Hewlett-Packard Co. v. Commissioner

OPINION

KOZINSKI, Circuit Judge:

It’s a timeless and tiresome question of American tax law: Is a transaction debt or equity? The extremes answer themselves. The classic equity investment entities'the investor to participate in management and share the (potentially limitless) profits— but only after those holding preferred, interests have been paid. High risk, high reward. The classic debt instrument, by contrast, entities' an investor to preferred and limited payments for a fixed-period. Low -risk, predictable reward. But a-vast hinterland of hybrid financial arrangements lurks'in the middle.

Des…