Volume 43 — Board of Tax Appeals

- The exemption allowed in sections 22(b)(5) of the Revenue Acts of 1934 and 1936, of amounts received through accident or health insurance as compensation for personal injuries or sickness, is not limited to the insured or to individual taxpayers other than the insured, but includes corporations which have insurable interests.

- The determination by the Commissioner of a deficiency in income tax in excess of the amount of an overassessment determined in excess profits tax, does not give the Board jurisdiction as to excess profits tax, although it does give jurisdiction as to the income tax.

1. Lots in a tract purchased by a building contractor for the purpose of subdivision and sale and to promote the building business, held, property held primarily for sale to customers in the ordinary… Held: property held primarily for sale to customers in the ordinary course of the taxpayer's trade or business, and the tax upon the profits from the sale is not limited by the percentage applicable to capital assets. 2.

A petition, filed by an oil producer within three years after payment of income tax, assailed the Commissioner's determination of depletion deductions, which in the return and the notice of deficiency had been computed by the percentage method. In neither the notice nor the petition was the unit method mentioned; the return contained the facts necessary for computation by both methods. Held, by virtue of the provision of section 114(b)(3), Revenue Act of 1934, requiring the allowance under the percentage method to be in no case less than under the unit method, that the petition is sufficient to support a determination by the Board, as required by section 322(d), that an overpayment under the unit method was made within three years before the filing of the petition.

1. Substantially all the shares, with voting rights, of a corporation in financial difficulties were transferred in trust to representatives of its principal creditors, and the same persons formed a… Held: The mere probability that creditors would not permit a dividend is insufficient to support the credit provided in section 26(c)(1), Revenue Act of 1936.

1. Under the facts shown there should be included in the taxable income of the three petitioners, as additional compensation for services rendered to their employer corporation, certain amounts representing the fair market value of shares of stock delivered to them by that corporation during the taxable year. 2. A loss deduction claimed by petitioner Priddy is not shown to have been sustained during the taxable year and is disallowed. 3.

The liabilities of taxpayers and of transferees being separate and distinct, and as separate statutory provisions are made for notices to, and appeals by, taxpayers and transferees, it is held that where a proceeding has been instituted based on notice of transferee liability, the Commissioner may not by amendment to his answer convert the proceeding into one for the redetermination of the liability of the petitioner as an original taxpayer or in the alternative as a…

1. Where corpus of trust was in fact invaded and payments therefrom made to life beneficiary, capital gains allocable to corpus under California law were not permanently set aside for charitable remaindermen so as to justify the deduction provided by section 162(a), Revenue Act of 1934. 2.

Value of property deposited by petitioner's lessee as security for agreements in its lease and in petitioner's lease with its landlord to defray future and conditional construction costs, held,… Held: income to petitioner upon forfeiture of the security by its lessee notwithstanding retention as security under continuing provisions of petitioner's lease with its landlord.

Petitioner owned lands in a drainage district which had issued bonds which were in default in 1932. Held: that the conveyance in 1932 was not a closed transaction determining loss in that year; that it was not a sale or exchange of a capital asset; that the trust was a liquidating trust; that petitioner abandoned his equity interest in 1935 sustaining loss in that year entitling him to deduction for the entire loss without the limitation…

Short term trusts examined, and upon the facts held that the trust income was not properly included in computing the net income of the settlor, under section 22(a), Revenue Act of 1934, but that, under section 167(a)(1), capital gains accumulated as corpus were properly included in computing petitioner's net income.

Where petitioner, the grantor of a trust terminating upon her death, reserves in the trust instrument a power to appoint the corpus by will or deed and the power is revocable during her life, held,… Held: she is not taxable in respect of that part of the trust income which, under the trust, is to be added to corpus, under sections 22(a), 166, or 167 of the Revenue Acts of 1934 and 1936.

Dividend, less in amount than the corporation's earned surplus and less than the value of unencumbered stocks and bonds available for payment of dividends, was declared in December 1936. Held: that the corporation was entitled to credit for a dividend paid in 1936, under section 27(a), Revenue Act of 1936.

1. Petitioner's subsidiary acquired an oil and gas lease by the terms of which and an assignment of the lease by the lessee certain amounts were payable to the lessor and lessee solely out of a… Held: that the amounts derived by the assignee from the sale of oil and gas reserved by the lessor and lessee and paid to them are not taxable income of the assignee. 2.

Money paid upon the order of a surrogate by the guardian of the property of three infants to the guardian of their persons for their maintenance, etc., is not within the income of such guardian of their persons, in her individual capacity.

- Transfers in trust of life estates with remainders to the grantor in case she survives the life tenants, but to her children in case she fails to survive the life tenants, are not taxable when made as completed gifts of the remainders to the children.

- On December 31, 1934, petitioner set aside in a reserve fund an amount to be applied on the payment of income tax deficiencies for 1930 and 1931 proposed in a deficiency notice mailed on June 8, 1934.

A taxpayer in the accrual basis is entitled to deduct from gross income the full amount of the interest accrued during the taxable year upon obligations outstanding, even though the obligations were not outstanding until after the date the interest began to run.

- Where because of changes in business conditions petitioner discarded certain machinery and equipment and recovered the salvage value thereof in the taxable year, held, that the loss sustained did… Held: that the loss sustained did not result from a sale of capital assets, but instead resulted from a loss of useful value of capital assets and that the loss is deductible in full.

Excess of costs over receipts of the operation of a transportation line deducted on returns for earlier years of operation held not properly included in the basis of gain from disposal of the line in a later year.

1. In Hartford-Empire Co.,26 B.T.A. 134, the question for decision by the Board was whether in computing allowances for the exhaustion of certain patents and applications for patents acquired by the… Held: that the question of a proper basis is not res adjudicata. 2. In 1922 the petitioner issued all of its shares of stock to three corporations, their shareholders, and creditors for patents and applications for patents and other assets of small value.

1. Petitioner, organized as a mining partnership under the laws of Idaho, held to be an association taxable as a corporation. 2. Capital stock tax returns not filed within the statutory period held valid in the absence of prior returns filed either by petitioner or respondent. 3.

An executor acting as trustee was entitled to retain certain commissions and others upon rendering an annual account to the beneficiaries of all his receipts and disbursements. Held: there was no constructive receipt.

- Grantor, providing that income of an irrevocable funded insurance trust for the benefit of his wife and daughters should be used to pay premiums on insurance on his life, has thus reserved to himself economic benefits in the property, the value of which was not a taxable gift.

1. The petitioner, making its income tax returns on the accrual basis, estimated the amount which it was to receive on a consignment of sugar in 1937 and included the amount in its gross income for… Held: that the correct amount should be substituted for the estimated amount in the redetermination of a deficiency in income tax for 1937. 2. In 1932 the petitioner had outstanding $320,000 first mortgage bonds.

