Court Opinion

ID: 4480211
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:14:08.562905+00
Date Added: 2024-06-11T15:03:33.730176
License: Public Domain

Drennen, J. dissenting: I respectfully dissent because I believe a strict application of the statutory language here involved as written, unaided by any legislative history or regulatory interpretation, more logically reaches the opposite result from that of the majority. The tax on mutual insurance companies is imposed by section 821 (a) and is the tax computed under paragraph (1) or paragraph (2), whichever is the greater. No reference is made in section 821(a) to the alternative tax on capital gain under section 1201 (a). The reference to section 1201 (a) is made in section 821 (e). Paragraphs (1) and (2) of section 821(a) provide methods of computation of the tax imposed by section 821 (a). Section 1201 (a) provides, in the case of corporations, that if the net long-term capital gain of the corporation exceeds the net short-term capital loss of the corporation, then, in lieu of the tax imposed by section 821(a)(1) there is imposed a tax as therein computed. In other words, as I read it, section 1201 (a) imposes an alternative tax rather than an alternative method of computation under section 821 (a). It appears to me that the more logical application of the statutory language contained in section 821(a) requires a computation of tax under paragraphs (1) and (2) first. If the tax as computed under paragraph (2), the so-called premium method, is greater, that is the end of the matter and that is the tax that is imposed by section 821 (a). However, if the tax computed under paragraph (1), the so-called investment method, is greater, then that is the tax imposed by section 821(a) unless an alternative tax is imposed by virtue of section 1201(a). But section 1201(a) does substitute an alternative tax if the tax on a mutual insurance company has been imposed by section 821(a) (1). There is no election provided; section 1201(a) provides that the tax computed thereunder is imposed in lieu of the tax imposed under section 821(a) (1). If Congress had actually intended, under section 821(a), to impose the greater of the tax computed under three alternative methods, which is the effect of the majority opinion except where the alternative tax under section 1201(a) is less than the tax computed under section 821(a) (1) but greater than the tax computed under section 821(a) (2), it seems to me that it would have made the reference to section 1201(a) either immediately following section 821(a) (1) or as a separate paragraph (3) under section 821(a). I do not think the provisions of section 7806, quoted in footnote 3 in the majority opinion, support an argument to the contrary. While those provisions may prevent the drawing of inferences, etc., from “the location or grouping of any particular section or provision or portion of this title” they certainly do not suggest that Congress would not make a logical arrangement of the three alternative methods of computation under section 821 (a) if that was what it intended. In my opinion petitioner’s application of the statute is correct and should be sustained. FoeeesteR, Fay, and Hoyt, JJ., agree with this dissent.