The opinion
On Rehearing.
PARKER, Circuit Judge.
The rehearing granted in this case and careful consideration of the briefs filed and arguments made thereop have served only to strengthen the majority of the court in the opinion heretofore expressed; and we see no basis whatever for the contention that our former opinion was based on a ground not considered by the Board of Tax Appeals. The question before the Board was whether the transfer to Mill Creek was of all the assets of the old company; and that question must necessarily have been answered there as it must be here by a consideration of the real nature of the incorporation of the new company and the transfer made to it when viewed in relation to the plan for the transfer of assets to Mill Creek.
It was not intended by what was said in the original opinion, to the effect that the transfer of assets from the old company to the new did not constitute a bona fide reorganization, to suggest that the transfer was a taxable transaction, but to point out that the creation of the new company and the transfer of the assets to it was a mere shifting of charters having no purpose other than to give to the later transfer to Mill Creek the appearance of a transfer of all, the corporate assets so as to bring that transfer within the non-recognition provisions of section 203(h) (1) (A), Revenue Act 1926, 44 Stat. 12 . The transfer to the new company was non-taxable whether it was a real reorganization or a mere shifting of charters, which would of course come within the terms of the reorganization statute. It is only in relation to the subsequent transfer to Mill Creek that it becomes important to determine whether the organization of the new company and its taking over of the assets was a genuine reorganization. If' there was no real reorganization and transfer, but a mere shifting of charters, the subsequent transfer to Mill Creek was not within the terms of the nonrecognition provision of the statute.
We are confirmed in our original opinion by the recent decision of the Supreme Court-in Minnesota Tea Co. v. Helvering, 58 S.Ct. 393, 395 , 82 L.Ed. —. In that case there was a reorganization in which stockholders paid the debts of a corporation from the cash distributed to them in the' course of the reorganization. The *738 question was whether the corporation was taxable on the amount of the debts thus paid on the theory that the cash used for that purpose was in reality received by the corporation, or whether it was nontaxable on the theory that the distribution to the stockholders was within the nonrecognition provisions of the statute. In holding the corporation taxable thereon the court said: “The conclusion is inescapable,' as the court below very clearly pointed out, that by this roundabout process petitioner received the same benefit 'as though it had retained that amount from distribution and applied it to the payment of such indebtedness.’ Payment of indebtedness, and not distribution of dividends, was, from the beginning, the aim of the understanding with the stockholders and was the end accomplished by carrying that understanding into effect. A given result at the end of a straight path is not made a different result because reached by following a devious path. The preliminary, distribution to the stockholders was a meaningless and unnecessary incident in the transmission of the fund to the creditors, all along intended to come to their hands, so transparently artificial that further discussion would be a needless waste of time.” (Italics ours.)
In the case at bar, the “aim” of the incorporation of the new cofhpany and the transfer made to it, was that the transfer to Mill Creek should appear to be a transfer of all of the assets of the company; and this was the end accomplished, and the only end accomplished so far as the record shows, by the incorporation and transfer. The incorporation of the new company and the transfer to it was a “meaningless and unnecessary incident.” It is true that the new company was incorporated under the laws of a different state from the old; but it does not appear that any corporate purpose was served by this change of jurisdictions and certainly the integrity of the existing business was not affected by the change. Cf. Braden Steel Corp. v. Commissioner, 10 Cir., 78 F.2d 808, 810 . It is said that the transfer to Mill Creek had a real corporate purpose. This is true, but it was taxable unless constituting a transfer of all of the assets of the corporation. The incorporation of and transfer to the new company, which had no proper corporate purpose, were resorted to in order to give the transfer to Mill Creek the appearance of being a transfer of all the assets of the transferor and hence not taxable. All that was done by the complicated corporate maneuvering employed was the transfer of a part of.the assets of the old company to Mill Creek in exchange for 1,000 shares of its stock, leaving the business of the old company in the hands of the old stockholders, with a new charter, but otherwise unaffected. This result is “not a different result because reached by following a devious path.”
And we think it clear that the incorporation of the new company and the transfer made to it were but parts of a single plan under which the transfer was made to Mill Creek and that they should be treated as parts of one transaction. When this is done, there is no room for the contention that all of the assets of the corporation were transferred to Mill Creek. Even though there was no unifying contract, the unity of the plan brings the case within the rule applied in Starr v. Commissioner, 4 Cir., 82 F.2d 964 .
For the reasons stated here and in our former opinion, the decision of the Board of Tax Appeals will be reversed.
Reversed.
HENRY H. WATKINS, District Judge, dissents.