Clearview Apartment Co. v. Commissioner
United States Tax Court
Petitioner in March 1951 borrowed $ 900,000 from the Metropolitan Life Insurance Company, and used $ 300,000 of the proceeds of the loan to pay the unpaid portion of a prior loan which was due on that date.
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Petitioner in March 1951 borrowed $ 900,000 from the Metropolitan Life Insurance Company, and used $ 300,000 of the proceeds of the loan to pay the unpaid portion of a prior loan which was due on that date. Held, the $ 600,000 additional indebtedness was not incurred by petitioner in good faith for the purposes of its business and was not, therefore, "borrowed capital" within the meaning of section 439 (b) (1) of the Internal Revenue Code of 1939 for the purpose of computing its invested capital and excess profits credit.
1Opinion of the Court
OPINION.
Raum, Judge:
The petitioner elected to use the “historical” invested capital method in the computation of its taxable adjusted excess profits net income for the year 1951. Having made this election, it became entitled to a credit based on invested capital under the applicable provisions of the Internal Bevenue Code of 1939 (secs. 430, 431, 434, 436, 437, 439, and 458). One of the factors entering into the determination of the amount of this credit is “daily borrowed capital.” That term is defined in section 439 (b) (1) to include the following:
The amount of the outstanding indebtedness…
2Cases cited2 opinions
- Hart-Bartlett-Sturtevant Grain Co. v. Commissioner of Internal RevenueCourt of Appeals for the Eighth Circuit · 1950
- Mahoney Motor Co. v. Commissioner of Internal RevenueCourt of Appeals for the Eighth Circuit · 1951
3Cited by1 opinion
- Clearview Apartment Co. v. CommissionerUnited States Tax Court · 1955