1. The petitioners entered into contracts for the drilling of wells under the terms of which the contractor agreed to drill the hole and furnish specified material and equipment and… Held: following Retsal Drilling Co.,42 B.T.A. 1057, that no part of the amounts paid to the drilling contractors is deductible as intangible drilling and development costs. 2. The petitioners agreed to pay a lump sum for the installation, ready for operation, of oil well pumping equipment.

Petitioner and another company acquired in 1926 rights of way and constructed a railway track extension thereon to provide transportation facilities to their respective… Held: petitioner's original investment was a capital expenditure for a benefit to accrue from the existence of the railway track extension, removal of which in 1936 resulted in a loss to petitioner. Deduction for the amount of the unrecovered cost is allowed under section 23(f), Revenue Act of 1936.

1. Decedent's conveyance of real estate to her son with the understanding, which was carried out, that the latter would execute a reconveyance to her to be recorded upon the son's prior death or to… Held: to be a transfer intended to take effect in possession or enjoyment at or after death, requiring the value of the property to be included in decedent's estate. Klein v. United States,283 U.S. 231, and Hallock v. Helvering,309 U.S. 106, followed. 2.

- Held, that payments to petitioner for the use of its name on the products of another corporation constituted income derived from royalties within the meaning of section 351(b)(1) of the Revenue… Held: that payments to petitioner for the use of its name on the products of another corporation constituted income derived from royalties within the meaning of section 351(b)(1) of the Revenue Acts of 1934 and 1936.

Decision of petitioner, recorded almost simultaneously with the receipt of property on an exchange, to sell the property and liquidate, held to show property received was not to be held * * * for investment by petitioner as required by the taxpostponing provisions of section 112(b)(1), Revenue Act of 1936, and the value of the property received is therefore to be included in petitioner's gross income.

Credit under section 26(c)(1) and (2), Revenue Act of 1936, not allowed where indenture of trust to secure an issue of bonds simply requires the petitioner to accumulate its net earnings until the operating capital of the company reaches the amount of $175,000.

Upon the record it is found that petitioner received, in the taxable year, 8,100 shares of preferred stock of United Dry Docks, Inc., of a par value of $810,000, in consideration for the issue, in exchange, of all of the capital stock of petitioner, and that the preferred stock, so acquired, did not constitute a commission earned by petitioner in that year, as determined by respondent.

1. Thomas Spruance, now deceased, during the taxable years embezzled and misappropriated funds belonging to the bank by which he was… Held: that the sums misappropriated by Spruance are taxable to his estate as income for the years in which the embezzlement occurred; held, further, that Hortense Spruance, the wife of Thomas Spruance, may not be taxed on one-half the embezzled funds under the community property laws of Texas, since the embezzler took no title to these…

1. Petitioner was the owner with two others of an oil payment payable out of seven-sixteenths of the oil produced by designated wells. Held: petitioner was the owner of an economic interest in the oil properties involved and amounts received during the taxable year under these payments must be included in income, the cost basis of such payments to be recouped only through depletion. T. W. Lee,42 B.T.A. 1217, followed. 2.

1. No completed gift was made in 1928 where, under terms of trust instrument executed in that year by a husband and wife, they could not repossess the property transferred to the trust, but reserved… Held: under the evidence, that the trust corpus had been contributed in equal proportions by petitioner and her husband, and that no portion thereof had been contributed by the son. 3.

1. Petitioners were the owners of an oil payment payable out of seven-sixteenths of the oil produced by designated wells. Held: petitioners were the owners of an economic interest in the oil properties involved and amounts received by them during the taxable year under these payments must be included in income, the cost basis of such payments to be recouped only through depletion. T. W. Lee,42 B.T.A. 1217, followed. 2.

1. DEDUCTIONS FOR DEPRECIATION - BASIS - In 1934 a corporation was indebted to petitioner in the amount of $3,305.73. Held: the basis for depreciation of the assets so acquired by petitioner was $20,000 at the time of acquisition. 2.

Petitioner on March 14, 1933, acquired by devise certain Iowa realty which had theretofore in January 1933 been entered on the county assessment rolls in the name of the devisor. Held: the taxes involved had not accrued at the time petitioner became the owner of the land and that he may deduct them from gross income under section 23(c) of the Revenue Act of 1934.

By the provisions of a written contract executed prior to May 1, 1936, the petitioner was prevented from paying any cash dividends out of its profits for 1936. Held: that the petitioner is entitled under section 26(c) of the Revenue Act of 1936 to a credit equaling the amount of its adjusted net income.

1. A bond indenture obligated the petitioner to reserve out of earnings $5,000 per year to discharge bonds maturing in the taxable year. Held: on the facts, that the Commissioner properly allowed credit under section 26(c)(2), Revenue Act of 1936, on only $5,000. 2.

Held, the members of a partnership which is engaged in the business of accepting wagers on horse races may deduct their individual losses from wagering transactions… Held: the members of a partnership which is engaged in the business of accepting wagers on horse races may deduct their individual losses from wagering transactions against their distributive shares of partnership gains. Jennings v. Commissioner, 110 Fed.(2d) 945; certiorari denied, 311 U.S. 704, followed.

- Life beneficiary of a trust who reported none of personal holding company undistributed adjusted net income in his return can not be forced to do so by Commissioner because the trust, a stockholder, reported its share on Form 1040.

1. Petitioners were the owners of a fractional interest in the mineral rights of a large acreage of lands situated in the State of Texas. Held: such transfer was a sale of petitioner' right to receive such payments for 20 years from the lessee and that petitioners are taxable in 1933 on only the amount which they received in 1933, since they were on the cash basis and did not receive any promissory note or other property for the remaining one-half due in 1934 but only the…

A foreign corporation, having no office or place of business in the United States, which, pursuant to contracts executed at its foreign office, broadcasts from there programs designed in the main for… Held: not to receive compensation or income from sources within the United States and, therefore, not subject to income tax.

Petitioner during 1936 received from certain of its vendors refunds representing that portion of amounts paid to such vendors in the purchase of cotton cloth as was attributable to the processing tax… Held: further, that the proof of record does not show that the said processing tax burden was absorbed by petitioner and not shifted by it to its vendee.

During the years 1936 and 1937 the petitioner received small reimbursements from vendors of processing taxes imposed by the Agricultural Adjustment Act which was held to be unconstitutional by the… Held: that the petitioner is not subject to the unjust enrichment tax imposed by section 501(a)(2) of the Revenue Act of 1936.

For the purposes of the credit provided by section 26(c)(1) of the Revenue Act of 1936, a corporate bylaw, as such, is not a written contract executed by the corporation. Davision-Joseph Campau Realty Co.,41 B.T.A. 675, followed.

