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It is well established that a compromise or collection of a
debt is not considered a sale or exchange of property because no
property or property rights passes to the debtor other than the
discharge of the obligation. See Fairbanks v. United States, 306
U.S. 436 (1939); National-Standard Co. v. Commissioner, 749 F.2d
369 (6th Cir. 1984), affg. 80 T.C. 551 (1983); Osenbach v.
Commissioner, 198 F.2d 235 (4th Cir. 1952), affg. 17 T.C. 797
(1951); Lee v. Commissioner, 119 F.2d 946 (7th Cir. 1941), affg. 42
B.T.A. 920 (1940); Guthrie v. Commissioner, 42 B.T.A. 696 (1940);
Hale v. Commissioner, 32 B.T.A. 356 (1935), affd. sub nom. Hale v.
Helvering, 85 F.2d 819 (D.C. Cir. 1936). In this regard, whatever
property or property rights might have existed vanish as a result
of the compromise or collection. Leh v. Commissioner, 27 T.C. 892,
898 (1957), affd. 260 F.2d 489 (9th Cir. 1958).
On several occasions we have addressed the issue of whether a
sale or exchange occurred on the payment of a judgment or the
settlement of a claim. See Towers v. Commissioner, 24 T.C. 199
(1955), affd. 247 F.2d 233 (2d Cir. 1957); Hudson v. Commissioner,
20 T.C. 734 (1953), affd. per curiam sub nom. Ogilvie v.
Commissioner, 216 F.2d 748 (6th Cir. 1954); Fahey v. Commissioner,
16 T.C. 105 (1951). In Fahey v. Commissioner, supra, we held that
where an attorney was assigned an interest in a contingent lawsuit
fee in exchange for a cash payment, settlement of the lawsuit and
payment of the fee to the attorney did not give rise to capital
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