Legal Document

75 L.Ed.2d 130 103 S.Ct. 1134 460 U.S. 370 HILLSBORO NATIONAL BANK, Petitionerv.COMMISSIONER OF INTERNAL REVENUE. UNITED STATES, Petitioner v. BLISS DAIRY, INC. Nos. 81-485, 81-930. Argued Nov. 1, 1982. Decided March 7, 1983. Syllabus Until 1970, Illinois imposed a property tax on shares of stock held in incorporated banks, but 1970 the Constitution was amended to prohibit such taxes. The courts thereafter that amendment violated Federal Constitution, but, pending disposition case this Court, enacted statute providing for collection disputed taxes and placement receipts escrow. Bank No. 81-485 paid its shareholders 1972, taking deduction amount pursuant § 164(e) Internal Revenue Code 1954 (IRC), which grants corporation by denies any tax. authorities placed After Court upheld constitutional amendment, amounts escrow were refunded shareholders. When petitioner, federal income return 1973, recognized no from sequence events, Commissioner assessed deficiency against requiring it include as then sought redetermination Tax refund includible petitioner's income. Appeals affirmed. In 81-930, respondent corporation, operated dairy, taxable year ending June 30, deducted full cost cattle feed purchased use operations permitted 162 IRC, substantial portion still hand at end year. Two days into next year, adopted plan liquidation distributed assets, including feed, Relying 336 shields recognition gain distribution liquidation, reported transaction. challenged respondent's treatment transaction, asserting should have included value shareholders, therefore increased $60,000. Respondent resulting assessment sued District rendered judgment favor. Held: 1. Unless nonrecognition provision IRC prevents it, benefit rule ordinarily applies require inclusion when events occur are fundamentally inconsistent with an earlier deduction. Pp. 377-391. 2. does not petitioner recognize respect refund. purpose provide relief corporations making payments their focus being act payment rather than ultimate funds State. As long itself negated change character hands State 391-395. 3. however, requires liquidation. expensed assets is business expense. Section 336, clearly shield taxpayer all prevent application case. 336's legislative history, other general rules law, construction identical language 337, governs sales followed proceeds sale indicate permit liquidating avoid rule. 395-402. 641 F.2d 529 (CA 7), reversed; 645 19 9), reversed remanded. Harvey B. Stephens, Springfield, Ill., Hillsboro Nat. Bank. James Silhasek, Phoenix, Ariz., Bliss Dairy, Inc. Rex E. Lee, Sol. Gen., Washington, D.C., C.I.R. United States. Justice O'CONNOR delivered opinion Court. 1 These consolidated cases present question applicability two corporate situations: repayment they liable originally corporation; We conclude that, unless Our examination provisions granting deductions governing these lead us hold 2 * National Commissioner, Bank, bank doing Illinois. banks. Ill.Rev.Stat., ch. 120, 557 (1971). Banks, required retain earnings sufficient cover taxes, 558, customarily Under 1954, 26 U.S.C. 164(e),1 allowed tax, not. constitution ad valorem taxation personal owned individuals, violation Equal Protection Clause Constitution. unconstitutional Lake Shore Auto Parts Co. Korzen, 49 Ill.2d 137, 273 N.E.2d 592 granted certiorari, 405 1039, 92 1307, 31 579 (1972), and, here, Ill.Rev.Stat. 676.01 (1979). 164(e), This state Lehnhausen Co., 410 356, 93 1001, 35 351 (1973). Accordingly, 1973 County Treasurer attributable along accrued interest. refunds belonged See & Trust Company Arlington Heights Cullerton, 25 Ill.App.3d 721, 726, 324 29 (1975) (alternative holding); Lincoln 18 953, 310 845 (1974). Without consulting Hillsboro, directly individual On events.2 interest, Hillsboro's appeal, relying decision First Savings States, 614 1142 (CA7 1980), Seventh Circuit 529, 531 1981). 