The opinion
TUTTLE, District Judge
(dissenting).
I cannot agree with the conclusion reached by a majority of the court nor with the views resulting in such conclusion, as expressed in the majority opinion. It seems to me entirely clear that the statutory provisions here involved are subject to none of the constitutional objections urged by the taxpayer and upheld by the court. There are no constitutional prohibitions which prevented Congress from enacting a statute, in proper form, which would impose either an excise tax oían income tax, or both, upon life insurance companies. There is no property or income from property involved in this case which is exempted by the Constitution from taxation as was the fact in National Life Insurance Co. v. United States, 277 U. S. 508 , 48 S. Ct. 591 , 72 L. Ed. 968 . That ease, therefore, is, in my opinion, not applicable here. Congress, pursuant to the power conferred upon it by the Sixteenth Amendment, has seen fit by this act to impose an income tax upon certain income of life insurance companies. No effort has been made in the act to impose an excise tax. Congress, having decided, as it had the power to do, to exempt life insurance companies from an excise tax, and from any tax on income from the life insurance business proper, very properly and justly-determined and enacted that, in computing the net income to be taxed, the life insurance companies should not be permitted to make deductions from gross income received from property previously accumulated (interest, dividends, and rents) unless such deductions were decreased by “the rental value,” as defined in the act, of “any real estate owned and occupied” by the company. This is the real purpose and result of the act, when considered and construed in its entirety. Obviously, Congress recognized that inasmuch as an effort was being made to tax only the income from property already acquired it would not be fair to permit the companies, so exempt from excise taxes and exempt from taxes on income from the life insurance business proper, to use this real estate without taking such use into account in making deductions from the gross income which were subjected to the provisions of this act. It cannot, of course, be doubted that in framing a statute to impose an income tax, Congress could impose such tax upon gross income without allowing any deductions or could allow such reasonable deductions as it deemed proper in determining the net income to be taxed.
The purpose and results of the act in question seem plain. It imposes a tax upon ac *474 tual income from certain property, namely, interest, dividends, and rents, without including as income any rental value of the real estate occupied by the taxpayer company, and permits a deduction, from such gross income, which deduction takes info account the use of real estate owned and occupied by such company. This was a constitutional method of accomplishing the desired results. Section 245 (b) denies deductions from gross income unless “the rental value,” as defined in such section, of the aforementioned real estate is taken into account in computing the amount of such deductions. This is no more objectionable, from a constitutional standpoint, because it is couched in this permissive language than it would have been if the language providing for such conditional deduction had been imperative. The majority opinion holds section 245 (b) unconstitutional on the ground that it provides for including “the rental value,” as there defined, of the space occupied by the company, in the return of gross income. I do not dissent on the ground that such “rental value,” however defined or computed, is taxable as income, or constitutes income, but on the ground that it is not in reality included in gross income, nor taxed, by this act. Construing, as we must, sections 245 (a) and 245 (b) together and as a whole, and considering them from the standpoint of the results sought and obtained, they do not impose any tax upon “the rental value,” or upon any part of the value, of the space occupied by the taxpayer, but in mathematical language provide, in substance, that if the gross deduction permitted by the act is claimed then that gross deduction must be reduced by the amount of such “rental value,” as therein defined. I construe the language of section 245 (b), which directs that if the allowed deduction is claimed the so-called “rental value” shall be included “in the return of gross income,” as a mere direction as to manner of computation rather than a matter of substance. For the purpose of reducing to an algebraic formula one of the mathematical methods by which Congress might have proceeded to accomplish the object intended, let us assume that A represents the gross income, which the act defines as the “gross amount of income received from interest, dividends and rents.” Let B represent “the rental value” of the “real estate owned and occupied” by the company. Let C represent the gross conditional deduction permitted by the act for taxes, expenses and depreciation. It seems plain that there is nothing in the Constitution which would have prevented Congress from enacting a tax law which provided that the net amount of income to be taxed was to be determined by taking A, the gross income, and deducting therefrom a sum to be determined by subtracting B, the rental value of the property used by the company, from C, the gross deduction conditionally permitted. The algebraic formula for this method would have been A — (C — B). If we reduce this formula to its most simple algebraic form, it becomes A -j-. B — C, which is the identical formula provided by the statute under consideration. Instead of providing a formula which would require a determination of the permitted deduction by subtracting B, the rental value of the property used by the company, from C, the gross deduction conditionally permitted, Congress provided the more simple formula which takes A, the gross income, and, if deduction is claimed, adds thereto B, the rental value, and then deducts C, the gross conditional deduction. This gives us the same formula, A -J- B — C. The two formulae are identical, in theory of taxation and in results. Congress had the power to impose a tax upon A, the gross income, and to provide for C, the gross deduction permitted by the act, and to reduce that gross deduction by subtracting therefrom B, the rental value of the property used. The resulting remainder to be taxed is the same whether we add B, the rental value, to the subtrahend A or subtract it from the minuend C. Neither imposes a tax upon the use or value of real estate. Both take the “rental value” of such use, as measured by the act, into account in determining the deduction permitted. The only difference is in the manner of doing the same arithmetical problem. The act provides for adding A and B and then subtracting C, whieh, it seems to me, as it evidently did to Congress, is more simple than subtracting B from C and then subtracting the remainder so obtained from A.
The power of Congress and the constitutionality of its enactments should be determined not upon any narrow considerations but in the light of the substance of the statute, having in.mind the object intended and the practical results accomplished. The meaning and purpose of this act in its entirety, including section 245 (b), seem to me plain and fully within the powers of Congress. In the final analysis, by sections 245 (a) and 245 (b) of the statute Congress permitted, without requiring, the deduction, from certain gross income of life insurance companies, of certain items of expense as reduced by a certain figure. That figure was *475 referred to, in section 245 (b), as the “rental value” of the real estate owned and occupied. by the taxpayer but its maximum was determined by a certain formula of computation prescribed by the statute. As, however, the last-mentioned figure does not, and is not intended to, represent income, but is used merely as a means of measurement of the amount of the deduction permitted, it is wholly immaterial whether it accurately represents rental value or is merely an arbitrary figure having no relation to the real rental value. Of course, even if it did actually represent rental value that would not meet the constitutional objection urged against its inclusion in, and as, income taxable under the Sixteenth Amendment, for the obvious reason that rental value does not constitute income. Used, however, merely for the purpose of measuring the amount of the permissible deduction in question, it does not, in my opinion, appear to be unreasonable or unfair, and I know of no reason why Congress could not, in its discretion and judgment, adopt it as part of the basis for computation of such deduction. It is, of course, obvious that these sections of the statute do not require, even indirectly, the taxpayer to pay more than the prescribed income tax upon any property except income, inasmuch as the net conditional deduction here allowed need not be claimed by the taxpayer, but may be entirely waived, in which event the latter will pay such income tax upon gross income without any deduction to which payment he can have no constitutional objection.
For the reasons stated, I reach the conclusion that the order of the Board of Tax Appeals should be set aside and the cause remanded for further proceedings not inconsistent with this opinion.