Court Opinion

ID: 9459017
Source: CourtListenerOpinion
Date Created: 2023-08-04 21:08:01.013571+00
Date Added: 2024-06-11T17:35:58.929354
License: Public Domain

BRIGHT, Circuit Judge
(dissenting).
The decision of the majority creates a tax windfall for a life insurance company by declaring invalid a Treasury Regulation which simply reiterates the statutory language. Code section 382(b) speaks in terms of “stockholders” of the “loss corporation” who, immediately after reorganization, own stock of the acquiring corporation as a prerequisite for the successor or acquiring corporation utilizing a net operating loss carryover of the acquired “loss corporation.” If the “stockholders” of the loss corporation immediately before the reorganization own more than 20 percent of the stock of the acquiring corporation immediately after the reorganization, the acquiring corporation is entitled to utilize 100 percent of the net operating loss carryover from the “loss corporation.” § 382(b)(2)(A).
It seems to me that the statutory language is quite plain. The term “stockholders” does not mean “corporation.”
In this case the record shows two distinct transactions through which taxpayer seeks to utilize the loss deduction:
1) On May 15, 1965, taxpayer’s predecessor, Stockman National Life Insurance Company, acquired the assets of Denver National Life Insurance Company (Denver) in exchange for stock. Denver, as a holding company, retained this stock.
2) In 1967, Denver transferred these shares to another insurance company in exchange for its stock and the newly-acquired stock was then distributed to Denver’s shareholders in a liquidation of Denver.
These transactions do not fall within the language of the statute since Denver, the “loss corporation,” not its stockholders, owned more than 20 percent of the stock of the acquiring corporation at the crucial time specified by § 382(b), i. e., “immediately after the reorganization” carried out on May 15,1965.
The regulation adds nothing to the express statutory language in explaining that:
[T]he stockholders (immediately before the reorganization) of a transfer- or-loss corporation shall not be regarded as owning, immediately after the reorganization, any stock of the acquiring corporation which is not distributed to such stockholders pursuant to the plan of reorganization. [Treas.Reg. § 1.382(b)-l(a)(2).]
The prerogative of enacting tax law belongs to Congress. The prerogative of interpreting and supplementing the tax statutes rests with the Commissioner of Internal Revenue. His reasonable regulations which are consistent with the statutory language must be sustained. Bingler v. Johnson, 394 U.S. 741, 89 S.Ct. 1439, 22 L.Ed.2d 695 (1969); United States v. Correll, 389 U.S. 299, 88 S.Ct. 445, 19 L.Ed.2d 537 (1967); Commissioner v. South Texas Lumber Co., 333 U.S. 496, 68 S.Ct. 695, 92 L.Ed. 831 (1948); Exel Corporation v. United States, 451 F.2d 80 (8th Cir. 1971).
I see no reason to overturn a regulation for equitable considerations, as suggested by the majority, nor because the government failed to show Stockman National Life Insurance Company guilty of “bad faith” in the reorganization, as suggested by the opinion of the district court unofficially reported at 71-2 USTC, ||9748.