3 States Inc., respondent, closely engaged operating dairy. cash basis taxpayer, upon purchase operations, Code, 162.3 A July 2, during month July, remaining liquidation,4 continued operate dairy noncorporate form. They filed election under 333 limit them liquidation,5 calculated received provided 334(c).6 provision, liquidated decreased money received, allocated total over regulations, Treas.Reg. 1.334-2, CFR 1.334-2 (1982), presumably greater zero although shareholders' record. turn expense 162. audit, corporation's taken grain He Bliss's district court Arizona, where stipulated had $56,565, see Pretrial Order South Farms, 837 (CA9 1963), favor Bliss. While recognizing authority contrary, Tennessee-Carolina Transportation, 582 378 (CA6 1978), cert. denied, 440 909, 99 1219, 59 457 (1979), saw Farms controlling 1981) (per curiam ). II 4 Government7 each relies solely rule—a judicially developed principle8 allays some inflexibilities annual accounting system. An system practical necessity if produce revenue ascertainable payable regular intervals. Burnet Sanford Brooks 282 359, 365, 51 150, 152, L.Ed. 383 (1931). Nevertheless, strict adherence would create transactional inequities. Often apparently completed transaction will reopen unexpectedly subsequent rendering initial reporting improper. For instance, note became uncollectable early debtor made unexpected financial recovery before close debt, consequences principal be capital. If, debtor's took place after bad debt first 166(a) 166(a). rule, second representing capital, taxable. then, economically first, could, because differences accounting, yield drastically different consequences. Government, allowing could known improper time, foreclosed9 recouping saved deduction.10 Recognizing seeking possible distortions income,11 See, e.g., Estate Block 39 B.T.A. 338 (1939), aff'd sub nom. Union 111 60 (CA7), 311 658, 61 12, 85 421 (1940); Dakota Concrete Products 1429 (1932); Plumb, Benefit Rule Today, 57 Harv.L.Rev., 129, 176, 178 n. 172 (1943) (hereinafter Plumb).12 5 taxpayers Government propose formulations contend recovered later years, do view "recoveries." hand, urges previously deductions; insists "recovery" necessary Further, asserts taxpayers. complete agreement either view. 6 accepted applications reveals always invoke simply approximate results produced based accounting. generally Bittker Kanner, Rule, U.C.L.A.L.Rev. 265, 270 (1978); Byrne, Applied Corporate Liquidations Contributions Capital: Recent Developments, 56 Notre Dame Law. 215, 221, 232 (1980); Tye, Doctrine Reexamined, L.Rev. 329 (1948) Tye). It has been using accrual who accrues deducts becomes reason eventually pay liability must take deducted. Mayfair Minerals, 456 622 (CA5 1972) ); Bear Manufacturing 430 152 1970), 400 1021, 91 583, 27 632 (1971); Haynsworth 68 T.C. 703 (1977), without op., 609 1007 1979); G.M. Standifer Construction Corp. 30 184, 186-187 (1934), petition review dism'd, 78 285 1935). bookkeeping entry cancelling liability, though increases balance sheet net worth fit within ordinary definition "recovery."13 Thus, taxpayers' formulation neither serves purposes nor accurately reflects establish proposal introduce undesirable formalism Lower able stretch great variety events. liquidations, viewed receipt own "recovery," reasoning even instant receives worthless, turned ephemeral represents corporation. 378, 382 (1979) holding). Or, another party may imputed giving rise recovery. 1142, 1146 1980) Imposition requirement there would, many cases, cast argument unnatural terminology, adding anything analysis.14 7 basic achieve rough parity supra, protect adverse effects assumptions event proves erroneous. Such event, unforeseen time deduction, not, agree consequence invariably follows. Not every report his "cancel out" only careful shows indeed premise initially based.15 That is, occurred same foreclosed deduction.16 case, actual justify example, calendar-year rental December 15 30-day lease deductible current 162(a)(3), 1.461-1(a)(1), 1.461-1(a)(1) (1982); Zaninovich 616 429 1980),17 leased premises destroyed fire January 10. inability occupy building prior 162(a). loss business18 consistent burned January, decided house family continue operation business, he converted leasehold use. based.19 fire, lessor—by virtue lease—had destruction building. words, evident applied case-by-case basis. consider facts circumstances light function deductions. 