Cleaver v. Commissioner
United States Tax Court
Petitioner, who was on cash basis of accounting, borrowed, in 1941, $ 69,000 from a bank and executed his notes in that amount, payable in five years. The notes called for the payment of interest in advance at the rate of 2 1/4 percent. Upon the execution of the notes the bank made available to petitioner $ 61,000 and applied the balance of the proceeds of the loan to the payment of the interest.
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Petitioner, who was on cash basis of accounting, borrowed, in 1941, $ 69,000 from a bank and executed his notes in that amount, payable in five years. The notes called for the payment of interest in advance at the rate of 2 1/4 percent. Upon the execution of the notes the bank made available to petitioner $ 61,000 and applied the balance of the proceeds of the loan to the payment of the interest. Held, petitioner is not entitled to deduct in 1941 the amount of such interest as "interest paid."
1Opinion of the Court
OPINION.
Kern, Judge:
In 1941 petitioner executed three notes by which he agreed to pay to a bank five years after the date of the notes an aggregate sum of approximately $69,000 with interest payable in advance at the rate of 2½ percent per annum from date to maturity. The interest so calculated amounted to approximately $8,000. The bank, at the time of the execution of the notes, gave to petitioner the approximate sum of $61,000 which represented the principal of the notes less the amount of interest for five years. Petitioner was on the cash basis of accounting. The narrow issue before us is…
2Cases cited1 opinion
- Eckert v. BurnetSupreme Court of the United States · 1931
3Cited by50 opinions
- Nat Harrison Assoc., Inc. v. CommissionerUnited States Tax Court · 1964
- Goodstein v. CommissionerUnited States Tax Court · 1958
- G. Douglas Burck and Marjorie W. Burck v. Commissioner of Internal RevenueCourt of Appeals for the Second Circuit · 1976
- Burck v. CommissionerUnited States Tax Court · 1975
- Wilkerson v. CommissionerUnited States Tax Court · 1978
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