Trowbridge v. Commissioner

¶1MEMORANDUM FINDINGS OF FACT AND OPINION

¶2FAY, Judge: Respondent determined deficiencies of $ 13,253.22 and $ 12,859.30 in petitioners' Federal income taxes for 1975 and 1976, respectively. The only issue is whether petitioners realized taxable income as a consequence of interest-free loans made to petitioner-husband by a corporation of which he was a shareholder.

¶3All the facts have been stipulated and are found accordingly.

¶4Petitioners, Milton Elmo Trowbridge and Elizabeth Trowbridge, husband and wife, were residents of Jackson, Miss., when they filed their petition in this case.

¶5Petitioner Milton Elmo Trowbridge (hereinafter*555 petitioner) owned 50 percent of the stock in Van-Trow Oldsmobile Company (hereinafter the corporation) during the years in issue. The corporation made interest-free loans to petitioner. The balance of those loans outstanding at the end of calendar ears 1974 and 1975, respectively, was $ 246,275.58 and $ 248,224.31.

¶6Petitioner was a cash basis taxpayer. He reported no income as a result of the loans and claimed no interest deduction under section 163 ¹ with respect to the loans.

¶7In his statutory notice of deficiency, respondent determined that petitioner realized income in the form of an economic benefit resulting from the interest-free loans. Accordingly, he increased petitioner's income by $ 19,368.17 and $ 18,726.34 in 1975 and 1976, respectively. ²

¶8The only issue is whether petitioner realized taxable income as a consequence of interest-free loans made to him by a corporation*556 of which he was a shareholder. We hold he did not.

¶9Respondent acknowledges that a decision in his favor would require us to overrule , and its progeny. ³ We decline his invitation to do so.

¶10To reflect the foregoing,

¶11Decision will be entered for petitioners.