The opinion
Atkins, J., dissenting: I think the majority opinion errs in holding that section 1.355-1 of the Income Tax Regulations under the Internal Revenue Code of 1954 is invalid in providing that section 355 does not apply to the division of a single business.
The Supreme Court has many times held that Treasury regulations must be sustained unless unreasonable and plainly inconsistent with the revenue statutes, and that they constitute contemporaneous constructions by those charged with administration of these statutes which should not be overruled except for weighty reasons. Commissioner v. South Texas Lumber Co., 333 U.S. 496 . It has also been stated by the Supreme Court that the practical interpretation of an ambiguous or doubtful statute that has been acted upon by officials charged with its administration will not be disturbed except for weighty reasons. Brewster v. Cage, 280 U.S. 327 , and cases therein cited.
Section 355 is not clear. It might be susceptible to different interpretations. However, it seems that the interpretation adopted in the regulations is not unreasonable and plainly inconsistent with the statute, specifically section 355(b) (2) (B). This is particularly true if the legislative history of the statutory provision is taken into consideration. See section 353 of the House bill (H.E. 8300), which required that a corporation would be treated as an “inactive corporation” unless separate books and records had been maintained for the business transferred to it. This clearly contemplated the separation of distinct businesses. See H. Eept. No. 1337, 83d Cong., 2d Sess., p. A124. The law as finally adopted did not incorporate this particular requirement that separate books should be kept, but in S. Eept. No. 1622, 83d Cong., 2d Sess., p. 50, it is stated that the changes made by the Senate in existing law correspond substantially to those made in the House bill and, as shown in the quotation from the Senate report, contained in the majority opinion, it was the intention that “both the business retained by the distributing company and the business of the corporation the stock of which is distributed must have been actively conducted for the 5 years preceding the distribution, a safeguard against avoidance not contained in existing law.”
Section 1.355-1 (c) of the regulations defines a trade or business as follows:
for purposes of section 355, a trade or business consists of a specific existing group of activities being carried on for the purpose of earning income or profit from only such group of activities, and the activities included in such group must include every operation which forms, a part of, or a step in, the process of earning income or profit from such group. Such group of activities ordinarily must include the collection of income and the payment of expenses. It does not include—
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(3) A group of activities which, while a part of a business operated for profit, are not themselves independently producing income even though such activities would produce income with the addition of other activities or with large increases in activities previously incidental or insubstantial.
Sixteen examples are set forth in the regulations to illustrate these provisions.
It seems clear that the activities of the Christopher Construction Company cannot be considered as the carrying on of anything but a single business, and hence it cannot be considered that the business carried on by the Coady Company immediately after the date of distribution had been actively conducted over a 5-year period prior to the distribution, within the meaning of section 355 (b) (2) (B) of the Code.
TURNER, Harron, Opper, and Train, /</., agree with this dissent.