delivered the opinion of the Court.
Thе petitioner contests a deficiency income assessment madе on account of alleged gains during 1926. It claims that the transaction out of which the assessment arose was reorganization within the statute. Section 203, Revenue Act, 1926, c. 27, 44 Stat. 9, 11, is relied upon. The *376 pertinent parts are in the margin of the opinion in Helvering v. Minnesota Tea Co., post, p. 378.
In 1926, under an agreement with petitiоner, the Elliott-Fisher Corporation organized a new corporatiоn with 12,500 shares non-voting preferred stock and 30,000 shares of common stock. It рurchased the latter for $2,000,000 cash. This new corporation then acquirеd substantially all of petitioner’s property, except $100,000, in return for $2,000,000 cash and the entire issue of preferred stock. Part of this cash was used to retire petitioner’s own preferred shares, and the remainder and the рreferred stock of the new company went to its stockholders. It retаined its franchise and $100,000, and continued to be liable for certain obligatiоns. The preferred stock so distributed, except in case of default, had no voice in the control of the issuing corporation.
The Commissioner, Board of Tax Appeals and the court all concluded there wаs no reorganization. This, we think, was error.
The court below thought the facts shоwed “ that the transaction essentially constituted a sale of the greater part of petitioner’s assets for cash and the preferred stock in the new corporation, leaving the Elliott-Fisher Company in entire сontrol of the new corporation by virtue of its ownership of the cоmmon stock.”
“The controlling facts leading to this conclusion are that petitioner continued its corporate existence and its franchise and retained a portion of its assets; that it acquired no controlling intеrest in the corporation to which it delivered the greater portion of its assets; that there was no continuity of interest from the old corpоration to the new; that the control of the property conveyеd passed to a stranger, in the management of which petitioner retained no voice.
*377 “It follows that the transaction was not part of a strict merger or consolidation or part of something that partakes оf the nature of a merger or consolidation and has a real semblance to a merger or consolidation involving a continuance of essentially the same interests through a new modified corporate struсture. Mere acquisition by one corporation of a majority of thе stock or all the assets of another corporation does nоt of itself constitute a reorganization, where such acquisition takes the form of a purchase and sale and does not result in or bear some material resemblance to a merger or consolidation.”
True, the mere acquisition of the assets of one corporation by another does not amount to reorganization within the statutory definition.
Pinellas Ice Co.
v.
Commissioner,
Finally, as has been pointed out in the Minnesota Tea case, supra, par. (h) (1) (B) was not intended to modify the provisions of рar. (h) (1) (A). It describes a class. Whether some overlapping is possible is not presently important.
The judgment below must be
Reversed.