Volume 41 — Tax Court Memorandum

During calendar years 1967 through 1970, transferor corporation paid to petitioner, or paid on behalf of petitioner, assets with a fair market value in excess of the tax deficiency and additions to… Held: Under section 6901(a), I.R.C. of 1954, petitioner is liable as transferee of the assets of the corporation for all taxes and additions to tax previously found to be owed by the corporation.

Held, petitioner Frank Bower is entitled to the 1973 dependency exemption deduction for petitioners' son. Held: petitioner Frank Bower is entitled to the 1973 dependency exemption deduction for petitioners' son.

For all of 1975 petitioners had custody of three children from a prior marriage of petitioner-wife. The children's noncustodial parent furnished a total of $2,140 for their support. Held, petitioners have not clearly established that they provided more than the noncustodial parent for the support of the children and are not entitled to the dependency exemptions and credits for the children.

Held, transfers of property by the decedent within 3 years of her death were made in contemplation of death. Held: transfers of property by the decedent within 3 years of her death were made in contemplation of death.

Petitioner owned and operated a bar at Incline Village, Nev., known as The Chessmen, Inc., a subchapter S corporation in 1970. Held: Petitioner had unreported income in 1969 in excess of the operating loss of The Chessmen, and was entitled to no net operating loss carryover to 1970. 2. Petitioner had unreported income in 1970 in amount determined by respondent. 3. Petitioner failed to prove entitlement to business and entertainment expenses for 1970. 4.

Petitioners' wholly-owned corporation transferred funds to petitioners during the years before the Court; some of these transfers were repaid during these years. Held: On the basis of the record herein, the net transfers were loans and not constructive dividends.

Petitioner-wife worked as a waitress in the staff dining room area of a restaurant (coffee shop) in a Las Vegas, Nevada, casino-hotel. Held: (1) Amount of tip income is determined. (2) Petitioners' constitutional and other objections are without legal merit. (3) Respondent's determination of an addition to tax under sec. 6653(a) (negligence) is sustained.

In 1976, petitioner was a state district court judge in Alabama. Held: deduction for club dues denied as not primarily for business purposes under section 274(a), I.R.C. 1954; heldfurther, deductible amount for gifts to fellow-employees determined under the limits of section 274(b) and (d), I.R.C. 1954; heldfurther, deductible automobile expense determined; heldfurther, deduction for office in the home…

Individual petitioners owned all of the stock in corporate petitioner and were two of eight stockholders in another, unrelated corporation. Held: corporate petitioner is not entitled to a business expense deduction under section 162, I.R.C. 1954, or a loss deduction under section 165, I.R.C. 1954, for the payment of a portion of the settlement; heldfurther, the payment of the settlement was a constructive dividend to the individual petitioners; Held further, the individual…

Petitioner worked as a taxi driver in Las Vegas, Hevada.He filed no income tax returns and kept no records for the years in issue. Held: Petitioner failed to prove that respondent erred in determining petitioner's tip income.(2) Petitioner failed to prove that respondent erred in determining petitioner's kickback, or commission, income. (3) Respondent's determination of an addition to tax under sec. 6651(a) (failure to file return) sustained.

Decedent executed a will leaving substantially all his estate to his son and naming his son as executor. Held: Under California law, the bank's claim on the guaranty was not extinguished by failure to file a claim against the estate since the claim was secured; (2) under sec. 2053, I.R.C. 1954, the estate is entitled to a deduction for the bank's lien, but the amount of the deduction must be reduced by the value of the right of subrogation…

Held: 1. Respondent failed to prove by clear and convincing evidence that any part of the underpayment of tax by petitioners for 1971 and 1972 was due to fraud. Held: Respondent failed to prove by clear and convincing evidence that any part of the underpayment of tax by petitioners for 1971 and 1972 was due to fraud. Addition to tax under sec. 6653(b), I.R.C. 1954, not approved. 2.

P, who had knowledge of the requirements for filing Federal income tax returns and of the requirements for paying tax on his income, filed no such returns and paid no such tax, and he kept no… Held: on facts so deemed admitted, the Commissioner has established that the underpayments of tax were due to fraud, and a default judgment will be entered with respect to the deficiencies in income taxes and the additions to tax under sec. 6654.

