Volume 39 — Board of Tax Appeals

Where a partnership, dealers in securities, took out a policy of insurance from an English company on the life of the President of the United States for the purpose of protecting their holdings in… Held: the premiums paid are not deductible as ordinary and necessary expenses of carrying on their business under section 23(a), Revenue Act of 1932.

The decedent in 1924 created an irrevocable trust with provision for payment of the income therefrom absolutely to herself for life, and upon her death the income to her three children during the lifetime of any two of them, the children of a deceased child to take the share their parent would have received, if living. Upon the death of two of the settlor's children the trust was to terminate and the survivor was to receive the corpus. In the event the settlor's children predeceased her simultaneously, the corpus would revert to the settlor, and if such possibility occurred after the settlor's death, the corpus was to go to her then surviving heirs at law per stirpes. The settlor died in 1934, one of her three children surviving. Held, that under the provisions of the Revenue Act of 1924, the amendment to section 302 of the Revenue Act of 1926 by the Joint Resolution of March 3, 1931, and section 803 of the Revenue Act of 1932 not being retroactive, the transfer was not made in contemplation of or intended to take effect in possession or enjoyment at or after the settlor's death.

Several years prior to his death the decedent by two trust indentures conveyed certain assets in trust, the income from which was to be paid to his… Held: that the transfers to the trusts were not made in contemplation of death or intended to take effect in possession or enjoyment at or after death; held, further, that, inasmuch as the decedent had a right to withdraw $150,000 from the trust estates created by his brother, that amount is includable in the gross estate.

In 1931 the petitioner, as trustee, pursuant to a court decree entered in connection with an intermediate accounting, paid to itself and charged to corpus the trustee commissions allowed under a… Held: that the trustee was not carrying on a trade or business, and therefore commissions are not deductible as ordinary and necessary business expense.

A state court has held that the property in question did not pass under a general power of appointment. Held: the decision is binding upon the Board as to whether or not the property passed under a general power of appointment.

1. Held, an item of $10,000 paid by the guardian of the property of an infant on account of legal services rendered to the guardian over a period of years by a law firm of which the guardian was a… Held: an item of $10,000 paid by the guardian of the property of an infant on account of legal services rendered to the guardian over a period of years by a law firm of which the guardian was a member was for personal services and not deductible as a business expense. 2.

A share of partnership profits was distributed to the estate of a deceased partner pursuant to a provision of the articles that the partnership be projected for a period beyond a member's death and… Held: the estate's distributive share of partnership income is not to be regarded as distributed to remaining partners and used by them to purchase the decedent's interest.

Petitioner made an overpayment of her income tax for the year 1932 which did not result from any ground stated by petitioner in a claim… Held: the amendment to the petition filed November 30, 1937, does not amend the claim for refund filed March 9, 1934, and, inasmuch as such claim for refund did not specify the grounds from which the overpayment results, it is an invalid claim for refund any payments of tax made by petitioner at different dates in 1933 were not made within…

Held, that petitioner acquired an option to purchase certain stock at less than market as a gift and not as compensation for services. Held: that petitioner acquired an option to purchase certain stock at less than market as a gift and not as compensation for services.

Amounts paid by a partnership to members of a predecessor firm under contracts providing for compensation for their services and the release of all their right in assets and goodwill of the old partnership, whose liabilities exceeded its assets and whose good will had been otherwise transferred, held not taxable to the partners as distributive shares of partnership income.

A corporation had a credit balance in a brokerage account equivalent to the debit balance in the account of its sole shareholder, which it guaranteed. Held: the corporation distributed no assets in liquidation and the shareholder realized no taxable gain.

Held, an amount received in compromise of litigation over the validity of a will did not constitute income. Lyeth v. Hoey,305 U.S. 188. Held: an amount received in compromise of litigation over the validity of a will did not constitute income. Lyeth v. Hoey,305 U.S. 188.

1. A note secured by a second mortgage is not ascertained to be worthless as ground for a deduction merely because the mortgaged property has been sold on foreclosure by the holder of the first mortgate when it does not appear from the evidence that the primary obligation of the note in question is worth less than the full amount of the loan. 2.

1. Where preferred stock junior to the outstanding preferred stock was received as a dividend on common stock, held, that the basis for determining gain on the dividend stock on subsequent… Held: that the basis for determining gain on the dividend stock on subsequent disposition within the same year is zero rather than an allocated portion of the basis of the common stock on which the dividend was declared. Frank J. and Hubert Kelly Trust,38 B.T.A. 1014, followed. 2.

Where indebtedness under a land sale contract was settled for less than its face amount, which was its cost, the holder accepting bonds of the Federal Farm Mortgage Corporation and cash, conveying the legal title to the purchaser and canceling the remainder of the debt, which was worthless, held that his loss is deductible in full as a bad debt, and is not limited by the capital loss provisions affecting sales or exchanges of property. Sec. 117, Revenue Act of 1934.

Petitioner and its subsidiary corporation made consolidated income tax return for the year 1932 upon exercise of an election under section 141(a) of Revenue Act of 1932 and consented to Regulations 78 prescribed by Commissioner under section 141(b) on May 15, 1933. On June 16, 1933, new revenue provisions were enacted in the National Industrial Recovery Act, which amended provisions of the 1932 Act relating to taxation of corporation income. Petitioner made a separate income tax return for the year 1933, claiming the right to a new election with respect to making a separate or consolidated return. Held, petitioner had a new right of election under the Revenue Act of 1933 and properly made its income tax return on the basis of a separate return. Regulations 78 were prescribed under the 1932 Act but they are not applicable to the year 1933 where no consolidated return is made.

1. On the facts, held that during the years 1932, 1933, and 1934 petitioner was an association taxable as a corporation. 2. Held: that such fiduciary return was an information return and not a return of the tax within the meaning of subdivision (c) of section 275, Revenue Act of 1932; (2) that subdivision (c) provides an exception to the general rule stated in subdivision (a) of the same section; and (3) that assessment and collection of the taxes due from…

Petitioner owned a one-half interest in real estate in California which it leased in 1925 for a term of fifty years and one month. Under the terms of the lease, in addition to rental, the lessee was required to and did erect in 1926 a building thereon which then became a part of the real estate, had a life of 33 1/3 years, and, if removed, had only a salvage value. In 1932, upon default on the lease by the lessee, the lessor repossessed the premises, including the building thus erected. Respondent determined petitioner realized taxable income in 1932 in the amount of one-half the depreciated cost of the building erected by the lessee, under Regulations 77, article 63, as amended by T.D. 4539, (C.B. XIV-1, p. 141). Held, the provisions of that article are invalid and petitioner realized no taxable income in 1932, as rental or otherwise, upon its acquisition of possession such leased premise. Blatt Co. v. United States,305 U.S. 267, followed.

