Volume 8 — Tax Court Reports

Petitioner, on the accrual basis, computed and accrued its 1943 liability under the Maryland Unemployment Compensation Law pursuant to rate notification by the administering state board and paid the accrued amounts prior to filing its 1943 tax returns on March 15, 1944. On April 21, 1944, the board, following an opinion of its counsel on a general question of law, notified petitioner that its correct rate was less than that originally determined. On May 15, 1944, petitioner's account was accordingly credited with a portion of the payments for 1943. Petitioner had not questioned the correctness of the earlier notification and it did not and could not have received notice of the later determination prior to April 21, 1944. Held, petitioner is entitled to a deduction in 1943 of the total amounts accrued.

Vinson Act -- Subcontractor -- Aggregation of Small Orders. -- Many small orders placed by a prime contractor with the petitioner may not be considered one subcontract aggregating more than $ 10,000 so as to limit the petitioner's profits under the Vinson Act.

Petitioner, a department store, heretofore reporting inventory on basis of retail method, held not precluded from electing to use the last in, first out method of maintaining inventories, as permitted by Internal Revenue Code, section 22(d), notwithstanding that as customary under the retail method it continues to take and record inventory by department dollar totals at retail and at cost and not by specific items.

1. Decedent entered into an agreement with a beneficiary of a life annuity under his father's will whereby the beneficiary released her interest in that estate so the estate could be distributed to… Held: that petitioner was not the owner of this $ 100 per month paid out of such rentals to the annuitant and it should not be included in petitioner's gross income. Blair v. Commissioner, 300 U.S. 5. 2.

1. Petitioner, on a cash basis, owed a creditor approximately $ 200,000, with interest thereon at 2 per cent due in advance. Held: that payment of interest charged of $ 4,219.33 was a payment of interest as such and is deductible from the petitioner's gross income. 2. Proper amount of deductions for gasoline, sales, and admission taxes determined.

1. Upon the evidence, held, petitioner has established under section 722 (b) (4), I. R. C., as amended, that its excess profits tax for… Held: petitioner has established under section 722 (b) (4), I. R. C., as amended, that its excess profits tax for the fiscal years ended April 30, 1942 and 1943, computed without the benefit of this section, was excessive and discriminatory where its average base period net income was an inadequate standard of normal earnings because it…

The decedent created an irrevocable trust in 1930, at the age of 72, for the benefit of nephews and nieces and their children. Held: that the value of the trust corpus is not to be included in the decedent's gross estate under section 811 (c) of the Internal Revenue Code. Estate of Edward P. Hughes, 7 T. C. 1348, followed.

1. Petitioner, the donee of a special power of appointment under the will of her father, executed the power in 1920, appointing her brother to receive the income of share C of a trust created by the… Held: the petitioner is not liable for gift tax on the income received by her brother from trustees during the years 1920 to August 24, 1938. 2.

Petitioner, a Nevada corporation, entered into contracts for erection of mining machinery and plant. Held: the contracts did not comprise a note or mortgage within the intendment of section 719 (a) (1), Internal Revenue Code, as to definition of borrowed invested capital.

Section 722(b) (2) -- Depressed Business -- Temporary Economic Condition. -- The petitioner has failed to show either that its business or the business of the industry of which it was a member was depressed during the base period years by Japanese competition, or that the Japanese competition was a temporary economic event unusual either in the case of the petitioner or in the case of the industry.

Petitioner in 1934 created three trusts, one each for the benefit of his wife and his minor son and daughter, and reserved to himself, as cotrustee, broad managerial authority, and discretionary… Held: petitioner is taxable on the income of each of the trusts under the principle of Helvering v. Clifford, 309 U.S. 331.

1. Community Property -- Commingling. -- Where the separate funds of the husband and the community funds are deposited in the same bank account, amounts paid for medical expenses may not be allowed as a deduction on the separate return of the husband unless it is shown by competent evidence that the expenditures were actually made from his separate funds. 2.

Petitioner is three-eighths degree Quinaielt Indian and, although married to a white man and residing off the reservation, is a duly enrolled and allotted member of the Quinaielt Indian Tribe. Held: the income from the sale of timber is not exempt, Charles Strom, 6 T. C. 621; and petitioner is taxable on the net proceeds received by the superintendent in the taxable year.

1. Fees paid by petitioner to her attorneys in the taxable year for services and advice with respect to the purchase of tax-anticipatory, interest-bearing bonds, the making of interest-bearing loans to corporate officers for the purpose of protecting petitioner's investment in the corporation, and with respect to the merits and legal aspects of plans submitted to petitioner by a firm of estate planners for the rearrangement and reinvestment of petitioner's entire estate,…

Petitioner owned 1,755 shares of stock in C corporation which were pledged to a bank as collateral security for loans made to him to help finance a new venture, R corporation, under an arrangement… Held: the sale of C stock by petitioner was a bona fide transaction, and the investment partnership was a bona fide business venture; and petitioner is taxable only on the gain realized from the sale of C stock and on his distributive share of the partnership income.

Petitioners are architects operating in partnership. Held: petitioners are not subcontractors described in section 403 (a) (5) (B) of the Renegotiation Act, as amended, and this Court has jurisdiction of the instant proceeding.

Petitioner W. H. Easley conducted a bottling and sales business under a contract with Seven-Up Co. of St. Louis, as a sole proprietorship. Held: that petitioners failed to make bona fide transfers of part of the business to the two trusts and, consequently, all of the income of the business is taxable to petitioners as community income.

1. The proceeds of an individual policy of life insurance taken out by an employee under the terms of the employer's group insurance… Held: includible in full in the deceased employee's gross estate under section 811 (g) (2), Internal Revenue Code, as amended by section 404 (a), Revenue Act of 1942, because, (a) the decedent possessed at death the right to change the beneficiary, an incident of ownership; and (b) the decedent paid directly or indirectly all premiums,…

1. A taxpayer prior to 1930 purchased lots which he unsuccessfully listed for sale with brokers. Held: not a capital asset within the meaning of section 117, Internal Revenue Code, and the loss resulting from its sale is deductible in full. 3.

Under the facts, held, that the profit from the sale of timber and lease of land was not realized and did not accrue for income tax purposes in 1940. Held: that the profit from the sale of timber and lease of land was not realized and did not accrue for income tax purposes in 1940.

