Volume 48 — Tax Court Reports

Decedent died testate in 1960 at the age of 49. Held: except for one deposit of $ 1,031.05 made by decedent's wife, it has not been shown that any part of the total amount was contributed from the wife's funds, other than those funds she acquired from the decedent for less than an adequate and full consideration in money or money's worth.

On Sept. 1, 1959, the petitioners acquired two buildings in Chicago from a corporation in which they were stockholders and they… Held: under these facts, the useful lives of the buildings and components were not accepted on audit by the Internal Revenue Service under presently established procedures for examining depreciation within the meaning of sec. 3.05 of Rev. Proc. 62-21 (Part II), and, consequently, respondent is not precluded from adjusting the useful lives…

Amount paid by taxpayer in settlement of claims made by the United States in a suit against taxpayer brought under 31 U.S.C. secs. 231-233 (False Claims Act), found on the evidence presented to be common law contractual damages as characterized in taxpayer's settlement offer which was accepted by the United States, held to be deductible. Allowance of the deduction would not frustrate a sharply defined public policy of the United States.

Held, petitioner is liable for income tax deficiencies and penalties based upon her husband's embezzlements and other unreported business income during taxable years in which legally effective joint… Held: petitioner is liable for income tax deficiencies and penalties based upon her husband's embezzlements and other unreported business income during taxable years in which legally effective joint returns were filed.

Held, the evidence herein does not permit a determination either of a range or maximum amount expended for the total support of petitioner's children and petitioner is therefore not entitled to… Held: the evidence herein does not permit a determination either of a range or maximum amount expended for the total support of petitioner's children and petitioner is therefore not entitled to dependency exemptions.

Held, petitioner agreed, and was required by needs of purchaser, to sell separate parcels of real estate to developer in a manner which would permit him to report the gain as long-term capital gain… Held: petitioner agreed, and was required by needs of purchaser, to sell separate parcels of real estate to developer in a manner which would permit him to report the gain as long-term capital gain on the installment method.

Ranchers, Inc.'s plan to offer stock failed to provide that said offering must end not later than 2 years after the date of the plan's adoption. Held: the stock offered under Ranchers' plan does not qualify under sec. 1244(c)(1) so as to entitle petitioners to ordinary loss treatment for losses suffered on their Ranchers stock upon its liquidation in 1963.

Respondent's determinations of deficiencies in income tax, based on increase in net worth, and additions to tax for fraud under sec. 293(b), I.R.C. 1939, sustained with certain adjustments, where petitioner failed to keep adequate records of his business and omitted large amounts of income from his returns.

1. Held, where executors segregate assets from an estate and transfer the same to themselves, absent showing of any claims or likelihood… Held: where executors segregate assets from an estate and transfer the same to themselves, absent showing of any claims or likelihood of claims against the estate, existence of State law prohibiting such transfer does not prevent transfer from constituting a distribution under sec. 2032, I.R.C. 1954, and sec. 20.2032-1(a) and (c), Estate…

Held, profit-sharing plan for all regular salaried employees of petitioner was not discriminatory in favor of officers, stockholders,… Held: profit-sharing plan for all regular salaried employees of petitioner was not discriminatory in favor of officers, stockholders, persons whose principal duties consist in supervising the work of other employees, or highly compensated employees, and petitioner's contributions to a trust created as a part of the plan are deductible.

In 1961, petitioner transferred 100,000 shares of stock in the corporation to an employee of the corporation to induce him to continue to work for the corporation. Petitioner retained 325,000 shares. Held: the transaction was a sale or exchange and petitioner sustained a capital loss.

A partnership composed of petitioners made an agreement with Shell Oil Co. to grant to it certain oil, gas, and sulphur interests by five separate conveyances, two of which were to cover several… Held: Depletion previously taken on the bonuses as to any property as defined in sec. 614(a), I.R.C. 1954, as to all of the acreage of which the lease was terminated without production having been obtained must be restored to the partnership income in 1962.

Held: 1. Petitioner is not entitled to retroactively adjust its beginning 1958 group accident and health claim reserves and individual hospital and medical claim reserves for alleged overstatements… Held: Petitioner is not entitled to retroactively adjust its beginning 1958 group accident and health claim reserves and individual hospital and medical claim reserves for alleged overstatements therein. 2.

