Evening star. [volume] (Washington, D.C.) 1854-1972, 1957-05-31
TAX MEMOS
BY FRANCIS p. DOUGLAS

marized from Tar Court rui-
tngS and Internal Repenue
Bulletins.
Odd Defense - The Internal
Revenue Service claimed $270,-
$50 in additional taxes on sums
withdrawn from four family held
corporations to pay gambling
debts. The revenue service con-
tended the amounts were either
dividends or distributions of
capital.
Total Withdrawals in the years
l946-52 were $2.S44,589. After
repayments and credits the net
was $741.472.
The taxpayer contested the
revenue service claim and ap-
lpealed to the Tax Court. The
court said the petitioner had
been hopeful. although not with
justification, that his luck would
change and he would be able to
restore all the unauthorized
Withdrawals to the corporations. +"
The petitioners defense, ac-
cording to the memorandum
opinion, was that the with
drawals were loans or embezzled
funds. and that in either event
they did not constitute taxable
Income"
The court decided they were
loans.-T. C. Memo. l957-l4.
Taxable Bribes-The petitioner
in a Tax Court case had been
a deputy internal revenue col
Hector. The internal Revenue
Commissioner assessed tax def
ciencies against him totaling
Sass ON unreported income in
1945 and 1916. plus $500 for
fraud and other penalties.
Brides received by q fellow tax
agent and turned over to the
petitioner amounted to $1,000.
The petitioner was indicted.
pleaded guilty and was i'm
Iprisoned.
Held - From the undisputed
facts In the testimony we must
conclude that he (the petitioner
deliberately omitted considerable
amounts Of income from brides
from his 1945 and 1916 returns
with intent to evade tax" He
should have known better be-
cause his official position should
have apprised him Of tax law
requirements" The claim {
against him were upheld.-T. C.
Memo. l957-18.
| Question Of Propriety-A tax
payer, a single man. claimed as
q dependent a married and un-
divorced woman with whom he
lived as man and wife. The ques-
ton. said the Tax Court, in
volved the propriety Of the In
ternal Revenue Commissioners
Idisallowance Of the dependency
exemption claimed.
The court, In constituting the
pertinent section of the code
found little assistance in its leg
islative history as to the intent
Of Congress. The case was one
of first impression.
Held-Congress never intend.
ed the law to be so construed "as
to permit a dependency exemp.
, ton for an individual whom the
taxpayer is maintaining In an
Illicit relationship in conscious
violation of the criminal Law
Of the Jurisdiction OF his
abode." To do so would be tc
encourage a condition "univer-
sally regarded as against good
public morals. "-27 T. c. No. 81
Deductible Club Dues--A trust
company official deducted from
his income tax returns $790 II
dues to four clubs in 1850, ant
$718 to three clubs in 1861. HI
explained the expenditures wert
incurred in connection with hi
employment.
In 1916 the company presi'
dent had suggested that he joir
clubs in addition to the men,
luncheon club to which he be.
longed. He Joined a club specif
ically mentioned by the pres
ident and the company paid hi
dues.
Later his salary was RAISED
and 1t was suggested he shoult
Ipay his club dues himself. H,
did so. He conceded he and hi
family made some use Of tn,
clubs for their personal enjoy
ment.
Held--The greater portion o
the amounts were ordinary an,
necessary expenses of carrying
ION his business" While he wa
not threatened with discharge
he failed to comply with tn
suggestions that he join club
and. later, that he pay the due
himself. "the purport Of sucl
suggestions was obvious" A de
lduction of $500 should be ri