Volume 64 — Tax Court Reports

Held, petitioner's sale in 1965 of all of his stock in his wholly owned subch. S corporation was not a bona fide arm's-length transaction and petitioner is taxable on the undistributed subch. Held: petitioner's sale in 1965 of all of his stock in his wholly owned subch. S corporation was not a bona fide arm's-length transaction and petitioner is taxable on the undistributed subch.

Harry E. Draper owned all the incidents of ownership in two insurance policies on the life of his wife, Elizabeth C. Draper, and was the beneficiary thereof. Held: the value of the two life insurance policies on Elizabeth's life is not taxable in Elizabeth's estate but is taxable in Harry's estate.

Rules 23(a)(1), 32(a), 34(a), 34(b)(7), 41(a), 41(d), and 60(a), Tax Court Rules of Practice and Procedure. -- A notice of deficiency was sent to Atlas Tool Co., Inc., Successor to Fletcher Plastics,… Held: Respondent's motion to dismiss will be denied and petitioner's motions to amend the caption and its pleadings will be granted.

Taxpayer was instrumental in acquiring certain property for development. Held: the transaction resulted in the sale or exchange of an option within the meaning of sec. 1234(a), I.R.C. 1954, on account of which the taxpayer realized a gain from the sale of a capital asset held for more than 6 months. Saunders v. United States, 450 F. 2d 1047 (9th Cir. 1971), distinguished.

Petitioner leased improved properties on 50-year and 46-year, 11-month leases from the Port, a public agency which financed construction of the improvements through the sale of industrial development… Held: no portion of the rent was nondeductible as advance rent.

In 1962, decedent created a trust in which he reserved many rights as to certain corporate stocks and provided that such stocks should go to his son and his daughter on his death. Held: that decedent made no taxable gift to his children by virtue of the 1962 trust. Held, further, that respondent has failed to prove that such trust was a backdated agreement, and that the shares of stock allegedly transferred in trust had actually been given outright to the children in 1962.

Petitioners were sole shareholders of A, a domestic corporation. A was organized solely for the purpose of holding stock interests in I, a British overseas trading corporation. Held: I is a controlled foreign corporation and the gain realized upon the sale of A stock is reportable as ordinary gain to the extent of earnings and profits. Secs. 957(a) and 1248, I.R.C. 1954. Held, further, I was liquidated at the time of the sale of stock in A corporation.

The corporations of which petitioners are transferees were classified as personal holding companies under provisions of the Internal Revenue Code added by the Revenue Act of 1964. Held: In order for a corporation to escape personal holding company treatment under the new provisions, a complete liquidation must have occurred before Jan. 1, 1966. The transferor corporations did not liquidate until after Jan. 1, 1966.

Held, petitioners' monthly receipts, measured by a percentage of the amounts received by Shell Oil Co. from the sale of water transported through pipelines laid on right-of-way across petitioners'… Held: petitioners' monthly receipts, measured by a percentage of the amounts received by Shell Oil Co. from the sale of water transported through pipelines laid on right-of-way across petitioners' land, are taxable as ordinary income.

Held, amounts paid to petitioners in 1969 as employees of the U.S. Air Force Europe Child Guidance Center in Wiesbaden, Germany, were paid by an agency of the United States and are not excludable… Held: amounts paid to petitioners in 1969 as employees of the U.S. Air Force Europe Child Guidance Center in Wiesbaden, Germany, were paid by an agency of the United States and are not excludable from petitioners' taxable income under sec. 911(a)(2), I.R.C. 1954.

A shareholder paid some of the debts of his corporation. Held, such payments were made to preserve his employment at another corporation and are deductible under sec. 162(a), I.R.C. 1954. Held: such payments were made to preserve his employment at another corporation and are deductible under sec. 162(a), I.R.C. 1954.

P corporation established S as a wholly owned foreign subsidiary. Held: S is not a controlled foreign corporation. Sec. 957(a), I.R.C. 1954.

Where the petitioner valued its inventory at the lower of cost or market, the Commissioner did not abuse the discretion vested in him under sec. 471, I.R.C. 1954, by reducing the petitioner's cost of goods sold and restoring to income the amount by which the petitioner reduced the value of its 1964 closing inventory to reflect the current net realizable value rather than current replacement cost of units of inventory determined to be excess under procedures in accordance…

The petitioner, a member of the Michigan Legislature, maintained a residence in the district which he represented, but he actually spent a majority of his working time in the State capital performing… Held: the petitioner's principal place of business was at the State capital, and consequently, he cannot deduct his expenses for meals and lodging while living there.

Petitioner Maurice Jarre contributed certain of his original music manuscripts and other related material, such as the score of Dr. Zhivago, to the University of Southern California in 1967 and 1968. Held: the fair market value of said gifts determined.

