Volume 42 — Tax Court Reports

Held: Petitioner's acquisition of Missourian in January 1955 was principally for a bona fide business purpose and was not for the principal purpose of evading or avoiding tax. Held: Petitioner's acquisition of Missourian in January 1955 was principally for a bona fide business purpose and was not for the principal purpose of evading or avoiding tax.

Held, certain advances made by petitioner-lawyer on behalf of his clients are not ordinary and necessary business expenses deductible under section 162, I.R.C. 1954. Held: certain advances made by petitioner-lawyer on behalf of his clients are not ordinary and necessary business expenses deductible under section 162, I.R.C. 1954.

1. Losses incurred by corporation in beer and ice businesses, which were discontinued in 1952, and in carrying idle real estate previously used in those businesses, may not be used as carryovers for… Held: In computing the holding period for those assets in F's hands there must be added the time that they were held by D. Sec. 1223(2), I.R.C. 1954. Rule of Kimbell-Diamond Milling Co., 14 T.C. 74, affirmed 187 F. 2d 718 (C.A. 5), inapplicable. 3.

1. Held, petitioner, a manufacturer of automobiles, did not realize net abnormal income within the meaning of section 721(a)(2)(C),… Held: petitioner, a manufacturer of automobiles, did not realize net abnormal income within the meaning of section 721(a)(2)(C), I.R.C. 1939, during its fiscal years ended September 30, 1942 to 1945, inclusive, which is attributable to other years by reason of its engineering work performed in connection with the production of the 1/4-ton…

Petitioners sold a 35-acre tract of land, on which they lived and conducted an airport operation, to a church in 1958 for a cash downpayment of $ 1,000 and notes totaling $ 181,600, payable in… Held: petitioners are entitled to return the income and profit on the sale of the real estate on the installment method provided in section 453(b), I.R.C. 1954. Held, further, petitioners are not liable for the addition to tax for negligence under section 6653(a), I.R.C. 1954.

Petitioner was incorporated in 1918. It manufactured and sold commercial truck trailers. Held: Respondent was not estopped by his prior actions from changing for Federal income tax purposes petitioner's practice of inventorying used trailers acquired after December 31, 1953, from $ 1 each to the lower of cost or market; (2) respondent was not precluded in 1959 from making the change beginning with the then open years 1954,…

Petitioners' representative negotiated a settlement stipulation with Government counsel, which was filed with this Court. Held: no valid grounds for setting aside the stipulation have been established.

1. Held: The Commissioner was warranted in allocating income of corporate petitioner to individual petitioner under section 482, I.R.C. 1954. Allocation approved as revised herein. 2. Held: The Commissioner was warranted in allocating income of corporate petitioner to individual petitioner under section 482, I.R.C. 1954. Allocation approved as revised herein. 2.

1. Held: Park & Tilford Import Corp. qualifies for relief under section 722(b)(4) of the 1939 Code. Held: Park & Tilford Import Corp. qualifies for relief under section 722(b)(4) of the 1939 Code. Determination made of a fair and just amount representing normal earnings to be used in the taxpayer's constructive average base period net income. 2.

Income from patents received in 1959 and 1960 held to be taxable as long-term capital gain from the sale or exchange of a capital asset under section 1235(a) of the Internal Revenue Code of 1954, rather than as ordinary income.

Petitioners, as partners, were engaged in the construction business. They held 45 percent of the stock of Cortland Homes, Inc., another 45 percent being held by owners of certain land. Held: the amounts so paid are deductible either as ordinary and necessary expenses or as business bad debts.

1. Held, on the facts, payments made by petitioner, a for-profit cemetery corporation, to its certificate-of-indebtedness holders and deducted… Held: on the facts, payments made by petitioner, a for-profit cemetery corporation, to its certificate-of-indebtedness holders and deducted by it during the taxable years as the cost of land do not represent deductible land costs but rather nondeductible distributions made with respect to the equity investment which such certificate…

The Brooklyn Dodgers and New York Giants of the major National League transferred their baseball organizations to the Los Angeles and San Francisco areas prior to… Held: Payments for the nonbulk sale of certain baseball player contracts are not within the purview of section 337; 2. Consideration for the sale of certain property rights flowing from the system of organized professional baseball is within the intendment of section 337; and 3. Organizational expenses determined.

