Lewis v. Commissioner
United States Tax Court
To finance the development of a piece of real property, HLI and its corporate associate obtained a $ 900,000 construction loan on Dec. 28, 1970. On that date HLI paid a nonrefundable loan fee of $ 36,000, and $ 44,000 to be applied against interest to accrue on the loan in 1971. Held, on its 1970 return, HLI was entitled to deduct the $ 36,000 loan fee in full, and to deduct the interest prepaid with respect to 1971 to the extent of a penalty which would have been incurred…
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To finance the development of a piece of real property, HLI and its corporate associate obtained a $ 900,000 construction loan on Dec. 28, 1970. On that date HLI paid a nonrefundable loan fee of $ 36,000, and $ 44,000 to be applied against interest to accrue on the loan in 1971. Held, on its 1970 return, HLI was entitled to deduct the $ 36,000 loan fee in full, and to deduct the interest prepaid with respect to 1971 to the extent of a penalty which would have been incurred had the borrowers prepaid the principal of the construction loan in full prior to 1971. Secs. 163 and 446(b), I.R.C. 1954.
1Opinion of the Court
OPINION
The parties to this litigation are agreed that the $36,000 loan fee (points) is interest within the meaning of section 163(a), I. R. C. 1954.4
Under section 163(a),5 a taxpayer reporting income and expenditures in accordance with the cash receipts and disbursements method of accounting is ordinarily entitled to deduct an interest payment in the year in which it is made. Lewis C. Christensen, 40 T.C. 563, 577-578 (1963). Unquestionably the fee was a payment of interest made in 1970; because once the $36,000 had been transferred on December 28, 1970, it was not refundable in any event.…
2Cases cited10 opinions
- Jack E. Golsen and Sylvia H. Golsen v. Commissioner of Internal RevenueCourt of Appeals for the Tenth Circuit · 1971
- Sandor v. CommissionerUnited States Tax Court · 1974
- Burck v. CommissionerUnited States Tax Court · 1975
- Orrisch v. CommissionerUnited States Tax Court · 1970
- R D. And Ida M. Cravens v. Commissioner of Internal RevenueCourt of Appeals for the Tenth Circuit · 1959
5 more not listed; retrieve them via the Exa API.
3Cited by18 opinions
- Baird v. CommissionerUnited States Tax Court · 1977
- Resnik v. CommissionerUnited States Tax Court · 1976
- Rubnitz v. CommissionerUnited States Tax Court · 1977
- James E. And Frances J. Allison v. The United StatesCourt of Appeals for the Federal Circuit · 1983
- Schubel v. CommissionerUnited States Tax Court · 1981
13 more not listed; retrieve them via the Exa API.