- 49 -
indebtedness within the meaning of the statute, stating in
pertinent part that “although an indebtedness is an obligation, an
obligation is not necessarily an ‘indebtedness’”. Id. at 497.
Nevertheless, the Supreme Court’s rejection of the taxpayer’s
argument was more firmly rooted in the Court’s holding that the
disputed payments did not constitute a payment of interest within
the meaning of the statute. See Deputy v. du Pont, supra at 498.
Petitioner’s interpretation of Deputy v. du Pont, supra, for
the proposition that “Salina’s short sale obligation” is “not an
‘indebtedness’ that constitutes a ‘liability’ under Section 752 of
the Code”, overstates the Supreme Court’s holding in that case. In
the first instance, the Supreme Court’s statement in Deputy v. du
Pont, supra at 497, that “an obligation is not necessarily an
‘indebtedness’”, which was directed at the taxpayer’s obligation to
transfer an amount equivalent to the dividends paid on the borrowed
securities to the lender, does not constitute a blanket holding
that a borrower’s obligation to close a short sale by returning the
borrowed securities to the lender will never be considered an
indebtedness. Moreover, petitioner attempts to equate the term
“indebtedness”, as contemplated under section 23(b) of the Internal
Revenue Code of 1928, with the term “liabilities” as used in
section 752, without any meaningful analysis or citation to
precedent. We, of course, are in no way constrained (nor prepared)
Page: Previous 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 NextLast modified: May 25, 2011