The opinion
SEITZ, Circuit Judge
(dissenting).
The economic reality here is that in the summer of 1957 the investors acquired from Hambro the three outstanding shares of Imperial for $4,150. The investors also received Imperial’s note to Hambro on which $129,324.06 was due. At the time Imperial’s gross assets amounted to about $5,000. It had adopted a plan of dissolution in 1955 and sold its last car in 1956. It was closing its affairs when the acquisition in question took place. The Tax Court held that even if the note obligation retained its debt classification in the hands of Ham-bro, it became part of the capital of Imperial and no longer a bona fide indebtedness immediately upon its transfer to the investors. The Tax Court reasoned that, from the point of view of the investors, the transfer of the note simply removed a substantial outstanding claim against the business they were ac *1338 quiring and in no way altered their singleminded purpose of acquiring only the franchise. The note, reasoned the Tax Court, had no independent economic significance in the purchase transaction.
I agree with the result reached by the Tax Court. Imperial was defunct and had no real capital; its only value to its owner, Hambro, was its franchise. Hambro also held a totally worthless note for $129,324.06 owed by the defunct Imperial. This note was transferred to the investors in the course of the purchase transaction. Regardless of the form of the transaction, I think the Tax Court was justified in concluding on this record that the transferees did not “invest” in the worthless and insubstantial “debt” involved here.
I realize that the Tax Court relied on Edwards v. Commissioner, 50 T.C. 220 (1969) which was later reversed by the Tenth Circuit, 415 F.2d 578 (1969). I think the Government’s case here is much stronger than that in the Edwards case. If Edwards , is thought indistinguishable, then I disagree with its conclusion. I would affirm.