Volume 39 — Tax Court Reports

Transfer of securities to church in trust to provide for perpetual care of transferor's plot in church cemetery held, not deductible as charitable contribution within meaning of section 170, I.R.C.… Held: not deductible as charitable contribution within meaning of section 170, I.R.C. 1954. Held, further, transaction resulted in taxable capital gain to transferor.

Petitioners were in the business of building and selling low-priced homes. With the exception of a few homes, petitioners obtained first mortgage loans on these homes prior to their sale. Held: Petitioners are entitled to report the income from the sale of their homes on the installment method of accounting as provided for in section 453, 1954 Code. Payment in the year of sale did not exceed 30 percent of the selling price.

1. Payments on Mixed Claims Commission Award -- German Bonds to Fund Payments. -- Held, bonds issued in 1953 by the Federal Republic of Germany to the Government of the United States of America, payable serially each year beginning in 1953 and ending in 1978, are not capital assets in the hands of the taxpayer within the provisions of section 1232(a), 1954 Internal Revenue Code, notwithstanding the fact that the net amount of the funds derived from the payment of the bonds on maturity are paid over ratably to holders of awards of the Mixed Claims Commission, United States and Germany, by the United States Treasury Department. Held, further, that amounts received in the taxable years by the petitioner from the Treasury Department in respect of its award, out of the proceeds of the bonds which matured in the taxable years, which were paid to the United States and deposited in the German special account for payment ratably to award holders, constitute ordinary income and not amounts received on retirement of capital assets in the hands of the taxpayer within the meaning of section 1232(a)(1). 2. Petitioner, on the accrual basis, adopted the view, when it filed its Federal income tax returns and New York corporation franchise tax returns for 1955, 1956, and 1957, that payments received in those years in respect of its award from the Mixed Claims Commission represented a return of capital and not income; it computed and accrued the amount of the State franchise tax on that basis; and it deducted such amounts of State franchise taxes in its Federal returns. In 1961, petitioner voluntarily filed amended Federal and State returns reporting the award payments as long-term capital gains and increased amounts of State franchise taxes resulting from the reporting of additional income in the amended New York corporation franchise tax returns. Held, that the additional State franchise taxes for 1955, 1956, and 1957 are accruable and deductible only in 1961, the taxable year in which petitioner admitted liability for tax in respect of a part of the payments on the Mixed Claims Commission award. Gunderson Bros. Engineering Corp., 16 T.C. 118, followed.

Held, petitioners did not have an economic interest in coal mined by them under contracts with the Christian Colliery Company in 1956 and 1957, and accordingly are not entitled to depletion… Held: petitioners did not have an economic interest in coal mined by them under contracts with the Christian Colliery Company in 1956 and 1957, and accordingly are not entitled to depletion deductions under sections 611 and 613, I.R.C. 1954.

Petitioner held stock in a California corporation operating a Ford dealership which had accumulated earnings but had never declared a dividend. Another stockholder, who had operated, as sole proprietor, a supervisory service for dealers, transferred this business to a new corporation, organized in Tennessee, for class A stock. The assets and franchise of the dealership were transferred to the new corporation for cash, which was distributed by the old corporation to all its stockholders (except one) for their stock and all the stockholders acquired class B stock in the new corporation. After these transactions the stockholders of the old corporation were in control of the new and had received their shares of the net earnings of the old. Held, the several transactions amounted to a reorganization within the terms of section 368(a)(1)(D), I.R.C. 1954, and the distribution to the petitioner was essentially equivalent to a dividend to the extent of his share of the earnings of the old corporation.

Petitioners in 1953 created three trusts for the benefit of their minor children each of which provided that it should cease and terminate on a specified date which in each instance was 10 years and… Held: the trusts were revocable trusts under California law until their amendment in 1954.

1. Gains on the sale of houses which petitioner purchased for investment and held for rental purposes for periods of 6 months or longer held taxable as long-term capital gains and not as ordinary income. 2. Depreciation deductions on such houses disallowed for taxable years in which houses were sold at prices in excess of their undepreciated costs as of first of such taxable years. 3.

1. Held, petitioner, receiving the entire amount due him as a bonus from his employer pursuant to a settlement agreement, cannot claim any withholding tax credit for amounts not actually withheld by… Held: petitioner, receiving the entire amount due him as a bonus from his employer pursuant to a settlement agreement, cannot claim any withholding tax credit for amounts not actually withheld by his employer. 2.

Held, where estate administration expenses have been paid out of the corpus of the estate, the value of the charitable bequest which… Held: where estate administration expenses have been paid out of the corpus of the estate, the value of the charitable bequest which consists of a remainder interest in the estate's residue in trust must be reduced by the amount of such expenses, notwithstanding the executor's election to claim them as deductions on the estate's income tax…

During 1954 the petitioner owned and conducted a combination hotel, liquor store, and beer and liquor tavern business. Held: respondent's determination is sustained.

