James P. Whitmer - Page 10

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          Lumber Co., 284 U.S. 1 (1931); see also Lehew v. Commissioner,              
          T.C. Memo. 1987-389 (COD includes the relinquishment of a right             
          to the repayment of advance insurance commissions or commissions            
          related to refunded premiums).  It does not naturally follow from           
          this firmly established law, however, that a guarantor such as              
          petitioner will always realize COD income on the discharge of a             
          primary obligor’s debt.  We have found no case in which a                   
          guarantor such as petitioner realized COD income from a discharge           
          of debt.  In Kirby Lumber, the seminal case on COD income, the              
          debtor was primarily liable for the debt.                                   
               Respondent relies on Bradford v. Commissioner, 233 F.2d 935            
          (6th Cir. 1956), revg. 22 T.C. 1057 (1954), and Tennessee                   
          Securities, Inc. v. Commissioner, 674 F.2d 570 (6th Cir. 1982),             
          affg. T.C. Memo. 1978-434, to support her determination that                
          petitioner realized COD income on the cancellation of Midwest’s             
          obligation to ITT.  We do not read these cases to support                   
          respondent’s determination, and she has not otherwise convinced             
          us that the rationale of Kirby Lumber applies to the facts at               
          hand.  Midwest obtained a nontaxable increase in assets on                  
          account of its debt to ITT.  Petitioner did not.  To be sure,               


               6(...continued)                                                        
          23 F.3d 1032, 1034 (6th Cir. 1994), affg. T.C. Memo. 1992-673.              








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