This somewhat complicated case eventually narrows to an answer to the question of “whether an item of net accrued interest receivable of the taxpayer’s predecessor corporation, all of whose assets the taxpayer acquired in a non-taxable consolidation, when collected by the taxpayer, constitutes income or the recovery of capital to the taxpayer”. Here the interest had accrued at the date of consolidation and the predecessor corporation had reported same as income on its income tax return. The Commissioner of Internal Revenue had eliminated such interest in determining the tax liability of the predecessor corporation. In other words, was the interest thus collected income of the taxpayer or a recovery of capital? The taxing authorities held it was income and collected it from the taxpayer. It paid the same under protest and brought suit in the court below to recover the alleged overpayment, and recovered judgment.
The opinion of the trial court holding it was not income, but a capital asset, comprehensively and satisfactorily discusses at length the questions involved which, by reference thereto, is made part hereof.1 Agreeing therewith, the judgment of the court below is affirmed.
For opinion of District Court, see 20 F.Supp. 27.