Volume 65 — Tax Court Reports

Petitioner derived his income exclusively from personal racetrack winnings and gambling. Held: petitioner was not carrying on a trade or business and was therefore not subject to the self-employment tax imposed by sec. 1401, I.R.C. 1954.

Petitioner owned an option to acquire property that Firemen's wished to own. Held: the transaction represents a valid exchange of properties under sec. 1031, I.R.C. 1954, and the funds advanced by Firemen's represent a loan to petitioner and not boot received by petitioner on the exchange. Held, further, petitioner recognized a short-term capital gain on the receipt of other funds attributable to the exchange.

Petitioners owned the stock of Raybert Productions, Inc. (Raybert), which, in turn, owned a motion picture named Easy Rider and a television program known as The Monkees. Held: the Easy Rider monthly payment for April 1970 is taxable to Raybert, and petitioners are liable as transferees for the tax thereon, but no part of the Easy Rider payment for May 1970 or The Monkees annual payment is taxable to Raybert.

Petitioner abandoned resort property as a secondary residence and immediately offered it for sale and/or rent. Held: by the time of the years in issue petitioner could not have had a reasonable expectation of receiving any rental income and she never held the property for appreciation in value; hence, the property was not property held for the production of income within the meaning of secs. 167 and 212, I.R.C. 1954.

Held: Amount advanced to petitioner, a New Jersey State trooper, as a meal allowance is includable in his income under sec. 61, I.R.C. 1954, and is not excludable under sec. 119, I.R.C. 1954, since… Held: Amount advanced to petitioner, a New Jersey State trooper, as a meal allowance is includable in his income under sec. 61, I.R.C. 1954, and is not excludable under sec. 119, I.R.C. 1954, since the amount was paid to him in cash.

Held: 1. A page 1 of a Form 1040, U.S. Individual Income Tax Return, which contained no figures as to income and deductions and had… Held: A page 1 of a Form 1040, U.S. Individual Income Tax Return, which contained no figures as to income and deductions and had deleted above petitioner's signature the words under penalties of perjury did not constitute a Federal income tax return for the year 1969, and similar documents did not constitute Federal income tax returns for…

Held, petitioner has not substantiated expenses for depreciation, air travel, advertising, business meals and lodging, medical expenses, charitable contributions, and general sales taxes beyond the… Held: petitioner has not substantiated expenses for depreciation, air travel, advertising, business meals and lodging, medical expenses, charitable contributions, and general sales taxes beyond the amounts respondent allowed.

On Jan. 31, 1931, decedent created a trust and named himself one of three trustees. The corpus of the trust included insurance policies on the decedent's life and other income-producing assets. Held: Decedent did not have the power to alter, amend, or revoke the trust as defined under sec. 2038(a)(2), I.R.C. 1954, because his power of substitution was no greater than a settlor's power to direct investments.

In 1966, petitioners were partners in a law firm with nine members. Effective Dec. 31, 1966, three members withdrew from the firm. Held: The transaction whereby the partners withdrew from the partnership was a liquidation of their interests under sec. 736, I.R.C. 1954, rather than a sale under sec. 741, I.R.C. 1954. The payments made to and on behalf of the withdrawing partners are deductible by the partnership in computing its taxable income for 1967.

Petitioners claimed an investment credit on their 1967 tax return. The property with respect to which the credit was claimed was disposed of in 1970. Held: The amended returns are not effective to alter the tax treatment accorded the credit on the initial return. Petitioners must recapture the credit in the year of disposition pursuant to sec. 47, I.R.C. 1954.

Diecks (now deceased) owned 20 percent of the stock of Cable Vista. Cable Vista had built and operated a cable TV system. Before Cable Vista, a subch. Held: Although Cable Vista was a collapsible corporation, within the meaning of sec. 341(b), there was on the facts no net unrealized appreciation in Cable Vista's subsec. (e) assets (ordinary income assets), hence sec. 341(e)(1) applied to cause Cable Vista not to be considered collapsible for purposes of sec. 341(a)(1).

Held: 1. Gifts of Arthur W. Clark's principal interests in Clifford trusts to the income beneficiaries thereof were not gifts of future interests and therefore were eligible for the annual gift tax… Held: Gifts of Arthur W. Clark's principal interests in Clifford trusts to the income beneficiaries thereof were not gifts of future interests and therefore were eligible for the annual gift tax exclusion of $ 3,000 per donee provided by sec. 2503(b), I.R.C. 1954. 2.

