United States v. Flannery, 268 U.S. 98 (1925)

United States v. Flannery

No. 527

Argued January 12, 1925
Decided April 13, 1925
268 U.S. 98

APPEAL FROM THE COURT OF CLAIMS

Syllabus

1. The Revenue Act of 1918 provided that net income should include "gains" derived from sales or dealings in property, §§ 212(a), and 213(a); that there should be allowed as deductions "losses" sustained during the taxable year "incurred in any transaction entered into for profit," § 214(a), and that

for the purpose of ascertaining the gain derived or loss sustained from the sale or other disposition of property . . . the basis shall be -- (1) In the case of property acquired before March 1, 1913, the fair market price or value of such property as of that date, and (2) In the case of property acquired on or after that date, the cost thereof.

§ 202(a).

Held:

(a) That the provisions of the act in reference to the gains derived and the losses sustained from the sale of property acquired before March 1, 1913, were correlative, and that whatever effect was intended to be given to the market value of property on that date in determining taxable gains, a corresponding effect was intended to be given to such market value in determining deductible losses;

(b) That the Act of 1918 imposed a tax and allowed a deduction to the extent only that an actual gain was derived or an actual loss sustained from the investment, and the provision in reference to the market value on March 1, 1913, was applicable only where there was such an actual gain or loss -- that is, that this provision was merely a limitation upon the amount of the actual gain or loss that would otherwise have been taxable or deductible. Goodrich v. Edwards, 255 U.S. 527; Walsh v. Brewster, id.,536. P. 100.

2. Decisions of this Court affecting the business interests of the country should not be disturbed except upon the most cogent reasons. P. 105.

59 Ct.Cls. 719 reversed.

Appeal from a judgment of the Court of Claims allowing recovery of an income tax paid under protest.