Federal Income TaxLoans, debt discharge, and illegal income
United States v. Kirby Lumber Co.
Supreme Court of the United States · Decided November 2, 1931 · Core case
Full citation
United States v. Kirby Lumber Co., 284 U.S. 1 (1931).
VerifiedQuotes, pinpoints and citation checked word for word against the opinion; facts checked against the opinion before publication. October 23, 2026.This brief explains the opinion as issued. Later treatment and current-law status are not assessed here.
United States
federal governmentplaintiff in error
Kirby Lumber Company
corporate taxpayerdefendant in error
Brief
Facts
In July, 1923, the Kirby Lumber Company issued its own bonds and received their par value. Later in the same year it purchased in the open market some of the same bonds at less than par, the difference of price being $137,521.30. The question in the case is whether this difference is a taxable gain or income of the company for the year 1923. By § 213(a) of the Revenue Act of 1921, gross income includes gains or profits and income derived from any source whatever. Treasury Regulations authorized by § 1303 of that Act provided that if a corporation purchases and retires any of its bonds at a price less than the issuing price or face value, the excess of the issuing price or face value over the purchase price is gain or income for the taxable year. The same regulation had been in force through repeated reenactments of the revenue acts.
Issue
Is the $137,521.30 by which the repurchase price of its bonds fell below the par value the Kirby Lumber Company received for them taxable gain or income for the year 1923?
Holding
Yes. The Treasury Regulation was a correct statement of the law, and by retiring its bonds for $137,521.30 less than their issuing price the company realized an accession to income in 1923.
IRAC
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