1. Facts & procedural history

2. Decision

3. See also

4. References

5. Further reading

6. External links

United States v. Kirby Lumber Co., 284 U.S. 1 (1931),^[1] was a case in which the United States Supreme Court held that when a corporation settles its debts for less than the face amount, a taxable gain has occurred.

Facts & procedural history

In 1923, the Kirby Lumber Company issued bonds which had a par value of $12,126,800. Later that same year, the company repurchased the same bonds in the open market for a sum less than par value. The difference between the issue price of the bonds and the price at which the company repurchased them was $137,521.30. The regulations promulgated by the United States Department of the Treasury stated that such a cost savings to a corporation was to be considered taxable income. The Court of Claims, however, found in favor of the taxpayer, analogizing the situation in this case to the one in Bowers v. Kerbaugh-Empire Co., 271 U.S. 170 (1925), a case in which a loan repaid in devalued German marks was not considered to be a taxable gain for the taxpaying company.

Decision

In a brief unanimous opinion, Justice Holmes upheld the validity of the Treasury regulations. He distinguished Bowers v. Kerbaugh-Empire Co. on the grounds that the enterprise in that case had been on the whole a failure, and had lost money. In this case, the taxpayer had made a clear and obvious gain. By paying off its debts for less than the issue price, it had freed up assets to spend on other things. Justice Holmes said nothing in his opinion about the Treasury's definition of income. Later cases before the Court did however address directly the Treasury's definition in connection with related cases.

See also

• List of United States Supreme Court cases, volume 284

References

Further reading

• {{cite journal |last=Bittker |first=Boris I. |authorlink= |author2=Thompson, Barton H. Jr. |year=1978 |title=Income from the Discharge of Indebtedness: The Progeny of United States v. Kirby Lumber Co. |journal=California Law Review |volume=66 |issue=6 |pages=1159–1187 |doi=10.2307/3479935|quote= |jstor= 3479935 }}
• {{cite book |title=Tax stories: An in-depth look at ten leading federal income tax cases |chapter=The Story of Kirby Lumber: The Many Faces of Discharge of Indebtedness Income |last=Schenk |first=Deborah H. |authorlink= |editor=Caron, Paul L. (ed.) |year=2002 |publisher=Foundation Press |location=New York |isbn=978-1-58778-403-3 |pages=97–130 }}
• 26 U.S.C. 108 (Section 108 of the Internal Revenue Code) and corresponding regulations, which contain the current rules on income from discharge of indebtedness.

External links

• {{wikisource-inline|United States v. Kirby Lumber Company}}
• {{caselaw source

• The Northerners
• The Northern Expeditions of Jiang Wei
• The Northern Expeditions of Zhuge Liang
• The Northern Hemisphere Summer heat wave of 2010
• The Northern Hospital, Epping
• The Northern Ireland Ambulance Service (NIAS)
• The Northern Lass
• The Northern Liberator
• The Northern Lights
• The Northern Miner
• The Northern Nomads
• The Northern Pines
• The Northern Reaches
• The Northern Rhodesia Police
• The Northern Scot
• The Northern Securities Company
• The Northern Standard
• The Northern Star
• The northern territory times
• The Northern Territory Times
• The Northern Whig Newspaper
• The North European Plain
• The north face guru
• The Northfields Technology College
• The North Jefferson News