18 Fraud

fraud as to 1960 since collateral estoppel applies not only to the parties in a prior suit but to their privies as well. Held, the wife was not collaterally estopped to deny fraud as to 1960 in the absence of proof of fraud on her part. (Sec. 6653, '54 Code.)

Kathleen C. Vannaman, 54 T.C. 1011, Nonacq., 1975-7 I.R.B. 6.

Gain or loss

(See also specific subject headings)

Recognition

236.50

Partnership interests exchanged.

On the exchange of a general partnership interest in one California partnership for a general partnership interest in a California limited partnership, both partnerships engaged in renting apartments before and after the exchange, it was held that the exchanged partnership interests were proprietary interests qualifying for nonrecognition of gain and not subject to the exclusion in the parenthetical clause of section 1031(a) of the Code. (Sec. 1031, '54 Code.)

Rollin E. Meyer, Jr., 58 T.C. 311, Nonacq., 1975-7 I.R.B. 6.

Gross income

(See also specific subject headings)

Exclusions-inclusions

246.100

NLRB award.

A NLRB award for pay lost due to an illegal discharge caused by a labor organization is includible in the recipient's gross income even though such award does not constitute wages for employment tax purposes. Rev. Rul. 57-55 relating to the treatment of such award as wages for employment tax purposes is amplified. §1.61-1. (Sec. 61, '54 Code.)

Rev. Rul. 75-64, 1975-9 I.R.B. 5.

246.150

Political contributions; service promised contributor.

Payments to a political campaign specified by a candidate or officeholder in exchange for his promise, not of a traditional and legitimate political nature, to perform a service for the contributor do not qualify as excludable political expense contributions and must be included in the gross income of the political candidate or officeholder. §1.61-1. (Sec. 61, '54 Code.)

Rev. Rul. 75-103, 1975-13 I.R.B. 6.

246.175
Reimbursement for moving expenses;
U.S. citizens employed abroad by
domestic employer.

Examples discuss the treatment of reimbursed moving expenses of a U.S. citizen who performs services abroad for his domestic employer, and whose foreign earnings qualify for exclusion from gross income under section 911(a) of the Code, and explain the extent to which his moving expenses are deductible and the extent to which the reimbursement is includible in his gross income and subject to tax withholding. The examples cover moving to the foreign country and moving back to the U.S. (1) to work for the same employer, (2) to work for a different employer, and (3) to retire. §§1.82-1, 1.217-1, 1.911-2. (Secs. 82, 217, 911, 3401; '54 Code.)

Rev. Rul. 75-84, 1975-11 I.R.B. 8.

246.200

Work-training programs; removed air traffic controllers.

Payments made by the Department of Transportation to or on behalf of individuals, removed from their positions as air traffic controllers, for expenses incurred, in their training for other employment are not scholarships, fellowship grants, or governmental welfare type payments and are includible in the individual's gross income. §1.61-1. (Secs. 61, 3401; '54 Code.)

Rev. Rul. 75-32, 1975-5 I.R.B. 5.

When included

250.30

Cotton producer; loan from
Commodity Credit Corporation.

The amount of an unpaid loan from the Commodity Credit Corporation to a cotton producer, who has not elected under section 77 of the Code to treat the loan as income in the taxable year received, is includible in his gross income in the year in which his liability on the loan is discharged by transferring to the Corporation his ownership of the cotton pledged as security. Any additional amount realized by the producer from the Corporation's sale of the cotton for more than the amount owed is includible in his income in the taxable year received if he uses the cash method or the year his right to the amount becomes fixed if he uses the accrual method. I.T. 4016 superseded. §1.451-1. (Sec. 451, '54 Code.) Rev. Rul. 75-57, 1975-8 I.R.B. 18.

250.50

Crop insurance proceeds; election.

Crop disaster payments received by a cash-method farmer from the Department of Agriculture under the Agricultural Act of 1949, as amended, because of crop damage from natural disasters in the same taxable

Index Digests

year do not qualify for the treatment provided by section 451(d) of the Code and must be included in gross income for the year received. §1.451-6. (Sec. 451, '54 Code.)

