Court Opinion

ID: 9455421
Source: CourtListenerOpinion
Date Created: 2023-08-04 19:21:35.972212+00
Date Added: 2024-06-11T17:34:35.569061
License: Public Domain

DAYIS, Judge
(dissenting):
There is a good deal to support taxpayer’s side of this technical and troublesome question, but my conclusion is that on balance the Government is right. First, the wording of § 1341 comports better with that view. Under plaintiff’s theory of “item”, adopted by the court, the parenthetical phrase “year (or years)” has no function since it would be impossible for an “item” to be “included in gross income” for more than a single “prior taxable year” — one “item” could never straddle two or more years. The court’s explanation- — that “(or years)” was included to assure that a year by year computation would be followed even if more than one year was involved — saddles Congress, if that was its purpose, with the useless incongruity of drafting § 1341 in a way strikingly different from the mass of other provisions of the Internal Revenue Code which are, of course, also meant to be applied whenever applicable, i. e. to one year, two years, three years, etc.
Second, the concept of an “item” under § 1341 as covering all the money bundled into one claim giving rise to a single right-to-refund accords better with the Regulations implementing the statute. Section 1.1341(a) (3) of those Regulations says that, for the purpose of determining whether a deduction exceeds $3,000, there shall be added “the aggregate of all such deductions with respect to each item of income (described in Section 1341(a) (1)) of the same class” (emphasis added). In § 1.1341-1, under the heading “Determination of amount of deduction attributable to prior taxable years”, one of the examples shows clearly the aggregation of similar items of *736claim-of-right income (an employee's compensation) over three years. Plaintiff insists that these regulations are restricted exclusively to the calculation of the $3,000 minimum. Literally, that is their immediate purpose, but they affirmatively show, in addition, that the Treasury has officially read “item” in § 1341 quite differently from plaintiff. With the deference due Treasury Regulations, that is a factor in the defendant’s favor here.
Third, the legislative history suggests that Congress’s only concern was to make sure that all taxpayers would be able to compensate themselves adequately, on repayment of amounts received in earlier years, for the taxes paid at that time. To the extent possible, the wording of the section should be interpreted in that light. There is no intimation of a desire that, under the new section, taxpayers be in a position to maximize their tax benefits, far above recoupment of the prior tax detriment, by picking and choosing the existing remedy (§ 1341(a) (4)) or the new remedy (§ 1341(a) (5)) from year to year. But that is what the court now allows plaintiff to do. This gives taxpayers more relief than Congress seems to have intended.
Finally, though United States v. Skelly Oil Co., 394 U.S. 678, 89 S.Ct. 1379, 22 L.Ed.2d 642 (1969), treats with a different problem, its broad central theme is that under § 1341 the taxpayer should not always win and the Government always lose (394 U.S. at 686, 89 S.Ct. 1379). To permit recovery here appears to me to cut into that principle by allowing our taxpayer to derive a greater tax benefit from its repayment than it would have had if the amounts had (a) never been received in the first place, or (b) been fully deducted in the year of repayment. Put another way, taxpayer will now be better off than under either the rule of exclusion or the deduction rule of United States v. Lewis, 340 U.S. 590, 71 S.Ct. 522, 95 L.Ed. 560 (1951).1
LARAMORE, Judge, joins in the foregoing dissenting opinion.

. I agree with the court in rejecting the defense of collateral estoppel. See my opinion in Hercules Powder Co. v. United States, 167 Ct.Cl. 639, 647, 337 F.2d 643, 647 (1964).