Drennen, Judge:
Respondent determined a deficiency in petitioner’s corporate income tax in the amount of $49,648.84 for its calendar year ended December 31, 1965. The issue presented for our decision is whether for purposes of section 631(a) of the Internal Revenue Code,1 petitioner held certain timber-cutting contracts, which it received in a liquidation distribution, for more than 6 months prior to January 1, 1965.
FINDINGS OF FACT
The majority of the facts have been stipulated and are so found. The parties have agreed on the following statements in the stipulation.
Cabax Mills (hereinafter Cabax or petitioner) is an Oregon corporation with its principal place of business located in Eugene, Oreg. Petitioner filed its Federal corporate income tax return for its taxable year ending December 31, 1965, with the district director of internal revenue, Portland, Oreg.
During the year in question, petitioner was engaged in logging and manufacturing lumber in the State of Oregon. In the early months of 1964, petitioner became interested in acquiring Snellstrom Lumber Co. (hereinafter Snellstrom), a small closely held corporation engaged in logging and manufacturing plywood and lumber. Petitioner’s interest in Snellstrom was engendered primarily in a plywood plant and certain timber-cutting rights it owned. Petitioner had attempted to purchase these assets from Snellstrom but the owners did not want to strip their corporation of its principal assets. Consequently, on March 31,1964, Cabax and representatives of the holders of 530 of the 538 outstanding shares of capital stock of Snellstrom executed a contract of sale for the stock.
Under the provisions of the sales contract, Cabax agreed to purchase, and the shareholders agreed to sell, 530 shares (or 98 percent) of the outstanding stock of Snellstrom. The sales price for the stock was $5,000 per share for a total purchase price of $2,650,000. The $5,000 price was payable on an installment basis: $1,000 at the closing; $450 at closing or within 60 days thereafter; and the balance of $3,550 in six equal installments, with each installment due on each succeeding anniversary of the closing, together with annual interest of 5 percent on the declining principal balances, beginning at the date of closing, interest to be paid with and in addition to the principal payments.
The closing of the transaction was scheduled for April 1, 1964, or a later time fixed by representatives of the sellers, but in no event later than April 9, 1964. The closing actually occurred April 3, 1964. Under the contract, the sellers were required to deliver title to and possession of the Snellstrom shares to Cabax, and Cabax was then to assume all of the benefits and burdens of the ownership of such shares. Additionally, the officers and directors of Snellstrom were required to resign and nominees of Cabax were immediately elected to assume complete management and control of the new subsidiary corporation. In return, Cabax was required to cause new certificates for the purchased shares to be issued in its name and delivered to a bank as trustee, under a pledge to provide security for the unpaid balance of the purchase price, promptly after the closing. The security arrangement included a prohibition against liquidation of Snellstrom by Cabax until 40 percent of the purchase price for the Snellstrom shares had been paid.
Following the acquisition of Snellstrom, Cabax operated it as a subsidiary for slightly more than a year. By April 1965, petitioner had satisfied the conditions precedent to Snellstrom’s liquidation imposed by the March 31, 1964, sales agreement. Accordingly, Snellstrom was liquidated pursuant to a plan of liquidation dated April 13, 1965.
In the course of the liquidation, Cabax surrendered all of its stock in Snellstrom and received in exchange therefor all of the assets and assumed all of the liabilities of Snellstrom immediately prior to its liquidation. However, cash in an amount equal to the aggregate book value of the 8 shares of Snellstrom stock which Cabax had not purchased was reserved by Snellstrom for such shareholders and Cabax did not assume the obligation of Snellstrom to the holders of the 8 shares. Among the assets which Cabax received from Snellstrom were the contract rights to cut six tracts of timber. Snellstrom had held these contract rights to cut timber for more than 6 months prior to January 1, 1965.
During the year prior to its liquidation, Snellstrom cut timber from certain tracts in which it had contractual cutting rights. Attend-antly, it elected to characterize its gain or loss realized from the appropriation of said timber under the provisions of section 631(a).
Subsequent to the liquidation, during the period commencing May 1, 1965, and ending December 31, 1965, Cabax cut timber for its operations under the contract rights received in the Snellstrom liquidation. Cabax also elected to characterize its gain or loss realized from the appropriation of said timber under the provisions of section 631(a).
