Volume 51 — Tax Court Reports

In 1961 a California court established in that State the validity of a 1957 Oregon divorce decree the terms of which awarded W specified… Held: the $ 5,000 credit against the judgment constituted a payment as described in the second sentence of sec. 71(b), I.R.C. 1954, 1All statutory references are to the Internal Revenue Code of 1954 unless otherwise stated. which reduced the amount of child support remaining unpaid in 1963; held further, the $ 10,000 payment in 1963 was a…

In 1962, a registered securities salesman claimed $ 5,784.44 as ordinary and necessary business expenses deductible in computing adjusted gross income under sec. 62(2)(D), I.R.C. 1954, as outside… Held: under the Cohan rule, petitioner incurred business expenses of $ 1,700; held, further, petitioner is not an outside salesman and his business expenses must be deducted from adjusted gross income in computing taxable income.

Held, 1. Under Georgia law petitioner is liable as transferee of an insolvent corporation to the extent of cash transfers made without valuable consideration. 2. Held: Under Georgia law petitioner is liable as transferee of an insolvent corporation to the extent of cash transfers made without valuable consideration. 2. Interest runs from the date of each transfer on the amount transferred at 7 percent per annum, the legal interest rate in Georgia. 3.

1. In 1953, grantors executed 10 irrevocable declarations of trust, each of which directed the trustee, subject to certain discretionary… Held: that each trust declaration created two separate trusts under sec. 641, I.R.C. 1954. 2. Held, further, that grantors created 20 rather than 2 trusts principally for tax-avoidance reasons. 3. Held, further, that each of the 20 trusts qualified in the years 1961 through 1965 as a taxable entity under sec. 641, I.R.C. 1954.

In December 1964, at the request of W, his former wife, H paid $ 15,000 irrevocably to his attorney as security for his performance of a proposed… Held: There was no constructive receipt by W in 1964; consequently, there was no payment by H in 1964 within the meaning of sec. 215, I.R.C. 1954, and H is not entitled to a deduction for alimony in that year. Richards' Estate v. Commissioner, 150 F. 2d 837 (C.A. 2, 1945), reversing a Memorandum Opinion of this Court, followed.

T, on accrual basis, operated a sole proprietorship, of which his married son was an employee. Held: the remaining one-half allocable to the son's wife's community property interest is similarly nondeductible.

The petitioner, one of a large group of affiliated corporations engaged in the insurance brokerage and agency business, purchased the stock of a corporation conducting a similar business, and… Held: that no part of the consideration paid for the intangible assets, including the list of expirations, is deductible as depreciation under sec. 167 of the Internal Revenue Code of 1954.

Petitioner was employed by the General Board of Christian Social Concerns of the Methodist Church. Held: under the facts, petitioner was not a minister of the gospel within sec. 107, I.R.C. 1954, and therefore not entitled to an exclusion for designated rental allowance paid to him by the board as part of his compensation and used by him to furnish a home.

In 1961, petitioner, a telephone company, purchased the entire assets of a neighboring telephone company, Rudolph, in order to expand… Held: Upon converting the former Rudolph assets from a manual to a dial system in 1962, petitioner was not entitled to a loss deduction under sec. 165, I.R.C. 1954, but was required to allocate its basis in the assets abandoned in the conversion, together with its cost of removing those assets, to the intangible right to service the former…

Petitioner, a California savings and loan association, insures the accounts of its depositors with the Federal Savings and Loan Insurance Corporation (FSLIC). Held: the prepayments are also capital expenditures for Federal income tax purposes, deductible only in the years and to the extent used to discharge petitioner's obligation to pay regular insurance premiums or to meet actual losses of the FSLIC.

Held, that regular tuition paid by petitioners for the education of their blind son at a private college-preparatory school is not deductible as a medical care expense under sec. 213, I.R.C. 1954. Held: that regular tuition paid by petitioners for the education of their blind son at a private college-preparatory school is not deductible as a medical care expense under sec. 213, I.R.C. 1954.

Petitioner was forced to sign joint Federal income tax returns for each of the years in issue by a domineering husband who gained her submission by threats and physical abuse. Held: that the income tax returns filed by petitioner's husband were not joint returns within the purview of sec. 6013, I.R.C. 1954, and therefore petitioner is not severally liable thereon.

