The opinion
Mellott,
dissenting: The petitioner purchased a share of bank stock and thereby became entitled “to share equally and ratably with all other holders of stock certificates of the Bank similarly endorsed, according to their several interests, in the dividends or profits, and, in the case of dissolution, in the distribution of the capital” of a security company. The security company had been organized in conformity with an agreement which provided that the “* * * officers or directors of the bank shall be the directors, and, as joint tenants and not as tenants in common, shall be stockholders, in such way, however, that the beneficial interest resulting from such stock (but not the right to vote) may accrue continuously and irrevocably to such persons assenting thereto as from time to time shall be registered stockholders of the Bank or of its successor, severally and respectively, in proportion to their registered holdings of the stock of the Bank or of its successors * * *.”
The holding of the majority to the effect that petitioner became a stockholder in the security company, through the purchase of a share of the Bank stock bearing the endorsement set out in the opinion, seems to me to be wrong. He did not buy two separate shares of stock, one in the Bank and one in the security company. He could not do so. He bought a share of Bank stock. That is what was “actively traded in * * * ‘over the counter’ ” and “all quotations of prices for Bank stock were for certificates of stock bearing that endorsement.”
If the unit which he bought — the bank stock with the endorsement — had been sold, gain or loss would have been computed upon *1171 its cost. But he did not sell it as a unit. He surrendered it on December 9, 1933, and, in the language of the majority, “in exchange therefor * * * received * * * certificates of Bank stock without said endorsements and declarations of interest.” This, it seems to me, is analogous to the situation which the Board had before it in Glenn H. Curtiss, 21 B. T. A. 629. It was there held that the cost of the exchanged securities should be apportioned to the securities received in the exchange according to the respective market values of the securities at the time received in the exchange. The Circuit Court affirmed, Curtiss v. Commissioner, 57 Fed. (2d) 847. Cf. I. T. 2302, V-2, C. B. 15. Sallie Strickland Tricou, 25 B. T. A. 713-723; aff'd., 68 Fed. (2d) 280; certiorari denied, 292 U. S. 655 . (Rule recognized but not applied for lack of proof.) Frances Elliott Clark, 28 B. T. A. 1225; aff'd., 77 Fed. (2d) 89. I. T. 2335, C. B. VI-1, p. 18. Fifth, Avenue Bank of New York, Executor, 31 B. T. A. 945; aff'd., 84 Fed. (2d) 787. H. A. Green, 33 B. T. A. 824 (petition to review dismissed, C. C. A., 9th Cir.).
In H. A. Green, supra, we pointed out that while there is no specific provision in the statute directing an apportionment of cost between two or more kinds of property received in a nontaxable exchange (which, it seems to me, is what we have here) still article 1567 of Regulations 62, interpreting the Revenue Act of 1921, must be considered as laying down a principle which is equally applicable in determining gain or loss under subsequent revenue acts. This regulation provides in part as follows:
* * * the proportion of the original cost, or other basis, to be allocated to each class of new securities is that proportion which the market value of the particular class bears to the market value of all securities received on the date of the exchange. * * * [Italics supplied.]
This is certainly a more “practicable” solution of our problem than that adopted by the majority.
Aiujndbll, Van Fossan, and Arnold agree with this dissent.