Lakeland Grocery Co. v. Commissioner

36 B.T.A. 289 (1937)

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Lakeland Grocery Co. v. Commissioner

Board of Tax Appeals
36 B.T.A. 289 (1937)

Facts

Lakeland Grocery Co. (Lakeland) (plaintiff) was forced into receivership by its creditors in December 1930. In March 1933, Lakeland filed for bankruptcy. To allow Lakeland to remain in business, its creditors agreed to forgive $104,710.16 of debt in return for a payment of $15,472.61. That left Lakeland with net assets of $39,596.93 free and clear of any claims by creditors. The commissioner of Internal Revenue (defendant) assessed Lakeland for additional income of $89,237.55, the difference between $104,710.16 (the amount of debt forgiven) and $15,472.61 (the amount paid to the creditors). Lakeland contended that no income resulted from the settlement with its creditors. The commissioner later conceded that the assessment should have been for only $39,596.93, Lakeland’s total net assets after the settlement with the creditors.

Rule of Law

Issue

Holding and Reasoning (Harron, J.)

Concurrence (Sternhagen, J.)

Dissent (Morris, J.)

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