1. In 1961 petitioner received Pacific stock pursuant to his exercise of a nonstatutory stock option, which option had no ascertainable market value when it was issued. Held: on the basis of the above facts petitioner acquired and held the stock, at all relevant times, subject to a restriction which has has [had] a significant effect on its value under 1.421-6(d)(2)(i) of the regulations and was thus not required to recognize income. 2.

The decedent was the absolute and unrestricted owner of a life insurance policy at the time of her death. Decedent and the insured (her husband) died simultaneously. Held: the amount representing the policy which is properly includable in the decedent's gross estate under sec. 2033, I.R.C. 1954, is an amount equal to the proceeds that were payable under the terms of the policy.

T, a physician, constructed a medical building in 1960 to meet the needs of his practice of ophthalmology, which he and his wife owned as community property. Held: T and his wife are not entitled to deduct any sums as rent in respect of such property. Van Zandt v. Commissioner, 341 F. 2d 440 (C.A. 5), affirming 40 T.C. 824; White v. Fitzpatrick, 193 F. 2d 398 (C.A. 2), certiorari denied 343 U.S. 928, followed.

Prior to 1958, petitioner's predecessor, Queen City Broadcasting Co., had operated a radiobroadcasting station in Seattle, Wash. Held: the applicable statute is sec. 167(a)(1), I.R.C. 1954. Held, further, respondent erred in disallowing $ 213,759.35 of the claimed deduction, but that petitioner failed to prove error as to the remaining $ 31,747.36 of the disallowed deduction.

In 1960 petitioner sold certain property for cash and a 10-year note providing for equal annual payments. Held: in substance petitioner used the three installments under the 10-year note to purchase his daughters' stock. It follows that in his fiscal taxable year ended June 30, 1962, petitioner disposed of the three installments within the purview of sec. 453(d)(1), I.R.C. 1954.

D and his wife-to-be V, both residents of Arizona, executed an antenuptial agreement wherein each relinquished all future marital rights (including the right to support and alimony in case of… Held: D made a completed gift of $ 200,100 when he transferred the money to the trustee subject to the terms of the trust instrument.

On its 1963 and 1964 income tax returns, petitioner deducted certain expenditures which it had incurred in replacing a pipeline in one of the cemeteries it operated. Held: the expenditures incurred by petitioner should be added to its improved-land account.

Petitioners acquired a herd of dairy cows from a decedent, who was a member of a cooperative marketing association. Decedent was required to market all milk from the herd through the association. Held: the right to base was an element separate from the herd, and the cost basis of the herd must be determined, exclusive of any value attributable to that right.

Petitioners purchased a herd of dairy cows from a seller, who was a member of a cooperative marketing association. The seller was required to market all milk from the herd through the association. Held: the right to base was an element separate from the herd and a portion of the purchase price must be allocated to the right to base. Held, further, the right to base is a nondepreciable asset.

Petitioner, while employed as a policeman, undertook a general college education as a philosophy major. Held: amounts spent for such education are personal expenses not deductible from gross income as ordinary and necessary expenses of carrying on a trade or business.

Petitioner Mary Ellen obtained money in 1959-64 by false pretenses. She pleaded guilty to a charge of grand larceny committed in 1961-64. Held: The money so obtained was taxable income to petitioners in accord with Rutkin v. United States, 343 U.S. 130 (1952), and James v. United States, 366 U.S. 213 (1961). 2. Pursuant to sec. 6501(e), I.R.C. 1954, the deficiencies for 1959-61 are not barred by the statute of limitations.

Held, petitioners' payments of tuition to an educational organization within sec. 170(c)(2)(B) are not deductible as charitable contributions. Held: petitioners' payments of tuition to an educational organization within sec. 170(c)(2)(B) are not deductible as charitable contributions. Harold DeJong, 36 T.C. 896 (1961), affd. 309 F. 2d 373 (C.A. 9, 1962), followed.

During the taxable year 1963 the petitioners sold certain stock short. Held: that the losses sustained by the petitioners on the short-sale transactions are not deductible for the taxable year 1963.

Petitioner, after graduating from college, began working full time in March 1964 for his father's construction company as an engineer. Held: that the study of law was undertaken by petitioner primarily for personal purposes and, therefore, the expenses he incurred for meals and lodging in 1964 are not deductible as ordinary and necessary business expenses under sec. 162(a), I.R.C. 1954, and sec. 1.162-5, Income Tax Regs.

