Volume 54 — Tax Court Reports

In implementation of an agreement with a corporation and its majority stockholder to purchase stock in the corporation and otherwise to help it financially, petitioners furnished collateral so that… Held: petitioners' payments to the bank are part of the cost of acquisition of their stock in the corporation and deduction of amounts thereof is subject to the limitations of sec. 165(f).

Petitioners, three affiliated casualty insurance companies, transferred their insurance businesses as going concerns to Buckeye Union Insurance Co., a newly formed corporation and wholly owned… Held: the income of $ 10,676,071.52 realized under the reinsurance and assumption agreement did not arise from a sale or exchange of property within the meaning of sec. 337, I.R.C. 1954.

The petitioner was the sole shareholder of a corporation which was liquidated in 1964. Held: under the circumstances, such disbursements shall be treated as loans for purposes of computing gain on the liquidation.

Held: The requirement of sec. 1.818-4(e), Income Tax Regs., that the election of a life insurance company to revalue its preliminary… Held: The requirement of sec. 1.818-4(e), Income Tax Regs., that the election of a life insurance company to revalue its preliminary term basis reserves must be filed not later than the date prescribed by law * * * for filing the return for such taxable year is a reasonable implementation of the congressional mandate and a needful rule for…

Petitioner assigned to his wholly owned corporation his one-half interest in a partnership (and not merely the right to future income) in… Held: that despite the fact that petitioner did not advise his partner of the assignment, and despite the fact that for State purposes the petitioner remained a partner after the assignment, the petitioner was no longer a partner for Federal income tax purposes (secs. 708 and 704(e), I.R.C. 1954), and that therefore he was no longer…

Held, petitioners realized capital gain upon the transfer by one of them to the corporation by which he was employed of ownership of its stock in return for the corporation's transfer to him of an… Held: petitioners realized capital gain upon the transfer by one of them to the corporation by which he was employed of ownership of its stock in return for the corporation's transfer to him of an insurance policy on his life.

Petitioners (T and his wife) were the sole and equal stockholders in three corporations, M, P, and E. M manufactured therapeutic devices invented or developed by T, and P and E marketed such devices. Held: In the circumstances of this case there was a reorganization under sec. 368(a)(1)(D), and the distributions were taxable to T and his wife as dividends under sec. 356(a)(2) rather than as capital gain realized on the liquidation of E under secs. 331(a) and 346.

Petitioner received certain nonstatutory options to acquire the stock of two corporations for which he had rendered services as an… Held: Petitioner was an employee of both corporations, and the options at issue were granted for reasons connected with such employment, and therefore, the rules contained in sec. 1.421-6, Income Tax Regs., are applicable to the instant case. 2. The options at issue did not have a readily ascertainable value at the time of their grant.

Held: 1. Respondent did not abuse his discretion or exceed his authority in retroactively revoking his ruling that petitioner was an exempt organization under… Held: Respondent did not abuse his discretion or exceed his authority in retroactively revoking his ruling that petitioner was an exempt organization under sec. 501(c)(7), I.R.C. 1954. 2. Assessment and collection of income taxes owing by petitioner for the years 1954-58 is not barred by the statute of limitations. 3.

Petitioners established identical trusts for the benefit of each of their minor children. Held: petitioners' gifts to the trusts were gifts of present interests to the extent of the value of the income portions thereof and gifts of future interests to the extent of the value of the remainders.

T made payments to his two children as heirs of his former wife pursuant to an Oklahoma divorce decree. Held: these payments were in respect of a division of property jointly acquired during marriage in accordance with Okla. Stat. Ann., tit. 12, sec. 1278; they accordingly do not qualify as alimony under sec. 71(a)(1), I.R.C. 1954, and are not deductible under sec. 215(a).

Deduction claimed on income tax return for gifts to spouse as evidenced by the filing of a Form 709 gift tax return. Held, gifts to spouse are commendable but nondeductible. Held: gifts to spouse are commendable but nondeductible.

Petitioner's lawsuit against his father's estate, and the executor, devisees, and legatees of said estate, was settled for $ 70,000. Held: the net amount petitioner received in the settlement, $ 39,666.66 (after paying attorney's fees and investigating fees), was not excludable from petitioner's gross income under sec. 102, I.R.C. 1954, as property acquired by gift, bequest, or inheritance.

1. Petitioner's subsidiary acquired from an unrelated party a franchise which petitioner had granted to that unrelated party. Held: petitioner is entitled to deduct amortization for the unexpired portion of the franchise it acquired upon the liquidation of its subsidiary. 2.

A New York joint and mutual will contained specific and explicit wording that its dispositive provisions were made in consideration of each other and were to be irrevocable. Held: The use of the phrase absolutely and forever in the dispositive provisions in favor of the respective makers is considered along with the other language of the will to determine whether the will created a contract between the makers and the question is answered affirmatively under New York law.

Petitioner and her sister conveyed an apartment building to an Illinois land trust, for the benefit of themselves, two other sisters, and a brother. Petitioner lived in one apartment, paying rent. Held: petitioner is not entitled to nonrecognition of any part of her gain under sec. 1034, I.R.C. 1954. Held, further, uncollected loans made by petitioner to the land trust were not bad debts.

Held: 1. A contract between a joint venture represented by petitioner and the Army Corps of Engineers, awarded as a result of procedures… Held: A contract between a joint venture represented by petitioner and the Army Corps of Engineers, awarded as a result of procedures which met all the requirements and standards of formal advertising as set out in sec. 3 of the Armed Forces Act of 1947, is exempt from renegotiation under sec. 106(a)(9) of the Renegotiation Act of 1951,…

Decedent, on June 6, 1932, made a transfer in trust, which provided, inter alia, that the trustees pay to her from the principal of the trust corpus $ 150,000 annually, and upon her death the… Held: that the entire value of the trust corpus as of the date of decedent's death is includable in her gross estate under sec. 2037, I.R.C. 1954. Banker's Trust Co. v. Higgins, 158 F.2d 957 (C.A. 2, 1947), and Estate of Arthur Klauber, 34 T.C. 968 (1960), distinguished.

Petitioner undertook a legal education, prior to obtaining employment as a teacher. Held: under the new education regulations, sec. 1.162-5, the law school expenses are not deductible since law school qualifies petitioner for a new trade or business; held, further, they are not deductible under the old regulations since petitioner could not have undertaken the education to primarily maintain or improve skills required in…

1. Held, non-interest-bearing notes issued to the stockholders of an electing small business corporation in exchange for their capital in… Held: non-interest-bearing notes issued to the stockholders of an electing small business corporation in exchange for their capital in the predecessor partnership, whether regarded as debt or as equity, did not give rise to more than one class of stock within the meaning of sec. 1371(a), I.R.C. 1954. Regs. sec. 1.1371-1(g) invalidated. 2.

Petitioners' son-in-law, Boyd, operated a livestock auction barn. Held: the advance of $ 8,500 is deductible under sec. 166(d), I.R.C. 1954, as a loss from a worthless nonbusiness debt. Held, further, the advance of $ 10,000 is deductible under sec. 166(f), I.R.C. 1954.

Held, payment, based on ability to pay, by adoptive parents to an adoption agency, a qualified charitable organization under sec. 170(c), I.R.C. 1954, to effect the adoption of a child is not a… Held: payment, based on ability to pay, by adoptive parents to an adoption agency, a qualified charitable organization under sec. 170(c), I.R.C. 1954, to effect the adoption of a child is not a charitable contribution within the meaning of sec. 170, I.R.C. 1954.

Petitioner was Governor of the State of Illinois for the 8 years here in question. He personally prepared and filed joint Federal income tax returns for 1953 through 1960, reporting a net income for the 8 years of $ 171,846.93. Respondent, using the net worth plus nondeductible expenditures method, determined petitioners' net income for the 8 years to be $ 369,096.29, which he reduced in his brief to $ 366,184.92.

