Citations
- 125 F.2d 865
Full opinion text
DENMAN, Circuit Judge.
This proceeding is upon petition to review a decision of the United States Board of Tax Appeals. The Commissioner of Internal Revenue determined against petitioner a deficiency in its income tax return for the calendar year 1938, in the amount of $479.75. The Board upheld the Commissioner and petitioner appeals.
Petitioner is a corporation of the State of Washington. In 1936 its board of directors declared a dividend on its common stock, payable in cash or in notes of the corporation at the election of the stockholders. A total dividend of $120,000 was declared and of this amount $94,026 was paid in promissory notes having an actual value at the time of delivery equal to their face value. In its income tax return for the calendar year 1936, petitioner claimed and was allowed a dividends-paid credit of $120,000 as against net income in the computation of the surtax on undistributed profits. This credit was taken pursuant to section 27(d) of the Revenue Act of 1936, 26 U.S.C.A. Int.Rev.Acts, page 837.
In the calendar year 1938, petitioner paid to the holders of its promissory notes the sum of $35,830.30, which sum represented the remaining principal balance of the notes issued in 1936. Petitioner claims it is entitled to a dividends-paid credit for the $35,830.30 under the provisions of section 27(a) (4) of the Revenue Act of 1938, 26 U.S.C.A. Int.Rev.Acts, page 1021. This section provides that “Amounts used or irrevocably set aside to pay or to retire indebtedness of any kind * * * ” are to be included in the dividends-paid credit. The Board of Tax Appeals held that petitioner was not entitled to the dividends-paid credit for the year 1938 on the ground that section 27(e) of the Revenue Act of 1938, which deals with dividends payable in obligations of the corporation, prevails over section 27(a) (4) and by implication excludes from section 27(a) (4) indebtedness in the form of dividends payable in notes of the corporation. From this decision petitioner appeals.
It thus appears that petitioner is claiming for 1938 a second deduction of the $35,830.30 which had been allowed as a part of the $120,000 deducted for 1936. In construing the provisions of the Revenue Act of 1938, we are governed by the principle that the right to a deduction must be clearly apparent from the statute and by the rule against interpretations which allow a double deduction.
Section 27(a) (4) on which petitioner relies gives a credit for the payment of indebtedness of