Shoong

This review concerns the determination under 26 U.S.C.A. § 125 of the amount of “amortizable bond premium” deduction, if any, from the two taxpayers’ gross incomes in the tax year 1944, because of the purchase in June 1944 and holding in that year by each of 5,000 debenture bonds of the American Telephone and Telegraph Company. Since the questions of law and fact are identical for each taxpayer, the reviews were consolidated for hearing.

Each bond is for a principal sum of $100 and bears interest at three (3) percent. It also has a stock purchasing option by which one share of the company’s stock may be purchased by the payment to the company of $40 and the surrender of the bond at its face value of $100. This right to purchase may be exercised by the bondholder at once. The bonds were callable by the corporation at $104 on September 1, 1944. Joe Shoong purchased his bonds at $120%; Rose Shoong at from $120% to $120%.

The taxpayers’ 1944 returns each had a deduction from gross income of the difference between the callable $104 and the purchase price of the 5,000 bonds held by each in the tax year. This was claimed as “amortizable bond premium” under 26 U.S. C.A. § 125. The…