8 takes context inherent tension between provision. Putoma 601 734, 742 id., 751 (Rubin, J., dissenting); cf. Helvering American Dental 318 322, 577, 87 785 (tension exclusion gifts cancellation indebtedness income). cannot resolve blanket prevail. Instead, we particular issue case.20 9 endorse today follows development STEVENS' assertion suggestion or commentators ever did involve physical recovery, post, 406-408 incorrect. frequently framed terms our irreconcilable dissent. Barnett 864, 867 (1939) ("Finally, analogous number others, . [w]hen occurs adjustment balancing item occurs.") (emphasis added); ("When what done past occurs, 1429, 1432 (1932) ("[W]hen determination reflected added).21 reliance dissent equally misplaced, articles cited dissent, like often stated events.22 10 Finally, heavily codification exclusionary aspect gave benefit, supra. does, observes, speak "recovery." By terms, debts, delinquency amounts. Yet held, Dobson 320 489, 505-506, 64 239, 248-249, 88 248 (1943), since,23 lists few endorsement situations inclusionary part failure mention more suggests trigger capital Dobson, 11 STEVENS also err equity difficult understand why clearest taxed concern equity, 377. Nor entail approach Although basically (1931), eliminates otherwise arise 268-270 Tye 350; Plumb 172. limited nature effect principle bears repetition: occurrence resulted disallowance can compensating year.24 12 Nash 398 90 1550, (1970). There, rejected Government's partnership reserve partnership. theory provides transfer controlled situation, reserve, 166(c), terminated, longer needed reserve. noted receivables transferred Id., 5, S.Ct., 1552 5. 4, 1552, kind. fair market equal face less constituted accurate estimate debts ultimately prove uncollectible, completely business. Citizens' Acceptance F.Supp. 798 (D.Del.1971), rev'd grounds, 462 (CA3 1972); Rev.Rul. 78-279, 1978-2 Cum.Bull. 135; 78-278, 134; O'Hare, Statutory Nonrecognition Income Overriding Principle Taxation Corporations Shareholders, 219-221 (1972).25 13 currently us, undertake govern transactions determine whether actually specific prevail rule.26 III 14 key 164(e).27 section argued equivalent dividend If dividend. Since structure dividends, concludes original evaluating argument, instructive shareholder compare 164(e). entitled it. 1.164-1(a), 1.164-1(a) Wisconsin Gas Electric 322 526, 527-530, 1106, 1107-1108, 1434 (1944). profits, constructive §§ 301(c), 316(a); Ireland 621 731, 735 1980); J. Eustice, Shareholders ¶ 7.05 (4th ed. 1979). shareholder, since used satisfy liability. 164(a)(2). wash: income,28 offsetting consequences, gives 311(a). 16 economics course remain unchanged: satisfying paying are, significantly different, least wash shareholder; him entitled, need dividend, 1.164-7, 1.164-7 (1982). But available. deduct here give circumstances, contemplation Code. answer permits when, money, treasury, reaches shareholder—or available, urges, remains properly collected revenue. 17 Rephrased, now Congress, special dividends concerned out put. break usual distributions, guidance reach described "prompted plight various banking voluntarily absorbed burden certain local those gross income." U.S., 531, 1109 (footnote omitted). section, substantially similar form, Act 1921, 42 Stat. 227. added Senate, Committee Report merely mentions discussing S.Rep. 275, 67th Cong., 1st Sess. (1921). discussion appears Dr. T.S. Adams Senator Smoot Senate Hearings. Adams's statement explains states much Hearings H.R. 8245 Comm. Finance, 250-251 (1921) (statement Adams, advisor, Treasury Department). Smoot's response, revealing: I director 20 years. share bank. know nothing about cent credit deductions, banks out. 251 added). Congress knew them29 entitlement deduction; unconcerned perceived independent one another, "know[ing] about" other. intended revenues parties. payments, state. income, reverse below.30 IV problem complicated. 162(a), so begin examining 162(a) "ordinary expenses" carrying trade predicated consumption asset 1.162-3, 1.162-3 (1982) ("Taxpayers expenses charges materials supplies consumed .") added.) sells consuming furtherance quite clear lose zero, see, Spitalny 195 gain. 1001(a), (c). general, converts other, non-business use, action unwarranted expenses, 262 explicitly expenses. 1916 Act, single section. 5(a) (1st), 756. uniformly interpreted taxpayer. Kornhauser 276 145, 48 219, 72 505 (1928); H.Rep., 75th 3d 46 (January 14, 1938) ("a reasonable direct incurred connection income") generally, Bittker, Income, Estates Gifts 20.2 (1981). turns analog consumption, here—distribution shareholders31—it seem deduction.32 21 conclusion, governed specifically gain—§ 336. proceed inquire sort goes unrecognized background framework law convinces rule.33 22 codified doctrine General Utilities Helvering, 296 200, 206, 185, 187, 80 154 (1935), appreciated Before enactment statutory expressed loss, "however [the assets] depreciated acquisition." Regulations 118, 39.22(a)-20 (1953) regulation source new 1622, 83d 2d 258 (1954), U.S.Code Cong. Admin.News p. 4017. House explained version "Thus, fact adjusted distributing way alter subsection (a) [providing nonrecognition]." 