Volume 47 — Tax Court Memorandum

Held: The provisions of the Tax Reform Act of 1976 retroactively increasing the minimum tax are not unconstitutional. United States v. Darusmont,449 U.S. 292 (1981). Held: The provisions of the Tax Reform Act of 1976 retroactively increasing the minimum tax are not unconstitutional. United States v. Darusmont,449 U.S. 292 (1981).

P, a flight engineer for Eastern Airlines, took a course to obtain an airline transport pilot certificate. Held: the cost of such course was not deductible as an educational expense under section 1.162-5, Income Tax Regs., because the course was part of a program of study which would lead to qualifying P in a new trade or business.

In November, 1975, petitioner contracted to exchange property on Buena Vista Avenue in Alameda, California, and two other properties in Alameda for two properties in Hayward, California, owned by X.… Held: petitioner's disposition of the Buena Vista property did not qualify for nonrecognition of gain under section 1031, I.R.C. 1954.

Held: Respondent fails to prove, by clear and convincing evidence, that petitioner-husband filed a false or fraudulent return with the intent to evade tax and that the exception to the general period… Held: Respondent fails to prove, by clear and convincing evidence, that petitioner-husband filed a false or fraudulent return with the intent to evade tax and that the exception to the general period of limitations set forth in section 6501(c)(1), I.R.C. 1954, applies.

Held: Fraud not proven for the years 1972, 1973 and 1974.

Petitioners established a church and purportedly transferred all their assets and income to the church by virtue of a vow of poverty. Held: 1. Income from pet shop business operated and controlled by petitioners before and after vow of poverty was taxable to petitioners. 2. Mary's salary from Continental Casualty Co. turned over to church was taxable income to petitioners. 3. Petitioners are not entitled to a charitable contribution deduction for Mary's salary. 4. Petitioners are liable for the addition to tax for negligence under sec. 6653(a), I.R.C. 1954.

Held: (1) Petitioners are not entitled to charitable contribution deductions claimed on their returns for 1979 and 1980; (2) petitioners… Held: Petitioners are not entitled to charitable contribution deductions claimed on their returns for 1979 and 1980; (2) petitioners may not deduct amounts expended for professional clothing and cleaning; (3) petitioners' travel and entertainment expenses are properly disallowed for lack of substantiation; and (4) petitioners are liable…

Maxwell Estroff owned 7,486 shares of stock of First Railroad and Banking Co. of Georgia, and his wife, Naomi, owned 14,073 shares. Held: The Estroffs entered into a contract or option to acquire substantially identical stock within 30 days of the sale and sec. 1091(a), I.R.C. 1954, disallows deduction of the loss on the sale of the stock.

Petitioner, a/k/a Conway Twitty, made certain payments to investors in a defunct restaurant business known as Twitty Burger, Inc. during the taxable years in issue. Held: the payments are deductible under section 162 as ordinary and necessary business expenses of petitioner's business as a country music performer.

Held: This Court's holding in original opinion confirmed on the basis of the additional evidence received upon reopening the record. Held: This Court's holding in original opinion confirmed on the basis of the additional evidence received upon reopening the record.

Held, petitioners failed to prove entitlement to a theft loss based upon alleged misappropriation of contribution to limited partnership. Held: petitioners failed to prove entitlement to a theft loss based upon alleged misappropriation of contribution to limited partnership.

Petitioners were in the business of writing indemnity bonds or financial guarantee bonds, for both a corporation owned by them and for Interstate, an unrelated insurance company. Held: The borrowed funds received by petitioners were loans which petitioners at all times intended to repay, and did repay. The funds were not taxable gross income to petitioners. Held,Further: Additions to tax for fraud under section 6653(b) not imposed.

Held: Petitioner is not entitled to an ordinary loss on stock which became worthless in 1977. The stock did not qualify as section 1244 stock. Held: Petitioner is not entitled to an ordinary loss on stock which became worthless in 1977. The stock did not qualify as section 1244 stock.

Ps failed to comply with informal and formal requests for the production of documents. Held: the Commissioner's motion for a default judgment as a sanction will be granted.

P filed a Form 1040 for 1975 on which he failed to provide specific information as to income and deductions. Held: P's constitutional claims are without merit, and the Commissioner's determinations are sustained as to the deficiencies. Held, further, P is liable for the additions to tax for fraud under sec. 6653(b), I.R.C. 1954.

During the winter of 1979-1974, large, portions of Ps' backyard fell away over a period of 6 to 8 weeks. Held: Ps sustained a deductible casualty loss in 1974; amount of such loss determined.

