Volume 4 — Board of Tax Appeals

- Evidence of value of tangible properties and patents paid in for stock held to be insufficient to form a basis for the determination of such values, and the Commissioner's determination, both with respect to invested capital and depreciation of such assets, must be approved.

Upon the evidence held, that the assessment by the Commissioner on March 31, 1924, of a deficiency in respect of the tax for the calendar year 1917 was not barred by the statute of limitations. Held: that the assessment by the Commissioner on March 31, 1924, of a deficiency in respect of the tax for the calendar year 1917 was not barred by the statute of limitations.

Where a partnership engaged in a general brokerage business acquired seats on various exchanges from its members at an agreed valuation based on their then market value, under an agreement that, at the termination of the partnership, each seat should be returned to the member in whose name it stood at its then market value, any gain or loss in the meantime to be accounted for as partnership gain or loss, held, that, on the dissolution of the partnership, the difference between the values at dates of acquisition and disposition constitutes gain or loss for the purpose of determining the income of the partnership under the Revenue Act of 1917.

1. JOINT RETURNS OF HUSBAND AND WIFE. - In the case of a husband and wife residing in Louisiana and subject to the community property laws of that State, the husband is authorized to make return of income from community property, and such return, which contains a report of all the gross income produced by or accruing to both husband and wife, although made in the husband's name only, is the joint return required by law. 2.

1. On the evidence, held, that the petitioner proved no good will that can be included in its invested capital for the taxable year. 2. Held: that the petitioner proved no good will that can be included in its invested capital for the taxable year. 2. On the evidence, held, that agreements to subscribe for stock may be included in invested capital only when and to the extent that payments thereon are made. 3. Request for special assessment denied.

BAD DEBTS; DEDUCTION IN PART. - Under the Revenue Act of 1921. a corporate taxpayer is entitled when satisfied that a debt is recoverable only in part, to charge off the part not recoverable.

1. During the calendar year 1918 the taxpayer and The Republican Co. were affiliated, within the meaning of section 240 of the Revenue Act of 1918. 2.

1. VALUE OF NEWS PUBLICATIONS. - The original cost, plus that part of expense of building up and developing a news publication circulation structure capitalized, held, upon the… Held: upon the evidence, to be the measure of the value of the investment when paid in to a corporation in exchange for stock. 2. GAINS FROM SALES, - Amounts received from the sale of assets, the cost of which has been either charged to expense or fully recovered by depreciation, are income.

Taxpayer's decedent purchased securities at a cost of $108,461.25. His estate returned said securities for Federal estate-tax purposes at $98,084.83. It sold said securities for $97,657.83. Held: upon these facts standing alone, that the estate established prima facie a deductible loss of $426.17.

Value of good will not determinable.

A liability to respond in damages for breach of contract occurring in 1920, which taxpayer does not admit to the injured party and does not accrue on its books, is not a proper deduction for the taxable year in which the breach occurred.

Profit on sale of an undivided interest in a partnership for shares of stock in a corporation determined.

Profit on sale of an undivided interest in a partnership for shares of stock in a corporation determined.

The evidence is insufficient to support a redetermination of deficiency.

A corporation otherwise exempt from tax is not deprived of exemption because it carries on profitable or competitive activities in furtherance of its predominant religious, charitable, scientific, or educational purpose.

The income and profits tax paid by the taxpayer corporation to the government of Porto Rico during the year 1919 upon its income for the year 1918, under a law passed in 1919, is a credit against the income, war-profits, and excess-profits tax paid by the taxpayer corporation for the calendar year 1919 under section 238(a) of the Revenue Act of 1918.

Value of inventory at the date of the death of the decedent determined.

Taxpayers are life tenants under a trust which includes depreciable assets. Held: that, under section 219 of the Revenue Act of 1918, life beneficiaries are not entitled to allowances which rate to capital transactions and the corpus of the estate. Article 347, Regulations 45, as amended by T.D. 2987, approved.

Reserves for damages and casualties are not allowable deductions.

1. Where income is derived in part from trading as a principal and in part from contracts with coal producers, involving the use of capital in financing such producers and marketing their coal, and… Held: that the stock was not issued solely for good will and that evidence of sales to customers procured by such individuals was insufficient to establish that good will had any cash value. 4.

1. In 1919 the water level in the Chicago River suddenly and unexpectedly receded and thus exposed part of the foundation piles under the decedent's building. These piles immediately started to rot, which caused the wall on the river side to settle to such extent that the collapse of the building threatened. The cost of shoring up the wall and repairing the foundation was a proper deduction from gross income under section 214(a)(1), Revenue Act of 1918. 2.

1. Expenses of exhibiting horses at state fairs, such horses being used to advertise the business of the taxpayer, held to be proper deductions from income. 2. Bonuses paid to business employees held to be proper deductions from income.

1. Deduction for exhaustion of leasehold on basis of March 1, 1913, value allowed. 2. Deduction for obsolescence of building disallowed.

1. Capitalized value of contracts acquired without cost may not be included in statutory invested capital or exhausted ratably for the purpose of taking annual deduction from gross income. 2. Taxpayer's request for inventory adjustments denied.

1. Where expenditures were made, partly for a new roof and partly for an old roof, held, that only the amount which can be identified as having been expended for repairs may be deducted. 2. Held: that only the amount which can be identified as having been expended for repairs may be deducted. 2. In determining gain or loss on conversion of capital assets, due allowance must be made for depreciation. 3.

1. A transfer tax paid by the executors from the residuary fund of the estate to the State Tax Commissioner of West Virginia is a proper legal deduction from gross income. 2. An inheritance tax paid by the executors to the State of Connecticut is allowable as a deduction from the gross income of the estate.

After taxpayer had paid a general contractor for the construction of a building, but before subcontractors and material men had been paid, the general contractor became insolvent, and the… Held: that the amounts so paid constituted a loss deductible by taxpayer in 1920 and were in no sense a part of the cost of the building.

1. Evidence held insufficient to show any error by the Commissioner in adjusting inventories. 2. Evidence held insufficient to show any payment for good will.

1. Upon the evidence, held, that the taxpayer did not, in the year involved, ascertain a debt to be worthless. 2. Held: that the taxpayer did not, in the year involved, ascertain a debt to be worthless. 2.

1. Held, that the evidence establishes that the taxpayer acquired good will for stock, but is insufficient to establish the value thereof. 2. Held: that the evidence establishes that the taxpayer acquired good will for stock, but is insufficient to establish the value thereof. 2. The taxpayer is entitled to have its profits tax assessed under section 328 of the Revenue Act of 1918. 3.

Upon the evidence, held, that the petitioner and Potterton Brothers. Inc., were affiliated. Held: that the petitioner and Potterton Brothers. Inc., were affiliated.