Rev. Rul. 75-36, 1975-6 I.R.B. 7.

250.60

Crop shares; contributed to charity or used as feed.

The fair market value of crop shares received as rent by a farmer-landlord, which are contributed to a charitable organization or are used as feed in the farming operation, must be included in the farmer-landlord's gross income at the time of such contribution or use. The taxpayer is considered to have made a charitable contribution or becomes entitled to a business expense deduction at the same time and in the same amount as the income recognized. Taxpayer may be entitled to use the optional method of determining net earnings from self-employment under section 1402(a) and the retirement income credit under section 37. Rev. Ruls. 56-496 and 63-66 modified. §§1.61-4, 1.162-12, 1.170A-1, 301.7805-1. (Secs. 61, 162, 170, 7805; '54 Code.) Rev. Rul. 75-11, 1975-2 I.R.B. 5.

250.100

Lump-sum payment in relinquishment of seniority rights.

A lump-sum payment received by a railroad employee as consideration for relinquishing employment seniority rights is ordinary income in the taxable year of receipt and the payment constitutes compensation for purposes of the RRTA and is wages for purposes of income tax withholding. Rev. Rul. 58-301 distinguished and Rev. Rul. 59227 superseded. §§1.61-1, 1.1221-1, 1.1222-1, 301.7805-1. (Secs. 61, 1221, 1222, 3231, 3401, 7805; '54 Code.)

Rev. Rul. 75-44, 1975-7 I.R.B. 7.

250.150

Original issue discount; ratable inclusion of interest on church bonds.

The ratable inclusion rules of section 1232(a)(3) of the Code apply to interest earned on a nonprofit corporate church's 10-year bonds issued at par, bearing annual interest of 7 percent compounded semiannually, and payable only at the maturity of the bonds. §1.1232-3A. (Sec. 1232, '54 Code.) Rev. Rul. 75-112, 1975-13 I.R.B. 17.

Husband and Wife

254.50

State income tax deduction; joint returns.

State income taxes imposed upon a married taxpayer and paid during the taxable year are deductible on a joint Federal return

Index Digests

regardless of which spouse actually paid the
taxes. Rev. Rul. 74-486 clarified. §1.164-1.
(Sec. 164, '54 Code.)

Rev. Rul. 75-47, 1975-7 I.R.B. 9.

Improvements

260.50

Mining; underground pumping
facilities.

Expenditures incurred at a producing
mine to excavate for and install under-
ground pumping facilities are subject to the
allowance for depreciation as improvements
to the property and neither the expenditures
nor the depreciation on the facilities is de-
ductible under section 616 of the Code.
§§1.167(a)-1, 1.616-1. (Secs. 167, 616; '54
Code.)

Rev. Rul. 75-60, 1975-8 I.R.B. 19.

Income averaging

262.20

Eligible individual; scholarship.

A taxpayer who in one of his base period
years received a scholarship excludable
from gross income that exceeded the total
amount otherwise used for his support is not
entitled to use the income averaging method
in computing his tax. §1.1303-1. (Sec. 1303,
'54 Code.)

Rev. Rul. 75-40, 1975-6 I.R.B. 21.

Income in respect of
decedents

264.10

Bonus; usufruct; Louisiana.

A widow domiciled in Louisiana whose
husband died intestate and who, under the
terms of a judgment of possession, was
placed in possession of an undivided one-
half interest in her own right in all commu-
nity property with the remaining undivided
one-half interest placed in possession of a
daughter subject to a usufruct in favor of
her mother, must include in her gross in-
come the full amount of the balance of a
bonus due the decedent which was paid to
her after the decedent's death. I.T. 3931 su-
perseded. §1.691(a)-2. (Sec. 691, '54 Code.)
Rev. Rul. 75-79, 1975-10 I.R.B. 10.

Income source

266.30

Citizen; foreign resident; excludable
income computation.