A parent corporation in a nontaxable reorganization liquidated five wholly owned subsidiaries, one of which had earnings and profits accumulated since March 1, 1913, in a comparatively small amount. Held: that a later distribution by the parent to its stockholders, including the petitioner, was, above the amount distributed from current earnings, distributed from capital. Commissioner v. Sansome, 60 Fed. (2d) 931; and Harter v. Helvering, 79 Fed. (2d) 12, followed.

1. Res Judicata. -- A decision of this Court holding the income of a trust for a prior year not taxable to the petitioner-grantor, under section 167, held not res judicata in these proceedings involving the petitioner's liability for tax on the income of the same trust under section 22 (a) and the doctrine of Helvering v. Clifford, 309 U.S. 331. 2.

Jurisdiction. -- The petitions herein were filed more than 90 days after notice of transferee liability was sent by respondent by registered mail to an address other than each petitioner's last known… Held: that the proceedings must be dismissed for want of jurisdiction, because of lack of required statutory notice; held, further, respondent's motions to dismiss are denied, and petitioners' motions to dismiss are granted.

1. Trustor, owning 73 per cent of the stock in a family holding corporation, provided in the trust agreement that he should have power to direct the trustee (who was also subject to removal by the… Held: such power to direct the investment of trust income in the family holding corporation completely dominated by the trustor was tantamount to the ownership of such income by the trustor, who is thereby taxable on such income under section 22 (a). 2.

1. Income -- Accrual. -- An item of $ 5,499.24 did not accrue as income of the year 1939. 2. Excess Profits Tax -- Excess Profits Credit Carry-over. -- The provisions of section 721 do not apply for the purpose of computing the excess profits carry-over of 1941 to 1942.

Petitioners were on the accrual basis and on or about November 30, 1939, certain property owned by them was condemned by the United States for public purposes. Held: Petitioners were taxable upon the entire amount of the interest of $ 17,756.73 in 1941 when the judgment in the condemnation proceeding was rendered and became final.

Decedent, in 1929, created an irrevocable trust wherein he reserved power to modify, alter, or amend the trust agreement, except that he did not have power to change any beneficial interests under… Held: that decedent had no such power of alteration or amendment as to make the corpus of the trust includible in his gross estate under section 811 (d) (2), Internal Revenue Code.

1. On the evidence, respondent's determination as to reasonable compensation for services rendered by petitioner's two principal stockholder-officers is sustained. 2. Petitioner, in computing its excess profits tax for 1941, deducted "an excess profits credit carry-over" as computed by adding an excess profits net loss to an excess profits credit. Held, under section 710 (c) (2) of the Internal Revenue Code, that a "minus" excess profits net income is not to be considered in the computation of unused excess profits credit.

In 1938 petitioner and his wife created irrevocable trusts, of which he was trustee and of which each corpus consisted of 5,000 shares of stock of Aero Industries Technical Institute, Inc. (later… Held: that the trust income is not taxable to the petitioners under section 167 or section 22 (a) of the Internal Revenue Code.

Petitioner is the widow of a retired fireman of the District of Columbia. Held: the amount received constituted taxable income to the petitioner.

Decedent died a resident of Massachusetts and in his will gave a 24 per cent remainder interest in his residuary estate to designated charities, after a preceding life estate to his widow in the… Held: that under the Massachusetts proration or apportionment statute (Ann.

Petitioner and her mother purchased two annuity contracts, each for a consideration of $ 25,000, of which each paid half. Each annuity contract provided for an annuity to the mother during her life, thereafter to the petitioner. Held, the Commissioner did not err in denying exclusion from gross income of the amount above 3 per cent of the consideration for which petitioner might have purchased separately an annuity contract for a period following the death of her mother, and in taxing 3 per cent of the $ 50,000 consideration paid, under section 22 (b) (2) of the Internal Revenue Code.

Held, that in determining the gift tax credit to which the estate is entitled under sections 813 (a) (2) and 936 (b) of the Internal… Held: that in determining the gift tax credit to which the estate is entitled under sections 813 (a) (2) and 936 (b) of the Internal Revenue Code on account of gift tax paid in 1936 and 1937 with respect to property now held includible in the gross estate, a separate credit should not be determined for each year, as in the respondent's…

Held, surrender by sole stockholder of small part of subsidiary's stock and payment from latter of amount of stockholder's cost basis as to… Held: surrender by sole stockholder of small part of subsidiary's stock and payment from latter of amount of stockholder's cost basis as to such stock, which amount was considerably less than subsidiary's accumulated earnings and profits, constituted a transaction essentially equivalent to the distribution of a taxable dividend under…

During the period of a lease ended December 31, 1941, the taxpayer's lessees erected a building on the property. The taxpayer recovered possession immediately after expiration of the lease. Held: not includible in the taxpayer's income for 1941, as recovery of possession fell in 1942.

A taxpayer, indefinitely stationed by his employer-corporation in New York, maintained a home occupied by his wife and daughter in Cleveland. Held: nondeductible because not related to his employer's business. Commissioner v. Flowers, 326 U.S. 465, followed.

The petitioner and her former husband made a property settlement which was described in their agreement and in the decree of their divorce as a payment of alimony in gross. Held: the alleged value of 98 shares on the date of compromise was not deductible as either a loss or a bad debt.

Petitioner was one of the trustees of four trusts created by his father for the benefit of petitioner's four sisters. Held: petitioner is entitled to the deduction as a nonbusiness expense under the provisions of section 23 (a)(2), I. R. C.

Petitioner, a mutual investment company, redeemed stock certificates at various times in the taxable year at stockholders' requests, paying… Held: petitioner is not entitled to include the above amount in the amount of dividends paid for purposes of the basic surtax credit under section 27 (b) (1) of the Internal Revenue Code because of the restriction imposed by section 27 (h), such distribution of earnings being held to come within the definition of preferential dividends.

1. In 1923 decedent established revocable trusts for the benefit of his children. Held: that decedent remolded the trusts, continuing as the grantor thereof, and that the trust corpora were includible in his estate under the provisions of section 811 (c) of the Internal Revenue Code. 2. John R. MacManus, as trustee under the declaration of trust, purchased certain annuity contracts with trust funds.

Petitioner was the beneficiary of a trust by the terms of which she was to be paid the income profits and proceeds thereof. In the taxable year the trust received short term capital gains. Held: none of these several items was income currently to be distributed to petitioner.

1. Bad Debts. -- Claimed bad debt deductions disallowed. 2. Held: that a partnership in which father and son were members was bona fide for business purposes and recognized for Federal tax purposes.

