Court Opinion

ID: 4485001
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:17:06.621892+00
Date Added: 2024-06-11T14:53:45.935074
License: Public Domain

Dawson, J., concurring: Because the majority opinion has in my view correctly categorized the transactions as the retirement of debt obligations, I concur in the result. At first blush, the facts of this case have all the markings of a short sale, and hence sale or exchange treatment would be provided under section 1233(a). Hoover Co. v. Commissioner, 72 T.C. 206, 243 (1979). However, this case was fully stipulated and carefully framed by the parties, who only advanced certain arguments.1 As such, insufficient evidence was presented to accurately determine if there was in fact a short sale.2 Therefore, respondent’s request that we analogize these transactions to short sales in order to provide support for a separate theory on which sale or exchange treatment could be derived was correctly denied.3 If the proper treatment of these transactions is outside the language of the statutes, that is a situation which Congress should address. Lacking such legislative guidance, I agree with the majority that the principles of Fairbanks v. United States, 306 U.S. 436 (1939), govern here.4  I disagree with the majority’s reliance on Rev. Rul. 78-281, 1978-2 C.B. 204. As to that ruling’s applicability, the facts of this case are no different from those in Hoover Co. v. Commissioner, supra, where we held that the ruling provided no aid to the taxpayer because "from a tax viewpoint there is generally little similarity between a piece of equipment and a share of stock in a foreign corporation.” 72 T.C. at 248. Accordingly, the ruling provides no support for petitioner’s case. Fay, Wiles, and Hamblen, JJ., agree with this concurring opinion.  Respondent’s hesitancy to argue that this constitutes a short sale might result from the risk, if he were successful, of allowing taxpayers in subsequent cases to be able to choose whether a sale or exchange occurs. If sale or exchange treatment depended solely upon the application of sec. 1233(a) to the closing of a short sale, a taxpayer might avoid that section’s provisions merely by retiring a foreign currency loan with cash.   We are informed that the Caisse loan proceeds were "invested” in FAN International stock in what appears to be either a sec. 351 or sec. 118-type transaction. Thus, it is not clear whether petitioner was ever "short,” that is, at risk with respect to the LF 25 million. For example, we do not know whether the francs were irrevocably invested in assets by the subsidiary; whether petitioner could compel its subsidiary to repay its capital contribution in the same amount of francs; or whether the payment by ARBED of the price of the stock was done in francs. The presence of some or all of these factual situations arguably precludes qualification as a short sale.   "Since section 1233 is a very specific, detailed, and intricately interwoven statute, extending it by analogy is unwarranted.” Carborundum Co. v. Commissioner, 74 T.C. 730, 738 (1980). See American Home Products Corp. v. United States, 220 Ct. Cl. 386, 601 F.2d 540, 550 (1979). I note that under respondent’s rationale an analogy to an additional interest payment under sec. 163 might be equally appropriate. See Treasury Department Discussion Draft, 45 Fed. Reg. 81711, 81713, 81717, examples 4 and 5 (Dec. 8, 1980).   See and compare Newman, "Tax Consequences of Foreign Currency Transactions: A look at Current Law and an Analysis of the Treasury Department Discussion Draft,” 36 Tax Law. 223, 229-232 (1983). The dissenting opinion would hold that sale or exchange treatment is proper by analogy, not to sec. 1233 (however, see pp. 569-570 of the dissent) but to a short sale itself. Aside from the tautologous notion that a short sale necessarily involves a sale or exchange, no authority is offered which supports this analogy. On the contrary, the dissent’s view would render sec. 1233(a) as mere surplusage. Indeed, the dissent’s argument is unavoidably premised on the statement that (p. 567): "When petitioner originally borrowed the francs, it in effect sold those francs short * * * ” I am at a loss to understand how a taxpayer’s borrowing and then returning property (whether it be an auto, a bushel of wheat, or Belgian francs) would constitute a sale, in law or effect. By borrowing and holding, a taxpayer has neither sold nor is he short. Moreover, I see no reason to treat the creation of an obligation by borrowing property as different from its retirement. If such is the case, the dissent’s view is totally incompatible with the doctrine of Fairbanks v. United States, and is therefore unwarranted.