Examples are given to show the computa-
tion of U.S. citizens' earned foreign income
excludable from gross income under section
911(a) of the Code, and deductions allocable

to the excluded income, in situations involv-
ing sole proprietors and partners who re-
ceive fees from services in excess of the
maximum exclusion, income from services
and capital in excess of the maximum exclu-
sion, and expenses in excess of income.
§1.911-2. (Sec. 911, '54 Code.)

Rev. Rul. 75-86, 1975-11 I.R.B. 13.

266.50

Citizen in foreign country; Atomic
Bomb Casualty Commission employee.

A U.S. citizen employed by the Atomic
Bomb Casualty Commission, an activity
funded largely under contracts with agen-
cies or instrumentalities of the U.S. Govern-
ment, is not an employee of the U.S. or any
of its agencies though considered so by an
agreement between the U.S. and Japanese
Governments and the salary paid to the em-
ployee while stationed in Japan is subject to
the exclusion from gross income. §1.911-2.
(Sec. 911, '54 Code.)

Rev. Rul. 75-30, 1975-4 I.R.B. 12.

266.80

Citizens; employed abroad by domestic
employer; moving expenses.

Examples discuss the treatment of reim-
bursed moving expenses of a U.S. citizen
who performs services abroad for his do-
mestic employer, and whose foreign earn-
ings qualify for exclusion from gross income
under section 911(a) of the Code, and ex-
plain the extent to which his moving ex-
penses are deductible and the extent to
which the reimbursement is includible in his
gross income and subject to tax withholding.
The examples cover moving to the foreign
country and moving back to the U.S. (1) to
work for the same employer, (2) to work for
a different employer, and (3) to retire.
§§1.82-1, 1.217-1, 1.911-2. (Secs. 82, 217,
911, 3401; '54 Code.)

Rev. Rul. 75-84, 1975-11 I.R.B. 8.

266.90
Citizens; foreign resident; moving
expenses.

The treatment is prescribed, under sec-
tion 217 of the Code, of moving expenses
incurred and paid in one year by a U.S. citi-
zen who moved to a foreign country to seek
employment, became a bona fide resident
there, and in the following year became en-
titled to the exclusion provisions of section
911. §§1.217-2, 1.911-2. (Secs. 217, 911; '54
Code.)

Rev. Rul. 75-85, 1975-11 I.R.B. 11.

Insurance

Premiums

276.20

Banks; borrower's life insurance policy
held as security.

Premiums paid by a bank during its tax-
able year on an unrelated defaulting borrow-

Insurance companies: Life 19

er's life insurance policy assigned to it as
security for his loan are deductible as a busi-
ness expense and any premium payment re-
coveries in subsequent taxable years are in-
cludible in gross income unless excludable
under section 111 of the Code. G.C.M. 14375
superseded. §§1.111-1, 1.162-1. (Secs. 111,
162; '54 Code.)

Rev. Rul. 75-46, 1975-7 I.R.B. 8.

276.70

Group-term life insurance purchased
for employees; level premium 5-year
term.

A group insurance policy providing life in-
surance protection in the form of level pre-
mium five-year term insurance with no cash
surrender value, paid-up value, or other
equivalent benefits, covering employees
only while they are included in the plan, and
paid for by the employer's contribution, can
be considered as group-term life insurance
to which such level premium is properly al-
locable. Rev. Rul. 71-360 clarified. §1.79-1.
(Sec. 79, '54 Code.)

Rev. Rul. 75-91, 1975-12 I.R.B. 8.

Proceeds

278.40

Farmers; crop destruction; election.

Crop disaster payments received by a
cash-method farmer from the Department
of Agriculture under the Agricultural Act of
1949, as amended, because of crop damage
from natural disasters in the same taxable
year do not qualify for the treatment pro-
vided by section 451(d) of the Code and
must be included in gross income for the
year received. §1.451-6. (Sec. 451, '54
Code.)

Rev. Rul. 75-36, 1975-6 I.R.B. 7.

278.80

Settlement under aircraft liability
policy.

