value of open-space or scenic easement over a 60-acre country gentleman's estate on the Potomac River donated in gross and in perpetuity to a charitable organization determined.

Held, petitioners' guarantees of a line of credit for and accounts payable of Windor, Inc., were not indirect contributions to Windor's capital; required payments of the guarantees gave rise to bad debts. Held, further, the bad debts arising out of payments on the guarantees were nonbusiness bad debts deductible under sec. 166(d)(1), IR.R.C. 1954.

Petitioner had accumulated earnings and profits for the years 1971, 1972 and 1973 of $161,535.78, $178,368.06 and $192,785.49, respectively. Held: petitioner had accumulated these earnings and profits to capitalize moving, expanding or remodeling the business premises; to meet contingent liabilities; and to cover working capital needs. Held further, avoidance of income tax with respect to its shareholders was not the purpose of such accumulations.

Petitioner and his former wife entered into a separation agreement which was later incorporated in the decree of divorce, pursuant to which petitioner was obligated to pay for the support of his former wife and the children of their marriage. As the result of a dispute, petitioner ceased making payments just prior to the divorced wife's remarriage. She filed suit and pursuant to an order of the New Jersey Superior Court, petitioner was ordered to pay specific amounts for the period subsequent to the wife's remarriage. Under New Jersey law any "legal obligation" of the petitioner with respect to the payment of "alimony" terminated upon the wife's remarriage. Held: the payments covering the period subsequent to his former wife's remarriage are not includable in petitioner's former wife's income under section 71(a)(1) or deductible by petitioner under section 215. Hoffman v. Commissioner,54 T.C. 1607 (1970).

Held: A small part of the property owned jointly by decedent and his wife at the time of his death was attributable to contributions by his surviving wife and is not taxable in decedent's estate. Held: A small part of the property owned jointly by decedent and his wife at the time of his death was attributable to contributions by his surviving wife and is not taxable in decedent's estate. Amount determined.

Held: Petitioner's unreported income from sales of heroin in the latter part of 1971 and the early part of 1972 redetermined. Held: Petitioner's unreported income from sales of heroin in the latter part of 1971 and the early part of 1972 redetermined. Petitioner's failure to report this income was due to negligence or intentional disregard of rules and regulations.

(1) P was engaged in the manufacture and distribution of disposable paper products. Held: P's evidence did not establish anticipated economic obsolescence; the Commissioner's determination of a 43-year composite useful life is sustained. (2) For 1970, P claimed an investment credit for an addition to its power plant, including a locker-washroom and turbine room.

Petitioners owned 9.8 percent of the stock of K. Though some of the stock of K was publicly traded on the over-the-counter market, petitioners' stock was restricted because it had not been registered… Held: fair market value of petitioners' stock determined.

In 1969 petitioner acquired four newspapers. In order to induce it to purchase one of these newspapers, petitioner ultimately received $100,000 from a third party. Held: the $100,000 received by petitioner constitutes a reduction of its basis in one of the newspapers. Brown v. Commissioner,10 B.T.A. 1036 (1928), and Federal Bulk Carriers, Inc. v. Commissioner,66 T.C. 283 (1976), affd. on other grounds, 558 F.2d 128 (2d Cir. 1977), followed.

Decedent purchased 140 acres of land, transferred it to his solely owned corporation in exchange for an installment note, and immediately discounted it to a third party who financed the purchase. Held: the transaction should be viewed as a purchase by the solely owned corporation. Decedent subsequently transferred his stock in the corporation to a trust. Held, the transfer of stock to the trust did not result in a constructive liquidation.

Hubbard owned 70.23 percent of the stock of Lumber Co. and Johnson owned the other 29.77 percent. Held: the advances made by Lumber Co. to Fireless prior to Jan. 1, 1972, were intended to be and were in fact loans and Lumber Co. is entitled a bad debt deduction with respect thereto in 1972. Advances made after that date were in the nature of contributions to capital and are not deductible as bad debts.

(1) At the time of his death, the decedent and his surviving spouse held certain real and personal property as joint tenants with rights of survivorship. No evidence was adduced to show that any portion of the value of such property was attributable to consideration furnished by the surviving spouse. Held, the entire date-of-death value of such property is includable in the gross estate. Sec. 2040, I.R.C. 1954. (2) Held, the gross estate includes one-half of the rent receivable with respect to real property held by the decedent and his surviving spouse as joint tenants with rights of survivorship and one-half of a joint bank account balance consisting of rentals from such property. Sec. 20.2033-1(b), Estate Tax Regs. (3) Held, the Commissioner's determination of the date-of-death fair market value of certain real property is sustained. (4) Held, insurance proceeds paid with respect to a life insurance policy on the life of the decedent are includable in the gross estate. Sec. 2042, I.R.C. 1954. (5) On the original estate tax return, the estate elected to value the gross estate as of the date of death. In an amended return filed almost 4 years after the decedent's death, the estate attempted to elect the alternate valuation date authorized by sec. 2032, I.R.C. 1954. Held, the election of the alternate valuation date was not valid, because it was not made within the time prescribed by sec. 2032(c), I.R.C. 1954; the Commissioner's determination of the date-of-death values of certain shares of stock is sustained. (6) Held, no deduction is allowable for an alleged claim against the estate. Sec. 2053(a), I.R.C. 1954. (7) Held, the petitioner has failed to prove that it is entitled to a deduction for attorney's fees and expenses of the executrix in excess of amounts claimed on the original estate tax return and previously allowed by the Commissioner. Sec. 2053(a), I.R.C. 1954.