1. Husband and wife owned all the stock of a corporation. Held: a plan of complete liquidation was adopted within the meaning of section 337, I.R.C. 1954, shortly before the corporation contracted to sell the land and building, and the gain on the sale of the building is not recognized to the corporation.

Held, an $ 8,600 payment made by petitioner to his wife in 1958 in settlement of arrearages in alimony or separate maintenance is not deductible by petitioner under… Held: an $ 8,600 payment made by petitioner to his wife in 1958 in settlement of arrearages in alimony or separate maintenance is not deductible by petitioner under section 215, 1954 Code, for the reason that such payment is not taxable to petitioner's wife under the provisions of section 71(a), 1954 Code.

On August 17, 1955, petitioners received $ 39,800 from Swan, Inc., their wholly owned corporation, except for qualifying shares, which was designated as payment for the stock of Charles, Inc., which… Held: Petitioners have failed to meet their burden of proving that what was in form a redemption under section 304, I.R.C. 1954, was in substance repayment of a loan to one of the petitioners, as alleged by them.

The petitioner was created in 1943 under a trust agreement which, as amended, provided that the employer-party to the agreement would make… Held: that under the circumstances presented the employer's failure to make contributions for its taxable years after 1947 did not prevent petitioner for its taxable years in issue from being a qualified trust within the meaning of section 401(a), I.R.C. 1954, and from being exempt from income tax under section 501(a) of that Code.

1. Petitioner carried on a reporting business as a sole proprietorship under the name of Columbia Reporting Co. He filed with the district director of internal revenue a timely notice of election to… Held: petitioner complied with the essential statutory requirements for making an election under section 1361, and there was a substantial compliance with the applicable regulation. 2.

Petitioner, a consolidated mining company located in the Coeur d'Alene mining district of Idaho, filed for the year 1957 its election to form the Burke aggregation within its Wallace Operating Unit. Held: The Burke aggregation for 1957 complied with the provisions of section 614(b), I.R.C. 1954, and the regulations thereunder and constituted a valid aggregation for cost depletion purposes. 2.

The principal basis for respondent's determination of unreported income was the voluntary disclosures she made while in the custody of police, as to the extent of the illegal… Held: the statements formed a competent basis for income determination and evidence of the statements by police officers was admissible without regard to whether such evidence might be barred in a criminal prosecution against petitioner under such cases as McNabb v. United States, 318 U.S. 332.

1. Held, that petitioner Elmer Benes realized taxable income in each of the years 1947 through 1950, to the extent that in each such year… Held: that petitioner Elmer Benes realized taxable income in each of the years 1947 through 1950, to the extent that in each such year the Benes Co. (of which he was president and owner of 500 of its 503 shares of stock outstanding) paid or incurred expenses in the erection of a residential home which Benes intended from the beginning…

Petitioners, accrual basis taxpayers, voluntarily changed their method of treatment of dealer reserve income for their taxable year ending December 31, 1957. Held: Petitioners' change in treatment of dealer reserve income was a change in method of accounting within the meaning of section 481, I.R.C. 1954.

1. Petitioner solicited funds in its newspaper for the purpose of meeting its operating expenses and to keep the newspaper in operation. Held: the contributions received by petitioner in response to such solicitations were includable in gross income under section 22(a), I.R.C. 1939, and were not excludable from income as gifts within the meaning of section 22(b)(3), I.R.C. 1939. 2. Held, further, petitioner correctly reported its receipts from bundle sales. 3.

