Volume 82 — Tax Court Reports

Petitioners were limited partners in a partnership formed to acquire and distribute a motion picture film. Held: Under the income forecast method, a deduction for depreciation must be based on net income. Accordingly, no depreciation deduction is allowable in the tax years in question since the partnership, a cash basis taxpayer, received no income during such years. Greene v. Commissioner, 81 T.C. 132 (1983), followed.

Petitioner, having been denied tax-exempt status as a religious organization under sec. 501(c)(3), I. R. C. 1954, as amended, petitioned this Court for a declaratory judgment pursuant to sec. 7428. Held: respondent's adverse ruling that petitioner does not qualify for tax exemption under sec. 501(c)(3) is sustained. Held, further, the local family missions do not qualify for a group ruling request.

Under decedent's will, his residuary estate was put into a trust. The trustee was directed to determine a specific portion thereof pursuant to a formula clause that would be designated the "wife's share." This amount was to be approximately equal to the maximum Federal estate tax marital deduction in determining the decedent's taxable estate. The remainder of the residuary trust was designated as the "balance." Decedent's surviving spouse was to receive all the income of the residuary trust and was given a testamentary power of appointment "over that portion of this trust which shall be equal in amount to my wife's share." Held: The "wife's share" of the residuary trust qualified for the marital deduction. Sec. 20.2056(b)-5, Estate Tax Regs., requiring that in order to qualify for the marital deduction, a "specific portion" of decedent's estate must constitute a "fractional or percentile" share of a property interest which passes to the spouse as invalid as applied here.

Decedent established a life insurance trust. The trustee applied for the policy on decedent's life and paid the initial premium with a check of decedent's in the exact amount of the premium. Decedent died 3 months later. Held, the trustee purchased the policy in his capacity as decedent's agent rather than as an independent trustee. Held, further, the policy proceeds are includable in decedent's estate under sec. 2035, I.R.C. 1954. Estate of Coleman v. Commissioner, 52 T.C. 921 (1969), explained and distinguished.

Petitioner moved for a continuance under Rule 134, Tax Court Rules of Practice and Procedure, and for an order compelling attendance at deposition pursuant to subpoena duces tecum under Rule 75, Tax… Held: the motion for continuance is granted upon petitioner's showing of good and sufficient cause and compliance with all applicable Rules. Held, further: The motion to compel attendance at deposition of respondent's experts is denied.

Petitioner and her husband were residents of Arizona, a community property State, during the years in issue. Held: petitioner did not thereby relinquish her community property interest in her husband's earnings, and she is liable for deficiencies in tax attributable to her failure to report one-half of those earnings on separate returns filed by her and for additions to tax for negligence.

In 1966, petitioners executed a contract covering a period of 62 years for the sale of timber to a timber cutting company. Held: the minimum payments do not qualify for capital gains treatment under sec. 631(b), I.R.C. 1954, because petitioners did not retain an economic interest in the timber.

Petitioners were citizens and domiciliaries of Sweden in the taxable years in issue. During those years, International Business Machines in New York employed petitioners and paid their wages. Held: Under the applicable laws of Sweden, petitioners' U.S. earnings were community property; petitioners' wives had present vested interests in the earnings. Accordingly, under sec. 1, I.R.C. 1954, for purposes of reporting their U.S. wages, petitioners and their wives were equal "owners" of such wages and petitioners were entitled to report only one-half of the wages on their respective Federal income tax returns.

Ps were members of 5 limited partnerships which were among 10 limited partnerships formed on Oct. 28, 1976. Held: On Oct. 29, 1976, the partnerships' obligations under the sublease agreements were illusory. Accordingly, sec. 1.612-3(b)(3), Income Tax Regs., as amended in Dec. 1977, applies, and no portion of the advanced royalties may be deducted by Ps for 1976.

Petitioners filed a motion for reconsideration of the Court's June 30, 1983, order, which directed petitioners to comply in full with respondent's document and interrogatory requests. Held: the intent of the partners is relevant to the determination of profit objective at the partnership level. Held, further, petitioners are not prejudiced by nonattendance at hearing where statement in lieu of appearance was filed and where no proof of prejudice was submitted.

Held: The parties, in making the computation pursuant to Rule 155, Tax Court Rules of Practice and Procedure, shall be guided by the following: 1. Held: The parties, in making the computation pursuant to Rule 155, Tax Court Rules of Practice and Procedure, shall be guided by the following: 1. Relay Rail Issue: The adjustment under sec. 481(a), I.R.C. 1954, restoring improperly deducted amounts to income, shall be made entirely in the year 1959. 2.

