Volume 68 — Tax Court Reports

In 1952, petitioners bought 114 acres of undeveloped land, intending to subdivide the land, improve the subdivided sites, and then sell those sites to purchasers who wanted to build homes. Held: petitioners were holding the condemned land as a capital asset when it was condemned.

Petitioner, the estate of a deceased, unrestricted Osage Indian, received income during the years in issue from Osage headright interests. Held: The Osage headright income is properly includable in petitioner's gross income. The Osage Allotment Act of June 28, 1906, ch. 3572, 34 Stat. 539, as in effect during the years in issue, does not exempt such income from Federal taxation.

Subchapter S. -- In 1961 CHM Co. filed an election under sec. 1372 of subch. S of the Internal Revenue Code of 1954. Held: a corporation's status as an electing corporation under subch. S is not terminated by the filing of petitions under ch. XI or XII by some of its shareholders.

W Corp. and R Corp. were owned by substantially the same group of shareholders. Held: the affiliated group is not permitted deductions for carryovers of preaffiliation net operating losses incurred by R.

P was furnished with a house by, and for the convenience of, his employer, but P had to purchase utilities, carpeting, and a heater, for which he was not reimbursed. Held: the utilities, carpeting, and heater were not furnished by the employer within the meaning of sec. 119, I.R.C. 1954, and hence, their cost is not excludable from income under that provision.

Rule 121, Tax Court Rules of Practice and Procedure. -- Held: Conviction of one of petitioners under sec. 7206(1), I.R.C. 1954, estops that… Held: Conviction of one of petitioners under sec. 7206(1), I.R.C. 1954, estops that petitioner from denying in a case involving sec. 6653(b), I.R.C. 1954, that his return for the year of his conviction was false and fraudulent and that there was an omission of income from his return in that year of the type on which the conviction was…

Held: Petitioner, an alien who established residence in the United States in 1962, did not abandon such resident status when she departed the country in 1966 and remained abroad for 4 years. Held: Petitioner, an alien who established residence in the United States in 1962, did not abandon such resident status when she departed the country in 1966 and remained abroad for 4 years.

Petitioner incurred liability for interest to the Government for deferred payment of estate tax to avoid forced sales of assets to pay the estate tax. Held: Interest expense incurred by petitioner on the unpaid balance of its Federal estate tax liability deferred under sec. 6161, I.R.C. 1954, is deductible as an administration expense under sec. 2053(a)(2). Ballance v. United States, 347 F.2d 419 (7th Cir. 1965), not followed. Rev. Rul. 75-239, 1975-1 C.B. 304, is invalid.

1. S-W-B, a corporation engaged in the investment banking business, sold its entire business, pursuant to a plan of liquidation under sec. 337, I.R.C. 1954. Held: No portion of the purchase price received by S-W-B in the sale of its business represented an assignment of income from partial performance of services under the transferred underwriting contracts.

Petitioners sold real property, the mortgages on which exceeded petitioners' adjusted basis, under an installment contract. Held: the purchaser assumed the mortgages within the meaning of sec. 1.453-4(c), Income Tax Regs., with the result that payments in the year of sale included the excess of the mortgages over the petitioners' adjusted basis. Stonecrest Corp. v. Commissioner, 24 T.C. 659 (1955), distinguished.

On Aug. 29, 1970, petitioner, a cash basis taxpayer, entered into a preliminary agreement to purchase property on which a convalescent home was being constructed and to lease it back to seller. Held: petitioner was the equitable owner of the property at the time the points were paid. Held, further: The 12 points paid to the permanent lender constituted prepaid interest for use of money over the life of the permanent loan and must be amortized over the life of the loan.

1. A partnership in which P was a member constructed a building on certain property owned by it and, on Dec. 31, 1971, entered into a… Held: Such transaction was a bona fide sale of the property by the partnership; (b) P has failed to establish that amounts designated as prepaid interest and points in the sale agreement represented part of the downpayment, hence, they are ordinary income to the partnership; and (c) the amount of gain attributable to the portion of the…

Rule 121, Tax Court Rules of Practice and Procedure. -- Petitioner John McShain received a condemnation award in 1967. Held: the condemned property was replaced by like kind property.

