The opinion
AruNdell,
dissenting: I respectfully dissent from the conclusion reached in the majority opinion.. I have pointed out in my dissenting opinion in the case of Woods v. Commissioner, this day decided, some of the reasons for my view. The error of the majority opinion *817 lies in its approach. It treats the transaction as essentially one by petitioner in its own stock rather than the sale by it of property at a price in excess of cost. Certainly, if petitioner had received in payment for the'180 shares of Wynn & Starr Co. stock, cash or property, other than stock of its own company, there would have been, on the stipulated facts, a profit of $27,000, all subject to tax. That the medium of payment happens to be its own stock makes the profit none the less and as it falls within the definition of income so often announced, I see no escape from the conclusion that it is subject to tax.
Where a corporation sells its stock of a par value of $100 for $110 there is no difficulty in reaching the conclusion that it has not made a profit of $10, for the amount paid in above par is but a paid-in surplus. Or should it sell its stock for $90, there is no loss, for again there has been but $90 invested in the business. The question becomes more difficult where a corporation buys its own stock on the market at one price and later sells it for a less or greater price. Such transactions were recognized in Simmons & Hammond Mfg. Co., 1 B. T. A. 803, as not giving rise to a taxable gain or loss. These cases are on the border line. But the present case would carry Simmons & Hammond to the extreme of saying that where a taxpayer sold property (not its own stock) at a profit, such profit may not be taxed if the medium of payment happens to be the seller’s own stock. This carries the reasoning in Simmons & Hammond be: yond its natural purpose. Behlow Estate Co., 12 B. T. A. 1365, and New Jersey Porcelain Co., 15 B. T. A. 1059, it seems to me state the correct rule and they should not be overruled.
It should be recognized that in those cases where a corporation acquires its own capital stock in exchange for property disposed of by it there are two transactions which must be considered — the acquisition of the stock, and the payment for the property. Under the decisions cited the first does not result in gain or loss; the second may. There is a gain or loss on the disposition of the property measured by the difference between the cost and selling price of such property, but no taxable gain or deductible loss between the issue price and cost of its own stock. The questions involved are entirely different, as is also the measure of the gain or loss.
The principle involved is no different than when stock is issued by a corporation for property. In such cases we have repeatedly held that for the purpose- of computing gain or loss on the subsequent sale of the property,- or for purposes of depreciation or depletion, the cost of the property was the fair market value of the shares issued. Does it not follow that if shares are received for property, the selling price of the property is the fair market value *818 of the shares received? All that is taxed is the gain or loss on the “ sale or other disposition ” of the property; any apparent gain or loss on the shares does not enter the computation and, in fact, depends upon a factor not involved in the computation of gain or loss on the sale of the property, viz., the selling price of the stock.
Morris, LaNsdoN, Marquette, Smith, Phillips, and Matthews agree with this dissent.