Volume 42 — Tax Court Memorandum

P, a corporation, was unable to lease property without its shareholders assuming personal responsibility for the leases. Held: under the circumstances, the full amount of P's rentals was paid as a condition to the continued use or possession of property; P's deductible expenses are not limited to the amount which the partnership was obligated to pay to its lessors. Sec. 162(a)(3), I.R.C. 1954.

The petition in this case was mailed on June 30, 1980 in an envelope postmarked by a private postage meter. On July 8, 1980, 8 days later, the petition was received and filed at the United States Tax Court. Held, under sec. 301.7502-1(c)(1)(iii)(b), Proced. & Admin. Regs., the petition was not received in the time ordinarily required for the delivery of a document properly mailed on the last day for its filing. Therefore, the petition was not timely filed.

Held: 1. Carryover losses disallowed. 2. Addition to tax for negligence under sec. 6653(a), I.R.C. 1954, not imposed. Held: Carryover losses disallowed. 2. Addition to tax for negligence under sec. 6653(a), I.R.C. 1954, not imposed.

P, a cotton merchant, bought and sold cotton futures and incurred losses. Held, such losses constituted capital losses and not ordinary losses since P failed to prove that it traded futures for reasons other than to take speculative positions in the cotton market.

Held, petitioner has not established that he is entitled to deductions for amounts paid to certain individuals under secs. 162, 165, or 166, I.R.C. 1954. Held: petitioner has not established that he is entitled to deductions for amounts paid to certain individuals under secs. 162, 165, or 166, I.R.C. 1954.

Held: Respondent's Motion to Dismiss for Lack of Prosecution is granted. Heldfurther: Petitioner is liable for the section 6653(b) addition to tax. Held: Respondent's Motion to Dismiss for Lack of Prosecution is granted. Heldfurther: Petitioner is liable for the section 6653(b) addition to tax.

Pursuant to a divorce decree, H made a lump sum payment of $ 14,000 to W which, by the terms of the decree, was utilized to pay the attorney's fees of W and certain marital obligations assumed by W.… Held: H is not entitled to an alimony deduction for the payment under secs. 215, 71(a)(1) and (c), IRC 1954.

Petitioner received $ 22,078.27 compensation during 1976, from which $ 1,424.14 in Federal tax was withheld. Held: petitioner's compensation was gross income. Held further, section 6653(a) addition to the tax is properly imposed.

Held, petitioners are not entitled to a claimed meals expense deduction. Held: petitioners are not entitled to a claimed meals expense deduction. Heldfurther, petitioners are not entitled to an employee business expense deduction for the cost of uniforms, laundry, tools, and equipment in excess of the amount allowed by respondent.

Petitioner, a construction worker, worked for over 2 years at a site approximately 112 miles from his purported tax home. Held: petitioner's employment during 1976 was indefinite and, accordingly, his claimed living expenses are not deductible under section 162(a)(2).

Petitioner, an over-the-road truck driver, maintained a log-book for 1976, which documented his route, hours, and mileage for each day spent traveling. Held: petitioner's records are insufficient to meet the substantiation requirements of section 274(d).

Petitioner was a member of partnerships which purchased property for cash and nonrecourse promissory notes secured by deeds of trust providing for nonjudicial foreclosure of the property in the event… Held: petitioner's share of the partnerships' losses was a capital loss subject to the limitations provided in secs. 1211 and 1212, I.R.C. 1954. Freeland v. Commissioner, 74 T.C. 970 (1980), followed.

Held: Amounts paid to P by the University of Minnesota for research performed are not excludable from gross income under section 117(a). Held further: Deduction for home office expenses disallowed.

Held, fair market value of real property determined. Held further, remainderman's purported disclaimer invalid under Virginia law. Held: fair market value of real property determined. Held further, remainderman's purported disclaimer invalid under Virginia law. Marital deduction denied because the interest which passed to decedent's surviving spouse was a terminable interest under section 2056(b).

Amounts paid as reasonable compensation determined. Held these amounts are deductible under section 162(a)(1), I.R.C. 1954, and constitute earned income for purposes of the limitations on tax (maxitax) provided by section 1348, I.R.C. 1954.

Held: Petitioners are entitled to a business bad debt deduction under ec. 166(a), I.R.C. 1954, for a debt which became worthless in 1975. Held: Petitioners are entitled to a business bad debt deduction under ec. 166(a), I.R.C. 1954, for a debt which became worthless in 1975.

Held, petitioners are not entitled to a claimed educational travel expense deduction under sec. 162, I.R.C. 1954. Held: petitioners are not entitled to a claimed educational travel expense deduction under sec. 162, I.R.C. 1954. Held further, petitioners may not exclude certain amounts from income under sec. 119, I.R.C. 1954. Held further, petitioners are not entitled to a sales tax deduction in excess of the amount allowed by respondent.

