Volume 55 — Tax Court Reports

Petitioner moved from the United States to Australia and in doing so incurred unreimbursed moving expenses. Held: petitioner is entitled to a deduction under sec. 217. Moving expenses are personal family expenses and as such are not disallowed by sec. 911(a).

Held: 1. Petitioners are not entitled to deductions for dependency exemptions for two minor children in 1966 because they did not provide more than half of their total support under sec. 152(a)(1),… Held: Petitioners are not entitled to deductions for dependency exemptions for two minor children in 1966 because they did not provide more than half of their total support under sec. 152(a)(1), I.R.C. 1954. 2.

An employment agreement required the employer to maintain insurance policies on the employee as a means of funding the employer's obligation to make deferred compensation payments. Held: the employee realized taxable income when the policies were transferred to him following termination of his employment rather than when the premiums thereon were paid.

Howard Straughn purchased 170 acres of land and changed the crops thereon from wheat and cotton to Emperor table grapes. Held: Straughn's expenses for subsoiling and leveling the land are deductible under sec. 175, I.R.C. 1954; his use of the land was substantially a continuation of the use which was made of the land immediately prior to its acquisition. Sec. 1.175-4(a)(2), Income Tax Regs., applied.

Sec. 483 was enacted on Feb. 26, 1964, and provided for the imputation of interest to certain deferred payments received upon the sale or exchange of property. Held: the application of sec. 483 to a sale completed less than 2 months prior to its enactment was not violative of the due process clause of the fifth amendment.

The petitioners incurred attorneys' fees and related expenses in pursuance of two causes of action. Held: petitioners are not entitled to deduct their legal fees under either sec. 162(a) or sec. 212, I.R.C. 1954. The expenditures were incurred in acquiring or in defending or perfecting title to property. Sec. 1.212-1(k) and (n), Income Tax Regs.

Petitioners, subsequent to the completion of two gas wells on certain property, entered into an oral agreement to participate in the… Held: Petitioners were not operators entitled to deduct intangible drilling costs with respect to the two wells drilled prior to their oral agreement to participate in the venture but were operators entitled to deduct intangible drilling costs with respect to the three wells drilled after their oral agreement to participate but prior to…

Held, a third-party note, assigned and guaranteed by the purchaser and received by the seller in the year of sale, is not an evidence of… Held: a third-party note, assigned and guaranteed by the purchaser and received by the seller in the year of sale, is not an evidence of indebtedness of the purchaser, and the fair market value of the note must be taken into consideration in determining the profit to be reported in the year of sale under the installment sale provisions…

The petitioner is in the business of manufacturing aircraft and nonaircraft governors. Held: the respondent abused his discretion in determining that certain income earned by the foreign subsidiary corporation should be reallocated to the petitioner under sec. 482, I.R.C. 1954, and the petitioner has established that its sales of aircraft controls to the foreign subsidiary corporation were at an arm's-length price.

Held: During his lifetime, decedent failed to effectively resign his trusteeships or to release his power under each of the trusts in question to accumulate or distribute the income of the trusts. Held: During his lifetime, decedent failed to effectively resign his trusteeships or to release his power under each of the trusts in question to accumulate or distribute the income of the trusts.

1. Held, that advances received by the petitioner from his employer constituted payments for services to be rendered in the future, rather than loans, and that such advances constituted taxable… Held: that advances received by the petitioner from his employer constituted payments for services to be rendered in the future, rather than loans, and that such advances constituted taxable income to the petitioner in the years received. 2.

Held, an allocable portion of depreciation and maintenance expenses with respect to property owned by the corporate petitioner is deductible by the corporation. Held: an allocable portion of depreciation and maintenance expenses with respect to property owned by the corporate petitioner is deductible by the corporation. Such property was acquired and used for both personal and business purposes. Allocation determined.

Petitioner's grandmother received from the State old-age assistance payments and health insurance, the value of which, in the aggregate, exceeded the amount spent by petitioner on the support of his… Held: on the facts, petitioner provided over one-half the total support received by his grandmother in the taxable year 1967.

Petitioner, an unmarried, past or present, male, deducted $ 600 for care of his invalid mother under sec. 214, I.R.C. 1954. Held: the legislative history of sec. 214 plainly discloses that petitioner is not within that class of persons covered by sec. 214. Held, further, there is no violation of due process since all members of the class of persons to which petitioner belongs are treated similarly.

