Court Opinion

ID: 4481071
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:14:41.118102+00
Date Added: 2024-06-11T15:03:36.339624
License: Public Domain

TaNNENWald, J., concurring: I am impelled to state my separate views in this case and Producers Chemical Co., also decided this day, not because I have any basic disagreement with the majority decision but because I think it important to underscore what we have decided and what we have not decided. The complexities of the problems involved are such that there should be no misconceptions in this regard. As I understand it, we have disapproved of respondent’s loss capitalization based upon expectation of profit rule and petitioner’s claim that all expenses should under all circumstances be deducted by the operator. We also have indicated that some of those expenses should be capitalized. But we have expressly left open what method of determining the capitalized amount should be adopted — i.e., should it be framed in terms of a portion of total expenses, the entire amount of the net loss sustained by the operator, a portion thereof, or otherwise ? Similarly, we left open the question of the deductibility by the holder of the production payment of all or any portion of the expenses incurred by the operator during the period of the production payment and required to be capitalized by him. We did this in order to permit respondent to consider alternatives in light of the totality of the complexities involved and to afford respondent and taxpayers the further opportunity to litigate the validity of whatever alternative respondent may decide upon. Our conclusion that some capitalization of expenses was in order still left us with the problem of deciding the amount which should properly be capitalized. Since the record did not reveal any other basis for determining such amount which would be more favorable to the petitioner, we adopted respondent’s calculations as a mathematical tool for arriving at the amount of tax due, subject to modification to reflect our views on other elements involved. In so doing, we recognized the fact that respondent was not entitled to any increase in the amount set forth in the deficiency notice since he neither pleaded nor otherwise asserted at trial any claim therefor. In short, we have navigated only as far as was necessary to decide these particular cases and have carefully refrained from entering unchartered waters. Rauk, DawsoN, and IrwiN, //., agree with this concurring opinion.