Court Opinion

ID: 9452826
Source: CourtListenerOpinion
Date Created: 2023-08-04 17:53:04.335083+00
Date Added: 2024-06-11T17:33:22.433526
License: Public Domain

WATERMAN, Circuit Judge
(concurring) :
I concur with my brothers in affirming the Tax Court. If I had been the trier of fact I might have been inclined to have reached a different result than was reached below, but as I must appraise the facts the Tax Court found by adherence to 26 U.S.C. § 7482(a) and to the rules announced in United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 92 L.Ed. 746 (1948), and Commissioner of Internal Revenue v. Duberstein, 363 U.S. 278, *258289-291, 80 S.Ct. 1190, 4 L.Ed.2d 1218 (1960), this inclination is insufficient to justify another dissent by me from a majority opinion of a panel of my brothers. See Schley v. Commissioner of Internal Revenue, 2 Cir. Mar. 17, 1967.
I must point out, however, that I am disturbed by the slant the Tax Court has adopted when it determines whether a very wealthy taxpayer’s activity in the production of economic goods has been motivated by a “profit motive.” See Schley v. Commissioner, supra (dissenting opinion). It would seem that it has become the Tax Court’s practice to emphasize by an emphasis which I believe to be out of proportion to a “close relationship to the data of personal human experience and the multiplicity of relevant factual elements”1 the factors of a taxpayer’s great wealth and income, his love of his work, and the losses he incurs in prosecuting that work. And as to the losses, even though they, as in Schley, may have been occasioned by a forward-looking somewhat expensive temporary program adopted in the relevant taxable years so as to make future farming operations profitable, or, as here, may have been occasioned by Bes-senyey’s firm belief that her horse enterprise would assuredly make profits for her in the future, the fact that the taxpayer is wealthy enough to absorb the losses appears automatically to result in having findings found below such as those here: “Her rewards consisted of personal satisfaction in the activity.” It would seem that, as to a wealthy taxpayer, inasmuch as losses taxpayer incurs may be comfortably absorbed by him he could not have had a profit motive in engaging in the business activity that resulted in the losses.
Of course an independently wealthy person will naturally be less concerned about temporarily making ends meet in the business activity in which he is engaged than one who, as taxpayer’s parallel horse-breeder here, is “in the serious business of making a living.” But this no more indicates that the activity is conducted primarily for pleasure, see Treas.Reg. § 1.212-1 (c), than does a large corporation’s expenditure of huge sums for new product development and marketing indicate it. Also, nobody would deny that if one enjoys one’s primary business activity financial losses suffered thereby are more happily endured than such losses would be if suffered in an activity one detests. But should one’s happiness or unhappiness be conclusive on whether one is or is not in a business for profit? Moreover, it seems inequitable that a well-capitalized corporation may undertake a long-range project despite the necessity of enduring continuous early losses in the launching of the project, but an affluent individual taxpayer may not. For example, here the Tax Court apparently disregarded the testimony of taxpayer’s expert to the effect that “the enterprise should show a profit in proper time” and that taxpayer was “proceeding as expeditiously as possible” in her long-range plan of developing a new breed of luxury horses. While in this case I cannot term the Tax Court’s inferences fallacious or its ultimate finding “clearly erroneous,” I would suggest that the court in adjudicating cases of this kind, could well give more serious consideration to such factors as whether the expectation of an ultimate profit is reasonable, how the operation is conducted, to what extent the taxpayer personally participates therein, and the likelihood that the activity taxpayer is engaged in is encompassed within the normal activities that occupy the time of other wealthy taxpayers. Surely such factors are as relevant to the question of a taxpayer’s intent as the single factor of enjoyment of one’s work. My views may be caused by “an academic desire for tidiness, symmetry and precision,” but see Commissioner of Internal Revenue v. Duberstein, 363 U.S. 278, 289-290, 80 S.Ct. 1190, (1960), and the thought that in *259tax matters the Tax Court’s approach to a study of the motives of the very rich would seem to be materially different from the approach to a study of the motives of the rest of us.2

. Compare, e.g., Theodore Sabelis, 37 T.C. 1058 (1962) and Ralph A. Mauller, T.C. Memo 1966-146 (June 24, 1966) with Ellen R. Sehley, T.C.Memo 1965-111, and the present case, Margit Sigray Bessen-yey, 45 T.C. 261 (1965).

. Commissioner of Internal Revenue v. Duberstein, 363 U.S. 278, 289, 80 S.Ct. 1190, 1199, 4 L.Ed.2d 1218.