Joe M. Smith and Florence P. Smith v. Commissioner of Internal Revenue, Henry v. Nielsen and Margaret E. Nielsen v. Commissioner of Internal Revenue

Petitioners seek a review of the decision of the tax court in connection with income tax deficiencies for the years 1962 and 1963.

The issues presented to us for review are:

(1) Whether Joe M. Smith, Robert H. Anderson and Henry V. Nielsen, shareholders in Smith-Nielsen Manufacturing Co., an electing small business corporation, must report as taxable income, payments received in reduction of a corporation indebtedness to them. Their bases for the indebtedness have been reduced, but not to zero, by virtue of adjustments for corporate net operating losses.

(2) Whether Joe M. Smith and Henry V. Nielsen, as members of a partnership on an accrual basis, must include an alleged compromise rental payment in the amount of $40,149.00 actually received on July 31, 1963, in income for the period ended June 30, 1963.

(1) Rather than add to the monumental volume of material in published opinions, we adopt as our own, on issue number one, the statement of facts as developed in the opinion of the Tax Court, Smith v. Commissioner, 48 T.C. 872 -875 (1967). Moreover, on this issue, we affirm the decision of the Tax Court for the reasons stated in its opinion. 48 T.c. 878-879.

(2) This issue…