Court Opinion

ID: 4480658
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:14:27.646512+00
Date Added: 2024-06-11T14:53:59.618038
License: Public Domain

Simpson, J., dissenting: I must dissent from the interpretation of the statute adopted by the majority. It is unfortunate that the outcome of this case turns on 1 day. However, whenever the qualification for some favorable tax treatment turns on whether the taxpayer acts before a specified day or before the expiration of a specified period— and the tax laws contain innumerable provisions of this type — some lucky taxpayers are going to qualify by just 1 day; whereas, less fortunate taxpayers are going to miss by a single day. Such consequences must have been anticipated by the lawmakers when they adopted such a limitation. When the statute uses a general standard, we must use reason and judgment in its construction and application; but when the statute is precise and definite, our compassion for the less fortunate gives us no authority to extend the statutory time for qualifying for the favorable tax treatment. The statutory provision which was applicable in the circumstances of this case made the qualification for the favorable tax treatment of the option depend upon whether a retired employee exercised the option within 3 months after the day on which he ceased to be an employee. The majority finds as a fact that John ceased to be an employee on September 1, 1960. However, I believe that this conclusion results from the application of an erroneous interpretation of the statute to the evidence in the case. Webster’s New International Dictionary (3d ed. 1961) states “to cease” means “bring to an end * * * to come to an end * * * to bring to an end an activity or action.” Since John was not able to work during August of 1960, the time when his employment ended must be determined solely from the intention of the parties. There is some suggestion in the case that John was subject to call at all times during the day so that his employment did not end until the last moment of August 31. Whenever his employment ended, even if it was at the last moment of the day, at that same moment his employment ceased; it was brought to an end; it came to an end. There is no dispute over the fact that August 31 was the final day of his employment; consequently, when a proper definition of the statute is applied, it is clear that his employment ceased on August 31, not September 1. The petitioner attempts to present this case as involving a conflict between the statute and the regulations and requiring us to choose between them. Without doubt, if there were such a conflict, we would be guided by the statute; but if the statute and the regulations are properly construed, there is in fact no conflict between them. The statute and the regulations use different language and different means of expressing the, rule, but both reach the same result. If we recognize that John ceased to be an employee of United States Steel on August 31, 1960, then we apply the statutory rule by beginning counting on September 1, and the 3-month period ended on November 30. On the other hand, if we apply the regulations, we count backward beginning with November 30,1960, and ending on September 1 of that year. Thus, although the statutory rule counts forward from the day after he ceases to be an employee, and the regulatory rule counts backward from the day before the day of his death, both reach the same result — under both applications of the rule, John would not have qualified for the favorable tax treatment of section 421 if he had exercised the option on December 1, the day of his death. Before now, no one has suggested that there was a conflict between the statute and the regulations. The regulations were first adopted in 1952. The statutory provision was reenacted in 1954, with no indication that anyone involved in the legislative process considered the regulatory interpretation improper. The same regulatory interpretation was again adopted and remained in effect throughout the years. Furthermore, when the revision of the stock option provisions was adopted as a part of the 1964 Revenue Act, the statutory provision was changed to use the “look-back” rule, and the accompanying committee report indicated that the employment requirement was identical and described it by using language similar to the regulatory interpretation. In so doing, Congress indicated that it considered the regulations and the statute to have the same effect. This longstanding-approval of the regulations — both implicit and explicit — indicates to me that people have generally considered them not to be in conflict with the statute. The majority opinion attempts to reconcile the statute and the regulations by modifying the clear language of the regulations. However, if the statute is properly construed, such modification is unnecessary. The clear language of the regulations and the longstanding assumption that it means the same as the statute confirms my understanding of the statutory expression “within 3 months after the date he ceases to be an employee.” Scott, /., agrees with this dissent.