William O. Douglas

“ Hence the fact that it cannot meet the statutory standards of a 'reorganization' does not necessarily mean that it cannot qualify as an 'exchange', any more than the failure to satisfy one clause of the 'reorganization' provisions means that none can be satisfied.
But the argument seems to be that even though there was an 'exchange' which met the requirements of § 112 (b) (5) , there was nevertheless a gain which is taxable. That gain, it is suggested, arose from the acquisition by the taxpayers of their equitable interest in the properties in substitution for their old bonds. ”

“ While the 'reorganization' provisions are restricted to intercorporate transactions, § 112 (b) (5) is not so confined, since the phrase 'one or more persons' includes 'individuals, trusts or estates, partnerships and corporations'. Treasury Reg. 94, Art. 112 (b) (5) -1. But there is no indication that the 'reorganization' provisions were designed as the exclusive method of deferring recognition of gain or loss in all cases of corporate readjustments or reorganizations. ”

“ Sec. 112 (b) (5) provides: 'No gain or loss shall be recognized if property is transferred to a corporation by one or more persons solely in exchange for stock or securities in such corporation, and immediately after the exchange such person or persons are in control of the corporation ”