dissenting: I am unable to agree with the holding of the majority, that section 112 (b) (6) of the 1939 Code “does not govern the situation here presented.” To the contrary, I feel that the facts (all of which were stipulated) bring the case within both the letter and the intent of that statute.
Section 112 (b) (6) provides: “No gain or loss shall be recognized upon the receipt by a corporation of property distributed upon the complete liquidation of another corporation.” Here, all the prerequisites to application of said statute, as specified therein, have been met, to wit:
(a) The parent corporation (petitioner herein) more than complied with the minimum requirements as to stock ownership. It owned 100 per cent of all shares of all classes of the subsidiary’s stock; and there was no change in this stock ownership, at any time material.
(b) The subsidiary made no distribution under the liquidation prior to the calendar year 1950, which is here involved.
(c) All net assets of the subsidiary, of every kind and character, were conveyed and transferred to the parent, pursuant to resolutions adopted by the directors of both corporations on September 18, 1950, which provided that the subsidiary should be dissolved as of December 1,1950, and that such conveyance and transfer to the parent should be made “in connection with the dissolution.”
(d) Since there was no series of distributions, the provisions respecting distributions of such character are not applicable. No other prerequisite to application is specified. The statute pertains only to the income tax consequences of “the receipt * * * of property” incident to the “complete liquidation of another corporation”; and it contains no provision which makes its application dependent upon principles of local corporate law — such as how the property received should be marshaled or allocated, on the parent’s books, between the preferred and common shares; or respecting what effect should be given to par values. To the contrary, the last sentence of section 112 (b) (6) provides:
A distribution otherwise constituting a distribution in complete liquidation within the meaning of this paragraph shall not be considered as not constituting such a distribution merely because it does not constitute a distribution or liquidation within the meaning of the corporate law under which the distribution is made; * * *
Section 112 (b) (6) provides an exception to the general rule, whereby liquidation of a corporation usually results in capital gain or loss to the stockholders. (See sec. 115 (c).) In providing for the nonrecognition of gains or losses in specified situations, it operates in a manner similar to various other paragraphs of section 112, relating to corporate reorganization; and, under related provisions of section 113 (a) (15), the basis of the assets received by the parent remains the same as the basis thereof in the hands of the subsidiary. All of this is predicated on the so-called “unitary theory” — that the parent corporation and its subsidiary together, constitute a single enterprise; and that persons interested in such enterprises should not be confronted with tax consequences, as a result of intracompany transactions which may make the corporate structure more complex or more simple, but which leave the parent corporation and its shareholders no wealthier or poorer than they were before. See Cortland Specialty Co. v. Commissioner, 60 F. 2d 937, 939-940, (C. A. 2), certiorari denied 288 U. S. 599; Helvering v. Credit Alliance Corporation,, 316 U. S. 107, 112. See also, Hearings Before Senate Finance Committee on H. R. 8974, 74th Cong., 1st Sess., pp. 170-171, 301-303 (1935).
The nonrecognition of gain or loss for income tax purposes, in connection with certain transactions, is a matter of policy on which Congress has the final say. And a statute embodying such policy should be so construed as to give effect to its intent.
I would have held that no gain or loss to the petitioner should be recognized in connection with the dissolution of its wholly owned subsidiary.
HarRON and Tietjens, J. /., agree with this dissent.