The opinion
MuRdock,
dissenting: The petitioner accrued and paid in 1934 the full charge for electric current. It never contested the amount and had no way of knowing in 1934 that any of the amount paid would ever be refunded. The accrual, the deduction claimed, and the allowance thereof for 1934 were all in accordance with proper accounting principles and with the statute. The matter ought to end there. The issue of whether the taxpayer should be required, at its own instance, to pay more tax than the Commissioner seeks to collect, is a false issue and whatever is said in deciding it must necessarily be obiter. The real question which the petitioner wants us to decide is that the refund was not income when it was received in 1939. But- that question can not be decided here.
Furthermore, much that is said on this subject in the majority opinion is wrong. I dissent from the opinion that deductions and income should be permitted to depend upon the wholly unrelated circumstance that the statute of limitations has or has not run. 1 The *96 correct rule, that income tax liability must be determined for annual periods upon the basis of facts as they existed in each such period, is not only inconsistent with the rule favored by the majority, but it has been approved by the highest court and followed many times by the courts and the Board. Burnet v. Sanford & Brooks Co., 282 U. S. 359 ; North American Oil Consolidated v. Burnet, 286 U. S. 417 ; Central United National Bank, 33 B. T. A. 588; affd., 99 Fed. (2d) 568; Estate of William H. Block, 39 B. T. A. 338; affd., 111 Fed. (2d) 60; Dougherty’s Sons, Inc. v. Commissioner, 121 Fed. (2d) 700, reversing 42 B. T. A. 892 (a case in which the Board thought the rule required the opposite result). Thus, it is vacuous for the prevailing opinion to say, “Much might be said for such a doctrine, but it is too late to advance it now.” The advance took place some time ago and much has been said for the doctrine already. See, for example, Estate of William H. Block, supra.
The majority recognizes that the statement of any rule in Elsie S. Eckstein, 41 B. T. A. 746, was pure dicta, because the issue had been conceded. But it is wrong to say that the statute of limitations rule has been “consistently applied, with the exception of a few distinguishable cases and obiter dicta.” The Board has not been consistent. Moreover, some of the cases in which the statute of limitations has been mentioned did not depend upon that factor, mentioned it merely in passing, and would have been decided the same way regardless of whether or not the statute had run. See, for example, Estate of William H. Block, supra; Elsie S. Eckstein, supra; Houbigant, Inc., 31 B. T. A. 954, and many of the cases involving taxes later declared unconstitutional. Those cases are reconcilable with the strict annual period rule. So is Inland Products Co., 10 B. T. A. 235; affd., 31 Fed. (2d) 867. Lehigh Valley Coal Sales Co., 15 B. T. A. 1401, involved invested capital and is therefore not in point. However, I would not hope to reconcile all of the cases with my view, but, on the other hand, the prevailing opinion fails to distinguish satisfactorily Victoria Paper Mills Co., 32 B. T. A. 666; affd., 83 Fed. (2d) 1022; M & N Cigar Manufacturers, Inc., 42 B. T. A. 1091; Estate of William H. Block, supra; Central United National Bank, supra; Dougherty’s Sons, Inc. v. Commissioner, supra; Burnet v. Sanford & Brooks Co., supra; and a number of other cases cited in the Houbigant and Block cases. I prefer to adhere to the more practical rule approved and followed in those cases, when the question is next properly raised.
Sternhagen, Black, and Arnold agree with this dissent.
The refund involved other years besides 1934 and, under this decision, parts may be income, parts may not, depending upon whether or not those years were closed when 1939 is being closed and, perhaps, upon how the Item was adjusted for those years.