Court Opinion

ID: 4496073
Source: CourtListenerOpinion
Date Created: 2020-01-23 18:14:39.822523+00
Date Added: 2024-06-11T08:00:13.836366
License: Public Domain

Aiiundell,.
dissenting: If the word “money” as used in section 203 (c) (1) of the Revenue Act of 1926 and the corresponding section of the Revenue Act of 1928 is to be given its accepted meaning, the assumption of a mortgage on purchased property certainly does not fall within it. Webster’s New International Dictionary defines the word “money” as follows: “In a comprehensive sense, anything customarily-used as a medium of exchange and measure of value.” In State v. Finnegean, 127 Iowa, 286; 103 N. W. 155, the word “money” *383is defined as “anything that circulates as the ordinary medium of exchange in buying and selling property”, and in Taylor v. Robinson, 34 Fed. 678, 681, the word is defined as “the whole volume of the medium of exchange recognized by the custom of merchants and the laws of the country.” In the instant case, the assumption of the mortgage does not serve to release any assets of the petitioner, as in United States v. Kirby Lumber Co., 284 U. S. 1, for the mortgage runs with the land and when the purchaser pays it off, he improves his own financial condition and not that of the seller. Nor can it be said that the assumption of a mortgage constitutes other property having a fair market value within the meaning of the revenue act. Fashion Center Building Co., 31 B. T. A. 167.
The argument contained in the majority opinion is, as I understand. it-, that, while the assumption of a mortgage is not money in its true sense, nevertheless it will be so treated because to do otherwise would result in part of the gain from the exchange going altogether untaxed because the formula for determining the basis for property received in a tax-free exchange (sec. 113 (a) (6)) does not in terms provide for reduction of the basis by amounts such as the value of the mortgage here assumed, which are properly returns of a part of the transferor’s cost. Even if the difficulty be a genuine one, I do not think the Board is warranted in completely disregarding the plain language of the statute. However, in my opinion, the basis section can be so interpreted as to avoid this difficulty. The basis prescribed for property received in tax-free exchanges, namely, “the same as in the case of property exchanged” can, I think, with perfect reasonableness be held to mean the cost to the transferor less any return of cost which he has received as by the assumption of the mortgage in the present case; the basis will then be adjusted for recognized gain or loss as prescribed. This solution, I think, more nearly effectuates the intent of Congress and does less violence to the statutes than does the holding in the majority opinion.
The provisions of the several revenue acts with which we are here concerned were designed to facilitate business adjustments without the present imposition of a tax and they recognize that the tax should not be imposed until the seller receives money or property having a fair market value which the law regards as the equivalent of cash. Cf. S. Kept. No. 398, p. 17, 68th Cong., 1st sess.
Van Fossan, McMahon, Matthews, Leech, and Arnold agree with this dissent.