Payments made by Pennsylvania to the dependent wife of the taxpayer, a state civil service employee in the armed forces, pursuant to the Act of June 7, 1917 (65 Purdon's Pa. Stat. Held: taxable to the taxpayer as compensation and not exempt as a gift.

Although the trustees directed that income from trust funds be distributed to three minor beneficiaries, who directed, in writing, that… Held: this income is taxable to the trust and not the beneficiaries because, since none of the income was expended for the support, maintenance, or education of the beneficiaries, the trustees were mandatorily required to accumulate it by the provisions of the trust and, therefore, it was not properly paid or credited to the beneficiaries…

The petitioner made payments to a bank, the purpose being to use the money, if necessary, to pay depositors in liquidation proceedings. Held: that the cost basis of the stock for determining gain or loss upon the sale thereof in the taxable years was its fair market value when acquired in the exchange.

A deduction for loss from bad debts in 1938 in the amount of $ 15,798.18 was abnormal in amount under section 711 (b) (1) (J) (ii), I.… Held: that petitioner has established that the abnormality in amount of its 1938 bad debt deduction was not a consequence of an increase in petitioner's gross income in its base period within the meaning of section 711 (b) (1) (K) (ii), so that petitioner is entitled to have $ 15,798.18 disallowed as a deduction and restored to base period…

Held, petitioner earned taxable income when, pursuant to an option given petitioner by the president of a corporation of which petitioner… Held: petitioner earned taxable income when, pursuant to an option given petitioner by the president of a corporation of which petitioner was an employee, petitioner purchased from the president personally, at less than market price, stock of the corporation, the difference in value of the stock from market value being compensation for…

Petitioner dismantled its marine railway in 1937 on condemnation of land upon which it was built. Held: in determining excess profits net income the gain realized in 1942 is excludible under section 711 (a), I. R. C.

Petitioner, a citizen of the United States, went to the British Isles in 1942 as an employee of Lockheed Overseas Corporation to do work important and essential to… Held: that petitioner was not during 1943 a bona fide resident of a foreign country or countries within the meaning of section 116, I. R. C., as amended by section 148 (a) of the Revenue Act of 1942, and the salary which he received from Lockheed is not exempt from taxation. Michael Downs, 7 T. C. 1053, followed.

The petitioner is a corporate taxpayer which keeps its books and files its income tax return on the cash basis. Held: the Commissioner is sustained following Martinus & Sons v. Commissioner, 116 Fed. (2d) 732, affirming B. T. A. memorandum opinion.

The petitioner set up a trust for benefit of his wife and children, reserving to himself the right to lease a building as well as control over sale, mortgage, or exchange of all property. Held: that the petitioner may not deduct as rent paid the $ 500 a month paid to the trustee. Johnson v. Commissioner, 86 Fed. (2d) 710.

1. Held, no valid partnership, recognizable for tax purposes, existed between petitioner and his wife. 2. Petitioner was a contractor. Held: no valid partnership, recognizable for tax purposes, existed between petitioner and his wife. 2. Petitioner was a contractor. He purchased lots and took title to most of them in the names of himself and his wife as tenants by the entirety. On these lots he constructed houses.

Prior to 1931 petitioners owned all the stock of a corporation and were the managing officers. Held: the payments made by petitioners in 1942 are deductible as losses under section 23 (e), Internal Revenue Code.

A corporation of which petitioner was sole stockholder distributed to him all of its assets, aggregating in value approximately $ 2,650,000, except a drilling rig having a depreciated book… Held: the cancellation of the stock and distribution of assets was not at such time and in such manner as to be essentially equivalent to distribution of a taxable dividend under section 115 (g), Internal Revenue Code, but, under section 115 (c), was a distribution in partial liquidation.

Petitioner, the owner of 655 of the total of 810 outstanding shares of stock of G corporation, claimed the right to deduct as a long… Held: amounts received by petitioner represented a series of distributions in complete cancellation of all of stock of G corporation in accordance with a plan of liquidation under which the transfer of all of its property was to be completed within three years from the close of the taxable year during which was made the first of the series…

1. Value of shares of corporate stock for gift tax purposes and estate tax purposes determined. 2. Held: that the gifts were of future interests. 3.

1. Petitioner, which held about 79 per cent of the total unsecured claims against an insolvent corporation and owned about 75 per cent of the common stock and 49 per cent of the preferred… Held: this transaction was not a nontaxable reorganization within the meaning of section 112 (b) (3), (4), or (5) of the Revenue Act of 1932. 2. In its income tax return for 1939 petitioner claimed a partial bad debt deduction, the greater part of which was disallowed by the Commissioner.

Held, that petitioner did not sustain the burden of proving that the declared value excess profits tax deductions were not in consequence of an increase in gross income in petitioner's base period (… Held: that petitioner did not sustain the burden of proving that the declared value excess profits tax deductions were not in consequence of an increase in gross income in petitioner's base period ( section 711 (b) (1) (K) (ii), Internal Revenue Code).

1. Transfer in trust in 1923 of life insurance policies, and income-producing securities, the income from which was to be used in part for the maintenance of the life insurance policies, and in part… Held: not to be in contemplation of death with respect to that proportion as to which wife was life beneficiary. 2.

1. Petitioners, with the approval of the Commissioner, used a reserve method of accounting for bad debts. Held: that the cash recoveries are income attributable to the recovery of bad debts and excludible from excess profits net income under section 711 (a) (1) (E) and section 711 (a) (2) (H) of the Internal Revenue Code, Boyd-Richardson Co., 5 T. C. 695, followed; and that (b) the reductions in specific reserve requirements for the taxable…

The petitioner is the executrix of the estate of her deceased husband and also the sole residuary legatee. The decedent's will was probated in 1938. Held: that the decedent's estate was in process of administration in the year 1941 and the net income was taxable to the estate rather than to petitioner, the sole beneficiary.

The decedent at his death carried two life insurance policies, one payable to his wife and one to daughters, both with provision for double indemnity in case of accidental death, and neither being… Held: the amounts received by the attorneys constitute a part of the gross estate, under section 811 (g) (2), Internal Revenue Code, and are not deductible under section 812 (b) (2), (3), as either administration expenses or claims against the estate.

