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U.S. Supreme Court

Old Colony Railroad Co. v. Commissioner, 284 U.S. 552 (1932)

Old Colony Railroad Co. v. Commissioner of Internal Revenue

No. 349

Argued January 18, 1932

Decided February 15, 1932

284 U.S. 552


1. Under Treasury Regulations promulgated by authority of the Revenue Act of 1921, the net amount of premium received by a corporation from subscribers to its bonds is income. P. 284 U. S. 557.

2. The repeated reenactment of a statute without substantial change is evidence of an implied legislative approval of a construction placed upon it by executive officers. Id.

3. Where a corporation issued its bonds at a premium, which was received prior to the adoption of the Sixteenth Amendment, the chanroblesvirtualawlibrary

Page 284 U. S. 553

amount of the premium is income for the year in which it was received, and no part thereof may be taxed by a subsequent income tax act. P. 284 U. S. 557.

4. This conclusion is not affected by the provision of a Treasury Regulation which directs that the amount of bond premiums received by a corporation be prorated or amortized over the life of the bonds. Id.

5. The words of a statute are to be interpreted in their usual, ordinary, and everyday meaning, and this rule applies to taxing acts. P. 284 U. S. 560.

6. Under § 234 of the Revenue Act of 1921, which allows as a deduction from the gross income of a corporation "all interest . . . on its indebtedness," the word "interest" in the quoted phrase means the amount agreed to be paid, which the contract denominates "interest," and does not mean the so-called "effective rate" of interest. Pp. 284 U. S. 559-561.

7. The fact that bonds of a corporation were issued at a premium does not operate to reduce the amount deductible as interest on indebtedness under the revenue acts. Pp. 284 U. S. 559, 284 U. S. 563.

8. Where the language of a tax statute is ambiguous, the Court adopts that construction which is most favorable to the taxpayer. P. 284 U. S. 561.

9. The rules of accounting enforced upon a carrier by the Interstate Commerce Commission are not binding upon the Commissioner of Internal Revenue, nor may he resort to the rules of that body, made for other purposes, for the determination of tax liability under the revenue acts. P. 284 U. S. 562.

50 F.2d 896 reversed.

Certiorari to review a judgment of the circuit court of appeals reversing a decision of the Board of Tax Appeals. The Board held erroneous the Commissioner's finding of a deficiency in petitioner's return for 1921. 18 B.T.A. 267. chanroblesvirtualawlibrary

Page 284 U. S. 554

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