Elkhorn Coal Co. v. Commissioner

ELKHORN COAL COMPANY, PETITIONER, ET AL., 1v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. Elkhorn Coal Co. v. Commissioner Docket Nos. 49064-49070. United States Board of Tax Appeals 34 B.T.A. 845; 1936 BTA LEXIS 637; July 30, 1936, Promulgated *637 Corporation A, with total stock of 7,540 shares of common stock caused corporation B to be organized, and on December 18, 1925, transferred to the latter certain assets consisting of stocks of subsidiaries and a tract of coal land, in exchange for 6,100 shares of the common stock of B, which shares were distributed among the stockholders of A on December 19. On December 31, 1925, A transferred its remaining assets, consisting of mine, mining plant, and equipment, to corporation C in exchange for 1,000 shares (25 percent) of C's capital stock. This mine of A adjoined the mines of C, and since December 31, 1925, these mines have been operated as one by C. On January 22, 1926, B acquired all of A's capital stock in exchange for the remaining 1,440 shares of its authorized stock and on the same date caused A to transfer to it the 1,000 shares of C's stock in liquidation. B is still in existence and has been engaged in mining coal on the coal lands transferred to it. A did no business after December 31, 1925, and its certificate of dissolution was issued on August 25, 1926. After January 22, 1926, the individuals who had owned all of the capital stock of A owned in the same proportions*638 all of the capital stock of B. Held, the transaction between A and B constituted a reorganization within the meaning of section 203(h)(1)(B) of the Revenue Act of 1926, and after such transaction A had only the assets later transferred to C; held, further, the transfer from A to C on December 31 was the acquisition by C of all the property of A and constituted a reorganization within the meaning of section 203(h)(1)(A), upon which the taxable gain was not recognized to A, under section 203(b)(3). John L. Steinbugler, Esq., Leo H. Hoffman, Esq., and Robert W. Knox, Esq., for the petitioners. R. W. Wilson, Esq., and Arthur Clark, Esq., for the respondent. MATTHEWS *846 These proceedings, which have been consolidated, arise under section 280 of the Revenue Act of 1926 and involve a deficiency in income tax determined against the Elkhorn Coal & Coke Co., a corporation, for the year 1925 in the amount of $74,332.44, which the respondent is seeking to collect from the petitioners as transferees of the assets of that corporation, which was dissolved under date of August 25, 1926. The only issue for determination in connection with*639 the amount of the deficiency is whether the transfer on December 31, 1925, by the Elkhorn Coal & Coke Co. of certain mining properties, which were all the properties it then possessed, to the Mill Creek Coal & Coke Co. in exchange for 1,000 shares of Mill Creek Coal & Coke Co. stock, constituted a reorganization within the provisions of section 203(h)(1)(A) on which the gain is not to be recognized under section 203(b)(3), as petitioners claim, or is a taxable transaction, as respondent contends. The individual petitioners contend that they are not transferees of the Elkhorn Coal & Coke Co. Certain issues raised by the pleadings were stipulated by the parties and effect will be given thereto in the redetermination of the deficiency under Rule 50. The proceedings were submitted upon the oral testimony of one witness with respect to the physical merger or consolidation of the operating properties of the Mill Creek Coal & Coke Co. and those of the Elkhorn Coal & Coke Co., and on a stipulation of facts which contained as a part thereof a number of exhibits. A summary of the facts contained in the stipulation and the exhibits attached thereto is sufficient for the purposes of this*640 report. FINDINGS OF FACT. The Elkhorn Coal & Coke Co. was organized under the laws of the State of West Virginia in 1889. Its total capital stock of every nature, issued and outstanding during December 1925, and until it was liquidated in 1926, was 7,540 shares of common stock. It was actively and continuously engaged in coal mining from incorporation to December 31, 1925. The Elkhorn Coal Co. was organized under the laws of the State of Delaware on December 9, 1925. Its total authorized capital stock of every nature was 7,540 shares of common stock, all of which were issued and outstanding on January 22, 1926. On organization, 10 shares were issued as qualifying shares. These shares, however, were considered part of the 6,100 shares issued in exchange for certain properties of the Elkhorn Coal & Coke Co. on December 18, 1925, as hereinafter set forth. The remainder of 1,440 shares, bringing the total up to 7,540 shares, was issued in exchange for