Court Opinion

ID: 4500439
Source: CourtListenerOpinion
Date Created: 2020-01-23 18:16:55.905583+00
Date Added: 2024-06-11T14:54:17.935624
License: Public Domain

Phillips,
dissenting: Because I believe that the petitioner falls squarely within the words of the statute permitting the deduction of the net loss claimed, I find myself unable to agree with that portion of the prevailing opinion which disallows such net loss as a deduction.
It is stipulated that for 1919 the petitioner sustained a net loss of $15,816.19. Section 204 of. the Revenue Act of 1918 provides, so far as material:
If for any taxable year beginning after October 31, 1918, and ending prior to January 1, 1920, it appears upon the production of evidence satisfactory to the Commissioner that mvy taxpayer has sustained a net loss, the amount of such net loss shall under regulations prescribed by the Commissioner with the approval of the Secretary be deducted from the net income of the taxpayer for the preceding taxable year; * * *. (Italics ours.)
The term taxpayer is defined in section 1 of the statute as including “any person, trust or estate subject to a tax imposed by this Act.” By a further definition the term “person” includes corporations. This petitioner appears to meet the definition of a “ taxpayer ” and to fall squarely within the provisions of section 204 unless there is some other section which excludes it. The Commissioner contends that because during a part of 1919 this petitioner was affiliated with the Ritter Company and filed a consolidated return for a part of the year, a new taxpayer was created of the affiliated group, that so much of the net loss as occurred during the period of affiliation can not be claimed by this petitioner, and since there is nothing from *623which we may determine when the loss was sustained, it may not be allowed. The pertinent provisions of the statute with reference to affiliated groups are:
Sec. 210. (a) That corporations which are affiliated within the meaning of this section shall, under regulations to be prescribed by the Commissioner with the approval of the Secretary, make a consolidated return of net income and invested capital for the purposes of this title and Title III, and the taxes thereunder shall be computed and determined upon the basis of such return: Provided,, * * *
In any case in which a tax is assessed upon the basis of a consolidated return, the total tax shall be computed in the first instance as a unit and shall then be assessed upon the respective affiliated corporations in such proportions as may be agreed upon among them, or, in the absence of such agreement, then on the basis of the net income properly assignable to each. * * *
While the statute provides for a consolidated return of the income of two or more taxpayers and creates a new group for the purposes of computing the income, it still leaves the tax liability with the separate corporations forming the group. Although for a part of 1919, petitioner was a part of such an affiliated group, it was still “ a person subject to a tax imposed by this Act ” and as such is entitled to the deduction which is given in express terms to all taxpayers.
I appreciate that there may result a deduction of the same loss by the petitioner in 1918 and by the affiliated group in 1919 and that such a result should only be reached if expressly authorized by the statute. In this case it appears that the terms of the statute are clear, that this taxpayer falls squarely within them, and that the deduction of the net loss suffered by it in 1919 should be allowed in 1918. It may well be that Congress did not have this situation in mind and would have provided otherwise had the matter been expressly called to its attention. It is not our province, however, to deny by statutory construction a deduction given to a taxpayer by the express terms of the taxing statute.