Commissioner v. Saginaw & Manistee Lumber Co.

MINTON, Circuit Judge.

The respondent-taxpayer, Saginaw & Manistee Lumber Company, is a corporation ■engaged in the business of running a sawmill, and in using some of the lumber in •certain manufacturing processes. It owns its own power plant, and from the power plant sells electricity to outsiders.

The respondent was in financial difficulties and to assure the payment of its bonds, it entered into a contract in January 1936 with the Bondholders’ Protective Committee and the • trustees, whereby the •respondent agreed to pay into a fund for the retirement of its bonds $2.50 for each ■thousand…