1. Under section 302(b), Revenue Act of 1950, filing of exempt organization information return constitutes filing of a return for statute of limitations purposes only if the organization loses its… Held: A joint venture was created, taxable as a partnership. Petitioner's profits retain the same taxable characteristics as they had to the joint venture. 9.

The Tower Club required each new member to pay an initiation fee part of which represented payment for 1 share of stock in the corporation. Held: that the amounts over and above the par value of the stock were in return for services and taxable as ordinary income.

Distributions upon redemption of all corporate stock pursuant to a plan under which corporate operating assets were sold to newly incorporated company, 72 2/3 percent owned by old company shareholders, followed by liquidation of old company, the plan accomplishing elimination of some old company shareholders and ownership, in part, of continuing business by some new shareholders, held properly treated as capital transaction under section 331(a)(2), I.R.C. 1954, and not to…

Rules of Practice -- Timeliness of Motions -- Rules 14(a), 15(a), and 17(c). -- Held: A motion addressed to respondent's answer asking the Court to require a further and better statement is timely… Held: A motion addressed to respondent's answer asking the Court to require a further and better statement is timely pursuant to Rule 17(c) if filed prior to setting the case for trial. Time within which to file such a motion is not limited by Rules 14(a) or 15(a).

1. Held, mitigation of limitations provisions (secs. 1311- 1314, I.R.C. 1954) applicable to adjustments made by the Commissioner. 2. Held: mitigation of limitations provisions (secs. 1311- 1314, I.R.C. 1954) applicable to adjustments made by the Commissioner. 2. Held, further, that, in the circumstances of this case, no present transferee liability exists in respect of one of the petitioners (Lena Drechsler) where transferor's taxes had previously been fully paid. 3.

Held, that an amount of $ 5,000 paid by a partnership, as lessee, to its lessor in 1948 as advance rental was not reimbursed to it by its sublessee, and that such amount is deductible by the… Held: that an amount of $ 5,000 paid by a partnership, as lessee, to its lessor in 1948 as advance rental was not reimbursed to it by its sublessee, and that such amount is deductible by the partnership from income of the taxable year 1957 when applied against the rental for that year.

Petitioner employed attorneys to represent him in suits for attorneys' fees claimed by two groups of attorneys who represented him in a… Held: legal expenses incurred with respect to the reduction of petitioner's liability for legal fees arising in connection with a will contest do not constitute ordinary and necessary expenses paid for the management, conservation, or maintenance of that property under section 212, 1954 Code, notwithstanding the attachment of petitioner's…

1. In 1957 petitioners established a trust for the benefit of their minor children, which trust was to terminate after 15 years. Held: the petitioners are to be treated as the owners of the trust within the meaning of section 677(a)(2), I.R.C. 1954. 2. Petitioner Ralph L. Humphrey, together with his brother and his father, owned 100 percent of the stock of X and Y corporations.

The amounts of petitioner's excessive profits on renegotiable contracts in 1953 and 1954, determined.

Petitioners, who have been farmers since 1935, carried on their farming operations prior to August 30, 1955, on approximately 2,400 acres of farmland which they owned and additional land which they… Held: these corporations are entities distinct from their stockholders, taxable as such, and respondent erred in adding their income to and deducting their expenses from petitioners' income. Sec. 269, I.R.C. 1954, is inapplicable.

1. Held, the petitioners are not entitled to depletion deductions for coal they mined under oral agreements with the lessee of land containing coal. 2. Held: the petitioners are not entitled to depletion deductions for coal they mined under oral agreements with the lessee of land containing coal. 2. Held, further, the petitioners at Docket No. 70456 failed to show that they are not subject to the penalty for failure to file a declaration of estimated tax for the year 1953.

1. Petitioner Clyborne acquired leases on coal properties and assigned them to petitioner Paragon, of which he was controlling… Held: 25 cents per ton of the 30-cent-per-ton royalty paid by Paragon to Clyborne was in fact a royalty, reasonable in amount, and is deductible by Paragon as an ordinary and necessary business expense, and the difference between 25 cents per ton and the royalties and overriding royalties paid by Clyborne to others is taxable to Clyborne…

Petitioner was incorporated September 27, 1948. It sustained large net operating losses for the fiscal years ended September 30, 1949 and 1950. Held: the respondent did not err in disallowing the claimed net operating loss deduction carryover from prior years of $ 64,832.25.

Petitioner filed a motion asking for a determination by the Court that the statement of the grounds on which petitioner relies to establish that none of its earnings and profits were permitted to… Held: motion denied.

Petitioner originated mortgages at par without charging a fee to affiliated builders and sold these mortgages at a discount price to wholly owned subsidiaries over whom it had complete control and… Held: the differences between the par-originated amount of the mortgages and the discounted sales price are not deductible losses. Held, further, that losses on sales of mortgages to nonaffiliates are capital and not ordinary losses.

Amounts paid to builder, exceeding contract price, for completion of petitioners' residence held, on facts, not deductible as nonbusiness bad debts. Held: on facts, not deductible as nonbusiness bad debts. Haywood P. Martin, 38 T.C. 188 (1962), distinguished.

