- 37 -
in Bates Motor Transp. Lines, Inc. v. Commissioner, 17 T.C. 151,
160 (1951), affd. 200 F.2d 20 (7th Cir. 1952):
The fact that the arrangement provided for Standard to
issue such shares directly to the stockholders of
Bates, who were to surrender to Standard the shares of
stock they held in Bates, was no different in effect
than if Standard had issued the shares directly to
Bates, who, in turn, had called in its outstanding
stock and in liquidation distributed to its stock-
holders the shares of stock in Standard. The result in
each instance would be for the stockholders of Bates to
receive the stock in Standard and leave Bates insolvent
and without funds to pay its debts. The short cut em-
ployed by which Standard issued its stock directly to
the stockholders of Bates in nowise relieved those
stockholders of their liability as transferees of the
assets of Bates.
Petitioners question the foregoing reliance by the Court of
Appeals for the Seventh Circuit on substance, and not form, in
Bates Motor Transp. Lines, Inc. v. Commissioner, supra. They
point out that the Court of Appeals for the Second Circuit in
Vendig v. Commissioner, supra at 95-96, stated that, to the ex-
tent that Bates Motor Transp. Lines, Inc. v. Commissioner, supra,
is not distinguishable on its facts from Vendig, the Bates case
was wrongly decided. We have already determined that we shall
not rely on the Vendig case because it is distinguishable from
the instant case.
Petitioners also attempt to distinguish Bates Motor Transp.
Lines, Inc. v. Commissioner, supra, from the instant case. They
point out that the transferee in Bates Motor Transp. Lines, Inc.
v. Commissioner, supra, owned all the stock of Standard and 64
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