Petitioners further point out not active in the affairs of the husband's death in 1928, and t of approximately 20 percent surplus at the time of the t time it would have been un the stock during decedent' 000 per year. It was also decedent to the corporat earnings for the five ye $7,000 per year. Unde "An analysis of the co children creates grave of decedent's death,' tion that it should' the obvious intent purported to accom 11 be sold it his +h either y them, in aries named est qualified to question. In so cerned, his contract As equally enforceable i to summarize above, petion promulgated January 8, holding therein that the value lent to the six trusts in question estate under section 811 (c) of the Estate of Pamelia D. Holland, should be granted. Le facts in the instant case and a recase, we have concluded that the facts #ferent from those present in the instant ase is not controlling. We have concluded that which decedent entered into with the Hofford le created the trusts in question and transferred to shares of his stock in the Hofford Co. (800 more shares if the contract by decedent for his life or for any period not ascertainable forbids, and henequently transferred to the trusts January 8, 1938) was not further held the reference to his death or for any period which does not in income to be exal before his death (1) the possession or enjoyment of, or the the pledge BT.A. We think we erred in so holding in our opinion decedent's de 811 (c) of the code. See George C. Doerschuck et al., Execudesignate talgated Janmary 8, 1945, and our report is hereby modified acfer was irdingly. The effect of this modification is to hold that the value after dece the property transferred to the six trusts by decedent is not includiPetitio in his gras este under the provisions of section 811 (c), as ertai does not it of, cr are used al.. Ex ur opi dified the r ind (c) DING PAPER Box COMPANY, INC., PETITIONER, v. SIONER OF INTERNAL REVENUE, RESPONDENT. Docket No. 5854. Promulgated February 19, 1945. ICATION FOR RELIEF UNDER SECTION 722-SUFFICIENCY OF CLAIM Alex M. Hamburg, Esq., for the petitioner. OPINION. MURDOCK, Judge: The Commissioner disallowed the petitioner's applications for relief, under section 722 of the Internal Revenue Code, from excess profits taxes for the years 1941 and 1942. The only error assigned in the petition is the Commissioner's action in disallowing the applications. The matter under consideration at the moment is the respondent's motion to dismiss the procceeding. The motion raises the question of the adequacy of the applications for relief. It is alleged therein that sufficient facts to show that any relief would be proper under the statute were not stated in the applications and the information furnished therein was so meager as not to permit any determination on the merits of the claims. The argument is that practically no facts to support the claims were set forth in the applications, ment provided that "no stock of W. F. Hofford, Inc. shall be sold or otherwise disposed of during the lifetime of Settlor without his written consent, and provided further that subsequent to the death of Settlor and during the lifetime of Donald V. Smith no stock of said Company shall be sold or otherwise disposed of without the written consent of the said Smith," this provision did not represent the reservation of any interest in the stock for the benefit of either Hofford or Smith, but merely a discretion to be exercised by them, in turn, in good faith and solely for the benefit of the beneficiaries named in the trusts, by the persons considered by decedent as best qualified to determine the advisability of any sale of the stock in question. In so far as the payment of decedent's salary was concerned, his contract of employment was with the Hofford Co. and was equally enforceable regardless of the ownership of its stock. For the reasons which we have endeavored to summarize above, petitioners pray that we reconsider our opinion promulgated January 8, 1945, 4 T. C. 542, supra, and reverse our holding therein that the value of the property transferred by the decedent to the six trusts in question was includible in decedent's gross estate under section 811 (c) of the Internal Revenue Code, following Estate of Pamelia D. Holland, supra. We think this motion should be granted. Upon a reexamination of the facts in the instant case and a reexamination of the Holland case, we have concluded that the facts in the Holland case are so different from those present in the instant case that the Holland case is not controlling. We have concluded that the employment contract which decedent entered into with the Hofford Co. at the time he created the trusts in question and transferred to them 1,200 shares of his stock in the Hofford Co. (800 more shares were subsequently transferred to the trusts January 8, 1938) was not a retention by decedent "for his life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death (1) the possession or enjoyment of, or the right to the income from the property" as those terms are used in section 811 (c) of the code. See George C. Doerschuck et al., Execu tors, 17 B. T. A. 1123. We think we erred in so holding in our opinion promulgated January 8, 1945, and our report is hereby modified accordingly. The effect of this modification