Court Opinion

ID: 4493356
Source: CourtListenerOpinion
Date Created: 2020-01-17 22:03:54.694842+00
Date Added: 2024-06-11T15:03:59.831851
License: Public Domain

Goodeioh,
dissenting: I disagree with the majority opinion. Here, respondent has treated petitioner’s return as one for a fiscal year and has computed the tax upon that basis, applying the rates in effect during the 12 months preceding the closing date of the fiscal year. True, of those 12 months, one falls back in 1928, when the rate was higher than it was in 1929 and when petitioner was not in existence, but that is not saying, as the majority opinion infers it is, that income earned in 1929 is income earned in 1928. That is only taxing the income earned by petitioner during its fiscal year at the rates prevailing during the whole of that year, which, in my opinion, is correct.
The fundamental inquiry is whether the period between the date petitioner was organized and the close of its fiscal' year is a “ taxable year ” within the meaning of that term as used in the statute, so that the tax must be computed on the basis of a full year of 12 months, or whether that period may be covered by a return for a fractional part of a year and the tax computed upon that basis.
Any doubt concerning the meaning of the term “taxable year” was removed by the enactment of section 200 (a) of the Revenue Act of 1924, which defined it as follows:
* * * xhe term “taxable year” includes, in tlie case oí a return made for a fractional part of a year under the provisions of this title or under regulations prescribed by the Commissioner ⅜ * ⅜ the period for which the return is made. * * *
*330See Weissberger Moving & Storage Co., 26 B.T.A. 1375, and cases there cited.
The same definition of the term “ taxable year ” is found in the 1928 Act (sec. 48 (a)) and the general rule established by the statute (sec. 41 et seg., Revenue Act of 1928) is that the net income shall be computed and taxed upon -the basis of the taxpayer’s annual accounting period. Petitioner relies upon paragraph (b) of section 47, which deals with returns for a period of less than 12 months. But it does not expressly provide that the period of less than 12 months from the organization of a taxpayer to the end of its accounting period shall be covered by a separate return and the tax computed on the basis of that period. It provides that such separate returns shall be made, and the tax computed in that manner, only where there is a change in the accounting period, or where such a return is required or permitted by the Commissioner’s regulations. What regulation has the Commissioner promulgated which requires or permits the filing of a return for a period of less than 12 months, and the computation of the tax upon that basis, in the situation here obtaining ? Petitioner fails to bring such a regulation to our attention, nor do we find any. On the contrary, respondent’s regulation covering this matter of returns for periods of less than 12 months clearly indicates that the income shall be computed upon an annual basis except where the return is occasioned by a change in the accounting period. This view finds support in respondent’s ruling of long standing, interpretative of his regulation, to the effect that a corporate return from date of incorporation to the end of the first accounting period, though covering a period of less than 12 months, is a return for the period of a full year, not for a fractional part of a year, and the statutory exemption is not to be correspondingly decreased. See G.C.M. 2292, VI-2 C.B. 78. Cf. Bankers Trust Co. v. Bowers, 295 Fed. 89. See also Carrol Chain Co., 1 B.T.A. 38 (8 Fed. (2d) 529). This ruling has been followed in G.C.M. 8156, IX-2 C.B. 124, promulgated to govern a situation arising upon facts almost identical with those in the case at bar; it is neither erroneous nor unreasonable and is here controlling. Respondent’s determination should be sustained.
Steenhagen and Leech agree with this dissent.