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The Courtroom held that Interstate couldn't deduct Phases’s reduction as it connected to the Levels business, which was separate from Interstate. The Court also stated that it didn't matter regardless of whether Interstate manufactured these types of payments less than a lawful obligation or voluntarily.
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, the court docket held that a company could not deduct desire paid out on behalf of its subsidiary: “Payments made by a stockholder of a corporation for the objective of preserving his interest therein needs to be considered to be a further price of his inventory” (four T.C. at 676). (See also South Am. Gold & Platinum Co
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Interstate managed Stages’s accounts, managed its finances, and paid out its charges and payroll. Inside of a year that Stages incurred a net working reduction, Interstate planned to deduct Levels’s decline because Interstate had paid Stages’s costs.
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