1. Petitioner purchased all of the outstanding stock of G, a corporation engaged in the small-loan business, in October 1950; it thereupon… Held: petitioner is not entitled to an amortization deduction in 1952 with regard to the premium paid for G's loans receivable since the 14-month period had already elapsed prior to that year; held, further, such deduction is not allowable, in the alternative, as a ratable portion of the price allegedly paid for the covenant not to…

Petitioner, a privately owned water company, had tar-painted cast-iron water pipes through which it supplied well water prior to 1950, at which time it connected its system to an adjacent system… Held: cleaning out this pipe and lining it with cement is a currently deductible repair.

Insured's election in 1950, before maturity under insurance company's annuity policy, to leave cash surrender value (principal sum) on deposit and receive monthly installments of principal augmented… Held: not to result in constructive receipt in taxable year 1951 of difference between premiums previously paid and cash surrender value, insurance company not being required to pay principal in taxable year.

The president and controlling stockholder of various controlled corporate automobile dealers contracted with a finance company to receive personally rebates from finance paper on installment sales by… Held: Excess rebates made to the president, because of sales by his controlled corporations, were earned by the corporations. 2.

In 1957 petitioner Charles Wilson retired from the employ of Triad Oil Company. Upon his retirement, Triad purchased a single-premium, no-refund annuity for petitioner. Held: Petitioner's rights under the annuity contract were nonforfeitable within the meaning of section 403(c), I.R.C. 1954. 2. On the facts presented, petitioner has not demonstrated that as applied to him section 403(c), I.R.C. 1954, is unconstitutional. 3.

During the years 1947 through 1951 petitioner, an Ohio building and loan association, was exempt from Federal income taxation by reason of being a domestic building and loan association within the… Held: Because of its exemption during the years 1947 through 1951 petitioner realized no economic gain nor tax benefit from the payment of the rebated State taxes. Accordingly, petitioner realized no taxable income upon the recovery, in 1956, of these taxes.

Incorporated in the divorce decree respecting decedent and his wife was a settlement agreement providing, inter alia, for the payment by decedent of $ 500 monthly installments until the wife died or remarried. Upon the death of decedent, the wife's claim against the estate to continue such payments was refused on the ground that such payments ceased upon the death of the decedent.

Petitioner, whose principal business was the manufacture and sale of precision switches and thermostatic controls, acquired a subsidiary engaged in the manufacture of metal buttons for work clothing… Held: the sale at a loss, of accounts receivable, inventories, land, and depreciable assets acquired by petitioner upon the distribution in complete liquidation of its wholly owned subsidiary, constitutes a capital loss.

In 1956 petitioner paid the Commonwealth of Massachusetts $ 9,000 in compromise of an inheritance tax assessed against petitioner. Held: such payment is not deductible by petitioner either as a charitable contribution under section 170, I.R.C. 1954, or as an ordinary and necessary business expense under section 162(a),

G corporation acquired all of the stock of three corporations controlled by petitioners in exchange for a part of its stock (valued at $ 27,912.50) and $ 27.36 in cash in lieu of fractional shares of… Held: The solely for all or a part of its voting stock requirement of section 368(a)(1)(B), I.R.C. 1954, is to be literally interpreted.

Petitioner owned an endowment insurance policy on his life in the amount of $ 10,000. Held: the assignment was bona fide but the entire gain realized ($ 2,263.70) is taxable as ordinary income. Commissioner v. Phillips, 275 F. 2d 33 (C.A. 4, 1960), followed.

Held, that a transaction, wherein the principal petitioner exchanged all his holdings of stock in a parent corporation for all the issued and outstanding stock of another corporation which was then a subsidiary of said parent, qualifies for nonrecognition of gain under section 355 of the 1954 Code. Held, further, that petitioner did not receive in the above-mentioned exchange transaction, in addition to the stock, any property which may be regarded as taxable "boot" under section 356(a) of the 1954 Code.

Decedent left the proceeds of an insurance policy to his surviving spouse under an interest option with an inter vivos right of withdrawal. Held: that the power of appointment of the surviving spouse came into existence immediately upon her husband's death and was exercisable in all events so as to qualify the insurance proceeds for the estate tax marital deduction under section 2056(b)(6), I.R.C. 1954.

Expenses incurred by petitioner in issuing its capital stock as a stock dividend are not deductible as ordinary and necessary business expenses.

Held, that a cash consideration of $ 900,000 received by the petitioner upon the assignment of his interest in oil and gas property is not… Held: that a cash consideration of $ 900,000 received by the petitioner upon the assignment of his interest in oil and gas property is not taxable as ordinary depletable income as representing an advance royalty or an amount received in anticipation of a production payment, but represents the selling price of all his interest in such…

1. In 1951, petitioner entered into a cost-plus-fixed-fee contract with Boeing. Held: with the exception of the $ 259,000 actually paid to petitioner in 1953, petitioner was not required to accrue in income any amount in excess of that authorized by Boeing. 2. Petitioner was and had been engaged in the performance of a number of cost-plus-fixed-fee contracts.