A, an individual, incorporated his sole proprietorship as C corporation (petitioner). Held: C may deduct the legal fees it paid for A's defense under sec. 162(a), I.R.C. 1954. Lohrke v. Commissioner, 48 T.C. 679 (1967), followed. United States v. Gilmore, 372 U.S. 39 (1963), discussed.

In 1955 decedent and his wife conveyed two farms, one each, to their son and daughter. Held: the farms are not includable in decedent's estate under an independent application of section 2036, I.R.C. 1954; heldfurther, petitioner was prejudicially surprised by respondent's late argument involving the combined operation of sections 2035 and 2036, I.R.C. 1954, with respect to the farms; therefore, the issue will not be…

Petitioner transferred a deed to 175 acres of land pursuant to a contract of sale. Held: the transfer of the deed was not an option disguised as a sale for tax purposes. Held, further: Land sold by petitioner, a real estate development company, was not held for an investment. Therefore, it is taxable as ordinary income.

P was employed by an attorney as an office manager-investigator-paralegal. A condition of such employment was that P obtain both an undergraduate degree and a law degree. Held: P's expenditures in obtaining an undergraduate degree were incurred in order for him to meet the minimum educational requirements of his employment, and P's expenditures in attending law school were part of a program of study which would lead to qualifying him in a new trade or business.

At a time when she owned tax-exempt obligations, decedent borrowed from a bank and used the loan proceeds to pay a portion of her Federal tax liabilities. Held: under the particular circumstances of this case, decedent did not incur or continue indebtedness for the purpose of purchasing or carrying tax-exempt obligations within the meaning of sec. 265(2), I.R.C. 1954.

Petitioner sold his 51-percent interest in a trailer park to Deen and reported the sale on the installment method as prescribed in sec. 453, I.R.C. 1954. As part of the consideration for such sale, Deen executed a $ 230,000 note in petitioner's favor. Prior to this sale, petitioner had been indebted to Deen on a $ 200,000 note which originally arose as part of an independent sales transaction. Both petitioner and Deen pledged the amounts due them under their respective notes as an additional source of payment to satisfy their obligations under each of the notes. Held, the mutual notes between petitioner and Deed were independent and did not, in substance, offset each other. Held further, petitioner did not receive payments in the year of sale in excess of 30 percent of the selling price of his interest in the trailer park. Held further, petitioner was entitled to report his gain on the sale on the installment method under sec. 453, I.R.C. 1954.

Petitioner, a professional writer, wrote a book which was published and copyrighted in 1967. Held: aside from the claimed deduction for the alleged copyright donation, amounts of properly substantiated and, therefore, allowable deductions for 1974, 1975 and 1976 determined; heldfurther, without a supporting written transfer document, as required by Federal copyright law, a legal interest in the copyright was not transferred to the…

Ps wished to acquire certain property, and they made a payment to the lessees of the property to avoid litigation over the lessees' claim to possession of the property; Ps also paid legal expenses… Held: such payments had their origin in the acquisition of a capital asset, and therefore, such payments were nondeductible capital expenditures.

Held: Petitioner is liable as a transferee under sections 6901(a) and 6902(a), Internal Revenue Code of 1954. Held: Petitioner is liable as a transferee under sections 6901(a) and 6902(a), Internal Revenue Code of 1954.

In 1974, petitioner W. F. Glisson sold a business which he had operated as a sole proprietorship. The sale included assets that he had used in another business which he discontinued in 1961. Held, no part of the sale price of those assets is allocable to goodwill. Held further, petitioners were entitled to report any gain from the sale of those assets under sec. 453(b), I.R.C. 1954.

In response to a request by T's employer that T find work space outside of employer's place of business, T constructed a design studio attached to his personal residence. Held: petitioner failed to carry its burden of establishing that the design studio lost all value as an asset used in T's trade or business in 1975.

A received an option to purchase some undeveloped land which was zoned for agricultural use. Together with B and C, A formed a corporation, M, to which A's option was transferred. A owned 100 percent of M's issued and outstanding stock while B and C held options for one-third of M's stock. After M succeeded in having its land rezoned for residential use, M adopted a plan of liquidation and sold the land. No other activities were conducted with regard to the land; M made no physical improvements to the land. Held, M was not a collapsible corporation as defined and thus is not required to recognize the gain from the sale of its land; A, B, and C are not liable as transferees. Held further, deficiencies in and additions to A, B, and C's income taxes determined.

In 1975, P made the election to be taxed as a small business corporation under subchapter S, I.R.C. 1954, but failed to file timely the agreement required by sec. 1.47-4(b) (2), Income Tax Regs., to… Held: under the circumstances of this case, there was good cause for filing the agreement late, and therefore, the investment credits received by P in prior years were not subject to recapture as a result of P's election under subchapter S.

In 1971, S sold an automotive parts business for $ 200,000. Held, portion of such price allocable to inventory determined. Held: portion of such price allocable to inventory determined.