In 1936 the petitioner received from its vendors $719.24 to reimburse it for processing taxes included in the sales price of corn syrup and peanuts purchased by it from August 1, 1935, to January 6,… Held: that the evidence of record does not show that the petitioner bore the burden of such processing taxes.

- Prior to 1934 petitioner leased for a long term of years a residential apartment in a building the title to which was vested in a body of four, self-perpetuating trustees. Held: the amounts so paid by petitioner are not deductible from his gross income under section 23(c), Revenue Acts of 1934 and 1936. Charles R. Holden,27 B.T.A. 530, followed.

1. During the taxable years 1922, 1923, and 1924 petitioner realized substantial amounts of income from his participation in an illegal liquor business, but failed to report such income in his income… Held: that his returns for those years were false and fraudulent, with intent to evade tax, and the assessment and collection of the deficiencies herein are not barred by the statute of limitations. 2.

Pursuant to contract dated June 9, 1933, Corporations A and B, on June 30, 1933, transferred certain of their assets to Corporations Y and Z, respectively, wholly owned subsidiaries of Corporation X, in exchange for stock and debentures of X, and immediately distributed the stock and debentures received to their stockholders, Corporations C and D, respectively.

1. For the years 1925 through 1935 the petitioner valued its inventories of live stock by the constant price method. Such basis was consistently accepted by the respondent for all years except 1935. Held: further, that the use of the farm price method is optional with the taxpayer; held, further, that the petitioner, so requesting and showing that cost may be ascertained from its books, is entitled to value its inventories on the basis of cost. 2.

Petitioner on May 15, 1929, agreed to transfer certain properties to the F. A. Gillespie & Sons Co., the capital stock of which was held in trust for herself, her… Held: the cost basis of the annuities to be used in computing the tax due under section 22(b)(2) of the Revenue Act of 1934 is the cost of these annuities from an insurance company and not the value of the transferred properties, which was in excess of that cost. F. A. Gillespie,38 B.T.A. 673, distinguished.

1. Petitioner during the taxable year was in the hands of a receiver but was not insolvent. The receivership had not been instituted by the corporation's creditors but by a dissatisfied stockholder. Held: that petitioner is not exempt from the undistributed profits surtax as an insolvent corporation in receivership, under the provisions of section 14(d)(2), Revenue Act of 1936. 2.

1This decision was promulgated as a printed pamphlet. MEMORANDUM SUR DECISION UNDER RULE 50 AND DENIAL OF MOTION TO VACATE, ETC.

The petitioner in the taxable year 1936 set aside for and paid to lessor certain rentals due in the following year and certain life insurance premiums provided for in a contract with the lessor. Held: the petitioner was not entitled to credit under section 26(c)(2) of the Revenue Act of 1936.

Dividends declared and credited to the accounts of shareholders, subject to their demand and control, but not withdrawn, held, dividends paid, for the purpose of the credit under section 27, Revenue… Held: dividends paid, for the purpose of the credit under section 27, Revenue Act of 1936.

Prior to July 2, 1936, petitioner executed a trust agreement and delivered printed bonds to a trustee to hold for exchange for outstanding preferred stock which was convertible into bonds. Held: that petitioner is not entitled, under section 26(c)(2) of the Revenue Act of 1936, to credits in those years for the amounts paid into the sinking fund, for purposes of computing the surtax on undistributed profits.

A letter written to the executors of an estate, advising that their claim for refund of estate taxes is rejected in its entirety, is not a notice of deficiency within the purview of section 308(a) of the Revenue Act of 1926 as amended by section 501 of the Revenue Act of 1934.

1. A purchase in 1934 by a corporation, which was not in existence in 1913, of one-tenth of its outstanding shares for a price in excess of one-tenth of its paid-in capital, held to absorb… Held: to the extent of such excess, not taxable as a dividend, but properly chargeable to capital account. Foster v. United States,303 U.S. 118, distinguished.

A corporation declared a dividend payable on the last day of its fiscal year. The resolution provided that in the event funds were not available the aliquot portions of the dividend should be credited to the drawing account of the stockholders. Such credits were made. The resolution also provided that charges might be made to the drawing accounts whenever in the opinion of the directors the finances of the company warranted payment in full of partial settlement.

1. Petitioner's claim to a credit under section 26(c)(1), Revenue Act of 1936, by reason of the provisions of its charter, held, disallowed. Held: disallowed. Helvering v. Northwest Steel Rolling Mills, Inc.,311 U.S. 46, and Crane-Johnson Co. v. Helvering,311 U.S. 54, followed. 2.

After default of a note secured by shares, the lender took the shares into its asset account at their fair market value and charged off as worthless the amount of the loan in excess of such value. For computing gain on the subsequent sale of the shares, basis held to be their value when taken over.

- In 1932 petitioner purchased an oil and gas royalty interest in certain land situated in Kansas. Held: respondent erred in disallowing the deduction claimed by petitioner for 1935.

1. Amounts constituting 15 percent of the gross receipts of certain corporations from gun perforation of oil wells received by the taxpayer corporation, more than 50 percent of whose stock was owned by not more than 5 individuals, in return for the use of from 85 to 100 of the taxpayer's patents and applications, of which 7 or 8 patents related to gun perforation, held to be "royalties" within section 351(b)(1) of the Revenue Acts of 1934 and 1936 and section 353 of the Revenue Act of 1936, as amended by section 1 of the Revenue Act of 1937, and the taxpayer corporation held to be a "personal holding company" within section 351(b)(1) of the Revenue Acts of 1934 and 1936 and section 352(a) of the Revenue Act of 1936, as amended, and subject to surtax under section 351(a) of the Revenue Acts of 1934 and 1936 and section 351 of the Revenue Act of 1936, as amended. 2. The four stockholders of the taxpayer corporation, more than 80 percent of whose gross income was personal holding company income within section 353 of the Revenue Act of 1936, as amended by section 1 of the Revenue Act of 1937, signed a reorganization agreement in the first half of the taxable year, whereby a new corporation to be formed was to issue its stock in exchang for the stock of several corporations owned by the four stockholders of the taxpayer. During the last half of the year the new corporation secured a permit authorizing it to issue its stock and issued the stock and the taxpayer corporation transferred its assets to the new corporation and filed a certificate of winding up and dissolution. Held, the requirement that "at any time during the last half of the taxable year" more than 50 percent of the taxpayer's stock be owned by not more than five individuals had been met and the taxpayer was a "personal holding company" within section 352(a) of the Revenue Act of 1936, as amended. 3. A personal holding company which distributed in liquidation, pursuant to a tax-free reorganization under section 112(b)(6) of the Revenue Act of 1936, amounts representing earned surplus chargeable to earnings and profits accumulated subsequent to February 28, 1913, held, entitled to a dividends paid credit for such amounts under section 27(f) of the Revenue Act of 1936 without limitation by subsection (h) in determining its surtax on undistributed profits and its personal holding company surtax for 1937. Credit Alliance Corporation,42 B.T.A. 1020, followed. 4. Petitioner Technicraft Engineering Corporation filed its income and excess profits tax returns for 1934 and 1935 on Form 1120 within the time required by law. The taxpayer, in good faith, believed that it was not a personal holding company and filed no return as a personal holding company on Form 1120 H, as required by law and Treasury regulations. Taxpayer's income and excess profits tax returns filed on Form 1120 made a full disclosure of its gross income and deductions and its resulting net income. Held, since the taxpayer failed to file a return as a personal holding company on Form 1120 H as required by law and Treasury regulations, the period of limitations prescribed by section 275(a), Revenue Act of 1934, has not run so as to bar the assessment of deficiencies in personal holding company surtaxes for the years 1934 and 1935. 5. A personal holding company filed income and excess profits tax returns for 1934, 1935, 1936, and 1937 on Form 1120 within the time required by law, in which a full disclosure was made of its gross income and deductions and resulting net income, but failed to file personal holding company returns on Form 1120 H for those years. Held, the imposition of 25 percent delinquency penalties is mandatory under the applicable revenue acts and the Treasury regulations promulgated in pursuance thereof.