As of Jan. 31, 1962, Land Co., transferor, a corporation wholly owned and controlled by petitioners, was insolvent, and was indebted to petitioners, transferees, for an amount exceeding $ 100,000. Held: Land Co.'s transfer of the parcel to petitioners was not a fraudulent transfer under the applicable State law; petitioners are not liable under sec. 6901 as transferees of property of Land Co.

1. Held, respondent was justified in employing the net worth increase plus nondeductible expenditures method of income reconstruction to determine the deficiencies. 2. Held: respondent was justified in employing the net worth increase plus nondeductible expenditures method of income reconstruction to determine the deficiencies. 2.

Held, since the equipment and machinery which petitioner purchased for use of other persons was in substance as well as form owned by… Held: since the equipment and machinery which petitioner purchased for use of other persons was in substance as well as form owned by petitioner and leased to the persons for whom acquired, petitioner is entitled to the investment credit provided for under sec. 38, I.R.C. 1954, with respect to the equipment and machinery which had a useful…

Decedent under her last will devised and bequeathed a part of her estate to a charitable trust which provided that the income from the… Held: the power to invest in regulated investment companies did not, under the law of Massachusetts, render the value of the remainder interest unascertainable; (2) under the law of Massachusetts the powers to determine all questions between income and principal were administrative powers and accordingly the beneficial interests could not…

Subchapter S corporations of which taxpayer was a majority stockholder made a disposition of installment obligations to an unrelated finance company. Held: basis was properly determined by the Commissioner under sec. 453(d)(2), I.R.C. 1954, and gain or loss on the disposition is to be calculated from the difference between amount of cash received from finance company and basis. Sec. 453(d), I.R.C. 1954.

The petitioners in all of these consolidated cases were limited partners in S.C., a partnership that was in turn a partner in Lake Murray partnership. Held: Respondent was right in disallowing said deductions for there was no existing indebtedness ( sec. 163, I.R.C. 1954) owed by the Lake Murray partnership to Sunset to support the interest payment.

Petitioner transferred farm property in trust to pay the net income to his four children until the youngest reached 21 years of age at which time the corpus of the trust was to be paid over to them. Held: the gifts of corpus were gifts of future interests in property. Held, further, the gifts of the right to receive the net income from the property were present interests, the value of which could be determined under sec. 25.2512-5, Gift Tax Regs.

Held, that the cost of $ 916.66 incurred by petitioner in sending her minor son to a summer residential camp constitutes part of his support under sec. 152(a), I.R.C. 1954, in determining who is… Held: that the cost of $ 916.66 incurred by petitioner in sending her minor son to a summer residential camp constitutes part of his support under sec. 152(a), I.R.C. 1954, in determining who is entitled to be allowed the deduction for the personal exemption under sec. 151.

Held, income of petitioner, a noncompetent Indian, from grazing cattle on land which had been allotted to another noncompetent Indian and… Held: income of petitioner, a noncompetent Indian, from grazing cattle on land which had been allotted to another noncompetent Indian and purchased by petitioner who had it taken in trust for him by the United States under sec. 5 of the Act of June 18, 1934 (48 Stat. 984, 25 U.S.C. sec. 465), is not exempt from Federal income tax.

Held, on the facts, an allowance for living expenses which petitioner received from his employer while he was on assignment away from his regular place of employment is not deductible as traveling… Held: on the facts, an allowance for living expenses which petitioner received from his employer while he was on assignment away from his regular place of employment is not deductible as traveling expenses under sec. 162(a), I.R.C. 1954, because petitioner was not away from home.

Held, a distribution to petitioner from a qualified profit-sharing trust of a corporation, which was made at the request of a union… Held: a distribution to petitioner from a qualified profit-sharing trust of a corporation, which was made at the request of a union representing hourly employees in labor negotiations and pursuant to an amendment of the trust on Aug. 23, 1966, effective as of Aug. 31, 1966, is taxable to petitioner as ordinary income and not as long-term…

The decedent possessed a general power of appointment exercisable with the consent of a trustee over the proceeds of certain insurance settlement contracts. Held: The trustee's consent was not limited by a substantial adverse interest in the property, subject to the power, within the meaning of sec. 2041(b)(1)(C)(ii), I.R.C. 1954, nor was the trustee's discretion limited by an ascertainable standard within the meaning of sec. 2041(b)(1)(A), I.R.C. 1954.

Held, fee expended in order to secure employment is deductible as an ordinary and necessary business expense within the meaning of sec. 162, I.R.C. 1954. Held: fee expended in order to secure employment is deductible as an ordinary and necessary business expense within the meaning of sec. 162, I.R.C. 1954.

1. Under a purported lease and option to purchase real property petitioner made payments in excess of the fair rental value of said property, prior to exercise of the option. Held: petitioner intended to and was acquiring an equity in the property and, therefore, the purported rental payments are not deductible under sec. 162 (a)(3), I.R.C. 1954. 2.

Petitioner, an internal revenue agent, attended law school and sought to deduct expenses incurred therein. Held: no deduction is allowed since petitioner is pursuing part of a program of study which will lead to qualifying him in a new trade or business, i.e., a lawyer.

Motion is made to dismiss petitioner's petition in this Court under sec. 6871(b), I.R.C. 1954, because the petition was filed subsequent to the appointment of a receiver by a State court to marshall… Held: the reversal of the order appointing a receiver had the same effect as though such order had not been made. Held, further, sec. 6871(b) is inapplicable to these facts and motion is therefore denied.

Respondent determined that certain redemptions of some shares of petitioner's stock in a corporation which he controlled, in each of several years, were essentially equivalent to dividends. Held: Respondent's determination is sustained. Petitioners have failed to establish that the redemptions were executed pursuant to a plan to eliminate petitioner's entire stock interest in the corporation or that they were not essentially equivalent to dividends.

1. The liquidation of petitioner, Lammerts, Inc., followed by the incorporation of a new corporation carrying on the same business did not constitute a sec. 368(a)(1)(F) reorganization where (a) the liquidation was undertaken pursuant to the testamentary directions of petitioners' deceased shareholder, (b) the decision to incorporate the new corporation was arrived at independently of the decision to liquidate the old corporation, (c) the persons possessing the proprietary…

Petitioner is a mutual insurance company. In 1962 the income of petitioner from its underwriting business was not includable in gross income. Held: for purposes of the investment credit such assets are not section 38 property within the meaning of sec. 48(a), I.R.C. 1954.

Dri-Powr Co., a sole proprietorship which was subsequently incorporated, was in the business of manufacturing various petroleum products and selling such products to independent distributors for… Held: The trust funds were not includable in the gross income of the sole proprietor of Dri-Powr Co. since he did not exercise a claim of right over such funds, and since the trust operated as a valid entity under California law. 2.

Petitioner, a Canadian citizen, realized a capital gain while living in the United States. Held: Even assuming that petitioner is correct in contending that the O.D. applies generally to the treaty's terms, it has been in direct conflict with sec. 1.871-5, Income Tax Regs. (and the predecessors of that section), at all relevant times.

Petitioner migrated from Europe to Ohio in 1948, having previously been a lawyer in Poland, his former country. Held: petitioner's expenses for attending law school do not qualify within the meaning of sec. 1.162-5(a)(2), Income Tax Regs., as a deductible educational expense.