An amount received by the estate of an
employee killed while a passenger in his em-
ployer's airplane, under the employer's air-
craft liability insurance policy that provided
specified payments for injury or death while
a passenger of the plane and upon execution
of a full release from all claims for damage
against the employer, is excludable from the
gross income of the estate. Rev. Rul. 58-578
superseded. §1.104-1. (Sec. 104, '54 Code.)
Rev. Rul. 75-45, 1975-7 I.R.B. 8.

Insurance companies

Life

280.20

Assets; partnership interest.

The partnership interest acquired by a life
insurance company through a cash contribu-

20 Insurance companies: Life

tion is an asset taken into account as an
"other asset" valued at its adjusted basis.
§1.805-5. (Sec. 805, '54 Code.)

Rev. Rul. 75-62, 1975-8 I.R.B. 22.

280.80

Reserves; revaluation; additional State
required reserves.

A life insurance company that computes
its reserves using a recognized preliminary
term basis for its decreasing term life insur-
ance contracts and elects to revalue its re-
serves under the approximate revaluation
method may not revalue that portion of the
reserve added to meet State minimum re-
serve requirements. §1.818-4. (Sec. 818, '54
Code.)

Rev. Rul. 75-51, 1975-7 I.R.B. 11.

Interest

Paid

290.30

Beneficiary's mortgage held by trust;
interest deemed paid and distributed.

Income of a testamentary trust required
to be distributed periodically, and consisting
solely of interest from mortgages on the
beneficiary's property must be included in
the gross income of both the trust and the
beneficiary, and the beneficiary may de-
duct the interest, even though by agreement
it is neither paid nor distributed. O.D. 606
superseded. §§1.61-1, 1.163-1, 1.662(c)-4.
(Secs. 61, 163, 662; '54 Code.)

Rev. Rul. 75-68, 1975-9 I.R.B. 7.

290.50

Debentures; issued to controlled trusts.

A corporate taxpayer deducted interest
on the 6-percent, 10-year, subordinated de-
bentures it issued to controlled Bermuda
Trusts in return for an option to purchase
the assets of a competitive corporation at a
price more than two times the purchase cost
to Bermuda Trusts and for a loan from Ber-
muda Trusts, part of which was financed by
a loan Bermuda Trusts obtained from other
trusts at a 4-percent interest rate. Held, the
taxpayer was entitled to deduct the amor-
tized interest with respect to the portion of
Bermuda Trusts' funds, exclusive of the
funds borrowed from other trusts, used to
purchase the option and interest at 4-percent
on those funds borrowed by Bermuda
Trusts as a conduit to the taxpayer. (Sec.
163, '54 Code.)

Mark Bixby, 58 T.C. 757, Acq., 1975-12
I.R.B. 6.

290.80

Life insurance policy loans.

Taxpayers, husband and wife, each pur-
chased in 1957 a $20,000 life insurance pol-
icy on their lives. The policies were
amended in December 1963 to provide for

loans on the cash values. Each policy called
for annual premiums in excess of $26,000
and provided for a guaranteed annual return
of $25,000 payable upon receipt of each an-
nual premium. After paying each premium
each taxpayer elected to leave the guaran-
teed annual return with the company to ac-
cumulate but borrowed it plus a portion of
the cash value. Held, the portions of the in-
terest payments attributable to the cash val-
ues are deductible as interest. (Secs. 163,
264; '54 Code.)

Rufus C. Salley, 55 T.C. 896, Acq. in re-
sult, 1975-7 I.R.B. 6.

290.100

Loan discount; cash or accrual
methods.

A loan discount that is the agreed charge
for the use of borrowed money is interest
deductible under the cash method of ac-
counting when it is actually paid and under
the accrual method of accounting when it
accrues. I.T. 3298 superseded. §§1.163-1,
1.461-1. (Secs. 163, 461; '54 Code.)
Rev. Rul. 75-12, 1975-2 I.R.B. 6.

Received

292.10

Beneficiary's mortgage held by trust;
interest deemed paid and distributed.

Income of a testamentary trust required
to be distributed periodically, and consisting
solely of interest from mortgages on the
beneficiary's property must be included in
the gross income of both the trust and the
beneficiary, and the beneficiary may de-
duct the interest, even though by agreement
it is neither paid nor distributed. O.D. 606
superseded. §§1.61-1, 1.163-1, 1.662(c)-4.
(Secs. 61, 163, 662; '54 Code.)

