Boulevard Bldg. Co. v. Commissioner , 21 B.T.A. 864 ( 1930 )

BOULEVARD BUILDING CO., PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Boulevard Bldg. Co. v. Commissioner

Docket No. 43918.

United States Board of Tax Appeals

21 B.T.A. 864; 1930 BTA LEXIS 1772;

December 23, 1930, Promulgated

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Where petitioner issued its mortgage bonds at par and subsequently purchased some of them on the open market at less than par and retired them, the difference between the par value and purchase price is not taxable as income.

James D. Benedict, Esq., for the petitioner.

T. M. Mather, Esq., for the respondent.

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BLACK

OPINION.

BLACK: In this proceeding the petitioner seeks redetermination of its income tax liability for the calendar year 1926, for which year the respondent has determined a deficiency in the amount of $405.

The sole error alleged is that the respondent erroneously included in the petitioner's income the difference between the issuing price of certain of petitioner's bonds and the price paid for these bonds by the petitioner for retirement.

It has been stipulated that in 1923 the petitioner had an outstanding bonded indebtedness of $90,000, secured by a mortgage on its real estate; that during the year 1923 petitioner purchased $29,000 face value of said mortgage bonds for $26,000; that these bonds were purchased for the purpose of cancellation; and that they were held until 1926, when they were delivered to the trustee and canceled.

The respondent held that when petitioner purchased its own bonds for less than par and retired the same, the difference between the issuing price and the price paid for them for retirement represented taxable gain or income. The Board has considered this question in a number of cases, both where a corporation purchased its own bonds for investment and where it purchased them for retirement and, following , has held that the difference between the issuing price at which said bonds were sold and the price for which they were purchased by the corporation does not represent taxable gain to the corporation. See , and the cases cited therein.

Under the authority of these cases we hold that the respondent erred in determining that petitioner realized a taxable gain upon the purchase and retirement of the bonds involved in this proceeding.

Judgment of no deficiency will be entered.