Held, that petitioner-lessor realized no income in the taxable year by reason of the erection of a building on lessor's land by a lessee under a lease for twenty-one years with privilege of three… Held: that petitioner-lessor realized no income in the taxable year by reason of the erection of a building on lessor's land by a lessee under a lease for twenty-one years with privilege of three renewals. Blatt Co. v. United States,305 U.S. 267.

1. Where petitioner kept its books on an accrual basis, and under a Plan to Aid Employees to Become Stockholders made arrangements with… Held: that petitioner is entitled to deduct from its gross income during 1929 as additional compensation paid or incurred during the year, under section 23(a), Revenue Act of 1928, the amounts credited to employees' purchase accounts in 1929 and prior years on stock for which they subscribed in 1926 and 1927 but which was not delivered to…

Where decedent was insured under a policy designated as group life insurance upon which premiums were paid by the organization with which he was associated and of which he was a director, held, upon… Held: upon consideration of the surrounding circumstances and of the characteristics of the policy, that the premiums were paid indirectly by the decedent and the insurance proceeds are includable in his estate under section 302(g), Revenue Act of 1926.

- A recapitalization and a reorganization ocurred where pursuant to a plan preferred stock was exchanged for debentures and retired and the authorized preferred reduced from $1,000,000 to $400,000.

Where a person transfers property to a trustee under an indenture of trust which provides that the income shall be paid to the settlor for life and that upon his death the corpus shall be paid over to whomsoever the settlor leaves real estate located in a particular place under his last will and testament, the settlor has not made a gift of the remainder interest within the purview of section 501 of the Revenue Act of 1932 as amended by section 511 of the Revenue Act of 1934.

1. The petitioner, a New York corporation organized to operate a tennis club, for many years has held national tennis tournaments awarded to it by the United States Lawn Tennis Association, of which… Held: that during the taxable years petitioner was not a club operated exclusively for pleasure, recreation and other nonprofitable purposes, no part of the earnings of which inured to the benefit of its shareholders. 2.

Certain shares of stock held for more than two years and sold in 1933 were held by a partnership primarily for sale in the course of its business of trading in securities for a profit.

Held, the salaries of the members of the Industrial Commission of Ohio and that of an employee of the commission are not constitutionally immune from Federal tax. Held: the salaries of the members of the Industrial Commission of Ohio and that of an employee of the commission are not constitutionally immune from Federal tax.

A corporation was organized prior to June 7, 1927, to receive all the assets, other than cash, of B company. Held: the transaction constituted a reorganization, and the liquidation of B company was in pursuance of the plan of reorganization; held, further, (1) petitioners received cash and stock in A corporation in full payment in exchange for their stock in B company, of an aggregate value in excess of the cost basis of the B company's stock,…

The limitation on capital losses provided by section 117(d) of the Revenue Act of 1934 held applicable to capital losses sustained by a corporation upon the liquidation of another corporation whose stock it held. White v. United States.305 U.S. 281, and Helvering v. Chester N. Weaver Co.,305 U.S. 293.

1. Where taxpayer, having purchased stock in a bank which later closed, voluntarily paid $5,000, because of his ownership thereof, though no assessment thereon was ever made, and then, during the tax… Held: taxpayer sustained no deductible loss. 2.

1. Debts were ascertained to be worthless in 1932 by the executive committee of a taxpayer bank and by the state bank examiner, and… Held: the amount charged off in 1933 is not deductible in that year. 2. The effect as a deduction upon a mortgagee-taxpayer of the foreclosure of a mortgage and his purchase of the property at auction for a bid price less than the mortgage loan must be tested by the bad debt provision of the statute and not by the loss provision. 3.

Where a life tenant of certain property assigned one-half of the rents to his two sons, he was not thereafter taxable on those rents, following Lowery v. Commissioner, 70 Fed.(2d) 713.

1. In 1930 the properties of Managers, a corporation, consisted of common stock in Motors Securities, a second corporation, common stock in General… Held: that the distribution of the class A stock to the stockholders of Managers was pursuant to a plan of reorganization within the purview of section 112(b)(3) and (i) of the Revenue Act of 1928, and the class A stock of Motors Securities in the hands of Managers' stockholders took the same basis as the stock of Managers.

1. In 1935 petitioner established two trusts for the benefit of his sons and other designated beneficiaries, retaining certain powers over the final disposition of… Held: these trusts did not constitute completed gifts, subject to the tax imposed by section 501, Revenue Act of 1932. 2. In 1935 petitioner established a trust for the benefit of his wife, the income of which was payable to her absolutely for life, with general power of appointment in respect of the principal.

Decedent's first wife asserted a claim against his estate for alimony, subsequent to decedent's death, that had been decreed to her by an Iowa court in the sum of $4,500 per annum during her natural… Held: that the amount paid in compromise of the first wife's claim is deductible from decedent's gross estate, since the claim did not rest upon a promise or agreement but rested upon a decree of court fixing and determining the amount of an obligation imposed by law.

The grantor of a trust, who formerly had a reversionary right to its accumulated income and prior to the taxable year assigned all his right in the trust to a corporation the shares of which were all owned by another trust of which he was not a beneficiary but was one of six trustees, held not taxable upon the accumulated income of the first trust.

Petitioners, husband and wife, filed a joint income tax return for the taxable year 1934. Held: that the amount of the husband's losses from the sale of capital assets which can be used as a deduction in computing the aggregate net income shown on the joint return is limited to $2,000 under the provisions of section 117(d), Revenue Act of 1934, since the husband had no net gain from the sale of capital assets in 1934.

Income of trusts payable to the grantor's wife for life, with reversion to the grantor or his heirs, and income of trusts for a short period of years payable to the grantor's wife, as guardian, but… Held: not taxable to the grantor in the absence of a requirement that the income be used to support, maintain, or educate the beneficiaries.

1. The value of 1,109,859 shares of stock of the A corporation, owned by a partnership in which decedent had an interest at the time of his death, determined. Held: under the evidence, the amounts are not deductible. 6. Value of a small lot of stock of the A corporation owned by the decedent individually determined. 7.

1. Tabulations of check stubs held admissible in evidence as a convenient form of presentation where there is a large number of such primary records, no question of the accuracy of the transcription is raised, and the stubs themselves are available in the hearing room for investigation or use in cross-examination by the adverse party. 2.

1. Where petitioner, a stock and commodities broker, sustained a loss through embezzlement of margin funds deposited by clients, held the loss was sustained in the year of embezzlement, since the deposits were not trust funds. 2. Proof of the amounts embezzled by testimony of the embezzler, held sufficient without production of petitioner's books. 3. A contribution to petitioner's capital by its principal stockholder, held not compensation for the loss.

1. The estate paid Federal estate taxes prior to 1932 and claimed and was allowed deductions from income for those payments. Held: the Commissioner did not err in including the refund in the income of the estate for the year of recovery. 2.

