Volume 51 — Tax Court Memorandum

Petitioner was a partner in a general partnership, which incorporated in 1976. Petitioner intended that the successor-corporation would not assume the partnership's ending liabilities. Held: respondent is not estopped from determining a deficiency in petitioner's income tax, based on respondent's initial examination of the partnership's tax return.

Held, P is not entitled to deduct advance royalties paid during 1977 because no coal was ever produced during that year and the royalties… Held: P is not entitled to deduct advance royalties paid during 1977 because no coal was ever produced during that year and the royalties were not paid pursuant to a valid minimum royalty provision as provided in section 1.612-3(b)(3), Income Tax Regs.Held further, damages are awarded under section 6673, I.R.C. 1954, for maintaining a…

Held, Ps are not entitled to claim a dependency exemption for a child from a previous marriage for 1978 or 1979. Held: Ps are not entitled to claim a dependency exemption for a child from a previous marriage for 1978 or 1979.

Held, Ps are not entitled to deduct advance royalties paid during the years in issue because no coal was ever produced during those years… Held: Ps are not entitled to deduct advance royalties paid during the years in issue because no coal was ever produced during those years and the royalties were not paid pursuant to a valid minimum royalty provision as provided in section 1.612-3(b)(3), Income Tax Regs.Held further, N is liable for additions to tax under section 6651(a),…

Held: Petitioners' airplane was acquired to qualify petitioner Michael M. Rossum for the position of co-pilot, a new trade or business. Held: Petitioners' airplane was acquired to qualify petitioner Michael M. Rossum for the position of co-pilot, a new trade or business. Therefore, respondent's disallowance of deductions and an investment credit relating to the airplane is sustained.

Held: Petitioner in docket No. 24229-81 contributed the majority of the support for her two children in 1978, and, therefore, is entitled to two dependency exemptions. Held: Petitioner in docket No. 24229-81 contributed the majority of the support for her two children in 1978, and, therefore, is entitled to two dependency exemptions. Held further, petitioners in docket No. 24912-81 are not entitled to the two dependency exemptions in issue.

Ps claimed deductions for advanced minimum royalties paid to Wyoming and Western Coal Reserves Inc., which had been held to be nondeductible in various cases, including Wendland v. Commissioner,79… Held: after the petition was filed, no settlement offer was extant.

Held: Petitioners' horse farm was not operated for profit for purposes of sections 212 and 183. Held: Petitioners' horse farm was not operated for profit for purposes of sections 212 and 183.

Held: Petitioner realized, and must recognize, $135,000 of additional income in 1974 as a result of his purchase of master recordings… Held: Petitioner realized, and must recognize, $135,000 of additional income in 1974 as a result of his purchase of master recordings via an offset against royalties owed him; petitioner's master recordings activity was not engaged in for profit and, therefore, he is not entitled to the claimed depreciation deduction or investment credit;…

Held: Respondent's disallowance of deductions for legal expenses and partnership losses sustained; petitioner is not entitled to claimed dependency exemptions or to use income… Held: Respondent's disallowance of deductions for legal expenses and partnership losses sustained; petitioner is not entitled to claimed dependency exemptions or to use income averaging in computing his tax liability; and petitioner is liable for additions to tax under sections 6651(a) and 6653(a).

P has totally and willfully failed to produce documents despite a specific order of this Court directing him to do so. Held: P's failure constitutes a default and judgment therefor is appropriate respecting the income tax deficiencies and the additions to the tax under sec. 6654, I.R.C. 1954. Rule 104(c)(3), Tax Court Rules of Practice and Procedure.Held further, P is liable for the additions to tax for fraud under sec. 6653(b), I.R.C. 1954.

Held: Personal service income assigned by petitioners to an Express Equity Pure Trust constitutes income to petitioners. Held: Personal service income assigned by petitioners to an Express Equity Pure Trust constitutes income to petitioners. Held further, petitioners are not entitled to depreciation and business expense deductions for an automobile leased to the trust. Held further, petitioners are liable for an addition to tax pursuant to section 6653(a).