P was the sole shareholder of A, an electing small business corporation under subch. S, I.R.C. 1954. In January 1967, A filed a voluntary petition in straight bankruptcy under chs. Held: Under bankruptcy law, the abandonment of worthless stock by the trustee was effective as of the day the petition in bankruptcy was filed so that P retained continuous title thereto.

Pursuant to a court separation decree, petitioner and his wife continued, without cohabitation, to share their common residence, and petitioner paid her certain temporary support payments. Held: petitioner was not separated from his wife within the meaning of sec. 71(a)(3) and was not entitled to deduct the support payments. Held, further, on the facts, mortgage payments made by petitioner were not alimony.

Held, this Court is not authorized by the provisions of Pub. Held: this Court is not authorized by the provisions of Pub. L. 94-559, 90 Stat. 2641 (Oct. 19, 1976) amending 42 U.S.C. sec. 1988, or any other provision of law to make an allowance of attorney's fees to a petitioner.

Decedent's estate consisted of sufficient personal property to pay debts and taxes but not enough to satisfy all legacies. Held: the bequest of all of my other personal property, including all horses, cattle and livestock of every kind to my wife passes only decedent's tangible personal property and is a specific bequest. Held, further, the bequest transmitting 75 shares of Fayco stock is a general bequest.

Petitioner, a corporation organized as a social club, sold bottled liquor to its members for consumption away from the club's premises. Held: petitioner was not operated exclusively for exempt purposes and did not qualify for tax exemption under sec. 501(c)(7), I.R.C. 1954.

Petitioner was the largest creditor of American, a company which was experiencing financial difficulties. Held: The disallowance of petitioner's addition to its reserve for bad debts is sustained. Petitioner did not establish (1) that any portion of the receivable from American became worthless within the taxable year at issue or (2) that respondent abused his discretion in disallowing any increment in petitioner's previous reserve balance.

Petitioner transferred all of the assets and liabilities of his sole proprietorship to a corporation in exchange for all the stock of such corporation. Held: an obligation to the extent that its payment would have been deductible if made by petitioner shall not, for purposes of secs. 357 and 358, be treated as a liability. Held, further, the amount of unreported rental income and various unsubstantiated deductions determined.

Decedent transferred property in trust and retained, as grantor, the power to add new beneficiaries and to change the respective beneficial interests therein. Held: use of the parol evidence rule examined and such rule considered as a rule of substantive law and enforced under the circumstances of the instant case.

Petitioner acquired the assets of a veterinary hospital, including certain medical record files containing the names and addresses of the pet owners and the medical histories of each animal patient… Held: The medical information is intangible property with a useful life of 7 years. Its value is separable from the goodwill and going-concern value of the acquired business. Held, further, the amount of the purchase price allocable to the files determined.

Held: 1. Executors of a decedent's estate are entitled to renounce decedent's testate share of the estate of his deceased wife under law… Held: Executors of a decedent's estate are entitled to renounce decedent's testate share of the estate of his deceased wife under law of New York prior to effective date of statutory provisions for renunciation of testate interests in New York even when the renunciation was made over 2 years after death of decedent's wife and probate of…

In 1969 petitioner, a bankrupt not discharged, paid directly to creditors of the bankruptcy estate 15 percent of their claims from funds not part of the bankruptcy estate. Held: payments to creditors in 1969 for identifiable costs of goods sold, the liability for which was incurred in 1963, are allowable as costs of goods sold in 1969.

Petitioner and her family, citizens of Chile, moved to the United States in 1966 when petitioner's husband secured a career position with an international organization in Washington, D.C. They were… Held: since petitioner and members of her family were resident aliens during the year in issue, she may file a joint return with her husband, and they together may claim their children and petitioner's mother as dependents.

Held, the expenses incurred by a building and loan association in selling foreclosed property in 1968 and 1969 are not deductible under sec.… Held: the expenses incurred by a building and loan association in selling foreclosed property in 1968 and 1969 are not deductible under sec. 162(a), I.R.C. 1954, but must be taken into account in making charges and credits to the association's reserve for losses from qualifying real property loans pursuant to sec. 595, I.R.C. 1954.