Petitioner is a nonstock, not-for-profit, housing cooperative corporation organized and operated for the benefit of its members. It is subject to Federal Housing Administration (FHA) regulations. Held: such forfeitures are gain to it and includable in its gross income under sec. 61(a). General American Investors Co., 19 T.C. 581 (1952), affd. 211 F. 2d 522 (2d Cir. 1954), affd. 348 U.S. 434 (1955).

Petitioner, which, among other business activities, owned and operated a motel, purchased 56 percent of the stock of Hotel Florence Co. in a single transaction. Held: the principal purpose of petitioner's acquisition of control of Florence was not tax avoidance contemplated by sec. 269(a), I.R.C. 1954, and petitioner is entitled to deduct the net operating losses of Florence on the consolidated return.

Best received $ 150,000 in settlement of an antitrust proceeding. Held: under these circumstances, the gain subsequently recovered is ordinary income. Arrowsmith v. Commissioner, 344 U.S. 6 (1952), applied. Held, further, the remaining proceeds of the settlement allocated among the other claims for damages.

Decedent's will gave to his surviving spouse and daughter successive life estates in his art collection and the remainder interest therein to a foundation. Held: the surviving spouse was given a terminable interest in the items of which she took absolute ownership and their value may not be taken into account in computing the marital deduction allowed by sec. 2056(a), I.R.C. 1954.

Messrs. McManus, Gutleben, and Chick acquired a tract of land in the industrial section of Oakland, Calif. The property was subdivided and improved and portions of it were sold. Held: the entity created by the petitioners constitutes a partnership. Held, further, the partnership acquired and held the property primarily for sale to customers in the ordinary course of its trade or business.

Petitioner was in the business of constructing and operating sewage disposal and treatment facilities and financed its construction costs by levying tie-in charges against prospective customers. Held: receipts from tie-in charges are not contributions to capital and are includable in petitioner's gross income.

1. Provision under will of decedent for payment of $ 200,000 to his surviving spouse under certain conditions did not give rise to a bequest for which a deduction was allowable under sec. 2056. 2. Decedent's will did not clearly direct that the Federal estate tax be chargeable solely to the interests of the life beneficiaries. The rule of apportionment prescribed by New York law must be applied.

Under decedent's will her residuary estate was left to her husband, if he survived her. Held: the estate is not entitled to the marital deduction with respect to any part of the residuary estate.

Petitioners refused to pay income taxes on the grounds that, by participating in the Vietnam war, the United States Government acted illegally and unconstitutionally and was guilty of war crimes,… Held: the payment of income taxes would not amount to such alleged complicity. Held, further, none of the grounds asserted by petitioners justifies redetermination of the deficiencies. Susan Jo Russell, 60 T.C. 942 (1973), and Abraham J. Muste, 35 T.C. 913 (1961), reaffirmed.

Prior to Dec. 7, 1941, petitioner conducted a business in China of importing, exporting, and contracting for the manufacture of linens and other goods. Held: on the facts of this case, the proceeds of the involuntary conversion of inventory were reinvested in property similar or related in service or use only to the extent they were reinvested in inventory.

Held: Notices of deficiencies approved and signed by an Acting Chief, Review Staff, in the Audit Division of the District Director's Office at Columbia, S. C., were valid. Held: Notices of deficiencies approved and signed by an Acting Chief, Review Staff, in the Audit Division of the District Director's Office at Columbia, S. C., were valid.

Petitioner's subsidiaries constructed their own telephone and power plant properties which qualify as new section 38 property as defined by sec. 48(b). Held: for purposes of determining qualified investment pursuant to sec. 46(c)(1)(A) on which the sec. 38 credit against tax is calculated, the basis of the self-constructed new sec. 38 property includes depreciation sustained with respect to a constructing asset on which no sec. 38 credit has been allowed.

In 1948, decedent owned 60 percent of the common stock and a substantial block of the preferred stock of a corporation. Held: decedent did not retain the enjoyment of the entrusted stock or the right to designate the person or persons who would enjoy the stock or the income therefrom within the meaning of sec. 2036(a)(1) or 2036(a)(2), I.R.C. 1954.