Petitioner's husband, after serving over 10 years on the Police Force of Columbus, Ohio, died on August 30, 1939, from a cause which was not… Held: the pension payments received by petitioner duringthe years 1956, 1957, and 1958 are amounts received under a contract of an employer providing for such payments by reason of an employee's death within the meaning of section 22 (b)(1)(B), I.R.C. 1939, which section is made applicable to the years 1956, 1957, and 1958 by section…

One of petitioners was manager of a motel for a corporate employer which leased the motel premises and operated the motel as one of a… Held: under section 119, I.R.C. 1954, the rental value of the house and value of the laundry and cleaning services, utilities, milk, and groceries from the motel kitchen furnished to petitioner are not includable in petitioner's income since they were furnished on the business premises of the employer for the convenience of the employer…

Petitioner, who kept its books and records on an accrual basis, sold trucks and trailers on a deferred payment basis. A finance charge was added to the cash sales price. Held: petitioner's method of reporting a portion of the finance charge as income as each installment became due and payable clearly reflected its income and was proper. Held, further, petitioner is not entitled to the benefits of the Dealer Reserve Income Adjustment Act of 1960.

Edwin and Harriet Johnson, husband and wife, operated a sole proprietorship which in 1956 made approximately 80 separate sales of manufactured products to… Held: Under section 267(a), I.R.C. 1954, the 46 sales were sales of property at a loss for which no deduction is allowable. Section 267 (a) so interpreted is not unconstitutional. The gains on the sales in excess of costs may not be used to reduce the loss on the 46 sales made at a loss and only the net loss disallowed.

Held, an amount of $ 125,584.90 allegedly owing by petitioner's decedent to her husband's estate at the time of her death is not deductible under section 2053 of the… Held: an amount of $ 125,584.90 allegedly owing by petitioner's decedent to her husband's estate at the time of her death is not deductible under section 2053 of the Internal Revenue Code of 1954 since petitioner has failed to establish that such alleged indebtedness was a legally enforceable obligation.

1. Held, certain income received by petitioner during all the years here involved from a Japanese corporation (Kyowa) under an agreement dated August 6, 1951, was taxable to petitioner as ordinary… Held: certain income received by petitioner during all the years here involved from a Japanese corporation (Kyowa) under an agreement dated August 6, 1951, was taxable to petitioner as ordinary income rather than as long-term capital gain. 2.

Petitioner is a corporation organized for the purpose of representing actors, writers, producers and directors as the artists' manager. Held: The income received by petitioner during all the years in issue was personal holding company income within the meaning of section 543(a)(5), I.R.C. 1954. Accordingly, petitioner was a personal holding company within the meaning of section 542, I.R.C. 1954.

The petitioner paid its lessee $ 200,000 to obtain a cancellation of a lease which had a remaining term of 8 1/4 years, and then entered into a new lease with another… Held: that the $ 200,000 payment made by the petitioner was not made in order to obtain the benefit of the new lease for the last 11 3/4 years of its term but rather to obtain such benefit for the unexpired period of the old lease, and that such amount is amortizable and deductible over such unexpired period.

Petitioner, who was engaged in the business of buying and selling grain and renting grain-storage facilities, constructed certain special-purpose grain warehouses. Held: That respondent's determination of a 20-year useful life for such facilities is proper. Evidence does not establish anticipated economic obsolescence of buildings.

A decree of a local Indiana court entered April 7, 1961, granting petitioner a divorce from her husband provided that her husband pay her the sum of Fifty-Two Thousand Four Hundred… Held: the $ 2,000 payment, as well as the nine payments of $ 350 made to petitioner in 1961, are installment payments discharging a part of an obligation, the principal sum of which is specified in money in the divorce decree which principal sum might be paid over a period of over 10 years.

From September 20, 1957, to January 23, 1959, petitioner Howard Littman was a resident research associate in the Chemical Engineering Division of Argonne National Laboratory, a facility being… Held: no part of the payments received during 1958 is excludable from gross income as a fellowship grant under section 117(a)(1)(B), I.R.C. 1954.

