dissenting: I must respectfully dissent from the opinion of the majority. The opinion of the majority is bottomed upon a concession supposedly made by the respondent in his brief that the transaction in question, which was cast in the form of a statutory merger under section 368(a)(1)(A), also constituted “a mere change in identity, form, or place of. organization” within the meaning of section 368(a)(1)(F). This is a question of law. I cannot accept statements made by the respondent in his brief for purposes of argument as a basis for decision on matters of law where such statements are in conflict with prior decisions of this Court.
In 1966, the petitioner planned and executed an upstream merger of its subsidiary into itself which qualified as a liquidation under section 332.1 Petitioner so reported the merger on its 1966 consolidated corporate return.
As a result of losses sustained in 1967 and 1968, however, petitioner subsequently found it advantageous to treat the transaction as a reorganization under section 368(a)(1)(F) since this section, unlike section 332, was exempt from the carryback limitations of section 381(b). Consequently, in 1969, petitioner amended its 1966 corporate return to reflect its new position.
Prior to the merger, petitioner and its subsidiary were separate and distinct taxable entities, albeit that the former was a holding company. For the reasons so thoroughly delineated by the Court in Estate of Bernard H. Stauffer, 48 T.C. 277 (1967), revd. 403 F. 2d 611 (C.A. 9, 1968), it is my view that Congress never intended section 368(a)(1)(F) to encompass the merger of two separate taxable entities. See also Associated Machine, 48 T.C. 318 (1967), revd. 403 F. 2d 622 (C.A. 9, 1968). Since an appeal in this case would lie in the Second Circuit, we are not bound by the cases to the contrary. E.g., Davant v. Commissioner, 366 F. 2d 874, 879 (C.A. 5, 1966). I would reaffirm this Court’s position in Estate of Bernard H. Stauffer, supra.
Contrary to the opinion of the majority, I interpret section 381(b) to be merely a limitation upon section 381(a). Indeed, the flush language of section 381(a) clearly states that the general rules set out in subsection (a) are “subject to the conditions and limitations specified in subsections (b) and (c).” Assuming arguendo that the merger falls within the descriptive language of section 368(a)(1)(F), we are faced with the additional requirement of section 381(a)(2) that the transaction must be one to which section 361 applies. It was the inability of an upstream merger, such as the one' we have here, to meet the nonrecognition requirements of section 112(b)(3) and (4) of the Revenue Act of 1934, the latter being the predecessor to section 361, that prompted Congress to enact section 332 in the Revenue Act of 1935. See Hearings on H.R. 8974 before the Senate Committee on Finance, 74th Cong., 1st Sess., pp. 171, 302 (1935).
STERRETTand Wiles, JJ, agree with this dissent.
Prior to effecting the merger, petitioner solicited and received a private ruling from respondent stating that the proposed transaction qualified as a liquidation under sec. 332.