On petitioner's consolidated Federal income tax returns for the taxable years 1967, 1968, and 1969, deductions were claimed for intangible drilling costs incurred in connection with the drilling of… Held: the intangible expenses incurred in drilling each of the wells constitute intangible drilling and development costs within the meaning of sec. 1.612-4, Income Tax Regs., and were properly deducted by petitioner.

The envelope containing the petition bore an illegible postmark. Held: The petitioner has established that the envelope containing his petition was mailed and postmarked within the statutory 90-day period provided in sec. 6213(a), I.R.C. 1954.

In a statutory merger, four active manufacturing or sales corporations, the stock of which was owned or controlled in varying proportions by related individuals, were merged into a newly organized… Held: The merger of four active corporations into one corporation, resulting in a change in the relative percentages of stock held by the individual shareholders, was not a mere change in identity, form, or place of organization within the meaning of sec. 368(a)(1)(F).

P's board of directors authorized a contribution to its profit-sharing trust before the close of the year in issue, although no record was made of such action. Held: under the circumstances, P incurred an accruable liability during the year in issue and is entitled to deduct such contribution for such year.

Held, executors' commissions under New York law which are deductible under sec. 2053, I.R.C. 1954, are limited to amounts computed under… Held: executors' commissions under New York law which are deductible under sec. 2053, I.R.C. 1954, are limited to amounts computed under New York statute even though decedent's will provided that each executor should be entitled to one full commission computed under laws of New York with certain modifications and if commissions were to be…

Certain individuals worked daily in the offices of the two petitioner professional corporations, but the workers' records were maintained and their paychecks were issued by a separate payroll service… Held: the office personnel are employees of the professional corporations and the Burnetta corporation's pension and profit-sharing plans fail to satisfy the coverage requirements of sec. 401(a)(3)(A), I.R.C. 1954.

Held: B, a corporate farmer, held water primarily for sale in the ordinary course of its trade or business. Held: B, a corporate farmer, held water primarily for sale in the ordinary course of its trade or business.

Petitioners exchanged their stock in Berwick for voting stock of Whittaker in 1968 in a tax-free reorganization under sec. 354(a)(1) and 368(a)(1)(B), I.R.C. 1954. Held: the shares received in 1971 constitute payments subject to the imputed interest provisions of sec. 483. Solomon v. Commissioner, 67 T.C. 379 (1976), and Jeffers v. United States, F.2d (Ct. Cl. 1977), followed.

1. Held: Petitioner, a Los Angeles, Calif., fireman, may not exclude or deduct from gross income amounts withheld from his salary during 1973 as contributions to the Los Angeles Firemen's Pension… Held: Petitioner, a Los Angeles, Calif., fireman, may not exclude or deduct from gross income amounts withheld from his salary during 1973 as contributions to the Los Angeles Firemen's Pension Fund.

Held: Interest credited to amounts withheld from the salary of petitioner Paul Newman by the State of New York under the laws of New York providing for retirement payments to… Held: Interest credited to amounts withheld from the salary of petitioner Paul Newman by the State of New York under the laws of New York providing for retirement payments to employees of the State was not interest on the obligations of a State within the meaning of sec. 103(a)(1), I.R.C. 1954.

Held: Amount in excess of proper charge to capital under sec. 312(e), I.R.C. 1954, upon redemption of stock, which meets the provisions… Held: Amount in excess of proper charge to capital under sec. 312(e), I.R.C. 1954, upon redemption of stock, which meets the provisions of sec. 302(a), is properly charged to earnings and profits and is subject to the limitations of sec. 312(a) so that the reduction of earnings and profits is to the extent thereof in the year of redemption.

Petitioners mailed their petition from New York, N.Y., on the 89th day following the mailing of the notice of deficiency. Held: Under the circumstances of this case the rule in Golsen v. Commissioner, 54 T.C. 742 (1970), affd. 445 F.2d 985 (10th Cir. 1971), cert. denied 404 U.S. 940 (1971), will not be followed.

