Volume 46 — Tax Court Reports

Held, prorata advances by the two equal stockholders of a corporation far in excess of their contributions to the corporation for stock were placed at the risk of the business and had the… Held: prorata advances by the two equal stockholders of a corporation far in excess of their contributions to the corporation for stock were placed at the risk of the business and had the characteristics of equity capital.

As part of a plan of liquidation, a cash basis corporation distributed to its stockholders certain assets including its rights in certain motion-picture photoplays together with its right to… Held: such income was not reportable by the corporation for the year during which it made the assignment to its stockholders, nor was the Commissioner authorized under section 446(b) of the 1954 Code to require the corporation to include the amount thereof in its income for that year.

The decedent at the date of his death owned 32.4 percent in value of the stock of A corporation, 66 percent of B corporation, 26.67… Held: that the value of 88.9 percent of the stock of A, B, and C corporations held by D corporation may not be combined with the value of the stock of the A, B, and C corporations held by the estate for the purpose of determining whether, under section 303(b)(2)(B) of the Internal Revenue Code of 1954, there was included in determining the…

T corp. owned an undivided one-fourth interest in a tract of land and C, its sole stockholder, owned an undivided one-fourth interest in two adjacent tracts. Held: M was not organized or used for any bona fide business purpose, and the exchange with U did not constitute a tax-free reorganization. The substance of the transaction was a taxable exchange of interest in land for stock of U. Gregory v. Helvering, 293 U.S. 465.

Petitioner, a Massachusetts corporation, received proceeds from fire insurance carried on a wool-processing mill, owned and operated by… Held: Petitioner's purchase of stock in the New Hampshire corporation was made for the purpose of replacing its Freetown mill within the meaning of section 1033, I.R.C. 1954; (2) petitioner's purchase of stock in the New Hampshire corporation was the purchase of stock in the acquisition of control of a corporation owning property similar…

Petitioners contributed money to a corporation organized to conduct the dredging of certain waterways. Held: the corporation was organized and operated primarily for the benefit of those persons owning property adjacent to the waterways dredged rather than for public or charitable purposes, so that contributions to it are not deductible under section 170, I.R.C. 1954.

Petitioners were transferees of an estate. Held: the consents were signed on behalf of the estate; held, further, that, in the absence of notification of the discharge to respondent, the estate was bound by both consents; held, further, that, in spite of the dismissal of the petition, the prior proceeding suspended the running of the period of limitations under section 277, I.R.C.…

In 1946 petitioners, Leon and Lucile, husband and wife, who were coowners of a partnership caused the organization of a corporation, Jewelry, to which they transferred the partnership assets in… Held: Respondent's notices of deficiency were valid and presumptively correct in spite of inconsistencies and confession of error as to one ground. 2.

1. Petitioner was incorporated in 1947, and at that time it acquired as its initial assets all the net assets and going business of a predecessor corporation, which were transferred to it by an… Held: on the facts, that said promissory notes did not represent a bona fide indebtedness of petitioner; but to the contrary, they represented in substance as distinguished from their form, equity capital invested at the risk of the business.

Petitioner contributed bound volumes of various medical journals to a hospital and also purchased raffle tickets from various charitable organizations. Held: the fair market value of the bound volumes determined to be no more than $ 415.50; held, further, petitioner is not entitled to a charitable deduction under section 170, I.R.C. of 1954, for the cost of the raffle tickets.

1. Held, legislative history of statutory prohibition against deduction of interest on loans to purchase multiple-premium annuities does not allow a deduction arising from transaction… Held: legislative history of statutory prohibition against deduction of interest on loans to purchase multiple-premium annuities does not allow a deduction arising from transaction occurring prior to effective date of such legislation, where the transaction lacks economic substance. 2.

Held: Deduction of partnership loss by limited partners is allowed only to the extent of the adjusted bases of their interests in the partnership at the end of the partnership year in which loss… Held: Deduction of partnership loss by limited partners is allowed only to the extent of the adjusted bases of their interests in the partnership at the end of the partnership year in which loss occurred. Sec. 704(d), I.R.C. 1954.

1. Held, reimbursement by the employer of one of petitioners of selling expenses incurred by petitioners on the sale of their Detroit residence, which was sold because of one of… Held: reimbursement by the employer of one of petitioners of selling expenses incurred by petitioners on the sale of their Detroit residence, which was sold because of one of petitioners being transferred to Minnesota for the convenience of his employer, constitutes taxable income to petitioners. 2.

