J. SIMPSON DEAN
35 T.C. 1083 (1961)
NATURE OF THE CASE: This was a dispute over interest free loans from a corporation wholly
owned by the taxpayers.
FACTS: Dean (Ps) were husband and wife and they were the sole owners of Nemours
Corporation. They obtained interest free loans from that corporation. The loan sums were in
total well in excess of $5 million. The IRS assessed taxes against Ps for the interest that
should have been charged at the then prevailing prime rates at the time each loan was made.
P sued to set aside these assessments alleging that an interest free loan cannot produce
taxable income and that such loans were not dividends nor were they compensation. The
government relied on past rulings related to rent free use of corporate property could
result in the realization of income.
ISSUE:
RULE OF LAW:
HOLDING AND DECISION:
LEGAL ANALYSIS:
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