Rev. Rul. 75-68, 1975-9 I.R.B. 7.

292.50

Premature withdrawal; time savings
account.

A series of questions and answers explain
how to claim a deduction, in arriving at ad-
justed gross income, for interest forfeited as
a result of premature withdrawal of funds
from a time savings account and the refund
procedure for a taxpayer who forfeited such
interest in 1973 and was not permitted the
deduction. §1.62-1. (Sec. 62, '54 Code.)
Rev. Rul. 75-20, 1975-3 I.R.B. 5.

292.55

Premature withdrawal; time savings
account.

Examples illustrate alternate methods of
computing interest to be reported by a fi-
nancial institution on Form 1099 INT, and
the amount of forfeiture deductible by a de-
positor, for the year of a depositor's prema-
ture withdrawal of funds from a time sav-
ings account upon which interest had been
previously paid or credited. Rev. Rul. 73-511

Index Digests

clarified and modified. §§1.62-1, 1.165-1,
1.451-1, 1.1232-1, 301.6049-1. (Secs. 62, 165,
451, 1232, 6049; '54 Code.)

Rev. Rul. 75-21, 1975-3 I.R.B. 39.

292.80

Ratable inclusion; church bonds;
original issued discount.

The ratable inclusion rules of section
1232(a)(3) of the Code apply to interest
earned on a nonprofit corporate church's
10-year bonds issued at par, bearing annual
interest of 7 percent compounded semiannu-
ally, and payable only at the maturity of the
bonds. §1.1232-3A. (Sec. 1232, '54 Code.)
Rev. Rul. 75-112, 1975-13 I.R.B. 17.

Inventories

296.20

Dealer in foreign exchange.

A dealer in foreign exchange who regu-
larly inventories his foreign currency on
hand at the close of the taxable year using
either cost, or cost or market, whichever is
lower, may file his income tax return on that
basis; however, if he is not a dealer, but
purchases foreign currency merely as inci-
dent to his principal business, he must com-
pute gain or loss when he disposes of for-
eign currency and may not inventory it at
the close of his taxable year. O.D. 834 super-
seded. §§1.61-1, 1.471-1. (Secs. 61, 471; '54
Code.)

Rev. Rul. 75-104, 1975-13 I.R.B. 6.

296.40

Farm-price; poultry raised for egg
production.

An accrual method corporation that pur-
chases and raises chicks for commercial sale
of their eggs, selling the hens to meat pro-
cessing plants only after they no longer pro-
duce eggs in marketable quantities, may in-
ventory its flocks under the farm-price
method; however, a change to that method
is a change in accounting method. §§1.61-4,
1.162-12, 1.471-6, 1.1231-2. (Secs. 61, 162,
471, 1231; '54 Code.)

Rev. Rul. 75-37, 1975-6 I.R.B. 6; W.P.
Garth, 56 T.C. 610, Acq., 1975-6 I.R.B. 5.

296.60

LIFO; financial conformity
requirements.

A LIFO election, reelection, or extension
to all or a greater portion of the inventories
will not be terminated solely because a tax-
payer is subject to and complies with finan-
cial disclosure requirements of the Financial
Accounting Standards Board and the Secu-
rities and Exchange Commission which re-
quire that footnotes or commentary on an-
nual reports and financial statements dis-
close the effect of the change in method on
income provided such disclosure is made
solely for the taxable year of the change.

Index Digests

Rev. Proc. 73-37 amplified. §§1.472-1, 1.4722. (Sec. 601.204, S.P.R.; Sec. 472, '54 Code.) Rev. Proc. 75-10, 1975-7 I.R.B. 16.

296.80

LIFO; financial conformity requirements.

A taxpayer adopting the LIFO inventory method may, without violating section 472(c) and (e) of the Code, include on its balance sheet a footnote or parenthetical statement disclosing the excess of replacement cost or current cost over LIFO stated value. Rev. Rul. 73-66 amplified. §1.472-2. (Sec. 472, '54 Code.)

