The opinion
Opper,
dissenting: It seems to me the Board’s opinion results from an inadmissible extension of the scope of section 112. That section begins:
(a) Geneeal Rule. — Upon the sale or exchange of property the entire amount of the gain or loss, * * * shall be recognized, except * * *. •
There follow successive provisions, each beginning “No gain or loss shall be recognized”, which define the breadth of the exceptions. One such provision, section 112 (b) (3), is presumably that on which the majority opinion rests.
It seems inescapable, however, that section 112 deals exclusively with sales or exchanges, both as to its statement of the general rule and with respect to the negations thereof contained in the exceptions. If petitioner were relying upon a sale or exchange as the justification for her claim, resort to the exceptions would be both necessary and *669 appropriate. But petitioner’s position here is affected neither one way nor the other by the sale or exchange concept, because her assertion is not that a debt owed to her has been sold, but that it became partially uncollectible in the tax year. Her situation is no different than if the securities had remained at all times in her safe deposit box without change. If, under these circumstances, she could demonstrate that the debts they represent have become partially worthless, the deduction is proper to the extent of the charge-off. Revenue Act of 1934, sec. 23 (k). It is not necessary to resort to a sale or exchange to obtain this benefit. Ross v. Commissioner, 72 Fed. (2d) 122; Commonwealth Commercial State Bank v. Lucas, 41 Fed. (2d) 111. The retort that there was no sale or exchange, or that if there was one she is not entitled to rely on it under section 112 (b) (3) , thus falls wide of the mark. If petitioner would be in no better position because of section 112 (a) she can hardly be in a worse one because of 112 (b) (3).
It may be urged that there was an exchange here, later in the year, even though it lacks tax significance under petitioner’s claim; and hence that section 112 operates. But what would be the result if she had refrained from consummating the exchange of the physical securities? Would it then be said that there was an exchange, notwithstanding there was actually none; or that the mere postponement to the following year of the physical exchange would be sufficient to give the taxpayer the benefit of the deduction? See Henry R. Huntting, 32 B. T. A. 495. If the latter, the only effect of the Board’s decision is to force creditors to withhold their cooperation in a reorganization, so as to secure the benefit of the tax deduction. That Congress intended a result so contrary to public policy is difficult to believe.
Aetjndell, MttRdocK, Meleott, and HakRon agree with this dissent.