Rule 72, Tax Court Rules of Practice and Procedure. -- Petitioner filed a motion for an order requiring respondent to produce two revenue… Held: Respondent's objection to the production of the two district conferee reports, the appellate conferee reports, two conference memoranda, and certain other documents pertaining to the audit of petitioner's Federal income tax returns is sustained on the ground that they are protected from discovery by governmental privilege and one…

1. Amounts of management fees based on a percent of rentals received by partnerships which were accrued by partnerships and deducted but not paid to partners who reported income on a cash basis are not guaranteed payments under sec. 707(c), I.R.C. 1954. 2.

Where an erroneous refund has been made to a taxpayer in respect of an excessive carryback of a net operating loss, the Government has alternative remedies. The Commissioner may determine a deficiency in respect of the year of the refund, or the Government may proceed to recover the refund in a civil action brought in the name of the United States pursuant to sec. 7405.

Rendar paid no dividends during its 1968 fiscal taxable year but paid a dividend, adequate in amount to exhaust its "undistributed personal holding company income," before the 15th day of the third month following the close of such year. Held: Even assuming that Rendar had reasonable cause for failing to pay any dividends during its 1968 fiscal year, such reasonable cause is no defense to its failure to comply with sec. 563(b), which requires that some dividends must have actually been paid during its 1968 fiscal year. It is therefore liable for the 70-percent personal holding company tax as provided for in sec. 541.

Petitioners and their predecessors acquired the assets of three credit-reporting organizations including the voluminous files containing information used in the credit-reporting businesses. Held: The credit information is intangible property with a useful life of 6 years. Its value is separable from the goodwill and going-concern value of the acquired businesses. Held, further, amount of each purchase price allocable to the cost of the file determined.

Petitioner sells television picture tube warranty contracts which have various expiration dates. Held: petitioner, an accrual basis taxpayer, is not entitled to deduct currently its estimated costs to be incurred in the future in performing under the warranty contracts.

Petitioners became entitled to equal shares in a prize in the Irish Sweepstakes in 1969. Held: the prize money was income to petitioners in 1969.

Petitioner purchased land intending to construct new facilities. Held: The transaction was a bona fide sale and not an exchange of property for a leasehold with cash as boot. Therefore, sec. 1031 is not applicable and the loss must be recognized.

The Commissioner, on Apr. 13, 1972, made a jeopardy assessment against petitioners; on May 12, 1972, the United States District Court appointed a receiver who qualified on May 25, 1972; on June 9,… Held: respondent's motion to dismiss for lack of jurisdiction is granted. Leon I. Ross, 38 T.C. 309 (1962), followed. Conlee Construction Co., 54 T.C. 402 (1970), and Fotochrome, Inc., 57 T.C. 842 (1972), distinguished.

Held: A transfer of appreciated stock by petitioner to his wife pursuant to a property settlement agreement incident to a divorce under West Virginia law constitutes a taxable event resulting in… Held: A transfer of appreciated stock by petitioner to his wife pursuant to a property settlement agreement incident to a divorce under West Virginia law constitutes a taxable event resulting in realization of a capital gain by petitioner.

Held, no part of the consideration paid to acquire the circulation and all other tangible and intangible assets of a competing newspaper business as a going concern may be currently deducted as an… Held: no part of the consideration paid to acquire the circulation and all other tangible and intangible assets of a competing newspaper business as a going concern may be currently deducted as an expense of maintaining circulation within the meaning of sec. 173 or under sec. 162.

Held, petitioners must include in their gross income the value of the economic benefit received from the maintenance of certain whole life insurance… Held: petitioners must include in their gross income the value of the economic benefit received from the maintenance of certain whole life insurance policies by their family-owned corporation under a so-called split-dollar arrangement. Held, further, value determined through application of Rev. Rul. 55-713, 1955-2 C.B. 23.

P was awarded a postdoctoral fellowship grant to perform research. At the same time, P registered for courses in a graduate medical program which would have led to granting of a degree. Held: the exclusion of the fellowship is limited to $ 300 per month. Sec. 117, I.R.C. 1954.

Held: 1. The fair market value of real estate in which Gordon Hyde acquired an interest in 1967 is determined. Held: The fair market value of real estate in which Gordon Hyde acquired an interest in 1967 is determined. The assessment and collection of taxes which may be owing by reason of Gordon Hyde's acquisition of an interest in real estate in 1967 are barred by the statute of limitations. Sec. 6501, I.R.C. 1954. 2.