Petitioner married on June 30, 1939, and since that date has resided with his wife in California. Held: that the income from the business should be apportioned between the capital invested and the petitioner's services, that the apportionment to capital should be in an amount equal to 8 per cent of the capital and is the separate property of petitioner to the extent of 8 per cent on his separate capital in the business, and the…

1. Under the facts, held that petitioners continuously retained ownership of certain real estate from 1925 onward. Held: petitioners' basis for depreciating the buildings is $ 125,000 plus $ 9,213.47; held, further, that the difference between the cost of the bonds to petitioners and their face value constituted income to petitioners as and when petitioners purchased the bonds. 3. Proper rate of depreciation determined.

The petitioner, through its president (who owned 96 per cent of its stock) and a staff of assistants, conducted a flying school. Held: on the facts, that petitioner is not a personal service corporation as defined in section 725 (a).

An estate of which the petitioner was the residuary legatee had net income in the amount of $ 24,709.74 for the year 1942, and in December of that year the final account of the estate was filed with… Held: under the provisions of section 162 (b), I. R. C., as amended by section 111 (b) of the Revenue Act of 1942, the entire net income of the estate is income which is to be distributed currently and is includible in the taxable income of petitioner.

1. The taxpayer, reporting income on a cash basis, advanced operating funds to a corporation owned principally by him and received therefor the corporation's notes, which he discounted at a bank. Held: deductible as a bad debt in the year when the taxpayer sustained actual cash detriment by payment of the notes.

Petitioner from 1930 until the taxable year was one of the administrators of an estate consisting in large part of the stock in a corporation formed after decedent's death to incorporate decedent's… Held: the payments totaling $ 11,500 are deductible as nontrade or nonbusiness expenses under section 23 (a) (2), Internal Revenue Code.

Petitioners are wholly owned subsidiaries of a parent corporation organized in 1915. Held: the income earned under each of these contracts in excess of the 6 per cent of the outstanding capital stock of each subsidiary, respectively, belonged to and was the income of the parent corporation as principal, and was not, therefore, taxable to petitioners. Southern Pac. Co. v. Lowe, 247 U.S. 330, followed.

Petitioner, an abstract company, was incorporated in 1902, and $ 15,000 was paid in for stock. Held: only $ 15,000, in addition to accumulated earnings and profits at the beginning of the respective years allowed by the deficiency notice, should be included in computing equity invested capital; held, further, club dues not allowed as deductions; held, further, no error in addition of penalty for failure to file timely return.

1. Allowable deductions for expense incurred in the course of travel and for entertainment expense determined. 2. Termination of litigation in 1940, depriving petitioner of title to oil rights claimed by him, held to preclude allowance of loss in 1941 for capital investment therein. 3.

1. Petitioner, a British subject, or his agent, filed income tax returns for the years 1923 and 1924. Assessment and collection of taxes for such years barred by statute of limitations. 2. Imposition of fraud penalty for year 1937 not sustained. 3. Omissions from gross income for year 1937 less than 25 per cent thereof. Statute of limitations has tolled as to that year. 4.

1. During 1936-1938 the petitioner failed to report alleged manufacture of hair oil and pay excise taxes thereon, and when assessed for such taxes in 1942, and thereafter, it contended that it had not manufactured. Tax was paid in 1943 and judgment went against the petitioner in a suit for refund. Deduction for taxes in 1943 allowed. 2. Deduction of expense of operating airplane while petitioner's president was learning to fly, denied.

Petitioner was controlled by an individual, Hugh Smith, until after Smith's death and thereafter by his estate. Held: that the allocation by respondent of income to petitioner of 20 cents per gallon for all gallonage of syrup used by Smith was proper under section 45 of the applicable statutes. 2. During all of the taxable years more than 50 per centum in value of petitioner's outstanding stock was owned by not more than five individuals.

1. Excess Profits Tax -- Equity Invested Capital -- Section 718 (a) (2), I. R. C. -- Amounts of cash and property paid in for shares must be reduced in computing equity invested capital by corresponding amounts of capital later paid out by the petitioner in reacquiring its own shares. 2. Deductions -- Officers' Salaries. -- The total amount paid to three officers, held deductible under section 23 (a) (1) (A) as reasonable compensation for services rendered.

The petitioner was for 28 years employed by subsidiaries of Standard Oil Co. of New Jersey, including Anglo, and for 10 years prior thereto by a company absorbed by a subsidiary of Standard. Held: the payment to petitioner in 1941 was not an annuity, within section 22 (b) (2) of the Internal Revenue Code, and the $ 415,000 was not taxable to him in 1940, and the payment in 1941 was all taxable income under section 22 (a) of the Internal Revenue Code.

The failure of an executor and tax-exempt charitable legatees to file formal signed consents under oath with the Commissioner for the computation of income as permitted by section 134 (g), Revenue… Held: to bar the estate's right to exclude decedent's income accrued between January 1, 1942, and decedent's death on June 26, 1942.

During the period from 1932 to 1937 petitioners, as senior executives, made transfers of their common stock in a corporation to certain junior executives, in accordance with a plan for changing… Held: even assuming that the value of the stock was in excess of the consideration, the transfers were made in the ordinary course of business and are not subject to gift tax.

Losses resulting from the liquidation of segregated assets in a depositors' trust fund, held, not deductible against the taxable income of the bank from other sources, where the cost basis of the… Held: not deductible against the taxable income of the bank from other sources, where the cost basis of the segregated assets had been returned to the bank in prior years through deductions claimed and allowed in its returns or in claims for refund.

Petitioner claimed for 1941 a deduction arising from the loss of stock in a French company. Held: petitioner failed to sustain his burden of proving ownership of the stock at any time in 1941 and is not therefore entitled to a loss deduction under section 23 (e), Internal Revenue Code; held, further, that petitioner is not entitled to a war loss deduction in 1941 under section 127 (a) (2) and (3) for the same reason.

Petitioner and two sons formed a partnership, to which all contributed capital and services. Held: that the transaction did not result in taxable gift from petitioner under sections 501 and 503 of Revenue Act of 1932.

1. Petitioner H. D. Winship, in his individual capacity, on the facts, held, not entitled to a deduction for a net operating loss carry-over in the year 1941. 2. Held: not entitled to a deduction for a net operating loss carry-over in the year 1941. 2. Petitioner H. D. Winship, in his individual capacity, on the facts, held, taxable in 1941 on 100 per cent of dividends because the stock upon which the dividends were paid was his separate (not community) property. 3.