P did not appear at the trial. Held, the Commissioner's determination of the deficiencies and additions to tax under sec. 6651(a)(1), I.R.C. 1954, for delinquency, and under sec. 6653(a), I.R.C.… Held: the Commissioner's determination of the deficiencies and additions to tax under sec. 6651(a)(1), I.R.C. 1954, for delinquency, and under sec. 6653(a), I.R.C. 1954, for intentional disregard of rules and regulations, are sustained.

Held: Petitioner failed to prove that damage to a concrete slab supporting his mobile home and forming a patio was due to a casualty within the meaning of section 165(c)(3), I.R.C. 1954. Held: Petitioner failed to prove that damage to a concrete slab supporting his mobile home and forming a patio was due to a casualty within the meaning of section 165(c)(3), I.R.C. 1954.

P seeks judgment as a matter of law in P's favor of the characterization of certain payments on a loan guarantee as an ordinary loss. Held: P has not made a prima facie showing that there is no genuine issue of material fact. Held further, P's Motion for Summary Judgment is denied. Rule 121, Tax Court Rules of Practice and Procedure.

Petitioners failed to report on their Federal income tax returns income received from unlawful activities. Held, petitioners failed to report $168,643.11 and $177,112.38 taxable income for the years 1971 and 1972, respectively. Held further, both petitioners are liable for the additions to tax for fraud under sec. 6653(b), I.R.C. 1954.

Held: Deductible portion of travel expenses of teacher's sabbatical leave determined. Held: Deductible portion of travel expenses of teacher's sabbatical leave determined.

Held: (1) Petitioner is not entitled to charitable contributions deductions disallowed by respondent; and (2) promotional and public relations expenses are not allowed.

In 1879, P railroad leased all its property to R railroad for 990 years. Held: the April 1, 1976, agreement did not generate income to P in 1976. Another part of the 1879 lease provided that if R no longer needed certain leased property for railroad purposes, it could, with P's consent, sell such property. The proceeds of such sales would be applied only to retire P's mortgages and bonds.

Held: (1) Receipt of income from sale of railroad cars is ordinary income. (2) Petitioner has met his burden of proof with respect to $20,000 deducted as commission expense in 1976. Held: Receipt of income from sale of railroad cars is ordinary income. (2) Petitioner has met his burden of proof with respect to $20,000 deducted as commission expense in 1976.

During 1971, petitioner was engaged in the business of marketing vacuum cleaner bags and accessories. Petitioner claimed various business expenses deductions under sec. 162, I.R.C. 1954. Petitioner also claimed various itemized deductions. Held: (1) Amounts of allowable advertising expenses, commission expenses, and auto expenses for local transportation are determined. Sec. 162, I.R.C. 1954. (2) Petitioner is not entitled to deductions for travel and entertainment expenses because he has not satisfied the requirements of sec. 274, I.R.C. 1954. (3) Amounts of allowable itemized deductions are determined; the standard deduction is allowed. Sec. 141, I.R.C. 1954. (4) Petitioner is liable for an addition to tax under sec. 6653(a), I.R.C. 1954.

Held: 1. Anthony and Dorothi Astone are liable for the addition to tax for fraud for their taxable years 1966 through 1971, inclusive. 2. Except to the extent conceded by respondent, Anthony and Dorothi Astone received constructive dividends from Newburgh during the taxable years 1966 through 1971, as determined in the notice of deficiency. 3. Dorothi Astone received unreported rental income during her taxable years 1966 through 1971 in the amounts determined by respondent. 4. Anthony Astone received unreported compensation income from Newburgh during his 1966 and 1969 taxable years in the amounts determined by respondent. 5. Except to the extent conceded by respondent, Anthony Astone received unreported capital gains during his 1969 and 1971 taxable years, as determined in the notice of deficiency. 6. Dorothi Astone does not qualify as an innocent spouse under section 6013(e)(1) for her taxable years 1966 through 1971. Held: 1. Newburgh received unreported business income in the amounts determined by respondent. 2. Newburgh is not entitled to deductions for business expenses in excess of the amounts allowed by respondent. 3. Newburgh is not entitled to net operating loss deductions for its taxable years ending September 30, 1967 and September 30, 1970. 4. Newburgh is not entitled to an equipment loss deduction for its taxable year ending September 30, 1971. 5. Newburgh is liable for the addition to tax for fraud for its taxable years ending September 30, 1965, through September 30, 1971, inclusive. Held: 1. Except to the extent conceded by respondent, Dorothi Astone realized long-term capital gain in her 1965 taxable year as determined in the notice of deficiency. 2. Dorothi Astone is not liable for the addition to tax for fraud for her 1965 taxable year. 3. Dorothi Astone is not liable for the additions to tax under section 6651(a) or 6653(a).

