Document: 339 U.S. 619 70 S.Ct. 905 94 L.Ed. 1108 COMMISSIONER OF INTERNAL REVENUEv.KORELL. No. 384. Argued Feb. 7, 1950. Decided June 5, Mr. Arnold Raum, Washington D.C., for petitioner. Paul L. Peyton, New York City, respondent. Chief Justice VINSON delivered the opinion of Court. 1 The tax consequences a purchase convertible bonds are in issue here. In August, 1944, respondent, an individual taxpayer, purchased certain American Telephone and Telegraph Company bonds, each having face value $100, at premium price averaging slightly excess $121. Each bond was into share common stock, option bondholder, upon payment $40. market stock over $163 when respondent made his purchases. were callable prior to maturity date according schedule appearing indenture; had corporation given appropriate notice dates respondent's purchase, would have been redeemed $104. 2 1944 income return, claimed deduction $8,600 amortizable premium. He computed on as difference between price, $121, call This computation is concededly correct if allowable. Commissioner Internal Revenue, petitioner here, refused allow any such deduction. His theory that § 125 Revenue Code, 26 U.S.C.A. 125, establishing 'amortizable premium' did not include paid conversion privilege. A contrary view statute adopted by Tax 1948, 10 T.C. 1001. court below affirmed, holding entitled amortization 1949, 176 F.2d 152. We granted certiorari, 338 890, 241, resolve conflict decision Court Appeals Ninth Circuit v. Shoong, 177 131. 3 Prior 1942, irrelevant purposes. Whether or exceeded bond, holder considered full basis capital gain loss, reported all taxable interest received income.1 presenting its 1942 proposals, however, Treasury receipt entirely but partially restoration capital. Its spokesman pointed consequent discrimination against holders bonds: they being taxed return capital, while tax-exempt not.2 To remedy this inequity, recommendd be permitted case loss adjusted amount allowable taxables disallowable tax-exempts. These recommendations ultimately included Act 56 Stat. 798, 822, §§ 113 113, 125. 4 Section contains four subsections.3 (a), general rule established, applicable 'In * *,' may taken tax-exempt, taxable. Taxpayers latter category elect whether amortize accordance with rules laid down subsection (c). Subsection (b) defines method computing 'the premium, *.' Petitioner urges does define kind which amortizable; contends provision establishes mandatory (d) consists definition 'bond' exceptions thereto, chiefly held sale trade. That securities fall within without undisputed. 5 There can no doubt callability convertibility these do remove them from reach role specifically brought congressional discussion least one witness hearings.4 And Congress rendered unmistakably clear answers language Act, e.g., express reference 'earlier date,' 125(b)(1), both Committee Reports. 'The fact itself prevent application section. earliest will, purposes section, date. Hence, total required spread period established date, rather than convert rests owner (as it case), purview section.'5 type course binding courts. 6 concedes he involve mind. argument privilege, whereas intended only (entitled 'true' petitioner) securing higher rate average nothing else. reject inapposite structure statute, unsupported legislative history inconsistent normal use term 'bond premium.' 7 As wrote scope adequately denoted defining 'bond.' need qualify words order make meaning clear; 'premium' isolated defined nor explained history, never used apart mate No attempt distinguish reasons paying mark pertinent Regulations, 111, 29.125. They mirror constructed terms 'bonds.' Again, we note here involved question embraced statute. 