Rev. Rul. 75-50, 1975-7 I.R.B. 11.

296.100

LIFO; financial conformity requirements.

The issuance of an annual report using inventories valued under the FIFO method invalidates a subsequent election to use the LIFO method for the year reported. §1.4722. (Sec. 472, '54 Code.)

Rev. Rul. 75-49, 1975-7 I.R.B. 11.

296.120

Valuation; election; returns under examination.

The application of transition rules under section 1.471-11(e) of the regulations to situations in which an issue involving the method of inventory costing is raised in an examination of a return during the two-year transition period provided in section 1.47111(e)(1)(ii) is explained. §§1.446-1, 1.471-11. (Sec. 601.204, S.P.R.; Secs. 446, 471, '54 Code.)

Rev. Proc. 75-4, 1975-4 I.R.B. 20.

Investment credit

298.30

Air conditioning and heating; factory building.

Built-in air conditioning or heating units that supplement factory-wide central air conditioning and heating systems and those with extensive duct work serving one or more local areas do not qualify as section 38 property; but window air conditioning units, portable plug-in heaters, and the air conditioning or heater units used to maintain certain temperature and humidity requirements essential to a particular process or production activity qualify. §1.48-1. (Sec. 48, '54 Code.)

Rev. Rul. 75-77, 1975-10 I.R.B. 6.

298.60

Air handling and safety equipment; factory building.

Air handling or safety equipment units that service a building as a whole relate to the operation and maintenance of the building and are structural components that do not qualify as section 38 property; but when

necessary to, and used directly with, a single machine or a specific process such as paint spraying or welding they are tangible personal property that qualifies. §1.48-1. (Sec. 48, '54 Code.)

Rev. Rul. 75-78, 1975-10 I.R.B. 7.

298.90

Cable antenna television system; partnership lessor.

A cable antenna television system, owned by a partnership formed solely to finance the construction and lease of the system to a corporate operator, does not qualify as property manufactured by the partnership, and the partnership is not entitled to investment credit. Rev. Rul. 68-445 distinguished. §§1.38-1, 1.46-4. (Secs. 38, 46; '54 Code.) Rev. Rul. 75-1, 1975-1 I.R.B. 11.

298.120

Carryback; affiliated group; new subsidiaries.

The portion of consolidated unused investment credit of an affiliated group filing a consolidated return, attributable to the common parent's two new wholly owned subsidiaries, may be carried back to the parent's separate return for a year in which the subsidiaries were not in existence but may not be carried back to any other member of the group. §1.1502-79. (Sec. 1502, '54 Code.) Rev. Rul. 75-54, 1975-7 I.R.B. 14.

298.150

Unused; allowance in closed year; net operating loss carryback adjusted.

Due to a net operating loss for fiscal 1967, taxpayers filed for a tentative carryback adjustment to 1964 and received the claimed refund. It was later determined that the loss for 1967 was overstated and a deficiency existed for the amount of the carryback refund. The taxpayers sought to offset an unused investment credit attributable to the year 1964 against the deficiency even though the credit had not been claimed and any claim was barred by statute. Held, the taxpayers are entitled to the benefit of an unused investment credit for fiscal 1964 to the extent of, but not in excess of, the amount of the deficiency for that year. (Sec. 6501, '54 Code.)

James G. Maxcy, 59 T.C. 716, Nonacq., 1975-6 I.R.B. 5.

Joint returns

(See: Husband and wife)

Levy

306.50

Interest rate.

Examples are provided for the computation of the 9 percent interest rate on underpayments and overpayments of tax, effec

Trustee in bankruptcy; withholding taxes; priority.

A trustee in bankruptcy is obligated to withhold, report, and pay over income and Social Security taxes from payment of priority claims for employee's wages earned prior to, but unpaid at the time of, an employer's bankruptcy. Proofs of claim on the part of the U.S. with respect to the taxes are not required and the taxes are entitled to second priority of payment under section 64(a) of the Bankruptcy Act. §1.6011-1. (Sec. 6011, '54 Code.)

