Volume 8 — Tax Court Memorandum

Amount of deductions allowable for year 1943 determined. Respondent's determination as to the year 1944 approved for failure of proof by petitioners.

Where petitioners, husband and wife, as individuals and as trustees for two minor children under a declaration of trust formed an alleged partnership re-allocating their interests in certain property… Held: the partnership will not be recognized for income tax purposes.

Deduction. - Held, that a claimed bonus deduction is not allowable under section 24(c), I.R.C. Held: that a claimed bonus deduction is not allowable under section 24(c), I.R.C.

Credit for dependent children determined.

Percentage of proft earned in operation of a grocery store determined.

Respondent's determination approved because of failure of proof.

Petitioners, husband and wife, with advice of counsel, purportedly formed a partnership which took over the assets and liabilities of a corporation of the same name. Thereafter the business was continued without material change. The wife invested no capital originating with her in the business; she made no substantial contribution to the control and management of the business; and she performed no other vital services in connection with the operation of the business. Held, the alleged partnership cannot be recognized for tax purposes and the income is taxable to the husband. Commissioner v. Tower, 327 U.S. 280, followed. At the time the alleged partnership was formed the husband transferred to his wife a 21/85ths interest therein for $21,000 which was to be paid out of a portion of her distributive share of earnings, leaving a portion thereof in the business. Held, she did not thereby invest capital originating with her upon which she can claim a fair return, distinguishing Abe Schreiber, et al. 6 T.C. 707, affirmed 160 Fed. (2d) 108. The alleged partnership kept its books and records and filed its returns on a fiscal year basis ending October 31st. The petitioners kept no books of account and their tax returns were filed on a calendar year basis. Respondent, after determining that there was no partnership between husband and wife recognizable for tax purposes, adjusted the husband's returns for the taxable years to a calendar year basis. Held, respondent's adjustments approved. Petitioners omitted from the gross income reported on their 1940 joint return an amount properly includible therein which was in excess of 25 per cent of the gross income stated in their return. Held, under such circumstances the five-year period of limitations provided by section 275 (c), Internal Revenue Code, applies.

Held, petitioner's returns accurately reflected his total income. Held: petitioner's returns accurately reflected his total income.

1. The petitioner was engaged in the development of new business ventures and the organization and promotion of various corporations. Held: that the advances which petitioner made to the pen company were bona fide loans and represented business rather than nonbusiness debts. Vincent C. Campbell, 11 T.C. 510, followed.

Petitioners, husband and wife, acquired a Chevrolet dealership in November 1938 which they incorporated as the Roberts Chevrolet Company on August 10, 1939. This business was operated by them until April 1, 1942, when it was succeeded by Stewart Chevrolet Company, a partnership in which Roberts Chevrolet Company and J. W. Stewart, Jr., each owned a one-half interest.

Respondent sustained for failure of proof of error. Fraud penalty approved.

Petitioner received a salary and a share of the profits of his employer's business. The profits for 1942 were determined at the end of the year and petitioner's share was paid him in January, 1943. Held: petitioner's share of the 1942 profits is 1943 income.

Petitioner is not entitled to a deduction either as a charitable contribution or as a bad debt.

Petitioner, a trustee and a remainderman of a testamentary trust estate, in 1941 paid the sum of $70,000 in discharge of his personal guaranty of the payment of certain notes issued by the trust estate under a mortgage agreement on which a default arose. In 1942 and 1943 petitioner made additional payments on account of such guaranty. Held: 1. The loss sustained in 1941 resulted from a transaction entered into for profit and did not constitute a deduction attributable to the operation of a business regularly carried on by petitioner. The loss which can be carried over as a net operating loss is limited to the extent provided in section 122 (d) (5) of the Internal Revenue Code. The payments made in 1942 and 1943 on account of such guaranty are likewise sustained in a transaction entered into for profit and are deductible in full under section 23 (e) (2) of the Internal Revenue Code.

