C. P. And Helen Brooke v. United States

(dissenting):

I vigorously, although respectfully, dissent. The majority’s opinion disturbs me for two principal reasons. First, I think it disregards the fundamental consideration that we are bound by prior decisions of our very own. See Etcheverry v. United States, 320 F.2d 873, 874 (9th Cir. 1963). Secondly, by creating yet another legal standard under which to assess the tax consequences of a “gift and leaseback” transactions, the majority, in my judgment, adds further inconsistency to an area of tax law that is already fraught with too much semantic confusion.

Our decision controlling the tax treatment of a gift and leaseback transaction is Kirschenmann v. Westover, 225 F.2d 69 (9th Cir.), cert. denied, 350 U.S. 834 , 76 S.Ct. 70 , 100 L.Ed. 744 (1955), wherein we held

In Shaffer Terminals, which involved a sale and leaseback transaction, we affirmed the Tax Court’s disallowance of rental deductions, relying on the decision of the Tax Court and the then recently pronounced decisions of our Brothers of the Second and Fifth Circuits in White v. Fitzpatrick, 193 F.2d 398 (2d Cir. 1951), cert. denied, 343 U.S. 928 , 72 S.Ct. 762 , 96 L.Ed. 1338 (1952) (gift and leaseback), and…

This suit seeks refund of federal income taxes paid in the years 1960, 1961 and 1962. The District Court entered judgment for the taxpayer on December 9, 1968, 292 F.Supp. 571 (1968). It amended the judgment on June 23, 1969, 300 F.Supp. 465 (1969). The United States has taken this appeal.

*1157 The taxpayer is a physician who practices medicine in Missoula, Montana. His family in 1959 included six children from ages 6 to 14. His income during the years in issue varied between $26,000 and $30,000. As a gift he deeded to his children real estate which was improved by a pharmacy, a rental apartment, and the offices of his medical practice. Following the conveyance the Montana State Probate Court appointed the taxpayer as guardian of the children. In this capacity the taxpayer collected rents from the pharmacy and apartment. Without a written lease, he also paid to himself as guardian for his children the reasonable rental value of his medical offices. The rents so collected were applied to the children’s insurance, health and education. Expenditures were made for private school tuition, musical instruments, music, swimming and public speaking lessons. The taxpayer also purchased an…

468 F.2d 1155 72-2 USTC P 9594 C. P. and Helen BROOKE, Plaintiffs-Appellees, v. UNITED STATES of America, Defendant-Appellant. No. 25069. United States Court of Appeals, Ninth Circuit. July 26, 1972. 1 Grant W. Wiprud, Atty. (argued), Lee A. Jackson, Janet R. Spragens, Attys., Johnnie M. Walters, Asst. Atty. Gen., Washington, D. C., Otis L. Packwood, U. S. Atty., Butte, Mont., for defendant-appellant. 2 John R. McInnis, (argued), of Garlington, Lohn & Robinson, Missoula, Mont., for plaintiffs-appellees. 3 Before ELY and WRIGHT, Circuit Judges, and POWELL, District Judge. * POWELL, District Judge: 4 This suit seeks refund of federal income taxes paid in the years 1960, 1961 and 1962. The District Court entered judgment for the taxpayer on December 9, 1968, 292 F.Supp. 571 (1968). It amended the judgment on June 23, 1969, 300 F.Supp. 465 (1969). The United States has taken this appeal. 5 The taxpayer is a physician who practices medicine in Missoula, Montana. His family in 1959 included six children from ages 6 to 14. His income during the years in issue varied between $26,000 and $30,000. As a gift he deeded to his children real estate which was improved by a pharmacy, a rental…