Decedent bequeathed to his surviving spouse properties to be selected by her from the residue of his estate, sufficient to obtain the maximum allowable marital deduction. Held: that the interest bequeathed to decedent's surviving spouse is not a terminable interest and qualifies for the marital deduction under sec. 2056(a), I.R.C. 1954.

Held, under the facts of this case the respondent has the authority to allow a retroactive change of accounting method. Held: under the facts of this case the respondent has the authority to allow a retroactive change of accounting method.

Held, in determining earnings and profits of a parent corporation a distribution by a subsidiary, designated as a dividend to the parent at… Held: in determining earnings and profits of a parent corporation a distribution by a subsidiary, designated as a dividend to the parent at a time when the consolidated return as filed showed no consolidated tax liability, is a dividend to the parent only to the extent that the payment exceeds the subsidiary's allocable portion of the…

1. In 1969, Aero, which had 11 employees, established a stock bonus plan for its employees. At a special meeting, the plan was read and discussed with them. Held: under the circumstances, the plan was adequately communicated to the employees to satisfy the requirements of sec. 1.401-1(a)(2), Income Tax Regs. 2. In 1970, Aero requested a determination that the plan qualified under sec. 401, I.R.C. 1954.

Petitioner, a tax-exempt organization, leased land to a company on Dec. 19, 1953. Held: the indebtedness incurred to construct the original building was exempt from treatment as business lease indebtedness under sec. 514(g)(5) when incurred and did not lose the exemption by execution of a new lease. Held, further: Petitioner's obligation to construct the addition was not fixed on or before Mar. 1, 1954.

1. T Co., a railroad, had chosen in the past and continued during the taxable years to use the retirement-replacement-betterment (RRB) method of accounting in respect of… Held: Even if T had been able to demonstrate that its track structure would in fact be retired in 50 years, it was not entitled to anticipate such through ratable depreciation deductions. The very essence of the RRB method is that the capitalized cost of assets be deducted in the year of retirement only.

Rules 31(a), 36(b), 37, and 70(a)(2), Tax Court Rules of Practice and Procedure. -- Petitioner filed a motion to commence discovery prior to filing… Held: the motion is denied because respondent's answers meets the fair notice requirements of Rule 31(a) and the required form of Rule 36(b). The affirmative allegations in the answer are matters within the knowledge of petitioner who is, therefore, in a position to admit, deny, or claim lack of knowledge of such allegations.

Rules 121 and 146, Tax Court Rules of Practice and Procedure. -- Petitioner is a married American citizen who resided in Brazil during his taxable years 1969, 1970, and 1971. Held: petitioner's motion for summary judgment will be granted since half of his income for services rendered is attributable to his spouse under Brazilian community property law.

Decedent made a gift in contemplation of death, incurring a liability for Washington gift taxes, but died before the gift taxes were paid. Held: the Washington gift tax was allowable as a deduction from the Federal gross estate as a claim against the estate under sec. 2053, even though the estate had claimed, and been allowed by respondent to include, the amount of the gift tax in the inheritance taxes creditable under sec. 2011(a).

After having been adjudicated a bankrupt but before discharge and termination of the bankruptcy proceedings, the taxpayer received a statutory… Held: Samuel J. King, 51 T.C. 851 (1969), followed. The bankruptcy court has not acquired jurisdiction of this controversy pursuant to bankruptcy rule 303, or amendments to the Bankruptcy Act enacted in 1966 and 1970. If the bankruptcy court assumes jurisdiction, a renewed motion to dismiss for lack of jurisdiction will be in order.

Held, under Rule 70(b), the burden of proof has no bearing on the discoverability of facts. Held: under Rule 70(b), the burden of proof has no bearing on the discoverability of facts. Held, further: The general state of one's health is no ground for refusing to answer interrogatories. Adequate safeguards may be fashioned under a protective order pursuant to Rule 103 but the Court will not issue such order sua sponte.

The petitioner renounced his U.S. citizenship 1 day before liquidating distributions were transferred to him. Held: one of the principal purposes for such loss of citizenship was to avoid Federal income taxes on the distributions, and the gains on such distributions are taxable under sec. 877, I.R.C. 1954; held, further, the fair market value of a note received in the distributions determined; held, further, expenses incurred in moving to…

Held, since petitioner participated sufficiently in the process and risk of loss involved in growing ducks, it qualifies as a farmer within the meaning of sec.… Held: since petitioner participated sufficiently in the process and risk of loss involved in growing ducks, it qualifies as a farmer within the meaning of sec. 1.471-6(a), Income Tax Regs., and therefore is entitled to file its income tax returns on the cash receipts and disbursements method of accounting.

