Volume 7 — Tax Court Memorandum

Held, that the wife of petitioner is not a partner, for income tax purposes, in the partnership of Gil Graber & Company of which petitioner was a member.

Held, that the transactions here involved between petitioner and the holder of all its outstanding old bonds did not constitute purchase and sale transactions but an exchange or substitution of new… Held: that the transactions here involved between petitioner and the holder of all its outstanding old bonds did not constitute purchase and sale transactions but an exchange or substitution of new bonds for old as evidence of a continuing indebtedness between the same parties.

Held, that the transactions here involved between petitioner and the holder of all its outstanding old bonds did not constitute purchase and sale transactions, but an exchange or substitution of new… Held: that the transactions here involved between petitioner and the holder of all its outstanding old bonds did not constitute purchase and sale transactions, but an exchange or substitution of new bonds for old as evidence of a continuing indebtedness between the same parties.

Petitioner and his wife entered into a separation agreement on January 1, 1943, under which he was obligated to pay her $500 a month. Petitioner's wife later instituted divorce proceedings against him in Nevada and was granted a decree of divorce in May 1944. Held, the $6,000 paid by petitioner to his wife in 1943 was not paid subsequent to a court decree and petitioner is not entitled to a deduction under section 23(u), I.R.C.

1. Held, payments for protection from arrests and prosecution are not deductible in determining income. 2. Held: payments for protection from arrests and prosecution are not deductible in determining income. 2. Expenses of actually earning income in illegal businesses are deductible in computing net income subject to tax. 3. Fraud penalties approved.

Bad debt. - Claimed bad debt deductions disallowed. Loss. - Held, that petitioner sustained a long-term capital loss in 1942 upon the disposition of shares of beneficial interest acquired in January 1940 in a business trust which was an association taxable as a corporation.

1. Held, payments for protection from arrests and prosecution are not deductible in determining income. 2. Held: payments for protection from arrests and prosecution are not deductible in determining income. 2. Expenses of actually earning income in illegal businesses are deductible in computing net income subject to tax. 3. Fraud penalties approved.

Petitioner and his wife went into the plumbing business in Atlanta in 1922 with their joint savings up to that time as their capital. Held: petitioner and his wife conducted the Florida end of the business in 1940 as a joint venture and the entire business in 1941 as a partnership and the petitioner is taxable only on one-half of the profits from the joint venture and on one-half of the profits from the partnership.

In 1943 petitioners conveyed certain common stock to a trustee as gifts for the use and benefit of their six grandchildren. Held: that these gifts were gifts of future interests, for which no exclusions are allowable under section 1003(b)(3), I.R.C.

In 1943 the taxpayer corporation, on the accrual basis, discontinued use of steel dies in the manufacture of civilian products. Held: these business expenses were not incurred in 1943 and deduction of the estimated repair cost is denied.

Petitioner, a banking institution, closed its doors December 20, 1931 and, in order to make possible its reopening and continued operation as a going bank, it was agreed by petitioner and each of its… Held: petitioner is not immune from income tax under section 3798 (b) of the Internal Revenue Code.

Petitioner, a personal holding company, was the owner of certain patents and patent rights to a slug casting machine. Held: The assignment in 1923 of the foreign rights effected a sale of a capital asset. (2) Claims for amortization deductions in the taxable year disallowed for failure of proof.

Petitioner, a Texas corporation, had been hopelessly insolvent for several years prior to 1939. Held: no amount may be included in petitioner's equity invested capital under section 718, I.R.C., on account of the claimed cancellation of indebtedness.

Held, on the facts, premium payments by petitioner during 1943 and 1944 for life insurance of its president and majority stockholder were not intended as additional compensation to him and were not ordinary and necessary business expenses, hence, not deductible for tax purposes.

When petitioner inaugurated a sausage manufacturing and retailing establishment in 1928 his wife made available some of her personal funds which were used in the business. Held: no valid partnership existed in the taxable years because the parties never entered a definite agreement to become partners or share profits and losses, and the entire profits derived in the taxable years are taxable to petitioner.

Held, under the facts and circumstances amounts paid as salaries to the three officers of petitioner for the taxable year 1941 were reasonable in amount and for personal services actually rendered. Held: under the facts and circumstances amounts paid as salaries to the three officers of petitioner for the taxable year 1941 were reasonable in amount and for personal services actually rendered.

