Court Opinion

ID: 9650534
Source: CourtListenerOpinion
Date Created: 2023-08-23 15:42:30.144198+00
Date Added: 2024-06-11T18:12:23.111884
License: Public Domain

L. HAND, Circuit Judge
(dissenting).
When in 1932 the Supreme Court decided that the plaintiff and companies like it might be within § 246 of the Revenue Act of 1926 (United States v. Home Title Ins. Co., 285 U.S. 191, 52 S.Ct. 319, 76 L.Ed. 695; Bowers v. Lawyers’ Title Insurance Co., 285 U.S. 182, 52 S.Ct. 350, 76 L.Ed. 690) a part of their income necessarily escaped taxation; and, presumably on that account, the statute was changed that very year. It is not probable that such companies were in the mind of Congress, and I believe that it supposed that in “investment income” and “underwriting income”, it had included all the income (except perhaps capital gains) of insurance companies, “other than a life or mutual insurance company”. Hence it was unnecessary to limit the deductions allowed by § 247(a) (1) to expenses incurred in creating taxable income. All expenses were so incurred, just as they are in the case of an ordinary corporation. As soon as corporations like the plaintiff were classed as insurance companies, this plan went awry; for, not only did some of the income escape taxation, but § 247(a) (1) gave them a positive bonus. The deduction of an “expense” seems to me always to presuppose that it is part of the cost of producing taxable income, and that alone would, I think, have been enough to persuade me not to read the words of § 247 (a) (1) literally. However, I find confirmation in § 245, which defined the *188deductions allowed to life insurance companies. These companies were taxed only upon the same items which § 246 described collectively as “investment income”. Section 245(b) (5) limited the deductible expenses of life insurance companies to “investment expenses”, and § 245(b) did the same as the taxes and obsolescence; and Congress, at any rate in their case, meant to disallow the cost of producing exempt income. If it be asked, why, if that is true, it did not use the same language m § 247, I answer that the definition of gross income in § 246 had, as I have said, been , suppose exhausive. en we must read the words strictly, and I acknowledge that there is no vade mecum when to do so, and when not to;. a generally disclosed purpose is at times enough to change what would otherwise be their meaning, and here there appears to me to have been such a purpose.