The opinion
Tkammell,
dissenting: I am unable to agree with the conclusion reached by the Board in this case. The Commissioner was given express authority by section 113 (a) (1) to promulgate regulations apportioning costs among several classes of stock. His promulgation of article 600 of Regulations 74 was pursuant to the statutory authority. The statute provides as follows:
(9) Tax-free distributions. If the property consists- of stock or securities distributed after December 31, 1923, to a taxpayer in connection with a transaction described in section 112 (g), the basis in the case of the stock in respect of which the distribution was made shall be apportioned, under rules and regulations prescribed by the Commissioner with the approval of the Secretary, between .such stock and the stock or securities distributed.
The statute left certain details to be filled in by regulations of the Commissioner; when those details are filled in by the regulations they become a part of the statute, unless contrary to law or unless purely arbitrary and without reason.
This means that section 113 (a) (1) is to be read in connection, with article 600 of Regulations 74, promulgated pursuant thereto-.. To some extent at least this was a delegation of legislative authority to the Commissioner and the regulation becomes a part of the legislation. It is in no sense a regulation of the Commissioner inter *797 preting the statute, but completes and fills out details left vacant. If the Commissioner interprets the statute by his regulations, it may be conceded that he may change his interpretation by a subsequent regulation, but in my opinion a different rule should be followed when the regulation is in effect to be read as a part of the statute specifically authorized and considered by Congress to be a material part thereof. It is not shown that article 600 of Regulations 74 as originally promulgated was invalid, contrary to the statute, or in any sense illegal. On the other hand, the prevailing opinion assumes the validity of the original regulation. At least it does not question it. This being true, the question here is whether the regulation, after once having been incorporated by the statute as a part of the law, can be changed retroactively to affect transactions which took place before the change. While Congress itself may impose an income tax retroactively, the question is, Can the Commissioner in effect change the law, by changing his regulation after it had become a part of the law? If so, it means that the Commissioner can change the law after a transaction occurred, which was not taxable at the time entered into. In my opinion Congress has not given such power to the Commissioner. When the Commissioner filled in the details of the law by his regulations as provided by the statute, he exercised his full power. Congress has not given authority to the Commissioner in effect to change or impose tax liability retroactively when Congress itself expressed no intention with respect to a retroactive application. When the Commissioner promulgated the original regulation, if valid, the details of the law had been completely filled in and the law was then complete. If the Commissioner, by regulation, changes the effect of such a law, it is new legislation, in my opinion not contemplated. It is conceded, however, that the Commissioner has the right to change the regulation prospectively. Even in legislation enacted by Congress, it must clearly appear that it was the intention to give it a retroactive effect. To give a retroactive effect to a regulation which is incorporated into the statute it seems to me would be similar to the principle announced by the Supreme Court in the cases of Untermyer v. Anderson, 276 U. S. 440 ; Blodgett v. Holden, 275 U. S. 142 ; and Arizona Grocery Co. v. Atchison T. & S. F. Ry. Co., 284 U. S. 370 . If the original regulation had been contrary to law or so unreasonable or arbitrary that it should not be recognized as a valid regulation, a different situation would arise.
I do not agree with the concurring opinion that the Commissioner correctly applied subdivision (2) of article 600 and that the original regulation is capable of the interpretation expressed in the amended regulation. In my opinion stock of the same character or preference *798 refers to the kind or character of stock and not whether it is in one corporation or another. It is true that stock of one corporation is materially different from that of another, but it is not necessarily materially different in character or preference. Section 112 (g) and article 576 refer to the surrender of stock or securities in a corporation a party to a reorganization and the receipt of stock or securities in such corporation or another corporation, a party to the reorganization. The statute clearly contemplated an exchange of stock in one corporation for stock in another.
ARUNdell agrees with this dissent.
Morris did not participate in the consideration of or decision in this proceeding.