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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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