In 1952 petitioner sold his preferred and common stock in Radio Kentucky, Inc., to the corporation for the total sum of $ 60,000 of which $ 15,700 was the price of the preferred and $ 44,300 the… Held: that the assumption of the indebtedness by the corporation was includable as part of the initial payments, thus resulting in petitioner having received an amount in excess of 30 percent of the selling price in the year of sale.

1. Proceeds of so-called flight or accident insurance paid to beneficiary upon death of airline passenger held includable in decedent's gross estate as insurance under policies on the life of the decedent. Sec. 2042(2), I.R.C. 1954. Leopold Ackerman, 15 B.T.A. 635, followed. 2.

One of petitioners advanced funds to an estate of which she was executrix for payment of administration expenses and taxes and was reimbursed for such advances with the approval of the Probate Court… Held: the difference between the fair market value of the stock at the dates transferred to petitioner and the amount of petitioner's advances to the estate discharged by these transfers did not constitute either ordinary income or capital gain to petitioners.

Held, where petitioner's rights to certain interests in an oil lease were conditional and qualified in 1953, the fair market value of the interests was not taxable income in 1953 under the doctrine of constructive receipt of income. Petitioner did not have unfettered command and was not free to enjoy the interests at his option until 1957. Held, further, the fair market value of the interests received in the oil lease was ordinary income subject to depletion in 1957 and the services rendered by petitioner as consideration for the interests did not represent petitioner's capital investment in the development of the oil lease.

Held, when petitioner, president, general manager, and owner of 75 percent of the corporation's stock, paid a corporate debt pursuant to a prior personal guarantee of such debt, the corporation having liquidated, she incurred the loss on a nonbusiness bad debt inasmuch as such endorsement was not proximately related to a trade or business carried on by petitioner during that year.

Petitioner acquired its own obligation, which had been treated by the holder thereof as an installment obligation, in a transaction to which section 351 applies. Held: Petitioner took the obligation, albeit its own obligation, as an installment obligation and at its transferor's basis.

Members of a social club contribute to its Employees' Christmas Fund. The fund is distributed to the employees as Christmas bonuses under a formula which takes into account the salary and length of service of each employee. No tipping is allowed under the rules of the club, which call attention to the opportunity given members to contribute to the gratuity fund. Held, such distributions to employees are compensatory, in the nature of bonuses or tips and taxable as income under section 61(a) of the Internal Revenue Code of 1954.

Decedent, by her will, left her entire estate to her son, the petitioner. Held: decedent's estate is entitled to the estate tax marital deduction for the sum passing to decedent's husband pursuant to his election to take as in intestacy.

Petitioners, equal partners in White Way Pure Milk Company, sold the assets of the partnership to Pet Dairy Products Company and entered into individual covenants not to compete for a period of 10 years. Held, (1) that partnership assets were sold and not partnership interests; (2) that payments under the covenants not to compete were ordinary income and not capital gain from the sale of goodwill; (3) that the sales price of the partnership's inventory of milk and dairy products was $ 17,770.49 and not $ 10,000 as reported; and (4) that the sales price of the partnership's expendable supplies was $ 9,171.95, which represented short-term capital gain, since such supplies have not been shown to have been held for more than 6 months.

Held, petitioner Jewel T. Bruner has established she furnished more than one-half of the total support of her son Tom during the taxable years involved. Held: petitioner Jewel T. Bruner has established she furnished more than one-half of the total support of her son Tom during the taxable years involved.

Upon dissolution in 1955 of an architectural partnership in which petitioner was one of two partners, a settlement agreement was entered into by the partners under which petitioner was to take over,… Held: the cash payments made to petitioner and the cancellation of his indebtedness to the firm were attributable to petitioner's interest in the uncompleted contracts of the firm assigned to the other partner.

Petitioner, a nonexempt cooperative association, received compensation from Commodity Credit Corporation for handling and storing grain delivered by producers in satisfaction of their Commodity… Held: such compensation was not excludable from petitioner's gross income as patronage dividends.

1. Held, that the transfer by petitioner Arthur Kniffen in 1957 of his sole proprietorship assets and liabilities (including a $ 44,625.79 liability owing to his transferee… Held: that the transfer by petitioner Arthur Kniffen in 1957 of his sole proprietorship assets and liabilities (including a $ 44,625.79 liability owing to his transferee corporation) to his controlled corporation constituted a partially taxable exchange under sections 351 and 357, I.R.C. 1954. 2.

Held, that, under the circumstances here involved, payments received by the petitioner from a corporation after the death of her husband,… Held: that, under the circumstances here involved, payments received by the petitioner from a corporation after the death of her husband, who had been president of the corporation, were not gifts within the meaning of section 102(a) of the Internal Revenue Code of 1954, but constituted ordinary income to her under section 61(a) of the…

Decedent, who had solicited insurance for a British firm on a commission basis, executed an agreement in 1936 providing for the payment of commissions after his death in designated amounts and for a… Held: the amounts of $ 50,000 in each of the years 1953, 1954, and 1955 are includable in petitioner's income for those years as income in respect of a decedent within the meaning of section 126, I.R.C. 1939, and section 691, I.R.C. 1954.