In the case of an appeal pending before the Board at the time the Revenue Act of 1926 became effective, in which the only allegation of error related to a year for which no deficiency had been… Held: that the Board is without jurisdiction under the 1926 Act to determine whether an overpayment of tax has been made for such year which may be applied to reduce a deficiency for another year.

For the fiscal year ending March 31, 1921, taxpayer sustained a net loss as defined in section 204(a) of the Revenue Act of 1921. Held: that no part of such net loss may be allowed as a deduction.

In conformity with the statutes of the States of Indiana and Ohio, certain citizens desiring to obtain electric service constructed certain transmission lines at a cost of $10,500 and transferred the… Held: that the transmission lines, which became the property of the taxpayer upon being transferred to it by the constructors, did not constitute taxable income within the meaning of the Sixteenth Amendment to the Constitution and the Revenue Act of 1921.

On the facts, held, that the taxpayer was a member of the partnership of T. R. Goodlatte & Sons until April 1, 1920, but that his partnership interest during the first three months of that year was… Held: that the taxpayer was a member of the partnership of T. R. Goodlatte & Sons until April 1, 1920, but that his partnership interest during the first three months of that year was only his percentage of the quarterly profits which the partners termed deferred salary.

Disallowance of the deduction for losses on bad debts sustained upon the evidence.

The value of good will paid in to a corporation for shares of capital stock determined.

1. Cost of advertising for promoting sale of Liberty bonds, held to be an ordinary and necessary business expense. 2. Rates of depreciation determined. 3. Invested capital adjusted.

The taxpayer and the Maryland Coal & Coke Co. were not affiliated during the calendar year 1920.

1. Under the 1918 amendment to the National Banking Act, three banking associations agreed to unite their business and assets and to continue the business under the charter of one of such… Held: that no new corporate entity was created, the effect of the statute being to merge the identity of two of such associations in the third, whose corporate existence continued. 2.

A certain leasehold held to have had no value, at the time acquired, for invested capital purposes.

Proof insufficient to determine debt to be worthless.

Under the facts, held, that merchandise actually purchased, whether the price was fully paid or not, and sold during a taxable year, should be added to purchases during the year, even if the taxpayer… Held: that merchandise actually purchased, whether the price was fully paid or not, and sold during a taxable year, should be added to purchases during the year, even if the taxpayer was on the cash receipts and disbursements basis.

1. Salaries paid or credited to a corporation's officers under authority of resolutions duly adopted by its board of directors, held to have been reasonable… Held: that the taxpayer did not derive taxable income as to the amounts retained by the city during the years here in question, and on the reorganization completed a closed transaction whereby it exchanged its contingent claims for capital stock in the new company, at that time the stock having no fair market value.

1. Amounts paid out of earnings by a corporation as premiums on the lives of its officers in excess of that part of premiums which is applicable to pure term… Held: under the evidence, that the taxpayer being on the accrual basis, received taxable gain in 1920 and 1921 from the sale of houses when it permitted the building and loan association to hold as security a portion of the purchase price which it received as payments were made to the building and loan association.

1. When a question as to the jurisdiction of the Board is raised, that question must be determined before the Board proceeds further with the proceeding. Frost Superior Fence Co.,1 B.T.A. 1096; A. H. Stange,1 B.T.A. 810. 2. It is not the duty or province of the Board to decide questions of policy in the administration of the office of the Commissioner. Clois L. Green,2 B.T.A. 148. 3.

Petitioner appealed from a notice of the Commissioner which was not a statutory deficiency notice and from which no appeal lay to the Board; thereafter, when more than 60 days had elapsed from the… Held: that since the limitation had run against its appeal, its remedy was barred and that it could not, by process of amendment, constitute a void appeal to be a timely appeal.

Where the taxpayer, in making up inventories, arbitrarily deducted 7 per cent from invoice price of goods to compensate for discounts, held, that such method is not a compliance with art. 1583 of… Held: that such method is not a compliance with art. 1583 of Regulations 45.

Held, on the evidence, that the taxpayer is not entitled to a deduction on account of obsolescence of machinery. Held: on the evidence, that the taxpayer is not entitled to a deduction on account of obsolescence of machinery.

Item allowed as invested capital.

1. Where the Commissioner determined a deficiency for one year and an overassessment of tax for another, such overassessment not arising from the denial of any claim for abatement of a deficiency,… Held: that the Board has no jurisdiction of the appeal. 2. Section 274(g) of the Revenue Act of 1926 denies to the Board jurisdiction over such an appeal, and supersedes the decision of the Board in Appeal of E. J. Barry,1 B.T.A. 156.

1. The Revenue Act of 1926, section 283(b), does not give jurisdiction to the Board of an appeal over which it had no jurisdiction under the Revenue Act of 1924. 2.

1. Cost of Imperial Russian Government Fifth War Loan bonds allowed as a deduction in 1920 as a debt ascertained by the taxpayer to be worthless and charged off in that year. 2. Indebtedness evidence by a bond may be ascertained to be worthless prior to the maturity date of the bond.

The amount of salaries paid to officers which may be deducted from gross income in tax returns determined.

The defermination of the Commissioner that inadequate depreciation had been deducted in prior years is approved in the absence of sufficient evidence to show that it is erroneous.

The basis for determining gain or loss on the sale of stock of an insurance company which had originally been doing business as a mutual company, is the cost and not the value when acquired in 1914, regardless of what factors enter into the value.

The cost of stock determined for the purpose of determining gain on the sale thereof.

- Club-room rentals and taxi fares incurred for the benefit of a corporation but paid by an employee are not proper deductions from the employee's gross income, in the absence of evidence that the employee's compensation was fixed in an amount intended to cover such expenses.

PATENTS; BASIS OF DEDUCTION FOR EXHAUSTION. - The owner of certain patents in the year 1912 granted the exclusive right of user during the life of the latest patent. The basis for the statutory deduction on account of exhaustion held to be the March 1, 1913, value of the contract, and, upon the evidence, the value of that contract found to be the amount of $100,000.

1. Value of assets acquired by corporation in exchange for stock is not proven by evidence that two small blocks of stock were subsequently acquired at par by two stockholders who gave their notes… Held: that depreciation must be computed in accordance with section 234(a)(7) of the Revenue Acts of 1918 and 1921 and that it is unaffected by sections 326 and 331 of such Acts.

1. The Board has jurisdiction of an appeal by the taxpayer from the determination of a deficiency, the sole object of which appeal is to secure a determination by the Board that the deficiency should be increased. 2. Evidence in the record reviewed and held to be insufficient to enable the Board to determine whether the treatment accorded by the Commissioner to certain payments made by the taxpayer was correct or incorrect. In the circumstances, the determination made by the Commissioner must be approved.

1. The doctrine of res adjudicata did not, under the Revenue Act of 1924, operate to make a finding of fact in a former case, involving 1918, as to the value of patents, conclusive as to such fact in a case involving 1919. 2. A finding of fact by the Board is entitled to the presumption of correctness and, when introduced in a subsequent case, throws the burden of going forward on the opposing party. 3.

