dissenting: On the first issue it is my opinion that the exchange of property for cash and stock of the new corporation comes within subsections (b) (5) and (c) (1) of section 112 of the Revenue Act of 1932 and that the recognizable gain to the partnership should be limited to the cash received by it. The transaction, in brief, was this: The partnership transferred property worth $250,000 to the new corporation for stock worth $150,000 and $100,000 cash; the other stockholder paid in cash to the new corporation in *746the amount of $180,000 and got stock in the same amount. These two transferors, one transferring property consisting of patents, patent applications, and inventions, and the other transferring property in the form of cash (Halliburton v. Commissioner, 78 Fed. (2d) 265) were in control of the new corporation immediately thereafter. So far they are within the first clause of section 112 (b) (5). But, says the majority opinion, they are excluded from that section by reason of the last clause requiring that the stock and securities received by each transferor be substantially in proportion to his interest in the property prior to the exchange. It is said that this requirement is not met for this reason: The partnership transferor took out of the new corporation stock worth less than the assets it put in by $100,000, whereas the other transferor took out stock equal in value to the property (cash) that it put in. Wherefore, it is said, the required before-and-after equal proportions are destroyed. This view, it seems to me, disregards subsection (c) (1) which I think was designed to meet the very situation presented here. It is not at all uncommon in the creation of corporations and in corporate adjustments that some of the parties to the transaction receive cash in addition to stock and securities, and subsections (b) (5) and (c) (1) together provide for this and include such situations in the nonrecognition provisions after taking due account of the cash or “other property” received by recognizing gain on them. It is after the cash or other property is subjected to recognition that the determination is to be made as to whether the before-and-after proportions are maintained.. That is, the cash or other property must be considered as being paid for an equivalent portion of the property transferred, and then the remainder of the property transferred is taken as the basis for measuring the proportions of the transferors before and after the exchange. To hold otherwise would be to say that the cash or other property was a gift, which of course is not the fact, and if it were it would not be recognized as a gain. So, in the present case the $100,000 cash should be set off against an equivalent amount of the property transferred by the partnership— and this the partnership admits comes within the recognition provisions. The $100,000 worth of property so set off against the cash should not again be used for measuring the proportions under subsection (b) (5). That property, like the cash, should be excluded from further consideration; to borrow the words of the majority opinion, the “cash payments are ignored.” Excluding $100,000 worth of property transferred, the partnership transferred the remainder of the property of a value of $150,000 for $150,000 worth of stock and the other transferor transferred property (cash) of the value of $180,000 for $180,000 worth of stock. Thus each of the *747two transferors received stock exactly in proportion to the property transferred. This view carries out the intent of the two subsections when read together, as they must be because of the reference in (c) (1) to (b) (5).
I think the view here expressed is entirely consistent with the holding of the Circuit Court of Appeals for the Fourth Circuit in United Carbon Co. v. Commissioner, 90 Fed. (2d) 43.
Black agrees with this dissent.