1. Held, that certain 1958 and 1959 transactions of petitioners Pridemark, Inc., and Pridemark, Inc., of Connecticut, and their… Held: that certain 1958 and 1959 transactions of petitioners Pridemark, Inc., and Pridemark, Inc., of Connecticut, and their respective stockholders, did not effect complete liquidations of said corporations within the meaning of section 337 of the 1954 Code, because such transactions were incidental to a reorganization of the continuing…

Petitioner William E. Gabriel and his brother, as of October 15, 1955, owned approximately 70 percent of the stock of Boiler Co. That company had been actively engaged in three lines of business for… Held: the distribution of the Engineering stock to petitioner in December 1956 qualifies for nonrecognition of gain pursuant to section 355, I.R.C. 1954.

Held, distributions to shareholders were incident to a plan of reorganization, secs. 368(a)(1)(D) and 354(b)(1)(A), I.R.C. 1954, taxable as dividends to the extent provided in section… Held: distributions to shareholders were incident to a plan of reorganization, secs. 368(a)(1)(D) and 354(b)(1)(A), I.R.C. 1954, taxable as dividends to the extent provided in section 356(a) (2), rather than as capital gains pursuant to sections 331 and 346 dealing with corporate liquidations.

JGT and HRH corporations entered into a joint plan and agreement of merger pursuant to State law, and the name of the surviving corporation was changed to Turnbull, Inc., the… Held: Respondent is not required to plead specifically whether transferee liability is asserted at law or in equity. 2. Notice of petitioner's liability as transferee asserted primary liability against HRH for the determined deficiencies. 3. After the merger the assets of HRH were vested in petitioner.

Held, long-term capital loss in the amount of $ 12,918.87 realized upon the transfer of securities by petitioner to the fiduciary of its employees' profit-sharing trust as its… Held: long-term capital loss in the amount of $ 12,918.87 realized upon the transfer of securities by petitioner to the fiduciary of its employees' profit-sharing trust as its contribution under its profit-sharing plan is not deductible by reason of section 267 of the Internal Revenue Code of 1954.

1. Held, that where petitioner's decedent withdrew from an insolvent corporation of which he was an officer and substantial stockholder, large… Held: that where petitioner's decedent withdrew from an insolvent corporation of which he was an officer and substantial stockholder, large amounts of cash which he used in part for the corporation's benefit and in part for his own personal purposes, said decedent was liable as a transferee of said corporation, to the extent that he…

1. A domestic partnership entered into three contracts for construction of facilities used at missile-tracking stations in the Caribbean. Held: Respondent was authorized to allocate a part of the net profit on the three contracts to the domestic companies, but allocation of the entire net profits to them was unreasonable. Reasonable allocation of the net profits between the various entities determined. 2.

1. Held, that more than 20 percent of the 1959 gross receipts of Farmingdale, a corporation wholly owned by the petitioner, was derived… Held: that more than 20 percent of the 1959 gross receipts of Farmingdale, a corporation wholly owned by the petitioner, was derived from personal holding company income and that, pursuant to the provisions of section 1372(e)(5) of the Internal Revenue Code of 1954, Farmingdale's election not to be subject to the taxes imposed by chapter 1…

Petitioner and his mother lived together in a home owned jointly by petitioner and his brother. Petitioner's mother was suffering from mental and physical illness. Held: petitioner is not entitled to a dependency credit for his mother in either 1958 or 1959 as he did not furnish over one-half of her support in either year. Mildred Bartsch, 41 T.C. 883 (1964), followed.

1. Decedent had been a participant under his employer's Deferred Compensation Plan. Held: this after death credit is not includable in the decedent's gross estate. Estate of William E. Barr, 40 T.C. 227 (1963), followed. 2. Decedent had been a beneficiary under two annuity contracts which called for a return of his contributions to the cost of said contracts if death came before annuity date.

