dissenting: The question presented is one of first impression and the answer is not free from doubt. However, I think the statute requires a different answer than the one arrived at by the majority. A partnership while generally spoken of as an income computing entity is not a tax computing entity, for it is always the taxpayer who computes the tax and the taxpayer is the partner and not the partnership.
Section 182 of the Internal Revenue Code provides how the net income of a partner will be computed and in subsections (a) and (b) it states that his distributive share of the capital gains and losses of the partnership (whether short-term or long-term) will be included as part of his gains and losses from the sale or exchange of capital assets. It is only in subsection (c) that it is stated that the partner’s distributive share of the ordinary net income will be as computed by the partnership as such, or in the language of the statute as computed in section 183 (b).
When we turn to section 183 (b) we find that (b) (1) provides that in computing the net income of a partnership “There shall be segregated the gains and losses from sales or exchanges of capital assets,” and subsection (b) (2) provides that ordinary net income or loss will be determined “After excluding all items of gai-n and loss from sales or exchanges of capital assets.”
This separate and distinct treatment of partnership capital gains and losses is further expressed in the offsetting of capital losses. The extent to which capital losses of a partnership are allowed to the individual partner is not limited by the capital gains of a partnership, but by his share of the capital gains plus the net income of the individual partner, or $1,000, whichever is smaller. See section 117 (d).
It is thus seen that as now provided capital gains and losses of a partnership are segregated and excluded from the computation of the ordinary net income of a partnership. The capital gains do not become a part of that income, but instead are listed in the partnership return for information purposes and enter directly into the income of the individual partners. In these circumstances, I think it is only reasonable that the individual partner determine the method of reporting and accounting for his share of the partnership gains and losses.
All agree that the transaction in question is one that constituted an installment sale within the purview of subsection 44 (b) of the Internal Revenue Code. The question whether the individual partner, as contrasted to the partnership, may make the election is, in my view, resolved by the segregation and exclusion of section 183 which in effect excepts partnership capital gains and losses from the general rule that the partnership is the income computing entity. Since the partnership capital gains and losses may not, as in the computation of ordinary income of individuals, corporations and others, be included in the ordinary net income of the partnership, but must be set aside and chan-nelled directly to the individual partners, I think it is the individual partners rather than the partnership that must make the election under section 44 (b).
I think the petitioner should prevail.
KeRN, VaN FossaN, Hill, JoiiNsoN, and Bulge, JJ., agree with this dissent.