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U.S. Supreme Court

Helvering v. Midland Mutual Life Ins. Co., 300 U.S. 216 (1937)

Helvering v. Midland Mutual Life Insurance Co.

No. 257

Argued January 7, 1937

Decided February 15, 1937

300 U.S. 216


1. Where a life insurance company, at foreclosure sale, bid the principal of its mortgage loan plus accrued interest and took over the property in satisfaction of the whole debt without payment and repayment of any cash, held that the amount of the interest was taxable as income "received during the taxable year from

Page 300 U. S. 217

interest," Revenue Act 1928, § 202(a), even though the property, when so acquired, was worth less than the amount of the principal. P. 300 U. S. 222.

The bid was made without regard to the value of the property apparently for the purpose of avoiding loss of investment in case of redemption by the mortgagor. The property was carried on the company's books as an asset, valued at the principal of the loan plus certain expenses. The interest was not entered either as asset or as income.

2. The term "interest" in the Act, supra, is used generically. P. 300 U. S. 223.

3. A receipt of interest is taxable as income, whether paid in cash or by credit. Id.

4. Bookkeeping entries, though in some circumstances of evidential value, are not determinative of tax liability. Id.

5. A mortgagee who, at foreclosure sale, acquires the property by bid of principal and interest acquires the same rights qua purchaser as the stranger who buys for cash, and in either case the debt, including the interest, is paid. Id.

6. Where the legal effect of a transaction fits the plain letter of a tax act, the transaction is included unless a definite intent to exclude it is clearly revealed in the Act or its history. P. 300 U. S. 224.

7. Tax laws are construed with a view to their efficient administration. P. 300 U. S. 225.

8. The tax in this case is not inconsistent with rights of mortgagees as defined in Louisville Joint Stock Land Bank v. Radford, 295 U. S. 555. P. 300 U. S. 226.

83 F.2d 629 reversed.

Certiorari, 299 U.S. 527, to review a judgment reversing a decision of the Board of Tax Appeals sustaining an increased income tax assessment.

Page 300 U. S. 220

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