Tampa & Gulf Coast Railroad Company v. Commissioner of Internal Revenue

In this petition to review a Tax Court decision, 56 T.C. 1393, we are called upon to decide whether the court properly considered a conglomerate’s treatment of interest on a debt. The Tax Court’s decision was adverse to the taxpayer which had inconsistently treated interest on a debt. We affirm because in our view the Tax Court properly closed a loophole which the conglomerate had opened.

The taxpayer, Tampa & Gulf Coast Railroad Company, owes most of the debt to its parent, Seaboard Coast Line Railroad Company, which controls Tampa through ownership of common stock. The taxpayer reports its…