Held, respondent's determination of fraud sustained. Held: respondent's determination of fraud sustained.

Held, amount of gambling losses determined. Held: amount of gambling losses determined.

Held: Respondent did not prove fraud by clear and convincing evidence. Held: Respondent did not prove fraud by clear and convincing evidence.

H and W were divorced in 1975 after 31 years of marriage. Pursuant to their stipulation, the divorce decree provided for a nearly equal division of their property. Held: H has failed to prove that the provision for payment of $84,000 was included as a result of the marital relationship, rather than as a result of a property settlement.

P owned 95 percent of the stock of H. During 1974, H constructed an addition to a building on land owned by P. Through inadvertence, the full costs of the building addition were not charged… Held: P intended to pay the full costs of the addition; the undercharges were not a constructive dividend to him. Held, further, the amount of the undercharges constitutes an account receivable includable in the gross receipts of H, and its net operating loss must be reduced accordingly.

Held: Deficiencies determined against a petitioner in the Federal Witness Protection Program but fraud addition not found.

Petitioner acquired 82 subdivided lots in North Dallas between 1973 and 1978. Held: Gains on the sale of the 19 lots sold outright were taxable as ordinary income.

Held: (1) Respondent's motion to dismiss as to the deficiency for failure properly to prosecute is granted. Rule 123(b), Tax Court Rules of Practice and Procedure. Held: Respondent's motion to dismiss as to the deficiency for failure properly to prosecute is granted. Rule 123(b), Tax Court Rules of Practice and Procedure. (2) Addition to tax is imposed under sec. 6653(b) (fraud), I.R.C. 1954. Doncaster v. Commissioner,77 T.C. 334 (1981).

Petitioner has failed to produce documents despite a specific order of this Court directing him to do so. Held, petitioner's failure constitutes a default under the circumstances of this case. Held: petitioner's failure constitutes a default under the circumstances of this case. Respondent's Motion to Impose Sanctions seeking a judgment for default under Rule 104(c)(3), Tax Court Rules of Practice and Procedure, is granted.

Held, petitioner is liable for addition to tax under sec. 6653(b), I.R.C. 1954, for 1976, but he is not liable for additions under that section for 1974 and 1975. Held: petitioner is liable for addition to tax under sec. 6653(b), I.R.C. 1954, for 1976, but he is not liable for additions under that section for 1974 and 1975.

Held: (1) Petitioner received unreported income during 1975 and 1976; and (2) petitioner is liable for additions to tax under sec. 6653(a), I.R.C. 1954. Held: Petitioner received unreported income during 1975 and 1976; and (2) petitioner is liable for additions to tax under sec. 6653(a), I.R.C. 1954.

During 1971, H and W formed a "family trust" and began selling to others the materials for the establishment of "family trusts." H and W filed no individual income tax returns for 1971 and 1972. For 1973 and 1974, they filed joint returns. H and W filed fiduciary returns for the family trust for 1972, 1973, and 1974. The individual and joint returns omitted income and overstated deductions; some of H and W's gross income was not reported on any return. Held, H and W, not the family trust, are taxable on all the income earned by them during 1971 through 1974. Held, further, the Commissioner's determinations of deficiencies against H. and W, as modified herein, are sustained. Held, further, H and W fraudulently underpaid their tax for each of the years 1971, 1972, 1973, and 1974.

Held: (1) Respondent's motion for summary judgment is granted as to the deficiencies and additions to tax under sec. 6654(a), I.R.C. 1954. Held: Respondent's motion for summary judgment is granted as to the deficiencies and additions to tax under sec. 6654(a), I.R.C. 1954. Rule 121(a), Tax Court Rules of Practice and Procedure. (2) Additions to tax are imposed under sec. 6653(b) (fraud), I.R.C. 1954. Doncaster v. Commissioner,77 T.C. 334 (1981).

Corporations: Closely held: Deductions: Sham transactions. -- Payments made by a closely held corporation to its owner and a partnership controlled by him were disregarded during the computation of the corporation's taxable income because the transactions were sham ones that were used simply for the purpose of reducing taxes. The owner acquired the profitable investment corporation with the intent of liquidating it and there was no business reason for it to pay either (1) a management fee of $100,000 to him during the final five weeks of its existence or (2) payments of $150,000 for certain lease rights for benefits that would not accrue until after it was liquidated. -- CCH.

