May 16, 1935
MONTANA, WYOMING & SOUTHERN R. CO., PETITIONER,
COMMISSIONER OF INTERNAL REVENUE, RESPONDENT
Petition for Review of the United States Board of Tax Appeals.
Before BUFFINGTON and THOMPSON, Circuit Judges, and JOHNSON, District Judge.
In this income tax case it appears that taxpayer, an operating railroad corporation, had, in 1909, in the purchase of railroad property, issued $900,000 of its own bonds at par. In the tax year of 1930 it bought back $55,000 par value of these bonds for $39,832.50. While it has not surrendered such bonds to the trustee for cancellation, it still owns them, and by its purchase has proportionately paid such part of its indebtedness. On hearing, the Commissioner held the taxpayer had made a profit of the difference between the par issue price and the lower purchase price. The Tax Board approved the Commissioner's holding, saying: "The principle applicable here is that of United States v. Kirby Lumber Co., 284 U.S. 1, 52 S. Ct. 4, 76 L. Ed. 131, and Helvering v. American Chicle Co., 291 U.S. 426, 54 S. Ct. 460, 78 L. Ed. 891, in both of which the taxpayers bought in bonds at less than face value."
Finding no error in the Tax Board's ruling, it is affirmed.
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