In the allocation of certain expenses among separate mining properties in order to determine the amount of taxable income for the purposes of the 50-percent limitation contained in sec. 613(a), I.R.C. 1954: (1) Petitioner's payments of 40 cents per ton to the United Mine Workers of America Welfare and Retirement Fund constitute direct expenses and should be allocated among the separate mining properties in proportion to tonnage sold.

Held: 1. Amounts expended to acquire upland cotton acreage allotments were capital expenditures and not deductible as ordinary and necessary… Held: Amounts expended to acquire upland cotton acreage allotments were capital expenditures and not deductible as ordinary and necessary business expenses. Secs. 263 and 162, I.R.C. 1954. 2. A legal fee paid in connection with the partition of inherited lands was also a nondeductible capital expenditure under sec. 263, I.R.C. 1954.

Petitioner's 1966 income tax return bore an address in Milwaukee, Wis. Held: petitioner's last known address, within the meaning of sec. 6212(b)(1), I.R.C. 1954, with respect to the notice of deficiency for 1966 was the one listed in his 1966 income tax return.

The petitioner exercised a stock option granted to him by the life insurance company for which he was an agent. Held: the petitioner was an employee of the company, and the stock option qualified as a restricted stock option under sec. 424, I.R.C. 1954.

Pursuant to a divorce decree which incorporated a property settlement based on an oral agreement summarized in court, petitioner… Held: under the fact, here shown the $ 125,000 was not paid in settlement of petitioner's marital rights in property owned by her husband, nor in lieu of a division of such property, but more nearly resembled an amount received by petitioner from a sale of her own interest in stock which was the manner in which she reported the transaction…

Decedents and their family owned virtually all of the units in a voting trust which held a majority of the shares of a stock life… Held: In determining the units' fair market value for gift and estate tax purposes, the first-offer restrictions were a relevant factor to be considered along with all of the other relevant valuation factors, and neither the over-the-counter price of the underlying shares nor the formula price represented the absolute index of fair market…

Corporation A owned 100 percent of the stock of corporation B, an American subsidiary, and corporation C, a foreign subsidiary. Held: the various steps, including the liquidation of corporation B, were integral parts of a reorganization of corporation B within the purview of sec. 368(a)(1)(D) and the gain to corporation A upon the surrender of its stock in corporation B is taxable as a dividend solely under sec. 356(a)(2) to the extent of the undistributed earnings…

Held: The notice of deficiency was mailed to taxpayer at her last known address and the Tax Court is without jurisdiction to redetermine deficiencies when the petition was not filed… Held: The notice of deficiency was mailed to taxpayer at her last known address and the Tax Court is without jurisdiction to redetermine deficiencies when the petition was not filed within 90 days after the notice of deficiency was mailed to the taxpayer. Respondent's motion to dismiss granted.

Decedent transferred stock in a closely held corporation to a trust, and under the terms of the trust instrument the transfer was a complete one within the meaning of sec. 2036, I.R.C. 1954. Held: decedent did not retain either the possession or enjoyment of the stock within the meaning of sec. 2036(a)(1), I.R.C. 1954, or the right to designate the persons who shall possess the stock or the income therefrom within the meaning of sec. 2036(a)(2), I.R.C. 1954.

Held, the Commissioner properly determined that petitioner, who had earned income from sources without the United States, could not claim a deduction from gross… Held: the Commissioner properly determined that petitioner, who had earned income from sources without the United States, could not claim a deduction from gross income, of a portion of her expenses, since a portion of such expenses was properly allocable to or chargeable against amounts excluded from gross income.

A corporation organized for the development of real estate subdivisions and the construction and sale of houses was liquidated in 1963, after it had realized 100 percent, 93 percent, and 56 percent,… Held: the corporation was not a collapsible one within the meaning of sec. 341, I.R.C. 1954, because, at the time it was liquidated, it had already realized a substantial part of the taxable income to be derived from its real estate subdivision property.

It is the opinion of the Tax Court that to qualify for a deduction under sec. 166(a)(1), I.R.C. 1954, as a business bad debt, a taxpayer must prove that the primary and dominant motivation for… Held: In this case the Tax Court will apply the significant motivation test approved by the Court of Appeals for the Fifth Circuit in United States v. Generes, 427 F. 2d 279 (C.A. 5, 1970), that being the circuit within which this case arose. See Jack E. Golsen, 54 T.C. 742.

