Volume 67 — Tax Court Reports

H and W owned a ranch in Lockhart, Tex., which was operated by H. They spent most of their time in Austin, Tex., where W was employed. Held: W's expenses for lodging in Austin were not deductible traveling expenses because she was not away from home within the meaning of sec. 162(a)(2), I.R.C. 1954; (2) H's expenses for lodging in Austin were nondeductible personal expenses; and (3) H's expenses of traveling between Austin and the ranch were nondeductible commuting…

1. Petitioner owned a patent on a leveling device. Held: petitioner retained valuable rights at the time of the American license and is not entitled to capital gain treatment of royalties received thereunder under sec. 1235, I.R.C. 1954.

Petitioner adopted a pension plan in 1970. Held: This Court has jurisdiction to make a declaration with respect to the continuing qualification of an employee retirement plan only with respect to a plan amendment or a plan termination. Since petitioner's situation falls into neither of these categories, respondent's motion is granted.

Petitioners adopted retirement plans. Applications for determination of qualification and exemption were filed with the Internal Revenue Service on petitioners' behalf. Held: On the facts herein, sec. 7476 does not apply to plans in existence on Jan. 1, 1974, when the plan year involved begins before Jan. 1, 1976. Accordingly, respondent's motion to dismiss for lack of jurisdiction is granted.

Held, for purposes of the overall limitation on foreign tax credit, the phrase portion of the consolidated taxable income attributable to such… Held: for purposes of the overall limitation on foreign tax credit, the phrase portion of the consolidated taxable income attributable to such [Western Hemisphere trade] corporations in sec. 1503(b)(1), I.R.C. 1954, has the same meaning as it does in sec. 1.1502-25, Income Tax Regs., relating to the computation of the consolidated…

Petitioner is a stock life insurance company, taxable pursuant to the provisions of subch. L, I.R.C. 1954. Held: in computing its gain from operations, petitioner is entitled to use the 3-percent alternative deduction provided for under sec. 809(d)(5) for premiums received on certain guaranteed renewable accident and health policies during the years in issue, since such policies are issued or renewed for periods of 5 years or more, as required…

Petitioner established two identical irrevocable trusts, naming her mother as beneficiary of one and her father as beneficiary of the other. Held: The trustor intended to give beneficiaries a viable income right which boilerplate administrative powers could not derogate under local law.

Petitioners owned real estate in Florida, most of which they had acquired in 1948 and 1949. Held: The payments received by petitioners were payments to keep an option effective and not interest payments on the purchase price of property; (2) the agreements provided for a 5-year option with quarterly payments to keep the option effective and not a series of 3-month options; and (3) the fact that the payments to keep the option…

Rule 70(a)(1), Tax Court Rules of Practice and Procedure. -- As a prerequisite to partaking in any informal discussion, petitioners' counsel required respondent… Held: Petitioners' counsel has not made a good faith effort to comply with the directive of Rule 70(a)(1) that urges the parties to undertake informal consultation or communication before utilizing formal discovery procedures. Therefore, petitioners' Interrogatories Motions and related Admissions Motions are denied.

Held, the useful lives of petitioners' three motels determined. Held: the useful lives of petitioners' three motels determined. Held, further: The useful life of petitioners' antique car museum is not so linked to that of the motel located on the same premises that their useful lives will terminate simultaneously. The useful life of the antique car museum determined.

1. Held, since petitioner failed to prove that the taxpayer's return for the taxable period ending May 31, 1970, was filed more than 3 years prior to the issuance of the deficiency notice herein,… Held: since petitioner failed to prove that the taxpayer's return for the taxable period ending May 31, 1970, was filed more than 3 years prior to the issuance of the deficiency notice herein, such notice was timely. Sec. 6501(a), I.R.C. 1954. 2.

Held: Eligibility requirements of taxpayer corporation's profit-sharing plan operated so as to discriminate in favor of officers, shareholders, and highly compensated employees within the meaning of… Held: Eligibility requirements of taxpayer corporation's profit-sharing plan operated so as to discriminate in favor of officers, shareholders, and highly compensated employees within the meaning of sec. 401(a)(3)(B).

