Volume 37 — Tax Court Memorandum

Held: Petitioners failed to prove that certain debentures became worthless in 1973. They are not entitled to a loss deduction under sec. 165(a), I.R.C. 1954. Held: Petitioners failed to prove that certain debentures became worthless in 1973. They are not entitled to a loss deduction under sec. 165(a), I.R.C. 1954.

Petitioner, The State Metals & Steel Company, Inc. valued its closing inventory for October 31, 1970, at $100,000. Held, proper inventory value determined to be $150,000. Held: proper inventory value determined to be $150,000.

Petitioner intentionally failed to file income tax returns for the years 1966 through 1971 due to a dispute with the Commissioner over his tax liability for a year not before the Court. Held: failure to file income tax returns was due to willful neglect and intentional disregard of rules and regulations, and additions to tax under 6651(a) and 6653(a) upheld.

Held, petitioner is entitled to a deduction in his taxable year 1970 for feed purchased in that year. Held: petitioner is entitled to a deduction in his taxable year 1970 for feed purchased in that year. The feed was consumed in 1970 and in the first 45 days of 1971. Held further, petitioner is entitled to a deduction in 1970 for expenditures made in that year for services to the extent that such services were actually performed therein.

Held, respondent's disallowance of medical deduction upheld as petitioner did not prove expenses or that his father qualified as his dependent. Held: respondent's disallowance of medical deduction upheld as petitioner did not prove expenses or that his father qualified as his dependent.

The noncustodial father contributed $1,118 for the support of each of his two minor children of a former marriage. Held: the custodial mother has clearly established as required by section 152(e)(2)(B), I.R.C. 1954, that she provided more for the support of both children than did the noncustodial father in 1974.

Petitioner's former wife did not sign either the 1971 or 1972 tax return filed by petitioner. At petitioner's direction, her name was placed on the return and it was filed as a joint return. Held: returns were intended as joint returns and petitioner is entitled to the benefits thereof. Held,further, since the section 6653(a) penalty is based on petitioner's having filed a joint return instead of a separate return, there is no basis for it.

Petitioner was shot during a hold-up attempt while making deliveries on his milk route business. Held: petitioner failed to prove he did not transfer the route as an inducement to the transferees to collect his accounts. Therefore, the transfer of the route was a sale or exchange of a capital asset. Held,further, respondent's determination of transportation expense upheld. Held,further, amount of bad debts determined under Cohan rule.

Held, petitioner's income earned pursuant to to his trade or business of being a consulting engineer is subject to the self-employment tax of sec. 1401. Held: petitioner's income earned pursuant to to his trade or business of being a consulting engineer is subject to the self-employment tax of sec. 1401.

Petitioner and another began a new corporation in the business of manufacturing interior packaging products. Petitioner was employed by the corporation as its president and chief operating officer. Over a period of years he loaned a large sum of money to the corporation and eventually he was forced to sell the note at a loss. Held, petitioner's loans were made with an investment motive and, therefore, gave rise to a nonbusiness debt. Respondent contended for the first time at trial that petitioner compromised a debt not wholly worthless. Held,further, respondent raised a new matter under Rule 142(a), Tax Court Rules of Practice and Procedure, and failed to carry his burden of proof.

Respondent determined that petitioners Benjamin and Sonia Gradus had unreported taxable income in the years 1967-1970 by use of the net worth and expenditures method and that the source of the… Held: Petitioners Benjamin and Sonia Gradus failed to prove error in respondent's computation of unreported income by the net worth method; they failed to prove cash on hand at the beginning of the period.

A liquor store business was sold for $90,000. In the sales agreement, among other things, $20,000 was allocated to a covenant not to compete and $10,000 to goodwill. Held: seller has failed to show by strong proof that the assignment of consideration to the covenant by the agreement lacked economic reality or that it would have been unreasonable for the purchaser to have required the covenant.

Petitioner, for personal reasons, maintained his house and family in California while he was employed in Mississippi. Held: petitioner was not away from home within the meaning of sec. 162(a)(2) and, accordingly, his traveling, lodging and meal expenses incurred while working in Mississippi are not deductible.

Petitioner claimed four dependency exemptions on her 1973 Individual Income Tax Return as a protest to United States involvement in Viet Nam and United States military spending generally. Held: petitioner's dissatisfaction with United States involvement in Viet Nam and United States military spending generally is not a valid basis on which to claim additional dependency exemptions.

The Executrix of decedent's estate provided the attorney handling the estate all the information necessary to file the return prior to the time the return was due. She knew a return was required, and the attorney knew that one of his responsibilities was to file the return. No reason was given for the attorney's late filing. Held, petitioner has not shown that late filing was due to reasonable cause.

As payment for legal services petitioner transferred 10,000 shares of Portable Parking Structures International stock on March 10, 1970 and 10,000 shares on April 2, 1970. Held: the fair market value of such stock was $7.00 per share on the former date and $5.61 per share on the latter date.

Held, petitioner is not entitled to a war crimes deduction. Held: petitioner is not entitled to a war crimes deduction.

Decedent, Harry Teplitz, was a sales agent for several corporations whose business was importing and exporting steel. Held: The returns for the years 1967, 1968, and 1969 were joint returns of Harry and Gladys and both were jointly and severally liable thereon. Held, further: Gladys qualified as an innocent spouse under sec. 6013(e)(1), I.R.C. 1954, for the year 1967 and is relieved from liability for the tax and penalties for that year.

In 1973 petitioners (1) paid the Federal excise tax on an automobile used solely for their personal purposes, (2) paid life and casualty, fire and automobile insurance premiums and (3) contributed… Held: petitioners are not entitled to a deduction for payment of a Federal excise tax on their car used solely for personal purposes. Sec. 164(a); sec. 1.164-2(f), Income Tax Regs. 2. Held further, payments of insurance premiums are not casualty losses under sec. 165(c). 3.

Petitioners made gifts of securities having a basis of $1,200 to several trusts for the benefit of their grandchildren, upon the condition that the transferee trusts pay all gift taxes resulting from… Held: petitioners did not realize taxable income as a result of the payment of the gift taxes by the trusts. Estate of Henry v. Commissioner, 69 T.C. (Feb. 6, 1978), a companion case decided contemporaneously herewith, followed.

P is a member of the Wider Quaker Fellowship and/or the Religious Society of Friends. Held: P is liable for the tax imposed on self-employment income. Secs. 1401 and 1402, I.R.C. 1954, do not abridge the free exercise of P's religion; nor is the exemption provided by sec. 1402(e) or (h) unconstitutionally narrow.