Partnership. - Held, that petitioners, husband and wife, were partners doing business under the firm name of M & M Truck Company. Income. - Held, that the business of M & M Truck Company did not have additional unreported income from certain bank deposits as determined by respondent. Depreciation. - Useful life of motor tractors and tank trailers used in the business determined.

Held, deduction in excess of amounts actually paid to taxpayer's father in taxable years not allowable under section 23 (a)(1), I.R.C., as reasonable compensation for his services rendered in… Held: deduction in excess of amounts actually paid to taxpayer's father in taxable years not allowable under section 23 (a)(1), I.R.C., as reasonable compensation for his services rendered in taxpayer's business.

The business of Gaidry Motors was not a partnership composed of petitioner as an individual and as trustee for his wife and two minor children within the meaning of the Internal Revenue Code, and the income thereof for 1943 was taxable in its entirety to petitioner.

On December 23, 1942, the board of directors of an engineering corporation adopted a resolution allowing petitioner, its president and controlling stockholder, compensation of $40,000 for services… Held: that there was no constructive receipt of income by petitioner in 1942 and the entire amount is taxable to him in 1943.

Held, that all of the income of an alleged partnership was taxable to petitioner. Held: that all of the income of an alleged partnership was taxable to petitioner.

Held: Where a deduction under section 23 (f) for loss arising from casualty was claimed and allowed in a base period year, the disallowance of such deduction, in computing the excess… Held: Where a deduction under section 23 (f) for loss arising from casualty was claimed and allowed in a base period year, the disallowance of such deduction, in computing the excess profits net income for such year, is mandatory under section 711 (b) (1) (E) of the Internal Revenue Code.

1. Four corporations were organized solely to hold legal title to various parcels of real property in order to forestall personal creditors of one of two partners who… Held: that the corporate entity of corporation A in 1937, corporations B and C in 1939, and corporations B, C, and D in 1940, should be disregarded for tax purposes, and that the net profits or losses in those years from the realty owned by them were actually realized by the partners and taxable thereto.

Held, that certain payments by petitioner corporation to a former employee are not deductible as ordinary and necessary business expenses. Held: that certain payments by petitioner corporation to a former employee are not deductible as ordinary and necessary business expenses.

Petitioner, a casualty insurance company taxable under section 204, Internal Revenue Code, computed its unpaid losses outstanding at the end of 1942 as required by the annual report to the State Insurance Department on the form approved by the National Convention of Insurance Commissioners. Held, petitioner's computation was in accordance with section 204 (b). Commissioner v. New Hampshire Fire Insurance Co., 146 Fed. (2d) 697, affirming 2 T.C. 708. Held, also, petitioner's unearned premiums reserve is not includible in equity invested capital for 1940 or 1941, following Federal Union Insurance Co., 5 T.C. 374.

Bad debts: Worthless notes. - Collateral Serial 6% coupon notes of the Level Club, Inc., became worthless prior to the year 1942 where the organization was adjudicated a bankrupt in 1930, although the New York Court of Appeals did not deny leave to appeal from an adverse judgment until 1942.

Family partnership: Capital. - Contribution by taxpayer's wife for their son of $20,000 to new business did not establish a partnership between the taxpayer and his son. It is held that the contribution was merely shifting of family funds.

Petitioner, a subsidiary of a holding company, acquired certain properties in 1927 from the holding company, which had acquired the same… Held: that the several transactions, beginning with the purchase of the stock of X and Y for cash and including the conveyance of the properties to petitioner as the operating subsidiary, were one transaction for tax purposes and the transfer did not come within any of the provisions of section 203 (h) (1) of the Revenue Act of 1926, or…

On the evidence, Held, petitioner failed to prove that he contributed over half the support of his two minor daughters during the taxable year. Held: petitioner failed to prove that he contributed over half the support of his two minor daughters during the taxable year.

The assets of a completely liquidated corporation were distributed in kind as a liquidating dividend to its four stockholders in proportion to their stock interest. The stockholders sold the assets three days later to another corporation. Fair market value of the assets as of the date of distribution and the respective gains on liquidation, and subsequent sale of the assets, determined.

In 1942 petitioner sustained a loss from the sale of land, buildings, and equipment which he had used for the production and sale of citrus fruits since 1931. Held: the loss resulting from the sale of the property may not be carried over and used as a deduction in determining petitioner's 1943 tax liability. Joseph Sic, 10 T.C. 1096, followed.

