United States v. Midland-Ross Corp.

Midland-Ross Corporation (Midland) (plaintiff) bought noninterest-bearing promissory notes below face value and resold them at a higher price later the same year, before maturity, reporting the resulting gains as capital gains; the commissioner of internal revenue determined these gains were really a form of interest and thus taxable as ordinary income, issuing a deficiency notice. Midland paid the deficiency and sued for a refund, winning in both the district court and the Sixth Circuit, and the Supreme Court granted certiorari to resolve a circuit split.