1. The decedent, more than two years before his death and not in contemplation of death, assigned all of his right, title, and interest in and to certain life insurance policies upon his own life to… Held: that the proceeds of the policies paid to the trustee upon decedent's death are not includable in the gross estate. 2.

A capital loss sustained by an estate in the process of administration is personal to the estate as a taxable entity, and a sole devisee and legatee receiving the income of the estate in 1933 in the form of interest and dividends may not deduct from such income any part of the capital loss.

1. Partial charge-off of indebtedness allowed in 1932 to the extent that it was ascertained to be worthless and charged off in that year and further charge-off disallowed in 1934 where the remainder of the debt was worthless in 1933. 2. Compensation in the form of fees received by the petitioner for services as notary public in the State of New York in 1932, 1934, and 1935 held not exempt from Federal income tax.

1. Annual installments of principal of life insurance received by the beneficiary after the death of the insured held exempt from income tax, Revenue Act of 1934, section 22(b)(1). 2. Amounts received by the beneficiary in addition to the principal installments of life insurance as distributions of earnings of the insurer held not exempt.

1. Petitioner, which reported income on the accrual basis, had a right under contract made in the taxable year to a discount totaling… Held: that though the other party was liable and able to comply with its contract to deliver beer and to pay the discounts as purchases were made, petitioner had income in the taxable year only to the extent that the discount was paid in that year, the payment of future discounts lacking the definiteness necessary to true reflection of…

Petitioner, president of corporation, was granted an option to purchase stock thereof at a price substantially the same as at market price at date of the option. Held: on the facts, that the option was not granted as compensation for services rendered by the petitioner and that the petitioner did not, in the taxable year, have income to the extent of the difference between the option price and the fair market value of the stock.

1. Prepaid interest is deductible in the return for the year of payment under section 23(b) of the Revenue Act of 1934, where the taxpayer is on the cash basis of accounting. 2.

1. LOSS DEDUCTION - SECTION 23(e), REVENUE ACT OF 1932. - Action of respondent approved in denying deduction of a capital loss sustained by petitioner from the sale in 1932 of certain shares of… Held: the net income of the trust for the years 1932 and 1933 was paid to petitioner's former wife in discharge of his legal obligation arising under the provisions of the trust agreement, and such income is properly taxable to petitioner. Douglas v. Willcuts,296 U.S. 1.

Nonmaturing debentures held to be evidences of indebtedness and interest paid thereon deductible.

JOINT VENTURE - DEDUCTION OF NONCAPITAL LOSS UNDER SECTION 23(r), REVENUE ACT OF 1932. - Petitioners, husband and wife, in 1933 established a so-called joint brokerage or trading account with funds… Held: such account did not constitute a joint venture, but was in fact the individual account and property of the husband, and he is entitled to deduct the noncapital loss sustained in that account from the noncapital gains realized by him in another individual account.

Where the income of a trust was used in partial liquidation of a legal obligation of the grantors of the trust, held that such income is taxable to the grantors. Helvering v. Blumenthal,296 U.S. 552, and Douglas v. Willcuts,296 U.S. 1, followed.

1. The 1934 opening inventory of each corporation in an affiliated group is to be adjusted to accord with the closing inventory appearing on the group's income tax return for the preceding year. Regulations 86, art. 113(a)(11)-1. 2. The elimination of an affiliated seller's intercompany profits from the consolidated closing inventory of a prior year requires similar reduction of the opening inventory costs of the affiliated buyers for 1934. 3.

A corporation which owns and operates a labor temple containing offices, meeting halls, an auditorium, recreation hall, etc., for the use and occupancy of labor unions and councils and their members, all the shares of which are owned by such unions and their members, is exempt from tax under the Revenue Act of 1934, sec. 101, as a labor organization.

JURISDICTION. - Under the laws of the States of Washington and California, the merger of a Washington corporation into a California corporation makes the California corporation primarily liable for any deficiency in taxes of the Washington corporation, and a petition for redetermination filed by the California corporation based on a deficiency notice addressed to the Washington corporation is within our jurisdiction as a petition filed by the taxpayer.

1. Where two corporations merge or consolidate to form a new corporation, and thereafter shares of the new corporation acquired as a result of the ownership of shares in one of the old corporations are sold, no identification of shares exchanged being proved, the basis for gain or loss on the new shares is the total cost of the old shares divided by the number of new shares. Christian W. Von Gunten,28 B.T.A. 702; affd., 76 Fed.(2d) 670, followed. 2.

Where petitioner received an extortion letter threatening harm to his children unless a certain sum was paid, expenditures made to obtain evidence used in the trial and conviction of the writer thereof, held not deductible as an ordinary and necessary business expense or as a contribution for the use of the United States.

A bus company, though wholly owned by a railroad company and organized for the purpose of protecting and supplementing its business, can not be classified as a corporation whose principal business is that of a common carrier by railroad. It is therefore held that such company may not file a consolidated return of income with its parent corporation under section 141, Revenue Act of 1934.

Petitioners filed a joint tentative return for the year 1934 on March 15, 1935, on forms supplied by the Commissioner through the local collector, and secured an extension of time to file their final… Held: that the Commissioner did not err in refusing to permit petitioners to file separate returns.

Interest on life insurance policy loans, which by the terms of the contracts was added to the principal of the loans when it became due in 1933 and remained unpaid by the policyholder, decedent,… Held: not deductible as interest paid within the taxable year on indebtedness under the provisions of section 23(b), Revenue Act of 1932. S. E. Thomason,33 B.T.A. 576, followed.

Where the powers of the trustee, under the terms of a written trust, as properly supplemented by a contemporaneous oral agreement by the parties to the written trusts, are limited, during the by the parties to the written trusts, are limited, during the tax years, to those purely ministerial, such a trust is taxable, for those years, as a trust and not as an association. Lewis & Co. v. Commissioner,301 U.S. 385, followed.

In the taxable year petitioner made an irrevocable transfer to a trust, for the benefit of her grandson, of certain bonds upon which there was accrued but unmatured interest at the time of transfer. There was no matured interest due on the bonds at the time of the gift. Petitioner made her income tax returns on the cash basis. Held, there was no constructive receipt of the unmatured interest by petitioner and hence it is not taxable to her as income.

Where, conforming to the provisions of a trust theretofore created by herself, taxpayer, with the consent of the income beneficiary, revoked the trust pro tanto and withdrew certain stock theretofore… Held: the basis for determining gain or loss is, in the first instance, the cost to grantor and, in the second, the cost to fiduciary.

- The petitioner had certain shares of stock. Similar shares were selling on the market at prices far in excess of the cost of the petitioner's stock. Held: the petitioner realized no profit from the transactions.

Where real property situated in the State of New Jersey was devised to a decedent's son with a provision that upon the son's death without issue arriving at the age of 21 years the property should go to others, held under the law of New Jersey that the property passed to the son in fee and petitioners, the son's children, took through their father and not from the original decedent.