During the taxable year 1932 petitioner acquired working interests in certain oil and gas mining leases covering lands located in the State of Oklahoma. It thereafter assigned to others, as consideration for the drilling of wells and furnishing of materials and as security for loans, undivided fractional interests payable in oil if, as, and when produced and saved. Other interests of a future and contingent nature were also assigned.

1. Petitioner in 1933 purchased Joint Stock Land Bank bonds, after receivers had been appointed for the issuing institutions in accordance with the Farm Loan Act, paying therefor approximately 20 percent of the face amount of the bonds and accrued interest. During 1934, 1935, and 1936 the receivers paid petitioner, as dividends, approximately 80 percent of the face amount of the bonds and interest which had accrued upon them prior to his purchase.

1. Title to real estate (subject to a mortgage) was acquired by trustees to be held for the benefit of the owners of the preferred and common shares issued by the trust. Held: under the evidence and the terms of the trust instrument, that there was a distribution in complete liquidation of an association taxable as a corporation. Petitioner's loss is deductible as a capital, rather than as an ordinary, loss. Tyrrell v. Commissioner, 91 Fed.(2d) 500. 2.

Before May 1, 1936, a bank approved the making of a loan to the taxpayer under the condition, inter alia, that the taxpayer pay no dividends before payment of the loan. Held: not operative until June 1936, and the taxpayer was not entitled to a credit under section 26(c)(1), Revenue Act of 1936.

1. Expenditures for tunnels, equipment, and a mill necessary to extract ore profitably from a mine previously worked by primitive methods,… Held: a capital investment recoverable through depletion allowances and not a deductible operating expense. 2. Interest paid on borrowings for the development of a mine, held, to reduce the net income of the property for purposes of computing the deduction for percentage depletion. Mirabel Quicksilver Co.,41 B.T.A. 401, followed. 3.

During the taxable year 1933 petitioner received 8,000 shares of stock of a Nevada corporation in payment for services rendered by… Held: petitioner is not entitled to plead the invalidity of the shares issued by the Nevada corporation by reason of no California permit to issue such shares having been obtained; held, further, petitioner has failed to prove that th 8,000 shares did not have a fair market value when received of $27,040 as determined by the respondent;…

Held, petitioner sustained a capital loss upon the foreclosure of mortgages as to which he was under no personal liability. Held: petitioner sustained a capital loss upon the foreclosure of mortgages as to which he was under no personal liability. Helvering v. Hammel,311 U.S. 504, and Electro-Chemical Engraving Co. v. Commissioner,311 U.S. 513, followed.

Taxpayer, a salesman, was employed under an agreement whereby he was to be paid on a commission basis, with an added clause as to minimum monthly payments. Held: the taxpayer is not taxable in 1937 on the amounts withheld by the employer and applied as per the agreement; held, further, the taxpayer is taxable on the amount credited to him on the company's books at the close of the taxable year.

In 1934 taxpayer set up two short term trusts, naming his wife and sister as beneficiaries. Held: the income of both trusts is taxable to the settlor under section 22(a) of the Revenue Acts of 1934 and 1936.

1. Five corporations were completely liquidated during the taxable year and each delivered all its assets, including its entire earnings and profits for the year, to the corporation owning all its… Held: following Credit Alliance Corporation,42 B.T.A. 1020, dividends paid credit under section 27, Revenue Act of 1936, is allowable, with specific subordinate adjustments. 2.

Certain compensation credited to petitioner's officer-stockholders in a prior year but not paid to them, which they did not return for income taxation but which petitioner deducted on its income tax… Held: the amount canceled is taxable income to petitioner in the year when canceled and credited to surplus. Beacon Auto Stores, Inc.,42 B.T.A. 703, followed.

One on the cash basis under contract with another to perform services for a fixed salary plus a percentage of certain receipts which could not be determined until an accounting in the following year… Held: not taxable upon the percentage amount in the tax year.

1. Gifts by decedent to her daughters, the residuary legatees under her will made at about the same time, while decedent was suffering from the infirmity which resulted in her death,… Held: transfers in contemplation of death. 2. Value of McKesson & Robbins, Inc., stock held value established by stock exchange prices for similar shares on valuation dates, notwithstanding that such prices may have been due to concealments and misrepresentations subsequently discovered. 3.

On August 6, 1932, certain realty was transferred by W. H. H. Chamberlin to petitioner in return for its entire capital stock and the… Held: the exchange was within section 112(b)(5) of the Revenue Act of 1932, the gift of the stock to transferor's family being a transaction separate from the exchange, and the basis of the property in petitioner's hands in therefore the basis in Chamberlin's hands, as provided by section 113(a)(8); held, further, section 213(f) of the…

1. REORGANIZATION - ASSUMPTION OF DEBT. - Where old bondholders exchanged past due bonds for new bonds of a new company in a reorganization under 77B of the Bankruptcy Act, the new company assumed the liability of the old within the meaning of section 112(g) of the Revenue Act of 1934, as amended by section 213 of the Revenue Act of 1939. 2.

- Income of a trust established by the petitioner payable to his wife for her life or for a period of ten years, whichever should be shorter, was taxable to the petitioner since he retained substantial control over the trust property. Helvering v. Clifford,309 U.S. 331, followed.