The taxpayer's conduct was intimately entwined with the inaccurate and incomplete recording of his business income, and the resulting substantial understatements of income on his 1964,… Held: the taxpayer's returns for 1964, 1965, and 1966 were false and fraudulent with the intent to evade taxes, thereby lifting the bar on the assessment and collection of the deficiencies for those years. Held, further, the additions to tax under sec. 6653(b), I.R.C. 1954, are applicable.

(1) The petitioners set up a profit-sharing plan which provided for graduated vesting of employee accounts. Held: such forfeitures were reallocated in such a manner as to discriminate in favor of one of the prohibited groups, and consequently, the plan did not qualify under sec. 401(a), I.R.C. 1954, for those years. (2) One of the petitioners changed its corporate name during its 1972 taxable year.

Held, for purposes of computing the late filing penalty provided for in sec. 6651(a), the timely mailing -- timely filing rule of sec. 7502 is inapplicable if the return is mailed after its due date. Held: for purposes of computing the late filing penalty provided for in sec. 6651(a), the timely mailing -- timely filing rule of sec. 7502 is inapplicable if the return is mailed after its due date.

For calendar years 1967 through 1970, petitioners, who are farmers, filed Forms 1040 reporting no gross income or deductions but simply claiming that because the United States had gone off the gold… Held: since the Forms 1040 filed by petitioners have previously been held not to constitute returns, petitioners are collaterally estopped to assert the contrary. The statute of limitations therefore did not bar the asserted deficiencies.

At the time of his death at age 28 decedent possessed a general power of appointment over an inter vivos trust created by his mother and father for his benefit. Held: the value of the trust property over which decedent possessed a general power of appointment is includable in his gross estate for estate tax purposes under sec. 2041(a)(2), I.R.C. 1954.

Petitioners were ordered by this Court to answer respondent's interrogatories but they refused to do so. Held: Petitioners may not avoid answering the interrogatories on a claim of privilege under the fifth amendment to the U.S. Constitution. They have not established the requisite reasonable basis for apprehension of the hazards of self-incrimination.

Pursuant to sec. 482, respondent allocated income to a partnership in respect of sales of equipment by the partnership to a commonly controlled corporation. Held: respondent's determination of arm's-length price was unreasonable and arbitrary. 2. Held, further, arm's-length price determined by reference to the cost plus method as set forth in sec. 1.482-2(e)(4), Income Tax Regs. 3. Held, further, respondent's disallowance of depreciation deductions sustained.

Under an insurance policy, the direct beneficiary, who was the surviving spouse of the insured, had the right as of the date of the insured's… Held: the proceeds payable under such insurance policy qualify for the marital deduction because: (1) As of the date of the decedent's death, the proceeds were held by the insurer subject to an agreement within the meaning of sec. 2056(b)(6), I.R.C. 1954; (2) the proceeds were payable commencing not later than 13 months after the…

P was a candidate for the Ph.D. degree in clinical psychology. All candidates for such degree were required to serve a 1-year clinical internship. Held: such payments were compensation for services and did not constitute a scholarship or fellowship grant excludable under sec. 117, I.R.C. 1954.

College Housing, Inc. (CHI), owned and operated dormitories at Indiana University, Indiana, Pa. Held: petitioner cannot avoid transferee liability on the theory that the substance of the transaction between petitioner and the stockholders of CHI was a purchase of assets from CHI rather than a purchase of stock and subsequent liquidation of CHI. Held, further: The liquidation of CHI occurred sometime after Sept. 30, 1968.

On Dec. 14, 1970, petitioner John G. Pahl executed a contract, stated to be effective Jan. 1, 1969, whereby he agreed to restore to a corporation he controlled any amounts received as compensation,… Held: petitioners are not entitled under either sec. 1341(a) or 162(a), I.R.C. 1954, to a deduction for the 1972 restoration of amounts attributable to the period prior to the execution of the Dec. 14, 1970, agreement.

In 1967 a controlled subsidiary corporation purchased from a decedent's estate a portion of the stock of the subsidiary's parent corporation in a transaction qualifying under sec. 303, I.R.C. 1954. Held: the parent corporation did not realize a dividend in 1967 from its subsidiary corporation under sec. 304(a)(2) and (b)( 2)(B), I.R.C. 1954, as a result of the purchase of its stock.

