Document: 349 U.S. 237 75 S.Ct. 736 99 L.Ed. 1029 LEWYT CORPORATION (Now Known as Lewyt Manufacturing Corporation), Petitioner,v.COMMISSIONER OF INTERNAL REVENUE. No. 417. Argued April 19, 1955. Decided May 23, Mr. Seymour Sheriff, Washington, D.C., for petitioner. Asst. Atty. Gen. H. Brian Holland, respondent. Justice DOUGLAS delivered the opinion of Court. 1 This case is a companion to United States v. Olympic Radio & Television, Inc., 232, 733. The main point in two cases same—whether taxpayer on accrual basis can, computing its net operating loss one year, deduct amount excess profits taxes which were paid that year but had accrued an earlier year. 2 years 1944 and 1945 profit taxpayer. For 1946 1947, incurred losses allowed by Commissioner carry-back deductions 1945. sought augment it account tax liability. disallowed deduction Tax Court sustained Commissioner. 18 T.C. 1245. Appeals affirmed. 215 F.2d 518. here petition certiorari we granted, 348 895, 217, resolve conflict with case. Our views, expressed latter case, coincide those Appeals. Accordingly, affirm part judgment. 3 There present this not involved question whether may be offset against income reported or ultimately found due. claims former; Commissioner, latter. 4 centers § 122(b)(1) 122(d)(6). As have seen directs given carried back preceding taxable years.* And 122(d)(6) allows 'the imposed Subchapter E Chapter (i.e., tax) within * *.' (Italics added.) 5 taxpayer's 1944, shown return, was $827,852.99; and, finally determined, $584,866.81. due according return $625,561.59. after allowing $164,326.38 arising 1946, making other adjustments, determined liability $280,540.33. computed at $304,326.48, is, $584,866.81 minus Since less than there no 1945, provides '* first shall excess, if any, such over second 6 taxpayer, however, contends 'accrued' viz., If larger correct figure, then will so great leave can deducted income. 7 controversy turns meaning clause reads, 'imposed' argument having once got back, through credit refund, difference between 'accrued'in due, double benefit should inferred. benefit, argued, certainly denied when figure upon based has economic reality. 8 But rule general equitable considerations do control measure benefits cuts both ways. It applicable Government Congress strit lavish allowance benefits. formula writes arbitrary harsh applications. where claimed fairly statutory language construction harmony statute organic whole, withheld from though they represent unexpected windfall. See Bullen State Wisconsin, 240 625, 630, 36 473, 474, 60 830. 9 When wrote word into 122(d)(6), might used different senses—either identify define levied collected. We think former sense. 10 In place, 2. year.' conjunction makes tolerably clear merely identifies describes 'accrued.' That say, sentence whole indicates way reference. seems understanding. Senate Finance Committee reported: 11 'Section 122 Code, relating computation section 23(s) amended allow (subject certain rules) for, carry-over from, years.' S.Rep. 1631, 77th Cong., 2d Sess., p. 67. see H.R.Rep. 2333, 65. 12 test deductibility under 13 Secondly, dealing deductions, during specified exceptions. 23(c). Some excepted are identified well-known names, e.g., federal taxes, estate, inheritance, legacy, succession, gift taxes. 23(c)(1)(A), (D). Other reference provisions law. Thus 23(c)(1)(B) excepts 'war-profits excess-profits 2.' Treasury Regulation tax. provides: 'Subject exception stated deductible gross accrued.' 26 CFR 39.23(c)—1. 14 Section 23 especially relevant here, since taken almost verbatim 23. Revenue Act 1941 provided that, income, 'paid year' allowed. 15 respects tax, 23(c)(2) provided: 16 'For purposes subsection, excessprofits 2— 17 '(A) limited 55 Stat. 700. would seem (A) adjustment paid. omitted quantitative sense dropped, while retained. Finally, before ultimate adjustments made. elementary Security Flour Mills Co. 321 281, 284, 64 596, 597, 88 725. therefore concept embodies annual accounting principle. If, basis, events account, effectively read out varied meaning, contrary our ruling 19 true computations designed spread five-year period. concerned technical being reallocation. find justification taking 'accrued ' mean thing setting another situation. 20 conclusion accord line related decisions. scheme been posited duty pay without regard made available carry-back. Manning Selley Tube Box Co., 338 561, 567, 70 386, 389, 94 346. Only recently applied principle Koppers 254, 268, held these payable full interest amounts even portions abated. 21 short, normal concepts basis. not, course, ascertained solely set forth erroneously arrived proper application recognized principles met. Events transactions later years, irrelevant determination warrant alteration question. Affirmed reversed part: 22 HARLAN took consideration decision FRANKFURTER, whom REED BURTON join, dissenting. 24 involves rather opaquely worded provision Internal Code 1939, 122. problem directed, objectives plan pursued, ought elude clarity. 25 system taxation operates Each required determine, knowledge him end original strict form, did permit readjustment reflect unanticipated occurring subsequent years—for instance, repayment money received sale goods services year—even logically practically facts operated reduce originally reported. More important, equal next business human view broader period Here ameliorations unduly drastic consequences rigid form. Primarily consider which, degree, permits reflection fact may, uncommon fluctuation affairs, years. At time relevant, 'net loss' operations occurred any succeeding could cancelled 'carry-back 'carry-over' received. reducing already reported, refunded. 