Petitioners seek to compel production of documents pursuant to Rule 72(b). Held, Rule 72(b) does not require any good-cause showing as a prerequisite to production of documents; held, further, production of the documents will be had; no objection was made to production on grounds of privilege or relevance, P.T. & L. Construction Co., 63 T.C. 404 (1974); held, further, no showing has been made that production is premature, and we will not postpone production without such showing. Andrew Piscatelli, 64 T.C. 424 (1975).

On Apr. 30, 1963, petitioner Frank L. Butler transferred his medical office building to a bank, as trustee, for his minor children for a period of 11 years, and contemporaneously leased it back for… Held: petitioners are not entitled to deductions under sec. 162(a)(3), I.R.C. 1954, for the rent paid to the trust during 1970 and 1971.

On July 25, 1975, respondent served on petitioners' counsel in each of these two cases and, in due course, filed with this Court a Request for Admissions in accordance with Rule 90, Tax Court… Held: Under Rule 90(c) of the Rules of Practice and Procedure of this Court, if no response is made to a request for admissions which has been properly served, the statements of fact in the request are deemed admitted. Respondent's motions are superfluous and are, therefore, denied.

A corporation, which had enjoyed subch. S status in prior years, failed to qualify for the year 1969. Held: Crediting the undistributed taxable income for the taxable year 1968 to the loans payable account on Jan. 1, 1969, did not result in a distribution of money to the corporation's shareholders within 2 1/2 months after the close of the taxable year 1968.

Petitioner deducted as business expenses his costs of certain entertainment, travel, business gifts, and club dues. Held: the records were not lost due to a casualty beyond petitioner's control, and therefore he was not relieved of the substantiation requirements of sec. 274.

Edward J. Fehrs died on Nov. 18, 1973. Respondent mailed a joint notice of deficiency to Edward J. and Violette Fehrs on Dec. 27, 1974. Held: respondent's motion to dismiss for lack of jurisdiction as to Edward J. Fehrs, deceased, is granted.

An apartment building on petitioners' property was destroyed by fire in February 1968. The balance of the property was condemned later in 1968. Held: petitioners realized a recognizable gain upon receipt of the partial condemnation award in 1969. Held, further, condemnation award allocated between rental and personal portions of property. Held, further, respondent not barred from assessing deficiency for 1969 by either sec. 7121, I.R.C. 1954, or equitable estoppel.

Petitioner filed consolidated returns with its subsidiary, Imesco, for 1967 and 1968. Held: sec. 1.1502-32(e), Income Tax Regs., which requires a parent corporation filing consolidated returns to reduce its basis in the stock of its subsidiary below zero for losses of the subsidiary in excess of the parent's basis in the stock (thus creating an excess loss account), is valid.

In September 1968 petitioner-husband was transferred by his employer from New York to San Francisco. Held: petitioners are not entitled under sec. 1034, I.R.C. 1954, to include as a part of the purchase price of their new residence the discounted present value of future lease payments on the land upon which it is located in determining the nonrecognition of gain on the sale of their old residence.

Decedent and his former wife while domiciled in Pennsylvania in 1950 entered into a separation agreement which was binding whether or… Held: There was no consideration in money or money's worth received for the creation of the trust to secure the monthly payments to decedent's former wife independent of the consideration received for decedent's agreement to make the monthly payments and therefore no reduction of the value of the trust includable in decedent's gross estate…

Held, petitioners are not entitled to a percentage depletion deduction in 1970 with respect to income derived from coal mining under a nonexclusive and nontransferable license which was subject to… Held: petitioners are not entitled to a percentage depletion deduction in 1970 with respect to income derived from coal mining under a nonexclusive and nontransferable license which was subject to termination without cause by giving the licensee 10 days' notice.

A decision of this Court allowed a corporation an embezzlement loss deduction for 1965. Held: An overstatement of cost of goods sold is not a deduction within the meaning of sec. 1312(2). Respondent is barred from asserting a deficiency by sec. 6501.

1. The fair market values of a terminal facility and of tires and tubes distributed to petitioner on the liquidation of a wholly owned subsidiary are determined. 2. Held: on its liquidation S had to include in gross income the lesser of the fair market value of the tires and tubes distributed or the portion of their cost attributable to their remaining useful life.

