Volume 84 — Tax Court Reports

Petitioner maintained an office in his home that was rented to his employer for his own use. Held: The payments, to the extent they are reasonable, constitute rent, and, under sec. 280A(c)(3), I.R.C. 1954, the costs of producing that income may be deducted in accordance with sec. 280A(c)(5). Reasonable rental value and deductible amounts determined.

P obtained certain loans from its tax-exempt employee profit-sharing plan prior to Jan. 1, 1975, and the loans remained outstanding after that date. Held: P is liable for the excise taxes imposed by sec. 4975, I.R.C. 1954, with respect to such loans. Held, further, sec. 4975, as applied to P's loans, does not constitute an ex post facto law.

Ten shareholders of S, holding about 20 percent of S's common stock and none of its preferred, created a new corporation, P. The 10 shareholders' S common stock holdings ranged from about 1 percent to about 4 percent; their P stock holdings were each 10 percent. Pursuant to a plan, (a) S transferred substantially all of its assets to P, and (b) P transferred $ 21,000 to S, P assumed S's obligations under certain leases and with respect to work in progress, and P issued additional shares of its stock to the 10 shareholders. These additional shares were in proportion to the 10 shareholders' holdings in P and not to their holdings in S. Held: 1. The transaction is not a D reorganization, because it failed to comply with the requirements of secs. 368(a)(1)(D) and 354(b)(1), I.R.C. 1954, regarding distribution of stock. Liquidation-reincorporation cases are distinguished. P is not entitled to deduct S's net operating losses and is not entitled to compute depreciation on S's bases in the transferred depreciable assets. 2. P is not entitled to increase its bases in the transferred assets on account of the fair market value of the additional shares issued to the 10 shareholders. P incurred certain legal expenses in connection with the organization of P and the transaction with S. P deducted the full amounts of these expenses on its income tax return for the year of its incorporation. 3. P is not entitled to amortize these amounts under sec. 248, I.R.C. 1954, because P failed to make any election in the form required by the regulations under this section; P's deduction on its income tax return is inconsistent with any possible election under this section. 4. Those amounts to which sec. 248, I.R.C. 1954, does not apply are to be added to the bases of certain 10-year assets, and depreciation deductions and investment credit are to be recomputed. P entered into a purchase and sale agreement with C and with MP, an executive of C. Part of the agreement was MP's covenant not to compete for a stated term of 6 years. P paid the consideration for this covenant over a period of 31 months. 5. P's payments for the covenant not to compete are amortizable and deductible over the covenant's life (6 years) and not over the period the payments were made (31 months).

Petitioners sold their contract rights in a janitorial and building maintenance franchise network and reported the proceeds of the sale under the installment method of accounting. Held: petitioners sold capital assets which are entitled to capital gain treatment. Held, further, the proceeds properly were reported under the installment method.

Held, a surviving widow's allowance under Texas probate law is a terminable interest and does not qualify for deduction from a Texas decedent's gross estate under sec. 2056, I.R.C. 1954. Held: a surviving widow's allowance under Texas probate law is a terminable interest and does not qualify for deduction from a Texas decedent's gross estate under sec. 2056, I.R.C. 1954.

Petitioners unsuccessfully sought a favorable ruling under sec. 367, I.R.C. 1954, regarding an exchange of all the outstanding shares of YPI, a domestic corporation, for a majority interest in YPL, a… Held: in light of all the facts and circumstances, respondent's ruling that petitioners' transfer had as one of its principal purposes the avoidance of Federal income taxes was unreasonable.

In 1954 through 1959, P and his brother were members of a partnership engaged in the business of distributing and selling a drug called Krebiozen. Thereafter, P, alone, carried on the business. Held; 1. The amounts of the items to be included in the cost of goods sold for the partnership determined. 2. The exchange rate to be used in converting those amounts into dollars determined. 3. P is not liable for an addition to tax for failure to file timely declarations of estimated tax for the taxable year 1954 under sec. 294(d)(1)(A), I.R.C. 1939. 4. Additions to tax for underpayment of estimated tax for the taxable years 1955 through 1958 under sec. 6654, I.R.C. 1954, sustained. 5. P is not liable for additions to tax for fraud for the taxable years 1954 through 1959 under sec. 6653(b), I.R.C. 1954. 6. Sanctions imposed under Rule 104, Tax Court Rules of Practice and Procedure.