P claimed a deduction for certain payments made to his former spouse under the terms of their divorce decree. Held: such payments were installment payments discharging a part of an obligation the principal sum of which is * * * specified in the decree, under sec. 71(c)(1), I.R.C. 1954, and were therefore not periodic payments, as required by sec. 71(a), I.R.C. 1954.

Petitioner, a calender year taxpayer using the accrual method of accounting, is a railroad engaged in interstate commerce. Held: petitioner may deduct its accrued RRTA taxes for each of the taxable years 1974 and 1975 because as of the close of each taxable year, all events had occurred that determined the fact of liability, and the amount thereof could be and was determined with reasonable accuracy. Sec. 1.461-1(a)(2), Income Tax Regs., applied.

In July 1977, petitioner received a distribution from a profit-sharing trust of the total amount credited to his account. He rolled over the entire amount into an IRA. The distribution was attributable solely to employer contributions in years when the trust was exempt from tax under sec. 501(a), I.R.C. 1954. In 1979, respondent retroactively revoked the trust's exempt status effective Mar. 31, 1974. Held, petitioner is entitled to roll over the distribution into an IRA under sec. 402(a)(5), I.R.C. 1954, because the distribution is attributable to contributions made in years the trust was exempt. Greenwald v. Commissioner, 366 F.2d 538 (2d Cir. 1966), revg. in part 44 T.C. 137 (1965), and Woodson v. Commissioner, 73 T.C. 779 (1980), revd. 651 F.2d 1094 (5th Cir. 1981), followed. Held, further, sec. 1.402(a)-1(a)(1)(ii), Income Tax Regs., is invalid to the extent it looks solely to the exempt or nonexempt status of the trust at the time of distribution.

P and D acquired a long-term ground lease of property which they intended to develop with an office building. Held: Under the circumstances of this case, the partnership, and not the corporation, was the owner of the project for Federal income tax purposes. The corporation held record title and executed the loans as the agent of the partnership.

Petitioner seeks a declaratory judgment that it is exempt from taxation under sec. 501(c)(3), I.R.C. 1954. Petitioner's sole activity is the operation of bingo games. Held: petitioner may not qualify for exemption on the ground that it will donate its profits to exempt organizations.

Petitioner was incorporated as a nonprofit corporation under Iowa statutes for the purpose of raising money to be used for providing college scholarships. Held: Petitioner was not operated exclusively for exempt purposes under the provisions of sec. 501(c)(3), I.R.C. 1954, and sec. 1.501(c)(3)-1(c)(1), Income Tax Regs. Therefore, it is not exempt from Federal income tax.

Held, the Reindeer Industry Act of 1937, 25 U.S.C. sec. 500 (1982), does not provide for the exemption from Federal income taxes of… Held: the Reindeer Industry Act of 1937, 25 U.S.C. sec. 500 (1982), does not provide for the exemption from Federal income taxes of Alaskan Native reindeer herd operators who operate under the regulation of the Secretary of the Interior; thus, petitioners are taxable on their share of the income of a partnership engaged in the operation of…

Petitioner-husbands were ministers of the gospel. Each owned or rented his own home. Held: each petitioner-husband is to exclude from gross income only the amount of his out-of-pocket expenses in renting or providing his home. Sec. 107(2), I.R.C. 1954.

Petitioner was organized to be a vehicle to provide education and charity. In its application for tax-exempt status, it failed to provide details regarding its proposed operations. Held, petitioner has failed to prove that it will operate exclusively for exempt purposes under sec. 501(c)(3), I.R.C. 1954.

Husband and wife negotiated and entered into an agreement under which husband was to pay specified amounts to wife as installment payments of a principal sum obligation in lieu of support payments. Held: The individual subparagraphs of the agreement are to be viewed as components of a single stream of support payments, not as independent obligations which must be separately analyzed for Federal income tax purposes.

Petitioner filed a petition in this Court claiming that his wages are not taxable income. Held: respondent's determination of deficiencies and additions to tax under secs. 6651(a), 6653(a), and 6654(a), I.R.C. 1954, are sustained. Held, further, damages under sec. 6673, I.R.C. 1954, are awarded to the United States because petitioner instituted these proceedings primarily for delay, and his position is frivolous.

