dissenting: I dissent from so much of the opinion in this case as holds that a taxpayer making his return on a cash receipts and disbursements basis may not deduct from gross income the full amount of the fire insurance premiums paid within the taxable year. The petitioner’s tax return was admittedly made on the cash basis. TTis right to do so is not questioned. The respondent simply contends that the portion of the premiums paid within the calendar year 1934 “applicable to future periods” may not be deducted from gross income.
I think it plain that in a return on a cash basis a taxpayer is entitled to deduct from gross income cash payments of expenses. The real question here is whether fire insurance premiums are an expense. *1121I think they are. Manifestly, if the fire insurance company’s agent had extended credit to the petitioner and the premiums had not been paid until 1937 the petitioner would not be entitled to deduct them from the gross income of 1934, because not paid within the year. When paid in 1937 they would be allowed as a deduction from gross income of 1937, because paid within that year.
The significance of the cash basis is that the flow of cash into and out of. the taxpayer’s treasury determines the amount of the gross receipts and deductions therefrom to be reported in the return. Speaking of the cash basis, the Supreme Court, in Avery v. Commissioner, 292 U. S. 210, said:
* * * unless Congress has definitely indicated an intention that the words should be construed otherwise, we must apply them according to their usual acceptation.
In the opinion of the Board reliance is placed upon Higginbotham-Bailey-Logan Co., 8 B. T. A. 566. The taxpayer involved in that case was on the accrual basis. It paid fire insurance premiums on policies running for more than one year. It sought to deduct in its return the full amount of the premiums paid although in its balance sheet it carried as an asset the portion of the premiums allocable to the unexpired insurance at the end of the year. The Board held that, since a return made on the accrual basis aims to allocate to the taxable year the expenses properly belonging to that year, the taxpayer was not entitled to deduct from gross income of the taxable year the portion of the premiums allocable to future periods. The Board did not hold in that case- that the fire insurance premiums were a capital expenditure; that the taxpayer acquired a capital asset which was to be depreciated over the fife of the policies. It simply held that fire insurance premiums should be expensed over the life of the policies so as to allocate to the taxable year the portion of the premiums that properly belonged to the taxable year. I do not think that the taxing statute warrants the deduction from gross income of fire insurance premiums under the heading of an allowance for depreciation.
Reference is also made to J. Alland & Brother, Inc. v. United States, 28 Fed. (2d) 792. In my opinion the principle involved in that case is not applicable to this one. The facts were that the taxpayer in 1921 agreed to pay $18,000 bonus in the acquisition of a leasehold, the period to start January 1, 1922. The taxpayer paid $10,500 of the amount in 1921 and claimed the amount as a deduction from gross income upon the ground that it made its return on a cash basis and that it was an expense of that year. The court held that it was capital expenditure. Manifestly, the principle has no application to the proceeding at bar.
*1122The reasoning of the court in Welch v. Be Blois, 94 Fed. (2d) 842, seéms to me to be correct. In the course of its opinion the court said:
* * * Insurance which is purchased and paid for this year obviously will not furnish a deductible expense for next year. If the cost of insurance is apportioned between different years, the cost of many other kinds of materials and supplies and equally ordinary requirements, must also be apportioned, and great difficulties in accounting will be introduced which are foreign to the principle which the statute contemplates and will serve no useful purpose. Expenditures for such things are in no true sense capital expenditures. * * *
The effect of the Board’s opinion in this case is needlessly to complicate the administration of the law. It denies to the taxpayer the right to make a return on a cash basis — at least so far as fire insurance premiums are concerned. It does not put the petitioner strictly on an accrual basis so far as these are concerned. It puts it on a hybrid basis for. it allows the petitioner to deduct a portion .of the premiums allocable to the period extending beyond December 31, 1934. It seems to me that it should be the policy of the Board to simplify rather than to complicate the administration of the taxing law, especially where, as here, the deferment of the deduction of a part of the premiums will, as stated by the court in Welch v. Be Blois, supra, “serve no useful purpose.”
AeNold and Hilt, agree with this dissent.