The opinion
SimpsoN, /., dissenting: I agree with the views of Judge Fay, but I wish to add some of my thoughts.
Unquestionably, under a literal reading of the statute, this petitioner does not come within the terms of section 166(g) since it is not a dealer in property. However, I believe that more is expected of us than merely to adhere slavishly to a literal reading of the statute. I conceive the judicial office to include the responsibility of attempting to carry out the purpose of the legislation.
In enacting section 166(g), Congress made clear that it intended to provide only a limited opportunity for guarantors to establish reserves to cover their liabilities as such, and we must carefully attempt to carry out that purpose — to 'bring within the provision all those persons who were intended to be benefited, but not to extend it to unintended persons. The statute restricts the provision to dealers in property and to obligations arising out of the sale of real property or tangible personal property, and these restrictions are emphasized in the committee reports. Nothing is said about the situation involved in this case; but we should do more than merely read the words of the statute and the committee reports — we should analyze them to determine how this situation falls in relation to the apparent purposes of the legislation.
If Federal’s, Inc., had not created the petitioner, but had retained the accounts receivable, it would have qualified under section 166(g). Thus, our question resolves down to whether this business should be denied the benefit of section 166(g) merely because it formed a separate legal person to which the accounts receivable were transferred. I am convinced that there is no reason to deprive the petitioner of the benefit of section 166 (g); indeed, I am confident that Congress would not want it deprived of such benefit merely because the business activities were divided between two separate legal persons and the accounts receivable transferred to the petitioner. Under these circumstances, we are not impotent to carry out the purposes of the legislation; in fact, I believe that it is our responsibility to do so.
It has been suggested that if we depart from a literal meaning of the statute, other cases will arise that present us with the troublesome problems of where to draw the line. If we apply section 166(g) in this case, what would we do if the parent owned less than 100 percent of the stock or if the subsidiary was engaged in some other activity in addition to handling the accounts receivable of the parent. The possibility of such problems arising does not, in my opinion, justify our refusing to apply section 166(g) in this situation when it seems clear that the provision should be applied. I expect that we will be holding court for those taxpayers who want to raise the other problems, and we will decide them when they arise and we have all the facts before us.
Fay, /., agrees with this dissenting opinion.