*206 Decision will be entered for the petitioner.
Cancellation by petitioner's sole stockholder of debt previously created by unrelated tenant and assumed by petitioner's agreement with its stockholder when petitioner's property was acquired from original debtor, held, on facts, not to result in income taxable to petitioner.
*697 Respondent determined a deficiency in income tax for the fiscal year ending April 30, 1954, of $ 37,557.19. The deficiency*207 is based solely upon the determination that petitioner realized income upon the cancellation of indebtedness owed to its sole shareholder. The parties have stipulated some of the facts.
FINDINGS OF FACT.
The stipulated facts are hereby found accordingly.
Petitioner is a corporation organized under the laws of the Commonwealth of Massachusetts on September 11, 1941. It was originally organized under the name of "Copley Plaza Company," which was subsequently changed to "Sheraton Plaza Company." For all taxable years relevant to this proceeding, petitioner filed its Federal income tax returns with the district director of internal revenue, Boston, Massachusetts, on an accrual method of accounting for the fiscal year ending April 30 of each year.
From September 11, 1941, to the present, all of the outstanding capital stock of petitioner was owned by the Copley Square Trust (hereinafter called the trust). The trust was organized under the laws of the Commonwealth of Massachusetts as a trust with transferable shares and is taxable as a corporation under the Federal income tax laws. Sheraton Corporation of America (hereinafter called Sheraton), a New Jersey corporation, was a shareholder*208 of the trust during all years relevant to this proceeding, owning the following percentages of the outstanding voting shares of the trust on the dates indicated: September 1, 1941 -- 34 percent; April 30, 1953 -- 91.2 percent; April 30, 1954 -- 92.5 percent; and March 28, 1956 -- 95 percent.
For several years prior to and including its taxable year ended April 30, 1954, and for all subsequent taxable years, Sheraton and several of the corporations of which it was majority stockholder filed consolidated income tax returns on an accrual method of accounting. The trust and petitioner were not members of the affiliated group included in Sheraton's consolidated income tax returns through the taxable year ended April 30, 1954. Commencing with the taxable *698 year ended April 30, 1955, and for all subsequent taxable years, petitioner and the trust were members of the affiliated group included in Sheraton's consolidated income tax returns. Through the fiscal year ended April 30, 1954, the trust maintained its books and records and filed its Federal income tax returns on a cash or "modified cash" method of accounting. For the fiscal year ended April 30, 1955, and for subsequent fiscal*209 years, the trust was included in the consolidated income tax returns filed by Sheraton, which were on an accrual basis.
During all years relevant to this proceeding, Ernest Henderson was president of Sheraton and of petitioner and was a trustee of the trust and Robert L. Moore was treasurer of Sheraton and of petitioner and was a trustee of the trust.
From the date of its organization to the present, petitioner has operated a hotel in the city of Boston, Massachusetts, originally known as the Copley Plaza and now known as the Sheraton Plaza. From 1912 until September 11, 1941, the hotel in question had been operated by Copley Plaza Operating Company (hereinafter called the operating company). Since 1912 and during all years relevant to this proceeding, the land and buildings constituting the hotel were owned by the trust and up to September 1, 1941, were leased to the operating company and, since then, to petitioner.
On May 31, 1939, the trust and the operating company, as landlord and tenant, respectively, amended the existing lease of the hotel, in part, as follows:
2. For three years and seven months beginning with June 1, 1939, in lieu of the rent and other payments provided*210 in said lease as extended, the rent shall be as provided in clause 4 hereof.
* * * *
4. In lieu of the rent and other payments provided in said lease as extended, the Lessee [operating company] will pay to the Lessors [the trust] * * * a sum equal to all the Lessee's net profits, if any, from the operation of said Hotel during the preceeding three months * * *; but such payments by the Lessee shall not in any event exceed the amount stipulated in said extended lease for the period involved. In determining the Lessee's net profits, there shall be deducted all taxes paid by the Lessee and a manager's salary as may be agreed upon from time to time by the Lessors and the Lessee, but no executive salary shall be deducted. Notwithstanding the foregoing, the Lessee, in order that it may have on hand sufficient cash for operating expenses, shall not be required to make to the Lessors payments as aforesaid to an amount which will reduce its available cash in bank and on hand below $ 25,000; and the Lessee may retain, to use as aforesaid, $ 25,000 from its cash in bank and on hand on June 1, 1939; but without thereby being released from its (the Lessee's) obligation to account to the Lessor's*211 for the same on January 2, 1943 or on the earlier termination of this agreement. * * *
* * * *
9. During the three years and seven months beginning June 1, 1939, the Lessee will not pay any dividends on its capital stock, nor any salary or other remuneration to any officer or director of the Lessee except if and while he is manager of said Hotel, or (except as otherwise herein provided) incur debts except *699 rent at any one time in excess of cash in bank and in hand and accounts receivable less reserves as determined by the Lessors' auditors.
