*656 Petitioner owned practically all of the capital stock and some of the bonds of a subsidiary company which in 1937 underwent a reorganization under section 77B of the Bankruptcy Act. As a part of the reorganization plan petitioner surrendered all of its old stock and some of its bonds for cancellation, paid off in cash approximately $2,000,000 of the subsidiary's bonds which it had guaranteed, canceled the subsidiary's indebtedness to it of over $522,000, and received all of the subsidiary's newly issued capital stock and some of its bonds. Held, that there was a reorganization of the subsidiary company within the meaning of section 112(g)(1) of the Revenue Act of 1936 and that the gain or loss resulting to petitioner from the exchange of old stock and bonds and other indebtedness for new stock and bonds is nonrecognizable under section 112(b).
*716 This proceeding involves a deficiency of $470,337.20 in petitioner's income tax for 1937. The question for determination is whether petitioner is entitled to a loss deduction*657 of approximately $2,473,600 representing, for the most part, its investment in the capital stock of a subsidiary company, and a debt of the company, which underwent a reorganization under section 77B of the Bankruptcy Act in the taxable year 1937. The respondent has determined that there was a reorganization of the subsidiary company within the meaning of section 112(g)(1) of the Revenue Act of 1936 and that petitioner's losses, if any, are nonrecognizable under the provisions of section 112(b).
FINDINGS OF FACT.
Petitioner is a Pennsylvania corporation, with its principal office at Philadelphia. It filed its income tax return for 1937 with the collector of internal revenue at Philadelphia.
At the beginning of the taxable year 1937 petitioner was the owner of 98.97 percent of the common stock and all of the preferred stock of the Nashville Gas & Heating Co., a public utility operating corporation organized under the laws of Tennessee in 1912. Petitioner is also the owner of all or the controlling shares of stock of a number of utility companies operating in Pennsylvania, New Jersey, Delaware, Connecticut, and other states.
The Nashville Gas & Heating Co. is a Tennessee*658 corporation organized in 1912, with a capital stock of $100,000 divided into 1,000 shares of $100 each. By charter amendment of May 2, 1912, the authorized capital stock was increased to $3,100,000 divided into 16,000 shares of common stock and 15,000 shares of preferred stock, each share having a par value of $100.
The Nashville Co. is a Delaware corporation organized on June 1, 1912, with an authorized capital stock of 40,000 shares of common *717 stock and no other class of stock. On June 1, 1912, it issued 50 shares of its stock for $5,000 cash and on June 7, 1912, it issued the balance of its authorized capital stock (39,950 shares) for 15,995 shares (out of 16,000 shares outstanding) of common stock of the Nashville Gas & Heating Co.
Between June 7 and June 25, 1912, the petitioner acquired 20,400 shares (51 percent) of the capital stock of the Nashville Co. Between the last mentioned date and December 31, 1916, the petitioner acquired an additional 15,420 shares of capital stock of the same company, making its total holdings 35,820 shares.
On May 29, 1912, the Nashville Gas & Heating Co. executed a mortgage on all of its properties securing an authorized issue*659 of $6,000,000 face value of first mortgage 5 percent 25-year gold bonds, the bonds to be dated May 1, 1912. An amount of $2,965,000 face value of these bonds was issued. Through the operation of a sinking fund provided for by the bond indenture, $236,000 of the bonds were retired prior to 1935, at which time proceedings were instituted for a reorganization of the company under section 77B of the Bankruptcy Act, as noted hereinafter.
At the instance of the bankers underwriting the issue of the first $2,000,000 of the aforesaid bonds, and after payment of $100,000 by said bankers to petitioner, petitioner, on June 25, 1912, guaranteed the payment of both principal and interest of the bonds, Nos. 1 to 2,000, both inclusive, of the face value of $1,000 each.
On April 29, 1914, the Nashville Gas & Heating Co. had outstanding 8,000 shares of preferred stock and 16,000 shares of common stock, none of which were owned by the petitioner.
From April 30, 1914, to December 3, 1915, both dates inclusive, petitioner acquired 8,000 shares of the preferred stock of the Nashville Gas & Heating Co. at a cost of $726,360.67.