Respondent's action in disallowing net operating loss carry-over pursuant to section 122, I.R.C., approved.

Commissioner's disallowance of unsupported deductions sustained.

Held, petitioner not entitled to deductions under section 23 (u), I.R.C., on account of payments made to his divorced wife. Held: petitioner not entitled to deductions under section 23 (u), I.R.C., on account of payments made to his divorced wife.

Amount of contributions and other deductions determined.

Held, on the evidence submitted that taxpayer has failed to prove that a certain gift in trust was not that of future interest. Held: on the evidence submitted that taxpayer has failed to prove that a certain gift in trust was not that of future interest.

Section 107 (a), I.R.C. - Held, to be applicable to compensation received in 1943 for services rendered to one corporation which were entirely separate and distinct from services rendered to another… Held: to be applicable to compensation received in 1943 for services rendered to one corporation which were entirely separate and distinct from services rendered to another corporation over the same period of time.

Petitioners, husband and wife, in the taxable years 1942 and 1943 realized income from the sale of various parcels of real estate owned by them as community property. During these same years they also derived community income from a real estate and insurance brokerage business conducted by the husband and from the rental of other property. Held, that the real properties sold by petitioners in the taxable years were not capital assets within the meaning of section 117(a)(1) of the Internal Revenue Code, and that the profit derived constituted ordinary income and not capital gain.

Petitioner, a Minneapolis department store, claimed a deduction of $38,000 in each of the fiscal years ending January 31, 1943, and January 31, 1944, representing salaries paid to its president and vice-president. These officers, who were husband and wife, owned substantially all of petitioner's outstanding stock. Respondent disallowed $16,000 of the $38,000 claimed by petitioner for compensation in each fiscal year. Held, the amount which petitioner is entitled to claim for salaries paid to its officers in each of the taxable years determined.

On the record, held, the purported sale of certain merchandise by petitioner to his wife was not made pursuant to a bona fide transaction entered into at arm's length. Held: the purported sale of certain merchandise by petitioner to his wife was not made pursuant to a bona fide transaction entered into at arm's length. The respondent's determination that the profit resulting from a resale thereof was the income of petitioner is sustained.

Upon the record it is found that no partnership existed between petitioner and his wife in the operation of a business of installation and repair of refrigeration equipment prior to July 1, 1944, and… Held: that the evidence is insufficient to establish that items claimed by petitioner as deductions representing business expenses are allowable in excess of the amount allowed by respondent in determining the deficiencies.

In the taxable year petitioner was the owner of defaulted bonds of two Florida municipalities, together with defaulted detached interest coupons and a participating certificate evidencing ownership… Held: that the refunding bonds thus received by petitioner were substantially different from the securities surrendered, and such transactions resulted in gain or loss as an exchange within the purview of section 112(a) of the Internal Revenue Code.

During the pendency of certain litigation brought by petitioner's lessor claiming back rentals to be due, a settlement was effected in consideration of payments by petitioner under which, in addition to the settlement of the litigation, petitioner received a conveyance from the lessor of the leased property and also a release from obligations not involved in the litigation. $2Held, that the payments made by petitioner under this settlement are not subject to deduction as business expenses, no part of the amount paid having been allocated to the settlement of the litigation and no part having been shown to have been in fact paid to secure such settlement. Further held, that certain incidental expenses paid by petitioner during the course of the litigation, and fees paid by it to its attorneys for services rendered therein represent allowable deductions as business expenses.

Petitioner was proprietor of Badcock's Economy Furniture Store which bought and sold at retail new and secondhand furniture on the cash and installment basis, principally the latter. Held: respondent's determination was a proper exercise of the discretion which the statute lodged with him under such circumstances.

Upon the facts, held: 1. That during the taxable year 1941, the Hewett Grocery Company was a valid partnership for tax purposes, and the… Held: That during the taxable year 1941, the Hewett Grocery Company was a valid partnership for tax purposes, and the respondent erred in taxing all its net income to petitioner. 2. The respondent's determination that the net income of the Soo Realty Company for 1941 was taxable to petitioner is sustained for failure of proof. 3.

