Commissioner v. Korell
339 U.S. 619 (1950)

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U.S. Supreme Court

Commissioner v. Korell, 339 U.S. 619 (1950)

Commissioner v. Korell

No. 384

Argued February 7, 1950

Decided June 5, 1950

339 U.S. 619

Syllabus

In 1944, an individual taxpayer purchased at a premium price of $121 certain taxable corporate bonds with a face value of $100 which were then callable at $104. Upon payment of $40, each bond was convertible at the option of the holder into a share of common stock which then had a market value of $163.

Held: under § 125 of the Internal Revenue Code, the taxpayer, in his income tax return for 1944, was entitled to deduct, as "amortizable bond premium" on each bond, the difference between the purchase price of $121 and the call price of $104. Pp. 339 U. S. 620-628.

(a) The callability and convertibility of these bonds did not remove them from the reach of § 125. Pp. 339 U. S. 623-624.

(b) That the premium may have been paid for the conversion privilege, rather than for a higher rate of interest, did not prevent it from being amortizable under § 125. Pp. 339 U. S. 624-628.

(c) The term "bond premium" in § 125 means any extra payment, regardless of the reason therefor. P. 339 U. S. 627.

176 F.2d 152, affirmed.

The Commissioner of Internal Revenue disallowed respondent's deduction in his individual income tax return of "amortizable bond premium" under § 125 of the Internal Revenue Code. The Tax Court overruled the Commissioner. 10 T.C. 1001. The Court of Appeals affirmed. 176 F.2d 152. This Court granted certiorari. 338 U.S. 890. Affirmed, p. 339 U. S. 628.

Page 339 U. S. 620

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