Petitioner filed a pretrial motion requesting the Court to find that its timely statement purporting to comply with the requirements of sec. 534, I.R.C. 1954, was sufficient to place the burden of… Held: motion granted.

A limited partnership of professional engineers, having one general partner, continued to operate after his death. Held: petitioners' position is not well taken because: 1. The limited partners who continued the conduct of partnership's affairs were licensed professional engineers and consequently their acts were lawful under New York law; 2.

Sec. 1033, I.R.C. 1954 -- Purchase of Similar Property. -- Petitioners, in order to acquire investment property similar to property involuntarily converted by condemnation in 1959, executed as buyers… Held: petitioners purchased property in 1960 similar or related in service or use to the converted property within the meaning of sec. 1033.

Held, that petitioner is not entitled to a nonbusiness bad debt deduction for the year 1959 because she has not proved that a debtor-creditor relationship was created when her husband received an… Held: that petitioner is not entitled to a nonbusiness bad debt deduction for the year 1959 because she has not proved that a debtor-creditor relationship was created when her husband received an undivided interest in real property purchased with funds from her separate estate.

Sec. 167 -- Depreciation -- Exhaustion of Property Used in a Business. -- The cost of a contract or a lease for the use of space, for a definite period, in which to place vending machines is deductible over the period of the lease as depreciation under sec. 167 of the Internal Revenue Code of 1954.

George Burwell and Anne S. Laster were married in 1958, both having been previously married to other spouses and both having children by their former marriages. Held: The periodic payments constitute gross income to the recipient wife under sec. 71(a)(2), I.R.C. 1954, and accordingly are deductible by the payor husband under sec. 215, I.R.C. 1954. In the jurisdiction where the annulment was decreed, a support obligation can be imposed upon the husband by an annulment decree.

Petitioner, a corporation and successor in interest to a partnership in a 1957 transaction qualifying under sec. 351, was a manufacturer of gages and gage blocks. Held: petitioner's method of accounting does not clearly reflect income and therefore respondent's change in accounting method requiring the inclusion of overhead in inventory is sustained. Held, further, sec. 481 is applicable.

Condemnation proceeding against petitioner's land and structures was commenced in December 1960 and an estimated amount deposited with the court at that time. Held: under Ohio law, there was no actual or constructive receipt of any part of the award, nor was it subject to any claim of right by petitioner until 1961, so that gain on the property was taxable to this calendar year basis petitioner in that year.

The petitioner and her husband filed a joint income tax return for 1960 showing a net operating loss and applied for a tentative carryback adjustment pursuant to sec. 6411, I.R.C. 1954. Held: sec. 6411, I.R.C. 1954, requiring the respondent to act upon an application for tentative carryback adjustment within 90 days, is not a statute of limitations which prevents a later determination of a deficiency for the year of the claimed net operating loss.

Held, petitioner, a producing oil and gas well, found to be a mining partnership which did not qualify as an association taxable as a corporation. Held: petitioner, a producing oil and gas well, found to be a mining partnership which did not qualify as an association taxable as a corporation.

Petitioner created two trusts in 1959 providing for the income to be paid to specifically named individuals for their lives and, should they predecease petitioner, for her life, and upon… Held: petitioner is entitled to include in her deductions, subject to the limitations of sec. 170(b)(1)(A), I.R.C. 1954, the value as of the date the trusts were created of the remainder interest in those trusts as determined by reference to the actuarial tables in respondent's regulations.

A 1963 landslide did no physical damage to petitioners' residence property but did involve the sole access street and resulted in an immediate diminution in its fair market value. Held: that the drop in value was a fluctuation caused by temporary buyer resistance and the Code does not authorize casualty loss deductions for wavering values. Stowers v. United States, 169 F.Supp. 246 (S.D. Miss. 1958), distinguished.

Decedent made a bequest in trust by will which provided that her surviving spouse have the net income therefrom for life with a general power of appointment exercisable by will and that upon default… Held: decedent's estate is entitled to a charitable deduction under sec. 2055(b)(2), I.R.C. 1954; and further held, decedent's estate is entitled to a marital deduction under sec. 2056(b)(5), I.R.C. 1954, in an amount undiminished by any application of sec. 2055(b)(2).

