Johnson v. Commissioner
United States Board of Tax Appeals
Under a plan to avoid taxes, the husband placed money in the hands of his wife, who placed it with a trustee bank, which, under direction in the trust instrument, lent to the husband on his note, which note the trustee was prohibited from assigning or forcibly collecting; the husband paid to the trustee an amount equal to interest on the money, with which amount the trustee, under the plan, paid premiums on insurance on the busband's life for the benefit of the wife, and a…
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Under a plan to avoid taxes, the husband placed money in the hands of his wife, who placed it with a trustee bank, which, under direction in the trust instrument, lent to the husband on his note, which note the trustee was prohibited from assigning or forcibly collecting; the husband paid to the trustee an amount equal to interest on the money, with which amount the trustee, under the plan, paid premiums on insurance on the busband's life for the benefit of the wife, and a surplus to her. Held, the amount paid the trustee as interest is not deductible by the husband; held, further, no part of…
1Opinion of the Court
*1007OPINION.
Seawell :
Section 23 of the Revenue Act of 1928 provides:
In computing net income there shall be allowed as deductions:
& # sjc(b) Interest. — All interest paid or accrued within the taxable year * * *.
Petitioner Johnson contends that he borrowed $400,000 from the City Bank Farmers Trust Co., trustee, and gave the trustee his demand note for that amount bearing 6 percent interest, and that during the taxable year paid said trustee $24,000, the amount of interest accrued on the note during the year.
Interest is defined to be “compensation which is paid by the borrower to the lender or by…
2Cases cited4 opinions
- Corliss v. BowersSupreme Court of the United States · 1930
- Douglas v. WillcutsSupreme Court of the United States · 1935
- Burnet v. WellsSupreme Court of the United States · 1933
- McArthur v. . GordonNew York Court of Appeals · 1891
3Cited by18 opinions
- Apt v. BirminghamDistrict Court, N.D. Iowa · 1950
- Van Zandt v. CommissionerUnited States Tax Court · 1963
- Kerr v. CommissionerUnited States Tax Court · 1999
- Linder v. CommissionerUnited States Tax Court · 1977
- Lerner v. CommissionerUnited States Tax Court · 1978
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