stock of the *847 Elkhorn Coal & Coke Co. on January 22, 1926, as hereinafter set forth. The Elkhorn Coal Co. has been actively engaged in mining coal on its Patterson-McMullin tract. The Mill Creek Coal & Coke Co. *641 was organized under the laws of West Virginia in 1891. Its total capital stock of every nature issued and outstanding up to December 31, 1925, was 3,000 shares of common stock. On December 31, 1925, the issued and outstanding common stock was increased to 4,000 shares of common stock by the exchange of 1,000 shares of common stock for certain property of the Elkhorn Coal & Coke Co., as hereinafter set forth. The principal business of the Mill Creek Coal & Coke Co. was that of mining coal. During the months of December 1925 and January 1926 the Elkhorn Coal & Coke Co., Elkhorn Coal Co., and Mill Creek Coal & Coke Co. transacted certain business, as set forth in the minutes of the meetings of the stockholders and directors of such corporations. On December 18, 1925, in accordance with the authority conferred by regular corporate action of the stockholders and directors of the Elkhorn Coal Co. and of the Elkhorn Coal & Coke Co., the Elkhorn Coal Co. acquired certain assets from the Elkhorn Coal & Coke Co. in exchange for 6,100 shares of its stock. Immediately thereafter (on December 19, 1925) the 6,100 shares of stock of the Elkhorn Coal Co. were distributed by the Elkhorn Coal*642 & Coke Co. to its stockholders pro rata in proportion to their then stockholdings in the Elkhorn Coal & Coke Co. The Elkhorn Coal & Coke Co. assets exchanged for the 6,100 shares of the Elkhorn Coal Co. stock, were, briefly, as follows: 993 shares Williams Pocahontas Coal Co. stock 23 shares Underwood Coal Co. stock 400 shares Mill Creek Coal Co. stock 400 shares Central Pocahontas Coal Co. stock Patterson-McMullin tract Wm. C. Atwater & Co. demand loan The Patterson-McMullin tract, listed above, consisted of 5,100 acres of coal lands containing a very large tonnage of high grade Pocahontas coal, located in McDowell County, West Virginia. This land was transferred in fee. On December 28, 1925, pursuant to proper corporate action by the stockholders and directors of the two corporations, certain other current assets were transferred to the Elkhorn Coal Co., in consideration of that company's assumption of all the liabilities of the Elkhorn Coal & Coke Co. Thereafter, the Elkhorn Coal & Coke Co. was possessed only of certain operating properties consisting of mine, mining plant, and mining equipment located at Maybeury, West Virginia. *848 On December 31, 1925, and*643 as authorized by corporate action of the stockholders and directors of the Elkhorn Coal & Coke Co. and of the Mill Creek Coal & Coke Co., all the assets then possessed by the Elkhorn Coal & Coke Co. were exchanged for 1,000 shares of Mill Creek Coal & Coke Co. stock. These assets, consisting of mine, mining plant, and mining equipment located at Maybeury, West Virginia, adjoined the mining properties of the Mill Creek Coal & Coke Co. This mining property was thereafter operated by the Mill Creek Coal & Coke Co., and immediately upon its acquisition, Mill Creek began the construction of a track and tunnel to connect the mines located on the Mill Creek properties with the mining plant and equipment located on what was formerly the Elkhorn Coal & Coke Co. property. The construction of the railroad and tunnel required about 18 months. On January 22, 1926, the remaining 1,440 authorized shares of the Elkhorn Coal Co. stock were issued to the stockholders of Elkhorn Coal & Coke Co. in exchange for all of the capital stock of the Elkhorn Coal & Coke Co., which shares were received by the stockholders of the Elkhorn Coal & Coke Co. pro rata in proportion to their stockholdings. Thereupon*644 the Elkhorn Coal Co. became the sole stockholder of the Elkhorn Coal & Coke Co. and those individuals who had owned 7,540 shares of the common stock of the Elkhorn Coal & Coke Co. owned in the same proportion 7,540 shares of the Elkhorn Coal Co. On the same day, January 22, 1926, the Elkhorn Coal Co., the then owner of 100 percent of the stock of the Elkhorn Coal & Coke Co., caused the Elkhorn Coal & Coke Co. to transfer to it the 1,000 shares of stock of the Mill Creek Coal & Coke Co., which had been received in exchange for the above-described operating properties, and proceeded to dissolve the Elkhorn Coal & Coke Co. The above transfers made on January 22, 1926, were made pursuant to a plan whereby a merger or consolidation was to be effected between the Elkhorn Coal Co. and the Elkhorn Coal & Coke Co. through the acquisition by the Elkhorn Coal Co. of all the stock of the Elkhorn Coal & Coke Co. in exchange for 1,440 shares of Elkhorn Coal Co. stock and the dissolution of the