On April 23, 1917, the petitioner transferred its 35,820 shares*660 of the common stock of the Nashville Co. to that company and received in exchange 14,328 shares of the common stock of the Nashville Gas & Heating Co. Between April 23, 1917, and February 19, 1931, the petitioner acquired 1,506.4 more shares of the common stock of Nashville Gas & Heating Co., bringing petitioner's ownership of said common shares to 15,834.4 shares. The cost to the petitioner of these shares was $188,140.35.
The preferred shares of the Nashville Gas & Heating Co. were entitled to a cumulative dividend at the rate of 6 percent per annum and were preferred as to both principal and dividends. They had voting rights only if preferred dividends were in arrears as much as 18 percent of the face value of the preferred shares.
*718 During the period October 29, 1913, to January 1, 1922, petitioner made loans to the Nashville Gas & Heating Co. aggregating $1,036,336.50. This entire indebtedness was canceled and forgiven to the Nashville Gas & Heating Co. by petitioner in 1922 and petitioner's book surplus was reduced accordingly. The amount was not claimed or allowed as a deduction in petitioner's income tax returns for 1922 or subsequent years. Petitioner*661 filed consolidated income tax returns with the Nashville Gas & Heating Co. for 1918 and 1919, in which losses of that company in the respective amounts of $32,974.78 and $8,885.90 were used in computing the consolidated net taxable income as shown on such returns. During the period October 30, 1923, to June 27, 1931, petitioner advanced to the Nashville Gas & Heating Co. various amounts aggregating $559,000 which were repaid to petitioner with interest during that period. From June 27, 1931, to January 9, 1935, petitioner advanced further amounts to that company aggregating $522,225, on which interest was paid up to June 30, 1934, but not thereafter. No payment on the principal amount of such advances was ever made.
Prior to 1937 the petitioner set up credits in an account entitled "Reserve for contingencies" to provide for anticipated losses. This reserve was a subdivision of petitioner's earned surplus account. During 1937 petitioner debited the account with cash loans to the Nashville Gas & Heating Co. of $522,225.
On July 5, 1935, the Nashville Gas & Heating Co. filed a petition in the United States District Court for the Middle District of Tennessee for reorganization*662 under section 77B of the Bankruptcy Act. It was set forth in the petition that, in addition to the indebtedness of $522,225 due the United Gas Improvement Co. (petitioner), the debtor was in default on its sinking fund payments and the interest on its bonded indebtedness in the respective amounts of $36,800 and $68,225, and that the dividends on its preferred stock accumulated since April 30, 1928, then amounted to $336,000. It was further stated in the petition that for the fiscal year ended May 31, 1935, the debtor's gross income was only $62,349, whereas the fixed annual interest on its bonded indebtedness amounted to $136,450; that operating income had been steadily declining; that rates had been reduced; that the debtor was unable to meet its debts; and that therefore it desired to effect a plan of reorganization. The court, by order dated August 29, 1935, named the Third National Bank in Nashville, Tennessee, as depositary in the proceedings and on September 17, 1935, the petitioner transmitted to the depositary $37,000 face value of guaranteed first mortgage bonds, $40,000 face value of unguaranteed bonds, 8,000 shares of preferred stock, and 15,834.4 shares of common stock*663 of the debtor company.
*719 On September 20, 1935, a plan of reorganization was filed with the court but on objection of some of the bondholders this plan was withdrawn and on March 16, 1936, a new plan was submitted, which was approved by the court on June 11, 1937. The approved plan listed the following securities and claims as those to be affected by the reorganization:
| First Mortgage Five Per Cent. Sinking Fund Gold Bonds due May 1, 1937, guaranteed principal and interest by The United Gas Improvement Company (herein sometimes called Guarantor) | $1,954,000. |
| First Mortgage Five Per Cent. Sinking Fund Gold Bonds due May 1, 1937 (unguaranteed) | 775,000. |
| Accrued Interest on said Bonds from Nov. 1, 1934 amounting as of July 5, 1935 to | 92,797. |
| Loans Payable to The United Gas Improvement Company | 522,225. |
| 6% Cumulative Preferred Stock (100 par value) (wholly owned by The United Gas Improvement Company) | 800,000. |
| Common Stock ( $100 par value) ($1,583,440 of which is owned by The United Gas Improvement Company) | 1,600,000. |
The reorganization plan further provided in part as follows:
IV. DISTRIBUTION OF NEW SECURITIES.First Mortgage Five Per Cent. *664 Sinking Fund Gold Bonds due May 1, 1937.
(a) Guaranteed Bonds (Nos. 1 to 2000, inclusive).