10. The Lessors hold a chattel mortgage from the Lessee dated June 22, 1932 * * *.
11. * * * It is agreed, however, that said mortgage shall secure, in addition to the sums provided for by an unrecorded indenture dated June 22, 1932 between the Lessee and the then trustees of * * * [the trust], the amount by which the rent and other payments due under the lease of said Hotel as extended, are reduced by this agreement, subject to adjustments from time to time by reason of payments received by the Lessors under clause 4 hereof.
* * * *
14. On December 31, 1942, or upon the termination of this agreement by the Lessors under clause 16, or*212 upon the failure of the Lessee to perform or observe any of its covenants or agreements contained in said lease, * * * the Lessee will, on such termination, expiration or breach, do all reasonable acts necessary or proper to secure to the Lessors the full possession and use of the leased real estate and the mortgaged personal property, if the mortgage has not been foreclosed prior thereto (including similar property acquired since the last preceding mortgage and put in said Hotel), and the business of said Hotel, in such manner as to enable the Lessors to continue without loss or interruption the business of operating said Hotel, and the Lessee will immediately turn over to the Lessors all its cash in Bank and in hand, bills receivable, licenses, permits, guest-registers and all books of account and records pertaining to the business, or copies thereof, and the Lessors may immediately take possession of the same; and the Lessee further covenants that in case of such entry the Lessors may immediately take, for their own use, without payment, the whole or any part of all supplies belonging to the Lessee then in the said Hotel, including fuel, provisions, beverages and all supplies of*213 a perishable nature. * * *
15. The Lessors shall as promptly as possible from the property other than mortgaged property which under clause 14 they receive from the Lessee satisfy all current obligations and debts incurred by the Lessee in accordance with clause 9 hereof. They shall then reimburse themselves for any rent due under this agreement and shall pay to the Lessee any balance remaining but in no event more than $ 29,686.86; and thereupon neither party shall have any further claim against the other by reason of said lease, or any modification thereof, or otherwise, and the Lessors will, if the Lessee so requests, discharge any or all then outstanding mortgages of the Lessee held by them.
16. The Lessors may terminate this agreement at any time by written notice to that effect * * *.
Until August 29, 1941, the stockholders of the trust and the operating company had been unrelated. On that date the trust purchased all of the outstanding shares of capital stock of the operating company for $ 29,686.86. * The balance sheet of the operating company for August 31, 1941, showed:
| Assets | |
| Cash on hand and in banks | $ 51,005.41 |
| Accounts receivable, less reserve for doubtful accounts | 45,667.28 |
| Due from officer and employees | 3,264.29 |
| Inventories of food, beverages, fuel oil, and supplies | 41,284.19 |
| Prepaid expenses and deferred charges | 5,966.48 |
| Linen, china, glassware, and uniforms | 28,143.36 |
| Fixed asset, front office bookkeeping machine | 3,007.00 |
| Total assets | 178,338.01 |
| Liabilities | |
| Accounts payable | $ 47,298.89 |
| Accrued expenses | 25,310.56 |
| Credit balances in accounts receivable | 87.91 |
| Due to employees for locker key deposits, etc | 13.50 |
| Rent due trustees of the Copley Square Trust | 75,930.29 |
| Total liabilities | 148,641.15 |
| Capital | |
| Capital stock | $ 75,000.00 |
| Deficit | 45,303.14 |
| Total capital | * 29,696.86 |
| Total liabilities and capital | 178,338.01 |
*700 On September 11, 1941, the trust and the operating company agreed to terminate the lease and further agreed, in part, as follows:
2. The parties hereto agree that the Lessee shall remain in possession of said Copley Plaza Hotel until such time as the Lessee shall transfer all of its assets to a new corporation to be organized for the purpose of taking over the property of the Lessee and that said possession and operation of said property from the period after the termination of said lease shall be for the account of said new corporation.