On Jan. 1, 1973, A, mother of B, C, and D, transferred to B and C her interest in the family partnership, in exchange for a note. Held: the Jan. 1, 1973, transactions between A and B and C, and between B and C and D, were taxable gifts to the extent that the property transferred exceeded in value the consideration received therefor. Held, further, the impact upon value of the restrictive clause in the family partnership agreements determined.

A member of petitioners' consolidated return group was a member of a joint venture which was engaged in the construction of a water tunnel. The venture, which employed the completed contract method for reporting income and expenses, unilaterally withdrew from the project without finishing it in 1975 after suffering extensive losses. Held, 1975 was not the year of contract completion, and petitioners may not deduct their distributive share of the venture's losses from constructing the tunnel in that year. Another member of petitioners' consolidated return group was engaged in the construction of a dam. Held, further, the gross receipts from the dam construction are equivalent to gross income and, therefore, the member qualifies as a Western Hemisphere Trade Corporation for the year 1975.

R determined deficiencies and fraud additions against Ps based upon documents, testimony, and other information secured by R's agents from grand jury proceedings. Held: assuming R's use of the grand jury materials was improper, such use does not invalidate the statutory notices.

M and T maintained a home office in 1977 and 1978 which was exclusively used on a regular basis as a place of business. This exclusive use was for the convenience of M's employer. Held: petitioners are not entitled to a home office deduction in 1977 since patients, clients, or customers of M's employer did not physically use the home office in meeting or dealing with M, as required by sec. 280A(c)(1)(B), I.R.C. 1954.

C's five children formed a partnership which leased equipment and a yacht to C corporation, a construction contractor. Held: the partnership is a sham, whether viewed under the sec. 704(e), I.R.C. 1954, regulations or the test in Commissioner v. Culbertson, 337 U.S. 733 (1949). Held, further, the partnership's property will be treated, for Federal tax purposes, as being owned by C corporation.

Potash Corp. of America (PCA), a division of petitioner, mines and concentrates sylvinite ore, producing five grades of potassium chloride, or muriate of potash, which it sells primarily for use as an agricultural fertilizer. The Commissioner agrees that the muriate produced by flotation constitutes mining for the purpose of computing petitioner's allowance for percentage depletion but determined that PCA's treatment processes, involving the leaching and crystallization of muriate "fines" and dust in order to produce its soluble and chemical grade muriate, are refining or manufacturing processes and, therefore, nonmining processes. Held, leaching and crystallization of muriate "fines" and dust by PCA constitute mining treatment processes within the meaning of sec. 613(c)(4), I.R.C. 1954. (Issue 1.) The Commissioner determined that PCA is not entitled to use the actual sales, or representative market or field price to compute its gross income from mining because its storage and loading for shipment of potash were nonmining processes, thus requiring use of the proportionate profits method. Held, the storage and loading for shipment performed by PCA are mining processes, and PCA is entitled to use the actual sales price, or representative market or field price in computing its gross income from mining. (Issues 2, 3.) The Commissioner determined that PCA's standard muriate was not of a like kind and grade as the muriate it ships to other cities for conversion into potassium sulphate. Potassium sulphate is also a fertilizer component. The oil added to the standard muriate to prevent caking interferes with the sulphate conversion process and is omitted from the muriate used for this purpose. The oil does not enhance the value of the standard muriate as a fertilizer. In addition, a greater percentage of post-flotation amines, present in the standard muriate, are removed because they, too, interfere with the conversion process. The Commissioner denied use of the f.o.b. mine sales price of the standard grade muriate as a representative market price for the muriate shipped for conversion. Held, the muriate shipped for conversion containing no oil and slightly fewer amines is of like kind and grade as the standard grade muriate with appropriate adjustments for oil and amine cost differences. (Issue 4.) The Commissioner determined that the costs of leasing railroad cars and freight prepaid by PCA on customers' accounts for muriate transported in the leased railcars were nonmining costs for purposes of applying the proportionate profits formula. Held, PCA is not required to use the proportionate profits method for computing its percentage depletion allowance. Reasonable expenses are not relevant to PCA's computation of percentage depletion which is based upon its f.o.b. mine sales price for domestic muriate and its f.o.b. port or vessel sales price less the cost of purchased transportation to the customer for exported muriate. (Issues 5, 6.) In computing the "50% limit" of "taxable income from the property" for the depletion deduction, the Commissioner determined that interest income could not be used to reduce the interest expense deduction. Held, PCA is entitled to reduce its interest expense deduction by interest income in computing "taxable income from the property" for purposes of the "50% limit" on the depletion deduction. Sec. 613(a), I.R.C. 1954. (Issue 7.)

