Harkins Bowling, Inc. v. Knox

DONOVAN, District Judge.

In this action plaintiff seeks to recover income taxes and interest paid pursuant to a deficiency assessment. Taxpayer, a corporation, deducted interest payments on notes in the amount of $109,650, issued by it to its sole stockholders. The deductions were taken by the taxpayer under authority of § 23(b) of the Internal Revenue Code of 1939, 26 U.S.C.A. § 23(b) (hereinafter referred to as the Act), which allows as a deduction from gross income all interest paid in the tax year on “indebtedness.” The Director determined that the $109,650 constituted a contribution to…