For several years prior to the taxable years petitioner and his brother, sister and mother owned and operated a business as a partnership under the name of West Tulsa Pipe and Supply Company. Held: that on and after May 23, 1941, she was a partner in the business owning a 6/18ths share of the net profits and this share is taxable to her and not to petitioner. On this issue the Commissioner is reversed.

The decedent, who died in 1911, bequeathed an annuity of $2,500 a year to his divorced wife, payable so long as she did not remarry. He placed a portion of his stockholdings in trust for his two nephews, who were also equal legatees of a residuary estate consisting in part of his remaining stock interests. The two nephews, one of whom is petitioner, qualified as administrators of the estate in 1918 following the death of the executor, and in 1923 they had the entire lot of stock issued to themselves as legatees. Petitioner and his brother paid the annuity from 1915 until the death of the latter in 1935, after which time petitioner paid the entire annuity. In 1939 decedent's divorced wife entered into an agreement with petitioner and with the executrix of his brother's estate whereby decedent's estate was allowed to be formally closed and petitioner in return undertook personally to pay the annuitant the sum of $2,500 per year. Held, petitioner's payments in 1942 and 1943 are not excludable from gross income under section 22 (b) (3), or deductible therefrom under section 23 (a) (2), I.R.C.

Petitioner, an attorney, represented certain stockholders and creditors of a company in receivership for which the court, in December, 1936, awarded him a fee of $125,000. Held: under the facts and circumstances, petitioner's services subsequent to 1936 were not rendered in earning the fee allowed by the court, and section 107, Internal Revenue Code, may not be applied in computing the tax for 1940 attributable to the fee.

In 1929 the petitioner entered into a contract with the Bagdad Company to purchase or procure purchasers of 200,000 shares of its stock… Held: That the petitioner received 152,000 shares (111,000 and 41,000) in payment for his services in securing the underwriting and for the release of his rights under the 1927 contract; and that, from the receipt of the 111,000 shares, he realized taxable income of $362,293.19 consisting of $266,859.04 as payment for his personal services…

On the record, held, petitioner has failed to establish that the business conducted in the taxable year 1944, under the name "Albert C. Phy," was not operated as a sole proprietorship. All the net income therefrom is taxable to petitioner.

The D. H. Willey Lumber Company Issues Issues 1 and 9. Held: not deductible by the company under section 23 (a), Revenue Act of 1936. (c) An amount paid by the company in 1937 for a new automobile and charged to purchases, held, not deductible as a business expense. (d) Certain bonuses paid by the company to its employees, held deductible as not being in excess of reasonable compensation.

1. Upon the evidence, held, the respondent did not err in including in gross income for the years 1937 through 1940 certain amounts as representing income received from two corporations, 2. Held: the respondent did not err in including in gross income for the years 1937 through 1940 certain amounts as representing income received from two corporations, 2.

Deduction of a bad debt alleged to have become worthless in 1943 disallowed for failure of proof.

Petitioner operated retail liquor stores in South Carolina. Held: respondent's determination was erroneous.

In 1942, 1943, and 1944, petitioner realized income from the operation of a rooming house and rents from houses owned by her. Held: that petitioner's records substantially reflect her income and business expenses and that her tax liability for the taxable years should be determined on the basis thereof. Held, further, that petitioner did not fraudulently file her tax returns with intent to evade tax and that the 50 per cent fraud penalty may not be imposed.

Petitioners Awe and Lucia were sole members of a partnership during the period from April 1, 1942 through December 31, 1943. Awe claimed a deduction on his 1942 individual Federal income tax return attributable to partnership traveling expenses in 1942. Lucia claimed a deduction on his 1943 individual Federal income tax return due to a capital loss suffered in that year.

In 1942, 1943, and 1944, petitioner realized income from the operation of rooming houses and apartment buildings owned by him and his wife. Held: petitioner's gross income and business deductions determined for the three taxable years. Held, further, petitioner did not fradulently file his tax returns with intent to evade tax and that the 50 per cent fraud penalty may not be imposed.

Petitioner, the beneficiary of a testamentary trust created by her deceased husband, was empowered to take all or any part of the trust income and all or any part of the trust corpus for… Held: the beneficiary had such unfettered command and control over the trust income and trust corpus that she is taxable under section 22 (a), I.R.C., on all income of the trust estate. Edward Mallinckrodt, Jr., 2 T.C. 1128, affd., 146 Fed. (2d) 1, certiorari denied, 324 U.S. 371, followed.