During 1972, a partnership provided management services to three corporations and engaged in other activities in which capital was a material income-producing factor. Held: for purposes of sec. 1348, I.R.C. 1954, the management services provided by the partnership constituted a separate trade or business and capital was not a material income-producing factor in that business. Held further, the management services income constitutes earned income under sec. 1348, I.R.C. 1954.

Held, respondent's motion to dismiss for failure to state a claim upon which relief can be granted, pursuant to Rule 40, Tax Courts Rules of Practice and Procedure, is granted.

Held, petitioner was not "away from home" within the meaning of section 162(a)(2), I.R.C. 1954, and, therefore, expenses incurred for travel, meals, and lodging with respect to his employment are nondeductible. Held further, additional deductions for various expenses claimed by petitioner on his return denied.

Held: Petitioner's conviction under section 7206(1) estops him from denying in a subsequent proceeding involving the section 6653(b) civil fraud penalty (1)… Held: Petitioner's conviction under section 7206(1) estops him from denying in a subsequent proceeding involving the section 6653(b) civil fraud penalty (1) that his returns for the years of his conviction were false and fraudulent and (2) that he omitted substantial amounts of income from his returns for those years.

Held: Petitioner failed to prove that his employment as an ironworker in the construction of a nuclear power plant project was temporary in 1977, and, therefore, he is not entitled to deduct under section 162(a), I.R.C. 1954, automobile expenses incurred in traveling daily between his residence and place of employment.

H and M were participants in a profit-sharing plan adopted by their employer in 1970. They were also trustees of the trust created under such plan. The employer made contributions to the trust in 1970 and 1971, but there were no contributions after 1971. In 1974, a revenue agent suggested to the trustees that the assets of the trust should be distributed to the participants. Thereafter, in 1974, the distributions were made. In 1978, H and M each transferred a part of his distribution to an individual retirement account. Held: (1) The entire amount of the distribution received by H and M in 1974 was includable in gross income for 1974; the transfers to the individual retirement accounts in 1978 did not qualify as rollover amounts under sec. 402(a)(5), I.R.C. 1954; and (2) the Commissioner is not precluded by the doctrine of estoppel or by an alleged oral agreement with H and M from asserting that the distributions received by them constituted ordinary income.

Value of 2.86-acre lot lying west of the Intercoastal Waterway near Jacksonville Beach, Fla., contributed to the Methodist Church by petitioners in 1975 determined.

Held, a payment made to petitioner Robert Eugene Evans for 60 days of accrued leave upon his retirement from the United States Air Force is includable in his gross income. Held further, petitioners are not entitled to a claimed job-hunting expense deduction under sec. 162(a), I.R.C. 1954.

Held, petitioner was not away from home within the meaning of section 162(a)(2), I.R.C. 1954, and, therefore, expenses incurred for mileage, meals, and lodging with respect to his employment are… Held: petitioner was not away from home within the meaning of section 162(a)(2), I.R.C. 1954, and, therefore, expenses incurred for mileage, meals, and lodging with respect to his employment are nondeductible.

Held, petitioner is not entitled to deductions for alimony and other miscellaneous expenses in excess of the amounts allowed by respondent.

In order to improve its credit petitioner paid the residual debts of a related corporation which had previously been liquidated by creditors. Held: the payments were an ordinary and necessary expense incurred in the conduct of petitioner's business.

Held, petitioner was not away from home within the meaning of section 162(a)(2), I.R.C. 1954, and, therefore, expenses incurred for mileage, meals, and lodging with respect to his employment are… Held: petitioner was not away from home within the meaning of section 162(a)(2), I.R.C. 1954, and, therefore, expenses incurred for mileage, meals, and lodging with respect to his employment are nondeductible.

Held: (1)(a) Petitioners may not depreciate certain building components separately where in prior years a composite method was used to depreciate these components and building… Held: (1)(a) Petitioners may not depreciate certain building components separately where in prior years a composite method was used to depreciate these components and building shells. (b) Useful lives of building shells determined to be 35 years. (c) Useful lives of certain components determined.

By Memorandum Opinion filed July 6, 1977 this Court set forth the adjustments to petitioners' 1967 and 1968 Federal income tax returns that were agreed to by petitioners and respondent. Held: in computing averagable income within the meaning of sec. 1302, I.R.C. 1954, base period income may not be less than zero. Sec. 1.1302-3(b), Income Tax Regs.; Tebon v. Commissioner, 55 T.C. 410 (1970).

Petitioners Joseph and Shirley Proctor owned all of the stock in petitioner Chattanooga Products while Joseph Proctor (Proctor) individually owned all of the stock in petitioner R &… Held: the Proctors failed to prove that unexplained bank deposits in 1972, 1973 and 1976 did not represent unreported income as determined by respondent. 2. Held, charitable contribution deductions under sec. 170(a)(1), I.R.C. 1954, for the Proctors' 1972, 1973 and 1976 tax years determined. 3.

