Commissioner v. McWilliams

MILLER, Circuit Judge

(dissenting).

In the recent decision in Commissioner v. Tower, 327 U.S. 280, 66 S.Ct. 532, the Supreme Court restated and reaffirmed the rule of many decades in stating “ ‘The legal right of a taxpayer to decrease the amount of what would otherwise be his taxes, or altogether avoid them, by means which the law permits, cannot be doubted.’ Gregory v. Helvering, 293 U.S. 465, 469, 55 S.Ct. 266, 79 L.Ed. 596, 97 A.L.R. 1355. We do not reject that principle.” In my opinion, the transactions here involved fall within that rule. The sale by the taxpayer in each instance was an actual, bona fide sale on the open market between a seller and a buyer dealing at arm’s length. The buyer was not a member of the taxpayer’s family, was in fact unknown to the seller, and had no obligation, agreement or understanding in any shape or form to resell or transfer the securities so purchased to any member,of the seller’s family or to anyone. He paid for them out of his own funds. The record shows no resale by the purchaser of the securities so purchased. Under such circumstances the taxpayer did not sell either directly or indirectly to a member of his family. He sold to a stranger. The transaction was a completed one and terminated at this point. It resulted in a deductible loss for income tax purposes. What another member of the taxpayer’s family did in an entirely separate transaction with a different unknown stranger, again dealing at arm’s length in the open market does not, in my opinion, merge the two transactions into one or change the legal aspect of the completed sale on the part of the first taxpayer. Unless we are to consider the income of the several members of a family group as a unit for income tax purposes, each transaction is a separate one for each individual taxpayer. Congress has not yet enacted legislation merging such individual incomes, though several times proposed. The motive of tax avoidance does not take the place of such legislation. I am of the opinion that the ruling of the Tax Court should be affirmed. Commissioner v. Ickelheimer, 2 Cir., 132 F.2d 660, 145 A.L.R. 556; Dobson v. Commissioner, 320 U.S. 489, 64 S.Ct. 239, 88 L.Ed. 248; John Kelley Co. v. Commissioner, 326 U.S. 521, 66 S.Ct. 299.