Petitioners acquired a one-half interest in an oil lease in return for their agreement to pay one-half of the intangible drilling costs incident to the sinking of a well. Held: that this expenditure by petitioners was to them a cost of the property acquired and not subject to deduction as an expense under section 23 (m) of the Internal Revenue Code.

A trust created in form analogous to that of a corporation for the purpose of buying and selling property, real or personal, held, an association taxable as a corporation. Held: an association taxable as a corporation.

During the years 1942 and 1943 petitioner was an engineer and machinery broker, designing, selling and installing equipment for fabricating… Held: that the major portion of such expenditures was made for business purposes. Held, further, that the exact amount of such expenditures for business purposes was not determinable from the evidence but that an allocation of the expenditures between business and personal expenses can properly be made. Cohan v. Commissioner, 39 Fed.

Upon the facts which have been stipulated, held, that the sale of certain shares of common stock in the Thompson Automatic Arms Corporation was made by the Borall Corporation as its own property and was not made for the account of petitioner, Matthew J. Hall, Borall Corporation v. Commissioner, 167 Fed. (2d) 865, decided May 4, 1948, followed.

Petitioner, a corporation on the cash receipts and disbursements basis, ceased doing business and transferred all its assets to its three stockholders subject to all its liabilities and obligations which the stockholders assumed and agreed to pay. Held, the agreement by the stockholders to pay petitioner's obligations did not constitute payment by petitioner, entitling it to deductions in the amounts of its unpaid obligations.

1. Respondent, in computing excess-profits tax credit, properly reduced petitioner's equity invested capital by an amount representing dividends paid in prior years, which dividends were in excess of surplus available for dividends in such respective years, without including in surplus unrealized profit on installment sales under section 718 (b) (1) of the Internal Revenue Code. 2.

Held, a certain agreement constituted a trust and not a sale of the business; income from the business should be taxed accordingly. Held: a certain agreement constituted a trust and not a sale of the business; income from the business should be taxed accordingly.

Petitioner did not file an income tax return for either of the tax years 1935 to 1938, inclusive. On September 30, 1946, respondent filed an income tax return for petitioner for each of the years above named, made a jeopardy assessment on October 3, 1946, of the tax shown by such returns to be due and on November 13, 1946, determined deficiencies in income tax so assessed and delinquency penalties thereon. Notice of such deficiencies and penalties was duly given to petitioner on the last named date. No evidence was submitted negativing the correctness of the amounts of such deficiencies or in respect of petitioner's failure to file returns. Held, respondent's determination of deficiencies was not barred by the statute of limitations and that such deficiencies and penalties in the amounts determined by respondent should be sustained.

Petitioner and one Cates, doing business as partners, on June 1, 1941, sold for purchaser's notes aggregating $35,000 payable at the rate of $700 per month, certain equipment and territorial rights to one Cannon, retaining as security a lien on the equipment sold. $4,900 of the notes were paid in 1941 and all notes were paid as they matured. The notes were not shown on the partnership books as "notes receivable" but the book value to the partnership of the equipment sold Cannon was carried in the equipment account. Respondent determined that additional gain of $20,047.98 resulted to the partnership from the sale and taxed one-half thereof to petitioner. Held, petitioner failed to show error in respondent's determination. At the end of 1941 petitioner sold his half interest in the partnership, excepting specified partnership assets, to his partner, Cates, at the book value as of December 31, 1941, of the part sold. Petitioner claims that by this sale, the Cannon notes not being shown in book value as notes receivable, he sustained a deductible loss in 1941 to the extent of one-half of the difference between the unpaid Cannon notes and the value at which the assets sold were carried on the books. Held, under the facts, petitioner not entitled to the deduction claimed.

1. Respondent's determinations that petitioner received rebates or "kickbacks" from the president of a motor transportation company which constituted income in several years are sustained. 2. Fraud penalties for failure to report such income are sustained.

Henry T. Roberts, the petitioner herein, on December 6, 1938, formed a corporation for the sole purpose of holding title to a farm then owned and operated by him. Held: That for tax purposes the corporation and its sole stockholder must be regarded as separate and distinct entities. 2. During the taxable years 1938, 1939, and 1940, the business of farming was conducted solely by the petitioner in his individual capacity.

