Pacific Magnesium, Inc. v. Westover, Collector of Internal Revenue

The problem in this case is whether a settlement and discharge of appellant taxpayer’s debt of $39,335.07 (upon the acceptance by a creditor corporation of a payment of $4,000) constituted income of $35,335.07 to the taxpayer, or whether such a settlement and discharge constituted a gift of that amount to the taxpayer by the creditor corporation (and therefore entitled the taxpayer corporation to an exemption of this amount from its gross income under the provisions of Sec-tin 22(b) (3) of the Internal Revenue Code, 26 U.S.C.A. § 22(b) (3), or whether this settlement and discharge (which the…