Court Opinion

ID: 9640298
Source: CourtListenerOpinion
Date Created: 2023-08-22 17:02:34.936992+00
Date Added: 2024-06-11T18:10:28.966397
License: Public Domain

HANEY, Circuit Judge,
dissenting.
I dissent. The taxpayer made his return on the cash basis. The amount claimed as a deduction was paid in 1929 by the taxpayer from proceeds of his note to a bank made in 1929, but which note was not paid in 1929. Under such circumstances, the taxpayer sustains a loss only when he pays the note. Eckert v. Burnet, 283 U.S. 140, 51 S.Ct. 373, 75 L.Ed. 911; Hart v. Commissioner (C.C.A.1) 54 F.(2d) 848, 852. The taxpayer in the taxable year parted with nothing but a promise to pay; he merely substituted creditors. Crain v. Commissioner (C.C.A.8) 75 F.(2d) 962, is contrary, but I am unwilling to follow it.
Assuming the soundness of the majority’s holding with respect to the theory of a primary liability imposed by the law of California, in favor of the bank, and against the petitioner, it is difficult to see how the bank can be a third party or stranger to the transaction as argued by petitioner as being the factor distinguishing this from Eckert v. Burnet, supra.