Colony, Inc. v. Commissioner
United States Tax Court
1. The petitioner is a corporation organized to acquire, subdivide, and sell real estate. It was organized with a total capital of $ 1,000. It obtained bank loans, secured by liens on its real estate, in an amount in excess of $ 149,000. Five of petitioner's stockholders paid over a total of $ 57,800 to petitioner and received petitioner's interest-bearing promissory notes in that amount.
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1. The petitioner is a corporation organized to acquire, subdivide, and sell real estate. It was organized with a total capital of $ 1,000. It obtained bank loans, secured by liens on its real estate, in an amount in excess of $ 149,000. Five of petitioner's stockholders paid over a total of $ 57,800 to petitioner and received petitioner's interest-bearing promissory notes in that amount. Held, the $ 57,800 paid over to petitioner by its stockholders constituted contributions to capital, rather than bona fide loans, and amounts paid by petitioner to the stockholders in 1948, 1949, and 1950…
1Opinion of the Court
OPINION.
HaRRON, Judge:
Issue 1.
The first question to be decided is whether the payments made by petitioner to five of its stockholders in the amounts of $8,988.41, $3,468, and $3,468, in the taxable years ended October 31, 1948, 1949, and 1950, respectively, were payments of interest on indebtedness, which are deductible under section 23 (b) of the 1939 Code, or whether the payments constituted nondeductible distributions in the nature of dividends. The determination of this issue depends on whether the $57,800 paid by the shareholders to petitioner in return for petitioner’s notes…
2Cases cited14 opinions
- Gooding Amusement Co. v. CommissionerUnited States Tax Court · 1954
- Schnitzer v. CommissionerUnited States Tax Court · 1949
- Commissioner of Internal Revenue v. Proctor ShopCourt of Appeals for the Ninth Circuit · 1936
- Uptegrove Lumber Co. v. Commissioner of Internal RevenueCourt of Appeals for the Third Circuit · 1953
- Cohen v. Commissioner of Internal RevenueCourt of Appeals for the Second Circuit · 1945
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3Cited by76 opinions
- Colony, Inc. v. CommissionerSupreme Court of the United States · 1958
- Lawrence v. CommissionerUnited States Tax Court · 1957
- Aldon Homes, Inc. v. CommissionerUnited States Tax Court · 1959
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- Bakersfield Energy Partners, LP v. Comm'rUnited States Tax Court · 2007
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