Held, petitioners are not entitled to miscellaneous business expense deductions in excess of amounts allowed by respondent; held further,… Held: petitioners are not entitled to miscellaneous business expense deductions in excess of amounts allowed by respondent; held further, petitioners are not entitled to deduct claimed medical care expenses under sec. 213, I.R.C. 1954; held further, the increase by respondent of petitioners' gross income for 1974 is not erroneous;…

Held, part of the underpayment of petitioners' 1971, 1972, and 1973 Federal income taxes was due to fraud on the part of petitioner Gilbert L. Lane, Sr., and therefore, the imposition of the fraud… Held: part of the underpayment of petitioners' 1971, 1972, and 1973 Federal income taxes was due to fraud on the part of petitioner Gilbert L. Lane, Sr., and therefore, the imposition of the fraud addition to tax against him for those years is sustained. Sec. 6653(b), I.R.C. 1954.

In 1974, P was employed as a computer operator. During the year, he was also enrolled in college courses. Held: the educational expenses incurred by P, including any related traveling expenses, were personal expenses and not ordinary and necessary business expenses. Sec. 1.162-5, Income Tax Regs.Held, further, the tuition aid payments which P received from his employers were includable in his gross income.

Held, value of lodging furnished to P by his employer is includable in his gross income during the years in issue since he failed to meet all the requirements for exclusion under sec. 119, I.R.C. 1954.

Ps' attorney prepared and Ps timely executed elections and consents to have their corporation taxed as a small business corporation. Held: Ps failed to meet their burden of proving that such elections and consents were ever filed with the IRS. Accordingly, Ps are not entitled to a deduction for the net operating losses incurred by their corporation.

Petitioner's entitlement to deductions under secs. 170, 162 and 213, I.R.C. of 1954, determined. Petitioner's entitlement to, and amount of, casualty loss deduction under sec. 165 determined. Sec. 6653(a) addition to tax, for negligence, found inapplicable.

In 1975, petitioners sold Residence 1 and acquired Residence 2. Gain from the sale was rolled over under sec. 1034(a), I.R.C. 1954. In 1976, petitioners sold Residence 2 and acquired Residence 3. Held: Petitioners failed to prove that respondent erred in determining that sec. 1034(a) did not apply to the gain from the sale of Residence 2.

Ps. who were farmers, contracted with an individual, who was related to them, to harvest their crop. Held: the Commissioner's disallowance of a deduction for a portion of the fee sustained, since Ps failed to prove that any amount greater than that allowed by the Commissioner was an ordinary and necessary business expense under sec. 162(a), I.R.C. 1954.

In 1976, petitioners sold Residence 1 and purchased Residence 2; later in that year, petitioners sold Residence 2 and purchased Residence 3 as a result of petitioner-husband's transfer by his employer to a new principal place of work. Gain from the sale of Residence 1 was "rolled over" under sec. 1034(a), I.R.C. 1954. Held: Respondent's determination that petitioners must recognize gain from the sale of Residence 2 is sustained. Sec. 1034(d), I.R.C. 1954(pre-1978).

Petitioner bought and sold substantial amounts of stocks and bonds during the years in issue. Held, petitioner was not a dealer in securities; therefore, stocks and bonds are capital assets in the hands of the petitioner within the meaning of sec. 1221, I.R.C. of 1954.

Ps purchased a restaurant under a sales agreement which contained no covenant not to compete. Held: Ps failed to adduce strong proof of the existence of such a covenant, and accordingly, they are not entitled to deduct any of the purchase price as payment for such a covenant.

Held: The expenses incurred in 1973 by petitioner, a flight surgeon/aviation pathologist/aviation medical examiner employed by the U.S. Navy, in maintaining his proficiency as… Held: The expenses incurred in 1973 by petitioner, a flight surgeon/aviation pathologist/aviation medical examiner employed by the U.S. Navy, in maintaining his proficiency as a private pilot are deductible under sec. 162(a), I.R.C. 1954, and the amplifying regulations, sec. 1.162-5, Income Tax Regs.

Petitioners claimed a deduction under sec. 170, I.R.C. 1954, for alleged contributions to the Church of the Brothers and claimed other alleged expenses were deductible under secs. 164, 165 and 212. Held: petitioners have not substantiated the claimed contributions. Held further, even if contributions were substantiated, the Church of the Brothers was not an organization under sec. 170(c)(2) to which deductible contributions could be made.

Held, petitioner is entitled to relief from tax liability as an innocent spouse under section 6013(e), I.R.C. 1954. Held: petitioner is entitled to relief from tax liability as an innocent spouse under section 6013(e), I.R.C. 1954.

