Court Opinion

ID: 4483740
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:16:16.128867+00
Date Added: 2024-06-11T07:58:22.359201
License: Public Domain

Quealy, J., dissenting: The majority would gratuitously overrule Schiffman v. Commissioner, 47 T.C. 537 (1967),1 without either party having raised that issue. During the taxable year in question, that case not only represented the opinion of this Court, but had been acquiesced in by the respondent. (1967-2 C.B. 3.) In fact, respondent’s acquiescence was not withdrawn until some years later. This Court failed to sustain respondent’s change of position in Max Sobel Wholesale Liquors v. Commissioner, 69 T.C. 477 (1977). I fail to see the distinction here. Section 162(c)(2) in its present form was enacted by section 310 of the Revenue Act of 1971. At that time, the respondent had acquiesced in the Schiffman case and in Pittsburgh Milk Co. v. Commissioner, 26 T.C. 707 (1956).2 Respondent’s acquiescence in those cases was not withdrawn until respondent decided to seek a reversal of those cases. (Rev. Rul. 77-244, 1977-29 I.R.B. 8.) In Max Sobel Wholesale Liquors v. Commissioner, supra, a majority of this Court reaffirmed its position in the Pittsburgh Milk line of cases. This Court said at page 484: We must assume that Congress was aware of the decision of this Court in the Pittsburgh Milk case. At the time that the legislation was enacted, the respondent had acquiesced in that decision. If Congress had intended to overrule the Pittsburgh Milk case, it is only reasonable to expect that the amendment would have been more specific in so doing or that the congressional intent would find expression in the Report of the Finance Committee accompanying the bill. No mention of any such intent is made in the Report of the Finance Committee accompanying the bill. S. Rept. No. 92-437,92d Cong., 1st Sess. 72-73. Nor am I able to distinguish the Schiffman case on the facts. Both there and in the present case, the taxpayer was selling insurance. Such insurance was sold with the agreement that all or a portion of the premium would be “rebated” to the insured. The mechanics of carrying out this agreement does alter the nature of the transaction. If petitioner had not agreed to apply his commission to the payment of the premium, there would have been no sale. The transaction upon which the respondent relies as a basis for taxing the petitioner encompassed as an essential element the understanding that petitioner would, in effect, waive his right to the commission. A taxpayer cannot realize income to the extent that he gives the buyer the money to purchase the product that the taxpayer is selling, regardless of the legality of the transaction. The decision of the Court in this case, if correct, not only would result in a tax to petitioner on the amount rebated to the insured, but would require that such amount be included in the income of the insured. In the face of the law as it stood when the Congress amended section 162(c)(2) and enacted section 162(c)(3) in section 310(a) of the Revenue Act of 1971 (Pub. L. 92-178, sec. 310(a)), with the Schiffman case on the books and acquiesced in by the respondent, I find it difficult to reach that result in the absence of any indication that the Congress intended to overrule that case. On the contrary, section 310(a) of the Revenue Act of 1971 indicates, at least by implication, that the Congress recognized that a “rebate” of a portion of the price paid by the seller to the purchaser was not within the scope of section 162(c)(2) as amended. In section 162(c)(3), enacted in recognition of the problem faced in the medicare and medicaid programs, the Congress specifically included “rebates.” If the respondent’s position is correct, this would have been unnecessary. What we have here is a statute which had been interpreted by the courts so as to exclude from its scope a refund or rebate of a part of the purchase price between the seller and the buyer, regardless of its legality. That was the state of the law when Congress reenacted section 162(c)(2) as part of section 310(a) of the Revenue Act of 1971. As pointed out in Max Sobel Wholesale Liquors v. Commissioner, supra, neither the language of the statute nor the reports of the Committees would justify the inference that the Congress thereby intended to overrule the Pittsburgh Milk line of cases. The respondent also, at least by implication, recognized that the Congress had not overruled the Pittsburgh Milk line of cases in the changes which were enacted in section 310(a) of the 1971 Act. In his interpretation of that section, respondent’s only example is that of the traditional “kickback” to the ship’s captain by the shipyard. Sec. 1.162-18(b)(5), Income Tax Regs. What the majority of the Court would do here is overrule prior law, notwithstanding the failure of the respondent to seek that result in the reenactment of the statute. In fact, respondent waited some 6 years after the 1971 Act before changing his position. (Rev. Rul. 77-244, supra.) Goffe and Chabot, JJ., agree with this dissenting opinion.   Acq., 1967-2 C.B. 3, nonacq., 1977-181.R.B. 6.    Nonacq., 1959-1 C.B. 6, acq., 1962-2 C.B. 5, nonacq., 1976-331.R.B. 6.