Head Ski Company, Inc., Appellee, v. United States of America, Appellant, 454 F.2d 732 (4th Cir. 1972)

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US Court of Appeals for the Fourth Circuit - 454 F.2d 732 (4th Cir. 1972) Argued Dec. 8, 1971. Decided Jan. 26, 1972

Richard W. Perkins, Atty., Dept. of Justice (Fred B. Ugast, Acting Asst. Atty. Gen., Meyer Rothwacks and Stephen H. Hutzelman, Attys. Dept. of Justice, and George Beall, U. S. Atty., D. Md., and John G. Sakellaris, Asst. U. S. Atty., on brief), for appellant.

Edward S. Smith, Baltimore, Md. (Albert S. Barr, III, Paul V. Niemeyer, and Piper & Marbury, Baltimore, Md., on brief), for appellee.

Before BOREMAN, Senior Circuit Judge, and BRYAN and BUTZNER, Circuit Judges.


The government appeals from the entry of summary judgment in favor of Head Ski Company granting a refund of income tax for 1965.1 

The sole issue is whether a premium Head Ski paid for the redemption of a convertible note was deductible as a business expense or nondeductible as a capital outlay. Applying Treasury Regulation Sec. 1.61-12(c) (1) (1965),2  the district court held that the premium was deductible. In reaching this conclusion, it relied primarily on Southwest Grease & Oil Company, Inc. v. United States, 435 F.2d 675 (10th Cir. 1971), and Roberts & Porter, Inc. v. Commissioner of Internal Revenue, 307 F.2d 745 (7th Cir. 1962), which in their material aspects are indistinguishable. We affirm.


Head Ski Co. v. United States, 323 F. Supp. 1383 (D. Md. 1971)


The transaction occurred before the effective date of 26 U.S.C. § 249 (1969), which contains a limitation on the deduction of a premium paid to repurchase convertible obligations