dissenting: I am unable to agree with the holding of the majority on the fourth stated issue.
On the question raised by the fourth issue, I recognize that there has not been entire consistency in the opinions of the Board. I be*95lieve, however, that correct principles were announced in Estate of William H. Block, 39 B. T. A. 338; affd., 111 Fed. (2d) 60, where we said:
Income tax liability must be determined for annual periods on tbe basis of facts as they existed in each period. When recovery or some other event which is inconsistent with what has been done in the past occurs, adjustment must be made in reporting income for the year in which the change occurs. No other system would be practical in view of the statute of limitations, the obvious administrative difficulties involved, and the lack of finality in income tax liability which would result. * * *
The majority opinion attempts to distinguish the Block case and the decision in Commissioner v. Central United National Bank, 99 Fed. (2d) 568, affirming 33 B. T. A. 588, but I believe the attempt futile. If correct principles were applied we would deny the request that an allocated portion of the refund be included in petitioner’s gross income for the taxable year. The entire refund Should be included in income in 1939, when it was actually received. The fortuitous circumstance that the year 1934 is still open should not be held to be a controlling fact. A pertinent inquiry would be — assuming that the years subsequent to 1934 are closed, the present record being silent on the point— Is the balance of the refund free of tax, or shall we construct and apply a different rule ?
SteRNhageN and Arnold agree with this dissent.