Worthlessness of stock in and debt due from petitioner's subsidiary not established in the taxable year 1942, nor in 1940. Fair market value of property acquired by petitioner in 1933 and sold by it in 1940 determined for purposes of carry-over of loss.

Held, amount paid in settlement of alleged violation of Maximum Price Regulations of the Office of Price Administration is not an ordinary and necessary business expense of taxpayer's business.

Expenses of taxpayer, who had suffered a coronary occlusion, and his wife, for railroad and Pullman travel; for a year's rent of an apartment, and wages of a maid employed to care for the apartment, held, not allowable as deductions for medical care.

Decedent, who died in November 1941, established two trusts, one in 1922 and the other in 1934. Held: the respective amounts were properly included in the gross estate of decedent-grantor under section 811 (c), I.R.C. Allowable deductions and reported estate tax exceeded the value of the gross estate of decedent-grantor in the hands of the executors of his estate for administration.

Evidence held sufficient to establish that one-half of the income of the business of wheat farming involved herein is taxable to the petitioner's wife rather than the petitioner.

On the record, held, payments made by petitioner in the taxable years involved, as compensation for services, to its two executives were reasonable in amount and are deductible in full under section… Held: payments made by petitioner in the taxable years involved, as compensation for services, to its two executives were reasonable in amount and are deductible in full under section 23(a)(1)(A) of the Internal Revenue Code.

Petitioner in 1929 loaned securities valued at $32,968.75 for the purpose of securing the borrower's brokerage account, taking in return a demand promissory note in that amount. The borrower in 1930 allowed the securities to be used as collateral for a debt of a third party without petitioner's consent. The securities were subsequently sold to satisfy the third party's indebtedness and both he and the borrower, as a result of the stock market crash and the following depression, were rendered hopelessly insolvent in the early 1930's. Petitioner has never received any payment on the principal or interest of the note and in his income tax return for the calendar year 1944 claimed a deduction in the amount of $32,968.75 as a non-business bad debt. Held, that the non-business debt owed to petitioner became worthless in a year prior to 1944 and may not be deducted by the petitioner in that year under the provisions of section 23(k)(4) of the Internal Revenue Code.

Where the assignment of certain insurance policies contained a possibility of reverter to decedent, the original owner, held, that the proceeds of the policies are includible in the gross estate of… Held: that the proceeds of the policies are includible in the gross estate of the decedent under Estate of Sidney M. Spiegel, et al., v. Commissioner, 335 U.S. 701 (January 17, 1949).

During the years 1941 to 1944, inclusive, petitioner was a barber in Washington, D.C., working at his trade. Held: the information slips which petitioner received from his employer correctly represented petitioner's income from the barbering business. Held, further, petitioner underestimated his tips and the amounts in our findings of fact should be used instead of those used in petitioner's returns.

Held, property transferred to a trust under which the life estate in the income was reserved to the donor is includible in the gross estate of deceased donor under section 811 (c), I.R.C.Francois L.… Held: property transferred to a trust under which the life estate in the income was reserved to the donor is includible in the gross estate of deceased donor under section 811 (c), I.R.C.Francois L. Church, 335 U.S. 632 (January 17, 1949).

Petitioner agreed to trade a farm and $21,000 in cash for another farm. Held: the gain on the transaction was not tax free under section 112 (b) (1), Internal Revenue Code, but was taxable as capital gain to the extent of the cash received, pursuant to section 112 (c) (1).

In the years 1942 to 1945, inclusive, petitioner paid compensation to its three officers under a minimum salary plus contingent bonus arrangement. Held, that the amounts paid by petitioner to its three officers in the years 1942 to 1945, inclusive, constituted reasonable compensation for the services actually rendered by them and that such amounts are deductible by petitioner as ordinary and necessary business expenses.