Petitioner instituted this proceeding claiming that his wages are not income subject to tax. Held: in these circumstances, respondent's determinations of income tax deficiencies and additions to the tax under secs. 6651(a), 6653(a), and 6654, I.R.C. 1954 as amended, are sustained.

Respondent determined deficiencies totaling $ 123,582.09 and additions to tax for fraud under sec. 6653(b), I.R.C. 1954, totaling $ 61,791.06, for the years 1967 through 1973. Held: motion to set aside default, on ground that petitioner's failure to appear was due to misunderstanding that case was settled, denied; deficiencies and additions to tax sustained.

Petitioners used their boat for business purposes, for repair or maintenance purposes, for charitable purposes, and for other personal or nonbusiness purposes. In applying the "used primarily" test of sec. 274(a), I.R.C. 1954, and sec. 1.274-2(e)(iii), Income Tax Regs. -- Held: 1. Calendar days of charitable use are taken into account as calendar days of nonbusiness use. 2. Calendar days of repair or maintenance use are apportioned between business use and nonbusiness use. 3. Petitioners have failed to show that the boat was used primarily for the furtherance of petitioner-husband's trade or business and so they are not entitled to claimed deductions under secs. 162(a) and 167 and a claimed credit under sec. 38, I.R.C. 1954.

Held, date of grant of nonqualified employee stock option determined to be subsequent to Apr. 22, 1969, the effective date of sec. 83, I.R.C. 1954. Held, further, the compensation element in the option was taxable in year of exercise.

Held, blockage is not a restriction within the meaning of sec. 83(a)(1), I.R.C. 1954, and thus may be taken into account in valuing shares of stock. Held: blockage is not a restriction within the meaning of sec. 83(a)(1), I.R.C. 1954, and thus may be taken into account in valuing shares of stock.

In 1979, P filed an imperfect petition which was not signed by her or by an admitted attorney on her behalf and with respect to which the filing fee was not paid. Held: under such circumstances, an order of dismissal for lack of jurisdiction is treated like a decision, and the motion to vacate such order was untimely.

Connecticut taxes corporations pursuant to a "piggy-back" system whereby Federal taxable income serves as the State taxable income base. The Commissioner and Consolidated (a Connecticut corporation and an accrual method taxpayer) reached an agreement in 1983 that part of Consolidated's 1976 Federal deduction for officers' salaries should be disallowed. The resulting increase in Consolidated's 1976 Federal taxable income from the 1983 settlement gave rise to an additional Connecticut corporation business tax liability, which Consolidated sought to accrue in 1976. Held, Consolidated may not accrue the additional State tax in 1976 because Consolidated "contested" the adjustment to Federal taxable income, thereby contesting a liability under the Connecticut piggy-back tax system.

Petitioners owned all of the stock of a certain corporation engaged in the business of selling garage doors as a wholesaler. They entered into a redemption agreement wherein they sold all of their stock to the corporation and resigned from their positions as officers and directors. Petitioners' son was the sole owner of the corporation after the redemption. Mr. Seda continued to be employed by the corporation after the redemption. Held: The redemption of petitioners' stock did not qualify as a complete redemption under sec. 302(b)(3), I.R.C. 1954. Their son's stock interest is attributable to petitioners under sec. 318(a)(1) because Mr. Seda retained an interest in the corporation as an employee after the redemption. Sec. 302(c)(2)(A)(i). Held, further: The payments Mr. Seda received for services rendered to the corporation after the redemption were taxable as salary. Thus, petitioners are not entitled to an overpayment.

Petitioner J claimed interest deductions in 1973, 1974, and 1975 for payments made in those years on alleged indebtedness incurred to purchase silver bullion in a series of… Held: interest deductions disallowed because J neither actually purchased silver nor incurred any indebtedness. Petitioner F also claimed interest deductions in 1974 and 1975 for payments made in those years for alleged indebtedness incurred to purchase silver bullion in cash and carry transactions.

D died a Nevada domiciliary, and A, B, and C were appointed coexecutors of her estate. Held: the notice of deficiency is valid, and the petition is untimely.

