Hypotheek Land Co. v. Commissioner of Internal Revenue

The basic and material facts underlying the controlling issues presented in this review proceeding are clearly set forth in the opinion and findings of the Tax Court reported in 16 T.C. 126 .8. A detailed summary of these facts is therefore unnecessary.

In its opinion the Tax Court states that “the sole issue is whether the • respondent [Commissioner] erred in reducing petitioner’s deduction of interest allowable on its obligation to the [two so-called] Dutch banks from the rate of 5 per cent to 3 per cent.” In disallowing the deduction for interest in excess of 3 per cent the Commissioner did not cite any section of the Code in his notice of deficiency.

In a brief in the Tax Court the Commissioner presented the case as coming within the purview of Section 45 of the Internal Revenue Code, 26 U.S.C.A. § 45 , dealing with allocation of income and deductions. Apparently the Tax Court was not impressed or persuaded by this particular argument and it did not “consider” the merits of the argument made by the parties as to the applicability of Section 45 — “because, in our opinion, the deduction * * is not an allowable deduction under section 23(b) of the Internal Revenue Code” 26…