Petitioner obtained an option to purchase a majority interest in Dorman Mills, a corporation engaged in the manufacture of fabrics. Held: in substance petitioner, not Park, earned the management service fees paid by Dorman Mills.

On Apr. 17, 1936, decedent and his wife, Ione, contemporaneously executed a separation agreement calling for monthly payments and a… Held: both the separation agreement and transfer in trust were made in consideration of the release of Ione's support rights; held, further, that the transfer in trust was not supported by adequate and full consideration within the meaning of secs. 2036 and 2038; and, held, further, under sec. 2043(a), decedent's gross estate includes the…

Held, the absolute and unrestricted owner of life insurance policies on the life of another possesses, at the instant of his simultaneous death with the insured, property rights… Held: the absolute and unrestricted owner of life insurance policies on the life of another possesses, at the instant of his simultaneous death with the insured, property rights which are includable in his gross estate at a value equal to the entire proceeds payable under the terms of the policies.

Petitioner realized gain upon the involuntary conversion of real property in 1957. Held: petitioner did not timely purchase the replacement property within the intendment of sec. 1033, I.R.C. 1954.

T corporation owned real estate which it leased to an affiliate and in which the affiliate conducted its business operations. Held: the nonrecognition provisions of sec. 1033(a), I.R.C. 1954, do not apply, because (1) T had no property interest in the adjacent real estate threatened by the proposed legal action, and (2) the threat did not relate to any involuntary conversion by the way of requisition or condemnation.

Two dental surgeons working as partners had established and developed profitable practices at San Francisco and at San Rafael. Held: The record demonstrates by strong proof that the assignment of consideration to the covenant by the agreement did not have any independent basis in fact or * * * arguable relationship with business reality such that reasonable men, genuinely concerned with their economic future, might bargain for * * *.

Petitioners, stockholders in Oak Park, received by way of distribution pursuant to the split-up of that corporation, stock of Oak Park North, a wholly owned subsidiary, in exchange for their Oak Park… Held: the distributions to petitioners fail to qualify under sec. 355, I.R.C. 1954, because the active business requirements of (b)(2)(B) and (C) thereof were not satisfied.

Respondent's motion to dismiss for lack of jurisdiction denied where respondent did not reasonably ascertain the last known address of petitioner. Held: such filing is considered timely.

Petitioner Murdock MacPherson was the beneficial owner of one-half of the 125 shares of Ocean Shores Bowl, Inc., stock issued to his brother, petitioner William MacPherson. Held: petitioners are not entitled to deduct the amounts claimed on their 1962 and 1963 income tax returns under sec. 1374(a), I.R.C. 1954, as their prorata shares of the net operating losses incurred by Ocean Shores Bowl, Inc., for the short taxable year 1962 and the taxable year 1963.

Petitioner, who spent roughly 20 percent of his more than 30 years of Federal service, married and domiciled in community property States and the balance in noncommunity property States, started to… Held: under these facts, the retirement income is acquired over a period of time, therefore, it is community property in the proportion that the domicile of the community in a community property State bears to petitioner's entire period of Federal service.

In 1960, settlor established a trust, the income of which was payable to his children and the principal of which was distributable to them if they survived the settlor and reached a specific age,… Held: the retained powers prevented the transfer in trust from being a completed gift under sec. 2511(a), I.R.C. 1954; held, further, no part of the transfer was made by Henriette Goelet.

Decedent, prior to his death, gave his son $ 109,000 in cash in an one-half of the trust corpus, $ 54,500, is includable in decedent's gross was community property. Held: one-half of the trust corpus, $ 54,500, is includable in decedent's gross estate. Sec. 2280, Cal. Civ. Code (1931), construed.

Held: 1. Expenditures for research and development, which were made and properly capitalized in prior years and which were allocable to renegotiable business, were costs of renegotiable… Held: Expenditures for research and development, which were made and properly capitalized in prior years and which were allocable to renegotiable business, were costs of renegotiable business in the year the project was abandoned and the expenditures were charged off against income. 2.

Petitioners traveled by automobile from Lawrenceburg, Ky., to Rochester, Minn., where medical treatment was received. Held: the expenditures for meals and lodging constituted transportation expenses deductible under sec. 213(e)(1)(B), I.R.C. 1954. Held, further, amount of deductible automobile expenses determined. Held, further, expenditures for trip to California were not deductible as expenses for the production of income under sec. 212, I.R.C. 1954.