Bonuses paid employees in 1920 as additional compensation for services rendered in 1919 in lieu of increases in regular salaries, no legal obligation to the employees being incurred in 1919, are not deductible in 1919 as expenses incurred in that year.

The value of shares of stock at December 25, 1917, determined.

Petitioner asserts that it is entitled to relief under sections 327 and 328 of the Revenue Act of 1918. Commissioner affirmed without consideration of merits of case because of insufficiency of proof.

Exhaustion, wear, tear, and obsolescence: Rate of 5 per cent held to be proper under the circumstances.

The evidence of record does not prove such an abnormality of invested capital or income as warrants the determination of tax liability under section 328 of the Revenue Act of 1918.

In 1915 the taxpayer charged to surplus certain improvement accounts shown by its books. Held: upon the evidence, that the taxpayer is entitled to include in invested capital the depreciated cost of the improvements charged to surplus in 1915.

Held, that the amount of certain notes payable involved herein should not be included in the taxpayer's invested capital.

Where a taxpayer, reporting income on the basis of cash receipts and disbursements, enters into an agreement by the terms of which the actual payment to it of interest is deferred to the succeeding… Held: that the interest so paid is income to it in the year in which received.

On the evidence, held, that the taxpayer was not a personal service corporation. Held: that the taxpayer was not a personal service corporation.

The Federal estate tax imposed by the Revenue Act of 1916 accrued one year after the death of the decedent; and where the accounts of an estate were kept on the accrual basis, the estate tax was a proper deduction from the gross income of the estate for the year in which it accrued, notwithstanding the fact that the Commissioner extended the time for payment.

The evidence does not show that the taxpayer ascertained, during the year 1920, a debt in the amount of $60,353.02 to have been worthless.

1. The value of certain shares of stock forming a part of the gross estate of the decedent determined. 2. Loans on insurance policies on the life of the decedent, in which the widow of the decedent was beneficiary, deducted from the face of the policies in making settlement thereunder, held not to constitute claims against the estate of the decedent.

1. Actual cash value of leases of theatre buildings in excess of rentals remaining to be paid at time of acquisition of such leases for stock determined, for invested capital and depreciation… Held: upon the evidence, that the issuance of the entire capital stock was within the control of G., and, therefore, sec. 331 of the Revenue Act of 1918 should be applied in valuing the assets so transferred.

1. Taxpayer exchanged its capital stock for a mixed aggregate of tangible and intangible property. Held: that the amount thereof should be allocated to the classes of assets according to their cash value at the time paid in, and that the taxpayer may include in invested capital as paid-in surplus the excess of the actual cash value of the tangibles over the par value of the capital stock allocated thereto and good will to the extent of…

1. On the evidence, held, that the taxpayer is entitled to a deductible loss on account of the abandonment of plans to build a hotel in 1919. 2. Held: that the taxpayer is entitled to a deductible loss on account of the abandonment of plans to build a hotel in 1919. 2. The March 1, 1913, value of real estate determined. 3. The amount of deductible loss sustained on account of abandoning plans to build a railroad is based on the cost of the stock of the railroad.

Books of account of the taxpayers held to reflect gross profits from sales of merchandise.

Amounts invested in oil leases in wildcat territory, which became worthless during the taxable year as the result of the sinking of dry wells, are deductible as losses from gross income.

Amount spent for improvements and repair of leased premises in accordance with provisions of lease, held to constitute a capital expenditure, the cost of which should be depreciated over the life of the lease.

The Commissioner's computation of petitioner's income upon the accrual basis approved.

James Butler Grocery Co. owned directly 90 per cent of the voting stock of James Butler, Inc., and the remaining 10 per cent of the stock of the latter was owned by the majority stockholders of the James Butler Grocery Co., who also owned all, or substantially all, of the voting stock of the other four corporations who are also parties to this proceeding. Held, that the first two corporations mentioned were affiliated under clause (1) and that the last four corporations mentioned were affiliated under clause (2) of subdivisions (b) and (c), respectively, of section 240 of the Revenue Acts of 1918 and 1921.

Under section 326(a) of the Revenue Act of 1918, interestbearing demand promissory notes of solvent and responsible makers, actually and bona fide paid in for preferred stock of a Kansas corporation, constitute invested capital of such corporation at the time paid in to the extent of their actual cash value.

1. JOINT RETURNS OF HUSBAND AND WIFE. - A return purporting to contain all of the gross income produced by or accruing to both husband and wife, although made in the husband's name only, is a joint return in accordance with the statute. 2.

1. JOINT RETURNS OF HUSBAND AND WIFE. - A return purporting to contain all of the gross income produced by or accruing to both husband and wife, although made in the husband's name only, is a joint return in accordance with the statute. 2.

1. JOINT RETURNS OF HUSBAND AND WIFE. - A return purporting to contain all of the gross income produced by or accruing to both husband and wife, although made in the husband's name only, is a joint return in accordance with the statute. 2.

Leaseholds valued for invested capital purposes and as a basis for an allowance for depreciation.

1. The Board is without jurisdiction to redetermine an overassessment for any year in which no deficiency is asserted. 2. Loss from transactions in oil leaseholds determined and allowed.

Value of certain securities received as compensation for services determined.

Value of certain securities received as compensation for services determined.

Value of certain securities received as compensation for services determined.

Credit balances in the accounts of the officers of the corporation which were allowed to remain in the business were borrowed capital.

1. In a general plan for the acquisition of the property of a corporation, a group of individuals first bought the stock. Held: a case within section 331, Revenue Act of 1918, and such property included in new corporation's invested capital at same figure as applied to old corporation. 2. A corporation's invested capital is not affected by a change of ownership of its stock.

1. The Board, having jurisdiction of the subject, must consider all matters necessary to the exercise of jurisdiction. 2. Held: that the two corporations were affiliated on and after April 10, 1920. 8. Quoere: Whether all corporations involved in a question of affiliation are proper parties in a proceeding before the Board?

As the taxpayer operated his business as a sole proprietorship, money withdrawn from the cash drawer by him but included in gross profits should not be charged to him a second time as income from salary.

Certain amounts paid to officers and stockholders and deducted as compensation for services rendered, held to have represented a distribution of profits.

Held, that the stockholders of a corporation are not the owners of the corporate property, and that the sale by the stockholders of their stock does not in any way affect or change the corporation's… Held: that the stockholders of a corporation are not the owners of the corporate property, and that the sale by the stockholders of their stock does not in any way affect or change the corporation's invested capital.

Upon the evidence, held, that the taxpayer is not entitled to deduct its liability on account of unreturned bags in making its income and profits-tax returns for the taxable years. Held: that the taxpayer is not entitled to deduct its liability on account of unreturned bags in making its income and profits-tax returns for the taxable years.

