Proctor Shop, Inc. v. Commissioner
United States Board of Tax Appeals
1. Petitioner issued so-called "debenture preference stock" which is determined to be evidence of indebtedness rather than stock, and the payments made thereon at the rate of 6 percent per annum are held to be deductible as interest paid. 2. The evidence establishes that amounts equal to 2 3/4 percent of gross sales allowed by respondent as additions to reserve for bad debts are insufficient to cover actual bad debts, and that additions equal to 4 percent of gross sales as…
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1. Petitioner issued so-called "debenture preference stock" which is determined to be evidence of indebtedness rather than stock, and the payments made thereon at the rate of 6 percent per annum are held to be deductible as interest paid. 2. The evidence establishes that amounts equal to 2 3/4 percent of gross sales allowed by respondent as additions to reserve for bad debts are insufficient to cover actual bad debts, and that additions equal to 4 percent of gross sales as claimed by petitioner represent reasonable additions to the reserve.
1Opinion of the Court
*725OPINION.
Anundell :
The first question is whether petitioner’s payments to Aaron Holtz of 6 percent on his “ debenture preference stock ” were payments of dividends or interest. Petitioner claims that the real relation between it and Holtz was that of debtor and creditor and the annual sums paid are deductible as interest on borrowed money.
This question has been presented a number of times to the Board and the courts under slightly varying facts. In some cases the so-called stock was to be retired at a fixed date, Arthur R. Jones Syndicate, 6 B.T.A. 853; reversed, 23 Fed. (2d) 833, and in…
2Cases cited5 opinions
- Kentucky River Coal Corp. v. CommissionerUnited States Board of Tax Appeals · 1926
- Finance & Inv. Corp. v. CommissionerUnited States Board of Tax Appeals · 1930
- Nowland Realty Co. v. CommissionerUnited States Board of Tax Appeals · 1929
- Elko Lamoille Power Co. v. CommissionerUnited States Board of Tax Appeals · 1930
- Badger Lumber Co. v. CommissionerUnited States Board of Tax Appeals · 1931
3Cited by1 opinion
- Proctor Shop, Inc. v. CommissionerUnited States Board of Tax Appeals · 1934