Several years ago, Berkshire, Warren & Co., LLC, an investment banking firm, purchased 1,000,000 shares of Outron Corporation preferred stock directly from the corporation for $100,000,000.   Berkshire paid for the stock by giving Outron a promissory note for $100,000,000 due in 20 years, with interest payable annually at 2 percent, which was then the prevailing market rate. Recently, Outron decided that it needed to increase its current cash flow and offered Berkshire a reduction of the principal amount of the promissory note to $80,000,000 if Berkshire would agree to increase the interest rate to the current market rate of 10%. Berkshire found the offer advantageous and accepted it. How much COD income does Berkshire realize? Are there any further tax consequences?

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