Petitioner adopted a retirement plan on or about Sept. 19, 1975. Held: sec. 7476(b)(3), I.R.C. 1954, does not confer upon taxpayers an automatic right to declaratory judgment relief upon the expiration of 270 days from the date an administrative determination is requested.

Rules 1, 61, and 141, Tax Court Rules of Practice and Procedure. -- The deficiencies in income tax determined against petitioners arose from the same transaction which… Held: Rule 61 provides for permissive joinder of parties, all of whom have received statutory notices of deficiency or liability. Until such a notice is issued and a petition filed with this Court assigning error to the determination in such notice, this Court has no jurisdiction to join a party in a case.

Petitioner, a membership organization composed of retail florists, received advances from its members which it was obligated to apply to the… Held: the clearing house and marketing advances were not gross income to petitioner. Held, further, certain other receipts of petitioner's clearing house and marketing operations which were not burdened with restrictions as to disposition in petitioner's hands did constitute gross income from which allocable expenses were deductible.

Petitioner, a U.S. citizen residing abroad, operated a farming business as a sole proprietorship in Ireland at a loss. Held: under sec. 911(b), petitioner was required to exclude a portion of her gross farm income as earned income. Brewster v. Commissioner, 473 F.2d 160 (D.C. Cir. 1972), affg.

TIDC, a wholly owned subsidiary of petitioner, purchased stock of its parent from a shareholder of petitioner. Held: petitioner did not constructively receive a taxable distribution from its subsidiary corporation under sec. 304(a)(2) and (b)( 2)(B), I.R.C. 1954, as a result of the stock purchase. Helen M. Webb, 67 T.C. (1976), followed.

Petitioners exchanged their stock in Q and D for voting stock of W pursuant to written agreements in a tax-free reorganization under secs. 354(a)(1) and 368(a)(1)(B), I.R.C. 1954. Held: sec. 483 is applicable to deferred payments received in tax-free reorganizations. Held, further, the existence of deferred payments without provision for adequate interest, not the manner in which deferred payments are computed, is determinative of the applicability of sec. 483.

Held, the tax computations under sec. 1341 are not applicable to the repayment of embezzled funds because these funds are not received under a claim of right. Held: the tax computations under sec. 1341 are not applicable to the repayment of embezzled funds because these funds are not received under a claim of right.

Petitioners and the Hansens each owned 50 percent of the stock of Hansen-Atlee, a corporation engaged primarily in the development and rental of commercial and residential properties. Held: The reorganization did not qualify as a tax-free division under sec. 355.

Petitioner, a 19-member partnership engaged in the practice of law, adopted an employees' profit-sharing plan which meets all the requirements for qualification except certain ones applicable… Held: at all relevant times at least one partner has been an owner-employee within the meaning of sec. 401(c)(3)(B), I.R.C. 1954; therefore, since the owner-employee requirements for qualification of petitioner's profit-sharing plan have not been met, the plan is not a qualified one.

Petitioners were employed at the Nevada test site, a nuclear testing facility located in a remote area of the Nevada desert. Held: the test site allowance paid to private contractor employees and Federal employees is includable in gross income under sec. 61(a), I.R.C. 1954, and is not excludable from gross income under sec. 119.

Petitioners are allergic to a variety of chemical compounds found in pesticides and herbicides. Held: based upon the facts and record in this case, petitioners may deduct as a medical expense the additional cost of chemically uncontaminated foods.

Held, during the years in issue, the eligibility requirements of the petitioner's profit-sharing plan operated in a discriminatory manner… Held: during the years in issue, the eligibility requirements of the petitioner's profit-sharing plan operated in a discriminatory manner in violation of sec. 401(a)(3)(B), I.R.C. 1954; held, further, the Commissioner's retroactive revocation of the qualified status of the petitioner's plan did not constitute an abuse of his discretion.

Petitioner, who executed Form 872-A extending the statute of limitations on assessment of tax, was a shareholder of a subch. S corporation engaged in the inland water transportation of cargo. Held: execution of the Form 872-A did not violate sec. 6501(c)(4), I.R.C. 1954, or the Fifth Amendment to the U.S. Constitution. Held, further, petitioner's gift for the use of the Presbyterian missionary is not deductible under sec. 170.