Petitioner, a nonresident alien, received a sign-on bonus to enter into an agreement to play professional hockey for B, a U.S. taxpayer. Held: the sign-on bonus is to be allocated to sources within and without the United States, under sec. 863, I.R.C. 1954, on the basis of the number of games played by B during the season within and without the United States.

At death, decedent was beneficial owner of 1,478 acres of land. During the last 25 years of his life, 1,108 acres were in timber, 270 acres in row crops, and 100 acres in pasture. Held: the 1,478 acres qualify for special use valuation under sec. 2032A(b) and sec. 20.2032A-3(b)(1), Estate Tax Regs. Held, further, this Court is without jurisdiction to review respondent's determination that the estate does not qualify to pay the tax in installments under secs. 6166 and 6166A.

P, the chief executive officer of a large corporation, had his principal office in Chicago, Ill. Held: the expenses of maintaining such office and the depreciation attributable to it are deductible under secs. 162(a) and 167, I.R.C. 1954; they are not personal expenses subject to sec. 262, I.R.C. 1954.

In 1972, petitioner was the lessor of property subject to a 99-year redeemable Maryland ground rent. Held, petitioner's retained interest in the land is "primarily a security interest" within the meaning of sec. 1055(c)(3), I.R.C. 1954, and the redeemable ground rent is treated as being in the nature of a mortgage. Held, further, petitioner omitted from his 1972 gross income an amount in excess of 25 percent of that stated in the return, and assessment of the deficiency is not barred by the statute of limitations. Sec. 6501(e)(1). In 1974, petitioner exchanged 1 redeemable Maryland ground rent for 18 redeemable Maryland ground rents. Held, no taxable gain or loss occurred as a result of this transaction. Held, further, payments received pursuant to a redeemable ground rent are includable as interest income. Held, further, petitioner's subch. S corporation received excessive passive income during 1974.

Mr. and Mrs. A were divorced on Sept. 2, 1977. They were residents of Texas, a community property State. Respondent, in determining Mr. A's income tax liability, determined that the community portion of Mr. A's distributive share of partnership income should be allocated based upon an interim income statement of the partnership as of the date of divorce. Alternatively, respondent, in determining Mr. A's income tax liability, allocated Mr. A's distributive share of partnership income based upon the partnership's 1977 Federal income tax return as adjusted for the portion of the year that Mr. and Mrs. A were married. Respondent also allocated Mr. A's distributive share of partnership additional first-year depreciation based upon the portion of the year that Mr. and Mrs. A were married. Held, respondent's alternative allocations based upon the pro rata portion of the year that Mr. and Mrs. A were married are reasonable and therefore sustained. Hockaday v. Commissioner, 22 T.C. 1327 (1954), followed.

H and W were granted a decree of divorce in Texas Domestic Relations Court. A provision in the decree required H to pay W $ 400 per month for the remainder of her lifetime or until she remarried. Held: the monthly payments made by H to W pursuant to the divorce decree constitute support payments under sec. 71(a), I.R.C. 1954, and are deductible by H as alimony under sec. 215. Taylor v. Campbell, 335 F.2d 841 (5th Cir. 1964), followed.

Petitioner instituted this proceeding but refused to participate in the Court's stipulation procedures under Rule 91, Tax Court Rules of Practice and Procedure, or to produce any evidence in regard… Held: respondent's determinations of income tax deficiencies and additions to the tax under secs. 6651(a) and 6653(a), I.R.C. 1954, are sustained.

Petitioner had a fully vested interest in his employer's qualified profit-sharing plan. His employment was subsequently terminated for attempting to embezzle goods from his employer. Held: petitioner must include in income the value of his fully vested interest in his former employer's profit-sharing plan. Secs. 402(a), 451, I.R.C. 1954.

Rule 104(c)(3), Tax Court Rules of Practice and Procedure. -- The Court ordered P to answer R's interrogatories and to produce documents sought by R. P failed to comply with this order but instead reiterated frivolous claims the Court had already considered and rejected in ordering P to comply with R's discovery requests. R moved to dismiss the petition under Rule 104(c)(3) as a sanction for P's noncompliance with our order. Held: R's motion to dismiss granted. P's failure to comply with the Court's discovery order was due to "willfulness, bad faith, or [other] fault." Societe Internationale v. Rogers (357 U.S. 197 (1958)) standard under Fed. R. Civ. P. 37(b)(2) followed for dismissals under Rule 104(c).

