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1983-682 Webster, Larry E. and Anne H.

1983-782 Wein, David, Inc. 1983-724 Weissman, David J. and Anne M.

1983-788 Wells, Samuel 1983-788 Wells, Samuel and Ann 1983-553 Westent, Inc. 1983-392 Wichacheewa, Pichai P. and Oranuch

1983-620 Wigutow, Marcus and

Estate of Rose; Eliza

beth and Marcus; and
Marcus Wigutow,
M.D., Inc.

1983-656 Willard, George M. and

Susan J.

1983-656 Willard, William H. and Judith T.

1983-584 Winter, George, Jr. 1983-782 Wisotsky, Charles and Eva

1983-467 Witten, Louis J. and

Lillian

1983-467 Witten, Max and

1983-764 Woesner Abstract & Title Co.

1983-633 Wohl, Alvin R. and Donna

1983-488 Wood, John G. and Ella P.

1983-763 Wood, Quentin E. and Louise L.

1983-707 Wright, Larrimore and Mary M.

1983-688 Yoder, Eli B. and Emma

1983-604 Young, Barbara E. 1983-604 Young, David L. 1983-633 Young, Robert D. and Barbara J.

1983-686 Young, Seth Edward, Jr., Estate

1983-688 Yutzy, Ammon E. and Mary E.

1983-660 Zamora, Donald R. 1983-513 Zechiel, Lois 1983-652 Zeropack Co. 1983-716 Zingaro, James C. 1983-597 Zohoury, Badi and Wil

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INDEX-DIGEST

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ACCOUNTING METHODS

See also DEPRECIATION and PARTNERSHIPS.

Change of Capitalization Method to LIFO Inventory Meth-
od-Real Property Not "Merchandise."-Commissioner did not
abuse his discretion in rejecting use of LIFO inventory method under
sec. 472 by petitioner real estate developer, since homes or lots which
petitioner sold were real estate and not "merchandise" within
meaning of reg. 1.471-1, method used by petitioner in 1973 and prior
years was method of capitalization under sec. 263(a) which clearly
reflected its income and was not inventory method within meaning of
sec. 471, petitioner was neither required nor permitted to use
inventories, and because Commissioner did not consent to petitioner's
changing to such method, petitioner's use of the method was
improper (sec. 446(e)). W. C. & A. N. Miller Development Co. v.
Commissioner

ACCUMULATED EARNINGS TAX

Burden of Proof-Statement by Taxpayer-Effect of Tax
Court Discovery Rules on Sec. 534(c) Requirements.-Where
petitioner corporation moved under Rule 142(e) for pretrial ruling
that its statement submitted under sec. 534(c), relating to grounds for
accumulation of its earnings and profits, was sufficient to shift
burden of proof to Commissioner, Court determined (1) as to seven
grounds asserted by petitioner in its sec. 534(c) statement to support
its contention that its earnings and profits were not permitted to
accumulate beyond the reasonable needs of business, burden of proof
shifted to Commissioner as to only two grounds for which its
statement set forth facts sufficient to show basis thereof, and (2) in
light of statutory purpose to encourage taxpayer to "show its hand"
while case is still under administrative consideration, opportunity for
discovery under Tax Court Rules does not affect scope of facts to be
included in petitioner's sec. 534(c) statement to support the grounds
alleged. Rutter v. Commissioner

619

937

1015

ADDITIONS TO TAX

See also INCOME and UNITED STATES TAX COURT.

Fraud-Submission of False Information as Evidence of Intent To Evade Tax-Tax Protester.-Where petitioner knowingly filed false W-4 forms for 1979, deliberately falsified his W-2 forms, and filed inadequate returns, Court determined petitioner was liable for sec. 6653(b) addition to tax for fraud, since evidence showed he intended to evade payment of tax he knew he owed. Raley v. Commissioner, 676 F.2d 980 (3d Cir.), distinguished. Hebrank v. Commissioner ...

Late Filing-Negligence-Purported Charitable Contributions to "Church" Used for Personal, Family, and Living Expenses. (1) Petitioners were liable for sec. 6651(a) additions to tax, since having offered no explanation for delinquent filing of their 1979 return, they failed to carry their burden of proving that the delinquency was due to reasonable cause and not to willful neglect, and (2) petitioners were liable for sec. 6653(a) additions to tax for negligence or intentional disregard of rules and regulations for 197679, absent any explanation for omission of interest and dividend income for 1978-79 and for their inconsistent action of claiming as charitable contributions to their "church," funds which were used for their nondeductible personal, family, and living expenses. Davis v. Commissioner

Negligence-Tax-Avoidance Scheme.-Where petitioner's taxavoidance scheme was flagrant attempt to assign wage income and to claim deductions in an amount 10 times as great as actual expenditures, Court determined sec. 6653(a) negligence addition was wholly justified, since petitioner's testimony was unworthy of belief, and no reasonable person could believe such a "pie-in-the-sky" scheme. Benningfield v. Commissioner ..

