W.L. Hardee and Elnora L. Hardee v. The United States

NICHOLS, Circuit Judge.

This case is before the court on appeal from a judgment* of the United States Claims Court in which the trial judge held that an interest-free loan from a closely-held corporation to its majority shareholder and president results in taxable income to this borrower. The trial judge thus refused to follow the well-entrenched principle of tax law that such loans do not result in taxable gain to the borrower. First articulated by the United States Tax Court in Dean v. Commissioner, 35 T.C. 1083 (1961), this principle has since been accepted by five federal courts of appeal…