Well, the difference between you gentlemen is largely based upon, a word which is not underscored in the statute — one would italicize it and the other would just leave it as it is.
What Congress had in mind in 26 U.S. C.A. § 117 presents a difficulty in unraveling the respective positions taken by the income tax authorities and the citizen with reference to whether a transaction was capital gain or ordinary income. One goes back as far as the parent which gave birth to the corporation to determine what the charter issuing sovereignty said could be done under the charter.
We have an interesting case, which has become the law all over the nation, known as the Long Bell Lumber Company. That permits such a latitude — reasonably, I think — with reference to what a chartered institution may engage in under its charter without running the risk of having that charter taken away from it by the issuing authorities. Ultra vires may be pleaded by certain parties, but not by all parties. We cannot, with justice, I think, claim that what the Oldham Lumber Company did was ultra vires. It was in the ordinary course of business. The witnesses who have taken the stand do not run counter to the written stipulation of the parties, which was quite agreeable to the Court, and speaks well of the talent and learning of each side. Those authorities of the corporation testify that these lots were acquired for the purpose of
I find, gentlemen, that as a fact, and in addition to what I have already said, that these lots acquired in the twenties and sold in 1944 at a loss, as stipulated by the parties, were not capital assets, but were losses that are deductible under the income tax statute.