UNITED STATES v. KIRBY LUMBER CO., 284 U.S. 1

Summary

The trial court held that respondent taxpayer did not realize a taxable gain from the purchase of its own bonds on the open market at less than their par value, which it had received when it issued them. Upon the petition for certiorari review by the United States, the United States Supreme Court reviewed § 213(a) of the Revenue Act of November 23, 1921, and held that gross income included gains or profits and income derived from any source whatever. By the Treasury Regulations authorized by statute, if a corporation purchased and retired any such 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 was income for the taxable year. The Court found no reason to disregard the regulations. There was no shrinkage of assets, and respondent made a clear gain. As a result of its dealings, respondent realized a certain sum previously offset by the obligation of bonds. Therefore, respondent realized taxable income.