Held, that petitioner is entitled to a theft loss deduction under section 165(c)(3) of the Internal Revenue Code of 1954 resulting from his sale of certain annuity contracts in reliance upon a… Held: that petitioner is entitled to a theft loss deduction under section 165(c)(3) of the Internal Revenue Code of 1954 resulting from his sale of certain annuity contracts in reliance upon a misrepresentation made on behalf of the purchaser as to the value thereof.

During the taxable years 1960 and 1961 petitioner was employed at intervals to render consulting engineering services with regard to the automation of generating stations. Held: that the amounts expended for meals while working at the two stations in 1960 and the remaining station in 1961 are allowable deductions under section 162(a)(2), I.R.C. 1954. Hanson v. Commissioner, 298 F. 2d 391 (C.A. 8, 1962).

Held, a full-time cantor of the Jewish faith, commissioned by the Cantors Assembly of America and installed by a congregation, is a minister of the gospel entitled to exclude the… Held: a full-time cantor of the Jewish faith, commissioned by the Cantors Assembly of America and installed by a congregation, is a minister of the gospel entitled to exclude the portion of his remuneration received as a rental allowance from his gross income under section 107(2), I.R.C. 1954.

Upon the evidence it is held: 1. The packing and crating charges and the 6-percent handling charges paid by an American company to a Holland Company (N.V.… Held: The packing and crating charges and the 6-percent handling charges paid by an American company to a Holland Company (N.V. company) as well as the alleged fees and commissions paid by the American company to the Holland brothers were properly allowable as additional separate items of cost of goods and expense. 2.

Decedent's contract of employment provided for a salary payable to him and monthly payments to his widow for her life if he died during the term of the contract. Held: the salary payments to the decedent did not constitute an annuity or other payment, and the value of the payments to the widow is not includable in decedent's gross estate under section 2039(a), I.R.C. 1954.

On remand from Court of Appeals for the Eighth Circuit, it is determined which properties sold by petitioner during the years involved were sales of properties held primarily, or principally, for sale to customers in the ordinary course of petitioner's trade or business.

Two minor children lived with their mother in a house jointly owned by their parents who were separated and later divorced without making provision for disposition or use of the jointly owned house. Held: in determining which parent furnished over one-half of the support of the two children, the item of lodging is considered as furnished one-half by each parent.

Petitioner husband and one Forsythe terminated their partnership. All of the partnership's assets were distributed to Forsythe, who assumed all of its liabilities. Held: Forsythe's assumption of his partner's share of the partnership liabilities constituted a distribution in liquidation within the meaning of sections 731 and 736, I.R.C. 1954, and loss realized on such liquidation was capital loss under section 741, I.R.C. 1954.

During the taxable years in issue, petitioners were employed by Pan American World Airways, Inc., Guided Missiles Range Division, in connection… Held: that during the taxable years involved petitioners were not bona fide residents of a foreign country or countries within the meaning of section 911(a)(1) of the Internal Revenue Code of 1954 and are not entitled to exclude from gross income amounts received in those years for services performed at the down range missile sites.

Pursuant to a jeopardy assessment of deficiencies in the individual income taxes of the residuary legatee-executor of decedent's estate, respondent served notices of levy upon certain third parties… Held: the estate tax liability and interest thereon had been paid at the time the notice of deficiency herein was issued and this Court is without jurisdiction.

1. A covenant not to compete given in connection with sale of a newspaper was nonseverable from the goodwill and other assets transferred and no part of the purchase price is allocable to the covenant. 2. Petitioners failed to prove that $ 250 allegedly contributed to an organization for construction of a municipal golf course was an ordinary and necessary business expense of their newspaper-publishing partnership in the year 1960. 3.

The conveyance by one of petitioners of a one-half interest in his accounting practice to another with whom he formed a partnership for the practice of accounting resulted in capital gain to the extent that the amount received exceeds petitioner's basis in the assets sold, the portion of the payment in excess of that allocable to the tangible assets transferred to the partnership being in payment for one-half of the business' goodwill.

Held, the Renegotiation Act of 1951, as amended, specifically applies to petitioners' contracts with the Department of the Navy. Held: the Renegotiation Act of 1951, as amended, specifically applies to petitioners' contracts with the Department of the Navy.

