The opinion
Mellott,
dissenting: The opinion of the majority holds that on January 10, 1933, there was a sale of the securities by the trust to the petitioner for $8,000, an immediate sale on the installment plan of the same securities by the petitioner to his newly created corporation for $100,000, followed by a sale by the corporation, as an undisclosed principal through petitioner as its agent, to Lay for $100,000. I can not accept this view.
A substantial portion of the sum paid by Lay was paid because of petitioner’s claim against him for fraud. In this connection the testimony of the lawyer who handled the transaction for the petitioner is illuminating. He said:
I told Mr. Griffiths that our rights against -Lay consisted of a cause of action involving a breach of trust in the general nature of a tort claim, and that in order to effect the settlement it would be necessary to unite the ownership of the stock and the tort claim, or claim for breach of trust, in the same person. I therefore told him it would be essential for him to reacquire the stock that had been sold to the John Griffiths Investment Trust, and he said he would.
The petitioner testified to the same effect. He stated that the attorney told him “that in order to clean it up I should buy the stock back from the Investment Trust because of my right of action against Lay, and I believe Lay’s attorney wanted it that way because the Investment Trust only had the stock and I had the right of action.”
While petitioner assigned to the corporation any rights which he might have against Lay to require him “to purchase said stock” it is significant that no attempt was made to assign to the corporation his “cause of action involving a breach of trust in the nature of a tort claim, or claim for breach of trust.” Perhaps such claim was not assignable under the laws of Illinois. Cf. Babcock v. Farwell, 146 Ill. App. 307 ; affd., 245 Ill. 14 ; 91 N. E. 683 ; North Chicago St. Ry. Co. v. Ackley, 171 Ill. 100 ; 49 N. E. 222 . But even if it were assignable it is significant that Lay was not advised that any assignment had been made and the release was executed by petitioner personally rather than on behalf of the corporation. The release recited that:
* * * as part consideration for the payment to tbe undersigned by the said Robert D. Lav of the said sum of One hundred eighty thousand dollars ($180,000), I, the undersigned, George W. Griffiths, for myself, my heirs, ad *322 ministrators and assigns, do hereby release and forever discharge the said Robert D. Lay, his heirs, executors, administrators, and assigns, from all actions, causes of action, contracts, debts, liabilities, obligations, suits, claims and demands whatsoever which I, the undersigned ever had, now have, or which I, my heirs, executors, administrators or assigns or any of them, hereafter can, shall or may have for or by reason of any act of omission, cause, matter or thing whatsoever, from the beginning of the World to the date hereof.
The conclusion is inescapable that the major portion of the consideration paid by Lay was for the settlement of the tort action. Under the circumstances I am of the opinion that it constituted income to petitioner. The corporation set up by him was devised merely for the purpose of preventing the amount “paid from vesting even for a second in the man who” was entitled to receive it and the whole transaction is simply an attempt to attribute the fruits “to a different tree from that on which they grew.” Lucas v. Earl, 281 U. S. 111 .
In addition, I am of the opinion that the principle recognized and applied by the court and the Board in connection with the sale of property by the S. A. MacQueen Co. is clearly applicable. See S. A. MacQueen Co., 26 B. T. A. 1337; affd., 67 Fed. (2d) 857. In that case the corporate owner of real estate had entered into an agreement to convey it to a purchaser for $150,000. The three stockholders of the corporation authorized the conveyance of the property to its president for a lesser sum and he executed a declaration of trust declaring his intention to distribute the profits to the stockholders in proportion to their holdings. The trust was carried out and the profit, being the difference between the sum paid by the president to the corporation and the sum received by him from the sale of the property, was distributed to the stockholders. It was held that substance and not form should control; that although in form there were two sales of the corporate real estate, in substance the transaction was a sale by the corporation through the agency of its president; that the obvious purpose of the procedure was to avoid the payment of tax and, under the facts, that the profit should be taxed to the petitioner.
Under the facts before us, I think finding should be made that although in form there was a sale by the corporation to Lay, in substance the transaction was a sale by the petitioner, through the agency • of the corporation, of securities owned by him, contemporaneous with the settlement by him of his tort action against Lay. “A given result at the end of a straight path is not made a different result because reached by following a devious path.” Minnesota Tea Co. v. Helver ing, 302 U. S. 609 . Cf. Shoenberg v. Commissioner, 77 Fed. (2d) 446; certiorari denied, 296 U. S. 586 .
Arundell, Smith, Turner, Arnold, and Harkon agree with this dissent.