Volume 52 — Tax Court Reports

In 1955, Management, a corporation wholly owned by petitioner and its joint venturer, Utah, distributed $ 250,000 to petitioner. Held: that the distribution was a dividend paid from the earnings and profits of Management within the meaning of secs. 301 and 316, I.R.C. 1954.

The petitioner sold his going business and at the same time entered into a separate agreement not to compete which recited the consideration therefor. Held: that the petitioner has not established by strong proof that such stated consideration was payment for goodwill rather than consideration for the agreement not to compete.

In 1961, petitioner incorporated its research division into a separate corporation (Swiss Controls) which then issued its debenture… Held: Swiss Controls was solvent on Dec. 31, 1962, and therefore a valid sec. 332 liquidation occurred, so that sec. 381 was applicable to permit petitioner to succeed to and take into account Swiss Controls' net operating loss carryovers Held, further, regardless of the applicability of sec. 381, the net operating loss deductions claimed…

Petitioner owned a tract of land on a lake and a portion of the lakebed, subject to the terms of a restrictive covenant recorded by the corporation which regulated the recreational use of the lake… Held: petitioners are entitled to a casualty loss deduction under sec. 165(a) and (c)( 3), I.R.C. 1954, for the damage to the realty, measured by their share of the cost of restoring the lake plus the amount expended in replacing the pier.

Petitioner and Maude C. Brown, his wife, executed a joint will which contained reciprocal provisions. Held: That Maude's will did not put petitioner to an election which resulted in a transfer of the remainder interest in his community property at her death; (2) that petitioner did not intend the instrument by its terms to effect a present transfer of any interest in his share of the community property at her death; (3) that the parol…

Petitioner placed two new oil storage tanks (number 413 and number 212) in service during the taxable year. Tank number 413 was used to blend No. 2 oil with No. 6 oil to produce No. 4 oil. Held: Both tanks qualify for the investment credit under secs. 38 and 46 of the Code. Both were used respectively as an integral part of and in connection with a manufacturing or production activity during their first year in service.

Petitioners, stockholders in a corporation, acquired improved realty in a sec. 333 liquidation with intent to demolish the improvement (a… Held: the partnership petitioners had formed to handle the property could not take a demolition deduction. It was the intention of petitioners to demolish at the time they acquired the property that precludes taking the deduction. The intention of the corporation when it bought the property some years before is immaterial.

1. The petitioner, who owned all of the outstanding nonvoting preferred stock of E & M and substantially all of its outstanding common stock, entered into an agreement with Borden, under which E & M… Held: the redemption of the petitioner's preferred stock was not essentially equivalent to a dividend. 2. The petitioner failed to show that he is entitled to any part of a deduction for legal fees disallowed by the respondent.

Held, payments by an employer of life insurance premiums on policies covering the life of an employee, where the annual increase in the… Held: payments by an employer of life insurance premiums on policies covering the life of an employee, where the annual increase in the cash surrender value accrues to the benefit of the employee and in addition he receives annual insurance protection for himself and family, result in a present economic benefit to such employee, and are…

Decedent left a will providing for a residual trust to his wife and payment of Federal and State death taxes from the residue of of the estate. Held: In determining the effect of Federal estate and State inheritance taxes on the surviving spouse's intestate share of the estate for purposes of computing the marital deduction the decision of the State Probate Court is not binding on this Court.

One of petitioners assigned certain patents, together with improvements that may be owned, controlled, or subject to licensing by him,… Held: The exclusive right to make, to use, and to sell with respect to one industrial field, namely, marine purposes, is an assignment of all substantial rights under sec. 1235, I.R.C. 1954; the fact that the original patent had expired does not cause the payments made under the contract to be ordinary income instead of capital gain where…

T, a bank employee, embezzled bank funds by crediting her brother's account with deposits he never made. Held: the embezzled funds are taxable income to T. Geiger's Estate v. Commissioner, 352 F. 2d 221, affirming a Memorandum Opinion of this Court, followed.

1. Held, an amount received by petitioner in 1958 was not includable in gross income. Such amount was received in exchange for stock of petitioner under sec. 1032, I.R.C. 1954. 2. Held: an amount received by petitioner in 1958 was not includable in gross income. Such amount was received in exchange for stock of petitioner under sec. 1032, I.R.C. 1954. 2. Held, further, legal fees paid by petitioner in 1958 were for services rendered to petitioner.

Petitioner, the vice president and general superintendent of a construction company, paid $ 2,667 in 1964 to a business management consultant and psychologist for education and training in… Held: on the facts, that the expenditure is deductible as an ordinary and necessary business expense under sec. 162(a), I.R.C. 1954, and sec. 1.162-5(a)(1), Income Tax Regs., because it was paid for education which improved petitioner's managerial skills required in his employment.