Ps' minor son, M, had emotional and learning problems which hindered his achievement in the public schools. Held: the private school was not a special school under sec. 1.213-1(e)(1)(v)(a), Income Tax Regs., since the ordinary education provided by it was not incidental to medical care, and therefore, the payments to the school are not deductible as medical expenses under sec. 213, I.R.C. 1954.

Held: Interest free loans from parents to their son and a family corporation on open account or evidenced by demand notes do not give rise to taxable gifts. Held: Interest free loans from parents to their son and a family corporation on open account or evidenced by demand notes do not give rise to taxable gifts. Crown v. Commissioner, 67 T.C. 1060 (1977), affd. 585 F.2d 234 (C.A. 7, 1978), followed.

H and W claimed deductions for charitable contributions, business expenses, and a payment of interest. They also claimed deductions for contributions made to an individual retirement account. Held: (1) H and W failed to prove that they were entitled to deductions for charitable contributions, business expenses, and a payment of interest in excess of the amounts allowed by the Commissioner; (2) H was an active participant in a retirement plan established for its employees by the U.S. and therefore was not eligible to make contributions to an individual retirement account; and (3) Part of the underpayment of tax for each year in issue was due to negligence.

Taxpayers elected to treat the cutting of timber as a sale or exchange of a capital asset pursuant to sec. 631(a), I.R.C. 1954. Held: the fair market value of such timber as of January 1, 1971, January 1, 1972, October 1, 1972, and January 1, 1973, determined.

Held: Amounts paid to petitioner-husbands were reasonable compensation (within the meaning of sec. 162(a)(1), I.R.C. 1954), and so constituted earned income for purposes of the limitations on tax… Held: Amounts paid to petitioner-husbands were reasonable compensation (within the meaning of sec. 162(a)(1), I.R.C. 1954), and so constituted earned income for purposes of the limitations on tax (maxitax) provided by section 1348.

Ps, H and W, deducted as a moving expense the cost of transporting H's children from the Philippines to the U.S. Prior to such time, Ps' principal place of abode was the U.S., and H's children's… Held: Since prior to their move H's children's principal place of abode was not the same as Ps, Ps are not entitled to deduct the cost of transporting such children to the U.S.Sec. 217(b)(3)(C), I.R.C. 1954.

Held, deductions for employee travel expenses, medical expenses, and theft and casualty losses determined. Held: deductions for employee travel expenses, medical expenses, and theft and casualty losses determined.

From 1968 through 1975, petitioner was employed by Hill Air Force Base and assigned to the Hill Air Force Base range to which he regularly commuted. In 1975 petitioner received an allowance pursuant to 5 U.S.C. sec. 5942 as compensation for the hardship of commuting to a remote workplace, the range, from 1971 through 1975. Held, the allowance received by petitioner is includable in gross income under sec. 61(a), I.R.C. 1954. Held further, transportation costs incurred by petitioner in commuting between his home and the base or the range are nondeductible personal expenses under sec. 262. Held further, transportation costs related to petitioner's travel between the base and the range are deductible under sec. 162 in the year paid.

Held, miscellaneous deductions determined. Held Further,sec. 6653(a), I.R.C. 1954, addition to tax for negligence imposed. Held: miscellaneous deductions determined. Held Further,sec. 6653(a), I.R.C. 1954, addition to tax for negligence imposed.

Held, petitioner is not entitled to claimed rental and automobile expense deductions; held further, petitioner is not entitled to a legal and other professional services expense deduction in excess… Held: petitioner is not entitled to claimed rental and automobile expense deductions; held further, petitioner is not entitled to a legal and other professional services expense deduction in excess of the amount allowed by respondent.

Petitioner is a professional service corporation established by four clinical departments of a teaching hospital associated with the University of Maryland School of Medicine. Each of petitioner's stockholders is a physician on the full-time faculty of the School of Medicine who devotes all of his time to the medical school and the hospital. Held, petitioner is organized and operated exclusively for exempt purposes under sec. 501(c)(3), I.R.C. 1954. University of Mass. Medical School Group Practice v. Commissioner, 74 T.C. 1299 (1980); B.H.W. Anesthesia Foundation v. Commissioner, 72 T.C. 681 (1979), followed.

