Accounting methods

(See also specific subject headings) 2.20

Accrual; deduction of expenses after income-reporting change.

An accrual-method taxpayer that made an approved change in reporting income from COD sales, representing 90 percent of its total sales, from the year of shipment to the year in which payment is received has not changed to a cash method of accounting and must continue deducting its expenses under the accrual method of accounting. §1.446-1. (Sec. 446, '54 Code.)

Rev. Rul. 75-96, 1975-12 I.R.B. 12.

2.40

Change; carrying charges, etc.; failure to elect to capitalize in prior years.

A manufacturing corporation that for ten years capitalized taxes and carrying charges incurred on machinery used in its business without having properly elected to do so adopted a method of accounting with respect to such expenses and is precluded from amending its returns for open years and deducting the expenses for such years. Rev. Rul. 70-539 distinguished. §§1.266-1, 1.446-1. (Secs. 266, 446; '54 Code.)

Rev. Rul. 75-56, 1975-8 I.R.B. 5.

2.60

Foreign branch assets and liabilities; exchange fluctuation.

A domestic corporation may compute the income or loss from its foreign branch operation by using the "net worth" or "balance sheet" method, recording noncurrent assets and liabilities at the rate of exchange in effect when acquired or incurred and appraising the current assets and liabilities at the currency exchange rate at the end of the taxable year. O.D. 489 superseded. §§1.4461, 1.481-1. (Secs. 63, 446, 481; '54 Code.) Rev. Rul. 75-106, 1975-13 I.R.B. 8.

2.70

Foreign branch income or loss; exchange fluctuation.

Funds required to be furnished by a domestic bank to its foreign branch as capital, capital reserve, or legal reserve, used by the branch as current assets, must be included in the determination of foreign branch income or loss under the "net worth" or "balance sheet" method and any gain or loss due to fluctuation in the value of foreign currency is recognized; however, if such funds are used to purchase noncurrent assets, the basis of the assets for income tax purposes is not adjusted for foreign currency fluctuation. §1.446-1. (Secs. 63, 446; '54 Code.) Rev. Rul. 75-105, 1975-13 I.R.B. 7.

2.75

Foreign branch net profits; exchange fluctuation.

The dollar conversion of net profits reported at the end of the taxable year in terms of foreign currency by a foreign branch of a domestic corporation using an accrual method of accounting may be computed by using the rate of exchange in effect on the date of any remittances made by the branch during the year and the rate of exchange at the close of the taxable year for any unremitted net profits. O.D. 550 superseded. §1.446-1. (Secs. 63, 446; '54 Code.) Rev. Rul. 75-107, 1975-13 I.R.B. 9.

2.100

Inventories; 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.

2.110

Inventories; 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.

2.120

Inventories; LIFO; financial disclosure.

A LIFO election, reelection, or extension to all or a greater portion of the inventories will not be terminated solely because a taxpayer is subject to and complies with financial disclosure requirements of the Financial Accounting Standards Board and the Securities and Exchange Commission which require that footnotes or commentary on annual reports and financial statements disclose the effect of the change in method on income provided such disclosure is made solely for the taxable year of the change. 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.

Additions to tax

(See: Penalties)

Administration

10.10

Advisory committees.

The following advisory committees are established or renewed:

Art Advisory Panel of the Commissioner of Internal Revenue, 1975-11 I.R.B. 86.

Chief Counsel's Advisory Committee on Rules of Professional Conduct, 1975-1 I.R.B. 23.

Small Business Advisory Committee to the Commissioner of Internal Revenue, 1975-7 I.R.B. 20.

10.40

Delegations of authority.

The following documents deal with delegations of authority with respect to the Service:

Del. Order-Citation-Subject

35 (Rev. 6), 1975-8 I.R.B. 35, Agreements as determinations.

42 (Rev. 6), 1975-8 I.R.B. 35, Consents fixing period of limitation.

96 (Rev. 2), 1975-9 I.R.B. 23, Application of rulings without retroactive effect.

97 (Rev. 12), 1975-9 I.R.B. 23, Closing agreements.

112 (Rev. 1), 1975-7 I.R.B. 17, Determination letters; pension trust."

113 (Rev. 2), 1975-7 I.R.B. 18, Determination letters; exempt organizations.

139 (Rev. 1), 1975-7 I.R.B. 19, Extension of correction period and allowable distribution period; private foundations.

