SP CI L TT NTION drected to cautonary notce on ths page that pu
shed rungs of the ureau do not have the force and eSe
of Treasury Decsons and that they are appcabe ony to facts presented n the pubshed ca
Treasury Department
ureau of Interna Revenue
Interna Revenue uetn
Cumuatve uetn I -1
NU RY- UN , 1930
f /
IN T IS ISSU
P.ge / /.-
Introductory Notes
Contents -
Rungs Nos. 4488-4683
oard of Ta ppeas . . .INDI N NI RST -
Income Ta - LI R RI S
n 5S ::: mvm:: SSt
Part m (1924 ct) 250-265
Part I (1921 and Pror cts) 266-350
Saes Ta 351-355
state Ta . . 356-391
Msceaneous Ta 392-402
Msceaneous 403-414
Inde 415-425
The rungs reported n the Interna Revenue uetn are for the nformaton of ta payers and ther counse aa
showng the trend of offca opnon n the admnstraton of the ureau of Interna Revenue the rungs other than
Treasury Decsons have none o the force or effect of Treasury Decsons and do not commt the Department to
any nterpretaton of the aw whch has not been formay approved and promugated by the Secretary of the
Treasury. ach rung embodes the admnstratve appcaton of the aw and Treasury Decsons to the entre
state o facta upon whch a partcuar case rests. It s especay to be noted that the same resut w not neces-
aawy be reached n another case uness a the matera facts are dentca wth those of the reported case. s t a
awt aways feasbe to pubsh a compete statement of the facts underyng each rung, there can be no assurance
that any new case s dentca wth the reported case. s bearng oat ths dstncton, t may be observed that the
rungs pubshed from tme to tme may appear to reverse rungs prevousy pubshed.
Offcers of the ureau of Interna Revenue are especay cautoned aganst reachng a concuson n any case
merey oa the bass of smarty to a pubshed rung, and shoud base ther |udgment on the appcaton of a per-
tnent provsons of the aw and Treasury Decsons to a the facts n each case. These rungs shoud be used as ads
n studyng the aw and ts forma constructon as made n the reguatons and Treasury Decsons prevousy ssued.
In addton to pubshng a Interna Revenue Treasury Decsons, t s the pocy of the ureau of Interna Revenue
to pubsh a rungs and decsons, ncudng opnons of the Genera Counse for the ureau of Interna Revenue,
whch, because they announce a rung or decson upon a nove queston or upon a queston n regard to whch
there e sts no prevousy pubshed rung or decson, or for other reasons, are of such mportance as to be of
genera nterest It s aso the pocy of the ureau to pubsh a rungs or decsons whch revoke, modfy, amend,
or affect n any manner whatever any pubshed rung or decson. In many nstances opnons of the Genera
Counse for the ureau of Interna Revenue are not of genera nterest because they announce no new rung or no
new constructon of the revenue aws bat smpy appy rungs aready made pubc to certan stuatons of fact whch
are wthout speca sgnfcance. It a not the pocy of the ureau to pubsh such opnons. Therefore, the numbers
assgned to the pubshed opnons of the Genera Counse for the ureau of Interna Revenue are not consecutve.
No unpubshed rung or decson w be cted or reed upon by any offcer or empoyee of the ureau of Interna
Revenue as a precedent n the dsposton of other cases. Uness otherwse specfcay ndcated, a pubshed
rungs and decsons have receved the consderaton and approva of the Genera Counse for the ureau of
Interna Revenue.
UNIT D ST T S GO RNM NT PRINTING O IC . W S INGTON : 1930
er sae by the Superntendent of Documents, Washngton, D. C. - - - See back of tte for prc
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1 ,5787
The Interna Revenue uetn servce for 1930 w consst of
weeky buetns and semannua cumuatve buetns.
The weeky buetns w contan the rungs and decsons to be
made pubc and a Treasury Department decsons (known as Treas-
ury decsons) pertanng to Interna Revenue matters. The sem-
annua cumuatve buetns w contan a rungs and decsons
(ncudng Treasury decsons) pubshed durng the prevous s
months.
The compete uetn servce may be obtaned, on a subscrpton
bass, from the Superntendent of Documents, Government Prntng
Offce, Washngton, D. C, for 2 per year.
New subscrbers and others desrng to obtan the 1919, 1920, and
1921 Income Ta Servce may do so from the Superntendent of Docu-
ments at prces as foows: Dgest of Income Ta Rungs No. 19
(contanng dgests of a rungs appearng n Cumuatve uetns 1
to 5, ncusve), 50 cents per copy Cumuatve uetns Nos. 1 to 5,
contanng n fu a rungs pubshed snce pr, 1919, to and n-
cudng December, 1921, as foows: No. 1, 30 cents No. 2, 25 cents
No. 3, 30 cents No. 4, 30 cents No. 5, 25 cents.
Persons desrng to obtan the one ssue of Saes Ta uetn for
1920, uetn ST-1-20, and the Cumuatve uetns for anuary-
une and uy-December, 1921, may procure them from the Supernten-
dent of Documents at 15 cents and 5 cents each, respectvey, per copy.
Persons desrng to obtan the Interna Revenue uetn servce for
the years 1922,1923,1924,1925,1926,1927,1928,1929, nnd 1930 may do
so at prces as foows:
Cumuatve uetn 1-1 ( anuary- une, 1922) 40 cents
Cumuatve uetn 1-2 ( uy-December, 1922) 30 cents
Cumuatve uetn II- ( anuary- une, 1923) 30 cents
Cumuatve uetn II-2 ( uy-December, 1923) 40 cents
Cumuatve uetn III- ( anuary- une, 1924) 50 cents
Cumuatve uetn III-2 ( uy-December, 1924) 50 cents
Dgest No. 13 ( anuary, 1922-December, 1924) 60 cents
Cumuatve uetn I -1 ( anuary- une, 1925) 40 cents
Cumuatve uetn I -2 ( uy-December, 1925) 35 cents
Dgest No. 17 ( anuary-December, 1925) 25 cents
Cumuatve uetn - ( anuary- une, 1926) 40 cents
Cumuatve uetn -2 ( uy-December, 1926) 30 cents
Dgest No. 21 ( anuary-December, 1926) 15 cents
Cumuatve uetn I-1 ( anuary- une, 1927) 40 cents
Cumuatve uetn I-2 ( uy-December, 1927) 40 cents
Dgest No. 22 ( anuary, 1925-December, 1927) 35 cents
Cumuatve uetn II-1 ( anuary- une, 1928) 35 cents
Cumuatve uetn II-2 ( uy-December, 1928) 50 cents
Cumuatve uetn III-1 ( anuary- une, 1929) 50 cents
Cumuatve uetn III-2 ( uy-December, 1929) 55 cents
Cumuatve uetn I -1 ( anuary- une, 1930) 50 cents
U nqures n regard to these pubcatons and subscrptons shoud
be sent to the Superntendent of Documents, Government Prntng
Offce, Washngton, D. C.
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INTRODUCTORY NOT S.
The Interna Revenue Cumuatve uetn I -1, n addton to
a decsons of the Treasury Department (caed Treasury decsons)
pertanng to Interna Revenue matters, contans Genera Counse s
opnons, and rungs and decsons pertanng to ncome, estate, saes,
and msceaneous ta es, as ndcated on the tte-page of ths u-
etn, pubshed n the weeky uetns ( oume I , Nos. 1 to 26,
ncusve), for the perod anuary 1 to une 30, 1930. It aso con-
tans a cumuatve st of announcements reatng to decsons of
the Unted States oard of Ta ppeas pubshed n the Interna
Revenue uetn Servce from December 22,1924, to une 30,1930.
Income Ta rungs are prnted n four parts. Rungs under the
Revenue ct of 1928 are pubshed as Part I, the secton headngs
correspondng wth the sectons of that aw and the artce headngs
correspondng wth the artce headngs of Reguatons 74. Rungs
under the Revenue ct of 1926 are pubshed as Part II, the secton
and artce headngs correspondng wth the secton and artce head-
ngs of the Revenue ct of 1926 and Reguatons 69. Rungs under
the Revenue ct of 1924 are prnted as Part III, the secton and
artce headngs correspondng wth the secton and artce headngs
of the Revenue ct of 1924 and Reguatons 65. Rungs under the
Revenue ct of 1921 or earer cts are prnted as Part I , the
secton and artce headngs correspondng wth the secton and
artce headngs of the Revenue ct of 1921 and Reguatons 62.
R I TIONS.
The foowng abbrevatons are used throughout the uetn:
, , C, etc. The names of Indvduas.
. R M. Commttee on ppeas and Revew memorandum.
. R. R. Commttee on ppeas and Revew recommendaton.
. T. oard of Ta ppeas.
C. . Cumuatve uetn.
Ct. D. Court decson.
C. S. T. Capta Stock Ta Dvson.
D. C. Treasury Department crcuar.
. T. state Ta Dvson.
G. C. M. Genera Counse s memorandum.
I. T. Income Ta Unt.
M, N, , Y, Z, etc. The names of corporatons, paces, or busnesses, accordng
to content.
Mn. Mmeographed etter.
MS. Msceaneous Dvson.
O. or L. O. Soctor s aw opnon.
O. D. Offce decson.
Op. . G. Opnon of the ttorney Genera.
S. T. Saes Ta Dvson.
S. M. Soctor s memorandum.
So. Op. Soctor s opnon.
S. R. Soctor s recommendaton.
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T. Tobacco Dvson.
T. . M. dvsory Ta oard memorandum.
T. . R. dvsory Ta oard recommendaton.
T. D. Treasury decson.
as and y are used to represent certan numbers, and when used wth the word
doars represent sums of money.
The practce of promugatng Treasury Decsons that embody
court decsons reatng to the nterna revenue has been dscontnued.
ereafter opnons of the courts, wth approprate headnotes for the
nformaton and gudance of ta payers and offcers and empoyees of
the ureau of Interna Re venue, w be pubshed n the Interna
Revenue uetn wthout forma approva and promugaton by the
Secretary of the Treasury.
NNOUNC M NT R L TING TO O RD O T PP LS D CISIONS.
Under the provsons of the Revenue cts of 1924 and 1926, reat-
ng to appeas to the oard of Ta ppeas, the Commssoner may
acquesce n the decson of the oard or he may, f the appea was
heard by the oard pror to the passage of the 1926 ct, cause to be
nsttuted a proceedng n court for the coecton of any part of a
ta determned by the Commssoner to be due but dsaowed by the
oard, provded that such proceedng s commenced wthn one year
after fna decson of the oard. s to appeas heard by the oard
after the passage of the 1926 ct, the Commssoner may, wthn
s months after the oard s decson s rendered, fe a petton
for a revew of the decson by a Crcut Court of ppeas or by
the Court of ppeas of the Dstrct of Coumba. In order that
ta payers and the genera pubc may be nformed as to whether or
not the Commssoner has acquesced n a decson of the oard of
Ta ppeas dsaowng a ta determned by the Commssoner to
be due, announcement w be made n the weeky uetn at the
earest practcabe date. Decsons so acquesced n shoud be reed
upon by offcers and empoyees of the ureau of Interna Revenue as
precedents n the dsposton of other cases before the ureau.
or addtona nformaton whch w be of assstance n the use
of the Interna Revenue uetn servce read the Introductory Notes
to the atest Dgest.
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CONT NTS.
Treasury decsons:
4283..
4284..
4285..
4287.
4290.
4291 _
Court decsons:
144-.
145
14
147.
148
150.
151.
152.
153.
154.
155.
158.
157.
158.
150.
160-
161.
166..
167..
168..
170-
171.
172.
173.
174.
175.
176.
177.
178.
179.
182..
183..
184..
185..
186. _
187..
188..
189..
190 ..
191-
192..
193-.
194..
Genera
ran-Ia:
6711.
6717.
Rung No.
Counse s merao-
1 -12-4574
I -12-4573
I -12-4572
I -13-4582
I -14-4594
I -16-4607
I -1S-4619
I -18-4623
1 -18-4624
I -18-4625
I -1-4491
I -1-4493
I -2-4501
I -3-4508
I -5-1520
I -5-4521
I -8-4529
I -7-4534
I -8-4540
I -9-4546
I -9-4548
1 -9-4547
I -10-4555
I -10-4554
I -10-4556
1 -12-4586
I -12-4570
I -12-4567
I -12-4569
1 -13-4579
I -13-4580
I -13-4581
1 -13-4583
I -14-4689
I -14-4590
I -14-4693
I -15-4599
I -16-40O5
I -17-4611
I -17-4613
I -17-4614
L -18-4621
I -19-4632
1 -19-4629
I -19-4631
I -19-4630
1 -19-4634
1 -19-4633
I -19-4639
I -19-4640
I -19-4641
I -20-4646
1 -20-4O47
1 -21-4653
I -22-4659
I -22-4660
I -24-4071
I -24-4670
I -25-4675
I -26-4081
I -26-4683
I -19-4635
I -12-4565
I -2-4498
I -17-4612
Page.
306
358
356
409
411
409
160
351
351
127
252
339
247
372
274
268
348
336
298
266
305
279
376
284
337
250
312
281
301
272
292
367
308
2(0
314
294
271
317
352
250
318
211
343
227
245
243
353
376
276
246
359
295
382
362
3M
332
383
386
228
302
231
402
179
136
169
Rung.
Genera Counse s me
randa Contnued.
7188.
7285
7309. _
7310
7373
7407 - -.
7411
7420
7432-..
7448
7451
7465.. -
7472
7475
7498
7614
7515. -
7527
7542
7545
7549
7561
7592
7598
7016-
7629
7068
7765
7871...
7925 _
7937
7997
8031
8036
8050...
8090
8093
8098
8131-
8132
8144
oard of Ta ppeas:1
2523-
3899--
7129-_
7248..
7249-.
7250..
7420..
7638..
7640..
773.-)..
8714-_
8718..
8779._
9016--
9063..
9004..
9074.-
9219.-
9714..
10390-
10004-
10610-
10991.
11015.
11101.
Rung No.
I -19-4636
I -1-1490
I -2-4500
I -14-4588
I -4-4514
I -3-4605
1 -8-4537
I -6-4524
I -6-4520
I -7-4531
I -14-4586
I -0-4526
I -11-1560
I -23-4664
I -IO-4551
I -12-4504
I -10-4552
I -9-1542
I -7-4535
I -15-4598
I -10 1604
I -22-4657
I -10-4553
I -13-4576
I -19-4628
I -13-1577
I -17-4610
I -18-4620
I -17-46C9
I -19-4627
I -20-1643
I -20-4645
I -22-1658
I -21-1652
I -21-4654
I -20-4079
I -20-4682
I -24-4609
I -25-4674
I -25-4676
I -23-4663
I -15-4595
1 -20-4642
I -17-1608
I -12-4563
I - 2-4563
I -12-4563
I -12-4563
I -12-4563
I -20-4642
1 -10-4001
I -9-4541
I -0-4523
I -10-4550
I -11-4558
I -3-4604
1 -3-I504
I -15-15 5
I -3-4504
I -17-4608
I -16-4601
I -7-4530
I -7-4530
I 1 4488
I -10-4550
I -13-4575
1 The contents contan references to oard of Ta ppeas acquescences and nonacqu escences pubshed
ony durng the s months ended une 30, 1930, Inasmuch as references to the remander of the oard of
Ta ppeas acquescences and nonacquescences contaned n the cumuatve st heren have been fur-
1 n the cumuatve buetns coverng the earer respectve perods.
( I
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oard of Ta ppeas Con.
11239
11271
11272
11418
11459
11637
11796
11878
12069
12123
12136
12166
12345
12518
12709
12770
13121
13416
13584...
13585
13603...
13718
13719
13732
13753
13754...
13776
13878
13998
14321
14440
14518
14544
14553--.
14771
14882
15199.
15548.
15563-
15693.
15813.
15822.
15823.
15824.
15835.
15850.
15882.
15926.
10107.
16108.
16177.
16200.
16259.
16287.
16310.
16354.
16356.
16356.
16379.
16398...
16433...
16477...
16478...
16537...
16562...
16743...
16864
16883
16915
17018
17097
17098
17099
17126
17127....
17153
17154
17155....
17156
Rung No.
I -13-4575
I -9-4541
I -3-4504
I -3-4504
I -17-4608
I -22-4656
I -12-4563
I -22-4656
I -12-4563
I -17-4608
1 -14-1585
I -9-1541
I -12-4563
I -9-4541
I -15-4595
I -14-4585
I -17-4608
I -21-1649
I -25-4673
1 -25-4673
I -25-4673
I -10-4550
I -26-4678
I -26-4678
I -20-4642
I -7-4530
I -7-4530
I -6-4523
I -12-4563
I -14-4585
I -18-4616
I -22-4656
I -12-4563
I -25-4673
I -26-4678
I -3-4504
I -17-4608
I -17-4608
I -10-4550
I -22-4656
I -10-4550
I -16-4601
I -3-4504
I -3-4504
I -3-4504
I -3-4504
I -13-4575
I -12-4563
I -3-4504
I -3-4504
I -9-4541
I -14-4585
I -11-4558
I -14-4585
I -11-4558
I -9-4541
I -7-4530
I -3-4504
I -3-4504
I -3-4504
I -15-4595
I -20-4642
I -12-4563
I -12-4563
I -12-4563
I -5-4516
I -25-4673
I -15-4595
I -10-4550
I -22-4656
I -16-4601
I -20-4642
I -11-4558
I -11-4558
I -11-4558
1 -23-4662
I -23-4662
I -22-4656
I -22-4656
I -22-4656
I -22-4656
Page.
35
6
70
70
66, 74
38
15
39
30
33
22
72, 76
70
42
64
8
21
64
31
55
66
63
16
34
32
51
51
62
10
22
7, 62
71
13
1
42
32
2
19
36
75
78
12
73
42, 73
42, 72
42, 72
31, 69
S
31
19
40, 71
42, 73
10
17
25
42, 72
42, 72
42, 73
4, 59,
61, 78
22, 30
30, 42
53
38
4, 59.
61, 78
72
58
14
5
75
75
76
49
49, 75
45
46
46
46
Rung.
oard of Ta
17157
17158
17173
17174
17254
17410
17411
17496
17686 ....
17730
17799
18000
18001
18044...
18121
18168
18279
18280
18281
18282
18309
18367
18449
18457
18690
18720
18721
18746
18936
19016
19057
19167
19224
19306
19395
19409
19507
19567
19593
19614
19786
19941
19982
20055
20103
20138
20169
20303
20482
20512
20535
20664
20714
20924
21189
21392
21393
21566
21581
21686
21741
21859
21916
21928
21943
22072
22077
22111
22194
22236
22365
22371
22454
22502
22561
22667
22717
23184
23189
23744
23758
Rung No.
I -22-4656
4:.
I -22-4656
45
I -22-4656
tt
I -22-4656
17, 45
I -18-4616
15
I -22-4656
U
I -22-4656
61
I -20-4642
I -16-4601
n
I -15-4595
IS
I -16-4601
70
I -11-4558
7s
I -U-4558
I -16-4601
3
I -11-4558
M
I -20-4642
n
I -3-4504
10
I -3-4504
If.
I -3-4604
u
I -3-4504
10
I -20-4642
70
I -9-4541
M
I -22-4656
70
I -20-4642
20
I -25-4673
31
I -17-4608
M
I -17-4608
,
77
I -24-4667
M
I -12-4563
6. 62
I -23-4662
ft
I -22-4656
3
I -11-4558
07
I -12-4563
37
I -17-4608
72
I -14-4585
I -9-4541
a
I -16-4601
a
I -24-4667
07
I -24-4667
01
I -24-4667
07
I -13-4575
I -9-4541
78
I -17-4608
M
I -8-4536
26, 27,
68
I -9-4541
11
I -10-4550
33
I -13-4575
U
I -18-4016
6,
27.
at,
I -13-4576
16
I -22-4656
I -22-4656
OS
I -23-4662
I -9-4541
75
I -12-4563
4N
I -18-4616
36
I -19-4626
II
I -16-1001
7
I -25-4673
7(1
I -17-4608
tt
I -25-4673
68
I -25-4673
70
I -20-4642
8
I -23-4662
I -15-4595
18. 65
I -16-4601
27
I -15-4595
17
74
I -9-4541
75
I -17-4608
11
I -8-4536
76
I -10-4550
U
I -13-4575
65
I -20-4642
7. .
I -22-4656
4
I -14-4585
I -20-4642
27
I -22-4656
75
I -26-4678
51
I -16-4601
20
I -10-4550
I -22-4656
66
I -12-4563
69
G
e
n
e
r
a
t
e
d
f
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L
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Z
h
a
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g
(
N
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w
Y
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U
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v
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t
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)
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2
0
1
3
-
0
1
-
2
2
0
3
:
4
7
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#
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II
Rung No.
I -20-4642
I -16-4601
I -20-1642
I -22-4S5
I -4-4510
I -22-4656
I -22-4656
I -22-4656
I -20-4642
I -9-1541
I -14-4585
I -18-4616
I -18-4616
I -16-4601
I -20-4642
I -24-4667
I -14-4585
I -1-4488
I -1-4488
I -1-4488
I -1-4488
I -1-4488
I -1-4488
I -1-4488
I -3-4504
I -22-4656
I -10-4550
I -14-4585
I -14-4585
I -23-4062
I -13-4575
I -14-4585
I -12-4563
I -25-4673
I -16-4601
I -3-4504
I -3-4504
I -3-4504
I -16-4601
I -25-4673
I -10-4550
I -10-4550
I -12-4563
I -25-4673
I -10-4550
I -9-4541
I -25-4673
I -12-4563
I -14-4585
I -9-4541
I -9-4541
I -9-4541
I -9-4541
I -20-4642
I -23-4662
I -21-4649
I -25-4673
I -16-4601
I -24-4667
I -20-4642
I -20-4642
I -26-4678
I -20-4642
I -17-4608
I -20-4642
I -16-1601
I -22-4656
I -9-4541
I -9-4541
I -16-4601
I -12-4563
I -5-4516
I -22-4656
age
59
18
61
78
64
67
3
64
61
8
8
31
8
35
50
8
43
26,68
70
46
75
62
3
54
76
2
14,47
42, 72
42,73
42,72
63
63,78
11
S3
68
44
44
77
40
14,38
64
87
67
71
64
6
37
7,45
72
17,52
18
37
U
11
2,5
71
75
78
62
32,69
25
72
75
ung.
oard ot Ta ppeas Con.
30071..
30204
30308.
30309.. -
30448...
30673...
30903 ----
30906 ----
30943
30984 ...
31095
31121
31305 -
31522 -
32297
32298..
32370..
32599
32600
34015
35075
36261
36901
39931...
40643-
41474,
41599.
41648.
41675
Offce decsons (I. T.):
2515
2516 -.
2517
2518
2519
2520
2521
2522 -.
2523 -
2524
2525
2526
2527
2528
2529
2530
2531
2532_-
2533
2534
2535.
2536..
2537
2538
2539
Offce decsons (MS.):
98
100
101
102
103
Mmeographs:
3787
3789
3791
3794
3S0O.
3802.
Rung No.
Msceaneous
I -8-4536
I -22-4656
I -2-4496
I -2-4496
I -17-4608
I -25-4673
I -14-4585
I -10-4550
I -23-4662
I -12-4563
I -18-4616
I -12-4563
I -25-4673
I -18-4616
I -12-4563
I -12-4563
I -22-4656
I -22-4656
I -3-4504
I -1-4488
I -1-4488
I -17-4608
I -4-4510
I -18-4616
I -9-4541
I -22-4656
I -22-4656
I -10-4550
I -18-4616
I -9-1541
I -16-4601
I -1-4489
I -1-4492
I -2-4499
I -3-4507
I -4-4511
I -4-4512
I -4-4513
I -5-4517
I -5-4518
I -5-4519
I -8-4538
I -9-4543
I -9-4544
I -11-4559
I -12-4568
- s s
I -14-4587
I -15-4596
I -15-4597
I -16-4602
I -18-4618
I -20-4644
I -21-4650
I -21-4651
I -24-4668
I -2-4502
I -6-4527
I -11-4561
I -14-4591
I -19-1637
I -23-4665
I -2-4497
I -3-4506
I -7-4532
I -9-4545
I -16-4603
I -18-4617
I -1-4494
I -26-4680
Page.
G
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U
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v
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t
y
)
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n
2
0
1
3
-
0
1
-
2
2
0
3
:
4
7
G
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2
0
2
7
/
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u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
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D
o
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a
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,
G
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w
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#
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CONT NTS O CUMUL TI ULL TINS (I.T.) 1 TO 5 S. T. OR 1920 ND 1921 INT RN L
R NU 1-1,1-2, -, D-2, m-1, III-2, I -1, I -2, -, -2, T , I-2, O-1, D-2, III-1. n-2,
ND I -1.
Cumuatve uetn.
Income Ta :
December, 1019 (No. 1)
anuary- une, 1920 (No. 2)
uy-December, 1920 (No. 3) .Z
anuary- une, 1921 (No. 4) ._
uy-December, 1921 (No. 5)..
Saes Ta :
1920 (ST. 1-20)
anuary- une, 1921
uy-December, 1921
Interna Revenue uetn:
anuary- une, 1922 (No. 1-1).
uy-December, 1922 (No. 1-2)
anuary- une, 1923 (No. II-) _
uy-December, 1923 (No. II-2)
anuary- une, 1924 (No. III-)
uy-December, 1924 (No. III-2)
anuary- une, 1925 (No. I -1)
uy-December, 1925 (No. I -2)...
anuary- une, 1926 (No. -) .
uy-December, 1926 (No. -2)
anuary- une, 1927 (No. I-1).._
uy-December, 1927 (No. I-2). .
anuary- une, 1298 (No. II-1)
uy-December, 1928 (No. II-2).
anuary- une, 1929 (No. III-1)
uy-December, 1929 (No. III-2)
anuary- une, 1930 (No. I -1)
( III)
G
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U
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t
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)
o
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2
0
1
3
-
0
1
-
2
2
0
3
:
4
7
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/
2
0
2
7
/
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u
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3
0
0
0
0
0
8
9
0
5
4
3
4
4
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a
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O RD O T PP LS.
CUMUL TI LIST O NNOUNC M NTS R L TING TO
D CISIONS O T UNIT D ST T S O RD O T
PP LS PU LIS D IN T INT RN L R NU UL-
L TIN S R IC ROM D C M R 22, 1924, TO UN 30,
1930, INCLUSI .
The Commssoner acquesces n the foowng decsons of the
Unted States oard of Ta ppeas:
Ta payer.
Docket
oard of Ta ppeas.
No.
oume.
Page.
13055
12
556
3346
3
415
11903
10
646
9265
11
820
1598
6
1065
4211
3
1126
1929
2
253
1-1544
17
1324
14544
17
1324
4361
5
113
3522
4
589
17780
10
763
21860
17
17
9591
8
460
10847
10
849
3078
4059
787
9229
8
1260
3718
3
705
7476
7
305
7343
7
1230
11838
12
1252
1164
.
837
1907
4
1184
12075
12
1238
12616
12
1238
5656
9
347
9092
10
213
7290
7
1256
7289
7
1256
8690
8
693
383
2
1313
aron, Theodore
battor Reaty Co
bbeve Cotton Ms
ckerman- ohnson Co
cme Ms, Inc
cme, Pamers DeMooy oundry Co,
corn Refnng Co
dams, va, estate of.
dams, va ., e ecutor
dams, . G
dams Motor Co
damson, Chares ., trustee
damson, enry
daskn, erman
der Co., The
der, Segmund
. G. S. Mnng Co.
guar Land ssocaton, The
|a Coa Co
|a nameng oundry Co
kron Rubber Moud Machne Co
abama Coca-Coa ottng Co
ba o Paper Co
e ander County Natona ank
e ander County Savngs ank
e ander Manufacturng Co
merca Cabes, Inc.2
Men, .
en, Mrs. . .
en eta., ames ., e ecutors
en, Lous
1 Rung No. 4678 Incudes a acquescence and nonacquescence notces pubshed n the Interna Reve-
nue uetn servce to and ncudng une 30,1930.
1 cquescence reates to a Issues e cept as to tentatve ta .
state ta decson.
(1)
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2
0
1
3
-
0
1
-
2
2
0
3
:
4
7
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2
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3
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0
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8
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5
4
3
4
4
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2
Ta payer.
erton, Robert
ance Mng Co
ng Cory Co.1.
sop, dward ., estate of
sop, dward ., e ecutor
umnum ake Co
mercan uto Trmmng Co. eta
mercan o Co
mercan Coortype Co
mercan Cream of Tartar Co
mercan eature m Co.
mercan et Co
mercan rut Growers, Inc
mercan- awaan Steamshp Co
mercan Lace Manufacturng Co
mercan LaDentee, Inc
mercan Manganese Stee Co
mercan Ms Co
mercan Natona ank of St. Pau.
mercan Packng Co., Inc
mercan Photo Payer Co
mercan Seatng Co. .
mercan Seatng Co.
mercan Seedess Rasn Co
mercan Show ntertanment Co
mercan Stee Co
mercan Stone Co
mercan Teegraph Cabe Co
aencan 3 Way Lu fer Prsm Co., Inc
ercan Trust Co., admnstrator 6
nercan Trust Co., trustee
mercan ave Co
mes, Chares Lesey, e ecutor
mes, Chares W., estate of.
mes, ohn S
mgo Coa Co
namosa armers Creamery Co
nderson, Isabe
nderson, ohn, estate of
nderson Gustafson
ndeson- arngton Coa Co...
nderson Lnd Manufacturng Co
nderson, Gustave ., trustee
nderson Lumber Co., .
ndrews, ffe, estate of
ndrews et a., ames M., e ecutors
ngeo Co., G
ngeo rut Co., G
nger, dward
nnston Cty Land Co
nthracte Trust Co., admnstrator estate of ohn
oseph rown, deceased
oard of Ta ppeas.
Docket
No.
16431
15649
6606
6519
6519
4669
8444
3430
5418
7901
2078
4437
14882
9043
4225
8293
611
8145
1994
14702
30751
33212
1173
1290
4772
14676
15725
7679
8368
10898
2967
5935
12962
29173
4696
10520
10520
8895
11684
29352
1394
32561
1556
743
3074
32561
9103
13096
13096
10869
10869
25958
1368
4947
oume.
13
10
7
7
7
6
3
10
2
11
18
11
7
8
1
7
2
14
2
4
14
15
5
7
9
2
9
13
18
4
14
14
9
8
13
5
10
3
6
2
10
15
13
13
12
12
17
2
cquescence reates to a ssues e cept the thrd ssue.
ICstate ta decson acquescence reates ony to 1912 trust.
cquescence reates to ssues nvovng offcers saares and ega e cuses.
cquescence n decson n so far as t reates to ncuson n nvested capta of (1) 2o,000 pad by
ta payer n IMS for nventon on whch patents were pendng, (2) .1SO0 for counse fees.
cquescence reates to frst ssue of decson.
state ta decson.
G
e
n
e
r
a
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e
d
f
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(
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2
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1
3
-
0
1
-
2
2
0
3
:
4
7
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5
4
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Ta payer.
utcch, Grego
ntonopos, George
ntonopos, ast
ppaachan Reaty Co
ppe et a., bert ., e ecutors
ppe, acob, estate of
ppeby, |r., Scott
ppegate, Raph ndrew, e ecutor. .
ragon Ms
ransas Compress Co
rchbad, |r., et a., R. W., e ecutors.
rchbod, ohn ., e ecutor 1
. rcher Paper Co., The
rcher-Strauss Rubber Co
rds Co
rmstead, D. L.
rmstrong, rd
rmstrong, .
rmstrong, .
rt rass Co
rter Pant Gass Co
rthurs, W. C
rt Meta Constructon Co
ssocated udng Co
ssocated Denta Suppy Co
ssocated Gas ectrc Co
tkns, ma oster
tkns, ohn ., estate of
tantc Coast Lne R. R. Co
tantc Coast Lne R. R. Co.2
tas Pvwood Co
tas Tack Co
tterbury, Grosvenor
ubrey, George
uchncoss, . owand, e ecutor.
udtorum Co
uerbach, Sao
ut Wborg Co
ut Wborg Co. of New York
ut Wborg Co. of Uruguay
ustn, . Pumer, estate of
ustn, Co., M.
uther, oseph P
uto Specates Manufacturng Co
utomatc re arm Co. of Deaware..
utomatc re arm Co. of New York.
utovent an ower Co
very, Thomas
von Ms
von Street Trust
ver, Chares
yer, Wam P.
oard of Ta ppeas.
No.
oume.
Page.
19057
18
513
3925
3
1236
4013
3
1236
9685
12
52
7041
10
1225
7041
10
1225
25046
18
565
7970
10
705
18044
17
257
4378
8
155
4695
4
483
8629
8
919
342
1
634
17194
25188
809
13023
12
679
14750
I
21952
13
1248
28227
3297
6
384
232
1
296
3297
6
384
19841
15
583
1574
2
1256
2468
3
374
4943
4
493
12733
14
863
5650
9
1022
2296
2
263
15485
9
140
3377
9
140
2505
2
892
10983
9
1193
25797
17
156
4725
9
1322
195
1
169
4409
8
70
24312
11
947
4483
5
163
1976
2
67
16655
10
183
24376
17
665
24375
17
665
24377
17
665
9357
10
1055
14883
13
867
2778
5
736
10449
15928
455
10292
13
1195
10292
13
1195
240
5
282
27688
11
958
6246
7
143
4459
3
553
6442
7
324
16230
10
11
1 state ta decson acquescence reates to thrd ssue of decson.
1 cquescence reates to frst ssue of decson.
1 onacquescence notce n the case of Orosvenor tterbury (C. . I -1, 4) recaed.
G
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f
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1
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1
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2
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4
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
.
ach, L., estate of
ackus Sons, |r.,
adger Takng Machne Co
ahr, W.
aey, ohn W
ae, e ander..
ae, Mrs. e ander
ard, ames
ard Machne Co., The
pker Lumber Co
aaban atz Corporaton
afour, Sr Robert
a Roer earng Co
amert, . T
ank of rady
ank of Commerce
ank of artsve, The
ank of Rockngham
anna Manufacturng Co
anse, ndrew
anta Refrgerator Co
arker, George ., estate of
arker, 0.
arnard, Mrs. C.
arnes Coa Mnng Co. and Coumbus Coa
Mnng Co
arncttc, atherne Wknson, soe and ony her _
arrows, etcher L
arry, .
arry, ohn nthony
artey, R.
arton Wson, Inc
artron, .
ass Pubshng Co., . P
astrop Mercante Co., Ltd
atson-Cook Co
aumann ct a., Ma , e ecutors
aumhoff, George W
ay Rdge Land Improvement Co
ay State Securtes Co
each musement Corporaton
eacon Coa Co.2
eaver Lumber Co
ecker, S. L
ecker ros
ecker Paper Co
eccr, oseph G
ekns ousehod Shppng Co
e, ames
e-Rogers Zemurray ros. Co.
eamore, Davd
ee Ise Creamery Co
ee Ise ast Sde Creamery Co.
ettgrath, W.
10637
3777
10239
5020
3901
4784
4783
9393
201
3271
5386
2344
15233
3227
IN .I
4800
999
4682
762
20502
17164
8728
3583
22454
3209
16379
16743
3158
99
1724
2623
11913
2721
11742
8124
5458
6981
1624
21217
3685
18288
11894
3534
9400
9949
16954
4555
2367
8618
21981
8859
1220
6385
12317
12317
2018
9
6
8
10
3
12
12
4
2
2
6
2
15
8
3
10
1
3
1
16
15
13
3
S
16
4
1
2
4
13
3
12
7
6
8
3
16
3
14
9
9
8
9
10
14
13
7
4
3
14
14
3
1 cquescence reates to ssues 2 and 4 of decson.
1 cquescence reates to second and thrd ssues of decson.
G
e
n
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r
a
t
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d
f
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L
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(
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2
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1
3
-
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1
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2
2
0
3
:
4
7
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#
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5
Ta payer.
emont Stone Co
erdge O Co
et Raway Co. of Chcago 1
ems, sr., Thomas
endhem, . M., estate of
endhem, enretta
endhem, uus, e ecutor
enham Ice Cream Co
enne, George ., estate of 2
ent-ey, .
enton County ardware Co
erg Industra coho Co., Davd
erzz ros. Co
ern, Inc., Irvng
ermngham Lumber Co
ernard s Inc., George
ernd, ohn M
ernsten, . R
ernsten, anne
ernstorff, ans
ernuth-Lembcke Co
erthod, zabeth
esse, Ma we
essemer Investment Co
est rewery Co
ettendorf, oseph W
ettcns, bert
ckett-Swett Lvestock Co
ckcy, Mton
g Rapds ectrc Co
g Western O Gas Co
fc Co., Raymond R
s ros. Memora Corporaton _
ngham, rthur W., e ecutor
rd, Samue
rkeand, .
rmngham Trust Savngs Co., c ecutor.
ru, enry
shop, ohn ., trustee
shop, Martha ., e ecutr 2
shop, Roand P
shop, Samue D., estate of2
shop, Wam T
tter Root Stock arm
by Co., otham
|ornstad, Otto
ack Yates, Inc
acke, . W
ackstone, D. L., admftstrntor
ar, eneer Co
ake, ohn . L
tzer, Ma
och, .
odget, anne
odget, Wam, estate of
odget, Wam P
odget et a., Wam P., e ecutors
Docket
oard or Ta ppeas.
No.
oume.
Page.
/ 12410
28531
12
1159
6296
11
127
4289
9
304
3100
2
255
7964
8
158
7963
8
158
7964
8
158
3401
5
97
12962
13
105
2512
5
314
9896
10
869
13102
13
1349
22388
10
1307
3049
2
377
2654
1
1201
5410
8
716
3340
4
291
1258
6
323
1258
6
323
4054
8
787
17018
17
599
7248
12
1306
4971
3
567
5295
8
1011
19139
1G
1354
2035
3
378
1488
2
535
8347
12
326
297
1
544
14868
9
737
7150
9
427
15399
15
320
1346
7
1182
20303
15
1001
6721
4
259
3464
3
209
7440
5
245
610
1
416
29173
18
580
20009
14
130
14007
13
784
20069
14
130
14008
13
784
5777
10
81
15577
14
144
18115
12
20
3442
2
873
2282
2
747
10401
12
456
6703
5
886
7461
9
651
5443
3
696
10076
6
563
29393
13
1243
10344
13
1243
29392
13
1243
10344
13
1243
1 cquescence reates ony to ssues nvovng computaton of net ncome for 191S and 1919
sve deprecaton restored to ncome for 1918 and 1919.
state ta decson.
state ta decson acquescence reates to deductons for attorneys fees and e ecutors con|
and e ces-
G
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r
a
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e
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f
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(
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2
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1
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-
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1
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2
2
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3
:
4
7
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#
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6
Ta payer
odgett, ohn W
ogg Lttauer, Iuc
oom ros., Inc
oomfed, rederck
ow et aL, dee M., admnstrators 1
ow, George P., estate of1
udworth, Mrs. W. M
ue Rdge Overas Co
ue Rver Pacer Mnng Co
n men tha, S.
um s, Inc.5
oadwee, Isabee M
oa s Ros Corporaton
oas, Chares S., estate of
ockhoff, arry W
oercke Runyou
ogart, Lacey L., admnstrator Leon C. Rggs
estate
oggs, Mary Waker, e ecutr 1
oggs, R. ., estate of1
oggs uh, Inc
oge Co., Inc., W. 8
oker Cutery ardware Co., Inc
ouger- rankn Lumber Co
onaparte, en C, estate of
onneve Lumber Co
onne ros., Inc
onwt Teer Co
oone, D. W._
oone, .
oone, ames D
oone, W.
ooth urnture Carpet Co
orden, Spencer, estate of1
orden, |r., Spencer, e ecutor 1
osshardt, rank
oston Odsmobe Co
oston Store, Inc., The
oston Structura Stee Co
otsford-Constantne Tyer
oucher-Cortrght Coa Co
ouden, Chares
owen, an
owman, .
owman, . W
owman, . Wam
oyce tract Co
ovd, .
o yer Co., .
oyne Cty Lumber Co
oynton, Chares T., estate of
oynton, N.
state ta decson.
cquescence reates to saary ssue.
cquesccnce reates to deducton of e penses (or annua pcnc.
Docket
No.
35356
5297
9440
6501
30077
30077
6285
10210
6299
17082
2523
10743
22370
1139
3206
2981
1932
12309
12309
9269
18119
2208
13267
8077
1652
3657
7806
21859
27824
28700
3053
3052
30G1
3163
426
5909
5909
4436
11239
4216
836
9759
11616
6764
7965
2690
15850
7467
18935
9327
6751
5739
10495
840
9145
oard of Ta ppeas.
oume.
13
3
10
6
16
16
7
6
8
12
7
17
11
16
2
3
3
2
11
11
6
12
7
1
2
15
17
9
9
9
9
6
6
6
4
16
7
1
10
7
7
2
16
8
16
9
6
4
10
5
11
G
e
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e
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f
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(
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U
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t
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)
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2
0
1
3
-
0
1
-
2
2
0
3
:
4
7
G
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3
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0
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8
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5
4
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4
4
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#
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7
-
Ta payer.
oard of Ta ppeas.
No.
oume.
Page.
5342
1
6909
6
434
6910
8384
14
339
47
1
111
5621
4
995
7434
7
818
17221
14
1153
5399
5
1290
8572
5
297
8432
5
297
1545
3
1086
1546
3
1086
7390
4
108
20124
10
1118
2836
2
821
730
6
579
730
6
579
2801
4
42
2801
4
42
5844
9
423
5844
9
423
539
1
269
21393
17
704
21393
17
704
78
1
417
14005
10
496
14321
17
711
11406
I
19365
12
500
28186
11672
11
62
21074
14
1351
27921
17
1173
13658
14
797
20063
14
801
9173
10
306
1905
2
53
1904
2
48
3897
7
414
3896
7
414
3897
7
414
11647
8
969
20527
9
1008
13792
13
174
7747
10
510
13932
27779
13
981
31427
7994
6
895
499
1
502
3675
4
1129
8191
9
521
11161
10
1036
11224
10
1036
oynton Gasone Co.
radford Co
radey, W. C
radshaw, Rosen a W
rady, dwn
raey, . R
ray- erguson Gn Co
rand, fred
rand, Php R
randes Investment Co
randes Sons, . L
randenburg, dwn C, e ecutor estate of George
M. Oyster, |r
randon, D. S
rannun Lumber Co
rauer, Pau, estate of
rauer et a., Mary ., e ecutors
ray, zabeth ., admnstratr estate of Rch-
ard ray
ray, Rchard, estate of
rehmer, ugust . W., estate of1
rehmer et a., Otto T., e ecutors 1
reevoort ote Co
rewer, . R., admnstrator
rewer, Magge, estate of
rewer Co.,
rewster Laundry
rcke, Maude nea
rer Coeres
rggs Turvas
rgg8-Weaver Machnery Co
rghton Syndcate No. 1
rnkerhoff- ars Trust Savngs Co.
rsto, P. L_.
rtt, en|amn T
rtt, Mary , estate of
roadhead, met N., estate of
roadhead, Shedon ., estate of
roadhead, Wam ., admnstrator.
rodbeck,Lucy
ronson, W. S
rookyn Trust Co., e ecutor 1
rooks Sons, M. S
rown, Chares.
rown, dward T
rown, dwn M
rown, enry I
rown, acob ., trustee.
rown, ames
rown, ames Crosby
state ta decson.
1 cquescence does not reate to net oss deducton.
cquescence reates to deducton of amounts e pended for resurveyng, mantanng, and markng
boundares of pettoner s property and the cost of removng a boer and nstang a now one.
G
e
n
e
r
a
t
e
d
f
o
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L
n
Z
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a
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g
(
N
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Y
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k
U
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v
e
r
s
t
y
)
o
n
2
0
1
3
-
0
1
-
2
2
0
3
:
4
7
G
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.
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/
2
0
2
7
/
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u
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3
0
0
0
0
0
8
9
0
5
4
3
4
4
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8
Ta payer.
oard of Ta ppeas.
No.
oume.
Page.
4947
3
486
6056
4
74
16200
14
609
11162
10
1036
12748
13
832
2975
4
56
9748
10
106
7967
8
112
12709
14
609
12703
9
719
11134
21634
1370
4937
4
1191
10995
8
1164
25154
16
485
1037
6
914
93
1
320
129
1
342
4055
8
787
176
1
83
7892
6
881
3719
5
1135
3719
5
1135
7447
15
727
6568
9
171
25155
16
485
25157
16
485
25172
16
485
12988
12
434
8779
15
435
8779
15
435
5855
6
335
2306
3
503
3170
5
947
3170
5
947
6035
9
1155
6035
9
1155
6888
7
993
0888
7
993
7566
7
456
13117
12
51
1311
3
1134
5782
6
1297
4232
4
4
8601
12
879
12026
13
781
1697
5
553
2749
11
275
2038
3
1158
21311
13
892
2106
2
143
12611
5
1003
8673
13
579
4753
12
1209
3292
3
20
13099
11
1005
13100
11
1005
2050
6
412
rown, ohn oseph, estate of .
rown, Rves 8., e ecutor
rown, . L
rown, Thatcher M
rown, Water
rown, Warren
rown rown, Inc
rown Co., . II
rown Coa Coke Co., R. L--
rown Lumber Co
rowne, dward I., estate of
rowne, Water D
rownfed, Maro
rownng, . T
rownng Co., . M. M. S
rownsve Matamoros rdge Co
ruce uman Drug Co
ruere, enry
run Coa Co
runer Wooen Co., Inc
runner, rnod W., estate of
runner, mma ., e ecutr
runton Studos, Inc., Robert
rush, George De orest
ryson, C.
ryson, M. T
ryson, T. W
uck, en ., estate of
uckeye rewng Co
uckeye Producng Co
uedngen, Robert
uena sta ardwood Co
uffao orge Co
uffao Steam Pump Co
ugher, Irederck ., estate of
ugher et a.,- rederck McLean, e ecutors.
u, rchbad ., estate of
u, rnest M., e ecutor
uard, ernce
uock, .
urgess, Rchard
urg, Oscar
urgo, .
urgucres Co., Ltd., . M
urke, Thomas, estate of
urke ectrc Co.2
urkhart, Rosa
urktt, George W., estate of
urev Tobacco Co. of rankfort
urngton Overa Manufacturng Co., The.
urns, .R
urns, Samue
urns, W.
urnsdc Stee Co
urr, erome P
urr, Water C
urt se et a., ertram W., e ecutors
stdto tu decson
cquescence reates to ssue 5, as to patent group No. 2, and ssue 6.
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9
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
usche, . C.
ames.
Co
uter Grocery Co. et a.
uter, Inc., ohn W
yfed, Gadys R
yrd Prntng Co
yron Shoe Manufacturng Co., Inc.
ywaters, . unter
vwaters, P.
ywaters, R. S
Co.
c.
Cadac utomobe Co. of Inos.
Carns, .
Caforna rewng ssocaton 1
Caforna Canneres Co
Caforna Deta arms, Inc
Caanan Road Improvement Co...
Camden urngton County Ry.
Camden Wooen Co
Cameron, W.
Campen, rtz
Campbe, . O
Campbe et a , Nancy Carver Lathrop, trustees.
Campbe, Nge Lese
Canaan, arry and ate
Canton rt Meta Co
Canton Stee Ceng Co
Cantre Co., The red
Canvon Lumber Co
Cape, . W.
Capta Cty Investment Co
Capto ote Co.1
Capto Park ote Corporaton
Capto Securtes Co
Capto Theatre Co
Caps, Mary, deceased, estate of
Capps, Lna
Carbo Petroeum Co.
Carey, C. W.
Carse Garment Co
Carmchae, D. L
Carmchae, .
Carney, Rchard
Carney Coa Co.
Carpenter, D. M
Carpenter, ohn
Carpenter, Mary
9447
10202
10755
2952
5978
1572
989
14902
463
6288
6287
6289
2657
18143
3903
2228
9820
13303
4991
10655
9313
21986
5631
16617
373
304
7111
7112
3141
4917
7069
5376
6610
7134
7705
3031
6224
6720
4451
9524
2432
3632
12061
12493
7027
5562
8496
11072
11073
11071
10
2
4
1
2
15
1
7
7
7
5
12
5
2
6
12
3
12
.)
10
G
15
1
1
(
6
3
4
7
4
5
3
8
4
2
12
(
3
5
12
6
10
8
8
8
1 cquescence reates to deducton of contrbuton to State rewers ssocaton and affaton wth
the emsr Co.
cquescence does not reate to that part of decson nvovng appcaton of yers decson (1 . T. .,
am.
state ta decson.
cquescence reates to a ssues of decson e cept fourth ssue.
cquescence reates ony to ssues 2 and 4 n decson.
cquescence reates to ssue No. 2 and wth respect to fsca year ended May 31,1U17, under ssue No. 1.
4090 30 2
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10
Ta payer.
Carpenter, Mary ., admnstratr .
Carpenter, Maud ., estate of
Carr, . Lawrence
Carr, atheen M
Carro Chan Co.1
Carro Mercante Co., . S
Carter Co., W. W ----
Carter, MacDonad Mer, Inc.
Carter, Warren
Case Pow Works, . I
Cass, vn C
Cassdv Co., Inc
Caswe Co., George W
Ceuod Co
Centadrnk ters Co., Inc
Centra musement Co
Centra uto Market
Centra Savngs ank
Centra States Coa Co
Centra Wsconsn Creamery Co
Chamber of Commerce udng Co
Champon Coated Paper Co
Champon Stove Co
Chander, .
Chander, Maran Ots
Channon Manufacturng Co., ames
Chapn Laundry Co
Chappeow dvertsng Co
Chareston Securty Co., e ecutor
Charters Creek Coa Co
Chatham Phen Natona ank
Chattanooga Mattress Co
Chatterton Son
Cheeseman, W. C
Cherokee Ochre Co
Chcago cceptance Co
Chcago re rck Co
Chcago, Indanapos Lousve Ry. Co
Chcago Insuated Wre Manufacturng Co
Chcago Raway qupment Co
Chcago Starch Co
Chcago Takng Machne Co
Chds Co., W.
Chshom s Sons Co., Wm. (Chshom Shove Co.).
Choate, |r., Chares ., estate of
Chormann et a., gnes . C, e ecutors
Chormann, rederck, estate of
Choynsk, erbert
Chrstensen, N. P
Chrstopher, L.
Chrstopher Co. of Caforna, L.
Chrstopher Co. of Deaware, L.
Church oes Co
Cncnnat Mnng Co
Ctzens Loan ssocaton
Ctzens Natona ank
oard of Ta ppeas.
No.
oume.
Page.
11070
8
675
11070
8
675
18282
15
1042
18279
15
1042
104
1
38
4222
11744
1
1157
689
1
849
12954
14
522
9605
11
900
664
3
981
19890
16
1341
9368
11
190
13878
14
15
8543
19459
989
5214
6
662
2418
2
886
8327
7
973
5006
10
1408
8735
4
1134
13350
15
390
9598
11
720
19279
10
433
870
1
656
4039
3
146
16259
16
1248
6803
8
959
7650
6
609
12688
13
1090
3843
4
1269
9652
10
984
107
1
460
3714
4
464
6057
5
105
20811
15
422
9846
9
406
12764
12
150
11063
10
180
11152
10
1143
2380
10
1195
3964
4
452
18438
13
487
19427
13
1364
12363
13
154
4127
3
855
1840
3
1070
13552
16
71
10345
10
920
10345
10
920
14448
14
9
4380
7
625
8931
13
729
16085
13
729
17448
13
729
3526
4
1067
8427
8
79
412
I
518
6148
6
156
Nonacquescence notce n case of Carro Chan Co. (C. . I -1, 4) recaed
cquescence reates to cost of bank budng, ts physca fe from date of
1913, vaue.
acquston, and March 1,
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11
Ta payer.
oard of Ta ppeas.
No.
oume.
Page.
3373
2
1239
13249
14
1155
11730
14199
8
468
28912
17
637
22111
17
637
7973
10
925
820
6
1085
8015
12
425
20103
36901
453
536
1
491
1707
2
555
8049
9
460
5785
4
356
3660
5
1291
73
1
87
169
1
234
17294
14
1209
28141
15
1410
6029
8
49
6929
15
934
6930
15
934
5456
3
429
8603
16097
1242
7136
9
547
3801
3
215
6604
8
468
4685
6
415
5930
8
421
11556
12498
1
12
702
28049
1879
3
1071
7361
9238
87
7167
7
475
9134
7
903
9133
7
903
4891
3
835
3004
3
947
764
1
534
26672
16
1426
5986
5
102
11148
7
913
550
1
561
20916
12
256
1414
3
622
5823
4
1126
9582
10
1085
3209
3
891
9170
6
623
10182
6
249
11133
8
52
5810
3
1163
Ctzens Trust Co. of Utca...
Ctrus Soap Co. of Caforna,
Ctv Gas Co. of Norfok 1
Cty Natona ank
Cty Natona ank of Commerce
Ctv Park rewng Co
Cark, . ., estate of
Cark, rank ., e ecutor
Cark, Grace Scrpps
Cark, Grace Scrpps and Re
Cark, arod
Cark, Le M
Cark Co
Cark Co., ames T
Ceveand ome rewng Co
Ceveand Snow-Church Co
Ceveand Trndad Pavng Co. of Deaware-
Ceveand Trust Co., trustee
Ceveand Wooen Ms
Cne, Mrs. a Ppes1
Cne, W. D.
Coates, ane
Coatesve oer Works
Cobb, L. S
Cockran, . T
Cocks-Cark ngravng Co
Codrngton, the M
Coffn, Irene
Coffn, Wnthrop
Coghn ectrc Co
Cohn Sons Co., M. .
Cohn-Goodman Co
Coe, Mrs. W. C
Coe, W. C
Coeman, ames
Cotz, en|amn
Coege Pont oat Corporaton.
Cons, red ..
Cons, W. C. and C. C
Cons and wfe, W. D
Conson, ohn W
Comer-Green Lumber Co.4
Coumba Theatre Co
Coumbus read Co
Coumbus Cannng Co _
Coumbus Coa Mnng Co_
Co vert, Warner L
Combs, sr., W.
Comey ohnson Co
Commerca Co. of gypt, uc.
cquescence In so far as decson determnes that Cty Gas Co. of Norfok and rgna Raway
rer Co. were affated wth each other.
cquescence reates to ssue as to whether proceeds of a note coected n 1919 represents ncome for
year aso decson as to ffth ssue.
to aowance of offcers saares,
to deprecaton aowance.
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12
Ta payer.
Commerca urnture Co__
Compton, nna L., e ecutr
Compton, orace ., estate of
Comstock-Caste Stove Co
Concord ectrc Co
Conen, Wam
Coney Tn o Corporaton
Conn, acob
Connectcut ectrc Manufacturng Co
Connectcut Natona Pavements, Inc
Conne, zra ., estate of1
Connorzed Musc Co
Conover Co., C.
Conrad ardware Co
Conrad Shoe Co
Consodated ectrc Lamp Co
Consumer s Coa Co
Consumers Ice Co
Conway, dran C
Cook, . G
Cook, ohn
Cook, R.
Coon aey State ank
Cooper, . . T., estate of
Cooper, . T
Cooper, C.
Cooper, dna
Cooper, Samue
Cooper- rannan Nava Stores Co
Copand, Davd
Corbett, ott R
Corbett, amton
Corbett, enry L
Corbett, Merrtt
Corman Co
Cornng Gass Works
Coronado O Gas Co
Corscana Gas ectrc Co
Cotton Concentraton Co
Couch, . C
Couter, |r., Chares
Covert, sther ee1
Covngton Cotton O Co
Cowe, Matte, and Mona Cowe, e ecutrces
estate Robert Cowe
Cowe, Robert, deceased, estate of
Co e, |r., et a., fred C, trustees
Co e, Sopha G
Crag O Co
Crak, ohn T
Crampton, atharne S., e ecutr 1
Crampton, Orson L., estate of1
Cranda orse Co
Crane, rederck G., estate of
state ta decson.
cquescence reates to a ssues e eopt aoway note Issue.
Docket
No.
6507
8519
8519
3347
4355
815
15693
11978
7549
3448
12368
7179
9830
11584
597
555
8121
12704
1614
1741
6331
3643
11352
12634
3144
2206
2206
959
10068
9557
11836
16643
11837
18733
22491
6227
9826
10503
4499
4625
202
8181
20048
5534
691
691
6805
2121
9706
20230
2283
11362
11362
7924
10695
15374
16789
oard of Ta ppeas.
oume.
8
11
11
4
7
1
17
16
6
3
11
7
7
8
1
1
10
11
9
5
4
3
13
9
7
4
4
1
9
15
8
8
8
15
16
13
9
14
6
4
1
6
12
12
3
5
10
10
8
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2
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1
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1
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2
2
0
3
:
4
7
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0
8
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5
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4
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#
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13
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Crane, Rose P., e ecutr .
Cravens, Water
Crawford Loan bstract Co
Cray, ames R
Crayton, . S.
Cremn, .
Cremn, T. O
Crescent Cap Co., Inc
Crescent Coa Mnng Co
Crews, C. W., estate of
Crews, Davd W., estate of 1
Crews et a., rank .
Crew , ate Downng, admnstratr .
Crder ros. Commsson Co
Cry, Dane ., estate of
CrUy et a., George Snyder, e ecutors .
Crocker Co., Inc., . S
Croker, |r., Rchard
Crompton udng Corporaton
Cronnger Packng Co
Crosby, verett U
Crosby, Manard
Crosby-Chcago
Cross Investment Co
Crossman, are L
Crothers, R.
Crouse, Cavn
Crowe Corporaton
Crowe Lumber Gran Co
Crown Cemetery ssocaton.
Crown Manufacturng Co
Crown Wamette Paper Co
Cruger Co
Crysta ock Coa Coke Co. . .
Crysta Ice Co
Cuba Grapefrut Co., Inc
Cunan, . S
Cuman, |r., oseph
Cuum, Lous W-. ttS
Cummngs, W.
Cunnngham Sons Co., R.
Curee, W. S
Curry et a., bert, admnstrators
Curry, Wam L., estate of
Curts, rank G., estate of
Curts, arret ., deceased, estate of.
Curts, Lous
Curtss, George W..
1 state ta decson.
10695
15374
16789
3381
7681
6364
11306
9197
9198
10557
2208
981
9010
9010
981
128
5085
13847
17210
18747
17210
18747
11601
6090
4301
12981
3764
2365
11674
799
7052
19619
5841
3717
5411
366
118
532
9450
/ 11358
31010
11974
14518
31305
13134
7954
15828
16487
5914
29089
2678
10640
7099
1638
17730
17730
4720
442
11164
2327
3
10
7
11
5
5
10
6
8
8
8
8
10
15
15
15
12
2
14
4
14
14
2
10
5
11
5
6
6
12
14
11
15
14
5
16
3
9
10
G
17
17
6
3
10
4
G
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a
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(
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U
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)
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2
0
1
3
-
0
1
-
2
2
0
3
:
4
7
G
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2
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3
0
0
0
0
0
8
9
0
5
4
3
4
4
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Ta payer.
oard of Ta ppeas.
No.
oume.
Pace.
1987
3
828
2143
2
39
3721
3
401
14733
14734
35
11 : s
4
31
412(1
9
1173
. - 7
5
905
1057
2
615
194
1
54
1373
3
1042
110134
11
90
10840
7
1086
0302
4
499
929
S
276
1372
5
76
10299
10
1233
2616
2
359
20324
16
65
8219
8
981
3877
9
1212
2691
2
328
5497
6
281
6885
S
299
16915
17
142
1552
3
896
11227
10
191
6182
4
1236
15610
10
1036
11165
10
1036
15610
10
1036
10892
12
412
2459
2
102
25964
17
570
6926
7
811
643
2
444
20950
15
225
3331
3
343
118
773
532
12195
11
706
27766
17
927
18064
15
306
8112
7
286
5025
7
158
8573
7
279
10563
9
1365
13038
13
587
5663
4
1043
3005
2
729
8630
7
94
13574
14
205
23968
I
1 ft
29740
1035
19462
13
1376
Cusack Co., Thomas
Cushman Mam
Cuyahoga Co., The.
. T.
The.
Dagger Co.,
Day News Pubshng Co.,
Day Pantagraph, Inc.1
Dar ada Reaty Co., Inc
Da ton, dward
Daton Gymnasum and Swmmng Schoo, Inc.
Day, Davd R., estate of
Dana Co., Inc., Wam
Dane ros. Co
Darng, ay N
Darrow, rank D
Dartt Co., C.
Davs, C. R
Davs, I. M
Davs, Mary Cheney
Davs, Mrs. W. .
Davs, Sade S., e ecutr 2
Davs ndrews Co
Davs Co., The
Davs Yarn Co., Inc
Dayton Wrght rpane Co
Dean, nne L
Deck Camp Tank Co
Deerand Turpentne Co
Deano, ugene, estate of
Deano, Moreau
Deano, Moreau and Wam ., e ecutors
Dcatour everage Corporaton
De Lsser, orace, estate of3
De, Wam ., estate of
Deto Grass Rug Co.
Denhom Mc ay Co
Denta Co. of merca
Denver Crown Ry. Co._
Depost Trust Savngs ank, e ecutor.
Derby, da Portner
Derschug, ohn N.4...
Des Cognets, sr., Lous
Desher ote Co .
Des Mones Improvement Co
Detrot gg scut Specaty Co
Detrot Opera ouse, Inc
Detrot apor Stove Co
Deutsch, uus W ,
De an Co
De au , Norman
De ed, Sanford
De ore, red
1 cquescence reates ony to determnaton of pad-n surpus at date of organsaton and rates of
deprecaton.
state ta decson.
cquescence reates to frst ssue n decson.
4 cquescence reates to ssue 2 of decson
G
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a
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f
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(
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2
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1
3
-
0
1
-
2
2
0
3
:
4
7
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2
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0
0
8
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5
4
3
4
4
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15
Ta payer.
oard of Ta ppeas.
No.
oume.
Page.
5040
10012
1155
12733
14
863
2528
6
732
2528
6
732
13526
11
620
11637
14
1295
156
1
108
5193
8
722
548
1
507
8367
10
141
9730
6
1371
4563
3
65
1794
2
127
3575
2
983
475
1
641
863
1
1082
3874
11
39
14551
13
921
14387
19152
248
21392
17
1123
21392
17
1123
10300
11
812
13905
16312
(
256
4468
2
1098
1050
5
766
30943
18
230
9974
12
271
5762
9
1081
25359
12
271
1629
6
455
1629
6
455
11218
12
1102
11220
12
1102
11219
12
1102
18030
12
1102
288
1
372
5738
9
496
13329
9
218
11449
8
676
2276
2
469
19392
15
570
14954
14
1185
17254
18
374
20169
17
486
20169
17
486
3152
9
1216
18280
15
1042
18281
15
1042
7020
8
955
15815
14
225
17019
10
1150
3121
5
239
3644
4
743
8629
8
919
3351
5
711
Dewey, Mdred McLean
Damond Pow, eather Down Co
Dbbe, Leon N., e ecutor 1
Dbbe, Lous N., estate of1
Dcenso, epo
Dckey, Water S
Dckey Grocery Co., L. Z
Dcknson, .
Desng, red D., e ecutor
Detrch, Gustav -
Detrck, erman T
D, Lews
Dhng Cotton Ms
Ds ros. Co
D e Manufacturng Co
Dobson, ames
Dockum, arry
Doerfer, Magdaen, benefcary, etc
Doernbecher Manufacturng Co
Doerschuck et a., George C, e ecutors and trustees
Doerschuck, Gustav . L., estate of1
Doherty Co., en C
Dog, Inc., Wam S
Domenco ante s Sons, Inc
Donaghey Rea state Constructon Co
Donadson, R. Goden
Donadson Co., Inc., L. S
Donadson Iron Co
Donadson Reaty Co
Donason, re M., e ecutor 1
Donason, ohn ., estate of 1
Dorn, Lous, estate of
Dorn, Rene
Dorn, R. . -
Dorn Co., R.
Dougas, George P. and esse P
Dougas Park ockey Cub
Douty, . ...
Downg, Robert
Downng Co., T. D
Dudey W. S.
Duffea et a., Dve ., e ecutors..
Duke, Nanane
Duany, George W., estate of
Duany, |r., eta., George W., benefcares
Duncan Co.,
Dunn, esse P
Dunn, Dewtt C
Dunn Co., ohn
Dunn Manufacturng Co
Dunson Ms2
Durabt Stee Locker Co
Durkn, P. rank
Dustn, nne M., estate of I
Dyer et a., George R., e ecutors 1 1
state ta decson. ,
to ssue wth respect to stntuto of mutous.
utes to thrd ssue of decson.
G
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2
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1
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1
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2
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:
4
7
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16
Ta payer.
oard of Ta ppeas.
No.
oume.
Page.
5593
4
24
13565
12
96
12515
13
116
8664
11
796
12163
8
1169
4240
3
41
9762
10
1245
2685
2
463
2684
2
463
2686
2
463
679
2
19
1171
2
19
9354
10
110
3940
4
967
3940
4
967
1842
1
998
10021
10
39
581
1
556
6413
7
152
4695
4
483
2270
2
603
6995
6
74
7096
7
290
17552
15
147
11954
10
508
20482
17
628
18036
12
1058
16693
15
494
10639
9
1404
26136
15
1075
7636
5
309
6503
6
89
22557
11
101
672
2
44
7049
10
79
7048
10
79
11448
12
681
6805
6
1322
10399
11395
14
1148
14631
802
1
760
6193
8
1289
5981
8
1289
8471
10
1248
10006
9
588
13718
14
1124
10251
7
919
10250
7
919
2333
3
51
7376
13
616
2208
5
541
14406
12
739
362
3
897
7347
5
806
3221
3
118C
6797
8
867
21644
16
1042
.
age Shoe Manufacturng Co., Inc
are, s P
ast Lynn Coa Co
ast Market Street ote Co
astern Shoe Manufacturng Co
astack, ames L
astand, Thomas
aton, Chares
aton, zra Z
aton, Macom
cksten, se S
cksten, Lous
dgar, Cnton G
dmonds, eanne, e ecutr
dmonds, ohn W., estate of
dmunds, . M
dwards, Water
gan ausman Co., Inc
ggnk, enry
hrch. |r., ranz, estate of
mer . mend
ba Manufacturng Co
ectro Magnetc Too Co
freth, my en
as ro., Inc., G
as Co., oseph
kns, Luther
ott, . M
ott, W.
s, Wade
m Cty Cotton Ms
m Cty Nursery Co
mhurst Investment Co
Paso Southwestern Co
Paso ectrc Co
Paso ectrc Ry. Co
sasner, Neson ., e ecutor 1
mpre State nance Corporaton .
ngneers O Co
ngander, . L
ngeman, .
ngeman, M. S
nns- rown Co
ntress rck Co
re Sk Ms
rwn, . C
rwn Mrs. . C
scave, |r., Wam M...
sperson, Mrs. Nes (Mee)
ssanbee Mnes Co
sseen Reaty Corporaton
ttenson Wnng Dry Goods Co
vans, Leroy G
vans, W. L
vens oward re rck Co
vergreen Road Land Co
state ta decson.
G
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2
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1
3
-
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1
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2
0
3
:
4
7
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17
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
ves, . C
wng, oseph Neff
change ank fe Trust Co.
admnstrator
yestone, rank
ysenbach, Oscar
of Shreveport, La.,
1669
2
115
14068
13
705
17174
17
429
6463
12
1232
21107
10
716
.
archd, Marcus D., estate of1
archd, Nee ., e ecutr 1
atoute Iron Stee Co
aketnd Shp Co
atco, George
arow, Samue, estate of1
arm Impement Co
armers Merchants Natona ank
anners Merchants Natona ank of Nocona,
Te
armers Merchants State ank
armers ank Trust Co., e ecutor 1
armers Cooperatve ssocaton
armers Cooperatve Co
armers evator Co
armers ue Co
armers Loan Trust Co., admnstrator a
Trust Co., e ecutor8
Loan Trust Co. and Isabee W. Tford,
e ecutors
armers Unon Co-Operatve ssocaton
arnsworth, oyt Co
aroU- tte Co
awkes, Lese
ear Co., Inc., red
edera earngs Co., Inc
edera Gas, O Coa Co., trustees for
edera odng Co
edera Pate Gass Co
eges, Ma
edman, Davd
e, .
eows Medca Manufacturng Co
enner, Chares . and rgna S
erguson, Chares
erry Market, Inc
bre Contaner Co
bre Yarn Co
cken Tobacco Co., .
dea Investment Co
dety-Phadepha Trust Co., e ecutor
dety-Phadepha Trust Co., e ecutor 1
dety Trust Co
dety Trust Co.4.
ed Co., Marsha
er bre Co
nance poraton Deveopment Corporaton
of merca
1 state ta decson.
1 Nonacquescence notce In ths case, pubshed n Cumuatve uetn I -2, recaed.
1 state ta decson acquescence reates to ssue 1 of decson.
cquescence reates to deducton of ta es on rea estate and persona property.
19022
19022
10547
3706
1601
7268
9823
5570
12990
1811
10914
654
16342
13424
210
1399
18234
3286
11055
16287
737
11305
9327
9233
7888
2003
1055
6036
5604
2089
5592
8980
2216
11313
3671
7475
7244
10440
983
27597
28469
4920
13638
15279
24877
6805
9
9
11
6
3
7
6
8
10
2
10
7
13
13
1
3
16
3
13
16
1
14
9
9
15
1
6
13
3
7
5
14
5
9
10
10
2
16
17
4
13
14
14
G
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2
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1
3
-
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1
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2
2
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3
:
4
7
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#
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18
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
ncham, dward, estate of
ncham, mma, e ecutr 1
nck Co., enry
nk Co., George
ns ver, Chares
ppn, . O
restone, sther
rst Natona ank of Durant, Oka
rst Natona ank of vanston, Wyo
rst Natona ank of ort Dodge, Iowa
rst Natona ank of Goodand, ans
rst Natona ank of Lob ngees
rst Natona ank of Marow, Oka
rst Natona ank of Rock Rapds, Iowa...
rst Natona ank of Seepy ye, Mnn
rst Natona ank of Stoughton, Ws
rst State ank
she, enry R
she Marks
sher, Car G
tchburg Steam ngne Co
ach, ohn
a nun Insuatng Co
emng, C. ., estate of1
emng et a., dmund ., e ecutors 1
etcher, Chares ., estate of1
e be e Co
nt, rnest P
nt Rver rck Co
ood, Mrs. . D
orence Ms, Inc
orda Grocery Co
oyd, T.
oer Wa Paper Co
oey, D. 0
o ths Shoe Co
orbes, Rose D
orbes, W. S
orgeus, . W
orrester, D. ruce
orrester, W. 8
orrester-Nace o Co
orstmann, uus
ort Orange Paper Co
ort Wayne ngneerng Manufacturng Co
ort Worth Warehouse Storage Co
oster, . M., estate of2
oster, Mrs. ames Martn, e ecutr 2
oster Gasse, Ltd
ostora Mng Gran Co
ower, sr., . S
o , Rchard M
o Sons, Inc., W. P
o Rver Iron Co
rance, George enry, estate of1
rance, Nanne ., e ecutr 1
rancescon Co., . C
state ta decson.
I cquescence reates to ssues 2 and 4 of decson.
cquescence reates to frst ssue of decson.
30071
30071
4339
1369
6468
980
740
6913
19
8021
1280
2817
9889
687
2334
2790
2581
13912
13912
7594
433
12809
5120
7212
7212
7856
13829
17945
746
24558
10383
151
12221
10103
13118
9944
10236
7141
2881
10576
10577
19064
2521
641
489
3864
21928
21928
9232
17191
3260
28904
34477
16389
4743
28558
2855S
10585
16
16
4
5
8
2
2
6
1
7
5
6
9
6
7
2
5
14
14
7
1
13
6
9
9
9
13
12
2
16
9
1
11
9
12
7
7
7
6
12
12
12
6
1
6
16
16
6
11
4
15
15
5
18
18
10
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19
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
rancs, T.
rank Seder Co
rank Seder, Inc
ranke, Osmond ., e ecutor
ranke, Inc., So
ranke Tton, Inc -
rankn, Wrt
rankn Ms
rank-Severs Undertakng Co..
raser, rthur C
raser rck Co
raser, George
razer, red
reedom O Works Co.
reeand Catte Co..
rees, |r., Peter
rey, |r., et a., Mtche M., e ecutors Wam .
Scafe estate
redrch Sous Co.,
redman Neckwear Corporaton, L
rend, George
rend, Oscar, e ecutor estate of erman . Meyer.
rschkorn, . S
rost, Chares
rost et a., . Y., e ecutors
ruen Investment Co
uer, O. R
uton, Guy
urst ros. Co
G.
Gaats, erry
Gaagher, Thomas P
Gaon Paper Co
Gaumbeck, C
Gavn, ohn M., admnstrator
Gambee, Wheeer
Gamon Meter Co
Garber, . . .
Garber, M. C.
Garden, . ..._ ---
Gardner, .
Gardner Governor Co.
Gardner Prntng Co
Garretson, Sopha M
Garrson Co
Gaskns, . W
Gassner, Lous
Gate Cty Coffn Co
2525
10614
10615
22514
3182
3253
307
9266
9267
11423
2194
6495
12028
5929
9865
9707
17882
20128
9518
11307
391
3412
19334
5000
1062
7879
26422
10441
1126
10801
9362
3362
10747
21862
1377
10641
820
3972
395
3708
14097
3710
13909
15926
5218
321
5061
5818
15006
4242
4017
4517
2
13
13
3
3
1
7
8
7
3
6
10
6
10
8
12
1
2
15
8
4
7
16
12
2
11
11
2
8
17
5
9
6
4
1
11
11
16
7
5
4
10
17
4
4
3
state ta decson.
1 cquescence reates to ssue as to whether the ncome reazed under agreement of December 14, 191 ,
s ta abe In proportonate amounts to the severa pettoners or whether such proportonate amounts are
5 one-haf to the pettoners and one-haf to ther respectve wves.
es not reate to that part of decson nvovng appcaton of yers decson (1 . T. .,
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20
Ta payer.
Gatff Coa Co
Geger raverman urnture Co.
Gem State Lumber Co
Genera Lead atteres Co
George, Mke
Georga Car Locomotve Co.1
Georga- orda Land Co
Georga Manufacturng Co
Georga State Savngs ssocaton-.
Georga eneer Package Co
Germantown rad Co
Gerst et a., erbert .
Gesse et ah, gbert G., e ecutors a_
Gettys, M.
Gant Tre Rubber Co
Gfford, arry N
Gbert Creek Land Co
Ges, da R
Ges Co., George
Gcn, Margaret
Gespe, Rchard T
Gespe Coa Co
Gam Manufacturng Co
Govch Co., oe
Gson, arry W
Grard Coa Co
Gackner Reaty Corporaton, ohn..
Gady Manufacturng Co
Gobe-Gazette Prntng Co.
Gobe Outet Co
Goener urnture Co
Goerke Co., The
Goethe Co., fred C
Goconda O Co
Godberg, arry S
Godberg, Lous M
Godberger, Leo G
Godman,
Godman, I
Godman, Lous ., estate of 1
Godman et a., Robert P., e ecutors
Godschmdt et a., Georgette, e ecutors8.
Godschmdt, enry P., estate of
Godsmth, Lan M
Godsten, Davd S
Godsten, as
Godsten, Mrs. as
Good Manufacturng Co
Goodn, C. W., estate of2
Goodng, Mrs. . G.
Goodng, Mrs. red W.
Goodatte, Raymond R
Goodman, mma ., estate of
Docket
oard of Ta ppeas.
No.
oume.
Pag .
11084
8
726
1906
2
171
3984
2
4 9
718
2
392
5774
6
124
3131
2
986
31095
16
1253
1718
5
893
5352
4
748
3479
2
584
5215
3879
3
1336
3888
5365
4
658
5366
5367
12394
15
624
3495
3
441
9412
7
1249
2677
3
334
13848
14
921
1536
1
1066
5387
4
335
1785
2
75
3851
2
1317
12509
13
926
964
1
967
7746
6
864
2395
2
1221
3724
6
105
10338
11
151
227
1
337
3899
)
18457
16
161
24196
14029
10
165
3500
2
1290
5992
7
860
13273
15
199
10176
7
955
5389
4
1073
11615
9
1355
243
1
249
11907
12
874
11173
12
874
11463
11
92
11463
11
92
16138
14
1010
16138
14
1010
6335
7
151
5161
3
425
8268
6
1142
8269
6
1142
19840
15
583
4220
8
1277
3264
4
389
3263
4
388
4007
4
165
10124
12
823
1 cquescence reates ony to Issue 1 n decson,
state ta decson.
1 Revokes nonacqueseence pubshed n Cumuatve uetn I-1 at page 7.
G
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21
Ta payer.
oard of Ta ppeas.
No.
oume.
Page.
21337
9
1209
21338
9
1209
10304
11
833
6631
5
1216
2470
3
311
5224
11
365
8553
5
297
887
1
684
7396
18082
16
549
24631
8
1166
1356
2374
8
13
2373
8
13
21116
9
1119
19327
15
1166
9714
12770
1024
13792
13
174
2584
5
395
3659
3
1026
2340
5
1163
8113
7
286
716
2
672
4552
6
347
143
1
222
4503
4
1264
1477
2
552
10489
12
383
8433
11850
( 8
225
3574
3
467
10604
16
396
3836
2
979
10124
12
823
3127
5
442
3784
3
1323
2311
5
887
168
1
152
3000
2
910
5690
6
587
11926
9
1281
10827
10
386
11546
7
1094
11400
11
565
7372
9
381
3393
3
313
16025
11
122
1159
3
508
1828
1848
2
1145
6063
10
599
1064
7
1043
1755
2
105
13625
9
418
10441
12
1295
Goodwn, C.
Goodwn, Moe _
Goodyear, Chares ., estate of _
Gopher Grante Co ,
Gordon urnture Co
Goes Prntng Press Co
Gottfred, edwg .
Gotteb ros
Gouston dvertsng gency, Inc., rnest .
Graft, George
Gramercy Investng Co. of New York
Gramercy Investng Co. of Pennsyvana
Grand Rapds Natona ank
Grand Rapds Show Case Co
Grant, een M. W., estate of 1
Grant Constructon Co., George .--
6 rant Trust fe Savngs Co., trustee.
Gras, Rudoph
Graves, George
Gray, |r., . 3.
Gray, W.
Gray Davs, Inc
Gray Prntng Co., The
Graydon, Samue
Great ear Sprng Co.1
Great Northern Ry. Co.
Green O Soap Co
Green Rver DstngCo
Greenbaum, Mchae
Greenebaum, Moses ., e ecutor
Greene Co., .
Greenve Coa Co
Greenve Opera ouse ssocaton.
Greenve Te te Suppy Co
ssocaton
. _
Greenwood
Greever, Mr. and
Greyock Ms
Greaemer, Chester D
Grffn, P. P
Grffth, . C
Gr, Inc., ugust
Grmmer, enry
Grttman, red
Grover, rthur
Guarantee Constructon Co.
Guarantee Tte Trust Co.
Gueph ote Corporaton...
Guenther, Pau
Guggenhemer, . Randoph .
Gurnee, Water S., estate of.
1 state ta decson.
cquescence reates to deprecaton and obsoescence ad|ustments.
) cquescence reates to a ssues of decson e cept ssue nvovng the queston whether the company
shoud accrue as ncome n the ta abe years nterest earned but not pad n those years on obgatons of
other corporatons owned by t.
cquescence n decson n so far as the oard bods that there s no defcency for 1917.
cquescence reates to fourth ssue of decson.
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22
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Gus Sun ookng change Co.
Gutterman Sons Co., . M...
Guttcrman Strauss Co
.
aas, Otto
adaway, ohn
adden, |r., et a., ohn spnwa, e ecutors .
adden, Mare Torrance, estate of
adden, T. Irvng, e ecutor.
agerstown Shoe Leggng Co
agerty Shoe Co., P
a, Chares Ward
a et a., ohn S., e ecutors
a Co., Inc., . .
aahan, Stephen
aam, dwn C
aenbeck, arry C, estate of
aenbeck, ohn ., e ecutor
aer, Mary
amcrsag, . P
amcrsag, uan L
amton Chambers Co., Inc
amton Manufacturng Co
ammack, Rsh Sons Co
ammerschmdt ranzen Co
ammersey, Chares
ammon, ram ., estate of4
ammond, .
ampton Co
ampton Cotton Ms
ancock Constructon Co. eta
ancock nttng Ms
aney and wfe, dgar P
any, W. W
ansen, ans C, estate of
ansen, . fred, e ecutor
anson, Maud astngs
ardng Gass Co
ardy, George W
armony Grove Ms, Inc
arnsberger s, Inc
arrs, en
arrs, Chares L., admnstrator estate of Wam
L. arrs, deceased 4
arrs, . L
arrs, Sam
arrs, Wam L.,
deceased, estate of
arrs musement Co. of Mchgan.
arrs Co.,
10786
10458
234
3542
12717
9421
9421
16398
463
16023
11650
13552
4612
6848
3582
12470
12470
14063
25751
13597
13596
131
2507
10516
13751
20501
10914
11163
2054
589
11758
16520
3486
8516
6744
6744
5109
19708
7981
4500
7053
10980
4426
10430
8614
9623
4426
17841
17842
12123
13998
22502
113
3884
13
8
1
3
13
10
10
17
1
15
6
16
8
14
2
10
10
14
15
15
1
3
6
12
16
10
10
2
2
11
15
6
6
6
0
8
15
5
2
7
10
5
14
11
5
IS
16
10
3
arrs- mery Co
arrs Grocery Co., Inc., W.
state tar decson: nonacquescen.ee notce In ths case pubshed n Cumuatve uetn II-2, page
47, revoked.
Nonaoqueecenee notce In the case of . . a Co., Inc. (( . . -, f), recaed.
1 cquescence does not reate to deductbty of chartabe contrbutons.
state ta decson.
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23
Ta payer.
arrods Motor Car Co.
art Cotton Ms
art, ohn W
artford Connectcut Western R. R. Co
artford at fe Cap Co
artey, arry
art-Wood Lumber Co
aske, George S., estate of
aske, . mory, estate of
aske, athryn M., e ecutr George S. aske
. S.
ce M
astngs, O.
atze ueher, Inc.1.
aupt, oseph
ausmann, Lous, e ecutor
ausmann, Theresa R., estate of
averstck, dward
awkns, C.
awks Nursery Co
ayes Te te Co., Inc
aynes, Chares ., e ecutor
aynes, rederck
aynes, R. R., estate of
aysett, ohn
azett Moss, Inc
earn, en|amn ., estate of
earn, the D., admnstratr
, . . --
, admnstrator .
eaton Constructon Co., C. T
ecker, Dane. _
eddon, Chares
efetz, ascha
eneman Lumber Co.
ed, ntonette ., e ecutr of estate Wam
D. ed -
ed, Wam D., estate of
eer et a., . S., e ecutors
eer ros. Co
eer Too Co...
eman, Isaas W., estate of
enderson, Mrs. ce D., e ecutr
enderson, |r., Mrs. S.
enderson, |r., S.
enderson Co., . C
enderson Cotton Ms
enderson Overand Co., The
enderson Tre Rubber Co
enuger et a.,
enrv, ohn
enr v, Matte ., conservatr 1
enry. R. D...
Docket
No.
6184
834
9032
12781
3916
2021
7400
27725
2984
4335
7102
4335
14817
5106
5107
9501
11454
5781
5931
5931
9882
418
1469
844
9584
7247
9584
13119
2247
10285
10285
6015
11141
11944
13695
7735
15914
9237
10175
1988
1988
4575
9073
9072
4575
1875
1917
1916
5272
5504
4776
11953
205
6375
7268
3545
oard of Ta ppeas.
oume.
cquescence reates to second ssue of decson.
state ta decson.
1 cquescence reates to ssue as to market vaue on March 1, 1013. o( tmber
7
2
7
16
5
2
6
13
8
8
10
6
5
5
13
6
1
4
6
7
6
12
2
9
9
7
8
11
17
15
15
11
3
3
10
9
9
10
2
2
2
5
4
4
12
9
6
7
owned on that date.
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1
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:
4
7
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#
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24
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
enser rewng Co., oseph- .
erad-Despatch Co
erenden, en C, estate of
ermabrecht, ohn
eron Meta ed Co
ess ros.2
11874
4556
ess udng Co.
essenbruch et a., erman M., e ecutors
essenbruch, Ida M., estate of
euben, Inc., G.
ewett Gran Provson Co. of scanaba
e ter, Percy
eydrck, L. C
eyn, Otto P
bbard, Spencer, artett Co
ckory Spnnng Co
cko , Lee
cks, ohn ., estate of 1
cks, L. R. and R. ., dstrbutees 1
ggnbotham- aey-Logan Co.5
gh et a., orace S., benefcares
ghand musement Co
ghand Land Co., Ltd
ghands Casket Manufacturng Co
et a., G. ., admnstrators 1
, .
, . L
, Lena G
cnmeyer, . ., estate of1 r-
enmeyer, Mary, e ecutr estate of . .
enmeyer, deceased 1
man, M. P. G
nckey, Raph L
nshaw, R.
rsch Dstng Co., S
rst egey Lnseed Co
tchcock, abert
ochschd, erthod
R_
ochschd, arod .
odges, red G.
oe Co., Inc.,
of rau Co.
of rau Co
offman, rnest Gustav, estate of.
offman, . C
odcn Martn Lumber Co
ongsworth, Turner Co
omes, Lea ., estate of
ot et a., ames ., e ecutors .
ot, Robert L., estate of1
ot-Grante Ms Co
752
3236
8039
13936
19251
20345
39003
17907
17907
13125
18683
7878
4120
5503
3788
7431
367
367
6702
7253
7253
4691
6291
5316
2320
532
4220
1689
6215
5800
1862
1862
2372
4193
33021
15816
7482
6107
3081
4058
3080
4057
7729
7216
6134
4636
7914
6611
826
656
7970
12636
12636
1784
12
4
5
6
2
7
15
10
10
13
14
8
4
5
2
1
7
9
9
8
7
3
2
6
8
3
9
8
2
2
2
6
16
14
4
4
9
7
6
12
8
4
2
1
10
14
14
1
1 state ta decson.
3 cquescence reates to frst ssue of decson.
cquescent reates to thrd ssue of decson.
G
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a
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2
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1
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-
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1
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2
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:
4
7
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8
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5
4
3
4
4
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25
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
ot Pad Ms, Inc., . M-
oton Co., rank ---
ome enefca ssocaton
ome Industry Iron Works
ome State ank
ong-Cooper Co
ood, Chares
ooper, arry
opkns, Water L
ortenstne, . L., coadmnstrator
oskns, ohn
oskns Lumber Co., . 8
ote Grunewad Co., Ltd
ote Patten Co. et a
ote Wsconsn Reaty Co.
ouck Co., Ltd
ouse errmann
ouston et Termna Ry. Co. .
ovey, Peter P
ovey Co., C.
oward Theatre Co
oweU, red
owe, Thomas
ower Seaman, Inc
ub Dress Manufacturng Co
ub, Inc., The
ub Shoe Co
uber, Wam D
udson, Chares I., estate of 1
uev, . L
uff, ndrews Thomas
ughes, ohn N
ughes Coa Co
ughes Co., d. S
ughson, rank C.
ubert, dmund D., estate of .
ume, .
umphrey Co., .
umphres, C. CI.
unng Mercante Co
unucutt, Mary L
unt et a., the P., e ecutrccs
unt, ohn ., estate of 1
unter, Mrs. Oe
unter Coa Co - -
untngton Cearfed Teephone Co. and Sum-
merve Teephone Co
upfe Co., Inc., . Chr. G
8745
10261
19589
7991
14462
15000
6990
5271
1476
3633
10241
2390
1593
5792
11755
22220
22221
8159
14090
30958
8494
1677
5448
16310
12489
12492
4196
283
3553
3554
1170
9975
3351
6132
336
9104
7142
674S
14120
6690
11294
11204
11027
15829
18498
3511
29821
15
3621
9801
9801
6292
2503
358
9834
9
1360
10
1317
15
1319
8
1267
15
121
11
896
4
1020
8
397
2
549
3
697
7
299
3
846
5
761
13
943
16
334
7
670
13
621
6
1364
2
1099
4
175
16
57
12
510
12
510
4
261
1
197
3
1259
2
836
12
1
5
711
4
370
1
542
8
206
8
306
6
949
10
242
12
818
9
31
15
312
3
441
17
811
1
130
10
1004
12
396
12
396
7
495
2
828
1
731
9
944
1 state ta decson.
cquescence reates to thrd ssue of decson.
1 state ta decson acquescence reates to ssues concernng checkng account, rea
fond.
cquescence reates to good-w and bad-debt Issues.
4090 30 3
estate, and penson
G
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2
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1
3
-
0
1
-
2
2
0
3
:
4
7
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26
Ta payer.
Docket
No.
oard of Ta ppeas
oume.
6
695
15
1107
9
181
4
705
13
956
11
789
11
789
13
1187
14
771
8
13
1
217
16
762
5
910
12
818
4
103
4
1227
16
1410
9
713
15
521
4
870
3
1116
1
7
7
982
14
863
3
283
4
1030
4
1178
4
305
16
897
18
298
2
875
8
687
6
303
1
45
4
1055
13
981
5
934
urey, . W..
uron udng
Co
uron Portand Cement Co -
utchns Lumber Storage Co.1
utchns Lumber Storage Co
utchnson, ames M
utchnson, Wam N
utchson, Chares a _.
uttersche ruder Gemende et a.
trustees, etc.
uyer s
yams Coa Co., Ltd., et a., Robert P
ymans et a., dwn C, e ecutors
yme Pantng Manufacturng Co., Lous.
Inos Merchants Trust Co.. e ecutor1
Inos Merchants Trust Co., e ecutor estate of
Wam R. Manerre, deceased
Inos Paper o Co
Inos Smetng Refnng Co
Impera urnture Co
Independent etna Sprnker Co
Independent rewng Co. of Pttsburgh 5
Independent ectrc Machnery Co
Independent Lfe Insurance Co. of merca
Inde Noton Co.
Innes- ehney Optca Co..
Internatona eddng Co
Internatona oer Works Co
Inter-Urban Constructon Co
Iron Cty ectrc Co
Iron Cty Improvement Co
Irvng ank-Coumba Trust Co. et a., e ecutors 8
Irvona Coa Coke Co
Irwn, enne I., e ecutr estate of Mary .
McCah
Irwn, .
Irwn ue Co., .
Isaacs Co., Inc., Reub
Isand Lne Shppng Co
Israe, osep
Ives, omes
7339
1 127
3334
4973
3307
7129
11284
11285
8053
15757
1357
1445
219
17895
2903
11204
3106
770
21180
16929
10588
25755
3242
2742
26295
1023
3368
12733
2322
4387
6103
2138
20055
23184
2547
9392
9030
59
3414
27780
31428
5646
cquescence does not reate to that part of decson nvovng appcaton of yers decson (1 . T. .,
1135).
cquescence reates to deducton of cost of wardrobe and traveng e penses.
state ta decson.
state ta decson acquescence reates to ssues concernng checkng account, rea estate, and
penson fund.
cquesoonoe reates ony to ssue 1 n decson.
cquescence reates to oard s nterpretaton of secton 245 (b) of the Revenue cts of 1021 and 1924.
7 cquescence does not appy to that part of decson reatng to appea of Guaranty Constructon Co.
(2 . T. ., 1145).
state ta decson acquescence reates to ta abty of 415 shares of Peeress Push Manufacturng
Co. stock and 489 shares of Otto aeger Son, Inc., stock.
G
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2
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1
3
-
0
1
-
2
2
0
3
:
4
7
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#
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27
Tspayer.
oard of Ta ppeas.
No.
oume.
Pmce.
14995
17662
|
726
4272
9
312
22561
18
454
9001
11
1257
20303
15
1001
9002
11
1257
12944
)
12945
15996
702
17856
9003
11
12S7
9000
11
1267
3089
9
734
10742
11
496
20055
16
897
2509
13
764
4068
2
1071
21943
17
205
92
1
659
10798
12
1165
14060
15
161
215
4
765
3222
3
1180
1533
2
540
5416
3
854
6801
9
1027
6802
9
1027
9047
10
736
8353
9
232
8352
9
232
7565
7
456
9877
8
992
11250
13
850
8259
5
253
1415
10
95
15301
8
108
9550
11
534
10748
8
857
3839
4
967
7442
10
229
3265
6
472
7441
10
229
7441
7442
0
229
6812
10
411
6812
10
411
9550
11
534
6870
7
556
3839
4
967
32226
15
1314
8466
10928
1
325
6352
7
1054
15298
12
1204
ack, Cec M
ackng, D. C-
ack s
ackson, nnette T.1
ackson, Carone Mather, estate of .
ackson, George .1
ackson, ames .
ackson, Ws .1
ackson Tnde 1
ackson Sanatorum ospta Co
acobs, Wam M
aeger, Otto, estate of
ames, rthur Curtss 1
ames, . R
ames Manufacturng Co., D. O
amestow n Worsted Ms
areck Manufacturng Co
audon ngneerng Co., . S
enckes Spnnng Co
ennngs, . T
eweers udng Co
ewett Co
oe, .
oe, L. -
ohn ancock Mutua Lfe Insurance Co.
ohns, Margaret
ohns, Waace C
ohnson, C. L
ohnson, Chares R
ohnson, . C, e ecutor .
ohnson, ar O
ohnson, dwn M
ohnson, anne W
ohnson et a., omer S., e ecutors 4_
ohnson, . L
ohnson, |r., ohn ., estate of
ohnson, ate, estate of
ohnson, Nes
ohnson, R. ., estate of
ohnson, Robert G., e ecutor
ohnson, Sarah L., estate of
ohnson et a., Seymour, e ecutors s-
ohnson, Stephen O., estate of 4
ohnson, T.
ohnson, Theodosa, e ecutr
ohnson Locke Mercante Co
ohnston, . T. M
ohnston, Mary rg, e ecutr 5_
ohnston, W.
1 cquescence does not reate to tentatve ta
1 state ta decson acquescence reates to deductons for attorneys _
state ta decson acquescence reates to ta abty of 415 shares of
Co. stock and 409 shares of Otto aeger Son, Inc., stock
state ta decson acquescence reates to vaue of stock
state ta decson.
and e ecutors commssons.
Push Manufacturng
G
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2
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1
3
-
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1
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2
0
3
:
4
7
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8
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5
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4
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28
Ta payer.
Docket
No.
oard of Ta ppeas.
ohnstone, dward
ohnstown udng and Loan ssocaton
ohnstown Democrat Co., Inc
oet-Norfok arm Corporaton
ones, . W., admnstrator
ones, Mrs. . W., estate of
ones, George C
ones, enry M
ones, ersche
ones Co., T. P
ones oow Ware Co
ones Lumber Co
ordan Marsh Co
osyn Manufacturng Suppy Co
oyce- cebe Co., The
ume Reaty Constructon Co
ustus Parker Co
.
ahn, bert
ahn, ugene S
ahuku Pantaton Co
aser, rthur
atenbach Stephens, Inc
amper, Lous
anawha Cty Co
ansas Mng Co
ansas Savngs Trust Co. et a., admnstrators
of estate of . W. Shuths, deceased
arges osery Co
arno-Smth Co
arr, dmund
artman, be
asco Ms, Inc
ass, Ma and enne
atz esthoff, Ltd
aua Raway Co., Ltd
aufman, . R
aufman, Mrs. . R
aufman, Ltd., arry S
aufman, Samue R., estate of 1
aufman, Straus Co
aufman, Una Lbby, e ecutr 1
aufmann, fred D., estate of 1
aufmann, Raymond M., e ecutor 1
aweah Lemon Co
ay, Waace G
ean, amton
eeer, Isaac P
eeer rass Co
eeer Reaty Co
een, erbert Ide
eenan, atherne P.1
eener s O, Natura Gas ue Co
state ta decson.
30694
2898
1647
6795
8218
8218
4864
7325
12662
944
4294
14751
3275
4458
9809
4267
11758
13770
13842
10430
19156
1289
9426
19702
22231
6100
14630
2835
1827
11384
14619
1525
13244
22355
1259
4707
11101
12811
12812
8154
11845
4698
2649
4698
10907
10907
4583
10102
10745
6379
6218
6218
22262
6352
7862
17
6
2
8
8
8
6
1
2
12
6
3
6
6
11
13
14
14
12
2
12
14
13
3
2
8
13
2
10
15
1
5
13
9
9
5
2
6
11
11
5
10
10
8
9
9
15
7
6
G
e
n
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r
a
t
e
d
f
o
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L
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a
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g
(
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)
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2
0
1
3
-
0
1
-
2
2
0
3
:
4
7
G
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#
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29
Docket
No.
oard of Ta ppeas.
oume.
Page.
eeney, bert .1
eews Reaty Co., Inc.2
em, . D
ekaha Sugar Co., Ltd
eer, Ida .
eer Mechanca ngneerng Corporaton
eey, arry P
eey, Thomas
eogg. Commsson Co
ey, rmn L., admnstrator 1
ey, Dane
ey, .
ey, Mare ., estate of
ey, Over Warren, estate of
esey, S. R
eso, rgna
emper, ackson ., admnstrator
enefck, Nee, e ecutr estate of Wam ene-
fck, deceased
enefck, Wam, estate of
ennedy, D. ., deceased, estate of
ennedy et a, nne S., e ecutors s
ohn T
ennngton Co., R.
ennngton Reaty Co
enny ros. Co., The
enosha rut Co
ensngton Water Co
entucky ectrc Lamp Co
entucky Land, Gas O Co
esser, George ., estate of
etcham, .R
eystone Natona ank of Pttsburgh, Pa.
er, . L
er, W.
eser Son Co., Inc.,
by Car oundry Co
mba, Davd
ng, ar
ng, a Day, e ecutr
ng, Robert C., estate of
ng, Wam C
ng Lumber O Co
ng-Parker, Inc
ngsey, Louse
ngston, George M
ngton, ammond L
ngton, O. M
ngton, W. W
ns, braham
rk Coa Co
rkenda, . P., estate of
rtand ros. Co., Inc
sse, Carone T.
21916
10489
2488
15435
291
6741
6891
7036
3945
7092
8365
1796
12394
7092
6082
8351
12198
523
523
5244
5244
19785
7836
7837
7834
1530
410
19018
14337
1473
3182
14531
10805
15985
15986
10990
6931
11968
9942
8283
8283
6729
9695
8315
12288
8392
8216
8409
8217
6760
2879
3094
4482
21788
17
12
4
13
2
6
9
9
6
8
10
3
15
8
6
9
14
3
3
4
4
16
2
16
14
2
3
)
13
15
15
15
4
8
9
10
10
10
4
6
11
8
8
S
3
3
7
3
15
560
383
1240
690
494
990-
832
834
771
1193
141
257
624
1193
1068
232
931
659
659
330
330
1372
1030
1030
1019
63
630
603
838
1207
1208
786
1114
1114
359
1294
475
502
698
698
308
1253
884
296
981
981
981
981
1348
755
771
669
1270
1 cquescence a resut ony of decson.
cquescence reates to deprecaton and obsoescence ad|ustments.
state ta decson.
cquescence reates to deducton of fees pad to attorneys.
G
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30
Ta payer.
oard of Ta ppeas.
oume.
s
et t, orence
L., admnstrators
ster, Wam ., estate of 1
ster Land Improvement Co.2.
au, an Petersom, Dunap, Inc_
auber mbrodery Works
eeman Dry Goods Co
en
, oren
ce L. _
en, Isadore
ne, enry, e ecutor
ng, Mary Cark
se, mer
napp, tte
napp ros. Co
ne, ohn
nffn, Leonard
noerschd, . C
no , Chester
no eta., Grace M., e ecutors estate of Seymour
. no
no , Seymour ., estate of
no ve rck Co
nutson ardware Co
ohbe Co., Inc., Php
och Co.. Inc., Isse
oee, Wam . 1
oen ros., Inc
oepf, oseph O
oynos Co.
ongsberg, Nathan
onod, arbara
ossar Co., Inc
ountze, nne P
ountze, Luther, estate of
rauss, e ander
repke, . C
reg Tannng Co
ruT, rancs
uhr et a., urgen
uhr Sons, urgen
unke Co., Inc
urtz, Ma
urtz, Robert
urzman, Samue.
ye, Wam ...
3707
11986
18061
3707
11986
18061
12355
6881
12433
2S7 1
4004
4005
6061
6102
10157
10430
16433
1495
11318
2775
19430
7420
7959
20503
2441
2936
2936
8844
4384
330S
322
6093
712
14006
4130
6016
9670
18400
11878
16398
3611
10716
3318
16985
13436
13436
3519
11411
15960
f 11412
15959
10659
16701
11
11
9
9
11
2
14
18
1
10
7
13
12
5
16
2
3
3
12
5
4
1
7
1
13
4
4
9
16
17
17
5
7
4
10
12
12
3
124
1 cquescence reates to ssue as to whether the ncome reazed under agreements of December 14,1918,
s ta abe n proportonate amounts to the severa pettoners or whether such proportonate amounts art
ta abe one-haf to the pettoners and one-haf to ther respectve wves.
cquescence reates to a ssues e cept ssue wth respect to queston of aowance of amortzaton n
1918 of costs ncurred n 1919.
cquescence reates to a ponts of decson e cept that pertanng to the year 1919.
G
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f
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(
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2
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1
3
-
0
1
-
2
2
0
3
:
4
7
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8
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0
5
4
3
4
4
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#
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31
Ta payer.
oard of Ta ppeas.
No.
oume.
Page.
25156
16
485
12368
11
1254
15068
14
71
2010
2
535
1323
8
785
14242
6
429
9346
13
177
8366
10
141
10610
16
396
11603
10
1153
15835
1 11
I 15
1
655
14370
12
435
8281
9
39
9842
7
1142
2131
2
777
2567
2
199
6420
9
1020
2733
3
245
12621
6
1086
6190
6
165
3431
6
241
15882
16
1151
21479
16
48
21479
16
48
6603
5
879
3930
3
331
6674
5
1287
508
5
57
19395
17
1083
19395
17
1083
13566
13
463
2284
2
747
4510
12
1076
13416
18690
781
7300
16
1309
5985
6
1005
5984
6
1005
7676
6
1132
10911
10
283
7309
6
4
3847
3
193
6607
7
460
19751
15
1401
4867
4
133
16617
15
414
10329
8
1006
5744
7
99
7768
8
974
7769
8
974
849
1
1051
4863
16
250
L.
Lacev, Mrs. . L
Lackawanna Trust Co. et a., e ecutors .
La rancasc Pece Dye Works
Lake, . W
Lam, . W
Lamb Lumber Impement Co
Lambom, rthur
Lambrecht, Rchard G .
La Montagne s Sons, Inc.,
Lancaster Lens Co.2
Landreth Co., . . .
Lang, ohn
Lang room Co
Langdon, arret
Langenbach, dward
Langey Co., W. C
Langey Mchaes Co
Larrowe Mng Co
Larsh, D. L
Lash Co., Lee
Lassen Lumber o Co
Lasster Co., Robert G _
Latham, een, admnstratr _
Latham, . ., estate of 1
Lathrop Co., Inc., C. P
Laurens Trust Co
Lautz Marbe Corporaton
Law Credt Co
Lawer, R. ., estate of
Lawer, Mrs. R. ., e ecutr .
Lawrence, . M
Lawson, ohn
Lawson, W.
Leach, Mary W
Leach, W.
Lee, Mrs. eanne
Lee, ohn C
Lee, Matda oz
Lee Co., Wson
Lefang, . M.
Leggett, Davd G., deceased, estate of .
Lehgh udng Corporaton
Lehgh aey Coa Saes Co
Lechner ordan Co
Leter, Lev Z., estate of
Leghton ros. Prntng Co
Leghton Suppy Co
Leand, enry M
Leand Wfred C
Lembcke Co., Inc., ernuth
Lembeck, Gustav W
state ta decson.
1 cquescence reates to ssue whether nvested capta for 1919 shoud be reduced on account of the
1918 defcency barred by the statute of mtatons.
1 cquescence reates to a ssues n both decsons e cept nvested capta queston n decson pub-
shed In 11 .T. ., 1.
Nonacquescenee notce n ths case, pubshed n Cumuatve uetn I -. , page , recaed.
G
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2
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-
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2
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3
:
4
7
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5
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#
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32
Ta payer.
oard of Ta
No.
oume.
Page.
1083
5
1206
14771
14
830
3156
4
1221
3157
4
1221
13725
1
13726
14
139
29404
6056
4
74
5846
13
871
10587
8
1150
6444
5
892
7435
8
298
6832
5
689
3247
3
422
9987
10
536
9918
16
61
3097
2
788
4639
12
850
7109
15
124
5902
6
41
7416
4
910
2212
2213
3
617
6257
5
778
4398
6
181
3760
4
155
6842
4
1181
4133
9
447
14501
15
149
8805
8
285
2235
2
308
3489
5
109
38
2
740
13790
14
703
6725
9
24
6800
12738
1390
14541
1
17624
1
15
680
30395
1619
4
1245
11279
11669
243
1935
4
76
10031
11438
19050
)
179
1048
13732
18
699
3411
3
475
10699
10
11
2467
7
413
6423
11
428
6422
6424
428
12091
15
82
12092
15
82
12093
15
82
29788
17
81
Leno Land Co
Leon Iron Co
Leonard, rthur
Leonard, Chares M
Lesser ros. Co
Lester, Lucy C, estate of
Letts, rthur, estate of
Levee, nna L. Stark, e ecutr 1
Levn, N
Levne, yman
Levne ros. Co., Inc.a
Levy Co., Ma
Lews, T.
Lews Co., Chares C
Lews- a Iron Works
Le ngton Reaty Co
Leydg, .
L ommedeu Sons Co., Chares
Lbby oun, Ltd
Lberman, Meyer
Lberty gency Co
Lberty Iron Works
Lberty Lght Power Co
Lckumovtz, Morrs
Ldstone Co., R. D
Lebes Co.,
Lebman-Swaney Reaty Co
Lfe Savng Devces Co
Lggett, . T
Lhue Pantaton Co., Ltd
Ly, . T
Lnbert, Chares P., estate of
Lmbert Co., Chares P
Lncon Cotton Ms
Lndahr Santarum, Inc
Lndsey-Long Coa Lumber Co
Lnn, Gus
Lsk Manufacturng Co., Ltd.
Lster, . C
Lster, ames R
Ltte, Theodore W
Lve Stock Natona ank
Lvermore, Norman
Lvermore Co., Norman
Loyd, ugustne M
Loyd, dward
Loyd, Wam S
Lobsenz, esse 4
1 state ta decson.
cquescence reates to ssues 3, 5, and 8 n decson.
cquescence reates to nvested capta ssue.
cquescence reates to frst and second ssues of decson.
G
e
n
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a
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d
f
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2
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1
3
-
0
1
-
2
2
0
3
:
4
7
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3
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0
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8
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0
5
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4
4
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#
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33
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Locke, Thomas
Lockport Paper Co
Locks and Canas on Merrmack Rver, Propretors
of the
Lockwood, R. ., estate of
Loeb, Car M
Loeb, uus
Loetscher, Chrstan, estate of 1
Loetscher et a., ohn ., e ecutors . _
Loffand, . M
Loffand, T. 8
Lofts, . M. and . S., admnstrators.
Lofts, 8. T. ., deceased, estate of
Logan ryan
Lonergan, ohn
Long, Davd T
Long, M.
Long Isand oundry Co., Inc
Loose, a C, e ecutr
Loose, acob L., estate of
Loper, . T
Lord, se
Lord ushne Co
Lord Motor Car Co
Lorng,
Los ngees Cemetery ssocaton
Los ngees Towe Servce Co
Los ngees Trust Savngs ank
Loughborough, .
Lousana ockey Cub, Inc
Lousve eneer Ms
Loveace- ubanks Lumber Co
Loveand, Russe
Lovett, oanna, e ecutr estate of Thomas .
Lovett
Lovett, Thomas ., deceased, estate of
Lowry, . unt
Lozer, Charotte C, estate of s
Lube, aron D
Lube, braham P
Lube, acob
Lube, Morrs M
Lube, Samue L._
Luce urnture Co
Lukns, . W
Luton Mnng Co., Inc
Lynch Constructon Co
Lynes, my .v,fc r, .-
Lynes, Samue
Lyon fc ard Co., Inc
10616
4872
299
3843
3082
9191
9192
3083
4061
14325
14325
13425
13426
7581
7581
4008
6441
20138
7721
2726
8699
8699
10080
17189
10597
12124
4718
12069
293
8866
23391
2818
8746
14654
10180
15235
1926
2940
2940
11972
7513
26187
26188
26186
26185
26184
6536
2544
13680
3375
7089
7090
7486
11380
14
14
10
10
6
6
4
4
17
8
2
15
16
12
9
5
15
2
6
10
13
12
10
10
3
3
11
7
16
16
16
10
1C
9
3
12
3
7
7
1 state ta decson
com mssons, attorneys fees,
1 state ta decson.
_ reates to a ssues, e cept those nvovng deductons (or e ecutors
msceaneous admnstraton e penses.
G
e
n
e
r
a
t
e
d
f
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L
n
Z
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g
(
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2
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1
3
-
0
1
-
2
2
0
3
:
4
7
G
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0
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8
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0
5
4
3
4
4
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#
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34
Ta payer.
oard of Ta ppeas.
No.
oume.
Page.
1110
2
517
10443
8
967
279
4
996
4284
19271
6833
428
569
11
11141
8
740
6602
14
1367
5240
4
251
1127
1
922
7854
7
1256
7855
7
1256
5600
11
1216
119
1
907
10390
17
394
4675
4
375
2422
2
66
1750
4
1112
11032
14
323
13719
14
1124
5225
5
1226
14502
14
1208
1977
4
341
7704
14
OO
3106
4
103
9123
8
221
8111
7
286
10230
10
633
341
1
706
611
1
575
5808
13
145
215
4
765
14091
1
14092
13
657
32033
1
1580
6
368
2242
4
867
544
1
1240
6208
10
763
17780
10
763
3799
10
763
17646
10
763
3858
10
763
17646
10
763
20287
8
1100
10806
7
895
10875
7
895
13912
14
87
7132
6
729
3797
3
82
15384
15
1080
8419
12
1376
10453
11
685
2030S
10
1140
4574
7
454
10617
12
267
M.
Mabe evator Co.1
Mac dam oster, Inc.
cDonad-
- atchuck Prntng Co
MacRae, ugh
Mackay, Mton
Mackenze, R. ., estate of3
MacMan, . R
Macman Co., The
Madson edze State ank
Maer, Mrs. W. N
Maer, W. N
Magee urnace Co.
Magnus, Mabee Reynard, Inc
Magure state, Ltd., ohn
Mane Dary Co
Mase, |r., Nchoas
Manckrodt, sr., dward 4
Manckrodt, sr., dward, estate of
Manson Co., . R
Maone, dwn
Mater, Maurce
Mande ros
Mancy Mng Co
Manerre, Wam R., deceased, estate of.
Mann, P. L
Mannng, Chares N
Mannng Co., L.
Manomet Cranberry Co .
Manora Deveopment Corporaton
Mante, Lee
Manve enckes Co
Marbe Shattuck Char Co.
Ltd.
Margod Garden Co.
Marne Insurance Co..
Markenhem Co., The
Marke, van --
Marke (II), George ., estate of.
Marke, |r. (I), George
Marke, sr., George ., estate of.
Marke, ohn
Marke, ohn, trustee
Markowtz, Dane S
Marks, . en|amn
Marks, Isaac
Marks, oseph D
Marks, Wson
Marboro ertzer Co
Marn Grocery Co
Marsh, . W
Marsh ork Coa Co
Marsha, dward
Marsha Spencer Co
Martn, .
Nonacquesccnee notce pubshed n Cumuatve uetn I -2, page 0, recaed.
state ta decson.
cquescence reates to second ssue of decson,
cquescence reates to frst Issue n decson.
G
e
n
e
r
a
t
e
d
f
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L
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g
(
N
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2
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1
3
-
0
1
-
2
2
0
3
:
4
7
G
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/
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2
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2
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/
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3
0
0
0
0
0
8
9
0
5
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35
Ta payer.
Docket
No.
oard of Tat ppeas.
oume.
Martn, Darwn D
Maryott Spencer Loggng Co. et a.
Masbn Cotton M Co
Mason Machne Works Co
3001
3341
448
289
1496
6514
1378
10032
3861
2116
14551
10853
1322
26776
18325
37209
3774
4490
4885
4885
11102
21
Massengae dvertsng gency
Mather Paper Co.1
Mathews, W.
Matns ros. Co
Mattage, Chares enry
Maurer, Chares ., estate of
Maury Mng Co
Maus| nna R. and L. M
Mayer, CP
Mayer, enry, estate of
Mayer s, Inc
Mc ester- dwards Coa Co
Mc rde, . T., estate of
Mc rde, Rose L., admnstratr
Mc ryde Sugar Co., Ltd... -- --
McCabe Co., M. ... --
McCah, ugene P., admnstrator estate of Mary
. McCah. -
McCah, Mary ., estate of
McCaum, .
McCann Co., Inc., .
McCarthy, ohn rancs, estate of
McCarthy, Water R., e ecutor
McCarthy 4 Sons, Inc., ohn
McCauey Co., C. R
McCoud, Chares ... --
McCogan, deade, admnstratr 2
McCogan. Dane ., estate of
McConne. .
McCormck, sr., ohn
McCormck et a., Robert
McCoy- randt Machnery Co
McCreerv, cnrv
McDonad, .
McDonad, Mary ., e ecutr
McDonad, Mrs. Lyde
McDonad, Patrck ., estate of3
McDonne, dward
McDonne, . S
Mc etrdge, dward P
Mc etrdge, Georgana
Mc etrdge, Martha G
McGnns, ob
McGynn, . P..
McGown- oshee Lumber Co.
McGrath, . R
McGrath Co., Wam
Mcntosh, Rchard
Mcntosh Ms
Mc enna, ames P
1 Non cquescence notce pubshed n Cumuatve uetn -, twge 7, recaed.
state ta decson.
1 cquescence reates to thrd Issue of decson.
2547
2547
14311
6578
8277
17334
17334
354
1273
20405
3147
3147
3211
22235
1880
1605
10733
3557
25158
3042
9336
3042
6194
13546
11503
11210
11209
6647
4714
10446
495
5317
15199
9832
121
6
10
1
3
2
11
3
13
9
3
13
10
3
16
16
5
10
8
8
13
1
2
2
14
14
14
9
9
1
1
13
10
10
6
16
1
2
8
4
16
2
9
2
4
6
9
9
9
4
4
10
6
10
16
9
1
G
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e
r
a
t
e
d
f
o
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L
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a
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g
(
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)
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2
0
1
3
-
0
1
-
2
2
0
3
:
4
7
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0
0
8
9
0
5
4
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4
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#
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36
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Mc nnon, L. ., estate of
Mc nght, . udson
Mc nght, R. C
McLean, Carone S
McMchae, Morgan
McMan Meta Co
McMun, M. ., estate of
McNaghten et a., Macom, e ecutors.
McNe, Robert .1 ---
McReynods, oseph
McWams, . W.
Mead et a., Wam W., e ecutors
Meade Cyce Co
Meadow ork Coa Co
Mechancs ank of rookyn
Mechancs Reaty Co., Inc., and Mechancs Reaty
Co. of Pennsyvana
Megeath, Ida
Mcgeath, 8.
Megeath, Samue
Megeath et a., Ceorge W
Mene, dward, estate ofa
Mene, the G., e ecutr 1
Menhard, Carre W
Meck, .
Meton, ger
Mepham, George S
Mercante Trust Co., e ecutor8
Mercer, ohn W
Merchants Natona ank
Merchants Transfer Storage Co
Merckens, ugust
Meredth, . T
Meredth, G. W., estate of
Mereen- ohnson Machne Co
Merges Co.,
Mcrat, Chares
Merke room Co
Mertz, dward P
Messenger Pubshng Co
Mesta Machne Co
Metare Cemetery ssocaton
Meta Crafters, Inc
Metasap Chemca Co
Metcaf, dwn D., estate of
Metcaf, Morrs
Metro Pctures Corporaton of New ngand
Metro Pctures m change of Pennsyvana-
Metropotan Laundry Co
Mctzger, L
Meurcr Stee arre Co., Inc
Me can Teegraph Co.4
2650
4048
10804
1534
2221
3841
8015
5846
17261
21189
31121
14977
25979
7228
5756
9770
9755
2351
7119
2815
9248
7118
3098
3098
2100
7623
5699
1981
9528
8233
8179
30906
10108
1540
4478
3531
11640
12438
10594
4953
5695
1569
2841
437
19842
13569
13348
25479
4437
747
538
9682
7749
9093
6
3
13
4
4
2
12
13
16
17
6
10
9
9
2
5
5
5
5
6
6
3
6
7
3
13
6
6
17
7
2
I
11
9
3
5
2
12
4
15
12
13
16
11
1
2
5
7
10
1 cquescence reates to deducton of oss on account of worthess stock,
s state ta decson.
state ta decson acquescence reates to ssue regardng ta abty of proceeds of fe
e cess of 40,000 e empton and ssue as to bequest of works of art to or for the use of the Cathoc Cathedra,
St. Lous, Mo.
cquescence reates to ssues nvovng offcers saares aDd ega e penses.
s cquescence reates to a ssues e cept as to tentatve ta .
G
e
n
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r
a
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f
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(
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2
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1
3
-
0
1
-
2
2
0
3
:
4
7
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#
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37
Ta payer.
Meyer, nton M
Meyer, erman ., estate of
Meyer ro. Co.,
Meyrowtz, m
Mam each Improvement Co
Mche, George
Mchgan Con Lock Co
Mchgan Lthographng Co
Mchgan Trust Co. et a., e ecutors...
Mcke, Tom
Mddeton Compress Warehouse Co.
Mdand Coa Co.
Mdand Natona Lfe Insurance Co...
Mdand Refnng Co
Mdwest ote Co
MUes Co., W. C
Mar, W. D
Mard et a., verett L., trustees
Mer, ddson
Mer, .
Mer, G.
Mer, enne L., e ecutr
Mer ohn L., estate of
Mer, Staney R
Mer, Day b Co
Mken, George W., estate of
Mng Moore Mercante Co
Ms, Lucy M., estate of1
Mton, George ., estate of
Mton, |r., George ., e ecutor ..
Mwaukee rass Manufacturng Co_
Mwaukee Woven Wre Works
Mner rees Lumber Co
Mner Lthographng Co., . C
Mnneapos Sash Door Co
Mnneapos Syndcate
Mnnesota Cement Constructon Co.
Mtche dvertsng gency, Inc
Mtche uto Co., . P
Mtten, Robert
Mobery ue Transfer Co
Mobery O Co
Mobe Devery Co
Mobe Rver Saw M Co
Mogg Coa Coke Co
Mone Dspatch Pubshng Co
Monarch Cooperage Co
Monarch ectrc Wre Co
Monk, enry
Monroe Cotton Ms
Monroe urnture Co., Ltd., et a
Montgomery, Lawrence
Moon, nne
Moon, O. L
Moore, nna ., e ecutr 1
1 state ta decson.
oard of Ta ppeas.
No.
oume.
Page.
5737
3
1329
1062
4
686
5384
4
481
3241
3
1327
14869
14
10
439
6
979
4368
2
1314
1423
1
989
6725
9
24
440
5
979
1125
1
1145
27
1
311
28889
14
200
/ 709
2
292
1983
2
296
2933
5
121
/ 3439
9559
5
625
10638
9
1404
840
5
294
1596
3
726
3465
7
921
4469
6
401
4397
11
854
4397
11
854
17002
12
702
20267
15
13
10123
7
785
7560
5
1060
1028
3
1010
19224
17
380
f 3424
19224
1
17
380
21024
13542
I
10
936
8163
16
75
10579
10
521
468
1
588
388
2
505
10163
13
1303
6284
6
151
10351
10
1311
7597
10
1001
10891
11
731
27862
17
1242
3552
3
163
7124
8
1224
8700
8
368
12408
10
588
9235
11
934
11590
13
929
13405
12
158
11396
9
16
3310
6
172
2543
2
743
28583
17
1308
8675
6
385
8674
6
385
10542
13
864
G
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2
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1
3
-
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1
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2
2
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3
:
4
7
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#
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38
Ta payer.
Moore, George
Moore, .
Moore, L. C. 1
Moore, Wam, estate of
Moore Stave Co., Lucas
Moore Scrver Co
Moores, arry C
Moorhouse, braham, estate of
Moorhouse et a., Mary zabeth, admnstrators2.
Moors, ohn
Mooyer, Chrstan, estate of
Mooyer, Margaret ., e ecutr estate of Chrstan
Mooyer, deceased1
Moorefed and wfe, W.
Moreand Co., Thomas
Morgan, Caud
Morgan, ohn
Morgan, Water G
Morrs, omer P
Morrs, ohn T
Morrs aey Stee Co. .
Morrs Cummngs Dredgng Co
Morrson Wooen Co
Morrson-Merr Co
Morton, . D
Mosby Co., Inc., .
Mosentha, Php ., estate of
Mosentha, Water ., e ecutor
Moser Wacker, Inc
Mosher Manufacturng Co
Moser, M.
Moser, Moses, estate of2
Mossberg Pressed Stee Corporaton
Mossman, Yarnee Co.
Mountan Ice Co
Mt. ernon Car Mfg. Co
Mt. ernon Natona ank
Movse, Sdney G
Mudd Motor Co., Ray .
Mueer Metas Co
Mur, ames S
Muns, Wam
Mutbestoe Co
Mumper, ewngs
Munger, L. S
Munger, Trude T
Munn ote Co
Munsey Trust Co., trustee
Munson, Caros W
Munson, dgar, e ecutor estate of arret . Curts,
deceased
Murchson Natona ank
Docket
No.
14953
3544
3709
13907
10542
5146
678
4209
5101
5101
1021
3404
3404
5721
18367
6290
10978
3449
6510
6525
16604
9492
9596
9543
4358
3559
2781
6994
6994
4475
1886
5304
17895
8757
3269
11076
11459
20512
14207
237
5967
1192
4395
3648
13917
7598
14053
28479
16897
13819
27766
16562
442
608
oard of Ta ppeas.
14
8
11
13
5
2
3
8
8
1
2
2
4
16
7
10
5
15
9
10
10
2
6
6
12
12
4
7
5
16
9
17
13
2
4
3
3
3
14
6
13
16
16
14
17
18
3
1
cquescence reates to ssue as to whether the ncome reazed under agreements of Dec. 14, 1918,
s ta abe n proportonate amounts to the severa pettoners or whether such proportonate amounts
are ta abe one-haf to the pettoners and one-haf to ther respectve wves.
state ta decson.
cquescence reates to ssues decded adversey to the Commssoner, wth the e cepton of ssues
nvovng deducton of tentatve ta es n determnng the earnngs avaabe for payment of dvdends
n 1918 and 1919.
G
e
n
e
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a
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f
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(
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2
0
1
3
-
0
1
-
2
2
0
3
:
4
7
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8
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5
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4
4
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#
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39
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Murphy, .
Murphy, Ray Sater, benefcary
Murphy Transfer Storage Co
Musseman, C.
Musser, R. C
Mutua Chemca Co. of merca
a Cotton Ms Co
Thread Manufacturng Co., enry.
N.
Nabors O Gas Co
Nace, ruce
Nartzk, uus ., estate of
Nathan, Morrs, estate of 1
Natona ank of atmore
Natona Casket Co
Natona m Pubcty Co
Natona Gauge qupment Co.
Natona Grocer Co
Natona Industra coho Co
Natona Land Co
Natona O Products Co
Natona Pano Manufacturng Co.
Natona Pneumatc Co
Natona Sash Door Co
Natona Straw Works
Natona Takng Machne Saes Corporaton.
Natona Tea Co
Nava Stores qupment Co
Nazareth Cement Co
Neapotan Ice Cream Co
Ne, ames
Neser, C.
Nekonegan Paper Co
Neuberger, Ma and Rudoph
Neusteter Sut Co
Nevns, rank
Nevns, rank ., admnstrator
Nevns, Thomas ., estate of
Newbod Son Co., R. S
New Century Coor Pate Co
Newe, ohn T_.
Newyn Coa Co
Newman, Lews D
Newman Theatre Co
Newman, Wam C.
Newmarket Co
New Oreans Can Co
New Oreans, Te as Me co Ry. Co. .
Newton, .
Newton, W.
Newton Cotton Ms
New York ower Co
7137
26472
8191
11554
160
4781
10083
16413
3641
7962
10578
4316
11448
3844
19982
1807
13413
562
4853
11130
13570
3333
20486
3651
5788
5065
5272
23189
13003
2446
11793
9290
11796
21064
3035
3036
4001
3344
3350
3350
5698
10986
24094
41675
9753
19138
3694
6530
1489
11994
400
9626
9627
10731
3861
9
7
1
3
12
15
2
7
12
8
12
3
16
4
14
1
7
10
12
11
5
5
16
5
17
16
4
8
8
18
16
8
12
12
12
7
10
17
9
9
4
10
2
7
6
7
7
12
9
state ta decson.
cquescence does not reate to tentatve ta ssue.
cquescence does not reate to deducton of amount of bad debt ascertaned to be worthess and charged
off n 192a
1 cquescence reates to second ssue of decson.
G
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r
a
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f
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(
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)
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2
0
1
3
-
0
1
-
2
2
0
3
:
4
8
G
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8
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5
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4
4
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#
p
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e
40
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
New York, rookyn Manhattan each Ry. Co.
New York, Ontaro Western Ry. Co
New York Takng Machne Co
Nagara Searchght Co., Inc
Nce a earng Co
Nchos, . M
Nchos, ohn W. T., estate of 1
Nchos et a., George, e ecutors 1
Nchos, Roy
Nchos Contractng Co
Nckev, . ., estate of
Nckey Sons, . .
Nckey, S. M
Nckey, W.
N on, ate I
Noe, Rchard
Nokoms Cotton Ms
Noan, Caude
Node orst Co.
Norfok Western Ry. Co
North mercan O Consodated
North Iowa rck Te Co
North Mc ester Coa Co
North Street Trust
Northeastern O Gas Co
Northern ote Co
Northern Mchgan Transportaton Co.
Northern Natona ank
Northern Trust Co. et a., e ecutors
Northern Trust Co., e ecutor 4
Northwest Lumber Co
Northwestern States Portand Cement Co. _
Northwestern Yeast Co
North wood Co.,
Norton et a., ram S., e ecutors
Norton, ames ., estate of
Norve, . R
Norve, Mrs. . R
Norwood, Caef Co
Noyes, Chares R., estate of7
O.
Oates, Mrs. Omer
O ren et a., anche, e ecutors
O ren Leather nsh Corporaton, oseph.
4945
974
12363
9505
2109
12623
9599
9599
24016
13399
1961
1235
1236
1237
1238
1239
1967
1962
1186
3223
4557
27682
9867
3601
8714
16107
5655
6831
10545
2231
3525
2768
3168
16691
4316
7127
10650
15310
5763
10456
1511
5122
19038
19038
7720
7719
9
18486
8393
13042
25747
9630
3
1
13
10
6
15
10
10
17
15
3
3
3
2
3
2
16
12
3
12
10
5
6
3
3
16
8
9
5
4
16
10
6
6
1
16
8
10
12
8
Revokes nonacquescence pubshed n Cumuatve uetn II-1, page 39.
1 cquescence reates to thrd Issue of decson.
cquescence reates to determnaton of cost and vaue of o propertes and mprovements thereon for
nvested capta and dopeton purposes, and mathematca cacuaton of nvested capta.
4 state ta decson acquescence reates to trusts of 1912,1919, and 1921.
cquescence reates to frst, second, thrd, fourth, and s th ssues of decson.
state ta decson.
7 state ta decson acquescence reates to Issues 2 and 3 of decson.
G
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2
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1
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-
0
1
-
2
2
0
3
:
4
8
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41
Ocean ccdent Guarantee Corporaton, Ltd..
O Connor Co., .
0 Day Investment Co
Oet|en, C. G
O ar, P. ., estate of
O are, . rank
Oho 4 g Sandy Coa Co., trustees for
Oho Grease Co
Oho Sheep Woo Growers ssocaton Co
Od armers O Co
Ods, Mard D.1
Geet, Israe
Onger ghanders, Inc
Onger Mortuary ssocaton
Osen, ohn
Osen Water fe Towng Co
O Meara, C.
O Ne, ohn, estate of 1
O Ne, |r., et a., ohn ., e ecutors 1
O Ne Machne Co
Oppenhemer, Leon
Opperman Coa Co
Orando Petroeum Co
Orth, rank L
Orteefen, dam
Osage Steamshp Co., Ltd
Osborne Cark Lumber Co
Ostrow, Samue D
Ots, ames
Ots Stee Co
O Tooe, ames
Ottoander, C. . W
Overand nght Co., Inc
Overand Lumber Co
Owen- mes- mba Co
Owens otte Co
Oyster, |r., George M., estate of.
Ozark Ms, Inc
oard of Ta ppeas.
Paauhau Sugar Pantaton Co.
Pabst, rdon
Pacfc akng Co
Pacfc Car qupment Co..
Pacfc Coast Ppe Co.
Pacfc Coast Redwood Co
Pacfc Novety Co
Pacfc Ppe Suppy Co
Pacfc Reaty Corporaton
Paducah Inos R. R. Co..
Paducah Water Co.
PaRet, .
de Modes
No.
oume.
Page.
3114
6
1045
1060
1
1021
16632
13
1230
11643
11
608
4184
3
1039
30377
12
702
7888
15
273
6023
4
1207
15149
14
911
2824
12
203
8718
15
560
9622
8
826
532
6
773
532
6
773
1460
6
889
1908
1
1149
9822
11
101
5185
4
78
5185
4
78
7922
9
567
9977
7
1156
3317
1
14729
6
1215
15792
20399
11
101
5588
9
249
12900
14
1403
3396
3
141
10493
8
382
14690
12
870
4711
7
882
7520
6
358
19402
12
769
4494
5
651
19366
15
870
3946
2
489
1637
5
921
1033
8
1107
7390
4
108
4377
6
1179
13879
13
500
2227
6
843
84
2
391
1093
2
348
7961
11
1329
1847
5
423
8162
5
1017
1943
2
870
4526
5
1223
3028
2
1001
6055
5
1067
4279
6
310
5502
5
189
cquescence does not reato to partnershp Issuo.
1 state ta decson.
cquescence reates ony to deducton of contrbuton to church budng fund.
cquescence reates to ssue 1 of decson.
4090 30 4
G
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2
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1
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-
0
1
-
2
2
0
3
:
4
8
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0
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8
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5
4
3
4
4
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42
Ta payer.
Pamer, ar M
Pamer, . C
Pantazas, Chares
Pantazas, ames
Pantud ote Co. and Pantnd udng Co.
Par-a-Te O Co.
Pars Coak, Sut Mnerv ouse.
Parsh, 8. W
Parsh-Watson, M
Parsh-Watson Co., Inc.
Parsan, The
Park musement Co
Park ros. Rogers, Inc
Parker, rthur M., estate of.
Parker, George 8
Paker, een Ptts
Parker, Nora D
Parker, W. D
Parker Wre Goods Co
Parkersburg Maretta Sand Co
Parma Co
Parsha, Wam W...
Patapsco aast Co
Patch, radford C
Pate, Zebuon ance
Patterson, G. S
Patterson, W.
Patterson Produce Co
Pau, ar
Pauson, Peder, estate of
Pauson et at., Wam I., e ecutors.
Payne, dward W
Pearce et aL, rthur P., trustees
Pearce, |r., Chares
Pear, en, estate of
Pear, ernard, soe dstrbutee
Pcarsa, Gbert
Pearsa Co., Inc
Peavy- ymes Lumber Co. .
Peavy-Moore Lumber Co. .
Peavy-Wson Lumber Co. .
oard of Ta ppeas.
oume.
Page.
5447
3
403
1181
1
882
3382
5
975
3382
5
975
18436
9
878
13896
13
540
5500
5
189
9504
9
1236
4684
3
840
2833
2
851
4894
4
605
583
2
415
7926
15
106
16921
16
587
2460
6
719
14954
14
1185
5602
10
854
14186
14
1185
8647
13
1239
8646
13
1239
3999
5452
8
448
12050
11
87
14553
18
429
6452
7
318
1800
1
1081
6332
4
916
14955
13
1236
12345
16
716
8901
7
621
3994
4
950
13927
11
784
13571
10
732
13571
10
732
9065
12
781
9615
13
150
5606
6
450
16433
18
249
16433
18
249
11997
10
467
12722
5
1177
15824
16354
14
625
25984
15823
16355
14
625
25986
15822
16356
14
625
25985
16108
16
1008
12329
14
1089
12328
14
1089
9380
5
386
Peck s urnture Co.
Pederson, ans 4
Pedcrson, Mare4
Peebes et a., W. 8., admnstrators
cquescence does not e tend to that pert of the oard s decson whch purports to hod that secton
704(a) of the Revenue ct of 1928 s appcabe to the case.
cquescence does not reate to affaton ssue, ecept wth regard to Peavy-Wson Lumber Co. and
Chrste astern Raway Co. for 1917,1918, and 1919.
1 cquescence does not reate to easehod Issue.
cquescence reates to Issues (c), (d), and (e).
state ta decson.
G
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r
a
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d
f
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2
0
1
3
-
0
1
-
2
2
0
3
:
4
8
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8
9
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5
4
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4
4
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43
Ta payer.
Peeress Pacfc Co
Pennsua Shpbudng Co
Penn Chemca Works
Penna, P. - -
Pennngton-Gesser Co
Pennsyvana Co. for Insurance on Lves and
Grantng nnutes, e ecutor under the w of
Mary . rtt, deceased
Peopes Ice Cod Storage Co -.
Peopes Trust Co., trustee
Perkns, .
oten
Perkns Land Lumber Co
Permanent Loan and Savngs ssocaton.
Perry, . G
Perry, .
Perry Dormney
Perryman, . R
Persons, ames
Peru Char Works
Peruna Co.1
Petauma Santa Rosa R. R. Co.2.
Peters, ohn
Peters Manufacturng Co
Peterson Co., George C._
Pevey Dary Co
Pheps, . M.
Pheps, Martha ., e ecutr
Pheps, Wam L., estate of
Pheps-Waters Co.4
Phps, dward S
Phps, George .1. -- -
Phps, ohn D., estate of ..
Phps, oseph dward, e ecutor .
Phps, oseph W., estate of
Phps, T. C
Phmont Reaty Co
Pho Corporaton, L. .
Phoen Natona ank.
Phoen Savngs ank Trust Co.
Pckerng, Lorng.
Pckerng, Rose C
Pctora Revew Co., The.
Pedmont Lumber Co
Pedmont-Mt. ry Guano Co.
Perce- rrow Motor Car Co
Docket
No.
14376
5741
9247
21861
10082
oard of Ta ppeas.
oume.
10
9
7
17
11
1904
2
48
14365
10
16
8472
10
1385
5152
6
781
6851
14
584
11363
17041
I
528
2268
2
132
9023
9
796
9022
9
796
852
1
995
2735
6301
311
3250
5
716
3408
3
29
5102
12333
1180
13830
11
541
25276
16
895
2091
1
1198
1266
1
690
161
1
385
14749
1
21953
13
1248
28226
4803
6
648
4803
6
648
19419
15
1166
2376
9
1016
6352
7
1054
6352
7
1054
6352
7
1054
6352
7
1054
12802
9
153
11758
11
800
16673
24755
16
130
32327
13149
14
115
13149
14
115
5908
5
670
5840
5
670
4487
)
6661
5
416
11303
12828
14
778
1757
3
1009
8542
8
72
893
2
396
1 cquescence reates to ssue as to vaue of good w for nvested capta purposes for 1010.
1 cquescence reates to that part of decson as to the purchase of ta payer s own bonds at ess than
par whch were hed as an nvestment.
1 state ta decson.
1 cquescence does not reate to ssue as to whether Phe|ts-Waters Co. was a transferee of Wsconsn
hemra Co.
G
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f
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2
0
1
3
-
0
1
-
2
2
0
3
:
4
8
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3
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0
0
0
0
8
9
0
5
4
3
4
4
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#
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44
Ta payer.
Person Co
Pke County Coa Corporaton 1
Pne, . rank
Pne uff Compress Warehouse Co
Pne Rdge Mnes Co
Pnhorn, Rchard, estate of2
Poneer Laundry Co
Pttard, . T
Pttsburgh essemer Coa Co
Pttsburgh Grndng Whee Co
Pttsburgh-Northern Coa Co
Panters Nut Chocoate Co
Pana, Inc., Theo
Paut Co., L. S
Pumb, Raph
Punkett, Chares T
Punkett, orence C
Punkett, Lyda
Punkett, Wam C
Pymouth Coa Mnng Co
Ponset Ms
Pochronades, Pau
Pomeranz, aron
Pomeranz, braham
Pomeranz, Otto S
Pomons, Denns
Pomons, Spro
Pond, D. .
Pope, rthur
Pope, Carence
Pope, Mrs. Carence
Pope Sanatorum Co
Popuar Dry Goods Co
Popuar Prced Taorng Co
Port Townsend Puget Sound Ry. Co
Post, ames
Poston, Carence ., estate of
Poston et a., oyd ., admnstrators
Pottash, arry
Pottash, Ma
Pottash ros
Potter arms, Inc
Pound ote Co., .
Powe, ope Ives, estate ofa
Powe, T. I. are, e ecutor3
Powe Coa Co
Power, Chares . and ohn M., e ecutorss_
Power, Thomas C. estate of
Power ro., T. C
Powers, Mary ., e ecutr 2
Powers, Rchard ., estate of
Powers, Samue L
Powers Mayer, Inc
Powers Mayer Manufacturng Co
Pratt, Wam ., estate of
oard of Ta ppeas.
No.
oume.
Page.
