dissenting: The statute involved in this matter, section 113 (b) (1) (B) of the Internal Revenue Code, provides, in substance, that the basis shall be adjusted “to the extent allowed (but not less than the amount allowable) * * *,” and Regulations 103, section 19.113 (b) (1) —1, on the same subject, provides in part that, “The determination of the amount properly allowable shall, however, be made on the basis of facts reasonably known to exist at the end of such year or period.” Such regulation seems to entail a reasonable and valid interpretation of the statute. As I view this situation, the majority opinion disregards the regulation, without saying that it is invalid ; and I do not think that it can properly be said to be invalid. Therefore, I think it should be followed. The conclusion of the majority opinion appears altogether to lack a “basis of facts reasonably known to exist at the end of such year or period,” that is, the end of the year ending May 31, 1933. The fact that for later years, 1939, 1940, and 1941, it was agreed that the useful life of the plant would expire J une 1,1953, does not, for me, constitute any stipulation applying the above regulation to the earlier years.
Virginian Hotel Corporation v. Helvering, 319 U. S. 523, appears to me to offer no assistance here. The whole point of that case was that depreciation could be “allowed” or “allowable,” even though no tax benefit was had, because of net losses taken. The case seems to add nothing to the statute, and certainly not to the regulation, in a situation where, as in the ten years here involved, depreciation was not claimed at all. United States v. Ludey, 274 U. S. 295, relied on in the majority opinion, seems to contradict the majority conclusion, for in part it says on this subject:
* * * If in any year he has failed to claim, * * * the amount to which he was entitled, rectification of the error must be sought through a review of the action of the bureau for that year. He cannot choose the year in which he will take a reduction. * * *
Also, although, as above remarked, the Virginian Hotel Corporation, is devoted to the problem posed when there is no tax benefit, it is nevertheless interesting that when that case was in the Circuit Court, Helvering v. Virginian Hotel Corporation, 132 Fed. (2d) 909, the court said:
It is well settled that allowable depreciation must be deducted from cost in arriving at the base under secs. 114 and 113 (b) even though the deduction of depreciation in prior returns has resulted in no tax benefit, and even though depreciation may not have been deducted at all in prior returns. * * * [Italics supplied.]
Beckridge Corporations. Commissioner, 129 Fed. (2d) 318, is cited for the statement last quoted. In that case no depreciation had been claimed in the taxpayer’s returns and there had been net loss each year. Nevertheless, the depreciation allowable was held deductible from the basis of the property, indicating that the rule does not depend upon deduction of depreciation. Yet, the majority opinion here makes a distinction based upon the fact of no deduction of the depreciation in the returns. In my opinion, we are required by the statute and regulation to adjust the basis by the amount of depreciation allowable under the facts as they appeared at the end of the period when no deductions were claimed. I therefore dissent.