-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
(1931).]
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
follows:
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).
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