Source: https://supreme.justia.com/cases/federal/us/305/357/case.html
Timestamp: 2017-01-17 23:29:48
Document Index: 402308411

Matched Legal Cases: ['§ 23', '§ 101', '§ 101', '§ 101', '§ 101', '§ 23', '§ 101', '§ 23', '§ 23']

United States v. Pleasants (full text) :: 305 U.S. 357 (1939) :: Justia U.S. Supreme Court Center Log In
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United States v. Pleasants 305 U.S. 357 (1939)
U.S. Supreme CourtUnited States v. Pleasants, 305 U.S. 357 (1939)United States v. PleasantsNo. 169Argued December 5, 1938Decided January 3, 1939305 U.S. 357CERTIORARI TO THE COURT OF CLAIMS
The question is whether the 15 percentum allowed as a deduction for charitable contributions under § 23(n) of Page 305 U. S. 358 the Revenue Act of 1932 is to be calculated on the taxpayer's net income computed without regard to a capital net loss as to which special provision is made by Section 101(b).
"[s]ince the capital loss of $154,921.98 is in excess of adjusted ordinary net income of $94,963.52 Page 305 U. S. 359 (without contributions), there is no net income against which to make a deduction for contributions."
Section 101(c)(6) defines "capital net loss" as "the excess of the sum of the capital losses plus the capital deductions over the total amount of capital gain." Page 305 U. S. 360 Section 101(c)(7) defines "ordinary net income" as "the net income, computed in accordance with the provisions of this title, after excluding all items of capital gain, capital loss, and capital deductions."
It will be observed that the provision for the limitation with respect to a capital net loss under § 101(b) (unlike the provision in § 101(a) as to a capital net gain) gives no option to the taxpayer. [Footnote 7] The limitation is explicit, and must be followed as written. The limitation applies equally when there is no capital gain, and hence nothing to be deducted from capital losses on that score. [Footnote 8] The Page 305 U. S. 361 limitation is applicable unless, as stated in the last clause of Section 101(b), a greater tax would result from not applying it. [Footnote 9] In the instant case, there is no question that the limitation does apply and the Commissioner has applied it.
We have noted that the limitation of § 101(b) is not applicable if the tax, computed without regard to that section, would be greater. The latter method of computation brings out the distinction clearly. For, in that method, the capital net loss is deducted from the ordinary net income in order to arrive at the total net income for the purpose of applying the normal tax and surtax rates. See illustration in Regulations 77, Article 503. But, where the limitation of § 101(b) governs, because the tax as otherwise computed would not be greater, capital losses are not deducted in determining the net income which is Page 305 U. S. 362 to be taxed, but are used only for the purpose of determining the specified offset against the tax on that net income. Id.
There is nothing to the contrary in our decision in Helvering v. Bliss, supra. In that case, there was a capital Page 305 U. S. 363 net gain. The net income of the taxpayer comprehended that net gain, as well as his net income otherwise computed. We decided that it was his total net income which was to be regarded as the basis for the allowance under § 23(n). We found nothing in § 101 which, in that application, prescribed "merely a method for segregating a portion of that net income for taxation at a special rate," that in any wise altered the right of the taxpayer to take the deduction in accordance with § 23(n). Id., 293 U. S. 150-151. Here, instead of a capital net gain, we have a capital net loss. There is no gain to be added to the taxpayer's net income otherwise computed, and, thus, that is the only net income taxable under the statute. To that net income the provision of § 23(n) appropriately applies. We observed in the Bliss case that the exemption of income devoted to charity and the reduction of the rate of tax on capital gains "were liberalizations of the law in the taxpayer's favor, were begotten from motives of public policy, and are not to be narrowly construed." That observation is equally pertinent here.
"* * * *" "(b) Rates of Surtax -- There shall be levied, collected, and paid for each taxable year upon the net income of every individual a surtax as follows. . . ."