Swenson Land & Cattle Co. v. Commissioner
United States Tax Court
T Corp. incurred interest expenses on account of its long outstanding bond indebtedness, which indebtedness T Corp. was empowered to prepay in whole or in part on Dec. 31 of each year. During several of the years in which T Corp. continued its bond indebtedness, it invested a large portion of its available funds in short-term (less than 1 year) tax-exempt securities.
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T Corp. incurred interest expenses on account of its long outstanding bond indebtedness, which indebtedness T Corp. was empowered to prepay in whole or in part on Dec. 31 of each year. During several of the years in which T Corp. continued its bond indebtedness, it invested a large portion of its available funds in short-term (less than 1 year) tax-exempt securities. Held, in the circumstances of this case, T Corp. did not incur or continue its indebtedness for the purpose of carrying tax-exempt securities as contemplated by sec. 265(2), I.R.C. 1954.
1Opinion of the Court
Raum, Judge:
The Commissioner determined deficiencies of $15,625.70 and $14,812.23 in petitioner’s Federal income taxes for the calendar years 1967 and 1968, respectively. At issue are: (1) Whether portions of the interest expense deductions claimed by petitioner for the taxable years should be disallowed because they represent interest on indebtedness “continued to purchase or carry” tax-exempt obligations within the meaning of section 265(2), I.R.C. 1954; and if so, (2) how those portions should be determined. The question of the average fair market values of petitioner’s assets, should that…
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