The holders of guaranteed First Mortgage Five Per Cent. Sinking Fund Gold Bonds due May 1, 1937, will receive for each $1,000. bond, with the unpaid coupons appertaining thereto, cash in an amount equal to the principal amount of their bonds and unpaid coupons to and including May 1, 1937. Cash for this purpose will be provided as set forth in (c) below.
* * *
(b) Unguaranteed Bonds (Nos. 2001 and succeeding).
The holders of unguaranteed First Mortgage Five Per Cent. Sinking Fund Gold Bonds due May 1, 1937, will receive for each $1000 bond with appurtenant coupons maturing on and after May 1, 1935, $1000 principal amount of new First Mortgage Bonds 5% Series due 1951.
* * *
(c) Claim of Guarantor.
If, on the consummation of the Plan, the Guarantor of the payment of principal and interest of the said guaranteed bonds (Nos. 1 to 2000, inclusive) shall pay to the Girard Trust Company, as trustee, cash in an amount sufficient to make the payments to the guaranteed bondholders as stated in (a) above, to be used for such purpose, the Guarantor shall receive all of the*665 capital stock of the Company, namely, 20,000 shares of $100 par value each.
The rights of the Guarantor will be altered by discharge of the Company from all liability to such Guarantor on account of such payments, and the Guarantor will receive new securities as above set forth on account of such payments and discharge.
Treasury Bonds.
$225,000. principal amount of new First Mortgage Bonds 5% Series due 1951, will be authenticated by the Trustee and delivered to and held by the Company *720 in its treasury, and may be disposed of by the Company at such time or times as its Board of Directors shall determine at not less than $900, for each $1000. bond and subject to no further restrictions.
Loans Aforesaid Payable to The United Gas Improvement Company.
The loans aforesaid payable to The United Gas Improvement Company will be cancelled, and The United Gas Improvement Company will not receive any distribution of cash or securities on account of such loans.
6% Cumulative Preferred Stock.
The holder (The United Gas Improvement Company) of the 6% Cumulative Preferred Stock will not receive any distribution of cash or securities on account of the shares now held.
*666 Common Stock.
The holders (The United Gas Improvement Company owns 15,834 2/5 shares) of the present Common Stock will not receive any distribution of cash or securities on account of the shares which they now hold.
The rights of all stockholders of the Company will be altered by the termination of all rights and interests of such stockholders.
On April 23, 1937, the petitioner deposited with the Girard Trust Co. of Philadelphia, trustee under the mortgage indenture, the sum of $1,968,207.86 to be paid out by the trustee in the redemption of the guaranteed first mortgage 5 percent bonds referred to above. Of this amount $1,917,000 was paid to the holders of such bonds on account of principal, $47,925 on account of six months' interest due May 1, 1937, and $3,282.86 to th trustee for fees, commissions, etc.
On or about August 25, 1937, the Nashville Gas & Heating Co. issued and delivered to the petitioner 20,000 shares of its new common stock.
The final decree of the United States District Court in the bankruptcy proceedings was entered April 11, 1938, in which it was stated that the "confirmed Plan of Reorganization dated March 2, 1936 in all respects has been fully*667 executed."
The surplus of the Nashville Gas & Heating Co., as shown by its balance sheets as of December 31 of each year, increased from approximately $20,000 in 1912 to $300,000 in 1932. It decreased in 1933 to approximately $29,000 and thereafter deficits are shown of approximately $15,000 in 1934, $101,000 in 1935, and $140,000 in 1936. The fixed assets were carried during the years 1931 to 1936, inclusive, at approximately $6,000,000. Pursuant to the plan of reorganization described above and the order of the court approving such plan, the Nashville Gas & Heating Co. wrote down its plant, property, and equipment accounts by the amount of $1,665,785.33.