Held, the transfer by petitioners of a waterline they constructed which connected to the city of Rockingham's water system as required by a city ordinance did not qualify as a charitable deduction. Held: the transfer by petitioners of a waterline they constructed which connected to the city of Rockingham's water system as required by a city ordinance did not qualify as a charitable deduction. Rather, such costs are to be capitalized under sec. 263.

Petitioner, wife, attended Columbia University for three years and obtained a doctorate in nursing education. Held: on the facts she was engaged in a trade or business during the period she was working toward her doctorate. Held,further, deductions for certain travel, meals and lodging expenses allowed because incurred while away from home.

H, a camouflage engineer, and W spent 38 days visiting 8 European countries. Held: the major portion of such trip did not directly maintain or improve skills required in H's employment, and therefore, his portion of the expenses is not deductible.

Petitioners claimed deductions for military expenditures because of their moral and religious objections to paying taxes for military purposes. Held: respondent's motion for judgment on the pleadings granted.

Respondent's determination disallowing business losses claimed on petitioners' return for 1970 and additions to tax for delinquency (sec. 6651(a), I.R.C. 1954) and negligence (sec. 6653(a), I.R.C. 1954) sustained. Petitioners failed to carry their burden of proving error in respondent's determination. Respondent's failure to afford petitioners an administrative hearing before issuing notice of deficiency is not a denial of due process.

A decree of divorce, dated April 24, 1972, provided, in part, that petitioner's former spouse be awarded (1) alimony in gross of $60,000, payable $1,000 per month for sixty months beginning in May,… Held: under Nebraska law an award of alimony in gross made before July 6, 1972 is not subject to modification and, therefore, the award is not subject to a contingency, under sec. 1.71-1(d)(3)(i)(a), Income Tax Regs.

Corporate petitioner paid individual petitioner $8,935.82 to reimburse expenses the latter incurred while attending the University of Portland. Held: the expenditure was inherently personal to the individual petitioner and cannot be characterized as an ordinary and necessary business expense of the corporation. Held further, neither was the payment intended as compensation.

Held, the petitioner has no constitutional right to refuse to pay income taxes because of his religiously motivated objections to Government policy; held, further, the petitioner lacks… Held: the petitioner has no constitutional right to refuse to pay income taxes because of his religiously motivated objections to Government policy; held, further, the petitioner lacks standing to raise the issue of violations of international law allegedly committed by the United States.

P visited his mother in Arizona for 60 days in 1945-1946. During such visit, he did not intend to remain in Arizona. From 1946 through 1976, he resided in Germany. Held: P was not domiciled in the State of Arizona in 1971.

Held, petitioner is not entitled to a deduction as alimony of payments made to his former wife in 1972. Petitioner failed to prove that the payments were made under a decree of divorce or a written instrument incident to such divorce, sec. 71(a)(1), I.R.C. 1954, or under a decree requiring him to make the payments for the support and maintenance of his former wife, sec. 71(a)(3), I.R.C. 1954.

Held, petitioner, a security guard, is not entitled to deduct expenses of driving his automobile between his home and various jobsites. Held: petitioner, a security guard, is not entitled to deduct expenses of driving his automobile between his home and various jobsites.

Decedent, a resident of Texas, a community property state, made inter vivos transfers of an insurance policy and cash to his wife. Held: decedent retained no incidents of ownership in the insurance policy under sec. 2042(2), I.R.C. 1954. Held further, under Texas law, decedent retained the right to the income from the cash for his life within the meaning of sec. 2036(a)(1), I.R.C. 1954.

(1) Ps, well known professional artists, sustained substantial losses from the operation of their cattle ranch. Held: the ranch operation was not conducted to make a profit; therefore, losses sustained are not deductible. (2) Ps claimed depreciation deductions based on the entire cost of their guest facilities and a room known as the Gallery.

Petitioner owned two automobiles, one of which was used primarily in petitioner's trade or business. Held: petitioner failed to prove that the business use of that automobile was in excess of the amount determined by respondent. Petitioner owned a yacht. Held further, petitioner failed to substantiate the business use of the yacht as required under sec. 274. The yacht was damaged during a hurricane.

In 1968, P's parents transferred $4,000 to him, and he promised to repay them $8,000 in the future. During 1971 and 1972, P paid his mother approximately $5,000. Held: P is not entitled to deduct as interest under sec. 163(a), I.R.C. 1954, any part of the payments to his mother.

On June 20, 1977, respondent mailed a notice of deficiency to petitioner. Held: the erroneous delivery of the petition to the Internal Revenue Service, Indianapolis Office, deprives this Court of jurisdiction under secs. 6213 and 7502, I.R.C. 1954; and (2) respondent is not estopped by alleged unauthorized acts of his agents. Therefore, respondent's motion to dismiss for lack of jurisdiction will be granted.

Lake, Inc., sold its retail liquor business and all of its assets used therein, including its liquor license, in 1968 for $200,000 payable on the installment basis. It was not liquidated but was kept alive to receive the installment payments. Its only income in 1969 and 1970 was payments of principal and interest. It deducted various expenses including wages paid to its principal stockholder, Joel Heim, his mother, and girlfriend, rent paid to Heim, utilities, insurance, legal and accounting fees, and travel and entertainment. Respondent disallowed some of the expenses as being incurred in searching for a new business and other expenses as being for the personal benefit of Heim. Held: Respondent's allocation of expenses to investigatory activities approved and deductions for such expenses disallowed. Held: Respondent's allocation of part of the expenses as being for the personal benefit of Heim approved. Such expenses were not deductible by Lake, Inc., and are included in the taxable income of Heim as dividends. Held: Lake, Inc., was a personal holding company is 1969 and 1970 but because of the dividends paid deduction it was not liable for personal holding company tax. Respondent's claim that the constructive dividends to Heim were preferential dividends and thus not deductible in determining undistributed personal holding company income not considered because first raised on brief.

Petitioner, a United States citizen, was employed by the Congress of Micronesia, Trust Territory of the Pacific Islands, Saipan, Mariana Islands. Held: the Congress of Micronesia, as well as the other branches of the Trust Territory government, is an agency of the United States within the meaning of sec. 911(a)(2), I.R.C. 1954. Accordingly, petitioner's salary is not excludable from his gross income.

Petitioner reported income from wagering on horseraces and claimed a lesser amount as a deduction for wagering losses. Respondent disallowed all of the wagering losses claimed, Held, petitioner had substantial wagering losses during the taxable year which are deductible under sec. 165(a) and (d), I.R.C. 1954. Amount determined.

Petitioner, an accountant, organized the Church of Eternal Life and Liberty in 1974 and contributed cash and the furnishings in his rented apartment to the church. Held: Contributions made by petitioner to the church in 1974 are not deductible as charitable contributions. Held,further: Petitioner's receipts in the form of Federal Reserve Notes are not excludable from income because not redeemable in gold or silver.

