¶1dissenting: The majority holds that the petitioner’s debt of $38,220 from Llenroc was not a “non-business bad debt” within the language of section 23 (k) (4) of the Internal Revenue Code — in other words, that it was incurred in the taxpayer’s trade or business. I am unable to agree. In my opinion the concept of business has been here extended entirely too far. In Ralph 0. Holmes, 37 B. T. A. 865, referring to Hutchings v. Burnet, 58 F. 2d 514, we said “the phrase ‘carrying on a trade or business’ as used in the revenue statutes bears a more restricted meaning than the general definition of what constitutes business transactions.” Though perhaps in the broadest sense the petitioner’s transactions here involved might be termed business matters, my view is that within the purview of the revenue statutes, particularly section 23 (k) (4) of the code, the debt involved was not a business debt. Not every monetary transaction even though made with the intent to profit comes within the concept of business within the revenue acts. In Higgins v. Commissioner, 312 U. S. 212, we find: “As the Circuit Court of Appeals observed, all expenses of every business transaction are not deductible.”
¶2Section 23 (k) (4) was added to the Internal Revenue Code by section 124 of the Revenue Act of 1942. The committee reports, both of the House Ways and Means Committee and the Senate Committee on Finance, covering section 124 state with reference to the determination whether a debt is incurred in the trade or business: … the determination is substantially the same as that which is made for the purpose of ascertaining whether a loss from the type of transaction covered by section 23 (e) is ‘incurred in trade or business’ under paragraph (1) of that section.” 1942-2 C. B. 573. It is clear I think that the concept of trade or business involved here is not different from that laid down in the Higgins case, supra; and it is equally clear that there a distinction is made between true business expenses and others in connection with a taxpayer’s investments. It is my thought that Congress has never seen fit to broaden such concept of business as laid down in the Higgins case but that the instant case attempts so to do and to pull into the statutory idea of business matters which can be so denominated only by entertainment of a very broad and extra-statutory concept. Examination of the legislative history of this matter, in my view, clearly so indicates. As above stated, the statute originates in section 124 of the Revenue Act of 1942. Section 121 of the Revenue Act of 1942 is the basis for section 23 (a) (2) of the Internal Revenue Code providing, for the first time, for the deduction of “non-trade or non-business expenses.” The Congressional committee reports, again of both House and Senate, covering section 121 (section 118 of the original House bill), emphasize the lack of any change in the concept of trade or business by pointing out that the amendments made allow deductions “whether or not such expenses are paid or incurred in carrying on a trade or business” and allowing deductions for exhaustion and wear and tear “whether or not such property is used by the taxpayer in a trade or business.” 1942-2 C. B. 570. Further indication that the essential concept of business was not altered, but that specific statutory additions, to the matter of deductions, were made, is the fact that section 2B (e) — as above seen furnishing substantially the same test as for section 23 (k) (1) — not only makes a sharp distinction between matters “incurred in trade or business” and those “entered into for profit though not connected with trade or business,” but was not amended by the Revenue Act of 1942 as were section 23 (a) (by the addition of the non-trade or nonbusiness expenses) and section 23 (k) (by the addition of subsection (4) here involved). Section 23 (e) allows losses in two classes, that is, (1) in trade or business, and (2) in profit transactions, not trade-or-business connected. The lack of amendment in 1942 of section 23 (e) at a time when both sections 23 (a) and 23 (k), as to deductions and bad debts, were being amended, appears clearly to indicate that the distinction between transactions in trade or business and profit transactions outside thereof, was being continued. The majority view in the instant case however, in my opinion, merely because the petitioner’s loss of about $38,000 could not be said not to be in a profit transaction, throws it into “trade or business.” In the absence of a definite relaxation of the previous distinction between trade or business and other profit transactions outside of trade or business, I think the majority conclusion is unjustified. I note that the definition of a “non-business debt” in section 23 (k) (4) ties the matter closely to losses and therefore to section 23 (e), for the definition of “non-business debt” is, so far as here concerned, one that is other than a debt “the loss from the worthlessness of which is incurred in the taxpayer’s trade or business.” (Emphasis added.) In short, the definition in section 23 (k) (4). particularly excludes mere profit-transaction losses from the category of business debts. Unless the loss from the debt here in question was incurred “in the taxpayer’s trade or business” — in the language of section 23 (e) (1), it is not a business debt; that is to say, “non-business debt” in section 23 (k) (4) includes those, loss from which is incurred in mere profit transactions not connected with trade, within section 23 (e) (2). Surely, therefore, the lack of amendment of section 23 (e) indicates plainly that the “non-business debt,” newly provided in 1942 by section 23 (k) (4), was not intended broadly to cover mere profit-transaction debts or anything beyond the previously established and unamended concept of “trade or business,” losses from which had been and continued to be allowed under section 23 (e) (1). In the face of such treatment of this situation by Congress petitioner must perforce, and indeed contrary to clear Congressional intent, broaden the definition of trade or business in order to include the loss here involved. I strongly affirm that such treatment is not only not within the Congressional intent but is contrary to it. When Congress wished to add nonbusiness expense deductions, it did not broaden the previous concept of business but recognized it and added a new idea, section 23 (a) (2); likewise, when it wished to alter the treatment of “non-business debts,” it did not enlarge the concept of business but its definition specifically limited “non-business debts” to those other than where the loss from worthlessness was incurred in trade or business, the exact expression used in section 23 (e) (1). Anything else is left a nonbusiness debt— and the petitioner’s debt here is found among the residue. Had Congress intended to extend the coverage to business debts and not to limit them carefully to those “incurred in trade or business” under previous statutory definition, it could easily have so stated. The careful reference, in the definition, to loss in trade or business, as expressed in section 23 (e) (1), negatives the conclusion of the majority here. This thought is emphasized in the committee reports above referred to where, 1942-2 C. B. 573, it is stated that the character of the debt is to be determined by the relation which the loss bears to the trade or business of the taxpayer, requiring that relation to be “a proximate one in the conduct of the trade or business.” The language does not refer to loss resulting from “trade or business or transactions entered into for profit.” Yet this is the effect of the majority opinion. The definition of nonbusiness debts in section 23 (k) (4) depends upon the “loss” which in turn must and does refer to section 23 (e) because only there are losses allowed deduction. Thus we see that only a loss “incurred in the taxpayer’s trade or business” — the subject of section 23 (e) (1) — is referred to, see that the concept of trade or business is not general, but special, and that only the preexisting concept was in mind, and see that general profit transactions outside of trade or business are specifically not covered. I think the majority opinion covers them into “trade or business.”