Elkhorn Coal & Coke Co., which plan was authorized by proper corporate action of the stockholders and directors of both corporations. The Elkhorn Coal & Coke Co. did no business whatsoever after December 31, 1925. *645 Its certificate of dissolution was issued by the State of West Virginia on or about August 25, 1926. The directors and stockholders of the Elkhorn Coal & Coke Co. purposed that the liquidation and dissolution of the Elkhorn Coal & Coke Co. be effected immediately after December 31, 1925, and directed their counsel to *849 outline the course they should take and assist in holding necessary meetings and doing everything necessary to accomplish such liquidation and dissolution. The following schedule shows the issued and outstanding stock of every kind of the Elkhorn Coal Co., Elkhorn Coal & Coke Co., and Mill Creek Coal & Coke Co. and the stockholders therein, at the time indicated: Elkhorn Coal Co. Mill Creek Coal & Coke Co. Elkhorn Coal & Coke Co. to Jan. 22, 1926 Dec. 19, 1925 Jan. 22, 1926 Prior to Dec. 31, 1925 Dec. 31, 1925 1. Wm. C. Atwater [2] 2. Wm. C. Atwater, Jr 1,598 1,292.5 1,598 [1] 3. John J. Atwater 1,598 1,292.5 1,598 4. David H. Atwater 1,604 1,297.5 1,604 5. Margaret A. Olds 1,170 947.5 1,170 6. Charles B. Smith [143] 115.5 [35] 7. John L. Steinbugler [1] 8. Chas. P. Hutchins [650] 9. Lena C. Hutchins [741] 599.5 [741] 10. Jos. H. Spafford [13] 10.5 [13] 11. Estate of W. H. Wheeler [13] 10.5 [13] 12. Wm. C. Atwater & Co. (a) [598] 13. Elkhorn Coal Co [400] 14. Elkhorn Coal & Coke Co 1,000 15. Williams Pocahontas Coal Co. (b) [370] 16. Fall River Pocahontas Collieries Co. (c) [200] 17. C. C. Beury [107] 18. Catherine Deppen (heirs of) [107] 19. Clara Lorenz [107] 20. Hannah Rowe [107] 21. Mrs. E. A. Rowe [107] 22. Mrs. Wm. J. Beury [143] 23. Susan M. Beury [143] 24. H. C. Beury [143] 25. Chas. E. Beury [143] 26. Jos. P. Beury [143] 27. Estate of E. B. Gallaudet [93] 28. Mrs. E. B. Gallaudet [50] Total 7,540 6,100 7,540 3,000 4,000 *646 The 1,000 shares of stock of Mill Creek Coal & Coke Co., which were issued to Elkhorn Coal & Coke Co. in exchange for its mine and mining properties located at Maybeury, West Virginia, had a fair market value on December 31, 1925, of $550,000. This value was in excess of the deficiency herein asserted both at the date of the exchange on December 31, 1925, and at the date of transfer of this stock to the Elkhorn Coal Co. upon the liquidation of the Elkhorn Coal & Coke Co. *850 The fair market value of the stock of the Elkhorn Coal Co. received*647 by the individual petitioners on December 19, 1925, was $186.73 per share on that date. The fair market value of the Elkhorn Coal Co. stock received by the individual petitioners on January 22, 1926, in exchange for their Elkhorn Coal & Coke Co. stock, was $224.01. The gross income of the Elkhorn Coal & Coke Co. for 1925, other than that in dispute, was $171,728.41, of which $148,916.34 represented gross profit from mining and mine store sales. The corporation received no dividends during that year on the stock of other corporations owned by it. For the years 1922, 1923, and 1924, over 90 percent of the gross income of the Elkhorn Coal & Coke Co. was from mining operations. In its income tax return for 1925 the Elkhorn Coal & Coke Co. did not report any taxable gain from the above described transactions whereby it transferred certain assets to the Elkhorn Coal Co. and its remaining assets to the Mill Creek Coal & Coke Co. The respondent determined that the Mill Creek Coal & Coke Co. did not acquire "substantially all the properties of another corporation" when the Elkhorn Coal & Coke Co. conveyed to it those operating properties which were located at Maybeury, West Virginia, *648 and has determined a deficiency on the theory that a profit was realized by the Elkhorn Coal & Coke Co. on this conveyance to the Mill Creek Coal & Coke Co., which deficiency the respondent seeks to collect from the petitioners as transferees of the assets of the Elkhorn Coal & Coke Co. The deficiency asserted against the taxpayer is outstanding and unpaid. OPINION. MATTHEWS: 2 The division report and determination in the aboveentitled case promulgated on January 28, 1936, and published at 33 B.T.A. 995, which was, on motion of respondent filed January 25, 1936, referred to the Board for review, was vacated on March 6, 1936, and the proceedings rereferred for further consideration. It is the position of the petitioners that when the Elkhorn Coal & Coke Co., hereinafter referred to as Elkhorn, transferred a part of its assets to the Elkhorn Coal Co., hereinafter referred to as the new company, in exchange for over 80 percent of the new company's stock, which was distributed to Elkhorn's stockholders, there was a reorganization within the