Held: Petitioners denied dependency exemption deductions for two grandsons who were college students having more than $ 600 in gross income during the taxable year. Held: Petitioners denied dependency exemption deductions for two grandsons who were college students having more than $ 600 in gross income during the taxable year. Instructions accompanying Federal income tax return (Form 1040) did not support petitioners' claim.

The stock of C. F. Mueller Co. (Mueller) was held in trust for the exclusive benefit of the School of Law of New York University. Held: the purported charitable contributions were made for the benefit of the only entity having a beneficial interest in Mueller and are, in the circumstances of this case, nondeductible dividend distributions.

Although employed as a welfare field representative by the Minnesota Department of Public Welfare, petitioner lacked the desirable qualification of a master's degree. Held: the stipend was not a scholarship excludable under sec. 117. Aileene Evans, 34 T.C. 720, no longer followed.

The petitioner and its subsidiaries filed consolidated returns for the calendar years 1961, 1962, and 1963. Held: since it is conceded that the enactment of the Revenue Act of 1964 (Pub.

Held, amounts expended for the retention of a Christian Science practitioner whose services, during the years in issue, were availed of solely by petitioner's treasurer-board chairman, were not… Held: amounts expended for the retention of a Christian Science practitioner whose services, during the years in issue, were availed of solely by petitioner's treasurer-board chairman, were not properly deductible by petitioner as an ordinary and necessary expense of its business.

The corporation in which petitioners were equal shareholders received rents during its taxable years ended May 31, 1960 and 1961, in excess of 20 percent of its gross… Held: that the corporation's election to be treated as a small business corporation under subchapter S of the Internal Revenue Code of 1954 was terminated for its taxable year ended May 31, 1960, and for its succeeding taxable years under sec. 1372(e)(5) of the Code; that sec. 1372(e)(5) as amended by Pub.

Petitioner owned 812 of 1,353 shares of Highland Co., a road construction corporation, having a total basis of $ 62,440. Held: petitioner is not entitled to a capital loss deduction for the taxable year 1965 on the stock which she owned in the Highland Co. Secs. 302 and 317(b), 331(a)(1), 331(a)(2) and 346, and 165, I.R.C. 1954.

The petitioner, a publicly owned corporation, issued 50-year 6-percent income debentures in exchange for most of the outstanding stock of one class. Held: the debentures are instruments of indebtedness on which interest is deductible when accrued, including the interest attributed to the 15-month period prior to issuance.

Held, amounts remaining in a pension plan account on the date of death of petitioner's decedent were properly included in her (decedent's) gross estate. Held: amounts remaining in a pension plan account on the date of death of petitioner's decedent were properly included in her (decedent's) gross estate.

Petitioner was a New York police officer. He was injured in line of duty. He incurred medical expenses of $ 3,857.50. He sued the City for $ 500,000. Held: petitioner was not entitled to the deduction under sec. 213, I.R.C. 1954, because he was compensated for the expenses.

T, a domestic building and loan association, claimed deductions on its Federal income tax returns for additions made to a bad debt… Held: assuming that copies of the income tax returns could otherwise qualify as part of petitioner's books of account, petitioner has failed to establish that any such copies were in fact maintained as a permanent part of its regular books of account as required by sec. 1.593-7(a), Income Tax Regs.Held further, in the alternative, copies…

The Commissioner disallowed several deductions -- including the deduction for additions made to a bad debt reserve for qualifying real property loans -- claimed for the taxable year by T, a domestic… Held: where the deduction for additions to bad debt reserves was fatally defective in the first instance, sec. 1.593-5(b)(2) of the regulations does not permit the petitioner to deduct a recomputed addition to its reserves measured by the increase in its taxable income.

Under their 1963 partnership agreement, partners A and B were to share equally the gains and losses from the operation of two apartment houses as well as the… Held: the special allocation of depreciation was made for the principal purpose of the avoidance of tax within the meaning of sec. 704(b), I.R.C. 1954, and consequently, the computation of A's share of the partnership losses during 1966 and 1967 may include only 50 percent of the allowable depreciation on the houses.

The petitioner received periodic payments from her former husband pursuant to a written agreement incident to their divorce. Held: such payments are in discharge of a legal obligation incurred by the husband because of the marital relationship and are taxable to the petitioner.