Decedent was a widow and a resident of California. She died on Dec. 2, 1961. Held: On the facts, with regard to the income tax cases, held: (1) The widow purchased the life interest in the portion of the trust attributable to her husband's share of community property transferred to the trust and she is entitled to amortization deductions based on her cost basis in the life interest and her life expectancy, as…

Previously this Court held that a net operating loss claimed by petitioner passed to the trustee in bankruptcy. 52 T.C. 745. Held: a motion to substitute the trustee in bankruptcy is denied because he would under no circumstances be entitled to relief in this proceeding. Held, further, the reasons advanced by petitioner are insufficient to support the granting of his motions to vacate or revise the prior decision and for further trial and reconsideration.

Held, fee expended to secure employment is deductible as an ordinary and necessary business expense within the meaning of sec. 162, I.R.C. 1954. David J. Primuth, 54 T.C. 374 (1970). Held: fee expended to secure employment is deductible as an ordinary and necessary business expense within the meaning of sec. 162, I.R.C. 1954. David J. Primuth, 54 T.C. 374 (1970).

Petitioners, husband and wife, were employed as a Latin and a world history teacher, respectively, in New York City high schools during 1966. Held: that the husband has failed to establish that the major portion of the activities during such travel was directly and proximately related to skills required of him as a Latin teacher and, therefore, the travel expenses attributed to him are not deductible as ordinary and necessary business expenses.

Petitioners are trust beneficiaries of a trust which during the years in question was the lessor in certain mining leases. Held: the issue is ruled by our opinion in Winifred E. Higgins, 33 T.C. 161, that the petitioners, who are in the position of lessors, may include within their depletable gross income the amount of ad valorem taxes on the minerals in place paid by the lessees during the years in issue pursuant to the terms of the leases.

A divorce decree provided that H should furnish W with a residence without charge. W occupied a residence owned by a corporation, which was owned by H and to which he made rental payments. Held: such payments constitute periodic payments within the meaning of sec. 71(a)(1), I.R.C. 1954, and are includable in the gross income of W.

Pursuant to the Illinois Uniform Gifts to Minors Act, decedent conveyed in two separate transfers certain shares of stock to herself as custodian for two grandsons. Held: the shares are includable in her gross estate under sec. 2038(a), I.R.C. 1954.

1. Lessor and its sole shareholder entered into an agreement with lessee whereby the assets of the lessor and assets owned by the shareholder individually were to be leased to lessee for a 10-year… Held: under the circumstances of this case the purported loan constituted the payment of advance rentals to the lessor and the payment of a dividend to the shareholder in the taxable year of the purported loan. 2.

On May 31, 1962, petitioner had his wholly owned corporation liquidated, and he thereafter operated its business as a sole proprietorship. Held: the distribution to petitioner of the assets of the original corporation was in complete liquidation thereof within the meaning of sec. 331(a), I.R.C. 1954, and is not taxable as a dividend under sec. 301, I.R.C. 1954, or as boot arising out of a reorganization defined in sec. 368(a) (1)(D) or (F), I.R.C. 1954.

T made payments to his former wife pursuant to a divorce decree and property settlement agreement incorporated therein. Held: such payments were in respect of a division of property pursuant to Oklahoma law and are not deductible under sec. 215, I.R.C. 1954, as alimony described in sec. 71.

Petitioner leased from the United States for a term of 75 years a tract of land at Fort Eustis, Va., and built thereon buildings… Held: petitioner's failure to report such gain in its return for fiscal 1958 constituted a constructive election under sec. 1033, I.R.C. 1954, and (2) respondent is not barred from assessing a deficiency for petitioner's fiscal 1958 since none of petitioner's returns prior to that for fiscal 1964 constituted a notification to respondent of…

The petitioner obtained a State trial court decree, which adjudicated the decedent's interests in certain property. Held: 1. Held: The decree does not bind this Court for Federal estate tax purposes, since the respondent was not a party to the State court proceeding. 2. The petitioner has failed to sustain the burden of proving the respondent's determinations incorrect with respect to the interests in property includable in the estate and the values thereof. 3.

Petitioner was an employee of the Jackson County Public Welfare Commission of the State of Oregon. Held: amounts received by the petitioner from the Oregon State Welfare Commission while on educational leave are not excludable from petitioner's gross income as either scholarships or fellowship grants. Sec. 1.117-4(c); Bingler v. Johnson, 394 U.S. 741 (1969).

Held: 1. The fact that one of petitioners, Jules Cowan, was in Tijuana, Mexico, from 9 a.m. until 7:30 p.m. on the day the notice of deficiency was mailed to him does not… Held: The fact that one of petitioners, Jules Cowan, was in Tijuana, Mexico, from 9 a.m. until 7:30 p.m. on the day the notice of deficiency was mailed to him does not cause him to have 150 days from the date of the mailing of the notice of deficiency within which to file a petition with this Court. 2.

1. Held, the useful life of concrete brick buildings at a shopping center was determined to be 30 years. Held: the useful life of concrete brick buildings at a shopping center was determined to be 30 years. Held, further, that the lessor and the lessee were not related persons within the meaning of sec. 178(b) and the cost of the buildings could be amortized over the term of petitioner's lease. 2.

Taxpayer was a construction worker who maintained a home in Williamsport, Md. Held: petitioner's tax home was not in Washington and respondent erred in disallowing the claimed deduction.

Held: 1. The 5-percent depletion rate provided for in sec. 613(b)(7), I.R.C. 1954, is applicable to dolomitic limestone used by petitioner… Held: The 5-percent depletion rate provided for in sec. 613(b)(7), I.R.C. 1954, is applicable to dolomitic limestone used by petitioner as an aggregate in the manufacture of Poz-O-Pac, a patented product, which is used primarily as a base for roads, even though there is some chemical reaction between the dolomitic limestone and another…

Held: 1. Petitioners may not report the gain realized from the sale of stock on the installment method of accounting since the payments received in the year of sale exceeded 30 percent of the selling… Held: Petitioners may not report the gain realized from the sale of stock on the installment method of accounting since the payments received in the year of sale exceeded 30 percent of the selling price. Sec. 453(b)(2)(A)(ii). 2.

Held, payment by petitioner to widow of deceased officer of predecessor corporation was not deductible as a business expense under sec. 162(a) and sec. 404(a)(5) ( sec. 1.404(a)-12, Income Tax Regs.). Held: payment by petitioner to widow of deceased officer of predecessor corporation was not deductible as a business expense under sec. 162(a) and sec. 404(a)(5) ( sec. 1.404(a)-12, Income Tax Regs.).

Held, petitioners were not incorporated for the principal purpose of evasion or avoidance of Federal income tax, within the purview of sec. 269, by securing the benefit of the surtax exemption. Held: petitioners were not incorporated for the principal purpose of evasion or avoidance of Federal income tax, within the purview of sec. 269, by securing the benefit of the surtax exemption.

The petitioner, the leader of the Harvard-Radcliffe Hillel Folk Dance Group, made two trips by himself to attend folk dance festivals. Held: the expenses of the trips are not deductible as charitable contributions under sec. 170, I.R.C. 1954.

Held: (1) That the burden of proof did not shift to respondent because no new matter was pleaded in his answer, Rule 32, Tax Court… Held: That the burden of proof did not shift to respondent because no new matter was pleaded in his answer, Rule 32, Tax Court Rules of Practice; (2) that respondent did not conduct a second examination of petitioner's books and records in violation of sec. 7605(b), I.R.C. 1954; and (3) that the petitioner is not entitled to a depreciation…

Pursuant to an incentive program maintained by his employer, Mobil, petitioner was granted a 3-year release from status as an active employee at Mobil's laboratory in Dallas, Tex., to undertake… Held: no part of the expenses for petitioner's meals and lodging while he was residing in Columbus is deductible. Held, further, unreimbursed expenses incurred by petitioner in moving his family from Dallas to Columbus in 1963 are not deductible under sec. 162(a), I.R.C. 1954.