meaning of clause (B) of section 203(h)(1) of*649 the Revenue Act of 1926; that the subsequent transfer by Elkhorn of all the properties which it then owned to the Mill Creek Coal & Coke Co., hereinafter referred to as Mill Creek, for *851 1,000 shares of 25 percent of Mill Creek stock, constituted a reorganization within the meaning of clause (A), and that no taxable gain was realized by Elkhorn as a result of either of these transactions, under the provisions of section 203(b)(3). Petitioners also contend that Elkhorn Coal Co. alone is subject to transferee liability, if any. The respondent takes the position that there was one continuous plan which embraced all the steps taken and that before a single step was taken there had been formulated a single plan of reorganization or regrouping of corporate assets. He lays great stress on the fact that meetings of the directors and stockholders of Elkhorn and of the new company, and a meeting of the directors of Mill Creek, were held at the same place upon the same day, December 17, 1925, and all within the space of a few hours, and were attended by the same individuals. He argues that, since Mill Creek did not intend to acquire substantially all of the property owned by*650 Elkhorn at the inception of the plan, Mill Creek did not acquire "substantially all" of the property of Elkhorn on December 31, 1925. Respondent contends that in substance, and in fact, what occurred is this: Mill Creek acquired a portion of the assets of Elkhorn in exchange for 25 percent of the total outstanding stock of Mill Creek and the remaining assets of Elkhorn, having substantial value, were retained by a successor corporation to Elkhorn in such manner that the equitable interest therein of each stockholder of Elkhorn remained unchanged; that the retention of the remaining assets by the successor corporation was in all respects the equivalent of retention by Elkhorn itself; that the various steps taken, or transactions consummated, between Elkhorn and the new company, and thereafter between Elkhorn and Mill Creek, were nothing more nor less than an elaborate tax avoidance scheme to accomplish a result equivalent in all other respects to that which would have obtained if Elkhorn and transferred its mining properties directly to Mill Creek in exchange for 1,000 shares (25 percent) of Mill Creek stock. Respondent does not argue that each of the steps taken, if viewed separately*651 and apart from all other steps, does not fall within certain of the tax-exempt provisions of the statute. He submits, however, that there is no justification for viewing these transactions separately and apart one from the other; that, since in cases involving the question of whether or not immediately after a transfer the transferor or its stockholders or both are in control of the transferee so as to bring the case within the exemption of section 203 neither the Board nor the courts have hesitated to consider the entire series of events after the transfer and to reject as not constituting control *852 the momentary appearance of control where it was never intended, by equal reasoning the entire series of events preceding a transfer must be considered in cases like the present to see whether or not substantially all the assets of one corporation have in effect been acquired by another or whether such was the appearance artificially given to a transaction through the maneuvering of events, whereas in reality the transaction did not meet the test. In support of the motion filed by respondent for reference of the division report promulgated on January 28, 1936, to the Board*652 for review, respondent submits that it was encumbent upon the petitioners to show affirmatively that the transfer to Mill Creek was so completely separate, distinct, and disassociated from the transfer by Elkhorn of other assets at the same time that it can fairly be said that the transfer to Mill Creek was an acquisition by Mill Creek of substantially all of Elkhorn's properties. He lays great stress on the fact that there is no testimony by anyone on behalf of petitioners that the two acquisitions were disconnected. He again lays stress on the coincidence of personnel, time of meetings, and control of all three corporations by the same individuals, and states that on the very day that the first transfer was made, December 18, 1925, the second transfer was as good as made and that it was a practical certainty that it would be made. He again submits that both transfers were part and parcel of a larger plan in which a substantial portion of Elkhorn's assets were transferred to the new company and its other assets were transferred to Mill Creek, and insists that on the facts we should treat the two transfers as having been made at substantially the same time or that the transfer to*653 the new company was equivalent to a retention by Elkhorn of the assets transferred. He cites the cases of Alice V. St. Onge,31 B.T.A. 295, and Arctic Ice Machine Co.,23 B.T.A. 1223, as supporting his contention. Respondent also contends that each of the petitioners is a transferee, either directly or indirectly, of the assets of Elkhorn, and that each petitioner was in receipt of an amount in excess of the tax liability asserted against the taxpayer. The applicable provisions of the Revenue Act of 1926 are set out in the margin. 