Court Opinion

ID: 4496580
Source: CourtListenerOpinion
Date Created: 2020-01-23 18:14:57.127942+00
Date Added: 2024-06-11T08:00:15.054766
License: Public Domain

TURNER,
dissenting and concurring: We are not here called upon to consider transactions prompted by normal business motives. In all of the major issues the transactions themselves or the manner of their execution were induced by the desire to reduce taxable income and not by business purposes. With reference to the transfer of the Pittsburgh Coal Co., common stock to the Union Trust Co., the petitioner himself testified that “everything was fixed up for taxes at that time.” With reference to the transaction involving the stock of the Western Public Service Corporation, Phillips, senior employee of the petitioner and his brother, R. B. Mellon, and the only witness who had any direct knowledge of the transaction with the Union Trust Co. in respect thereto, stated that he knew of no purpose other than that of creating a loss deduction for income tax purposes. In the case of the sale by the McClintic-Marshall Corporation of its fabricating business and assets, the negotiating parties, after they had agreed upon the substance of the transaction, the assets to be acquired by Bethlehem, and the price to be paid, instructed the attorneys to draw up the contract or contracts in such a manner, if possible, that the assets might be transferred from McClintic-Marshall to Bethle*1084hem so as to avoid any recognition of gain to the McClintic-Marshall Corporation or its stockholders. The result-of these instructions was the extended experimentation with the various forms of contract, the organization of the Union Construction Co. for use as a conduit in making the transfer to Bethlehem, its actual use for holding the other assets when the formal transfer to Bethlehem was made, and, after that, its dissolution.
Accordingly, we do not have here the case of the ordinary taxpayer who, at the end of the year, shapes his income tax return to reflect the results of business concluded, but the case of a taxpayer v/ho just prior to the end of the taxable year undertakes to shape his business affairs and the results therefrom to match the pattern of the income tax return he desires to file. We have' the case of a taxpayer who, prior to the close of the taxable year, checks his gains and estimates the tax due thereon for the purpose of determining whether it is in excess of the,amount which he considers as a “fair” amount for him to pay to the Government in the form of income taxes. The survey in the instant case disclosed income taxes greatly in excess of the amount considered “fair” and the transaction with the Union Trust Co. covering the Pittsburgh Coal Co. common stock resulted.
It is well settled that the purpose of tax avoidance does not in and of itself vitiate the legal consequences of. a transaction. Furthermore, as the majority, opinion points out, “The legal, right of a taxpayer to decrease the amount of what otherwise would be his taxes or altogether avoid them, by means which the law permits, can not be doubted.” Gregory v. Helvering, 293 U. S. 465. But when tax avoidance is the primary motive, as is the admitted case here, the transactions involved are to be subjected to careful scrutiny to determine whether they are “in fact as well as in legal form what the participants” claim them to be. Percy C. Madeira, 36 B. T. A. 456; Robert Wilson Carter, 36 B. T. A. 598; James Nicholson, 32 B. T. A. 971; affd., 90 Fed. (2d) 980; Sydney M. Shoenberg, 30 B. T. A. 659; affd., 77 Fed. (2d) 446; Grace A. Cowan, Executrix, 30 B. T. A. 296; Rand Co., 29 B. T. A. 467; affd., 77 Fed. (2d) 450; Harold F. Seymour, 27 B. T. A. 403; Harold B. Clark, 2 B. T. A. 555. And a taxpayer who indulges in transactions primarily for the purpose of tax avoidance does so with his eyes wide open and must face the tax consequences if his judgment has been faulty, the legal advice followed unsound, or the form or ritual indulged in falls short of accomplishing his purposes. For, as the court said affirming Robert P. Morsman, 33 B. T. A. 800, at 90 Fed. (2d) 22, “When a taxpayer thus boldly proclaims that his intent, at least in part, in attempting to create a trust is to evade taxes the court should examine the forms used by him for the accomplishment of his purpose *1085with particular care; and, if his ingenuity fails at any point, the court should not lend him its aid by resolving doubts in his favor.”
The petitioner here claims that he has accomplished his purpose and has complied with all legal requirements in connection with all transactions indulged in by him for the purpose of reducing his taxable gain and the amount of tax due thereon. He rests his claim for such a conclusion upon written' documents and book entries carefully drawn and made with the primary purpose in mind of reducing taxable net income. On some of the issues the formal documents are supplemented by categorical statements of the petitioner himself. The respondent claims that the documentary evidence so prepared and relied on by the petitioner is at the most in the nature of self-serving declarations and that such weight as might otherwise be given to -it is destroyed and nullified by surrounding circumstances, the course of conduct of the parties participating in the transactions, and various statements and acts of the parties themselves and other individuals at times when the tax effect was not in mind.

Pittsburgh Goal Co. Stock.

On this issue there must have been an actual sale of the - Pittsburgh Coal Co. common stock and that sale must have occurred in 1931 if the petitioner is to prevail. The petitioner claims that such a sale did take place in December of 1931, with the Union Trust Co. as the purchaser. The burden was on him to establish that fact and, if he has failed to do so, he is not entitled to have doubts resolved in his favor. Robert P. Morsman, supra. In my opinion there is evidence of record which refutes, or to state the conclusion most leniently for the petitioner, casts a definite cloud of doubt on his claim that he made an outright and bona fide sale of the stock to the Union Trust Co., and the evidence submitted by him does not clear away those doubts. For that reason I am unable to agree with the conclusion reached in the majority opinion, that the petitioner has sustained his burden and that a valid sale was made.
