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Summaries - F

Click on the case name for the complete text.

Forbes v. United States
75-1 U.S. Tax Cas. ¶9126, 35 Am. Fed. Tax R.2d 75-448 (1974).

Taxpayers, who were principally engaged in raising livestock, growing peanuts and pecans, and providing quail for hunting, sold timber from their ranch in 1961, 1964, 1965, and 1966, the latter two years being the taxable years involved in litigation. The taxpayers reported the proceeds from the sales as long-term capital gains, but the Commissioner concluded that they should be treated as ordinary income. The 1965 sale was conducted by a consulting firm which had advised the sale due to beaver damage to the timber, but title did not pass to the buyer until the logs cut by the taxpayers were picked up by the buyer at a distribution point. The 1966 sale was precipitated by the discovery of diseased timber on one tract. An oral agreement was made whereby the buyer, in his discretion, had the right to cut as much standing timber as he desired, paying only for what he cut. The taxpayers claimed the timber sold in both years as a capital asset under section 1221.
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Forrest v. Commissioner
45 TCM 1156, Tax Ct. Mem. Dec. (CCH) 40,006(M), (P-H) ¶ 83,177 (1983)

Expenses--trade or business: Aviator.--A flight engineer's education expenditures for a course leading to an airline transport pilot rating certificate required by his employer to act as pilot in command for a commercial airline, and where there was no direct and proximate relationship between the training course and his duties as a flight engineer, qualified him for a new trade or business and were nondeductible. In addition, because the flight engineer received nontaxable reimbursement from the V. A. for his flight training expenses, he was not entitled, in any event, to deduct such expenses to the extent of the reimbursement.

Expenses--trade or business: Telephones: Cohan rule: Ordinary and necessary.--Where the evidence did not support a finding that a flight engineer used his home telephone one-half the time to talk long-distance to his employer or tax advisor, he was entitled to deduct only an amount for the business use of the telephone. Further, the care of his uniform was shown to be an ordinary and necessary business expense, so the flight engineer was entitled to an estimated deduction for uniform cleaning. Finally, payments characterized as "union dues" made to a pilot's mutual aid plan were not required of the flight engineer to retain his job with his airline and were not deductible as ordinary and necessary business expenses.

Losses: Evidence: Disallowance.--A flight engineer and his wife did not suffer a casualty loss when their trees were destroyed by show and rain, because the damage was caused by a progressive deterioration due to several months of sustained bad weather, and not by a "sudden invasion."
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Foster Lumber Co. v. United States
97 S. Ct. 204, 50 L.Ed.2d 199 (1976)

The corporate taxpayer realized $7,236 of ordinary income and $166,634 of capital gain in fiscal 1966, $114,261 of ordinary, income and $114,656 of capital gain in fiscal 1967, and suffered a net operating loss of $42,203 in fiscal 1968, The taxpayer sought to carry back the 1968 net operating loss to its prior taxable years under Section 172. In recomputing its 1966 tax liability, the taxpayer applied the net operating loss to offset entirely the $7,236 of ordinary income, and computed its tax on the $166,634 of capital gain by applying the Section 1201 alternative tax. The Commissioner agreed that the 1966 recomputation was appropriate. In recomputing its 1967 tax liability, the taxpayer applied the unused portion of the net operating loss ($34,967) against the 1967 ordinary income. The Commissioner contended that no carryover was available to be carried forward to 1967. The Commissioner argued that Section 172(b)(2) allows the taxpayer to carry forward from 1966 only the excess of the net operating loss over the total amount of taxable income for 1966 ($173,870).
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Foster Lumber Co. v. United States
500 F2d 1230, 74-2 U.S.T.C. ¶9611 (1974)

The corporate taxpayer realized $7,236 of ordinary income and $166,634 of capital gains in fiscal 1966, $114,261 of ordinary income and $114,656 of capital gains in fiscal 1967, and suffered a net operating loss of $42,203 in fiscal 1968. The taxpayer sought to carry back the 1968 net operating loss to its prior taxable years under Section 172. In recomputing its 1966 tax liability, the taxpayer applied the net operating loss to offset entirely the $7,236 of ordinary income, and computed its tax on $166,634 of capital gains by applying the Section 1201 alternative tax. The Commissioner agreed that the 1966 recomputation was appropriate. In recomputing its 1967 tax liability, the taxpayer applied the unused portion of the net operating loss ($34,967) against the 1967 ordinary income. The Commissioner contended that no carryover was available to be carried forward to 1967. The Commissioner argued that Section 172(b)(2) allows the taxpayer to carry forward from 1966 only the excess of the net operating loss over the total amount of taxable income for 1966 ($173,870) Section 172(b)(2) provides that "[T]he portion of such loss which shall be carried to each of the other taxable years shall be the excess, if any, of the amount of such loss over the sum of the taxable income for each of the prior taxable years to which such loss may be carried.''
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