3 *654 *853 We agreed with respondent that the whole series of events preceding a transaction claimed to be a tax-free reorganization, under the terms of clause (A) of section 203(h)(1), should be considered in determining whether or not substantially all the assets of one corporation have in fact been acquired by another. We also think that events subsequent to such a transaction should be taken into consideration. We do not doubt that before a single step was taken a plan had been formulated for regrouping the corporate assets. We do not question the fact that Mill Creek was on December 17, 1925, aware of the steps which were subsequently to be taken by Elkhorn and the new company, since three of the directors of each corporation, which constituted a majority of the directors of each corporation, were the same individuals and since Elkhorn and its stockholders owned or controlled a majority of the stock of Mill Creek. And it is clear that after all the steps had been taken the individuals who had been stockholders of Elkhorn had the same economic interest in the assets transferred to the new corporation and to Mill Creek as they formerly had in such assets. We do not agree, *655 however, with respondent's contention that the transfer of a large part of the assets of Elkhorn to the new company on December 18 was equivalent to the retention by Elkhorn itself of these assets. Such conclusion is not justified by the stipulated facts. Neither do the facts justify the respondent's contention that the transfer to the new corporation should be treated as having been made at the same time as the transfer to Mill Creek. In the instant case the same group of individuals controlled all the corporations involved. Neither this group of individuals nor Elkhorn was enriched by the transactions. The group of individuals owned or controlled the same interest in the assets after December 31 and after January 22 as they did before December 9, when the new corporation was organized. Each of the several transfers was the shifting of assets from one corporation to another for stock. None of the transfers bears the semblance of a sale. The reason for transferring the mining property located at Maybeury, West Virginia, from Elkhorn to Mill Creek was to operate the two mines as one and thus reduce the cost of operation. Such transfer was germane to the business of both*656 corporations, which was the mining of coal. *854 The stipulated facts justify the inference that one of the motives which the stockholders of Elkhorn had in organizing the new corporation and causing the three corporations to adopt the several steps or plans of reorganization which were adopted and carried out, was to make the transfer of the mining properties from Elkhorn to Mill Creek without resulting tax liability to Elkhorn or to themselves. The facts do not justify the inference that this was the only motive of the stockholders; but even if it were, we could not, on the facts of this case, refuse to regard what was actually done and to give effect thereto. Elkhorn and its stockholders are separate taxable entities and we have before us the tax liability of Elkhorn. By the first transfer there was a modification of the corporate structure of Elkhorn. A large part of its assets were transferred to the new company for over 80 percent of that corporation's stock, which was immediately distributed by Elkhorn to its stockholders. The new corporation was organized under the laws of another state and has been engaged in mining coal on the tract of coal lands which was*657 transferred to it, and it is still in existence. By this transfer and the distribution of the stock received, Elkhorn completely divested itself of all right, title, and interest in and to the assets transferred and the stock received in exchange. In so far as Elkhorn was concerned, it was in exactly the same position after the transfer of December 18 as it would have been if it had distributed these assets to its stockholders in kind instead of distributing to them the stock which it received upon their transfer. As was stated above, we think that consideration should be given to the whole series of events, both before and after a