Held, allegations deemed admitted under Rule 37(c), Tax Court Rules of Practice and Procedure, are sufficient to sustain an income tax deficiency and an addition to the tax under sec. 6654, I.R.C.… Held: allegations deemed admitted under Rule 37(c), Tax Court Rules of Practice and Procedure, are sufficient to sustain an income tax deficiency and an addition to the tax under sec. 6654, I.R.C. 1954, and R's motion for summary judgment on those issues is granted.

Petitioner-wife received a bachelor of arts degree in Education and Sociology. Held: Under sec. 1.162-5(b)(3)(i), Income Tax Regs., all teaching and related duties shall be considered to involve the same general type of work. Petitioner-wife's education did not qualify her for a new trade or business. Petitioner-wife's education expenses are deductible. Sec. 162(a), I.R.C. 1954.

Held: A Michigan land contract executed by the limited partnership in which petitioners were partners had an ascertainable for market value. Held: A Michigan land contract executed by the limited partnership in which petitioners were partners had an ascertainable for market value. Therefore, under the installment sale provisions, gain on the sale must be reported as payments are received.

Held: Petitioner-husband was an itinerant electrician whose tax home traveled with him. Hence, travel expenses are not deductible. Held: Petitioner-husband was an itinerant electrician whose tax home traveled with him. Hence, travel expenses are not deductible. Held further, petitioners failed to prove that moneys paid to petitioner-husband's former wife constituted deductible alimony.

P was a casual, i.e., nonprofessional gambler, whose gambling losses exceeded his winnings in 1980. He was also a taxpayer who could be claimed as a dependent on the return of another. Held: P's gambling losses are items of itemized deduction, limited as provided in sec. 165(d), I.R.C.Held further, P was entitled neither to the zero-bracket amount nor to any itemized deductions in computing his taxable income, under sec. 63, I.R.C., under the facts of this case.

P attempts to place tax years 1979-1984 at dispute in this Court. Tax years 1979 and 1980 were closed out by Order of Dismissal and Decision entered on August 24, 1983 from which no appeal was taken. Held: R's Motion to Dismiss for Lack of Jurisdiction is granted.

The envelope containing the petition filed herein was mailed from Daytona Beach, Florida, and was postmarked by a private postage meter. Held: Ps failed to prove they met the requirements of sec. 301.7502-1(c)(1)(iii)(b), Proced. & Admin. Regs.; accordingly, under secs. 7502(b) and 6213(a), I.R.C. 1954, the petition was not timely filed. R's Motion to Dismiss for Lack of Jurisdiction is granted.

Where Tax Court has no jurisdiction it may not entertain a motion for award of reasonable litigation costs.

Petitioner is a magazine publisher and it sold its magazines to a distributor, which, in turn, consigned the magazines to local wholesalers to distribute… Held: petitioner's dealings with its distributor were on a sale or return basis, not a consignment basis. Held further, petitioner properly accrued as income the gross sales price of magazines shipped. Held further, respondent properly disallowed petitioner's claimed deductions for anticipated returns of unsold magazines.

B was the sole shareholder and manager of Nor-Pen, a corporation which owned and operated five Round Table pizza restaurants in San Mateo County, California. Held: the racing expenses are allocated between advertising expenses deductible by Nor-Pen and nondeductible expenditures imputed to B as constructive dividends.

Over a period of 6 months in 1979 and 1980, petitioner-husband engaged in six currency transactions in which he received an aggregate of $439,988 in small-denomination bills. Held: Respondent has proven fraud by clear and convincing evidence as to petitioner-husband for 1979 and 1980, and as to petitioner-wife for 1980. Additions to tax imposed. Sec. 6653(b), I.R.C. 1954. (2) Respondent has failed to carry his fraud burden of proof as to petitioner-wife for 1979.

Held: Petitioner is not entitled to a theft loss deduction for the fees paid for membership in Life Science Church in the year of payment; held further, additions to tax under sections 6651(a),… Held: Petitioner is not entitled to a theft loss deduction for the fees paid for membership in Life Science Church in the year of payment; held further, additions to tax under sections 6651(a), 6653(a), and 6654(a) are sustained but damages under section 6673 are not imposed.

