Scope of Tax Benefit Rule Limited
Harris, Steven M. & Ravikoff, Ronald B.
Abstract
In Putoma Corp. the Tax Court decided that foregiveness of interest indebtedness owed by a corporation (which had deducted for the accrued but unpaid interest) to a shareholder did not result in taxable income to the corporation because the interest foregiveness was a contribution to capital. The authors dispute the court's analysis and suggest a framework for future decisions concerning this problem.