Held: Sec. 1.1302-3(b), Income Tax Regs., providing that for purposes of the averaging computation base period income may never be less than zero, is valid. Held: Sec. 1.1302-3(b), Income Tax Regs., providing that for purposes of the averaging computation base period income may never be less than zero, is valid.

1. The petitioner established an inter vivos trust under the terms of which income and principal was to be used for the college education of his grandnieces and grandnephews. Held: Charitable deduction was properly disallowed. The trust was established for a private rather than the public charitable purpose required by sec. 2522(a)(2), I.R.C. 1954. 2. The petitioners made gifts in trust for the benefit of their minor grandchildren in December of 1964.

The oral agreements entered into between petitioner Hyman Podell and a real estate operator in 1964 and 1965 established a joint venture for the purpose of purchasing, renovating, and selling certain… Held: amounts received by the petitioner on the sale of certain real estate are taxable as ordinary income under sec. 61.

During 1966 petitioner was a postdoctoral resident research associate with the National Bureau of Standards. Held: no part of the stipend received from the Bureau was excludable from income in 1966 as a fellowship grant within the meaning of sec. 117(a)(1)(B), I.R.C. 1954.

1. Taxpayer by agreement paid part cash and executed two promissory notes for all of the stock of corporations A, B, C, and D, which stock was… Held: the above transaction constituted a redemption of stock by A under sec. 304(a)(1) which redemption did not result in an exchange of stock under sec. 302(b)(1), hence any distribution of property to taxpayer in the year of the agreement (1963) was taxable as a dividend under sec. 301(a) to the extent of A's earnings and profits.

Petitioner paid $ 40,000 to acquire right to lease additional space under a lease which had a remaining 17 months of the original term with option to renew for an additional year. Held: sec. 178(a), I.R.C. 1954, governs the amount of amortization deduction to which petitioner is entitled, and under that section the $ 40,000 is amortizable over the period of the remaining term of the lease plus the option period.

On their joint Federal income tax return for 1963, the taxpayers elected to capitalize certain tax and interest payments pursuant to sec. 266, I.R.C. 1954, and the regulations promulgated thereunder. Held: the taxpayers' initial election may not be revoked.

Held: Petitioner's unreimbursed expenses incurred in using his plane on trips benefiting his employer and expenses attributable to its personal use are not deductible as business… Held: Petitioner's unreimbursed expenses incurred in using his plane on trips benefiting his employer and expenses attributable to its personal use are not deductible as business expenses. Accordingly, his effort to impute income to such uses and deduct expenses attributable thereto must fail.

Petitioner sought to exclude itself from classification as a personal holding company on the ground that it was a lending and finance company satisfying all the requirements of sec. 542(c)(6). Held: the withdrawals were in fact loans within the meaning of sec. 542(c)(6)(D) and, therefore, petitioner was a personal holding company during 1965.

Petitioners own 100 percent of the issued and outstanding stock of corporations A and C. Corporation A owned 100 percent of the stock of corporation B. Between 1960 and… Held: the distribution of the stock of corporation B by corporation A to petitioners in 1965 constitutes a taxable dividend since corporation B was not engaged in the active conduct of a trade or business for the 5-year period preceding such distribution. Sec. 355 (b); sec. 1.355-1(c)(3), Income Tax Regs.

The Coates family owned all of the shares of CAM corporation and WIP corporation. CAM purchased the shares of WIP. Held: 1. Held: The Rose Ann Coates Trust, not Rose Ann Coates, was the proper taxpayer where Rose Ann Coates had agreed by mutual will to place her community shares in trust, and the transaction occurred after the death of her husband. 2.

Petitioner used insurance proceeds totaling $ 110,000, paid for destruction of property by fire, in an attempt to save a financially troubled corporation owned and controlled by his wife. Held: petitioner realized a long-term gain upon receipt of part of the proceeds, which he held under a claim of right, provisions in a lease to the contrary notwithstanding.

Decedent entered into an arrangement with a contractor in order to dispose of certain fill dirt and other materials from decedent's property and to have the property left in such condition that its… Held: in the circumstances of this case, the gain reflected in the payments made in return for the materials is taxable as ordinary income rather than as capital gain.

Petitioner, desirous of becoming supervisor within the framework of Alabama Market Centers, Inc., paid a total of $ 2,420 to that organization in 1967. Held: $ 1,800 represented cost or expense of acquiring a capital asset and as such constituted capital expenditure.

