Evening star. [volume] (Washington, D.C.) 1854-1972, 1956-11-07

tsed from rulings OF the United
States Tar Court.
Tax Exemption and Obesity
Three men who marketed a rem
edy for obesity sold their corpor-
alton for 81 million in notes to-
a foundation. This had been set
up by a taX-exempt organization
publishing a magazine dealing
with social reform which paid in
the total capital of 81 900 of the
foundation. The original owners
of the corporation were retained
as managers at $4,000 a year
each. Among other things the
Tax Court
Held-The business purposes
and operating facilities Of the
foundation were identical with
those of the corporation which
the three original owners had
been operating as stockhold-
ers and officers. No new
capital was added other than
the $1,000. which was less than
the cost of organization of the
foundation. No new customer
was obtained; no competitor was
eliminated; no new product or
operation was made available:
no new management was brought
in; no new plant or other phys
ical properties were acquired, and
there was no change which could
reasonably be expected to in
crease earnings.
The logical conclusion is that
the purposes behind the transfer
were two: to formulate a pur-I
ported sale under which the
three owners could masquerade
as creditors and withdraw earned
surplus and profits in the guise
OF capital gains, and to create
"a pretext for the tax exemption.
The court also found that fair
value was not more than Sill.
million and that the 81 million
was an obese figure.-27 T. c.
No. 4.
Foreign Residence-A social
worker employed by the former
United Nations Relief and
Rehabilitation Administration
abroad became ill when she was
chief of mission in Ethiopia. She
returned to Washington in De-
cember. l947. Her employment
with UNRRA was terminated in 4
January, 1913. Later she was
employed by the United Nations
International Childrens' Emer-
gency Fund. UNICEF sent her
to Bulgaria in October. 1913.
At issue was whether the
earned income from sources
the United States re- I
ceived during 1913 is to be ex-
cluded from her taxable income
because she was "a bona fide
resident of a foreign country or
countries during the entire tax
able year" She maintained she
did not re-establish her resi-
dence in the United States until /
1850.
Heid-The case is distinguish |
abe from others in which an
American is employed in a {
foreign country and. with as
surance of retaining that en-
ployment, temporarily visits t
United States. The income from
sources without the United
States of the petitioner in this
case was not excluded from tax
as she was not a bona fide resi- !
dent OF a foreign country during
the entire taxable year.-27 7. C.
No. 2.
Trust Creator Taxable--A tax !
payer created a trust in l943
pursuant to a divorce decree. the
income to be applied by the
trustee to the maintenance and
education Of the taxpayers
minor son. The trust assets
were leased TO a partnership
composed Of the taxpayer and
his uncle. The trust income was
on the books OF the
business to the account Of the
minor son.
The trustee died about a year
later and no successor was APP
pointed until 1947. In the mean
time the taxpayer was in control
Of the trust assets and made
such payments from the trust
income as he saw fit, debiting
the sums 70 the account. All
income was not expended.
HeId--The entire trust income
was taxable TO the taxpayer. I
It. c. Memo. i956-235.
ODD-LOT DEALINGS