Maxwell Hardware Company, a Corporation, on Review v. Commissioner of Internal Revenue, on Review

This is a petition for review of a decision of the Tax Court of the United States, jurisdiction of which is conferred on this Court under Title 26, U.S.C. § 7482 . The Tax Court disallowed to Petitioner, Maxwell Hardware Company, a corporation, net operating loss carryover deductions taken for its tax years ending January 31, 1957 to 1960, inclusive.

In summary, the facts are that Maxwell Hardware had sustained approximately $1,000,000 of losses in a hardware business. It entered into an agreement with two partners, Beckett and Fede-righi, who were engaged in numerous real estate development activities as partners and controlling stockholders of corporations, whereby a real estate department was established in Maxwell Hardware to develop a subdivision, the funds therefor being furnished by the two partners through purchases of non-voting preferred stock in the corporation for an amount which was approximately two-fifths of the then value of the common stock of the corporation. The real estate department was accounted for independently of the other corporate business. The agreement provided that the real estate department should not be discontinued for a period of six years, that…