Tax Law Commons^™

Torts - Master And Servant - Payment Of Social Security Tax As Evidence Of Relationship, Irving L. Halpern S.Ed.

Michigan Law Review

Plaintiff's decedent was killed when his tractor-truck collided with an automobile driven by defendant's salesman. In an action to recover damages for the death of decedent, the trial court submitted to the jury, as evidence bf a master-servant relationship, the payment of social security taxes by the defendant on behalf of the salesman. Judgment was rendered for the plaintiff. On appeal, held, the record of social security payments by defendant on behalf of its salesman was properly submitted to the jury as evidence of a master-servant relationship. Peetz v. Mazek Auto Supply Co., (Neb. 1955) 70 N.W. (2d) …

Taxation - Federal Income Tax - Purchase By Network Of Corporation Producing Entertainer's Radio Show As Compensation To Entertainer, Jerome K. Walsh, Jr.

Michigan Law Review

Prior to 1947, Jack Benny produced a complete radio show for his sponsor, American Tobacco Company. In January 1947 Amusement Enterprises was incorporated with Benny taking 60 percent of the stock and the remainder going to three of his business associates. Amusement contracted with American to produce a complete radio show, exclusive of Benny's services, to be broadcast over the NBC network on Sunday evenings. Benny signed a separate contract with American as the star of the show. Under the American-Benny contract American could make no change in the time of the broadcast or the network facilities without Benny's approval. …

Taxation - Federal Income Tax - Stockholder's Contractual Duty To Creditors To Finance Corporation As A Business For Purposes Of Bad Debt Deduction, Norman A. Zilber S.Ed.

Michigan Law Review

In 1946 petitioner organized a wholly-owned corporation for the sole purpose of producing a single motion picture at the estimated cost of $175,000. He obtained loan commitments from two lending institutions for $170,000 in exchange for his agreement to increase the paid-in capital to $25,000 and to guarantee personally the financing of the completion of the picture should the budgeted funds prove inadequate. In addition, petitioner made further commitments to secure the institutions' loans. Eventually, $53,273.65 was advanced by petitioner to fulfill his obligations under the agreements. In 1948 the debt which the corporation owed him was deemed worthless and …

Taxation - Federal Estate Tax - Deductibility Of Contingent Bequests To Charity, Jack G. Armstrong S.Ed.

Michigan Law Review

Testator bequeathed a remainder interest to charitable organizations which was contingent upon her sister, age eighty-two, predeceasing two other women, ages sixty-seven and sixty-eight. The Commissioner disallowed a deduction for this bequest on the ground that it was not certain that charity would receive any benefit. In the district court the parties stipulated that there was an eleven to one chance that charity would receive the bequest. On the basis of this stipulation the district court found for the taxpayer. On appeal, held, reversed. In order for a deduction to be allowed the possibility that charity will not take …

Taxation - Federal Income Tax - Renting Out A Single Home As A Trade Or Business For Purposes Of Capital Loss Carry-Over, Alice Austin S.Ed.

Michigan Law Review

Taxpayer, who was not in the real estate business and who was involved in only occasional real estate transactions, inherited a house which he rented out until he sold it at a loss. He treated the transaction as a capital loss, taking advantage of the capital loss carry-over provisions of the Internal Revenue Code. Deficiency assessments were levied against the taxpayer upon the theory that the loss sustained upon the sale of the house was an ordinary loss which could not be carried over to later years. Taxpayer paid the deficiency assessment and sued for a refund. The district court …

Taxation - Inheritance Tax - Transfers Subject To Take Effect At Or After Death, Harvey A. Howard S.Ed.

Michigan Law Review

Decedent was a participant in a company profit-sharing savings and retirement trust. Under the terms of the plan, the company made deposits with a trustee on an annual basis and relinquished the right to recapture or impair the fund for its own use or benefit. The contributions were to be held for ten years with accrued interest, and then were to be distributed to the employees in three annual instalments. Should an employee leave the company, he was entitled to his share in three instalments; in the event of retirement or illness he was to receive his entire share in …

Taxation - Federal Income Tax - Punitive Damages And Recovered "Insider's Profits" Taxable As Income, Alice Austin S.Ed.

