concurring: A rule of law might be inferred from the majority opinion to the effect that if any negotiations for the purchase of a corporation’s property are begun while the corporation holds title to the property, then any sale of the property later made by the stockholders after the corporation’s liquidation to a purchaser who had participated in such negotiations in any way and to any extent, must be considered the sale of the corporation under the doctrine of Commissioner v. Court Holding Co., 324 U. S. 331.
Because of my doubt that such a rule of law is correct, and my view that, under the facts found, the decision reached by the majority is correct without resort to it, I am stating the grounds for my concurrence in this opinion.
The Court Holding Co. case was one of a series of cases decided by the Supreme Court which emphasized the importance of the “substance of a transaction,” which should not “be disguised by mere formalities.” In that case the Court held that “a sale by one person, can not be transformed for tax purposes into a sale by another by using the latter as a conduit through which to pass title.” This rule is applicable to those cases in which there have been negotiations between the corporation and the prospective purchaser of the corporate property resulting in a substantial agreement between the corporation and the purchaser as to the sale of the property. If such a substantial agreement has been reached as a result of negotiations between the prospective purchaser and the officers of the corporation, then the later use of the stockholders of the corporation (by liquidation of the corporation) as “a conduit through which to pass title” will not change what is, in substance, a sale by the corporation to a sale by the stockholders. See Fairfield Steamship Corporation v. Commissioner, 157 Fed. (2d) 321, 322.
In the instant case, taking the facts as found, I am of the opinion that the negotiations between Louben, Inc., and the president of petitioner resulted in a substantial agreement for the sale of the property of the corporation, and the later agreement of the stockholders of petitioner was intended to give effect to the prior agreement of the corporation.
Samuel Hyman was president of petitioner corporation. As such, he was an agent for petitioner and was under obligation to act for the best interests of his corporation. With regard to any proposal to buy the property of the corporation, it is to be at least presumed that he would represent the corporation in conformity with that obligation in any negotiations instituted by Louben, Inc. It is certainly not to be presumed that his actions on behalf of his wife and daughter would affect his fiduciary obligation to the corporation. In any event, petitioner, although having the burden of proof, did not attempt to prove by the witness who was best qualified to testify on this point (Hyman, himself), that Hyman did not represent petitioner in the preliminary negotiations with Louben, Inc.
I would construe the facts found as follows: Hyman, as president of petitioner corporation, negotiated with Louben, Inc., with regard to the sale of the corporation’s property on behalf of the corporation. When a substantial agreement had been reached as a result of these negotiations, Hyman then negotiated the method of carrying out the sale, and the method followed was the purported sale by the stockholders after liquidation of the corporation.
Under this construction of the facts, the rule of the Court Holding Co. case would be clearly applicable.
Leech and Arnold, JJ., agree with the above.