Otte, 419 U.S., Ct. D. 1969, 1975-2 I.R.B. 10.

Limitation period

316.50

Investment credit; unused; closed carryback year.

Due to a net operating loss for fiscal 1967, taxpayers filed for a tentative carryback adjustment to 1964 and received the claimed refund. It was later determined that the loss for 1967 was overstated and a deficiency existed for the amount of the carryback refund. The taxpayers sought to offset an unused investment credit attributable to the year 1964 against the deficiency even though the credit had not been claimed and any claim was barred by statute. Held, the taxpayers are entitled to the benefit of an unused investment credit for fiscal 1964 to the extent of, but not in excess of, the amount of the deficiency for that year. (Sec. 6501, '54 Code.)

James G. Maxcy, 59 T.C. 716, Nonacq., 1975-6 I.R.B. 5.

Liquidations

318.40

Distributions; determination of taxable

status.

Instructions and guidelines are set forth relating to the determination of the taxable status of corporate distributions and the supporting information to be furnished to the Service. Rev. Proc. 65-10 and 67-12 superseded. §§1.301-1, 1.316-1, 1.333-1, 1.6042-2. (Sec. 601.602, S.P.R.; Secs. 301, 316, 333, 6042, '54 Code.)

Rev. Proc. 75-17, 1975-13 I.R.B. 20.

22 Liquidations

318.80

Partial; contraction of business;
termination of contract.

The termination of a contract represent-
ing 95 percent of the gross income of a do-
mestic corporation resulted in a genuine
contraction of the corporation's business
and the distribution of cash, made available
by the release of funds from a restricted ac-
count established under a credit agreement
with a bank and representing the working
capital attributable to the terminated busi-
ness, in redemption of a portion of the cor-
poration stock qualifies as a distribution in
partial liquidation. §1.346-1. (Sec. 346, '54
Code.)

Rev. Rul. 75-3, 1975-1 I.R.B. 12.

Livestock

(See: Farmers and farming)

Loans

320.20

Commodity Credit Corporation; cotton
producer.

The amount of an unpaid loan from the
Commodity Credit Corporation to a cotton
producer, who has not elected under section
77 of the Code to treat the loan as income in
the taxable year received, is includible in his
gross income in the year in which his liabil-
ity on the loan is discharged by transferring
to the Corporation his ownership of the cot-
ton pledged as security. Any additional
amount realized by the producer from the
Corporation's sale of the cotton for more
than the amount owed is includible in his
income in the taxable year received if he
uses the cash method or the year his right to
the amount becomes fixed if he uses the
accrual method. I.T. 4016 superseded.
§1.451-1. (Sec. 451, '54 Code.)

Rev. Rul. 75-57, 1975-8 I.R.B. 18.

Losses

322.20

Casualty; State grants to flood victims;
prior year losses.

A grant received under a Pennsylvania
statute to further compensate and reimburse
individuals for flood losses sustained in
1971 and 1972, by a taxpayer who in a prior
year had deducted the loss as a casualty
loss, is includible in the taxpayer's gross in-
come in the year received, subject to the
provisions of section 111 of the Code, but, if
not previously deducted or if the standard
deduction was claimed, the grant need not
be included. §§1.111-1, 1.165-1. (Secs. 111,
165; '54 Code.)

Rev. Rul. 75-28, 1975-4 I.R.B. 10.

322.40

Foreign exchange; advance to foreign
agent and currency investment.

A calendar-year accrual-method domestic
corporation, not a dealer in foreign cur-
rency, may not deduct a loss due to fluctu-
ation in the value of foreign currency for an
advance made during a taxable year to its
foreign agent, who converted and deposited
it in the country where located, for business
purchases not made by the end of the tax-
able year or for the currency of that country
it purchased as an investment and had on
deposit there at the end of the taxable year.
O.D.S 764 and 940 superseded. §§1.61-1,
1.165-1. (Secs. 61, 165; '54 Code.)

Rev. Rul. 75-109, 1975-13 I.R.B. 14.

