Forgiveness of Indebtedness – Part Sale Part Gift what is the rationale for treating the repurchase of debt for less than the amount it was issued for as income? 2. When not recognizing the forgiveness of indebtedness in a Hirsch situation, why must there be a reduction of basis in the asset? 3. Why is it difficult to successfully argue that a creditor has forgiven debt as a gift? Give an example from a case that we studied. 4. When can the making of a gift create taxable income to the person making the gift? Give an example from the cases that we covered. Kirby Lumber Co., 284 U.S. 1 (1931) Hirsch, 115 F. 2d 656 (1940) American Dental Co., 318 U.S. 322 (1943) 5th Avenue & 14th St., 147 F. 2d 453 (1944) Jacobson, 336 U.S. 28 (1949)
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