We here deal with problems arising under the Korean Excess Profits Tax Statute, as to which others have said, and we have echoed, that this statute '* * * probably represented the most intricate and baffling enactment ever to receive Congressional approval.' Burford-Toothaker Tractor Co. v. United States, 5 Cir., 1959, 262 F.2d 891.

As we struggle through this intricate web of definitions, exclusions, provisions, exceptions, cross references, limitations, provisos and a general but unavoidable obscurity,1 it is our conclusion that 430(e)(2)(B)(i), expressly incorporating 445(g)(2)(B), impliedly carries with it 445(g)(3), though not necessarily that portion of 461 impliedly incorporated by the reference to 462(g) in 445(g)(1), so that the attribution rules of 503(a)(1)(2) (5) makes ownership of the corporate stock by the minor beneficiaries of a trust the ownership of the father, and thus pushes the stock ownership beyond the critical 50 per cent to make thereby a new corporation an old one.

Perhaps this needs some elaboration.

In view of this conclusion we may briefly state the critical facts. Taxpayer is Tuboscope Company, a Delaware corporation incorporated on July 25, 1952. The tax years in question are the fiscal years ending April 30, 1953 and April 30, 1954. On the basis of the jury's special verdict, and judgment entered in Taxpayer's favor, Taxpayer has thus far successfully maintained the contention that it was subject to the 5 per cent rate imposed on new corporations under 430.

This whole controversy arises because while Tuboscope admittedly was an actual new corporation, the Government contends that by the provisions of 430(e)(2)(B) (i) what is new in fact is old in tax law since Tuboscope Company acquired substantially all of its assets in August 1952 from Tubular Service and Engineering Company, a Taxas corporation, 90 per cent of whose stock was owned by W. H. Hopkins (and wife in community). This is so because by the operation of 430(e)(2)(B)(i)2 the new corporation shall be deemed to have the same age as that of any other corporation which 'was a party with the taxpayer to a transaction described in section 445(g)(2)(A), (B), or (C).'3

Initially the question is whether Hopkins, admittedly the owner of 90 per cent of the stock of the transferor corporation, Tubular Service, was the owner, directly or indirectly, of more than 50 per cent of the stock of Tuboscope at the time of the acquisition. It is uncontradicted that he was the apparent technical owner of 60 per cent of Tuboscope stock on the date of transfer of assets. The trial below and much of the argument here has centered around the question whether this ownership was in actuality for 60 per cent rather than 15 per cent individually and the remaining 45 per cent for his three minor children in accordance with a prearranged plan. Under this plan the new corporation, Tuboscope, was to be created so that it would be owned 40 per cent by certain key employees of Tubular Service, 15 per cent by Hopkins, and 45 per cent by the three minor children through a trust then being actively formulated under guidance of a Bank, later named Trustee. For our purposes, we may assume that the case permitted the jury verdict and that it and the evidence was sufficient to warrant the judgment so far as non-beneficial ownership of the 45 per cent of the stock by Hopkins at any time. We may do this because, in our view, whether Hopkins owned 60 per cent, as he nominally did for two months' time, or only 15 per cent, the operation of 5034 attributed the 45 per cent of the stock, held in the trust for the three minor children as beneficiaries, to him as their father.

In defense of its judgment, Taxpayer urges that 430(e)(2)(B)(i), note 1, supra, obviously refers to an 'acquiring corporation' and Tuboscope does not meet any of the definitions of that technical term of art set forth in 461. If Taxpayer is correct on this, we do not get to the question of attribution, and what was a new corporation in fact would, it is conceded, be a new corporation for this tax law. But even if wrong on this, Taxpayer further contends that since 430(e)(2)(B)(i) refers solely to 445(g)(2)(A), (B) or (C), set out, note 3, supra, the failure to incorporate 445(g)(3) must be deemed to have been deliberate and purposeful. Since the portion incorporated expressly by reference (445(g)(2)) makes no mention of the 503 attribution rules, and these are mentioned only in subparagraph (3) of 445(g), ownership of the 50 per cent would be determined on ordinary rules of property since no artificial tax law attribution is prescribed. At this point it would be necessary to determine the validity and sufficiency of the jury verdict and judgment on the nature of Hopkins' ownership of the stock held for the children as of the date of transfer. But as a further and last position in this system of fluid defenses, Taxpayer asserts that even if the attribution rules of 503, note 4, supra, are incorporated through the operation of 445(g)(3), the interests of these minor beneficiaries of a skillfully drawn Texas spendthrift trust is so remote that they would not satisfy the statutory status of 'beneficiaries' under 503(a)(1).

