concurring: While I concur in the result reached in the instant case and the reasons given therefor, I do not agree that this case is distinguishable from Commissioner v. Carter, 170 F. 2d 911, and Westover v. Smith, 173 F. 2d 90. The differences between those cases and the instant case pointed to in the majority opinion do exist, but they are not, in my opinion, distinguishing differences. In other words, I think those cases were incorrectly decided.
To say that an exchange of corporate stock for assets in kind in a corporate liquidation is a closed transaction with respect to such assets as have a fair market value at the time of liquidation, but is not a closed transaction with respect to assets which at the time of liquidation do not have a fair market value, is, it seems to me, wholly artificial. The transaction is a closed and completed transaction in each instance. The erstwhile stockholder of the corporation, in each instance, has finally and completely disposed of his stock, has received assets of the corporation in full and complete satisfaction therefor, and there is thereafter no obligation on the part of any one to pay or transfer to him anything further in payment or exchange for his stock. The transaction is just as much a closed transaction as if he had paid cash in full for the property, instead of stock.
Burnet v. Logan, 283 U. S. 404, is an entirely different case. There the taxpayer had sold stock in a corporation, receiving a part of the selling price in cash at the time the transaction was entered into and leaving the remainder of the selling price to be paid over a period of time, such remainder to be measured by the results from the operation of certain ore properties which belonged to the corporation the stock of which was sold. Unlike this case, the transaction there had not been completed; a part of the consideration for the stock remained to be paid.
Undoubtedly a major factor contributing to the erroneous decisions in the Carter and Westover cases was the long-standing and still continued loose practice of referring to transactions falling within the provisions of section 112 (b) of the Code as transactions in which the recognition of the gain therefrom is postponed. Section 112 is limited in its application to realized gains and losses and contains no provision for a later or postponed recognition of gain. The gain is either recognized under section 112 (a), or, under section 112 (b), is not recognized. Whether or not the recipient of property in an exchange described in section 112 (b) is ever taxable on gain on or from the property so acquired does not depend upon any subsequent recognition of gain already realized or on any subsequent realization of gain on the stock given in exchange for such property, the latter obviously being impossible, since the said stock has already been finally and completely disposed of and the full consideration therefor received, but, instead, depends on and results from some wholly independent and different disposition of or realization on the property in question, and that, without regard to whether the property did or did not have a fair market value when acquired in exchange for the stock. And further, whether the subsequent gain, when so realized, is capital gain or ordinary income, must be determined from the nature and character of the subsequent gain-realizing transaction, and not on the nature of the prior transaction whereby the property then disposed of was acquired.