Decedent, who had solicited insurance for a British firm on a commission basis, executed an agreement in 1936 providing for the payment of commissions after his death in designated amounts and for a limited period. He bequeathed one-half of the commission payments to petitioner, his surviving spouse. Decedent died in 1951 and petitioner agreed in 1952 and 1953 to accept $ 150,000 in full settlement of her claim, and also agreed to a reduction in her payments for a portion of amounts required to pay British death duty. Petitioner received $ 50,000 from the British insurance brokers in each of the years 1953 and 1954, and in 1955 she received $ 19,815.05, with $ 30,184.95 withheld from the last payment to be applied to British death duty. In 1956 the board of directors of the British insurance firm voted to make annual payments of $ 13,500 to petitioner. Held, the amounts of $ 50,000 in each of the years 1953, 1954, and 1955 are includable in petitioner's income for those years as income in respect of a decedent within the meaning of section 126, I.R.C. 1939, and section 691, I.R.C. 1954. No deduction is allowable in 1955 for the amount of $ 30,184.95, which was withheld for the payment of British death duty. Held, further, the payment of $ 13,500 to petitioner in each of the years 1956, 1957, and 1958 by the British firm was not a gift within the meaning of section 102, I.R.C. 1954. Held, further, petitioner is entitled to the $ 5,000 employees' death benefit exclusion under section 101(b), I.R.C. 1954, and, consequently, only the amount of the payment from the British firm in excess of $ 5,000 is includable in her income for 1956.

Petitioner in 1958 paid an amount in compromise of assessed income taxes, additions to tax, and interest and accrued but unassessed interest of her husband's estate, her own liability, and the… Held: since there is no showing that any portion of the amount paid in compromise was for interest on petitioner's liability, no portion of the payment is deductible by petitioner as interest paid in 1958.

1. The petitioner deeded real property used in its business to a real estate agent in 1956, but retained the use of the property rent free until the real estate agent should acquire a lot and… Held: that petitioner, in 1957, exchanged its property for property of like kind plus money and that the gain upon the transaction is recognizable but in an amount not in excess of the money received. Sec. 1031, I.R.C. 1954. 2.

1. Foundation's loans to its substantial donors during the taxable years held, on the facts, not to constitute operation for a substantial nonexempt purpose. 2. Held: on the facts, not to constitute operation for a substantial nonexempt purpose. 2. Respondent did not notify Foundation that it had engaged in prohibited transactions.

X corporation possessed an ex contractu claim against Y corporation. Held: the amounts expended by petitioner are not in the nature of capital expenditures but are nonbusiness expenses deductible under sec. 212(1), I.R.C. 1954.

Petitioner, in April 1957, accepted employment with the E. R. Carpenter Co., Inc., and assumed his duties in Richmond, Va., on May 1, 1957. Held: that the payment of $ 5,000 to petitioner in 1958 in accordance with said guarantee represented incentive compensation to petitioner taxable to him as such and was not part of the proceeds of the sale of the property. Otto Sorg Schairer, 9 T.C. 549 (1947), not followed.

Petitioners acquired the stock of a corporation and soon afterward caused it to complete or terminate its existing contracts and to sell its equipment. Held: There was no real contraction of business or liquidation until the new contract had been performed. Since the relation of the petitioners to the corporation was not changed, the distributions were essentially equivalent to dividends under section 115 (g) and constituted ordinary taxable income in the years of receipt.

1. The petitioners were the creators and trustees of the M. & W. Waller Fund and were its sole donors. Held: that the Fund was organized and operated exclusively for exempt purposes described in sections 170 and 501 of the Internal Revenue Code of 1954, and that the petitioners are entitled to deduct the amounts claimed under section 170. 2.

Petitioners were members of Killam & Hurd, a partnership. Prior to April 1, 1954, the partnership owned certain interests in three separate leases. Held: that by reason of entering into the unitization and operating agreements, Killam & Hurd did not thereby lose its right to claim depletion on the separate leases as its separate properties.

Payments made to decedent's divorced wife during the calendar years 1957, 1958, and 1959 pursuant to a journal entry entered by the Common Pleas Court of Summit County, Ohio, on or about July 10,… Held: not deductible by petitioners under section 215, I.R.C. 1954.

Cancellation by petitioner's sole stockholder of debt previously created by unrelated tenant and assumed by petitioner's agreement with its stockholder when petitioner's property was acquired from… Held: on facts, not to result in income taxable to petitioner.

Petitioner purchased a 10-acre tract. It intended to develop a shopping center and rent the stores. In 1957, financial considerations necessitated sale of approximately 30 percent of the tract. Held: Basis of the entire tract apportioned to determine the respective bases of the parcels which were sold. (2) No part of the costs of paving and lighting the retained center parcel is allocable to the basis of either or both of the parcels which were sold.

