dissenting: The premises upon which the majority holding is based are (1) that husband and wife are separate taxpayers, and (2) that the net loss provisions of the statute apply only to the individual taxpayer sustaining the loss. Upon these premises the conclusion is reached that a carried forward loss may be used as a deduction only by the individual taxpayer who sustained the loss.
Passing the first premise without comment, I think that the second is wrong. The statute provides that where husband and wife file a single joint return “ the tax shall be computed on the aggregate income.” The income described by the adjective “ aggregate ” is obviously net income, as it is net — as distinguished from gross— upon which tax is computed. In arriving at net income one of the allowable deductions is the net loss for the preceding year. The language of the statute is, “ the amount thereof [the net loss] shall be allowed as a deduction in computing the net income of the taxpayer.” In thus allowing a net loss as a deduction in computing net income the net loss is treated in the same manner as other deductions — expenses, bad debts, etc. — that is, as a deduction from gross income in order to determine net income. The same reasoning which would confine net losses to the individual sustaining them would require similar treatment of other deductions, and yet the other deductions have never been so restricted. As early as 1921, in O. D. 1005, C. B. 5, p. 196, it was held:
Where the net income of one spouse is in excess of $2,000 but the other has allowable deductions, which if applied against this net income will result in mating the figure representing the aggregate net income of both less than $2,000, no return need be filed.
If a net loss is so strictly individual and personal as the majority opinion holds, it would seem erroneous to reduce the net loss of one spouse to be carried over by the nontaxable income of the other, but such is the rule laid down in Samuel G. Adams, 19 B. T. A. 781. In that case we said in part:
* * * When a husband and wife elect to file a joint return in the name of the husband, they thereby adopt a method under which the only return submitted is this joint return, which is sworn to by the husband and the tax *438shown due thereon is assessed against him. In determining whether tax is due, all items of taxable income and allowable deductions o-f both parties are taken into consideration in the same manner as if a determination were being made with respect to one taxpayer. In other words, the two are treated as a unit for the purpose of determining taxable net income and we think a different course should not be pursued when we come to arrive at a “net loss” as applicable to the year for which the joint return was filed. To determine the “ net loss ” of an individual for 1921, it is necessary to take into consideration not only the items of gross income specified in the statute, but also nontaxable income received by such individual. And the same method' would obviously apply where a “ net loss ” is being determined on the basis of a joint return for one year which would be allowable as a deduction in computing net income on a joint return for the subsequent year. * * *
The majority opinion cites Woolford Realty Co. v. Rose, 286 U. S. 319. That case involved consolidated returns of corporations, which seem to me to be fundamentally different from joint returns of husband and wife. In a consolidated return the net income or loss of each corporation is separately computed and the net results are combined. No corporation in the initial computation can take advantage of an affilate’s income or losses. In the case of a joint return of husband and wife “ gross income and deductions are listed as though they belonged to the one making the return.” Frank B. Gummey, 26 B. T. A. 894; Samuel G. Adams, supra, O. D. 1005, supra; art. 381, Regulations 14. That is, all income and deductions in the first instance go into hotchpot and the net result determines whether any return need be filed, and, if so, the tax is calculated on that result — what the statute describes as “ aggregate income.”
Prior to the Revenue Act of 1928 the liability of affiliated corporations for tax was limited by statute, in the absence of an agreement among them, to the portion of the total tax determined on the basis of the net income assignable to each corporation. That rule was subsequently changed and the liability made several. See art. 15, Regulations 15. In the case of a joint return it seems never to have been questioned but that husband and wife were severally liable for the full amount of the tax. It was so ruled under the Revenue Act of 1918, see I. T. 1515, II-l C. B. p. 144, and no holding to the contrary has been brought to our attention.
Corporations filing consolidated or separate returns are bound to file in the same way for subsequent years except as they may obtain permission from the Commissioner to change. An election made by husband and wife does not bind them for any other year; they are entirely free to file either separate or joint returns for successive years without regard for the kind of return filed in any prior year, and without obtaining the consent of the Commissioner to change.
In the Woolford Realty Co. case it was pointed out as a practical consideration that the result of failing to confine a net loss to the corporation sustaining it would be “ that a prosperous corporation *439could buy the shares of one that had suffered losses and wipe out thereby its own liability for taxes.” It would require a most fertile imagination to suppose any such consideration applicable to husband and wife.
For these reasons I think the second premise of the majority opinion to be erroneous and the conclusion reached must fall with it.
Trammell, Matthews, Goodrich, and Leech agree with this dissent.