Court Opinion

ID: 6923082
Source: CourtListenerOpinion
Date Created: 2022-07-23 23:08:43.178807+00
Date Added: 2024-06-11T16:06:51.335418
License: Public Domain

JERTBERG, Circuit Judge
(dissenting).
I am in agreement with the majority opinion insofar as it holds that the determinations made by the Commissioner are valid and that the petitions for redeterminations filed by petitioners properly invoked the jurisdictions of the Tax Court. However, I am unable to agree with the majority holding that the Tax Court was under no duty to make findings of fact but could rest its redeterminations upon the presumption of correctness of the Commissioner’s 'determinations.
I write at some length only because I feel that the decision in this case involves procedural matters which are important in the administration of the Revenue laws.
It is clear, as the majority opinion points out, that the “motions for judgments on the pleadings” were improper. The Tax Court characterized such motions as “meaningless.” Such motions, however, might reasonably have been construed as motions requiring the Commissioner to elect which of his conflicting determinations he wished to stand upon.
The Tax Court stated, “It is to be understood that such judgments will be based upon the presumption of correctness of respondent’s determinations and petitioners’ failure to sustain their burden of proving they were not.” Petitioners concede the correctness of the alternative position taken by the Commissioner. Under such circumstances, they should not be required to prove the correctness of the position taken and asserted by him. See Harbor Plywood Corporation v. Commissioner of Internal Revenue, 143 F.2d 780 (9th Cir. 1944), at p. 783.
The two positions taken by the Commissioner are based upon conflicting factual situations which are mutually exclusive. They cannot both be correct. The situation presented is not the application of conflicting legal theories of liability sought to be applied to the same set of facts or determinations made *708against different taxpayers in respect to the same income.
In the Commissioner’s first position, it is asserted that the lot sales were those of the respective corporations and that the net profits are taxable, first, to such corporations and then, as corporate distributions, to petitioners, as stockholders, as ordinary income. In the second position of the Commissioner, it is asserted that the homes were not capital assets but were held primarily for sale to customers in the ordinary course of petitioners’ trade or business and that the net profits from the sales were taxable to petitioners as ordinary income.
While this Court has upheld the validity of conflicting determinations by the Commissioner against the same taxpayer in respect to the same income [see Revell, Inc. v. Riddell, cited in the majority opinion], such holding was reached because of the duty of the Commissioner to protect the revenue. The duty of the Tax Court is to base its redetermination on law applicable to the case before it. I believe redetermination consists of more than simply adopting the amounts of deficiencies fixed in the Commissioner’s determinations in instances where the determinations are based upon conflicting factual determinations which are mutually exclusive. I believe under such circumstances that redetermination should inform the taxpayer as to which determination the presumption of correctness has been applied. Redetermination should inform the taxpayer of the basis of law and fact supporting the re-determination. See Helvering v. Tex-Penn Company, 300 U.S. 481, at p. 498, 57 S.Ct. 569, 81 L.Ed. 755. As stated in Timmons v. Commissioner of Internal Revenue, 198 F.2d 142 (4th Cir. 1952), at p. 143:
“The court should have found the facts upon which the reconstruction was based so that we could judge whether or not it was properly made. It is well settled that ‘there must be findings, stated either in the court’s opinion or separately, which are sufficient to indicate the factual basis for the ultimate conclusion.’ ”
(Citation of cases omitted.)
To the same effect, see Estate of Albert E. MacCrowe, etc., et al. v. Commissioner of Internal Revenue, 252 F.2d 293 (4th Cir. 1958).
In the instant cases the petitioners do not know nor does this Court know, whether the redeterminations are based upon the premise that the net profits realized by the respective corporations from the lot sales are taxable to the petitioners as corporate distributions in the nature of dividends or on the premise that the lots were held by petitioners primarily for sale to customers in the ordinary course of the trade or business of the petitioners and that the net profits from the sales are taxable to petitioners as ordinary income. In my view, it is the duty of the Tax Court to embody in its redeterminations the basis in fact of its decisions. This is particularly true in the instant cases where the record reveals that there are cases pending in the Tax Court wherein the Commissioner determined tax deficiencies against petitioners as transferees of the respective corporations in respect to the same net profits from the lot sales as are involved in the instant cases.
The majority opinion evinces no concern for the plight of the petitioners who conceivably might pay tax on the same income twice without hope of relief. I do not share the view expressed in the majority opinion that the petitioners are simply the victims of their own cunning legal maneuvers and, therefore, have no right to complain.
I have been unable to find any other decision of the Tax Court wherein the presumption of correctness has been applied by the Tax Court to alternate determinations of the Commissioner against the same taxpayer in respect to the same income based upon conflicting factual situations which are mutually exclusive.
I would remand these cases to the Tax Court with directions to adopt one or the other of the conflicting determinations as the basis for the application of the presumption of correctness. Upon re*709mand, I would suggest that the Tax Court apply its expertise to the question of burden of proof in the circumstances of these cases. In this connection, I call attention to the ease of Lawrence M. Hirsig v. Commissioner, 4 T.C.M. 848. In that case, two cases were consolidated for trial. In one case the Commissioner made a deficiency tax determination against Hirsig. In the other case the Commissioner made a tax deficiency determination against Lawrence M. Hirsig, Inc., a Corporation. Both determinations related to the same income. In the course of its opinion the Court stated:
“The conflicting determinations of the Commissioner detract from, if they do not completely nullify any presumption of correctness otherwise attributable to them. Cf. Helvering v. Taylor, 293 U.S. 507 [55 S.Ct. 287, 79 L.Ed. 623, 14 AFTR 1194].”