Court Opinion

ID: 4477992
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:12:50.064705+00
Date Added: 2024-06-11T12:47:40.377258
License: Public Domain

Disney, /., dissenting: I must dissent from the view adopted by the majority. Section 115 (c) of the revenue code appears to me to contain such ambiguity on this question as to require us to look to the committee reports for light; and when we do examine those reports we find what appears to me to be clear indication of congressional intent to set a definite three-year period for liquidation, contrary to the conclusion reached in the majority opinion. The statutory language is “a bona fide plan of liquidation and under which the transfer of the property under the liquidation is to be completed within a time specified in the plan, not exceeding * * * three years * * *.” The legislation was initiated in the Revenue Act of 1936. The report of the Committee on Ways and Means says: Section 115 (c) has been revised so as to permit the shareholders (other than corporations) of a corporation which is completely liquidated within a 2-year period, to be taxed on the resulting gain under the provisions of section 117 (a). [Italics supplied.] No mention of this subject is found further in the committee reports covering the Revenue Act of 1936. In 1938 section 115 was amended to provide a three-year period instead of one of two years; and in that connection the report of the Senate Finance Committee uses the following language: The reported bill endeavors to encourage the liquidation of both domestic and foreign personal holding companies by expanding the time within which complete liquidation must occur to have any resulting gain to shareholders subject only to the capital-gains rate. * * * The committee believes that any corporation should be allowed three years in which to consummate a complete liquidation. * * * Your committee proposes to give all corporations three years in which to consummate a complete liquidation instead of the two years provided for under existing law. Thus, a shareholder may be able to report his profits from liquidation in four taxable periods, if the corporation begins liquidation during one of his taxable years. * * * In respect of foreign personal holding companies, existing law provides that these companies must be liquidated before January 1, 1938, in order that their shareholders may receive the benefits of the capital-gains provisions, unless an extension was granted by the Commissioner. * * * The committee proposes, therefore, in the case of these companies, to allow their liquidation on or before June 30, 1939, under the capital-gains provisions of the bill. [Emphasis supplied.] It is noted that the committee believes that three years should be allowed “to consummate a complete” liquidation. It would appear that consummation and completion so used in connection with “three years” connote a definite limitation upon such completion; also that the word “must” is twice used; first, referring to the time for liquidation in general, and, second, with reference to the former law as to foreign personal holding companies, and that as to such companies a definite date, June 30, 1939, is set on or before which Congress proposes to “allow their liquidation.” On the floor of the Senate, Senator Harrison on this subject said in part: “And we have given th$m 3 years in which to liquidate. That applies to subsidiaries also.’’ He offered for the record (Congressional Record, p. 4962) the following: This amendment to section 115 (c) Is a clarifying amendment to make certain that the change made in the House bill by the bill as reported, which lengthened by 1 year, as compared with the similar provision of the 1936 act, the period within which a corporate liquidation must be completed in order to qualify as a complete liquidation, will apply only to liquidations begun in a taxable year governed by the bill. [Italics supplied.] Finally, the conference committee had this to say: Amendment No. 51: In the case of corporations other than foreign personal holding companies, this amendment extends the time within which complete liquidation must occur, so as to come within section 115 (c). * * * [Italics supplied.] In my opinion all of the above clearly indicates that Congress intended a definite three-year limitation, except in the particular case of a foreign personal holding company, as to which a definite date for completion was set, except that, upon a showing of impossibility of completion “due to the laws of the foreign country * * * or for other reason,” extension might be secured, but even in that case not beyond six months, from July 1, 1938, to December 31, 1938. Committee reports could hardly be plainer in their indication of congressional intent; and, unless the statute is so clearly unambiguous as to preclude resort to such reports, the provision here involved provides, as to domestic corporations, for a definite three-year period. “Whether the language of a statute is so plain that there is no room for construction must be determined with reference to the connections, the subject dealt with, and the objects in view.” 59 C. J. 955. By such light, unambiguity can not be seen so clearly as to cause us to decline to consider the unambiguous language of the committee reports. Bona -fides of plan is not the only criterion, for the statute, after providing for such bona fides, continues with “and,” to provide for transfer thereunder which “is to be completed” within three years. Does this mean merely that the plan should specify a time limit, not mandatory if there was good faith, or did Congress itself require transfer which “is to be completed” within the time limit stated ? Surely on this point doubt is left. A California statute provided that a witness false in one part of his testimony “is to be distrusted in others,” and it was held that “a thing that is to be must be,” so that the expression was found mandatory. White v. Disher, 7 Pac. 826; Belm v. Patrick, 293 Pac. 849. Such a case is of course not controlling here, but it seems to emphasize that there is a real question as to the legislative intent in the instant matter. “* * * the fundamental rule of construction, to which all other rules are subordinate, is that the court shall, by all aids available* ascertain and give effect * * * to the intention or purpose of the legislature as expressed in the statute.” 59 C. J. 948, citing Texas Employers’ Ins. Assn. v. Tyler, 283 S. W. 929, and Ebert v. Poston, 266 S. E. 549. We should in my opinion here consult legislative history; if we do so, a three-year period, definite, is found to be the intent of Congress. Harron, J., agrees with this dissent.