Petitioner, a national bank, entered into an agreement with another banking institution (Federal) subject to the approval of the… Held: the net increase in Federal's earnings and profits arising because of the inclusion in its income for its final period of its bad debt reserve is properly used as an increase in the adjusted basis of petitioner in Federal's stock for the purpose of determining the basis to petitioner of the assets acquired from Federal under sec.…

1. Petitioners in late 1959 entered into an agreement to purchase a business and sublease the property on which the business was conducted, the agreement specifically providing that petitioners would… Held: that 40 percent of the rental payments made by petitioner with respect to the first property for the first 6 months of 1962 was not rent but part of the purchase price of that property since the substance of the agreement was that petitioner was purchasing the property.

Respondent's determination as to the corporate petitioner, inter alia, allocated to it without change certain items of income, depreciation, and expense returned by two other corporations. Held: Respondent's contention has no standing in this case. This is not an instance of a determination inherently supportable by several theories, one of which is first urged on brief. Respondent's contention is inconsistent with his determination and more in the nature of an about-face.

O, the owner of a herd of breeding cows, leased the cows to X for a term of several years. Held: O is not entitled to any allowance for depreciation on the herd during the term of the lease.

Petitioner, an employee of North American Aviation, Inc., at Downey, Calif., was transferred to a new post of duty at White Sands Missile Range, N. Mex., on an… Held: that the $ 903.33 so received was in the nature of compensation and thus includable in gross income. Held, further, that it constituted nondeductible personal living expenses under sec. 262 of the Internal Revenue Code of 1954. Commissioner v. Starr, 399 F. 2d 675 (C.A.10), reversing 46 T.C. 743, followed.

New York State appropriated certain property of the petitioner in 1959. A partial payment of $ 81,900 in respect of such property was made to the petitioner in 1961, and the New York Court of Claims awarded the petitioner $ 166,575 in 1964. The petitioner's adjusted basis in the property was less than $ 81,900. The petitioner replaced the property in 1965 with other property similar or related in service or use. Held: 1. The petitioner realized gain in 1961 as the result of the partial payment. Accordingly, it may not elect sec. 1033 nonrecognition treatment of its gain on the appropriated property. 2. The petitioner did not file timely income tax returns for the years 1961 and 1964, and it has not shown that such failure was due to reasonable cause and not due to willful neglect. 3. No part of the underpayment of income taxes for 1961 and 1964 was due to negligence or intentional disregard of rules and regulations.

Property of petitioners was condemned in 1963 and the condemnor deposited the amount of the initial award, as determined by a Kentucky county court, with the clerk of the court. Held: petitioners constructively received the amount deposited in 1963.

Petitioner sold his interest in a two-man partnership to his partner and received cash for his share of unbilled work in progress and cash plus an assumption of his share of the partnership… Held: the cash representing petitioner's share of work in progress was payment attributable to unrealized receivables and taxable as ordinary income under sec. 751(c), I.R.C. 1954. Held, further, petitioner's basis in his partnership interest determined.

Held, taxpayer did not have a depreciable interest in certain real property: Charles Bertram Currier, 7 T.C. 980 (1946), is not res… Held: taxpayer did not have a depreciable interest in certain real property: Charles Bertram Currier, 7 T.C. 980 (1946), is not res judicata as to this proceeding, involving different taxable years, nor does it act as a collateral estoppel as to matters in this proceeding which were not actually presented and determined in the earlier suit.

In 1960 the petitioner received proceeds from the sale of securities which he had embezzled. Held: that the respondent did not err in including in the petitioner's gross income for the taxable year 1960 that portion of the embezzled funds which was not repaid in 1960.

On Feb. 1, 1964, F, a retail department store chain, sold its installment accounts receivables to FNB, a bank. Held: even though the contract reserve was greater than the unrecognized service charges, F must recognize these service charges as income at the time the accounts were sold.

Petitioner was a theatrical agent who during 1961, 1962, and 1963 visited bars and nightclubs in an effort to obtain contracts to represent… Held: Amount of deductions to which petitioner is entitled for travel and entertainment expenses in 1961 and 1962 determined under Cohan v. Commissioner, 39 F. 2d 540 (C.A. 2, 1930), and respondent's determination of amount allowable as deduction for use of home for business entertainment sustained because of failure of proof by…

S Co. suffered a casualty to certain citrus tree land. Held: the amount deductible as a casualty loss under sec. 165(a), I.R.C. 1954, determined to be equal to the cost of restoring the land to its precasualty condition and not the net decrease in fair market value of the land.