Held, petitioners are not entitled to exclude disability annuity payments from income under sec. 105, I.R.C. 1954. Held: petitioners are not entitled to exclude disability annuity payments from income under sec. 105, I.R.C. 1954.

Held, addition to tax for fraud determined. Held: addition to tax for fraud determined.

Petitioner was an employee for part of 1976. He was self-employed, delivering mail under contract with the United States Postal Service for the remainder of 1976 and for all of 1977, 1978, and 1979. Held: Petitioner failed to show that his deductible expenses for any of these years exceeded the amounts allowed by respondent. (2) Petitioner is liable for additions to tax under section 6654 (estimated tax), I.R.C. 1954, for each of these years.

Ps were limited partners in a partnership formed to acquire and distribute a motion picture film. For 1975 and 1976, the partnership reported no income from the distribution of the film but claimed large deductions for depreciation. The Commissioner moved for a partial summary judgment on the ground that the partnership was not entitled to any depreciation deductions since it had no income for those years. Ps now claim that the partnership did receive income for such years. Held, Ps' allegations fail to set forth "specific facts" showing that the partnership did receive income reportable for 1975 and 1976. Mere denials of the moving party's allegations or restatements of a party's own allegations are insufficient to defeat a motion for summary judgment.

Petitioner-husband resigned his position as vice-president of a subsidiary corporation. He owned stock in the corporation's parent holding company. After lengthy negotiations, he transferred his stock to the parent and executed a general release in favor of both corporations. He received $42,000 from the parent and $32,334 from the subsidiary. Held: (1) Petitioner-husband received $74,334 for his stock in the parent, which is taxable as long-term capital gain. (2) This Court does not have jurisdiction to determine whether the payment from the subsidiary is subject to the Federal Insurance Contributions Act (FICA) tax imposed by section 3101, I.R.C. 1954.

Petitioners are gas utility companies. Before service was commenced, petitioners required each customer to make a cash deposit to secure payment of all bills rendered to the customer. When service was terminated the deposit was typically credited against charges for gas consumed and other items in the customer's final bill. Held: The deposits are better characterized as prepayments of income items than as security for non-income-producing covenants. Therefore, the deposits constituted income to petitioners. Held: The deposits constituted substantial advance payments for inventoriable goods and, as such, were includable in income no later than the last day of the second taxable year following the year of receipt. Sec. 1.451-5(c)(1), Income Tax Regs. Held: The Change in the method of accounting for the deposits resulting from the foregoing holdings constituted a change in petitioners' "method of accounting" for purposes of sec. 481, I.R.C. 1954.

Petitioner filed its estate tax return after the due date and after the expiration of two extensions of time for filing. Held: Petitioner failed to make a valid election to use the alternate valuation date in valuing its assets. Sec. 2032(c), I.R.C. 1954.

Petitioners sold the assets of their wholly-owned subchapter S corporation to a buyer pursuant to an agreement of sale that allocated $297,000 of the $330,000 total purchase price to certain property… Held: Allocation made to non-section 1245 property.

Ps, husband and wife, were engaged in the trucking business during the years 1970 through 1974. Held: The Commissioner's net worth determinations, as modified by his concessions and by this opinion, are sustained. (2) Ps are not liable for the addition to tax for fraud for any of the years in issue. Sec. 6653(b), I.R.C. 1954.

Taxpayer corporation paid large sums to an employee who was blackmailing the principal shareholder. Held: such payments are not deductible to the corporation as there is no evidence that such payments were ordinary and necessary. However, the payments are not constructive dividends to shareholder.

Wife, who had no income, refused to sign original return because she had reservations about its correctness. Held: wife did not intend to file a joint return and petitioner is not entitled to joint return computation. On return petitioner claimed two losses from theft, the first being for currency found to be missing after a visit by an acquaintance of the petitioner, and the second from the burglary of a boat house.

Petitioner has failed to produce documents despite a specific order of this Court directing him to do so. Held, petitioner's failure constitutes a default under the circumstances of this case. Held: petitioner's failure constitutes a default under the circumstances of this case. Respondent's Motion for Order of Dismissal seeking, Interalia, a judgment for default under Rule 104(c)(3), Tax Court Rules of Practice and Procedure, is granted.

Held: Petitioner's compensation and interest (paid in Federal Reserve Notes) is income subject to taxation. Additions to tax are sustained. Held: Petitioner's compensation and interest (paid in Federal Reserve Notes) is income subject to taxation. Additions to tax are sustained.

