A. R. Lantz Co., Inc. v. United States

This action deals with the oft-litigated tax issue of whether certain advances made to a corporation created debt, or constituted capital contributions.

Taxpayer appeals from an adverse judgment of the United States District Court wherein he sought recovery of taxes paid pursuant to notice of deficiency and assessment. Our jurisdiction on appeal is founded on 28 U.S.C. § 1291 .

The dispute arises from tax returns filed for the fiscal years ending in February of 1963 and 1964. The facts were summarized as follows by the trial judge:

“The plaintiff [taxpayer] was incorporated on June 1, 1955. Its predecessor was an equal partnership of [A. R.] Lantz and [Gus D.] Vellis doing business under the name of A. R. Lantz Co. During the two months prior to incorporation, David Cornman advanced $51,000 to the partnership. It was understood by all concerned that this sum represented the value of a one-third interest in the partnership and was made in anticipation of the incorporation. The three individuals agreed that upon incorporation of the plaintiff, each would receive $15,000 of common stock as partial consideration for his interest in or claim against the partnership and that the…