- 20 -
National Alfalfa Dehydrating & Milling Co., 417 U.S. 134, 149
(1974):
that, while a taxpayer is free to organize his affairs
as he chooses, nevertheless, once having done so he
must accept the tax consequences of his choice, whether
contemplated or not, * * * and may not enjoy the
benefit of some other route he might have chosen to
follow but did not. [Citations omitted.]
See also Television Indus., Inc. v. Commissioner, 284 F.2d 322,
325 (2d Cir. 1960), affg. 32 T.C. 1297 (1959).
Taxpayers have, however, been permitted to assert substance
over form in situations where their “tax reporting and other
actions have shown an honest and consistent respect for * * * the
substance of * * * [a transaction]". FNMA v. Commissioner, 90
T.C. 405, 426 (1988) (citing Illinois Power Co. v. Commissioner,
87 T.C. 1417, 1430 (1986)), affd. 896 F.2d 580 (D.C. Cir. 1990).
Petitioner has, for all purposes, treated the advances as
loans and was instructed by its parent corporation to accrue
interest. Under those circumstances, we reject petitioner's
approach of testing its own choice of form with traditional debt
versus equity considerations, such as the absence of a fixed
payment schedule, maturity dates, enforcement, or formal debt
instruments.10 We are likewise unpersuaded by petitioner's
10 Petitioner, for example, relies on the following line of
cases. Hardman v. United States, 827 F.2d 1409 (9th Cir. 1987);
Fin Hay Realty Co. v. United States, 398 F.2d 694 (3d Cir. 1968);
Dixie Dairies Corp. v. Commissioner, 74 T.C. 476 (1980); Nestle
Holdings, Inc. v. Commissioner, T.C. Memo. 1995-441; Green Leaf
(continued...)
Page: Previous 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 NextLast modified: May 25, 2011