On the same day, the trustees adopted a Plan of Reorganization and Liquidation of the operating company, which provided, in part, as follows:
Operating Company owes [the trust] for unpaid rent up to August 31, 1941.
* * * *
[Petitioner] * * * is a new Massachusetts corporation organized, or to be organized for the purpose of carrying out this plan of reorganization and liquidation.
Operating Company will transfer all of its assets*215 to * * * [petitioner] in exchange for the issue to Operating Company of 750 shares of Capital Stock of [petitioner] (being all of the stock of [petitioner] now to be issued) and the assumption by [petitioner] of all liabilities and contract obligations of Operating Company other than the indebtedness of Operating Company to [the trust] for unpaid rent. The furniture and fittings of Copley Plaza Hotel which belong to Operating Company are subject to chattel mortgages to [the trust] to secure the unpaid rent, but there is no liability on Operating Company for the unpaid rent beyond such amount as may be realized from the mortgaged property by foreclosure. The furniture and fittings will be transferred to [petitioner] subject to the lien of said mortgages and without the assumption by [petitioner] of the liability secured by the said mortgages. The transfer contemplated hereby shall be made as of September 1, 1941 and all transactions by Operating Company since that time shall be deemed to have been made for the account of [petitioner].
Operating Company will transfer to [the trust] all the stock of [petitioner] thus received as a final distribution in liquidation and will dissolve.
*216 Pursuant to the Plan of Reorganization and Liquidation, the operating company assigned and transferred to petitioner (effective *701 as of September 1, 1941) all of its cash, accounts receivable, inventories, merchandise, supplies, licenses, and all furniture, fittings, and equipment, subject to certain chattel mortgages held by the trust on the furniture, fittings, and equipment, solely in exchange for 750 shares of petitioner's capital stock, being all of the capital stock of petitioner issued and outstanding. In addition, petitioner assumed all indebtedness of the operating company exclusive of any indebtedness of the operating company to the trust for unpaid rent.
By an agreement dated March 28, 1942, the Plan of Reorganization and Liquidation was amended, in part, as follows:
WHEREAS, under agreements between Operating Company and Trustees, Operating Company had not been required to make payments of rent currently payable, and not otherwise postponed, of amounts which would reduce its available cash on hand and in banks below $ 25,000.00, and as a result of such provision Operating Company owed to Trustees on August 31, 1941, on account of such withheld payments an amount*217 of approximately $ 75,000.00 in addition to other amounts of rent which had been postponed and the payment of which was limited by agreement to the amount which should be realized from the foreclosure of the chattel mortgage securing the same; and
WHEREAS, it was the intention of the parties that [petitioner] should assume the liability of Operating Company to Trustees for the withheld rental payments amounting to approximately $ 75,000.00 but should not assume the liability of Operating Company for the remainder of the unpaid rent, and the provision of the Plan of Reorganization and Liquidation of [operating company] involves a mutual mistake to that extent:
* * * *
[Petitioner will assume] all liabilities and contract obligations of Operating Company other than the indebtedness of Operating Company to [the trust] for unpaid rent, except approximately $ 75,000.00 being the amounts withheld from time to time to enable Operating Company to maintain a cash position of $ 25,000.00 at the end of each rental payment period. * * *
By this amendment, petitioner assumed a liability amounting to $ 75,930.29, which was subsequently reduced to $ 37,225.36 by cash payments by petitioner *218 and other adjustments.
By another agreement also dated March 28, 1942, the trustees of the trust released and discharged all of the chattel mortgages previously given by the operating company to the trust to secure, in part, liabilities for unpaid rent and petitioner assumed and agreed to pay on open account to the trust the sum of $ 35,000, which was the agreed value of the furniture, furnishings, and equipment which had been subject to the chattel mortgages.
For the taxable periods commencing January 1, 1933, and ended August 31, 1941, the operating company claimed as deductions for Federal income tax purposes all rent currently payable to the trust. As the trust was on a cash basis for Federal income tax purposes, the amounts owed by the operating company to the trust for unpaid rent for the period commencing January 1, 1933, and ending August 31, *702 1941, were not reported as income on the Federal income tax returns of the trust for such periods.