*721 The balance sheet of the Nashville Gas & Heating Co. as of December 31, 1936, shows as follows:
| ASSETS | |
| Total | $6,294,854.15 |
| LIABILITIES | |
| Capital Stock: | |
| Preferred | $800,000.00 |
| Common | 1,600,000.00 |
| Funded debt | 2,729,000.00 |
| Advances - U.G.I. Co | 522,225.00 |
| Customers' deposits | 25,743.53 |
| Accounts payable | 32,800.16 |
| Accrued accounts | 335,800.08 |
| Reserves | 389,728.74 |
| Surplus | (140,443.36) |
| Total | 6,294,854.15 |
The balance sheet as at December 31, 1937, after giving effect to the write-down*668 of assets ordered by the court in the amount of $1,665,785.33, shows as follows:
| ASSETS | |
| Total | $4,578,907.89 |
| LIABILITIES | |
| Capital stock (par $100): | |
| Authorized and issued, 20,000 shares | $2,000,000.00 |
| Funded debt | 775,000.00 |
| Current and accrued liabilities | 61,959.70 |
| Customers' advances for construction | 116.59 |
| Reserves | 431,553.35 |
| Capital surplus | 1,417,371.56 |
| Earned surplus | (107,093.31) |
| Total | 4,578,907.89 |
The income account of the Nashville Gas & Heating Co. for the calendar years 1931 to 1936, inclusive, shows net income (principally from operations) of $134,427.68 for 1931, $9,070.24 for 1932, and $40,545.88 for 1933, and losses of $43,830.97 for 1934, $87,720.34 for 1935, and $37,384.92 for 1936. A net income of $51,547,32 is shown for 1937. The net income for 1937 is restated to give effect to the plan of reorganization.
Neither the balance sheets nor the income accounts referred to above for the years 1934, 1935, and 1936 reflect any accrued interest due petitioner on the $522,225 indebtedness. Such accrued interest amounted to $13,055.63 in 1934, $26,111.25 in 1935, and $26,111.25 in 1936.
*722 In its income and excess profits*669 tax return for 1937 petitioner claimed a loss deduction of $2,473,062.52 on its investment in the Nashville Gas & Heating Co., made up of the following items:
| Loss of investment in Nashville Gas & Heating Co.: | |
| Preferred stock, 8,000 shares | |
| Common stock, 15,834 2/5 shares | $914,501.02 |
| Notes receivable | 490,975.42 |
| Cash loans | 689,657.50 |
| Crisfield contract | 377,928.58 |
| 2,473,062.52 |
The respondent disallowed the deduction claimed on the ground that the transactions above described constituted a reorganization of the Nashville Gas & Heating Co. within the meaning of section 112(g) of the Revenue Act of 1936 and that no loss to petitioner is recognizable on such reorganization.
OPINION.
SMITH: The petitioner alleges in its petition to this Board that in the determination of the deficiency for 1937 the respondent made the following errors:
(a) The Commissioner of Internal Revenue, * * * erroneously disallowed deductions of a loss in the amount of $2,473,062.52, which loss petitioner sustained in the year 1937 through bankruptcy of Nashville Gas and Heating Company, a Tennessee corporation, to which corporation petitioner had loaned large sums of money and*670 in the preferred and common stocks of which corporation petitioner had invested large sums of money.
(b) The said Nashville Gas and Heating Company was also indebted to petitioner on two other items - one for an account receivable in the amount of $200.22, and the other for accrued interest in the amount of $333.34 - both of which sums of money petitioner lost through the same bankruptcy proceedings and both of which the Commissioner of Internal Revenue erroneously disallowed as a deduction when computing petitioner's net income for the year 1937.
The alleged loss of $2,473,062.52 is composed of the following items:
| Investment in the preferred stock | $726,360.67 |
| Investment in the common stock | 188,140.35 |
| Loans to company from 10/9/21 to 1/1/22, the aggregate of which was charged off on the petitioner's books of account in 1922 but not claimed as a deduction from gross income of that year | 1,036,336.50 |
| Loans to company which had not been charged off at date of bankruptcy proceedings | 522,225.00 |
| 2,473,062.52 |
The account receivable of the Nashville Gas & Heating Co. of $200.22 and the item of accrued interest of $333.34 were not affected by the plan of reorganization. *671 That plan specifically provided that the liabilities of Nashville Gas & Heating Co., other than those specifically *723 mentioned in the plan of reorganization, were not to be affected. The petitioner has offered no evidence in support of its claim for the deduction of these two items and it will be considered that the petitioner has waived its claim thereto.