The purchase by Cabax of the Snellstrom stock constituted a “purchase” within the meaning of section 334(b)(3) of the Code. Following the purchase of the Snellstrom stock, Cabax continued to hold it as a capital asset until the shares were surrendered pursuant to the liquidation plan.
The liquidation of Snellstrom was a liquidation of the type described in section 334(b)(2). The basis of the property distributed to Cabax from Snellstrom, including the timber rights, was determined pursuant to the provisions of section 334(b) (2) to be $2,814,559.15.
On its return filed March 11, 1966, petitioner reported total long-term capital gains of $358,158.72. Of that figure, $302,928.39 was reported as long-term capital gain realized on the timber cut under the timber rights originally owned by Snellstrom. In the notice of deficiency respondent determined that the $302,928.39 gain did not qualify for long-term capital gains treatment under the provisions of section 631(a), because petitioner had not held the timber rights for more than 6 months prior to the beginning of its 1965 tax year as required by that section.
Prior to trial, the parties stipulated that petitioner’s 1965 timber-cutting operations under the auspices of the Snellstrom timber contracts will be considered as a sale or exchange of such timber as provided in section 631(a) if petitioner establishes that its holding period of the contract rights to cut such timber is deemed to have commenced before June 30, 1964.
We find from the evidence that petitioner’s purpose in buying the stock of Snellstrom was to acquire the assets of Snellstrom.
OPINION
The basic facts are not in dispute. The single issue for our determination is whether petitioner can be considered under the applicable sections of the Code to have held the contract rights to cut timber, which it received on the liquidation of Snellstrom, for a period of more than 6 months before January 1, 1965. In other words, for purposes of section 631(a), will petitioner be considered to have acquired the cutting rights held by Snellstrom at the time it acquired the Snell-strom stock in April of 1964 or at the time Snellstrom was liquidated in April of 1965.
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Drennen, Judge:
Respondent determined a deficiency in petitioner’s corporate income tax in the amount of $49,648.84 for its calendar year ended December 31, 1965. The issue presented for our decision is whether for purposes of section 631(a) of the Internal Revenue Code,1 petitioner held certain timber-cutting contracts, which it received in a liquidation distribution, for more than 6 months prior to January 1, 1965.
FINDINGS OF FACT
The majority of the facts have been stipulated and are so found. The parties have agreed on the following statements in the stipulation.
Cabax Mills (hereinafter Cabax or petitioner) is an Oregon corporation with its principal place of business located in Eugene, Oreg. Petitioner filed its Federal corporate income tax return for its taxable year ending December 31, 1965, with the district director of internal revenue, Portland, Oreg.
During the year in question, petitioner was engaged in logging and manufacturing lumber in the State of Oregon. In the early months of 1964, petitioner became interested in acquiring Snellstrom Lumber Co. (hereinafter Snellstrom), a small closely held corporation engaged in logging and manufacturing plywood and lumber. Petitioner’s interest in Snellstrom was engendered primarily in a plywood plant and certain timber-cutting rights it owned. Petitioner had attempted to purchase these assets from Snellstrom but the owners did not want to strip their corporation of its principal assets. Consequently, on March 31,1964, Cabax and representatives of the holders of 530 of the 538 outstanding shares of capital stock of Snellstrom executed a contract of sale for the stock.
Under the provisions of the sales contract, Cabax agreed to purchase, and the shareholders agreed to sell, 530 shares (or 98 percent) of the outstanding stock of Snellstrom. The sales price for the stock was $5,000 per share for a total purchase price of $2,650,000. The $5,000 price was payable on an installment basis: $1,000 at the closing; $450 at closing or within 60 days thereafter; and the balance of $3,550 in six equal installments, with each installment due on each succeeding anniversary of the closing, together with annual interest of 5 percent on the declining principal balances, beginning at the date of closing, interest to be paid with and in addition to the principal payments.