Held, where a partnership is dissolved and its assets distributed to the members in kind and not in cash, no gain or loss is realized by a member, as a result of his partnership investment, until… Held: where a partnership is dissolved and its assets distributed to the members in kind and not in cash, no gain or loss is realized by a member, as a result of his partnership investment, until he has disposed of the assets received by him. Treasury Regulations No. 77, art. 604.

Income from a trust paid to a divorced and remarried wife held taxable to the husband, who created the trust prior to the granting of the divorce in recognition of his legal liability to support his wife, even though in the absence of such agreement his obligation to support and maintain his wife would have been terminated under the laws of Pennsylvania by her divorce.

1. In 1926 petitioner purchased certain property for the sole purpose of providing a home for himself and his family, taking title to the property in the name of his wife. The property was used as a residence until the death of the wife in 1929. Petitioner acquired legal title as beneficiary under his wife's will and subsequently assumed personal liability on a purchase-money mortgage executed by the wife. The property was rented in 1931, but was again occupied by petitioner and his family as a residence in 1933. Thereafter it remained vacant until sold under foreclosure of the mortgage in 1934. Held, the loss, if any, sustained by petitioner from the foreclosure sale is not allowable as a deduction from gross income in computing taxable net income. W. H. Moses,21 B.T.A. 226. 2. In 1926 petitioner purchased a parcel of real estate consisting of 10 lots, taking title in his wife's name. The wife died in 1929 and petitioner acquired legal title to the property under her will. Subsequently he assumed personal liability on a purchase-money mortgage executed by the wife. The mortgage was foreclosed in 1934, and petitioner thereby sustained a loss. Held, the transaction did not constitute a "sale or exchange" and allowance of the loss sustained is not limited by the provisions of section 117(a) or (d), Revenue Act of 1934.

1. Where a decedent conveyed his residuary estate to trustees in trust, directing them to divide the principal thereof into three equal… Held: as to income, the gift to each beneficiary was of the entire income of his one-third share in the undivided trust assets which the beneficiary owned and was entitled to have applied to his use as it accrued and the annual trust income is taxable to each beneficiary as income currently distributable under section 162(b) of the 1932…

1. Where husband and wife separated and lived apart, in contemplation and anticipation of a divorce later obtained, and the husband, desiring to make provision for her maintenance and support so long… Held: the income provided for her in the agreement and in the trust so created for her is taxable to him, since it discharges his duty and obligation made specific by his agreement to support her during her natural life. 2.

The life beneficiary of the income of a trust, who also held a general power of appointment in respect of the trust assets, held, not entitled to a deduction in her individual income tax return of a… Held: not entitled to a deduction in her individual income tax return of a net capital loss sustained by the trust estate.

- A resident alien held head of a family where he maintained his aged mother in their home in England, even though he also maintained a residence in New York and spent about one-half of his time on business in this country.

The decedent in her will exercised a power of appointment conferred upon her by the will of her deceased husband as to a portion of the… Held: that under the laws of the State of New York the property over which the decedent exercised the power of appointment passed to the appointees under the will of the decedent's husband and not under the power of appointment, and that the value of such property is not includable in decedent's gross estate under section 302(f) of the…

1. Petitioner, to enhance his prestige as a motion picture actor through better cooperation of studio employees with whom he was engaged, paid or distributed to them, in… Held: under the circumstances, ordinary and necessary expenses of his business as a professional actor. 2. Petitioner's disbursements for meals and lodging in California while working in motion pictures were for his personal living expenses, and therefore are not deductible as traveling expenses. 3.

Petitioner assigned the contingent ritht to receive future commissions on insurance renewal premiums to a trust company in 1924 and 1928. Held: the assignment was of future compensation for personal services and, since petitioner was the earner of the income, it is taxable to him regardless of the anticipatory assignments. Lucas v. Earl,281 U.S. 111, and Van Meter v. Commissioner, 61 Fed.(2d) 817, followed.

In 1929 petitioner established a trust providing that the income should be payable to him during his lifetime, then to his wife and others, with remainder over. Held: the purported assignment was void, and the income derived by the first trust during the years 1933 and 1934 was taxable to petitioner. Blair v. Commissioner,300 U.S. 5, distinguished.

The will of petitioner's testator gave the income from a trust fund to a daughter of the testator for her life, with the power of appointment by will to Amherst College of any amount, not in excess… Held: no such certainty of basis for the computation of the value of any bequest to a charity, as is required, existed at the death of the testator. If follows no deduction therefor is permissible.

1. Upon evidence showing that the petitioner owned an undivided interest of 25 percent in a promissory note, held, that only 25 percent of the entire interest paid on the note should be included in… Held: that only 25 percent of the entire interest paid on the note should be included in its gross income. 2.

Petitioner, a trust, owns several parcels of real estate located in the city of Detroit. Held: that it is an association within the meaning of section 1111(a)(2) of the Revenue Act of 1932.

1. A taxpayer who had a home in Washington to which he and his family expected to and did return whenever they went away, and who also had… Held: domiciled in Washington. 2. A dificiency notice which merely determined that because a taxpayer and his wife were not domiciled in a community property state they should not be permitted to divide their combined income, does not constitute a determination that each item of divided income was the separate income of the taxpayer. 3.

A resident of California executed an agreement vesting in his wife a present, existing and equal interest in property acquired by him prior to the effective date of section 161(a) of the California… Held: that only 50 percent of the property owned by him prior to the execution of such agreement may be included in his gross estate. United States v. Goodyear, 99 Fed.(2d) 523, followed.

The petitioner issued its preferred stock to the vendors of assets acquired at the time of organization. Held: preferred stock shares issued in these circumstances constituted evidences of debt, and the so-called dividends paid or accrued under these terms amounted to interest on indebtedness within section 23(b), Revenue Act of 1934. Commissioner v. Proctor Shop, Inc., 82 Fed.(2d) 792, affirming 30 B.T.A. 721.

A personal holding company made distribution in pursuance of a general plan to close up the corporate business. It was engaged in no business other than that of liquidating its affairs and capital. Held: that such distribution, though considered only so far as from net earnings in the taxable year, was one in liquidation and was not a dividend within the purview of section 351(b)(2)(c) of the Revenue Act of 1934.

1. The voluntary surrender of a combined life insurance and annuity contract for its face amount is not a sale or exchange, and no part of the gain realized thereby is taxable as capital gain under section 117, Revenue Act of 1934. 2. The term "evidence of indebtedness", as used in section 117(f), Revenue Act of 1934, excludes insurance and annuity contracts, being limited by the doctrine of noscitur a sociis to such things as bonds, debentures, notes, etc., which are specifled in the context.

Amounts paid as rental by a lessee during the taxable year pursuant to an agreement requiring the conveyance to lessee of the property whenever it had paid the total sum due for the 10-year term,… Held: not deductible as rental under Revenue Act of 1934, section 23(a).

