LUMBARD, Chief Judge.
The sole question to be decided is whether that portion of the proceeds from the "flat" sale of defaulted bond which is allocable to interest accrued while the taxpayers held the bonds is taxable as ordinary income or capital gain. We hold that it is ordinary income.
On March 15, 1950 the taxpayers purchased $50,000 face amount of Missouri Pacific Railroad Company 5% bonds upon which interest of $20,000, accrued from March 1, 1942 to...
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