Petitioner, who was neither the employer of, nor related to, the creator of certain patentable devices, acquired an undivided one-half interest in all substantial rights to such patentable devices… Held: petitioner qualifies as a holder within the meaning of section 1235(b)(2), I.R.C. 1954.

Held: (1) The assessment and collection of deficiencies in income tax and additions to tax determined against Metropolitan Air Freight Depot, Inc., are not barred by limitations. Held: The assessment and collection of deficiencies in income tax and additions to tax determined against Metropolitan Air Freight Depot, Inc., are not barred by limitations. (2) The assessment and collection of transferee liability asserted against the petitioner are not barred by limitations.

Petitioner maintained a home in which his daughter lived for part of the summer in 1960 and in which she spent some of her time in the latter part of 1960 while… Held: Petitioner's daughter's principal place of abode was not petitioner's home for the entire taxable year 1960 so as to qualify petitioner as head of a household but petitioner does qualify as head of a household because of furnishing over one-half of the cost of maintaining a household for his dependent parents.

The Commissioner determined deficiencies in income tax and additions to tax for fraud, based upon alleged expenditures in excess of reported income and any known nontaxable sources. Held: petitioner failed to carry his burden of proof in respect of the basic deficiency, which must therefore be approved.

1. A $ 124,148.80 loss sustained by a real estate partnership in respect of its obligations as a guarantor of certain loans in connection with its participation in the development of several… Held: such loss is to be classified as arising from a business rather than a nonbusiness bad debt. 2.

Held, amounts paid by a wife to her attorneys allocable to obtaining alimony includable in her gross income are deductible under section 212(1), 1954 Code. Held: amounts paid by a wife to her attorneys allocable to obtaining alimony includable in her gross income are deductible under section 212(1), 1954 Code.

Bush Hog Manufacturing Co., Inc., all of whose stock was owned by four individuals, took over the manufacturing of Bush Hog cutting machines in 1953 and formed two sales companies to distribute the… Held: Each of the sales companies was a viable entity and earned the income reported by it.

1. Petitioner, an accrual basis taxpayer, sold automobiles during the taxable year 1955 on a deferred payment basis. Held: that the finance charges accrued ratably over the lives of the contracts and only those amounts of said charges which accrued to petitioner during 1955 are includable in its gross income for that year pursuant to secs. 446 and 451(a) of the 1954 Code. 2.

1. Held, petitioners are not entitled to a dependency exemption deduction for petitioner W. B. Counts' mother, because they failed to prove she had less than $ 600 gross income in 1960. 2. Held: petitioners are not entitled to a dependency exemption deduction for petitioner W. B. Counts' mother, because they failed to prove she had less than $ 600 gross income in 1960. 2.

Held, that the amount which the principal petitioner paid during the taxable year through withholdings from his salary, as his employee… Held: that the amount which the principal petitioner paid during the taxable year through withholdings from his salary, as his employee contributions to the qualified pension and insurance plan of his employer, does not constitute an allowable deduction under section 162 or any other section of the Internal Revenue Code of 1954.

1. Held: Petitioner's purported purchase on February 14, 1955, of 3,000 shares of certain stock, dividend on, from Keizer & Co., a securities dealer, and purported resale of the 3,000 shares, ex… Held: Petitioner's purported purchase on February 14, 1955, of 3,000 shares of certain stock, dividend on, from Keizer & Co., a securities dealer, and purported resale of the 3,000 shares, ex dividend, to Keizer & Co. on February 15, 1955, reversing the transaction, were a sham.

American, a State bank, and Security, a national bank, consolidated under the national bank's charter. American had carried on an insurance brokerage business for more than 5 years. Held: the transfer was a nontaxable spin-off, and the value of the distributed stock is not taxable to the shareholders as a dividend. Secs. 355 and 368, I.R.C. 1954.