1. Value of leasehold paid in to the Washington Hotel Co. at the date of its organization for capital stock determined for invested capital purposes, and as of March 1, 1913, for exhaustion. 2. Consolidated invested capital increased to include the aggregate amount by which the assets are understated on the books of the affiliated companies. 3.

Under the provisions of the Revenue Act of 1926, where an appeal has been taken from the determination of a deficiency in gift tax, the Board has jurisdiction to hear the appeal and determine any overpayment, even though the tax may have been paid after the appeal was taken. The same jurisdiction is extended by the Act to appeals taken under section 308 (a) of the Revenue Act of 1924, prior to and undetermined at the date of the enactment of the Revenue Act of 1926.

1. Evidence held insufficient to show that the Commissioner's determination of the fair market price or value of buildings, machinery, and equipment on March 1, 1913, and the cost of subsequent… Held: that the Commissioner should have allowed a deduction for 1919 of $33,000 as account of debts ascertained to be worthless and charged off within that year. 4.

Replacement cost of depreciable assets as of March 1, 1913, depreciated from the date of acquisition to that date, can not, in the absence of other evidence, be accepted as the value for depreciation allowances for the taxable years in question.

MARCH 1, 1913, VALUE OF LAND. - Comparative selling values of two nearby tracts of land shortly prior to and following March 1, 1913, held, to be proof of the March 1, 1913, value of petitioner's property.

The cost of buildings, machinery, furniture and fixtures determined for depreciation purposes.

In the case of an insurance company which retires from business and reinsures its policy risks, paying for such reinsurance an amount equal to the unearned premiums on the policies, the net decrease in reserves for unearned premiums is properly to be included in computing gross income.

Upon the evidence, the petitioner's claim for deduction of bad debts for 1919 allowed, and disallowed for 1920.

The invested capital of the taxpayer can not be determined and the tax should be computed under the provisions of section 328 of the Revenue Act of 1918.

1. On the evidence, held, that the invested capital of the petitioner was correctly determined by the Commissioner. 2. Held: that the invested capital of the petitioner was correctly determined by the Commissioner. 2. The Commissioner granted a refund claim filed by the petitioner and afterwards reversed that ruling and asserted a deficiency based on the facts involved in the claim for refund.

The deceased was a member of a partnership. He reported his income on the basis of a calendar year and it reported its income on the basis of a fiscal year ending January 31. He died August 15, 1920. Held: that only his distributive share of its net income for its fiscal year ending January 31, 1920, should be included in his return for 1920.

Under the Revenue Act of 1918, the March 1, 1913, value of certain shares of stock should not be reduced by the amount of a tax-free distribution made thereon in 1917, in determining the gain derived from the sale thereof in 1919.

1. Value of patent determined on the evidence. 2. The taxpayer is entitled to have its taxes assessed under section 210 of the Revenue Act of 1917, on the ground that its invested capital can not be determined.

1. Upon the evidence, held, that the value of 50 shares of stock, received in 1923 as compensation for services rendered, constitutes income in that year. 2. Held: that the value of 50 shares of stock, received in 1923 as compensation for services rendered, constitutes income in that year. 2.

1. An attempted assignment of the rents, issues, profits, interest and income from a trust created under a will, to be paid to the use of the taxpayer, held invalid under the laws of New York. 2. The amount paid by a wife to her husband under an agreement providing that, in consideration of his giving up the sea-faring profession, she would divide her income with him equally, and each would bear all expenses equally, is not deductible as a business expense.

Payments by the taxpayer to its stockholders, held to constitute a distribution of profits.

The fair market value of shares of stock, received by the taxpayer as compensation for personal services, determined.

The fair market value of shares of stock, received by the taxpayer as compensation for personal services, determined.

An individual conducted a business as a sole proprietor and took inventories and determined profits as of June 30, and December 31 of each year. Held: that, in the absence of evidence showing the true profits of the business from January 1 to May 13, 1918, the action of the Commissioner in making his allocation of profits should not be disturbed.

The petitioner and Kolynos, Inc., were affiliated during the fiscal years ended August 31, 1917, 1918, and 1919, respectively.

1. A corporation took over the business and assets of another corporation which had taken over the business and assets of successive partnerships, the first of which was engaged in the general… Held: that the taxpayer corporation, which was organized in 1917, was the successor of a business which was in existence on August 1, 1914, and as such does not come within the proviso of section 240(a) of the Revenue Act of 1918. 2.

Where mining machinery is discarded due to the abandonment of a mine, the taxpayer may deduct from gross income in the year of abandonment the difference between the depreciated cost and the salvage value.

1. The consistent accounting practice of a seller of fungible goods to accrue the price fixed by its sales contracts as income in the year of the contract, when the evidence shows that all parties in the trade regard title to the goods as passing at that time and not at the time of later delivery and payment, held correctly to reflect income. 2.

Taxpayers were corporations organized and doing business in the State of Iowa during the year 1918 and until July 1, 1919, when their assets were sold and they subsequently dissolved during the year… Held: that the net losses for so much of the year 1919 as expired prior to the dissolution were allowable as deductions from net income for 1918.

Evidence held insufficient to show that the Commissioner's computation of petitioner's income for 1920 upon the percentage basis was erroneous.

The prior that patent rights paid in to a corporation in 1912 in exchange for $15,000 special capital stock had no actual cash value in 1919, does not entitle the taxpayer to deduct from gross income of the year 1919 the amount of $15,000 under the circumstances stated herein.

1. Control by one corporation, through a long-term lease, of the property and business of another corporation does not constitute control of the stock of such other corporation. 2. Held: that the lessor corporations were not entitled to affiliation with the assignee.

1. Premiums received on the sale of capital stock held to constitute paid-in surplus and properly included in invested capital. 2. Held: that notes given to cover unpaid balances on stock subscriptions may be included in invested capital. 3.

Held, that a loss due to the destruction of a pleasure automobile by collision is not such other casualty as is deductible from gross income under the Revenue Act of 1921, section 214(a)(6), as… Held: that a loss due to the destruction of a pleasure automobile by collision is not such other casualty as is deductible from gross income under the Revenue Act of 1921, section 214(a)(6), as amended.

1. Upon incorporation of a joint venture, a portion of the property acquired by the corporation was transferred to it at cost to the joint venturers under a written agreement which provided that the… Held: that such net profits constituted taxable income of the individuals and not of the corporation. 2.

1. The taxpayer filed with the Commissioner an appeal from a so-called 30-day letter and a claim in abatement of proposed additional tax for 1918. Held: the Board has no jurisdiction of an appeal relating to the year 1918. 2. As a portion of the taxpayer's brewery plant was continued in use after 1919, although to a lesser extent, in making near-beer, an allowance for obsolescence can not be made for that year based on that portion becoming obsolete by the end of 1919. 3.

