Court Opinion

ID: 4476933
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:12:16.384773+00
Date Added: 2024-06-11T15:03:27.500843
License: Public Domain

MuedocK, J., concurring :'The statement of the issue is “whether the increment or profit realized upon the sale, 10 days prior to maturity, of certain non-interest-bearing notes originally issued on a discount basis for substantially less than their face value, is taxable as ordinary (interest) income, or as capital gain.” It may be assumed from this statement and from the findings as to bases that a portion of the purchase price was to be paid in notes on which no interest was specified but the face amount of the notes was to include interest and was arrived at by computing interest at 5 per cent to the date of maturity of the notes and adding it to the principal amount owed on that portion of the purchase price. The amount thus added was, and was intended to be, discount, the equivalent of interest, to the extent to which it would ultimately be received by the seller-creditors. The latter chose not to hold the notes to maturity but transferred them to a third party 10 days prior to maturity for an amount slightly less than the face amount of the notes. The excess thus received over the bases of the notes was a realization by the petitioners of the discount involved in the original delivery and receipt of those notes. That discount was the equivalent of interest for the forbearance with respect to that part of the purchase price and is taxable in full as interest. Charles T. Fisher, 19 T. C. 384, affd. 209 F. 2d 513, certiorari denied 347 U. S. 1014. Raum, /., agrees with this concurring opinion.