The opinion
Tyson, J., concurring: I agree with the result reached in the majority opinion on the first and third issues. I also agree with the result reached on the second issue, that Oceanic’s acquisition and subsequent disposition of shares of its own capital stock were a capital transaction which did not result in the realization of profits or otherwise reduce the then existing impairment of capital of Oceanic. However, I do not agree that the record establishes the existence of the basic fact upon which the opinion’s rationale on this issue is predicated; that fact being that the shares of stock against which the assessments had been levied were acquired by Oceanic by forfeiture. That the rationale of the opinion is based on such a basic fact is clearly shown by a statement in the opinion made, after citation of authorities as to the effect of forfeiture of stock and some subsidiary questions. That statement is as follows:
* * * Looking to realities, the acquisition of these shares was not the purchase by Oceanic of an asset. While they are described as having been “bid” in for the amount of the unpaid assessments against them, and Oceanic carried them at a book cost equal to the amount of such unpaid assessments, plus a small amount of unexplained expenses, the effect of their acquisition was that of forfeiture [emphasis supplied] for failure to pay the assessments or calls against them, made apparently in accordance with the terms of their original issue. In their reacquisition there was no outgo from either capital or profits, and the cost figures on Oceanic’s books were accounting entries, nothing more. * * *
If it were shown as a fact that the shares in question were acquired by Oceanic by forfeiture, as the majority opinion finds they were, I would not disagree with the rationale of that opinion on the second issue. However, not only is the fact that Oceanic acquired the shares by forfeiture not shown by the record, but also they are affirmatively shown to have been acquired by purchase and not by forfeiture, since the written stipulation of the parties on this point is as follows:
The shares of stock on which the assessments listed in the preceding schedule had not been paid were bid in by the corporation pursuant to delinquency sale [emphasis supplied] and thereafter carried on its books as treasury stock in the amount of $134,210.26. Said $134,210.26 represented the total of the unpaid assessments for which these shares were bid in together with charges in connection therewith. * * *
From the above quoted stipulation it clearly appears that the assessed shares were acquired by Oceanic by purchase for a consideration, and, this being so, I think that proper consideration of this issue can be had only on the established facts: (1) That there was a purchase of the assessed shares by Oceanic, and (2), of course, that there was a resale of them thereafter by Oceanic. When so considered, I think disposition of the issue should be in favor of the petitioners under authority of a long line of cases holding that, as a general rule of law, when a purchase and subsequent resale of its own stock are-made by a-corporation no gain or loss to the corporation is realized thereby. Simmons & Hammond Manufacturing Co., 1 B. T. A. 803, a leading case; Cooperative Furniture Co., 2 B. T. A. 165; Atlantic Carton Corporation, 2 B. T. A. 380; Hutchins Lumber & Storage Co., 4 B. T. A. 705; Farmers Deposit National Bank, 5 B. T. A. 520; H. S. Crocker Co., 5 B. T. A. 537; Interurban Construction Co., 5 B. T. A. 529; Liberty Agency Co., 5 B. T. A. 778; Union Trust Co. of New Jersey, 12 B. T. A. 688; and 105 West 55th Street, Inc., 15 B. T. A. 210.
There is no question that the transaction here involved is not one where “a corporation deals in its own shares as it might in the shares of another corporation” even if the principle set out in these words in the amendment of May 2, 1934, to the regulations applied to the transactions here involved, which took place many years before the date of the amendment, for the reasons that: Oceanic purchased its own shares at a delinquency sale necessitated by failure of some of its stockholders to pay assessments levied on their stock; Oceanic held the purchased shares comprising almost one-half of its total authorized and issued stock as treasury stock for a period of six or seven years before its resale; when the resale was made Oceanic was insolvent and its shares were worthless; and no other purchases or sales of its own shares were ever made by Oceanic, except in the sale of its original issues.
Briefly stated, the error in the majority opinion on this issue is, I think, that it has applied a principle of law premised upon a basic fact, i. e., that Oceanic acquired the assessed stock by forfeiture— which fact is affirmatively shown not to have existed — whereas, I think a different principle of law should be applied and premised Upon the real facts affirmatively shown to have existed, i. e., that Oceanic acquired the stock by purchase at the delinquency sale and thereafter sold the stock, thereby bringing the transactions within the general rule of law established by the above cited authorities, that a corporation realizes no gain from a purchase and resale of its own stock.
Leech, J., agrees with this concurring opinion.