The opinion
AeUNDEll, J., dissenting: The majority do not question the fact that the salaries in dispute were constructively received by the corporate officers. On the contrary, I take it that all will agree that the salaries were constructively received. They were unconditionally credited to the individual accounts of the officers pursuant to a formal vote by the board of directors; they were voted without restrictions as to the time or maimer of payment; and the officers were authorized to draw checks on all the corporation’s bank accounts to their own order. That the corporation was able to pay is shown by the fact that its total assets were in excess of its total liabilities throughout the year, and the cash on deposit in banks was greatly in excess of the amounts due the officers. The officers themselves reported their full salaries as income for the taxable year in question. Thus, it appears beyond cavil that the full amounts of the salaries were unconditionally available to the corporate officers for the taking. Therefore, under Regulations 111, sections 29.42-2 and 29.42-3, and under such decisions as John A. Brander, 3 B. T. A. 231; Jacobus v. United States, 9 Fed. Supp. 41; John I. Chipley, 25 B. T. A. 1103, and many others, a clearer case of constructive receipt would be difficult to imagine.
It seems to me that neither legally, economically, nor logically can there ever be a constructive receipt without a concomitant constructive payment. Whether or not a constructive payment is within the word “paid” as used in a particular statute or section of the code is a different question. For example, we have recently said that a constructive payment will not satisfy the term “paid” in section 24 (c) (1) of the code, relating to deductions for unpaid expenses and interest. See Anthony P. Miller, Inc., 7 T. C. 729 ; cf. P. G. Lake, Inc., 4 T. C. 1 ; affd., 148 Fed. (2d) 898. (However, at least one Circuit Court has held to the contrary, Musselman Hub-Brake Co. v. Commissioner, 139 Fed. (2d) 65, and even this Court in a number of memorandum opinions has at least intimated to the contrary.) So, also, it has been said that a constructive payment will not satisfy the term “paid” in section 27, relating to the “dividends paid credit” of corporations. Cox Motor Sales Co., 42 B. T. A. 192; Sanford Corporation v. Commissioner, 106 Fed. (2d) 882; but see Valley Lumber Co. of Lodi, 43 B. T. A. 423.
Sections 24 (c) and 27, however, are statutes having a special and limited purpose and spring from a background having to do with tax evasion or avoidance. And so, while a constructive payment may not satisfy these particular statutes because of their special purpose, doc.sions so holding or intimating are not very good precedents for determining whether a constructive payment is within the terms of a statute having broad and general applicability. Moreover, I think it noteworthy that in the Miller, Lake, Cox, and Sanford cases, cited in the preceding paragraph, it was found that there was no constructive receipt by the payees in the taxable year of the payors, the taxpayers.
The case primarily relied upon by the majority, Martinus & Sons v. Commissioner, 116 Fed. (2d) 732, in my opinion, affords little support for the conclusion reached. It seems to me that case and this one are alike only in that in each the taxpayer-corporation and the officers whose salaries were in question were both on a cash basis of accounting. From that point on the similarity ceases, as is shown by the following quotation from our memorandum opinion in the Mar-tinus case:
Briefly, our determination is chiefly based on the following grounds: That the petitioner kept its records and filed its income tax returns on the basis of cash receipts and disbursements; that the salaries it was agreed the officers, in 19S5, were entitled to were never set aside to or for them, never credited to them by petitioner on its records, and, in our opinion, were never actually nor constructively received by them in 19S5, except in the specific amounts allowed them as deductions by the respondent; that the salaries to which the officers were entitled were not available to them, so that “at any time” during 1935 they might have drawn on petitioner for the amounts and received the same; that their salaries were not always and “at any time” available to them, so as to constitute payment, actual or constructive. [Italics mine.]
It is apparent, therefore, that in the Martinus case there was not a constructive receipt by the corporate officers, and it was so held. Of course, if there was no constructive receipt there could be no constructive payment. For that reason I think that neither factually nor in principle does the Martinus case aid the view taken by the majority here.
We do not have here a case involving the application or construction of a special statute such as section 24 (c) or section 27, and I think the majority opinion recognizes this fact. Rather, it is a question involving interpretation of statutes of general applicability to all taxpayers, sections 42 and 43 of the code, relating respectively to the period in which items of gross income are taxable and the period in which deductions and credits are taken. For a cash basis taxpayer, section 42 prescribes the general rule that items of gross income shall be included in the gross income for the taxable year in which “received” by the taxpayer, and section 43 provides that deductions shall be taken for the taxable year in which “paid.” The doctrine of constructive receipt has been engrafted upon the term “received” in section 42 on the theory that where one on a cash basis can receive income for the asking, it is tantamount to or the equivalent of receipt.
Here we have a situation in which the taxpayer-corporation and its officers are on the same basis of accounting, i. e., the cash receipts and disbursements basis. That which is an item of gross income to the payees is an item of deductible expense to the payor. The respondent does not contend here that the salaries were excessive or unreasonable. In these circumstances, the ultimate question, as I see it, is why, if the facts are such as to amount to a receipt of taxable income by the payees, they do not also amount to a payment by the payor, i think t hey do.
For the reasons stated I respectfully dissent.
Tyson, J., agrees with this dissent.