Petitioner, a foreign corporation having no office or place of business in the United States and not engaged in business here, received dividends in 1936 from a wholly owned domestic corporation. Held: that petitioner is liable for the tax on such dividends, pursuant to section 231(a) of the Revenue Act of 1936, notwithstanding the provisions of section 144 (b) of the act.

Insurance commissions held on facts to have been earned by corporation's president, to whom they are taxable, and not by assignee corporation.

Petitioner, a banking institution, closed its doors in May 1932 and in order to make possible its reopening its depositors relinquished… Held: petitioner is not given immunity from collection of United States taxes by section 3798 of the Internal Revenue Code, since no lien on its future earnings was given the depositors in lieu of their canceled deposits; held, further, petitioner is not entitled to deduct for the year 1936 as an ordinary and necessary business expense the…

Petitioner is the owner of certain shares of stock which he purchased several years ago. Held: the amount thus received in reimbursement was not from the sale or exchange of capital assets but was ordinary income taxable at full rates.

Petitioner, executor and testamentary trustee of an estate of substantial size, claimed deduction from the estate's income for the years 1935… Held: that expenses arising out of actions brought to retain control or management of the estate as a going concern are deductible, but those incurred in mere passive conservation of assets are not; held, further, that it is immaterial here whether deductions in respect of the same expenses have been allowed from the gross estate in…

An allowance paid under the statutes of Michigan as a widow's allowance during administration of estate is not an allowable deduction from income of estate, although probate court specified that such payment be made out of income.

In computing percentage depletion as permitted by the Revenue Act of 1934, section 114(b)(4), income from the property held to include income received by the owner and operator of a mine from the sale of minerals extracted from reworked tailings, even though these had previously been availed of in computing unit depletion. Atlas Milling Co. v. Jones (C.C.A., 10th Cir.), 115 Fed.(2d) 61, distinguished.

Petitioner was the owner and licensor of patents covering a process of clay treating used in the refining of gasoline. Held: that the entire amounts which petitioner received as royalties in the taxable years should be included in its taxable income without the exclusion of the amounts which it paid to its former stockholders under paragraph 27(a), (b), and (c); held, further, that the amounts which petitioner paid to its former stockholders under…

In 1935 the petitioner, a processor of hogs, accrued its liability for processing taxes imposed under the Agricultural Adjustment Act. Held: the respondent erred in disallowing the deduction.

Executors paid to the petitioner, as principal beneficiary under her husband's will, amounts within the income of the taxable year. Held: on the facts, that the payments are identified as made from income accumulated by the executors from earlier years and upon which the estate had paid income tax, and that the amounts received were improperly included by the Commissioner in the petitioner's income.

The decedent on November 3, 1936, became entitled to the immediate distribution of the corpus of five trusts of which he was the sole surviving beneficiary. Distribution was made in the year 1937. Held: the decedent may deduct such taxes, under section 23(c) of the Revenue Act of 1936, since he was the beneficial owner of the property at the time these taxes accrued and was liable, at least secondarily, for their payment. Hord v. Commissioner, 95 Fed.(2d) 179, followed.

In 1937 the petitioner sustained a loss of $12,479,48 as a result of the condemnation and taking by the Territory of Hawaii of certain real estate then owned by the petitioner. Held: that the deductible loss is limited by section 117(d) of the Revenue Act of 1936 to $2,000.

1. In 1922 petitioner exchanged capital stock for certain depreciable assets. The transaction was held to be a taxable exchange in Forrester Box Co.,25 B.T.A. 128, and is now res judicata. Held: petitioner's basis for determining gain on the sale is cost, which must be adjusted by depreciation sustained between date of acquisition and sale. 2.

On February 28, 1938, petitioner's board of directors approved a bonus of $10,390.47 to H. W. Fincher as president, under a bonus agreement between them. Held: under provisions of section 301 of the Revenue Act of 1937, deduction by petitioner of portion of bonus unpaid on March 15, 1938, not allowable.

Petitioner, the owner of 200 shares of stock of the A corporation, entered into an agreement with the B corporation, which already owned 1,220 shares of A corporation's stock, whereby petitioner and two other individuals would exchange 556 shares of A stock for 3,336 shares of B stock. By virtue of the exchange B became owner of all the outstanding stock of A, with the exception of the qualifying shares. No proof was offered to show that B's acquisition of its original holding of 1,220 shares of A stock was solely in exchange for its voting stock. Held, the exchange of petitioner's A corporation stock for B corporation's shares was not a tax-free reorganization within the meaning of section 112(g)(1)(B) of the Revenue Act of 1934; held, further, that the exchange occurred in the year 1935.

Petitioner made absolute sales of units of cemetery property, and delivered deeds to the purchasers. Held: the transactions were sales; payments received from purchasers were income from sales rather than loans; and annual payments by petitioner were for retaining the options rather than interest.

Where the taxpayer incurred expense in a suit to remove a cloud on its title to certain land upon which the defendant claimed a mineral rights lease given by taxpayer's predecessor in title, which… Held: that the expense was a capital expenditure and not deductible, following Moynier v. Welch, 97 Fed.(2d) 471.

A resident of California in 1929 transferred in trust a tract of land separately owned by him and a tract for which his wife paid one-ninth of the cost with separate funds and both signed a note… Held: the value of the husband's gross estate uopn his death in 1937 includes (1) one-half of the value of the personalty of both spouses; (2) the full value of the separately owned tract, transferred in trust; (3) four-ninths of the value of the second tract, transferred in trust.

Petitioner was the owner of certain second preferred shares of stock in a corporation, which shares became worthless in the taxable year. Petitioner contends that these shares had the same basis of cost as an equal number of preferred shares in another corporation which transferred its assets in a prior year to a successor corporation. Held, that the transfer of assets by the old company to the new corporation was not in pursuance of a plan of reorganization because neither the transferor corporation nor its stockholders retained a substantial continuing interest in the assets which were transferred. Hence the basis of petitioner's loss was not the cost of petitioner's preferred stock in the old company, but was the cost of his shares in the successor corporation.

Held, on the facts, that the petitioner has not shown error in determination of deficiency on the theory of capital loss limited under section 117, Revenue Act of 1936. Held: on the facts, that the petitioner has not shown error in determination of deficiency on the theory of capital loss limited under section 117, Revenue Act of 1936.

Suit to foreclose a mortgage upon property owned by a corporation was instituted in a state court. The corporation distributed its cash to its stockholders as a liquidating dividend. Subsequently a deficiency judgment was rendered against the corporation, but no effort was ever made to compel repayment of the liquidating dividends. Petitioner computed his loss upon the corporate stock by deducting the amount of the liquidating dividends from its cost.