Petitioner brought suit to have the judgment granting her a divorce from her former husband declared void, the property settlement agreement approved therein set aside, and a new judgment entered… Held: the $ 3,000 attorney fee is not deductible under section 212(2), I.R.C. 1954, since the matter out of which it grew was a personal or family one and also because it was expended for the purpose of acquiring a capital asset.

1. Held, the undistributed income of a wholly owned Panama subsidiary formed by petitioner for valid business purposes is not includable in petitioner's taxable income in the years 1959, 1960, and… Held: the undistributed income of a wholly owned Panama subsidiary formed by petitioner for valid business purposes is not includable in petitioner's taxable income in the years 1959, 1960, and 1961. 2.

Dry rot damage discovered in 1959 held not deductible as a casualty loss under section 165(c)(3), I.R.C. 1954. E. G. Kilroe, 32 T.C. 1304, distinguished.

Arthur G. B. Metcalf and Mary C. Thomson (formerly Metcalf) were divorced by decree nisi of Probate Court of Norfolk County, Mass., November… Held: The payments made by Arthur to Mary discharged the obligation for payment for support of minor children imposed by the decree of January 18, 1955, and therefore under sections 71 and 215, I.R.C. 1954, are not includable in Mary's income or deductible by Arthur even though such payments also discharged the surviving contractual…

Petitioner acquired railroad properties at public auction in 1923 subject to a mortgage securing $ 5,660,000 in bonds due January 1, 1922, issued by Georgia Pacific Railway Co., a former owner of the… Held: petitioner is not entitled to include the $ 2,038,335.80 in its basis for its railroad properties for purposes of computing depreciation deductions by the retirement method for the years 1951, 1952, and 1953.

1. Held, installation expenses of leased gas appliances must be capitalized. Useful life of such installations redetermined. 2. Held: installation expenses of leased gas appliances must be capitalized. Useful life of such installations redetermined. 2.

1. Held, that petitioners in 1957 changed their method of accounting in reporting their taxable income from the cash method to the accrual method without… Held: that petitioners in 1957 changed their method of accounting in reporting their taxable income from the cash method to the accrual method without securing the permission of the Commissioner to make such a change and the Commissioner is sustained in his adjustments made under section 481, I.R.C. 1954, as amended. 2.

1. Held, that petitioner Jeanne Hamar, as successor trustee of the testamentary trust created under the will of a decedent, is severally liable… Held: that petitioner Jeanne Hamar, as successor trustee of the testamentary trust created under the will of a decedent, is severally liable as a transferee of said decedent's estate in the limited amount determined by the Commissioner, for the unpaid deficiency in estate tax and addition to tax owed by said decedent's estate, plus…

The Commonwealth of Pennsylvania by condemnation took and appropriated to highway purposes a portion of petitioners' farmland which resulted in damage to the retained land and the improvements… Held: that a portion of the payment received by petitioners on account of the condemnation was attributable to the damage resulting to the retained land and the improvements.

Petitioner, a doctor, developed a nutritional treatment program of combating debilitating and degenerative diseases. Held: Respondent has correctly denied petitioner the election to have his clinic taxed as a corporation under section 1361. The income produced by the clinic is a product of petitioner's personal services. None of the capital employed in the clinic plays a material part in the production of income.

1. Petitioner Fritz Huntsinger and several of his business associates incorporated the Humacid Co. in 1951 to exploit an idea Huntsinger had concerning a lining for oil drill-holes. Held: Humacid is not entitled to carry over the losses previously incurred by it and deduct them from profits generated by the business formerly conducted by the partnership. Libson Shops, Inc. v. Koehler, 353 U.S. 382 (1957). 2.

Held, retail furniture corporation's transfer of installment financing activities to new corporation in exchange for stock of the latter which was distributed to its own stockholders was a… Held: retail furniture corporation's transfer of installment financing activities to new corporation in exchange for stock of the latter which was distributed to its own stockholders was a nonrecognizable spin-off. Sec. 355, I.R.C. 1954.