The closing of the transaction was scheduled for April 1, 1964, or a later time fixed by representatives of the sellers, but in no event later than April 9, 1964. The closing actually occurred April 3, 1964. Under the contract, the sellers were required to deliver title to and possession of the Snellstrom shares to Cabax, and Cabax was then to assume all of the benefits and burdens of the ownership of such shares. Additionally, the officers and directors of Snellstrom were required to resign and nominees of Cabax were immediately elected to assume complete management and control of the new subsidiary corporation. In return, Cabax was required to cause new certificates for the purchased shares to be issued in its name and delivered to a bank as trustee, under a pledge to provide security for the unpaid balance of the purchase price, promptly after the closing. The security arrangement included a prohibition against liquidation of Snellstrom by Cabax until 40 percent of the purchase price for the Snellstrom shares had been paid.
Following the acquisition of Snellstrom, Cabax operated it as a subsidiary for slightly more than a year. By April 1965, petitioner had satisfied the conditions precedent to Snellstrom’s liquidation imposed by the March 31, 1964, sales agreement. Accordingly, Snellstrom was liquidated pursuant to a plan of liquidation dated April 13, 1965.
In the course of the liquidation, Cabax surrendered all of its stock in Snellstrom and received in exchange therefor all of the assets and assumed all of the liabilities of Snellstrom immediately prior to its liquidation. However, cash in an amount equal to the aggregate book value of the 8 shares of Snellstrom stock which Cabax had not purchased was reserved by Snellstrom for such shareholders and Cabax did not assume the obligation of Snellstrom to the holders of the 8 shares. Among the assets which Cabax received from Snellstrom were the contract rights to cut six tracts of timber. Snellstrom had held these contract rights to cut timber for more than 6 months prior to January 1, 1965.
During the year prior to its liquidation, Snellstrom cut timber from certain tracts in which it had contractual cutting rights. Attend-antly, it elected to characterize its gain or loss realized from the appropriation of said timber under the provisions of section 631(a).
Subsequent to the liquidation, during the period commencing May 1, 1965, and ending December 31, 1965, Cabax cut timber for its operations under the contract rights received in the Snellstrom liquidation. Cabax also elected to characterize its gain or loss realized from the appropriation of said timber under the provisions of section 631(a).
The purchase by Cabax of the Snellstrom stock constituted a “purchase” within the meaning of section 334(b)(3) of the Code. Following the purchase of the Snellstrom stock, Cabax continued to hold it as a capital asset until the shares were surrendered pursuant to the liquidation plan.
The liquidation of Snellstrom was a liquidation of the type described in section 334(b)(2). The basis of the property distributed to Cabax from Snellstrom, including the timber rights, was determined pursuant to the provisions of section 334(b) (2) to be $2,814,559.15.
On its return filed March 11, 1966, petitioner reported total long-term capital gains of $358,158.72. Of that figure, $302,928.39 was reported as long-term capital gain realized on the timber cut under the timber rights originally owned by Snellstrom. In the notice of deficiency respondent determined that the $302,928.39 gain did not qualify for long-term capital gains treatment under the provisions of section 631(a), because petitioner had not held the timber rights for more than 6 months prior to the beginning of its 1965 tax year as required by that section.
Prior to trial, the parties stipulated that petitioner’s 1965 timber-cutting operations under the auspices of the Snellstrom timber contracts will be considered as a sale or exchange of such timber as provided in section 631(a) if petitioner establishes that its holding period of the contract rights to cut such timber is deemed to have commenced before June 30, 1964.
We find from the evidence that petitioner’s purpose in buying the stock of Snellstrom was to acquire the assets of Snellstrom.
OPINION
The basic facts are not in dispute. The single issue for our determination is whether petitioner can be considered under the applicable sections of the Code to have held the contract rights to cut timber, which it received on the liquidation of Snellstrom, for a period of more than 6 months before January 1, 1965. In other words, for purposes of section 631(a), will petitioner be considered to have acquired the cutting rights held by Snellstrom at the time it acquired the Snell-strom stock in April of 1964 or at the time Snellstrom was liquidated in April of 1965.
Petitioner alleges that it purchased 98 percent of the stock of Snellstrom on April 3, 1964, and that this constituted a purchase within the meaning of section 334(b) (3); that it liquidated Snellstrom on April 30, 1965, pursuant to a plan of liquidation adopted on April 13, 1965; that it received from Snellstrom contract rights to cut certain tracts of timber; and that it cut the timber during the period May 1, 1965, through December 31, 1965. Petitioner further alleges that its purchase and liquidation of Snellstrom were section 334(b) (2) transactions, that Snellstrom held the contract rights to cut timber for more than 6 months prior to January 1, 1965, and that petitioner held the stock of Snellstrom for more than 6 months prior to January 1, 1965.