Certain amounts were credited in 1943 on the books of his employer to Lester C. Smith, Special Acct. as additional compensation for Smith's services rendered such employer. Held: that such amounts were not constructively received in 1943 and that respondent erred in including in each of Smith's and his wife's income as community income, one-half of those amounts.

"Series A debenture notes" issued in exchange for preferred stock, held under the facts to represent capital investment and payments to holders thereof although designated as "interest" are not deductible as interest paid.

1. In 1936 and 1937 petitioner invested in stock of, and made loans to, Central California Utilities Corporation. Held: the stock investment and the indebtedness became worthless prior to January 1, 1942, and petitioner is not entitled to deduct in 1943 a net operating loss carry-over from 1942. 2. In 1941 petitioner filed a separate return which showed a net operating loss. In 1943 petitioner and its subsidiary filed a consolidated return.

Partnership. - Family partnership consisting of husband and wife and their adult daughter recognized for tax purposes.

1. Petitioner's wife and two others contributed equally the entire capital to start the business of Alloy Rods (manufacturing welding rods), first a venture, then a corporation and finally a… Held: that petitioner is taxable on 1/34th of the income of the partnership. 2. Respondent's action in using the original cost of machinery and equipment as the basis for depreciation approved in the absence of proof to the contrary. 3.

Gross income: Exclusions: Proceeds from life insurance policy. - Since taxpayer's return indicated only that a life insurance poliy had been acquired for some consideration, and he failed to sustain the burden of proving the amount of such consideration, the entire proceeds less collection expenses were properly included in gross income by the Commissioner.

Petitioner in 1944 sold 22 sows and one boar from his hog breeding herd. These animals had been held by him primarily for breeding purposes and for a period longer than six months. Held: that the animals sold by petitioner in 1944 from his hog breeding herd were capital assets within the meaning of section 117(j) of the Internal Revenue Code and the profits realized from such sales are taxable to the petitioner as capital gains and not as ordinary income.

During 1944, petitioner sold "short" certain shares of stock, the shares to cover which, although purchased by petitioner in that year, were not delivered to the "lender" until 1945. While "short" of this stock, petitioner received $14,000 in dividends thereon, the amount of which, during 1944, she paid to the "lender" of the stock. Held: 1. She sustained no deductible short-term loss under section 117 (a)(3) or (b) of the Internal Revenue Code during 1944, and respondent did not err in denying her such a deduction. 2. Petitioner is entitled to deduct the amount of $14,000 as an ordinary business expense under Section 23 (a)(1)(A) of the Internal Revenue Code.

Payments made by petitioner to the United States Government by reason of claims for "liquidated damages" for child labor violations under the Walsh-Healey Act, held not deductible as an ordinary and necessary business expense.

For the taxable years petitioner compensated its two principal officers under a salary and bonus arrangement established many years prior… Held: the compensation paid during each of the taxable years was reasonable for the personal services actually rendered. In determining its depreciation deduction for each of the taxable years petitioner estimated the useful life of its funeral home on Chippewa Street at 33 1/3 years. Respondent determined the useful life to be 50 years.

Credit for dependents. - Upon failure of proof that petitioners contributed more than half of the amount expended for the support of two grandchildren who lived under the custody and care of their… Held: that petitioners are not entitled to claimed credit for dependents.

Held, that under the facts certain sales of lots from a subdivision known as the Sylvan Eagle subdivision near the City of Dallas, Texas, were of property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business and are taxable as ordinary income and not as capital gains. Held, further, that certain other sales from a tract known as Canal Street property near the City of Dallas, Texas, were not sales of property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business but were sales of capital assets owned and held for more than six months and the gains therefrom are taxable as capital gains and not as ordinary income.

In 1945 petitioner sustained a loss from the sale of rental real estate. Petitioner was engaged, during the periods involved, in the buying and selling of real estate. Held: that such loss is not attributable to the operation of the business regularly carried on by petitioner. The loss which can be carried back is limited to the extent provided in section 122 (d) (5) of the Internal Revenue Code. Joseph Sic, 10 T.C. 1096, and Hartwig N. Baruch, 11 T.C. 96, followed.