Petitioners, osteopathic doctors, paid in 1962 certain sums for staff fee assessments in order to secure staff privileges in a hospital. Held: the so-called nonnegotiable participation debentures were not enforceable obligations or debts and their surrender to the hospital did not constitute gifts or contributions to the hospital within the meaning of sec. 170. I.R.C. 1954.

T, as a stockholder and guarantor of certain corporate notes of X Corp., made partial payments in discharge of his obligation as guarantor. Held: T's loss is not deductible under sec. 165(c)(2), I.R.C. 1954, as a loss incurred in a transaction entered into for profit. T is limited to a short-term capital loss as determined by the Commissioner. Putnam v. Commissioner, 352 U.S. 82 (1956).

The petitioners sold residential property, a part of the selling price of which was represented by a note secured by a second mortgage upon the… Held: that since the fair market value of the property securing the original note was in excess of the indebtedness secured by both the first and second mortgages, the indebtedness due the petitioners was not worthless in whole or in part, and the petitioners are not entitled to a bad debt deduction under sec. 166, I.R.C. 1954.

Motion to strike paragraphs in a petition designed to show Renegotiation Board acted arbitrarily in determining excess profits and acted erroneously with respect to credit for State taxes is granted on the ground that this Court lacks jurisdiction to review the Board's proceedings and lacks jurisdiction to determine tax credits.

B corporation, engaged in both the manufacture and repair of automobile radiators, transferred its repair business to B', a corporation under common control having a similar name. Held: B' has not shown by a clear preponderance of the evidence that the securing of an additional surtax exemption was not a major purpose of the transfer. Sec. 1551, I.R.C. 1954.

Held, certain amounts paid by T to his widowed mother in accordance with a partnership agreement previously entered into with his father constituted unrealized receivables, secs. 736 and 751, I.R.C.… Held: certain amounts paid by T to his widowed mother in accordance with a partnership agreement previously entered into with his father constituted unrealized receivables, secs. 736 and 751, I.R.C. 1954, and were therefore deductible.

Respondent has determined that on a stock sale-purchase transaction, within the meaning of sec. 16(b) of the Securities Exchange Act of 1934, payment by petitioner to his employer of the difference… Held: Arrowsmith principles not applicable. Held, further, petitioner's payment constituted deductible ordinary and necessary business expense.

Petitioner is a United States corporation engaged in the manufacture and sale within this country of sprayed-insulation products. Held: Petitioner transferred a going business consisting of several assets whose taxable nature must be individually determined. (2) The trademarks and know-how constituted property within the meaning of sec. 1221, I.R.C. 1954.

Petitioner owned and operated an office building. It rented space to tenants and provided the usual and customary services in connection therewith. Held: that its gross receipts constituted rents under sec. 1372(e)(5), I.R.C. 1954, and sec. 1.1372-4(b)(5)(iv), Income Tax Regs., thus causing a termination of petitioner's election to be taxed as a small business corporation under sec. 1372(a), I.R.C. 1954.

Sec. 6213, I.R.C. 1954, is not unconstitutional, either as being in violation of the fifth amendment or as depriving petitioner of due process of law when interpreted as limiting the time allowed to petitioner to file a petition with this Court to 90 days from the date of the mailing to him of a notice of deficiency, even though the final order disposing of a criminal action against petitioner alleging violations of secs. 4401 and 4411, I.R.C. 1954, was not entered until 77…

Petitioner purported to transfer to his minor children 90 percent of the stock of Kelly Supply Co. which then elected to be taxed as a subchapter S corporation. Held: that the purported transfers were not bona fide as they lacked economic reality and petitioner remained the real owner of the stock; accordingly, all income of the corporation is taxable to petitioner.

Under decedent's will his widow was left certain property outright and she was given a fractional interest in certain trust income. Held: The election to take dower which was recognized by the Probate Court was not in accordance with State law, and is not recognized for Federal tax purposes.

Held, certain installment payments made by the petitioner to his former wife qualify as alimony for Federal income tax purposes since such… Held: certain installment payments made by the petitioner to his former wife qualify as alimony for Federal income tax purposes since such payments were for the support of petitioner's former wife rather than in consideration for any property interest owned by her; held, further, the petitioner's obligation to make such installment…

1. Held, Commissioner's allocations under sec. 482, I.R.C. 1954, approved in part and disapproved in part, 2. Held: Commissioner's allocations under sec. 482, I.R.C. 1954, approved in part and disapproved in part, 2. Held, Commissioner has failed to carry burden of proof to establish omission of more than 25 percent of gross income under sec. 6501 (e), I.R.C. 1954, in respect of fiscal 1961.

