which it would purchase simultaneously from vendor's sole stock holder for $45,000. The foregoing method of effecting the sale was devised because of tax considerations and it is not intended that vendee at any time will acquire control of vendor as a result of the temporary stock ownership. Our consideration herein is on that basis, and vendee should not purchase the 36 shares of vendor's stock from Idol unless it intends to immediately relinquish them to vendor in payment for the properties covered by the instant purchase.

Not only is it plain from the evidence before us that Cassens had no interest in acquiring any of Speedway's stock, but there is no indication here that Idol had any real desire to dispose of any part of his 42 shares of the corporation's stock. The only reason the transactions were cast in the form of a sale of stock followed by a redemption was the possibility of obtaining favorable tax treatment.

It is true, as petitioners contend, that on its face the transitory registration of stock ownership in the name of Cassens followed by registration in the name of Speedway and accompanied by a shifting of stock certificates representing 32 shares from Idol to Cassens to Speedway, formally complies with the requirements of a stock redemption under section 302 (b) (3) of the 1954 Code, and looks like a "complete redemption of all of the stock of the corporation owned by the shareholder [Cassens]." Cf. John A. Decker, 32 T.C. 326, affd. 286 F. 2d 427; Ray Edenfield, 19 T.C. 13; and Zenz v. Quinlivan, 213 F. 2d 914. The essential difficulties with this contention result from the absence of record evidence tending to indicate that Cassens not only formally but in substance became the owner, for tax purposes, of 32 shares of Speedway stock, and that the corporation actually intended to and did redeem those shares from Cassens.

Not only does the evidence before us fail to disclose that Idol really wished to dispose of any of his 42 Speedway shares or that Cassens desired to acquire them, but it also fails to indicate that Speedway had any reason or purpose to reacquire part of its outstanding shares. Petitioners have not established that Speedway had a real intention to reduce its capital or to redeem any part of its outstanding stock. Petitioners place some reliance on our decision in Standard Linen Service, Inc., 33 T.C. 1, in which the taxpayer, the owner and operator of a linen supply business, was the wholly owned subsidiary of Model Laundry Co. Model was in need of additional capital to meet its liabilities, make building repairs, and expand its drycleaning business. Because of these and other operating problems confronting Model, certain of its stockholders decided to sell all of their stock in the corporation. A prospective purchaser, Alsco, was contacted, which was interested solely in acquiring certain assets belonging to Model and the taxpayer. The stockholders of Model insisted on disposing only of their stock, and Alsco ultimately agreed to purchase 45,476 of Model's 61,795 outstanding shares subject to the understanding that it could immediately transfer the shares to Model in exchange for

its linen supply assets. Thereupon, the taxpayer, Standard Linen Service, Inc., was liquidated and its assets were distributed to Model. Alsco purchased the 45,476 shares from the stockholders of Model for $1,909,992, and immediately delivered the stock to Model in exchange for its assets valued at $1,909,992. Model retired the 45,476 shares, as well as certain shares held in its treasury, and amended its articles of incorporation to reflect a capital reduction and partial liquidation. Noting the strong evidence that the stockholders intended to and insisted upon selling their stock, the further proof of a genuine stock redemption and partial liquidation of assets by Model, the absence of any indication that Model desired to sell its assets, and the fact that the form of the transactions there in question was determined by the purposes of the parties and was consistent therewith, we there held that the formal steps taken had substance and constituted a realistic sale of stock followed by a partial liquidation of assets.

Patently, the type of evidence we found persuasive in Standard Linen Service, Inc., supra, is absent from the record before us, with the exception of the parallel circumstance that Cassens here like Alsco in the Standard Linen Service case intended to acquire and did acquire business assets. Speedway's sole purpose was to assist Idol to obtain $40,000 in cash. The preliminary negotiations contemplated the disposal by Speedway of certain of its assets to Cassens. There is no evidence of any offer or discussion concerning the disposition to Cassens of stock. As noted above, Idol has failed to show that he had any intention to part with a portion of his equity in the corporation and he remained sole stockholder of Speedway after the transactions of May 1, 1957, were completed. In view of these facts and since the form of these transactions was controlled solely by tax considerations, we are unable to hold that the formal steps on which petitioners rely are consistent with what actually took place.

