Court Opinion

ID: 4481623
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:14:59.637331+00
Date Added: 2024-06-11T14:53:49.639112
License: Public Domain

Simpson, J., dissenting: In my judgment, I would reach a different conclusion than the majority in this case, although I do not disagree with it in principle. In his second opinion in the Western National case (51 T.C. 824 (1969)), Judge Drennen decided to construe the term “assets,” as used in section 805, in the light of the industry practice; in doing so, he recognized that he was not adopting the common usage of that term and that he was not applying the traditional concepts of accrual accounting. The life insurance business involves many concepts and practices which are peculiar to that business, and the income which should be subject to taxation cannot be determined without taking into consideration those peculiar concepts and practices. It is, moreover, a business which is generally subject to regulation by the States, and through the National Association of Insurance Commissioners, uniform standards are established. Generally speaking, Congress has laid down the rules for determining the income of life insurance companies which is subject to Federal taxation, but in many respects, such income must be determined by reliance on the industry practices established in accordance with the regulations of the NAIC. In deciding to adopt the industry’s concept of what constitutes an asset for purposes of section 805, 1 believe Judge Drennen acted wisely. Nonetheless, I now believe that the time has come for us to abandon our own view of how the statute should be interpreted and to accept the views of the three Courts of Appeals. Western National Life Insurance Co. of Texas v. Commissioner, 432 F. 2d 298 (C.A. 5, 1970), reversing and remanding 50 T.C. 285 (1968) as modified by 51 T.C. 824 (1969); Jefferson Standard Life Insurance Co. v. United States, 408 F. 2d 842, 844 (C.A. 4, 1969); Franklin Life Insurance Co. v. United States, 399 F. 2d 757 (C.A. 7, 1968). Generally, it is our duty to decide a question in accordance with our best judgment. It would be irresponsible, in my opinion, for us to abrogate our own power to decide an issue and to accept the decision of another court merely because one other court had passed upon the question. Yet, we are not wholly free to expound the law as we may see it. Of course, we are constrained to give effect to our own precedents and to follow the decision of a circuit when the law has been established by decision of the Court of Appeals for that circuit. Jack E. Golsen, 54 T.C. 742 (1970), on appeal (C.A. 10, May 4, 1970). Even when the Court of Appeals has not spoken for the circuit in which the case arises, we do give serious consideration to the views of other circuits. At times, we may decide to continue to adhere to our view even though a Court of Appeals in a different circuit takes a different position. However, if many of the circuit courts adopt a position contrary to ours, there must come a time when we accede to their views, however much we may be convinced of the correctness of our view. There is no magic in the number of three — there is no number of contrary decisions by the circuit courts which, in my view, should automatically cause us to accede to their views. When to abandon our view must depend upon the issue in controversy and other related circumstances. In this case, the issue is complex, and although I believe Judge Drennen’s opinion was sound, I must recognize that it is difficult to make an overpowering argument for it. Under such circumstances, I believe that we should reconsider our position and accept the views of the circuits. No one can predict with certainty how the Sixth Circuit will decide the issue, but we can be sure that they will give great weight to the views of the other Circuit Courts of Appeals. Western National Life Insurance Co. of Texas v. Commissioner, supra; Goodenow v. Commissioner, 238 F. 2d 20 (C.A. 8, 1956). In view of the nature of the issue in controversy, it is difficult to demonstrate that -those circuits were clearly erroneous, and it is difficult to give cogent reasons why the Sixth Circuit should not follow them. It is most unlikely that the Sixth Circuit will not adopt the same position as the other circuits. For us to persist in our view under such circumstances forces a party to further litigation, when it should not be necessary. In this case, the burden will be placed upon the Government, but in tomorrow’s case, it might fall on the taxpayer. Quealx, /., agrees with this dissent.