dissenting: I respectfully disagree with the majority’s conclusion on the first issue. Section 691(a), which prescribes the general rule for the taxation of “income in respect of a decedent,” refers to the “right to receive” items of gross income. Generally speaking, the term “income in respect of a decedent” applies only to “those amounts to which a decedent was entitled as gross income” but which were not properly includable in his final return. Sec. 1.691(a)-l(b), Income Tax Regs. As stated in Trust Co. of Georgia v. Ross, 392 F.2d 694, 695 (5th Cir. 1967), cert. denied 393 U.S. 830 (1968): “the right [to income] is to be distinguished from the activity which creates the right. Absent such a right, no matter how great the activities or efforts, there would be no taxable income under sec. 691.” While the right to income need not be a legal right to collect a sum ascertainable on the date of death, see Commissioner v. Linde, 213 F.2d 1 (9th Cir. 1954), remanding 17 T.C. 584 (1951), cert. denied 348 U.S. 871 (1954); O’Daniel’s Estate v. Commissioner, 173 F.2d 966 (2d Cir. 1949), affg. 10 T.C. 631 (1948), the right to collect the income when realized must have arisen prior to or at the decedent’s death. The problem in the instant case, therefore, is not to weigh and assess the probabilities at decedent’s death that his estate or some other beneficiary would or would not ultimately receive the proceeds of the liquidation of Bi-State, but rather to determine the rights of the decedent or that beneficiary as of the date of decedent’s death.
This imprecise test is not easily applied to cases involving the liquidation of corporations. In my opinion, in such cases “The crucial question should be whether the redemption or. liquidation has proceeded to a point beyond the control of the decedent prior to his death.” Ferguson, Freeland & Stevens, Federal Income Taxation of Estates and Beneficiaries 208 (1970). The issue of whether a contract for the disposition of property has created income in respect of a decedent, e.g., via sale, is analogous. In contract cases, the issue is whether,, on the date of death, the transaction has proceeded to the point where the value of the property has been converted into an intangible right to receive the ultimate proceeds of the sale or other disposition. Sec. 1.691(a)-2(b), Example 4, Income Tax Regs. Such a conversion occurs only when the property is somehow put beyond the control of decedent prior to his death. See Commissioner v. Linde, supra; Estate of Helen Davison, 155 Ct. Cl. 290, 292 F.2d 937 (1961), cert. denied 368 U.S. 939 (1961); Stephen H. Dorsey, 49 T.C. 606, 633 (1968). In Trust Co. of Georgia v. Ross, supra, for example, the court, holding that the disposition of certain stock by decedent prior to his death created income in respect of a decedent, stated (392 F.2d at 696):
[Decedent] entered into a binding contract prior to his death. That contract required the conveyance of the property from whence the income in litigation was derived. The contract created a right to these proceeds in [decedent] at the time the contract was executed. The contract inured to and was binding upon his executor.* * *
In contrast, in Keck v. Commissioner, 415 F.2d 531 (6th Cir. 1969), revg. 49 T.C. 313 (1968), discussed at length in the majority opinion, where a contingent or informal agreement to liquidate a corporation did not constitute a binding contract, the Court of Appeals refused to find income in respect of a decedent.
I do not think the liquidation of Bi-State, at decedent’s death, had proceeded to a point beyond his control so that his stock had been converted to a mere right to receive income. It bears reiterating that decedent was sole shareholder of Bi-State. To the extent possible under a scheme of State regulation his control of that corporation was absolute, and his rights were in no way diluted by the presence of minority shareholders. His estate succeeded to the same quantum of control.
At any time prior to his death, decedent, the sole shareholder, could have reversed the decision to liquidate Bi-State. Neb. Rev. Stat. secs. 21-2087, 21-2088 (1974). Similarly, at any time after his death and prior to the distributions on November 29 and 30, 1968, decedent’s estate, as sole shareholder, could have rescinded the resolution to liquidate and sold the stock to a third party or could have decided to keep the corporation alive so that, for example, it could continue the operation of the gift shop or the ownership of the real and personal property located at 4827 Dodge Street in Omaha. Had the estate taken either one of those steps, clearly it would not have received income in respect of a decedent. The estate received the liquidation proceeds only because it, as sole shareholder, did not revoke the liquidation resolution.
Under the Trust Co. of Georgia reasoning, since there was no commitment by either the decedent or his executor to permit Bi-State to be liquidated, decedent’s stock at his death had not been converted to income.
The importance of the power to rescind a decision to liquidate a corporation has been emphasized in cases dealing with the transfer of stock in a corporation after the adoption of a resolution to liquidate. In Rushing v. Commissioner, 441 F.2d 593 (5th Cir. 1971), affg. 52 T.C. 888 (1969), the court held that the transfer of a controlling interest in the corporation relieved the transferor of tax on the liquidation proceeds of the transferred shares. An opposite result was reached in Hudspeth v. United States, 471 F.2d 275 (8th Cir. 1972),' where the taxpayer transferred shares to a charity but retained a controlling interest in the corporation. The Hudspeth court explained the dichotomy as follows (471 F.2d at 278):
we read Rushing [Rushing v. Commissioner, 441 F.2d 593 (5th Cir. 1971)] as evincing the proposition that if the donor or vendor transfers a controlling interest in a corporation, such that the'transferee will have the legal capacity to suspend or rescind the liquidation and thereby have the power to supercede the donor’s initial intent to provide the donee only with the otherwise imminent liquidation proceeds, then the gains are not taxable to the transferor. But, in the case where the taxpayer retains control of the corporation and the transferee will be unable to vitiate the taxpayer’s intent to liquidate, the shareholders’ vote remains sufficient to constitute the necessary severance of gain.
To the same effect, see Kinsey v. Commissioner, 477 F.2d 1058, 1062 (2d Cir. 1973), affg. 58 T.C. 259 (1972); Simmons v. United States, 341 F. Supp. 947, 951 (M.D. Ga. 1972); cf. Jacobs v. United States, 280 F. Supp. 437 (S.D. Ohio 1966), affd. 390 F.2d 877 (6th Cir. 1968). While these cases involved the alleged constructive receipt or anticipatory assignment of income, I think their reasoning is apposite in resolving the present controversy. The right of the decedent or his estate to rescind the liquidation resolution shows that the liquidation had not proceeded to a point beyond the control of the decedent-shareholder. His unbridled right unilaterally to reverse the liquidation decision eviscerated any claim to a “right” to the liquidation proceeds under the Nebraska statute.
Deciding the first issue in this fashion would obviate the necessity for dealing with the second one.
Forrester and Drennen, JJ, agree with this dissent.