Court Opinion

ID: 4602899
Source: CourtListenerOpinion
Date Created: 2020-11-20 19:30:47.261309+00
Date Added: 2024-06-11T08:00:51.642219
License: Public Domain

ILLINOIS POWER & LIGHT CORPORATION, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.Illinois Power & Light Corp. v. CommissionerDocket Nos. 56299, 59687.United States Board of Tax Appeals33 B.T.A. 1189; 1936 BTA LEXIS 772; February 25, 1936, Promulgated *772  1.  Held, petitioner is entitled to deduct from gross income in the year of retirement unexhausted bond discount and premium upon the call and retirement of outstanding bonds of one of several corporations which, prior to such call and petirement, were merged or consolidated into petitioner corporation.  2.  Held, petitioner is entitled to deduct from gross income in the year of retirement unexhausted bond discount, premium, and expenses incident to the retirement of its own bond issue and that of another member of the affiliated group filing a consolidated return, where the funds used for such purposes were replaced by the proceeds of a new issue, or where the proceeds of the new issue were used directly to retire the prior issue.  Henry S. Wingate, Esq., R. B. Goodell, Esq., and Henry I. Green, Esq., for the petitioner.  Elden McFarland, Esq., for the respondent.  TRAMMELL *1189  These are consolidated proceedings for the redetermination of deficiencies in income tax in Docket No. 56299 for the years 1926 and 1927 in the amounts of $80,075.74 and $62,726.40, respectively, and in Docket No. 59687 for the year 1928 in the amount of*773  $57,132.17.  The issues are: (1) Whether petitioner is entitled to deduct from gross income in the year of retirement unamortized bond discount and premium upon the call and retirement of outstanding bonds of one of several corporations which, prior to such call and retirement, were merged or consolidated into petitioner corporation; and (2) whether petitioner is entitled to deduct from gross income in the year of petirement unamortized bond discount, premium, and expenses incident to the retirement of its own bonds and those of another member of the affiliated group filing a consolidated return, *1190  where the funds used for such purposes were replaced by the proceeds of a new issue, or where the proceeds of the new issue were used directly to retire the prior issue.  FINDINGS OF FACT.  The parties filed a stipulation of facts in each case, which, together with the attached exhibits, we here adopt in full by reference, but set out below only so much of the stipulated facts as is deemed pertinent to a discussion of the issues, viz: On May 25, 1923, in accordance with the provisions of an Act of the Legislature of the State of Illinois, entitled "An Act in Relation to*774 Corporations for Pecuniary Profit" approved June 28, 1919, and all acts amendatory thereof, and pursuant to action duly taken at meetings of the stockholders of certain corporations organized and existing under the laws of the State of Illinois, the said corporations, of which Southern Illinois Light and Power Company was one, were consolidated into and formed Illinois Power and Light Corporation, the petitioner herein.  Pursuant to its Certificate of Consolidation, petitioner became subject to all the restrictions, liabilities and duties of each of the corporations enumerated on page 7 thereof, of which Southern Illinois Light and Power Company was one.  * * * The principal corporate office of the petitioner is in the City of Monticello, County of Piatt, State of Illinois, and its principal business office is at 231 South LaSalle Street, Chicago, Illinois.  Petitioner filed consolidated income tax returns for itself and its affiliated corporations for the calendar years 1926 and 1927 with the Collector of Internal Revenue at Springfield, Illinois.  On February 19, 1931, respondent mailed a notice of deficiency to the petitioner, setting forth his determination of deficiencies*775  in income taxes for the years 1926 and 1927 in the amounts of $80,075.74 and $62,726.40, respectively.  * * * Thereafter, pursuant to the provisions of Section 606 of the Revenue Act of 1928, petitioner and respondent entered into written agreements as to final determination covering specific matters relating to the income tax liability of the petitioner and its affiliated corporations for the calendar years 1926 and 1927.  Each of the said agreements was approved by the Secretary of the Treasury or by the Undersecretary within six months from the date when it was signed by the petitioner.  * * * As a result of the execution of the agreements referred to * * * the controversy between petitioner and respondent, as respects petitioner's income tax liability for the years 1926 and 1927, is confined to the action of the respondent in disallowing deductions from gross income of the year 1926 aggregating $593,153.65 and of deductions from gross income of the year 1927 aggregating $464,639.97, such amounts representing premiums paid by the petitioner upon the retirement of certain bonds and unamortized discount and expense upon such bonds.  From time to time during the year 1922, Southern*776 Illinois Light and Power Company, the corporation referred to above, issued and sold for cash $3,623.600 in principal amount of its 7% First Lien and Refunding Gold Bonds Series A, at an aggregate discount of $432,119 and received therefor $3,191,481 in cash.  *1191  The following tabulation sets forth correctly the dates of issue, the par value of bonds issued, the prices at which the bonds were sold and the amounts of cash received.  Date issuedPar value of bonds issuedPriceCash receivedFebruary 1922$550,000.0084$462,000.00March 1922650,000.0084546,000.00March 1922175,000.0087152,250.00March 192250,100.009045,090.00April 192215,500.009013,950.00May 19221,200,000.00891,068,000.00June 192241,700.009037,530.00August 1922122,000.0090109,800.00August 192237,100.009033,390.00August 192225,600.009023,040.00August 1922647,000.0093601,710.00August 19222,800.00892,492.00October 192245,800.009041,220.00November 19222,500.00852,125.00November 19227,800.00937,254.00November 192250,700.009045,630.003,623,600.003,191,481.00*777  Such bonds were issued pursuant to the terms of a Trust Indenture between Southern Illinois Light and Power Company and Central Trust Company of Illinois, as Trustee, dated December 1, 1921.  * * * In connection with the issuance of the aforesaid Bonds, Southern Illinois Light and Power Company incurred expenses aggregating $21,416.51.  The aggregate amount of discount and expense upon the aforesaid Bonds was $453,535.51, of which $101,437.12 was amortized during the period from their issuance to December 1, 1926.  Of the 7% First Lien and Refunding Gold Bonds, Series A, of Southern Illinois Light and Power Company, issued as aforesaid, there remained outstanding on December 1, 1926 $3,236,100 in principal amount.  The unamortized discount and expense upon said bonds at that date was $352,098.39.  On December 1, 1926, pursuant to notice duly given in accordance with a resolution duly adopted at a meeting of the Directors of the Petitioner held on September 27, 1926, the 7% First Lien and Refunding Gold Bondds, Series A of Southern Illinois Light and Power Company then outstanding in the principal amount of $3,236,100 were redeemed and retired by the petitioner for $3,478,807.50, *778  in cash, exclusive of interest.  The amount of premium paid by the Petitioner in cash upon the redemption of the bonds as aforesaid was $242,707.50.  From time to time during the years 1922 and 1923, Southern Illinois Light and Power Company, * * * issued and sold for cash $423,000 in principal amount of its 6% First Lien and Refunding Gold Bonds, Series B, at an aggregate discount of $60,452 and received therefor $362,548 in cash.  * * * Such bonds were issued pursuant to the terms of a Trust indenture to Central Trust Company of Illinois, as Trustee, dated December 1, 1921, and a supplemental Indenture dated August 1, 1922, * * * In connection with the issuance of the aforesaid Series B bonds, Southern Illinois Light and Power Company incurred expenses aggregating $2,803,83.  The aggregate amount of discount and expense upon the aforesaid bonds was $63,255.83, of which $17,682.97 was amortized during the period from their issuance to February 1, 1927.  *1192  On February 1, 1927, there remained outstanding 6% First Lien and Refunding Gold Bonds, Series B, of Southern Illinois Light and Power Company in the principal amount of $423,000 issued as aforesaid.  The unamortized*779  discount and expense upon said bonds at that date was $45,572.86.  On February 1, 1927, pursuant to notice duly given in accordance with a resolution duly adopted at a meeting of the Directors of the petitioner held on November 22, 1926, the 6% First Lien and Refunding Gold Bonds, Series B, of Southern Illinois Light and Power Company then outstanding in the principal amount of $423,000 were redeemed and retired by the petitioner for $448,380 in cash, exclusive of interest.  