He made deficiency assessments according to the view

This preview shows page 2 - 3 out of 3 pages.

*He made deficiency assessments according to the view just stated and the Board of Tax Appeals approved the result.The Circuit Court of Appeals held that, in the circumstances, it was impossible to determine with fair certainty the market value of the agreement by the Youngstown Company to pay 60 cents per ton. Also, that respondent was entitled to the return of her capital--the value of 250 shares on March 1, 1913, and the assessed value of the interest derived from her mother--before she could be charged with any taxable income. As this had not in fact been returned, there was no taxable income.We agree with the result reached by the Circuit Court of Appeals.The 1916 transaction was a sale of stock--not an exchange of property. We are not dealing with royalties or deductions from gross income because of depletion of mining property. Nor does the situation demand that an effort be made to place according to the best available data some approximate value upon the contract for future payments. This probably was necessary in order to assess the mother’s estate. As annual payments on account of extracted ore come in they can be readily apportioned first as return of capital and later as profit. The liability for income tax ultimately can be fairly determined without resort to mere estimates, assumptions and speculation. When the profit, if any, is actually realized, the taxpayer will be required to respond. The consideration for the sale was $2,200,000.00 in cash and the promise of future money payments wholly contingent upon facts and circumstances not possible to foretell with anything like fair certainty. The promise was in no proper sense equivalent to cash. It had no ascertainable fair market value. The transaction was not a closed one. Respondent might never recoup her capital investment from payments only conditionally promised. Prior to 1921 all receipts from the sale of her shares amounted to less than their value on March 1, 1913. She properly demanded the return of her capital investment before assessment of any taxable profit based on conjecture.“In order to determine whether there has been gain or loss, and the amount of the gain, if any, we must withdraw from the gross proceeds an amount sufficient to restore the capital value that existed at the commencement of the period under consideration.” Doyle v. Mitchell,247 U. S. 179, 184, 185 [1 USTC¶17]. Rev. Act 1916, Sec. 2, 39 Stat. 757, 758; Rev. Act 1918, c. 18, 40 Stat. 1057. Ordinarily, at least, a taxpayer may not deduct from gross receipts a supposed loss which in fact is represented by his outstanding note. Eckert v. Commissioner of Internal Revenue,283 U. S. 140 [2 USTC¶714]. And, conversely, a promise to pay indeterminate sums of money is not necessarily taxable income. “Generally speaking, the income tax law is concerned only with realized losses, as with realized gains.”

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture