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CALLANAN RD. IMPROVEMENT CO. v. UNITED STATES

January 15, 1968

Callanan Road Improvement Company, Plaintiff,
v.
United States of America, Defendant


Foley, District Judge.


The opinion of the court was delivered by: FOLEY

Memorandum-Decision and Order

FOLEY, District Judge.

 This suit is for refund of corporate income taxes allegedly overpaid for the years 1951 through 1954. The complaint is set forth in four counts. Over a long period of time, often seemingly necessary for the presentation and disposition of most federal tax problems, a number of the issues raised by the pleadings have been settled. As the lawyers put it now, there is only one remaining issue for determination. Ordinarily, such narrowing brings comfort to a Court, but review and consideration establishes in my mind that the sole remaining issue, commendably made so precise, still presents a puzzling, difficult problem that entails interpretation and application of complex portions of the Internal Revenue Codes of 1939 and 1954, their interplay and certain regulations particularly relating to the 1954 Code. With realization of the impossibility to frame tax statutes in simple A, B, C language to allow slide-rule application, abstruse language again makes difficult the search for true intent and meaning in this particular situation. The problem is presented to the Court by formal motion of the plaintiff for summary judgment in its favor on the single issue, constituting actually a request for summary declaratory expression and direction for further computation of the refund, considering the partial settlement and impact of the favorable decision sought for the plaintiff on the issue here. The Government counters, as is its right, to the summary judgment motion with request for judgment in its favor on the remaining issue.

 Primarily the discussion and determination is concerned with certain portions of Section 172 of the Internal Revenue Code of 1954 (26 U.S.C. 1958 ed., Sec. 172). The portions thereof deemed pertinent and important by the attorneys in their argument and briefing are set forth at this point.

 SEC. 172. NET OPERATING LOSS DEDUCTION.

 
(a) Deduction Allowed. -- There shall be allowed as a deduction for the taxable year an amount equal to the aggregate of (1) the net operating loss carryovers to such year, plus (2) the net operating loss carrybacks to such year. For purposes of this subtitle, the term "net operating loss deduction" means the deduction allowed by this subsection.
 
(b) Net Operating Loss Carrybacks and Carryovers.
 
(1) Years to which loss may be carried. -- A net operating loss for any taxable year ending after December 31, 1953, shall be --
 
(A) a net operating loss carryback to each of the 2 taxable years preceding the taxable year of such loss, and
 
(B) a net operating loss carryover to each of the 5 taxable years following the taxable year of such loss.
 
(2) Amount of carrybacks and carryovers. -- Except as provided in subsection (f), the entire amount of the net operating loss for any taxable year (hereinafter in this section referred to as the "loss year") shall be carried to the earliest of the 7 taxable years to which (by reason of subparagraphs (A) and (B) of paragraph (1)) such loss may be carried. The portion of such loss which shall be carried to each of the other 6 taxable years shall be the excess, if any, of the amount of such loss over the sum of the taxable income for each of the prior taxable years to which such loss may be carried.
 
* * *
 
(c) Net Operating Loss Defined. -- For purposes of this section the term "net operating loss" means (for any taxable year ending after December 31, 1953) the excess of the deductions allowed by this chapter over the gross income. Such excess shall be computed with the modifications specified in subsection (d). * * *
 
(e) Law Applicable to Computations. -- In determining the amount of any net operating loss carryback or carryover to any taxable year, the necessary computations involving any other taxable year shall be made under the law applicable to such other taxable year. The preceding sentence shall apply with respect to ...

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