Continuation of support payments to divorced wife originally specified in separation agreement, held, on facts, not gifts within the meaning of the gift tax statute. I.R.C. 1939, ch. 4. Held: on facts, not gifts within the meaning of the gift tax statute. I.R.C. 1939, ch. 4.

In 1955 petitioner settled a claim against a former employer for a breach of an employment contract. Held: The amount of $ 41,835, which was consideration for the cancellation of the employment contract, was includable in petitioner's income in 1955. The loan and the purported promissory notes were without substance and must be disregarded.

Held, that under these facts the purchaser of taxpayer's mortgaged real property did not take such property subject to the mortgage or… Held: that under these facts the purchaser of taxpayer's mortgaged real property did not take such property subject to the mortgage or assume the mortgage; hence the excess of the mortgage over the taxpayer's basis in the property is not included in the payment received by taxpayer in the year of sale for the purpose of the 30-percent…

Decedent's renunciation of right to stock dividends received and held by trust and to which she was entitled as income beneficiary of the trust under State law, held, a transfer with retained life… Held: a transfer with retained life estate within the meaning of sec. 2036, I.R.C. 1954. Held, also, the stock dividends, which remained in the trust at death, should be included in decedent's estate at actual value.

Spouse's failure to signify her consent by signing the consent-of-spouse statement on the face of petitioner's gift tax returns, or otherwise, precludes petitioner from having one-half of his gifts considered as having been made by his spouse for gift tax purposes.

Held, the lots sold by petitioners during the years involved were not held by petitioners for sale to customers in the ordinary course of a trade or business and the gain was therefore taxable as… Held: the lots sold by petitioners during the years involved were not held by petitioners for sale to customers in the ordinary course of a trade or business and the gain was therefore taxable as capital gain.

Petitioner was employed by a division of Douglas Aircraft Corp., which had its headquarters in Santa Monica, Calif. Held: that the major portion of the per diem allowances for 1955, 1956, and 1957 were not reimbursement for traveling expenses while away from home under the purview of sections 62(2)(B) and 162(a)(2), I.R.C. 1954. Wright v. Hartsell, 305 F. 2d 221 (C.A. 9, 1962), distinguished.

The petitioner corporation which was organized in 1920 under the Membership Corporation Law of New York, operated during the taxable… Held: that the operation of said resort did not constitute the promotion of social welfare within the meaning of section 501(c)(4) of the 1954 Code; that said operation was petitioner's primary activity; and that for the taxable year, petitioner was not exempt from income tax under said statute, as an organization operated exclusively for…

Addition to Reserve for Bad Debt -- Sec. 166(c), I.R.C. 1954. -- The petitioner has no right under sec. 166(c) to deduct an addition to bad debt reserve for notes discounted and not then owned by it.

The promoters of a housing development of 315 homes, with the loans to be insured under section 213 of the National Housing Act, as amended, formed 16 nonprofit mutual corporations to hold title to… Held: the respondent did not err in allocating a single surtax exemption among the 16 petitioners under sections 269 and 482, I.R.C. 1954.

1. Held, that the amount paid by new employer to cover expenses of moving petitioners' household effects to place of new employment constituted… Held: that the amount paid by new employer to cover expenses of moving petitioners' household effects to place of new employment constituted taxable income to petitioners. 2. Held, that the amount paid by new employer for real estate commission on sale of petitioners' former residence constituted taxable income to petitioners.

On August 5, 1955, pursuant to the provisions of the New York City Administrative Code, the city was vested with title and the right to possession under an order of condemnation of certain real… Held: that the sale occurred under local law when the city was vested with title and the right to possession. Since such date was before the corporation adopted its plan of liquidation, the award does not qualify as a nonrecognizable gain under sec. 337(a), I.R.C. 1954.

Held, at the time of purchase, petitioner did not intend ultimately to demolish the building situated on the property purchased by petitioner in 1952 and an allocation of the purchase price between… Held: at the time of purchase, petitioner did not intend ultimately to demolish the building situated on the property purchased by petitioner in 1952 and an allocation of the purchase price between the building and the land was proper.

Under a pension agreement between decedent and his employer, funded by insurance and annuity contracts, in the event of decedent's death prior to normal retirement date employer was to arrange with… Held: The value of the annuity benefits includable in decedent's gross estate under section 2039, I.R.C. 1954, was the cost of providing decedent's spouse with specified income for life with no term certain.

Petitioner was controlling stockholder of a corporation which had in effect a tax-exempt pension trust plan providing insurance policies for employees. Held: The $ 4,800 paid was compensation taxable to petitioner, and the fair market value of the policy, less his basis in it, was ordinary income to him. Section 402(a)(2), I.R.C. 1954, providing capital gains treatment for certain pension trust distributions upon severance from employment, is not applicable.