The petitioners, during each of the taxable years involved, were husband and wife domiciled in the State of California which is a community property State. Held: that for the purpose of computing the retirement income credit provided by section 37 of the 1954 Code, the portion of the wife's retirement income which is taken into account for such computation, should be reduced to reflect the earned community income derived from the personal services of the husband.

Petitioners, in the landscaping and nursery business, were under great pressure from the mortgagee of their farm on which they lived and… Held: in subdividing a portion of such farm and in selling subdivided lots therefrom in 1960 and 1961, their activities were so extensive as to constitute a second business and they held such lots primarily for sale to customers in the ordinary course of such trade or business in that such lots were held principally for such purpose and…

Held, an earthslide occurring during the course of excavation of a building site was a casualty within the meaning of section 165(c)(3), I.R.C. 1954. Amount of deductible loss determined. Held: an earthslide occurring during the course of excavation of a building site was a casualty within the meaning of section 165(c)(3), I.R.C. 1954. Amount of deductible loss determined.

Held, that where decedent was given a general power of appointment over a trust prior to 1942 by settlor of a trust, trust amendments… Held: that where decedent was given a general power of appointment over a trust prior to 1942 by settlor of a trust, trust amendments solely in favor of issue and spouses of issue executed by decedent prior to November 1, 1951, were not an exercise of decedent's power of appointment rendering the appointive property taxable as part of her…

Petitioners, flight engineers on propeller aircraft, took pilot training in order to meet the requirement of their employer that the second… Held: petitioners are entitled to deduct the expenditures made for training to acquire commercial pilots' licenses and instrument ratings since this training improved their skill as flight engineers and met a specific requirement of their employer for the retention of their status as flight crew members doing the flight engineer's…

Petitioners, father and son, each owned 50 percent of the stock of two corporations, A company and B company. Held: The transfer of the group insurance business from A company to B company constituted a reorganization within the meaning of section 368(a)(1)(D). 2. Each petitioner's receipt of A company's assets must be treated as a dividend under section 356(a)(2), to extent provided by that section. A company's earnings and profits determined.

Petitioner William, a Canadian citizen, spent about 70 days of each of the years 1957 through 1959 in Florida in a furnished house… Held: William was a nonresident and Hazel was a resident of the United States during the 3 years; held, further, the exemption from tax under the tax treaty between Canada and the United States of U.S.-source capital gain realized by a Canadian resident applies only if such individual is not a U.S. resident; held, further, the failure of…

Petitioner acquired a warehouse building offered for sale for $ 1 million, paying $ 750,000 cash and simultaneously granting the party from which it purchased the property a right to 2 1/2… Held: Petitioner realized taxable rent income in the amount of the fair market value of the leaseback. The transaction was a purchase of the entire fee interest and a leaseback of a portion thereof, and not a purchase of a remainder interest with the seller reserving an estate for years.

Petitioner sold a warehouse property offered for sale for approximately $ 1 million, receiving $ 750,000 cash plus a contractual right to retain occupancy of a portion of the premises without further… Held: The amount realized on the sale of the property included the fair market value of the 2 1/2-year rent-free occupancy rights. 2.

Abraham M. Sonnabend purchased a farm and herd of cattle and engaged in the business of cattle breeding. Held: Respondent properly applied section 270, I.R.C. 1954, limiting the deductions allowed for the fiscal year ended in 1958. 2. The notice of deficiency, mailed within 1 year after expiration of the normal period of limitations on assessment, is timely under section 270(d).

1. In 1956, an inventor transferred an exclusive license to patents to corporation R which was not a related person within the meaning of section… Held: that in 1956 section 1235(d) applied to an indirect transfer of a patent to a related person; that there was such an indirect transfer; and that when a holder of a patent transfers it to a related person and receives payments in the manner described in section 1235(a), such payments are taxable as ordinary income. 2.

Decedent inherited real property from her husband which had a value at that time of approximately $ 33,000. Held: under the facts of this case, the amount to be included in decedent's gross estate on account of this property is the sum of $ 95,000 minus an amount equal to the expenditures made thereon by the surviving joint tenant from his own funds in the approximate amount of $ 16,000.