On her 1972 Federal income tax return, the petitioner took a war crimes deduction on the ground that payment of such taxes would… Held: the petitioner lacks standing to raise the issue of violations of international law allegedly committed by the United States because she fails to meet the requirements of Flast v. Cohen, 392 U.S. 83 (1968), regarding taxpayer standing, and because she has neither suffered an injury, nor is she in danger of doing so, as a consequence…

Petitioners and others owned a cigarette filter invention which they transferred to a trust created in June 1967, retaining the right to the trust's income as well as any gains from the… Held: since the trust created by petitioners, to which they transferred the invention, was a grantor trust within the provisions of sec. 677, I.R.C. 1954, sec. 671, I.R.C. 1954, entitles petitioners to their proportionate share of deductions for any charitable contributions by the trust.

Petitioners were shareholders of X corporation, which owned an office building. Held: there was not a written contract for the acquisition of [sec. 1250] property * * *, which was, on July 24, 1969, and at all times thereafter, binding on the taxpayer within the meaning of sec. 167(j)(6)(C), I.R.C. 1954, and therefore the partnership was not entitled to use the 150 percent of declining balance method in computing…

This case, originally decided in 54 T.C. 1364 (1970), is before the Court on remand in part from the U.S. Court of Appeals for the Seventh Circuit… Held: On these facts, the so-called free rate is the proper rate of conversion. 2. The free distribution of 63,903 ampules is a capital expenditure in the nature of goodwill. Petitioner has failed to establish a useful life over which these expenditures can be amortized and is not entitled to a deduction with respect thereto.

Petitioner incurred a net operating loss in 1969 and claimed a carryback adjustment to 1966. The tentative allowance of the 1966 adjustment released a previously allowed investment credit. Held: Under sec. 6501(j), I.R.C. 1954, the notice of deficiency for 1963 was timely. The carryback to 1963 was attributable to the tentative allowance of adjustments made as a result of the net operating loss incurred in 1969.

Petitioner and his brother, as joint venturers doing business as Gulfmont Enterprises, acquired two apartment buildings located on Beach Front Highway in Gulfport, Miss., in April 1969. Held: the insurance recovery received by petitioner constituted taxable income for 1970. At the time they purchased the apartment buildings, petitioner and his brother assumed payment of two notes having an unpaid balance of $ 32,501.36 secured by deeds of trust.

Petitioner and his former wife acquired a house in Grosse Pointe Woods, Mich., in 1950 at a total cost of $ 51,065. Held: petitioner is not entitled to deductions for depreciation and maintenance expense with respect to the house for the years 1968 and 1969 because the house was not held for the production of income.

Rule 121, Tax Court Rules of Practice and Procedure. -- On July 14, 1970, petitioner's tax return, which was due on July 15, 1970, was mailed in a properly addressed envelope, postage prepaid. Held: the 3-year statute of limitations on assessments under sec. 6501, I.R.C. 1954, had expired at the time the notice of deficiency was mailed.

Held, petitioner's failure to file a return cannot avoid the determination of a deficiency against him under sec. 6211(a), I.R.C. 1954. Held: petitioner's failure to file a return cannot avoid the determination of a deficiency against him under sec. 6211(a), I.R.C. 1954. Held, further, that sec. 6020(b)(1), I.R.C. 1954, does not require respondent to file a return for petitioner before issuing a statutory notice of deficiency.

The period for filing a petition expired on May 21, 1974. Held: Respondent's motion to dismiss for lack of jurisdiction denied. Sec. 7502, in providing that a petition forwarded in a timely postmarked cover is timely filed, had in mind a readable postmark. Evidence as to time of mailing is relevant where the postmark is inadvertently omitted in its entirety as well as when it is partially omitted.

Petitioner was transferred to Spain by his employer, who reimbursed him for expenses incurred in the move. Held: Petitioner is not entitled to deduct fully his moving expenses incurred under sec. 217. Such expenses are partially allocable to or chargeable against exempt earned income and consequently partially disallowed by sec. 911(a). Jon F. Hartung, 55 T.C. 1 (1970), and Richard L. Markus, T.C. Memo. 1971-313 not followed.

Petitioner Edward F. Neubecker and another partner withdrew from a three-man legal partnership and formed their own partnership. Held: petitioner did not sustain a recognizable loss with respect to his partnership interest as a result of his withdrawal. Sec. 731(a)(2), I.R.C. 1954. Held, further, petitioners are liable for an addition to tax for late filing of their return for 1969 pursuant to sec. 6651(a), I.R.C. 1954.

