Index Digests

336.65

Citizens; foreign resident; income
earned outside U.S.

A taxpayer who moved to Australia
where he secured employment, was entitled
to a deduction under section 217 of the Code
for unreimbursed moving expenses. The
Commissioner's contention that such ex-
penses were allocable to taxpayer's tax
exempt Australian income and disallowed
by section 911(a) was rejected. (Secs. 217,
911; '54 Code.)

Jon F. Hartung, 55 T.C. 1, Nonacq., 1975-
11 I.R.B. 5.

336.90

Citizens; foreign resident; income
earned outside U.S.

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.

Natural resources

(See also: Depletion: Oil and gas
properties)

338.50

Timber; cost depletion; basis; long-
term contract.

The fair market value of the timber exist-
ing at the time of the execution of a long-
term timber purchase contract constitutes
the basis for depletion of the timber and
payments in excess of the fair market value
are consideration for the use of the land de-
ductible as a business expense. §§1.162-1,
1.612-1. (Secs. 162, 612; '54 Code.)
Rev. Rul. 75-59, 1975-8 I.R.B. 19.

Net operating loss

340.35

Carryback; unused investment credit;
closed year; deficiency.

Due to a net operating loss for fiscal 1967,
taxpayers filed for a tentative carryback ad-
justment 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 re-
fund. The taxpayers sought to offset an un-
used 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.

Nonbusiness expenses

342.40

House rented to relative at less than
fair market value.

A taxpayer who rents a house to his
brother for less than the fair market value
and less than his total expenses attributable
to the house may not deduct, under sections
162 and 212 of the Code, the interest, taxes,
operating expenses, and depreciation but he
may deduct the expenses to the extent al-
lowed under section 1.183-1(b)(1) of the
regulations provided he itemizes his deduc-
tions. §§1.62-1, 1.162-12, 1.183-1, 1.212-1.
(Secs. 62, 162, 183, 212; '54 Code.)
Rev. Rul. 75-14, 1975-2 I.R.B. 7.

Nonresidents

344.30

Citizens; earned income from outside
U.S.; moving expenses.

A taxpayer who moved to Australia
where he secured employment, was entitled
to a deduction under section 217 of the Code
for unreimbursed moving expenses. The
Commissioner's contention that such ex-
penses were allocable to taxpayer's tax
exempt Australian income and disallowed
by section 911(a) was rejected. (Secs. 217,
911; '54 Code.)

Jon F. Hartung, 55 T.C. 1, Nonacq., 1975-
11 I.R.B. 5.

344.70

Citizens; earned income from outside
U.S.; 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.

344.100
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

Overpayments 23

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.

344.140

Citizens; 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.

344.180

Citizens; naturalized; domiciled in
country of birth.

A foreign-born individual, whose U.S.
citizenship was conferred upon him as a mi-
nor when his parents became naturalized
citizens, does not lose his citizenship by tak-
ing up residence in the country of his birth
after attaining majority and is not relieved
of the duty of filing Federal income tax re-
turns. O.D. 695 superseded. §1.1-1. (Sec. 1,
'54 Code.)

Rev. Rul. 75-82, 1975-11 I.R.B. 6.

Oil and gas properties

356.40

Depletion; gross income from property;
compression of gas prior to sale.

Gross income from property does not in-
clude that portion of the selling price of
natural gas attributable to the taxpayer's
process of compressing the gas, to meet pur-
chaser's specifications, prior to its delivery
to the purchaser's pipeline. §§1.611-1, 1.613-
3. (Secs. 611, 613; '54 Code.)

Rev. Rul. 75-6, 1975-1 I.R.B. 15.

Overpayments

360.40

Interest rate.

Examples are provided for the computa-
tion of the 9 percent interest rate on under-
payments and overpayments of tax, effec-
tive on July 1, 1975, under the provisions of
section 6621 of the Code as added by Pub.
L. 93-625. §§301.6332-1, 301.6601-1,
301.6602-1, 301.6611-1, 301.7426-1. (Secs.
6332, 6601, 6602, 6611, 6621, 7426; '54
Code.)

Rev. Rul. 75-58, 1975-8 I.R.B. 24.

24 Partnerships

Partnerships

362.40

Classification; arrangement among
subsidiaries.

A partnership formed under a statute cor-
responding to the Uniform Partnership Act
by a domestic corporation's four domestic
subsidiaries, each with business reasons for
independent existence outside the partner-
ship, for the purpose of purchasing a crude
oil storage barge and chartering it to an un-
related corporation, and not to avoid tax, is
classified as a partnership. §301.7701-2.
(Sec. 7701, '54 Code.)

Rev. Rul. 75-19, 1975-2 I.R.B. 18.

362.80

Classification; cattle owner; feed lot;
fattening agreement.

A corporate feed lot operator and an indi-
vidual cattle owner enters into a 5-year ser-
vice agreement under which the cattle
owner makes a cash commitment, supplies
cattle for fattening, purchases feed from the
feed lot operator, and independently mar-
kets the cattle. The feed lot operator fur-
nishes insurance, labor, accommodations,
equipment for the separate care and feeding
of the cattle, and guarantees the owner a
return of a certain percentage of his cash
commitment. The feed lot operator received
a percentage of the owner's net profit in
exchange for his services. The arrangement
will not be classified as a partnership.
§301.7701-3. (Sec. 7701, '54 Code.)

