Jacobson v. Comm'r of Internal Revenue

7 Citing cases

  1. Levitt v. United States

    368 F. Supp. 644 (S.D. Iowa 1974)   Cited 3 times

    ties then moved for summary judgment, and the Court took the case under submission upon written briefs and oral argument.         The legal principles involved in applying section 265(2) are discussed in the following cases: Mariorenzi v. Commissioner (1973), 32 T.C.M. 681; Indian Trail Trading Post, Inc. v. Commissioner (1973), 60 T.C. 497; Bradford v. Commissioner (1973), 60 T.C. 253; Batten v. United States (D.C.Va., 1971), 322 F.Supp. 629; Norfolk Shipbuilding & Dry-Dock Corp. v. United States (D.C.Va., 1971), 321 F.Supp. 222; Ball v. Commissioner (1970), 54 T.C. 1200; Leslie v. Commissioner (CA 2, 1969), 413 F.2d 636, cert. denied, 396 U.S. 1007, 90 S.Ct. 564, 24 L.Ed.2d 500; Wisconsin Cheeseman, Inc. v. United States (CA 7, 1968), 388 F.2d 240; Illinois Terminal Railroad Co. v. United States (1967), 375 F.2d 1016, 179 Ct.Cl. 674; Bishop v. Commissioner (CA 4, 1965), 342 F.2d 757; Jacobson v. Commissioner (1957), 28 T.C. 579.         From these cases the following principles can be distilled.

  2. Indian Trail Trading Post, Inc. v. Comm'r of Internal Revenue

    60 T.C. 497 (U.S.T.C. 1973)

    Under these circumstances, it might be said that there is a sufficient degree of tracing present to justify the inference that, whatever petitioner's original purpose may have been, it became so diffused by the act of allowing the funds to lie fallow that the actual use of the funds for the acquisition of the bonds provided the necessary purposive connection with the earlier borrowing. Cf. Constance M. Bishop, supra; Bernard H. Jacobson, 28 T.C. 579 (1957), where this Court also held that the mere fact that funds were commingled with other funds was not sufficient to insulate the taxpayer. That petitioner utilized the borrowed funds to reimburse itself for prior expenditures does not require a different conclusion in the absence of any evidence that such reimbursement was necessary to enable petitioner to finance the ongoing current requirements of its business.

  3. Ball v. Comm'r of Internal Revenue

    54 T.C. 1200 (U.S.T.C. 1970)   Cited 6 times

    With this test, it is clear that a ‘taxpayer is not ipso facto deprived of a deduction for interest on indebtedness while holding tax-exempt securities.’ Wisconsin Cheesman, Inc. v. United States, supra at 422; Bernard H. Jacobson, 28 T.C. 579 (1957); R. B. George Machinery Co., 26 B.T.A. 594 (1932). And it is equally clear from the legislative history, that a mechanical test was not desired Illinois Terminal Railroad Co. v. United States, supra at 1022.

  4. Leslie v. Comm'r of Internal Revenue

    50 T.C. 11 (U.S.T.C. 1968)   Cited 8 times

    Wisconsin Cheeseman, Inc. v. United States, 388 F.2d 420 (C.A. 7, 1968); Illinois Terminal Railroad Co. v. United States, 375 F.2d 1016 (Ct. Cl. 1967). In Bernard H. Jacobson, 28 T.C. 579 (1957), the taxpayers several times borrowed funds from a bank on the security of common stock, deposited the proceeds in a custodian account used for investments, and on the same day or shortly thereafter, purchased tax-exempt securities that were for the most part in the same amount as the indebtedness incurred. The taxpayers argued that section 23(b) of the Internal Revenue Code of 1939 (now section 265(2)) applied only when the borrowed money is used directly to purchase the tax-exempt securities, such as brokers' loans or purchases on margin, but not when the proceeds of a loan are commingled with other funds of the purchaser.

  5. Drybrough v. Comm'r of Internal Revenue

    42 T.C. 1029 (U.S.T.C. 1964)   Cited 4 times

    The fact that the loan was incurred by Drybrough while the tax-exempt securities were purchased in Marion's name is of no moment. Bernard H. Jacobson, 28 T.C. 579 (1957). The purpose for which Drybrough incurred the interest expenses was to effect the purchase of tax-exempt securities, not to carry on a legitimate business function, see R. B. George Machinery Co., 26 B.T.A. 594 (1932); Sioux Falls Metal Culvert Co., 26 B.T.A. 1324 (1932), or to pay a valid indebtedness.

  6. Gold v. Comm'r of Internal Revenue

    41 T.C. 419 (U.S.T.C. 1963)   Cited 3 times

    — Interest on indebtedness incurred or continued to purchase or carry obligations (other than obligations of the United States issued after September 24, 1917, and originally subscribed for by the taxpayer) the interest on which is wholly exempt from the taxes imposed by this subtitle. Cf. Bernard H. Jacobson, 28 T.C. 579; Constance M. Bishop, 41 T.C. 154. The tax-exempt interest on the Housing Authority notes was an essential ingredient of the tax-avoidance device before us, for it was through the application of such alleged nontaxable receipts against the interest purportedly owed to Gibraltar on the Treasury notes that Gibraltar was able to create the illusion on its books that petitioner had ‘paid’ the major part of the interest in respect of the Treasury notes.

  7. Bishop v. Comm'r of Internal Revenue

    41 T.C. 154 (U.S.T.C. 1963)   Cited 4 times

    The first purchase made after the sale was of the tax-exempt securities, and the cost of such securities was almost equal to the sales price received upon the sale of the non-tax-exempt securities. Cf. Bernard H. Jacobson, 28 T.C. 579 (1957). Later in 1956 petitioner sold the tax-exempt securities she purchased in April 1956 and purchased other tax-exempt securities with the proceeds of the sale.