Underhill v. Commissioner
United States Tax Court
Petitioner acquired obligations in the form of negotiable promissory notes at sizable discounts. The obligations were usually secured by second deeds of trust on residential property. Petitioner treated payments during the taxable year as recovery of his cost. In prior taxable years, petitioner had treated a prorata portion of each payment as discount income.
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Petitioner acquired obligations in the form of negotiable promissory notes at sizable discounts. The obligations were usually secured by second deeds of trust on residential property. Petitioner treated payments during the taxable year as recovery of his cost. In prior taxable years, petitioner had treated a prorata portion of each payment as discount income. Held, with some exceptions, the obligations owned by petitioner as measured by defined critical factors were speculative. Held, further, that petitioner was not required to report, as discount income, a prorata portion of payments on…
1Opinion of the Court
Tannenwald, Judge:
The respondent determined a deficiency in petitioners’ income taxes for the year 1961 in the amount of $1,777.47.
There are two questions presented. The first involves a determination of the proper basis for reporting discount income by a cash basis taxpayer who has purchased debt obligations at less than the unpaid principal balance of the obligation at the time of acquisition. The second involves a determination whether, if the cost recovery basis is held to be proper, petitioner is precluded from utilizing such basis by section 446 (e) ,1 where prior to the taxable year…
2Cases cited27 opinions
- Burnet v. Sanford & Brooks Co.Supreme Court of the United States · 1931
- Burnet v. LoganSupreme Court of the United States · 1931
- Ross v. Commissioner of Internal RevenueCourt of Appeals for the First Circuit · 1948
- Beacon Publishing Company, a Kansas Corporation v. Commissioner of Internal RevenueCourt of Appeals for the Tenth Circuit · 1955
- Fruehauf Trailer Co. v. CommissionerUnited States Tax Court · 1964
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3Cited by48 opinions
- Southern Pacific Transp. Co. v. CommissionerUnited States Tax Court · 1980
- Standard Oil Co. v. CommissionerUnited States Tax Court · 1981
- Dearborn Gage Co. v. CommissionerUnited States Tax Court · 1967
- Lewis v. CommissionerUnited States Tax Court · 1966
- Herbert S. Witte v. Commissioner of Internal RevenueCourt of Appeals for the D.C. Circuit · 1975
43 more not listed; retrieve them via the Exa API.