Held: The employment of Lawrence Petricca as an electrician at the Seabrook Nuclear Power Plant during 1980 was indefinite, hence travel expenses are not deductible. Held: The employment of Lawrence Petricca as an electrician at the Seabrook Nuclear Power Plant during 1980 was indefinite, hence travel expenses are not deductible. Held further, petitioner's charitable contribution to Church of the Angels is not deductible.

Held: Petitioner is not entitled to a theft loss deduction for the fees paid for membership in Life Science Church in the year of payment; held further, additions to tax under sections 6651(a),… Held: Petitioner is not entitled to a theft loss deduction for the fees paid for membership in Life Science Church in the year of payment; held further, additions to tax under sections 6651(a), 6653(a), and 6654(a) are sustained but damages under section 6673 are not imposed.

Prior to the years in issue, P served as chief executive officer, president and chairman of the board of HCA, a corporation involved in certain government-sponsored turnkey housing projects. Held: P received the payments in issue as compensation for his availability for consulting services rather than as additional consideration for his HCA stock.

In 1967, petitioner, a dentist, acquired a patent for a dental amalgam called Dispersalloy. Held: Dispersalloy, Inc. was organized for a substantial business purpose.

Held: Petitioner is not entitled to a charitable contribution deduction in excess of that allowed by respondent; petitioner is liable for an addition to tax under section 6653(a); and damages are… Held: Petitioner is not entitled to a charitable contribution deduction in excess of that allowed by respondent; petitioner is liable for an addition to tax under section 6653(a); and damages are awarded under section 6673.

Petitioner, who had to switch from carpooling to use of his own car to get to and from his place of employment, in order to put his minor children on school buses in the mornings, may not deduct the different in the cost of his transportation as child care expense.

Petitioner owned all the stock of Real/Tech, a small business corporation. Held: Petitioner is not entitled to deduct his losses on the transfer of Real/Tech as ordinary losses under section 1244 of the Internal Revenue Code.

During 1979 and 1980, P, a practicing psychiatrist, underwent psychotherapy. Held: because the psychotherapy improved P's skills as a psychiatrist, he is entitled to deduct the expenses he incurred in undergoing psychotherapy as an education expense under section 162(a), I.R.C. 1954. Iglesias v. Commissioner,76 T.C. 1060 (1981), and Voigt v. Commissioner,74 T.C. 82 (1980), applied.

In the 1971 taxable year, petitioner deducted a $31,555 ordinary loss with respect to a partnership interest. Held: for the 1971 taxable year, petitioner has failed to demonstrate that he is entitled to deduct the ordinary loss claimed with respect to his partnership interest. Held further, for the 1973 taxable year, respondent has sustained its burden of proof that petitioner is not entitled to deduct the claimed business expenses.

Ps claimed a deduction for a payment allegedly made to their family trust in return for services rendered in managing family dental practice. Held: The Commissioner's denial of all deductions relating to the family trust for lack of substantiation did not shift the burden of proof. (2) Family trust not recognized for tax purposes. (3) Ps entitled to deductions for substantiated business related expenses.

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 & Procedure. (2) Addition to tax is imposed under sec. 6653(b) (fraud), I.R.C. 1954. Doncaster v. Commissioner,77 T.C. 334 (1981).

Held: (1) Deficiencies in income tax for each year 1973 through 1980 sustained. (2) Additions to tax under secs. 6653(b) and 6654, I.R.C. 1954, sustained. Held: Deficiencies in income tax for each year 1973 through 1980 sustained. (2) Additions to tax under secs. 6653(b) and 6654, I.R.C. 1954, sustained. (3) Fraud tolled the running of the statute of limitations under sec. 6501(c)(1), I.R.C. 1954.

