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U.S. Supreme Court

Hanover Bank v. Commissioner, 369 U.S. 672 (1962)

Hanover Bank v. Commissioner

No. 224

Argued February 27, 1962

Decided May 21, 1962

369 U.S. 672


The Internal Revenue Code of 1939 permits a taxpayer to deduct, through amortization, the premium he has paid in purchasing corporate bonds, and § 125 provides that the amount to be amortized "shall be determined . . . with reference to the amount payable on maturity or on earlier call date." In 1953, prior to December 1, taxpayers purchased at a premium corporate bonds which were callable on 30 days' notice, either at a "general call price" or at a lower "special call price," and elected on their 1953 income tax returns to claim deductions for bond premiums computed with reference to the 30-day call period and the special call price.

Held: they were entitled to do so, since the special call price at which the bonds here involved could be redeemed from a limited sinking fund and from other special funds made available upon the occurrence of certain contingent events was an "amount payable . . . on earlier call date" within the meaning of § 125, and there was no basis in the statute, in the legislative history, or in the Commissioner's prior interpretations of the statute for a distinction between a reference to a general or special call price in computing amortizable bond premiums under the 1939 Code. Pp. 369 U. S. 673-688.

289 F.2d 69, reversed.

Page 369 U. S. 673

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