On these facts, petitioner contends that under section 1223(1) its holding period for the timber is deemed to have commenced when it acquired the stock of Snellstrom, or more than 6 months prior to January 1, 1965, and that, therefore, under section 631(a)2 its cutting of the timber should be viewed as a sale or exchange, thus entitling it to capital gains treatment on its profits derived therefrom.3
Respondent contends that petitioner’s holding period for the timber rights commenced when Snellstrom was liquidated. Respondent argues that a parent corporation and its subsidiary are two separate entities, and thus, Cabax cannot be deemed the owner of Snellstrom’s assets, for purposes of section 631(a), prior to the liquidation of Snellstrom. Respondent further urges that if we adopt his view that the purchase and subsequent liquidation of a subsidiary corporation in a section 334(b)(2) setting should be treated as one continuous transaction beginning with the stock purchase and concluding with the parent corporation’s receipt of its subsidiary’s assets at the liquidation, then section 1223(1) is not applicable. In his view, since the successive steps employed to acquire Snellstrom’s assets are treated as one under section 334(b)(2), i.e., the purchase of the assets, the holding period of the assets should not begin until the parent receives them in liquidation.
Section 631(a) provides that if a taxpayer so elects on its return, the cutting of timber during such year by the taxpayer who owns or has the contract right to cut timber shall be considered as a sale or exchange of the timber cut during the year, provided the taxpayer has owned such timber or the contract right to cut such timber for more than 6 months before the beginning of such year.
Section 1231 provides that if the recognized gains on sales or exchanges of property used in the trade or business (plus gains from involuntary conversions) exceed the recognized losses from such sales, exchanges, and conversions, such gains shall be considered as gains from sales or exchanges of capital assets held for more than 6 months (i.e., long-term capital gains). For purposes of section 1231 timber with respect to which section 631 applies is included within the term “property used in the trade or business.” Sec. 1231(b)(2).
Pursuant to the above provisions petitioner would be entitled to report its gains on the timber cut under the cutting contracts it acquired from Snellstrom as long-term capital gain if it can be considered to have owned those contracts for more than 6 months prior to January 1, 1965.
Section 1223(1) 4 provides that in determining the period for which the taxpayer has held property received in an exchange, there shall be included tbe period for which, it held the property exchanged if the property has the same basis in its hands as the property exchanged. These requirements for “tacking” the holding period of the stock of Snellstrom acquired by petitioner in April of 1964 to the holding period of the timber-cutting contracts it received upon liquidation of Snellstrom in April of 1965, would appear to be met if the timber-cutting contracts had the same basis in petitioner’s hands as did the property exchanged therefor, i.e., the stock of Snellstrom.
Section 331(a)(1) provides that amounts distributed in complete liquidation of a corporation shall be treated as in full payment in exchange for the stock. Assuming for the moment that under this section the cutting contracts were received by petitioner in exchange for the Snellstrom stock, the next step is to determine petitioner’s basis in the cutting contracts.
Section 334(a) provides in general that if property is received in a distribution in complete liquidation, and if gain or loss is recognized on receipt of such property, the basis of the property in the hands of the distributee is its fair market value at the time of distribution. Section 334(b)(1) provides, however, that if property is received by a corporation in complete liquidation of another corporation which qualifies for nonrecognition of gain or loss under section 332, the basis of the property in the hands of the distributee shall be the same as it would be in the hands of the transferor, except as provided in paragraph (2). Paragraph (2) provides an exception to the general rule, and whether that exception applies to the facts of this case, is the basic issue here involved.
Section 334(b)(2) 5 provides, for purposes of this case, that if property is received by a corporation in complete liquidation of another corporation and if the distribution is pursuant to a plan of liquidation adopted after June 22, 1954, and not more than 2 years after the transaction next described, and stock of the distributing corporation possessing at least 80 percent of the total voting power and at least 80 percent of the total number of shares of all classes of stock was acquired by the distributee by purchase during a 12-month period beginning with the date of the first acquisition by purchase, then the basis of the property in the hands of the distributee shall be the adjusted basis of the stock with respect to which the distribution was made. The facts of this case appear to meet the requirements of section 334(b)(2) so that petitioner’s basis in the timber-cutting contracts is the same as its adjusted basis in the Snellstrom stock. Petitioner “purchased” 98 percent of the stock of Snellstrom, as defined in section 334(b)(3), on April 3, 1964, and the cutting contracts were received by petitioner in a complete liquidation of Snellstrom pursuant to a plan of liquidation adopted after 1954 and within 2 years after petitioner acquired more than 80 percent of all of Snellstrom’s stock within 12 months after the date it first purchased any Snellstrom stock.