T purchased 20 executive special life insurance policies that were specially designed, calling for abnormally high premiums and providing for correspondingly high loan and cash surrender values. Held: T's out-of-pocket costs were in substance the true cost of the insurance purchased by him and he did not in fact pay any interest on borrowed funds. T is not entitled to any deduction for interest paid. Sec. 163. I.R.C. 1954.

Held: The petitioner and a licensed insurance agent entered into an agreement whereby commissions on insurance business, obtained by the agent as a result of leads by the petitioner, would be paid to… Held: The petitioner and a licensed insurance agent entered into an agreement whereby commissions on insurance business, obtained by the agent as a result of leads by the petitioner, would be paid to a corporation the stock of which was owned one-half by each.

1. Petitioners owed amounts to their wholly owned corporation substantially in proportion to their stockholdings. Held: the redemptions were essentially equivalent to dividends. United States v. Davis, 397 U.S. 301 (1970), followed. 2. Petitioner Lou Ella Runnels used an automobile owned and made available to her by the corporation. Held, respondent's determination of the amount of income realized by her from use of the automobile is sustained.

Petitioners' wholly owned subchapter S corporation suffered net operating losses in its taxable years ending Apr. 30, 1963 through 1965. Held: an erroneous refund suit under sec. 7405, I.R.C. 1954, is not the Commissioner's exclusive remedy for recovery of the refunds; they may also be assessed under the deficiency procedures set forth in secs. 6212-6215, I.R.C. 1954.

On Jan. 10, 1964, the petitioner sold his business under a contract providing for payments in installments without interest. Held: that sec. 483 retroactively applies to the petitioner's transaction with the result that the payment received by the petitioner in the taxable year of sale exceeded 30 percent of the selling price as reduced by unstated interest, and that, therefore, the petitioner was not entitled to report the gain upon the sale on the instalment…

1. The order of abatement of bequests under decedent-husband's will determined for the purpose of computing the marital deduction under sec. 2056, I.R.C. 1954. 2. Bequests to the trustees of the Palladium Fund to be used primarily as a pension, unemployment, and insurance fund for the employees of the Palladium-Item, a newspaper, and the wives and minor children of such employees are not deductible under sec. 2055, I.R.C. 1954, as charitable bequests.

General Controls Co. had instituted a profit-sharing retirement income plan for its employees under which it was obligated to contribute 15 percent of its net operating profits to the Company Fund… Held: the plan was not continued and adopted by the new corporation and, thus, following Mary Miller, 22 T.C. 293, affd. 226 F. 2d 618, the lump-sum distribution made to petitioner was taxable as long-term capital gain within the meaning of sec. 402(a)(2), I.R.C. 1954.

1. An agreement entitled Joint Venture Agreement entered into by one of petitioners and four other individuals under which an 18-unit condominium was to be built on property, title to which was placed in a trust for the benefit of such five individuals and their wives, created a partnership as defined in sec. 761, I.R.C. 1954. 2.

Held: 1. Decedent's estate is not entitled to the marital deduction for personal property passing under a provision of a will, which is construed under the law of the… Held: Decedent's estate is not entitled to the marital deduction for personal property passing under a provision of a will, which is construed under the law of the State of New York, that in the event his wife survives him but dies before the probate of his will, the property is bequeathed to his daughter. 2.

In 1959, a California interlocutory decree of divorce separately provided that petitioner should pay $ 100 per month for his wife's support and $ 100 per month for the support of his minor child. Held: the decision of the New York Supreme Court constituted a sufficient designation to make the California decree the operative instrument with the result that the $ 75 per month from and after July 27, 1965, constituted a nondeductible expenditure for child support.

Held, for taxable years commencing prior to Jan. 1, 1966, the portion of a consolidated net operating loss attributable to a subsidiary cannot be carried back to offset the income of the parent… Held: for taxable years commencing prior to Jan. 1, 1966, the portion of a consolidated net operating loss attributable to a subsidiary cannot be carried back to offset the income of the parent corporation in a separate return year prior to incorporation of the subsidiary.

1. Held, that petitioner was not entitled to deduct or exclude 15 percent of the premiums received on title insurance as unearned premiums within the meaning of sec. 832(b)(4), I.R.C. 1954. 2. Held: that petitioner was not entitled to deduct or exclude 15 percent of the premiums received on title insurance as unearned premiums within the meaning of sec. 832(b)(4), I.R.C. 1954. 2.

In 1944, petitioner's former husband Vince Nelson, who was in the U.S. Army, instituted a suit for divorce in the Circuit Court of St. Lucie County, Fla., and on the basis of allegations in his… Held: petitioner has failed to prove that Nelson's divorce decree was invalid and, therefore, she had no inchoate dower right in his land to release in April 1965. Accordingly, the $ 40,000 in question constitutes ordinary taxable income to her under sec. 61, I.R.C. 1954.

1. Petitioner owned rental property which was situated within an urban renewal area. Held: petitioner sold his property under threat of condemnation and, accordingly, is entitled to nonrecognition of his gain under sec. 1033, I.R.C. 1954.

Held: 1. The petitioner, a physician, may not deduct the costs incurred by him in traveling between his home and the hospital where he was employed, in connection with his extra duty at the hospital.… Held: The petitioner, a physician, may not deduct the costs incurred by him in traveling between his home and the hospital where he was employed, in connection with his extra duty at the hospital. 2.

Held: The transfer by the petitioner of stock of its subsidiary to a principal stockholder in exchange for its own stock and a cash payment… Held: The transfer by the petitioner of stock of its subsidiary to a principal stockholder in exchange for its own stock and a cash payment cannot be fragmented into two separate transactions, namely, a distribution with respect to its stock as to a part and a sale for cash as to the balance of the stock transferred by the petitioner.

Held: 1. Deficiencies of the individual petitioners and corporate petitioner redetermined. 2. Held: Deficiencies of the individual petitioners and corporate petitioner redetermined. 2. Petitioner Frank C. Cicio's conviction under sec. 7201, I.R.C. 1954, for filing false and fraudulent returns for 1958, 1959, and 1960 collaterally estops him from denying that a part of the underpayments for those years was due to fraud.

The petitioner, as president of a corporation the stock of which was owned by his son, received a stated salary, and, in addition, withdrew amounts from the corporation which were carried on the… Held: that such additional amounts withdrawn by the petitioner constituted additional compensation for services, rather than loans to him.

In 1958, petitioners organized MidtownHoldings Corp. for the purpose of constructing and operating an enclosed mall shopping center adjacent to their department stores. Held: that respondent may not utilize sec. 482, I.R.C. 1954, to impute interest income to petitioners on said loans, since Midtown and petitioners were not controlled, directly or indirectly, by the same interests.

Petitioner has paid a bonus to its employees for 30 years and has accounted for it by taking a deduction in the year of payment. Held: such treatment does not clearly reflect income, since the bonus was a labor cost, a portion of which should have been included in ending inventory as are other labor and labor-related costs.

Held, an insurance company, which undertakes to pay the monthly sum due on the insured's mortgage while the insured is absent from work on… Held: an insurance company, which undertakes to pay the monthly sum due on the insured's mortgage while the insured is absent from work on account of illness or other disability, may treat as unpaid losses within the meaning of sec. 832(b)(5), the estimated liability in a subsequent year on account of a disabling illness or accidental…

Petitioner, a dealer in municipal bonds, incurred and continued various amounts of indebtedness for the purpose of purchasing and holding such bonds until the time of their subsequent resale. Held: notwithstanding petitioner's ultimate purpose of reselling the municipal bonds at a profit, the interest on the indebtedness incurred and continued for the purpose of purchasing and carrying such bonds is nonetheless nondeductible under sec. 265(2), I.R.C. 1954.