The amount of premium paid by the petitioner in cash upon the redemption of the bonds as aforesaid was $25,380.  In May, 1923, the petitioner issued, pursuant to a resolution duly adopted at a meeting of the Directors held on May 28, 1923, $10,000,000 in principal amount of its 30-year 7% Sinking Fund Debenture Gold Bonds.  Said bonds were issued pursuant to the provisions of a Trust Agreement between the petitioner and Central Trust Company of Illinois, as Trustee, dated as of April 2, 1923, * * * On April 1, 1927, pursuant to notice duly given in accordance with a resolution duly adopted at a meeting of the Directors of the petitioner held on January 3, 1927, the 30-year 7% Sinking Fund Debenture Gold Bonds*780  of the petitioner then outstanding in the principal amount of $9,614,800 were redeemed and retired by the petitioner for $10,056,134.27 in cash, exclusive of interest.  The amount of premium paid by the petitioner in cash upon the retirement of the bonds as aforesaid was $441,334.27 of which $13,978.39 has been allowed as a deduction from the gross income of the petitioner for the year 1927, leaving an unamortized balance of $427,355.88.  Pursuant to a resolution duly adopted at a meeting of the Directors of the petitioner held on December 1, 1926, the petitioner issued, on or after December 14, 1926, $4,227,700 in principal amount of its First and Refunding Mortgage Bonds, Series C.  Such bonds were issued pursuant to Section 2 of Article III of a Trust Indenture, dated April 2, 1923, to Harris Trust and Savings Bank and M. H. MacLean * * *.  In accordance with the provisions of Section 2 of Article III of said Indenture, the bonds so issued were equal in principal amount to $4,227,700 of fundable underlying obligations which as of December 1, 1926 had been paid, purchased or redeemed, included among which were the 7% First Lien and Refunding Gold Bonds, Series A, of Southern Illinois*781  Light and Power Company, in the principal amount of $3,236,100 which had been redeemed for cash and retired as aforesaid on December 1, 1926.  None of the First and Refunding Mortgage Bonds, Series C, of the petitioner issued as aforesaid was issued in exchange for bonds of SouthernIllinois Light and Power Company.  One of the purposes of the issue of First and Refunding Mortgage Bonds, Series C, of the face value of $4,227,700 by petitioner on December 22, 1926 was to replace in whole or in part funds used in the redemption and retirement of the Southern Illinois Light and Power Company 7% First Lien and Refunding Gold Bonds, Series A, in the principal amount of $3,236,100 which were redeemed by petitioner for cash and retired on December 1, 1926 as set out hereinabove.  The unamortized discount applicable to the Southern Illinois Light and Power Company 7% First Lien and Refunding Gold Bonds, Series A retired on December 1, 1926, together with the premium paid on such retirement as set out above was not charged off on the petitioner's books at the time of *1193  such retirement, but was set up and carried as discount and/or expense applicable to the First and Refunding*782  Mortgage Bonds, Series C, issued on December 22, 1926.  Pursuant to a resolution duly adopted at a meeting of the Directors of the petitioner held on June 2, 1927, the petitioner issued, on or after June 22, 1927, $921,700 in principal amount of its First and Refunding Mortgage Bonds Series C.  Such bonds were issued pursuant to Section 2 of Article III of a Trust Indenture, dated April 2, 1923, to Harris Trust and Savings Bank and M. H. McLean.  * * * In accordance with the provisions of Section 2 of Article III of said Indenture, the bonds so issued were equal in principal amount to $921,700 of fundable underlying obligations which as of June 1, 1927, had been paid, purchased or redeemed, including among which were the 6% First Lien and Refunding Gold Bonds, Series B, of Southern Illinois Light and Power Company, in the principal amount of $423,000 which had been redeemed for cash and retired as aforesaid on February 1, 1927.  None of the First and Refunding Mortgage Bonds, Series C, of the petitioner issued as aforesaid was issued in exchange for bonds of SouthernIllinois Light and Power Company.  One of the purposes of the issue of First and Refunding Mortgage Bonds, Series*783  C, of the face value of $921,700 on June 27, 1927 was to replace in whole or in part funds used in the redemption and retirement of the 6% First Lien and Refunding Gold Bonds, Series B, of Southern Illinois Light and Power Company in the principal amount of $423,000.00, which were redeemed for cash and retired on February 1, 1927.  * * * The unamortized discount applicable to the Southern Illinois Light and Power Company 6% First Lien and Refunding Gold Bonds, Series B, retired by petitioner on February 1, 1927, together with the premium paid on such retirement * * * was not charged off on the petitioner's books at the time of such retirement, but was set up and carried as discount and/or expense applicable to the First and Refunding Mortgage Bonds, Series C, issued on June 27, 1927.  Pursuant to a resolution duly adopted at a meeting of the Directors of the petitioner held on February 14, 1927, the petitioner issued and sold for cash, on or after March 1, 1927, $9,500,000 in principal amount of its 30-year 5 1/2% Sinking Fund Debenture Gold Bonds.  Such bonds were issued pursuant to a Trust Agreement between the petitioner and Central Trust Company of Illinois as Trustee, dated*784  March 1, 1927, * * * One of the purposes of the issue of the 30-year 5 1/2% Sinking Fund Debenture Gold Bonds by the petitioner was to obtain funds for the redemption and retirement of its 30-Year 7% Sinking Fund Debenture Gold Bonds in the principal amount of $9,614,800 which were redeemed for cash and retired as aforesaid on April 1, 1927.  None of the 30-year 5 1/2% Sinking Fund Debenture Gold Bonds issued as aforesaid was issued in exchange for 30-year 7% Sinking Fund Debenture Gold Bonds of the petitioner.  The premium paid by petitioner on retirement of $9,614,800 face value of its 7% Sinking Fund Debenture Gold Bonds on April 1, 1927, * * * was not charged off on the petitioner's books at the time of such retirement, but was set up and carried as discount and/or expense applicable to the 30-year 5 1/2% Sinking Fund Debenture Gold Bonds, issued in March, 1927.  In determining the deficiency for the year 1926, set forth in the notice of deficiency dated February 19, 1931, the respondent refused to allow as a deduction from the gross income of the petitioner the amount of premium paid *1194  by it on December 1, 1926 upon the redemption of the Series A bonds of Southern*785 Illinois Light and Power Company, to wit: $242,707.50; and refused to allow as a deduction the unamortized balance of discount and expense upon said bonds, to wit: $352,098.39; but in lieu thereof allowed as a deduction 1/360 of $594,805.89 (which is the sum of the amounts disallowed).  The amount so allowed as a deduction by him was $1,652.24.  In determining the deficiency for the year 1927, set forth in the notice of deficiency dated February 19, 1931, the respondent refused to allow as deductions from the gross income of the petitioner the amount of the premiums paid by it on February 1, 1927 upon the redemption of the Series B bonds of SouthernIllinois Light and Power Company, to wit: $25,380, and the unamortized balance of the premiums paid by it on April 1, 1927, upon the redemption of its 7% Debenture Bonds, to wit: $427,355.88; and refused to allow as a deduction the unamortized balance of discount and expense upon the Series B bonds of SouthernIllinois Light and Power Company, to wit: $45,572.86; but in lieu thereof allowed as deductions, 10/360 of $498,308.74 (which is the sum of the amounts disallowed) and 12/360 of $594,805.89 (which is the sum of the amounts disallowed*786  as deductions in his determination of the deficiency for the year 1926).  The aggregate amount so allowed as a deduction by him was $33,668.77.  If the respondent erred in refusing to allow as deductions from the gross income of the petitioner for the year 1926 the total amounts disallowed by him as set forth hereinabove, and in refusing to allow as deductions from the gross income of the petitioner for the year 1927 the total amounts disallowed by him as set forth above there is no deficiency in income tax due from the petitioner for the year 1926 or for the year 1927.  If the disallowance by the respondent of the aforesaid amounts as deductions was correct, the deficiency in income tax for the year 1926 is $80,075.74 and the deficiency in income tax for the year 1927 is $62,726.40.  The petitioner filed a consolidated income tax return for the calendar year 1928 for itself and its affiliated corporations, one of which was Iowa Power and Light Company, a corporation organized under the laws of the State of Iowa with the Collector of Internal Revenue at Springfield, Illinois.  