Rev. Rul. 75-43, 1975-6 I.R.B. 24.

362.120

Classification; checklist.

A checklist of required but frequently
omitted information to be submitted with re-
quests for rulings concerning partnership
classification. (Sec. 601.201, S.P.R.)

Rev. Proc. 75-16, 1975-10 I.R.B. 59.

362.160

Exchanges of partnership interests.

On the exchange of a general partnership
interest in one California partnership for a
general partnership interest in a California
limited partnership, both partnerships en-
gaged in renting apartments before and after
the exchange, it was held that the exchanged
partnership interests were proprietary inter-
ests qualifying for nonrecognition of gain
and not subject to the exclusion in the par-
enthetical 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.

362.200

Joint venture; one-half interest in race
horse transferred.

Taxpayers purchased a race horse on the
advice of the horse's trainer and at the same
time promised the trainer a half interest in
the horse once the acquisition costs were

recovered. A joint venture was entered into
with each contributing his half-interest in
the horse. Held, the transfer of a half inter-
est in the horse was not a gift but compensa-
tion for past services in training the horse
based on a business relationship of the par-
ties concerned and the time of transfer was
conditional upon stated circumstances. The
transfer constituted the formation of a joint
venture to which the taxpayers contributed
appreciated capital and resulted in a capital
gain under section 1231(a) of the Code.
(Secs. 61, 705, 1231; '54 Code.)

F.C. McDougal, 62 T.C. 720, Acq., 1975-
10 I.R.B. 5.

362.230

Limited; low income housing project;
New York.

Determination of whether a limited part-
nership formed under New York State law
is to be treated as the owner of the project
and whether each partner may include a por- .
tion of a loan made by the New York Hous-
ing Finance Agency in the basis of his part-
nership interest. §§1.61-1, 1.752-1, 1.761-1,
301.7701-2. (Secs. 61, 752, 761, 7701; '54
Code.)

Rev. Rul. 75-31, 1975-4 I.R.B. 6.

Patents

364.35

Engineering and manufacturing know-
how sold with non-exclusive license.

The taxpayer invented and applied for

Index Digests

question. The Commissioner contended that
the wife was collaterally estopped to deny
fraud as to 1960 since collateral estoppel ap-
plies 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.

Pension trusts

(See: Employees' plans)

Personal expenses

370.120

Wage deductions for 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.

patents on components of a high-speed Personal holding

typer for use with computers. He granted a
non-exclusive license to a company to
manufacture, use, or sell the typer, and fur-
nished the company a complete set of draw-
ings for the typer, in exchange for royalty
payments provided for under their agree-
ment. He continued to manufacture and sell
typers, and granted license to others without
the drawings. Held, the amounts taxpayer
received from the company related to the
technical know-how he furnished in the
form of the drawings, rather than to any li-
cense under the patents, and he conveyed
all substantial rights of ownership in the
technical know-how to the company; ac-
cordingly, such amounts were properly re-
ported as capital gains. (Sec. 1235, '54
Code.)

Francis H. Shepard, Jr., 57 T.C. 600,
Nonacq., 1975-13 I.R.B. 5.

Personal service income; professional
service corporation.

Income earned by a domestic professional
service corporation, 80-percent owned by
its sole physician-employee who specializes
in a certain area of medicine, will not be
considered from personal service contracts
in the absence of contracts between the cor-
poration or the physician and the patients
that the physician will personally perform
the services or evidence that the services
are so unique as to preclude substitution.
§1.543-1. (Sec. 543, '54 Code.)

Rev. Rul. 75-67, 1975-9 I.R.B. 7.

Political contributions

374.50

Contingent on future act by candidate
or officeholder.

Payments to a political campaign speci-
fied by a candidate or officeholder in ex-
change for his promise, not of a traditional
and legitimate political nature, to perform a
service for a contributor do not qualify as

26 Rent received

have made a charitable contribution or be-
comes entitled to a business expense deduc-
tion 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-em-
ployment under section 1402(a) and the re-
tirement 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.

408.80

Foreign property; conversion of profits
into dollars.

A U.S. calendar year individual whose
rental profits from property he owns in a
foreign country are deposited in that coun-
try and periodically transferred to him in the
U.S. should, before deducting depreciation,
convert the transfers into dollars at the ex-
change rate in effect on each transfer date
and may compute the rate for any unremit-
ted profit by dividing by 12 the total of the
closing rates of exchange for all months in
the year. Depreciation computed in dollars
is separately determined. §1.61-1. (Sec. 61,
'54 Code.)

Rev. Rul. 75-90, 1975-12 I.R.B. 8.

408.140

Real estate investment trust; unrelated
coowner as manager.

A specified annual payment (accumulated
if not paid) received by a real estate invest-
ment trust out of the new rental income
from real property it coowns with an unre-
lated corporation, under an agreement that
the corporation manage the property, re-
ceive no management fee, but retain the net
income that exceeds the payment to the
trust, does not qualify as "rents from real
property." §1.856-4. (Sec. 856, '54 Code.)
Rev. Rul. 75-52, 1975-7 I.R.B. 12.

