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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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