TAXES-Continued

INCOME TAX-Continued

DEDUCTIONS-Continued

145 C. Cls.

INTEREST-Continued

not give rise to an actual indebtedness, there is no obligation to
pay interest and purported interest payments are not deductible
for income tax purposes. Section 23(b), Internal Revenue Code

of 1939. Broome, 298.

Internal Revenue 517

LOSSES.

Capital losses.

Abandonment of capital asset.

What constitutes.

Before a taxpayer can take a capital loss deduction for income tax
purposes, the capital asset must be completely liquidated by dis-
posing of it or permanently abandoning it as worthless. The
abandonment of a capital asset involves an actual intent on the
part of the owner to abandon, plus an act or acts designed to carry
out such intention. Hazeltine Corp., 138.

Internal Revenue 659

Abandonment of trade-mark.

What constitutes.

Unless the trade-marked name of a patented article has become a
generic designation of that article by the time the basic patent on
the article expires, the trade-mark does not pass into the public
domain with the patented article and the expiration of the patent
in such a case does not result in the abandonment of the trade-
mark. Hazeltine Corp., 138.

Trade-Marks and Trade-Names and Unfair Competition → 32

When the owner of a trade-mark adopts a resolution for the aban-
donment of the trade-mark and directs the company officers to adjust
the owner's accounts to reflect the writing off of the assets, which
adjustment is made and then followed by a public announcement
that the trade-mark has been abandoned as of and from a specific
date, there has been an effective abandonment during that year for
income tax purposes. Hazeltine Corp., 138.

Internal Revenue 674

Trade-Marks and Trade-Names and Unfair Competition — 82

Inasmuch as the registration of a trade-mark is merely prima facie
evidence of ownership, failure to renew registration is not, of itself,
conclusive on the issue of abandonment of the trade-mark; and
where no other identifiable act of abandonment occurs during the

145 C. Cls.

TAXES Continued

INCOME TAX-Continued

DEDUCTIONS-Continued

LOSSES-Continued

year in which the trade-mark registration is allowed to expire,
abandonment does not take place in that year. Hazeltine Corp., 138.
Trade-Marks and Trade-Names and Unfair Competition 32

Nonuse of a trade-mark because the product previously associated
with it is no longer in demand by the public is not the equivalent
of the abandonment of the trade-mark, since the owner may retain
it for possible use on another product of the same class. Hazeltine
Corp., 138.

Trade-Marks and Trade-Names and Unfair Competition ←→ 82

Capital losses.

Stock transferred.

Where the taxpayer was allowed to deduct as a business expense
the value of stock transferred to accomplish a business purpose, the
taxpayer was also entitled to take a capital loss deduction on the
difference between that stock's fair market value at the time of
transfer and its higher cost of acquisition. Montana Power Co., 611.
Internal Revenue 642

EXEMPTIONS.
Organizations.

Destination of income test.

Where the destination of some of the income of a purported chari-
table or educational (exempt) organization is private gain of indi-
viduals rather than exclusively public benefit, the organization
is not operated exclusively for the exempt purposes and is not
entitled to the tax exemption under section 101 (6) of the Internal
Revenue Code of 1939 (26 U.S.C. (1952) § 101 (6)). Horace Heidt
Foundation, 322.

Internal Revenue 837

INCOME TAXABLE.

Income from rents and royalties.

Royalties as consideration for stock sale.

Income received by the owner of an "overriding royalty" in oil,
gas and other mineral products, is taxable as ordinary income and
not as capital gains, despite the fact that the taxpayer acquired
the overriding royalty interest as a part of the consideration for
the sale of its stock in the oil development company. Warren, 571.

Internal Revenue 409.10

145 C. Cls.

TAXES-Continued

INCOME TAX-Continued

INCOME TAXABLE-Continued

Indebtedness or liability settled by taxpayer.

An obligation of a taxpayer representing commissions due a sales-
man, which amount the taxpayer deducted in the year due, should
have been reported as income in the later year to the extent that
the deduction exceeded the amount for which the taxpayer settled
the salesman's claim for the commissions in such later year. Boxy
Custom Clothes Corp., 602.

Indebtedness or liability written off by taxpayer.

An amount which the taxpayer deducted as a liability and in a
later year wrote off should have been reported as income in the
year in which the taxpayer treated this amount as income avail-
able for such use as it cared to put the money, even though there
might then have existed a possibility that a demand for payment
would be made. Roxy Custom Clothes Corp., 602.

The provision in the Internal Revenue Code relating to the right
to a drawback is the grant of a privilege rather than a refund of
taxes assessed and collected and as such must be construed in favor
of the Government and against the party claiming the privilege.
United States v. Walker-Hill Co., 79 F. Supp. 482. McCormick & Co.,
160.