Michigan Law Review

In previous litigation one of the defendant taxpayers received punitive damages for fraud practiced upon it and both received treble damages for injuries to business caused by conduct in violation of the federal antitrust laws. The court of appeals affirmed the Tax Court's rulings that these receipts were not taxable as gross income. On certiorari to the Supreme Court, held, reversed. Money received as punitive awards is includible in gross income under section 22 (a), I.R.C. (1939). Commissioner v. Glenshaw Glass Co. and William Goldman Theatres, Inc., 348 U.S. 426, 75 S.Ct. 473 (1955).

Constitutional Law - Federal Immunity From State Taxation - Validity Of State Sales Tax Upon Purchases And Sales By National Banks, Julius B. Poppinga

Michigan Law Review

The 1949 revision of the Michigan Sales Tax Act changed the federal exemption provision so as to permit taxation of sales to corporations acting as agents or instrumentalities of the federal government but not wholly owned by the United States. Accordingly, defendant department of revenue took the position that sales to plaintiff, a national banking institution organized under the National Banking Act, are taxable. In the course of its operations, plaintiff purchases office equipment and other tangible personal property from Michigan. retailers. It also sells food and services to employees through its cafeteria, and sells repossessed merchandise to other parties. …

Legislation - Application Of Merchantile License Tax To Lawyers, Edward H. Hoenicke

Michigan Law Review

The Philadelphia City Council passed an ordinance entitled "An Ordinance--To provide for revenue by imposing a mercantile license tax on persons engaging in certain businesses including manufacturing, professions, occupations, trades, vocations, and commercial activities in the City of Philadelphia. . . ." Under this ordinance the city required lawyers to register, pay a registration fee, and pay a tax on a percentage of their gross volume of business; thereupon, "mercantile licenses" were issued to them. The city charter required each ordinance to deal with one subject only and to express that subject in the title. The application of the ordinance …

Tax-Free Corporate Acquisitions - The Law And The Proposed Regulations, Robert L. Merritt

Michigan Law Review

The quest for interpretation is indeed an ancient one. Our life path is pervaded by a search for meanings.

It has been said of the law that it is sometimes better to have a bad rule than to have no rule. I suppose the rationale is that unsatisfactory certainties at least permit action, and are susceptible to a change for the better, the very badness of the rule serving to accelerate the equitable resolution. Being neither philosopher nor historian, I do not know whether that patience which awaits ultimate improvement is always a virtue.

Taxation - Federal Income Tax - Meals And Lodging Under The 1954 Code, John H. Mcdermott

Michigan Law Review

Before discussing the application of the 1954 Internal Revenue Code with regard to the taxability of meals and lodging furnished an employee by his employer, several fundamental tax concepts should be examined. The first of these involves the definition of gross income, which for many years has been cast in broad statutory language. For example, section 22(a) of the 1939 Internal Revenue Code provided that gross income includes " ... gains, profits, and income derived from salaries, wages, or compensation for personal service ... of whatever kind and in whatever form paid .... " Comprehensive as these terms appear, gross …

Lore: How To Win A Tax Case, John J. Raymond

Michigan Law Review

A Review of How to Win A Tax Case. By Martin M. Lore

Taxation - Federal Income Taxation - Problems Created By The Complex Trust Provisions Of The 1954 Code, Harvey A. Howard S.Ed.

Michigan Law Review

This comment will not be expository of all of the trust provisions but rather will attempt to deal with some of the more important interpretative difficulties likely to be encountered in the new law involving the taxation of the income of those trusts which may accumulate income, distribute corpus, or pay or set aside amounts for charitable purposes. It will be assumed that the reader is familiar with the basic statutory pattern of the trust sections of the new code.

Taxation - Federal Income Tax - Corporate Accumulations, Stock Dividends And The "Preferred Stock Bail-Out," And Taxability Of The Corporation Upon The Distribution Of "Inventory Assets" Under The Internal Revenue Code Of 1954, Alice Austin S.Ed.

Michigan Law Review

It is the purpose of this discussion to indicate, with respect to corporate accumulations and distributions, some of the major interpretative problems existing under the 1939 code which Congress has failed to resolve, as well as some of the major interpretative difficulties which arise for the first time under the 1954 code.

Taxation - Federal Income Tax - Extent To Which A Dividend In Kind Is Ordinary Income Under The Internal Revenue Code, Alice Austin S.Ed.