Rules 70 and 72, Tax Court Rules of Practice and Procedure. -- A Technical Advice Memorandum was issued by the National Office of the Internal Revenue Service to a District Director in connection… Held: the TAM is not subject to discovery under Rule 70. Held, further, private letter rulings that may have been issued by the Internal Revenue Service to other taxpayers are not subject to discovery under Rules 70(b) and 72.

Rule 103, Tax Court Rules of Practice and Procedure. -- Petitioners filed a motion for protective order to relieve them of unnecessary and undue burden and expense in stipulating… Held: The matters sought by respondent to be stipulated are not relevant to the issues before the Court and petitioners are entitled to a protective order. Discovery is to be used to ascertain facts bearing on the issues before the Court not to explore the possibility of raising additional issues.

Held: 1. Entries on petitioner's income tax return for TYE 1966 were adequate to constitute a clue so that sec. 6501(e)(1)(A)(ii) applies. Held: Entries on petitioner's income tax return for TYE 1966 were adequate to constitute a clue so that sec. 6501(e)(1)(A)(ii) applies. The 6-year period of limitations does not apply and assessment of additional tax for that year is barred by the running of the 3-year period of limitations. 2.

Held: Sec. 332, I.R.C. 1954, applicable to avoid recognition of gain on liquidation of subsidiary. Held: Sec. 332, I.R.C. 1954, applicable to avoid recognition of gain on liquidation of subsidiary. Taxpayer owned 80 percent of the stock of the subsidiary on the date of the adoption of the plan of liquidation within the meaning of sec. 332(b).

Petitioner, a research subsidiary of an outdoor advertising corporation, had net operating losses. Held: The parent corporation was merely a conduit and not a transferor corporation within the meaning of sec. 269(a)(2), I.R.C. 1954. The basis of the outdoor advertising assets in the hands of the petitioner should be determined by reference to the cost of those assets. YOC Heating Corp., 61 T.C. 168 (1973), followed.

Decedent's will left the residue of his estate to his surviving spouse with full power in her to dispose of such property in her discretion. Held: the estate property which passed to decedent's surviving spouse qualifies for the marital deduction under sec. 2056, I.R.C. 1954.

T Corp. entered into a contract under which J Co. had the right to remove sand and gravel from T Corp.'s property, and which, as construed herein, did not require it to remove all or any specified… Held: T Corp. did not sell its minerals in place but rather received royalty payments which constituted personal holding company income on account of which T Corp. was a personal holding company. Secs. 542(a)(1), 543(a)(3) and (b)( 1), I.R.C. 1954.

Decedent, a resident and domiciliary of Wisconsin who died testate on Nov. 1, 1968, left the bulk of his estate to his friend, Priscilla Baker Lane, under his will executed on Jan. 30, 1967. Held: Priscilla Baker Lane Steffke was not the surviving spouse of decedent within the meaning of sec. 2056, I.R.C. 1954, and decedent's estate is not entitled to the marital deduction allowed by that section.

Where the Supreme Court of New York, County of New York, had issued a declaratory judgment holding a Mexican divorce obtained by a husband invalid and that the wife he attempted to divorce was his legal wife and this judgment was outstanding, unchallenged at the date of the husband's death, the wife he attempted to divorce is his surviving spouse within the meaning of sec. 2056, I.R.C. 1954, and not the person he purported to marry after the Mexican divorce decree was…

In 1966, petitioner Harold, a California resident, obtained an ex parte Mexican divorce, not recognizable under California law, from Doris, and married petitioner, Louise. Held: Harold and Louise were not husband and wife in 1967 through 1970 within the meaning of sec. 6013. Marital status for tax purposes is the same as marital status for State law purposes. The rule in Albert Gersten, 28 T.C. 756 (1957), affd. on this issue 267 F. 2d 195 (9th Cir. 1959), is reaffirmed.

The petitioners sold and later reacquired certain real property. Held: their basis in the real property includes their basis in a note received from the purchasers in connection with the sale of the property and discharged in connection with the reacquisition. Sec. 1038(c), I.R.C. 1954.

During each of the taxable years at issue, the controlling shareholders of the petitioner met and decided on the amount of the bonus to be received by each of them for the year, but such bonuses were… Held: under the circumstances, the amount of each bonus was not constructively received during the taxable year or within 2 1/2 months after the close of the taxable year. Sec. 267(a)(2)(A)(ii), I.R.C. 1954.

In order to be released from a covenant not to compete, the petitioner transferred to his former employer certain rights in stock that he had acquired from such employer at a… Held: the loss was not an expense of seeking new employment. Sec. 162(a), I.R.C. 1954. Held, further, the sale was not integrally related to the bargain purchase of the stock. Held, further, the petitioner failed to prove that when transferred, the stock rights had an ascertainable market value.

