Court Opinion

ID: 9465633
Source: CourtListenerOpinion
Date Created: 2023-08-05 00:51:47.098627+00
Date Added: 2024-06-11T17:39:17.225237
License: Public Domain

JAMES C. HILL, Circuit Judge,
specially concurring:
I concur in the panel opinion, but I offer these additional comments.
In February of 1962 the taxpayers elected to be taxed as a corporation under Section 1361; at that time the law provided that their election was irrevocable. Dismayed over the meager number of elections made under .the statute, Congress in 1966 amended the ill-fated Section 1361 to allow for the voluntary revocation of these once “irrevocable” elections; elections not voluntarily revoked would be terminated by operation of law on January 1, 1969. In amending the statute, Congress permitted taxpayers whose Section 1361 “corporations” were “liquidated” by the revocation or termination of their elections to avoid the tax consequences of this “liquidation” by incorporating their businesses under state law. No similar break was given to taxpayers who did not choose to incorporate. On January 1, 1969, these taxpayers’ election terminated. In accordance with Treasury Regulation § 1.1361-16(b), the Internal Revenue Service treated this termination as a taxable corporate liquidation and the Commissioner assessed a deficiency against the taxpayers for the calendar year 1969.
The taxpayers argue, quite persuasively, that the Commissioner’s treatment of their election as a “liquidation” is a mere fiction because they have continued to operate their business as a proprietorship. Although we agree that no actual liquidation has occurred, Congressional intent could not be clearer: taxpayers who incorporate following the termination of revocation of their election may avoid adverse tax consequences, while taxpayers who do not so incorporate must pay taxes on their corporate “liquidation.” Such is the law. It is not our province to question the wisdom of *264such a result; we simply apply the law as expressed by the will of Congress. Any relief for the taxpayers must come from Congress and not through the emasculation of the statute by judicial gloss. See Manatee County v. Train, 583 F.2d 179, 184 (5th Cir. 1978) (Hill, J., concurring).