O. H. Kruse Grain & Milling v. Commissioner of Internal Revenue

The Commissioner of Internal Revenue determined a deficiency in petitioner grain company’s returns for the years 1952 and 1953. Petitioner filed a petition for redetermination of the deficiency with the Tax Court under Title 26 U.S.C. § 6213 . The Tax Court sustained the deficiency in part and disallowed it in part. From that decision petitioner seeks review under Title 26 U.S.C. § 7482 .

Petitioner corporation claimed deductions from net income for the years 1952 and 1953 for certain items of interest and rent owing to its sole proprietor. The Commissioner determined (a) that the interest was not due on a bona fide debt, nor (b) was it paid within two and one-half months of the next tax year, as required by § 24(c) of the Internal Revenue Code of 1939. The Tax Court found that the interest was not due on a bona fide debt, and did not reach the § 24 (c) problem. The Commissioner determined that the rents were not paid within the requisite two and one-half months as required by § 24(c), and disallowed the rental deductions on that basis alone. The Tax Court determined that the amounts deducted for rentals had been constructively received by the corporation’s sole owner during the…