Helvering v. Metropolitan Edison Co.
United States Supreme Court
306 U.S. 522 (1939)
- Written by Daniel Clark, JD
Facts
The Metropolitan Edison Company (Metropolitan) (plaintiff) acquired all the assets of another corporation (the subsidiary) and assumed its liabilities pursuant to state merger law. The subsidiary ceased to exist as a separate corporate entity after the asset transfer. Metropolitan then redeemed some of the subsidiary’s outstanding bonds and sought to take certain tax deductions in connection with that redemption. The Internal Revenue Service (IRS) (defendant) disallowed the deductions, arguing that a corporation could not deduct expenses related to the bonds of a corporation whose assets it acquired and whose liabilities it assumed. Rather, the IRS argued, an acquiring corporation could deduct such expenses only if it had consolidated with the subsidiary in a formal merger. The court of appeals ruled in favor of Metropolitan, and the IRS appealed to the United States Supreme Court.
Rule of Law
Issue
Holding and Reasoning (Roberts, J.)
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