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Inherent in an economy financed by a large volume of credit, extending over varying intervals of time, is the problem of debt reduction and revalorization. The ramifications of this problem in the income tax field have long intrigued legal scholars and confounded the courts. A recent case illustrates anew the danger, to client and counsel, lurking in the assumption that the tax significances of debt reduction have finally been reduced to mathematical certainty. The taxpayer borrowed $90,000 from a bank in 1925, using the funds to pay off encumbrances upon, and make improvements on, a piece of property. As a part of the transaction he executed bonds, secured by a mortgage on the property, which the bank sold to the public. The taxpayer retired the bonds as they matured until the advent of the depression when he found it necessary to secure extensions of interest and principal payments. Finally, in 1938, 1939, and 1940, he repurchased certain of the bonds at less than par, making some purchases through the secretary of a bondholders' committee, and through a security house; and others directly from the bondholders. The commissioner adjusted the taxpayer's tax returns for those years by adding to income the difference between the issue price and retirement price of each bond. Before the Tax Court a majority felt that the gain resultant from the committee and security house purchases was income, as these lacked the personal element necessary to find gifts from the bondholders. But they thought the gains from the direct purchases were gifts within the doctrine of Helvering v. American Dental Co. Six judges dissented on the grounds that the Supreme Court never intended to make the tax consequences of bond repurchases dependent on the degree of acquaintance between debtor and bondholder. Hence, they argued, the gains from all purchases were income under United States v. Kirby Lumber Co. On cross appeal to the seventh circuit it was held that, since none of the purchases was made in an open market, the gains from all the purchases were gifts to the taxpayer from the bondholders. Thus is provided fresh impetus for the spirited controversy as to when, if ever, a taxpayer realizes taxable gain through the reduction of his indebtedness.