¶3I note also that the trade or business, proximate relation to which is required, must under the committee reports be one in which the taxpayer is engaged “at the time the debt becomes worthless.” Several examples are given, including one where a debt incurred because of a loan from A while he was in the grocery business became worthless after he had sold that business but retained the claim. The loss is not, the report holds, a proximate incident to the conduct of trade or business in which A was engaged at the time of worthlessness. Under this thought it was incumbent upon petitioner in the instant case to show the nature of his business at the time of the worthlessness of the debt. Though hesitating, because this is a fact question, to question the majority conclusion of fact, I must nevertheless point out that the evidence relied upon fails to indicate that the petitioner’s business, at the time the debt became worthless, was such as to constitute trade or business even within the thought of Henry E. Sage, 15 T. C. 299, or Vincent C. Campbell, 11 T. C. 510, relied upon by the majority. The essence of those cases appears to be that if one is actively engaged in the affairs of a large number of transactions, corporate or otherwise, they may constitute his business. Thus in the Sage case there were numerous transactions and in the Campbell case petitioner was involved in the conduct of twelve corporations. Here the facts depended upon by the majority to constitute business are that petitioner had invested money in a number of enterprises, had investigated possibilities of many more, had purchased stock in small corporations and lent money or allowed his money to remain in such ventures, had put his money in the enterprises and participated in their management as officer or director, or both. None of these elements can bo considered because they are not shown to have existed in the taxable year, under the test suggested by the committee reports as above seen. The same is true of petitioner’s taking part in the management and lending money to a garage in which he and his brother were partners. Nothing indicates whether this was true in the taxable'year. Obviously, I think, his ownership of stock in A. M. & A., leaving earnings with that company, does not establish business. He was not a director or officer after the “early 1940’s,” and even under the test of Commissioner v. People’s-Pittsburgh Trust Co., 60 F. 2d 187, the business of the corporation would not in 1945, the taxable year, be his business. I know of no case holding that merely being a general manager of a department store constitutes one’s business. Moreover, his contract as manager terminated January 1,1945. He had because of difficulties with A. M. & A. not, in fact, been general manager since April 1941 and had been engaged in litigation with the company since January 4, 1944. In addition petitioner was a stockholder and director of a bank and of Central Cleaning Plant. His ownership in Central is shown to have existed in the taxable year but neither of these companies can be relied upon to establish business because they merely required attendance at board meetings. Obviously he did not participate in the management of either one. Also, petitioner held 49 per cent of the stock of A. M. & A. Cleaning Corporation and was an officer and director and left some of his salary in the business, and spent several hours a day at the plant. However, the “business was sold in 1944 or 1945.” I therefore must eliminate it as a basis for petitioner’s business in the taxable year 1945 for it may have been sold in 1944. Lastly, petitioner, subsequent to the year in question, became a stockholder, president, and manager of Oliver Gear Works. Such relationship after 1945 is obviously of no value to the petitioner’s contention. The same is true of his present ownership and management of a building in Buffalo. Thus we find no showing that any of the alleged trades or businesses of the petitioner covered the taxable year 1945 except interest in Central Cleaning Plant, which required only attendance at board meetings and under no test of which I know could constitute petitioner’s trade or business.
¶4It should be noted, also, considering the reliance placed upon Henry E. Sage, supra, that it involved section 122 (d) (5) and net operating loss deductions, and not section 23 (k) (4). Moreover, section 122 (d) (5) requires merely that the deduction be “attributable to” the operation of a trade or business regularly carried on and is not tied in with loss under section 23 (e) as is section 23 (k) (4). In Vincent G. Campbell, supra, petitioners had a practice as a part of their business to advance to or leave money on open accounts in twelve corporations in the organization, in the ownership and operation of which they had been engaged since 1929. I consider the case no support for the majority conclusion here in this one.
¶5I would therefore conclude both on the facts and on the law that the debt from the worthlessness of which petitioner lost about $38,000 in 1945 was a “non-business debt” within the intendment of section 23 (k) (4).
¶6I therefore respectfully dissent.