First National Banks of Chicago v. United States - 283 U.S. 142 (1931)
U.S. Supreme Court
First National Banks of Chicago v. United States, 283 U.S. 142 (1931)
First National Banks of Chicago v. United States
Argued March 4, 1931
Decided April 13, 1931
283 U.S. 142
1. The Federal Farm Loan Act (§§ 16 and 13), in empowering joint stock land banks to invest their funds in the "purchase" of qualified first mortgages on farm lands, means that they may lend on such security. The loans so made are "securities issued under the provisions of" that Act, within the meaning of § 213, Title II, of the Revenue Act of 1921, and the interest upon them is exempt from taxation under that Title. P. 283 U. S. 145.
2. A national bank, in making a consolidated income and profits tax return for the year 1922, sought to deduct from gross income the interest paid on bonds of its affiliated joint stock land banks the principal of which was lent by the land banks on farm mortgages pursuant to the Farm Loan Act. Held that the deduction was properly disallowed, since the mortgages are "obligations or securities . . . the interest upon which is wholly exempt from taxation under this title" within the meaning of § 234, Title II, of the Revenue Act of 1921, and, by that section, interest on indebtedness incurred or continued to purchase or carry tax-exempt obligations or securities is not deductible from gross income. Pp. 283 U. S. 143, 283 U. S. 147.
69 Ct.Cls. 312, 38 F.2d 925, affirmed.
Certiorari, 281 U.S. 719, to review a judgment of the Court of Claims disallowing a deduction in an income and profits tax return.