1. Petitioner is entitled, under section 23 (k) (1) of the Internal Revenue Code, to the deduction of the amount of $40,670.60, representing a deficiency resulting from a foreclosure sale of certain properties of Cape Code Farms, Inc., as a bad debt which became worthless in the year 1942. 2. Petitioner's claim of a bad debt deduction in the amount of $8,120.36 for the year 1942, or the taxable year 1943, is disallowed for failure of proof.

Upon the facts, held, the amounts of $5,000 and $1,500 paid by petitioner in the taxable year 1944 to its president and vice-president, respectively, constituted reasonable compensation for services which each of them actually rendered to petitioner, and are properly deductible under section 23(a)(1)(A) of the Internal Revenue Code.

The deductibility of certain alleged expenditures, made in the taxable year 1944, determined.

On the facts, held, the amount includable in petitioner's equity invested capital as property paid in for stock under section 718 (a) (2) of the Internal Revenue Code determined. Held: the amount includable in petitioner's equity invested capital as property paid in for stock under section 718 (a) (2) of the Internal Revenue Code determined.

During 1941 the petitioner and his wife were engaged in a hatchery business consisting of a principal office and over twenty branch establishments, which they operated under an oral partnership agreement. The wife had contributed from her own funds substantial amounts in establishing the business, was responsible for its finances, and actively participated in the control and management of its affairs. In the absence of satisfactory records the respondent recomputed business income for 1941 on the basis of the available books, branch bank statements and canceled checks. The respondent increased the gross receipts of the business for 1941 by increasing sales at the home office and branch profits as reported, and by including in the gross receipts of the business sales made by the home office to its branches. Various deductions claimed by the partnership were disallowed in whole or in part. Respondent assessed deficiencies against the petitioner as the sole proprietor of the business and imposed in respect to the tax a 50 per cent addition for fraud under section 293 (b) of the Internal Revenue Code. Held, 1. That the petitioner and his wife each owned an undivided one-half interest and were bona fide partners in the hatchery business during the taxable year 1941. 2. That the respondent's determination of partnership income for 1941 is approved for the failure of the petitioner to sustain his burden of proving that the respondent, in his reconstruction of business income, erred in any substantial respect. 3. That the respondent properly disallowed a portion of a deduction claimed by the partnership in 1941 for loss by fire. 4. That no part of any deficiency herein for the taxable year 1941 was due to fraud with intent to evade tax.

On the facts, held: 1. Petitioner Walter D. Abbott is liable as transferee of Abbott Associates, Inc. for the entire deficiency determined against that… Held: Petitioner Walter D. Abbott is liable as transferee of Abbott Associates, Inc. for the entire deficiency determined against that corporation. 2. Petitioner Grace D. Hubbard received no assets of Abbott Associates, Inc. and is not liable as a transferee for any part of the deficiency determined against that corporation.

Disallowance of $608.69, claimed as a deduction for medical care for petitioners, husband and wife, approved for lack of evidence.

Additions to taxpayer's reserve for bad debts for the fiscal years 1940, 1941 and 1942, held, reasonable in amount and, therefore, deductible from gross income under section 23 (k) (1), I.R.C. Held: reasonable in amount and, therefore, deductible from gross income under section 23 (k) (1), I.R.C.

Upon hearing in accordance with the mandate from the United States Court of Appeals, it is held, (a) that the petitioner was not, under… Held: that the petitioner was not, under the mandate herein, relieved of the duty of adducing evidence to meet the prima facie case made by the respondent as to basis of good will; (b) that petitioner had no basis in good will for which he received money in settlement of an action in court; and (c) that the petitioner had and settled no…

Loan of $25,000 which became worthless was a business bad debt rather than a non-business bad debt and is deductible in full under section 23(k)(1) of the Internal Revenue Code.

Held, a valid partnership existed between petitioner and his two sons in the taxable year 1945. Held: a valid partnership existed between petitioner and his two sons in the taxable year 1945.