Now tracking back through the provisions of the various sections described above, it would appear, patently at least, that petitioner was entitled to report its gain from cutting timber under the cutting contracts received from Snellstrom as long-term capital gain under section 1231. Inasmuch as petitioner’s basis in the cutting contracts was the same as its basis in the Snellstrom stock (sec. 334(b) (2)) and the cutting contracts are considered to have been received in an exchange under section 331(a)(1), petitioner would appear to be entitled to tack its holding period of the Snellstrom stock onto its holding period of the cutting contracts under section 1223(1). Since petitioner acquired the Snellstrom stock in April of 1964, the holding period of the cutting contracts would also start in April of 1964, which was more than 6 months prior to the start of 1965, the year in which petitioner cut the timber here involved. Petitioner having made the election on its 1965 return provided for in section 631(a) the timber cut in 1965 is considered to be property used in its trade or business under section 1231(b)(2) and the gains realized thereon are considered to be gain from the sale or exchange of capital assets held for more than 6 months under section 1231(a), or long-term capital gain as claimed by petitioner.
Despite the rather clear language of the statutes involved, which points to a decision in petitioner’s favor, respondent argues that an exchange within the meaning of section 1223(1) has not occurred because the principles codified in section 334(b)(2) permitting a substituted basis do not recognize the assets as being received in exchange; that it would be inconsistent with the purpose of section 1223(1) to treat tbe section 334(b)(2) situation as a purchase of assets resulting in a stepped-up basis “and also to tack on part of tbe acquired corporation’s bolding period.” In tbe first place petitioner is not seeking to tack on Snellstrom’s bolding period of tbe cutting contracts but only to tack on its own bolding period of tbe stock, i.e. to commence its bolding period at tbe time it made its investment to acquire tbe assets of Snellstrom. Secondly, we cannot agree tbat tbe principles codified in section 334(b)(2) do not recognize tbe assets as having been received in an exchange within tbe meaning of section 1223(1). To accept tbat position requires writing into section 1223(1) an exception tbat is not there.
Section 334(b)(2) was first enacted in 1954 and was intended to be a codification of tbe judicial principles set forth in Kimbell-Diamond Milling Co., 14 T.C. 74 (1950), affirmed per curiam 187 F. 2d 718 (C.A. 5, 1951), certiorari denied 342 U.S. 827 (1951). See H. Rept. No. 1337, to accompany H.R. 8300 (Pub. L. No. 591), 83d Cong., 2d Sess., p. A109 (1954); S. Rept. No. 1622, to accompany H.R. 8300 (Pub. L. No. 591), 83d Cong., 2d Sess., p. 48 (1954).
Prior to 1954, tbe provisions of tbe 1939 Code technically forced tbe acquiring corporation to take a carryover basis in tbe distributed assets, regardless of bow much or bow little it paid for tbe subsidiary’s stock. However, tbe substituted basis result was attainable in tbe courts under tbe Kimbell-Diamond doctrine which employed fictions and a subjective intent standard to determine if a substituted basis was warranted. See United States v. M.O.J. Corporation, 274 F. 2d 713 (C.A. 5, 1960); United States v. Mattison, 273 F. 2d 13 (C.A. 9, 1959); Georgia-Pacific Corporation v. United States, 264 F. 2d 161 (C.A. 5, 1959); Commissioner v. Ashland Oil & R. Co., 99 F. 2d 588 (C.A. 6, 1938), certiorari denied 306 U.S. 661 (1939); North American Service Co., 33 T.C. 677 (1960); Orr Mills, 30 T.C. 150 (1958); Estate of James F. Suter, 29 T.C. 244 (1957); Montana-Dakota Utilities Co., 25 T.C. 408 (1955); H. B. Snively, 19 T.C. 850 (1953), affd. 219 F. 2d 266 (C.A. 5, 1955); Kimbell-Diamond Milling Co., supra; Koppers Coal Co., 6 T.C. 1209 (1946).