Petitioner grossly understated his income in the years 1963 through 1968. Held: petitioner's returns for 1963 through 1968 were false and fraudulent with the intent to evade taxes, thereby lifting the bar on the assessment and collection of the deficiencies for those years. Held,further, the additions to tax under sec. 6653(b), I.R.C. 1954, are applicable. Held,further, amount of deficiencies determined.

Petitioner, a fourth year resident, received monies for services rendered. Held: characterization of such monies as an educational stipend by Louisiana R.S. 46:922 does not require their treatment as proceeds from a scholarship or fellowship within the purview of Federal income tax laws, sec. 117.

Petitioner, a U.S. resident, was married to a nonresident alien during 1974. Petitioner filed a separate individual income tax return for that year. Held: Petitioner is precluded from deducting more than $500 on account of capital losses in excess of capital gains for 1974 (sec. 1211(b)(1) and (2)), even though he was forbidden by statute to file a joint return for that year (sec. 6013(a)(1)). Richard S. Kestenbaum, for the respondent.

Held, expenses incurred by petitioner in traveling to Europe were not deductible ordinary and necessary business expenses. Held: expenses incurred by petitioner in traveling to Europe were not deductible ordinary and necessary business expenses.

Petitioners had no reasonable cause for the delay in filing their income tax return. Held, respondent properly imposed a penalty under sec. 6651(a), I.R.C. 1954.

Lana Chaney Long filed no Federal income tax returns for 1965 through 1968. After her death in 1968 her son was appointed her executor. Held: the delay in filing Lana Chaney Long's Federal income tax returns was not due to reasonable cause. Respondent therefore properly imposed the penalty provided by sec. 6651(a), I.R.C. 1954.

Held, petitioner is not entitled to a casualty loss deduction for anticipated medical expenses, loss of past, present, and future anticipated earnings, and other anticipated disability related losses… Held: petitioner is not entitled to a casualty loss deduction for anticipated medical expenses, loss of past, present, and future anticipated earnings, and other anticipated disability related losses that occurred when petitioner was injured in an automobile accident.

Held, petitioner was not away from home when he incurred traveling expenses. Held: petitioner was not away from home when he incurred traveling expenses.

Entitlement to dependency exemptions for four children of divorced parents determined.

Held, costs of sending dependent child to a private school are not deductible under sec. 213, I.R.C. 1954. Held: costs of sending dependent child to a private school are not deductible under sec. 213, I.R.C. 1954.

During the last six months of 1972, petitioners worked 70 to 75 hours per week at Bethesda Lutheran Hospital where they were engaged in a post-medical school residency program.Petitioners were paid… Held: on the facts, no portion of the amount received by petitioners from Bethesda Lutheran Hospital constituted a scholarship or fellowship grant which is not includable in gross income pursuant to section 117, I.R.C. 1954.

Held, petitioner's tip income determined. Held: petitioner's tip income determined.

Petitioner Alton, an attorney, was also a partner of his father in an insurance agency. Held: respondent failed to prove that petitioner's failure to file returns was with the intent to evade tax for the years 1962-66. Held, further, petitioner's failure to file returns for the years 1967-71 was with intent to evade tax and the addition to tax for fraud under section 6653(b), I.R.C. 1954, is imposed on Alton for those years.

Petitioner and Feldman formed a partnership to construct an apartment complex. Held: the special allocation has no substantial economic effect and, accordingly, will not be recognized. Sec. 704(b)(2), I.R.C. 1954 is applicable.

Pursuant to terms of a qualifying sec. 368(a)(1)(B) reorganization additional stock was due petitioners in an amount determined by average stock exchange closing price in December, 1970. Held: as of December 31, 1970 petitioners had no legal right to compel delivery of stock and therefore such stock not constructively received in that year. Interest imputed to petitioners under sec. 483 upon receipt of stock therefore taxable in 1971.

Petitioner and another entered into an agreement whereby they joined together to develop real property. Petitioner was to provide the know-how, the other party was to provide the capital. Held: Petitioner was a joint venturer entitled to report his share of proceeds from a sale of the developed real property as his share of joint venture capital gain. Held,further: The fair market value of stock, debentures, and a note determined.

Petitioner-husbands are executives of a large electric utility company. Held: Petitioners must include their wives' convention expenses in gross income. Held further: Petitioners may not deduct those expenses under sec. 162(a)(2), I.R.C. 1954. Pursuant to Company policy, petitioners' employer reimbursed them for dues, fees, and expenses at social, athletic, and country clubs.

Held, petitioners' expenses incurred while on a trip through Mexico, Central and South America are not deductible business expenses. Held: petitioners' expenses incurred while on a trip through Mexico, Central and South America are not deductible business expenses.

Held, petitioners failed to prove what portion, if any, of medical fees paid to deliver their adopted child constituted medical care for the child. Accordingly, no deduction is allowed. Held: petitioners failed to prove what portion, if any, of medical fees paid to deliver their adopted child constituted medical care for the child. Accordingly, no deduction is allowed.

Held, the Commissioner failed to carry his burden of proving that the petitioners executed consents extending the statute of limitations in this case. Held: the Commissioner failed to carry his burden of proving that the petitioners executed consents extending the statute of limitations in this case.

Held, petitioner was not away from home when he incurred traveling expenses. Held: petitioner was not away from home when he incurred traveling expenses.

Held, petitioners had legal title to land and a two story house thereon. Held: petitioners had legal title to land and a two story house thereon. They sustained a casualty or theft loss on the building prior to making a valid gift of the land to the City of Chicago. Held further, the amount of petitioners' charitable contribution and casualty or theft loss deductions determined.

Petitioner, Collegiate Cap and Gown Company, was transferee of Cap and Gown Company. Under petitioner's accounting method it deferred reporting prepaid income until the taxable year the services which related to that prepaid income were performed which was the taxable year following the taxable year of receipt. Cap and Gown consistently reported its income in this manner since at least 1954. Held, the result in this case is controlled by the case of Artnell Co. v. Commissioner,400 F. 2d 981 (7th Cir. 1968), revg. and remanding 48 T.C. 411 (1967), supp. opinion T.C. Memo. 1970-85, under our rule in Golsen v. Commissioner,54 T.C. 742 (1970), affd. 445 F. 2d 985 (10th Cir. 1971), cert. denied 404 U.S. 940 (1971). We hold the method of accounting herein employed clearly reflected income.