R and J, husband and wife, were the sole shareholders of a corporation, C. R and J organized C to carry on a construction business which they had previously conducted as a proprietorship. Held: sec. 482, I.R.C. 1954, as amended, authorizes the Commissioner to allocate rental income from C to R and J for C's use of their assets in connection with jobs which C was engaged to perform.

Rule 53, Tax Court Rules of Practice and Procedure. -- Shank was released, pursuant to sec. 2204(a), I.R.C. 1954, from personal liability for estate tax imposed upon him as executor of decedent's… Held: that a release from personal liability under sec. 2204(a) has no bearing on whether sec. 6903, I.R.C. 1954, requiring notice of termination of fiduciary capacity, has been satisfied. Held, further: That sec. 6903 was not complied with and the notice of deficiency was valid.

Petitioner was not a member of the striking union, yet he honored its picket line and received from it regular payments, calculated as a percentage of his wages but without regard to his financial… Held: such payments were not gifts, excludable under sec. 102(a), I.R.C. 1954.

Petitioner claims and respondent now concedes consolidated net operating losses for 1968 and 1969 sufficient to eliminate the deficiencies determined by respondent for the tax years 1965 and… Held: respondent's concession does not deprive the Court of jurisdiction under sec. 6214 to resolve the issues raised in the pleadings. Held, further: Since respondent's concession is accepted, the deficiencies in 1965 and 1966 are zero, and a decision will be entered for petitioner.

Petitioner claimed a bad debt deduction under sec. 166 for wages never paid. Held: respondent did not err is disallowing the bad debt deduction since petitioner had never reported the amount claimed in income, as required by sec. 1.166-1(e), Income Tax Regs.Held, further, petitioner is not entitled to claim a tax credit for wages his employer was never liable to withhold.

B Corp. adopted a plan of liquidation pursuant to which it distributed all of its assets to its sole shareholder within 24 months of adopting the plan. Held: B Corp. failed to designate such amount as a dividend within the time prescribed in the regulations pursuant to sec. 316(b)(2)(B)(ii), on account of which it is not entitled to a deduction for dividends paid but must include that amount in its undistributed personal holding company income.

Petitioner recovered $ 18,030.90, after expenses and attorneys' fees, in settlement of a job discrimination suit under title VII of the Civil Rights Act of 1964. Held: the entire amount recovered constitutes income under sec. 61, I.R.C. 1954.

A portion of the compensation otherwise receivable by petitioner from his employer was placed in a nonexempt trust for his benefit during 1969 and 1970. Held: the entrusted funds deposited prior to Aug. 1, 1969, were nonforfeitable within the meaning of sec. 402(b), I.R.C. 1954, and the funds deposited after that date, when sec. 83, I.R.C. 1954, became applicable, were not subject to a substantial risk of forfeiture within the meaning of sec. 83(a), I.R.C. 1954.

Petitioner leased property it owned in Youngstown, Ohio, to Sears, Roebuck & Co. under a long-term lease. Held: petitioner had a right to receive the rental or indemnification therefor that was fixed in 1970 and 1971 and is required to accrue the agreed amount thereof as income in 1970 and 1971.

1. Deposits in petitioners' savings and checking accounts far exceeded their reported income. Held: the Commissioner's determination to reconstruct their income by the bank deposit method was not arbitrary or unreasonable; held, further, the explanation offered at trial and the Commissioner's concession do not shift the burden of proof to the Commissioner. 2.

During the last 8 years of his life, decedent suffered from heart disease which caused his death in December 1969. Held: the subject transfer was a transfer in contemplation of death within the meaning of sec. 2035 notwithstanding the fact that the will and codicil integrating the provisions of the inter vivos trust were subsequently revoked.

Held, the period from Jan. 1, 1971, through June 25, 1971, the date of the death of the deceased taxpayer, was his entire taxable year within the meaning of sec. 911(a)(1), I.R.C. 1954. Held: the period from Jan. 1, 1971, through June 25, 1971, the date of the death of the deceased taxpayer, was his entire taxable year within the meaning of sec. 911(a)(1), I.R.C. 1954.

T Corp. incurred interest expenses on account of its long outstanding bond indebtedness, which indebtedness T Corp. was empowered to prepay in whole or in part on Dec. 31 of each year. Held: in the circumstances of this case, T Corp. did not incur or continue its indebtedness for the purpose of carrying tax-exempt securities as contemplated by sec. 265(2), I.R.C. 1954.

