Burck v. Commissioner
United States Tax Court
Petitioner, a cash basis taxpayer, borrowed from a bank, late in the calendar year, amounts totaling $ 5,388,600. Of this amount $ 1 million was added to petitioner's bank account. On Dec. 30, 1969, 1 day after petitioner's receipt of the borrowed funds, pursuant to the negotiations culminating in the loan, the amount of $ 377,202, representing 1 year's interest on the loans, was debited to petitioner's bank account and transferred to the creditor bank.
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Petitioner, a cash basis taxpayer, borrowed from a bank, late in the calendar year, amounts totaling $ 5,388,600. Of this amount $ 1 million was added to petitioner's bank account. On Dec. 30, 1969, 1 day after petitioner's receipt of the borrowed funds, pursuant to the negotiations culminating in the loan, the amount of $ 377,202, representing 1 year's interest on the loans, was debited to petitioner's bank account and transferred to the creditor bank. Petitioners deducted this amount on their 1969 tax return under sec. 163(a). Respondent disallowed the deduction claiming the loan…
1Opinion of the Court
Fay, Judge:
Respondent determined a deficiency in the Federal income tax of petitioners for the taxable year 1969 in the amount of $245,956.55.
The primary issue for decision is whether the petitioners have prepaid 1 year’s interest or have in substance received a discounted loan in which no interest was paid during the taxable year in question. If the former, we must then determine whether a deduction in excess of 3/365 of the interest paid during the taxable year would result in a material distortion of income.
FINDINGS OF FACT
Certain facts have been stipulated and are found accordingly. The…
2Cases cited24 opinions
- Knetsch v. United StatesSupreme Court of the United States · 1960
- Commissioner v. HansenSupreme Court of the United States · 1959
- Evans v. GoreSupreme Court of the United States · 1920
- Kapel Goldstein and Tillie Goldstein v. Commissioner of Internal RevenueCourt of Appeals for the Second Circuit · 1966
- Stubbs, Overbeck & Associates, Inc. v. United StatesCourt of Appeals for the Fifth Circuit · 1971
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