Court Opinion

ID: 4477411
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:12:31.31914+00
Date Added: 2024-06-11T14:52:12.523815
License: Public Domain

BRUCE, /., dissenting: I concur with the opinion of the majority with respect to all of the issues determined except the issue dealing with the right of the petitioner to deductions for amortization of the cost of the A Agency Contract, the A Agency Renewal Contract, and of Flagg’s interest in the B Agency Contract. As to this issue I respectfully dissent. With respect to the A Agency Renewal Contract I do not think the evidence sufficient to establish that any of the proceeds involved herein arose out of decedent’s rights under the A Agency Renewal Contract, and petitioner is not entitled to deduct the costs of this interest out of the proceeds of other contract interests. Lewis N. Cotlow, 22 T. C. 1019, affd. 228 F. 2d 186. With respect to the Flagg interest under the B Agency Contract, assuming petitioner is entitled to recover the cost of this contract through depletion over a period of years, petitioner has failed to produce facts on which the amounts of such deductions may be computed. Unlike H. B. Hill, 3 B. T. A. 761, the record herein does not disclose the total income to be anticipated under such contract, although evidence sufficient to establish such fact was obviously in petitioner’s possession or could have been obtained from the insurance company. On the other hand, if the cost of this interest was recoverable out of the first renewal commissions received thereunder, there is no evidence that the receipts prior to the years in controversy were not sufficient to have completely reimbursed decedent or petitioner for the consideration paid therefor. Deductions must be taken in the year allowable and are not to be deferred to a later year at the choice of the taxpayer. As to the A Agency Contract a different problem is presented from that of the A Agency Renewal Contract and Flagg’s interest under the B Agency. Here we are dealing with a capital asset which was to be used for the production of income over an indefinite period of years. Cf. Stewart Title Guaranty Co., 20 T. C. 630; Reserve Natural Gas Co., 12 B. T. A. 219; Christensen Machine Co., 18 B. T. A. 256. Where the contract is for an indefinite period no allowance may be made for exhaustion based on the life of the contract, since no exhaustion was taking place which was susceptible of measurement. See General Equipment Co., 2 B. T. A. 804; Coca-Gola Bottling Co., 6 B. T. A. 1333; Int. Rev. Bull. F (Rev. Jan. 1942), p. 88; Keokuk and Hamilton Bridge, Inc., 12 T. C. 249, 263, reversed on other grounds 180 F. 2d 58. That the A Agency contract was for an indefinite period is not disputed. Finally, the fact that no question was raised as to deductions for costs taken in decedent’s returns for years prior to his death does not estop the Commissioner from contesting such deductions in the years before us. Schafer v. Helvering, 83 F. 2d 317, affd. 299 U. S. 171. In my opinion there is no room for the application of the Cohan rule (Cohan v. Commissioner, 39 F. 2d 540) in this case. I would accordingly deny the petitioner any deduction for the unrecovered cost of either of the three contracts involved.