Petitioner and his brother were the sole stockholders and officers of Beacon Sales Co. The basis of petitioner's stock in such corporation… Held: The cancellation of indebtedness in 1961, which is treated as a distribution of property, along with the deductions in 1960 and 1961 by petitioner of his prorata share of the corporation's net operating losses, effected the reduction of petitioner's stock basis to zero, which, pursuant to sec. 1374(c)(2), prevented the subsequent…

Decedent transferred and bequeathed a material part of her estate to a trust (Fund C) to be delivered to the Bishop of the Roman… Held: The gift of Fund C does not constitute a valid charitable (as opposed to a religious) bequest under section 55-26 of the Virginia Code of 1950, and the statement of an inferior court of Virginia (in approving a compromise settlement) that said fund did constitute a valid charitable gift is not binding on us, Commissioner v. Estate of…

Petitioner Joseph Garrison was the principal stockholder-officer-employee of a corporation and received a purported $ 40,000 bonus for his services. Held: on the particular facts, the $ 15,000 constituted a distribution in complete liquidation in respect of petitioner's stock within the meaning of sec. 331(a), I.R.C. 1954.

Petitioner and his wife lived together in the State of Washington from prior to Jan. 1, 1966, until Sept. 1, 1966, when they were separated but not divorced. Held: Under the law of the State of Washington petitioner's earnings for the entire year 1966 are community property but his wife's earnings after Sept. 1, 1966, are her separate property. Community expenses, which include child support, paid from community funds are considered as paid one-half by each spouse.

Petitioners' motion, under Rule 19(f), Tax Court Rules of Practice, for special leave to file out of time a motion to vacate a decision of this Court entered in 1955 pursuant to a stipulation of the parties on the ground that fraud was perpetrated on the Court in obtaining such decision, denied.

In 1962, petitioner received one of a series of distributions in complete liquidation of another corporation. Held: the gain realized by petitioner on the liquidating distribution is gain derived from an exchange of stock; therefore, more than 20 percent of petitioner's gross receipts constituted personal holding company income, with the result that petitioner's status as a subch. S corporation terminated in 1962.

In 1956, decedent executed a quitclaim deed of his residence in favor of his three sons. He continued his exclusive occupancy of the premises until he entered a nursing home in March 1963. Held: under all the facts and circumstances, decedent retained the possession or enjoyment of the residence until his death and the property is includable in his gross estate under sec. 2036(a)(1), I.R.C. 1954. Estate of Allen D. Gutchess, 46 T.C. 554 (1966), distinguished.

Petitioners are opposed, on religious grounds, to life insurance. Held: Petitioners are liable for the tax on self-employment income under sec. 1401, I.R.C. 1954. The Social Security Act does not constitute an abridgement of petitioners' freedom of religion, nor are the exemption provisions of sec. 1402(h), I.R.C. 1954, unconstitutionally narrow in scope.

The petitioner and Greenberg each owned an undivided one-half interest in a patent; neither could dispose of his interest in the patent or any part thereof without the consent of the other. Held: the petitioner did not transfer all substantial rights to his interest in the patent, within the meaning of sec. 1235, I.R.C. 1954.

1. Held, amendment to a pension plan did not result in any deductible theft loss to a participating employee. Sec. 165, I.R.C. 1954. 2. Held: amendment to a pension plan did not result in any deductible theft loss to a participating employee. Sec. 165, I.R.C. 1954. 2.

Petitioner, a noncompetent Indian enrolled with the Gros Ventre Tribe, during the years 1958 and 1959 conducted farming and ranching… Held: Under the decision in Squire v. Capoeman, 351 U.S. 1 (1956), and respondent's ruling stating his application of the holding in that case, petitioner's income derived from farming and ranching activities on his allotted lands, his lands received by gift from his mother, and his land acquired by order transferring inherited lands is…

1. T corporation, for its taxable year ending June 30, 1962, had capital gain income of $ 83,787.64 and ordinary income of $ 1,115.57. Held: in computing tax under the alternative method provided in sec. 1201(a), I.R.C. 1954, no part of the net operating loss may be applied against the capital gain. Walter M. Weil, 23 T.C. 424, affirmed 229 F. 2d 593 (C.A. 6) followed. 2.

A Form 7900 letter sent by ordinary mail to a bankrupt in care of the trustee in bankruptcy informing the trustee that respondent proposes to assess deficiencies in income tax against the bankrupt for years prior to the one in which the petition in bankruptcy was filed under the provisions of the Internal Revenue Code relating to bankruptcy is not a notice of deficiency to the individual within the meaning of secs. 6212 and 6213, I.R.C. 1954.

Petitioners, as shareholders of Palms Motel, Inc., an electing small business corporation engaged in the business of operating a motor hotel, each claimed a deduction on his… Held: that neither the covenant not to compete nor the amount allocated thereto was separately bargained for; (2) that the covenant had no basis in fact or arguable relationship with business reality; (3) that the obligation for the covenant was contingent; and (4) that the covenant was not amortizable.