10.80

Seal of the Treasury Department.

The list of officials authorized to affix the Seal of the Treasury Department in the authentication of originals and copies of books, records, papers, writings, and documents of the Department, has been revised. Treasury Department Order 107 (Revision 17) superseded.

Treasury Dept. Order 107 (Rev. 18), 19751 I.R.B. 23.

10.90

Secretary of Treasury.

The manner of designating certain officers to act as Secretary of the Treasury is set forth. E.O. 11680 revoked.

E.O. 11822, 1975-2 I.R.B. 43.

Affiliated corporations

(See also: Consolidated returns)

Index Digests

16.15

Allocation of tax liability; change in method.

An affiliated group that includes an insurance company will be denied permission to change its method of allocating consolidated. tax liability to either the method in section 1.1522-1(a)(2) of the regulations or the combined method in section 1.1502-33(d)(2)(ii), determined for each taxable year depending on the insurance company's tax liability on a separate return basis, to comply with a directive of the insurance commissioner of the company's home state. §§1.1502-33, 1.15521. (Secs. 1502, 1552; '54 Code.)

Rev. Rul. 75-80, 1975-10 I.R.B. 11.

Allocation of income and deductions

20.60

Leasing arrangement; imputed interest on loans.

Two corporations had equal ownership and control of a corporation organized to construct and operate an enclosed mall shopping center adjacent to their department stores. During the years in question, the mall corporation paid no interest on certain loans made to it by its corporate owners. Held, the Commissioner may not utilize section 482 of the Code to impute interest income to the owners on the loans since the mall corporation and owners were not controlled, directly or indirectly, by the same interests. (Sec. 482, '54 Code.)

B. Forman Co., 54 T.C. 912, Nonacq., 1975-11 I.R.B. 5.

Allowances

22.80

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

The portion of a retired minister's pension designated as a rental allowance by the national governing body of a religious denomination having complete control over the retirement fund is excludable. Rev. Rul. 62117 distinguished. §1.107-1 (Sec. 107, '54 Code.)

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

Amortization

24.80

Railroads; rolling stock; "original use" and "placed in service."

The "original use" of freight cars delivered by a manufacturer to a railroad under a short-term interim financing arrangement, pending permanent financing through sale

of equipment trust certificates, began with the railroad for purposes of section 184(d)(2) of the Code, and such cars were "placed in service" on the date or dates they were delivered to and accepted by the railroad. (Sec. 184, '54 Code.)

Rev. Rul. 75-29, 1975-4 I.R.B. 10.

Annuities and pensions (See: Employees' plans; Self-employed plans)

Attorneys and agents

40.10

Advisory committee.

The Chief Counsel's Advisory Committee on Rules of Professional Conduct is established.

1975-1 I.R.B. 23.

Automobiles

42.80

Mileage rate; business expenses; employees and self-employed.

For taxable years beginning after 1973, an employee or self-employed person whose automobile has been fully depreciated under the straight-line method may compute the allowable deduction for business use of his automobile at a standard mileage rate of 10 cents per mile. Rev. Proc. 74-23 amplified. §1.162-17. (Sec. 601.105, S.P.R.; Sec. 162, '54 Code.)

Rev. Rul. 75-3, 1975-4 I.R.B. 20.

Bankruptcy and receiverships

48.40

Priority; trustee's liability to withhold.

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.)

10.

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

Banks

50.15

Accounting method; foreign branch income or loss; exchange fluctuation.

Funds required to be furnished by a domestic bank to its foreign branch as capital, capital reserve, or legal reserve, used by the branch as current assets, must be included in the determination of foreign branch income or loss under the "net worth" or "bal

Information returns; forfeiture of interest on premature withdrawals.

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

50.60

Insurance premiums; borrower's life insurance policy held as security.

Premiums paid by a bank during its taxable year on an unrelated defaulting borrower's life insurance policy assigned to it as security for his loan are deductible as a business expense and any premium payment recoveries in subsequent taxable years are includible 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.

Basis

52.50

Guaranteed accounts receivable.

A corporate taxpayer acquired the assets of an unrelated corporation and allocated the purchase price for the accounts receivable, which were guaranteed by the seller, at face value. Held, the accounts receivable were properly entered as equivalent of cash on the taxpayers books. (Sec. 1011, '54 Code.)

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

52.80

Partnerships; low income housing project; New York.