1. Where petitioner failed to prove that he was entitled to any per diem allowance for expenses in addition to his regular salary and also failed to prove the amount of any of his expenses in case he had been so entitled, held, the respondent's determination of the deficiencies is approved for lack of evidence. 2. Where petitioner during the taxable years in question was a senior auditor in the War Department of the United States and received a net income from salaries considerably in excess of the personal exemption to which he was entitled for each of the years 1927 to 1931, inclusive, and failed to file any income tax returns for any of the years involved during this period, held, part of the deficiency for each year was "due to fraud with intent to evade tax" as the term is used in section 275(b) of the Revenue Act of 1926 and section 293(b) of the Revenue Act of 1928, and the addition by the Commissioner of fraud penalties is sustained.

From January 23 to May 20, 1935, the petitioner corporation was in the hands of two trustees appointed by the Chancery Court of New Jersey and the officers of the corporation were ousted from control. Held: that the assessment and collection of the deficiency are not barred by the statute of limitations.

1. A railroad which has consistently used the "retirement method" of accounting, in accordance with the regulations of the Interstate Commerce Commission, can not for the taxable years 1927 and 1928 obtain the benefit of deductions for depreciation and obsolescence not accounted for on its books and not taken on its returns, in respect of its docks, elevators, and office building. Central Railroad Co. of New Jersey,35 B.T.A. 501, followed. 2. A conveyance of land by a railroad to a city for highway purposes, the effect of which is of lasting benefit by way of flood protection, accessibility to city streets, and reduced cost of crossing protection, does not entitle the railroad to a deduction of the March 1, 1913, value of the land conveyed. Kauai Terminal, Ltd.,36 B.T.A. 893, followed.

Held, where some eleven years before her death and while she was in good mental and physical health, the decedent, in order to place her… Held: where some eleven years before her death and while she was in good mental and physical health, the decedent, in order to place her property beyond the hazards of her husband's bad business ventures, transferred certain business real estate to an irrevocable trust over which she retained no control, the transfer was not made in…

Petitioner created a trust, with himself as trustee, the income of which was payable to his wife, in the discretion of the trustee at any time at or before its termination, which was to occur upon… Held: no part of the 1934 income of the trust was taxable to the petitioner.

A corporation carried life insurance policies whose face values aggregated $105,000 upon the life of its president, under which it was sole beneficiary. Held: the distribution of the proceeds of the policies among the corporation's stockholders after the death of the insured, made by the trustee pursuant to the agreement, constituted cash dividends subject to taxation. Isaac May,20 B.T.A. 282; Cummings v. Commissioner, 73 Fed.(2d) 477.

In 1922 petitioner organized corporation A under the laws of Illinois for the purpose of dealing in installment paper, it also having power to deal in corporate stocks and bonds. Held: transaction constituted a tax-free reorganization, that no taxable liquidation of corporation A occurred, and that cancellation of rights to return of capital from A did not result in taxable income to petitioner.

Petitioner, having placed corporate stock in the names of several sisters, with the stated intention of having the income paid to them, retaining in her own possession the stock certificates endorsed in blank; and thereafter having borrowed the proceeds of the redemption of such stock with an agreement that she would pay interest thereon in stipulated amounts to the respective sisters during their natural lives, held not to be entitled to deduct such amounts as interest…

Petitioner entered into a contract to purchase certain machinery, but before the contract was fully performed a second contract was agreed upon and executed whereby the original contract was… Held: that petitioner's basis for computing depreciation on machinery and the profit or loss on the sale thereof is to be determined under the terms of the second contract.

1. Where executors, after their discharge under Missouri law, filed a petition with the Board for redetermination of the estate's income… Held: in a proceeding to determine the liability of a transferee from the estate, that the petition was properly filed and the proceeding, being on the Board's docket, tolled the running of the statute of limitations against the original taxpayer, and therefore against the transferee, until the decision of the Board became final, Revenue…

Petitioner purchased seven sets of abstract books in 1918. Three were discarded and four were placed in its workroom. Held: that inasmuch as no postings had been made to the set discarded in 1933 since the date it was acquired in 1918 and it was not used in petitioner's business subsequent to 1933, no deduction for obsolescence may be allowed in 1934 and subsequent years.

1. Book values of the assets of a corporation, held, in the absence of other evidence, sufficient to constitute a prima facie showing by petitioner that the corporation's stock was not… Held: in the absence of other evidence, sufficient to constitute a prima facie showing by petitioner that the corporation's stock was not worthless in prior years. 2. The Board will not take judicial notice of matters merely by reason of the fact that they are contained in its files.

1. Held, bonds issued under the California Municipal Improvement District Act of 1915 were obligations of a political subdivision of… Held: bonds issued under the California Municipal Improvement District Act of 1915 were obligations of a political subdivision of the State of California, and interest received thereon by petitioners during the years 1934-1936 was not subject to Federal income tax; held, further, bonds issued under the California Street Opening Bond Act of…

In February 1934 petitioner, a nonresident alien, sold through a New York broker 500 shares of Coty, Inc., stock. Held: the sales in question were short sales transactions.

GAIN AND LOSS; CORPORATION DEALING IN ITS OWN STOCK. - A regulation of the Commissioner provided that a corporation realizes no gain and sustains no loss from purchases and sales of its own stock. Held: that the Treasury decision is not applicable and the petitioner realized no gain from sales of its own stock in 1934 and 1935.

The owner of foreign state, municipal, and industrial coupon bonds, clipped therefrom and delivered before maturity to another, as a gift, negotiable interest coupons having a maturity within the… Held: that the amounts received by the donee on the coupons were taxable income to the donor.

Petitioner failed to pay all of the taxes assessed against lots owned by him in a municipality of Ontario, Canada. Held: that petitioner is not entitled to deduct as a loss in the taxable year the amount of his investment in the said lots, inasmuch as the period within which the lots might have been redeemed did not expire until the succeeding year.

Petitioner, as lessee, entered into a lease with the lessor corporation, providing for a cash rental and guaranteeing the payment of interest on preferred stock of lessor and the redemption of such… Held: that the dividends and taxes paid and accrued by the petitioner are deductible as items of rent.

1. Several years prior to the taxable years petitioner created irrevocable trusts for his two minor daughters. Held: $3,000 of the income of the trust for the unmarried minor daughter is taxable to petitioner under section 167(a)(2), Revenue Act of 1934, even though only small amounts of the income of the trust were actually paid to petitioner in each of the taxable years; held, further, that none of the income of the trust for the married daughter…

The discharge of a husband's legal obligation to support his wife and minor child held an adequate and full consideration in money or money's worth for a transfer in trust by the husband for the benefit of the wife and child.