Held: Petitioners did not prove that they contributed more than one-half of the support for four minor children during the year in issue, and therefore are not entitled to deductions for personal… Held: Petitioners did not prove that they contributed more than one-half of the support for four minor children during the year in issue, and therefore are not entitled to deductions for personal exemptions. Secs. 151 (a) and (e) and 152(a), I.R.C. 1954. Sec. 152(e) not applicable.

Petitioner, president and owner of all issued stock of Fidelity, decided to retire and gave Skinner, a lawyer, an option to purchase all of his stock for $ 1,500,000. Held: For the purposes of this case, the substance of each transaction, except for the override agreement, was consistent with its form, and the reinsurance agreement constituted a sale of Fidelity's insurance business as determined by respondent. Secs. 332 and 381 were not applicable.

The decedent established an inter vivos trust, appointing his son as trustee, and transferred property thereto with the direction that… Held: that the decedent did not retain or reserve the possession or enjoyment of, or right to the income from, the property transferred inasmuch as the income or property was not to be applied toward the discharge of his legal obligation to support his wife, the use for such purpose being within the discretion of the trustee, and therefore…

In 1967 petitioner was employed by the University of Minnesota on a part-time basis as a graduate teaching assistant in the zoology department. Held: petitioner is not entitled to a deduction under sec. 162(a), I.R.C. 1954, and sec. 1.162-5, Income Tax Regs. (1967), for expense he incurred in taking graduate courses while serving as a graduate teaching assistant.

Petitioner sold to A corporation property consisting of land and building for $ 500,000 in the following manner: A would assume a $ 400,000 mortgage and execute a $ 100,000 purchase-money mortgage… Held: Petitioner cannot avail itself of the installment method of sec. 453, I.R.C. 1954, which requires the receipt of at least two payments or installments. The elimination of the initial-payments rules of prior law did not change this requirement.

Huber Homes was engaged principally in the construction and sale of single-family houses. Huber Investment, its wholly owned subsidiary, was engaged principally in the real estate rental business. Held: there was no income to distribute, apportion, or allocate within the meaning of sec. 482, and the Commissioner's determination is not authorized by that section.

The petitioner, who was a field auditor for the Defense Department, incurred some transportation expenses which were not reimbursed in traveling to… Held: the petitioner failed to prove that such expenses were ordinary and necessary expenses of his trade or business and not the result of his personal choice as to a place to live; and (2) the petitioner failed to prove that he was required to travel in his own automobile in order to carry the materials relating to his work.

1. During 1965 petitioners made payments to three parochial schools for tuition and books for their children. Held, the expenses are personal and not deductible as charitable contributions. 2. Held: the expenses are personal and not deductible as charitable contributions. 2. Petitioner Donald W. Fausner, an airline pilot, regularly drove to work transporting himself, a flight kit bag, and an overnight bag.

The petitioner-husband, an airline flight officer, regularly used his private automobile to drive to and from work. Held: the automobile expenses in question represented nondeductible personal commuting expenses under sec. 262 of the 1954 Code, and no portion of the total amount was properly deductible under sec. 162, 1954 Code.

H and W owned improved real estate used in a business operated by H. This property was condemned. Held: an election under sec. 1033(a)(3)(A) to defer recognition of the gain realized on the condemnation was available to the decedent's widow and his estate in a properly filed joint return for the year of decedent's death, as the testamentary trustees were acting on his behalf in making the replacement.

Statute of Limitations for Transferees of Transferees. -- Sec. 311(b)(2), I.R.C. 1939, provides that the period of limitation for assessment of the liability of a transferee of a… Held: The phrase court proceeding for the collection of the tax or liability in respect thereof in the clause of exception to sec. 311 (b)(2), I.R.C. 1939, refers solely to a court proceeding for the collection of a tax, not to a Tax Court proceeding for the redetermination of liability. 2.

Held: 1. Under sec. 357(c), I.R.C. 1954, petitioner had a taxable gain to the extent that her and her deceased husband's liabilities assumed by newly formed corporation A exceeded the adjusted basis… Held: Under sec. 357(c), I.R.C. 1954, petitioner had a taxable gain to the extent that her and her deceased husband's liabilities assumed by newly formed corporation A exceeded the adjusted basis of assets transferred in a sec. 351 exchange. 2.