Capital Outlay -- Ordinary and Necessary Expense -- Charitable Contribution. -- Expenditures made by an osteopath as a condition precedent to obtain the privileges of practicing as a staff member in a hospital to be constructed with these and other similar expenditures were not charitable contributions, were not ordinary and necessary expense deductions, but were capital outlays made to secure long-term advantages for the payors.

Held, (1) there was no overpayment in petitioner's 1943 excess profits tax; and (2) the deficiency in petitioner's 1943 taxes may reflect… Held: there was no overpayment in petitioner's 1943 excess profits tax; and (2) the deficiency in petitioner's 1943 taxes may reflect not only uncontested adjustments made by the Commissioner but also the amount of taxes previously assessed which were allowed as a credit under section 3806(b), I.R.C. 1939, in discharge of petitioner's…

Petitioner, a franchise Chevrolet and Buick dealer using the accrual method of accounting, contributed certain amounts to the advertising and promotional funds administered and operated by General… Held: that petitioner was required to accrue the amount of the refund as income in the the taxable year 1956. Held, further, that petitioner's method of deducting advertising expenses was proper and clearly reflected income.

Jurisdiction -- 90 or 150 Days for Filing -- Person Outside the United States -- Sec. 6213 (a), 1954 Code. -- If the person to whom the notice of deficiency is addressed is outside the United States at the time the notice is mailed and there dies, the 150-day period applies.

In its income tax returns for the taxable years in issue the petitioner took certain deductions for additions to its reserve for bad debts… Held: that the basic and ultimate issue for determination is the correctness of the respondent's action in disallowing the deductions, on the basis of the record herein, viewed in the light of the provisions of sec. 166, I.R.C. 1954, and not viewed merely in the light of the provisions of Mim. 6209 and rulings supplementary thereto.

1. Petitioner Reffett instituted action against UMWA for damages for destruction of his coal mine and equipment, and entered into contract with two witnesses to pay… Held: the amounts paid to the witnesses out of the recovery are not excludable from Reffett's gross income. Held, further, the amounts paid the witnesses are not deductible by Reffett. 2. Addition to tax for failure to file a declaration of estimated tax for the year 1954 sustained against petitioner Bolling.

1. Gain -- Divorce Property Settlement. -- The husband realized long-term capital gain from a Colorado court divorce decree transferring real property to the wife. United States v. Davis, 370 U.S. 65. 2. Loss -- Divorce Property Settlement -- Family Residence. -- A loss on the family residence transferred is not deductible. 3. Deduction -- Attorneys' Fees -- Divorce. -- No part of attorneys' fees, though allocable to the property division, is deductible.

1. Capital Gain or Ordinary Income From Single Sale of Acreage. -- Farmland bought and later sold as one piece was not held primarily for sale to customers in the ordinary course of any trade or business of the owner despite the fact that it was suitable for subdivision. 2.

Petitioners owned rice storage warehouses located adjacent to a rice mill of an agricultural marketing cooperative controlling 60 percent of the California rice industry. Held: the warehouses were public grain [warehouses] within the meaning of sec. 169(d)(2), I.R.C. 1954.

Held, that petitioner was availed of for the purpose of avoiding the income tax with respect to its shareholders, by permitting its earnings and profits to accumulate instead of being divided or… Held: that petitioner was availed of for the purpose of avoiding the income tax with respect to its shareholders, by permitting its earnings and profits to accumulate instead of being divided or distributed, for each of the taxable years here involved.

Decedent provided for establishment of a testamentary trust out of the residue of her estate with assets approximating $ 300,000, to pay the income to a 69-year old brother-in-law for life and, upon… Held: the trust instrument provided measurable standards limiting the power of invasion and the possibility of invasion of the corpus was so remote as to be negligible. Therefore the charitable bequests are deductible under section 2055 of the Internal Revenue Code of 1954.

Held, the fair market value of a retirement contract executed by decedent and his employer is includable in his gross estate under section 2039(a), I.R.C. 1954 (but not under section 2033, I.R.C.… Held: the fair market value of a retirement contract executed by decedent and his employer is includable in his gross estate under section 2039(a), I.R.C. 1954 (but not under section 2033, I.R.C. 1954).

Held, the administration of the Estate of Addison Miller was unduly prolonged beyond the end of 1955 and consequently the income of said estate for 1956 and part of 1957 was properly includable in… Held: the administration of the Estate of Addison Miller was unduly prolonged beyond the end of 1955 and consequently the income of said estate for 1956 and part of 1957 was properly includable in petitioner's income for 1956 and 1957.

Jurisdiction. -- Under section 272(a), I.R.C. 1939, and section 6213(a) I.R.C. 1954, when a timely petition has been filed in this Court by the proper representative of a decedent after receipt of a proper notice from respondent determining deficiencies in decedent's income tax, the subsequent filing of a claim by respondent for the same taxes for the same years in the State court in which administration of the decedent's estate is pending and action by that court thereon…

1. Collapsible Corporations, Sec. 117(m), I.R.C. 1939. -- Petitioner was a minority stockholder in four corporations constructing apartment… Held: these corporations were collapsible within the meaning of section 117(m). 2. In the other two corporations, costs exceeded the available capital and loans and the shareholders were called upon for additional funds. Petitioner was unable to provide funds and agreed to sell his shares to permit new investors to acquire his interest.

