(dissent-
ing).
I cannot concur in the conclusions reached by the majority. Since a reversal of the Tax Court’s rulings is placed squarely on Campbell v. United States, 3 Cir., 1944, 144 F.2d 177, consideration of that case is required.
As I understand the Campbell case, this court, per Judge Maris, found two reasons why the undistributed earnings of a corporation were not transferred over for tax purposes to a successor corporation in a tax-free reorganization. The first was that “The identity of proprietary interests which existed in the Sansome case” was lacking in the Campbell reorganization. The second was “the accumulated earnings of the predecessor corporation have been distributed to its stockholders at the time of the reorganization.” Campbell v. United States, supra, 144 F.2d at pages 180, 181. There were thus alternative bases for the Campbell ruling.
Acquiescing in principle in the second basis for that decision, I am compelled to disagree with the first, if it was meant to be laid down as a criterion to be applied in other cases. Stripping aside the language necessary for the solution of the perplexing problem of statutory construction in the Sansome case, I believe that the real basis for that ruling is the prevention of tax evasion. See Putnam v. United States, 1 Cir., 1945, 149 F.2d 721, 726. By judicial interpretation, later sanctioned by Congress (see S.Rep.No.2156, 74th Cong.2d Session, p. 19, 1939-1 Cum.Bull., Part 2, 678-690), the general rule has evolved that where one corporation acquires all the assets and assumes all the existing obligations of another corporation in a tax-free reorganization, the undistributed earned surplus of the transferor becomes the undistributed earned surplus of the transferee and is subject to taxation as a dividend on subsequent distribution to the stockholders of the transferee. The factor of vital importance in the application of this general rule is the distribution of earned corporate surplus which had not previously been distributed. Such earnings do not disappear, and the rule of Sansome which has been “adopted in this circuit and has been followed in every circuit in which the question has been determined,” Campbell v. United States, supra, 144 F.2d at page 179, has laid to rest the question of capitalization of accumulated earnings through the device of reorganization. Identity of the distributee is no more material than identity of the distributor. Any distribution made by a corporation to its shareholders out of its earnings and profits accumulated after February 28, 1913, is a dividend. Section 115(a), Internal Revenue Code.1 Gross income includes income from dividends. Section 22(a), Internal Revenue Code.2 We have long since passed the stage where taxability of dividends distributed to those who became shareholders af ted the corporate earnings or profits came into existence is even questioned. See United States v. Phellis, 1921, 257 U.S. 156, 171, 172, 42 S.Ct. 63, 66 L.Ed. 180; Taft v. Bowers, 1929, 278 U.S. 470, 484, 49 S.Ct. 199, 73 L.Ed. 460, 64 A.L.R. 362. Thus, that the profits had already been earned when petitioners purchased their shares in 1940 is immaterial. Cf. Commissioner v. Sansome, 2 Cir., 60 F.2d 931, 932. “Under the Sansome rule, earnings or profits which pass to a successor company are taxable as dividends on subsequent distribution. It does not matter who received them”. Putnam v. United States, supra, 149 F.2d at page 727.
In my view this case narrows down to this: Two companies (one will be referred to herein as “Crandall” and the other as “Henderson”) are reorganized into a third (called the “New Corporation” herein), with the reorganization resulting in a possibly recognizable distribution of Crandall’s earnings but with no distribution whatsoever of Henderson’s earnings. None of the $355,247.75 in cash which passed in this transaction came out of Henderson’s earnings. Indeed, the Tax Court found that all of the assets of Henderson were acquired by the New Corporation solely in exchange for 9,524 shares of its stock. The Tax Court also found that at the time of this acquisition, Henderson had earnings and profits of $74,743.62 accumulated subsequent to March 1, 1913.
*136On March 21, 1940, the petitioners purchased their shares in the New Corporation. On June 19, 1940, the New Corporation distributed to its common shareholders cash in the amount of $35,166.25, of which petitioners received $25,000 between them. Whether the accumulated earnings (without regard to the earnings of Crandall, but including the earnings of Henderson), considering the Treasury Stock purchased and held and the possibility of loss up to June 1940 (the company’s loss for the year 1940 was $37,252.47), were sufficient to cover such distribution is for determination by the trier of the facts. If so found, it follows that what the petitioners received was dividends in accordance with the Sansome doctrine. Cf. Campbell v. United States, supra, Judge Jones’ dissent, 144 F.2d at p. 184.
Accordingly, I. should reverse-and remand to the Tax Court for such determination.
26 U.S.C.A. Int.Rev.Code, § 115 (a).
26 U.S.C.A. Int.Rev.Code, § 22(a).