2554-58 Creston Corp. v. Commissioner
United States Tax Court
1. Held, notes issued by corporate taxpayer to its three stockholders did not in fact represent an "indebtedness" within the meaning of section 163(a), I.R.C. 1954. The funds were not advanced with reasonable expectation of repayment regardless of the success of the venture; they were, in substance, risk capital.
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1. Held, notes issued by corporate taxpayer to its three stockholders did not in fact represent an "indebtedness" within the meaning of section 163(a), I.R.C. 1954. The funds were not advanced with reasonable expectation of repayment regardless of the success of the venture; they were, in substance, risk capital. The notes were issued in proportion to stock ownership; no outsider would have made any such loan on comparable terms; the ratio of debt to equity was 205 to 1; and there was no firm intention to repay the principal amounts of the loan at maturity in accordance with the terms of the…
1Opinion of the Court
OPINION
Rattm, Judge:
1. Alleged interest paid on the mortgage notes.— Whether amounts designated as interest and paid by petitioner to its shareholders are deductible under section 163(a) of the Internal Revenue Code of 19541 is essentially a question of fact upon which the taxpayer has the burden of proof. Arlington Park Jockey Club v. Sauber, 262 F. 2d 902, 905 (C.A. 7); Charter Wire, Inc. v. United States, 309 F. 2d 878, 880 (C.A. 7); Matthiessen v. Commissioner, 194 F. 2d 659, 661 (C.A. 2); O. H. Kruse Grain & Milling Co. v. Commissioner, 279 F. 2d 123, 125 (C.A. 9); Sam Schnitzer, 13 T.C.…
2Cases cited14 opinions
- John Kelley Co. v. CommissionerSupreme Court of the United States · 1946
- Benjamin D. And Madeline Prentice Gilbert v. Commissioner of Internal RevenueCourt of Appeals for the Second Circuit · 1957
- Bazley v. CommissionerSupreme Court of the United States · 1947
- Schnitzer v. CommissionerUnited States Tax Court · 1949
- Dobkin v. CommissionerUnited States Tax Court · 1950
9 more not listed; retrieve them via the Exa API.
3Cited by43 opinions
- Ambassador Apartments, Inc. v. CommissionerUnited States Tax Court · 1968
- Gamman v. CommissionerUnited States Tax Court · 1966
- Smith v. CommissionerUnited States Tax Court · 1968
- Motel Corp. v. CommissionerUnited States Tax Court · 1970
- Hambuechen v. CommissionerUnited States Tax Court · 1964
38 more not listed; retrieve them via the Exa API.