James Clark McReynolds

“ The Commissioner here maintains that the definition of reorganization found in section 203 (h) (1) (A) , Revenue Act 1924, 43 Stat. 256 (26 U.S.C.A. § 112 note) , should be limited to transactions which partake of the nature of mergers or consolidations, and that here the Vanadium merely made an investment in Ferro Alloys stock and obtained only the rights of a stockholder therein. It is also urged that an exchange of stocks for bonds results in a substantial change of position and that such bonds are 'other property' within the meaning of the statute, and, as such, subject to tax. ”

“ In December, 1924, respondents owned all the stock of Ferro Alloys Corporation. They exchanged this with the Vanadium Corporation for stock of the latter valued at $30 per share and for $1,161,184.50 mortgage bonds of Ferro Alloys guaranteed by Vanadium. Ferro Alloys continued to conduct business until its dissolution in 1928. Article 1574 of Treasury Regulations 65 provided that under the Act of 1924 no gain or loss shall be recognized to the shareholders from the exchange of stock made in connection with the reorganization, if two or more corporations reorganize ”

“ The applicable statutory provision is section 203, Revenue Act 1924, the pertinent parts of which are in the margin of the opinion in Helvering v. Minnesota Tea Co., 296 U.S. 378, 56 S.Ct. 269, 80 L.Ed. 284. ”