dissenting: Arnes v. United States, 981 F.2d 456 (9th Cir. 1992), tells us two things: First, the Court of Appeals for the Ninth Circuit will review our decision de novo. Id. at 458. Second, because the Court of Appeals held that section 1041 applied to Joann, it is illogical to think that the Court of Appeals will not reverse us. The Court of Appeals held that Joann recognized no gain on account of section 1041. Because of the way section 1041 works, however, a corollary of that holding is that Joann transferred her shares to John, who received them by gift. See sec. 1041(b). It is inconsistent to hold that view (i.e., that John received the shares by gift) and, at the same time, to question whether he received a constructive dividend because he was obligated to buy those shares. That is the question that the majority answers in the negative. The majority has in front of it the exact same transaction addressed by the Court of Appeals in Arnes. It seems to me that the decision of the Court of Appeals in Arnes (unless the Court of Appeals overrules itself) precludes the Court of Appeals from even considering the majority’s theory. To the extent that Edler v. Commissioner, 727 F.2d 857 (9th Cir. 1984), affg. T.C. Memo. 1982-67, is inconsistent with Arnes, I assume that it was overruled by Arnes, sub silentio. Edler, of course, predated the enactment of section 1041. Efficiency thus dictates that we decide for respondent. See Golsen v. Commissioner, 54 T.C. 742, 757 (1970), affd. 445 F.2d 985 (10th Cir. 1971). We are free, of course, to set forth (as Judge Beghe has done) the reasons why we believe the Court of Appéals to be wrong. Id. On the premises stated, I cannot concur in the decision of the majority.
Swift, Jacobs, Gerber, and Whalen, JJ., agree with this dissent.