Roberts & Porter, Inc. v. Commissioner
United States Tax Court
Petitioner, a corporation, purchased its own convertible notes for $ 117,763.20 which were originally issued at par for $ 40,000 and callable at 106 percent. The purchase price was based upon the agreed book value of the 240 shares of petitioner's stock into which the notes were convertible.
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Petitioner, a corporation, purchased its own convertible notes for $ 117,763.20 which were originally issued at par for $ 40,000 and callable at 106 percent. The purchase price was based upon the agreed book value of the 240 shares of petitioner's stock into which the notes were convertible. Held, the excess of the purchase price over the call price was directly attributable to the conversion feature of the notes and is not deductible as a business expense, but the 6-percent premium provided for as a part of the call price is deductible as an expense.
1Opinion of the Court
Fisher, Judge:
Respondent determined a deficiency in petitioner’s income tax for the taxable year 1956 in the amount of $40,436.86. The issue for our decision is whether the amount paid by petitioner to redeem its convertible notes in excess of the issuing price is a deductible expense in whole or in part where the excess of the purchase price over the call price is attributable to the conversion feature of the notes.
FINDINGS OF FACT.
Most of the facts have been stipulated and are herein incorporated by this reference.
Roberts & Porter, Inc. (hereinafter referred to as petitioner), is a…
2Cases cited11 opinions
- New Colonial Ice Co. v. HelveringSupreme Court of the United States · 1934
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- Commissioner v. KorellSupreme Court of the United States · 1950
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