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of debt is effective upon agreement, not when removed from
books);28 Bear Manufacturing Co. v. United States, 430 F.2d 152,
154 (7th Cir. 1970) (income is realized when the liability
terminates as a practical matter); Fidelity-Philadelphia Trust
Co. v. Commissioner, 23 T.C. 527, 530 (1954) (the important
consideration is that it was unlikely as a matter of fact that
the obligor would have to honor its obligation to the obligee);
Estate of Marcus v. Commissioner, T.C. Memo. 1975-9 (the
decedent's estate realized income in the year of the decedent's
death because the executors did not intend to satisfy certain
debts and the creditor's management did not intend to enforce
those claims). For tax purposes, it is well settled that the
substance of a transaction as revealed by the evidence as a whole
controls over the form employed; i.e., the veil of form is
pierced and the entire transaction is carefully scrutinized.
Commissioner v. Court Holding Co., 324 U.S. 331, 334 (1945); Haag
v. Commissioner, 334 F.2d 351, 355 (8th Cir. 1964), affg. 40 T.C.
488 (1963). Thus, we consider the evidence submitted to decide
whether in 1991 INI, Inc., intended to enforce repayment of
petitioner's indebtedness to it.
On its return filed for fiscal year ended September 30,
1990, INI reported that it had gross receipts of $171,287 and
total income of $215,187. On Schedule L of its return INI
reported that at the beginning of the year it had total assets of
28 See supra note 11.
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