Petitioner, pursuant to an agreement dated October 4, 1938, purchased 6,000 shares of its capital stock which it subsequently retired. Held: the interest paid by petitioner as a result of this transaction in the fiscal year ending October 31, 1939, in the amount of $12,788.88, was abnormal only in amount under section 11 (b) (1) (J) (ii) and was not an abnormal deduction as to class under section 711 (b) (1) (J) (i) of the Internal Revenue Code.

Expenses for room and board paid by petitioner while in Philadelphia, at which place she was employed in the Immigration and Naturalization Service, are not deductible as traveling expenses even though petitioner retained a residence in Washington, D.C., from which place her office had been transferred. Railroad expenses from Philadelphia to Washington and return were incurred for petitioner's personal convenience and likewise are not deductible as traveling expenses.

Held, the income of a certain trust was taxable to petitioner grantor. Held: the income of a certain trust was taxable to petitioner grantor.

During the years 1944 and 1945 petitioner owned a barber shop which was operated by an agent. Petitioner filed returns for those years, purporting to show the net income from such operation. Held: the Commissioner's action in so doing is approved, and (2) his imposition of the statutory fraud penalty is approved.

Fees paid by petitioner to lawyers to protect its interest in connection with demands against it as a transferee of assets of a predecessor company, held deductible as an ordinary and necessary expense.

On the facts, held, the extent to which certain payments made by respective petitioners are properly deductible is determined. Held: the extent to which certain payments made by respective petitioners are properly deductible is determined.

On the record, it is held that a valid partnership for Federal income tax purposes existed between petitioners and their wives during the taxable years, and the wives of the petitioners are each taxable under the partnership agreement upon one-sixth of the earnings of the partnership.

Amounts designated as promotional expenses paid by petitioner, a practicing physician, held, on the evidence, not deductible as ordinary and necessary business expense. Held: on the evidence, not deductible as ordinary and necessary business expense. Amount of casualty loss resulting from destruction by fire of petitioner's residence and its contents determined from the evidence.

Petitioner, on March 15, 1943, gave to his wife 42,721 shares of the common stock of Foremost Dairies, Inc., and on April 10, 1943, 3,991 shares of Foremost Dairies preferred stock. Held: the fair market value of the common and preferred stock on the respective dates of the gifts determined. Held, further, that petitioner is liable for a delinquency penalty for his failure to file returns within the time prescribed by law.

On the evidence, held, petitioner has failed to establish that the used car business conducted in the taxable year 1943 was not his individual business, and the respondent's determination that all… Held: petitioner has failed to establish that the used car business conducted in the taxable year 1943 was not his individual business, and the respondent's determination that all the net income therefrom was taxable to him as sole proprietor is sustained.

1. Loss: Damage from storm. - The extent of the loss sustained by the taxpayers in 1938, not compensated for by insurance or otherwise, by reason of the destruction of trees on their country estate as the result of a hurricane, is determined from the evidence. Deduction for loss allowed under section 23 (e) (3) of the Revenue Act of 1938. 2. Decision limited to assignment of error in the pleadings. M. C. Parrish & Co., 3 T.C. 119, 129; aff'd, 147 Fed. (2d) 284.

Fair market value determined of two farm and wood land properties, and of 1,442 acres of country real estate assembled for an unusual home site.

Petitioners are domiciled in the State of Washington, a community property state and were married in 1929. Held: the income of the business during the taxable years 1942, 1943 and 1944 was due primarily to the personal services of the spouses and the use of their community capital in the business and was the community income of petitioners under the laws of the State of Washington and the Commissioner erred in allocating a considerable part of…

The respondent included in decedent's estate the entire value of certain Florida properties, which at the time of decedent's death were held in the names of decedent and his wife as tenants by the… Held: it has been established that decedent's wife furnished one-half the consideration paid for such properties, and only one-half the entire value thereof is properly includable in decedent's estate under section 811 (e) of the Internal Revenue Code.

On the record, held, in the taxable year 1943 petitioner and his wife conducted an insurance business under the name of R.C. Fleeman Agency as a bona fide partnership for income tax purposes, and… Held: in the taxable year 1943 petitioner and his wife conducted an insurance business under the name of R.C. Fleeman Agency as a bona fide partnership for income tax purposes, and respondent erred in taxing the entire net income therefrom to petitioner as sole proprietor.

Held, that a certain payment was a gift exempt from income taxation and not compensation for services rendered. Bert P. Newton, 11 T.C. No. 62, followed. Held: that a certain payment was a gift exempt from income taxation and not compensation for services rendered. Bert P. Newton, 11 T.C. No. 62, followed.

