Wasson v. United States, 16578.

• Decision Date: 28 February 1958
• Docket Number: No. 16578.,16578.
• Citation: 250 F.2d 826
• Parties: A. L. WASSON and wife, Mattie Pallmeyer Wasson, Appellants, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

250 F.2d 826 (1958)

A. L. WASSON and wife, Mattie Pallmeyer Wasson, Appellants, v. UNITED STATES of America, Appellee.

No. 16578.

United States Court of Appeals Fifth Circuit.

January 7, 1958.

Rehearing Denied February 28, 1958.

Grover Cunningham, Jr., Big Spring, Tex., for appellants.

Charles K. Rice, Asst. Atty. Gen., Lee A. Jackson, Ellis N. Slack, Robert N. Anderson, Davis W. Morton, Jr., Attys., Dept. of Justice, Washington, D. C., Heard L. Floore, U. S. Atty., Fort Worth, Tex., for appellee.

Before HUTCHESON, Chief Judge, and RIVES and WISDOM, Circuit Judges.

HUTCHESON, Chief Judge.

Based upon a claimed net operating loss carry-back from the calendar year 1951, the suit was for the recovery of income taxes overpaid for the calendar year 1950. Tried to the court without a jury, there were findings of fact and conclusions of law, not reported, rejecting plaintiffs' claim on the general ground, as to each of its elements, that taxpayers failed to sustain their burden of proving the claimed 1951 net operating loss carry-back deduction against 1950 income, within the meaning of Secs. 23 and 122(d) of the Internal Revenue Code of 1939, 26 U.S.C.A. §§ 23, 122(d).

Appealing from the judgment, plaintiffs are here attacking the findings and conclusions that were adverse to them, and under seven numbered points,¹ urging with vigor and conviction that the court erred in so finding and holding.

As the taxpayers see the case, while they devote more time to and argue more earnestly point No. 1, because of its greater effect on the general result they argue each of the other claims of error with conviction, insisting as to each that it is well taken and requires a reversal.

Appellee sees the case differently. It recognizes the great significance of the holding attacked in point No. 1, and its effect upon the case, and argues this point with vigor and earnestness. As to the other points, while it does insist that none of them are well taken, it argues them in more or less cavalier fashion on the theory, stated by it in its argument on point No. 5, that, unless the claim of error with respect to point No. 1 is sustained, there will be no loss carry-back, and if it is sustained and the whole loss is allowed, it will be sufficient to wipe out the entire 1950 tax.

As to point No. 5 for instance, relating to cost depletion, appellee, after categorically stating that it is of no consequences on this appeal because no claim was made for it in the claims for refund, no offer of proof was made at the trial, and no exception taken to the judge's ruling, and accordingly it is not a proper issue here on appeal, goes on to say: "In all events the issue is academic since the claimed 1951 operating loss carry-back deduction depends essentially on taxpayers' erroneous contention, points 1(a) and (b), made with respect to the district court's disallowance of Mrs. Wasson's moiety of the 1951 community loss, viz., $53,678.02 for purposes of this appeal, and the 1951 operating loss carry-back deduction would still be zero if the percentage depletion adjustments under Sec. 122 of the 1939 Code were left out of account altogether."

Certainly it is the case that the issue of the character of the property loss and, therefore, the nature of the loss, whether community or separate, is the dominant point in this case. We turn, therefore, to its consideration, noting with respect to it that the court, after finding that Wasson was a widower from August 27, 1950 until September 3, 1951, when he married his present wife, that she had no income between Sept. 3, 1951 and December 31, 1951, from her separate property, further found:

"10. A. L. Wasson\'s books for 1951 show losses (largely sheep and cattle losses) which he contends were his separate losses and should be used in computing his net operating loss carry-back from 1951 to 1950. The Commissioner of Internal Revenue disallowed one-half of the losses incurred between Sept. 3, 1951, and Dec. 31, 1951, determining that this portion of the loss was a community loss attributable to Mrs. Mattie Pallmeyer Wasson and not allowable to A. L. Wasson for carry-back purposes against his income and that of his former spouse, Mrs. Mattie Wasson, for the taxable year 1950."

