J. Simpson Dean v. Commissioner

The Deans (plaintiffs), who controlled Nemours Corporation, borrowed over $2 million from Nemours on non-interest-bearing notes during 1955–1956. The Commissioner (defendant) determined a tax deficiency, reasoning that had the Deans borrowed the same funds elsewhere, they would have paid substantial interest (calculated at roughly $65,000 and $98,000 for the respective years), and that avoiding those interest charges by borrowing interest-free from a family-controlled corporation constituted taxable economic benefit to the Deans.