Court Opinion

ID: 9641668
Source: CourtListenerOpinion
Date Created: 2023-08-22 17:37:36.795558+00
Date Added: 2024-06-11T18:10:39.045900
License: Public Domain

On Petition for Rehearing.
Counsel press upon us the fact that Tr. Dec. 3435, afterward Reg. 69, Art. 31, was not promulgated until 1923, and could not affect compensation received in 1918. The effective date of the regulation did not escape our notice; that it should be stressed in this petition indicates a misconception of our opinion. Even though we be in error, counsel are entitled to a clear statement of our views.
In 1918, when the stock was received as compensation, it should have been returned as income. Tr.Reg. 45, Art. 33. It was not. The statute has run for that year, and neither the Commissioner, the Board, nor the courts may ignore the limitation statute.
In 1926, the stock was sold. What was the gain to be returned as income in 1926? Section 204 (a), Revenue Act 1926, 44 Stat. 14, provides that it is the difference between the sale price and cost. What did it cost? The record does not show. It simply shows that it was received as compensation for services. What the services were, or their value, is not disclosed; and if it were, it would seem to make no difference.
The taxpayers seek to substitute the “fair value” of the stock in 1918 for the criterion of “cost” supplied by the statute; the record discloses the 1918 value of the stock and not its cost. We find no warrant for that substitution in Reg. 69, Art. 31, because the taxpayers, not having brought themselves within its terms, cannot rely upon it. If it has no application to the case because not in force in 1918, as now urged, it is another reason why it affords no support for substituting “value” for “cost.”
Nor can we find any other warrant for such substitution. On the contrary, Larkin v. United States (C.C.A.8) 78 F.(2d) 951, on facts not distinguishable, holds that a taxpayer who has failed to return for taxes stock received for services, may not, when the stock is sold, avail himself of the privilege accorded by the regulation to those who have made a proper return. We are in accord with that opinion, and do not find that it has been reversed or discredited by the Supreme Court.
The petition for rehearing is denied.