On the facts, held: amounts expended for entertainment, for initiation fees, dues and expenses of club membership, and for maid and baby-sitters caring… Held: amounts expended for entertainment, for initiation fees, dues and expenses of club membership, and for maid and baby-sitters caring for petitioner's children while his wife worked in his office are not deductible under section 23 (a), Internal Revenue Code, as ordinary and necessary expenses of petitioner's business.

In 1939 petitioner corporation made an assignment for the benefit of creditors. Held: that the partnership was a separate entity, was not acting as agent or trustee of petitioner, was conducting its own business and therefore petitioner is not entitled to deduct operating losses suffered by the partnership during the fiscal years ending October 31, 1943 and October 31, 1944.

Taxpayer, engaged in the operation of sandstone quarries for the removal therefrom of grindstone and manufacturing same into various sizes for use as abrasives in the manufacture of cutting tools,… Held: not entitled to allowance for depletion on the discovery basis.

1. Certain deductions allowed and others disallowed. 2. Amounts of net operating losses, carry-overs and carry-backs, determined. 3. Petitioner was entitled to an exemption as head of family.

Respondent's holding that the income of a certain trust created by taxpayer for the benefit of his wife was used to satisfy his legal obligations, disapproved.

1. Upon the evidence, held, that the respondent did not err in determining that the sales of the petitioner corporation for the fiscal year ended March 31, 1941, were understated in the amount of… Held: that the respondent did not err in determining that the sales of the petitioner corporation for the fiscal year ended March 31, 1941, were understated in the amount of $25,772.21. 2.

Under a trust agreement executed in 1929, as amended, taxpayer reserved the right and power to change any beneficiary or beneficiaries or the proportionate interest of any beneficiary or… Held: the income of the trust is taxable to taxpayer-grantor under section 22(a), I.R.C.

Petitioner, a manufacturer's agent, bought a 60-foot boat in 1942, paid expenses of its maintenance and use, and sold it in 1943. On the facts, held, expense of boat's operation and loss upon its sale are not ordinary and necessary business expenses and business loss.

Petitioner's income for the calendar years 1944 and 1945 determined by the net worth method, and the respondent's imposition of a 50 per cent addition to the tax for fraud in each taxable year sustained.

1. Amount of petitioner's taxable income determined. 2. Held, petitioner, a doctor, filed a false and fraudulent return with intent to evade tax. Held: petitioner, a doctor, filed a false and fraudulent return with intent to evade tax.

1. A partnership between petitioners, their mother and a sister, held not valid as to the mother and sister. Inclusion of five-sixths of the income therefrom in the taxable income of Rocco J. Cardone for 1943 and 1944 approved.

Petitioner acquired the assets and assumed the liabilities of a predecessor corporation and partnership. Held: the amount paid in compromise was a part of the cost of assets acquired by petitioner from its predecessors and was not a business expense or loss of petitioner.

1. Petitioner failed to establish that it was a life insurance company as contemplated by section 201, I.R.C., and entitled to be taxed as such, its so-called reserve funds not being held exclusively for the fulfillment of its life insurance and other like contracts and being subject to invasion for other purposes. 2.

Respondent determined a portion of salary and bonus paid by petitioner to one of its officers to be in excess of reasonable compensation for services actually rendered. Held: under the facts, he committed no error in so doing. Petitioner acquired the business and equipment of some of its competitors and allocated part of the purchase price paid therefor to commissions. Held, the amounts so designated were capital expenditures and not deductible as business expenses.

Held, the residual value of an estate bequeathed to charity was impossible of ascertainment and hence not deductible under section 812 (d), I.R.C.

During the taxable years 1943, 1944, and 1945, all of the petitioner's income from his dental practice was recorded in his business books and records. Held: That no part of any deficiency for each of the taxable years in question is due to fraud with intent to evade tax. 2.

Respondent's determination that a certain debt did not become worthless in the taxable year sustained for failure of proof.

