Joe Balestrieri & Co. v. Commissioner of Internal Rev.
Court of Appeals for the Ninth Circuit · 1949-11-15 · cited 31×
The case concerned whether a California corporation on a cash basis could deduct $22,229.37 as a loss on its 1943 excess profits tax return after it guaranteed repayment of advances made by Pacific Vegetable Oil Corporation to a partnership formed to mill chrome ore. In exchange for the guarantee, the corporation was offered half the partnership's profits. When the venture failed after about 90 days, the corporation paid part of the losses and gave a note for the balance, which it claimed as a deductible loss. The Tax Court disallowed the deduction, concluding the corporation acted only as a guarantor rather than a joint adventurer and that a cash-basis taxpayer does not realize a deductible loss by merely issuing a note. The reviewing court analyzed the agreements, the nature of the obligation, and applicable tax rules on cash payments and secondary liabilities to assess the claim.