21340
12
678
7189
4
625
27573
16
555
7989
6
938
2208
5
541
6388
7
1104
4739
5
821
1804
5
929
5626
9004
45
2558
2
2559
/ 2
712
2837
6
105
8788
10081
173
7866
10
1158
16563
15
535
3370
7
295
3701
3
1265
3758
3
1265
3757
3
1265
3756
3
1265
4003
3
1023
83
1
6
1265
2
1263
11759
11
507
11760
11
507
11761
11
507
3382
5
975
3382
5
975
14460
12
865
6849
14
584
2151
3
595
2500
3
595
4148
4
1085
2141
6
78
9222
8
831
2564
2
12488
12
510
27350
17
921
27350
17
921
11992
12
190
11991
12
190
11990
12
190
5928
6
110
5792
13
943
10
166
9888
10
166
11945
12
492
10400
11
1313
10400
11
1313
3740
6
835
5422
6
633
5422
6
633
11558
12
702
(Sf
6
329
6862
6
329
8858
7
621
cquescence reates ony to ssue 1 n decson.
state ta decson.
cquescence reates to a ssues e cept |ursdcton ssue.
G
e
n
e
r
a
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e
d
f
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2
0
1
3
-
0
1
-
2
2
0
3
:
4
8
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2
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0
0
0
0
0
8
9
0
5
4
3
4
4
P
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#
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45
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Pratt Letchworth Co
Premer O Co
Premer Packng Co
Preston, omer M
Preston et a., omer M., admnstrators
Prestwood, . M., estate of
Prestwood, N. ., admnstrator
Prce, Samue
Producers ue Co
Prouty et a., nson ., e ecutor 1
Prouty.C. C, estate of1
Pryor, Luke, estate of1
Pugh, sr., Mrs. ohn
Pugh, |r., . C, estate of
Pugh, sr., . C, estate of
Pugh, |r., Mrs. . C
Pugh, sr., Mrs. . C, e ecutr
Pugh, L. G
Pugh, Mrs. L. G
Pugh, O. L
Pugh, Mrs. O. L
Purce, nne L., e ecutr
Purcc, oseph, estate of
Purdy enderson Co
Purty Oats Co
Purty Oats Co. of Davenport
Putnam, enretta, deceased, estate of1
Putnev Mercante Co., L.
Putze, enry
.
, Manufacturng Co
P.
Cty Prntng Co
R.
Rade Co., ohn
Radn, tta, admnstratr
Radn, Samue, estate of
Ranbow Royaty Co
Raegh Smokeess ue Co
Rammng, R. W
Randoph ote Co
Raner Grand Co
Ransom, Inc., Stephen
Rauh fc Sons ertzer Co., .
Ravner, Wam
Raymond- adey Corporaton
Read Phosphate Co
Rea state Trust Co. et a., e ecutors, estate
of George W. Mken 1
Reaty ssocates, as syndcate manager
Reaty Saes Co
Redands Securty Co
Reed, . M
Reed, Lea
state ta decson.
cquescence reates to ssue 1 of decson.
4644
7996
20629
10192
9816
3896
7755
7755
11764
159
2951
2951
9380
17156
17174
17155
17173
17156
17158
17157
17153
17154
3838
3838
5198
4364
4365
5273
3195
4053
2814
7196
6985
5576
8175
8175
3619
7767
5983
1580
4236
7904
7905
10720
8284
5128
10238
10123
27921
18145
5703
0776
5110
12
12
9
7
6
t
7
I
5
5
5
17
17
17
17
17
17
17
17
17
4
1
4
4
1
3
3
8
5
8
8
3
0
0
0
11
12
10
4
13
7
17
10
5
6
8
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46
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Rega Shoe Co
Rechenback, arry L
Renhardt, ane R
Renhart, Patrck D
Resner Mfg. Co., W.
Rezensten, Lous, trustee
Rezensten Tru t state, Rosa _
Renaker, .
Renfro, . T
Renfro, Mrs. Inez C
Reserve Natura Gas Co. of Lousana.
Retaers re Insurance Co
Retaw Mnes Co
Re Machnery Suppy Co
Reynods, . D
Reynods, .
Rhodes, rownson ampman, Inc.
Rbbon Cff rut Co
Rce edng, Inc
Rch and wfe, C. R
Rchand County udng and Loan ssocaton.
Rchmond osery Ms
Rchmond Mca Co., Inc
Rckard, George L
Rcker, George
Rcks, W. R
Rff e, enry
Rggs, Leon C, estate of, Lacey L. ogart, admns-
trator
Rgsby, G. D
Rke, rederck
Rker, |r., Samue, e ecutor
Rnger Co., George
Ro ectrc Co
Rter, oseph
Rver Ra Storage Co
Rvervew State ank
Roberts, . S
Roberts, rances ., estate of
Roberts, .
Roberts Co., U. N a--
Roberts, ncent G
Robertson, Chares
Robertson, arry
Robertson, .
Robnson, ndrew P
Robnson Co., . M.1
Robnson, . M., estate of
Robnson Shows Co., ohn
Rock Isand Sash Door Works
Rockford rck Te Co
Rockford Maeabe Iron Works
Rodefer O Co., Davd
Roden Coa Co
784
2015
904
16702
12436
8146
8146
13120
6138
6138
8704
9006
14185
17707
3733
2208
1791
7829
25575
894
12337
5219
2823
19420
21259
38675
3703
7763
13065
15606
6817
12803
3576
1932
5599
24335
7102
8565
12756
14392
1233
11180
5344
17698
9579
1270
5344
595
5436
17227
14924
5652
6341
13893
7258
3873
2451
10184
7915
1
1
2
15
13
9
12
8
8
12
s
3
5
3
10
17
2
12
3
6
15
13
15
10
12
3
2
6
18
6
10
9
13
1
12
7
10
9
2
7
1
5
13
12
5
12
13
4
2
11
5
cquescence reates to ssues 2, 3, 4, 5, and r. n decson.
G
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#
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47
Ta payer.
Roe, Chares ., estate of
Roebng, ar G., estate of.
Roesch, Wam ...
Roesse Co., Ltd., Lous
Rogers, ate
Rogers, Noah C, e ecutor
Rogers, R. M
Rogers, Robert C
Rogers, T. . and ctora .
Rofe, Ward G., e ecutor .
Romayor Grave Co
Rome Wre Co
Roos, Mortz
Roper, sha
Roper, Mrs. sha
Rose Co., dward
Rosentha, en|amn
Rosentha, annah 8
Rosenwad We, Inc
Roshek ros. Co. Roshek Reaty Co.
Rosyn ue Co.
Ross Co., Inc., .
Ross, ames, estate of1
Ross-Sper Gove Co
Rosser, Luther Z., estate of 1
Roth, Chares ., estate of
Roth ote Co
Roth Shoe Co., Whtney
Rouse, empstone Co., Inc.4
Rowe, ohn
Rowe, M. D.
Rowe, Mrs. M. D.5
Rova Coeres Co., The
Rova ue Co
Rova Wet Wash Laundry, Inc
Rubens Co., Chares.
Rubensten, Gertude G., e ecutr .
Rubensten, Lous, estate of 1
Rub-No-More Co
Rucker, .
Rucker, W.
Ruckman, Coa Co
Rudoph, . L
Rudoph Co., Inc., M.
Rudoph, T. T
Ruf, rank ., estate of
Ruos, . D
oard of Ta ppeas.
No.
oume.
Page.
11030
14
312
13042
10
682
25747
12
. 1195
2551
7
293
1009
2
1141
10843
7
711
25964
17
570
10842
7
711
13581
24740
,2
816
15536
15
638
18486
16
519
7532
11
828
8759
8
360
3079
4060
(
787
8642
7
1112
8643
7
1112
2092
2
341
990
2
19
991
2
19
8596
11
921
1844
2
260
9074
22072
285
7281
7
196
8690
8
693
10212
10
1340
2161
3
809
1508
3
868
542
1
1111
89
1
453
7673
10987
1018
3067
2
1159
9063
7
903
9064
7
903
233
1
369
9386
8
741
11481
14
470
5736
6356
6
626
12569
3795
10
864
3795
10
864
57
1
228
2928
9
921
2929
9
921
4277
5
534
4571
6
265
2069
4
476
4570
6
265
9528
13
85
9119
13
240
state ta decson.
1 state ta decson acquescence reates to ssues 2 and 3 of decson.
cquescence reates to tentatve ta ssue.
cquescence reates to ssue concernng openng nventory at December 1, 1917.
quescence reates to frst Issue of decson.
ate ta decson acquescence reates to ssue regardng ta abty of proceeds of fe nsurance n
3,000 e empton and ssue as to bequest of works of art to or for the use of the Cathoc Cathedra,
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48
Ta payer.
Docket
No.
oard of Ta ppeas.
Ruprecht, Chares C
Russe, Chares ., estate of
Russe, Mary I. ., estate of
Russe Mng Co
Russe Whee oundry Co
Ruud Manufacturng Co
Ryan Co
Ryan, ohn C, estate of
Ryan, ate C, e ecutr
Rye each Peasure Park Co., Inc.
Ryman, . ., estate of
Ryman, Nancy
S.
St. Car Guaranty Tte Co
St. Lous Maeabe Castng Co.1
St. Loue Screw Co
St. Lous Unon Trust Co., e ecutor.
Sachs, Chares
Sackett, . T
Sadder, ohn
Safe Guard Check Wrter Corporaton.
Sakowtz, Lous
Samon, George
Samon, Water
Saomon, Leon
Sampe at Stores Co., Inc..
Sampson, Wam C
Sanborn ros, successors, etc.
Sand Sprngs ome
Saner-Ragey Lumber Co
San rancsco Lumber Co
Sanford Cotton Ms
Sanger, as ., estate of
Santa Mara Gas Co
Sargent, Ma|ore L
Sau, Maurce
Savannah Rver Lumber Co. et a. .
Savannah Shp Chandery Suppy Co.
Savnar Co., Inc
Sawyer Mng Co
Sayre Stampng Co
Scafe, Wam ., estate of
Scaes, . L.s
Schatznger, ern hard, estate of
Schatznger, Sabna, e ecutr
Schecr, braham
Scheuer, erman, estate of
Schck, ndrew, deceased, estate of
Schff, en|amn
Schng Gran Co
Schemmer Graber Co., The
Schesnger, rmn
22638
24312
11250
183
2029
16278
54
1986
1986
13108
1706
1705
7578
5490
15168
2077
11032
7561
7577
3796
11451
10807
5733
3115
3725
12231
6042
204
11082
4871
431
10643
12813
6981
11507
3678
14067
14354
16130
26936
14805
3624
20924
3040
391
11408
11383
11383
10857
4621
3659
4742
5939
1422
13728
16
11
13
1
3
15
2
2
2
6
5
5
2
14
6
4
2
10
7
3
3
4
8
13
1
14
6
3
10
14
8
10
4
13
14
13
9
17
2
1
10
12
12
11
9
8
3
8
2
11
cquescence does not reate to ssue Invovng tentatve ta ad|ustment.
1 cquescence reates to affaton for 1917 and ncuson of Savannah Rver Lumber Co. In consodated
group for 1918-1921.
state ta decson.
G
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3
-
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2
2
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3
:
4
8
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8
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4
4
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#
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49
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Schett, doph
Schossberg, dwn,.
Sctunck, Wson
Schmd, ohn
Schoekopf, Water
Schoenhet et a., Wam, e ecutors.
Schroth, oseph, estate of 1
Schroth, ua nna, e ecutr 1
Schubert, ndrew
Sehutzc. . Wam
Schuz, . ., estate of 1
Schuz, mma ane, e ecutr 1
Schuz akng Co
Schwarzer Co., .
Schwng, Samue P., estate of 1
Schwnn, Ignaz
Scott, ohn
Scott, Sheby D
Scove, George S
Scrpps et a., Wam ., trustees under decaraton
of trust e ecuted by ames . Scrpps
Seaboard Ms, Inc. ( etmann Co., Inc., suc-
cessor)
Secor ote Co
Securtes Investng und, Inc.
Securty Trust Savngs ank, trustee 1.
Securty Trust Co-e ecutor 1
Segman, George W., e ecutor
Scgman, Isaac N., estate of
Ses oto Crcus Co
Sewyn Operatng Corporaton
Seneca Coa Mnng Co
Sentne Pubshng Co
Serren, nna, e ecutr 1
Serren, ohn, estate of 1
Servce Recorder Co., The
Seven Nneteen fth venue Co
Severa Co., W.
Sever, Maron Shanwad
Shaffer, ohn C
Shanwad, Maron D.2
Shamokn aey Pottsve R. R. Co..
Sharpe, Mary .1
Shame, Rchard
Sharp, W. Z
Shaw, . W --
Shaw, Guthre, e ecutor
Shaw, ames G., |r., estate of
Sheakey ennedy ros
Sheane uto Co., W. W
Sheen, esse G
Sheet Meta Constructon Co., Inc
Sheffed Dentfrce Co.4 -
Shedon Manufacturng Co.,
10016
2006
1971
11714
6212
9857
9858
3914
3914
6667
21581
5686
5686
2074
667
3633
8441
10418
6180
2443
434
6499
5023
5024
224
10304
6720
9758
9758
13964
4851
1049
5712
8836
8836
2201
6031
1702
14410
1072
14410
4944
17127
17126
10598
15612
9644
9644
6282
5187
543
5089
11814
12836
7
2
3
10
4
14
5
5
4
18
7
7
3
3
3
9
6
9
2
5
7
1
11
4
10
10
12
5
2
8
7
7
2
5
3
14
9
14
3
17
17
8
13
9
9
7
9
G
3
13
13
1 state ta decson.
1 cquescence reates to ssue as to whether certan ncome accrung to estate of pettoner s father was
ta abe ncome to pettoner.
| n so far as decson reates to reducton of dstrbutabe royaty ncome to an amount
h of the other two pettoners,
aocaton c
1 of ta n consodated return.
G
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1
3
-
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1
-
2
2
0
3
:
4
8
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#
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50
Ta payer.
Sheton et a., Chares ., e ecutors .
Shepard, Stuart G
Sherdan Meat Co
Sherdan, Thomas
Sherman Stater Co
Sherrod, rchbad
Sherrod, enry Lambert
8herwood, ohn W
Shner O M Manufacturng Co..
Shpowners Merchants Tugboat Co.
Shope rck Co
Shotter, S. O. and Isabe, e ecutors...
Shotter, S. P., deceased, estate of
Shuths, . W., deceased, estate of...
Shure Co., N
Shutter, Maron D
Shutteworth, Wony Co., Inc
Sbey et a., ohn R., e ecutors
Sbey, Rufus ., estate of
Sckes, Mrs.
Sk, Mrs. W. W
Sk, WW
S , Mrs. S. .
Sver Co., Inc., Wam
Sverman, e ander
Smmons Co
Smon, . S
Smon, ato M
Smonds Co., C.
Smons, |r., and wfe, ames
Smons rck Co.2.
Snshmer, Sdney W
Sknker et a., Isabea N., e ecutrces .
Sknker, Thomas ., estate of 1
Sater, Chas. W
Sater, . N., trust
Sattery, Stephen ---
Sne, ohn T
Smth, ert
Smth, Mrs. ert
Smth, Mrs. D. Sydney
Smth, rancs .
Smth, arry ., e ecutor 1
Smth, arry . P
Smth, Theodore
Smth, Water T
Smth Insurance Servce, Inc
Smth Son Co., Lee S
Smth Machne Co., .
Smythe, rnest ., estate of
Sntzer-Warner Co
Snow, rancs S
Snyder, Wam
Sofsburg, Louse
oard of Ta |
No.
oume.
Page.
2161
3
809
17132
15
627
5493
10
211
13698
4
1299
4313
4
23
22257
16
622
22258
16
622
7748
8
103
2875
11
805
3955
4
403
6531
5
1042
3134
2
912
3134
2
012
1827
2
1253
3655
4
1181
1316
2
23
1362
5
76
24921
16
915
24921
16
915
10430
14
1259
10864
7
1256
10864
7
1256
25171
16
485
9708
10
1328
10389
6
1329
1927
8
631
4912
4
1078
9993
10
1186
267
1
105
5329
5
480
13973
24509
14
878
27247
11068
7
1099
11155
13
846
11155
13
846
4134
5
804
8191
9
521
9312
9
1123
6752
9
1222
5329
5
480
5329
5
480
3262
4
385
1020
1
868
3098
6
341
2552
7
293
1054
9
57
4841
4
397
10901
9
284
3328
3
343
7519
7
525
12198
14
931
12964
19220
342
6850
14
584
13186
11
807
7249
7250
n
1306
1 state ta decson.
1 cquescence does not reate to contrbuton to the Yeur Cub.
Revokes nouactuescencc pubshed n Cumuatve uetn I- ut
page S.
G
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1
3
-
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1
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2
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:
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8
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8
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5
4
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51
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Page.
Soof, . W
Soomon, arry
Somers Lumber Co
Sonenbck, Davd
Sonora ank Trust Co
Sooy, Chares
South Chcago Drug Co ---
South ucd Savngs Loan Co.
, ugusta G., estate of._
musement Co., Inc..
Southern eed Co
Southern Press Coth Mfg. Co
Southern Sand Grave Co., Inc
Southern Tre Rubber Co
Spadng, atherne
Spang-Chafant Co., Inc
Speer, Lena
Spencer Lumber Co. et a., .
Sphar rck Co -
Spofford, annah M., admnstratr of estate of
Lucy M. Ms 1
Sporborg-Wam D., admnstrator
Sprague, zabeth S
Sprague Tre Rubber Co
Sprng rook Ice Co
Sprngdae Cemetery ssocaton
Sprnke, ames L., estate of
Squer, . entey
Stafford, Wam
Stafford-Lowdon Co
Staey, . ---
Stacy, Wnner C_.
Stamey-Mackey Constructon Co
Standard rewery, Inc
Standard Gas Products Co
Standard Marne Insurance Co., Ltd
Standard Refractores Co
Standard Sk Dyeng Co..
Standfer Constructon Corporaton, G. M.
Stanfed, Theodore
Staney, ames T
Staney Insuatng Co
Stapey Co., Inc., O. S
Star Porcean Co
Starck, Php ., estate of
Starck, Php T., e ecutor
Starck
Stark, rthur L., estate of...
Stark rck Co
Starr, C. L
Starr, oward W
Starrett, Pau
State ank of cester
estate of Php .
Stearns, rank ., e ecutor.
482
20112
2401
3665
7838
2882
15157
19508
6359
13753
13754
13587
13004
6603
22717
7302
10469
2389
7639
2086
1028
7914
6740
4717
12862
4169
10401
12078
14313
9088
6435
10750
1271
10226
10492
9843
4822
3617
3618
11694
5550
3076
4056
17323
2983
7685
5002
4051
4051
10587
12582
12739
101
6557
5913
16672
19922
1
15
2
4
7
10
13
14
3
14
6
10
5
18
7
0
3
10
2
3
8
8
11
12
3
12
13
14
7
9
4
10
5
4
15
2
13
4
3
3
8
12
9
1
4
8
16
776
419
106
986
66
493
1374
1079
1063
300
736
303
879
210
588
858
413
452
946
1016
1272
173
610
433
223
456
1223
1199
1121
932
1038
383
374
1221
853
24
648
525
787
158
967
557
989
514
514
1150
667
886
681
398
878
889
1 state ta decson.
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52
Ta payor.
Stearns, . M., estate of
Steee, Wedees Co
Sten et a., Sade S., e ecutors 1
Stenbach Co
Stewagon, ohn W., estate of
Stephens ue Co., Inc
Sterng Reaty Co
Stern, Car
Stern, m
Stern, oseph
Stern, ues
Stern, Lous
Stern, Samue
Stern et a., Samue . ., e ecutors .
Stevenson, D. M
Stewart Co., red S
Stewart Co., G. S
Stegtz, Treber Co., Inc
St, George W
Stwater Mng Co
SUwe Paper Co., .
Stock brdge, M. C
Stockbrdge, Mrs. M. C
Stowerck Chocoate Co
Stott, noch, estate of
Stouts Mountan Coa Co
Stratton Grocery Co
Strauss, Davd, estate of1
Strauss Market, Inc
Strffer, Inc., dward C
Stroh rewery Co
Strombcrg ectrc Co
Strong, ewat Co., Inc
Strong, omer L
Strong, .
Strong, Stea
Strother Lumber Co., G.
Stryker, rthur
Stumer, ne anche
Stumer, anche G
Stumer, Los M
Stumer (II), Lous M
Suburban Investment Co., The
Sugar Run Coa Mnng Co
Sugarand Industres
Suhr, Chares L --
Suvan Grante Constructon Co
Summt Whoesae Grocery Co
Sumpter aev Ry. Co
Sumter Coca-Coa ottng Co
Sunfower Packng Corporaton
Sunnysde Coa Coke Co.2
Sunshne Coak Sut Co -
Superheater Co
Superor ngravng Co
state ta decson.
cquescence reates to second ssuo of decson.
oard of Ta ppeas.
No.
oume.
Page.
16672
19922
M
889
10215
11
279
4621
9
486
2888
3
348
28469
17
910
15343
26383
I
666
6333
8
1000
19377
5
871
2186
5
89
5887
14
838
2187
5
S
19376
5
870
5943
14
838
2459
2
102
14698
9
552
5975
5
436
3065
2
1016
653
1
452
6521
8
391
5687
5
280
7301
6
531
1866
2
327
1867
2
327
6030
4
467
12195
11
706
6542
4
1292
7645
8
317
3877
9
1212
3378
2
1264
5533
7
887
16537
16
1192
3398
8
1170
5069
3
1035
19507
14
902
1909
6
417
1909
6
417
15235
10
1174
30204
39931
1033
992
2
19
993
2
19
904
2
19
905
2
19
1923
1
1121
9236
11
587
25063
15
1265
6406
4
1198
8790
6
703
676
1
1040
13145
10
1325
9079
7
890
531
2
1104
9442
9
984
11810
16
540
8383
12
5
7949
17814
861
G
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53
Docket
No.
oard of Ta ppeas.
oume.
Superor Motor Parts Co.1
Superor Pocahontas Coa Co
Susman, Otto
Sotff, S. D.
Swaney, wng
Swartz Co., Inc., . R
Sweeney, dward ., estate of ..
Sweeney, esse Gar, e ecutr .
Sweeney ames Co
8weet, Gertrude
Sweeten, P. P
Swnehart Tre Rubber Co
Sydco Photopay Corporaton
Syvan ectrc ath, Inc
Syracuse Washng Machne Corporaton.
ames
mne Laboratory, Inc
3tt, enretta ., estate of1
5tt et a., . rederck, e ecutors .
Tampa ectrc Co
Tarr, rank
Tayor,
Tayor, a D., e ecutr
Tayor, arret
Tayor, oward M
Tayor, Moses
Tayor, P. L.
Tavor, T. ., estate of
Tayor Constructon Co., Inc., .
Tcapue, .
Te- ectrc Co
Tempe, Water P
Tempeton, eny Co., Ltd
Tennessee bre Co
Tcr ush. Davd
Terre, dgar
Tc arkana Cotton O Co., Inc
Te as Chemca Co
Thcs, |r., George
Thomas, . L
Thomas Shoe Co., The
Thompson, . W
Thompson, Sectha 0. (Mrs. . C.)
Thompson, Mrs . T. C, e ecutr 3
Thompson, T. C, estate of1
Thompson, W. .
Thompson, W. an
Thompson ack.
10348
5377
3077
9190
2786
2863
3688
6322
6322
10266
19783
9240
4331
1436
10221
7411
26851
41474
13908
3199
16136
16136
13344
28332
29593
3543
3050
7617
3066
12732
8789
10020
7617
11877
4040
315
12018
6145
18432
10717
4015
3132
1888
6360
3958
9213
209
7412
1895
5280
5280
677
17509
10837
8
7
8
4
5
G
15
15
10
8
3
2
7
5
17
11
7
15
15
12
3
9
7
2
14
7
11
7
13
3
1
10
15
4
7
1
11
3
6
1
10
9
3
3
5
10
11
1 cquescence reates to second ssue of decson.
state ta decson.
1 cquescence reates to ssue as to whether the ncome reazed under agreements of December 14,1918,
s tuabe In proportonate amounts to the severa pettoners or whether such proportonate amounts are
ta abe one-haf to the pettoners and one-haf to ther respectve wves.
G
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d
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2
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1
3
-
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1
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2
2
0
3
:
4
8
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0
0
8
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5
4
3
4
4
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54
Ta payer.
oard of Ta ppeas.
No.
oume.
Page.
7917
10
57
1869
2
661
9679
10315
1203
385
2
570
18234
16
181
4206
3
1006
7638
12
1306
9898
10
368
521
9
499
21647
16
68
9314
9
1123
9314
9
1123
12456
12
481
3286
3
884
18041
19963
437
6378
8
914
8999
11
1257
9195
11
288
85
2
582
2450
2
754
1508
3
868
7452
6
610
14429
12
804
1022
1
868
2959
3
327
2960
3
327
9615
13
150
7068
7
961
2889
3870
3
1196
6506
25837
17
690
3440
3
521
11402
16
101
2317
2
701
20046
12
1343
20047
12
1343
830
1
894
5084
5694
371
16030
15
872
15152
15
1107
4897
3
1064
8270
8
981
4524
6
768
3397
10
134
2710
2
1165
1114
4
1169
587
1
653
6585
7
119
12988
12
434
6407
5
1242
3634
3
743
7863
13
932
3470
2
796
19016
17
135
19016
17
135
Thompson Co., ohn R
Thompson Pacfc Coast Co., L.
Thompson Scenc Raway Co., L.
Thorkdsen, Thomas
Thorn, Susan ., estate of1
Thorpe, een Converse
Thorwarth, ohn ., estate of
315 West 97th Street Reaty Co., Inc
Threefoot, ., estate of
Tbbs, Wam
Tetz, Louse C, admnstratr
Tetz, Robert M., estate of
Tfft, Layer fc Co., Inc --
Tford, enry Morgan, deceased, estate of
Tt, C.
Tton, S. U., estate of
Tnde, rank T.
Tte Insurance Trust Co
Ttus, Lous
Ttusve Trust Co., e ecutor
Tvo Theatre Co
Toccoa urnture Co
Todd, C. Lee
Todd, George W
Todd, Lbanus M
Tomfohrdc, ndreas, estate of
Tomnson, . G
Tonawanda Power Co
Tooke, C.
Topeka Tent wnng Co
Tower Co. .
Towns ospta, Chares
Townsend, nna M.
Townsend, . Ray
Townsend Lumber Co
To away Tannng Co
Trace ork Mnng Co
Tracy, Thomas .
Transatantc Cock Watch Co.
Trathen, Mrs. . Res
Treat ardware Corporaton
Trefry, W. S
Tr County Lght Power Co
Troost venue Cemetery ssocaton
Tro e Manufacturng Co., The
Troy Manufacturng Co
Trust Co. of Georga, e ecutor
Tschffey, rederck
Tsvogou, Constantne
Tucker, . G
Tucker, Geneveve
Tucker, enry St. George, e ecutor
Tucker, Martha S., estate of
state ta decson acquescence reates to ssue 1 of decson
cquescence does not reate to tentatve tn ssue,
state ta decson.
G
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55
Tugren, erbert
Tugren, S. Mnard
Tunneton ank
Tur Iron Car Co., Inc
Turner, Mrs. W.
Turner Termna Co
Tweve ast Thrtv-frst Street ote Co
Twn Cty Sand Grave Co
Two Nnety-Two atbush venue Corporaton
Tyer ppach, Inc
Tyer, May L
Tyer Warehouse Co
U.
Ucta Investment Co
Uferts, .
Unoa Rea state Co
Unon Co
Unon Department Store Co
Unon Meta Manufacturng Co
Unon Pate Wre Co
Unon Stock Yards Co
Unon Termna evator Co
Unon Trust Co., e ecutor
Unon Trust Co. of Ceveand, Oho, e ecutor 1
Unted Motor Co
Unted States nveope Co
Unted States dety Guaranty Co
Unted States Merchants Shppers Insurance Co.2
Unted States Mortgage Trust Co., e ecutor1
Unted States Payng Card Co
Unted States Refractores Corporaton3
Unted States Too Co
Unted States Trust Co. of New York et a., e ecu-
tors1 -
Unted States Trust Co. of New York, e ecutor
Unted States arnsh Te Co
Unted Studos, Inc
Unted Thacker Coa Co., trustees for
Unty Schoo of Chrstanty
Unversa Stee Co
Untermyer, vn
Utca Motor Car Co
oard of Ta ppeas.
.
anco Ms, Inc
ancouver ome Co
an de amps oand Dutch akers,.
an anne Revovng Door Co
anderbt et a., Wam ., e ecutors,
anderbt, Wam ., estate of
an Ceave Trust
32599
32600
11433
9255
4162
3934
3645
7171
5189
995
10722
512
5792
14034
3457
15630
7835
35
2524
28823
7078
7388
16271
4478
6983
12744
7422
12432
4263
10439
2459
19305
5642
4650
7856
11030
15069
23900
7888
1799
12380
26612
9086
13270
5550
1430
9988
13030
13030
13584
13585
30673
oume.
16
16
11
5
3
3
11
3
0
10
1
13
It
3
14
8
1
-1
17
12
14
.)
5
12
10
5
13
2
15
9
3
.
14
15
15
15
4
16
1 1
10
12
1
2
11
1 1
11
18
1 state ta decson.
1 cquescence reates to ssue as to 1
cquescence reates to a ssues e cept ssue wth respect to queston of aowance of amortzaton In
1918 of costs ncurred n 1919.
G
e
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a
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2
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1
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1
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2
2
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3
:
4
8
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0
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8
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0
5
4
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4
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#
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56
Ta payer.
an tten, Chares
an eet, Carey
an ook, .
an ook, Mrs. .
an orn Co., Inc., Over
an Lndey Nursery Co.,
an Lndey Orchard Co.,
an Schack, en L., estate of 1
aucan, Samue M
audreu Lumber Co
aughan, ohn Chares, estate of1
aughan, Leonard oden, coe ecutor2.
aughan arnes, Inc
etch, dwn P
rden, M. L
rgna Lumber o Co
. rgna Raway Power Co.3
scose Co., The
sta de rroyo
oebe, acob, estate of1
oebe, Water W., e ecutor
otz, bert L., estate of
otz, atherne L., e ecutr
on Paten, ar
on Ruck, ar, estate of.
oyer, . L
W.
Wadsworth, arod ., estate of
Wadsworth, esse ., e ecutr estate of arod .
Wadsworth, deceased
Wagner, fred T
Wah, enry
Wah, W. Wey
Wamanao Sugar Co
Wad, Lous
Waker, |r., . C
Waker, |r., Mrs. . C
Waker-Crm Co., Inc., The
Wa, rank
Wa Ochs, Inc
Waace arnes Co
Wangford, C.
Wangford, mer R
Was Tractor Co
Wasdorf, Mr. and Mrs. dward
Wash, oseph ., e ecutor 2
Water, George L., estate of2
Water et a., oward ., e ecutors estate of
George L. Water, deceased 2
Water Co., Inc., D. N.
Water Co., Inc., et a., D. N.
Water Rea state Co
Ward, amton
Ward, Wn
Docket
No.
8793
2047
9358
9359
8252
3109
3109
7127
18488
6908
10514
10514
7311
1179
5200
3546
9040
11731
3164
10231
6009
6009
25604
25604
16959
9857
9858
5453
1982
1982
23744
2292
2004
24879
4629
8266
8267
446
7359
3857
3653
231
230
663
2410
6388
1782
1782
4006
7618
7618
11322
10471
oard of Ta ppeas.
oume.
8
2
8
8
9
2
2
9
16
8
10
10
6
6
3
3
11
7
7
16
16
10
14
4
1
17
2
2
13
8
6
0
1
4
4
10
4
4
3
4
7
2
2
4
10
10
8
7
state ta decson acquescence reates to trusts of 1912, 1919, and 1921.
state ta decson.
cquescence n so far as decson determnes that Cty Oas Co. of Norfok and rgna Raway
Power Co. were affated wth each other.
G
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a
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2
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1
3
-
0
1
-
2
2
0
3
:
4
8
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#
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57
Ta payer.
oard of Ta
No.
oume.
Page.
4588
3
1154
2550
7
293
2475
7
483
4471
3
844
7051
9
743
6609
7133
441
1321
1
1117
4619
4
987
27597
16
1214
20810
15
422
7228
6
752
6286
7
495
3580
3
85
5792
13
943
13966
14
7G5
1277
1
911
4001
8
477
2925
2
976
2924
4
15
8488
8
943
2922
2
976
3852
4
15
2921
2
976
2923
2
976
7955
4
664
178
1
871
1279
1
759
2404
3
247
2724
3
247
7070
9
238
5591
5
366
9146
11
503
3647
3
355
2563
2
84
2604
6
300
9645
13
1342
13048
14672
1184
10433
13
249
10433
13
249
11917
13
1284
10059
7
615
4004
1
4005
6061
6
617
6102
10157
11134
21634
(
1370
12587
12
800
5199
9
1169
548
1
507
10106
8
442
10106
8
442
8019
19871
954
Warren Co., The
Warren, b
Washburn, Cheney D
Washngton Cadac Co
Washngton Caterng Co
Washngton ote Co.1
Washngton Paper Stock Co
Washngton Pece Dyeng nshng Co_
Wassennan, Isaac, estate of
Watson, C. C
Watson, Martha ., estate of
Watson, Mrs. Myrte
Watson town rck Co
Watterson ote Co
Wausau Cannng Co
Waynesboro Manufacturers ssocaton
Weakey Coak Sut Co
Weaver, ee R
Weaver, ee R.1--
Weaver, ames
Weaver, M.
Weaver, M. ., estate of
Weaver, S. P
Weaver, T. L
Weaver, Water
Webb ocorsesk, Inc
Webb, Leand D
Webb Press Co., Ltd
Webb, Stuart W
Weber- unke-Lange Coa Co
Wedgwood Sons, Ltd., osah
Weed, enry D
Weeks Co., L. S
We- amson Co., Inc
Wener, . L
Wengarten, Davd, estate of
Wengarten, Meve D., e ecutor
Wes, . W. D
Wess, Pau
Wessenbach, Mnna .
Wech et a., . Soher, trustees._
Wech, Prank P
Wesh Packng Co
Wenze, rnst, estate of
Wcrbeovsky, braham, e ecutor.
Werbeovsky, . ., estate of
Werk Co., M
1 cquescence does not reate to that part of decson nvovng appcaton of the yers decson (1 .
T. ., 1138).
1 Revokes nonacquescenco pubshed n Cumuatve uetn -2, pngo 1.
1 state tas decson.
4000 --30 5
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2
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58
Ta payer.
oard of Ta ppeas.
No.
oume.
Page.
24497
15
482
6984
9
69
10548
17055
12
1394
25239
2843
2
483
6872
4
629
2172
3
128
2723
5
1185
300
1
436
6032
4
147
14790
16
378
16883
17
1120
3763
2
1308
14452
10
17
6475
12
889
2852
5
109
12001
14
496
8604
7
972
19755
15
553
26439
13
302
26439
13
302
4799
5
829
9665
8
1246
21093
16
96
428
1
973
31522
17
811
12768
15
470
5622
4
995
5623
4
995
5554
4
995
12768
15
470
28141
15
1410
23948
11
461
10673
12
714
8472
10
1385
11046
7
1170
14110
16
197
1399
3
97
10316
15888
1192
3090
6
472
7086
5
1274
3478
2
747
3094
7
771
609
1
725
16476
16
968
5574
10
102
5574
10
102
7955
4
664
7615
7
467
7637
7
467
11425
9
1030
21666
17
654
Werner, enry P
Werner Werner Cothng urnshng Goods Co
Weser ros., Inc
West ay Co., The
West Corporaton, . C
West nd Consodated Mnng Co
Westergren, Inc., M.
West Pont Investment Co
West 28th Street Corporaton
West rgna Coa Co
West rgna Maeabe Iron Co
Westermann Pagano, Inc
Western mercan O Co.1
Western Maryand Ry. Co.
Western Star Mng Co
Western Wheeed Scraper Co.3
Western Znc O de Co
Westand Co
Wharton et a., Gerad ., e ecutors
Wharton, ohn G., estate of
Wheary, George
Wheatey, ames .s
Wheeer, D.
When Cothng Co
Whsnant, .
Whte, sa L., estate of 4
Whte, |r., ames
Whte, ua
Whte, Robert P
Whte et a., W. T., e ecutors 4
Whte Trust No. 1, R. . and .
Whtehead, CP
Whtehouse Leather Products Co., Inc
Whteey, urt ., estate of
Whtng, C. L., Inc
Whtman, Carence
Whtman, Nathane, deceased, estate of
Whtman Sons, Inc., Carence
Whtmeyer, a
Whtmore, vah P
Whtson, Thomas
Whorton et a., Gen C, e ecutors 4
Why brow, Carence
Wckens Co
Wckwre, Theodore ., estate of
Wckwre et a., Theodore ., |r., e ecutors.
Wedemann rewng Co., George
Wcss, . C
Wess, Oga
Wggnton, George P
Wber, George I., estate of4
1 cquescence reates to second ssue of decson.
cquescence reates to reducton by 2 percent of ncome ta of ta payer for caendar years 1918 and 1919.
cquescence docs not reate to that porton of decson whch hods that secton 281(c) of the Revenue
ct of 1926 s appcabe to the case.
4 state ta decson.
cquescence reates to tem (2) of decson.
Nonacquescence notce n ths case, pubshed n Cumuatve uetn I -2, page 6, recaed.
G
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a
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1
3
-
0
1
-
2
2
0
3
:
4
8
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59
Docket
No.
oard of Ta ppeas.
oume.
Wber Natona ank of Oneonta, New York, e -
ecutor and trustee 1
Wbur, Loyd ._
Wdennann Co., C
Whte et a., ugh, e ecutors and trustees_
Wkens Lange
Wkes, . rank
Wkes, . Renwck
Wkes- arre Lace Manufacturng Co.
Wkns, L.
Wknson, W. ., estate of
Wams, arry --
Wams, Robert W., e ecutor of estate of en C.
onaparte
Wams oundry Machne Co
Wams Steamshp Co
Wamson, e ander
Wamson Rauers Co
Wamson Mng Co
Ws, Mrs. W. T
Ws, W. T
Wson ros. Co. .
Wson, Chares
estate of 1.
Wson . .-- ------
Wson, anne L., e ecutr 1
Wson urnture Co
Wson, .
Wng, R.
Wnshp, Chares N
Wnter Garden, Inc
Wsconsn ydro- ectrc Co
Wof, . . G
Wof Manufacturng Co
Wofe, mma S., estate of
Wofe, Russe, e ecutor
Wofe Co., Udopho
Woferman, red, e ecutor
Woferman, Lous, estate of1
Women s ppare Co
Wood ros. Thresher Co
Wood, av
Wood, T.
Woodcffe Sk Ms
Woodmar Reaty Co
Woodruff Lumber Co
Woodruff Son, ohn T
Woods Sons Co., oseph W
Woods Theatre Co., .
Woods, Wam Stone, estate of
Worcester ank Trust Co. et a., admnstrators.
Wrght, erbert N., estate of
Wrght, O. ., estate of
Wrght, Pear Ross, admnstratr
Wrght, W. ---
Wrght s utomatc Tobacco Packng Machne Co.
21666
5636
10611
8289
7462
10649
29037
12024
12023
452
4208
16379
16743
4207
1652
10190
8725
2343
11292
1042
15679
15679
8460
4909
6911
4909
11317
18157
24499
6754
8246
9601
2970
8626
16149
16149
16010
11291
11291
4001
5877
13014
11029
559
30984
7262
6S0 1
9156
11067
7462
14230
14230
12096
12096
4270
1837
17
5
8
11
15
11
11
1
6
16
6
1
16
7
2
12
G
7
7
7
5
L2
6
10
15
17
10
10
10
8
10
15
15
15
10
10
s
4
11
9
I
17
6
6
8
12
11
13
13
12
12
10
1
3 ta decson.
3 reates to ssues 2 and 4 of decson.
3 to deducton of Pennsyvana and New ersey nhertance ta es,
e reates to frst ssue of decson.
G
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2
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3
:
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8
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60
Ta payer.
oard of Ta ppeas.
oume. Page.
Wyatt et a., zabeth C. R., e ecutors
Wyman Co., C. C
Wyomng Te Tmber Co
Y.
Yahoa Sand 4 Grave Co
Yakma op Co
Yae revda Paper o Manufacturng Co
Yeow Popar Lumber Co
Yoder, dward
Yokohama -Ito washa, Ltd
Yost erre
Young, I. ., estate of
Young, May S., e ecutr 1
Young, Mna ., e ecutor
Young, S. Marsh
Young Men s Chrstan ssocaton Retrement
und, Inc.1
Youngstown read Co
Younkcr ros., Inc
Yow, rances Whte
Z.
Zegen, rederck
Zenth Mng Co
Zeger, |r., Wam
Zmmerman, . W
Zmmerman, enne
Zour Drawn Metas Co
17698
10676
21370
24574
2281
9527
3353
9894
3220
2653
2085
7440
3847
4720
1839
36261
41599
1333
5522
5555
10
8
6
8
2
12
3
6
2
5
3
6
2
18
2
8
4
6426
10
844
5454
8
1279
123
1
186
2513
5
314
2145
2
667
4908
8
853
The Commssoner does NOT acquesce n the foowng decsons of
the Unted States oard of Ta ppeas:
Ta payer.
oard of Ta ppeas.
No.
oume
Page.
24341
16
497
13189
12
692
9092
10
213
0606
7
574
6519
7
848
6519
7
848
6439
4
568
350
2
498
4437
11
1271
10619
7
1043
4772
4
649
dams, Wam P
tkn, . ng
merca Cabes, Inc.3
ng Cory Co.
sop, dward ., estate of ..
sop, dward ., e ecutors.-.
magamated Sugar Co
mercan press Co
mercan eature m Co.3
mercan Leather Products Co.
mercan Seatng Co.4
Nonacquescence notce n ths case, pubshed n Cumuatve uetn I -2, page 6, s recaed.
cquescence s n the resut ony.
Nonacquescence reates to ssue as to tentatve ta .
1 Nonacquescence reates to thrd ssue.
state ta decson nonacquescence reates ony to 1917 tru t.
Nonacquescence n so far as t reates to ncuson n nvested capta of the sum of 198,716.37.
G
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U
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)
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2
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1
3
-
0
1
-
2
2
0
3
:
4
8
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#
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61
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Page.
mercan Seatng Co.
mercan Stee Co
nkeny, ohn D., e ecutor _ -
nkeny, Lev, estate of
rchbod, ohn ., e ecutor
rnod et a., ohn .
thena rck Te Co
tantc Coast Lne R. R. Co.5.
tas Tack Co.
udubon Park Reaty Co
ud, . W
yers Co., L. S.7
.
aker, dward
a et a., Water ., coe ecutors
amberg Cotton Ms Co
ancker, |r., .
ank of Dupn
ank of Itay, San rancsco, Caf
ank of Topeka
arnes, deade C
arnes et a., Chares G-, e ecutors
arnes, |r., ohn, estate of
arnes, oseph
arnes, oseph, admnstrator
arnes, Wam C
arnette, atherne Wknson, soe and ony her 8.
arron- nderson Co
artett et a., Php C. ., e ecutors
artett, erschc, estate of
arton, Mary L., trustee
arton, Ots, estate of
ates, . W. (Mrs.)
eacon Coa Co.8
eck, Maron . urt
ehow state Co .
emont Iron Works
eowsky, Morrs
et Raway Co. of Chcago10
enedct, ames ., estate of
enson Lumber Co
14676
669
8904
8904
8629
20887
20888
20889
20890
12926
19339
10983
11497
9629
12169
1217
25080
6858
9445
10104
18617
12950
15810
18850
17411
8624
8625
5266
9577
5266
17410
16379
16743
24769
23581
23581
12934
12934
18611
11894
19593
12670
10454
9656
4289
21621
19519
14
1
9
9
8
14
14
9
12
6
13
1
17
8
11
12
13
15
17
7
7
7
17
16
17
t
6
5
11
9
17
12
6
7
9
9
328
839
1302
1302
919
954
1359
1193
3
875
1213
1135
733
180
1236
420
652
1226
1301
1002
360
924
924
924
1002
1390
686
510
510
1008
1008
420
280
413
1365
722
424
304
438
593
reates to second and thrd ssues of decson,
c decson.
state ta decson nonacquescence reates to frst and second ssues of decson.
Nonacquescence reates to fraud penates.
Nonacquescence reates to second ssue of decson.
Nonacquescence reates to ssue nvovng reducton of nvested capta on account of dvdend payment.
........ ubshed n Cumuatve
f cases acquesced n.
Nonacquescence r
Nonacquescence n so far as decson aows pettoners to deduct for the years 1920 and 1921 ther ao-
cabe porton of edera estate and State transfer ta es pad on shares receved by them by vrtue of a com-
promse agreement modfyng the terms of the w and n e cess of ther shares recevabe under the w.
10 Nonacquescence reates to ssues nvovng edera ncome ta es added to ncome for 1917, 1918, and
1919, n respect of whch pettoner was entted to be rembursed by ts tenant companes.
G
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(
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2
0
1
3
-
0
1
-
2
2
0
3
:
4
8
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62
Tapayer.
Docket
No.
oard of Ta ppeas.
oume.
enson Tmber Co
erger, Mathda W
erger, Water
erks oundry Manufacturng Co_
ern Dye Works
est Stee Castngs Co
ggs, sr., .
ngham, rthur W., e ecutor 1
ngham, Robert W
ar, dward T
ar, W. ., estate of 2
ar Co.. . C
aney, dth
ock, . ates.
ock, . ates, e ecutor
ock, rank ., estate of
ock ohner Mercante Co
ossburg Mercante Co
um s, Inc.
umberg ros. Co.4
ydenburgh, a..
oger Crawford, Inc
on wt Teer Co_
ourne, my ., estate of5
owman, . Wam6
oykn, zabeth W
oyne Cty Lumber Co
rackenrdge, George W., estate of
raunsten, Louse R
rawner, e ander arrson, estate of2_
rawner, rances, e ecutr a
renneman, Davd
renneman, . L.
renneman, erna L
rant, . S., admnstrator
rcke, Maude nea 7
rer Coeres .
rttngham, uan .
rttngham, uan G
ronson et a., ames D., trustees a
rooks, W. .
rown Co., M
ryant Stratton Commerca Schoo, Inc.
ack, Truman, estate of
uock, .
urges, Rchard
urke ectrc Co.10
16311
6110
6111
6998
15714
8326
15255
20303
8823
25684
2440
7147
10613
18792
18793
18793
4576
2880
2523
12137
9921
14745
26037
7883
18935
29784
4635
6515
13776
16092
16092
8361
8323
8324
8860
14321
11406
19365
28186
13557
16535
18435
18535
7702
10991
24864
43
17660
28612
25908
1697
9
10
10
5
13
6
15
15
8
18
4
11
13
11
11
11
4
4
7
17
12
5
13
10
8
16
10
7
11
10
15
15
10
10
10
6
17
12
403(a), Revenue ct of 1921, undmnshed by 21,753.40 of the deductons under
of sad secton.
s state ta decson.
Nonacquescence reates to ssues as to procedure for handng nstament saes.
Nonacquescence reates to frst ssue of decson.
Nonacquescence does not reate to deductbty of New York nhertance ta
Nonacquescence reates to deducton of contrbutons to a trust.
7 Nonacquescence reates to net oss deducton.
1 Nonacquescence reates to depeton ssue.
Revokes acquescence pubshed n Cumuatve uetn I -1, at page 6.
n Nonacquescence reates to ssues 1 and 2, and ssue 5 as to patent group No. 1
13
375
13
375
7
127
12
31
9
753
1
32
13
415
16
451
17
275
5
553
r paragraph (2), ,
paragraphs (1) a
eeton
ad (3)
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-
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1
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2
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:
4
8
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63
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
5
99
4
842
8
1191
16
1
15
1
5
347
4
842
9
156
6
60
8
1076
15
458
17
575
4
441
12
166
6
539
10
1397
16
515
10
1408
17
881
12
647
16
961
17
820
4
842
3
25
16
1129
16
839
12
615
4
637
4
637
15
934
15
934
6
8
9
87
4
1280
12
256
8
492
15
1309
15
1311
359
6
679
13
1252
16
178
urton, Lawrence mer.
yck, W. S.
yers, oward Webster..
C.
adwaader, ohn, estate of
adwaader, |r., et a., ohn, e ecutors
aforua rewng ssocaton 1
aaway, uer
ambrdge Ice Co
Campbe, rcher Mavnard 1
Campbe, . L
Campbe Co., ohn
Campe, Mnne L
Capto ote Co.2
Carbo Petroeum Co.
Carey, C. WS
Carney Coa Co.5
Carmthers, Mabe G
Centra Savngs ank 6
Centra Unon Trust Co. of New York, guardan..
Century Musc Pubshng Co
Chadbourne fe Moore
Chambers, nna M
Chapn, W.
Chapn Constructon Co
Chcago Portrat Co
Cty utton Works
Cark, ames
Ceveand, Panesve shtabua R. R. Co
Ceveand, Panesve astern R. R. Co
Cne, Mrs. a Ppes7
Cne, W. D.
Cngan, Margaretta T
Cohn Sons Co., M.
2689
2260
10319
13296
13296
3903
2264
7282
18320
18321
19591
30688
6610
7134
9524
2432
5562
8496
25741
5006
26518
12840
17066
17686
26057
2267
3200
21396
15826
11918
4927
4927
6929
Cons-McCarthy Candy Co.
Comer-Green Lumber Co. ..
Connectcut Passumpsc Rvers R. R. Co.10.
Conne, G.
Conne, Mrs. G.
Conneee, C. U
Conover Co., S.
Consodated Investment Co
Consodated Te te Corporaton
4227
7361
9238
4302
20916
8424
9100
18405
18406
3363
3926
13603
15983
1 Nonacquescence reates to queston of affaton as to the companes ncuded n the unts.
Nonacquescence reates ony to tf|at part of decson whch reates to appcaton of the yers decson
(1 . T. , 1135).
Nonacquescence reates to fourth ssue of decson.
Nonacquescence reates to ssues 1 and 3 n decson.
Nonacquescence reates to ssue No. 1 n so far as t reates to fsca year ended May 31,1919.
Nonacquescence reates to obsoescence ssue.
Nonacquescence reates to deducton n 1919 of commssons ncurred nsae of property aso decson
s to fourth ssue.
1 Nonacquescence reates to 25 per cent penaty for faure to De a return.
Nonacquescence reates to ssue whether the consodated return for 1919 started the runnng of the
statute of mtatons as to the Comer-Green Lumber Co.
Nonacquescence reates to frst ssue of decson n so far as t hods that the ncome was not reazed
unt the year n whch the ta es became due and payabe and aso to the second ssue of decson.
G
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f
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(
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t
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)
o
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2
0
1
3
-
0
1
-
2
2
0
3
:
4
8
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3
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8
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64
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Converse Cooperage Co.-_
Conway, . W
Coon aey State ank
Corbett Stuart
Corneus Lumber Co
Crabtree Co., .
Crane, T. I
Crocker Co., . S
Cross Mountan Coa Co_.
12518
2263
11352
11855
4273
5889
27769
4581
1219
Crown Potteres Co 10043
Cunnngham- eckemeer Suppy Co.
Curran, Maurce _
D.
D ramon, enretta
Day Pantagraph, Inc.
Day Record Co
Dane, Chares R
Dane, S.
Darby, Rufus C
Davs, Chas.
Davs, Oscar
Day, enry M
De orest, ua N
Denert, sr., Oscar
Deto Grass Rug Co.3
Dennett, red
DcRenter, Ronad
Derschug, ohn N. --
Desmond s, Inc
Dckerman ng s, Inc
Deckerhoff, Raffoer Co
Descher, fred
Don, ohn P
Doehne, George, estate of
Don, arret M., estate of 5-_
Downg, Mary M
Duggan, anna, estate of
Duggan, ames, e ecutor 6
Duhme, Ophea, estate of
Duncan Coa Co., W. G
Dunson Ms 7
Dustn, nne M., estate ofs-
Dwght Loyd Snterng Co.
.
astern Steamshp Lnes, Inc 24870
dgar Co., ames 14606
15838
793
10644
4126
12058
20037
22044
20036
2265
18622
18625
30198
5857
6937
6926
11498
6243
18064
14465
4928
25079
13121
10985
9344
5594
2394
4706
4700
0858
12347
17019
8629
120
am, arvey _
kn, Dr. Wm. S..
kns, Wam M.
18001
18629
27807
17
4
13
11
5
5
17
5
2
12
14
6
7
9
13
16
16
4
11
11
12
4
11
7
7
7
16
15
4
17
IS
9
6
9
6
8
8
8
13
10
8
1
17
16
10
11
16
1 Nonacquesccnce reates to ssue nvovng oss of 1,000 on Gaoway note.
2 Nonacquesccnce reates ony to ssues Invovng reducng nvented capta by reducng current earnngs
avaabe for dvdends by ta accrued for current year.
Nonacquescence reates o .econd ssue n decson.
Nonacquesccnce reates to ssue 1 of decson.
Nonacquescence does not reate to deductbty of New York nhertance tar.
state ta decson.
Nomcquesconeo reates to ssue regardng ursdcton.
state ta decson nonacquescence reates to frst and second ssues of decson.
G
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(
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)
o
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2
0
1
3
-
0
1
-
2
2
0
3
:
4
8
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3
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0
0
0
0
8
9
0
5
4
3
4
4
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#
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65
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
son, . R
mery et a., are C, e ecutors
mery, |r., Lews, estate of
sperson, Nes, estate of1
sperson, Mrs. Nes (Mee), e ecutr ._
cesor-Leader Laundry Co
O Co
ane, vevn rancs
armers tepost Natona ank and ffated
anks
armers Loan Trust Co., e ecutor
armers Loan Trust Co., e ecutor 1
dety Trust Co.
ed, Marsha
rst Natona ank of rdgeport, Conn., e ecutor.
rst Natona ank of Duuth, admnstrator
rst Natona ank, resno, Caf
rst State ank of rackettve, Te
rst State ank of Wemar
rst Trust Savngs ank
tsgerad, Mary
oster, ce sher
oster, . M., estate of
oster, ames ., estate of1
oster, Mrs. ames Martn, e ecutr 1
o , ugene
Prancescon Co., . C.s
rancs, rancs, guardan
rancs . r., rancs
rank, Wam G., admnstrator
rankn et a., Thomas ., e ecutors and trustees.
resh Pond Ice Co
uer, |r., ames W
G.
Gaum, bert ., trustee.
Garber, . .6
Garber, M. C.
Gardner Governor Co.7
Uarneau Co., Inc., oseph..---- -
Genera Manfod Prntng Co_
Georga Car Locomotve Co.5 .
Gbson, ate oa, estate of
Gdeon- nderson Co
Gette, atharne
Grard Trust Co., e ecutor 1
30309
9766
9766
7071
7071
9221
28764
16725
6220
18234
21621
13638
11840
18721
18502
18503
15811
12876
12657
16011
11746
810
10126
12928
11493
21829
20535
10585
16724
16724
9344
6515
7282
3068
6101
3708
14097
3710
13909
321
40
14577
3131
7402
22365
18754
11298
15
9
9
11
11
8
16
15
5
16
16
13
15
18
13
13
9
10
11
5
7
16
13
16
17
10
15
15
6
11
9
7
10
11
11
5
1
12
2
7
18
14
10
1 state ta decson.
state ta decson nonacquescence reates to ssue 2 of decson.
1 Nonacquescence reates to ssue concernng nvested capta for 1920 and 1921.
Nonacquescence reates to ssue 1 of decson.
1 Nonacquescence reates to thrd ssue of decson.
Nonacquescence reates to ssue as to whether the agreements of December 14,1918, and tho dscharge
thereof were productve of ncomo ta abe for the yearsnvoved, and, f so, to what e tent.
Nonacquescence reates ony to that part of decson whch reates to c
) appcaton of the yers c
G
e
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f
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g
(
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t
y
)
o
n
2
0
1
3
-
0
1
-
2
2
0
3
:
4
8
G
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2
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3
0
0
0
0
0
8
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0
5
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4
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#
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66
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Grard Trust Co. et a., e ecutors
Gechman, Ph
Genn, Thomas
Goddard, ohn N
Godfrey, onathan
Gong e Manufacturng Co
Gonzous Creek O Co. (dssoved), trustees for
credtors of
Goodrum, |r., .
Gordon, enry
Grandn, orence
Grandn, George W., trustee
Grandn, enry
Graves et a, . ., commttee for credtors of
Whttaker acon
Great ear Sprng Co.1
Great Northern Ry. Co.s
Greene et a., Rchard T., trustees.
Greck Condensed uttermk Co..
Greyock Ms 3
Guarantee Constructon Co.4
Gud Co., Inc., .
Guf States Stee Co_
Gwn, ar S
aght, George W
aer, Mary 5
amton, arrs Co.
amet Ice Co
anon, Mary _
annba Mssour Land Co_
arbour-Longmre Co
aran Co., O.
arret Cotton Ms
arrs, zabeth
arrs O Co., C. C
arry Co., S.
artford- armont Co.
artmann, Chares
aske arker Car Co_..
ass, . S.7
atze ueher, Inc.8
aubens, enry, e ecutor...
23208
18121
2262
18621
18720
17584
13393
18613
13838
25740
25742
25742
22631
10489
8433
11850
23973
3691
11926
1828
1848
8741
9276
18358
18359
17983
6141
14063
25751
4170
15687
25516
27251
9084
6905
1374
6228
11820
8011
1644
9016
18930
7009
14817
9501
11454
11418
16
17
4
11
18
15
12
11
12
10
16
16
12
12
8
15
7
9
2
11
12
14
4
14
12
16
16
9
7
1
5
11
13
4
12
14
9
13
10
17
1 Nonacquescence does not reate to deprecaton and obsoescence ad|ustments.
1 Nonacquescence reates to ssue nvovng the queston whether the company shoud accrue as ncome
n the ta abe years nterest earned but not pad n those years on obgatons of other corporatons owned
by t.
Nonacquescence n decson n so far as the oard hods that t has |ursdcton to determne the over-
payment for 1017.
Nonacquescence reates to second ssue of decson.
Nonacquescence reates to ssue concernng deductbty of chartabe contrbutons.
Rovokes acquescence pubshed n Cumuatve uetn III-1, page .
1 Nonacquescenco reates to frst ssue of decson.
Nonacquescenco reates to thrd ssue n decson.
G
e
n
e
r
a
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f
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)
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2
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1
3
-
0
1
-
2
2
0
3
:
4
8
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3
0
0
0
0
0
8
9
0
5
4
3
4
4
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#
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67
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
awkns, rank
ay, ane urt1
aynes, wood, estate of
eneman Lumber Co.
enrch, Samue G., estate of
epershausen et a., George, e ecutors .
epershausen, Php, estate of 3
emock oow Coa Coke Co
enaghan, zabeth
endrcks, armon W
. W., trustee
aburn, C. sher, estate of
ance, . P
don, ames
ershey Manufacturng Co.
Php W
Rubber Co
key, .
ggnbotham- aey-Logan Co.s
nd, George U
nd, Roph Co
nman, Thos. P
rsch Co., doph
-Wes Manufacturng Co
rau Co., The
, Isabea C, estate of 3
et a., Meyer C, e ecutors .
n, rederck
Sed, Mary D. Moore
oyoke Westfed R. R. Co
ome uders Shppng ssocaton __
ome Laundry Co
ouston et Termna Ry. Co.7...
oward Co., . W. . P
owe, Chares
ubert, dmund D., estate of 8
umphreys, . C
unt, . C .
untngton, nne
untngton, Waace
pfe Co., Inc., . Chr. G.
ps, mma urt 1
Lumber Storage Co.10
Chares 11
2572
19614
11721
10175
2420
24911
24911
8837
27252
4554
4303
9690
11192
32297
28862
32108
6245
8039
325
19107
4691
19167
19167
18615
3230
30494
6134
5338
3361
100S9
8425
7044
6047
8494
19863
27S05
11204
4069
19888
25807
25806
9834
19567
3307
8053
21382
4
17
13
11
2
18
18
10
10
4
S
11
11
18
14
10
7
1
11
8
18
18
11
7
14
6
3
7
9
8
4
6
15
16
12
9
15
15
15
9
17
4
13
16
1 Nonacqueseence n so far as decson aows pettoners to deduct for the years 1920 and 1921 ther
aocabe porton of edera estate and State transfer ta es pad on shares receved by them by vrtue of a
compromse agreement modfyng the terms of the w and n e cess of ther shares recevabe under the
w.
1 Nonacqueseence reates to ssuo as to tentatve ta .
state ta decson.
4 Nonacqueseence reates to second ssue of decson.
Nonacqueseence reates to frst, second, and fourth ssues of decson.
Nonacqueseence reates to thrd ssue n decson.
T Nonacqueseence reates to second and fourth ssues of decson.
1 state ta decson nonacqueseence reates to ssue concernng transfer of stock.
Nonacqueseence reates to obsoescence ssue.
w Nonacqueseence reates ony to that part of decson whch reates to appcaton of the yers decson
(1 . T. ., 1135).
n Nonacqueseence reates to deducton of amount e pended for tranng to keep n condton for
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68
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
I.
Inos Merchants Trust Co., e ecutors 1
Inos Rura Credt ssocaton
Independent rewng Co. of Pttsburgh 1
Independent rck Co
Independent Lfe Insurance Co. of merca
Indana arbor et R. R. Co
Indana Rong Ms Co
Indana Stove Works 4
Indanapos Street Ry. Co
Indvdua Towe Cabnet Servce Co
Industra Loan Investment Co._
Ingewood Park Cemetery ssocaton
Inman, dward
Interurban Constructon Co
Irvng ank-Coumba Trust Co. et a., e ecutors5
.
ackson, nnette T.8
ackson, Carone Mather, estate of 7-
ackson, George .
ackson, Mnne L., estate of 8
ackson, Ws .8
ackson Tnde 8
aeger, Otto, estate of
ames, rthur Curtss 8
efferson Gas Coa Co
ohnson et a., omer S., e ecutors
ohnson, Stephen O., estate of 9
ohnston, Mrs. . ., deceased
ohnston, R. ., her at aw
ones, S.
ab, Lous
een, erbert Ide
eeney, George ., estate of_
eeney, Raymond G., e ecutor.
eews Reaty Co., Inc.10
chota Mnng Co
eystone Coa Mnng Co
11204
5058
3242
8198
25295
21550
37661
12259
8148
8787
1231
12586
20664
3249
2501
2687
7028
20055
19421
19422
8423
11715
14424
11715
14424
10489
1117
10168
12
3
4
11
17
16
13
8
7
17
6
4
5
5
16
9001
11
1257
20303
15
1001
9002
11
1257
4219
3
832
9003
11
1257
9000
11
1257
20055
16
897
2509
13
764
14951
33247
1135
9550
11
534
9550
11
534
14355
12
185
14355
12
185
27220
17
1131
15
15
6
15
15
12
3
10
state tu decson nonacqueseenco reates to ssue concernng transfer of stock.
Nonacquesc uco reates ony to ssue 2 n decson.
Nonacquescence n assumpton of authorty by the oard to pass upon consttutonaty of secton
215(b) of the Revenue cts of 1921 and 1924 and refusa to admnster same.
Nonacquescence reates to second ssue of decson.
stato ta decson nonacquescence reates to deducton for e ecutors commssons and attorneys
fees.
a Nonacquescence reates to tentatve ta ssue.
state ta decson nonacquescence reates to deducton of the amount under paragraph (2), secton
403(a), Revenue ct of 1921, undmnshed by 21,753.40 of the deductons under paragraphs (1) and (3) o.
sad secton.
state ta decson.
stato ta decson nonacquescence reates to trust nstruments of 1918 and 1921.
o Nonacquescence does not reate to deprecaton and obsoesccnco ad|ustments.
G
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2
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-
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1
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2
2
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:
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8
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69
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
eystone Stee Wre Co.
sse, Carone T
sse, Carone T.1
ster et a., orence L., admnstrators _
ster, Wam ., estate of
ster Land Improvement Co.8.
ttery Reaty Co
en, orence L.4_
yman,
ohn, ches ..
ohn, Le
uhn, .
ynett, arod .
Lancaster et a., ohn L., recevers.
Lancaster Lens Co.4
Land Improvement Suppy Co..
Landreth Co., . .
Langwe Rea state Corporaton.
Lawson, ohn S
Leasng udng Co
Le us, Mary ee urt_
Lee Lve Stock Commsson Co
Lee Shoe Co., Inc., ohn
Levne ros. Co., Inc. 8
Ley Co., Inc., rtd T
Lberty Insurance ank
Leber et a., . W., e ecutors
Lghtnng Creek O Gas Co
Lsk Manufacturng Co., Ltd.9.
17496
18203
21788
3707
11986
18061
3707
11986
18061
12355
15114
34274
4004
4005
6061
6102
10157
6753
16478
16477
18631
13190
9863
11603
28773
15835
23758
6108
14423
18745
280
10061
6832
18168
5070
9720
8584
23204
10031
11438
19050
20440
24414
29788
9295
16
15
15
11
11
9
14
4
1G
16
11
12
9
10
IS
11
17
10
16
17
7
11
5
9
14
13
11
15
15
8
17
7
Lvezey, . M
Loyd, rnest
Lobsenz, esse 10
Lock, Moore Co., Ltd
Nonacquescence reates to deducton of aquot part of cost of mprovements to certan property.
onacquescence reates to ssue as to whether the agreements of December 14, 1918, and the dscharge
thereof were productve of ncome ta abe for the years nvoved, and, f so, to what e tent.
Nonae noscenco reates to ssue wth respect to queston of aowance of amortzaton n 1918 on costs
ncurred n 1919.
Nonacquescence reates to queston n decson pertanng to the year 1919.
Nonacquescence reates to the ssue as to whether a return sgned by the presdent and secretary was
the return requred by statute, the Sng of whch started the runnng of the statute of mtatons.
Nonacquescence reates ony to nvested capta ssue.
1 Nonacquescence n so far as decson aows pettoners to deduct for the years 1920 and 1921 ther aocabe
porton of edera estate and State transfer ta es pad on shares receved by them by vrtue of a compro-
mse agreement modfyng the terms of the w and n e cess of ther shares recevabe under the w.
8 Nonacquescence reates to Issue 0 In decson.
Nonacquescence reates to deprecaton ssue.
Nonacquescenco reates to thrd and fourth ssues of decson.
G
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)
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2
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1
3
-
0
1
-
2
2
0
3
:
4
8
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3
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0
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0
0
8
9
0
5
4
3
4
4
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#
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70
Ta payer.
Docke
No.
oard of Ta ppeas.
oume.
Loetscher, Chrstan, estate of 1
Loetseher et a., ohn ., e ecutors
Loewensten ros. Garment Co
Los ngees Sat Lake R. R. Co...
Lousana Nava Stores, Inc
Ludngton, Chares ., estate of
M.
Magec urnace Co.
Mahonng Coa R. R. Co
Maey Co., dward
Manckrodt, |r., dward
Manckrodt, sr., dward
Mata Tempe ssocaton
Manhattan rewng Co
Mann, rankn P., estate of
Mansfed, enry ., estate of
Mansfed, Mnne I., e ecutr 4
Martme Securtes Co.5
Martn dvertsng gency, Inc., Mac...
Mathews, ohn
Matthessen, |r., . W
Mc voy Co
McCung et a., u L., e ecutors
McCormck et a., Cyrus ., e ecutors 6_
McCormck, Nette ower, estate of .
McCutchen, C.
McDonough, ames
McDowe. S. L
McDowe, Mrs. S. L
McGee, Nee
McGown- oshee Lumber Co.1
McMurtre, dnah
McNe, Robert L
Mercante Trust Co., e ecutor
Merrtt, Thomas ., estate of
Metro Pctures Corporaton of New ngand .
Me can Teegraph Co.
Mam8 Motor Works, Inc
Mddese Ice Co. eta
Md-West o Co
Man, M.
Mer, Carence
Modern Inventons Corporaton
Mor, arry C
Moore, L. C.
14325
14325
8465
21741
18449
23208
5000
2202
9677
11031
1750
29476
693
6101
12165
12165
324
8115
9583
2125
9216
12468
22731
22731
19819
21462
11272
11271
13292
29938
10446
19740
17261
9528
18502
18503
4437
9093
6052
7282
11066
21555
14087
25377
19135
3709
13907
14
14
13
IS
18
16
11
4
6
14
4
16
6
10
17
17
2
11
s
2
10
13
13
13
10
16
15
15
13
10
8
(
13
13
11
10
5
(I
11
10
13
10
14
11
state ta decson nonacquescence reates to ssues nvovng e ecutors commssons, attorneys
fees, and msceaneous admnstraton e penses.
Nonacquesconce reates to frst ssue of derson.
Nonacquescence reates to second ssue of decson.
state ta decson.
Ths notce, whch was orgnay pubshed n uetn I 41, page 1, was repubshed n Cumuatve
uetn -, page 7, for tho reason that the case was erroneousy ncuded n the st of cases acquesced
n, pubshed n Cumuatve uetn I -2, page 3.
state ta decson nonacquescence n so far as decson hods as nonta abe the vaue of pro|erty
paced n trust under the Instrument of uy 27, 1918.
f Nonacquescence reates to deducton of commsson pad to agents for negotatng ease.
state ta decson nonacquescence reates to deductbty of remander vaue of the resduary estate
bequeathed to charty.
Nonacquescence reates to tentatve ta ssue.
Nonacquescence reates to ssue as to whether the agreements of December 14,1918, and the dscharge
thereof were productve of ncome ta abe for tho years nvoved, and. If so, to what e tent.
G
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2
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1
3
-
0
1
-
2
2
0
3
:
4
8
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0
0
8
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5
4
3
4
4
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71
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Page.
Moore Corporaton, ohn C
Moore Cotton Ms Co
Morgan, rooks
Morre Co., ohn
Morrs, Caspar W
Morsman, |r., dgar M., admnstrator _
Morsman, dgar M., estate of1
Morsman, |r., dgar M., admnstrator
Moser, Car
Moser, George
Moser, osephne T
Moser, uus C
Mossman, Yarnee Co.1
M. S. C. odng Corporaton et a
Muer, Car, estate of
Murphy et a., ames C, e ecutors 1
Murphy O Co
Myers, Long Co
N.
Natona ank of Topeka
Natona Pano Manufacturng Co.3
Natona Products Co.
The.
Natona Refnng Co. of Oho et a
Natona Sugar Manufacturng Co
Natona Tank port Co
Neson, C. N., estate of1
Neuman Co. et a., . L
Nevn, Wam L., e ecutor 1
ersey Porcean Co
, Lan D
, Loyd D
et a., Loyd D., e ecutors
Newman, Lous, estate of
Newman, Wam C.4
New Oreans, Te as Me co Ry. Co.5
Nes re rck Co
960 Park ve. Co., Inc., et a
Node orst Co.
Nord op Ranch
Nordhot, ohn
Norfok nttng Ms Corporaton
North mercan O Consodated 7
Northern Trust Co., e ecutor 1
Northern Trust Co., e ecutor 8
18861
29543
18614
15114
34274
27806
17660
32075
32075
13473
13475
13474
13471
3269
11076
4620
9720
4166
14440
12358
24511
18850
3333
20486
6136
12120
186
10605
3274
7702
18348
31551
29568
15940
15936
15939
15939
6530
400
2628
6978
9867
6149
3766
4341
8714
16107
2473
7127
15
1140
17
662
11
420
14
569
16
1405
13
415
14
108
14
108
12
672
12
672
12
672
12
672
9
45
7
216
13
1175
5
952
15
1195
14
460
15
1301
11
46
7
632
11
511
1
236
7
577
3
1217
7
127
16
533
16
15
15
1059
15
369
15
369
15
369
15
369
10
158
6
436
6
8
7
216
12
417
10
835
4
509
5
792
12
68
9
1310
9
96
1 state ta decson.
Nonacquescence reates to ssue nvovng deducton of tentatve ta es n determnng the earnngs
avaabe for payment of dvdends n 1818 and 1919.
Nonacquescence reates to tentatve ta ssue.
Nonacquescence reates to deducton of amount of bad debt ascertaned to be worthess and charged
off n 1920.
reates to ssues 1 and 4 n decson.
reates to frst ssue of decson.
I to bass of chargng depeton on cost of defendng tte to o propertes and
earned n 1916 and reeased to ta payer n 1917.
s reates to trust created on ebruary . , 1917.
G
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2
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1
3
-
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1
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2
2
0
3
:
4
8
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0
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0
0
8
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0
5
4
3
4
4
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#
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72
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Northsde aduct Co.1
Northwestern Improvement Co
Northwestern States Portand Cement Co.
Norton et aL, rank ., e ecutors
Norwch Worcester R. R. Co
Norwood Lumber Co
Noyes, Chares R., estate of
Nunnay, .
Nunnay, Wnshp
0.
Oho as Dye nshng Works
Obet Motor Co
Od Coony R. R. Co
Od Domnon Steamshp Co
Ods, Mard D.s
Onda Gasone Co
Onger Corporaton
O Ne, ohn
O Ne, Mrs. ohn ( rances)
Ortsefen, dam 9
Ostenberg, W.
Ott, W M
Ottey, ohn
Ottumwa Serum Co
Ou udng and Loan ssocaton
P.
Pacfc Coast Ppe Co.7
Pacfc Southwest Trust Savngs ank, e ecutor8
Pametto Coa Co
Paramount nttng Ms
Parrett, O. S
Paso Robes Mercante Co
Payne, Martha
Pearson, rc
Peavy- yrnes Lumber Co.8
Peavy-Moore Lumber Co.8
11728
14200
12106
5763
10456
5594
2020
3785
18486
18627
18620
20395
14700
7820
24462
8718
15799
19077
25469
16864
16864
12900
19306
34015
13713
18623
15114
34274
3865
7961
12136
9478
18272
20306
29902
6766
11655
2803S
32298
27S04
15824
16354
25984
15823
10355
2598G
9
14
7
9
2
6
10
11
11
10
10
6
16
15
13
9
16
16
14
17
15
11
14
6
11
14
16
11
17
4
12
IS
IS
16
14
1-1
Nonacquescence n so far as decson determnes that ghand Park Co. and Northsde aduct Co.
wcro affated wth rgna Raway Power Co.
Nonacquesceneo reates to ffth ssue of decson.
Nonacquescence does not reate to deductbty of New York nhertance ta .
state ta decson nonacquescence reates to ssue 1 of decson.
Nonacquescenco reates to partnershp ssue.
Nonacquescence does not reate to deducton of contrbuton to church budng fund.
Nonacquescence reates to ssue 8 of decson.
8 state ta decson.
Nonacquescence reates to affaton ssue, ecept wth regard to Pcavy-Wsor. Lumber Co. and
Chrste 6 astern Ry. Co. for 1917,1918, and 1919.
G
e
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f
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(
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2
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1
3
-
0
1
-
2
2
0
3
:
4
8
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8
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#
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73
Ta payer.
Peavy-Wson Lumber Co.1.
Peck s urnture Co.
Pederson, ans 3
Pederson, Mare s
Peeress Wooen Ms
Peton, onoro Gbson, e ecutr 4_
Peruna Co.5
Petpuma Santa Rosa R. R. Co.8
Pheps-Waters Co.
Phadepha uartz Co
Petsch, my Lake, deceased, estate of
Petsch, Water G., e ecutor 8
Pke County Coa Corporaton
Pttsburgh nfe orge Co
Pttsburgh Provson Packng Co.
Pttsburgh Suppy Co.10
Pttsburgh Unon Stock Yards Co_.
Pttsburgh ave, oundry Constructon Co.
Potter, .
Powe Coa Co.
Prescott et a., Over, e ecutors 12
Prescott, Wm. R
Prndbe, ohn
Prndbe, Loretta
Prtzaff, rederck C
Prosser, Seward
Provdence Worcester R. R. Co
Provdent Trust Co. et a., admnstrators
-
uaker Mad, Inc..
R.
Raston Stee Car Co
Randa, George W., estate of.
oard of Ta ppeas.
No.
oume.
Page.
15822
1
16356
14
625
25985
16108
16
1008
12329
14
1089
12328
14
1089
12038
13
1119
7402
7
1144
5102
12333
1
1180
13830
11
541
19419
15
1166
6677
13
1146
5424
6
582
5424
6
582
7189
4
625
7464
6
1083
9219
15813
16
139
32370
18864
14
620
9219
15813
16
139
32370
9089
6
460
7432
10
563
11945
12
492
7883
8
582
18626
11
420
15344
16
187
15345
16
187
6109
10
747
8520
7
734
6297
7775
1186
4976
5
1004
11421
10
301
7640
18158
1416
5850
6765
679
Nonacquescence reates to affaton ssue, e cept wth regard to Peavy-Wson Lumber Co and
Chrste 4 astern Ry. Co. for 1917, 1918, and 1919.
I Nonacquescence reates to easehod ssue.
Nonacquescence reates to ssue (a).
state ta decson.
Nonacquescence reates to ssue as to whether the oard hod ursdcton to hear and determne a def-
cency for 1920.
Nonacquescence reates to that part of decson as to the purchase of ta payer s own bonds at ess than
par whch were retred.
Nonacquescence reates to ssue as to whether Pheps-Waters Co. was a transferee of Wsconsn Chem-
ca Co.
Nonacquescence reates to ffth ssue of decson.
Nonacquescence reates ony to ssue 2 n decson.
Nonacquescence reates to ssue nvovng speca assessment.
II Nonacquescence reates to ursdcton ssue.
Nonacquescence does not reate to deductbty of New York nhertance ta .
4090
G
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2
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1
3
-
0
1
-
2
2
0
3
:
4
8
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0
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8
9
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5
4
3
4
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#
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74
Ta payer.
Rauh Sons ertzer Co., .1
Rebadow, nna N
Red Samon Cannng Co
Reeb, M. .
Reese, .
Rey, Warren
Renbod, erman, estate of
Reance Manufacturng Co
Remngton Rand, Inc
Remngton Typewrter Co
Renzehausen rederck C
Reynods, Mary G., estate of
Reynods, Php M., estate of
Rhode Isand Too Co
Rchfed O Co
Rchmond et Ry. Co
Rggs Natona ank
Rndge Land Navgaton Co
Robertson Co., . P
Robnson Co., . M.8
Robnson, Mrs. C.
Rodenbough, zabeth McCahan, estate of
Rodenbough, mer ., e ecutor of the estate of
zabeth McCahan Rodenbough, deceased1
Rofe, Ward G., e ecutor4
Root, enry L., estate of
Root, Suse M., e ecutr
Rosenbaum ros., Inc
Rosyn ue Co.8
Rosseter, ohn
Roth, W.
Rouse, empstone fc Co., Inc.6
Rowe, M. D. 7
Rowe, Mrs. M. D.
Ruf, rank .,estate of9
St. Lous Maeabe Castng Co.9
St. Lous Natona aseba Cub
Saeger, Wford C
Sage, Margaret Ova, estate of
San oaqun rut Investment Co
Sarfert, Ma
Sass, Morrs
Savannah Rver Lumber Co. et a.10
Docket
No.
10720
15937
4146
9847
18404
5380
11418
6021
34726
2788
10658
8625
8624
2832
15799
19077
7218
30903
3698
14104
5652
8271
465
465
18486
2825
2825
13050
9074
22072
6179
6012
7673
10987
9063
9064
9528
5490
15168
26798
7562
5882
6988
6989
20801
3436
6922
14354
16130
26936
oard of Ta ppeas.
oume.
12
15
15
8
15
7
17
7
11
4
8
8
8
3
13
13
17
2
14
5
8
1
1
16
5
5
11
16
12
4
7
7
13
15
9
6
16
6
12
14
Nonacquescence reates to ssues 3 and 4 of decson,
Nonaoquesoenoe reates to frst ssue n decson.
1 state ta decson.
state ta decson nonacquescence reates to ssue 1 of decson.
Nonacquescence reates to ssue nvovng notce of defcency for fsca yeur I 17 and speca assessment
ssue.
Nonacquescence reates to fna ssue of decson.
7 Nonacquescence reates to second ssue of decson.
state ta decson nonacquescence reates to deductbty of remander vaue of the resduary estate
bequeathed to charty.
Nonacquescence reates to tentatve ta ssue. ,
Nonacquescence reates to affaton of Savannah Rver Tmber Co. and Port Wentworth Lumber Co.
wth group for 1918-1921.
G
e
n
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r
a
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d
f
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L
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(
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)
o
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2
0
1
3
-
0
1
-
2
2
0
3
:
4
8
G
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2
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/
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3
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0
0
0
0
8
9
0
5
4
3
4
4
P
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#
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75
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Scarbrough, . W
Scarbrough, Mrs. . W.
Scarbrough, Lemue
Scha, Wam
Schoenhet et a., Wam, e ecutors
Schoette Co., dwn
Schreer Co., onrad
Scuv Syrup Co., D.
Seaboard Natona ank of New York, N.
ecutor 1
Seas, ctora D. (Mrs.)
Seas Shppng Co., Inc
Sever, Maron Shanwad 3
Shaffer, C.
Shaffran, Moe.
Shanwad, Maron D.
Shame, Marv .4
Sheffed Dentfrce Co.5
Shto Co., ohn
ShUto Reatv Co
Shoemaker, ora .
Spg Inc og _ _ _
Sver ng Consodated Mnng Co. of Utah.
Gn Co...
Smons rck Co.7.
Smpe ngneerng Co.
Srshemer ros., Inc
Socum et a., erbert erman, e ecutors.
Sma, G. G
Smth, Carence C
Smth grcutura Chemca Co
Smthers, rancs S., estate of 1
Sowers Manufacturng Co
Spencer, Maron Parsons 8
Standard Lfe Insurance Co. of merca
Stange, . . 10
Starbuck, . ., admnstrator.
Stener Manufacturng Co
17099
17098
17097
9721
19163
16626
1941
3600
10005
9690
18624
20714
22077
41648
14410
9872
29987
14410
17127
11814
6187
6186
25640
1739
15153
21523
13973
24509
27247
15548
22667
40643
29560
6498
5882
27976
3767
13179
665
14464
22194
12475
25842
29779
553
11724
22371
17
17
17
13
14
13
9
10
11
11
16
14
12
18
14
17
13
8
8
16
1
8
16
14
17
5
6
16
4
11
1
16
11
13
1
13
18
1 state ta decson.
Ths case was nadvertenty prnted n uetn III-48 as havng been acquesced n by the Com-
1 Nonacquescence reates to ssue as to whether oard had |ursdcton to hear an detormno defcences.
Nonacquescence wth respect to oard s acton n e cudng from ncome the amount receved from
Mary . Sharpe trust.
1 Nonacquescence reates to oss sustaned through obsoescenco of trade-mark.
Nonacquescence reates to deducton for e hauston of fe estate
Nonacquescence reates to contrbuton to the Year Cub.
Revokes acquescence pubshed n Cumuatve uetn II-2, 37.
Nonacquescence reates to ssue nvovng the queston of reserve.
cquescence notce n the case of . . Stange (C. . I -2, 4) recaed.
G
e
n
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r
a
t
e
d
f
o
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L
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Z
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g
(
N
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U
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r
s
t
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)
o
n
2
0
1
3
-
0
1
-
2
2
0
3
:
4
8
G
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2
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2
7
/
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3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
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G
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s
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_
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#
p
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-
g
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e
76
Ta payer.
Stephens- damson Manufacturng Co.
Stetson son
Stevens, . G
Stevens Thompson Paper Co.
Stewart, Davd 1
Stone,. George L
Stoney, Mary M. (Mrs.)
Strckand, D.
Strckand, Ove
Strckand, D. . and Ove
Strong, . R., estate of
Sugg, . D., estate of
Sunn, L.
Sunnysde Coa Coke Co.2
Superor Motor Parts Co.3
Swenson, Chrstna, estate of
Swenson, S. T., e ecutor
Swft, Luce W
Swft Co., C.
Sykes, Rchard, estate of
Tat, ames 8
Tavor, Thaa C
Temoyan et a., nne, trustees..
Temoyan, Mrs. ormg, estate of.
Te as Pacfc Ry. Co
Te te M Suppy Co
Thomas, C. R
Thomas, Thomas ., estate of
Thomas, W. ubrey
Thomas Coa Co.8
Thorn, Susan ., estate of 7
Thome, Neae Co., Inc
Tghe, nna M
Tnde, rank T.
Tobn, Chares .
Trppcnsce Manufacturng Co._
Trumbc Refnng Co. of rzona.
oard of Ta ppeas.
No.
oume.
Page.
13462
I
18641
25010
41
30443
1
8736
11
397
16318
14
1120
3501
5
1213
18309
17
604
10756
9
20
18628
11
420
40707
16
419
40708
16
419
23159
16
419
12408
13
335
8860
6
651
7483
6
1232
9442
9
984
10348
8
407
16177
14
675
16177
14
675
18516
11
420
12315
12
974
12136
1 14
I 16
1372
1437
13908
11
979
17799
17
820
22239
16
923
22239
16
923
9863
9
365
10382
8
145
7139
8
118
4230
6
8
4229
6
8
639
8098
10
18234
16
181
12491
13
490
13472
12
672
8999
11
1257
25922
17
1261
13261
15
15
11763
17492
26434
14
348
32151
26306
15
983
10045
9
871
2473
9
1310
10439
13
164
Turners as Power ectrc Go
Turnure, George
U.
Underwood, Lucy C., estate of2
Unted States Merchants Shppers Insurance Go.9.
Nonacquescence reates to ssue 1 of decson.
Nonacquescence reates to the thrd ssue of decson.
Nonacquescence reates to fna ssue of decson.
state ta decson.
Nonacquescence reates to ssue as to whether the agreements of December 14,1918, and the dscbarge
hereof were productve of ncome ta abe for the years nvoved, and, f so, to what e tent.
8 Nonpcquescenoe reates to second ssue of decson.
state ta decson nonacquescence reates to ssue 2 of decson.
Nonacquescence reates to tentatve ta ssue.
Nonacquescence reates to premum reserve ssue.
G
e
n
e
r
a
t
e
d
f
o
r
L
n
Z
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a
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g
(
N
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Y
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k
U
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v
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r
s
t
y
)
o
n
2
0
1
3
-
0
1
-
2
2
0
3
:
4
8
G
M
T
/
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t
t
p
:
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d
.
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.
n
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/
2
0
2
7
/
n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
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D
o
m
a
n
,
G
o
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d
/
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_
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#
p
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g
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e
77
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Unted States Refractores Corporaton 1
Unted States Trust Co. of New York et a., e -
ecutors of rancs S. Smthers, deceased2
Upham, Roy
.
an Schack, en L., estate of 1
an Zandt, acobs Co
rgna Carona Securtes Corporaton et a.
rgna Raway Power Co.4
on Ruck, ar, estate of2 5
W.
Wadde, Mary T...
Waggoner, da
Waggoner, R. M
Wagner, Rchard G
Wacott Lathe Co
Wado, Chares G., estate of
Waker, Wam a, estate of.
Waters, rances W. (Mrs.)
Waworth, Chares W
Wanamaker, ohn, estate of
Wardaw, W. C
Warner, red W
Warren, Wm. C
Washburn, . L
Washngton ote Co.8
Washngton Post Co
We, oseph, estate of
We, Sopha, admnstratr 2_
Wessenbach, Mnna .7
Wes ros. Constructon Co
Western change ank
Western Maryand Ry. Co.8
Western Wheeed Scraper Co. _.
Wheatey, ames .10
Whte, C.
Whte age O Refnng Co.
Whtehouse, Syb
5642
665
16105
7127
6863
11605
7484
9040
11731
16626
4228
5881
5880
42C5
1142
18721
23973
18616
8794
31551
2261
3713
18632
27590
6609
7133
8085
18960
18960
4004
4005
6061
6102
10157
11015
4967
6475
12001
9665
30308
30448
13220
1
16
9
8
6
9
14
6
9
9
9
2
18
15
11
0
16
4
5
11
16
10
15
15
16
12
12
14
8
15
19
7
Nonacquescence reates to ssue wth respect to queston of aowance of amortzaton n 1918 on costs
ncurred n 1919.
state ta decson.
state ta decson nonacquescence reates to trust created on ebruary 9,1917.
Nonacquoscenco n so far as decson determnes that ghand Park Co. and Northsde aduct Co.
were affated wth rgna Raway S Power Co.
Ths case was nadvertenty prnted n uetn III-48 as havng been acquesced n by the Com-
mssoner.
Nonacquescence reates ony to that part of decson whch reates to appcaton of the yers decson
(1 . T. ., 1135).
Nonacquescence reates to queston n decson pertanng to the year 1919.
Nonacquescence reates to ssues concernng contrbutons to ssocaton of Raway ecutves and
accrua n caendar year 1919 of ncreased compensaton for transportaton of ma, awarded by Interstate
Commerce Commsson on December 23,1919.
Nonacquescence reates to that porton of decson whch hods that secton 234(c) of the Revenue
ct of 1926 s appcabe to the case.
c Nonacquescence reates to tem (3) n decson.
G
e
n
e
r
a
t
e
d
f
o
r
L
n
Z
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a
n
g
(
N
e
w
Y
o
r
k
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78
Tapayer.
Whtehurst et a., ohn L
Y htehuret, et a., Mary M.
Wckersham, Chas.
Wdener, George D
Wdener, oseph
Wknson, W. ., estate of 1
Wams arvey Corporaton,
Wshre O Co., Inc..
Wson, hu Cement-
Wson, George .
Wson, Mrs. enry
Wson, Wam W
Wson Syndcate Trust
Wndfeder, ohn ., estate of a
Wnker ro. Co., Isaac
Wnshp, C. R
Wnshp, zabeth T. (Mrs.)
Wre Whee Corporaton of merca.
Wsconsn rdge Iron Co
Wofford, G. T
Wof et a., Ma , trustees
Wofe, mma S., estate of 3
Wofe, Russe, e ecutor 1
Woferman, red, e ecutor 4
Woferman, Lous, estate of 4
Woodrow Lee Trust
Woodruff, rnest
Woodruff, Geo. C
Woodruff, as. W
Woodward, Davd
Wooston, euah . ., estate of --
Worste Co., Ltd
Wrght, George M
Wrght, Inc., en T
W. T. M. Co
Wurts-Dundas, Mure
Wyomng Centra ssocaton
Y.
Yorkshre Creamery Co
York Ice Mk Co
Young, oward 8
Young, ames ., estate of 2
Z.
Zakon, Wam
Zeerbach, Isadore
Zeerbach, Theresa
Znn, rthur
Znn, Martn
Docket
No.
12446
12447
18612
7723
7724
7725
16379
16743
19409
19941
29697
3927
8500
8501
35075
8502
12427
27808
4166
11932
13775
18618
18630
26555
13739
12529
6149
16149
16149
11291
11291
15563
2050
18518
18619
2266
11298
14707
24851
12164
8778
13093
26518
9965
20546
15114
34274
18348
18000
4976
5450
2028
883
2789
3444
oard of Ta ppeas.
14
16
10
5
oume.
Page.
12
1416
12
1416
11
420
8
651
8
651
1390
1
752
13
1150
11
963
11
963
16
1280
11
963
14
508
5
952
15
38
11
420
11
420
16
737
13
246
15
1225
10
835
15
835
15
835
10
285
10
285
17
109
4
842
11
420
11
420
4
842
10
1100
15
413
18
471
12
1149
11
722
17
881
8
1064
Nonftoquescencc reates to ssue 1 of decson.
state ta decson.
Nonocquesoence reates to deducton of Connectcut and West rgna nhertance ta es.
state ta decson nonscquesceuce reates to second ssue of decson.
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INCOM T RULINGS. P RT I.
R NU CT O 1928.
SU TITL . G N R L PRO ISIONS.
P RT I. R T S O T .
S CTION 11. NORM L T ON INDI IDU LS.
rtce 12: Norma ta on ndvdua ct- I -2-4497
zens or resdents of the Unted States. Mm. 3787
( so Secton 144. rtce 761, and Secton
145, rtce 781.)
Rates of ncome ta appcabe for caendar year 1929.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C, December 31,1929.
Coectors of Interna Revenue, Interna Revenue gents n Charge,
Wthhodng gents, and Others Concerned:
The |ont resouton of the Congress ( . . Res. 133) reducng
rates or ncome ta for the caendar year 1929 was approved by the
Presdent December 16, 1929.
The foowng tabe shows the rates of ncome ta appcabe to
the caendar year 1929 and the correspondng rates of ta under the
Revenue ct of 1928:
.Secton of Revenue ct
ot 1928.
Descrpton of tat.
Sectons 11 and 161.
Secton 13
Secton 201
Secton 204
Secton 211
Sectons 144 and 146
Norma ta on ndvduas and on estates and
trusts.
Ta on corporatons
Ta on fe nsurance companes _
Ta on nsurance companes other than fe or
mutua.
Norma ta on nonresdent aens
Wthhodng at source
New rate
appcabe
to caendar
year 1929.
Rate
under
1928 ct.
Per cent.
Per cent.
Mo
m
I 4
2
3
S
11
12
11
12
11
12
of
I
2
3
4
5
on
I
4
6
11
12
s the new rates are appcabe ony to the caendar year 1929,
they w not be n effect after December 31, 1929.
(79)
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22(a), rt. 58.
80
Wthhodng agents are hereby notfed that wth respect to pay-
ments made after December 31, 1929, the ta shoud be wthhed at
the rates specfed n sectons 144 and 145 of the Revenue ct
of 1928.
nqures concernng ths mmeograph etter shoud be marked
for the attenton of IT: : RR,
. . Mres,
ctng Commssoner.
P RT II. COMPUT TION O N T INCOM .
S CTION 22(a). GROSS INCOM : G N R L
D INITION.
rtce 58: Sae of stock and rghts. I -6-4524
G. C. M. 7420
R NU CT O 1928.
Method outned of determnng gan or oss from the sae of war-
rants attached to debenture bonds enttng the hoder thereof to
purchase stock of the ssung corporaton, and from the sae of
stock acqured through the e ercse of smar warrants.
On pr 4, 1929, the ta payer acqured severa 1,000 par vaue
debenture bonds of the M Company for the sum of doars. When
devered to the ta payer, each bond had attached to t a warrant
enttng the hoder thereof to purchase Gy shares of cass stock
of the ssung corporaton, and n addton each bond had attached
an appcaton for addtona warrants for the purchase of cass
stock, whch appcaton coud be used when announcement was sub-
sequenty made. n announcement reatve to the appcaton for
addtona warrants was made n a crcuar ssued by the M Com-
pany on pr 24, 1929. The crcuar stated that hoders of secur-
tes carryng warrants for the purchase of cass stock coud appy
for and receve addtona warrants to purchase such stock and that
hoders of the debenture bonds woud receve such warrants upon the
return, pro| ery e ecuted, of the appcatons theretofore ssued
wth those bonds. The ta payer apped for and receved addtona
warrants to purchase cass common stock whch t e ercsed and
thereby acqured 4y shares of the cass common stock of the M
Company on payment of the subscrpton prce of doars per
share. The orgna warrants whch were attached to the debenture
bonds were e ercsabe after December 31, 1929.
The ta payer sod the 4y shares of stock n 1929 at a substanta
advance over the subscrpton prce. The ta payer requests nfor-
maton reatve to the determnaton of gan or oss from such sae
and reatve to the determnaton of gan or oss n case t ses the
warrants whch were attached to the debenture bonds at the tme the
bonds were purchased.
Under the foregong facts t s evdent that the debenture bonds,
the warrants thereto attached, and the appcatons for addtona
warrants consttuted the property purchased on pr 4, 1929. The
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81
22(a), rt. 58.
cost thereof shoud be aocated between the three eements of the
property purchased accordng to ther respectve vaues at the tme
of the purchase, whch vaues shoud be determned from a ava-
abe evdence.
Thus the appcatons for warrants represented a porton of the
capta nvestment of the ta payer ana the rght eventuay to
purchase addtona stock. When the appcatons were submtted
and the warrants receved n eu thereof, there was smpy a change
or mutaton of the evdence of the rght to purchase addtona
stock. ence the cost or other bass assgned to the appcatons
attached to the warrants. When the warrants were e ercsed, the
stock so acqured assumed as ts bass the cost or other bass of the
warrants pus the subscrpton prce. The e cess, f any, of the
amount receved from the sae of the stock over the bass thereof
|ust above ndcated consttuted ncome to the ta payer for the year
of sae. If the ta payer ses the warrants whch were attached
to the bonds, gan or oss w resut accordng to whether the
amount receved s n e cess of or ess than the porton of the cost
assgned to the warrants as ther bass.
C. M. Charest,
Genera Counse, v/reau of Interna Revenue.
rtce 58: Sae of stock and rghts. I -14-4586
G. C. M. 7451
R NU CT O 1928.
t the end of 1927 ta payer owned uy shares of M Company
stock (whch he had purchased for cash on une 6, 1927) but at the
same tme was short Oy shares of the same stock. The stock
purchased on une 6, 1927, was not at any tme used to margn hs
ong or short accounts. The short account was cosed on
anuary 3, 1928, by the devery to the broker of the 10|/ shares
purchased on une 6, 1927.
ed, that there was a dsposton on anuary 3, 1928, of the
stock purchased on une 6, 1927, whch was equvaent to a sae,
and any ta abe gan resutng therefrom shoud be reported as
ncome for 1928.
n opnon s requested reatve to the year n whch the ta abe
gan resutng to , the ta payer, from purchases and saes of stock
of the M Company was reazed.
The frst purchase of the M Company stock was made for cash
on une 6, 1927, and conssted of 10y shares. Ths stock was not
carred n the ta payer s account wth the broker but was devered
to hm outrght. Durng the months of October and November,
saes of the M Company stock were made n the tota amount of y
shares, and on December 1, 1927, a new account was opened for the
ta payer on the broker s books whch was abeed Short account,
showng the ta payer to be short the y shares prevousy sod.
The purchases made durng December e ceeded the saes by y shares,
showng the account to be short Oy shares at the end of the
month. The account was baanced by the devery to the broker on
anuary 3, 1928, of the 0y shares purchased on une 6, 1927. The
queston nvoved s whether the amount of the ta abe gan reazed
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23(a), rt. 121.
82
shoud be ncuded n the ta payer s ncome for the year 1927 or for
the year 1928.
t the end of 1927 the ta payer owned y shares of the M Com-
pany stock whch he had purchased on une 6, 1927, but he was aso
short 1 shares of the same stock. owever, the stock purchased
on une 6, 1927, was not at any tme used to margn the ong or
short accounts, and was hed by the ta payer durng 1927 nde-
pendenty of hs margna transactons. Under these crcumstances,
t s the opnon of ths offce that the Oy shares of stock owned by
the ta payer can not be sad to have covered hs short account n
1927, and accordngy no ta abe gan was reazed by hm n that
year. s the short account n queston was cosed on anuary 3,
1928, by the devery to the broker of the Oy shares purchased on
une 6, 1927, there was a dsposton on anuary 3, 1928, of the stock
purchased on une 6, 1927, whch was equvaent to a sae. Conse-
quenty, any ta abe gan resutng therefrom shoud be reported as
ncome for 1928.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
S CTION 23(a). D DUCTIONS OM GROSS
INCOM : P NS S.
rtce 121: usness e penses. I -13 4576
G. C. M. 7598
R NU CTS O 1926 ND 1928.
The assessments eved by the Depostors Guaranty und Com-
msson aganst banks dong busness n South Dakota under the
aws of that State are not deductbe from gross Income as
ordnary and necessary e penses pad or ncurred In carryng
on any trade or busness under secton 234 of the Revenue ct
of 1926 or secton 23(a) of the Revenue ct of 1928.
n opnon s requested as to whether certan assessments eved
by the Depostors Guaranty und Commsson aganst banks dong
busness under the aws of the State of South Dakota consttute a-
owabe deductons from gross ncome as ordnary and necessary e -
penses pad or ncurred n carryng on any trade or busness under
secton 234 of the Revenue ct of 1926 and secton 23(a) of the
Revenue ct of 1928.
The assessments are pad pursuant to South Dakota Laws, 1927,
chapter 54, amendng sectons 9005, 9009 to 9011, ncusve, 9015 to
9018, ncusve, and 9020, South Dakota Code, whch ntroduced an
arrangement for the protecton of depostors n banks dong busness
under the aws of South Dakota. Secton 8948 of the South Dakota
Code defnes a bank as every corporaton, assocaton, frm or
ndvdua n ths State whose busness, n whoe or n part, conssts
n the takng of deposts or buyng and seng e change and every
bank, as thus defned, and each ndvdua sharehoder or member
of such corporaton, assocaton, or frm s sub|ect to the bankng
aws. The supervson and reguaton of a banks and ther share-
hoders and members are vested n the Depostors Guaranty und
Commsson. The charman and e ecutve offcer of the commsson
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83
23(a), rt. 121.
s the superntendent of banks. The powers and dutes of the com-
msson are broad and vared, ncudng supervsory, reguatory, and
vstora functons not here matera.
or the purpose of protectng depostors n banks and hoders of
e change guaranty fund assessments are coected from each bank.
Payments nto the guaranty fund of each bank are made to the treas-
urer of the Depostors Guaranty und Commsson, and the amount
thereof s by hm credted to a guaranty fund to be provded by sad
bank, and deposted wth the State treasurer. The payments nto
the fund of a bank may arse from two sources:
(1) In the case of a newy organzed bank, the sharehoders thereof
are requred before openng the bank for busness to pay to the
treasurer of the Depostors Guaranty und Commsson an amount
equa to 4 per cent of the authorzed capta stock of such bank, for
the soe purpose of creatng a credt for the estabshment of a de-
postors guaranty fund for the beneft of the credtors of sad bank,
and no further payment nto the fund s requred for the then current
year. Ths payment by the sharehoders of a newy organzed bank
s n addton to the sum of 10 per share above par requred to be
pad n to each newy organzed bank, n respect of each share of ts
stock, pror to ts openng for busness to be charged by the bank
busness n the current year) s requred to pay to the treasurer of the
Depostors Guaranty und Commsson n each year an amount
equa to one-fourth of 1 per cent of ts average day deposts for the
precedng 12 months. In order that a determnaton may be made of
such average day deposts for the precedng 12 months, each bank
s requred to fe an annua report wth the commsson. Thereafter
the commsson determnes the amount payabe nto the fund and
eves an assessment aganst the assets of the bank. Upon notce
of the assessment the bank s requred to pay the amount thereof to
the commsson before the payment of any dvdend or any dstrbu-
ton of profts to stockhoders. ach bank may pay the amount
ether n cash or n securtes approved by the commsson. (Secton
9011, as amended.) Ths payment s n addton to a requred add-
ton to the bank surpus of not ess than one-tenth of the net proft
of the year (no further addtons to surpus beng requred when
sad surpus amounts to 20 per cent of the capta stock), such surpus,
however, beng retaned by the bank. Dvdends are aso prohbted
e cept out of the net profts propery appcabe thereto, and they
must not n any way mpar or dmnsh the capta.
Whether the amount pad n by a partcuar bank to the Depos-
tors Guaranty und Commsson arses from ether of the above-
mentoned sources, t s credted by the treasurer of the commsson
to the guaranty fund of the payng bank and deposted by the com-
msson treasurer wth the State treasurer. t the opton of the
commsson, the State treasurer may permt the fund of the bank
to reman unnvested n a dormant account but, f the commsson
so eects, the State treasurer s requred to nvest the fund n secur-
tes seected by the bank, provded the sad securtes meet the
approva of the commsson. The ncome from these nvestments s
credted to the guaranty fund of the bank and renvested as prnc-
pa. When the amount of the fund (whether derved from mvest-
busness (not one |ust startng
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23(a), rt. 121.
84
ments of payments or from payments) equas the amount of the
capta stock of the bank, no further payments are requred by the
bank or ts sharehoders, athough n case of the nsovency of the
bank the commsson may enforce the abty of the sharehoders to
answer n an amount equa to the capta stock of the bank shoud
the assets n the hands of the bank and the guaranty fund of the
bank bo nsuffcent to meet a ts obgatons.
The statute requres that the entre fund sha be retaned to secure
and ndemnfy the credtors of the bank from whch coected and
that upon nsovency of the bank, n case the assets of the bank are
nsuffcent to pay a obgatons upon qudaton, however caused,
the whoe fund of the bank may be wthdrawn by the commsson
nnd apped as other assets of the bank to the payment of the credtors
of the bank, the commsson havng fu supervson and manage-
ment of the qudaton and settement of nsovent banks. In case
the bank goes nto vountary qudaton or s converted nto a
natona bank, no wthdrawa of the fund of the bank may be made
unt satsfactory proof s gven the commsson of the fu satsfac-
ton of a the obgatons of the sad bank, whereupon the comms-
son ssues ts order to the State treasurer drectng hm to turn the
fund over to the sharehoders of the sad bank or ther authorzed
representatves, as the sad sharehoders sha drect. Ony those
who are sharehoders at the tme of the fna qudaton of the bank
are entted to share n the fund or to drect ts dsposton, the
statute provdng that the amount thereof, as the same accumuates
from year to year, sha become and at a tmes reman, the property
of the stockhoders of sad bank as the ndvdua ownershp of sad
stock sha be dscosed by the books of sad bank. (Secton 9011.
as amended.)
The queston under consderaton s whether the amounts pad by
the bank n each year to the Depostors Guaranty und Commsson
consttute ordnary and necessary e penses pad or ncurred n car-
ryng on any trade or busness. The type of depostors guaranty
fund here under consderaton s ceary dstngushabe from the
type of depostors guaranty fund consdered n I. T. 1481 (C. .
1-2, 194) and I. T. 1332 (C. . 1-1, 283) or even from the type of
depostors guaranty fund consdered n rst State ank of rack-
ettve v. Commssoner (9 . T. ., 975, C. . II-1, 37) and rst
State ank of Wevrnar v. Commssoner (10 . T. ., 396, C. .
IT-2, 47).
The guaranty fund of each South Dakota bank s a fund embarked
e cusvey n the enterprse of the partcuar bank (precsey as
are ts capta, surpus, and undvded profts) and requred by aw
to reman embarked n that enterprse and not to be wthdrawn
from t unt the enterprse comes to an end. It can not be dverted
to any other enterprse t can not be used to cover or pay the
osses of any other bank throughout ts e stence t must reman
as a consttuent part of the enterprse of the partcuar bank and
upon the termnaton of the enterprse of that partcuar bank t
s dsposed of precsey ke every other fund or asset devoted to
that enterprse, namey, used to pay the obgatons of that enter-
prse, or, f a such obgatons have been satsfed, dstrbuted to-
gether wth a other assets of the bank to the sharehoders n
qudaton.
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85
23(a), rt. 121.
The stuaton wth respect to the depostors guaranty fund con-
sdered n the cases above cted s dfferent. In those cases the fund
s n the nature of an nsurance fund, kept and accumuated for the
purpose of payng the obgatons not of the partcuar bank makng
the payment but of a banks n the State.
It s an essenta part of depostors guaranty funds proceedng
upon the nsurance dea that the funds pad by one bank may be used
to pay the osses of another bank. There s no such eement n the
nstant case, snce by no possbty may the fund of one bank be
used to pay the osses of another or be used n any manner for the
beneft of any other. The amount pad n to the guaranty fund of
a bank by ts sharehoders pror to openng for busness dffers n
but one partcuar from the amount of 10 above the par of each
share requred to be pad n to the bank by each sharehoder before
openng for busness and the amount pad n to the guaranty fund
by each bank before the payment of any dvdend or any ds-
trbuton of profts to stockhoders dffers n but one partcuar
from the amount of the net proft of the bank for the precedng
perod requred to be carred to a surpus fund before any dvdend
s decared, namey, the guaranty fund s n the custody of State
offcers whe the pad-n surpus requred to be set asde as undvded
profts and the earnngs requred to be carred to surpus are n the
custody of the bank tsef. ut the nvestment of a these funds s
n the hands of the bank tsef.
Whe the securtes n whch the bank causes the guaranty fund to
be nvested must meet the approva of the commsson, t s aso
true that the nvestment by the bank of ts undvded profts and
surpus s aso sub|ect to the supervson and reguaton of the com-
msson. s has aready been notced, the guaranty fund of a par-
tcuar bank and a earnngs thereon can nure ony to the beneft of
the bank and of those benefcay nterested theren, namey, by beng
used to pay the obgatons of the bank and, a such obgatons hav-
ng been satsfed, by beng dstrbuted together wth a other prop-
erty of the bank. It foows that the amount pad by a partcuar
bank to ts fund, pursuant to an assessment, has none of the char-
acterstcs of an tem of e pense such a payment, ke the payment
to the fund of the bank by ts sharehoders of an amount equa to 4
per cent of the authorzed capta stock, s essentay a payment nto
a reserve fund created and mantaned for dschargng a partcuar
obgaton (ether possbe, antcpated, contngent, or uncondtona)
of the payor. Its detachment from the genera capta and surpus of
the bank and ts e cusve devoton to nvestment, n order that t may
be avaabe soey for the payment of credtors shoud dsaster over-
take the genera capta and surpus of the enterprse, gve to t no
one of the characterstcs of an e pense tem. It s far from beng a
necessary outay or e pendture n order that proft may be reazed,
or even an outay or e pendture n order to conserve the e stng
capta or surpus. It s, n reaty, merey a segregaton of the cap-
ta or surpus n order that n any event a fund may be n hand
wherewth to pay capta or e pense obgatons n case dsaster shoud
wpe out a or part of the capta or surpus devoted to the genera
uses of the enterprse. (See artce 65, Reguatons 74 artce 542,
Reguatons 69 and 65 artce 541(a), Reguatons 45 O. D. 288,
C. . 1, 221 O. D. 529, C. . 2. 216 S. M. 1145, C. . 1, 219 I. T.
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23(a), rt. 121.
86
1699, C. . II-, 52 Chcago, Rock Isand Pacfc Raway Co. v.
Commssoner, 13 . T. ., 988 and rank P. Wech v. Commssoner,
12 . T. ., 800, C. . II-2, 42.) etween the payment by a bank
to ts guaranty fund and the carryng to surpus n each year of one-
tenth of the net proft of the bank there s no essenta dfference
such dfferences as e st are dfferences n degree, not n knd, beng
dfferences n the degree to whch the guaranty fund s protected from
genera busness rsks and thus safeguarded n order that t m y
certany be avaabe shoud capta, surpus, and undvded profts
be destroyed or mpared n the course of the busness.
The provson n the statute that the amount of the fund as the
same accumuates from year to year sha become and at a tmes
reman the property of the sharehoders of sad bank as the nd-
vdua ownershp or sad stock sha be dscosed by the books of sad
bank s essentay a decaraton that the fund sha be rrevocaby
set asde for the soe purpose of payng the obgatons of the
partcuar bank n case the genera assets of the bank shoud prove
nsuffcent for that purpose. The provson was desgned to make
cear that the bank mght never wthdraw the funds, such a wth-
drawa beng qute nconsstent wth the rrevocabe dedcaton of
the fund to the protecton of depostors. If, at any tme, the fund
shoud be requred to pay the obgatons of the bank, a of the
bank s affars woud necessary be n the hands of the Depostors
Guaranty und Commsson and not n the hands of the bank s
offcers. If the affars of a bank shoud be wound up and a ts
obgatons satsfed, the assets of the bank woud be necessary
dstrbutabe aone to the sharehoders thereof, and they aone
woud have a rght to the dstrbuton thereof. In such a stuaton
the statute specfcay provdes that the guaranty fund tsef sha
be dstrbuted drect to the sharehoders rather than to the bank
tsef, thus emnatng needess crcuty of acton. The statute
rebuts any nference that at any moment pror to dstrbuton by
the commsson of the fund to the sharehoders upon the qudaton
of ther bank the sharehoders of the bank have any of the ncdents
of ownershp.
Pror to the compete qudaton of the bank each sharehoder
thereof has the same rght to the fund that he has to the capta
and the undvded profts and surpus requred by the statute to be
kept n hand by the bank and n the fund the sharehoder s rghts
are dstncty nferor to hs rghts n the ordnary profts of the
bank. If, pror to qudaton, the sharehoder ses hs stock, he
oses a rghts n the fund n precsey the same way as he oses
a rght n the capta, undvded profts, and surpus of the bank.
The statute tsef decares that the nterest of the sharehoder n the
fund sha pass at a tmes as an ncdent of the sae of hs shares.
ccordngy, the partcuar anguage of the provson of the statute
under consderaton does not mtate n any way aganst the vews
heren e pressed.
In vew of the foregong, t s the opnon of ths offce that the
assessments eved by the Depostors Guaranty und Commsson
aganst banks dong busness n South Dakota under the aws of that
State are not deductbe from gross ncome as ordnary and necessary
e penses pad or ncurred n carryng on any trade or busness under
G
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87
23(a), rt. 130.
secton 234 of the Revenue ct of 1926 or secton 23(a) of the
Revenue ct of 1928.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
rtce 130: Rentas. I -20-4643
G. C. M. 7937
R NU CTS O 1921, 1924, 1926, ND 1928.
The decson of the oard of Ta ppeas n the case of W. 8.
oge d Co.. Inc. (5 . T. ., 541, C. . III-1, 5) shoud be con-
strued as beng appcabe ony to those cases n whch no part of
the royates pad n any one year s credted to future producton
of ore.
n opnon s requested as to whether the amount of yeary mn-
mum royates pad under a ease shoud be regarded as renta n ts
entrety and, therefore, deductbe n the year n whch the royates
were pad or accrued, or shoud be regarded as deductbe renta ony
to the e tent that the royates represent actua tonnage mned
durng the year under the ease, the baance or unearned royates
to be treated as a capta e pendture by the essee to be apped
to the ore tonnage mned n ater years and deductbe n the year
n whch the unearned or advanced royaty s so apped.
In the eary part of anuary, 1923, the M Company eased certan
coa propertes from the N Company and the O Company for a
perod or 30 years. The pertnent parts of the artces n tre ease
read as foows:
rtce II. The essee sha pay to the essors as rent and royaty for each
and every ton of two thousand (2,000) pounds of coa mned hereunder, e cept
as provded n rtce III, as foows, to-wt:
On a coa mned hereunder from the frst (1st) day of anuary, 1923, to
the frst (1st) day of anuary, 1928, the sum of ffteen (15) cents per net
ton from the frst (1st) day of anuary, 1928, to the frst (1st) day of anu-
ary, 1933. the sura of seventeen and one-haf (17 ) cents per net ton and
from the frst (1st) day of anuary, 1933, to the frst (1st) day of anuary,
1953. the sum of twenty (20) cents per net ton.
Sad rent sha be pad quartery on or before the twenteth (20th) day of
anuary, pr, uy, and October, of each year, for the quarter mmedatey
precedng.
rtce III. The essee sha pay to the essors as a mnmum annua renta
hereunder on account of coa mned, or to be mned, at east the foowng
sums, to-wt:
or the year begnnng the 1st day of anuary, 1923, the royaty as heren-
above provded, on a the coa actuay mned durng the sad year
or the year begnnng the 1st day of anuary, 1924, such sum as woud be
pad upon the actua producton durng sad year of tons at the rate of
royaty n force hereunder for such year
or the year begnnng the 1st day of anuary, 1925, such sum as woud be
pad upon the actua producton durng sad year of tons at the rate of
royaty n force hereunder for such year and,
or the year begnnng the 1st day of anuary, 1926, and for each and every
year thereafter durng the contnuance of ths ease, such sum as woud be pad
upon the actua producton durng such year of tons at the rate of
royaty n force hereunder for such year.
Payments of any amount necessary to compete the mnmum annua renta
for any one year sha he made on or before the twenteth (20th) day of anu-
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23(a), rt. 130.
88
ary of the ne t year. ut the essee, however, sha have the prvege durng
any succeedng year or years, of mnng free from royaty a suffcent quantty
of coa over and above the quantty requred to yed the mnmum annua renta
for sad years, at the rate of tonnage royaty provded n rtce II hereof (or
at the rate substtuted therefor n a renewa hereof), to remburse It for any
defcency that may have occurred n any precedng year or years: Provded,
however, that no payments n e cess of the mnmum annua renta for any one
year sha be credted aganst a defcency n any subsequent year, e cept as
herenafter provded n ths artce.
Snce the acquston of the ease the ta payer has been unabe n
any year to mne a suffcent number of tons of coa to equa the mn-
mum royaty provded for n the ease, and the Income Ta Unt
proposed to aow as a deducton ony that part of the royates whch
actuay represented the tonnage mned durng the year for whch
the return was fed.
It s contended that under the decsons of the oard of Ta
ppeas n the cases of W. S. oge Co., Inc., and Marsh ork
Coa Co. (11 . T. ., 685, C. . III-1, 29) the entre amount of
the mnmum royaty payments consttuted rentas and as such was
deductbe n the year pad or accrued.
There appears to be no queston that the concusons reached by the
oard n the case of W. S. oge Co., Inc., are appcabe to
those cases where the essees have no rght to recoup n future years
any part of the mnmum royates pad n e cess of royates repre-
sentng the actua tonnage mned. There s some queston, however,
as to whether the decson n that case and the decson n the case of
Marsh ork Coa Co. are appcabe to those cases n whch the un-
earned or advanced royates are credted to future ore producton.
specay s ths true n the case of the Marsh ork Coa Go. n
vew of the statement of the oard that there was nothng n the
ease to ndcate that royates coud accrue to the credt of the
pettoner and coud be satsfed by unmted future shpments.
The oard of Ta ppeas n ts fndngs of fact and ts opnon
n the W. S. oge case made no reference to the terms of the eases
nvoved, nor dd the oard n ts opnon make any specfc reference
to cases where a part of the mnmum royates or unearned royates
may be credted to future ore mned. The ony statement n the
opnon of the oard n regard to the mnmum royates s as
foows:
Wth reference to the mnmum royates, we are of the opnon
that they consttute rent and are aowabe deductons. It s we setted that
royates pad under the provsons of mnng eases consttute rents. ( ppea
of state of Mary . McCah, 2 . T. ., 875 Lynch v. worth-Stephens Co.,
267 T . S., 364 on amnbo h v. Sargent Land Co., 242 U. S., 503 and Unted
States v. watk Mnng Co., 247 U. S., 116.) The mere fact that the bass
of computng such rents s at a rate of so much per ton, provded a certan
quantty of ore or coa s removed, or s f ed at a certan, specfed amount f
the requred quantty s not mned, does not n any way affect the nature of the
payment.
though the Supreme Court n the cases of Lynch v. worth-
Stephens Co. (267 U. S., 364, T. D. 3690, C. . I -1, 162), on
awmbach v. Sargent Land Co. (242 U. S., 503), and Unted States
v. vwabk Mnng Co. (247 U. S., 116) hed that the eases there
under consderaton were not conveyances of ore n pace and that
the royates pad were rent for the prvege of enterng upon and
removng mneras, no decson or opnon was rendered as to when
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the rents or royates shoud be deducted from the ncome of the
essee. In the case of Marsh ork Coa Co., the oard of Ta
ppeas apparenty had n mnd that some dstncton shoud be
drawn between those eases whch contaned a provson that
unearned royates mght accrue to the credt of the essee and be
apped to future ore producton, for the oard n that case stated:
The cam of the pettoner that certan royates and ta es pad on nac-
tve and undeveoped and be restored to capta s dened, frst, because nothng
n the ease ndcates that a separate royaty was to appy to each tract or
that such royates accrued to the credt of the pettoner and coud be satsfed
by unmted future shpments, and, second, because tems such as annua
renta and annua ta es are deductbe as e pense each year and are pad
or benefts receved durng the year. The mere fact that the pettoner dd
not take fuest advantage of the benefts for whch t pad rentas and ta es
does not change the character of the e pendtures.
The oard aso n the case of C/ares . Merat (9 . T. ., 813,
C. . III-1, 30) referred to royates pad whch coud not be
credted to the essee on future producton as dstngushed from
advanced royates whch coud be credted to future producton.
The oard n that case stated:
We are of the opnon that the tota payments consttute rentas
and as such are deductbe . Some of the payments were termed n
:be eases as advanced royaty and by the e press provsons of the eases
they coud not be credted aganst any producton other than that of the current
year. Under such crcumstances, we beeve the amounts pad as such are
deductbe n the current ta abe year. Itacs supped.
The oard of Ta ppeas n aton Coa Co. v. Commsso-ner
(19 . T. ., 169) consdered a ease acqured on November 2, 1925,
whch provded for royates at the rate of 25 cents per ton wth a
mnmum royaty of 50,000 and ta es on the property. On Novem-
ber 14, 1920, a new ease was entered nto for the same property,
to run from November 1, 1926, unt the e hauston of the ore. The
ease provded that the essee agreed to pay as renta 50,000 upon the
e ecuton and devery of the agreement and 51,250 on the 1st day
of May, 1927. The ease further provded that the essee shoud
pay royaty at the rate of 13 cents per ton wth a mnmum royaty
of 26,000 per year pus the ta es and one-haf of the net proft
from the operatons. The Commssoner dsaowed deductons
taken by the ta payer of 50,000 for each of the ta abe years on
the ground that the amounts represented a bonus pad n connecton
wth the attanng of the ease and shoud be captazed. The
oard n ts opnon stated as foows:
Counse argued that f the tota amount pad n each of the three
years s computed, t w appear that the renta for each year was reasonabe
when the 50,000 s ncuded for each of the years 1926 and 1927. We are not
satsfed, however, that the payment of 50,000 n each of the years 1926 and
1927 reay represented renta for those years aone. Where e pendtures are
n part a consderaton for the use of rented premses for years other than the
ta abe years, the whoe thereof can not propery be consdered ordnary and
necessary e penses of carryng on the busness durng the ta abe years, and
ony the part thereof propery attrbutabe to the process of earnng ncome
darng the ta abe years may be deducted from gross ncome for those years.
( . and d ro., Inc., 1 . T. . 631, affd., 28 ed. (2d), 792 . endrch,
Inc., 3 . T. ., 77 Coumba Theatre Co., 3 . T. ., 622 onwt Teer Co.,
4090 30 7
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90
17 . T. ., 1019 rst Natona ank of Omaha, 17 . T. ., 1358 aatore
ro. v. Lnes, 23 ed. (2d), 676 Duffy v. Centra Raroad Co. of New ersey,
268 U. S., 55 Unted Sates v. nderson, 269 U. S., 422.)
Whether the 50,000 pad n each of the ta abe years was a bonus or advance
payment of renta, these payments shoud not be deducted n ther entrety n
the ta abe years.
In none of the cases decded by the courts or the oard of Ta
ppeas has the queston here under consderaton been specfcay
passed upon, athough the oard ntmated n the cases of the Marsh
ork Coa Co., Chares . Merat, and the aton Coa Co., referred
to heren, that unearned or advanced royates, athough consdered
as rent, shoud not be deducted n the year pad, f they are credted
to the account of the essee to be apped to future ore producton.
In regard to the past procedure n the treatment of unearned or
advanced royates, t s stated that the unt has for many years un-
formy nssted upon the practce of captazng the payment of
unearned or advanced royates, and that ths has been the genera
accountng practce of corporatons hodng eases whch contan
recoupment provsons.
It s the opnon of ths offce that n the ght of the statements
contaned n subsequent decsons of the oard the W. S. oge dec-
son shoud be construed as beng appcabe ony to those cases n
whch no part of the royates pad n any one year s credted to
future producton of ore, especay n vew of the fact that the ques-
ton now at ssue was not specfcay passed upon by the oard, and
n vew of the ong and consstent practce tnat has been foowed
by the ureau.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
S CTION 23(c). D DUCTIONS ROM GROSS
INCOM :T S G N R LLY.
rtce 151: Ta es. I -3-4505
G. C. M. 7407
R NU CT O 1928.
The motor vehce fue ta mposed by the State of ansas s
deductbe n the ncome ta return of the consumer who pays t
and to whom t s not refunded. If, however, the ta s added to
or made a part of the busness e pense of such consumer, t can not
be deducted by hm separatey as a ta .
n opnon s requested as to whether the motor vehce fue ta
mposed by the State of ansas under the provsons of chapter 274,
Laws of ansas, 1925, and chapter 287, Laws of ansas, 1929, s
deductbe n the ncome ta return of the consumer.
Chapter 274, Laws of ansas, 1925, approved March 2, 1925, m-
poses a ta of 2 cents per gaon, and chapter 287, Laws of ansas,
1929, approved ebruary 22, 1929 (n effect pr 1, 1929, repeang
chapter 274), mposes a ta of 3 cents per gaon on the sae or use
of motor vehce fue.
Secton 1 of both acts defnes motor vehce fue to mean and
ncude gasone, benzne, naphtha, benzo, and a other voate and
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23(c , rt. 151.
nfammabe quds, not ncudng kerosene o, sod or used for the
purpose of operatng or propeng motor vehces.
Secton 2 of the 1925 act provdes as foows:
That a ta of 2 cents per gaon, or fracton thereof, Is hereby mposed on
the sae or use of a motor-vehce fue used n ths State for any purpose
whatsoever, provded sad tu sha be pad but once. Sad ta sha be
computed upon a motor-vehce fue receved by each deaer n ths State and
pad n a manner herenafter provded: Provded, That an aowance of 3 per
cent of the tota gaonage receved durng every caendar month sha be made
and deducted by the deaer to cover hs or ther osses n handng such motor-
vehce fue and that a refund sha be made to sad deaer for the ta pad
cm a motor-vehce fue, whch, after such payment, sha be ost or destroyed
by fre, ghtnng, food, tornado, wndstorm, e poson, or other cause.
Secton 2 of the 1929 act s substantay smar to the provsons
of secton 2 of the 1925 act, e cept that the rate of ta mposed s 3
cents per gaon nstead of 2 cents per gaon.
Secton 3 of the 1925 act provdes as foows:
That every deaer payng such ta or beng abe for the payment thereof,
sha be entted to charge and coect the sum of 2 cents per gaon on such
motor vehce fue sod by hm or them, for any purpose whatsoever, as a part
r f the seng prce thereof, and every such deaer sha post In a conspcuous
pace at hs pace of busness, a pacard, not ess than 12 nches n ength and
7 nches n heght, upon whch sha be shown n etters and fgures not ess
than 2 nches n heght, the seng prce of gasone per gaon and the
amount of the ta charged thereon.
Secton 3 of the 1929 act s substantay smar to the provsons
of secton 3 of the 1925 act, wth the e cepton that the deaer s
entted to charge and coect 3 cents per gaon nstead of 2 cents
per gaon.
Secton 5 of both acts provdes that the ta mposed by such act
sha be pad by the deaer to the State o nspector at the same
tme that the statement provded for n secton 4 of each act s
rendered to the State o nspector.
Secton 11 of the 1925 act and secton 10 of the 1929 act contan
substantay the same provsons. They provde for the refundng
of the motor fue ta mposed by the respectve acts to the person
or persons who sha buy any motor vehce fue as defned by the
act, who sha pay the motor vehce fue ta thereon mposed by
the act, and who sha use the fue for purposes other than the
purpose of operatng and propeng motor vehces on pubc roads,
State hghways, streets, and aeys, provded the sworn statement
requred by the act s presented, n the manner and wthn the tme
specfed, to the board of county commssoners of the county where
the ta was pad.
Secton 12 of the 1929 act provdes as foows:
On and after uy 1, 1931, the amount of ta under secton 2 of ths act sha
be 2 cents nstead of 3 cents per gaon on such sae or use of such motor-
vehce fue and on and after the sad date the amount per gaon on such
sae of such motor-vehce fue whch the deaer sha be authorzed to charge
and coect under secton 3 of ths act sha be 2 cents nstead of 3 cents per
gaon and as to purchases or recepts of such motor-vehce fue whch sha
occur on and after the same date, referred to n secton 9 of ths act, the
amount of the remttance and payment by a party to the State o nspector
under secton 9 sha be 2 cents nstead of 3 cents per gaon on such purchuse
or recept of such motor-vehce fue.
Secton 23(c) of the Revenue ct of 1928 provdes that n com-
putng net ncome there sha be aowed as deductons ta es pad
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23(c), rt. 151.
92
or accrued wthn the ta abe year, wth certan e ceptons not here
matera. rtce 151 of Reguatons 74, promugated under the
Revenue ct of 1928, provdes that n genera ta es are deductbe
ony by the person upon whom they are mposed.
It appea s from the foregong that the purpose of chapter 274,
Laws of ansas, 1925, was to mpose the motor vehce fue ta
upon the consumer. Chapter 287, Laws of ansas, 1929, s smar
n purpose, e cept the rate of ta mposed s 3 cents per gaon
nstead of 2 cents per gaon. In accordance wth the provsons of
secton 23(c) of the Revenue ct of 1928 and artce 151 of Regua-
tons 74, t s hed that the motor vehce fue ta mposed by the
State of ansas s deductbe n the ncome ta return of the con-
sumer who pays t and to whom t s not refunded. If, however, the
ta s added to or made a part of the busness e pense of such con-
sumer, t can not be deducted by hm separatey as a ta .
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
rtce 151: Ta es. I -4-4511
I. T. 2519
R .NU CT O 1928.
The ta mposed by the State of North Dakota on motor vehce
fue s deductbe n the ncome t: return of the consumer who
pays t and to whom t s not refunded. If, however, the ta s
added to or made a part of the busness e pense of such consumer,
t can not be deducted by hm separatey as a ta .
rung s requested as to whether the ta mposed by the State
of North Dakota on motor vehce fue s deductbe n the edera
ncome ta return of the consumer.
The motor vehce fue ta n queston s eved n accordance wth
the provsons of the act of the State of North Dakota, approved
as an ntated measure at a state-wde eecton hed une 30, 1926
(sec page 547, Laws of North Dakota, 1927), as amended by chapter
178, Laws of North Dakota, 1927, and by chapter 1G6, Laws of North
Dakota, 1929.
Secton 1 of the act of 1926 defnes motor vehce fues to mean
and ncude gasone, benzne, naphtha, benzo, and such other
voate and nfammabe quds as may be produced or compounded
for the purpose of operatng or propeng motor vehces, e cept
the product commony known as kerosene o.
Secton 2 of the act, as amended, provdes n part as foows:
That each nd every deaer n motor vehce fue, us defned n ths act, who
s now encased, or who may hereafter engage n hs own name, or n the name
of others, or n the name of hs representatve or agents, n ths State, n the
sae or use of motor vehce fue as heren defned, sha, not ater than the
15th day of each caendar month, render to the State audtor, on forms
prescrbed, prepared, and furnshed by the State audtor, a sworn statement
of the number of gaons of motor vehce fue sod or used by hm or them
durng the precedng caendar month, whch statement sha be sworn to by one
of the prncpa offcers, n case of domestc corporaton or by the resdent
genera agent, or agents, or attorney-n-fact, or by a chef accountant or offcer
n case of a foregn corporaton by the managng agent or owner n case of a
frm, assocaton or ndvdua and sha contan a statement of the quanttes
of motor vehce fue sod or used wthn the State of North Dakota from hs
or ther respectve paces of busness, and f any of such motor vehce fue
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23 (c), rt. 151.
has been sod and devered by sad deaer to customers n the orgna package,
whether In tank cars, barres or other packages and n the same form and
condton n whch the same was mported, sad statement sha show the
amount of motor vehce fue so sod and the names and addresses of the persons,
nn or corporatons to whom the same was sod.
Sad deaer sha pay a cense ta of 3 cents per gaon on a motor vehce
fue used and sod by hm, other than such fue sod by hm or them, n the
orgna packages as above specfed, and sha have the opton of payng sad
ta of 3 cents per gaon on a motor vehce fue sod by hm or them, n the
State, n the orgna packages n whch the same was mported as above
specfed.
Secton 3 of the act, as amended, reads as foows:
very deaer payng such cense ta or beng abe for the payment thereof,
sha be entted to charge and coect the sum of 3 cents per gaon, on such
motor fue sod by hm, as a part of the seng prce thereof.
Secton 5 of the act, as amended, provdes, among other thngs,
that the deaer n makng payments to the State audtor of the ta
as provded for n that secton sha frst deduct from the amount
of ta due y2 per cent thereof to cover the cost of coectng sad
ta and transmttng the same to the State audtor.
Secton 6 of the act, as amended, contans the foowng provson:
That any person or persons, frm or corporaton who sha buy or use any
motor vehce fue as defned n ths act, for the purpose of operatng and
propeng statonary gas engnes, tractors used for agrcutura purposes, motor
boats, arpanes or arcraft, or who sha purchase or use any of such fue for
shtng, heatng, ceanng or dyeng or other commerca use of the same,
ecept motor vehces operated or ntended to be operated, n whoe or n
part upon any of the pubc hghways n the State of North Dakota, on whch
motor fue ta mposed by t hs act has been pad sha be rembursed and
repad the amount of such ta pad by hm, on presentaton to the State
audtor, on a form prescrbed by the State audtor, of a sworn statement
settng forth the tota amount of such fue purchased and used by such con-
sumer, other than n motor vehces operated or ntended to be operated upon
any of the pubc hghways n the State of North Dakota, and the purpose for
whch sad motor fue upon whch he cams e empton from sad ta was
used .
Secton 23(c) of the Revenue ct of 1928 provdes that n comput-
ng net ncome there sha be aowed as deductons ta es pad or
accrued wthn the ta abe year, wth certan e ceptons not here
matera. rtce 151 of Reguatons 74, promugated under the
Revenue ct of 1928, provdes that n genera ta es are deductbe
ony by the person upon whom they are mposed.
rom the foregong quoted sectons of the aw of the State of
North Dakota mposng a ta on motor vehce fues, t appears that
t was ntended to mpose such ta upon the purchaser of such
fues whch are used for the purpose of operatng motor vehces
n whoe or n part upon any of the pubc hghways of the State
of North Dakota. It s hed, therefore, n accordance wth the pro-
vsons of secton 23(c) of the Revenue ct of 1928 and artce
151 of Reguatons 74, that the ta n queston s deductbe n the
ncome ta return of the consumer who pays t and to whom t
s not refunded. If, however, the ta s added to or made a part
of the busness e pense of such consumer, t can not be deducted
by hm separatey as a ta .
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23(c), rt. 151.
94
rtce 151: Ta es. I -5-4517
I. T. 2522
R NU CT O 1928.
The motor vehce fue ta mposed n the Dstrct of Coumba
s deductbe n the ncome ta return of the consumer who pays
the ta and to whom t s not refunded. If, however, such ta s
added to or made a part of the busness e pense of such consumer,
t can not be deducted by hm separatey as a ta . I. T. 2157
(O. . I -1, 35), n so far as t hods that the ta mposed n the
Dstrct of Coumba s deductbe ony by the deaer, s revoked.
rung s requested as to whether the motor vehce fue ta m-
posed n the Dstrct of Coumba s deductbe n the edera ncome
ta return of the consumer.
The motor vehce fue ta n force n the Dstrct of Coumba s
mposed n accordance wth the provsons of the ct of pr 23,
1924 (chapter 131, 43 Statutes at Large, 106).
The ct referred to contans the foowng provsons:
e t enacted by the Senate and Sonne of Representatves of the Unted States
of merca n Congress assembed, That a ta of 2 cents per gaon on a
motor-vehce fues wthn the Dstrct of Coumba, sod or otherwse dsposed
of by an mporter, or used by hm n a motor vehce operated for hre or for
commerca purposes, sha be eved, coected, and pad n the manner heren-
after provded. The proceeds of the ta , e cept as provded n secton 10, sha
be pad nto the Treasury of the Unted States entrey to the credt of the
Dstrct of Coumba and sha be avaabe for appropraton by the Congress
e cusvey for road and street mprovement and repar.
Secton 2(b) of the ct reads as foows:
The term motor-vehce fues means gasone and other voate and
nfammabe qud fues produced or compounded for the purpose of operatng
or propeng nterna-combuston engnes: Provded, That kerosene sha not be
consdered to be a motor-vehce fue n the meanng of ths ct.
Secton 6 of the ct reads as foows:
That the ta n respect to motor-vehce fue so sod or otherwse dsposed of
or used n any caendar month sha be pad by the mporter on or before the
ast day of the ne t succeedng caendar month to the coector of ta es of the
Dstrct of Coumba, who sha ssue a recept to the mporter therefor.
Secton 10 of the ct reads n part as foows:
That any person who purchases any motor-vehce fue n the Dstrct of
Coumba to be used for operatng or propeng any .statonary gas engne,
tractor used for agrcutura purposes, motor boat, aeropane, or arcraft of any
character, or for ceanng or dyeng, or for any other purpose other than use
n a motor vehce operated, or ntended to be operated, n whoe or n part
upon any of the pubc hghways of the Dstrct of Coumba, on whch motor-
vehce fue the ta mposed by ths ct sha have been pad, sha be refunded
the amount of such ta so pad by the mporter, upon presentng to the coector
of ta es of the Dstrct of Coumba a sworn statement accompaned by the
nvoces showng such purchase, whch statement sha set forth the tota
anrount of such motor-vehce fue so purchased and used by such consumer
other than n motor vehces operated, or ntended to be operated, on any of the
pubc hghways of the Dstrct of Coumba. Such refunds sha bp made by
check by the coector of ta es from moneys pad for ta es on motor-vehce
fues and retaned on depost as herenafter n ths secton provded.
Secton 14 of the ct reads as foows:
That when under authorty of aw gasone or other motor-vehce fue s
sod by an agency of the Unted States wthn the Dstrct of Coumba, for use
n prvatey owned vehces, such agency of the Unted States sha, by agree-
ment wth the Commssoners of the Dstrct of Coumba, arrange for the co-
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23(c). rt. 151.
ecton of the ta of 2 cents per gaon heren authorzed to be mposed, and for
accountng to the coector of ta es of the Dstrct of Coumba for the proceeds
of such ta coectons.
Secton 23(c) of the Revenue ct of 1928 provdes that n com-
putng net ncome there sha be aowed as deductons ta es pad
or accrued wthn the ta abe year, wth certan e ceptons not here
matera. rtce 151 of Reguatons 74, promugated under the
Revenue ct of 1928, provdes that n genera ta es are deductbe
ony by the person upon whom they are mposed.
In L T. 2157 t was hed that the motor vehce fue ta mposed
n the Dstrct of Coumba was mposed upon the deaer and that
such ta was, therefore, deductbe for edera ncome ta purposes
ony by the deaer. Upon reconsderaton of the provsons or the
aw mposng the ta under consderaton, especay secton 10 of
the ct provdng for the refundng to the consumer of the motor
vehce fue ta pad on motor vehce fue used for purposes other
than propeng motor vehces operated n whoe or n part upon any
of the pubc hghways of the Dstrct of Coumba, t appears that
the purpose of the ct of pr 23, 1924, was to mpose the ta n
queston upon the consumer.