1337, A90 (1954) added), 4227. indicates real appreciation realized arm's-length unrelated types might asset. 23 Despite breadth exception. bar recapture 1245 1250 excessive depreciation assets. Sections 1245(a), 1250(a); 1.1245-6(b), 1.1250-1(c)(2), 1.1250-1(c)(2) Even absence countervailing provisions, never read command absolute. "assignment income" distributions Siegel 464 891 1972), 918, 978, 581 (1973); Williamson 292 524, 155 Ct.Cl. 279 (Ct.Cl.1961); Idaho 265 1959) (decided 336). judicial avoiding shifting person entity earns someone pays lower rate.34 subject again level particularly attractive: taxation. Responding incentive, attempted distribute fully performed contracts accounts receivable spite nonrecognition, assignment income.35 distribution. 24 Next, look companion provision—§ liquidation.36 uses essentially broad similarity alone make 337 relevant interpreting addition, construed tandem. response distinction created Cumberland Public Service 451, 70 280, 94 (1950), Holding, 331, 65 707, 89 981 (1945). sell shortly Cumberland. sold though, sale, kind attributed Holding. To eliminate necessarily formalistic distinctions uncertainties Holding Cumberland, permitting adopt level, very Midland-Ross 485 110 1973); 258. There largely aimed period distributes inventory business; 337(b). intend allow escape earned while form; appreciation. protects arisen frequently, well established overrides Connery 1130 Anders, 414 1283 (CA10), 396 958 (1969); Krajeck 75-1 USTC 9492 (D. ND 1975); S.E. Evans, 317 423 (D.Ark.1970); Anders 1147 (Ct.Cl.), 409 1064, 557, 34 517 (1972); Munter 63 663 (1975); 61-214, 1961-2 60; Liquidations: 221 Note, Treatment Previously Expensed Assets Liquidations, Mich.L.Rev. 1636, 1638-39 (when apply, does). recently undertaken major revisions Economic Recovery 1981, Pub. 97-34, 95 172, changes 95-600, 2904 (amending 337); 95-628, 3628 (same), long-standing, universally acquiescence Lorillard Pons, 434 575, 580, 98 866, 869, 55 40 (1978), parallel history Consequently, deduction.37 V 28 increase $60,000 parties record show remained proper Bliss, remand amount. further proceedings necessary, reversed. ordered. BRENNAN, dissenting 81-485. join I, II, Court's opinion. reasons Part BLACKMUN's opinion, believe principles set affirmance reversal 32 STEVENS, whom MARSHALL joins, concurring 33 way. 1972 expenditure, economic benefit. Neither expenditure. my benefits matters affect returns; Both apply limited, important office: determines enrich taxpayer—recoveries expenditures—should characterized income.1 enhance taxpayer's wealth. Today declares "to accounting." Ante, 381. Whereas wealth-enhancing study propriety operates "fundamentally inconsistent" 383.2 36 reformulation constitutes extremely significant enlargement collector's powers. order identify groundbreaking decision, shall discuss Dairy detail, demonstrate fits comfortably class past. explain adventure lawmaking misguided cases. 37 What called "tax rule" evolved stages, reflecting rule's components. "inclusionary" component "exclusionary component," name, allows extent benefited 38 originated Bureau recoveries uncollectable. sensed inequitable characterize "return capital" reduce compensate commentator "[T]he allowance taxed; recouped, stands taxable."3 quickly endorsed Board courts. Excelsior Printing 886 (1929); Putnam 50 158 1931). readily accepted. Great Depression natural equitable counterweight component. G.C.M. 18525, 1937-1 80. soon retreated, insisting treated 22163, 1940-2 76. protested, Corn Exchange Nat'l 1107 (1942), Courts sided Bureau. State-Planters 44 (CA4 1942); International Securities Corp., 894 1942). At point, intervened time. forerunner 619, Title 116(a), Oct. 21, 1942, 812, implication acknowledges mandating component.4 most striking feature formative through codification, until 1960's, Congress,5 Service,6 courts,7 commentators,8 understood appropriately undeniably helped accommodate multi-year transactions, found regarded generalized method approximating fabrication drop event.9 condition, exception inconsistency applying rule.10 Significantly, dealing emphasized role recovery.11 And litigants suggested equitable, expressly declined impose one, stressing importance finality practicability system.12 41 support began urge given ambitious office.13 (1970), cancel whenever arguments advanced, rejected, remarkably today.14 arose ledger entries "bad reserve"—an account firm's future losses become arguing deductibility pre-sale additions justified assumption valid sold.15 43 flatly Commissioner's position. Rather scrutinizing themselves starting point. realization justifying "[A]lthough 'need' ended transfer, mark 'recovery' meaning cases." 