(dissenting) :

The taxpayers seek through the device of adding corporate securities to a bundle of treasury notes 1 to get a deduction for the whole package of interest on the loan made for the purchase. Similarly the government goes for all or nothing. It has won completely in the tax court and here.

This case does raise, in a very cogent way, the question of whether the whole previous line of Livingstone cases is correctly decided or decided on the right theories. It may be that the courts did step in to fill a gap that should have been left for the Congress. But on the principle of stare decisis, and possibly on reason, I would accept the standing line of Livingstone cases and apply them to the proportionate part of the interest here allocable to the treasury notes. Then I would turn around, and allow the deduction for interest allocable to the purchase of the securities other than treasury notes.

I would have no trouble allowing all of the interest if the transaction were all corporate securities. Interest that was paid on a legal, bet (which so many business transactions are) ought to be deductible when a substantial risk was involved as it was on the corporate securities.

Taxpayers actually paid $14,218.10 as interest at the threshold. They got many corporate securities 2 in the end and they got some lawsuits with Livingstone. Apparently there is a profit on the securities to the Cahns. Will the government claim its share of the profit from the Cahns on the corporate securities they have sold and others they may sell at a profit ? It would seem odd for it to do so when we hold the deal was a sham.

As indicated, I would not in the vernacular “go for broke” with either the taxpayers or the government.

. On the treasury notes the plan was to buy in 1957 notes at the market of about $92.00 a hundred. The notes would mature in. 1962. Hopefully, the Cahns at or about maturity would get a good capital gain subject to lower income tax rates than that for his professional earnings. Meanwhile, they hoped- to take the interest cost of the transaction as a 100 per cent deduction. This would reduce their ordinary income in their very high brackets. If success taxwise could have been guaranteed; it was a fine idea.

. The ratio was $125,000 of treasury notes to approximately $25,000 of corporate securities, or five to one.