1. A notice of deficiency for the calendar year 1936, held, in the circumstances, to be proper, notwithstanding the taxpayer was… Held: in the circumstances, to be proper, notwithstanding the taxpayer was liquidated and dissolved on March 31, 1936. 2. A statement on the return that the taxpayer had been dissolved and that its parent company had acquired its assets in liquidation, held not to be a request for prompt assessment affecting the statute of limitation. 3.

Petitioner's principal business was buying and selling lumber and building materials. Held: such real estate did not constitute property held primarily for sale to customers in the ordinary course of its trade or business and loss sustained upon sale is deductible as a capital loss under section 117(b), Revenue Act of 1936. Harr v. MacLaughlin,15 Fed.Supp. 1004, distinguished.

Decedent in 1931 established a trust for the support of his wife and children, reserving rights to reach certain portions of the corpus… Held: petitioners are not taxable on the income paid to decedent's divorced spouse during 1934 and 1935, since he had no continuing obligation to support her; held, further, petitioners are taxable on trust income to the extent of settlor's right to reach portions of the corpus and to the extent of trust income applied on his obligations.

Where a corporation issued preferred stock certificates in 1936, providing that dividends on preferred stock would be cumulative beginning with the year commencing May 1, 1939, and paid annually, before any dividend would be set apart or paid on the common stock, such a certificate is not a contract restricting payment of dividends in the taxable year ended March 31, 1937, as contemplated by section 26(c)(1) of the Revenue Act of 1936.

1. In the taxable year petitioner sold 25 shares of the class A preferred stock of the X corporation to A for $2,500. Held: that petitioner realized no gain from such sale. 2. In the taxable year petitioner also sold 200 shares of the class A preferred stock of the X corporation to B for $15,000. Petitioner had acquired 22 2/9 shares in 1933 in part payment of the purchase price of 50 shares of the old common stock of the X corporation.

Held, petitioner is not entitled to deduct from gross income (under section 23(0)(2), Revenue Act of 1934) payments made during 1934 and 1935 for the erection of a school building in Struno, Italy. Held: petitioner is not entitled to deduct from gross income (under section 23(0)(2), Revenue Act of 1934) payments made during 1934 and 1935 for the erection of a school building in Struno, Italy.

The petitioner received an award in condemnation proceedings for its property taken. Held: on the facts, that corporate entities will not be disregarded, and that there was no error in including the amount of the award in petitioner's gross income.

1. Petitioner refinanced its demand bank loan, contracted prior to January 1, 1934, by issuing debentures in 1934 to its stockholders and using the proceeds of the debentures to pay off the bank. Held: petitioner is entitled to deduct the aforesaid sum as an amount used or set aside to retire indebtedness incurred prior to January, 1, 1934, under section 351(b)(2)(B) of the Revenue Act of 1934. Sun Pipe Line Co.,42 B.T.A. 1413, followed. 2.

In 1923 petitioner and his wife entered into an irrevocable trust agreement transferring certain properties to a trustee with directions to pay a… Held: the judgment of the Supreme Court for the year 1933 does not make the question herein res judicata for subsequent years, Blair v. Commissioner,300 U.S. 5; held, further, that the income from the trust distributed to petitioner's divorced wife during 1934 and 1935 is not taxable to petitioner. Helvering v. Fuller,310 U.S. 69.

Petitioner owned 600 shares of corporate stock on which a dividend of $20 a share, or $12,000, was declared November 18, 1937, payable in cash on December 18, 1937. Held: that the exercise of his power to assign and sell his right to receive the declared dividend constituted a realization of income by petitioner taxable to him as ordinary income.

Prior to 1936 the petitioners kept their books of account and made their income tax returns upon the crop basis of reporting income. Held: that the petitioners are not entitled to deduct from the gross income of 1936 the indirect expenses allocable to the sugar on hand at December 31, 1935, which was sold in 1936.

In 1937 petitioner irrevocably assigned as gifts a single premium endowment insurance policy issued to her on her own life and two annual… Held: that the proper criterion for the valuation of the three policies for gift tax purposes was the cost of duplicating the policies at the date of gift rather than the cash surrender value of the policies at such date. Guggenheim v. rasquin,312 U.S. 254; United States v. Ryerson,312 U.S. 260; Powers v. Commissioner,312 U.S. 259.

Petitioner having been allowed a dividends paid credit for 1936 in the full face amount of its promissory notes paid as dividends, held not entitled in 1938 to dividends paid credit under the Revenue Act of 1938, section 27(a)(4), for amounts used to pay off such notes.

The petitioner is the European representative of the National Advisory Committee for Aeronautics, at Paris. Held: that these excess payments are deductible from gross income as traveling expenses.

A Missouri corporation's charter expired in 1935. Prior to the lapse there existed a written contract executed by that corporation expressly restricting the payment of dividends. Held: the taxpayer may not claim a credit under section 26(c)(1) of the Revenue Act of 1936, since it did not execute any written contract expressly restricting the payment of dividends.

1. Held, a loss sustained by petitioner in 1936 as the result of a forced sale of real estate under foreclosure of a mortgage, was a loss upon the sale of a capital asset… Held: a loss sustained by petitioner in 1936 as the result of a forced sale of real estate under foreclosure of a mortgage, was a loss upon the sale of a capital asset within the purview of section 117(d) of the Revenue Act of 1936, and the amount deductible is subject to the limitations therein provided.

1. A Kentucky court entered a judgment fixing the alimony of decedent's former wife at $150,000, in accordance with an agreement between… Held: the proceeds of the policies should be included in the value of the gross estate under section 302(g) of the Revenue Act of 1926, as amended by section 404 of the Revenue Act of 1934, Mathilde B. Hooper, Administratrix,41 B.T.A. 114; (2) the amount fixed as alimony in the judgment of the Kentucky court should be deducted from the…

In 1934 petitioner and her husband were residents of and domiciled in New York. Held: petitioner is not entitled to deduct one-half of that amount from the half of the income of the marital community reported by her in the taxable year.

1. GIFT TAX - RULE AGAINST PERPETUITIES INVALIDATING TRANSFER. - Held, that a deed executed in 1926 which contained provisions in violation… Held: that a deed executed in 1926 which contained provisions in violation of the New York rule against perpetuities was nevertheless valid in part so that a completed gift was made in 1926, and, consequently, the estate in the property which was given in 1926 could not be the subject of another gift in 1935, the taxable year, when the…

The taxpayer on the accrual basis was obligated under Minnesota law to pay certain state property taxes for the years 1929 to 1933, inclusive,… Held: that the taxes accrued in the prior years and are therefore not deductible in 1936; held, further, that the Board has no jurisdiction under sections 272(g) and 322(d) to determine an overpayment for a year not before it and apply it as a credit against the deficiency for the taxable year. Helmuth Heyl,34 B.T.A. 223, followed.