The petitioners filed motions to vacate our decision in Frank G. Templeton, 66 T.C. 509 (1976), and to reconsider our opinion in that case, asserting that two paragraphs of the stipulation were… Held: The motion to reconsider is granted, and the facts in the case are revised accordingly; however, the changed facts do not lead to a different holding. The motion to vacate is therefore denied.

Petitioners, as stockholders of Associates, the parent corporation of an affiliated group, received distributions from Associates during… Held: the formula approved in Helvering v. Jarvis, 123 F.2d 742 (4th Cir. 1941), affg. 43 B.T.A. 439 (1941), rather than the formula prescribed by respondent in Rev. Rul. 70-531, 1970-2 C.B. 76, is the correct formula to apply in determining the proper charge to capital account in a redemption distribution under sec. 312(e), I.R.C. 1954,…

In 1968 the petitioner-husband acquired unregistered stock in exchange for his automobile service proprietorship. In 1969 he sold the stock and reported a long-term capital gain of $ 38,422. Held: the payments constituted long-term capital losses because they were directly related to the prior tax year sale of the unregistered stock.

Petitioners are husband and wife who effected a sale of various securities from husband to wife in 1973. Held: petitioners are not entitled to report the gain realized by the husband from their interspousal transfer pursuant to the provisions of sec. 453, I.R.C. 1954, because it has not been established that the transfer was a bona fide installment sale for tax purposes in substance as well as in form.

Harder Tree in 1964 agreed to acquire by merger Cardinal Maintenance, which was then owned by Rogers. Held: The payment of $ 100,677.44 by Harder Tree to Rogers for the repurchase of his Harder Tree stock was a capital transaction under sec. 311(a), I.R.C. 1954, giving rise to no taxable gain or loss.

One and one-half percent of the first $ 4,800 of wages paid petitioner-husband was withheld at the source by his employer during the calendar year… Held: Where respondent files a notice conceding the substantive issue in a case and requests the Court to enter a decision of no deficiency, and petitioners oppose such concession and urge the issuance of an opinion, the Court, in the exercise of its discretion and in the interests of justice, may decide the substantive issue. 2.

Upon the death of decedent's wife in 1964, respondent asserted a gift tax deficiency in settlement of which decedent paid a gift tax on the theory that, upon his wife's death, their joint and mutual… Held: Respondent is not estopped or precluded from amending his answer to plead alternatively under sec. 2033, I.R.C. 1954.

Held, a 3 1/2-percent loan fee withheld by the lender from the principal amount of a 25-year construction loan may not be deducted by the borrower in 1970 when escrow closed (on Dec. 17, 1970) on… Held: a 3 1/2-percent loan fee withheld by the lender from the principal amount of a 25-year construction loan may not be deducted by the borrower in 1970 when escrow closed (on Dec. 17, 1970) on such loan.

Held: Amounts received from National Defense Education Act fellowships and a teaching assistantship, both properly excluded from gross income under sec. 117, do not represent support which a taxpayer… Held: Amounts received from National Defense Education Act fellowships and a teaching assistantship, both properly excluded from gross income under sec. 117, do not represent support which a taxpayer furnished himself.

An opinion was filed in Winston Stoody, 66 T.C. 710 (1976), on July 14, 1976, and a decision entered in favor of respondent on July 21, 1976. Held: petitioners' motion to vacate our decision is granted, and their motion for reconsideration of our findings and opinion is granted in part. Held, further: Petitioners are entitled to an interest deduction in 1968 of $ 4,000. However, an interest deduction in 1969 is denied.

In April 1971 petitioners, Philippine nationals, moved from Manila to San Francisco, and 4 months later moved on to New York City where they remained through the rest of 1971. Held: as dual-status (nonresident and resident) aliens petitioners were not entitled to file a joint return or use the standard deduction.

Amounts were paid into the capital of a subch. S corporation on behalf of petitioners, evidenced by nonrecourse notes and secured by their stock in the corporation. Held: the advances constituted loans, and not gifts, to the petitioners. Further held, on surrender of the stock in payment of the notes, petitioners realized a gain to the extent that the face amount due on the notes exceeded the adjusted basis of the stock, regardless of the fair market value of such stock.

