Barnett v. Commissioner

¶1dissenting:

¶2The majority found that petitioner failed to prove that his various transactions with Gibraltar were genuine and bona fide. However, I believe that the record clearly indicates (1) petitioner borrowed $750,000 from Gibraltar which he used to purchase United States Treasury certificates of indebtedness; (2) petitioner owned and used said Treasury certificates as collateral security for the repayment of his borrowings; and (3) petitioner actually paid interest with respect to the aforesaid borrowings. See my dissent in Kapel Goldstein, 44 T.C. 284 (1965).

¶3In finding that petitioner failed to meet his burden of proof that a genuine indebtedness was created, the majority, in effect, wields said burden as a cudgel to strike down artful schemes producing tax benefits. The burden of proof provides no such tool. I envision such usage as subverting Rule 31 (b) (1), Tax Court Rules of Practice,1 and ultimately placing an untoward burden on this Court and the judicial function we serve. In attempting to meet such a swollen concept of the burden of proof, a taxpayer will feel constrained to introduce the testimony of all witnesses whose testimony may relate to his case, regardless of how tangential or remote such testimony may be.

¶4The majority opinion stresses the absence of a reasonable profit motive on petitioner’s part. Moreover, it asserts: “Petitioner did not introduce any evidence to show that the transaction with Gibraltar was one entered into for profit.” It must be borne in mind, however, that, unlike other deduction provisions, section 163 does not require that the expenditure be incurred in connection with a transaction entered into for profit. Therefore, I believe that the majority places an unjustifiable limitation upon the treatment of interest which cannot be reconciled with section 163,2 absent congressional guidance in this direction. See Commissioner v. Brown, 380 U.S. 563 (1965).

¶5The majority goes on to state: “Any possible profit realized would have been de mmimis without regard for the tax-saving aspects.” With regard to this statement, I refer to Mr. Justice Harlan’s concurring opinion in Commissioner v. Brown, supra, wherein he stated:

Were it not for tlie tax law, tlie [taxpayer’s] transaction … would make no sense …. However tlie tax laws exist as an economic reality in tlie businessman’s world, much like the existence of a competitor. Businessmen plan their affairs around both, and a tax dollar is just as real as one derived from any other source. …