Michigan Law Review

Taxpayer, a corporate shareholder, received from the corporation a distribution of property which had appreciated in value over its adjusted cost. The earnings and profits of the corporation were sufficient to cover the adjusted cost of the property distributed, but were not sufficient to cover its full fair market value at the time of distribution. The Tax Court held that the fair market value of the distribution was taxable as a dividend only to the extent of the corporation's earnings and profits. On appeal, held, reversed. In determining whether a distribution in kind is a dividend under section 115(a), …

Obligations Of A State-Created Authority: Do They Constitute A Debt Of The State, Elizabeth Gaspar Brown

Michigan Law Review

Although provisions in a number of state constitutions limit the amount of debt a state may incur state legislatures frequently have attempted to circumvent such limitations. Recent decades have seen increased use of the "authority," set up by the legislature to accomplish a particular objective and given power to issue evidences of indebtedness to finance the objective, repayment to come from the revenues of the authority, with the declaration that the obligations of the authority are not those of the state. The enabling legislation has been challenged as unconstitutional, often on the ground that the obligations of the authority are …

Michigan Title Examinations And The 1954 Revenue Code's New General Lien Provisions, L. Hart Wright

Michigan Law Review

Title examiners, and more particularly their clients, have long suffered from a controversy-limited almost exclusively to Michigan- involving the methods by which the United States Treasury Department could perfect general federal tax liens. The December 1952 issue of the Michigan Law Review carried an article by the present writer pointing up the irreconcilable difference which has existed for a quarter of a century between the type of record notice which the Treasury was willing to provide prospective bona fide purchasers et al., and the quite different and more demanding type which the Michigan Legislature insisted upon if the local offices …

Constitutional Law - Due Process - Enforced Collection Of State Use Tax From Nonresident Vendor, John Leddy S.Ed.

Michigan Law Review

Appellant is a Delaware corporation engaging in the retail furniture business in Delaware. It has no place of business in Maryland, nor does it solicit orders in that state. It does not accept mail or phone orders from Maryland, nor does it advertise in any Maryland publications. The only contacts which the appellant has with Maryland customers, aside from direct dealings at appellant's retail store, are occasional direct mail advertisements, which it sends to all of its customers wherever located, and deliveries of goods purchased by Maryland customers. These deliveries are either made by commercial carrier or by appellant's own …

Jacobs: Law Writers And The Courts, Richard. A. Edwards

Michigan Law Review

A Review of Law Writers and the Courts. By Clyde E. Jacobs

Taxation - Federal Income Tax - Deferred Compensation As Affected By Constructive Receipt Doctrine, David D. Dowd, Jr. S.Ed.

Michigan Law Review

Prior to his retirement as a general agent of a life insurance company, the petitioner entered into a new contract with the company by which he was to receive upon retirement fixed monthly instalments for fifteen years in lieu of his original contract rights to receive renewal premium commissions as they were paid into the company. Petitioner, as a cash basis taxpayer, reported as income only the instalments received. The Commissioner assessed deficiencies in the reports, contending that petitioner's taxable income consisted of all renewal commissions received by the company during the taxable year, rather than the instalment payments. Rejecting …

Taxation-Federal Income Tax-Limited Deductibility Of Entertainment Expenses, David W. Belin S.Ed.

Michigan Law Review

In the sophisticated commercial world of today there are many expenses that might be termed of a "mixed complexion," having elements of both a business and non-business character. Nowhere is this better exemplified than in the area of entertainment expenses. Though one may assume that it should be the policy of the courts to allow full and fair deduction of business expenses in general, many difficulties arise regarding expenditures for entertainment purposes. In virtually all entertainment there is personal enjoyment of a social nature by the taxpayer as well as potential business value. Furthermore, what business value there is will …

Evidence-Presumtions-Alabama Statute Making Compliance With Federal Wagering Tax Law Prima Facie Evidence Of Violation Of State Gambling Law, John C. Hall S.Ed.

Michigan Law Review

In 1953 the Alabama legislature, taking advantage of the federal occupational tax on professional gamblers, enacted legislation making possession of the federal wagering tax stamp prima facie evidence of violation of the state gambling laws.

Corporations - Effect Of Domestication Statute On Foreign Corporations, J. David Voss S.Ed.

