Wakelee v. Commissioner

U.S. Tax Court

Wakelee v. Commissioner

17 T.C. 745

CourtUnited States Tax Court

DecidedOctober 31, 1951

DocketDocket No. 28411

StatusPublished

This text of 17 T.C. 745 (Wakelee v. Commissioner) is published on Counsel Stack Legal Research, covering United States Tax Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook

Wakelee v. Commissioner, 17 T.C. 745 (tax 1951).

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Opinion

OPINION.

Offer, Judge:

That petitioner’s arrangement with Mrs. Taylor was entered into “for the production or collection of income”¹ cannot be doubted. See 58th Street Plaza Theatre, Inc., (Leo Brecher), 16 T. C. 469, 477. He became entitled to all of the dividends and a quarter of the capital gains arising from the securities covered by the agreement, benefits which were clearly income to him and were so dealt with by him. That he was required under the agreement to pay Mrs. Taylor an annual percentage on the money put up by her may not have been “ordinary” in the sense of “usual” or “frequent.” But it is not so different from other situations as to be considered unlike recognized business transactions and thus outside the scope of the deduction section. See Carl Hess, 7 T. C. 333 (guarantee against loss); Norbert H. Wiesler, 6 T. C. 1148, affd. (C. A. 6) 161 E. 2d 997; Commissioner v. Wilson (C. A. 9), 163 F. 2d 680, certiorari denied 332 U. S. 842 (short sales); 58th Street Plaza Theatre, Inc., supra (joint trading account). The contract was somewhat unusual, but once entered into, the discharge of financial obligations created by it was both ordinary and necessary. Cf. Welch v. Helvering, 290 U. S. 111.

It may well be that these payments were not actually interest, and we do not hold that they were. But they are so analogous to interest that to view them as extraordinary or unnecessary would clearly be unwarranted. Commissioner v. Wilson, supra, 682; see Welch v. Helvering, supra. For the reasons stated, we view the amounts in controversy as deductible, and find the deficiency to have been erroneous to that extent.

Decision will be entered under Pule 50.

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OPINION.

Offer, Judge:

That petitioner’s arrangement with Mrs. Taylor was entered into “for the production or collection of income”¹ cannot be doubted. See 58th Street Plaza Theatre, Inc., (Leo Brecher), 16 T. C. 469, 477. He became entitled to all of the dividends and a quarter of the capital gains arising from the securities covered by the agreement, benefits which were clearly income to him and were so dealt with by him. That he was required under the agreement to pay Mrs. Taylor an annual percentage on the money put up by her may not have been “ordinary” in the sense of “usual” or “frequent.” But it is not so different from other situations as to be considered unlike recognized business transactions and thus outside the scope of the deduction section. See Carl Hess, 7 T. C. 333 (guarantee against loss); Norbert H. Wiesler, 6 T. C. 1148, affd. (C. A. 6) 161 E. 2d 997; Commissioner v. Wilson (C. A. 9), 163 F. 2d 680, certiorari denied 332 U. S. 842 (short sales); 58th Street Plaza Theatre, Inc., supra (joint trading account). The contract was somewhat unusual, but once entered into, the discharge of financial obligations created by it was both ordinary and necessary. Cf. Welch v. Helvering, 290 U. S. 111.

It may well be that these payments were not actually interest, and we do not hold that they were. But they are so analogous to interest that to view them as extraordinary or unnecessary would clearly be unwarranted. Commissioner v. Wilson, supra, 682; see Welch v. Helvering, supra. For the reasons stated, we view the amounts in controversy as deductible, and find the deficiency to have been erroneous to that extent.

Decision will be entered under Pule 50.

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17 T.C. 745, Counsel Stack Legal Research, https://law.counselstack.com/opinion/wakelee-v-commissioner-tax-1951.

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