The opinion
L. HAND, Circuit Judge
(dissenting).
Sections 115(c) and 115(i) withdraw the partial exemption from taxation granted by § 117(a), when a corporation “completely liquidates” either the whole or a part of its shares. Apparently Congress feared that otherwise the shareholders might escape full taxation upon accumulated earnings. At any rate it makes no difference here what the purpose was, because, whatever it was, it as well includes a case where the company buys its own shares which thereby become “treasury shares,” as one where the authorized capitalization is also reduced. So far as the shareholder is concerned, the first is as much a “liquidation” of his shares as the second; the only difference concerns the corporation alone, i. e., that “treasury shares” are treated, somewhat metaphysically, as though they still existed, and that to reissue them there is no need of restoring the authorized capital to what it was originally. Borg v. International Silver Company, 2 Cir., 11 F. 2d 147, 150 . That difference ought not to be decisive unless the words used compel us to treat it so — particularly since we are dealing with an exemption. Therefore, I should regard it as irrelevant here if Lind-berg and Alpers had actually “intended” a sale of the shares to Lindberg, but it does not seem to me that they did; they intended a sale to the corporation, and merely erroneously supposed that its legal effects were the same as a sale to Lind-berg, because Lindberg was the only remaining shareholder.
As to the words used, they are in the alternative — “cancellation or redemption” —and we must assume that there is a difference in their meaning. I should agree that there would be strong, and perhaps conclusive, reason for saying that “treasury shares” were not “cancelled”; and I should also agree that “redeem” ordinarily also involves a cancellation; as for example when a company redeems a preferred issue. But it is a somewhat less formal word than “cancelled,” and besides, as I have said, it ought to cover situations in which the shares are not “cancelled.” For these reasons it appears to me that we do not do it too much violence to make it cover “treasury shares,” which are — at least colloquially speaking — -certainly “redeemed”; especially since, if we do not so construe it, the apparent purpose of the statute is not fully realized. The Board has decided otherwise on several occasions, and the reasoning in Amelia H. Cohen Trust v. Commissioner, 3 Cir., 121 F.2d 689, 691 , assumed that the distinction was crucial, though the decision did not require such a holding; but I cannot agree, and therefore I think the order should be affirmed.