Held, upon the facts, that a business partnership existed between petitioner and his wife within the purview of the Federal revenue law during the tax years. Held: upon the facts, that a business partnership existed between petitioner and his wife within the purview of the Federal revenue law during the tax years.

Held, petitioner's claim for a deduction in the fiscal year ended April 30, 1946 of the sum of $6,000 as officer's separation settlement is disallowed for failure of proof.

Amount of petitioner's loss from involuntary conversion resulting from destruction by fire of residence and contents owned jointly by petitioner and his wife determined from the evidence. Held: petitioner is entitled to a deduction for rent paid to his wife for use of her land.

1. Held, respondent's method of determinating income and consequent deficiencies was arbitrary and without rational or reasonable basis. 2. Amount of deficiencies determined on the proof of record. 3. Held: respondent's method of determinating income and consequent deficiencies was arbitrary and without rational or reasonable basis. 2. Amount of deficiencies determined on the proof of record. 3. Fraud penalties disapproved.

Prior to October 9, 1942, petitioner and two of his sons owned all of the outstanding stock of a corporation engaged in the business of building… Held: the partnership composed of petitioner and his children constituted a bona fide partnership and the income distributed to the five children who acquired their interests by virtue of the gift to each of $4,000 by their father cannot be taxed to him under the doctrine of Tower v. Commissioner [327 U.S. 280,], and Lusthaus v.…

Petitioner realized income during the taxable years 1942 to 1945 primarily from the operation of a bar and package store, for which business he maintained a complete set of books and records. Held: that the business records kept by petitioner accurately reflect his income for the taxable years involved and that his income tax returns, which were substantially based upon these books, disclose his full tax liability for each of the taxable years in issue.

Upon the facts, held, respondent did not err in disallowing in part compensation paid to three of petitioner's officers during the taxable year 1943.

Where, pursuant to a formal partnership contract, the father, the son and the son's wife all performed vital services in the community enterprise, held, that a bona fide partnership existed and that the parties properly returned for taxation their individual shares of the net profits pursuant to the written contract.

On the record, held: 1. Petitioner during the taxable year 1943 was a resident alien. 2. Held: Petitioner during the taxable year 1943 was a resident alien. 2. Respondent's disallowance of claimed deductions for amusement taxes paid and for seaman's uniforms and cleaning same sustained.

Upon the facts, held, that certain transfers of property made by decedent in December, 1941, were not made in contemplation of death. Held: that certain transfers of property made by decedent in December, 1941, were not made in contemplation of death.

Income: Realization: Benefit: Reduction of indebtedness. - The net income from the operation of a theatre in which decedent's former… Held: taxable in its entirety to the estate which also owned an interest in the property, since that income was used under the terms of an agreement to liquidate the indebtedness on the theatre in such a manner as to increase the equity of the estate in the property but not to benefit the former wife and not to increase her equity in that…

Petitioner for several years prior to 1944 had been in business operating an imprinting plant and the manufacture of leather novelties. Held: there was a bona fide partnership existing between petitioner and his daughter in 1944 and petitioner is only taxable on his one-half share of the profits and is not taxable on his daughter's share of the profits.

Respondent erred in disallowing any part of the compensation paid by petitioner to its three principal executives in the taxable years 1942 and 1943.

During the taxable years 1939 to 1942, inclusive, petitioner bought and sold lumber in carload lots on his own account. Held: a part of the deficiencies resulting from such understatements was due to fraud with intent to evade tax and fraud penalties were correctly imposed by the Commissioner.

Petitioner's controlling stockholder, acting through a power of attorney for his son, then in the Armed Forces, entered into an agreement with… Held: respondent did not err in including the partnership's income in the income of petitioner. Petitioner's inventory of broomcorn was computed on the last in, first out basis. Prior to 1945 the increase in the inventory of broomcorn on hand at the end of a fiscal year was valued at the average cost of all purchased in the year.

In 1921, petitioner and his wife entered into an oral agreement to engage in the business of constructing ornamental iron work. Held: that a real partnership existed and Commissioner's action in taxing to petitioner his wife's share in the profits of the business for 1944 is not approved.

Fraud penalties determined.

Held, a valid and legal partnership for tax purposes existed between petitioner and his wife during the taxable year. Held: a valid and legal partnership for tax purposes existed between petitioner and his wife during the taxable year.