The opinion of the court was delivered by: Igoe, District Judge.
1. Plaintiff is now and at all times hereafter mentioned a
corporation duly organized under and by virtue of the laws of the
State of Illinois with its registered office and principal place
of business in the County of Cook, State of Illinois, within the
First Collection District of Illinois and within the Northern
Judicial District, Eastern Division of the State of Illinois.
2. John T. Jarecki, defendant, is now Collector of Internal
Revenue for the United States of America for the First Collection
District of Illinois and has been Collector at all times
hereinafter mentioned. Defendant now is and long has been a
resident of the First Collection District of Illinois within the
Northern Judicial District, Eastern Division, of the State of
3. Plaintiff is the sole owner of the claim herein presented
and has made no assignment of said claim or any part thereof. No
other suit or process by plaintiff or any assignee of plaintiff
is pending against any other person or against defendant, for or
in respect of plaintiff's claim.
4. Plaintiff manufactures insulated wires and cables for the
appliance and automobile industries and for use in motors and
generators. Copper is the most important raw material used by
plaintiff. Copper became scarce in 1948, and plaintiff determined
that it should protect its inventory of copper by buying for
future needs. Plaintiff had banked at The First National Bank of
Chicago since 1929, and had borrowed money from the Bank from
time to time and had maintained deposit accounts with this Bank.
Therefore on November 2, 1948 the plaintiff's Board of Directors
authorized the officers of plaintiff to borrow $1,000,000 from
that Bank for the purchase of copper. On November 17, 1948
plaintiff made a written application to The First National Bank
of Chicago to borrow $1,000,000. This application set forth the
terms and conditions of the transaction. On November 17, 1948 the
Bank, in writing, accepted the application. Plaintiff received
the said $1,000,000 from the Bank on November 17, 1948 and on the
same date delivered a promissory note to The First National Bank
of Chicago as evidence of the borrowing. Such a transaction is
commonly referred to in banking circles as a "term loan". The
promissory note here involved is not generally known in the
commercial banking world as a debenture nor as a corporate
security; nor is it generally known in the investment banking
business as a debenture or a corporate security; nor is it
generally known by bank examiners as a debenture or investment
security. A true and correct copy of said promissory note and of
said loan application and of said acceptance by the Bank are
attached to the complaint and to the stipulation of facts filed
herein, and are hereby incorporated by reference and made a part
of these findings of fact.
5. The taxes in controversy are stamp taxes in the amount of
$1,100. The Commissioner of Internal Revenue determined that a
stamp tax liability in the amount of $1,100 was incurred by
plaintiff upon the issuance of the note to The First National
Bank of Chicago, and on October 7, 1949 defendant issued his
Notice and Demand for Tax to plaintiff demanding payment of the
tax within 10 days from October 7, 1949. Pursuant thereto, on
October 17, 1949 plaintiff paid the tax to defendant, Collector
of Internal Revenue of the United States of America for the First
Collection District of Illinois.
6. The promissory note here involved was not in registered form
and did not bear interest coupons.
7. Term bank loan notes, after their original issuance, are not
bought and sold or otherwise traded in as are debentures and
other corporate securities.
1. The court has jurisdiction of the parties and of the subject
2. The instrument delivered by plaintiff to The First National
Bank of Chicago as evidence of the $1,000,000 loan was a
3. The instrument delivered by plaintiff to The First National
Bank of Chicago was not a debenture nor a corporate security as
those terms are used in Section 1801 of the Internal Revenue
Code, 26 U.S.C.A. § 1801, and is not subject to stamp tax under
that section or any other section of the Internal Revenue Code.
4. The assessment and collection of $1,100 stamp taxes by
defendant on the instrument delivered to The First National Bank