Adams Bros. Co. v. Commissioner
United States Tax Court
Petitioner, a wholly owned subsidiary, received advances from its parent. The parent paid purchase invoices and petitioner deposited sales proceeds to parent's account. The debits and credits were recorded in open accounts. Periodically, petitioner issued its note for the balance due parent, and canceled the last prior note. The notes were negotiable but were not negotiated.
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Petitioner, a wholly owned subsidiary, received advances from its parent. The parent paid purchase invoices and petitioner deposited sales proceeds to parent's account. The debits and credits were recorded in open accounts. Periodically, petitioner issued its note for the balance due parent, and canceled the last prior note. The notes were negotiable but were not negotiated. Held, the indebtedness was not "evidenced" by a note and was not borrowed capital within the meaning of section 719 (a) (1), Internal Revenue Code.
1Opinion of the Court
opinion.
Tietjens, Judge:
The petitioner, a wholly owned subsidiary of Paxton & Gallagher Co., maintained two open accounts with its parent, one each for its grocery business and its liquor business. The parent advanced money by paying the petitioner’s purchase invoices. The petitioner deposited sales receipts to the parent’s account. Generally the petitioner owed the parent for advances in excess of sales for the grocery business, while the parent owed the petitioner for an excess of deposits over advances on the liquor business. Each corporation gave the other its note for the separate…
2Cases cited2 opinions
- Flint Nortown Theatre Co. v. CommissionerUnited States Tax Court · 1945
- Kellogg Com. Co. v. CommissionerUnited States Tax Court · 1949
3Cited by1 opinion
- Adams Bros. Co. v. CommissionerUnited States Tax Court · 1954