Seaboard Coffee Service, Inc. v. Commissioner
United States Tax Court
In 1971, X corporation issued debentures to A, a shareholder of X, in exchange for A's stock in X. The debentures matured in 15 years, but X could, at its option, redeem them after 10 years for a premium which varied with the time of redemption. Neither X's stock nor the debentures were traded on an established securities market. Held, X is not entitled to an interest deduction for original issue discount. Sec. 1.163-4(a), Income Tax Regs., sustained.
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In 1971, X corporation issued debentures to A, a shareholder of X, in exchange for A's stock in X. The debentures matured in 15 years, but X could, at its option, redeem them after 10 years for a premium which varied with the time of redemption. Neither X's stock nor the debentures were traded on an established securities market. Held, X is not entitled to an interest deduction for original issue discount. Sec. 1.163-4(a), Income Tax Regs., sustained. Held, further, X is not entitled to amortize and deduct the call premium which would be due if it redeemed the debentures prior to maturity,…
1Opinion of the Court
Simpson, Judge:
The Commissioner determined deficiencies in the petitioner’s Federal corporate income taxes, and the petitioner claimed an overpayment, as follows:
TYE May 31— Deficiency Overpayment
1973 . $10,987.87 $714.64
1974 . 14,975.54
1975 . 14,975.53
Certain issues have been settled. The issues remaining for decision are: (1) Whether original issue discount arises where a corporation issues debentures after May 27, 1969, for its own stock when neither the stock nor the debentures are traded on an established securities market; and (2) whether the petitioner is entitled to amortize and…
2Cases cited25 opinions
- United States v. AndersonSupreme Court of the United States · 1926
- Commissioner v. South Texas Lumber Co.Supreme Court of the United States · 1948
- Bingler v. JohnsonSupreme Court of the United States · 1969
- Dixon v. United StatesSupreme Court of the United States · 1965
- Dixie Pine Products Co. v. CommissionerSupreme Court of the United States · 1944
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3Cited by7 opinions
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- Golden Nugget, Inc. v. CommissionerUnited States Tax Court · 1984
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