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taxable income was not a Sixteenth Amendment-permitted income
tax. 87 F.2d at 324-325.
The Circuit Court of Appeals analyzed the situation as
follows (87 F.2d at 325):
While the computation of income is made
with due and necessary regard to periods of
time, which are established years either
calendar or fiscal, it cuts altogether too
fine to say that true, and therefore taxable,
income can only be ascertained by putting
together all the profit and loss transactions
of the period and determining net income
accordingly regardless of the fact that they
may in whole or in part be quite unrelated
except for the time element and the fact that
they were those of the same taxpayer. If,
for instance, a separate and distinct
transaction during the year results in a net
realized gain to the taxpayer in and of
itself, income which is taxed has been
received, but Congress may, or may not, have
allowed deductions which as a matter of
computation will relieve that income in whole
or in part from the taxation to which
otherwise it would be subject. * * *
Accordingly, the Circuit Court of Appeals upheld the
constitutionality of the section 23(r) limitation.
To the same effect is White v. Commissioner, 37 B.T.A. 1106
(1938). The taxpayer sustained a net loss in his securities
trading. 37 B.T.A. at 1109. After discussing Davis v. United
States, supra, we stated in White as follows (37 B.T.A. at 1110-
1111):
This petitioner, however, asserts that the
deduction he seeks is not a statutory
deduction, but falls within the first
classification of deductions made by the
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