1. TITLE OF LAND ACQUIRED BY GIFT. - The taxpayer made a grant in the nature of a gift by word of mouth of a definite tract of land to his… Held: that under the facts in this case, and the statutes of the State of Georgia, the said son and daughter were on the 26th day of November, 1919, the owners of their said respective tracts of land and of all the standing timber thereon, and properly accounted for their respective shares of the gains resulting from the sale of such…

1. Value of leases and options acquired for stock determined for the purpose of computing the annual deduction on account of the exhaustion thereof. 2. Held: that a loss through damage to certain machinery by fire was a proper deduction for 1919.

1. Personal service classification denied. 2. Upon the evidence, held, that $7,500 was reasonable compensation of petitioner's president for 1920. Held: that $7,500 was reasonable compensation of petitioner's president for 1920.

Upon the evidence, held, that the taxpayer is not entitled to depreciate its inventory at December 31, 1919, for the purpose of determining its tax liability for 1919. Held: that the taxpayer is not entitled to depreciate its inventory at December 31, 1919, for the purpose of determining its tax liability for 1919.

Petitioners formed a partnership in 1920 and took over cattle at their cost to a predecessor partnership. Held: the petitioners may reflect in their 1920 returns the decrease in the value of the cattle which occurred subsequent to their acquisition in 1920.

A disposition of stock under the circumstances of this appeal held to have been a sale under the provisions of section 202(a) of the Revenue Act of 1918 and not an exchange of stock for stock under… Held: further, that the fair market value of the right to subscribe for stock of another corporation received as a part of the consideration for the stock sold should be included in determining the gain or loss upon such sale.

1. Amounts paid for acquiring title to certain inventions represented by applications for patents and expenses incident thereto are capital expenditures and in the instant proceeding must be treated as elements of invested capital. 2.

Deductions for exhaustion, wear and tear of machinery and equipment, and the profit upon the sale of real estate determined from the evidence.

NET LOSS: OPERATION OF BUSINESS REGULARLY CARRIED ON BY THE TAXPAYER. - Where, in order to further its regular business, a petitioner operating an advertising agency purchased stock in another… Held: that the loss thus sustained on the purchased stock should be included among other losses in the computation of the statutory net loss under section 204(a)(1) of the Revenue Act of 1918.

Under the laws of Kentucky a corporation may continue, after its dissolution, to act for the purpose of closing up its business, for a period of time reasonable for such purpose. Held: under the facts of this case, that the petitioner corporation may properly maintain this proceeding, although dissolved under the laws of Kentucky on December 29, 1920.

Under the Revenue Act of 1921, a wife in California was entitled to file a separate return and be taxed separately upon her separate earnings.

Petitioners and their wives, residents of California, were not entitled, under the provisions of the Revenue Acts of 1921 and 1926, to file separate returns for the calendar years involved upon the community property basis and be taxed each upon one half of the income of the community.

Contribution to chamber of commerce for purchase of camp site disallowed.

The agreement or contract involved herein held to create a leasehold interest in land, and the value thereof should be included in invested capital as tangible property.

1. A taxpayer keeping its books of account and making its income-tax returns for 1916 and subsequent years upon the accrual basis and deducting from gross income for the years 1916 and 1917 royalties shown by its books of account to have accrued but not to have been paid, and compromising its liability for such royalties in 1921 for an amount less than the amount shown by its books of account, is not entitled to restate its net income for the years 1916 and 1917 by excluding…

1. Amount of paid-in surplus to which the petitioner is entitled, determined. 2. Held: that said amount may be included in invested capital. 3. Petitioner purchased $25,000 par value of its own stock for $60,000 cash, $45,000 of which was borrowed. Held, that invested capital should be reduced to the extent that the total amount paid exceeds the current earnings available at the date of purchase. 4.

1. A voluntary unincorporated association, composed of employees of a railroad company, or its successors, and of its or their affiliated, controlled, and leased lines, organized for the purpose of establishing and managing a relief fund for the payment of benefits to its members, in case of sickness, accident, or death, whose business is conducted by executive officers under the supervision of an advisory committee, a majority of which is elected by the members of the…

The transfer by tenants in common of their undivided interests in a number of oil leases to a corporation in exchange for the capital stock of that corporation resulted in taxable income under section 202 of the Revenue Act of 1918.

The error alleged is that the Commissioner refused to permit the petitioner to value its inventories on the average-cost method. Held: that if the Commissioner obtains a result that is just and reasonable, it will not be disturbed, regardless of the method used in making the computation, and that the proof does not show that the result obtained by the Commissioner is incorrect.

The superintendent of the Bureau of Water of the City of Syracuse is exempt from income tax upon the salary received by him as such superintendent during the years 1922 and 1923, under section 1211 of the Revenue Act of 1926.

1. The Board is without jurisdiction to redetermine overassessment for a year in which no deficiency has been asserted. 2. Held: that the funds advanced for the construction of a railway track constitute a loan by the petitioner to the railroad company.

Interest involved herein held to have been paid by the taxpayer on May 1, 1918, and May 1, 1922, and, the taxpayer being on the cash receipts and disbursements basis, such interest is not deductible from gross income for the fiscal years ended April 30, 1918, and April 30, 1922.

In determining whether the net income for 1922 is in excess of $25,000 and the credit of $2,000 provided for by section 236(b) of the Revenue Act of 1921 is to be allowed, the net loss provided for by section 204(b) may not be deducted.

Profit from sale of land, and amount of exhaustion, wear and tear of assets, determined.

1. The taxpayer credited to another corporation, which was the record owner of real property, the sum of $1,500, to be drawn upon and used by the latter to pay taxes and interest charges due on land… Held: under the facts, the amount is not deductible by taxpayer either as a bad debt or as interest and taxes paid by it. 2.

1. The petitioners acquired property by gift made prior to March 1, 1913, and now claim a loss as the result of its sale or other disposition. Held: that the loss, if any, can not be determined in the absence of proof of value at the date of acquisition. 2.

1. Under the facts stated, held, that cash received through the issuance of convertible notes may be included in invested capital. Appeal of Middleton Compress & Warehouse Co.,1 B.T.A. 1145. 2. Held: that cash received through the issuance of convertible notes may be included in invested capital. Appeal of Middleton Compress & Warehouse Co.,1 B.T.A. 1145. 2.

The evidence does not show that the good will of the taxpayer's business had a fair market value on March 1, 1913; hence, the taxpayer did not sustain any deductible loss from the fact that he could not continue his business after national prohibition became effective in 1919.

1. Held, that the transaction involved herein between the Trust Company of Georgia and certain stockholders of that company constituted a joint vanture. 2. Held: that the transaction involved herein between the Trust Company of Georgia and certain stockholders of that company constituted a joint vanture. 2. The amount of gain realized by the stockholders of the Trust Company of Georgia who participated in the joint venture, determined.

1. The interest on Anglo-French Loan bonds and British Government bonds, owned by a foreign corporation, but held within the United States, is not income from sources within the United States within… Held: not to be a proper deduction in computing net income for that year.

