49 T.C. 419">*419 Respondent determined a deficiency of $ 3,499.44 in the income taxes of petitioners for the year 1962.

Although petitioners placed the entire deficiency in dispute, they failed to allege error as to certain minor adjustments. Consequently, such matters are not in controversy. The only issue for decision is whether a distribution of $ 19,125.30 to petitioner, Victor S. Gittens, on March 31, 1962, of his entire interest in the Philco Corp. employees profit-sharing plan was made on account of his separation from the service of his employer so as to qualify as a long-term1968 U.S. Tax Ct. LEXIS 185">*188 capital gain under the provisions of section 402(a)(2), I.R.C. 1954. ¹

FINDINGS OF FACT

Most of the facts have been stipulated by the parties. The stipulation of facts and exhibits attached thereto are incorporated herein by this reference.

Victor S. Gittens and Bernice Gittens are husband and wife whose legal residence was Philadelphia, Pa., at the time they filed their petition in this proceeding. They filed their joint Federal income tax return for the calendar year 1962 with the district director of internal revenue at Philadelphia, Pa. Victor S. Gittens will be referred to herein as the petitioner.

On December 31, 1943, Philco Corp., a Pennsylvania corporation (herein called Philco-Penn), established a noncontributory profit-sharing plan (herein referred to as the plan) for the benefit of its salaried employees. The First Pennsylvania Banking & Trust Co. was named trustee of a fund established to implement the 1968 U.S. Tax Ct. LEXIS 185">*189 plan. The 49 T.C. 419">*420 trust satisfied the requirements of section 401(a) and was exempt from tax under section 501(a).

The board of directors of Philco-Penn was given broad discretion, subject only to an upper limit, in determining its yearly contribution to the trust. No contribution had to be made if deemed to be contrary to the best interests of Philco-Penn. Benefits under the plan were made payable generally to "any member who for any cause separates from the service." Philco-Penn was given the right to amend or discontinue the plan at any time so long as the benefits inured exclusively to the employees. As a salaried employee of Philco-Penn, petitioner participated in the plan from its inception.

On September 13, 1961, Philco-Penn entered into an "Agreement and Plan of Reorganization" with the Ford Motor Co. (herein called Ford) under which Ford agreed to purchase all the assets and assume all the liabilities of Philco-Penn in exchange for shares of Ford common stock. In addition, Ford agreed to "take appropriate action and to enter into appropriate agreements with respect to adoption of, amendment of, or substitution for [all welfare or benefit plans and arrangements of Philco-Penn]." 1968 U.S. Tax Ct. LEXIS 185">*190 The transaction was closed on December 11, 1961, and Ford formed a new wholly owned Delaware corporation, also named Philco Corp. (herein called Philco-Del), to take title to the assets and to continue the business of Philco-Penn. Following the sale of assets, Philco-Penn was liquidated by the distribution of Ford common stock to the Philco-Penn shareholders.

Philco-Del announced the impending reorganization to its employees on December 7, 1961, in a letter which provided inter alia:

Philco-Delaware has no present plan to change Philco-Pennsylvania's personnel policies, procedures and employment conditions, or current wage and salary structure, retirement and pension plans, or group insurance plans, but reserves all rights to change or discontinue them. For these purposes, service or employment with Philco-Pennsylvania will be considered equivalent to service or employment with Philco-Delaware, and the transition from employment by Philco-Pennsylvania to employment by Philco-Delaware will not interrupt the continuity of your employment or service.

It is planned that commencing with the opening of business on December 11, 1961, which is the time presently scheduled for Philco-Delaware1968 U.S. Tax Ct. LEXIS 185">*191 to take over the operations, your employment at will by Philco-Delaware will commence.

Your continuing to perform your assigned duties with Philco-Delaware will constitute your acceptance of and agreement to these terms.

