Court Opinion

ID: 9447769
Source: CourtListenerOpinion
Date Created: 2023-08-03 22:44:00.225971+00
Date Added: 2024-06-11T17:31:11.182433
License: Public Domain

SCHNACKENBERG, Circuit Judge
(dissenting).
Even if we had a right to disregard rule 52(a),1 and were to weigh the evidence heard by the Tax Court, we would still arrive at substantially this finding of fact made by that court:
“The series of transactions * * constituted a single planned transaction entered into by petitioner with no intention that such transactions should produce a business profit, gain or benefit other than that which might result from a deduction for bond premium amortization in accordance with sections 23 and 125 of the Code and a deduction for a contribution of its equity in the Appalachian bonds. * * * ”
The language of the Supreme Court in Gregory v. Helvering, 293 U.S. 465, 55 S.Ct. 266, 79 L.Ed. 596, characterizes the real nature of the transactions of petitioner in this case. The court said, 293 U.S. at page 469, 55 S.Ct. at page 267:
“ * * * The legal right of a taxpayer to decrease the amount of what otherwise would be his taxes, or altogether avoid them, by means which the law permits, cannot be doubted. United States v. Isham, 17 Wall. 496, 506 [21 L.Ed. 728]; Superior Oil Co. v. [State of] Mississippi, 280 U.S. 390, 395-396 [50 S.Ct. 169, 74 L.Ed. 504]; Jones v. Helvering, 63 App.D.C. 204, 71 F. (2d) 214, 217. But the question for determination is whether what was done, apart from the tax motive, was the thing which the statute intended. * * *
“ * * * Putting aside, then, the question of motive, in respect of taxation altogether, and fixing the character of the proceeding by what actually occurred, what do we find? Simply an operation having no business or corporate purpose — a mere device which put on the form of a corporate reorganization as a disguise for concealing its real character, and the sole object and accomplishment of which was the consummation of a preconceived plan, * * *. It was brought into exist*432ence for no other purpose; it performed, as it was intended from the beginning it should perform, no other function. * * * ”
We find pertinent here what the court said, 293 U.S. at page 470, 55 S.Ct. at page 268:
“ * * * The ruie -which excludes from consideration the motive of tax avoidance is not pertinent to the situation, because the transaction upon its face lies outside the plain intent of the statute. To hold otherwise would be to exalt artifice above reality and to deprive the statutory provision in question of all serious purpose.”
In Gregory v. Helvering, supra, the court affirmed the Second Circuit, 69 F.2d 809, where it was said, at page 810:
“ -» * * Therefore, if what was done here, was what was intended by section 112(i) (1) (B), it is of no consequence that it was all an elaborate scheme to get rid of income taxes, as it certainly was. Nevertheless, it does not follow that Congress meant to cover such a transaction, not even though the facts answer the dictionary definitions of each term used in the statutory definition. It is quite true, as the Board has very well said, that as the articulation of a statute increases, the room for interpretation must contract ; but the meaning of a sentence may be more than that of the separate words, as a melody is more than the notes, and no degree of particularity can ever obviate recourse to the setting in which all appear, and which all collectively create * * ”
To the same effect is Knetsch v. United States, 364 U.S. 361, 81 S.Ct. 132, 5 L.Ed.2d 128.
■ The total cost of the bonds was $115,-843.75, and, since petitioner borrowed $100,000 of this amount, it was actually out-of-pocket $15,843.75. Obviously, it did not intend to hold the bonds for any appreciable length of time. Its bank note for $100,000 was dated September 30, 1953 and was due 35 days after date. Petitioner planned to pay this loan when due, as its own president testified, through the donee’s sale of the bonds. It was, of course, very unlikely that the bonds would either greatly appreciate or depreciate in value during the short period they were held by petitioner. In any event, any augmentation or diminution of such equity, by reason of fluctuation in the market over the 34 day period between the purchase of the bonds on September 22, 1953 and the gift thereof to the Foundation on October 26, 1953, would simply result in increasing or diminishing the size of the gift. Moreover, during the short period that it actually held the bonds, petitioner would not be any the poorer for the cost of the loan, since the interest rate on the latter (3% per cent) was precisely the same as the rate of interest earned by the bonds. Thus, in net effect, petitioner simply invested $15,843.75 with the expectation of making a gift to the Foundation of whatever amount that investment would produce, in the form of its equity in the bonds. Its economic position was altered only to the extent of this net investment, and the investment was made only for the ultimate purpose of making the gift. As matters turned out, the bonds actually appreciated in value to such an extent that the Foundation realized a net amount, on the sale of the bonds, somewhat in excess of petitioner’s cash investment. This fact, however, does not alter the situation so far as it affected petitioner’s economic position, since its intention at all times was to make the gift to the Foundation.
Tax benefits are available only where the commercial substance of a transaction corresponds to its form.
I would hold, in the case at bar, that petitioner’s purchase and ephemeral ownership of bonds had no independent commercial significance but were simply a device to secure an amortization deduction in addition to a charitable contribution deduction. It is my opinion that only the gift of bonds had any real economic significance.
For these reasons, I would affirm.

. Fed.Rules Civ.Proc. 28 U.S.C.A., rule 52(a).