In our opinion the momentary formal registration of 32 shares of Speedway stock in the name of Cassens Transport Company on May 1, 1957, was so transitory and so clearly inconsistent with the actual purposes and intentions of the parties and the ultimate results of these transactions as to be entirely lacking in substance. The purpose of Speedway was to transfer assets to Cassens and it did so; the purpose of Cassens was to acquire certain of the assets of Speedway and it did so. Thus, in effect, Cassens purchased assets from Speedway even though it momentarily received stock in order to do so. See Commissioner v. Ashland Oil & R. Co., 99 F. 2d 588, certiorari denied 306 U.S. 661; Kimbell-Diamond Milling Co., 14 T.C. 74, affd. 187 F.2d 718; Montana-Dakota Utilities Co., 25 T.C. 408. Accordingly, the $40,000 cash payment made by Cassens on May 1, 1957, realistically must be regarded as the consideration paid for the Detroit franchise

and 15 pieces of equipment. Since the Detroit franchise was acquired by Speedway in 1955 at a cost of $15,000 and the equipment sold to Cassens had a net book value on May 1, 1957, of $1,857.09, Speedway, as a result of the sale of these assets, realized long-term capital gain in the amount of $23,142.91.

Inasmuch as the $40,000 cash payment received by Idol constituted the consideration paid by Cassens for the assets purchased by it from Speedway, and since the distribution of this amount to him on May 1, 1957, was the result of an integrated two-step transaction personally initiated by him for the purpose of obtaining the assistance of the corporation to enable him to satisfy his own indebtedness to Security Credit Company, and since Speedway had earnings and profits sufficient to make such a distribution, which left Idol its sole stockholder (as he was before the transaction), we conclude that this payment to him constituted a distribution essentially equivalent to a dividend. Ferro v. Commissioner, supra; cf. Genevra Heman, 32 T.C. 479, affd. 283 F. 2d 227.

Decisions will be entered for the respondent.

MCNUTT-BOYCE COMPANY, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket No. 88637. Filed June 27, 1962.

During the calendar year 1958 petitioner realized gross income of $79,824.53, accrued and paid interest charges in carrying on its business of $49,656.28, accrued and paid other deductions totaling $1,135 50, and as a result had a net taxable income of $29,032.75. Notwithstanding section 163, I.R.C. 1954, held, the interest is a deduction "allowable under section 162 (relating to trade or business expenses)" as that phrase is used in section 542 (c) (9), I.R.C. 1954, and being more than 15 percent of the gross income, petitioner comes within the "exceptions" to the term "personal holding company" as defined in section 542 (a). I.R.C. 1954. Where there is no repugnancy between two sections of the same statute, the language of a specific provision of one should not be allowed to limit or control the general provision of the other.

Junius II. Payne, Jr., Esq., for the petitioner.

R. P. Hertzog, Esq., for the respondent.

OPINION.

ARUNDELL, Judge: Respondent determined a deficiency in personal holding company tax for the calendar year 1958 in the amount of $16,320.36.

The sole issue in controversy, and the only matter for determination, is whether the interest of $49,656.28 accrued and paid by petitioner in 1958 to the

Fidelity National Bank of Baton Rouge, Louisiana, is a deduction allowable to petitioner under section 162 of the Internal Revenue Code of 1954, as amended, for the purpose of section 542(e)(9) of that Code. Without prejudice to either party as to this issue, it is hereby agreed that in all other respects petitioner throughout the calendar year 1958 met the requirements of a finance company qualifying for the exception to the definition of a personal holding company set forth in section 542(c) (9) of the Internal Revenue Code of 1954, as amended. The facts were stipulated and are so found.