Decedent was the surviving spouse of Edna. Held: decedent's estate is not entitled to a charitable deduction under sec. 2055(b)(1) on account of the passing of the same remainder interest to the same charitable organization, which under sec. 2055(b)(2) was deemed a transfer to such organization by Edna; and held, further, our holding above does not affect the includability of the…

Held, a revocable transfer of property to a trust made prior to Mar. 4, 1931, which transfer became irrevocable after Mar. 4, 1931, but before the grantor's… Held: a revocable transfer of property to a trust made prior to Mar. 4, 1931, which transfer became irrevocable after Mar. 4, 1931, but before the grantor's death, falls within the exception of sec. 2036(b), I.R.C. 1954, and the value of the trust property is not includable in the grantor's gross estate upon her death.

1. Corporations A, B, and C, organized under the laws of California, Illinois, and New York, respectively, carried on separate but related… Held: the fusion of A, B, and C into D was not a mere change in identity, form, or place of organization within the meaning of sec. 368(a)(1)(F) of the 1954 Code, with the result, first, that A, B, and C were required to file closing returns for the taxable period ending at the time of the merger under sec. 381(b)(1), and second, that a…

1. During the years in issue, petitioner was a member of the Los Angeles Dodgers but, nevertheless, maintained a home in Spokane, Wash., wherein his wife and children… Held: petitioner's post of duty was in Los Angeles, Calif., which was also petitioner's home for tax purposes. Consequently, expenditures made by petitioner in 1962 and 1963 for travel, meals, and lodging in Los Angeles are not deductible as travel expenses under sec. 62(2)(B) or sec. 162(a)(2), I.R.C. 1954.

Capital Assets -- Sec. 1221(1) -- Condemnation by Eminent Domain. -- Property was not held primarily for sale to customers in the ordinary course of the petitioner's business after notice of condemnation by eminent domain for State highway purposes.

Corporations A (Shop) and B (J & M), California corporations, carried on separate but similar businesses in California. Held: the combination of A and B into B was not a mere change in identity, form, or place of organization within the meaning of sec. 368(a)(1)(F), 1954 Code; therefore, a post-merger net operating loss of B could not be carried back to a premerger year of A, to offset 1959 income of A because of the provisions of sec. 381(b) (3).

Held, petitioners' contributions to a trust of which a college was sole beneficiary did not qualify for the additional 10-percent deduction under the special rule of sec. 170(b)(1)(A) of the 1954… Held: petitioners' contributions to a trust of which a college was sole beneficiary did not qualify for the additional 10-percent deduction under the special rule of sec. 170(b)(1)(A) of the 1954 Code because they were not made to the college, as required by the statute.

Neither petitioner appeared in person or by counsel at the trial of this proceeding. Held: respondent's determination of deficiencies in tax for each of the years 1955 to 1958, inclusive, is sustained; (2) at least a part of the deficiency for each of said years was due to fraud.

Petitioner entered into an agreement with his father in 1958 to share equally any bonus he might receive for signing a professional baseball contract as compensation for his father's coaching efforts… Held: that the annual $ 11,000 payment of the bonus made to petitioner's father in 1960 should be allowed as a business expense deduction to petitioner for his 1960 taxable year.

Petitioner, Richard T. Houlette, a career Coast Guard officer, purchased a home in Portland, Oreg., in 1954. Held: Petitioner's actions, considering all the facts, constitute an abandonment of the Portland house as his old residence for purposes of sec. 1034, I.R.C. 1954. Accordingly, the gain petitioner realized on the sale of the Portland house is not subject to nonrecognition under sec. 1034.

Petitioners made a contribution to the Missionary Dentist, Inc. (a.k.a. Worldwide Dental Health Service). Held: the contribution does not qualify for the additional 10-percent allowance for charitable contributions under sec. 170(b)(1)(A), I.R.C. 1954.

In 1946 the petitioners and others acquired several apartment buildings, and maintained and rented the apartments under the name of Realty. Held: that since Realty reported the gain on the completed-transaction basis, the petitioners are not entitled to elect to report their share of the gain on the installment method. Sec. 703(b), I.R.C. 1954.

In 1961, three brothers transferred their partnership business, consisting of stock in four corporations and real estate, to a corporation owned partly by them and partly by seven employees of the… Held: The 15-year promissory note constituted a bona fide indebtedness rather than equity capital investments by the three brothers, and the corporation was entitled to deduct its annual interest payments made on the note. 2.

