Petitioner also argues that the loss incurred by Muskingum in July 1956 on the sale of its assets, as distinguished from Muskingum's operating losses from January 1, 1956, through July 1956, does not fall within the interdicted purpose of section 269. We disagree. In Temple Square Mfg. Co., 36 T.C. 88, 95, this Court said that "Once the principal purpose of the acquisition is found, namely, to evade or avoid tax, any deduction which would not otherwise be available, is rendered unallowable." A similar approach was adopted by the Court in the R. P. Collins case. In that case the taxpayer filed a consolidated income tax return in which it utilized the postaffiliation losses of a recently acquired corporation. These losses consisted of (1) operating losses and (2) capital losses stemming chiefly from the loss on the sale of the acquired corporation's plant and equipment. There was evidence that prior to the acquisition of the "loss" corporation the taxpayer had been apprised of the substantial tax loss which could result from a quick sale of the corporation's assets. Taxpayer therefore agreed that whatever might have been its overall purpose in acquiring the corporation (i.e., to take advantage of the expected losses from a sale of its plant and equipment) it assuredly was not a principal purpose to acquire operating losses during the postaffiliation period. The Court of Appeals rejected this attempt to fragmentize the losses:

We find this argument unpersuasive because, on the facts of this case, it unrealistically attempts to segregate into isolated segments a course of conduct which is essentially unitary both in conception and in impact. Assuming, as taxpayer would have us do, that the court could conclude that the "overall" purpose of the acquisition was to avoid taxes, viz., to obtain the capital losses resulting from the sale of the plant and equipment, then we believe that it must have been within the fair contemplation of the taxpayer that certain operating losses would necessarily be incurred before this ultimate purpose could be effectuated and, to that extent, the operating losses would be included as a necessary incident of the "overall purpose." In effect, once it is conceded that Priscilla was acquired with a view towards obtaining the tax advantages stemming from a corporate dismemberment, then we believe that all the losses which immediately precede this ultimate act are constituent elements of a course of conduct proscribed by Section 129. They are tarred by the same brush.

The argument here is a little different than the above case for here the principal purpose was to secure the contemplated post acquisition operating losses. But the principle is the same. We do not believe that the statute requires at the time of acquisition a precise awareness of every deduction, credit, or other allowance that such acquisition will bring to the taxpayer. It is enough if at the time of acquisition the principal purpose was to obtain a tax benefit.

Petitioner makes an alternative argument that the net advances by petitioner and Enterprises to Muskingum as of July 30, 1956, in the amount of $257,857.31 became worthless in 1956 and should be allowed as a business bad debt deduction by petitioner under section 166. This

issue does not appear in the pleadings and is raised for the first time on brief. We have held that such an issue will not be considered by the Court. Merle P. Brooks, 36 T.C. 1128; Warner G. Baird, 42 B.T.A. 970. Moreover, petitioner made no effort either at the trial or on brief to establish that a true debtor-creditor relationship existed between petitioner and Enterprises on the one hand and Muskingum on the other. See 0. H. Kruse Grain & Milling v. Commissioner, 279 F. 2d 123, where the court lists 11 separate determining factors generally used by the courts to decide whether amounts advanced to a corporation constitute indebtedness or equity capital. What evidence there is rather indicates that the advances to Muskingum, which were largely used by Muskingum to purchase capital assets for its mining operations, were not intended as debts.

We hold that petitioner has not established that the principal purpose for its acquisition of Muskingum in September 1955 was other than to obtain the benefit of its deductions, credits, or other allowances. Decision will be entered under Rule 50.

CLYDE L. MARTIN AND GRACE MARTIN, PETITIONERS, V. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket No. 92394. Filed June 26, 1962.

Held, respondent's motion to dismiss for want of prosecution is granted.

John A. Shaw, Esq., for the petitioners.

Claude R. Sanders, Esq., for the respondent.

OPINION.

BRUCE, Judge: The respondent determined a deficiency in the income tax of the petitioners for the calendar year 1957 in the amount of $1,800.24.

The statutory notice was issued February 23, 1961. The petition herein was filed May 19, 1961, and respondent's answer was filed July 10, 1961. The principal issue presented by the pleadings is whether petitioners were entitled to apportion a fee of $20,000, received in 1957, over the years 1951 through 1957, under the provisions of sections 1301 to 1307, inclusive, of the Internal Revenue Code of 1954. Other issues arose out of the disallowance by respondent of certain deductions which had been claimed by petitioners for salaries and wages, telephone expenses, dues, licenses, and advertising. In determining the deficiency respondent allowed an additional deduction for legal expenses incurred in connection with the $20,000 fee, as well as the

standard deduction of $1,000 and personal exemptions in the amount of $2,400.

Petitioners were husband and wife. At the time the petition was filed they resided in Clayton, Missouri. The return for 1957 was filed with the district director of internal revenue at St. Louis, Missouri.

At the time this case was called for trial at St. Louis, Missouri, on June 4, 1962, John A. Shaw, who had been petitioners' counsel of record, informed the Court that both of the petitioners had died subsequent to the filing of the petition-Clyde L. Martin on June 1, 1961, and Grace Martin on March 4, 1962; that they were survived by two adult sons; but left no estate and administration had not been granted or requested for the estate of either of the decedents and none was contemplated; that under the circumstances no substitution of parties had been made and he had no evidence to offer. Counsel for respondent moved to dismiss the case for want of prosecution and this motion. was taken under advisement by the Court.