Held, no deduction is allowable for alimony payments made by petitioner to his former wife under sections 22 (k) and 23 (u), I.R.C. Held further, a nunc pro tunc order by a State court,… Held: no deduction is allowable for alimony payments made by petitioner to his former wife under sections 22 (k) and 23 (u), I.R.C. Held further, a nunc pro tunc order by a State court, amending previous order of the court, is not effective to make deductible payments made in former years.

Petitioner seeks to include in its equity invested capital for 1944 an amount in addition to that allowed by respondent representing what it claims to be the value of intangibles and good will… Held: petitioner has failed to sustain its burden of proof and particularly has failed to prove the factors necessary to apply the formula set forth in A.R.M. 34.

Upon the facts, held, (1) respondent improperly disallowed part of the compensation petitioner paid two of its officers during fiscal years 1944, 1945 and 1946; (2) bonuses of the two officers in the fiscal year 1944 constituted additional compensation; (3) the full amount of the bonus accrued by petitioner to one of its officers in the fiscal year 1944 was deductible in the absence of proof that part of it came within the terms of section 24 (c) of the Internal Revenue Code; (4) petitioner is entitled to a net operating loss carry-back from the fiscal year 1946 to the fiscal year 1944.

For its fiscal years ending January 31, 1942, January 31, 1943, and January 31, 1944, petitioner consistently took inventories of its merchandise on the basis of its worth, as determined by… Held: that respondent's action resulted in a distortion of income and is not approved.

Petitioner, on his withdrawal from a law partnership, received cash and tangible assets in the amount of $40,506. In his income tax returns he treated the transaction as a sale of capital assets. Held: that a portion of the sum received represented payment for his proprietorship interest in the partnership and the balance was ordinary income in settlement of his interest in earned but uncollected fees.

Upon the facts, held, ( 1) the assessment or collection of any taxes due for the years 1937 through 1940 is not barred by the statute of… Held: ( 1) the assessment or collection of any taxes due for the years 1937 through 1940 is not barred by the statute of limitation, (2) petitioner realized taxable income in 1936 and his failure to file a return in that year was not due to reasonable cause, (3) petitioner understated his income for the years 1937 through 1943 in the…

Upon the facts, held, petitioner's employment in Melville, Rhode Island was indefinite and, hence, the expenses involved were personal rather than deductible expenses under section 23 (a) (1) (A) of… Held: petitioner's employment in Melville, Rhode Island was indefinite and, hence, the expenses involved were personal rather than deductible expenses under section 23 (a) (1) (A) of the Internal Revenue Code. Commissioner v. Flowers, 326 U.S. 465.

1. Upon the facts of record it is held that petitioner, his wife and his daughter were partners in an enterprise known as Alloy Rods Company, each owning a 1/17th interest therein. 2. Respondent's action in using the original cost of machinery and equipment as the basis for depreciation approved in the absence of proof to the contrary. 3. Respondent's holding that payments of so-called debenture notes resulted in income approved for lack of proof of error. 4.

Deduction: Business expenses. - Petitioner, an advertising solicitor, deducted on his returns as ordinary and necessary business… Held: the expenditures for taxi fares and telephone calls were in furtherance of petitioner's business and properly deductible as business expenses under section 23 (a) (1) (A), I.R.C., but as the claim for deduction was based solely upon petitioner's estimate, an allowance of only part of the claim as a deduction is made under the rule of…

With full knowledge of the petitioner's correct address, the Commissioner sent by registered mail a notice of deficiency, having the petitioner's name and address as its inside address, to the petitioner's attorney at his own address. A power of attorney executed by the petitioner to his attorney did not confer authority to receive the notice of deficiency but requested that copies of communications relating to his authorized acts be sent to him.