Petitioner has failed to produce documents and answer interrogatories despite a specific Order of this Court directing him to do so. Held: petitioner's failure constitutes a default under the circumstances of this case. Respondent's Motion to Impose Sanctions, seeking a judgment for default under Rule 104(c)(3), Tax Court Rules of Practice and Procedure, is granted.

Fairfield, a land development company, with few stockholders, sought to acquire the assets and liabilities of Oceans, an unrelated company that was in… Held: Respondent erred in disallowing the net operating loss carryover deductions claimed by petitioner. Petitioner carried its burden of proving that its principal purpose in acquiring the assets and liabilities of Oceans was not to evade or avoid Federal income taxes within the meaning of Section 269, I.R.C. 1954.

Held: Petitioners may not deduct the cost of a flight training course to the extent they received reimbursement in the form of nontaxable benefits from the Veterans Administration. Held: Petitioners may not deduct the cost of a flight training course to the extent they received reimbursement in the form of nontaxable benefits from the Veterans Administration. Manocchio v. Commissioner,78 T.C. 989 (1982), affd. 710 F.2d 1400 (9th Cir. 1983), followed.

Held: (1) Petitioners have failed to prove that expenses of their residence, designed to look like a Moorish castle, are deductible as advertising… Held: Petitioners have failed to prove that expenses of their residence, designed to look like a Moorish castle, are deductible as advertising or promotional expenses of petitioner-husband's real estate business. (2) Petitioners underreported the gross receipts of the real estate business in the amount determined by respondent.

Held, summary judgment for tax deficiency and addition to tax for fraud is granted upon the taxpayer's failure to respond to respondent's Request for Admissions. The facts deemed admitted by the taxpayer's failure to respond are sufficient to demonstrate that no genuine issue as to any material fact exists.

Held: Premiums paid on $200,000 group life insurance policy determined to be constructive dividends to stockholder-employee. Held: Premiums paid on $200,000 group life insurance policy determined to be constructive dividends to stockholder-employee.

In 1978, H and W formed a family trust. They conveyed all their assets are their lifetime services to the family trust. Held: H and W's assignment of property and services to the family trust constitutes an anticipatory assignment of income which is invalid for tax purposes. In addition, H and W are treated as the owners of the income from the property and services under the grantor trust provisions of secs. 671-677, I.R.C. 1954.

Held: Cost of survey to restore storm damaged boundary is deductible. Held: Cost of survey to restore storm damaged boundary is deductible.

The petition in this case was filed and signed by petitioners' accountant. On March 31, 1983 the Court entered a stipulated decision in the case executed by petitioners and respondent. Petitioners subsequently claimed they did not authorize or ratify the filing of the petition and filed a motion to vacate the stipulated decision for lack of jurisdiction. Held, the evidence establishes that petitioners' accountant acted as petitioners' authorized agent in filing the petition. Therefore, the motion to vacate the stipulated decision for lack of jurisdiction will be denied. Held further, the Court will not consider petitioners' allegation that the statute of limitations bars the assessment of taxes for the taxable years 1977 and 1978 since this issue was not raised in the pleadings.

For 1972, 1973, and 1974, petitioner-husband failed to file returns for partnership until after audit started; failed to report on individual returns his part of partnership net income but claimed… Held: individual returns for 1972, 1973, and 1974 were fraudulent and addition to tax under section 6653(b) sustained.

Respondent disallowed deduction for charitable contribution of $40,166 and determined return was fraudulent because petitioner-husband knew claimed contribution was not made and/or recipient did not… Held: evidence of alleged false statements including petitioner's testimony is admissible even if statements originally obtained in violation of petitioner's rights under Fifth Amendment. Brod v. Commissioner,65 T.C. 948 (1976).

Radiology is a Subchapter S corporation. Shortly after forming Radiology, Ps transferred all of the company's stock to their children. Held, the transfers were not bona fide. Held: the transfers were not bona fide. Ps are the true owners of Radiology's stock and the company's income is taxable to them and not to their children. Held further, certain claimed losses on a purported investment in a movie partnership are not deductible for lack of substantiation.

In 1970 and 1971, H owned and operated liquor stores. Held: The Commissioner's determination of deficiencies in the Federal income tax liabilities of H and of W are sustained. (2) H is liable for the additions to tax for fraud for 1970, 1971, and 1972. Sec. 6653(b), I.R.C. 1954. (3) H and W are liable for the additions to tax for failure to pay estimated tax for 1970, 1971, and 1972.

