Case Name: Venture Funding, Ltd., Petitioner v. Commissioner of Internal Revenue, Respondent
Court: United States Tax Court
Jurisdiction: United States
Decision Date: 1998-03-26
Citations: 110 T.C. 236
Docket Number: Docket No. 4174-95
Parties: Venture Funding, Ltd., Petitioner v. Commissioner of Internal Revenue, Respondent
Judges: Chabot, Swift, Jacobs, Gerber, Parr, Colvin, Foley and Vasquez, JJ., agree with this majority opinion.
Reporter: Reports of the Tax Court of the United States
Volume: 110
Pages: 236–271

Head Matter:
Venture Funding, Ltd., Petitioner v. Commissioner of Internal Revenue, Respondent
Docket No. 4174-95.
Filed March 26, 1998.
Joseph Falcone, Brian H. Rolfe, and Robert J. Zinkel, Jr., for petitioner.
Mark I. Siegel, for respondent.

Opinion:
OPINION
Laro, Judge:
This case was submitted to the Court fully stipulated. See Rule 122. Petitioner petitioned the Court to redetermine respondent's determination of deficiencies of $347,583 and $27,578 in its 1988 and 1989 Federal income taxes. We must decide whether section 83(h) prevents petitioner from currently deducting the value of stock that it transferred to its employees in 1988 as compensation for services. We hold it does. Unless otherwise indicated, section references are to the Internal Revenue Code in effect for the subject years. Rule references are to the Tax Court Rules of Practice and Procedure.
Background
All facts have been stipulated. The stipulations of fact and the exhibits submitted therewith are incorporated herein by this reference. Petitioner is an accrual method corporation whose principal place of business was in Detroit, Michigan, when it petitioned the Court. It was owned as follows during the subject years:
Shareholder Ownership percentage
Eugene Schuster. 49.45
Monis Schuster . 9.99
Adam Schuster . 9.99
Joseph Schuster. 9.99
Sarah Schuster . 9.99
Jayson Pankin . 9.99
Ann Schuster . .50
London Arts . .10
Total . 100.00
All the Schusters are related, and London Arts is a corporation whose stock is owned by Eugene Schuster.
On March 27, 1987, Endotronics, Inc. (Endotronics), filed a petition for reorganization in the U.S. Bankruptcy Court for the District of Minnesota. On April 4, 1988, the court confirmed an amended plan of reorganization under which petitioner gained a controlling interest in Endotronics. Later that day, petitioner transferred Endotronics stock to 12 of its employees as compensation for services. The following chart lists the employees who received Endotronics stock and the fair market value of the stock that they each received:
Fair market Employee value
Eugene Schuster. $390,625.00
Monis Schuster . 156,250.00
Mary Parkhill . 58,593.75
Bert Williams. 78,125.00
David Dawson. 78,125.00
Ira Snider. 66,953.13
Christopher Dean . 11,718.75
Jayson Pankin . 156,250.00
Werner Wahl . 7,812.50
W. Kent Clarke. 7,812.50
Carolyn Mazurkiewicz . 7,812.50
Mary Lore . 58,593.75
Total. 1,078,671.88
Petitioner did not issue to any of these employees, or to respondent, a Form W-2, Wage and Tax Statement, or a Form 1099-MISC, Miscellaneous Income, and none of these employees included any of this compensation in his or her 1988 gross income. Petitioner claimed a $1,078,672 deduction for the transfer on its 1988 Federal income tax return. Petitioner filed its 1988 return based on the calendar year.
Discussion
Respondent determined that petitioner could not deduct the claimed amount because it failed to meet the requirements of section 83. Petitioner must prove this determination wrong. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Petitioner also must prove its entitlement to the deduction. Deductions are a matter of legislative grace. New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934).