The respondent's position is that the petitioner sustained no recognizable loss on the transactions in question, since it turned in to the corporation its obligations to petitioner, and other property, and received in exchange therefor all of the capital stock and some bonds of the reorganized corporation. Respondent further contends in the alternative that the stock and securities, as well as the indebtedness of the Nashville Gas & Heating Co., became worthless, if at all, prior to the taxable year 1937. In his answer in which he makes such alternative contention the respondent alleges that upon payment of the guaranteed bonds of the Nashville Gas & Heating Co. petitioner became subrogated to the rights of the bondholders and that in effect petitioner surrendered such bonds, together with those which it already*672 owned, for the common stock of the reorganized corporation of a greater value, thereby realizing a taxable gain of over $1,300,000.
The material provisions of the statute (Revenue Act of 1936) read as follows:
SEC. 112. RECOGNITION OF GAIN OR LOSS.
(a) GENERAL RULE. - Upon the sale or exchange of property the entire amount of the gain or loss, determined under section 111, shall be recognized, except as hereinafter provided in this section.
(b) EXCHANGES SOLELY IN KIND. -
* * *
(3) STOCK FOR STOCK ON REORGANIZATION. - No gain or loss shall be recognized if stock or securities in a corporation a party to a reorganization are, in pursuance of the plan of reorganization, exchanged solely for stock or securities in such corporation or in another corporation a party to the reorganization.
* * *
(g) DEFINITION OF REORGANIZATION. - As used in this section and section 113 -
(1) The term "reorganization" means (a) a statutory merger or consolidation, or (b) the acquisition by one corporation in exchange solely for all or a part of its voting stock; of at least 80 per centum of the voting stock and at least 80 per centum of the total number of shares of all other classes*673 of stock of another corporation; or of substantially all the properties of another corporation, or (c) a transfer by a corporation of all or a part of its assets to another corporation if immediately after the transfer the transferor or its stockholders or both are in control of the corporation to which the assets are transferred, or (d) a recapitalization, or (e) a mere change in identity, form, or place of organization, however effected.
It should be observed that we are not dealing here with a merger or consolidation of corporations. The Nashville Gas & Heating Co. had the same assets after the reorganization as it had before. Its liabilities *724 were reduced. It was the same corporate entity as before. Even if none of the other requirements of a reorganization as defined in section 112(g) was met, there was certainly a "recapitalization" of the Nashville Gas & Heating Co. under section 112(g)(1)(D). See ; affd., ; *674 ; affirmed without opinion (C.C.A., 6th Cir.), Jan. 14, 1936; ; affd., ; ; ; .
At the beginning of the reorganization proceedings under section 77B of the Bankruptcy Act petitioner owned practically all of the Nashville Gas & Heating Co.'s common stock (15,834.4 shares out of 16,000), all of its outstanding preferred shares, $37,000 of its guaranteed bonds, and $40,000 of its unguaranteed bonds. At the conclusion of the reorganization proceedings, and upon consummation of the plan of reorganization, petitioner owned all of the corporation's common stock (it had no issued preferred stock) and $40,000 of its new bonds. Petitioner argues, however, that under the reorganization plan there was no exchange of the old shares for the new shares within the meaning of section 112(b)(3), but that the new shares were issued to it solely in consideration for the cash payment of $1,968,207.86*675 which petitioner furnished to pay off the guaranteed bonds.
While the reorganization plan expressly provided that the holders of the old stock, both common and preferred, would turn those shares in to the trustee for cancellation and would receive nothing in exchange for them, we do not think that this determines what was actually done in the reorganization, or the tax consequences thereof.
In the first place, it is obvious that the petitioner was the principal party interested in the reorganization of the Nashville Gas & Heating Co., since it owned practically all of its capital stock, was the guarantor of most of its outstanding bonds, and was its principal creditor. It was of no consequence to the other bondholders or to anyone else, unless to the minority common stockholders, whether the reorganization plan provided that the new shares should be issued to the petitioner in exchange for the old shares and the indebtedness or in consideration for petitioner's payment of the guaranteed bonds. Petitioner was obligated by contract to pay off the bonds in any event. We do not know who the minority common stockholders were. They held only 1.03 percent (165.6 shares out of 16,000*676 shares) of the common stock. They made no objection to the plan of reorganization. The plan which was approved by the court provided that the rights and interests of all common stockholders would be terminated by the execution of the *725 plan. The Nashville Gas & Heating Co. was not adjudged and never claimed to be insolvent. The proceedings for reorganization under section 77B were based upon the company's inability to meet the obligations on its bonds and other fixed payments as they became due. The petitioner points out in its brief in this proceeding that the corporate balance sheets for 1935 and 1936 show only a slight impairment of capital and a "very substantial equity, sufficient in amount to return to petitioner the major portion of its investment in the preferred and common stocks of Nashville Gas & Heating Company."
