Gilbert Hahn, Jr. and Margot H. Hahn - Page 12

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          taxpayer’s husband had executed a note in favor of a bank.  At              
          the husband’s request in 1938, the taxpayer substituted her own             
          $100,000 note for a portion of the indebtedness without receiving           
          any compensation in return.  Id. at 936.  In 1943, the bank wrote           
          off $50,000 of the note.  In 1946, a relative purchased the note            
          for $50,000 with funds provided by the taxpayer and her husband,            
          and the note was retired.  Id.  The Commissioner determined that            
          the wife had realized $50,000 of discharge of indebtedness income           
          in 1946.  Id.                                                               
               The Court of Appeals for the Sixth Circuit held that the               
          taxpayer had not realized income.  The court stated that while a            
          “mechanical application” of tax law would support the                       
          Commissioner’s determination, the court “need not * * * be                  
          oblivious to the net effect of the entire transaction”.  Id. at             
          938-939.  The court concluded that “by any realistic standard the           
          * * * [taxpayer] never realized any income at all from the                  
          transaction”.  Id. at 938.  The court also concluded that                   
          “Stripped of superficial distinctions, the Rail Joint Co. case is           
          identical in principle with the present case.”  Id. at 939.                 
               We note that Bradford did not involve a debt instrument                
          issued for less than par value.  Additionally, Bradford involved            
          unusual facts, suggesting that it is of limited application.  For           
          example, the court did not address whether the taxpayer’s husband           
          had realized discharge of indebtedness income because his tax               

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