Due to the high cost and unavailability of medical malpractice insurance, a physician-owned insurance company known as the Medical Inter-Insurance Exchange of New Jersey (Exchange) was formed… Held: the cost of the SLC does not qualify as an ordinary business expense under sec. 162(a), I.R.C. 1954. Held, further, that the payment for the SLC by the P.C. does not constitute a dividend or additional income to the shareholder/employee or nonshareholder/employee, respectively.

Held, under Montana v. United States, 440 U.S. 147 (1979), P is a party in the prior litigation with the United States. Held: under Montana v. United States, 440 U.S. 147 (1979), P is a party in the prior litigation with the United States.

H and W owned real property as joint tenants with right of survivorship. Held: Under Illinois law, title to the real property held by H and W as joint tenants passed to H as survivor when W died, without restriction under the will. There was no gift to the children by H when W died. H made gifts to his children, their spouses, and one grandchild in the taxable years 1973 through 1977. H died in 1977.

Petitioners received as part of a liquidating distribution from Dunmovin Corp. 24,950 shares of General Motors common stock, which Dunmovin had received after 1953 as a result of the court-ordered… Held: the General Motors stock was, for purposes of sec. 333(e)(2), I.R.C. 1954, acquired by Dunmovin after Dec. 31, 1953.

Henry C. Bickmeyer was a shareholder in two corporations. Held: the gains from the liquidation of the corporations received by decedent's estate in fiscal years 1974 and 1976 were income in respect of a decedent under sec. 691(a)(1), I.R.C. 1954, and the estate is not entitled to a step up in basis for the stock rights in the two corporations under sec. 1014(a) and (c), I.R.C. 1954.

Capital gains from sale of farmland development rights to the Maryland Agricultural Land Preservation Foundation are not exempted from the alternative minimum tax imposed by sec. 55, I.R.C. 1954, notwithstanding the Farmland Protection Policy set forth in 7 U.S.C. sec. 4201.

Petitioners filed a motion for summary judgment on the grounds that a bankruptcy court, with jurisdiction over the assets and liabilities of the debtor, determined in the bankruptcy proceeding the Federal income tax liabilities of the debtor's limited partners. Held, although in limited circumstances a bankruptcy court may have jurisdiction to determine certain Federal tax liabilities of individuals and entities other than the debtor in bankruptcy, the facts and circumstances of the bankruptcy proceeding in question herein would not have justified an adjudication in that proceeding of the Federal income tax liabilities of the limited partners, and the Bankruptcy Court did not do so.

Petitioners purchased computer equipment packages for lease. Held: Petitioners cannot deduct the payments to M pursuant to sec. 162, I.R.C. 1954. Petitioners must capitalize these expenditures and amortize their cost over the entire lives of the leases. Commissioner v. Lincoln Savings & Loan Association, 403 U.S. 345 (1971), followed.

The notice of deficiency was issued more than 3, but less than 6, years after petitioners' 1976 return was filed. Held: Petitioners' motion for partial summary judgment denied. 1. The fact that agents of respondent discovered the items of omitted income during the audit and prior to the expiration of the usual 3-year statute does not preclude respondent's resorting to the 6-year statute. 2.

Ps claimed losses in connection with the ownership of specially equipped refrigerated highway freight trailers. Held: Ps may not deduct the claimed losses since they did not engage in the activities for profit within the meaning of sec. 183, I.R.C. 1954.