Petitioners adopted a child on Feb. 12, 1972. Held: Petitioners failed to carry their burden to show that any of the medical services rendered to the natural mother constituted medical care for the child. Accordingly, no deduction for the expenses incurred for such services is allowed.

Petitioners obtained a 5-year option to purchase an entire tract of land. After 4 1/2 years petitioners received an offer to purchase a part of the tract and a check for $ 5,000 from the offerors. Held: Petitioners sold the option to their accountant and properly reported their gain as long-term capital gain. Sale of the option was not a sham.

Pursuant to a decree of divorce entered July 3, 1967, petitioner was awarded $ 66,550, payable in 121 monthly installments of $ 550 each. Held: the cases requiring strict compliance with the formalistic requirements of sec. 71(c) do not debar the application of Johnson v. Commissioner, 45 T.C. 530 (1966), recognizing for Federal income tax purposes the effect of a nunc pro tunc order relating to child support. Johnson v. Commissioner, supra, followed.

Under the terms of decedent's will, his surviving spouse W was entitled to the net income from a testamentary trust, but, if such income was less… Held: 3.5-percent net rate of return on corpus permitted by regulations not shown to be at variance with the facts. Held, further, probability that entire corpus would be invaded for W's benefit not so remote as to be negligible, and the estate is not entitled to a charitable deduction for any portion of the testamentary trust.

Two unrelated families each owned 50 percent of the fair market value of corporations X, Y, and Z. Pursuant to the tax-free reorganization,… Held: Corporations X, Y, and Z were not owned substantially by the same persons in the same proportion within the meaning of sec. 382(b)(3), and the loss carryover must be reduced pursuant to the formula in sec. 382(b)(2). Commonwealth Container Corp. v. Commissioner, 48 T.C. 483 (1967), affd. 393 F.2d 269 (3d Cir. 1968), followed.

In March 1969 petitioner signed a contract to purchase 72 looms in three equal shipments. Held: the contract gave petitioner a power of termination rather than a power of cancellation as those terms are defined in Uniform Commercial Code sec. 2-106.

Petitioners entered into an agreement in 1964 to exchange stock in one corporation for stock in another corporation in a transaction qualifying as a reorganization under sec. 368(a)(1)(B). Held: a portion of the stock received by petitioners in 1969 and 1971 is taxable as interest income under the provisions of sec. 483. Catterall v. Commissioner, 68 T.C. 413 (1977), and Solomon v. Commissioner, 67 T.C. 379 (1976), followed.

The predecessor of VGS, New Southland, acquired all the stock of a corporation and certain assets of a partnership which operated together as a going concern. Held: no goodwill was acquired as a part of the acquisition of the stock of the corporation and partnership assets. Held, further, going-concern value was acquired in that acquisition and that element is not depreciable as an enhancement to the depreciable assets.

Petitioner, a commissioned officer in the United States Marine Corps, seeks to deduct the expenses he incurred in attending law school. Held: petitioner's law school expenses are not deductible as ordinary and necessary business expenses because they were incurred in the pursuit of a program of study which will lead to qualifying him in a new trade or business, sec. 1.162-5(b)(3)(i), Income Tax Regs., namely, the practice of law.

Petitioner obtained a divorce during 1973. He claimed a dependency exemption for his former spouse on his 1973 return which respondent disallowed. Held: petitioner's right to due process and equal protection under the 14th Amendment was not violated since the 14th Amendment does not apply to Federal tax statutes. Held, further: Petitioner's right to due process of law under the 5th Amendment was not violated by operation of secs. 151(b), 152(a), and 153.

A group of individuals, including some of the petitioners, jointly owned patents covering certain rock-crushing machines. Held: A transfer of all patent rights within a specified geographical area does not automatically qualify as a transfer of all substantial rights to a patent within the meaning of sec. 1235, I.R.C. 1954.

On Feb. 25, 1971, petitioner was advised by the Redevelopment Agency of the City of Fresno that the building in which it was leasing its place of… Held: petitioner's moving expenses, to the extent reimbursed, are nondeductible in its fiscal year ended June 30, 1971, since petitioner's right to reimbursement was fixed and matured without substantial contingency as of May 20, 1971, when the agency issued its written authorization to incur moving expenses in a specified amount.