P operated a numbers business from 1968 through 1971 but reported no income from such business on his Federal income tax returns for such years. Held: (1) P grossly understated his income each year from 1968 through 1971; (2) some part of the underpayment for each of the years at issue was due to P's fraud with intent to evade tax within the meaning of sec. 6653(b), I.R.C. 1954; (3) the Commissioner has failed to prove that any part of the underpayment was due to fraud on the part of P's wife; (4) P's wife has not proved that she is entitled to the relief from liability for the deficiencies provided by sec. 6013(e)(1), I.R.C. 1954; and (5) there is no basis for suppressing any evidence admitted at the trial.

Taxpayer, a welder whose residence was in North Carolina, was away from home while employed for about 1 year in Maryland and he is entitled to deduct his expenses for meals and lodgings while there. His employment in Maryland was temporary and his tax home did not change from North Carolina to Maryland.

Due to impending changes in the Medicare Program, the owners and operators of a nursing home decided to sell the operating portion of the business. Held: sellers have met their burden to show the employment contract was a sham and represented the sale of the operating business, entitling them to capital gains treatment. Held,further, public policy does not bar the section 1202 deduction on the sale.

In order to ensure itself a steady supply of timber for use in its lumber business, K Corporation entered into a long-term timber-cutting contract with… Held: where the evidence is sufficient to establish that from the outset the transaction in question was bona fide and conducted in an arm's-length manner, then the ultimate objective of the constructive dividend theory has been attained and it is unnecessary for us to independently determine the value of the property sold.

Held, petitioner is not entitled to carry forward his distributive share of a 1968 partnership loss on his 1974 individual return. Held: petitioner is not entitled to carry forward his distributive share of a 1968 partnership loss on his 1974 individual return. Held further, petitioner relied upon the cost of repairs method to establish the amount of a casualty loss. However the repairs were never made and, accordingly, the deduction is disallowed.

Held: Petitioner's employment as an ironworker in the construction of a power plant at Cheshire, Ohio, was not temporary in 1973. Held: Petitioner's employment as an ironworker in the construction of a power plant at Cheshire, Ohio, was not temporary in 1973. Petitioner's daily transportation expenses incurred in traveling between his residence in Kenova, W. Va., and the jobsite in Ohio are not deductible.

Held: Petitioner's employment as an ironworker in the construction of a power plant at Cheshire, Ohio, was not temporary in 1973. Held: Petitioner's employment as an ironworker in the construction of a power plant at Cheshire, Ohio, was not temporary in 1973. Petitioner's daily transportation expenses incurred in traveling between his residence in Shoals, W. Va., and the jobsite in Ohio are not deductible.

Held: Respondent's motion to dismiss for lack of jurisdiction because petition not timely filed granted. Petition received by Court 7 days late. Held: Respondent's motion to dismiss for lack of jurisdiction because petition not timely filed granted. Petition received by Court 7 days late. Envelope in which petition was mailed bore a timely private postage meter date but it also bore a United States Postal Service postmark that was 1 day late.

Held, respondent's use of the net worth method of determining income is discretionary; petitioner may not require its use. Held: respondent's use of the net worth method of determining income is discretionary; petitioner may not require its use.

Held, petitioner's receipt of 385,000 shares of Industries stock in 1968 was a taxable event. Held: petitioner's receipt of 385,000 shares of Industries stock in 1968 was a taxable event.

Held, petitioner failed to satisfy the requirements of sec. 217, I.R.C. 1954, and therefore may not deduct his moving expenses. Held further, charitable contributions deduction determined. Held: petitioner failed to satisfy the requirements of sec. 217, I.R.C. 1954, and therefore may not deduct his moving expenses. Held further, charitable contributions deduction determined.

Held, the exchange of an orange grove for grazing land does not qualify under sec. 1031 as petitioner, a dealer in realty, has not proven that the grazing land was not held primarily for sale. Held: the exchange of an orange grove for grazing land does not qualify under sec. 1031 as petitioner, a dealer in realty, has not proven that the grazing land was not held primarily for sale.

During 1970, Foxley, a partnership, was defrauded of money. Held: on February 28, 1971, the end of Foxley's tax year, petitioners, as partners in Foxley, had no reasonable prospects of recovering more than $ 3,773 of the amount lost.

H and W were divorced in 1970. In 1972, both claimed dependency deductions for their two children, who were in the custody of W. In that year, H furnished over $ 1,200 in support of the children. Held: W failed to prove that she provided more support for the children than did H; therefore, H, not W, is entitled to claim the dependency deductions. Sec. 152(e)(2)(B), I.R.C. 1954.

Respondent moved to amend the pleadings to conform with the evidence. Held,section 6214(a) does not give respondent an unqualified right to amend his answer at anytime during the course of the trial. Held further, because the facts do not support respondent's motion, it is denied. Held further, the value of assets distributed by Alabama to petitioner determined.

Petitioner refused to offer any evidence with respect to his taxable income and the allegations of violations of his constitutional rights in his petition. Petitioner failed to carry his burden of proof under Rule 142(a), Rules of Practice and Procedure, United States Tax Court, and decision will be entered for respondent in the amounts of the deficiencies determned in the notice of deficiency.

Respondent's Motion To Dismiss Based Upon Failure To State A Claim Upon Which Relief Can Be Granted, granted. Petition failed to allege any errors in respondent's determination of petitioners' tax liability or any facts concerning their taxable income, but instead recited various baseless constitutional arguments which have been decided adversely by this and other courts many times.

Petitioner purchased 1,000 shares of stock in margin account with a brokerage firm. A trustee was appointed under the Securities Investor Protection Act of 1970 to liquidate the brokerage firm. Held: the resulting loss sustained by petitioner was attributable to a decline in the value of the stock, and not to any defalcation on the part of the broker. The loss resulted from the sale of a capital asset subject to the limitations of sec. 1211, I.R.C.1954.

Petitioner leased certain improved real property for the purpose of running a restaurant. Held: the lease and its renewal were entered with a profit motive and, as such, rental payments made under the lease agreement may be deducted under either section 162 or 212 as either trade or business expenses or expenses incurred in the production of income; such payments were not payments made for the acquisition of a capital asset.

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. 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, the petitioners purchased and held their condominium in Punta Gorda, Florida, as an activity engaged in for profit. Held: the petitioners purchased and held their condominium in Punta Gorda, Florida, as an activity engaged in for profit.