Decedent and his wife executed mutual wills containing certain language of a nature that would contractually bind them to dispose of their collective estate in a specified manner. Held: Under New York law, the independent contractual language contained in the wills created a contract which was binding upon the survivor.

Respondent determined a deficiency against petitioner, his determination being based in part upon statements from confidential informers regarding petitioner's alleged business of selling heroin. Held: based upon the testimony of the revenue agent and in camera inspection by the Court of the confidential informers' statements, respondent's determination was not arbitrary or unreasonable and petitioner therefore had the burden to rebut such determination.

Corporation S is wholly owned by petitioner Knott and his wife. Held: the real estate sales were charitable contributions in the form of bargain sales. Held, further, S and its subsidiaries, in computing their accumulated taxable income, may reduce their taxable income to the extent the fair market value of the real estate exceeded the amount realized.

Held, based on all the facts presented, compensation paid by petitioner Levenson & Klein, Inc., to its president/chairman of the board was reasonable. Held: based on all the facts presented, compensation paid by petitioner Levenson & Klein, Inc., to its president/chairman of the board was reasonable.

Held: (1) Under facts here present, the Secretary or his delegate had not been notified by either petitioner that they had established… Held: Under facts here present, the Secretary or his delegate had not been notified by either petitioner that they had established separate residences prior to the mailing of the notice of deficiency and therefore a notice addressed to them jointly at their last known address was a valid notice of deficiency under sec. 6212(b), I.R.C. 1954.

1. Held, petitioner substantially complied with the directions of sec. 1.964-1(c)(3), Income Tax Regs., prescribing the procedure for the… Held: petitioner substantially complied with the directions of sec. 1.964-1(c)(3), Income Tax Regs., prescribing the procedure for the election of depreciation accounting methods, and the earnings and profits of three of its controlled foreign subsidiaries for the taxable years ended Oct. 31 of 1967 through 1970, properly reflected…

Held, for purposes of determining qualified investment pursuant to sec. 46(c)(1)(A) on which the new sec. 38 credit against tax is… Held: for purposes of determining qualified investment pursuant to sec. 46(c)(1)(A) on which the new sec. 38 credit against tax is calculated, the basis of the self-constructed new sec. 38 property does not include depreciation sustained with respect to construction-related assets having useful lives of at least 4, but less than 8, years.

In 1950 John Huston leased land to a lessee under a lease which, with renewal options, extended for 20 years. Held: Petitioners are not entitled to depreciation deductions in respect of the improvements until after the termination of the lease on Mar. 2, 1970. Thereafter, they are entitled to recover through depreciation deductions their $ 200,000 investment allocable to the acquired reversionary interest in the improvements.

Rule 121, Tax Court Rules of Practice and Procedure. -- For purposes only of their motion for summary judgment, petitioners concede that certain shares of stock standing in the name of their attorney… Held: the Court will not consider petitioners' motion for summary judgment under such circumstances.

The testator directed in his will that certain property be held in trust and that the income be accumulated until a sufficient amount existed to build a hospital in Kerasitsa, Greece. Held: pursuant to Kentucky law we find that the testator's intent was to have a hospital built for the village of Kerasitsa and that this intent was sufficient to vest title in the village or its representative.

1. Petitioners' home was damaged by fire. They received insurance proceeds covering the costs of repairing their home to its prefire condition, and the necessary repairs were made. Held: Petitioners' method of determining their loss is rejected because it is based on a hypothesis having no relation to the actual events.

C transferred certain stock of P, owned by him prior to such transfer, to a broker to be held in a subordinated securities account. Held: C was the beneficial owner of the stock held in the account, and after the sale, DL directly owned, within the meaning of sec. 1504(a), I.R.C. 1954, at least 80 percent of the stock of P so that the two corporations were entitled to file a consolidated return.

Petitioner purchased improved real property in the loop area of Chicago. The highest and best use of the property required retention of the building located thereon. Held: It is not proper to adjust the land and building values in this manner on the facts before us. Even if current values could be expected to reflect demolition costs on the facts before us, these costs would reduce the value of the building rather than the land.

In 1970, petitioner won $ 100,000 in a lottery. Held: the prize money was income to petitioner in 1970. Held, further, the prize money, held by petitioner's parents as custodians under the Uniform Gifts to Minors Act, did not constitute the corpus of a trust.