Thereafter, pursuant to the provisions of Section 606 of the Revenue Act on 1928, the Petitioner and*787  the Respondent entered into a written agreement as to final determination covering specific matters relating to the income tax liability of the Petitioner and its affiliated corporations for the calendar year 1928.  Said agreement was approved by the Secretary of the Treasury or by the Under Secretary within six months from the date when it was signed by the Petitioner.  * * * Thereafter, on June 26, 1931, the Respondent mailed to the Petitioner a notice of deficiency setting forth his determination of a deficiency in income tax for the year 1928 in the amount $57,132.17.  * * * As a result of the execution of the aforesaid closing agreement, the controversy between the Petitioner and the Respondent as respects petitioner's income tax liability for the year 1928 is confined to the action of the Respondent in disallowing deductions from gross income of petitioner and its affiliated corporations for the year 1928 aggregating $476,101.45 representing premiums paid by Iowa Power and Light Company, the corporation referred to in paragraph 2 hereof, upon the retirement of certain bonds, and unamortized discount and expense upon such bonds.  On May 21, 1925, Iowa Power and Light Company, *788  * * * issued and sold for cash $2,000,000 in principal amount of its 6% First Mortgage Gold *1195  Bonds, Series A, at an aggregate discount of $90,000 and received therefor $1,910,000 in cash.  Such bonds were issued pursuant to a Deed of Trust to Harris Trust and Savings Bank and M. H. MacLean, as Trustee, dated May 1, 1925, * * * In connection with the issuance of the aforesaid bonds, Iowa Power and Light Company incurred expenses aggregating $17,121.88.  The aggregate amount of discount and expense upon the aforesaid bonds was $107,121.88, of which $9,237.41 was amortized during the period from their issuance to May 1, 1928.  On May 27, 1926, Iowa Power and Light Company issued and sold for cash $3,000,000 in principal amount of its 5 1/2% First Mortgage Gold Bonds, Series B, at an aggregate discount of $180,000 and received therefor $2,820,000 in cash.  Such bonds were issued pursuant to a Deed of Trust to Harris Trust and Savings Bank and M. H. MacLean, as Trustees, dated May 1, 1925.  * * * In connection with the issuance of the aforesaid bonds, Iowa Power and Light Company incurred expenses aggregating $11,890.89.  The aggregate amount of discount and expense upon the*789  aforesaid bonds was $191,890.89, of which $12,592.80 was amortized during the period from their issuance to May 1, 1928.  On May 1, 1928, there remained outstanding 6% First Mortgage Gold Bonds, Series A, of Iowa Power and Light Company in the principal amount of $2,000,000 issued as aforesaid.  The unamortized discount and expense upon said bonds at that date was $97,884.47.  On May 1, 1928, there remained outstanding 5 1/2% First Mortgage Gold Bonds, Series B, of Iowa Power and Light Company in the principal amount of $3,000,000 issued as aforesaid.  The unamortized discount and expense upon said bonds at that date was $179,298.09.  On May 1, 1928, pursuant to notice duly given in accordance with a resolution duly adopted at a meeting of the Directors of Iowa Power and Light Company held on February 24, 1928, the 6% First Mortgage Gold Bonds, Series A, of said Company then outstanding in the principal amount of $2,000,000 were redeemed and retired by said Company for $2,100,000 in cash, exclusive of interest; and the 5 1/2% First Mortgage Gold Bonds, Series B, of Company then outstanding in the principal amount of $3,000,000 were redeemed and retired by said Company for $3,150,000*790  in cash, exclusive of interest.  The amount of premium paid by said Company in cash upon the redemption of the bonds as aforesaid was $250,000.  Pursuant to a resolution duly adopted at a meeting of the Directors of Iowa Power and Light Company held on February 24, 1928, Iowa Power and Light Company issued, and sold for cash on March 21, 1928, $6,000,000 in principal amount of its 4 1/2% First Mortgage Gold Bonds, Series A.  Such bonds were issued pursuant to an Indenture of Mortgage or Deed of Trust to Harris Trust and Savings Bank and M. H. MacLean, as Trustees, dated March 1, 1928 * * * One of the purposes of the issue of the 4 1/2% First Mortgage Gold Bonds, Series A, by the Iowa Power and Light Company was to obtain funds for the redemption and retirement of its 6% First Mortgage Gold Bonds, Series A, in the principal amount of $2,000,000 and for the redemption and retirement of its 5 1/2% First Mortgage Gold Bonds, Series B, which were redeemed for cash and retired as aforesaid on May 1, 1928.  