From September 11, 1941, through its fiscal year ended April 30, 1947, petitioner had claimed as deductions for Federal income tax purposes the total amount of rent payable to the trust under the various lease agreements which *219 were in effect during this period. As the trust was on a cash basis during this period, the trust had only reported as taxable the amount of rent actually received.
During 1951 the trust and petitioner agreed to the assessment of deficiencies in Federal income taxes relating to their respective taxable years from 1941 to April 30, 1947, based on adjustments of the rental income reported by the trust and the rental deductions claimed by petitioner. Pursuant to the agreement of settlement, the trust was required to treat as constructively received a certain amount of the rent payable by petitioner to the trust from and after January 1, 1942, whether or not paid, and petitioner agreed to deductions for such periods limited to the amounts which the trust was required to report as income. The settlement with the Internal Revenue Service did not involve the obligations of the operating company to the trust assumed by petitioner as of September 1, 1941.
As a result of this settlement, the accountants of the trust recommended that the trust account for liabilities owed by petitioner to the trust be segregated so that the amounts which the trust agreed to treat as having been constructively*220 received could be received tax free by the trust in future years. To avoid complication in the future, the accountants suggested that the indebtedness of petitioner to the trust be segregated on petitioner's books, reflecting the amount of accrued rent which the trust had agreed to treat as constructively received, the amount of accrued rent in excess of the amount allowed as a deduction to petitioner pursuant to the agreed settlement, and the amount of $ 72,225.36 which had been assumed by petitioner as of September 1, 1941, at the time it acquired the assets of the operating company. The accountants further suggested that the trustees forgive the amount of accrued rent owed by petitioner which was disallowed as a deduction to petitioner in accordance with the settlement with the Internal Revenue Service.
During petitioner's fiscal year ended April 30, 1953, the trustees of the trust forgave indebtedness owed by petitioner in the amount of $ 125,811.95, representing that portion of the amount of accrued and unpaid rent owing by petitioner to the trust for the period from September 1, 1941, through April 30, 1951, which had been disallowed as a deduction to petitioner in accordance*221 with the agreed settlement with the Internal Revenue Service. Appropriate entries were made in petitioner's books of account to restore the amount forgiven to its *703 surplus account. In addition, the liabilities of petitioner to the trust were segregated as the accountants had suggested.
For some time prior to October 16, 1953, petitioner's officers had been concerned about the Federal income tax effect of the aggregate amount of $ 72,225.36 owed by petitioner to the trust if the trust and petitioner were included in the Federal consolidated income tax return of Sheraton and its subsidiaries.
Upon the advice of their accountants and attorneys, the trustees of the trust canceled and forgave the indebtedness of petitioner to the trust in the aggregate amount of $ 72,225.36, representing the liabilities originally due from the operating company to the trust remaining unpaid as of that date. The cancellation and forgiveness of the indebtedness of petitioner to the trust was recorded on petitioner's books as follows:
| Debit -- Trustees of Copley Square Trust -- | ||
| Balance at September 1, 1941 | $ 72,225.36 | |
| Credit -- Paid-in surplus | $ 72,225.36 |
To close out balance*222 in amount of $ 72,225.36 as of September 1, 1941, in accordance with the vote of the Trustees of Copley Square Trust on October 16, 1953.
The trust recorded the cancellation and forgiveness of indebtedness on its books as follows:
| Debits -- Investments, Sheraton Plaza Company | $ 72,225.36 | |
| Credit -- Accounts receivable -- Sheraton Plaza | ||
| Company account | $ 72,225.36 |
To close out indebtedness in the amount of $ 72,225.36 as of September 1, 1941, in accordance with the vote of the Trustees of Copley Square Trust on October 16, 1953.
In his deficiency notice, respondent determined that "the cancellation of indebtedness in the amount of $ 72,225.36 owed by you to your sole stockholder * * * constitutes income taxable to you in that amount."
The cancellation of indebtedness in the amount of $ 72,225.36 resulted in no taxable income to petitioner in its fiscal year 1954.
OPINION.