Held: 1. The ascertainable value of a reversionary interest retained by the decedent, the creator of an irrevocable inter vivos trust in 1929, is includable in decedent's gross estate under section… Held: The ascertainable value of a reversionary interest retained by the decedent, the creator of an irrevocable inter vivos trust in 1929, is includable in decedent's gross estate under section 2033, I.R.C. 1954. 2.

1. Held, an amount of $ 3,046.32 paid by petitioner John C. Nordt Co., Inc., to Bertha C. Nordt during 1959 was for reasonable, current, and past services rendered by Bertha to the corporation, and… Held: an amount of $ 3,046.32 paid by petitioner John C. Nordt Co., Inc., to Bertha C. Nordt during 1959 was for reasonable, current, and past services rendered by Bertha to the corporation, and is deductible by the corporation under section 162 (a) (1), I.R.C. 1954. 2.

Held, although a multiple-support agreement was executed pursuant to section 152(c), I.R.C. 1954, the petitioner is not entitled to a… Held: although a multiple-support agreement was executed pursuant to section 152(c), I.R.C. 1954, the petitioner is not entitled to a dependency exemption for her sister where the sister contributed an amount ($ 409.71) to a common family fund used for the support of all members of the household which was greater than one-half of the total…

Petitioner, on April 9, 1958, ordered through his broker K, at a price above par, $ 9 million face amount of U.S. Treasury 2 3/8-percent bonds due June 15, 1958. Held: Petitioner was not the owner of the bonds and is not entitled to a deduction for amortization of bond premium. 2. Petitioner is entitled to a deduction for a loss in a transaction entered into for profit.

A transfer by petitioner of stock in a closely held corporation to his wife under a property settlement agreement incident to a divorce granted by an Oklahoma court constituted such a disposition of property as to result in petitioner's receiving a taxable gain in the amount of the difference in his basis in the stock and the fair market value of the stock on the date of the transfer. The fair market value of the stock transferred is determined from the evidence.

Petitioners owned and operated an irrigated farm in Colorado, which they acquired in 1955, together with 300 shares of Highland Irrigation Co., a nonprofit mutual assessment corporation which owned… Held: Petitioners are not entitled to deduct as ordinary and necessary business expenses under section 162, I.R.C. 1954, that portion of their assessments applied by Highland to make payments on that portion of the bank loan used to build the dam and to buy the bank stock. 2.

Petitioner entered into four joint ventures with Marion H. Woody involving the acquisition of race horses to be raced for profit. Held: One-half of the total expenses deducted by petitioner for maintenance and training of the four horses which he owned jointly with Woody must be capitalized as the cost of acquiring his one-half interests in these horses. 2.

A notice of deficiency was sent to petitioner by certified mail on September 30, 1965. The petition was sent by ordinary mail. Held: the petition was not timely filed with the Tax Court within the period prescribed by sections 6213(a) and 7502(a), I.R.C. 1954; therefore, respondent's motion to dismiss for lack of jurisdiction is granted. Skolski v. Commissioner, 351 F. 2d 485 (C.A. 3, 1965), and Alexander Molosh, 45 T.C. 320 (1965), distinguished.

Held, a loss sustained upon the sale of a personal residence is not deductible as a medical expense under section 213, I.R.C. 1954, even though petitioners were motivated to change their residence to… Held: a loss sustained upon the sale of a personal residence is not deductible as a medical expense under section 213, I.R.C. 1954, even though petitioners were motivated to change their residence to avert the possibility of psychological damage to their daughter.

Petitioner's corporate employer paid the premiums on a group, term life insurance policy on his life, with petitioner naming the beneficiary. Petitioner owned control of his employer. Held: the policy and the premiums were available to petitioner as an employee within the meaning of section 1.61-2(d)(2), Income Tax Regs., and such premiums are not taxable to him.

Held, was figures leased to a wax museum constitute commercial equipment as that term is used in the Income Tax Convention between the United States and the Kingdom of the Netherlands. Held: was figures leased to a wax museum constitute commercial equipment as that term is used in the Income Tax Convention between the United States and the Kingdom of the Netherlands.

Petitioner-husband paid $ 2,350 as support payments for his three children in 1962, but petitioners did not know the total cost of support for the children or the income of petitioner-husband's… Held: petitioners have failed to prove that petitioner-husband provided more than one-half of the support for his three minor children, and accordingly, dependency exemptions for the year 1962 under section 151(e), I.R.C. 1954, denied.

