dissenting: The petitioner sold certain pieces of property. In years prior to the taxable year he received payments on account, which, in the case of each sale, amounted to less than his cost of the property sold. Petitioner treated these payments as recoveries of capital on the ground that the obligations of the purchasers to make such payments had no fair market value. The majority opinion formally approves' this treatment which had, in fact, been approved by the Commissioner. In the taxable year the petitioner repossessed each property in satisfaction of the unpaid purchase price. The question is the gain or loss sustained by the petitioner on such repossession.
The majority opinion holds that in computing gain or loss upon repossession there is a material distinction between those cases in which the taxpayer has sold the property on a deferred payment basis and retained the legal title as security for the future payment, and where he has conveyed legal title and retains a mortgage conveyance for the same purpose. As to the basis for such distinction the opinion is silent.
I can conceive of no theory upon which such a distinction can be justified. In both cases the result to the seller is identical. The loss or gain realized is in fact the same. Both are cases of sales of property. I can not accept a theory under which the taxpayer, merely through-the mechanics he has employed to secure payment of the purchase price, will realize a taxable gain, in the event the property is repossessed, but would be held to have sustained a deductible loss *194in the same transaction, if he used slightly different mechanics to do the same thing.
For purposes of illustration let us assume that the taxpayer here owned two lots which cost him $5,000 each and which he sold to the same purchaser on the same day for $10,000 each. On each lot the purchaser made a cash payment of $2,000 and agreed to pay the balance in equal periodic installments. In the sale of one lot the taxpayer executed a deed and took back a purchase money mortgage. In the sale of the other, the parties executed a contract under which it was agreed that the taxpayer would retain legal title until the final payment was made. In both cases the taxpayer treated the cash payments as recoveries of capital, as was done in the case at bar. Let us assume further that the purchaser defaults in the following year and his offer to reconvey, to the taxpayer, his interest in the two lots for the surrender of his notes is accepted, and this is done. The lots have each a fair market value of $2,000 as of the date of repossession.
So far as the taxpayer is concerned, the result in each case is, in fact, the same and yet the application of the theory of the majority opinion would require an entirely different computation. In the case of the lot upon which the taxpayer had taken back a purchase money mortgage, the rule recognized in Henry Heldt, 16 B. T. A. 1035, and other similar cases cited in the majority opinion would be applied and the taxpayer would be held to have sustained a deductible loss of $1,000. This would be the excess of his basis, which is $5,000, less $2,000 recovered in the cash payments made, or $3,000, over the $2,000 fair market value of the property at the time repossessed. In the sale of the other lot, identical in all respects except for the fact that the seller used a slightly different method for securing the payment of the deferred installments, our decision of some years back in Galvin T. Graves, 17 B. T. A. 1318, would be invoked. The fair market value of the property repossessed would be disregarded and the taxpayer would be held to have realized a taxable gain of $2,000, composed of the payments on account which were “forfeited” to him on repossession.
In the recent case of Boca Ratone Co. v. Commissioner, 86 Fed. (2d) 9, reversing 31 B. T. A. 1060, even though the respondent’s regulations had approved it, the court specifically rejected this very distinction upon which the majority opinion is predicated. In this opinion the court states:
* * * Taxation is a practical matter. Tlie reasoning of the Board in an effort to justify the distinction made in the Regulations is too technical, refined, and legalistic. The Regulations as to this distin'ction exceed the provisions of the Statute and are invalid. If there is any doubt about this, it should be resolved in favor of the petitioner. Gould v. Gould, 245 U. S. 151, *195153, 38 S. Ct. 53, 62 L. Ed. 211; Crocker v. Malley, 219 U. S. 223, 253, 39 S. Ct. 270, 63 L. Ed. 573, 2 A. L. R. 1601; United States v. Field, 255 U. S. 257, 262, 41 S. Ct. 256, 65 L. Ed. 617, 18 A. L. R. 1461.
The decision of the Third Circuit in Boca Ratone Co. v. Commissioner, supra, has been accepted and followed by us in the recent case of Eggerman Investment Co., 36 B. T. A. 1196. It is directly in point here. The majority opinion attempts' to distinguish this case with the mere statement that there the taxpayer had elected to return his gain on the installment basis. This is a distinction without a difference. The principle announced by the court is in no wise affected or controlled by the method used by the taxpayer in reporting the income realized on the sale. It is evidently overlooked that section 44 affects, only, the year in which the income from a given transaction is to be taxed. Its application does not increase or decrease the amount of the gain realized. The gain or loss upon repossession of property, where payments made have been reported upon the installment basis, is the same amount as in cases where that basis has not been used except for the reduction of the amount of gain or the increase of the amount of loss by the sum of that portion of prior payments which had been included in income.
I think that the gain realized in all of the pending transactions should be computed in accordance with the rule laid down in Henry Heldt, supra, and similar cases cited in the majority opinion. Section 44 (d) applies that rule in cases where the income realized prior to the repossession had been returned upon the installment basis. It is my opinion that this method of computation should be used in both the classes of sales here and gives the actual gain realized. The method the majority opinion applies to five of the pending transactions and which disregards, as an element in the computation of gain or repossession, the fair market value of the property repossessed, is erroneous.