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In Halle, the mutual agreement of the purchaser and seller
covering a purchase price and settlement date, as well as the
additional compensation due the seller if the settlement date
were deferred, persuaded the court that the parties had
contractually established an indebtedness. With respect to the
obligation found there to be indebtedness, there was agreement
between the purchaser and seller covering the amount of the
obligation, as of its due date, as well as agreement covering the
due date itself.
Indeck can meet neither of those conditions with respect to
the obligation it claims is indebtedness. Prior to the
Settlement Agreement, the amount and timing of any obligation
Indeck owed Mr. Polsky for his shares depended upon the terms of
the Shareholders’ Agreement, the interpretation of which was
disputed by the parties. The only adjudication of those terms,
by an arbitrator, had been vacated before ripening into an
enforceable judgment. The contractual arrangement between Indeck
and Mr. Polsky that might have passed muster as indebtedness
under the standard employed in Halle was the Settlement
Agreement, as it fixed the amount of Indeck’s obligation and its
due date. But under the Settlement Agreement, Indeck was not
required to make payment before May 15, 1994; there was no
forbearance of money by Mr. Polsky until that date and thus no
interest for purposes of section 163(a).
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