I respectfully dissent, believing the gain to be long-term capital gain.
Fearing diminution of the dollar value of its stock in its British subsidiary in the event of devaluation of the pound, petitioner acquired by contract the right to sell to City Bank 1,100,000 pounds at $2.7691 per pound. This contract right, I believe, was a capital asset. It clearly is not excluded from the definition of that term under the literal language of section 1221(1). Although respondent asserts, and the Court holds, that the contract is caught within the sweep of the ¡Com Products doctrine, this cannot be so. Corn Products teaches that capital gain treatment is reserved for “transactions in property which are not the normal source of business income.” 350 U.S. 46, 52 (1955). The contract here and the property (pounds) were clearly not the normal source of petitioner’s business income. There is no indication that the transaction was recurring. As such, it was unlike that in Gom Products. Intended, as the majority finds it was, to offset possible anticipated decline in the dollar value of the sterling subsidiary’s stock, the transaction was more closely related to that stock, a capital asset in petitioner’s hands, than to the subsidiary’s routine business operations. While the majority refers to currency hedges as “part and parcel of a multinational business,” there is no evidence that this transaction was routine or customary for petitioner. Furthermore, nothing in the evidence or findings justifies us in ignoring the separate corporate identities of petitioner and its subsidiary. The business of the subsidiary was not that of the parent. National Carbide Corp. v. Commissioner, 336 U.S. 422 (1949); Moline Properties v. Commissioner, 319 U.S. 436 (1943).
Since the contract was a capital asset, concededly held for more than 6 months, long-term capital gain treatment was appropriate if the disposition of the contract on December 20, 1967, constituted a sale. Sec. 1222(3), I.R.C. 1954. On this issue I respectfully disagree with the concurring opinion. After the devaluation the contract right to sell pounds for more than their value was a valuable and readily marketable asset. No shenanigans or special deals were required to sell it, and we have no evidence either occurred. While the purchaser, Amsterdam, froze its profits by simultaneously hedging, there is no reason this circumstance should convert petitioner’s sale into something else. Petitioner clearly divested itself of all title to, and realistic further concern regarding, the contract, and became unconditionally entitled to the price. No more is required for a “sale,” which has the same meaning in tax law as in ordinary parlance. Commissioner v. Brown, 380 U.S. 563 (1965); Helvering v. Flaccus Leather Co., 313 U.S. 247 (1941). Petitioner’s failure to prove its lack of knowledge of what Amsterdam planned to do with the contract is immaterial, for such knowledge could not add to or subtract from the finality of petitioner's disposition. The concurring opinion also refers to petitioner’s failure to prove absence of “participation” in the Amsterdam-City Bank arrangement, but the record is clear enough to support, indeed to require, the Court finding as a fact that the participants in that transaction were Amsterdam and First National City Bank. Moreover, petitioner could properly claim unfair surprise if taxed with the concurring opinion’s theory that it failed to disprove that Amsterdam acted as petitioner’s agent. Bespondent’s counsel, in his opening statement, admitted that “IFF transferred its agreement with First National City Bank to Amsterdam Overseas Corporation for $387,000.” This admission, while in effect belatedly retracted by respondent’s advancing a new theory at a second trial session, is quite inconsistent with any notion of IFF’s subsequent retention of ownership. Accordingly, I would find that a sale took place and the gain was long-term capital gain. See Conrad N. Hilton, 13 T.C. 623 (1949); Stanley D. Beard, 4 T.C. 756 (1945); Clara M. Tully Trust, 1 T.C. 611 (1943).
FokresteR and Sterrett, JJ., agree with this dissent.