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13 It is quite true that the court in the International
Canadian case stated (p. 525) that the active conduct
requirement “is to disqualify corporations which are
‘inactive’ in the sense that they receive investment income
rather than business income.” But that statement was made
in the context of a situation where the taxpayer was engaged
regularly and actively in the business of making sales in
Canada, and the income in question was derived from such
sales. The court obviously did not give any consideration
to the applicability of the statute to an isolated
transaction of the type before us, and we do not give that
language the possible expansive reading that would include
such a transaction within the “active conduct” clause.
14 This understanding of the statutes’ purpose conforms well
to the Commissioner’s position that interest income, which
would otherwise constitute “passive” income outside the
purview of sec. 921(2), meets the “active conduct”
requirement when received from the taxpayer’s customers on
account of their credit obligations arising from the regular
and recurring conduct of the taxpayer’s business. Rev. Rul.
65-290, 1965-2 C.B. 241.
In Kewanee Oil Co. v. Commissioner, 62 T.C. at 738, we held
that the taxpayer’s income from the sale of “substantially all of
its oil- and gas-producing property and associated equipment, the
source of virtually its entire revenues until that time” was
derived from the termination of the major portion of its
business and not from the active conduct thereof;
accordingly, * * * [the taxpayer] did not meet the “active
conduct” requirement set forth in section 921 and was
therefore not entitled to the deduction provided in section
922. [Id. at 739.]
In United States Gypsum Co. v. United States, 304 F. Supp.
at 642-643, the opinion upon which respondent relies, the
District Court discussed approvingly the opinion of the Court of
Appeals for the Ninth Circuit in Frank v. International Canadian
Corp., supra. The District Court then contrasted the factual
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