Reorganizations

410.60

Continuity of interest; stock exchanged
for voting trust certificates.

Two stockholders, each owning 50 per-
cent of the stock of a corporation, who es-
tablished a voting trust and transferred all of
their corporate stock to the trust in ex-
change for an equal amount of voting trust
certificates will be considered the owners of
the stock for purposes of determining
whether the continuity of interest require-
ment of the regulations is met. §1.368-1.
(Sec. 368, '54 Code.)

Rev. Rul. 75-95, 1975-12 I.R.B. 12.

410.110

Merger; stock and note received for
stock; dividend equivalency.

In determining dividend equivalency un-
der section 356(a)(2) of the Code of a distri-

bution in
in connection with a section
368(a)(1)(A) reorganization in which an indi-
vidual received a note and stock of the ac-
quiring corporation in exchange for his
stock in the acquired corporation, the Ser-
vice will continue to view the distribution as
having been made by the acquired corpora-
tion and not by the acquiring corporation.
The Wright decision will not be followed.
§§1.302-1, 1.356-1, 1.368-1. (Secs. 302, 356,
368; '54 Code.)

Rev. Rul. 75-83, 1975-11 I.R.B. 6.

410.150

Recapitalization; proportionate interest
increased.

A recapitalization in which the shares of
one of two classes of common stock (with
equal voting rights and previously sharing in
dividends and liquidating distributions ac-
cording to their par values at a 10-to-1 ratio)
were exchanged for stocks of the higher par
value at an exchange rate of 7-to-1, thereby
increasing the exchanging shareholders'
proportionate interests in the assets and
earnings and profits of the corporation, was
an isolated transaction not part of a plan to
periodically increase their interest and is not
deemed, under section 305(c) of the Code,
to result in a distribution to which sections
305(b)(2) and 301 apply. §1.305-3. (Sec. 305,
'54 Code.)

Rev. Rul. 75-93, 1975-12 I.R.B. 10.

410.190

Rulings procedure; escrowed stock.

Guidelines set forth the operating rules
for issuing an advance ruling for a reorgani-
zation involving an escrow agreement under
which a portion of the stock of the acquiring
corporation may be returned to it under
specified conditions. Rev. Proc. 74-26 am-
plified. (Sec. 601.201, S.P.R.)

Rev. Proc. 75-11, 1975-8 I.R.B. 26.

410.230

Solely for voting stock, additional
transfer by acquiring corporation.

The nonrecognition of gain or loss provi-
sions of section 354 of the Code apply to
additional voting stock transferred within
one year of a section 368(a)(1)(B) reorgani-
zation to former shareholders of the ac-
quired corporation to fulfill the original
terms of the plan after discovery that the
fair market value of the acquiring corpora-
tion's stock had been erroneously com-
puted. §§1.354-1, 1.368-2. (Secs. 354, 368;
'54 Code.)

Rev. Rul. 75-94, 1975-12 I.R.B. 11.

410.260

Solely for voting stock; inherent
additional dividend rights.

The solely for voting stock requirement of
section 368(a)(1)(B) of the Code is not vio-
lated by an acquiring corporation issuing to
the shareholders of the acquired corporation
shares of voting convertible preferred stock

Index Digests

which provide for the payment of additional
dividends, under certain circumstances, to
any holder of the stock. §1.368-2. (Sec. 368,
'54 Code.)

Rev. Rul. 75-33, 1975-5 I.R.B. 10.

Residents

(See: Nonresidents)

Returns

(See also: Consolidated returns;
Forms)

422.60

Corporations; taxable status of
distributions.

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. Procs. 65-10 and 67-12 su-
perseded. §§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.

422.100
Fiduciary; trust property; title in
beneficiaries.

A Fiduciary Income Tax Return must be
filed by an executor with respect to the in-
come from realty subject to administration
prior to its transfer to the decedent's widow
in satisfaction of her dower interest and by a
trustee under a power in trust created by the
will with respect to income he received from
realty to which the beneficiaries held legal
title. S.M. 4945 and Rev. Rul. 59-154 super-
seded. §§1.641(a)-2, 301.7701-4. (Secs. 641,
7701; '54 Code.)

Rev. Rul. 75-61, 1975-8 I.R.B. 20.

422.150

Individual; separate statement to
support sick pay exclusion.

Employees must submit a statement
showing the computation of excludable sick
pay on their individual income tax returns
even though the amount is shown separately
on Form W-2. Conditions are given under
which an employer may show separately on
Form W-2 excludable sick pay paid after
1974. Rev. Proc. 56-17 superseded and Rev.
Proc. 73-19 obsoleted. §1.105-4. (Sec.
601.401, S.P.R.; Secs. 105, 3401, '54 Code.)
Rev. Proc. 75-7, 1975-5 I.R.B. 28.

422.190

Information; financial institutions;
forfeiture of interest on premature
withdrawals.

Examples illustrate alternate methods of
computing interest to be reported by a fi-
nancial institution on Form 1099 INT, and