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Second, in each case, the taxpayer was both the issuer of the
debentures and the party responsible for their conversion into
its stock, so that it was not possible for the debentures to be
converted without being returned to the issuer and obligor. Such
is not the case herein.
Respondent seeks to find support for her position from the
District Court opinion in ITT Corp. v. United States, supra. In
that case, the District Court first held that this Court's
decision in International Telephone & Telegraph v. Commissioner,
supra, had collateral estoppel effect with respect to the issue
of ITT's basis in debentures acquired in an exchange for stock,
but not as to whether the debentures survived the exchange. The
court then proceeded to find that the debentures did not survive
the exchange. This decision was reversed, on the basis that
collateral estoppel applied to both issues. The Court of Appeals
reasoned that, although we had applied a particular consolidated
return regulation in International Telephone & Telegraph v.
Commissioner, supra, we had necessarily decided that the
debentures had survived the exchange, following which, ITT had
sold the converted debentures to the issuing subsidiaries. ITT
Corp. v. United States, 963 F.2d at 565-566.
Finally, respondent argues that the converted debentures
were not redeemable because section 4.12 of the indenture
requires that all debentures be presented for redemption at the
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