Petitioner created a trust and transferred to herself and her sister, as cotrustees, certain securities. Held: :1) The retention of the reversionary interest by the settlor did not constitute a corpus and no part of the income of the trust is taxable to her under the provisions of section 166 of the Revenue Act of 1934; :2) Petitioner did not retain such control and enjoyment of the corpus of the trust that she remained in substance the owner…

Residuary income beneficiary of a trust held not entitled to any greater deduction for depreciation of trust corpus than a portion measured by her proportion of the trust income.

Held, income representing fees paid to an attorney for personal services in securing by suit and judgment against the United States recovery of moneys under the World War Veterans' Act relating to War Risk insurance, is taxable.

Under a trust instrument, the settlor was to receive the income but, admittedly, was completely and irrevocably divested of the corpus, except for the requirement that that the net income * * * shall… Held: :1) Since the record does not contradict the vesting of the power of the trustee to revest corpus of the trust in the grantor, the determination of the respondent is affirmed. :2) The power to revest, vested in the trustee as such, and thus limited, is still a

On February 10, 1933, the taxpayer created a revocable trust for the life of the settlor, the income of which was payable in such proportions as his wife, trustee, determined in her discretion or to… Held: the income of the trust for the period from June 19, 1934, to January 1, 1935, was taxable to the trust under sections 161 and 162 of the Revenue Act of 1934, and was not taxable to the taxpayer under section 166 or 167 of the same revenue act.

1. Where trust established for grantor's children permitted grantor to obtain corpus and accumulations of income only in the event of a remote contingency, held, following William E. Boeing,37 B.T.A.… Held: following William E. Boeing,37 B.T.A. 178, the income, not being accumulated for future distribution to the grantor, is not taxable to her under section 167:a):1), Revenue Acts of 1934 and 1936. 2.

In his income tax return for 1931 the petitioner claimed the deduction from gross income of large amounts of money which were either not paid or did not constitute legal deductions from gross income. Held: that the return filed for 1931 was false and fraudulent with intent to evade tax.

Under the community property laws of California one-half of the proceeds of insurance policies attributable to premiums paid from community property after July 29, 1927, should be excluded from the taxable estate.

- Credit for domestic corporation on account of foreign taxes paid by foreign subsidiary under section 131 of the Revenue Act of 1932 may not be computed by reducing foreign tax payments made in prior years to American dollars at the rates of exchange prevailing at the time of those payments.

An individual taxpayer, who was both the trustee and a life beneficiary of the residuary income of a trust set up under his wife's will, shortly after her death on October 8, 1933, orally disclaimed… Held: the trust income was not taxable as amounts distributable to the taxpayer under section 162 of the Revenue Act of 1934.

1. Under Erie Railroad Co. v. Tompkins,304 U.S. 64, the law of the State of Ohio controls the status of stock ownership in that state. 2. The term paid for but not evidenced by certificates (later issued). 3. Petitioner was not, during the taxable year, a personal holding company under the provisions of section 351 of the Revenue Act of 1934.

The petitioner, on a cash basis, on October 1, 1927, discounted at a bank an interest-bearing note of a face value of $127,000, after having endorsed the note, and received the proceeds thereof, less… Held: that the petitioner is not entitled to the deduction claimed.

Petitioner and her husband organized a corporation for the purpose of selling certain stock to it on the installment plan in order to avoid a direct sale which petitioner was obliged to make for cash. The vendee consented to the intervening transfer only upon condition that the new corporation would comply with petitioner's obligation. Petitioner's transfer and the new corporation's transfer for cash both occurred within 24 hours. Held, the creation of the corporation and routing of the transfer through it constituted a scheme or device to avoid the tax consequences of petitioner's obligation and she is not entitled to report the gain on the installment basis. Commissioner v. Griffiths, 103 Fed.:2d) 110, followed.

Compensation paid to a taxpayer in the form of percentage fees under a contract, by a Texas county for services rendered the county in building public roads and highways, is not immune from taxation under Rhe Revenue Act of 1934. Metcalf & Eddy v. Mitchell,269 U.S. 514.

1. Pursuant to a 15-year lease of real property of which the taxpayer was landlord, $125,000 was deposited by the tenant as security for the performance of its obligations under the lease. Held: :a) The forfeited deposit constitutes income in the year of forfeiture rather than the year of receipt. :b) The taxpayer suffered no deductible loss because of its inability to relet the property on terms as advantageous as those embodied in the canceled lease. 2.

SECTION 44:d), REVENUE ACTS OF 1932. - Commissioner's assertion of a tax under section 44:d) sustained where administratrix upon filing a return in 1934 failed to file bond as permitted by the statute and regulations. F. Harold Johnston,33 B.T.A. 551, distinguished. Erroneous advice given by a deputy collector can not prevent the Commissioner from applying the statute. John D. Biggers,39 B.T.A. 480.

Where in computing the taxpayer's net income for 1934 a depletion deduction of 27 1/2 percent was properly allowed on the bonus paid the taxpayer for granting an oil and gas lease and where in 1935 the lease was terminated without any oil or gas having been extracted from the property covered by the lease, the Commissioner did not err in restoring to income for 1935 the amount of the depletion deduction legally taken for 1934.

1. Where certain insurance polices were transferred under a trust agreement which provided that the proceeds therefrom, payable to the trustee, should be held and invested by the trustee and the net… Held: the $40,000 exemption of section 302:g), Revenue Act of 1926, is applicable. 2. Decedent paid a portion of premiums on a group insurance policy. His estate is taxable on that portion of the proceeds attributable to such premiums. 3.

After the expiration of a certain period, income to the amount of $500 per month from a trust was to be paid to the grantor for life, the excess income to be accumulated and invaded, if necessary to… Held: that sections 166 and 167 of the Revenue Act of 1932 are not applicable.

In 1934 taxpayer liquidated certain shares of building and loan association stock and suffered a loss thereby. The shares had been held for more than two years but had not matured. Held, that the transaction constituted a distribution in partial liquidation within the meaning of section 115 of the Revenue Act of 1934 and resulted in a capital loss to the taxpayer and the amount of his deductible loss is limited by section 117:d) of the Revenue Act of 1934. Henderson v. United States,22 Fed.Supp. 206.

In 1929 petitioner purchased two parcels of real estate under land contracts. In one instance petitioner was the original vendee, while in the other he was assignee of the vendee. Held: that the transactions constituted sales or exchanges of capital assets and the losses thus sustained by petitioner are capital losses. Following Betty Rogers,37 B.T.A. 897.

Where, after separation and divorce, the petitioner made monthly payments to the wife which, pursuant to the court's decree, were for the support of said plaintiff and minor children, the wife having… Held: that the petitioner is entitled to the statutory credits for the dependent children.

26:c):2), REVENUE ACT OF 1936. - None allowed where contract to purchase real estate provided that the purchase price should be paid out of earnings of a ten or fifteen-year period.

During the years 1933 and 1934 C. Henderson Supplee took out insurance policies upon his own life, irrevocably naming his wife, Flora D. Supplee, the beneficiary, if living at the date of his death. Held: that the value of the gifts was one-half of the cancellation value at the date of issuance, following Ernest A. Cronin,37 B.T.A. 914.