By a deed of gift, decedent and his spouse transferred a 372-acre farm to their four children and contemporaneously rented the farm from the children at its fair rental value. Held: decedent did not retain possession of enjoyment of the farm or the right to the income therefrom within the meaning of sec. 2036(a), I.R.C. 1954.

In 1959, taxpayer, an open-pit mining operator, acquired the fee title to a tract of land, containing commercially marketable limestone deposits, subject to a right-of-way for an existing gas… Held: such expenses constitute part of the cost of the mineral rights and are not currently deductible as development expenditures under sec. 616(a) or as ordinary and necessary business expenses under sec. 162(a), I.R.C. 1954.

Mason & Dixon, a motor carrier of freight, was the sole shareholder of Interstate, Motorways, and Regal. Held: The distribution of the stock of Interstate, Motorways, and Regal to its shareholders (the petitioners) by Mason & Dixon on Oct. 4, 1963, constitutes a taxable dividend. The subsidiaries were not engaged in the active conduct of a trade or business during the 5-year period prior to the date of distribution. Sec. 355(b), I.R.C. 1954.

In order to furnish bonds required for the performance of certain construction contracts for the board of education it was necessary for… Held: Despite the fact that Rosenblum's capital contribution was cast in the form of preferred stock, all facts and circumstances indicate that in substance the transaction was a joint venture. There was a contract that a joint venture be formed, the contribution of money, an agreement for joint control, and an agreement to share profits.

The envelope containing the petition was deposited in a U.S. Post Office on the 90th day of the period provided by sec. 6213(a), I.R.C. 1954. Held: evidence that the envelope would have been postmarked within the 90-day period is inadmissible and respondent's motion to dismiss for lack of jurisdiction is granted.

Petitioner, an attorney, incurred legal and related expenses incident to his contest of his father's will which had disinherited him and which contained statements expressing the decedent's wish that… Held: that petitioner has not shown that such expenses constituted ordinary and necessary expenses incurred in carrying on his business as an attorney under sec. 162(a), I.R.C. 1954.

1. Monthly payments by petitioner to his former wife in the amount of $ 1,700 during 1964 were alimony within the meaning of secs. 71 and 215, I.R.C. 1954, to the extent of $ 1,000 and capital investments for the acquisition of part of her share of the community property to the extent of $ 700. 2.

T corporation operated an authorized Ford dealership in Philadelphia, Pa. Held: the payment is includable in T's income and is not excludable as a contribution to capital.

Prior to his death decedent and his wife, residents of California, placed 7,500 shares of stock in trust with their niece's children as beneficiaries and the niece as trustee. Held: The trust is revocable and decedent's community property portion must be included in his estate under sec. 2038, I.R.C. 1954. The subsequent writing incorporating the terms of the prior oral trust is an effective instrument, and the express provision allowing revocation is operative.

The petitioner, a real estate broker, paid an initiation fee to join a listing service. Held: the initiation fee was a capital expenditure, and hence was not deductible under either sec. 162(a) or sec. 212(1), I.R.C. 1954.

Petitioners established and periodically funded certain substantially identical trusts for their minor children and grandchildren. Held: by virtue of sec. 2503(c), I.R.C. 1954, petitioners' transfers to the trusts were not gifts of future interests of property for the purposes of sec. 2503(b), I.R.C. 1954.

The petitioner executed a note to a hospital in 1964 to pay for the medical expenses of his dependent sister. Held: no part of the amount paid on the bank loan in 1965 is deductible as a medical expense paid in that year.

Petitioner husband herein was an international airline pilot who traveled by automobile between his home and John F. Kennedy Airport. Held: although petitioner husband would have traveled by automobile in any event, an allocation of his automobile expenses is required in this case by virtue of Sullivan v. Commissioner, 368 F. 2d 1007 (C.A. 2, 1966), and Jack E. Golsen, 54 T.C. 742 (1970), on appeal (C.A. 10, May 4, 1970).

Petitioner, a nonprofit corporation, received funds from Ford Motor Co. auto dealers which, under a written agreement, were to be expended solely for the not-for-profit purposes of the fund in… Held: petitioner held all funds in trust, and could realize no gain or profit as a result of their receipt; hence said funds are not includable in petitioner's gross income.

An interlocutory judgment of divorce was entered by a California court on Sept. 14, 1965, in favor of T's husband, adjudicating the property rights of the spouses. Held: in the circumstances of this case, T must include in her gross income for 1965 one-half of the community income received by her husband during 1965 up to the date of the interlocutory decree of divorce.

