Sandor v. Commissioner
United States Tax Court
Petitioners, cash basis taxpayers, borrowed $ 100,000 from a bank to purchase shares in two mutual funds. The loan was evidenced by a note dated Dec. 31, 1968, payable on demand, or if no demand was made, then 5 years after date, with interest at 7 1/2 percent per annum from date until maturity. Petitioners prepaid the interest for the entire 5-year term on Dec. 27, 1968, and deducted the prepaid interest on their 1968 tax return.
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Petitioners, cash basis taxpayers, borrowed $ 100,000 from a bank to purchase shares in two mutual funds. The loan was evidenced by a note dated Dec. 31, 1968, payable on demand, or if no demand was made, then 5 years after date, with interest at 7 1/2 percent per annum from date until maturity. Petitioners prepaid the interest for the entire 5-year term on Dec. 27, 1968, and deducted the prepaid interest on their 1968 tax return. Respondent disallowed the deduction under sec. 446, I.R.C. 1954, because such deduction would materially distort taxable income for 1968. Held, respondent did not…
1Opinion of the Court
Drennen, Judge:
Respondent determined a deficiency in petitioners’ income tax for the year 1968 in the amount of $27,090.
Petitioners accounted for their income on the cash basis. The deficiency determined by respondent in the notice of deficiency resulted from the disallowance of a deduction for prepaid interest in the amount of $88,021 and disallowance of part of a claimed loss from a partnership. The partnership loss issue has been conceded by petitioner and is not before the Court. The reason stated for disallowance of the prepaid interest deduction was that it was “not allowable under…
2Cases cited41 opinions
- Gregory v. HelveringSupreme Court of the United States · 1935
- Knetsch v. United StatesSupreme Court of the United States · 1960
- Security Flour Mills Co. v. CommissionerSupreme Court of the United States · 1944
- Commissioner v. HansenSupreme Court of the United States · 1959
- American Automobile Assn. v. United StatesSupreme Court of the United States · 1961
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3Cited by104 opinions
- Siegel v. CommissionerUnited States Tax Court · 1982
- Andrew A. Sandor and Jeanne Sandor v. Commissioner of Internal RevenueCourt of Appeals for the Ninth Circuit · 1976
- G. Douglas Burck and Marjorie W. Burck v. Commissioner of Internal RevenueCourt of Appeals for the Second Circuit · 1976
- Baird v. CommissionerUnited States Tax Court · 1977
- Burck v. CommissionerUnited States Tax Court · 1975
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