Banking Decisions: Guarantor's Deductibility on a Bankruptcy-Discharged Loan
The US Court of Appeals for the Third Circuit reversed the Tax Court in Stratmore Versus Commissioner (1986) holding that interest payments are deductible under Section 163 of the Internal Revenue Code (IRC). The appellants, the guarantors of certain debts of 2 corporations, reaffirmed their liabili...
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Veröffentlicht in: | The Banking law journal 1986-09, Vol.103 (5), p.487 |
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Format: | Artikel |
Sprache: | eng |
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Zusammenfassung: | The US Court of Appeals for the Third Circuit reversed the Tax Court in Stratmore Versus Commissioner (1986) holding that interest payments are deductible under Section 163 of the Internal Revenue Code (IRC). The appellants, the guarantors of certain debts of 2 corporations, reaffirmed their liability in the corporations' 1957 plans for reorganization under Chapter 11 of the Bankruptcy Act. Subsequent payments on these debts were deducted from their gross income as deductions for bad debts and interest. The Court of Appeals noted that Treasury Regulation Section 1.163-1 affords an exception to the rule on the ''taxpayer's direct obligation'' by allowing a deduction for interest paid on a real estate mortgage even when the taxpayer was not directly liable on the debt secured by the property. The court may have erred on some less significant points but was clearly correct in holding that the guarantors could and had become the primary obligors on the debt. |
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ISSN: | 0005-5506 2381-3512 |