That the form of á sale to the Union Trust Co. was indulged in is beyond doubt, but, as we said in Sydney M. Shoenberg, supra, “It is well settled that a mere ritualistic compliance with legal forms is not enough.” We also have the petitioner’s statement declaring an intention to sell the stock to the Union Trust Co. and the further assertion by him that he did sell the stock to that company. In that connection, however, we further find in Sydney M. Shoenberg, supra, that “A sale must rest on a genuine intention to dispose of property without reservation or evasion of mind. What is in the minds of the parties is not to be determined solely by self-serving *1086declarations or testimony of the party interested. It is pertinent to consider all the acts of the parties, the several steps employed, and all other related facts and inferences.” In Rand Co., supra, the court, in affirming the Board, said:
If the sales by the taxpayers to Trux were complete and final with no understanding with him as to repurchase, the loss was deductible; otherwise not. Shoenberg v. Commissioner, 77 Red. (2d) 446, (C. C. A. 8). The burden was upon taxpayers to establish the above fact. Transactions of this character are necessarily secret, and the real situation is known only to the immediate parties. The Board was not compelled blindly to accept their testimony that there was no such understanding. It could examine the probabilities of such truth * * *.
Further, in Harold F. Seymour, supra; James Nicholson, supra; Percy C. Madiera, supra; Robert Wilson Carter, supra; James W. Singer, 32 B. T. A. 177; D. A. Belden, 30 B. T. A. 601; Charles S. Hempstead, 18 B. T. A. 204; Albert W. Finlay, 17 B. T. A. 828; and numerous other cases, we have, in the light of surrounding circumstances, refused to accept categorical conclusions in the testimony of the various petitioners to the effect that actual sales were accomplished. The Board was unwilling to lend its aid in resolving doubts in their favor.
In this connection it seems to me pertinent to review the acts of the parties, the character of the property dealt with, the testimony of the witnesses, and their relation to the transaction and to each other, in order to determine the probability that the petitioner sold and that the Union Trust Co. acquired or intended to acquire as its own and without reservation the 123,622 shares of the Pittsburgh Coal Co. common stock in question.
The transaction took place between the petitioner and H. C. McEldowney, president of the Union Trust Co., and the only testimony bearing directly on the purported sale and purchase is that of the petitioner, who said that he went to the Mellon Bank Building and saw McEldowney at the close of a meeting of the Mellon Bank and told him he would like to sell to the Union Trust Co. his Pittsburgh Coal Co. common stock; that McEldowney asked one or two questions “concerning the amount, and the stock and so forth” and, after being told that the amount in round figures came to $500,000, considered the matter for a moment and said: “All right. Send it up and we will take it.” That, according to the petitioner, was “substantially everything that was said.”
Having supplied us with the petitioner’s version of the transaction, counsel for the petitioner called witnesses from the Union Trust Co. to show its position and attitude in the matter. The witnesses called, however, were subordinates in the bank and disavowed any knowledge of the details or circumstances of the actual trans*1087action between the petitioner and McEldowney. Counsel for the petitioner brought out that the stock at the direction of McEldowney was taken up on the books of the bank as an investment and that title was taken in the name of the Acly Co., a partnership composed of officers in the bank, organized for the purpose of holding title to securities belonging to the bank. It was also brought out that there were two similar partnerships, one by the name of Mac & Co. and the other by the name of Clay & Co. It was explained that securities held in trust were transferred to Mac & Co. and that securities held for clients or customers or in any custodian relationship were transferred to Clay & Co. On cross-examination by counsel for respondent, however, it was admitted that Mac & Co. was not even organized until after the Pittsburgh Coal Co. stock had been transferred to Coalesced. It was further admitted that, while the Acly Co. may have been organized for the purpose of holding title to securities owned by the bank, during the year 1930, 36 out of the 39 dividend-paying stocks held by Acly did not belong to the bank but to customers of the bank. Such was the use of Acly at the time the Pittsburgh Coal Co. stock was transferred to it. It was further shown that, during 1931,17 out of the 27 dividend-paying stocks held by Acly belonged to customers of the bank and not the bank itself.
As to the character of the stock, the petitioner himself testified that it had no actual or intrinsic value and that it had no prospects as a dividend producer. The Pittsburgh.Coal Co. had not, according to the petitioner, paid dividends on the common stock “for a large number of years” and the accumulated dividends on its preferred stock were then in excess of $40 per share and at the time of the hearing had increased to approximately $65 per share. The coal business, as affecting the Pittsburgh Coal Co., had been in a decline for more than fifteen years and there was nothing at the time to indicate that anything but a continued decline could be expected. And even though there might be an improvement in the coal business in general, it was the petitioner’s opinion that it would not come in time to be of any benefit to the common stockholders of the Pittsburgh Coal Co. The only value that the petitioner was willing to attribute to the common.stock of the Pittsburgh Coal Co. was a strategic value for voting purposes. Undoubtedly McEldowney was also fully aware of these facts, since his company had handled the original purchase by the petitioner and his brother of some of these same shares, and in 1929 had sold a $20,000,000 bond issue for the Pittsburgh Coal Co. Yet we are asked to find as a fact that the Union Trust Co. actually purchased, with the funds of its investors and depositors and as an investment, 123,622 shares of that stock, a stock which had no dividend prospects and which the bank had never seen *1088fit to invest in even during the prosperous days of the Pittsburgh Coal Co., if it had ever known such days.