On medical advice Ps moved their son from a mental hospital into a private apartment in the vicinity of the hospital. Held, amounts expended to maintain and insure their son's automobile are not deductible medical care expenses. Held further, amounts expended for their son's meals and lodging are not deductible medical care expenses. Held further, amounts expended for a surrogate parent/trustee/advisor for their son are not deductible medical care expenses.

The male petitioners worked as blackjack (21), big wheel (Big 6), and roulette dealers at a Las Vegas, Nevada, casino-hotel. Respondent determined deficiencies based on "toke" income in addition to the amounts petitioners reported. Held: (1) Equitable estoppel and laches do not bar respondent's deficiency determinations. (2) Respondent's determinations were not arbitrary and excessive and so are presumptively correct. (3) Tokes constitute taxable income. (4) Amounts of toke income are determined. (5) Statute of limitations does not bar deficiencies for 1969 and 1970 in docket No. 7945-78. Secs. 6501(e)(1) and 6501(c)(4), I.R.C. 1954.

Petitioner John Dady was a tugboat captain who lived in Florida due to his daughter's health, and traveled to and from his home every week to ports somewhere between Boston, Mass., and Norfolk, Va., to board and leave the boat when there were crew changes. Held: Petitioners are not entitled to deduct John's traveling expenses between his home in Florida and the various places he met the tugboat to make crew changes. Held, further: petitioners suffered a casualty loss in 1976 when a storm severely damaged a bulk-head at the rear of their property in New York. Amount of deductible loss determined.

Held, petitioner John R. Bride was not away from home within the meaning of section 162(a)(2), I.R.C. 1954, and, therefore expenses incurred for lodging, meals, and mileage with respect to his… Held: petitioner John R. Bride was not away from home within the meaning of section 162(a)(2), I.R.C. 1954, and, therefore expenses incurred for lodging, meals, and mileage with respect to his employment are nondeductible.

Held, petitioner William S. Boykin, being a participant in his employer's noncontributory employee pension plan for 1976, may not deduct the contribution he made in 1976 to… Held: petitioner William S. Boykin, being a participant in his employer's noncontributory employee pension plan for 1976, may not deduct the contribution he made in 1976 to an IRA he established in 1975. Held, further, petitioner is liable for the 6-percent excise tax imposed by sec. 4973, I.R.C. 1954.

Held, petitioner's transportation expenses are not deductible under section 162(a), I.R.C. 1954. Held: petitioner's transportation expenses are not deductible under section 162(a), I.R.C. 1954.

Petitioner Frank P. Battaglia and another individual operated a business as a partnership. Held: the promissory note issued by the corporation to petitioner constituted other property received by petitioner pursuant to the exchange, within the meaning of section 351(b), I.R.C. 1954.

Petitioners, husband and wife, created two trusts. They purportedly conveyed their lifetime services and other personal property to one of the trusts and their residence to the other. Petitioner husband also created a third trust to which he purportedly conveyed a personal automobile. The trust documents for each trust granted petitioners, as trustees, the authority to distribute all trust income to themselves without the approval or consent of an adverse party. Held, the purported conveyances of lifetime services by petitioners were merely assignments of income which were ineffective to shift the incidence to taxation from petitioners to the trust. Held further, petitioners, as grantors, are treated as the owners of the first and second trusts, and petitioner husband is treated as the owner of the third trust. Sec. 677, I.R.C. 1954. Held further, petitioners are liable for additions to tax under sec. 6653(a), I.R.C. 1954.

Held, petitioner failed to prove that respondent's determination of his income is erroneous. Held further, additions to tax imposed by respondent are sustained. Held: petitioner failed to prove that respondent's determination of his income is erroneous. Held further, additions to tax imposed by respondent are sustained.

The Minnesota Supreme Court affirmed the Minnesota Tax Court's decision that the decedent, Lucile L. Sholes, owned 19 contracts for deed at the time of her death. Held: the value of the 19 contracts for deed is includable in decedent's gross estate. Commissioner v. Estate of Bosch, 387 U.S. 456 (1967), followed.

Petitioners claimed a deduction under sec. 170, I.R.C. 1954, for alleged contributions to the Valhalla Universal Life Church. Held: petitioners have neither substantiated the full amount of the claimed contributions nor proven that the Valhalla Universal Life Church was an organization under sec. 170(c)(2), I.R.C. 1954, to which deductible contributions could be made.

Petitioner learned of E's interest in going public with his record company and of H's interest in acquiring a record company. Petitioner telephoned E and H and advised each of the other's interest. Held: Petitioner's finder's fee income was not derived from a trade or business, within the meaning of sec. 172(d)(4), I.R.C. 1954.

Held, petitioner was availed of for the purpose of avoiding the income tax with respect to its shareholders.

Held: (1) Deduction for casualty loss of automobile disallowed where record did not support the view that petitioner was the owners of the… Held: Deduction for casualty loss of automobile disallowed where record did not support the view that petitioner was the owners of the automobile. (2) Support payments made to spouse pursuant to deed of separation were periodic and therefore deductible, as under North Carolina law such payments were contingent on the wife's remarriage.