On December 8, 1961, the board of directors of Philco-Penn adopted in accordance with the terms of the plan the following amendments which are relevant to this case:

"Philco Corporation" shall mean Philco Corporation, a Pennsylvania corporation, as of any time prior to the closing under the Agreement and Plan of Reorganization dated September 13, 1961, as amended, between it and Ford Motor Company, and shall mean Philco Corporation a Delaware corporation, as of any time thereafter.

* * * *

49 T.C. 419">*421 Each member shall be entitled to elect to have distributed to him as of March 31, 1962, the benefit to which he would have been entitled under the Plan in the event of his separation from the service on that date and any distribution of benefits with respect to a member who shall not so elect will be deferred until his death or other separation from service. Each such election shall be made in writing, and shall be irrevocably made not later than January 31, 1962, in1968 U.S. Tax Ct. LEXIS 185">*192 accordance with such reasonable rules as the Committee appointed to administer the Plan shall prescribe.

* * * *

The adoption of the Plan by Philco Corporation, a Delaware corporation, effective upon the closing under the Agreement and Plan of Reorganization dated September 13, 1961, as amended, between Philco Corporation, a Pennsylvania corporation, and Ford Motor Company, shall constitute a continuation of the Plan without any interruption whatsoever in its existence and operation. Any person who was employed by Philco Corporation, a Pennsylvania corporation, immediately prior to such closing and who becomes employed by Philco Corporation, a Delaware corporation, promptly following such closing shall not be deemed to have separated from service for purposes of the Plan.

An agreement between Philco-Penn, Philco-Del, and the First Pennsylvania Banking & Trust Co. on December 9, 1961, provided that Philco-Del would succeed, by reason of its adoption of the plan, to all the rights and liabilities of Philco-Penn under the trust agreement implementing the plan, effective upon the closing under the reorganization agreement.

Participants of the plan received notice on January 5, 1962, 1968 U.S. Tax Ct. LEXIS 185">*193 of the amendments and of their right to elect to have their benefits distributed to them as of March 31, 1962. The letter of notification stated, in part, as follows:

The transfer of service from Philco-Corporation (Pennsylvania) to the present Philco Corporation (Delaware) in connection with the recent acquisition of the business and assets of Philco Corporation (Pennsylvania) does not constitute a separation from service for purposes of the Plan.

* * * *

It is planned to present a proposal to the Board of Directors of the Corporation to discontinue contributions under the Profit Sharing Plan. As you know, the last contribution to the Plan was made for the year 1959. No contribution was made for 1960, and in view of the profit performance of the Corporation during 1961, no contribution can be made for that year.

* * * *

Under present income tax laws the distribution would be taxed as ordinary income, and would not be entitled to long term capital gain treatment.

Petitioner was an engineer specialist in Philco-Penn's Engineering Department prior to the acquisition by Ford. He continued in the same capacity in Philco-Del's Engineering Department after December 11, 1961. He performed1968 U.S. Tax Ct. LEXIS 185">*194 the same functions with both companies under the same immediate superiors. Petitioner executed the election form and on or about March 31, 1962, received from the trust a lump-sum distribution of $ 19,125.30 which represented the total amount payable 49 T.C. 419">*422 to him under the plan and which consisted of $ 7,390.92 in cash and Ford stock with a fair market value of $ 11,734.38.

As of December 11, 1961, there were 6,689 participants in the plan, 3,553 of whom executed the election to withdraw. All others remained in the plan which continued in existence, administered by a new trustee, a bank in Detroit. Philco-Del made no contributions to the plan, and in 1963 Ford established a stock-purchase plan for Philco-Del employees, similar to ones established in other Ford-controlled installations. Petitioner retired from the employment of Philco-Del on June 30, 1965.

Petitioner's distribution from the profit-sharing plan was reported as long-term capital gain in the joint Federal income tax return filed by him and wife for the year 1962. Respondent determined that the distribution represented ordinary income.