Internal Revenue 1962

Production-what constitues.

Distilled spirits imported from abroad and taxed as "alcohol" but
arriving in this country in such an impure state as to require much
additional distillation and purification in a domeste plant, are not,
for the purposes of the drawback provision of the Internal Revenue
Code of 1939, "produced" in a domestic plant within the meaning
of sections 2809(b)(1) and 3124(a)(1) of the Code. McCormick &
Co., 160.

Plaintiff's claim for a drawback under section 3250 (1) of the In-
ternal Revenue Code of 1939 (26 U.S.C. (1952) 3250(1)), arises
when it uses distilled spirits in the manufacture of nonbeverage
products and the plaintiff is the "real party in interest" for pur-
poses of prosecuting the action in this court within the meaning

145 C. Cls.

TAXES-Continued

LIQUOR TAX-Continued

DRAWBACK-Continued

Real party in interest-Continued

of the court's Rule 20(a), despite the fact that the industrial al-
cohol plant which sold the alcohol to plaintiff bore the expense of
plaintiff's lawsuit and secured the ultimate payment of the plain-
tiff's claim against defendant, McCormick & Co., 160,

Statutes-construction and operation.

Since section 3250(1) of chapter 27 of the Internal Revenue Code
of 1939 provides for a drawback on nonbeverage distilled spirits
subject to the taxing provisions of chapter 26 of the Code, chap-
ter 26 is a proper place to look for definitions to determine the
meaning of the term "produced" used in chapter 27, section 3250(1).
Aetna Insurance Co. v. United States, 142 C. Cls. 771, distinguished.
McCormick & Co., 160.

Internal Revenue 1962

TEMPORARY PROMOTION ACT. See Military Pay.

THIRD PARTIES. See Pleading and Practice.

TORT.

See Counterclaims; Court of Claims-Jurisdiction.

TRADE-MARKS. See Taxes-Income Tax.

TRADING WITH THE ENEMY ACT.

VESTING POWER.

Limitations on.

The President, who had been entrusted by Congress with complete
power over the subject of alien property, including the authority
to determine what property was subject to vesting, effectively lim-
ited that power to vest with respect to property acquired by Ger-
man or Japanese interests after December 31, 1946, when the At-
torney General, together with the Secretaries of the Treasury,
State, and War, issued a press release on March 4, 1947, announcing
that the Office of Alien Property of the Department of Justice
would not vest such property and that the fiduciaries of enemy
property acquired after December 31, 1946, need no longer report it
and were free to transfer it. That press release was an invitation
to aliens to bring property into, or acquire property in, this coun-
try without danger of confiscation. Further evidence of the Presi-
dent's intention to limit the right to vest such property are the
letters sent to the Vice President, as President of the Senate, and
to the Speaker of the House, proposing congressional action ter-
minating the state of war but preserving the right to vest German
property acquired before January 1, 1947. Gmo. Niehaus & Co., 173.
War and National Defense - 12

TRIAL. See Pleading and Practice.

UNIFORM SALES

ACT OF ILLINOIS. See Contracts.

145 C. Cls.

VETERANS' EDUCATION APPEALS BOARD. See Court of Claims—
Jurisdiction.

VETERANS' PREFERENCE ACT. See Civilian Pay.

VETERANS' TRAINING.

COURT OF CLAIMS JURISDICTION.

Veterans' Education Appeals Board decisions.

Review of.

Where the "customary cost of tuition" (section 2, Public Law 610,
64 Stat. 336, 338) determined by the Administrator of Veterans
Affairs, is based on prior contract rates which had been found
by the Veterans Administration to be fair and reasonable, and the
reasonableness of the rate determination had never been attacked
by plaintiff at the agency level, and the evidence before the court
indicates that the holding of the Veterans' Education Appeals Board
as to what was plaintiff's customary rate was neither arbitrary,
capricious nor lacking in substantial evidence, there is no basis for
the court to overturn the holding of the board. B. & S. Lenox
Trade School, 723.

Misrepresentation by school.

Implied promise to make restitution.

Where a private school engaged in the training of veterans under
contract with the Veterans Administration, by misrepresentation,
induced the Administration to make overpayments for tuition, sup-
plies and subsistence allowances for students, the law will imply
a promise on the part of the school to repay such overpayments.
Tennessee Mechanical Institute, 344.

Armed Services 105

Recoupment.

Right of Veterans Administration.

Where the Veterans Administration had determined plaintiff's cus-
tomary cost of tuition for the training of veterans on the basis of
false and inflated cost data, the Administration had the right and
duy to redetermine the school's tuition rate retroactively and to
recoup such overpayments. Tennessee Mechanical Institute, 344.
Armed Services 105

WARSAW CONVENTION. See Carriers.

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