Southwest Texas Electrical Cooperative, Inc. v. Commissioner

JERRY E. SMITH, Circuit. Judge:

Southwest Texas Electrical Cooperative, Inc. (“petitioner”), received a low-interest federal loan to finance an improvement of its facilities. At the time of construction, petitioner needed and withdrew only one-half of the approved loan amount; it later withdrew the remainder, however, and invested it in Treasury. Notes. The Tax Court, found that interest income from the Treasury Notes is debt-financed and therefore subject to federal taxation. We affirm.

I

Petitioner, a tax-exempt rural electrical cooperative, received a $5,148 million loan from the Rural…