UNITED STATES V. MIDLAND-ROSS CORPORATION
381 U.S. 54 (1965)
NATURE OF THE CASE: The United States (D) appealed a decision, which affirmed the
district court's determination that Midland (P) was entitled to a refund and that D erred
when it was determined that P's gains attributable to original issue discount were but
interest in another form, and therefore were taxable as ordinary income.
FACTS: P bought noninterest-bearing promissory notes from the issuers at prices
discounted below the face amounts. Each of the notes was held for more than six months, and,
before maturity and in the year of purchase, was sold for less than its face amount but more
than its issue price. The gain in each case was the economic equivalent of interest for the
use of the money to the date of sale but P reported the gains as capital gains. D determined
that the gains attributable to original issue discount were but interest in another form and
therefore were taxable as ordinary income. P petitioned and prevailed in the District Court
and in the Court of Appeals. The Supreme Court granted certiorari.
ISSUE:
RULE OF LAW:
HOLDING AND DECISION:
LEGAL ANALYSIS:
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