Tonopah & T. R. Co. v. Commissioner
United States Board of Tax Appeals
Foreign corporation A owns all of the stock of domestic corporation B. The latter has indebtedness evidenced by bonds held by nonresident alien individuals and foreign corporations. The bonds are guaranteed as to principal and interest by A. For a number of years, including the taxable years, B has been operating at a loss and A has made and charged advances to it.
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Foreign corporation A owns all of the stock of domestic corporation B. The latter has indebtedness evidenced by bonds held by nonresident alien individuals and foreign corporations. The bonds are guaranteed as to principal and interest by A. For a number of years, including the taxable years, B has been operating at a loss and A has made and charged advances to it. During the taxable year A, pursuant to its guaranty, paid the interest due on B's bonds, out of funds on deposit in a foreign country, and charged the amount thereof as advances to B. Held, the interest so paid was income from…
1Opinion of the Court
*1045OPINION.
Hill:
The sole question presented for determination is whether the interest paid to nonresident alien individuals and foreign corporations under the circumstances detailed in the stipulated facts was income from sources within the United States, taxable under sections 143 and 144 of the Revenue Act of 1936. If the interest so paid was such income, the deficiency determined by respondent must be approved; otherwise there is no deficiency.
Section 119 (a) (1) of the Revenue Act of 1936 provides in material part as follows:
SEO. 119. INCOME WITHIN THE UNITED STATES.(a) Gross Income prom…
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