Court Opinion

ID: 4495637
Source: CourtListenerOpinion
Date Created: 2020-01-23 18:14:26.167471+00
Date Added: 2024-06-11T14:54:13.009197
License: Public Domain

SteeNhageN,
dissenting: The opinion holds that $745 expended by the corporation in 1926 for amendment of its articles of incorporation is an allowable deduction in 1930. Without discussion, the decision is merely predicated upon the prior decision in the Malta case, a Division decision not reviewed by the Board. This is the first instance where the Board has reviewed the question whether an organization outlay, or something said to be analogous thereto, is within the statutory provision for the deduction of losses sustained during the taxable year and not compensated for by insurance or otherwise, Revenue Act of 1924, section 234 (a) (4); Revenue Act of 1928, section 23 (f).
I am unable to find that a loss has been sustained. It has been held, beyond the reach of further inquiry, that at the time of the outlay there is no deduction either by way of current business expense or by way of loss, and it has also been held that such an outlay is not such a capital investment as to become the basis for annual exhaustion. *46These two denials can form no basis for granting the allowance at some other time or under other circumstances, unless such deduction is provided for by the statute. The deduction is not to be granted merely because the taxpayer is compelled by an accounting convention to charge off the item and thus clear it from its books, nor is the deduction to be granted merely because the tax return of the taxpayer has never been permitted by the statute to reflect the outlay. It has been held often enough that deductions depend upon the statute.
Aside from the accounting, I can see no substance in the idea that a corporation suffers a loss of the cost of its corporate existence when it dissolves. Its organization costs are incurred because it desires to exist. It gets what it desires for as long as it wishes and then voluntarily quits. Thereby it loses nothing. To the contrary, it has enjoyed everything which the expenditure contemplated. Just as it has been said that the corporation acquired nothing exhaustible by the expenditure, so it must be said that it loses nothing at the end.
It is a far greater strain of reasoning to call the amount a loss at the time of dissolution, which perchance may be many years after the expenditure has been actually written off and forgotten, than .it would have been to call it either an expense or an exhaustible investment at the beginning of the corporation’s life. It is merely another instance of a nondescript accounting item the substance of which is not within the enumerated statutory factors of net income.
McMahoN agrees with this dissent.