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Whipple v. Commissioner

United States Supreme Court
373 U.S. 193 (1963)


A. J. Whipple (plaintiff) was the 80 percent owner of Mission Orange Bottling Company of Lubbock, Inc. (Mission Orange). Whipple bought land, built a factory on the land, and leased the premises to Mission Orange. Mission Orange did not pay Whipple a salary, and Whipple had no employment duties. Whipple also loaned Mission Orange significant money for other expenses. In 1953, Whipple’s loans and lease agreement with Mission Orange became worthless. Whipple deducted these amounts on his federal taxes as a bad business debt. The commissioner of internal revenue (commissioner) (defendant) determined that this was a nonbusiness bad debt and assessed a deficiency. Whipple petitioned the tax court for a redetermination. The tax court found for the commissioner, holding that Whipple was not in the business of bottling or general financing. The court of appeals affirmed. The United States Supreme Court granted certiorari.

Rule of Law


Holding and Reasoning (White, J.)

Dissent (Douglas, J.)

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