Petitioner's transferor, a professional baseball corporation, excluded from gross income all advance receipts from tickets, radio and television, and parking fees, which related to games to be played… Held: such advance receipts are taxable when received, regardless of the liquidation; except that the amounts collected as Federal admissions tax are a trust fund and not part of the collector's gross income.

Proceeds of insurance policy received by petitioner from company by which one of its employees who had embezzled some of its funds was insured were not received by reason of the death of the insured but were received as restitution of embezzled funds.

Petitioners are husband and wife. In the fall of 1963 after assisting his wife in alighting from their family automobile, the husband accidentally slammed the door on his wife's hand. Held: the slamming of the automobile door upon the wife's ring and the resulting loss of the diamond entitle the petitioners to deduct the diamond's loss as a loss arising from other casualty under sec. 165(c) (3), I.R.C. 1954.

1. In reporting his taxable income for the taxable years herein petitioner capitalized the total estimated cost of his college or higher education as the basis to him of his engineering degree and… Held: that petitioner has not brought the amount so claimed within the ambit of sec. 167, I.R.C. 1954. 2. During the taxable years herein petitioner carried on personal business activities under the name Basic & Experimental Physics.

H and W were divorced on Nov. 5, 1953. On Oct. 15, 1953, they entered into a property settlement agreement under which H became obligated to pay W a lump sum of $ 5,000 and monthly… Held: that the legal obligation of H to make the payments to W was incurred under the agreement of Oct. 15, 1953, that the date when the last payment was due and payable was not before Nov. 4, 1963, and that, therefore, such payments were periodic payments under sec. 71(c)(2), I.R.C. 1954.

Petitioner's predecessors in title had purchased the subject business and goodwill protected by a covenant not to compete under such circumstances that the covenant was nonseverable and taken to… Held: The characterization of the settlement is derivative from the elements of the judgment which was settled. 2.

The petitioner, Annette Dorfman, was the remainderman of two trusts which terminated in 1956. Held: that such regulation is not unreasonable or clearly contrary to the will of Congress, and is therefore valid.

Persons owning 100 percent of the outstanding stock of Tri-City Container Corp. (180 shares) immediately before it was merged into… Held: the stockholders of Tri-City (immediately before the merger), as the result of owning stock of Tri-City, owned (immediately after the merger) less than 20 percent of the fair market value of the outstanding stock of petitioner within the meaning of sec. 382(b)(1), I.R.C. 1954, and the net operating loss carryover of Tri-City to be…

Held, petitioner is not liable as a transferee of assets of Norma Nathan for an unpaid deficiency in income tax, due for the year 1952, plus an addition to the tax pursuant to sec. 293(b) of the… Held: petitioner is not liable as a transferee of assets of Norma Nathan for an unpaid deficiency in income tax, due for the year 1952, plus an addition to the tax pursuant to sec. 293(b) of the Internal Revenue Code of 1939, and interest as provided by law.

Petitioners made gifts of shares of stock representing a minority interest in a closely held corporation in September 1961, at which time the stock was not publicly traded. Held: respondent has not sustained his burden of proof that any part of the shares sold to petitioners' son constituted a gift; and 3. Further held, the gifts I/T/F (in trust for) petitioners' grandchildren constituted gifts of present interests; and 4.

1. Casualty loss of timber is limited to the basis of the taxpayer in the portion of the timber lost and not its basis in all timber on the tract on which the damaged timber was located. 2.

Petitioner purchased 100 percent of the stock of the old company from its shareholders and liquidated the old company pursuant to sec. 332, I.R.C. 1954. Held: that petitioner may properly compute the basis of the assets received in the liquidation under sec. 334(b)(2). Held, further, that the basis allocated by petitioner to the tram equipment was proper. Held, further, that the useful life of ski lift No. 3 was 15 years.

Held, the cancellation by petitioner of a franchise which it owned did not constitute a sale or exchange within the meaning of secs. 1221 or 1231, I.R.C. 1954, because petitioner did not receive any… Held: the cancellation by petitioner of a franchise which it owned did not constitute a sale or exchange within the meaning of secs. 1221 or 1231, I.R.C. 1954, because petitioner did not receive any consideration for either the cancellation or assignment of said franchise.