Petitioner, a foreign service officer with the Department of State, was ordered to return to the United States for consultation with the Department in… Held: Petitioner's alleged traveling expenses incurred while he was on home leave are not deductible as traveling expenses while away from home in the pursuit of a trade or business, within the meaning of sec. 162(a)(2), I.R.C. 1954. Rudolph v. United States, 291 F. 2d 841, certiorari dismissed 370 U.S. 269 (1962).

Held, payments received by T from his employer (IBM) in the full amount of his salary while pursuing studies at a university for a Ph. Held: payments received by T from his employer (IBM) in the full amount of his salary while pursuing studies at a university for a Ph. D. under an employer-sponsored advanced education program were not excludable from gross income as a scholarship or fellowship grant.

Petitioners contracted to sell their farm (Elk Grove), which included about 2 acres immediately surrounding their residence, to S.P. for $ 2,500 per acre in a series of conveyances. Held: Petitioners exchanges of Elk Grove property for property of like kind qualified as currently nontaxable transactions under sec. 1031 of the Code. Their exchange for the deed of trust note was not, inter alia, an exchange for like property and did not qualify under that section. 2.

Certain sums received by petitioner Henry P. Wager in connection with the sale of a patent and stock were compensation for a covenant not to compete and availability for consulting services as provided in the pertinent agreements and were therefore ordinary income either under the mistake, undue influence, fraud, duress, etc. rule of Commissioner v. Danielson, 378 F. 2d 771 (C.A. 3, 1967), or the strong proof rule of Ullman v. Commissioner, 264 F. 2d 305 (C.A. 2, 1959).

Petitioner, an accrual basis taxpayer, and respondent entered into an agreement settling prior tax liabilities. Held: In accordance with Rev. Rul. 58-239, 1958-1 C.B. 94, the payments are to be applied against the taxes, penalties, and interest, in that order, due for the earliest year, then to taxes, penalties, and interest, in that order, due for each succeeding year, until the payments are absorbed.

Tel-O-Tube Corp. was dissolved under New Jersey law in 1960, but retained inter alia four interest-bearing notes and an antitrust claim until… Held: that the corporation continued in existence as a taxable entity through Sept. 30, 1961, pursuant to sec. 1.6012-2(a)(2), Income Tax Regs., and is taxable on the interest income earned with respect to the notes for the period from Sept. 30, 1960, to Aug. 1, 1961, and on the proceeds from the settlement of the antitrust claim.

Petitioner is a farmers' cooperative whose activities consist of receiving butterfat from producers and selling milk to principally one nearby dairy. Held: petitioner was not exempt from Federal income taxes during its fiscal years 1958 and 1959. Held, further, the amounts transferred to petitioner's stated capital account were not patronage dividends to the extent paid to patron shareholders nor interest payments to the extent paid to nonpatron shareholders.

The 90-day and 150-day period provided in sec. 6213(a), I.R.C. 1954, for filing a timely petition in the Tax Court includes all calendar days (not counting Saturday, Sunday, or a legal holiday as the last day) and is not limited to business days.

Held, an amount received by petitioner as consideration for the release of all his rights under an employment contract, including the right to be employed as a project manager, the… Held: an amount received by petitioner as consideration for the release of all his rights under an employment contract, including the right to be employed as a project manager, the right to receive 20 percent of net profits, and the right to exercise a stock option, constitutes ordinary income.

Petitioners are members of a partnership which leases docking facilities for pleasure boats. The partnership built and/or improved floating docks for two of its marine basins. Held: the floating docks are tangible personal property within the meaning of secs. 48 and 179, I.R.C. 1954. Held, further, the pilings are not tangible personal property within the meaning of such sections.

Held: Funds which were community property of a husband and wife living in Arizona retained their character as community property when placed in a joint… Held: Funds which were community property of a husband and wife living in Arizona retained their character as community property when placed in a joint bank account of the husband and wife where it was the intent of the parties that the funds remain community property and the funds were treated by them as community property.

Following over a year of continuous intense litigation between decedent and his wife in various courts and jurisdictions, they executed a… Held: a substantial part of the consideration for the transfer moving to decedent was the surrender of the wife's support rights and to the extent thereof the transfer was not a gift; held, further, that the value of such support rights was the amount fixed in the alternative determination set out in the statutory notice of deficiency in…

Reasonable expenses paid in litigating the liability of an estate for estate tax in a case arising from the determination by respondent of the liability of the transferor estate against transferees are deductible in computing the estate tax liability of the transferees.