Another circumstance which seems to me to be of significance in determining the position of the Union Trust Co. in the Pittsburgh Coal Co. stock transaction is the manner of its disposition. The testimony in that connection was given by Korb, one of McEldowney’s subordinates. Korb disavowed actual or direct knowledge of the circumstances or terms of acquisition of the stock by the bank. In reality he took up the story in March of 1932, when, according to his testimony, he was instructed by McEldowney to dispose of the stock if and when a reasonable return could be received on the bank’s investment therein. Korb’s activities in that direction were limited exclusively to calls made to H. M. Johnson, the petitioner’s principal personal employee. He stated that he asked Johnson if he knew of any one interested in acquiring the stock and was advised that he knew no one. Korb made no further inquiries of any one and stated that he made no effort to dispose of the stock to any other party or interest, but some two or three weeks later called Johnson a second time and, upon either the second or third call, Johnson asked that a price be quoted. The price was quoted in the form of a memorandum, reading as follows:
Figured for April 25, 1932.
A. W. Mellon.
Dec. 30, 1931, 123,622 shares Pittsburgh Coal Company Common
Stock ($100 par value) at 4.0445875_$500,000.00
Cost___$500,000.00
Interest—118 days at 6%- 9,833. 33
Stock Transfer Stamps- 4,944. 88
Penna. Five Mill Tax__ 2,500.00
$517,278.21
Average price figured on $517,278.21__ $4.18435399
Upon the receipt of the above quotation Johnson acquiesced in Korb’s proposition and' it was then for the first time that Korb, according to his testimony, learned that the stock was to go to the Coalesced Co. instead of the petitioner.
In addition to the fact that Korb actually made no effort to dispose of the Pittsburgh Coal Co. common stock to anyone other than the petitioner, it is interesting to note from his testimony that he knew practically nothing about the stock and made no effort to learn anything about the condition of the company. He could not' have informed any prospective purchaser as to the voting rights of the common and preferred stock, nor of the dividend provisions of the preferred stock. He did not know the date of the last dividend *1089paid on. the common stock, nor its dividend record. He knew nothing of the funded debt, and could not say whether the bonds outstanding were mortgage bonds.- He had no knowledge as to the holdings of the company, the accessibility of its properties, the acreage in operation nor of the reserve acreage. He knew nothing about the facilities of the company for handling and transporting coal, and made no inquiry as to, the value of the properties back of the stock. It is further of interest and significant to note that Johnson, the petitioner’s secretary and principal personal employee, was of the opinion that it would have taken the Union Trust Co. about five- years to have disposed of the stock on the market at the rate at which it was then being traded.
I am able to reach no other conclusion than that the Union Trust Co. throughout the transaction looked to the petitioner to take up or to provide a taker for the Pittsburgh Coal Co. stock and to pay a reasonable sum, for services rendered. It is asking too much for me to believe that a bank such as the Union Trust Co. would purchase for its portfolio, at a price of $500,000, shares of stock which had no dividend prospects and on which no dividends had been paid “for a large number of years”, a stock secondary to an issue of preferred stock which at that time had dividends accumulated against it in excess of $40 per share, a stock which the petitioner, himself stated had no actual or intrinsic value, and a stock which, according to the petitioner’s principal employee, would have required the bank approximately five years to dispose of if it had been dependent upon the open market. And while Korb, under cross-examination by respondent’s counsel, did not accede to a description of the stock as a “frozen asset”, he did admit that he would not classify it as a “liquid asset.”
At this point mention should also be made of the contention of the respondent that the petitioner in reality had no desire or intention of disposing of his, Pittsburgh Coal Co. common stock to any interests outside of his family, and the facts and circumstances upon which this contention is based. At some period between 1927 and 1930, probably 1929, petitioner received an offer from Frank E. Taplin to purchase 100,000 shares of common stock of the Pittsburgh Coal Co. at $100 per share and as a down payment Taplin offered a certified check for $500,000. The stock at that time was selling on the market for an amount in excess of $80 per share. This offer the petitioner rejected and stated as his reason therefor that Taplin’s chief interest in acquiring the stock of the Pittsburgh Coal Co. was for the purpose of supplying freight for a railroad in which he was interested; that the Pittsburgh Coal Co. was an important factor in the welfare and industrial and commercial life of the Pittsburgh area; that control of *1090the Pittsburgh Coal Co. by Taplin would have been injurious to Pittsburgh; and for those reasons he would not have sold the stock to Taplin under any circumstances. Prior to his testimony in this connection, however, the petitioner had stated that the Pittsburgh Coal Co. stock had no actual value and no dividend prospects and that the company had been in a bad way for some fifteen years; that his holdings in the common stock of the company were securities that he desired to dispose of and that he “would have desired before that time to have sold the stock” if he had had it before him “and there was the opportunity or the occasion to do so.” Yet the stock had been specifically brought to his mind by the Taplin offer of 1929 or thereabouts, and he had refused to consider the offer and took no further steps to dispose of it. It may also be noted here that the only value of any nature that petitioner was willing to attribute to the stock was a strategic value for voting purposes, and it was that strategic voting value as distinguished from value as an investment which apparently caused Taplin to make his offer in 1929 and prompted the petitioner to refuse it.. He admitted from the witness stand that, when he decided “to sell” the block of stock in 1931, he made no. effort to learn whether Taplin or any other outside interest might still be interested in acquiring the stock and reiterated that he would not have sold the stock to Taplin in any event, while contending at the same that he made a definite, outright sale of the stock with no strings attached and did not care what became of it. The respondent’s explanation, which in the light of the facts seems the more reasonable one, is that it was at all times intended that the stock would eventually be acquired by the Coalesced Co. and that the Union Trust Co. was merely a depository until such time as it might be deemed expedient to transfer the stock to Coalesced. In this connection it is pointed out that R. B. Mellon, petitioner’s brother, formed a corporation parallel in almost every respect with the Coalesced Co. and that B. B. Mellon’s holdings in the Pittsburgh Coal Co. stock passed directly from him to such corporation without any detours through the Union Trust Co. or other corporation.