Petitioner was organized in 1945 as a nonprofit corporation under the laws of the State of California to raise funds for Loyola University of Los Angeles, and has been operated for that purpose up to… Held: petitioner was not a feeder organization as defined in sec. 502, I.R.C. 1954. Held, further, that the rent which petitioner received from its lessees was not unrelated business taxable income as defined in sec. 512 of the Code.

Petitioner attempted to assign to two charities a portion of his interest in a partnership business subsequent to the sale and distribution of the proceeds of the… Held: the purported assignment was lacking in any business purpose and was merely an anticipatory assignment of ordinary partnership income taxable to petitioner upon the collection and disbursement of rental income by the partnership. Paul W. Trousdale, 16 T.C. 1056 (1951), affd. 219 F. 2d 563 (C.A. 9, 1955).

Petitioner was a loan company incorporated in California, on Apr. 23, 1959, with an initial capitalization of $ 1,500. Held: Petitioner was a personal holding company during the taxable years ended Apr. 30, 1960, 1961, and 1962. It does not fall within the exception for loan or investment corporations found in former sec. 542(c)(8), I.R.C. 1954, during the years in issue. 2.

Petitioner, while employed as a full-time engineer at the Sandia Corp., enrolled in an evening law school course of study leading to… Held: the expenditures for the education are not deductible under sec. 162(a), I.R.C. 1954, as the education was not directly and proximately related to petitioner's employment; the expenditures were not for education undertaken primarily for the purpose of maintaining or improving employment skills; nor did petitioner's employer expressly…

Held, payments made by petitioner's former husband to her pursuant to order of a responding State court under provisions of the Uniform Reciprocal… Held: payments made by petitioner's former husband to her pursuant to order of a responding State court under provisions of the Uniform Reciprocal Enforcement of Support Act upon her petition for support of a minor child are not alimony, includable in petitioner's income under sec. 71 of the 1954 Internal Revenue Code.

Petitioners invested in a small business corporation, in stock, loans, and by guaranty of its debt. The corporation became insolvent. The directors authorized an issue of Section 1244 stock. Held: Petitioners sustained no losses in connection with the Section 1244 stock, following Wesley H. Morgan, 46 T.C. 878. 2. Petitioners sustained losses on their investments, loan, and guarantees, as determined herein.

Petitioner sold his partnership interest in November 1953. In a prior case in this Court involving his 1952 and 1953 taxes the issues of his distributive share of partnership earnings and the basis for his partnership interest were presented and determined. In the instant case involving the year 1954 petitioner received the final payment from the 1953 sale of his partnership interest.

Petitioner, a candidate for a Ph. D. degree in French, was paid $ 1,111.12 by the University of Texas in her capacity as a teaching assistant. Held: that the payments do not qualify as excludable fellowship grants under sec. 117, I.R.C. 1954, but are taxable as compensation for services rendered.

1. Held, that under the community property laws of Louisiana a wife has a present, vested interest in the income of the community and is… Held: that under the community property laws of Louisiana a wife has a present, vested interest in the income of the community and is therefore under a duty to make either a single or a joint return, and is liable for the tax on one-half of community income; and this is so, even though the wife subsequently renounces the community of…

Petitioner was self-employed and had only temporary employees working for him. During 1963, he purchased U.S. Government Retirement Plan Bonds. Held: petitioner had no plan during 1963 which met the requirements of sec. 405 and the amounts paid for the bonds are not deductible.

Petitioner Co. made a $ 25,000 payment to X Co., a competitor doing business in the same building, pursuant to an agreement whereby X Co. agreed to dispose of all its equipment and facilities, vacate… Held: on the facts, no amount of the $ 25,000 payment made by petitioner is allocable to an asset with a determinable life and no depreciation deduction is allowable to petitioner.

Petitioner was a bona fide resident of Okinawa whose wages were paid by an agency of the United States. Held: that at some time prior to the years in issue petitioner had adopted Okinawa as his domicile and could no longer exclude one-half of his wages as the community income of his wife under California law.