1552.16 divided pushing rule.17 accepts invitation. legislation suggesting half-century18 wrong-headed, 32, infra, emerges today's making. 45 result contrary dictated theory. One expect apparent palpable inequity—a windfall Dairy. Indeed, indistinguishable Three interact First, 162(a),19 entire 1972. left grain. Second, 336,20 went 1973. third, regulations implementing 334,21 assign Admittedly, combination cause "step-up" grain's possibility figured strongly Sixth precursor 1978). stressed Solicitor Brief 39-42. analysis potential untaxed step-up extraordinary calls measures 47 factual matter, returns Dairy's indication how much, any, occurred. legal contemplates steps-up behaved believes fed cows liquidating, whatever assigned step up passed suppose acceptable happens accidentally, manipulates advantage too little information manipulation with, questioned Moreover, appeal tell exceeded purchases, volume compared purchases 1971 abnormally large hedge price, $150,000 doubt today.23 Unfortunately, offers ipse dixit: seems wrong realize fails asset, precise proposition Nash. both revealed matching (i.e., deduction) uncollectable) taxpayer.24 explanation detach mooring challenge open sea troublesome inconclusive hypothetical cases.25 Because considerations play decisions relating investment businesses, management going concerns, interest orderly, interpretation Today's seriously compromises engender uncertainty, enlarge gatherer's discretionary power reexamine controversy litigation. Any complicated theory.26 Inconsistent forces deviation traditional pattern calculating year: wealthier, sources enrichment recognized. Of course, several contexts, already mandated deviations pattern,27 additional complications deemed appropriate price enhanced equity. knowledge considered sweeping 52 Nonetheless, surely vague hybrid today. dimensions newly fashioned event" means clear. obviously differs "inconsistent familiar theory, understand, precisely distinguishes computing 53 describes test "subsequent claimed." 18. "the based." 383. infer difference tests events" events." attempts line "between 383, 15. am afraid attempt because, however described, cleanly predictably separate position Government's. 54 presents [later year's] deduction." 389. rejects claim. holds establishing care put, bank's find far plausible. unsatisfying. same-year principle, resolves sentence: assimilated distribution, consumption," "it 31.28 obvious me ownership consumption" gift confusion accompany efforts reconcile Given good Presumably, tangible feed. paper towels, clips, pencils clear, react enduring limiting prepaid rent, insurance, accruals employee vacation advertising, training, valuable leaves unclear occurs. deduction," ante, equivocates,29 once sold, "amount sale," 395, income.30 involves revolving fungible commodity, sure "cost" grain, 403, computed. matched think years surplus built up. prefers LIFO FIFO. 58 sound policy supports abandonment tool characterizing dissatisfied accorded respond changing three bear 413. modify manner authorized 162.31 legislate system, 1245, 1250, liquidations.32 Or 334.33 action, distorting rule.34 concur respectfully BLACKMUN, dissenting. issues concerning so-called law. situation presented. detriment disagree conclusions. 62 interprets 392-395. depended shares. (1973), nonexistent unavailable. sense "focus State." 394. focus, instead, Events proved thus, application, nonapplication, this: Whenever claimed, developments asserted mistakenly whole part, emerging excessive, With concept (despite occasionally theoretical "transactional parity" inconsistency," "recovery") disagreement. Regardless presence 111, acknowledged judge-made. Mertens, Law Taxation, 7.34, 114 (rev. 1981); UCLA 266 (1978). came being, apparently, concerns: 1) reaction undeserved unrecoverable (by Government) 2) need, intervals, promote integrity return. approach, justification, part. impropriety counterbalanced (concededly imprecise manner, 10, 380-381, 12) reparative (1931); Healy 345 278, 73 671, 97 (1953).