It s hed, therefore, n accordance wth secton 23(c) of the
Revenue ct of 1928 and artce 151 of Reguatons 74, that the motor
vehce fue ta mposed n the Dstrct of Coumba s deductbe n
the edera ncome ta return of the consumer who pays t and to
whom t s not refunded. If, however, such ta s added to or made
a part of the busness e pense of such consumer, t can not be de-
ducted by hm separatey as a ta . I. T. 2157, n so far as t hods
that the ta mposed n the Dstrct of Coumba s deductbe ony
by the deaer, s hereby revoked.
rtce 151: Ta es. I -6-4525
G. C. M. 7465
R NU CT O 1928.
The gasone ta mposed by the State of Indana s deductbe
n the Income ta return of the consumer who pays t and to
whom It Is not refunded. If, however, the ta s added to or made
a part of the busness e pense of such consumer, t can not be
deducted by hm separatey as a ta .
n opnon s requested as to whether the gasone ta mposed by
the State of Indana s deductbe n the edera ncome ta return of
the consumer.
The gasone ta of the State of Indana s mposed n accordance
wth the provsons of chapter 182, Laws of Indana, 1923, as
amended by chapters 49 and 146. Laws of Indana, 1925, and chapters
36 and 48, Laws of Indana, 1929.
Secton 1 of chapter 182, as amended, provdes:
That a cense fee of four cents (4 ) per gaon, or fracton of
a gaon, s hereby mposed on the use of a gasone used n ths State for
any purpose whatsoever. The cense fee hereby provded for, uness such
fee sha have been prevousy pad, sha be coected by the deaer seng
gasone to purchasers who purchase for purposes other than resae, and sha
be pad by the purchaser to the deaer and by such deaer to the audtor of
state n the manner and wthn the tme herenafter specfed.
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23(c), rt. 151.
96
Secton 2 of chapter 182, as amended, provdes that on or before
the 25th day of each caendar month every deaer engaged n seng
gasone to purchasers for purposes other than resae sha render to
the State audtor a statement of the number of gaons of gasone
sod durng the precedng caendar month, and sha pay to the
audtor the cense fees coected by hm durng such precedng
caendar month.
Secton 5 of chapter 182 provdes:
ny person who sha buy or use any gasone for the purpose of operatng
or propeng statonary gas engnes, tractors used for agrcutura purposes,
motor boats, arpanes or arcraft, or who sha purchase or use any gasone
for ceanng or dyeng or for any other commerca use e cept for propeng
motor vehces operated n whoe or n part upon any of the pubc hghways
of the State, sha be rembursed and repad the amount of such cense fee
pad by hm upon presentng to the audtor of state a statement, accompaned
by the orgna nvoces showng such purchases, whch statement sha set
forth the tota amount of such gasone so purchased and used by such con-
sumer, other than for propeng motor vehces operated or ntended to be
operated n whoe or n part upon any of the pubc hghways of ths State,
and the audtor of state sha, upon the presentaton of such statement and such
nvoces, cause to be repad, to such consumer, from the fund created by the
cense fees coected on the use of gasone, as heren provded, the amount of
the cense fees pad by such consumer on gasone used for purposes other
than propeng motor vehces as herenbefore provded.
Secton 7 of chapter 182 provdes:
ny person, frm or corporaton who s now engaged, or who may hereafter
engage, In the busness of seng or dstrbutng gasone wthn ths State
e cusvey for resae and not for sae to the user or utmate consumer
thereof, or seng or dstrbutng gasone through agents or empoyees, and
whether engaged n nterstate or ntrastate busness, or both, may assume
fu abty for the renderng of the statements and the payment of the
cense fees, provded for n sectons 1 and 2 of ths act, on a gasone so
sod or dstrbuted by such person, frm or corporaton wthn ths State. It
sha not be necessary for any deaer to render the statements or submt the
returns or coect the cense fees provded for n sectons 1 and 2 of ths act,
f the cense fees on the gasone so sod by such deaer have been prevousy
pad and f such deaer has n hs possesson nvoces showng that the person,
frm or corporaton from whom the gasone sod by such deaer was pur-
chased has assumed fu abty for the payment of the cense fees thereon,
as herenbefore provded n ths act.
Secton 8 of chapter 182 defnes the term deaer to mean any
person, frm, corporaton, assocaton, or partnershp whch mports,
or causes to be mported, gasone for use, dstrbuton, sae, or
devery n the State of Indana after the same reaches the State
and has become mnged wth ts other property aso any person,
frm, corporaton, assocaton, or partnershp whch produces, re-
fnes, manufactures, or compounds gasone n the State of Indana
for use, dstrbuton, sae, or devery n the State and aso any
person, frm, corporaton, assocaton, or partnershp whch ses
or uses gasone n the State however and wherever such gasone
may have been obtaned. It s further provded n that secton
that any deaer who uses gasone from hs own suppy sha be
deemed a purchaser from hmsef and sha pay the cense fee on
each gaon of gasone so used as he woud have done had he
purchased the gasone from some other deaer.
Secton 23(c) of the Revenue ct of 1928 provdes that n com-
putng net ncome there sha be aowed as deductons ta es pad
or accrued wthn the ta abe year, wth certan e ceptons not here
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23(c), rt. 151.
matera. rtce 151 of Reguatons 74, promugated under the
Revenue ct of 1928, provdes that n genera ta es are deductbe
ony by the person upon whom they are mposed.
rom the provsons of the sectons of the aws of the State of
Indana, quoted above, t appears that t s the purpose to mpose
the ta upon the ndvdua consumer. It s hed, therefore, n
accordance wth the provsons of secton 23(c) of the Revenue ct
of 1928 and artce 151 of Reguatons 74, that the gasone ta m-
posed by the State of Indana s deductbe n the edera ncome
ta return of the consumer who pays t and to whom t s not re-
funded. If, however, th,e ta s added to or made a part of the
busness e pense of such consumer, t can not be deducted by hm
separatey as a ta .
C. M. Chakest,
Genera Counse, ureau of Interna Revenue.
rtce 151: Ta es. I -7-4531
G. C. M. 7448
R NU CT O 1928.
The cense ta eved by the State of Wyomng on gasone s
deductbe for edera Income ta purposes ony by the whoesaer.
If, however, the ta s added to or made a part of the busness
e pense of such whoesaer, t can not be deducted by hm sepa-
ratey as a ta .
n opnon s requested as to whether the cense ta eved by the
State of Wyomng on gasone s deductbe for edera ncome ta
purposes by the consumer.
The ta n queston s mposed n accordance wth the provsons
of chapter 73, Sesson Laws of Wyomng, 1923, as amended by chap-
ter 89, Sesson Laws of Wyomng, 1925 chapter 70, Sesson Laws of
Wyomng, 1927 and chapter 139, Sesson Laws of Wyomng, 1929
(effectve pr 1, 1929).
Secton 2 of chapter 73, Sesson Laws of Wyomng, 1923, as
amended, provdes:
cense ta of 4 cents per gaon Is hereby eved on a gasone used or
sod n ths State after pr 1, 1929, for domestc consumpton to be coected
as herenafter set forth.
Secton 3 of chapter 73, as amended, provdes:
On and after pr 1, 1929, each and every whoesaer as denned n ths act,
who s now engaged or who may hereafter engage n hs own name, or n the
name of others, or n the name of hs representatves or agents n ths State, n
the sae or use of gasone as heren defned sha, not ater than the 15th of each
month, render to the State treasurer a statement of a gasone sod or used by
them n the State of Wyomng durng the precedng caendar month, and pay to
the State treasurer at the same tme, the cense ta of 4 cents per gaon on
a such gasone. Sad statement to the State treasurer sha be upon banks
furnshed by hm, and sha be sworn to by the owner or managng agent n
the case of an ndvdua, frm or assocaton, by the resdent genera agent
or attorney n the case of a foregn corporaton, or by one of the prncpa
offcers n the ease of a domestc corporaton.
Secton 1 of chapter 73, as amended, defnes the term whoesaer
to mean any person, frm, or corporaton whch mports or causes to
be mported gasone, as defned n the act, for sae n the State of
Wyomng, to the |obber or consumer, or to persons who n turn se
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23(c), rt. 151.
98
to the |obber or consumer. The term s further defned to mean any
person, frm, or corporaton whch produces, refnes, manufactures,
bends, or compounds gasone n the State of Wyomng for use, sae,
or dstrbuton n the State.
Secton 23(c) of the Revenue ct of 1928 provdes that n com-
putng net ncome there sha be aowed as deductons ta es pad or
accrued wthn the ta abe year, wth certan e ceptons not here
matera. rtce 151 of Reguatons 74, promugated under the
Revenue ct of 1928, provdes that n genera ta es are deductbe
ony by the person upon whom they are mposed.
In the sesson aws, above referred to, the Legsature of Wyomng
has not ndcated a purpose or ntenton to mpose the cense ta
on the consumer of gasone ether by e pressy statng such nten-
ton, by provdng for the refund of the cense ta to the consumer
who uses the gasone for purposes other than for propeng motor
vehces on the pubc hgnways, by provdng that the whoesaer
sha coect the cense ta from the consumer, or by ndcatng
n any way that the burden of the cense ta was paced upon the
consumer. Those aws, on the contrary, recognze ony the whoe-
saer and evdence the ntenton to mpose upon hm the burden of the
cense ta on gasone.
It s hed, therefore, n accordance wth the provsons of secton
23(c) of the Revenue ct of 1928 and artce 151 of Reguatons 74,
that the ta n queston s deductbe for edera ncome ta purposes
ony by the whoesaer. If, however, the ta s added to or made
a part of the busness e pense of such whoesaer, t can not be de-
ducted by hm separatey as a ta .
C. M. Chakest,
Genera Counse, ureau of Interna Revenue.
rtce 151: Ta es. I -8-4537
G. C. M. 7411
R NU CT O 1928.
The gasone ta mposed by the State of Tennessee s a speca
prvege tu mposed upon dstrbutors of gasone, and s deduct-
be by the dstrbutor and not by the ndvdua consumer. If,
however, the ta s added to or made a part of the busness e pense
of such dstrbutor, t can not be deducted by hm separatey as
a ta .
n opnon s requested as to whether the gasone ta mposed by
the. State of Tennessee s deductbe n the edera ncome ta re-
turn of the ndvdua consumer.
The gasone ta of the State of Tennessee s mposed n accord-
ance wth the provsons of chapter 58, Pubc cts of Tennessee,
1923, as amended by chapter 4, Pubc cts of Tennessee, 1925, and
by chapter 11, Pubc cts of Tennessee, 1929 (effectve ebruarv
16,1929).
Secton 2 of chapter 58, Pubc cts of Tennessee, 1923, as
amended, provdes n part:
That every dstrbutor sha, for the year 1923, and each year there-
after, when engaged n such busness n ths State, pay to the State comp-
troer, for the e cusve use of the State, a speca prvege ta . n addton
to a other ta es, for engagng n and carryng on such busness n ths State,
G
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23(c), rt. 151.
n an amount equa to 5 cents for each gaon, of gasone, and 5 cents for each
gaon of dstate refned, manufactured, produced, or compounded by such
dstrbutor and sod by hm n ths State, or shpped, transported or mported
by such dstrbutor nto, and dstrbuted or sod by hm wthn ths State, dur-
ng such year .
Secton 1 of chapter 58 defnes the word dstrbutor to mean
and ncude ever 7 person who engages n the busness n the State of
refnng, manufacturng, producng, or compoundng gasone or
dstate and seng the same n the State and aso every person
who engages n the busness n the State of shppng, transportng,
. or mportng any gasone or dstate nto, and makng orgna
saes of the same n, the State.
Secton 7 of chapter 58 provdes:
That each dstrbutor and each deaer must, wthn thrty (30) days after
the end of each such quarter, and at the same tme the statement requred by-
secton 6 of ths act s devered to the State comptroer, pay to the State
comptroer, the amount of the prvege ta shown by such statement to be
dne for the quarter for whch the statement s made and fed.
Secton 23(c) of the Revenue ct of 1928 provdes that n com-
putng net ncome there sha be aowed as deductons ta es pad
or accrued wthn the ta abe year, wth certan e ceptons not here
matera. rtce 151 of Reguatons 74, promugated under the
Revenue ct of 1928, provdes that n genera ta es are deductbe
ony by the person upon whom they are mposed.
In the pubc acts above referred to, the Legsature of Tennessee
has not ndcated a purpose or ntenton to mpose the gasone ta
on the consumer ether by e pressy statng such ntenton, by pro-
vdng for the refund of the ta to the consumer who uses the gaso-
ne for purposes other than for propeng motor vehces on the
pubc hghways, by provdng that the dstrbutor sha coect the
ta from the consumer, or by ndcatng n any way that the burden
of the ta was paced upon the consumer. Those aws, however, do
evdence a cear purpose to mpose upon the dstrbutor a speca
prvege ta for engagng n and carryng on such busness n the
State. It s, therefore, the opnon of ths offce that the gasone
ta mposed by the State of Tennessee s a speca prvege ta
mposed upon dstrbutors of gasone, and s deductbe under the
provsons of secton 23(c) of the Revenue ct of 1928 and artce 151
of Reguatons 74 b T the dstrbutor and not by the ndvdua
consumer. If, however, the ta s added to or made a part of the
busness e pense of such dstrbutor, t can not be deducted by hm
separatey as a ta .
C. M. Chakest.
Genera Couruse, ureau of Interna Revenue.
rtce 151: Ta es. I -9-4542
G. C. M. 7527
R NT CT O 1028.
The gasone ta mposed by the State of abama s deductbe
for edera ucome ta purposes by the dstrbutor, reta deaer,
or storer who pays t and not by the consumer. If, however, the
ta s added to or made a part of the busness e pense of such
dstrbutor, reta deaer, or storer, t can not be deducted by hm
separatey as a ta .
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23(c), rt. 151.
100
n opnon s requested as to whether the gasone ta mposed by
the State of abama s deductbe for edera ncome ta purposes
by the consumer.
The gasone ta of the State of abama s mposed n accord-
ance wth the provsons of the act of the egsature approved
ebruary 10, 1923 (Genera cts of abama, 1923, page 36), as
amended by the act of the egsature approved ugust 27, 1927
(Genera cts of abama, 1927, page 326), and n accordance wth
the provsons of the act of the egsature approved anuary 4, 1927
(Genera cts of abama, 1927, page 790).
The act approved ebruary 10, 1923, as amended by the act
approved ugust 27, 1927, s entted:
n act to mpose an e cse ta on persons, corporatons, copartnershps,
companes, agences or assocatons engaged n the busness of seng, dstrbut-
ng, storng or wthdrawng from storage for any purpose whatsoever gasone
or other qud motor fues or devces or substtutes therefor n ths State
am provdng for the coecton and payment of such ta and dstrbuton of
the funds derved therefrom, and provdng for ts enforcement and f ng a
penaty for the voaton of any of the provsons hereof.
Secton 1 of the act approved ebruary 10, 1923, as amended by
secton 2 of the act approved ugust 27, 1927, defnes the term gaso-
ne to ncude gasone, naphtha, and other qud motor fues or any
devces or substtutes therefor, commony used n nterna combuston
engnes, specfcay e cudng certan os for heatng and ghtng
purposes and defnes person, dstrbutor, reta deaer, and
storer for the purposes of the act as foows:
The word person means and ncudes every person, corporaton,
copartnershp, company, agency or assocaton, snguar or pura. The term
dstrbutor sha ncude any person who sha engage n the seng of
gasone as heren defned n ths State by whoesae n domestc trade, but
sha not appy to any transacton by such dstrbutor n nterstate commerce.
The term reta deaer sha ncude any person heren defned as dstrbu-
tor who s aso engaged n the sae of gasone as heren defned, at any pace
n ths State, n broken quanttes. The term storer as heren used sha
ncude any person who shps gasone nto ths State, n tank quanttes, and
stores the same and wthdraws or uses the same for any purpose.
Secton 2 of the act approved ebruary 10, 1923, as amended by
secton 3 of the act approved ugust 27, 1927, provdes:
(a) very dstrbutor, reta deaer or storer of gasone as heren defned
sha pay an e cse ta of 2 cents per gaon upon the seng, dstrbutng or
wthdrawng from storage for any use gasone as heren defned n ths State,
provded however that ths e cse ta sha not be eved upon the sae of
gasone n nterstate commerce, and provded further that where the e cse
ta of 2 cents per gaon upon the sae of sucr gasone sha have been pad
by a dstrbutor or by a reta deaer or storer such payment sha be suffcent,
the ntenton beng that the ta sha not be pad but once, (b) The e cse
ta mposed by subdvson (a) of ths secton sha appy to persons, frms,
corporatons, deaers or dstrbutors storng gasone and dstrbutng the
same or aowng the same to be wthdrawn from storage, whether such wth-
drawas be for saes or other use provded, that seers of gasone and ts
substtutes payng the ta heren provded may pay the same computed and
pad on the bass of ther saes as herenafter requred and storers and
dstrbutors sha compute and pay ths ta on the bass of ther wthdrawas
or dstrbutons.
Secton 3 of the act approved ebruary 10, 1923, as amended by
secton 4 of the act approved ugust 27, 1927, provdes that on or
before the 20th day of each month every person upon whom the
e cse ta s eved sha render to the State ta commsson a state-
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101
23(c), rt. 151.
ment of a saes and wthdrawas of gasone made durng the ne t
precedng month, abe for the ta heren prescrbed, and at the
tme of makng such report sha pay to the State ta commsson
an amount of money equa to the e cse ta mposed.
Secton 11 of the act approved ebruary 10, 1923, as amended by
secton 10 of the act approved ugust 27, 1927, provdes:
If dstrbutor, storer, or reta deaer, n gasone covered by ths act sha
fa to make the monthy return and to pay the ta prescrbed, as provded by
ths act, the ta sha be deemed denquent wthn the meanng of ths act,
and there sha be added to the amount of the ta a penaty of 25 per cent. If
n the opnon of the State ta commsson a good and suffcent cause and
reason s shown for such denquency the State ta commsson may remt the
penaty, otherwse the penaty sha be pad. The State ta commsson sha
be authorzed and empowered to make return for the denquent ta payer upon
such nformaton as t may reasonaby obtan, and add thereto the penaty as
provded n ths secton of ths act. The State ta commsson sha, as soon as
s practcabe, and before the 30th day of the month, certfy to the State
audtor and the State treasurer names of a persons abe to pay the ta
heren provded together wth the post offce address and the amount of the ta ,
and f any such ta and penates sha not have been pad, the charman of the
State ta commsson sha ssue e ecutons for the coecton of such ta
drected to any sherff of the State of abama, who sha proceed to coect
the same n the manner now provded by aw for the coecton of denquent
ta by the county ta coectors and make returns of such e ecutons to the
State ta commsson. The ta and a penates heren provded for sha be
hed as a debt payabe to the State of abama by the person aganst whom
the same sha be charged and a such penates and assessments sha be a
en upon the property n ths State of the party charged therewth.
Secton 23(c) of the Revenue ct of 1928 provdes that n com-
putng net ncome there sha be aowed as deductons ta es pad
or accrued wthn the ta abe year, wth certan e ceptons not here
matera. rtce 151 of Reguatons 74, promugated under the
Revenue ct of 1928, provdes that n genera ta es are deductbe
ony by the person upon whom they are mposed.
It appears from the foregong that the purpose of the act approved
ebruary 10, 1923, as amended, s to mpose the gasone ta of the
State of abama upon the dstrbutor, reta deaer, or storer. The
act approved anuary 4, 1927, mposng an addtona ta of 2 cents
per gaon, s smar and the same purpose s manfest. There s
nothng n the statutes, ether by provson for a refund or otherwse,
to ndcate an ntenton or purpose to mpose the ta upon the
consumer of gasone. It s, therefore, the opnon of ths offce that
the gasone ta mposed by the State of abama s deductbe
under the provsons of secton 23(c) of the Revenue ct of 1928 and
artce 151 of Reguatons 74 by the dstrbutor, reta deaer, or
storer who pays t and not bv the consumer. If, however, the ta
s added to or made a part of the busness e pense of such dstrbutor,
reta deaer, or storer, t can not be deducted by hm separatey as
a ta .
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
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23(c), rt. 151.
102
rtce 151: Ta es. I -10- 551
G. C. M. 7498
R NU CT OP 1928.
The motor vehce fue ta mposed by the State of Nebraska s
deductbe for edera ncome ta purposes by the deaer who pays
t and not by the consumer. If. however, the ta s added to or
made a part of the busness e penses of such deaer, t can not be
deducted by hm separatey as a ta .
n opnon s requested as to whether the motor vehce fue ta
mposed by the State of Nebraska s deductbe for edera ncome
ta purposes by the consumer.
The motor vehce fue ta of the State of Nebraska s mposed n
accordance wth the provsons of chapter 172, Laws of Nebraska,
1925, as amended by chapter 151, Laws of Nebraska, 1927 by chap-
ter 149, Laws of Nebraska. 1929 and by chapter 150, Laws of
Nebraska, 1929.
Secton 5 of chapter 172, as amended, provdes:
very deaer who s now engaged or who may hereafter engage, n hs own
name or n the name of others, or n the name of hs representatves, or agents
n ths State, n the sae, dstrbuton and use of motor vehce fues, sha
render and have on fe wth the State treasurer by the 15th day of each
caendar month, begnnng wth the 15th day of the frst month after ths act
sha become effectve, on forms prescrbed, prepared and furnshed by sad
State treasurer, a sworn statement of the number of gaons of motor vehce
fues, to be based on capacty of contaner, receved, mported and unoaded
and empted or caused to be receved or mported and unoaded and empted
by such deaer n the State of Nebraska, and the number of gaons of motor
vehce fues produced, refned, manufactured or compounded by such deaer
wthn the State of Nebraska, durng the precedng caendar month, whch
statement sha be sworn to by a resdent of the State of Nebraska, who s a
prncpa offcer, genera agent, managng agent, attorney-n-fact, chef account-
ant, or owner, and n addton to the ta now provded for by aw sha at the
tme sad statement s fed pay a ta of 4 cents per gaon upon a motor
vehce fues, as shown by such statement, remttng sad ta to sad State
treasurer, who sha recept the deaer therefor, and pay to the State treasurer
a of the money thus receved. The State treasurer sha have authorty to
ad|ust a errors on payment, and to authorze refund of ta pad on motor
vehce fue destroyed by fre or act of God, or used and consumed by the Unted
States Government or ts agences, and to authorze a refund of the amount
of the ta pad n States other than Nebraska, on saes of motor vehce fue
theren on whch ta was pad n ths State, sad refund not to e ceed per
gaon the ta mposed by ths State, and to ssue vouchers therefor. Pro-
vded : Such deaer sha be entted to a shrnkage of 3 per cent of the num-
ber of gaons, to be based on capacty of contaner, of motor vehce fues
receved or mported, produced, refned, manufactured or compounded by hm,
as shown by such report at the pont where the car or contaner comes to rest
or s unoaded wthn the State of Nebraska.
Secton 1 of chapter 172, as amended, defnes motor vehces to
ncude a automotve or sef-propeed vehces, engnes, or machnes,
movabe or mmovabe, whch arc operated or propeed n whoe or n
part by nterna combuston of one or more of the motor vehce fues
defned theren. The term motor vehce fue s defned as ncud-
ng such fues known as gasone, benzo, naphtha, and benzne wth an
nta bong pont under 200 ahrenhet such other voate and
nfammabe qud as may be produced or compounded for the purpose
of, or as may oe used for, operatng or propeng motor vehces
e cept the product commony known as kerosene o, kerosene ds-
tate, crude petroeum, naphtha, and benzne wth a bong pont
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103
23(c), rt. 151.
over 200 ahrenhet and resduum gas o or smudge o. The
term deaer s defned as ncudng any person, frm, copartnershp,
company, agency, assocaton, corporaton, State, county, munc-
paty, or subdvson of ether thereof, whch mports or causes to
be mported nto the State of Nebraska, and aso any person, frm,
copartnershp, company, agency, assocaton, corporaton, State,
county, or muncpaty, or subdvson of ether thereof, whch pro-
duces, refnes, manufactures, or compounds such motor vehce fue
as theren defned, any part of whch s for use, dstrbuton, sae, or
devery n the State of Nebraska.
Secton 23(c) of the evenue ct of 1928 provdes that n com-
putng net ncome there sha be aowed as deductons ta es pad
or accrued wthn the ta abe year, wth certan e ceptons not here
matera. rtce 151 of Reguatons 74, promugated under the
Revenue ct of 1928, provdes that n genera ta es are deductbe
ony by the person upon whom they are mposed.
In the aws of Nebraska, above referred to, the Legsature of
Nebraska has not ndcated a purpose or ntenton to mpose the
motor vehce fue ta on the consumer ether by e pressy statng
such ntenton, by provdng for the refund of the ta to the con-
sumer who uses the motor vehce fue for purposes other than for
propeng motor vehces on the pubc hghways, by provdng that
the deaer sha coect the ta from the consumer, or by ndcatng
n any way that the burden of the ta was paced upon the consumer.
Those aws, on the contrary, recognze ony the deaer, and evdence
the ntenton to mpose upon hm the burden of the motor vehce
fue ta .
It s therefore the opnon of ths offce that the motor vehce
fue ta mposed by the State of Nebraska s deductbe under the
provsons of secton 23(c) of the Revenue ct of 1928 and artce
151 of Reguatons 74 by he deaer who pays t and not by the
consumer. If, however, the ta s added to or made a part of the
busness e pense of such deaer, t can not be deducted by hm
separatey as a ta .
C. M. Charest.
Genera Counse. ureau of Interna Revenue.
rtck 151: Ta es. I -11-4559
I. T. 2528
R NU CT O 1928.
The motor fues ta Imposed by the State of Idaho s deductbe
n the ncome ta return of the consumer who pays t and to whom
t s not refunded. If, however, the ta s added to or made a part
of the busness e penses of such consumer, t can not be deducted
by hm separatey as a ta .
rung s requested n regard to the deductbty, for edera
ncome ta purposes, of the motor fues ta mposed by the State
of Idaho.
The motor fues ta of the State of Idaho s mposed n accordance
wth the provsons of chapter 172, Laws of Idaho, 1923, as amended
by chapter 185, Laws of Idaho, 1925 chapter 203. Laws of Idaho,
1927 and chapter 283, Laws of Idaho, 1929.
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23(c), rt. 151.
104
Secton 1( ) of chapter 172 defnes the term motor fues to
mean such fues as gasone and any fud or substance whch s a
product of petroeum, or nto whch any product of petroeum enters
or s found as a consttuent eement, consumed for power purposes,
but not ncudng kerosene, crude petroeum, resduum, gas, or
smudge o.
Secton 1(C) of chapter 172 defnes the term deaer to ncude
any person, frm, or corporaton whch mports motor fues, as above
denned, nto the State of Idaho, or produces, manufactures, com-
pounds, refnes, or bends such motor fues n that State.
Secton 2 of chapter 172, as amended, provdes n part as foows:
That each and every deaer as defned n ths act, who s now
engaged or who may hereafter engage n hs own name, or n the name of
others, or n the name of hs representatves or agents n ths State, n the
sae of motor fues heren defned, sha, not ater than the 15th day of each
caendar month begnnng wth the second caendar month after ths act has
become effectve, render a statement to the commssoner of aw enforcement
of the State of Idaho of a motor fues sod and/or used by hm or them n the
State of Idaho durng the precedng caendar month, and pay a cense ta
of 4 cents per gaon on a motor fues as shown by such statement n the
manner and wthn the tme herenafter provded.
Secton 10 of chapter 172, as amended, provdes n part as foows:
ny person, frm or corporaton who sha buy and use any motor fues as
defned n ths act for the purposes of operatng or propeng statonary gas
engnes, tractors or motor boats, or who sha purchase or use any
of such fue for ceanng or dyeng or other commerca use of the same,
e cept n motor vehces operated or ntended to be operated upon any of
the pubc hghways of the State of Idaho, and who sha have pad any ta
on motor fues eved or drected to be pad as provded by ths act, ether
drecty by the coecton of such ta by the vendor from such customer
consumer or ndrecty by addng the amount of such ta to the prce of
such fues and pad by such consumer, sha be rembursed and repad the
amount of such ta pad by hm upon presentng to the commssoner of aw
enforcement of the State of Idaho an affdavt accompaned by the orgna
recepts showng such purchase, whch affdavt sha be verfed by the oath
of such affant, and sha state the tota amount of such fues so purchased,
and used by such consumer, other than n the operaton of motors, motor
vehces, tractors or other engnes operated or ntended to be operated upon
any of the pubc hghways of the State of Idaho, and sad commssoner of
aw enforcement, upon the presentaton of such affdavt and such recept,
sha cause to be repad to such consumer from the ta es coected on motor
fues the sad tu es so pad by such consumer on fues purchased and used,
other than for the purposes aforesad .
Secton 23(c) of the Revenue ct of 1928 provdes that n com-
putng net ncome there sha be aowed as deductons ta es pad
or accrued wthn the ta abe year, wth certan e ceptons not here
matera. rtce 151 of Reguatons 74, promugated under the
Revenue ct of 1928, provdes that n genera ta es are deductbe
ony by the person upon whom they are mposed.
rom the foregong quoted sectons t appears that the motor fues
ta of the State of Idaho s mposed upon the consumer. It s hed,
therefore, n accordance wth the provsons of secton 23(c) of the
Revenue ct of 1928 and artce 151 of Reguatons 74, that the
motor fues ta mposed by the State of Idaho s deductbe n the
edera ncome ta return of the consumer who pays t and to whom t
s not refunded. If, however, the ta s added to or made a part
of the busness e penses of such consumer, t can not be deducted
separatey by hm as a ta .
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23(c), rt. 151.
rtce 151: Ta es. I -14-4587
I. T. 2531
R NU CT O 1928.
The ta mposed on motor fue by the State of ermont s deduct-
be for edera ncome ta purposes ony by the dstrbutor and
not by the ndvdua consumer. If, however, the ta s added to
or made a part of the busness e penses of such dstrbutor, t
can not be deducted by hm separatey as a ta .
rung s requested n regard to the deductbty for edera
ncome ta purposes of the motor fue ta mposed by the State of
ermont.
The motor fue ta of the State of ermont s mposed n accord-
ance wth the provsons of Part I of the genera revenue act of that
State, approved March 15, 1929 (No. 30 of the cts of 1929, Laws
of ermont, 1929, p. 38). Part I (sectons 1 to 11) of that act became
effectve pr 1, 1929.
Secton 1 of the genera revenue act defnes the term dstrbutor
to mean a person, frm, or corporaton whch mports, or causes to
be mported, gasone or other motor fue, e cept kerosene, for use,
dstrbuton, or sae n the State, or any person, frm, or corporaton
whch produces, refnes, manufactures, or compounds gasone or
other motor fue, e cept kerosene, n the State, for use, dstrbuton,
or sae wthn the State.
Secton 5 of the act provdes, n part, as foows:
t the tme of fng sad report each dstrbutor, n a cases not e empt from
such ta under the aws of the Unted States, sha pay to the State treasurer
a ta of 4 cents per gaon upon each gaon of such motor fue sod by sad
dstrbutor and sha aso pay to the State treasurer a ta of 4 cents per gaon
upon each gaon of such motor fue used wthn the State by sad ds-
trbutor.
Secton 7 of the act provdes:
If any person sha receve such motor fue n such form and under such
crcumstances as sha precude the coecton of the ta from the dstrbutor
by reason of the provsons of the Consttuton and aws of the Unted States,
and sha thereafter se or use such motor fue n the State n such manner
and under such crcumstances as may sub|ect such sae to the ta ng power
of the State, such person sha be consdered a dstrbutor and sha make the
same reports, pay the same ta es, and be sub|ect to a the other provsons of
ths act reatng to the dstrbutors of motor fue.
Secton 23(c) of the Revenue ct of 1928 provdes that n com-
putng net ncome there sha be aowed as deductons ta es pad or
accrued wthn the ta abe year, wth certan e ceptons not here
matera. rtce 151 of Reguatons 74, promugated under the
Revenue ct of 1928, provdes that n genera ta es are deductbe
ony by the person upon whom they are mposed.
rom the foregong quoted sectons t appears that the motor fue
ta of ermont s mposed upon the dstrbutor who ses or uses
motor fue n the State of ermont. There s nothng n the act,
ether by provson for a refund or otherwse, to ndcate an nten-
ton or purpose to mpose the ta upon the consumer of motor fue,
e cept to the e tent that the motor fue s used or consumed by the
dstrbutor. It s hed, therefore, n accordance wth secton 23(c)
of the Revenue ct of 1928 and artce 151 of Reguatons 74, that
such ta s deductbe for edera ncome ta purposes ony by the
4090 30 8
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23(c), rt. 151.
106
dstrbutor and not by the ndvdua consumer. If, however, the ta
s added to or made a part of the busness e penses of such dstrbu-
tor, t can not be deducted by hm separatey as a ta .
rtce 151: Ta es. I -15- 1596
I. T. 2532
R NU CT O 1928.
The motor vehce fue ta mposed by the State of New ersey
s deductbe for edera ncome ta purposes by the dstrbutor
who pays t and not by the consumer. If, however, the ta s
added to or made a part of the busness e pense of suc dstrbu-
tor, t cnn not be deducted by hm separatey as a ta .
dvce s requested as to whether the motor vehce fue ta
mposed by the State of New ersey s deductbe for edera ncome
ta purposes by the consumer.
The motor vehce fue ta of the State of New ersey s mposed
n accordance wth the provsons of chapter 334, Laws of New-
ersey, 1927, as amended by chapter 190, Laws of New ersey, 1928,
and by chapter 228, Laws of New ersey, 1929 (effectve pr 29,
1929).
Chapter 334, as amended, s entted:
n act to mpose a ta on the sae of motor vehce fues as heren defned
to be pad by dstrbutors as heren defned reguatng the sae of such
fues provdng for the coecton of sad ta , for reports of saes of such
motor fues, and for the dsposton of the revenue derved from such ta ,
and f ng penates for the voaton of the terms thereof.
Secton 1 of chapter 334, as amended, defnes the term motor
vehce to ncude any vehce propeed or drawn aong any pubc
road by any power other than muscuar, and motor boats or any
boat or scow propeed whoy or n part from power derved from
a gasone engne, e cept road roers, street sprnkers, fre engnes
or fre department apparatus, poce patro wagons, ambuances
owned by muncpates or hosptas, motor cyces of State and
muncpa poce, motor vehces of the Unted States Government,
auto buses, commony caed |tneys, whch now pay a muncpa or
franchse ta on ther gross recepts, agrcutura tractors, ana such
vehces as run ony on ra or tracks. The term fues s defned
to ncude gasone, benzo, or other products to be used by the
purchaser thereof n the propeng of motor vehces usng com-
bustbe type engnes over the hghways of the State. The term
dstrbutor s defned to ncude any person, assocatons of per-
sons, frm, or corporaton, wherever resdent or ocated, whch m-
ports or causes to be mported nto the State fues as defned by
the statute, for use, dstrbuton, or sae after the same reach the
State and aso any person, assocaton of persons, frm, or corpora-
ton wrhch produces, refnes, manufactures, or compounds wthn
the State, or causes to be produced, refned, manufactured, or com-
pounded, fues as defned by the statute.
Secton 4 of chapter 334, as amended, provdes:
very dstrbutor sha, on or before the ast busness day of each month,
ender a report to the commssoner of motor vehces statng the number
of gaons of such fue sod or used n the State by hm durng the precedng
caendar month on forms to he furnshed bv sad commssoner of motor
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107
23(c), rt. 151.
vehces. On or before the frst day of the caendar month succeedng the
fng of snd report, each dstrbutor sha pay to the commssoner of
motor vehces a ta of 2 cents per gaon upon each gaon so reported,
whch sha be n addton to any motor vehce cense fee now or hereafter
assessed n ths State.
Secton 5 of chapter 334. as amended, provdes:
Wherever any dstrbutor or reta deaer sha make any dstrbuton or
sae of fues to any person, frm or corporaton, upon representaton that
the same s to be used for the purpose of manufacture or agrcutura use or
tor any of the vehces enumerated In secton one (1) of ths act, he sha
certfy such saes to the commssoner of motor vehces on a form provded
for such purpose. The commssoner of motor vehces may requre such
purchaser to certfy to hm under oath, on forms furnshed for such purpose,
the use whch s to be made of such fues, and whether any porton or the
whoe of such fue so purchased s to be used In the operaton of motor
vehces. Whoever sha receve any such fues n such form and under such
(rcunstances as sha precude the coecton of ths ta from the dstrbutors
by reason of the provsons of the aws of the Unted States, and sha there-
after se or use any such nterna combuston engne fues n such manner
and under such crcumstances as may sub|ect such sae or use to the ta ng
power of ths State, such person sha be consdered as a dstrbutor, and
sha make the same reports, pay the same ta es, and be sub|ect to a other
provsons of ths act reatng to dstrbutor of such fues. If any porton
or the whoe of such fue so purchased s ta abe under ths act, then the
purchaser sha be charged wth the ta provded n ths act and sha pay
the same n accordance wth the provsons hereof.
Secton 23(c) of the Revenue ct of 1928 provdes that n com-
putng net ncome there sha be aowed as deductons ta es pad
or accrued wthn the ta abe year, wth certan e ceptons not here
matera. rtce 151 of Reguatons 74, promugated under the
Revenue ct of 1928, provdes that n genera ta es are deductbe
ony by the person upon whom they are mposed.
In the statutes above referred to, the Legsature of New ersey
has not ndcated a purpose or ntenton to mpose the motor vehce
fue ta upon the consumer ether by e pressy statng such nten-
ton, by provdng for a refund of the ta to the consumer who uses
motor vehce fue for purposes other than n the operaton of motor
vehces as defned n the statute, by provdng that the deaer sha
coect the ta from the consumer, or by ndcatng n any other
way that the burden of the ta s paced upon the consumer. It s
hed, therefore, n accordance wth the provsons of secton 23(c)
of the Revenue ct of 1928 and artce 151 of Reguatons 74, that
the motor vehce fue ta mposed by the State of New ersey s
deductbe for edera ncome ta purposes by the dstrbutor who
pays t and not by the consumer. If, however, the ta s added to
or made a part of the busness e pense of such dstrbutor, t can not
be deducted by hm separatey as a ta .
rtce 151: Ta es. I -16-4602
I. T. 2534
R NU CT O 1928.
The motor fue ta mposed by the State of Coorado under the
provsons of chapter 139, Laws of Coorado, 1929. s dedtetbe
for edera ncome ta purposes by the deaer and not by the con-
sumer. If. however, such ta s added to or made a part of the
busness e penses of such deaer, t can not be deducted by hm
separatey as a ta .
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23(c), rt. 151.
108
rung s requested n regard to the deductbty, for edera
ncome ta purposes, of the motor fue ta mposed by the State of
Coorado.
The motor fue ta now n force n Coorado s mposed n accord-
ance wth the provsons of chapter 139, Laws of Coorado, 1929.
effectve May 1, 1929.
Secton 1 of the act defnes the term motor fue to mean and
ncude gasone and every other voate and nfammabe qud
ordnary, practcay, or commercay usabe n nterna combus-
ton engnes for the generaton of power. The term does not, how-
ever, ncude kerosene o or kerosene dstate. The sad secton
defnes the term dstrbutor to mean and ncude every pereon
who ses motor fue n the State of Coorado. The term person
s defned by the sad secton to mean and ncude every ndvdua,
frm, assocaton, |ont stock company, syndcate, corporaton, cty,
town, county, or other potca subdvson of the State of Coorado.
Secton 2 of the act provdes:
n e cse ta of 4 cents per gaon or fracton thereof s hereby mposed and
sha be coected on a motor fue sod, offered for sae or used n ths State
for any purpose whatsoever: Provded, however, that upon the same motor fue
ony one ta of 4 cents per gaon or fracton thereof sha be pad n ths State,
for whch ta the dstrbutor frst recevng the motor fue n ths State after t
has eft the refnery of ts orgn or tank farm at or appurtenant to such re-
fnery, ether wthout or wthn ths State, sha be prmary abe. Sad ta
sha be computed upon and measured by the tota amount of motor fue re-
ceved by each dstrbutor n ths State and pad n the manner herenafter
provded the amount receved, n the case of motor fue shpped to a dstrbutor
from a refnery, to bo deemed the amount shpped from the ref:ery, as shown
by the refnery nvoce. Provded, that an aowance of 2 per cent of the tota
amount receved, as shown by such refnery nvoces, durng each caendar
month, sha be made and deducted by the dstrbutor to cover hs osses n
transt and n unoadng such motor fue and, provded, further, that a refund
sha be made or a credt aowed to any dstrbutor for the ta pad or accrue
on a motor fue whch sha after shpment or recept be ost or destroyed by
fre, ghtnng, food, tornado, wndstorm or e poson, but such oss or destruc-
ton must be proved to the reasonabe satsfacton of the State nspector of
os. Provded, further, that where motor fue sha be transported by a ds-
trbutor to a pont or ponts outsde ths State, and there dsposed of, then and
n such event, upon the dstrbutor s fng wth the State nspector of os a
dupcate b of adng or affdavt, showng the transacton, the ta provded
for heren sha not appy to such motor fue and f aready pad sha be re-
funded to the dstrbutor. Prov ded, further, that when the ta mposed by
ths act s pad to a dstrbutor on any motor fue by the purchaser thereof,
an such motor fue s used for a purpose other than propeng of a motor
vehce on pubc streets or hghways n ths State, such ta sha be refunded
by the State treasurer to such purchaser upon hs appcaton, whch sha be
made to the State nspector of os wthn 00 days after the purchase, and sha
be supported by an affdavt of the purchaser and accompaned by the orgna
pad nvoce or saes recept. Sad appcaton sha be made on forms
p escrbed and furnshed by the State Inspector of os.
Secton 5 of the act provdes that every dstrbutor sha compute
the amount of ta payabe on a motor fue receved durng the pre-
cedng month and sha pay to the State nspector of os the fu
amount of the ta .
Secton 6 of the act reads n part as foows:
very person who sha use n ths State for propeng a motor vehce on
the pubc streets or hghways, any motor fue on whch a censed dstrbutor
has not pad or s not abe for the ta herenbefore mposed, sha be abe
for and sha pay to the State Inspector of os an e cse ta of 4 cents per
gaon or fracton thereof upon a such motor fue so used n ths State .
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109
23(c), rt. 151.
The motor fue ta n force n Coorado pror to May 1, 1929, was
mposed n accordance wth the provsons of chapter 168, Laws of
Coorado, 1919, as amended by chapter 153, Laws of Coorado, 1923,
and by chapter 140, Laws of Coorado, 1927 (repeaed by chapter
139. Laws of Coorado, 1929).
The Supreme Court of the State of Coorado has hed that the
effect of chapter 168, Laws of Coorado, 1919, whch eved a ta
upon each gaon of kerosene, gasone offered for sae
or used for consumpton for power purposes n propeng vehces,
was to mpose the ta upon the deaer ttude O Co. v. Peope,
TO Coo., 452, 202 Pac, 180 Rversde Ice Storage Co. v. Peope,
72 Coo. 266, 210 Pac, 1118) and has hed that chapter 168. Laws
of Coorado, 1919, as amended by chapter 153, Laws of Coorado,
1923, s to the same effect. See Mer v. Peope (76 Coo., 157, 230
Pac, 603), where the court used the foowng anguage:
The ta s not ony an e cse ta but t s an ndrect ta , and ta es of ths
character, f not aways, usuay are eved upon and coected from a person
other than the one who utmatey pays them. t s, we thnk, m-
posed upon a deaer who ses or offers to se the product, and the seer may
compe the buyer to remburse hm therefor. In the ttude O Co. case
mentoned ths court In Its opnon not ony hed the ta was vad but that
t s a ta on a deaer.
The Supreme Court of the State of Coorado has aso construed
the effect of chapter 168, Laws of Coorado, 1919, as amended by
chapter 153, Laws of Coorado, 1923, and chapter 140, Laws of
Coorado, 1927. The act, as amended, provded n part that each
dstrbutor shoud render a statement or a gasone sod, used, or
offered for sae durng the precedng month and accompany such
statement wth the payment of an e cse ta of 3 cents per gaon
thereon. It was further provded that the ta when pad on any
gasone used for a purpose other than the propeng of motor veh-
ces shoud be refunded to the user. very person who knowngy
used any gasone on whch the ta had not been pad by any ds-
trbutor was requred to pay an e cse ta of 3 cents per gaon.
The court hed that the ta was mposed upon the deaer. (Peopte
v. Cty and County of Denver, 272 Pac, 629 Peope v. Te as Co.,
275 Pac, 896.)
Secton 23(c) of the Revenue ct of 1928 provdes that n com-
putng net ncome there sha be aowed as deductons ta es pad
or accrued wthn the ta abe year, wth certan e ceptons not here
matera. rtce 151 of Reguatons 74, promugated under the
Revenue ct of 1928, provdes that n genera ta es are deductbe
ony by the person upon whom they are mposed.
The motor fue ta mposed by chapter 168, Laws of Coorado,
1919, as amended by chapter 153, Laws of Coorado, 1923, and by
chapter 140, Laws of Coorado, 1927, has been construed by the
Supreme Court of Coorado as a ta upon the deaer. Chapter 139,
Laws of Coorado, 1929, s substantay the same, n so far as the
evyng of the ta s concerned, as chapter 168, as amended. It s
hed, therefore, n accordance wth the provsons of secton 23(c)
of the Revenue ct of 1928 and artce 151 of Reguatons 74, that
the motor fue ta mposed by the State of Coorado under the
provsons of chapter 139, Laws of Coorado, 1929, s deductbe for
edera ncome ta purposes by the deaer and not by the consumer.
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110
If, however, such ta s added to or made a part of the busness
e penses of such deaer, t can not be deducted by hm separatey as
a ta .
rtce 151: Ta es. I -19-4G27
G. C. M. 7925
R NU CT O 1928.
The gasone ta mposed by the State of South Carona s
deductbe for edera ncome ta purposes ony by the o company
whch pays t and not by the consumer. If, however, the ta s
added to or made a part of the busness e pense of such company,
t can not be deducted by t separatey as a ta .
n opnon s requested n regard to the deductbty, for edera
ncome ta purposes, of the gasone ta mposed by the State of
South Carona.
The gasone ta of the State of South Carona s mposed n
accordance wth the provsons of an act of the genera assemby
approved March 21, 1924, and known as ct No. 731 of the cts
of 1924, as amended by an act of the genera assemby approved
March 23, 1925, and known as ct No. 34 of the cts of 1925.
Secton 10 of ct No. 731 of the cts of 1924, as amended, contans
among others the foowng provsons:
That every o company dong domestc or ntrastate busness wthn
ths State, and engagng n the busness of seng, consgnng, usng, shppng,
or dstrbutng for the purpose of sae wthn ths State, any gasone or
any substtute therefor, or combnaton thereof, for the prvege of carryng
on such busness sha be sub|ect to the payment of a cense ta , whch ta
sha be measured by and graduated n accordance wth the voume of saes
f such o company wthn the State. very such o company sha pay to
the State treasurer an amount of money equa to fve (5) cents per gaon
cn a gasone, combnatons thereof, or substtutes therefor, sod or consgned,
used, shpped or dstrbuted for the purpose of sae wthn the State. That
every o company sub|ect to the ta provded for n ths act sha, on or befure
the 20th day of each month, and every month, make out and fe wth tne
South Carona Ta Commsson a return under oath, n such form as may be
prescrbed by sad South Carona Ta Commsson showng the number of
gaons of gasone, combnatons thereof, or substtutes therefor, whch have
been sod or consgned, used, shpped or dstrbuted for the purpose of sae
wthn ths State durng the prevous month and sha at the same tme remt
to the State treasurer the amount of the ta provded by ths act.
It s hereby decared to be the ntent and purpose of ths act
to mpose a ta upon every o company engaged n domestc or ntrastate
commerce or busness wthn the schedue provded wthn ths act, at the
rate theren specfed, where such gasone, combnatons thereof, or substtutes
therefor, s orgnay sod, consgned, used, shpped or dstrbuted by such o
company n ths State, but nothng wthn ths act sha be construed to
mpose any such cense ta upon any seng agent, consumer or retaer,
seng, consgnng, shppng, dstrbutng or usng any of sad gasone, com-
bnatons thereof, or substtutes therefor, whch may have been bought from,
consgned by, or otherwse baed by any o company as defned wthn ths
act, whch has pad the ta as heren mposed, nor sha ths act be hed
to appy n case of nterstate commerce.
The term o company as used n ths act sha mean and be hed to ncude
any person, frm, corporaton, company, partnershp or assocaton engaged n
seng or n consgnng, usng, shppng or dstrbutng for the purpose of
orgna sae wthn ths State, gasone, combnatons thereof, or substtutes
therefor, as specfed n ths act. The term orgna sae sha mean the frst
sae of such product or the frst dstrbuton, transfer, consgnment or bament
of such products for the purposes of sae wthn ths State.
That the ta es and a penates heren provded sha be hed as a debt pa -
abe to the State by the party aganst whom the same sha be charged, and
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23(c), rt. 164.
a such ta es, penates and assessments sha he a frst en n a cases what-
soever upon a property of the party charged therewth : Provded, That nothng
contaned heren sha be construed as mposng any ta on kerosene.
Secton 23(c) of the Revenue ct of 1928 provdes that n com-
putng net ncome there sha he aowed as deductons ta es pad
or accrued wthn the ta ahe year, wth certan e ceptons not here
matera. rtce 151 of Reguatons 74, promugated under the
Revenue ct of 1928, provdes that n genera ta es are deductbe
ony by the person upon whom they are mposed.
It appears from the foregong that the purpose of secton 10 of
ct No. 731 of the cts of 1924, as amended, s to mpose the gasone
ta of the State of South Carona upon every o company engaged
n the busness of seng, consgnng, usng, shppng, or dstrbutng
for sae wthn the State, gasone or any substtute therefor, or
combnaton thereof (wth the e cepton of kerosene), for the prv-
ege of carryng on such busness. There s nothng n the statute,
ether by provson for a refund or otherwse, to ndcate an ntenton
or purpose to mpose the ta upon the consumer of gasone. It s,
therefore, the opnon of ths offce that the gasone ta mposed by
the State of South Carona s deductbe under the provsons of
secton 23(c) of the Revenue ct of 1928 and artce 151 of Regua-
tons 74 ony by the o company by whch t s pad and not by the
consumer. owever, f the ta s added to or made a part of such
company s busness e penses, t can not be deducted by t separatey
Determnaton of the date as of whch the transfer ta mposed
upon contngent nterests by the New York ta aw may be deducted
by an estate for edera ncome ta purposes.
n opnon s requested as to the date as of whch New York trans-
fer ta es mposed by artce 10 of the New York ta aw on the
transfer of contngent nterests n property may be deducted for
edera ncome ta purposes by an estate n the process of admn-
straton.
Secton 23(c) of the Revenue ct of 1928 provdes that n com-
putng net ncome there sha be aowed as deductons ta es pad
or accrued wthn the ta abe year, wth certan e ceptons not
here matera. The subsecton further provdes that or the pur-
pose of ths subsecton estate, nhertance, egacy, and successon
ta es accrue on the due date thereof, e cept as otherwse provded
by the aw of the |ursdcton mposng such ta es, and sha be
aowed as a deducton ony to the estate.
Secton 230 of the New York ta aw, as amended by chapter 144,
Laws of New York. 1925, provdes n part as foows:
I rocce ngs by appraser.
When property s transferred n trust or otherwse, and the rghts, nterest
or estates f the transferees are e enent upon contngences or condtons
as a ta .
C. M. Charest,
Genera Counse. ureau of Interna Revenue.
I -12-4564
C . C. M. 7514
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23(0). rt. 154.
112
whereby they may be whoy or n part created, defeated, e tended or abrdged,
a ta sha be mposed upon sad transfer at the hghest rate whch, on the
happenng of any of the sad contngences or condtons, woud be possbe under
the provsons of ths artce, whch ta sha be computed on the fu, und-
mnshed vaue of such property at the tme of the transfer wthout deducton
for or on account of any ntervenng estate or nterest, and such ta so mposed
sha be due and payabe forthwth by the e ecutors or trustees out of the
property transferred, and the surrogate sha enter a temporary order deter-
mnng the amount of sad ta n accordance wth ths provson provded,
however, that on the happenng of any contngency whereby the sad property,
or any part thereof, s transferred to a person or corporaton e empt from ta a-
ton under the provsons of ths artce, or to any person ta abe at a rate ess
than the rate mposed and pad, such person or corporaton sha be entted to a
return of so much of the ta mposed and pad as s the dfference between the
amount pad and the amount whc sad person or corporaton shoud pay under
the provsons of ths artce, computed upon the fu, undmnshed vaue of the
property as aforesad and the e ecutor or trustee of each estate, or the ega
representatve havng charge of the trust fund, sha mmedatey upon the
happenng of sad contngences or condtons appy to the surrogate of the
proper county, upon a verfed peton settng forth a the facts, and gvng at
east 10 days notce by ma to a nterested persons or corporatons, for an
order modfyng the temporary ta ng order of sad surrogate so as to provde
for the fna assessment and determnaton of the ta n accordance wth the
utmate transfer or devouton of sad property. If appcaton for modfcaton
of the temporary ta ng order s not made wthn s months after the hap-
penng of any contngency or condton the ta as fnay f ed and determned
sha bear nterest at the rate of 6 per centum per annum from the date when
such contngency or condton happened to the date of the entry of the modfy-
ng order, whch nterest sha be n addton to the nterest mposed by secton 223
of ths artce for nonpayment of the ta at the hghest possbe rate wthn 18
months from the date of the transfer. Whenever a ta on a transfer de-
pendent on a contngency or condton has been determned at the hghest rate
n the manner prescrbed by the foregong provsons and the persona property
ncuded n the transfer s ess than the amount of sad ta , the e ecutors or
trustees, n eu of payng the amount so determned, may eect to fe n the
offce of the ta commsson a bond to the peope of the State, approved as to
form and amount by the ta commsson, for the purpose of securng the pay-
ment of the ta on such transfer. The ta commsson at any tme may
ncrease or decrease the amount of such bond as condtons may requre.
Secton 241, as amended by chapter 402, Laws of New York, 1927,
provdes n part as foows:
Dsposton of revenues ta on contngent remanders refunds n certan
cases.
Notwthstandng the provsons of secton 222 of ths chapter, whenever the
ta on a contngent transfer has been determned at the hghest rate whch
on the happenng of any of the contngences or condtons woud be possbe
under the provsons of ths artce, t sha be payabe to the ta commsson,
whch sha depost the amount of such ta n some sovent bank, trust com-
pany or trust companes, or savngs banks n ths State desgnated by the
State comptroer, to the credt of the State comptroer on account of such
estate, payng the nterest thereon when coected by hm to the e ecutor or
trustee of sad estate, to be apped by sad e ecutor or trustee as provded by
the decedent s w. Upon the happenng of the contngences or condtons
whereby the property transferred utmatey vests n possesson, f t then
passes to persons ta abe at the hghest rate, the State comptroer on the
certfcate of the ta commsson, sha turn over the amount so retaned to the
State treasury, or f the property transferred utmatey vests n persons ta -
abe at a ower rate or a person or corporaton e empt from ta aton by the
provsons of ths artce, the State comptroer on the certfcate of the ta
commsson sha refund any e cess of ta so hed to the e ecutor or trustee of
the estate, to be dsposed of by sad e ecutor or trustee as provded by the
decedent s w and sha turn over the baance, f any, to the State treasury.
ecutors or trustees of any estate may eect to assgn to and depost wth
the ta commsson, bonds or other securtes of the estate approved by the
ta commsson, both as to the form of the coatera and the amount thereof,
for the purpose of securng the payment of the ta on sad transfer, whch
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113
23(c), rt. 154.
sad bonds or other securtes sha be hed by the ta commsson, to the
credt of sad estate unt the actua vestng of sad property, the ncome
therefrom when receved by the ta commsson to be pad over to the
e ecutor or trustee.
If any e ecutor or trustee sha have deposted securtes, or both cash and
securtes, to an amount n e cess of the sum necessary to pay the transfer
ta upon such contngent transfer, the e cess so deposted sha be returned
to the e ecutor or trustee, or f any e ecutor or trustee sha have deposted
securtes, or both cash and securtes, to an amount ess than s suffcent to
pay the ta upon such contngent transfer as fnay assessed and determned,
the e ecutor or trustee of sad estate sha forthwth, upon the entry of the
order determnng the correct amount of ta due, pay to the. ta commsson
the baance due on account of sad ta . In case securtes sha have been
deposted and the ta upon such contngent transfer as fnay assessed and
determned sha be pad, the e ecutor or trustee sha be entted to the
return of such securtes but f the ta s not pad wthn 60 days after
the entry of the order fnay assessng and determnng the ta , the ta com-
msson may se the securtes so deposted n the open market or at pubc
aucton, at ts opt.on, and appy the proceeds thereof to the payment of the
ta .
rom an e amnaton of the foregong provsons of aw t ap-
pears that the depost of money or securtes to guarantee the pay-
ment of the ta mposed by artce 10 of the New York ta aw oh
the transfer of contngent nterests s not n fact a payment of the
ta but merey securty for the payment of the ta . When the surro-
gate enters a temporary order determnng the amount whch woud
be payabe at the hghest rate, he s merey carryng out the prov-
sons of the statute whch prescrbe a method for the protecton of
the State revenue. It shoud be noted that the e ecutors or trustees
may, under certan crcumstances, eect to fe n the offce of the ta
commsson a bond for the purpose of securng such transfer ta , or
they may depost securtes of the estate, but n ether case there s
no payment of ta unt a fna order has been ssued. In other
words, the temporary ta ng order s frst ssued and the actua
coecton of ta s hed n abeyance pendng the happenng of the
contngency. If the benefca nterest utmatey vests n an or-
ganzaton whch s e empt from ta aton, any cash deposted to
the credt of the State comptroer on account of the estate s
refunded. It seems, therefore, that not unt the contngency or
condton has happened can t be known whether there w n fact
be a ta .
In the case of In re echfs state (219 pp. Dv. 656, 220 N. Y. S-,
325), the Supreme Court of New York had occason to construe sec-
ton 230, as amended by chapter 144, Laws of New York, 1925, and
secton 241, before t was amended n 1927. The queston presented
was the consttutonaty of the provsons of aw whch ta ed the
transfer of property on the vaue at the tme of the transfer, wthout
deducton on account of any ntervenng estate. The court sad n
part as foows:
If the State became at once benefcay entted to the ta on the contngent
remander, the mathematca concuson reached by the appeants woud be
correct ut the State does not presenty get ths taw. The ncome from the
Mfc or securtes deposted to cover the ta goes back to the estate durng the
whoe duraton of the trust. There s no dfference between ta ng a contngent
remander on the assessment of ts present worth, wth a ta payabe presenty,
nd ta ng t, wth a ta payabe at the date of vestng, on ts face vaue rather
ban ts present worth. One s the e act arthmetca equvaent of the other.
No property rght s nvaded by ths scheme of ta aton.
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23(c), rt. 154.
114
ewed as an entty, the estate s not utnn , because n effect t merey de-
posts securty for the ta . The fe tenant s not harmed, because she does not
ose the ncome by premature payment of the ta , but Is safeguarded n her
en|oyment of that ncome by the provsons of secton 241. Itacs supped.
Ths decson was affrmed by the Court of ppeas of New York
(246 N. Y., 602, 159 N. ., 668).
The same queston was consdered by the Supreme Court of the
Unted States n Saomon et a. v. State Ta Commsson of New
York (278 U. S., 484, 49 S. Ct., 192). The court hed that the aw
as amended n 1925, provdng for the ta aton of transfers of con-
tngent remanders n accordance wth the vaue at the testator s
death of estates transferred, undmnshed by ntervenng fe estate,
was not n voaton of due process of aw cause of the Consttuton,
thus sustanng the decson of the Court of ppeas of New York.
The Unted States Supreme Court stated n part as foows:
The ta on the transfer of contngent remanders s not payabe unt the
death of the fe tenant and t s measured by the vaue of the testator s
death of the estate transferred, undmnshed by the vaue of the ntervenng
fe estate. or the due payment of the deferred taw the e ecutor must furnsh
adequate securty. The amount of the securty s f ed by a temporary tawng
order. (Laws of 1925, ch. 144, sees. 1, 2, amendng sectons 230 and 241 of ta
aw (Oonso. Laws, ch. 60).)
s the remanders are contngent, t s mpossbe to know, before the con-
tngency happens, n whom the remanders w vest and t may be mposs-
be to determne unt then the reatonshp of the benefcares to the testator
and the portons of the estate whch they w respectvey receve. Thus the
rate of ta aton w reman uncertan. or ths reason, the statute postpones
unt the contngency happens both the defntve assessment of the ta on the
transfer of the contngent remanders and the payment thereof.
The argument presented s unsound, because t gnores the fact that the ta
n respect to the contngent remanders s not payabe unt after the death of
the fe tenant. The temporary ta ng order, entered upon the testator s death,
s made soey to nsure that the ta so deferred w be pad when utmatey
assessed. The requrement may be satsfed by depostng wth the State ether
approved securtes or cash. In ether event the ncome coected from the
securty pror to the tme when the ta becomes payabe s accounted for to
the e ecutor, and, after the ta has been pad, the securtes or cash remanng
on depost w be accounted for to hm. y appyng the appcabe rate to
the fu vaue of that whch comes nto en|oyment, and not e actng payment
of the ta unt then, a |ust resut s sought. or the defntve assessment
of the contngent remander and the payment of the ta thereon are postponed
to the same date. Itacs supped.
In vew of the foregong, t s evdent that where cash s deposted
wth the ta commsson n accordance wth the temporary ta ng
order, the amount so deposted does not consttute payment of the
ta es proposed wth respect to contngent nterests, for the fna ta
s not determned and can not be ascertaned unt after the happen-
ng of the contngency. The cash depost s hed for the estate and
the nterest thereon s payabe, to the e ecutor or trustee of the estate,
for. as stated n In re echtfs state, supra, the State does not pres-
enty get ths ta . It woud seem, therefore, that not unt the cer-
tfcate of the ta commsson s ssued to the State comptroer, as
provded by secton 241, as amended, upon recept of whch the
amount retaned s pad nto the State treasury, can t be sad that
the State has receved the ta and there has been a payment thereof.
It s assumed that the State comptroer upon recept of the certf-
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115
23(c), rt. 164.
cate mmedatey turns over the amount of ta requred to be retaned
to the State treasury and refunds any e cess to the e ecutor or trus-
tee of the estate n accordance wtn the statute. s the cash de-
post s paced n a bank, trust company, or savngs bank by the
comptroer on account of the estate, t can not be reasonaby hed
that the estate s so dvested of tte to the funds as to consttute a
payment of ta .
It s the opnon of ths offce, therefore, that where the estate
keeps ts books of account on the cash recepts and dsbursements
bass, and an amount s pad on contngent nterests n pursuance to
the temporary ta ng order to be deposted, as provded by secton
241, as amended, the cash so deposted and utmatey turned over to
the State treasury s deductbe by an estate n process of admns-
traton as of the date when the ta commsson ssues ts certfcate
to the State comptroer.
If, n eu of depostng cash equa to the amount determned by
the temporary ta ng order, securtes of the estate are deposted
wth the ta commsson n accordance wth eecton gven by sec-
ton 241, as amended, the depost of such securtes s certany not
a payment of ta , for the statute provdes for a return of the secur-
tes when the ta upon the contngent transfer, as fnay determned
by the modfyng order, s n fact pad. In such cases the actua date
of payment of the ta by means of cash or check s the date as of
whch the deducton may be camed for edera ncome ta purposes,
rather than the date on whch the securtes were deposted.
It s necessary, however, to formuate a dfferent rue as to the
date as of whch the ta on the transfer of contngent nterests may
be taken as a deducton for edera ncome ta purposes, where the
estate keeps ts books of account on the accrua bass. Secton 23(c)
of the Revenue ct of 1928 specfcay provdes that estate, nhert-
ance, egacy, and successon ta es accrue on the due date thereof,
e cept as otherwse provded by the aw of the |ursdcton mposng
such ta es. Secton 222 of the New York ta aw, as amended by
chapter 476, Laws of New York, 1921, provdes n part as foows:
ccrua and payment of ta es. ta es Imposed by ths artce sha be
due and payabe at the tme of the transfer, e cept as heren otherwse pro-
Tded. Ta es upon the transfer of any estate, property or nterest theren
mted, condtoned, dependent or determnabe upon the happenng of any
contngency or future event by reason of whch the far market vaue thereof
can not be ascertaned at the tme of the transfer as heren provded, shaU
accrue and become due and payabe when the persons or corporatons bene-
fcay entted thereto sha come nto actua possesson or en|oyment
thereof.
It w be noted that secton 222 of the New York ta aw, whch
s quoted above, provdes that the ta upon the transfer of contngent
nterests accrues and becomes due and payabe when the persons
benefcay entted thereto sha come nto actua possesson or
en|oyment thereof. Ths provson of aw s st n effect and s
not changed by the provsons of sectons 230 and 241, as amended,
referred to heren, whch requre the depost of cash or securtes for
the payment of the ta . In genera, upon the happenng of the
contngency the persons entted to the estate whch s dependent
thereon come nto actua possesson or en|oyment thereof. t that
tme the ta upon the transfer of contngent nterests becomes due
and payabe and accrues.
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23 (c), rt. 154.
116
Referrng agan to secton 23(c) of the Revenue ct of 1928, t
s specfcay provded n that secton that estate, nhertance, egacy,
and successon ta es accrue on the due date thereof, e cept as other-
wse provded by the aw of the |ursdcton mposng such ta es.
The provsons of sectons 230 and 241, as amended, whch requre
the depost of cash or securtes or the furnshng of a bond to pay
the ta when t s fnay determned, are merey statutory provsons
to protect the nterests of the State and to guarantee the payment
of the ta as utmatey determned. s stated by the Unted States
Supreme Court n Saomon et a. v. State Ta Commsson:
The ta on the transfer of contngent remanders s not payabe unt
the death of the fe tenant the statue postpones unt the con-
tngency happens both the defnte assessment of the ta on the transfer of
the contngent remanders and the payment thereof. the ta In
respect to the contngent remanders s not payabe unt after the death of
the fe tenant. The temporary ta ng order, entered upon the testator s death,
s made soey to nsure that the ta so deferred w be pad when utmatey
assessed.
Thus the Unted States Supreme Court, n consderng the effect of
sectons 230 and 241, as amended, recognzed the fact that the ta
was not payabe unt the happenng of the contngency. Ths nter-
pretaton eads to the concuson that under the New York aw the
transfer ta mposed on contngent nterests becomes due and payabe
upon the happenng of the contngency. In other words, the due
date of the ta s the date as of whch the contngency happens.
s there appears to be no aw of the |ursdcton mposng the ta
whch provdes otherwse, the ta necessary accrues on the due
date n accordance wth secton 23(c) of the Revenue ct of 1928.
Ths vew s strengthened by the fact that secton 230 of the New
York ta aw, as amended, provdes that If appcaton for mod-
fcaton of the temporary ta ng order s not made wthn s months
after the happenng of any contngency or condton the ta as
fnay determned sha bear nterest at tre rate of 6 per centum per
annum from the date when such contngency or condton happened
to the date of the entry of the modfyng order.
To permt an estate n the process of admnstraton to accrue a
abty based upon a contngency whch may never happen woud
stretch the theory of accrua beyond the scope of that contempated
n Unted States v. nderson (269 U. S., 422 46 S. Ct., 131, T. D.
3839, C. . -, 179). In the opnon rendered by the Supreme
Court n that case t was stated n part as foows:
In a technca ega sense t may be argued that a ta does not accrue unt t
has been assessed and becomes due but t s aso true that n advance of the
assessment of a ta a the events may occur whch f the amount of the ta
and determne the abty of the ta payer to pay t Itacs supped.
The event whch estabshes the accrua date of transfer ta es
upon contngent nterests under the New York ta aw s the happen-
ng of the contngency whch, under the New York statutes referred
to above, f es the due date of the ta .
Wth respect to contngent abtes, the oard of Ta ppeas
has consstenty hed that such tems are not deductbe n computng
net ncome. ppea of Uvade Co., 1 . T. ., 932 ppea of Wm.
. Osth emer, 1 . T. ., 18 ston v. Commssoner, 4 . T. .,
1159 Covngton Cotton OU Co. v. Commssoner, 12 . T. ., 1018,
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117
23(k), rt. 201.
C. . III-1, 10 ppea of Thatcher Medcne Co., 3 . T. .,
154.)
Secton 230 of the New York ta aw was further amended by
chapter 549, Laws of New York, 1928, but the amendment contans
a mtaton as to the amount of ta mposed upon contngent trans-
fers and does not reate to the accrua date thereof.
In vew of the fact that secton 23(c) of the Revenue ct of 1928
provdes that estate, nhertance, egacy, and successon ta es accrue
on the due date thereof, ths offce s of the opnon that the transfer
ta es mposed upon the transfer of contngent nterests by the New
York ta aw shoud be accrued for edera ncome ta purposes as
of the date when the contngency happens.
C. M. Charest,
Genera Comse, ureau of Interna Revenue.
S CTION 23(e). D DUCTIONS ROM GROSS INCOM :
LOSS S Y INDI IDU LS.
rtce 171: Losses.
R NU CT O 192 8.
ppcabty of the wash saes provsons of secton 118 of
the Revenue ct of 1928 to a member of a stock e change who buys
and ses shares of stock or securtes ony on hs own account. (Sec
L T. 2523, page 145.
S CTION 23 (k). D DUCTIONS ROM GROSS
INCOM : D PR CI TION.
rtce 201: Deprecaton. I -21-4650
( so Secton 111, rtce 561.) I. T. 2537
R NU CT O 1928.
Where the trustee under a w s coectng ncome consstng
of nterest on bonds, dvdends on stocks, and rents from mproved
rea property whch s pad over to a fe benefcary, and the w
does not provde that the trustee make any aowance for depreca-
ton on the budngs n determnng the ncome dstrbutabe to the
fe benefcary, the atter w be entted to the deprecaton
aowance to the e cuson of the trustee, regardess of the fact
that profts were reazed durng the ta abe year from the sae
of securtes comprsng a porton of the corpus of the trust
whch profts are not dstrbutabe to the fe benefcary.
The bass for determnng deprecaton on the budngs com-
prsng a porton of the corpus of the trust s the far market vaue
of such budngs at the date of the death of the decedent.
In determnng the amount of gan or oss from the sae of any
of the budngs by the trustee, the bass of the budngs must be
decreased by the mount of the deductons for deprecaton whch
have snce ther acquston by the trust been aowabe n respect
of such budngs, even though such deductons have been aowabe
to the fe benefcary to the e cuson of the trustee.
dvce s requested wth respect to the ta abty for 1929 of
the trust created under the w of , of whch the M Company s
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23(k), rt. 201.
US
trustee, and the ta abty for the same year of the fe bene-
fcary, .
The M Company, trustee under the w of , who ded on Decem-
ber , 1926, s coectng the ncome, consstng of nterest on bonds,
dvdends on stock, and rents from varous parces of mproved rea
property, whch s dstrbuted to the fe benefcary, . The w
does not provde that the trustee make any aowance for depreca-
ton on the budngs n determnng the ncome dstrbutabe to the
fe benefcary.
The questons presented are (1) whether the benefcary w be
permtted to take as a deducton n determnng hs net ta abe
ncome for 1929 the amount of deprecaton sustaned on budngs
stuated on the rea property hed n trust, regardess of the fact
that the trustee reazed profts durng the year 1929 from the sae
of certan securtes whch comprsed a part of the corpus of the
trust, whch profts were not dstrbutabe to the fe benefcary (2)
f so, whether the bass for determnng the aowabe deprecaton
s the far market vaue of such budngs at the date of the death
of the decedent and (3) whether on the sae n 1929 of some or a
of the rea property the trustee shoud ad|ust the bass for deter-
mnng gan or oss by the deprecaton aowabe n respect of such
budngs, even though the deducton was aowabe to the fe bene-
fcary to the e cuson of the trustee.
Secton 23 of the Revenue ct of 1928 provdes that n computng
net ncome there sha be aowed as deductons:
(k) Deprecaton. reasonabe aowance for the e hauston, wear and tear
of property used n the trade or busness, ncudng a reasonabe aowance for
obsoescence. In the case of property hed by one person for fe wth remander
to another person, the deducton sha be computed as f the fe tenant were
the absoute owner of the property and sha be aowed to the fe tenant.
In the case of property hed In trust the aowabe deducton sha be apportoned
between the ncome benefcares and the trustee n accordance wth the pertnent
provsons of the nstrument creatng the trust, or, n the absence of such
provsons, on the bass of the trust Income aocabe to each.
Under the above-quoted provsons of the statute, the aowabe
deducton for deprecaton n the case of property hed n trust s to
be apportoned between the ncome benefcares and the trustee n
accordance wth the pertnent provsons of the w, deed, or other
nstrument creatng the trust, or, n the absence of such provsons,
on the bass of the trust ncome whch s aocabe to the trustee and
the benefcares, respectvey. Inasmuch as the w of the decedent
n the nstant case dd not contan any provson wth respect to
makng any aowance for deprecaton of the budngs, and under
the provsons of the w the ncome from such property computed
wthout regard to deprecaton s to be dstrbuted to the fe benef-
cary, such benefcary w be entted for 1929 to the deprecaton
aowance to the e cuson of the trustee, regardess of the fact that
profts were reazed durng the ta abe year from the sae of
securtes comprsng a porton of the corpus of the trust whch
profts are not dstrbutabe to the fe benefcary.
The bass for determnng deprecaton on the budngs comprs-
ng a porton of the corpus of the trust s the far market vaue of
such budngs at the date of the death of the decedent. or such
purpose, the vaue of the budngs as apprased for the purpose of
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119
25, rt. 295.
the edera estate ta s to be deemed to be ther far market vaue at
the date of the death of the decedent. (See sectons 114(a) and
113(a)5 of the Revenue ct of 1928 and artces 611 and 596 of
Reguatons 74.)
In determnng the amount of the gan or oss from the sae of
any of the budngs by the trustee, the t ass of the budngs must be
decreased by the amount of the deductons for deprecaton whch
have snce ther acquston by the trust been aowabe n respect of
such budngs, even though such deductons have been aowabe to
the fe benefcary to the e cuson of the trustee. (See secton
111(b) of the Revenue ct of 1928.)
S CTION 25. CR DITS O INDI IDU L
G INST N T INCOM .
rtce 295: Date determnng e empton. I -16-4603
Mm. 3800
Method of computng the persona e empton where the status
of the ta payer changes durng the ta abe year.
Treasury Department,
Offce of Commssoner of Interna Revent|e,
Washngton, D. C, March 29, 1980.
Coectors of Interna Revenue, Interna Revenue gents n Charge,
and Others Concerned:
Reference s made to subsectons (c), (d), and (e) of secton 25 of
the Revenue ct of 1928, whch are as foows:
(c) Pergona e empton. In the case of a snge person, a persona e emp-
ton of 1,500 or n the case of the head of a famy or a marred person vng
wth husband or wfe, a persona e empton of 3,500. husband and wfe
vng together sha receve but one persona e empton. The amount of such
persona e empton sha be 3,500. If such husband and wfe make separate
returns, the persona e empton may be taken by ether or dvded between
them.
(d) Credt for dependents. 400 for each per|son (other than husband or
wfe) dependent upon and recevng hs chef support from the ta payer f such
dependent person s under 18 years of age or s ncapabe of sef-support because
mentay or physcay defectve.
(e) Change of status.
(1) The credt for dependents sha be determned by the status of the ta -
payer on the ast day of hs ta abe year.
(2) The persona e empton aowed by subsecton (c) of ths secton sha,
n case the status of the ta payer changes durng hs ta abe year, be the sum
of an uuount whch bears the same rato to 1,500 as the number of months
durng whch the ta payer was snge bears to 12 months, pus an amount whch
bears the same rato to 3,500 as the number of months durng whch the ta -
payer was a marred person vng wth husband or wfe or was the head
of a famy bears to 12 months. or the purposes of ths paragraph a frac-
tona part of a month sha be dsregarded uness t amounts to more than
haf a month, n whch ease It sha be consdered as a month.
(3) In the case of an ndvdua who des durng the ta abe year, the per-
sona e empton and the credt for dependents sha be determned by hs status
nt the tme of hs death, and n such case fu credts sha be aowed to the
survvng spouse, f any, accordng to hs or her status at the cose of the
ta abe year.
Reference s aso made to artces 291 to 295, ncusve, of Regua-
tons 74 nterpretatve of the above-quoted provsons of the ct.
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25, rt. 295.
120
Under the above-quoted provsons of the ct and the artces of
Reguatons 74 nterpretatve thereof, t s to be borne n mnd that
(1) In no case may a husband and wfe who are vng together
on the ast day of the ta abe year receve a greater |ont persona
e empton than 3,500
(2) n ndvdua who des durng the ta abe year s entted
to a persona e empton of 1,500 or 3,500 accordng to hs or her
status at the tme of death
(3) Where an ndvdua des durng the ta abe year, the survv-
ng spouse s entted to fu credts accordng to hs or her status at
the cose of the ta abe year. Ths may be ustrated by the foow-
ng e ampes:
ampe 1. , the husband, and , the wfe, were marred on
anuary 1 and ved together unt December 1, the date of s death.
s status was that of a snge person on December 31, the cose of
the ta abe year. Regardess of whether s ncome was suffcent
to requre the fng of a return n her behaf, the persona e empton
of s 3,500 and the persona e empton of , the husband, woud be
that of a snge person, or 1,500.
ampe 2. , the husband, and , the wfe, were marred on
anuary 1 and ved together unt anuary 31, the date of s death.
remaned snge unt November 1, on whch date he marred C,
and he was vng wth hs wfe, C, on December 31. Regardess of
whether s ncome was suffcent to requre the fng of a return n
her behaf, the persona e empton of s 3,500, and nasmuch as
was vng wth hs wfe, C, on December 31, hs persona e emp-
ton aso woud be 3,500.
(4) The status of a ta payer under secton 25 of the ct may be
ether the 1,500 status n the case of a snge person or a marred
person not vng wth husband or wfe, or the 3,500 status n the
case of a marred person vng wth husband or wfe or the head of
a famy. marred person vng wth husband or wfe who by
reason of death or separaton becomes a snge person or a marred
person not vng wth husband or wfe, changes from the 3,500
status to the 1,500 status. marred person vng wth husband
or wfe who by reason of death or separaton ceases to be a marred
person vng wth husband or wfe but s the head of a famy does
not change hs status, nasmuch as both before and after the death or
separaton he was n the 3,500 status. In the case of a snge person
who marres a person who s the head of a famy, the persona e emp-
ton of the snge person pror to marrage s merged n that of the
head of the famy. These statements may be ustrated by the
foowng e ampes:
am.pe 1. was head of a famy from anuary 1 to une 1, on
whch date he marred a snge person. The |ont persona e emp-
ton n ths case s 3,500.
ampe 2. The head of a famy ceased to have that status on
ne 1 by reason of the death of hs dependent. e was marred
to a snge person on uy 1. The |ont persona e empton n ths
case s 3,458.33 that s, 11/12 of 3,500 for the perod durng whch
the 3,500 status e sted, pus 1/12 of 1,500 for the husband durng
the month that he was snge, pus 1/12 of 1,500 for the wfe durng
the month that she was snge and her e empton was not merged n
that of her husband.
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121
31, rt. 312.
The provsons of ths mmeograph, e cept as to amounts, are
equay appcabe under the Revenue ct of 1924 and the Revenue
ct of 1926. Mmeograph 3288, dated ebruary 28, 1925 (C. .
I -I, 40) and a other rungs nconsstent wth the prncpes
heren ad down are to that e tent modfed.
Inqures regardng ths mmeograph or procedure n connecton
therewth shoud refer to the number of the mmeograph and the
symbos IT: : RR.
Robt. . Lucas, Commssoner.
P RT III. CR DITS G INST T .
S CTION 31. RN D INCOM CR DIT.
rtce 312: Defntons and mtatons. I -18-4617
Mn. 3802
Determnaton of earned ncome on professona fees under the
Revenue ct of 1928.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C, pr 11, 1930.
Coectors of Interna Revenue, Interna Revenue gents n Charge,
and Others Concerned:
Under secton 31 of the Revenue ct of 1928 an ndvdua s
entted to cam aganst the ta computed on hs net ncome a credt
of 25 per cent of the ta whch woud be payabe f hs earned net
ncome consttuted hs entre net ncome. arned ncome under the
statute means wages, saares, professona fees, and other amounts
receved as compensaton for persona servces actuay rendered.
Under e stng rungs t has been hed that professona fees n
order to consttute earned ncome must be receved as compensaton
for persona servces actuay rendered, and n some nstances ta -
payers performng professona servces who empoy assstants n
ther offces have been dened the rght to ncude a of the pro-
fessona fees up to the statutory mt of 30,000 as earned ncome.
I Mmeograph 3471 (C. . -2, 16), the foowng statement
appears:
If the busness requres ony a nomna capta and the ncome s derved
prncpay from the persona servces of the ta payer, as a doctor or awyer,
the entre profts, not e ceedng 20,000 30,000 under Revenue ct of 192S ,
may be consdered as earned ncome. If a ta payer s engaged n the
practce of a professon on hs own account and empoys an assstant over
whom he e ercses ony a perfunctory supervson, the proft resutng from the
abor of such assstant can not be regarded as earned ncome by the empoyer
uness hs tota net ncome s ess than 5,000.
It was not ntended to deny the ta payer the rght to consder the
entre amount receved as professona fees as earned ncome f the
ta payer s engaged n a professona occupaton, such as a doctor
or a awyer, even though the ta payer empoys assstants who per-
4090 30 9
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41, rt. 321.
122
form part or a of the servces provded the cents or patents are
those of the ta payer and ook to the ta payer as the responsbe
person n connecton wth the servces performed.
Ths mmeograph w aso appy to ncome receved as profes-
sona fees from a professona partnershp, even though the partner-
shp empoys assstants who work on a saary bass, provded the
cents or patents are those of some actve member of the partner-
shp and ook to some actve member of the partnershp as respon-
sbe for the servces performed.
Ths mmeograp shoud not be construed as appyng to any
trade or busness n whch both persona servces and capta are
matera ncome-producng factors.
The provsons of ths mmeograph are aso appcabe to the
determnaton of the earned ncome credt on amounts receved as
professona fees under the provsons of secton 209 of the Revenue
cts of 1924 and 1926.
Mmeograph 3471 s amended n so far as t s nconsstent wth
ths mmeograph.
ny nqures made n regard to ths mmeograp shoud refer
to the number of the mmeograph and the symbos IT: : RR.
Robt. . Lucas, Comm totwr.
P RT I . CCOUNTING P RIODS ND M T ODS O CCOUNTING.
S CTION 41 G N R L RUL .
rtce 321: Computaton of net ncome.
I - -4512
I. T. 2520
R NU CT O 1 2 .
The foowng rates of e change are accepted by the ureau of
Interna Revenue as the current or market rates of e change pre-
vang as of December 31, 1929:
Country or cty.
ustra.
egum
ugara --
Czechosovaka..
Denmark
ok and
nand
rance
Germany...
Greece
nungary
Itay...
Netherands
Norway
Poand
Portuga..
Rumana
Span -
Sweden
Monetary uut.
Schng...
Iega
Lev
rone
rone
Pound
Markka
ranc
Recsmark
Drachma...
Pengo
Lra
Guder
rone..
Zoty
scudo
Leu
Peseta
aue n
terms of
Cnted
States
money.
0. 140680
. 139000
. 007240
.029801
.388120
4.881100 II
.025170
. 030302
.238044
.013000
. 175187
.052340
.403491
.288102
.112083
.044983
.005001
. 133805
( ountry or cty.
Swtzerand.
Yugosava.
ongkong..
Chna
Chna
Chna
Inda.
apan
Sngapore...
Canada.
Ctrba
Moco
rgentna..
rgentna..
raz
Che
Uruguay
Coomba...
M . : : ,ry unt.
ranc
Dnar
Doar
Shangha tae..
Me can doar
Yuan doar
Rupee
Yen.
Doar
Doar
Peso -.
Peso
Peso (god).
Peso (paper)...
Mres
Peso
Peso
Peso
aue n
terms of
Cnted
States
0 194244
.017729
.407142
.514842
.371562
. 389180
.304835
. mum
.500000
. .ST7
.478300
. ..so. r.
.412735
.10903 )
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123
44, rt. 351.
rtce 321: Computaton of net ncome. I -9-4543
I. T. 2526
R NU CT OP 1928.
The ta payer s fsca year ends ugust 31, and ts accounts are
kept on a cash recepts and dsbursements bass. It pays the
borrower 94 n cash on a 100 note payabe 10 per month. t the
end of the fsca year fve payments have been made.
ed, eac monthy payment of 10 represents a return of 9.40
n prncpa and reazed dscount of 60 cents. The dscount shoud
be reported rataby over the perod covered by the note.
dvce s requested n the case of the M Company reatve to the
proper method of treatng dscount appcabe to oans made by
that company whch are evdenced by notes payabe n nstaments.
The company has foowed the practce of carryng the entre ds-
count or nterest on each note nto ts proft and oss account as
ncome at the tme the oan s made. The company s method of
dong busness s typfed by the recept of a 100 note whch s pay-
abe over a perod of 10 months at the rate of 10 per month and on
whch the company pad the borrower 94 n cash. The note at the
cose of the ta payer s fsca year, namey, ugust 31, has fve
months to run before maturty. The ta payer keeps ts books on
the cash recepts and dsbursements bass.
It s hed that the dscount n queston shoud be reported rataby
by the company over the perod covered by the note. In other
words, each monthy payment of 10 shoud be consdered as con-
sstng of prncpa n the amount of 9.40 and of reazed dscount
n the amount of 0.60. (Cf. I. T. 1650, C. . II-, 48 8. M. 3820,
C. . I -2, 32 G. C. M. 5060, C. . II-2, 64 and Shafpa Reaty
Co. v. Commssoner, 8 . T. ., 283.)
S CTION 44. INST LLM NT SIS.
rtce 351: Sae of persona property on I -4-4513
nstament pan. I. T. 2521
R NU CT O 1928.
On anuary 1, 15)28, the busness of the O Company, a copartner-
shp, was taken over by the M Company, a corporaton. The
copartnershp reported ts ncome on the accrua bass, a the
profts appcabe to ts saes beng reported n ther entrety for
the year n whch the saes were made. Whe most of Its saes
were made on the nstament pan, some were made on open credt
and for cash. mong the assets transferred were 3.5 doars of
accounts recevabe (both nstament and open credt accounts),
and of ths amount 2a doars was coected by the M Company n
1928.
ed, the M Company, athough t eected to rewrt ts net ncome
on the nstament bass for 1928 and subsequent ta abe years, s
not requred under the provsons of secton 44(e) of the Revenue
ct of 1928 to take up as 1928 ncome any porton of the 2 doars
coected by t n 1928 wth respect to the 3.5-e doars accounts
recevabe.
dvce s requested as to the appcabty of secton 44(c) of the
Revenue ct of 1928 n accountng for payments receved by the M
Company n 1928 wth respect to certan accounts transferred to t
by the O Company on anuary 1, 1928.
G
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44, rt. 351.1
124
The M Company, a corporaton, was organzed on anuary 1,
1928, for the purpose of takng over the busness formery conducted
by the O Company, a copartnershp, engaged n seng furnture at
reta. Most of the saes of the O Company were made on the n-
stament pan, athough some of them were made on open credt and
for cash. The O Company ref|orted ts ncome on the accrua
bass, n accordance wth the method of accountng empoyed n
keepng ts books. Consequenty, a the profts appcabe to ts
saes were reported n ther entrety for the year n whch such saes
were made. On anuary 1, 1928, the partners transferred the assets
of the O Company to the M Company n e change for a the stock
of the M Company. mong the assets transferred by the partners
there were 3.5a doars of accounts recevabe (both nstament and
open credt accounts), and of ths amount 2 doars was coected by
the M Company n 1928.
Inqury s made whether under the provsons of secton 44(c) of
the Revenue ct of 1928 the M Company, havng eected to report
ts net ncome on the nstament bass for 1928 and subsequent ta -
abe years, must take up as 1928 ncome a porton of the 2 doars
coected by t n 1928 wth respect to the 3.5a doars accounts
recevabe.
Secton 44(c) of the Revenue ct of 1928 provdes as foows:
(c) Change from accrua to nstament oass. If a ta payer entted to the
benefts of subsecton (a) eects for any ta abe year to report hs net ncome
on the nstament bass, then n computng hs ncome for the year of change
or any subsequent year, amounts actuay receved durng any such year on
account of saes or other dspostons of property made n any pror year sha
not be e cuded.
Upon the foregong statement of facts t s hed that secton 44(c)
of the 1928 ct s not appcabe to any porton of the 3.5a doars
accounts recevabe upon whch payments were made subsequent to
anuary 1, 1928, as the M Company dd not make the saes gvng
rse to the accounts recevabe and s a separate ta abe entty from
the company whch made the saes. The accounts recevabe ac-
qured by the M Company were acqured upon organzaton as part
of ts orgna capta. There was no change by the M Company
from the accrua to the nstament bass of reportng ncome.
ccordngy, the M Company, athough t eected to report ts
net ncome on the nstament bass for 1928 and subsequent ta abe
years, s not requred under the provsons of secton 44(c) of the
Revenue ct of 1928 to take up as 1928 ncome any porton of the
2a doars coected by t n 1928 wth respect to the 3.5a doars
accounts recevabe.
rtce 351: Sae of persona property on nstament pan.
R NU CT O 192S.
cuson n computng ncome for the year of change and a
subsequent years of amounts receved on account of saes or e changes
of property made n years pror to change to nstament bass n the
case of a ta payer quafyng under secton 705 of the Revenue ct
of 1928. (See G. C. M. 8144, page 173.)
G
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125
51, rt. 381.
rtce 355: Gan or oss upon dsposton of I -1-4489
nstament obgatons. I. T. 2515
R NU CT O 1928.
The decedent ded subsequent to the enactment of the Revenue
ct of 1928, ownng nstament obgatons receved n connecton
wth the sae of rea estate, the proft from whch he had eected
to report on the nstament bass and on whch he had reported
ony a porton of the proft to be reazed. Upon hs death the n-
stament obgatons were transmtted to the e ecutor of hs estate.
ed, the provsons of secton 44(d) of the Revenue ct of
1928 are appcabe to the transmsson of the nstament obga-
tons upon the death of the decedent. The gan or oss resutng
from the transmsson of the nstament obgatons, computed n
accordance wth the method prescrbed n the foregong secton,
shoud be ncuded n the decedent s return for the ta abe year n
whch hs death occurred.
dvce s requested as to the proper treatment for ncome ta pur-
poses of nstament obgatons orgnay receved by and upon
hs death transmtted to the e ecutor of hs estate.
ded subsequent to the enactment of the Revenue ct of 1928,
ownng nstament obgatons receved n connecton wth the sae
of rea estate, the proft from whch he had eected to report on the
nstament bass and on whch he had reported ony a porton of the
proft to be reazed.
The provsons of secton 44(d) of the Revenue ct of 1928 whch
pertan to the queston at ssue are as foows:
If an nstament obgaton s satsfed at other than ts face vaue or ds-
trbuted, transmtted, sod, or otherwse dsposed of, gan or oss sha resut
to the e tent of the dfference between the bass of the obgaton and
(2) n case of a dstrbuton, transmsson, or dsposton otherwse than by
sae or e change the far market vaue of the obgaton at the tme of such
dstrbuton, transmsson, or dsposton. The bass of the obgaton sha be
the e cess of the face vaue of the obgaton over an amount equa to the ncome
whch woud be returnabe were the obgaton satsfed In fu.
The above-quoted provsons of secton 44(d) of the statute are
hed to be appcabe to the transmsson of the nstament obga-
tons n queston upon the death of . In ths connecton, see page
24 of the report of the Commttee on nance of the Senate on the
nterna revenue b of 1928.
ccordngy, the gan or oss resutng from the- transmsson of
the nstament obgatons upon the death of the decedent, computed
n accordance wth the method prescrbed n secton 44(d) of the
Revenue ct of 1928, shoud be ncuded n the decedent s return for
the ta abe year n whch hs death occurred.
P RT . R TURNS ND P YM NT O T .
S CTION 51. INDI IDU L R TURNS.
rtce 381: Indvdua returns. IN-18-4618
I. T. 2535
R NU CT O 1928.
and hs wfe fed a |ont return on ebruary 4, 1929, for the
caendar year 1928. Separate returns were subsequenty fed by
and hs wfe on ebruary 20, 1929.
ed, that snce the separate returns were fed before March 15,
1929, they shoud be accepted as propery substtuted for the |ont
return prevousy fed. I. T. 2367 (C. . I-2, 73) revoked.
G
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53, rt. 402.
126
dvce s requested as to whether separate returns fed by and
hs wfe for the year 1928 may be accepted as propery substtuted for
a |ont return for that year prevousy fed by them. The |ont
return was fed on ebruary 4, 1929, and the separate returns were
fed on ebruary 20, 1929.
t the tme the |ont return was fed there was pendng n the
ureau the queston whether a husband and wfe domced n Ca-
forna shoud be aowed to dvde ncome from communty property
acqured on and after uy 29, 1927, and report such ncome on the
bass of separate returns. , upon nqury, receved the nformaton
that no change had been made n the prevous practce of not permt-
tng such ncome to be dvded, whereupon he and hs wfe fed a |ont
return. Wthn a week after sad |ont return was fed he was n-
formed that the ureau had ssued ts rung (I. T. 2457, C. .
III 1, 89) permttng such ncome to be dvded. Upon recept of
offca confrmaton of the rung, and hs wfe on ebruary 20,
1929, fed separate returns, each reportng one-haf of the ncome
from communty property acqured on and after uy 29, 1927.
fter carefu consderaton the ureau has decded that ths case
s governed by the decson n Grant v. Rose (24 ed. (2d), 115),
whch arose under secton 223 of the Revenue ct of 1921. Secton
51(b) of the Revenue ct of 1928 contans substantay the same
provsons wth respect to returns of husbands and wves as sad
secton 223. The court n Grant v. Rose sad n part that:
On the other hand, there s nothng n the ct to e tend the rght of choce
beyond the tme for makng the returns. It s not unreasonabe to cam a
rght to substtute one form of return for the other up to the ast day for
makng returns, hut, after that, and especay after the returns have been
revewed and assessments made, there are strong admnstratve reasons for
not permttng the upsettng of the whoe bass of cacuaton. I hod
that the statutory rght of choce s e hausted on e praton of the tme for
fng returns. There s no rght, and t seems to me no proprety, n aowng
any change ater to the dsadvantage of other casses of ta payers.
Ths decson was favoraby commented upon by the Crcut Court
of ppeas for the Seventh Crcut n utfoph v. Commssoner (29
ed. (2d), 695), and may now be taken to have been accepted by the
ureau as a modfcaton of the rue announced by the oard of Ta
ppeas n R. Dovmes, |r., v. Commssoner (5 . T. ., 1029).
It s hed, therefore, that snce the separate returns n the nstant
case were fed before March 15, 1929, the ast da|7 for fng returns
for the caendar year 1928, they shoud be accepted as propery sub-
sttuted for the |ont return prevousy fed. I. T. 2367, beng ncon-
sstent wth the (.-(|ucuson heren reached, s revoked.
S CTION 53. TIM ND PL C OR
ILING R TURNS.
rtce 402: tensons of tme for fng
returns.
I -3-4506
Mn. 378 )
Instructons to coectors reatve to e tensons of tme for fng
ncome ta returns.
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127
55, rt. 421.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C, anuary 10, 1930.
Coectors of Intern-o Revenue, Interna Revenue gents n Charge,
and Others Concerned:
Reference s made to Mmeograph 3759, dated October 9, 1929
(C. . III-2, 123), contanng nstructons to coectors rea-
tve to e tensons of tme for fng ncome ta returns.
The nstructons so ssued were ntended, prmary, for gudance
n the consderaton by the coectors of appcatons for e tensons
of tme where the ta payers nterested had faed to make every
reasonabe effort to fe returns on tme. In short, the mmeograph
was ntended to prevent the grantng of e tensons of tme n those
cases where t was reasonaby possbe for the ta payer to avod the
need thereof. owever, t was not ntended that the appcaton of
ths rue shoud resut n the adopton by the ureau of an e treme
poston. In the admnstraton of the authorty conferred upon
coectors by Mmeograph 3361 (C. . I -2, p. 69) and artce 402 of
Reguatons 74, for grantng e tensons of tme for fng returns,
coectors shoud e ercse due dscreton n denyng requests for such
e tensons and, therefore, shoud act favoraby upon those requests
where the reasons advanced are, n hs opnon, mertorous.
In e ercsng the prvege afforded them to secure e tensons of
tme for fng returns, ta payers whose requests are granted w,
n accordance wth Mmeograph 3361, be requred to fe, on or
before the due date of the return, a tentatve return accompaned
wth at east one-fourth of the ta estmated to be due and w be
charged wth nterest at the rate of 6 per cent per annum on any
defcency n the unpad nstaments of ta from the orgna due
date thereof unt pad.
ueres regardng ths mmeograph w refer to the number of
the mmeograph and the symbos IT: : RR.
Robt. . Lucas, Commsshner.
S CTION 55. PU LICITY O R TURNS.
rtce 421: Inspecton of returns. I -18-4625
T. D.4291
mendment to Treasury Decson 385C C. . -, 106 to permt
nsW ton of returns y Department of Commerce for statstca
purposes.
Treasury Department,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
Paragraph 13 of Treasury Decson 3856 (beng reguatons pre-
sented by the Secretary and approved by the Presdent, as amended,
appcabe to the nspecton of returns under the Revenue ct of
1928 and pror Revenue cts), s amended by addng at the end
thereof the foowng new sentence:
The Secretary of the Treasury, upon suc condtons and mtatons as e
may mpose, s authorzed to permt the nspecton of returns, upon the wrtten
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103, rt. 525. 128
request of the Secretary of Commerce, by such offcers and empoyees as the
Secretary of Commerce may desgnate, for statstca purposes.
Ogden L. Ms,
ctng Secretary of the Treasury.
pproved pr 8, 1930.
erbert oover,
The Whte ouse.
CUTI ORD R.
INSP CTION O T R TURNS Y D P RTM NT O COMM RC OR ST TISTIC L
PURPOS S.
Pursuant to the provsons of secton 55 of the Revenue ct of
1928, and secton 257 of the Revenue ct of 1926, t s hereby ordered
that returns may be open to nspecton by offcers and empoyees of
the Department of Commerce, for statstca purposes, n accordance
and upon compance wth the amendment, bearng even date here-
wth, to the rues and reguatons prescrbed by the Secretary of the
Treasury and approved by the Presdent, bearng date of pr 13,
192G, as amended.
erbert oover.
The Whte ouse,
pr 8, 030.
SU TITL C SUPPL M NT L PRO ISIONS.
SUPPL M NT . R T S O T .
S CTION 103. MPTIONS ROM T ON
CORPOR TIONS.
rtce 525: udng and oan assocatons I -26-4679
and cooperatve batks. G. C. M. 8090
R NU CT O 1928 ND PRIOR R NU CTS.
The prncpe announced In Unte States v. The Cambrdge
Loan urnng Co. (278 U. S., 55, T. I). 4252, C. . II-2, 290)
does not appy to a rura oan and savngs assocaton organzed
under the aws of Indana.
n opnon s requested as to whether the M Rura Loan and
Savngs ssocaton s e empt from ta aton as a domestc budng
and oan assocaton under secton 103(4) of the Revenue ct of
1928 and the correspondng sectons of pror Revenue cts.
The aws of the State of Indana, under whch ths assocaton was
ncorporated, n one statute authorze the organzaton of budng
and oan assocatons and n another statute authorze the organza-
ton of rura oan and savngs assocatons. The assocaton n the
nstant case was organzed under the atter statute, whch provdes
that such assocatons sha have and may e ercse the rghts, powers,
and prveges granted under that statute, and aso those of a
domestc budng and oan assocaton organzed under the aws
of that State.
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129
111, rt. 561.
In the case of Unted States v. The Cambrdge Loan udng
Co. the court hed n substance that a budng and oan assocaton
organzed pursuant to and operated n accordance wth the aws
of a State (and after December 31, 1920, makng substantay a
ts oans to members) s a domestc budng and oan assocaton
entted to e empton under secton 231(4) of the Revenue cts of
1918 and 1921.
Whe rura oan and savngs assocatons have some of the charac-
terstcs of budng and oan assocatons, they obvousy are not
organzed or operated e cusvey as budng and oan assocatons,
but are. under the statutes of the State of Indana, treated as organ-
zatons separate and dstnct from budng and oan assocatons.
Contro of the organzaton s by statute paced n the hands of
guaranty stockhoders, and such stockhoders are entted to receve
preferenta treatment n the dstrbuton of profts and, sub|ect to
cams of credtors, are entted, upon dssouton, to the surpus
created.
Wth respect to the common stock, the statute provdes:
The shares of common stock sha he the same as shares of stock n sad
domestc budng and oan assocatons, e cept that sad shares heren are
nonrotnf/ and the hoder or owner has no abty thereon after the par vaue
s pad nto the assocaton, and the manner of payment may be as provded
and cassfed n the by-aws of the assocaton the guaranty stockhoders In
the assocaton sha be |onty and severay abe n addton to the par vaue
of ther guaranty stock, n a sum equa to the amount of ther severa hodngs
of that stock to pay any unsatsfed debt or abty of the assocaton after a
the assets and every other resource of the assocaton sha be e hausted.
Itacs supped.
In vew of the fact that rura oan and savngs assocatons are not
mutua n ther nterna admnstraton (the guaranty stockhoders
beng e cusve n contro) and are not mutua n the dstrbuton of
profts (the dstrbuton to common stockhoders beng mted to a
f ed rate of nterest, whereas guaranty stockhoders are entted to a
profts after deductng therefrom e penses, osses, and amounts
credted to surpus), and snce such assocatons are not organzed as
budng and oan assocatons under the State statute, ths offce
s of the opnon that the prncpe of The Cambrdge Loan ud-
ng Co. case does not appy to such organzatons.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
SUPPL M NT . COMPUT TION O N T INCOM .
S CTION 111. D T RMIN TION O MOUNT
O G IN OR LOSS.
rtce 5G1: Determnaton of the amount of I -15-4597
gan or oss. I. T. 2533
R Nr CT O 1928 ND TRIOR R NU CTS.
I. T. 2510 see on page 2681, In effect hodng that a ta payer
n determnng the pun or oss arsng from the sae of hs persona
resdence, contnuousy occuped by hm as such, s requred to
reduce the cost of the property, or the far market vaue as at
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111, rt. 561.
130
March 1, 1913, by the deprecaton sustaned s appcabe ony
under the Revenue cts of 1921 and pror Revenue cta. The
ad|ustments to be made to the bass of property n computng the
amount of gan or oss from ts sae or other dsposton under the
Revenue ct of 1924 and subsequent Revenue cts are e pressy
prescrbed n those cts.
n opnon as been requested as to the scope of I. T. 2516, revok-
ng Offce Decson 600 (C. . 3, 46) and n effect hodng that a
ta payer n determnng the gan or oss arsng from the sae of hs
persona resdence, contnuousy occuped by hm as such, s re-
qured to reduce the cost of the property or ts far market vaue as
at March 1. 1913, by the deprecaton sustaned.
I. T. 2516 appes ony to the computaton of gan or oss arsng
from the sae of a ta payer s persona resdence n years controed
by the Revenue ct of 1921 or pror Revenue cts. The ad|ustments
to be made to the bass of property n computng the amount of gan
or oss from ts sae or other dsposton under the Revenue ct of
1924 and subsequent Revenue cts are e pressy prescrbed n those
cts (but not n the Revenue ct of 1921 or pror Revenue cts), so
that under the 1924 and subsequent cts a that s necessary or
permssbe s to foow the e press provsons of the appcabe
statute. See secton 202(b) of the Revenue cts of 1924 and 1926
and secton 111(b) of the Revenue ct of 1928.
Under the Revenue ct of 1921 and pror Revenue cts the nec-
essary ad|ustments to the bass of property n computng gan or oss
from ts sae or other dsposton must be made n accordance wth
fundamenta prncpe wth no gudance from the provsons of the
Revenue cts themseves. (See Unted States v. Chares . Ludey,
274 U. S., 295, T. D. 4046, C. . I-2, 157.) The hodng of Offce
Decson 600 that, nasmuch as no deducton for deprecaton of
the persona resdence of a ta payer s aowabe n hs ncome ta
returns, no ad|ustment to the gan or oss bass of the property on
account of such deprecaton need be made, s a non sequtur. The
concuson by no means foows from the premse stated.
The reason a ta payer s not aowed a deprecaton deducton on
a persona resdence s that such deprecaton represents a persona
or vng e pense, a type of tem whch the Revenue cts provde
sha not be aowed as a deducton. It s manfest that the dsa-
owance of a deprecaton deducton on a persona resdence s not
due to the fact that such property does not deprecate. If a ta -
payer purchases a vauabe resdence and ves n t unt the prop-
erty has been argey consumed by deprecaton, there s no reason
or ogc for aowng hm, when he ses what remans of the prop-
erty, to cam a oss computed on the theory that he-s seng the
same vauabe property whch he purchased years before. s a mat-
ter of fact he s not seng what he purchased but ony what re-
mans thereof. Therefore, such a ta payer has no rght on funda-
menta prncpe to cam as a gan or oss bass the cost of that
whch he once purchased but whch has been used up and e -
hausted by use durng the course of years. If no ad|ustment were
made to the gan or oss bass of resdenta property on account
of the deprecaton thereof whe used as a resdence, the effect
woud be to aow a ta payer to deduct n the year of sae the very
amounts whch were dsaowed as deprecaton n pror years be-
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131
113, rt. 594.
cause they represented persona or vng e penses of the ta payer.
The ta ng statutes, n the absence of e press provsons to the
contrary, shoud not be construed so as to aow a ta payer n effect
to deduct for ncome ta purposes hs accumuated persona and
vng e penses n the year he ses hs resdence, when the aw
ceary prohbts the annua deducton of such persona or vng
e penses as they are ncurred.
rtce 561: Determnaton of the amount of gan
or oss.
R NU CT O 1928.
Determnaton of the amount of gan or oss from the sae of
mproved rea property by a trustee under a w where the deduc-
tons for deprecaton n respect of the budngs on the property
were aowabe to a fe benefcary to the e cuson of the trustee.
(See I. T. 2537, page 117.)
S CTION 113. SIS OR D T RMINING
G IN OR LOSS.
rtce 594: Property acqured by transfer n I -20-4644
trust after December 31, 1920. I. T. 253C
R NU CT O 1928.
The bass of property acqured by a transfer n trust after
December 31, 1920, wthout a vauabe consderaton, s the cost
of the property to the grantor, f cost s hs bass, and not the
vaue as of the date of transfer n trust. The words ncreased
n the amount of gan or decreased n the amount of oss recog-
nzed to the grantor upon such transfer, etc., contaned n secton
113(a)3 of the Revenue ct of 1928, appy to a stuaton where
property Is transferred n trust for a vauabe consderaton.
Under such crcumstances the e cess of the consderaton receved
for the transfer over the cost or other bass of the property to
the grantor shoud be used to ncrease the bass of the property
acqured and vce versa.
n e panaton has been requested of the mport of secton 113 (a)3
of the Revenue ct of 1928, whch provdes:
Transfer n tru.t after December 31, 1930. If the property was acqured
:fter December 31, 1920, by a transfer n trust (other than by a transfer
n trust by a bequest or devse) the bass sha be the same as t woud be
n the hands of the grantor, ncreased n the amount of gan or decreased
n the amount of oss recognzed to the grantor upon such transfer under
the aw appcabe to the year n whch the transfer was made.
Specfcay, advce s desred as to whether the bass to be used
by the trust s the cost of the property to the grantor or the vaue
of the property as at the date t s transferred to the trust. dvce
s aso desred as to the sgnfcance of the words ncreased n the
amount of gan or decreased n the amount of oss recognzed to
the grantor upon such transfer under the aw appcabe to the year
n whch the transfer was made.
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113, rt. 595.
132
It s the opnon of ths offce that the bass of property acqured
by a transfer n trust after December 31, 1920, wthout a vauabe
consderaton, s the cost or other bass whch the property woud
have had n the hands of the grantor had no transfer n trust been
made. In other words, the bass of the property acqured s the
cost of the property to the grantor, f cost s hs bass, and not the
vaue as of the date of transfer n trust. The words, ncreased
n the amount of gan or decreased n the amount of oss recognzed
to the grantor upon such transfer, etc., appy to a stuaton where
property s transferred n trust for a vauabe consderaton. Under
such crcumstances the e cess of the consderaton receved for the
transfer over the cost or other bass of the property to the grantor
shoud be used to ncrease the bass of the property acqured and
vce versa.
rtce 595: Property acqured by gft or trans- I 1 1514
fer n trust on or before December 31, 1920. G. C. M. 7373
R NU CT O 1928.
y the terms of the w of C, who ded une 19, 1921, he e er-
csed a power of appontment over certan property, dvdng the
property Into as many shares as there were grandchdren of the
testator then vng, to be dstrbuted to them outrght f over the
age of 25 years and to be hed n trust for ther beneft unt reach-
ng the age of 25 years f under that age. The trust res was
turned over to the trustees ebruary 23, 1922. Ta payer, one of
the grandchdren, reached the age of 25 years on anuary 21,
1928, on whch date her share of the trust res was dstrbuted to
her. Incuded n the property so dstrbuted were y shares of
stock of the M Company, whch stock was sod by ta payer on
anuary 28, 1928.
ed, the nterest of the ta payer n the stock n queston vested
at date of testator s death ( une 19. 1921), and the vaue of the
stock on that date s the bass to be used for the purpose of deter-
mnng gan or oss from the sae of the stock by the ta payer.
n opnon s requested reatve to the bass for determnng gan
or oss n the case of a sae of stock receved by as the resut of an
e ercse by w of a genera power of appontment.
The facts are as foows: , by w, gave hs son, C, a genera
power to appont by w certan assets, ncudng the stock here n
queston, to wt, y shares of the M Company stock. C ded une 19,
1921, eavng a w n whch he referred to the power of appont-
ment and e pressy e ercsed the same. Cause 6 of hs w reads,
n part, as foows:
Whereas I have a power of appontment over certan property under the
w of my father, , I hereby gve and appont sad property to D and ,
n trust to dvde the same nto two equa moetes and pay the ncome of
one moety to each of my sons. and G, durng hs fe. On the death of
ether of my sons, or on my death, f ether of them sha de before me, the
trustees sha dvde hs moety nto as many shares ns there are grandchdren
of mne then vng, or deceased eavng ssue then vng, and sha pay over
one such share to each grandchd who sha then be vng and above the age
of twenty-ve (25) years, and to the ssue then vng, by rght of representa-
ton, of each grandchd who has deceased eavng ssue then vng, and sha
contnue to hod n trust the shares of the grandchdren who are then under
the age of twenty-fve (25) years, and sha pay the ncome of one share to
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133
113, rt. 595.
each such grandchd unt he or she sha reach the age of twenty-fve (25)
years, and sha then pay over the prncpa of hs or her share to hm or her.
Upon the death of any grandchd under the age of twenty-fve (25) years,
hs or her share sha be pad over to hs or her ssue vng at hs or her
death, by rght of representaton, and f he or she sha eave no ssue, then
such share sha be dvded among my grandchdren then vng, suc grand-
chdren takng per capta, and the ssue then vng, by rght of representaton,
of any deceased grandchd .
The son, G, mentoned n the above cause, predeceased C, and
there were eft at the atter s death three grandchdren, a under
the age of 25 years, but no ssue of any predeceased grandchdren.
In accordance wth the w, the hat of the apponted property
of whch G woud have been the fe benefcary had he ved was
dvded nto three equa shares, one share to be hed for the beneft
of each of the three grandchdren unt he or she reached the age of
25 years. The trust res was turned over to the trustees on ebruary
23, 1922. , one of the three grandchdren |ust referred to, became
25 years of age on anuary 21, 1928, and on the same day her share
of the trust res, ncudng the M Company stock, was dstrbuted to
her. She sod the same on anuary 28, 1928. It s her contenton
that the bass to be used by her n determnng gan or oss from
the sae s ether the vaue of the stock on the date on whch the
assets were turned over to the trustees for the three grandchdren,
to wt, ebruary 23, 1922, or the vaue on the date on whch the
stock was dstrbuted to her n person.
s the sae occurred n the year 1928, the queston s to be decded
under the provsons of the Revenue ct of 1928. Secton 113(a)4
of that ct provdes
(4) Gft or transfer n trust before anuary 1, 1921. f the property was
acqured by gft or transfer n trust on or before December 31, 1920, the bass
sha be the far market vaue of such property at the tme of such acquston.
The provsons of ths paragraph sha appy to the acquston of such property
nterests as are specfed n secton 402(e) of the Revenue ct of 1921, or n
secton 302(f) of the Revenue ct of 1924 or the Revenue ct of 1926 (reatng
to property passng under power of appontment) regardess of the tme of
acquston
whe artce 595 of Reguatons 74 provdes n part:
Property acqured by gft or transfer n trust on or before December 31,
1920. (a) In computng the gan or oss from the sae or other dsposton of
property acqured by gft or by transfer n trust on or before December 31,
1920, the bass (e cept as stated n (b) of ths artce) sha be the far mar-
ket vaue of such property at the tme of acquston. The provsons of ths
artce sha appy to
Such property nterests as passed to the ta payer under a genera power of
apontment e ercsed ether by w or by deed e ecuted n contempaton of
death or ntended to take effect n possesson or en|oyment at or after death,
regardess of whether such property nterests were acqured by the ta payer
on or before December 31, 1920, or after that date.
It thus ceary appears that even though property receved as the
resut of the e ercse of a genera power of appontment s acqured
through the means of a w, the bass s ts vaue at the tme of
acquston. ad Congress desred to treat such property n the
same way that t treated property transmtted at death, the obvous
method of dong so woud have been to provde that the provsons
reatng to property transmtted at death (secton 113(a)o) shoud
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113, rt. 595.
134
appy to property receved through the e ercse of a genera power of
appontment by w. It w aso be noted that under the Revenue ct
of 1926 the bass was the same for apponted property as t s under
the Revenue ct of 1928 that s, ts vaue at date of acquston-
whe the bass for property acqured by bequest, devse, or nhert-
ance was ts vaue at that date, under the 1926 ct but not under the
1928 ct. It s cear, therefore, that n the 1928 ct Congress n-
tended to treat the two casses dfferenty. Secton 113(a)5 reates
to property once owned by the decedent and gven away by hm at
hs death. s stated n Shaftuck v. urr age (229 Mass., 448, 118
N. ., 889 at page 890) :
When a donor gves to another power of appontment over property, the donee
of the power does not thereby become the owner of the property. The donee
has no tte whatever to the property. The power s smpy a deegaton to the
donee of authorty to act for the donor n the dsposton of the ater s
property. The appontee named by e ercse of ths deegated authorty takes as
recpent of the bounty of the donor and not as egatee of the donee .
On no theory of hard fact s the property apponted the property of the donee
of the power.
ven assumng that on prncpe no dstncton ought to be taken
between the bass for property once owned by the testator and wed
by hm and the bass for property over whch he had a power of
appontment whch he e ercsed by w, the fact remans that Con-
gress has ceary stated one bass for the frst case and a dfferent
bass for the second.
The ne t queston s, When dd acqure the stock n queston
The answer depends upon when her nterest n the stock vested un-
der the provsons of C s w. Under the Revenue ct of 1926 and
pror cts ths offce took the poston that, f the egatee s or dev-
see s nterest was vested at the testator s death, the bass for deter-
mnng gan or oss upon subsequent sae or other dsposton by
hm was the vaue of the nterest at the tme of the testator s death.
(O. D. 667, C. . 8, 52 L. O. 1012, C. . 2, 34.) Ths was the rue
whether or not the nterest was a specfc egacy, a genera egacy,
or a resduary bequest. The rue aso was that t by the terms of the
w the nterest of the devsee or egatee was contngent, the bass
was ts vaue on the day the nterest fnay vested. (O. D. 727,
C. . 3, 53.) Moreover, a vested nterest was vaued at the date of
the testator s death, even though t was sub|ect to beng dvested.
(O. D. 694, C. . 3, 53.)
In the nstant case, as G predeceased the testator, the provson of
the w requrng survva at hs death was rendered noperatve,
and the requrement of beng ave at the testator s death became
effectve. If smpy survvng the testator s the ony condton
precedent to vestng, then of course the nterest of vested at hs
death. It s therefore necessary to ascertan whether there were any
other condtons precedent to vestng and, f so, when they were
satsfed. It w be noted that there were as many benefca shares
provded for as there were grandchdren ave at the testator s death,
and that ths of course woud ncude a share for . Wth respect
to each such share t was further provded that the trustees shoud
pay the ncome from the same to the grandchd unt he or she at-
taned the age of 25 years and then pav over the prncpa. In case
any grandchd ded under the age of 25 years, the share of such
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135
113, rt. 695.
grandchd was to go to hs or her ssue vng at hs or her death.
Whe t s true that there was no drect gft to the grandchdren
under the age of 25 years, the provson wth respect to the corpus
beng that t be pad to them at the age of 25 years, the nterest of
each grandchd vested at the testator s death. Where there s a
provson that the prncpa be pad over to a benefcary at some
future tme and n the meantme the ncome from sad prncpa s
ordered to be pad to hm, the Supreme Court of Massachusetts has
hed that the nterest n the prncpa s vested.
In drdge, dm... v. drdge, ecutor (63 Mass., 516), the
testator drected the e ecutor to pay over to , , and C, grand-
chdren, 1,000 each at 21, and further provded that sad grand-
chdren be supported durng ther mnorty out of the. egacy be-
ueathed. The court hed that the egacy vested at the testator s
eath, sayng:
ut t Is a decsve crcumstance, n the present case, that the egacy s
charged wth the support of the egatee durng ter mnorty. f t
Mood upon ths cause aone, t appears to us that the ntent woud be qute
dear, because t creates an mmedate benefca nterest n the egatee, and
the payment ony s postponed.
In uer et a. v. Wmthrop et a. (85 Mass., 51. at page GO), the
same court sad:
That nterest s gven unt a egacy becomes payabe, s one of the strongest
ndcatons of a vested egacy.
gan, n Schouer on Ws (6th ed., vo. 2. pp. 1440-1441), t
s stated:
ny present vested nterest n the ncome carres prma face a vested nterest
to those who sha fnay take the capta . The gft of the whoe
f the nterest or ncome w generay vest the prncpa at the death of the
testator, and where a rght to nterest on a fund unt a sected tme s gven
to , and then the prncpa s to be pad to hm, the rght to the fund tsef
shoud vest n at the death of the testator.
In the same work, voume 2, page 1420, t s stated:
The rue that where rghts depend soey upon a drecton to dvde or pay
at a future date, the gft does not vest unt the date named does not appy
where the postponement s to et n other nterests, or for the convenence of the
estate or where the remander s postponed unt a benefcary
reaches a certan age, as a drecton to e ecutors to hod and a certan tme
and then dvde It among certan persons gves them a vested remander.
In the opnon of ths offce the nstant case fas wthn the rue
of the authortes heren cted, and t s therefore concuded that the
nterest of n the stock n queston vested at the date of the tes-
tator s death ( une 19, 1921). t that tme she acqured the stock.
It foows, under the facts of the nstant case, that the vaue of the
stock at the date of the testator s death s the bass to be used for
the purpose of determnng gan or oss from the sae of the stock
by the ta payer.
C. M. Charest,
Genera Counse. ureau of Interna Revenue.
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113, rt. 596.
136
rtce 596: Property transmtted at death. I -2 4498
G. C. M. 6811
R NU CT O 1928.
y the terms of the w of , who ded In 1921, the resdue of
hs estate (a farm) was devsed to n trust for the support of
C wth the remander over to n fee. Durng the perod between
the testator s death and the death of C, n 19127, made e tensve
capta mprovements. e sod the mproved property n 1928.
ed, the bass to was the vaue of hs nterest at date of
the testator s death, and he s entted to an ad|ustment to ths
bass for the cost of capta mprovements made by hm whe the
fe tenant was n possesson. s nterest n the mprovements
was that of a remanderman and Shoud he treated accordngy
n determnng hs gan or oss on the sae.
n opnon s requested reatve to the bass for determnng
gan or oss on the sae by of hs remander nterest acqured
under the w of .
, the testator, ded November , 1921, possessed of a farm
ocated n Massachusetts. The cause n the w by whch ths
property was transferred reads as foows:
fter the payment of my |ust debts and the egaces above mentoned a the
rest, resdue, and remander of my property, whether rea, persona, or m ed,
I gve, devse, and bequeath unto , to be hed by hm n trust to be used
for the care and support of hs mother, C, usng the ncome thereof and so much
of the prncpa as w support her reasonaby n the staton of fe In whch
she now ves, and unt her death, and after her decease I hereby gve, devse,
and bequeath the resdue of my estate, or so much thereof as sha then be
remanng, to the sad , to hod absoutey for hs own use forever.
C, the fe tenant, who was 78 years od at the tme of the testator s
death, ded on ugust , 1927. sod the property about a year
ater and cams a deducton n hs 1928 ncome-ta return for a oss
aeged to have been sustaned on the sae. There s no queston but
that from the tme of the testator s death, ntended to se hs re-
mander nterest as soon as the fe tenant ded, and to that end
made e tensve capta mprovements whe the fe tenant ved.
Snce the hodng, mprovng, and seng of the property consttuted
a transacton entered nto for proft, the oss ncurred on the sae
of the property s deductbe. (See appea of Robert W. Wams.
ecutor, 1 . T. ., 1101, C. . I -2, 5.)
Secton 113(a)5 of the Revenue ct of 1928 provdes n part:
If persona property was acqured by specfc bequest, or f rea property was
acqured by genera or specfc devse or by ntestacy, the bass sha be the
far market vaue of the property at the tme of the death of the
decedent.
rtce 59G, Reguatons 74, provdes n part:
In the foowng cases the bass for determnng gan or oss from the sae
or other dsposton of property acqured after ebruary 28, 1913, sha be the
far market vaue of the property at the tme of the death of the decedent:
(2) Rea property acqured by genera or specfc devse or by ntestacy:
and
The remander to was a vested remander, athough there was
the possbty that the prncpa mght be e hausted n support of
the ffe tenant n accordance wth the terms of the w. (O. D. 694,
C. . 3, 53.) Under the provsons |ust quoted the bass for deter-
mnng gan or oss on sae of s nterest was ts vaue at the tme
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137
113, rt.
of the decedent s death. (S. O. 35, C. . 3, 50 O. D. 694, supra.)
The fact that the fe tenant ded pror to the sae of the remander
does not resut n a new determnaton of vaue as of the date of the
ater death. (See Ithaca Trust Co., ecutor, v. Unted States,
279 U. S., 151, Ct. D. 61, C. . III-1, 313.) Nor does the poss-
bty of e hauston of the corpus, under the facts of the nstant
case, prevent a vauaton of the remander at the tme of the testa-
tor s death. smar provson to the one here n queston e sted
n the case of the Ithaca Trust Co. v. Unted States, supra, and de-
spte t the Supreme Court hed that the remander nterest was
capabe of vauaton. Speakng through Mr. ustce omes, the
court sad:
The prncpa that coud be used was ony so much as mght be necessary
to contnue the comfort then en|oyed. The standard was f ed n fact and
capabe of beng stated n defnte terms of money. It was not eft to the
wdow s dscreton. There was no uncertanty apprecaby greater
than the genera uncertanty that attends human affars.
It s further provded n artce 596, Reguatons 74:
or the purposes of ths artce, the vaue of property as apprased for the
purpose of the edera estate ta or n the case of estates not sub|ect to that
ta , ts vaue as apprased n the State court for the purpose of State nher-
tance ta es sha be deemed to be ts far market vaue at the tme of the
death of the decedent
Reference s made by to the provson for vaung remander
nterests n Massachusetts as of the tme of ther comng nto pos-
sesson, and on the bass of that provson he cams that he s entted
to a vauaton under the provsons of artce 596 as of the tme of
the fe tenant s death. It was not ntended by the provsons of
artce 596 that a vaue determned by State aw as of an entrey
dfferent tme shoud be taken for the basc vaue prescrbed by the
edera aw as of the tme of the testator s death. Moreover, under
the Massachusetts aw remanders may at the opton of the bene-
fcary be vaued as of the tme of the testator s death. (See chap-
ter 65, secton 14, Genera Laws of Massachusetts, 1921.) The bass
to , therefore, was the vaue of hs nterest at the date of the
testator s death on November , 1921.
s entted to an ad|ustment to ths bass for the cost of capta
mprovements made by hm whe the fe tenant was n possesson.
e s not entted, however, to add the fu cost of the mprovements
to the bass. s mother was entted to the use of the mprovements
durng her fetme. That porton of the cost of the mprovements
attrbutabe to her fe nterest represented a gft to her. Ths con-
cuson s supported n prncpe by Offce Decson 847 (C. . 4, 45)
and aso by the decson of the oard of Ta ppeas n Iarry .
Robertson v. Commssoner (5 . T. ., 748, C. . I-, 5), whch
hed that the dfference between the far market vaue of and con-
veyed to near reatves for an nadequate consderaton and the
amount of such consderaton consttuted a gft. In the opnon of
ths offce, s nterest n the mprovements was that of a remander-
man and shoud be treated accordngy (see Reguatons 70, 1920
edton, page 22) n determnng hs gan or oss on the sae of the
mproved property after he came nto possesson.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
4090 30 10
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138
rtce 596: Property transmtted at death. I -9-4544
I. T. 2527
R NU CT O 1948.
Durng the year 1927 certan stock rghts were ssued to the estate
of and sod durng that year. The 1927 return of the estate was
fed on March , 1928. In apportonng the bass of the stock n
respect of whch the rghts were ssued between the stock and the
rghts for the purpose of determnng the gan or oss on the sae
of the rghts n 1927, the cost of the stock to the decedent, whch
was n e cess of ts vaue at the date of hs death, was used as the
bass to be apportoned. Smar rghts were ssued to the estate
n 1029 and sod n that year.
ed, e cept n the case of a return of a decedent s estate for
any ta abe year precedng the ta abe year 1928 fed between
pr 6, 1927, and uy 7, 1928, n whch case t was permssbe for
the estate to use as the gan or oss bass of property sod the cost
or other bass thereof to the decedent, the far market vaue of
property at the (ate of the decedent s death s the bass of the
propery to the estate. Therefore, the far market vaue at the
date of s death of the stock acqured from the decedent by the
estate of . ad|usted on account of the 1927 rghts, s the bass to
be apportoned between the stock and the rghts ssued n 1929 for
the purpose of determnng the gun or oss on the sae of the rghts
n 1929.
dvce s requested reatve to the proper bass to be used by the
estate of for computng the gan or oss resutng from the sae
durng the year 1929 of stock rghts ssued n that year1 to the estate
on stock of the M Company.
The stock n queston, consstng of y shares, was owned by , the
decedent, at the date of hs death, and t therefore formed a part of
the estate to be admnstered by the e ecutors. The cost of the stock
to the decedent was 16a doars a share, whe the vaue at the date
of death was b doars a share. Certan rghts n respect of such
stock were ssued to the estate n 1927, whch were sod wthout beng
e ercsed n that year, and n apportonng the bass of the stock
between the stock and the rghts for the purpose of determnng
the gan or oss on such sae the cost of the stock to the decedent was
used, pursuant to the reguatons then n effect. If the vaue of the
stock as of the date of death had been used n the apportonment for
the year 1927, the porton thereof aocabe to the stock woud have
been 9a doars a share, the porton thereof aocabe to the corre-
spondng rght beng a doars nstead of 1.6a doars, the amount
used n computng the gan or oss shown n the 1927 return of the
estate fed on March , 1928.
In the case of a return of a decedent s estate for any ta abe year
precedng the ta abe year 1928 fed between pr 6, 1927, and uy
7, 1928, t was permssbe for the estate to use as the gan or oss
bass of property sod the cost or other bass thereof to the decedent.
(See secton 702 of the Revenue ct of 1928 and T. D. 4177, C. .
II-2, 134.) In a other cases the far market vaue of property
at the date of the decedent s death s the bass of the property to the
estate. Secton 113(a)5 of the Revenue ct of 1928, whch s con-
trong as to the sae n 1929 of property acqured by a decedent s
estate from the decedent, specfcay so provdes. Therefore, regard-
ess of the bass empoyed n the apportonment for the year 1927,
the far market vaue at the date of s death of the stock acqured
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113, rt. 596,
from the decedent, by the estate of , ad|usted on account of the
1927 rghts, s the bass to be apportoned between the stock and the
rghts ssued n 1929 for the purpose of determnng the gan or oss
on the sae of the rghts n 1929. The far market vaue of the stock
on the date of the decedent s death was 10a doars per share, and such
bass became 9a doars per share after the ssuance of the rghts n
1927. 9a: doars per share s, accordngy, the bass whch s aocabe
accordng to ther respectve vaues between the stock and the rghts
ssued n respect thereof n 1929.
rtce 596: Property transmtted at dearth. I -24-4668
I. T. 2539
R NU CT O 192
The decedent, who ded pror to March 1, 1913, named Ms four
sons as e ecutors of hs w and bequeathed th resdue of hs
estate n trust to hs sons, the net ncome to be used for the beneft
of hs wfe and chdren after the wfe s death the trustees were
to dvde the baance of the estate equay among: the chdren.
The testator s wfe ded n 1926, and certan securtes receved
by the ta payer, one of the chdren, from the trustees under the
w were sod n 1928.
ed, the bass, to be used n computng the gan or oss from the
safe s the far market vaue of the securtes as of the date of
ther dstrbuton by the sons of the decedent as e ecutors of the
tatter s w to themseves as trustees, or the far market vnhe
of the securtes a of March 1, 1913, whchever s greater.
h opnon s requested as to the bass to be used by the ta payer,
, n computng gan or oss from the sae n 1928 of securtes
receved by hm from the trustees apponted under hs father s
w.
, the father, ded some tme pror to March 1, 1913, and by hs
w apponted hs sons , C, DT and as e ecutors. Under para-
graph 8 of the w the testator bequeathed a the rest, resdue,
and remander of hs estate rea, persona, and m ed n trust
to hs sons to be hed undvded durng the fetme of hs wfe,
the net ncome to be used for the beneft of hs wfe and chdren.
fter hs wfe s death, the trustees were requred under the terms of
the w to set asde n trust for each chd and dvde the
baance of the resduary estate equay among the testator s chdren
free from a trusts. The wfe ded n 1926 and the securtes re-
ceved by the ta payer, , from the trustees were sod by hm n
1928.
The provsons of the Revenue ct of 1928 whch are appcabe
to the nstant case are set forth beow:
Sec. 113. ass bob kt.hmm.ng Gan ok Loss.
(a) Property acqured after ebruary 28, 1913. The bass for determnng
the gan or oss from the sae or other dsposton- of property acqured after
ebruary 28, 1913,. sha be the cost of such property e cept that
(5) Property transmtted at death. If persona property was acqured by
specfc bequest, or f rea property was acqured by genera or specfc devse
or by ntestacy, te bass sha be the far market vaue of the property at
the tme of the death of the decedent. If the property was acqured by
th decedent s estate from the decedent, the bass n the hands of the estate
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113, rt. 596.
140
sha be the far market vaue of the property at the tme of the death of
the decedent. In a other cases f the property was acqured ether by w
or by ntestacy, the bass sha be the far market vaue of the property at
the tme of the dstrbuton to the ta payer.
(b) Property acqured before March 1, 1913. The bass for determnng the
gan or oss from the sae or other dsposton of property acqured before
March 1, 1913, sha be:
(1) the cost of such property (or, n the case of such property as Is
descrbed In subsecton (a) (1), (4), (5), or (12) of ths secton, the bass
as theren provded), or
(2) the far market vaue of such property as of March 1, 1913, whchever
s greater.
Consderaton w frst be gven to the queston of the nature of
s nterest n the securtes.
In enaday v. Snwtt (179 U. S., 606) the Supreme Court of the
Unted States quotes wth approva the foowng defnton of the
term genera egacy :
Wams says n reference to the dfferent knds of egaces that:
egacy s genera when t s so gven as not to amount to a bequest of a par-
tcuar thng or money of the testator, dstngushed from a others of the
same knd. egacy s specfc when t s a bequest of a specfed part of
the testator s persona estate, whch s so dstngushed. nd he
adds: The courts n genera are averse from construng egaces to be
specfc and the ntenton of the testator, wth reference to the thng
bequeathed, must be cear.
In Sade v. Tabot (182 Mass., 256, 65 N. ., 374) t was hed,
under a w gvng to varous persons 36 shares of stock n a cor-
poraton foo wed by a resduary gft of a the rest, resdue, and
remander of my estate (t appearng that the testator owned at
the date of the w ony 31 shares and at hs death ony 25 shares),
that the egaces of stock were genera egaces, so that the e ecutor
shoud make up the defct by purchase.
In oston Safe Depost Trust Co. v. Reed (229 Mass., 267, 118
N. ., 333) the Supreme udca Court of Massachusetts stated n
part as foows:
In the frst artce of the codc the testator bequeathed stocks and bonds
to the amount of 100,000 to the egatees there mentoned. Ths was a genera,
and not a specfc bequest. ( ohnson v. Ooss, 128 Mass., 433 Parker v. Cobe,
208 Mass., 260, 94 N. ., 476, 33 L. R. . (N. S.), 978, 21 nn. cas.
1100 .
In Doe, Lessee of Poor, v. Consdne (6 Wa., 458) the Supreme
Court of the Unted States, n dscussng the dfference between
vested remanders and contngent remanders, stated n part as
foows:
vested remander s where a present nterest passes to a certan and defnte
person, but to be en|oyed n futuro. There must be a partcuar estate to
support t. The remander must pass out of the grantor at the creaton of
the partcuar estate. It must vest n the grantee durng the contnuance of
the estate, or eo nstant that t determnes.
Ths rue s thus stated wth more funess by the Supreme Court of Mas-
sachusetts. Where a remander s mted to take effect n possesson, f ever,
mmedatey upon the determnaton of a partcuar estate, whch estate s to
determne by an event that must unarvdaby happen by the effu of tme,
the remander vests n nterest as soon as the remanderman s n esse and
ascertaned, provded nothng but hs own death before the determnaton of
the partcuar estate, w prevent such remander from vestng n possesson
yet, f the estate s mted over to another n the event of the death of the
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141
113, rt. 596.
remanderman before the determnaton of the partcuar estate, hs vested
estate w be sub|ect to be dvested by that event, and the nterest of the sub-
sttuted remanderman whch was before ether an e ecutory devse or a con-
tngent remander, w, f he s n esse and ascertaned, be mmedatey con-
verted nto a vested remander.
The character of a remander as vested s not affected by an
uncertanty as to the quantum of nterest whch w be receved
by the remanderman. (Thorngton v. Thorngton, 111 a., 237, 20
So., 407.) Moreover, a remander whch s otherwse vested s not
rendered contngent by conferrng a power of sae upon ether a
fe tenant or the e ecutor as to any part of the estate upon whch
the power s not e ercsed the remander s unaffected. (23 Rung
Case Law, p. 511.)
It s cear from the above that , under hs father s w, wth
respect to the securtes here under consderaton, had a vested
remander nterest n a genera egacy of persona property.
It remans to be determned whether he acqured that property
nterest after ebruary 28, 1913 (secton 113(a), Revenue ct of
1928), or before March 1,1913 (secton 113(b), Revenue ct of 1928).
In rewster v. Gage (280 U. S., 327, Ct. D. 148, see on page 274)
the Supreme Court of the Unted States hed that a egatee under a
w acqures property wthn the meanng of secton 202(a)2 of
the Revenue ct of 1918 and secton 202(a)3 of the Revenue ct of
1921 at the date of the decedent s death. The court stated n part as
foows:
Upon the death of the owner, tte to hs rea estate passes to hs hers or
devsees. dfferent rue appes to persona property. Tte to t does not
vest at once n hers or egatees. (.Unted States v. ones. 236 U. S., 106, 112.)
ut mmedatey upon the death of the owner there vests n each of them the
rght to hs dstrbutve share of so much as sha reman after proper admns-
traton and the rght to have t devered upon entry of the decree of dstrbu-
ton. (Sanders v. Soutter, 136 N. T., 97 a v. a, 49 Conn., 52 Cook v.
McDowe, 52 N. . a., 351.) Upon acceptance of the trust there vests n
the admnstrators or e ecutors, as of the date of the death, tte to a
persona property beongng to the estate t s taken, not for themseves,
bat n the rght of others for the proper admnstraton of the estate and for
dstrbuton of the resdue. The decree of dstrbuton confers no new rght
t merey dentfes the property remanng, evdences rght of possesson n te
hers or egatees and requres the admnstrators or e ecutors to dever t to
them. The ega tte so gven reates back to the date of the death. ( oster
v. fed, 20 Pck., 67, 70 Wager v. Wager, 89 N. Y., 161, 166 Thompson v.
Thomas 30 Mss., 152, 158.)
Pettoner s rght ater to have hs share of the resdue vested mmedatey
upon testator s death.
Under the decson n rewster v. Gage, supra, t s proper to
concude that the property nterests here under consderaton were
acqured wthn the meanng of secton 113 of the Revenue ct
of 1928 as of the date of s death. Ths concuson s supported
aso by the case of a v. oand (189 Mass., 3G9, 75 N. ., 713).
In the nstant case, as s (the father s) death took pace pror to
March 1, 1913, the bass to be used by n determnng the gan or
oss from the sae of the securtes s governed by secton 113(b) of
the ct. Under secton 113(b) the bass s:
(1) the cost of such property (or, In the case of such property
as s descrbed n subsecton (a) (1), (4), (5), or (12) of ths secton, the bass
as theren provded), or
(2) the far market vaue of such property as of March 1, 1913, whchever
s greater.
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113, rt. 50ft.
142
Under secton 113(b),. n vew of the fact that the property s. of
the knd descrbed n the thrd sentence of subsecton (a)5 of secton
113, supra, the bass s the far market vane of the property at.
the tme of dstrbuton to the ta payer or the far market vaue
of such property as of March 1, 1913, whchever s greater.
