The opinion
TueneR, J., concurring: As I see this case, the result must still be the same even if Anaheim should be sustained in its contention that its entire outlay in producing the water sold to its stockholders represented ordinary and necessary expenses in the conduct of its business and was thereby deductible in full. Under its bylaws, as amended in 1934, it was to supply water to its stockholders at cost. It would accordingly follow that the stockholders were obligated to pay cost. If then Anaheim should be held to be correct in its contentions, the shareholders must be said to have paid the cost when Anaheim’s rent and oil royalty income was applied, together with the money actually paid by the water purchasers, in satisfaction of their water purchase obligations. The gross receipts from water sales would thus be increased to the same extent that Anaheim’s rent and oil royalty income was so applied. And with the receipts from water sales thus being exactly the amount of the outlay in production thereof, Anaheim’s rent and oil royalty income would be left intact as net taxable income, allowance, of course, being made for any proper deductions attributable to the production of such income.
Furthermore, as the opinion of the Court herein suggests, it does not seem to me that the fact that the transactions of SABD with Anaheim and SAVI were pursuant to written agreement presents a crucial difference with respect to those transactions.