Petitioner provided money to a corporation that was in need of financial help. In return for part of the funds, petitioner received 50 percent of the stock of the corporation. Held: petitioner is not entitled to a deduction under sec. 165, I.R.C. 1954, because he has not proved that his losses were due to theft as defined under the relevant state law.

Petitioner made "temporary alimony" payments to his spouse prior to the entry of a decree of divorce. Held, the amounts paid by petitioner to his spouse prior to the decree of divorce are not deductible by petitioner as alimony under sec. 215(a), I.R.C. 1954.

Held, fair market value of land contributed to charity determined. Held: fair market value of land contributed to charity determined.

For each of the years in issue, petitioner claimed a so-called war involvement deduction. Held, respondent properly disallowed petitioner's war involvement deductions. Held: respondent properly disallowed petitioner's war involvement deductions. Held further, petitioner is liable for additions to tax under sec. 6653(a), I.R.C. 1954.

Held, respondent properly determined that petitioners were liable for the minimum tax under section 56(a), I.R.C. 1954, as amended by the Tax Reform Act of 1976, Pub.L. 94-455, 90 Stat. 1520. United States v. Darusmont, 449 U.S. 292 (1981), followed.

Held: the date-of-death fair market values of two parcels of real estate determined. Held: the date-of-death fair market values of two parcels of real estate determined.

Petitioner, Thomas C. Banks, was a fireman in Jacksonville, Fla., in 1975 and 1976. He was regularly on duty 24 hours and then off duty 48 hours. While on duty he could not leave the fire station for meals. He also owned and operated a heating and air-conditioning business while off duty. Held, petitioner may not deduct the cost of his meals voluntarily eaten at the fire station. Held, further: Petitioner may deduct a portion of the expense of maintaining a telephone in his house and the cost of familiarization-cruising of his territory. Amounts determined. Held, further, the deductible amount of petitioner's cost of goods sold in his heating and air-conditioning business for 1975 determined.

P, a bank officer, embezzled funds from his employer from 1961 through 1975 through the creation of fictitious loans. P used the embezzled funds for personal living expenses and to make payments on both bona fide loans of legitimate bank customers and prior fictitious loans created by P. Held, all the proceeds of fictitious loans received after 1968 are taxable income to P. Held further, the payments made on bona fide loans of legitimate bank customers and payments made on fictitious loans created by P prior to 1969 are not deductible by P as ordinary and necessary expenses incurred during the taxable year for the production of income. Held further, P's wife is jointly and severally liable for the deficiency in tax but not for the 50 percent penalty for fraud.

Held, respondent's motion to dismiss for lack of jurisdiction as to H. Lee Clifton, deceased, is granted. Held: respondent's motion to dismiss for lack of jurisdiction as to H. Lee Clifton, deceased, is granted.

Held, petitioner is not exempt from tax because she is of the Black or Negro race or because she was a member of the Moorish Science Temple, The Divine and National Movement of North America, Inc.,… Held: petitioner is not exempt from tax because she is of the Black or Negro race or because she was a member of the Moorish Science Temple, The Divine and National Movement of North America, Inc., No. 13.

Petitioner was covered by his employer's group insurance plan. The plan covered only six out of eight employees. Petitioner set the insurance coverage brackets. Held, petitioner has not proved that the plan covered all full-time, eligible employees or that the insurer set the coverage brackets, as required by sec. 1.79-1(b)(1)(iii)(d), Income Tax Regs. Accordingly, the amounts of insurance premiums paid by petitioner's employer are includable in income in the year paid.

Or or about Apr. 15, 1977 petitioners filed a joint return for 1976. Thereon petitioners stated constitutional objections to the payment of income taxes on compensation received from their employers. No return was filed for 1977. On Mar. 19, 1980 respondent sent notices of deficiency to petitioners, jointly for the 1976 taxable year and to each petitioner, separately, for the 1977 taxable year. Petitioners filed one timely petition with the Tax Court on June 18, 1980 with respect to all three notices. On or about Sept. 21, 1980 petitioners filed a joint return for 1977. Held, petitioners' constitutional arguments are without merit and the wages received from their employers constitute gross income. Sec. 61, I.R.C. 1954. Held further, petitioners are not entitled to elect to file a joint return for 1977 after receiving a notice of deficiency and after having filed a petition with the Tax Court for that year. Sec. 6013(b)(2)(C). Held further, petitioners are liable for additions to tax under sec. 6653(a) for negligence or intentional disregard of the rules and regulations for 1976 and 1977 and additions to tax under sec. 6651(a) for failure to file timely returns for 1977.

