John S. Taft and Virginia M. Taft and John Taft Electric Company, a Corporation v. Commissioner of Internal Revenue

This is a petition to review the decisions entered by the Tax Court in two separate cases. The Tax Court consolidated the cases for trial and briefing and they have also been consolidated for purposes of this proceeding. We have jurisdiction to hear this matter pursuant to the provisions of 26 U.S.C. § 7482 (1958).

Petitioners in the first case, number 17593, are John S. Taft (hereinafter Taft) and Virginia M. Taft, husband and wife. In the second case, number 17594, the petitioner is John Taft Electric Company, a corporation.

We will briefly set forth the pertinent facts and then discuss each case separately.

In 1953 and for some years prior thereto Taft was the sole proprietor of the John Taft Electric Company, a sole proprietorship engaged in the electrical contracting business. All of the assets of the proprietorship were in Taft’s own name. In about 1953, in connection with discussions with his attorney over the preparation of a will Taft decided to incorporate the proprietorship. Taft’s attorney was a director of the Rocklite Company, a corporation (hereinafter Rocklite). Rocklite had been engaged in the manufacturing and selling of lightweight aggregate, a construction…