It w be noted that the four sons of were named by hm as
e ecutors of hs w and aso as trustees. Under the prncpe ad
down n Genera Counse s Memorandum 6195 (C. . III 1, 99),
the securtes here under consderaton were dstrbuted wthn the
ntendment of secton 113(a)5, supra, when the e ecutors renqushed
the securtes to themseves as trustees, and not when such securtes
were surrendered by the trustees at the termnaton of the trust. It
foows, therefore, that when the sons as e ecutors dstrbuted the
securtes to themseves as trustees, the property assumed as ts bass
ts then far market vaue, or ts far market vaue as of March 1,1913,
whchever s greater, not ony for the determnaton of gan or oss
to the trustees, but aso for the determnaton of gan or oss to the
benefcares after the ega tte had merged nto ther equtabe
ownershp through the surrender by the trustees of the corpus of the
trust.
ccordngy, t s the opnon of ths offce that the bass to be
used by , n computng the gan or oss from the sae n 1968 of
the securtes receved by hm from the trustees apponted under
hs father s w, s the far market vaue of the securtes as of the
date of ther dstrbuton by the sons of the decedent as e ecutors
under the atter s w to themseves as trustees under the w , or
the far market vaue of the securtes as of March 1,1913, whchever
s greater.
rtce 596 : Property transmtted at death. I -25- 674
G. C. M. 8131
R NU CT OP 1928.
Certan corporate securtes among the assets, of the estate of ,
the husband of , were sod by the e ecutou of hs estate,
havng ded n 1929 domced In the State of Caforna. The
securtes were acqured by the decedent pror to uy 29, 1927,
and were communty property.
ed, the bnss for determnng gan or oss to the estate from
the sae s tte far market vaue of the property at the tme of
the eath of decedent.
n opnon s requested as to the bass to be used for determnng
gan or oss to the estate of , the husband of , from the sae n
1929 of communty property acqured by pror to uy 29, 1927.
t the tme of hs death was domced n the State of Caforna.
ded on or about une , 1929, eavng a ast w and testament
desgnatng and appontng the M Company as e ecutor. mong
the assets of the estate were y shares of stock n the O Company,
whch were acqured by the decedent pror to uy 29, 1927, and
whch were a part of the communty property of the decedent and
hs survvng wdow. The stock was sod by the e ecutor on Novem-
ber T1929.
Upon the death of ether husband or wfe, one-haf of the com-
munty property beongs, under the aws of Caforna, to the sur-
vvng spouse the other haf s sub|ect to testamentary dspos-
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143
f 113, rt. 596.
ton by the decedent, and n the absence thereof goes to the survvng
spouse, sub|ect to the provsons of secton 1402 of the cv code.
(Secton 1401, Deerng s Cv Code of Caforna, 1925.) Com-
munty property passng from the contro of the husband, ether by
reason of hs death or by vrtue of testamentary dsposton by the
wfe, s sub|ect to hs debts, famy aowance, and the charges and
e penses of admnstraton. (Secton 1402, Deerng s Cv Code of
Caforna, 1925.) The entre communty property, however, s ad-
mnstered as part of the estate of the deceased husband. (In re
Chanqutfs state, 193 Pac, 762 In re urdck s state, 112 Ca.,
387, 44 Pac, 734.) sae by the e ecutor of the communty property
to pay debts of the deceased husband passes the entre nterest n the
property, the wdow beng entted ony to one-haf of the resdue of
the estate after payment of a charges. (Sharp v. Loupe, 120 Ca.,
89, 52 Pac, 586.)
Under the aws of Caforna t s setted that pror to uy 29,
1927, the wfe s nterest n communty property was a mere e pect-
ancy. (Unted States v. obbns, 269 U. S., 315 T. D. 3817, C. .
-, 188 In re urdck-s state, supra Spreckes v. Sprec ces, 116
Ca., 339, 48 Pac, 228 Stewart v. Stewart, 269 Pac, 439.) In such
cases t has been hed that the communty property whch passes to
the wdow of the deceased husband n accordance wth the aws of
Caforna s sub|ect to edera estate ta mposed upon the husband s
estate. ( enshaw et a. v. Commssoner, 31 ed. (2d), 946 Tacott
v. Unted States, 23 ed. (2d), 897 T. D. 4032, C. . I-2, 355 ,
certorar dened, 277 U. S., 604, 48 S. Ct. 601.) It was stated n
Stewart v. Stewart, supra, that the courts of Caforna have con-
sstenty hed that durng the marrage the husband s the soe and
e cusve owner of a the communty property, and the wfe has no
tte thereto, or nterest or estate theren, other than a mere e pect-
ancy as an her, f she survve hm.
s ndcated above, pror to uy 29, 1927, the effectve date of the
amendment to the Cv Code of Caforna (Caforna Statutes and
mendments to the Code, 1927, page 484), known as secton 161a,
a wfe s nterest n the communty property pror to the husband s
death was a mere e pectancy. The queston as to the effect of such
amendment was consdered by the Supreme Court of Caforna n
the case of Stewart v. Stewart, supra, and t was hed that ths secton
of the code, whatever effect t may have upon communty property
acqured subsequent to ts effectve date, can not n any manner
reate to or govern the ownershp of property acqured pror thereto.
The property n the nstant case beng communty property acqured
pror to uy 29, 1927, t can not be hed that the wfe had a vested
nterest theren pror to the husband s death n vew of the decson
of the Supreme Court of Caforna n Stewart v. Stewart, supra.
It must be consdered, therefore, that the entre communty property
was acqured by the estate from the deceased husband that s, t
was transmtted at death and admnstered as a part of hs estate.
Secton 113(a)5 of the evenue ct of 1928, reatng to the bass
for determnng gan or oss from the sae or other dsposton of
property transmtted at death, provdes n part as foows:
Property transmtted at death. If persona pro crty was acqured by specfc
bequest, or f rea property was acqured by genera or specfc devse or by
Intestacy, the bass sha be the far market vaue of the property at the tme
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115, rt. 028.
144
of the death of the decedent. If the property was acqured by the decedent s
estate from the decedent, the bass n the hands of the estate sha be the far
market vaue of the property at the tme of the death of the decedent. In a
other cases f the property was acqured ether by w or by ntestacy, the bass
sha be the far market vaue of the property at the tme of the dstrbuton
to the ta payer. Itacs supped.
s shares of stock formng a part of the communty property n
the nstant case were acqured by the decedent s estate from the
decedent, and were sod by the e ecutor of the estate, the bass for
determnng gan or oss to the estate from the sae s the far market
vaue of the property at the tme of the deat of the decedent.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
S CTION 115. DISTRI UTIONS Y
CORPOR TIONS.
rtce 628: Stock dvdends. I -21-4651
I. T. 2538
R NU CT O 1028.
The M Company has outstandng preferred stock, the dvdends
on whch are payabe n cash or at the eecton of the stockhoders
n common stock. In December, 1929, a dvdend was decared
payabe n cash on ebruary 15, 1930, n res ect of each share
the record hoder of whch on anuary 15, 1930, had not on or
before sad date fed a certfcate of eecton to receve dvdends
n common stock f a certfcate of eecton was fed, tte dvdend
was payabe n common stock.
ed, the stockhoders who fed such certfcates of eecton on
or before the record date receved a stock dvdend and therefore
reazed no ta abe ncome.
dvce s requested reatve to the ta abty as ncome of a dv-
dend decared by the board of drectors of the M Company n De-
cember, 1929, on ts preferred stock. The dvdend was made pay-
abe on ebruary 15, 1930, to the stockhoders of record as of
anuary 15, 1930.
The preferred stock n queston was ssued wth the provson that
the hoder of each share woud be entted to receve dvdends
thereon, when and as decared by the board of drectors, at the spec-
fed rate of per annum, or at hs opton or eecton he was to
be entted to receve dvdends thereon n common stock of the
company at a specfed rate. In decarng the dvdend payabe
on ebruary 15, 1930, the decaraton was worded to provde for
such opton or eecton. The pertnent porton of the decarng
resouton s as foows:
Resoved: That a dvdend s hereby decared on the outstandng shares of
preferred stock of the company payabe ebruary 15, 1930, to the hoders of
sad sock of record on the books of the company at the cose of busness anu-
ary 15, 1930, as foows: (a) cash dvdend of s decared on each
share n respect of whch the record hoder at the cose of busness on anuary
15, 1930, sha not have fed on or before sad date an eecton to receve
dvdends thereon n common stock of the company, and (b) a stock dvdend
of of a share of common stock s decared on each share n respect of whch
the record hoder at the cose of busness anuary 15, 1930, sha have fed on
or before sad date an eecton to receve dvdends thereon n common stock
Of the company.
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145
118, rt. 661.
It has been unformy hed that where a dvdend s unquafedy
made payabe n cash, t s a cash dvdend, regardess of the fact
that the cash may be apped or used by the stockhoder to purchase
stock of the corporaton, as set forth n the rungs pubshed as
dvsory Ta oard Recommendaton 63 (C. . 1, 24), Offce Dec-
son 565 (C. . 3, 22), and Commttee on ppeas and Revew
Recommendaton 1127 (C. . 1-2, 8).
The case at hand nvoves certan features not present n the cases
on whch the above-mentoned rungs were based. In the nstant
case the st of the stockhoders to whom the dvdend was payabe
became f ed on the record date, anuary 15, 1930, and t was on
that date that the rght of a partcuar stockhoder to receve cash
or stock became f ed, nasmuch as the certfcate of eecton, n order
to be effectve, was requred to be fed on or before that date. s to
those who fed such certfcates of eecton, the dvdend became
payabe n stock and not n cash. Such stockhoders were not at
any tme entted to receve cash and dd not become credtors of the
corporaton e cept that they had the rght to demand the stock to
whch they were entted. The amount of cash requred to be pad
out by the corporaton, f any, aso became f ed on such record date.
s to those stockhoders to whom the dvdend was payabe n stock,
no dstrbuton of cash or other assets of the corporaton woud be
made and the ony resut or effect as to the corporaton woud be the
ssuance of the addtona stock. The stuaton s therefore anaogous
to that presented n the case whch formed the sub|ect of the memo-
randum pubshed as Genera Counse s Memorandum 6709 (C. .
III-2, 132). It s accordngy hed that the stockhoders who fed
such certfcates of eecton on or before the record date receved a
stock dvdend and therefore reazed no ta abe ncome. s to the
stockhoders who dd not fe such certfcates of eecton, there was
an ordnary cash dvdend consttutng ta abe ncome to them,
S CTION 118. LOSS O S L O STOC
OR S CURITI S.
rtce 661: Losses n connecton wth sae I -5-4518
and repurchase of securtes. I. T. 2523
( so Secton 23(e), rtce 171.)
R NU CT O 1028.
ppcabty of the wash saes provsons of secton 118 of the
Revenue ct of 1928 to a member of a stock e change who buys
and ses shares of stock or securtes ony on hs own account.
n opnon s requested as to whether the wash saes provsons
of secton 118 of the Revenue ct of 1928 are appcabe n the case
of a ta payer who s a member of a stock e change but who buys and
ses shares of stock or securtes ony on hs own account.
Secton 118 of the Revenue ct of 1928 provdes n part as foows:
In the case of any oss camed to have been sustaned n any sae or other
dsposton of shares of stock or securtes where t appears that wthn 30
days before or after the date of such sae or other dsposton the ta payer
has acqured (otherwse than by request or nhertance) or has entered nto
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131, rt. 691.
146
a contract or opton to acqure substantay dentca property, and the property
so acqured s hed by the ta payer for any perod after such sate or other
dsposton, no deducton for the oss sha be aowed under secton 23(e)2
of ths tte .
If the ta payer engages n the buyng and seng of shares of
stock or securtes, though ony on hs own account, to a degree suff-
cent to consttute a trade or busness, osses arsng from the sae
or other dsposton of such shares of stock or securtes w be de-
ductbe under secton 23(e) of the Revenue ct of 1928, whch
provdes for the aowance of osses sustaned durng the ta abe
year and not compensated for by nsurance, f ncurred n a trade
or busness. If, however, the number of such transactons entered
nto s reatvey sma and does not requre suffcent tme of the ta -
payer to consttute a trade or busness, the transactons w be
governed by the provsons of secton 118 of the Revenue ct of
1928, whch precude a deducton under secton 23(e) 2 of the Reve-
nue ct of 1928 of osses from the sae or other dsposton of shares
of stock or securtes f wthn 30 days before or after the date of
such sae or other dsposton substantay dentca property s ac-
qured, otherwse than by bequest or nhertance, and hed by the
ta payer for any perod of tme after such sae or other dsposton.
SUPPL M NT C CR DITS G INST T .
S CTION 131. T S O OR IGN COUNTRI S ND
POSS SSIONS O UNIT D ST T S.
rtce 691: nayss of credt for ta es. I -13- 1577
G. C. M. 7629
R NU CT O 1928.
The 8 per cent ta mposed by the Repubc of Cuba on the net
profts of corporatons wth a share capta s an ncome ta .
domestc corporaton whch s requred to pay such ta to the
Repubc of Cuba s entted, under the provsons of secton 131
of the Revenue ct of 1928, to credt such Cuban ta aganst, ts
edera ncome ta , sub|ect, however, to the mtaton as stated
n that secton.
n opnon s requested as to whether the 8 per cent ta on the
net profts of companes wth a share capta,1 now effectve n
Cuba, may be apped as a credt under secton 131 of the Revenue
ct of 1928 aganst ta due the Unted States by domestc corpora-
tons. In ths connecton reference s made to I. T. 1522 (C. . 1-2,
199), wheren t was hed that a smar ta may be aowed as a
credt under secton 238 of the Revenue cts of 1918 and 1921.
The 8 per cent ta on the profts of corporatons wth a share
capta was authorzed under the foowng provsons of rtce II
of the mtary order No. 463 of 1900, readng as foows:
II. The foowng sha pay ta es to the State at the rate of 8 per cent of
ther net profts :
(a) unks of ssue and dscount transactng busness ether on rea estate
or on persona property.
(b) Stock companes, e cept mnng companes, savngs banks, and such
Government oan and pedge companes as may be offcay recognzed and
ncuded accordngy n the st of ta e emptons.
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142, rt. 731.
Under the provsons of a Cuban aw whch became effectve anu-
ary 29, 1927, abty to the 8 per cent profts, ta under paragraph
(b) of rtce II, order No. 463 of 1900, s e cused unt uy 20,
1925, but after that date the or ter remans, n force and the banks,
corporatons, and companes to whch t refers are obged to pay the
ta theren specfed.
Subsecton (a) of secton 131 of the Revenue ct of 1928 provdes
that n the case of a ctzen of the Unted States, and of a domestc
corporaton the edera ncome ta sha be credted wth the amount
of any ncome, war-profts, and e cess-profts, ta es pad or accrued
darng the ta abe year to any foregn country or to any possesson
of the Unted States. It s further provded n subsecton (b) of
secton 131 of the Revenue ct of 1928 that n no case sha the
amount of credt taken under secton 131 e ceed the same proporton
of the ta (computed on the bass of the ta payer s net ncome wth-
out the deducton of any ncome, war-profts, or e cess-profts ta any
part of whch may be aowed to hm as a credt), aganst whch such
credt s taken, whch the ta payer s net ncome (computed wth-
out the deducton of any such ncome, war-profts or e cess-profts
ta ) from sources wthout the Unted States bears to hs entre nefc
ncome (computed wthout such deducton) for tve same ta abe
year.
Inasmuch as a ta on net profts s a ta on ncome, t foows that
the 8 per cent ta mposed by the Repubc of Cuba on the net profts
of corporatons wth a share capta s an ncome ta and that
a domestc corporaton whch s requred to pay such ta to the
Repubc of Cuba s entted, under the provsons of secton 131 of
the Revenue ct of 1928, to credt such Cuban ta aganst ts edera
ncome ta , sub|ect, however, to the mtaton as stated n that
secton.
C M. Charest,
Genera Counse, ureau of Interna Revenue.
SUPPL M NT D. R TURNS N0 P YM NT O T .
S CTION 142. CONSOLID T D R TURNS O COR-
POR TIONS T L Y R 1928.
rtce 731: Consodated returns of affated I -2G-4682
corporatons for 1928. G. C. M. 8093
R NU CTS O 1924, 1020. ND 19 .
Procedure to be adopted n the dsposton of pendng cases for
the ta abe years 1924 to 1928, ncusve, where some of the com-
panes of an affated group have fed a so-caed consodated
return, and other companes n the group have fed separate
returns.
Soctor s Memorandum 2683 (C. . I -1, 238) and Genera
Counse s Memorandum 1808 (C. . TI-2, 125) modfed.
n opnon s requested as to the effect of certan oard of Ta
ppeas decsons, herenafter noted, upon cases arsng under the
Revenue cts of 1924, 1926, and 1928, where a so-caed consodated
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142, rt. 731. 148
return has been fed by two or more corporatons n an affated
group and separate returns have been fed by other corporatons n
the same affated group.
The appcabe Revenue cts provde that very corporaton
sub|ect to ta aton under ths tte sha make a return, statng spe-
cfcay the tems of ts gross ncome and the deductons and credts
aowed by ths tte. (Secton 239(a) of the Revenue cts of 1924
and 1926 and secton 52(a) of the Revenue ct of 1928.) These
cts further provde that affated corporatons sha have a choce
to fe a consodated return or separate returns for the corporatons
n the affated group. Secton 240(a) of the Revenue cts of 1924
and 1926, whch s substantay dentca wth secton 142(a) of the
Revenue ct of 1928, reads as foows:
Sec. 240. (a) Corporatons whch are affated wthn the meanng of ths
secton may, for any ta abe year, make separate returns or, under reguatons
prescrbed by the Commssoner wth the approva of the Secretary, make a
consodated return of net ncome for the purpose of ths tte, n whch case
the ta es thereunder sha be computed and determned upon the bass of such
return. If return s made on ether of such bases, a returns thereafter made
sha be upon the same bass uness permsson to change the bass s granted
by the Commssoner.
The purpose evdenced by ths statutory provson s that a snge
consodated return must be fed for each group of affated corpora-
tons, n M hch a the corporatons n the group must be ncuded,
or that separate returns must be fed for each and every company
n such group. Ths purpose was perhaps more adequatey e -
pressed n secton 141 of the 1928 ct wth respect to returns for
1929 and subsequent ta abe years where the foowng anguage s
used:
(a) Prvege to fe consodated returns. n affated group of corpora-
tons sha, sub|ect to the provsons of ths secton, have the prvege of mak-
ng a consodated return for the ta abe year 1929 or any subsequent ta abe
year, n eu of separate returns.
The queston of how the eecton to fe a consodated return or
separate returns was to be e ercsed under secton 240 of the Revenue
ct of 1921 was consdered n Soctor s Memorandum 2683 (C. .
I -1, 238). In that memorandum the foowng anguage was
used:
The anguage of secton 240(a) s specfc. It states that corporatons
whch are affated may make separate returns or, make
o consodated return. Ths anguage can mean but one thng that the group
as a whoe may render ndvdua corporate returns or that the group as a
whoe may render a consodated return. Ths offce s therefore of the opnon
that where a group of corporatons are affated wthn the meanng of secton
240(b) of the Revenue ct of 1021 they must for any ta abe year begnnng
on or after anuary 1, 1022. ether eect to fe one consodated return for the
entre group or fe ndvdua returns for each corporaton.
In Genera Counse s Memorandum 1808 (C. . I-2, 125), ths
offce agan consdered the queston and advsed the unt as foows:
the eecton to fe returns upon one bass or the other s made by
the affated corporatons. Ths s especay true n the case of a cass
affaton. ence the eecton n such cases s made by the affated
group as a whoe, and not by any one corporaton as the prncpa company.
ach corporaton n the affated group shoud have a voce n the seecton
of the bass upon whch the return or returns for the affated group shoud
be made, and n order that the seecton made w consttute an eecton as
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142, rt. 731.
requred by the statute and reguatons, supra, there must be a substanta
unanmty on the part of the affated corporatons. In other words, f the
affated group s to be treated as a snge enterprse, the number of con-
sttuent corporatons that agree upon the bass of makng the return must be
such that ther acton s substantay the acton of the affated group.
Thus, n the nstant case, where the stock of the three corporatons formng
the affated group was owned by the same nterests throughout the years n
queston, the acton of two of the corporatons n seectng a dfferent bass
for fng returns than was seected by the thrd corporaton can not be treated
as equvaent to the acton of the affated group as a whoe, and t foows
that no eecton has been made by the affated corporatons under secton
240(a), supra, for the year 1924.
Subsequent to the promugaton of Soctor s Memorandum 2683
and Genera Counse s Memorandum 1808 the oard of Ta ppeas
has rendered two decsons, vz, . . athng Park, Inc. (17 . T. .,
748), and partment Corporaton (17 . T. ., 876), deang wth
ths genera queston, whch affect the procedure to be foowed by
the ureau n such cases.
In the athng Park case the parent company fed a separate re-
turn and ts two subsdares fed a return purportng to be a conso-
dated return. The ureau determned the choce of the affated
group on the bass of the acton of the parent company. The oard
sad:
Secton 240 permtted each to make a separate return or the group
to fe a consodated return. oseph P. Day, Inc., fed a separate return. Such
return when fed consttuted the proper return for that corporaton for that
year and, ownng a the stock of the pettoner, whch n turn owned the sock
of the rghton each aths, Inc., t had the rght to determne and seect on
whch bass the returns shoud be fed, that s, ether a consodated return or
separate returns, not both a consodated return and separate returns. Snce
the statute does not permt some of a group of affated corporatons to make a
separate return and the remander to make a consodated return, the conso-
dated return fed by two of the corporatons was not the return requred by
statute. The group of affated corporatons dd not fe a consodated return.
Snce the return fed by oseph P. Day, Inc., for each of the years was the
return requred of t by aw ( evdere Lumber Co., C . T. ., 84),
the ta of each corporaton shoud be computed on a separate bass .
Ths decson s contrary to the faure of choce theory, under
whch a new opportunty for eecton of bass woud be e tended n
such a case. The ascertanment of what choce was actuay made s
treated as a queston of fact to be determned on the evdence. It s
ndcated that the |udgment can rest on the acton taken by the parent
company, and, snce n that case the parent company had fed sepa-
rate returns, that bass was taken to be the choce of the group.
In the case of the partment Corporaton, supra, the parent com-
pany |oned n a so-caed consodated return wth two subsdares
and a thrd subsdary fed a separate return. The ureau on the
substanta unanmty theory determned the ta abty of the
group on a consodated bass, brngng the thrd subsdary nto the
consodaton apparenty wthout frst gvng notce to the group.
The parent company ob|ected to the defcency asserted aganst t
as a resut of such acton on the ground that the subsdary had a
ega rght to fe a separate return. The acton of the subsdary
havng thus been defended as ts postve and defnte e ercse of
choce to fe a separate return, the oard hed that the subsdary
had the rght to such choce, the e ercse of whch necesstated sepa-
rate returns from a the companes n the group, despte the acton
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P42,, rt. 734.
150
f the parent company Ln |onng n a so-caed ceassodated re torn
wth ts two other subsdares. The oard sad rn part:
We aso concude that any one of the affated corporatons may
eect to fe a separate return. It cam not be deprved of ths prvege by
any one or more of the corporatons wth whch t s affated. It foows that
f any one of the affated corporaton nssts upon, ts rght to fe- a separate
return, no consodated return caa be fed for the affated group t s ony
where a of the affated corporatons |ota n the fng of a conso dsted
return for 1922 that such a return can be sad: to have been fed.
or 1922 and 192 , the shburtoa partment Corporaton fed separate re-
turns. There s nothng to ndcate that ths nas ue to nadvertence or to
doubt that t was affated wth pettoner and entted to |on n fng a. con-
sodated return. The statute gves t the rght to make ts- eecton.
Itacs supped.
Ths atter decson thus states defntey the oard s vew that f a
subsdary has fed a separate return and nssts apon ts rght to
do so, the separate bass must be adopted for a of the companes
n the affated group, even though the parent company has |oned
wth other companes n the group n a so-caed consodated return.
s has been ndcated, ths was a case n whch one subsdary out
of an affated group of four companes fed a separate return. If
the facts n the case had shown that the fng of the separate return
by the one subsdary was due to nadvertence or a doubt on the
part of the subsdary as to ts affated srtatas, the oard ndcates
that t woud have decded that, substantay, the affated group as
a whoe had chosen n favor of the consodated bass. The nsstence
by the subsdary on ts separate return precuded that treatment of
The foregong are the prncpa decsons of the oard thus far
aong ths ne. The ater decsons n the cases of Southern Power
Co. (17 . T. ., 9C 2) and Wedmann Sk Dyeng Co. (18 . T. .,
642) are e acty smar to and foow the case of . . athng
Park, Inc., supra.
The oard s decsons may be taken as supportng the foowng
procedure: The e tenson of a new opportunty to decde between
the two bases of makng returns s not warranted, and the q|eston
of whch choce was made by the affated group orgnay s to be
determned on the evdence surroundng the makng of returns
actuay fed where the parent company of a group has fed a
separate return, such acton s to be consdered to represent the
choce of the group as a whoe n favor of separate returns for a
of the companes where the separate returns were fed by sub-
sdary companes, such acton s not necessary controngr for the
stuaton must be |udged by the facts n the case, and, at east n
cases where substantay a of the affated companes fed a return
purportng to be a consodated return, f the acton of the sub-
sdary companes not ncuded n snch return was due to nad-
vertence or doubt as to affated status, the facts w warrant the
fndng that a choce of the consodated bass was made but f
ob|ecton to beng ncuded n the consodated return s made by
any one subsdary whch fed a separate return, ths s to be taken
as concusve evdence that ts separate return was fed as the resut
of a defnte and postve e ercse of ts ndvdua rght of choce,
n whch ease the ta abty of the group must be determned
on the separate bass
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151
142, rt. 731.
It shoud be a comparatvey easy matter to ascertan whether
the acton of subsdary companes n fng separate returns was
due to a doubt as to the affated status. It w be more dffcut
to determne whether the fng of separate returns resuted from
nadvertence. The dctonary meanng of the term ncudes
ack of heedfuness or attentveness, nattenton, and neg-
gence. The oard has not cted any specfc e ampes whch can
e used for comparatve purposes. There are no doubt cases of
nactve companes kept ave for charter purposes ony, or of com-
paratvey nactve companes wth a neggbe ncome, and other
cases, where the fng of separate returns by mnor subsdares
came about by reason of mere accdenta causes, n whch the ta
as determned on the returns as actuay fed s not materay
dfferent from the tota ta of the group on the bass of a snge
consodated return. No genera rue can be ad down for the
determnaton of cases of nadvertence.
Ths offce s, therefore, of the opnon that the foowng pro-
codure shoud be adopted n the dsposton of pendng cases for the
ta abe years 1924 to 1928, ncusve, where some of the companes
of an affated group have fed a so-caed consodated return ad
other companes n the group have fed separate returns:
1. Where the parent company has fed a separate return, the ta
abty of the companes n the affated group shoud be determned
on the separate bass.
2. (a) Where a subsdary company nssts upon ts rght to fe a
separate return, the ta abty of the affated group shoud be
determned on the separate bass.
(b) Where a subsdary company deberatey fed a separate
return wth fu knowedge of ts rghts and not due to nadvertence,
the ta abty of the affated group shoud be determned on the
separate bass.
3. Where n cases of a substanta unanmty of the affated cor-
poratons n favor of the consodated bass (. e., where substantay
a of the corporate enttes of the group, ncudng the parent com-
pany, f any, fed a consodated return) t appears to the satsfac-
ton of the unt that the acton of the subsdary company or com-
panes not ncuded n the consodated return was due to nad-
vertence or doubt as to ther affated status, the unt shoud ascer-
tan whether such subsdares nsst upon ther separate returns,
and, f no subsdary thus nssts but on the contrary consents and
requests n wrtng that t be ncuded n the affated group and
such wrtten request s |oned n by a the members of the affated
group, then the ta shoud be determned on the bass of a conso-
dated return for the entre affated group. In such cases there
shoud be requred a defnte agreement from a the corporatons to
the effect that the tota ta abty of a the corporatons to be
ncuded n the affaton, and any awfu defcency or overassess-
ment aganst the corporatons ncuded, sha be aocated to one
member of the group, preferaby the parent corporaton, f any, or
to the respectve members of such group n agreed proportons.
In the practca appcaton of the words substanta unanmty
of the affated corporatons, herenabove mentoned n ths para-
graph, nactve corporatons may be gnored. The unt shoud aso
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152
keep defntey n mnd that the statute of mtatons aganst any
corporaton may as a matter of aw begn to run from the fng of
ther orgna separate returns, and shoud take a necessary acton
wth respect to the corporatons nvoved accordngy.
Soctor s Memorandum 2683 and Genera Counse s Memorandum
1808 are modfed n so far as nconsstent herewth.
C. M. Cu R ST,
Genera Counse, ureau of Interna Revenue.
rtce 733: Change n stock ownershp durng I -2 4499
ta abe year where consodated return s made. I. T. 2517
R NU CT O 1928.
or the perod from May to December, 1928, the M Company,
whose books were cosed on the bass of a fsca year termnatng
anuary 31, was affated wth the N Company, and Its ncome
durng such perod was ncuded n the consodated return fed
by the parent company and ts subsdary companes. The ncome
earned by the M Company durng the months of ebruary, March,
and pr, 1928. was reported upon a separate return.
ed, an amended return may not he fed by the M Company
combnng ts ncome for the months of ebruary, March, and
pr, 1928, and anuary, 1929. separate orgna return for
the month of anuary, 1929, shoud be ted.
dvce s requested as to how the M Company shoud return ts
ncome for the month of anuary, 1929, under the foowng facts:
The M Company (herenafter caed the subsdary company)
was organzed n 1923 to take over and carry on the branch opera-
tons of the N Company (herenafter caed the frst parent com-
pany), conducted pror thereto by the atter n the State of R.
rom the date of ncorporaton of the subsdary company unt
May 1, 1925, the two corporatons were affated for edera ta
purposes. y reason of certan changes n the stock hodngs n
the subsdary company, t was not so affated wth the frst parent
company durng the perod from May 1, 1925, unt May 1, 1928, at
whch tme, as the resut of other changes n the stock hodngs,
the affaton status agan became effectve. On anuary 2, 1929,
the frst parent company sod a of ts subsdary stock hodngs,
ncudng the capta stock of the subsdary company under con-
sderaton, to the O Company, caed heren the second parent
company.
Durng the years n queston the books of the subsdary com-
pany were cosed on the bass of a fsca year termnatng on an-
uary 31. or the fsca years pror to and ncudng the fsca year
ended anuary 31, 1928, ts returns were fed on a consodated and
separate bass, respectvey, n accordance wth ts status of affa-
ton and nonaftaton wth the frst parent company durng such
tme. s the resut of the changes m the stock hodngs n the
subsdary company durng the fsca year ended anuary 31. 1929,
the ncome earned by t durng the perod from ebruary to De-
cember, 1928, ncusve, was returned as foows: The ncome earned
n the months of ebruary, March, and pr was reported upon a
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153
142, rt. 733.
separate return fed on or about pr 15, 1929, nasmuch as the
subsdary company was not affated wth any other corporaton
durng such perod. The ncome earned n the foowng eght
months, May to December, ncusve, was ncuded n the conso-
dated return fed at about the same tme by the frst parent com-
pany and ts subsdary companes, n vew of the renewa of the
affaton status between the frst parent company and the subsdary
company under consderaton. The ncome earned by the subsdary
company for the remanng month n the fsca year ended anuary
31, 1929 namey anuary, 1929, n whch t was affated wth the
second parent company, has not been returned for ta aton as yet
and forms the sub|ect of the queston heren presented.
The books of the second parent company are cosed upon a
caendar-year bass, and ts returns are fed accordngy. On or
before pr 15,1929, the due date for fng returns of ncome earned
durng the fsca year termnatng anuary 31, 1929, the subsdary
company was advsed by the second parent company that a con-
sodated return woud be fed n due course for the caendar year
1929, whch return woud ncude the ncome of the subsdary earned
durng the month of anuary, 1929. ecause of these nstructons
the subsdary company dd not fe a return on or before pr 15,
1929, to account for the ncome earned durng anuary, 1929, nas-
much as under these crcumstances no return for that month was
then requred to be fed. Subsequenty, however, the second parent
company nformed the subsdary company that a consodated re-
turn woud not be fed for the caendar year 1929 and that nstead
each of the companes ncuded n the affated group woud fe
separate returns. ecause of ths change n pan, the subsdary s
now requred to account separatey for the ncome earned durng the
month of anuary, 1929.
On the bass of the foregong, the queston arses as to:
(a) Whether an amended return shoud be fed by the subsdary
company, n eu of the separate return aready fed for the months
of ebruary, March, and pr, 1928, ncudng not ony the ncome
of those three months but the ncome earned n anuary, 1929 that
s, a of the ncome for those parts of the fsca year ended anuar|T
31, 1929, whch are not embraced n the consodated return fed by
the frst parent company or
(b) Whether an orgna separate return shoud be fed by the
subsdary company for the month of anuary, 1929, because of the
fact that those parts of the fsca year ended anuary 31. 1929, whch
are not embraced n the consodated return of the frst parent com-
pany are not contnuous n pont of tme, one part fang pror to
and the other part subsequent to the perod of affaton wth the frst
parent company.
n amended return may not be fed by the subsdary company
combnng ts ncome for the months of ebruary, March, and pr,
1928, and anuary, 1929, as beng the perod of nonaffaton wth
the frst parent company. though these four months fa wthn
the same fsca accountng perod of the subsdary company, they do
not consttute a snge ta abe perod so as to be reported upon one
return. The fact that the perod of affaton wth the frst parent
4090 30 11
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144, rt. 761.
154
company, from May to December, 1928, ncusve, ntervened, so that
three months of the fsca year fe pror to and one month fe sub-
sequent to such perod of affaton, resuts n the formaton of the
pror three-month perod and the subsequent one-month perod nto
dstnctve ta abe perods for whch separate returns must be fed.
ccordngy, the subsdary company shoud fe a separate orgna
return for the month of anuary, 1929.
S CTION 144. WIT OLDING O T
T SOURC .
rtce 761: Wthhodng ta at source.
R NU CT O 1928.
Rates of ta appcabe for caendar year 1929. (See Mm. 3787,
page 79.)
rtce 761: Wthhodng ta at source. I -7-4532
( so Secton 145, rtce 781.) Mn. 3791
Reease of e cess ta wthhed under sectons 144 and 145 of the
Revenue ct of 1928, pror to the approva (December 16, 1929) of
the ont Resouton ( . . Res. 133) reducng rates of ncome ta
for the caendar year 1929.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C, ebruary 1, 1930.
Coectors of Interna Revenue, Interna Revenue gents n Charge,
Wthhodng gents, and Others Concerned:
The |ont resouton of the Congress ( . . Res. 133) reducng
rates of ncome ta for the caendar year 1929 was approved by the
Presdent on December 16, 1929.
The foowng tabe shows the rates of ncome ta appcabe to the
caendar year 1929 and the correspondng rates of ta under the
Revenue ct of 1928:
Sectons of Revenue ct of
192S.
Descrpton of ta .
New rate
appcabe
to caendar
year 1929.
Rate
under
1928 ct.
Per cent.
1 of 1
Percent.
Sectons 11 and 161
Norma ta on ndvduas and on estates and
trusts.
1 I
11
11
11
3
e
Secton 13,-. -
Ta on corporatons
12
12
12
Secton 201
Ta on fe nsurance companes
Secton 204
Ta on nsurance companes other than fe or
mutua.
of
2
to
Norma ta on nonresdent aens
3
5
v of
to
Wthhodng at source
5
12
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155
144, rt. 761.
Wthhodng agents have n ther possesson at ths tme ta wth-
hed under the Revenue ct of 1928 durng the year 1929, pror to
the approva of the ont Resouton on December 16, 1929. The
foowng casses are affected by the reduced rates of wthhodng
provded by the ont Resouton:
Perrons.
Ctzens and
States
resdents of the Unted
Nonresdent aen ndvduas
Character of ncome.
Interest on corporaton bonds and
smar obgatons contanng a ta -
free covenant.
Interest on corporaton bonds and
smar obgatons contanng a ta -
free covenant.
Interest on corporaton bonds and
smar obgatons not contanng a
ta -free covenant.
Compensaton for servces rendered n
the Unted States by aen resdents
of Canada or Me co.
Other f ed or determnabe, annua
or perodca ncome.
Interest on corporaton bonds and
smar obgatons contanng a ta -
free covenant.
Interest on corporaton bonds and
smar obgatons not contanng a
ta -free covenant.
Other f ed or determnabe annua or
perodca ncome.
Interest on corporaton bonds and
smar obgatons contanng a ta -
free covenant.
Interest on corporaton bonds and
smar obgatons not contanng a
ta -free covenant.
Other f ed or determnabe, annua
or perodca ncome.
In the case of bonds and smar obgatons contanng a ta -
free covenant ssued by domestc corporatons, resdent foregn cor-
poratons, or nonresdent foregn corporatons havng a payng or
fsca agent n the Unted States, monthy returns, orm 1012, fed
for 1929, w show ta at the rate of y2 per cent wthhed from
nterest pad to ctzens or resdents of the Unted States who reported
such nterest on ne 2 of ownershp certfcate, orm 1000. Wth-
hodng agents w be hed abe for ta on such nterest pad to
such ta payers.at the rate of ony y2 of 1 per cent.
Monthy returns, orm 1012, fed for 1929 by domestc corpora-
tons, resdent foregn corporatons, or nonresdent foregn corpora-
tons havng a payng or fsca agent n the Unted States coverng
nterest on bonds and smar obgatons w aso show ta wthhed
as foows:
Partnershps not engaged n trade or
busness wthn the Unted States
and not havng any offce or pace of
busness theren, composed n whoe
or n part of nonresdent aens
oregn corporatons not engaged n
trade or busness wthn the Unted
States and not havng any offce or
pace of busness theren
G
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1
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2
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144, rt. 761.
156
Character o nterest.
Owner of bonds.
Rate of
ta re-
qured to
be wth-
hed under
secton
1 (a).
Revenue
ctof 1928.
Derved from obgatons contanng a ta -free
covenant n whch the abty assumed by
the obgor e ceeds 2 per cent.
Derved from obgatons contanng a ta -free
covenant n whch theabty assumed by
the obgor e ceeds 2 per cent.
Derved from obgatons contanng a ta -free
covenant n whch theabty assumed by
the obgor e ceeds 2 per cent.
Derved from obgatons contanng a ta -free
covenant n whch theabty assumed by
the obgor does not e ceed 2 per cent.
Derved from obgatons contanng a ta -free
covenant n whch the abty assumed by
the obgor does not e ceed 2 per cent.
Derved from obgatons contanng a ta -free
covenant n whch the abty assumed by
the obgor does not e ceed 2 per cent.
Derved from obgatons not contanng a
ta -free covenant.
Derved from obgatons not contanng a
ta -free covenant.
Derved from obgatons not contanng a
ta -free covenant.
oregn corporatons not engaged n trade or
busness wthn the Unted States and not
havng any offce or pace of busness theren.
Nonresdent aen ndvduas
Partnershps not engaged n trade or busness
wthn the Unted States and not havng any
offce or pace of busness theren, composed
n whoe or n part of nonresdent aens.
oregn corporatons not engaged n trade or
busness wthn the Unted States and not
hav ng any offce or pace of busness theren.
Nonresdent aen ndvduas
Partnershps not engaged n trade or busness
wthn the Unted States and not havng any
offce or pace of busness theren, composed
n whoe or n part of nonresdent aens.
oregn corporatons not engaged n trade or
busness wthn the Unted States and not
havng any offce or pace of busness theren.
Percent.
2
2
1
5
5
12
5
6
12
s there s no authorty n the ont Resouton for reducng
the ta requred to be wthhed at the rate of 2 per cent, wthhodng
agents sha pay the amount of ta shown on monthy returns, orm
1012, at the rate of 2 per cent, rrespectve of the status of the person
n whose behaf the ta s pad.
In the case of ta wthhed at the rate of 5 per cent from nterest
on bonds and smar obgatons ssued by domestc and resdent
foregn corporatons, pad to nonresdent aen ndvduas and
partnershps not engaged n trade or busness wthn the Unted
States and not havng any offce or pace of busness theren, com-
posed n whoe or n part of nonresdent aens, and n the case of ta
wthhed at the rate of 12 per cent from such nterest pad to foregn
corporatons not engaged n trade or busness wthn the Unted States
and not havng any offce or pace of busness theren, an amount
equa to 1 per cent of the nterest may be reeased by the wthhodng
agents and pad over to the person from whom t was wthhed, or
hs proper representatve. In order to reconce the dscrepancy
between the aggregate amount of ta as shown by monthy returns,
orm 1012, and the annua return, orm 1013, requred to be fed not
ater than March 15, 1930, an temzed statement showng names,
addresses, and the amounts refunded shoud be attached to the annua
return, orm 1013. If any of the ta shown to be due on orm 1013
s reeased after the fng of such return, the wthhodng agents
shoud fe an temzed statement showng the names, addresses, and
the amounts so reeased, wth coectors of nterna revenue at the
tme requred for the payment of the ta , on or before une 15,
1930, and the ta abty of the wthhodng agents w be de-
creased accordngy.
G
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157
144, rt. 761.
Under sectons 144(b) and 215 of the Revenue ct of 1928 payors
of compensaton for servces rendered wthn the Unted States by
nonresdent aens who are resdents of Canada or Me co are re-
qured to wthhod ta at the rates of y2 per cent, 3 per cent, and
5 per cent, provded by secton 211 of the ct, n cases where the
nonresdent aens fe orm 1115 wth the payor. Wthhodng
agents who have wthhed ta from such compensaton at the rates
of y2 Per cent, 3 per cent, or 5 per cent, may reease an amount equa
to 1 per cent of such compensaton to the person from whom the ta
was wthhed, or hs proper representatve. Such ncome s reported
on annua return, orm 1042.
The f ed or determnabe annua or perodca ncome, other
than that herenbefore referred to, of nonresdent aen ndvduas,
partnershps not engaged n trade or busness wthn the Unted
States and not havng any offce or pace of busness theren, com-
posed n whoe or n part of nonresdent aens, and foregn cor-
poratons not engaged m trade or busness wthn the Unted States
and not havng any offce or pace of busness theren, s sub|ect to
wthhodng under the Revenue ct of 1928 at the rate of 5 per cent
n the case of nonresdent aen ndvduas and partnershps not
engaged n trade or busness wthn the Unted States and not havng
any offce or pace of busness theren, composed n whoe or n part
of nonresdent aens, and 12 per cent n the case of foregn cor-
poratons not engaged n trade or busness wthn the Unted States
and not havng any offce or pace of busness theren. Wthhodng
agents who have wthhed ta at these rates may reease an amount
equa to 1 per cent of the ncome and pay t over to the person from
whom the ta was wthhed, or hs proper representatve. Such n-
come s reported on annua return, orm 1042.
It s unnecessary to make any reference on orm 1042 to the fact
that any part of the ta orgnay wthhed has been reeased to the
ta payer. The fact that the ta s reported as wthhed on the return
at the rates of y2 of 1 per cent, 2 per cent, 4 per cent, or 11 per cent
w be equvaent to a statement that 1 per cent of the ncome has
been reeased to the ta payer or hs proper representatve.
Wthhodng agents who pror to une 15, 1930, do not reease the
e cess ta wthhed durng 1929 to persons from whom the ta was
wthhed, or ther proper representatves, are requred to pay such
e cess ta to the approprate coectors of nterna revenue not ater
than une 15, 1930.
The procedure under the provsons of artce 764 of Reguatons
74, pertanng to the reease by wthhodng agents of the tota ta
wthhed from nonresdent aen ndvduas after notfcaton by the
ureau of the resut of the e amnaton of the e empton certfcates,
orm 1002, fed by the nonresdent aens, s not afected by the pro-
vsons of the ont Resouton. If e empton certfcates, orm
1002, are receved after une 15, 1930, any refund of the ta wth-
hed from ncome covered by such certfcates w be made by the
Government to the ta payers or ther proper representatves n the
usua manner.
In a other cases where the e cess ta wthhed has been pad to
the Government by the wthhodng agents t w be necessary n
the case of a nonresdent aen ndvdua, n order for the ta payer
to obtan a refund of such e cess ta , to fe or cause to be fed a
G
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162, rt. 863. 158
return on orm 1040 of hs ncome from a sources wthn the
Unted States and n the case of a foregn corporaton not engaged
n trade or busness wthn the Unted States and not havng any
offce or pace of busness theren to fe or cause to be fed a return
of such ncome on orm 1120.
nqures concernng ths mmeograph shoud refer to the
number thereof and be marked for the attenton of IT: : RR.
Robt. . Lucas, Commssoner.
S CTION 145. P YM NT O CORPOR TION
INCOM T T SOURC .
rtce 781: Wthhodng n the case of nonresdent
foregn corporatons.
R NU CT O 1928.
Rates of ta appcabe for caendar year 1929. (See Mm. 3787.
page 79.)
rtce 781: Wthhodng n the case of nonresdent
foregn corporatons.
R NU CT O 1928.
Reease of e cess tu wthhed pror to reducton of rates of ncome
ta for the caendar year 1929. (See Mm. 3791. page 154.)
SUPPL M NT . ST T S ND TRUSTS.
S CTION 162. N T INCOM .
rtce 863: Decedent s estate durng nd
mnstraton.
R NU CT O 1928.
The year s support for the wdow and mnor chdren aowed
by the aws of the State of Georga s a charge upon the estate of
the decedent and s superor to that of an nterna revenue ta en.
In payng over to the wdow and mnor chdren the amount
f ed n accordance wth the terms of the State aw for such sup-
port the e ecutors woud not come wthn the provsons of sectons
3400 and 3407 of the Revsed Statutes of the Unted States.
rung s requested as to whether n the State of Georga the
statutory year s support for the wdow and mnor chdren of the
deceased ta payer has prorty over the ta en of the Unted States.
Under secton 4041 of the Code of Georga, the provson for the
support of a famy s ncuded among the necessary e penses of
admnstraton and s to be preferred over a other debts payabe
out of the estate of the decedent e cept as otherwse provded. In
I -3-4507
I. T. 2518
G
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a
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f
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(
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)
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2
0
1
3
-
0
1
-
2
2
0
3
:
4
9
G
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8
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4
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4
4
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159
162, rt. 863.
ths connecton see ubrght et a. v. oardman et a. (159 Ga., 58,
125 S. ., 44), where the Supreme Court of Georga sad:
It thus appears that under our aw a year s support ranks frst In prorty
among debts of a decedent. The ony e ceptons to the above rue are specfed
n sectons of the Cv Code of 1910, 4048, 4049, 4050, where the 12 months
support s made nferor to purchase money, rent, suppes, etc.
Secton 4000 of the Code of Georga sets up the order of prort|
of debts payabe out of the estate of the decedent as foows:
(1) Year s support for the famy
(2) unera e penses
(3) Necessary e penses of admnstraton
(4) Unpad ta es or other debts due to the State or the Unted
States.
Other prortes foow n consecutve order but, as none of them
are of mportance n connecton wth the pendng questons, they are
not enumerated.
In Soctor s Memorandum 5032 (C. . -, 109) t s sad that:
unera e penses and the e penses of admnstraton are not debts of the
decedent but charges aganst the property of the deceased, to be deducted
before the payment of debts, whether preferred or not.
It s to be noted that the year s support to the wdow and famy
s, by the postve terms of secton 4041 of the Code of Georga, made
a necessary e pense of admnstraton. In a case arsng n the State
of Mane, where under the aws of that State a wdow s aowance
had been made, the court hed n the case of the Postmaster Genera
. Robbns (19 ed. Cas., 1126) that the ct of Congress of March 1,
1797 (one of the statutes on whch sectons 3466 and 3467, Revsed
Statutes, are based), gvng to the debts to the Unted States prorty
over a other debts due from a deceased debtor, does not entte the
Government to receve ts debts from the admnstrator pror to hs
payment to the wdow of the aowance made to her under the terms
of the State aw. In the te t of the opnon the court compares the
wdow s aowance wth her rght of dower, whch has been hed n
Genera Counse s Memorandum 824 (C. . -2, 54) to be superor
to the en of the Unted States for nterna revenue ta es.
The prorty of the aowance for support to the wdow, or to the
wdow and chdren, has been sustaned n a number of cases.
Lvngston v. Langey, 79 Ga., 169, 3 S. ., 909 Crenshaw v. Moore,
124 Tenn., 528, 137 S. W., 924 In re ohn . ennedy, 157 Ca.,
517, 108 Pac, 280 State of Mnnesota v. Probate Court, 137 Mnn.,
238, 163 N. W., 285 state of Newe uen, 47 Utah, 96, 151 Pac,
533.)
It s the opnon of ths offce that the year s support for the wdow
and mnor chdren aowed by the aws of the State of Georga s a
charge upon the estate of the decedent and s superor to that of an
nterna revenue ta en. It foows, therefore, that n payng over
to the wdow and mnor chdren the amount f ed n accordance wth
the terms of the State aw for such support the e ecutors woud not
come wthn the provsons of sectons 3466 and 3467 of the Revsed
Statutes of the Unted States.
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212, rt. 1042. 160
SUPPL M NT . NONR SID NT LI N INDI IDU LS.
S CTION 212. GROSS INCOM .
rtce 1042: cuson of earnngs of foregn T -18-461 )
shps from gross ncome. T. D. 4289
INCOM T .
empton from ta aton of earnngs of shps documented
under the aws of Span.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
Secton 213(b) 8 of the Revenue cts of 1921, 1924, and 1926,
and sectons 212(b) and 231(b) of the Revenue ct of 1928, provde
that there sha oe e empt from ta aton the ncome of a nonres-
dent aen or foregn corporaton whch conssts e cusvey of
earnngs derved from the operaton of a shp or shps documented
under the aws of a foregn country whch grants an equvaent
e empton to ctzens of the Unted States and to corporatons
organzed n the Unted States.
Span grants an equvaent e empton to ctzens of the Unted
States and corporatons organzed n the Unted States, from anu-
ary 1, 1921. ccordngy, artce 89 of Reguatons 62, as amended
by Treasury Decsons 3488 (C. . II-, p. 80), 3813 (C. . -,
p. 225), 4013 (C. . I-1, p. 59), 4098 (C. . I-2, p. 58), 4135
(C. . II-1, p. 81), 4227 (C. . II-2, p. 125), and 4269 ( uetn
TII-27, p. 5 C. . III-2, p. 146 ) artce 89 of Reguatons 65,
as amended by Treasury Decsons 3812 (C. . -, p. 47), 4013
(C. . I-1, p. 59), 4098 (C. . I-2, p. 58), 4135 (C. . II-1,
p. 81), 4227 (C. . II-2, p. 125), and 4269 ( uetn III-27,
p. 5 C. . III-2, p. 146 ) artce 89 of Reguatons 69, as
amended by Treasury Decsons 4013 (C. . I-1, p. 59), 4098 (C.
. I-2, p. 58), 4135 (C. . II-1, p. 81), 4227 (C. . II-2, p.
125), and 4269 ( uetn III-27, p. 5 C. . III-2, p. 146 )
and artce 1042 of Reguatons 74, as amended by Treasury Dec-
son 4269 ( uetn III-27, p. 5 C. . III-2, p. 146 ), are hereby
further amended so as to ncude Span n the st of countres
whch e empt from ta so much of the ncome of ctzens of the
Unted States nonresdent n such foregn countres and of corpora-
tons organzed n the Unted States as conssts of earnngs derved
from the operaton of a shp or shps documented under the aws
of the Unted States, and to e cude Span from the st of coun-
tres whc do not grant such e empton.
Rost. . Lucas,
Commssoner of Interna Revenue
pproved pr 25, 1930.
. W. Meon,
Secretary of the Treasury.
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161 272, rt. 1172.
SUPPL M NT 1 SS SSM NT ND COLL CTION O D ICI NCI S.
S CTION 272 PROC DUR IN G N R L.
rtce 1172: Coecton of a defcency. I -6-4526
G. C. M. 7432
R NU CT OP 1928.
Where a pena sum s stated n a bond gven to secure the pay-
ment of ta es to the Unted States and the surety upon demand
negects or refuses to pay the amount due under the terms of
the bond, nterest from the tme of defaut on the amount de-
manded may be coected from the surety, even though the aggre-
gate of such nterest and the amount demanded e ceeds the
pena sum stated n the bond.
The opnon of ths offce s requested as to whether nterest from
the tme of defaut may be coected from the surety on a bond gven
n New York to secure the payment of ta es to the Unted States,
demand havng been made upon the surety to satsfy ts abty
under the bond, where there has been a breach of the condtons
of the bond but the pena sum stated n the bond s nsuffcent to
cover the amount demanded and such nterest.
Secton 160 of the cv practce act of New York (Cevenger s
New York Practce, page 107) provdes as foows:
bond n a pena sum, e ecuted wthn or wthout the State and contanng
a condton to the effect that t s to be vod upor. performance of any act, has
the same effect, for the purpose of mantanng an acton or speca proceedng
or two or more successve actons or speca proceedngs thereupon, as f t
contaned a covenant to pay the sum or to perform the act specfed n the
condton thereof. ut the damages to be recovered for a breach or succes-
sve breaches of the condton, can not e ceed, n the aggregate, the pena sum,
e cept where the condton s for the payment of money n whch case, they
can not e ceed the pena sum, wth nterest thereupon from the tme when
the defendant made defaut n the performance of the condton.
In ranard v. ones (18 N. Y., 35) the Court of ppeas of the
State of New York hed that the recovery aganst a surety on a
bond for the payment of money s not mted to the penaty but
may e ceed t so far as necessary to ncude nterest from the tme
of the breach and that, so far as nterest s payabe by the terms of
the contract, t s mted by the penaty unt defaut s made, but
after breach nterest s recoverabe, not ony under the contract, but
as damages. The court sad:
It may be a reasonabe doctrne, that a surety who has bound hmsef under
a f ed penaty for the payment of money or some other act to be done by a
thrd person, has marked the utmost mt of hs own abty. ut when the
tme has come for hm to dscharge that abty, and he negects or refuses
to do so, t s equay reasonabe, and atogether |ust, that he shoud compen-
sate the credtor for the deay whch he has nterposed. The ega measure of
ths compensaton s, nterest on the sum whch he ought to have pad from the
tme when payment was due from hm. The queston, n short, s, not
what s the measure of a surety s abty nnder a pena bond, but what does
the aw e act of hm for an un|ust deay n payment after hs abty s
ascertaned and the debt s actuay due from hm.
In the case of eers v. Shannon (73 N. Y., 292) the New York
Court of ppeas sad that the surety w be ds-
charged by a payment of the pena sum, prompty made upon the
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292.
162
happenng of a breach of the condton. If he deays payment,
hs abty may be carred further n a bond condtoned for the
payment of money and up to the amount of the penaty
and nterest thereon from the tme of the breach and up to the
date of the |udgment.
In the case of Goucester Cty v. schbach (54 N. . L., 150, 23
t., 360) the Supreme Court of New ersey sad :
The true rue, n my |udgment, s that upon an acton on a bond wth
condton anne ed, f t appears that the condton has been broken, and that
the sum reay due, or the damage nctuay sustaned, e ceeds the penaty,
the pantff may recover the penaty as a debt, and substanta damages for
ts detenton, measured by nterest thereon from the tme the penaty ought to
have been pad, and not e ceedng n the whoe the sum reay due or the
damage actuay sustaned. Whe the modern ngsh decsons seem adverse
to ths vew, the weght of mercan authorty s decdedy n ts favor.
or the foregong reasons, ths offce s of the opnon that on
bonds wth surety, gven to secure the coecton of ta es due the
Unted States, where a pena sum s stated n the bond, and the
surety, upon demand, negects or refuses to pay the amount due
under the terms of the bond, nterest from the tme of defaut on
the amount demanded may be coected from the surety, even though
the aggregate of such nterest and the amount demanded e ceeds
the pena sum stated n the bond.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
SUPPL M NT m. nterest and addtons to the ta .
S CTION 292. INT R ST ON D ICI NCI S.
Secton 292. I -9-4545
Mn. 3794
Revenue ct of 1928 Interest on defcences n ta assessed
pror to due date of ast nstament of ta .
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C, ebruary 10, 1930.
Offcas of the ureau of Interna Revenue, Coectors of Interna
Revenue, Interna Revenue gents n Charge, and Others Con-
cerned:
Consderabe confuson has apparenty arsen concernng the
amount of nterest coectbe upon defcences n ta mposed by
the Revenue ct of 1928 n cases where such ta es are beng pad n
nstaments and the defcences are assessed at any tme pror to the
due date of the ast nstament.
Secton 272 () and secton 292 of the Revenue ct of 1928 provde,
respectvey, as foows:
Proratng of defcency to nstaments. If the ta payer has eected to pay
the ta n nstaments and a defcency as been assessed, the defcency sha
be prorated to the four nstaments. cept as provded In secton 273 (re-
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163
292.
atng to |eopardy assessments), that part of the defcency so prorated to
any nstament the date for payment of whch has not arrved, sha be
coected at the same tme as and as part of such nstament. That part of
the defcency so prorated to any nstament the date for payment of whch
has arrved, sha be pad upon notce and demand from the coector.
Interest on defcences. Interest upon the amount determned as a defcency
sha be assessed at the same tme ns the defcency, sha be pad upon notce
and demand from the coector, and sha be coected as a part of the ta ,
at the rate of 6 per centum per annum from the date prescrbed for the pay-
ment of the ta (or, f the ta s pad n nstaments, from the date prescrbed
for the payment of the frst nstament) to the date the defcency s as-
sessed, or, n the case of a waver under secton 272(d). to the thrteth day
after the fng of such waver or to the date the defcency s assessed whch-
ever s the earer.
Pror to the enactment of the Revenue ct of 1926 nterest on
defcences n ta was mposed from the due date of the ta f pad
n a snge payment, or from the due dates of the varous nstaments
f pad n nstaments. (See secton 250(b) of the Revenue ct
of 1921 and secton 274(f) of the Revenue ct of 1924.)
Upon the enactment of the Revenue ct of 1926, however, nterest
upon defcences n ta was mposed from the due date of the ta
f pad n a snge payment or from the due date of the frst nsta-
ment f pad n nstaments. In other words, the ta payer who pad
the ta m nstaments was paced n the same poston wth respect
to the perod over whch nterest shoud be computed on a defcency
as the ta payer who had pad hs ta n fu on or before the due
date. In order that no dscrmnaton may be made aganst the
ta payer who has pad hs orgna ta n a snge payment on or
before ts due date, nterest upon a defcences n ta es mposed
by the Revenue ct of 1928 w hereafter be computed from the
due date of the ta (f pad n a snge payment) or from the due
date of the frst nstament (f pad n nstaments), to the date
of the assessment, as specfcay provded for n secton 292 of the
Revenue ct of 1928. Where the ta s beng pad n nstaments
and the defcency and defcency nterest are paced on the assessment
st pror to the due date of the ast nstament, the nterest, beng a
part of the ta for coecton purposes, w be prorated to the four
nstaments and coected n the same manner as the defcency.
(See secton 272() of the Revenue ct of 1928.) or e ampe, f
a return s fed for the caendar year 1929 showng an orgna ta
of 400, and a defcency of 100, pus nterest of 2, s assessed on
uy 15, 1930, the defcency and defcency nterest w be coected
as foows:
mount of defcency and nterest
payabe on notce and demand
from coector.
mount payabe Sept. 15, 1930.
mount payabe Dec. 15,1930.
Defcency prorated to frst
and second nstaments,
25 each 50.00
Thrd nstament 100.00
ourth nstament 100.00
Defcency prorated to
Defcency prorated to
Interest prorated to frst and
second nstaments, 50
cents each 1.00
thrd nstament 25.00
Interest prorated to
fourth nstament 25.00
Interest prorated to
thrd nstament .50
fourth Instament 50
51.00
125.50
125. 50
The prncpe outned above s aso appcabe to defcences n
ta assessed on return coverng fsca years where the ta s beng
pad n nstaments.
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606, rt. 1301.
164
ccordngy, t w be seen that, regardess of whether the ta -
payer makes payment of the fu amount of orgna ta on or before
the due date or makes payment of such ta n nstaments, nterest
w be asserted on any defcency shown to be due at the rate of 6 per
cent per annum from the due date for payment of the ta , or the frst
nstament thereof, to the date of the assessment of the defcency.
or the purpose of coecton, defcency nterest assessed pror to
the due date of the ast nstament of ta may be prorated to the
nstaments and coected n the same manner as the defcency, pro-
vded the ta payer eected to make payment of the orgna ta n
nstaments.
ny correspondence wth regard to ths mmeograph shoud refer
to the number thereof and the symbos IT: : RR.
Robt. . Lucas, Commssoner.
TITL I . DMINISTR TI PRO ISIONS.
S CTION 601. O RD O T PP LS-
PROC DUR .
Secton 001.
ndngs of fact not ncuded n oard s forma fndngs. (See
Ct. D. 155. page 279.)
S CTION 6()6. CLOSING GR M NTS.
rtce 1301: Cosng agreements reatng to I -16-4604
ta abty n respect of nterna-revenue G. C. M. 7549
ta es.
R NU CT O 1928.
Where the report of a revenue agent sets out an amount whch Is
stated to represent the ta abty of the ta payer and a cosng
agreement s duy e ecuted upon the bass of ths report, a mstake
n one of the tems ncuded n the report can not be sad to con-
sttute a msrepresentaton of fact upon whch the agreement may
be set asde.
n opnon s requested reatve to whether a cosng agreement
e ecuted by , the ta payer, for the year 1926 may be set asde.
The ta payer fed hs ncome ta return for the year 1926 under
date of March 28, 1927. ta n the sum of 28 doars was assessed
and pad. n e amnaton was made of the books and records of
the ta payer for the year 1926, and n ugust, 1928, the revenue
agent submtted a report n whch he recommended an overassess-
ment for that year n the sum of 12a doars. Under date of Novem-
ber 8, 1928, the ta payer fed a protest wth respect to the revenue
agent s report. s a resut of the ta payer s protest an ad|ustment
was made n the ta payer s net ncome for 1926 by aowng as a
deducton an tem amountng to 14 d doars, and an overassessment
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165
606, rt. 1301.
for 1926 was recommended n favor of the ta payer n the sum of
20s doars. Ths ad|ustment was accepted by the ta payer, and
an overassessment of 20a doars was determned by the Income Ta
Unt.
Under date of December 3, 1928, the ta payer e ecuted a cosng
agreement on orm 866 n accordance wth the provsons of sec-
ton 606 of the Revenue ct of 1928, n whch the ta payer s ncome
ta abty for 1926 was stated to be n the prncpa sum of 8a
doars, the orgna ta assessment n the sum of 28a doars ess
the overassessment of 20a doars. Ths cosng agreement was
sgned by the Commssoner of Interna Revenue on anuary , 1929,
and has been approved by the Secretary of the Treasury, the ap-
prova beng specfcay enumerated on Schedue No. , dated
anuary , 1929.
Under date of pr 5, 1929, there was fed by the ta payer a
cam for refund for 1926 n the sum of doars, n whch the
reasons for whch the refund shoud be aowed were stated as
foows:
In statement from Interna revenue agent n charge at , dated
ugust , 1928, the ta payer s ad|usted aowabe deducton was computed as
143a doars nstead of 152 doars. Ths error was due to the fact that n
the agent s statement no cognzance was taken of nterest, ta es, and other
e penses amountng to 9 r doars.
Under date of May , 1929, the ta payer was advsed that ths
cam woud be re|ected for the reason that hs ta abty for
1926 was cosed by agreement n accordance wth the provsons of
secton 606 of the Revenue ct of 1928. The schedue upon whch
the dsaowance of ths cam was sted was dated une , 1929.
Under date of une 19, 1929, the ta payer addressed a etter to the
Commssoner of Interna Revenue n. whch e cepton s taken to
the re|ecton of the cam for refund. It s camed by the ta payer
that some of the fgures contaned n the revenue agent s report are
ncorrect, and that hs net ncome was computed wthout takng nto
consderaton certan aowabe deductons. It s aeged that these
errors consttute a msrepresentaton of fact, and that the cosng
agreement e ecuted by the ta payer s not bndng upon hm. The
ta payer states:
refy, the agent omtted certan tems of nterest, ta es, and e pense.
Whe a protest was fed and a conference was hed, the queston n dspute
was one of prncpe and no fgures were nvoved.
Whe t s perfecty true that I shoud have dscovered the error pror to
the hearng and had same corrected at that tme, t s equay true that I was
fuy |ustfed n assumng the Government s fgures to be correct, and t was
ony n preparng an amended 1927 return that the error was dscovered.
The opnon of ths offce has been requested as to whether, under
the facts stated above, there has been a msrepresentaton of a
matera fact wthn the meanng of secton 606 of the Revenue ct
of 1928 whch w authorze the reopenng of the case.
Secton 606(b) of the Revenue ct of 1928 provdes, wth respect
to the fnaty of cosng agreements, as foows:
If such agreement s approved by the Secretary such agreement
sha be fna and concusve, and, e cept upon a showng of fraud or mafeas-
ance, or msrepresentaton of a matera fact (1) the case sha not be reopened
as to the matters agreed upon or the agreement modfed, by any offcer,
empoyee, or agent of the Unted States .
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606, rt. 1301
166
It s cear that secton 606 was enacted n an effort to dscourage the
constant reopenng of cosed cases. The very purpose of the secton
was to make absoutey fna the determnaton agreed upon by the
ta payer and the Commssoner. cosng agreement s not effectve
unt approved by the Secretary of the Treasury, but once consum-
mated, may not be set asde e cept upon a showng of fraud or
mafeasance, or msrepresentaton of a matera fact.
The queston has arsen whether n order to consttute a msrep-
resentaton of a matera fact upon whch a cosng agreement may
be set asde, the nformaton or statement aeged to be fase must be
furnshed or made wfuy and wth knowedge of ts fasty and
wth an ntenton to deceve. The genera rue of aw upon ths
queston s stated n 9 Corpus urs, 1169, as foows:
ccordng to the weght of authorty, msrepresentaton of matera facts,
athough nnocenty made, f acted on by the other party to hs detrment w
consttute a suffcent ground for rescsson and canceaton n equty. The
rea nqury s not whether the party makng the representaton knew t to be
fase, but whether the other party beeved t to be true, and was msed by t
n makng the contract and. whether the msrepresentaton s made nnocenty
or knowngy, the effect s the same.
though t s not necessary that the aeged msrepresentaton
be made ntentonay, there must be a reance upon the representa-
ton whch s camed to be fase, ese no rght of acton arses n
behaf of the person to whom such representaton s made. In other
words, before there can be a rescsson of a contract on account of
msrepresentatons, t must be made to appear that the party seekng
reef actuay reed upon the msrepresentatons of the other party
and acted upon them. If he does not rey upon the msrepresenta-
tons but acts as a resut of hs ndependent nvestgaton of the
facts, he can not cam to have been damaged by them.
In Pomeroy, quty urs., 4th d., secton 893, the rue s stated
as foows:
If, after a representaton of fact, however postve, the party to
whom t was made nsttutes an nqury for hmsef, has recourse to the proper
means of obtanng nformaton, and actuay earns the rea facts, he can not
cam to have reed upon the msrepresentaton and to have been msed by t.
Such cam woud smpy be untrue. The same resut must pany foow
when, after the representaton, the party recevng t has gven to hm a suff-
cent opportunty of e amnng Into the rea facts, when hs attenton Is
drected to the sources of nformaton, and he commences, or purports or pro-
fesses to commence, an nvestgaton. The panest motves of e pedency and
of |ustce requre that he shoud be charged wth a the knowedge whch he
mght have obtaned had he pursued the Inqury to the end wth dgence and
competeness. e can not cam that he dd not earn the truth, and that he
was msed.
In Wston on Contracts, voume 3, secton 1515, the rue s agan
stated as foows:
Where one to whom fase statements are made undertakes to verfy them
and form a |udgment of hs own upon the facts, ths s evdence of a reance
on hs own |udgment rather than on the representatons and no reef can be
had, uness t s found as a fact that the representatons were aso reed upon.
dstncton may be drawn between a msrepresentaton of fact
and a mstake of fact, but cases nvovng contracts entered nto
under a mstake of fact w be here referred to for the reason that
the rungs theren appear to throw ght upon the ssue presented
n the nstant case.
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167
( 600, rt. 1301.
In consderng whether equty w decree the canceaton of an
nstrument because at the tme of ts e ecuton one or both of the
partes abored under a mstake of fact, t s necessary to consder
the materaty of the aeged mstake. In 4 R. C. L., 507, secton 20,
the genera rue s stated:
the authortes are practcay unanmous n hodng that the ms-
take must not resut from the want of that degree of care and dgence
whch woud be e ercsed by persons of reasonabe prudence under the same
crcumstances, or equty w not reeve aganst t. Moreover a mstake such
as w entte one to canceaton must be matera to the transacton and
affect the substance thereof, rather than a mere ncdent or the nducement
for enterng nto t. Thus some authortes regard an error commtted n com-
putng the amount that one sha bd for a contract as affectng the nducement
for enterng Into the contract, rather than the contract tsef, and rescsson
of the atter has been refused upon that ground. s t has sometmes been
put, a contract w not be rescnded for a mstake of fact where the mstake
resuts from a process of reasonng or motve on the part of one of the partes.
In the case of Grymes v. Sanders et a. (93 U. S., 55, 23 L. d.,
798) the Supreme Court of the Unted States hed:
mstake as to a matter of fact, to warrant reef n equty, must be mate-
ra, and the fact must be such that t anmated and controed the conduct of
the party. It must go to the essence of the ob|ect n vew, and not be merey
ncdenta. The court must be satsfed, that but for the mstake the compan-
ant woud not have assumed the obgaton from whch he seeks to be reeved.
( err on Mstake and raud, 408 Trgg v. Read, 5 umph., 520 ennngs v.
roughton, 17 eav., 541 Thompson v. ackson, 3 Rand., 507 arrod s ers
v. Cowan, ardn, 543 v. ush, 19 arb. ( rk), 522 ousan v. Toutnn,
9 a., 662.) Mstake, to be avaabe n equty, must not have arsen
from neggence, where the means of knowedge were easy accessbe. The
party companng must have e ercsed at east the degree of dgence whch
may be fary e pected from a reasonabe person. ( err on raud and
Mstake, 407.)
In the case of Stenmeyer v. Schroeppe (226 111., 9, 80 N. ., 564,
10 L. R. . (N. S.), 114, 117 m. St. Rep., 224) there was nvoved
n footng up the dfferent tems of a b, made the tota of 1,446,
nstead of 1,867, whch t woud have been had he correcty added
the amounts. s bookkeeper coped the st on one of the company
bheads, wthout gvng the prces of each tem, and at the bottom
of the st wrote the foowng words: bove for 1,446. The um-
ber was devered, and the purchaser pad the 1,446 but refused to
pay any more. The vendor sued for the dfference. The court n
passng on the matter sad:
mstake whc w |ustfy reef In equty must affect the substance of the
contract, and not a mere ncdent or the nducement for enterng nto t. The
mstake of the appeants dd not reate to the sub|ect matter of the contract,
ts ocaton, dentty, or amount, and there was nether beef n the e stence
of a fact whch dd not e st or gnorance of any fact matera to the contract
whch dd e st. The contract was e acty what each party understood t to be
and t e pressed what was ntended by each. If t can be set asde on account
of the error n addng up the amounts representng the seng prce, t coud be
set asde for a mstake n computng the percentage of profts whch appeants
ntended to make, or on account of a mstake n the cost of the umber to
them, or any other mscacuaton on ther part. If equty woud reeve on
account of such a mstake there woud be no stabty n contracts, and we
thnk the appeate court was rght n concudng that the mstake was not of
such a character as to entte the appeants to the reef prayed for.
See aso 4 L. R. ., 483 (note), where t s stated:
If a mstake s made by one or both partes n reference to some fact whch,
though connected wth the transacton, s merey ncdenta, and not a part o
The vendor of the umber,
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606, rt. 1301.
168
the very sub|ect matter, or essenta to any of Its terms or f the companng
party fas to show that hs conduct was In reaty determned by t n ether
case the mstake w not be ground for any reef, affrmatve or defensve.
The authortes cted above reate to contracts n genera. cosng
agreement such as the one entered nto n the nstant case s very
mted n ts scope and does not have a the usua ncdents of an
ordnary contract. There s no provson for settng asde a cosng
agreement because of a mutua mstake of fact. Where a cosng
agreement s e ecuted n accordance wth the provsons of secton
606, quoted above, t must be treated as fna and concusve uness the
partcuar facts of the case brng t wthn one of the e ceptons
specfcay set out n the statute. cosng agreement, ncudng the
one n the nstant case, rectes that there has been a determnaton
of the ta abty of the ta payer n a stated amount for a specfed
perod. fter the approva of a cosng agreement by the Secretary
of the Treasury, the Government may not vountary reopen the case,
nor can the ta payer force a reopenng of the case n court, e cept
upon a showng of fraud or mafeasance, or msrepresentaton of a
matera fact. It may be subsequenty deveoped that there has been
an error n the computaton of the ta payer s ta abty, but such an
error may not be corrected, whether t be n favor of the ta payer or
of the Government, e cept n accordance wth the provsons of the
statute.
It has been shown that a msrepresentaton of fact, athough made
nnocenty and wthout knowedge of ts fasty, may be a suffcent
ground for canceaton n equty of a contract, but t must be made
to appear that the party seekng reef reed upon such msrepresen-
taton and that t was so matera as to be of the essence of the
contract.
In the nstant case the burden s upon the ta payer to show that
the cosng agreement woud not have been e ecuted e cept for a
msrepresentaton of a matera fact upon whch he reed. There
has been a faure to make ths showng. The msrepresentaton
companed of heren s that the revenue agent omtted to ncude
certan tems as deductons n arrvng at the resut upon whch the
cosng agreement was based. In vew of the provsons of the
reguatons (artce 451, Reguatons 74) for an e amnaton by
the ta payer of the revenue agent s report and for protest and hear-
ng wth respect to the same, t s the opnon of ths offce that mat-
ters contaned n the revenue agent s report, such as the amount of
gross ncome, net ncome, deductons, etc., coud not, by reason of
beng ncorrect, amount to a msrepresentaton of a matera fact
wthn the meanng of the statute. The revenue agent obtaned the
nformaton contaned n hs report from the books and records
submtted by the ta payer. The ad|ustment n ta abty was
accepted by the ta payer.
It s admtted by the ta payer that he shoud have dscovered the
error pror to the hearng whch was granted hm and had the same
corrected, but he states that he was fuy |ustfed n assumng the
Government s fgures to be correct. revenue agent s report s
necessary based upon facts pecuary wthn the knowedge of the
ta payer. Where such a report sets out an amount whch s stated
to represent the ta abty of the ta payer and a cosng agreement
s duy e ecuted upon the bass of ths report, a mstake n one of
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169
606, rt. 1301.
the tems ncuded n the report can not be sad to consttute a
msrepresentaton of fact upon whch the agreement may be set
asde. Uness ths concuson s correct, t woud be possbe to
reopen practcay every case n whch a cosng agreement s sgned
and approved where t subsequenty deveops that an unntentona
mstake was made n the determnaton of the ta abty of the
ta payer. Such a resut woud defeat the very purpose of secton
606. and, nstead of fnay dsposng of cases, the e ecuton of cosng
agreements woud ead to endess dsputes.
In vew of the foregong, ths offce s of the opnon that the
cosng agreement whch was entered nto n the nstant case s fna
and concusve and may not be set asde.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
rtce 1301: Cosng agreements reatng to I -17-4612
ta abty n respect of nterna-revenue G. C. M. 6894
ta es.
NU CT O 1928.
The rght to e amne the ta payer s books s not affected by the
e ecuton and approva of a cosng agreement. n nvestgaton
may be made by the ureau at any tme to determne whether there
s any fraud or mafeasance, or msrepresentaton of a matera fact
n connecton wth the e ecuton of an agreement under secton 606
of the Revenue ct of 1928.
The opnon of ths offce s requested as to whether the ureau ha
any rght, after the e ecuton and approva of a cosng agreement,
to make any further nspecton of the ta payer s books for the pur-
pose of determnng whether there s any fraud or mafeasance, or
msrepresentaton of a matera fact n connecton wth the e ecuton
of the cosng agreement, where there are reasonabe grounds to
beeve that such s the case.
Wth respect to a further nspecton of the ta payer s books, at-
tenton s drected to secton 1105 of the Revenue ct of 1926, whch
provdes as foows:
Sec. 1105. No ta payer sha be sub|ected to unnecessary e amnatons or
nvestgatons, and ony one nspecton of a ta payer s books of account sha be
made for each ta abe year uness the ta payer requests otherwse or uness
the Commssoner, after nvestgaton, notfes the ta payer n wrtng that an
addtona nspecton s necessary.
Secton 618 of the Revenue ct of 1928 reads as foows:
Secton 1104 of the Revenue ct of 1926 s amended to read as foows:
Sec. 1104. The Commssoner, for the purpose of ascertanng the correct-
ness of any return or for the purpose of makng a return where none has been
made, s hereby authorzed, by any offcer or empoyee of the ureau of Interna
Revenue, ncudng the fed servce, desgnated by hm for that purpose, to
e amne any books, papers, records, or memoranda bearng upon the matters
requred to be ncuded n the return, and may requre the attendance of the
person renderng the return or of any offcer or empoyee of such person, or the
attendance of any other person havng knowedge n the premses, and may take
hs testmony wth reference to the matter requred by aw to be ncuded n
such return, wth power to admnster oaths to such person or persons.
4090 30 12
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t 07.
170
Snce t woud appear that there are reasonabe grounds to beeve
that there was fraud or mafeasance, or msrepresentaton of a
matera fact n connecton wth the e ecuton of the cosng agree-
ment, an addtona nspecton of the ta payer s books becomes nec-
essary, and upon compance wth the foregong sectons of the ct
the ta payer s books may be sub|ected to further e amnaton. The
rght to e amne the ta payer s books s not affected by the e ecuton
of a cosng agreement. It may be that the nvestgaton and the
addtona nspecton of the ta payer s books w not furnsh ev-
dence suffcent to entte the ureau to set asde the cosng agree-
ment, but the e ecuton of such agreement does not precude the
ureau from makng an nvestgaton to determne whether the case
may be reopened.
Wth respect to the fnaty of cosng agreements, secton 606(b)
of the Revenue ct of 1928 provdes that f the agreement s duy
approved by the Secretary, such agreement sha be fna and con-
cusve, and, e cept upon a showng of fraud or mafeasance, or
msrepresentaton of a matera fact (1) the case sha not be
reopened as to the matters agreed upon or the agreement modfed
by any offcer, empoyee, or agent of the Unted States .
It s the opnon of ths offce that an nvestgaton may be made
by the ureau at any tme to determne whether there s any fraud
or mafeasance, or msrepresentaton of a matera fact n connecton
wth the e ecuton of an agreement under secton 606. The nvestga-
ton may dscose that errors were made n the computaton of the
ta abty and t may appear that the ta payer shoud have pad a
greater ta , but the agreement may not be set asde by the ureau
or by the courts uness the case comes wthn the e ceptons quoted
above. Where an nvestgaton s made and there s an absence
of fraud or mafeasance, or msrepresentaton of a matera fact,
the case may not be reopened as to the matters agreed upon or the
agreement modfed. Ths does not mean, however, that the ureau
may not make an nvestgaton n any case n order to deveop the
true facts. n nvestgaton does not amount to a reopenng.
Whether the case may be reopened depends upon the resuts of the
nvestgaton.
C. M. CI R ST,
Genera Counse, ureau of Interna Revenue.
S CTION 607. CT O PIR TION O P RIOD
O LIMIT TION G INST UNIT D ST T S.
Secton 607.
revenue act of 1928.
Revocaton of Genera Counse s Memorandum 5601 (C. . u-,
126), regardng waver e ecuted after e praton of perod of mta-
ton for assessment. (See G. C. M. 7515, page 171.)
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171
611.
S CTION 611. COLL CTIONS ST Y D Y
CL IM IN T M NT.
Secton 611.
R NU CT O 1928.
Constructon of stayed. (See Ct. D. 151, page 326.)
Secton 611.
( so Secton 607.)
I -10-4552
G. C. M. 7515
R NU CT O 1928.
n overpayment of ta for one year credted aganst an out-
standng assessment of ta (duy assessed pror to une 2,1924) for
another year after the statutory perod for coecton of- the ta
assessed had e pred, whether the credt was made before or after
the enactment of the Revenue ct of 1926, but not ater than one
year after the enactment of the Revenue ct of 1928, aganst
whch assessment an abatement cam was ted by the ta payer,
can not egay be refunded because of the provsons of secton
611 of the Revenue ct of 1928. Genera Counse s Memorandum
5601 (C. R. III-1, 126) and aU other memoranda nconsstent
herewt are revoked.
The opnon of ths offce s requested reatve to the protest of the
M Company aganst the re|ecton of ts cam for refund of 2.35os
doars.
The ta payer s ncome and profts ta return for 1918 was fed on
September 12, 1919. ta abty of 206.22a doars was reported
on the orgna return, whch was duy assessed- ganst the unpad
porton of the ta assessed a cam for abatement was fed on
December 1, 1919. Credts of 1.82a doars, .23a doars, and .30a
doars on account of overpayments by the ta payer for the years
1921, 1922, and 1923 were made aganst the outstandng assessment
of ta for 1918 on ebruary 20, 1926, and on ebruary 25, 1927.
Refund of the amounts so credted s sought by the ta payer.
rom the facts as outned t seems cear that coecton of the
unpad ta for the year 1918 was barred pror to the dates the
credts were made. n abatement cam was fed aganst the un-
pad porton of the assessment of ta for 1918, and thus the queston
s rased whether or not the refund of the amounts credted aganst
such unpad porton s prohbted by reason of secton 611 of the
Revenue ct of 1928. The ta payer contends that secton 611 of the
Revenue ct of 1928 s nappcabe, nasmuch as the coecton of
the 1918 ta was barred pror to the enactment of the Revenue ct
of 1928. It s to be noted that the credts were made on ebruary
20, 1926, and ebruary 25, 1927 that s to say, both before and after
the date of the enactment of the Revenue ct of 1926, contanng
secton 1106(a), whch reads as foows:
The bar of the statute of mtatons aganst the Unted States n respect
of any nterna-revenue ta sha not ony operate to bar the remedy but sha
e tngush the abty but no credt or refund n respect of such ta sha be
aowed uness the ta payer has overpad the ta . The bar of the statute of
mtatons aganst the ta payer n respect of any nterna-revenue ta sha not
ony operate to bar the remedy but sha e tngush the abty but no
coecton n respect of such ta sha be made uness the ta payer has under-
pnd the ta .
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703.
172
It has been hed that a tmey credt of an overpayment of ncome
ta for one year aganst an assessed ta for another year s a pay-
ment of so much of the ta as s covered by the credt. (S. O. 107,
C. . 4, 336.) It has aso been hed that where a credt was made
after coecton of the ta aganst whch the overpayment was
credted was barred, and the coecton of the assessed ta (whch
was duy assessed pror to une 2, 1924) was deayed or stayed
because of the fng by the ta payer of an abatement cam, such
credt, even though t woud otherwse have been vod, s vadated
by the provsons of secton 611 of the Revenue ct of 1928. (G.
C. M. 5308, C. . II-2, 93.) ccordngy, the refund cam n
the nstant case was propery re|ected. The fact that the credts
were made n part durng the tme that secton 1106(a) of the
Revenue ct of 1926 was n e stence and the fact that the coec-
ton of the 1918 ta aganst whch the credts were made was barred
pror to the enactment of the Revenue ct of 1928 are consdered
to be mmatera. It s true that ths offce has e pressed the opnon
that a waver e ecuted by a ta payer on March 8, 1926, after the
statute of mtatons upon assessment had run and after the date of
the enactment of the Revenue ct of 1926, contanng secton
1106(a), s neffectve for the purpose of e tendng the perod of
mtaton for assessment. (G. C. M. 5601.) That memorandum,
based upon the provsons of secton 1106(a), s now beeved to be
erroneous, nasmuch as secton 1106(a) of the Revenue ct of 1926
was retroactvey repeaed by secton 612 of the Revenue ct of
1928 as of ebruary 26, 1926. In effect the aw as t now stands s
as though secton 1106(a) had never e sted.
It s the opnon of ths offce, therefore, that an overpayment of
ta for one year credted aganst an outstandng assessment of ta
(duy assessed pror to une 2,1924) for another year after the statu-
tory perod for coecton of the ta assessed had e pred, whether
the credt was made before or after the enactment of the Revenue
ct of 1926, but not ater than one year after the enactment of the
Revenue ct of 1928, aganst whch assessment an abatement cam
was fed by the ta payer, can not egay be refunded because of the
provsons of secton 611 of the Revenue ct of 1928. Genera
Counse s Memorandum 5601 and a other memoranda nconsstent
herewth are revoked.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
TITL . G N R L PRO ISIONS.
S CTION 703. D DUCTION O ST T ND
IN RIT NC T S R TRO CTI .
Secton 703. I -8-453S
I. T. 2525
R NU CT O 1928.
Secton 703 of the Revenue ct of 1928, reatng to the deduct-
bty of estate, nhertance, egacy, and successon ta es, s appcabe
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173 705.
to edera estate ta es as we as to State nhertance ta es. The
secton reates to the determnaton of net ncome under the Rev-
enue ct of 1926 and pror Revenue cts but not under the Revenue
ct of 1928. Under the Revenue ct of 1928, as provded by secton
23(c) of that ct, estate, nhertance, egacy, and successon ta es
are aowabe deductons ony to the estate.
S CTION 705. INST LLM NT S L S-
R TRO CTI .
Secton 705.
( so Secton 44, rtce 351.)
R NU CT O 1928.
In determnng defcences n ta aganst a ta payer quafyng
under secton 705 of the Revenue ct of 1928, there shoud be
e cuded n computng ncome for the year of change to the nsta-
ment bass and for a subsequent years (ncudng years covered
by the Revenue ct of 1928), amounts receved on account of saes
or e changes of property made n years pror to the year of
change. Secton 44(c) of the Revenue ct of 1928 shoud not be
apped so as to prevent the operaton of secton 705 as ndcated.
The busness of the ta payer durng the years pror to and subse-
quent to 1923 was the pubcaton and sae of certan books. arge
proporton of the ta payer s saes was made on the nstament
pan. Pror to the year 1923 the ta payer returned ts ncome on
the straght accrua bass, the entre proft from nstament saes
beng accrued and ncuded n gross ncome for the respectve years
n whch the saes were made. or the caendar year 1923 the ta -
payer by ts orgna return fed n une, 1924, changed ts method
of reportng ncome from the straght accrua bass to the nsta-
ment bass the same bass was foowed by the ta payer for the
years 1924 to 1927. In makng ts return for the years 1923 to 1927
t e cuded n computng ncome amounts receved n those years
on account of saes made pror to 1923.
Defcences n ta for the years 1925 to 1927 have been determned
by the Income Ta Unt, whch defcences have been determned
by ncudng n computng ncome for those years amounts receved
n the severa years on account of saes made pror to 1923, the year
of change to the nstament bass. The ta payer contends that such
acton on the part of the Income Ta Unt s prohbted by secton
705 of the Revenue ct of 1928.
Under the foregong crcumstances two questons are presented
for an opnon, whch are n substance:
(1) Whether n computng ncome for years subsequent to 1924
n the case of a ta payer who by an orgna return made for the
year 1923 and fed pror to ebruary 26, 1926, changed to the
nstament bass of reportng ncome, there shoud be e cuded
amounts receved n years subsequent to 1924 on account of saes
made n years pror to 1923, and
(2) If the frst queston be affrmatvey answered, does such e cu-
son e tend nto years covered by the Revenue ct of 1928
I -23-4663
G. C. M. 8144
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705.
174
The souton of the foregong questons turns upon the nterpreta-
ton of secton 705 of the Revenue ct of 1928, whch reads as
foows:
Seo. 705. Instament Saes Retkoactvb.
(a) If any ta payer by an orgna return made pror to ebruary 26, 1926,
changed the method of reportng hs net ncome for the ta abe year 102- or
any pror ta abe year to the nstament bass, then, f hs ncome for such year
s propery to be computed on the nstament bass
(1) No refund or credt of ncome, war-profts, or e cess-profts ta es for
thp year n respect of whch the change s made or any subsequent year sha
be made or aowed, uness the ta payer has overpad hs ta es for such year,
computed by ncudng, n computng ncome, amounts receved durng such year
on account of saes or other dspostons of property made n any pror year
and
(2) No defcency sha be determned or found n respect of any such ta es
uness the ta payer has underpad hs ta es for mwh year, computed by e cud-
ng, n computng ncome, amounts receved durng such year on account of
saes or other dspostons of property made n any year pror to the year
n respect of whch the change was made.
(b) Nothng n ths secton sha be construed as n any manner modfyng
secton 607. 608, 609. or 610 of ths ct, reatng to the effect of the runnng
of the statute of mtatons. Itacs supped.1
It shoud be noted that paragraph (2) of subsecton (a) specf-
cay provdes that n cases controed by the above-quoted secton no
defcency sha be found uness the ta payer has underpad hs ta es
for such year, computed by e cudng, n computng ncome,
amounts receved durng such year on account of saes of
property made n any year pror to the year n respect of whch the
change was made. s the ta payer n the nstant case changed to
the nstament bass by ts orgna return for the year 1923, there s
no queston of ts rght to the beneft of the secton wth respect to
proposed defcences the ony queston s the e tent of that reef,
. e., whether the reef stops wth the year 1924, or whether the same
e cuson of amounts receved on account of pre 1923 saes may e tend
nto ater years. The souton of ths queston depends upon the
proper antecedent of the term such year occurrng n paragraph
(2) of subsecton (a).
In the frst cause of subsecton (a) of secton 705 there s mentoned
the ta abe year 1924 or any pror ta abe year, whe n paragraph
(1) of that subsecton there s mentoned the year n respect of
whch the change s made or any subsequent year. If such year
n paragraph (2) refers to the ta abe year 1924 or any pror ta -
abe year mentoned n the frst cause of subsecton (a), the
ta payer s cam for reef must be dened for the years now n
queston on the other hand, f the antecedent of such year n
paragraph (2) s the year n respect of whch the change s made or
any subsequent year, contaned n paragraph (1), the ta payer s
contenton s correct.
Ths offce consders the atter nterpretaton of paragraph (2) to
be the correct one, and that paragraph (2) shoud be treated as f
t read as foows:
No defcency sha be determned or found n respect of any such ta es
ncome, war-profts, or e cess-profts ta es uneas the ta payer has under-
pad hs ta es for such year rthe year n respect of whch the change s made
or any subsequent year , computed by e cudng, n computng ncome, amounts
receved durng such year the year n respect of whch the change s made or
any subsequent year on account of saes or other dspostons of property
made In any year pror to the year n respect of whch the change was made.
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175
705.
The reasons whch nduce ths concuson are hereafter bref|
stated.
It must frst be noted that paragraph (1) of subsecton (a) makes
t cear that no refund may be aowed for the year n respect of
whch the change s made or any subsequent year uness the ta -
payer has overpad hs ta es for such year, computed by ncudng, n
computng ncome, amounts receved durng such year on account
of saes made n pror years. The term such year used n the
atter part of that paragraph obvousy refers to ts mmedate ante-
cedent otherwse the paragraph woud mt the computaton of
ncome as theren requred for the purpose of determnng the rght
of the ta payer to a refund to the year 1 24 or any pror year. That
meanng woud pany be contrary to the etter of that paragraph.
Snce both paragraphs (1) and (2) appy to the same cass-of tta -
payers n the two dfferent crcumstances covered by those para-
graphs, there appears to be no good reason for mtng the tme of
appcaton of the second paragraph more strcty than that of the
frst.
gan, t beng cear that such year n paragraph (1) refers to
the year n respect of whch the change s made or any subsequent
year n the same paragraph, t s not reasonaby to be presumed
that the draftsman of the two parae paragraphs (note the word
and between the two paragraphs) referred to a dfferent ante-
cedent when he used the same term such year n paragraph (2).
nay, the statement of the managers on the part of the ouse,
submtted by Mr. awey, of the conference commttee ( eport No.
1882, Seventeth Congress, frst sesson), contaned the foowng n
reaton to ths secton:
mendment No. 215: The ouse b contaned no provson of retroactve
appcaton to ta payers changng from the accrua to the Instament bass for
reportng ncome for ta purposes. The 1919 reguatons of the Treasury pre-
scrbed n such cases the so-caed doube-ta rue. The 1920 reguatons, how-
ever, abandoned ths rue. In 1925 the oard of Ta ppeas hed the 1920
reguatons nvad, upon the ground that they dd not accuratey refect the
Income of the ta payer durng the transton perod. Secton 1208 of the
Revenue ct of 1926 was a compromse provson, wrtng nto the aw for the
frst tme a statutory recognton of the nstament bass and adoptng the
doube-ta rue of the 1919 reguatons. In order to reeve ta payers who
have not yet pad the defcences resutng from the appcaton of the doube-
ta rue (n accordance wth secton 1208), the Senate amendment provdes
that n such cases the amount of the defcency w be computed n accordance
wth the snge-ta rue and, nasmuch as the fnanca status of ta payers who
have aready pad an amount suffcent to cover ther ta abty when com-
puted n accordance wth the doube-ta rue, w not be |eopardzed, the Senate
amendment provdes that the doube-ta rue sha be apped n computng the
rght to a refund or credt. The Senate amendment was made appcabe to
any ta payer who fed an orgna return or an amended return pror to the
effectve date of the Revenue ct of 1920, and for the ta abe year 1924 or any
pror ta abe year.
The ouse recedes wth an amendment denyng reef to a ta payer who, for
e ampe, n 1922, fed an amended return for 1918, 1919. and 1920, shftng
from the accrua to the nstament bass. Ths ta payer, however, w be
granted reef for the year n whch he fed an orgna return and for the
years foowng.
The statement of the above-quoted report that the ta payer woud
be granted reef for the year n whch he fed an orgna return and
for the years foowng, and the use n the statute of the year n
respect of whch the change s made or any subsequent year are
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705.
176
regarded as suffcent to requre the appcaton of the reef afforded
by the statute not ony to the year of change but aso to a subse-
quent years n whch payments on account of saes made n the
preehange years are receved.
It s therefore the opnon of ths offce that where a ta payer
propery quafes under 6ecton 705 of the Revenue ct of 1928, n
determnng defcences aganst the ta payer there shoud be e -
cuded n computng ncome for the year of change to the nsta-
ment bass and for a subsequent years, amounts receved on account
of saes or e changes of property made n years pror to the year of
change, and that such procedure shoud be foowed not ony for the
years nvoved n the nstant case but aso for years covered by the
Revenue ct of 1928. Secton 44(c) of the Revenue ct of 1928
shoud not be apped so as to prevent the operaton of secton 705
thereof as above ndcated.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
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177 2, rt. 1502.
INCOM T RULINGS. P RT II.
R NU CT O 1926.
TITL I. G N R L D INITIONS.
S CTION 2. G N R L D INITIONS.
rtce 1502: ssocaton. I -23-4664
G. CM.7475
R NU CT O 1926.
The Iu of M, a awaan organzaton, was organzed for the
purpose of managng ts sharehoders and nterests. The organ-
zaton has offcers whch are eected by the sharehoders. It has
by-aws smar to those of a corporaton, hods meetngs at whch
a ma|orty n nterest contros, acts n ts own name, and has shares
whch are transferabe wthout the consent of a the members.
Snce the organzaton s engaged n a busness enterprse and
resembes a corporaton n form and method of procedure, t s
cassfed, for ncome ta purposes, as an assocaton.
n opnon s requested as to whether the u of M, a awaan
organzaton, shoud be cassfed, for ncome ta purposes, as an
assocaton.
The u of M has been n e stence for many years. Its offcers
consst of a presdent, treasurer, and secretary who are eected by the
sharehoders. It has by-aws smar to those of a corporaton,
whch may be amended by two-thrds vote of the sharehoders.
Meetngs are hed upon request of any one of the offcers, or at the
request of sharehoders ownng n the aggregate at east 15 shares,
after pubcaton of proper notce n the newspapers. The organza-
ton may sue and be sued, n ts own name. ach sharehoder owns
an nterest n a the and controed by the hu, but a sharehoder
can not force a partton to hm by metes and bounds of any partcu-
ar area, and the ony way he can se hs nterest n the common and
s to se hs share n the nu. The shares of the hu are transferabe
wthout the consent of a the sharehoders, and many transfers have
actuay taken pace. ach share enttes the hoder to one vote at
the meetngs of the hu, a ma|orty vote of a the shares beng
necessary to pass any measure or resouton.
The chef ncome of the hu s from the sae of water. The hu aso
receves rentas from fshng ponds and from varous tenants of farm
ands. In one year t receved ncome from the renta of sugar-cane
ands. Some very sma saes of wood and frut have aso been made
by the hu n past years.
The ease to the water company s for 50 years, but the other eases
are for 5 or 6 years. the eases are made n the name of the u
of M as essor and are sgned on behaf of the hu by ts presdent and
treasurer, and n some cases, aso, by ts secretary. ach ease must
be approved at a hu meetng, but a ma|orty vote of the shares s
bndng upon a the members.
It s the opnon of ths offce that, whe the sharehoders of the hu
appear to hod the and as tenants n common, they are much more
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178
than mere coowners of property. They have, wth respect to such
and, created an organzed body for the prosecuton of a common
enterprse, and have agreed to be bound by the decson of a ma|orty
n nterest of the sharehoders thereof. In so dong they have
adopted the characterstc mode of acton of a assocatons and have
abandoned the characterstc mode of acton of mere coowners, who,
when actng at a, act untedy. urthermore, the assocated enter-
prse nvoves not merey the utmate sae of a partcuar pece of
property but a contnuous seres of acts over a ong perod of tme n-
vovng frequent attenton and acton.
The makng of short-term eases consttutes a busness enterprse
( ec/t v. Mae/, 265 U. S., 144, T. D. 3595, C. . III-, 489 ppea
of Durfee Mnera Co., 7 . T. ., 231), but, even f the busness ee-
ment were ackng, the fact that the organzaton has offcers and by-
aws, hods meetngs at whch a ma|orty n nterest contros, acts n
ts own name, and has shares whch are transferabe wthout the con-
sent of the sharehoders, woud render t necessary to cassfy the
organzaton as an assocaton because of ts great resembance to a
corporaton n form and method of procedure.
urthermore, the courts have stated that a hu s an assocaton.
In De res v. Scott (268 ed., 952, 959), the Crcut Court of
ppeas for the Nnth Crcut sad:
We are unabe to sustan ths |udgment, n vew of the evdence n the cause
and of the prevous decsons of the court, to whch reference has been made.
y them we understand that t s not ony the aw of the present case, bat
the we-setted aw of awa, that whe members of a awaan and hu
hod the property as tenants n common, the adopton of reguatons concernng
the management of the hu and the use of the and consttutes them a vountary
assocaton, and that persons enterng nto membershp through the acquston
of shares, so caed, n the and, and those camng under them, take ther
nterest theren sub|ect to such vad reguatons as may have een adopted by
the hu wth reference to the hodng of the and n severaty.
Thaver s Dgest, awa Reports, ctes oster v. anehoe Ranch
Co, (12 ., 363) as hodng that
The hu, as a pecuar natve nsttuton, has, pursuant to ts rues and cus-
toms, certan powers of an assocaton whch do not beong to ts members
ndvduay as tenants n common. mong these powers s that of bndng
a ts members at a reguary caed and duy attended meetng, by a vote
not unanmous.
In vew of the foregong, t s the opnon of ths offce that the
u of M shoud be cassfed, for ncome ta purposes, as an
assocaton.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
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179
201, rt. 1543.
TITL n. INCOM T .
P RT I. G N R L PRO ISIONS.
S CTION 201 DISTRI UTIONS Y
CORPOR TIONS.
rtce 1543: Dstrbutons out of earnngs or
profts accumuated pror to March 1, 1913.
I -12-4565
G. C. M. 6T17
R NT CT O 1926.
Where there have been ta -free dstrbutons out of earnngs or
profts of an assocaton accumuated pror to March 1, 1913, the
bass for determnng gan or oss (under secton 204 of the Reve-
nue ct of 1926) on the sae or other dsposton of the certfcates
In respect of whch the dstrbutons were made can be reduced by
such dstrbutons ony to the e tent that they were made on or
after the effectve date of the 1920 ct.
n opnon s requested as to the bass for determnng gan or
oss on the sae n 1925 of certan certfcates of benefca nterest
n the M Company.
In 1925 the ta payer, who fed hs return on the caendar-year bass,
sod hs certfcates of benefca nterest n an assocaton known as the
M Company. In 1923, 1924, and 1925 certan ta -free dstrbutons
on these certfcates were receved by the ta payer, the dstrbu-
tons beng made out of the earnngs or profts accumuated pror to
March 1, 1913. In the orgna audt of the ta payer s return for
the year 1925 the entre amount of the dstrbutons was used to
reduce the bass for determnng gan or oss derved from the sae
of the certfcates of benefca nterest. Such acton was based on
the nterpretaton paced by the Income Ta Unt on secton 201(b)
of the Revenue ct of 1926 and on artce 1543 of Reguatons 69.
These certfcates were smar to the certfcates mentoned n the
case of L. D. Newman (9 . T. ., 158). The Newman case arose
under the Revenue ct of 1924, whereas the nstant case arses under
the Revenue ct of 1926. The pettoner n the Newman case, |ust
as the ta payer n the nstant case, fed hs return on the caendar-
year bass.
The ta payer contends that the acton of the unt s erroneous, and
that the decson of the oard of Ta ppeas n the Newman case,
acquesced n by the Commssoner (C. . II-2, 29), shoud
contro the nstant case.
Secton 201(b) of the Revenue ct of 1926 provdes as foows:
or the purposes of ths ct every dstrbuton s made out of earnngs or
profts to the e tent thereof, and from the no.st recenty accumuated earnngs
or profts. ny earnngs or profts accumuated, or ncrease n vaue of prop-
erty accrued, before March 1, 1913, may be dstrbuted e empt from ta , after
the earnngs and profts accumuated after ebruary 28. 1913, have een ds-
trbuted, but any such ta -free dstrbuton sha be apped aganst and reduce
the bass of the stock provded n secton 204.
rtce 1543 of Reguatons 69 provdes, n part, as foows:
ta -free dstrbuton made by a corporaton out of earnngs or profts ac-
cumuated or Increase n vaue of property accrued pror to March 1, 1913, sha
be apped aganst the bass of the stock for the purpose of determnng gan or
oss from ts subsequent sae.
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201, rt. 1543.
180
Secton 201(b) of the Revenue ct of 1924 s couched n anguage
dentca wth that of secton 201(b) of the 1926 ct.
In the case of L. D. Newman, supra, the oard of Ta ppeas,
n construng the words may be dstrbuted as used n secton
201(b) of the 1924 ct, hed that the anguage contempated ony-
dstrbutons made on and after the effectve date of the 1924 ct,
and dd not appy to dstrbutons made n 1923. The oard aso
hed that the words such ta -free dstrbuton contaned n sec-
ton 201(b) refer ony to the ta -free dstrbutons made subsequent
to December 31, 1923 that s, to dstrbutons made on or after the
effectve date of the 1924 ct. Ths decson of the oard was ac-
quesced n by the Commssoner on recommendaton from ths
offce n a memorandum n whch t was concuded that the words
may be dstrbuted referred ony to dstrbutons made on or after
the effectve date of the 1924 ct that the words such ta -free ds-
trbuton referred ony to the ta -free dstrbutons mentoned n
the subdvson and that the decson of the oard was therefore
correct. In makng ths recommendaton ths offce had n mnd the
oard s decson n the case of Carone S. McLean (4 . T. ., 487,
acquesced n, C. . I-2, 4).
One of the reasons actuatng the oard s decson n the Newman
case was that Tte II of the Revenue ct of 1921, wnch ncuded
secton 201(b), was repeaed by secton 1100 of the Revenue ct of
1924, to take effect as of anuary 1, 1924. The pan nference was
that the words may be dstrbuted meant may be dstrbuted
hereafter, that s to say, dstrbutons made on or after the effectve
date of the 1924 ct.
oowng the reasonng whch actuated the oard n the New-
man case, a smar nterpretaton must be gven to the words may
be dstrbuted contaned n secton 201(b) of the 1926 ct as was
gven to the same words n secton 201 (b) of the 1924 ct, namey,
that the words refer ony to dstrbutons made on or after the effec-
tve date of the 1926 ct. The words such ta -free dstrbuton
n secton 201(b) of the 1926 ct must kewse be gven a smar
nterpretaton to that gven the words such ta -free dstrbuton
n the correspondng secton of the 1924 ct. The words may be
dstrbuted can not be taken to mean may have been dstrbuted.
Ths offce s therefore of the opnon that where there have been
ta -free dstrbutons out of earnngs or profts of an assocaton
accumuated pror to March 1, 1913, the bass for determnng gan
or oss (under secton 204 of the Revenue ct of 1926) on the sae or
other dsposton of the certfcates n respect of whch the dstrbu-
tons were made can be reduced by such dstrbutons ony to the e -
tent that they were made on or after the effectve date of the 1926 ct.
Ths poston as to the true ntent and meanng of the words may
be dstrbuted and such ta -free dstrbuton as used n secton
201(b) of the 1926 ct s not n confct wth the above-quoted por-
ton of artce 1543, for the reason that the same meanng gven to
such ta -free dstrbuton n secton 201(b) of the 1926 ct shoud
be gven to the words ta -free dstrbuton used n artce 1543.
Such words refer ony to dstrbutons made on or after the effectve
date of the 1926 ct, under whch that artce was promugated.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
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203, rt. 1574.
S CTION 202. D T RMIN TION O MOUNT
O G IN OR LOSS.
rtce 1561: Determnaton of the amount of gan or oss.
R NU CT O 1926.
Sae of persona resdence. (See I. T. 2533, page 129.)
S CTION 203. R COGNITION O G IN OR LOSS
ROM S L S ND C NG S.
Te transfer by of a ma|orty of the votng stock and of a
other casses of stock of the M Company to the N Company n
e change for ts entre capta stock, and the transfer by the N
Company of the same bock of stock to the O Company n e change
for 75 per cent of the stock of the atter company, consttuted reor-
ganzatons wthn the meanng of secton 203(h) 1( ) of the Reve-
nue ct of 1926. No ta abe gan resuted from the subsequent
sae by the O Company of the stock of the M Company. Under the
Revenue ct of 1926, the bass of the stock of the M Company n
the hands of the N Company and the O Company was the cost of
the stock to them, and not the cost or other bass of the stock n
the hands of .
On anuary 1, 1927, owned y shares (66 per cent) of the
preferred stock and 1y shares (70 per cent) of the common stock of
the M Company. The bass of these two bocks of stock n hs hands
was doars and 3a doars, respectvey, or a tota of 4a: doars.
In the eary part of November, 1927, receved an offer of 30a:
doars for the two bocks of stock of the M Company, whch offer
he dd not accept. On November 5, 1927, he organzed the N Com-
pany, and on November 7, 1927, he transferred to that corporaton
the two bocks of stock mentoned above n e change for ts entre
capta stock, consstng of y shares of no par vaue common stock.
aso owned 100 per cent of the outstandng stock of the O Com-
pany, consstng of 2y shares havng a par vaue of 10a doars. On
November 7, 1927, the O Company was authorzed to ncrease ts
capta stock from 10a: doars to 40a doars. Ths was done, and
on the same date the ncrease (30a doars par vaue stock) was ssued
to the N Company n e change for the y shares of preferred and 7y
shares of common stock of the M Company, whch t had acqured
on the same date from .
On November 17, 1927, the O Company sod the y shares of pre-
ferred stock and the 1y shares of common stock of the M Company
to the R Company for 30a doars.
The genera queston presented s whether the transactons above
set out, or any of them, resuted n ta abe gan to any of the ta -
payers nvoved. Specfcay, the queston presented s n connecton
wth the bass of the two bocks of stock of the M Company n the
hands of the varous transferees.
The transactons nvoved n ths case are three n number and
w be consdered n the order n whch they occurred:
rtce 1574: changes n connecton wth
corporate reorganzatons.
R NU CT O 1926.
I -1-4490
G. C. M. 7285
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203, rt. 1574.
182
1. The frst transacton conssts of the transfer by of the two
bocks of stock of the M Company, whch had a bass n hs hands
of doars, to the N Company n e change for the entre capta
stock of the atter company.
Ths transacton consttuted a reorganzaton wthn the meanng of
secton 203(h) 1( ) of the Revenue ct of 1926, because t was the
acquston by one corporaton (N Company) of at east a ma|orty of
the votng stock (70 per cent of the common stock) and at east a ma-
|orty of the tota number of shares of a the other casses of stock
(66 per cent of the preferred stock) of another corporaton (M
Company). oth corporatons were partes to a reorganzaton
wthn the meanng of secton 203(h)2 of the Revenue ct of 1926,
whch provdes as foows:
The term a party to a reorganzaton ncudes a corporaton resutng from
a reorganzaton and ncudes both corporatons In the case of an acquston by
one corporaton of at east a ma|orty of the votng stock and at east a ma-
|orty of the tota number of shares of a other casses of stock of another
corporaton.
The transacton resuted n no ta abe gan or oss by reason of sec-
ton 203(b)4 of the Revenue ct of 1926, whch provdes n part that
no gan or oss sha be recognzed f property s transferred to a
corporaton by one or more persons soey n e change for stock or
securtes n such corporaton, and mmedatey after the e change
such person or persons are n contro of the corporaton , be-
cause after had transferred the property (stock of the M Company)
to the N Company soey n e change for stock of the N Company,
he was n contro of the N Company by reason of hs ownng a the
stock of that company.
The bass of the stock of the N Company n the hands of s
the same as the bass of the property e changed, namey, 4a doars.
See secton 204(a)6 of the Revenue ct of 1926, whch provdes n
part that, If the property was acqured upon an e change de-
scrbed n subdvson (b), (d), (e), or (f) of secton 203, the bass
sha be the same as n the case of the pro|erty e changed, decreased
n the amount of any money receved by the ta payer and ncreased
n the amount of gan or decreased n the amount of oss to the ta -
payer that was recognzed upon such e change under the aw app-
cabe to the year h whch the e change was made. Ths
paragraph sha not appy to property acqured by a corporaton by
the ssuance of ts stock or securtes as the consderaton n whoe or
n part for the transfer of the property to t. It s noted, however,
that secton 204(a)6 does not by ts terms appy to property acqured
by a corporaton by the ssuance of ts own stock as consderaton for
the transfer of the property to t. ccordngy, t s evdent that
the bass of the stock of the M Company n the hands of the N Com-
pany s not mted by the provsons of secton 204(a)6. The other
provsons of secton 204 to be noted n consderng the queston of
the bass of the M Company stock n the hands of the N Company
are as foows:
Sec. 204. (a) The bass for determnng the gan or oss from the sae or
other dsposton of p o erry acqured after ebruary 28, 1913, sha be the
cost of such property e cept that
(8) If the property (other than stock or securtes n a corporaton a party
to a reorganzaton) was acqured after December 31, 1920, by a corporaton
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203, rt. 1574.
by the ssuance of ts stock or securtes n connecton wth a transacton
descrbed n paragraph (4) of subdvson (b) of secton 203 (ncudng, aso,
cases where part of the consderaton for the transfer of such property to the
corporaton was property or money n addton to such stock or securtes),
then the bass sha be the same as t woud be n the hands of the transferor,
ncreased n the amount of gan or decreased n the amount of oss recognzed
to the transferor upon such transfer under the aw appcabe to the year n
whch the transfer was made .
It s evdent that secton 204(a)8 does not by ts terms appy to a
stuaton where the property acqured s stock or securtes of a cor-
poraton a party to a reorganzaton.
Snce, as ponted out above, the M Company was a party to a reor-
ganzaton wthn the meanng of secton 203(h)2, the transacton
comes squarey wthn the e cepton set out n secton 204(a)8.
ccordngy, the bass of the stock of the M Company n the hands
of the N Company s the cost of such stock to the N Company, as
provded n the frst cause of secton 204(a).
2. The second transacton conssts of the transfer by the N Com-
pany of the two bocks of stock of the M Company to the O Com-
pany n e change for 30a doars par vaue stock (75 per cent) of
Ths transacton consttuted a reorganzaton wthn the meanng
of secton 203(h) 1( ), because the O Company acqured a ma|orty
of a casses of stock of the M Company and the N Company ac-
qured a ma|orty of a casses of stock of the O Company.
tnree corporatons were partes to a reorganzaton wthn the mean-
ng of secton 203(h)2. The transacton resuted n no ta abe gan
or oss by reason of secton 203(b)2 of the Revenue ct of 1926,
whch provdes that No gan or oss sha be recognzed f stock or
securtes n a corporaton a party to a reorganzaton are, n pursu-
ance of the pan of reorganzaton, e changed soey for stock or
securtes n such corporaton or n another corporaton a party to
the reorganzaton, because the stock of the M Company (a party
to a reorganzaton) was, n pursuance of a pan of reorganzaton,
e changed soey for stock or securtes n the O Company (a party
to a reorganzaton). The bass of the stock of the M Company n
the hands of the O Company must be the cost of such stock to the O
Company, as provded n the frst cause of secton 204(a), uness
some other provson of secton 204 requres a dfferent bass. The
ony other provson not heretofore consdered whch mght possby
appy s secton 204(a)7, whch provdes as foows:
If the property (other than stock or securtes n a corporaton a party to the
reorganzaton) was acqured after Decemer 31, 1917, by a corporaton n con-
necton wth a reorganzaton, and mmedatey after the transfer an nterest
or contro n such propery of 80 per centum or more remaned n the same
ersons or any of them, then the bass sha be the same as t woud be n the
hands of the transferor, ncreased n the amount of gan or decreased n the
amount of oss recognzed to the transferor upon such transfer under the aw
appcabe to the year n whch the transfer was made .
It s to be noted that secton 204(a)7 contans the same e cepton
(other than stock or securtes n a corporaton a party to the reor-
ganzaton) as s contaned n secton 204(a)8. ccordngy, n
the opnon of ths offce the bass of the stork of the M Company n
the hands of the O Company s the cost of that stock to the O Com-
pany, as provded n the frst cause of secton 204(a).
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203, rt. 1577.
184
3. The- thrd transacton conssts of the sae by the O Company
of the two bocks of stock of the M Company for 30 doars.
No ta abe gan resuted from the sae, because t appears that the
30 doars par vaue stock of the O Company ssued for the stock of
the M Company estabshed a cost thereof to the O Company of an
amount equa to the sae prce of the M Company stock.
It has been suggested, because the e ceptons contaned n secton
204(a) 7 and 8 have been omtted, so far as the transactons heren
dscussed are nvoved, from the correspondng secton of the Reve-
nue ct of 1928, that the provsons of the Revenue ct of 1928
may propery be taken as nterpretatve of the Revenue ct of 1926.
Wth ths contenton ths offce does not agree. The correspondng
secton of the Revenue ct of 1928 (secton 113) was not made retro-
actve, and there s nothng n the statute to ndcate that Congress
ntended that the secton snoud be gven retroactve appcaton n
any partcuar. The provsons of the Revenue ct of 1920, above
quoted, are cear and unambguous. In the absence of ambguty n
the statutes, the courts w not ook beyond the anguage of the stat-
ute tsef. s stated n 25 Rung Case Law, page 962:
When the anguage of the statute s pan and unambguous and
conveys a cear and defnte meanng, there s no occason for resortng to
the rues of statutory nterpretaton and constructon the statute must be
gven ts pan and obvous meanng. Ths prncpe s to be adhered to not-
wthstandng the fact that the court may be convnced by e traneous crcum-
stances that the egsature ntended to enact somethng very dfferent from
that whch t dd enact.
To the same effect, see aso Lake County v. Rons (130 U. S., 662)
Unted States v. Mcrram (263 U. S., 179 T. D. 3535, C. . II-2,
87 ) Perm Mutua Lfe Insurance Go. v. Lederer (252 U. S., 523
T. D. 3046, C. . 3, 249 ) New York Teephone Go. v. Treat (130
ed., 340, certorar dened 198 U. S., 584) and Lews Sutherand
Statutory Constructon, secton 363.
C. M. Chabest,
Genera Counse, ureau of Interna Revenue.
rtce 1577: Defntons. I -11-4560
G. C. M. 7472
R NU CT O 1926.
The transfer n 1926 of 60 per cent of the assets of the M Com-
pany to the N Company, whch owned 60 per cent of the shares
of capta stock of the M Company, n canceaton of the stock
hed by the N Company and the transfer of the baance of the
assets of the M Company to the N Company for stock of the N
Company consttute a reorganzaton wthn the meanng of secton
203(h)( ), and both the M company and the N Company are
partes to that reorganzaton the dstrbuton n compete qu-
daton of the M Company of a the assets of the M Company
to ts sharehoders s an e change wthn the meanng of secton
201(c), and such e change, as respects a sharehoders other than
the N Company, s wthn the purvew of secton 203(b)2, snce
they receved n canceaton of ther M Company stock stock of
the N Company. The N Company receved n spece 60 per cent
of the assets of the M Company, and gan or oss therefrom s to
be recognzed and computed as prescrbed by secton 201(c) of the
Revenue ct of 192G. Under secton 204(a)7 the bass of the
assets of the M Company n the hands of the N Company s the
same as t was n the hands of the M Company.
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185
203, rt. 1577.
n opnon s requested upon the foowng ssues:
I. (a) Dd the fng of a certfcate of dssouton on or about
, 1926, wth the secretary of state of New York termnate
the e stence of the M Company as a body corporate for a ega
purposes (specfcay for the purposes of sectons 2(a) (2) and
(3), 201 203, 204, and 230, et seq., of the Revenue ct of 1926) so
that a ts property and assets on that day vested n the then share-
hoders thereof or, as the case may be, n certan persons as trustees
for ts then sharehoders or
(b) Dd the M Company contnue to e st as a body corporate,
both for the purposes of the Revenue ct of 1926 (sectons 2(a) (2)
and (3), 201, 203, 204, and 230, et seq.), and for other ega purposes,
unt after the transfer of the property and assets to the N Company
II. Dd the transfer of the property and assets of the M Company
to the N Company consttute the acquston by one corporaton
of substantay a the propertes of another corporaton,
or otherwse a reorganzaton, wthn the meanng of secton
203(h)( ) of the Revenue ct of 1926
III. If the transfer of assets from the M Company to the N
Company consttuted a reorganzaton, s gan or oss to be recog-
nzed to the N Company n respect of the acquston of the sad
transferred assets
I . If the transfer of assets from the M Company to the N
Company consttuted a reorganzaton, s gan or oss to be recog-
nzed to the sharehoders of the M Company (other than the N
Company) n respect of the acquston of the stock of the N
Company
. If the transfer of assets from the M Company to the N Com-
pany consttuted a reorganzaton, s gan or oss to be recognzed
to the M Company n respect of the transfer of the sad assets
I. If the transfer of assets from the M Company to the N
Company consttuted a reorganzaton, what s the bass to the N
Company of the sad assets acqured by transfer from the M
Company
The facts appear to be as foows:
Durng the eary part of the ta abe year 1926 and for some tme
pror thereto the N Company owned 60 per cent of the shares of
capta stock of the M Company (a New York corporaton).
On , 1926, the N Company proposed to the drectors of the
M Company that the atter company be dssoved and a ts assets
sod to the N Company, n consderaton of the ssuance of 65y shares
of the capta stock of the N Company to the M Company or ts
nomnees.
On the same day the drectors of the M Company adopted a resou-
ton settng forth n deta a pan of corporate acton, desgnated
a Pan of reorganzaton, under whch the M Company was to be
dssoved, a ts assets were to be sod to the N Company n consder-
aton of the assumpton by the N Company of a the obgatons of
the M Company (ncudng the assumpton of the obgaton of the
M Company to any ob|ectng sharehoder enforcng the rghts re-
served to hm by secton 21, stock corporaton aw of New York) and
the ssuance by the N Company to the M Company or ts nomnees
of 65y shares of common stock of the N Company fuy pad and
4090 30 13
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203, rt. 1577.
186
nonassessabe, and the shares thus receved were to be dstrbuted
by the M Company to ts sharehoders on the bass of one share of
the N Company for each one and one-haf shares of the M Company.
On , 1926, the sharehoders of the M Company, n share-
hoders meetng assembed, approved the proposed pan or corporate
acton and authorzed the dssouton of the corporaton under the
stock corporaton aw of New York, the acceptance of the offer of
the N Company, and the sae of the corporate assets to the N Com-
pany n consderaton of the assumpton by the N Company of a
obgatons of the M Company and the ssuance by the N Company
of 65y shares of ts common stock.
Certfcate of dssouton of the M Company was accordngy fed
wth the secretary of state of New York on , 1926, and the
secretary of state ssued a certfcate on that date of such fng.
copy of the certfcate of the secretary of state n respect of such fng
was then pubshed for two consecutve weeks n a newspaper pub-
shed and crcuatng n the county n whch the offce of the
corporaton was ocated. The requste ndentures and agreements
conveyng and transferrng to the N Company a the assets of the
M Company were e ecuted and devered by t on , 1926.
On the same day the N Company e ecuted and devered the nden-
ture and agreement under whch t assumed and agreed to pay a
the abtes and obgatons of the M Company and the drectors
of the M Company apponted the transfer agent of the N Company
as ts nomnee to receve the 65 / shares of the stock of the N Com-
pany, and as the agency through whom the sharehoders of the M
Company mght e change ther stock for the stock of the N Company.
In due course thereafter the sharehoders of the M Company, other
than the N Company, devered to the sad transfer agent ther
shares of the M Company and receved ther ratabe proportons of
the N Company stock. s respects the ssuance, transfer, or devery
of the shares of the N Company, the facts are adequatey set forth n
the foowng e tracts from the affdavt of , who was the transfer
(5) That the aggregate number of shares of common stock of the N Company
requred to be devered to the M Company, or ts nomnees, for dstrbuton
among the stockhoders of the sad M Company, ncudng the N Company, to
effect, the ratabe e change of the N Company common stock for common stock
of the sad I Company, and agreed upon as an ncdent to the reorganzaton
of the sad M Company, was Goy shares of common stock of the N Company.
(G) That for the purpose aforesad, shares of common stock of the N Com-
pany n the, aggregate number of G5|/ shares were n fact devered to the I
Company, or ts nomnees.
(7) That the sad 65 / shares of common stock of the N Company comprsed
certfcates of N Company treasury stock, aggregatng n number y shares
certfcates of orgna ssue, aggregatng n number 25/ shares and 1 certf-
cate for 38|/ shares, whch atter certfcate had been made avaabe to the N
Company through oan from t he O Company.
(8) That the sad certfcate for 3Sy shares of N Company common stock,
ssued to the O Company, was assgned n bank and devered by the O Com-
pany to the N Company as a oan.
(0) That the sad certfcate for 38|/ shares of N Company common stock,
together wth certfcates representng orgna ssue and treasury stock of the
N Company, and aggregatng 65y shares n number, were thereupon devered
to the M Company, or ts nomnees, pursuant to the terms of the pan of reor-
ganzaton of the sad M Company.
(10) That under the pan of ratabe dstrbuton of the N Company common
stock for M Company common stock, agreed upon as an ncdent to the reor-
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187
203, rt. 1577.
santaton of the sad M Company, the N Company was entted to receve upon
e change of the shares of stock of the M Company hed by t, 3Sy shares of
ts own common stock.
(11) That the sad certfcate for 38y shares of the N Company common stock
theretofore devered by the N Company to the M Company, or ts nomnee,
as a part of the tota number of 65y shares of N Company stock devered by
the N Company to the M Company, or ts nomnees, was thereupon devered
hack t the N Company, as the proportonate part of the dstrbuton by the M
Company whch the N Company was entted to receve aganst recept by the
M Company of the correspondng amount of M Company stock surrendered by
te N Company for canceaton n accordance wth the pan of reorganzaton.
(12) That foowng recept by the N Company of the sad certfcate for 3Sy
shares, the sad certfcate was devered by the N Company to the O Company,
n fu satsfacton of the oan theretofore made by the sad O Company to the
Company.
I.
Was the M Company n e stence on , 1926, as a corporaton wthn
the meanng of the Revenue ct of 1926
rtce 10, secton 105, stock corporaton aw of New York, as
amended by chapter 787, Laws of New York, 1923 (n force through-
out the year 1926), provded as foows:
Dssouton wthout |udca proceedngs. ny stock corporaton, e cept a
moneyed or raroad corporaton, may be dssoved at any tme by the fng n
the offce of the secretary of state of a certfcate whch sha be entted and
ndorsed Certfcate of dssouton and sha state
Isnndry matters .
7. The drectors sha forthwth cause a copy of such certfcate
to be pubshed at east once a week for two successve weeks n a newspaper
pubshed and crcuatng n the county n whch the offce of the corporaton
s ocated and at the e praton of such pubcaton such corporaton by Its
board of drectors sha proceed to ad|ust and wnd up ts busness and affars,
wth power to carry out ts contracts and to se ts assets at pubc or prvate
sae, and to appy the same n dscharge of ts abtes and obgatons and,
after payng and adequatey provdng for the payment of such abtes and
obgatons, to dstrbute the remander of ts assets among ts stockhoders,
accordng to ther respectve rghts and nterests. The county cerk sha fe n
hs offce the dupcate certfcate maed to hm by the secretary of state.
8. Such corporaton sha contnue for the purpose of payng, satsfyng and
dschargng any e stng abtes or obgatons, coectng and dstrbutng
ts assets and dong a other acts requred to ad|ust and wnd up ts busness
and affars, and may sue and be sued n ts corporate name.
9. fter payng or adequatey provdng for the abtes and obgatons
of the corporaton the drectors, wth the wrtten consent of te hoders of a
ma|orty of the outstandng shares of the corporaton entted to vote thereon,
may se the remanng assets or any part thereof to a corporaton organzed
nnder the aws of ths or any other State, and take n payment therefor the
stock or bonds or both of such corporaton and dstrbute them among the
stockhoders, n proporton to ther nterest theren, but no such sae sha
be vad as aganst any stockhoder who, wthn GO days after the mang
of notce to hm of such sae, sha appy to the supreme court n the manner
provded by secton 21, for an apprasa of the vaue of hs nterest n the
assets so sod and uness wthn 30 days after such apprasa the stockhoders
consentng to such sae, or some of them, sha pay to such ob|ectng stock-
hoder or depost for hs account, n the manner drected by the court, the
amount of such apprasa upon such payment or depost the nterest of such
ob|ectng stockhoder sha vest n the person or persons makng such payment
or depost.
Under these provsons t s cear that on . 1926. and at
a tmes durng the year 1926 pror thereto, the M Company was
a bodv corporate under the aws of New York. (See Tapey v.
eer, 133 pp. Dv. 54, 117 N. Y. S., 817 Cunnngham v. Gauber
et ah, 133 pp. Dv. 10, 117 N. Y. S., 866 Securty Trust Co. v.
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203, rt. 1577.
188
Prtckard, 201 pp. Dv. 142, 194 N. Y. S., 486 sphat Pavng
Co. v. New York, 149 pp. Dv. 622, 134 N. Y. S., 433.) It was,
therefore, a corporaton wthn the meanng of sectons 2(a) (2)
and (3), 201, 203, 204, 230, et seq., of the Revenue ct of 1926.
There beng no evdence that the M Company at any tme ever
conveyed or dstrbuted to ts sharehoders the assets transferred
to the N Company, or any evdence that the sharehoders of the
M Company ever transferred or purported to transfer the sad
assets to the N Company, t must be concuded that the M Company,
an e stng corporaton on , 1926, both under the aws of
New York and under the Revenue ct of 1926, dd, on that day,
transfer a ts assets to the N Company.
n.
Dd the transfer of the property and assets of the M Company to the N
Company consttute the acquston by one corporaton of sub-
stantay a the propertes of another corporaton, or otherwse a re-
organzaton, wthn the meanng of secton 203(h)( ) of the Revenue
ct of 1926
It s cear that the transfer on , 1926, by the M
Company of a of ts assets to the N Company consttuted the
acquston by one corporaton of substantay a the
propertes of another corporaton, and hence a reorganzaton
wthn the meanng of secton 203(h) 1( ) of the Revenue ct
of 1926.
n.
reorganzaton e stng, s Ran or oss to be recognzed to the N Com-
pany In respect of the acquston of the sad transferred assets
The form and purpose of the entre transacton make t hghy
mprobabe that the N Company ever ntended to ssue to the
nomnees of the M Company 38y shares of ts own stock, whch was
the porton of the C y shares deverabe by the N Company (n part
consderaton of the transfer of a the assets of the M Company)
to whch the N Company was entted under the reorganzaton
pan as the owner of 60 per cent of the M Company stock. The
actua ssuance of those shares woud have been fute, snce the N
Company was entted to receve the entre 38y shares back forth-
wth upon ther devery to such nomnees. The resut woud be
the manua act of devery of the certfcate of such shares to the
nomnees and the manua devery of the certfcate back agan to
the N Company. In substance and effect ts tota resut coud not
have been more, n any event, than, n case the shares were a new
ssue, the creaton n the corporate treasury of the N Company of
38y shares of treasury stock, and, n case the shares were purchased
n the market, the acquston of 3S / shares as treasury stock. The
mere manua devery to the nomnee of the M Company and the
mere manua devery back agan woud not change ether of these
resuts, snce qute regardess of the manua transfers the N Com-
pany woud be, and at a tmes reman, at east the owner of the
whoe benefca nterest n the shares.
s a matter of fact the N Company dd much ess than ths. It
nether ssued nor acqured through purchase the requste 38 / shares
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189
203, rt. 1577.
of ts own stock, but merey borrowed a certfcate representng
such shares from the O Company (a corporaton composed of per-
sons heavy nterested ether as sharehoders or offcers n the N
Company) and manuay devered ths certfcate to the transfer
agent of the N Company n hs capacty of nomnee of the M Com-
pany. Sad transfer agent manuay devered the sad certfcate
back agan to the N Company, the shares of the M Company owned
by the N Company havng been devered to hm, and thereupon
the N Company manuay devered the sad certfcate back agan
to the O Company. Ths so-caed borrowng transacton dffers
fundamentay from a borrowng transacton ncdent to a short
sae, such as was consdered bv the Supreme Court of the Unted
States n Provost et ah v. Unted States (2G9 U. S., 443, T. D. 3678,
C. . I 1, 352). ere the ntenton of a partes to the transac-
ton was that the dentca certfcate and the dentca shares repre-
sented by the certfcate shoud be returned n spece to the ender,
once they had served the purposes of the borrower.
In Provost et a. v. Unted States the ntenton of the partes
was that the dentca certfcate and the dentca shares represented
by the certfcate shoud not be returned n spece to the ender but
shoud be sod and devered to another, and that a dfferent certf-
cate representng other shares shoud be used n repayng the ender.
ere the mere temporary possesson and mere manua use of a
specfc certfcate representng specfc shares was ntended, and not
the transfer of the benefca ownershp of the shares n queston.
There t s perfecty cear that the ender ntended a the ncdents
of both ega and benefca ownershp n the securtes to pass to
the borrower, and that when a return was made of the borrowed
stock a the ncdents of both ega and benefca ownershp n qute
dfferent shares shoud pass from borrower to ender. ere the soe
purpose of the borrowng transacton was to gve to the borrower the
ndca of ownershp of a specfc certfcate and of the specfc shares
represented thereby, n order that the borrower mght have n hand
the vsbe evdence of ownershp wth whch he coud techncay
satsfy a contract whch n one provson requred hm to dever
such a certfcate to a transfer agent and n another provson gave
hm a vested and specfcay enforcbe rght to have the certfcate
back agan forthwth. Whether the ntenton of the partes and the
effect of ther transacton were to vest n the borrower a ega tte
to the certfcate and the shares represented thereby, or merey the
ndca of ownershp of the sad certfcates and the shares repre-
sented thereby, t s cear that both the ntenton and ega effect of
the transacton were to vest n the borrower n any event no more
than a bare technca ega tte wthout any benefca ownershp of
any knd.
Snce the ncome ta provsons of the Revenue cts concern
themseves wth actua benefca ownershp and not mere ega tte,
the ega effect of the varous deangs wth the partcuar certfcate
representng the 38// shares (devered by the ender, the O Com-
pany, to the borrower, the N Company devered by the N Com-
pany to ts transfer agent, actng as nomnee of the M Company
devered by sad transfer agent back agan to the N Company and
devered by the N Company back agan to the ender, the O Com-
pany) s ther rea substance and effect and n rea substance and
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203, rt. 1577.
190
effect the N Company receved n spece GO per cent of the assets
of the M Company as a dstrbuton n compete qudaton of
that corporaton, and accordngy gan or oss therefrom s to be
recognzed and computed as prescrbed by secton 201(c) of the
Revenue ct of 1926. Rockefeer v. Unted States, 237 U. S., 176,
T. D. 3271, C. . 5, 34 Stam/e v. Unted States, Court of Cams,
November 4, 1929, Ct. D. 138, C. . III-2, 268 Langsta|f v. Lucas,
9 ed. (2d), 691, 13 ed. (2d), 1022, T. D. 3793, C. . -, 164.)
though the N Company dd not go so far as to contend that the
borrowng of the certfcate to 38y shares from the O Company con-
sttuted the purchase of the shares represented thereby, t dd never-
theess contend that ts ncome ta abty shoud be determned
by regardng the deangs wth the borrowed certfcate as (1) the
purchase of the shares represented thereby, (2) the e change of
such shares for 60 per cent of the assets of the M Company, (3)
the e change of the shares of the M Company for the shares repre-
sented by the sad certfcates, and (4) the sae of the shares repre-
sented by the certfcate to the ender, and that, accordngy, there
was no reazaton of gan by the N Company by reason of the fact
that each of the deangs was a deang n shares of the N Company
and was a capta transacton from whch, under artce 543 of Regu-
atons 69, no gans, profts, or ncome coud be reazed. The con-
tenton s untenabe, for the reason that artce 543 contempates
deangs wth shares of stock n whch the corporaton acqures a,
or at east the substanta and benefca, ncdents of ownershp n
such a way as to make the deangs wth the shares n substance and
effect ether the redempton, retrement, and canceaton of the
shares or the actua ssuance of the shares.
Ths offce s, therefore, of the opnon that the deangs wth the
certfcate representng 38_ / shares of the stock of the N Company
have no consequences cognzabe for the purposes of Tte II. Revenue
ct of 1926 that 60 per cent of the assets of the M Company was
receved by the N Company as a dstrbuton n compete qudaton
of the former corporaton wthn the meanng of secton 201(c)
of the Revenue ct of 1926 and that, accordngy, gan or oss s to
be computed and recognzed pursuant to the provsons of that
secton.
T .
reorganzaton e stng, s gan or oss to be recognzed to the sharehoders
of the M Company (other than the N Company) n respect of the acquston
of the stock of the N Company
It s cear that (1) the transfer of the assets of the M Company
to the N Company s a reorganzaton wthn the meanng of
secton 203(h) 1( ) of the Revenue ct of 1926 (2) that both
the M Company and the N Company are partes to that reorganza-
ton (3) that the dstrbuton n compete qudaton of a the
assets (as respects sharehoders other than the N Company of the
shares of that corporaton) of the M Company to ts sharehoders
s an e change wthn the meanng of secton 201(c) of the Revenue
ct of 1926 and (4) that such e change, as respects a sharehoders
other than the N Company, s wthn the purvew of secton 203(b)2
of the Revenue ct of 1926. ccordngy, no gan or oss s recog-
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191
203, rt. 1577.
nzed to any of such sharehoders from the transacton, the prov-
sons of secton 204(a)6 of the Revenue ct of 1926 determnng the
bass of the shares thus receved n e change.
.
reorganzaton e stng, s gan or oss to be recognzed to the M Com-
pany n respect of the transfer of the sad assets
It has heretofore been concuded that the transfer to the N Com-
pany of 60 per cent of the assets of the M Company consttuted an
ordnary qudatng dvdend. Under artce 543 of Reguatons
69, no gan or oss s reazed by a corporaton from the mere
dstrbuton of ts assets n knd upon dssouton. ccordngy,
as respects the assets of the M Company dstrbuted n knd to the
N Company, no gan or oss s reazed by the M Company from the
dstrbuton.
s respects the assets transferred to the N Company n con-
sderaton of the shares of that corporaton, secton 203(b)3 of the
Revenue ct of 1926 e pressy prescrbes the nonrecognton of
any gan or oss reazed by the M Company from the transfer.
I.
reorganzaton e stng, what s the bass to the N Company of the sad
assets acqured by transfer from the M Company
It s cear that the assets acqured by the N Company on ,
1926, were not stocks or securtes n a corporaton a party to the
reorganzaton, and that they were acqured after December 31,
1917, by a corporaton n connecton wth a reorganzaton. Sec-
ton 204(a)7 of the Revenue ct of 1926 s, therefore, ceary ap-
pcabe f mmedatey after the transfer an nterest or contro
n such property of 80 per centum or more remaned n the same
persons or any of them. The statute contans no defnton of the
meanng of the phrase nterest or contro n such property of 80
per centum or more. The term contro n ts ordnary con-
notaton mpes that whch s untary and n ts nature ndvsbe,
and hence not capabe of beng e pressed n terms of a percentage.
ut the statute ceary e presses an ntenton that the phrase of
80 per centum or more sha mt both contro and nterest.
Snce ether an nterest n such property of 80 per
centum or more or a contro n such property of 80 per centum
or more ceary satsfes secton 204(a)7, t w here be suffcent
to determne the meanng of an nterest n such prop-
ertv of 80 per centum or more.
The term nterest s a very broad one, ceary much broader
than the term ownershp, and snce t s used n a provson havng
reference ony to property owned by a corporaton and acqured
n connecton wth a reorganzaton (commony, f not unversay,
n connecton wth a transfer by one corporaton to another, and thus
a change of ownershp from one corporaton to another), the con-
cuson s rresstbe that the term n secton 204(a)7 s used to
desgnate that utmate or benefca speces of rghts, n the nature
of ownershp, whch the ndvdua sharehoder has n property the
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203, rt. 1577.