1. The interest on Anglo-French Loan bonds and British Government bonds owned by a foreign company but held in the United States is not income from sources within the United States within the meaning of the Revenue Act of 1918. 2.

1. Payments by a brewery corporation of dues to a brewery association organized and legally conducted for the purpose of furthering the interests of its members are ordinary and necessary expenses deductible from gross income in the corporation's income-tax returns. 2. The taxpayer corporation purchased 476 of its own bonds in 1919 at less than the issue price. Held, that it received no taxable income from such purchase.

1. The taxpayer entered into an agreement with his wife, on March 10, 1900, which declared that each was an owner of an undivided one-half interest of all of… Held: that a partnership existed between the parties for the years 1918 and 1919. 2. The partnership included in its inventory at December 31, 1919, certain merchandise which was afterwards found to be worthless. Held, that the inventory may not be reduced by the amount of the goods discovered to be worthless in 1920.

Upon the evidence, held, that debts owing to petitioner by certain foreign subsidiaries which it charged off during the year 1918 were… Held: that debts owing to petitioner by certain foreign subsidiaries which it charged off during the year 1918 were worthless and constituted proper deductions from gross income for that year; also that petitioner's investments in corporations in Germany and Austria-Hungary were worthless on December 31, 1918, and were deductible as losses…

- The petitioner during the year 1919 in accordance with its regular method of accounting accrued and set up on its books, as a charge against 1919 business, items of interest, collection expenses,… Held: that all such items as finally adjusted were proper charges against 1919 gross income and lawful deductions for that year.

1. Shares of stock valued as of March 1, 1913, for determination of gain or loss on liquidation of corporation. 2. Held: the loss is not deductible from 1920 income as it was not sustained until the sale was completed.

Installment sales provisions held not applicable to transactions where improved real estate is sold for a consideration paid by a cash payment of approximately 25 per cent and notes secured by mortgage for the balance which notes are in the same year sold for cash.

Action of the Commissioner in denying a deduction for bad debts, approved.

In the absence of evidence that the action of the Commissioner in failing to reduce the excess-profits tax for the fiscal year ended July 31, 1919, under section 328 of the Revenue Act of 1918, was erroneous, his determination must be approved.

Held, under the evidence, that amounts received by the taxpayer under perpetual-care contracts were received in trust and are not taxable profits. Held: under the evidence, that amounts received by the taxpayer under perpetual-care contracts were received in trust and are not taxable profits.

Expenditures held to be ordinary and necessary expenses.

1. Commissions earned by a partnership which kept its books of account and made its returns on an accrual basis became income for the years in which earned and were a part of the distributive shares of the partners in those years, regardless of the year in which the commissions were collected. 2. Petitioners, not being on an accrual basis, are not subject to tax on salaries until received. 3. Commissioner's adjustment of inventory approved. 4.

Upon all the evidence, held, that the petitioner was affiliated with the New York Central R.R. Co. during the years 1918, 1919, and 1920.

1. The value of a leasehold at March 1, 1913, determined. 2. In determining the profit on the sale in 1919 of a leasehold acquired prior to March 1, 1913, the value at the basic date should be reduced by the amount of exhaustion taking place between that date and the date of sale.

The C Co. owned 50 per cent of the stock of the D Co. The J Co. owned the other 50 per cent, and because of its financial obligations to the C Co. it placed its stock in escrow and agreed not to vote. Held: under all the circumstances, that C Co. and D Co. were affiliated under the Revenue Act of 1918.

1. Evidence held insufficient to support claimed valuation of building for invested capital and depreciation purposes. 2. Commissioner's allocation of loss on account of returned merchandise approved. 3. Commissioner's adjustment of invested capital on account of prior years' taxes approved.

A liability to respond in damages for breach of contract occurring in 1920, which liability taxpayer does not admit to the injured party and does not accrue on its books, is not a proper deduction for the taxable year in which the breach occurred.

Where a corporation failed in 1917, and thereafter, until its legal dissolution in 1923, did no business of any kind, held no corporate meetings and exercised no corporate rights or privileges,… Held: the income in question was income of the partnership and not of the corporation.

1. The so-called tentative return, for the taxable year 1918, filed by the petitioner on or about March 15, 1919, is not the return… Held: that the proposed rejection in part of the claim for abatement is, to the extent that the amount of the rejection exceeds the tax shown by the petitioner on its return, to wit, $3,509.67, a determination of a deficiency by the Commissioner after June 2, 1924, and that jurisdiction lies in the Board to hear and determine the appeal.

1. For lack of evidence, the determination of the Commissioner that the taxpayer is not entitled to assessment under section 328 of the Revenue Act of 1918 is approved. 2. Held: that the taxpayer did not make a contribution during the taxable year for the erection of a school building for its employees.

1. The valuation of an Associated Press franchise determined for invested capital purposes. 2. Held, under the evidence, that withdrawals by officers were not dividends. Held: under the evidence, that withdrawals by officers were not dividends.

1. Upon the evidence, held, that the sale by a partnership, composed of the petitioners, of its businesses, including its tangible and intangible assets, was a single transaction and the gain or loss… Held: that the sale by a partnership, composed of the petitioners, of its businesses, including its tangible and intangible assets, was a single transaction and the gain or loss upon the sale of the good will may not be computed separately. 2.

An amount paid by the executor in satisfaction of a note of the decedent allowed as a deduction in determining the net estate.

Certain amounts credited to the taxpayer on the books of a corporation held not to be dividends.

On the facts stated, held, that expenditures for copper rolls should be capitalized and not charged to expense. Depreciation rate on said rolls determined. Held: that expenditures for copper rolls should be capitalized and not charged to expense. Depreciation rate on said rolls determined.

On the facts stated, held, that the Washington Porcelain Co. was affiliated with the Star Porcelain Co. and the Frenchtown Porcelain Co. for the years 1920 and 1921. Held: that the Washington Porcelain Co. was affiliated with the Star Porcelain Co. and the Frenchtown Porcelain Co. for the years 1920 and 1921.

The Commissioner's method of averaging the cost in the case of the sale of stock upon which a stock dividend has been declared and rights to subscribe for additional stock have been issued and exercised, approved.

Upon the evidence, held, that certain notes were not ascertained to be worthless and charged off the books of the petitioner during the taxable year. Held: that certain notes were not ascertained to be worthless and charged off the books of the petitioner during the taxable year.

Upon the evidence, held, that petitioner is entitled to a deduction of debts determined to be worthless and charged off within the year 1923. Held: that petitioner is entitled to a deduction of debts determined to be worthless and charged off within the year 1923.

- The Board is unable to compute and allow a deduction based upon the alleged obsolescence of saloon fixtures and equipment when only the cost of an aggregate of items, some of which continued in use, is furnished and there is no testimony respecting the cost or remaining value of the portion of the property the use of which is continued, or the salvage value of that which ceased to be usable.