Petitioner argues that section 83(h) and the underlying regulations let it deduct the claimed amount in 1988 because petitioner's employees were required to recognize the corresponding income in that year. The fact that the employees failed to recognize this income in 1988, petitioner argues, has no bearing on its right to this deduction. Petitioner argues that respondent's regulations are invalid to the extent that they require an employer to issue an employee a Form W-2 or Form 1099 as a prerequisite to a deduction under section 83(h). Petitioner alleges that the income from the transfer of the Endotronics stock was includable in petitioner's employees' incomes for the year of transfer, which is the statutory requirement for a deduction under section 83(h), and respondent's regulatory requirement that petitioner also issue Forms W-2 to its employees to deduct the compensation under section 83(h) impermissibly adds restrictions to a statute which are not there. Petitioner, relying mainly on section 1.83-6(a)(3), Income Tax Regs., argues that it may deduct the claimed amount in 1988 because that amount is deductible in 1988 under petitioner's accrual method.
We disagree with petitioner that it may deduct the claimed amount in 1988. We start our analysis with the statutory text, construing the language as written by the legislators with reference to the legislative history primarily to learn the purpose of the statute and to resolve any ambiguity in the words used in the text. Trans City Life Ins. Co. v. Commissioner, 106 T.C. 274, 299 (1996). Section 83, which was added to the Code as section 321(a) of the Tax Reform Act of 1969, Pub. L. 91-172, 83 Stat. 588, reads in relevant part:
SEC. 83. PROPERTY TRANSFERRED IN CONNECTION WITH PERFORMANCE OF SERVICES.
(a) General Rule. — If, in connection with the performance of services, property is transferred to any person other than the person for whom such services are performed, the excess of—
(1) the fair market value of such property (determined without regard to any restriction other than a restriction which by its terms will never lapse) at the first time the rights of the person having the beneficial interest in such property are transferable or are not subject to a substantial risk of forfeiture, whichever occurs earlier, over
(2) the amount (if any) paid for such property,
shall be included in the gross income of the person who performed such services in the first taxable year in which the rights of the person having the beneficial interest in such property are transferable or are not subject to a substantial risk of forfeiture, whichever is applicable.
(h) Deduction by Employer. — In the case of a transfer of property to which this section applies , there shall be allowed as a deduction under section 162, to the person for whom were performed the services in connection with which such property was transferred, an amount equal to the amount included under subsection (a) in the gross income of the person who performed such services. Such deduction shall be allowed for the taxable year of such person in which or with which ends the taxable year in which such amount is included in the gross income of the person who performed such services.
The legislative history to section 83 reveals that it was enacted primarily to set forth rules on the tax treatment of deferred compensation arrangements known as restricted stock plans; i.e., arrangements under which employers transfer stock to their employees as compensation for services, where the stock is subject to restrictions which affect its value. S. Rept. 91-552, at 253, 256-263 (1969), 1969-3 C.B. 423, 500-503. Section 83 was not meant, however, to reach only restricted stock. The legislators drafted section 83 broadly to reach any transaction in which "a person receives a beneficial interest in property, such as stock, by reason of his [or her] performance of services", id. at 256, 1969-3 C.B. at 501, and, as this Court has observed pre viously, "Absent specific provision that a particular transfer [of property to a person in connection with the performance of services] is excepted from section 83, this section is applicable", Alves v. Commissioner, 79 T.C. 864, 876 (1982), affd. 734 F.2d 478 (9th Cir. 1984). Once applicable, section 83 rests an employer's deduction on its employee's inclusion in income of a corresponding amount. As stated by the Senate Finance Committee in its report: "The allowable deduction is the amount which the employee is required to recognize as income. The deduction is to be allowed in the employer's accounting period which includes the close of the taxable year in which the employee recognizes the income". S. Rept. 91 — 552, supra at 262, 1969-3 C.B. at 502.