192
drect ownershp of and the benefca and ega tte to whch s n
a corporaton of whch the ndvdua s a sharehoder. ny other
constructon woud render the statute totay meanngess, for f
the statute contempates ownershp, ether ega or equtabe, t s
obvous that the acqurng corporaton has the whoe ega and
equtabe ownershp, and accordngy no nterest or contro of any
percentage can be sad to reman n anyone mmedatey after the
transfer. It must be noted further that the requrement of the
statute s merey that an nterest or contro n such property of
80 per centum or more reman n the same persons or
any of them,. 1 1 The statute s, therefore, satsfed f among those
havng an utmate benefca rght n the property mmedatey
after the transfer there s a snge person who before the transfer
had at east 80 per centum of the utmate benefca rght n the
property and mmedatey after the transfer st had an 80 per
centum utmate benefca rght n the property.
Lkewse the statute s satsfed f among those persons havng an
utmate benefca rght n the property mmedatey after the
transfer there s a group of persons who mmedatey before the
transfer possessed an utmate benefca rght of at east 80 per
centum and mmedatey after the transfer st possessed an ut-
mate benefca rght of at east 80 per centum. The statutory an-
guage s cear an nterest n such property of 80 per
centum or more remaned n the same persons or any of them.n If
among those who possessed both mmedatey before the transfer an
utmate benefca rght n the property and mmedatey after the
transfer an utmate benefca rght n the property there s a
group of persons who coectvey possessed mmedatey before the
transfer at east 80 per centum of the utmate benefca rght n the
property and mmedatey after the transfer at east 80 per
centum of the utmate benefca rght n the property, the statute s
satsfed. The statute does not purport to requre that each member
of such a group sha possess both before and after the transfer the
same percentage of the whoe utmate benefca rght n the prop-
erty t merey requres that an nterest n such property
of 80 per centum or more remaned n the same persons or anv of
them.
Nether the egsatve hstory of the statute nor ts conte t. ,. r
the egsatve hstory nor the conte t of the somewhat smar pro-
vson appearng n secton 331 of the Revenue ct of 1921 and secton
331 of the Revenue ct of 1918, affords any bass for the concuson
that Congress ntended that not ony shoud an nterest n
such property of 80 per centum or more reman n the
same persons or any of them, but aso that each of such perso
shoud, both before and after the transfer, possess the same per-
centage of the utmate benefca rght ( nterest ) n the propery
In the nstant case, t s cear that mmedatey before the transfa
the sharehoders of the M Company conssted of the N Company
(ownng GO per cent of the shares) and sundry other persons who
may here be caed for convenence the R group (ownng 40 per cent
of the shares). It s aso cear that mmedatey after the transfer
the body of the sharehoders of the N Company conssted of (1) a
those who were sharehoders mmedatey before the transfer and (2)
the R group.
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193
203, rt. 1577.
It foows that mmedatey before the transfer 100 per cent of
the utmate benefca rght n the property was possessed by the
then sharehoders of the N Company (through the ownershp by
the N Company of 60 per cent of the shares of the M Company)
and by the R group (through the ownershp of 40 per cent of the
shares), and mmedatey after the transfer 100 per cent of the
utmate benefca rght n the property was possessed by the then
sharehoders of the N Company (consstng of those who were
sharehoders of the N Company mmedatey before the transfer
and the R group), and that not ony dd an nterest n
such property of 80 per centum or more reman n the
same persons or any of them, but aso an nterest n
such property of 100 per cent remaned n the same
persons or any of them wthn the meanng of secton 204(a)7. It
s probaby true that the R group possessed 40 per cent of the
utmate benefca rght n the property mmedatey before the
transfer and possessed probaby a esser percentage of the utmate
benefca rght n the property mmedatey after the transfer
that the then sharehoders of the N Company mmedatey before
the transfer possessed 60 per cent of the utmate benefca rght
n the property and mmedatey after the transfer possessed
probaby more than 60 per cent of the utmate benefca rght n
the property. s has aready been noted, however, the statute
merey requres that at east 80 per centum of the tota utmate
benefca rght n the property sha reman n the same group
of persons. The assets here n queston are, therefore, n the hands
of the N Company, controed by the provsons of secton 204(a)7
and (c) of the Revenue ct of 1926.
The crcumstance that under III, supra, gan or oss s recog-
nzabe to the N Company n respect of ts recept of 60 per cent
of the sad assets n no way aters the resut. Secton 204 of the
Revenue ct of 1926 contempates generay that, n a reorganzaton
transacton, the sharehoder n the reorganzed corporaton, n
respect of hs shares, shoud take the sub|ect matter receved on
the e change ta -on (Taft v. owers, 278 U. S., 470, Ct. D. 49,
C. . III-1, 226) (secton 204(a)6), and the transferee corpora-
ton recevng the assets of the reorganzed corporaton shoud take
such assets ta -on aso (secton 204(a)7). ere the N Com-
pany happens to be both sharehoder and transferee corporaton
ts transacton as sharehoder s cosed, and accordngy gan or
oss must be recognzed ts transacton as transferee corporaton
s not cosed, and accordngy the sub|ect matter thereof n ts
entrety s taken ta -on. The dua capacty of the N Company
here s merey a strkng ustraton of the reorganzaton prov-
sons of aw and not n any way an anomay (e cept as the setted
rue of emch v. eman (276 U. S., 233, T. D. 4217, C. .
II-2, 238) may tsef be consdered an anomay).
C. M. Chaeest,
Genera Counse, ureau of Interna Revenue.
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203, rt. 1577.
194
rtce 1577: Defntons. I -13-4578
I. T. 2530
R NU CT OP 1926.
In 1927 the N Company transferred 6|/ shares of stock of the O
Company to the M Company n e change for Oy shares or a ma-
|orty of the atter s stuck, .y shares of whch were receved by the
N Company and 9.9|/ shares of whch were receved by the stock-
hoders of the N Company.
ed, the transacton was a reorganzaton wthn the meanng
of secton 203(h)( ) of the Revenue ct of 192G, snce the N
Company acqured a ma|orty of a the stock of the M Company
both the N Company and the M Company were partes to the
reorganzaton: and the dstrbutees (stockhoders of the N Com-
pany) of the M Company stock derved no ta abe gan upon re-
cept of tc stock under secton 203(e) of the same ct.
dvce s requested whether gan to can be recognzed, n a
transacton where by reason of hs ownershp of z shares of stock
of the N Company receved 2s shares of stock of the M Company, n
vew of the provsons of secton 203(c) of the Revenue ct of 1926,
whch provdes as foows:
Sec. 203. (c) If there s dstrbuted, n pursuance of a pan of reorganza-
ton, to a sharehoder n a corporaton a party to the reorganzaton, stock or
securtes n such corporaton or n another corporaton a party to the reor-
ganzaton, wthout the surrender by such sharehoder of stock or securtes
n such a corporaton, no gan to the dstrbutee from the recept of such
stock or securtes sha be recognzed.
Pror to 1927 the O Company was formed, to whch the N Com-
pany transferred 7y shares of common stock of the P Company and
certan shares of the R Company n e change for a of the stock of
that corporaton, consstng of 6y shares. new corporaton, the M
Company, was organzed on May , 1927, wth an authorzed capta
stock of 8y shares of common stock wthout par vaue, whch was
shorty thereafter ncreased to 18y shares. On May , 1927, the
e ecutve commttee of the N Company met and approved a pro-
posa to the M Company whereby the N Company was to e change
6y shares of common stock of the O Company for Oy shares of the
M Company. The proposa submtted to the M Company reads n
part as foows:
You w ssue forthwth .y shares of stock of your company to our company
and you w ssue forthwth to the common stockhoders of our company 9.9y
shares of your stock and w smutaneousy dstrbute and dever such shares
to our company and to our common stockhoders as of record May 31, 1927, at
the rate of shares of the common stock of your company n respect to each
share of common stock of our company so hed by sad common stockhoders.
In e change for sad stock of your company to be ssued to us and drect to
our stockhoders, we w dever to you sad (u shares of sad O Company.
The proposa of the N Company to the M Company was accepted
by the atter corporaton, and the transacton contempated by the
proposa was competed on May 10, 1927.
On May 9, 1927, the O Company dsposed of a of ts stock hod-
ngs n the R Company. The O Company therefore had assets re-
manng consstng of 7y shares of common stock of the P Company.
The M Company, on May 10, 1927, qudated the O Company and
receved n qudaton a of the assets of the O Company, that s, 7y
shares of common stock of the P Company.
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195
204, rt. 1591.
The basc transacton nvoved n the nstant case was the transfer
by the N Company of 6y shares of the O Company stock to the M
Company n e change for 1 shares of the atter s stock, .y shares
of whch were receved by the N Company and 9. shares of whch
were receved by the stockhoders of the N Company. The 9.9// shares
ssued to the stockhoders of the N Company were under the facts
stated frst constructvey receved by the N Company. ( rtce 547,
Reguatons 69 Rockefeer v. Unted States, 257 U. S., 176 T. D.
32 1, C. . 5, 34 Unted States v. Cedarburg Mk Co. et ah, 288
ed., 996 Rensseaer S. R. Go. v. Irwn, 249 ed.. 726, certorar
dened 246 U. S., 671.)
Secton 203 of the Revenue ct of 1926 provdes n part as foows:
(h) s used n ths secton and sectons 201 and 204
(1) The term reorganzaton means ( ) a merger or consodaton (n-
cudng the acquston by one corporaton of at east a ma|orty of the votng
stock and at east a ma|orty of the tota number of shares of a other casses
of stock of another corporaton, or substantay a the propertes of another
corporaton) .
(2) The term a party to a reorganzaton ncudes a corporaton resutng
from a reorganzaton and ncudes both corporatons n the case of an acqus-
ton by one corporaton of at east a ma|orty of the votng stock and at east
a ma|orty of the tota number of shares of a other casses of stock of another
corporaton.
The transacton n queston was ceary a reorganzaton wthn
the meanng of secton 203(h)( |) of the Revenue ct of 1926, snce
the N Company acqured a ma|orty of a the stock of the M Com-
pany. so, both the N Company and the M Company were partes
to the reorganzaton under the e press anguage of secton 203(h)2.
ccordngy, the dstrbutees ( and the other stockhoders of the
N Company) of the M Company stock derved no ta abe gan upon
recept of the stock under secton 203(c) of the Revenue ct of 1926.
The cost or other bass of the stock of the N Company owned by
shoud be apportoned between that stock and the stock of the
M Companv n accordance wth the provsons of secton 204(a)9 of
the Revenue ct of 1926 and artce 1599 (rue 2) of Reguatons 69.
S CTION 204. SIS OR D T RMINING G IN OR
LOSS, D PL TION, ND D PR CI TION.
In 1925, the ta payer, a corporaton engaged n buyng and se-
ng rea estate, by genera warranty deed conveyed rea property
whch t owned n fee smpe to a trust company for a nomna con-
sderaton. The trust company e ecuted a decaraton of trust
acknowedgng that t hed the reaty as trustee for the hoders
of certan and trust certfcates, whch certfcates were to be
Issued by the trust company. t the same tme the trust company
e ecuted a ease of the reaty to the ta payer for 99 years, renew-
abe forever, wth the opton to the essee to repurchase the entre
reaty, or any of ts consttuent parces, at any tme after pr 1,
1935, on stated terms, the proceeds to be apped n redeemng cer-
tfcates. These and trust certfcates were mmedatey turned
over to the ta payer, by whch they were sod to a fnanca con-
cern that ater sod them to the pubc as an nvestment. The proft
rtce 1591: ass for determnng gan or
oss from sae.
R NU CT O 1926.
I -24-4669
G. C. M. 8098
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204, rt. 1591.
196
on the sae of these certfcates was reported by the ta payer n
Its return for 1925.
ed, the conveyance by the ta payer to the trust company was
s nonta abe transacton and not, a sae.
The ta payer, a corporaton engaged n the busness of purchas-
ng and seng rea property, owned rea property n the cty of ,
State of Y. In 1925 t desred to borrow money on certan of the
reaty owned by t, whch had a far market vaue of 2oo doars.
It socted the oan from a bank, offerng the rea property as
securty. The bank suggested that, nstead of borrowng the money
secured by a mortgage on the rea property, another method of
obtanng the needed funds be empoyed. The method empoyed
was as foows:
The ta payer by genera warranty deed conveyed the reaty to
a trust company n fee smpe for a nomna consderaton of 10.
The trust company e ecuted a decaraton of trust acknowedgng
that t hed the reaty as trustee for the hoders of certan and
trust certfcates, whch certfcates were to be ssued by the trust
company. The trust company at the same tme e ecuted a ease
of the reaty to the ta payer for the term of 99 years, renewabe
forever, wth the opton to the ta payer to repurchase the entre
reaty at any tme after pr 1, 1935, for an amount equa to the
face vaue of the certfcates then outstandng, together wth accrued
nterest and a sma bonus, or to repurchase any of the parces that
made up the entre reaty hed n trust at a f ed prce per parce,
wth consequent ad|ustment of the renta, the proceeds to be apped
by the trustee n redeemng certfcates. The renta was an amount
suffcent to pay the nterest on the outstandng certfcates pus
the compensaton to the trustee n admnsterng the trust, and
was to be decreased proportonatey as any certfcate was redeemed
and canceed. The certfcates stpuated that they were not ob-
gatons of the trust company, but were to be pad as to nterest and
prncpa ony out of the renta and other moneys pad to the trust
company by the essee. The ta payer, as essee, was to pay a
ta es and upkeep of the premses, and the e pense of the trust
company n admnsterng the trust. The ta payer had the rght
at any tme after pr 1, 1935, to provde the trustee wth funds
wherewth outstandng certfcates coud be purchased and canceed,
thus effectng a correspondng decrease n the renta payabe by the
ta payer. I, after pr 1, 1935. certfcates were not vountary
offered for purchase, the trustee coud determne by ot what certf-
cates were to be purchased for canceaton. Provson was made for
repossesson of the reaty by the trustee for the use of the certfcate
hoders n case of defaut on the part of the ta payer essee.
These and trust certfcates were mmedatey turned over by the
trustee to the ta payer, whch thereupon sod the certfcates to a
fnanca concern at a dscount. These certfcates vere, n turn, sod
by the fnanca concern to the pubc as an nvestment. The ta -
payer reported the proft on the sae of these and trust certfcates n
ts ncome ta return for 1925.
The queston s rased whether the conveyance of the reaty by the
ta payer to the trustee was a sae resutng n ta abe ncome.
The contenton s made that the transacton consttuted a sae of
rea estate for a consderaton of cash receved and a 99-year ease
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204, rt. 1591.
renewabe forever, the vaue of whcn was part of the sae prce
of the property.
It s apparent that the conveyance to the trust company, the deca-
raton of trust by the trust company, the ease to the ta payer,
the ssuance and devery to the ta payer of the and trust certf-
cates by the trustee, and ther sae by the ta payer were but
component parts of one whoe transacton whereby the ta payer n
effect obtaned funds by a sae of redeemabe equtabe nterests
n the reaty. Such methods of obtanng funds are common n the
vcnty of the cty of , whereby the ega and the equtabe nterests
are separated and redeemabe shares of benefca nterest n the
equtabe estate bearng nterest are sod as nvestments. Such
shares of equtabe nterest are consdered to be nterests n reaty
and not personaty under the aws of the State of Y. In such
cases, as m the nstant one, the ega tte s odged n the hands
of a trustee, whch eases the property to secure funds for the pay-
ment of nterest on the certfcates. Thus, when the transacton was
compete, the ega tte was n the trustee, sub|ect to repurchase by the
ta payer. The ta payer had possesson of the equtabe estate rep-
resented by the certfcates, and aso possesson of the reaty as essee,
a possesson t had never renqushed at the tme of the conveyance.
The ta payer sod ths equtabe estate, whch was reaty, and thereby
reazed a proft, such property beng ncuded n ts ncome ta
return for 1925.
It s qute evdent that there never was any ntent to make a sae of
the reaty to the trustee. There was ceary no ntent on the part of
the trust company to purchase the property or to retan t, e cept
n accordance wth the terms of the trust, or any ntent on ts part
to do more than act as trustee for the hoders of the and trust cer-
tfcates as ong as any certfcates were outstandng. The trustee
coud not se the reaty e cept as provded n the decaraton of
trust that s, to the essee after pr 1, 1935, or n case of defaut
by the essee. The provson for a consstent and proportonate
decrease n the amount of the renta payabe by the essee to the
trustee ndcates that the reatonshp of andord and tenant between
the trustee and the ta payer was merey nomna, and that the
trustee dd not have or cam to have any actua nterest n the reaty
further than to carry out the terms of the trust. Consderng the
transacton as a whoe, the ta payer merey sod equtabe nterests
n ts reaty, redeemabe at ts opton after a certan date, whch
nterests were n the form of and trust certfcates and are consdered
to be reaty n the State of Y.
Ths offce s of the opnon that the ta payer n conveyng the
reaty to the trust company n the nstant case dd not effect or
ntend to effect a sae of such reaty, but such conveyance was but a
premnary step n the separaton of the equtabe nterest n the
reaty from the ega tte, wth a vew to seng such equtabe
nterest. Such a sae was made. The transfer by the ta payer of
the reaty to the trust company, as trustee, was a nonta abe trans-
acton, beng a mere transfer of property to a trustee, the transferor
contnung as the equtabe owner of the property whch was made
the sub|ect of the trust.
C. M. Carf.st,
Genera Counse, ureau of Interna Revenue.
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204, rt. 1595.
198
rtce 1595: Property acqured by transfer
n trust after December 31, 1920.
I -2-4500
G. C. M. 7309
R NU CT O 1926.
On September 13, 1927, , who s st vng, transferred y shares
of stock of the M Company to the O Trust Company as trustee.
The trustee s to pay the net ncome to the donor (urng hs fe-
tme and upon hs death to hs two daughters durng ther ves
and upon ther demse to dever the corpus to ther ssue or ap-
pontees. The transferred shares were acqured by the donor pror
to March 1, 1913, and ther vaue on that date was doars. On
September 20, 1927, the trustee sod the shares for 2 doars.
Inasmuch as the / shares of the M Company were acqured by
transfer n trust after December 31, 1920, and nasmuch as the
acquston thereof by the trustee does not come wthn the purvew
of secton 204(a)5, the gan to the trustee from the sae of the
shares n 1927 must be determned on the bass prescrbed by the
provsons contaned In the frst sentence of secton 204(a)3 of the
Revenne ct of 1926.
On September 13, 1927, (herenafter referred to as the donor),
who s st vng, e ecuted a vountary trust nstrument whereby
he transferred y shares of the M Company to the O Trust Company,
as trustee. y that nstrument the trustee s requred to pay the net
ncome from the corpus of the trust to the donor durng hs fetme,
and upon hs death to pay the net ncome to hs two daughters dur-
ng ther ves, and upon ther demse to pay and dever the corpus
to ther ssue, or appontees, as the case may be.
The transferred shares of stock were acqured by the donor pror
to March 1, 1913, and ther vaue on that date was doars. On or
about September 20, 1927, the trustee sod the shares for 2 doars.
It s contended by the trustee that, snce the donor reserved the
ncome from the trust estate for hs fe, the trust takes effect n
possesson or en|oyment at or after hs death and that, consequenty,
the far market vaue of the shares as of the date they were trans-
ferred n trust consttutes the bass for determnng the gan or oss
to the trustee from the sae thereof n 1927.
Ths contenton rases the queston as to whether the gan from
the sae of the shares shoud be determned on the bass prescrbed
by paragraph (3), or on the bass prescrbed by paragraph (5), of
subdvson (a) of secton 204 of the Revenue ct of 1926.
Those paragraphs of subdvson (a) of secton 204, so far as here
matera, provde as foows:
(a) The bass for determnng the gan or oss from the sae or other ds-
poston of property acqured after ebruary 2S, 1913. sha be the cost of such
property e cept that
(3) If the property was acqured after December 31, 1920, by a transfer In
trust (other than by a transfer n trust by bequest or devse) the bass sha
be the same as t woud be n the hands of the grantor, ncreased n the
amount of gan or decreased n the amonnt of oss recognzed to the grantor
upon such transfer under the aw appcabe to the year n whch the transfer
was made. The provsons of ths paragraph sha not appy to the acquston
of such property nterests as are specfed n subdvson (c)
of secton 302 of ths ct
(5) If the property was acqured by bequest, devse, or nhertance, the
bass sha be the far market vaue of such property at the tme of such
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199
208, rt. 1651.
a ustoo. The provsons of ths paragraph sha appy to the acquston of
s v|h property nterests as are specfed n subdvson (c)
of secton 302 of ths ct .
Secton 302 of the 1926 ct, to the e tent that t reates to the
queston under consderaton, provdes:
The vaue of the gross estate of the decedent sha be determned by n-
cudng the vaue at the tme of hs death of u property, rea or persona,
tangbe or ntangbe, wherever stuated
(c To the e tent of any nterest theren of whch the decedent has at any
tme made a transfer, by trust , ntended to take effect n posses-
son or en|oyment at or after hs death, e cept n case of a bona fde sae for
an adequate and fu consderaton n money or money s worth.
It w be notced that the provsons of secton 204 (a) 5 appy
u to the acquston of such property nterests as are specfed
n subdvson (c) of secton 302, . e., property nterests
whch a decedent transferred, by trust or otherwse, to take effect
n possesson or en|oyment at or after hs death. rom ths t
f ows that a vendor trustee s not entted to the beneft of secton
204(a)5 uness the sae of the trust property s made after the
death of the donor (settor). That secton appes to a case where
the donor des after he has, by way of trust, made a gft whch
under secton 302 consttutes a part of hs gross estate, as a transfer
ntended to take effect n possesson or en|oyment at or after hs
death. It does not appy to a case where the donor, as n the
nstant case, s st vng.
Inasmuch as the y shares of the M Company were acqured by
transfer n trust after December 31, 1920, and nasmuch as the acqu-
ston thereof by the trustee does not come wthn the purvew of
secton 204 (a) 5, the gan to the trustee from the sae of the shares
n 1927 must be determned on the bass prescrbed by the pro-
vsons contaned n the frst sentence of secton 204 (a)3.
C. M. Charkst,
Genera Counse, ureau of Interna. Revenue.
S CTION 208. C PIT L C INS ND LOSS S.
rtce 1G51: Defnton and ustraton of I 5 4519
capta net gan. I. T. 2524
R NU CT O 1926.
conveyance n 1926 of a one-fourth nterest n and to a of
the o, gas, and other mneras n and under descrbed ands
owned n fee by and for more than two years nvoved a sae
of capta assets, and the gan derved therefrom s ta abe as
capta gan under the provsons of secton 208 of the Revenue ct
of 1926.
Inqury s made as to whether the conveyance of an nterest n
and to a of the o, gas, and other mneras n and under certan
ands, under the facts herenafter set out, nvoved a sae of capta
assets wthn the scope of secton 208 of the Revenue ct of 192(5.
The ta payers, and , were the owners n fee for a number
of years of a tract of and n Y County, State of . y a con-
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208, rt. 1651.
200
tract of ease e ecuted n 1925, such ta payers eased to C for
the soe and ony purpose of mnng and operatng for o and gas
and of ayng ppe nes and of budng tanks, power statons,
and structures thereon to produce, save, and take care of sad
products, a that certan tract of and stuated n the County of Y,
State of , for a term of 10 years from ths date, and
as ong thereafter as o or gas or ether of them s produced from
sad and by the essee. Under such ease the essee agreed:
1st. To dever to the credt of essor, free of cost, n the ppe ne to whch
he may connect hs wes, the equa one-eghth part of a o produced and
saved from the eased premses.
2d. To pay the essor one-eghth of the proceeds from the sae of gas for the
gas from each we where gas ony s found, whe the same s beng used off
the premses, and essor to have gas free of cost from any such we for a
stoves and a nsde ghts n the prncpa dweng house on sad and dur-
ng the tme by makng hs own connectons wth the we at hs own rsk
and e pense.
3d. To pay essor for gas produced from any o we and used off the
premses at the rate of one-eghth of the proceeds from the sae of gas for the
tme durng whch such gas sha be used.
urther provsons were contaned n the ease reatve to the
tme mtaton wth respect to the commencement of the drng
work and the payment of renta coverng the prvege of deferrng
the commencement of we-drng operatons for 12-month perods.
y a deed e ecuted n 1926, the ta payers conveyed to and ,
for a consderaton of doars, one-fourth nterest n and to
a of the o, gas, and other mneras n and under, and that may
be produced from, the foowng descrbed ands stuated n Y
County, State of , . Such deed aso contaned the fo-
owng provsons:
nd sad above descrbed ands beng now under an o and gas ease, org-
nay e ecuted n favor of C and now hed by C and D, t s understood and agreed
that ths sae Is made sub|ect to sad ease, but covers and ncudes one-fourth
of a the o royaty and gas renta or royaty due and to be pad under the
terms of sad ease.
It s agreed and understood that one-fourth of the money rentas whch may
be pad to e tend the term wthn whch a we may be begun under the terms
of sad ease s to be pad to the sad and , and n the event that the sad
above descrbed ease for any reason becomes canceed or forfeted, then and n
that event: the ease nterests and a future rentas on sad and for o, gas, and
mnera prveges sha be owned |onty by and , ownng a three-fourths
nterest, and by || and , ownng a one-fourth nterest.
Ths sae s made for and n consderaton of the sum of w doars cash n
hand pad, the recept of whch s hereby acknowedged.
To ave and to od, the above descrbed property, together wth a and
snguar rghts and appurtenances thereto n anywse beongng, unto the sad
and , ther hers and assgns forever, and the sad and do hereby bnd
themseves, ther hers, e ecutors, and admnstrators to warrant and forever
defend a and snguar the sad property unto the sad and , ther hers and
assgns aganst every person whomsoever awfuy camng or to cam the
same or any part thereof.
Secton 208 of the Revenue ct of 1926 provdes n part as foows:
(1) The term capta gan means ta abe gan from the sae or e change
of capta assets consummated after December 31, 1021
(8) The term capta assets means property hed by the ta payer for more
than two years (whether or not connected wth hs trade or busness), but does
not ncude stock n trade of the ta payer or other property of a knd whch
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201
212, rt. 23.
woud propery be ncuded n the nventory of the ta payer f on hand at the
cose of the ta abe year, or property hed by the ta payer prmary for sae
n the course of hs trade or busness.
(b) In the case of any ta payer (other than a corporaton) who for any
ta abe year derves a capta net gan, there sha (at the eecton of the ta -
payer) be eved, coected and pad, n eu of the ta es mposed by sectons
210 and 211 of ths tte, a ta determned as foows:
parta ta sha rst he computed upon the bass of the ordnary net
ncome at the rates and n the manner provded n sectons 210 and 211, and the
tota ta sha be ths amount pus 12 per centum of the capta net gan.
The deed n the nstant case conveyed a one-fourth nterest n the
o, gas, and other mneras n and under the descrbed ands and n
the royaty rghts n respect thereto wthout mtaton as to duraton
of tme. The conveyance was smar to that nvoved n the case of
. . Murphy (9 . T. ., 610, C. . III-1, 32). In that case the
oard of Ta ppeas hed that the property rghts conveyed by the
ta payer were capta assets, as denned n secton 206 of the
Revenue ct of 1921, whch had been owned for more than two years
pror to the date of conveyance, and that the proft derved there-
from was capta gan whch shoud be ta ed under the provsons
of secton 206 of the Revenue ct of 1921. The defnton of capta
assets contaned n secton 206 of the Revenue ct of 1921 does not
dffer materay from that contaned n secton 208 of the Revenue
ct of 1926.
In vew of the foregong, t s hed that the conveyance made by
the ta payers to and n 1926 nvoved a sae of capta assets,
and that the gan derved therefrom s ta abe as capta gan under
the provsons of secton 208 of the Revenue ct of 1926.
S CTION 209. RN D INCOM .
rtce 1662: Defntons and mtatons.
R NU CT O 1926.
Determnaton of earned ncome on professona fees. (See Mm.
3802, page 121.)
P RT II. INDI IDU LS.
S CTION 212. N T INCOM O INDI IDU LS
D IN D.
rtce 23: ases of computaton. I -22-4657
G. C. M. 7561
R NU CT O 1826.
The ta payer havng kept ts books on the accrua bass from
date of ncorporaton to date of dssouton and havng fed ts
returns for 1926 and 1927 on that bass may not now fe amended
returns reportng ts ncome on the nstament bass.
n opnon s requested as to whether a corporaton havng kept
ts books on the accrua bass from date of ncorporaton to date of
4090 30 14
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212, rt. 23.
202
dssouton and havng fed ts returns on that bass may now fe
amended returns reportng ts ncome on the nstament bass.
The ta payer was ncorporated under the aws of the State of R
on ebruary , 1924. Shorty after ts organzaton t acqured
and havng a frontage of feet on a certan street. The con-
sderaton pad was a purchase money mortgage for 1.5a doars and
the entre ssue of y shares (havng a par vaue of 100 each) of the
capta stock of the ta payer. In 1925 the ta payer sod a porton
of the tract wth a frontage of feet. The entre consderaton
of doars was pad n cash n that year. In 1926 the remander
of the property was sod for 8a doars, the nta payment n 1926
beng 2a doars cash, the baance of doars beng deferred to
1931, pursuant to mortgages for that amount maturng fve years
from the date of the sae. oowng the sae of the ta payer s
property, t was dssoved, and, on or before pr 1, 1927, ts net
assets, ncudng the mortgages for 6a doars, were dstrbuted as
qudatng dvdends to ts stockhoders.
In ts ncome ta return for 1926 the ta payer used as the bass
for ascertanng the gan on the sae what t consdered to be the
cost of the property to t n 1924, and attrbuted to the mortgages,
amountng to 6a doars, a far market vaue of 4 doars. The
ta payer aeges that the computaton of proft on the above bass
was approved by the ureau n a etter dated anuary 11, 1927.
owever, the ureau subsequenty determned that the ta payer had
ncorrecty computed the cost of the property, and that the mortgage
notes were worth ther face, wth the resut that the net ncome of
the ta payer was ncreased by some 3a doars.
The ta payer contends that snce the vaues used by the ta payer
n computng proft from the transacton have been re|ected by the
ureau, t now has the rght to have the proft from the transacton
computed on the nstament bass.
The gst of the ta payer s argument s that there s no statute,
no reguaton or rung, and no decson of any board or court pre-
ventng a ta payer, whch has n ts ncome ta return for a certan
year computed ts ncome from an nstament sae on a bass other
than the nstament bass, from changng to the nstament bass
after a redetermnaton by the ureau of ts ncome for such year.
The ta payer aso argues that by secton 1208 of the Revenue ct
of 1926 Congress has recognzed the rght of the ta payer to make
the change.
Secton 212(b) of the Revenue ct of 1926 reads n part as
foows:
The net ncome sha he computed upon the bass of the ta payer s annua
accountng perod (fsca year or caendar year, as the case may he) n ac-
cordance wth the method of accountng reguary empoyed n keepng the
books of such ta payer
Subdvson (d) of the same secton provdes:
Under reguatons prescrbed by the Commssoner wth the approva of
the Secretary, a person who reguary ses or otherwse dsposes of persona
property on the nstament pan may return as ncome therefrom n any ta -
abe year that proporton of the nstament payments actuay receved n
that year whch the tota proft reazed or to be reazed when the payment
s competed, bears to the tota contract prce. In the case (1) of a casua
sae or other casua dsposton of persona property for a prce e ceedng
1,000, or (2) of a sae or other dsposton of rea property, f n ether case
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203
212, rt. 23.
the nta payments do not e ceed one-fourth of the purchase prce, the ncome
may, under reguatons prescrbed by the Commssoner wth the approva
of the Secretary, be returned on the bass and n the manner above prescrbed
n ths subdvson.
Secton 1208 of the Revenue ct of 1920 provdes as foows:
The provsons of subdvson (d) of secton 212 sha be retroactvey apped
n computng ncome under the provsons of the Revenue ct of 1916, the
Revenue ct of 1917. the Itevenue ct of 1918. the Revenue ct of 1921, or the
Revenue ct of 1924, or any of such cts as amended. ny ta that has
een pad under such cts pror to the enactment of ths ct, f n e cess of
the ta mposed by such cts as retroactvey modfed by ths secton, sha,
sub|ect to the statutory perod of mtatons propery appcabe thereto, be
credted or refunded to the ta payer as provded n secton 284.
The ta payer used the accrua method of accountng and the
returns fed for the years 1924 to 1927, ncusve, contan the
statement that they are not based upon actua recepts and dsburse-
ments but are made on the accrua bass, thus ndcatng that the
method of accountng used n the ta payer s returns was consstent
wth the method of accountng reguary empoyed n keepng ts
books.
The sae n queston took pace n 1926, and t was optona wth
the ta payer to record the sae on ts books and return the profts
on the nstament bass under the e press provsons of secton
212(d) had t seen ft to do so. The phrase may return n
secton 212(d) contempates an eecton by the ta payer. The
weght of authorty s to the effect that an eecton e ercsed by the
ta pa| er becomes fna and bndng upon e praton of the tme for
fng returns. (Grant v. Rose, 24 ed. (2d), 115.)
Thus n Gbert W. Lee v. Commssoner (0 . T. ., 135) the
oard refused to permt the pettoner to change from an nsta-
ment bass to an accrua bass of reportng ts ncome for the years
1918 and 1920, sayng:
It s apparent, therefore, that the pettoner eected to return the
ncome resutng from the sae of ots on the nstament bass. Ths choce
must have been consdered and doubtess was made because t was deemed to
best serve the nterests of the pettoner. avng once made hs eecton,
the pettoner shoud not e aowed to change to a dfferent bass merey
because subsequent egsaton or other events made t to hs nterest so
to do.
nd n evdere Lumber Co. v. Commssoner (6 . T. ., 84)
the oard hed that a corporaton fng a separate return for 1922
coud not subsequenty |on wth another corporaton n fng a
consodated return for the same year. The oard sad :
The statute, thus, In the case of affated corporatons, provdes
two ways n whch returns may he fed. ther return s a correct and proper
return, but the return that s fed s the ony return recognzed by the aw
and upon whch the ta es due thereunder sha be computed and determned.
We decded, n / . Dowres, |r., v. Commssoner (5 . T. ., 1029), that a
separate return coud not be subsequenty fed, where a |ont return had been
fed pursuant to the provsons of secton 223 of the Revenue ct of 1921.
The decson u R. Doones, |r., v. Commssoner, supra, s decsve and contro-
ng n the nstant proceedng.
The Unted States Crcut Court of ppeas for the Second
Crcut s on record to the effect that the ad|ustment by the Com-
mssoner of nventory and other tems to correct an understatement
of ncome as reported n the 1917 return of an affated group, whose
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213(a), rt. 31.
204
accounts were substantay on the accrua bass, dd not consttute
a re|ecton of the bass and permt the ta payers to report ncome
on the cash recepts and dsbursements bass. ( mercan Can Co. v.
o vers, 35 ed. (2d), 832.)
Secton 1208 of the Revenue ct of 1926 has no appcaton to the
facts n ths case, snce that secton ony appes subdvson (d) of
secton 212 retroactvey to transactons arsng under the Revenue
ct of 1924 and pror cts. (See artce 42, Reguatons 69.)
In vew of the foregong, ths offce s of the opnon that the
ta payer shoud not be permtted to change to the nstament bass
of reportng ts ncome for the years 1926 and 1927.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
S CTION 213(a). GROSS INCOM D IN D:
INCLUSIONS.
rtce 31: What ncuded n gross ncome. I -22 4658
G. C. M. 8031
R NU CTS O 192 4 ND 1926.
Under the aws of Te as rents receved by the husband durng
1924 and 1925 pror to September 1, 1925 (the effectve date of
the Revsed Cv Statutes of Te as, 1925), as we as on and
after that date, from hs separate rea estate consttute hs
separate property and are ta abe to hm under the Revenue cts
of 1924 and 1926.
n opnon s requested as to what acton shoud be taken on
s cam for refund fed for the ta abe years 1924 and 1925.
based on hs contenton that the rents from a husband s separate
rea estate consttute communty ncome under the aws of Te as.
On May 25, 1923, the ta payer, , acqured certan rea estate
stuated n the cty of R, Te as, by nhertance from hs father.
Under the aws of the State of Te as (artce 4621, ernon s Sayes
Cv. Stat., 1914) ths rea estate was the separate property of the
ta payer. Durng the years 1924 and 1925 he receved as rentas
from the rea estate 23a doars and 25a doars, respectvey. The
ta payer and hs wfe pad an ncome ta on the rentas for the
years 1924 and 1925, each returnng one-haf thereof on the theory
that the rentas consttuted communty ncome. On March 13, 1929,
the Commssoner determned a defcency n ncome ta es for 1924
and 1925 aganst the ta payers. Ths defcency was pad and on
ugust 30, 1929, cams for refund of ncome ta es for 1924 and
1925 n the amounts of 1.2a doars and doars, respectvey, were
fed wth the coector of nterna revenue. The ta payer concedes
that on and after September 1, 1925 (the effectve date of the
Revsed Cv Statutes of Te as, 1925), the rents from h.s separate
rea estate consttute hs separate property. ccordngy, the soe
queston rased by the ta payer s whether, pror to September 1,
1925, the rent from the separate rea estate of the husband con-
sttuted communty property under the aws of the State of Te as.
It s the contenton of the ta payer that the rentas so receved
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205
t 213(a), rt. 31.
durng the year 1924 and from anuary 1 to September 1, 1925,
were, under the Te as statutes, communty ncome, and that he was
ony requred to pay edera ncome ta es on one-haf of such ncome.
rtce 4613 of the Revsed Cv Statutes of Te as, 1925, provdes
as foows:
property of the husband, both rea and persona, owned or camed by
hm before marrage, and that acqured afterwards by gft, devse, or descent,
as aso the ncrease of a ands thus acqured, and the rents and revenues
derved therefrom, sha be hs separate property. The separate property of
the husband sha not be sub|ect to the debts contracted by the wfe, ether
before or after marrage, e cept for necessares furnshed hersef and chdren
after her marrage wth hm, nor for torts of the wfe. Durng marrage
the husband sha have the soe management, contro and dsposton of hs
separate property, both rea and persona.
rtce 4621, ernon s Sayes Te as Cv Statutes, 1914, pertan-
ng to the separate property of the husband, as we as artce 4622,
reatng to the separate property of the wfe, made no specfc menton
of the rents derved from the separate property of ether. y an act
approved pr 4, 1917, chapter 194, Laws of Te as, 1917, and by
chapter 130, Laws of Te as, 1921, not approved by the governor
but effectve 90 days after ad|ournment, t was provded as foows:
rt. 4621. Separate property management |onder of husband n convey-
ance, etc. permsson to convey where husband abandons wfe, s nsane or
refuses to |on debts or torts of husband and wfe conveyance of homestead.
property, both rea and persona, of the husband owned or camed by
hm before marrage and that acqured afterwards by gft, devse or descent,
as aso the ncrease of a ands thus acqured, and tte rents and revenues
derved therefrom, sha be hs separate property. The separate property
of the husband sha not be sub|ect to the debts contracted by the wfe, ether
before or after marrage, e cept for necessares furnshed hersef and chdren
after her marrage wth hm nor for torts of the wfe . property of the
wfe, both rea and persona, owned or camed by her before marrage, and
that acqured afterwards by gft, devse or descent, as aso the ncrease of
a ands thus acqured, and the rents and revenues derved therefrom, sha
be the separate property of the wfe. Durng marrage, the husband sha
have the soe management, contro and dsposton of hs separate property,
both rea and persona, and the wfe sha have the soe management, contro
and dsposton of her separate property, both rea and persona
Nether the separate property of the wfe, nor the rents from the wfe s separate
rea estate, nor the nterest on bonds and notes beongng to her, nor dvdends
on stocks owned by her, nor her persona earnngs, sha be sub|ect to the
payment of debts contracted by the husband nor of torts of the husband .
Matter n brackets n 1921 act ony.
Pror to the enactment of the 1917 and 1921 acts of Te as, referred
to above, t seems to be setted that the rents from the wfe s sepa-
rate ands consttuted communty property. merson- r antng-
ham Impement Co. v. rothers, 194 S, W., 608: Te as Lumber
Loan Co. v. rst Natona ank, 209 S. W., 811 rmstrong v.
TwrbevUe, 216 S. W., 1101.) nd t was hed n Wnters v. Duncan
(220 S. W., 219) that pror to pr 4,1917, rents from the husband s
separate ands were eommuntv property. (See aso Garden hre v.
Gardenhre, 258 S. W., 1077.)
The consttuton of the State of Te as makes no provson reatng
to the separate property of the husband. Wth respect to the wfe s
separate property, secton 15 of rtce I of the consttuton of
the State of Te as provdes as foows:
property, both rea and persona, of the wfe, owned or camed by her
before marrage, and that acqured afterward by gft, devse or descent, sha
be her separate property and aws sha be passed more ceary defnng the
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213(a), rt. 31.
206
rghts of the wfe, n reaton as we o er separate property as that hed
n common wth her husband. Laws sha aso he passed provdng for the
regstraton of the wfe s separate property.
In rnod v. Leonard (114 Te ., 535, 273 S. W., 799) t was hed,
the rents and revenues derved from the wfe s separate ands not
beng a part of the wfe s separate property under the consttuton,
and the egsature beng wthout authorty to enarge or dmnsh
such property, that the portons of the acts of 1917 and 1921 enacted
by the Te as Legsature whereby t was attempted to make the
rents and revenues of the wfe s separate ands a part of her separate
estate were nvad.
It s contended, however, n behaf of the ta payer that, nasmuch
as the Supreme Court of Te as n rnod v. Leonard, supra, has
hed the acts to be nvad n ths respect, they are nvad n ther
entrety, and that, therefore, the rents from the husband s separate
rea estate n the State of Te as pror to September 1, 1925, the
effectve date of the Revsed Cv Statutes of Te as, 1925, are
communty property. Wth ths contenton ths offce s unabe to
agree. It was specfca| hed n rnod v. Leonard, supra, that
the provsons of the acts of 1917 and 1921, e emptng rents from
the wfe s separate ands from payment of communty debts con-
tracted by the husband, were separate and dstnct from the prov-
son of the acts undertakng to make the rents and revenues from
separate ands part of her separate estate, and that such other
provsons were vad and operatve. The court n ts opnon
stated as foows:
Snce rents and revenues derved from the wfe s separate auds are entrey
wthout the consttutona defnton of the wfe s separate property, and snce
the egsature can nether enarge nor dmnsh such property, t foows that
the portons of the acts of 1917 and 1021. whch undertake to make rents and
revenues from the wfe s separate ands a part of her separate estate, are
nvad.
The provson of the acts of 1917 and 1921, decarng the e empton,
s separate and dstnct from the porton of the acts undertakng to change
the ownershp of rents and revenues from the wfe s separate ands. ence
such provson mght be operatve n each act. despte faure of the purpose
to make the rents separate property of the wfe. (Western Unon Te. Co. v.
State, 62 Te ., 633.)
In Godman, Tester d- Co. v. Whtte et .r.. No. 4066 (114 Te ..
548, 273 S. W., 808), the Supreme Court of Te as aso stated as
foows:
ence the portons of the acts of 1917 and 1921 whch undertake
t make rents of the wfe s separate ands a part of her separate estate are
vod because voatve of the consttuton. In answerng the certfed questons
above mentoned, the court has e pressy uphr wt vad the portons of sad
acts conferrng on the wfe the soe management, contro, and dsposton of
rrran portons of the communty estate and of her separate ands and tn-
rents thereof, sub|ect to certan mtatons, and e emptng her separate property
and portons of the communty commtted to her management, contro, and
dsposton from payment of debts contracted by the husband, ftacs
supped.
rom the foregong t s evdent, therefore, that the portons of the
acts of 1917 and 1921 whch specfcay provde that the rents and
revenues from separate ands of the husband sha aso be hs separate
property are kewse vad. In other words, the supreme court of the
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207
213(a), rt. 45.
State hed those acts nvad ony n so far as they voated the State
consttuton bv seekng to enarge the wfe s estate. In /Stephens
v. Stephens (292 S. W., 290) the court of cv appeas ned that
o e tracted from the husband s separate and was persona property
and the consderaton receved therefor consttuted a part of hs
separate estate. The court used anguage ndcatng that rents from
the husband s separate rea estate receved pror to the effectve
date of the Revsed Cv Statutes of Te as, 1925, were communty
property, but that was not the pont at ssue and must be consdered
as dcta. It mght be nferred from other anguage used by the
court n Stephens v. Stephens, supra, that the acts of the State
egsature referred to had been hed nvad n ther entrety by
the Supreme Court of the State n rnod v. Leonard, supra. ut
ths dcta can not be accepted as controng. s ponted out above,
the Supreme Court of Te as hed as nvad ony the portons of
the acts of 1917 and 1921 whch undertake to make rents and
revenues from the wfe s separate ands a part of her separate
estate.
The concuson necessary foows that the other portons of the
acts referred to are vad. Ths s the effect of the decson as stated
by the supreme court n another opnon rendered on the same date.
(See Godman, Lester Co. v. Whtte et u ., supra.) Inasmuch as
the aws of Te as (chapter 194, Laws of Te as, 1917 chapter 130,
Laws of Te as, 1921 and secton 4613, Revsed Cv Statutes of
Te as, 1925) specfcay provde that the rents and revenues derved
from the husband s separate ands consttute hs separate property,
such rents receved pror to September 1, 1925, as we as such rents
receved on or after that date, can not be treated as representng
communty ncome.
The ureau has prevousy consdered the queston whether under
the aws of Te as rents receved pror to September 1, 1925, from the
separate rea estate of the husband are communty ncome and the
ssue was tred before the oard of Ta ppeas n the case of ohn
0 Ne and Mrs. ohn ( rances) O Ne v. Commssoner (16 . T.
., 614). The oard hed n that case that farm rentas receved
n the year 1920 from rea estate stuated n the State of Te as, whch
was the separate property of the husband, consttuted communty
ncome under the aws of Te as. The ureau, however, has non-
acquesced n that decson. (See on page 72.)
It s, therefore, the opnon of ths offce that the ta payer s cam
for refund shoud be re|ected.
C. M. Cr R ST,
Genera Counse, ureau of Interna Revenue.
rtce 45: Sae of rea property on nsta- I -17-4609
ment pan. G. C. M. 7871
R NU CT O 1026.
ta payer whose actvtes consst n seng roofs aready con-
structed and n seng rootng matera and attachng t to bud-
ngs, may not be treated as engaged n the sae or other dsposton
of rea property wthn the meanng of secton 212(d) of the
Revenue ct of 1926.
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213(a), rt. 45.
208
n opnon s requested as to whether the M Company may be
treated as engaged n the sae or other dsposton of rea property
wthn the meanng of secton 212(d) of the Revenue ct of 1920.
It appears that the ta payer s busness conssts n the sae of
roofs aready constructed and n seng roofng matera and attach-
ng t to budngs. typca form of contract used by the ta payer
n connecton wth ts busness cas for the constructon of a roof
on a house at a cost of 10a doars, payment to be made as foows:
doars on May 15, 19 , and as doars on the 15th of each succeed-
ng month thereafter unt the b s pad n fu. ppro matey
80 per cent of the average seng prce represents a charge for the
matera, the baance beng many for abor nstaaton.
Secton 212(d) of the Revenue ct of 1926 reads as foows:
Under reguatons prescrbed by the Commssoner wth the approva of the
Secretary, a person who reguary ses or otherwse dsposes of persona prop-
erty on the nstament pan may return as ncome therefrom n any ta abe
year that proporton of the nstament payments actuay receved n that year
whch the tota proft reazed or to be reazed when the payment s com-
peted, boars to the tota contract prce. In the case (1) of a casua sae or
other casua dsposton of persona property for a prce e ceedng 1,000, or
(2) of a sae or other dsposton of rea property, f n ether case the nta
payments do not e ceed one-fourth of the purchase prce, the ncome may. under
reguatons prescrbed by the Commssoner wth the approva of the Secretary,
be returned on the bass and n the manner above prescrbed n ths subdvson.
s used n ths subdvson the term nta payments means the payments
receved n cash or property other than evdences of ndebtedness of the pur-
chaser durng the ta abe perod n whch the sae or other dsposton s made.
The genera aw n regard to f tures s that a f ture s a thng
whch, though orgnay a movabe chatte, s by reason of ts anne -
aton to the and regarded as part of the and, partakng of ts
character and beongng, n the ordnary case at east, to the per-
son or persons ownng the and. (See Tffany on Rea Property
( d. 1920), voume 1, secton 268, page 912 26 C. ., page 657, secton
6.) The fact that a chatte s so attached to a structure that ts
remova woud eave an unfnshed gap n the structure s regarded
as strong evdence that the chatte has become a part of the and.
(Tffany on Rea Property, supra, secton 268, page 912.) rom
the foregong t s qute evdent that when the ta payer aff es ts
matera to a house n constructng a roof, such matera becomes
a part of the and.
The queston presented s whether, n vew of ths concuson,
the ta payer may be treated as engaged n the sae or other dspo-
ston of rea property.
concse defnton of rea property s gven n ouver s Lavv
Dctonary as and, and generay whatever s erected or growng
upon or aff ed to and. so rghts ssung out of, anne ed to, and
e ercsabe wthn or about the same.
Tffany on Rea Property, supra, secton 3, at page 7, says:
nd at. the present day the e presson rea estate or ts equvaent rea
property s frequenty apped n connecton wt propretary nterests n
aud, wthout specfyng any person as the owner thereof. That s, the and,
or some nterest theren, s referred to as rea estate, or rea property, and
not as a partcuar person s rea estate or rea property.
Tn Lews Sutherand Statutory Constructon, voume 2, paragraph
393, t s stated: r
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214(a), rt.O,
So t s a we setted canon of constructon that where ega terms are
used n a statute, they are to receve ther technca meanng, uness the
contrary pany appears to have been the ntent of the egsature
and aso, n paragraph 398, t s stated:
Where a statute uses a word, whch s we known and has a defnte sense
at common aw or n the wrtten aw, wthout defnng t, t w be presumed
to be used n that sense and w be so construed, uness t ceary appears that
t was not so ntended.
In the case of ggnbotom v. ggnbothom, (177 y., 271, 197
S. W., 627, at page 628) the Court of ppeas of entucky sad:
The frst and most eementary rue n the constructon of a statute s that
t s to be assumed that the words and phrases thereof are used n ther techn-
ca meanng, f they have acqured one. It s sad that the f ed technca
meanng of a word must be gven to t when used n a statute, uness the con-
te t shows an ntenton to use t n a dfferent sense whst words of common
use are to be understood n ther natura, pan, ordnary, md genune .sgnf-
caton as apped to the sub|ect mutter of the enactment.
rom the foregong, t foows that n construng the e presson
rea property as used n secton 212(d) of the 1926 ct, the words
must he gven ther usua and common sgnfcaton. ccordngy,
the phrase a sae or other dsposton of rea property n that
secton must mean a sae or other dsposton of and or of rghts n
or to and. In the nstant case the ta payer n seng roofs aready
constructed and n seng roofng matera and attachng t to bud-
ngs s not seng and or any rghts n or to and. What the ta -
payer ses may become aff ed to the and of another, but t s not
and tsef nor any rght n or to and. Such sae, therefore, s not
a sae or other dsposton of rea property.
Ths offce s of the opnon that the M Company may not be treated
as engaged n the sae or other dsposton of rea property wthn
the meanng of secton 212(d) of the Revenue ct of 1926.
C. M. Charest.
Genera Counse, ureau of Interna Revenue.
S CTION 213(b). GROSS INCOM D IN D: -
CLUSIONS.
rtc k 89: ddtona e cusons from gross ncome.
R NU CT O 1926.
mendment of artce 89, Reguatons 69, to ncude Span n the
st of countres whch satsfy the equvaent e empton requrement
of secton 213(b)8 of the Revenue ct of 1926. (See T. D. 4289.
page 160.)
S CTION 214(a) 1. D DUCTIONS LLOW D INDI-
IDU LS: USIN SS P NS S.
rtce 110: Rentas.
R NU CT O 192(1.
The decson n the case of W. 8. oge Co., Inc. (5 . T. .,
541, C. . III-1, 5), s appcabe ony to those cases n whch
no part of the royates pad n any one year s credted to future
producton of ore. (See G. C. M. 7937, page 87.)
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210
S CTION 215. IT MS NOT D DUCTI L .
rtce 293: Premums on busness nsurance. I -20 4645
G. C. M. 7997
R NU CT O 1920.
The ta payer and an nsurance company entered nto a banket
nsurance contract under the terms of whch poces were ssued
to empoyees of the ta payer, the premums beng pad by the
ta payer. The benefcares were desgnated by the nsured and
|oned wth the nsured n assgnng the poces to the ta payer.
The master contract and assgnment e pressy reserves to the ta -
payer the e cusve rght to termnate the pocy.
ed, nasmuch as the ta payer s ndrecty a benefcary, to
the e tent that t may termnate the poces at w wthout the
consent of the empoyees and receve the cash surrender vaues,
the premum payments are not aowabe as deductons n deter-
mnng ts net ncome.
n opnon s requested wth respect to the proper treatment for
ncome ta purposes of premums pad by the ta payer on fe
nsurance poces coverng the ves of ts empoyees, under a group
nsurance contract, where the empoyee desgnates the benefcary
but assgns the pocy to the empoyer.
The ta payer and the N Company entered nto a banket nsur-
ance contract, under the terms of whch nsurance poces were
ssued to the ndvdua empoyees of the ta payer, the entre amount
of the premums for the nsurance beng pad by the ta payer. The
master contract under whch the ndvdua poces were ssued
contans the foowng condtons:
Premums: The premum for each pocy ssued sha be pad by the em-
poyer annuay n advance. The premum to be charged on any pocy ac-
cepted at standard rates sha be the premum as pubshed by the company
tn the date of ssuance of the new pocy for the age attaned by the nsured
at that tme. Substandard cases requrng an e tra premum w be rated
ndvduay.
The empoyer sha furnsh the company wth a sgned appcaton for n-
surance n accordance wth the schedue on page 1. from each of hs em-
poyees who has competed 1/30 months of servce at the date of ths agreement,
from a other empoyees as soon as they compete 3 months of servce, and
from each empoyee who becomes entted to an ncrease n the amount of hs
nsurance.
The empoyer sha renew from year to year the poces of nsurance on
a empoyees who are retaned n servce.
aure to compy wth the above condtons w termnate ths agreement.
Insurabty: The company w consder evdence of nsurabty when
presented on orm No. . No evdence of nsurabty w be requred for
an ncrease n the amount of nsurance on any empoyee who remans contnu-
ousy n I he servce of the empoyer, provded such ncrease s made n accord-
ance wth the provsons outned n the Schedue of Insurance on page 1
of ths agreement.
ssgnment of the poces: The empoyer sha requre from each nsured
empoyee the e ecuton of an assgnment n favor of the empoyer on forms
provded by the company for that purpose.
Termnaton of empoyment: Upon termnaton of empoyment of an nsured
empoyee the empoyer sha eect one of the foowng optons:
(1) Surrender the pocy ssued to such nsured empoyee and receve n
e change therefor the cash vaue of sad pocy as provded theren.
12) ecute a reease of assgnment, f the pocy s to be gven to the nsured
empoyee.
The amounts for whch the ndvdua empoyees were nsured
under these poces vared accordng to the ength of tme the em-
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215. rt, 293.
poyee had been n the servce of the ta payer. The poces afforded
the empoyees death benefts payabe to ther dependents n the
event they ded whe n the servce of ther empoyer, dsabty pro-
tecton n the event they became dsabed through sckness or acc-
dent, and an annuty n the event they reached the age of 65 and
outved ther usefuness to the empoyer. The benefcares were
desgnated by the nsured and, mmedatey after the poces were
ssued, |oned wth the nsured n assgnng the poces to the ta -
payer, as provded under the terms and condtons of the master
contract, supra. The assgnment thus e ecuted reads as foows:
or one doar and oter vauabe consderatons, recept of whch Is hereby
acknowedged, we hereby assgn, transfer, and set over to the M ank, a cor-
poraton of , and desgnated as the empoyer of the nsured, a our rght,
tte, and nterest n and to the anne ed pocy No. , ssued by the N Com-
pany, upon the fe of wth the rght to such, assgnee to surrender the
pocy or to e ercse any and a opton , rghts and prvege n sad contract
gven to the nsured or benefcary wthout ther consent, provded, however,
tat n the event of the death or dsabty of the nsured or the maturty of the
pocy whe the nsured Is n the servce of the M ank and whe the pocy s
n force the sad assgnee sha receve the proceeds or any benefts or ncome n
trust for the nsured or benefcary, whchever may be entted to the same
under the terms of the pocy, but payment to the assgnee hereunder sha
reeve the N Company of a further abty and t sha not be requred to
see to the appcaton of the proceeds of the pocy by the sad assgnee as
trustee. Itacs supped.
though the poces were wrtten under the genera rues of
group nsurance, they can not be cassfed as such n a partcuars.
Group nsurance poces are usuay one-year renewabe term poces,
wthout cash or oan vaue, and wthout pad-up or annuty pro-
vsons. The poces n the nstant case ncude these provsons.
The ta payer contends that n order to carry out ts genera pan of
suppyng vauabe nsurance for ts empoyees, and n order to pre-
vent them from borrowng on the cash surrender or oan vaue, or
otherwse commttng the poces, t was necessary to secure the
above-mentoned assgnment.
Snce the poces were frst ssued there have been fve cancea-
tons nvovng cash surrender vaue, the amount receved there-
under beng credted by the ta payer to proft and oss n the year
of recept. Two or three empoyees, eavng the empoyment of the
ta payer under favorabe condtons, eected to carry on ther po-
ces, and were permtted to do so. One death occurred and the bene-
fcary named n the pocy receved the benefts under the pocy.
In the preparaton of ts 1927 ncome ta return, the ta payer
camed as a deducton the amount of premums pad on these po-
ces for that year.
The opnon of ths offce s requested as to whether the premums n
queston consttute an aowabe deducton n computng net ncome.
The pertnent provsons of the Revenue ct of 1926 n force
durng the year 1927 are as foows:
Seo. 215. (a) In computng net ncome no deducton sha n any case be
owed n respect of
(4) Premums pad on any fe nsurance pocy coverng the fe of any
offcer or empoyee, or of any person fnancay nterested n any trade or
busness carred on by the ta payer, when the ta payer s drecty or ndrecty
a benefcary under such pocy.
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212
The controng queston s whether the ta payer s drecty or
ndrecty a. benefcary under these poces.
The queston of the status of an assgnee of a fe nsurance pocy
for vaue was before the Supreme Court of Wsconsn n the case of
St o v. Mutua en. Lfe Ins. Co. (115 Ws., 558, 92 N. W., 277).
In that decson the court used the foowng anguage:
person made a benefcary of pocy for vaue receved s not a
mere benefcary that may be changed at the w of the assured. e s the
transferee of a property nterest n the pocy. ( oyce. Ins.. 742.) The word
benefcary s approprate to an assgnee as we as to what we ca a
mere benefcary. ny person, whether by assgnment or otherwse, entted
to take under a pocy of fe nsurance, s n a broad sense a benefcary.
assgnees are benefcares.
Revertng to the facts n the nstant case, the master contract wth
the accompanyng papers, e ecuted contemporaneousy wth the
e ecuton of the poces and as part of the contract, are to be
construed and consdered wth t n arrvng at a proper souton
of the queston. It appears that the ta payer s a benefcary
by assgnment of the poces, nasmuch as t aone s entted to
receve the payments thereunder from the nsurance company, and
s ndrecty a benefcary, to the e tent that t may termnate the
poces at w wthout the consent of the empoyees and receve the
cash surrender vaues. The master contract and assgnment e -
pressy reserves to the ta payer ths e cusve rght to termnate the
pocy. In the event of a recevershp, the recever coud surrender
the poces and add the proceeds thus acqured to the assets for the
beneft of credtors. In Soctor s Opnon 136 (C. . 1-1, 197).
the statement s made that the cear nference from the reguatons,
consdered n the ght of the meanng of the term ndrecty a
benefcary, s that f the ta payer has or may procure a fnanca
beneft by reason of the payment, or possbty of the payment, of
the proceeds, as dstngushed from the mere ncdenta beneft on
account of ncreased effcency, such ta payer s ndrecty a bene-
fcary under the pocy.
In the case of the Omaha evator Co. v. Commssoner (6 . T. .,
817), the corporaton took out fe nsurance poces on the ves of
ts offcers and empoyees, namng tsef as benefcary n each pocy,
but by a separate contract wth each offcer and empoyee agreed to
pay the proceeds thereof to the benefcares named by the nsured, f
death occurred durng empoyment, or, f the nsured ved and con-
tnued n the servce of the company, to turn the pocy over to hm.
It was stated by the oard n that case:
There s no evdence that the pettoner coud not, whenever t saw ft, cance
the pocy and receve the beneft of the cash surrender vaue or at any tme
have the beneft of the oan vaue. The pettoner had contro of the
pocy and coud have benefted thereunder drecty or ndrecty. In vew of
te foregong, t s our opnon that the premum payments are not aowabe
as deductons n determnng the pettoner s net ncome.
The above-cted case, whe not anaogous to the present one n a
ts detas, s suffcenty parae n ts essenta features as to be an
authorty for the dsaowance of the premums n queston as a
deducton.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
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217, rt. 326.
S CTION 216. C DITS LLOW D
INDI IDU LS.
rtce 305: Date determnng e empton.
R NU CT O 1926.
Method of computng the persona e empton where the status of
the ta payer changes durng the ta abe year. (See Mm. 3800.
page 119.)
S CTION 217. N T INCOM O NONR SID NT
LI N INDI IDU LS.
rtce 326: pportonment of deductons. I -10-4553
G. C. M. 7592
R NU CT O 1926.
Where a foregn nsurance company authorzed to wrte severa
knds of nsurance has, n ood fath und unaffected by consdera-
tons of ta abty, adopted a reasonabe method of aocatng
or apportonng the overhead e penses of the company to the
severa departments of ts busness, such aocaton or apporton-
ment shoud be accepted. The porton of the overhead e penses
aocated or apportoned to the departments dong busness n the
Unted States shoud be further aocated or apportoned between
the ncome of such departments from sources wthn the Unted
States and from sources wthout the Unted States on a ratabe
bass. The ratabe part of such e penses whch may be deducted
from ncome from sources wthn the Unted States shoud be. de-
termned by the rato of the gross ncome of such departments
from sources wthn the Unted States to the tota gross ncome of
such departments. If, however, the company has not adopted such
a method of aocatng or apportonng ts overhead e penses, a
ratabe part of the tota overhead e penses of a departments,
based upon the rato of gross ncome from sources wthn the Unted
States to tota gross ncome from a sources, may be deducted
from Unted States ncome.
In the case of a foregn nsurance company ta abe under secton
246(a)2 of the Revenue ct of 1926, the queston has been rased as
to what sha be ncuded n tota gross ncome, as that term s
used n artce 326 of Reguatons 69, n determnng the rato of
gross ncome from sources wthn the Unted States to tota gross
ncome where there are home offce e penses whch can not be
defntey aocated to ncome from sources wthn the Unted States
or wthout the Unted States. The queston arses n connecton
wth a foregn corporaton whch has an agency or branch n ths
country authorzed to wrte ony certan knds of nsurance, whereas
the home offce s authorzed and does wrte addtona knds of
nsurance.
Secton 247(b) of the Re venue ct of 1926 provdes that:
In the case of a foregn corporaton the deductons aowed n ths secton
sha be aowed to the e tent provded n subdvson (b) of secton 234.
Secton 234(b) of the Revenue ct of 1926 provdes:
In the case of a foregn corporaton or of a corporaton entted to the benefts
of secton 262 the deductons aowed n subdvson (a) sha be aowed ony
f and to the e tent that they are connected wth ncome from sources wthn
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214
the Unted States and the proper apportonment and aocaton of the deduc-
tons wth respect to sources wthn and wthout the Unted States sha be
determned as provded n secton 217 under rues and reguatons prescrbed
by the Commssoner wth the approva of the Secretary.
Secton 217(b) of the Revenue ct of 1926 provdes that from
the tems of gross ncome from sources wthn the Unted States
there sha be deducted the e penses, osses, and other deductons
propery apportoned or aocated thereto and a ratabe part of any
e penses, osses, or other deductons whch can not defntey be
aocated to some tem or cass of gross ncome.
rtce 326, Reguatons 69, provdes n part as foows:
rom the tems specfed n artces 317-322 as beng derved specfcay from
sources wthn the Unted States there sha be deducted the e penses, osses,
and other deductons propery apportoned or aocated thereto and a ratabe
part of any other e penses, osses, or deductons whch can not defntey be
aocated to some tem or cass of gross ncome. The remander sha be n-
cuded n fu as ncome from sources wthn the Unted States. The ratabe
part s based upon the rato of gross ncome from sources wthn the Unted
States to the tota gross ncome.
It s the nterpretaton of the term tota gross ncome n the
ast sentence quoted from artce 326 whch s n queston.
The ta payer transacts through ts branches n the Unted States
a fre and marne nsurance busness ony, whereas ts genera bus-
ness ncudes the wrtng of fre, marne, accdent, and other forms
of nsurance. In computng the amount of genera e penses, here-
after termed overhead, to be taken as a deducton from gross
ncome from sources wthn the Unted States the ta payer dd not
ake nto account ts entre gross ncome from a sources, but took
nto account ony the amount of gross ncome whch t derved from
ts fre and marne nsurance busness both wthn and wthout the
Unted States. Ths was done because of the fact that the busness
carred on by ts Unted States branches was mted to fre and
marne nsurance. The ta payer then determned the percentage
whch the gross ncome of the Unted States branches bore to the
tota of ts gross fre and marne nsurance ncome from a sources
and took as a deducton from the gross ncome of ts Unted States
branches that percentage of the overhead e penses aocated to the
fre and marne nsurance departments. The Income Ta Unt n
audtng the ta payer s return took nto account the gross ncome
derved from a sources rather than the gross ncome attrbutabe
to the fre and marne nsurance departments, athough t foowed
the ta payer n gvng consderaton to ony such porton of the
overhead e penses as was aocated to the fre and marne nsurance
departments. The ta payer contends that f ts method of comput-
ng the amount of overhead e penses to be aocated as a deducton
aganst gross ncome from sources wthn the Unted States s re|ected
and ts tota gross ncome from a sources s taken nto account, then
the tota amount of overhead e penses and not merey the amount
aocated to the fre and marne nsurance departments shoud be
taken nto consderaton. rato based on gross ncome from
sources wthn the Unted States to tota gross ncome from a
sources apped to that porton of the overhead e penses aocated to
the departments dong busness n the Unted States woud not gve
a ratabe part of unaocated e penses wthn the meanng of the
aw and the reguatons.
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215
217, rt. 328.
It s the opnon of ths offce that where a foregn nsurance
company authorzed to wrte severa knds of nsurance has, n good
fath and unaffected by consderatons of ta abty, adopted a
reasonabe method of aocatng or apportonng the overhead e -
penses of the company to the severa departments of ts busness,
such aocaton or apportonment shoud be accepted. The porton
of the overhead e penses aocated or apportoned to the departments
dong busness n the Unted States shoud be further aocated or
apportoned between the ncome of such departments from sources
wthn the Unted States and from sources wthout the Unted States
on a ratabe bass. The ratabe part of such e penses whch may be
deducted from ncome from sources wthn the Unted States shoud
be determned by the rato of the gross ncome of such departments
from sources wthn the Unted States to the tota gross ncome of
such departments. If, however, the company has not adopted such
a method of aocatng or apportonng ts overhead e penses, a
ratabe part of the tota overhead e penses of a departments, based
upon the rato of gross ncome from sources wthn the Unted States
to tota gross ncome from a sources, may be deducted from Unted
States ncome.
The source of the proft derved from the sae n the Unted
States of eectroytc copper produced n a foregn country must
be determned under the rues provded n secton 217 of the
Revenue ct of 1926. Under that secton such proft s gross n-
come derved party from sources wthn and party from sources
wthout the Unted States. In determnng what part of the proft
s from foregn sources, the vaue of the copper n the foregn
country shoud be consdered as the gross ncome from sources
wthn the foregn country and shoud be treated as an ndepend-
ent producton prce otherwse estabshed to the satsfacton
of te Commssoner wthn the meanng of case 1 of artce 328,
Reguatons 09.
n opnon s requested as to the proper method of ascertanng
the net ncome of the N Company for 1927 from sources wthout
the Unted States to be used n determnng the mtaton on the
credt for foregn ta es under the provsons of secton 238(a) of the
Revenue ct of 192C.
The facts are as foows:
The N Company, the ta payer, s the owner and operator of copper
mnes and reducton pants stuated n a foregn country. It pro-
duces at such pants n the foregn country eectroytc copper of
standard form and grade, substantay a of whch s sod n the
I nted States and other countres. Copper such as that produced by
the N Company s a word commodty and s ready saabe n the
markets of the word. Day quotatons for such copper are made n
London and New York and are unversay recognzed n the trade.
C. M. Chakest,
Genera Counse, ureau of Interna Revenue.
rtce 328: Income from the sae of persona
property derved from sources party wthn
and party wthout the Unted States.
R NU CT O 1926.
I -15-4598
G. C. M. 7545
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217, rt. 328.
216
If devered abroad, such copper s sod at a prce based upon the
London quotatons, and, f sod and devered n ths country, at a
prce based upon the New York quotatons. The London and New
York quotatons are generay unform wth a dfferenta for add-
tona cost of devery where made abroad. Saes are made for
present and future devery up to a perod of three or four months,
whch s more tme than s actuay necessary to dever the copper
from the warehouse n the foregn country to the Unted States or the
foregn ports where sod.
The ta payer states
The net prce nvaraby receved for such copper by the N Company was
the reguar word market prce, as above gven, ess seng commsson and
transportaton and other costs of devery and, by such saes over a perod
of many years, ncudng the year 1927, there was ceary estabshed a produc-
ton prce of such eectroytc copper as produced n the foregn country whch
was the reguar word market prce ess transportaton and other devery costs,
nterest, carryng charges, nsurance, and seng commssons of the agences
seng the same.
of the eectroytc copper produced by the N Company durng the year
1927 and other years had a defnte, ready ascertanabe vaue or producton
prce n the foregn country n an amount equa to the gross saes prces for
whch the copper was sod ess the deductons above gven. Therefore, none
of the net proft receved from the producton and sae of such copper was
ncome from sources wthn the Unted States.
ccordng to the managers of the prncpa metas saes agences
n the Unted States, not ony dd the eectroytc copper produced
by the N Company have a vaue n the foregn country n the amount
stated above, but the N Company coud have entered nto frm con-
tracts for the sae of such copper n the foregn country for such
amount.
Snce ebruary 1, 1924, the N Company has sod a of ts copper,
e ceptng a sma amount sod by t n the foregn country, through
the P Company, a domestc corporaton engaged n the genera
busness of seng copper wth ts prncpa pace of busness n New
York Cty. The saes made through the P Company by the N
Company may be dvded nto domestc saes and foregn saes. In
the year 1927 the domestc saes made by the P Company for the
account of the N Company amounted to 2.93y pounds of eectroytc
copper at a gross or devered vaue of .85a doars. The foregn
saes made by the P Company for the account of the N Company
n 1927 amounted to 1.7Gy pounds at a gross saes prce of 2.38|-
doars and were made to the Company, a domestc corporaton.
The copper purchased by the Company was for resae n the
e port market. It was shpped and devered drect from the
foregn country to the varous foregn ports, and none of such copper
ever entered the Unted States.
In the year 1927 the N Company was sub|ected to and pad a
foregn ncome ta under the ncome ta aw of the foregn country
amountng to .45a doars. Credt was camed aganst the 1927 n-
come ta due the Unted States for an amount of such foregn ncome
ta so pad n e cess of the tota Unted States ta computed on the
1927 return. In determnng the mtaton on the amount of the
credt a of the proft derved from the sae of eectroytc copper
roduced by the N Company was treated by the ta payer as ncome
rom sources wthn the foregn country. In support of ths treat-
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217
217, rt. 328.
ment the ta payer contends, frst, that the proft n queston comes
wthn the provson of secton 217(e) of the Revenue ct of 1926,
that gans, profts, and ncome derved from the sae of per-
sona property produced (n whoe or n part) by the ta payer
wthout the Unted States and sod wthn the Unted States, sha
be treated as derved party from sources wthn and party from
sources wthout the Unted States second, that the part of the n-
come whch s from sources wthn the Unted States and the part
whch s from sources wthout the Unted States must be determned
under case 1 of artce 5328, Reguatons 69 and, thrd, that under
such reguatons an ndependent factory or producton prce has
been estabshed namey, the reguar word market prce ess ocean
freght, nsurance, carryng charges, and cost of seng and as the
vaue of the copper n the foregn country thus estabshed was the
net amount receved therefor, a of the proft s refected n such
ndependent producton prce and, therefore, s ncome from sources
wthn the foregn country.
The pertnent porton of secton 217(e) s as foows:
Items of gross ncome, e penses, osses and deductons, other than those
specfed n subdvsons (a) and (c), sha be aocated or apportoned to
sources wthn or wthout the Unted States under rues and reguatons pre-
scrbed by the Commssoner wth the approva of the Secretary. In
the case of gross ncome derved from sources party wthn and party wthout
the Unted States, the net Income may frst be computed by deductng the
e penses, osses or other deductons apportoned or aocated thereto and a
ratabe part of any e pense , osses or other deductons whch can not defntey
be aocated to some tems or cass of gross ncome and the porton of such
net ncome attrbutabe to sources wthn the Unted States may be determned
by processes or formuas of genera apportonment prescrbed by the Comms-
soner wth the approva of the Secretary. Gans, profts and ncome
(2) from the sae of persona property produced (n whoe or n
part) by the ta payer wthout and sod wthn the Unted States, sha be treated
as derved party from sources wthn and party from sources wthout the
Unted States. Itacs supped.
Subdvson (f) provdes:
s used n ths secton the word produced Incudes created,
fabrcated, manufactured, e tracted, processed, cured, or aged.
rtce 328, Reguatons 69, contans the rues and reguatons
whch have been prescrbed by the Commssoner for apportonng
ncome derved from the sae n one country of persona property
produced (n whoe or n part) by the ta payer n another country.
. The porton of such ncome derved from sources party wthn the Unted
States and party wthn a foregn country whch s attrbutabe to sources
wthn the Unted States sha be determned accordng to the foowng rues
and cases:
Persona property produced and sod. Gross ncome derved from the sae
of persona property produced (n whoe or n part) by the ta payer wthn
the Unted States and sod wthn n foregn country, or produced (n whoe or
n part) by the ta payer wthn a foregn country and sod wthn the Unted
States sha be treated as derved party from sources wthn the Unted States
and party from sources wthn a foregn country under one of the cases
named beow. s used heren the word produced ncudes created, fabr-
cated, manufactured, e tracted, processed, cured, or aged.
Case 1 . Where the manufacturer or producer reguary ses part of hs
output to whoy ndependent dstrbutors or other seng concerns n such a
way as to estabsh fary an ndependent factory or producton prce or
4090 30 15
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217, rt. 328.
218
shows to the satsfacton of the Commssoner that such an ndependent factory
or producton prce has been otherwse estabshed unaffected by consderatons
of ta abty, and the seng or dstrbutng branch or department of the
busness s ocated n a dfferent country from that n whch the factory s
ocated or the producton carred on, the net ncome attrbutabe to sources
wthn the Unted States sha be computed by an accountng whch treats the
products us sod by the factory or productve department of the busness to
the dstrbutng or seng department at the ndependent factory prce so
estabshed. In a such cases the bass of the accountng sha be fuy
e paned n a statement attached to the return.
The substance of the ta payer s argument s that eectroytc cop-
per, for whch there s a word market and a word market prce,
has a defnte, ready ascertanabe market vaue n the pace of
producton, and such vaue s an ndependent producton prce whch
has been otherwse estabshed unaffected by consderatons of
ta abty wthn the meanng of case 1 , and shoud be treated
us the prce at whch the copper s sod to the dstrbutng department
of the busness.
Ths offce agrees wth the ta payer that the source of the proft
derved from the sae n the Unted States of eectroytc copper
produced n the foregn country must be determned under the rues
n secton 217. The tem of gross ncome here n queston s e acty
descrbed n that sentence of subdvson (e) quoted above whch s
taczed. Ths provson very ceary and defntey states that such
proft sha be treated as derved party from sources wthn the
Unted States and party from sources wthout the Unted States.
The precedng sentence provdes that the porton of such net ncome
attrbutabe to sources wthn the Unted States may be determned
by processes or formuas of genera apportonment prescrbed by
the Commssoner wth the approva of the Secretary. Such proc-
esses have been prescrbed n artce 328.
In the nstant case the eectroytc copper s persona property
whch was produced wthout the Unted States, a part of whch
was sod wthn the Unted States and a part sod wthout the
Unted States. Under the provson quoted above, therefore, the
gross ncome derved from the sae ot eectroytc copper n the
Unted States shoud be treated as gross ncome derved from sources
party wthn and party wthout the Unted States. of the
proft made on the foregn saes of copper s from sources wthout
the Unted States, as such copper was produced, sod, and devered
wthout the Unted States.
The queston resoves tsef nto whether (1) an ndependent fac-
tory or producton prce has been estabshed by the ta payer to the
satsfacton of the Commssoner wthn the meanng of case 1 of
artce 328, or (2) whether the proft derved from the sae n the
Unted States of eectroytc copper produced n the foregn country
shoud be apportoned to sources wthn and wthout the Unted
States under case 2 of artce 328.
The copper sod n the Unted States was n a form ready to be
manufactured and was sod at a prce based upon New York market
quotatons for such refned copper. n ndependent dstrbutor
coud not have sod such refned copper at a hgher prce than the
New York market prce. of the copper sod by the N Company
was sod through the P Company, a seng agency. urthermore,
the Company, to whch the e port copper was sod, was not an
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219 218, rt. 335.
ndependent dstrbutor wthn the meanng of the reguatons.
ccordngy, the ta payer dd not reguary se to ndependent ds-
trbutors n such a way as to estabsh an ndependent factory or
producton prce. It must be determned, then, whether t has been
shown to the satsfacton of the Commssoner that an ndependent
producton prce has been otherwse estabshed unaffected by
consderatons of ta abty.
It s a fact, whch the ureau recognzes, that copper, as we as
god and sver, s a meta whch has an nternatona market and can
aways be sod at any pace and n any stage of preparaton for the
current market prce at New York or London mnus the cost of
ayng down the meta n refned form at New York or London,
respectvey. Ths beng the case, the vaue of such metas as copper,
sver, and god at the pace of producton refects the gross ncome
attrbutabe to the country n whch the mne s ocated. If the
queston were one of determnng what part of the proft derved from
the sae wthout the Unted States or copper produced wthn the
Unted States was attrbutabe to sources wthn the Unted States,
the ready determnabe market vaue of such copper n the Unted
States woud be used as a bass for computng the proft attrbutabe
to the Unted States. Ths vaue woud refect a producton prce
otherwse estabshed unaffected by consderatons of ta a-
bty wthn the meanng of case 1 of artce 328, Reguatons 69.
It s the opnon of ths offce, therefore, that n determnng what
part of the proft derved by the N Company from the sae n the
Unted States of eectroytc copper produced n the foregn country
s from sources wthn the foregn country, the vaue of the copper
n the foregn country shoud be taken to refect the gross ncome
from sources wthn the foregn country and shoud be treated as
an ndependent producton prce otherwse estabshed to the
satsfacton of the Commssoner wthn the meanng of case 1
of artce 328. In the nstant case ths producton prce or vaue
s the New York market prce ess transportaton and other devery
costs, carryng charges, nsurance, and seng commsson of the
agency seng the copper.
The net ncome of the N Company for 1927 from sources wthout
the Unted States to be used n determnng the mtaton on the
credt for foregn ta es under the provsons of secton 238(a) of
the Revenue ct of 1926 shoud be computed n accordance wth
the foregong opnon.
C. M. Charest,
Genera Counse, weau of Intena Revenue.
S CTION 218. P RTN RS IPS.
rtce 335: Partnershps. I -19-4628
G. C. M. 7616
R NU CTS O 1924 ND 1026.
, a resdent of orda, ded on November 30, 1924, eavng a
w by whch be drected that hs nterest n the partnershp of
Co. shoud contnue for a perod of two years.
ed, that the estate of was a member of a new partnershp
formed on December 1, 1924, and that the estate s proportonate
part of the profts of such partnershp durng ts contnuance,
whether dstrbuted or not, was ncome to the estate.
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218, rt. 335.
220
The opnon of ths offce s requested as to the ta abty of the
estate of wth respect to the ncome of Co., a partnershp.
, a resdent of orda, ded on November 30, 1924, eavng a w.
or some tme pror to hs death he was a partner wth hs son, ,
n a partnershp dong busness under the frm name of Co. C,
the wdow of , was named e ecutr by the w. Up to December,
1929, the estate had not been setted, or any fna account fed. The
testator s w reads n part as foows:
Whereas I have nvested certan moneys n a busness, and where-
as t mght be pre|udca to the nterest of my son, , n the event dstrbu-
ton shoud requre the payment of my nterest n the sad busness upon short
notce, I therefore drect that that porton of my esate whch s nvested n
the busness be aowed to reman nvested n such busness under the same
terms and condtons as t s now nvested, provded however that such porton
of my estate as s nvested n the busness may be demanded upon two years
notce n wrtng to the sad .
The frm, Co., by etter dated uy , 1926, advsed the coec-
tor as foows:
Due to the death of one of the members of ths frm. , the books were cosed
November 30, 1924, and partnershp returns fed as of that date hs nterests
n the partnershp were taken over by hs estate therefore the new frm was
organzed as at December 1, 1924, and we have estabshed May 31 as the end
of our fsca year.
C, the e ecutr , never notfed Co. or of any ntenton of
wthdrawng the estate s funds from the busness. fter the death
of , the other partner, , reported hs dstrbutve share of the
profts from the busness for 1925, and such profts as were earned up
to September 1, 1926, on whch date the busness was ncorporated.
C contends that the estate of never receved any dstrbuton
from Co., the partnershp, and hence s not sub|ect to ncome
ta upon any earnngs or profts of the partnershp.
rom the foregong t s cear that , the testator, desred and
drected that hs nterest n the partnershp shoud contnue for a
perod of two years. rom the etter of the frm to the coector,
quoted above, and the method used by n reportng hs ncome
from the busness, t s apparent that the nterest of n the od part-
nershp (whch was dssoved by the death of ) was contnued
after December 1, 1924, n a new partnershp, the new partners beng
and the estate of .
It s a genera rue of aw that a partner may, by hs w, drect
that hs capta reman n a partnershp after hs death and gve to
hs survvng partners the rght to carry on the partnershp busness,
ether to the e cuson of hs persona representatves or those who
are benefcay nterested n hs estate, or by the substtuton of such
persons as partners n hs pace. (See 47 C. ., 1071, sec. 658.) Ths
offce, as found nothng n the statutes of orda or n the decsons
of the orda courts prohbtng an estate, under such crcumstances,
from beng a member of a partnershp.
It s concuded, therefore, that from December 1, 1924, a new
partnershp e sted n whch and the estate of were partners
that such partnershp contnued unt the ncorporaton of the bus-
ness on September 1, 1926 that durng the contnuance of the part-
nershp the estate of was n the process of admnstraton and that
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234, rt. 561.
the estate s proportonate part of the profts of such partnershp,
whether dstrbuted or not, was ncome to the estate.
C. M. Carest,
Genera Counse, ureau of Interna Revenue.
S CTION 220. SION O SURT S Y
INCORPOR TION.
rtce 351: Ta aton of corporaton utzed for evason
of surta .
R NU CT OP 1920.
In|uncton to restran coecton of ta es assessed under secton
220, Revenue ct of 1926. (See Ct. D. 183, 246.)
P RT III. CORPOR TIONS.
S CTION 231. CONDITION L ND OT R
MPTIONS O CORPOR TIONS.
rtce 515: udng and oan assocatons and cooperatve
banks.
R NU CT O 1926.
Rura oan and savngs assocatons organzed under the aws of
Indana. (See G. C. M. 8090, page 128.)
S CTION 234. D DUCTIONS LLOW D
CORPOR TIONS.
rtce 561: owabe deductons.
R NU CT O 1926.
ssessments eved aganst banks by Depostors Guaranty und
Commsson of South Dakota. (See G. C. M. 7598, page 82.)
rtce 561: owabe deductons. I -17-4610
G. C. M. 7668
R NU CT O 1926.
part of the deductons for busness e penses camed by the
M ank n ts return for 1926 was dsaowed on the ground that
the ta payer had some ta -e empt ncome.
ed, the dsaowance as a deducton of a porton of the nonseg-
regated busness e penses soey because of the e stence of some
ta -e empt ncome was mproper. The decson n the case of c-
tor G. Marqussee et a. (11 . T. ., 334) s not appcabe.
n opnon s requested as to whether a part of the deductons for
busness e penses camed by the M ank n ts return for 1926 was
propery dsaowed on the ground that the ta payer had some ta -
e empt ncome.
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222
Durng 1926 the M ank had ta -e empt ncome of doars and
other ta abe ncome of 9 doars. Its e penses ncuded amounts
pad to saared offcers (a casher and three assstant cashers) and
wages aggregatng doars, but no defnte amount was segregated
and charged as e penses ncurred n connecton wth the ta -e empt
ncome. Upon an e amnaton of the ta payer s books of account
and records the e amnng offcer dsaowed a part of the deductons
for busness e penses camed n the return nasmuch as the ta payer
receved some ta -e empt ncome. The e amnng offcer reed upon
the decson of the oard of Ta ppeas n the case of ctor G.
Marqussee et ah, n whch case the same proporton of the busness
e penses camed by the ta payers was dsaowed as the ta -e empt
ncome bore to the tota ncome, bot ta abe and ta -e empt. The
ta payer contends that the decson of the oard of Ta ppeas n
the above-named case s not appcabe under the facts of the nstant
case.
The queston presented s whether, n the event actua segregaton
s not made of the e penses ncurred n connecton wth a ta -
e empt ncome, the method used n the Marqussee case shoud be
foowed n a cases where a ta payer receves ta -e empt ncome
n connecton wth whch there as necessary been a certan amount
of e penses ncurred n the securng of the ta -e empt ncome.
In the appea of Marqussee the pettoner receved ta -e empt n-
come as offca stenographer for a State court. e aso had ta abe
ncome as a reporter. e deducted hs e penses connected wth
both ncomes from hs ta abe ncome. The oard hed: To the
e tent that such e penses are ncdent to the occupaton of the State
empoyee they are not ordnary and necessary e penses of any trade
or busness from whch any ta abe ncome s derved. The oard
aso hed that the acton of the Commssoner n dsaowng such
porton of the e penses as the ta -e empt ncome bore to the tota n-
come was reasonabe and proper n the absence of segregaton.
The Marqussee case does not appear to be appcabe to a case such
as the nstant case. The decson n that case s that the e penses
ncdent to the occupaton of a State empoyee are not ordnary and
necessary e penses of any trade or busness from whch ta abe n-
come s derved. The method of apportonment used was merey to
aocate the e penses n the absence of segregaton.
Sectons 233 and 213 of the Revenue ct of 1926 defne gross n-
come and prescrbe what t sha ncude and what t sha not
ncude. Income that s e empt from ta s e pressy e cuded.
Secton 234(a) 1, pertanng to deductons aowed corporatons, pro-
vdes that n computng net ncome there sha be aowed as deduc-
tons the ordnary and necessary e penses pad or ncurred dur-
ng the ta abe year n carryng on any trade or busness.
The e penses n the nstant case were ordnary and necessary n
carryng on the busness of the ta payer. The dsaowance of a
porton of the e penses by the e amnng offcer was due to the fact
that the ta payer had some ta -e empt ncome and not to the fact
that such e penses were not ordnary or necessary.
In Natona Lfe Insurance Co. v. Unted States (1927) (277 U. S.,
508, T. D. 4206, C. . II-2, 296 the nsurance company was ta ed
under the Revenue ct of 1921, whch provded that the gross ncome
of a fe nsurance company shoud be the gross amount of ncome
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223
240, rt. 632.
receved durng the ta abe year from nterest, dvdends, and rents,
and that the net ncome upon whch the ncome ta s to be assessed
shoud be the gross ncome ess specfc deductons, among whch are
(1) the amount of nterest receved durng the ta abe year from ta -
e empt securtes and (2) the amount equa to 4 per cent of the mean
of the company s reserve funds dmnshed, however, by the amount
of the frst deducton, namey, the nterest from ta -e empt securtes.
sut was brought to recover the ta es aeged to have been egay
coected, and the Court of Cams gave |udgment for the Unted
States. (63 Ct. Cs., 256.) The Supreme Court reversed the Court
of Cams and hed that the effect of the statutory computaton of
deductons was to mpose a drect ta on the ncome of the e empt
securtes. The court, speakng through Mr. ustce McReynods,
stated on page 519 as foows:
The porton of pettoner s ncome from te three specfed sources whch
Congress had power to ta ts ta abe Income was the sum of these tems
ess the nterest derved from ta -e empt securtes. ecause of the recept of
nterest from such securtes, and to ts fu e tent, pursung the pan of the
statute, the coector dmnshed the 4 per cent deducton aowabe to those
hodng no such securtes. Thus, he requred pettoner to pay more upon ts
ta abe Income than coud have been demanded had ths been derved soey
from ta abe securtes. If permtted, ths woud destroy the guaranteed
e empton. One may not be sub|ected to greater burdens upon hs ta abe
property soey because he owns some that s free. No devce or form of words
can deprve hm of the e empton for whch he has awfuy contracted.
(See aso Unted States v. Rtche (1872), edera Case No. 16.168,
27 ed. Cas., 818 Peope, etc., v. Commssoners (1870), 41 ow.
Prac. Reports (N. Y.), 459 Pochard Motor Car Co. v. Cty of Detrot
(1925), 232 Mch., 245, 205 N. W., 106 and Mer v. Mwaukee
(1927), 272 U. S., 713.)
dsaowance of a porton of the e penses woud resut n the
ta payer payng more ta es soey due to the e stence of some ta -
e empt ncome, and, as stated n Natona Lfe Insurance Co., a
ta payer umay not be sub|ected to greater burdens upon hs ta abe
property soey because he owns some that s free.
or the foregong reasons ths offce s of the opnon that the
decson n the Marqussee case s not appcabe to the nstant case,
and that the dsaowance as a deducton of a porton of the nonsegv-
gated e penses soey because of the e stence of some ta -e empt
ncome was mproper.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
S CTION 240. CONSOLID T D R TURNS O
CORPOR TIONS.
rtce 632: Consodated returns. I -18-4620
G. C. M. 7765
R NU CT O 1926.
No ad|ustment to the gan or oss bass of a subsdary corpora-
ton s stock n the hands of the parent corporaton s permssbe
on account of the pror gans of the subsdary, whether such gans
are reported n a consodated return or In a separate return, or on
account of the pror osses of the subsdary where the osses are
reported n a separate return, but an ad|ustment to the gan or oss
bass of a subsdary corporaton s stock n the hands of the parent
corporaton s necessary where the osses o the subsdary are
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224
reported In a consodated return and used as an nffset aganst
the ncome of the parent corporaton and t appears that the osses
coud not have be-n avaed of by the subsdary as net osses or
otherwse had ts ncome been reported n separate returns nstead
of beng reported n a consodated return.
n opnon s requested reatve to the proper ad|ustments to be
made to the gan or oss bass of the stock of a subsdary corpora-
ton n the hands of a parent corporaton. The foowng cases are
ustratve of the probem:
1. Corporaton M owned a the stock of Corporaton durng the
year 1925, and each corporaton derved a gan durng that year.
The gans of the corporatons Mere reported n separate returns. In
anuary, 1926, a the stock of Corporaton N was sod by Corpora-
ton M. Corporaton was dssoved mmedatey after the sae of
ts stock.
2. Corporaton W owned a the stock of Corporaton durng
the year 1925, and each corporaton derved a gan durng that year.
The gans of both corporatons were ncuded n a consodated re-
turn, and the ta was aocated on the bass of the net ncome propery
assgnabe to each of the corporatons. In anuary, 1926, a the
stock of Corporaton was sod by Corporaton W. Corporaton
was dssoved mmedatey after the sae of ts stock.
3. Corporaton O owned a the stock of Corporaton P durng
the year 1925. and Corporaton O derved a gan n e cess of the oss
sustaned by Corporaton P durng that year. The two corporatons
fed separate returns. In anuary, 1926, Corporaton O sod a
the stock of Corporaton P. Corporaton P was dssoved mmed-
atey after the sae of ts stock.
4. Corporaton Y owned a the stock of Corporaton Z durng the
year 1925, and Corporaton Y derved a gan n e cess of the oss
sustaned by Corporaton Z durng such ta abe year. consodated
return was fed by the two corporatons n 1925. In anuary, 1926,
Corporaton Y sod a the stock of Corporaton Z. Corporaton Z
was dssoved mmedatey after the sae of ts stock.
In order to dspose of the queston presented, the cases w be
consdered n the order set out above:
1. Under the facts above set out n connecton wth ths case, no
ad|ustment to the gan or oss bass of the stock of Corporaton N
n the hands of Corporaton M s permssbe on account of the gans
derved by Corporaton N. though Corporaton M was the parent
of an affated group, the gans of each of the two corporatons were
separatey reported. or ncome ta purposes Corporaton M was
smpy the owner of the stock of Corporaton . s a stockhoder.
Corporaton M was not entted to ncrease the bass of the stock of
Corporaton n ts hands by reason of the gans whch Corporaton
N derved and reported n ts separate ncome ta return. emch
v. emcm, 276 U. S., 233 sner v. Macomher, 252 U. S., 189, T. D.
3010, C. . 3, 25.)
2. There s no rea dstncton between the stuaton presented n
connecton wth Corporatons W and and the stuaton n con-
necton wth Corporatons M and . In both cases the fu gan of
each of the corporatons has been reported for ncome ta purposes
and the ta pad by the partcuar corporaton whch derved the
gan. To permt an ncrease n the bass of the stock of Corporaton
n the hands of Corporaton W on account of the gans derved
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240, rt. 632.
by Corporaton and reported n the consodated return, and at
the same tme to deny a smar ad|ustment to the bass of the stock
of Corporaton N n the hands of Corporaton M on account of the
grans of Corporaton N, reported n a separate return, woud resut
n a cear dscrmnaton n favor of Corporaton W. Ths queston
was consdered by the Crcut Court of ppeas for the Second
Crcut n Remngton Rand, Inc., v. Commssoner (33 ed. (2d),
77. certorar dened 50 S. Ct., 39). In that case the court hed that
a parent corporaton coud not take nto account as addtona cost
of the stock of ts subsdary the accumuated earnngs of the sub-
sdary. The court further ponted out that wth respect to such
gans the parent corporaton of an affated group was n no dffer-
ent poston from that of an other stockhoder n a corporaton.
3. It s now we estabshed that as a genera rue stockhoders
n corporatons are not entted to reduce ther ncome by reason
of the osses suffered by the corporaton n whch they hod stock.
( ppea of mes, 1 . T. ., 63 ppea of Wstar, 2 . T. ., 1045
O. D. 795, C. . 4, 155.) The corporaton s an entty, separate and
dstnct from ts stockhoders, and as such t reports ts ncome n
a return whoy dvorced from the returns of ts stockhoders. ven
where the stockhoder s assessed and pays nto the corporaton
amounts gong to make up corporate osses, the amounts so pad do
not consttute current deductons to the stockhoder. ( ppea of
Lutz, 2 . T. ., 484 Paecton v. Commssoner, 7 . T. ., 92.)
Corporaton O s therefore to be treated merey as the owner of
the stock of Corporaton P. Its ncome ta returns are |ust as
separate and dstnct as they woud have been had no affaton
e sted and Corporaton O had been the owner of ony a nomna
porton of the stock of Corporaton P. Under such crcumstances
n the determnaton of gan or oss from the sae of the stock of
Corporaton P by Corporaton O n 1926 no ad|ustment to the bass
of the stock was caed for. ccordngy, the cost or other bass of
the stock of Corporaton P n the hands of Corporaton O shoud not
be decreased by any osses sustaned by that corporaton.
4. The stuaton presented n the case of Corporatons Y and Z,
however, dffers materay from that presented n any of the other
cases above consdered. Secton 240(b) of the Revenue ct of 1926
provdes n part that:
In any case n whch a ta s assessed upon the bass of a consodated return,
the tota ta sha be computed n the frst nstance as a unt and sha then be
assessed upon the respectve affated corporatons n such proportons as may
e agreed upon among them, or, n the absence of any such agreement, then on
the bass of the net ncome propery assgnabe to each.
The computaton of the tota ta of Corporatons Y and Z as a
unt has the effect of reducng the ncome of Corporaton Y by the
amount of the oss suffered by Corporaton Z. In other words, the
stockhoder (Corporaton Y) s e pressy gven the rght, through
the medum of the consodated return, of reducng ts ta abe ncome
by the osses of the corporaton n whch t hed stock (Corporaton
Z). To ths e tent the prvege granted to affated corporatons
fng consodated returns consttutes an e cepton to the genera
rue noted above n connecton wth the case of Corporatons O and P.
To permt Corporaton Y to retan an undmnshed bass for the
stock of Corporaton Z, after havng receved the beneft of the oss
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240, rt. 632.
226
of Corporaton Z n the consodated return, a oss whch coud not
have been avaed of by ether of the corporatons had separate re-
turns been fed, and at the same tme to deny Corporaton O the
beneft of the oss of Corporaton P, woud resut n a cear dscrm-
naton n favor of Corporaton Y. In other words, the oss of Cor-
poraton Z woud be refected twce, f Corporaton Y were permtted
to retan an undmnshed bass for the stock of Corporaton Z, once
n the consodated return as an offset to the ncome of Corporaton
Y, and agan n the determnaton of the gan or oss to Corporaton
Y upon the sae of the stock of Corporaton Z, whereas the oss of
Corporaton P woud be refected ony n the determnaton of the.
gan or oss to Corporaton O upon the sae of the stock of Corpora-
ton P. The ta ng statute shoud be construed so as to avod such
dscrmnaton.
In secton 202(b) of the Revenue ct of 1926 t s provded that:
In computng the amount of gan or oss under subdvson (a)
(1) Proper ad|ustment sha he made for any e pendture or tem of oss
propery chargeabe to capta account .
Doube deductons ke doube ta aton shoud never be presumed
and shoud aways be avoded uness ceary provded by the statute.
Congress ntended to use ts power to the fuest e tent permtted
by the s teenth amendment. sner v. Macomber, supra, and
Irwn v. Gavt, 268 U. S., 161, T. D. 3710, C. . I -1, 123.) More-
over, deductons are created by the statute and therefore are not
aowed as a matter of rght. eng a grant of prvege, a camed
deducton must come squarey wthn one or more of the deductons
e pressy aowed by statute. Unted States v. Lwey, 274 U. S.,
295, T. D. 4046, C. . I-2, 157 Commerca eath fe ccdent
Co. v. Pckerng, 281 ed., 539, T. D. 3313, C. . 1-1, 256.) In
Unted States v. Ludey, supra, the Supreme Court hed that aowabe
deprecaton of property must be deducted from cost n determnng
the e stence and amount of proft reazed from a sae of the
property (athough there was no specfc statutory requrement to
that effect), and gave as one of ts reasons that any other con-
structon woud permt a doube deducton for the oss of the same
capta assets.
In Unted States v. annery (268 U. S., 98, T. D. 3703, C. . I -1,
106) the Supreme Court, n consderng the statutory bass for de-
termnng gan or oss under the provsons of the Revenue cts of
1916 and 1918, used the foowng anguage:
we thnk t shoud be hed that the ct of 1918 mposed a ta
and aowed a deducton to the e tent ony that an actua gan was derved
or an actua os9 sustaned from the nvestment, and that the provson n
reference to the market vaue on March 1, 1913, was appcabe ony where
there was such an actua gan or oss, that s, that ths provson was merey
a mtaton upon the amount of the actua gan or oss that woud otherwse
have been ta abe or deductbe.
See aso Nchos v. Smth (35 ed. (2d), 938, Ct. D. 142, C. .
III-2, 278) and cases theren cted.
It s therefore the opnon of ths offce that no ad|ustment to
the gan or oss bass of a subsdary corporaton s stock n the hands
of the parent corporaton s permssbe on account of the pror
gans of the subsdary, whether such gans are reported n a con-
sodated return or n a separate return, or on account of the pror
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227
277 and 278, rt. 1272.
osses of the subsdary where the osses are reported n a separate
return, but that an ad|ustment to the gan or oss bass of a subsd-
ary corporaton s stock n the hands of the parent corporaton s
necessary where the osses of the subsdary are reported n a con-
sodated return and used as an offset aganst the ncome of the
parent corporaton and t appears that the osses coud not have
been avaed of by the subsdary as net osses or otherwse had
ts ncome been reported n separate returns nstead of beng
reported n a consodated return.
The foregong consderatons appy equay as we to a case
where t becomes necessary to determne the gan or oss to a parent
corporaton from the qudaton of a subsdary corporaton takng
pace after the termnaton of the consodated return perod.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
rtce 632: Consodated returns.
R NU CT O 1026.
Procedure for dsposton of cases where affated group has fed
a so-caed consodated return for some of ts members and separate
returns have been fed for other companes n the group. (See G.
C. M. 8093, page 147.)
P RT . P YM NT, COLL CTION, ND R UND O T ND
P N LTI S.
S CTIONS 277 ND 278. P RIOD O LIMIT TION UPON
SS SSM NT ND COLL CTION O T .
rtce 1272: Perod of mtaton upon coec- I -19 1629
ton of ta . Ct. D. 177
federa ta es coecton decson of court.
Coecton adty ond.
Where a ta payer fes a cam for credt of ta es aganst an
unpad assessment and thereafter and wthn the statutory perod
for coecton he fes a bond, to obtan a postponement of the
coecton, condtoned to pay such ta as the Commssoner mght
determne to be due, the vadty of the coecton, after the e p-
raton of the statutory perod for coecton, of the amount found
due on the bond s not affected by the recta n the bond that t
was gven to cover a cam for abatement and the fact that no such
cam was fed.
Coubt of Cams of the Unted States.
Roberts Sash Door Co., a Corporaton, v. The Unted, States.
March 12, 1930.
opnon.
G||een, udge, devered the opnon of the court,
Ths s a sut to recover 3,205.54. ncome and profts ta es for the caendar
year 1920, whch was coected from the pantff after the statute of mtatons
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277 and 278, rt. 1272.
228
had run. In answer the defendant aeges and the evdence shows that before
the statute of mtatons had run the pantff fed a bond wth surety for the
payment of such ta es as the Commssoner mght determne to be due.
Defendant contends that a abty upon the bond was substtuted for pantffs
ta abty, and that the coecton was merey a satsfacton of the amount
that was due on the bond. Ths presents the soe ssue n the case.
In the bref fed by pantffs counse, t s practcay conceded that f what
Is referred to a.s a proper bond had been fed, the coecton was authorzed,
whether t was a coecton of the ta or a coecton of the abty on the bond,
but counse for pantff urges that snce the bond rected
Whereas, The above-bouuden prncpa has fed or s about to fe a cam
n abatement
and as no cam n abatement was n fact fed, the bond never became a
bndng obgaton. There s no dspute about the facts, but we are unabe
to agree wth ths contenton, whch s based on the theory that a cam for
abatement had to be ted n order to furnsh a consderaton for the bond.
The statement n the bond that the prncpa had fed or was about to fe a
cam n abatement was sgned and authorzed by pantffs offcers, who
e ecuted the bond, but n our vew t was entrey mmatera whether or not
pantff saw ft afterwards to fe the pea n abatement. The consderaton
for the bond was n the fact that a ta had been assessed and by reason
of the fng of the bond ts coecton was postponed. The vadty of the
bond was not affected by the faure to fe the pea n abatement.
The surety bond above referred to was red after the pantff had fed wth
the coector a cam for credt n the sum of 3,965.56, based on aeged over-
payments for the years 1912 to 1919. The purpose of fng the bond was
evdenty to obtan a postponement of the coecton of the ta unt the coector
or Commssoner coud determne whether the pantff was entted to any
part of the credt so camed. Subsequenty the Commssoner passed on the
cam for credt, whch was aowed n part. Ths aowance was credted on
unpad assessments aganst the pantff, and after the appcaton thereon of
the credts, there remaned an unpad baance of 2,428.44.
Pantff contends that the tng of a cam for credt s not the same as
the fng of a cam n abatement. We see no reason to determne whether t was
or not, as n any event ths matter woud not affect the vadty of the bond or
the coecton of the amount whch the Commssoner found st to he due.
On ora argument t was suggested that f the ta had not been pad and sut
had been brought on the bond by the defendant, there coud be no recovery of
the ta from the pantff on account of the manner In whch the bond was
e ecuted. We can see no materaty n ths, as the case must be decded
on the facts as they are and not as f the sut had been begun n a dfferent
manner and upon dfferent facts. Moreover, the bond unquestonaby created a
abty for the ta es whch was dscharged by the payment thereof.
avng reached these concusons, under the rues ad down n Gray Motor
Co. v. Unted States (16 ed. (2d), 367 T. D. 3994, C. . I-1, 149 ), Unted
States v. Retnods (27 ed. (2d), 902), McCavfhn v. Phadepha arge Co.
(27 ed. (2d), 628 T. D. 4199, C. . II-2, 168 ), and Unted States v. ohn
arth Co. (279 U. S., 370 Ct. D. 65, C. . III-1, 189 ), the coecton of
the amount covered by the bond, namey, such ta found by the Commssoner
to be due, wth nterest at the rate prescrbed by aw, was authorzed.
It foows that the petton must be dsmssed, and t s so ordered.
INCOM ND C SS PRO ITS T S R NU CT O 1026 D CISION O
SUPR M COURT.
1. Sut Co-ecton Lmtaton Transferees Trust und
Doctrne.
sut n equty aganst transferees under the trust fund doctrne
to sub|ect assets In ther hands to the payment of the ta of the
transferor s a sut to coect the ta , the coecton of whch s
sub|ect to the mtaton prescrbed by secton 278(d) of the Reve-
nue ct of 1926.
rtce 1272: Perod of mtaton upon coec
ton of ta .
I -25-4675
Ct. D. 192
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229
277 and 278, rt. 1272.
2. Same No Return ssessment by Commssoned Commence-
ment of Perod.
Where a ta payer fes no return, the makng of an assessment
by the Commssoner commences the runnng of the 6-year coec-
ton perod provded for n secton 278(d) of the Revenue ct of
1926. and a sut aganst transferees under the trust fund doctrne
nsttuted more than s years after the assessment s barred by
that subsecton.
Supreme Court op the Unted States.
The Unted States of merca, Pettoner, v. Neson . Updke et a.
On wrt of certorar to the Unted States Crcut Court of ppeas for the ghth Crcut.
May 19, 1930.
OPINION.
Mr. ustce Sutherand devered the opnon of the court.
Pror to the passage of the Revenue ct of 1917, the Updke Gran Co., a
Nebraska corporaton, fed ts ncome ta and e cess profts ta returns for
the 11 months endng une 30, 1917, that eng the end of the fsca year whch
the corporaton had seected as ts annua perod for edera ta aton. The
returns n form comped wth the provsons of the aw then n force, and were
correct n pont of fact. The fu amount of the ta , as shown by the returns,
was pad. In ugust, 1917, the corporaton was awfuy dssoved and ts
assets, after payment of a debts, were dstrbuted among ts stockhoders.
Shorty after the passage of the Revenue ct of October 3, 1917, whch, among
other changes, ncreased the rate of ta aton, the Commssoner of Interna
Revenue ssued a reguaton provdng that corporatons whch had dssoved
n 1917 pror to the date of that ct shoud fe ta returns n accordance wth
ts provsons for the perod precedng dssouton. bank form for that
purpose was maed to the corporaton, but was returned by ts former secretary
une ecuted wth the nformaton that the corporaton, pror to ts dssouton,
had fed ta returns and pad a ta es due under e stng aws.
In October, 1918, a revenue agent e amned the books of the corporaton
and made a return n reguar form, upon whch, n anuary, 1920, addtona
ncome and e cess profts ta es were assessed for the perod endng une 30,
1917. The return so made was not verfed or sgned n behaf of the corpora-
ton, or otherwse. The present sut to recover the amount was brought aganst
respondents, stockhoders of the corporaton, n 1927, more than seven years
after the assessment. TLo theory upon whch the sut was begun and prosecuted
s, that the assets of the corporaton dstrbuted to the stockhoders, to the
e tent of the addtona ta es, became trust funds receved to the use of the
Unted States. The edera dstrct court entered a decree dsmssng the
b. (25 . (2d), 746.) Upon appea, the crcut court of appeas affrmed the
decree upon the ground that the sut was barred by the provsons of secton 278
of the Revenue ct of 1926. (Ch. 27, 44 Stat., 9, 59 U. S. C. Supp., Tte 26,
sees. 1058, 1060, 1061. 32 . (2d), 1.)
The prncpa queston presented here, and the ony one we need consder, s
whether the sut, havng been brought more than s years after the assessment,
was barred by the provsons of secton 278, quoted beow:
(a) In the case of of a faure to fe a return the ta may be
assessed, or a proceedng n court for the coecton of such ta may be begun
wthout assessment, at any tme.
(d) Where the assessment has been made (whether before or
after the enactment of ths ct) wthn the statutory perod of mtaton
propery appcabe thereto, such ta may be coected by dstrant or by a
proceedng n court (begun before or after the enactment of ths ct), but ony
f begun (1) wthn s years after the assessment of the ta , .
(U. S. C. Supp., Tte 26. sees. 1058, 1061.)
In accordance wth the cam of the Government, the court beow hed that
there was a faure to fe a return wthn the meanng of paragraph (a). See
aso Updke v. Unted States (8 . (2d), 913 T. D. 3815, C. . -, 312 ). We
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277 and 278, rt. 1272.
230
assume wthout decdng the correctness of that vew aud consder the case
accordngy.
The Government contends (1) that secton 278(d) reates ony to proceed-
ngs to coect ta es qua ta es, and not to suts n equty to recover trust
funds, and that the present sut s of the atter character but (2) that the
present case s not wthn the provsons of that secton even f a sut aganst
the stockhoders be controed by the same rue as a proceedng aganst the
corporaton tsef.
rst. The frst pont turns upon the queston whether ths s a proceedng
to coect a tu , as to whch t s sad that the provson of secton 278(d)
that such ta may be coected by a proceedng n court, etc..
refers ony to drect proceedng aganst the ta payer and that ths vew s
borne out by a consderaton of secton 280 (ch. 27, 44 Stat., 9, 61 T . S. C. Supp..
Tte 20, sec. 1009), whch prescrbes a mode of procedure aganst transferees
of the property of a ta payer.
The contenton s that by the anguage of secton 280 Congress has ceary
dfferentated between ta payers aud transferees by referrng to the abty
of the atter as the abty at aw or n equty, of a transferee of property
of a ta payer, n respect of the ta mposed upon the ta payer. and
then, apparenty reazng that the mtaton perods as to the coecton c.-f
ta es qua ta es woud have no appcaton to the remedy aganst transferees,
creatng a dstnct perod of mtaton n respect (hereof.
Ths vew of the statute s not admssbe. The pan words of secton 280(a)
are, that, e cept as herenafter n ths secton provded, the abty of the
transferee sha be assessed, coected, and pad sub|ect, among other thngs,
to the same provsons and mtatons as n the case of a defcency n a ta
mposed by ths tte (ncudng the provsons authorzng
proceedngs n court for coecton ). Nothng therenafter provded
n that secton affects the appcaton to the present case of these genera words
n respect of mtatons, for, whe the succeedng paragraphs contan pro-
vsons of mtaton n respect of assessment, they contan none n respect of
coecton. It seems pan enough, wthout stoppng to cte authorty, that the
present sut, though not aganst the corporaton but aganst ts transferees to
sub|ect assets n ther hands to the payment of the ta , s n every rea sense
a proceedng n court to coect a ta . The ta mposed upon the corporaton
s the bass of the abty, whether sought to be enforced drecty aganst the
corporaton or by sut aganst ts transferees. The am u the one case, as n
the other, s to enforce a ta abty and the effect of the anguage above
quoted from secton 280 s to read nto that secton, and make appcabe to the
transferee equay wth the orgna ta payer, the provson of secton 278(d)
n reaton to the perod of mtaton for the coecton of a ta . Indeed, when
used to connote payment of a ta , t puts no undue stran upou the word ta -
payer to brng wthn ts meanng that person whose pro|erty, beng mpressed
wth a trust to that end, s sub|ected to the burden. Certany t woud be hard
to convnce such a person that e had not pad a ta .
Second. It foows that f by secton 278(d) the perod of mtaton had run
n favor of the corporaton, t had run n favor of the transferees. The con-
tenton of the Government that the secton does not appy under the facts of the
present cas , depends upon the meanng of the phrase whch we have ta-
czed : Where the assessment has been made wthn the
statutory perod of mtaton propery appcabe thereto, such ta may be
coec ted by a proceedng u court but ony f begun (1)
wthn s years after the assessment of the ta . The argument, n
effect, s ths: In 1920, when the assessment was made, there was, and had been,
no provson of aw whch n any form mted the tme for assessng or coectng
ta es, and, therefore, an assessment n 1920 of 1917 ta es coud not fuf the
requrements of secton 278(d), because, n that vew, there was no statutory
perod of mtaton propery appcabe thereto and, assumng te appca-
bty of statutes passed after 1920. the provson n these statutes s that th
assessment may be made at any tme, and that s not a perod of mtator
wthn the meanng of secton 278(d), for the word perod connotes a stated
nterva of tme commony thought of n terms of years, months, and days.
The cear ntent of secton 278. as apped to the facts of the present case. wa
to desgnate the e tent of tme for the enforcement of the ta abty. Where,
n a no return case, an assessment, whch, under paragraph (a), may bo
made at any tme, has n fact been made, a proceedng to coect must be begun
wthn s years thereafter but where there has been no assessment, the pro-
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231
277 and 278, rt. 1272.
c-wdg may be begun at any tme. In the present case there was an assessment,
and t woud not be doubted that the sut wus barred at the e praton of thu
6-year per od of mtaton, uness for the presence of the words taczed above.
ave these words the effect of avertng the bar We thnk not. n actua
assessment havng been made, t must be assumed that the Government was n
possesson of the facts whch gave rse to the abty upon whch the assessment
was predcated. In such case to aow au ndefnte tme for proceedng to
coect the ta woud be out of harmony wth the obvous pocy of the ct to
promote repose by f ng a defnte perod after assessment wthn whch suts
and proceedngs for the coecton of ta es must be brought.
In the ght of that pocy, t seems reasonaby cear that the savng cause,
wthn the statutory perod of mtaton propery appcabe thereto, was
nserted soey for the protecton of the ta payer that s to say, n order
to precude coecton of the ta even wthn s years after the assessment,
f that assessment, when made, was barred by the appcabe statutory
mtaton. Ths concuson s confrmed, f confrmaton be necessary, by
the provsons of paragraph (a), whch ceary contempate that the 6-yenr
perod sha appy, e cept where the proceedng to coect s brought wthout
asessment, n whch event t may be brought at any tme.
It may be that the savng cause was not strcty necessary, but was
nserted from e cessve care to put the rght of the ta payer beyond dspute.
In any event, we thnk ths s the far nterpretaton of the cause, and the
one whch must be accepted, especay n vew of the rue whch requres
t.nng acts, ncudng provsons of mtaton emboded theren, to be con-
strued beray n favor of the ta payer. owprs v. Ne-w York bany
Lghterage Co., 273 U. S., 346, 349 T. D. 4009, C. . I-1, 268 .)
Ths dsposes of the case, and t becomes unnecessary to determne whether
the phrase at any tme mports a perod of mtaton, or to consder
other questons presented n argument.
Decree affrmed.
rtce - t 2: Perod of mtaton upon coec- I -26-4G8:
ton of ta . Ct. D. 194
I COM T R NU CTS O 1918 NP 192C D CISION O COURT.
1. W T adty.
greements consentng to the determnaton, assessment and
coecton of ta es after the e praton of the statutory perod of
mtaton, sgned by one or more offcers of a corporaton, to whch
the corporate sea s aff ed and bearng what purports to be the
sgnature of the Commssoner, are vad for the purpose of e tend-
ng the statutory perod for the assessment and coecton of ta es.
Such a waver need not be supported by a consderaton, the statute
requrng ony a consent.
2. Deducton Loss Demoton or udngs.
No oss s deductbe under secton 234(a)4 of the Revenue ct
of 1918 on account of the demoton of budngs n 1918 and 1919
whch stood on and when t was bought n 1916 by the ta payer
for the purpose of enargng ts pant.
3. Deducton Loss When Deductbe.
The oss of an amount pad as a consderaton for an agreement
for the e cusve cense to use a process for treatng four, whch
process proved unsatsfactory, s not deductbe n 1918, when t
was charged as a oss because of an unsatsfactory tra of the
process, but n 1919, when the charge was reentered on the ta -
payer s books and after fu e permentaton t concuded the
process was worthess and abandoned t
4. Decson ffrmed.
The decson of the dstrct court (34 ed. (2d), 513) affrmed.
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277 and 278, rt. 1272.
232
Unted States Crcut Court of ppeas for the Thrd Crcut.
Lbera Rakng Co., ppeee-Defendant, v. D. . ener, Coector of In-
terna Revenue for the Twenty-thrd Dstrct of Pvnmuh-ann, ppeant-
Pantff.
ppea from the |udgment of tn- Dstrct Court of the Unted States for the Western
Dstrct of Pennsyvana.
efore uffngton, Crcut udge, and Thomson and vs, Dstrct udges.
anuary 23, 1930.
OPINION.
Thomson. L . .: The Lberty akng Co. brngs ths sut aganst D. .
ener, coector, to recover back | .418.24 ncome and profts ta es for the
year 1918. The coector havng hed the company abe, an appea was taken
to the oard of Ta ppeas, whch was heard n 1926, the oard sustanng
(he rung of the coector. The appea to the oard beng fed before the
ct of 1926. the pantff, nstead of appeang drecty to ths court, eected
to pay the ta es and sue n the Unted States dstrct court, under secton
283(b) of the Revenue ct of 1926. The case was tred wthout a |ury and
the court, after makng speca fndngs, entered |udgment (hereon for the
defendant. The case s before us on appea from that decson.
The frst queston nvoves te statute of mtatons. If that statute does
not appy, the ne t queston s:
Was the pantff entted, n computng ts ta abe ncome for the year 1918,
to deduct
(a) Loss of . 11,000 aeged to have resuted from the demoton of certan
budngs whch were razed n order to make way for pant e tensons
(b) Loss of 10,000 aeged to have resuted from the worthessness of a
four mng process
(c) n aeged oss of 5,895.45, beng a part of the cost of certan bread
wrappers whch were too sma for the bread oaves manufactured by the
pantff after the war
The statute of mtatons woud have been a bar n ths case, e cept for
two wavers, e ecuted by the pantff, one dated ebruary 4, 1924, e tendng
the tme for the assessment and coecton of the 1918 ta es for one year after
the e praton of the statutory perod of mtatons, and a second waver
dated November 29, 1924, wdth covered not ony the year 1918, but aso the
year 1919.
Whe these wavers have been attacked by the defendant as nvad, we
agree wth the court that there does not appear any substanta ob|ecton to
ther vadty. The e tenson of tme seems to have been of marked advantage
to the pantff, and was foowed by very substanta reductons n the amounts
camed aganst t.
The frst waver was sgned by the presdent and secretary of the pantff
company wth the corporate sea anne ed. In t, the pantff consented to
the determnaton, assessment and coecton of any ta es for the year
1918, for one year after the e praton of the statutory perod of mtatons.
y the second waver, the pantff consented to the e tenson of the perod
for determnaton, assessment and coecton of ta es for the years 1918
and 1919, for one year after the e praton of the statutory perod of
mtatons wthn whch assessments of ta es may be made for the year or
years mentoned.
The court teow hed as untenabe the ob|ecton that the wavers were not
propery e ecuted by the pantff or by the Commssoner of Interna Revenue
that the sgnng of such a waver, by one or more e ecutve offcers, wth the
corporate sea aff ed, gven as t was to secure further consderaton of corpo-
rate ta abty, comes wthn the ordnary powers of corporate offcers that
as to the acceptance by the Commssoner, wavers beng fed n hs offce
bearng what purports to be hs sgnature and acted upon by that offcer,
gvng repeated consderaton to the pantff s cams for further reductons,
whch resuted n wthhodng coectons whe the pantffs books were beng
e amned, these facts precude the pantff from now controvertng the vadty
of the wavers. The ob|ecton that the wavers were wthout consderaton can
not be sustaned. The statute requres nothng but consent, and t woud be
unconsconabe to aow the a payer to afterwards repudate a consent upon
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233
277 and 278, rt. 1272.
whch the Commssoner has acted and reed. It appears that, n the crcum-
stances, the e ecuton of the wavers was a necessary ncdent to the securng
of further consderaton of the pantff s ta abty.
We concude that there was no error n sustanng the vadty of the wavers.
s to the three tems upon whch pantff cams a oss:
In November, 1916. pantff bought addtona ground ad|onng ts pace of
busness for the future e tenson of ts pant. There were three budngs on
ths and, vaued at 11,000, whch pantff tore down n 1918 and 1919, n order
to make room for the contempated e tensons to ts pant. Pantff camed
ths tem as a deductbe oss n 1918.
The court n ts fndngs and concusons hed that ths tem was not a
deductbe oss. The court found that the property, as t stood, was bought for
the purpose of enargng the pant that there was no oss sustaned because
the demoton was n contempaton at the tme the property was bought.
The court concuded that ths stuaton was drecty covered by artce 142 of
eguatons 45, to the effect that when a ta payer buys rea estate upon whch
s ocated a budng whch he proceeds to raze n vew of erectng another,
t w be consdered that the ta payer has sustaned no deductbe oss by
reason of the demoton of the od budng, and no deductbe e penses on
account of the cost of remova that the vaue of the rea estate, e cusve of
od mprovements, s presumaby equa to the purchase prce of the and and
budng, pus the cost of remova of the od. Whe the razng of the budngs
In ths case was somewhat deferred, we thnk the concuson of the court was
correct.
On October 24, 1917, pantff made an agreement wth a mng company for
an e cusve cense to use the erendeen Process for treatng four. The
consderaton agreed upon was 10,000, of whch 2,500 was pad n 1917. The
agreement contaned a provson that the pantff mght process four at ts
own pant or send t to the ms of the erendeen company at Danve, 111.
In 1918, the pantff had ts four processed at Danve, but found the process
unsatsfactory, and n December, 1918, charged as a oss the entre 10,000.
Later, n 1919, ths charge was reentered on the books of the company, and
equpment was Instaed at ts pant at Pttsburgh for the process, whch was
used there durng the year 1919. Ths process was not satsfactory, the
machnery beng dsmanted n 1920. The Commssoner aowed ths tem
as a oss n 1919, but not n 1918.
The court n fndng wth the Commssoner sad:
There had been no tra of the process by the pantff unt 1919, when
for the frst tme t nstaed the necessary machnery to make a test of the
process. The accountants of the pantff charged ths tem back on the books
of the pantff after t had been camed as a 1918 oss. There was no error
n so dong.
The court was, perhaps, n error n sayng that there had been no tra of
the process unt 1919. It seems that the process was tred and found unsats-
factory n Danve, n 1918, and n December of that year pantff charged the
entre amount of 10,000 as a oss. ad the matter ended there the pantff
woud have been entted to the oss as camed. ut t dd not end there.
vdenty not satsfed wth the resut of ther 1918 e perments, the charge was
reentered on the books and new equpment nstaed at ts pant n Pttsburgh,
whch was used there durng the year 1919. They were e permentng to
determne whether, n fact, the process was good or bad, and n 1919, after fu
e permentaton, they concuded the process was worthess and abandoned t.
It woud seem that ths was the tme when the matter was defntey determned
and the oss defntey estabshed. We see no error n aowng credt for the
oss n 1919.
In the year 1918, the pantff purchased a quantty of paper bread oaf-
wrappers for use on oaves of the sze prescrbed by the Unted States ood
dmnstrator durng the war. fter the rmstce n November, 1918, the
food reguatons were canceed. The pantff then enarged the sze of ts oaf,
wth the resut that the wrappers bought n 1918 were too sma. s a resut,
the pantff used two wrappers on each oaf for the baance of the year 1918
and e tendng nto the year 1919, when t procured other wrappers and aban-
doned those bought n 1918. The pantff charged off 50 per cent of the cost of
the wrappers on hand December 31, 1918, as a oss, whch the Commssoner
dsaowed for the ta year 1918. Such oss from the abandonment of unused
4090 30 16
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279, pt, 1281.
234
wrappers was aowed as deducton n 1019. The court waa of opnon that
there was no deductbe oss under the statute aowabe for ether the year
1918 or 1919, and hed there was no shrnkage h nventory. The court hed,
however, that f there was a deductbe oss t was n the year 1919, as the
Commssoner had aowed. Wth ths concuson we can not agree. The
wrappers were purchased of the sze prescrbed by the Government. Later, the
food reguatons were canceed, whch was a matter far beyond the contro of
the pantff. It was natura that the norma sze of the oaf thereafter shoud
govern, and a cear oss resuted to the pantff by reason of the change of
condtons. It woud seem to us correct for the pantff to charge off 50 per
cent of the cost of the wrappers on hand December 31, 1918, as a oss whch t
bad sustaned n that year.
To the addtona oss nvoved n ths tem, the pantff shoud be entted
to credt, and to that e tent the concuson of the court shoud be modfed. If
the Government w fe a remtttur as to the amount of ths tem of oss, the
|udgment w n a respects be affrmed.
S CTION 279.- OP RDY SS SSM NTS.
rtce 1281: eopardy assessments. I -21-4652
G. C. M. 803G
R NU CT O 1926.
|eopardy bond under secton 279(f) of the Revenue ct of
1926 may not be accepted from a dssoved corporaton the e st-
ence of whch has been whoy termnated nether s a |eopardy
bond under ths secton from a successor corporaton acceptabe n
connecton wt a |eopardy assessment made aganst ts predecessor
dssoved corporaton.
Under secton 40 of the genera corporaton aw of Deaware,
a dssoved Deaware corporaton contnues ts e stence for three
years from ts dssouton for the purpose of wndng up ts affars,
and wthn that tme may fe a |eopardy bond under secton 279(f)
of the Revenue ct of 1926. If, however, t s desred to fe such
a bond under secton 279 more than three years from the date of
the dssouton of the corporaton, the bond shoud be fed by
trustees or recevers actng under authorty of secton 43 of the
genera corporaton aw of Deaware, as amended, notwthstandng
the fact that the corporaton has appeaed to the oard of Ta
ppeas wthn the 3-year perod.
n opnon s requested as to whether a bond may be accepted
under secton 279(f) of the Revenue ct of 1926, where the prn-
cpas are dssoved corporatons aso, whether a bond may be ac-
cepted from a corporaton organzed under the aws of Deaware,
where three years from the date of dssouton have eapsed but a
petton was fed wth the Unted States oard of Ta ppeas
wthn the 3-year perod.
Secton 279(f) of the Revenue ct of 1926 provdes as foows:
(f) When a |eopardy assessment has been made the ta payer, wthn 10 days
after notce and demand from the coector for the payment of the amount of
the assessment, may obtan a stay of coecton of the whoe or any part of the
amount of the assessment by fng wth the coector a bond n such amount,
not e ceedng doube the amount as to whch the stay s desred, and wth such
suretes, as the coector deems necessary, condtoned upon the payment of so
much of the amount, the coecton of whch s stayed by the bond, as s not
abated by a decson of the oard whch has become fna, together wth nterest
thereon as provded n subdvson (|) of ths secton.
In Okahoma Natura Gas Co. v. Okahoma (273 U. 3., 257) the
counse for both partes moved the Unted States Supreme Court to
substtute a new party appeant for the Okahoma Gas Co., whch
atter company had been duy and egay dssoved as a corporaton
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235
279, rt. 12 L
by decree of the Dstrct Court of Tusa County, Oka., after the
wrt of error to the Supreme Court had been aowed. In denyng
the motons the Supreme Court, speakng through Mr. Chef ustce
Taft, sad:
There s no specfc provson n our rues for te substtuton as a party t-
gant of a successor to a dssoved corporaton. It s we setted that at com-
mon aw and n the edera |ursdcton a corporaton whch has been ds-
soved s as f t dd not e st, and the resut of the dssouton cannot be ds-
tngushed from the death of a natura person n ts effect. It foows
therefore that, as the death of the natura person abates a pendng tgaton
to whch such a person s a party, dssouton of a corporaton at common aw
abates a tgaton n whch the corporaton s appearng ether as pantff
or defendant. To aow actons to contnue woud be to contnue the e stence
of the corporaton pro hoc vce. ut corporatons e st for specfc purposes,
and ony by egsatve act, so that f the fe of the corporaton s to contnue
even ony for tgatng purposes t Is necessary that there shoud be some
statutory authorty for the proongaton. The matter s reay not procedura
or controed by the rues of the court In whch the tgaton pends. It con-
cerns the fundamenta aw of the corporaton enacted by the State whch
brought the corporaton nto beng.
In S. rsch Dstng Co. v. Commssoner (14 . T. ., 1073,
C. . III-2, 23) the oard accordngy hed that t was wthout
|ursdcton to hear and determne a proceedng nsttuted and
prosecuted by a Mssour corporaton whose e stence was whoy
termnated.
Ths offce s of the opnon that n cases of ths character |eop-
ardy bonds under secton 279(f), supra, shoud not be accepted from
dssoved corporatons.
Where, however, under the aws of the State of ts ncorporaton,
a corporaton contnues after ts dssouton to act for the purpose
of cosng up ts busness, t may mantan a proceedng before the
oard, provded the proceedngs are taken by the corporaton, or by
the ndvduas authorzed by the State aw to wnd up the affars
of the dssoved corporaton, and are brought wthn the tme pre-
scrbed by the State aw and n accordance wth the provsons of that
aw. ( ppea of The George Wedemann, rewm-g Co. et ok, 4 . T.
., 664, C. . II-2, 43 Centra Natona ank v. Commssoner,
11 . T. ., 1017 Sanborn ros. v. Commssoner, 14 . T. ., 1059,
C. . III-2, 46.) Under such crcumstances and condtons |eop-
ardy bonds under secton 279(f) may be accepted from corporatons
after ther dssouton.
The oard has dened |ursdcton as to an appea fed by a cor-
poraton whch s the successor of a dssoved corporaton notwth-
standng the fact that the successor corporaton had assumed the
payment of the defcency on the ground that the successor corpo-
raton was not the ta payer referred to n secton 279. (Cf. nter
aa ngneers O Co. v. Convmssoner, 14 . T. ., 1148, C. .
III-1, 13 Wes Lesh Manufacturng Co. v. Commssoner, 13 .
T. ., 144 mercan rch Co. v. Commssoner, 13 . T. ., 552
ond, Inc., v. Commssoner, 12 . T. ., 339.) In cases of ths knd
t woud not be proper to accept |eopardy bonds under secton 279(f)
from successor corporatons n connecton wth |eopardy assessments
made aganst ther predecessor dssoved corporatons.
The concusons heren e pressed are genera n ther nature,
The poston to be taken n a gven case w, of course, depend on
the facts of that partcuar case.
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279, rt. 1281.
236
In connecton wth the nqury whether a bond may be accepted
from a Deaware corporaton under the crcumstances above
descrbed, reference s made to sectons 40 and 43 of the genera
corporaton aw of Deaware, as amended (Chapter 112, Laws of
Deaware, 1925), whch provde respectvey as foows:
Sec. 40. Contnuaton of corporaton after dssouton for purposes of sut,
etc corporatons, whether they e pre by ther own mtaton, or are
otherwse dssoved, sha nevertheess be contnued for the term of three years
from such e praton or dssouton bodes corporate for the purpose of prose-
cutng and defendng suts by or aganst them, and of enabng them graduay
to sette and cose ther busness, to dspose of and convey ther property, and
to dvde ther capta stock, but not for the purpose of contnung the busness
for whch sad corporaton sha have been estabshed provded, however, that
wth respect to any acton, sut or proceedng begun or commenced by or
aganst the corporaton pror to such e praton or dssouton and wth respect
to any acton, sut or proceedng begun or commenced by the corporaton wthn
three years after the date of such e praton or dssouton, such corporaton
sha ony for the purpose of such actons, suts or proceedngs so begun or
commenced be contnued bodes corporate beyond sad three year perod and
unt any |udgments, orders or decrees theren sha be fuy e ecuted.
1957. Sec. 43. Dssoved corporatons recevers for how apponted powers.
When any corporaton organzed under ths chapter sha be dssoved n any
manner whatever, the court of chancery, on appcaton of any credtor or
stockhoder of such corporaton, at any tme, may ether appont the drectors
thereof trustees, or appont one or more persons to be recevers, of and for such
corporaton, to take charge of the estate and effects thereof, and to coect the
debts and property due and beongng to the company, wth power to prosecute
and defend, n the name of the corporaton, or otherwse, a such suts as may
be necessary or proper for the purposes aforesad, and to appont an agent or
agents under them, and to do a other acts whch mght be done by such cor-
poraton, f n beng, that may be necessary for the fna settement of the
unfnshed busness of the corporaton and the powers of such trustees or
recevers may be contnued as ong as the chanceor sha thnk necessary
for the purposes aforesad.
It has been hed that the power of a court of chancery under
secton 43, supra, to appont a recever for a dssoved corporaton
s not mted to three years from dssouton, notwthstandng
secton 40. (Saughter v. Moore, 9 De., ch. 350. 82 t., 963 arned
v. eacon Rea state Co., 9 De., ch. 232, 80 t., 805, S. Ct.,
De., 84 t., 229.)
In the ast-named case the Supreme Court of Deaware, n ds-
cussng secton 40 and secton 43, supra, stated as foows:
Whe a dssoved corporaton s not contnued for the purpose
of dong the busness for whch t was created, t s contnued n order that,
for the perod of three years, the corporaton tsef may sette and cose ts
busness, and, f t fas so to do, that thereafter ts credtors and stockhoders
may, by appcaton to the court of chancery, secure the appontment of trustees
or recevers who sha make a fna settement of the unfnshed busness of
the corporaton.
In g Sespc O Co. v. Cochran (276 ed., 216) t was hed n
part that under secton 40 a Deaware corporaton whose charter has
become vod for nonpayment of ta es s contnued as a body corporate
for a perod of three years n order to sette and cose ts busness
and that t may e ecute documents n the norma manner by ts
offcers durng ths perod.
In Care v. Internatona Cay Products Co. (Court of Chancery,
pr, 1920, 132 t., 892) the foowng statement s made regardng
the functons of the drectors of a dssoved corporaton under secton
40 and secton 43, supra:
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237
284, rt. 1305.
The defendant was duy dssoved under the genera corporaton act (22 De.
Laws, ch. 167). Upon the dssouton of a corporaton, the drectors were
formery consttuted by sectons 41 and 42 of the act trustees wth certan
powers for the purpose of settng the corporaton s affars. The chanceor
was authorzed by secton 43 upon the appcaton of a credtor or stockhoder
to contnue the drectors of dssoved corporatons as trustees, or to appont
a recever. ut a recever woud not be apponted under secton 43 to take
over from the drector-trustees the duty of wndng up e cept for reason shown,
or by consent of the drectors. Caha, Recever, v. Lofand et a., 107 .,
769, 12 De., ch. 125.)
Sectons 41 and 42 have now been repeaed by secton 10, chapter 112, voume
34, Laws of Deaware. So that now the drectors are no onger contnued as
trustees. Though by an amendment to secton 43 they may be apponted to
act as such or a recever may be apponted.
(1) Upon the dssouton of a corporaton, ts e stence s contnued by sec-
ton 40 as heretofore for the space of three years for the purpose of graduay
settng and cosng ts busness. The drectors, now that sectons 41 and 42
are repeaed, therefore contnue as drectors, not as trustees, to cose up the
corporate busness. The same consderatons whch prompted the chanceor
n the cted case to refuse to dspace the drectors as trustees n dssouton
by a recever e cept for reason shown, suggest that the drectors as drectors
n dssouton shoud kewse be not smary dspaced e cept for reason
shown.
In vew of the above cases, t s the opnon of ths offce that under
secton 40 of the genera corporaton aw of Deaware, supra, a ds-
soved Deaware corporaton contnues ts e stence for three years
from ts dssouton for the purpose of wndng up ts affars, and
wthn that tme may fe a |eopardy bond under secton 279(f)
of the Revenue ct of 1926. If, however, t s desred to fe such
a bond under secton 279 more than three years from the date of
the dssouton of the corporaton, the bond shoud be fed by trustees
or recevers actng under authorty of secton 43 of the genera
corporaton aw of Deaware, as amended, notwthstandng the fact
that the corporaton has appeaed to the oard of Ta ppeas
wthn the 3-year perod.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
S CTION 284. CR DITS ND R UNDS.
rtce 1305: Lmtatons upon the credtng I -14-4588
and refundng of ta es pad. G. C. M. 7310
R NU CT O 1926.
successor corporaton under a consodaton agreement e e-
cuted n accordance wth the aws of Pennsyvana may e ecute a
vad waver on behaf of one of the consttuent corporatons for a
ta abe year pror to the consodaton.
n opnon s requested reatve to the vadty of a waver fed
on behaf of one of ts consttuent corporatons by the O Corporaton,
a successor corporaton under a consodaton agreement e ecuted n
accordance wth the aws of the State of Pennsyvana.
The matera facts are as foows:
The M Company and the N Company e ecuted an agreement under
date of December , 1922, agreeng to consodate under the name of
O Corporaton, a new corporaton organzed for the purpose. The
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284, rt. 1305.
238
agreement was carred nto effect on December , 1922. The M Com-
pany had overpad ts ta es for the year 1919. Under date of anu-
ary , 1925, the ureau receved a waver from the O Corporaton
wavng the tme for makng an assessment aganst the M Company
for the year 1919. Ths waver was sgned: O Corporaton, Suc-
cessor to M Company, by , Presdent. The waver bore the sea of
the O Corporaton, over whch was wrtten the sgnature of the
corporaton s secretary.
