James Clark McReynolds

“ Respondent is a New Jersey corporation the nature of whose business is undisclosed. Its books are kept on the accrual basis.
The Sen Sen Chiclet Company, incorporated under the laws of Maine, also carried on an undiclosed business. In 1909 it issued a series of 20 year bonds-whether secured by a lien, or otherwise, does not appear. The indenture under which they issued required that $50,000 be supplied each year which the trustee should use for purchasing outstanding bonds.
In 1914 respondent bought all assets of the Sen Sen Company. ”

“ But if he buys property by an obligation in the form of a bond, note, or the like, and if it remains in kind after the debt is paid, there can be no 'gain.' The cost has indeed been definitely settled, but that is only one term of the equation ”

“ When all of the bonds have been retired by the petitioner its obligations to the Sen Sen Chiclet Company will have been satisfied in full, and whatever the total amount paid to retire the bonds, it will constitute a part of the cost to petitioner of the Sen Sen Chiclet Co. assets.'
In support of the same view, the Circuit Court of Appeals said: 'When a taxpayer gets money by issuing an obligation which he later discharges for less than its face, the transaction is completed, because money need not be sold or exchanged to be 'realized.' So we read United States v. ”