Court Opinion

ID: 8594585
Source: CourtListenerOpinion
Date Created: 2022-11-23 16:01:36.70466+00
Date Added: 2024-06-11T16:54:49.284981
License: Public Domain

Davis, Judge,
concurring:
While agreeing with the court’s analysis and application of the mitigation provisions — which I join — I sketch an additional, narrower ground supporting the same result. As the court points out, “The increase in income for 1962 generated by plaintiffs’ respective shares of the $44,302 cost of sales adjustment would not have affected plaintiffs’ refund claims for 1962.” Both parties stated at the oral argument that, because of substantial losses, taxpayers’ refund claims for 1962 would have been granted in precisely the same amount even if there had never been an adjustment in Western Equipment’s sales costs. 'It necessarily follows that, with respect to the present plaintiffs, that adjustment, when made for 1962, was wholly inoperative and irrelevant to the action taken by the Internal Revenue 'Service for that year. As to those suitors the adjustment was at most obiter dictum for 1962; it had no operative impact at all. So far as the plaintiffs were concerned, the Service, when it received their 1962 refund claims, need not have gone in any way into the problem of cost of sales; it could dispose of the claims in their favor without touching on, or considering, *96that subject.1 Yet it is the Service’s adjustment in Western Equipment’s sales cost for 1962 on which plaintiffs rely, and must rely, to invoke the mitigation remedy.
As I understand this segment of the Code (26 TJ.S.C. §§ 1311-1314), a “determination”, to trigger mitigation, must, at least in these circumstances, be operative and actual with respect to the suing taxpayer for the year involved, and not simply a Service declaration of position which is wholly academic for that year. The first six subdivisions of section 1312 (“Circumstances of adjustment”) refer to situations in which the “determination” “requires” or “allows” or “disallows” — language which implies an actual, operative effect; the last subparagraph relates to a “determination” which “determines the basis of property”, and again suggests that this finding must have an actual impact for the year made. In addition, in defining “determination” to include a refund, section 1313(a) (3) speaks of the “items” “allowed” or “disallowed”, thus once more focusing on actual effect. The same concept underlies section 1313(c), defining “related taxpayer”, which uses the terms, “the taxpayer with respect to whom a determination is made.” And the legislative history implies that maintenance of the inconsistent position must have some real bite when it refers to taking “the profit out of inconsistency.” See Birchenough v. United States, 187 Ct. Cl. 702, 707, 410 F. 2d 1247, 1250 (1969). A Service determination in the air, an advisory opinion without present impact, would not be enough — but in substance that is what occurred here with respect to plaintiffs.
The IES position does appear to have been operative for 1962 for the par-tners not now suing, but I do not think this makes a difference as to plaintiffs, even though those other individuals were “related taxpayers” (See § 1313 (c) (6)). Section 1312(1) (“Double inclusion of an item of gross income”), which plaintiffs invoke, seems to me to “reguire[s]” (emphasis added) the inclusion in the taxpayer’s gross income for the year involved (1962) of an item erroneously included for another year (1961) in the taxpayer’s gross income or in the gross income of a related taxpayer. The first *97pant of this condition was not met by the plaintiffs, though it may have been fulfilled as to their non-suing partners.

 This was apparently not true as to other partners In Western Equipment Company, not now before us, and that seems to be the reason the Service delved Into the matter.