Malone & Hyde, Inc. v. Commissioner
United States Tax Court
Petitioner was organized as a wholly owned subsidiary to take over an area of existing business of its parent. The parent furnished capital to cover a large portion of petitioner's fixed assets and advanced funds on open account initially without, but in the years involved herein with, interest to cover petitioner's inventory requirements. Petitioner's operations were highly successful.
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Petitioner was organized as a wholly owned subsidiary to take over an area of existing business of its parent. The parent furnished capital to cover a large portion of petitioner's fixed assets and advanced funds on open account initially without, but in the years involved herein with, interest to cover petitioner's inventory requirements. Petitioner's operations were highly successful. Held, under all the circumstances, the advances represented bona fide indebtedness and the interest paid was a proper deduction.
1Opinion of the Court
OPINION
The sole issue for our consideration is whether certain advances to petitioner by its parent corporation and sole stockholder constituted debt or equity capital. If the advances were equity, the interest deductions claimed herein are not allowable.
We see no need to attempt to match the facts in this case to the detailed and varied criteria utilized by the decided cases in determining whether an advance is debt or equity; in the final analysis, the issue is one of fact and the burden of proof is on petitioner. E.g., John Kelley Co. v. Commissioner, 326 U.S. 521, 530 (1946); Gooding…
2Cases cited12 opinions
- John Kelley Co. v. CommissionerSupreme Court of the United States · 1946
- Gooding Amusement Co. v. CommissionerUnited States Tax Court · 1954
- Kraft Foods Company v. Commissioner of Internal Revenue, (Two Cases)Court of Appeals for the Second Circuit · 1956
- Jack Daniel Distillery, Lem Motlow, Prop., Inc. v. The United StatesUnited States Court of Claims · 1967
- Byerlite Corporation v. Parker C. Williams, District Director of Internal Revenue, Eighteenth District of OhioCourt of Appeals for the Sixth Circuit · 1960
7 more not listed; retrieve them via the Exa API.
3Cited by10 opinions
- Kean v. CommissionerUnited States Tax Court · 1988
- Nestle Holdings v. CommissionerUnited States Tax Court · 1995
- Green Leaf Ventures v. CommissionerUnited States Tax Court · 1995
- Bowater Inc. v. CommissionerUnited States Tax Court · 1995
- Bowman v. CommissionerUnited States Tax Court · 1995
5 more not listed; retrieve them via the Exa API.