Separate petitions by Samuel F. Houston, by Sallie H. Henry, and by William Hobart Porter and another, executors of the estate of William W. Porter, deceased, to review redeterminations by the Board of Tax Appeals sustaining determinations by the Commissioner of Internal Revenue relating to deficiencies in income taxes.
Before WOOLLEY and DAVIS, Circuit Judges, and JOHNSON, District Judge.
These cases are here on motion to remand to the United States Board of Tax Appeals. A single question of law is involved, and all three cases will be disposed of in one opinion.
The petitioners, in making their income tax returns for the year 1920, claimed that they had sustained losses in a certain transaction entered into in 1906. This transaction related to the reorganization of the Real Estate Trust Company of Philadelphia which was closed because of excessive loans made to Adolph Segal, who deposited with it certain stocks and bonds as collateral secrtain was proposed to reorganize and reopen the company if a fund of $2,500,000 could be raised by subscriptions.The petitioners subscribed to this fund, and these subscriptions gave them an interest in the Segal securities which were to be administered by the trust company. The subscribers hoped to realize from these securities enough to pay the subscriptions and also a profit. But their hopes did not materialize, and in 1920 it was thought best to dispose of the securities, and so they were sold. The petitioners were allotted their pro rata share of the securities. In making their income tax returns for the year 1920, they claimed as a loss the difference between their subscriptions (cost to them of the securities) and what they received for them when sold.
The Commissioner of Internal Revenue disallowed the claims, and the United States Board of Tax Appeals sustained his determination on the ground that the value of the securities on March 1, 1913, must be established as well as their cost, and this had not been done. On appeal to this court, the redetermination of the Board of Tax Appeals was reversed, and the income tax returns of the petitioners, so far as they were affected by the deductions here in question, were approved, 39 F.2d 351, 358, 360. The Commissioner appealed to the United States Supreme Court, which reversed our judgment, 51 S. Ct. 413, 416, and remanded the case to this court for further proceedings in a mandate which contains the following language:
"On consideration whereof, It is now here ordered and adjudged by this Court that the judgment of the United States Circuit Court of Appeals in this cause, be, and the same is hereby reversed.
And it is further ordered, That this cause be, and the same is hereby, remanded to the said Circuit Court of Appeals for further proceedings in conformity with the opinion of this court.
You, therefore, are hereby commanded that such further proceedings be had in such cause, in conformity with the opinion and judgment of this Court, as according to right and justice, and the laws of the United States, ought to be had, the said writ of certiorari notwithstanding."
Thereupon the petitioners filed a motion in this court to remand the cases to the Board of Tax Appeals so as to give them an opportunity to submit before it evidence of the value of the Segal securities here involved on March 1, 1913. The Commissioner opposes that motion on the ground that this court is without power to remand the cases to the Board. The question of the power of this court is therefore the first issue.
The statute creating the United States Board of Tax Appeals (USCA, title 26, § 1226(b) gives this court power "to affirm or, if the decision of the board is not in accordance with law, to modify or reverse the decision of the board, with or without remanding the case for a rehearing, as justice may require." We therefore had power when the case was here before to remand it to the Board of Tax Appeals, if its decision was not in accordance with law.
We were commanded by the mandate of the Supreme Court to take such further proceedings in the case, in conformity with its opinion and judgment, as according to right and justice ought to be had. The Supreme Court did not specifically tell us what ought to be done, but following its usual policy, as laid down in the case of Ex parte Medway, 23 Wall. (90 U.S.) 504, 23 L. Ed. 160, it left us free to proceed in accordance with our own idea of what law and justice required when all the facts in the case, and the power conferred upon us by the statute, are considered.
The mandate of the Supreme Court restored to this court the power which it had when the case was first here, other than the questions which it decided. The question of our power to remand this case was not decided. Liberty National Bank v. Bear (C.C.A.) 4 F.2d 240, 242, certiorari denied 268 U.S. 693, 45 S. Ct. 512, 69 L. Ed. 1160; In re Sanford Fork & Tool Co., 160 U.S. 247, 256, 16 S. Ct. 291, 40 L. Ed. 414; In re Louisville, 231 U.S. 639, 645, 34 S. Ct. 255, 58 ...