- 16 - 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 compositionPage: Previous 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Next
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