None of the 4 1/2% First Mortgage Gold Bonds, Series A, issued as aforesaid was issued in exchange for 6% First Mortgage Gold Bonds, Series A, or for 5 1/2% First Mortgage Gold Bonds, *791  Series B, of the Iowa Power and Light Company.  The unamortized discount applicable to the Iowa Power and Light Company 6% First Mortgage Gold Bonds, Series A, in the principal amount of $2,000,000 *1196  and 5 1/2% First Mortgage Gold Bonds, Series B, in the principal amount of $3,000,000 retired on May 1, 1928, together with the premium paid upon such retirements, * * * was not charged off on the books of such corporation at the time of such retirement but was set up and carried as discount and/or expense applicable to the 4 1/2% First Mortgage Gold Bonds, Series A, issued on March 21, 1928.  In determining the deificiency for the year 1928, set forth in his letter dated June 26, 1931, the respondent refused to allow as a deduction from the gross income of the petitioner and its affiliated corporations the amount of premium paid by Iowa Power and Light Company on May 1, 1928 upon the redemption of its 6% First Mortgage Gold Bonds, Series A, and 5 1/2% First Mortgage Gold Bonds, Series B, to wit: $250,000 and refused to allow as a deductions the unamortized balance of discount and expense upon said bonds at May 1, 1928, to wit: $97,884.47 of the Series A bonds, and $179,298.09*792  on the Series B bonds; but in lieu thereof allowed as deductions 1/30 of $594,805.89 (which is the sum of certain amounts disallowed as deductions in his determination of a deficiency for the year 1926) and 1/30 of $498,308.74 (which is the sum of certain amounts disallowed as deductions in his determination of a deficiency for the year 1927) and 10/360 of $527,182.56 which is the sum of certain amounts disallowed as deductions in 1928.  The aggregate amount so allowed as deductions by him was $51,081.11.  If the respondent erred in refusing to allow as deductions from the gross income of the petitioner and its affiliated companies for the year 1928 the amounts disallowed by him as set forth above, there is no deficiency in income tax due from the petitioner for the year 1928.  If the disallowance by the Respondent of the aforesaid amounts as deductions was correct, the deficiency in income tax for the year 1928 is $57,132.17.  OPINION.  TRAMMELL: 1 The first question presented here is whether petitioner is entitled to deduct from gross income for the year of retirement, the unamortized discount (and premium paid) upon the retirement of certain bonds issued by a corporation*793  which subsequently, but prior to the retirement of the bonds, became merged or consolidated into petitioner corporation.  In the case of , we discussed at some length previous Board decisions and court decisions on the subject of the allowance of a deduction from gross income for the year of retirement of the unamortized discount and premium paid upon the retirement of bonds.  It is not necessary to further discuss those cases here.  That case involved the question of the deduction of unamortized discount of bonds retired by a corporation which succeeded to the assets and liabilities of the issuing company, and we held that such successor corporation was not entitled to a deduction.  This case is materially different from that case in that in this case there was a statutory consolidation *1197  under the laws of Illinois, the pertinent provisions of which statute are quoted in the margin.2*794 Under this statute the consolidated corporation becomes the owner of all the property and succeeds to all the liabilities of the component corporations by operation of law and not by purchase.  See ; affd., . In this case the bonds issued by the Southern Illinois Co. became by operation of law the obligations of the consolidated corporation, the petitioner herein, to the same extent as if the bonds had been issued by it.  Petitioner stood in the place of the issuing corporation and it is therefore entitled to treat the unexhausted discount and premium paid upon retirement of the bonds in the same manner as like discount and premium in the case of its own bonds.  We therefore hold that the petitioner is entitled to the deduction claimed for unamortized discount and premium paid on the bonds retired.  