Determination of whether a limited partnership formed under New York State law is to be treated as the owner of the project and whether each partner may include a portion of a loan made by the New York Housing Finance Agency in the basis of his partnership 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.

10 Bonds

Beneficiaries

(See specific subject headings)

Bonds

54.40

Discount; recapitalization; exchanged for common and preferred stock.

No amount is includible in the income of debenture holders, under section 1232(a)(2)(A) or (a)(2)(B) of the Code, as a result of the exchange of their debentures for common or preferred stock in a recapitalization qualifying as a reorganization under section 368(a)(1)(E). §1.1232-1. (Sec. 1232, '54 Code.)

Rev. Rul. 75-39, 1975-6 I.R.B. 21.

54.80

Original issue discount; ratable inclusion of interest; 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.

Business expenses

(See also specific subject headings) 60.150

Nonprofit activity; house rented to relative.

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

Capital assets

(See also: Capital gains and losses)

64.50

Engineering and manufacturing knowhow sold with non-exclusive license.

The taxpayer invented and applied for patents on components of a high-speed typer for use with computers. He granted a non-exclusive license to a company to manufacture, use, or sell the typer, and furnished the company a complete set of drawings for the typer, in exchange for royalty payments provided for under their agreement. 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 license under the patents, and he conveyed all substantial rights of ownership in the technical know-how to the company; accordingly, such amounts were properly reported as capital gains. (Sec. 1235, '54 Code.)

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

64.200

Worthless corporate stock held by corporate officer.

An officer-stockholder of a stock brokerage and investment banking firm who voluntarily purchased his stock in the corporation during its period of prosperity and rapid 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.

Campaign expenses

62.30

Political contributions received for services.

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.

66.40

Carrying charges, etc.; election improper.

A manufacturing corporation that for ten years capitalized taxes and carrying charges incurred on machinery used in its business without having properly elected to do so adopted a method of accounting with respect to such expenses and is precluded from amending its returns for open years and deducting the expenses for such years. Rev. Rul. 70-539 distinguished. §§1.266-1, 1.446-1. (Secs. 266, 446; '54 Code.)

Rev. Rul. 75-56, 1975-8 I.R.B. 5.

Capital gains and losses

(See also: Capital assets)

Business property

70.60

Index Digests

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 interest in the horse was not a gift but compensation for past services in training the horse based on a business relationship of the parties 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., 197510 I.R.B. 5.

70.100

Returnable reels; deposits forfeited.

Returnable reels used by a manufacturer to ship cable to a customer, who pays a deposit refundable within one year for the reels, are depreciable property used in the taxpayer's trade or business within the meaning of section 1231(b) of the Code and gain or loss recognized as a result of retaining the forfeited deposits is treated in accordance with the provisions of section 1231(a), subject to recapture under section 1245. Rev. Rul. 58-77 revoked. §§1.1231-1, 1.1245-1. (Secs. 1231, 1245; '54 Code.) Rev. Rul. 75-34, 1975-5 I.R.B. 14.

Individuals

76.20

Bonds; discount; recapitalization; exchanged for common and preferred stock.

No amount is includible in the income of debenture holders, under section 1232(a)(2)(A) or (a)(2)(B) of the Code, as a result of the exchange of their debentures for common or preferred stock in a recapitalization qualifying as a reorganization under section 368(a)(1)(E). §1.1232-1. (Sec. 1232, '54 Code.)

Rev. Rul. 75-39, 1975-6 I.R.B. 21.

76.60
Lump-sum settlement; employment
seniority rights relinquished.

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.

Index Digests

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, 3241, 3401, 7805; '54 Code.)

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

76.100

Worthless corporate stock held by corporate officer.

An officer-stockholder of a stock brokerage and investment banking firm who voluntarily purchased his stock in the corporation during its period of prosperity and rapid 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.

Partnerships

(See: Partnerships)

Carrybacks and carryovers

(See also: Net operating loss)

78.50

Investment credit; 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.

Carrying charges

80.20

Capitalized; improper election; change of accounting method.

A manufacturing corporation that for ten years capitalized taxes and carrying charges incurred on machinery used in its business without having properly elected to do so adopted a method of accounting with respect to such expenses and is precluded from amending its returns for open years and deducting the expenses for such years. Rev. Rul. 70-539 distinguished. §§1.266-1, 1.446-1. (Secs. 266, 446; '54 Code.)

