Court Opinion

ID: 6921797
Source: CourtListenerOpinion
Date Created: 2022-07-23 23:04:30.23593+00
Date Added: 2024-06-11T16:06:49.242924
License: Public Domain

JOHN R. BROWN, Circuit Judge
(dissenting) .
I do not understand how the entity concept, firmly and long since adopted by this Court,12 can coexist with the hybrid contention that while the interest sold is an indivisible part of the whole entity, this does not include as a part of that entity that which, absent a sale of all, would have been taxable as ordinary income.
I recognize, of course, that courts continue to see a distinction but what they are in fact applying is but a sugar-coated version of the now-rejected aggregate theory that the microscope must be put on each and every asset, right or claim being effectually transferred in order to determine what would have been payable had the entire sale not been made.13
*868While I suppose we ought to know better than anyone else what we wrote and, more important, what we meant in Le Sage v. Commissioner, 5 Cir., 1949, 173 F.2d 826, the system of written court opinions gives us no more right, no more prescience, than the most remote competent reader, Judge or lawyer. Aetna Life Insurance Company v. Texas Gulf Sulphur Company, 5 Cir., 1956, 235 F.2d 791. As a circumstance which I regard ■of great significance the 8th Circuit has by express citation and reference14 to our Smith and Long cases (note 1, supra) aligned us with the 6th, 7th and 8th Circuits in treating the sale as a capital gain. What the left hand in Smith and Long twice gave in March 1949, surely the right hand did not intend to take away ostensibly a month later in Le Sage.
But the Court does not finally put it on Le Sage. Nor would I. The transaction is a sale of an entire interest. It is the sale which is the decisive factor. What is sold is not merely the right to receive income theretofore earned and thereafter to be realized from past operations. It comprehends everything. The everything happens to include as an indivisible part what has been, or will shortly be, earned from prior operations. The sale of all is the thing. Devoted as we are to the proposition that the sauce is for goose or gander alike with a strict neutrality whether it helps or hinders government or taxpayer, Weinert v. Commissioner, 5 Cir., 1961, 294 F.2d 750 this determines the tax consequence of that transaction. It is not determined by what might have been but never was. General Gas Corporation v. Commissioner, 5 Cir., 1961, 293 F.2d 35.
I therefore
Dissent.

. See note 1, supra.

. Chopping up the “entity” cannot be justified on the basis that for the item to be a genuine capital asset subject to capital gains it must have been derived from partnership earnings on which the partners returned and paid an income tax. For example partnership ABO in the early part of the tax year earns $30,-000 and invests it all immediately in a building. Partner B has fortuitous non-partnership deductions, etc., .so no tax is *868due by him for that year. In the event of an outright sale of his partnership interest is his “portion” of the building ordinary income while the interests of partners A and O are capital assets, or vice versa?

. See note 10, supra.