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J. Simpson Dean v. Commissioner

United States Tax Court
35 T.C. 1083 (1961)


In the tax years 1955–1956, J. Simpson Dean and Paulina DuPont Dean (plaintiffs) controlled Nemours Corporation (Nemours). The Deans had borrowed over $2 million from Nemours, for which Nemours issued several non-interest bearing notes. The Commissioner (defendant) determined a deficiency in the Deans’ income tax for that period. The Commissioner believed the Deans had realized taxable income to the extent that they benefited from the interest-free use of the loans. The Commissioner calculated that had the Deans borrowed money elsewhere, they would have been charged interest in the amounts of $65,648.79 in 1955 and $97,931.71 in 1956. The Commissioner reasoned that by borrowing from a family-controlled corporation, the Deans benefited economically from the avoidance of interest charges. The Commissioner concluded that this benefit was taxable income to the Deans.

Rule of Law


Holding and Reasoning (Raum, J.)

Concurrence (Opper, J.)

Dissent (Bruce, J.)

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