The petitioner found no suitable employment in the vicinity of his family residence, so he accepted positions in other localities, but did not change his residence. Held: his duplicate living expenses were incurred because of his personal choice of a place of residence rather than because of the demands of his trade or business, and therefore are nondeductible.

Petitioner is a nonprofit New York membership corporation organized and operated for: (1) The preservation and conservation of the Adirondack forests and the proper protection of… Held: to the extent the expenses incurred in maintaining and providing facilities and services for members exceeded the income received therefrom, they are not deductible under sec. 162(a), since they did not arise from the carrying on of any trade or business within the intendment of that section.

Proceedings by the United States to condemn the equity of the corporate taxpayer in Wherry project property were commenced on Dec. 18, 1957, and $ 83,000 was deposited with the U.S. District Court as… Held: that, under the circumstances of this case, the gain attributable to the assumption of the mortgage is taxable to the corporation in its fiscal year 1959.

C.F.U. granted nonexclusive licenses in patents which it held. C.F.U. then sold its remaining interests in the patents to petitioners. Held: that petitioners transferred all substantial rights which they held in the patents, and thus the amounts they received qualify as capital gains.

Incident to divorce proceedings, petitioner sold his interest in a motel to his former wife. Held: on the facts, that petitioner sustained a loss, and such loss was deductible under sec. 165, I.R.C. 1954.

Petitioner Charles H. Hansen entered into agreements on Nov. 23, 1962, to purchase all the stock of petitioner Pacific Coast Music Jobbers, Inc., whereby the sellers would receive $ 25,000 plus… Held: Hansen became a shareholder of Pacific on Nov. 23, 1962, and his failure to consent to Pacific's election under sec. 1372 not to be subject to tax caused a termination of that election.

In 1969 respondent mailed a notice of deficiency to The Cincinnati Transit Company determining deficiencies in its income taxes for the years 1956-64. Held: Respondent's motion is granted. No notice of deficiency nor notice of transferee liability has been mailed to Transit, Inc., and this Court has no jurisdiction over Transit, Inc.Transit, Inc., may not join in this proceeding as a party-petitioner.

In 1966, the petitioner resigned her position as teacher of Germanic languages and commenced full-time study leading to a Ph.D. degree in that field. Held: expenditures incurred by the petitioner in connection with graduate studies in 1967 are nondeductible personal expenses. The petitioner failed to prove that she was engaged in carrying on a trade or business within the meaning of sec. 162(a), I.R.C. 1954.

At the date of his death, decedent held certain assets as custodian for his three minor children under the Wisconsin Uniform Gifts to Minors Act. Held: the assets held by decedent as custodian are includable in his estate under both secs. 2036 and 2038, I.R.C. 1954.

Petitioners purchased two $ 20,000 life insurance policies calling for annual premiums in excess of $ 26,000 on each policy and… Held: the loans of the guaranteed annual return did not represent true indebtedness, and purported interest payments thereon are not allowable as deductions under secs. 162(a), 163(a), or 212(1), I.R.C. 1954; held, further, interest payments on loans attributable to the cash values of the life insurance reserves are deductible as interest…

Petitioner's income tax returns claimed various expenses as deductions for 1950 and 1951 which were spurious and fictitious and unrelated to its business operations, dominated and controlled by its… Held: petitioner not barred by collateral estoppel from denying its fraud because of conviction of its president for filing and causing to be filed a false and fraudulent corporate return for 1951. C.B.C. Super Markets, Inc., 54 T.C. 882 (1970), followed.

Held, respondent's allocation under sec. 482 of the Internal Revenue Code of 1954 of a substantial portion of the sales income of a Swiss… Held: respondent's allocation under sec. 482 of the Internal Revenue Code of 1954 of a substantial portion of the sales income of a Swiss subsidiary in 1960 and 1961 to its domestic parent, a manufacturer of glass, paint, and chemical products, is not sustained; held, further, the existence of a long-standing interest-free indebtedness…

Taxpayer did not compute or pay any self-employment tax in 1966 under sec. 1401, I.R.C. 1954, though he had self-employment income. Held: taxpayer is still subject to self-employment tax.