The second issue presents the question whether petitioner is entitled to deduct from gross income for the year of retirement unexhausted bond discount, premium, and expenses incident to the retirement of its own bond issue and that of another member of the affiliated group filing a consolidated return, *795  where the funds used for such purposes were replaced by the proceeds of a new issue, or where the proceeds of the new issue were used directly to retire the prior issue.  This case does not involve the question whether a parent corporation is entitled to a deduction on account of unamortized discount on the retirement by the parent corporation of bonds issued by a subsidiary.  Here, petitioner, the parent corporation, issued and *1198  redeemed its own bonds, and the subsidiary issued and redeemed its own bonds.  Petitioner claims a deduction of the discount on the bonds issued and retired by it, and because of the fact that it filed a consolidated return for itself and the subsidiary, also claims a deduction for the subsidiary's bond discount in determining the total tax liability on the basis of the consolidated return.  The only point in controversy here is whether such deductions are allowable where the funds used for retirement of the bonds were replaced by proceeds from the sale of a new issue of bonds.  On brief respondent concedes that both the Board and the courts have taken a view contrary to his contention on this question, but, pending further judicial clarification, *796  continues to urge his position.  In , we held that a corporation which retires and outstanding issue of bonds at a callable price above par in accordance with the trust agreement is entitled to a deduction for the unexhausted discount and expense on the old bond issue and for the premium paid on retirement, even though it had borrowed money to retire the bonds and promptly repaid the amount borrowed from the proceeds of a new bond issue.  And see also ;  (reconsideration); ; , affirming the Board's memorandum opinion entered May 11, 1933; , affirming the Board's memorandum opinion entered October 25, 1933; and , affirming the Board's memorandum opinion entered December 27, 1933. *797 On authority of the decisions above cited, respondent's action on the second issue herein is revised.  Since we reach the conclusion that respondent erred in refusing to allow the deductions claimed by the petitioner, we hold, in accordance with the stipulations of the parties, that there is no deficiency due from the petitioner for either of the taxable years involved.  Reviewed by the Board.  Judgment will be entered for petitioner.MURDOCK dissents.  Footnotes1. This decision was prepared during Mr. Trammell's term of office. ↩2. After setting forth the procedure for the merger or consolidation of two or more corporations into a single corporation, the statute provides: 70.  Such single corporation shall thereupon and thereafter possess all the rights, privileges, immunities, powers and franchises, as well of a public as of a private nature, and all property, real, personal and mixed, and all debts due on whatever account, as well as for stock subscriptions and all other things in action of, or belonging to, each of such corporations, and be subject to all the restrictions, liabilities and duties of each of such corporations so merged or consolidated.  All property, rights, privileges, immunities, powers and franchises and all and every other interest shall thereafter be as effectually the property of the single corporation as they were of the several and respective merging or consolidating corporations.  The title to any real estate, whether by deed or otherwise, under the laws of this state, vested in any of such corporations, shall not revert or be in any way impaired by reason of such merger or consolidation.  71.  All rights of creditors and all liens upon the property of either of such merging or consolidating corporations shall be preserved unimpaired, and all debts, liabilities and duties of the respective corporations shall henceforth attach to such single corporation and may be enforced against it to the same extent as if such debts, liabilities and duties had been incurred or contracted by it.  Any action by or against one of the corporations merged or consolidated may be prosecuted to judgment as if such merger or consolidation had not taken place, or the merged or consolidated corporation may be substituted in its place.  [Cahill's Illinois Revised Statutes, Ch. 32, p. 677.] ↩