"11. Considering all the testimony and exhibits, the losses (referred to in par. 10, supra) occurred between Sept. 3, 1951 and Dec. 31, 1951. The evidence does not indicate that the losses occurred earlier in the taxable year, prior to this second marriage."

and, on the basis of these findings, concluded:

"3. That the Commissioner\'s allocation of $48,550.98 of the 1951 loss to Mattie Pallmeyer Wasson as a part of the community operation was correct. The losses in this case were largely sheep and cattle losses. Clearly, any increase of the livestock would have been community gain. It has not been shown that there was no increase of the livestock between the time of the taxpayer\'s second marriage and the end of the year. Any loss attributable to the decrease of the livestock was community loss. The taxpayer has the burden of showing that the loss was separate. Allen v. Commissioner, 22 T.C. 70. This burden was not met."

It is appellant's position: that these findings and conclusions are patently and inherently wrong; that, in making them, the court has incorrectly disregarded the compulsive nature and effect of the evidence, including particularly the time factor in the second marriage, and of the controlling principles of law; that, under the undisputed facts of record and the law of the Texas cases, these findings and conclusions may not stand.

Appellee, on its part, pointing to the findings and conclusions, urges upon us that the district court correctly held that Mr. Wasson failed to sustain his burden of proving that the 1951 sheep and cattle losses were not, as agent Hawkins testified by way of conclusion they were, losses of property belonging to the community of the second marriage with one-half of them, therefore, belonging and attributable to the second wife and hence not available to him for carry-back purposes, but, on the contrary, were losses of his separate property and wholly available to him.

Insisting that the burden of proving a separately available 1951 loss carry-back deduction made it incumbent upon Wasson to show that the 1951 operating losses occurred prior to his second marriage, and pointing to the finding of the district court that the heavy 1951 losses all occurred between September 3, and December 31, 1951, appellee, quite incorrectly we think, insists that it is thereby established that Wasson failed to sustain his burden of showing that the 1951 loss claimed was of separate instead of community property.

It recognizes, however, the bizarre, indeed the almost fanciful nature of the agent's conclusional testimony, on which the district judge based his findings and conclusions, (1) that of the heavy sheep and cattle losses sustained in 1951, none of them occurred prior to August 30, 1951, but all were suffered in the last four months of the year, (2) that none of the sheep and cattle lost were the original stock constituting the separate property of the taxpayer but all were increase thereof born after August 30th and before December 31st. Hard put to it, therefore, to point to any evidence or any theory of law upon which it can hope to justify the decision below, that the taxpayers as a community sustained losses consisting wholly of the offspring of Wasson's separate property, born and dying in the last four months of the year, except the greatly overworked one that the burden was upon the taxpayers to make out their case and they failed to sustain the burden, returns in its brief again and again to the theme thus stated by it on page 25:

"We emphasize the burden incumbent on the taxpayer with respect to the carry-back deduction herein claimed because of the unusual mode of proof taken by the taxpayer in this proceeding. The principal witness called by both taxpayer and by the government was Ben Hawkins, the Revenue Agent. * * * He explained his adjustment and the reasons therefor. All of the computations here involved * * * are based on his unrefuted testimony. No convincing contradictory evidence with respect to these adjustments was introduced although Wasson\'s testimony was, in one respect at least, directed to that end. Wasson testified that sheep losses on the * * * New Mexico ranch occurred in the spring of 1951 immediately prior to the transfer of 508 head, down to his Red House ranch in Big Spring, Texas, in July of that year."

After stating that this self serving testimony is directly refuted by Agent Hawkins' testimony on direct, as taxpayer's witness, the appellee concludes:

"With respect to this testimony, the District Court concluded that while `there is some question in the record as to just when these losses occurred, whether before or after the taxpayer\'s second marriage\', he had `failed to meet his burden of proof\', and the trial judge found that, under all the evidence, `the losses * * * occurred between Sept. 3, 1951 and Dec. 31, 1951.\'" (Emphasis supplied.)

Pinpointing the wholly inconclusive and conclusional nature of the testimony of Agent Hawkins, on which the findings and conclusions of the court and the argument of the appellants are based, by setting it out in question and answer form,² the taxpayers meet appellee's arguments and assumptions head on.

They meet them in fact by pointing to Wasson's uncontradicted and entirely reasonable testimony³ and contrasting it with the wholly unsupported, indeed unwarranted...