(concurring in part and dissenting in part)
I concur in most of what is said in the opinion of the majority and in its affirmance of the Tax Court’s decision, *251except (1) as to the fair market value of the security deeds, and (2) as to the capital gains issue. I agree, too, with the rejection by the majority of the petitioners’ contention that the determinations of increases in petitioners’ net worth were so arbitrary and unreliable as to withdraw from the determinations all presumption of correctness.
I disagree, however, with the reason given for the rejection, that “The chief fallacy of this contention lies in its major premise”; and with the statement that “The determinations made by the Commissioner were neither arbitrary nor unreasonable under the circumstances of the investigation.”
I particularly disagree with the apparent assumption of the opinion that because the revenue agents found it difficult under the circumstances to reach correct conclusions, they and the commissioner were relieved of the obligation of making reasonable determinations as near correct as reasonably possible.
Under i?he undisputed facts in this case and the findings of the Tax Court, it is quite clear to me that certain of the determinations were not only incorrect but were arrived at under the application of the principle implicit in the majority opinion that, under the circumstances of this case, it was the right, if not the duty, of the agents and the commissioner to throw the book at the taxpayers by making extreme determinations leaving them to avoid their effect if they can. I do not know of a single decision which has so held. Indeed, I regard it as settled that the prima facie presumption which attends the determinations of the commissioner is based upon a principle the exact contrary of this. This principle is that he has acted fairly and reasonably in making his determinations and is prepared to support them with evidence if credible evidence that they are incorrect, is offered.
Acting in this case in accordance with the guiding influence of the correct principle, instead of blindly following the determinations of the commissioner, the Tax Court in the main, after a painstaking and searching consideration of the record as a whole, accepted some and rejected others of his determinations, basing its findings on its view of the state of the evidence.
Because it did so, I agree with the majority, except as to the two matters referred to above and hereafter briefly discussed, that its finding and conclusions are not clearly erroneous and should be affirmed.
Upon the first question, the value of the security deeds, I am of the firm opinion that the majority, in stating on page 246 of 250 F.2d that “It was not arbitrary for the agents to consider as worth face value notes which the taxpayer had exacted when he sold the various parcels of real estate”,1 acted upon a patently unsound premise.
I am of the equally firm opinion that the Tax Court gravely erred when, without any testimony to the contrary and in the face of the testimony of all the witnesses as to their value, though conceding that the commissioner had erroneously determined that their fair market value was their face, it reached up into the air to pluck a figure down to which no one testified and which a mere reading of the record will show is not only unsup*252ported by, but is contrary to, all of the testimony.
It will serve no useful purpose for me to set out this testimony. It is sufficient to say: that the statements in the brief of the petitioner as to the state of the evidence are completely accurate, that neither the brief of the taxpayer, the opinion of the Tax Court, nor that of the majority of this court in any manner contradicts these statements; and that, when the nature and character of the property are considered, there is not only no reasonable basis but no basis whatever for a finding that the fair market value of the security deeds as a whole was 70 percent of their face, none that they exceeded SO percent of their face.
As to the second question, the claim of the petitioners to capital gains treatment, a matter which the majority opinion does not even treat at all, except by a sweeping dictum, I think it completely clear that, upon this record and the controlling cases from this court, the finding of the Tax Court is mere fiating without any support in the evidence, indeed directly contrary to it.
In support of their claim that they were entitled to capital gains treatment on the sale of the properties in question, petitioners testified without contradiction that the 58 pieces of property in question were acquired for rental purposes and that they were not held for sale to customers in the regular course of their business.
The Commissioner introduced no evidence whatever to the contrary. The Tax Coui't, without pointing to any evidence in support of its conclusion except that the petitioners did have other properties which were held for sale, lumped all of their properties together, though some were and some were not held for sale, and by its mere say so brushed away the testimony of petitioners which was not contradicted and was not shown in any manner to be unreliable.
It seems to me that the decision of the Tax Court and of the majority on this issue runs directly counter to the reasoning and the decisions of this court in J. H. Robinson Truck Lines v. Commissioner, 5 Cir., 183 F.2d 739, Cf. Hightower v. Commissioner, 5 Cir., 187 F.2d 535, and Burford-Toothaker Tractor Co. v. Commissioner, 5 Cir., 192 F.2d 633, and in Smith v. Dunn, 5 Cir., 224 F.2d 353; Foran v. Commissioner, 5 Cir., 165 F.2d 705, and other cases from this court, particularly Ross v. Commissioner, 5 Cir., 227 F.2d 265; Consolidated Naval Stores v. Fahs, 5 Cir., 227 F.2d 923, and Goldberg v. Commissioner, 5 Cir., 223 F.2d 709.
I dissent from the affirmance of the Tax Court’s decision on these two issues.
Rehearing denied: HUTCHESON, Chief Judge, concurring in part and dissenting in part.
. “As to this item, the agents took the full amount of the notes, which was neither arbitrary nor without support even though the Tax Court later found that 70 percent of the fa®e of these notes was the correct value. It was not arbitrary for the agents to consider as worth faoe value notes which the taxpayer had executed when he sold the various parcels of real estate and which he was currently collecting according to their terms, including interest of from 5 to 8 percent.”