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time specified in the note. Consequently, petitioner incurred a
liability for the related items. When petitioner was released
from the liability, he realized an accession to income due to the
freeing of assets previously offset by the liability. See Jelle
v. Commissioner, supra at 67.
Petitioner nevertheless urges a contrary result, relying
primarily on Commissioner v. Rail Joint Co., 61 F.2d 751 (2d Cir.
1932), affg. 22 B.T.A. 1277 (1931); Fashion Park, Inc. v.
Commissioner, 21 T.C. 600 (1954); and Bradford v. Commissioner,
233 F.2d 935 (6th Cir. 1956), revg. 22 T.C. 1057 (1954). Those
cases are distinguishable.
Rail Joint Co. and Fashion Park, Inc. each involved a
corporate taxpayer that had issued bonds and later repurchased
them for less than par (i.e., face) value. The Commissioner
determined that each taxpayer had realized discharge of
indebtedness income equal to the difference between the
repurchase price of the bonds and their par value. Commissioner
v. Rail Joint Co., supra at 751; Fashion Park, Inc. v.
Commissioner, supra at 600.
The court in each case held that the taxpayer had not
realized income. In Commissioner v. Rail Joint Co., supra at
752, the Court of Appeals for the Second Circuit reasoned that
the taxpayer “never received any increment to its assets * * * at
the time * * * [the bonds] were retired.” In Fashion Park, Inc.
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