Petitioner was a commissioned officer in the U.S. Air Force Reserve. Held: petitioner is entitled to exclude from income in 1975 that portion of his retirement pay to the extent of the $ 11,250 repayment not absorbed by the exclusion in 1974 because the repayment of readjustment pay represents consideration for an annuity under sec. 72(d), I.R.C. 1954, as amended.

Under the facts presented: Held, that petitioner has failed to prove that he gave respondent clear and concise oral notification of a change of address to Florida from Minnesota prior to the issuance… Held: that petitioner has failed to prove that he gave respondent clear and concise oral notification of a change of address to Florida from Minnesota prior to the issuance of respondent's statutory notice for the years 1978 and 1979.

Ps seek judgment as a matter of law in their favor and R seeks judgment as a matter of law in his favor. The only issue for decision is whether sec. 104(a)(1), I.R.C. 1954, permits the exclusion of certain payments from gross income. A party may move for an adjudication in his favor if there is no genuine issue of material fact and a decision may be rendered as a matter of law. Held, local ordinance containing irrebuttable presumption that illness was occupationally caused was not a statute in the nature of a workmen's compensation act. Held, further, neither Ps nor R have made the requisite showing that there is no genuine issue of material fact. Held, further, Ps' and R's motions for summary judgment are denied.

1. During 1971, in settlement of a lawsuit over the price to be paid under a refined products output contract, X forgave over $ 2.6 million in principal indebtedness that Y owed it for Y's purchase of a refinery from X in 1966. Held: The discharge of indebtedness constituted a payment in settlement of a claim for profits; accordingly, the settlement "proceeds" are ordinary income to Y. The exclusion provided by sec. 108, I.R.C. 1954, does not apply. 2. During 1969, Y began construction of an HF alkylation unit at the refinery. Prior to Apr. 19, 1969, Y staked out the jobsite and had test soil borings taken, but no other work was done. The unit was placed in service during 1970. Held, the alkylation unit is not pretermination property and is not eligible for the investment tax credit under sec. 49(b)(3), I.R.C. 1954.

During petitioner's fiscal year ended Mar. 31, 1973, owners of U-Haul trailers, trucks, handtrucks, and towbars executed Investment Incentive Tax Credit Lessors Election Statements, electing as… Held: U-Haul International was the lessee of the trailers, trucks, handtrucks, and towbars. Accordingly, U-Haul International was entitled to claim the investment tax credit under secs. 38 and 48(d), I.R.C. 1954. Respondent's argument that an agency relationship existed, rejected.

Petitioner-husband (G) is a doctor employed by the corporate petitioner (C). G and petitioner-wife (F) are C's officers and are trustees of the profit-sharing plan and the pension plan maintained by C for its employees. During the years in issue, G and F attended two financial planning seminars, one aboard the QE II on a Caribbean cruise and the other at Acapulco, Mexico. G and F also attended a medical seminar aboard a ship which cruised from Norway to Finland. C paid and deducted the registration fees and travel expenses connected with these trips. Held: 1. C's expenses allocable to lectures discussing employee plans are ordinary and necessary business expenses deductible under sec. 162(a), I.R.C. 1954, by C and are not income to G and F. 2. C's expenses allocable to lectures discussing the operation of a medical practice are ordinary and necessary business expenses deductible under sec. 162(a), I.R.C. 1954, by C and are not income to G and F. 3. All three trips were primarily personal vacations of G and F and not primarily business trips. Expenses not allocable to employee plan lectures or medical practice lectures are not deductible under sec. 162(a), I.R.C. 1954, by C and are income to G and F. Sec. 1.162-2(b), Income Tax Regs.

Petitioner sold his 25-percent stock interest in a real estate brokerage firm to two remaining shareholders and/or the corporation. Held: On the facts of this case, the agreement was ambiguous and, accordingly, the rule of Commissioner v. Danielson, 378 F.2d 771 (3d Cir. 1967), vacating and remanding 44 T.C. 549 (1965), that the literal terms of an agreement are to be determinative for income tax purposes, does not apply.

Petitioner sold three tracts of farmland during 1976 in two separate sales and reported the gain realized from these sales in full on his income tax return for 1976. Held: petitioner may not subsequently elect the installment method of reporting after having reported the gain from the sale in full on his original return.