From the text of section 83, we understand that it applies to the case at hand because "in connection with the performance of services, property [was] transferred to [a] person other than the person for whom such services [were] performed". See also sec. 1.83-l(a)(l), Income Tax Regs. ("Section 83 provides rules for the taxation of property transferred to an employee in connection with the performance of services by such employee"). See generally sec. 1.61-2(d)(6), Income Tax Regs, (rules of section 1.61-2(d), Income Tax Regs., relating to compensation paid other than in cash, apply to transfers of property "to the extent such rules are not inconsistent with section 83"). We also understand that petitioner may deduct the value of the transferred property when the corresponding value is "included in the gross income of the [persons] who performed such services." Because none of petitioner's employees included the corresponding amount in his or her 1988 income, it follows that petitioner may not deduct any of the claimed amount in that year. Whereas petitioner would have us read section 83(h) to allow it a deduction in 1988 for the amount of income that was includable in its employees' income for 1988, we decline to do so. An amount is deductible under section 83(h) in the year that the corresponding income is "included" in the recipient employee's income, which means to us that the amount is taken into account in determining the tax liability of the employee for that year. See S. Rept. 91-552, supra at 262, 1969-3 C.B. at 502 ("The deduction [under section 83(h)] is to be allowed in the employer's accounting period which includes the close of the taxable year in which the employee recognizes the income"); see also Lenz v. Commissioner, 101 T.C. 260, 265 (1993) (" 'Allowable deduction' generally refers to a deduction which qualifies under a specific Code provision whereas 'allowed deduction', on the other hand, refers to a deduction granted by the Internal Revenue Service which is actually taken on a return and will result in a reduction of the taxpayer's income tax"). See generally Bittker & McMahon, Federal Income Taxation of Individuals, par. 28.2, at 28-2 (2d ed. 1995) (the word "recognized" means "taken into account in computing taxable income").
Neither party references the legislative history of section 83(h), and we do not resort to it to alter the plain meaning of the words used in the statute. A statute speaks for itself, and its legislative history is sought to clarify the text only when the meaning of the words therein is "inescapably ambiguous". Garcia v. United States, 469 U.S. 70, 76 n.3 (1984); see also Ex parte Collett, 337 U.S. 55 (1949). When read in view of the legislative intent for section 83, the text of section 83(h) is unambiguous. As stated in section 83(h), an employer who transfers property to an employee as compensation for services rendered to it may generally deduct "an amount equal to the amount included in the gross income of the person who performed such services [and the] deduction shall be allowed for the taxable year of [the employer] in which or with which ends the taxable year in which such amount is included in the [employee's] gross income". Given the clarity of this text, our inquiry starts and ends with the statutory text, and we apply the plain and common meaning of that text. TVA v. Hill, 437 U.S. 153 (1978); United States v. American Trucking Associations, Inc., 310 U.S. 534, 543-544 (1940); see also Connecticut Natl. Bank v. Germain, 503 U.S. 249, 253-254 (1992). The statutory prerequisite to petitioner's deduction under section 83(h) is that the corresponding amount must be "included" in its employees' income, and, given the fact that petitioner's employees did not include any of the subject income in their 1988 incomes, we conclude that petitioner is not entitled to a corresponding deduction for that year.
We recognize that the Congress' insistence that an amount be included in an employee's income as a precursor to an employer's deduction under section 83(h) may present difficulties to some employers attempting to ascertain whether their employees included an amount in income. We decline to second-guess the wisdom of the Congress in promulgating such a requirement or to rewrite section 83(h) in a way that is more employer friendly by substituting the word. "includable" for the word "included". As the Court has noted many times before in similar settings, we apply section 83 according to its terms, although such an application could result in an inequity in a particular case. See Alves v. Commissioner, 79 T.C. at 878, and the cases cited therein, for prior cases in which the Court has applied section 83 literally, notwithstanding the inequities that could occur from such an application. Although the Congress has given the Commissioner broad authority under section 7805(a) to prescribe rules and regulations to implement provisions, including provisions such as the one at hand, which could otherwise be difficult to meet in practice, the duty and province of this and other courts are to interpret the statute as written. As the Supreme Court has repeatedly instructed the lower courts for almost 200 years, "where the statute's language is plain, 'the sole function of the courts is to enforce it according to its terms.'" United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241 (1989) (quoting Caminetti v. United States, 242 U.S. 470, 485 (1917)); see also United States v. Goldenberg, 168 U.S. 95, 102-103 (1897); Oneale v. Thornton, 10 U.S. (6 Cranch) 53, 68 (1810). "[Cjourts must presume that a legislature says in a statute what it means and means in a statute what it says there." Connecticut Natl. Bank v. Germain, supra at 253-254.