OPINION

Petitioner received within 1 taxable year the total distribution payable1968 U.S. Tax Ct. LEXIS 185">*195 to him under an employees' trust which was exempt from tax under section 501(a). Consequently, we must decide whether the distribution was made "on account of the employee's * * * separation from the service," resulting in capital gains treatment under section 402(a)(2). ²

1968 U.S. Tax Ct. LEXIS 185">*196 Petitioner was a salaried employee of Philco-Penn from its inception and continued to be employed in the same capacity by Philco-Del until his retirement on June 30, 1965. He contends that when the corporate reorganization occurred the change in his employment from Philco-Penn to Philco-Del constituted a "separation from the service" of his employer, Philco-Penn, and claims that the lump-sum distribution he received from the trust was "on account of" that separation. Respondent joins issue on both points.

Passing for the moment the question whether the reorganization of Philco-Penn caused a "separation from the service," we think it is perfectly clear that the distribution received by petitioner was "on account of" the reorganization. The facts establish a causal relationship between the reorganization and the distribution. On December 8, 1961, incident to the "closing" process, the board of directors of Philco-Penn amended the plan to authorize an election by the participants to remain 49 T.C. 419">*423 in the plan or to withdraw from it and receive a lump-sum distribution. Since the board believed that the reorganization would not entail a "separation from the service" by its employees, 1968 U.S. Tax Ct. LEXIS 185">*197 within the terms of the plan, but that it was such occasion as to allow an election to withdraw, it considered the amendment necessary to authorize the extraordinary distribution.

Election and distribution to the withdrawing employees followed within 4 months of the closing date under the reorganization agreement. We do not read the phrase "on account of" to require strict coincidence in time of the date upon which the right to the distribution accrues and the date of "separation." Accordingly, we view the distribution as having been made incident to and "on account of" the reorganization. Cf. E. N. Funkhouser, 44 T.C. 178">44 T.C. 178, 44 T.C. 178">184 (1965), affd. 375 F.2d 1 (C.A. 4, 1967).

In reaching this conclusion, we disagree with petitioner's argument that there was no real assumption and continuance of the plan by Philco-Del. We attach little significance to the fact that Philco-Del did not contribute to the plan in 1961 and that in 1963 Ford established its standard stock-purchase plan for the Philco-Del employees. Under the terms of the plan, the Philco board of directors had the unfettered discretion to make any or no contribution 1968 U.S. Tax Ct. LEXIS 185">*198 to the trust according to the best interests of the corporation. No contribution was made in 1960, the year before the reorganization, because of low earnings, a condition which continued through 1961. There is no requirement under section 401(a) that the employer contribute every year, and the inference that there was no bona fide adoption of the plan by Philco-Del cannot be drawn because the suspension of contributions was motivated by "business necessity." Sec. 1.401-1(b)(2), Income Tax Regs. About half the participants remained in the plan after the distribution and continue to be subject to its provisions. Philco-Del's adoption of the plan was more than a mere "formality designed to give it a short breathing spell until it could consummate the mechanics of discontinuance." Jack E. Schlegel, 46 T.C. 706">46 T.C. 706, 46 T.C. 706">709 (1966).

This determination raises squarely the question as to whether the reorganization of the Philco Corp. resulted in an en masse "separation from the service" of its employees. It is well established that the transfer of a controlling interest in the stock of a corporation alone does not cause a "separation from the service." See United States v. Johnson, 331 F.2d 9431968 U.S. Tax Ct. LEXIS 185">*199 (C.A. 5, 1964); United States v. Martin, 337 F.2d 171 (C.A. 8, 1964); Harry K. Oliphint, 24 T.C. 744">24 T.C. 744 (1955), affirmed per curiam on another point 234 F.2d 699 (C.A. 5, 1956). On the other hand, two earlier decisions of this Court based upon section 165(b), I.R.C. 1939, held that when, pursuant to a corporate reorganization, all the assets and liabilities of one corporation are transferred to another and the transferor corporation is dissolved, the employees of the 49 T.C. 419">*424 transferor corporation are "separated from the service" of their employer as of the date of dissolution, even though there is no change in the management, policies, or personnel of the transferor corporation. Mary Miller, 22 T.C. 293">22 T.C. 293 (1954), affirmed per curiam 226 F.2d 618 (C.A. 6, 1955); Lester B. Martin, 26 T.C. 100">26 T.C. 100 (1956). The rationale of these cases has been tacitly accepted in some cases as applicable to section 402(a)(2), e.g., 46 T.C. 706">Jack E. Schlegel, supra;Rybacki v. Conley, 340 F.2d 9441968 U.S. Tax Ct. LEXIS 185">*200 (C.A. 2, 1965); Thomas E. Judkins, 31 T.C. 1022">31 T.C. 1022 (1959); but it has been seriously questioned by others, e.g., United States v. Johnson, supra;United States v. Martin, supra;44 T.C. 178">E. N. Funkhouser, supra.