■ Tbe purpose for enacting section 334(b) (2) was to provide a mechanical test for determining whether tbe Kimbell-Diamond doctrine is applicable in determining tbe basis of assets acquired by tbe circuitous route of acquiring tbe stock of tbe corporation which owned those assets and then liquidating tbat corporation. Under section 334(b)(2) any corporation fulfilling tbe conditions set out in it must take a substituted basis in tbe distributed assets of tbe fiquidated subsidiary equal to tbe parent corporation’s basis in tbe subsidiary’s stock. Tbe rationale of the provision assumes tbe stock of tbe liquidating corporation is priced to reflect tbe current value of its assets; and, thus, tbe distributee corporation takes a basis in all of tbe assets received in liquidation equal to tbeir fair market value instead of a carryover basis in tbe assets derived from tbe bquidating corporation’s basis in them as required in section 334(b)(1). See H. Kept. No. 1337, supra at p. A100. Consequently, section 334(b)(2) bas tbe effect of a double-edged sword; it requires tbe acquiring corporation to take a substituted basis in tbe distributed assets regardless of wbetber tbe corporation’s basis in tbe subsidiary’s stock is more or less than tbe subsidiary’s basis in those assets.
We find nothing inconsistent with tbe purpose of section 334(b)(2) and tbe rationale of Kimbell-Diamond to permit tbe acquiring corporation to add to its bolding period for tbe assets so acquired tbe time that it held tbe subsidiary’s stock. In fact, it seems more consistent with tbe underlying theory of tbe statute, that tbe purchase of tbe stock was in fact tbe purchase of tbe assets, to do so. Also, applying tbe clear meaning of the statutory language leads to that result.
Respondent’s objection to this line of reasoning is that tbe doctrine of Kimbell-Diamond, on which section 334(b)(2) is based, requires tbe series of steps employed to acquire tbe assets to be treated as one transaction, tbe purchase of naked assets. Accordingly, be reasons that tbe exchange aspect of a section 334(b)(2) liquidation is nonexistent under tbe rationale of tbe Kimbell-Diamond doctrine. With no exchange in tbe transaction, bis position continues, tbe liquidation cannot meet tbe conditions of section 1223(1) and consequently there can be no tacking of bolding periods. Coincidently, in support of bis position that section 1223(1) is inapplicable, respondent asserts that tbe Kimbell-Diamond doctrine as refined in Georgia-Pacific Corporation v. United States, supra, treats tbe series of steps as one continuous transaction, and thus it remains “open” from tbe purchase of tbe subsidiary’s stock to tbe final distribution in liquidation. Respondent contends that it is this pendent nature of tbe transaction which prevents tbe bolding period of tbe assets from attaching prior to tbe bquidation.
As we see it, there are several infirmities in respondent’s position. First, as we have established, tbe section 334(b)(2) exception does not dispense with tbe fact that a bquidation bas taken place. Madison Square Garden Corp., 58 T.C. 619 (1972). Since tbe bquidation bas not been extirpated, then by the plain language of sections 331(a) and 332, tbe bquidation qualifies as an exchange. Secondly, we think that respondent reads too much into tbe holdings of tbe cases be cites. Those cases address only tbe problem of what basis attaches to assets received in a bquidation under special circumstances. They do not appear to contemplate or anticipate any use of tbe Kimbell-Diamond doctrine to determine bolding period. Furthermore, even if we engage in respondent’s line of reasoning, we find that the legal fiction of the doctrine would not only abolish the existence of the liquidation exchange but would also dispense with the purchase of the stock in the subsidiary. Extending this to the final step, it follows that the purchase of the stock actually is the purchase of the assets,6 with the holding period attaching at that time, and the liquidation no more than a formalistic measure employed to reduce the then-owned assets to petitioner’s possession. In short, the significance of the series of steps is effectuated with the performance of the first step. Cf. George A. Roesel, 56 T.C. 14 (1971). The conclusion then belies the consistency of respondent’s position.
