Court Opinion

ID: 4472072
Source: CourtListenerOpinion
Date Created: 2020-01-13 23:16:17.223719+00
Date Added: 2024-06-11T14:53:49.021701
License: Public Domain

OppeR, J., dissenting: The sole controversy under the first issue is the right of petitioners to apply the last in, first out method to a retail business whose inventories are kept in terms of dollars. This issue I had supposed was settled by Hutzler Brothers Co., 8. T. C. 14. That this is the sole controversy appears from the pleadings, from the opening statements of both counsel, and from the briefs. Respondent’s counsel summed it up when he said at the commencement of the hearing: * * * I think, your Honor, that the ultimate determination of this question will turn on the interpretation of Section 22 (d) and the regulations issued thereunder. While petitioners asserted their right to the use of the lifo method— a right denied by respondent — they nowhere took the position that the details of the method used by them, or the scope of their proof, were at all exclusive. One of the respects in which respondent’s determination is said in the petition to be erroneous is that: The Petitioner having elected in good faith to adopt the “Last-in, First-out” method of inventory, and the Commissioner having refused the particular procedure and plan used by the Petitioner, the Commissioner erred in not redetermining the inventory of the Petitioner on a “Last-in, First-out” method deemed correct by him. This proposition was never abandoned by petitioners, and in his opening statement petitioners’ counsel reiterated: The petitioners contest each of the determinations of deficiency thus made. * * * They further contend * * * that an opportunity should have been afforded them to meet any objections made to their method and that a deficiency could not properly be determined against them unless they refused to meet the objections, or unless after meeting the same, there existed a deficiency. In that posture of the case they produced the factual proof and established the figures contained in their application for use of the method and in their petitions. So far as appears, all of the material available was properly shown. Nowhere at the trial or in his brief-does respondent complain that petitioners’ proof was inadequate. Nowhere does he draw a distinction between the sufficiency of petitioners’ method as applied in the warehouses and in the retail stores. Even under ordinary circumstances, a situation of this sort would seem to me to require at the minimum that petitioners be given a further opportunity to supply a deficiency in proof of which the reading of the majority opinion will for the first time advise them. But this is not an ordinary case. Subsequent to this hearing, several things have happened. In Hutzler Brothers Co., supra, decided after the hearing in this case, we said (p. 32) : The adoption of appropriate details to accomplish the general purpose of applying the Lifo method to retail merchants could well be the subject of an administrative regulation. It might then be that any reasonable and practical method directed by the Commissioner would be mandatory to the exclusion of others not thought by him to be adequate or authoritative. This suggestion seems to me in effect to be merely an alternative phrasing of the position of petitioners in this proceeding presented by their allegation of error and opening statement already quoted. No such regulation had, of course, been issued when this proceeding was heard, nor, indeed, at the time of the Hutzler Brothers Co. opinion. But respondent has now announced his intention of issuing such a regulation, retroactive to include the very period which is here before us. Federal Register, Dec. 24.1947. Had such a regulation been in effect when this proceeding was instituted, petitioners could not have assigned as error the Commissioner’s failure to supply petitioners with a method of computing a lifo inventory. The subsequent decision in the Hutzler Brothers Co. case and the proposed regulation seem to me to have the effect of an acknowledgment on the part of respondent that to that extent the assertion of error in the petition is well founded. The only reasonable upshot would be to give the parties an .opportunity to make this record consistent with these now accomplished facts; to give respondent an opportunity to recompute the deficiency, if any, in accordance with his own proposed regulation; and thereupon to give petitioners an opportunity to take an informed position with respect to the figures that would then appear. But, at the very least, the decision should not go against petitioners now, and particularly not for a failure of proof. The effect of the present disposition seems to me either to misapply the doctrine of the Cohan case because there was here no “inexactitude” of the taxpayers’ “own making”; of, on the other hand, to require the abandonment of petitioners’ present inventory method — a system which has been for many years sufficiently precise for the purposes of petitioners’ business and sufficiently reflective of true income to be acceptable to respondent. To this length we were unprepared to go in Hutzler Brothers Co., supra. It may indeed be said that petitioners and respondent can not yet arrive at the figures contemplated by the new regulation, which remains in tentative form through deference to the provisions of the Administrative Procedure Act, section 4. But that merely convinces me of the exquisite inappropriateness of attempting to dispose of this proceeding at this particular pinpoint of time. Murdock, J., agrees with this dissent.