Dudley B. and La Donna K. Merkel - Page 13

               marks had fallen in value, which so far as it went was                 
               a gain for the defendant in error, and it was contended                
               by the plaintiff in error that the gain was taxable                    
               income.  But the transaction as a whole was a loss, and                
               the contention was denied.  Here there was no shrinkage                
               of assets and the taxpayer made a clear gain.  As a                    
               result of its dealings it made available $137,521.30                   
               assets previously offset by the obligation of bonds now                
               extinct.  We see nothing to be gained by the discussion                
               of judicial definitions.  The defendant in error has                   
               realized within the year an accession to income * * * .                
               [United States v. Kirby Lumber Co., 284 U.S. 1, 3                      
               In Dallas Transfer & Terminal Warehouse Co. v. Commissioner,           
          70 F.2d 95 (5th Cir. 1934), revg. 27 B.T.A. 651 (1933), the                 
          taxpayer was relieved of an indebtedness with respect to unpaid             
          rent and interest thereon of $107,881 upon conveying to the                 
          lessor certain real property of lesser value.  The Court of                 
          Appeals for the Fifth Circuit held that the transaction did not             
          give rise to taxable income because the taxpayer remained                   
          insolvent3 after the discharge of its debt to the lessor and                
          distinguished United States v. Kirby Lumber Co., supra, as                  
               The taxpayer's [Kirby Lumber Co.'s] assets having been                 
               increased by the cash received for the bonds, by the                   
               repurchase of some of those bonds at less than par the                 
               taxpayer, to the extent of the difference between what                 
               it received for those bonds and what it paid in                        
               repurchasing them, had an asset which had ceased to be                 
               offset by any liability, with a result that after that                 
               transaction the taxpayer had greater assets than it had                
               before.  The decision * * * that the increase in clear                 
               assets so brought about constituted taxable income is                  

          3    The Board of Tax Appeals, however, noted that the taxpayer             
          was solvent after the discharge.  See Dallas Transfer & Terminal            
          Warehouse Co. v. Commissioner, 27 B.T.A. 651, 657 (1933), revd.             
          70 F.2d 95 (5th Cir. 1934).                                                 

Page:  Previous  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  Next

Last modified: May 25, 2011