Petitioner corporation was organized by two doctors to own and operate a 42-bed hospital previously owned and operated by them. Held: under the facts involved herein, petitioner was operated to a considerable extent for the benefit of the two founding doctors, and was not operated exclusively as a charitable organization.

Petitioner repaid to his corporate employer a portion of his salary, determined to be excessive by the Internal Revenue Service, pursuant to… Held: no portion of the foregoing repayment is deductible under section 1341, I.R.C. 1954, because petitioner's obligation to repay, if any, did not arise out of the circumstances, terms, or conditions of the original payment but, instead, arose out of a subsequent agreement between payee (petitioner) and payor (petitioner's employer).

Held, that the petitioners are not entitled to deduct for their taxable year 1959, pursuant to subchapter S, section 1374 of the Internal… Held: that the petitioners are not entitled to deduct for their taxable year 1959, pursuant to subchapter S, section 1374 of the Internal Revenue Code of 1954, any portion of a net operating loss sustained by their bankrupt small business corporation in its taxable year ended February 28, 1959, for the reasons that (1) the election filed…

Petitioner, who was an electrical engineer employed by IBM, voluntarily applied for the position of patent trainee in IBM's patent training program, a program designed to qualify eligible applicants… Held: the educational expenses incurred and paid by petitioner to attend law school are not deductible as ordinary and necessary business expenses under section 162(a), I.R.C. 1954.

1. Collateral estoppel held not applicable where the facts in the second case involving different taxable years are materially different from the facts involved in the first case. 2.

Held, value of family residence transferred by husband to wife about 11 years before his death is not to be included in husband's estate under section 2036, I.R.C. 1954, even though he continued to… Held: value of family residence transferred by husband to wife about 11 years before his death is not to be included in husband's estate under section 2036, I.R.C. 1954, even though he continued to occupy the residence with his wife until his death.

Petitioner was engaged in the business of breeding and racing thoroughbred horses. He formed a syndicate to share in the ownership of a valuable stallion held by him for breeding purposes. Held: the sale of such shares by petitioner was the sale of livestock held for breeding purposes and therefore the sale of property used in petitioner's trade or business within the meaning of section 1231, I.R.C. 1954.

On February 12, 1962, petitioner gave $ 5,000 to the International Services of Information Foundation, Inc., a nonexempt organization, to help disseminate the views of the foundation by sending… Held: that the amount was given to or for the use of the nonexempt foundation and, therefore, is not deductible as a charitable contribution under section 170, I.R.C. 1954.

Securities in an estate were sold to secure funds for administration purposes, and the selling expenses were deducted as administration expenses under section 2553, I.R.C. 1954, for estate tax… Held: Such deduction and offset were proper and section 642(g), I.R.C. 1954, which is designed to disallow double deductions as between income and estate taxes, was not applicable because the selling expense was an offset against selling price and not a true deduction.

Petitioners created a trust, naming themselves trustees and life income beneficiaries, with gifts in remainder to certain charitable organizations. Held: Respondent's prospective ruling is not a disallowance of a claimed deduction. His notice of deficiency is not a disallowance of a deduction within the meaning of paragraph 16 of the trust instrument where petitioners exercise their right to litigate.

Petitioner granted Pan American Petroleum Corp. a 3-year option to acquire oil and gas leases. Pan American Petroleum made a cash payment of $ 172,800 to petitioner upon receipt of the option. Held: the transfer contemplated in the option agreement would, if effected, constitute an assignment for tax purposes, taxable at capital gains rates.

In 1961, petitioners, pursuant to section 351, I.R.C. 1954, transferred all the assets and liabilities of their sole proprietorship to their controlled corporation in exchange for its entire capital… Held: Section 357(c) is applicable and petitioners are taxable on the excess of liabilities assumed by the corporation over petitioners' adjusted basis of property transferred. 2.

Petitioner had an option to purchase shares of stock of his employer under a restricted stock option plan which required written notice to the company's treasurer at St. Paul, Minn., of his intention… Held: petitioner did not hold the stock for more than 6 months and is not entitled to treat the gain as long-term capital gain.

T corporation received checks in payment for certain sales made by it. Held: income tax returns for the corporation signed by the president or his coconspirator which failed to include the sales in question were false and fraudulent with intent to evade tax.

