Court Opinion

ID: 9469650
Source: CourtListenerOpinion
Date Created: 2023-08-05 02:45:50.017756+00
Date Added: 2024-06-11T17:41:29.602148
License: Public Domain

GEE, Circuit Judge,
dissenting:
The law applicable to. this sale by a charity of a capital asset provides, in pertinent part, that a tax is due upon the gain from such a sale of “property used for the production of interest, dividends, rents, and royalties....” 26 U.S.C. § 4940(c)(4)(A). Since it is undisputed that this charity did not use the property concerned for any such production, the late Judge Gordon held that no tax was due. Zemurray Foundation v. United States, 509 F.Supp. 976 (E.D.La.1981). We hold that because the property may have been usable for such purposes its sale may be taxable and remand for such a determination. With deference, and for the reasons stated in his opinion, it seems to me that Judge Gordon has the better of the argument.1
There is nothing ambiguous about the word “used,” and it simply does not mean “usable.”2 Had Congress meant the latter, it could easily have said so. Though it did not, Treasury decrees that this is what it meant, and we agree. I see no more justification for this than for a decision by us that had Congress instead said “usable,” it really meant “used.” Why is one amendment preferable to the other?
More than most others, tax laws are literally received and applied. A reason for this is that tax impositions and exemptions are matters of legislative grace and of compromises — compromises typically ending hard *104fights between advocates of opposing forces and policies. To a considerable extent they simply represent where the contending forces exhausted themselves and the legislative struggle came to an end. To reopen the contest in the judicial branch, in the name of an internal consistency that seems satisfying to us, and declare a different outcome seems to me an action beyond the warrant of our office and especially inappropriate in the tax field. I respectfully dissent.

. The regulation upon which the majority travels also adds to the law’s listing of assets used to produce “interest, dividends, rents and royalties” a fifth category: “property of a type which generally produces ... capital gains through appreciation.” Treas.Reg. § 53.4940-1(f)(1). Judge Gordon specifically found that the property in question was of the type added by this fifth category but held this an invalid expansion of the law’s reach. The majority holds that he erred in so ruling (MS p. 9) but declines to uphold the imposition of tax on that basis. I confess that I do not understand this action.
If Judge Gordon erred and the added category is valid, it seems to me that the majority should reverse and uphold the imposition of the tax, obviating the need for a remand. Judge Gordon’s factual finding that this timberland is included in the fifth category is reviewable by us under the “clearly erroneous” standard of Fed.R.Civ.P. 52. As the Supreme Court recently held, “clearly erroneous” means precisely that, see Pullman-Standard v. Swint, - U.S. -, 102 S.Ct. 1781, 72 L.Ed.2d 66 (1982), and the majority fails to demonstrate that the trial court’s finding meets this standard. I do not think the category valid, however, since it adds to the list a type of property that the law plainly omits. As an example, assume the charity was given a jade figurine or an ornate silver chalice. These do not generally produce “interest, dividends, rents [or] royalties.” Thus the law as enacted by Congress would not tax their sale. They do, however, appreciate — and so the regulation would cover and tax their disposition. For similar reasons to those that I state in text below, I think such an inclusion of new and entirely different categories of property — an inclusion that converts a limited list of types of assets to an all-inclusive one that could more simply be phrased as “all capital assets” — is not regulation but rather legislation.

. A possible construction might be that if the asset has ever been so “used” by the charity’s benefactor (or any predecessor), the imposition of a tax was intended. I am unable to conceive of any policy affecting the charity that could underlie such an approach, however, or any rhyme or reason informing it. I therefore hesitate to impute it to Congress.