Court Opinion

ID: 9481863
Source: CourtListenerOpinion
Date Created: 2023-08-05 08:34:14.238375+00
Date Added: 2024-06-11T17:48:37.798050
License: Public Domain

JOHN R. BROWN, Circuit Judge,
concurring.
With some misgivings I concur.
First, I cannot so easily dispose of the contrary holding by the Federal Circuit in Holiday Village Shopping Center, Inc. v. United States, 773 F.2d 276 (Fed.Cir.1985). I agree that there was ample basis, (i) for the conclusion that by closeness of holdings the partnership should not be viewed as an independent taxable entity and, (ii) for the implication that the transaction was conceived and executed as a purposeful hope to evade taxes. See id. at 279-80. But that Court did not rely on such circumstance as decisive. Indeed, it went on to hold several significant things. It relied on the House Conference Committee Report assertion that, while for some purposes under Subchapter K the “entity” approach is used, “[n]o inference is intended ... that ... for the purpose of applying other provisions of ... [the code] ... the concept of *1170the partnership as a collection of individuals is more appropriate for such provisions.” 1 The Court proceeded to hold that for § 1250 it is more appropriate to treat the partnership as an aggregate or “collection of individuals” than as a “separate entity.” Id. at 279.
The Court went on:
Holiday Village thus benefited from the deductions to the same extent as if it had owned the depreciable assets directly, but now seeks to avoid recapture on the theory that it did not own those assets.
# * sp * * *
Holiday Village offers no convincing reason to support this anomalous result. Its argument is a highly technical one that turns largely on the form of the transaction, i.e., that what it distributed to its stockholders on liquidation was an interest in the partnership and not the underlying partnership property which gave that interest its value and which was the subject of the depreciation that it previously had utilized to reduce its taxable income.
* # * s)c * *
We conclude that, for the reasons given above, it is appropriate in this case to disregard the partnership entity and treat the liquidating distribution by Holiday Village to its stockholders of its tax interest in the partnership as a distribution of the underlying partnership assets themselves.
Some courts — certainly not the court for the Federal Circuit — might dismiss these somber holdings as mere dicta. If that is really our view, perhaps we should forthrightly say so, in order that the High Court can see whether, in fact, there is an outright conflict meriting possible certiorari.
Additionally, I cannot escape the feeling that the result of the court’s decisions comes close to an instance of “now you see it, now you don’t” that: properly meeting all of the § 1254 requirements, somehow, someway, by our declarations, undergoes juridical transmutation into a partnership interest immune to recapture.
Although, on the high road of principles, we ought not to be swayed by fiscal consequences, the case remains — at least from my perception — a determination that by the stroke of the scrivener’s pen, a substantial ($9 million) profit subject to a $3 million income tax is turned into a recoverable (and distributable) profit ($3 million).
With no change in the nature, or kind, of property, the corporation — and its distribu-tee shareholders — are afforded this $3 million difference over what would have been the case were the fractional mineral interests distributed directly.
I do concur without reservation that the creation of the partnerships was for sound business reasons without any motive for tax avoidance. I concur also that the 1984 Amendment (§ 386) is not significant.

. H.R.Conf.Rep. No. 2543, 83rd Cong.2d Sess. 59, reprinted in 1954 U.S.Code Cong. & Admin. News 5280, 5319-20.