The consodaton agreement, foowng the Pennsyvana statutes,
provded, nter aa:
Upon the consummaton of ths act of consodaton n the manner provded
by aw, a and snguar the rghts, prveges, and franchses of each ft the sad
corporatons, partes hereto, and a the property, rea, persona, and m ed, and
a accounts and bs recevabe and a other rghts and ehoses In acton beong-
ng to each of the sad corporatons, partes hereto, sha be taken, deemed,
and consdered to be sod, transferred, assgned and conveyed to. and vested
n the sad consodated or new corporaton wthout further act or deed, to
the ntent that the sad consodated or new corporaton sha become the owner
( f and have vested n t a the sad rghts, prveges, franchses, propertes,
choses and rghts n acton now beongng to and owned by the sad corpora-
tons, partes hereto or to whch sad corporatons are or may be entted.
Provded, however, that a the rghts of credtors and a ens upon the
property of each of the sad cor|wratons, partes hereto, sha contnue unm-
pared and the respectve consttuent corporatons, partes hereto, sha be
deemed to be n e stence to preserve the same, an a debts, dutes, and
abtes of each of the sad consttuent corporatons, partes hereto, sha
henceforth attach to the sad new corporaton and may be enforced aganst t
to the same e tent and by the same process as f sad debts, dutes, and ab-
tes had been contracted by sad consodated or new corporaton.
The agreement aso provded as foows:
the sad corporatons, partes hereto, sha be deemed and taken
to be one corporaton by the name and stye herenafter provded, and such new
corporaton sha possess a the rghts, prveges, franchses, and propertes
(heretofore vested n and beongng to each of the corporatons, partes hereto,
or to whch they are entted by reason of any matter, cause or thng
whatsoever.
The offcers and drectors of the O Corporaton are the same as
those of the M Company and the N Company, e cept that and C,
who were drectors and offcers of the N Company, are nether off-
cers nor drectors of the O Corporaton.
The queston of the. vadty of the waver fed on anuary ,
1925, arses n connecton wth the contenton of the O Corporaton
rhat the fng of such waver effected an e tenson of the perod for
fng a refund cam for the 1919 ta es overpad by the M Company
n accordance wth the provsons of secton 284(g) of the Revenue
ct of 1926, whch reads as foows:
If the ta payer has, wthn fve years from the tme the return for the ta abe
year 1917 was due, fed a waver of hs rght to have the ta es due for such
ta abe year determned and assessed wthn fve years after the return wn
fed, or f he has, on or before une 15, 1924, fed such a waver n respect
of the ta es due for the ta abe year 1918, then such credt or refund reatng
to the ta es for the year n respect of whch the waver was fed sha be
aowed or made f cam therefor s fed ether on or before pr 1, 1925, or
wthn four years from the tme the ta was pad. If the ta payer has, on or
before une 15, 1925, fed su-ch a waver n respect of the ta es aw for the
ta abe year 101 ), then such credt or refund reatng to the taves for the
ta abe year 1919 sha be aowed or made f cam therefor s fed ether on
or before pr 1, 1926, or wthn four years from the tme the ta was pad.
If the ta payer has, on or before une 15, 1926, fed such a waver n respect
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239
248, rt. 1306.
of the tares due fat the ta abe year 1820 or 1921. then such credt or refund
reatng to de ta es for te ta abe year 1920 or 1921 sha be aowed or
matte f cam therefor s fed ether on ot before pr 1, 1927, or wthn
fmrr years from the tme the ta was pad. If any such waver so fed has,
efore the e praton of te perod thereof, been e tended ether by the fng
of a new waver or by the e tenson of the orgna waver, t en such credt or
refund reatng to the ta es for the year u respect of whch the waver was
fed sha be aowed or made f cnm therefor s fed ether (1) wthn four
years from the tme the ta was pad, or 2) on or before pr 1, 1926, In the
case of credts or refunds reatng to the ta es for the ta abe years 1917 and
1918, or on or before pr 1, 1927, n the case of -credts or refunds reatng
to the ta es for the ta abe year 1919, or on or before pr 1, 1928, n the case
of credts or refunds reatng to the ta es for the ta abe years 1920 and
1021. Ths subdvson sha not authorze a credt or refund prohbted by
the provsons of subdvson (d). Itacs supped.
Letters patent were ssued by the State of Pennsyvana, and re-
corded Deoember , 1922, authorzng the consodaton of the M
Company and N Company nto a body corporate and potc n deed
and n aw, by the name, stye, and tte of O Corporaton, and entted
to a of the prveges, mmuntes, franchses, and powers conferred
by the act entted n act authorzng the merger and consodaton
of certan corporatons approved the 3d day of May, nno Domn
one thousand nne hundred and nne, or whch may have heretofore
been conferred upon sad corporatons by any act or acts of the
Genera ssemby of the Commonweath of Pennsyvana .
The act n queston s contaned n the Pennsyvana Statutes for
1920 (1909 PL., 408).
Sec. 5748. It sha be awfu for any corporaton, now or hereafter organzed
under the provsons of any genera or speca act of assemby authorzng
the formaton of any corporaton or corporatons, to merge ts corporate rghts,
franchses, powers, and prveges wth and nto those of any other corpora-
ton or corporatons transactng the same or a smar ne of busness, so
that by vrtue of ths act such conwratons may consodate, and so that
a the property, rghts, franchses, and prveges then by aw vested n
ether of such corporatons, so merged, sha be transferred to and vested n
the corporaton nto whch such merger sha be made: .
Sec. 5750. Upon the fng of sad certfcates and agreement, or copy of the
agreement, n the offce of the secretary of the Commonweath, and upon the
ssung of new etters patent thereon by the governor, the sad merger sha
be deemed to have taken pace, and the sad corporatons to he one corpora-
ton under the name adopted n and by sad agreement, possessng a the
rghts, prveges, and franchses theretofore vested n each of them and
a the estate and property, rea and persona, and rghts of acton, of each
of sad corporatons, sha be deemed and taken to be transferred to and vested
n the sad new corporaton, wthout any further act or deed: Provded, That
a rghts of credtors and a ens upon the property of each of sad cor-
poratons sha contnue unmpared, mted n en to the property affected
by such ens at the tme of the creaton of the same, and the respectve
consttuent corporatons may be deemed to be n e stence to preserve the same
and a debts not of record, dutes, and abtes of each of sad consttuent
corporatons sha thenceforth attach to the sad new corporaton, and may
be enforced aganst t to the same e tent and by the same process as f sad
debt , dutes, and abtes had been contracted by t.
The effect of a consodaton, wth respect to the e tncton of the
consttuent corporatons and the creaton of a new corporaton or
the contnued e stence of one or both of the consttuent corporatons,
depends upon the statute under whch the consodaton s effected.
(Corpus urs, vo. 14 , sec. 3655.) owever, the genera rue s
that a consodaton effects the dssouton of the consttuent cor-
poratons and brngs nto e stence a new corporaton. (Yazoo, etc.,
. Co. v. dams, 180 U. S., 1 St. Lous, tc., R. Co. v. erry, 113
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284, rt. 1305.
240
U. S., 465.) When a consodaton resuts n the creaton of a new
corporaton the usua effect of the consodaton statutes s that the
new corporaton succeeds to the rghts, powers, prveges, and m-
muntes of each of the consttuent corporatons, e cept so far as
otherwse provded by the act of consodaton, by other appcabe
statutory or consttutona provsons, or by the mtatons of the
new corporaton s charter. (Commonweath v. uffao, tc., R. Co.,
207 Pa., 100, 56 t., 412 Rum ey v. New York. tc., R. Co., 203
Pa., 579, 53 t., 495 Pa. R. Co. v. arkns, 149 Pa., 121, 24 t.,
175.) The weght of authorty seems to be that a new corporaton
comes nto e stence by the consodaton and that the consttuent
corporatons no onger e st e cept to the e tent authorzed by the
statute under whch (he consodaton s made. (Chcago, tc., R/. v.
shng, 100 111., 373, 43 N. ., 373 Dggs v. dety, tc., Co.,
112 Md.. 50, 75 t., 517 Mner v. New York, tc.. R. R., 123 N. Y.,
242, 25 N. ., 339. See aso Cook on Corporatons, 8th d., o. ,
sec. 897.)
The specfc wordng of the Pennsyvana statutes ndcates that
a new corporaton comes nto e stence upon the ssung of new et-
ters patent, possessng a the rghts, prveges, and franchses there-
tofore vested n each of the consttuent corporatons. urthermore,
a the property, rea and persona, and rghts of acton of each cor-
poraton are transferred and vested n the new corporaton, and the
debts and abtes of each consttuent corporaton attach to the new
corporaton and may be enforced aganst t to the same e tent and by
the same process as f such debts and abtes had been contracted
by the new corporaton.
In the case of Petry et a. v. arwood ectrc Co. (280 Pa., 142,
124 t., 302), the queston of merger or consodaton under secton
5748 of the Pennsyvana Statutes for 1920, supra, was nvoved.
The court stated n part as foows:
(1) Dd the merger work a dssouton of the company so far as the preferred
stockhoders are concerned That In the doman of the practca a dssouton
resuted from the merger there can be no doubt after t was accompshed,
the defendant s e stence ended, so far as beng a gong, operatng entty s
concerned ts property and good w passed nto the contro and ownershp of
the new corporaton, and t ceased to do busness. The effect was to wpe out
the mergng companes and fuse them a nto the new one created.
In that case the court cted wth approva Lauman v. Lebanon o.
R. Co. (30 Pa., 42, 72 mer. Dec, 685) and quoted from that decson,
as foows:
y such an act the Lebanon company oses ts actua dentty, abandons ts
name and therefore ts ega dentty and ts corporate e stence, and can no
onger cam any ega recognton. Ths s caed a merger of the Lebanon
corporaton nto the other hut such a merger s a dssouton, destroyng the
actua dentty of both, whe the ega dentty of one of them s preserved, as
where a fe estate s merged n a fee smpe, one beng destroyed and the other
enarged by the operaton.
There can be no queston that under the Pennsyvana statutes and
the foregong authortes every rght, duty, or abty of a constt-
uent corporaton nures or attaches to the successor corporaton. ust
as the successor corporaton, under the State aws and under the
decsons, must bear a the burdens of ts consttuent corporatons, t
s kewse entted to a the prveges of those corporatons.
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241
284, rt. 1305.
In the case of Lyman R. Rowe ms Co. v. Phps, coector,
the I -man . owe ms Co. and the Lyman . owe ttractons
Co. were consodated nto a new corporaton caed the Lyman .
owe ms Co., the pantff corporaton. In passng upon the same
ssue as that nvoved n the nstant case, the ower court hed that
a waver hed by the successor corporaton was a vad waver. On
appea, the |udgment by the ower court was affrmed (33 ed. (2d),
891).
In vew of the foregong, t s the opnon of ths offce that the
waver fed by the O Corporaton on anuary , 1925, n the nstant
case was vad and that the contenton of the O Corporaton shoud
be sustaned.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
rtce 1305: Lmtatons upon the credtng I -18-4621
and refundng of ta es pad. Ct. D. 175
INCOM T R NU CT O 1926 D CISION O COURT.
Sut ursdcton ppea to oabd.
Where after the enactment of the Revenue ct of 1926 the Com-
mssoner has notfed a ta payer of a defcency under secton
274 of that ct n respect of a ta mposed by a pror ct and the
ta payer fes a petton wth the oard of Ta ppeas for a
redetermnaton of the defcency, a sut, nsttuted durng the
pendency of the appea to the oard, to recover the amount of
an aeged overpayment of ta for the year for whch the defcency
was determned s barred by secton 284(d) of the Revenue ct of
1926.
Court of Cams of the Unted States.
rthur Curts ames v. The Unted States.
ebruary 17, 1930.
opnon.
Ltteton, udge, devered the opnon of the court.
Defendant has demurred to the petton n ths case on the ground that under
secton 284(d) of the Revenue ct of 1926 ths court s wthout |ursdcton to
entertan ths sut because pror to the nsttuton thereof the Commssoner of
Interna Revenue maed to the pantff a notce of a defcency n respect of
the ta for 1919 and the pantff nsttuted a proceedng before the Unted States
oard of Ta ppeas.
rom the record t appears that for the caendar year 1919 pantff pad a
ta of 2,031,853.73 and subsequenty, on March 6, 1926, duy fed a cam for
refund for 389,627.78, or such greater amount as mght be egay refundabe.
On May 13, 1926, the Commssoner of Interna Revenue rendered a decson on
the cam for refund and re|ected the cam n fu upon the ground that pan-
tff s correct ta abty for 1919 was n e cess of the amount whch he had
pad. On the same day, namey, May 13, 1926, the Commssoner notfed the
pantff by regstered ma of hs determnaton of a defcency n respect of the
ta of the pantff for the caendar year 1919 of 178,202.17.
uy 10, 1926, pantff nsttuted a proceedng before the Unted States oard
of Ta ppeas by the fng of a petton theren n whch he camed that he
owed no defcency whatever but, on the contrary, was entted to a refund, and
prayed the oard to fnd that he had made an overpayment of 389,027.78, or
such greater amount as mght be egay refundabe, as the sad oard was
authorzed to do under secton 284(e) of the Revenue ct of 1926. (44 Stat., 9,
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284, rt. 1305.
242
ch. 27.) Ths proceedng was docketed by the oard of Ta ppeas under
Docket No. 18305 and up to the (ate of the submsson of ths case upon the
demurrer the proceedng had not been heard or decded by the oard.
May 7, 1928, wthn two years after the re|ecton by the Commssoner of
pantff s cam for refund, e nsttuted sut n ths court askng |udgment for
1,118,299.58, ncome ta aeged to have been erroneousy and egay assessed
and coected, together wth nterest at 0 per cent from the dates of payment
thereof. Defendant demurred to the petton upon the ground that the court s
wthout |ursdcton to entertan pantffs sut.
In support, of the pea to the |ursdcton, the defendant contends that (1)
ths court has no |ursdcton unt the pantff has pad a the ta camed by
the Commssoner, has fed a cam for refund thereof, and brngs sut u on sad
cam (2) the pantff eected to nsttute a proceedng before the oard of
Ta ppeas upon the Commssoner s defcency notce and he has made cam
n that proceedng and st has opportunty to make further cam before the
oard for any overpayment that e may have made (3) two forums were ava-
abe to the pantff and he eected to go nto the oard of Ta ppeas. There-
fore, he s commtted to hs eecton and can not proceed n ths court. Unt
the oard of Ta ppeas renders a decson n the proceedng there pendng, t
s mpossbe to determne whether any overpayment has n fact been made and
sut s therefore premature.
The pantff, on the other hand, contendng that the defendant s pea to the
|ursdcton shoud be overrued, asserts that he has a cear rght n ths court
that the oard of Ta ppeas under secton 284(e) of the evenue ct of
1926, now secton 507 of the Revenue ct of 1928, has no power to award a
|udgment n favor of any ta payer aganst the Commssoner of Interna Reve-
nue or aganst the Unted States or any agency thereof, but s soey vested
wth the power to determne the amount of overpayment made by the ta payer,
f any that a ta payer must necessary proceed ether n ths court or n a
dstrct court of the Unted States aganst a coector, to protect hs rght to the
refund and to secure a |udgment n hs favor for the amount thereof that the
rghts of the ta payer are n nowse changed from those whch e sted pror to
the enactment of the Revenue ct of 1926 e cept that the oard of Ta ppeas
s gven the power by that ct to determne the amount of an overpayment,
wthout beng gven any power whatever to award the ta payer an enforceabe
|udgment and that the oard of Ta ppeas s n no sense an equvaent and
aternatve forum to ths court.
There s no nconsstency between secton 3226 of the Revsed Statutes, as
reenacted by secton 1113 of the Revenue ct of 1926, and the other provsons
of the ct, especay secton 284, reatng to proceedngs before the oard of
Ta ppeas and to the nsttuton of suts. In a cases decded by the oard
under the 1924 ct, the ta payer may pursue the remedy provded by secton
3226 n cases nsttuted under the 1924 c t and heard and decded by t he
oard after the passage of the 1926 ct, the ta payer may pursue the remedy
provded by secton 3226 or petton for revew of the decson of the oard.
(Od Coon// Trust Co. et a. v. Commssoner of Interna Revenue, 279 U. S..
716.) In cases where the ta payer has fed cam for refund he may nsttute
sut n court, as provded n secton 3226 of the Revsed Statutes, provded he
does so before the Commssoner determnes and notfes hm of a defcency
under secton 274 of the Revenue ct of 1926 (Oho tcc oundry Co. v. Unted
States, decded ths date), and f any such defcency notce s gven, the ta -
payer may pay the defcency and nsttute sut n court. There doubtess e sts
and certany w arse cases where the ta payer has overpad hs ta upon the
orgna return and refund cams n respect thereof w be fed whch w
ether not be acted upon or w be re|ected by the Commssoner wthout any
determnaton then or thereafter of a defcency. such cases w fa under
secton 3226 of the Revsed Statutes. ut, f the ta payer fes a cam for
refund whch, after ebruary 26, 1926, s re|ected by the Commssoner, and the
Commssoner at the same tme, or before notce of re|ecton, or the nsttuton
of sut, determnes and notfes the ta payer of a defcency for such ta abe
year, the ta payer has the prvege ether to pay the addtona ta and pro-
ceed under secton 3226 by sut n court or to take the defcency and a ques-
tons reatng to hs ta abty for such year to the oard of Ta ppeas. In
the ast-mentoned nstance the ta payer can not nsttute sut n court and aso
nsttute a proceedng before the oard of Ta ppeas. e must decde whch
course he w pursue. The conference report upon the Revenue ct of 1926
states, at page 46, wth respect to the nsttuton of a proceedng before the
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243
284, rt. 1305.
oard after the enactment of that ct n respect of a defcency for a pror
ta abe year, that f the ta payer takes the case to the oard and the oard
decdes aganst the Government, the Commssoner mast ake the case up to the
crcut court of appeas and, f necessary, to the Supreme Court before he may
make any assessment. So, aso, the ta payer, f he avas hmsef of hs rght
to take the case to the oard, s forever barred from any cam or sut for
refund n respect of the year to whch the defcency etter reated. If the
ta payer has fed a cam wthn the tme prescrbed by aw, hs rghts to a
refund are as fuy protected before the oard as they woud be by a sut n
court.
The pantff, however, argues that the defendant s demurrer shoud be
overrued, for, f hs petton s dsmssed, he may entrey ose hs rght to
enforce coecton of overpayment. e nssts thut the oard can ony fnd
the fact of overpayment and that the ony provson of aw under whch a
ta payer can enforce coecton of an overpayment s that whch has been
n force In substantay ts present form for many years as secton 3226, supra,
and, snce that secton provdes that the ta payer sha brng sut wthn
fve years after the ta was pad or wthn two years after the dsaowance
of the cam for refund, he woud ose hs rght to enforce coecton of the
overpayment f he shoud wat unt the decson of te oard has become
fna. Upon ths reasonng, pantff ponts out that hs cam was dsaowed
by the Commssoner on May 13, 1926, and uness he fed sut on or before
May 12, 192S, he woud forfet hs rght to enforce payment of the refund.
Contnung, pantff argues that t woud be odd Indeed f Congress by enact-
ng remeda egsaton gvng the oard power to fnd an overpayment as
we as a defcency, but wthout any new provson for enforcement of the
refund of such overpayment, took away from the ta payer, by mere Imp-
caton, hs e stng rght of enforcement, by mposng on such rght a new
condton precedent to the brngng of such sut whch woud, n a case ke
ths, sub|ect the ta payer to the mtatons of secton 3226, supra, and so
deprve hm of the rght to enforce the coecton of overpayment by fng
sut upon the cam.
We thnk the camed nabty to obtan a refund of an overpayment found
by the oard n a decson whch has become fna under the statute s more
apparent than rea. Congress dd not ntend by the provsons of secton 284
that the ta payer shoud be mted to secton 3226 n hs rght to obtan the
return from the Government of an overpayment n stuatons fang under
secton 284. Congress has made the decson of the oard whch has become
fna bndng on everyone. In such cases the Commssoner of Interna Reve-
nue has no dscreton or the rght to e ercse any |udgment concernng the
proprety of overpayments where no credts are nvoved. e must pay ac-
cordng to the decson of the oard. If he does not, the statute, as we ponted
out n Oho Stee oundry Co. v. Unted States, No. -143, s suffcenty broad
to authorze sut to enforce payment.
or the reason stated heren and by the court In the opnon ths day
rendered n Oho Stee oundry Co. v. The Unted Statet, No. -143, we are of
opnon that the defendant s pea to the |ursdcton n ths case s we taken
and s sustaned. See aso rndey v. evner (D. C. W. D. Pa., vo. 1, 1930
P. . edera Ta Servce, par. 470). The petton must therefore be ds-
mssed, and t s so ordered.
rtce 1305: Lmtatons upon the credtng I -19-4630
and refundng of ta es pad. Ct. D. 179
INCOM T R NU CTS Or 1921 ND 1926 D CISION O COURT.
Credts and Refunds Cam Lmtaton Date of Payment
by Check.
ng the day on whch a coector receves a check n payment
of ta es as the date of payment of the ta es, as provded by artce
1733 of Reguatons 62, s authorzed under secton 1325 of the
Revenue ct of 1921, and the date of the recept of the check and
not the date the check was cashed starts the runnng of the perod,
prescrbed by secton 284 (b) of the Revenue ct of 1926, wthn
whch a cam for refund must be fed.
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284, rt. 1305.
244
Coubt of Cams of the Unted States.
Second Natona ank of Sagnaw, Trustee of the state of Wengton R. urr,
Deceased, v. The Unted States.
pr 7, 1930.
OPINION.
Green, udge, devered the opnon of the court.
Ths s a sut brought to recover a refund on a payment of ncome ta . The
partes have stpuated that the soe ssue n the case s whether the cam
for refund was fed wthn four years from the tme when the ta was pad.
There s no dspute about the facts. The partcuar payment n controversy
was made by a check whch was devered to the coector of nterna revenue
on the 13th day of December, 1923. The check was drawn upon the Second
Natona ank of Sagnaw and was pad by that bank on the 15th day of
December, 1923, and on December 15, 1927, the pantff fed ts cam for
refund n the amount of 4,838.84, beng the amount of the check. Under
the statute n force at that tme, the cam for refund was requred to be fed
wthn four years from the tme of the payment of the ta .
The pantff rees on the we-known rue whch ordnary appes that
recept of a check does not operate as a payment unt the check s cashed and
therefore contends that the statute of mtatons dd not begn to run n ths
case on the date the check was devered to the Commssoner but on the date
t was pad by the bank.
In ths connecton the defendant cas attenton to the fact that the statute
authorzng the coector to receve checks n payment of ta es provdes that
n case a check so receved s not pnd by the bank on whch t s drawn, the
person who has tendered such check sha reman abe for the ta . Ths pro-
vson, t s sad, shows that payment was not made when the check was de-
vered, and, taken n connecton wth the other anguage of the statute, shows
that the recept of checks was merey permssve, and whe t operated for the
convenence of the ta payer, the recept of the check dd not e tngush hs
abty.
When these provsons are consdered n the ght of other provsons of the
aw and Treasury reguatons made thereunder, we thnk there s no doubt
about the matter. rtce 1733 of Treasury reguatons headed Payment of
ta by uncertfed checks provdes, among other thngs, as foows:
The day on whch the coector receves the check w be consdered the date
of payment so far as the ta payer s concerned, uness the check s returned
dshonored.
Ths reguaton f ed the date of payment, and f the Treasury authortes
had the rght to make such a reguaton t s controng n the case, for the ta -
payer was bound to take notce thereof.
We thnk that authorty to make ths reguaton was gven by the statute
whch authorzed the coector to receve checks n payment of ta es, to whch
eference has prevousy been made and whch s as foows:
Sec. 1325. That coectors may receve, uncertfed checks n
payment of ncome, war-profts and e cess-profts ta es and any other ta es
payabe other than by stamp, durng such tme and under such reguatons as
the Commssoner, wth the approva of the Secretary, sha prescrbe: but f
a check so receved s not pad by the bank on whch t s drawn the person by
whom such check has been tendered sha reman abe for the payment of the
tu and for a ega penates and addtons the same as f such check had not
been tendered.
It w be observed that ths secton authorzes these checks to be receved
under such reguatons as the Commssoner, wth the approva of the Secre-
tary, sha prescrbe. If the reguatons n queston was a reasonabe one, the
Treasury had the rght to prescrbe t. We thnk t was reasonabe, as t was
manfesty for the best nterests of both the Government and the ta payer that
t shoud be known whether the date when the check was receved by the Com-
mssoner was to be taken as the date of payment. In many cases such know-
edge woud be mportant to one party or the other. If not defntey known or
understood, t woud be often dffcut to determne when further acton shoud
be taken f such ucon became necessary.
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245
1106, rt. 1341.
s we fnd that the reguaton was authorzed and bndng upon the pantff,
t foows that a cam for refund was fed too ate and pantff s petton must
be dsmssed. It s so ordered.
TITL L G N R L DMINISTR TI PRO ISIONS.
S CTION 1106. IN L D T RMIN TIONS
ND SS SSM NTS.
D R L T S-R NU CT O 1926 D CISION O COURT.,
Sut ursdcton Cosng greement adty.
Where a ta payer and the Commssoner have e ecuted a cos-
ng agreement pursuant to secton 1106(b) of the Revenue ct of
1926, subdvson 2 of that subsecton bars a sut to recover any
part of the ta covered by the agreement (e cept upon a showng
of fraud or mafeasance or msrepresentaton of fact materay
affectng the determnaton or assessment made), even though t
was assessed by reason of a provson of the Revenue ct that
has been decared unconsttutona.
Dstrct Court of the Unted States, Dstrct of Connectcut.
etna Lfe Insurance Co. v. Robert O. aton, Coector of Interna Revenue.
urrows, Dstrct udge: Ths s an acton at aw to recover 376,340.36,
assessed by the Government aganst the pantff for ta es for the caendar
years 1923 and 1924 on edera, State, and muncpa bonds, and pad by the
pantff to the Government under the provsons of secton 245(a)2 of the
Revenue ct of 1921 (and 1924).
In 1927, when t was fnay agreed between the partes as to the ta es to
whch the defendant was entted for those years (and the year 1922, wth
whch we are not here concerned), the partes made a cosng agreement
under the authorty of and n pursuance of secton 1106(b) of the Revenue
ct of 1926, whch provdes as foows:
Sec. 1106. (b) If after a determnaton and assessment n any case the
ta payer has pad n whoe any ta or penaty, or accepted any abatement,
credt, or refund based on such determnaton and assessment, and an agree-
ment s made n wrtng between the ta payer and the Commssoner, wth
the approva of the Secretary, that such determnaton and assessment sha
be fna and concusve, then (e cept upon a showng of fraud or mafeasance
or msrepresentaton of fact materay affectng the determnaton or assess-
ment thus made) (1) the case sha not be reopened or the determnaton and
assessment modfed by any offcer, empoyee, or agent of the Unted States,
and (2) no sut, acton, or proceedng to annu, modfy, or set asde such
determnaton or assessment sha be entertaned by any court of the Unted
States.
On une 4, 1928, the Supreme Court, n Natona Lfe Insurance Co. v. Unted
States (277 U. S., 508 T. D. 4200, C. . II-2, 296 ), hed that secton
245(a)2, n so far as t apped to edera, State, and muncpa bonds, s
unconsttutona. ence ths sut to recover sad amount so pad on such
s-ec-urtes hed by the pantff.
Ths acton s brought under secton 41 of the udca Code (sec. 24, as
amended), gvng orgna |ursdcton to the dstrct courts. The defendant
enters a demurrer to the compant on the grounds that the matters aeged
theren do not consttute a cause of acton that sad assessment s fna and
concusve by reason of the cosng agreement n pursuance of secton 1100(b)
rtce 1341: na determnaton and assess-
ment of ta or penaty.
I -19-4631
Ct. D. 178
pr 10, 1930.
OPINION.
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1113, rt. 1351.
246
and that ths court s wthout |ursdcton because of the provson of cause
2 (sec. 1106(b)). It s conceded that there s no showng of fraud or ma-
feasance or msrepresentaton of fact materay affectng the determnaton
or assessment thus made.
Consderng the queston of |ursdcton rased by the demurrer, f Congress
had ntended by the anguage determnaton and assessment n the above
secton that t appy to the amount assessed ony, and that subsecton 2 prohbt
the court from entertanng a sut to annu, modfy, or set asde the assess-
ment ony on the ground that the amount s ncorrect, t woud have so stated.
Dut ths secton s not so restrctve as to mean the amount of the assessment
ony, but s a-embracng n ts scope. It s apparent from the anguage that
t was the ntent of Congress to gve both partes the authorty, and f they
chose to e ercse t to sea wth fnaty any partcuar assessment. If t were
the ntent that the queston of the egaty of a ta ng statute be wthout the
secton, t woud have e cepted t wth the other e ceptons mentoned theren.
Congress has the nherent rght to name the condtons under whch a sut
may be brought, and under whch t s prohbted, whereby the Government s
affected ether by the sut tsef or any |udgment obtaned especay where
t pertans to nterna revenues. (See Graham v. Dupont, 262 T . S.. 234 T. D.
3486, C. . II-, 226 .) The prohbton n subsecton 2 s a mtaton on the
powers granted under the udca Code, secton 41, and deprves the court of
|ursdcton.
The demurrer s sustaned. Let an order be submtted accordngy.
S CTION 1113. LIMIT TIONS UPON SUITS ND
PROC DINGS Y T T P Y R.
rtce 1351: Suts for recovery of ta es erro- I -19- 640
neousy coected. Ct. D. 183
( so Secton 220, rtce 351.)
ncome ta revenue acts of 1921, 1924. and 1926 decson of court.
Sut In|uncton ursdcton vason of Surta es by Incor-
poraton.
Secton 3224 of the Revsed Statutes prohbts the ssung of an
n|uncton to restran the coecton of ta es assessed under secton
220 of the Revenue cts of 1921, 1024, and 192(5, whch provdes for
the mposton of addtona ta es where a corporaton permts ts
gans and profts to accumuate for the purpose of preventng the
mposton of the surta es upon such ncome f dstrbuted to ts
stockhoders.
Dstrct Court, astern Dstrct of Mcoan.
rench Mortgage t Itond Co. v. red L. Wood-worth.
March 7, 1930.
OPINION.
Smons, Dstrct udge: Ths s a moton to dsmss the b of compant on
the ground that the n|unctve reef sought s prohbted by secton 3224 of the
Revsed Statutes, whch provdes:
No sut for the purpose of restranng the assessment or coecton of any
ta sha be mantaned n any court.
The b aeges that the defendant demands payment and socks by dstrant
to coect aganst the pantff a burden assessed aganst t for the year 1923
under secton 220 of the Revenue ct of 1921, a burden assessed for the year
1924 under secton 220 of the Revenue ct of 1924, and a burden assessed
aganst t for the year 1925 under secton 220 of the Iteveme ct of 1920.
The pantff contends that none of these burdens are for ta es, nor nterest
on ta es, nor for ad vaorem penates n respect to or as addtona ta es.
Secton 220 of the respectve Revenue cts represents the effort of the Congress
to prevent the avodance of surta es by stockhoders n corporatons formed for
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247
1211.
or avaed of for that apparent purpose. Whether the burden mposed by
secton 220 consttutes a ta , or whether t s a penaty desgned to prevent
the dong of somethng over whch Congress has no contro, and whether the
ct s consttutona or not, s not wthn the scope of ths nqury. The pan-
tff contends that t s entted to n|unctve reef despte secton 3224, on two
man grounds: (1) That the burden s a penaty rather than a ta , (2) that
f the abty created by secton 220 s a ta , that there are present crcum-
stances so unusua and e traordnary as to |ustfy the court n grantng
equtabe reef.
To the cam that n|uncton shoud be granted because the abty s a
penaty and not a ta or, f a ta , s puntve n ts nature, the case of aey v.
George (259 U. S., 18 T. D. 3346, C. . 1-2, 337 ), read n connecton wth
aey v. Coector of Interna Revenue aey v. The Dre e urnture Co.
(259 U. S., 20) (the chd abor ta case), furnshes a compete answer.
verythng that s here sad as to the pena character, the unawfu pur-
pose, the unconsttutonaty of the burden sought to be mposed by secton
220. was there found to be true n respect to the so-caed chd abor ta ,
and yet the Supreme Court hed that t was precuded from sustanng the
ssue of an n|uncton by secton 3224, supra. In the ght of these cases, ths
court mght we have been spared the 150 pages of argument and ctaton
tendng to show that the burden of secton 220 s not a ta .
It has not been very easy to foow the pantffs severa contentons reatve
to the unusua and e ceptona crcumstances camed to be here present to
sustan the grantng of the n|unctve reef prayed for. In so far as t s
ntmated that the avodng of mutpcty of suts and the removng of coud
from pantff s tte are grounds for enstng the ad of a court of equty, (he
rue of Dodge v. Osborne (240 U. S., 118) must contro. Many of the other
aeged e ceptona crcumstances camed to be here present and to warrant
equtabe reef are shown to be wthout mert n C. . Routzahn v. enry R.
Ttrroer (36 ed., 208). decded by the S th Crcut Court, of ppeas snce the
argument on the nstant moton. Certany ths s true of the cam that the
statute does not gve a rght to |udca revew of an admnstratve order
before the order can be enforced, and of the contenton that t voates the
cue process cause of the Consttuton. That case aso answers the conten-
ton that where an ct mposes an unconsttutona abty and forbds a
|udca revew e cept n one way, that one who appeas for revew n the
way provded thereby estops hmsef to deny (he vadty of the mposton.
Smary, t dsposes of the contenton that secton 3224 may be gnored n
equty on the ground that power gven to an admnstratve offcer or board
by the chaenged secton s one not normay ncdenta to the ta ng power.
Wth respect to the contenton that secton 220 of the respectve statutes were
repeaed by ater enactments, I can see no dstncton between settng up
nvadty on consttutona grounds as an e cuse for avodng secton 3224
and settng up nvadty on any other ground. If secton 3224 tes the hands
of the court n the one ease, t does n the other.
In vew of the concusons arrved at, the moton to dsmss w be granted,
and an order may be entered n accordance wth ths opnon.
TTfL II. G N R L PRO ISIONS.
S CTION 1211. S L RI S O ST T ND
MUNICIP L O IC RS.
Sr rrro 1211. I -2-4501
Ct. D. 146
INCOM T R NU CTS O 1918. 1921, ND 1926 D CISION O COURT.
1. Income empton Independent Contbactob mpa yee of
State Lawyer mpoyed by Cty.
awyer, engaged n the genera practce of hs professon,
who Is retaned as ega counse by the board of waterworks
trustees of a cty, has the status of an ndependent contractor and
not that of an offcer or an empoyee of a potca subdvson of
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1211. 248
a State, and the compensaton receved by hm as such counse far
ega servces rendered n connecton wth the operaton of the
waterworks system of the cty s not e empt from Income ta .
2. Decson Reversed.
The decson of the Unted States oard of Ta peas (8
. T. ., 1191) reversed.
Unted States Crcut Court of ppeas, ghth Crcut.
Davd . ar, Commssoner of Interna Revenue, v. Mary . yers, ecvtr
of the state of oward Webster yers, Deceased.
On petton to revew decson of Unted States oard of Ta ppeas.
October 9, 1929.1
OPINION.
an akenburoh, Crcut udge, devered the opnon of the court.
The Commssoner of Interna Revenue added to the gross ncome, for the
years 1920 to 1923. of oward Webster yers, now deceased, amounts re-
ceved by hm as attorney and counseor for the board of waterworks trustees
of the cty of I es Mones. Iowa, whereby there resuted defcences n ncome
ta es for such years n the sum of 758.27. yers ap eaed from the fndng
of the Commssoner to the oard of Ta ppeas, whch, upon hearng, con-
cuded that the pettoner became and contnued to be an empoyee of a potca
subdvson of the State of Iow:a, and, therefore, that the compensaton -whch
he receved for servces rendered to the board of waterworks trustees of the
cty of Pes Mones s e empt from ncome ta es. It was. therefore, ordered
and ad|udged that, upon redetermnaton, there was no defcency for the years
1920 to 1923. rom ths order of redetermnaton the Government prose-
cutes ths appea.
The oard of Ta ppeas made the foowng fndngs of fact upon whch
ts opnon was based :
Under the provsons of acts of the Legsature of the State of Iowa and
ordnances of the cty of Des Mones, there was created and estabshed n the
cty of Des Mones n the atter part of the year 1919 a board of waterworks
trustees, and pursuant to State and muncpa egsaton the sad board ac-
qured a pant for the purpose of furnshng water for the use of peope of
Des Mones, and the snd pant and ts equpment thereupon became a munc-
pay owned property.
Durng a the tmes heren mentoned the pettoner was a awyer engaged
n the practce of hs professon n the cty of Des Mones.
Or. March 10, 1920, the board of waterworks trustees, at a reguar sesson,
adopted a resouton as foows:
On moton of Mr. Wchnsk, seconded by Mr. Worth, t was resoved
that Mr. . W. yers, counse for the cty, be and s hereby retaned as the
ega counse for the board of waterworks trustees, at a compensaton of
2,500 for the year begnnng pr 1, 1920 t beng understood that-the com-
pensaton w be aowed on the same bass for the month of March, 1920. The
moton was unanmousy adopted.
The pettoner accepted the arrangement provded for by such resouton
and durng the years 1920 to 1923, ncusve, receved compensaton as foows:
or the year 1920 2,674.65
or the year 1921 2. 500. 00
or the year 1922 2, 500. 00
or the year 1923 2, 083. 30
The pettoner, actng under advce and n confdent beef that the com-
pensaton thus receved by hm was e empt from ncome ta , omtted these
amounts from hs ndvdua ncome-ta returns for the severa years. The
Commssoner added these respectve amounts to pettoner s ncome for each
of the years camed and thus produced the defcences companed of.
Ceary the Government s not prohbted from ta ng the nstrumentates
of a State, or a potca subdvson of a State, when these are empoyed n
the e ercse of a propretary functon. The Supreme Court, n South Carona
v. Unted States (199 U. 8., 437), hed that:
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249
1211.
The e empton of State agences and nstrumentates from natona ta -
aton s mted to those whch are of a strcty governmenta character, and
does not e tend to those used by the State n carryng on an ordnary prvate
busness.
In nt v. Stone-Tract/ Co. (220 U. S., 107, 157, 172), t s sad that:
It s no part of the essenta governmenta functons of a State to provde
means of transportaton, suppy artfca ght, water, and the ke.
nd
The cases unte n e emptng from edera ta aton the means and nstru-
mentates empoyed n carryng on the governmenta operatons of the State.
The e ercse of such rghts as the estabshment of a |udcary, the empoy-
ment of offcers to admnster and e ecute the aws, and smar governmenta
functons can not be ta ed by the edera Government.
rom these hodngs t woud appear that the budng and operaton of a
waterworks system by muncpates consttutes the e ercse of a propretary,
rather than a governmenta, functon.
In Cty of Wnona v. otzet (169 ed., 321, 333) ths court decded that:
The power of a cty to construct and operate waterworks s not a potca
or governmenta, but a prvate or corporate, power, granted and e ercsed,
not to enabe t to contro ts peope, but to authorze t to furnsh to tsef
and to ts nhabtants water for ther prvate advantage.
In Mer Grocery Co. v. Cty of Des Mones (195 a., 1310) the Supreme
Court of Iowa, wth respect to the waterworks system here concerned, recog-
nzes the dstncton between propretary and governmenta functons n the
operaton of muncpay owned waterworks systems. In our |udgment, the
dstncton whch must contro the determnaton of ths case s thus stated
by the Supreme Court n Metcaf ddy v. Mtche, dmnstratr (269
U. S., 515 T. D. 3824, C. . -, 218 ) :
One who s not an offcer or empoyee of a State does not estabsh e emp-
ton from edera ncome ta merey by showng that hs ncome was re-
ceved as compensaton for servces rendered under a contract wth the State,
when t does not appear that the ta mpars n any substanta manner hs
abty to dscharge hs obgatons to the State or the abty of the State or
ts subdvsons to procure the servces of prvate ndvduas to ad them n
ther undertakngs.
In Panhande O Co. v. no (277 U. S., 218) t was hed:
State ta mposed on deaers n gasone for the prvege of seng and
measured at so many cents per gaon of gasone sod, s vod under the
edera Consttuton as apped to saes to nstrumentates of the Unted
States, such as the Coast Guard feet and a veterans hospta.
The rung, however, was mted to a case where the ega effect s to burden
and ta the Unted States and to e act trbute on ts transactons for the
support of the State. The doctrne announced n Metcaf ddy v. Mtche,
supra, was n nowse mpared.
It remans then ony to determne whether the attorney n ths case was an
ndependent contractor, or an empoyee of such character as to entte the re-
muneraton receved by hm, as such, to e empton from ncome ta es, and n
such determnaton, as we nterpret our power to revew the decsons of the
oard of Ta ppeas, we are confned to ts fndngs of fact. In those
fndngs t s stated that durng a the tmes theren mentoned the pettoner
was a awyer engaged n the practce of hs professon n the cty of Des
Mones, Iowa. We thnk ths s suffcent to estabsh that he was free to
engage, and was engaged, n other busness for other cents that he was a
free professona agent as to the nature of hs servces and the advce that he
woud gve. Nowhere n the record s t reveaed to what e tent, f at a,
hs servces were sub|ect to the contro of the board of trustees. urthermore,
we are of opnon that an attorney who s engaged n ths manner, who has
not contracted to gve to such a cent hs entre and e cusve servces, does
not thereby become an offcer or empoyee n the sense of ths statute. It s
our |udgment that Mr. yers dd not become such an empoyee of ths potca
subdvson of the State of Iowa, and that the compensaton whch he receved
for servces was, therefore, not e empt from ncome ta es. It foows, there-
fore, that the |udgment of the Unted States oard of Ta ppeas must be
reversed.
4090 30 17
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204, rt. 1598. 250
INCOM T RULINGS. P RT III.
R NU CT O 1924.
TITL II. INCOM T .
P RT I. G N R L PRO ISIONS.
S CTION 202. D T RMIN TION O MOUNT
O G IN OR LOSS.
rtce 1561: Determnaton of the amount of gan or oss.
R NU CT O 1924.
Sae of persona resdence. (See I. T. 2533, page 129.)
S CTION 204. SIS OR D T RMINING G IN OR
LOSS, D PL TION, ND D PR CI TION.
rtce 1598: Property acqured after December I -17-4613
31, 1920, by a corporaton. Ct. D. 173
INCOM T R NU CT O 1924 D CISION O COURT.
Gan or Lobs Sae ass Retroactvty Consttutonaty.
Secton 204(a)8 of the Revenue ct of 1924, whch provdes the
bass for determnng gan or oss from a sae n a case descrbed
theren, s consttutona as apped to a sae made n 1924 before
the enactment of that ct.
Unted States Crcut Court of ppeas foe the Nnth Crcut.
Osburn Caforna Corporaton, a- Corporaton, appeant, v. Gaen . Wech.
Unted States Coector of Interna Revenue for he S th Dstrct of Ca-
forna, appeee.
March 24. 1930.
OPINION.
Rudkn, Crcut udge: In December. 1923, M. R. Osburn was the owner of
999 shares of the capta stock of the Domugnez Land Corporaton, of the
vaue of 199,700. On December 10 of that year the Osburn Caforna Corpora-
ton was organzed under the aws of the State of Caforna, wth an author-
zed capta of . 200,000. dvded nto 2,000 shares of the par vaue of 100 each.
Upon the formaton of the ast-mentoned conoraton t acqured and took over
from Osburn the 999 shares of the capta stock of the Domnguez Corporaton
and ssued to hm n payment therefor 1.997 shares of ts own capta stock, of
the actua and par vaue of . 197,700. ebruary 5, 1924, the Osburn Corporaton
acqured 1 addtona share of the Domnguez stock from Osburn for 201.90.
and on the same day sod the entre 1.000 shares for 201,925. December 31,
1923, the Osbnrn Corporaton receved a capta dstrbuton from the Domnguez
Corporaton of 4,995, on account of the stock so acqured, and n ts ncome-ta
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251
204, rt. 1598.
return for the caendar year 1924 t reported a net proft arsng from the sae
of the Domnguez stock In the sum of 7,018.10, beng the dfference between
the seng prce of the stock and the prce pad for t, wth the capta dstr-
buton added. Thereafter the Commssoner of Interna Revenue determned
that the proper bass for determnng the gan or oss from the sae of the
Domnguez stock by the Osburn Corporaton was the same as t woud be n
the hands of Osburn, the transferor, and computed the ta on the bass of the
cost of the stock to Osburn, ess certan qudatng dvdends receved by hm.
The ta thus computed was pad under protest, and the present acton was
nsttuted by the Osburn Corporaton aganst the coector of nterna revenue
to recover the addtona ta so e acted. demurrer was sustaned to an
amended compant, settng forth the foregong facts, and from the |udgment of
dsmssa the present appea was prosecuted.
The Domnguez stock was acqured by the appeant after December 31, 1920,
n the manner specfed n paragraph 8 of secton 204(a) of the Revenue ct
of une 2, 1924 (43 Stat., 259), and t s there e pressy provded that the bass
for determnng the gan or oss from the sae or other dsposton of property
acqured after December 31, 1920, sha be the same as t woud be n the hands
of the transferor, ncreased n the amount of gan or decreased n the amount
of oss recognzed to the transferor upon such transfer under the aw appcabe
to the year n whch the transfer was made.
It must be conceded that n makng the assessment companed of the Com-
mssoner of Interna Revenue acted wthn the scope of hs authorty and
wthn the e press terms of the statute. It s suggested that the court shoud
construe ths feature or provson of the Revenue ct of 1924 as prospectve
ony, but the ct s n e press terms made appcabe to transfers made after
December 31, 1920, and there s no room for constructon n ths regard.
gan, t s contended that the Domnguez stock became capta n the hands
of the Osburn Corporaton, because secton 11 of artce 12 of the Caforna
consttuton provdes that no corporaton sha ssue sock or bonds e cept for
money pad, abor done, or property actuay receved, and that Congress can
ouy ta ncome as dstngushed from capta. ut Congress bus power to
mpose a ta upon ncomes and, as an ncdent, to defne what sha consttute
Income and the power In that regard s not mted or crcumscrbed by the
Laws of the severa States. True, the edera Government usuay recognzes
rues of property n the State, but t s not compeed to recognze transfers
weh resut n no substanta change n benefca ownershp. The noton that
a corporaton s an entty separate and dstnct from ts stockhoders s a c-
ton of aw wch the court w regard for some purposes and dsregard for
others. or ta purposes, ths fcton Is often dsregarded. The ct permttng
affated corporatons to fe consodated returns Is an ustraton. Under
the Revenue ct of 1921, a property owner mght transfer hs property to a
corporaton of hs own creaton, takng the stock of the corporaton n payment,
and then se the property through the corporaton, thus escapng any ta ,
based on the transfer or transacton. ut ths rght e sted ocase of the
aw and not n defance of the aw. It was entrey competent for Congress to
provde, as t has, that the obgaton to pay the ta n such cases shoud foow
the transfer nto the hands of the new owner. Lookng ony to the future, such
an ct woud not seem open to crtcsm, much ess to ob|ecton on consttutona
grounds, and makng the ct retroactve does not, n our opnon, make t
arbtrary or confscatory. Many past Revenue cts have been made retroactve,
as w appear from the ong st of cases cted In the dssentng opnon of
Mr. ustce randes n Untermyer v. nderson (276 U. S., 440, 447 T. D. 4157,
C. . I-1, 326 ), and n many of the cases thus cted the retroactve provsons
of the cts under consderaton worked far greater In|ustce to the companng
partes than s the case here. In ony two or three nstances, so far as we
are advsed, has the Supreme Court decared Revenue cts nvad on the ground
that they were arbtrary and confscatory. (Nchos v. Coodge, 274 U. S., 531
T. D. 4072, C. . I-2, 351 ISodgett v. odcn, 275 U. S., 142 T. D. 4117,
C. . II-1, 324 nterm/er v. nderson, supra.) The present case s, we
thnk, ready dstngushabe from them. In any event, we are not convnced
that the ct under consderaton s vod for any of the reasons urged aganst
It, nor do we harbor any serous doubt on that queston. The concuson thus
announced s n harmony wth the decson of the Court of Cams, under
smar facts, n Newman, Saunders Co. . Unted States (30 . (2d), 1000).
The |udgment s affrmed.
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213(b), rt. 88. 252
S CTION 209. RN D INCOM .
rtce 1662: Defntons and mtatons.
R NU CT O 1924.
Determnaton of earned ncome on professona fees. (See Mm.
3802, page 121.)
P RT II. INDI IDU LS.
S CTION 213(a). GROSS INCOM D IN D:
INCLUSIONS.
rtce 31: What ncuded n gross ncome.
R NU CT O 1924.
Rentas receved n the year 1924 from rea estate stuated n the
State of Te as whch was the separate property of the husband.
(See G. C. M. 8031, page 204.)
S CTION 213(b). GROSS INCOM D IN D:
CLUSIONS.
rtce 88: Compensaton of State offcers I -1-4491
and empoyees. Ct. D. 144
ncome ta revenue acts of 1918, 1021, and 1924 decson of court.
Income empton State Offces rgna Pot.
person, censed as a branch pot under the aws of rgna
and whose dutes are to a certan e tent reguated by the State,
whose ncome as such s derved soey from fees pad hm by those
makng use of hs servces, s not an offcer of the State and the
fees receved by hm as a pot tre not e empt from ncome ta .
Court of Cams of the Unted States.
Oeorye . cw y. The Unted States.
December 2, 1929.
OPINION.
Green, udge, devered the opnon of the court.
The pantff brngs ths sut to recover ta es pad by hm on ncome derved
soey from hs earnngs as a rgna pot durng the years 1920 to 1925.
Counse for pantff states n hs bref that It nvoves the snge queston
whether the pantff s an offcer or servant of the State of rgna whose
earnngs were derved from the e ercse of a governmenta functon.
In consderng the queston of whether the pantff was an offcer of the
State, we fnd that the courts have been unabe to frame a defnton whch
w meet the requrements of the case and that because of the varety of
meanngs or shades of meanng n whch the terms offce and offcer may
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253
213(b), rt. 8
be empoyed, each case must be determned by a consderaton of the statutes
of the State whch appy to the poston under consderaton, together wth
the partcuar facts and crcumstances nvoved.
In the nstant ease, t appears that the pantff was what s caed a branch
pot. e was censed under the aws of the State of rgna. The cense
was obtaned through e amnaton by a board created by statute for the pur-
pose of determnng the quafcatons of pots. The aws of rgna requre
that pots gve a bond, have certan equpment, f the amount of fees whch
they may charge, and aso to a certan e tent reguate the performance of ther
dutes. The aw aso provdes for ther remova or suspenson for s eefed
causes. ut a ths, n our opnon, was merey a matter of reguaton, and
n so dong the State was merey e ercsng a power whch has often been
used wth reference to other cangs and professons.
The pantff receved no compensaton from the State, and hs Income from
hs cang was derved soey from fees pad hm by partes makng use of hs
servces. ny resdent of the State of rgna s egbe to become a branch
pot, and the adopton of apprentces nto the servce s determned by the
pots themseves, who consttute a vountary assocaton. When the pots
consder that the needs of commerce demand an ncrease n ther number, they
seect the requred number of young men as apprentces and tran them unt
they become quafed to undergo e amnaton, when, f successfu, they receve
ther censes as pots.
In order to e empt the pantff from the payment of the ta t must appear
that the coecton thereof n some way prevented the State from e ercsng
some governmenta functon, or n some way mpared ts abty to make use
of such functon. In other words, the ta s a vad one f t does not n any
way nterfere wth the State e ercsng ts powers of government under the
Consttuton.
We do not thnk the pantff was a pubc offcer. To be a pubc offcer he
must have hed an offce as a part of the State government. The term offce
Impes a deegaton to a certan e tent of soveregn power to t, and possesson
of t by the person fng the ofce that s, an authorty s conferred to e er-
cse some porton of the soveregn power of the State ether n makng, admn-
sterng, or e ecutng the aws. See cases cted n 46 Corpus urs, 923, note
30(a). The fact that the pantff was censed by the State of rgna was
not enough to make hm an offcer or agent of the State, nor dd the fact that
hs dutes were to a certan e tent reguated by the State make hm an offcer
of the State. If ths were not the rue, a pawnbroker n many States woud be
a State offcer. The statutory provsons wth reference to hs appontment, the
fees whch he mght charge, and the dutes whch he was to perform were
nstances of e ercse of soveregn power on the part of the State, but he was
not actng for the State, e ercsng any of ts pubc functons, or adng n
carryng out any of ts soveregn powers when, n the course of hs empoyment,
he drected the course of vesses so that they mght nether be n|ured them-
seves nor n|ure others, whch was hs prncpa duty as a pot. The State pro-
vded a board for the e amnaton of pots, smar to boards that are provded
for the e amnaton of doctors and awyers. The ob|ect and purpose n creat-
ng such boards obvousy s to determne the quafcatons of those who ntend
to enter the ranks of these professons and prevent the pubc from recevng
damage whch mght occur from the admsson to practce n a professon or ca-
ng of ncompetent or unworthy ndvduas. It s often sad that awyers are
offcers of the court, but we thnk that no one woud contend that the ncome
whch they receve from ther prvate practce was not sub|ect to ta aton. It
w be observed aso that the State had no voce n determnng who mght
become branch pots. Ths matter was determned entrey by the pots
assocaton.
On the whoe, we concude that the pantff was not a pubc offcer of the
State of rgna, and that a ta eved upon the ncome of branch pots,
derved through ther servces as pots, woud not hnder, restran, or nterfere
wth the State of rgna n e ercsng any governmenta functon. It foows
that pantff s not entted to have refunded the ta es nvoved heren.
These vews make t unnecessary for us to determne to what e tent the
pantff may be burred from a recovery of any of the ta pad by reason of
havng faed to fe a cam for refund wthn the tme prescrbed by aw.
The petton of pantff must be dsmssed, and t s so ordered.
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219, rt. 347.
254
rtce 89: ddtona e cusons from gross ncome.
R NU CT O 1924.
mendment of artce 89, Reguatons 65, to ncude Span n the
st of countres whch satsfy the equvaent e empton requrement
of secton 213(b)8 of the Revenue ct of 1924 (See T. D. 4289,
page 160.)
S CTION 214 (a) 1. D DUCTIONS LLOW D INDI-
IDU LS : USIN SS P NS S.
rtce 110: Rentas.
R NU CT O 1924.
The decson n the case of W. S. oge Co., Inc. (5 . T. ., 641,
C. . III-1, 5), s appcabe ony to those cases n whch no part
of the royates pad n anv one year s credted to future producton
of ore. (See G. C. M. 7937, page 87.)
S CTION 216 CR DITS LLOW D
INDI IDU LS.
rtce 305: Date determnng e empton.
R NU CT O 1924.
Method of computng the persona e empton where the status of
the ta payer changes durng the ta abe year. (See Mn. 3800,
page 119.)
S CTION 218. P RTN RS IPS.
rtce 335: Partnershps.
R NU CT O 1924.
Renewa or contnuance of orda partnershp, wth deceased
partner s estate as member. (See G. C. M. 7616, page 219.)
S CTION 219. ST T S ND TRUSTS.
rtce 347: Income of trusts ta abe to I -22 1659
grantor. Ct. D. 188
INCOM T R NU CT O 1924 D CISION O SUPR M COURT.
1. Income Revocabe Trust Ta abe to Gkantob- Consttu-
tonaty Retboactvty.
Subdvsons (g) and (h) of secton 219 of the Revenue ct of
1924, requrng that the ncome of a trust (a) wheren the grantor
as the power to revest n hmsef tte to any part of the corpus
of the trust or (b) wheren the ncome of the trust may n the
dscreton of the grantor be dstrbuted to hm, sha be ncuded
n computng the net ncome of the grantor, are consttutona even
as apped to such a trust created before the effectve date of that
secton.
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219, rt. 347.
2. Decson ffrmed.
The decson of the crcut court of appeas (34 ed. (2d), 656,
Ct. D. 83 C. . III-2, 249 ) affrmed.
Supreme Coubt of the Unted States.
Chares . Corss, Pettoner, v. rank . owers, Coector of Interna
Revenue for the Second Dstrct of New York.
On wrt of certorar to the Unted States Crcut Court of ppeas for the Second Crcut
pr 28, 1930.
OPINION.
Mr. ustce omes devered the opnon of the court.
Ths s a sut to recover the amount of an Income ta pad by the pantff,
the pettoner, under the Revenue ct of 1924, une 2, 1924 (ch. 234, sec. 219 (g),
(h), 43 Stat., 253, 277). (U. S. C, Tte 26, sec. 960.) The compant was ds-
mssed by the dstrct court (30 . (2d), 135), and the |udgment was affrmed
by the crcut court of appeas (34 . (2d), 656). wrt of certorar was
granted by ths court.
The queston rased by the pettoner s whether the above secton of the
Revenue ct can be apped consttutonay to hm upon the foowng facts:
In 1922 he transferred the fund from whch arose the ncome n respect of whch
the pettoner was ta ed to trustees, n trust to pay the ncome to hs wfe for
fe wth remander over to ther chdren. y the nstrument creatng the trust
the pettoner reserved power to modfy or ater n any manner, or revoke n
whoe or n part, ths ndenture and the trusts then e stng, and the estates
and nterests n property hereby created, etc. It s not necessary to quote more
words because there can be no doubt that the pettoner fuy reserved the power
at any moment to abosh or change the trust at hs w. The statute referred
to provdes that when the grantor of a trust has, at any tme durng the ta -
abe year, the power to revest n hmsef tte to any part of the
corpus of the trust, then the ncome of such part of the trust for such ta abe
year sha be ncuded n computng the net ncome of the grantor. Secton
219(g) wth other smar provsons as to ncome n secton 219(h). There
can be no doubt ether that the statute purports to ta the pantff n ths
case. ut the net ncome for 1924 was pad over to the pettoner s wfe and the
pettoner s argument s that however t mght have been n dfferent crcum-
stances the ncome never was hs and he can not e ta ed for t. The ega
estate was n the trustee and the equtabe nterest n the wfe.
ut ta aton s not so much concerned wth the refnements of tte as t
s wth actua command over the property ta ed the actua beneft for whch
the ta s pad. If a man drected hs bank to pay over ncome as re-
ceved to a servant or frend, unt further orders, no one woud doubt that
he coud be ta ed upon the amounts so pad. It s answered that n that
case he woud have a tte, whereas here he dd not. ut from the pont of vew
of ta aton there woud be no dfference. The tte woud merey mean a
rght to stop the payment before t took pace. The same rght e sted here,
athough t s not caed a tte but s caed a power. The acquston by
the wfe of the Income became compete ony when the pantff faed to
e ercse the power that he reserved. (Satonsta v. Satonsta, 276 U. S.
260. 271 Chase Natona ank v. Unted States, 278 U. S. 327 Ct. D. 40, C. .
III-1, 3081 Renccke v. Northern Trust Co., 278 U. S. 339 T. D. 4261, C. .
III 1, 305 .) St speakng wth reference to ta aton, f a man dsposes
of a fund n such a way that another s aowed to en|oy the ncome whch t
Is n the power of the frst to approprate, t does not matter whether the
permsson s gven by assent or by faure to e press dssent. The ncome
that s sub|ect to a man s unfettered command and that he s free to en|oy
at hs own opton may be ta ed to hm as hs ncome, whether he sees ft to
en|oy t or not. We consder the case too cear to need hep from the oca
aw of New York or from arguments based on the power of Congress to prevent
escape from ta es or surta es by devces that easy mght be apped to that end.
udgment affrmed.
The Chef ustce took no part n ths case.
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273 and 274, rt. 1232. 256
S CTION 220. SION O SU T S Y
INCORPOR TION.
rtce 351: Ta aton of corporatons utzed for evason
of surta .
R NU CT O 1924.
In|uncton to restran coecton of ta es assessed under secton
220, Revenue ct of 1924. (See Ct. D. 183, page 246.)
P RT III. CORPOR TIONS.
S CTION 231. CONDITION L ND OT R
MPTIONS O CORPOR TIONS.
rtce 515: udng and oan assocatons and cooperatve
hanks.
R NU CT O 1924.
Rura oan and savngs assocatons organzed under the aws of
Indana. (See G. C. M. 8090, page 128.)
S CTION 240. CONSOLID T D R TURNS O
CORPOR TIONS.
rtce 632: Consodated returns.
R NU CT O 1924.
Procedure for dsposton of cases where affated group has fed
a so-caed consodated return for some of ts members and separate
returns have been fed for other companes n the group. (See
G. C. M. 8093, page 147.)
P RT . P YM NT, COLL CTION, ND R UND O T ND
P N LTI S.
S CTIONS 273 ND 274. D ICI NCY
IN T .
rtce 1232: ssessment of a defcency. I -12 4566
Ct. D. 159
INCOM ND C SS PRO ITS T S R NU CT O 1924 D CISION O
COURT.
1. eopardy ssessment adty Reducton op Defcency
New ssessment.
Where the Commssoner makes a |eopardy assessment of a
defcency under secton 274(d) of the Revenue ct of 1024, the
reducton of the amount of the defcency after the e praton of
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257
273 and 247, rt. 1232.
te statutory perod for assessment and the sustanng of t as to the
remander on a dfferent theory than that upon whch the assess-
ment of the defcency was orgnay based do not consttute a
new and nvad assessment.
2. eopardy ssessment Commssoner s Reef ary pra-
ton of Statutory Perod for ssessment.
It s not error, as a matter of aw, for the Commssoner, n mak-
ng an assessment under secton 274(d) of the Revenue ct of 1924,
to base hs beef that the assessment or coecton of a defcency
w be |eopardzed by deay on the ground that the statutory perod
wthn whch an assessment may be made w e pre at an eary
date.
3. eopardy ssessment Commssoner s Dscreton Revew of
oard of Ta ppeas.
The Commssoner s power to make a |eopardy assessment under
secton 274(d) of the Revenue ct of 1924 s entrey a dscreton-
ary one and t s not error for the oard of Ta ppeas to decne
to revew the reasons for the Commssoner s beef that assessment
or coecton of a defcency w be |eopardzed by deay.
4. Decson ffrmed.
The decson of the Unted States oard of Ta ppeas (10
. T. ., 884) affrmed.
Unted States Crcut Court of ppeas for the Seventh Crcut.
enry ecdcr v. Commssoner of Interna Revenue.
Petton for revew of order of the oard of Ta ppeas.
efore schuer and Page, Crcut udges, and Luse, Dstrct udge.
December 5, 1929.
opnon.
Luse, D. .: Ths matter comes before the court on a petton, under secton
1003(a) of the Revenue ct of 1926, to revew an order of redetermnaton of
the oard of Ta ppeas hodng that there was a defcency ta for the
year 1921, amountng to 559.30, propery assessed aganst the pettoner by the
Commssoner of Interna Revenue.
On March 15, 1922, pettoner fed a return of ncome for the year 1921.
y secton 277 of the ct of 1924, ncome ta es mposed by the Revenue ct of
1921 were requred to be assessed wthn four years after the return was fed,
and hence such mtaton woud have e pred on March 15, 1926.
On ebruary 3, 1926, respondent, actng under the provsons of secton 274(d)
of the 1924 ct, made a |eopardy (so-caed) assessment of a defcency
amountng to 832.14 aganst pettoner, and on the same date notfed pet-
toner of such defcency assessment and of hs rght to fe a cam In abate-
ment under secton 279 of that ct. The statement accompanyng the Com-
mssoner s etter of ebruary 3, 1926, dscosed that the defcency was based
upon pettoner s omsson to deduct deprecaton upon a budng n Chcago
from a oss upon sae of rea estate whch he deducted n hs orgna return.
Such statement aso contaned the foowng:
It w be mpractcabe to gve you the usua 30-day notce of the proposed
assessment for the year 1921, n vew of the e praton at an eary date of the
4-year perod provded by secton 277(a) of the Revenue ct of 1924 wthn
whch assessment for ths year may be made. In order that the nterests of
the Government may not be |eopardzed, assessment of the ta for the year 1921
w be made mmedatey.
On ebruary 26, 1926, pettoner fed a cam for the abatement of the fu
amount of the defcency ta under secton 279, ct of 1924, but was advsed by
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273 and 274, rt. 1232.
258
respondent on November 23, 1926, that t was proposed to aow the abatement
cam n the amount of 272.84 and re|ect t n the sum of 559.30. On anu-
ary 24, 1927, after a hearng before the respondent, the atter notfed pettoner
of hs adherence to hs former proposa. Respondent sought revew before
the oard of Ta ppeas, whch redetermned the defcency n conformty
wth the determnaton of the Commssoner.
It appears that nvestgaton by fed agents of the Treasury Department
dscosed that the rea property sod by pettoner ncuded no budngs and
hence no deprecaton was requred to be deducted, but t was aso found that,
n computng hs oss on the sae, pettoner had used the March 1, 1913, vaue
rather than the ower vaue n March, 1910, when pettoner had acqured
the property by gft. The fna determnaton of the Commssoner was a re-
ad|ustment and downward revson of the frst assessment, based upon ths
new nformaton.
The contenton of the pettoner before the oard of Ta ppeas and here
was: (1) That the correct defcency assessment made by the Commssoner
after pettoner had fed hs cam n abatement was n fact a new assessment,
made after the e praton of the perod of mtaton (2) that the mmnent
e pry of the perod of mtaton s not a ground upon whch the Commssoner
may base a beef that assessment and coecton of a defcency s |eopardzed
(3) that the oard of Ta ppeas erred n refusng to nqure nto the bass
for the Commssoner s beef that |eopardy e sted.
Upon the ora argument a number of the ponts made by pettoner s counse
n ther bref were defntey abandoned by them, and whe hs contenton No.
1 above was not stressed upon the argument, we do not fee warranted n
ncudng t among the ponts so abandoned, and hence w dscuss t brefy.
The term defcency s defned n secton 273 of the ct of 1924 as the
amount by whch the ta mposed by ths tte e ceeds the amount shown as
the ta by the ta payer upon hs return. Such defnton ndcates that a
defcency conssts not of a theory or a method of computaton but of a sum
of money representng the dfference between what the ta payer s return ds-
coses and what the aw n fact mposes on hm under the actua crcumstance.
In makng the assessment orgnay the Commssoner acted on ncompete
nformaton, but nevertheess the assessment was made on account of an e -
cessve cam of oss resutng from the sae of certan rea property. Com-
pete nformaton about the sae ndcated that the oss was greater than the
orgna defcency assessment aowed but ess than pettoner s orgna return
dscosed, and upon the demand of pettoner under hs cam for abatement the
orgna assessment was reduced. In vew of the fact that the amount of the
assessment as fnay f ed was ower than and comprehended wthn the sum
orgnay assessed, and partcuary n vew of the fact that the orgna and
amended defcency assessment reaed to the same oss, we see no error n the
concuson of the oard that there was but one assessment nvoved, and that
one was assessed wthn the 4-year statutory perod.
Does the mmnence of the e pry of the perod wthn whch an assessment
may be made consttute a ground upon whch the Commssoner may base a
beef that the assessment or coecton of a defcency w be |eopardzed by
deay, and assess a defcency under secton 274(d) of the ct of 1924
ssessments made by the Commssoner under the provsons of secton 274(d)
may be revewed by the oard of Ta ppeas ony upon the ta payer s fng
a cam of abatement, wth bond, under secton 279. Normay, the procedure
s under secton 274 (a) and (b), and no assessment s made unt opportunty
s afforded for revew by the oard of Ta ppeas. Ths the Supreme Court
characterzes, n Russe v. . 8. (278 U. S., 181, 49 S. Ct., 121 T. D. 4200, C. .
III-1, 206 ). as a new and vauabe rght. owever, t s pan that, under
some crcumstances, the Commssoner may make an mmedate assessment,
wtout notce, under the provsons of secton 274(d). Pettoner argues that
the ony egtmate bass for such beef by the Commssoner are such acts
on the part of the ta payer as are descrbed n secton 282 of the ct of 1924
and whch w make deay dangerous to the effectve assessment and coecton
of a defcency. owever, we thnk ths argument overooks the dstncton
between defcences under secton 273, ct of 1924, whch presupposes a return
made or prevous assessment, or coecton wthout assessment, wnch s the
sub|ect matter of secton 274(d), and the powers accorded the Commssoner by
secton 282, generay, to decare the ta abe perod mmedatey termnated for
a ta payer desgnng qucky to depart from the country. Secton 274 deas
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273 and 274, rt. 1232.
wth stuatons where ta returns have been fed and defcences are found
theren, whe secton 282 empowers the Commssoner, among other thngs,
to dea wth emergences created by the ta payer, by mmedatey termnatng
the ta abe perod, whether or not return has been fed or s yet normay
due. No reason s perceved why the beef of |eopardy n the assessment
or coecton of defcences, referred to n secton 274(d), shoud be mted
to the acts of ta payer referred to n secton 282. Rather, we thnk the
sectons are desgned to suppement one another, e tendng to the Commssoner
e traordnary powers n the dfferent stuatons whch may confront hm, and
that secton 282 does not operate to e cude the eary e pry of a mtaton
perod as a bass for the beef by a Commssoner that |eopardy e sts under
secton 274(d).
It s urged, however, that subdvson (b) of secton 277, ct of 1924,
dsspates any necessty for consderng the eary e praton of the mtaton
perod as endangerng the coecton or assessment of a ta . That secton reads:
The perod wthn whch an assessment s requred to be made by
subdvson (a) of ths secton n respect of any defcency sha be e tended
(1) by 60 days f a notce of such defcency has been maed to the ta payer
under subdvson (a) of secton 274 and no appea has been fed wth the
oard of Ta ppeas, or, (2) f an appea has been fed, then by the number
of days between the date of the mang of such notce and the date of the
fna decson by the oard.
Obvousy ths secton abates to a consderabe degree the rgdty of the
statute of mtatons and shoud, normay, substantay decrease the number
of eases n whch the Commssoner beeves that |eopardy e sts. owever, as
we read secton 274 (a) and (b), governng the norma procedure of defcency
determnatons and assessments, assessment by the Commssoner foows the e -
praton of the 60-day perod aowed for appea, n the event no appea s
taken, and foows the fna decson of the oard of Ta ppeas, n the event
an appea s taken, so that n ether event t remans for the Commssoner to
make an assessment ether after the e praton of the 60-day perod aowed
for the appea or the fna decson of the oard of Ta ppeas. Thus, f
notce of determnaton of a defcency were gven one day pror to the e pry
of the statutory perod of mtaton, there woud reman but one day n whch
the Commssoner mght make an assessment, even though the e tensons of the
statute of mtatons provded by secton 277(b) be nvoked. ence we are
unabe to say that, as a matter of aw, the e stence of secton 277 whoy
obvates the danger to an assessment or ts coecton resutng from the m-
mnence of the e pry of the mtaton perod.
In the nstant case, bad the Commssoner proceeded under secton 274(a)
and (b) to gve notce of hs determnaton of a defcency on ebruary 3, 1026,
nstead of makng the (so-caed) |eopardy assessment, the mtaton perod
woud have been so e tended by the provsons of secton 277(b) as to afford
the Commssoner 40 days after the 60-day appea perod had e pred or after
the fna decson of the oard of Ta ppeas had been rendered wthn whch
to have made an assessment. Whe ths woud appear to be ampe, neverthe-
ess, whether t was so n fact must depend upon numerous crcumstances
pecuary wthn the knowedge and understandng of the Commssoner, n-
cudng the press of smar mutters n the ureau and n the fed.
On the appea by pettoner from the Commssoner s rung upon the former s
cam for abatement, the oard of Ta ppeas decned to nqure nto the
reasons whch formed the bass of the Commssoner s beef that the assess-
ment or coecton of the defcency woud be |eopardzed by deay. In thus
hodng the oard consstenty foowed ts rung n a number of decsons.
(See Caforna ssocated Rasn Co., 1 . T. ., 1251 Cos L. Oreene, 2 . T.
., 148 ames Cousem, 11 . T. ., 1040. 1157 et seq.
In the case frst above cted the oard stated the ground for thus hodng,
as foows:
Congress has e pressy based the power of |eopardy assessment upon the
Commssoner s offca beef, consstenty wth hs responsbty for the
protecton and coecton of the revenue. If he so e ercsed ths power as to
be arbtrary and oppressve, the remedy es wth the courts, as t does wth
any offca abuse of power or dscreton. The appea of ths oard can not be
used for ths purpose, especay when Congress has e pressy provded an
appea on the merts from the dena of a cam for abatement.
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277 and 278, rt. 1272.
260
In the Couzens case (supra) the oard was urged to wthdraw the rue an
nounced In the Rasn company case, and It was urged that the |eopardy assess-
ment, beng vod because the fact that the statutory mtaton perod was
about to e pre was nsuffcent to warrant a beef on the part of the Com-
mssoner that the assessment was |eopardzed, and nasmuch as the procedure
by way of determnaton of a defcency appea to the oard of Ta ppeas
and assessment had not been foowed, there e sted no vad assessment. To
ths contenton the oard, n ts opnon, stated:
The effect of such a readng of the statute s that when the Commssoner
determnes that a defcency e sts and at the same tme beeves that deay
w |eopardze ts coecton, hs eecton to assess Is at the per of osng
the ta entrey, for even f the defcency be cear, t woud be ost f the
beef of |eopardy proved to be mstaken. Such a constructon demonstrates
wth ncreased force the wsdom of the rue stated n Caforna ssocated
Rasn Co. (1 . T. ., 1251) that the oard s wthout power to ad|udcate
whether the crcumstances upon whch the Commssoner acted were such as
to denote |eopardy and |ustfy hs beef. We adhere to that decson.
Whe the queston Is not free from doubt, we are of opnon that the revew
before the oard of Ta ppeas under secton 270(b), ct of 1924, whch
revew s upon the Commssoner s rung upon the cam of abatement, brngs
before the oard the merts of the queson of the ta payer s abty, and the
amount thereof. Whe there are mportant dfferences between the procedure
under secton 274 (a) and (b) on the one hand and secton 274(d) on the
other, such dfferences are matters of procedure not affectng the amount or
|ustce of the ta whch the ta payer w utmatey be requred to pay.
Whether the Commssoner shoud proceed under (a) and (b) of secton 274,
or under (d) thereof, s an admnstratve queston not affectng the amount
of the ta . There s aso the absence of statutory standards by whch any
revewng body may test the correctness of the beef of the Commssoner.
These two eements qute ceary dstngush the nstant cnse from that of
ar v. Oesteren Machne Co. (275 U. S., 220, 48 S. Ct., 87 T. D. 4120, C. .
II-1, 181 ). The provsons of secton 274(d), permttng the Commssoner
to make |eopardy assessments pendng appea from hs determnaton of a
defcency, seems Inconsstent wth congressona ntent that the oard shoud,
on revew of a cam n abatement of such an assessment, nqure nto the
reasons promptng the Commssoner to thus proceed.
On the whoe, we see no error n the concuson arrved at by the oard
of Ta ppeas, and hence
The petton s dened.
S CTIONS 277 ND 278. P RIOD O LIMIT TION UPON
SS SSM NT ND COLL CTION O T .
ncome ta revenue act of 1824 decson of supreme court.
1. ssessment Lmtaton Commencement op Perod Tenta-
tve Return.
competed return, and not the so-caed tentatve return, for
the ta abe year 1918 s the return requred to be fed by the pro-
vsons of secton 239 of the Revenue ct of 1918, and the fng of
the tentatve return does not start the runnng of the 5-year
perod wthn whch the amount of ta due must be assessed under
secton 250(d) of that ct.
2. Coecton Lmtaton Waver.
Where the rght to assess and coect ta es for the year 1918
whch woud otherwse e pre on une 16, 1924, s e tended by an
agreement n wrtng to une 16, 1925, an assessment made before
the atter date by vrtue of the agreement may be coected wthn
s years from the date of such assessment as provded by secton
278(d) of the Revenue ct of 1924.
rtce 1272: Perod of mtaton upon coec-
ton of ta .
I -14-4589
Ct. D. 167
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261
277 and 278, rt. 1272.
Supreme Coubt of the Unted States.
118. orshem ros. Drygoods Co., Ld., Pettoner, v. The Unted States.
On certorar to the Unted States Crcut Court of ppeas for the fth Crcut.
414. Thomas W. Whte, Coector, Pettoner, v. ood Rubber Co.
On certorar to the Unted States Crcut Court of ppeas for the rst Crcut.
ebruary 24, 1930.
OPINION.
Mr. ustce randes devered the opnon of the court
These cases, whch were argued together, present the same questons. In
each case, the ta payer seeks to recover wth nterest an amount assessed and
coected, after March 15, 1925, as an addtona ncome and e cess-profts ta
for 1918 under the Revenue ct of 1918. In each, the cam s that both the
assessment and the coecton were made after the e praton of the tme a-
owed therefor. In a ong ne of cases arsng out of smar facts, the oard
of Ta ppeas has hed consstenty that nether the assessment nor the
coecton was made too ate. Iu No. 414 the acton was brought n the edera
court for Massachusetts aganst the coector to recover 39,043.99. The dstrct
court, wthout passng on the tmeness of the assessment, hed that the coec-
ton was barred and entered |udgment for the pantff. (28 . (2d), 54.)
The Crcut Court of ppeas for the rst Crcut affrmed the |udgment on
the ground that the assessment was barred, and e pressed no opnon on the
queston decded by the dstrct court. (33 . (2d), 739.) In No. 118, the
acton was brought n the edera court for western Lousana aganst the
Unted States to recover 11,282.15. That court, decdng both questons n
favor of the Government, entered a |udgment for the defendant (26 . (2d),
505), whch was affrmed, on both grounds, by the Crcut Court of ppeas
for the fth Crcut (29 . (2d), 895.) In other edera courts, aso, there
has been dversty of opnon. Ths court granted wrts of certorar. (280
U. S., 539.)
rst. Whether the assessment was barred depends upon whether the perod
of mtaton was started by the fng before March 15, 1919, of a so-caed
tentatve return, or by the ater fng of a so-caed competed return.
The queston arses n ths way: The Revenue ct of 1918 was not approved
unt ebruary 24, 1919 (ch. 18, 40 Stat, 1057). Secton 241(a) requred that
returns on the bass of the caendar year shoud be made on or before the 15th
day of March. Secton 239 requred that a corporaton s return shoud state
specfcay the tems of ts gross ncome and the deductons and credts
aowed. The form of return prescrbed by the Commssoner of Interna
Revenue for gvng ths nformaton, known as orm 1120, s an eaborate docu-
ment composed of a summary n 4 schedues, wth 11 supportng schedues
and 26 subschedues. The summary cas for the specfcaton of some 93
tems. The supportng schedues and subschedues ca for the specfcaton of
kome 357 tems and of as many more tems to be stated n appendces as the
crcumstances of the partcuar ta payers mght requre.
It was obvous that many corporatons woud be unabe, n the short nterva
between ebruary 24 and March 15, to prepare ther returns n tme. Sectons
227(a) and 241(a) authorzed the Commssoner to grant a reasonabe e ten-
son of tme for fng returns whenever n hs |udgment good cause e sts. ut
secton 250(a) provded that where an e tenson of tme for fng a return s
granted the tme for payment of the frst nstament sha be postponed unt
the date of the e praton of the perod of the e tenson. The necesstes of
the Government made t undesrabe that payments on account of the frst n-
stament of ta es be postponed. To meet ths stuaton, the foowng pocy
was announced n a pubc statement ssued by the Commssoner: though
no genera e tenson of tme w be authorzed for fng the edera ncome ta
returns due March 15, the Commssoner of Interna Revenue has approved a
nove feature of ta coecton whch w serve for a practca purposes as a
possbe e tenson of 45 days for the fng of cor raton ncome and e cess
profts ta returns. If a corporaton fnds that t s m-
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277 and 278, rt. 1272.
262
possbe to compete ts return by March 15, t may make a return of the est-
mated ta due and make payment thereof not ater than March 15. If merto-
rous reason s shown, the competed return coud be fed wthn 45 days after
that date. The statement contnued: Provson for systematcay handng
ths new feature w be made n the constructon of the new return banks
emboded n whch s a detachabe etter of remttance. ny corpo-
raton whch fnds that, for suffcent reasons, t can not compete ts return by-
March 15, may detach and f out the etter of remttance, and forward same
to the coector on or before March 15, together wth a check for the
ta due on that date . statement n wrtng of the reasons why t s
mpossbe for the corporaton to compete the return by the specfed date must
ccompany every such remttance. The devce was modfed by a further
statement on ebruary 27, 1919. separate bank, known as orm 1031T,
and entted Tentatve return and estmate of corporaton ncome and profts
ta es and request for e tenson of tme for fng return, was to be used nstead
of the detachabe etter of remttance. Ths bank was n the form of a etter
to the coector and contaned, besdes nstructons and the oath of the presdent
and treasurer, ony a statement that one-fourth of the estmated amount of
ta es was remtted therewth and that an e tenson of tme to fe the compete
return was requested for the reasons stated.
ach corporaton e ecuted the tentatve return, orm 1031T, and sent t.
wth a remttance of one-quarter of the estmated ta , to the coector on or
before March 15, 1919. The orshem company fed ts compete return. orm
1120. on une 16, 1919 the ood company, on uy 14, 1919. Secton 250(d)
of the Revenue ct of 1918 provded that the amount of ta due under any
return sha be determned and assessed by the Commssoner wthn fve years
after the return was due or was made . Ths perod was e tended
under the Revenue ct of 1921, November 23, 1921 (ch. 136, sec. 250(d), 42 Stat.,
227, 265-266), whch provded that the amount of the ta under the 1918 ct
shoud be determned and assessed wthn fve years after the return was
fed, uness both the Commssoner and the ta payer consent n wrtng to a
ater determnaton, assessment, and coecton of the ta . In each of the
cases at bar, the Commssoner and the ta payers e ecuted, pror to March 15.
1924, an nstrument caed Income and profts ta waver. The wavers
sated that In pursuance of the provsons of sunvson (d) of secton 250
of the Revenue ct of 1921, the Commssoner and the ta payer consent to
a determnaton, assessment, and coecton of the amount of ncome, e cess-
profts, or war-profts ta es due under any return made . Ths waver
s n effect from the date t s sgned by the ta payer and w reman n effect
for a perod of one year after the e praton of the statutory perod of mta-
ton . In each case, the assessment was made more than s years
after March 15, 1919, but wthn s years after the fng of the competed return
on orm 1120. If orm 1031T was the return wthn the meanng of the
above provsons as to mtaton, then the assessments were made too ate.
We are of opnon that the fng of the document known as orm 1031T.
duy e ecuted, dd not start the runnng of the perod of mtaton. orm
1031T s not an nstrument e pressy provded for n the ct. It s not n
the nature of a st, schedue, or return, commony requred by ta
Rtatutes. It was an nventon of the Commssoner desgned to meet a pecuar
e gency. Its purpose was to secure to the ta payer a needed e tenson of tme
for fng the requred return, wthout defeatng the Government s rght to
prompt payment of the frst nstament. s orm 1031T made no reference to
ncome, or to deductons or credts, t coud not have been ntended as the
return stntug specfcay the tems of gross ncome, and the
deductons and credts the return requred to satsfy the statute.
Secton 3182 of the Revsed Statutes (U. S. C, Tte 26, secton 102) pro-
vdes that the Commssoner sha make the nqures, determnatons, and
assessments of a ta es and sha certfy a st of such assessments
to the proper coector. Secton 250(h) of the 1918 ct requred
that as soon as practcabe after the return s fed, the Commssoner sha
e amne t. If t then appears that the correct amount of the ta s greater
or ess than that shown n the return, the nstaments sha be recomputed. It
was to serve these purposes that secton 239 requred a corporatons to make
returns statng specfcay the tems of gross ncome and the
deductons and credts. The burden of suppyng by the return the nforma-
ton on whch assessments were to be based was thus mposed upon the ta -
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263
277 and 278, rt. 1272.
payer. nd, n provdng that the perod of mtaton shoud begn on the
date when the return was fed, rather than when t was due, the statute
pany manfested a purpose that the perod was to commence ony when
the ta payer had supped ths nformaton n the prescrbed manner. orm
1120 provded for furnshng the data whch woud enabe the Commssoner
to make a determnaton, assessment, and recomputaton. orm 1031T fur-
nshed no data whch coud, n any way, ad hm n that connecton. It s
true that even the compete return on orm 1120 need not be accepted by
the Commssoner as the soe bass for the determnaton of the amount of the
ta . ssessments are frequenty based on audts of the Income Ta Unt.
owever, the purpose of these audts s not to emnate the necessty of fng
the return, but to safeguard aganst error or dshonesty.
The corporatons concede that secton 239 defned the nature of the return
requred and referred to n the severa provsons of the ct, and that orm
1031T dd not compy wth that secton but, n support of ther contenton
that the tentatve return, orm 1031T, started the runnng of the perod of
mtaton, they present the foowng arguments: They urge that the suff-
cency of a return for the purpose of startng the perod of mtatons does
not depend upon a strct compance wth the requrements of secton 239
that the ct requred but one return that orm 1031T was a forma docu-
ment prescrbed by the Commssoner, caed a return and so termed on
ts face, and that the compete return shoud, therefore, be treated as an
amendment or competon of the tentatve return that orm 1031T was a
suffcent return to start the perod of mtaton, because t was suffcent to
prevent the e tenson of tme for the payment of the frst nstament of the
ta pursuant to secton 250(a) because t was a suffcent return under secton
250(e) to consttute notce and demand for the payment of the frst nsta-
ment because t was a suffcent return to form the bass of an assessment,
whch, under the nw, must be based on a return and because t was a suff-
cent return to sub|ect ta payers to the penates provded by secton 3176
of the Revsed Statutes and secton 253 of the ct, for fuure to fe t on
tme.
These arguments gnore the dfferences n nature and purpose between orm
1031T and the return requred by the ct. The mere fact that orm 1031T
was a forma document prescrbed by the Commssoner and termed a return
does not dentfy t as the return requred by the ct. The word return s
not a technca word of art. It may be true that the fng of a return whch s
defectve or ncompete under secton 239 s suffcent to start the runnng of the
perod of mtaton and that the fng of an amended return does not to
the perod. ut the defectve or ncompete return purports to be a specfc
statement of the tems of ncome, deductons, and credts n compance wth
secton 239. nd, to have that effect, t must honesty and reasonaby be
ntended as such. There s not a pretense of such purpose wth respect to
orm 1031T. Nor s t the purpose of orm 1120 to suppy or correct somethng
omtted or msstated n orm 1031T. The atter was nether defectve nor
ncompete. The e tenson of tme for the payment of the frst nstament
was prevented, not because orm 1031T was consdered a return n compance
wth the statute, but because the Commssoner e acted payment as a condton
for the requested e tenson of tme to fe the return. The penates were to
e mposed for the faure to fe, or the ate fng, of the detaed return above
descrbed. nd the penates were avoded, not by the fng of orm 1031T
as a substanta compance wth the requrement of a return, but, as e pressy
stated n that form, by the e tenson of tme to fe whch was granted n
consderaton of the fng of ths tentatve return and the payment of not ess
tan one-fourth of the estmated amount of the ta , and for the reasons stated.
Obvousy, wthout the payment of the fr t nstament and the consequent
grant of an e tenson of tme, the mere fng of orm 1031T woud not have
avoded the penates prescrbed for the ate fng of the return requred by
the ct Nor woud the penates have been avoded by the fng of that form,
f the compete return were not fed w thn the e tended tme.
The contenton that because orm 1031T was suffcent as a notce and de-
mand under secton 250(e), t was a suffcent return to start the perod of
mtaton, s equay unsound. That secton dd not prescrbe the e cusve
mode for the notce and demand for payment of the frst nstament. ny n-
strument contanng the notce and demand woud be as effcacous for that
purpose as the return requred by the statute. nay, the argument that
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277 and 278, rt. 1272.
264
orm 1031T was a suffcent return to furnsh the bass for assessment acks
sgnfcance, whether or not t s sound. The Commssoner s not confned to
the ta payer s return for the bass of hs assessment. e may secure addtona
nformaton and he may assess the ta even f the ta payer fes no return.
(Rev. Stat., secton 3176, U. S. C, Tte 26, secton 97 Revenue ct 1918, sec-
ton 250(c).) The mere fact that, n the absence of any nformaton, the
Commssoner mght be compeed to assess the ta on the bass of the ta -
payer s estmate does not transform that smpe estmate of the amount of
the ta nto the detaed return of the tems of gross ncome, deducton, and
credts requred by the ct. orm 1031T was ony a forma substtute for the
smpe etter orgnay panned, remttng payment and requestng an e tenson.
That t was caed tentatve return s of no sgnfcance. It was termed aso
stmate of corporaton ncome and profts ta es and request for e tenson of
tme for fng return.
It has been sad that the Government Is assumng an nconsstent and
unconsconabe atttude. ut there s nothng nconsstent or unconsconabe
n ts poston. The Commssoner dd not represent that the date of fng
orm 1031T woud be treated as the begnnng of the perod of mtaton.
nd t s not cear that he had the power to shorten the perod prescrbed
by the statute. The Government has not treated orm 1031T for any pur-
pose as the return requred by the ct. The tentatve return was confessedy
a nove devce. It mposed no hardshp on ta payers. Indeed, It enabed
them to save the nterest charge whch otherwse woud have attended an
e tenson of tme to fe the return and pay the frst Instament. Notce
of the Commssoner s ntenton to assess defcences n stated amounts was
gven to the corporatons much before March 15, 1925. The deay n the assess-
ments past that date was due to negotatons wth the Commssoner whch
resuted n the reducton of those amounts to ess than haf |n the one case
and to about one-s th n the other. The corporatons are n no poston
to compan of the Government s acton.
Second. The cam that, even f the assessment was tmey, the coecton
was barred, depends upon the effect of the Income and profts ta waver
and the appcabty of the Revenue cts of 1924 and 1926. s prevousy
stated, both corporatons and the Commssoner e ecuted ths nstrument pur-
suant to secton 250(d) of the 1921 ct, pror to March 15, 1924, and consented
to the determnaton, assessment, and coecton of the ta , ths waver
to be n effect for one year after the e praton of the statutory perod of
mtaton. Under the 1921 ct, secton 250(d), ths perod was fve years
after the return was fed. The Revenue cts of 1924 and 1926 e tended the
perod for coecton to s years after the date of assessment ( une 2, 1924,
oh. 234, secton 278(d), 43 Stat., 253, 300 eb. 26, 1926, ch. 27, secton 278(d),
44 Stat., 9, 59). In both cases proceedngs for coecton of the ta were
begun more than s years after ether the tentatve or the compete returns
were fed, but ess than s years after the assessments were made. In the
orshem case, coecton was effected In 1925 n the ood case, n 1926,
after the passage of the 1926 ct.
The Government contends that the ncome and profts ta wavers e ecuted
by the corporatons were wavers by them of the statutory perod for another
year that whe these wavers were st n force and whe the corporatons
abty was thus st ave, the Revenue cts of 1924 and 1926 were passed,
ncreasng the perod for coecton to s years after assessment that these
cts are appcabe to the cases at bar and that, snce the coectons were
made wthn s years after the assessments, they were tmey made. The
corporatons nsst that the wavers were not merey wavers e tendng
the statutory perod, but were bndng contracts whch mted the tme n
whch the Commssoner coud assess and coect the ta es and that no
change n the aw made after the (ate of the contracts and enargng the
tme for coecton can affect ther rghts. They urge that the 1924 and 1926
cts dd not purport to e tend the perods thus mted by contract and that,
f construed as e tendng such perods, the provsons of these cts are uncon-
sttutona. They concede that, n the absence of contract, a egsature may
consttutonay engthen or shorten the perod n whch a rght may be enforced
by ega proceedngs.
We are of opnon that the contenton of the Government must preva. The
wavers e ecuted by the partes were not contracts bndng the Commssoner not
to make the assessments and coectons after the perods specfed. t the
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265
277 and 278, rt. 1272.
tme when the wavers were e ecuted, the Commssoner was wthout power
under the statute to assess or coect the ta es after the statutory perod, as e -
tended by the wavers. promse by the Commssoner not to do what by the
statute e was precuded from dong woud have been of no sgnfcance. The
wavers do not purport to contan such a promse. ( ank of Commerce v. Rose,
26 . (2d), 365, 366 T. D. 4207, C. . II-2, 2071 Greyock Ms v. Comms-
soner, 31 . (2d), 655, 657 Ct. I). 98, C. . III-2, 253 .) nd, obvousy,
the Commssoner dd not undertake to mt the power of Congress to e tend the
perod, of mtatons, as consderaton for the wavers. The nstruments were
nothng more than what they were termed on ther face wavers and that was
a to whch the Commssoner was authorzed to consent.
Stress s ad on the use of the words agree and agreement n the cts
and reguatons. ut these are ordnary words havng no technca sgnf-
cance. It s aso urged that, uness a contract was ntended, there s no reason
why the consent of the Commssoner shoud have been requred. ut an other-
wse pan meanng shoud not be dstorted merey for the sake of fndng a
purpose for ths admnstratve requrement. If a reason must be found, t
e sts n the genera desrabty of the requrement as an admnstratve matter.
It serves to keep the Commssoner n coser touch wth the matters whch he s
charged to admnster. It avods cams of mprovdent e ecuton of wavers
and unauthorzed e actons by subordnates of the Department for the purpose
of curng ther own denquences. nd t provdes a forma procedure whch
s generay desrabe for the Commssoner, coectors, and subordnates n the
Department. That other means mght have been devsed for the same purpose
s of no sgnfcance.
The queston as to the appcabty of the ater cts may be brefy dsposed
of. Secton 1100 of the Revenue ct of 1924 repeaed the 1921 ct. Secton
277(a)2 of the 1924 ct e pressy deat wth ta es due under the cts of 1918
and 1921 and t reenacted the 5-year mtaton wt the e press quafcaton
cept as provded n secton 278. Secton 278(c) reenacted the provson
as to e tenson of tme by the consent of the Commssoner and the ta payer
and consttuted the soe statutory authorty for the waver of the perod of
mtaton for ta es due under the 1918 and 1921 cts. It unquestonaby apped
to wavers thereafter to be e ecuted and no reason appears why t dd not
equay appy to wavers e ecuted pror to the passage of the ct Secton
278(d) prescrbed the perod of mtaton for the coecton of ta es appcabe
to a cases enumerated n that secton and secton 277, whch e pressy ncuded
ta es under the ct of 1918. The stuatons ntended to be e cuded from the
mtatons prescrbed were carefuy specfed n secton 278(e) : (1) ssess-
ments or coectons aready barred before the passage of that ct and (2)
assessments made and proceedngs begun pror to that tme. Nether of the
cases at bar fas wthn those e ceptons. Snce, n both cases, assessment and
coecton were not barred on the enactment of the 1924 ct, and were made
after that date, the secton s appcabe. Compare Russe v. Unted States
(278 U. S., 181 T. D. 4260, C. . III-1, 206 ).
It s urged that thS constructon of the cts causes dscrmnaton aganst
ta payers who obgngy consented to addtona tme for assessment and
coecton and n favor of those who obduratey refused such consent or whose
returns were not audted pror to the bar of the statute for the purpose of
assessng defcences. That ta payers whose returns ed to no suspcon of
naccuracy pror to the e praton of the statutory perod are n a preferabe
poston s due not to any un|ust dscrmnaton contaned n the 1924 or 1926
cts, but to the quaty of ther returns and to proptous crcumstances. or
the dsobgng ta payers, the cts provded an aternatve remedy n the so-
caed eopardy assessment and demand (1924, secton 274(d), 43 Stat., 297
1926, secton 279, 44 Stat., 59). It s urged aso that the Government may not
propery and consstenty accept the consent contaned n the wavers and
not be bound by the mtaton. ut the mtaton was ony on the corpora-
tons consent and the Government was bound thereby. The nstruments con-
taned nothng, however, whch coud restrct the Government s power to en-
arge the statutory provsons as to mtaton. The tmeness of the coec-
ton s based not upon the wavers, but upon the statutes.
No. 118 affrmed.
No. 414 reversed.
4090 30 18
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201, rt. 1541. 2GC
INCOM T RULINGS. P RT I .
R NU CT O 1921 OR PRIOR R NU CTS.
TITL II. INCOM T .
P RT I. G N R L PRO ISIONS.
S CTION 201. DI ID NDS.
rtce 1541: Dvdends. I -9-4546
( so Secton 213(a), rtce 53.) Ct. D. 153
INCOM T R NU CTS O 1916 ND 1918 D CISION O COORT.
1. Dvdend Constructve Recept Profts Credted.
Where, wthout a forma decaraton of a dvdend, profts of a
corporaton accumuated snce ebruary 28, 1913, are credted on
the books of the corporaton to the accounts of the stockhoders,
but not e acty n proporton to ther respectve stock nterests,
and are unquafedy sub|ect to the demands of the stockhoders,
the profts so credted consttute ta abe dvdends to the stock-
hoders under the Revenue cts of 191C and 1918 n amounts pro-
portonate to ther respectve stock hodngs as determned by he
Commssoner and are constructvey receved when credted.
2. Decson ffrmed.
The decson of the Unted States oard of Ta ppeas (6 .
T. ., 1031) affrmed.
Court of ppeas of the Dstrct of Coumba. No. 4829.
heo . a4cy v. C mm.soner of Interna Revenue.
ppea from the oard of Ta ppeas.
December 2, 1929.
OPLNION.
an Orsde, ssocate ustce: Ths appea s from the decson of the
Unted States oard of Ta ppeas, affrmng the acton of the Commssoner
of Interna Revenue, hodng appeant, a stockhoder of the adey-Dean Gass
Co., abe for ta aton on a porton of the earnngs of the company for the
years 1917 and 1918, whch were set asde to the credt of the appeant on
the books of the corporaton.
It appears that the adey-Denn Gass Co., a Mssour corporaton. Is en-
gaged n the manufacture and sae of pate and wndow gass. The stock-
hoders wth ther respectve shares are as foows: Owen M. Dean, 105 shares
Leo G. adey, 94 shares: George G. effernan, 1 share.
It was the custom of the corporaton up to 1910 to decare dvdends to the
stockhoders. rom 1910 to 191S, ncusve, no e press decaratons of dvdends
were made by the board of drectors. effernan was pad 1/200 of the net
earnngs and the baance of the earnngs were credted one-haf to the account
of Dean and one-haf to the account of appeant, adey.
The credts for 1916 were entered to appeant s account on anuary 2, 1917
and the credts for the year 1917 were entered on hs account on anuary 2.1918.
Return thereon was made for the ta abe years 1917 and 1918, respectvey.
Whe the credts to adey wth 94 shares and Dean wth 105 shares were
equa, the Commssoner ta ed appeant adey onv wth respect to hs pro-
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267
201, rt. 1541.
portonate share of the earnngs, based upon the actua amount of stock owned
for the years 1917 and 1918.
The evdence dscoses that whe there was no forma decaraton of dv-
dends ap ennt s share of the corporate earnngs were credted to hs account,
to whch saares, rents, nterest, and other tems due hm by the corporaton
were kewse credted and he had authorty to draw, and dd draw, nds-
crmnatey, aganst the tota sum standng to hs credt. Whe t s true that
appeant dd not, durng ether year n queston, wthdraw a the earnngs
whch were credted to hm, but eft the baance standng to hs credt to be
used n the busness of the corporaton, the fact remans that the whoe account
was unquafedy sub|ect to hs demand and under hs domnum.
ppeant contends that nether the amounts credted to hm as stockhoder
are dvdends, nor can they be construed as dvdends ether under the genera
aw as apped to corporatons, or the specfc defnton of dvdends found n
the Revenue ct of 1918.
Secton 201(a) of the Revenue ct of 1918 (40 Stat., 1057) defnes a dvdend
as foows:
That the term dvdend when used n ths tte means (1)
any dstrbuton made by a corporaton, other than a persona servce corpora-
ton, to ts sharehoders or members, whether n cash or n other property or n
stock of the corporaton, out of ts earnngs or profts accumuated snce
ebruary 28, 1913.
It s eementary that the mere decaraton of a dvdend does not consttute
ether a dvdend or a dstrbuton. efore there can be a dvdend there must
be a decaraton of such by the proper offcers and funds set asde for ts
payment. It then becomes the property of the stockhoder to the e tent that
he may mantan an acton aganst the corporaton for ts recovery. Whe
there was no decaraton of a dvdend n ths case, there was a determnaton
of the amount of profts or earnngs to whch the respectve stockhoders were
entted. One stockhoder was pad hs share n cash. The shares of the
others were credted to ther respectve accounts on the books of the corporaton
n such a manner as to brng the fund wthn the absoute and unquafed
domnum and contro of the stockhoder. Whe, techncay speakng, ths
woud not amount to the decaraton of a dvdend, t woud amount to a ds-
trbuton of the assets n such a manner that the theory of corporate entty
s not affected or dsregarded, snce t s setted aw that the dvson of
profts of a corporaton among ts stockhoders amounts to a constructve
dvdend, whether t s ntended by the drectors or stockhoders to consttute
a dvdend or not (Chattanooga Savngs ank v. rewer, 17 ed. (2d), 79.
Certorar dened, 274 U. S., 751.)
In the Chattanooga case the capta stock was owned by two stockhoders,
who, durng the year 1920, wthdrew funds from the busness wthout corporate
acton, chargng the wthdrawas to themseves on the books. The fna wth-
drawas of November 9, 1920, brought the totas for the year nto e act pro-
portons to the respectve nterest of the stockhoders n the corporaton. Wth
the apparent ntenton of curng the defect by correcton of the corporate
records, the drectors on uy 14, 1921, formery decared a dvdend n an
amount equa to the combned wthdrawas of the two stockhoders for the
precedng year, credtng t to ther respectve accounts.
ta was assessed aganst one of the stockhoders for the year 1920 on
hs wthdrawas. The ta was pad, and ths acton was brought to recover.
The court, dsposng of the case, sad:
forma decaraton of the dvdend was not necessary. (Spencer v.
Lowe (C. C. .), 198 ., 691 Smth v. Moore (C. C. .), 199 ., 689.) ny
dstrbuton by the company to ts sharehoders, out of the earnngs or profts
accumuated snce ebruary 28, 1913, was a dvdend wthn the meanng of
secton 201(a) of the Revenue ct.
The ony respect n whch that case dffers from ths s that there the
e act proportonate amount was credted to each stockhoder whe here, after
the payment of the share to effernan, the baance was credted equay be-
tween the stockhoders. We thnk ths does not change the ega effect of the
transfer of the funds from the domnum and contro of the corporaton nto the
domnum and contro of the stockhoders, and the mere ad|ustment, for the
purposes of ta aton, of the proportonate amount of the earnngs to whch
adey was entted was wthn the genera supervsory contro of the Com-
mssoner n determnng the ta to be assessed.
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202, rt. 1561.
268
It does not ceary appear whether the ta payer rendered hs returns on a
cash or accrua hass, but we thnk ths s not matera, snce the mere credt
of hs account wth the earnngs consttuted an accrua. (Unted States v.
nderson, 269 U. S., 422 T. D. 3839, C. . -, 179 .) owever, accordng to
the practce of the Department, the amounts were constructvey receved when
credted. Under artce 4, paragraph 51, Treasury Reguatons 33, artce 53,
t s provded as foows:
Income whch s credted to the account of or set apart for a ta payer and
whch may be drawn upon by hm at any tme s sub|ect to ta for the year
durng whch so credted or set apart, athough not then actuay reduced to
possesson. To consttute recept n such a case the ncome must be credted
to the ta payer wthout, any substanta mtaton or restrcton as to the tme
or manner of payment or condton upon whch payment s to be made.
book entry, f made, shoud ndcate an absoute transfer from one account to
another. If the ncome s not credted, but s set apart, such ncome must
be unquafedy sub|ect to the demand of the ta payer. Ths ds-
tncton between recept and accrua must be kept n mnd. Income may
accrue to the ta payer and yet not be sub|ect to hs demand or capabe of
beng drawn on or aganst by hm.
Ceary, under ths rue, the earnngs set asde n the present case must
be construed as a recept nstead of an accrua, snce the share of the earn-
ngs beongng to the appeant was not ony paced to hs credt on the books
of the corporaton, but was brought unquafedy sub|ect to hs demand. It
was money avaabe for hs use as much as f t had been paced m hs bank
account sub|ect to cheek.
The decson of the oard s affrmed, wth costs.
Offce Decson 600 (C. . 3. 46), hodng that a ta payer n deter-
mnng the gan arsng from the sae of hs persona resdence,
contnuousy occuped by hm as such, s not requred to reduce the
cost of the property or ts far market vaue as at March 1, 1913, by
the deprecaton sustaned, s revoked, n vew of the Commssoner s
nonacquescence n the decson of the oard of Ta ppeas n
W. . rooks v. Commssoner (12 . T. ., 31) (see on page 62),
rtce 1561: ass for determnng gan or I -5 4521
oss from sae. Ct. D. 149
ncome ta revenue act of 1918 decson of court.
1. Gan Sae Stock of ffated Corporaton Cost.
Where the entre capta stock of an affated corporaton whch
was purchased by the parent company subsequent to ebruary 28,
1913, s sod by t to outsde nterests at a prce n e cess of ts
cost, ta abe gan resuts. In determnng the cost of such stock
the earnngs of the subsdary accumuated durng the perod
ts stock was owned by the pare|t company may not be taken nto
account as addtons to the cost.
2. Decson Reversed.
The decson of the Unted States oard of Ta ppeas (11
. T. ., 773) reversed.
S CTION 202. SIS OR D T RMINING
G IN OR LOSS.
rtce 1561: ass for determnng gan or
oss from sae.
R NU CT O 1918.
I -1-4492
I. T. 2516
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269
202, rt. 1561.
Unted States Crcut Court of ppeas fob the Second Crcut.
Remngton Rand, Inc., v. Commssoner of Interna Revenue.
Commssoner of Interna Revenue v. Remngton Rand, Inc.
ppeas from the Unted States oard of Ta ppeas.
une 3, 1929.1
OPINION.
oth the ta payer and the Commssoner have fed pettons to revew an
order of the oard of Ta ppeas redetermnng a defcency n ncome and
profts ta es for the year 1920 n the sum of 10,509.01. Reversed on Comms-
soner s petton ta payer s petton dsmssed.
Remngton Rand, Inc., s a Deaware corporaton whch has assumed, pur-
suant to secton 280 of the Revenue ct of 1926 (44 Stat., 61), a ta abtes
of nker- awter Co., a Mchgan corporaton. The ta n dspute arses out
of transactons of the atter corporaton. aker- avvter Co. (referred to here-
after as the parent company) purchased on March 1, 1916, a the capta stock
of Commerca Statonery Loose Leaf Co., an Inos corporaton (referred
to hereafter as the subsdary company), for the prce of 45,000. On ebruary
28, 1920, the parent company sod the stock of ts subsdary for 60,000.
On that date the subsdary s books showed net profts of 28,454.35 made be-
tween March 1, 1916, and ebruary 28, 1920, a of whch had been renvested
n ts busness, so that the book vaue of ts stock at the date of sae
was greater by ths amount than t was at the date when the parent company
purchased t. rom anuary 1, 1918, down to the date of sae the two corpora-
tons were affated wthn the meanng of secton 240 of the Revenue ct of
1918 and consodated returns were fed for the caendar years 1918 and 1919
and for the frst two months of 1920. or the ast 10 months of 1920 separate
returns were requred, affaton havng ceased wth the sae of the stock. The
Commssoner determned that the parent company reazed a proft of 15,000
upon the sae and assessed a defcency ta accordngy. The ta payer con-
tended that nstead of ncurrng any gan the parent company sustaned a oss
of 13,454.35, on the theory that the accumuated profts shoud be added to
the orgna cost of the stock, makng a tota cost of 73,454.35. Upon the ta -
payer s petton to redetermne the ta the oard of Ta ppeas hed that
the parent company nether derved ncome nor sustaned oss. Ths resuted
In the order whch both partes seek to revew. The oard s opnon s re-
ported n 11 . T. ., 773.
Swan, Crcut udge: It s unnecessary to demonstrate by specfc reference
to the provsons of the Revenue ct of 1918 (40 Stat., 1057) that generay
gans from saes made wthn the ta year must be ncuded n ta abe ncome
and that osses on saes may be deducted from gross ncome. If an ndvdua
ta payer had purchased the stock of ths subsdary company for 45,000 n
1917 and had sod t n 1920 for 60,000, he woud have derved a ta abe gan
of 15,000 n the atter year and the fact that durng hs perod of ownershp
the corporaton had accumuated net profts whch were renvested n ts bus-
ness woud pay no part n determnng whether gan or oss resuted from the
sae. The same rue woud appy to a corporate owner of shares of stock n a
nonaffated corporaton. ( ppea of armers Depost Nat. ank. 5 . T. .,
520, 522 a|/s v. Oauey Mt. Coa Co., 247 U. S., 189.) In the nstant case,
however, the oard of Ta ppeas hed that nether gan nor oss resuted
from the sae, because the corporate owner of the stock and the corporaton
whch ssued It were affated wthn the meanng of secton 240 of the Revenue
ct. Its opnon foows aker- awter Co. v. Commssoner (7 . T. ., 594),
where t was sad, at page 598:
We have hed n armers Depost Natona ank (5 . T. ., 520) that a
sae by one member of an affated group of shares of capta stock owned by t
n another member of the group s a sae by the affated group of Its own
capta stock and that such sae consttutes a capta transacton whch does
not resut n ether a ta abe gan or a deductbe oss.
The prncpe thus announced s chaenged by both pettoners and presents
the frst queston for our decson.
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202, rt. 1561.
270
The theory and purposes of affaton have been e paned n the Treasury
reguatons (Reg. 45, art. 631) and have recenty been commented u m by ths
court. (Ice Servce Co. v. Commssoner, 30 . (2d), 230 Commssoner v.
doph rsoh f Co., 30 . (2d), 645 Ct. D. 66, C. . 1I1-1, 207 .) We can
not ud n the etter of secton 240, nor n the theory whch underes ths egs-
aton, anythng whch requres that gans or osses be dsregarded when stock
s sod to outsders by a corporate owner affated wth the corporaton whch
Issued the stock. Such a sae termnates the affaton whch had resuted
from ts purchase. oth the purchase and the sae took pace outsde the perod
of affaton and were made by the seer for ts own account, not for the
account of the affated group as much so, we thnk, as f the parent company
had purchased ackacre before the affaton began and bad sod t after the
affaton ceased. We can not agree that the transacton was the same as the
purchase and sae by a corporaton of ts own shares, even f t be conceded that
deangs by a corporaton n ts own shares gve rse to nether ta abe proft
nor deductbe oss, as was hed n ppea of Smmons fc ammond Mfg. Co.
(1 . T. ., 803). In decdng the aker- awter case the oard reed upon
ts pror decsons n ppea of armers Depost Nat. ank, supra, and ppea
of II. S. Crocker Co. (5 . T. ., 537). n each of these cases t was assumed
that the sae dd not dsturb the e stng affaton durng the ta year under
consderaton. In Utca nttng Co. v. Unted Staes Ct. D. 120, O. .
III-2, 352 (reported n Unted States Day, May 29, 1929), the Court of
Cams nterpreted these cases as hodng that the Commssoner coud not ta
as ncome the gan on ntercompany transactons. Whatever may be the rue
where affaton contnues after the sae, under the facts of the nstant case we
thnk the oard erred In rung that nether ta abe gan nor deductbe oss
resuted to the parent company from the sae of the stock.
Conceded) a gan of 15,000 was reazed, uness the parent company may
take nto account us addtona cost of the stock the subsdary s accumuated
earnngs of 28,454.35. It s argued that the parent company coud have had ts
subsdary decare ts net profts as dvdends, wthout sub|ectng the parent
company to any ta by reason of secton 234(a)6 and that t coud then
have nvested such dvdends n the busness of the subsdary, n whch event
they woud be treated as an addton to the prce pad for the stock (Regua-
tons 45, artce 543). In other words, we are urged to hod that the accumua-
ton of earnngs by the subsdary was a constructve recept of dvdends and
renvestment of them by the parent company. ut the same argument coud
be made wth equa force n respect to an ndvdua or corporate owner of
stock suffcent n amount to contro the board of drectors of the subsdary
yet nsuffcent to resut n affaton. Ta abtes must be determned by
what n fact was done. See Unted States v. Phes (257 U. S., 156. 172
T. D. 3270. C. . 5. 37 ). The fact s that no decaraton of dvdends and no
renvestment of them has occurred n ether case, and t woud seem unreason-
abe to accept the theory of constructve recept and nvestment n the one
case but not n the other. Where affaton s absent, no one doubts that the
theory woud be re|ected to accept t woud contradct the theory of sner v.
Maoomber (252 U. S., 189 T. . 3010. 0. . 3. 25 ).
gan, t s urged that a faure to treat the accumuated earnngs as an add-
ton to the cost of the stock w produce the nequtabe resut of doube ta a-
ton, because the earnngs have aready been ta ed as ncome of the affated
group. ut doube ta aton of ths character w e st though there be no
affaton between the owner of the stock and the corporaton whch ssued t,
and s, as ponted out n emch v. Ieman (276 IT. S., 233, 237 T. D. 4217,
C. . II-2, 238 ), the ordnary ncdent of a proftabe sae of stock. We hod,
therefore, that the sae resuted n ta abe gan of 15,000.
The order of the oard was not detrmenta to the ta payer and ts petton
for revew s dsmssed. Upon the Commssoner s petton the order s reversed
and the cause remanded for assessment of a ta n conformty wth the vews
heren e pressed.
rtce 1561: ass for determnng pan or oss from sae.
R NU CT O 1921 ND PRIO R NU CTS.
Sae of persona resdence. (See I. T. 2533, page 129.)
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271
( 202, rt. 1661.
rtce 1561: ass for determnng gan or
oss from sae.
I -15-4599
Ct. D. 170
ncome ta revenue act of 1918 decson of court.
1. Income Sae Gan Cash and Rghts Receved as Con-
sderaton.
Where a stockhoder of a bank, whose assets and capta stock
are acqured by a trust company, receves for each share of bank
stock transferred by hm an amount n cash together wth the rght
to buy four shares of the trust company, the transacton s a sae
under the provsons of secton 202(a) of the Revenue ct of 1918
and the far market vaue of the rght to subscrbe for the stock
shoud be ncuded n determnng the gan from the sae.
2. Decson ffrmed.
The decson of the Unted States oard of Ta ppeas (11 .
T. ., 057) affrmed.
ocard Moran v. Robert S. Lucas, Con m soner of Interna Revenue. No.
4907.
ames . Shea v. Robert II. Lucas, Commssoner of Interna Revenue. No.
4908.
efore Mabtn, Chef ustce, and Ttou and an Oksde, ssocate ustces.
The decson heren appeaed from s reported n 11 . T. ., 057.
These appeas nvove certan ncome-ta defcences for the year 1919. The
cases are dentca n character.
On March 18, 1919, a contract was e ecuted, and afterwards carred nto
effect, whereby the mercan Securty Trust Co., a Dstrct of Coumba
corporaton, acqured the assets and outstandng capta stock of the ome
Savngs ank, Inc., and assumed a obgatons of the bank other than ts
abty to stockhoders. The stockhoders of the ome Savngs ank receved
400 per share for ther stock, together wth the rght to buy 4 shares of the
capta stock of the mercan Securty Trust Co. at the prce of . 100 a shore,
for each share of stock n the ome Savngs ank transferred by them under
the contract.
It appears by competent and convncng evdence that at the tme of ths
transacton the stock of the mercan Securty Trust Co. possessed a far
market vaue of 220 a share. In practca effect, therefore, the owner of a
share of stock In the ome Savngs ank receved 400 n cash for each share
of stock transferred by hm, and became entted to convert the 400 thus
receved nto 4 shares of the stock of the mercan Securty Trust Co., havng
at the tme an aggregate far market vaue of 880. The modus operand thus
pursued was nduced by certan restrctons prescrbed by the aws reatng to
corporatons n the Dstrct of Coumba. owever, t was manfesty con-
tempated by the contract that the vendor of each share of stock woud ava
hmsef of the rght to secure n payment thereof the stpuated shares of stock
n the other corporaton havng a vaue of 880, nstead of restng satsfed wth
400 n cash.
t the tme of ths transacton the appeant Moran was the owner of 10
shares of the capta stock of the ome Savngs ank, and the appeant Shea
was at the same tme the owner of 29 shares of .smar stock, a of whch were
transferred under the contract. In ther ncome-ta returns for the year
1919 the appeants computed the prce receved for ther stock as ony 400
a share, and gnored the vaue represented by the rght to buy 4 shares of
stock of the mercan Securty Trust Co. at a prce 120 a share ess than
the far market vaue thereof at the tme,
Coubt of ppeas of the Dstrct of Coumba.
ppeas from the Unted States oard of Ta ppeas.
December 2, 1029.
OPINION.
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202, rt. 1562.
272
Upon consderaton of the returns the Commssoner hed that the transacton
n queston was an e change of stock, and determned a defcency n respect
to the return. The ssue was then appeaed to the oard of Ta ppeas.
The oard hed that the dsposton of stock by the appeants under the cr-
cumstances consttuted a sae thereof under the provsons of secton 202(a)
of the Revenue ct of 1918, and that n computng the prce receved for
ther stock the appeants shoud have ncuded theren the far market vaue
of the rght to subscrbe for the stock of the mercan Securty Trust Co.,
whch was granted to them by the contract. The oard hed that under the
crcumstances the far market vaue of that rght was 120 a share, and
therefore that the prce receved by appeants for each share of stock sod
by them was 400, pus 480 as the vaue of the subscrpton rghts, makng
a tota actua prce of 880 per share. The oard entered a redetermnaton
accordngy, and ths appea was taken therefrom.
ppeants contend that the subscrpton rght was not transferabe and
therefore had no market vaue. We do not agree wth ths vew, for t does
not appear that the rght, when matured, was not transferabe, and n any
event t was a property rght whch permtted the hoder of each share of
stock to buy for 100 a securty havng a present market vaue of 220. It
may be noted that the appeants n fact avaed themseves of ths rght,
and that t was a substanta part of the consderaton whch nduced them
to part wth ther orgna hodngs.
It s argued by appeants that the subscrpton rght amounts to no more
than a stock dvdend and s not ta abe as a gan, under the prncpe an-
nounced n Towne v. sner (245 U. S., 418). Ths vew s not tenabe. In that
case the Supreme Court hed that a stock dvdend representng merey surpus
profts transferred to the capta account of the corporaton was not ta abe
as ncome. The court sad: stock dvdend reay takes nothng from the
property of the corporaton, and adds nothng to the nterests of the share-
hoders. Its property s not dmnshed, and ther nterests are not ncreased.
In the present case, however, the appeants receved as part consderaton for
the sae of ther stock n one corporaton a proftabe rght to buy stock n a
dfferent corporaton. Ths rght certany added to the nterests of the
stockhoders. The present case comes wthn the rue announced n Pcabody
v. sner (247 U. S., 347) Unted States v. Phete (257 U. 8., 156 T. D. 3270.
C. . 5, 37 ) : Rockefeer v. Unted States (257 U. S., 176 T. D. 3271, C. .
5, 34 ) Cuman v. Waker (262 U. S., 134 T. D. 3508, C. . II-2, 551 ) and
Marr v. Unted States (2(58 U. S., 536, 539 T. D. 3755, C. . I -2, 116 ).
The appeants contend that the subscrpton rght can not represent any ta -
abe ncome unt a sae s made of the stock purchased under ts terms. It s
argued that unt a sae s made the vaue of the stock thus secured can not be
defntey ascertaned, nor determnaton made of the oss or proft resutng
therefrom. We thnk, however, that the queston s one of present vaue, and
the prce reazed on actua saes made n the usua and customary manner s
admssbe to f such vaue. See ppeas of . . Sau et a. (4 . T. ., 639),
nvovng the same transacton as ths, but wth other stockhoders as partes.
The decson appeaed from s accordngy affrmed, wth costs.
rtce 1562: Sae of property acqured by gft I -13 o79
after December 31, 1920. Ct. D. 163
INCOM T R NU CT O 1921 D CISION O SUPR M COURT.
Income Sae Gft fter December 31, 1920 Retroactvty
Consttutonaty.
Secton 202(a)2 of the Revenue ct of 1921, whch provdes that
the bass for ascertanng gan from a sae of property acqured
by gft after December 31, 1920, sha be the same as that whch t
woud have n the hands of the donor or the ast precedng owner
by whom t was not acqured by gft, s appcabe where the sae
s effected n 1921 before the enactment of that ct, and as so con-
strued the secton s consttutona.
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202, rt. 1562.
Supreme Cot|bt of the Unted States.
nta . Cooper, Pettoner, v. The Unted States.
On wrt of certorar to the Court of Cams.
ebruary 24, 1930.
OPINION.
Mr. ustce McReynods devered the opnon of the court.
Pettoner pad ncome ta es assessed accordng to her return for the caendar
year 1921 thereafter, by sut n the Court of Cams, she sought to recover
a porton of the same ( 8,474.90), wth nterest, whch she aeged had been
mpropery e acted.
er return showed 36,670 as gan derved from the sae of 380 shares of
bank stock sod November 7, 1921. at 210 per share. She acqured ths stock
November 1, 1921, by gft from her husband. On that day ts far market vaue
was 210 per share n 1918 t cost her husband 113.50 per share.
The chaenged assessment was made under secton 202(a)2, Revenue ct,
November 23, 1921, effectve (sec. 2C3) anuary 1, 1921. (Ch. 136, 42 Stat.,
227, 229.)
Sec. 202. (a) That the bass for ascertanng the gan derved or oss sus-
taned from a sae or other dsposton of property, rea, persona, or m ed,
acqured after ebruary 28, 1913, sha be the cost of such property e cept
that
(2) In the case of such property, acqured by gft after December 31, 1920,
the bass sha be the same as that whch t woud have n the hands of the
donor or the ast precedng owner by whom t was not acqured by gft.
In the case of such property acqured by gft on or before December 31, 1920.
the bass for ascertanng gan or oss from a sae or other dsposton thereof
sha be the far market prce or vaue of such property at the tme of such
acquston.
The Court of Cams decded aganst the pettoner and the cause s here
upon certorar. She mantans
rst, that secton 202(a)2 shoud not be construed as appcabe to trans-
actons fuy competed before enactment of the statute. Second, that f con-
strued to appy where both gft and sae were consummated before such
enactment the secton s arbtrary and caprcous and, therefore, nvad unde
the due process cause of the ffth amendment.
To support the frst pont, Shwab v. Doye (258 U. S., 529 T. D. 3339, C. R
1-2, 312 ) s cted: for the second, Nchos v. Coodae (274 U. S., 531 T. D.
4072, C. . I-2, 3511), odgett v. oden (275 U. S. 142 T. D. 4117, C. R.
II-1, 324 ), Untennyer v. nderson (276 U. S., 440 T. D. 4157, C. R. II-1,
326 ), are reed upon.
We thnk the purpose of Congress to appy the provsons of secton 202(a)2
to the transacton here nvoved s cear. Shwab v. Doye grew out of the
Revenue ct of September 8, 1916. There, after consderng the reevant
crcumstances, we decared there was no ntenton to gve retroactve effect
to the enactment. ere, the contrary desgn s not doubtfu.
The power of Congress to ta as part of a donee s ncome the dfference
between what the gft cost the donor and the prce receved therefor when
sod by the donee was affrmed n Taft v. owers (278 U. S., 470 Ct. D. 49,
C. . III-1, 220 ), and s not now dened.
That the questoned provson can not be decared n confct wth the
edera Consttuton merey because t requres gans from pror but recent
transactons to be treated as part of the ta payer s gross ncome has not been
open to serous doubt snce ru haber v. Unon Pacfc R. R. (240 U. S., 1) and
Lynch v. ornby (247 U. S., 339).
Nchos v. Coodae (274 U. S., 531) hed arbtrary and caprcous a statute
whch requred e ecutors to pay an e cse ostensby ad upon the transfer
of property by death, but reckoned upon ts vaue pus the vaue of other
property conveyed by the decedent before the enactment n entre good fath
and wthout contempaton of death, and sad that to enforce t woud amount
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274
to confscaton. odgett v. odcn (275 U. S., 142) and Urtermycr v. nder-
son (270 U. S., 440) consdered the vadty of an enactment whch ad a ta
upon donors because of Rfts fuy consummated pror to ts passage. We hed
ths was beyond the power of Congress. None of these cases s n pont they
save no consderaton to the power of Congress to requre that ta abe ncome
shoud ncude profts from transactons consummated wthn the year.
We can fnd nothng unusua, arbtrary, or caprcous n the provson of
the ta ng ct here nvoved, and the |udgment of the court beow must be
affrmed.
rtce 1563: Sae of property acqured by I -5-4520
gft on or before December 31, 1920, or by Ct. D. 14S
bequest, devse, or nhertance.
INCOM T R NU CTS O 1918 ND 1921 D CISION O SUPR M
COURT.
1. Gan or Loss ass Property cqured by equest.
egatee under a w acqures property wthn the meanng of
secton 202(a)2 of the Revenue ct of 1918 and secton 202(a)S of
the Revenue ct of 1921 at the date of the testator s death, uud the
bass provded by those sectons n ascertanng proft or oss on the
sae of the property s ts far market vaue at that tme, when the
death occurs on or after March 1, 1913, and not ts vaue at the date
of dstrbuton.
2. udgment ffrmed.
The |udement of the Crcut Court of ppeas for the Second
Crcut (30 ed. (2d), 004 (Ct. D. 50 C. . III-1. 229 ))
affrmed.
Supreme Court of the Unted States.
. rankn rewster, pettoner, v. ert P. Gage, Coector of Interna Revenue.
On wrt of certorar to the Crcut Court of ppeas for the Second Crcut.
anuary 6, 1930.
OPINION.
Mr. ustce uter devered the opnon of the court.
Pettoner s father ded testate May 20, 1918. The surrogate s court nt
Rochester, N. Y.. ente-ed a fna decree pr 19, 1920, pursuant to whch cer-
tan stocks were dstrbuted to the pettoner as one of the resduary egatees.
e sod some of them n 1920, 1921. and 1922. or hs ncome ta returns, he
computed proft or oss on each sae by comparng the seng prce of the stock
wth ts vaue at the date of the decree of dstrbuton and pad the amounts so
determned.
ut the Commssoner of Interna Revenue hed that the vaues of the stock
at the date of the testator s death shoud he taken for the cacuaton of ncome,
and on that bass assessed for each year an addtona ta , whch pettoner
pad under protest. e brought ths acton n the Dstrct Court for the
Western Dstrct of New York to recover the amounts so e acted. The court
gave |udgment for hm. (25 . (2d). 915.) The crcut, court of appea:-
reversed. (30 . (2d), 604 )
The ta es for 1920 are governed by the Revenue ct of 1918 (40 Stat.. 1057.
1000, 1065) and those for 1921 and 1922 by the ct of 1921 (42 Stat., 227, 22)
237). s defned n these aws, gross ncome ncudes gans derved from
saes of property but does not ncude the vaue of property acqured by bequest,
devse, or descent. (Sec. 213.) Secton 202(a) n each ct provdes that for
the purpose of ascertanng the gan derved or oss sustaned from the sae
of property acqured on or after March 1, 1913, the bass sha he ts cost.
Ths provson s made more defnte n the ct of 1921 by subdvson (3).
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275
202, rt. 1563.
It provdes that, n case of property, acqured by bequest, devse, or n-
hertance, the bass sha be the far market prce or vaue of such property
at the tme of such acquston.- It s not suggested by ether party that ths
provson changed the aw or that the bass for computng the ta for 1920
under the earer ct s not the same as that appcabe for 1921 and 1922
under the ater ct. It s necessary to construe the word acqured and the
phrase at the tme of such acquston to determne whether the vaue of the
stock at the tme of testator s death or ts vaue on the date of the decree shoud
be used n the cacuaton.
Upon the death of the owner, tte to hs rea estate passes to hs hers or
devsees. dfferent rue appes to persona property. Tte to t does not
vest at once n hers or egatees. (Unted States v. ones, 236 U. S., 106, 112.)
ut mmedatey upon the death of the owner there vests n each of them the
rght to hs dstrbutve share of so much as sha reman after proper admn-
straton and the rght to have t devered upon entry of the decree of dstr-
buton. (Sander v. Soutter, 136 N. Y., 97 a v. a, 49 Conn., 52 Cook v.
McDowe, 52 N. . ., 351.)
Upon acceptance of the trust there vests n the admnstrators or e ecutors,
as of the date of the death, tte o a persona property beongng to the estate
t s taken, not for themseves, but n the rght of others for the proper ad-
mnstraton of the estate and for dstrbuton of the resdue. The decree of
dstrbuton confers no new rght t merey dentfes the property remanng,
evdences rght of possesson n the hers or egatees, and requres the admns-
trators or e ecutors to dever t to them. The ega tte so gven reates back
to the date of the death. ( oster v. fcd, 20 Pck., 67, 70 Wager v. Wager,
89 N. Y., 161. 166 Thompson v. Thomas, 30 Mss., 152, 158.)
Pettoner s rght ater to have hs share of the resdue vested mmedatey
upon testator s death. t that tme ettoner became enrched by ts worth,
whch was drecty reated to and woud ncrease or decne correspondngy
wth the vaue of the property. nd. notwthstandng the postponement of
transfer of the ega tte to hm. Congress unquestonaby had power and
reasonaby mght f vaue at the tme tte passed from the decedent as the
bass for determnng gan or oss upon sae of the rght or of the property
before or after the decree of dstrbuton. nd we thnk that n substance t
woud not be nconsstent wth the rues of aw governng the descent and ds-
trbuton of rea and persona property of decedents to construe the words n
queston to mean the date of death.
Undoubtedy the bass for the ascertanment of gan or oss on the sae of
rea estate by an her or devsee s ts vaue at the tme of decedent s death.
That s the tme of such acquston. The decree of dstrbuton necessary
s ater than, and has no defnte reaton to, the tme when the rea estate
passes. nd generay specfc bequests are handed over to the egatees soon
after the death of the testator and such property may be and often s sod by
thorn pror to the entry of the decree for fna dstrbuton. In such cases
gans or osses are to be cacuated under these cts on vaue at the tme of
death. No other bass s or reasonaby coud be suggested.
There s nothng n ether of the cts or n ther egsatve hstory to nd-
cate a purpose to estabsh two bases (1) vaue of rea estate and specfc
bequests at tme of death and (2) vaue of other property at date of decree.
The rue that ambgutes n ta aws are to be resoved n favor of ta payers
has no appcaton here because t s mpossbe to determne whch bass woud
mpose a greater burden. nd nether constructon s to be preferred on the
ground that the other woud rase serous queston as to consttutona vadty.
The generaty of the words used n both cts ndcates ntenton that the
vaue at the tme of death of the decedent was to be taken as the bass n
a cases.
The Revenue ct of 1918 and subsequent cts ta ed ncomes of estates durng
the perod of the admnstraton, ncudng profts on saes of property, and
such gans are cacuated on vaue at date of decedent s death. There appears
to be no reason why gans or osses to the estate shoud bo cacuated on one
bass and those to the resduary egatees on another.
Treasury reguatons under the Revenue cts n force between 1917 and 1928
decared that vaue at tme of the death of decedent shoud be taken as the bass
for ascertanng proft or oss from sae of property acqured by bequest or de-
scent snce ebruary 28, 1913. Reguatons 33, revsed, paragraph 44, promu-
gated wth reference to secton 2(a), Revenue ct of 1916, provded that n
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202, rt. 1563.
276
computng proft or gan upon property acqured by nhertance, the bass
shoud be apprased vaue at the tme of decedent s death. Reguatons 45.
artce 1562, promugated wth reference to secton 202 of the Revenue ct
of 1918, decared that for the purpose of determnng the proft or oss from
the sae of property acqured by bequest, devse or descent snce ebruary 28,
1913, ts vnue as apprased for the purpose of the edera estate ta
shoud be deemed to be ts far market vaue when acqured. nd vaue at
the tme of death s the bass of that apprasa. (Secton 402, 40 Stat.,
1097.) Reguatons 62, artce 1563, under the ct of 1921, are substantay
to the same effect as the earer reguatons.
These reguatons were prepared by the Department charged wth the duty of
enforcng the cts. The rue so estabshed s reasonabe and does no voence
to the etter or sprt of the provsons construed. reversa of that con-
structon woud be key to produce nconvenence and resut n nequaty. It
s the setted rue that the practca nterpretaton of an ambguous or doubtfu
statute that has been acted upon by offcas charged wth ts admnstraton w
not be dsturbed e cept for weghty reasons. (Logan v. Davs, 233 U. S., 613,
627 Maryand Casuaty Co. v. Unted States, 251 U. S., 342, 349 oen g v.
Washngton Co., 265 U. S., 322, 331.)
The meanng of acqured n secton 202(a) of the ct of 1918 was not
changed by and n conte t means the same as does the phrase tme of such
acquston n the correspondng provson of the ct of 1921. nd that
phrase was contnued n secton 204(a)5 of the Revenue cts of 1924 and 1926.
(43 Stat., 258 : 44 Stat., 14.) The reguatons promugated under that secton
are substantay the same as the earer reguatons. (Reguatons 65, artce
1594 Reguatons 69, artce 1594.)
The substanta reennctment n ater cts of the provson theretofore con-
strued by the Department s persuasve evdence of egsatve approva of the
reguaton. (Natona Lead Co. v. Unted States, 252 U. S., 140, 146 Unted
States v. ermanos y Compana, 209 U. S., 337, 339 Unted States v. G. atk t
ro., 204 T . S., 143, 152.) The subsequent egsaton confrmed and carred
forward the po cy evdenced by the earer enactments as nterpreted n the
reguatons promugated under them.
The Revenue ct of 1928, secton 113(a)5, e pressy estabshed vaue at the
tme of the death of the decedent as the bass of cacuaton n respect of saes
of persona property acqured by specfc bequest and of rea estate acqured
by genera or specfc devse or by ntestacy, and n a other cases f ed far
market vaue at the tme of dstrbuton to the ta payer as the bass. (45
Stat., 819.) The deberate seecton of anguage so dfferng from that used
n the earer cts ndcates that a change of aw was ntended. Ordnary,
statutes estabsh rues for the future, and they w not be apped retro-
spectvey uness that purpose pany appears. (Unted States v. Magnoa Co.,
276 U. S.. 160, 162 T. D. 4153. C. . I1-1, 287 and cases cted.) There s
no support for the suggeston that subdvson (5) e pressed the meanng, or was
ntended to govern or affect the constructon, of the earer statutes.
udgment affrmed.
rtce 1563: Sae of property acqured by I -19 4639
gft on or before December 31, 1920, or by Ct. D. 182
bequest, devse, or nhertance.
INCOM T R NU CT O 1921 D CISION O COURT.
Gan or Loss Sae of Stock and Rghts ass.
Where shares of stock are acqured by gft after ebruary 28,
1913, and before anuary 1, 1921, and the donee e ercses the rght
to subscrbe for new shares of the same stock, the bass n deter-
mnng gan or oss, under secton 202 of the Revenue ct of 1921,
from the sae of each share acqured by gft s the quotent of the
far market vaue of the shares when receved as a gft, pus the
subscrpton prce of the new shares of stock, dvded by the sum
of the number of the od shares and the number of new shares
covered by the rght.
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202, rt. 1563.
Unted States Dstrct Court, Dstrct of Connectcut.
Thomas eces and Geneveve ewes v. Robert O. aton, Coector of Interna
Revenue.
March 12, 1930.
opnon.
Thomas, Dstrct udge: Ths matter s here on defendant s demurrer to
the compant, whch sets forth the usua ta payer s acton to recover ncome
ta es aeged to have been egay assessed and pad under protest. The pro-
cedure adopted by the defendant n fng a demurrer to the compant foows
the course adopted and apparenty approved n Tovme v. Mc gott (274 ed.,
960 T. D. 3252, C. . 5, 43 ), so that the queston presented s whether
the Commssoner of Interna Revenue was authorzed by aw to appy to
the facts the provsons of artce 39, Reguatons 62, as amended by Treasury
Decson 3403 C. . 1-2, 64 .
The ncome ta return for the caendar year 1922 fed by Thomas ewes
was a |ont return wth hs wfe, Geneveve Chase ewes, and n ths |ont
return was set up the ta abe ncome of both persons.
In ugust, 1913, Mrs. ewes receved as a gft under a deed of trust e e-
cuted by her father n 1909, 200 shares of the capta stock of the artford
re Insurance Co. It s aeged by the pantffs and conceded by the defendant
that ths stock, at the tme t was receved, had a vaue of 695 per share.
In the year 1919 the company ssued to ts sharehoders the rght to subscrbe
for one new share of ts stock for each share then hed, at a cost of 150 per
share. Mrs. ewes e ercsed ths rght to subscrbe and acqured 200 new
shares, for whch she pad 30,000. In ebruary, 1922, she sod 125 shares
of the orgna 200 shares acqured n ugust, 1913, at appro matey 571
per share, makng devery from the orgna certfcate of stock. It s aeged
n the compant and reported n the |ont return, that by reason thereof she
suffered a oss of 124 a share, or 15,500, on the theory that the vaue of
the stock n 1913 was 695 and the sae prce n 1922 was 571 and the
dfference represented a oss per share. The amended compant, after averrng
that the net oss was 15,500, then aeges that the net ncome for 1922 from
a other sources was 12,402.66, so that there was a net defct for that year
of 2,869.85 resutng In no ta due.
Thereafter, the return of the pantffs havng been audted by the Treasury
Department, a ta of 2,894.35, wth nterest, was assessed aganst the pantffs
for the year 1922, and after the usua routne, the same was fnay pad under
protest. The compant further aeges that the Government determned that
the correct vaue of the stock sod, as of 1913, was 422.50 per share nstead
of 695 per share, whch vaue was arrved at by addng to the vaue of the
orgna 200 shares, vz, 139,000, the cost of the new 200 shares, vz, 30,000
resutng n a tota cost for the 400 shares of 169,000, or an average cost of
422.50 per share. Therefore, when the stock was sod for 571 per share the
dfference between 571 and 422.50 consttuted the proft per share, and upon
ths bass the Commssoner assessed the ta .