Petitioners have failed to (1) answer respondent's interrogatories, and (2) stipulate to facts not reasonably considered to be in dispute, despite two orders of the Court directing them to do so or… Held: Petitioners' failures constitute a default under the circumstances of this case. Respondent's motion to dismiss for lack of prosecution is granted. Rules 104(c)(3), 123(a), 123(b), Tax Court Rules of Practice and Procedure.

Petitioner sold an apartment complex in 1971 pursuant to a wrap-around mortgage arrangement and properly elected to report the gain on the sale under section 453. Held: facts and circumstances surrounding the settlement reveal that in 1975 the purchaser took the apartment complex subject to a mortgage held by petitioner's mortgagee.

Held: Where the burden of proof as to all issues placed in dispute by the pleadings is upon petitioner and where the Court, upon… Held: Where the burden of proof as to all issues placed in dispute by the pleadings is upon petitioner and where the Court, upon petitioner's unwarranted, unexplained, and persistent refusal to answer interrogatories or produce documents, issues orders precluding petitioner, at any trial of the case, from introducing any evidence with…

G made an installment sale of his one-half interest in certain businesses to J for $ 600,000. The sales agreement contained a covenant by G not to compete with the businesses to which no portion of the sales price was allocated. G reported his entire gain as long-term capital gain while J's "successors in interest" amortized a portion of each payment as allocable to G's covenant not to compete. Held, no portion of the sales price is allocable to G's covenant not to compete.

Held, petitioner's motion for summary judgment is denied.

H and W filed a joint Federal income tax return for 1972. Held: W is not entitled to relief as an innocent spouse under sec. 6013(e), I.R.C. 1954, since she has failed to prove that she did not know or have reason to know of the omission of income.

Petitioner, with her husband, sold farm property in 1975 and elected to report her gain on the installment method. Held: a portion of the installment payment representing payment of principal constitutes long-term capital gain to petitioner in 1977 and 1978. Held further, the first Form 1040 filed by petitioner for 1977 does not constitute a return within the meaning of sec. 6011(a), I.R.C. 1954.

Held, petitioner's income from operation of a weekly bingo game constituted unrelated business taxable income under secs. 511 and 513, I.R.C. 1954. Held: petitioner's income from operation of a weekly bingo game constituted unrelated business taxable income under secs. 511 and 513, I.R.C. 1954. Heldfurther, petitioner is not liable for the addition to tax under sec. 6651(a)(1).

Basis in property sold by petitioner and his then wife in 1976 determined.

Petitioners commenced a cattle-raising operation in 1973. Held: for the taxable years 1975 through 1977 petitioners' cattle-breeding operation was an activity engaged in for profit and therefore is not within the reach of sec. 183, I.R.C. 1954. Effect of decision limited to years at issue.

In 1974 petitioner sold his stock in a legal practice. He received a $ 100,000 note, payable with interest in three installments. The last installment was due in 1976. The debtor failed to make any payments on the note. Held, the note was deductible as a worthless debt in 1976. Sec. 166(a), I.R.C. 1954. Heldfurther, the note constituted a nonbusiness bad debt. Sec. 166(d).

Decedent transferred $ 253,416.35 worth of stock in a family owned corporation to his three children and their families within 3 years of his death. Held: because the transfers were motivated by a concern for the financial security of his children and by a desire to minimize decedent's income and gift taxes, the transfers were not in contemplation of death within the meaning of sec. 2035, I.R.C. 1954.

Petitioner filed false and fraudulent original income tax returns for 1970, 1971, and 1972. On December 14, 1973, petitioner filed nonfraudulent amended returns for 1970 and 1972, and on December 17, 1973, petitioner filed a nonfraudulent amended return for 1971. The Commissioner, more than three years after filing all of the amended returns and more than six years after filing the original returns for 1970 and 1971, mailed a statutory notice of deficiency to petitioner covering all three taxable years. The Commissioner, more than six years after filing the original returns for 1970, assessed the taxes shown on the amended returns for all three years. Held, The filing of the amended returns commenced the running of the three-year period of limitations on assessment; therefore, assessment of additional tax is barred by the statute of limitations because the statutory notice was not mailed by the Commissioner within that three-year period. Klemp v. Commissioner, 77 T.C.     (Aug. 5, 1981), followed. Held further, the six-year period of limitations provided in sec. 6501(e), I.R.C. 1954, did not apply. Klemp v. Commissioner, supra, followed. Held further , for purposes of the period of limitations which limits the amount of refund or credit of taxes that may be allowed where an overpayment is determined, payment of the tax was made when respondent assessed the tax, so that petitioner is entitled to a refund of such overpayments.

Held: A swimming pool installed at petitioners' home at a cost of $ 10,516.26, and used for medical purposes added $ 4,000 to the value of petitioners' property. Petitioners are entitled to deduct $ 6,516.26 of the cost of the pool as a medical expense.

Decedent transferred property to a trust which provided that the trustee may, in his sole and absolute discretion, distribute to decedent corpus and/or income. Held: although decedent received the income from the trust, she did not receive it pursuant to an agreement, express or implied, entered into contemporaneously with the transfer of the property to the trust and therefore she did not retain possession or enjoyment of the property within the meaning of sec. 2036(a)(1).