Held: 1. Petitioners are entitled to deduct as intangible drilling and development expenses certain amounts paid in 1959 and 1960 for drilling on four illegally deviated oil wells bottomed outside of… Held: Petitioners are entitled to deduct as intangible drilling and development expenses certain amounts paid in 1959 and 1960 for drilling on four illegally deviated oil wells bottomed outside of property on which they had a working interest in a lease. 2.

Petitioner husband incurred legal expenses in recovering nontaxable damages solely for personal injuries suffered in an automobile accident which occurred while he was engaged in business. Held: such expenses are nondeductible personal expenses and not business expenses within the meaning of sec. 162.

Held, a partnership composed of petitioners had an economic interest in coal in place under two leases which entitled it to a deduction for percentage depletion, but had no… Held: a partnership composed of petitioners had an economic interest in coal in place under two leases which entitled it to a deduction for percentage depletion, but had no economic interest in coal in place under a third lease because the lessor reserved the right to terminate it on 60 days' notice.

1. T. corp. adopted a plan to sell its business assets and liquidate within a year. Held: the loss on sale of assets was nonrecognizable under sec. 337, in view of failure of proof that rights to all unknown, contingent, or unmatured claims had not been transferred to T's stockholder within the year in the course of T's liquidation. 2.

Held, that a transaction between petitioner and two sister corporations qualifies as a statutory merger under sec. 368(a)(1) (A), I.R.C. 1954, and, therefore, petitioner is… Held: that a transaction between petitioner and two sister corporations qualifies as a statutory merger under sec. 368(a)(1) (A), I.R.C. 1954, and, therefore, petitioner is entitled to a deduction for net operating loss carryovers arising from the prior operations of the merged sister corporations.

Petitioner created a number of trusts to which he transferred common stock of W. T. Grant Co. These trusts provide for income to be paid to… Held: the provisions of the trusts with respect to 5-percent stock dividends being income did not create sufficient uncertainty as to the value of the charitable remainder or create such a possibility of diversion of the remainder interest as to require that the fair market value at the date of transfer of the stock transferred to the…

Petitioner Register Publications, Inc., paid medical benefits on behalf of certain employees, all but one of whom were stockholders, or their relatives. Held: irrespective of whether a plan existed, it was not a plan for employees and the payments in question were includable in the gross income of the individual petitioners under sec. 105, I.R.C. 1954, and not deductible by the petitioner corporation under sec. 162(a).

The petitioner, Thomas L. Johnson, a fireman for the Merced County Fire Department, worked on his off-duty days as a gardener, handyman, and occasional chauffeur for Robinson, an elderly wealthy,… Held: the amounts received by petitioner from Robinson in excess of his daily wages were nontaxable gifts or loans.

Petitioner Harold Arlen is a composer of popular music of modern times. Held: the $ 50,000 received by petitioner in 1959 from the parent company was a loan and as such did not constitute taxable income in that year except to the extent of $ 5,000 of royalties earned and applied to the repayment of the first note in that year.

Petitioner Samuel D. Miller, the prime lessee of a business property, granted a sublease at an increased rental to the purchaser of the going-concern business. Held: petitioner sold or exchanged a capital asset and is entitled to capital gains treatment for the $ 32,000 payment.

On Mar. 19, 1966, respondent had on file in its Portland office a general power of attorney signed by petitioner, but not notarized or witnessed, appointing Warde H. Erwin as attorney-in-fact. Held: The notice of deficiency was sent to petitioner at his last-known address pursuant to sec. 6212, I.R.C. 1954. 2. The notice requirement of Pub.

Held, that, under sec. 1374, I.R.C. 1954, a net operating loss sustained in the taxable year 1963 by a corporation which had elected to be taxed as a small business corporation under subch. Held: that, under sec. 1374, I.R.C. 1954, a net operating loss sustained in the taxable year 1963 by a corporation which had elected to be taxed as a small business corporation under subch.

Held, an administrator of a decedent's estate, chargeable with notice of contingent tax liabilities, conducts a unilateral inquiry or investigation at his peril under sec. 6901(a)(1)(B), I.R.C. 1954,… Held: an administrator of a decedent's estate, chargeable with notice of contingent tax liabilities, conducts a unilateral inquiry or investigation at his peril under sec. 6901(a)(1)(B), I.R.C. 1954, and Rev. Stat. sec. 3467 (31 U.S.C. sec. 192).