Petitioner, an integrated miner-manufacturer, obtained minerals from natural brine and computed its gross income from mining for depletion purposes upon the sales price of the… Held: petitioner's natural brines at the wellhead were not its first commercially marketable product within the meaning of sec. 613, I.R.C. 1954, and therefore petitioner's processes are to be included in its gross income from mining. United States v. Cannelton Sewer Pipe Co., 364 U.S. 76, considered.

Petitioner and his wife were divorced. Pursuant to the divorce decree, the former wife was awarded custody of their minor son and given the use and benefit of the family residence which petitioner… Held: that petitioner was not a head of a household within the meaning of sec. 1(b)(2)(A), I.R.C. 1954, because the household which he maintained was not his home.

Held, sec. 152(b)(3), I.R.C. 1954, is constitutional; under such provision, a taxpayer is not entitled to a dependency deduction for an individual who, during the… Held: sec. 152(b)(3), I.R.C. 1954, is constitutional; under such provision, a taxpayer is not entitled to a dependency deduction for an individual who, during the taxable year, was not a citizen of the United States, resided in Korea, and did not have as his principal place of abode the home of the taxpayer.

In December 1930 decedent transferred securities valued at $ 374,790 to her husband. Held: In substance and practical effect decedent transferred property to the trusts to the extent of her claim for restitution against her husband; and the transaction, therefore, constituted a transfer by decedent after Mar. 3, 1931, within sec. 2036, I.R.C. 1954.

1. Held, that the petitioners did not, within the period specified in sec. 1033, I.R.C. 1954, purchase properties to replace properties converted as a result of condemnation, and… Held: that the petitioners did not, within the period specified in sec. 1033, I.R.C. 1954, purchase properties to replace properties converted as a result of condemnation, and that therefore the gains upon the conversions are not entitled to the nonrecognition-of-gain provisions of that section. 2.

Developers and builders advanced funds to water companies and municipalities sufficient to finance extension of water facilities into new real estate projects. Held: the contracts were evidences of indebtedness within the meaning of sec. 1232(a), I.R.C. 1954, and (2) the contracts were not in registered form within the meaning of sec. 1232(a)(1), I.R.C. 1954.

Petitioner is in the business of selling fur pelts at wholesale and tailoring and selling custom-made fur coats at retail. Held: respondent's adjustments requiring petitioner to include advance payments in income in the year of receipt were proper. Held, further, no deduction should be allowed in the year of advancement for estimated cost of goods sold or for State sales tax.

T, an employee of the Federal Aviation Agency (FAA) lived together with his wife and children on Wake Island. Held: the amounts thus expended for such supplies may not be excluded from T's wages as meals furnished to him by his employer. Sec. 119, I.R.C. 1954.

1. The petitioner paid certain personal property taxes and filing fees on behalf of a corporation (not a subch. Held: the petitioner may not deduct such payments on his personal income tax return. 2. Property owned by the corporation suffered damage due to vandalism. Held, the petitioner is not entitled to a deduction, either as depreciation or as a casualty or business loss, on account of such damage on his personal return. 3.

Petitioners, during the years 1962 through 1965, were husband and wife domiciled in a community property State. Held: for the purpose of computing the retirement income credit provided by sec. 37, I.R.C. 1954, capital was not a material income-producing factor in petitioner's business; held, further, earned income in such computation should be determined by reference to net profits from petitioner's business and sec. 1.37-2(a), Income Tax Regs., is…

Petitioner acquired health and accident insurance policies from an insolvent insurance company and assumed the liabilities thereunder. 1. Held: the amount of unearned premiums and existing liabilities under the policies should not be netted against the gross cost to determine the consideration paid. 2. Held, further, the unearned premiums constituted income to the petititioner. 3.

Held, petitioner's earnings and profits for the taxable years 1959 through 1962 were not permitted to accumulate beyond the reasonable needs of petitioner's business including the reasonably… Held: petitioner's earnings and profits for the taxable years 1959 through 1962 were not permitted to accumulate beyond the reasonable needs of petitioner's business including the reasonably anticipated needs of the business.

Facts: Petitioner, a full-time member of a law school faculty, expended amounts for admission to the bar of Iowa and for a reception held on the… Held: the bar admission fee is a capital expenditure which is not deductible because the word ordinary in sec. 162(a) precludes a deduction for such expenditures. Held, further, the primary motivation for the reception was personal rather than business; hence, sec. 262, I.R.C. 1954, precludes any deduction for the cost thereof.