Held: 1. The mere filing of a suit by the seller to rescind the sale of stock did not postpone the realization of taxable gain. 2. Held: The mere filing of a suit by the seller to rescind the sale of stock did not postpone the realization of taxable gain. 2. Neither the acquisition by the seller of options to purchase a part of the stock sold nor the receipt of the stock on the exercise of the options resulted in a rescission of the sale. 3.

Petitioner, a life insurance company, is entitled to exclude the loading portion of deferred and uncollected premiums and due and unpaid premiums in computing assets under sec. 805(b)(4), I.R.C. 1954, and gross amount of premiums for the purposes of sec. 809(c)(1), I.R.C. 1954.

Corporation A was recapitalized in 1964 and liquidated in 1965. The Commissioner seeks to strip the recapitalization of its tax-free nature due to the lack of a business purpose. Held: on the record herein, one which is fully stipulated, the petitioners have shown a valid business purpose for the recapitalization, and the Commissioner's reliance on inference is not sufficient to strip the transaction of its otherwise tax-free character. Sec. 368(a)(1)(E), I.R.C. 1954.

In January 1960, petitioner paid $ 7,700 to Maurice H. Kamm for 770 shares of common stock of Kabak Corp. These shares were thereafter issued to Kamm. They were never issued to petitioner. Held: petitioner failed to prove theft loss in 1963 since he did not prove $ 7,700 was obtained from him by false pretenses. Held, further: Petitioner failed to prove he sustained any deductible loss in 1963. Accordingly, respondent's disallowance of deduction was proper.

National, a corporation whose principal business was the ownership and operation of commercial real estate, was principally owned by three… Held: the fair market value of the hotel at the date of sale was $ 830,000, not $ 661,280.21, the amount paid for it; held, further, the Honigmans realized a taxable dividend in an amount equal to the difference between the fair market value of the hotel and the amount paid for it; held, further, the dividend does not qualify under sec.…

During the years in issue, the petitioner and D lived together as man and wife, although they were not married. Held: the funds transferred directly to the petitioner and to the brokerage account in her name and the funds spent for the improvement of her realty, to the extent not expended for D's purposes, were gifts to her rather than compensation for services, because D's predominant motive in making the transfers was personal affection and…

The taxpayer first elected the double-declining-balance method of computing depreciation for certain motel properties but now concedes that such method was not available to it and seeks to adopt the… Held: as the taxpayer had not previously regularly used the double declining-balance method, its adoption of the 150-percent declining-balance method was not a change of depreciation method and, hence, did not require the Commissioner's consent.

Held, on the facts presented the petitioners have failed to carry their burden of proving that certain municipal franchises for CATV have… Held: on the facts presented the petitioners have failed to carry their burden of proving that certain municipal franchises for CATV have determinable useful lives. Accordingly, the respondent's determination that deductions for depreciation under sec. 167 (a), I.R.C. 1954, with respect to these franchises were not allowable is sustained.

1. Petitioner furnished more than half of the support of her son and is, therefore, entitled to a dependency exemption deduction for him for 1966. Secs. 151, 152, I.R.C. 1954. 2. Real property taxes for 1965 and 1966 on a residence owned by petitioner's mother were not imposed upon petitioner and are not deductible by her under sec. 164(a), I.R.C. 1954. 3.

In an action for separation by petitioner against her then husband, the New York Supreme Court denied a motion for temporary alimony on condition that the… Held: the action of the Supreme Court did not constitute a currently enforceable judicial order or decree and consequently payments made by the husband, prior to the time of the separation decree directing that support payments be made, were not includable in petitioner's gross income under sec. 71(a), I.R.C. 1954.

Held, respondent's computations under Rule 50 adopted. Held, further, no jurisdiction to determine postassessment interest on jeopardy assessments. Held: respondent's computations under Rule 50 adopted. Held, further, no jurisdiction to determine postassessment interest on jeopardy assessments.

Held, the Commissioner's determination of discrimination in the operation of petitioner's pension plan under secs. 401(a)(3)(B) and 401(a)(4) is not arbitrary, unreasonable, or an abuse of… Held: the Commissioner's determination of discrimination in the operation of petitioner's pension plan under secs. 401(a)(3)(B) and 401(a)(4) is not arbitrary, unreasonable, or an abuse of discretion, and his determination is therefore sustained.

Renegotiation. -- Petitioner's motion that this Court rule that the burden of proof that petitioner realized excessive profits and the amount thereof is on respondent, denied.