Cooper v. COMMISSIONER OF INTERNAL REVENUE

• Decision Date: 19 June 1952
• Docket Number: No. 6404.,6404.
• Citation: 197 F.2d 951
• Parties: COOPER v. COMMISSIONER OF INTERNAL REVENUE.
• Court: U.S. Court of Appeals — Fourth Circuit

197 F.2d 951 (1952)

COOPER v. COMMISSIONER OF INTERNAL REVENUE.

No. 6404.

United States Court of Appeals Fourth Circuit.

Argued April 10, 1952.

Decided June 19, 1952.

Wade H. Cooper, pro se.

F. E. Youngman, Sp. Asst. to Atty. Gen. (Ellis N. Slack, Acting Asst. Atty. Gen., Helen Goodner and William L. Norton, Jr., Sp. Assts. to Atty. Gen., on brief), for respondent.

Before PARKER, Chief Judge, and SOPER and DOBIE, Circuit Judges.

DOBIE, Circuit Judge.

This is a petition for review, filed by the taxpayer, Wade H. Cooper, of federal income taxes assessed against him for the year 1946. Taxpayer appeals from a decision of the Tax Court of the United States holding that in 1946 he realized taxable income of $7,433.88, representing the difference between the amount he received from interest claims assigned to him by former bank depositors and the amount he paid for the claims.

The United States Savings Bank, of which taxpayer has been president and majority stock owner, was closed by Presidential proclamation March 6, 1933. On March 17, 1933, the Acting Comptroller of the Currency was appointed a conservator, and on February 10, 1934, was appointed a receiver.

The creditors of the bank received 100% of their principal and a partial interest dividend of 10%. The stockholders received nothing.

In March, 1945, the United States Circuit Court of Appeals for the District of Columbia affirmed the District Court's decision, holding that the creditors were entitled to be paid interest at the rate of 6% per annum upon their allowed claims. Cooper v. Parsons, 80 U.S.App.D.C. 409, 148 F.2d 21.

In early October, 1945, taxpayer by postcard invited certain former depositors of the bank to his office where in a prepared statement he asserted that the court was in error in allowing the depositors 6% interest instead of 3%. He offered to pay each depositor 3% in fair settlement of his claim for interest since the date of the bank's closing, in return for an assignment of each claim of taxpayer. Some depositors agreed to accept this offer. After taxpayer received the assignments, the Supreme Court of the United States on October 8, 1945, denied the petition for certiorari and on November 5, 1945, denied a petition for rehearing. Cooper v. Parsons, 326 U.S. 726, 808, 66 S.Ct. 32, 90 L.Ed. 431. The receivership was closed on December 31, 1945.

During 1946, taxpayer received from the Comptroller of the Currency checks aggregating $10,619.83 with respect to the interest claims assigned to him. He had paid $3,185.95 for them.

The Tax Court held that the difference between the amount taxpayer paid ($3,185.99) and the amount he received from the Comptroller of the Currency ($10,619.83) in payment of the alleged claims, or $7,433.88, constituted taxable income for the year 1946.

Taxpayer's argument that the excess of what he received over what he paid for these interest claims, was a gift by the depositors, is utterly without merit. The assignments were in absolute legal form and there is no evidence of any donative intent. The record discloses no support for the argument that these depositors made gifts to taxpayer out of gratitude for the Bank's policy of refraining "from declaring dividends in order to build up and maintain a large reserve to protect depositors."

The right of the depositors to receive interest at the rate of 6% had not been finally determined and there was a chance that the Supreme Court might reduce this rate of interest. There is ample warrant for the finding of the Tax Court that the depositors accepted taxpayer's offer of 3% for their interest claims because they thought the chance of getting more was uncertain or because they wanted their money immediately rather than upon the termination of the litigation.

The decision that there was no gift here makes academic the assertion of taxpayer that he acquired a vested right arising out of the decision of the Supreme Court in C. I. R. v. Wemyss, 324 U.S. 303, 65 S.Ct. 652, 89 L.Ed. 958. It is elementary that there is no vested right in a rule of law proclaimed in a judicial decision.

Taxpayer next insists that if there was no gift here, he is taxable on the excess as a capital gain only to the extent of 50% under Section 117(b) of the Internal Revenue Code, 26 U.S.C.A. § 117(b).

This section, however, does not apply unless there is a sale or exchange of a capital asset and the decisions support the contention of the Commissioner that a distribution of corporate assets such as took place in this case is not a sale or exchange of capital assets within the meaning of the statute. Herbert's Estate v. C. I. R., 3 Cir., 139 F.2d 756, 758; Lee v. C. I. R., 7 Cir., 119 F. 2d 946; Helvering v. Roth, 2 Cir., 115 F.2d 239, 241; Bingham v. C. I. R., 2 Cir., 105 F.2d 971, 972; Hale v. Helvering, 66 App.D.C. 242, 85 F.2d 819.

We think, however, that the provisions of Section 117(f) are worthy of consideration by the Tax Court since the section provides that for the purposes of the statute amounts received by the holder upon the retirement of certificates or other evidences of indebtedness issued by any corporation with interest coupons or in registered form shall be considered as amounts received in exchange therefor. There are decisions which indicate that the certificates of indebtedness held by the taxpayer in this case fall within the terms of the statute. See Rieger v. C. I. R., 6 Cir., 139 F.2d 618; Cf. Gerard v. Helvering, 2 Cir., 120 F.2d 235. We do not decide this point, however, since the record is not entirely clear and for the reasons hereinafter stated, the case must in any event be remanded to the Tax Court for further proceedings.

Nor were the payments made to taxpayer on these assigned claims liquidating dividends paid to him as a stockholder in the Bank. The amounts were paid to him, under the assignments, as interest due the depositors under court decision, not as distributions paid upon his stock.

On October 1, 1951, after the hearing on the merits of the petition and after the findings of fact and opinion had been rendered, taxpayer filed a motion to amend his petition, which he has not printed in the appendix to his brief. It was, however, included in his Designation for the Record on Review, and may be found in the original transcript of record transmitted to our Court. In it he asked leave to amend to claim a deduction, under Section 117(e) of the Internal Revenue Code, for the carry-over of a capital loss in the amount of $352,800.00, due to the fact that his stock in the Bank had become worthless....