If the petitioner had dealt directly with Coalesced and Coalesced had paid to him in December 1931, out of its cash and funds acquired by use of its credit, the sum of $500,000 and had continued to hold the stock as it has since the acquisition thereof in April of 1932, there would be much less cause to doubt the petitioner’s claim that an- actual sale was made. Edward Securities Corporation, 30 B. T. A. 918; affd., 83 Fed. (2d) 1007; A. S. Eldridge, 30 B. T. A. 1322; Ralph Hochstetter, 34 B. T. A. 791; Jones v. Helvering, 71 Fed. (2d) 214; James E. Wells, 29 B. T. A. 222. As it is, however, the transaction did not take that course and petitioner’s position must stand or fall on the *1091soundness of his claim that he made an actual and outright sale to the Union Trust Co. during 1931, and to sustain him on that claim we are ashed to ignore the facts reviewed above and to conclude that the Union Trust Co. purchased the stock and later found a buyer in Coalesced free and clear of any understanding with the petitioner as to its subsequent disposition.
In Harold F. Seymour, supra, we said:
Though the Board has approved deductions for losses where the evidence was not decidedly more favorable to petitioner than that surrounding the first purported sale, we can recall no case in which approval has been given where the same parties went through almost the identical process in the next year. To approve a single instance requires the resolving of many doubts in favor of the petitioner, but to permit a recurrence of the same procedure in the next year under the circumstances here present overtaxes our credulity. Despite the statement of the parties to the transactions that they were outright sales, we are not convinced that such sales were free and genuine. In our judgment they were lacking in bona fides.
If the transaction of 1927-1928 stood alone the deduction might conceivably have been allowed, but the repetition thereof for the years 1928-1929 in precise parallelism goes beyond mere coincidence. It casts such doubt on the good faith of petitioner in both years as to make it impossible for us to approve the purported sales. The evidence and inferences reasonably to be drawn therefrom lean too strongly against petitioner to permit us to approve the deductions.
While we have before us only the one taxable year, 1931, in line with the holding in the case cited, proof was offered of similar activities of the petitioner in the years 1932 and 1933. In December of 1932 we find the petitioner again going over the matter of his prospective income tax for that year and a review of securities which, if sold, would result in the loss deductions desired for reducing net taxable income. We again find the petitioner and Johnson agreeing upon the use of certain securities, and we find that this time Johnson made the deal with H. C. McEldowney, president of Union Trust Co., the transaction occurring on December 29, 1932. This time, instead of the securities of one company, we find that a number of securities were involved, but in that list we find securities even less attractive as an investment than was the Pittsburgh Coal Co. common stock in December 1931. We find the Union Trust Co. purportedly paying $6,500 for preferred shares of the United Porto Rican Sugar Co., which company was even then in default on an outstanding issue of gold notes and in the same transaction paying $10,400 for $208,000 par value of the gold notes then in default. In the same transaction we find the Union Trust Co. purportedly paying $19,931.50 for 5,500 shares of Missouri Pacific Railroad Co. preferred stock, while in the same transaction it was able to acquire Missouri Pacific Railroad Co. gold bonds having a par value of $219,000 at 7⅝ cents on the dollar. To conclude that any normal bank would carry among its investments *1092securities of such character, let alone make an outright purchase of them, is incredible, and we find that almost immediately the Union Trust Co. took the necessary steps to clear these securities from its portfolio.
In February following Korb received instructions from McEldowney with reference to these securities similar to the instructions in March of the preceding year with reference to the Pittsburgh Coal Co. common stock. Korb, as before, called Johnson and inquired for a purchaser and Johnson advised Korb that he would call him back and let him know. He suggested, however, that Korb quote him a price. In the meantime the market price of the American Locomotive Co. shares had increased from $200,000, the price at which they had been listed in the December transaction, to $240,000. Johnson balked at paying the market price of $240,000, and fixed the price at $215,000. Upon consultation with McEldowney, Korb was instructed to accept Johnson’s price. To further offset the apparent profit to the Union Trust Co. on the American Locomotive Co. shares, reductions were made on the “sales” slip in the price at which the Missouri Pacific preferred shares and bonds and the Sugar Co.’s gold notes were transferred to Coalesced. The Sugar Co.' preferred stock was listed on the “sales” slip at $6,500, the same price at which it had been included in the December transaction.
