Court Opinion

ID: 9446507
Source: CourtListenerOpinion
Date Created: 2023-08-03 21:56:57.474771+00
Date Added: 2024-06-11T17:30:40.799302
License: Public Domain

*502FINNEGAN, Circuit Judge
(dissenting).
This is one of those cases where the uncontroverted operative facts are so simple their meaning leads us off in divergent directions searching for etiological implications in a check given this widowed taxpayer by her deceased husband’s employer. Mrs. Simpson’s husband commenced working for the Mueller Company in August, 1899 and remained, save for an insignificant interval, with that Corporation until he died on January 16, 1951. Admittedly there was absent any legal obligation existing by and between Mueller and Mr. Simpson to pay over money to Mrs. Simpson on the death of her husband and a careful reading of the original transcript not only supports that fact, but shows an utter lack of any contrary evidence.
Mueller first articulated its policy of taking care of widows surviving their husbands, who had been employed by Mueller, through a resolution adopted by its Board of Directors on August 18, 1910. A footnote in the history of federal taxation will show the Sixteenth Amendment was ratified on February 25, 1913. And nothing in this record indicates that Mueller embarked on its policy with the aim of circumventing tax laws culminating in I.R.C.1939.
Mueller’s accounting treatment of the disbursement to Mrs. Simpson is beside the point when all we are deciding is whether she received taxable income or a gift. Names of accounts mean little in financial analysis unless, of course, we were confronted with some uniform system of accounts prescribed by a regulatory body pursuant to enabling legislation. From the face of the record, and speaking from an accounting viewpoint, Mueller acquired no asset for the cash expended, and no liability had been discharged. But the Corporation’s cash had been reduced and net worth must be similarly reduced in order for the debits to continue to equal the credits. See Shugerman, Accounting for Lawyers, 35 (1952). Even if Mueller charged an account happily labeled “Gifts to Widows,” the economic impact on the corporation would have been the same for it diminished its asset-cash and good accounting practice would require appropriate bookkeeping entries reflecting that change in cash and its offset. Mueller’s duty to correctly reflect its financial position for its stockholders supersedes the need for some euphemistic account title congenial to Mrs. Simpson.
“ ‘Expenses’ is a word of broad import. It has no fixed definition. It is of varying signification and is dependent for its precise meaning upon its connection and the purpose to be accomplished by its use. It is comprehensive enough to include a wide range of disbursements. Standing alone, it is ambiguous. Its breadth of meaning shows the diversity of subjects which may be included within it.” Pittsfield & N. A. R. Corp. v. Boston & A. R. Co., 1927, 260 Mass. 390, 157 N.E. 611, 614. Whatever reason there might have been, and none appears of record, for allowing Mueller the payment to Mrs. Simpson as a deductible expense is irrelevant. This payment was obviously occasioned by Mr. Simpson’s death not his past services.
Although this is an appeal ,from the district court much that was said concerning Rule 52, Federal Rules of Civil Procedure in Wisconsin Memorial Park Co. v. Commissioner of Internal Revenue, 7 Cir., 1958, 255 F.2d 751, 754, has per-tinency here. The only way Mueller’s voluntary payment can be hurdled is by penalizing Mrs. Simpson for suspected state of mind imputed to various Mueller directors for the past 50 years. Instead of abandoning Rule 52 I would obey it and affirm the judgments. My position would be misunderstood if interpreted as opening the floodgates for tax avoidance in remotely similar situations. The key here lies in the record and particular facts.