In dealing with the vexed problem of the receipt of income from cancellation of indebtedness, it is important to consider not only the circumstances under which the debt was forgiven, United States v. Kirby Lumber Co., 284 U.S. 1">284 U.S. 1 (1931); Helvering v. Amer. Chicle Co., 291 U.S. 426 (1934);*223 Helvering v. Amer. Dental Co., 318 U.S. 322">318 U.S. 322 (1943); Commissioner v. Jacobson, 336 U.S. 28">336 U.S. 28 (1949), but also what gave rise to the debt in the first place, so that the entire transaction can be viewed as a whole. See, e.g., Bowers *704 v. Kerbaugh-Empire Co., 271 U.S. 170">271 U.S. 170 (1926); Hirsch v. Commissioner, 115 F. 2d 656 (C.A. 7, 1940), reversing 41 B.T.A. 890">41 B.T.A. 890 (1940); A. L. Killian Co., 44 B.T.A. 169">44 B.T.A. 169 (1941), affd. 128 F. 2d 433 (C.A. 8, 1942); Gehring Publishing Co., 1 T.C. 345">1 T.C. 345 (1942); Astoria Marine Construction Co., 12 T.C. 798 (1949). This case, for example, is not similar to one in which bonds issued for cash at par to third parties are ultimately discharged for a smaller amount, thus benefiting the debtor economically in a pecuniary sense, to the extent of the difference between the cash received or the par value of the bonds assumed and that used to liquidate the debt. See, e.g., United States v. Kirby Lumber Co., supra.*224
Here, petitioner's sole stockholder purchased property and organized petitioner to receive it. 1*225 Apparently as an afterthought, and with no additional consideration, petitioner assumed the obligation to pay its parent an indebtedness due from a stranger for rent which had become due before it was born. 2 It is not as though petitioner had agreed with the previous tenant to assume the obligation; cf. Helvering v. Amer. Chicle Co., supra, or as though petitioner itself had received any benefit from the deductions which gave rise to it. What advantage petitioner or its parent anticipated from this unexplained assumption is entirely mysterious but probably irrelevant. It is this same assumed indebtedness created in connection with the acquisition of petitioner's property that was ultimately canceled and which gives rise to the present claim by respondent that petitioner is thereby in receipt of taxable income.
Petitioner's parent could not, of course, write off the debt, since it had never been taken up in its income. And it seems clear, in spite of respondent's insistence to the contrary, that this is not an instance of tax benefit, see, e.g., sec. 22(b)(12), I.R.C. 1939, where the creation of the original debt secured for petitioner the benefit of a current deduction while at the same time eliminating the receipt of income by the parent. But see Commissioner v. Auto Strop Safety Razor Co., 74 F. 2d 226 (C.A. 2, 1934), affirming 28 B.T.A. 621">28 B.T.A. 621 (1933). All such problems were solved in the tax settlement covering the years during which petitioner had been in existence.
The debt in question may have created a benefit for the previous tenant of the property by conferring*226 upon it a deduction for the accrual *705 of rent which, in fact, was never paid. We need not pause to consider whether the accruals under such circumstances were proper. See Zimmerman Steel Co., 45 B.T.A. 1041">45 B.T.A. 1041 (1941), revd. 130 F. 2d 1011 (C.A. 8, 1942). The significant factor is that at that time there was no more than an arm's-length relationship between the tenant and petitioner's parent, the landlord, which actually received none of the accrued rent; and we can safely assume, for a similar reason, and since no effort was made to collect the arrearages, that the original debtor was insolvent.3 See Astoria Marine Construction Co., supra.
*227 Petitioner suggests that, since the debt was assumed in a transaction in which property was acquired, it partook from its inception of the nature of a capital item as to it. We view the facts as supporting this position. Even had petitioner paid the defaulted rent in lieu of having it forgiven, it could not have taken a deduction therefor. Magruder v. Supplee, 394">316 U.S. 394 (1942). Petitioner received the personal property to be used in operating its business by issuing its stock 4 and assuming certain debts originally represented by chattel mortgages on the personal property. These were released by the parent without eliminating the indebtedness but the record indicates that they were the limit of any value attributable to the chattels. The amount here in question is beyond any such figure.
*228 That the portion of the arrangement between petitioner and its parent may have been one in which no gain or loss was recognized is likewise irrelevant. 5 It seems clear that the transfer of the property from the original tenant was a genuine sale, as in Hirsch v. Commissioner, supra, for example, subject to the mortgage, which was evidently the full extent of the value of the property.