Petitioner, a manufacturer of high-speed cameras, valued its inventories by including therein only its costs for direct labor and direct materials. Held: petitioner's method of inventory valuation wherein all factory overhead expenses are charged off currently and excluded from inventory costs does not clearly reflect its income and does not conform to accepted accounting standards for a manufacturing concern.

Petitioner deeded properties to each of her two sons and in return took a vendor's lien note from each for the full value of the properties… Held: petitioner made gifts of the transferred properties to her sons in the year 1961 only to the extent of $ 3,000 each since she received consideration for the transfer consisting of enforceable vendor's lien notes and deeds of trust which had a fair market value of the value of the properties transferred to each son in excess of $…

Held, petitioners are subject to self-employment tax on self-employment income derived from their citrus grove farming operations for the taxable years 1958, 1959, and 1960 under the provisions of… Held: petitioners are subject to self-employment tax on self-employment income derived from their citrus grove farming operations for the taxable years 1958, 1959, and 1960 under the provisions of sections 1401 and 1402 of the Internal Revenue Code of 1954, as amended.

1. In 1959 the petitioners, in a transaction governed by section 1031 of the Internal Revenue Code of 1954, exchanged certain property… Held: that the payments received by the petitioners in the year of the transaction, consisting of the net value of the property received in the exchange and cash payments made on the note, exceeded 30 percent of the selling price, consisting of the net value of the property received in the exchange, the amount of the encumbrance assumed by…

Held, petitioner's monthly drawing account, which he received while in Saudi Arabia as a partner of a domestic partnership, represented a… Held: petitioner's monthly drawing account, which he received while in Saudi Arabia as a partner of a domestic partnership, represented a distribution of reportable partnership profits and not guaranteed payments that would constitute earned income from sources without the United States wholly excludable from gross income and exempt from…

Petitioners, both employed as salesmen, spent 53 nights during 1959 in a motel in Palestine, Tex. Held: the petitioners did not have a home in Palestine, Tex., and consequently are not entitled to the deductions allowed by section 162(a)(2) of the 1954 Code.

Petitioner, pursuant to a written property settlement agreement incorporated in a divorce decree, was obligated to pay his former wife $ 300 a month for the support, maintenance, and education of his daughter. Petitioner defaulted in payment and his former wife brought suit for the back payments, totaling $ 6,540, plus interest and court costs. Judgment was rendered in her favor in the total amount of $ 7,055.79. Petitioner and his former wife settled their differences for $ 7,000. During the years petitioner was in default, his daughter was over 18 but under 21 years of age. Held, no part of the $ 7,000 paid by petitioner to his former wife is deductible as alimony by virtue of sec. 71(b), I.R.C. 1954. Held, further, that part of the $ 7,000 which represents interest on the payments in default is deductible by petitioner as interest paid.

Petitioner surrendered or exchanged 12 endowment policies on their maturity dates for 12 paid-up life insurance policies. Held: 1. Held: Petitioners realized ordinary income in the amount of the excess of the cost of the paid-up life insurance policies over the cost of the endowment policies surrendered. 2.

Held, that certain income received by petitioners from the collection of promissory notes in 1957, 1958, 1959, and 1960 is taxable under the Internal Revenue Code of 1954 rather than under the 1939… Held: that certain income received by petitioners from the collection of promissory notes in 1957, 1958, 1959, and 1960 is taxable under the Internal Revenue Code of 1954 rather than under the 1939 Code.

Petitioners, on a calendar year basis, were the principal stockholders and the salaried executive officers of a closely held corporation with a fiscal year ended June 30. Held: respondent's determination that each petitioner constructively received, during 1959, one-half of the compensation for fiscal 1960 as fixed by corporate resolution on February 16, 1960, is sustained only to the extent of the $ 400 monthly salary to each petitioner.

Held, on the facts, judgments were includable in decedent's gross estate because they were not assigned or satisfied prior to his death. Held: on the facts, judgments were includable in decedent's gross estate because they were not assigned or satisfied prior to his death. Held, further, this Court is not bound by an orphans' court decision which reached no determination on the merits as to decedent's interest in the judgments.