A partnership, of which the petitioner was a 50 percent member, sold shipyard properties, and it and the petitioner reported the gain from… Held: that even if the use of the installment method was improper, the item claimed by the respondent to have been omitted is not to be taken into account in determining the amount omitted from gross income since such item was disclosed in the partnership return in a manner adequate to apprise the respondent of the nature and amount…

Held, a wholly owned subsidiary of a tax-exempt charitable corporation is not entitled to deduct as charitable contributions transfers of its equity in certain bonds to its parent corporation. Held: a wholly owned subsidiary of a tax-exempt charitable corporation is not entitled to deduct as charitable contributions transfers of its equity in certain bonds to its parent corporation.

In a series of transactions forming a part of an integrated plan to eliminate the other two stockholders of a corporation, petitioner William surrendered all of his stock to the corporation in… Held: the distribution of the real estate to petitioner William was essentially equivalent to a dividend and was taxable to William as a dividend.

On January 24, 1962, petitioner purchased all assets used in a fire and casualty insurance agency, including equipment, records, and expiration lists. Held: That such amounts are not excludable from petitioner's gross income. 2. That the payments are not deductible by petitioner as ordinary and necessary business expenses since they represented part of the cost of acquiring the insurance expiration lists.

Held, petitioners are not entitled to deduct as a medical expense the cost of certain foods consumed by petitioner J. Willard Harris, a diabetic, pursuant to a medically prescribed diet, since the… Held: petitioners are not entitled to deduct as a medical expense the cost of certain foods consumed by petitioner J. Willard Harris, a diabetic, pursuant to a medically prescribed diet, since the prescribed foods were a substitute for foods ordinarily consumed.

Held, in view of the decision in Commissioner v. Lester, 366 U.S. 299 (1961), parol and other extrinsic evidence are inadmissible to explain… Held: in view of the decision in Commissioner v. Lester, 366 U.S. 299 (1961), parol and other extrinsic evidence are inadmissible to explain the intent, motives, and conduct of parties to a clear and unambiguous written separation agreement which, pursuant to sec. 71(b), I.R.C. 1954, fixed periodic payments for the support of minor…

Books and records of T's employer were illegally seized by local authorities without a warrant. Held: burden of proof in respect of deficiencies in T's income tax is upon T notwithstanding that the Commissioner relied in part upon facts disclosed by the seized books and records in making his determination of deficiency.

Held, the unenforceability under Texas law of a provision for support in a judgment of divorce does not prevent the characterization of payments made pursuant thereto as alimony for purposes of… Held: the unenforceability under Texas law of a provision for support in a judgment of divorce does not prevent the characterization of payments made pursuant thereto as alimony for purposes of sections 71(a) and 215(a), I.R.C. 1954.

Corporation A, in order to withdraw from business in Kentucky, contributed its Kentucky assets, including its inventories of liquor, to… Held: that corporation B acquired the contributed inventories, within the meaning of section 472(b), I.R.C. 1954, at the time of contribution, rather than at the times they were acquired by corporation A, and that it is not required, as determined by the respondent, to retain in its inventory records the identity of corporation A's LIFO…

In January 1959 Worthington purchased all of the shares of Annin and in May 1959 Annin was liquidated into Worthington. Held: the distribution to petitioner was not made on account of * * * separation from the service and is not entitled to capital gains treatment under section 402(a)(2), I.R.C. 1954.

1. Held, in computing the amount of a charitable deduction under section 2055, I.R.C. 1954, when there has been an election under section… Held: in computing the amount of a charitable deduction under section 2055, I.R.C. 1954, when there has been an election under section 642(g), I.R.C. 1954, to deduct administration expenses in computing the income of the estate rather than in computing the taxable estate, and when the income beneficiary is required under State law to…

Petitioner purchased an undivided one-third interest in a parcel of real estate. Held: the trusts did not become bona fide owners of any interest in the property, and, upon the facts presented, did not become bona fide partners in the real estate venture; accordingly, the income and losses of the partnership which petitioner attempted to ascribe to the trusts must be attributed to him.

Petitioners owned farmland which they rented to tenants for growing grain and cotton. Held: that petitioners must include in gross income for the years 1961 and 1962 the amounts of cash received by the charitable organizations from the sale of the donated sharecrop rents in such years.