Korb, who had been employed by the Union Trust Co. for approximately 20 years, was unable to recall any instance except those described in this proceeding where the Union Trust Co. ever at any time purchased a stock which at the time of purchase was neither earning nor paying a dividend unless the acquisition was in connection with some contract designed to indemnify the bank against loss. Lightbown, chief clerk in the bond department, who had been with the bank since 1921, knew of no other instance where the Union Trust Co. had ever acquired preferred stock in a corporation which was in default on its notes. It is also significant, in my opinion, that the Union Trust Co. did not consider the stock of the Pittsburgh Coal Co. as sufficient collateral on Coalesced’s purchase note for $400,000 and within a few days Coalesced, at the request of the bank, deposited as additional collateral Republic of Poland bonds having a par value of $500,000.
In December of 1933 the petitioner and Johnson were again making a survey of the petitioner’s affairs from an income tax standpoint and the sale of certain securities was considered. On this occasion Johnson suggested that the Coalesced Co. could use such securities, but the petitioner, according to Johnson, stated that in this instance, if the Coalesced Co. desired to acquire the securities it would have to do so through the market, while on the other hand the petitioner testified *1093that it was Johnson who suggested that the securities be sold on the market and that Coalesced could place a purchase order at the same time. A reason prompting the sale through a broker was that question had been raised about a sale of securities for tax purposes to a family corporation. The result was that Johnson placed an order with the brokerage firm of Moore, Leonard & Lynch to sell the securities in question for the account of the petitioner and at the same time placed a matched order on the part of Coalesced to buy these same securities. The same employees who delivered the securities to the brokerage firm for the account of petitioner brought them back to the office of the petitioner for the Coalesced Co.
All of the securities “sold” by petitioner to the Union Trust Co. at a loss during the years 1931 and 1932 were the securities “sold” for the purpose of creating loss deductions and in each instance, shortly after the close of the year, all of such securities were acquired from the Union Trust Co. by Coalesced.
The petitioner here admittedly elected to decrease the amount .of what would otherwise be his taxes by the creation of a loss deduction, and, if the record contained only the evidence of the formalities indulged in by him and the Union Trust Co. in connection therewith, and the formalities later indulged in with reference to the acquisition of the same stock by the Coalesced Co. in April of the following year, and the testimony of the petitioner of his intention to finally and definitely dispose of the stock, we should undoubtedly, in the light of the decisions referred to above, hold that he had sustained his burden of proving a sale to the Union Trust Co. in December of 1931, and that as a result thereof he is entitled to the loss deduction claimed. The evidence of record is not so limited, however, but also includes the detailed circumstances outlined above, which in my opinion definitely cast a cloud of doubt on the claim of the petitioner that the sales were outright and bona fide, doubts which the petitioner has not succeeded in clearing away and, as the court pointed out in Robert P. Morsman, supra, the petitioner’s ingenuity having failed him in this connection, the Board should not lend him its aid by resolving the doubts in his favor. Again referring to the conclusions of the Board in Harold F. Seymour, supra, the nature, condition, and state of the securities involved in the transaction and the recurrence of similar procedure in the following years “under the circumstances here present overtaxes” my credulity. For that reason I am unable to agree with the conclusion reached in the majority opinion with respect to the transaction in December of 1931 between the petitioner and the Union Trust Co. covering the 123,622 shares of common stock of the Pittsburgh Coal Co.

*1094
Western Public Service Corporation Stock.

While I concur in the result reached by the majority on this issue, I am unable to agree that a categorical finding should be made that R. B. Mellon, acting for the petitioner and himself, made a valid sale of 54,000 shares of stock of the Western Public Service Corporation to the Union Trust Co. on December 2,1931. It is my opinion that the Division erred in denying to the respondent the right to introduce evidence which it was claimed tended to show that the members of the executive committee and the board of directors of the Union Trust Co. used that company for the purpose of going through the formality of sales to it of certain securities, particularly Western Public Service Corporation stock, in December of each year in order to create loss deductions, when as a matter of fact it was understood that shortly after the running of a period of thirty days they would similarly go through the formality of a repurchase of these same securities. It was the position of counsel for the respondent that the evidence offered, when considered with other evidence in the record, would show that the transaction between R. B. Mellon and the Union Trust Co. in respect of the 54,000 shares of Western Public Service Corporation stock was of that character and that no actual sale of the stock was ever made or intended. In my opinion the Division undertook to prejudge evidence which it neither heard nor examined and without knowing what it would show when considered with other evidence of record.
As the record now stands it shows that the Union Trust Co. engaged in similar transactions with other individuals, particularly members of its board of directors and executive committee, who transferred stock to it in December and reacquired the same stock thirty to ninety days later. At or about the same time that R. B. Mellon transferred 54,000 shares of the Western Public Service Corporation stock to the Union Trust Co., William B. Schiller and Boy A. Hunt, members of the board of directors and the executive committee, so transferred and reacquired 5,000 shares and 6,000 shares, respectively, of Western Public Service Corporation stock.

