Court Opinion

ID: 9448687
Source: CourtListenerOpinion
Date Created: 2023-08-03 23:42:48.115448+00
Date Added: 2024-06-11T17:31:31.592214
License: Public Domain

CECIL, Circuit Judge
(dissenting).
The taxes paid by the appellees, the recovery of which were the subject of the action in the District Court, were obviously imposed under the 1939 Code. The loss sustained in 1955, which is the subject of the carryback, was calculated under the 1954 Internal Revenue Code. The loss carryback to 1953 was authorized under the 1954 Code. (Sec. 172(b) (1) (A) as in effect at the time of and applicable to this case.)
The loss carryback feature of the income tax law is based on a fiction that the loss in fact occurred in the year to which it was carried back. “The purpose of the ‘carryback,’ or ‘carry-over,’ privilege is to allow a taxpayer some equivalent for the fact that he has not been able to reduce his tax by a loss, because he has had no income in that year against which to credit it; and the only practicable equivalent is by fiction to treat the loss as a deduction from his income in an earlier, or a later, year.” Commissioner of Internal Revenue v. VanBergh, 209 F.2d 23, 25, C.A.2; Phoenix Coal Co. v. Commissioner of Internal Revenue, 231 F.2d 420, C.A.2. It is to be noted that the fiction is that the loss of 1955 occurred in 1953 and not that the income of 1953 was earned in 1955. In the above cited cases, it was held that for the purpose of carrying back the loss the Commissioner could recompute the taxes for the year to which the loss was carried. It thus appears that the subject of this action is the 1953 taxes imposed under the 1939 Code. It follows therefore that the recovery of these taxes must be under the law as it was at the time the taxes were imposed, unless that law has been repealed. The taxpayers are in the same position as they would be if they were asking for a recomputation of their 1953 taxes. They can no more apply the 1954 Code limitation to their claim here than they could ask for a re-computation of the 1953 taxes under some new benefit of the 1954 Code.
The appellees point to section 7851(a) (1) subtitle (A) as repealing the provisions of the 1939 Code. This position is without support so far as it applies to the limitation of a carryback to the 1939 Code. Subdivision (a) (6), subtitle F (A), provides, “The provisions of sub*657title F shall apply with respect to any tax imposed by the Internal Revenue Code of 1939 only to the extent provided in sub-paragraphs (B) and (C) of this paragraph.” This in effect means that the provisions of subtitle F shall not be applicable to the Internal Revenue Code of 1939 unless specifically stated. There is nothing in these paragraphs which makes the limitation of section 6511 of the 1954 Code applicable to refunds of taxes imposed by the 1939 Code.
In support of the claim that the limitation of section 6511(d) (2) (A) applies to the taxes imposed by the 1939 Code, which are involved here, the majority opinion refers to and quotes from section 7851(a) (6) (B). This is to the effect that on and after January 1, 1955, the provisions of Subchapter A of Chapter 65, relating to abatements, credits and refunds, shall be applicable to all internal revenue taxes whether imposed by the Internal Revenue Code of 1954 or 1939. It should be noted that section 6511(d) (2) (A) is not in Chapter 65 but it is in Chapter 66. Chapter 65 does not include the recovery of taxes based on a carryback loss. It is my view that the conclusion of the majority of the Court, “By these provisions, the 1954 Code was to govern refunds whether the taxes were imposed under either Code,” is not warranted.
As stated in the majority opinion, no cases exactly in point have been cited nor have I found any from my own research. In Kent v. Commissioner, above cited, it was held that a loss carryback from 1955 to 1953 required the computation of the amount of the deduction under the 1939 Code.
I conclude that the taxes involved in this action were imposed and arise out of taxes calculated and determined under the 1939 Internal Revenue Code and that section 322(b) (6) of the 1939 Code was in effect as to the recovery of taxes imposed under that Code.
It follows that the claim of the taxpayers was not timely filed and that the District Court was without jurisdiction to hear and determine the issues presented in the complaint.
ORDER.