Held, 1. Petitioners' gross income determined. 2. Edward C. Lee is not entitled to claimed educational and travel expense deductions. 3. Held: Petitioners' gross income determined. 2. Edward C. Lee is not entitled to claimed educational and travel expense deductions. 3. Edward C. Lee is not entitled to claimed miscellaneous deductions. 4. Imposition of additions to tax under sec. 6651(a) and sec. 6653(a) sustained. 5.

Respondent mailed the notice of deficiency to the address on petitioner's letterhead, which contained an erroneous zip code. Respondent had used this address for several previous letters which had all reached petitioner in due course. Petitioner never received the notice of deficiency and filed his petition approximately 3 years after issuance of the notice. Held, respondent reasonably relied upon the address communicated by petitioner and thus the notice of deficiency was sent to petitioner's last known address. Respondent's motion to dismiss for lack of jurisdiction is granted.

Held: Lodging furnished to petitioner while he was employed as an equipment engineer on the Alaska pipeline project was not on the business premises of the employer. Held: Lodging furnished to petitioner while he was employed as an equipment engineer on the Alaska pipeline project was not on the business premises of the employer. Accordingly, the value of the lodging is not excludable from gross income under section 119.

Held, part of the underpayment of petitioner's 1973 and 1974 Federal income taxes was due to fraud with intent to evade tax under section 6653(b), I.R.C. 1954. Held further, respondent failed to prove by clear and convincing evidence that any part of petitioner's underpayment of tax for 1972 was due to fraud.

Petitioner's receipts from certain construction jobs were deposited in a separate bank account. Petitioner's two 50-percent shareholder-officers withdraw equal amounts from this account. Held: The deposits (or withdrawals) are not deductible as compensation (sec. 162(a)(1), I.R.C. 1954). (2) Respondent's determination of additions to tax under section 6653(a) (negligence) sustained.

Held, part of the underpayment of petitioner's 1974 and 1975 Federal income taxes was due to fraud with intent to evade tax under section 6653(b), I.R.C. 1954.

Held: Educational expense deduction disallowed because petitioners did not establish that courses taken by petitioner-husband were sufficiently related to his trade or business. Held: Educational expense deduction disallowed because petitioners did not establish that courses taken by petitioner-husband were sufficiently related to his trade or business. Secs. 262, 162, I.R.C. 1954.

Petitioner-husband was the pastor of a local, independent church in Rapid City, South Dakota. Held: (1) Petitioners' deductible business expenses are determined. Sec. 162, I.R.C. 1954. Held: Petitioners' deductible business expenses are determined. Sec. 162, I.R.C. 1954. (2) Notice of deficiency is valid.

1. Petitioner's operation of a farm was an activity not engaged in for profit so that losses incurred in each of the years in issue are not deductible pursuant to sec. 183, I.R.C. 1954. 2. Petitioner failed to prove that his basis in real property sold in 1974 was greater than determined by respondent. 3. Mobile homes purchased by petitioner in 1975 did not qualify for investment credits under sec. 48(a)(3), I.R.C. 1954. 4.

Held, petitioner understated his taxable income for 1972 and 1973. Held further, part of the underpayment of taxes for 1972 and 1973 was due to fraud with intent to evade tax under section 6653(b), I.R.C. 1954.

Petitioner worked as a waiter in the production showroom in a Las Vegas, Nevada, casino-hotel. Held: (1) Amount of tip income is determined. Held: Amount of tip income is determined. (2) Respondent's determination of additions to tax under sec. 6653(a) (negligence) is sustained.

Petitioner worked as a waitress in a coffee shop and in the production showroom in a Las Vegas, Nevada, casino-hotel. Held: (1) Amount of tip income is determined. Held: Amount of tip income is determined. (2) Respondent's determination of additions to tax under sec. 6653(a) (negligence) is sustained.

Petitioner worked as a waiter in a dining room and in the production showroom in a Las Vegas, Nevada, casino-hotel. Held: (1) Amount of tip income is determined. (2) Respondent's determination of additions to tax under sec. 6653(a) (negligence) is sustained.

Held: Petitioner Judith Goldstein was not in the trade or business of teaching in 1973 and 1974, and so educational expenses incurred by her are not deductible. Sec. 162, I.R.C. 1954.

During 1977, P earned wages. P claimed that she was not taxable on such wages because of her membership in a religious order which required her to give all of her income to such order. Held: P failed to introduce any evidence with respect to such religious order; therefore, the wages earned by P were taxable to her.