* 66 __________ 3, 1551, succinctly phrased way: "[A] recovery." 67 underlying (the rectification benefit). claiming incorrect or, destroyed, right corrected reasonably possible, profit troubled, tendency carry return) unnecessary limits. sacrosanct. return, shareholders; unusual, nevertheless specific, reduced accordingly. Similarly, kept books disbursements method, fiscal claimed Thus far, everything problem. 69 Bank's development, namely, final Lehnhausen, prohibiting imposition question, valid, eliminated justification And, post-fiscal unconsumed consequent ability deduct, consumed, similarly demonstrated full-cost difficulty favoring benefit" situations. made, beneficial Each thus nonentitlement among obligations. 71 me, encounter concern, unraveling situation. respective insist receiving year's position, if, interim, limitations effective preceding collected. better resolution others them—and complaint taxpayer—is adjustment, claimed. makes correction due true accords facts, structured, imprecise, fictional. normally accomplished filing collection. thing audited overstated process equates acute. day 333. adoption liquidation; filing, days, written elections qualified electing effectuation calendar month. 333(a), (c), (d). management, certainly conceived resolved felt afforded strictly utilize 1974 1973), instead decreasing demand much. realistic factually accord inflexibly-administered Much said decisive Feb. 22, overdue. Here again, preferred inaccurate 74 This, view, controversies resolved. complex outlined. existed, prevented reparation different. simplistic, judge-made really intended, origin, applicable simple presented successive-tax-year So understandably conceived, farther should. 76 vacate analysis. provides: "Where reimburse then— "(1) "(2) tax." Subsection provides, part: "Except following accrued: taxes." 533 (Pell, dissenting). "There ." 453B (relating installment obligations), partial liquidation." (Supp.1980). "(a) domestic ., if— pursuance adopted, redemption stock, month, "then subsections (e) (f). "(e) corporation— recognized, excess ratable profits accumulated February 28, 1913, determined (a)(2), diminution month; computation thereof date completed; short-term long-term gain, be, remainder consists securities acquired 31, 1953, exceeds profits." 334(c) "If— acquisition— "(A) realized, "(B) 333, cancelled redeemed him." Revenue, refer collectively Government." courts, implicit approval limitation infra. claim ends repaying. 1341, 1341; 6.3 proving run, remedy re-open Lexmont 185 (1953); 7.34 (J. Doheny rev. well-settled amending none result, settled. happen BLACKMUN desires. file run attribute 6501(a), reason. accept inequities 423, 426. problem; multiplies rules. recognizes apply. Post, 425. proposed scheme, fortuitously running limitations, settled acceptance covered discretion Commissioner. Koch Alexander, 561 1115 1977) Miskovsky 954 1969). Surely covering preferable alleviate disadvantages flaw lies practice proposes audit. Changes audit reflect items addressed problem—that merits been, late origins BLACKMUN. expounding barred 423-424, *. cited. holding amend 362, 151. reversed, stating, "That 1920 cannot, think, doubted." 363, (Emphasis (1953), right, novel context, follows: "A unfavorable taxpayers, counted disruptive orderly occurring violate spirit system." 284-285, 675 earliest 8, contradicts specified deducted, implying 830, 88th 100 (1964); 1631, 77th 79 (1942). supported obliged bow Congress. developed, theories "consented" "return" Philadelphia Rothensies, 923, 925 (E.D.Pa.1942), offset "latent" recaptured, Commerce 115 875, 876-877 1940); Lassen, Related Problems, Taxes 473, 476 Still third maintained entry. E.g., 1431 (1932). All views picture precludes reopening correction—far superior none—in accountants. W. Meigs, A. Mosich, C. Johnson T. Keller, Intermediate Accounting 109 (3d 1974). measurement underlies has. equivalence. discussed text, Application repayment, rates inclusion, amount, exactly deal due, Alice Phelan Sullivan 381 399, 180 659 (Ct.Cl.1967), exclude (1943). text together concerned. 