Petitioner acquired certain publication rights with respect to a gothic novel and, as consideration, paid $ 31,000 in cash, assigned $… Held: that petitioner did not engage in the publication activities with respect to the book with an actual objective of making a profit and, therefore, he is not entitled to deductions for business expenses under sec. 162(a) or sec. 212(1), I.R.C. 1954, for depreciation under sec. 167(a), I.R.C. 1954, or to an investment credit under sec.…

On Dec. 8, 1983, respondent sent P a notice of deficiency for 1978, 1979, 1980, and 1981. P had previously received a notice of deficiency for 1978. P filed petitions from both notices. Held: the notice of deficiency of Dec. 8, 1983, was an invalid second notice for 1978, and the Court has no jurisdiction over 1978 from that notice. Held, further: That the invalidity of the notice for 1978 does not affect the Court's jurisdiction over the 1979, 1980, and 1981 taxable years.

Petitioner is the producer of the game show, To Tell The Truth (TTTT). Held: Petitioner's TTTT tapes constituted qualified films within the meaning of sec. 48(k)(1)(B), since they were created primarily for use as public entertainment and since the market for those tapes was not primarily topical or otherwise essentially transitory in nature.

Held, in these circumstances, consolidation of declaratory judgment case with deficiency case not permitted. Held: in these circumstances, consolidation of declaratory judgment case with deficiency case not permitted.

Ps participated in a charitable contributions tax shelter program involving scholarly reprint books. Held: The transaction was not a sham. Ps purchased reprint books and contributed those books to qualified donees and are entitled to charitable contributions deductions for the fair market value of the donated books. Sec. 170, I.R.C. 1954; sec. 1.170A-1(c)(1), Income Tax Regs.

D died testate in California. By her will, D gave her condominium and its contents to her husband, but she also made an alternate gift of such property in the event that her husband did not… Held: the disposition to D's husband created a terminable interest under sec. 2056(b), I.R.C. 1954, for which no marital deduction is available, because such disposition would have terminated or failed if he had not survived the entry of the final decree of distribution of her estate.

L, a limited partnership, was formed in April 1976 to develop an apartment project. P became a limited partner in July 1976. Held: Having proven that sec. 706(c)(2)(B) is applicable because P became a partner of L after its formation, the Commissioner's burden of proof extends only to applying a reasonable method of accounting for P's varying interest in the partnership.

Rules 30 and 41(a), Tax Court Rules of Practice and Procedure. -- Respondent filed a motion to dismiss for failure to state a claim;… Held: Leave to file amended petition is not necessary where no responsive pleading has been filed; motion to dismiss is not a responsive pleading. Rules 41(a) and 30, Tax Court Rules of Practice and Procedure. Amended petition relates back to time of filing original petition and will be considered in light of the motion to dismiss.

The Court of Appeals held that in order to deduct general expenses from gross investment income under sec. 804(c)(1), I.R.C. 1954, they must be directly related to the production of investment income. Held: petitioner may not deduct any portion of the Ohio Franchise Tax because such tax was not directly related to the production of investment income.

Old SP was the common parent of an affiliated group which filed consolidated Federal income tax returns for the years at issue, calendar years 1962 through 1965. Held: That SPTC is liable as a transferee at law for the liabilities of old SP because SPTC contractually assumed the obligations of old SP under the merger agreement, regardless of the fact that SPTC is primarily liable under State law.

Old SP was the common parent of an affiliated group that filed consolidated income tax returns for the years at issue, calendar years 1962 through 1965. Held: That under the reverse acquisition rule of section 1.1502-75(d)(3), Income Tax Regs., new SP became the common parent for the group and was the proper entity to receive the statutory notice of deficiency for the group. The notice was therefore valid, and petitioner's motion to dismiss is denied.

Old SP was the common parent of an affiliated group which filed consolidated returns for the years at issue, calendar years 1966… Held: That SPTC is liable as a transferee at law for the liabilities of old SP because SPTC contractually assumed the obligations of old SP under the merger agreement, regardless of the fact that SPTC is primarily liable under State law. Respondent's notice of transferee liability was proper and therefore SPTC's motion to dismiss is denied.

Old SP was the common parent of an affiliated group that filed consolidated income tax returns for the years at issue, calendar years 1966 through 1968. Held: That under the reverse acquisition rule of sec. 1.1502-75(d)(3), Income Tax Regs., new SP became the common parent for the group and was the proper entity to receive the statutory notice of deficiency for the group. The notice was therefore valid, and petitioner's motion to dismiss is denied.

