William O. Douglas

“ The years 1944 and 1945 were years of profit for the taxpayer. For the years 1946 and 1947, the taxpayer incurred net operating losses which were allowed by the Commissioner as carry-back deductions to the years 1944 and 1945. The taxpayer sought to augment its net operating loss for 1946 by the amount of excess profits taxes which it paid in 1946 on account of its 1945 excess profits tax liability. The Commissioner disallowed the deduction and the Tax Court sustained the Commissioner. ”

“ More important, the system required that a taxpayer with profit in one year and an equal loss in the next year pay taxes in the year of profit without regard to the loss in the next year, even though from a business and human point of view the taxpayer, over the broader period of two years, had no income. ”

“ The double benefit, it is argued, should certainly be denied when the figure upon which it is based has no economic reality.
But the rule that general equitable considerations do not control the measure of deductions or tax benefits cuts both ways. It is as applicable to the Government as to the taxpayer. Congress may be strit or lavish in its allowance of deductions or tax benefits. The formula it writes may be arbitrary and harsh in its applications. ”

“ That is elementary in tax law. See Security Flour Mills Co. v. Commissioner, 321 U.S. 281, 284, 64 S.Ct. 596, 597, 88 L.Ed. 725. It would seem therefore that the concept 'accrued' embodies the annual accounting principle. If, in case of a taxpayer on the accrual basis, events after the taxable year are taken into account, the word 'accrued' would be effectively read out of § 122 (d) (6) or given a varied meaning, contrary to our ruling in the Olympic Radio case. ”