United States v. Harold C. And Olive B. Isaak

400 F.2d 869 68-2 USTC P 9598 UNITED STATES of America, Appellant, v. Harold C. and Olive B. ISAAK, Appellees. No. 22248. United States Court of Appeals Ninth Circuit. Sept. 20, 1968. Louis M. Kauder (argued), Atty., Dept. of Justice, Mitchell Rogovin, Asst. Atty. Gen., Meyer Rothwacks, Harry Baum, Attys., Washington, D.C., Smithmoore P. Myers, U.S. Atty., Spokane, Wash., for appellant. Francis J. Butler (argued), of Butler & Lukins, Spokane, Wash., for appellees. Before CHAMBERS and MERRILL, Circuit Judges, and VON DER HEYDT, District Judge. MERRILL, Circuit Judge: 1 This case presents the question whether a farmer-taxpayer who has elected, under 77 of the Internal Revenue Code of 1954, 1 to include in income amounts received as loans from the Commodity Credit Corporation may nonetheless exclude from income so much of the amounts as he repays before the end of the taxable year in redemption of his crops held as collateral for the loan. 2 Taxpayers, having on determination of the Commissioner paid a deficiency in their federal income taxes for the year 1957, brought suit for refund asserting their right to exclude such payment from income. The District Court held in their…

This case presents the question whether a farmer-taxpayer who has elected, under § 77 of the Internal Revenue Code of 1954, 1 to include in income amounts received as loans from the Commodity Credit Corporation may nonetheless exclude from income so much of the amounts as he repays before the end of the taxable year in redemption of his crops held as collateral for the loan.

Taxpayers, having on determination of the Commissioner paid a deficiency in their federal income taxes for the year 1957, brought suit for refund asserting their right to exclude such payment from income. The District Court held in their favor and the United States has taken this appeal.

Taxpayers are husband and wife who own a wheat farm in the State of Washington. They report their income on a calendar-year basis and maintain their books on a cash basis. From time to time prior to 1957 they borrowed money from the Commodity Credit Corporation, an agency of the United States Department of Agriculture, using their wheat crops as collateral. Prior to 1957 they elected, pursuant to § 77, to treat such loans as income. That election was in *870 effect in 1957. During 1957 they received loans from the Commodity…

(dissenting):

I dissent. I would follow Thompson v. Commissioner of Internal Revenue, 5 Cir., 322 F.2d 122 .