that they (i.e., the offices and directors of plaintiff) were dealing in these shares as they would in those of another corporation.
In the instant action plaintiff did not acquire these shares voluntarily either for advantageous investment or any speculative purpose as would be the case in the acquisition of shares of another corporation. Rather, they were forced to acquire them by Federal statutory provisions. Moreover, the shares were reissued almost immediately after acquisition upon the decision by corporate officials that it would be better not to speculate in these shares.
Such action indicates to us that the shares were not acquired nor were they held as an investment with the thought of selling at some opportune future date so that a gain might be realized.
Plaintiff contends, however, that the holding in United States v. Anderson, Clayton and Company, supra, is a very narrow one and the instant case does not fall within its purview. It is argued that the Anderson, Clayton & Co. case applies only to transactions 'limited to a wholly intracorporate purpose'. For authority plaintiff draws our attention toRev.Rul. 60-328, I.R.B.1960-42, p. 14, the official headnote of which reads:
'Where the acquisition and disposition of treasury stock by a corporation is limited to a wholly intracorporate purpose with no element of speculation or gain envisioned, it does not constitute dealing by the corporation in its own shares as it might deal in the shares of another corporation within the meaning of Section 39.22(a)-15 of Regulation 118.'
Plaintiff submits that since the acquisition and resale of the shares was not wholly for an intracorporate purpose, the loss should be recognized by the Government as deductible. Plaintiff asserts that the disposition of its stock was for a wholly extracorporate purpose, i.e., to realize as much as possible from the sale, and the decision to sell was primarily dictated by market conditions for plaintiff's stock.
The distinction between extracorporate and intracorporate purpose is not clear. However, it would be fair to say that a transaction of an extracorporate nature is one that cannot be directly traced to the internal affairs of the corporation. Rather, it is something that the corporation does that any individual might himself do to realize a material gain outside of his own business or profession. It is readily discernible here that plaintiff acquired these shares for a wholly intracorporate purpose, i.e., the merger. Perhaps if plaintiff had held these shares for a longer period of time with the thought of realizing a gain, rather than disposing of them almost immediately, a different result would be reached.
Further, we do not believe, as plaintiff contends, that Anderson, Clayton & Co. established such a narrow test as that suggested by the plaintiff, i.e., whether there is a taxable gain or loss depends on whether the transaction is limited to a wholly intracorporate purpose. We believe the test is a much broader one. That enunciated in Hercules Powder Co. v. United States, 180 F.Supp. 363 (1960), is more appropriate. In that case Judge Madden, at page 366, said:
'The problem in a particular case would seem to be, then, how much does the activity of the corporation look like the activity of an outside investor and speculator in its stock. A slight resemblance would seem to be insufficient to justify the distinction.'
We are convinced that the activity of plaintiff here certainly does not look like the activity of an outside investor or speculator in its stock and that the transactions do not constitute dealing by the corporation in its own shares as it might in the shares of another corporation within the meaning of the Regulation.
The motion of the plaintiff for summary judgment will be denied and that of the defendant granted.