The "separation from the service" criterion of section 402(a)(2) must be applied on a case-by-case basis. We conclude on the facts of this case that the reorganization of the Philco Corp. did not cause petitioner's "separation from the service." The enactment of section 402(e)³ of the 1954 Code and the legislative history relating thereto reflects the intent of Congress that, except in the year 1954, capital gains treatment should not be accorded to distributions spawned by "reorganizations which do not involve a substantial change in the make-up of employees." S. Rept. No. 1622, to accompany H.R. 8300 (Pub. L. 591), 83d Cong., 2d Sess., p. 54 (1954). Moreover, as Judge Wisdom said in the majority opinion of the Court of Appeals for the Fifth Circuit in United States v. Johnson, 331 F. 2d at 949:

On its face, Section 402(e)1968 U.S. Tax Ct. LEXIS 185">*201 seems to say that after 1954 distributions will not qualify for capital-gain treatment if they are made as a result of the termination of a plan incident to a corporate reorganization, even if the corporate employer is completely liquidated. Apparently, Congress was willing to approve Miller for one year, for the benefit of the limited number of persons who acted in reliance on that decision. In other words, after 1954 a separation from service would occur only on the employee's death, retirement, resignation, or discharge; not when he continues on the same job for a different employer as a result of a liquidation, merger or consolidation of his former employer.

1968 U.S. Tax Ct. LEXIS 185">*202 When viewed in this context, it is plain that "separation from the service" requires a change in the employment relationship in more than a formal or technical sense. The Court of Appeals in Johnson held that when one corporation purchases all the outstanding stock of a second corporation, then merges into the second corporation, there occurs a mere technical change in the employment relationship of the persons employed throughout by the surviving corporation. In the present case the first corporation (Ford) purchased all the assets and 49 T.C. 419">*425 liabilities of the second (Philco-Penn), then changed the second corporation's State of incorporation. In applying the provisions of section 402(a)(2) to these facts, we discern no meaningful distinction between the transfer of stock and the transfer of assets. We are left, then, with the question of whether, as to an employment relationship, a change in the employer's State of incorporation is one of form or substance.

In answering this question, we place great weight on the congressional intent to ignore reorganizations not involving a "substantial change in the make-up of employees." The employees of Philco-Penn became employees1968 U.S. Tax Ct. LEXIS 185">*203 of Philco-Del in the same capacities simply by reporting to work on December 11, 1961. No substantial change was made in the supervisory personnel after that date. Petitioner worked in the same capacity under the same superiors both before and after the reorganization. Apparently, the only personnel change involved the selection of a new president and a new production manager. The facts of this case do not establish a "substantial change in the make-up of employees" to render petitioner's change in employment more than one in form only. Consequently, we conclude that there was no "separation from the service" which entitles petitioner to have his distribution taxed as a long-term capital gain under section 402(a)(2). ⁴ Since the distribution did not occur in 1954, section 402(e) is inapplicable, and petitioner must report the entire amount received in 1962 as ordinary income.

1968 U.S. Tax Ct. LEXIS 185">*204 Since we have found that the instant distribution was made "on account of" the corporate reorganization, ⁵1968 U.S. Tax Ct. LEXIS 185">*205 we believe that the adoption of the plan by Philco-Del does not serve as a basis for distinguishing the rationale of the Mary Miller case. ⁶ Therefore, to the extent inconsistent with the result reached here, we consider the Miller case, as well as the Lester B. Martin case, to be abrogated by the provisions of 49 T.C. 419">*426 the Internal Revenue Code of 1954. See the thorough treatment of this point in United States v. Johnson, supra at 946-949.