transaction, claimed to be a tax-free reorganization, in determining whether the transaction is in fact what it appears to be in form. But where, as here, the main object to be accomplished is a legitimate business purpose, effect must be given to what was done. Upon every exchange, gain or loss is realized and is recognized for tax purposes unless it falls within one of the exceptions in the statute. The time when such exchange takes place is a question of fact, and if the facts show that an exchange made at a particular time was for a legitimate*658 business purpose and was intended to be a permanent exchange and not merely a temporary holding of title to obscure the real transaction, effect must be given thereto. The transfer of December 18 was not a device to hide the real nature of the later transfer, but was a bona fide business move under which Elkhorn intended to, and did, effectively and permanently dispose of the assets transferred on that date for a controlling interest in the corporation to which they were transferred. This transaction meets the definition of reorganization *855 contained in clause (B) of section 203(h)(1). After December 19, when the stock received on the exchange was distributed to its stockholders without the surrender of their Elkhorn stock, Elkhorn was possessed only of the mining properties located at Maybeury, West Virginia. After December 19 the stockholders had shares in two corporations which evidence their interest in the assets which had formerly been held by one corporation, but Elkhorn had only the mine and mining properties located at Maybeury, West Virginia. On December 31 these properties were transferred to Mill Creek for 1,000 shares (25 percent) of Mill Creek's stock. *659 By this exchange, Mill Creek acquired all the properties of another corporation, which constitutes a reorganization within the definition contained in clause (A) of section 203(h)(1). Under the provisions of section 203(b)(3) no gain or loss is recognized where a corporation, a party to a reorganization, exchanges property, in pursuance to the plan of reorganization, solely for stock or securities in another corporation, a party to the reorganization. Since the decisions of the Supreme Court in Gregory v. Helvering,293 U.S. 465; Helvering v. Minnesota Tea Co.,296 U.S. 378; Helvering v. Watts,296 U.S. 387, and Nelson Co. v. Helvering,296 U.S. 374, it is clear that where a transfer made pursuant to a plan of reorganization meets the terms of the statute, and such transfer is not merely a device to obscure the real transaction, effect must be given thereto. See also Helvering v. Winston Brothers Co., 76 Fed.(2d) 381; Western Industries Co. v. Helvering, 82 Fed.(2d) 461; *660 Chisholm v. Commissioner, 79 Fed.(2d) 14, and Bremer v. White,10 Fed.Supp. 9. The respondent would have us substitute, by construction, a fictitious transaction which would have had a similar economic effect, in so far as the stockholders of Elkhorn are concerned, for the transactions which were actually made. There is nothing in the record which would justify such disregard of what actually occurred. There was no duty on the part of Elkhorn, or its stockholders, so to fit the transfers into the revenue act as to produce a tax. Gregory v. Helvering, supra. In our opinion, the facts show affirmatively that the transfer to Mill Creek was completely separate and distinct from the earlier transfer by Elkhorn to the new corporation. The transfer made on December 18 was complete within itself, regardless of what Elkhorn planned to do later, or did subsequently do. It was not a sham or a device intended to obscure the character of the transaction of December 31. The stipulated facts do not suggest other than a bona fide business move. *856 The transfer made on December 31 was also complete within itself, and*661 was made for reasons germane to the business of both corporations. This transfer falls within the terms of clause (A) of section 203(h)(1), whether or not Elkhorn was dissolved. Helvering v. Minnesota Tea Co., supra.Therefore, the transaction of December 31 was no sale, but a reorganization. The transferor received an interest in the transferee which represented a material part of the value of the transferred assets and within a short time the transferor was dissolved. Giving heed to what in law was done, rather than to its economic equivalent, the transfer of December 31 was made pursuant to a plan of reorganization, and, under the provisions of section 203(b)(3), the gain to Elkhorn upon the transfer is not recognized. The case of Alice B. St. Onge, supra, was decided before the Supreme Court rendered its decisions in Helvering v.Minnesota Tea Co., Helvering v. Watts, and Nelson Co. v. Helvering, supra, and is now on appeal to the