Petitioner, employed by the U.S. Steel Corp. at San Francisco, Calif., was permanently transferred at the sole behest of his employer to its new plant at Lander, Wyo. Held: the amount of the reimbursement received from his employer, for expenses incidental to petitioner's transfer, did not constitute taxable income to petitioner under section 61(a), I.R.C. 1954.

Held: 1. Advances by petitioner to a controlled corporation were nonbusiness debts. (a) Petitioner was not in the trade or business of promoting corporations for a fee or commission. (b) Petitioner was not in the trade or business of promoting corporations for a profit on their sale. (c) Petitioner was not in the trade or business of lending money. (d) The advances were not proximately related to any separate trade or business of the petitioner distinct from that of the corporation. 2. Petitioner is not entitled to a casualty loss deduction in excess of insurance proceeds as the result of the destruction of his home and its contents by fire. Petitioner's evidence was insufficient to establish his basis in the house, his basis in its contents, or the fair market value of its contents immediately before the fire. 3. Insurance proceeds paid to reimburse petitioner for additional living expenses occasioned by the fire are income to him. 4. As to claimed bad debt deduction of $ 1,000, there was sufficient evidence to find that a loan was made, that the debt had value when created, and that the debt became worthless in 1959. 5. As to claimed business expense deduction of $ 1,000, testimony that a loan was made is no support, and having failed to move to conform pleadings to proof, petitioner is not entitled to a bad debt deduction. Even if petitioner had so moved, there was no proof that the debt became worthless in the year the deduction was claimed.

1. Held: On the facts, payments made by petitioner to its landshare holders and deducted by it during the taxable years as the cost of land sold do not represent… Held: On the facts, payments made by petitioner to its landshare holders and deducted by it during the taxable years as the cost of land sold do not represent deductible land costs but rather nondeductible distributions made with respect to equity investment which such landshare holders had in petitioner.

On June 20, 1960, Janet D. Dix, then 79 years of age and in good health, transferred to her three children, John and George Dix, and… Held: petitioners John and George realized taxable gain on the sale of their share of the securities, their basis in the securities sold being determined by the present value of the prospective life payments according to table 1 of section 20.2031-7 (a), (b), and (f) of Estate Tax Regulations; Rev. Rul. 55-119, 1955-1 C.B. 352, followed in…

1. Unamortized portion of amount owed by decedent's son to decedent in a certain loan transaction held to be an interest in property owned by decedent at the time of his death and therefore includable in his gross estate. Sec. 2033, I.R.C. 1954. 2. Certain remainder bequests to charity held not deductible because the possibility that such gifts might not in fact be paid over to the charities was not so remote as to be negligible.

Petitioner Albert Gemma, a builder of houses, kept no adequate records and fraudulently failed to file income tax returns for the years 1954 through 1957. Held: Respondent's determination of Albert's income was within the authority conferred by section 446, I.R.C. 1954; 2. Respondent's computation is sustained with specific adjustments; 3. Additions to tax for fraud are sustained against Albert; 4.

In 1959 petitioners purchased an Arizona on-sale retailer's liquor license. At that time, such license could be leased by the owner and was capable of transfer separately from the business itself. Held: petitioners did not incur a deductible loss in 1961 of the amount paid for their license.

Mutual Insurance Company Other Than Life -- Interest on Guaranty Fund Certificates -- Sec. 822(c)(5). -- The guaranty fund certificates represented indebtedness within the meaning of section 822(c)(5) and the interest paid thereon was deductible by a mutual insurance company other than life.

B (petitioners) negotiated with A for the purchase of a farm. A wanted $ 1,175,500 for the farm. Held: that the amount paid on the so-called production payment was includable in the taxable income of B for the year 1963. Such production payment was simply a method used by B to pay part of the purchase price of the farm from future income and in substance constituted an encumbrance or security device.

Petitioner controlled corporations H, N, and G. Petitioner transferred to H all of his N and G stock and received a cash credit of $ 64,850 plus stock of H worth $ 48,640. Held on remand, the distribution of $ 64,850 was essentially equivalent to a dividend.

Petitioners' partnership paid $ 8,400 for equipment acquired by Junction Drilling Co. on February 23, 1961. Junction was formally incorporated on March 2, 1961. Held: The 8,400 shares of stock and the 21,103 shares of stock issued by Junction to petitioners' partnership do not qualify as section 1244 stock. Upon liquidation of Junction the partnership and petitioners realized a capital loss rather than ordinary loss on the stock of Junction.