Held: 1. Delay rentals paid under a standard oil, gas, and mineral lease are rents within the meaning of sec. 1372(e)(5), I.R.C. 1954,… Held: Delay rentals paid under a standard oil, gas, and mineral lease are rents within the meaning of sec. 1372(e)(5), I.R.C. 1954, and petitioner's election to be taxed as a small business corporation terminated under that section in its fiscal year ending Sept. 30, 1963, when over 20 percent of its gross receipts was from delay rentals.…

Rule 120, Tax Court Rules of Practice and Procedure. -- Held, that a Tax Court stipulated decision with respect to a deficiency determined… Held: that a Tax Court stipulated decision with respect to a deficiency determined for petitioner's failure to withhold income tax on income earned by a nonresident alien for the calendar years 1968 and 1969, under neither I.R.C. sec. 6212(c) nor the doctrine of res judicata, bars respondent from asserting another deficiency against the…

1. In computing the total support of a person for the purpose of secs. 151 and 152, I.R.C. 1954, payment of hospital costs by Medicare provided for in part A of tit. XVIII of the Social Security Act, as amended, 42 U.S.C. sec. 1395, should not be treated differently from payments of medical or hospital costs as provided for in part B of tit.

Petitioner moved to vacate a decision of this Court that there was a deficiency in petitioner's income tax for 1956, which decision became final on Feb. 29, 1968, on the grounds of fraud on the… Held: the grounds alleged by petitioner do not constitute fraud on this Court.

The owner of certain motel property entered into several agreements purporting to sell such property to a limited partnership, of which the deceased taxpayer was a member,… Held: the partnership obligations defined in the aforesaid agreements are not sufficiently definite and unconditional to constitute indebtedness on which interest is allowable as a deduction under sec. 163(a), I.R.C. 1954, or cost basis for depreciation deduction purposes under sec. 167(g), I.R.C. 1954.

P performed services as an intern and resident at three hospitals. He received monthly payments from the hospital where he was working at the time. Held: such payments do not constitute a scholarship or fellowship grant excludable under sec. 117, I.R.C. 1954; held, further, the cash allowance for food was compensation and not excludable under sec. 119, I.R.C. 1954.

1. Decedent's Federal estate tax return was filed Nov. 27, 1968, and initially accepted by the classifying officer in the District Director's… Held: Rev. Proc. 68-28, 1968-2 C.B. 912, is not applicable because the case was not closed after examination; (2) the alleged failure to follow the reopening provisions did not curtail respondent's right to issue a statutory notice of transferee liability; and (3) the Estate Tax Closing Letter did not estop respondent from asserting…

Rule 60(c), Tax Court Rules of Practice and Procedure. -- Held: Wis. Stat. Held: Wis. Stat. Ann. sec. 180.787 providing for survival of remedies for and against a dissolved corporation limits capacity of a dissolved corporation to sue. Dissolved corporation had no authority to file petition in Tax Court more than 2 years after dissolution. Respondent's motion to dismiss for lack of jurisdiction granted.

Rule 121, Tax Court Rules of Practice and Procedure. -- Held: Wis. Stat. Held: Wis. Stat. Ann. sec. 180.787 providing for survival of remedies for and against dissolved corporations and their stockholders for a period of 2 years after dissolution does not limit the liability of stockholders as transferees of corporate assets.

Held: 1. Pursuant to sec. 304(a)(2), I.R.C. 1954, the purchase by Bankers of stock of its parent, Union, from General, the controlling… Held: Pursuant to sec. 304(a)(2), I.R.C. 1954, the purchase by Bankers of stock of its parent, Union, from General, the controlling stockholder of Union, resulted in a constructive dividend from Bankers to Union to the extent of Bankers' earnings and profits, and in turn a distribution by Union in redemption of its stock from General. 2.

Rules 70 and 72, Tax Court Rules of Practice and Procedure. -- Petitioner filed a motion under Rule 72 for production of third-party affidavits taken by special agents of respondent. Held: the affidavits were not prepared in anticipation of litigation and are accordingly not protected by the work product doctrine. P. T. & L. Construction Co., 63 T.C. 404 (1974), followed.

Petitioner, a sole proprietor, paid a minister $ 7,020 a year to give him and his employees spiritual advice and to perform various business-related tasks. Held: only $ 1,000 of that amount, which constituted compensation for business-related tasks, is deductible.

Petitioner, relying solely on balance sheet book value figures and consistent yearly losses, but without considering going concern values, charged off a portion of its subsidiary's debt as partially… Held: respondent's disallowance not shown to be arbitrary or unreasonable especially in view of fact that liquidation of the subsidary was not shown to have been contemplated nor to have occurred.

1. D created a trust for his daughter. Under Texas law, the trust was revocable unless made irrevocable by the trust instrument or by a supplement or… Held: nothing in the trust or other instruments made the trust irrevocable; held, further, the tax treatment of the trust must be determined without regard to the possibility of reformation. 2. D, who was then age 82 and facing exploratory surgery, gave a lake cottage to his son, which he had always intended giving to the son.