Rev. Rul. 75-56, 1975-8 I.R.B. 5.

Casualty

(See: Losses)

Charitable contributions

82.30

Crop shares.

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.

82.50

Domestic charity; funds used in foreign country.

Contributions by an individual to a domestic charity, formed to deal with the problem of plant and wildlife ecology in a foreign country through programs that include grants to foreign organizations and over which it maintains control and responsibility, are deductible as charitable contributions. §1.170A-1. (Sec. 170, '54 Code.) Rev. Rul. 75-65, 1975-9 I.R.B. 5.

82.100

Interests in property; retained right to

use.

The contribution of a tract of land to the U.S. by an individual who retained the right during his lifetime to train his personal hunting dog on the trails extending over the entire tract is deductible. §1.170A-7. (Sec. 170, '54 Code.)

Rev. Rul. 75-66, 1975-9 I.R.B. 6.

Citizens

(See: Nonresidents)

Clergymen

(See: Ministers)

Compensation received

Miscellaneous

100.50

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 in

Consolidated returns 11

come 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.

Salaries, fees, etc.

104.25

Employment seniority rights relinquished; lump-sum payment.

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. 104.100

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.

Sickness or injuries

(See: Sick pay)

Consolidated returns

108.20

Allocation of tax liability; change in method.

An affiliated group that includes an insurance company will be denied permission to change its method of allocating consolidated tax liability to either the method in section 1.1552-1(a)(2) of the regulations or the combined method in section 1.1502-33(d)(2)(ii), determined for each taxable year depending on the insurance company's tax liability on a separate return basis, to comply with a directive of the insurance commissioner of the company's home state. §§1.1502-33, 1.15521. (Secs. 1502, 1552; '54 Code.) Rev. Rul. 75-80, 1975-10 I.R.B. 11.

108.60

Investment credit; carryback; new subsidiaries.

The portion of consolidated unused investment credit of an affiliated group filing

12 Consolidated returns

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.

Constructive ownership of stock

110.80

Redemption; family corporation; reacquisition; executor becomes corporation president.

The requirements of section 302(c)(2)(A)(ii) of the Code are violated where one of two brothers who, within 10 years of the date all of his stock in a family corporation was redeemed and after the required agreement was filed, became president of the corporation while executor of the estate of his sole-shareholder father. Rev. Rul. 72-380 amplified. §1.302-4. (Sec. 302, '54 Code.)

Rev. Rul. 75-2, 1975-1 I.R.B. 11.

Constructive receipt of income

112.50

Interest; ratable inclusion; 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.

112.60

Interest deemed paid and distributed; beneficiary's mortgage held by trust.

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 deduct 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.

Contracts

114.80

Timber; long-term; depletion; basis.

The fair market value of the timber existing at the time of the execution of a longterm 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 deductible 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.

Contributions

(See: Charitable contributions; Employee's plans; Political contributions; Self-employed plans)

Controlled foreign corporations

118.30

Earnings; U.S. investments; personal holding company.

118.70

Index Digests

Foreign tax credit; dividend paid by Namibian subsidiary to domestic parent.

The dividend paid by a wholly owned South West African (Namibian) subsidiary to its domestic parent out of accumulated profits of taxable years 1973 and 1974 is not a dividend received from a less developed country corporation for purposes of computing the parent's foreign tax credit. §§1.902-3, 1.955-4. (Secs. 902, 955; '54 Code.)

Rev. Rul. 75-53, 1975-7 I.R.B. 13.

Cooperatives

(See: Exempt organizations)

Two U.S. taxpayers were sole sharehold- Corporations

ers of a controlled foreign corporation for 1963 which was also a foreign personal holding company in 1964, 1965, and 1967. For each of those years the corporation had an increase in its earnings invested in U.S. property as defined in section 956 of the Code. The shareholders were subject to tax under section 551(b) on the corporation's income for 1964, 1965, and 1967. Held, under the provision of section 951(d) the shareholders were not required to include in their gross income in 1964, 1965, and 1967 any part of the corporation's increased earnings invested in U.S. property notwithstanding section 1.951-3 of the regulations. (Secs. 551, 951; '54 Code.)

Leonard E. Whitlock, 59 T.C. 490, Nonacq., 1975-11 I.R.B. 5.

Settlement under aircraft liability insurance policy.

An amount received by the estate of an employee killed while a passenger in his employer's airplane, under the employer's aircraft 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.