We think Taxpayer's first argument is unsound. Section 430(e)(2)(B)(i) does not define the longevity of the new corporation in terms of one which has been an 'acquiring' or an 'acquired' corporation under 461. It speaks in terms not of a peculiar status created by a technical tax term of art. Rather it speaks in terms of conduct. The conduct, to be sure, is not spelled out in 430(e)(2) (B)(i). Like most complex legislation repetition is avoided and accuracy achieved, by the shorthand method of incorporation by reference. The conduct, then, is that spelled out in 445(g)(2)(B), note 3, supra.

If the owner of more than 50 per cent of the stock of the transferor corporation is, at the time of the transfer of assets, the owner of more than 50 per cent of the stock of the transferee corporation, then 445(g)(2)(B) is operative even though the parties to that transaction would not meet the definition of an acquiring corporation under 461.5

That being so, the only question is whether Hopkins owned more than 50 per cent of the stock of Tuboscope on the date of transfer. This is the only matter open under 445(g)(2)(B) as it is undisputed that he owned 90 per cent of The stock in the transferor (Tubular Service) and that Tuboscope obtained substantially all of its assets from Tubular Service.

Nothing is gained by assaying the transaction to determine whether the multiple-step-transaction rule, Kanawha Gas & Utilities Co. v. Commissioner, 5 Cir., 1954, 214 F.2d 685; Georgia-Pacific Corp. v. United States, 5 Cir., 1959, 264 F.2d 161; 3 Mertens, Law of Federal Income Taxation 20.161, should apply to make the beneficial ownership of 45 per cent of the stock that of the monors by relation back to the date of incorporation if, after so doing, 503 attribution rules make the children's ownership that of their father. Consequently, the decisive question then becomes whether the attribution rules do apply and if so, to what extent.

Taspayer's argument is initially beguiling. For, in the atmosphere of the general amorality of tax legislation, all are free to assume that omissions as well as inclusions by Congress are purposeful and articulate. There is little place for judicial construction of the usual type where technical omissions and inaccuracies are construed in a way to effectuate the general policy of the act. Consequently, it is not for us to supply 445(g)(3), note 3, supra, if express incorporation was necessary merely because Congress made an obvious error of leaving it out. But it is quite a different matter if the intention appears plain that Congress effectually incorporated 445(g)(3) through the reference to 445(g)(2).

We think this is what was done. By the peculiar construction of 445(g)(2) more was incorporated than that set forth in (2)(A), (B) or (C). It states '(2) the transactions to which paragraph (1) applies are as follows: * * *.' We need not determine to what extent there is an incorporation of 445(g)(1) into (2), see note 5, supra. But it is plain from the wording of subparagraph (2) that subparagraph (1) is in some respects included within the incorporation of (2). That means that two such paragraphs, (1) and (2), are thus included, leaving only the one in question, 445(g)(3). But by the peculiar structure of (3) it is evident that Congress meant (3) to relate automatically either to (1) or (2) or both. If this is not so, then it has no meaning. All subparagraph (3) states is that '(3) for the purposes of this subsection, the provisions of section 503 shall be applicable in the determination of ownership of stock.' If subparagraph (3) is to stand on its own unrelated to subparagraph (1) or (2) or both, then it serves no purpose whatsoever because subparagraph (3) does not prescribe any circumstance or situation to which 503 would be applicable. The phrase 'for the purposes of this subsection' as found in subparagraph (3) obviously must mean then that the whole of subsection (g) is referred to. General Retail Corp. v. Commissioner, 1957, 29 T.C. 632, affirmed 6 Cir., 1959, 262 F.2d 591.

