The opinion
DisNey,
dissenting: I can not agree with the conclusion of the majority opinion that the petitioner has shown a loss in a transaction entered into for profit. The petitioner in seeking a deduction must not only point to a statute authorizing it, but affirmatively show that he comes within its terms. New Colonial Ice Co. v. Helvering, 292 U. S. 435, 440 . “A transaction entered into or completed on a basis other than that of an ordinary business transaction does not qualify as one entered into for profit within the meaning of the revenue law”, Evans v. Rothensies, 114 Fed. (2d) 958, denying loss on transfer of stock for an annuity because the transfer was made on favorable terms as a member of the transferor’s family. In my opinion the petitioner has failed to ,show that the insurance contracts herein constituted such ordinary business transactions, or that considerations of family did not control. On brief the petitioner states his motive thus:
When the petitioner insured his life in 1922 he undoubtedly had a dual motive: (1) to make provision for his family or dependents in the event of his untimely death; and (2) to accumulate an estate by the investment of his savings in insurance, a form of investment which would yield income and at the same time make the cash value of his policies readily available to him at any time. * * *
Tacitly, he admits that the' primary purpose was provision for his family. The profit motive must be primary as the majority opinion concedes, citing cases, to which I add Donald McDonald, Jr., Adminis trator, 28 B. T. A. 64. I am unable to see how it can be said that profit was the prime motive here.
*716 Industrial Trust Co. v. Broderick, 94 Fed. (2d) 927; certiorari denied, 304 U. S. 572 , involved the question whether deductible loss was sustained by a decedent in the last taxable period prior to his death by reason of the fact that payments received by him upon annuities were less than the cost thereof. The petitioner contended that the purchases of annuities were transactions entered into for profit. The court said:
Neither do we think Mr. Parks at the time he entered into the contracts in question did so with the view of making a profit. As above said, what he was seeking was security during the term of his life, not profit, and received what he contracted for.
I think there is, so far as here pertinent, no distinction between the annuities in the cited case and the insurance policies in this. The cash surrender provisions in the insurance policies herein seem to me to be matters of security during life, equally with the payments under the annuities in the Broderick case; they do not render the life insurance policies profit transactions, and are clearly subordinate to the prime purpose of protection.
The provision of section 23 (e) as to transactions entered into for profit seems to have had its inception in section 5 of the Eevenue Act of 1916, which, provides for a deduction under subsection (a) Fifth, as follows:
In transactions entered into for profit but not connected with his business or trade, the losses actually sustained therein during the year to an amount not exceeding the profits arising therefrom.
The language as to “an amount not exceeding the profits arising therefrom” was added by the Senate. It is apparent from this language that the profits entering into the transaction must be,financial profits, capable of comparison with, and of being subtracted from, financial losses sustained in similar transactions. The fact that this limitation is not continued in later acts is no indication that the word “profits” does not continue to connote financial profit as distinguished from any satisfaction or economic security which the purchaser of the life insurance policy may obtain for himself or his beneficiaries.
It is not sufficient, in my opinion, to compare the cash surrender feature of .petitioners insurance contracts with a savings account, even if we assume that a mere savings account is a transaction entered into for profit; for that is not the primary feature of the contracts. Under the particular situation here, it appears that profit upon amounts invested was impossible; certainly the contrary is not shown, for cash surrender values presuppose fully paid premiums, and here the dividends were applied upon premiums and reduced the amount paid, leaving no showing of possibility of profit thereon, in cash surrender values. When actual cost of insurance is deducted from *717 payments, premiums already reduced by dividends, the possibility of profit seems, to say the least, so remote as to be no basis for application of section 23 (e). A realistic approach to the question of investment and profit also seems to raise the query as to whether any low rates of interest added by the insurance company to payments made should not be compared with ordinary interest rates paid for use of money. Such a comparison demonstrates, it seems to me, that the object of the insurance policy is not profit, but protection, and at the most merely safety. The prime motive here, as I see it, was not “acquisition of money beyond the amount expended” or “pecuniary gain” under the definition of profit transaction laid down in Goldsborough v. Burnet, 46 Fed. (2d) 432. I respectfully dissent.