Petitioner was receiving a substantial amount of royalty income from the licensing of a patent on a process used in the synthetic fiber industry. Held: under the circumstances, petitioner's payment to the British corporation was an ordinary and necessary expense of carrying on his licensing business.

Held, payments aggregating $ 7,000 a year (out of a larger total) by a husband to his divorced wife were for the support of their two minor children and were neither includable in her gross income… Held: payments aggregating $ 7,000 a year (out of a larger total) by a husband to his divorced wife were for the support of their two minor children and were neither includable in her gross income nor deductible by him.

During the taxable year the petitioners, acting in accordance with a plan previously negotiated with two corporations which owned interests in hotel properties,… Held: that the transaction whereby petitioners sold the Waldorf leasehold and hotel furniture by contract of conditional sale, constituted a sale or other disposition of property, within the meaning of sec. 1001, I.R.C. 1954, as to which gain or loss to the petitioners should be determined for income tax purposes.

Petitioners purchased a used 111-space mobile home park for $ 327,000. Of this total, $ 143,000 was for land and $ 184,000 for improvements. Held: petitioners are not entitled to an investment credit for the cost of the systems under secs. 38 and 48(a)(1)(B), I.R.C. 1954.

Held, no claim for reimbursement with respect to which there was a reasonable prospect of recovery existed at the time petitioners'… Held: no claim for reimbursement with respect to which there was a reasonable prospect of recovery existed at the time petitioners' property was nationalized by Communist Czechoslovakia, even though petitioner then knew of Czechoslovakian assets in this country, consequently he may not deduct his loss in a later year when his claim was…

Stock in an Arizona corporation formed by a husband and wife while married and living together in Arizona was issued one-half to the husband and one-half to the wife. Held: the stock issued in the wife's name as well as that issued in the husband's name is community property under Arizona law. (Ariz. Rev. Stat. Ann. sec. 25-211 (1956)).

1. The interest of a member of an association taxable as a corporation is to be treated as stock in determining whether a distribution from the association to the member is to be taxed as a dividend and a payment in retirement of a portion of a member's interest is to be treated as a redemption under sec. 317(b), I.R.C. 1954, by the association of a portion of the member's stock. 2.

Held: A residuary cash beneficiary of an estate is not entitled to deduct an attorney's fee paid to oppose demands for extraordinary compensation made by the executrix of… Held: A residuary cash beneficiary of an estate is not entitled to deduct an attorney's fee paid to oppose demands for extraordinary compensation made by the executrix of the estate and an accounting of accounts receivable submitted by the executrix. Such fee was not deductible under sec. 212, I.R.C. 1954.

Petitioner on advice of his accountant, concurred in by his attorney, signed on Mar. 24, 1961, and submitted to respondent a Form 872 purporting to extend the statute of limitations with respect to… Held: the Form 872 signed by petitioner and altered in respondent's office after being so signed was not effective to extend the statute of limitations for the calendar year 1957.

Petitioner owned debt obligations, subject to repurchase undertakings on the part of third parties. Held: that, in the absence of evidence that the repurchase undertakings would not be honored, petitioner is not entitled to additions to its bad debt reserve with respect to such debt obligations.

Finance companies, licensed under the Indiana Small Loan Act and related Indiana statutes to make loans, made available to their… Held: that the finance companies earned, and controlled the disposition of, compensation derived from the sale of the credit life insurance during the taxable years 1958 through 1962, and that the respondent's allocation of 50 percent of the net premiums paid for such insurance to them during such taxable years pursuant to secs. 61 and 482…

In 1955 Ward transferred to the newly incorporated petitioner corporation in exchange for all of its stock, all of the assets used by him in the operation of a radio station. Held: the gain realized on the sale and assignment of the radio station license in June 1961 to the third-party purchaser is taxable to the petitioner corporation and not to Ward individually.

An industrial laundry which provided a rental service of laundered apparels, coveralls, towels and other items, charged the cost of these items to expense when purchased. Held: the gain realized upon the rental items in the liquidating sale is, pursuant to sec. 337, not recognized to the corporation.