In the case at hand, the Commissioner has prescribed an employer-friendly regulatory rule with respect to section 83(h). The Commissioner's regulations, however, do not help petitioner under the facts herein. The applicable regulations are found in section 1.83-6, Income Tax Regs. These regulations, which are generally effective for transfers of property after June 30, 1969, T.D. 7564, 1978-2 C.B. 71, 82, read:
§1.83-6. Deduction by employer. — (a) Allowance of deduction — (1) General rule. In the case of a transfer of property in connection with the performance of services , a deduction is allowable under section 162 or 212, to the person for whom such services were performed. The amount of the deduction is equal to the amount includible as compensation in the gross income of the service provider, under section 83(a) , but only to the extent such amount meets the requirements of section 162 or 212 and the regulations thereunder. Such deduction shall be allowed only for the taxable year of such person in which or with which ends the taxable year of the service provider in which such amount is includible as compensation.
(2) Special rule. If the service provider is an employee of the person for whom services were performed, such deduction is allowed for the taxable year of the employer in which or with which ends the taxable year of the employee in which such amount is includible as compensation, but only if the employer deducts and withholds upon such amount in accordance with section 3402. A deduction will not be disallowed under the preceding sentence if the employer does not withhold and deduct upon amounts excluded from gross income, such as amounts excluded under section 79, section 101(b), or subchapter N.
(3) Exceptions. Where property is substantially vested upon transfer, the deduction shall be allowed to such person in accordance with his method of accounting (in conformity with section 446 and 461).
Under these interpretative regulations, the Commissioner has allowed an employer such as petitioner to deduct compensation paid to an employee through a transfer of property in the year that the corresponding income is includable in the employee's income if the employer deducts and withholds income tax on the payment under section 3402. See sec. 1.83-6(a)(2), Income Tax Regs.; see also sec. 7805(a) (the Commissioner authorized to "prescribe all needful rules and regulations for the enforcement of this title"). Petitioner does not benefit from these regulations because it did not withhold income tax on any of the payments underlying the claimed deduction. Although petitioner attempts to avoid this result by arguing that these regulations are invalid, we do not agree. The statutory text allows a deduction when the corresponding amount is included in income, and the Commissioner's regulations merely establish a "safe harbor" for concluding that the corresponding amount was included in income. The Commissioner's regulatory implementation of the congressional mandate set forth in section 83(h) is reasonable, which, in turn, means that the regulations are valid. United States v. Vogel Fertilizer Co., 455 U.S. 16, 24 (1982); United States v. Correll, 389 U.S. 299, 307 (1967). The special rule as to the deduction and withholding of payroll taxes was meant to alleviate the "[difficulties] that a service recipient may have in demonstrating that an amount has actually been included in the service provider's gross income", see T.D. 8599, 1995-2 C.B. 12, 12, and its effect that an employer's deduction is in fact offset by a corresponding inclusion in income comports with the statute's purpose of matching an employer's deduction with income inclusion by the employee.