The Union Construction Co. Liquidation.

The Board has found as a fact that the Union-Koppers and the Union-Pitt reorganizations and the distribution by Union to its stockholders of the Koppers stock and the Pitt stock acquired in those reorganizations were parts of a single plan to completely liquidate Union. With this conclusion I am in hearty accord. In my opinion, however, that finding precludes the holding thereafter made that the distribution of the Koppers stock and the Pitt stock falls within the *1095meaning of section 112 (g)1 of the Revenue Act of 1928, and further precludes the conclusion reached that application of the section mentioned requires that the distribution of the Koppers stock, the Pitt stock and the other assets, even though actually made in a single plan for the complete liquidation of Union, be broken up into three separate transactions for the purpose of computing the gain to the stockholders therefrom, also that the basis to the stockholders of the Union stock be prorated to the three separate transactions for purposes of such computation. To so hold is to make a gain computing or determining section out of section 112 instead of a gain recognizing section, as the statute definitely shows it was intended to be. There is nothing in that section at any place prescribing the method for the computation or determination of gain.
The realization of gain by stockholders from distributions made to them by the corporations in which stock is held is governed by section 115 of the act, entitled “distributions by corporations.” Distributions in liquidation are specifically dealt with in subsection (c) of that section, which reads in part as follows:
(c) Distributions in liquidation.—Amounts distributed in complete liquidation of a corporation shall be treated as in full payment in exchange for the stock * * *. The gain or loss to distributee resulting from such exchange shall be determined, under section 111, but shall be recognized only to the extent provided in section 112. [Italics supplied.]
From the above it appears that the statute presents a complete and orderly course to be followed in determining the income tax effect of distributions in liquidation. The nature of the distribution or transaction for the purpose of determining gain or loss is to be resolved by the application of section 115 (c), supra. The amount of the gain or loss is to be determined or computed under the provisions of section 111, and the extent to which the gain or loss so realized and so computed is to be recognized is next determined by the application of section 112.
The Koppers stock, the Pitt stock and the other assets of Union having been distributed to the stockholders of Union in a single plan of complete liquidation, the receipt by the petitioner of his pro rata share of such assets was, under the plain wording of section 115 (c) quoted above, an exchange by him of his Union stock for such assets. *1096Following the course directed by the statute and referring next to section 111 for determination of the gain from such an exchange, we find in subsection (a) that “the gain from the sale or other disposition of property shall be the excess of the amount realized therefrom” over the taxpayer’s basis, and, further, in subsection (c) that “The amount realized from the sale or other disposition of property shall be the sum of any money received plus the fair market value of the property (other than money) received.” Applying the above mentioned provisions of section 111 to the instant case, the gain to the petitioner from the liquidation of Union was the difference between the fair market value of the property received, namely, the Koppers stock, the Pitt stock and other assets, and the basis to him of his Union stock. Certainly there is nothing in section 111, the section that governs the “Determination of amount of gain of loss”, that gives any color to the claim that the gain in the case of an exchange of property is to be computed or determined separately with respect to each item of property received in the exchange, but to the contrary, the plain language of the statute is that the amount realized is the “sum” of the money “plus” the fair market value of the property and the gain is the excess of that total over the taxpayer’s basis for his stock in the corporation liquidated.
The nature of the transaction having been determined by section 115 (c) and the amount of the gain computed or determined under section 111, we are next directed to section 112 to determine the extent to which the gain realized and determined is to be recognized for income tax purposes. Bearing in mind that section 115 (c) directs that distributions in complete liquidation shall for purposes of the income tax statute be treated as in exchange of the stock for the assets distributed, we find in section 112 (a) a provision that “Upon the sale or exchange of property the entire amount of the gain * * * determined under section 111 shall be recognized, except as hereinafter provided in this section.” Referring to the remaining provisions of section 112 in order, the first subsection prescribing the extent to which the gain to a stockholder from corporate distributions is recognized is 112 (b) (3), which provides:
No gain or loss shall be recognized if stock or securities in a corporation a party to a reorganization are, in pursuance of the plan of reorganization, exchanged solely for stock or securities in such corporation or in another corporation a party to the reorganization.
Admittedly the shares of Koppers stock and of Pitt stock were acquired by Union in corporate reorganizations and in each instance were securities of a corporation “a party to a reorganization.” It is also true that the plans of reorganization contemplated the distribution of these shares by Union to its stockholders. It is thus apparent *1097that the only circumstance that provents nonrecognition of all the gain realized by the petitioner from the liquidation of Union is that the exchange by him of his Union stock was not “solely” for the Koppers stock and the Pitt stock, but for other property as well.
Proceeding with the examination of section 112, we find that the exception of fact which prevents the application of section 112 (b) (3) is specifically dealt with in section 112 (c) (1) as follows * * * if an exchange would be within the provisions of subsection (b) * * * (3) of this section if it were not for the fact that the property received in exchange consists not only of property permitted by such paragraph [(b) (3)] to be received without recognition of gain, but also of other property or money, then the gain, if any, to the recipient shall be recognized, but in an amount not in excess of the sum of such money and the fair market value of such other property.”