1. On Jan. 7, 1969, Omar Ash and other directors of SCC improvidently granted an option to Reed to acquire 75,000 shares of SCC stock from SCC for less than 1 percent of… Held: Any gain, loss or expense incurred by Ash as a result of transferring his stock to SCC must be recognized and accounted for in 1969, not 1970 as claimed by petitioners. 2. Ash owned all the stock of Sandomar, a corporation formed April 23, 1970, to engage in the business of buying and selling cattle.

For the years 1971 through 1975 petitioner prepared income tax returns for himself and his wife under the status of married, filing separately. Held: petitioner is liable for additions to tax for fraud under sec. 6653(b), I.R.C. 1954, for the taxable years 1971 through 1974.

Petitioner was one of a group of related entities, including three corporations, a partnership and an estate. Held: the activities participated in by the estate through the entities in which it held a controlling or substantial interest constitute a business for purposes of section 482.

Petitioners have failed to produce documents despite an order of this Court directing them to do so. Held: Petitioners' failure constitutes a default under the circumstances of this case. Held: Petitioners' failure constitutes a default under the circumstances of this case. Respondent's motion to impose sanctions seeking a judgment for default under Rule 104(c)(3), Tax Court Rules of Practice and Procedure, granted.

Petitioner does not qualify for relief as innocent spouse under sec. 6013(e), I.R.C. 1954.

Held: As a matter of law, petitioner is not entitled to a military tax deduction. Accordingly, respondent's motion for summary judgment is granted. Held: As a matter of law, petitioner is not entitled to a military tax deduction. Accordingly, respondent's motion for summary judgment is granted.

Petitioners have failed to produce documents and answer respondent's interrogatories despite a specific order of this Court directing them to do so. Held, petitioners' failure constitutes a default under the circumstances of this case. Respondent's motion to impose sanctions seeking a judgment for default under Rule 104(c)(3), Tax Court Rules of Practice and Procedure, granted.

Petitioners were shareholders of a subchapter S corporation. Petitioners guaranteed A's loan to the corporation. Petitioners never paid any amounts on the loan. Held: petitioners' bases in their investments in the subchapter S corporation are not increased by A's loan to the corporation or by petitioners' guarantees; net operating loss pass-through deductions are disallowed. Sec. 1374(c)(2), I.R.C. 1954.

1. Martin and Ace Bernstein purchased a manufacturing plant in Juneau, Wisconsin, for $ 524,236. Held: no bona fide sale occurred and the depreciation deductions claimed by NVST, based upon its purported cost of $ 3,000,000, are disallowed. 2. Held, deductions for interest payments by NVST with respect to its indebtedness in connection with the purported purchase of the Juneau plant disallowed. 3.

Held, petitioner did not substantiate the entire amount of the disallowed contributions and/or prove that the donee organizations were qualified under section 170(c)(2) to receive… Held: petitioner did not substantiate the entire amount of the disallowed contributions and/or prove that the donee organizations were qualified under section 170(c)(2) to receive deductible contributions. Held further, petitioner did not substantiate disallowed expenses for medicine and drugs.

Held, determinations by the Commissioner as to the amounts of profits and losses realized by Ps from two businesses sustained since Ps failed to produce evidence to refute the determinations. Held: determinations by the Commissioner as to the amounts of profits and losses realized by Ps from two businesses sustained since Ps failed to produce evidence to refute the determinations.

Held, petitioners failed to prove that a debt became wholly worthless in 1974 and petitioners were not entitled to a bad debt deduction under sec. 166(a)(1), I.R.C. 1954, for 1974. Held: petitioners failed to prove that a debt became wholly worthless in 1974 and petitioners were not entitled to a bad debt deduction under sec. 166(a)(1), I.R.C. 1954, for 1974.

Held: 1. Wages received by petitioner are subject to Federal income tax. Deficiency determined by respondent is sustained. 2. Held: Wages received by petitioner are subject to Federal income tax. Deficiency determined by respondent is sustained. 2. Petitioner is liable for addition to tax under sec. 6651(a), I.R.C. 1954, for failure to file a timely income tax return for 1977. 3.

Held: 1. Wages received by William and Erna Howell in 1976 and by Erna Howell in 1977 and military retirement pay received by William Howell in 1976 and 1977 are includable in petitioners' taxable… Held: Wages received by William and Erna Howell in 1976 and by Erna Howell in 1977 and military retirement pay received by William Howell in 1976 and 1977 are includable in petitioners' taxable income and subject to Federal income tax. 2.

Petitioner-husband has been a member of the board of directors of a natural gas utility since 1949. Held: petitioner-husband was not in the trade or business of being a director or a consultant and the fees received as a director and as a consultant were not self-employment income; heldfurther, respondent failed to carry his burden of proof as to the increased deficiency in self-employment taxes asserted for 1975.

