- 6 -
Respondent seeks comfort from Consolidated Edison Co. of New
York, Inc. v. United States, supra. In that case, the taxpayer
prepaid real property taxes to New York City and received a
discount. It contended that the discount was tax-exempt
interest. The Court of Appeals for the Second Circuit rejected
that contention and held that the discount was includable in
gross income. The Court of Appeals then went on to hold that,
under the particular circumstances involved, the taxpayer was
entitled to deduct the full amount of the accrued taxes,
unreduced by the discount, on the ground that it utilized the
economic value of the discount to make the payments. There is
not the slightest indication by the Court of Appeals that it
considered the economic value of the discount as constituting
property, which is the issue involved herein. Such being the
case, and given the totally different circumstances involved
herein, we find respondent's reliance on Consolidated Edison Co
of New York, Inc. misplaced.
The long and short of the matter is that the discount
involved herein had economic value but that value cannot be
equated with property for which petitioner made the prepayment.
Consequently, we answer in the negative the threshold question
delineated by the remand.
Since there is no prepayment for property, we hold that the
prepayment in and of itself does not constitute investment-type
Page: Previous 1 2 3 4 5 6 7 Next
Last modified: May 25, 2011