Gilbert Hahn, Jr. and Margot H. Hahn - Page 11




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          later repurchased its bonds for an amount greater than the issue            
          price, the taxpayers did not realize income and were, in fact,              
          poorer by the transaction.  In Fashion Park, Inc., this Court               
          rejected the Commissioner’s argument that the holdings of Rail              
          Joint Co. and Fashion Park, Inc. conflicted with Kirby Lumber               
          Co., noting that “‘We have consistently * * * emphasized the                
          issue price rather than par value in computing gain from the                
          discharge of obligations.’”  Fashion Park, Inc. v. Commissioner,            
          supra at 606 (quoting Kramon Dev. Co. v. Commissioner, 3 T.C.               
          342, 349 (1944)); see also Rail Joint Co. v. Commissioner, supra            
          at 752.  The holdings in Rail Joint Co. and Fashion Park, Inc.              
          are consistent with section 1.61-12(c)(3), Income Tax Regs.,                
          which provides:  “If bonds are issued by a corporation and are              
          subsequently repurchased by the corporation at a price which is             
          exceeded by the issue price * * *, the amount of such excess is             
          income for the taxable year.”                                               
               In the instant case, petitioner did not issue bonds or other           
          debt instruments at a discount.  Accordingly, cases such as Rail            
          Joint Co. and Fashion Park, Inc. are inapposite.                            
               The third case on which petitioner relies, Bradford v.                 
          Commissioner, supra, is also distinguishable.  In Bradford, the             

               5(...continued)                                                        
          T.C. 600 (1954), the taxpayer originally issued $50 par preferred           
          stock for $5 a share.  In a tax-free reorganization, the company            
          later issued $50 par value bonds in an exchange for the preferred           
          stock.  Id. at 601-603.                                                     





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