8 sure, might proceeded (and premium) than, well But cannot precise avenue expression actually because particular know, disposed our decision, public revenues maximized adopting another statutory path. legislating generality cases. It created new also extent tax-exempts.6 adjustment increased revenue potential, lower obviously raised possible lowered loss. par 58.5 billion dollars,7 there set off potential. gains will exceed avoided depends instance uncertainties fluctuations rates cluster other factors induces bondholder act determines years.8 combine specific produce effect some appear too drastic intended. record indicate anticipated long-run yield tax-exempts decrease federal revenue. even expected entailed, decided more equal treatment taxpayers important loss; argued lacked discretion reached conclusion. If practice sections causing erred balancing competing considerations involved, amendment must enacted 9 fails intimate confine higher-than-market rate. At most, petitioner's presentation materials suggests who seeking primarily mind; establish legislated him exclusively.9 Congress, advising concluded best manner affording relief correcting inequitable bondholders whose receipts taxable, types causes payment. accountants writers field, addition value.10 suggestion limited significance, echoing solely extra caused desire obtain yield. On contrary, authors noted variety induce practical impossibility disentangling isolating purpose relative evaluation, reading upheld.11 adopt means payment, regardless reason therefor, firmly principle law ordinary persuasive their meaning.12 11 conclude distinctions based inducements delimited wished categories Respondent therefore judgment affirmed. 12 Affirmed. 13 BLACK dissents. believes should with, by, 14 DOUGLAS JACKSON took part consideration case. Life Ins. Co. Edwards, 1926, 271 109, 116, 46 436, 437, 859; cf. Old Colony R. 1932, 284 552, 561, 52 211, 214, 76 484. Statement Randolph Paul, then Adviser Secretary subsequently General Counsel Department, Hearings before House Ways Means Revisions 77th Cong., 2d Sess. 90 (1942). Int.Rev.Code titled 'Amortizable premium,' reads follows: '(a) rule. (d), following shall apply (determined under (b)) year beginning after December 31, 1941: '(1) Interest wholly (other excludable gross income), allowed '(2) tax-exempt. income, year. '(3) Adjustment credit net provided section 25(a)(1) (2), 26(a), be, reduced '(For account see 113(b)(1)(H).) (See 6, post, 625, 908.) '(b) Amortizable Amount For paragraph determined (for determining exchange) payable earlier adjustments proper reflect unamortized respect (a) becomes taxpayer bond. amortizable. attributable Method determination. determinations paragraphs (1) (2) made— '(A) amortizing regularly employed reasonable; '(B) cases, regulations prescribing reasonable methods prescribed approval Secretary. '(c) Election bonds. Eligibility election permitted. classes has elected apply. '(d) Definition debenture, note, certificate evidence indebtedness, issued bearing (including like obligation government political subdivision thereof), coupons registered form, constitutes trade properly inventory hand close year, customers business.' See statement Roy C. Osgood, Senate Finance H.R. 7378, 1728—29 H.R.Rep.No.2333, 80 Precisely same appears S.Rep.No.1631, Treas. Reg. 29.125—5, identical tenor. 113(b)(1) provides 'Proper property cases (H) 125) exempt imposed chapter, pursuant 125(a)(2), section) deductions 125(a)(1) thereto.' 3, ante, 621, 906, text Of amount, 25.5 wholly, 33.0 Statistical Abstract United States 372 (1948). case, disclose how sold six months above 138, possibility merely theoretical, stood 138 starting 1945. cites 47 (1942), statements John O'Brien, Revision Sess., None excluding reflecting financial E.g., 'When sell greater par, said Financial Handbook 1210 (3d ed. 1948); '* premium—the cost later exceeds Paton, Advanced Accounting 197 (1941); Grossman, Investment Principles Practice (1939); Noble, 447 (4th 1945). 555, 212, 484; Bogert, Trusts Trustees, Part 1, 1935, 831; Scott Trusts, 239.2 (1939). See, Dewing, Policy Corporations 662 1941); Saliers Holmes, Basic 509 (1937); 831, page 319; 1337 Williams, Are Convertibles Now Attractive? 83 Mag. Wall St. 134 Crane 1947, 331 6—7, 67 1050, 1051, 91 1301; Helvering William Flaccus Oak Leather Co., 1941, 313 247, 249, 61 878, 879, 85 1310; San Joaquin Fruit & 1936, 297 496, 499, 569, 570, 824; Lang 1933, 289 53 534, 535, 77 1066; Atlantic Coast Line Phillips, 332 168, 171, 1584, 1586, 1977.

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