Custom Chrome, Inc. and Subsidiaries - Page 28

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          compensation paid under section 83.  We disagree.  The existence            
          of OID is determined as of the date of issue of the investment              
          unit.  Secs. 1273(b)(2), 1273(c)(2), 1275(a)(2)(B).                         
               In support of the argument that it should be entitled to a             
          $3.069 million deduction for 1992 as loan fees with regard to the           
          $26 million loan, petitioner relies on cases where options were             
          issued as trade discounts in connection with long-term sales                
          contracts.  See Computervision Intl. v. Commissioner, T.C. Memo.            
          1996-131; Convergent Techs., Inc. v. Commissioner, T.C. Memo.               
          1995-320; Sun Microsystems, Inc. v. Commissioner, T.C. Memo.                
          1993-467.  Petitioner's reliance on these cases is misplaced.               
          The options in the instant case were not issued as trade                    
          discounts but as part of a lending transaction.  Further, the               
          cases cited do not involve loan fees or loan charges.  No                   
          credible evidence supports petitioner's claimed deduction for               
          loan fees.                                                                  
               Further, under section 83 only upon exercise of stock                  
          options received for services rendered may a corporation claim              
          deductions for compensation paid.  The options at issue herein              
          were not issued to FNBB in connection with services rendered.               
               The evidence does not support, for any of the years in                 
          issue, petitioner’s claim to a deduction of $3.069 million for              
          OID, loan fees, or compensation paid under section 83 relating to           







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