*2579 A loss for the six-month period ended December 31, 1921, is not a net loss for any taxable year beginning after December 31, 1920, within the purview of section 204 of the Revenue Act of 1921, and such loss is not a legal deduction from gross income in a return for the calendar year 1922.
*435 This proceeding is for the redetermination of a deficiency in income tax for the year 1922 in the amount of $2,025.39. The point in issue is the right of the petitioner to deduct from gross income a loss shown on an amended income and profits-tax return for the six-month period ended December 31, 1921.
FINDINGS OF FACT.
The petitioner is a Massachusetts corporation. Down to and including the twelve-month period ended June 30, 1921, the petitioner made its income-tax returns on the basis of a fiscal year ended June 30.
In the summer of 1921, at the suggestion of the Department of Public Utilities of the Commonwealth of Massachusetts and for the purpose of placing all its annual returns upon a calendar year basis, and with the permission of the Commissioner*2580 of Internal Revenue, the petitioner changed its accounting period for the purpose of income-tax returns from the fiscal year basis to a calendar year basis and, in accordance with the provisions of the Revenue Act of 1921, filed a separate return for the six-month period ended December 31, 1921, and thereafter filed returns on the calendar year basis. The return filed for the six-month period ended December 31, 1921, showed a net income of $143,544.20. In this return it claimed no deduction from gross income on account of depreciation of its properties. Thereafter, a revenue agent made an examination of petitioner's books of account and determined that the petitioner had no net income for the six-month period in question but in lieu thereof a net loss of $89,216.52. This amount included a deduction of $3,422.33 representing domestic dividends received during the period. The petitioner filed an amended income and profits-tax return for the six-month period ended December 31, 1921, substantially in accord with the audit of the revenue agent.
The petitioner's original return, as amended for the calendar year 1922, showed taxable net income in the amount of $295,507.81. In *436 *2581 this return no deduction was made for any loss sustained during the taxable period from July 1, 1921, to December 31, 1921.
The petitioner's return for 1922 was amended by the Commissioner to show a net income of $311,710.92. This is admitted by the petitioner to be the correct net income before the deduction of any loss sustained for the preceding six-month period. In this proceeding the petitioner claims that not only is there no deficiency in tax for the calendar year 1922, but that it is entitled to a refund for the year of $8,698.89. It claims that the loss sustained during the six-month period ended December 31, 1921, of $89,216.52 less the amount of $3,422.33, representing nontaxable dividends, is a legal deduction from gross income of the calendar year 1922. The amount of the loss claimed, to wit, $85,794.19, is the correct amount to be deducted from gross income of the calendar year 1922 if, as a matter of law, the petitioner is entitled to any deduction in respect of losses for the preceding six-month period.
OPINION.
SMITH: Section 204(a) of the Revenue Act of 1921 defines the term "net loss." Subdivision (b) of the same section provides:
If for any taxable*2582 year beginning after December 31, 1920, it appears upon the production of evidence satisfactory to the Commissioner that any taxpayer has sustained a net loss, the amount thereof shall be deducted from the net income of the taxpayer for the succeeding taxable year; * * *
Section 200 of the same Act provides:
That when used in this title -
(1) The term "taxable year" means the calendar year, or the fiscal year ending during such calendar year, upon the basis of which the net income is computed under section 212 or section 232. The term "fiscal year" means an accounting period of twelve months ending on the last day of any month other than December. The first taxable year, to be called the taxable year 1921, shall be the calendar year 1921 or any fiscal year ending during the calendar year 1921.
In , the Board held:
For the fiscal year ending March 31, 1921, taxpayer sustained a net loss as defined in section 204(a) of the Revenue Act of 1921. With the approval of the Commissioner it changed its fiscal year and filed a return for the period beginning April 1, 1921, and ending February 28, 1922, and claimed the*2583 right to deduct a portion of such net loss from the income for such period. Held, that no part of such net loss may be allowed as a deduction.
The petitioner claims that its case is distinguishable from the above appeal for the reason that the petitioner is not attempting to deduct a net loss for a twelve-month period from the income of a succeeding period less than a twelve-month period; that the petitioner is claiming the right to deduct a net loss for a fractional part of a year from the gross income of a full taxable year. We are not impressed, however, *437 by this argument. The reasoning in the Arthur Walker & Co. appeal is equally applicable here. Congress has specifically defined the term "taxable year" as meaning a twelve-month period. In the Revenue Acts of 1924 and 1926, Congress has seen fit to define a taxable year differently and to provide that "The term 'taxable year' includes, in the case of a return made for a fractional part of a year under the provisions of this title or under regulations prescribed by the Commissioner with the approval of the Secretary, the period for which such return is made."
It has not provided that this new definition*2584 for a "taxable year" shall have any retroactive effect. We must assume that if Congress had intended it to have a retroactive effect it would have so provided. This it has not done. To modify the definition of the term "taxable year," as contained in the Revenue Act of 1921, for the purpose of giving relief to the instant petitioner, would, as said in the Walker & Co. appeal, supra, be tantamount to legislation. For these reasons the point in issue must be decided adversely to the contentions of the petitioner.
Judgment will be entered for the respondent.
Considered by TRUSSELL, LOVE, and LITTLETON.