Petitioner, during the taxable years 1934 to 1939, inclusive, derived income from engaging in an illegal enterprise of bankingnumbers pools and horse play, a considerable amount of which income he… Held: ( 1) Petitioner filed false and fraudulent income tax returns for the taxable periods involved, with intent to evade tax; (2) A fraud penalty of 50 per centum of the total deficiency to be determined under Rule 50, in accordance with our findings herein, allowed.

The fair market value of that portion of petitioner's oil royalty interest which she transferred in trust as gifts on April 20, 1938 and December 30, 1942 determined for gift tax purposes.

The respondent determined deficiencies for the taxable years 1937 to 1941, inclusive, under the so-called bank deposit method; additions to the tax for fraud in each of said years; and a 25 per cent… Held: The amounts of various deductions to which the petitioners are entitled during the taxable years determined. 2. That a part of the deficiency in each of the years 1937 and 1939 was due to fraud with intent to evade tax. 3.

On the facts, held, petitioner not entitled to exemption for dependents for 1945 on account of amounts contributed toward the support of his two minor sons living with his former wife. Held: petitioner not entitled to exemption for dependents for 1945 on account of amounts contributed toward the support of his two minor sons living with his former wife.

On the facts, held, that the fair market value of residential property which petitioner owned in Shaker Heights, a suburb of Cleveland, Ohio, at the time when he rented it to a tenant on October… Held: that the fair market value of residential property which petitioner owned in Shaker Heights, a suburb of Cleveland, Ohio, at the time when he rented it to a tenant on October 2, 1941, after having at a date prior thereto abandoned its use as a private residence, was $27,500.

1. Salaries and bonuses paid to petitioner's president and vice president, held, reasonable under the provisions of section 23(a)(1)(A), I.R.C. 2. Held: reasonable under the provisions of section 23(a)(1)(A), I.R.C. 2. Additional hauling charges paid in 1942 for services performed by trucker in 1939 and 1940 for petitioner on an accrual basis, held, not deductible in 1942.

The petitioner formerly operated a retail shoe store known as the Phillip Shoe Company, as a single proprietorship. His two sons had worked in the store since they were eight or nine years old. Held: the parties, in good faith and acting with a business purpose, intended to join together as partners in the present conduct of the enterprise and that Norman Eisenshtadt should be recognized as a partner in the Phillip Shoe Company, during the taxable years.

Petitioner loaned various sums of money to Krome Corporation in 1942 for which it received unsecured notes, two of which aggregated $85,000. Held: the notes aggregating $85,000 upon which nothing has ever been paid became worthless in petitioner's fiscal year ended February 28, 1945, and are deductible as bad debts.

An organization of volunteer firemen incorporated under the Membership Corporation Law of New York, held, organized for charitable purposes within the meaning and purpose of section 23(o)(2) of the… Held: organized for charitable purposes within the meaning and purpose of section 23(o)(2) of the Internal Revenue Code and contributions thereto are deductible. Roy C. McKenna, 5 T.C. 712, followed.

Upon the facts, held, petitioners held the property involved primarily for sale to customers in the ordinary course of their business and, hence, are not entitled to treat the profits from the sale… Held: petitioners held the property involved primarily for sale to customers in the ordinary course of their business and, hence, are not entitled to treat the profits from the sale of such property as capital gain under section 117, Internal Revenue Code.

During the administration of her husband's estate in 1942, petitioner, as his widow, received a family allowance therefrom by order of the… Held: that in California family allowance paid during the period of administration of the estate constitutes a charge against the corpus of the estate, and therefore the 1942 income of the estate payable to petitioner on termination of her husband's estate and taxable to her in 1942, was not diminished by payment of the family allowance.

Dividends. - The extent to which distributions received by petitioner on stock of the J. D. and A. B. Spreckels Company during 1938, 1939, and 1940 constituted taxable dividends is, by stipulation, to be determined pursuant to the opinion in Grace H. Kelham, et al., 13 T.C. - (No. 125). Deduction: Bad debt. - On the facts, held that petitioner is entitled to a bad debt deduction for the year 1939. Earned income credit. - Held, that the amount thereof be recomputed under Rule 50.