Perlman v. Commissioner
United States Tax Court
Petitioner was an officer and a substantial stockholder of an insurance company. The company's financial condition was precarious. In 1950 petitioner canceled the company's indebtedness to him for unpaid portions of his 1943-1947 salary. Held, the cancellation constituted a contribution to capital and was not deductible under section 23 (a) or (e), I. R. C. 1939.
1Opinion of the Court
OPINION.
Baum, Judge:
Petitioners argue that they are entitled to the deduction as an expense under section 23 (a) or as a loss under section 23 (e) of the Internal Eevenue Code of 1939. However, we conclude on all the evidence that the release constituted a contribution to capital and, therefore, is not deductible in 1950 under any section of the Code,
The company’s financial condition was acute. Its capital and surplus account was far too low in relation to the amount of premiums written, and there was danger that the State insurance authorities might take action that would cripple the…
2Cases cited4 opinions
- Lidgerwood Manufacturing Co. v. Commissioner of Internal RevenueCourt of Appeals for the Second Circuit · 1956
- Sackstein v. CommissionerUnited States Tax Court · 1950
- O. D. Bratton v. Commissioner of Internal RevenueCourt of Appeals for the Sixth Circuit · 1954
- Goldner v. CommissionerUnited States Tax Court · 1956
3Cited by1 opinion
- Perlman v. CommissionerUnited States Tax Court · 1957