Michigan Law Review

Plaintiff brought suit to enjoin the collection of a state tax on intangibles consisting of stocks held by plaintiff in domesticated foreign corporations. The lower court enjoined the defendant, a county treasurer, from collecting the tax. On appeal, held, reversed, three judges dissenting. A foreign corporation which has complied with the Nebraska domestication statute is a foreign corporation for purposes of the Nebraska intangibles tax. Omaha Nat. Bank v. Jensen, (Neb. 1953) 58 N.W. (2d) 582.

Taxation - Federal Income Tax - Deductibility Of Expenses Incurred By Attorney In Attending Tax Institute, John E. Riecker S.Ed.

Michigan Law Review

Petitioner was a member of a firm of lawyers engaged in general practice in Binghamton, New York. The firm did enough work in federal taxation to warrant petitioner's specializing in this field, and his partners relied upon him to keep abreast of all significant developments in tax law. Petitioner attended the Fifth Annual Institute on Federal Taxation, conducted in New York City under the sponsorship of New York University and designed exclusively for practitioners and specialists in the tax field. He incurred expenses for travel, board, lodging, and tuition, all of which he deducted as ordinary and necessary business expenses …

Taxation - Federal Income Tax - Exchange Of Debentures For Preferred Stock As Tax-Free Reorganization, Raymond R. Trombadore S.Ed.

Michigan Law Review

Plaintiff held common and preferred stock of the Gulf States Paper Corporation. In 1942 plaintiff received new debentures in exchange for his preferred stock, pursuant to a plan for the recapitalization of the company whereby the entire 25,000 shares of previously outstanding preferred stock (including plaintiff's 208 shares) were exchanged for new debentures of like value. In 1950 the Commissioner assessed an income tax deficiency against plaintiff, determining that the redemption and cancellation of the preferred stock represented a distribution essentially equivalent to the distribution of a dividend and taxable under section 115(g)(1) of the Internal Revenue Code. Plaintiff sued …

Taxation - Federal Income Tax - Deductibility By An Employee Of Sum Paid In Settlement Of Claim Arising From His Operation Of Automobile Used In Company's Business, Richard B. Barnett S.Ed.

Michigan Law Review

Petitioner and one Elkins were employed by a corporation which they had organized to engage in the electrical contracting business. They furnished their own automobiles to transport men and material from job to job, and were reimbursed by the corporation for operating expenses. The corporation also paid for insurance and repairs of the automobiles. While Elkins was using petitioner's car to drive two employees to a job in progress, a collision occurred causing personal injuries to the two employees, who recovered a judgment against petitioner which he finally settled by payment of $4,000 in excess of the amount of the …

Constitutional Law - Congressional Powers - Validity Of The 1951 Gamblers' Occupation Tax Act, James W. Callison S.Ed.

Michigan Law Review

The Revenue Act of 1951 levied a tax on persons engaged in the business of accepting wagers, requiring such persons to register their names and places of business and residence with the Collector of Internal Revenue. The act also required the disclosure of the name and address of each person receiving wagers for the registrant, or, if the registrant himself received wagers for another, the name of that person. Violations of the act were punishable by fine and imprisonment. Defendant was indicted for willful failure to register and pay the tax. The district court granted defendant's motion to dismiss on …

Taxation - Federal Income Tax - Consequences To Seller And Buyer Of Covenant Not To Compete, Richard B. Barnett S.Ed.

Michigan Law Review

The owners of the entire capital stock of a newspaper business received an offer of $1,000,000 for their stock and a covenant not to compete with buyers for ten years. After the offer was accepted and the contract of sale drawn up, buyer asked for a clause in the contract evaluating the covenant not to compete at $50 a share and the stock at $150 a share in order to help him taxwise. The clause was accepted with little discussion. The sellers reported the entire proceeds of the sale on their income tax returns as long term capital gain, but …

Taxation - Federal Income Tax - Exemplary Damages As Taxable Income To Recipient, Eliot Gerber S.Ed.

Michigan Law Review

Petitioner, a motion picture exhibitor, sued certain motion picture distributors under the private remedy provisions of the federal antitrust acts. Judgment was had against the distributors for treble damages. Upon failure of petitioner to report as income the amount recovered above its actual loss of profits, the Commissioner determined deficiencies in petitioner's income tax. Held, the amount recovered above actual loss of profits was exemplary damages and not taxable income. William Goldman Theatres, Inc., 19 T.C. 637 (1953).

Notes, Michigan Law Review

Michigan Law Review

The information given in the notes is derived from inspection of the books, publishers' literature, and the ordinary library sources.