Respondent disallowed a medical expense deduction representing living expenses of the petitioner, Doris Rose, and her daughter while… Held: The enactment of sec. 213, I.R.C. 1954, precluded the deductibility of living expenses incurred while away from home for medical purposes except when paid as part of a hospital bill or as a necessary incident to medical care in an institution as specified in sec. 1.213-1(e)(1), Income Tax Regs.Held, further: The trip taken by Robert…

Petitioner, a real estate broker, earned and reported commissions for the years 1954 and 1955 in the amounts of $ 58,573.31 and $ 96,307.23, respectively. Held: that petitioner failed to sustain his burden of showing he was entitled to more than the $ 2,000 business expense deduction allowed by respondent for each of the years in issue.

Finance company sold all of its assets under written agreements which provided that $ 37,000 of the total purchase price of $ 187,200 was allocated to covenants not to compete. Held: Seller's resolution contemplated the execution of the written agreements which contained the covenants and other definitive provisions of the sales and said agreements were the sales contracts.

Petitioners acquired a joint life interest in a percentage of the income from an estate trust in exchange for their transfer to the trust of certain shares of stock transferred to them by decedent… Held: the amortized cost of acquiring the life estate is deductible under sec. 167(a)(2), I.R.C. 1954. Held, further, that portion of the amortized cost allocable to tax-exempt interest income is not disallowed as a deduction by sec. 265, I.R.C. 1954.

Held, that education is an item of support within the meaning of sec. 152(a) of the Internal Revenue Code of 1954. Held: that education is an item of support within the meaning of sec. 152(a) of the Internal Revenue Code of 1954. Held, further, that the petitioner has not shown that he provided over half of the support of his son during the taxable year 1965 and he is therefore not entitled to a dependency exemption for the son.

Held, that the petitioner's household was not his son's principal place of abode for the taxable year 1965 within the meaning of sec. 1(b)(2) of the Internal Revenue Code of 1954 and the petitioner… Held: that the petitioner's household was not his son's principal place of abode for the taxable year 1965 within the meaning of sec. 1(b)(2) of the Internal Revenue Code of 1954 and the petitioner was not entitled to head-of-household treatment for such year.

Henry C. Clark was formerly employed as an attorney in the Collection Litigation Division of the Office of Regional Counsel of Internal Revenue Service, New York. Held: under the circumstances the motion to disqualify is denied.

On Jan. 3, 1956, William F. Stahl sold to his controlled corporation (Precision) eight patents and five patent applications for a full… Held: the substance of the transaction in 1956 was a sale of patents and patent applications for $ 300,000, payable in installments of $ 20,000 per year for 15 years beginning Jan. 3, 1957; (2) the sale of the patents, depreciable property, was subject to the provisions of sec. 1239, I.R.C. 1954, under which 140/300 of the amounts received…

H and W were killed in an airplane crash under circumstances such that there is not sufficient proof to determine the chronology of their… Held: for purposes of calculating a credit for prior estate taxes under sec. 2013 in W's estate, assuming arguendo that a transfer of W's life estate in the trust created under H's will had been made from H's estate to W, nevertheless W's life estate had no value in H's estate at the time of H's death and therefore no sec. 2013 credit is…

Held, certain corporate securities owned by the petitioners are stock, not debt, and accordingly, payments received by the petitioners on account of such securities are distributions with respect to… Held: certain corporate securities owned by the petitioners are stock, not debt, and accordingly, payments received by the petitioners on account of such securities are distributions with respect to stock and not interest.

O.B.M. adopted a plan of complete liquidation on June 23, 1961. On June 23, 1962, O.B.M. retained assets in excess of those needed to meet its claims. Held: 1. Held: The petitioners have failed to prove that O.B.M. made a diligent attempt to determine what assets needed to be retained to meet claims and to distribute the rest of its assets, and accordingly, sec. 337, I.R.C. 1954, does not apply to the liquidation. 2.

Petitioners leased property to the California Highway Patrol under a 10-year lease beginning in January 1963. Held: The expenditures are not deductible as ordinary and necessary business expenses by petitioners in 1965. Respondent's determination that the expenditures were deductible as capital losses in 1965 approved.

Shortly after the enactment of the Revenue Act of 1962, petitioner filed its first consolidated return for its 1962 fiscal year. For its 1963 fiscal year, petitioner elected to file a separate return. Held: in view of the ambiguity in Rev. Rul. 62-204, petitioner's election to file a separate return was timely.

Petitioners, owners and mortgagors of two adjacent tracts of land sold one of the tracts to Motels, Inc., which, as part of the consideration for the transfer, executed a promissory note secured by a… Held: the improvements on the land were not sold to Motels, Inc.Held, further, Motels, Inc., assumed petitioners' mortgages on the land.