The husband of the individual petitioner herein was an employee participant of a trusteed pension plan which was funded entirely by the purchase of annuity policies. Held: petitioner is entitled to capital gains treatment upon her receipt of the lump-sum payment in 1961 under sec. 403(a)(2), Y.R.C. 1954. The assignment of the annuity policies to the employee participants under the pension plan gave rise to a qualified annuity plan.

Decedent and wife executed a trust indenture creating four substantially identical trusts for the benefit of their four children. Held: the indenture provision restricting the use of trust income and principal left decedent with authority to make substantial payments of income and principal to the trust beneficiaries, and the trusts were therefore includable in his gross estate pursuant to secs. 2036(a)(2) and 2038(a)(1), I.R.C. 1954.

Held, that the petitioner is entitled to deduct as a casualty loss under sec. 165, I.R.C. 1954, only one-half of the loss to a… Held: that the petitioner is entitled to deduct as a casualty loss under sec. 165, I.R.C. 1954, only one-half of the loss to a residence which, at the time of loss, was owned jointly by petitioner and her former husband as community property under the law of the State of Washington, notwithstanding the fact that, subsequent to the loss but…

1. Held, a certain lease cancellation payment of $ 10,000 in 1962 was made solely for the purpose of acquiring a new, more lucrative lease from a new tenant, the TraveLodge Corp.; consequently, the… Held: a certain lease cancellation payment of $ 10,000 in 1962 was made solely for the purpose of acquiring a new, more lucrative lease from a new tenant, the TraveLodge Corp.; consequently, the payment should be amortized over the life of the new TraveLodge lease. 2.

Held, proof that petitioner-husband filed fraudulent joint returns and that part of the underpayments of tax was due to his fraud is sufficient to invoke the provisions… Held: proof that petitioner-husband filed fraudulent joint returns and that part of the underpayments of tax was due to his fraud is sufficient to invoke the provisions of secs. 6501(c)(1) and 6653(b), I.R.C. 1954, against the joint-filing petitioner-wife, even in the absence of proof of fraud on her part.

1. Held, respondent's proposed amendment to his answer, increasing petitioner's taxable income for 1961 in the identical amount by which petitioner's… Held: respondent's proposed amendment to his answer, increasing petitioner's taxable income for 1961 in the identical amount by which petitioner's net operating loss for 1962 is increased, is not untimely or prejudicial and merely conforms the answer to the proof adduced at trial. Rule 17(d), Tax Court Rules of Practice. 2.

Petitioners were the principal stockholders and directors of Gillespie Equipment, Inc. Robert E. Gillespie was also a salaried executive of that company. Held: the losses were nonbusiness bad debts inasmuch as such losses were not proximately related to a trade or business of the petitioners.

Held, the owner of an interest in an oil and gas lease is not entitled to an investment credit under sec. 46, I.R.C. 1954, on account of equipment purchased for such lease with restricted funds… Held: the owner of an interest in an oil and gas lease is not entitled to an investment credit under sec. 46, I.R.C. 1954, on account of equipment purchased for such lease with restricted funds realized from the sale of a production payment.

A partnership, of which two of the petitioners were partners, owned land and buildings. Held: the demolition was pursuant to the requirements of a lease ( sec. 1.165-3(b)(2), Income Tax Regs.); the partnership is not entitled to deduct a demolition loss in 1965 but is required to amortize the adjusted cost basis of the property over the period of the lease.

Petitioners agreed to convey to WRI the lot on which their principal dwelling house was situated and to remove the dwelling therefrom. Held: none of the gain realized on the exchange of the lot qualified for nonrecognition since petitioners retained their former dwelling house, and therefore did not sell their old residence within the meaning of sec. 1034(a), I.R.C. 1954. Benjamin A. O'Barr, 44 T.C. 501 (1965), followed.

M Corp. established a profit-sharing plan under which employer contributions were allocated among the participants on the basis of their compensation weighted for years of past service. Held: the weighting for past services results in discrimination in contributions under sec. 401(a)(4), I.R.C. 1954, and the plan established by M Corp. is not qualified within the meaning of sec. 401(a), I.R.C. 1954.

Decedent, approximately 3 weeks before his death, entered into identical contracts with three corporations of which he was an officer and employee, under which as an inducement to the decedent to… Held: the commuted value of the payments provided for in the contracts is includable in the gross estate of decedent under sec. 2035, I.R.C. 1954.

Held: 1. The $ 86,500 sales price of petitioner's mortgage-servicing business was in part for capital assets of the nature of goodwill and in part for its right to future income from servicing fees. 2. On the basis of the evidence $ 10,000 is allocated as the sales price of the capital assets and the balance of the $ 86,500 as the sales price of the right to future income. 3. The gain on the sale of the capital assets is taxable to petitioner as long-term capital gain and the gain on the sale of the right to future income is taxable to it as ordinary income. 4. Since both the capital assets and the right to future income are property and the right to future income is not compensation for services, petitioner is entitled to report the entire gain from the sale on the installment method, the other requirements of sec. 453, I.R.C. 1954, having been met by it. 5. The evidence does not show that any amount due by petitioner to another for procuring for it some of the mortgages being serviced at the date of the sale was accrued in 1962 except the amount of $ 1,100 representing a fee due petitioner in 1962 by the other person on a bond which amount petitioner permitted him to retain.

In 1955 T assigned gas rights in certain oil and gas leases in return for annual payments based on the volume of actual or possible gas production. Apart from a cash payment for physical equipment and facilities, T received no present consideration and looked solely to the deferred annual payments in respect of gas production or potential gas production as consideration for the gas reserves themselves. No limit was placed on the amount of such payments, and the assignee was not permitted to sell any of the assigned gas rights without the consent of T. In 1958 the parties modified the instruments under which the assignments had been made by setting a $ 134,619,000 limit on the amount of the deferred payments owed by the assignee and by permitting the assignee to sell the gas rights without obtaining T's consent, provided that T would be entitled to one-half of the proceeds of such sale. At the time the modifications were made, a reasonable estimate of the time required to pay the total consideration, in view of the variables involved, would have been between 50 and 100 years; the assignee was not required to pay interest on the unpaid balance. Held: As a practical matter in the circumstances of this case, T looked solely to gas production as the source of the deferred payments and consequently retained an "economic interest" in the gas properties in question. Deferred payments received in 1958 and 1959 therefore represent ordinary income to T rather than the proceeds of sale of a capital asset.

Held: (1) Respondent's use of the bank deposits-expenditures method of determining taxable income was not arbitrary and capricious. Held: Respondent's use of the bank deposits-expenditures method of determining taxable income was not arbitrary and capricious.

Held, the Clarkes received substantial amounts of taxable income, which they did not report, from diversion to them of funds collected but not… Held: the Clarkes received substantial amounts of taxable income, which they did not report, from diversion to them of funds collected but not reported as income by a corporation in which they owned one-half of the stock and from payment by the corporation of the cost of construction of, and improvements to, various properties.

Under the terms of her will, the decedent made a bequest to her surviving husband on the condition that he execute and file with the Probate Court an agreement, within 4 months of her death, to… Held: the marital deduction is not allowable under sec. 2056(b), I.R.C. 1954, since the interest received by the surviving spouse was a terminable interest.

Petitioner and her husband (Elo) held land as community property which they leased to a third party for 10 years. Held: Basis and depreciable interest are not synonymous terms, and absent any showing that this was a premium lease, calling for rent in excess of fair market value, petitioner has nothing to depreciate.

1. Held, income taxes incurred subsequent to the death of the transferee decedent by another taxable entity do not reduce the value of the interest of the… Held: income taxes incurred subsequent to the death of the transferee decedent by another taxable entity do not reduce the value of the interest of the within decedent in the prior estate under sec. 2033, I.R.C. 1954; nor are they deductible from the within decedent's gross estate under sec. 2053(a)(3), I.R.C. 1954. 2.

