Court Opinion

ID: 9456055
Source: CourtListenerOpinion
Date Created: 2023-08-04 19:40:52.594756+00
Date Added: 2024-06-11T17:34:50.120326
License: Public Domain

FRED M. TAYLOR, District Judge
(dissenting):
The crucial question presented in this case is whether the tax court was clearly erroneous in finding that “petitioner has not proved that the files have a determinable useful life.” The uncontra-dicted evidence in the record is that the files and records were useful in the insurance business of petitioner for a period of three to five years and that they would become worthless and obsolete at the end of six years. This was in effect the testimony of Mr. Davis, a major stockholder of petitioner and an experienced insurance man, which testimony was not challenged on cross-examination and was corroborated by Mr. Den-ton, an expert in the insurance business. Furthermore, there was considerable testimony in regard to the use of the files by petitioner in its business for the period of time before they became obsolete. It was stipulated by the parties that the files and records acquired by petitioner were assets and the value assigned to them by petitioner was not in issue.
The tax court held that the evidence of useful life offered by the taxpayer did not have sufficient probative value to overcome or rebut the presumption of correctness of the Commissioner’s determination, on the basis that such evidence was “very scant,” “vague,” and “conclusory.” The majority agrees that the tax court is not bound to accept the testimony of an interested party even though that testimony was uncontro-verted.
I agree with the majority that this court has consistently held that the Commissioner’s determinations are presumed correct but that the presumption disappears upon introduction of appropriate evidence by the taxpayer sufficient to support a contrary finding. I must and do disagree with the majority that the uncontradicted evidence in this case was insufficient to overcome such presumption and to support a contrary finding. I believe the record is sufficient to support a finding in regard to the useful life of the files and that it was error not to make such a finding. It is difficult for me to understand what further evidence was necessary to be introduced by the taxpayer to overcome the presumption since no contrary evidence was offered. The testimony of Mr. Davis, although brief, was positive and to the point that the files were useful and valuable in the business, that their utility declined over a period of three to five years, and that they became obsolete after six years because changes in appraisal values, cost of living, and the general situation of the policy holder render the information valueless after that period. The witness therefore stated more than a mere “conclusion” that the files had a six year life, in that he advanced factual *1228explanations and reasons for the six year period chosen.
The majority opinion cites the holding of this court in Wood v. Commissioner of Internal Revenue, 338 F.2d 602 (9th Cir. 1964), for the proposition that the tax court is not required to accept or believe the uneontroverted evidence offered by the taxpayer. While I do not dispute the validity of the proposition stated or the numerous authorities in support thereof, I believe that the rule is inapposite here. The rule was first clearly stated in Quock Ting v. United States, 140 U.S. 417, 420-421, 11 S.Ct. 733, 734, 35 L.Ed. 501 (1891), cited by the majority here, and quoted with approval by this court in Factor v. Commissioner of Internal Revenue, 281 F.2d 100 (9th Cir. 1960). The Supreme Court there stated that:
“Undoubtedly, as a general rule, positive testimony as to a particular fact, uncontradicted by any one, should control the decision of the court; but that rule admits of many exceptions. There may be such an inherent improbability in the statements of a witness as to induce the court or jury to disregard his evidence, even in the absence of any direct conflicting testimony. He may be contradicted by the facts he states as completely as by direct adverse testimony; and there may be so many omissions in his account of particular transactions, or of his own conduct, as to discredit his whole story. His manner, too, of testifying may give rise to doubts of his sincerity, and create the impression that he is giving a wrong coloring to material facts. All these things may properly be considered in determining the weight which should be given his statements, although there be no adverse verbal testimony adduced.” [Emphasis added.]
The present case falls within none of the exceptions enumerated. The testimony here is neither inherently improbable nor self contradictory, as it clearly was in Quock Ting v. United States, supra, nor are there significant omissions in the testimony, as for example, in Birnbaum v. Commissioner of Internal Revenue, 117 F.2d 395 (7th Cir. 1941).
The sole possible reason for discrediting the testimony in this case is the demeanor of the witness, as the majority suggests in citing Wood v. Commissioner of Internal Revenue, supra. While the attitudes of a witness cannot be made a part of the record, and therefore the evaluation of demeanor is left exclusively to the trial court, there is nothing in this record to indicate that the tax court tended to discredit the witness’s testimony because of his demeanor, or because the testimony lacked sincerity or candor. On the contrary, it appears that the tax court’s finding of insufficiency was predicated on the evidence itself, and not on the manner of its presentation. In my view, therefore, there is “no circumstance in the record which casts doubt on the verity” of the uncontroverted evidence offered by the taxpayer regarding the useful life of the files. Perlmutter v. Commissioner of Internal Revenue, 373 F.2d 45 (10th Cir. 1967); Nicholas v. Davis, 204 F.2d 200 (10th Cir. 1953). The fact alone that the witness has an interest in the subject matter does not justify disregarding his otherwise positive and uncontradicted testimony. Southeastern Canteen Co. v. Commissioner of Internal Revenue, 410 F.2d 615 (6th Cir. 1969); Stafos v. Missouri Pac. R. Co., 367 F.2d 314 (10th Cir. 1966).
This court in Niederkrome v. Commissioner of Internal Revenue, 266 F.2d 238, 241 (9th Cir. 1958) stated the rule to be that:
“We have consistently held that a determination by the Commissioner raises a presumption of correctness which disappears once evidence which would support a contrary finding has been adduced in the trial of a contested issue.” [Emphasis added]
*1229I am convinced that the evidence introduced by taxpayer was sufficient to comply with this rule. With the resulting disappearance of the presumption of correctness, the taxpayer’s evidence necessarily becomes the sole evidence adduced as to the contested issue. Accordingly, I would reverse.