(dissenting).
Appellants were partners engaged in operating a gambling enterprise. Deficiency assessments were entered against them for federal income taxes for the years 1948, 1949 and 1950, in the amount of $412,729.87 applicable to Plisco, $309,-740.33 applicable to Baker, and $324,-933.69 applicable to May.1 With interest the judgments entered on these assessments are, respectively, $614,551.46, $474,397.38, and $497,437.99. There is no satisfactory evidence that these men owe these large sums to the United States, and so I cannot agree to affirm the judgments.
For the years in question each appellant reported as his individual share an amount of income from the partnership, and paid the income tax on the amount reported. As derived from gambling for the three-year period, $56,607.23 was reported by Plisco, $43,261.49 by May and $43,261.49 was attributed to Baker.
It is no doubt true that appellants failed to maintain adequate records; but the cases before us are not for violation of any statute or regulation respecting records,2 or for violation of the gambling laws. The question is whether appellants owe the United States the amounts of the judgments.
The grounds advanced to support the assessments on which the judgments rest, as I understand the majority opinion, are that the Commissioner assessed deficiencies in amounts which appellants’ records revealed as “net wins” for each day, and although these same records indicated “net losses” the Commissioner could disregard all such claimed losses since they were not substantiated by appellants. Since deficiency assessments are deemed to be prima facie correct it is considered that the Government proved its case in the District Court merely by introducing in evidence the assessments arrived at in this manner.
The difficulty with the above is that the assessments thus given controlling effect are based entirely on records which also indicate substantial gambling losses, none of which were taken into account. I think the United States may not thus choose and reject from the same records. The parts chosen have no more trustworthiness than the parts rejected. Cf. Dewey v. Hotchkiss, 30 N.Y. 497, 499-501 (1864); Weaver v. Welsh, 325 Pa. 571, 574-75, 191 A. 3, 6 (1937); Rowan *789v. Chenoweth, 49 W.Va. 287, 292-293, 38 S.E. 544, 546 (1901); Wigmore, Evidence § 2118 (3d ed. 1940). And see Showell v. Commissioner, 238 F.2d 148, 153-155 (9th Cir. 1956) (dissenting opinion).
I also think it is inaccurate to say that the assessments result from the disallowance of alleged gambling losses which were not substantiated. This is not the situation. The assessments result from taking these taxpayers’ own records, accepting completely the wins shown thereby and disregarding entirely the losses, except losses accounted for by the taxpayers in reaching net wins. This is to me indeed an unreliable and arbitrary method by which to obtain these judgments. The method shown to have been used destroys the prima facie correctness of the result. The majority opinion itself states the records referred to “do not ‘clearly reflect income’ within the meaning of Int.Rev.Code of 1954 § 446(b) * * *. The records reflect nothing more than the taxpayers’ naked conclusions concerning the next taxable income or loss resulting from each day operations. The Commissioner was not required to ■accept them.” Yet the Commissioner did not disregard them. These very records are the sole basis for the amounts of the .assessments. The majority opinion somehow seeks to overcome this difficulty by .accepting the wins shown by these unacceptable records, as if they show the income, relying on the theoiy that appellants had an incentive to reduce their taxes by overstating losses and understating profits. One may agree to the incentive, but its existence wholly fails to establish the accuracy or reasonableness of the income taxed or of the method used to determine it. These “wins” were part and parcel of records showing “losses” and cannot reasonably be considered separately from the complemen-tarily shown “losses.”
Moreover, appellant May testified as to the method employed in recording the .results of each day’s operations, explaining that the figures were transferred from daily sheets to the more condensed summary indicating net wins and losses. The majority opinion assumes that these records were admissible as past recollections recorded, and yet there is no evidence that none of the losses thus shown was incurred. It is not necessary to establish that they occurred as recorded; for Mr. May’s testimony, considered with the records, was sufficient to overcome the prima facie correctness of the Commissioner’s determinations. The presumption in his favor upon which the judgments rest disappears when competent evidence to the contrary is introduced. Cf. Gersten v. Commissioner, 267 F.2d 195, 199 (9th Cir. 1959); Cullers v. Commissioner, 237 F.2d 611, 614 (8th Cir. 1956); Showell v. Commissioner, supra 238 F.2d at 153-155; 9 Mertens, Law of Federal Income Taxation § 50.71 (1958).
Aside from the foregoing, it seems that the principle of Cohan v. Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930), is also applicable. The reason advanced by the majority for a contrary position is that appellants failed to produce any reliable figures from which an estimate of losses could be made. Appellants must have sustained some losses and incurred some expense during the three-year period, other than those considered in arriving at net wins. In Bickers, supra note 2, in somewhat similar circumstances, the Tax Court used its “best judgment” in determining wagering losses which had been entirely excluded by the Commissioner for lack of substantiation, and see Drews, 25 T.C. 1354 (1956), where, however, there was testimony, which the Tax Court accepted, that there were some losses. Cf. Stein, supra note 2.
In any event, I would hold that the prima facie correctness of the assessments made by the Commissioner was overcome when the manner in which they were made was disclosed, and also by the testimony of appellant May.
. The United States, proceeding under dis-traint warrants, had, in 1952 and 1954, levied upon certain assets of Plisco, realizing $11,984.65, which was credited to his deficiency for 1948. Payments of $40 and $30 were received from May in 1955.
No amounts have been obtained from Baker.
. I note that the Commissioner has imposed negligence penalties against the appellants. These may be levied for failure to maintain adequate records. See Stein, 1962 P-H Tax Ct. Mem. If 62,019; Bickers, 29 P-H Tax Ct. Mem. 1f 60,083 (1960). And see Int.Rev.Code of 1954, § 6653(a).