Petitioner, a resident of New York, was separated from his wife under a written separation agreement executed in 1964, but they were not legally separated under a decree of… Held: Petitioner is not entitled to compute his tax as an unmarried individual under sec. 1(c), I.R.C. 1954. Neither secs. 71 and 215 of the Internal Revenue Code nor New York law with respect to separation agreements qualifies petitioner as an unmarried individual for filing status under sec. 1(c).

Each petitioner executed an unlimited waiver (Form 872-A) for the taxable year 1965 which provided in part that the period of limitation… Held: letters mailed by respondent's authorized agent to petitioners on Jan. 2, 1973, and Mar. 6, 1973, respectively, constituted the requisite notification of termination of Appellate Division consideration which triggered the running of the agreed 90-day period and, therefore, respondent's statutory notices of deficiencies, issued more…

Petitioners filed false and fraudulent joint income tax returns for the years in issue. They subsequently filed amended returns. Held: the original returns determine the applicable statute of limitations; the amended returns are of no import in determining whether the statutory notice was timely.

Held, petitioner is a mutual insurance company under sec. 821(a) and is taxable as such. Held: petitioner is a mutual insurance company under sec. 821(a) and is taxable as such.

TASK Corp., the employer of the petitioner-husband, withheld 1 percent of the first $ 9,000 of wages paid to petitioner during the calendar year 1975 pursuant to secs. 984-986,… Held: The compulsory contribution made in 1975 by petitioner to the California disability insurance fund is deductible as a State income tax within the purview of sec. 164(a)(3), I.R.C. 1954. McGowan v. Commissioner, 67 T.C. 599 (1976), applied. 2. Rev. Rul. 75-149, 1975-1 C.B. 65, is invalid.

On Sept. 27, 1967, petitioner executed a profit-sharing agreement and petitioner and the trustee of the plan executed a trust agreement for the plan. Held: petitioner is not entitled to retroactive qualification of the plan for taxable years ending Sept. 30, 1971, and Sept. 30, 1972, under the rationale of Aero Rental v. Commissioner, 64 T.C. 331 (1975), because of petitioner's lack of diligence in seeking qualification of the plan.

Decedent gave to his wife his community one-half share of certain property, so that it became her separate property. Held: decedent's gross estate includes (as a transfer with reserved life estate under sec. 2036(a)(1)) one-half of the transferred share (one-quarter of the whole). Estate of Hinds v. Commissioner, 11 T.C. 314 (1948), affd. on other grounds 180 F.2d 930 (5th Cir. 1950), followed.

Petitioner is an artist who has been involved in artistic activities for 20 years. Held: Petitioner's testimony and the objective evidence clearly establish that petitioner is a most dedicated artist who pursued her artistic activities during the years in question with the bona fide intention and expectation of making a profit.

In 1959, a partnership of which petitioner-husband was a member acquired a piece of land for subdivision purposes, obtained an estimate of the costs of developing it, and began development and sales… Held: upon the sale of all lots remaining in the subdivision and liquidation and distribution of the partnership assets, the reserve created for the estimated cost of developing the subdivision was ready to be, and was, closed.

Held: 1. Petitioners' losses as guarantors on obligations of World Foods, Inc., are deductible as nonbusiness bad debts. 2. Petitioners were the owners of 60,000 shares of the capital stock of World Foods, Inc., as of Dec. 31, 1970. 3. The stock of World Foods, Inc., was worthless as of Dec. 31, 1970. 4. Petitioners' investments in Scifo Enterprises, Ltd., were not worthless as of Dec. 31, 1970.

1. For each of its taxable years 1959 through 1961, petitioner, a dairy cooperative, reported deductions in excess of gross income. Held: Petitioner entitled to net operating loss carryover deductions under sec. 172, I.R.C. 1954, in the succeeding years. Respondent's disallowance of net operating loss carryover, based upon cost principle of cooperative operation, rejected. 2.