The result is that we hold that the attribution rules of 503 applied to the transaction described in 445(g)(2)(B) and that Hopkins' stock ownership must be judged in the light of the statutory attribution.

As 503(a)(2), note 4, supra, makes the ownership by children that of the parent, the question then turns of whether the minor children owned this stock. The act is specific for 503(a)(1) states that 'stock owned, directly or indirectly, by or for a * * * trust shall be considered as being owned proportionately by its shareholders, partners, or beneficiaries.'

The Taxpayer argues here that Hopkins' three minor children were not 'beneficiaries' within the meaning of this staute. Taxpayer argues that the term relates only to those who have a direct present interest in the shares and income in the taxable year concerned and not those whose interest, whether vested or contingent, will or may become effective at a later time. See Steuben Securities Corp. v. Commissioner, 1943, 1 T.C. 395. The Taxpayer emphasizes that the trusts here are irrevocable spendthrift trusts. The trustee bank has the power to sell the stock. No child is entitled to any income from the trusts until age 21 unless the trustee, in its sole discretion, elects to make a distribution. No trust is to be terminated and distributed until the beneficiary is 25 years old and each of these children was under the age of 10 years at the time of the trust creation.

But 503 does not confine itself to beneficiaries having an immediate and enforceable right. What the status of these three children was, what the intention of the trustors with respect to the trust was is reflected by the trust instrument itself. Under the heading of 'Beneficiaries' Article 1 provides 'all of the present beneficiaries of these trusts are the children of trustors * * *.' And the trustee in traditional language was charged with the duty to 'hold, manage, control and dispose of the property of the trust estate solely and equally in separate trusts for the use and benefit of the beneficiaries designated * * *.' Nearly every trust for minor children, whether or not written with the emphatic prohibitions of a spendthrift trust, invariably commits the management and distribution to the sole discretion of the trustee with distribution of corpus and income as a matter of right deferred to some specified age after majority. The argument advanced here would exclude all such trusts from the operation of 503. And the purpose so carefully spelled out in 503(a)(2) concerning family ownership 'directly or indirectly' would be bypassed through the simple expedient of an inter vivos irrevocable trust. The children were beneficiaries. 503 makes the beneficiary of a trust the owner. The same section makes ownership of the child that of the parent. When that is done, Hopkins had a 60 per cent interest regardless of the time the children's interests became effective or the time of the creation and effectiveness of the trust in their behalf.

Since the tax falls and the adjustments and allowances arise from the terms of the tax statute itself, we cannot, and ought not, be concerned with any supposed intrinsic equities. Technical as are these interwoven sections of the Korean Excess Profits Tax, we do not regard that the inexorable application of these statutes interpreted as we have results in any unexpected or unintended consequence. It if was a new corporation, it was to have a favorable excess profits tax rate. If it was but a continuation of a long existing organization and business, it was not to have this benefit if the creation of the new was through the transfer of substantial properties into a new shell having more than 50 per cent of the same ownership when tested in the light of the economic unity of the family. Tubular Service was a going concern of high earning capacity. All of its assets were transferred to Tuboscope to engage in the same character of work and for which it made fast and substantial profits. The Hopkins family remained the substantial majority stockholders directly interested in its prosperity and growth.

The result is that giving full and absolute credit to the jury finding concerning the purpose and plan of the ownership of 45 per cent of the stock by the minors as beneficiaries of the trust to be established, and crediting all facts in support of the judgment, the Government as a matter of law was entitled to judgment in its favor. No further action being required, the judgment is reversed and rendered.

Reversed and rendered.

CAMERON, Circuit Judge, dissenting.

PER CURIAM.

As neither of the Judges who concurred in the opinion is of the view that the petition for rehearing should be granted, it is Ordered that the same be and is hereby Denied; but this order is to make clear that the reversal of the District Court's judgment relates solely to that portion appealed from and before this Court for review.

Denied.