27 Stripped details, appears simple. However, comprehensively multifarious manifestations activities, embodied intricate form raises difficulties. They accentuated because relevance peculiarities accounting. 28 Thus, raised dealt 733, brings focus differences systems, year's recorded cash receipts disbursements utilizing system. agree whose all calculated system, must determine forward same question, play more complex well modification concept. grows 'renegotiation' devised deal potentialities unconscionable war contractors providing supplies Government. Under it, contract price agreed contractor subject date what thought fair proved overly generous. so, entitled reduction or, payment made, refund profit. Naturally enough, permitted he repay reopening U.S.C. 3806(b), U.S.C.A. 3806(b). 29 suffered ($164,326.38), considerable ($827,852.991 $1,215,320.25 respectively). petitioner corporate Much derived contracts. Renegotiation reduced actually retained below figures $397,970.00. Petitioner, therefore, reflecting fact. 30 On petitioner's carry Where, remainder, dispute extent loss. Does anything remain income? 31 detailed determining how much remains difficulty arises applying formula, explicit, left doubt, translating generality amounts. enhanced some factors discernible congressional purpose unclear. Logically expect concel Congress, own good reasons, felt reflected calculation. One factor, us explain, 1944. 32 To vivity problem, concreteness formula. states, insofar lift loss, subtracting (1944),' (1944).' dry description 33 addition crucial. is: figure? close truthful balance sheet indicated ($625,561.59)? Or eventually definitively resulted downward revision ($318,577.67 renegotiation, plus approximately $150,000.00 loss)? 34 ($625,561.59) (because take unknown renegotiation carry-back) ($584,866.81), reasons explained, parties concede Applying nothing subtract bring about further Court's twice 35 hand, adjusted occasioned use loss; ($584,866.81) ($280,540.33) greater ($164,326.38). Either positions supported arguments literal statute. compelled choice austere written, undistorted unmitigated judicial rewriting, matter specific Where taxing clear, place loose conceptions 'equity statute.' laws notoriously expressions ordered reason fairness. probably never revenue design oversight, favored groups laid claim unfairness similarly situated. sail shore literalness problems laws, affixed particular phrase itself distort entirety context conveys commands. ambiguous used, mode Radio, supra, ignored—that credits matters legislative grace himself clearly relief claims. 37 Nor does shed light problem. decided consistent his systems—that calculating operations, figures, payments occasion figure. issue here. 38 crucial phrases are: (1) 'tax 2', (2) serves nature referred vouchsafes issue. need add said this. agree, compels reading gives it. 39 current come only reflects difficult continual old returns developments. Burnet Sanford Brooks 282 359, 51 150, 383; 286, 598, 725; Dixie Pine Products 320 516, 519, 364, 365, 420. Were presented owed deficiency, existing filed, situation eliminated deficiency. Cf. Seeley 346; 268. 40 generally acquired inevitably, lexicographically speaking, interences grown up usage, glossator, term art context. 41 sections code, express exactly opposite philosophy gave rise looking single direct re-examination past effort ameliorate shortsightedness fostered restrictive, closed very direction require facts. Surely rational refusing recognize state affairs unfolded you re-examine—the occasions adjusting returns, administrative convenience underlie closing empty apply. 42 relieve unrealistic taxed really there. conclude intended go extreme confirmation preclude result. lies subsection 122(b)(1)(B),2 alone justifies assumption, parties, lower ($827,852.99). All demonstrate unadjusted proves force income' §§ 21(a), 22, 41, 42(a), 43, 48(c). Inherent, 122's explicitly section's 43 122(b)(1)(B) shows assumed discussing states effect necessary specifically developed adjustments. assumption consequence renegotiation. differentiation, recognizing 44 I affirm. 'If beginning December 31, 1941, each except exceptions, additions, limitations (d)(1), (2), (4), (6), (B) loss.' 122(b)(1). most instances result, throughout litigation briefs, opinions. record three conflicting sets purport contingency, noted below, becomes important distinguish figures. Petitioner filed return. objected several also thus arriving corrected substantially either Throughout cited events, $827,852.99. exces $817,680.90. Petitioner's showed $747,236.60, correction errors $982,836.81. Similarly raw claimed. $605,561.59. $549,206.15 Because aware cognizance carry-back, arrive known filed. would, approximate $770,000.00. When, given, ($584,866.81 $280,540.33 petitioner, substantial corrections errors, comparable quoted Fortunately affect reached here—whether become important. comparable, disagreement refunded ($318,577.67). Upon subtraction resultant ($306,983.92) give formula—it used—the resulting (approximately $150,000). So reduced, 'computed (1944) (the 1946)

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