The history of these regulations is noteworthy. When the Commissioner originally proposed these regulations in 1971, they did not contain a safe harbor provision under which an employer could deduct the value of property transferred to an employee as compensation for services, absent the employee's including the corresponding amount in income. Section 1.83-6, Income Tax Regs., was originally proposed as follows:
§1.83-6. Deduction by employer. — (a) In general. In the case of a transfer of property in connection with the performance of services , there is allowed as a deduction under section 162 or 212, to the person for whom such services were performed, an amount equal to the amount included, under subsection (a) of section 83 as compensation, in the gross income of the person who performed such services, but only to the extent such amount meets the requirements of section 162 or 212 and the regulations thereunder. Such deduction shall be allowed only for the taxable year of such person in which or with which ends the taxable year for which such amount is included as compensation in the gross income of the person who performed such services. [Sec. 1.83-6, Proposed Income Tax Regs., 36 Fed. Reg. 10793 (June 3, 1971).]
After these proposed regulations were published, the Commissioner received numerous comments expressing concern as to the difficulty that an employer may have in demonstrating that an amount has actually been included in an employee's gross income. Accordingly, the Commissioner, in finalizing the proposed regulations, opted to allow a deduc tion at the time that the corresponding amount was includable in an employee's gross income, even if the employee did not properly include the includable amount in his or her income. As a quid pro quo to receiving the deduction at that time, however, the Commissioner required that the employer deduct and withhold payroll taxes from the underlying payment.
Most recently, the Commissioner has amended the regulations under section 83(h) to "more closely [follow] the statutory language of [that] section". T.D. 8599, supra, 1995-2 C.B. at 13. The current regulations, which are effective for deductions in taxable years beginning on or after January 1, 1995, but which may be used by employers claiming deductions for any taxable year not closed by the period of limitations under section 6501, read:
§1.83-6. Deduction by employer. — (a) Allowance of deduction — (1) General rule. In the case of a transfer of property in connection with the performance of services , a deduction is allowable under section 162 or 212 to the person for whom the services were performed. The amount of the deduction is equal to the amount included as compensation in the gross income of the service provider under section 83(a) , but only to the extent the amount meets the requirements of section 162 or 212 and the regulations thereunder. The deduction is allowed only for the taxable year of that person in which or with which ends the taxable year of the service provider in which the amount is included as compensation.
(2) Special rule. For purposes of paragraph (a)(1) of this section, the service provider is deemed to have included the amount as compensation in gross income if the person for whom the services were performed satisfies in a timely manner all requirements of section 6041 or section 6041A, and the regulations thereunder, with respect to that amount of compensation.
(3) Exceptions. Where property is substantially vested upon transfer, the deduction shall be allowed to such person in accordance with his method of accounting (in conformity with sections 446 and 461).
As stated by the Commissioner in the preamble to these regulations:
Under section 83(h) of the Code, in the case of a transfer of property to which section 83(a) applies, the person for whom services were provided may deduct an amount equal to the amount included in the service provider's gross income. In light of the difficulty that a service recipient may have in demonstrating that an amount has actually been included in the service provider's gross income, the general rule in former §1.83-6(a)(l) permitted the deduction for the amount "includible" in the service provider's gross income. Thus, the deduction was allowed to the service recipient even if the service provider did not properly report the includible amount. Where the service provider was an employee of the service recipient, however, the special rule in §1.83-6(a)(2) provided that a deduction could be claimed only if the service recipient (employer) deducted and withheld income tax in accordance with section 3402. The special rule was designed to ensure that the service recipient's deduction was in fact offset by a corresponding inclusion in the service provider's gross income. The special rule was limited to employer-employee situations because in other situations there was no underlying withholding requirement upon which the deduction could be conditioned.
Taxpayers expressed concern that it was often difficult to satisfy the prerequisite that employers must deduct and withhold income tax from payments in kind as a condition for claiming a deduction. These regulations address this concern by eliminating this prerequisite, while still ensuring consistent treatment between service recipients and service providers as required by the statute. In addition, because the deduction no longer is conditioned on withholding, there no longer is a need to have different rules for those who receive services from employees and those who receive services from others.
Under these regulations, the former general rule and special rule are replaced by a revised general rule that more closely follows the statutory language of section 83(h). The service recipient is allowed a deduction for the amount "included" in the service provider's gross income. For this purpose, the amount included means the amount reported on an original or amended return or included in gross income as a result of an IRS audit of the service provider.
