action to its substance." And further, "It seems incredible that Congress intended to tax as income a business transaction which admittedly produced no gain, no profit, and hence no income. If any income had accrued to the plaintiff by reason of the sale and exchange made it would doubtless be taxable."
There were perfectly good reasons for the reorganization and the good faith of the parties is not questioned. I assume that the statute was not intended to put an embargo upon legitimate reorganizations when deemed essential for carrying on important enterprises. Eisner v. Macomber was rightly decided and the principle which I think it announced seems in conflict with the decision just announced.
Mr. Justice Van Devanter concurs in this dissent.
ROCKEFELLER v. UNITED STATES.
NEW YORK TRUST COMPANY ET AL., EXECUTORS OF HARKNESS, v. EDWARDS, COLLECTOR OF UNITED STATES INTERNAL REVENUE FOR THE SECOND DISTRICT OF NEW YORK.
ERROR TO THE DISTRICT COURT OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK.
- Where the stockholders of a corporation, which is engaged in producing, buying and selling crude petroleum and in transporting it through its pipe lines, form a new corporation to which the pipe line property is conveyed by the old corporation and in consideration therefor and as part of the transaction all the capital stock of the new corporation, of par value equal to the valuation of the property so conveyed, is distributed among such stockholders pro rata, either by being issued to them directly, or by being first