(1) P is an accrual method taxpayer with a taxable year ending Sept. 30. On Sept. 21, 1970, the board of directors of P approved a proposed stock bonus plan, authorized execution of the plan and creation of a trust, and authorized a contribution to the trust. A written plan was executed the same day, but the trust agreement was not executed, and the contribution was not made, until June 14, 1971, one day prior to the last day for the filing of its return for the year ending Sept. 30, 1970. Held, a stock bonus trust qualified under sec. 401(a), I.R.C. 1954, did not exist in P's taxable year ending Sept. 30, 1970; therefore, P's contribution to the trust was not an accruable item for its year ending Sept. 30, 1970, and is not deductible in such year under sec. 404(a)(3) and ( 6), I.R.C. 1954. Catawba Industrial Rubber Co. v. Commissioner,64 T.C. 1011 (1975), followed. (2) Held, further, the Commissioner's determination of the useful lives of P's slag-processing equipment and of certain leasehold improvements is sustained. (3) Held, further, the Commissioner's disallowance of deductions for legal expenses and for travel and entertainment expenses is sustained. Secs. 162 and 274, I.R.C. 1954.

Held, petitioner's traveling expenses were not incurred while away from home within the meaning of sec. 162(a)(2), I.R.C. 1954. Held: petitioner's traveling expenses were not incurred while away from home within the meaning of sec. 162(a)(2), I.R.C. 1954. Held further, petitioner's legal expenses were not incurred for the production or collection of income within the meaning of sec. 212(1), I.R.C. 1954.

Held, petitioners required to include in income reimbursement received from employers for expenses incurred. Held: petitioners required to include in income reimbursement received from employers for expenses incurred.

Held: Receipt of Federal Reserve notes constitutes taxable income; respondent's actions in enforcing the income tax laws against petitioner did not violate petitioner's constitutional rights. Held: Receipt of Federal Reserve notes constitutes taxable income; respondent's actions in enforcing the income tax laws against petitioner did not violate petitioner's constitutional rights.

(1) Ps were teachers. During 1974, they maintained and used a home office, which contained antique furniture and a library. Held: Ps failed to establish the useful life and business use of the furniture and the basis, business use, and useful life of the library; therefore, they are not entitled to depreciation deductions for them under sec. 167, I.R.C. 1954. (2) Ps spent $ 125 on educational materials in 1974.

Held, amount of petitioners' advances to their corporation determined. Held further, such advances were contributions to capital. Held further, petitioners failed to establish the worthlessness of their investment in 1973.

Respondent disallowed, for lack of substantiation, certain deductions claimed by petitioner on his 1973 and 1974 Federal income tax returns. Petitioner was served with a subpoena duces tecum calling for him to produce at the trial of this case certain by-laws and financial records of the Universal Christian Church, Inc., the organization to which the contributions were allegedly made and of which petitioner was allegedly a director. Petitioner appeared when the case was called for trial, but he refused to comply with the subpoena duces tecum as ordered by the Court. Held, petitioner's failure to obey the Court's order directing him to comply with the subpoena duces tecum leaves the record barren of evidence on which the Court may find that he is entitled to deductions for charitable contributions as allowed by section 170(a), I.R.C. 1954. Respondent's oral motion to dismiss for failure to properly prosecute will be granted.

Petitioners advanced sums to a corporation in 1967 and paid out further amounts under guaranty and indemnity agreements in 1972. Held: petitioners are not entitled to a 1972 bad debt deduction for the 1967 payments since they failed to establish the debt created thereby became worthless in 1972. Held further, petitioners are entitled to a 1972 nonbusiness bad debt for the amounts expended in 1972.

During the taxable years 1964 to 1969, inclusive, petitioners, husband and wife, as officers and majority shareholders of three family-owned corporations, withdrew large sums of corporate funds for… Held: the amounts withdrawn were not bona fide loans but were informal distributions of taxable dividends.

Life insurance policies for which decedent applied were issued to his son and daughter as owners and beneficiaries. Held: decedent did not possess at his death any incidents of ownership in the policies, and so decedent's gross estate does not include half of the policy proceeds under section 2042(2). 2.

A father and two sons were equal partners in a cattle ranch. They orally agreed that upon the father's death, the sons would pay their mother 20 percent of the gross receipts from steer sales in order to provide her with support. Held, the payments in question were made pursuant to this agreement and represent the mother's distributive share of the partnership receipts.

Held, payments to acquire corporate stock are capital expenses under sec. 263, I.R.C. 1954. Held: payments to acquire corporate stock are capital expenses under sec. 263, I.R.C. 1954.

Held, business entertainment expense substantiated under sec. 274(d), I.R.C. 1954. Held further, petitioners are not entitled to a deduction for home-office expense. Held: business entertainment expense substantiated under sec. 274(d), I.R.C. 1954. Held further, petitioners are not entitled to a deduction for home-office expense.

While president and general manager of a company, the taxpayer was expected and required by the company to make certain gifts and incur certain travel and entertainment expenses. Held: because petitioner's expenditures were not made in the course of discharging his duties as an employee, he is not entitled to deduct them.

Held, petitioner is not entitled to deduct child support and voluntary payments made in 1972 and 1973 as alimony payments. Sec. 215, I.R.C. 1954. Held: petitioner is not entitled to deduct child support and voluntary payments made in 1972 and 1973 as alimony payments. Sec. 215, I.R.C. 1954. Held further, the underpayment of petitioner's taxes was due to negligence or intentional disregard of rules and regulations. Sec. 6653(a), I.R.C. 1954.

Petitioners reported the gross receipts from their restaurant based on total of cash register tapes. Held: Because the cash register tapes did not accurately reflect the gross receipts, respondent was entitled to use the bank deposits method of reconstructing income. Held,further: Amount of income and bad debts determined. Held,further:Section 1.1245-6(d), Income Tax Regs., as applied to the sale of a sole proprietorship is not invalidated by the principles enunciated in Williams v. McGowan,152 F.2d 570 (2d Cir. 1945). Held,further: Negligence penalty under section 6653(a) was not properly imposed.

Held, the Commissioner properly adjusted the deduction claimed for the decedent's community onehalf of the net excess of liabilities incurred over advances received with respect to a certain… Held: the Commissioner properly adjusted the deduction claimed for the decedent's community onehalf of the net excess of liabilities incurred over advances received with respect to a certain construction project.

Held, the amount of P's deductible loss resulting from a theft determined. Held, further, P is entitled to deduct his travel, meal, and lodging expenses to the extent they were incurred to maintain and improve his property held for investment.

Respondent's motion to dismiss for failure to state a claim upon which relief could be granted, granted.

(1) P, a truck driver, incurred expenses for meals while away from home on business in 1974, but kept records of such expenses for only part of that year. The Commissioner allowed P a deduction of $ 6.50 for each day he was traveling away from home, and the total deduction so computed exceeded the amount shown by P's records. Held, since P did not maintain the records required by sec. 274(d), I.R.C. 1954, to substantiate his expenditures for meals throughout the year, he has failed to prove that he is entitled to a larger deduction than that allowed by the Commissioner. (2) P furnished over $ 1,200 in 1974 in support of his son by a former marriage. P's former wife furnished more support for the son than P in that year. Held, P is not entitled to a dependency deduction for his son. Sec. 152(e), I.R.C. 1954. (3) P's son resided with him for 6 weeks during 1974; he resided with P's former wife the remainder of the year. Held, P's residence was not his son's principal place of abode during that year; therefore, P is not entitled to use head of household rates for that year. Sec. 2(a), I.R.C. 1954.