Petitioners were firefighters required by their employer to pay their share of a common mess even if they did not eat the meal. Held: petitioners may deduct the amount they paid for the mess under sec. 162(a), I.R.C. 1954.

Held: Respondent's motion for summary judgment is granted; additions to tax are imposed under sec. 6653(b) (fraud), I.R.C. 1954. Held: Respondent's motion for summary judgment is granted; additions to tax are imposed under sec. 6653(b) (fraud), I.R.C. 1954. Doncaster v. Commissioner,77 T.C. 334 (1981); Rule 121(a), Tax Court Rules of Practice and Procedure.

Held: Transfer was made in contemplation of death under sec. 2035, I.R.C. 1954, as in effect for pre-1977 transfers. Held: Transfer was made in contemplation of death under sec. 2035, I.R.C. 1954, as in effect for pre-1977 transfers.

Held, T's deduction of commuting expenses is disallowed because his employment was not temporary. Held further, a travel allowance paid to T by one of his employers is includable in gross income. Held: T's deduction of commuting expenses is disallowed because his employment was not temporary. Held further, a travel allowance paid to T by one of his employers is includable in gross income. Held further, addition to tax for negligence is sustained.

Held: Petitioners were not in the real estate business in 1973; they failed to demonstrate error in respondent's computation of loss on sale of a silo; income from lot sales in 1974, 1975 and 1976… Held: Petitioners were not in the real estate business in 1973; they failed to demonstrate error in respondent's computation of loss on sale of a silo; income from lot sales in 1974, 1975 and 1976 redetermined; claimed embezzlement loss in 1976 disapproved.

Held: Addition to tax under sec. 6653(b), I.R.C. 1954, found. Held: Addition to tax under sec. 6653(b), I.R.C. 1954, found.

Clymer was the sole stockholder and chief executive officer of Denison, a Coors beer distributor in northern Texas. Held: Amounts paid to Clymer in 1974, 1975 and 1976 under the contingent compensation agreement exceeded reasonable compensation for his services. Reasonable compensation determined.

Held: 1. Fair market value of wastewater treatment plants was $75,000 when donated to Vanderbilt University; 2. Held: Fair market value of wastewater treatment plants was $75,000 when donated to Vanderbilt University; 2. Respondent did not abuse his discretion in requiring Asphalt Products Co., Inc. to change from the cash to the accrual method of accounting; 3.

In 1973, the decedent transferred stock to her four daughters as part of a settlement of litigation involving a bitter family dispute. Held: the transfer of stock was made for an adequate and full consideration in money or money's worth and was not a taxable gift. Stock transferred by decedent to one daughter was not transferred on corporation's books but as dividends were delivered to the daughter, she deposited them in the decedent's bank account.

Petitioner earned income from his dairy farm for each of the years in issue. He understood his obligations to pay income taxes and to file tax returns. Held: Additions to tax under section 6653(b), I.R.C. 1954 (fraud), imposed for each of the years in issue.

Petitioner earned income as an employee for each of the years in issue. He understood his obligations to pay income taxes, to be subjected to withholding, and to file tax returns. The Forms 1040A and 1040 he sent to respondent for these years did not constitute tax returns. He filed false Forms W-4 with his employers. Held: Additions to tax under section 6653(b), I.R.C. 1954 (fraud), imposed for each of the years in issue.

During 1977, P was the president and chief operating officer of 8 corporations, which operated retail gasoline stations and related businesses. Held: Under all the circumstances, part of P's compensation was a dividend distribution; amount of reasonable compensation determined. (2) Travel and entertainment expenses paid by the corporations are constructive dividends to P.

K was engaged in the developing of real estate and the providing of real estate services. Held: Regardless of the reason for allowing K to acquire an interest in RMOC, K received no income upon its receipt of such interest because the interest, as valued by the net assets of the partnership less the limited partners' contributions, was worthless when acquired. The value of the property at such time determined.

Held: (1) Alimony pendente lite payments received by petitioner Camille V. Murracca from her husband pursuant to a court order are includable in her gross income; (2) petitioner Francis A. Muracca is entitled to a dedection for alimony pendente lite payments made to his wife pursuant to a court order; (3) petitioner Francis A. Muracca is entitled to claimed dependency exemption; (4) petitioner Camille V. Muracca is not entitled to claimed dependency exemption; (5) petitioner Camille V. Muracca is not entitled to file her 1977 tax return as unmarried head of household.