1. Held, the liquidation of the transferor corporation, engaged in the business of producing and selling mink pelts, was pursuant to an… Held: the liquidation of the transferor corporation, engaged in the business of producing and selling mink pelts, was pursuant to an adopted plan under sec. 337(a) and it qualified for nonrecognition of gain under said section when the final checks were distributed to the stockholders within a year even though the checks were not paid…

Petitioner acquired control of a corporation engaged in a similar business by issuing its own shares in exchange for the shares of the acquired corporation. Held: Petitioner's dealings in its own shares were entirely intracorporate and nonspeculative. Its speculation was in the stock and business of the corporation which it acquired, not in its own shares.

T owned all the stock in A corporation. A corporation was in turn the sole shareholder of B corporation. Held: the net withdrawals from B corporation during the year in issue were not bona fide loans to T but, as a result of T's control over A and B corporations, were constructive dividends to T from A corporation.

Held: (1) That petitioner is not entitled to an extraordinary obsolescence deduction of $ 223,225.42 for the taxable year 1964 with respect to its fuel elements building because… Held: That petitioner is not entitled to an extraordinary obsolescence deduction of $ 223,225.42 for the taxable year 1964 with respect to its fuel elements building because the building was not permanently retired from use in its trade or business as required by sec. 1.167(a)-8, Income Tax Regs.

The petitioners participated in ventures to drill for and exploit geothermal steam. Held: the petitioner which participated in the successful venture is entitled to deduct percentage depletion at the rate of 27 1/2 percent against gross income it received from steam production. Held, further, all petitioners are entitled to expense the intangible costs of drilling and developing geothermal steam wells.

Petitioner, owner of an independent television station, was the licensee of various syndicated and feature films. Held: petitioner's method was not proper.

The petitioner's husband died owing substantial taxes and additions to tax for the years 1947 and 1948. He was insolvent at all times relevant to this proceeding. Held: The petitioner is not liable as a transferee with respect to funds which she returned to her husband. 2. The petitioner is not liable as a transferee with respect to funds and property which she received in satisfaction of a bona fide claim against her husband.

In an antenuptial agreement H and W each waived all claims of dower, curtesy, or other statutory right in the property of the other, and they also agreed in substance that the survivor of the first… Held: upon W's death, the commuted value of H's life interest in W's property does not qualify for deduction from W's gross estate as a claim against her estate contracted for an adequate and full consideration in money or money's worth. Sec. 2053(c), I.R.C. 1954.

Petitioner claimed a net operating loss of the alleged net worth of a sole proprietorship as a result of bankruptcy proceedings instituted by him in 1963, the assets of the business… Held: the right to carry back the claimed net operating loss passed to the trustee in bankruptcy and could not be utilized by petitioner or his former wife. Held, further, petitioner was not entitled to have the deficiency determined against him reduced by the refunds made to his former wife.

The petitioner, a member of a partnership, was the managing partner of the firm's Paris office for a period of time and received payments from the partnership attributable to such period. Held: some of the payments were guaranteed payments within the meaning of sec. 707(c), I.R.C. 1954, and are fully excludable from gross income under sec. 911, I.R.C. 1954, as income from sources without the United States.

Pursuant to a contract executed by petitioner and the union representing most of its employees, negotiated as to its important provisions by representatives of the major steel companies and of the… Held: that petitioner is entitled to accrue and deduct these amounts as business expenses incurred during the taxable years.

Respondent mailed to petitioners a letter meeting all the formal requirements of a statutory notice of deficiency and notifying them that income tax deficiencies and additions to tax had been… Held: respondent determined a deficiency in petitioners' income tax, and this Court therefore has jurisdiction over the petition.

Tax Court has no jurisdiction where Commissioner of Internal Revenue has neither determined a deficiency nor mailed a notice of deficiency to petitioner. Petition based on respondent's notice to petitioner of addition to tax due for underpayment of estimated tax, without the issuance of a notice of deficiency, as permitted by sec. 6659(b), I.R.C. 1954, as amended by Pub. L. 86-470, 1960-1 C.B. 840, must be dismissed for lack of jurisdiction.

Held, that the petitioner has not shown that it was not availed of during the taxable years in question for the purpose of avoiding the… Held: that the petitioner has not shown that it was not availed of during the taxable years in question for the purpose of avoiding the income tax with respect to its shareholder by permitting its earnings and profits for such years to accumulate instead of being divided or distributed, and that it is therefore subject to the accumulated…

Petitioners, as husband and wife, entered into a settlement agreement, subsequently incorporated in a divorce decree, which provided that the husband would transfer to the wife real and personal… Held: the transfers of real and personal property represented a property settlement; they are not includable in the wife's income under sec. 71(c) or deductible by the husband under sec. 215, I.R.C. 1954.

