The opinion
ÁRundell,
dissenting: I disagree on the last point — the treatment of brokers’ commissions. In my opinion the majority report errs in failing to allow the commissions to be deducted as ordinary and necessary expenses.
*811 The facts stipulated abundantly establish that the taxpayer’s activities in buying and selling securities amounted to a trade or business. Being engaged in a trade or business, it would seem that his expenses would be deductible under that section of the statute which allows the deduction of “all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.” Sec. 23 (a). It is difficult to see why commissions, particularly selling commissions, are not ordinary and necessary expenses. They are a part of the cost of selling goods, treated as such generally in business, and are allowed by the Commissioner’s regulations to dealers in securities as distinguished from traders in that class of goods without expressed reason for the distinction. The statute makes no such distinction.
Earlier decisions are pointed to as establishing that commissions are not treated as expenses. Under the statutes in force when those decisions were rendered it mattered little what designation was given to them as long as they went into the computation of gain or loss. The practice of treating buying commissions as part of the cost and selling commissions as a reduction of selling price was in the interest of simplification of accounting for gains or losses and was without direct statutory sanction. Now that statutes have been enacted under which the taxpayer, following the former practice, can not deduct a sustained loss, it seems to me that he should be permitted to call his expenditures by their true name — expenses of trade or business — and bring them within the statutory provision directly dealing with such expenditures. It is to be noted that section 23 (r), which is applied by the majority report to this case, does not deal with expenses at all, and, if there is any conflict between it and section 23 (a), then it should give way to the section directly dealing with expenses.
It is not a sound answer to the taxpayer’s argument to say to him that possibly he may have the benefit of his expenses in a future year on other sales or exchanges. The taxing statutes have consistently assessed income taxes on the basis of annual accounting periods (Helvering v. Morgan's, Inc., 293 U. S. 121 ) and in order to achieve this end it is necessary to account in each year for the profits or losses on the sale or exchange of all property dealt in within the year. This requires that all profit on the property and all deductions allowed with respect to it be reported as occurring within the year. It is only when the deductions allowed for the year are exhausted that there is resort to the exception of carrying over to a succeeding year. Here, if we follow the plain wording of the statute and allow as expenses what are generally regarded as such, the taxpayer’s operations within the year will be accounted for *812 within that same year and thus meet the primary intent of Congress to levy taxes on an annual basis.
So far I have discussed mainly commissions on sales, for they are to my mind clearly business expenses. Commissions on purchases are a bit more difficult to classify, perhaps because we have fallen into the habit of speaking of them as “capital expenditures.” Yet upon analysis they are little if any different from selling expenses. To one engaged in the business of buying and selling they are ordinary and necessary expenses. A merchant employing a buyer on salary would unquestionably deduct the salary as a current business expense rather than allocate it as part of the cost of goods, and in substance a commission paid to a buyer is no different.
Leech, Arnold, and LIarron agree with this dissent.
Black agrees with this dissent in so far as it relates to selling commissions.