Petitioner-husband was travelling by airplane on a business trip, when suddenly he began to act in a bizarre and irrational manner; he also threatened two members of the flight crew and assaulted a passenger. After the airplane landed, petitioner-husband was arrested. Two weeks later, he was indicted. At trial, the court rendered an acquittal verdict by reason of temporary insanity. Petitioners paid $16,850 for legal fees in the criminal case and paid $3,800 to the assaulted passenger in settlement of a related civil claim. Held: The expenses are not "ordinary"; the amounts paid are not deductible under sec. 162, I.R.C. 1954. Dancer v. Commissioner,73 T.C. 1103 (1980), and Clark v. Commissioner,30 T.C. 1330 (1958), are distinguishable.

Ps purchased land from a corporation controlled by them.Held, if the purchase price was below fair market value of land, the excess is a dividend to Ps. Held: if the purchase price was below fair market value of land, the excess is a dividend to Ps.

Held: Amounts owed to petitioners and deposited in accounts held by petitioners, or paid in satisfaction of petitioners' personal obligations or the obligations of their wholly owned corporations,… Held: Amounts owed to petitioners and deposited in accounts held by petitioners, or paid in satisfaction of petitioners' personal obligations or the obligations of their wholly owned corporations, constitute income to petitioners.

Petitioner's employment as a journeyman electrician at the North Anna Nuclear Power Plant in Mineral, VA, was not temporary. Petitioner's expenses in travelling between Mechanicsville, VA, where he lived, and Mineral, VA, where he worked, are not deductible.

Held, Ps' failure to report gross receipts from their sole proprietorship over a 4-year period was due to fraud within the meaning of sec. 6653(b), I.R.C. 1954. Held: Ps' failure to report gross receipts from their sole proprietorship over a 4-year period was due to fraud within the meaning of sec. 6653(b), I.R.C. 1954.

Held: Installment payments under separation agreement found to be due within 10 years for purposes of section 71(c)(2) as then in effect. Held: Installment payments under separation agreement found to be due within 10 years for purposes of section 71(c)(2) as then in effect.

Held: Petitioners are not entitled to deduct expenses of maintaining an office in their home, failed to substantiate claimed business entertainment expenses, and are liable for an addition to tax for… Held: Petitioners are not entitled to deduct expenses of maintaining an office in their home, failed to substantiate claimed business entertainment expenses, and are liable for an addition to tax for negligence for the 1979 taxable year.

Petitioner, a State-regulated natural gas utility company, collected customer deposits from customers who did not have established credit records. Held: The customer deposits are primarily for the purpose of prepayment for goods and services and, thus, are includable in petitioner's income as advance payments.

Petitioner, whose principal income in 1982 was from wages, joined the Virginia Patriots in 1983. Held: Petitioner failed to prove that he was entitled to the deduction for cost of goods sold. Held,further: The underpayment of tax shown on petitioner's amended return for 1982 was due to fraud.

Petitioners are the owners of a hotel through their respective partnership interests. The hotel was leased to another partnership who, in turn, subleased the property for management purposes. Held: respondent properly denied petitioners' deduction of expenses attributable to hotel repairs and maintenance as ordinary and necessary business expenses. The expenditures incurred for repairs must be amortized as incidental to a plan of capital improvements of the hotel property.

Held: Husband's contribution to two house funds operated by fire station to which he was attached are not deductible under sec. 162. Held: Husband's contribution to two house funds operated by fire station to which he was attached are not deductible under sec. 162.

Held, P's motion under Rule 90(c), Tax Court Rules of Practice and Procedure, to enlarge the time in which to answer R's requests for admission and reply to interrogatories and P's alternative motion… Held: P's motion under Rule 90(c), Tax Court Rules of Practice and Procedure, to enlarge the time in which to answer R's requests for admission and reply to interrogatories and P's alternative motion under Rule 90(e) to withdraw or modify admissions is denied.

Held, the statutory notice of deficiency was mailed to petitioner's last known address. The Commissioner's motion to dismiss for lack of jurisdiction is granted. Held: the statutory notice of deficiency was mailed to petitioner's last known address. The Commissioner's motion to dismiss for lack of jurisdiction is granted.

