International Register Co. v. Commissioner

*262OPINION.

The only question before' us is whether the unabsorbed net loss for the year 1923 can be applied against net income for the year 1926.

Sections 206(b) and 206(e) of the Revenue Act of 1926 provide that:

(b) If, for any taxable year, it appears upon the production of evidence satisfactory to the Commissioner that any taxpayer has sustained a net loss, the amount thereof shall be allowed as a deduction in computing the net income of the taxpayer for the succeeding taxable year (hereinafter in this section called “ second year and if such net loss is in excess of such net income (computed *263without such deduction), the amount of such excess shall be allowed as a deduction in computing the net income for the next succeeding taxable year (hereinafter in this section called “ third year”) ; the deduction in all cases to be made under regulations prescribed by the Commissioner with the approval of the Secretary.

(e) If for the taxable year 1923 a taxpayer sustained a net loss within the provisions of the Revenue Act of 1921, or if for the taxable year 1924 a taxpayer sustained a net loss within the provisions of the Revenue Act of 1924, the amount of such net loss shall be allowed as a deduction in computing net income for the two succeeding taxable years to the same extent and in the same manner as a net loss sustained for one taxable year is, under this Act, allowed as a deduction for the two succeeding taxable years.

In construing the foregoing provisions of the Revenue Act of 1926, counsel for the petitioner, after calling attention to the net loss provisions contained in the Revenue Acts of 1918 and 1921, argues that the words “ if, for any taxable year, it appears ” contained in section 206(b) of the Revenue Act of 1926 make it necessary to construe the word “ or ” appearing in subdivision (e) as being in the conjunctive and not in the disjunctive. He claims that the whole phraseology of subdivision (e) is meaningless if the word “ or ” is considered in the disjunctive, pointing out that the phrases “ such net loss,” “ one taxable year,” and “ for the two succeeding taxable years ” are meaningless if the word “ or ” is not considered as having been used in a conjunctive sense.

In the Revenue Act of 1926, section 206(e) represents a consolidation in one subdivision of those provisions of law which were contained in section 206, subdivisions (e) and (f) of the Revenue Act of 1924. Neither the House Ways and Means Committee Report, the Senate Finance Committee Report, nor the Conference Report on the Revenue Act of 1926 makes any mention of section 206 (e). However, subdivisions (e) and (f) of section 206 of the Revenue Act of 1924 were new matter which had not existed previously in any income-tax act, and with respect to those subdivisions the report of the Senate Committee on Finance, 68th Cong., 1st sess., on the Internal Revenue Bill of 1924, and a statement of the “ Changes'made in the Revenue Act of 1921 by H. R. 6115 and the reasons therefor,” dated March 6, 1924, prepared for the use of the Committee on Finance, state:

Section 206(e) and (f) : Subdivisions (e) and (f) cover the case in which a taxpayer sustained a net loss for years prior to the effective date of this act and provides that the amount thereof, computed under the Revenue Act of 1921, shall be allowed as a deduction under this act. .

Furthermore, section 206(b) of the Revenue Act of 1924 is essentially similar to section 206(b) of the Revenue Act of 1926 and in view of the Senate Finance Committee report as to the reasons underlying the incorporation of subdivisions (e) and (f) in the Revenue Act of 1924, it appears to us that the words “ if, for any taxable *264year, it appears ” are wholly prospective and are not to be given any retrospective application. This interpretation of the words “ if, for any taxable year, it appears ” when read in conjunction with the explanation for the insertion of subdivisions (e) and (f) as new matter in the Revenue Act of 1924 demonstrates to us that the word “ or ” in section 206(e) of the Revenue Act of 1926 is to be read in the conjunctive. Consequently, under the Revenue Act of 1926 a net loss for the taxable year 1923 can not be carried forward further than the next two succeeding taxable years. Cf. Junius Beebe, 18 B. T. A. 529.

Judgment will be entered for the respondent.