Petitioners received family allowance distributions from their father's estate for the years in issue. The estate had distributable net income in excess of all estate distributions for those years. Held: all family allowance distributions were properly includable in gross income under sec. 662(a), I.R.C. 1954, 2All statutory references are to the Internal Revenue Code of 1954, as amended, unless otherwise stated. whether paid from estate's income or from its corpus.

Petitioner settled two lawsuits filed against it by agreeing to pay Cleanamation a total of $ 450,000. Held: $ 300,000 of the total settlement liability was incurred with respect to the claims asserted in the lawsuits. Of that amount, $ 100,000 related to a conversion claim and is required to be treated for tax purposes as a capital expenditure.

College leased land to CDC at $ 1 per year. Immediately thereafter, under a leaseback agreement, CDC leased the land, plus buildings to be constructed thereon, back to College for 25 years. Held: For $ 49,000 petitioner purchased CDC's right to monthly payments from College of $ 543, lasting approximately 23 1/2 years. In substance neither CDC nor petitioner made any capital investments in the newly constructed buildings or in obtaining a lease thereon.

Petitioner is a resident of France who also maintains an office and apartment in New York City. Held: Under sec. 6213(a) petitioner has 150 days within which to file an appeal with this Court. Therefore, the petition herein was timely filed.

In May 1972, petitioner contracted to purchase land and paid $ 10,000 earnest money into an escrow. Held: Under Texas law, what petitioner purchased in May 1972 and sold in September 1972 was an option to purchase land. His cost basis in the option included the $ 10,000 deposit on the May 1972 contract and the assignees' payment therefor was, for purposes of sec. 453, part of petitioner's sales proceeds.

Petitioner, a New Jersey resident, executed gratuitous promises under seal to pay certain sums to his sister. He paid and deducted interest on the promised amounts. Held: under New Jersey law the sealed promises are unenforceable and interest paid with respect thereto is nondeductible.

Among his other business and investment interests, T was engaged in the business of racing thoroughbred horses. He purchased a pregnant broodmare for use in that business. Held: the colt was not held by T primarily for sale to customers in the ordinary course of his business. Malat v. Riddell, 383 U.S. 569. Held, further, the gain realized was entitled to capital gain treatment pursuant to sec. 1231(a), I.R.C. 1954. Held, further, basis of the colt determined.

Petitioner licensed a Brazilian corporation to use petitioner's trade name, trademark, and technical knowhow in exchange for 5-percent royalty payments. The agreement provided for a 15-year term. Held: amounts received by petitioner under the judgment award were not capital gains under sec. 1221 or sec. 1231. 1All statutory references are to the Internal Revenue Code of 1954, as amended, unless otherwise stated.

Held, uncorrected inadvertent failure of a corporation to contribute to trusts which were part of pension and profit-sharing plans on… Held: uncorrected inadvertent failure of a corporation to contribute to trusts which were part of pension and profit-sharing plans on behalf of its only employee eligible under the plans other than the shareholder-officers, who were highly compensated, caused the plans and trusts to fail to qualify under sec. 401(a), I.R.C. 1954, for the…

In a case involving the year of sale, 1968, this Court entered a decision based on an agreed-upon computation of the parties which was not considered by the Court. Held: collateral estoppel is not applicable to require that the erroneous method of computation of the parties for the year 1968 be used in computing the amount of capital gain on the sale that must be included in taxpayer's income for the years 1969 and 1970.

Held, upon reconsideration of the earlier opinion in this case, Rev. Proc. 68-27, 1968-2 C.B. 911, relating to the continued use of a previously justified class life for purposes of computing… Held: upon reconsideration of the earlier opinion in this case, Rev. Proc. 68-27, 1968-2 C.B. 911, relating to the continued use of a previously justified class life for purposes of computing depreciation, was not intended to be retroactive and will not be so applied in this case.