Petitioners' subch. S corporation owned and operated coin-activated laundry facilities in apartment buildings, which were available for use both by tenants and the general public. Held: the investment credit applies to investment in such facilities as nonlodging commercial facilities available to persons not using the lodging facility on the same basis as it is available to the tenants. Sec. 1.48-1(h)(2)(i), Income Tax Regs.

Decedent was the beneficiary of a marital deduction trust established by her husband's will. Held: the value of the assets distributed from the trust during decedent's life is not includable in decedent's gross estate under sec. 2041, I.R.C. 1954.

The petitioners were fruit farmers and were members of D, a farmers' marketing cooperative, which packed and marketed their fruit. D performed its services at cost. Held: the payment of the estimated cost is an ordinary and necessary expense of the petitioners' business.

Held, the weekly operation of a bingo game by an organization exempt under sec. 501(c)(4), I.R.C. 1954, was a trade or business and the income derived therefrom is taxable as unrelated business… Held: the weekly operation of a bingo game by an organization exempt under sec. 501(c)(4), I.R.C. 1954, was a trade or business and the income derived therefrom is taxable as unrelated business income under secs. 511 through 513, I.R.C. 1954.

To finance the development of a piece of real property, HLI and its corporate associate obtained a $ 900,000 construction loan on Dec. 28, 1970. Held: on its 1970 return, HLI was entitled to deduct the $ 36,000 loan fee in full, and to deduct the interest prepaid with respect to 1971 to the extent of a penalty which would have been incurred had the borrowers prepaid the principal of the construction loan in full prior to 1971. Secs. 163 and 446(b), I.R.C. 1954.

Decedent devised and bequeathed his residuary estate to a testamentary trust. Held: The selling expenses are deductible from the value of the gross estate under sec. 2053(a). Estate of Louis Sternberger, 18 T.C. 836 (1952), followed. The decedent did not specifically devise the rental properties nor did his will contemplate a distribution of the properties in kind.

Petitioner is a Texas corporation engaged in the development, manufacture, and sale of various products for the outdoorsman. Held: the portion of legal fees incurred by petitioner which is attributable to trade names must be capitalized. The remainder of these fees are currently deductible. In order to finance the acquisition from Brunswick, petitioner secured a loan from Prudential.

Held, outdoor advertising signs constitute tangible personal property within the meaning of sec. 48(a)(1)(A), I.R.C. 1954, and therefore, may qualify for the investment credit provided in sec. 38,… Held: outdoor advertising signs constitute tangible personal property within the meaning of sec. 48(a)(1)(A), I.R.C. 1954, and therefore, may qualify for the investment credit provided in sec. 38, I.R.C. 1954.

Petitioners purchased all the capital stock of Hamilton Homes, Inc., and immediately liquidated and dissolved the corporation, receiving assets having a value in excess of the corporation's… Held: petitioners are liable at law and in equity as transferees for the taxes due from Hamilton Homes, Inc.

Petitioners received a condemnation award from the District of Columbia during the calendar year 1967. Held: Petitioners have not made a timely decision not to replace. Therefore, they may not revoke their prior election and have their Federal income tax for the calendar year 1967 recomputed.

Petitioner, a wool processor, created Nor-West and acquired 72 percent of its stock, to manufacture woolen cloth. Held: On the facts, petitioner's stock in Nor-West was a capital asset in its hands and petitioner's losses therefrom were capital losses. The existence of a substantial investment motive precludes the applicability of the doctrine of Corn Products Co. v. Commissioner, 350 U.S. 46 (1955), even where a business motive predominates.

Petitioner's predecessor, a casualty insurance company, reflected its income on its returns substantially on the basis of the underwriting exhibit of the annual statement approved by the National… Held: the regulation is valid; and petitioner's motion for summary judgment will be denied.

Petitioner created four charitable remainder trusts of which he and his wife were trustees and in which they retained a life income interest. Held: Petitioner was accountable to a third party or disinterested authority no matter what hat he was wearing. The charitable trusts were viable entities and their charitable purpose will be fulfilled in due time. The sales transactions should be upheld.

Effective Jan. 1, 1969, petitioner elected, in accordance with sec. 1372, I.R.C. 1954, to become an electing small business corporation. Held: under sec. 1.47-4(b)(2)(ii), Income Tax Regs., which permits such an assumption agreement to be filed for good cause on a date later than the date specified in the regulation, the assumption agreement filed on Apr. 17, 1970, effectively relieved petitioner of the claimed investment credit recapture tax.