Petitioner is a corporation organized on January 1, 1958, and existing under the laws of the State of Delaware with its principal business address in Baton Rouge, Louisiana. It filed its Federal income tax return for the taxable year 1958 with the district director of internal revenue in New Orleans, Louisiana.

Petitioner is engaged in the business of purchasing installment notes and contracts on heavy machinery and other items. It keeps its books and prepares its income tax returns on a calendar year basis and on an accrual method of accounting.

During the calendar year 1958 petitioner purchased in connection with its business, installment notes and contracts in approximately the amount of $1,373,984.79. Since petitioner had insufficient capital to handle this volume of financing, it was obliged to obtain the necessary funds through commercial borrowing. For this purpose petitioner borrowed from the Fidelity National Bank of Baton Rouge, Louisiana, substantial sums of money which at various times in 1958 reached the figure of $933,236.73. During the year 1958 petitioner accrued and paid interest charges aggregating $49,656.28 to this bank on the funds thus borrowed.

The correct gross income of petitioner for the calendar year 1958 was $79,824.53.

In addition to the above interest of $49,656.28 which petitioner deducted on its Federal income tax return for the calendar year 1958, petitioner also deducted other items which it accrued and paid in that year as follows:

The correct net taxable income of petitioner for the calendar year 1958 was $29,032.75 ($79,824.53 minus $49,656.28 minus $1,135.50). On this net income petitioner reported an income tax liability of $9,597.03.

Section 542 of the Internal Revenue Code of 1954, as amended, insofar as is here material, is in the margin.1

The parties agree that petitioner is a "personal holding company" as that term is defined in section 542 (a) unless it comes within the exception specified in section 542(c)(9); and they also agree that petitioner does come within the exception if the interest which petitioner paid to the Fidelity National Bank of Baton Rouge in the amount of $49,656.28 is allowable as a deduction from gross income "under section 162" of the 1954 Code. The respondent contends that the interest is not allowable as a deduction under section 162 because it is specifically allowable under section 163 of the 1954 Code.

Petitioner concedes that the interest is specifically allowable as a deduction under section 163 but contends that it also meets the test of an ordinary and necessary expense paid or incurred in carrying on a trade or business and is, therefore, also deductible under section 162. It concedes, of course, that it is not entitled to deduct the interest twice.

It is our opinion that the interest of $49,656.28 constitutes a deduction allowable to petitioner under section 162 of the 1954 Code for the calendar year 1958, for the purposes of section 542 (c) (9) thereof. Such conclusion is based on two grounds. First of all, we think section 162 makes it clear that interest, though specifically deductible under section 163, may also be deducted under section 162 if it constitutes an ordinary and necessary business expense of the taxpayer. Secondly, there can be no question that the interest of $49,656.28 accrued and paid by petitioner in 1958 constitutes an ordinary and necessary expense incurred in carrying on petitioner's business within the meaning of section 162.

In determining whether interest may be deducted by a taxpayer under section 162, it is important to note that subsection (a) thereof

1 SEC. 542. DEFINITION OF PERSONAL HOLDING COMPANY.

(a) GENERAL RULE. For purposes of this subtitle, the term "personal holding company" means any corporation (other than a corporation described in subsection (c)) if—

(c) EXCEPTIONS.-The term "personal holding company" as defined in subsection (a) does not include

(9) a finance company, actively and regularly engaged in the business of purchasing or discounting accounts or notes receivable or installment obligations.

provided that the deductions allowable under section 162 (relating to trade or business expenses), other than compensation for personal services rendered by shareholders (including members of the shareholder's family as described in section 544 (a) (2)), constitute 15 percent or more of the gross income • [Emphasis supplied.] SEC. 162. TRADE OR BUSINESS EXPENSES.

(a) IN GENERAL.-There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business including—♦ ♦ ♦ [Emphasis supplied.]

SEC. 163. INTEREST.

(a) GENERAL RULE.-There shall be allowed as a deduction all interest paid or accrued within the taxable year on indebtedness.