1. Petitioner was incorporated under the laws of the State of Tennessee, to receive title to a patent and other property then involved… Held: the expenditures were capital in nature and are not deductible as ordinary and necessary business expenses. 2. Petitioner received patent royalties in the taxable year. That was its sole income. While no stock of petitioner had been issued, it is stipulated that certificates for 51 per cent of its stock will be issued to four persons.

Deduction -- Business Expense. -- Petitioner, a practicing lawyer, entered into a written contract in September 1941 with his 22-year-old son to pay the cost of tuition, books, and living expenses of… Held: the expenses paid by petitioner during 1941 for the son's attendance at law school are not deductible as ordinary and necessary expenses of petitioner's business of practicing law.

1. Respondent's determination that petitioners, waiters in a restaurant, received income as tips in an amount equal to 10 per cent of sales to patrons, sustained. 2. Charge of fraud to evade taxes sustained.

Where a trust, all the net income of which is currently distributable, receives both taxable and exempt income and incurs expense, a portion of which is… Held: that in determining the net amount of taxable income which the beneficiaries receive and on which they are taxable, only that expense which is allowed as a deduction to the trust should be deducted from the gross taxable income, and the remaining disallowed expense must be charged to the gross exempt income.

Under the facts, held, that income from decedent's estate was taxable to the estate because such income did not become payable to the… Held: that income from decedent's estate was taxable to the estate because such income did not become payable to the legatees under section 162 (b), Internal Revenue Code, nor was the income properly paid or credited to the legatees under section 162 (c) during the taxable year; held, further, that income received by the estate during…

The taxpayer and his brother and sister acquired by their mother's will securities and rented buildings which they held as partners from 1928 until 1940. Held: As the taxpayer's credit balance was not established as a debt due him, the amount relinquished in the agreement is not deductible as a bad debt.

1. On the facts, held, that petitioners realized income in 1940 rather than 1939 on account of certain promotional stock issued to them. 2. Value of promotional stock determined. 3. Held: that petitioners realized income in 1940 rather than 1939 on account of certain promotional stock issued to them. 2. Value of promotional stock determined. 3. Promotional stock issued to petitioner La Motte T. Cohu, held to be community property.

1. On June 18, 1941, it was agreed between the taxpayer and his employer that petitioner's profit participation for 1940 under a contract with his employer… Held: that this agreement to defer the payment of the $ 87,076.40 in question from 1941 to 1942 was entered into in a bona fide business transaction at arm's length between petitioner and his employer corporation and petitioner did not constructively receive the amount in 1941. Kay Kimbell, 41 B. T. A. 940, followed. 2.

Petitioner, married and a resident of the State of Texas, gave certain gifts of community property to his children. His wife consented to the gifts. Held: Petitioner is taxable on the entire value of the gifts under section 1000 (d) of the Internal Revenue Code. (2) Section 1000 (d) is not unconstitutional as violative of the due process clause of the Fifth Amendment to the Constitution. Fernandez v. Wiener, 326 U.S. 340.

Petitioner bank in previous years charged off and was allowed deduction of notes as worthless. In the taxable year it declared a dividend in kind and distributed such notes to its stockholders. Held: the taxpayer is not taxable upon such recoveries. General Utilities & Operating Co. v. Helvering, 296 U.S. 200, followed.

Estate Tax -- Deductions -- Funeral Expenses -- Section 812 (b) (1). -- The amount of a bequest to a cemetery for perpetual care of a lot in which members of the decedent's family were buried, but in which he was not to be and was not buried, is not deductible as a funeral expense under section 812 (b) (1).

1. War Loss. -- On the facts, held, that petitioner sustained a war loss in 1941 under subsections (2) and (3) of section 127 (a), I. R. C., with respect to shares of stock of… Held: that petitioner sustained a war loss in 1941 under subsections (2) and (3) of section 127 (a), I. R. C., with respect to shares of stock of a Netherlands corporation. The amount of the loss sustained is determined. 2. Pleadings. -- Contention not covered by respondent's answer not considered. 3.

1. In the taxable years 1943 and 1944, petitioner William I. Connelly, a Government employee holding a classified civil service position, was enrolled as a temporary member of the Coast Guard… Held: Petitioner was not a commissioned officer of the Coast Guard Reserve entitling him to a tax exclusion of $ 1,500 in the respective taxable years, within the purview of section 23 (b) (13), I. R. C., as amended by the Revenue Act of 1945.

Taxpayer, upon reaching majority in 1937, brought suit for accounting against a bank, her former guardian and administrator of her father's estate, from which she received a distributive share. Held: the amount representing commissions was a return of capital and the amount representing interest was income taxable in 1940.

Income of a trust created by petitioner's parents under which she was trustee and a beneficiary and had discretion as to amounts to be first devoted to education of her children, held, on the facts,… Held: on the facts, not subject to petitioner's unfettered control to the extent that she is taxable on income therefrom expended by her for education of minor son. Edward Mallinckrodt, Jr., 2 T. C. 1128, distinguished.

Estate Tax -- Deduction -- Charitable Bequest. -- A residuary bequest to charity is not deductible where the principal of the trust can be used for the comfort and support of the life tenants if the income is not sufficient for that purpose, even though that income with separate income of the life tenants would be sufficient, since under the law of Pennsylvania the trust principal can be exhausted under such circumstances before the life beneficiary need resort to her own…

Held, Congress, in amending section 22 (b) (3) of the Internal Revenue Code by section 111 of the Revenue Act of 1942, did not change the law with respect to the taxation of trust income to… Held: Congress, in amending section 22 (b) (3) of the Internal Revenue Code by section 111 of the Revenue Act of 1942, did not change the law with respect to the taxation of trust income to the grantor under code section 22 (a) and the principles of Helvering v. Clifford, 309 U.S. 331.

1. Petitioner, recipient of assets of insolvent taxpayer-corporation, of which petitioner's decedent had been stockholder, held liable for unpaid taxes of the taxpayer as a transferee under Internal… Held: that no issue arises in this proceeding with respect to the liability of the administrator as a fiduciary under R. S. 3467, in the absence of a deficiency notice addressed to him personally.

1. Petitioner expended $ 2,765.29 for grading and dirt fill in connection with 1940 flood damage and in erecting a levee to protect its plant from future floods. Held: no part of the expenditure is deductible as an ordinary and necessary business expense of 1941. 2. Held, petitioner has established its right to deduct a casualty loss in 1940 of $ 2,765.29. 3.