1. Held, on the facts presented, that payments of salary and other benefits to or on behalf of petitioner's former medical secretary during an extended period… Held: on the facts presented, that payments of salary and other benefits to or on behalf of petitioner's former medical secretary during an extended period of illness were for personal reasons and are not deductible as ordinary and necessary business expenses under sec. 162(a) of the Internal Revenue Code of 1954. 2.

Decedent established two inter vivos trusts with a reserved life estate, two secondary life estates, and ultimate remainders to named charities. Held: the discretionary powers did not constitute a power of indirect invasion in favor of the secondary life beneficiaries and the charitable remainders are deductible under sec. 2055, I.R.C. 1954.

T was one of five field agents for the Massachusetts Office of School Lunch Programs. Held: T is not entitled to deduction for mileage in excess of that for which he was reimbursed. The excess expenses were personal rather than business connected and resulted from T's determination for his own convenience to continue to reside outside his assigned territory at a point likely to require extensive additional travel.

In 1966, the petitioner was an enlisted man in the U.S. Army and was required to have his hair cut at least every 2 weeks. Held, the cost of such haircuts is a personal expense and not deductible. Held: the cost of such haircuts is a personal expense and not deductible.

In the Federal estate tax return for his deceased wife, the petitioner included in gross estate one-half of the value of certain stock owned by them as joint tenants. Held: the petitioner has failed to sustain his burden of proving that any portion of the stock was required to be included in his deceased wife's gross estate, and accordingly, his basis in such stock for the purpose of determining gain or loss is its cost.

Petitioner paid and accrued about $ 26,000 in 1963 in order to accelerate the termination of a lease (which was to expire in 1970) so that petitioner could demolish an existing building and put the… Held: Petitioner is not entitled to deduct the $ 26,000 in 1963 as a business expense under sec. 162 of the Internal Revenue Code of 1954. The expenditure was for a capital asset (the unexpired term of the lease) which had a definite life beginning after the year before us.

The Industrial Expansion Committee of a group of American Philips corporations decided in March of 1957 to have one of the corporations in the group merge with A. Hollander & Son, Inc. in such a way that the Philips companies would acquire control of Hollander. This merger was effected in July 1957. Hollander had a two-million-dollar-plus net operating loss carryover. The loss resulted from a fur business which it had disposed of in the latter half of 1956. Respondent determined the principal purpose for the acquisition was to secure the benefit of a deduction for the loss carryover. In October of 1956 Hollander purchased a profitable chemical business. Petitioner asserts that the purpose for the acquisition of Hollander by Philips was business motivated in that Hollander was a public corporation listed on the New York Stock Exchange and it had the chemical business which was a business in an industry in which Philips was interested. Long prior to the disposition of Hollander's fur business and its acquisition of the chemical business, contact and association existed between Hollander's top management and Philips' company men and Philips' men had aided Hollander in disposing of its losing fur business and financing its purchase of Brook Chemical Co. Held, that petitioner has failed to show that the acquisition of Hollander was not for the "principal purpose" of evasion or avoidance of income tax within the meaning of sec. 269, I.R.C. 1954, and that the net operating losses of Hollander used by the postmerger corporation in its 1958 and 1959 returns were properly denied as deductions.

Petitioner-corporations received 6-percent cumulative preferred stock in partial consideration for assets transferred to the issuing corporation. Held: the payments made to petitioners with respect to this stock were dividends in reality as well as in form, and consequently, petitioners are entitled to the 85-percent dividends-received deduction under sec. 243, I.R.C. 1954.

As a participant in a joint venture to incorporate a savings and loan association, petitioners expended funds to secure a charter from the savings and loan commissioner of the State of California. Held: petitioners' loss is deductible under sec. 165(c)(2) as a loss incurred in a transaction entered into for profit. Charles T. Parker, 1 T.C. 709 (1943).

1. Held, a sole shareholder of two corporations did not receive a constructive dividend when one corporation advanced funds to the other. 2. Held: a sole shareholder of two corporations did not receive a constructive dividend when one corporation advanced funds to the other. 2. Held, further, petitioners did not realize additional gain when they sold certain notes evidencing loans to corporations whose stock petitioners sold in the same transactions. 3.

Petitioners each sold a number of real estate lots during the years in question. Held: all of such lots were held primarily for sale to customers in the ordinary course of the respective petitioner's trade or business within the meaning of sec. 1221(1), I.R.C. 1954; the gains realized upon the sales of such lots are taxable as ordinary income.

The corporate petitioners received distributive shares of income as limited partners in partnerships of which the individual petitioners were general partners. Held: the amounts which corporate petitioners received are taxable to the corporations' sole shareholders, who are the individual petitioners herein.

The taxpayer, a corporation, sold all of its assets, including certain sec. 1245 property, pursuant to a plan of complete liquidation. Held: the gain realized upon the taxpayer's sale of the sec. 1245 property must be recognized under sec. 1245.