Petitioner, a wage earner, failed to file Federal income tax returns for the taxable years 1975, 1976, 1977, and 1978. Held: the additions to tax for fraud and failure to pay estimated tax are imposed. Held, further, petitioner is collaterally estopped by his criminal conviction under sec. 7203, I.R.C. 1954, from denying that he willfully failed to file a Federal income tax return for the taxable year 1977.

Held, lessor partnership is true owner of computer equipment for tax purposes; petitioners may not amortize equity placement fee over life of partnership. Held: lessor partnership is true owner of computer equipment for tax purposes; petitioners may not amortize equity placement fee over life of partnership.

P and wholly owned subsidiary K executed an assignment agreement transferring certain of P's interests in five projects in the U.K. sector of the North Sea from P to K on Dec. 30,… Held: Under English law, the assignment is not effective until the requisite consents and approvals have been obtained. Requisite includes both the consent of the Department of Energy and the approval of the Inland Revenue, neither of which was obtained before the end of the taxable year 1975.

For the taxable years 1971 through July 24, 1975, petitioner was a member of an affiliated group of corporations filing consolidated returns. Held: under sec. 1.1502-77(a), Income Tax Regs., Fidelity had authority to agree that the disputed investment loss is not allowable for 1973; petitioner's motion for partial summary judgment will be denied.

P acquired two banks at prices exceeding the aggregate book values of the assets reported in the financial statements of the acquired banks. Held: petitioner is not precluded from allocating the aggregate purchase prices among the acquired assets even though such allocations were not negotiated or calculated at the time of the acquisitions.

Petitioner, a life insurance company under subch. L, I.R.C. 1954, acquired life insurance reserves from Progressive, also a life insurance company under subch. Held: sec. 381, I.R.C. 1954, does not require petitioner to add the acquired reserves to its sec. 810, I.R.C. 1954, opening balance in the revalued amount; rather, petitioner must include the unrevalued dollar balance of the acquired reserves in its opening balance.

Held: Tax Court has no jurisdiction over R's determination disallowing P's election under sec. 6166, I.R.C. 1954, as amended, to pay estate tax in installments. Held: Tax Court has no jurisdiction over R's determination disallowing P's election under sec. 6166, I.R.C. 1954, as amended, to pay estate tax in installments. Such determination is divorced from determination of P's entitlement to deduction for administration expense of interest.

Petitioners deducted their distributive shares of the losses claimed during the years in question by the Knox County Partners, Ltd., a limited partnership organized and operated for the avowed… Held: Petitioners have not carried their burden of proving that Knox County Partners, Ltd., was organized and operated with the primary and predominant objective of realizing an economic profit.

Petitioner, a local farmers' cooperative, included patronage dividends received from regional cooperatives of which it was a member in its gross income in the year of receipt. Held: petitioner's allocation method was equitable considering the stability of its membership, the practicalities of the allocation, and the apparent approval of the method by its members. Lamesa Cooperative Gin v. Commissioner, 78 T.C. 894 (1982), followed.

P's are the seven heirs of the Estate of John A. Fischer. At his death on Jan. 29, 1978, decedent devised to such heirs, as tenants in common, a 209-acre crop-producing family farm. Held: the cash lease of the farm constituted a cessation of qualified use of the farm by a qualified heir, calling for the imposition of an additional or recapture estate tax pursuant to sec. 2032A(c)(1)(B).

Held: Petitioner's conviction under sec. 7206(1), I.R.C. 1954, does not collaterally estop petitioners from denying that any part of their underpayment for 1978 was due to fraud, within the… Held: Petitioner's conviction under sec. 7206(1), I.R.C. 1954, does not collaterally estop petitioners from denying that any part of their underpayment for 1978 was due to fraud, within the meaning of sec. 6653(b), I.R.C. 1954. Respondent's motion for partial summary judgment denied.

