Commissioner of Internal Revenue v. Herman M. Greenspun and Barbara J. Greenspun

Herman M. Greenspun received a loan at a three percent interest rate when the prevailing market rate was six percent. The Commissioner of Internal Revenue (Commissioner) determined deficiencies in Green-spun’s 1967 and 1969 federal income taxes on the theory that Greenspun had realized gross income in an amount equal to the economic value between the market rate of interest and the actual interest rate on his loan. The Tax Court found in favor of Greenspun, 72 T.C. 931 (1979). We affirm.

I

Facts

The facts in this case are undisputed and are fully chronicled in the Tax Court’s opinion. For our purposes, it is necessary to discuss only the most pertinent facts.

In 1966, Howard Hughes moved to Las Vegas, Nevada. Not long after his arrival, Hughes became interested in making large investments and acquisitions in the Las Vegas area. Anticipating opposition to many of his purchases, Hughes sought to acquire local radio, television, and newspaper interests in order to create a favorable public image by manipulating the press. During this time Greenspun was the owner, publisher, and editor of the Las Vegas Sun newspaper and the owner of KLAS-TV Channel 8 in Las Vegas. In 1967, Hughes…