Roderick E. Carlson and Jeanette S. Carlson - Page 16




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               receives taxable income in the amount by which his                     
               provable debts exceed the value of his surrendered                     
               assets. * * *                                                          
          Id.  The Court of Appeals distinguished United States v. Kirby              
          Lumber Co., supra, as follows:                                              
               The instant case is substantially different from the                   
               [Kirby Lumber Co.] case * * *.  In the last-mentioned                  
               case a corporation issued its bonds at par and in the                  
               same year repurchased some of them at less than par.                   
               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 repur-                 
               chasing 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 [Kirby Lumber Co.] * * * that the                
               increase in clear assets so brought about constituted                  
               taxable income is not applicable to the facts of the                   
               instant case, as the cancellation of the respondent’s                  
               [Dallas Transfer & Terminal Warehouse Co.’s] past due                  
               debt to its lessor did not have the effect of making                   
               the respondent’s assets greater than they were before                  
               that transaction occurred. * * *                                       
          Dallas Transfer & Terminal Warehouse Co. v. Commissioner, supra             
          at 96.                                                                      
               In Lakeland Grocery Co. v. Commissioner, 36 B.T.A. 289                 
          (1937), the Board of Tax Appeals (Board) considered the insol-              
          vency exclusion established by Dallas Transfer & Terminal Ware-             
          house Co. v. Commissioner, supra.  In Lakeland Grocery Co., the             
          taxpayer entered into a so-called composition settlement under              
          which the taxpayer paid its creditors $15,473 in consideration of           
          being relieved of its indebtedness to those creditors in the                
          amount of $104,710.  Prior to entering into the composition                 





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