(1) P, an air traffic controller, deducted amounts claimed to be travel expenses incurred on work-related trips. Held: P failed to prove that such expenses were ordinary and necessary business expenses and failed to subtantiate the amounts claimed; thus, P cannot deduct such expenses. Secs. 162(a), 274(d), I.R.C. 1954. (2) P's former wife, a teacher, obtained her master's degree in 1973 as a condition of her continued employment.

Held, Under New Jersey law a consent order (enjoining occupancy of home by petitioner) issued pendentelite accompanied by order to support… Held: Under New Jersey law a consent order (enjoining occupancy of home by petitioner) issued pendentelite accompanied by order to support affects the marital relationship for a limited time only and hence petitioner is not entitled to file return as head of household but rather must file his return as a married individual filing a…

Keller Street Development Company sought to treat a payment received in settlement of a shareholder's derivative lawsuit as gain from the sale of a capital asset. Held: such amount was paid as reasonable compensation for the use of Keller's transferred assets for almost a decade and as a substitute for such product or profit derived thereby, and is fully includable in Keller's gross income pursuant to sec. 61.

Pursuant to a judgment dissolving the marriage of petitioner, petitioner transferred to his wife his interest as a tenant by the entirety in both the personal residence and in certain lots. Held: the transfer of property interests by petitioner was in exchange for marital rights of his wife and therefore taxable to petitioner. United States v. Davis,370 U.S. 65 (1962).

Held: For a person's stock ownership to be taken into account in determining whether the 80 percent ownership test of sec. 1563(a)(2)(A) has been satisfied, the person must own stock in each member… Held: For a person's stock ownership to be taken into account in determining whether the 80 percent ownership test of sec. 1563(a)(2)(A) has been satisfied, the person must own stock in each member of the alleged controlled group of corporations.

Petitioner's purchase of stock in a corporation was evidenced by a letter agreement which stated that the corporation would use its best efforts to effect corporate qualification under sec. 1244. Held: petitioner failed to prove the requisite elements of sec. 1244(c).

Petitioner husband was a full-time student during the taxable year. Held, petitioner failed to prove that he was gainfully employed within the meaning of sec. 214. Held: petitioner failed to prove that he was gainfully employed within the meaning of sec. 214.

P, a U.S. citizen, was a civilian employee of the U.S. Army from 1953 through Dec. 31, 1971. P's wife was a citizen of France. The couple resided in Morocco from 1953 to 1959, in France from 1959 to 1967, and in Germany from 1967 through 1971. Held, P failed to establish that his domicile for 1970 and 1971 was other than Germany, where he lived and worked; under German law, he is not entitled to exclude from gross income one-half of his earnings as belonging to his nonresident alien wife.

Held, respondent failed to carry his burden of proving fraud on the prat of Charles Floyd for 1968 by clear and convincing evidence since he failed to establish Charles Floyd had any specific… Held: respondent failed to carry his burden of proving fraud on the prat of Charles Floyd for 1968 by clear and convincing evidence since he failed to establish Charles Floyd had any specific knowledge of the inaccuracy of records delivered to the return preparer.

Held: (1) The Federal income tax is constitutional; and (2) income must be reported in Federal Reserve notes, and the tax is imposed on the income so reported. Held: The Federal income tax is constitutional; and (2) income must be reported in Federal Reserve notes, and the tax is imposed on the income so reported.

Decedent received amounts from a corporation of which he was principal shareholder. He repaid certain of these amounts. Held: the receipts constituted loans, and not dividends, to decedent. Held,further, the indebtedness arising from the loans was discharged, giving rise to income to petitioner under section 61(a)(12).

(1) The Commissioner recomputed Ps' income using the bank deposits method. Held: in a dispute over a deficiency, the Commissioner does not bear the burden of proving a likely source for the unexplained deposits. Held, further, Ps failed to prove the Commissioner's deficiency determination was incorrect.

P was a social worker in 1972 and 1973 and received kickbacks in connection with the issuance of unauthorized welfare checks. Held: the Commissioner failed to prove the amount of such kickbacks, and since he undertook to prove fraud by showing a pattern of substantial omissions of income, he has failed to carry his burden of proving fraud.

Petitioners claimed casualty loss and charitable contribution deductions under sections 165 and 170, I.R.C. 1954, respectively, in excess of respondent's determination. Held: petitioners failed to present sufficient evidence to substantiate the full amount of the casualty loss and charitable contribution deductions as claimed.

The Commissioner issued statutory notices of deficiency to petitioners in which he "determined from the books and records of petitioners' partnership and subchapter S corporations that petitioners had additional income and losses in lieu of the amounts reported on the returns." The statutory notices did not incorporate by reference any revenue agents' reports. The income and losses reported by petitioners on their returns coincided with petitioners' distributive shares reflected on the books and records and tax returns of the partnership and subchapter S corporations. At trial respondent admitted that he relied upon Sec. 482, I.R.C. 1954, and that he determined that certain transactions among the related business entities were false. Held: Under the circumstances of these cases the failure of the Commissioner to specify reliance on Sec. 482 in his statutory notices is prejudicial to petitioners' ability to prepare for trial; petitioners did not receive "fair warning" of respondent's reliance on Sec. 482 within the rationale of Rubin v. Commissioner, 56 T.C. 1155 (1971), affd. 460 F.2d 1216 (2d Cir. 1972); and respondent is precluded from relying on Sec. 482 at trial.Held further: The language of the statutory notices giving reasons for the adjustments to petitioners' income being contrary to the stipulated facts, the grounds proposed by respondent at trial to support the adjustments to petitioners' income constitute new "issues," not new "theories"; the statutory notices lose their presumptive correctness; and respondent bears the burden under Rule 142(a), Tax Court Rules of Practice and Procedure of proving affirmative allegations which he was permitted to plead at the commencement of the trial. Respondent offered certain schedules prepared in part by petitioners' accountant through the revenue agent who received them during one conference. The accountant invoked his privilege in refusing to testify under the Fifth Amendment, U.S. Constitution. Held: The offer of proof by respondent was insufficient to demonstrate their relevancy or to demonstrate that they were admissions of petitioners; the proffered exhibits constitute hearsay; the conferences constituted negotiations to compromise a claim within the meaning of Rule 408 of the Federal Rules of Evidence and admissibility, therefore, is denied. Held further: Respondent's evidence is insufficient to sustain his burden of proving deficiencies in tax and is insufficient to sustain his burden of proving fraud.