Where under trust created by petitioner, she, as trustee, could in her absolute discretion determine upon the amount of trust income to be accumulated, convert it into corpus and invade the trust corpus for her own to her under section 167 of the Revenue Act of 1934.

A trust terminates at a fixed time or upon the death either of the grantor or beneficiary prior to such time. Held: the trust is irrevocable within the meaning of section 166 of the Revenue Act of 1934; held, further, that section 167:a):3) of the Revenue Act of 1934 does not apply where beneficiary pays premium on a policy of insurance, owned by beneficiary, on life of grantor, out of distributed income of trust, there being no restriction on the…

1. BASIS. - Personal property, not specifically bequeathed to a taxpayer but distributed to her from a trust created by and in accordance with the will of her father, takes as its basis for gain or loss in her hands its fair market value at the time or the distribution, regardless of whether it was owned by the father at the date of his death, purchased by the executors, or purchased by the trustees.

1. YEAR OF LOSS. - Where the offer of a taxpayer to sell real estate was accepted in 1933, and, thereafter in that year, deeds were delivered to the purchaser, possession was taken by the purchaser, and the purchaser put up collateral for payment of the purchase price, the seller sustained loss from the disposition of the property in 1933 rather than in a later year. 2.

1. Taxpayer owned certain stock, the certificates for which were deposited in his safe deposit box in North Carolina. Held: the gift was consummated subsequent to June 6, 1932, the effective date of the gift tax provisions of the Revenue Act of 1932, and was subject to gift tax 2. Taxpayer owned certain stock which he had placed in the custody of a corporation.

On December 19, 1933, petitioner sold to a wholly owned corporation at $1.20 per share stock in another corporation having no cost basis to petitioner, which stock was sold by petitioner, acting for… Held: the last sale in question must be treated for tax purposes as if made by petitioner individually, and the gain derived is taxable to him.

Petitioners in 1929 contracted to sell real estate for a price of $185,000, the vendee paying $35,000 upon execution of the contract and agreeing to pay the balance on the closing date in 1930. By further agreement the closing date was postponed to 1931 upon payment by the vendee of $25,000 additional purchase money. In 1931 the vendee defaulted on the contract and refused to make further payment. In 1933 petitioners brought suit against the vendee for specific performance and the vendee set up a conterclaim for recovery of the purchase money paid. On April 3, 1934, the court entered its decree dismissing both complaints on the merits. Held, that the purchase money payments received by the petitioners in 1929 and 1930 constituted taxable income of the petitioners for 1934.

1. Petitioner, living in California under a visitor's visa and actively engaged during the taxable year in attempting to secure required data for… Held: to be a resident of California, and entitled to return his income from salary on a community property basis. He is entitled to a personal exemption of $2,500. 2. Amounts expended for entertainment, automobile operating costs, and telephone, telegraph, and cable charges, held, ordinary and necessary business expenses.

Under an agreement of April 23, 1934, the petitioner relinquished his interest in mortgaged real estate and obtained a release from the mortgage debt. Held: that the loss was a capital net loss and that the deduction is limited to $2,000 by section 117(d) of the Revenue Act of 1934.

Taxpayer, who was sole support for divorced wife and their two minor children over whom he in fact exercised family control, was head of a family within section 25:b):1) of the Revenue Act of 1934.

Held, under the provisions of section 131 of the Revenue Act of 1932 petitioner is entitled to a credit for British taxes accrued.

1. A trust company, in which petitioner held two blocks of stock acquired at different times, reduced its capital stock from 600,000 shares to 352,000 shares in connection with a plan of… Held: that the old stock was exchanged for stock and money in pursuance of a plan of reorganization, under section 112(c)(1), Revenue Act of 1928. 2. Prior to the taxable year the corporation changed its name and was transformed from a bank into a trust company under the laws of New York.

During 1921, 1922, and 1923 taxpayer paid certain county taxes under protest and deducted the amounts paid in computing his taxable income for those years. Held: the amount of the refund is includable in taxpayer's income for 1932 only to the extent that he benefited from the deductions taken in the prior years.

Petitioner, either as vendee or assignee of a vendee under land purchase contracts, acquired two parcels of real estate. Held: that the losses sustained by petitioner by the surrendering, quitclaiming, or assigning of its interests in the said parcels of real estate were capital losses and subject to the limitation prescribed in section 117(d) of the Revenue Act of 1934, but as to the cash payment of $250, the loss was an ordinary loss.

General city taxes on real property within the corporate limits of cities of the metropolitan class in the State of Nebraska become due and are a first lien thereon from and including the first day… Held: the taxes due on such date constitute a proper deduction from gross income by a taxpayer on the accrual basis. United States v. Anderson,269 U.S. 422.

1. Petitioner, which had no taxable net income for the year in question, but filed form 1122 in connection with a consolidated return of its parent, held liable on a deficiency in parent's income. Held: neither petitioner nor its lessee is entitled to deduction for depreciation on the property.

Petitioner owned real estate of a value of approximately $10,000,000, nontaxable securities of a value of approximately $16,000,000, and… Held: that under section 23(a), Revenue Act of 1932, he is not entitled to deductions as expense of trade or business so far as incurred in the ownership of securities, but is entitled to deduction of expenses so far as incurred in his real estate business, both in New York and in his Paris office, which are held to be business expenses.

1. Where under the terms of the trust instrument there is a mere possibility of a reverter of a part of the corpus to the grantor, held, that the grantor had no vested power to revest such portion of… Held: that the grantor had no vested power to revest such portion of the corpus in himself, within the meaning of section 166 of the Revenue Act of 1934, following Phebe Warren McKean Downs,36 B.T.A. 1129: William E. Boeing,37 B.T.A. 178. 2.

1. Petitioner was a manufacturing corporation, organized in 1909. Because of dissension between its majority and minority stockholders, it acquired the stockholdings of the latter in 1932. Held: the transaction constituted a partial liquidation and the transfer of the United States bonds was a distribution in kind upon which no gain or loss was sustained by the petitioner. 2.

The timber of a taxpayer was entirely killed in 1933 by a forest fire. It was not, however, thereby made worthless. Held: the entire timber was not the subject of a loss deduction in the year of the fire, but such a deduction is to be taken in the years and amounts in which, as shown by the evidence, the destruction and worthlessness occur.

1. Where a part of the gross income of an estate is to be used pursuant to the terms of a will exclusively for charitable or educational purposes it is deductible from the income of the estate under section 162(a) of the Revenue Act of 1934 even though it is payable from principal in years when income is insufficient. Helvering v. Pardee,290 U.S. 365, and similar cases under (b) and (c) distinguished. 2. A use is "exclusively" charitable even though some purely incidental use which is not charitable may inherently result.