Held, sec. 7502(a), I.R.C. 1954, so-called timely mailing -- timely filing statute, is applicable to petition filed in Tax Court for redetermination of excessive profits under Renegotiation Act of… Held: sec. 7502(a), I.R.C. 1954, so-called timely mailing -- timely filing statute, is applicable to petition filed in Tax Court for redetermination of excessive profits under Renegotiation Act of 1951.

Petitioners paid $ 2,000 as a downpayment on a home. The house was not completed per specifications and petitioners refused to close the transaction, although they had taken possession. Held: petitioners cannot deduct the amounts involved herein as a nonbusiness bad debt under sec. 166(d), I.R.C. 1954, because no debt existed between them and the builder.

T, an engineer employed by X corporation, made payments to Frederick Chusid & Co. to assist him in obtaining a new job as an engineer with increased compensation. Held: T's payments to Chusid are deductible as ordinary and necessary business expenses. Sec. 162(a), I.R.C. 1954. Cf. David J. Primuth, 54 T.C. 374; Guy R. Motto, 54 T.C. 558.

Petitioners owned tax-exempt securities at the same time they incurred certain indebtedness to finance business ventures. Held, the interest on the indebtedness is allowable as a deduction. Held: the interest on the indebtedness is allowable as a deduction. Sec. 265(2), I.R.C. 1954, is inapplicable since there was no sufficiently direct relationship between the incurrence or continuation of the debt and the carrying of the tax-exempt securities.

The petitioner made 1-day business trips requiring 16 to 19 hours, during which he generally rested once or twice briefly in his automobile. He always returned home at night. Held: the cost of meals consumed during these long workdays are not deductible.

1. The petitioner claimed deductions for additions to its reserve for bad debts for guaranteed debt obligations in its returns filed for its taxable years ending… Held: that the petitioner is not entitled to claim the benefits of Pub. L. 89-722 for its taxable years ended Nov. 30, 1962 and 1963, as the assessment of a deficiency in those years was barred at the time of its claim. Held, further, that the petitioner is entitled to maintain a reserve pursuant to sec. 2 of Pub.

Held, in a transfer qualifying under sec. 351, I.R.C. 1954, the transferor does not have to add back to income unused amounts in his bad debt reserve. Held: in a transfer qualifying under sec. 351, I.R.C. 1954, the transferor does not have to add back to income unused amounts in his bad debt reserve. Nash v. United States, 398 U.S. 1 (1970), followed.

1. Certain taxes paid by petitioner's English subsidiary under Schedule A of the English Income Tax Act of 1952 do not for foreign tax credit purposes qualify as an income tax or a tax paid in lieu of an income tax within the meaning of secs. 901 and 903, I.R.C. 1954. 2.

Held: 1. Petitioners are entitled to deduct under sec. 162, I.R.C. 1954, traveling expenses including living costs of one petitioner during the time he was teaching in Korea as a Fulbright grantee. Held: Petitioners are entitled to deduct under sec. 162, I.R.C. 1954, traveling expenses including living costs of one petitioner during the time he was teaching in Korea as a Fulbright grantee. Laurence P. Dowd, 37 T.C. 399 (1961), followed. 2.

Held, tract of undeveloped land sold by petitioner, which was in the business of developing residential real estate and constructing houses thereon for sale, was not… Held: tract of undeveloped land sold by petitioner, which was in the business of developing residential real estate and constructing houses thereon for sale, was not property held by petitioner primarily for sale to customers in the ordinary course of petitioner's business; capital gains treatment allowed.

Held, having failed to prove that a debtor-creditor relationship existed between a former shareholder and itself, petitioner's claim to a bad debt deduction under sec. 166, I.R.C. 1954, cannot be… Held: having failed to prove that a debtor-creditor relationship existed between a former shareholder and itself, petitioner's claim to a bad debt deduction under sec. 166, I.R.C. 1954, cannot be sustained.

Held: The partially tax motivated transactions between petitioner and a small business corporation controlled by him, in which petitioner's demand notes… Held: The partially tax motivated transactions between petitioner and a small business corporation controlled by him, in which petitioner's demand notes were issued to the corporation in exchange for its long-term notes in like amounts, were not sufficient to create indebtedness within the meaning of sec. 1374(c)(2)(B).

Shortly after Dec. 1, 1965, petitioners moved out of their personal residence and immediately offered it for sale at a price in excess of the then market value but not in excess of their investment. Held: during 1966, petitioners did not hold the property for the production of income within the meaning of sec. 167(a)(2) or 212(2), I.R.C. 1954.

1. Held, shares of corporate stock were sold by petitioner rather than trusts of which he was the settlor-trustee, where he and the purchasers had agreed upon all the terms of the sale prior to… Held: shares of corporate stock were sold by petitioner rather than trusts of which he was the settlor-trustee, where he and the purchasers had agreed upon all the terms of the sale prior to the creation of the trusts and he participated in the closing in his individual capacity. 2.

The decedent in transferring certain property in trust for his father retained a reversionary interest. Held: the value of the reversionary interest for purposes of sec. 2037(a)(2) is to be determined by the applicable mortality tables; the decedent's state of health must be disregarded.

Held: (1) Petitioner, an insurance trust set up to acquire insurance for members at group rates, is not an organization exempt from Federal income tax under sec. 501(c)(4), I.R.C. 1954. Held: Petitioner, an insurance trust set up to acquire insurance for members at group rates, is not an organization exempt from Federal income tax under sec. 501(c)(4), I.R.C. 1954.

Decedent owned a one-half interest in a partnership providing architectural and engineering services. Held: That the right to receive the proceeds of the collection of the accounts receivable was one of the rights included in the partnership interest and, under sec. 691(a)(1) and (3), I.R.C. 1954, constituted income in respect of a decedent.

Petitioners became resident aliens on Dec. 31, 1961, on which date they left Cuba and entered the United States as parolees. Cuban law provided that, unless they returned to Cuba within 29 days, they would be considered to have permanently abandoned Cuba and their property considered nationalized. Held, petitioners did not constructively abandon certain business properties prior to their entry into the United States and are entitled to a loss deduction under sec. 165, I.R.C. 1954.

Respondent's motion for reconsideration of opinion granted and decided as to one item in the net worth plus nondeductible expenditures computation for the year 1958.

The S corporation had been engaged in the business of owning and operating commercial rental properties since 1945. Held: That the property in question, together with the activities in connection therewith, were not sufficient to constitute the active conduct of a trade or business within the meaning of sec. 355(b), I.R.C. 1954; that A corporation, therefore, was not engaged in the active conduct of a trade or business immediately following the…

1. Held, the good-faith filing of a Form 1065 partnership return reflecting petitioner's only source of income was not sufficient to start the running of the statute of limitations where petitioner… Held: the good-faith filing of a Form 1065 partnership return reflecting petitioner's only source of income was not sufficient to start the running of the statute of limitations where petitioner had failed to file an individual return, as required by sec. 6012(a). 2.

Petitioner's employer erroneously withheld Federal Insurance Contributions Act (FICA) taxes from his wages for the period Jan. 1, 1965, to Oct. 1, 1965. Held: that respondent's motion is granted since the Tax Court's jurisdiction in determining an overpayment or credit of FICA taxes is expressly limited by sec. 31(b), I.R.C. 1954, and under the facts is not applicable in the determination of the deficiency herein.

The decedent, a nonresident alien, provided in his will that 25 percent of the income of his residuary estate be paid to a Canadian foundation;… Held: the possibility that the bequest would not become effective was so remote as to be negligible. Held, further, the bequest was to a trustee or trustees * * * to be used within the United States, since the funds were expended here. Hence, the decedent's estate is entitled to the claimed deduction for a charitable contribution.