During the years in issue, P was a domestic manufacturer of personal leather goods. P also purchased for resale identical leather goods from wholly owned Puerto Rican subsidiaries. P elected the dollar-value LIFO method of pricing its inventory. One pool was kept for its entire inventory investment. Held, two separate inventory pools were required to be maintained, one for the goods manufactured by petitioner and another for the goods purchased for resale. Sec. 1.472-8(b), Income Tax Regs., applied. In 1975, P began manufacturing leather goods in Puerto Rico. These goods were identical to the goods produced by P in the United States. The costs of producing these goods, however, differed substantially from the costs of producing them domestically. Held, P properly elected to treat the goods manufactured in Puerto Rico as a new "item" in its inventory pool within the meaning of sec. 1.472-8(e)(2)(iii), Income Tax Regs.

Petitioner, administrator of a defined benefit plan, applied for a determination by the Commissioner that the plan was qualified under sec. 401, I.R.C. 1954. Held: petition dismissed for lack of jurisdiction. Sec. 7476(b)(4), I.R.C. 1954.

The Revenue Act of 1978, enacted on Nov. 6, 1978, restructured the minimum tax provisions for 1978 and later years. Held: petitioners, husband and wife, with a taxable year beginning Aug. 1, 1978, and ending July 31, 1979, are subject to the 15-percent add-on tax as in effect for taxable years beginning in 1978.

Petitioner was a partner in a general partnership that was a limited partner in five limited partnerships that engaged in equipment leasing activities. Held: under sec. 465, I.R.C. 1954, the general partnership may net losses and gains distributed to it by the limited partnerships in determining petitioner's distributive share of loss from the general partnership's equipment leasing activities.

Petitioner tampered with an official Form 1040 by modifying margin and item captions in order to categorize his wages as Non-taxable receipts that he claims are not gross income subject to tax. Held: wages are subject to tax. 2. Held, further, the tampered form was not a return within the meaning of secs. 6011, 6012, 6072, and 6651(a)(1), I.R.C. 1954, and an addition to tax is due under sec. 6651(a)(1), I.R.C. 1954. 3.

Held, based on all the relevant facts in the record, taxpayer, a full-time gambler for his own account, was in the trade or business of gambling. Held: based on all the relevant facts in the record, taxpayer, a full-time gambler for his own account, was in the trade or business of gambling.

In 1959, petitioner purchased Soldier's Additional Homestead Rights granted to certain soldiers who served in the Civil War. Held: the origin of the claim giving rise to the litigation against petitioner was his sale of the rights, and the damages and costs he paid constitute a long-term capital loss. Shannonhouse v. Commissioner, 21 T.C. 422 (1953), followed.

Ts' 1977 consolidated taxable income was computed by combining income from foreign sources and a loss from domestic sources. The domestic loss was a composite of a loss from domestic operations and three items of "tax preference" as defined in sec. 57(a), I.R.C. 1954. In respect of the income from foreign sources, Ts paid or were deemed to have paid foreign income taxes. Ts elected to credit these taxes against their 1977 Federal income tax liability pursuant to sec. 901(a), thus eliminating such liability completely. In addition, Ts' foreign tax credits exceeded the amount of Federal income tax which would have been payable even if Ts' foreign source income had not been reduced by the tax preference items. Accordingly, the effect of Ts' claiming such preferences was to increase the amount of foreign tax credit carrybacks and carryovers under sec. 904(c). However, these carrybacks and carryovers expired unused. Held, because Ts received no tax benefit from their 1977 "tax preferences" either in 1977 or any other year, sec. 58(h) relieves them of liability for the minimum tax on tax preferences imposed by sec. 56.

An individual (R) and his wholly owned corporation (D) caused a partnership (P), in which R held a 49-percent interest and D a 51-percent interest, to distribute a 160-acre tract of land in two… Held: based on the stipulated facts of this case, R and D, in their individual capacities and not on behalf of P, contributed and sold the property to the city; therefore, the substance and form of the transaction were as one.

Decedent was a public school teacher employed by the Board of Education of the City of New York. Held: the benefit is excludable under sec. 2039(c)(3), I.R.C. 1954; the board is an educational organization under sec. 170(b)(1)(A)(ii), I.R.C. 1954, which is exempt from tax under sec. 501(a), I.R.C. 1954.