Petitioner and 5 other affiliates were severally liable for a deficiency in tax under a consolidated income tax return filed in 1930 by 66 affiliates. Held: to the extent petitioner paid interest on more than its proportionate share of the deficiency petitioner is not entitled to a deduction for interest paid or accrued on indebtedness.

Exempt Corporation -- Business League -- Section 101 (7), I. R. C. -- An association which, as one of its important activities, published a catalog listing only products of member manufacturers, was performing special services for those members and was not exempt as a business league under section 101 (7), I. R. C.

Held, the cost of evening meals eaten by petitioner in restaurants on nights when he worked overtime and the cost of clothing worn by petitioner at work, but of a kind adaptable for general wear, are… Held: the cost of evening meals eaten by petitioner in restaurants on nights when he worked overtime and the cost of clothing worn by petitioner at work, but of a kind adaptable for general wear, are personal expenses and are not deductible for income tax purposes.

1. Held, on the facts, petitioner was engaged during 1940 and 1941 in the trade or business of selling real estate, and certain properties disposed of were held by him primarily for sale to… Held: on the facts, petitioner was engaged during 1940 and 1941 in the trade or business of selling real estate, and certain properties disposed of were held by him primarily for sale to customers in the ordinary course of his trade or business within section 117 (a) (1), I. R. C. 2.

Petitioner, in 1919, created a trust, with a corporate trustee. Held: the trust income is not taxable to the trustor under section 22 (a), 166, or 167, I. R. C.

Petitioner is engaged in the business of manufacturing dairy products and bottling fluid milk at Paris, Texas. Held: petitioner failed to establish that its excess profits tax for the calendar years 1941 and 1942, computed without the benefit of section 722, I. R. C., as amended, was excessive and discriminatory because of the factors mentioned in section 722 (b) (2), but has established that its said tax was excessive and discriminatory because of…

1. Income -- Partnership -- Family Arrangement. -- The Commissioner may not arbitrarily allocate to a partner more than his distributive share under the partnership agreement. 2. Id. -- A determination made upon an incorrect theory will not be disturbed where the petitioner fails to prove that the result reached was incorrect. 3.

The trustee of a Pennsylvania testamentary trust acquired an office building by deed from the owner, who thereby avoided further payment of ground rent. Held: Court approval of the 1937 accounts of a trustee who used income to pay carrying charges on trust-held real estate is conclusive of their correctness.

In 1942 petitioner, then a widower, went to Edmonton, Canada, as an employee of a contractor who was engaged in construction work on the Canol oil project. Held: that during the entire year 1943 petitioner was a bona fide resident of Canada and the compensation which he earned from his work on the Canol oil project in Canada should be excluded from his gross income under section 116 (a) (1), I. R. C.Arthur J. H. Johnson, 7 T. C. 1040, distinguished.

1. Decedent and his spouse, residing in a community property state, held property as joint tenants at the time of the decedent's death. The entire value of such joint property is includible in the gross estate of the decedent, except such proportion thereof as may be shown to have originally belonged to the surviving spouse or acquired by the surviving spouse for a full and adequate consideration in money or money's worth. 2.

1. The city of Philadelphia offered to exchange new bonds for outstanding bonds, representing a part of its indebtedness, under a refinancing plan whereby the exchange was optional with the… Held: recognizable for tax purposes. Motor Products Corporation, 47 B. T. A. 983, distinguished. 2.

A personal holding company, more than one-half of whose stock is held by the Alien Property Custodian, is liable to a 25 per cent addition to tax for failure to file a personal holding company income tax return, where reasonable cause for such failure is not shown.

The stock of the petitioner, organized to conduct an express business, is owned by about 70 railroads. Held: the petitioner is not a mere creature of the railroads contracting with it, it has income, and the Commissioner did not err in adding to its income amounts of excessive depreciation deductions; held, further, that the value of petitioner's stock had adjusted declared value of zero for 1937; held, further, that the petitioner was…

Held, that $ 5,000 allowed by the Missouri probate court pursuant to section 106, Revised Statutes of Missouri, 1939, for a year's support… Held: that $ 5,000 allowed by the Missouri probate court pursuant to section 106, Revised Statutes of Missouri, 1939, for a year's support of the widower of the decedent is properly includible in the gross estate for Federal estate tax purposes and, in the absence of a showing that the widower was dependent upon the decedent, is not an…

In the taxable year 1940, petitioners were members of the New York partnership of J. P. Morgan & Co. On March 29, 1940, under the Banking… Held: The securities listed in the bill of sale were sold by the partnership to the trust company, and respondent improperly disallowed deduction of the resulting losses under the provisions of section 24 (b) (1) (B), I. R. C. (2) The contribution of the defaulted securities and cash was in effect made by the partners individually to the…

Petitioner's excessive profits for the fiscal year ended September 30, 1943, held to be the amount determined by the respondent, petitioner not having sustained its burden of proving that respondent erred in its original determination, and respondent not having sustained its burden of proving, as alleged in its amended answer, that petitioner had additional excessive profits for that year.

A testatrix directed her executor to sell certain real estate and distribute the proceeds among the four taxpayers as legatees. Held: Under New York law title to the real estate was vested in the executor and never passed to the legatees, who had a right only to the money proceeds of its sale. Anderson v. Wilson, 289 U.S. 20.

1. Employees' Pension Trust -- Exemption -- Section 165 (a), I. R. C. -- A trust held not to qualify under section 165 (a) and beneficiary not exempt from tax on contributions made to trust for his benefit. 2. Income -- Trust Created for Employee. -- A contribution by an employer to a trust for an employee, held not taxable to employee to extent forfeitable by his failure to remain in employ for period of years.

Deduction by a mortgagor of his loss from an involuntary foreclosure sale of the mortgaged property to members of his family, held, precluded by section 24 (b) (1) (A) of the Internal Revenue Code. Held: precluded by section 24 (b) (1) (A) of the Internal Revenue Code.

1. Petitioner, as compensation for financing services rendered, became entitled to receive a certain percentage of royalties from a process known as Kodachrome. Held: that the royalties received by the wife after petitioner's assignment to her were not taxable to him. 2. Cost basis of bonus stock determined.

1. Unconstitutionality of the Renegotiation Act of April 28, 1942, held not shown. 2. The amount of excessive profits from a contract for erection of a part of a soldiers' cantonment determined under Renegotiation Act and upon the evidence.