A lessor is not entitled to a depletion deduction based on discovery value unless it appears that such value is materially disproportionate to the cost.

The availability of the defense of the statute of limitations in and of itself is not a sufficient ascertainment of worthlessness to justify the charging off of a note as a bad debt.

Under the conditions of fact existing in this proceeding the petitioner is not entitled to classification as a personal service corporation.

1. On the evidence, held, that the taxpayer was a personal service corporation during the years 1918, 1919, and 1920. 2. Held: that the taxpayer was a personal service corporation during the years 1918, 1919, and 1920. 2.

Upon the evidence, held, that the petitioner is not entitled to a deduction from his income for the taxable year under the provisions of section 204(b) of the Revenue Act of 1921. Held: that the petitioner is not entitled to a deduction from his income for the taxable year under the provisions of section 204(b) of the Revenue Act of 1921.

Held, under the facts in this case, where the petitioner enterea into a contract in 1910 for the sale of a piece of real estate for a definite sum and thereafter, in 1920, made a conveyance thereof for the amount theretofore agreed upon, depreciation of the buildings on the property is not a factor entering into the determination of gain or loss on the sale.

AFFILIATION. - Petitioner held not affiliated with a company which owned all the capital stock of a third company to which the petitioner leased its property under a long-term lease.

The amounts deducted by the petitioner as salaries of officers and employees for the taxable year were reasonable, and the income and profits-tax return for such year was made without fraudulent intent.

Accounts neither ascertained to have been worthless nor charged off the petitioner's books of account in the taxable year are not deductible from gross income.

In the absence of unusual circumstances the price at which property is sold establishes its value, and in the absence of any showing of such circumstances opinion evidence will not be regarded as sufficient to establish a value greatly in excess of that shown by a bona fide transaction.

1. Value of certain property at March 1, 1913, determined from evidence. 2. Depreciation of buildings must be considered in computing loss or gain from the sale thereof.

Actual losses proved by competent evidence are the only basis for deduction for obsolescence of tangible property.

On June 21, 1920, the petitioner and others, being the owners of an undivided interest in a patent and licenses issued thereunder, transferred their interests in said patent and licenses to a… Held: that in the circumstances of this proceeding petitioner was entitled to a deduction for 1920 and 1921 for the exhaustion of her interest in the patent.

Held, that a liquidating dividend was received in 1920 and not in 1919 as determined by the Commissioner. Held: that a liquidating dividend was received in 1920 and not in 1919 as determined by the Commissioner.

Where an agreement exists between husband and wife domiciled in the State of California that the wife's salary is to be her separate property, she may report that salary in a separate return.

Salary earned prior to marriage may be reported by the wife in her separate return.

Under the Revenue Act of 1921, a wife in California was entitled to file a separate return and be taxed separately upon her separate earnings. Estate of George W. Randall,4 B.T.A. 679.

Coupons payable January 1, 1923, and deposited in a bank for collection on December 23, 1922, constitute income of the owner for the year 1923 and not for the year 1922.

1. A bookkeeper without authority from directors credited net earnings of a corporation to personal accounts of shareholders. Held: such net earnings were earned surplus and invested capital for the entire taxable year. 2. On the evidence, held, that the petitioner is not entitled to relief under section 210 of the Revenue Act of 1917.

1. DEPRECIATION. - Value and life of buildings determined. As to other assets, proof held insufficient. 2. Held: that the amounts so distributed were not loans by the taxpayer to the corporation with which it is affiliated and that the invested capital of the taxpayer was properly reduced by the amount of the distribution.

In the case of property acquired in exchange for stock prior to March 3, 1917, if the value thereof is clearly and substantially in excess of the par value of the stock… Held: that to the extent such proceeds were expended in the acquisition of a similar site, the petitioner is entitled to relief under the provisions of section 234(a)(14). Held, that the value of certain demand notes given by the stockholders to the petitioner may not be included in invested capital.

The record cards of a corporation engaged in business as a dispensing optician, upon which cards there is written or drawn specific data and measurements from which new lenses and frames may be made, are tangible property, and the value thereof may be included in invested capital.

1. The Board has no jurisdiction to entertain an appeal from a determination by the Commissioner of deficiencies in excise taxes for the years 1909, 1910, 1911, and 1912, levied under the Corporation… Held: that the actual cash value, at the date of acquisition, of the circulation of the Decatur Despatch, acquired by the petitioner for capital stock in 1906, was $4,500, and the invested capital, as determined by the Commissioner, should be increased by this amount.

- Petitioner and his wife in 1922 were residents of California. Held: that the Commissioner erred in including the salary of the wife in the income of the petitioner.

1. GAIN FROM DISPOSITION OF CORPORATE STOCK. - Prior to June, 1919, petitioner had acquired and then owned 300 shares of stock of Mechanics American National Bank of St. Louis. Held: that this transaction resulted in the realization of no gain to the petitioner. 2.

A corporation purchased tangible property for $2,500,000 cash, derived from bonds and preferred stock issued at its organization, and, during… Held: that the petitioner was a new corporation and acquired the property of the old corporation in exchange for stock, that the property so acquired had an actual cash value at the time paid in, in February, 1906, of $1,650,000, and that in computing the invested capital for the years involved this amount should be included therein.

1. An amount paid by a taxpayer on account of a fine, penalty and court costs for violating the anti-trust law of a state, and attorneys' fees incident to the defense of taxpayer against an indictment for such violation, held not to be deductible as an ordinary and necessary expense of taxpayer's business. 2. Rates of depreciation of property determined.

The petitioner erected an obstruction in a public highway. One Emery drove his automobile into the obstruction and was killed. His executors brought suit to recover damages. Held: that the reserve set up before the final determination of the liability may not be deducted from gross income.

Evidence held insufficient to warrant a modification of the deficiency.

1. Dividends paid in 1917 are taxable at 1917 rates to the extent of 1917 earnings available for distribution at the time of the declaration of the dividend. Edwards v. Douglas,269 U.S. 204; 46 Sup.Ct. 85; 5 Am.Fed. Tax Rep. 5666. 2. Commissioner's finding by pro rata method that one-sixth of 1917 earnings was available for distribution on March 1, 1917, approved. Douglas v. Edwards,287 Fed. 919; 2 Am. Fed. Tax Rep. 1890.

COMMUNITY PROPERTY. - In 1921 the petitioner, who with his wife was domiciled in California, collected income from corporate securities which were acquired subsequent to their marriage but were kept in the wife's safe deposit box, to which he had access. Held, the evidence is insufficient to overcome the presumption that the securities were community property, and the income therefrom held taxable to the petitioner. United States v. Robbins,269 U.S. 315; Appeal of D. Cerruti,4 B.T.A. 682.

In January, 1913, petitioners sold certain ore-bearing property and each of them received in exchange for its or his interest therein a certain amount in cash and forty-one non-interest-bearing… Held: that the amounts received by petitioners upon the payment of their respective notes in the years 1919, 1920, 1921, and 1922, in excess of the fair market value of such notes on March 1, 1913, which value was in excess of cost, was taxable income.