By linking section 334(b)(2) to section 1223(1), petitioner becomes entitled to no more than the other potential participants in a complete tax-free liquidation of an 80-percent subsidiary. In section 332 situations where a parent corporation fails to come within the provisions of section 334(b) (2), it takes a carryover basis in the distributed assets under section 334(b) (1) and is permitted to tack the subsidiary’s holding period for the assets to that of its own under section 1223(2). Frederick Steel Co., 42 T.C. 13 (1964), reversed on other grounds 375 F. 2d 351 (C.A. 6, 1967), certiorari denied 389 U.S. 901 (1967); Rev. Rul. 70-6, 1970-1 C.B. 172. Similarly, where a minority shareholder receives assets in exchange for his stock in a section 332 liquidation, he may elect to come within the provisions of section 333, in which case he takes a substituted basis, equal to his basis in the liquidating corporation’s stock, under section 334(c). In a special ruling, dated May 10, 1956, the Commissioner determined that under such circumstances a section 333 shareholder may tack the holding period of his stock in the liquidating corporation to that of his holding period in the distributed assets.
Finally, not only do we believe that our decision obtains the proper legal result in holding that petitioner may avail itself of section 1223(1), but it also comports with the equitable motives of Congress manifested in its enactment of section 334(b)(2). For we hold that an acquiring corporation, Cabax in this case, is treated as if it had been able to purchase the naked assets of its subsidiary as of the date it was forced to buy most of the subsidiary’s stock to obtain the assets in an indirect manner. Such treatment is afforded by the basis provisions of section 334(b)(2), and our decision here is simply a logical extension of that purpose. Here, petitioner, has not gained any unwarranted tax benefits for it is clear tbat Cabax may tack only its own bolding periods, tbat of tbe Snellstrom stock to tbe assets received in liquidation, and, therefore, it receives no unwarranted benefit from Snellstrom’s prior ownership of tbe timber contracts.7
Respondent also argues tbat inasmuch as petitioner did not have tbe right to cut and sell timber under tbe Snellstrom contracts on its own account until Snellstrom was bquidated on April 30, 1965, petitioner was not entitled to make tbe section 631(a) election for 1965. Respondent relies on section 1.631-1 (b)(1), Income Tax Regs., and on Carlen v. Commissioner, 220 F. 2d 338 (C.A. 9, 1955), affirming 20 T.C. 573 (1953), in support of his argument. Section 631(a) permits tbe election to be made “by a taxpayer who owns, or has a contract right to cut, such timber.” Tbe regulation, in defining who has tbe right to make tbe election, provides tbat in order to have a “contract right to cut timber” within tbe meaning of section 631(a), a taxpayer must have a right to sell tbe timber cut under tbe contract on his own account or to use such cut timber in bis trade or business. Quoting tbe Tax Court opinion, the court, in Carlen v. Commissioner, supra, said:
The statute speaks of the cutting of timber for sale by a taxpayer who has a right to cut such timber. To us this means that the taxpayer who would claim the benefit of the statute must be the one who has not only the right to cut but also the right to sell on his own account. * * *
Petitioner points out, correctly we think, tbat tbe regulation and tbe Carien case are concerned with tbe difference between a logging contractor, who has no beneficial interest in tbe timber and is not entitled to make tbe election, and an owner-logger who ha's tbe right to cut and sell timber for his own account. We do not believe tbe rationale of tbe regulation or tbe Carien case precludes petitioner from claiming tbe benefits of section 631(a) under the circumstances here involved. It is clear from tbe evidence in this case tbat, under tbe rationale of Kimbell-Diamond Milling Co., supra, petitioner acquired a beneficial interest in tbe timber at the time it purchased tbe Snellstrom stock, and tbat that was its purpose in purchasing tbe stock. Furthermore, it seems clear tbat under section 331(a)(1) the cutting contracts received by petitioner upon liquidation of Snellstrom shall be treated as payment in exchange for tbe Snellstrom stock so tbat section 1223(1) applies and permits tbe “tacking” of petitioner’s bolding period of this stock to tbe bolding period of tbe property exchanged tberefor, i.e., tbe cutting contracts.
Since tbe parties have stipulated that petitioner qualifies for an election under section 631(a) if it is entitled to a section 1223(1) bolding period, we are relieved of discussing that issue at this time.
Decision will be entered for the 'petitioner.