Decision will be entered for the respondent.

Tannenwald, J., concurring: I think the majority has reached1968 U.S. Tax Ct. LEXIS 185">*206 the right result for the wrong reason.

Contributions to the plan were discretionary with the original employer, Philco-Penn. The agreement with Ford provided that Ford would be furnished with "assignments of all pension, retirement, profit-sharing, bonus, and other welfare or benefit plans" of Philco-Penn and "evidence of such other corporate action by [Philco-Penn] as may be needed to place Ford in the position [Philco-Penn] now occupies under such plans" and that "Ford agrees to take appropriate action and to enter into appropriate argeements with respect to adoption of, amendment of, or substitution for such plans." Moreover, the agreement between Philco-Penn, Philco-Del, and the trustee of the plan provided that Philco-Del "shall succeed to all the rights and liabilities of [Philco-Penn] under the Trust Agreement." Philco-Penn by appropriate corporate action amended the plan to implement the foregoing and specifically provided in such amendment that the term "Philco Corporation" as used in the trust agreement should include Philco-Del. All of the foregoing antedated the closing of the transfer of the business of Philco-Penn to Philco-Del on December 11, 1961.

It seems to me 1968 U.S. Tax Ct. LEXIS 185">*207 that, by virtue of that closing, Philco-Del adopted the plan. By the terms of the plan, contributions were permitted but not required, and there is nothing in the record before us to indicate that the decision of Philco-Del in this regard had to be made before the end of 1962. ¹ To be sure, Philco-Del in fact made no contributions to the plan but we have no way of determining on the record herein when the decision not to contribute was taken. For aught that appears, that decision may not have been made until well into 1962. ²

1968 U.S. Tax Ct. LEXIS 185">*208 Petitioner became an employee of Philco-Del at the time of the closing, to wit, December 11, 1961. He did not receive notice of his right to elect withdrawal of his share under the plan until January 1962 and did not exercise this right of election until later in that month. He was still an employee of Philco-Del at the time of actual distribution on March 31, 1962, and did not retire until June 30, 1965.

49 T.C. 419">*427 Under the foregoing circumstances, I think this case falls squarely within the ambit of Jack E. Schlegel, 46 T.C. 706">46 T.C. 706 (1966), and E. N. Funkhouser, 44 T.C. 178">44 T.C. 178 (1965), affd. 375 F.2d 1 (C.A. 4, 1967).

Even if petitioner's right to withdraw was fixed prior to the closing and therefore these two decisions are not controlling (see 46 T.C. 706">Jack E. Schlegel, supra at 709), the result herein should be the same. It cannot be gainsaid that petitioner separated from the service of Philco-Penn on December 11, 1961. But it does not follow that the distribution to him was "on account of" such separation. Petitioner had the option either to have his share distributed1968 U.S. Tax Ct. LEXIS 185">*209 to him or remain under the plan. It was his choice, not his "separation from the service," which was the reason for the distribution. E. N. Funkhouser, 44 T.C. 178">44 T.C. 184-185.

For the foregoing reasons, it is, in my opinion, unnecessary to face, as the majority does, the question whether there is a conflict between section 402(a)(2) and Mary Miller, 22 T.C. 293">22 T.C. 293 (1954), affirmed per curiam 226 F.2d 618 (C.A. 6, 1955), and Lester B. Martin, 26 T.C. 100">26 T.C. 100 (1956). As Judge Raum succinctly pointed out in E. N. Funkhouser, 44 T.C. 178">44 T.C. 184, those cases are "To be sharply distinguished" with respect to situations such as are involved herein.

I also think the majority's rationale that "separation from the service" under section 402(a)(2) requires a "substantial change in the make-up of employees" is incorrect.