P filed petition in Bankruptcy Court under Bankruptcy Code ch. 7, 11 U.S.C. Initial discharge of P-debtor revoked. Held: revocation of bankruptcy discharge precludes P from filing petition in Tax Court under 11 U.S.C. sec. 362(a)(8). Held, further, petition dismissed for lack of jurisdiction. Held, further, amount of time in which P may file petition in Tax Court computed.

In 1972, decedent, a California resident, created a revocable trust in which he retained a life estate. Decedent transferred his residence to the trust. Held: the full value of the residence ($ 89,000) is includable in the estate under secs. 2036(a) and 2038(a), I.R.C. 1954, without reduction for the value of J's life estate.

Petitioner was the grantor of four trusts. Held: sec. 1.1001-2(c), example (5), Income Tax Regs., is a valid interpretation of secs. 671, 674, and 1001, I.R.C. 1954, because the grantor is treated as the owner of the trust property, and the perfection of the trusts resulted in a taxable disposition of the trust property by petitioner to the trusts.

P, a college professor, also owned and managed five rental properties and operated a chemical analysis business. Held: The separate structure used as an office was appurtenant to P's house and therefore constituted part of the dwelling unit for purposes of sec. 280A, I.R.C. 1954. 2.

Petitioners having failed to file a brief, after being directed by the Court to include therein detailed findings of fact based upon specific, detailed, easily found and legible evidence, respondent… Held: under the facts of this case and in the exercise of the Court's discretion, respondent's motion to dismiss those issues pursuant to Rule 123(b) will be granted. Held, further, amounts of additional income received by petitioners during the years in issue determined.

During trial, petitioners attempted to establish their entitlement to losses from a subch. S corporation and depreciation allowable to the corporation. Held: issues are determined against petitioners because they failed to satisfy their burden of proof. Stringer v. Commissioner, 84 T.C. 693 (1985), distinguished.

Petitioners purchased gemstones and minerals in the years 1977, 1978, and 1979, and approximately 1 year after the dates of purchase donated them to the Smithsonian Institution. Held: the most reliable evidence of the fair market value of the items was the cost of the items to the petitioners.

P purchased equipment for use in its remodeled, new, and relocated supermarkets. The equipment installed in the remodeled stores was in use in the fiscal years of purchase. Held: only the equipment installed in the remodeled stores was placed in service in the fiscal years of purchase and qualified for depreciation and investment tax credits pursuant to secs. 167 and 38, I.R.C. 1954. P installed HVAC units in several of its supermarkets in 1977 and 1979.

P, a tax-exempt social club under sec. 501(c)(7), I.R.C. 1954, purchased land in 1972 to expand its recreational facilities. P sold the land and realized gain in 1974. Held: P's realized 1974 gain is recognized. The nonrecognition provisions of sec. 512(a)(3)(D), I.R.C. 1954, do not apply.

Petitioner, a nurse-practitioner, was a member of a religious order of the Roman Catholic Church. Held: Petitioner's wages were earned in her individual capacity, and not as an agent of the Order. Her wages are therefore subject to taxation.

At the time of his death, the decedent was a tenant in common with no right of survivorship in farm property with others who were not his heirs or devisees. Held: The surviving tenants in common had no interest in the designated property upon the death of decedent, and sec. 20.2032A-8(c)(2), Estate Tax Regs., is invalid by including as persons having an interest in the designated property all co-tenants insofar as that term includes surviving tenants in common.

Petitioner Albert Matut was in possession of $ 175,000, the ownership of which he denied and apparently claimed belonged to Mario Lignarolo. Held: this Court lacks jurisdiction over petitioner in his individual capacity because respondent did not send a notice of deficiency to him in that capacity. Held, further, Mario Lignarolo's motion to intervene as a party petitioner is denied.

During 1972, 1973, and 1974, petitioner performed uncompensated legal services for organizations eligible to receive deductible… Held: Petitioner is not entitled to deduct the value of his contributed services to various charitable organizations under sec. 170, I.R.C. 1954; sec. 1.170A-1(g), Income Tax Regs., which disallows such deduction is valid. 2. The value of his uncompensated services in the divorce proceeding is not deductible under sec. 162, I.R.C. 1954. 3.