ALIMONY

Predivorce Support Agreement-W's Pending RemarriagePresumption of Merger Into Divorce Decree Under State Law Rebutted by Parties' Intent.-Where in 1973 before their divorce, H and W executed an agreement providing for monthly payments to W for her support and maintenance over 20-year period; at the time, W's pending remarriage was known to H; and agreement was incorporated by reference into divorce decree; Court determined, for taxable years 1975-77, (1) H's payments to W constituted gross income to W under sec. 71(a) and were deductible by H under sec. 215; (2) no portion of payments constituted nontaxable payments for support of minor children under sec. 71(b), since no specific designation was made; (3) under Illinois law, presumption of merger of agreement into divorce decree was rebutted by parties' intent to the contrary, and prior agreement retained its independent legal significance (Hoffman v. Commissioner, 54 T.C. 1607, distinguished); (4) despite automatic termination of maintenance and support on remarriage under State law, H's legal obligation to pay contractual

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640

806

408

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ALIMONY-continued

support under agreement was not relieved, and payments qualifying
under secs. 71(a) and 215(a) for tax purposes could legally continue as
such under agreement; and (5) qualification of payments under both
71(a)(1) and 71(a)(2) was not precluded by sec. 71(a), since dual
qualification results from dual remedies available under decree and
agreement where agreement is incorporated, but does not merge, into
decree. Mass v. Commissioner

AMORTIZATION

See DEPRECIATION.

CAPITAL GAINS AND LOSSES
See also INCOME.

Forgiveness-of-Indebtedness Income-Release From Prior
Loans in Exchange for Stock-Guarantee Agreement as True
Debt or as Substitute for Prior Debt.—Where petitioner A and B
formed company to construct and sell townhouses; new investors
entered venture by purchasing shares and lending money to A and B;
and later new investors had disagreement with A and B relative to
company and repayment of the loans, Court determined A had
forgiveness-of-indebtedness income upon execution of settlement
agreement, whereby A and B transferred their stock in venture to
new investors for release from loan obligations, since even though
guarantee agreement executed on same day was inseparable from
settlement agreement, on facts, guarantee agreement was too contin-
gent to be treated as a true debt (CRC Corp. v. Commissioner, 693 F.2d
281 (3d Cir.), and Brountas v. Commissioner, 692 F.2d 152 (1st Cir.),
followed) or as indebtedness which refinanced prior liability. Zappo
v. Commissioner

.....

CHARITABLE CONTRIBUTIONS
See INCOME.

COMPENSATION

"Group-Term" Insurance Premiums Paid by Family Corpora-
tion-Deductibility by Company-Taxability to Insured.-Pre-
miums paid by A's family corporation X on $1 million whole life
policy on A's life were not deductible by X, since term insurance
coverage was not intended as past or present compensation for
services of A, who had retired as president, but were in response to
A's estate-planning requirements, and X failed to show premiums
were ordinary and necessary business expenses; and exemption of
premiums from A's income was not available under sec. 79(b)(1), since
insurance was not "group-term" life insurance under sec. 79 because
plan adopted by X did not preclude "individual selection" of amounts
of insurance within meaning of regs. in effect in 1974-75. Whitcomb
v. Commissioner

112

77

505

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CONTRIBUTIONS

See also ADDITIONS TO TAX and EVIDENCE.

Charitable-Universal Life Church-Burden of Proof.-Peti-
tioners failed to carry their burden of proving that they made any
charitable contributions to Universal Life Church, Inc., in California,
considering that all checks except one were deposited into "church"
accounts over which petitioner wife had sole signatory power; nor
were petitioners entitled to deductions for charitable contributions to
their own Universal Life Church "chapter," since petitioners' re-
tained control and personal benefit precluded a finding of gift, there
was no evidence regarding the organization and operation of their
chapter or of the distribution of its assets upon dissolution, and the
net earnings of their chapter inured to their benefit. Davis v.
Commissioner

CORPORATIONS

See also GAIN OR LOSS.

Foreign Subsidiaries-Bona Fides Commissioner's Alloca-
tion of Income.-Where petitioner corporation, which had previous-
ly owned and managed hospitals in United States, organized in
Cayman Islands X corporation as first-tier subsidiary to serve as
umbrella company for expansion into foreign countries, and Y
corporation as second-tier subsidiary to obtain and perform manage-
ment contract with Kingdom of Saudi Arabia, and petitioner did not
include any income from contract on its 1973 tax return, Court
determined, on record, (1) Y was not a sham corporation but was
separate entity for Federal tax purposes, since Y was organized for
business purpose and actually carried on some business activities in
1973; (2) petitioner did not transfer any property to Y that would
have required advance ruling by Commissioner under sec. 367, since
petitioner's presenting Y with opportunity to enter contract did not
transfer any legally enforceable contractual or other right to Y that
constituted "property" under sec. 351 or 367; (3) petitioner did not
receive stock in Y in exchange for its services in negotiating contract;
and (4) 75% of Y's taxable income was allocable to petitioner under
sec. 482 to take into account petitioner's services to its controlled
second-tier subsidiary, Y, in lending personnel and intangibles to Y
without compensation. Hospital Corp. of America v. Commis-
sioner

.....

Merger Qualification as Sec. 368(a)(1)(F) Reorganization-
Net Operating Loss Carryback.-Merger of corporation X into
petitioner corporation Y did not qualify as sec. 368(a)(1)(F) reorgani-
zation, since under rule stated by 9th Circuit, business of X was not
continued by Y following their merger, so that Y's net operating loss
could not be carried back to offset X's income for taxable year
beginning May 1, 1973. Mariani Frozen Foods, Inc. v. Commis-
sioner

806

520

448

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