Circuit Court of Appeals for the First Circuit. Whether we would have reached any different decision if we had had the benefit of the Supreme Court decisions, it is not now necessary to decide. The*662 St. Onge case is distinguishable on its facts from the instant case. In that case the plan adopted and carried out was described and called a plan of sale under which the assets and business of a state bank (of which the taxpayer was a stockholder) were purchased by a national bank for cash, and the stock of the national bank was purchased by the stockholders of the state bank for cash. We held that the transaction was what the parties called it - a sale for cash by the state bank and the purchase of stock of the national bank for cash by the stockholders of the state bank. In the instant case the transactions of December 18, 1925, and of December 31, 1925, were both made pursuant to plans of reorganization, whereby assets of one corporation were exchanged for stock of another corporation. Since there were other adjustments about which the parties are not in dispute, it is necessary to determine whether all of the petitioners are transferees of Elkhorn. The stipulated facts show that the individual petitioners are not transferees of Elkhorn. Inasmuch as the Elkhorn Coal Co. acquired all of the assets of Elkhorn in liquidation on January 22, 1926, it is the only transferee*663 of Elkhorn, within the meaning of the statute. Reviewed by the Board. Judgment of no deficiency will be entered in Docket Nos. 49065, 49066, 49067, 49068, 49069, and 49070. Judgment under Rule 50 will be entered in Docket No. 49064. *857 MURDOCK, dissenting: I do not think there was a statutory reorganization within the definition of section 112(i)(1)(A) of the Revenue Act of 1928. The question is whether there was an acquisition by one corporation of "substantially all of the properties of another corporation." The transferor corporation in this case first divested itself of a part of its assets; then the acquiring corporation acquired all of the assets which remained. These two steps were both parts of one plan. They were both essential to the completion of the two alleged statutory reorganizations involved in that single plan. See Liquidating Co.,33 B.T.A. 1173. I think that plan must be looked at as a whole, and if the acquiring corporation does not, in the end, have substantially all of the properties which the transferring corporation had when the first step in the plan was taken, then the express terms of the statute have not been complied*664 with. Alice V. St. Onge,31 B.T.A. 295. See also Arctic Ice Machine Co.,23 B.T.A. 1223; David Gross,34 B.T.A. 395. The Board has consistently followed these cases and no higher authority has ever said they were wrong. LEECH, TURNER, MELLOTT, and ARNOLD agree with this dissent. Footnotes 1. Proceedings of the following petitioners are consolidated herewith: William C. Atwater, Jr.; David H. Atwater; John J. Atwater; Margaret A. Olds; Lena C. Hutchins; and Charles P. Hutchins. ↩ a. (a) All of the stock of Wm. C. Atwater & Co. was owned by the stockholders of the Elkhorn Coal & Coke Co., the wife of William C. Atwater, and two employees of that company. ↩ b. (b) All of the stock of the Williams Pocahontas Coal Co., except qualifying shares, was owned by Elkhorn and the qualifying shares were owned by the stockholders of Elkhorn. ↩ c. (c) All of the stock of the Fall River Pocahontas Collieries Co. was owned by the stockholders of Elkhorn. Thus, 1,607 shares of Mill Creek Coal & Coke Co. stock, prior to December 31, 1925, were owned or controlled either directly or indirectly by Elkhorn and its stockholders. ↩ 2. This decision was prepared during Miss Matthews' term of office. ↩ 3. RECOGNITION OF GAIN OR LOSS FROM SALES AND EXCHANGES. SEC. 203. (a) Upon the sale or exchange of property the entire amount of the gain or loss, determined under section 202, shall be recognized, except as hereinafter provided in this section. * * * (b) (3) No gain or loss shall be recognized if a corporation a party to a reorganization exchanges property, in pursuance of the plan of reorganization, solely for stock or securities in another corporation a party to the reorganization. * * * (h) As used in this section and sections 201 and 204 - (1) The term "reorganization" means (A) a merger or consolidation (including the acquisition by one corporation of at least a majority of the voting stock and at least a majority of the total number of shares of all other classes of stock of another corporation or substantially all the properties of another corporation), or (B) 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 (C) a recapitalization, or (D) a mere change in identity, form, or place of organization, however effected. ↩