Petitioner, indicted for murder in 1972, made claims on his 1973 Federal income tax return for (1) a casualty loss deduction for wages not received when… Held: no deduction is allowed for wages or salary never received; (2) defending against the murder charges was a personal expense under section 262, I.R.C. 1954; and (3) a net operating loss carryover will not be allowed where no proof is offered of the effects of the carryback required under section 172(b), I.R.C. 1954.

Held, monies received by petitioner as a result of her medical internship at Waterbury Hospital, Waterbury, Connecticut and residency at University of Oregon Medical School… Held: monies received by petitioner as a result of her medical internship at Waterbury Hospital, Waterbury, Connecticut and residency at University of Oregon Medical School Hospitals and Clinics and Veterans Administration Hospital, Portland, Oregon are not excludable from income under sec. 117.

Petitioners claimed employee business deduction for husband-petitioner's living expenses near his job, separate from wife-petitoner's living quarters. Held: regardless of filing a joint return, each petitioner has a separate tax home for purposes of business deductions, which, for husband-petitioner, was his principal place of employment.

(1) On Aug. 14, 1968, X entered into a purchase agreement with the shareholders of Y pursuant to which X purchased 90 percent of Y's stock. Held: under the facts of this case, the transfers were bona fide loans and not dividends, and therefore X was not subject to the personal holding company tax. (2) X and Y entered into a management contract in which X agreed to provide management services for Y in exchange for 50 percent of Y's pre-tax profits.

Held: Petitioner's assignment by his employer, General Electric Corp., from its Syracuse, N.Y., plant to the New Orleans area to check the sonar systems of ships being… Held: Petitioner's assignment by his employer, General Electric Corp., from its Syracuse, N.Y., plant to the New Orleans area to check the sonar systems of ships being constructed by Avondale Shipyards, Inc., was not temporary and the New Orleans area was petitioners' tax home during the assignment.

Held, petitioner has established by the clear preponderance of the evidence that a major purpose of a corporate transfer of assets to it was not the securing of a surtax exemption within the meaning of sec. 1551(a), I.R.C. 1954. Respondent's disallowance of such exemption is disapproved.

Held, property determined to be a partnership asset.Held further, the sec. 1033, I.R.C. 1954, election with respect to involuntarily converted partnership property is open only to the… Held: property determined to be a partnership asset.Held further, the sec. 1033, I.R.C. 1954, election with respect to involuntarily converted partnership property is open only to the partnership; therefore, reinvestment by the partners individually does not qualify for nonrecognition.

In 1974 the husband-petitioner provided more than $ 1,200 for the support of his three children by a former marriage.His former wife provided more than he did for the support of the three children,… Held: petitioners are not entitled to a dependency exemption for any of the three children.Sec. 152(e), I.R.C. 1954.

Petitioner failed to file his 1966 income tax return and delinquently filed his 1967, 1968 and 1969 returns after being contacted by a… Held: petitioner received $ 69,811.43 and $ 6,606.37 in unreported pross income in 1967 and 1968, respectively. Held further, part of the underpayments in 1967 and 1968 was due to fraud within the meaning of sec. 6653(b), I.R.C. 1954. Held further, petitioner is liable for penalties under secs. 6651(a) and 6653(a), I.R.C. 1954, for 1966.

Petitioner's allowable losses from vandalism determined.

Petitioner, a self-employed individual covered under a qualified H.R. 10 plan, miscalculated the amount of his earned income for 1974; such error resulted in petitioner making a lower contribution to… Held: petitioner is not entitled to a deduction for a contribution which he intended to make to his H.R. 10 plan during 1974 but which was not actually paid into the plan during that year.

Held, petitioners' income redetermined by source and application of funds method. Held: petitioners' income redetermined by source and application of funds method.

1. At a hearing under Rule 155 of the Tax Court Rules of Practice and Procedure to determine the correct amount of the deficiency in docket No. 8905-72 under the opinion rendered by this… Held: the new issue may not be raised at the Rule 155 hearing. 2. At the Rule 155 hearing in docket No. 8907-72, petitioner B. Silverton claimed for the first time that she did not sign the joint return for 1970 and was not liable for the deficiency determined to be due for that year.

Held: On these facts, where books and records maintained by taxpayer were inadequate, respondent was justified in reconstructing petitioner's income using cash basis net worth method… Held: On these facts, where books and records maintained by taxpayer were inadequate, respondent was justified in reconstructing petitioner's income using cash basis net worth method notwithstanding the existence of inventories of petitioner. Thus, deficiencies were properly determined.

P, a truck driver, incurred expenses for meals while away from home on business in 1974 but kept no records of such expenses. Held: since P did not maintain the records required by sec. 274(d), I.R.C. 1954, to substantiate his expenditures for meals during 1974, he has failed to prove that he is entitled to a larger deduction than that allowed by the Commissioner.

In 1968, A and B transferred certain developed properties to X corporation in exchange for certain mountain properties. Held: under the facts of this case, A and B, and not X, owned the 82.2 acres when it was sold to M in 1973.

Petitioner claimed deductions for certain gifts made to charities, and for certain casualty losses, for his taxable year ended December 31, 1973. Held: amount of allowable charitable and casualty loss deductions determined.

L. D. Perry maintained various business interests from 1968 through 1970 but failed to report all his income from such businesses on… Held: L. D. Perry grossly understated his income each year from 1968 through 1970; (2) some part of the underpayment for each of the years at issue was due to L. D. Perry's fraud with intent to evade tax within the meaning of sec. 6653(b), I.R.C. 1954; and (3) respondent failed to prove that any part of the underpayment was due to fraud on…

1. P instituted suit against his former employer for libel and slander, asking for equitable relief and damages, including $144,000 for lost income and damages to his professional reputation. The Wayne County Circuit Court awarded petitioner $175,000 damages based on lost income but no equitable relief. The employer appealed and while appeal was pending, the parties settled out of court for $105,000 and all the equitable relief prayed. The settlement did not allocate the payments. Held, the $105,000 payment was made on account of damage to P's professional reputation. In the absence of any arguments to the contrary by petitioner, such amounts are included in his income. 2. In 1969 and 1970, P was a resident pursuing a three-year certificate non-degree psychiatric training program for which he received a stipend, with Northville State Hospital. The primary purpose of making payments to P was to compensate him for services provided. Held, payments received by petitioner are not excludable as a scholarship or fellowship grant within the meaning of sec. 117. 3. P also engaged in research during 1968, 1969, and 1970, which, however, had no commercial application. Held, petitioner was not engaged in a trade or business as a researcher during 1969 and 1970. Held,further, amount of trade or business deductions to which petitioner is entitled as a medical doctor during these years determined .