Held, petitioners' losses in trading in commodity futures straddles during 1979 allowed pursuant to the provisions of sec. 108 of the Tax Reform Act of 1984. Held: petitioners' losses in trading in commodity futures straddles during 1979 allowed pursuant to the provisions of sec. 108 of the Tax Reform Act of 1984.

Amounts received from the Social Security Administration as survivor benefits constitute support payments provided by the Federal Government and not by the taxpayer-recipient for purposes of the income averaging provisions of sec. 1303 (c)(1), I.R.C. 1954.

L, a Louisiana partnership in commendam (equivalent to a limited partnership) was formed in 1977 to make secured loans on, acquire, own,… Held: The special allocation to P lacked substantial economic effect. Sec. 704(b), I.R.C. 1954. 2. For purposes of redetermining P's distributive share of L's net loss, her interest in the partnership within the meaning of sec. 704(b) must reflect the variation of her ownership interest during the year. Sec. 706(c)(2)(B), I.R.C. 1954.

Petitioner and a partnership of which he was a partner executed an Assumption of Liability, by which petitioner purported to assume the obligation to pay principal and interest on a nonrecourse note… Held: Payments made by petitioner after the incorporation transaction, purporting to be interest on the note, are not deductible as interest under sec. 163(a), I.R.C. 1954, because the payments were not made on indebtedness; 2.

Freesen Equipment Co., a subch. S corporation of which petitioners are the sole shareholders, entered into several joint venture… Held: the heavy construction equipment was subject to a lease for sec. 46(e)(3), I.R.C. 1954, purposes. Held, further, the transactions in issue failed to satisfy the noncorporate lessor provisions of sec. 46(e)(3), I.R.C. 1954. Held, further, the heavy construction equipment was subject to a lease for sec. 57(a)(3), I.R.C. 1954, purposes.

Petitioner's wholly owned subsidiary incorporated a wholly owned captive insurance subsidiary (Lombardy). Held: petitioner failed to shift 92 percent of its risk of loss; therefore, 92 percent of its premiums paid to Fremont is not deductible as an ordinary and necessary business expense for insurance. Carnation Co. v. Commissioner, 71 T.C. 400 (1978), affd. 640 F.2d 1010 (9th Cir. 1981), followed.

Held: A royalty provision requiring petitioner to execute nonrecourse promissory notes payable solely out of coal production and secured… Held: A royalty provision requiring petitioner to execute nonrecourse promissory notes payable solely out of coal production and secured only by mining rights under a coal sublease, as well as to pay cash and to execute a recourse promissory note, is not a minimum royalty provision within the meaning of sec. 1.612-3(b)(3), Income Tax Regs.

Held, on remand from the Court of Appeals for the Second Circuit (723 F.2d 1062), that this petitioner's gambling activities do not constitute a trade or… Held: on remand from the Court of Appeals for the Second Circuit (723 F.2d 1062), that this petitioner's gambling activities do not constitute a trade or business. Held, further, that the failure of Congress to permit the deduction of his gambling losses for purposes of computing the minimum tax is not unconstitutional.

P was a partner in a limited partnership organized to acquire and distribute a motion picture film. Held: the Commissioner's motion is denied because the proposed amendment, while not requiring a further trial, would unfairly prejudice Ps.

CONTENTSPageHeadnote999Introduction and Statement of Issues1001Findings of Fact1002I.History and Background of Eli Lilly & Co.1002A. Petitioner1002B. Lilly P.R.1004II.History and Background of Darvon… Held: Lilly P.R.'s ownership of the manufacturing intangibles is recognized in determining arm's-length prices between Lilly P.R. and petitioner. Held, further, the prices Lilly P.R. charged petitioner caused a distortion of income justifying reallocations. 2.