Held, T corp. was not a mere conduit in respect of certain interest payments received by it; such payments were includable in its own… Held: T corp. was not a mere conduit in respect of certain interest payments received by it; such payments were includable in its own gross income, with the consequence that it qualified as a personal holding company under sec. 542, I.R.C. 1954, and thereby became subject to the special tax imposed by sec. 541 on its undistributed personal…

Held, the transcript of the testimony given by the taxpayer's accountant before a Federal grand jury is not qualified as an exception to… Held: the transcript of the testimony given by the taxpayer's accountant before a Federal grand jury is not qualified as an exception to the hearsay rule under rule 803(24) or 804(b)(5) of the Federal Rules of Evidence and accordingly may not be received as substantive evidence in a subsequent civil action involving the tax liability of…

Held: Stock which was sold to the employees of subsidiary corporations subject to a repurchase option was excluded stock within the meaning of sec. 1563(c)(2)(A)(iii), I.R.C. 1954. Held: Stock which was sold to the employees of subsidiary corporations subject to a repurchase option was excluded stock within the meaning of sec. 1563(c)(2)(A)(iii), I.R.C. 1954.

William Herbert owned all of the stock of petitioner, Fairfax Auto Parts, Inc., and 55 percent of the outstanding stock of petitioner,… Held: for a person's stock ownership to be taken into account in determining whether the ownership tests of sec. 1563(a)(2) have been satisfied, that person must own stock in each member of the controlled group. Held, further, since the 80-percent test has not been satisfied, petitioners do not constitute a brother-sister controlled group.

Decedent's husband predeceased her. His will provided that all property was to go to decedent. Held: there is no deduction under sec. 2053 as a claim against the estate for a usufructuary accounting, there being no requirement under Louisiana law for decedent's estate to account to the forced heirs of decedent's husband for the amounts decedent consumed under the leasehold interests since she had acquired full ownership of these…

Petitioner acquired an escrow position from its president-director in exchange for a promissory note in the face amount of $ 255,000. Held: The transfer of the escrow position was not made in an arm's-length transaction. 2. The method used to arrive at a purchase price for the escrow position transferred was not based on economic reality. 3. The price paid for the escrow was excessive and paid for a purpose other than the purchase of the escrow position. 4.

Rules 70 and 72, Tax Court Rules of Practice and Procedure. -- During the course of the investigation of P's tax liability, the Commissioner's agents interviewed several witnesses and took statements… Held: the documents must be produced, but the production is postponed until P responds to the Commissioner's requested admissions.

Partnership was dissolved and two partners sold assets of the partnership business to corporation which continued the business. Held: no part of the sale price was attributable to goodwill or deferred sales; excess of sale price over book value was allocable to machinery and equipment; partners' gain from sale was ordinary income under secs. 735(a)(1) and 751(c) (effectively, recapture of accelerated depreciation under sec. 1245); and one partner is liable for…

Petitioner was an active member of St. James Armenian Church of Los Angeles. Held: the portion of the legal fees attributable to the collection of interest on the loan by petitioner to St. James is deductible under sec. 212(1). Held, further, remainder of legal fees do not qualify as deductible expenses under sec. 162, 212, or 170 but are nondeductible personal expenditures under sec. 262.

Decedent was the sole shareholder of a corporation. Held: on the date of his death the decedent possessed the right to receive the proceeds of the liquidation; therefore, the liquidating distribution received by the estate constituted income in respect of a decedent within the meaning of sec. 691, I.R.C. 1954.

Held, petitioner, a stock fire and casualty insurance company taxable under sec. 831, I.R.C. 1954, is not entitled to include commissions on deferred premium installments in its computation of… Held: petitioner, a stock fire and casualty insurance company taxable under sec. 831, I.R.C. 1954, is not entitled to include commissions on deferred premium installments in its computation of expenses incurred under sec. 832(b)(6), I.R.C. 1954.

Petitioners incurred $ 2,484.30 of moving expenses qualifying for deduction under sec. 217, I.R.C. 1954, when they moved from New York to Puerto Rico during… Held: In the absence of any evidence that petitioners earned income subject to Federal income tax after moving to Puerto Rico, petitioners' moving expense deduction must be disallowed because those expenses were properly allocable to or chargeable against tax-exempt income derived from sources within Puerto Rico.

