Amory Cotton Oil Company, Plaintiff-Appellee-Cross-Appellant v. United States of America, Defendant-Appellant-Cross-Appellee

GODBOLD, Circuit Judge.

This is a subchapter S 1 case concerning the requirement that a corporation electing subchapter S status have only-one class of stock. 2 It presents the questions of whether purported debt of such a corporation may be recharacterized as equity capital constituting a second class of stock, causing the corporation to forfeit its subchapter S status and to become subject to ordinary corporate tax liability, 3 and, if there can be such recharacterization, what standards apply to determine if recharacterization is appropriate. These inquiries bring us to the meaning and the…