Arrowsmith v. Commissioner of Internal Revenue/Dissent Douglas

Mr. Justice DOUGLAS, dissenting.

I agree with Mr. Justice JACKSON that these losses should be treated as ordinary, not capital, losses. There were no capital transactions in the year in which the losses were suffered. Those transactions occurred and were accounted for in earlier years in accord with the established principle that each year is a separate unit for tax accounting purposes. See United States v. Lewis, 340 U.S. 590, 71 S.Ct. 522, 95 L.Ed. 560. I have not felt, as my dissent in the Lewis case indicates, that the law made that an inexorable principle. But if it is the law, we should require observance of it-not merely by taxpayers but by the government as well. We should force each year to stand on its own footing, whoever may gain or lose from it in a particular case. We impeach that principle when we treat this year's losses as if they diminished last year's gains.