Parent charged by law with responsibility for support of minor children and who actually was the sole contributor to their maintenance, held entitled to credits for dependents, notwithstanding children had property of their own which yielded substantial income during the same period.

Exchange of corporate bonds for new bonds of the same corporation made pursuant to a plan held governed by nonrecognition provisions. Revenue Act of 1936, sec. 112(b)(3) and (g)(1).

In 1931, pursuant to a plan of expansion entered upon in 1930, a corporation in which the petitioners were the principal stockholders increased its capital stock from $60,000 to $250,000 by the… Held: that the redemption of the stock was essentially equivalent to the distribution of a taxable dividend under section 115(g) of the Revenue Act of 1934.

Petitioner in 1936 and 1937 failed to report one-half of the income of her husband derived from personal services, alleging that by virtue of a contract entered into with her husband she had agreed that his entire income should be his separate property. Held, the evidence is insufficient to disclose a contract of the nature contended for by petitioner, and accordingly she must report one-half of her husband's income from personal services.

Petitioner, a resident of Pennsylvania, created a trust, reserving the income for life with remainders over. In 1935 and 1936 the trustees sold trust securities, realizing capital gains. Held: that in the absence of evidence as to what trust securities were sold and as to what the gains on the sales were attributable, the respondent's determination that all of the gains are distributable income of the trust, taxable to the petitioner, must be sustained.

1. In computing the net taxable income from sources within the United States of a foreign life insurance company the tax-free interest from obligations of the United States and tax-free dividends… Held: reserves required by law within the meaning of section 203(a)(2) of the Revenue Acts of 1932 and 1934. Helvering v.Oregon Mutual Life Insurance Co., 311, U.S. 267. 3.

1. The petitioner owned all the capital stock of Schuman Motors, Ltd., and as agent for that corporation deposited its funds in its own bank account. The subsidiary's activities were greatly curtailed after March 14, 1934, and after 1934 its assets were principally in the form of cash and of notes and accounts receivable. It was not dissolved until 1938 and had no intention of liquidating prior to that year. Held, that the petitioner derived no taxable income in 1934 from the cash collections of money belonging to and held by the petitioner for the account of the subsidiary. 2. From March 1, 1913, to December 31, 1934, the petitioner kept its accounts and made its income tax returns upon the accrual basis except with respect to interest income, which was returned upon the cash basis. For 1934 the respondent has held that the interest income should likewise be reported upon the accrual basis and has included in the interest income for that year $18,141.37 which he computed as the amount of the accrued and uncollected interest at the beginning of the year plus the amount accrued during the year. Held, that the respondent did not err in so doing.

By resolution of the board of directors, approved by a resolution of the stockholders signed by all stockholders, a corporation amended its charter to provide for restriction of payment of dividends… Held: that such resolutions and the filing of certificate of amendment of charter with the secretary of state did not constitute a written contract executed by the corporation, within the intendment of section 26(c)(1), Revenue Act of 1936.

During and prior to the taxable year petitioner was beneficiary of certain policies of insurance upon the life of her husband. Held: that the overdue interest which was added to principal of the loans by the insurance companies became principal and payments in the taxable year by petitioner of amounts equal to amounts added to principal are not deductible as interest paid; held, further, that petitioner is not entitled to deduct amounts paid in the taxable year…

1. The taxpayer is the life beneficiary of a trust part of the corpus of which was preferred stock of a certain Massachusetts corporation calling for the payment of 6 percent annually and no more. Held: the taxpayer is taxable on the amount of such dividends in the years in which they were actually distributed to her by the trustee. 2.

On February 26, 1934, the petitioner accepted an exclusive agency for leasing and licensing machines used in distributing milk and other dairy products in paper containers. He was to receive a portion of the royalties paid by the lessees or licensees in his territory. On April 23, 1936, the petitioner sold all of his interest in the agency contract for $26,000 cash and $19,200 additional, payable $200 per month for a period of eight years. He received from the vendee $27,600 in 1936 and $2,400 in 1937. Held, that the gains were capital gains.

On September 6, 1933, petitioner and his wife, while living separate and apart, entered into a property settlement agreement in which they agreed that all subsequently acquired property should be the… Held: the 1933 agreement was in full force and effect during the taxable years 1934 to 1937, inclusive, during which years all of petitioner's earnings are taxable to him as his separate property.

1. TRUST INCOME TAXABLE TO GRANTOR. - Income of short term trust taxable to grantor, following Helvering v. Clifford,309 U.S. 331. 2. GIFT TAX - INCOMPLETE GIFT. - Gift was incomplete until termination of trust where dependent upon beneficiary-donee being alive at termination of trust. 3.

1 and 2. Where a corporation without any plan or purpose to liquidate its business reduces the par value of its capital stock and makes a cash distribution of such reduction to the stockholders, and… Held: that the distribution is a dividend taxable to the stockholders at the ordinary dividend rate and not a liquidating dividend. 3.

1. Section 24(a)(6) of the Revenue Act of 1934 does not prevent a grantor of a trust for the benefit of his daughter taking a deduction for a loss on a bona fide sale of stock by him to the trust. 2. Difference between unrecovered cost of land contracts and bonds taken in settlement of vendees' liability thereon is deductible as a bad debt. James R. Stewart,39 B.T.A. 87, followed.

Certificates of proof of claim issued by national bank receiver, held, not such certificates of indebtedness as to justify treating payment thereon as a sale or exchange. Held: not such certificates of indebtedness as to justify treating payment thereon as a sale or exchange. Revenue Act of 1936, sec. 117(f).

Petitioner subscribed to shares of stock in a realty corporation. In 1935 the shareholders of the corporation voted to dissolve the corporation and appointed a liquidator. Held: the release from stockholder liability did not amount to a distribution in liquidation within the meaning of section 115(c) of the Revenue Act of 1934 and the loss due to worthlessness of the stock was deductible in the taxable year as an ordinary loss.

Income received by petitioner subsequent to September 1, 1936, the date of a property settlement agreement with his wife, the final judgment of divorce from whom was entered on October 1, 1937, is not community income and is taxable to him individually. The contention of petitioner that the language of the property settlement agreement was not sufficient to change the character of future earnings from community property to separate property is not sustained.

1. (a) In determining the expiration date of a United States patent, held, the first day of the 17-year period begins to run on the day after the patent is granted, so in the case… Held: the first day of the 17-year period begins to run on the day after the patent is granted, so in the case of a patent granted January 7, 1913, the expiration date is January 7, 1930. (b) On March 1, 1913, petitioner owned a United States patent which had been granted on January 7, 1913.

In 1934 petitioner leased mineral rights from X, with an option to purchase the rights in 5 years for $5,000. Held: the transactions in 1937 resulted in purchase of mineral rights by petitioner and a resale to Y. Acquisition of the mineral rights in 1937 did not relate back to 1934. Petitioner sold a capital asset held less than one year. The entire gain is taxable under section 117(a) of the Revenue Act of 1936.

