United States v. Haskel Engineering & Supply Company

This tax case concerns certain deductions claimed by appellee for the taxable years 1957, 1958 and 1959. From 1946 to 1952 Richard Hayman and Don Dris-kel operated a partnership under the name of Haskel Engineering & Supply Company. Hayman had a sixty per cent interest and Driskel a forty per cent interest. In 1952 the business was converted into corporate form, the corporation involved here issuing 1500 shares of stock and $64,000 in debenture bonds for the operating assets of the business. Each partner took his proportionate share of the stock and of the bonds. The bonds were to mature 20 years from the date of issue and specified an interest rate of four per cent, payment of which was in no way contingent upon the earnings of the corporation. They were not by their terms subordinated to any subsequently incurred debt. The bonds were redeemable prior to maturity at the option of the corporation, at a premium of two per cent for every year that the maturity was accelerated.

During the taxable years in question the appellee corporation paid the prescribed interest to the registered owners of the outstanding bonds. During 1957 $30,000 of the bonds were redeemed and a premium of…