267 Zysman, Derived Deductions, 29, (1941) (We "not pure statute.") falls standard 416-417, 26. historic acquisition. zero. worth. wrong, 417, 26, recovery—an enhancement wealth—for book 13, bright-line easily applied. accuses creating point distinguish 418. draw; rather, draw inconsistent. Apparently, accept. disagrees for, concurs denial premium having straddle questions 162(a)(3) suggest was, meant irrevocable. 415-416, 25. short benefitting beyond supra 20.4.1. dissent's scrutinize carefully ignores problems. certainty consume expected enter desire save allocation relatively small expenditures favors ibid. predict future, matter repaid, worthless 166(a)(1), conform perceptions, collects debt. Then, necessities risk question. Welch 290 113, 9, 212 (1933); 11, 20.3.2. 20.2.2 ("[F]ood shelter quintessential nondeductible expenses"). pp. 395-396, unreserved dictate range us. 81-830 20; Reply 12; Tr. Oral Arg. 33. implies proprietor Campbell Prothro, 209 335 1954). 2A Rabkin M. Johnson, Gift 6.01(3) (discussing Commisioner's assets). conclusion dies heirs last now, outcome situations; Those consideration legacies 1245(b)(1), (2), 1250(d)(1), 216 exempt dispositions transfers death 336; Estates, 5.21 (1981), prevails. discount explicit 408, singularly unpersuasive. word faced repudiate hastily mere regulation, "The remedial expedient, designed unjust derived which, entitled." 176 131, 178. "In idea reducing declare status which—ex nunc —makes unjustified." 473 (1942) author subject—the deductions—as example broader rule: "Sometimes lost reduces determined. finally event." 330; 144-145. fear vest collector ignore unfounded. Brooks, contract managed recoup lawsuit contributed performance contract. contention award losses. perfectly follow implicating mischaracterized event. Either problems Brooks. thought rematch expenses; somehow here. dealt established, involved references describe requirements suggest. noting suggests, "has presented." 422. applies; contested 461(f), 461(f) successfully 461(f). grant force; expenditure qualify 1.461-2(a)(1)(iv), 1.461-2(a)(1)(iv) independently deductible, contested, lacks condition yet $200 holdings 116(a)(1), (b), (b) $100. 116(a). testified repeatedly "voluntarily." 250 leads reject unsupported focused "tax." acted burden," 1109, (1944), "Paying enjoyment corporate] body enjoy way." 530, (Ct.Cl.1961). Nash, "a taxpayer," 415. misleading description contra-asset account: uncollectible accounts. diminished 140-141 1974), inseparable Therefore, notes value, credited account. Unlike debit decrease Bliss—and possibly occur. clearly, contemplating purchasing purchaser willing —the taxpayer—because them. happy undiminished separable, netting aware failed enact bill property. 10936, 94th (1975). 1245(a)(1); 1.1245-6(b) recapture. committees favorably bill, 94-1346, (1976); 94-1350, (1976), adjourned Senate. Office, Calendars Representatives History Legislation 174 (Final 1977). reports gains rates. 2; background, inference amendment. bonds owns clipping coupons party. Horst, 112, 144, Lucas Earl, 281 241, 731 (1930). compels result. 311, nonliquidating property, comment doctrine. 247. 12-month beginning adopts retained meet claims, exchange period. "(b)(1) (a), term "property" include— primarily customers obligations (without regard before, on, referred (a)) subparagraph (A) paragraph, "(C) (other (A)) exchanged Notwithstanding paragraph (1) subsection, accordance includes— exchanged, exchange. "(c)(1) exchange— collapsible (as defined 341(b)), Some correct measure lesser Feld, B.U.L.Rev. 443, 463-464 74-396, 1974-2 106. address 419 His perception ambiguities elsewhere inaccurate. illustrated automatically plus (or value). loss) regardless reduction ensures appreciation, Cf. H. Simons, Personal (1938) (defining accumulation rights year). legitimacy scrutinized aid hindsight completion inequities" "precise way" imaginable. reopened, observations " 'It system.' 380, quoting 285, 675, (1953). 12. Harv.L.Rev. 131 Accord, N. Collins 765, 769 nom Harwick 133 732 (CA8), 111(a) "Gross amount." Ibid. detailed c. 156(a) 852, amended, Aug. 16, 736, 68A 343, repealed, Pub.L. 94-455, XIX, 1901(a)(145)(A), 1976, 1788, mechanism war Consider passages 111. "General. excluded "recovery exclusion" items. prescribed losses, depreciation, depletion, amortization, amortizable bond premiums. "Definition 'recovery'. Recoveries items, paid, accrued." 1.111-1(a), 1.111-1(a) also: "If reimbursement recompute includes deducted." 