Court Opinion

ID: 9644544
Source: CourtListenerOpinion
Date Created: 2023-08-22 20:59:06.037097+00
Date Added: 2024-06-11T18:11:14.586511
License: Public Domain

HEALY, Circuit Judge
(concurring).
I concur in the affirmance of the Board’s order. However, in respect of the first point discussed in the main opinion, my concurrence is based upon reasons other than those advanced in support of the opinion.
The transferor banks had effected no reduction in taxes by the deduction from gross income in 1933 of the charged-off debts on which the transferee (taxpayer) made recoveries in 1934. More plainly, the net losses of the transferor banks in 1933 were greater than the bad debt deductions claimed. The main opinion ignores this important circumstance. Whether or not, in such situation, the debts had a cost basis in the hands of the transferors, prior to the transfer, is a highly debatable question which we need not decide.
The Board determined, and I think correctly, that whatever value the non-ledger (charged-off) assets had was lost to the transferors at the time of the transfers, hence the basis of such assets to them at that time -was zero. This for the reason that the transferors received from the transferee merely an assumption of their liabilities in the equivalent of their ledger or good assets. The latter were found from the evidence to be worth the amounts at which they were carried on the books of the transferors. There was no evidence that the transferee paid anything or parted with any consideration for the charged-off debts. Accordingly, upon the transfer without consideration, the transferors sustained a recognized loss of the full face value of such assets.
Applying to this situation § 113(a) (7), quoted in the main opinion, it necessarily follows that the basis of the charged-off debts to the transferee would be the same as in the hands of the transferors upon the transfer, that is, zero; and any collections made by the transferee on such accounts would constitute income. The result is reasonable, since it did not appear that the transferee had any investment in these debts.