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Realization Of Income Through Cancellations, Modifications, And Bargain Purchases Of Indebtedness: I, L. Hart Wright

Michigan Law Review

Treasury regulations bearing on the tax consequence of a cancellation, modification, or bargain purchase of one's outstanding indebtedness date back to those issued in connection with the Revenue Act of 1918. Thirteen years elapsed after their issuance before the Supreme Court in 1931 finally approved, at least with respect to the bargain purchase with which it was concerned, the principal which the regulations incorporated, namely, that the savings effected by such debtors could, as a constitutional as well as a statutory matter, involve the realization of taxable income. Competing interpretations of that decision, the government insisting on a sweeping application …