Petitioners received lump-sum cash payments in consideration of their executing agreements conveying, for a period of 25 years renewable for an additional 20 years, the rights to all of the water… Held: petitioners did not retain an economic interest in the water in place, the agreements effected sales rather than leases, and the consideration received by petitioners is taxable as capital gain rather than ordinary income.

Petitioner had no knowledge of, or benefit from, funds embezzled by her husband. She signed joint tax returns with him which failed to include such funds in income. Held: on remand, that the nondisclosure to petitioner by her husband of the receipt of such funds did not require a finding that petitioner did not voluntarily sign the returns and she is accordingly liable for the conceded deficiencies in income tax under sec. 6013(d)(3), I.R.C. 1954.

Held: 1. Certain payments made by the petitioner to its shareholders are not deductible by it as interest inasmuch as such payments were made in respect of capital contributions and not in respect… Held: Certain payments made by the petitioner to its shareholders are not deductible by it as interest inasmuch as such payments were made in respect of capital contributions and not in respect of debt. 2. Amounts credited to the payment of overdue interest are interest income. 3.

The petitioners' son was of normal intelligence but had difficulty reading. His lack of reading proficiency was caused, at least to some extent, by his emotional problems. Held: the school was not a special school within the meaning of sec. 1.213-1(e)(v)(a), Income Tax Regs.Held, further, no part of the tuition was paid to the school for medical care within the meaning of sec. 213(e)(1), I.R.C. 1954.

Petitioner Hugo Romanelli owned and operated a tavern from 1961 through 1964, the taxable years in question. Held: The search warrant was valid despite an irregularity in the number address of petitioner's tavern which was erroneously stated to be 5152 rather than 5158. 2. The search warrant, issued in 1964 and based upon violation of secs. 4412 and 4905, I.R.C. 1954, was valid.

In 1963 petitioners, pursuant to a previously executed agreement, made a gift of oriental art objects to the City and County of San Francisco… Held: that petitioners are entitled to the additional deduction of 10 percent of their adjusted gross income because the museum is in operation an integral part of the San Francisco school system, so that the gift by petitioners to the City for use in the museum was a gift to the City for expansion and development of its educational…

T entered into two contracts to purchase separate undeveloped tracts of land. In each instance the contract of sale provided for conveyance of the property to a trustee. Held: gains realized by T as a result of payments received by him from the corporation were ordinary income rather than capital gain since the properties were held by him primarily for sale to customers in the ordinary course of his trade or business within the meaning of sec. 1221, I.R.C. 1954.

In 1946, the copyright of a record book was sold in consideration of periodic future payments until Oct. 1, 1973. Held: the definition of capital asset in sec. 1221, I.R.C. 1954, rather than in sec. 117(a)(1), I.R.C. 1939, in the form in effect prior to amendments included in the Revenue Act of 1950, determines the tax character of receipts in 1964, 1965, and 1966; such receipts are ordinary income, not capital gain.

Petitioner, an employee of the Department of Public Welfare of the City and County of San Francisco, received maintenance payments from the California State Department of Social Welfare during 1963… Held: such payments are not excludable from petitioner's gross income as scholarships or fellowship grants. Sec. 117(a), I.R.C. 1954; sec. 1.117-4(c), Income Tax Regs.

Petitioners refused to produce their books and records for examination by a revenue agent who was attempting to ascertain the correctness of their income tax returns for 1965. Held: since petitioners failed to carry their burden of proof, the determined deficiencies are sustained; respondent was not required to obtain a court order under sec. 7604, I.R.C. 1954, compelling production of the withheld records as a condition to the determination of the disputed deficiencies.

A and B were each 50 percent stockholders of C corporation. In 1965 C made liquidating distributions of all of their assets to A and B in exchange for all of their capital stock. Held: the purported distribution in 1968 was not a genuine distribution for purposes of sec. 316(b)(2), I.R.C. 1954, and therefore does not qualify for the deficiency dividends deduction under sec. 547, I.R.C. 1954.

Agents of the Internal Revenue Service, having received information that petitioner had taxable income during 1962, 1963, and 1964, attempted to obtain data as to the amount of that income. Held: the notice of deficiency was not proved to be either arbitrary or excessive.

Held: 1. Respondent proved by competent evidence that his notice of deficiency dated June 18, 1969, was sent to petitioner at his last-known address on June 18, 1969, by certified mail… Held: Respondent proved by competent evidence that his notice of deficiency dated June 18, 1969, was sent to petitioner at his last-known address on June 18, 1969, by certified mail pursuant to sec. 6212(a), I.R.C. 1954. Regular certified mailing procedures were followed by respondent. 2.

Held: That sec. 117(b)(2)(B), I.R.C. 1954, limits the exclusion from gross income of amounts received as a fellowship grant to 36 months of entitlement to such exclusion, whether claimed or not, and… Held: That sec. 117(b)(2)(B), I.R.C. 1954, limits the exclusion from gross income of amounts received as a fellowship grant to 36 months of entitlement to such exclusion, whether claimed or not, and regulations sec. 1.117-2(b)(2) and (3) properly so interprets such section.

Petitioner was an intern and a resident physician at Freedmen's Hospital, Washington, D.C., during the year in question, for which he received a stipend of $ 6,501.14. Held: the stipend received by petitioner from Freedmen's Hospital in 1967 was not a fellowship grant within the meaning of sec. 117(a)(1)(B), and petitioner is not entitled to any deduction therefor. Aloysius J. Proskey, 51 T.C. 918 (1969), followed.

Held: 1. Petitioner is liable as transferee for income tax in the amount of $ 17,802.68 plus interest owed by the corporation of which he was the… Held: Petitioner is liable as transferee for income tax in the amount of $ 17,802.68 plus interest owed by the corporation of which he was the sole stockholder at the time he received as a liquidating distribution assets of a value in excess of the tax plus interest of the corporation, which were all its assets which had not been…

Petitioner transferred a patent to a corporation. Held: Petitioner is collaterally estopped from relitigating the issue decided in the prior proceeding. The evidence proffered has no effect on the controlling facts in the prior litigation and therefore does not preclude application of collateral estoppel.

Petitioner was engaged during the years at issue in the business of acquiring undeveloped real estate, arranging for the construction of improvements thereon, leasing the improvements… Held: petitioner was not a mere holding or investment company for purposes of the accumulated earnings tax provisions; held, further, the compensation petitioner paid to its officer-shareholders was reasonable, and consequently, was fully deductible under the provisions of sec. 162(a)(1).

Held, the cancellation of interest indebtedness by the shareholder-creditor of Hartland Corp. did not result in the receipt of income by the corporation… Held: the cancellation of interest indebtedness by the shareholder-creditor of Hartland Corp. did not result in the receipt of income by the corporation notwithstanding the deduction of such interest as it accrued in prior years. Such cancellation constituted, rather, a capital contribution to the corporation.

B, who was the owner of certain life insurance policies and had an interest in a group term life insurance policy (which by its terms… Held: that the proceeds of all the life insurance policies, except the group term policy, are not includable in B's gross estate under sec. 2042(2), I.R.C. 1954, because he possessed no incidents of ownership therein at the time of his death; and (2) that the proceeds of the group term policy are includable in B's gross estate because the…

Pursuant to a decree of separation providing in part for payments by the petitioner to his wife for support and maintenance of the [wife]… Held: since the decree of separation does not fix the amount petitioner is to pay for the support of his minor children, sec. 71(b), I.R.C. 1954, the sums paid under the decree are deductible from his gross income, sec. 215, I.R.C. 1954, and includable in the wife's gross income, sec. 71(a), I.R.C. 1954, but may not be taken into account…

Held, expenses incurred by petitioner in connection with his campaigns for State senator are not deductible under either sec. 162(a) or sec. 212(1) of the Internal Revenue Code of 1954. Held: expenses incurred by petitioner in connection with his campaigns for State senator are not deductible under either sec. 162(a) or sec. 212(1) of the Internal Revenue Code of 1954.