Taxpayers, husband and wife, in November 1941 each executed a so-called deed of gift and trust agreement for the benefit of their minor son and daughter. Held: the trusts were, under section 2280, revocable during the taxable year, the decision of the California court notwithstanding, and that the income of the trust was therefore includible in the taxable income of taxpayer-grantors under section 166 of the Internal Revenue Code.

1. Estate Tax -- Gross Estate -- Trusts -- Power to Revoke -- Contemplation of Death -- Sections 811(d)(2) and (d)(4). -- The decedent retained no power to revoke the trust and did not relinquish the power of revocation in contemplation of death.

Held, refunds of undistributed profits surtax for 1936 and 1937 to which petitioner became entitled under the provisions of section 501 of the Revenue Act of 1942,… Held: refunds of undistributed profits surtax for 1936 and 1937 to which petitioner became entitled under the provisions of section 501 of the Revenue Act of 1942, retroactively amending the Revenue Act of 1936, are not includible in invested capital for excess profits tax purposes prior to January 1, 1943.

The decedent took out policies of insurance on his own life under which he could direct that the proceeds should be paid in the face amount of the policies or in periodic installments to the beneficiary. He elected to have the proceeds paid to his wife, the beneficiary, in monthly installments for life. However, up to the time of his death he reserved the right to change the beneficiaries and the method of payment of the proceeds.

Payment by cash-basis petitioner pursuant to agreement that he would make good deficit, consisting of difference between proceeds of sales of securities and amounts advanced by another, held deductible as a loss in year when sales were completed and final amount due computed and paid; notwithstanding that petitioner was entitled under the agreement to any profit on the sales and has been held in a prior proceeding liable for the tax thereon.

Petitioner corporation declared year end bonuses to officers and employees, to be paid unless prohibited by emergency price control… Held: amounts so paid its president and vice president, the individual petitioners here, were properly accrued by the corporations and constructively received by the individuals for tax purposes in 1942, even though the individuals on their own initiative refrained from cashing the checks until 1943, when they secured an official ruling…

Petitioner is a corporation, organized primarily for the conducting of horse racing in Arkansas. Held: the interest deductions were abnormal only in amount under subparagraph (J) (ii) and were not abnormal by class under subparagraph (J) (i) of section 711 (b) (1), Internal Revenue Code.

Petitioner, a regulated investment company, issued seven classes of stock, the assets received for each class being segregated for the… Held: petitioner may compute its net long term capital gains by deducting from the total long term capital gains of all classes of assets the total net short term capital losses of all of such classes and the dividends actually paid from long term capital gains, concerning which proper statutory notice was given, the statute conferring no…

1. Petitioner was the settlor of 4 irrevocable trusts for the benefit of his wife and 2 minor daughters, to which he conveyed certain shares of stock in a corporation in which he owned all the shares. Held: petitioner is not taxable on the income of the trusts under section 22 (a), I. R. C. 2.

Petitioner was a party to an agreement with British companies in 1940 under which a sum was paid to petitioner, who retained one-half and paid the other half to the owner of certain British patents. Held: petitioner did not sell or exchange depreciable property in 1940 under the agreement with the British companies, within the provisions of section 711 (a) (1) (B) of the Internal Revenue Code.

1. Deductions from Income -- Intangible Drilling and Development Costs. -- Petitioner acquired an interest in leases by drilling and developing and was not entitled to deduct those costs as expenses. F. H. E. Oil Co., 3 T. C. 13; affd., 147 Fed. (2d) 1002, followed. 2.

From the year 1915 to 1940 depreciation on building owned by petitioner was taken at the rate of 3 per cent per annum except that no depreciation was claimed or allowed for a period of 3 1/2 years. Held: the allowable depreciation for years in which no depreciation was either claimed or allowed is to be controlled by useful life (33 1/3 years) as known at the end of each such year rather than by the useful life (50 years) as known after the taxable year 1940.

Foreclosure of mortgage and sale of mortgaged property having the effect under State law of discharging petitioner's obligation in an amount greater than its adjusted basis for the mortgaged property, held to result in gain in year in which action for deficiency judgment was barred.

The recoupment in 1941 of an investment in an oil venture which the petitioner had deducted as a loss in 1930, held taxable as ordinary income in 1941 to the extent that the deduction resulted in a reduction of taxable income for such prior year.

1. Jurisdiction -- Refund Claim -- Excess Profits Tax -- Section 732. -- Disallowance of a claim for refund under 713 (f) gives the Court jurisdiction where the disallowance relates to the application of section 711 (b) (1) (I) and (K), relating to abnormalities. 2.

Deductions from Income -- Bad Debts -- Nonbusiness Debts -- Section 23 (k) (4). -- A debt which represented partial purchase price of a fractional accretion to an Exchange seat sold in 1929 and which became worthless in 1943 is not a non-business debt to a taxpayer who was using his Exchange seat from 1923 through 1943 in his business of acting as floor member for various partnerships.

Petitioner is engaged in the retail clothing business in San Diego, California. Held: the amounts which petitioner added to its earned surplus in each of the taxable years were not unreasonable in amount in view of the needs of the business, and petitioner was not availed of in either of the taxable years for the purpose of preventing the imposition of surtax upon its stockholders.

Petitioner succeeded in 1940 to a partnership as component corporation under section 740 (b) (5), Internal Revenue Code. Held: that the amounts determined by the Commissioner were reasonable, that amounts allowable for computation of earned income credit under section 25 (a), Internal Revenue Code, do not control, and that the validity of the deficiencies and the burden of proof are not affected by determination by the Commissioner of the computation as a…

The decedent, as donor, created an inter vivos trust for the benefit of his wife and children. Held: that a reasonable construction of the trust instrument is that the donor made gifts to each of the six children, individually, of present interest in trust income; that the evidence supports a finding that the trust property will produce during the term of the trust a net income annually which will yield income of $ 100 per year to…

1. Taxpayer gave 4,000 shares of stock to each of four trusts. Held, 4 gifts of 4,000 shares of stock were made. 2. The value of each block of stock is determined for gift tax. Held: 4 gifts of 4,000 shares of stock were made. 2. The value of each block of stock is determined for gift tax.

Petitioner was chartered in 1902 as a mutual fire insurance company under the laws of Pennsylvania. All policyholders are members entitled to vote for directors. It has no stockholders. Held: the petitioner was in 1940 and 1941 a mutual insurance company, the income of which was used or held for the purpose of paying losses and expenses, and was exempt under section 101 (11), I. R. C., from corporation income and excess profits taxes.