Held, petitioner, a Michigan State court judge, is not entitled to exclude his salary from income under the United States or Michigan Constitution. Held: petitioner, a Michigan State court judge, is not entitled to exclude his salary from income under the United States or Michigan Constitution.

Held: Obligation of petitioner to provide support for his estranged wife pursuant to decree of the Family Court of the State of New York was extinguished by a judgment of absolute divorce… Held: Obligation of petitioner to provide support for his estranged wife pursuant to decree of the Family Court of the State of New York was extinguished by a judgment of absolute divorce granted to the petitioner by the Supreme Court of New York on the grounds of wife's misconduct.

Decedent owned 17,538.2 acres of ranch land in Texas. Held: petitioner is not entitled to deduct the entire amount of the outstanding balance of the note either as a claim against the estate under sec. 2053(a)(3), or as a mortgage debt under sec. 2053(a)(4). Held, further, petitioner is not entitled to report only decedent's net equity in the property under sec. 2033.

Petitioner, an accrual basis taxpayer with a fiscal year ending Mar. 31, adopted a Master Profit-Sharing Plan on or about Mar. 10, 1970, and contributed $ 100 to the trust at the time. Held: Petitioner's liability to contribute the additional $ 16,200 to the trust was not fixed as of Mar. 31, 1970, and it was not accruable in fiscal 1970. The $ 16,200 contribution is not deductible in petitioner's fiscal year ending Mar. 31, 1970.

T, a United States citizen, was employed by the government of the Trust Territory of the Pacific Islands where he lived during such employment. Held: the government of the Trust Territory of the Pacific Islands is an agency of the United States as intended by sec. 911(a)(2), I.R.C. 1954, and the amounts which it paid to T are therefore not excludable from T's gross income under that Code section.

Held, where, after a taxpayer files a petition under ch. XI of the Bankruptcy Act, respondent sends that taxpayer a notice that… Held: where, after a taxpayer files a petition under ch. XI of the Bankruptcy Act, respondent sends that taxpayer a notice that deficiencies have been determined against him which are being assessed under sec. 6871(a), I.R.C. 1954, but sends no deficiency notice authorized by sec. 6212, I.R.C. 1954, for the years involved, this Court lacks…

1. Transfers by decedent's wife from a checking account held jointly with decedent without his knowledge were not gifts in contemplation of death. 2. Gifts of voting trust certificates within 3 years of date of death were not gifts in contemplation of death. 3. Value of shares of stock in closely held family corporations determined for gift tax and estate tax purposes.

Petitioner John A. Cupler II developed two items of specialized medical equipment, which he then donated to charitable organizations. Held, one donation was made in 1967 and the other in 1969. Held: one donation was made in 1967 and the other in 1969. Held, further, that the fair market value of the 1967 donation is $ 10,000 and that of the 1969 donation is $ 15,000.

Under a California divorce decree the husband was awarded all of petitioner-wife's community property share of stock in the family… Held: to the extent husband used his separate property to pay for wife's community interest in the stock, there was a taxable sale on which wife's gain must be recognized, but with respect to the portion of such stock disposed of in exchange for husband's interest in other community property, there was a nontaxable division of community…

Petitioners received long-term capital gains from a ground lease and timber-cutting contract which was income in respect of a decedent which,… Held: the deduction allowable for estate tax attributable to income in respect of a decedent under sec. 691(c), I.R.C. 1954, in these circumstances need not be offset against the long-term capital gain before allowance of the 50-percent deduction thereon under sec. 1202, I.R.C. 1954, but is allowable as an itemized deduction against…

During 1970, petitioner worked as an insurance agent for Farmers Insurance Group under a contract that provided, inter alia, that he was an independent contractor and not an employee. Held: during 1970, petitioner was not an employee of Farmers Insurance Group for purposes of exclusion from self-employment tax.

1. The petitioners purchased all of the stock in T-M Corp. from H. They claimed that as part of the sale, H orally promised not to compete with the business of T-M, but later he did compete and… Held: the alleged covenant would be an asset of T-M, and not the petitioners, so that any loss sustained when the covenant became worthless was not incurred by the petitioners. 2.

Rules 103, 161, Tax Court Rules of Practice and Procedure. -- Petitioners were granted a protective order under Rule 103 to relieve them from… Held: The motion for reconsideration is granted. The rationale of the first opinion is sound and is not overruled; however, upon reconsideration because of the particular circumstances of these cases of which we are now aware, the protective order will be vacated and the petitioners will be required to stipulate the said matters.