In 1977, P received income. He claimed that under a vow of poverty, he had transferred such income to the Life Science Church, and that, as a result, he was exempt from the Federal income tax. Held: P failed to prove that the Life Science Church existed, or that, if it existed, such church was not P's alter ego, or that P donated his income to such church; and therefore, P was not exempt from the Federal income tax.

Petitioner-husband was a general partner in, and Commission salesman for, a securities brokerage, investment, and financial services firm. Held: The 30-percent limit of section 911(b), I.R.C. 1954, applies to petitioner-husband's commission income in determining his earned income for purposes of the limitation on tax (maxitax) provided by section 1348 (pre-1979).

Held, part of the underpayment of petitioner's taxes for each of the years at issue was due to fraud with intent to evade tax under section 6653(b), I.R.C. 1954.

Petitioner and her son operated the family farm as a partnership. Held, petitioner failed to prove that there was an implicit agreement allocating the full amount of the partnership's income to her son. Held further, petitioner was entitled to a distributive share of one-half of the partnership's income for 1973 and 1974.

Ps transferred funds to S, a corporation of which H was a shareholder, and claimed a deduction for such transfers as a research and experimental expense carried on in Ps' behalf. Held: such transfer was a nondeductible contribution to capital and not reimbursement to S for research carried on in Ps' behalf. Sec. 174(a)(1), I.R.C. 1954; sec. 1.174-2(a)(2), Income Tax Regs.

Held, certain accounting and other expenses incurred by petitioner, a bank holding corporation, were incurred in connection with the acquisition of the stock of another bank, a capital asset, and must be capitalized and are not deductible as ordinary and necessary business expenses.

Held, no part of the payments received by petitioner as a resident in a hospital are excludable from gross income as a scholarship or fellowship grant under sec. 117, I.R.C. 1954. Held: no part of the payments received by petitioner as a resident in a hospital are excludable from gross income as a scholarship or fellowship grant under sec. 117, I.R.C. 1954.

(1) During 1975, in order for Ps to be full-time employees, they incurred and paid expenses for the care of their son. Held: the payments to W's sister are not deductible child care expenses. Sec. 214(e), I.R.C. 1954. (2) During 1975 and 1976, H was employed as an air pollution analyst. During such period, H attended law school, and his studies helped to improve or maintain his job skills. Ps claimed a deduction for the expenses of H's law studies.

Held: (1) Respondent's determination that petitioners had unreported income sustained; (2) additional deductions for business expenses… Held: Respondent's determination that petitioners had unreported income sustained; (2) additional deductions for business expenses denied; (3) sec. 1244, I.R.C. 1954, loss disallowed; (4) claimed nonbusiness bad debt deduction denied; (5) capital loss deduction disallowed; (6) sections 6651(a) and 6653(a) additions to tax imposed; (7)…

In Sept. 1975, P was employed as an iron worker in St. Johns, Ariz., on the construction of an electrical generating plant. Held: while P was employed in St. Johns, he was not away from home within the meaning of sec. 162(a), I.R.C. 1954, since his employment was not temporary; therefore, P was not entitled to deduct the expenses for meals and lodging incurred by him in St. Johns.

Held, petitioner is not entitled to a casualty loss deduction under sec. 165(c)(3), I.R.C. 1954, for coconut palm trees destroyed by lethal yellowing.

Ps and R's delegate executed a consent extending the period of the statute of limitations in this case, but such consent was not dated. Held: R failed to carry his burden of proving that such consent was executed prior to the running of the period of limitations.

Held, petitioners' income determined. Held further, additions to tax imposed by respondent sustained. Held: petitioners' income determined. Held further, additions to tax imposed by respondent sustained.

Held, petitioner's gross income determined. Held further, additions to tax imposed by respondent sustained. Held: petitioner's gross income determined. Held further, additions to tax imposed by respondent sustained.

Held, petitioners' rental of their Hawaiian condominium is an activity engaged in for profit; Held further, a previous judgment against petitioners in a refund action for different taxable years does not estop petitioners from litigating the issues in the instant case; Held further, allowable deductions determined under section 212 and also under section 280A for 1976.

Held: Petitioner's basis in his partnership interest does not include the face value of a note allegedly tendered by him to the partnership… Held: Petitioner's basis in his partnership interest does not include the face value of a note allegedly tendered by him to the partnership upon the formation of the partnership. Accordingly, petitioner's claimed partnership loss is disallowed to the extent that such loss exceeds his basis in the partnership interest. Section 704(d).

