Court Opinion

ID: 4490161
Source: CourtListenerOpinion
Date Created: 2020-01-17 22:02:13.472065+00
Date Added: 2024-06-11T15:03:56.329228
License: Public Domain

Black,
dissenting: I think the attempt of the Board in the foregoing opinion to apply the doctrine of the Moore Cotton Mills Co. case, 17 B. T. A. 662, to the instant case is fundamental error. The situations are not the same.
*922In the Moore Cotton Mills Co. case the taxpayer remained the same individual corporate entity for all three of the taxable years, 1921,1922, and 1923. That is not the situation now before us.
The Majestic Coal Co. in the years 1918 and 1919 remained the same taxpaying unit, but in 1920 it became affiliated with the Alabama By-Products Corporation and other corporations, and undvr the provisions of section 240 of the Revenue Act of 1918 one consolidated return was filed for the entire group of corporations.
In the judgment of the writer, the later action brings about a very different application of the benefits conferred by section 204 than is the case where the individual corporate taxpayer remains unaffiliated with other corporations. The writer believes that the Board correctly interpreted the meaning of section 204 (b) of the Act of 1918 in its decision in the Moore Cotton Mills Co. case, but does not believe that such interpretation has any application whatever in the present case.
Section 204 (b) of the Act of 1918 reads:
If5 for any taxable year beginning after October 31, 1918, ana ending prior to January 1, 1920, it appears upon the production of evidence satisfactory to the Commissioner that any taxpayer has sustained a net loss, the amount of such net- loss shall under regulations prescribed by the Commissioner with the approval of the Secretary be deducted from the net income of the taxpayer [italics ours] for the preceding taxable year; and the taxes imposed by this title and by Title III for such preceding year shall be redetermined accordingly. * * * If such net loss is in excess of the net income for such preceding taxable year, the amount of such excess shall under regulations prescribed by the Commissioner with the approval of the Secretary be allowed as a deduction in computing the net income [of the taxpayer (We have inserted the three foregoing words in italics, for of course that is the plain meaning of the statute.) ] for the succeeding taxable year.
Now manifestly the foregoing statute, which was clearly enacted by Congress for the benefit of the taxpayer, was intended for the benefit of the individual taxpayer whether he was an individual in person or an individual corporation. It was not intended as a benefit to groups of individuals or groups of corporations filing consolidated returns in subsequent years.
The very best evidence that the language which we have quoted above was intended to apply only to individuals in person and individual corporations was that Congress, in order to let partnerships and beneficiaries of an estate or trust in on the benefits of the section, found it necessary to add paragraph (c) of section 204, which reads:
(c) The benefit of this section shall be allowed to the members of a partnership and the beneficiaries of an estate or trust.
If Congress had intended to grant such benefit to affiliated corporations filing a consolidated return under the provisions of section 240 of the Revenue Act of 1918 it would have added, after the word “trust” just above quoted, language substantially as follows: *923“ and to affiliated corporations filing a consolidated return under section 240 of this Act,” so that paragraph (c) of section 204 as amended would have read:
(c) The benefit of this section shall be allowed to the members of a partnership and the beneficiaries of an estate or trust and to affiliated corporations filing a consolidated return under the provisions of section 240 of this Act.
No such language was used, and I submit that the majority opinion in this case is reading into the statute a meaning which was never intended by Congress and which is clearly in conflict with the language of the statute itself.
In the instant case the Majestic Coal Co. had a loss of $82,113.20 for the year 1919. It had net income’ of $5,828.45 in 1918. The decision of the majority members of the Board will allow the 1919 loss to not only wipe out the $5,828.45 net income of the same corporation in 1918 (a proceeding concededly proper under the language of the statute), but will permit the remainder of the 1919 loss, $76,-887.75, to be carried forward into 1920 and used as a deduction in determining net income not of the individual corporation, the Majestic Coal Co., but the net income of the consolidated group headed by the Alabama By-Products Corporation. The effect of this ruling by the Board is to allow $76,887.75 of income in 1920 which was not income of the Majestic Coal Co. in that year, for it had none, but income of the other members of the affiliation, to be wiped out by net losses of the Majestic Coal Co. in 1919.
I believe that this is doing something that Congress did not intend to do when it enacted section 204(b) of the Act of 1918 and which the language of that Act does not support. Hence I can not agree to it.
Trussell agrees with this dissent.