Court Opinion

ID: 4483570
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:16:10.87522+00
Date Added: 2024-06-11T15:04:27.336059
License: Public Domain

Murdock, J., dissenting: The petitioner received money in 1937 for what might be described as one-half of the international bridge which it had formerly operated. This money was received pursuant to a contract voluntarily entered into in an earlier year. The transaction in 1937 was, for income tax purposes, a sale or disposition. The sale or disposition resulted in a loss ,for income tax purposes. The transaction, for all practical purposes, reduced the petitioner’s business by approximately one-half, as must have,been contemplated as a possibility when the contract was originally made. The reduction in size of the business through this disposition was a direct cause of the loss or, to put it the other way around, the loss was a consequence of a change in the size or condition of the business engaged in by the taxpayer. Section 711(b) (1) (K) (ii) provides in such cases that a deduction shall not be disallowed. I am unable to follow the reasoning of the prevailing opinion which holds that the deduction shall be disallowed for 1937. That opinion speaks of the 1937 transaction as a condemnation by the Mexican Government. There was no condemnation. The Mexican Government merely took in 1937 what it had a right to take under the earlier contract. I could not distinguish this case from one in which a taxpayer had voluntarily sold one-half of its business at a loss. The loss was in a sense a consequence of the election made by the Mexican Government. But loss in this connection is an income tax concept. Even a condemnation is usually followed by an award based upon appraisals, and either gain or loss may result, depending upon whether the amount of the award exceeds the basis for gain or loss on the property. The loss was a consequence of the disposition of property for less than its basis. The disposition was a change in the size of the business. I see no reason to conclude that Congress intended to disallow a deduction under such circumstances. TuRNER and Harron, JJ., agree with this dissent.