In view of these circumstances we can not escape the conviction that the real consideration which petitioner gave for the new stock was the old stock and bonds and the indebtedness.
It has been held repeatedly that all of the different steps taken under a reorganization plan must be regarded as component parts of the plan and can not be treated*677 as isolated transactions in determining the tax consequences. ; ; ; ; affd., ; .
In , there was a reorganization under section 77B of the Bankruptcy Act which the taxpayer conceded, and which we held, to be a reorganization under section 112(g)(1)(D). Pursuant to the reorganization plan, there was a replacement of old stock and bonds with new stock. The taxpayer surrendered his old shares and a large indebtedness owed to it by the reorganized corporation for cancellation and in exchange received new class B shares. We held that the taxpayer did not sustain any recognizable loss on the transaction, and the Circuit Court of Appeals for the Second Circuit affirmed. In the instant case the petitioner surrendered for cancellation shares of the old stock, bonds, and the debt of the*678 old corporation and received all of the newly issued common stock and some of the new bonds.
The facts in the instant case would not be distinguishable from those in the Hoagland Corporation case except for the express provision in the reorganization plan here that the old shares and the indebtedness owing to petitioner would be conceled and nothing would be given in exchange for them. As stated above, we do not think that the wording of the reorganization plan determines what consideration was actually paid for the new shares. The plan does not state specifically that petitioner's payment of the guaranteed bonds would constitute the entire consideration for the new common stock. It says merely that:
If, on the consummation of the Plan, the Guarantor of the payment of principal and interest of the said guaranteed bonds (Nos. 1 to 2000, inclusive) shall pay to *726 the Girard Trust Company, as trustee, cash in an amount sufficient to make the payments to the guaranteed bondholders as stated in (a) above, to be used for such purpose, the Guarantor shall receive all of the capital stock of the Company, namely, 20,000 shares of $100 par value each.
Petitioner was*679 already legally bound to pay both principal and interest on the bonds, the due date of which was May 1, 1937. The cash for that purpose was deposited with the trustee on April 23, 1937.
Regardless of the wording of the plan, we think that in effect petitioner exchanged its old common and preferred stock and most of its claims against that company for the new common stock. See ; affd., .
As to the old common and preferred stock, there was clearly an exchange of "stock or securities * * * solely for stock or securities" within the meaning of section 112(b)(3) and no gain or loss is recognizable on the transaction.
The fact that the cash or other property than "stock or securities" is given in exchange "solely for stock or securities" does not prevent the application of section 112(b)(3). ; ; ; *680 . While the indebtedness for moneys advanced to the reorganized corporation was not "securities" (or stock), it was nevertheless, we think, an additional consideration for the new stock and for that reason may not be treated as a bad debt of the taxable year.
As an additional reason for disallowing the deductions claimed by the petitioner, we think the evidence fails to establish that the securities of the Nashville Gas & Heating Co., or its indebtedness to the petitioner at the time of the reorganization, became worthless during the taxable year 1937. The book value of the common stock, as shown by the company's balance sheet at December 31, 1937, was $3,310,278.25, which figure is arrived at by adding to the par value of the stock ($2,000,000) the capital surplus ($1,417,371.56) and by deducting from the total the deficit in earned surplus of $107,093.31. There is nothing in the evidence to indicate that the petitioner would have been willing to part with the securities or relinquish the debt as proposed in the plan of reorganization without receiving the entire new issue of capital stock. The plan contemplated*681 a cutting down of the liabilities of the company, the cancellation of the preferred and common shares outstanding, and the substitution therefor of 20,000 shares of common stock. Consideration must be given to the entire plan of reorganization. When so given, it must be held that the common stock was issued in consideration of all that was done by the petitioner. See
*727 The respondent's claim for an increased deficiency for the taxable year was an alternative contention. Since we have sustained the respondent's contentions upon which the deficiency was determined, it is not necessary to consider the alternative contention.
Reviewed by the Board.
Decision will be entered for the respondent.
MURDOCK, LEECH, and KERN dissent.