The Court of Appeals held that petitioner's off-season conditioning expenses are allowable to the extent that they contribute to his fitness throughout the regular hockey season and directed us to decide which expenses were deductible under sec. 162, I.R.C. 1954. Held, none are deductible due to lack of substantiation. In addition, the Court of Appeals directed us to decide whether petitioner's expenses in answering fan mail and purchasing Hockey News are deductible under sec. 162. Held, both of these expenses are deductible.

A major portion of the assets of petitioner corporation's pension trust was loaned to petitioner's sole shareholder and trustee of the pension plan, who in turn loaned the funds to petitioner. Held: The pension trust did not operate for the exclusive benefit of employees and, hence, fails to be qualified under sec. 401(a), I.R.C. 1954. Enactment of ERISA did not serve to alter the sanction of disqualification.

1. P, a common carrier by rail, leased all of its railroad properties on a net basis for 999 years. Held: the indebtedness to the lessees differs so fundamentally from the original bond obligation that P may not treat one as a substitute for the other. 2. P claimed an investment credit for replacement property and additions and betterments (A-B property) constructed on the leased premises by the lessees.

Petitioners purchased two condominium units in a complex operated by a limited partnership as a resort hotel. Held: petitioners' units were not used exclusively as a hotel within the meaning of sec. 280A(f)(1)(B), I.R.C. 1954. Held, further, petitioners' units were only rented at fair rental those days the units were actually rented to hotel guests.

In Brinley v. Commissioner, T.C. Memo. 1983-408, we held that petitioners were not entitled to a charitable contribution deduction under sec. 170, I.R.C. 1954, for amounts paid to a church-designated travel agent for their son's travel to a site of missionary service and for amounts paid directly to their son to sustain him while he served as a missionary for the Church of Jesus Christ of Latter-Day Saints. Petitioners timely filed a motion for reconsideration claiming, inter alia, that the subsequently issued opinion of the Tenth Circuit Court of Appeals in White v. United States, 725 F.2d 1269 (10th Cir. 1984), is contrary to the holding in our original opinion. We granted petitioners' motion. Held: We reaffirm our original opinion. Petitioners are not entitled to a charitable contribution deduction under sec. 170 because their contributions did not satisfy the control requirement.

Petitioner-husbands received distributions in 1978 from a trust which was part of a pension plan. They "rolled over" these distributions into individual retirement accounts. In 1980, respondent revoked the favorable determination letter that had previously been issued to the plan. This revocation was made retroactive to Jan. 1, 1976. Held: 1. To the extent that any distribution is attributable to periods before Jan. 1, 1976, the amount thereof is treated as a distribution which, under sec. 402(a)(5), I.R.C. 1954, has been rolled over tax free. The post-1975 portion of each such distribution is taxable currently under sec. 402(b), I.R.C. 1954. Baetens v. Commissioner, 82 T.C. 152 (1984). 2. The amounts rolled over tax free are not excess contributions, and so are not taxable under sec. 4973, I.R.C. 1954. The post-1975 portion of each distribution which was rolled over is an excess contribution to an individual retirement account and is taxable under sec. 4973, I.R.C. 1954.

Prior to her death, decedent transferred common stock to three charitable remainder annuity trusts. Held: the annuities constitute nondeductible terminable interests under sec. 2056(b), I.R.C. 1954, and therefore the annuities do not qualify for the marital deduction.

Petitioners seek to deduct as charitable contributions certain transfers of land and money to the Kneadmore Life Community Church (KLCC). Held: petitioners' deductions denied because the KLCC was operated for a substantial nonexempt purpose and because its net earnings inured to the benefit of its members. Sec. 170(c)(2), I.R.C. 1954.

D's estate tax return was not filed within 9 months after her death ( sec. 6075(a), I.R.C. 1954), but was filed within the 18-day extension of time requested by P for filing of the return. Held: R's motion denied. Tax Court has jurisdiction to review R's denial of an extension of time for filing under sec. 6081(a), I.R.C. 1954. There remains a genuine issue of material fact as to whether R abused his discretion in denying P's request for the 18-day extension of time.

During the years 1977 through 1980, petitioner engaged in three sets of essentially offsetting options transactions which established spread positions. Held: petitioner's claimed losses did not arise from transactions entered into primarily for profit and therefore are not deductible under sec. 165(c)(2), I.R.C. 1954. Held, further, petitioner's transactions were not a variety of tax-motivated transactions which Congress intended to encourage.