It is well settled that the jurisdiction of this Court which attached upon the filing of the petition is not divested despite the failure of substitution under Rule 23 of the rules of practice of this Court. Roy R. Yeoman, 25 T.C. 589. Respondent's motion to dismiss is granted.

Decision will be entered for the respondent.

LYON TYLER MATTHEW, PETITIONER, V. COMMISSIONER OF INTERNAL

REVENUE, RESPONDENT.

LEWIS N. HILL, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

HOLLAN L. FLOYD, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket Nos. 86447, 88480, 88939. Filed June 27, 1962.

During the taxable years involved the petitioners were employees of Pan American World Airways engaged in maintaining missile stations on various foreign islands in connection with the United States missile-testing program. Their employment was of indefinite duration, each of them intended to stay on such islands for an indefinite period, and in fact each had stayed on the various islands for a number of years. They were quartered in company-furnished barracks at the sites and used the company-furnished dining halls. They were not restricted to the bases, except during working hours, but were free to, and did, participate in the community life of the islands. Held, that the petitioners were bona fide residents of a foreign country or countries throughout the taxable years in question and that their salaries are exempt from income tax. Sec. 911 (a) (1), I.R.C. 1954.

Lucius A. Buck, Esq., Horace R. Drew, Jr., Esq., and Theodore W. Glocker, Jr., Esq., for the petitioners.

Kenneth G. Anderson, Esq., for the respondent.

ATKINS, Judge: The respondent determined deficiencies in income tax of the petitioners for the taxable years and in the amounts as follows:

The question common to each of these consolidated cases is whether the petitioner was a bona fide resident of a foreign country or countries during the years in question with the result that his compensation is excludible from gross income pursuant to section 911(a) (1) of the Internal Revenue Code of 1954. The petitioner Hill also alleges error of the respondent in disallowing certain claimed exemptions.

FINDINGS OF FACT.

Some of the facts have been stipulated and the stipulations are incorporated herein by this reference.

All three petitioners are citizens of the United States and filed their income tax returns for the years involved with the district director of internal revenue, Jacksonville, Florida. During the years in question they were employed at various sites in the Bahama Islands (Grand Bahama, Eleuthera, San Salvador, and Mayaguana) and on Antigua and Ascension Islands, by the Down Range Missile Division of Pan American World Airways, Inc., under circumstances hereinafter described.

Prior to 1950 the United States Government established at Cape Canaveral, Florida, a site for the development of a long range missile program. The responsibility for the development of this program devolved upon the United States Air Force.

In 1950 an agreement was entered into between the United States and the United Kingdom of Great Britain and Northern Ireland, with the concurrence of the government of the Bahama Islands, providing for a guided missile flight testing range to extend through the Bahama Islands and the waters adjacent thereto, and to be used by both governments. The agreement was effective for a period of 25 years and thereafter until 1 year from the day on which either government should give notice to the other of its intention to terminate. The

United Kingdom agreed, among other things, to provide such sites in the Bahama Islands as might be necessary for the purpose of the operation of the flight testing range, so long as the agreement remained in force.

Among other things, the above agreement provided that the immigration laws of the Bahama Islands should not operate to prevent admission into the islands of any United States national employed by or under a contract with the Government of the United States in connection with the flight testing range; that such nationals so employed in the islands, or their wives or minor children, should not be liable to pay income tax in the islands, or any poll tax, or tax on ownership or use of property within a site; that the United States should have the right to establish military post offices on the sites for use of the civilian personnel, including contractors and their employees; that no customs duties or other taxes on goods should be imposed by the Bahama Islands upon the personal belongings or household effects of contractors and their employees, nationals of the United States, employed in connection with the flight testing range, and that no export tax should be charged in the event of reshipment thereof from the Bahama Islands; and that with respect to security offenses, either on or off the site, committed by a United States national not subject to United States military or naval law, the United States should have exclusive jurisdiction under certain circumstances, and that under. certain circumstances the United States and the Bahama Islands should have concurrent jurisdiction over all other offenses committed inside the sites, but that otherwise the jurisdiction of the civil courts of the Bahama Islands should not be affected.1

1 The agreement provides in part:

Article V
Jurisdiction

(1) The Government of the United States of America shall have the right to exercise the following jurisdiction over offenses committed in the Bahama Islands:

(d) Where the accused is not a member of the United States Forces, a British national or a local alien, and is not a person subject to United States military or naval law, and a civil court of the United States is sitting in the Bahama Islands, exclusive jurisdiction over security offenses committed inside the Sites; concurrent jurisdiction over all other offenses committed inside the Sites and, if a state of war exists, over security offenses committed outside the Sites.

(2) Wherever, under paragraph (1) of this Article, the Government of the United States of America has the right to exercise exclusive jurisdiction over security offenses commited inside the Sites, such right shall extend to security offenses committed outside the Sites which are not punishable under the law of the Bahama Islands.

(5) In every case in which under this Article the Government of the United States of America has the right to exercise concurrent jurisdiction, the following provisions shall have effect:

(a) The case shall be tried by such court as may be arranged between the Government of the Bahama Islands and the United States authorities.

(c) Where the offense is within the jurisdiction of a civil court of the Bahama Islands and of a civil court of the United States, trial by one shall exclude trial by the other.

(Footnote continued on p. 420.)