Court Opinion

ID: 9477935
Source: CourtListenerOpinion
Date Created: 2023-08-05 06:35:14.974421+00
Date Added: 2024-06-11T17:46:08.055290
License: Public Domain

WELLFORD, Circuit Judge,
concurring in part and dissenting in part.
Judge Nelson has set out the factual background of this complicated tax case admirably. I believe the result reached here was influenced by the reflection in the *182opinion that “the government’s interpretation of the contract ... would result in the government’s keeping more than $53,000 in taxes paid on ‘income’ that the taxpayer never received_” The taxpayer’s inclusion of this amount in the 1974 return in dispute had to have been based on its as-certion that it was entitled, or had a fixed, rather than a contingent, right to this income from the other party. The government did take the position by stipulation that it was “properly reported” in that year. The government’s position is technical and “hardnosed;” however, even if taxpayer did not receive the income accrued and reported during 1974, Hardaway Construction Company did not establish under the tax laws that it “sustained a loss” in 1975.
Unfortunately, the taxpayer allowed the statute of limitations to run with respect to seeking a refund on the 1974 return. This was the correct procedure for it to follow in recouping the tax payment made in anticipation of income it never received. The taxpayer also had the opportunity to claim the payment from the developer under one construction of the contract, but failed or declined to do so, or even to seek a quantum meruit payment. It should be noted also that construction delays, which may have been attributable to taxpayer’s lack of diligence, were a cause of the failure of permanent financing to materialize.1
I agree with the majority that taxpayer did not sustain its burden and claim of loss under 26 U.S.C. § 166, as the amount of claimed deduction in question was never a “debt.” Taxpayer’s assertion that the claim of loss is allowable under 26 U.S.C. § 165(a) is inconsistent with an assertion in the stipulation that it properly reported the retainage on the 1974 return as income. It is for the taxpayer, not the government, to prove that it is entitled to a refund. I find no alternative, therefore, although it is not the happy and equitable choice, but to disagree with the conclusion that taxpayer has established that it was entitled in 1975 to a deduction for a loss “actually sustained” and evidenced by “closed and completed transactions, fixed by identifiable events.” I, accordingly, dissent from this aspect to the decision, and would reverse the decision of the district court.

. The majority concedes that "it was presumably within the construction company's [plaintiff’s] power to complete the project before the expiration of ... [the] permanent commitment.”