The debt may have been canceled without donative intent on the part of the parent, see Helvering v. Amer. Dental Co., supra, but that *706 is of no significance in dealing with a contribution to capital by a sole shareholder. Robert H. Scanlon, 42 B.T.A. 997">42 B.T.A. 997 (1940).*229
Had petitioner's parent forgiven the preexisting rental indebtedness of petitioner's insolvent predecessor, which bore every indication of being too high to be tolerable, the situation would have been comparable to that envisaged in both Astoria Marine Construction Co., supra, and Hirsch v. Commissioner, supra, since the property covered by the chattel mortgages, the debtor's only apparent asset, was turned over to the creditor. And this would seem to us to be true notwithstanding that the debtor had currently deducted the rent. Highland Farms Corporation, 42 B.T.A. 1314">42 B.T.A. 1314 (1940). Instead, the parent caused petitioner to assume the indebtedness when acquiring the property and later forgave it.
It is hence of little moment whether we view the operation as a readjustment of purchase price, Hirsch v. Commissioner, supra; as one in which the original debtor was insolvent, see Astoria Marine Construction Co., supra; as a transaction in which the entire result was an absence of profit to petitioner, Bowers v. Kerbaugh-Empire Co., supra;*230 or as a capital contribution to petitioner by its parent by means of a gratuitous cancellation of the debt. 6 Even if the petitioner had benefited from the deductions, that would not have prevented the parent's act from being "gratuitous." Commissioner v. Auto Strop Safety Razor Co., supra.
Had the obviously worthless old indebtedness never been taken into consideration by petitioner, or had it instead issued additional common stock to its parent, the matter would be free from doubt. It seems to us that the parties have put themselves virtually in this position without in any way adversely affecting the revenue. We regard the deficiency determination in this respect as unwarranted
Decision will be entered for the petitioner*231 .
Footnotes
*. The discrepancy, if any, is not explained.↩
1. From the balance sheet of the old operating company included in our findings, it appears that the trust acquired stock or assets worth some $ 178,000 and subject to liabilities of only about $ 73,000 exclusive of the debt owed to the trust itself -- in other words, a net of over $ 100,000 -- for less than $ 30,000. While in form this was a purchase of stock, but see Estate of James F. Suter, 29 T.C. 244">29 T.C. 244 (1957), the book value of the company's assets is some evidence of the value of the stock. B. F. Edwards, 39 B.T.A. 735">39 B.T.A. 735, 737 (1939); Lillian G. McEwan, 26 B.T.A. 726">26 B.T.A. 726↩ (1932).
2. Respondent concurs in this view of the facts: "Thus, at the time of the debt cancellation the petitioner was obligated to the Trust in a total amount of $ 72,256.36, all of which amount related back to the prereorganization rent obligations of the Operating Company to the Trust."↩
3. A different interpretation of the facts is possible and we intimate no opinion as to which is correct. If the trust by acquiring property from its debtor at a drastically reduced price (footnote 1, supra) in effect collected the unpaid rent due it and if, representing as it did an income item of unpaid rent, the trust then received income of well over $ 70,000 in 1941, that would still not affect the disposition of our present question. "When the indebtedness was canceled, whether or not it was a contribution to the capital of the debtor depends upon considerations entirely foreign to the question of the payment of income taxes in some previous year." Commissioner v. Auto Strop Safety Razor Co., 74 F. 2d 226, 227↩.
4. Regs. 118.
Sec. 39.22(a)-15. Acquisition or disposition by a corporation of its own capital stock. * * * The receipt by a corporation of the subscription price of shares of its capital stock upon their original issuance gives rise to neither taxable gain nor deductible loss, whether the subscription or issue price be in excess of, or less than, the par or stated value of such stock.
See also sec. 118, I.R.C. 1954↩, and S. Rept. No 1622, to accompany H.R. 8300 (Pub. L. 591), 83d Cong., 2d Sess., pp. 18, 190.
5. Respondent says, for example: "Since the rent debts were never paid but were claimed as federal income tax deductions, they conferred both tax and economic benefits on the petition and its predecessor, which benefits are attributable to the petitioner whether or not the debts were carried over as part of a 'reorganization'."↩
6. "In general, if a shareholder in a corporation which is indebted to him gratuitously forgives the debt, the transaction amounts to a contribution to the capital of the corporation to the extent of the principal of the debt." Sec. 39.22(a)-13, Regs. 118.↩