Held, the petitioner, a doctor, may not deduct the costs incurred by him in traveling between his home and his various places of employment.

H and W timely filed a joint Federal income tax return for 1975. Held: under such circumstances, the election to file a joint return is irrevocable. Ladden v. Commissioner,38 T.C. 530 (1962), and sec. 1.6013-1(a)(1), Income Tax Regs., followed.

Held, petitioner is liable for self-employment tax under sec. 1401. Held: petitioner is liable for self-employment tax under sec. 1401.

Held, petitioner's transferee liability determined. Held: petitioner's transferee liability determined.

Held: Respondent sustained in asserting addition to tax under sec. 6653(a), I.R.C. 1954, for 1972 and deficiency in tax for 1975. Held: Respondent sustained in asserting addition to tax under sec. 6653(a), I.R.C. 1954, for 1972 and deficiency in tax for 1975.

Petitioner suffered losses on foreclosure sales of certain properties held subject to mortgage. Held: because petitioner did not prove that the proceeds of the loan for which he undertook the mortgage obligation were used in the acquisition or improvement of the mortgaged property, no deduction is allowed. Held,further, amounts specifically designated as interest as part of a judgment must be considered as such.

Held: amount of deductions allowable under section 162 determined. Held: amount of deductions allowable under section 162 determined.

Petitioners began negotiations to lease the building housing their wholly-owned corporation's furniture business. They had an offer to lease in early April and signed the lease in May. Held: the amounts advanced by petitioners and recorded by the corporation as loans were in substance contributions to capital; accordingly, subsequent distributions to petitioners were not loan repayments but taxable dividends.

Petitioners purchased clothing for their children for the children's use in their employment (in order to conform to the employer's dress code). Held: regardless of whether the clothing qualified as a trade or business expense, section 73 deems such expenses as expenses of the children, deductible by the children but not by the parents.

In docket No. 2917-76, respondent used the bank deposits method of recomputing income due to inadequate records. Held: respondent's use of this method was reasonable under the circumstances. Held, further, amount of taxable income determined. In docket No. 3143-76, held, further, amount of business expenses incurred determined; held, further, no casualty loss allowed. Held, further, taxpayer did not file an income tax return for 1971.

Petitioner was employed through his union by M-K on a construction project during which period he maintained two homes. Held: petitioner's position with M-K was temporary and expenses incurred at the construction project are deductible as away-from-home expenses.

Respondent used the bank deposits method of recomputing income, due to inadequate records maintained by petitioners. Petitioners refused to supply possible corroborating information due to their fear of possible criminal prosecution.Held, undisputed increase in petitioners' bank accounts, all designated as being generated from business activities, are sufficient to carry respondent's burden of showing omissions from gross income for purposes of section 6501(e)(1) (A)(i), thus shifting to petitioners the burden of explaining why the increases do not represent taxable income. Petitioners' fear of criminal prosecution did not justify their refusal to cooperate. Petitioners have failed to show that they did not understate their gross income by 25 percent or less and thus the six-year statute of limitations exception in section 6501(e) applies to permit assessment.

Petitioner claimed a loss equal to the decline in value of stock he was prohibited from selling as an insider within the purview of the Securities Act of 1934. Held,Sec. 165 and Income Tax Regs. sec. 1.165-4(a) require an identifiable event to establish amount of loss. While petitioner's status as an insider prohibited him from protecting himself against the inevitable loss in value resulting from publication of certain adverse facts, his stock was not rendered valueless.

Held: Despite a receipt signed by director of Christian Charities Church, there is no credible evidence that petitioner made an $8,500 cash contribution to the church or that the church was an… Held: Despite a receipt signed by director of Christian Charities Church, there is no credible evidence that petitioner made an $8,500 cash contribution to the church or that the church was an organization qualified within the purview of sec. 170(c)(2).

Held: Legal fees expended by wife to establish her claim to be surviving wife entitled to dower rights, which claim was settled with estate, are not deductible under sec.… Held: Legal fees expended by wife to establish her claim to be surviving wife entitled to dower rights, which claim was settled with estate, are not deductible under sec. 212, sec. 1.212-1(k), Income Tax Regs., but rather represent a capital expense incurred to prove a property right in first instance.

Held: Petitioners not entitled to dependency exemptions because it was clearly established that the custodial parent supplied over half of children's… Held: Petitioners not entitled to dependency exemptions because it was clearly established that the custodial parent supplied over half of children's support. Held,further: The cost of replacing three tires damaged in an accident while moving a mobile home is not deductible as a moving expense, under section 217, I.R.C. 1954.

Respondent determined that petitioner did not file an income tax return for 1972. Petitioner claimed that he did, but refused to provide a copy to respondent's agent. Held: the statute of limitations does not bar assessment of petitioner's tax liability. Heldfurther: because of petitioner's failure to comply with the subpoena, under the circumstances of this case, petitioner's direct testimony was properly stricken from the record.

Joque and his former wife Frances are the parents of Anna. Joque and Frances were divorced in 1971, custody of Anna being awarded to Frances. In 1973 and 1974, Joque and his second wife Mosetta, petitioners herein, claimed Anna as a dependent and used the correlative exemption. Custodial parent Frances made the same dependency claim of Anna and used the same exemption for 1973 and 1974. Respondent disallowed the use of the exemption by the petitioners for both 1973 and 1974. Held, although petitioners supplied over $1,200 in support of Anna, petitioners do not qualify for a dependency exemption for Anna, since custodial parent Frances still supplied over half of the total support of Anna. Section 152(e)(2)(B), I.R.C. 1954.

Held: Investment by petitioner in CM Corporation was not worthless in 1963. Heldfurther: Penalty for late filing pursuant to sec. 6651(a), I.R.C. 1954, upheld.

Held, payment deductible alimony under sec. 215, I.R.C. 1954.

Petitioner failed to prove that business expenses paid in cash, claimed on his return and allowed by respondent, were not paid from unreported income. Respondent's determination of additional, unreported income approved.

Held, Amount of miscellaneous deductions determined. Held: Amount of miscellaneous deductions determined.

Held, petitioner failed to prove amounts claimed as automobile expenses under sec. 162 were expended for business purposes. Held further, petitioner is not entitled to deductions for automobile and garage depreciation. Held further, personal use of the corporate automobile resulted in a constructive dividend to petitioner. Held further, petitioner failed to satisfy the sec. 274 requirements with respect to amounts claimed as entertainment expenses.