Rules 70 and 72, Tax Court Rules of Practice and Procedure. -- Petitioner filed a motion to compel respondent, pursuant to Rule 72, to produce: (1) Copies of statements made by petitioner; (2) copies… Held: respondent must produce the above documents except to the extent that the impeachment and governmental privilege exceptions to discovery are applicable.

Held, a trust instrument, executed by Robert L. Moody on June 13, 1960, as subsequently amended, created a separate trust for each of his children rather than a single trust for the benefit of all of… Held: a trust instrument, executed by Robert L. Moody on June 13, 1960, as subsequently amended, created a separate trust for each of his children rather than a single trust for the benefit of all of them.

On her 1960 and 1961 gift tax returns petitioner reported one-half of the gifts made by her husband in those years, claiming a portion of her specific exemption as an offset against said gifts. Held: petitioner, by executing a consent under sec. 2513, is considered to be the donor of one-half of the gifts made by her husband for purposes of the gift tax provisions.

Held, even though civil tax case involves addition to tax for fraud, petitioner is required to answer interrogatories which will disclose… Held: even though civil tax case involves addition to tax for fraud, petitioner is required to answer interrogatories which will disclose evidence that was suppressed in a criminal fraud case brought against petitioner for the same years on the ground that the evidence was obtained in violation of petitioner's rights under the fifth…

Petitioners, husband and wife living in the community property State of California, filed joint Federal income tax returns for the years 1967 through 1970. Held: while the innocent wife is not liable for additions to tax with respect to her tax liability under sec. 6653(b), as amended in 1971, the husband is liable for additions to tax with respect to the entire amount of the deficiencies in tax for which he is jointly and severally liable.

Decedent's husband gave her 4,000 shares of stock in January of 1922. Decedent transferred these shares to a trust, created for her four children, in December of 1923. Held: petitioner has failed to carry its burden of proving that decedent's husband, not decedent, was the actual transferor of the original corpus of the trust.

Petitioners are citizens of Uruguay, where they were married, and were domiciled in Mexico during the taxable years 1958 through 1961. Held: both the salary and the capital gains were community income under the applicable laws of Mexico. Held, further, the wife's community share of both the salary and the capital gains is taxable to her under sec. 871(c), I.R.C. 1954.

In 1941, petitioner George W. Rosenkranz moved to Cuba from Hungary, and in 1942, petitioner Edith Rosenkranz moved to Cuba from Austria. Held: both the salary and capital gains were the community property of petitioners under the applicable Mexican law. Held, further, petitioner Edith Rosenkranz is taxable under sec. 871(c), I.R.C. 1954, on her community share of both the salary and the capital gains.

Rule 22, Tax Court Rules of Practice and Procedure. -- A petition was addressed and delivered to the Clerk, United States District Court, Washington, D.C., prior to the expiration of the 90-day… Held: in accordance with sec. 6213, I.R.C. 1954, and Rule 22, the petition was not filed with the Tax Court when it was received by the Clerk of the District Court; nor is sec. 7502, I.R.C. 1954, applicable to such mailing of the petition since it was not then properly addressed.

An action was instituted against the taxpayer under SEC rule 10b-5 to recover damages on account of the sale of certain stock to the taxpayer. Held: The taxpayer did not give any advice in his capacity as a corporate executive. The purchase of the stock was not made by the taxpayer in his trade or business. While the taxpayer was concerned over the possible damage to his business reputation, such concern cannot be separated from the claim for monetary damages.

Before her enrollment as a full-time graduate student in a Ph.D. program in social work, P held various positions in social work involving the performance of casework, teaching, and research. Held: since the Ph.D. degree obtained by P was the minimum amount of education normally required for the employment she secured as a full-time permanent faculty member, the expenses thereof are not deductible under sec. 1.162-5(b)(2), Income Tax Regs. 2.

An incorporator irrevocably contracted, as part of the incorporation transaction, to sell to a third party 50 percent of the stock the incorporator received in exchange for his transfer to the… Held: the incorporator did not control, within the meaning of sec. 368(c), I.R.C. 1954, the requisite percentage of stock immediately after the exchange for the incorporation to be a tax-free exchange under sec. 351(a), I.R.C. 1954.

