dissenting: The question in this case is whether the petitioner meets the provisions of section 112(d) (1) of the Revenue Act of 1928 to the extent of $106,471.73 of the cash received by it from the Grand Union Co., which was the amount of the corporate debts assumed and discharged by the petitioner’s stockholders. The majority opinion holds that it does. I can not agree with that holding.
First: The recent case of the Liquidating Co., 33 B. T. A. 1173, decides directly against the suggestion that a distribution among creditors may come within the statute, holding that cash received in a reorganization and used to redeem the taxpayer’s debentures was not distributed within the meaning of the cited section. To the same effect is West Texas Refining & Developing Co. v. Commissioner, 68 Fed. (2d) 77.
Second: If the above proposition is sound, there would not be a different rule where the corporation turns the money over to others to use to pay its debts. Whatever the legal relation of the recipients to the taxpayer, they would be liable for payment of the debts at the instance of the creditors. Lawrence v. Fox, 20 N. Y. 268; Hendrick v. Lindsay, 93 U. S. 143. Their liability in this respect would not depend on the solvency or insolvency of the taxpayer nor upon whether or not the liability of the taxpayer persisted. I think it *150a misconstruction of the provisions of the resolution to say that the distribution by the corporation and the agreement by the stockholders to assume the debts were not conditioned upon each other. The part of the resolution quoted consists of one sentence. In the first part it is resolved “that all moneys * * ⅜ be immediately distributed * * * upon the assumption by the stockholders of all the corporate debts.” In the second part the directors are authorized and directed to distribute the money accordingly and to enter into an agreement with the stockholders whereby the stockholders “in consideration of such distribution * * * agree to pay all the corporate debts.” To me it seems clear from this language that the distribution is expressly conditioned upon the assumption of the corporate debts by the stockholders and they took the distribution subject to this condition. A dividend resolution “is to be taken as it emanates from the board. A part of it can not be taken and the rest discarded.” State v. B. & O. R. R., 6 Gill (Md.) 363, 386, quoted in General Utilities & Operating Co., 29 B. T. A. 934; aff'd., 296 U. S. 200. Thus, in the final analysis the petitioner merely used its stockholders as a conduit for payment of its debts, and gain realized and used for this purpose can not escape tax under the reorganization provisions of the statute. Liquidating Co., supra.
Black, McMahon, Turnee, Mellott, and Arnold agree with this dissent.