Held, accumulated income of a testamentary trust created under the will of decedent's mother is includible in the gross estate of decedent under sec. 2033. Held: accumulated income of a testamentary trust created under the will of decedent's mother is includible in the gross estate of decedent under sec. 2033.

Held, petitioners did not acquire land and buildings with the intent to demolish the buildings but acquired them for purposes of rental and investment and petitioners are therefore entitled to a deduction for loss on demolition of the buildings under sec. 165, I.R.C. 1954. Held further, petitioners are entitled to deduct expenses of the properties in excess of rentals under sec. 183, I.R.C. 1954.

Held, amount of charitable contribution deductions determined. Held, further, dry rot caused petitioners' patio roof to collapse on a windy day, and petitioners are not entitled to a casualty loss deduction for the resulting damage.

In 1973, decedent's wholly-owned corporation purchased a life insurance policy on decedent's life. The corporation owned the policy, paid the premium and named itself as beneficiary. Held: the proceeds of such policy in excess of the cash surrender value are includable in decedent's gross estate under sec. 2042(2), I.R.C. 1954, because decedent possessed an incident of ownership in the subject policy at the time of his death.

During 1971, 1972, and 1973, petitioners operated a linen sales business and substantially underreported the income from this business for each of these years. Held: Respondent's determination of additions to tax under section 6653(b) (fraud) is sustained.

1. Respondent's determination of unreported taxable income approved, with certain exceptions. Cash on hand at the beginning of the period in issue determined by the Court. 2. Respondent carried his burden of proving that a part of the underpayment of tax required to be shown on petitioners' returns for the years 1969, 1970, and 1971 was due to fraud and that the returns were false and fraudulent with the intent to evade tax.

Petitioner-husband taught as a lecturer in a university for two years. Then, for two years he studied full time for a Ph.D. agree. Held: Since (1) the education maintained or improved petitioner-husband's skills as a teacher, (2) the education was not necessary to meet the minimum educational requirements for teachers, and (3) the education did not qualify him for a new trade or business, the educational expenses are deductible when made.

Held, allocation of farm cost between land and improvements for purposes of depreciation and investment credit determined. Held further, depreciation deductions denied on certain farm improvements not used by petitioners in their trade or business.

During 1975 and 1976, petitioner, an anesthesiologist, used his Cadillac for personal and business reasons. Held: petitioner is not allowed a depreciation deduction under section 167, I.R.C. 1954, for his Cadillac in 1976 because such automobile was depreciated below a reasonable salvage value in 1975. Held further, deduction under section 162(a), I.R.C. 1954, for other expenses of operating the Cadillac determined.

Petitioners received a mail-order charter from the Universal Life Church, Inc., Modesto, California; they filled in the name Brockman Scientific Church on the charter; and they kept records in which… Held: Petitioners did not make gifts to the Brockman Scientific Church or to the Universal Life Church, Inc., Modesto, California; charitable contributions deduction is disallowed. Sec. 170(a)(1), IRC 1954.

Held, amount of casualty loss deduction determined. Held: amount of casualty loss deduction determined.

During 1958 through 1962, P represented himself to various U.S. companies as a person of influence in obtaining contracts with the… Held: the amount of P's deductible business expenses determined. Held, further, P received gross income from swindling during each of the years in issue, and P's failure to file returns and report such income was due to fraud. Held, further, P is liable for the penalty for failure to pay estimated tax imposed by sec. 6654, I.R.C. 1954.

Held, bank loans made to an electing small business corporation that were guaranteed by petitioner-shareholders did not increase the basis… Held: bank loans made to an electing small business corporation that were guaranteed by petitioner-shareholders did not increase the basis of petitioners' investment in the corporation under section 1374(c)(2), I.R.C. 1954. Held further, petitioners are not entitled to deduct their pro rata share of such corporation's net operating loss.

Held: (1) Ps were not entitled to deductions for bad debts since they failed to prove that the claimed debts ever existed or that, if they existed, they became worthless during the years in… Held: Ps were not entitled to deductions for bad debts since they failed to prove that the claimed debts ever existed or that, if they existed, they became worthless during the years in issue. (2) Business expenses incurred by Ps determined. (3) Allowable moving expenses determined.

Petitioner made advance royalty payments to David-Stewart in connection with the preparation of a reference work. Held: sec. 2119 of the Tax Reform Act of 1976 does not apply to allow petitioner a current deduction for such expenditures under sec. 174, I.R.C. 1954, because petitioner fails to meet the consistency requirement of sec. 2119.