1. Held, stipulated decisions entered by the Tax Court determining deficiencies against two estates are res judicata as to the liabilities of the estates in a later action involving the assessment of… Held: stipulated decisions entered by the Tax Court determining deficiencies against two estates are res judicata as to the liabilities of the estates in a later action involving the assessment of such liabilities against the transferees of the estates. 2.

Ts made gifts of corporate stock to trusts which in form provided for payment of income to children and distribution of corpus at certain ages. Held: in the circumstances of this case, the so-called income interests are not reasonably susceptible of valuation; accordingly, the donors are not entitled to the $ 3,000 exclusions in the computation of their gift taxes. Sec. 2503, I.R.C. 1954.

The petitioners filed tax returns, protests, and powers of attorney with the respondent designating specific addresses as their own. Held: the notices of deficiency were validly issued. Held, further, petitions dismissed for lack of jurisdiction.

1. Sidney, Philip, and Irving Olson are brothers. Held: that the distribution by Cleveland of its Buffalo stock was for a valid business purpose within contemplation of sec. 355, I.R.C. 1954. 2.

1. Petitioners were stockholder-creditors of an electing small business corporation. Held: each payment is allocable in part to return of basis and in part to income. 2.

Held, (1) the Bar Harbor property is includable in decedent's gross estate at a value of $ 10,000, and (2) petitioners have failed to… Held: the Bar Harbor property is includable in decedent's gross estate at a value of $ 10,000, and (2) petitioners have failed to prove that there was adequate and full consideration in money or money's worth for the remainder interest of the testamentary trust created by paragraph Third A of decedent's will, and such remainder interest in…

Held, payments received under the War Orphans' Educational Assistance Act of 1956, 38 U.S.C. sec. 1701 (1964 ed.), and used by the recipient for his support are scholarships within the purview of… Held: payments received under the War Orphans' Educational Assistance Act of 1956, 38 U.S.C. sec. 1701 (1964 ed.), and used by the recipient for his support are scholarships within the purview of sec. 152(d), I.R.C. 1954.

The petitioner, which was engaged in the business of owning and developing residential subdivisions, constructed waterlines as a necessary incident to the successful development… Held: that the waterlines did not constitute property used in the trade or business of the petitioner within the meaning of sec. 1231 of the Internal Revenue Code of 1954, and that therefore the gain from such involuntary conversion is not to be treated as long-term capital gain under that section.

Robert W. Pointer, who was the owner of a manufacturing and construction business, expended $ 24,000 in developing and subdividing 10.63 acres of land, which petitioners had held for over 5 years and… Held: the development activities constituted substantial improvements that substantially enhanced the value of the property so that petitioners are not entitled to have the amounts realized from sales of lots taxed as capital gains under sec. 1237, I.R.C. 1954.

On Dec. 1, 1966, respondent issued a notice of deficiency to the estate of Charles M. DuPuy and the executors thereof determining a deficiency in the estate tax liability of the estate. Held: Respondent's motion is granted. The Court has no jurisdiction over the issue relating to the personal liability of the executors as fiduciaries sought to be raised in the above manner.

1. Joint Federal income tax returns voluntarily signed by both husband and wife without knowledge on the part of the wife of the omission from the income shown on the returns of amounts embezzled by her husband are joint returns so that under the provisions of sec. 6013(d)(3), I.R.C. 1954, the wife is jointly and severally liable for deficiencies in income tax and additions to tax resulting from fraud on the part of the husband for the years for which such joint returns were…

Taxpayer pursued a studied course of concealing a part of his distributive share of partnership income in 1958 and 1959; however he died in January 1960 and his 1959 income tax return was signed and… Held: no fraudulent intent can be imputed to the decedent under these circumstances and the determination of fraud for 1959 is not sustained.

1. Following an initial audit, petitioners received a communication from the district director of internal revenue stating that their returns for 1959 and 1960 would be accepted as filed. Held: this routine letter did not constitute a closing agreement under sec. 7121, I.R.C. 1954 2. Held, further: A reexamination of petitioners' returns and records for the years 1959 and 1960 did not violate sec. 7605 (b), I.R.C. 1954.

Petitioner Teich, Sr., donated $ 1.2 million so-called blue chip securities to foundation in June 1960. Held: that the 1960 transactions did not operate to deprive foundation of its exemption as a charitable organization under sec. 501(c) (3) or sec. 2522(a), I.R.C. 1954.