Suttle v. C. I. R., 79-1385
| Citation | 625 F.2d 1127 |
| Decision Date | 01 July 1980 |
| Docket Number | No. 79-1385,79-1385 |
| Parties | 80-2 USTC P 9534 Albert SUTTLE and Grace E. Suttle, Appellees, v. COMMISSIONER OF INTERNAL REVENUE, Appellant. |
| Court | United States Courts of Appeals. United States Court of Appeals (4th Circuit) |
Jonathan S. Cohen, Tax Division, Dept. of Justice, Washington, D. C. (M. Carr Ferguson, Asst. Atty. Gen., Gilbert E. Andrews, and Helen A. Buckley, Tax Division, Dept. of Justice, Washington, D. C., on brief), for appellant.
James L. Sanderlin, Richmond, Va. (Carle E. Davis, Joseph C. Wool, Jr., McGuire, Woods & Battle, Richmond, Va., on brief), for appellees.
Before HALL and SPROUSE, Circuit Judges. *
The appellee, Albert Suttle, was the recipient of several interest-free loans from a closely-held corporation. The Commissioner of Internal Revenue (Commissioner) issued a notice of deficiency to Suttle and his wife 1 for the economic value of the interest-free loans. The Tax Court found in favor of the Suttles, and the Commissioner appealed. We affirm.
During the tax years of 1972 and 1973, Albert Suttle owned 65 percent of the outstanding stock of Master Chevrolet Sales, Incorporated (Master). The balance of the outstanding stock was owned by Suttle's son and two brothers. Suttle was the president of Master, a member of its board of directors and its salaried employee.
Since 1937, Suttle had borrowed money from Master without paying interest. During 1972 and 1973, these interest-free loans averaged approximately $252,000. Based on a stipulated interest rate of 5.5 percent, the Commissioner calculated the interest on these loans to be $13,875.51 for 1972 and $20,159.96 for 1973. The Commissioner determined that these sums represented unreported gross income and issued a deficiency notice for unpaid taxes of $7,842.83 for 1972 and $9,321.57 for 1973.
The Tax Court ruled in favor of Suttle, relying primarily upon its earlier ruling in J. Simpson Dean v. Commissioner, 35 T.C. 1083 (1961). In Dean, the Commissioner argued that an interest-free loan by a corporation to a stockholder or officer conferred a benefit, and that such a benefit was taxable income to its recipient under 26 U.S.C. § 61. In support of his argument, the Commissioner cited several cases holding that a stockholder's or officer's rent-free use of corporate automobiles, residences and similar property conferred a taxable benefit equal to the fair market value of such usage. Since money is a corporate asset, the same as an automobile or house, the Commissioner argued that interest-free loans conferred a benefit upon the recipient equal to the fair market interest expense of the loan, and that such a benefit...
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...F.2d 123 (CA9 1982); Beaton v. Commissioner, 664 F.2d 315 (CA1 1981); Martin v. Commissioner, 649 F.2d 1133 (CA5 1981); Suttle v. Commissioner, 625 F.2d 1127 (CA4 1980). 5. During the period between the Johnson decision and the Court of Appeals' decision in this case, Congress amended the g......
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