Houston Textile Co. v. Commissioner of Internal Revenue
This text of 173 F.2d 464 (Houston Textile Co. v. Commissioner of Internal Revenue) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fifth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.
Opinion
This petition brings up for solution one of those difficult jigsaw tax law puzzles all too common in the present deplorable crazy quilt patchwork state of the Internal Revenue laws. Of this one we think it may be truly said, “This kind cometh not out save by fasting and by prayer”.
Broadly stated, the question for decision here concerns the adjusted excess profits net income credit to be allowed petitioner under Sec. 26(e)', as computed under Sec. 711(a) (3) (B), I.R.C. 26 U.S.C.A. §§ 26, 711(a) (3) (B), for a short tax year of three months.
More narrowly stated, it is whether the correct amount is $81,746.17, the credit based on a full year as claimed by petitioner, or $29,928.95,. the credit based-on the short year as determined by the commissioner and the Táx Court.
Still more narrowly stated, it is whether, as contended by the Commissioner and found by the Tax Court, Sec. 29.47-1 Supplement to Regulations 111, under the terms of which the smaller amount was arrived at, is consistent with and a reasonable application of Sec. 26(e) and related sections and, therefore, is valid and controlling here.
The Tax Court, in an opinion1 setting out the facts2 and the applicable statutes, [465]*465and leaning heavily on the invoked regu-. lation, makes it clear that the facts are not in dispute and that the question to be decided is purely one of law.
The petitioner conceding that if the regulation is valid, the challenged determination must stand, assails the regulation and the opinion of the Tax Court as not reasonably interpreting- and applying the statute, but as unreasonably amending, indeed rewriting, it. It insists that the determination is without legal basis. Pointing to what it claims is a finding as of uncontested fact that “the adjusted excess profits net income” of petitioner, as defined in Sec. 710(b) is $81,764.17, it insists that the'tax court was wrong in holding that Congress could not have intended such a result, wrong in holding that the regulation preventing it is valid.
The commissioner denying that the Tax Court found that petitioner’s actual adjusted excess profits net income was $81,764.17, points out that this was a finding not of the actual adjusted excess profits net income for the three months taxable year but a finding of what such net income would be if figured on a theoretical 12 mouths basis. Pointing out further that the computation under Sec. 711(a) (3) (B) results in imposing the amount of $28,432.-50 as the excess profits tax for the short taxable year,3 he insists that the Tax Court was right in finding, as the correct amount, $29,928.95, the amount of which the tax actually imposed and paid, $28,432.50 was 95 percent. He calls to our attention, too, that the credit allowed under Sec. 26(c) is “to the extent provided in the various sections imposing the tax”, and that Sec. 711 (a) (3) must, therefore, be read in conjunction with Sec. 710(b) and Secs. 13(a) (2) and 15(a), I.R.C. Finally, citing in support Advance Aluminum Castings Corporation v. Commissioner, 7 Cir., 168 F.2d 3’53, the Commissioner insists that, the regulation aside, petitioner must fail, for the burden, to point to, statutory language giving it credit in an amount exempting it from a great part of the tax for the short year, is far heavier than petitioner can bear.
As to the regulation, the Commissioner, citing the cases4 holding that treasury regulations must be sustained unless unreasonable and plainly inconsistent with the statute, insists that the regulation does no more than spell out the reasonable construction which must be placed upon the body of applicable statutes when read and interpreted as a whole. We agree with the Commissioner.
We need not determine whether, in the present diffused and disconnected state of the statutes, each section and subdivision seeming to the uninitiate to exist separate and apart, wrapped in the solitude of its own originality, and to present as a whole an apparently fortuitous and unrelated concourse, we could unpuzzle the puzzle, [466]*466without the aid of the regulation, by mere assiduous assembling, sorting and selection of the statutory pieces. For any doubt we might have, as to whether the construction put upon the statutes by the Commissioner and the Tax Court rather than the one urged upon us by the petitioner is correct, is dispelled by a reading of the regulation and the reflection that whether the matter is as simple and plain as Commissioner and Tax Court see it, the statutes are certainly subject to the construction the regulation gives them. The regulation is reasonable, consistent, and, therefore, valid, and it is controlling here.
The petition is Denied. The order of the Tax Court is Affirmed.
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Cite This Page — Counsel Stack
173 F.2d 464, 37 A.F.T.R. (P-H) 1140, 1949 U.S. App. LEXIS 4414, Counsel Stack Legal Research, https://law.counselstack.com/opinion/houston-textile-co-v-commissioner-of-internal-revenue-ca5-1949.