J. Simpson Dean

35 T.C. 1083 (1961)

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Nature of the Case

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Facts

Dean (Ps) were husband and wife, and they were the sole owners of Nemours Corporation. They obtained interest-free loans from that corporation. The loan sums were in total well in excess of $5 million. The IRS assessed taxes against Ps for the interest that should have been charged at the then prevailing prime rates at the time each loan was made. P sued to set aside these assessments alleging that an interest-free loan cannot produce taxable income and that such loans were not dividends nor were they compensation. The government relied on past rulings related to rent-free use of corporate property could result in the realization of income.