Indmar Products Co., Inc. v. Commissioner

444 F.3d 771 (2006)

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Indmar Products Co., Inc. v. Commissioner

United States Court of Appeals for the Sixth Circuit
444 F.3d 771 (2006)

  • Written by Robert Cane, JD

Facts

Richard Rowe and Donna Rowe owned a majority of Indmar Products Co., Inc. (plaintiff). Indmar stockholders had routinely advanced funds to the corporation in exchange for a 10 percent annual return since the 1970s. The advances were documented with promissory notes starting in 1993. The advances were structured as demand loans without a maturity date or payment schedule to be paid on demand of the stockholders. At times, Indmar financed repayment of stockholder advances through its bank. Indmar used the advances for working capital to meet the daily operating needs of the company. Indmar treated the advances as loans in its records and deducted the interest expenses on its tax returns. The commissioner of the Internal Revenue Service (IRS) (defendant) assessed a deficiency against Indmar for claiming the interest-expense deductions. Indmar challenged the IRS commissioner’s decision in tax court. The tax court ruled that the interest payments to stockholders were not deductible. Indmar appealed to the United States Court of Appeals for the Sixth Circuit.

Rule of Law

Issue

Holding and Reasoning (McKeague, J.)

Concurrence (Rogers, J.)

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