Court Opinion

ID: 9464716
Source: CourtListenerOpinion
Date Created: 2023-08-04 23:40:36.328362+00
Date Added: 2024-06-11T17:38:46.570080
License: Public Domain

ALBERT V. BRYAN, Senior Circuit Judge,
dissenting:
Accepting the facts of this case as they are quite faithfully laid out in the majority opinion, I would reverse the Tax Court’s holding that the appellant-taxpayer’s 1971 loss of $18,830.31, conceded by the Commissioner, was not deductible because it was “compensated for by insurance”, citing Internal Revenue Code, 1954, Section 165(a).*
The issue on the present appeal is accurately put by the Commissioner:
“Whether the Tax Court correctly determined that the taxpayer was not entitled to a deduction for a loss resulting from his investment in a partnership because his loss was compensated for by the proceeds from a ‘key man’ life insurance policy upon the life of his partner.”
For insurance to constitute compensation offsetting an otherwise tax deductible loss under Section 165(a), the Tax Court has heretofore squarely and unconditionally held that the loss must be due to the risk insured against, Robert O. Deming, Jr., 9 T.C. 383, 387 (1947). [Accent added.] The Tax Court does not now deny this earlier enunciation but simply fails to apply it.
This departure occurs in attributing the admitted loss to the partner’s death, the risk insured. To my mind the evidence does not support a finding that his decease was, within the intent of Section 165(a), the cause of the appellant-taxpayer’s loss. The loss occurred after the death of the partner, that is to say, it had not either accrued or arisen in his lifetime. The loss originated when the taxpayer and the widow made settlement of their respective interests in the partnership’s remaining capital assets. This permitted the taxpayer to assert his claimed depreciation loss. Thus the loss was not identifiable with participation of Chappell, the insured partner, in the business. Always to be remembered is that the risk insured against was the life of Chap-pell, not the success of the business. Therefore, incidents in the latter, created post mortem, were not touched by the insurance.
Upon these considerations I would reverse the Tax Court.

 Section 165(a) states, in pertinent part, that:
“General Rule. — There shall be allowed as a deduction any loss sustained during the taxable year and not compensated for by insurance or otherwise . . In this dissent I am assuming arguendo that the term “insurance” as used in the statute includes life insurance.