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proof is on the Commissioner. Since the Govern-
ment has not sustained its burden of proof the
5-year statute is not applicable and the 3-year
statute of limitations precluded a lawful assessment
for that year. The plaintiff is entitled to recover.
Id.

VI. (6) In the instant case, the plaintiff, on July 23, 1946,
filed a waiver of restrictions on assessment and col-
lection of the income tax deficiencies for 1942 through
1945, and on November 22, 1946, the Commissioner
of Internal Revenue assessed the tax deficiencies
with interest computed to August 22, 1946, thirty
days after the filing of the waiver. On November 7,
1947, the Commissioner signed the overassessment
schedule and issued certificates of overassessment
for 1942 and 1943, with interest thereon, part of
which was credited against the deficiencies and in-
terest. It is held that interest on the overpayment
stopped accruing on November 22, 1946, not on
August 22, 1946. Judgment for plaintiff. Dewey
Portland Cement, 41.

Internal Revenue 2201.

VII. (7) Where plaintiff, a corporation, sues for amounts paid
as "over-riding royalties" in 1947 and 1948 which
amounts plaintiff asserts were deductible as ordinary
and necessary expenses under Section 23 (a) (1) (A)
of the Internal Revenue Code, it is held, on all the
facts and circumstances of the case, that the plaintiff
is not entitled to recover. Ingle Coal, 121.
Internal Revenue 570.

VIII. (8) The plaintiff corporation, Ingle Coal Corporation, was
successor to the Ingle Coal Company, a family
corporation engaged in the business of mining bitu-
minous coal on lands held under lease, the lands not
having been acquired from the Ingle family. The
stockholders of the old corporation decided to liqui-
date the corporation, transfer its assets and liabili-
ties to the stockholders, who would then in turn
transfer them to a new corporation in exchange for
the stock of the new corporation and a new contract
obligating the new corporation to pay named indi-
viduals, who were then stockholders, five cents a

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ton royalty, in addition to the royalty stipulated in
the lease, on the coal thereafter mined under the
lease. The plan was duly consummated and royal-
ties paid for the period from July 1, 1942, to Decem-
ber 31, 1942, and for the year 1943. The Commis-
sioner disallowed the deduction of the overriding
royalties as an expense. In 10 T. C. 1199, Ingle
Coal Corporation v. Commissioner, the Tax Court
sustained the finding of the Commissioner and held
that the "over-riding royalties" were not an ordinary
and necessary expense and were in substance a non-
deductible distribution of dividends. The decision
was affirmed, 174 F. 2d 569. Id.

IX. (9) In its income tax returns for the tax years 1947 and
1948, the plaintiff included in its deductions the
"over-riding royalties" for each of these years, which
deductions the Commissioner disallowed. Claim
for refund was timely filed. Id.

Internal Revenue & 570.

X. (10) The contention of the defendant is not sustained that
the plaintiff is estopped from prosecution of the
instant case by the doctrine of collateral estoppel
for the reason that the material facts and the issues
of law are the same as those previously litigated in
Ingle Coal Corporation v. Commissioner, 174 F. 2d.
569. The fact that 50 percent of the "over-riding
royalties" involved in the instant case were paid to
non-stockholders is a significant change in the ma-
terial facts which makes the doctrine of collateral
estoppel inapplicable. Id.

Judgment 715 (3).

XI. (11) In the light of all the facts and circumstances of the
instant case, it is held that the transaction by which
the assets and liabilities of the Ingle Coal Company
were transferred to the Ingle Coal Corporation, the
plaintiff, was without substance and was a sham.
The agreement lacked real consideration, was
gratuitous, and was in reality a device for a distri-
bution of dividends or profits in the guise of royalty
payments. The payments of the "over-riding
royalties" were not an ordinary and necessary
expense within the meaning of the tax statutes. Id.
Internal Revenue

570.

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XII. (12) Taxpayers are free to adopt any form of legal organiza-
tion for the conduct of their affairs, dictated by
business prudence and convenience. Taxpayers
have a right to decrease the amount of their taxes
by means which the statutes permit. But the
means adopted are subject to scrutiny, and, in a
proper case, may be ignored for tax purposes. Id.
Internal Revenue 193.

XIII. (13) For the purpose of administration of the taxing
statutes, transactions involving close or family
corporations and the stockholders are subject to
special scrutiny to determine their true purpose and
effect. Transitory arrangements should be dis-
regarded for substance and reality. Id.