1. Upon facts showing that petitioner acquiesced in, affirmed, and benefited from respondent's allowance of a specific exemption of $38,000 in computing gift tax liability for the year 1933, which… Held: that petitioner is not entitled to a further specific exemption in 1935, and that he has exercised his option to exhaust the allowable specific exemption for gift tax purposes in 1933. 2.

In contemplation of divorce petitioner created a trust in favor of his wife and son. Held: that petitioner failed to sustain the burden of showing that the divorce court did not retain such right to revise its decree as would constitute a continuing contingent obligation on petitioner (Helvering v. Leonard,310 U.S. 80, followed); Held, further, that trust income actually paid for support and maintenance of petitioner's son…

1. A transfer in trust reserving the reversion if the settlor survives the beneficiary is not subject to gift tax. 2. Held: not sufficient for decision as to the existence or value of a gift of other than the property, no such issue being raised by the pleadings.

A group of individuals loosely organized, whose only business activity was the purchase and sale of shares of stock of a single corporation, held, not an association taxable as a corporation, where… Held: not an association taxable as a corporation, where legal title to the shares purchased was held by the members and where there was no centralized management of the affairs of the group.

During or prior to the taxable years 1934 and 1935, petitioner acquired various interests in oil and gas mining leases in consideration of the drilling and equipping of wells thereon.

- In December 1935, petitioner negotiated a mortgage loan from a bank in the amount of $85,000. Held: petitioner is not entitled to the credit provided in either subdivision (1) or (2) of section 26(c), Revenue Act of 1936.

Pro rata redemption by a corporation at book value of a portion of its preferred stock, with the stipulation that the proceeds would first be applied to discharge indebtedness of the stockholders to… Held: on the facts essentially equivalent to the distribution of a taxable dividend to the extent of earnings available therefor. Revenue Act of 1936, sec. 115(g).

1. In order to secure the deduction authorized by section 351(b)(2)(B) of the Revenue Act of 1934, the indebtedness must have been incurred prior to January 1, 1934, by the taxpayer. 2. A penalty of 25 percent for late filing of a return must be sustained under section 406 of the Revenue Act of 1935 where no reasonable cause for the tardiness is shown.

Petitioner was incorporated in 1916, all of its capital stock (except for qualifying shares) being issued to the Foutana Co. and the Fontana Water Co., from which companies it acquired title to… Held: that such payments during taxable years of 1935, 1936, and 1937 were distributions in the nature of dividends.

The petitioner is the president and a director of Harbisons' Dairies, Inc., a Pennsylvania corporation, and during the years 1932 to 1937, both inclusive, devoted substantially all of his time to its… Held: that no part of the $23,543.10 in question is a legal deduction from gross income.

1. Amount of income realized by the petitioner from gambling and operating gambling house determined upon basis of facts reflected by purchase and use of cashier's checks and by bank accounts. 2. Penalties imposed by the Commissioner for fraud and failure to file returns sustained.

The petitioner is a member of a partnership which filed its income tax returns on a calendar year basis. The petitioner made his income tax returns upon the basis of a fiscal year ending September 30. Held: that there must be included in such return his share of the profits of the partnership for the calendar year 1936.

- An estate which was continued by tacit consent of the residuary legatees was not engaged in carrying on any business as a result of its activities in keeping its funds invested in marketable securities and collecting the income therefrom, Higgins v. Commissioner,312 U.S. 212, followed, nor was it engaged in any business through its activities in connection with various corporations in which it held stock, particularly where it was merely trying to protect its investment in…

Petitioner in 1930 leased coal mining rights in a tract of land and subsequently, before the taxable year, subleased these rights in a portion of the acreage covered by the original lease, reserving… Held: petitioner has properly treated the income from the two sources as arising from a single property as permitted by article 23(m)-1(j) of Regulations 86.

A contract provision that out of the net proceeds of operation of specified property and other moneys available for the purpose a taxpayer would pay certain notes does not support a credit under section 26(c)(2), Revenue Act of 1936, since the noteholders are the shareholders and directors, and with their consent in the practical administration of the contract no payments on the notes or interest have ever been made, the notes have been frequently renewed, there is no…

1. Under a policy of insurance on decedent's life issued in 1929, the income from the proceeds was to be paid to his wife for life; upon… Held: that the transfer of interests under the policy was not complete for estate tax purposes until decedent's death and that section 302(g) of the Revenue Act of 1926 as amended applies to the policy in question, Emily King Parker et al., Trustees,30 B.T.A. 342, and similar cases no longer followed; held, further, that only such portion…

Waivers executed in the name of a dissolved corporation, and after its existence was terminated for all purposes, were without effect to extend the statutory time for assessment and collection of its tax liability from its transferee.

1. In the taxable year petitioner referred a debt of $95.74 for collection to his attorney, who in turn referred the debt for collection to a correspondent… Held: that the debt was ascertained to be worthless within the taxable year and was deductible as a bad debt in that year. 2. In the taxable year petitioner on the accrual basis received without restriction as to its disposition the total sales price of coal which he sold as agent for the X corporation in that year.

1. During the years 1934 to 1936, inclusive, the petitioner corporation, Ross Brothers Horse & Mule Co., was engaged in the business of conducting a public auction and otherwise selling horses and… Held: that the trading activities recorded in the W. R. Ross mule account were a part of the business of the corporation and the net profits realized therefrom constituted taxable income to it. 2.

A final decree by a state court under the Missouri Declaratory Judgment Act, construing a Missouri trust in which it was found that all the interested parties were before the court, were represented by counsel or in person, that an actual controversy existed, and from the evidence adduced, found and determined that the trust was irrevocable, is binding on the Board.

1. Amounts paid by a partnership in settlement of litigation to compel executors to perfect the transfer of a stock exchange membership which… Held: not deductible. 2. The gain from the exchange by a holder of debentures of an old corporation having liabilities in excess of assets, for shares in a new corporation and warrants to purchase shares in a third corporation, held, limited to the value of the warrants, since the exchange was in a statutory reorganization under…

In the taxable year petitioner was under a legal obligation to support his two children, who were under 18 years of age, and actually furnished their entire support out of his own funds. Held: that in the taxable year petitioner's two children were dependent upon him within the meaning of section 25(b)(2) of the Revenue Act of 1936 and that he is entitled to a credit of $400 for each of them.

Cash received from an interested individual to induce petitioner to part with stock for which petitioner also received other stock on an exchange in a reorganization subject to the nonrecognition… Held: part of sales price causing proportion of gain attributable to cash to be taxed as capital gain rather than ordinary income.