Held, for a new corporation to be treated as an electing small business corporation for its first taxable period, its election under sec. 1372, I.R.C. 1954, must be filed no later than 1 month after… Held: for a new corporation to be treated as an electing small business corporation for its first taxable period, its election under sec. 1372, I.R.C. 1954, must be filed no later than 1 month after it acquires assets or begins business operations.

1. Decedent's three children purchased and at all times owned a life insurance policy on her life. Decedent paid all the premiums, a portion of which were concededly in contemplation of death. Held: no portion of the proceeds of the insurance is includable in her estate under sec. 2035, I.R.C. 1954, the amount includable being limited to the premiums paid in contemplation of death. 2.

Petitioner purchased for a lump sum a mixed aggregate of current and fixed assets. Held: only the prepaid expenses, including the prepaid insurance, are equivalent to cash in allocating the lump-sum purchase price among the assets under sec. 1012, I.R.C. 1954.

Petitioners owned the stock of two corporations. Held: The distribution in redemption was essentially equivalent to a dividend, and should therefore be treated as a distribution of property to which sec. 301 applies. Sec. 302(d), I.R.C. 1954; and 2.

T was incorporated in 1953 under a special act of the Massachusetts Legislature for the purpose of promoting the economy of the State by lending funds to businesses located in areas of… Held: the Commissioner did not abuse his discretion in disallowing in full deductions in the amounts of $ 61,008, $ 63,233, $ 75,131, and $ 92,777 taken by T for the years 1961-64, respectively, for claimed additions to its bad debt reserve under sec. 166(c), I.R.C. 1954.

Petitioners were the shareholders and officers of a closely held farming corporation. They were also employed by the corporation in a supervisory capacity. Held: the fair rental value of such lodging is includable in petitioners' gross income. Petitioners were not required to accept the lodging furnished to them as a condition of employment within the meaning of sec. 119(2), I.R.C. 1954.

Petitioners are civilian employees at Vandenberg Air Force Base. Since they are not permitted to live on the base, they reside in surrounding communities. Held: such expenses are commuting expenses and are not deductible under sec. 162, I.R.C. 1954.

In each of the years 1959 through 1963, petitioner received bonuses upon the execution of oil and gas leases, and claimed percentage… Held: the bonuses, but not the sums which corresponded with amounts previously deducted as depletion and reported as income in the succeeding year, were personal holding company income within the meaning of sec. 543(a), I.R.C. 1954, and petitioner's deductions allowable under sec. 162 constituted 15 percent of petitioner's gross income…

The father of petitioner Peter Vaira devised land to him on condition that he support his mother for life and pay one of his brothers $ 2,000 over a period of years. Held: since the value of the land devised to Peter was substantially equal to the value of the obligations he assumed, he acquired the land entirely by purchase, with no element of inheritance, and his basis in the land is determined solely under sec. 1012, I.R.C. 1954.

Maynard, a hospital, obtained in 1934 an exemption from Federal income tax as a charitable organization. Held: Maynard was not operated exclusively for charitable purposes. (2) Some of Maynards profits inured to the benefit of its private stockholders. (3) Maynard is not tax exempt for any of the years 1940 through 1960.

In 1956 petitioner purchased a television station for $ 4,800,000 of which $ 2,700,000 was allocated by petitioner to the purchase price… Held: on the proof presented herein petitioner has failed to show that the network affiliation contract was of use in petitioner's business for only a limited period, the length of which can be estimated with reasonable accuracy or that the useful life of such contract is other than indefinite or indeterminate and therefore has failed to…

T was a writer of technical reports and manuals who obtained employment with various firms that in turn had contracts or arrangements with various corporations to furnish writers to such corporations… Held: the expenses were not incurred by T while away from home. He had no home other than Binghamton during 1965; his connections with Garfield, N.J., were too tenuous for it to be considered his home.

WBB obtained a restaurant franchise for the State of Wisconsin. Held: the Commissioner's allocations to WBB of all the gross income and deductions of the subsidiaries under sec. 482 were not arbitrary, capricious, or unreasonable.

The petitioner, a graduate engineer, obtained a part-time position as a patent trainee. A requisite of such position was that the petitioner be actively engaged in securing a law degree. Held: the law school expenses incurred by the petitioner to attend law school are not deductible as ordinary and necessary business expenses under sec. 162(a), I.R.C. 1954.

Held: 1. That the plan adopted by Spectacular Shows, Inc., on May 21, 1960, meets all the requirements of sec. 1244(c)(1)(A), I.R.C. 1954, and regulations thereto. 2. Held: That the plan adopted by Spectacular Shows, Inc., on May 21, 1960, meets all the requirements of sec. 1244(c)(1)(A), I.R.C. 1954, and regulations thereto. 2.