Petitioner, a national banking association, administers numerous trusts through its trust department. In administering the trusts, the said department makes cash payments on their behalf. Held: to the extent a payment made by the trust department exceeds the balance in the account to be charged, that payment represents a loan made by petitioner to the trust on behalf of which the payment is made.

Petitioner is an accrual basis taxpayer with a fiscal year ending Apr. 30. Held: a qualified profit-sharing trust was not in existence in petitioner's fiscal year 1972. Held, further, petitioner's contribution to the trust made July 13, 1972, was not an accruable item in fiscal 1972 and is not deductible in that year under sec. 404(a) or 404(a)(6), I.R.C. 1954.

Petitioner Amelia S. Horne was a major shareholder of a corporation and the named beneficiary of two insurance policies on the life of decedent, her husband, who was a shareholder and officer of the… Held: the proceeds were not a taxable constructive dividend distribution by the corporation to petitioner Amelia S. Horne, within the meaning of secs. 316(a)(1) and 301(c)(1), I.R.C. 1954.

Petitioner, a wholly owned subsidiary of Allied Telephone Co. (Allied), on May 5, 1965, acquired all the stock of Crossett Telephone Co. (Crossett), a corporation formed that… Held: Crossett was a member of the controlled group consisting of petitioner, Allied, and Crossett with respect to Crossett's short taxable year under the provisions of secs. 1561(b) and 1563(b), I.R.C. 1954, and therefore under sec. 1561(a) is entitled to only one-third of a $ 25,000 surtax exemption.

Petitioner Edwin D. Davis, an orthopedic surgeon, organized two corporations for performing the X-ray services and physical therapy… Held: the income earned by the corporations is not taxable to petitioner under sec. 61, I.R.C. 1954; the Commissioner abused his discretion under sec. 482 by allocating the income from the corporations to petitioner; and the income of the corporations is not allocable to petitioner under sec. 1375(c) because he did not render substantial…

1. Decedent transferred assets in trust and thereafter in fact received distributions during the remainder of her life which in the aggregate exceeded the net income of the trust. In the gift tax return filed by her upon the creation of the trust the value of a retained life estate was subtracted in computing the amount of the taxable gift. Held, decedent retained the "enjoyment" of the assets transferred in trust within sec. 2036(a)(1), I.R.C. 1954, by reason of at least an implied understanding, found herein, that the income therefrom would be distributed to her. Cf. Skinner's Estate v. United States, 316 F. 2d 517 (3d Cir.), affirming 197 F. Supp. 726 (E.D. Pa.). 2. Transaction involving bank account in joint names of decedent and her daughter held not in contemplation of death.

Petitioner, an official court reporter for a Federal District Court, organized a corporation which reproduced and sold transcripts of trials that petitioner was responsible for in the course of his… Held: the corporation was not a sham for tax purposes but the income of the corporation is taxable to petitioners under secs. 61(a) and 482, I.R.C. 1954.

Petitioner was a professional football player employed under contracts covering a 3-year period. Held: under the circumstances of this case, the franchise location of each of the teams involved was petitioner's home under sec. 162(a)(2), I.R.C. 1954, and his living expenses at those locations are not deductible.

Petitioner was a real estate salesman for Dart Industries. He received a commission from Dart Industries for each real estate purchase transaction he arranged between Dart Industries and a purchaser. Held: petitioner may not exclude from gross income the real estate commissions he received from transactions in which he purchased property for his own account. Commissioner v. Daehler, 281 F. 2d 823 (5th Cir. 1960), revg. 31 T.C. 722 (1959), followed.

On Dec. 23, 1968, petitioners, cash basis taxpayers, paid 40 months' prepaid interest on a trust-deed note financing newly purchased apartments. Held: No binding contract existed on Nov. 26, 1968. The nonretroactivity provisions of Rev. Rul. 68-643, 1968-2 C.B. 76, were unsatisfied. Held, further, petitioners' method of accounting for prepaid interest does not clearly reflect income, and the disallowance of the prepaid interest deduction is therefore sustained.

Petitioner Goldstein owned all of the stock of American Bronze and substantially all of the stock of Cleveland Brass Manufacturing Co. at the time Cleveland Brass sold its… Held: the merger of Cleveland Brass and American Bronze qualified as a reorganization under sec. 368(a)(1)(A), I.R.C. 1954, and American Bronze, as the continuing corporation, was entitled to deduct on its 1970 return the operating loss carryovers of Cleveland Brass under secs. 381(a) and 172 of the Code.

An electing small business corporation, whose stock was owned by petitioners, was engaged in the construction business with a peak season of approximately 7 months. Held: petitioners have not shown that the corporation's computations produced a reasonable allowance for depreciation under sec. 167(a), I.R.C. 1954.