Foreign corporation A owns all of the stock of domestic corporation B. The latter has indebtedness evidenced by bonds held by nonresident alien individuals and foreign corporations. Held: the interest so paid was income from sources within the United States and B is required to deduct and withhold taxes thereon.

While in good health and not in contemplation of death, the decedent, who was 75 years of age, and an insurance company entered into two separate contracts, one a single premium life insurance policy… Held: the amount of $20,030.43 received by the beneficiary represented insurance as that term is used in section 302(g) of the Revenue Act of 1926, as amended, and not being in excess of the exemption of $40,000, should not be included in decedent's gross estate.

1. An agreement by spouses, residents of Oregon, to treat all their property as held in community, was ineffective to stamp as community income the husband's share of the profits of a partnership to which he had contributed farm land in Washington, acquired as his separate property. 2. The categorical statement of a member of a partnership that his wife and his partner's wife were also members is inadequate to prove the wives partners. 3.

1. A partnership keeping no books, which derived profits from a construction contract begun in the preceding year and completed in the taxable year, held not taxable on the completed contract basis. 2. A partnership which is a member of another firm may not deduct on its return any part of amounts paid by the other partnership to an individual for services in organizing a foreign corporation and seeking contracts.

1. Stockholders of corporation F agreed with an underwriting firm to exchange all of their stock for all of the preferred shares and 120,000 of the common shares of newly organized corporation S. The shares were all placed in escrow, followed by delivery of the preferred shares and 20,000 of the common shares of corporation S to the stockholders of corporation F. The remaining 100,000 shares of corporation S were delivered to the underwriters for $2,790,000 cash, which was distributed to the stockholders of corporation F. Held, that a reorganization was effected between the stockholders of corporation F and corporation S and that the gain realized by the petitioner, a stockholder of corporation F, is taxable under section 203(d)(1) of the Revenue Act of 1926 to the extent of the cash received. 2. March 1, 1913, fair market value of stock of corporation F determined. 3. In 1927 and 1928 petitioner purchased additional stock of corporation S, of which he sold some in 1928 and exchanged the balance for stock of corporation R in a nontaxable reorganization, then in 1928 sold some of the latter. Held, (1) The block of S stock purchased in 1927 and sold in 1928 being identifiable, the basis is cost, and, having been held less than two years, the loss is an ordinary loss; (2) The R stock having been acquired in a nontaxable reorganization, the basis of each share is the total basis of the stock of S exchanged therefor divided by the number of shares of R stock received, Christian W. Von Gunten,28 B.T.A. 702, subject, however, to an allocation between common and preferred shares according to value; (3) Some of the R shares sold in 1928 being identifiable with S shares purchased in 1927 and 1928, the gain or loss thereon is ordinary income or loss; the remainder not being identifiable, the period of holding the F and S shares must be added to the period of holding the R stock and such shares were capital assets in 1928. Sec. 101(c)(8)(A), Revenue Act of 1928. 4. The provisions of either section 3229 or section 3469 of the Revised Statutes pertaining to compromises and settlements not having been complied with, held, that the respondent is not estopped to claim additional taxes for 1927 and 1928, although petitioner had paid certain additional taxes for 1927 and posted a bond for the payment of additional taxes for 1928 as agreed upon prior to receiving the notice of deficiency herein.

Gains resulting from transactions in joint stock land bank bonds issued under the Federal Farm Loan Act held taxable.

In 1927 petitioner purchased a parcel of real property under a land contract which provided that in case he defaulted in carrying out the terms thereof the vendor would have the right to declare the… Held: the loss thus sustained by petitioner constitutes an ordinary loss deductible in full under section 23(e) of the Revenue Act of 1934, Harold R. Smith,39 B.T.A. 892, distinguished.

The Commissioner determined the fair market value of several blocks of 2,500 shares of stock at the time of their disposition by gift on the… Held: that the fair market value of the blocks as thus determined is supported by the evidence, including (a) opinions of experts (arrived at upon study of market conditions, the financial record of the corporation, and a comparison of such corporation and its stock with similar corporations and their stock) that the exchange prices…

While in good health and not in contemplation of death, decedent, who was then 80 years of age, and an insurance company on December 6, 1935, entered into two… Held: the amount of $25,000 receivable by the beneficiary represented insurance as that term is used in section 302(g) of the Revenue Act of 1926, as amended, and, not being in excess of the exemption of $40,000, should not be included in the decedent's gross estate. Estate of Anna M. Keller,39 B.T.A. 1047, followed.

Pursuant to the mandate of the Circuit Court of Appeals for the Ninth Circuit for additional findings of fact and opinion based thereon, the Board finds that the transfers made by Linda Von Der Ahe and the Grocers Securities Co. to the petitioner were made in furtherance of and for the purpose of executing and putting into effect the plan of reorganization embodied in the Merrill contract as amended, and reaffirms its prior opinion appearing in 33 B.T.A. 30.

1. Claim of the divorced wife of decedent arising out of a settlement of property rights made prior to divorce held not an allowable deduction from gross estate. 2. Claim for benefit of minor children arising out of said agreement is an allowable deduction.

Pursuant to a plan to place certain chattels owned by DeWitt Clinton Co., and used by it in the operation of the DeWitt Clinton Hotel, beyond the reach of a realty mortgagee, the… Held: the chattels were acquired by petitioner pursuant to a plan of reorganization and the basis for their depreciation in the hands of petitioner is their original cost to the transferor, DeWitt Clinton Co., adjusted under section 113(b)(1)(B). Sec. 113(a)(7), Revenue Acts of 1932 and 1934.

Petitioner was the owner in the taxable year of an oil and gas payment of which it had a certain unrecovered basis of cost. Held: the exchange is not nontaxable under section 112(b)(1), Revenue Act of 1934, but is taxable under the general rule provided in section 112(a).

1. Petitioner may deduct, from her 1934 gross income, New Jersey real estate taxes for 1934 paid by her on properties purchased October 16, 1933, and December 8, 1933, respectively. 2. While Compiled Statutes of New Jersey, sec. 208-66d (302), directed that assessments for 1934 should be made October 1, 1933, in the name of the owner of real property on that date, the 1934 taxes on real estate did not "accrue" in 1933 but in 1934 when all the events determining the liability became fixed and certain; hence the taxes paid by petitioner were her own and not those of the prior owner of the properties.

The taxpayer was the holder of bonds of a state irrigation district and in the taxable year 1934 deposited his bonds with the district under… Held: that since retirement was contemplated at the time the taxpayer first ascertained the bonds' partial worthlessness, not section 23(k), Revenue Act of 1934, relating to bad debts, but section 117(f), providing for the retirement of bonds, is applicable; and the loss resulting will be a capital loss determined as therein provided.

Petitioner and his wife agreed in writing on the division and distribution of their community property and the custody, maintenance, and support of their minor children, and settled all property… Held: no part of the trust income was taxable to petitioner.