White v. United States, 305 U.S. 281 (1938)

CERTIORARI TO THE COURT OF CIAIMS

Syllabus

1. Under §§ 23 and 101 of the Revenue Act of 1928, upon a complete liquidation of a corporation, stockholders’ losses from their investments in its stock held for more than two years are not ordinary losses deductible in full from gross income, but are capital losses 12 1/2% of which is deductible, under § 101, from the tax as computed without regard to such losses. P. 283.

2. Under this Act, stockholders’ gains and losses upon liquidation of the corporation are taxed on the same basis as gains or losses upon sales and exchanges of property, with the rate of tax prescribed by § 101. P. 284.

This conclusion follows from a comparison and analysis of §§ 12, 21-23, 101, 112, 113 and 115, and is supported by judicial construction of § 115(c), Hellmich v. Hellman, 276 U.S. 233, as it appeared in the Revenue Act of 1918, § 201(c), and by the legislative history of §§ 101 and 115, and by reports of congressional committees.

3. Article 625 of Treasury Regulations 74, interpreting §§ 101 and 115(c) of the 1928 Act, is a clear recognition that §§ 115 and 101, when rend with the other sections of the Act, are interdependent, and require stockholders’ gains upon liquidation to be taxed as are the corresponding gains on sales of property. P. 290.

4. The repeated reenactment of §§ 101 and 115(c), as they appear in the Revenue Acts of 1924, 1928, and 1932, is upon accepted principles a Congressional adoption of treasury regulations as correctly interpreting those sections, and is Congressional recognition that §§ 101 and 115(c) are to be read together in order to ascertain the method by which gains and losses upon liquidation are to be taxed. The method, in the case of stock held for more than two years, is that applied by § 101 to capital gains and losses from the sale or exchange of property. P. 291.

5. The argument that doubts must be resolved in favor of the taxpayer is rejected. P. 292.

It is a function of courts to resolve doubts, and no reason is perceived why that function should be abdicated in a tax case more than in any other where the rights of suitors turn on the construction of a statute, and it is the duty of a court to decide what that construction fairly should be.

6. Every deduction from gross income is allowed as a matter of legislative grace, and only as there is clear provision therefor can any particular deduction be allowed, and a taxpayer seeking a deduction must be able to point to an applicable statute and show that he comes within its terms. P. 292.

86 Ct.Cls. 125, 21 F.Supp. 361, affirmed.

Certiorari, post, p. 581, to review judgments rejecting claims for the recovery of money paid under additional income tax assessments. Cf. the next case.