Hartland Assoc. v. Commissioner
United States Tax Court
Held, the cancellation of interest indebtedness by the shareholder-creditor of Hartland Corp. did not result in the receipt of income by the corporation notwithstanding the deduction of such interest as it accrued in prior years. Such cancellation constituted, rather, a capital contribution to the corporation.
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Held, the cancellation of interest indebtedness by the shareholder-creditor of Hartland Corp. did not result in the receipt of income by the corporation notwithstanding the deduction of such interest as it accrued in prior years. Such cancellation constituted, rather, a capital contribution to the corporation. Held, further, Hartland Corp. must be denied a deduction for accrued rentals payable in favor of its controlling shareholder which remained unpaid as of the close of the 2 1/2-month period following the taxable year. A document evidencing the rental indebtedness issued by the…
1Opinion of the Court
OPINION
The first issue to be decided is whether the cancellation by Rau, a creditor-shareholder of Hartland, of Hartland’s interest indebtedness constituted taxable income to Hartland.
Section 61(a) (12), I.R.C. 1954, requires the inclusion in gross income of “Income from discharge of indebtedness.” It is clear, however, that income resulting from such discharge is not in all cases taxable to the debtor. Where the cancellation is “gratuitous,” that is, “a release of something for nothing,” cancelation of a debt is regarded as a gift2 and is thus excluded from gross income under section 102.…
2Cases cited29 opinions
- Carlos and Jacqueline Marcello v. Commissioner of Internal Revenue, Joseph, Jr. And Anastasia Marcello v. Commissioner of Internal RevenueCourt of Appeals for the Fifth Circuit · 1967
- Helvering v. American Dental Co.Supreme Court of the United States · 1943
- Marcello v. CommissionerUnited States Tax Court · 1964
- Bedell v. Commissioner of Internal RevenueCourt of Appeals for the Second Circuit · 1929
- Johnston v. CommissionerUnited States Tax Court · 1950
24 more not listed; retrieve them via the Exa API.
3Cited by9 opinions
- Putoma Corp. v. CommissionerUnited States Tax Court · 1976
- Putoma Corp., Successor by Merger of Pro-Mac Company, Petitioners- Cross-Appellants v. Commissioner of Internal Revenue, Cross-AppelleeCourt of Appeals for the Fifth Circuit · 1979
- Hartland Assoc. v. CommissionerUnited States Tax Court · 1970
- Putoma Corp. v. CommissionerUnited States Tax Court · 1976
- Putoma Corp. v. CommissionerUnited States Tax Court · 1976
4 more not listed; retrieve them via the Exa API.