XIV. (14) Where the plaintiff sues to recover interest on over-
payments of taxes for the fiscal years ending August
31, 1943, 1944, 1947, and 1948, it is held that under
Section 3771 (b) (1) of the Internal Revenue Code
(1939) interest on the overassessments should be
allowed up to the assessment date of the deficiencies
against which a portion of the overassessment was
credited. Accordingly, interest on the overpayments
continued beyond 30 days after the filing of waivers.
Judgment suspended. Abney Mills, 159.

XV. (15) Where plaintiff, an attorney, who made his income tax
return on a cash basis, sues to recover for a portion of
taxes paid by him in 1937, on the basis that he had
mistakenly included items from two sources of in-
come; it is held that plaintiff is entitled to recover
on one item of asserted expense and is not otherwise
entitled to recover. Black, 165.

XVI. (16) Plaintiff was retained to procure compensation for
losses resulting from a fire caused by a railroad
operated by the Government and agreed to accept
as his compensation a percentage of net collections
received by a pool arrangement between himself and
a group of other attorneys. It is held that plaintiff
was taxable in 1937 on the entire amount of his
compensation for that year although only a part of
such compensation was received by him in that year
and the balance in a subsequent year, where it is

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determined that the entire amount was available
during the taxable year and no reason appeared why
the remaining portion could not then have been
collected by asking for it. Id.

Internal Revenue 265.

XVII. (17) Plaintiff reported as income for the year 1937 the sum
of $56,750 as compensation received as a lobbyist
for an association interested in legislation before
Congress, plaintiff taking $13,000 as expenses, re-
presenting sums paid over by plaintiff to individuals,
who, in his opinion, would acknowledge receipt
thereof. Later a further amount of such expenses
was claimed in an amended return, including $4,000
plaintiff asserts that he paid to others whom he did
not identify, and who are presumed to have been
persons who would have denied the receipt of the
asserted payments. It is held that to permit the
deduction of such payments as ordinary and neces-
sary business expenses would be an obvious violation
of public policy.

Internal Revenue

Id.
548.

XVIII. (18) On the report of a commissioner finding that there is
satisfactory proof that one-half of the plaintiff's
hotel bill during the five months of the active lobby-
ing for the sugar legislation was a deductible expense,
recovery is allowed for $2,505. Id.

Internal Revenue 568.

XIX. (19) In a suit for recovery of additional income taxes
assessed by the defendant and paid by the plaintiff
for the calendar year 1944, where the defendant
admits the overpayment and the only question
before the Court of Claims is whether the formal
claim for refund filed by the plaintiff on June 19,
1949, can be held to have been a perfection of an
informal claim filed on July 19, 1946; it is held that
in the light of the facts and circumstances existing
at the time, including the intention of the taxpayer
and the understanding of the Treasury officials,
the formal refund claim of June 19, 1949, was but
a perfection of the informal claim of July 19, 1946.
The defendant's motion to dismiss is denied. The
plaintiff is entitled to recover. Stuart, 174.
Internal Revenue

2027.

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XX. (20) In his 1944 income tax return the plaintiff claimed a
deduction on account of amortizable bond premiums
which was disallowed by the Commissioner in
accordance with the practice at that time. The
deductibility of the bond premiums in question was
then in litigation. Plaintiff in July 1946, filed a
"Waiver of Restriction on Assessment and Collec-
tion of Deficiency in Tax," and paid the amounts
in question. The "Waiver" stated that it should
not prejudice the plaintiff's claim for refund and
should not be construed as a final closing agreement.
Id.

Internal Revenue 2027.

XXI. (21) The purpose of the claim for refund required by Section
322 of the Internal Revenue Code is to advise the
Government that the taxpayer believes his taxes
have been erroneously assessed, and that he asks
for the return of the amount of overassessment
or for credit to his account. Whether a refund is
sufficient under the statute must be judged by the
facts rather than by the form. The assertion that
an alleged overpayment is erroneous and that such
payment is an overassessment need not contain a
specific and express demand for immediate refund,
when, as in the instant case, the question upon the
basis of which the refund is asserted and is asked,
is in litigation. Id.

Internal Revenue 2027.

XXII. (22) Upon the conclusion of the litigation which upheld
the plaintiff's contention as to the deductibility of
the amortization of bond premiums of the type in
question, plaintiff on June 19, 1949, filed on the
proper form a formal claim for refund, perfecting
his reservation and informal claim of July 19, 1946.
It is held that in the light of all the surrounding
facts and circumstances, including the intention of
the taxpayers, the formal claim of June 19, 1949, was
a timely amendment of the informal claim of July
19, 1946. Id.

XXIII. (23) The plaintiff in the instant case did not file a motion
for summary judgment but in view of the opinion
of the court, and the facts alleged in the petition
and the decision in Commissioner v. Korell, 339 U. S.
619, it is held that the plaintiff is obviously entitled