Commissioner of Internal Revenue v. Korell (339 U.S. 619)
U.S. Supreme Court · decided June 5, 1950 · Supreme Court Database (Spaeth)
- Citation
- 339 U.S. 619 · 70 S. Ct. 905
- Decided
- June 5, 1950
- Term
- October Term 1949
- Vote
- 6–1
- Majority author
- Justice Vinson
- Issue area
- Federal Taxation
- Disposition
- Affirmed
- Outcome
- Petitioning party lost
- Ideological direction
- Conservative
Opinion excerpt
Mr. Chief Justice Vinson delivered the opinion of the Court. The tax consequences of a purchase of convertible bonds are in issue here. In August, 1944, respondent, an individual taxpayer, purchased certain American Telephone and Telegraph Company bonds, each having a face value of $100, at a premium price averaging slightly in excess of $121. Each bond was convertible into a share of common stock, at the option of the bondholder, upon the payment of $40. The market price of the stock was over $163 when respondent made his bond purchases. The bonds were callable prior to maturity date according to a schedule appearing in the indenture; had the corporation given appropriate notice at the dates of respondent’s purchases, the bonds would have been redeemed at $104. In his 1944 income tax return, respondent claimed a deduction in excess of $8,600 for amortizable bond premium. He computed his deduction on each bond as the difference between his purchase price, $121, and the call price, $104. This computation is concededly correct if the deduction is allowable. The Commissioner of Internal Revenue, petitioner here, refused to allow any such deduction. His theory was that § 125 of the Internal Revenue Code establishing the deduction for “amortizable bond premium” did not include premium paid for the conversion privilege. A contrary view of the statute was adopted by the Tax Court.…
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