A corporation was indebted on a note in the amount of $ 400,000 to petitioner's mother, a stockholder. The note was secured by a mortgage on the corporation's building. Interest was paid by the corporation on the note during the lifetime of the owner of it and it was carried on the books of the corporation as bills payable due her. Petitioner's mother had expressed to certain members of the family her intention to never collect the principal of the debt, but during her lifetime she made no formal cancellation of it and did nothing to indicate that she intended to make a contribution of the principal of the note to the capital of the corporation. Upon the mother's death the $ 400,000 was transferred to a "Surplus Paid-In" account and subsequently the note was declared barred by the statute of limitations in a suit brought by the executor of the estate against the corporation. In 1940 and 1941 petitioner, a stockholder, received certain distributions from the corporation charged to "Reduction Surplus" account. Held, that petitioner's mother did not gratuitously forgive the indebtedness of the corporation's note; held, further , that the distributions made to petitioner are dividends within the meaning of section 115 (a) of the Internal Revenue Code.

The taxpayer mining company acquired and exercised mining rights in Honduras under a contract, ratified by an act of the Honduran Congress, whereby it agreed to pay 7 per cent of its net operating… Held: Such payments were not an income tax paid to a foreign government within the meaning of section 131, Internal Revenue Code, which grants a credit for income taxes paid to a foreign government. (2) Such payments are deductible as a business expense.

In 1922 the decedent created three irrevocable trusts, the income of which was to be paid absolutely to the named beneficiary. Held: the corpora of the respective trusts were not includible in the decedent's gross estate for estate tax purposes under either section 811 (c) or section 811 (d) (2) of the Internal Revenue Code. Estate of Milton J. Budlong, 7 T. C. 756; Jennings v. Smith, 161 Fed. (2d) 74, followed.

Income -- Revocable Trust -- Section 166 (1). -- Section 166(1) applies where four of six grantors retain power to revoke trust and revest in themselves title to a part of the trust corpus.

1. During a portion of the taxable year 1941 petitioner was engaged in constructing a shipyard in Houston, Texas. Held: petitioner is not entitled to report any part of his income on a community property basis. 2. Petitioner made several trips during 1941 collecting data and information regarding thoroughbred cattle procedures and grasses for pasture lands and investigating land and other items in connection with the cattle business.

The petitioner, a resident of Louisiana, had paraphernal property. Held: on the facts, that it was administered by her husband, and the income was community income and improperly taxed to the petitioner only.

The petitioner, a resident of Louisiana, had paraphernal property inherited from her father, consisting in large part of a one-third interest in Antoine's Restaurant. Her husband is an attorney. Held: on the facts, that paraphernal property is not shown to have been under his administration so as to require income to be taxed as that of the community.

1. Decision of the Supreme Court of the State of New York construing trust deeds as creating multiple trusts, held, not binding upon the Tax Court, although affirmed by the Appellate Division, where the proceeding in the lower court was not adversary and no opposition was offered to the prayers of the complaint. 2. Certain trust deeds construed as creating single trusts in the absence of any provision for multiple trusts or any beneficial interests requiring more than one trust for each trust deed.

Excess Profits Tax -- Relief under Section 722 (b) (4). -- The petitioner changed the character of its business by a substantial increase in its capacity for production during the base period. It has failed to establish a sufficient justification for the belief that it could have captured more business or increased its sales during any of the base period years, except for a few months in 1937, if it had had the capacity during the base period which it had at the end.

In 1938 and 1939 Pennsylvania Corporation made distributions to its shareholders and claimed credits for dividends paid. Held: the closing agreement covered only the amount of tax liability of Pennsylvania Corporation for the years 1938 and 1939, without regard to any specific matters or methods used in computing the amount of such tax liability, and it was not an agreement affecting the actual amount of any accumulated earnings or profits available for…

Legal expenses paid by a parent holding company in negotiating and carrying out an agreement whereby litigation and adverse claims against mining rights of its subsidiaries were settled and the… Held: not deductible by the parent as an ordinary and necessary expense because (1) not incurred in carrying on the parent's business and (2) made to hold or to acquire capital assets.

During the taxable years the petitioner obtained money on open account from its parent corporation, because of need of operating capital. Held: that the Commissioner did not err in denying credit for invested capital, under section 719 (a) (1), Internal Revenue Code.

Petitioner in 1930 guaranteed the stock margin trading account of his secretary. In 1941 he paid $ 31,372.44 under the guaranty. Held: under the facts and circumstances, petitioner is not entitled to a bad debt deduction for the amount so paid.

A partnership acquired an undivided interest in a producing oil and gas lease, by a contract which also gave it the preference to drill future wells at prevailing contract prices. Held: the Commissioner did not err in adding to the partnership income amounts representing the money judgment obtained by the partnership, though offset by judgment for development expenses, and in determining deficiencies against the partners accordingly.

New York State franchise tax on business corporations (article 9A of the Consolidated Laws of New York, secs. 208-219, as amended in 1944), under which computation of tax was based upon the business of the current fiscal year, and liability became fixed at that time, held properly accrued in that year, notwithstanding that the tax was not due until the following year. United States v. Anderson, 269 U.S. 422, 70 L. Ed. 347, 46 S. Ct. 131.

Petitioner's distributive share of income of partnership terminated upon his withdrawal and sale of his interest, held taxable to him as ordinary income in his taxable year of termination and payment, notwithstanding that partnership's fiscal year would not otherwise have terminated until following calendar year.

1. Credit for Foreign Tax -- Determination of Year to Which A Refund Applies -- Sections 131 and 729. -- The Commissioner did not err in allocating pro rata to prior excess profits years the refund of British excess profits taxes resulting from a subsequent year when there was a deficiency in standard profits. 2.

Petitioner in its base period was indebted to corporation B on certain bonds and mortgages. Held: the $ 32,000 gain was not income derived from the retirement or discharge of petitioner's bonds, which must be eliminated from base period income under section 711 (b) (1) (C) of the Internal Revenue Code.

Petitioner, a business corporation, was organized by 100 wholesale druggists, each of whom owned 10 shares of its capital stock. Held: Petitioner functioned as a business and not as a cooperative corporation. The fees collected under the service contracts with the manufacturers were its property.

Petitioner was one of eight life income beneficiaries under a testamentary trust set up by his father. Held: on the authority of Harrison v. Schaffner, 312 U.S. 579, petitioner's share of the income of the testamentary trust which was paid to the inter vivos trust is taxable to petitioner.