H and W executed a property settlement agreement (which was later incorporated into their divorce decree) providing that H would pay as… Held: the parties intended that $ 60,000 be paid by H to W in 119 monthly payments of $ 500 and 2 final monthly payments of $ 250 for a total of 121 monthly payments; as the payments were intended to be made over a period of more than 10 years, they were periodic payments in the nature of alimony or support, includable in the gross income…

Held, P, who kept no record of either winnings or losses from racetrack betting, failed to establish that his losses exceeded his unreported income from wagering, and therefore, he was not entitled… Held: P, who kept no record of either winnings or losses from racetrack betting, failed to establish that his losses exceeded his unreported income from wagering, and therefore, he was not entitled to a deduction for his claimed losses.

In 1968, petitioner banks implemented a consumer credit card plan as part of their banking operations. Held: the expenditures attributable thereto, with the exception of the initial $ 10,000 membership fee assessed each bank, are currently deductible as ordinary and necessary business expenses under sec. 162, I.R.C. 1954. First Security Bank of Idaho, N.A. v. Commissioner, 63 T.C. 644 (1975), on appeal (9th Cir., Sept. 7, 1976), followed.

Held, during the years in issue, petitioner's pension plan failed to meet the eligibility requirements for coverage under sec. 401(a)(3), I.R.C. 1954. Held: during the years in issue, petitioner's pension plan failed to meet the eligibility requirements for coverage under sec. 401(a)(3), I.R.C. 1954. Held, further, the improper operation of the pension plan cannot be cured retroactively by the funding of contributions to include eligible employees.

P filed a Form 1040 for 1974 which did not disclose her gross income or give any information with regard to her tax liability for such year. Held: Federal Reserve notes are not accounts receivable and are to be reported as income in accordance with a taxpayer's method of accounting; and (2) the document filed by P was not a return, and the Commissioner properly imposed the additions to the tax provided in secs. 6651(a) and 6653(a), I.R.C. 1954.

In 1968 four active corporations, A, B, C, and D merged into a fifth active corporation, P. The premerger corporations engaged in disparate and nonintegrated business activities which activities were… Held: The merger of four active corporations into a fifth active corporation, each with disparate, nonintegrated business operations and with significantly different shareholder interests, does not constitute a sec. 368(a)(1)(F) reorganization.

Decedent's will gave his surviving spouse a life estate in a trust; in a codicil he provided that in lieu of the trust interest she could… Held: the surviving spouse received the $ 40,000 pursuant to a testamentary right of election, not a power of appointment; such right is an interest in property within the meaning of sec. 2056(a), I.R.C. 1954. 1All statutory references are to the Internal Revenue Code of 1954, as amended, unless otherwise stated.Held, further, the act of…

Decedent's husband was grantor of an inter vivos trust in which the grantor reserved the income for life with power of revocation. Held: the renunciation was effective and decedent's interest in trust A is not includable in her gross estate. Estate of Dreyer v. Commissioner, 68 T.C. 275 (1977); Estate of Hoenig v. Commissioner, 66 T.C. 471 (1976).

Friedman & Jobusch Architects & Engineers, Inc. (the Corporation), established a stock bonus plan and trust. Held: The plan and trust as established and maintained discriminated in favor of employees who were officers and shareholders, and therefore failed to meet the requirements of secs. 401(a) and 501(a), I.R.C. 1954. Consequently, the Corporation is not entitled to deduct employer contributions under sec. 404.

Petitioner, an accrual basis taxpayer, contracted to make certain payments to three separate funds administered by three separate trusts to provide supplemental unemployment… Held: The existence of and the amount of petitioner's liabilities were fixed, certain, and not cancelable during the taxable years in issue even though the time of payment was not determinable. Accordingly, petitioner is entitled to deduct these amounts in the years in which they became determinable.

Held, a tract of undeveloped real estate located about 500 miles from the principal office of taxpayer, a California savings and loan association, was not property held for sale to… Held: a tract of undeveloped real estate located about 500 miles from the principal office of taxpayer, a California savings and loan association, was not property held for sale to customers in the ordinary course of the taxpayer's business, and loss on the sale thereof was a capital loss.

Petitioner, a United States citizen, was the sole stockholder of Oceanic, a controlled foreign corporation. Held: Oceanic was not a guarantor of petitioner's loan within the meaning of sec. 956(c), I.R.C. 1954, and, thus, petitioner did not realize taxable income from Oceanic under sec. 951 as a result of the loan transaction.