With section 112 (c) (1) we have a complete statutory formula for determining the effect for income tax purposes of the liquidation of Union. To summarize, the distributions in complete liquidation of Union constituted an exchange by petitioner of his Union stock for Koppers stock, Pitt stock, and other assets, and the gain is to be determined under section 111 and recognized to the extent provided by section 112. Sec. 115 (c). The gain determined under section 111 is the difference between the basis of petitioner’s Union stock and the fair market value of the Koppers stock, the Pitt stock, and other assets. Sec. 111 (a) and (c). If the petitioner had received only the Koppers stock and the Pitt stock in such exchange, then none of the gain realized under section 115 (c) and determined under section 111 would have been recognized because in such case the exchange of the Union stock would have been “solely” for the stock of corporations which were parties to reorganizations and in pursuance of the plans of reorganization. Sec. 112 (b) (3). The Union stock was not exchanged “solely” for the Koppers stock and the Pitt stock, however, but for other assets as well, and as a result the gain is recognized “but in an amount not in excess of * * * the fair market value of such other property.” Sec. 112 (c) (1).
There is no question that the gain realized was in excess of the fair market value of the property received other than the Koppers and Pitt stock and, applying section 112 (c) (1), the gain recognized as distinguished from gain realized or determined is limited to the fair market value of the other property. It is at once apparent that no part of the value received by the petitioner in liquidation of Union in the form of Koppers or Pitt stock is recognized for income tax purposes, the gain realized being limited to the fair market value of other property.
*1098As authority for the application of section 112 (g) to the distribution of the Koppers stock and the Pitt stock to the stockholders of Union, the majority opinion relies upon the former decisions of the Board in Rudolph Boehringer, 29 B. T. A. 8, and North American Utility Securities Corporation, 36 B. T. A. 320. The reasoning is. first, that the Koppers stock and the Pitt stock having been distributed to the stockholders of Union without simultaneous physical surrender of their Union stock certificates, there was no actual exchange of Union stock for Koppers and Pitt stock and that an exchange is a prerequisite to the application of sections 112 (b) (3) and 112 (c) (1) and, second, that the distribution of the Koppers stock and the Pitt stock, even though made in complete liquidation of Union, having been made without actual and simultaneous physical surrender of Union stock certificates, the distribution of the said Koppers stock and the Pitt stock literally falls within the language of section 112 (g). It is then concluded that the application of section 112 (g) requires that the distribution of the Koppers stock, the Pitt stock, and other assets, even though actually made in a single plan for the complete liquidation of Union, be broken up into three separate transactions for the purpose of computing the gain to the stockholders therefrom, and in making the computation that the basis of their Union stock must be prorated to the three transactions. The inference is that to hold otherwise would result in the recognition of gain on the distribution of the Koppers stock and the Pitt stock which admittedly were in each instance securities of a corporation a party to a reorganization and were distributed in pursuance of these plans of reorganization.
Considering first the proration of the basis of the Union stock, it has been pointed out above that the application of section 112 (c) (1) and the computation of the gain from the liquidation of Union as a unit does not result in recognition of any part of the gain received in the form of Koppers or Pitt stock for under the provisions of that section the gain recognized is limited to the fair market value of the other property distributed, and no part of the value attributable to the Koppers stock or Pitt stock is included. It is thus apparent that the nonrecognition of gain on the distribution of the Koppers stock and Pitt stock under the circumstances herein is not dependent upon the application of section 112 (g). It is further apparent that the result reached in the majority opinion is not a matter of recognition or nonrecognition of gain, but a matter of computation which is governed by section 111 and not by section 112 (g) or any other provision of section 112.
The most obvious fallacy in the majority opinion however is in the conclusion that the distribution of the Koppers stock and Pitt *1099stock was not in exchange for the Union stock, within the meaning of section 112 (b) (3) and section 112 (c) (1), but was a distribution of those stocks without the surrender of the Union stock within the provisions of section 112 (g). This conclusion entirely ignores and completely writes out of the statute the provision quoted above from section 115 (c) to the effect that distributions “in complete liquidation of a corporation shall be treated as in full payment in exchange for the stock." Congress, by the provision referred to, has completely removed any doubt as to the treatment of distributions in complete liquidation with respect to the stock of the corporation so liquidated. By that provision Congress has plainly said that a corporation and its stockholders may not defeat the exchange provisions of the statute by a mere failure at the time of liquidation to surrender the certificates which after all are only evidence of the shares in a corporation. Furthermore it should be pointed out that no contention is made that the Union stock was not physically surrendered as soon as the distribution in liquidation was concluded.
The failure to apply section 115 (c) to a distribution made by a corporation, pursuant to a plan of reorganization, may be due in part to an impression which seems to prevail in some quarters and which unfortunately may be inferred from language used in some of the decisions, to the effect that section 115 (c) and section 112 are each exclusive of each other in their application. From the plain language of section 115 (c) previously quoted, it is at once apparent that the language there used is applicable to all corporate distributions in liquidation and includes the distributions falling within the provisions of section 112. In other words, all distributions which meet the requirements of section 112 are also within the provisions of section 115 (c), but all distributions falling within the provisions of section 115 (c) are not necessarily subject to the provisions of section 112.
