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HELVERING V. MORGAN'S, INC., 293 U. S. 121 (1934)

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U.S. Supreme Court

Helvering v. Morgan's, Inc., 293 U.S. 121 (1934)

Helvering v. Morgan's, Inc.,

No. 12

Argued October 11, 12, 1934

Decided November 5, 1934

293 U.S. 121


1. Where a corporation, without change of its accounting year, filed a separate return for the part of the year 1925 which preceded its affiliation with another corporation, and filed a consolidated return for the remainder of the year, the periods covered by the two returns are not separate "taxable years," but are each a part of the taxable year as previously constituted within the meaning of § 206(b) of the Revenue Act of 1926, which permits a taxpayer to carry over and to deduct during the next two "taxable years" a net loss sustained "for any taxable year." P. 293 U. S. 124 et seq.

2. Section 200(a) of the same Act, in providing that "the term taxable year' includes, in the case of a fractional part of a year, the period for which such return is made," does not compel a different result. Pp. 293 U. S. 124-126.

3. While the term "includes" may sometimes be taken as synonymous with "means," it may be used also as the equivalent of "comprehends" or "embraces." Therefore, under § 200(a), the phrase "taxable year" may, where the context requires it, be taken to embrace all fractional parts of the taxable year; thus, "loss sustained for any taxable year," which § 206 permits to be carried forward and deducted from gross income for two successive years, includes a loss shown in a fractional part of the first preceding taxable year for which separate returns are filed. Pp. 293 U. S. 124-126.

4. In view of the extent to which the practice of fixing the tax with reference to the twelve months' accounting periods of the taxpayer has been recognized and carried into the structure of the revenue acts, only clear and compelling language added to § 200(a) to define the phrase "taxable year" would justify application of that phrase in the remedial § 206 to periods of less than twelve months, chanroblesvirtualawlibrary

Page 293 U. S. 122

in such manner as to restrict the benefits which like sections in earlier revenue acts had extended to taxpayers entitled to enjoy them. P. 293 U. S. 128.

5. Contemporary Treasury practice and Congressional Committee Reports make it clear that, in enacting § 206(b), the intention was that a taxpayer filing a return for a part of his taxable year should stand on the same footing, with respect to carrying over a loss shown by his return, as the taxpayer who filed a return for the entire twelve months. Pp. 293 U. S. 129-130.

68 F.2d 325 affirmed.

Certiorari, 292 U.S. 618, to review a judgment reversing a decision of the Board of Tax Appeals which sustained the action of the Commissioner in assessing a deficiency in income tax.

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