Because of the potential difficulty of demonstrating actual inclusion by the service provider, a special rule provides that, if the service recipient timely complies with applicable Form W-2 or 1099 reporting requirements under section 6041 (or 6041A), as appropriate, with respect to the amount includible in income by the service provider, the service provider is deemed to have included the amount in gross income for this purpose. Thus, the regulations allow the deduction without requiring the service recipient to demonstrate actual inclusion by the service provider.
The deemed inclusion rule may be used only by a service recipient whose compliance with applicable Form W-2 or 1099 reporting requirements is timely. Thus, for example, under the current reporting requirements, if amounts attributable to one or more section 83 transfers of property are includible in an employee's income in year 1 (and are not eligible for any reporting exemption), the employer generally is required to furnish the employee a Form W-2 reflecting that amount by January 31 of year 2 and generally is required to file a copy of the Form W — 2 with the federal government by the last day of February of year 2. If the employer reports to the employee and the government in a timely manner, the employer can rely on the deemed inclusion rule to claim a deduction for the amount in year 1. If the employee's Form W-2 is not furnished until after January 31 of year 2 or the government's copy of Form W-2 is not filed until after the last day of February of year 2, the employer generally is required to demonstrate that the employee actually included the amount in income in order to support its deduction of the amount.
[T.D. 8699, supra, 1995-2 C.B. at 12-13.]
Petitioner can find no refuge in current section 1.83-6, Income Tax Regs., because: (1) It has not issued a Form W-2 or Form 1099, and (2) none of its employees has included the value of the Endotronics stock in his or her gross income.
Nor can petitioner find refuge in section 1.83 — 6(a)(3), Income Tax Regs. Section 1.83-6(a)(3), Income Tax Regs., provides an exception to the general timing rule of section 1.83 — 6(a)(1), Income Tax Regs., in that the deduction afforded by section 1.83 — 6(a)(1) and/or (2), Income Tax Regs., is allowed to the employer in accordance with its method of accounting where the underlying property is substantially vested upon transfer. Section 1.83-6(a)(3), Income Tax Regs., does not, as argued by petitioner, provide an independent basis for deducting an amount under section 83(h). Section 1.83-6(a)(3), Income Tax Regs., merely sets forth the time that an amount is deductible, where the employer's right to the deduction has already been established by section 1.83-6(a)(1) and/or (2), Income Tax Regs. The fact that section 1.83-6(a)(3), Income Tax Regs., is only a timing provision is quickly seen by comparing the rules contained in that section with the rules contained in section 1.83-6(a)(l), Income Tax Regs. Section 1.83-6(a)(l), Income Tax Regs., tracks the statutory text in that they both contain three separate rules, the first of which allows a deduction under section 162 or 212, the second of which sets forth the amount of the deduction, and the third of which sets forth the timing of the deduction. Section 1.83-6(a)(3), Income Tax Regs., by contrast, contains only one rule, and that rule speaks only to the timing of the deduction.
The following example illustrates the applicability of section 1.83-6(a)(3), Income Tax Regs. Assume that the respective taxable years of an employer and an employee end on July 31 and December 31. Assume further that the employer transfers property to the employee on May 1, 1993, in connection with services rendered, that this property is substantially vested at the time of transfer, and that the employer deducts and withholds income tax on this transfer under section 3402. In such a case, the employee must include the value of the property in income for his or her taxable year ended December 31, 1993. See sec. 83(a). With respect to the employer, the general rule of section 1.83— 6(a)(1) and (2), Income Tax Regs., forces it to deduct the value of the transfer in its taxable year ended July 31, 1994 (i.e., its taxable year in which ends the taxable year of the employee in which the amount is included in gross income), although the employer made the payment in its taxable year ended July 31, 1993. By virtue of the safe harbor in section 1.83-6(a)(2), Income Tax Regs., and the exception in section 1.83-6(a)(3), Income Tax Regs., the employer can take the deduction in its taxable year ended July 31, 1993; i.e., the year in which the amount is deductible under the employer's method of accounting. See Schmidt Baking Co. v. Commissioner, 107 T.C. 271 (1996); see also Chalmette Gen. Hosp., Inc. v. United States, 71 aftr 2d 93-3314, 90-2 USTC par. 50,578 (E.D. La. 1990). See generally Utz, 384-2nd T.M., Restricted Property — Section 83 A-15-16 (1996).