322.60

Foreign exchange; current accounts
receivable and payable.

An accrual method domestic corporation
that maintains current accounts receivable
and payable covering transactions with its
wholly owned foreign subsidiary may not
deduct a loss under section 165 of the Code
as a result of valuing the accounts at the
exchange rate in effect at the end of the
taxable year. G.C.M. 4954 superseded.
§1.165-1. (Sec. 165, '54 Code.)

Rev. Rul. 75-108, 1975-13 I.R.B. 13.

322.80

Interest forfeited on premature
withdrawals; time savings account.

A series of questions and answers explain
how to claim a deduction, in arriving at ad-
justed gross income, for interest forfeited as
a result of premature withdrawal of funds
from a time savings account and the refund
procedure for a taxpayer who forfeited such
interest in 1973 and was not permitted the
deduction. §1.62-1. (Sec. 62, '54 Code.)
Rev. Rul. 75-20, 1975-3 I.R.B. 5.

322.100

Interest forfeited on premature
withdrawals; time savings account.

Examples illustrate alternate methods of
computing interest to be reported by a fi-
nancial institution on Form 1099 INT, and
the amount of forfeiture deductible by a de-
positor, for the year of a depositor's prema-
ture withdrawal of funds from a time sav-
ings account upon which interest had been
previously paid or credited. Rev. Rul. 75-511
clarified and modified. §§1.62-1, 1.165-1,
1.451-1, 1.1232-1, 301.6049-1. (Secs. 62, 165,
451, 1232, 6049; '54 Code.)

Rev. Rul. 75-21, 1975-3 I.R.B. 39.

322.140

Worthless corporate stock held by
corporate officer.

An officer-stockholder of a stock broker-
age and investment banking firm who vol-
untarily purchased his stock in the corpora-
tion during its period of prosperity and rapid

Index Digests

growth when the stock appeared to be an
attractive investment sustained a capital
loss rather than an ordinary loss in the year
the corporate stock became worthless.
§§1.165-1, 1.1221-1. (Secs. 165, 1221; '54
Code.)

Rev. Rul. 75-13, 1975-2 I.R.B. 6.

Medical expenses

326.40

Unemployment disability benefits fund
and private plan wage deductions.

Contributions made by employers and
employees to the New Jersey unemploy-
ment compensation fund, and by employers
to the State disability benefits fund, are de-
ductible as taxes under section 164(a) of the
Code. Amounts withheld from employees'
wages for contribution to the State disability
benefits fund or a substitute private plan are
neither taxes under section 164(a) nor medi-
cal expenses under section 213, but are non-
deductible personal expenses. I.T. 3970 su-
perseded. §§1.164-1, 1.213-1, 1.262-1. (Secs.
164, 213, 262; '54 Code.)

Rev. Rul. 75-48, 1975-7 I.R.B. 9.

Ministers

330.45

Rental allowance; portion of pension
designated by churches governing
body.

The portion of a retired minister's pension
designated as a rental allowance by the na-
tional governing body of a religious denomi-
nation having complete control over the re-
tirement fund is excludable. Rev. Rul. 62-
117 distinguished. §1.107-1. (Sec. 107, '54
Code.)

Rev. Rul. 75-22, 1975-3 I.R.B. 5.

Moving expenses

336.30

Citizens; employed abroad by domestic
employer.

Examples discuss the treatment of reim-
bursed moving expenses of a U.S. citizen
who performs services abroad for his do-
mestic employer, and whose foreign earn-
ings qualify for exclusion from gross income
under section 911(a) of the Code, and ex-
plain the extent to which his moving ex-
penses are deductible and the extent to
which the reimbursement is includible in his
gross income and subject to tax withholding.
The examples cover moving to the foreign
country and moving back to the U.S. (1) to
work for the same employer, (2) to work for
a different employer, and (3) to retire.
§§1.82-1, 1.217-1, 1.911-2. (Secs. 82, 217,
911, 3401; '54 Code.)

Rev. Rul. 75-84, 1975-11 I.R.B. 8.