When the "separation from the service" provision ( sec. 165(b), I.R.C. 1939) was first introduced into the Revenue Act of 1942, the Senate Finance Committee explained that it was intended to cover a situation where an employee was entitled1968 U.S. Tax Ct. LEXIS 185">*210 to bepaid his total distributions in the year "in which he retires or severs his connection with his employer." (Emphasis added.) See S. Rept. No. 1631, 77th Cong., 2d Sess., p. 138 (1942). See also Estate of Frank B. Fry, 19 T.C. 461">19 T.C. 461, 19 T.C. 461">464 (1952), affirmed per curiam 205 F.2d 517 (C.A. 3, 1953); Edward Joseph Glinske, Jr., 17 T.C. 562">17 T.C. 562, 17 T.C. 562">565 (1951). In 1952, when the Congress amended section 165(b) to deal with the problem of appreciation of distributed securities of the employer corporation, the committee reports again emphasized "the employee's separation from the employer's service." (Emphasis added.) See H. Rept. No. 2181, 82d Cong., 2d Sess., p. 1 (1952); S. Rept. No. 1831, 82d Cong., 2d Sess., p. 1 (1952). When the proposed Internal Revenue Code of 1954 was first introduced and as it passed the House of Representatives, it contained sections 402(a)(2) and 402(a)(3)(B)(ii). ³ H.R. 49 T.C. 419">*428 8300, 83d Cong., 2d Sess., pp. 97-98 (1954); H. Rept. No. 1337, 83d Cong., 2d Sess., p. A147 (1954). During the course of the hearings before the Senate Finance Committee, it was pointed out1968 U.S. Tax Ct. LEXIS 185">*211 by the Association of the Bar of the City of New York that such a provision might lead to abuse in that there could be technical compliance with the provision even though the business was continued. See Hearings before the Committee on Finance, United States Senate, 83d Cong., 2d Sess., p. 572 (1954). The result was a more restrictive provision which, with minor changes in conference not material herein, became section 402(e) of the 1954 Code (see H. Rept. No. 2543, 83d Cong., 2d Sess. (1954)). In incorporating this provision, the Senate Finance Committee stated:

The House bill extends capital gains treatment to lump-sum distributions to employees at the termination of a plan because of a complete liquidation of the business of the employer, such as a statutory merger, even though there is no separation from service. This was intended to cover, for example, the situation arising when a firm with a pension plan merges with another firm without a plan, and in the merger the pension plan of the first corporation is terminated.

Your committee's bill revises this provision of the House bill to eliminate the possibility that reorganizations which do not involve a substantial change 1968 U.S. Tax Ct. LEXIS 185">*212 in the make-up of employees might be arranged merely to take advantage of the capital gains provision. Thus, your committee's bill would grant capital gains treatment to lump-sum distributions occurring in calendar year 1954 where the termination of the plan is due to corporate liquidation in a prior calendar year. The purpose of granting capital gains treatment to such distributions is to avoid hardship in the case of certain plans which it is understood were terminated on the basis of mistaken assumptions regarding the application of present law. [See S. Rept. No. 1622, 83d Cong., 2d Sess., p. 54 (1954).]

1968 U.S. Tax Ct. LEXIS 185">*213 The majority, following the lead of Judge Wisdom in United States v. Johnson, 331 F.2d 943 (C.A. 5, 1964), seizes upon the words "substantial change in the make-up of employees" to support its rationale. In so doing, the majority, in my opinion, misreads the report of the Senate Finance Committee. That report reflects a concern with changes in employment involving no realistic structural change in the employer, such as the liquidation of a subsidiary corporation into its parent and a continuation of the business and the employment relationship without any accompanying change in beneficial ownership. That this is the case is revealed by the language in the committee report referring to "a substantial change in the make-up of employees" which "might be arranged merely to take advantage of the capital gains provision" (emphasis added; see S. Rept. No. 1622, supra) and to the fact that section 402(a)(2) is by its terms directed toward the narrow area of corporate liquidations and not reorganizations generally. ⁴

