Court Opinion

ID: 8589791
Source: CourtListenerOpinion
Date Created: 2022-11-23 15:45:21.219962+00
Date Added: 2024-06-11T16:54:23.790913
License: Public Domain

Madden, Judge,
concurring:
I agree with, the court’s decision and opinion. The income which a partner receives or is entitled to from his partnership is not treated for tax purposes as salary or corporate dividends paid out of earnings are treated. The lack of complete juridical entity in the partnership is recognized by permitting and requiring the taxpayer to trace back the money which he receives from the partnership to its source in the partnership, and to state whether it came from earnings or from sales of capital assets. But the time as of which he is regarded as getting it is the time of the partnership’s accounting period. In whichever of his, the partner’s, taxable years this accounting period falls, he must treat the income from his interest in the partnership as taxable, even though, in fact, the income came into the hands of the partnership in a prior year. This is the scheme of the Eevenue' Act of 1942.
A partner who also had individual capital transactions, in making his return for his taxable year which was the calendar year 1942, would list each of those transactions, and those relating to sales of property held for less than six months would come under one heading, and those of property held for more than six months under another. Then he would, pursuant to the statute, add to or subtract from the sum of each type of transaction his proportion of the aggregate gain or loss which his partnership had in the same type of transaction for its accounting year ending with or within the partner’s taxable year. If the partnership’s information return had been made according to the provisions of the Internal Eevenue Code before the 1942 amendments, what it reported as its .composite of, for example, short term capital transactions might be the result of adding items of gain or loss from sales of property held for 3 months, 7 months, and 17 months, all under 18 months and therefore “short term” under the pre-1942 law, but two of which had been held for more than six months, and which, under the 1942 amendments, would belong in the long-term category. The “information” provided by the partnership’s information return would be quite useless and it would be necessary *656to go back of that return and learn the facts about the separate partnership transactions, to see where they would properly fit into the taxpayer partner’s return. The Government would, presumably, permit and require the taxpayer, although his taxable year began on January 1, 1942, and, pursuant to Sec. 101 he had to make his return according to the amended law, to insert in his return a separate and special statement showing the results of the partnership return under the old law, and work those results into his final statement of his taxable income.
It is possible that Congress so intended, but we think it is not probable. When, in 1934 and 1938 Congress meant that, it clearly provided for it in Section 188 (b), as the opinion of the Court shows. The omission in the 1942 amendments of a comparable provision would seem to show that Congress intended, as Section 101 said, that taxable years beginning after December 31,1941, should be governed by the new law; that since the information return of a partnership might well give information as to the partnership income of partners whose taxable year began thereafter and as to other partners whose taxable years began before that date, it was not possible to require, in a single information return, the information necessary to compute the taxes of both kinds of partners, hence no special provision should be made in the statute for the transitory period which would only last for less than one year.
The fact that the partnership return would not be useful, during the transitory period, in computing the tax of at least some of the partners would not have been an unprecedented situation. In Section 188 (b) of the Code in the different forms that it took under the Revenue Acts of 1934 and 1938, its latter form being quoted in the Court’s opinion, one partnership return could not have served both for a partner whose taxable year began with the calendar year, and one who had a fiscal year beginning before that time. It would have been necessary, as to one or the other of them, to look behind the partnership return and learn the facts about the partnership transaction.
I agree, therefore, that under Section 101 the plaintiff *657was permitted and required to make his return under the amended law, and that the fact that during a transitory period, the partnership return would not furnish the necessary data for the plaintiff’s return is not a sufficient reason for relegating the plaintiff, as partner, to the unamended law when he, as an individual, was governed by the amended law.