U, as a coexecutor, paid a portion of an addition to tax for late filing of an estate tax return under sec. 6651(a), I.R.C. 1954. Held: the addition to tax is a fine or similar penalty under sec. 162(f) and is not deductible under sec. 162 or 212.

Petitioner's only connection with his alleged tax home in California was a leased apartment and a desire to return. Held, such contacts are insufficient to render California his tax home. Held: such contacts are insufficient to render California his tax home. Held, further, petitioner's claimed theft loss deduction is denied.

Rules 34(a), 34(b)(7), 41(a), and 60(a), Tax Court Rules of Practice and Procedure. -- Petitioners filed joint Federal income tax returns for 1971, 1972, and 1973 and received a joint statutory… Held: respondent's motion to dismiss for lack of jurisdiction as to the wife will be denied because she has established that she intended to join her husband in filing the timely imperfect petition and has ratified his act in filing such petition on her behalf.

Held: (1) When decedent transferred property to herself and her husband as joint tenants with right of survivorship in contemplation of death,… Held: When decedent transferred property to herself and her husband as joint tenants with right of survivorship in contemplation of death, the value of the property is includable in her gross estate even though decedent many years prior received the property as a gift from her husband who paid the full consideration for it; and (2)…

Petitioner, a U.S. citizen residing in France, was employed by J-M Europe Corp., a Delaware corporation subsidiary of Johns-Manville Corp., as an executive overseeing the operations of various… Held: The bonuses received by petitioner do not qualify as compensation for services performed wholly without the United States and thus are not wholly exempt from tax under sec. 911, I.R.C. 1954. Respondent's allocation on a time basis approved.

The decedent possessed at the time of her death, a power to appoint for a business purpose property held in a testamentary trust. Held: decedent's power was not limited by an ascertainable standard within the meaning of sec. 2041(b)(1)(A), I.R.C. 1954.

Held, petitioner is entitled to deduct certain expenses incurred as a condition of his employment as ordinary and necessary business expenses under sec. 162(a), I.R.C. 1954. Held: petitioner is entitled to deduct certain expenses incurred as a condition of his employment as ordinary and necessary business expenses under sec. 162(a), I.R.C. 1954.

T was an officer of a corporation and a participant in its qualified contributory pension plan. Held: T, a calendar year taxpayer, did not receive the total amount payable to him by the trust within 1 taxable year, as required by sec. 402(a)(2), I.R.C. 1954.

In consideration for the negotiation of certain coal leases on behalf of the operator, petitioners acquired royalty interests in those… Held: the second contract resulted in the sale or exchange of the royalty interests acquired by petitioners under the original contract; under the second contract, the petitioners did not retain an economic interest within the meaning of sec. 631(c); and the amounts received by petitioners under that contract are taxable as gain from the…

Petitioners, administrators of nursing homes, received amounts designated as parsonage allowances. Held: The amounts are not excludable from income despite the fact that petitioners are ordained ministers and operate the nursing homes under the fellowship of the Assemblies of God Church. Petitioners did not show any objective manifestation of control over the nursing homes by the Assemblies of God Church.

Held, merely because the U.S. Tax Court is established under art. I, not art. III, of the Constitution, it is not constitutionally prohibited from deciding this case. Held: merely because the U.S. Tax Court is established under art. I, not art. III, of the Constitution, it is not constitutionally prohibited from deciding this case. Held, further, I.R.C. sec. 402(a) (2) is not unconstitutional.

Two individuals owned over 75 percent of the stock and served as principal officers of each of two corporations. Held: on the facts, the two corporations were both owned and controlled by the same interests within the meaning of sec. 482, I.R.C. 1954. Held, further, the allocated interest income was properly computed with reference to the outstanding daily, rather than monthly, balances of the advances.

Held, a bequest to Scipio Cemetery of Scipio, Indiana, is not deductible for estate tax purposes under sec. 2055(a)(1) or (2) of the 1954 Code. Held: a bequest to Scipio Cemetery of Scipio, Indiana, is not deductible for estate tax purposes under sec. 2055(a)(1) or (2) of the 1954 Code.