Held, payments made by two partners to a third partner as retirement pay pursuant to the partnership termination agreement were payments in liquidation of the third partner's… Held: payments made by two partners to a third partner as retirement pay pursuant to the partnership termination agreement were payments in liquidation of the third partner's partnership interest under sec. 736, I.R.C. 1954, and not payments to purchase the third partner's interest under sec. 741.

P, a high school geography teacher, took an extensive trip overseas in 1975. Held: the cost of such trip is not deductible as an ordinary and necessary business expense under sec. 162(a), I.R.C. 1954, and sec. 1.162-5(d), Income Tax Regs., since he failed to show that the major portion of his activities directly maintained or improved skills required by him in his employment.

During a part of 1975, H was employed by SRC, which maintained a savings and profit-sharing plan for its employees. H's employment with SRC was terminated before he was eligible to receive employer contributions to such plan for 1975. After his employment with SRC was terminated, H made a contribution to an IRA. Held, it has not been shown that H may not subsequently receive credit for his prior participation in the SRC plan, and therefore, during 1975, H was an "active participant" in a qualified plan; accordingly, H may not deduct the contribution to the IRA. Foulkes v. Commissioner, 638 F. 2d 1105 (7th Cir. 1981), revg. a Memorandum Opinion of this Court, distinguished.

In Nov. 1975, P became employed by H as a fulltime salaried employee. Held: during 1975, P was an active participant in a qualified plan and, therefore, was ineligible to contribute to an IRA. Held, further, for 1975 and 1976, P is liable for the 6-percent excise tax imposed by sec. 4973, I.R.C. 1954.

Held: 1. Tax Court has jurisdiction to decide this case. 2. Tax Court has jurisdiction to enter a decision with respect to self-employment tax. 3. Held: Tax Court has jurisdiction to decide this case. 2. Tax Court has jurisdiction to enter a decision with respect to self-employment tax. 3. Issuance of notice of deficiency does not violate taxpayer's Fifth Amendment rights. Notice of deficiency valid. 4. Petitioner's taxably income for 1976 redetermined.

Held: Respondent's determination of additions to tax under sections 6651(a), 6653(a), and 6654 sustained. Held: Respondent's determination of additions to tax under sections 6651(a), 6653(a), and 6654 sustained.

Held, value of chose in action at date of decedent's death determined. Held: value of chose in action at date of decedent's death determined.

Held: In a corporate spin off the sale of the operating assets by the original corporation to a newly formed corporation in which three of the… Held: In a corporate spin off the sale of the operating assets by the original corporation to a newly formed corporation in which three of the stockholders of the original corporation were the sole stockholders was not a bargain sale. The three stockholders did not receive a constructive dividend from the original corporation.

G set up a trust to which she conveyed a $ 290,000 vacation home and retained for herself a one-sixth beneficial interest in the trust. Held: For valuation purposes amount of the gift is the value of the property conveyed by G to the trust less the value of the interest retained by G. Amount of the gift is not determined by considering what a one-sixth beneficial interest was worth to each of the five other beneficiaries.

(1) P, an 80-percent shareholder and officer in X, sold his shares with the assistance of H. Held, P may not deduct under either sec. 162 or 212, I.R.C. 1954, amounts paid to H incident to the sale. Held: P may not deduct under either sec. 162 or 212, I.R.C. 1954, amounts paid to H incident to the sale. (2) P donated his interest in certain equipment to a medical school.

D died in Sept. 1976. Within 3 years of his death, D assigned a contributory group term life insurance policy on his life to W. On D's death, W received the proceeds of such policy. Held: such assignment was made in contemplation of death within the meaning of sec. 2035 I.R.C. 1954; therefore, the proceeds of such policy are includable in D's gross estate.

(1) Petitioner-husband and C incorporated two businesses (X and Y) in 1974. Held: Petitioners are not entitled to a deduction in 1975 on account of the foregoing. (2) In 1976, money judgments were rendered against petitioner-husband and others. Petitioners have not paid anything toward the judgments. Held: Petitioners are not entitled to a deduction in 1976 on account of the judgments.

Held, petitioner's income determined. Heldfurther, additions to tax imposed by respondent sustained.

Petitioner made contributions to his corporate employer's qualified plan during the first 2 months of 1975. In February of 1975, petitioner was laid off from his employment, at which time he discontinued his contributions. In May of the same year, he commenced his own business and subsequently contributed $ 1,500 to a newly-established individual retirement account for the 1975 taxable year. Petitioner formally terminated his employment with his corporate employer in 1976. Had he returned to active employment rather than terminating, he would have been reinstated to his former status under the plan as of the time of his layoff. Held, petitioner is not entitled to a deduction under sec. 219(a), I.R.C. 1954, for his contribution to an individual retirement account in 1975. Foulkes v. Commissioner, 638 F.2d 1105 (7th Cir. 1981), distinguished.