207 days after the mailing of the notice of deficiency, the Court received an "Amended Petition" which was filed as a petition. Ps maintain that an original petition was timely mailed to the Court by ordinary mail 8 days before the expiration of the 90-day period for filing a petition. In response to R's Motion to Dismiss for Lack of Jurisdiction, Ps argue they ar entitled to a presumption that the original petition was received by the Court in the ordinary course of mail. Held, Ps are not entitled to a presumption that the original petition was received by the Court. Accordingly, Ps failed to prove that the original petition was timely filed. R's Motion is granted.

Held: Petitioner's attorney's fees, paid for him by persons unknown, is the only unreported income taxable to petitioner as a result of marijuana smuggling operation. Held: Petitioner's attorney's fees, paid for him by persons unknown, is the only unreported income taxable to petitioner as a result of marijuana smuggling operation.

Ps were five of seven shareholders of I.H.S., a subchapter S corporation operating two wholesale beverage distributing outlets in Michigan. Held: the deposits I.H.S. placed in its container deposits payable account were properly includable in I.H.S.'s gross income for the years in issue. Held further, I.H.S. was not entitled to accrue as a current expense the ending balances in its 1978 and 1979 container deposits payable account.

Ps dairy farming business was unprofitable. A State court distributed to Ps' creditors the proceeds of an auction and sale of Ps' cattle and farming equipment. Held: Ps have failed to prove that any portion of the funds disbursed by the State court were paid for interest. However, they are entitled to deduct all of their claimed feed expenses and a portion of their claimed legal expenses.

Held: (1) The Commissioner's determinations of deficiencies for 1975 in the income taxes of H and W are sustained. Held: The Commissioner's determinations of deficiencies for 1975 in the income taxes of H and W are sustained. (2) W is liable for the additions to tax under sec. 6651(a), I.R.C. 1954, for failure to timely file a tax return and under sec. 6653(a), I.R.C. 1954, for negligence or intentional disregard of rules and regulations.

In August 1975, decedent was a 50-percent stockholder in a corporation that purchased a life insurance policy on decedent's life. Held: the proceeds of the insurance policy payable to decedent's children are includable in decedent's gross estate pursuant to sec. 2042(2), I.R.C. 1954, because decedent possessed incidents of ownership in the insurance policy at the time of his death.

Brown-Schaefer acquired 98 percent of Old Cannonsburg by purchase and 2 percent in a stock-for-stock exchange. Held: Old Cannonsburg's merger into Brown-Schaefer did not constitute a section 368(a)(1)(F) reorganzation. Held further, New Cannonsburg cannot carry back post-merger net operating losses to offset Old Cannonsburg's pre-merger net operating income.

Held: Petitioner held real estate primarily for sale in the ordinary course of his trade or business and profits from sales of such real estate… Held: Petitioner held real estate primarily for sale in the ordinary course of his trade or business and profits from sales of such real estate constitute ordinary income; petitioner's profits from real estate sales in 1973 and 1978 are decreased by costs of renovations and repairs; amount of 1978 loss attributable to theft of coin…

Held, fair market value of stock donated by an individual to the City of Toledo redetermined on remand. Held: fair market value of stock donated by an individual to the City of Toledo redetermined on remand.

Petitioner, Universal Bible Church, Inc. (UBC) instituted this action for declaratory judgment pursuant to section 7428. Held: that petitioner has not satisfied its burden of proof that it qualifies as a church.

During the taxable year in issue, petitioner was in the trade or business of being an author and incurred expenses in writing a book. Held: expenses incurred by an author in writing a book are subject to the provisions of sec. 280.

During the taxable years in issue, petitioner worked as a musician. As leader of the musical group, petitioner executed contracts for the group's performances. Held: petitioner is liable for deficiencies in income taxes for unreported income received by the trust as compensation for his personal services as a musician. Held further, petitioner is liable for self-employment taxes attributable to the unreported income.

Using the bank deposits method, respondent determined that petitioner had unreported taxable income during the years in issue. Held: The amounts received by petitioner from Iran were gifts excludible from gross income under sec. 102(a), I.R.C. 1954. Held, further, Petitioner has established that he had no unreported taxable income for 1978.