T, an investment banker, was the prime mover in the promotion of a wallboard manufacturing plant which was to be located in Cuba. Held: T's loss on his direct loan was deductible as a business bad debt under sec. 166, I.R.C. 1954; held, further, T's payments of amounts owing under the P corporation guaranty were deductible as ordinary and necessary business expenses under sec. 162.

Beginning with the fiscal year ended Apr. 30, 1957, petitioner's books show that each year up to 1963 the control account in the general ledger of accounts payable exceeded the subsidiary… Held: respondent was justified in assuming this accounts payable item in the sum of $ 8,475.75 had once been deducted and in the absence of proof to the contrary respondent was right in determining petitioner received income in fiscal year 1963 resulting from this credit to earned surplus.

Upon reconsideration, held: That net deferred and uncollected premiums and net due and unpaid premiums (exclusive of loading) are includable in assets for computing taxpayer's share of investment… Held: That net deferred and uncollected premiums and net due and unpaid premiums (exclusive of loading) are includable in assets for computing taxpayer's share of investment income under sec. 804, I.R.C. 1954, as amended.

During 1963 petitioner was employed by the American Embassy Cooperative Commissary in Pakistan. Held: the commissary was an agency of the United States for the purpose of sec. 911(a), I.R.C. 1954, and, consequently, petitioner is not entitled to exclude from his gross income the compensation he received therefrom.

Petitioners were transferred by their employer, IBM, to other posts of duty. Held: the reimbursements are includable in gross income except allowance for moving petitioners' immediate family, household goods, and personal effects.

After having been adjudicated a bankrupt but before discharge and termination of the bankruptcy proceeding, the taxpayer received a statutory notice of deficiency for the taxable year 1962 and filed… Held: this court has jurisdiction to redetermine the deficiency; the respondent's motion to dismiss is denied.

Petitioner, a practicing attorney, claimed deductions for courtesy and promotion expenditures in 1964 and 1965, consisting of purchases of… Held: that the expenditures constitute entertainment expenses under sec. 274, I.R.C. 1954; that petitioner has failed to establish that the expenditures were directly related to the active conduct of his business as required by sec. 274(a)(1) and the regulations promulgated thereunder; and that petitioner has failed to comply with the…

The envelope containing the petition in this case was mailed from New York City and was postmarked by a private postage meter. Held: the regulations under sec. 7502(b), I.R.C. 1954, relating to metered mail are valid, and under such regulations, the petition is not deemed filed on the date of the postmark.

Decedent established four testamentary trusts, A, B, C, and D, for the benefit primarily of a son, daughter, and numerous other relatives and descendants, both living and unborn, with remainders… Held: That there was no reasonable certainty of a gift to charity of any ascertainable amount at the date of decedent's death. Therefore, the claimed deduction is disallowed.

Under prime contracts for highway construction, petitioner was entitled to partial payments from the Highway Department of Georgia measured by… Held: petitioner improperly accrued the retainage as an expense at the time withheld from payments to the subcontractors. Held, further, respondent initiated a change in petitioner's method of accounting within the meaning of sec. 481, I.R.C. 1954, authorizing an adjustment with respect to taxable years beginning after Dec. 31, 1953.

Held, Capehart housing contract subject to the 1951 Renegotiation Act and such prospective application is not unconstitutional under the fifth amendment. Held: Capehart housing contract subject to the 1951 Renegotiation Act and such prospective application is not unconstitutional under the fifth amendment.

1. Petitioner filed two income tax returns in each of the years 1956, 1957, 1958, and 1959. Held: The default of petitioner will stand as entered and the deficiencies determined are upheld. Petitioner has failed to sustain her burden of proof. Held, further, respondent proved fraud by clear and convincing evidence in each year before the Court, and his determinations of additions to tax for fraud are likewise sustained.

Petitioner was a resident physician at SLU Hospital from Aug. 1, 1961, to July 31, 1962, and at University (of Michigan) Hospital from Aug. 1, 1962, to June… Held: the stipend petitioner received from University Hospital in 1965 was not a fellowship grant as that term is used in sec. 117(a)(1)(B), I.R.C. 1954. Held, further, even if such stipend were a fellowship grant, the 36-month limitation in sec. 117(b)(2)(B) precludes exclusion from gross income of any portion thereof.