After two trial continuances and a variety of stalling tactics over a period of more than 3 years, petitioner, a trial attorney by profession acting in proper, was ordered to be ready for trial on… Held: under the circumstances, respondent's motion to dismiss for lack of prosecution is granted. Rule 123(b), Tax Court Rules of Practice and Procedure.

Rule 121, Tax Court Rules of Practice and Procedure. -- P moved for summary judgment, asserting that its depreciation deductions for the taxable years 1965 through 1969 were allowable in accordance… Held: motion granted in part and denied in part; Rev. Procs. 62-21, 65-13, and 68-27, 1968-2 C.B. 911, interpreted and applied.

Petitioners owned stock in a corporation which was in the business of selling pre-need funerals. Held: the payments are ordinary income. Mace Osenbach, 17 T.C. 797 (1951), affd. 198 F.2d 235 (4th Cir. 1952); Ralph R. Garrow, 43 T.C. 890 (1965), affd. 368 F.2d 809 (9th Cir. 1966), followed.

Held: In the light of all the facts, the useful lives of 18 cable television franchises owned by petitioner's controlled group of subsidiaries during 1967 through 1971 were estimable with reasonable… Held: In the light of all the facts, the useful lives of 18 cable television franchises owned by petitioner's controlled group of subsidiaries during 1967 through 1971 were estimable with reasonable accuracy within the meaning of sec. 1.167(a)-3, Income Tax Regs.

Sec. 83(a), I.R.C. 1954, measures income derived from the transfer of property in connection with the performance of services without regard to contractual restraints on the transfer of that property… Held: sec. 83(a) is not unconstitutional under the 5th or 16th Amendment.

Hamlin, Inc., established and funded an educational trust arrangement providing for the payment of the education expenses of the children of its key employees. Held: the payments made by the trust are compensatory in character, includable in the employee-parent's income under sec. 83, I.R.C. 1954, when the trust pays the children's education expenses.

In a redemption that qualified under sec. 302(a), I.R.C. 1954, corporation C, a cash method taxpayer, redeemed 50 percent of its outstanding preferred stock at less than the issuance price of such… Held: under sec. 312(e), I.R.C. 1954, the full amount of the redemption distribution is properly chargeable to the capital account of the preferred stock. Held, further, in computing C's earnings and profits, it may not reduce such account by its unpaid but accrued taxes.

In the taxable years 1970 and 1971, a banking corporation distributed as a dividend in kind U. S. Treasury bonds and notes which had appreciated in value to its parent bank holding company in… Held: the Commissioner was empowered to allocate the resulting income from the sale or redemption of such obligations to the banking corporation under sec. 482, I.R.C. 1954.

Held, petitioner's motion to dismiss for lack of jurisdiction on the ground that the statutory notice of deficiency was invalid, is denied. Held: petitioner's motion to dismiss for lack of jurisdiction on the ground that the statutory notice of deficiency was invalid, is denied.

Rules 61 and 63, Tax Court Rules of Practice and Procedure. -- Held, a beneficiary of an estate to whom no notice of deficiency or of… Held: a beneficiary of an estate to whom no notice of deficiency or of transferee liability has been sent cannot properly be joined as a party under Rule 61 or substituted as a party under Rule 63, even though respondent after determining a deficiency in estate tax made a jeopardy assessment and levied on property which respondent contends…

Petitioner, a personal holding company, paid deficiency dividends partly in cash and partly in other property which had a fair market value in excess of its adjusted basis in petitioner's hands. Held: sec. 1.562-1(a), Income Tax Regs., providing that the measure of the dividends-paid deduction for purposes of the personal holding company tax is the adjusted basis of the property, is valid, following Fulman v. United States, 545 F.2d 268 (1st Cir. 1976).

Petitioner was a one-third partner in Areljay Co., Not Incorporated. Held: petitioner is not subject to the gift tax on his proportionate share of the partnership's outstanding loans because the making of non-interest-bearing loans under these circumstances is not a taxable event.

Petitioners in computing their farm income, satisfied the accounting requirements of sec. 1251(b)(4)(A) but failed to make the elective statement pursuant to sec. 1251(b)(4)(B) and respondent's… Held: petitioners have substantially complied with the requirements of and are entitled to the benefits conferred by sec. 1251(b)(4) by fulfilling all the essential requirements thereof.