Held: (1) Absent election, Ps not entitled to NOL carryover where carryback would have absorbed NOL; and (2) sales tax paid on refrigerator could not be added to sales tax table amount to determine… Held: Absent election, Ps not entitled to NOL carryover where carryback would have absorbed NOL; and (2) sales tax paid on refrigerator could not be added to sales tax table amount to determine State sales tax deduction.

Held: (1) P had unreported income; and (2) P failed to substantiate claimed deductions. Held: P had unreported income; and (2) P failed to substantiate claimed deductions.

Held: Addition to tax for fraud found against wife but not against husband. Held: Addition to tax for fraud found against wife but not against husband. Fraud cannot be predicated upon actual or imputed knowledge of facts which, if investigated, would have led to a disclosure of understatement of income on joint tax returns.

Held: Petitioners' theft loss deduction determined; deduction for "lost use" of funds and loss of anticipated income denied; and petitioners' deduction for attorney fees paid in connection with grand jury investigation allowed.

Held, because Ps failed to produce certain documents as ordered by this Court, R's motion for imposition of sanctions seeking dismissal of these cases under Rule 104(c), Tax Court Rules of Practice… Held: because Ps failed to produce certain documents as ordered by this Court, R's motion for imposition of sanctions seeking dismissal of these cases under Rule 104(c), Tax Court Rules of Practice and Procedure, is granted.

During 1981, Ps maintained brokerage accounts on which they paid interest and from which they received interest and dividend income. Held: because Ps were not engaged in the trade or business of investing, Ps' investment interest expenses are deductible as itemized deductions under section 163, I.R.C. These expenses are therefore includable in Ps' 1981 alternative minimum taxable income.

J filed Forms 1040 for 1975, 1976 and 1977 which contained no information as to his income, deductions or credits for those years. Held: income tax deficiencies and additions to tax under section 6653(b), I.R.C., and section 6654, I.R.C., sustained. Held further, H is liable for J's tax liabilities and additions to tax to the extent of $74,550 as a transferee of J's assets.

Petitioner reported income and expenses with respect to the raising, breeding and training of horses. Held: petitioner has failed to demonstrate that he realized a net gain in any year of such activity, so that the presumption under section 183(d), I.R.C. 1954, is inapplicable.

Held: Petitioner did not own more than 50 percent in value of the stock of a foreign corporation and, therefore, was not taxable on its income under section 551 et seq.Held… Held: Petitioner did not own more than 50 percent in value of the stock of a foreign corporation and, therefore, was not taxable on its income under section 551 et seq.Held further, petitioner did not divert to his own account $178,000 of income of a corporation of which he was chief executive officer.

Held, Ps Are subject to the Limitations on investment interest deductions contained in section 163, I.R.C.Held further, Ps are not entitled to a refund of Federal income taxes paid in 1981. Held: Ps Are subject to the Limitations on investment interest deductions contained in section 163, I.R.C.Held further, Ps are not entitled to a refund of Federal income taxes paid in 1981.

Petitioner (P) is a Delaware corporation which owned certain interest bearing convertible debentures of H, another Delaware corporation. Held: the capital loss sustained by P is allowable as a deduction under section 165, I.R.C. 1954.

For 1980, P claimed a deduction for the expenses of operating her automobile in her business. The Commissioner disallowed such deduction in part. Held: P has failed to prove that she is entitled to a larger deduction than that allowed by the Commissioner.

Ps alleged that R conducted a second inspection of Ps' books and records in violation of section 7605(b), I.R.C. 1954, and that R's deficiency notice was arbitrary and capricious since it contained a… Held: Ps' motions to shift the burden of proof, which is treated as a motion to shift the burden of going forward with the evidence, and to dismiss and to compel discovery compliance denied.

Petitioners were married and filed joint Federal income tax returns for the taxable years in issue. Held: petitioners have failed to carry their burden of proof with respect to the deficiency determined for failure to report income from embezzled funds, in accordance with sec. 61, I.R.C. 1954.

Held: Additions to tax for fraud found against petitioner who failed to file Federal income tax returns and filed false withholding statements for the years in issue. Held: Additions to tax for fraud found against petitioner who failed to file Federal income tax returns and filed false withholding statements for the years in issue. Held further, addition to tax found against petitioner for failure to pay estimated tax. Held further, respondent's request for damages granted.

