Court Opinion

ID: 9640653
Source: CourtListenerOpinion
Date Created: 2023-08-22 17:11:07.691537+00
Date Added: 2024-06-11T18:10:31.590430
License: Public Domain

MORTON, Circuit Judge
(dissenting).
I regret' that I am unable to agree. Income is realized gain. An extinguishment of liabilities does not necessarily constitute income; it may or may not do so. If a man owes a million and has no assets, he does not realize an income of $599,999 by compounding half his debts for a nominal sum. In the aspect of it under discussion, income consists of freeing assets from a claim for debt for which they would otherwise be held. The distinction is stated with perfect clearness in the Kirby Case and reaffirmed, as it seems to me, in the American Chicle Case.
The Board of Tax Appeals found “that the transactions (here in question) merely amounted to a reduction in the purchase price of the fleet of vessels, that there was no release of free assets by the transactions involved. ® * • ” “Here, the transaction as a whole — the purchase and operation, of the ships — was a loss. There was a shrinkage in assets. The reduction in purchase price in the instant ease did not make available to the petitioner $158,409 of assets offset by the notes retired. It merely reduced the liability and thereby diminished the loss.” These findings of fact appear to have been correct; they are not challenged in the government’s brief. As the government’s claim to the additional tax depended on proof that the reduction of indebtedness did free assets, and' as that apt-pears not to have been the fact, I think the claim was properly disallowed by the Board of Tax Appeals and that its judgment should be affirmed. See Maryland Casualty Co. v. United States, 251 U. S. 342, 40 S. Ct. 155, 64 L. Ed. 297; Bowers v. Kerbaugh-Empire Co., 271 U. S. 170, 46 S. Ct. 449, 70 L. Ed. 886; United States v. Kirby Lumber Co., 284 U. S. 1, 52 S. Ct. 4, 76 L. Ed. 131; and Helvering v. American Chicle Co. (March 5; 1934), 54 S. Ct. 460; 78 L. Ed. 891.