On the brefs of counse the queston s treated as one of aw and t s assumed
that there s no dspute as to the facts. It s further assumed that the ony
queston s whether the Commssoner of Interna Revenue apped a correct
theory of vauaton. It woud, perhaps, have been more approprate to brng
ths queston up on a stpuaton settng out an agreed statement of facts.
Ths refecton Is prompted by the somewhat atered poston taken by the
pantffs n ther amended compant. In ther orgna compant they de-
manded the return of the entre sum assessed aganst them. In ther amended
compant they offer the suggeston that f they are not entted to the entre
sum, they are, at east, entted to a dmnuton of the ta upon an appcaton of
a modfed theory of averages, and not of the theory adopted and apped n
the nstant case. owever, as the matter arses upon demurrer, I sha deter-
mne whether upon the facts presented by the pantffs the Commssoner of
Interna Revenue was |ustfed n hs methodoogy, and f so that dsposes of
the ssues before me.
The nstant ta was mposed under the provsons of the Revenue ct of
1921. Secton 202 of that ct provded that where property was acqured by
gft on or before December 31, 1920, and was subsequenty sod, then the bass
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278
for ascertanng a gan sha be the far market prce or vaue of such property
at the tme of such acquston. s aready noted, t s conceded that the far
market vaue of the stock acqured by Mrs. ewea at the tme of ts acquston
by her was 695 per share. She contends, therefore, that f she sod any part
of ths stock for ess than . 695 per share she must, perforce of the defnton
of the statute, have suffered a oss.
Regardess of the cases to whch we w hereafter advert, t seems to me that
the vce of ths reasonng es n the dentfcaton of the concept of shares
wth that of property. The statute does not speak of the vaue of sharps
acqured by gft, but t speaks of the vaue of property acqured by gft. Prop-
erty, dependng upon ts nature and form, of course, may be nfntey dvsbe.
It may be dvded, we w say, nto 30 shares at one tme and nto 60 shares at
a ater tme but the 30 shares of earer date w comprse no more n ther
tota vaue than the 60 shares of the ater date. If a part of the property s
sod, then the queston s what reaton does the part sod bear to the whoe
of the property acqured not how many shares or subdvsons are there n the
property.
s an e ampe, et us assume the acquston by some one, ether by purchase
or gft (and t s mmatera whch), of a pot of ground whch, at the tme :
acquston, was dvded nto 20 equa ots, each havng a present vaue of
5.0(10. Let us ne t assume that the ta payer subdvdes the same property
nto 40 ots and then ses one of these ots for 4,000. Let us further assume
that these ots are a of equa vaue and of the same sze. Coud t then be
argued that nasmuch as a ot was orgnay worth 5,000 on the date of ts
acquston and because a ot was sod for 4,000. that therefore the ta payer
suffered a oss of 1,000 upon such sae So, when a corporaton, nstead of
dstrbutng ts surpus n cash to ts sharehoders, ncreased ts captazaton
and dstrbutes shares of stock representng such ncrease of captazaton to
ts sharehoders, t does nothng more than subdvde ota. Of necessty there
must ensue a drop n the market prce of each separate share of stock, but such
a share no onger represents the same fracton of the tota ssued capta stock
that t formery dd. sharehoder does not suffer by ths decrease n the
vaue of undvded shares because the apparent oss n the vaue of the od stock
s counterbaanced by the accreton thereto of the vaue of the new stock. If.
therefore, a stockhoder ses a of the orgna ssue of stock, but retaub
a of the new ssue, he, n effect, ses ony a part of the stock whch had been
orgnay acqured by hm he does not se a of t. To say, however, that
ths sae of a part resuts n a oss because each share of stock n that part
ses at a prce ower than the prce at whch the arger orgna share was
bought, s to adopt a fcton as the bass of determnng a ta .
When the ta payer n the nstant ease sod 125 shares of the tota number
of shares hed by her, she sod of the property whch she had acqured by
gft and not thereof. In the absence of other crcumstances the bass, then,
of determnng whether or not she ncurred a gan or oss s to determne the
tota vaue of the stock acqured by gft, and then take St thereof. If the tota
amount reazed from the sae of -fs was arger than b of the vaue pror to
1920, then a gan resuted and not a oss.
ut nto the acquston of ths addtona 200 shares of stock a new cost
eement supervened. The addtona 200 shares were not ssued purey by way
of stock dvdend. n addtona 30,000 was nvested n order to secure these
shares. Ths 30,000 must therefore be added to the 139,000 of orgna vaue
not because the orgna vaue s to be determned by e pendtures made years
ater, but because t s a smpe way of workng out the accountng probem, for.
propery speakng, ths 30,000 was n the nature of an e pense for mantenance.
ad t not been e pended, then the ta payer woud not have been abe to acqure
the addtona 200 shares and the resut woud be that the ta payer woud then
n rea earnest have suffered a oss of amost haf the vaue of ths stock. The
rght to buy 200 addtona shares at 150 per share, whe ap earng n the guse
of a prvege, was, n reaty, an mperatve, for f the so-caed prvege was
not e ercsed and others avaed themseves of the rght to purchase the new-
stock at the prce gven, then the ta payer s hodngs woud have suffered
serous deprecaton n vaue.
Therefore the Commssoner of Interna Revenue was rght n addng 30,000
to the orgna vaue of 130,000 as the tota vaue of the stock, and then
dvdng ths sum by 400 the tota number of shares n order to arrve at the
orgna vaue of a snge share of stock n the form n whch t s now hed.
s acton s, I thnk, sustaned by the ogc of the stuaton as we as by the
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202, rt. 1564.
authorty of Mes v. Safe Depost Co. (259 U. S., 247), yer v. ar (25 ed.
(2 I), 534), and Tocne v. Mc Ugott, supra.
or the reason heren stated the demurrer s sustaned, and t s so ordered.
. RTcL 1564: change of property. I -9-4547
Ct. D. 155
INCOM T R NU CTS O 1918 ND 1928 D CISION O COURT.
1. Income change Reobganzaton Cobpobate ssets
Tbansferbed fob Stock.
Where a corporaton transfers to a newy formed corporaton a
part of ts assets n e change for a of the atter s capta stock
and dstrbutes the shares of the new corporaton pro rata among
ts stockhoders, the od corporaton derves ta abe gan, under
secton 202 of the Revenue ct of 1918, n the amount by whch
the far market vaue of the stock receved n e change e ceeds
the bass of the property transferred. Such a transacton s not a
reorganzaton wthn the meanng of secton 202(b) of that ct
whch resuts n nether gan nor oss.
2. Same ffaton- Intercompany Transacton.
Under the foregong facts the transacton s not an ntercompany
transacton between affated corporatons whch s requred to be
dsregarded for ncome ta purposes.
3. oard of Ta ppeas ndngs of act.
The concuson n the opnon of the oard of Ta ppeas that
shares of stock had a market vaue when they were receved n
e change for other property s a fndng of that fact by the oard
and a compance wth secton 907(b) of the Revenue ct of 1924
as amended by secton 601 of the Revenue ct of 1928, even f t s
not ncuded among ts forma fndngs of fact. Where the ev-
dence s not presented to the appeate court t w not consder
dsturbng such a concuson of fact.
4. Decson ffrmed.
The decson of the Unted States oard of Ta ppeas (12 .
T. ., 452) affrmed.
Unted States Cbcut Court of ppeas for the Second Crcut.
The Insurance f Tte Guarantee Co., pettoner, v. Commsgoner of Interna
Revenue, respondent.
ppea from a decson of the oard of Ta ppeas f nc the ncome and profts ta of
the pettoner for the year 1920.
efore Manton, L. and, and Mack, Crcut udges.
The pettoner s a Connectcut company, nvestng ts money n mortgages
and coatera notes, and aso engaged n the rea estate and nsurance busness.
On anuary 1, 1920, the company, wshng to dvde ts busness, organzed
another company, the Gaffey company, wth an authorzed capta of 350
shares, whch the pettoner on that day purchased by the transfer of a part of
ts own property havng a vaue of 33,000. Thereupon t reduced ts own
shares, 700 n number, to 350, and dstrbuted the Gaffey shares pro rata
among ts sharehoders.
The Commssoner found the cost of the assets transferred to the Gaffey
company to have been 15,000 and treated the transacton as an e change under
secton 202(b) of the ct of 1918, n whch the Gaffey shares were the con-
sderaton receved. e found the market vaue of these shares to have been
par and therefore Increased the pettoner s ncome by 2O,000, whch the
oard affrmed. The appea cones up upon the fndngs and opnon of the
oard wthout any evdence. The ponts rased are four: (1) Was tere any
ta abe Income from the transacton (2) Were the companes affated
under secton 240 of the ct of 1918 (3) Was the transacton a reorgau-
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202, rt. 1564.
280
zaton, merger or consodaton under the e empton n secton 202(b) of that
ct (4) Dd the oard rnd that the Gaffey shares had a market vaue of
par and can ts opnon be regarded n decdng that queston
L. and, Crcut udge: We thnk that the dfference n vaue between the
shares and the cost of the property conveyed was ncome wthn the meanng of
the s teenth amendment. It s of course true that every change of form n a
securty s not treated as new property, as was once for a hed n sner v.
Macomber (252 U. S., 189 T. D. 3010, C. . 3, 25 ), and the queston of |ust
how much s enough s ndeed tanged. ut we see no reason here to rey on
the dstncton between Marr v. U. 8. (268 U. S., 536 T. D. 3755, C. . I -2,
116 ) and Wess v. Steam (265 U. S., 243 T. D. 3609, C. . III-2, 51 ), or to
resort to U. S. v. Phes (257 U. S., 156 T. D. 3270, C. . 5, 37 ), Rockefeer v.
U. S. (257 U. S., 176 T. D. 3271, C. . 5, 34 ), or Cunan v. Waker (262 U. S.,
134 T. D. 3508, C. . II-2, 55 ). None of these cases concerned the substtu-
ton of shares n a company for chattes, choses n acton, and other ntangbes.
Though courts at tmes gnore the corporate guse and ook to the contro re-
served through share ownershp, nether the aw nor commerca custom
assmates absoute tte wth share hodng for purposes of sae and so of
proft. Shares are separate saabe unts, not even aquot nterests n the
company s property, for ther owner has no more than a rght aganst the
company, at east before nsovency. Coectvey they may aow the hoder
to dea wth the assets as he w, but he adopts the corporate form |ust for a
new convenence n subdvdng and dsposng of hs rghts, and because aw and
commerce mpute substance to the change n form. Ths dvsbe command
of money so reazed does not e st unt he does so, he must se the goods en
boc or pecemea, practcay a very dfferent thng. If chattes receved n
e change woud create a proft, shares w do as we, and no ease has hed
the contrary. Tsvogou v. U. S. (31 ed. (2), 706 (C. C. . 1)) went on the
absence of any proof of vaue so dd ourn v. McLaunhn (19 ed. (2), 148),
and so, too, we read cafcy v. en (34 ed. (2), 941). and f some of the
anguage used may be thought to go further, we can not accept t.
The companes dd ndeed become affated after the transfer, by vrtue
of secton 240 of the ct of 1918, but not unt the pettoner receved the Gaffey
shares. That secton refers to returns for ncome arsng after the affaton
takes pace: the proft at bar was reazed at the nstant of ther recept. The
pont was apparenty not pressed before the oard, but t s wthout substance.
It s more debatabe whether the transacton was wthn the e empton of
secton 202(b) of the ct of 1918. The anguage reed upon s as foows:
When n connecton wth the reorganzaton, merger or consodaton of a
corporaton a person receves n pace of stock or securtes owned
by hm new stock or securtes of no greater aggregate par or face vaue
the new stock or securtes sha be treated as takng the pace of
the stock, securtes or property e changed.
rtce 1566 of the reguatons of 1918 e pressy assmated the trans-
acton at bar to a sae, and artce 1567 defned reorganzaton, merger or
consodaton so as to e cude t. The e empton as a whoe seems to us
to appy ony to a case where the securty hoders of one company receve new
securtes n e change for od. Perhaps t woud protect the sharehoders of
the pettoner n ths case from a ta upon the Gaffey shares, but t was not n-
tended to touch the sae of the assets themseves. There coud be no possbe
doubt as to ths were t not for the nter|ecton of the word property at the
end. Up to that pont the secton was pany speakng of an e change of
shares for shares, or securtes for securtes. Whether that word meant more
than to cover cases where the od shares were assessed as a condton of
recevng the new t s mpossbe certany to know. t any rate, t s not
enough to change the entre pattern of the e empton so as to cover such a
transacton as ths.
The pettoner argues that the amendment of 1921 (secton 202(c)2) s an
nterpretaton of what went before. Perhaps so but n that case t s con-
cusve aganst t, because, whe t defnes reorganzaton n such a way
as to cover ths case, t omts property and eaves no doubt that the noton
was ony to e empt securty hoders who receved substtuted securtes. Sub-
dvson (3) of secton 202(c) of the ct of 1921 may ncude the case at bar.
but t s a new enactment and can not throw any ght upon the ct of 1918.
We are asssted n reachng the resut we do by the fact that the Treasury has
so construed the secton, and because, beng an e empton from ta aton, we
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281
202, rt. 1564.
shoud bear aganst the ta payer. ( ener v. Coona Trust Co., 275 U. S., 232
T. D. 4112, C. . II-1, 207 .)
The most mportant queston and the ony one treated by the oard s
whether the shares of the Gaffey company had a market vaue. We have not
the evdence and the case must turn on the fndngs and opnon. The
fndngs, propery speakng, say nothng about market vaue, e cept that Gaffey
pad par for 125 shares of Gaffey stock. The pettoner says that ths s con-
tradcted by the tabes of share hodngs ncorporated In the fndngs. The
frst of these professes to gve the hodngs on December 31, 1919 n t Gaffey
s credted wth 112 shares. The fourth tabe credts hm wth 56 shares
after anuary 1, 1920, whch s rght, f hs hodngs were reduced one-haf. e
s, however, credted on the same date wth 181 Gaffey shares nstead of 56,
an Increase of 125, whch presumaby were those bought at par as stated
n the fndng. So far a s consstent There s, however, a fourth tabe of
hodngs In the pettoner after sae to . . Gaffey of 125 shares, whch
credts hm wth 237 shares at a tme when the pettoner s captazaton
was st 700. If ths propery represents the hodngs on anuary 1, 1920,
Gaffey, after the reducton of shares to 350, shoud have hed 118 shares
n each company, and In some way he acqured 62 Gaffey shares and
surrendered n e change a smar number of the pettoner s. If so, t s
certany possbe that he bought 125 shares In the pettoner wth the under-
standng that t shoud be credted to hm n a smar number of Gaffey
shares, the equazaton beng effected by ncreasng the hodngs of the
others n the pettoner and reducng ther Gnffey shares. It woud not be
ncorrect to descrbe ths as a purchase of Gaffey shares at par. In any
case, there s no certan Inference to contradct the fndng.
owever, a of ths Is besde the pont f there was an ndependent fndng
that the Gaffey shares had a market vaue, and such there was f we may ook
at the opnon. The pettoner nssts that we may not, and ths was decded
n endrck Coa t Dock Co. v. Com . (29 ed. (2), 559, (C. C. . 8)). That
case arose under secton 907(b) of the ct of 1920, whch requred the oard
to make fndngs of fact and a decson and gave t the opton of addng
an opnon f t thought advsabe. The ct of 1928 went nto effect
on May 29, 1928, and the decson n the case at bar was made on une
7 of that year beng procedura, the amendment affected pendng proceedngs.
s at that tme prescrbed, the duty of the oard (U. S. C., Tte 26,
secton 1219(b)) was to ncude In ts report ts fndngs of fact
or opnon or memorandum opnon. The ds|unctve Impes that t may
content Itsef wth an opnon or wth fndngs, and changes the requrement
theretofore e stng. If so, we see no reason why t shoud not make both,
reservng dsputed questons of fact to ther dscusson wthout antcpatng
ts concuson n fndngs. No doubt a concuson must somewhere appear,
as here t does, but to requre that t sha be caed a fndng seems to us
forma and de. It s qute true that n endrck, etc., Co. v. Com r., supra,
the court went further than the facts requred and sad that the amendment
had not changed the aw, but that was obter, and does not persuade us.
We thnk that the oard here decded that the shares had a market vaue
and n the absence of the evdence that was enough.
Order affrmed.
rtce 1564: change of property. I -12-4567
Ct.D. 161
INCOM T R NU CT O 1918 D CISION O COURT.
1. Income change of Property Consttutonaty.
Secton 202(b) of the Revenue ct of 1918, whch provdes for
the ta aton of gan derved from an e change of property, s
consttutona.
2. Same: onds Payabe n uture Ta payer s Income on
ass of Cash Recepts and Dsbursements.
Where a ta payer transfers property and receves n e change
bonds of the purchasng corporaton havng a far market vaue,
the bonds are property wthn the meanng of secton 202(b)
4090 30 19
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202, rt. 1564.
282
ef the Revenue ct of 1918 whch shoud e treated as the equva-
ent of cash to the e tent of ther far market vaue, and te gan
from such an e change s ta abe n the year when the bonds
are receved, though the ta payer s books are kept on the bass
of cash recepts and dsbursements and the bonds are payabe
n a future year.
3. Decson ffrmed.
The decson of the oard of Ta ppeas (9 . T. ., 140)
affrmed.
Court of ppeas of the Dstrct of Coumba. No. 4842.
state of ohn . tkns, Deceased, appeant, v. Robert . Lucas. Comms-
soner of Interna Revenue.
ppea from a decson of tue Unted States oard of Ta ppeas.
efore Martn. Chef ustce, and Robb and an Orsde, ssocate ustces
December 2, 1929.
opnon.
The decson heren appeaed from s reported n 9 . T. ., 140. It In-
voves ncome ta es for the years 1919 and 1920 n the respectve amounts of
S41.513. and 1,293.09.
It appears that the Caddo O Refnng Co., a Lousana corporaton, was
organzed n the year 1916, wth capta stock of 10,000,000, dvded Into
100,000 shares of the par vaue of 100 each. The deceased, ohn . tkns,
was one of the organzers of the company, and transferred certan property to
t for whch he receved 8,328 shares of ts capta stock. The stock when
receved by tkns had a market vaue of 20 per share. tkns at the same
tme owned a one-haf Interest n an o ease known as the Noe ease. The
other haf nterest theren was owned by the corporaton. tkns aso owned
a patented gasone refnng process known as the Chrstman process, whch
was eased to the corporaton upon a royaty bass. The record fas to ds-
cose the cost of the property whch tkns transferred to the corporaton as
a consderaton for the stock receved by hm. It appears, however, that ths
nterest n the Noe ease cost hm 74,828.95 net n 1919, and that the Chrst-
man process had cost hm nothng.
In the year 1919 the corporaton was n need of addtona funds, and t
entered Into negotatons wth certan Phadepha bankers for a reorganza-
ton of the busness. s a resut of ths a New York corporaton was or-
ganzed, entted the Caddo Centra Refnng Corporaton, wth capta stock
of 15,000,000, dvded nto 150,000 shares of the par vaue of 100 each. The
New York corporaton took over a of the assets of the od corporaton, and
assumed a of ts obgatons, ncudng a frst mortgage upon the propertes
taken over In the amount of 2,122,000. In May, 1919, the stockhoders of the
od corporaton transferred ther stock to the New York corporaton, and a
of them e cept tkns were pad for ther stock at the rate of 35 per share,
n bonds ssued by the corporaton whch were receved at par. tkns, how-
ever, entered nto a speca arrangement whereby he transferred hs stock to
the New York corporaton, and aso hs nterest n the Noe ease, and the
Chrstman process. e receved 15 per share n bonds at par for Ts stock,
amountng to 124,920 and 85,000 In cash together wth 100,000 n bonds at
par for hs Interest n the Noe ease and 200,000 n bonds at par for the
Chrstman process.
The bonds thus transferred were part of an ssue of bonds by the New York
corporaton n the aggregate amount of 5,378,800, known as the frst conso-
dated mortgage 10-year snkng fund 6 per cent go bonds, payabe anuary 1.
1930, secured by mortgage upon the propertes taken over from the od corpora-
ton, and aso by a frst mortgage upon certan other propertes to be acqured
subsequenty by the New York corporaton. t the tme of the transfer these
bonds had a market vaue of 04.43 cents on the doar.
When tkns made hs ncome ta return for 1919, he reported the recept of
the 85,000 whch had been pad to hm In cash, but made no return of the
corporaton bonds whch e had receved n the transacton. It s camed that
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202, rt. 1564.
he was not requred to report the bonds, nasmuch as he reported hs ncome
upon the cash and dsbursement bass, whereas the bonds were payabe at a
future date subsequent to the ta abe year.
The Commssoner of Interna Revenue, however, determned that there was
a defcency n the return, and made the foowng addtons to gross ncome,
to wt, 124,920 as proft receved by tkns n the sae of hs stock n the
od corporaton, aso 65,000 as proft n the sae of the Noe ease, and 130,000
as proft n the sae of the Chrstman process. The Commssoner aso ds-
aowed a deducton n the sum of 1,836.86 n the year 1919, and 1,826.36 n
the year 1920, camed as deprecaton on a certan o ease known as the
tkns-Cooney ease and the equpment thereon and aso dsaowed a deduc-
ton of 10,500 camed as a oss n 1920 on decedent s nvestment n certan
Commerca O Co. stock.
n appea was taken on behaf of tkns estate to the oard of Ta ppeas.
The oard sustaned the Commssoner s determnaton of proft on the Noe
-ase and the Chrstman process, but hed that under secton 202(b), Revenue
ct of 1918 (40 Stat., 1057), no proft shoud be recognzed upon the e change
of bonds for tkns stock n the od corporaton, nasmuch as the bonds receved
by hm were of no greater aggregate par vaue than the stock for whch they
were e changed. The aeged defcency of 124,920 because of the bonds re-
ceved by tkns for hs stock was therefore dsaowed. The oard, however,
sustaned the dsaowance by the Commssoner of the deductons camed by
tkns n hs return because of the tkns-Cooney ease and the Commerca
O Co. stock.
The present ap a was thereupon taken n behaf of tkns estate from the
decson of the oard.
ppeant contends that the word ncome as empoyed n the s teenth
amendment to the Consttuton of the Unted States was used to refer ony to
recepts n cash and not to recepts of property n e change for other property,
and consequenty that the recept by tkns of bonds payabe at a date subse-
quent to the ta abe year, and not actuay pad wthn that year, s not charge-
abe to hm as ncome theren.
ppeant aso contends that nasmuch as tkns reported hs ncome on the
bass of cash recepts and dsbursements he was not compeed to return the
sums represented by the bonds unt they were actuay receved by hm n cash.
ppeant furthermore contends that the e change of stock, ease, and process
nvoved a ump sum transacton, made n connecton wth the reorganzaton
of the Lousana corporaton, and that, under secton 202(b) of the Revenue
ct of 1918, no gan s ta abe because thereof.
We do not agree wth any of these contentons.
In the frst pace, we thnk that the transfer by tkns of hs stock n the
Lousana corporaton, hs nterest n the Noe ease, and the Chrstman process,
to the New York corporaton, were separate transactons based upon ndvdua
consderatons, and were not a ump sum transacton.
We thnk, moreover, that the bonds receved by tkns n e cess of cost, for
hs nterest n the Noe ease and the Chrstman process, shoud be treated as
ncome n the year 1919.
Secton 202 of the Revenue ct of 1918 reads n part as foows:
Sec. 202. (a) That for the purpose of ascertanng the gan derved or oss
sustaned from the sae or other dsposton of property, rea, persona, or m ed,
the bass sha be
(b) When property s e changed for other property, the property receved
n e change sha for the purpose of determnng gan or oss be treated as the
equvaent of cash to the amount of ts far market vaue, f any .
In Marr v. Unted States (268 U. S., 536, 539 T. D. 3755, C. . I -2, 116 ).
a case reatng to securtes receved by a ta payer n e change for other
securtes n a reorganzaton of a busness enterprse, Mr. ustce randes.
speakng for the Supreme Court of the Unted States, sad:
The Government nssts that dentty of the busness enterprse s not con-
cusve : that gan n vaue resutng from profts s ta abe as ncome, not
ony when t s represented by an nterest n a dfferent busness enterprse
or property, but aso when t s represented by an essentay dfferent nterest
n the same busness enterprse or property that In the case at bar, the gan
actuay made s represented by securtes wth essentay dfferent character-
stcs n an essentay dfferent corporaton and that, consequenty, the add-
tona vaue of the new securtes, athough they are st hed by the Marrs,
Is Income under the rue apped n Putted States v. Phets (257 U. S., 136
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5202, rt. 1566.
T. D. 3270, C. . 5, 37 ), Rockefeer v. Unted States (257 U. S., 176 T. D.
3271, C. . 5, 34 ), and Cunan v. Waker (262 U. S., 134 T. D. 3508, C. .
II-2, 55 ). In our opnon, the Government Is rght.
We are of the opnon, accordngy, that the term ncome as used n the
s teenth amendment ncudes gans derved by a ta payer from an e change of
property as we as gans reazed n money, and that the provsons n secton
202(b), supra, for the ta aton of such gans s consttutona, and furthermore
that corporate bonds payabe at a future date havng a recognzed market vaue
are property wthn the purvew of the statute. Such a bond s recognzed
by the commerca word as somethng more than a mere e ecutory contract for
the future payment of money, and s gven the status of a chose n possesson.
ccordngy, t was the duty of tkns to report the bonds as receved by hm
n 1919 at ther market vaue at that tme. Cunan v. Waker, supra tkns
v. ender, 26 . (2), 690 ede v. Commssoner, 30 . (2d), 622, 624 Treasury
Reguatons 45, artce 1564.)
ppeant furthermore contends that the stock whch tkns hed n the
Lousana corporaton had cost hm, f taken at ts par vaue, the sum of 832,-
800, and that the transfer thereof n 1919 for bonds havng a vaue of 80,485.96
had resuted n a oss to hmsef of 752,314.04. Or, f the vaue of the stock be
f ed wth reference to ts market vaue as of the date of the transacton, the oss
woud be 107,317.10 n 1919. ppeant nssts that one of these sums shoud
be deducted from the gross ncome of tkns as a oss n that year.
Ths cam apparenty was not presented to the oard of Ta ppeas, and the
record does not show the cost of the property whch tkns transferred n pay-
ment of hs stock. It s the cost, not the vaue, of the property whch contros
under the statute. Ths queston therefore s not before us. ppeant s bref
contans references to varous pages of the reporter s mnutes, but these are
not part of the record.
The deductons camed by tkns for deprecaton n respect to the tkns-
Cooney nvestment, and oss n qudaton of the Commerca O Co., were
re|ected by the oard of Ta ppeas, because of nsuffcent evdence n each
case. In our opnon these rungs were not erroneous.
The decson appeaed from s accordngy affrmed, wth costs.
rtce 1566: change of property whch resuts I -10-4554
n no gan or oss. Ct. D. 157
INCOM T R NU CT O 1918 D CISION O COURT.
1. Income Gan or Loss Reorganzaton.
The term reorganzaton used n secton 202(b) of the Rev-
enue ct of 1918 ncudes a reorganzaton resutng from a cred-
tor s b, a mortgage forecosure, and a recevershp, and s not re-
strcted to a vountary reorganzaton. transacton s not wth-
out the provsons of that subdvson by reason of the fact that
a sharehoder, as a condton of recevng new securtes, s re-
qured to pay cash as we as to surrender shares owned by hm.
2. Decson ffrmed.
The decson of the Unted States oard of Ta ppeas (12
. T. ., 1138) affrmed.
Unted States Crcut Court of ppeas for the rst Crcut.
George L. De os f t a., ecutors, v. Commssoner of Interna Revenue.
ppea from oard of Ta ppeas.
November 22, 1929.
OPINION.
nderson, .: Ths s a petton for revew of a decson by the Unted States
oard of Ta ppeas, sustanng the Commssoner of Interna Revenue n
hodng the estate of Davd Sears, of whch the pettoners are e ecutors, abe
to an addtona ta of 15,216.09 for 1920. The queston nvoved s the rght to
a deducton of 26,297.10, camed as a oss sustaned n 1920 n connecton
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285
202, rt. 1566.
wth Mr. Sears purchase of 366 shares of the preferred stock ( 100 par) of
the Massachusetts ectrc Cos. at a cost of 29,224.12, havng a market vaue
on March 1, 1913, of 27,816. n mmatera dfference appears n the com-
putatons of counse.
The Massachusetts ectrc Cos. was a vountary assocaton, ownng a the
common and part of the preferred stock, and some of the notes, of the ay
State Raway. Under the reorganzaton (herenafter sketched) Sears de-
posted hs 366 shares wth the reorganzaton managers, pad them 10 a
share on hs 366 shares ( 3,660), and receved n the new astern Street Ra-
way Co. an aotment of bonds and other securtes havng a tota par vaue
of 23,424 and a market vaue n 1920 of 5,398.50. The resut s camed as a
deductbe oss.
The ony ssue n ths case s whether the transacton under whch ths oss
was sustaned s wthn the provson of secton 202 (a) and (b) of the
Revenue ct of 1918 (40 Stat., 1057) so that the oss can not be recognzed.
Ths reads as foows:
Sec. 202. (a) That for the purpose of ascertanng the gan derved or oss
sustaned from the sae or other dsposton of property, rea, persona, or
m ed, the bass sha be
(1) In the case of property acqured before March 1, 1913, the far market
prce or vaue of such property as of that date and
(2) In the case of property acqured on or after that date, the cost thereof
or the nventory vaue, f the nventory s made n accordance wth secton 203.
(b) When property s e changed for other property, the property receved
n e change sha for the purpose of determnng gan or oss be treated as the
equvaent of cash to the amount of ts far market vaue, f any but when
n connecton wth the reorganzaton, merger, or consodaton of a corporaton
a person receves n pace of stock or securtes owned by hm new stock or secu-
rtes of no greater aggregate par or face vaue, no gan or oss sha be deemed
to occur from the e change, and the new stock or securtes receved sha be
treated as takng the pace of the stock, securtes, or property e changed.
When n the case of any such reorganzaton, merger, or consodaton the
aggregate par or face vaue of the new stock or securtes receved s n e cess
of the aggregate par or face vaue of the stock or securtes e changed, a ke
amount n par or face vaue of the new stock or securtes receved sha be
treated as takng the pace of the stock or securtes e changed, and the amount
of the e cess n par or face vaue sha be treated as a gan to the e tent that
the far market vaue of the new stock or securtes s greater than the cost
(or f acqured pror to March 1, 1913, the far market vaue as of that date)
of the stock or securtes e changed.
The man contenton of the appeants s that ths provson e cudng gan
or oss n case of an e change of securtes through a reorganzaton appes
ony to cases of vountary reorganzaton, and does not appy to such cases as
ths n whch a credtors b and resutant recevershp were ncdents of the
reorganzaton.
Ths contenton cas for a bref outne of the ay State reorganzaton.
In ate 1917 the ay State was n fnanca dffcutes, perhaps nsovent. It
was sub|ect to mortgage ndebtedness of some 17,000,000, besdes a substan-
ta amount of foatng debt. It needed a radca reorganzaton. Ths began
by a credtors b, assented to n behaf of the corporaton, and the appontment
of a recever. Then foowed mortgage forecosure, and a |udca sae, at
whch the property was bd n for 3,600,000 ony, and transferred to a new
corporaton, the astern Street Raway Co., organzed under a speca act
enacted by the Massachusetts Legsature n 1918. Ths prce bore no substan-
ta reaton ether to the outstandng ndebtedness of over 18,000,000 or to
the rea vaue of the property, as ndcated by the ssuance to the od stock
nterests of over 9,000,000 of new stocks. Ths goes far to ndcate, f matera,
that ths reorganzaton was a vountary one. Commttees were consttuted
to represent the varous groups of securty hoders n the od enterprse a ead-
ng oston bankng frm undertook the management of the reorganzaton. New
cash was obvousy necessary for workng capta. The pan of reorganzaton,
therefore, requred, as a condton of sharng n the securtes of the new com-
pany, the payment (n nstaments) as foows:
ay State Street Raway preferred
Massachusetts ectrc preferred--
Massachusetts ectrc common
15
10
6
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202, rt. 1566.
286
Though vountary, these cash contrbutons are commony caed assessments.
Sears eected to pay 10 per share on hs 366 shares of Massachusetts ectrc
preferred, and receved therefor on each share securtes havng the foowng
vaues:
Par vaue.
10. 00
8.00
25.00
27. 00
6 .00
Refundng mortgage 5s, 1948 .,
d|ustment stock. _
Opton warrants
Common stock _ 1 5.40
Market
vaue.
7.00
.48
1.87
14.75
The owners of these Massachusetts ectrc securtes had. of course, ther
opton ether to pay ther assessments and thus share In the new aotment,
or to se ther rghts and charge off as a oss the dfference between the
market vaue of ther securtes on March 1, 1913, and the sae prce of ther
rghts. The market vaue of Mr. Sears rghts n 1920 doubtess appro mated
to the dfference between the market va ue of the new securtes, 5,398.50.
and hs cash payment, 3,660, or 1,738.50. e must have thought hs rght
to partcpate worth more than ths sum otherwse he woud not have pad
the 3,660 and partcpated n the reorganzaton. What ther ater market
vaue proved to be we do not dscover n ths record.
Carefu consderaton of the abe argument and the authortes cted by the
pettoner s earned counse fas to convnce us that the Commssoner and the
oard of Ta ppeas were wrong. We are unabe to beeve that Congress
ntended to dstngush between vountary and (so-caed) nvountary reor-
ganzatons, assumng for the moment that ths reorganzaton s propery
cassed as nvountary. Reorganzatons, wthout court proceedngs, and gen-
eray a recevershp, are rare, partcuary n the case of pubc servce cor-
poratons, that must contnue to render servce, however fnancay embarrassed.
We thnk Congress must have used the word n ts ordnary and generay
accepted meanng. reorganzaton s defned In Webster s New Internatona
Dctonary as The reconstructon or rehabtaton of a corporaton, especay
a raroad, usuay affected compusory by a recevershp and forecosure.
Compare aso Morawetz on Prvate Corporatons, secton 812. ouver s
Law Dctonary contans a defnton whch, mutats mutands, descrbes ths
ay State reorganzaton:
Reorganzaton: term n common use to denote the carryng out, by
proper agreements and ega proceedngs, of a busness pan for wndng up
the affars of, or forecosng a mortgage or mortgages upon the property of.
nsovent corporatons, more frequenty raroad companes. It s usuay by
the |udca sae of the corporate property and franchses, and the formaton
by the purchasers of a new corporaton, n whch the property and franchses
are thereupon vested, and the stock and bonds of whch are dvded among
such of the partes nterested n the od company as are partes to the reor-
ganzaton pan.
In most of the States, statutes have been passed to reguate the purchase
of corporate propertes and franchses at |udca saes. They usuay provde
that the purchasers sha be. or become, or may organze a new corporaton
n takng over the assets and franchses purchased, and have and en|oy the
corporate rghts and franchses of the former company.
Usuay some of the securty hoders name a commttee who formuate a
pan of reorganzaton provdng for the depost of securtes wth the com-
mttee as agents or trustees for the owners for the purchase of the property
at the sae and the organzaton of a new company upon the bass of a
specfed scheme of dstrbuton of the new securtes among those who assent
to the pan. The securtes are generay deposted wth the commttee wth
very fu powers of contro, under the pan, and usuay wth a certan power
of modfcaton of the pan, under specfed crcumstances. When the new
company has been formed, the new securtes are ssued to the assent
partes n accordance wth the terms of the pan.
Insovent corporatons are ordnary ether reorganzed or qudated. In
qudaton, credtors and stockhoders get cash. In reorganzatons, however
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287
204, rt. 1602.
I ffected, tey get new securtes, or ese se ther rghts. Whether court pro-
ceedngs of any knd are found to be a necessary or e pedent means of effect-
ng a reorganzaton Is, for present purposes, a dstncton wthout a dfference.
So. aso, s the queston whether the od securty hoders are requred to make
payments n cash n order to share n the securtes of the successor corpora-
ton. The essenta fact s that the rght to share arses from a reorganza-
ton the securty hoders can not partcpate and st have a deductbe oss
under secton 202(b). Mr. Sears eected to pay hs assessment, thus takng hs
chances of recoupng hs Immedate oss for ta purposes he must be hed aso
to have eected not to cam a oss. Compare Unted States v. Phes (257
U. S., 156 TT. D. 3270. C. . 5, 37 ) Rnckefeer v. Unted States (257 U. S.,
176 T. D. 3271. C, . 5, 34 ) Cunan v. Waker (262 U. S., 134 T. D. 3508,
( . . II-2. 55 ) Wess v. Steam (265 T7. S., 242 T. D. 3609, C. . III-2, 51 )
Marr v. Unted States (268 U. S., 536 T. D. 3755, C. . I -2, 116 ).
The decson of the oard of Ta ppeas s affrmed.
S CTION 203. IN NTORI S.
rtce 1582: auaton of nventores.
R NU CT O 1918.
aure to produce proof of bass on whch nventores were taken.
(See Ct. D. 166, page 308.)
S CTION 204. N T LOSS S.
rtce 1602: Cam for aowance of net oss. I -25-4676
( so Secton 240, rtce 634.) G. C. M. 8132
R NU CT O 102t.
The addton of new members to an affated group of corpora-
tons durng a ta abe year does not create a new tn payer or end
the ta abe year of the group so as to requre the fng of a return
for the perod begnnng wth the date of each addton.
consodated net oss of an affated group for one year muy
not be deducted n ts entrety from the consodated net ncome of
the group for the frst succeedng ta abe year. owever, the por-
ton of the consodated net oss for the year propery attrbutabe
to each affated corporaton may be apped aganst the conso-
dated net ncome aocabe to such corporaton for the frst suc-
ceedng ta abe year.
Law Opnon 1113 (C. . III-2, 36) revoked so far as ncon-
sstent herewth.
n opnon s requested as to what e tent under the net oss pro-
vsons of secton 204 of the Revenue ct of 1921 a net oss for the
year 1922 may be carred forward to the year 1923 under (he foow-
n crcumstances:
The ta payer and a number of other companes fed a consodated
return for each of the years 1922 and 1923.
Pror to pr , 1922, the ta payer owned a sma amount of the
capta stock of the M Company, whch company was organzed n
18 as a resut of the |ont efforts of the ta payer and the ctzens
of the cty of R for the purpose of connectng the atter wth the
raroad nes of the former. The M Company has aways been
operated by the ta payer and has been a part of ts raroad system.
On pr , 1922, the ta payer became the owner of 100 per cent
of the capta stock of the M Company.
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204, rt. 1602.
288
The N Company was organzed on une , 1922, for the purpose
of takng tte to and operatng certan propertes wth the prmary
ob|ect n vew of nsurng another member of the affated group
wth an adequate suppy of a certan commodty. The N Company
was fnanced entrey by the ta payer, the atter ownng a of ts
capta stock.
The O Company was organzed by the ta payer on ugust ,
1923, for the purpose of takng tte to certan rea estate purchased
by the former n the neghborhood of the cty of S, State of Y.
The ta payer owned 100 per cent of the capta stock of the O
Company.
The affated group sustaned a net oss of appro matey 600a)
doars for the year 1922. or the same year the M Company had
a net oss of .035a) doars and the N Company had a net ncome of
1.79a doars. The affated group had a net ncome of appro -
matey 1,000a doars for the year 1923. or that year the M Com-
pany had a net ncome of .11a doars, the N Company had a net
ncome of 3.69a doars, and the O Company had a net oss of .02a
doars. The ta payer s contenton s that the consodated net oss
of appro matey 600a doars for 1922 shoud n ts entrety be
aowed as a deducton from the consodated net ncome of the
group for 1923. The Income Ta Unt took the poston that under
the decson of the oard of Ta ppeas n the case of the Sweets
Co. of merca, Inc. (12 . T. ., 1285), no part of the 1922 net
oss coud be carred forward to 1923.
Snce ths case was consdered by the Income Ta Unt the Unted
States Crcut Court of ppeas for the Second Crcut has revewed
the decson of the oard of Ta ppeas n the case of the Sweets
Co. of merca, Inc., supra, and rendered ts decson (40 ed. (2d),
436), and the Court of Cams has rendered a decson n the case of
Swft Co. v. Unted States (38 ed. (2d), 365), whch decsons
materay affect the ssues nvoved n the nstant case.
In the case of the Sweets Co. of merca, Inc., a New York cor-
poraton, engaged n the manufacture of candes, acqured durng
the year 1918 a of the capta stock of the Lance Cough Drop Co.,
aso a manufacturer of candes, and the two corporatons became
affated wthn the meanng of secton 240 of the Revenue ct of
1918. On uy 1, 1919, a rgna corporaton was organzed wth,
an authorzed capta stock of 500,000 shares, whch corporaton
acqured a of the capta stock of the New York corporaton n
e change for appro matey 200,000 shares of ts stock together wth
a sma cash payment. On October 29, 1929, the Lance Cough Drop
Co. merged nto the New York corporaton and two days ater the
New York corporaton was merged nto the rgna corporaton.
The oard of Ta ppeas hed that for the caendar year 1919
three returns shoud be fed, upon the theory that each change n
the membershp of the affated group created a dfferent ta abe
unt. The Unted States Crcut Court of ppeas for the Second
Crcut, referrng to the fndng of the oard of Ta ppeas n
regard to the number of returns that shoud be fed, stated as fo-
ows :
Wth such constructon of secton 240 we do not agree. It was
re|ected by the Court of Cams n a very recent opnon, Swft t Co. v. Unted
States, reported n Unted States Day, March 5 and 6, 1930. for reasons
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I 204, rt. 1602.
so foy e paned that we need not here repeat them. It w suffce to say that
we concur wth the Court of Cams n the vew that the severa members of the
affated group reman the ta payers and that the statutory provsons for
a consodated return decare merey a method of computng the ta es of the
corporate members of the group. change n the group does not create a
new ta payer nor change the ta abe year of those members whose affa-
ton contnues. It does, however, affect the computaton of the consodated net
ncome of the group.
The pettoners argue that affaton contnued after merger of the New York
corporaton nto the rgna corporaton, whch, f true, woud permt one
consodated return for the entre caendar year, wth the resut that the
Mrgna corporaton s osses durng the ast two months woud wpe out a
consodated net ncome. Counse rees upon Western Maryand . Co. v.
Commssoner (C. C. . 4) (33 . (2d), 695) and Grand Rapds Natona
ank v. Commssoner (9 . T. ., 1119). Whether they may be dfferent-
ated from the case at bar, we do not stop to nqure. It w suffce to say that,
n our opnon, affaton under the statutory defnton necessary ceased when,
after the fna merger, ony one corporaton remaned n e stence. ence, the
rgna corporaton must fe a separate return for the ast two months of the
year. consodated return for a three of the corporatons shoud cover
the perod up to October 31, 1919.
rtce 634 of Reguatons 45, as amended by Treasury Decson
4022 (C. . I-1, 258), artce 634 of Reguatons 62, as amended
by Treasury Decson 4023 (C. . I-1, 259), artce 634 of Regua-
tons 65, as amended by Treasury Decson 4024 (C. . I-1, 148),
and artce 634 of Reguatons 69 conform to the decson of the
Court of Cams n the case of Swft Go. v. Unted States, supra,
and provde n part as foows:
Where there are more than two corporatons affated at the begnnng of
the ta abe year, and due to a change n stock ownershp (or contro)1 the
affated status of one or more s termnated, but there reman at east two cor-
poratons affated durng the entre year, the parent or prncpa corporaton
shoud fe a consodated return for the entre year, e cudng from ts return
the ncome of the corporatons whose affated status s termnated from the
date of the change n stock ownershp or where two or more corporatons are
affated at the begnnng of the ta abe year, and through change n stock
ownershp (or contro)1 addtona corporatons become affated, the parent
or prncpa corporaton shoud fe a consodated return and ncude the ncome
of such corporatons from the date of change of stock ownershp. In ether
case, the subsdary or subordnate corporaton whose status s changed durng
the ta abe year shoud make a separate return for that part of the ta abe
year durng whch t was outsde of the affated group.
The Court of Cams n ts decson n Swft Co. v. Unted
States, supra, n referrng to the reguatons above quoted, stated as
foows:
It s cear that ths reguaton s not n confct wth the aw, and we thnk
t further appears, from what w herenafter be sad upon consderaton
thereof, that t s not unreasonabe, but s |u.st and far. The Revenue ureau
dsregarded t, not because t was unreasonabe, but because of the decson
of the oard of Ta ppeas n Sceets Co. of merca v. Commssoner (12
. T. ., 1285). oowng ths decson, the Commssoner reversed hs former
fndngs, under whch he had hed that the pantff and ts affated corpora-
tons had been overassessed for the caendar year 1918 n the sum of
8,744,053.58, and refused to aow them any deducton on account of osses n
the year 1919. If, n fact, the reguaton was not n confct wth aw and was
reasonabe, |ust, and far, as we sha undertake to show, t ought not to have
been set asde after the practce of the Department had so ong been reguated
by t, and n so dong the Commssoner erred.
1 The words In parentheses were omtted from artce 634 of Reguatons 65 and 69.
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204, rt. 1602.
200
The reguatons quoted e pressy requred that, where two or more cor-
poratons are affated at the begnnng of a ta abe year, and one of the
subsdary corporatons drops out, or a new one s added, the parent corpora-
ton sha fe a consodated return for the group for the entre ta abe year
(e cudng, of course, the ncome of the .subsdary whch dropped out from the
date of ts separaton, and ncudng the ncome of the new subsdary from the
date t was taken In). It s cear that by ths reguaton the Treasury Depart-
ment recognzed that the affated group does not cease to e st n such cases
but contnues for the purpose of computng the ta as ong as the parent
corporaton remans the same.
Under the reasonng of the crcut court of appeas and ts decson
n the Sweets Co. of merca, Inc., supra, and the decson of the
Court of Cams n Swft Co. v. Unted States, supra, ony one
consodated return shoud he fed n the nstant case for the ta abe
year 1922 and one consodated return for the ta abe year 1923, as
the ony change n the orgna affated group was the addton n
the year 1922 of two corporatons and n 1923 the addton of a thrd
corporaton, whch changes dd not create a new ta payer or end
the ta abe year of those corporatons whose affaton contnued.
avng determned that the addton to the group of corporatons
of new members durng a ta abe year does not end the ta abe year
of the affated group, t ne t becomes necessary to consder secton
204(b) of the Revenue ct of 1921 n regard to the treatment of the
net oss sustaned by te affated group for the year 1922. Secton
204(b) of the Revenue ct of 1921 provdes:
(b) If for any ta abe year begnnng after De-ember 31, 1920, t appears
upon the producton of evdence satsfactory to the Commssoner that any
ta payer has sustaned a net oss, the amount thereof sha be deducted from
the net ncome of the ta payer for the succeedng ta abe year: and f such
net oss s n e cess of the net ncome for such succeedng ta abe year, the
amount of such e cess sha be aowed as a deducton n computng the net
ncome for the ne t succeedng ta abe year: the deducton n a cases to be
made under reguatons prescrbed by the Commssoner wth the approva of
the Secretary.
In the case of Swft d- Co. v. Unted States, supra, t appears there
were some 50 or 60 corporatons affated pror to the year 1918. and
that on November 30, 1918, a corporaton, Lbby, McNe Lbby, a
member of the group, dropped out and was no onger affated wth
the other corporatons. On March 21, 1919, a corporaton known
as the Unon Meat Co. became affated wth Swft Co. and the
other members of the affated group and remaned a member thereof
unt une 2, 1919, at whch tme t was dssoved and ts assets
acqured by Swft Co . or the caendar year 1919 the affated
group, ncudng the Unon Meat Co.. had a net oss of appro -
matey 24,000,000, and the corporatons whch consttuted the
affated group n the year 1918 had a net ncome for that year of
appro matey 39,000,000. In the consodated return for 1919
Swft Co. contended that the consodated net oss shoud be de-
ducted from te consodated net ncome for the prevous year, and
that the ta for 1918 shoud be redetermned n accordance wth
secton 204(b) of the Revenue ct of 1918. Ths contenton was
dened on the grounds that durng the years 1918 and 1919 changes
were made n the affated group or groups, as one corporaton was
separated from the affated group n the year 1918 and one was
added n the year 1919, the resut beng that there were three separate
ta abe groups and that secton 204(b) was not appcabe.
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204, rt. 1602.
The Court of Cams, after decdng that ony one consodated
return for the affated group shoud be made for the year 1918 and
one consodated return for the year 1919, stated:
In ths connecton t ought to be stated that we thnk a proper constructon
of secton 240 of the Revenue ct of 1918 (40 Stat., 10S2), wth reference to
consodated returns, s that f there s an affated group that contnues
throughout the ta abe year and the separaton from the group of one of ts
members durng the year, or the addton to the group of a new member durng
the year, does not end the ta abe year of the consodated group for the
purpose of the determnaton of the consodated net ncome and nvested capta
for the computaton of the ncome and profts ta . that a consodated return
for the caendar year or the fsca year, as the case may be, shoud be fed by
the consodated group ncudng the ncome and nvested capta of the corpo-
raton whch became separated, or was added to the group durng the year
to the date of the separaton, or the addton, as the case may bo. The
consodated group, as such, s not a ta payer, but a ta -computng unt, and
the corporatons whch are members of the affated group for the year, or
became members durng the year, ose ther separate dentty whe so affated
nny for the purpose of computaton of the ta upon one ncome and one nvested
capta whch s composed of the ncome and nvested capta of such corpo-
ratons combned, but, when t cones to the assessment and coecton of the
ta so computed, t s assessed aganst and coected from the severa corpora-
tons consttutng the affated group, n proporton to the net ncome propery
assgnabe to each, uness there s an agreement among them as to a dfferent
apportonment. n affated group as a ta -computng unt may, n some
respects, be kened unto a partnershp under the 1918 and subsequent Revenue
cts.
It s stpuated that n redetermnng the ta abty for 1918 of the affated
group, of whch the pantff was the parent corporaton, pursuant to secton
204(b) of the Revenue ct of 1918, the Commssoner of Interna Revenue, be-
fore he changed hs poston because of the decson of the oard of Ta ppeas
n the case of Sweets Co. of merca, supra, proceeded n accordance wth the
prncpe of Interna Revenue Law Opnon 1113. C. . III-2, page 36, a part
of whch s set out n footnote No. 2 that s, deductng from the consodated
net ncome of 39,465,221.11 of the consodated group for 1918, on the eacn-
dar-year bass, the consodated net oss of 24,534,929.44 of the group for 1919.
on the caendar-year bass, after frst emnatng from the consodated net
ncome for 1918 the net ncome of Lbby, McNe Lbby for that year, sep-
aratey computed, and from the consodated net oss for 1919 the net oss of the
Unon Meat Co. for the part of that year t was n the affated group, sep-
aratey computed. In other words, what the Commssoner dd, before he de-
cded that the decson of the oard of Ta ppeas prevented the deducton
of a net oss for 1919 from 1918 ncome, was to deduct the tota of the conso-
dated net oss for 1919 from the tota of the consodated net ncome for 191N.
:nd. after ths had been done, to recompute the ta for 1918 upon the revsed
consodated net ncome, and to nocate the ta as redetermned to each of the
corporatons n the affated group In 1918 on the bass of the ta orgnay
assessed or aocated to them, and to gve them refunds accordngy, regardess
f whether such corporatons had a net oss or a net ncome In 1919. In our
opnon the method thus foowed by the Commssoner, and whch t appears
he proposes to foow f we decde that the net oss for 1919 may be deducted
from 1918 ncome, was erroneous. s we sha herenafter show, the Com-
mssoner shoud have deducted n 1918 ony that proporton of the conso-
dated net oss for 1919 as was aocabe to such corporatons havng net osses
n 1919. and that such proportons shoud have been apped as a deducton
from the ndvdua net ncomes of the corporatons for 1918, as had net n-
comes n that year.
It mght be argued that the poston we have taken heren, as to the separate-
ness of each member of the affated group as a ta payer, s not consstent
when we refuse to gve to one member of the affated group who sustaned a net
oss n 1919, the beneft of tns net oss as a deducton from 1918 ncome when
the affated group n 1919. when combned, had a consodated net ncome.
The answer to ths Is that n such a case, for the purpose of computaton,
secton 240 s a mtaton of secton 204 and that. In the computaton under
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212, rt. 23.
292
secton 240, osses of one company must e offset aganst the Income of tbe
other companes before It can be determned whether there s a net oss of any
company n 1919 whch may be apped aganst ts ncome for 1918. Obvousy,
f ths were not done, the net oss whch had been used to offset the ncome of
the other companes n the consodated group woud be aowed agan to reduce
tbe ncome of the company whch sustaned the oss when appyng t to the
ncome of the pror year, and we thnk Congress dd not ntend a doube
deducton of ths character.
The above case s controng n the nstant case, and the ta payer s
contenton that the consodated net oss for 1922 shoud n ts
entrety be deducted from the consodated net ncome for 1923 must
be dened. owever, the porton of the consodated net oss for
1922 propery attrbutabe to each affated corporaton may be
apped aganst the consodated net ncome aocabe to such corpora-
ton fo- 1923.
Due to the fact that the Court of Cams n ts decson gave a
detaed e ampe o.f how the concusons reached n the decson
shoud be apped, t s not deemed necessary that ths offce go nto
a detaed dscusson of the appcaton of the decson to the present
case. owever, n appyng the e ampe to the facts n the nstant
case t shoud be noted that the court assumed that each of the
corporatons affated n 1918 (comparabe to 1923 n the nstant
case) had a net ncome. If one of the members had sustaned a
oss, thereby reducng the consodated net ncome, t woud foow
from the court s reasonng that the net ncome of each corporaton
whch had a net ncome for 1923 must be proportonatey reduced
before deductng the net oss attrbutabe to that corporaton for
1922. It deveoped n the Swft case that severa of the subsdary
corporatons sustaned osses n 1918. In the fna stpuaton upon
whch |udgment was based, the procedure ndcated above was
foowed, and the stpuaton was accepted by the court.
Law Opnon 1113 (C. . III-2, 36), n so far as t s nconsstent
wth the concusons heren reached, s revoked.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
P RT II. INDI IDU LS.
S CTION 212. N T INCOM O INDI IDU LS
D IN D.
rtce 23: ases of computaton. I -13-4580
Ct. D. 164
ncome: ta revenue act O sho-decson of the supreme court.
ass op Computaton ccrua ass Correcton op Inventory.
The correcton by the Commssoner of an mproper tem n the
nventory of a ta payer does not consttute a re|ecton, under sec-
ton 18(d) of the Revenue ct of 1910. of the accrua bass upon
whch the ta payer s accounts were kept and upon whch ts return
was made.
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212, rt. 23.
Supreme Court op the Unted States.
128. The Unted States, Pettoner, v. mercan Can Co.
129. The Unted States, Pettoner, v. Mssour Can Co.
130. The Unted States, Pettoner, v. Detrot Can Co.
On wrts of certorar to the Unted States Crcut Court of ppeas for the Thrd Crcut.
ebruary 24, 1930.
OPINION.
Mr. ustce MoReynodb devered the opnon of the court.
In the courts beow these causes were heard together and one opnon here
w suffce.
Respondent, the mercan Can Co., owned the entre capta stock of respond-
ents Mssour Can Co. and Detrot Can Co. were ncorporated under the
aws of New ersey and had ther ega resdences and prncpa offces heren.
Ther paces of busness were wthn the second Unted States nterna revenue
dstrct of New York. Wam . dwards, formery coector for that dstrct,
retred March , 1921 rank . owers succeeded hm. Durng dwards
term he demanded and coected from these three corporatons ncome and
e cess profts ta es for 1917 aggregatng more than 5,200,000. Thereafter
Coector owers e acted of them above 3,300,000 as addtona ncome and
e cess profts ta es for the same year.
In anuary, 1926, respondents nsttuted actons aganst the Unted States n
the Dstrct Court for New ersey, as permtted under Unted States Code,
recton 41, paragraph 20 ( udca Code, sec. 24, par. 20 Revenue ct, November
23, 1921, ch. 136, sec. 1310(c), 42 Stat., 311 Revenue ct, ebruary 24, 1925,
ch. 309, 43 Stat, 972). They sought to recover wth nterest more than
2,700,000 pad, as they aeged, to dwards n e cess of ta es propery assess-
abe to them for 1917. udgments aganst the Unted States for the amounts
camed were affrmed by the Crcut Court of ppeas, Thrd Crcut, March
5, 1929 and the matter s here upon certorar.
They aso sued owers, coector, n the Dstrct Court, Southern Dstrct of
New York, to recover the addtona ta es for 1917 ( 3,300,000) demanded by
and pad to hm. These suts nvoved the same questons as those presented n
the causes now before us. udgments went for owers, coector. The Crcut
Court of ppeas, Second Crcut, affrmed them November 4. 1929.
The opnons and |udgments n the two crcuts upon the same facts are thus
n drect confct
Pertnent provsons of the statutes and Treasury reguatons are prnted n
the margn.1
The accounts of respondents were kept durng 1917 not upon the bass of
actua recepts and dsbursements but upon the accrua bass that s, pecunary
obgatons payabe to or by the company were treated as f dscharged when
ncurred. Purportng to proceed as permtted by secton 13(d), Tte I, Revenue
ct of 1916, they made returns to the coector upon the same bass. The Com-
mssoner ascertaned that the books showed e cessve nventory vaues and
thereby ndcated net ncomes much too sma. The vauaton paced
on arge quanttes of tn pate had been marked up from 3.60 per bo
to 7, and the hgher rather than the ower cost of ths raw matera had been
reported. Thereupon, he dsaowed the nfaton, corrected the erroneous en-
tres, and made reassessments accordng to the returns so modfed. Respondents
camed that ths acton amounted to re|ecton of the bass upon whch ther
returns had been made. so, that, after such re|ecton, no assessment coud
be made e cept one based upon recepts and dsbursements that Is, upon
amounts ascertaned by deductng from gross ncome receved, e penses pad
out osses charged off, Interest, and ta es (sec. 12, ct 1916). nd, further,
that computaton shoud be made wthout regard to nventores.
The Dstrct Court for New ersey and the Crcut Court of ppeas, Thrd
Crcut, acceptng respondents vew, awarded and approved |udgments aganst
the Unted States aggregatng some 4,000,000. The resut, we thnk, s man-
festy erroneous. Upon the fndngs, |udgments shoud have gone the other
way.
1 Not prnted n uetn servce.
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294
The cams of respondents rest upon mproper constructon of paragraph (d),
secton 13, ct of September 8, 1916. Ths provdes that a corpora-
ton keepng accounts upon any bass other than that of actua
recepts, and dsbursements, uness such other bass does not ceary refect
ts ncome, may, sub|ect to reguatons make ts return upon the
bass upon whch ts accounts are kept, n whch case the ta sha be com-
puted upon ts ncome as so returned: .
ass of keepng accounts as there used refers to the genera bookkeepng
system foowed by the ta payer and not to the accuracy or proprety of mere
ndvdua tems or entres upon the books. nd to correct an mproper tem
n a return whether the resut of mere error or desgned can not propery
be sa to consttute re|ecton of the bass upon whch the return was con-
structed. The statute empowers ta offcers to make necessary rues and regua-
tons and to take acton essenta to ordery enforcement of the obgatons
mposed. ere, the ta payers kept ther accounts on the accrua bass and
eected to make ther returns accordngy. They can not compan because
an tem theren was changed so as to conform wth admtted facts. If ther
returns had been made on the bass of actua recepts and dsbursements, cer-
tany they woud have been sub|ect to correcton for errors wthout changng
the bass and the same thng s true of returns framed upon an accrua bass.
Unted State v. nderson (269 U. S., 422, 437. 440, 443 T. D. 3839, C. .
-, 179) consdered the meanng of sectons 12(a) and 13(d), ct of 1916,
and sustaned the acton of the Commssoner, who had reassessed accordng
to an ad|usted return orgnay made up on the accrua bass.
We need not dscuss the queston whether under any crcumstances the
ta abe ncome of a manufacturng or mercante corporaton can be ascer-
taned wthout reference to nventory vaues. Certany, n most nstances,
where the ta payer carres on an e tensve busness, ths can not be done.
The chaenged |udgments are reversed. The causes w be remanded to the
dstrct court for approprate acton n harmony wth ths opnon.
Reversed.
rtce 23: ases of computaton. I -14 4593
Ct. D. 169
ncome ta revenue act of 1916 hecson of supreme court.
Income Sae ccrua ass Year of Recept of Income.
Proft from the sae of and by a ta payer, keepng ts books on
the accrua bass, does not accrue when a contract to se the and
n the future s entered nto but when the sae s consummated.
Supreme Court of the Unted States. No. 92. October Term, 1929.
Robert . Lucas, as Commssoner of Interna Revenue. Pettoner, v. North
Te as Lumber Co.
On wrt or certorar to the Unted Staes Crcut Court of ppeas for te fth Crcut.
ebruary 24. 1930.
Mr. ustce uter devered the opnon of the court.
The respondent, a Te as corporaton, for some tme pror to 1917 was engaged
n operatng a sawm, seng umber and buyng and seng tmberands. De-
cember 27. 1916, t gave to the Southern Pne Co. a 10-day opton to purchase ts
mberands for a specfed prce. The atter was sovent and abe to make the
purchase. On the same day tte was e amned and found satsfactory to the
Pne company. It arranged for the money needed and December 30, 1916,
notfed respondent that t woud e ercse the opton. On that day respondent
ceased operatons and wthdrew a empoyees from the and. anuary 5, 1917,
the papers whch were requred to effect the transfer were devered, the
purchase prce was pad, and the transacton was fnay cosed.
Respondent kept ts accounts on the accrua bass and treated the profts
derved from the sae as ncome n 1916. The Commssoner of Interna Reve-
nue determned that the gan had been reazed n. and was ta abe for. 1917.
The oard of Ta ppeas sustaned hs fndng. (7 . T. ., 1193.) The
Crcut Court of ppeas reversed the oard. (30 . (2d), 680.)
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295
212, rt. 23.
The gan derved from ths sae was ta abe ncome. If attrbuted to 1916
the ta woud be much ess than f made n 1917. Secton 13(d) of the Reve-
nue ct of 1916 provded that a corporaton keepng ts accounts upon any
ass other than that of actua recepts and dsbursements, uness such other
bass faed ceary to refect ncome, mght make return upon the bass upon
whch ts accounts were kept and have the ta computed upon the ncome so
returned.
n e ecutory contract of sae was created by the opton and notce, December
30. 1916. In the notce the purchaser decared tsef ready to cose the trans-
acton and pay the purchase prce as soon as the papers were prepared. Re-
spondent dd not prepare the papers necessary to effect the transfer or make
tender of tte or possesson or demand the purchase prce n 1916. The tte
and rght of possesson remaned n t unt the transacton was cosed. Conse-
quenty uncondtona abty of vendee for the purchase prce was not created
n that year. (Gober v. art, 36 Te as. 139. Cf. Unted States v. nderson,
269 D. S., 422, 441 T. D. 3839, C. . -, 1791 mercan Natona Co. v.
Unted States. 274 U. S., 99 T. D. 4099, C. . I-2. 1931.) The entry of the
purchase prce n respondent s accounts as ncome n that year was not war-
ranted. Respondent was not entted to make return or have the ta com-
puted on that bass, as ceary t dd not refect 1916 ncome.
udgment reversed.
rtce 23: ases of computaton. I -20-464C
Ct. D. 185
INCOM ND C SS PRO ITS T S R NU CT O 1018 D CISION O
SUPR M COURT.
1. ndng of act Concusveness of ndng.
fndng of fact by the Court of Cams s concusve on the
Supreme Court.
2. Deducton ass of Computaton oregn Ta es Rurden of
Pkoof.
The presumpton s that ta es pad are rghty coected upon
assessments correcty made by the Commssoner, and n a sut to
recover them the burden rests upon the ta payer to prove a the
facts necessary to estabsh the egaty of the coecton. In the
absence of fndngs, therefore, whether foregn ta es pad n 1918
had accrued n that or earer years, or whether under the ta -
payer s system of bookkeepng ther deducton n some earer year
was necessary n order to ascertan true ncome, t can not be
assumed n the ta payer s favor that foregn ta es pad n 1918 dd
not accrue earer, or that ther deducton f made n 1018, under
secton 238 of the Revenue ct of 1918, woud refect the ncome of
the ta payer whose hooks and ta return were on the accrua
bass.
3. udgment ffrmed.
The udgment of the Court of Cams of the Unted States (67 Ct.
Cs., 39, Ct. I . 124 C. . III-2, 320 ) affrmed.
Supreme Court of the Unted States.
Nes ement Pond Co., Pettoner, v. The Unted States.
On wrt of certorar to the Court of Cams.
pr 14, 1930.
OPINION.
Mr. ustce Stone devered the opnon of the court.
Ths case s here on certorar, granted October 21, 1929, to revew a
.udrment of the Court of Cams denyng recovery of a part of pettoner s
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212, rt. 23.
296
ncome and e cess profts ta es for the year 1918, aeged to have been egay
e acted. (67 Ot. Cs., 39.) Pettoner s a New ersey corporaton havng
an offce and prncpa pace of busness n New York. It mantans a London
branch, through whch t pad the rtsh Government n 1918 ncome ta for
the fsca year pr 6, 1917, to pr 5, 1918, upon ncome receved from sources
n Great rtan n 1916 and earer years, and based on a ta return made pror
to 1918. Smary, t pad n 1918 a ta for the year endng December 31,
1916, upon ncome and e cess profts from sources wthn Great rtan. In
makng ts ta return for the year 1918 pettoner camed credt for these
payments on ts ta . The Commssoner of Interna Revenue refused to aow
the credt, and coected a correspondngy ncreased ta , whch s the sub|ect of
the present sut.
The appcabe provso of secton 238 of the Revenue Law of 1918 (ch.
18, 40 Stat., 1057) provdes that the ta mposed by the ct on domestc
corporatons for any ta abe year sha be credted wth the amount of the
ncome and e cess profts ta es pad to foregn countres durng that year.
ut secton 200 defnes the term pad n secton 238 as pad or accrued or
pad or ncurred, and provdes that pad or accrued sha be construed ac-
cordng to the method of accountng upon the bass of wh ch the net ncome s
computed under secton 212. Secton 212(b) requres that net ta abe ncome
sha be computed n accordance wth the method of accountng reguary em-
poyed n keepng the books of such ta payer but f no such method of account-
ng has been so empoyed or f the method empoyed does not ceary refect the
ncome, the computaton sha be made upon such bass and n such manner as,
n the opnon of the Commssoner, does ceary refect the ncome.
Secton 13(d) of the Revenue ct of 1916 (ch. 463, 39 Stat., 756), n force
unt the ct of 1918 became effectve, provded that a corporate ta payer
keepng accounts upon any bass other than that of actua recepts and ds-
bursements, uness such other bass does not ceary refect ts ncome, may.
sub|ect to reguatons made by the Commssoner of Interna Revenue wth
the approva of the Secretary of the Treasury, make ts return upon the bass
upon whch ts accounts are kept, n whch case the ta sha be computed
upon ts ncome as so returned. Treasury Decson 2433, of anuary 8, 1917,
nterpretng ths secton, states Ths rung contempates that ncome and
authorzed deductons shoud be computed and accounted for on the same
bass, and Income Ta rung, anuary- une, 1921, Cumuatve uetn
No. 4, page 147 L. O. 1059 , provdes: Secton 13(d) of the Revenue ct
of 1916 s a quafyng secton and when accounts of a corporaton are kept
on a bass other than that of recepts and dsbursements, t quafes the
manner of makng deductons authorzed n secton 12(a) of the ct, and
the word pad n the atter secton s to be read pad or accrued, dependng
on how the accounts of the corporaton are kept.
The Court of Cams found that the books of the pettoner were kept on the
accrua bass that whe there were some e ceptons of sma tems of deferred
charges and credts and the e penses of the London offce whch were entered on
ts books ony when pad or receved, the prncpa and domnant purpose and
pan of ts accounts were to show ncome upon an accrua bass as the genera
and controng character of the account. It aso found that the pettoner s
return for 191S was on the accrua bass, as were ts ta returns for 1916,
1917, and 1919.
These fndngs are concusve here. (Luckenbarh 8. 8. Co. v. Unted States.
272 U. 8., 533, 538.) Under them pettoner s abty for the ta coected
must turn on the proprety of deductng the foregn ta payments from ncome
for the year 1918, when pad, n order to arrve at the true ncome of the ta -
payer. Under the 1916 ct, where the ta payer s books are kept and hs returns
made on the accrua bass, ta es charged on the books as they accrue must be
deducted when accrued, f true ncome s thus refected. (Unted States v.
nderson., 269 U. S., 422 T. D. 3839, C. . -, 179 .) ven f not so charged,
t was competent for the Commssoner, under the ct of 1916, as we as under
the e press provsons of secton 212(b) of the ct of 1918, to correct the ta -
payer s return by deductng the payments n the year n whch they accrued so
as to refect true ncome by conformng to the domnatng or controng charac-
ter of the ta payer s system of accounts. (Unted States v. mercan Can Co.,
decded ebruary 24, 1930 see Ct. D. 164, on page 2921. See Unted States
v. Mtche, 271 U. S., 9, 12-13 T. D. 3865, C. . -, 233 .)
The fndngs do not dscose whether the foregn ta es pad n 1918 had
accrued n that or n earer years, or whether under the pettoner s system of
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297
213(b), rt, 88.
bookkeepng ther deducton n some earer year was necessary :n order to ascer-
tan true ncome. ut the presumpton s that ta es pad are rghty coected
upon assessments correcty made by tbe Commssoner, and n a sut to recover
them the burden rests upon the ta payer to prove a the facts necessary to
estabsh the egaty of the coecton. (Unted States v. nderson, supra see
Unted States v. Rnd kopf. 105 U. S., 418.) In the absence of fndngs deter-
mnng the fact, t can not be assumed n pettoner s favor that the rtsh
ta es pad n 1918 dd not accrue earer, or that the r deducton f made n
1918 woud refect truy the ncome of the ta payer whose books and ta return
were on the accrua bass.
Pettoner argues that as ts payments of foregn ta es were charged on ts
books n the year when pad, as were other e penses of the London branch, ts
return was made on the bass upon whch ts accounts were kept and that under
secton 212(b) ts ta shoud have been computed upon ts ncome as so re-
turned, f that method refected true ncome. It s nssted that n the absence
of a fndng to the contrary, ths must be assumed, snce the Commssoner made
no read|ustment of pettoner s account of the London offce e penses, e cept
the tem of foregn ta es, and as t affrmatvey appears n the fndngs that
returns were made and accepted on the same bass as the 1918 return, for the
ta years 1919 and 1924. ut ths argument kewse rests upon the assumpton
of facts whch are wthout support n the fndngs that the other e penses of
the London offce for 1918 and the foregn ta payments deducted n the 1919
and 1924 returns dd not accrue n those years. If that assumpton s made,
faure of the Commssoner to correct the returns n these respects s as
attrbutabe to hs error or oversght or ack of nformaton as to any opnon
on hs part as to the proprety of the deductons n the years made.
ffrmed.
S CTION 213(a). GROSS INCOM D IN D:
INCLUSIONS.
rtce 53: ampes of constructve recept.
R NU CTS O 1916 ND 1018.
Profts credted to accounts of stockhoders wthout forma deca-
raton of dvdends. (See Ct. D. 153. page 266.)
S CTION 213(b). GROSS INCOM D IN D:
CLUSIONS.
rtce 88: Compensaton of State offcers and empoyees.
R NU CTS O 1018 ND 1921.
Compensaton of branch pots censed under the aws of r-
gna. (See Ct. D. 144, p. 252.)
rtce 88: Compensaton of State offcers and empoyees.
R NU CTS O 1818 ND 1921.
Compensaton of awyer retaned by cty board of waterworks
trustees. (See Ct, D. 146, page 247.)
4090 30 20
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214(a), rt. 111.
298
rtce 89: ddtona e cusons from gross ncome
under the Revenue ct of 1921.
R NU CT O 1021.
mendment of artce 89, Reguatons 62, to ncude Span n the
st of countres whch satsfy the equvaent e empton requrement
of secton 213(b) 8 of the Revenue ct of 1921. (See T. D. 4289.
page 160.)
S CTION 214(a) 1. D DUCTIONS LLOW D:
USIN SS P NS S.
rtce 101: usness e penses. I -12- 568
I. T. 2529
R NU CT O 1921.
Offce Decson 1030 (C. . 5, 120), n so far as t hods that e -
penses ncurred by a ta payer ncdent to the entertanment of em-
poyees by means of pcncs or dances are not deductbe s revoked,
n vew of the Commssoner s acquescence n the decson of the
oard of Ta ppeas n the case of Popuar Dry Goods Co. v. Com-
mssoner (6 . T. ., 78, C. . II-1, 25) and hs acquescence n
the decson of the oard n the cases of . . owman v. Comms-
soner and ./. Wam owman v. Commssoner (16 . T. ., 1157.
whch see on page 6) wth respect to ths ssue.
rtce 109: Rentas.
R NU CT O 1921.
The decson n the case of W. S. oge Co., Inc. (5 . T. .. 54f.
C. . III-, 5), s appcabe ony to those cases n whch no part of
the royates pad n any one | ear s c redted to future producton of
ore. (See G. C. M. 7937. page 87.)
rtce 111: When charges deductbe. I -8-4540
Ct. D. 15-_
INCOM T R NU CT O 1918 decson of court.
1. Deducton Contngent Compensaton.
Where a ta payer, keepng Its books of account on the accrua
bass, enters nto a contract wth an empoyee to pay hm n add-
ton to a f ed saary a percentage of the profts of the busness
over a perod of three years, to be reduced by a percentage of any
osses that mght resut from the operaton of the busness durng
the perod, the contract provdng for an accountng of the profts
and osses at ts termnaton, the ta payer may not deduct from
gross ncome, as a busness e pense, for the frst year of the
contract the amount of the profts credted to the empoyee at the
end of that year.
2. udgment ffrmed.
The |udgment of the dstrct court (33 ed. (2d), 196 Ct. D. 90,
C. . III-2. 2001) affrmed.
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299 214(a), rt. 111.
Unted States Cbcut Court of ppea , ghth Crcut.
ock d- oner Mercante Co., a Corporaton, appeant, v. Unted States
of merca, appeee.
ppea from the Dstrct Court of the Unted States for the astern Dstrct of Mssour.
anuary 15, 1930.
OPINION .
an akknburgh, Crcut udge, devered the opnon of te court.
ppeant s a Mssour corporaton engaged n the whoesae shoe busness
n St. Lous. One ake Wenbach was a saesman, e perenced n that busness,
and on the 19th of ebruary, 1919, the Mercante company, named as frst
party, Wenbach, named as second party, and Wenbach s wfe, named as thrd
party, entered nto a contract rectng that the frst party was desrous of open-
ng and carryng on a speca department of ts busness for the seng of
reguar nes of shoes at whoesae under the name and stye of cme Shoe
Specaty Co., and desred to engage sad second party as manager of that
department. It was further rected that the second and thrd partes desred
to partcpate n some manner n the profts of the new department, and of the
entre busness of the frst party. y the contract t was accordngy provded
that the second party shoud become manager of sad cme Shoe Specaty Co.,
and shoud trave and ca on the trade durng the reguar season for a perod
of three years from the date of contract, at a saary of forty-eght hundred do-
ars per year, payabe monthy, or such other saary as mght thereafter from
tme to tme durng sad perod be drawn by the presdent and secretary of the
corporaton. The party of the thrd part, as an nducement to frst party to
engage the servces of second party, agreed to depost wth frst party the sum
of 5,000 as a guaranty for the agreements n sad contract made by second
and thrd partes. The nstrument contaned the foowng paragraphs matera
to the ssue presented for determnaton:
In further consderaton of the servces to be rendered by party of the
second part, and the depost of sad sum of fve thousand doars ( 5,000) by
party of the thrd part, the party of the frat part sha pay to the party of the
thrd part one-thrd ( ) of the net profts earned by party of the frst part
durng the contnuance of ths contract, Incudng the busness conducted under
the name of the cme Shoe Specaty Co., and the partes of the second part
and ttrd part sha kewse share any osses n sad busness durng sad perod.
Upon the termnaton of ths contract, ether by e praton, canceaton,
of otherwse, the profts sha be fgured to the date of such termnaton and
any net osses to be shared by the partes of the second part and thrd part
sha be deducted from the sad sum of fve thousand doars ( 5,000) deposted
by the party of the thrd part and the party of the frst part sha pay to the
party of the thrd part sad sum of fve thousand doars ( 5,000) so deposted,
ess any deductons made, as herenabove stated, for osses ncurred, or, f
there be no osses, then pus the proper share of profts.
If the party of the second part sha de durng the perod of ths agree-
ment, (sc) the rght to the sad monthy compensaton of four hundred doars
( 400) sha termnate, and the rght to the dvson of profts, herenafter
mentoned, sha aso termnate.
The case was tred upon an agreed statement of facts. The further matera
parts of the stpuaton are the foowng:
The contract was performed unt May 27, 1921, when because of osses t
was termnated by mutua agreement. The pettoner on ts books of account
credted to Wenbach as of December 31, 1919, . 5,750.34, whch was ater
corrected to 5,193.27, representng hs share of the profts under the contract
aforesad up to December 31, 1919. The sad books of account were kept on
an accrua bass. There was a oss n 1920 and unt May 27, 1921.
Durng the entre perod of the contract heren, ake Wenbach devoted hs
fu tme to the busness of defendant heren under and by vrtue of the
provsons of the contract heren.
ake Wenbach and hs wfe Moy pad to the State of Mssour ncome
ta es for the caendar year 1919. The ta pad by Wenbach was based upon
hs stpuated saary of four hundred doars ( 400) a month, due and pad to
hm by vrtue of the provsons of the contract heren, sad ta amountng to
eghty-s and 41/100 doars ( 86.41). Mrs. Wenbach pad to the State of
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214(a), rt. 111.
300
Mssour an ncome ta based on shares of the profts under the contract heren
as shown by the books of defendant, whch proft was n the sum of fve thou-
sand one hundred nnety-three and 27/100 doars ( 5,193.27) and whch proft
was, as aforesad, the soe bass of the return and payment made by Wenbach.
The actua payments of the ta es aforementoned were made at the request
of the Wenbachs by the defendant heren, ock ohner Mercante Co.,
drect to the coector authorzed to receve ncome ta payments for and on
behaf of the State of Mssour. The amounts so pad, to wt, 86.41 for ake
Wenbach and 86.36 for Moy Wenbach, were charged back and debted by
the defendant heren to the account of Mr. Wenbach.
The payments aforesad and the entry n the books of the defendants heren
chargng back and debtng to the sad Wenbach the amount of ta es afore-
sad was duy entered n the books of the defendant on, to wt, the 26th day of
May, 1920.
On or about the 15th day of March, 1920, the defendant fed wth the
coector of nterna revenue for the frst dstrct of Mssour ts ncome ta
return for the caendar year 1919, purportng to be a true and correct state-
ment of the gans, profts, and ncome from a sources receved by the sad
defendant durng the caendar year 1919, from whch t was made to appear
that the defendant s net ncome for the caendar year 1919 was 11,466.43 and
the tota amount of ta due thereon, 1,929.57, whch amount was pad by the
defendant.
The defendant n computng hs ncome ta for the caendar year 1919 a-
owed as a deducton for ordnary and necessary e penses n conductng ts
busness the sum of 5,193.27, camed to have accrued or been ncurred n
that year under the terms of an agreement between the defendant and one
ake Wenbach and Moe Wenbach, hs wfe.
The agreement to whch reference s made s the contract of ebruary 1,
1919, the pertnent parts of whch have been rected and quoted.
March 2, 1927, the Unted States fed sut n the Dstrct Court for the
astern Dstrct of Mssour, aegng that the return fed by appeant March
15, 1920, was ncorrect, mseadng, and fase, n that t showed appeant s
net ncome for the year 1919 to be 11,466.43, whereas n fact appeant s net
ncome for that year was 17,223.27 that the Commssoner of Interna Reve-
nue, upon addtona nformaton and facts submtted, had drected a revew
and audt to be made of the ncome receved by appeant n the year 1919.
s a resut of such revew and audt, that ncome was corrected and rede-
termned and a defcency n ta for 1919 was found to be due from appe-
ant n the utmate sum, after a proper aowances, of 1,691.94. The Unted
States prayed |udgment for that amount, wth nterest. |ury was waved
by wrtten stpuaton, and the court found for the Unted States as prayed.
Revenue ct of 1918, secton 234(a), provdes that n computng a net
ncome of a corporaton sub|ect to ta Imposed by secton 230, there sha be
aowed t as deductons (1) a the ordnary and necessary e pense pad or
ncurred durng the ta abe year n carryng on any trade or busness, etc.
The decson n ths case turns upon whether the deducton camed was an
e pense whch was ncurred durng the ta abe year 1919. The books of ap-
peant were kept upon an accrua bass, and ths tem of 5,193.27 was en-
tered upon sad books as of December 31, 1919, to the credt of Wenbach,
and, therefore, as an e pense ncurred durng that year under the contract.
ppeant rees chefy upon the doctrne announced n Unted States v. nder-
son (269 U. S., 422 T. D. 3839, C. . -, 179 ), but we do not thnk that case
supports ts contenton under the facts presented. In hs argument n the
nderson case the Soctor Genera sad:
Under the accrua system an e pense accrues when a the events have
occurred from whch abty s determned and the abty has become f ed,
even though payment s not yet due.
The correctness of ths statement can not we be dsputed. It receved sub-
stanta approva n the opnon of the Supreme Court. Mr. ustce Stone
sad:
Ony a word need be sad wth reference to the contenton that the ta
upon muntons manufactured and sod n 1916 dd not accrue unt 1917. In
a technca ega sense t may be argued that a ta does not accrue unt t
has been assessed and becomes due but t s aso true that, n advance of the
assessment of a ta , a the events may occur whch f the amount of the ta
and determne the abty of the ta payer to pay t.
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301
214(a)7, rt. 155.
The necessary mport of ths anguage s that abtes or e penses w not
be consdered to have accrued uness a the events htve occurred from whch
abty and e penses can be determned. (Natove Co. v. Commssoner, C.
. D. C, 32 ed. (2d), 949 Ct. D. 77, C. . III-2,295 .) In the nstant
case the resut of busness durng the current year was refected by the books
argey as a matter of convenence n recordng but at no tme was the e -
pense of Wenbach s saesmanshp n e cess of hs saary, and any resutng
abty of appeant therefor, f ed or determned unt the termnaton of
the contract. s a matter of fact no such abty ever accrued. The osses
n 1920 and 1921 e ceeded the bookkeepng credt of 1919, and more than ab-
sorbed the 5,000 depost made. The contract s unambguous n ts provson
that profts and osses shoud be fgured ony upon ts termnaton. Unt
that tme they remaned unascertaned and undetermned. The - sum of
5,193.27 aowed as a deducton by appeant n makng ts ncome ta return
of March 15, 1920, was never Incurred as an e pense of carryng on ts bus-
ness ether n 1919 or at any other tme. The |udgment beow was fuy sup-
ported by the facts agreed and found, and s accordngy
ffrmed.
S CTION 214(a)4, 5, ND 6. D DUCTIONS
LLOW D: LOSS S.
rtce 142: ountary remova of budngs.
R NU CT O 1918.
Demoton of budngs razed to make way for pant e tenson
worthessness of a four mng process. (See Ct. D. 194, page 231.)
S CTION 214(a)7. D DUCTIONS LLOW D:
D D TS.
rtce 155: Reserve for bad debts. I -12-4569
Ct. D. 162
INCOM T R NU CT O 1921 decson of court.
1. Deducton Reserve foe ad Debts Instament Saes.
Where a ta payer, computng hs profts on the bass of cash
recepts and dsbursements, reports as gross Income the gross profts
from nstament saes, deductng therefrom the deferred nsta-
ments unearned and unpad at the end of the ta abe year, he
may not deduct under secton 214(a)7 of the Revenue ct of 1921
a reserve for bad debts set up aganst the nstaments to become
due n future years.
2. Decson ffrmed.
The decson of the oard of Ta ppeas (10 . T. ., 911)
affrmed.
Unted States Crcut Court of ppeas fob the Seventh CrRcurr.
Wbur Oeen ova v. Commssoner of Interna Revenue.
Petton for revew of order of the Unted States oard of Ta ppeas.
efore sohueb and vans, Crcut udges, and Woodward, Dstrct udge.
December 10, 1929.
opnon.
vans, C. .: Ths appea nvoves a dspute over the amount of appeant s
Income ta for the year endng anuary 31, 1922. The Commssoner refused
the ta payer a deducton of 35,000, and on appea to the Unted States oard
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214(a)8, rt. 163.
302
of Ta ppeas the rung was sustaned. Ths appea foowed. The ony
queston nvoved s appeant s rght to ths deducton.
ppeant s a ta payer resdng at Zon, 111., and engaged, among other
thngs, n the rea estate busness. In 1911, after becomng the recognzed
head of the Chrstan Cathoc postoc Church of Zon, he purchased from
the recever of that organzaton a arge quantty of unmproved and mproved
farm and and unmproved cty ots for whch he pad 950,000.
Ths cost was apportoned to the varous ots and parces of and as was by
appeant deemed |ust and far. Ths dstrbuton cost forms the bass of the
computatons of ta payer s gross ncome from saes of the eases of ths and.
ppeant conceved the pan of offerng ong-term eases to members of hs
regous fath and, n an ntensve drve to accompsh hs ob|ect, sod many
eases. ach ease ran for appro matey 1,080 years, but the stpuated gross
renta prce was to e pad by the essee n monthy nstaments n 7 years
ony. Thereafter the essee pad the ta es and a easehod fee of 1 and
agreed to keep the property n a proper state of repar. If essee faed to
make the payments or to perform any of the covenants the contract mght be
forfeted and determned at the opton of the appeant and upon such forfeture
the purchaser woud forfet and renqush a payments thereunder heretofore
made . Ony sma down payments were made when the ease was
e ecuted and over a thousand tracts were sod between uy 1 and December
31, 1922. The easehod saes for the fsca year endng anuary 31, 1922,
amounted to 433,258.12. ppeant s ncome ta return for ths year showed
a gross ncome of 3,026,816.21. e camed deductons to the amount of
2,834,603.67. It s out of these deductons that the present controversy arses.
fty-fve thousand doars was deducted as a reserve for bad and doubtfu
accounts. In ths tem was ncuded a reserve of 35,000 for easehod accounts
recevabe. Ths tem was dsaowed both by the Commssoner and oard of
Ta ppeas.
In computng hs ncome from easehod saes, appeant reported the gross
profts from such saes as gross ncome and deducted therefrom the amount of
the unearned porton of the easehod saes. rom ths proft baance, appe-
ant then camed a deducton of 35,000, whch he termed a reserve for bad
and doubtfu accounts.
Under certan crcumstances a reserve for bad debts may unquestonaby be
set up. (Sec. 214(a)7, ct of 1921, art. 151.) ut where, as here, the ta -
payer s reportng on nstament sae transactons and adopts the cash recepts
and dsbursements method as the bass for determnng hs profts, no aowance
can be made for a reserve to protect the unpad nstament saes. The Income
sde of the report dd not ncude the unearned porton of easehod saes whch
appeant sought of to offset by ths 35,000 tem. Obvousy t woud be un-
far to aow as a deducton an tem that had not found ts way nto the ncome
sheet. If the amount for whch a deducton n the way of reserve for had debts
s camed has tsef never been ncuded n the recepts (and we are here speak-
ng of nstament saes), t shoud not be permtted as a deducton. Ths has
been the consstent rung of the oard of Ta ppeas and the Commssoner.
( ppea of Chares . Con, 1 . T. ., 305 ppea of ooard . Smmons,
1 . T. ., 351 ppea of . Nobe ayes. 7 . T. .. 936 decson of the
Commssoner reported n C. . T-1, page 69 I. T. 2365 .)
The order affrmed.
S CTION 21-t(a)8. D DUCTIONS LLOW D:
D PR CI TION.
rtce 163: Deprecaton of ntangbe property. I -26 4681
( so Sectons 1318, 1319, and 1320, rtce 1050.) Ct. D. 193
INCOM ND C SS PRO ITS T S R NU CT O 1918 D CISION O
COURT.
1. Deducton Obsoescence Good W.
No aowance for obsoescence of .rood w due to prohbton
egsaton s deductbe from rross ncome under secton :34(a 7
of the Revenue ct of 191S.
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214(a)8, rt. 163.
2. Sut stoppe.
Where the busness of a corporaton, dssoved n 1917 by e -
praton of ts charter, s carred on n 1918 under the same name
and n the same ocaton by ts two stockhoders and drectors, who
make a corporaton return of ncome and profts ta es for the
atter year, and a cam for refund s fed n the name of the cor-
poraton by the survvng drector, who subsequenty fes aso a
second cam for refund, whch s decared to be suppementa and
amendatory of the frst cam, based upon the ground that a cor-
poraton return for 1918 was made n error, because the charter
had e pred and the busness was conducted by a partnershp,
the survvng drector, sung as trustee of the corporaton, s es-
topped to deny that the organzaton was ta abe as a corporaton
n 1918.
Court op Cams of the Unted States.
Mary . O. Rockwood, Trustee of Capce Commerca Co., a Dssoved Cor-
poraton, v. The Unted States.
March 3, 1930.
OPINION.
Gbeen, udge, devered the opnon of the court.
Ths s a sut to recover an aeged overpayment of ncome and e cess-profts
:a es for the year 1918.
The pantff s the trustee of the Capce Commerca Co., a dssoved cor-
Ioraton, whch was organzed under the aws of the State of Montana and
had been carryng on a whoesae quor busness from a tme pror to March
1, 1913. Under the aws of Montana ts charter e pred on October 13, 1917,
and the corporaton was thereby dssoved, but after that date the busness
was carred on through the year 1918 under the same name, n the same oca-
ton, and n the same manner by two stockhoders, who owned a the stock
:t the tme f ed by aw for ts dssouton. t that tme the pantff and
I wo other partes were drectors of the corporaton. The other two drectors
ded n 1923, eavng pantff the soe survvng trustee. There s nothng n
the evdence to show that the partes carryng on the busness knew that the
charter had e pred up to the tme when the second cam for refund (to whch
reference w herenafter be made) was fed on ebruary 8, 1927.
On uy 15, 1919, the Capce Commerca Co. fed a corporaton ncome and
profts-ta return for the caendar year 1918 showng a ta abty of
73,138.09, whch was assessed aganst that company n uy, 1919. Upon an
audt of ths return, the Commssoner of Interna Revenue determned the net
ncome of the company for 1918 to be 102,691.85, and by appyng the pro-
vsons for speca assessment under secton 328 of the Revenue ct of 1918 the
Commssoner determned ts ta abty to be 66,427.52, whch was pad, the
ast payment thereof beng on May 9, 1923. In determnng the net ncome of
the company to be 102,691.85, the Commssoner dd not aow any deducton
for oss of good w or other smar ntangbes. On anuary 6, 1925, the
corporaton fed a cam for refund of 51,912,01 of the ta es pad for the
year 1918, as above set forth, and as a ground for ths refund stated that the
Commssoner of Interna Revenue had refused to aow the sum of 65,000
for obsoescence of good w due to the enactment of prohbton egsaton.
Ths cam for refund was dened on pr 3, 1925.
On ebruary 8. 1927, a cam for refund of 10,280.08 of the ta es pad
for the year 1918, pus nterest and penates amountng to 2,056.02. aggregatng
12,336.10, was fed by the pantff as soe survvng drector of the Capce
Commerca Co. Te grounds of ths cam for refund were that the return
made for the year 1918 was erroneous for the reason that the charter of the com-
pany had e pred on October 13, 1917. and the corporaton had ceased to e st,
and further that after the e praton of the charter the ndvdua stock-
hoders contnued the busness as a partnershp under the same nnne aso that
the Commssoner was wthout authorty to ta the Capce Commerca Co.
as a corporaton or an assocaton. The cam for refund aso stated that t
was suppementa and amendatory of the former cam fed on anuary 6, 1925.
The frst cam for refund rases the queston of whether n computng the
net ncome of the Capce Commerca Co. for the ta abe year 1918 t was
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214(a)8, rt. 163.
304
entted to a deducton from gross ncome for obsoescence or oss of good wL
s the ony ground stated n the cam for refund as a bass of an aowance
for obsoescence or oss of good w was the fact that the State of Montana
had enacted a aw forbddng the sae of nto catng quors, commony known
as the prohbtory aw, ths queston s dsposed of by the case of Carke,
Coector, v. The abere Crysta Sprngs rewng Co., No. 68, decded by
the Supreme Court anuary 27, 1930 (C. C. . 8238), n whch t s hed that
no deducton can be made n computng net Income on such grounds. Ths
brngs us to a consderaton of the queston of whether the pantff s entted,
to a refund under her second cam fed ebruary 8, 1927.
The defendant ob|ects to a consderaton of the second cam for refund on
the ground that s months had not ntervened between the tme of the
Commssoner s decson and the tme of commencng the sut, as requred by
aw. The pantff, on the other hand, nssts that the second cam for refund
s n fact an amendment to the frst, and therefore there was no necessty of ths
apse of tme. The pantff aso asks that f the court shoud hod that the
acton was n fact prematurey brought, that she be permtted to dsmss
wthout pre|udce and commence a new sut. We do not fnd t necessary to
pass on these contentous, as upon a consderaton of the merts of pantff s
case we have come to the concuson that t s not we founded, for reasons
whch foow.
Pantff cams that after the e praton of the charter the corporaton
ceased to e st and that the partes conducted the busness as a partnershp,
but there s no evdence of any agreement between the partes and none from
whch an agreement mght be Imped to share the profts and osses of the
enterprse. Ths s an essenta eement of a partnershp, and therefore no
partnershp e sted. The busness was beng carred on by partes vountary
assocated and such an assocaton was sub|ect to the same ta es as a corpora-
ton. Under ths state of facts, we thnk t cear that the pantff can not
recover, for two reasons:
rst, the pantff s estopped to deny that the Capce Commerca Co. was
a corporaton. The company fed ts orgna return for 1918 as a corporaton,
and fed ts frst cam for a refund as a corporaton. Ths s ceary shown
by the fact that the cam was sgned by the vce presdent, and a computaton
of nvested capta made theren whch ncuded the profts of former years
when the company was a corporaton. These facts may not be suffcent to
create an estoppe for the reason that there s no evdence that the partes n
contro of the busness and who had the return and refund cam presented
knew at that tme that the charter had e pred. ut when the second cam
of refund was made, athough t was e pressy stated theren that the charter
had e pred, the pantff sought to take advantage of the company s former
cam of refund made as a corporaton and camng credts whch coud be
aowed ony n case the company was a corporaton n 1918. The pantff
st urges under the frst cam for refund that n assessng the ta to be pad,
the net profts of the corporaton for prevous years be ncuded n nvested
capta, and pantff s st askng or was so dong when the case was sub-
mtted to ths court that a deducton be made for good w ost by reason
of the prohbton act, whch formed a part of the bass of the cam fed as a
corporaton. In the ast cam for a refund pantff rases anew the contenton
of the frst cam for refund. Under ths state of facts, we thnk pantff s
estopped to set up the cam that the company was not a corporaton n 1918.
Second, f the company was not ta abe as a corporaton, t was ta abe as
an assocaton at a rate and for an amount whch at east woud have been no
ess than that assessed aganst the corporaton. Ths ta woud have been co-
ected had the assessment been tmey from the same partes who have n fact
pad the ta , and f the refund s made as camed, t w go to these partes.
The case was argued on behaf of pantff as f the refund woud go to the
corporaton. It can not, because the corporaton does not e st, nor can the
pantff propery cam a refund for the corporaton. Ths sut s entted
Mary . C. Rockwood, Trustee of Capce Commerca Co., a dssoved cor-
poraton. If ths tte be correct, the pantff has no authorty to brng the
sut, but the aegatons of the petton show that she s now the soe survvng
drector of the dssoved corporaton, and under the Montana statute s a
trustee for the stockhoders, credtors, and members of the corporaton, wth
power to wnd up ts affars and, of course, to turn over ts property to the
partes to whom t beongs and for the owners thereof. In other words, the
pantff s the trustee of ths property for the beneft of the stockhoders and
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214(a)10, rt. 204.
credtors. It thus appears that the stockhoders and credtors, or persons
camng under them, through the pantff, who s ther trustee, are makng a
cam for the refund of ta es whch they shoud have pad, on the ground that
the former assessment was erroneous n form, athough ths form was one for
whch the drectors were responsbe at the tme. We thnk t cear that the
partes for whom pantff s trustee have no bass n aw or equty for the
cam whch they are now makng. In ths concuson we are sustaned by
the decson made n McDonad Coa Co. v. ener (9 ed. (2d), 992, aff. 16
ed. (2d), 274 T. D. 3801, C. . -, 346 ), whch was a case where a partner-
shp had hed tsef out to the Government as a corporaton and of ts own
voton fed ncome and e cess-profts ta returns, as we as a capta stock
ta return, payng the ta es thereon, and was hed to be ta abe as a corpora-
ton for the years 1916, 1917, 1918, and 1919. In decdng ths case the court
sad:
They ought not n honesty and good fath to be permtted to represent them-
seves to be a corporaton, fe corporate ta returns, fe copes of mnutes of
corporate acton, certfy the sae and transfer of partnershp property to the
corporaton, and then deny the ncorporaton, when t suts the convenence of
the ncorporators. Ths s not the case of mstaken corporate ta return forms
by a partnershp there s an actua certfcaton to the Commssoner of Interna
Revenue of corporate acton, whch precudes the possbty of thfre beng any
mstake. There was a vountary and deberate adopton of the corporate forms
of acton by the persons who were the partners n the copartnershp, and who
became the ncorporators of the pantff company and ts ony stockhoders.
It s not necessary for us to decde whether the company was a de facto cor-
poraton or an assocaton. In any event, f we are correct n the vews e pressed
n the foregong opnon, the pantff s not entted to recover, and t s accord-
ngy ordered that her petton be dsmssed.
S CTION 214(a) 10. D DUCTIONS LLOW D:
D PL TION.
rtce 204: mount returnabe through depeton I -9-4548
and deprecaton n case of essor. Ct. D. 154
INCOM T R NU CTS O 1916 ND 1918 D CISION O SUPR M
COURT.
1. Deducton Depeton urden of Pboof Lessob Leases -
ecuted efore March 1, 1913.
The owner of an undvded nterest In ore ands eased before
March 1, 1913, who cams a refund of ncome ta es on the ground
that the sums aowed by the Commssoner as deductons for de-
peton were nsuffcent has the burden of estabshng the far
market ue of her nterest n the mnes on that date, and where
no estmate of the vaue of her Interest at that tme s gven n
evdence, she s not entted to recover.
2. Same owance for Depeton.
In the case of mnes, the depeton aowance permtted by the
Revenue cts of 1916 and 1918 must be based upon the far market
vaue of the ta payer s nterest n each mne consdered as an
entrety on March 1, 1913, regardess of the ocaton or tme of
e tracton of any partcuar ton of ore.
3. Same.
In determnng the far market vaue of a ta payer s nterest n
mnes, a method of estmaton whch f es the vaue per ton of ore
on March 1, 1913, at the equvaent of the sum whch f then put
at smpe nterest woud equa the actua amount receved for the
ore n ater years can not be accepted, as ths method of estmaton
dsregards the fact that the ta payer s nterest s n mnes con-
sdered as entretes and not n partcuar parts of ore beds and
decreases the 1913 market vaue wth the passng of every year.
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30G
Supreme Court of the Unted States.
Mabe O. Renecke, Coector of Interna Revenue, v. ud ra u adng.
On wrt of certorar to the Crcut Court of ppeas for the Seventh Crcut.
anuary 6. 1930.
OPINION.
Mr. ustce McRetnods devered the opnon of the court.
The respondent owns a one-s th nterest n severa eases e ecuted 1901,
1902, 1903, and 1905, whch authorze the essee to take ron ore from certan
Mnnesota ands for 25, 45, and 50 years from ther respectve dates. These
eases requre payments quartery of 25 cents royaty per ton upon a ore
e tracted provde for mnmum annua producton and termnaton under
specfed crcumstances.
Durng the year 1917 she receved out of such royates 260,072.30: durng
1918, 219,940.43. or 1917 she was aowed 99,561.20 as depeton for 1918.
84,979.55. Income ta was assessed aganst her upon the baances and pay-
ment e acted. Thereafter she unsuccessfuy camed refunds because the
sums aowed for depeton were nsuffcent. The present sut foowed.
The Revenue ct of 1918 (ch. 18, 40 Stat., 1057, 1006, 1067), approved eb-
ruary 24, 1919, provdes:
Seo. 214. (a) That n computng net ncome there sha be aowed as
deductons:
(10) In the case of mnes, o and gas wes, other natura deposts, and
tmber, a reasonabe aowance for depeton and for deprecaton of mprove-
ments, accordng to the pecuar condtons n each case, based upon cost ncud-
ng cost of deveopment not otherwse deducted: Provded, That n the case of
such propertes acqured pror to March 1, 1913, the far market vaue of the
property (or the ta payer s nterest theren) on that date sha be taken n
eu of cost up to that date: Provded further, That, n the case of mnes, o
and gas wes, dscovered by the ta payer, on or after March 1, 1913, and not
acqured as the resut of purchase of a proven tract or ease, where the far
market vaue of the property s materay dsproportonate to the cost, the
depeton aowance sha be based upon the far market vaue of the property
at the date of the dscovery, or wthn 30 days thereafter such reasonabe
aowance n a the above cases to be made under rues and reguatons to be
prescrbed by the Commssoner wth the approva of the Secretary. In the
case of eases the deductons aowed by ths paragraph sha be equtaby
apportoned between the essor and essee.
IG R D PL TION CL IM D OR LLOW NC .
Secton 5, Revenue ct for 1916 (ch. 463, 39 Stat., 756, 759), s n the mar-
gn. 1 Nether party suggests that ths dffers from the correspondng pro-
vson n the ct of 1918, supra, n any way here matera.
In her cam presented to the ta offcer for refund of overpayment for 1917
respondent sad:
Ta as assessed s based upon ncome receved from royates from ron
ore mnes. Depeton amountng to 99,561.20 was aowed to ta payer, whereas
depeton amountng to 203,510.86 shoud be aowed. The atter amount s
the present worth of the ore mned n 1917. as of March 1. 1913. and s arrved
at by dscountng the amount receved n 1917 at 5 per cent to March 1, 1913.
ke statement appears n her cam concernng overpayment for 1918.
The decaraton has two counts. The frst, reatng to payments for 1917,
aeges:
That the vaue or market prce of sad ore n the ground untouched and
une tracted on March 1, 1913, and on a dates subsequent thereto, e ceeded
the sum of 25 cents per ton. so that every ton of ore pad for under sad eases
n the year 1917 was dsposed of at a prce actuay ess than market prces
of the ore, and f then sod free of sad ease, woud have reazed more than
25 cents per ton. The actua depeton of the mnes by each ton of ore e -
tracted was more than 25 cents when e tracted.
1 Not prnted n uetn servce
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214(a)10, rt. 204.
That under the terms of the aw the depeton for ore e tracted or con-
sdered to be e tracted was f ed at the market vaue of the ore n pace In
the mne at the tme and pace of e tracton, but f such depeton aowance per
ton e ceeded the amount f ed as the royaty per ton n the ease, the depeton
aowance to the pantff coud not e ceed such royaty, but snce the royaty
when pad ncuded an amount of Interest on the payment consdered as deferred
from March 1, 1913, to the date of actua payment of royaty and the aowance
of such depeton n successve years coud never e ceed the market vaue of the
ore n the mne on March 1, 1913.
LLOW NC COULD NOT C D M R T LU .
That each payment for ore e tracted conssted of two parts, one of whch
was nterest on the deferred payment and the other of whch was the actua
present worth of the payment deferred from March 1, 1913. Sad actua present
worth Is accuratey represented for each ton by that sum whch put at nterest
on March 1, 1913, woud produce at the date of payment for ore the royaty
pad per ton to put t another way, the actua present worth of the ore e -
tracted Is accuratey ascertaned by takng from the royaty per ton pad the
part of the royaty, when and as pad, whch represented nterest on the de-
ferred payment from March 1, 1913.
That such an aowance of depeton n successve years and n the year
1917 dd not and coud not e ceed the market vaue of such ore on March 1,
1913.
That f of each payment for each ton of ore e tracted the amount of such
payment whch represents nterest on the payment as deferred and actuay
pad be fgured, the ncome of the owner w be accuratey determned as that
part of the 25 cents whch represents nterest.
That for the year 1917 a correct cacuaton under the rue above shows
that upon the tons of ore e tracted and pad for on anuary 14, 1917, of the
payment of 25 cents per ton, 0.2095 was for seng prce or prncpa and
0.0405 was nterest on the deferred payments, and that on the 330,507 tons e -
tracted the pantff was entted to depeton of 69.251.05 that upon the ore
pad for on pr 10, 1917, 0.2074 was for seng prce or prncpa and
SO.0426 was nterest on the deferred payments and that on the 48,958 tons e -
tracted the pantff was entted to depeton of 10,153.29 that on the ore pad
for on uy 10, 1917, 0.2053 was for seng prce or prncpa and 0.0447 was
nterest on the deferred payments and that on the 231,090 tons e tracted
pantff was entted to depeton of 47,434.55 that upon the ore pad for on
October 10, 1917, 0.2032 was for seng prce or prncpa and 0.0468 was
nterest on the deferred payments and that on the 432,120 tons e tracted the
pantff was entted to depeton of 87,791.42: that pantff s entted to
depeton amountng for the year 1917 to 214,630.31.
Count 2 contans smar aegatons concernng the payment for 1918.
N C SS RY TO S OW ILL G LITY O CTION. .
In the tra court, after requests by both sdes for drected verdct, the re-
spondent had |udgment, and ths was afrmed by the crcut court of appeas.
The atter court sad:
The soe controversy s over the correctness of the Government s method
of arrvng at the vaue of the ron ore n the ground on March 1, 1913, a matter
not covered by the Revenue cts n queston, nor by any reguaton of the
Treasury Department.
Ths does not accuratey state our understandng of the ssue. It was neces-
sary for the ta payer to show the egaty of the e actons. The burden of
estabshng that fact rested upon t, n order to show that t was entted to the
deducton whch the Commssoner had dsaowed, and that the addtona ta
was to that e tent egay assessed. ( otany Worsted Ms v. Unted States,
278 U. 8., 282, 289, 290 Ct. D. 39, C. . III-1, 279 ) Unted States v. ntterton
(269 . S., 422, 443 T. D. 3839, C. . -, 179 .) The rea pont s whether
respondent estabshed her cam for refund by adequate evdence. nd we
thnk she dd not.
On March 1, 1913, she was the essor of mnes from whch the essee had
the rght to e tract ore durng many years, payng therefor when taken out
25 cents per ton. er rghts were merey to receve the royates stpuated
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308
nnd to regan possesson when the eases termnated. Manfesty, the far
market vaue of ths nterest In 1913 was much ess than 25 cents per ton
of the estmated contents of the mnes, but respondent ntroduced no evdence
whch tended to show such vaue. The suggeston that market vaue per ton
on March 1, 1913, was equvaent to the sum whch f then put at smpe
nterest woud have amounted to 25 cents when the ore was actuay taken out
and the stpuated royaty became payabe can not be accepted. Ths method
of estmaton woud decrease the 1913 market vaue wth the passng of every
year. Moreover t dsregards the fact that respondent s nterest was n the
mnes consdered as entretes and not n partcuar parts of ore beds whch
the essee had agreed to remove durng desgnated future years.
Under the statute t became necessary for respondent to estabsh the far
market vaue of her nterest In the mnes on March 1, 1913, or at east that
such vaue was not beow what she camed t was. Otherwse, she coud not
recover. She ntroduced three wtnesses, who testfed as to ore vaues. No
one of them gave an estmate of the vaue of her nterest at that tme. Repy-
ng to the queston, You do not mean to testfy that Mrs. Spadng s nterest
n that ton of ore as of March 1, 1913, or at any other tme, was worth 25 cents
or any other sum, one of them sad: That queston s based upon Mrs.
Spadng s one-s th ownershp of a ease at 25 cents per ton. That queston
s an entrey dfferent one from the one asked me by Mr. Zane. It woud
requre a good dea of cacuaton and certan assumptons as to how fast that
ore woud be shpped. Then t woud requre dscountng aganst those assump-
tons to present vaue. That cacuaton woud take tme, and I can not answer
that wthout workng t out. The other two gave no estmate of such vaue.
The |udgment of the court beow must be reversed. The cause w be re-
manded to the dstrct court for further proceedngs n conformty wth ths
opnon.
Mr. ustce uter took no part n the consderaton or decson of ths cause.
S CTION 218. P RTN RS IPS ND P RSON L
S R IC CORPOR TIONS.
INCOM T R NU CT OP 1918 D CISION O COURT.
1. Deducton Loss Share of Partnershp.
ta payer, makng returns on a caendar-year bass, who s a
member of a partnershp makng ts returns on the bass of a fsca
year endng une 30, may not deduct In hs return for the caendar
year 1920, a proportonate share of any oss suffered by the part-
nershp durng the frst haf of ts fsca year ended une 30, 1921.
2. oard of Ta ppeas ndngs of act vdence.
The fndng of the oard of Ta ppeas on a queston of fact w
not be dsturbed on appea f there s any evdence to support
such fndng.
3. Opnon vdence) aue dmssbty.
The oard of Ta ppeas dd not err n refusng to accept as
evdence the opnon as to market vaue of merchandse of a wtness
whose soe source of authorty was quotatons from certan trade
papers whch were not produced n evdence.
4. Inventores ass Proof.
Where a ta payer fas to ntroduce any proof as to the bass
upon whch nventores were taken e can not cam the rght to
Incude any tems In the cosng nventory at market vaue.
UDGM NT R RS D ND C US R M ND D.
rtce 332: Dstrbutve shares of partners.
( so Secton 203, rtce 1582.)
I -13-4583
Ct. D. 166
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218, rt. 332.
5. oard of Ta ppeas ursdcton Commssoner s n-
swer Waver.
Where a ta payer has been notfed of e tensons of tme granted
the Commssoner for fng hs answer to the ta payer s petton to
the oard of Ta ppeas and proceeds wth the case on the
merts, ntroducng testmony and rasns no ob|ecton to the
vadty of the Commssoner s answer or hs rght to defend the
case and fas to make ob|ecton durng the progress of the case
before the oard that t had no rght to grant motons for such e -
tensons that dd not assgn reasons therefor as requred by the rues
of the oard, he waves the rght to ob|ect that such e tensons
were mpropery granted. In any event, such an ob|ecton can not
be rased for the frst tme on appea to the crcut court of
appeas.
6. Decson ffrmed.
The decson of the oard of Ta ppeas (13 . T. ., 51)
affrmed.
Unted States Crcut Court of ppeas, ourth Crcut.
W. W. Guy, dmnstrator of the state of . anton, Deceased, v. Comms-
soner of Interna Revenue.
On petton to revew the decson of the Unted Statea oard of Ta ppeas.
October 15, 1029.
opnon.
Soper, Dstrct udge: petton was fed wth the Unted States oard
of Ta ppeas by W. W. Guy, admnstrator of the estate of . anton.
to secure a redetermnaton of the ncome ta payabe by the estate for the
caendar year 1920. anton had been a member of a partnershp tradng
under the name of . anton Grocery Co. at Maron, N. C, and the nterest
of hs estate n the partnershp was contnued throughout the perod under
dscusson n ths case. The record shows that the ta abe year of the nd-
vdua estate corresponded wth the caendar year, whe the ta abe year of
the partnershp was computed for the perod endng une 30. It s conceded
by the partes that suc a stuaton s governed by secton 21S(a) of the
Revenue ct of 1918 (ch. 18, 40 Stat, 1057) and artce 322 of Reguatons 45
of the Treasury Department, and that n computng the net ncome of the
estate of the deceased for the caendar year there must be ncuded hs ds-
trbutve share, whether dstrbuted or not, of the net ncome of the partner-
shp for the perod endng une 30, 1920. The books of the partnershp were
cosed n the usua manner on une 30, 1920, and there was credted to the
capta account of the estate earnngs or profts amountng to 48,746. 1.
The second haf of the year 1920 was dsastrous, and on December 31, 1921,
a heavy oss, amountng to 88,728.59, was charged to the ta payer s estate.
Whe t s thus estabshed that the partnershp suffered a oss durng the
caendar year 1920, nevertheess t coud be avaed of ony n the ncome
ta return of the ta payer for the caendar year 1921.
The ta payer seeks reef on the ground that when the partnershp accounts
were cosed on une 30, 1920, tems of the nventory were erroneousy over-
vaued or omtted, so that the apparent profts then shown by the books dd
not actuay e st. When the case was heard beow, the ta payer offered to
show that the errors aeged fe nto two categores: (1) The partnershp
faed to ncude n the nventory certan ava sugar whch the partnershp
had contracted to buy durng the months of May and une, 1920, but whch
was not devered unt ater n the year. There was a oss on these goods
by reason of a decne n the market after they were bought, and t s camed
that ts oss shoud appear n the statement of une 30, 1920. (2) Dvers
tems of canned goods and other merchandse ncuded n the nventory were
erroneousy overvaued. The ta payer cams that f the errors reed on
are corrected, the substanta proft shown by the books as of une 30, 1920,
w be materay reduced, f not entrey wped out.
The Commssoner of Interna Revenue, the respondent n the case, makes
the pont on ths appea that t s not proper to ncude the osses on the sugar
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218, rt. 332.
310
contracts n the ta abe year endng une 30, 1920, on the ground that t
appears from the contracts that tte to the goods was not acqured by the
partnershp unt after that date, and consequenty no oss thereon coud have
accrued when the statement was made up. ut t s not necessary n ths
case to decde ths queston, snce, as w appear, there s evdence to sustan
the fndngs of the oard that the market vaue on Tune 30, 1020, of the goods
covered by the sugar contracts was not ess than the contract prce.
Durng the months of May, une, and uy, 1920, the sugar market was
n an e traordnary state. uctuatons were voent and erratc. Prces
reached an unusuay hgh eve and t s dtfcut to determne the precse
market vaue at any gven pont of tme. It s we known that a defnte
break n the market fnay came to pass, but whether t began before or
after une 30, 1920, was a controverted ssue before the oard. The Weeky
Statstc. ourna, an estabshed pubcaton devoted to the nterests of
the trade, faed to gve the current day prces between anuary 1 and
ugust 12, 1920, and ndcated the uncertan state of the market by descrbng
the prces durng ths perod as nomna. On ugust 12, 1920, the pubshed
prce was gven at 10.758 cents per pound. The ta payer offered the test-
mony of a member of the partnershp who sad that he had 28 years e -
perence n the purchase and sae of sugar, and that, n hs opnon, the market
vaue on une 30, 1920, of the sugar purchased by the frm was 4 cents per
pound. nother whoesae grocer testfed that he had bought the hghest
grade of refned sugar durng the entre month of une at 18 cents per pound,
and that ava sugar was of an nferor character, havng a reta prce between
2 and 3 cents ess than the hghest grade. e aso sad that n hs
opnon the break n prces occurred about the mdde of une, whch was
foowed by a genera decne n a prces of merchandse durng the atter
part of 1920. On the other hand, the records of the ta payer show that on
May 13, 1920, t purchased 1,000 bags of ava sugar at 22 cents per pound,
and on May 17, 500 bags at the same prce and that t aso bought ots of
hgh-grade sugar from the mercan Sugar Refnery as foows: On une 2,
1920, 100 barres at 22 cents per pound on une 9, 50 barres, and on une
26, 30 barres of the same goods at the same prce. The evdence aso shows
that n May, 1920, a arge quantty of rgentne sugar was sod at 23 cents
per pound and that some |obbers pad as hgh as 27 cents a pound for sugar
durng the perod under e amnaton. In ths state of the proof, we thnk
there was abundant evdence to support the fndng of the oard that on
une 30, 1920, the ava sugar whch the partnershp had agreed to purchase
was worth not ess than the contract prce. It Is we setted by the courts
of ths and other crcuts that the fndng of the oard on a queston of fact
w not be dsturbed on appea when t fnds support n the evdence. ( t-
antc Coast Dstrbutors v. Commssoner of Interna Revenue, decded by
ths court on uy 1, 1929 O bre rush Co. v. Commssoner. 32 . (2d),
42.) The pettoner contends that the rue ad down In these cases has
been upset by the decson of Od Coony Trust Co. v. Commssoner of Interna
Revenue Ct. D. 80, C. . III-2, 222 , decded by the Supreme Court une
3, 1929. ut we fnd nothng n ths case to |ustfy the ta payer s contenton.
It was there suggested that a proceedng before a crcut court of appeas
on a petton to revew a decson of the oard of Ta ppeas s not |udca
because t Invoves no cause or controversy, wthout whch a consttutona court
s ncapabe of e ercsng ts |udca functon. ut the Supreme Court hed
that ths vew coud not be sustaned and sad n the course of the argument
that t s not necessary that a proceedng to be |udca shoud be one en-
trey de novo. rom ths e presson t woud seem that f the case has any
bearng on the pont under dscusson, t tends to sustan rather than upset
the rue whch the crcut court of appeas have ad down.
In regard to other tems n the nventory of une 30, 1920, the pettoner
offered the evdence of a member of the frm to show that the vauatons
were too hgh. efore the wtness was aowed to e press a defnte opnon,
t was brought out on cross-e amnaton that he had no knowedge of actua
saes of the commodtes on or about the date n queston, or of the prces
obtaned. s soe source of authorty were quotatons from certan trade
papers whch were not produced n evdence. The oard refused to accept
the opnon of the wtness based on ths nsecure foundaton, and we thnk
that ths rung under the crcumstances was obvousy correct.
The correctness of the oard s refusn to permt the ta payer to revaue
the merchandse of the frm s further supported by the faure of the ta payer
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231, rt. 515.
to show the bass upon whch the nventory for Its fsca year was computed.
Secton 203 of the Revenue ct of 1918 provdes that nventores sha be
taken by a ta payer upon such bass as the Commssoner, wth the approva
of the Secretary, may prescrbe as conformng to the best accountng practce.
Sectons 1581 and 1582 of Treasury Reguatons 45 requre that nventores
must be vaued ether at cost prce or at cost or market prce, whchever s
ower, and that whchever bass s adopted must be apped consstenty to
the entre nventory. It s obvous that uness ths reguaton s foowed,
the ta abe Income of a busness can not be ascertaned. The evdence fas
to show that the nventory comped by the ta payer at the begnnng of the
ta abe year endng une 30, 1920, was computed on the bass of market prce
as dstngushed from the bass of cost. It foows that on ths ground aone the
decson of the oard of Ta ppeas was correct.
The ta payer further contends that the oard of Ta ppeas erred n
assumng and e ercsng |ursdcton n the case because the Commssoner
faed to fe an answer to the ta payer s petton wthn 60 days after servce
upon hm of copy of the petton. The record shows that the tme for the
Commssoner s auswer to be fed e pred uy 8, 1927, and that on the preced-
ng day, he fed a moton to be aowed 60 days addtona tme wthn whch
o fe hs answer but faed n sad moton to show any cause for the request.
The fng of a petton wth the oard by a ta payer, together wth the tme
wthn whch the petton must be fed, s reguated by the Revenue ct of
1026, secton 274 (a), (b) (eh. 27. 44 Stat., 955). There are no statutory
provsons requrng the Commssoner to fe an answer, but pursuant to the
authorty granted by Congress n secton 900(f) of the Revenue ct of 1924,
secton 907(a) of the Revenue ct of 1926, the oard has promugated rues 14
and 20. whch gve the Commssoner 60 days wthn whch to fe an answer
and authorzed e tensons of tme n the dscreton of the oard, on moton of
ether party fed n wrtng, and showng good and suffcent cause therefor.
It appears that the Commssoner faed to compy wth the provsons of the
ue reguatng e tensons of tme. ut the pettoner faed to make any
ob|ecton on ths score durng the progress of the case before the oard. e
was notfed that the e tenson was granted. e proceeded wth the case on
the merts, ntroduced testmony, and rased no ob|ecton as to the vadty
of the Commssoner s answer or hs rght to defend the case. We thnk t
s cear under these crcumstances that he waved any rght whch he may
have had to ob|ect to the consderaton of the case by the oard, and t s
now too ate n any event to rase the pont.
The decson of the oard of Ta ppeas s affrmed.
S CTION 220. SION O SURT S Y
INCORPOR TION.
rtce 351: Profts of corporaton ta abe to stock-
hoders.
R NU CT O 1921.
In|uncton to restran coecton of ta es assessed under secton
220, Revenue ct of 1921. (See Ct. D. 183. page 246.)
P RT III. CORPOR TIONS.
S CTION 231. CONDITION L ND OT R
MPTIONS O CORPOR TIONS.
rtce 515: udng and oan assocatons and cooperatve
banks.
R NU CT O 1921 ND TRIOR R NU CTS.
Rura oan and savngs assocatons organzed under the aws of
Indana. (See G. C. M. 8090. page 128.)
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312
S CTION 234. D DUCTIONS LLOW D
CORPOR TIONS.
rtce 561: owabe deductons. I -12-4570
Ct. D. 160
INCOM T R NU CT O 1918 D CISION OP COURT.
Deducton Saares uthorzed n Yeas fter Servces Ren-
dered.
ta payer keepng ts books on the accrua bass may not de-
duct, as a busness e pense, n the year n whch servces are ren-
dered, addtona saares authorzed and pad for such servces n
a subsequent year.
Dstrct Court of the Unted States, Dstrct of Mane, Southern Dvson.
Seabrght Woven et Co. v. rank . am, Coector of Interna Revenue.
anuary 24, 1930.
OPINION.
Peters, .: Ths sut s brought to recover certan addtona ncome ta es
assessed aganst the pantff for the years 1918 and 1919 and pad under pro-
test. The proprety of the deducton from ts ncome by the pantff of
certan sums pad to ts offcers and empoyees as addtona saary and com-
pensaton s the bass of the dspute.
It appears that n anuary, 1919, the treasurer of the pantff corporaton, on
hs own ntatve and wthout prevous acton by the board of drectors on the
sub|ect, drected the bookkeeper to set up a reserve account for e penses, of
whch varous tems aggregatng 33,500 was desgnated as saary reserves,
and n uy of that year the board of drectors voted that as addtona com-
pensaton for oya servces actuay rendered the foowng gfts or
bonuses be pad to our empoyees and offcers for 1918, n addton to ther
reguar saares, sad payment to take effect as of December, 1918, and the same
s hereby approved and ratfed. There foowed a st of four persons among
whom 32,000 was to be dvded, the other 1,500 gong to smaer empoyees.
ery much the same thng happened n 1920, when In anuary of that year
the treasurer agan, wthout prevous authorty, so far as the evdence dscoses,
t,et up another reserve for saares amountng to 20,400, and ater on the
drectors voted that sum, as addtona compensaton for servces rendered n
1919, to three of ts offcers or empoyees.
The varous sums voted were afterwards pad by the corporaton.
The corporaton n makng ts ncome ta return for 1918 used the bonus
payments voted n 1919 as a part of the e penses of 1918 to be deducted from
gross ncome to arrve at the net ncome. The same course was pursued the
ne t year. The Interna Revenue ureau dsaowed these deductons. The
addtona payments made necessary by ths acton were made by the ta payer,
whch has brought ths sut to have the aeged error of the ureau corrected.
Ta es for both years n queston were assessabe under the Revenue ct of
1918. y 234(a) t s provded:
That n computng the net ncome of a corporaton sub|ect to the ta m-
posed by secton 230 there sha be aowed as deductons:
(1) the ordnary and necessary e penses pad or ncurred durng the
ta abe year n carryng on any trade or busness, ncudng a reasonabe aow-
ance for saares or other compensaton for persona servces actuay ren
dered.
The frst queston whch presents tsef s whether the sums pad by the
pantff as addtona e penses were pad or ncurred durng the ta abe
years n whch they were used as deductons. Obvousy t can not be camed
that they were actuay pad durng those years, because no payments were made
n ether case unt after the votes of the drectors were passed n the year
foowng the renderng of the servces.
The pantff cams, however, that where ts books were kept on the accrua
bass, as was permtted by aw, and the servces were rendered durng the
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313
234, rt. 561.
respectve years n whch they were charged for as e penses, they were accrued
n accordance wth the method of accountng reguary empoyed n keepng
ts books, and were, therefore, deductbe n determnng the net ncome of the
pantff for those years.
The pantff ctes sectons 200 and 212(b) of the ct of 1918, as foows:
Secton 200:
That when used n ths tte
The term pad. for the purposes of deductons and credts under ths tte,
means pad or accrued or pad or Incurred, and the terms pad or ncurred
and pad or accrued sha be construed accordng to the method of accountng
upon the bass of whch the net ncome s computed under secton 212.
Secton 212(b) :
The net ncome sha be computed upon the bass of the ta payer s annua
accountng perod (fsca year or caendar year, as the case may be) n accord-
ance wth the method of accountng reguary empoyed n keepng the books
of such ta payer but f no such method of accountng has been so empoyed,
or f the method empoyed does not ceary refect the ncome, the computaton
sha be made upon such bass and n such manner as n the opnon of the
Commssoner does ceary refect the ncome.
No method of bookkeepng can be used to modfy the effect of the provson
of secton 234(a) that certan deductons, and therefore ony certan deductons,
sha be aowed to arrve at the ta abe ncome.
It may be, as the pantff argues, that the pantff s ncome s better refected
by deductng the e tra saares from the years n whch the servces were
rendered for whch the addtona sums were voted but that can not change
the pan provson of the aw, and we are confned to the queston as to whether
these bonus aowances (assumng them for the moment to be reasonabe) were
ncurred durng the ta abe year n whch charged.
To ncur means to brng upon onesef ndrecty by some act, to become
abe to somethng.
In ths case the corporaton became abe for the saares when voted by the
drectors. They were ncurred that s, they became a abty of the corpora-
ton when voted by the board of drectors, and not before. The evdence shows
tnat te by-aws of the corporaton gave ts treasurer ony the ordnary powers
of a treasurer and no authorty to saares. e can not make the corpora-
ton abe by enterng up certan bonuses whch he consders shoud be pad,
even f payments of the same amount are subsequenty ordered by the drectors.
The basc dea of the bookkeepng n the accrua system s that the books
sha mmedatey refect obgatons and e penses defntey ncurred and
ncome defntey earned wthout regard as to whether payment has been made
or s due. (O bre rush Co. v. Commssoner of Interna Revenue, 32 ed.
(2d), 42.)
The case of 8. Natove Co., Inc., v. Commssoner of Interna Revenue (32
ed. (2d), 949 Ct D. 77, C. . 1II-2, 295 ) s very much n pont. In that
case t s sad:
The accounts under the agreement were kept on the hooks of appeant on
an accrua bass, under whch system those tems of e pense coud not accrue
unt a the events occurred from whch abty coud be determned and
become f ed. Construng the provsons of the ncome ta aw here
nvoved, we are of the opnon that under the accrua system of accountng
ncome may be sad to be accrued when t s defntey receved, and that kewse
abtes or e penses w be consdered to have accrued ony when events
have occurred from whch abty or e pense can be determned and f ed,
even though payment s not yet due. Ths prncpe was nvoved n U. S.
v. nderson e at. (269 U. ., 422 T. D. 3839, C. . -, 179 .)
The oard of Ta ppeas has consstenty hed, and has been supported by
the courts n severa crcuts n hodng, that n order for a saary pad by a
corporaton to be deductbe as an e pense ncurred durng the ta abe year,
t must have been propery authorzed before or durng the year for whch t
s sought to be deducted, and that, where a saary for a pror year s authorzed
n a subsequent year, t s not an aowabe deducton for the pror year.
( ppea of Wam . Osthemer. 1 . T. ., 18.)
In aughan arnes, Inc., v. Commssoner of Interna Revenue (6 . T. .,
79) the oard sad:
4090 30 21
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5234, rt. 561.
314
If the compensaton voted and pad n 1922 was the payment of addtona
saares as and for a pror year, wthout prevous authorzaton therefor, t
woud not propery be aowabe n 1922. The reason s obvous. To hod
otherwse woud permt a corporaton wth a arge surpus In 1922 to effectuay
dspose of that surpus by votng saares over a ong seres of pror years. No
smper method of evadng ta es coud be thought of.
(W. 8. oge Co., Inc., et a. v. Commssoner of Interna Revenue, 26 ed-
era (2d), 771 dams, Payne d Ceaves, Inc., v. Commssoner of Interna
Revenue, 31 edera (2d), 1006.)
The pantff has cted, n support of ts contenton, the case of U. S. v.
nderson (269 D. S.. 422). Ths case s undoubtedy authorty for the propo-
ston that under the accrua system of accountng tems of e pense chargeabe
to a gven year may be accrued upon the books of the busness even though
the amounts were not actuay pad wthn that year. ut, nevertheess, t
must be frst determned whether or not they are proper accruas. The court
e pressy sad n that case, whch was a ta case, that
It s aso true that n advance of the assessment of a ta a the events
may occur whch f the amount of the ta and determne the abty of the
ta payer to pay t. In ths respect, for purposes of accountng and ascertanng
true ncome for a gven accountng perod, the muntons ta here n queston
dd not stand on any dfferent footng than other accrued e penses appearng
on appeee s books.
In the nstant case the saares here n queston do stand on a dfferent
footng than other accrued e penses appearng on the pantffs books, because
no events had occurred to f the amount and determne the abty of the
ta payer to pay t.
The defendant has argued wth consderabe force aganst the reasonabeness
of the saares voted one of these offcers for each of two years but n vew
of the fact that the deductons are not aowabe for the reasons mentoned 1
have not thought t necessary to consder the matter of the reasonabeness of
the amount.
udgment must be for the defendant, wth costs.
rtce 561: owabe deductons. I -14-4590
Ct. D. 168
INCOM T R NU CT O 1918 D CISION O SUPR M COURT.
Deducton Loss mount of a udgment.
Where a ta payer, keepng ts books on the accrua bass, n 1919
breaches ts contract for servces wth ts empoyee, who n that
year nsttutes a sut for damages, the amount of a |udgment
aganst the ta payer, fnay affrmed and pad n 1923 after a con-
test of ts abty, s not deductbe from gross ncome n 1919 as a
oss sustaned n that year wthn the meanng of secton 234(a)
of the Revenue ct of 1918.
Supreme Court of the Unted States. No. 67. October Term, 1929.
Robert . Lucas, as Commssoner of Interna Revenue, Pettoner, v. mercan
Code Co., Inc.
On certorar to the Unted States Crcut Court of ppeas for the Second Crcut.
ebruary 24, 1930.1
Mr. ustce randes devered the opnon of the court.
When the ncome-ta return for 1919 of the mercan Code Co., Inc., was
beng audted n 1925, the compny fed wth the Commssoner of Interna
Revenue a cam for a refund based upon ts faure to deduct from ts 1919
gross ncome the amount for whch |udgment was recovered aganst t In
1922 on a contested abty for a breach of contract n 1919. The Comms-
soner of Interna Revenue re|ected the cam and asserted a defcency. a
rung was sustaned by the oard of Ta ppeas. (10 . T, ., 476.) Its
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315
234, rt. 561.
decson was reversed by the Unted States Crcut Court of ppeas for the
Second Crcut. (30 . (2d), 222.) We granted a wrt of certorar.
(279 O. S., 832.)
The facts on whch the cam for the refund Is based are as foows: The
company agreed to empoy arquhar as saes manager for 18 years from
anuary 3, 1919, the compensaton to be a commsson based on saes. In May,
1919, t dscharged hm, for aeged cause. In uy, 1919, arquhar brought
sut aganst t n the Supreme Court of New York for wrongfu dscharge,
camng 100,000 damages. ffrmatve defenses were nterposed and abty
was contested. In October, 1919, the company notfed the Commssoner of the
sut and asked eave to deduct n ts ncome-ta return an amount equa to
the commssons for 1919 computed on the contract bass. Permsson was
refused but the company set up on ts books, at the cose of the year, a reserve
equa to the amount of such commssons, 14,704.79. t the cose of 1920, the
amount In ths reserve was Increased by 32,994.09, computed on the same
bass. In 1922, after a |ury tra, |udgment for 21,019.19 was entered n the
tra court, and, on appea by the company, was affrmed by the appeate dv-
son. The company then prosecuted a further appea to the court of appeas.
In 1923 the |udgment was affrmed by that court and pad by the company.
The |udgment havng been rendered by the tra court eary n 1922 before the
books were cosed for 1921, the reserve set up was ad|usted as of the cose of
1921 to the amount of the recovery, 21,019.19. That sum s camed as the
deducton for 1919.
The company kept ts books and made ts ncome-ta returns on the accrua
bass. The Revenue ct of 1918, ct of ebruary 24, 1919 (ch. 18, sec. 234(a)4,
40 Stat., 1057, 1077-1078), provdes that n computng net ncome osses sus-
taned durng the ta abe year and not compensated for by nsurance or other-
wse sna be aowed as deductons. Secton 212(b) provdes that the net
ncome sha be computed n accordance wth the method of accountng regu-
ary empoyed n keepng the books of such ta payer, uness the method
empoyed does not ceary refect the net ncome. nd artce 111 of Reguatons
2 o. 45 (1920 ed.) of the ureau of Interna Revenue provdes that a person
makng returns on an accrua bass has the rght to deduct a authorzed
aowances, whether pad n cash or set up as a abty .
The company s argument, sustaned by the court of appeas, s that, snce
the breach of the contract occurred n 1919, a the facts whch gave rse to the
abty were f ed n that year that damages must be assessed as of the date
of the breach that the oss therefore occurred n that year and that t s
mmatera that the amount of the damages was not determned or pad unt
ater. ttenton s specfcay caed to the provson n artce 111 whch
decares that f after makng a return a ta payer frst ascertans the amount
of a oss sustaned durng a pror ta abe year whch has not been deducted
from gross ncome, he may render an amended return for such precedng ta abe
year, ncudng such amount of oss n the deductons from gross ncome, and
may fe a cam for refund of the e cess ta pad by reason of the faure to
deduct such oss n the orgna return.
Generay speakng, the Income-ta aw s concerned ony wth reazed osses,
as wth reazed gans. (Wess v. Wener, 279 U. S., 333, 335 Ct. D. 60, C. .
III-1, 257 .) cepton s made, however, n the case of osses whch are so
reasonaby certan n fact and ascertanabe n amount as to |ustfy ther de-
ducton, n certan crcumstances, before they are absoutey reazed. s
rest ects osses occasoned by the ta payer s breach of contract, no defnte ega
test s provded by the statute for the determnaton of the year n whch the
oss Is to be deducted. The genera requrement that osses be deducted n the
year n whch they are sustaned cas for a practca, not a ega test. nd
the drecton that net ncome be computed accordng to the method of account-
ng reguary empoyed by the ta payer s e pressy mted to cases where the
Commssoner beeves that the accounts ceary refect the net ncome. Much
attude for dscreton s thus gven to the admnstratve board charged wth
the duty of enforcng the ct. Its nterpretaton of the statute and the prac-
tce adopted by t shoud not be nterfered wth uness ceary unawfu.
rtce 111 of Reguatons No. 45. nterpretng the provsons as to deductons
for osses, states: ny amount pad pursuant to a |udgment or otherwse on
account of damages for persona n|ures, patent nfrngement or otherwse,
s deductbe from gross ncome when the cam s put n |udgment or
pad . The oard of Ta ppeas has hed, n a seres of we rea-
soned opnons, that a oss occasoned by the ta payer s breath of contract s
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316
not deductbe In the year of the breach e cept under the speca crcumstances
where, wthn the ta year, there s a defnte admsson of abty, negotatons
for settement are begun, and a reasonabe estmate of the amount of the oss
s accrued on the books.1
It may be assumed that, snce the company kept ts books on the accrua
bass, the mere fact that the e act amount of the abty had not been def-
ntey f ed n 1919 woud not prevent the deducton, as a oss of that year, of
the amount ater pad. ut here there are other obstaces. Obvousy, the
mere refusa to perform a contract does not |ustfy the deducton, as a oss, of
the antcpated damages. or even an unquestonabe breach does not resut
In oss, f the n|ured party forgves or refrans from prosecutng hs cam.
nd, when abty s contested, the nsttuton of a sut does not, of tsef,
create certanty of oss. In the few cases n whch the oard of Ta ppeas
as aowed a deducton n the year of the breach, the contracts, nvovng the
purchase and sae of goods, were performabe n a comparatvey short perod
the appro mate amount of the damages was reasonaby predctabe negota-
tons for settement had been commenced wthn the year and were competed
soon after ts cose and the ta payers had accrued on ther books, at the end
of the year, a abty reasonaby estmated to equa the amount of the
damaRes.2
In the case at bar, the contract had neary 18 more years to run, at the tme
of ts breach. Labty for the breach was dened and strenuousy contested,
the tgaton beng carred to the hghest court of the State. The amount of
the damages, f any, was whoy unpredctabe. Whe the facts determnng
abty had occurred n the year of the breach, the amount to be recovered, f
there was ega abty, depended n arge part on the course of future events.
arquhar was under a duty to mtgate damages. e mght have procured
new empoyment, whch woud have reduced hs recovery to a nomna amount.
Or, recovery mght have been reduced or defeated by hs death. nay, the
company dd not accrue on ts books, wthn the ta year, a abty n the
estmated amount of the oss. The reserve set up had no reaton to the
apprehended tota oss. It consttuted smpy the amount of the commssons
whch woud have been payabe n that year f arquhar had remaned n the
company s empoy. That the company dd not ntend the reserve to be an
accrua of the tota estmated oss s ceary ndcated by the fact that, n 1920,
t charged to the reserve, to cover the commssons whch woud have been
payabe n 1920, an addtona amount, more than doube that charged n 1919.
The prudent busness man often sets up reserves to cover contngent abtes.
ut they are not aowabe as deductons. The reserve set up by the company
was of that character. It can not be sad that the oss actuay pad by the
company n 1021 was, as a matter of aw or of undenabe fact, sustaned n 1919.