Held: Respondent may use the deficiency procedures to recover an erroneous refund and is not limited to a suit under section 7405. Held: Respondent may use the deficiency procedures to recover an erroneous refund and is not limited to a suit under section 7405. Held further, failure of respondent to deliver to petitioner a copy of executed Form 872 does not affect validity of waiver.

Held: Disallowance of loss deduction and additions to tax for fraud sustained against Husband, a practicing lawyer, based upon falsely claiming a capital loss from a fictitious sale of stock. Held: Disallowance of loss deduction and additions to tax for fraud sustained against Husband, a practicing lawyer, based upon falsely claiming a capital loss from a fictitious sale of stock. Other issues determined.

During 1979 and 1980, P operated a farm near Waco, Tex., and spent the weekends there. During the week, he worked as an electrician near Houston, Tex., and derived his principal income from that work. Held: P's employment in the Houston area was temporary until July 1980 so that his travel expenses incurred before that time are deductible, but thereafter, his employment became indefinite.

Held, Ps may not claim a charitable contribution deduction for certain amounts contributed to the First Church of Theophysics, a local chapter of the Universal Life Church, Inc., of Modesto, California. Held further, additions to tax under section 6653(a)(1), I.R.C. 1954, and section 6653(a)(2), I.R.C. 1954, sustained. Held further, damages under section 6673, I.R.C. 1954, awarded to the United States.

Petitioner husband paid $12,000 for a race horse which was never delivered. Held: under California law where horse was purchased theft includes loss by embezzlement and petitioners are entitled to a theft loss deduction under section 165. In 1977, petitioner gave two art dealers $140,000 with which to purchase for him a specific collection of Indian artifacts and deliver collection to a museum.

Petitioner participated as a pilot, off-loader, and lookout in marijuana smuggling activities during 1980. Held: petitioner received $29,500 in taxable income for his involvement in marijuana smuggling activities. Held further, petitioner realized a long-term capital gain of $29,250 upon his transfer of property in satisfaction of a promissory note.

Held: (1) Deficiencies in income tax for 1980 and 1981 sustained. Held: Deficiencies in income tax for 1980 and 1981 sustained. (2) Additions to tax under sec. 6651(a), I.R.C. 1954 (for failure to file), sec. 6653(a), I.R.C. 1954 (for negligence or intentional disregard of rules and regulations), and sec. 6654, I.R.C. 1954 (for underpayment of estimated taxes), sustained.

Held: Petitioner's attorney's fees, paid for him by persons unknown, is the only unreported income taxable to petitioner as a result of marijuana smuggling operation. Held: Petitioner's attorney's fees, paid for him by persons unknown, is the only unreported income taxable to petitioner as a result of marijuana smuggling operation. Held further, petitioner's attorney's fees are deductible as expenses which arose in connection with an income-producing activity.

Held: Respondent's motions to amend the pleadings denied; individual petitioners received constructive dividends as a result of sale of property… Held: Respondent's motions to amend the pleadings denied; individual petitioners received constructive dividends as a result of sale of property interest between related corporations; disallowance of portion of corporate petitioner's interest deduction sustained; individual petitioners did not realized ordinary income on sale of…

During 1977, 1978 and 1979, P transferred funds to MARRES, a tax-exempt organization of which he was the founder and executive director. Held: P's claimed contributions are not deductible since P has retained dominion and control over MARRES' funds, and some of such funds have inured to P's benefit.

Talmud Properties Partnership1The case of P. Michael Hunt and Sherry L. Hunt v. Commissioner, docket No. 13386-80, was originally consolidated with these cases, but all issues in the Hunt case have been settled.

H and W were divorced in 1977. In 1981, both claimed dependency deductions for their two children, who were in the custody of W. In that year, H furnished over $1,200 in support of each child. Held, W failed to prove that she provided more support for the children than did H; therefore H, not W, is entitled to claim the dependency deductions. Sec. 152(a)(2)(B), I.R.C. 1954.