California Barrel Co. v. Commissioner

The petition herein asks review of an order of the Board of Tax Appeals entered in favor of the Commissioner in a proceeding wherein the petitioner sought an order determining that it was entitled to deduct $306,348.56 in computing its net income for the calendar year 1927, such deduction being part of an alleged loss sustained by another corporation in 1925.

The statute under which the deduction is claimed is in the Revenue Act of 1926 (Act of February 26, 1926, c. 27, § 206 (b), 44 Stat. 9 , 17, 26 U.S.C.A. § 117 note) and is as follows: “If, for any taxable year, it appears upon the production of evidence satisfactory to the Commissioner that any taxpayer has sustained a net loss, the amount thereof shall be allowed as a deduction in computing the net income of the *191 taxpayer for the succeeding taxable year (hereinafter in this section called ‘second year’), and if such net loss is in excess of such net income (computed without such deduction), the amount of such excess shall be allowed as a deduction in computing the net income for the next succeeding taxable year (hereinafter in this section called ‘third year’) ; the deduction in all cases to be made under regulations…