1968 U.S. Tax Ct. LEXIS 185">*214 49 T.C. 419">*429 In effect, the majority unnecessarily and erroneously indicates that a change of employer accomplished as a part of a transfer of ownership can never be a "separation from the service" unless there is also a change in the makeup of the employee group -- something that, in most transfers of businesses, is in fact unlikely to occur. Nothing in the legislative history requires such a rationale. Indeed, although section 402(e) may not have accomplished all that was originally intended by the House provision, I think it unwarranted, within the context of the total legislative history, to extend that section to situations beyond those involving modifications in corporate structures which bring about "a change in the employment relationship in no more than a formal or technical sense," i.e., unaccompanied by a meaningful change in the beneficial ownership of the business. See Rev. Rul. 58-94, 1958-1 C.B. 194, 196; Sellin, Taxation of Deferred Employee and Executive Compensation 368 (1960).

Concededly, the decided cases and rulings have a "bramble bush" character. See 46 T.C. 706">Jack E. Schlegel, supra at 708. United States v. Johnson, supra,1968 U.S. Tax Ct. LEXIS 185">*215 and United States v. Martin, 337 F.2d 171 (C.A. 8, 1964), are distinguishable on their facts since, in those cases, the taxpayer remained as an employee of the same entity after the transfer of ownership. The same can be said of United States v. Peebles, 331 F.2d 955 (C.A. 5, 1964); language in the opinion in that case indicating that the identity of the employer was an immaterial consideration is pure dicta and, I think, wrong. ⁵ Perhaps some language in the opinions in 22 T.C. 293">Mary Miller, supra, and 26 T.C. 100">Lester B. Martin, supra, can be construed to permit capital gains treatment of distributions where there is only a formal or technical change in the employment relationship; if so, I think such a construction should not be followed.

1968 U.S. Tax Ct. LEXIS 185">*216 A whole series of rulings by respondent reflects the rationale that change of employer plus meaningful change of beneficial ownership is sufficient to constitute "separation from the service" and that, if these two conditions are met, a "substantial change in the make-up of employees" is not a prerequisite. Rev. Rul. 58-94, 1958-1 C.B. 194; Rev. Rul. 58-95, 1958-1 C.B. 197; Rev. Rul. 58-96, 1958-1 C.B. 200; Rev. Rul. 58-97, 1958-1 C.B. 201; Rev. Rul. 58-98, 1958-1 C.B. 202; Rev. Rul. 58-99, 1958-1 C.B. 202; Rev. Rul. 58-383, 1958-2 C.B. 149. Even if the discernible pattern of legislative history is not as clear as I think it is, these rulings constitute a contemporaneous construction of what is at best an unclear statutory provision, the interpretation of which is controversial. See Funkhouser v. Commissioner, 375 F.2d 1, 5 (C.A. 4, 1967). Particularly1968 U.S. Tax Ct. LEXIS 185">*217 since respondent at no point herein seeks to disavow these rulings, they should be accorded substantial weight. 49 T.C. 419">*430 Cf. Hanover Bank v. Commissioner, 369 U.S. 672">369 U.S. 672 (1962). Under these circumstances, I simply do not understand their gratuitous rejection by the majority.

In the area of section 402(a)(2), taxpayers are sufficiently victims of decisions over which they have no control. See 46 T.C. 706">Jack E. Schlegel, supra at 710. I see no justification for adding to their misery.

Featherston, J., concurring: While I agree with the majority that petitioner was not "separated from the service" within the meaning of section 402, I do not believe this conclusion requires us to sweep aside the now existing precedents on which taxpayers and the Service have relied. I would hold merely that since Philco-Del succeeded to all the rights and liabilities of Philco-Penn under the trust agreement, and petitioner remained in the employ of Philco-Del, there was no "separation from the service" as required under section 402(a)(2). E. N. Funkhouser, 44 T.C. 178">44 T.C. 178, 44 T.C. 178">184 (1965), affd. 375 F.2d 11968 U.S. Tax Ct. LEXIS 185">*218 (C.A. 4, 1967).