The mere stipulation that certain expenditures were "development expenses" is not sufficient to change the ruling of the Commissioner that part thereof was not deductible under section 214(a)(1) of the Revenue Act of 1918.

An individual who is bound to exercise reasonable care, skill, and diligence pertaining to the business of his clients, and who may be liable to damages if he fails to do so, is not entitled to deduct from gross income an amount set up on his books of account as a reserve to provide for such contingent liability.

1. A deduction of $10,000 on account of the loss of a security acquired subsequent to March 1, 1913, for that amount, allowed. 2. Held: that expenditures paid or incurred in years subsequent to the fiscal year ended July 31, 1919, by reason of its continued existence and in connection with the matter of final settlement of its affairs, were not proper deductions from gross income for the fiscal year ended July 31, 1919.

Petitioner was not a personal service corporation during 1918 and 1919.

Held, that the taxpayer derived no taxable gain from the reorganization herein. Held: that the taxpayer derived no taxable gain from the reorganization herein.

An opinion of a witness can have weight to prove value only if there is reason to believe that it is held by one whose general and specific knowledge and whose ability to form an opinion entitle him to speak with some measure of authority.

Under the terms of the sales contract in this appeal, providing for deferred payments with interest, held, that the compensation paid for deferment of principal was interest and not a part of… Held: that the compensation paid for deferment of principal was interest and not a part of original consideration for the stock purchased.

Depreciation charges made on the books of the petitioner prior to 1917 for a series of years on a systematic basis, will not, for invested capital purposes, be disturbed without evidence that the depreciation written off by the petitioner was not actually sustained.

Value of farm land at March 1, 1913, determined.

1. Amounts received from a lottery, although such lottery is illegal, are taxable. Appeal of James P. McKenna,1 B.T.A. 326. 2. Payments made to an attorney for his client, and retained in part by the attorney to secure payment of his fees and disbursements, are taxable income to the client on a cash basis in the year in which paid over by the attorney.

1. The placing of a value upon certain stock by the District Court in a suit not involving parties before the Board does not render the question of value res adjudicata. See Appeal of Union Metal Manufacturing Co.,4 B.T.A. 287. 2. The taxpayer, having a 20 per cent distributive interest in the Henry F. Suhr Trust Estate, and both being on the cash receipts and disbursements basis, is not taxable for the year 1917 on the interest for 1917 on certain bonds received in 1921. 3.

1. Late in December, 1917, due to increased production and the discontinuance of water transportation facilities theretofore used, it became necessary for petitioner to acquire a new site and to… Held: that petitioner was entitled to deduct for obsolescence the unextinguished cost of its buildings on December 31, 1917, ratably over the years 1918 and 1919 and the first six months of 1920. 2.

Held, that the deduction for exhaustion, wear and tear of property during the taxable years should have been computed upon the basis of the value of the property on March 1, 1913, and upon the cost… Held: that the deduction for exhaustion, wear and tear of property during the taxable years should have been computed upon the basis of the value of the property on March 1, 1913, and upon the cost of additions subsequent thereto.

1. Loss upon sale of stock allowed. 2. March 1, 1913, value of certain buildings determined.

Amounts paid for ordinary repairs are deductible from gross income even though in excess of the annual average.

1. Personal service classification denied. 2. The action of the Commissioner in including in gross income $6,828.44, a portion of a reserve for advertising short rates, approved.

A partnership sold a part of its assets and divided the balance among the partners upon the basis of values placed upon them by accountants, which values were less than book values. Held: that the evidence does not show that the partners sustained a loss as a result of the division of the assets among them.

1. Additional compensation for the year 1921, authorized in 1922, is not a deductible item for 1921. 2. A motion made by the Commissioner to decrease invested capital for each year to the extent of the full tax paid for the prior year, instead of prorating such tax from the time it became due and payable, denied under authority of section 1207 of the Revenue Act of 1926.

Cost of building certain houses ascertained for purpose of determining the gain resulting from the sale thereof.

1. A South Dakota corporation may legally accept promissory notes worth par in payment for the issuance of its corporate stock. 2. Held: that such loss is deductible in 1920, the books being kept upon an accrual basis.

1. When a corporation liquidates and its assets are taken over by its stockholders, who conduct the business as a partnership, the transaction is controlled by section 201(c) of the Revenue Act of 1918. 2. When it is shown that no market overt existed at the time and place of transfer of property, its fair market value may otherwise be shown.

Value of real estate determined for invested capital purposes.

Debts claimed to be worthless but not charged off the petitioner's books of account are not legal deductions from gross income.

The depreciated cost of machinery discarded during the year held a proper deduction from gross income for such year.

Evidence held insufficient to show that certain expenditures involved herein should be capitalized.

Held, that the dividends involved herein were paid from 1917 earnings only to the extent that there were such earnings on January 17, 1917, the date the dividends were declared. Held: that the dividends involved herein were paid from 1917 earnings only to the extent that there were such earnings on January 17, 1917, the date the dividends were declared.

In the case of a sale of real estate, where the initial payments, other than evidences of indebtedness of the purchaser, received within the taxable year 1922, are less than one-fourth of the purchase price, the taxpayer may return as income the proportion of such payments which the total profits realized or to be realized bear to the total contract price. (Sec. 212(d) and sec. 1208, Revenue Act of 1926.)

1. Additional salaries of officers for 1919 disallowed. 2. A loss by fire fully compensated by insurance does not affect invested capital. 3. In the absence of any evidence, a penalty assessment must be approved.

Income from share of distributive profits of a partnership determined.

1. The same individual owned and controlled the stock of the Hayes Textile Co., Inc., and the Hayes Knitting Co. during 1918 and 1919. Held, that the two corporations were affiliated for 1918. 2. Held: that the two corporations were affiliated for 1918. 2.

Determination of Commissioner approved for want of proof.

Where there is no evidence that property transferred within three months prior to the date of death was not transferred in contemplation of death, held, that the transfer was made in contemplation of… Held: that the transfer was made in contemplation of death within the meaning of the statute.

A corporation owning and operating a mine and claiming a deduction from gross income of an amount for depletion based upon an estimated tonnage of coal in place, and the mine becoming completely exhausted during one of the taxable years under review, thereby proving that the number of tons of coal in place was substantially less than the estimated number of tons upon which the claim for depletion for earlier years was based, is entitled to have its claim for depletion for the year in which the mine was exhausted revised and to have the undepleted cost of the coal in place at the beginning of the taxable year taken as a deduction for depletion for such year.

A corporation which through a change of business conditions, has no use for a building erected for a particular purpose and abandons the building, is entitled to deduct from gross income in the year of abandonment the loss sustained by reason of such abandonment.

Losses sustained in farming, when engaged in as a business, are deductible.