Held: Petitioner properly reported amounts received from the grant of certain patent rights as capital gains. Par. Held: Petitioner properly reported amounts received from the grant of certain patent rights as capital gains. Par.

1. Held, amounts paid as a fee to an employment agency and for related expenses incurred in seeking employment are not deductible under sec. 162(a), I.R.C. 1954. 2. Held: amounts paid as a fee to an employment agency and for related expenses incurred in seeking employment are not deductible under sec. 162(a), I.R.C. 1954. 2.

Petitioner, Pierre Godart, was an organizer and stockholder of FAB Corp. whose stock became worthless in 1962. Held: the stock did not qualify under the statute and regulations as sec. 1244 stock in that the stock (1) was not issued pursuant to a written plan in which the period of the offering was specified to end in 2 years or less, (2) was not issued pursuant to a plan that specifically stated in terms of dollars the maximum amount to be…

On or about Apr. 21, 1960, petitioner agreed to become a general agent for an insurance company. Held: petitioner's acquisition of stock was not a taxable, compensatory bargain purchase.

1. Petitioners were drift miners who entered into leases and coal sales agreements giving them the right and obligation to mine certain areas to… Held: Such investments were quite similar to those considered by the Supreme Court in Paragon Coal Co. v. Commissioner, 380 U.S. 624. They were all either deductible or recoverable through depreciation, and petitioners had no economic interest in the coal in place, but merely an economic advantage to be derived from production. 2.

Petitioner, a subch. S corporation, by its activities produced promissory notes secured by deeds of trust which it then sold to insurance companies at a discount and was granted the right to service… Held: such notes were securities within the meaning of sec. 1372(e)(5), I.R.C. 1954, and sec. 1.1372-4(b)(5)(viii), Income Tax Regs., and therefore more than 20 percent of petitioner's gross receipts were personal holding company income and its election is terminated.

Petitioner paid $ 1,560 per year for 3 years to his former wife in discharge of legal obligations which, because of the family relationship, were imposed on him under decrees incident to separation… Held: Petitioner is not entitled to deduct any of the money paid to his former wife since the operative decrees of the State court specifically designated the funds as child support, albeit they were labeled alimony and 2.

Held, taxpayer's annual entries of credits in his business ledger in the names of members of his family, usually in multiples of $ 3,000 each, did not… Held: taxpayer's annual entries of credits in his business ledger in the names of members of his family, usually in multiples of $ 3,000 each, did not constitute gifts no matter how emphatically the taxpayer testified as to his donative intent and his understanding that he was liable to pay the credit balances on demand.

Decedent died Oct. 7, 1963. Her husband died Dec. 1, 1951. Held: That the value of the general power of appointment in the decedent over one-half of the corpus and income accrued and accumulated in the residuary trust created under the will of her husband is includable in her gross estate under sec. 2041(a)(2), I.R.C. 1954. 2.

Held, the costs of annual shearings of Christmas trees are ordinary and necessary business expenses deductible pursuant to sec. 162(a), I.R.C. 1954. Held: the costs of annual shearings of Christmas trees are ordinary and necessary business expenses deductible pursuant to sec. 162(a), I.R.C. 1954.

Petitioner, as lessor, and ASARCO, as lessee, were parties to an agreement whereby ASARCO was granted the exclusive right to explore, develop, and operate certain mining property in Idaho owned by… Held: that petitoner is entitled to include in its gross income and take percentage depletion on 50 percent of the net profits which it actually received, not on 50 percent of the total gross income from the property.

The petitioner and his family owned 40 percent of the outstanding stock in a corporation; two other family groups, headed by his brother and brother-in-law, owned most of the balance of the stock. Held: the redemptions of the petitioner's stock pursuant to this agreement were essentially equivalent to dividends.

In a corporate spin-off whereby Pacific corporation transferred to newly created Northwest corporation a portion of its business operations partly in exchange for Northwest stock, the shares of Northwest were distributed to Pacific stockholders (or their assignees) by means of stock rights that were issued in two separate offerings about 2 years apart.

The petitioner regularly sold food, food freezers, and life memberships on the installment plan. Held: petitioner's sales of life memberships were not sales of personal property within the meaning of sec. 453(a), I.R.C. 1954, and petitioner is therefore not entitled to report the income from such sales upon the installment method.