Held: 1. On the basis of the facts in this record, advances by one of the stockholders of a corporation (T.M.) to that corporation were loans and not contributions to capital and these advances did… Held: On the basis of the facts in this record, advances by one of the stockholders of a corporation (T.M.) to that corporation were loans and not contributions to capital and these advances did not constitute a second class of stock under sec. 1371, I.R.C. 1954; 2.

In 1962 petitioner entered into an agreement with Mildred Sekyra, whereby petitioner took over the operation of a cardroom on premises owned by Sekyra. Held: The 1962 agreement constituted a lease, the termination of which was a sale or exchange of property described in sec. 1231. Payments received pursuant to the settlement agreement were capital gains subject to recapture under sec. 1245 of depreciation taken with respect to the leasehold. 2.

Petitioner was the founder, president, and former sole shareholder of Multipane. He sold his Multipane shares to Gale. He owned a large block of Gale stock during the years in issue. Held: petitioner's primary motive in making the loans was to protect the business of Multipane and not to preserve or enhance his own employment or business reputation; the loss was incurred with respect to nonbusiness debts and is deductible only as provided in sec. 166(d), I.R.C. 1954.

Petitioner received a nonstatutory stock option in exchange for a compensatory restricted stock option and a reduction in his salary. Held: the nonstatutory stock option represented compensation to petitioner even though part was granted in exchange for the restricted option and part was granted to make up for his salary reduction.

Petitioner claimed as an itemized interest deduction an amount paid to respondent for failure to pay timely her proper tax liabilities. Sec. 6651(a)(2). Held: the above amount does not represent interest and does not constitute an allowable deduction.

Petitioner, an agricultural organization exempt from Federal income tax under sec. 501(c)(5), I.R.C. 1954, owned an office building, 10 percent of which petitioner used as its State headquarters and… Held: that only 76.04 percent of the allowable building rental expenses was deductible in determining petitioner's unrelated business taxable income, the remaining 23.96 percent of those expenses being attributable to petitioner's exempt income and, therefore, not deductible.

After this case was set for trial and an evidentiary hearing scheduled on whether petitioner's constitutional rights guaranteed by the fourth and fifth… Held: under the particular circumstances present here, respondent's motion is denied and further proceedings in this civil case will not be suspended. Petitioner was physically searched at Kennedy Airport as he departed on an airplane leaving the United States at which time $ 20,000 in cash was discovered on his person.

Held: The full amount of a depreciation deduction claimed by petitioners and not disallowed in a prior year was allowed, as that phrase is used in sec.… Held: The full amount of a depreciation deduction claimed by petitioners and not disallowed in a prior year was allowed, as that phrase is used in sec. 1016(a)(2)(B), I.R.C. 1954, with respect to a certain credit information file purchased by petitioners, and no part of such deduction was allowed with respect to goodwill.

Held: Depreciation deductions to be claimed for a short taxable year may be computed pursuant to the averaging convention authorized by sec. 1.167(a)-10(b), Income Tax Regs., at one-half the rate… Held: Depreciation deductions to be claimed for a short taxable year may be computed pursuant to the averaging convention authorized by sec. 1.167(a)-10(b), Income Tax Regs., at one-half the rate applicable for the short taxable year.

Held: This Court has no discretion to grant a continuance delaying entry of decisions in accordance with the mandate of a higher court where the mandate is in full force and effect. Held: This Court has no discretion to grant a continuance delaying entry of decisions in accordance with the mandate of a higher court where the mandate is in full force and effect. Entry of decisions is a merely ministerial duty. Gaines v. Rugg, 148 U.S. 228 (1893).

Petitioners sold stock, reporting as basis of the stock amounts which included interest paid on margin loans to purchase the stock. Held: What are sound accounting principles in a given case is a question of fact. Petitioners, who put on no evidence on this point, have failed to sustain their burden of proof.

Petitioner entered into an agreement with GM for the financing of a corporate dealership. GM held the voting stock and petitioner held solely nonvoting stock. Held: since the facts and the law were the same with respect to the taxable years 1965, 1966, and 1967, petitioner is precluded under the doctrine of collateral estoppel from relitigating the issue previously decided by the Court of Claims.

Held, petitioner is not entitled to a jury trial in the United States Tax Court. Held: petitioner is not entitled to a jury trial in the United States Tax Court.