Petitioner and her former husband entered into an agreement, contemporaneous with the entry of a decree of divorce, pursuant to which the petitioner received periodic payments for permanent… Held: Under Illinois law, any legal obligation of the petitioner's former husband with respect to the payment of alimony was terminated upon the petitioner's remarriage. Therefore, the payments in question are not includable in petitioner's income under sec. 71(a)(1), I.R.C. 1954.

Held, that the petitioner's mother did not have gross income of less than $ 600 for the year 1965 and that therefore the petitioner is not entitled, for her taxable year 1965, to a dependency… Held: that the petitioner's mother did not have gross income of less than $ 600 for the year 1965 and that therefore the petitioner is not entitled, for her taxable year 1965, to a dependency exemption deduction on account of her mother under sec. 151(e), I.R.C. 1954.

In an ABC transaction, petitioner (B) furnished a guaranty of a note issued by C to a bank which lent C funds in order to purchase a reserved production payment from A. The guaranty did not extend to… Held: petitioner had an economic interest in the production payment, with the result that the income attributable thereto was taxable to him.

Petitioners held interests in two partnerships. Held: The partners are accountable for their distributive shares of 1965 income measured by their percentage interests in the partnerships.

Held, gain from the liquidation of a corporation should have been recognized by petitioner (a cash basis taxpayer) in 1963 -- the year in… Held: gain from the liquidation of a corporation should have been recognized by petitioner (a cash basis taxpayer) in 1963 -- the year in which various securities held in the name of the liquidating corporation were delivered to a broker with instructions that new certificates be issued, pro rata, to the shareholders of the liquidating…

Petitioner incurred litigation expenses in connection with his unsuccessful prosecution of an action for the recovery of certain mining properties,… Held: Expenditures in connection with petitioner's unsuccessful attempt to establish an interest in property are nondeductible personal expenses. Petitioner's request for an accounting and damages was wholly dependent upon and incident to the determination of title and does not therefore affect the character of such litigation.

Held, in computing the loss realized upon the sale of property, petitioner is entitled to offset the sales proceeds by the expenses of sale,… Held: in computing the loss realized upon the sale of property, petitioner is entitled to offset the sales proceeds by the expenses of sale, notwithstanding his prior deduction of same as administration expenses on his estate tax return. Sec. 642(g), I.R.C. 1954, is applicable to statutory deductions rather than offsets.

1. Held, amount paid as prepaid interest in a transaction wherein petitioners purchased an apartment building was not deductible because the installment debt and prepayment-of-interest provisions in… Held: amount paid as prepaid interest in a transaction wherein petitioners purchased an apartment building was not deductible because the installment debt and prepayment-of-interest provisions in the purchase contract were shams and lacking in substance.

Held: The issuance of stock, property of the community, to the decedent and her husband as joint tenants with the right of survivorship did not, under Texas community… Held: The issuance of stock, property of the community, to the decedent and her husband as joint tenants with the right of survivorship did not, under Texas community property law, prevent ownership of one-half of such stock from vesting in the petitioner (the heir at law) upon the death of decedent's husband.

Held: 1. Petitioners are not entitled in these cases to recoupment of taxes paid on corporate distributions in 1960 because of our holding that they are liable as transferees to the extent of these… Held: Petitioners are not entitled in these cases to recoupment of taxes paid on corporate distributions in 1960 because of our holding that they are liable as transferees to the extent of these distributions for unpaid taxes of the corporation. 2.

Petitioners were beneficiaries in a profit-sharing trust established by their employer, a subsidiary of Crucible Steel Co. The subsidiary was merged into the parent. Held: a distribution made pursuant to such election was not made on account of a separation from service of their employer within the meaning of sec. 402(a) (2), I.R.C. 1954.

The petitioner-wife's daughter, a girl of average to above-average intelligence, suffered from an emotional disturbance which caused her to withdraw from reality and to be incapable of functioning… Held: the school was a special school within the meaning of sec. 1.213-1(e)(1)(v)(a), Income Tax Regs., and the tuition paid by the petitioners during the year in issue was expended for medical care within the meaning of sec. 213(e)(1) of the 1954 Code.

A and B were the sole stockholders of a corporation which owned and operated certain rental property. Held: A and B held the property as partners; (2) the election to take advantage of the nonrecognition provisions of sec. 1033, I.R.C. 1954, was open only to the partnership, pursuant to sec. 703(b), and therefore the reinvestments by A and B individually did not qualify for nonrecognition under sec. 1033; (3) the Commissioner is not…

Held, on the facts presented, that payments made by petitioner subsequent to the issuance of a restraining order requiring him to live… Held: on the facts presented, that payments made by petitioner subsequent to the issuance of a restraining order requiring him to live separate and apart from his wife and children and prior to the issuance of a temporary support order specifically directing the petitioner to pay his wife a specified amount for her support and that of…

The petitioners, together with the majority of the other residents and property owners in a housing subdivision, entered into a contract with a contractor to install water and sewer lines in their… Held: that the transfer by the petitioners to the village of their interest in the water and sewer system did not constitute a deductible charitable contribution under sec. 170, I.R.C. 1954.

Petitioner sold a residence in 1965 previously held for income-producing purposes, and on a page attached to his untimely return for that year, stated that he elected to treat the disposition as an… Held: Petitioner, having elected the installment method of reporting income, which was an acceptable method although the computation was inaccurate, is bound by such election and he cannot, after audit by respondent, choose a different method.

Petitioners, husband and wife, paid all the medical expenses attributable to an aunt's residence in a nursing home with funds consisting… Held: since the amount of the aunt's pension income exceeded $ 600, petitioners are not entitled to an exemption deduction for her; held, further, petitioners are entitled to deduct as medical expenses for the aunt only the amounts paid with their own funds; they are not entitled to deduct the amounts paid with the aunt's pension income.

Petitioners had ordinary taxable income during the taxable year of approximately $ 24,000 and taxable income derived from net long-term capital gain of approximately $ 56,500 (50 percent of capital… Held: respondent's determination upheld as in conformity with statute and not unconstitutional.

1. The petitioner has, since 1951, been engaged in farming. He failed to file income tax returns for the taxable years 1951 through 1963. Held: that, under the circumstances, the respondent's method of computing and allocating the increase in net worth was proper. Held, further, that in determining the petitioner's net worth as of Dec. 31, 1963, the respondent properly used the cost of assets rather than the fair market value thereof. 2.

In 1965, petitioners lost the use and occupancy of their home as a result of a fire in their kitchen. Held: that the insurance proceeds paid to reimburse petitioners for additional living expenses occasioned by the fire constitute gross income to them under sec. 61, I.R.C. 1954. I. Hal Millsap, Jr., 46 T.C. 751, 762, affd. 387 F. 2d 420 (C.A. 8, 1968), followed for years prior to 1969. Sec. 123, as added by Tax Reform Act of 1969.

The petitioner consistently valued its inventory by use of the prime cost method including in inventory only the cost of direct labor and materials. The respondent determined that such method did not clearly reflect the petitioner's income and that its inventory should be valued by use of the full absorption method.

Petitioner, as a named secondary beneficiary under qualified employee trusts (within the meaning of sec. 401(a) of the Internal Revenue Code of 1954), received lump-sum distributions therefrom after… Held: such distributions were not made on account of the employee's death within the meaning of sec. 402(a)(2), I.R.C. 1954, and capital gains treatment is not allowed.