Court Opinion

ID: 8598701
Source: CourtListenerOpinion
Date Created: 2022-11-23 19:29:38.581417+00
Date Added: 2024-06-11T16:55:06.049902
License: Public Domain

FERNANDEZ, Circuit Judge,
concurring:
I am not satisfied that Washington Mutual, Inc. (“WaMu”) can establish a cost basis in the rights that the government gave Home Savings of America (“Home Savings”) when Home Savings took over other savings and loan institutions pursuant to a tax-free “G” reorganization.1 However, I concur in the result on a different ground — those rights have a fair market value basis.2
WaMu, successor in interest to Home Savings, brought this action to recover income taxes that Home Savings allegedly overpaid to the United States. The district court granted summary judgment to the government, and this appeal followed.
WaMu asserts that the regulatory accounting privileges (“RAP”) and the branching rights (hereafter collectively “the Rights”) received from the Federal Savings and Loan Insurance Corporation (“FSLIC”) as part of an Assistance Agreement between FSLIC and Home Savings have a fair market value basis.3 WaMu appears to be correct; surely they had great value, which is why the transaction went forward. However, the government asserts three reasons that WaMu is in error. I reject those reasons.
First, the government says, the Rights were not received from FSLIC at all, but were received from the Federal Home Loan Bank Board (“the Board”). I disagree. No doubt the Rights did flow from actions of the Board, but, then, FSLIC is just an arm of the Board and is operated by the Board. See United States v. Winstar Corp., 518 U.S. 839, 890, 116 S.Ct. 2432, 2462, 135 L.Ed.2d 964 (1996); see also 12 U.S.C. § 1725(a). Indeed, the Board operates through FSLIC. See Winstar, 518 U.S. at 891, 116 S.Ct. at 2463. So, it is almost tautological to say that what FSLIC gave originated at the Board. What is significant, however, is that the Assistance Agreement was the contract between FSLIC and Home Savings and that agreement incorporates the Board resolutions that ultimately conferred the Rights upon Home Savings. It cannot be doubted that the Rights were received from FSLIC as part of the compensation to Home Savings when it, at the urging of FSLIC, merged with a number of insolvent savings and loan institutions.
Second, the government argues that the Rights were not given to Home Savings under the provisions of 12 U.S.C. § 1729(f). Again, I must disagree. If the Rights were not conveyed pursuant to that provision, it is difficult to see how they were conveyed at all because that is the provision that grants FSLIC the authority to enter into agreements and issue benefits to an insured institution, like Home Savings, for the purpose of facilitating a transaction of this type. It is already established beyond peradventure that § 1725(f) provided FSLIC’s authority to grant the RAP rights to Home Savings. See Winstar, 518 U.S. at 890, 116 S.Ct. at 2462. Assuming that the branching rights could be granted at all, and the government agrees that they could be, I see no principled basis for declaring that, unlike the RAP rights, they did not flow through FSLIC to Home Savings via the Assistance Agreement.
Third, the government argues that even if the above is true, Home Savings was not entitled to the beneficial treatment granted by 26 U.S.C. § 597 (1981),4 a provision *1223enacted for the very purpose of facilitating the kind of transaction that occurred here. At first blush, it is difficult to see why it was not. Well, says the government, § 597 only applies to “money or other property” and the Rights are neither. Why not? Because, says the government, the section is entitled “FSLIC financial assistance” and the Rights cannot be financial. Again, it is difficult to see why that would be so. In the first place, although titles might be helpful sometimes, they are not necessarily a good guide. In fact, in a tax case, we held that “the title of a statute cannot limit the plain meaning of its text.” Nordby Supply Co. v. United States, 572 F.2d 1377, 1378 (9th Cir.1978); see also 26 U.S.C. § 7806(b). Secondly, the word “financial” does not exclude the concept of property, and the words of the section itself demonstrate that. Finally, there can be no doubt that the parties knew that the Rights would aid Home Savings financially. Those rights were the property that made the deal viable. It seems peculiar to say that they are not the “property” referred to in § 597 because that property can only be money or things like money. Can it be thought that Congress did not understand the broad meaning of the word “property” in general? I think not.
Moreover, says the government, the legislative history5 refers to “payments” and that can only mean money. Again, I fail to see why one cannot pay over consideration or pay debts with property, and people often do. Moreover, the fact that § 597 refers to an “amount” does not change the analysis. Clearly, the whole of the phrase is “amount of money or other property.” In the first place, the word “amount” could be taken as modifying the word money only, in which case the word “property” would stand alone. In the second place, there is nothing peculiar about speaking of an amount of property, if “amount” modifies that word also. For example, in 26 U.S.C. § 301(c) a stockholder, who receives a distribution from a corporation, is taxed on the amount of the distribution. And for that purpose, the word “amount” means “amount of money received,”6 plus “the fair market value of the other property received.”7 Finally, the net effect of the government’s position would be to essentially read the word “property” out of § 597. I see no basis for that reading.
In short, on its face § 597 appears to provide that when Home Savings received the Rights, those constituted property with a significant value and Home Savings was entitled to have that property treated for tax purposes under those provisions. Nothing the government has argued changes that. Thus, WaMu has a fair market value basis in the Rights.
Home Savings greatly benefitted the government at a time of great need. When Home Savings agreed to engage in the mergers in question, it was given the Rights as part of the inducement to do so. The Rights were no mere lagniappe; they *1224had substantial value. Whether one accepts the analysis of the majority or mine, the result is that Home Savings did have a basis in them.
Thus I concur in the result.

. 26 U.S.C. § 368(a)(1)(G).

. I therefore see no need to wrestle with the question of cost basis at this time.

. See 26 U.S.C. § 61(a)(1); 26 C.F.R. § 1.61-2(d)(1).

. The section read as follows;
§ 597. FSLIC financial assistance. (a) Exclusion from gross income.
*1223Gross income of a domestic building and loan association does not include any amount of money or other property received from the Federal Savings and Loan Insurance Corporation pursuant to section 406(f) of the National Housing Act (12 U.S.C. sec. 1725(f)) regardless of whether any note or other instrument is issued in exchange therefor.
(b) No reduction in basis of assets.
No reduction in the basis of assets of a domestic building and loan association shall be made on account of money or other property received under the circumstances referred to in subsection (a).

. See H.R. Conf. Rep. No. 97-215, at 284 (1981), reprinted in 1981-2 C.B. 481, 526.

. 26 U.S.C. § 301(b)(1)(A).

. Id. at (b)(l)(B)(i).