is to hold that the value of the property transferred to the six trusts by decedent is not includible in his gross estate under the provisions of section 811 (c), as respondent contends. we Petitioners in their motion for reconsideration ask that find certain additional facts. Some of the additional facts which petitioners ask us to find we regard as immaterial. We, however, grant petitioners' motion for reconsideration in that respect, to the extent that we make the following additional findings of fact: The taxable income originally reported by the Hofford Co. for the years 1938 and 1939 made no adjustment for decedent's salary overdrafts in the amounts of $7,537.50 and $8,200, respectively, its actual net income for said years being $27,385.02 and $14,374.73, respectively. When decedent's salary overdrafts were discovered after his death, amended tax returns were filed upon behalf of the Hofford Co. for the years 1938 and 1939 upon the basis of the salary specified in his contract of employment. The salary of $15,000 per year provided for by the decedent's contract of employment was the same salary which decedent had previously drawn from the Hofford Co. in 1936 and 1937. Reviewed by the Court. Decision will be entered under Rule 50. MURDOCK, J., dissenting: I believe this case was correctly decided in the original opinion. THE BLUM FOLDING PAPER BOX COMPANY, INC., PETITIONER, V. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Docket No. 5854. Promulgated February 19, 1945. APPLICATION FOR RELIEF UNDER SECTION 722-SUFFICIENCY OF CLAIM Alex M. Hamburg, Esq., for the petitioner. OPINION. MURDOCK, Judge: The Commissioner disallowed the petitioner's applications for relief, under section 722 of the Internal Revenue Code, from excess profits taxes for the years 1941 and 1942. The only error assigned in the petition is the Commissioner's action in disallowing the applications. The matter under consideration at the moment is the respondent's motion to dismiss the procceeding. The motion raises. the question of the adequacy of the applications for relief. It is alleged therein that sufficient facts to show that any relief would be proper under the statute were not stated in the applications and the information furnished therein was so meager as not to permit any determination on the merits of the claims. The argument is that practically no facts to support the claims were set forth in the applications, the petitioner will never be permitted to prove facts except those stated in the applications, and, therefore, the proceeding should be dismissed at this time. It is suggested that the dismissal might be for lack of jurisdiction or, if that is not proper, then on the merits of the motion. The parties were fully heard on the motion and briefs were filed. The petitioner has indicated a willingness to have the proceeding stand or fall upon the merits of the motion and, perhaps more important, has failed to show that any good purpose would be served in having the proceeding go further, if the motion is meritorious. The facts are not in dispute. The applications here in question were filed on September 15, 1943, upon the prescribed forms. Each is a claim for the refund or credit of the full amount of the excess profits tax paid. The general information called for on the first page of the application was given, but the supporting information called for in the schedules was not given. Incorporated in the applications is a statement of several grounds for the granting of relief under section 722. The statement paraphrases subparagraphs 1, 2, and 4 of section 722 (b). Subparagraph 5 is also mentioned. Relief under any one of these subparagraphs would require the use of a "constructive average base period net income" larger than "the average base period net income." The applications do not contain the necessary supporting factual statements, but contain repeated statements that the factual information to support the applications will be assembled and filed later. The internal revenue agent in charge, after waiting five and onehalf months, sent to the petitioner on February 29, 1944, a letter calling attention to the fact that the information essential to the claims for relief had not been submitted and stating that unless the information was forthcoming in proper form within 30 days. the claims would be disallowed. The petitioner on March 7, 1944, acknowledged the receipt of the letter of February 29, 1944, and requested an extension of 90 days in which to complete the claims. The revenue agent in charge, by a letter dated March 8, 1944, notified the petitioner that an extension would be granted to May 7. No further extension was ever requested, no further information was supplied, and the Commissioner mailed to the petitioner on May 23, 1944, a notice of the disallowance of the claims for the reason that the information submitted failed to establish that the tax was excessive and discriminatory and failed to establish a fair and just amount representing normal earnings to be used as constructive average base period net income. A taxpayer can benefit under section 722 only by filing applications in accordance with regulations prescribed by the Commissioner.1 1 Sec. 722 (d), I. R. C., as amended by Public Law No. 201, 78th Cong., 1st sess., approved Dec. 17, 1943. |