The majority opinion does find authority for the conclusions reached in Rudolph Boehringer, supra, and North American Utility Securities Corporation, supra. Both cases ignore or overlook the provisions of section 115 (c), supra, to the effect that for the purposes of the income tax statute, distributions in complete liquidation of a corporation are to be treated as in exchange for the stock of the corporation so liquidated, and in my opinion should be overruled. When distributions in complete liquidation of corporations are treated as exchanges, the non-applicability of section 112 (g) at once becomes apparent. That section by its plain language is applicable only to cases where the stock of the corporation making the distribution is not exchanged.
*1100Furthermore, I am of the opinion that the only reasonable interpretation of section 112 (g) is that it was intended to apply to situations where the corporation making the distribution was to be continued as the owner of some property and the stock of such corporation would thereby have some value and that it was not to be applied in cases where a complete liquidation was made and the corporation, even though not formally dissolved, had no assets and its stock, even though not surrendered, had no value behind it. There is no language in the statute which prescribes a split-up of the basis of the old stock between the stock received in complete liquidation without recognition of gain and other assets received in the same plan of liquidation for the purpose of computing the gain from the liquidation, even though it be said that section 112 (g) does apply. The only statutory provision from which it might even be inferred that such a split-up of the basis of the old stock is intended, is found in section 113 (a) (9).2 That section prescribes the basis the stock received in a section 112 (g) distribution is to have for the purpose of determining gain or loss from its subsequent sale or disposition. For that purpose the stock so received does take an allotted portion of the basis of the old stock, while the remaining portion of the old basis is left to the old stock for the purpose of determining the gain or loss in the event of its subsequent sale or disposition. Under the circumstances of a complete liquidation, however, the old stock, even though outstanding, would have no value upon which any portion of the original basis could be prorated to it. Consequently the entire basis of the old stock would necessarily be applied against the fair market value of all the property distributed in liquidation and none of it would be left to the old stock and we would still find no justification for a computation of the gain herein in the manner contended for by the petitioner and approved by the opinion of the majority.
Gross v. Commissioner, 88 Fed. (2d) 567, is cited in the majority opinion as being clearly in point and the facts therein are given in considerable detail to show its applicability to this issue in the instant case. The distinction between the two cases in my opinion is readily apparent. In this case we have found that complete liquidation and distribution of all of the assets of the Union Construction *1101Co. was determined and carried out as a part of a single plan of complete liquidation. Union conducted no business and was not intended to conduct any business. It was organized to hold certain assets for the purpose of giving the appearance of a class A reorganization to the transfer by McClintic-Marshall of its remaining assets to Bethlehem and when that purpose was served Union was dissolved. In the Gross case the facts show that the stockholders of the Tampa Box Co., which was a business corporation and had been actively engaged in the conduct of business, determined that the corporation be not immediately dissolved but that it should continue to hold a substantial portion of its assets until such time as the board of directors should deem it advisable to make a distribution of those assets and such time as the stockholders themselves might determine upon the legal dissolution of the corporation. Furthermore the facts show that the distribution of a substantial portion of those assets was not determined upon and the legal dissolution of the corporation was not ordered for at least a year. It is further significant to note that that corporation, even though not actively engaged in the conduct of business during the year preceding its formal dissolution, was by remaining alive serving a business purpose—the preservation of its name was of value and of importance in the particular trade in which the corporation had been engaged—and, further, when legal dissolution was finally determined upon more than a year later, particular care was taken to see that a new corporation was organized for the purpose of acquiring and preserving the valuable name of the old corporation. The distinction between that case and the instant case is substantial and apparent. In that case there was no complete liquidation or dissolution and no complete liquidation or dissolution was intended. The stock of the Tampa Box Co. was not surrendered, but retained by the stockholders for a definite purpose, that of keeping the corporation alive in order that it might continue to hold a substantial amount of assets, also for the purpose of preserving a name valuable in the trade in which the corporation had been engaged. Thus in the Gross case we have distributions made under circumstances which literally and actually bring it within the provisions of section 112 (g). We have no such circumstances present in the instant case.
For the reasons stated above, I am unable to agree with the conclusions reached in the majority opinion of this issue and respectfully express my dissent.
Mellott, Arnold, Hill, Disney, Harron, and Kern agree with the concurring and dissenting opinion of Turner.

 SEC. 112. RECOGNITION OF GAIN OR LOSS.
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(g) Distribution of stock on reorganization.—If there is distributed, in pursuance of a plan of reorganization, to a shareholder in a corporation a party to the reorganization stock or securities in such corporation or in another corporation a party to. the reorganization, without the surrender by such shareholder of stock or securities in such a corporation, no gain to the distributee from the receipt of such stock or securities shall be recognized.

 SEC. 113. BASIS FOR DETERMINING GAIN OR LOSS.
(a) Property acquired after February 28, 1913.—The basis for determining the gain or loss from the sale or other disposition of property acquired after February 28, 1913, shall be the cost of such property; except that—
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(9) Tax-free distributions.—If the property consists of stock or securities distributed after December 31, 1923, to a taxpayer in connection with a transaction described in section 112 (g), the basis in the case of the stock in respect of which the distribution was made shall be apportioned, under rules and regulations prescribed by the Commissioner with the approval of the Secretary, between such stock and the stock or securities distributed.