Petitioner argues that section 1.83-6(a)(3), Income Tax Regs., the two cases cited immediately above, and Robinson v. Commissioner, 82 T.C. 444 (1984), support its right to a deduction in 1988, the year in which the amount is deductible under its accrual method, notwithstanding the fact that its employees did not include any of the subject amount in income. We do not agree. As discussed above, section 1.83-6(a)(3), Income Tax Regs., does not independently bestow a deduction on petitioner with respect to its transfer of the Endotronics stock. Moreover, petitioner's reliance on Schmidt Baking Co., Chalmette Gen. Hosp., and Robinson is misplaced. None of the courts in those cases addressed or decided the issue that is before us today. Nor did the parties in those cases, unlike the parties here, dispute that the employers were entitled to a deduction, challenging only the timing of that deduction.
In summary, petitioner has not met the requirements for deductibility under section 83(h), and it has not met the requirements for deductibility under section 1.83-6, Income Tax Regs., either pre- or post-amendment. Thus, section 83(h) prevents petitioner from deducting the value of the transferred stock in 1988. We have considered all arguments made by petitioner for a contrary holding and, to the extent not discussed above, find them to be irrelevant or without merit.
To reflect the foregoing,
Decision will be entered for respondent.
Reviewed by the Court.
Chabot, Swift, Jacobs, Gerber, Parr, Colvin, Foley and Vasquez, JJ., agree with this majority opinion.
The deficiency for 1989 results entirely from respondent's determination that a research and development credit that petitioner claimed for 1989, as a carryover from 1988, was usable in full in 1988. We sustain respondent's determination for 1989 as a result of our holding on the deduction issue.
Respondent determined alternatively that petitioner realized a $1,078,672 capital gain on its distribution of the stock. Because we agree with respondent's primary position, we do not address the alternative determination.
We also note that the drafters of sec. 83 knew the difference between the suffixes "-able" and "-ible", on the one hand, and "-ed" on the other. Sec. 83 includes both "transferable" and "transferred" in many places, and it is clear that those words are not interchangeable. Moreover, sec. 83 was added to the Code by sec. 321(a) of the Tax Reform Act of 1969 (the Act), Pub. L. 91-172, 83 Stat. 588; and sec. 321(b)(3) of the Act, 83 Stat. 591, which provides similar but not identical rules for nonexempt trusts and nonqualified annuities, amended sec. 404(a)(5) to provide for deductibility "in the taxable year in which an amount attributable to the contribution is includible in the gross income". (Emphasis added.) When we find, as we do here, that different words are used in the same section of the same act, we do not impute to Congress the intent to express the same meaning through the different words. See United States v. Olympic Radio & Television, 349 U.S. 232 (1955); Estate of Cuddihy v. Commissioner, 32 T.C. 1171, 1176 (1959); Root Glass Co. v. Commissioner, 1 T.C. 475, 477 (1943). "[L]egal documents are for the most part nonemotive, [and] it is presumed that the author's language has been used, not for its artistic or emotional effect, but for its ability to convey ideas. Accordingly, it is presumed that the author has not varied his terminology unless he has changed his meaning, and has not changed his meaning unless he has varied his terminology". Zuanich v. Commissioner, 77 T.C. 428, 443 n.26 (1981) (quoting R. Dickerson, The Interpretation and Application of Statutes 224 (1975)).