1. Petitioner is a transferee of Ethel Baker Kolb who was a tranferee of her mother (decedent) Justina C. Baker. Ethel F. Kaufman, a widow and sister of decedent, died testate in 1939. Held: that by reason of the 1941 agreement, Justina made a transfer of her one-half of one-third of the income and one-half of the remainder to her daughter Ethel, which transfers are includable in Justina's gross estate under section 2036(a)(1), I.R.C. 1954. 2.

1. V.G., a minority stockholder in T corp., in charge of its books and records, misappropriated funds from T and falsely recorded such misappropriations in T's books and records as corporate expenses… Held: in the circumstances of this case, T's returns for 1946-1954 were not false or fraudulent with intent to evade tax, and the Commissioner is not entitled to assess taxes otherwise barred. Sec. 276(a), I.R.C. 1939; sec. 6501(c), I.R.C. 1954. 2.

1. Held, petitioners, who sold savings and loan businesses with agreement to repurchase any mortgage notes defaulted within 18 months after the… Held: petitioners, who sold savings and loan businesses with agreement to repurchase any mortgage notes defaulted within 18 months after the sale, are required to include in income for the year of sale the balance of the reserves for bad debts established in connection with the notes transferred and deducted from taxable income. 2.

Decedent's husband died leaving his portion of community property to a testamentary trust. Held: the election by decedent to allow her share of the community property to pass into the trust created by her predeceased husband was a transfer with a retained life estate which did not constitute a bona fide sale for an adequate and full consideration in money or money's worth.

Held, that the amounts paid in 1954 and 1955 by petitioner to his wife under a decree of a Florida Circuit Court entered prior to March 1, 1954,… Held: that the amounts paid in 1954 and 1955 by petitioner to his wife under a decree of a Florida Circuit Court entered prior to March 1, 1954, ordering petitioner to make payments weekly as alimony unconnected with a divorce under section 65.09 of the Florida Statutes Annotated are not deductible under section 215 I.R.C. 1954.

In 1954, due to the poor health of petitioner Searles, Searles and his partner, petitioner Ferguson, decided to sell their partnership dairy business. Held: the transfer by Searles and Ferguson of their partnership assets to the Foundation for cash and a promissory note constituted the bona fide sale of a capital asset. Held, further, the rentals paid by the lessee-corporation to the Foundation were deductible as ordinary and necessary business expenses.

1. A corporation engaged in real estate development held not a collapsible corporation (sec. 117(m)(1)(2)(A), I.R.C. 1939) where at the time of the sale of its stock by petitioners 200 of its 474 residential lots had been sold and a substantial part of its total expected net income had been realized. Petitioners' gain on the sale of their one-half interest in the corporation's stock which they had held for more than 6 months was taxable as long-term capital gain.

Petitioner, in form, assigned three life insurance policies upon his life to a third party who, in accordance with an agreement between them, surrendered the policies, received the cash surrender… Held: the transaction between petitioner and the third party did not constitute a bona fide sale of the insurance policies but did constitute his personal surrender thereof through the third party as his agent.

Taxpayer purportedly borrowed money from banks to buy Treasury notes and Government bonds which were pledged as collateral to secure the loans with the proceeds upon maturity or resale being applied to payment of the loans. Held: Amounts paid to bank and designated as prepaid interest not deductible under section 163(a), I.R.C. 1954. As payments of interest, the transactions were shams.

Decedent had created a revocable inter vivos trust which was included in her gross estate but not in her probate estate. Held: The trust is entitled to deduct the trustees' fees in part for income tax purposes as an ordinary and necessary expense for the management of property held for the production of income ( sec. 212, I.R.C. 1954). 2.

1. Held, that where corporation B merged into corporation L and the latter then merged into petitioner, this Court has jurisdiction of the… Held: that where corporation B merged into corporation L and the latter then merged into petitioner, this Court has jurisdiction of the petition which petitioner filed for redetermination of income tax deficiencies determined against B; for as the result of said mergers, petitioner became directly and primarily liable for B's income tax…

1. Dividend-Bargain Purchase -- Title Acquired Indirectly. -- The Commissioner did not err in holding that the petitioner had received a dividend through a bargain purchase from petitioner's wholly owned corporation where he paid the purchase price and before the deal was closed, received a deed to the property.

Dividend -- Stockholders -- Ambiguous Contract. -- The Commissioner erred in holding that the petitioners sold bank stock for $ 375,000 and sold the bank building to the purchaser of the stock for $ 100,000, after receiving that real estate as a bargain purchase dividend from the bank.

Held, the Court is without jurisdiction with respect to the tax liability of the estate of John T. Eversole, deceased, for each of the years 1946, 1947, and 1948. Held: the Court is without jurisdiction with respect to the tax liability of the estate of John T. Eversole, deceased, for each of the years 1946, 1947, and 1948.