Court Opinion

ID: 6892335
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:45:02.020078+00
Date Added: 2024-06-11T16:05:52.540895
License: Public Domain

L. HAND, Circuit Judge
(dissenting).
I agree that we must accept the finding of the Tax Court that the debt did not become worthless in 1941; but that court did not find whether it became worthless before or after December 31, 1938. The amendment to § 23 (k) (1) in 1942 was made retroactive to December 31, 1938 — •§ 23(k), § 124(d) — and that, I submit, meant that the deduction of debts becoming worthless before then was to be determined under the old law. If so, debts, although they had actually become worthless before December 31, 1938, were to be deducted in the year in which the creditor “ascertained” that they became worthless. We have ruled a number of times — last in Mayer Tank Manufacturing Co. v. Commissioner, 126 F.2d 588, 591 — that the year in which a debt is “ascertained” to be worthless is that in which the creditor in fact “ascertained” it to be so, and not that in which he ought to have done so, or in which a reasonable man would have done so. Other circuits have held the contrary — e. g. Reading Co. v. Commissioner, 3 Cir., 132 F.2d 306, 309— but I assume that we should follow our own precedents. The Tax Court made no finding whether the taxpayer first “ascertained the debt to be worthless in 1941, although I believe that there was adequate basis for a finding that it was in that year. For the foregoing reasons I regard findings necessary upon the following questions: (1.) Did the debt become worthless before December 31, 1938? (2.) Did the taxpayer in fact “ascertain” before 1941 that it had become worthless?
I submit that this interpretation is the only one consistent with the purpose of the amendment, if, as I understand to have been the case, it was intended to relieve creditors. As the law was, they were in a difficult position, because they had to prove, not only that the debt had become worthless, but that the year in which they claimed the deduction was the first in which they had “ascertained” that it had become so; and the last in particular was often extremely troublesome. It is true that the present law imposes upon them the risk of learning when the debt does become worthless, but in that it does no more than in the case of other losses. My brothers are now deciding that, if a creditor failed to claim deduction for a debt which actually became worthless before 1939, he may never deduct it, although he was under no duty to “ascertain” its worthlessness in that year, the statute having assured him that he need not claim it until he in fact did “ascertain” it. The amendment therefore increased, instead of lightened, the burden of such taxpayers, and in effect took away their privi- . lege altogether. True, creditors whose debts became worthless in 1939, 1940, 1941, were at their peril bound to claim the deduction for those years, and it might appear that they were as much shut out as those whose debts became worthless earlier; but this is untrue, for in 1942 such creditors still had time to claim a refund for those years (§ 169(a) (2) of the Act of 1942, 26 U.S.C.A. Int.Rev.Code, § 322(b) (2). To confine the retroactivity of the amendment to debts becoming worthless after 1938, is, therefore, I submit, not only consistent with the text, but with the demands of justice.
Finally, I think that the question is opens to us upon this appeal. I should suppose that a question of law emerges with enough distinctness from any questions of fact in *778which it is’ enmeshed, to require an answer; and that that question was also one of general applicability. Indeed, it would seem that our jurisdiction must extend so far, if we are to have any whatever.