In 1965 through 1967, H.L. Federman & Co. underwrote the issuance of securities for certain companies for which it received commissions ranging from $ 13,624 to $ 75,000. At the time of each of the underwritings, H.L. Federman & Co. also received nonqualified options or warrants to purchase stock or other securities of the companies whose securities it was underwriting. The warrants were not traded on an established securities market. They were subject to various restrictions on transferability and generally were not exercisable for a certain period of time. Sometime after H.L. Federman & Co. acquired the warrants, it assigned most of them to its shareholders. In 1968 H.L. Federman transferred his interest in some of the warrants to a foreign situs trust, but he retained significant control over the trust property. Held, H.L. Federman & Co. received the warrants as compensation for underwriting services rendered. Held, further, the validity of sec. 1.61-15(b) and sec. 1.421-6, Income Tax Regs., is upheld insofar as those regulations, for the years involved herein, provided rules for the valuation of warrants received by underwriters for services rendered. Held, further , the transfer to the shareholders of the warrants constituted a dividend, taxable to the shareholders at the time a fair market value for the warrants can be determined. Held, further, the transfer by H.L. Federman of warrants to a foreign situs trust constituted a transfer with a retained interest in the ownership and beneficial enjoyment of the warrants so that the income from the trust is taxable to H.L. Federman under the grantor trust rules of the Internal Revenue Code of 1954, as amended.

P invests in a coal tax shelter where he signs a mining lease, which is actually a sublease, affording P the option of paying the royalty specified either by cash or a nonrecourse note. Held: minimum royalty provision in sec. 1.612-3(b)(3), Income Tax Regs., is valid following Wendland v. Commissioner, 79 T.C. 355 (1982), affd.

Petitioner, as a participant in the Wise County Mining Program, claimed a deduction for "mining development costs," "operating management fees," and "professional fees." Held: Petitioner has failed to carry his burden of proving that the Wise County Mining Program was organized and operated with the primary and predominant objective of realizing an economic profit. Therefore, petitioner is not entitled to deduct under sec. 616(a), I.R.C. 1954, his allocable share of "mining development costs." Held, further, petitioner is not entitled to deduct his allocable share of "operating management fees." Held, further, petitioner is not entitled to deduct his allocable share of "professional fees."

Ps calculated their taxes solely according to sec. 1348, I.R.C. 1954, as amended. Held, because Ps' income falls within the terms of secs. 55 and 1348, I.R.C. 1954 as amended, their income is subject to both sets of taxes.

Held, gross receipts, within the meaning of sec. 1372(e)(5), I.R.C. 1954, realized by a small business corporation trading in commodity futures contracts, equals the total amount received, unreduced… Held: gross receipts, within the meaning of sec. 1372(e)(5), I.R.C. 1954, realized by a small business corporation trading in commodity futures contracts, equals the total amount received, unreduced by any fees and commissions, and is not limited to gains from such transactions.

A pre-filing notification letter was sent by a District Director for respondent to each taxpayer who had invested in a certain tax shelter. Held: The pre-filing notification letter is not a notice of deficiency within the meaning of secs. 6212(a) and 6213(a), I.R.C. 1954. Therefore, this Court lacks jurisdiction. Respondent's motion will be granted.

Held: 1. Sec. 1.44C-2(h), Income Tax Regs., is valid; 2. Held: Sec. 1.44C-2(h), Income Tax Regs., is valid; 2. The retroactive application of sec. 1.44C-2(h), Income Tax Regs., is not arbitrary as a general matter or as applied to petitioners; and 3. Statements in I.R.S. Publications 17 and 903, properly interpreted, are not contrary to the provisions of sec. 1.44C-2(h), Income Tax Regs.

1. In 1974, Fisher Mills, a subsidiary of petitioner, was found guilty on a nolo contendere plea of violating sec. 1 of the Sherman… Held: On the facts here present, only a portion of the amount paid to American Bakeries is attributable to plaintiff's attorneys' fees and litigation costs and the balance is damages; (2) sec. 162(g), I.R.C. 1954, applies to disallow two-thirds of the damages paid by Fisher Mills for the years of the violation of which it was convicted,…

Petitioner, a California resident, held a 9.5-percent interest in a Florida limited partnership. Held: inspection of the books of account of the limited partnership does not constitute a second inspection of petitioner's books of account, and thus does not violate sec. 7605(b), I.R.C. 1954.