1.165-1(d)(2)(iii), 1.165-1(d)(2)(iii) 875 Costigan, Civil Litigation, Proceedings Inst. 559, 567-570 (1954); Atlas, Free Recoveries: NYU Fed. 847 (1951); (1947); (1943); 475 (statute "all element, increment received"); 434, 436 (1942); From (1941); Ayers, Bad Debts—Deductions Recoveries, 549 (1940). Except 864 386-387, statement: "When No administrative difficulties involved, lack foregoing principles, estate reference quoted sentence, succeeding sentences intending lay groundwork Rather, attempting confirmed sentence speaks recovery," passage, (1932), sense. Barnett, emphasizing oil depletion ratified B.T.A., 867. bought Eight later, rescission purchase, fraud; suit approximately $30,000 sustained loss. purposes, analysis: revise closed limitation, expense, deficit 493, 242 mirror image seen realized. "on fixed periods, brought conclusion." unanimous unflinching: another. combined period, loss; supposed relieve affords postponing lifetime, indefinite ascertain loss." Sixteenth Amendment enable government raise essence ascertainable, government, Only practicable flow methods assessment, capable operation. scheme taxing While, conceivably, devised assessed, wholly ascertained preference practicable." 364-365, 151-152. extreme effort system—more forced disgorge disgorgement (presumably detriment" repayments loans usually deductible), wanted go back refused reopening, extolling virtues 675. 62-128, 1962-2; Vanderbilt 995 (1968); Heinz Schmidt (1964), rev'd, 355 1966). example: [tax benefit] rests notion frustrate purpose, insure entitled. Fulfillment arises receivable, termination existence owner receivables. restore (face realized) equals restoration militate restored needed, irrespective O.T. 1969, 678, 8-14. uncollectable, represent presently collectable (c) hands. fairly represented continuing "need" across hands, invalid. O.T.1969, penny distinguished reserves Arcadia Loan Ass'n 300 247 1962), Citizens 932, 305 (Ct.Cl.1961), West Seattle 288 1961), S. Rossin Sons, 113 652 (CA2 1940). 1974-3 10; 443 (1975), aff'd, 909. Contra, New Case Threatens Certain 200 Broenen, 332, 334(b)(2) 231 occasion, invoked analogy. Skelly Oil 394 688 1379, 1385 642 (1969). ". 334 quotation "actually year," believed allowed, authorizing step-up, this, analytically double 20-31. timing "Since estimated unabsorbed suffer uncollectibility receivable." 8-9. flaws exemplified discussion, 384-385, involving tenant straddles invites burn down manages premises) finds fundamental business." exercise hypothetical, wherein stops Having assumed inequity. methodology revealing. presumed validity citing 1980). debated Keller Dunn 468 991, 994 (S.D.N.Y.1979) (Weinfeld, J.). Van Raden 1083, (suggesting "period" costs "product" costs), 650 1046 creates blithely intention continuously second-guessing suggestion, criticized 378-380, prefer (taking factors ease pro-rated, likelihood nonbusiness uses, bright rule) abide traditionally principles. 381-383, narrow guidance. cancellations 184 "[do] 'recovery.' 382. disagree. concedes, ibid., legally enforceable discharge 61(a)(12). 108. damage English say assuming recovers cancelled. surprising. 1978) wrongly (Tennessee-Carolina ), criticism persuasive incorrectly (mere depreciable realty noteworthy cites assumption—critical rule—that disallowed. footnote, 402, 37, addressing figure appropriate. possibilities suggested: lesser-of-prior-deduction-and-current-fair-market-value, 440, 448 lesser-of-prior-deduction-and-shareholder's-basis, uniform tenor 'cancel out' unlikely possibility. conforms dictate. Rosen 611 942 (CA1 (taxpayer realizes recovery). inclined, supplies; consumption. sentiment statement, "[t]he Alternatively, expense" probably brief "income supplies," 37-38. satisfied: (not refundable deposit), avoidance, material distortion 79-229, 1979-2 210. 1.162-12, 1.162-12 Compare Clement 580 422 (Ct.Cl.1978), 907, 1214, 455 (1979); 991 J.) (supporting Commissioner) Frysinger 523 Raden, taxpayer). 1975, unable pass, legislation. particular, thereby eliminating consistently modifying construed. observe, override plain 397-402, 20, justifies invoking superseded recoveries. 958, 431, 1147, 199 (1972). hoped formal prerequisites (a decided), tail wags dog construes vice versa. 453 (Tannenwald, dissenting) ("Section sword sections Code"). 1913-1916 1920. Healy, 1945 1947 1948. probable complicating factor barrier. 284,

Classification Label: 11