Petitioners were engaged in the wholesale distribution of radio parts and supplies in Pueblo, Colo. Held: the distribution of stock in the Grand Junction company to the stockholders of the Pueblo company was a tax-free distribution under section 355 of the 1954 Code, and no gain or loss was recognizable to petitioners on their receipt of stock of Grand Junction in that transaction.

Petitioner transferred improved real estate to five newly formed controlled corporations which assumed existing mortgages. Held: petitioner has failed to show by the clear preponderance of the evidence that his principal purpose with respect to the assumption of the liabilities in the circumstances was not to avoid Federal income tax on the exchange. The entire amount of the liabilities assumed is to be treated as money received by petitioner on the exchange.

Petitioner's 1955 Federal income tax return was not filed until January 31, 1957. Held: Petitioner is entitled to report its gain on the sale of its real estate in 1955 on the installment basis. Baca v. Commissioner, 326 F. 2d 189, followed.

A lump-sum payment received by petitioner from an insurance company in 1959 in settlement of petitioner's right to receive renewal commissions on special type insurance policies, conceived by petitioner and written by the insurance company, issued prior to termination of petitioner's employment contract with the insurance company in 1955, was taxable to petitioners as ordinary income.

Petitioners owned 99 percent of the stock of a corporation. Held: deductions and exclusions for the gift of stock claimed on petitioners' income and gift tax returns are not allowable, since income to the charity depends on dividends which are within petitioners' control. Income Tax Regs., sec. 1.170-1(e). Held, further, this regulation is not invalid.

Petitioner operates refuse dumps on land leased or owned. In 1952 he purchased for $ 150,000 a tract of land which contained excavations made by the extraction of clay. Held: petitioner may take deductions for depreciation for the investment in the space contained in the excavation purchased for use in his dump business based upon the quantity of space exhausted by filling in each year.

A corporation, several days before the close of its fiscal year, sold an office building it had owned for 9 years at a price in excess of its depreciated basis. Held: under the circumstances of this case, the amount received for the building upon its sale does not constitute or otherwise determine its salvage value, and the corporation is entitled to a depreciation deduction in the year of sale.

One stockholder owned all the stock of two Pennsylvania corporations -- neither of the corporations owned stock in the other. Held: the Commissioner is sustained. Ray Engineering Co., Inc., and Branch Coal Corp. were not members of an affiliated group within the provisions of section 1504, I.R.C. 1954, and did not have the privilege of filing consolidated returns under section 1501 of the 1954 Code.

Petitioner purchased business, medical, and dental equipment, leased it to outside parties, thereupon sold all of its rental and lease rights to… Held: that the petitioner could not allocate its cost basis of the business equipment between the sales of leases and the sales of the equipment subject to the leases. Held, further, that the petitioner was correct on its return in deducting ordinary losses on the sales of its equipment (subject to the leases) to Equipment, Inc.

Held, the balance in the amount of $ 27,445.71 in a reserve for bad debts account of petitioners' proprietorship was includable in petitioners' taxable income in 1959… Held: the balance in the amount of $ 27,445.71 in a reserve for bad debts account of petitioners' proprietorship was includable in petitioners' taxable income in 1959 when, in that year, the business of the proprietorship was transferred to a corporation in a transaction which qualified under section 351.

Petitioners, in the real estate business, held 103 installment notes secured by mortgages on houses and lots they had sold, the profit from which they had elected to report on the installment basis. Held: petitioners are taxable on the gain realized on the sale of the installment obligations.

Petitioner, Theresa C. McGovern, is a registered nurse. During each of the 4 years in issue she worked as a private duty nurse for various hospital patients in the Detroit area. In their joint return petitioners did not report the income Theresa received from her employment as a nurse. Respondent's determination that petitioners received nursing income during each of the years in issue is sustained.