Nor dd the company so regard t. The case at bar s unke Unted States v.
nderson (269 U. S-, 422 T. D. 3839, C. . -, 179 ). There, the abty for
the muntons ta at a f ed rate on the busness done In 1916 had confessedy
accrued n that year and was a charge on the busness of that year, athough
the e act amount due may not have been then ascertanabe and the ta was
not payabe unt 1917. It s aso unke mercan Natona Co. v. Unted
States (274 U. S., 99 T. D. 4099, C. . I-2, 193 ). There the bonus contract
ppea of Producers ue Co., 1 . T. .. 202: ppea of rghton Ms, 1 . T. .,
302 ppea of New Process Cork Co., 3 . T. ., 1339 ppea of Rump Confectonery Co.,
4 . T. .. 50 ppea of amer Coa Co., 4 . T. ., 947 : Umpre Prntng f o Co. .
Commssoner, 5 . T. ., 203: ppeat of Nce Ra Rearng Co., . T. ., 484, 496
Raegh Smokeess ue do. v. Commssoner, 6 . T. ., 381 armers Natona Rank v.
Commssoner. 6 . T. ., 1036 ewe v. Commssoner. 6 . T. ., 1010 Lynchburg Co-
ery Co. v. Commssoner, 1 . T. ., 282 dago Stee Co. v. Commssoner, 8 . T. ..
76 raser Rrck Co. v. Commssoner, 10 . T. ., 1262 Lebcter Manufacturng Co. v.
Commssoner, 12 . T. ., 145 . G. Curts Leather Co. v. Commssoner, 13 . T. .. 1259.
Compare ppea of Land Constructon Co., 4 . T. ., 1133 Ceuod Co. v. Commssoner,
9 . T. .. 989, 1005 Oraham-Rumgarner Co. . Commssoner, 11 . T. ., 603, 605
Lehgh udson Rver Ry. Co. v. Commssoner, 13 . T. ., 1154, 1164.
Thus, n ppea of Producers ue Co.. note 1 supra, there wore two contracts for the
purchase, respectvey, of 15,700 and 20.000 tons of coa n equa monthy nstaments
between May, 1020, and March. 1921, and between May. 1920, and May. 1921. oth con-
tracts wen rokon Id December, 1920, and offers of settement were mmedatey made.
U se ves of 7,500 and 30,000 wore set up n 1920. The cams were setted In anuary,
1921, for 5,500 and 29,792.40. Smar stuaton were Invoved n Raegh Smokeess
ue Co. v. Commssoner and raser Rrck Co. v. Commssoner, bd.
Compare ppea of Uruhn Company, 1 . T. .. 932 ppea of M. O. Stockbrdgc, 2
It. T. ., 327 ppea of Northwestern akers Suppy Co., 2 . T. ., 834 ppca of Rch-
mond Lght t Roroad Co., 4 . T. ., 91 ston v. Commssoner, 4 . T. .. 1159 The
Daes Co. v. Commssoner, 6 . T. ., 281, 2S3 : bre Yarn Co. v. Commssoner. 10
. T. ., 479, 480 aufman Department Stores, Inc., v. Commssoner, 11 . T. ., 949.
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234, rt. 561.
provded defntey for the payment of a f ed amount. It was debtum n
n-ae ent, sovendum n futuro. The case at bar s n prncpe more ke
Letceyn v. ectrc Reducton Co. (275 U. S., 243).
Reversed.
rtce 561: owabe deductons. I -16-4605
Ct. D. 171
INCOM T R NU CT O 1918 D CISION O COURT.
1. Deducton Loss rom Rebates.
Where goods are sod n 1018, guaranteed to be of good mer-
chantabe stock, the proft from the sae beng ncuded n ncome
of that year, and n 1910 the goods are found to be defectve and
the ndebtedness of the purchaser for the sae prce s therefore
dscharged, the vendor s oss s not deductbe n 1018 as a rebate
to the purchaser n pursuance of a contract entered nto durng
the year 1018 upon a sae made durng that year as contempated
by secton 234 (a) 14 of the Revenue ct of 1918.
2. Decson ffrmed.
The decson of the oard of Ta ppeas (11 . T. ., 846)
affrmed.
Court of ppeas of the Dstrct of Coumba. No. 4886.
ennngsen Produce Co. v. Commssoner of Interna Revenue.
ppea from a decson of the oard of Ta ppeas.
efore Martn, Chef ustce, and Robb and an Orsde, ssocate ustces.
anuary 6. 1930.
The stpuated facts are substantay as foows: On November 23, 1918,
appeant, a Nebraska corporaton, sod to a commsson company of Omaha,
Ne r.. a quantty of frozen, m ed eggs, guaranteeng them to be good
merchantabe stock. The sae prce of the eggs. 5,460.4 ), was ncuded n
appeant s gross saes for 1918, and aso as gross ncome n ts ncome ta
return for that year. The commsson company shpped the eggs to Chcago,
where, n 1010. they were sezed and fnay hed not to compy wth the
edera pure food aws. On pr 30, 1010, appeant credted to the com-
msson company the entre saes prce of the eggs, and dscharged the
commsson company s ndebtedness to t.
ppeant camed the oss n ts ncome ta return for 1918. The Com-
mssoner dsaowed t, but dd aow t for 1010. The oard of Ta ppeas
aftrmed the Commssoner.
The ta n ths case was computed under the provsons of the Revenue
ct of 1018 (40 Stat., 1057). Secton 234(a) of that ct provdes that n
computng the net ncome of a corporaton sub|ect to the ta mposed by secton
230 ttere sha be aowed as deductons: (4) Losses sustaned
durng the ta abe year and not compensated for by nsurance or other-
wse: .
Secton 234(a) 14(a) reads, n part, as foows:
t the tme of fng return for the ta abe year 1018 a ta payer may fe
a cam n abatement based on the fact that he has sustaned a substanta
oss (whether or not actuay reazed by sae or other dsposton) resutng
from any matera reducton (not due to temporary fuctuaton) of the vaue
of the nventory for such ta abe year, or from the actua payment after
the cose of such ta abe year of rebates n pursuance of contracts entered
nto durng such year upon saes made durng such year. If t
s shown to the satsfacton of the Commssoner that such substanta oss
has been sustaned, then n computng the ta es mposed by ths tte and
by Tte III the amount of such oss sha be deducted from the net
ncome,
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234, rt. 564.
318
The Commssoner deducted appeant s oss, under secton 234(a)4, n the
I91t return. ppeant contends that t shoud mve been deducted from
the 1018 return as a refund under secton 234(a) 14(a).
It s apparent from an e amnaton of the provsons of secton 234(a)14(u)
that ts purpose was to protect ta payers from abnorma condtons resutng
from the Word War and ts termnaton. It was recognzed that the market
vaue of the nventores of many ta payers woud be key to be ower because
of the termnaton of the war. When, therefore, ncome was determned for
1 )1S by the use of such nventores, t was manfest to Congress that such
ncome woud not be reazed f thereafter goods were sod at prces ower than
those prevang n 1918. ence the provson that the ta payer mght fe a
cam n abatement based on the fact that he had sustaned a substanta oss
resutng from any matera reducton of the vaue of the nventory for such
ta abe year. When the ta payer had made a sae n 1918 of goods nventored
n that year, under an agreement requrng the ta payer to aow a rebate to
the purchaser n the event of matera reducton n the vaue of the goods sod,
the ta payer was authorzed, under the aternatve provson of the secton, to
a deducton as of 1918.
In other words, as found by the Commssoner and the oard of Ta ppeas,
ths provson for rebate must he read n connecton wth the conte t and,
when so read, t s apparent that t was meant to cover osses smar n
character to those aowed on account of deprecated nventores. In our vew,
appeant s oss was not a rebate to the purchaser n pursuance of a contract
entered nto durng the year 1918 upon a sae made durng that year, as pro-
vded n secton 234(a)14(a). It was a payment by way of damages resutng
from the breach of warranty and, therefore, aowabe under the provsons of
secton 234(a)4. The dstncton between a warranty and a contract wheren
the vendor agrees n the event of a certan contngency to rebate some porton
of the purchase prce of the goods sod s too apparent to requre dscusson.
We concude, therefore, that appeant s oss was not of the character pro-
vded for n secton 234(a) 14(a).
The decson of (he oard s affrmed, wth costs.
ffrmed.
rtce 564: Interest. I -17-4614
Ct. D. 174
ncome ta revenue act of 1921 decson of court.
Deducton Interest edera ont-Stock Land ank.
edera |ont-stock and bank s not entted to deduct from
gross ncome nterest pad by t on ts bonds under the provsons
of secton 234(a)2 of the Revenue ct of 1921.
Court of Cams op the Unted States.
The rst Natona ank of Chcago, a Natona ankng ssocaton, v. The
Unted States.
March 3, 1930.
OPINION.
Wams, udge, devered the opnon of the court.
Decson n ths case was orgnay rendered n favor of the pantff on
May 0, 1929. moton for new tra havng been made by the defendant and
granted, and the |udgment vacated and the fndngs of fact and opnon wth-
drawn, the case s agan before the court for consderaton on merts.
The pantff seeks to recover the sum of 9,124.70, an aeged overpayment,
of ts ncome and profts ta es for the year 1922.
The facts have been stpuated and the soe queston to be determned s one
of aw, that s, whether or not nterest pad by |ont-stock and banks on ther
|ont-stock and bank bonds s deductbe from ncome under secton 234(a)2 of
Tte 11 of the Revenue ct of 1921 (42 Stat., 254).
The pantff, the rst Natona ank of Chcago, fed for the year 1922 a
consodated ncome and profts ta return, whch return consodated the
ncome of pantff and the foowng affated corporatons:
rst Trust Savngs ank, an Inos corporaton, Chcago, 111.
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319
234, rt. 664.
rst Natona Investment Co., now rst-Chcago Corporaton, an Inos
corporaton, Chcago, 111.
Natona Safe Depost Co., an Inos corporaton, Chcago, 111.
rst Trust ont Stock Land ank of Chcago, a |ont-stock and bank
organzed under the edera arm Loan ct of 1916, wth ts prncpa offce
n the cty of Chcago, 111.
rst Trust ont Stock Land ank of Daas, a |ont-stock and bank organ-
zed under the edera arm Loan ct of 1916, wth ts prncpa offce n the
cty of Daas, Te .
In computng ts ncome pantff deducted the amount of 78,807.80, ths
amount beng nterest pad durng the year 1922 on |ont-stock and bank bonds
of the rst Trust ont Stock Land ank of Chcago and the rst Trust ont
Stock Land ank of Daas.
The Commssoner of Interna Revenue dsaowed sad deducton. tmey
cam for refund was fed and re|ected, and ths acton s brought for the
recovery of the amount camed on account of the dsaowance of the rght to
deduct sad nterest, to wt, 9,124.70.
The rst Trust ont Stock Land anks of Chcago and of Daas were organ-
zed under the edera arm Loan ct of uy 17, 1916 (39 Stat., 360), and the
bonds n queston were ssued and sod to the pubc n accordance wth the
provsons of sad ct, and they were secured as requred by sad ct by the
depost, wth the proper farm oan regstrars, of farmers promssory notes,
whch n turn were seemed by frst mortgages on the borrowng farmers and.
The proceeds derved by the |ont-stock and banks from the ssue and sae of
sad bonds were used n makng new oans to farmers, whch were secured
n precsey the same manner as herenabove stated. Interest receved by
pantff on the farmers notes and mortgages was not ta abe as ncome, and
was not so ta ed for the year 1922. Interest on the sad |ont-stock and bank
bonds s not ta abe as ncome and the hoders of such bonds were not ta ed
on such ncome for the year 1922. The farmers notes and mortgages provde
for the payment of the oan on an amortzaton pan, as provded n secton 12
of the edera arm Loan ct, coverng a perod of 33 years, e cept, at the
opton of the borrowng farmer, t may be pad sooner. ont-stock and banks
are not permtted to engage n any busness e cept that of makng oans to
farmers and ssung bonds.
Secton 234 of the Revenue ct of 1921 reads:
(a) That n computng the net ncome of a corporaton sub|ect to the ta
mposed by secton 230 there sha be aowed as deductons:
(2) nterest pad or accrued wthn the ta abe year on ts ndebtedness,
e cept on ndebtedness ncurred or contnued to purchase or carry obgatons
or securtes the nterest upon whch s whoy e empt from ta aton
under ths tte.
Nether the ont Stock Land ank of Chcago nor the ont Stock Land
ank of Daas had any ta abe ncome for the year 1922, and nether of these
nsttutons as such pad ncome or profts ta es for that year. The queston
of the deductbty of the nterest pad by them on ther outstandng bonds
arses soey because of ther affaton durng the year wth pantff and other
corporatons havng ta abe ncomes, and the deducton s sought from ther
consodated ncome. Ths fact, of course, does not affect the rght of the
pantff to have the deducton camed f the |ont-stock and banks wth whch
t was affated durng the year woud have had a rght to the deducton had
they fed ndvdua returns for the year.
ont-stock and banks, not beng permtted to engage n any busness e cept
that of makng oans to farmers and ssung ther bonds to procure the
necessary funds therefor, do not ordnary have ncome sub|ect to ta aton,
and so ong as such banks operate as ndvdua and separate nsttutons, t
can not make the sghtest dfference whether they have or do not have the
rght to deduct the nterest pad on ther bonds. Ther ncome s ta e empt,
and consequenty the rght to make deductons therefrom means nothng.
When, as n the nstant case, |ont-stock and banks are affated wth bankng
corporatons that do have ta abe ncomes, the queston assumes mportance,
as the nterest deductons, f aowed, reduces the ta abty of the affac
group even then, however, t n no way affects the |ont-stock and banks
ncuded n such consodaton. They have no ta abe ncome and they pay
no ta es.
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234, rt. 564.
320
The pantff contends, (1) that the nterest deductons dened n respect
of ndebtedness ncurred or contnued to purchase or carry obgatons or se-
curtes, the nterest upon whch s whoy e empt from ta aton under ths
tte, has no reasonabe reaton or ogca appcaton to ndebtedness ncurred
by |ont-stock and banks on ther bonds to provde funds to make oans to
farmers on ther frst mortgages n contempaton of the edera arm Loan
ct, and there s no reasonabe ground on whch to attrbute any contrary
ntent to Congress. (2) That the face vaue constructon of the e cepton
cause, to the effect that such ndebtedness of |ont-stock and banks s not
ndebtedness ncurred or contnued to purchase or carry obgatons or secur-
tes, the nterest upon whch s whoy e empt from ta aton under ths tte,
s smpe, drect, and unambguous. (3) To cass a |ont-stock and bank n-
debtedness on ts bonds as ndebtedness ncurred or contnued to purchase or
carry obgatons or securtes, the nterest upon whch s whoy e empt from
ta aton under ths tte, mputes to the Congress an ntent whch s ncon-
sstent wth the cear ntent manfested by the Congress n the edera arm
Loan ct.
It s partcuary urged that
(a) The oanng of money by |ont-stock and banks to farmers on ther
frst mortgage securty s not a purchase or carry n contempaton of
the nterest deducton e cepton cause, secton 234(a)2, and consequenty
the e cepton s not appcabe to such ndebtedness of |ont-stock and banks
represented by ther bonds.
(b) The ndebtedness of |ont-stock and banks represented by ther bonds
s not ncurred or contnued to purchase or carry obgatons and securtes the
nterest upon whch s whoy e empt from ta aton under ths tte n that
the ony possbe e empton under ths tte woud be on the theory that frst
mortgage notes e ecuted to |ont-stock and banks, evdencng oans to
farmers, are securtes ssued under the provsons of the edera arm Loan
ct n contempaton of secton 213(b)4(b), and such frst mortgage notes
are not securtes ssued under the provsons of the edera arm Loan
ct.
(e) Obgatons or securtes n contempaton of the nterest deducton
e cepton cause are, n any event, ony such obgatons or securtes as are
desgnated n the nterest e empton cause, secton 213(b)4. armers mort-
gage notes evdencng such oans to them by |ont-stock and banks do not fa
wthn the obgatons or securtes desgnated n the nterest e empton
cause, secton 213(b)4(b). Consequenty, the ndebtedness of the |ont-stock
and banks ncurred to provde funds to make such oans to farmers s not
ncurred to purchase or carry ohgatons or securtes n contempaton of
secton 2S4(a)2, and therefore the nterest on such ndebtedness s deductbe,
rrespectve of the source of the e empton granted n respect of nterest pad
to |ont-stock and banks on such farmers frst mortgage notes.
(d) The nterest deducton e cepton phrase e empt from ta aton under
ths tte s the equvaent of e empt (from ta aton) under ths tte.
referrng to e emptons contaned n nterest e empton secton 213(b)4(b)
and appes as set forth n (b) above.
onds ssued by |ont-stock and banks consttute ndebtedness of such
hanks. Ths ndebtedness s ncurred and contnued by the banks to procure
funds to oan to farmers on ther notes secured by frst mortgages, the nterest
of whch s whoy ta e empt.
The queston s. Does ths ndebtedness of the |ont-stock and banks con-
sttute an ndebtedness Incurred or contnued to purchase or carry the notes
and frst mortgages of borrowng farmers
The pantff contends that t does not. That endng money to farmers on
ong-tme oans, secured by notes and mortgages, s not the purchasng and
carryng of such notes and mortgages.
Purchase s defned by Webster s New Internatona Dctonary as
(2) Law: Techncay, to acqure (rea estate) by any means whatever
other than descent or nhertance.
(3) To obtan (anythng) by payng money or ts equvaent the acqus-
ton of tte to, or property n, anythng for a prce buyng for money or ts
eq uvaent.
y the New Standard Dctonary as
Purchase: (1) To obtan or secure as one s own by payng or promsng to
pay a prce. (3) Law: (1) To acqure (property) by one s own act or agree-
ment, as dstngushed from the act or mere operaton of aw.
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321
234, rt. 564.
Synonym: cqure bargan for barter for get obtan procure secure.
The term purchase n ts genera sgnfcaton, and whch s the ega sense
of t, ncudes a modes of acqurng property e cept by descent, and t embraces
a devse. (McCartee v. Orphans syum (N. Y.), 9 Cow., 437.)
The payee of a note s the purchaser thereof, f he advances money or other-
wse parts wth vauabe consderaton therefor. (8 C. ., 468, 469, 470.)
The word carry s defned n Words and Phrases, voume 1, second seres,
page 577, as foows:
The term carry as used n contract by whch one of the partes to a con-
tract for the purchase of a patent rght agreed to carry the nterest of another
party who was to have a part nterest theren, means advance the money to
pay hs nterest. (Mann v. Urquhart, 116 Sw., 219, 222.)
Webster s Internatona Dctonary contans the foowng defnton:
16 Com. To bear the charges or burden of hodng or havng, as stocks,
merchandse, etc., from one tme to another to keep on one s books as a debtor
to bear to support.
New Standard Dctonary defnes the word carry :
10. To keep on hand mantan keep up support hod as to carryng a
fu stock to carry fe nsurance.
The words purchase or carry, n our opnon, uness they are to be gven a
technca meanng dfferent from that n whch they are ordnary used, are
apt words and characterze precsey the acquston of and the hodng of
farmers notes and mortgages by |ont-stock and bunks. We thnk, therefore,
the bonds of |ont-stock and banks consttute ndebtedness ncurred and con-
tnued to purchase and carry the ta -e empt notes and mortgages of farmers
e ecuted and ssued under the provsons of the edera arm Loan ct of 1916.
The pantff ne t contends that the notes and mortgages of farmers gven and
e ecuted under the provsons of the edera arm Loan ct are not obga-
tons or securtes wthn the meanng of the e cepton to the nterest-
deducton cause of secton 234 of the 1921 Revenue ct.
Obgatons s a generc word, and ncudes a knds of contracts by whch
contractng partes bnd themseves, and, n the absence of mtng words or the
connecton n whch t s used, w be construed n ts generc sense. (Snton
v. County of Carter, 23 ed., 535.)
The word obgatons has a very broad and comprehensve ega sgnf-
caton and embodes a nstruments of wrtng, however nforma, whereby one
party contracts wth another for the payment of money or the devery of specfc
artces. ( ouver s Law Dctonary. State v. Campbe, 103 N. C, 344
Morrson v. Love|oy, 6 Mnn., 353 (G., 224).)
Securtes s defned by standard authortes as foows:
Webster s New Internatona Dctonary:
Securty That whch secures or makes safe. Specf.: Somethng gven,
deposted, or pedged to make secure, or certan, the fufment of an obga-
ton, the payment of a debt. Specf.: n evdence of debt or of property, as a
bond, a stock certfcate, or other nstrument, etc. a document gvng the hoder
the rght to demand and receve property not n hs possesson.
bbott s Law Dctonary:
Securtes (pura) Is n use a genera term for wrtten assurances for
payment of money evdences of debt.
ack s Law Dctonary:
Securty The term s usuay apped to an obgaton, pedge, mortgage,
depost, en, etc. gven by a debtor n order to make secure the payment or
performance of hs debt, by furnshng the credtor wth a resource to be used
n case of faure n the prncpa obgatons.
If the anguage of the nterest-deducton cause, and the e cepton theren,
eft any doubt whatever that the frst mortgage notes are securtes, that doubt
s competey removed by the pan anguage of the edera arm Loan ct
under the provsons of whch such frst mortgages are acqured by |ont-stock
and banks, as they are ceary desgnated n the ct tsef as securtes.
Secton 18 of the ct provdes:
That any edera and bank or |ont-stock and bank, whch sha have voted
to ssue farm oan bonds under ths ct, sha make wrtten appcaton to the
edera arm Loan oard, through the farm oan regstrar of the dstrct, for
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322
approva of such ssue. Wth sad appcaton sad and bank sha tender to
sad farm oan regstrar as coatera securty frst mortgages o farm hnds
quafed under the provsons of secton 12, secton 15, or secton 16 of ths
ct, or Unted States Government bonds, not ess n aggregate amount than the
sum of the bonds proposed to be ssued. Sad bank sha furnsh wth such
mortgages a schedue contanng a descrpton thereof and such further nfor-
maton as may be prescrbed by the edera arm Loan oard.
Upon recept of such appcaton sad farm oan regstrar sha verfy sad
schedue and sha transmt sad appcaton and sad schedue to the edera
arm Loan oard, gvng such further nformaton pertanng thereto as he
may possess. The edera arm Loan oard sha forthwth cause to be made
such nvestgaton and apprasement of the securtes tendered as t sha deem
wse, and t sha grant n whoe or n part, or re|ect entrey, such appcaton.
Whe bonds of the Government of the Unted States are authorzed to he
tendered and used as coatera securty for farm-oan bonds, t s a matter
of common knowedge that they are not so used by |ont-stock and banks for
that purpose to any apprecabe e tent.
The record dscoses that farmers notes and frst mortgages were the ony
coatera securty tendered by the ont Stock Land anks of Chcago and
Daas wth ther varous appcatons to the edera arm Loan oard for
authorty to ssue farm-oan bonds. They were the ony securtes whch the
edera arm Loan oard under the provsons of secton 18 of the eders
arm Loan ct coud nvestgate and apprase n passng upon and approvng
appcaton to ssue the bonds n queston. If pantff s contenton s correct
that these notes and frst mortgages are not securtes wthn the meanng
of the edera arm Loan ct, no nvestgaton or apprasement of securtes
tendered was ever made by the edera arm Loan oard n passng upon
the appcatons of the ont Stock Land anks of Chcago and Daas to
ssue farm-oan bonds, because no securtes were ever tendered. To drect
the edera rm Loan oard to nvestgate and apprase the securtes
tendered as coatera securty for farm-oan bonds, and then say that farmers
frst notes and mortgages, whch consttute the ony coatera securty
tendered, as was the case here, are not securtes wthn the meanng of the
edera arm Loan ct amounts to an absurdty. The framers of a statute
are presumed to know and understand the meanng of the words used, and
where the anguage used Is cear and free from ambguty, and not n confct
wth other parts of the same ct, the courts must assume the egsatve ntent
to be what the pan meanng of the words used mport.
That Congress ntended to make the notes and frst mortgages of borrowng
andowners securtes, by the anguage used In secton 18 of the edera arm
Loan ct, s qute cear from other provsons of the ct and by the essenta
functons they perform In the whoe scheme of the |ont-stock and bank system.
armers notes and frst mortgages are repeatedy referred to In the ct as
coatera securty, and n secton 26 of the ct they are paced on the same
bass and gven the same ega status as the farm-oau bonds ssued under the
provsons of the ct.
Secton 26 reads:
rst mortgages e ecuted to edera and banks, or to |ont-stock and
hanks, and farm-oan bonds ssued under the provsons of ths ct, sha- be
deemed and hed to be nstrumentates of the Government of the Unted States
and as such they and the ncome derved therefrom sha be e empt from
edera, State, muncpa, and oca ta aton.
The farm-oan bonds are evdences of ndebtedness of the |ont-stock and
banks. The farmers notes and mortgages are evdences of ndebtedness of
borrowng farmers. They are of equa mportance n the operaton of |ont-
stock and bunks, and they are each made nstrumentates of the Govern-
ment of the Unted States n the ct provdng for the creaton of such banks.
The functon of these two Instrumentates n the operaton of the |ont-
stock and bank system s we stated n an opnon of ttorney Genera T. W.
Gregory (Opnons of ttorney Genera, voume 31, 105) :
I do not deem t necessary to anayze the ct n deta. It Is suffcent to
say that the mortgages and farm-oan bonds are of the very essence of the
system created by t. The orgna capta of the edera and banks s to be
oaned, through the agency of natona farm-oan assocatons, to bona fde
cutvators of the so on frst mortgages on farm ands. When a suffcent
amount n such mortgages has accumuated, they are to be turned over to a
regstrar apponted by the arm Loan oard, and wth the approva of the
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323
234, rt. 564.
board, farm-oan bonds are ssued by the and bank and sod. Wth the proceeds
further oans are made on mortgages, whch mortgages n ther turn become
the bass of an addtona ssue of bonds. Ths contnuous fow and refow of
mortgages and bonds consttutes the prme functon of the whoe system.
The provsons of secton 18 of the edera arm Loan ct desgnatng these
nstrumentates of the Government of the Unted States (farmers notes and
frst mortgages) securtes are n harmony wth the manfest ntent of the other
provsons of the ct and of the whoe scheme underyng the creaton and
operaton of |ont-stock and banks.
We are of the opnon that the notes and frst mortgages owned and hed by
|ont-stock and banks, and used by them as coatera securty for the payment
of ther bonds, are securtes under the provsons of the edera arm Loan
ct of 1916, and that as such the nterest upon them s specfcay e empted
from ta aton under secton 213(b)4 of the Revenue ct of 1921. It foows
that under the provsons of secton 234(a)2 of that ct the nterest pad by
|ont-stock and banks on ther farm-oan bonds, whch s ndebtedness ncurred,
and contnued to purchase and carry such securtes, comes wthn the e cepton
and s not deductbe from ncome.
The pantff urges the deducton of the nterest pad on ts farm-oan bonds
shoud not be dened for the reason that such dena tends to thwart or defeat
the purposes sought to be attaned n the enactment of the edera arm Loan
ct, to wt, to enabe farmers to obtan ong-tme oans on the securty of ther
ands at reasonabe rates of nterest. It s conended dena of the deducton
sought woud mpose a burden on the |ont-stock and banks contrary to the
ntent of the edera arm Loan ct and not contempated n the e cepton to
the nterest-deducton cause of secton 234(a)2.
Three agences are created by Congress under the provsons of the edera
arm Loan ct to carry out the purposes of the ct the edera farm banks,
natona farm-oan assocatons, and |ont-stock and banks. The natona farm-
oan assocatons are oca organzatons of andowners who desre to borrow
money on ther ands from edera farm banks.
The provsons of the ct provde that the contnenta Unted States, e cud-
ng aska, sha be dvded by the edera arm Loan oard nto 12 edera
and bank dstrcts, n each of whch dstrcts sha be estabshed one edera
farm-and bank. ach edera farm bank s requred to have a mnmum capta
stock of 750,000. The capta stock s dvded nto shares of 5 each and may
be subscrbed for and hed by an Indvdua, rm, or corporaton, or by the
government of any State or of the Unted States. It s provded that n case
the capta stock of a edera farm bank s not subscrbed wthn 30 days after
the books of such banks are opened for subscrpton for ts stock, t sha be the
duty of the Secretary of the Treasury to subscrbe the baance thereof on
behaf of the Unted States. n appropraton of 100,000,000 was provded n
the ct for the purpose of carryng nto effect the provsons of the ct. Prac-
tcay a the capta stock of the 12 edera and banks was subscrbed by the
Secretary of the Treasury and carred by the Government.
ont-stock and banks are organzed on a bass entrey dfferent from that
of the edera farm banks. The Government of the Unted States s e pressy
prohbted from subscrbng to or purchasng any of ther capta stock.
There are no requrements as to the ocaton of |ont-stock and banks nor
any mtaton on the number that may be organzed. They may be organzed
on the appcaton of any number of natura persons not ess than 10 and
wth a capta stock not ess than 250,000.
It s true, as contended by the pantff, the creaton of |ont-stock and
banks was authorzed on the theory that they woud serve as usefu agences
n accompshng the prmary purposes of the farm oan ct.
owever, the soe purpose of the stockhoders of |ont-stock aud banks s
to make profts out of ther nvested capta. It was the ntent of the farm oan
ct that these banks shoud be proft-makng nsttutons. Uness nvestors
coud make profts there woud be no nducement to them to furnsh the capta
requred for the organzaton of such banks, and obvousy they woud not be
organzed. In order that they mght be proft-earnng nsttutons, Congress
n the farm oan ct conferred on |ont-stock aud banks muefts and prveges
never before gven to any corporaton, agency, or nsttuton fnanced by prvate
capta and organzed and operated for proft.
ont-stock and banks are permtted to do two thngs, and nothng ese oan
money to farm owners, secured by frst mortgages on ther aud, and to ssue
and se farm-oan bonds.
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234, rt. 564.
324
The nterest receved by the banks on the notes and mortgages of borrowng
farmers to whom they oan money s e empt from a ta aton. The nterest
on ther outstandng bonds s e empt from ta aton. They are permtted to
receve nterest on oans to farmers to the e tent of 1 per cent n e cess of
the rate of nterest pad by them on ther bonds. eng permtted to ssue
bonds and make oans to ffteen tmes the amount of ther capta stock, they
have a possbe ma mum annua proft of 15 per cent on ther nvested capta,
ess e penses of operaton. In addton to ths they are e empted from
many of the restrctons mposed n the farm oan ct on the edera farm
banks as to nterest, the amount of money that may be oaned to a snge
borrower, the per cent of the vauaton that may be oaned upon, etc.
It w be seen that these |ont-stock and banks, so far as ther stockhoders
are concerned, are corporatons whch are organzed for proft, and when
managed and operated n the manner contempated n the farm oan ct they
can not be otherwse than hghy proftabe.
The vaue of the prveges and e emptons they en|oy under the aw when
compared wth nvestment corporatons organzed as a prvate busness for
the purpose of makng farm oans s strkngy evdent.
The nterest receved by a prvate corporaton on ts oans woud be ta abe,
and f t ssued and marketed bonds upon ts oans to obtan more money to
reoan, the ncome from ts bonds woud be sub|ect to edera ta aton, and
both the prncpa and the nterest woud be sub|ect to State ta aton aganst
the hoders thereof.
It was beeved at the tme of the enactment of the farm oan ct, as shown
by reports of commttees n the ouse and Senate, and by the debates n both
ouses of Congress, that these e ceptona advantages and benefts woud enabe
the |ont-stock and banks to practcay monopoze the farm-oan Investment
fed. If these banks have not been as prosperous n a cases as was antcpated
by Congress at the tme the aw was enacted, as has been ntmated n argument,
s not a matter for consderaton here. The undoubted purpose of Congress was
to create a system of rura credts that woud nsure ong-term oans to farm
owners at a ow rate of nterest. To assst n accompshng ths purpose Con-
gress gave to the |ont-stock and banks prveges and e emptons that woud
make nvestment n the capta stock of the banks nvtng and proftabe.
These bera provsons of the farm oan ct, t s contended, ndcate the
ntent of Congress, that nterest pad by these banks on ther farm oan bonds
does not come wthn the ntent and meanng of the e cepton to the nterest-
deducton cause of secton 234(a)2 of the Revenue ct of 1921, and that hodng
t does come wthn the e cepton s contrary to the manfest ntent and pur-
poses of the farm oan ct tsef. We do not agree wth ths contenton and we
fnd nothng n the provsons of the farm oan ct to ndcate any ntent on the
part of Congress that |ont-stock and banks shoud be gven any benefts or
e emptons other than those specfcay set out n the ct. Congress e empted
from ta aton of every knd and character the ncome derved by these banks on
oans made by them to andowners and aso made the nterest on the bonds
ssued by them whoy ta e empt to the hoders thereof n every respect, and
made t possbe for them to earn profts on ffteen tmes the amount of ther
nvested capta. These generous provsons afford no vad or ogca reason,
n our opnon, for construng the meanng of secton 234(a)2 of the Revenue
ct of 1921 n any manner other than by gvng to the anguage of the cause
the effect whch the pan and obvous meanng of the words used convey. The
fact that Congress n the farm oan ct gave generous and unusua benefts and
e emptons to |ont-stock and banks docs not ndcate the purpose or ntent
of Congress that they shoud en|oy other benefts and e emptons not gven
n the ct.
Construng the anguage of the e cepton to the nterest-deducton cause n
secton 234(a)2 to mean what the words used mport deprves the pantff
of no beneft the provsons of the farm oan ct accord to t. On the other
hand, to gve the anguage used the constructon contended for by the pantff
woud gve to t a beneft nowhere granted n the ct.
Pantff contends that the purpose of the e cepton n the nterest-deducton
cause of secton 234(a)2 was to foresta deberate ta avodance by ta payers.
That s, t was to prevent ta payers ncurrng ndebtedness to purchase ta -
e empt securtes and thereby get n addton to the e empton of nterest re-
ceved on such securtes a deducton of the nterest pad on the ndebtedness
so ncurred that the nterest deducton shoud be dsaowed ony n those cases
where the ndebtedness s ncurred wth a vew to ta avodance. The pantff
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240, rt. 634.
cams the ndebtedness Incurred by |ont-stock and banks on ther bonds s not
an ndebtedness ncurred wth a vew to ta avodance, and that the banks are
therefore entted to deduct the nterest pad on such ndebtedness.
There s no doubt that to foresta ta avodance was one of the purposes
sought to be accompshed n the enactment of the e cepton n the nterest-
deducton cause. owever, the congressona ntent to deny the nterest deduc-
ton ony where the ndebtedness was ncurred by the ta payer for the purpose
of ta avodance s not e pressed ether drecty or ndrecty n the anguage
used n the e cepton. The anguage of the nterest-deducton cause ncudng
the e cepton s both e pct and comprehensve.
It s a fundamenta rue of statutory constructon that the ntent of the
awmaker s to be found n the anguage of the statute. (Go crberg v.
Unted Sates, 168 U. S., 95.)
To get at the thought or meanng e pressed In a statute, the
frst resort, n a cases, s to the natura sgnfcance of the words, n the
order of the grammatca arrangements n whch he framers have
paced them. If the words carry a defnte meanng whch nvoves no
absurdty, nor any contradcton of other parts of the nstrument, then that
meanng apparent on the face must be accepted. Lake Co. v. Rons, 130
U. S., 670.)
There s no ambguty n the anguage used n secton 234(a)2. The meanng
of the words used s cear and free from doubt. Deducton may be had of
a nterest pad or accrued wthn the ta abe year on ts ndebtedness,
e cept on ndebtedness ncurred or contnued to purchase or carry obgatons
or securtes (other than obgatons of the Unted States ssued after Septem-
ber 24, 1917, and orgnay subscrbed for by the ta payer) the nterest upon
whch s whoy e empt from ta aton under ths tte, as ncome to the
ta payer.
The anguage of the e cepton s genera and n our opnon denes to a
ta payer the rght of deducton of nterest pad on ndebtedness ncurred or
contnued for the purpose of enabng the ta payer to purchase or carry ta -
e empt obgatons or securtes wthout regard to the reasons actuatng the
ta payer n ncurrng such ndebtedness.
The constructon urged by the pantff f adopted by the court woud n effect
requre the court to rewrte the e cepton to the nterest-deducton cause by
addng the words where such ndebtedness s ncurred wth a vew to ta
avodance.
That woud be the e ercse of a egsatve power whch, under the Con-
sttuton, the court does not possess. Courts can not. by nterpretaton, change
the pan meanng of a statute on the theory that there e sted n the mnds
of ts framers a atent une pressed ntent not conveyed n the anguage used.
We can not assume, there beng nothng n the anguage used to warrant
such assumpton, that the fu ntent and purpose of Congress are not ceary
e pressed n the anguage of secton 234 (a )2 of the Revenue ct of 1921.
Many of the eadng members of both the Senate and ouse who framed the
Revenue ct of 1921 were Members of Congress n 1916 and partcpated n
framng and passng the edera arm Loan ct. They were perfecty
famar wth ts provsons and ts purposes and had they ntended that the
e cepton n the nterest-deducton cause of secton 234(a)2 shoud not appy
to nterest pad by |ont-stock and banks on ther ndebtedness ncurred to
purchase and carry the farmers ta -e empt notes and frst mortgages, whch
are securtes under the provsons of the arm Loan ct, they woud, we
thnk, have e pressed such ntent by the use of approprate anguage.
It s our opnon, therefore, that pantff s petton shoud be and t s
hereby dsmssed. It s so ordered.
S CTION 240. CONSOLID T D R TURNS
O CORPOR TIONS.
rtce 634: Change n ownershp durng ta abe year.
R NU CT O 1921.
ddton of new members to group of corporatons durng ta abe
year. (See G. C. M. 8132, page 287.)
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250, rt. 1012. 326
P RT I . DMINISTR TI PRO ISIONS.
S CTION 250. P YM NT O T S.
rtce 1012: ssessment of ta . I -7-4534
Ct. D. 151
INCOM T R NU CTS O 1918 ND 1928 D CISION O COURT.
1. ssessment Lmtaton Commencement or Peeod Ten-
tatve Return.
competed return, and not the so-caed tentatve return, for
the ta abe year 1018 s the return requred to be fed by the pro-
vsons of secton 239 of the Revenue ct of 1918 and the fng of
the tentatve return does not start the runnng of the 5-year perod
wthn whch the amount of ta due must be assessed under sec-
ton 250(d) of that ct.
2. SS SSM NT UT ORITY O CoMMI ION R SS SSM NT.
determnaton of ta abty and a refund of ta pad do
not precude a redetermnaton and a reassessment by the Com-
mssoner wthn the perod of mtaton on assessment.
3. Sut Coecton Lmtaton Cam for batement Con-
sttuton-aty.
Secton 611 of the Revenue ct of 1928 wthdraws the statute of
mtaton upon coecton as a ground for the recovery back of
a ta pad under the condtons theren stated even though the ta
was pad unwngy. Coecton of a ta has been stayed wthn
the meanng of that secton where actua deay has resuted from
the fng of a cam for abatement. s so construed the secton s
consttutona.
Court of Cams of the Unted States.
Oak Worsted Ms, a ody Corporate, v. The Unted State .
December 2, 1929.
OPINION.
Green, udge, devered the opnon of the court.
so-caed tentatve return was fed by the pantff on March 12, 1919,
and as the assessment n controversy was made on March 26, 1924, the pan-
tnt cams that the 5-year perod of mtaton for the assessment of ta es
had e pred, and that the assessment was therefore ega. The defendant
contends that the mtatons perod dd not e pre unt fve years from une
16, 1919, when the competed return was fed, and ths presents the frst ques-
ton for our consderaton.
The oard of Ta ppeas has consstenty hed n a number of cases thnt
the fng of the so-caed tentatve return dd not start the runnng of the
statute of mtatons. (See Muttemvan Mfg. Co., 4 . T. ., 953.) In ths
concuson we concur for many reasons whch w requre a revew of the pro-
ceedngs whch ed up to the fng of the tentatve return, n order to as-
certan ts purpose and what was understood wth reference thereto by both
the ureau of Interna Revenue and the ta payer. The Revenue ct of
1918 was not approved un ebruary 24, 1019. It was qute pan to every-
one that arge busness concerns and ndvduas havng arge busness nterests
woud have great dffcuty n fng a return wthn the tme requred by aw,
and the ureau of Interna Revenue woud be deuged wth requests for e -
tenson of tme for fng returns. In farness to the ta payers, the most of
these appcatons woud have to be granted. The resut woud be to postpone
the payment of ta es n such amount that the Government mght become em-
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327
250, rt. 1012.
arrassed for want of revenues, for athough the Work W:r was over the
Government was st beng carred on at an enormous e pense. In order to
overcome ths dffcuty a puu was devsed whch provded the needed funds
for the Government and certany was a vauabe concesson to the ta payers
who brought themseves wthn ts terms by grantng them an e tenson of
tme for fng compete returns. crcuar was ssued by the Commssoner
od ebruary 27, 1019, gvng the partcuars of ths pan, as foows:
Income ta payers, both corporaton and ndvdua, were to-day granted
by the Interna Revenue ureau further reef wth respect to the fng of ther
competed ta returns for 1918. The statement that the ta payer s unabe
by March 15 to e ecute and fe the compete return w be accepted, under the
new procedure, as uffcent reason for e tendng for 45 duys the tme for
tng compete ncome and e cess-profts returns, provded n every case the ta -
payer pays, on or before March 15, at east 25 per cent of the estmated amount
of the ta due.
It further stated that a suppy of banks for the use of ta payers woud be
famshed for makng a tentatve return, and that the due date for the pay-
ment of ta es woud not be e tended nor woud the ta payer be reeved of
nterest f the amount pad was short of the amount eventuay found due.
The bank form furnshed to and used by pantff was headed Tentatve
return and estmate of corporaton ncome and profts ta es and request for
e tenson of tme for fng return, and contaned no statement whatsoever
showng the gross ncome, deductons, nvested capta, or other detas neces-
sary for a proper determnaton of pantff s ta abty. It merey estmated
the ta to be 80,000, and accordngy 20,000 was pad on the ta es. It
specfcay requested an e tenson of tme for fng the return, and n ths
connecton we are at a oss to understand what return coud possby be meant
e cept the return requred by aw. The tentatve return was not ony not
requred by the aw but there was no provson n the aw for t. It was
merey an nventon of the Commssoner, and ts purpose was to gve the ta -
payer an e tenson of tme for fng the return requred by aw and at the
same tme obtan the needed funds for the Government. The statute (secton
250, ct of 1918) provded that the ta sha be assessed wthn fve years
after the return was due or was made. What return The return not
authorzed by aw and not referred to n the statutes Ceary not. It was
the return whch the aw requred and whch was not made by the tentatve
return. The return on whch the statute of mtatons s made to depend s
the return requred by secton 239, whch s very dfferent from the so-caed
tentatve return. In ths connecton we have no reference to returns where the
ta payer attempts to compy wth the aw but through error or mstake does
not competey conform to ts requrements. We have here a case where there
was no pretense as far as makng the return was concerned that the aw was
beng comped wth. There was merey enough done so that the Commssoner
woud grant the e tenson of tme.
If we ook at the matter from the standpont of equty between the Govern-
ment and the ta payer we can come to no other concuson. The Government
had fve years n whch to make an assessment on a dfferent bass from the
return, but surey ths ought to be from the tme when the ta payer makes
such a return as w enabe the ureau to get at east some eementary
knowedge as to how much ta he ought to pay. We thnk no one woud con-
tend that the ta payer coud merey fe ths tentatve return and stop there
wthout fng another and competed return, but f the contenton of the pan-
tff s correct and ths was a rea return n the sense that the word return
Is used n the statute, nothng ese was requred.
It s argued that f the tentatve return was not a return at a hut merey
an appcaton or an agreement for an e tenson of tme, the tn payer was not
bound to pay the frst nstament of hs ta es unt he fed the competed
return. Ths argument overooks the fact that the whoe proceedng wns a
concesson to the ta payer beyond any requrement of the aw, for the Com-
mssoner mght grant or refuse an e tenson n hs dscreton, and havng that
rght, e coud prescrbe the terms on whch an e tenson shoud be granted.
The proposton on the part of the Commssoner was smpy that f the tn -
payer woud fe an estmate of hs ta es and a request for e tenson of tme
for fng a return and make payment of one-fourth the estmated ta , the
e tenson woud be granted, and he hnd a rght to make these requrement .
It Is aso argued that the Government s takng nconsstent postons that
t say at one t ne that the tentatve return was a return and then, when ts
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250, rt. 1012.
328
nterests requre the contrary, says t s no return but we fnd nothng ncon-
sstent n ts poston. It as at no tme stated that the so-caed tentatve
return woud be consdered as the return requred by aw. On the contrary,
the fact that an e tenson of tme was granted for fng a compete return
shows very ceary that t dd not so consder t otherwse no e tenson of
me woud have been necessary and whe we do not thnk t s matera
what the ta payer understood, we are unabe to see how t coud have under-
stood otherwse. The ony meanng gven n the dctonary to the word tenta-
tve whch woud at a appy to the stuaton under consderaton s e per-
menta. and whe ths meanng may appy to some features of the case, we
are ncned to thnk that the common or cooqua meanng of the word
tentatve n such stuatons s wth reference to somethng that w do or
w answer for the tme beng but no further.
or the reason above stated, we concur n the vew taken upon ths queston
by the oard of Ta ppeas and by the Crcut Court of p|eas n the case
of orshem ros. Dry Goods Co. v. Unted State (29 ed. (2d), 895 Ct. D.
SO, C. . III-1, 209 ), and hod that the I mtaton dd not begn to run unt
the competed return was fed and that the ta In queston was assessed wthn
the perod prescrbed by the statute.
Pantff aso contends that the Commssoner of Interna Revenue havng
determned the ta abty of the pantff n pr, 1922, was wthout authorty
to revse t, and that hs ater acton makng a new assessment was n e cess
of hs authorty, and the new assessment was therefore ega.
We do not thnk t s necessary to dscuss ths queston at ength. The prac-
tce of the Commssoner n makng new and dfferent assessments s of so ong
standng and has met wth such genera acquescence that ths n tsef const-
tutes a strong reason, re|ectng the contenton of pantff. ver snce the ed-
era ncome-ta aws have been enacted ths practce has been gong on. Con-
gress has not merey acquesced n t, but by varous enactments has recognzed
the practce, and has gone so far as to provde n the Revenue ct of 1921,
whch of course was not appcabe to ths case, a mtaton on the reopenng
of cases. The cases cted by pantff wth reference to the acts of some offca
of the Government whose acton s by aw made fna have no appcaton here.
The determnatons of the Commssoner are not bndng on the ta payer but
re merey a prma face reguaton. Wckwre v. Renccke, 275 U. S., 101
IT. D. 4126, C. . II-1, 3101.) The dstncton s ceary made n dety t
Coumba Trust Co. v. Lucas (7 ed. (2d), 146, 149). In otany Worsted
Ms v. Unted States (278 U. S., 282 Ct. D. 39, C. . III-1, 279 ), t ap-
peared that the ta payer fed a return and pad the ta on the bass thereof.
Subsequenty an addtona assessment was made by the ureau, and was pad.
The mpcaton of the decson, whch hed the ta payer coud not recover the
amount of the addtona assessment, was that the Commssoner coud make
changes n the orgna assessment and t was e pressy so hed by the oard
of Ta ppeas n ppea of ames Couzcns (11 . T. ., 1040), a case where
the Government offcas had f ed the amount of the ta whch was pad by
the party assessed.
Whe the ta n queston was assessed wthn the perod of mtatons t
was not coected wthn the tme f ed thereby, and f ths case s controed
by the rue ad down n owers v. New York bany Lghterage Co. (273 U. S.,
346 IT. D. 4009, C. . I-1, 268 ) the ta nvoved was not unawfuy coected
and the pantff s entted to recover. The defendant, however, contends that
secton 611 of the Revenue ct of 1928, whch was passed subsequent to the
decson n the owers case, so modfes the rue ad down theren that the
court shoud deny a recovery n the case at bar, and ths contenton presents
a compcated queston.
Secton 607 of the ct of 1928 provdes:
ny ta (or any nterest, penaty, addtona amount, or addton to such
ta ) assessed or pad (whether before or after the enactment of ths ct) after
the e praton of the perod of mtaton propery appcabe thereto sha be-
consdered an overpayment and sha be credted or refunded to the ta payer
f cam therefor s fed wthn the perod of mtaton for fng such cam.
Itacs ours.
Secton 611 provdes:
If any nterna-revenue ta (or any nterest, penaty, addtona amount,
or addton to such ta ) was, wthn the perod of mtaton propery app-
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329
250, rt. 1012.
cabe thereto, assessed pror to une 2, 1924. and f a eam n abatement was
fed, wth or wthout bond, and f the coecton of any part thereof was stayed,
then the payment of such part (made before or wthn one year after the enact-
ment of ths ct) sha not be consdered as an overpayment under the prov-
sons of secton, 607, reatng to payments made after the e praton of the perod
of mtaton on assessment and coecton. Itacs ours.
There can be no queston of what these sectons mean. In pantffs argument
t s sad:
Read together, these sectons provde that ta es assessed or pad out of
tme sha be credted or refunded to the ta payer f a tmey refund cam s
fed e cept n cases of tmey assessment made before une 2, 1924, and a
cam n abatement was fed and coecton of any part of the ta was stayed.
Wth ths statement we agree.
ut pantff nssts that they have no appcaton to ths case and that f
so construed as to deprve pantff of the rght of recovery heren the sectons
are unconsttutona.
urther n argument the pantff nssts that secton 611 has no reference
to suts on the part of ta payers and merey defnes the authorty of the
offcas of defendant n makng refunds or credts. In support of ths pos-
ton t ctes the cases of Cnton Iron Stee Co. v. ener (30 ed. (2d), 542),
re Coa t Coke Co. v. ener (33 ed. (2d), 135), and e cnks v.
untey, Coector (29 ed. (2d), 209). of these cases support the con-
tenton of pantff, but upon carefu e amnaton we are unabe to agree to
the rues ad down theren. In ths connecton, t shoud be noted that the
case ast above cted was reversed by a decson of the crcut court of ap-
peas, to whch reference w herenafter be made.
In consderng ths contenton, t shoud be observed at the outset that, t
s qute nconsstent wth the meanng whch s gven by pantff s counse
to the two sectons under consderaton and wth whch meanng, as stated
n the quotaton from pantff s argument set out above, we agree. Our
reasons for dfferng from these decsons cted by pantff are as foows:
It appears to us that Congress, by the provsons n the Revenue ct of
1928. was endeavorng to estabsh a rue whereby a condton of repose woud
be estabshed, and when ta es had been pad after the statute of mtatons
had run but whch were, due and ought to have been pad by the ta payer
before the e praton of the tme of mtatons, such ta es coud not be re-
covered by the ta payer. Whether ths genera observaton may be correct
or not, we thnk t qute cear that the constructon of sectons 607 and 611
adopted n the decsons cted on behaf of pantff s not correct, and that
ths w appear from a consderaton of the ogca effect of such a con-
structon.
s we understand the argument n favor of the rue adopted by these
decsons, the reason for the hodngs theren s based argey upon the fact
that n nether of these sectons s there any reference to court proceedngs,
actons, or suts. ut ths s not necessary f the specfcatons made n the
statute woud make a sut unavang.
Secton 607 specfes the knd and nature of cases n whch what s denom-
nated an overpayment may arse by reason of the coecton of ta es after the
e praton of the perod of the statute of mtatons, athough such ta es were
orgnay due and owng by the ta payer. Secton 611 makes an e cepton to
the rue ad down n secton 607 and n effect provdes, wth reference to cases
ncuded n ths e cepton, that no overpayment sha arse. Necessary t
foows that f demand s made upon the coector for the refund or return
of ta es pad after the runnng of the statute of mtatons but whch come
under ths e cepton, the coector s obged to say that he s forbdden by
aw to repay them. It w be observed n ths connecton that the decsons
cted by pantff assert that these sectons are merey drectons to the Com-
mssoner, coector, or other offcas of the Government and nothng more, and
therefore notwthstandng ther provsons sut may be brought and mantaned
to recover the ta . The doctrne ad down by these decsons as to cases
whch come under the e ceptons of secton 611 woud create a stuaton that
s very pecuar, to say the east. If, for e ampe, a demand s made upon a
coector for repayment, he must say that he s forbdden by aw to make t,
but f sut s begun aganst hm for the same thng for whch demand was
made, t can be mantaned and |udgment can be entered aganst hm. That
4090 30 22
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330
Congress ntended anythng so Inconsstent and useess we thnk no one w
contend. When the anguage of the two sectons s consdered we thnk t w
be seen there s nothng n them whch requres such a constructon. True, as
before stated, there s nothng sad wth reference to courts or court proceed-
ngs, hut court proceedngs are not the bass upon whch actons are mantaned
n actons ke the one at bar. That depends upon the rghts of the pantff
and ts rghts are f ed by these sectons. If the pantffs case cam - wthn
the provsons of secton 611, It had no rght to repayment. Ths makes t
necessary for us to consder as to whether ts case s n fact ncuded wthn
the provsons of ths secton.
It s aso contended by pantff that secton 611 appes ony to cases of
vountary payment and aso to cases where the coecton of any part thereof
(of the cam) was stayed, and that the coecton of the ta es nvoved n the
nstant case was not n fact stayed.
s to the frst contenton, we thnk the anguage of the statute shows ceary
that t s not we founded. The secton reates to cases where a pea n abate-
ment was fed whch n tsef woud show that the tu was pad unwngy.
Ths contenton aso s contrary to the meanng gven to the secton by the
report of the commttee whch presented the ct to Congress, whch w be
herenafter set out n connecton wth the second ob|ecton.
T second ob|ecton presents a more dffcut queston and for ts proper
consderaton t w be necessary to e amne that part of the report of the
Ways and Means Commttee on the Revenue ct of 1 )28 whch e pans the
purpose of secton 611 and the condtons whch t was ntended to meet. It s
as foows:
Pror to the enactment of the Revenue ct of 1924, t was the admnstra-
tve practce to assess mmedatey addtona ta es determned to e due. Upon
the assessment, ta payer were frequenty permtted to fe cams n abate-
ment wth the coector and thus deay the coecton unt the cam n abate-
ment coud be acted upm. If ths practce had not been foowed, undue
hardshp undoubtedy woud have been mposed upon the ta payer. It was
supposed that there was no mtaton upon the coecton by dstrant of the
amount utmatey determned to be due. owever, the Supreme Court has
ecenty hed, n a case n whch the perod for assessment e pred pror to the
enactment of the 1924 ct, that the perod for coecton was mted to ve
years from the date on whch the return was fed. _ Decsons upon cams n
abatement are beng made every day. mounts have been pad, are beng
pad, by the ta payer even though the statute of mtatons may have run.
ceptonay arge amounts are nvoved. ccordngy, t s of utmost m-
portance to provde that the payments aready made shoud not be refunded.
In ortor to prevent nequaty, t s aso provded that the amounts not yet
pad may be coected wthn a year after the enactment of the new ct.
Your commttee apprecates the fact that ths provson w probaby be
sub|ected to severe crtcsm by some of the ta payers affected. owever, t
must be borne n mnd that the provson authorzes the retenton and coecton
ony of amounts propery due, and merey wthdraws the defence of the statute
of mtatons. If t s determned that the amount pad s n e cess of the
proper ta abty, computed wthout regard to the statute of mtatons, such
e cess w consttute an overpayment whch may be refunded or credted as
n the case of any other overpayment. (Report No. 2, Seventeth Congress,
frst sesson, page 34.) Itacs ours.
readng of ths e cerpt from the report eaves no possbty of doubt about
the ntent and purpose whch Congress undertook to embody n secton 611.
s before stated, the statute ony appes to cases where the ta payer had
pad, after the runnng of the statute of mtatons, ta es whch had been rght-
fuy due and owng to the Government. There s no equty n a cam for the
refund of such ta es n any event, but the statute restrcts the Government n
retanng them to those cases ony where as a favor to the ta payer the Govern-
ment had permtted the fng of a pea n abatement and coecton was stayed
or n other words, to those cases whore the ta payer by fng a pea n abate-
ment had succeeded n deayng the case over the perod of mtatons and then
sought to take advantage of the favor that had been granted hm.
The argument made by the pantff s that durng the perod under consdera-
ton there wns no provson for n pea n abatement n the aw and especay
that there w:s nothng n the pea of abatement that woud, under the aw, n
any event operate as a stny upon the coecton of the tn . Ths may be
admtted, but f the statute appes ony to ta es the coecton of whch was
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250, rt. 1012.
stayed by the pea n abatement It becomes a practca nuty, for t coud
ouy appy to a sma number of cases arsng under the ct of 1924, whch
provded for the fng of a pea n abatement and bond to stay proceedngs,
f ndeed t had any appcaton at aL The anguage of secton 611 and the
statement made n the report, we thnk, forbd any such constructon. The
secton s not mted to cases where the coecton s stayed by the fng of
a pea n abatement, but smpy to cases where the coecton was stayed/
and we thnk the words was stayed were purposey used nstead of s
stayed. Congress ntended the ct to appy to the condtons set out n
the report showng that n numerous cases ta payers had fed cams In abate-
ment and deayed the coecton unt the cam n abatement coud be acted
upon. In ths case the coector, n March, 1924, demanded payment of the
ta n controversy and the pantff fed a pea n abatement, whereupon
nothng more was done unt ebruary, 1925, when the Commssoner passed on
the cam n abatement and aowed t n part, of whch the pantff was
notfed, and n March of the same year pantff fed an appea from the
defcency f ed by the ast determnaton to the Unted States oard of Ta
ppeas. No further acton was taken by the coector unt une, 1925. It
thus appears that pantff was granted a stay upon fng the pea n abatement.
The word stay as used n ordnary conversaton means to hod from pro-
ceedng, to postpone, or to keep back. In aw, t generay means to suspend
by |udca proceedngs. We thnk t was not used n the statute n ts strct
ega meanng but n ts ordnary sense and when we gve t that meanng t
s qute cear that the coecton was stayed by the coector or Commssoner,
and there can be no doubt but that n so hodng we are foowng the ntenton
of Congress as e pressed n the report to that body whch e paned the mean-
ng and purpose of secton 611. To put the constructon on the statute con-
tended for by pantff requres us to attrbute to Congress the absurdty of
decarng that uness a stay was brought nto effect by an act whch dd not
and coud not produce a stay, the statute woud not operate and thus the
statute woud nufy tsef. It needs no ctatons to show that t s our duty
to so construe the statute as to gve t some force and effect, when ths can
be done consstenty wth ts -anguage. The constructon gven, n our opnon,
not ony accords wth the anguage used, but s the ony constructon that coud
propery be gven.
These concusons are supported n part, f not entrey, by the opnon ren-
dered n the case of Cyde O. untey, coector, v. . 8. Oe and W. T. enks
by the Unted States Crcut Court of ppeas for the Nnth Crcut (32 ed.
(2d), 857 Ot D. 110, C. . 1II-2, 158 ), reversng Oe enks v. untey
(29 ed. (2d), 209), cted by counse for pantff and aso the case of Rega
oa Co. v. owers, decded by the Dstrct Court, Southern Dstrct of New
York. November 13, 1929 (C. C. ., D-9415, p. 8888) Ct. D. 133, C. .
III-2, 162 .
The decson n the case ast cted contans an eaborate dscusson of the
proper constructon of sectons 607 and 611 and the consttutona queston rased
n connecton therewth. On a of these matters the same concuson s reached
as s set forth n ths opnon. In the untey case, supra, attenton s caed
to the fact that f t be hed that the statutory provsons have no appcaton
to ta es coected after the perod of mtatons has e pred, the statute s
useess and meanngess. There woud of course be no occason or use what-
ever for the statute n cases where the ta was coected pror to the e pra-
ton of the perod of mtatons. The ony reason for enactng the statute n
queston was the fact, as shown by the report of the commttee, that amounts
have been pad, are beng pad, by the ta payer even though the statute of
mtatons may have run. It s qute evdent that the ntenton of the aw-
makers was that the statute shoud appy to ta es coected after the statute of
mtatons had run. .
Ob|ecton has been made that the constructon contended for by defendant s
retroactve and that a statute ought not to be construed as havng retroactve
appcaton uness t appears that Congress had such ntent. The provsons of
the statute under consderaton are retroactve n form and f anythng fur-
ther s needed to show the ntent of the egsatve body enactng t, t w be
found n that porton of the report accompanyng the ct of 1928 whch has
aready been set out n ths opnon. The report makes t cear that the soe
purpose of the provson was to obvate the effect of the decson n the case
of owers v. New York bany Lghterage Co., supra, and to appy to cases
arsng under pror cts.
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332
One other pont remans to be decded. It s further contended that f the stat-
ute s construed n accordance wth our hodng, t s unconsttutona and n-
vad, for the reason that t woud deprve pantff of a vested rght. If pantff
acqured such a rght, t was by vrtue of the statute of mtatons. In untey
v. Oe d enka (C. O. ., Nnth Crcut), supra, t s sad, no vested rght accrues
to the ta payer out of the runnng of the perod of mtaton for the coecton of
a vad ta , ctng Ruffetty v. Smth, e d Co. (257 U. S., 226) Unted States
v. enszen d Co. (206 U. S., 370) Coector v. ubbard (12 Wa., 1) aght
v. Unted States (22 ed. (2d), 367 LT. D. 4113, C. . II-1, 148 ) Campbe
v. ot (115 U. S., 620) Raroad Co. . abama (101 U. S., 832) eers v.
rkansas (20 ow., 527) West Sde Co. v. Pttsburgh Co. (219 U. S., 92)
rushaber v. U. P. R. R. Co. (240 U. S., 1) Lynch v. ornby (247 U. S., 339,
343).
These authortes woud seem to dspose of the pont ast consdered, but
before concudng attenton s especay drected to another rue whch, n our
opnon, effectuay precudes ths court from consderng pantff s cam.
Nothng s better setted than the prncpe that the egsatve branch of
the Government has compete rght and authorty to determne when, how,
and where the Government sha be sued and whether t can be sued at a.
If Congress sees ft to provde that a sut can not be mantaned for ta es pad,
It s cear (at east where the ta es were rghtfuy mposed) that they can
not be recovered. Where a statute creates a rght and provdes a speca
remedy, that remedy s e cusve. (Unted States v. abcoek, 250 U. S., 329,
331.) The constructon whch we have heretofore put on sectons 607 and 611
of the Revenue ct of 1928 specfy n what cases suts may be mantaned to
recover ta es pad whch In ther orgn were vad and due from the ta payer.
If we are correct n ths, then by cear Impcaton ony such suts as are per-
mtted by these two sectons can be mantaned on the ground that the ta
had been pad after the runnng of the statute of mtatons, and that such
was the ntenton of Congress we thnk admts of no doubt. s we fnd that
pantff s cam does not beong to a cass for whch sut may be brought, ths
court has no authorty or |ursdcton to approve t, regardess of whether
the rghts of the pantff had vested or not.
It foows that the petton of the pantff must be dsmssed, and t s so
ordered.
rtce 1012: ssessment of ta . I -22 4660
Ct. D. 189
INCOM ND C SS PRO ITS T S R NU CT O 1921 D CISION O
COURT.
1. ssessment Reassessment Commssoner s uthorty
urden of Proof.
The Commssoner has authorty to reconsder hs acton after
havng made a refund of a ta and to reassess the ta , wthn the
statutory perod as e tended by waver, n the case of fraud or
mstake or when he s n possesson of new and matera facts.
The acton of the Commssoner n makng such a reassessment s
prma face correct and the burden s upon the ta payer to show
that the Commssoner s acton grew out of crcumstances whch
dd not warrant t.
2. ssessment Lmtaton Defense.
The defense that an assessment was., barred by the statute of
mtaton can not be rased for the frst tme n an appeate
court.
3. Decson ffrmed.
The decson of the o. rd of Ta ppeas (8 . T. ., 628)
afrned.
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333
250, rt. 1012.
Untsd States Crcut Court of ppeas, S th Crcut.
The ustn Co. v. Commssoner of Interna Revenue.
On petton to revew an order of the Unted States oard of Ta ppeas.
November 13, 1029.
OPINION.
Moorman, Crcut udge: In pr, 1918, the pettoner made ts ncome ta
return for the year 1917, showng an ncome and e cess proft ta amountng
to 367,430.78. Thereafter, upon e amnaton by the Commssoner, an add-
tona ta was assessed aganst the pettoner, makng the tota of such ta es
for the year 558,009.78. The ta was duy pad. In une of 1923 the pet-
toner fed wth the Commssoner ts appcaton for a determnaton of ts
ncome and proft ta es for the year 1917 under secton 210 of the Revenue
ct of 1917. In ugust of 1923 the Commssoner aowed the appcaton,
determned the amount of ta abty, and aowed the pettoner a refund
of ta es, wth nterest, amountng to 327,593.74. Ths refund was pad.
Later, on March 19, 1924, the Commssoner, wthout beng requested to do so,
and wthout makng any further e amnaton of the pettoner s books, assessed
an addtona ta abty aganst the pettoner for the year 1917 n the sum
of 39,938.79. The oard of Ta ppeas, on appea thereto by pettoner,
affrmed the acton of the Commssoner, and the case s here on petton to
revew the rung of the oard.
The pettoner contends that when the Commssoner aowed ts appcaton
for a speca assessment under secton 210, and determned ts abty there-
under, makng a refund of ta es t had theretofore pad, there was a fna and
concusve assessment, bndng upon the Government and the ta payer, and
the Commssoner was thereafter wthout power to make any further assess-
ment. The mportant consderaton n Woodcorth v. aes (26 ed. (2d), 178
(6 C. C. .)), reed upon by the pettoner, was that t affrmatvey appeared
that the acton of the Commssoner was not based upon any fraud or mstake
of aw or fact, but upon a changed nference of fact from the same evdentary
facts, or what the Commssoner thought was a new and better vew of the
same facts. ddtona consderatons were that the reassessment there com-
paned of was made by a succeedng Commssoner and after two actons
approvng the orgna. Gvng to that case the broadest possbe constructon,
t s yet true, as there hed, that the acton of the Commssoner here reed
upon was sub|ect to revson for fraud or mstake of fact. If ether of these
eements entered nto the orgna assessment, we do not doubt that upon
dscovery thereof by the Commssoner he had the rght to correct t by makng
a reassessment
The orgna assessment here, made under secton 210, was not based entrey
upon facts contaned n the ta payer s return, but depended aso upon com-
paratve earnngs of representatve corporatons engaged n a ke or smar
busness, the data for whch the Commssoner ether had n hs offce or was
obtanng from such other corporatons as were makng ther ta returns.
There was no evdence before the oard to show upon what the Commssoner
acted n makng the addtona assessment whether upon new and further
facts whch he concevaby receved from ater reports of comparatve cor-
poratons, upon a corrected vew of the aw whch shoud contro hs concu-
son, or upon a dfferent fact-nference from the same evdentary facts. e
had the rght to make such an assessment under the frst two contngences,
and havng that rght, the queston arses: What effect s to be gven to hs
acton n the absence of any evdence of the facts or as to the aw upon whch
he acted that s, whether the burden was on the Commssoner to show that
the reassessment was made because of mstake of fact or aw n the frst
assessment, or whether t was on the pettoner to show that t was made upon
a new and dfferent vew of the same facts.
It s setted by the decsons of the Supreme Court that the fndngs of
the Commssoner are prma face correct, and that the ta payer who com-
pans of them has the burden before the oard of Ta ppeas of showng
that they are wrong. (Wvkvre v. Renecke, 275 U. S., 101 T. D. 4126. C. .
II-1, 316 .) It s sad, however, that the presumpton whch arose from the
fact of ths addtona assessment was overcome by a ke presumpton at-
tachng to the orgna assessment, and that the burden was on the Comms-
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334
soner to show that hs ater acton was taken for reasons authorzed n the
Woodworth case. We can not concur n that vew. The queston hefore the
oard concerned the addtona assessment not the earer one. The acton
of the Commssoner n makng t was under attack. The aw gave hm the
rght to make t under certan crcumstances. There s a presumpton tmt he
performed hs duty that s, thut he acted upon a the facts before hm,
ncudng new and dfferent ones. (.Unted States v. Chemca oundaton, 272
U. S., 1, 14.) Ths presumpton of the e stence of such new facts s not
nconsstent wth the presumpton attachng to the frst assessment, that the
Commssoner acted upon a the facts then before hm. Moreover, t was
wthn the power of the pettoner to obtan the facts of both assessments
through the processes of the oard of Ta ppeas. ( ar v. Onteren
Machne Co., 275 U. S., 220 T. D. 4120, C. . 1I-1, 181 .) It dd not do
ths, hut reed upon ack of authorty n the Commssoner to make any fur-
ther assessment. ven though there was ack of authorty to make such
assessment upon a changed vew of the same facts, there was not ack of
authorty to make t where there was fraud or mstake of aw or fact n the
orgna assessment. In ths stuaton the burden was on the pettoner to
show that the Commssoner s acton grew out of crcumstances whch dd not
warrant t.
queston made n ths court but not presented to the oard of Ta ppeas
s that the assessment s barred by the statute of mtatons. Reance s
paced on Russe v. Unted Sates (278 U. S., 181 T. D. 4260, C. . 1II-1,
200 ). We do not thnk that decson appcabe. What t hods s that secton
278 of the ct of 1924, f ng a mtaton of s years for coectng a ta by
dstrant or a proceedng n court, does not appy to assessments made before
the passage of that ct. Ths s not a proceedng n dstrant or n court to
coect a tu , and admttedy the mtatons of the ct of 1918 contnued by the
ct of 1921 are appcabe. Those cts provde that the ta sha be assessed
by the Commssoner wthn fve years after the return, and that no sut or
proceedng for coecton of any such ta sha be begun after the e praton of
the fve years. cept for a waver whch pettoner e ecuted and fed wth
the Commssoner, mtaton woud have e pred, under these statutes. pr 1,
1023. The waver was e ecuted ebruary 15, 1923, and was unmted, but an
order of the Commssoner ssued pr 11, 1925, drected that a such wavers
shoud be hed to e pre pr 1, 1924. Gvng fu effect, therefore, to ths
order of the Commssoner, he nevertheess had the rght to make the assess-
ment at any tme pror to pr 1, 1921. The assessment was made March 19,
1924. Whether the Government coud have coected ths ta after the e pra-
ton of the fve years, and what effect s to be gven the acton of the pettoner
n appeang from the rung of the Commssoner to the oard of Ta ppeas,
are questons that are not before us. The pettoner dd appea after the e pra-
ton of the fve years, and dd not rase before the oard any queston of mta-
ton or of the coectbty of the ta . The oard passed upon the ony queston
presented to t that s, the vadty of the acton of the Commssoner n
assessng the ta . The proprety of that acton s the queston before us, and
we repeat that we are not here concerned wth the power or means to coect
the ta . but ony whether the Commssoner acted wthn hs authorty and
accordng to aw n makng the assessment. On the record before us we can not
say that he dd not.
Petton dsmssed.
ones, Dstrct udge (dssentng) : Under secton 210 of the Revenue ct of
1917. and n the case of ths ta payer, the Commssoner had dscretonary
powers n the determnaton of ts ta abty (Wanutport Wre Rope Co. v.
Unted States. 277 U. S., 551 T. D. 4172, C. . II-2, 323 ) whch gave some-
what more fnaty to hs concusons than n cases where he was bound by
statutory rue of f ed percentages. avng such power and havng determned
the ta and authorzed a refund of overassessment whch was pad to and
accepted by the ta payer, the Commssoner s acton and the acceptance of the
refund by the ta payer e tngushed the ta abty. Save for fraud or
mstake, no further acton coud be taken but n that event the Government
mght sue to recover as for money had and receved through such fraud or
mstake, and the burden woud be where t rghtfuy shoud be. It seems to
me that reason dctates such requrement, and that the aw cotans no prov-
son or mpcaton otherwse.
Ta ng aws are to be construed strongy aganst the Government n favor
of the ta payer. (Goud v. Goud, 245 U, S., 151, page 153.) The Commssoner
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250, rt. 1012.
can not, n my vew, under the guse of addtona assessment or defcency
assessment, recover ta es refunded and accepted as n ths case. Under ths
concuson, t s of course mmatera that the ta payer faed to negatve
mstake of fact or aw as to the frst assessment, n the proceedngs before the
oard of Ta ppeas. Strpped of a form, he s seekng to recapture money
whch e has ad|udged to beong to the ta payer, by a method not open to hm.
In the petton of the ta payer, fed wth the oard of Ta ppeas anuary
15,1926, t, n paragraph 4, averred (Transcrpt of Record, page 2) :
The determnaton of the ta contaned n the sad defcency etter s
based upon the foowng error:
The Commssoner erroneousy assumed authorty and |ursdcton to
make such assessment whch was made under the foowng facts and
crcumstances:
nd then foows a statement of a the facts before us.
y paragraph 6 (Transcrpt of Record, page 4) the ta payer asserts that t
rees for ts appea on the foocng proposton of aw:
The Commssoner n entertanng and grantng the ta payer s appcaton
to be assessed fur ncome and profts ta es under the provsons of secton
210 of the Revenue ct of 1917, and hs acton thereunder n determnng the
amount of ta es to be awfuy assessed aganst the ta payer, e ercsed the
power conferred by sad ct of Congress, and fuy and fnay determned
sad matter. s order n the premses drectng the refund to be made to
ta payer, and the actua refund thereof by the Government, cosed and ended
the transacton, and sad Commssoner of Interna Revenue had no authorty,
rght or |ursdcton to agan reconsder sad matter. Ta payer contends that
a proceedngs taken by the Commssoner of Interna Revenue after sad
orgna determnaton of ugust 27, 1923, were and are wthout authorty of
aw and nu and vod.
To ths petton the Commssoner answered, admttng the facts contaned
In the petton and averrng that the propostons of aw were: (1) The
assessment made by the Commssoner was made wthn the scope of hs
authorty and represented a vad and ega assessment (2) the Unted States
oard of Ta ppeas has no |ursdcton In ths case. (Transcrpt of
Record, page 16.) fter the hearng before the oard of Ta ppeas the
Commssoner moved to dsmss the proceedng upon the ground that he had
not determned a defcency wthn the meanng of the statute, and that the
oard s wthout |ursdcton to determne the ssue rased. (I thnk ths
moton we mght have been sustaned, snce the ta assessed was not n
fact a defcency but represented a changed vew of the Commssoner.) The
oard of Ta ppeas made fndngs of fact whch were not n dspute and
by opnon dened the Commssoner s moton to dsmss the proceedngs for
ack of |ursdcton and stated as Its opnon (Transcrpt of Record, page 20) :
, The oard has heretofore had occason to consder the queston rased
by pettoner reatng to the authorty of the Commssoner to reconsder
hs acton after havng made a refund of ta es to a ta payer, under a
smar state of facts, and has hod that the Commssoner may wthn th3
statutory perod, or wthn the statutory perod or such perod as may be
agreed upon between the Commssoner and the ta payer, assess such ta as
he determnes to be due.
Thus t seems to me that a queston of aw as to the authorty of the
Commssoner was defntey and specfcay rased before the oard, and
as to whch t decded adversey to ths ta payer. In other words, the
appeant contended before the oard of Ta ppeas that the Commssoner
acted wthout authorty. The Commssoner admtted the facts n the petton,
dened he was wthout authorty to assess the ta , and moved to dsmss for
ack of |ursdcton for the reason that he had not determned a defcency
n ta . In ths stuaton the oard of Ta ppeas decded aganst both.
It seems to me there coud he no burden on the ta payer to prove that the
Commssoner was undertakng to do what he had no awfu authorty to
do that s, make a defcency assessment after the ta abty had been
e tngushed. It s for the Government to assert the Commssoner s mstake
and mpeach hs |udgment by approprate acton. (Unted States v. aufman,
96 U. S., 567, 571 Unted States v. Savngs ank. 104 U. S., 728, 733.) The
fndngs of the Commssoner n makng assessments may be prma face
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336
evdence of ther correctness, If he has the awfu rght to make them, but
where he has prevousy taken awfu acton (a determnaton nvovng
admnstratve dscreton), whch precudes such further fndngs, they have
no force at a.
ssumng the oard had |ursdcton to decde the queston of the Comms-
soner s authorty, t was ceary a epa queston wth a the essenta facts
conceded and before t. No other showng was necessary. The presumpton
of the vadty of the Commssoner s fndngs fas f he had no awfu tuthor-
ty to determne a defcency assessment. The ta payer on appea to the oard
of Ta ppeas assaed the Commssoner s acton, not because of an erro-
neous, wrong, or ega assessment, but because he had no awfu authorty
to make any assessment.
The conceded facts before the oard rased the ega queston of the Com-
mssoner s authorty. No other evdence was necessary. I have heretofore
taken ths vew n a somewhat anaogous case, Sterng Sprng Co. v. Routzahn,
No. 14485 In Law, decded oray Ct. D. 118, C. . III-2, 358 . No revew of
ths case was taken by the Government.
Subsequent egsaton has made statutory the rue and prncpe of aw
whch had theretofore been apped by the courts respectng the fnaty of the
Commssoner s determnaton of the assessment and the ta payer s acqu-
escence theren, but such egsaton does not transform an absence of authorty
for makng an assessment nto a vad ground therefor.
I thnk the vew taken here s supported by the aes case, wheren affrm-
ance was based upon the proposton that the Commssoner s acton n deter-
mnng the assessment, acquesced n and pad by the ta payer, consttuted an
ad|udcaton : and that uness authorty, e press or ceary mped, s gven
by statute, the ta can not be reopened or reassessed. In that case the Govern-
ment appears to have advanced the cam of |ustfcaton that a new and better
vew of the same facts resuted from a matured and better |udgment, and
made no cam of fraud or msrepresentaton or of new evdence, or of mstake
of aw or fact. Nor do I see how any cearer mpcaton or authorty can
arse out of the fact that the same Commssoner here s endeavorng to do what
t was hed n the aes case a successor coud not do. There woud seem
to me to be no more reason for permttng the same Commssoner to reverse
hmsef under such crcumstances than n permttng a successor to reverse
hm. The prncpe of the fnaty of the acton s the same n ether case.
If ths ta payer had not appeaed to the oard of Ta ppeas, but had
pad the assessment under protest and then sued to recover t, the stuaton
woud have been the same as In the aes case.
If the Commssoner had the power to make the defcency assessment. I do
not thnk the Government shoud be deprved of ts |ust ta es because of the
unwarranted acton of the Commssoner n makng the so-caed |eopardy
assessment under an apparent msapprehenson of the ta payer s character
or ntenton.
Under the assumpton of the vadty of the assessment, I agree wth con-
cuson of the ma|orty of the court respectng the queston of the statute of
mtatons.
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300, rt. 701.
TITL III. W R-PRO ITS ND C SS-PRO ITS T
OR 1921.
P RT I. G N R L D INITIONS.
S CTION 300. G N R L D INITIONS.
e cess profts ta revenue act of 1017 decson of court.
1. Tkade ob usness Professona Snger Royates.
Where a person pursues her professon as a snger durng 1917
and receves n that year as royates, pursuant to a 10-year con-
tract made n 1915, a percentage of the ncome from saes n 1917
of dupcate phonograph records of her voce made from master
records perfected n prevous years, the ncome from the royates
receved n 1917 s sub|ect to the e cess-profts ta mposed by sec-
ton 209 of the Revenue ct of 1917.
2. udgment ffrmed.
The |udgment of the dstrct court (23 ed. (2d), 328, T. D. 4219,
( . I . I1-2, 305) affrmed.
Unted States Crcut Court of ppeas fob the Second Crcut.
ma (uek Zmbat t, pantff-appeant, v. Chares W. nderson, Indvduay
and as Coector of Interna Revenue, defendant-appeee.
Mack, Crcut udge: Pantff sued to recover 6,700 pad as e cess-profts
ta es for the ta abe year 1917. The case was tred wthout a |ury upon the
foowng agreed facts: Pantff, by professon a snger of dstncton, was
actvey engaged n the e ercse of her professon throughout the year 1917,
as we as for severa years pror thereto, sngng n concerts and rectas,
and, pursuant to a contract entered nto n 1915, makng records for the
ctor Takng Machne Co. In her fary frequent concerts and rectas
durng 1917 she sang many songs theretofore recorded for the ctor company
and sod both whoesae and reta before, as we as durng, 1917.
In 1917, pantff receved from the ctor company 100,309.80, whch n-
cuded 76,806.25 from the sae n 1917 of dupcates of master records made
by her before that year.
Pantff s accounts and ncome returns were kept on a cash recepts and
dsbursements bass. Under the 1915 contract she was obgated to sng for
the ctor company, pror to December 10, 1925, not ess than 50 records, and
was to receve on the sae of the dupcate records 10 per cent of the reta
prce of each record, wth certan e ceptons. The contract further provded
that she w not at any tme durng the perod of ths agreement, make or
pt rmt to be made a record of her voce or a sound record of any knd
whatsoever for any person, party or concern other than the ctor company.
In addton to mposng ncome ta , the Revenue ct of October 3. 1917
(40 Stat., 300), paces a war e cess-profts ta upon trades and busnesses,
ncudng professons and occupatons. Secton 209 of that ct (40 Stat., 307)
provded
That n the case of a trade or busness havng no nvested capta
there sha be eved, assessed, coected and pad a ta equvaent
to 8 per centum of the net ncome of such trade or busness .
rtce 8 of Reguatons 41, promugated by the Commssoner of Interna
Revenue, wth the approva of the Secretary of the Treasury, provded as
foows:
rtce 701: War-profts and e cess-profts
ta .
I -10-4556
Ct.D. 158
anuary 31, 1930.
OPINION.
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338
In the case of an ndvdua the terms trade, busness, and trade or bus-
ness comprehend n hs actvtes for gan, proft or vehood entered nto
wth suffcent frequency or occupyng such porton of hs tme or attenton
as to consttute n vocaton, ncudng occupatons and professons. In
the foowng cases the gan or ncome s not sub|ect to e cess profts ta :
(b) the ncome from property arsng merey from ts ownershp
ncudng nterests, rent and smar ncome from nvestments, e cept a those
cases n whch the management of such nvestments reay consttutes u trade
or a busness.
royates receved by the pantff n 1917 concededy are ta abe as
ncome. The soe ssue s whether or not under the ct of October 3, 1917.
retroactvey effectve as of anuary 1, 1917, those royates receved by her
n 1917, on saes n 1917 of dupcates of records made by her pror thereto,
are ta abe as 1917 trade profts.
The dstrct |udge dsmssed the compant on the grounds that nether the
statute nor the reguatons requred that the ncome must have been earned
durng 1917 but that mere recept durng that year suffced, and that the
royates receved durng 1917 depended n consderabe part upon her pro-
fessona actvty durng that year.
Pantff contends: (1) That secton 209 eves a ta ony upon ncome
earned durng the ta abe year, and that the stpuated royates receved by
her were not n any part earned durng 1917 (2) that the rght to royates on
master dsks made pror to anuary 1, 1917, was a property rght on that
day, and therefore that ncome therefrom was not sub|ect to the e cess-profts
ta under the aw and was e pressy e empted by the departmenta reguatons.
(1) We pass the queston whether the ta mposed by secton 209 s mted
to ncome earned durng that year or ncudes ncome receved durng that
year but earned n prevous years n pursut of a trade or professon, for n
our opnon the evdence suffced for the court s fndng that the royates
re .e|yed by pantff durng 1917 were n fact earned n consderabe part durng
that year.
s pantff ceary was pursung her professon durng that year, she had
the burden of showng that the net ncome therefrom dd not ncude these
royates. (Wckure v. Rcnecke, 275 U. S., 101 T. D. 4126, C. . II I, 310
h ouss v. owers, 30 . (2d), 628 (C. C. . 2d.).) That she had faed to do.
er contnued concert work may have had a very marked effect upon her
royates for 1917. The more she ganed the popuar favor, the greater woud
normay be the demand both for her new and for her od records and every
tem of pubcty she receved for her work done n 1917 woud normay have-
some bearng u n the sae of these records n that year. In addton, her
contract wth the ctor company specfcay requred that she refran from
makng records for any other company. The e tent to whch her fufment
n 1917 of ths obgaton ncreased her ctor royates s not apparent, but
agan pantff has faed to show that performance of her covenant dd not
contrbute thereto or to what e tent t dd so contrbute.
(2) Pantff nssts, however, that her royates were ncome from property
arsng merey from ts ownershp wthn artce 8 of Reguatons 41. The
argument fnds some support n the fact that had pantff s voce faed on
December 31, 1916, and had she been nactve durng the ta abe year, the
royates woud have contnued or had she ded on that date, payment thereof
by the e press terms of the contract woud have been due to her estate. ut
n ths respect, too, pantff had faed to sustan the burden cast upon hpr.
The tota royates to be pad each year were not f ed by the contract but were
contngent n that they were dependent upon the saes durng the ta abe year:
and as she had not retred or ded, these n turn woud ordnary be affected
as heretofore stated, by her professona actvty durng that perod. In Woods
v. Lerc-ey-n (2S9 ed.. 498) the court found t unnecessary to decde a smar
queston, nasmuch as t hed that moneys earned merey ncdentay were
not earned n the busness n whch the court found the pantff to have
been engaged durng the ta abe year. If n the case nt bar t coud have
and had been proved that some defnte amount or percentage of these royates
woud have been receved rrespectve of whether pantff contnued to sng,
some recovery mght have been awarded: ths, however, was not done. On the
record before us, we must affrm the |udgment.
udgment affrmed.
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P RT IN ST D C PIT L.
S CTION 327. SP CI L C S S.
btce 901: Treatment of speca cases. I -1-4493
Ct. D. 145
e cess-profts ta revenue acts of 1917 and 1918 decson of court.
1. Speca ssessment Dscretonary Power Sut ursdc-
ton.
The provsons of the Revenue cts of 1917 and 1918, authorzng
the Commssoner n specfed cases to determne the ta as pro-
vded n secton 210 of the Revenue ct of 1917 and secton 328 of
the Revenue ct of 1918, confer dscretonary power, and hs
determnatons under those sectons are not revewabe by the
courts n the absence of fraud or other rreguarty.
2. Same baud.
egatons that the acton of the Commssoner was arbtrary,
un|ust, unawfu, and frauduent are mere ega concusons and
are nsuffcent to set up frauduent or arbtrary acton on the part
of the Commssoner.
3. Decson oowed.
The decson of the Unted States Supreme Court n the case of
/am port Wre Rope Co. v. Unted States (277 U. S., 55 (T.
D. 4172 C. . II-2, 323 )) foowed.
Unted States Cbcut Court or ppeas, ghth Crcut.
The Lve Stock Natona Rank, Sou Cty, Iowa, a Corporaton, appeant, v.
Unted States of merca, appetee.
ppea from the Dstrct Court ot the Unted States tor the Northern Dstrct of Iowa.
November 14, 1929.
opnon.
Gardner. Crcut udge, devered the opnon of the court.
In ths acton pantff seeks to recover from the Unted States certan war
and e cess profts ta es coected from t for the years 1917 and 1918, amount-
ng to 36,590.60, whch t s aeged were wrongfuy and egay assessed
aganst t by the Commssoner of Interna Revenue. The bass of ths aega-
ton s that the Commssoner of Interna Revenue assessed ts e cess profts
ta for the years 1917 and 1918 n the manner prescrbed by secton 301 of
the Revenue ct wthout the beneft of secton 210 for the year 1917 and of ,
secton 328 for the year 1918. That t was the duty of the Commssoner of
Interna Revenue, upon appcaton of the pantff for assessment of ts ta
for sad years under the provsons of secton 210 of the Revenue ct for 1917
and sectons 327 and 328 of the Revenue ct for the year 1918, n good fath
to determne, from the facts n hs possesson and wthn hs knowedge,
whether the borrowed capta empoyed and used by the pantff n ts busness
durng sad years, consstng of deposts as we as other borrowed money, was
so e cessve n comparson wth other representatve banks as to consttute
an abnormaty affectng the capta or ncome, and n arrvng at such deter-
mnaton to consder and ncude deposts as borrowed capta to the same
e tent as any and every other form of money borrowed by bankng and other
commerca and ndustra corporatons, and used as a matera ncome-pro-
ducng factor n ther busness. It s then aeged, as to the year 1918, that
regardess of hs sad duty and of the facts herenafter set forth wt regard
to the pantff s borrowed capta durng sad year, whch were wthn hs
Possesson and knowedge, the sad Commssoner arbtrary refused to con-
sder and ncude the pantff s deposts as borrowed capta n arrvng at such
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340
determnaton, and re|ected te sad hank s appcaton for assessment of ts
ta upon the erroneous and un|ust assumpton tat sad deposts were not
borrowed capta and shoud not he consdered and ncuded as such, thereby
wrongfuy, unawfuy, and frauduenty denyng and deprvng sad bank of
consderaton of ts sad appcaton and cam upon the merts of the same
and upon the facts n the possesson and knowedge of sad Commssoner, not
because the e cessve rato and amount of the sad bank s borrowed capta
dd not n fact consttute an abnorma condton enttng sad hank to the
beneft of sad sectons f deposts had been ncuded theren, hut because the
sad Commssoner erroneousy, wrongfuy, and frauduenty refused to so
ncude or consder the same n arrvng at such determnaton.
ke aegaton s contaned n the petton wth reference to the year 1917.
There s attached to the petton, and made a part thereof, a copy of the
Commssoner s decson, whch, omttng forma parts, s as foows:
Reference s made to your protest dated anuary 14, 1925, aganst the
dena of your appcaton for assessment of your profts ta for 1917 and
1918 under the provsons of secton 210 of the Revenue ct of 1917 and secton
328 of the Revenue ct of 1918, respectvey, as set forth n ureau etter dated
December 20, 1924.
fter a carefu revew of your protest and a of the evdence submtted at
ora hearng hed ebruary 18, 1925, n support of your contentons, you are
advsed that the ureau hods that no abnormaty affectng ether your capta
or Income has been dscosed for 1917 or 1918 whch woud brng your case
wthn the scope of secton 210 of the Revenue ct of 1917 or paragraph (d)
of secton 327 of the Revenue ct of 1918. urthermore, the audt of your
case dscosed no e ceptona hardshp evdenced by gross dsproporton between
the ta computed wthout beneft of secton 210 for 1917 and secton 328 for
1918 and the ta computed by reference to the representatve corporatons
specfed n these sectons.
ccordngy, the concusons set fort n the above-mentoned etter are
sustaned.
Your case s, therefore, deemed cosed.
demurrer was nterposed to pantff s petton on the grounds that (1) the
court had no |ursdcton of the sub|ect matter, (2) the petton dd not pead
any facts to gve rse to a queston of fraud as aganst the defendant, such
aegatons beng mere concusons. The ower court sustaned the demurrer,
and pantff decnng further to pead, |udgment of dsmssa was entered
and from that |udgment ths appea Is prosecuted.
The statutes, so far as pertnent to the ssues n ths case, are as foows:
Sec. 327. That n the foowng cases the ta sha be determned as pro-
vded In secton 328:
(d) Where upon appcaton by the corporaton the Commssoner fnds and
so decares of record that the ta f determned wthout beneft of ths secton
woud, owng to abnorma condtons affectng the capta or ncome of the
corporaton, work upon the corporaton an e ceptona hardshp evdenced by
gross dsproporton between the ta computed wthout beneft of ths secton
and the ta computed by reference to the representatve corporatons specfed
n secton 328. Ths subdvson sha not appy to any case (1) n whch the
ta (computed wthout beneft of ths secton) s hgh merey because the
corporaton earned wthn the ta abe year a hgh rate of proft upon a
norma nvested capta, nor (2) n whch 50 per centum or more of the gross
ncome of the corporaton for the ta abe year (computed under secton 233
of Tte II) conssts of gans, profts, commssons, or other ncome, derved
on a cost-pus bass from a Government contract or contracts made between
pr 6, 1917, and November 11, 1918, both dates ncusve.
Sec. 328. (a) That n the cases specfed n secton 327 the ta sha be the
amount whch bears the same rato to the net ncome of the ta payer (n e cess
of the specfc e empton of 3,000) for the ta abe year, as the average ta of
representatve corporatons engaged n a ke or smar trade or busness, bears
to ther average net ncome (n e cess of the specfc e empton of 3,000) for
such year .
Whe pantff made appcaton to the coector of nterna revenue for the
reef demanded n ths acton, no appea waR taken by t from the decson of
the Commssoner to the oard of Ta ppeas, nor was any appcaton made
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341
327, rt. 901.
to that oard for a revew of such determnaton. Instead of so dong, ths
acton was commenced n the dstrct court, and the |ursdcton of that court
to entertan such an acton s chaenged. If pantff was entted to any
further reef t shoud have sought that reef before the oard of Ta ppeas,
where the acton of the Commssoner was revewabe. (. ar v. Osteren
Machne Co., 275 U. S., 520 T. D. 4120, C. . II-1, 181 .)
The precse queston here nvoved was consdered by the Supreme Court n
Wamtport Wre Rope Co. v. Unted Sates (277 U. S., 551), and the opnon n
that case, wrtten by ustce randes, s so umnatng and apposte that we
quote beray therefrom. It s there sad:
The contenton here s that, snce the Commssoner s acton was made re-
vewabe on appea by the oard of Ta ppeas, t s and was aways revew-
abe n an orgna proceedng before the Court of Cams. The argument s
that Congress has conferred upon the Court of Cams |ursdcton over suts to
recover ta es aeged to have been erroneousy or egay assessed or coected
that here ts |ursdcton s nvoked to recover tu es camed to have been
assessed egay, because assessed under secton 301 nstead of under sectons
327 and 328 that t must therefore have power to determne whether condtons
e sted whch entted the company to the speca assessment provded for by
sectons 327 and 328 that f t fnds that such condtons dd e st, t must
aso have power to determne the true amount of the ta computed as theren
drected and that f t appears that the ta actuay pad e ceeds that whch
woud have been e acted under the speca assessment, the court may award
|udgment for the dfference.
Sectons 327 and 328 were ntended to broaden the powers of reef frst
conferred by secton 210 of the War Revenue ct of 1917 (eh. 63, 40 Stat, 300,
307). It was beeved necessary to provde a speca method of determnng
the ta for those cases n whch the ordnary method of assessment woud resut
n grave hardshp or serous nequaty. (Senate report, 65th Cong., thrd sess.,
No. 017, p. 14.) The speca assessment s to be made under paragraph (a)
when the Commssoner s unabe to determne the nvested capta. It s to
be made under paragraph (d) f he fnds and so decares of record that the ta
f determned wthout the beneft of ths secton woud work
an e ceptona hardshp . The task mposed on the Commssoner by
sectons 327 and 328 was one that coud ony be performed by an offca or a
body havng wde knowedge and e perence wth the cass of probems con-
cerned. or the requrement of a speca assessment under paragraph (d) of
secton 327 and ts computaton n a cases are dependent on the average ta
of representatve corporatons engaged n a ke or smar trade or busness.
To perform that task, power dscretonary n character was necessary
conferred. Whether, as provded n paragraph (d) of secton 327, there are
abnorma condtons whether, because of these condtons, computaton
under secton 301 woud work e ceptona hardshp whether there woud
be gross dsproporton between the ta computed under secton 301 and
that computed by reference to the representatve corporatons specfed n
secton 328 what are representatve corporatons engaged n a ke or
smar trade or busness whch corporatons are as neary as may be,
smary crcumstanced wth respect to gross ncome, net ncome, profts per
unt of busness transacted and capta empoyed, the amount and rate of
war profts or e cess profts, and a other reevant facts and crcumstances
these are a questons of admnstratve dscreton.
The soundness of the |udgment e ercsed by the ndvdua or body to
whom the ta was confded woud depend argey upon the e tent both of the
knowedge of the speca sub|ect possessed and of the e perence had n dea-
ng wth ths partcuar cass of probems. The concusons reached woud
rest argey upon consderatons not entrey susceptbe of proof or dsproof.
Congress dd not, by the Revenue ct of 1918, requre the Commssoner
to embody the resuts of hs deberaton n fndngs of fact. The purpose
f the meager record prescrbed by secton 328(c) n case the Commssoner
concudes to order a speca assessment s apparenty to protect the Treasury,
not the ta payer. or f the Commssoner refuses to make the speca
assessment, he s not requred to state the grounds of hs refusa, or, ndeed,
even to record the fact of such refusa. Thus the ams whch nduced Con-
gress to enact sectons 327 and 328, the nature of the task whch s confded
to the Commssoner, the methods of procedure peescrbed, and the anguage
empoyed to e press the condtons under whch the speca assessment Is
requred, a negatve the rght to a revew of hs determnaton by a court,
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327, rt. 901.
342
Ths decson eaves but tte further to be sad n ths case. It seems
cear that the pantff s remedy, f any, was to appea to the oard of Ta
ppeas, and t s equay cear that ths court s wthout |ursdcton to re-
vew the acton of the Commssoner of Interna Revenue.
It s argued, however, that the court has |ursdcton n ths case because
t s aeged n the petton that the Commssoner wrongfuy, unawfuy,
and frauduenty dened and deprved the pantff of consderaton of ts
appcaton and cam upon the merts and upon facts n the possesson and
knowedge of the Commssoner. Ths contenton s bottomed on the foowng
sentence n the opnon n the Wamsport Wre Rope Co. case, supra:
We concude that the determnaton whether the ta payer s entted to
the speca assessment was confded by Congress to the Commssoner, and coud
not, under the Revenue ct of 1918, be chaenged n the courts at east n
the absence of fraud or other Irreguartes.
It s of course eementary that a we peaded facts n a peadng are
admtted by a demurrer thereto. Mere aegatons of concusons and genera
charges that the decree chaenged was arbtrary, un|ust, unawfu, or
frauduent are mere ega concusons, and when emnated from ths petton
t w be observed that there are no facts peaded upon whch such aega-
tons can rest. (Marques v. rsbe, 101 U. S., 473 mber v. Choteau, 107
U. S., 586 an Wee v. Wnston, 115 U. S., 228 Sberschen v. Unted States,
260 U. S., 221.)
There was attached to and made a part of the petton a copy of the decson
of the Commssoner of Interna Revenue. y reference to ths decson t
appears that the Commssoner dd not decne to act and dd not decne to
entertan pantffs appcaton. s w be observed, t s rected n ths
decson that, fter a carefu revew of your protest and a of the evdence
mbmtted, at ora hearng hed ebruary 18, 1925, n support of your conten-
tons, you are advsed that the ureau hods that no abnormaty affectng
ether your capta or ncome has been dscosed for 1917 or 1918 whch woud
brng your case wthn the scope of secton 210 of the Revenue ct of 1917
or paragraph (d) of secton 327 of the Revenue ct of 1918. Ths decson
concusvey shows that pantff s appcaton for reef was consdered upon
Its merts and upon the evdence produced, and was decded adversey to the
pantffs contentons.
In the fna anayss, t ceary appears from the face of the petton that
the compant of the pantff s not that the Commssoner decned to act, nor,
ndeed, that he acted frauduenty or arbtrary, but that he acted erroneousy,
or at east that hs decson was adverse to the contenton of pantff. Ths
fas far short of estabshng an arbtrary or frauduent acton on the part of
the Commssoner. t most, the aegatons of the petton chaenge the sound-
ness of the Commssoner s determnaton upon a matter whch was propery
submtted to hs |udgment.
It foows that the aegatons of fact contaned n the petton, beng nsuf-
fcent to show any frauduent or arbtrary acton for refusng to act on the
part of the Commssoner, the ower court was wthout |ursdcton, and the
facts aeged n the petton were nsuffcent to consttute a cause of acton.
The |udgment of the ower court s therefore affrmed.
rtce 901: Treatment of speca cases.
R NU CT O 1921.
Redetermnaton and reassessment where speca assessment made
and part of ta refunded. (See Ct. D. 176, page 343.)
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343 1312, rt. 1141.
TITL III. G N R L DMINISTR TI PRO ISIONS.
S CTION 1312. IN L D T RMIN TIONS ND
SS SSM NTS.
rtce 1141: na determnaton of ta or I -19-4632
penaty. Ct. D. 176
( so Secton 327, rtce 901.)
INCOM ND C SS PRO ITS T S R NU CT OP 1921 D CISION
COURT.
ssessment Reassessment uthorty op Commssoner Spe-
ca ssessment.
Where the Commssoner has made a speca assessment under
sectons 327 and 328 of the Revenue ct of 1918 and refunded a
part of the ta pad, he s not precuded from makng a redeter-
mnaton of ta under those sectons and a reassessment wthn
the appcabe statutory perod where no statutory cosng agree-
ment was e ecuted under secton 1312 of the Revenue ct of 1921
when the refund was made.
Coubt op Cams of the Unted States.
Oak Worred M , a ody Corporate, v. The Unted States.
Suppementa opnon on moton for new tra.
ebruary 17, 1930.
OPINION.
Green, udge, devered the opnon of the court.
On the submsson of ths case t was contended by counse for pantff that
the ta n ths case havng been determned under the so-caed reef provsons
of sectons 327 and 328 of the ct of 1918, the matter of the amount of the
ta was governed by the dscreton of the Commssoner n appyng these
provsons, and that havng once determned the amount, e coud not by a
second and ater determnaton ncrease the amount whch he had orgnay
f ed for the ta , and as the matter was wthn the dscreton of the Comms-
soner, hs orgna determnaton was fna and concusve both upon hm and
ths court. It s now urged by bref n argument on the moton for a new
tra that ths pont receve further consderaton, and as there are other cases
on the docket nvovng the same queston, t has been thought best to fe ths
opnon suppementa to the one heretofore rendered.
t the outset, to avod confuson of thought, t shoud be kept n mnd that
the queston under consderaton s not whether the Commssoner s acton under
the sectons of the aw above referred to s revewabe by ths court. That
queston was setted by the Wamsport Wre Rope Co. case (277 U. S., 551
IT. 1). 4172, C. . II-2, 323 ), wheren t was hed that ths court had no
|ursdcton to revew hs decson n such cases. The queston n the case at
bar s whether the Commssoner had authorty to redetermne, change, or
modfy hs orgna determnaton or reassess an addtona amount aganst the
pantff. Counse for pantff, however, takng the Wamsport Wre Rope
Co. ease, supra, as the bass for hs argument, contends that the acton of the
Commssoner was fna and for that reason coud not bft changed even by
msef when once t was made. It woud seem a rather surprsng doctrne
that f the Commssoner dscovered the ne t day or the ne t month that he had
made a gross error, that he had no authorty to correct t. but for reasons
herenafter stated we sha not dscuss ths pont. Pantffs counse ctes a
number of cases |vhch he cams hod that when a trbuna or an offca s
authorzed to act wth dscretonary power, when that authorty has once been
e ercsed, no further authorty e sts and that where awfu authorty s
deegated to an admnstratve offcer, hs acts n an admnstratve way are
not sub|ect to change or revew. or the purposes of the argument, t may be
conceded that where the acta of the offcer are admnstratve n ther nature
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1312, rt. 1141.
344
a dfferent prncpe prevas wth reference to the revew thereof than when
he acts n a quas |udca capacty. Nevertheess, t s unformy hed that the
decsons of such trbuna or offcer may be set asde on the ground of fraud
or mstake, and t has aso been hed that an admnstratve offcer whose dec-
son s concusve upon the courts may revew and change Is orgna dt-cson,
provded that no rghts have become vested, such as woud arse from the
ssuance of a patent, a certfcate, or somethng of that nature. (Love v. a-
hve, 205 U. S., 19 ), 199.) Pantff aso contends that n such event the burden
of proof s upon the party seekng to have the decson changed to estabsh the
fraud or mstake, and that even then t can ony be done by a court and not
by the offcer or trbuna Itsef. The cases cted to support ths rue woud seem
to show that t ony appes when the Government s seekng to set asde the
act of one of ts own offcas. In ustn Co. v. Commssoner of Interna
Revenue, (8 . T. ., 628 affrmed 35 ed. (2d), 910), ths partcuar queston
was nvoved In a case of the same nature as the one before us. Wth refer-
ence to the addtona assessment made by the Commssoner, the court sad:
There s a presumpton that he performed hs duty. (Ctng Unted States
v. Chemca oundaton, 272 U. S., L)
nd wth reference to the cam that the Commssoner acked authorty to
make any further assessment, the court aso sad:
ven though there was ack of authorty to make such assessment upon a
changed vew of the same facts, there was not ack of authorty to make t
where there was fraud or mstake of aw or fact n the orgna assessment.
In ths stuaton the burden was on the pettoner to show that the Comms-
soner s acton grew out of crcumstances whch dd not warrant t.
ut t woud requre too much tme and space to revew the decsons rected
on behaf of pantff, and we do not thnk t necessary to anayze them, for
the reason that n our opnon they have no appcaton whatever to the case
at bar, and we can rest our decson frmy on other grounds. Our reasons for
ths hodng are set out beow.
fu consderaton of the queston now under consderaton requres that
we shoud go somewhat nto the hstory of the ncome and profts ta system
n force at the tme when the ta n queston was assessed. The frst e per-
ence of ths country wth an ncome ta was at the tme of the Cv War and
for a short perod thereafter. Durng that perod the rates of the ta com-
pared to those now n force were very ow and the admnstratve provsons
of the aw were few and smpe. The recovery of an amount overpad coud
ony be obtaned n the same manner as an overpayment of any other ta that
s, when the payment had been made under protest and sut brought to re-
cover the amount overpad. Ths ncome ta aw was repeaed and fnay
ad|udged unconsttutona. In 1913, the Consttuton havng been amended,
another ncome ta aw was paced upon our statute books. ere agan the
rates were, comparatvey speakng, qute ow. the admnstratve provsons
few and smpe, n no ease was the act of the Commssoner dscretonary, and
no changes were made n the method of obtanng refunds n proper cases.
fter ths country became nvoved n the Word War t became necessary to
greaty ncrease the rates of ncome and profts ta es, whch was done frst
by the ct of 1910 and then by the ct of 1918, under whch the ta es n ques-
ton n ths case were eved. It became evdent n fact, was a matter of com-
mon knowedge that the appcaton of these hgh rates through a ta wth
whch nether the Government offcas nor the ctzenshp of the country were
famar gave rse to numerous errors, nequates, an hardshps, both n favor
and aganst the ta payers, whch caed for acton by Congress. The resut
was that an entrey new body of aws was but up, under whch, whe the
admnstratve proceedngs were n part governed by authorzed Treasury
reguatons, for the most part they were ordered and drected by statutes n a
manner whch compared to the methods theretofore e stng may be sad to be
e ceedngy specfc. These statutory provsons apped to the ncome and
profts ta es. To what e tent they apped to other ta es t s not necessary
for us to heren determne. The speca ob|ect and purpose thereof was to
make cear and pan, so far as possbe, the procedure n admnsterng the
ncome and profts ta es, and they are to he found n connecton wth the
Revenue cts whch mposed them. These cts made great changes n te
proceedngs for the assessment and coecton of ta es and aso for the refund
of ta es erroneousy or wrongfuy coected. or the frst tme they provded
for mtatons upon the assessment and coecton of ta es, for the refund of
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345
1312, rt. 1141.
ta es athough no protest had been made when they were pad, and eventuay
gave the rght to have the queston of the ta payer s abty |udcay deter-
mned wthout havng frst pad the ta . So aso whe Congress was thus
makng the path of the ta payer easer and more defnte, t prescrbed mta-
tons on hs rght to ob|ect to assessments and cam refunds. It was aso
mportant that the Government as we as the ta payer shoud be protected
from errors and mstakes that mght enter nto the assessment and coecton
of ta es.
The utmate queston n the case s not whether the decson of the Com-
mssoner was fna, but when t became fna and that, as we sha see, was
ony when the statute of mtatons had run aganst the Government. Wth
the evdent purpose of makng t cear when the decson of the Commssoner
became fna, Congress, n the ct of 1921, ncuded a comprehensve and
sweepng provson appyng to a cases under the Income and profts ta es wth
reference to the tme when a case was fnay setted, showng defntey when
assessments made by the Commssoner became fna, so that no further acton
coud be taken. s the assessment whch pantff cams was fna was not
made unt 1022, ths provson unquestonaby apped thereto. It s found
n a separate tte of the ct, headed n manner and form as set out beow:
Tte III. Gknbba dmnstratve Pkovsons.
Ths ma|or dvson was aso subdvded, and n one of these subdvsons we
fnd secton 1312 of the same ct, whch, n our opnon, ceary contros the
|udgment n ths and smar cases. Ths secton wth ts subhead s set out
beow n e acty the form that t appears n the ct as passed by Congress:
fna determnatons and assessments.
Seo. 1312. That f after a determnaton and assessment n any case the
ta payer has wthout protest pad n whoe any ta or penaty, or accepted
any abatement, credt, or refund based on such determnaton and assessment,
and nn agreement s made n wrtng between the ta payer and the Comms-
soner, wth the approva of the Secretary, that such determnaton and assess-
ment sha be fna and concusve, then (e cept upon a showng of fraud
or mafeasance or msrepresentaton of fact materay affectng the determna-
ton or assessment thus made) (1) the case sha not be reopened or the
determnaton and assessment modfed by any offcer, empoyee, or agent of
the Unted States, and (2) no sut, acton, or proceedng to annu, modfy,
or set asde such determnaton or assessment sha be entertaned by any
court of the Unted States.
Ths secton (1312) appeared for the frst tme n the 1921 ct, but was
repeated verbatm ct teratm under the same tte and subhead n the
evenue cts of 1924 and 1926, e cept that the words wthout protest are
emtted. We thnk ths statute so pan that he who runs can read.
ta payer had ony to ook at these headngs to fnd under the head of fna
determnatons and assessments whether the assessment whch had been
made aganst hm was fna. In omqust v. ar (35 ed. (2d), 10) the
court sad wth reference to ths provson:
Secton 1312 provdes that, where the Commssoner has determned and
assessed the ta and wthout protest t has been fuy pad or a refund accepted
and a wrtten agreement entered nto by the Commssoner and the ta payer
(approved by the Secretary), such determnaton and assessment sha be
fna and concusve e cept for fraud, mafeasance, or msstatement of ma-
tera fact. Sectons 1309 and 1312 eave no doubt of the authorzed power n
the Commssoner to make ree amnaton, redetermnatons, and reassess-
ments. rom the above secton of the ct t s cear that Congress authorzed
ree amnatons by the Commssoner, and that the ony mts thereon
are that such must be made wthn four years (secton 250(d)) and must
be after wrtten notce to the ta payer after nvestgaton of the necessty
for such ree amnatons. Secton 1312 ponts out the way and the ony way
n whch an assessment may be made fna before e praton of the 4-year
perod. When a statute mts a thng to be done n a partcuar mode, t
ncudes the negatve of any other mode. ( otany Yorstc d MUs v. Unted
States, 278 U. S., 282, 289 Ct. D. 39, C. . III-1, 279 .)
Secton 1309 referred to ree amnatons.
4090 30 23
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1312, rt. 1141.
346
In the same decson, Woodnwth v. aet (26 ed. (2d), 178) s revewed,
and doubt s e pressed as to whether, under the partcuar facts n the case,
a contrary doctrne s hed theren, but the court n ts opnon says wth
reference to the case ast cted that t prefers the rue ad down n Loewy
Son, Inc., v. Commssoner (31 ed. (2d), 652), In whch the same constructon
s paced upon secton 1312 of the evenue ct of 1921.
We do not overook that n omqust v. ar, supra, and Loewy on, Inc.,
v. Commssoner, supra, the assessment was not made under an admnstratve
provson, but the ne of argument used n the decsons s equay appcabe
to the case at bar. It shoud be noted aso that n the ustn Co. vase, supra,
the assessments were made under a provson of the ct of 1917 smar to the
so-caed reef provsons of the ct of 1918 under whch the assessments were
made n the case at bar, and the act of the Commssoner was therefore ad
mnstratve, but the rght of the Commssoner to make a second assessment
was uphed.
If t be camed that pror to the passage of ths provson of the aw the
frst determnaton of the ta by the Commssoner under the reef provsons
was fna, ths affords no reason for such cases not beng ncuded wthn the
purvew of the secton under dscusson f Congress ntended to e empt te|u
from ts provsons, but rather furnshes a concusve argument that Congress
dd not so ntend. ssumng for the purpose of the argument that pror to
the passage of secton 1312 such acts have been fna, t makes t the more
evdent that f Congress had ntended that ths rue shoud contnue, t woud
have so stated n ths secton, whch was three tmes enacted, and whch wo
mt ht say assumed by everyone to be a-ncusve n ts provsons. the
works on ncome ta aton so treat t, and ths has been the practce foowed
by the Department, whch has repeatedy revewed ts decsons upon speca
assessments under the reef ct, upon the request of ta payers.
It s sad that when the Commssoner determned the ta under the reef
provsons of the ct of 1918, and not ony found that the pantff had been
overassessed but sent the pantff a check for the amount of the overassess-
ment, whch pantff accepted, the whoe matter was then setted. ut secton
1312 provdes for e acty ths knd of a case, and that such a settement
s not fna uness an agreement s made n wrtng between the ta payer and
the Commssoner as provded theren.
It shoud aso be noted that n secton 273 of the Revenue cts of 1924 and
1020 Congress provded that the Commssoner mght reverse hs acton n the
case of an abatement, refund, or credt, and reassess and coect the amount.
It e pressy recognzes that n arrvng at the correct ta to be coected there
may have been addtona assessments or coectons, abatements, refunds, and
credts and ceary ndcates that a refund, erroneous or otherwse, does not bar
acton by the Commssoner wthn the statutory perod provded by aw. n
amount erroneousy refunded becomes none the ess a ta because of that fact.
Snce the submsson of the case at bar, we have beeu favored wth further
argument on ths same queston n the case of Taft Wooen Co. v. Unted States,
No. -61. In the bref on the case ast cted, attenton s caed to provsons
of sectons 204(b) and 243(a)8 of the Revenue ct of 1918, whch t s sad,
were reenacted n the Revenue ct of 1921, and that there woud be no neces-
sty for these provsons, whch are genera n ther nature, beng enacted f the
Commssoner had power otherwse to redetermne the ta n a cases. There
mght possby be some force n ths argument f the partcuar provsons of
these two sectons had been reenacted n ther entrety. Such s not the caw.
The part of these provsons whch had genera appcaton, namey, the words
the ta es mposed by ths tte and by Tte III, was omtted and other
changes made when the sectons to whch reference s made were reenacted n
the ct of 1021, doubtess for the reason that Congress was makng e press
provson esewhere wth reference thereto In secton 1312 of the same ct.
whch we have set out above. s changed n the ct of 1021, these provsons
appy ony to partcuar cases and state that n such cases the Commssoner not
ony may ree amne the return, as he coud n a other cases, but that be
sha do so n certan nstances. Itacs ours. so, n the argument n
the Taft Wooen Co. case, supra, reference s made to sectons 222(a) and
2122(b) of the ct of 1918, whch t s sad were reenacted n the ct of 1921.
n e amnaton thereof w show that these provsons apped to amounts
camed by credts by the ta payer by reason of ta es pad n foregn countres,
or to refunds receved therefrom, and to nothng ese. It was ceary necessary
that a speca provson shoud be made wth reference thereto n a separate
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347
1312, rt. 1141.
p-ragraph. It Is aso sad that a Treasury reguaton prevented the reopenng
of a case tnder crcumstances such as e sted n the case at bar, but a casua
e amnaton of the Treasury reguaton wth reference to the reopenng of cases
makes t pan that It apped ony to cases where the ta payer was makng
appcaton to have the case reopened.
or the reasons above stated we hod that the Commssoner was not precuded
from makng a reassessment wthn the perod prescrbed by the statute of
mtatons, whch n ths case had not e pred. It foows that the moton for
a new tra must be overrued, and t s so ordered.
W amb, udge, and ooth, Chef ustce, concur.
Ltteton, udge, concurrng: On the theory that the court has |ursdcton
to go nto the queston of the authorty of the Commssoner to reconsder a
determnaton made by hm under sectons 327 and 328 and change hs frst
determnaton and reassess and coect a porton of the profts ta theretofore
determned under these sectons, and refunded, I agree wth the foregong
opnon and the concuson reached theren, but I thnk the cam of the pantff
shoud be dened on the ground that the court s wthout |ursdcton to pass
upon the queston of the authorty of the Commssoner n ths case.
Ths case reates entrey to a matter arsng under the speca-assessment
provsons of the statute, whch confer dscretonary power n the Comms-
soner to determne the facts and the rate of profts ta through a comparson of
the pantff wth other corporatons specfed n secton 328. It appears that
the pantff made a return for the year 1918 and pad a tota ncome and profts
ta of 91,944.37. Ths return showed a tota net ncome of 124,488.61, the
norma ta upon whch was 4,158.30 and the e cess-profts ta , as computed
under secton 301 of the Revenue ct of 1918, was 87,836.07. Thereafter pan-
tff made appcaton to the Commssoner for computaton of ts profts ta
under secton 328 of the sad act, known as the speca-assessment provson,
camng that the profts ta of 87,836.07 pad was too hgh and worked upon
the pantff an e ceptona hardshp as compared wth other corporatons
smary crcumstanced. The Commssoner, n hs dscreton, concuded that
ths appcaton shoud be granted, whereupon he made a computaton under the
rpeca-assessment sectons and on une 21, 1922, ncreased the net ncome of
the pantff to 125,219.28, but concuded that the e cess-profts ta , when
determned under secton 328, shoud be 57,736.39 nstead of 87,836.07. s a
resut, 26,487.97 of the profts ta pad on the return was refunded. In March,
1924, the Commssoner reconsdered hs acton taken under the speca-assess-
ment provsons and made another determnaton of the amount of pantffs
profts ta under these provsons by comparson wth other corporatons and
concuded that he had made a mstake that the correct comparson and com-
putaton showed a profts ta of 73,368.23, and that, as a resut, he had
refunded 13,756.02 too much. No change was made n the net Income. e
ecomputed and reassessed ths amount and upon recevng notce thereof the
pantff fed an abatement cam and a bref. Upon further consderaton the
Commssoner made a further comparson under the speca-assessment pro-
vsons and upon a further recomputaton aowed the abatement cam for
6.354.76 and re|ected t for 7,410.26. In ugust, 1925, the coector made
demand for the payment of the ast-mentoned amount, and n September, 1925,
the pantff pad t, together wth nterest n the amount of 592.82. In ths
f-ut pantff asks |udgment for the amount, upon the ground that the Comms-
soner s acton on une 21, 1922, under the speca-assessment provsons re-
fundng a porton of the e cess-profts ta shown upon the return, was fna
fnd that he was wthout authorty to reassess and coect any porton of the
amount so refunded.
To go nto the queston whether the Commssoner had authorty to change hs
determnaton and reassess a porton of the ta refunded under the speca-
assessment provsons woud be the same as nqurng nto the correctness of
such determnaton. The amount whch the Commssoner fnay determned the
pantff owed was ess than the ta mposed by secton 301. The entre matter
was embraced wthn the provsons of secton 328. Pantff cams that the
amount refunded ost ts character as a ta and coud be recovered ony by a
tt, n whch t woud be ncumbent upon the Government to prove that a
refund was erroneous. In such a stuaton the court woud not have |ursdc-
ton to go nto the matter. (Wamsport Wre. Rope Go. v. Unted States, 277
17. 8., 551.) nd, however egregous the mstake n the frst determnaton
mght have been, no porton of the amount erroneousy repad coud be recov-
ered by the Government.
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1324, rt. 1040.
348
S CTIONS 1318, 1319, ND 1320. LIMIT TIONS UPON
SUITS ND PROS CUTIONS.
rtce 1050: Suts for recovery of ta es erroneousy
coected.
R NU CT O 1018.
stoppe of survvng drector, sung as trustee of a corporaton
whose charter had e pred, to deny organzaton was ta abe as a
corporaton. (See Ct. D. 193, page 302.)
S CTION 1324. INT R ST ON R UNDS ND
UDGM NTS.
rtce 1040: Interest on refunds and |udg- I -6-4529
ments. Ct.D. 150
D R L T S R NU CT O 1021 D CISION O COURT.
Interest on Refund Protest Cam fob Refund Request fob
Speca ssessment.
request for a speca assessment of e cess-profts ta , wth a
statement of the ground for the same, red wth the ta payer s
return, s not a protest wthn the meanng of subdvson (a) nor
a cam for refund wthn the meanng of subdvson (a)3 of
secton 1324 of the Revenue ct of 1921, whch provdes for the
aowance of nterest on refunds under the condtons specfed
theren.
Court of Cams of the Unted States.
aas d Wadsten Co. v. The Unted States.
December 9, 1929.
opnon.
Graham, udge, devered the opnon of the court.
Ths case nvoves a cam for nterest on a camed aowance of a refund.
It grows out of the appcaton to the facts, whch w be brefy stated, of the
foowng provsons of the Revenue ct of 1921 (42 Stat, 316) :
Sec. 1324. (a) That upon the aowance of a cam for the refund of or
credt for Interna-revenue ta es pad, nterest sha be aowed and pad upon
the tota amount of such refund or credt at the rate of one-haf of 1 per
centum per month to the date of such aowance, as foows:
(2) If such amount was not pad under protest but pursuant to an addtona
assessment, from the tme such addtona assessment was pad .
The pantff states ts contentons as foows:
1. That t shoud be aowed nterest on the overpayment of 1916 ncome ta
n the amount of 1,731.50, from November 14, 1917, the date on whch the
addtona assessment was pad, to May 9. 1922, the date on whch the schedue
was s|rned by the Commssoner of Interna Revenue aowng the refund.
2. That t shoud be aowed nterest on the amount of 457,341.37, represent-
ng the net overpayment of ncome and e cess-profts ta es for the year 1917
( 462,038.34 ess 4,696.97) from the date on whch sad ta es were pad, une
20, 1928, to the date on whch the schedue aowng the sad refund was
sgned by the Commssoner, May 9, 1922.
3. That f ths court shoud decde that ts ncome and e cess profts ta es
for the year 1917 were not pad under a specfc protest wthn the meanng of
secton 1324(a) 1 of the Revenue ct of 1921, t shoud be aowed nterest on
the above-mentoned overpayment of 457,341.37 from s months after ane
20, 1918, to May 9, 1922.
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349
1324, rt. 1040.
The defendant s contenton n repy admts the frst contenton of pantff,
and confnes tsef n ts defense to the second upon the grounds
(1) That the pantff, as requred by the ct, fed no specfc protest when
payng the ta and
(2) That t fed no cam of refund n connecton wth the payment of
sad ta .
It woud proft nothng n reachng a concuson n the case to go nto the
detas of the fgures and facts nvoved. The questons frst to be consdered
are those rased by the defendant as to whether the pantff pad under
a specfc protest and whether the aowance of overpayment was based upon
a cam for a refund that s to say, whether a cam for a refund was
ever fed. The facts stated generay and n effect are as foows:
In ebruary, 1918, before payng ts ta es for the year 1917, pantff com-
muncated wth the ureau of Interna Revenue, statng that t woud ke
to have an opportunty to ay before the Commssoner the operaton of
aw n ts case, and to obtan hs opnon as to whether or not the ureau
woud consder ts statement as |ustfyng an assessment under secton 210
of the ct.
Secton 210 of the Revenue ct of 1917 gave to the Secretary of the
Treasury and the Commssoner of Interna Revenue power to grant reef
to ta payers where nvested capta coud not be satsfactory ascertaned and
t appeared that a ta payer was payng a arger ta than other companes
engaged n a ke or smar trade or busness. It s to be noted n passng
that ths secton was passed upon by the Supreme Court n the Wamsport
Wre Rope Co. case (277 U. S., 551, 561 T. D. 4172, C. . II-2, 323 ), whch
hed that ths court had no |ursdcton to revew the concusons of the
Commssoner of Interna Revenue n ascertanng nvested capta under
ths secton and grantng reef thereunder. Secton 210 s not a ta ng
statute, and a protest aganst the Commssoner s concuson or decson
under t woud be fute, and even f t were made, woud not entte the
pantff to reef n ths court on account of ether faure to make a speca
assessment or from an assessment whch had been made and was unsatsfactory
to the ta payer, or a refusa to make a speca assessment or make any
change wth regard to the pantff s nvested capta, eavng t as under the
return.
Thus t appears that the pantff was askng for a hearng under ths
secton, and to ts request the Commssoner reped on ebruary 15, 1918,
suggestng that t fe a statement of the facts n wrtng coverng ts case,
whch statement woud receve consderaton. On March 28, 1918, pantff
fed ts ta return for the year 1917 and accompaned t wth a statement
of the character suggested by the Commssoner reatve to a speca assess-
ment under secton 210. In ths statement t camed that ts ta under
the requrements of the return was proportonatey arger than that of
other representatve concerns n the same ne of busness further, that
the smpe form and manner of ts organzaton paced t at a dsadvantage
n comparson wth representatve concerns n a smar trade or busness,
and that under paragraph 4, artce 52 of the reguatons, ts nvested capta,
when computed n the manner specfed n the reguatons, s manfesty
serousy dsproportonate to the ta abe ncome, and concuded: We request
assessment n the manner provded for n artce 52, referrng aso to artces
18 and 24, Reguatons No. 41.
It thereafter pad the ta accordng to ts return, on une 20, 1918, and n
dong so stated that, together wth ts returns for corporaton ncome ta ,
e cess-profts ta , and muntons ta , we fed a request on May 28 for assess-
ment n the manner provded for n artce 52, referrng aso to artces 18
and 24, Reguatons 41.
On May 6, 1922, the Commssoner maed to the pantff a copy of certf-
cate of overassessment n connecton wth sad ta es of 462,038.34 and there-
after pad a refund to the pantff on ths bass, the detas of whch t s
not necessary to note at ths pont.
The pantff s contendng that t asked for a speca assessment and
ndcated ts opnon that the amount assessed aganst t under ts return
was out of proporton to that assessed aganst corporatons n a smar ne
of busness, and that ths request for a speca assessment was n protest wthn
the meanng of sad secton 1324(a) of the Revenue ct of 1921 and aso
consttuted a cam for a refund.
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1324, rt. 1040.
350
The queston s, Dd t amount to a protest wthn the meanng of secton
1324(a), and was t a cam for a refund wthn the meanng of that secton
Takng up, frst, the queston of protest, t s a term ndcatng dsagree-
ment or ob|ecton by the party makng t and conveyng to the other party
ths state of mnd, and e pressng dsapprobaton or dssent. What const-
tutes a protest n each case depends upon the facts whch embody t. It a
true that n the case of Green-port asn d Constructon Go. v. Unted States
(260 U. S., 512 T. D. 3429, C. . II-, 187 ), the Unted States Supreme
Court seems to have uphed the vew of the ower court that a cam for
abatement amounted to a protest, bat t s to be observed here that vstng the
pantff wth knowedge of the aw, t dd not fe a specfc protest and t
dd not ask for an abatement. It smpy requested a hearng by the Comms-
soner on a matter that was entrey wthn the dscreton of the Comms-
soner to grant, upon the ground that otherwse t woud be treated unfary
and caed upon to pay ta es dsproportonate to other companes n the same
ne of busness. It was granted a refund not because t woud have been
egay assessed had the Commssoner refused to grant t, because had he
refused the pantff woud have been wthout remedy, as the matter was
wthn hs dscreton, even f t had fed a forma protest and a forma cam
for a refund. ad the pantff been refused reef, even grantng that ts
statement was a cam for a refund, t coud not have on appea secured reef
In ths court. So that, vstng the pantff wth knowedge of the aw, t s
not to be supposed that t ntended ether to fe a protest or a cam for a
refund.
request for a speca assessment, therefore, under these crcumstances,
does not convey the dea, the thought, or convcton that t was ntended as or
was a protest, or a cam for a refund, snce t s cear that nether one woud
have been of any beneft to t as far as the decson of the Commssoner was
concerned. The Commssoner made a speca assessment and aowed t a
refund. e dd not aow but refused nterest, and the pantff here s n
effect askng the court to ncrease the aowance of the Commssoner by aow-
ng nterest and passng upon hs decson n a matter where hs decson was
fna and as to whch ths court has no |ursdcton. We thnk we are pre-
cuded under the decson n the WUamsport Wre Rope Co. case, supra, from
dong so, as to do so woud be to change the amount found by the Commssoner.
More than that, we further are of opnon that secton 1324(a) does not appy
to a request for a speca assessment but ony to cams where the acton of
the Commssoner s sub|ect to revew by ths court. The pantff by the
assessment under ts return had not been egay assessed as to ts nvested
capta, for the decson of the Commssoner was fna and ega.
ut, asde from ths, we are of the opnon that the request for a hearng and
the subsequent statement fed do not consttute a protest wthn the meanng
of the ct. It s somethng dfferent from a request for an abatement. It s
merey a request to the Commssoner to take some acton n a matter where
hs decson was fna. or the same reason we thnk t was not a cam for
a refund. urther, the ta es had not been pad, the Commssoner had nd-
cated an ntenton to consder the pantff s suggeston, and the pantff was
smpy fng facts embodyng ts suggeston for consderaton. There s noth-
ng to show what amount was camed or |ust how an amount coud be arrved
at. It was not known what the decson of the Commssoner woud be and
It must have known that shoud the decson be adverse to t t coud not
recover on a cam as for refusng a refund.
In ngs County Savngs Insttuton v. ar (116 U. S., 200) It was hed
that a cam for a refund coud not be egay made unt after the ta es had
been pad. Ths asserted cam was fed smutaneousy wth the return, and
the ta es were not pad unt une 20, 1918. We are of the opnon that the
pantff s not entted to recover under Its contenton numbered 2 above. The
pantff s entted to recover under ts contenton numbered 1. as set forth
above, nterest on the sum of 1,731.50 from November 14, 1917, to May 9. 1922.
Let |udgment be entered accordngy.
Wams, udge, and Ltteton, udge, dd not hear and took no part n the
decson of ths case.
Gbekn, udge, and ooth, Chef ustce, concur.
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S L T RULINGS.
TITL II. P RT II. T ON DMISSIONS ND DU S.
(1928)
S CTION 413. CLU DU S T .
Reguatons 43, rtce 40: Dues or member- I -18-4623
shp fees. T. D. 4290
rtces 40 and 41, Reguatons 43, amended.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
rtce 40, Reguatons 43, s hereby amended by addng the
foowng as the ffth paragraph thereof, vz:
Instaments pad on or after une 2d, 1928, on assessments eved or mposed
pror to that date to meet specfed capta e pendtures are not sub|ect to the
terms of secton 501 (a) 1(d) of the Revenue ct of 1926, added by secton 413
of the Revenue ct of 1928.
Reguatons 43, rtce 41: Intaton fees. I -18 4624
T. D.4290
rtce 41 of those reguatons s hereby amended by addng the
foowng as the ffth paragraph thereof, vz:
Instaments pad by a cub member on or after une 29, 1928, n satsfacton
of obgatons Incurred by hm pror to that date for the prce of a bond, stock
or certfcate representng an nterest n cub property, the purchase of whch
was requred as a condton precedent to membershp theren, are not sub|ect
to the terms of secton 501(a)2(d) of the Revenue ct of 1926, added by secton
41.3 of the Revenue ct of 1928.
Rout. . Lucas,
Commssoner of Interna Revenue.
pproved pr 28, 1930.
. W. Meon,
Secretary of the Treasury.
(351)
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Regs. 43-11(1924), rt. 9. 352
TITL III. T ON DU S. (1921)
IMPOSITION O T .
Reguatons 43-11(1924), rtce 9: Dues or mem- I -17-4611
bershp fees. Ct. D. 172
ta on dues revenue act of 1921 decson of court.
Dues oe Membershp ees Defnton.
The term dues or membershp fees as used n secton 801
of the Revenue ct of 1921 ncudes a assessments eved by a cub
for operatng e penses.
Unthd States Dstrct Court, Northern Dstrct or New York.
rdsey Cub, pantff, v. Cyrus Durey, Coector of Interna Revenue for the
ourteenth Dstrct of New York, defendant.
March 15, 1930.
OPINION.
ryant, D. .: Pantff s a New York membershp corporaton. Its artces
of ncorporaton provde for annua dues of 150 and aso authorze the board
of governors under certan restrctons, to evy and coect assessments. In
March, 1923, pursuant to resouton duy adopted, an assessmeut of 150 pus
15 for edera ta was eved aganst each actve and subscrbng member.
Ths was the frst assessment eved snce the ncepton of the cub n 1895.
Of the 74,783.37 coected under ths assessment, 51,650.89 was used for
capta e pendtures and 23,083.37 for operatng e penses.
The defendant eved a ta of 7,472.75 aganst the assessment coected as
a ta on dues. Ths was pad under protest and a cam for refund fed.
Defendant refunded 5,165.09, the ta coected on that part of the assessment
used for capta e pendtures and re|ected the baance of the cam, vz,
2,307.66, the ta coected on the assessment used for payment of operatng
e penses. Ths acton s brought by pantff to recover the re|ected sum.
t the tme ths assessment was made secton 801 of the Revenue ct of
1921 was n force. It mposed a ta on dues or membershp fees e ceedng
10 of cubs smar to and ncudng pantff. Secton 501 of the Revenue
ct of 1924 s substantay a reenactmcut of secton 801 of the 1921 ct
Nether ct defnes the term dues or membershp fees. The Commssoner
of Interna Revenue, n pursuance of te provsons of secton 1303 of the 1921
Revenue ct and secton 1001 of the 1924 Revenue ct, prescrbed rues
and reguatons for the enforcement of these cts. Reguatons 43, part 2,
artce 9 (1921), provdes that the term dues or membershp fees sha be
nterpreted as ncudng recurrent assessments and assessment for runnng
e penses, and artce 9 of the 1924 revson of sad reguatons nterprets the
term dues or membershp fees as ncudng a assessments e cept that
porton thereof mposed for capta e pendtures. It s under the ast nter-
pretaton that the ta n queston was eved and coected.
Pantff contends that the words dues or membershp fees as used n the
statute do not cover assessments of any knd and that the Commssoner,
n rung that cub assessments are to be ta ed, even to any e tent, went
beyond the scope of the statute. In other words, pantff urges that the
Commssoner attempted to remedy what n hs opnon was a defect or omsson
n the aw by egsatng nto the 1921 and 1924 cts provsons of aw whch
Congress dd not enact nor ntend to enact. That the Commssoner can not
transcend the egsatve functon by suppyng omssons s we setted. It s
aso we setted that hs reguatons, made pursuant to statutory authorty
wth the approva of the Secretary of the Treasury, n respect to the assessment
and coecton of nterna revenue, f not n confct wth the purpose and
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353
Regs. 52, rt. 6.
ntent of the statute, have the force of aw. What was the ntenton of the
statute Was t to ay an e cse ta upon a payments made to any soca,
athetc, or sportng cub or organzaton (f n e cess of 10 per year) whch
were used to defray annua e penses, or was t to ay a ta upon the sums
f ed to be pad at recurrng ntervas for the mantenance of the organzaton
and e empt from such ta any amount mposed as a snge act as dstngushed
from recurrng acts for the same purpose I am of the opnon that the former
e presses the evdent purpose and ntent of the statute. The words for
any perod contaned n the ct seem to oppose the mtng of the words
to payments made ony at recurrng ntervas. To ths may be added the
fact that the Department s nterpretaton of the statute has had such mped
approva that t shoud not be dsturbed. The substanta reenactment of ths
statute three tmes whe the reguaton nterpretng the statute to ncude
assessments was beng apped amounts to an mped egsatve recognton
and approva of the e ecutve constructon of the statute. Natona Land
Co. v. U. 8.. 252 U. S., 140.)
Defendant may have |udgment for dsmssa of compant, wth costs.
TITL I. T ON R G S. (1918)
R G S SOLD IN OTTL S OR OT R CLOS D CONT IN RS.
ta on beverages revenue act of 1918 decson of court.
Sae by endor ass of Ta .
Where a manufacturer paces bottes of ts beverage n the cus-
tody of a vendor, aganst whom the manufacturer on ts books
makes a charge, aowng hm a percentage thereof as a commsson,
and requres hm to se the beverage at a rate n e cess of the
charge, and the manufacturer not ony receves and credts the
vendor wth unsod goods but gves hm credt aso for breakage
wthout hs faut, the transacton s not a sae. The saes made by
such a vendor are saes of the manufacturer, and the ta on the
beverage, mposed by secton t 28 of the Revenue ct of 1918,
shoud be computed on the amount receved by the vendor from
hs saes.
Dstrct Court or the Unted States for the Western Dvson of the
Western Dstrct of Mssour.
red arvey, Inc., a Corporaton, pantff, v. Noah Crooks, as Unted States
Coector of Interna Revenue for the S th Dstrct of Mssour, defendant.
Reeves, Dstrct udge: Pantff seeks the refund of a certan ta whch t
was requred to pay. Such ta was mposed upon a arge number of cases
of beverage, known as soda pop, and whch were ether sod to or through
the agency of persons known and desgnated as news agents.
It s the contenton of the pantff that such beverage was sod to and not
through the agency of such news agents and that n consequence the ta
shoud be computed upon the amount pad by the news agents and not upon
the amount receved by such agents.
The statute under whch the ta was mposed s found n the Revenue ct
of 1918 and s numbered secton 628. Ths secton mposes a ta of 10 per
cent upon soft drnks, sod by the manufacturer, producer, or mporter, n
bottes or other cosed contaners.
Regvatons 52, rtce 6: Ta payabe by
the manufacturer.
I -19-4634
Ct. D. 180
ebruary 24, 1930.
OPINION.
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Regs. 52, rt. 6.
354
Pantff sod the beverage n queston to or through the agency of ts news
agents traveng on passenger trans of the Santa e Raway Go. There was
no wrtten contract or agreement between pantff and such news agents. n
ora agreement, however, mposed upon the news agent the duty to make saes
of .specfed artces paced n hs custody on hs trps over the raroad and to
account therefor at a specfed prce, and to return for credt unsod mer-
chandse. speca arrangement wth respect to soda pop was that such agent
shoud make saes at a f ed prce of 10 cents per botte or 2.40 per case of
24 bottes. owever, such agent was ony charged by pantff upon the bass
of 2 per case and was aowed a commsson of 20 per cent on that bass. The
net churge to pantff was 1.60 per case. Ths meant a proft to the agent of
80 cents per case of 24 bottes.
ccordng to the evdence, the amount aowed the agent above 2 was
treated as a bonus. It was hed out as one of the nducements to enter the
servce. The pantff not ony receved and credted the agent wth unsod
merchandse but n case of breakage, wthout the faut of the agent, save
credt |ust the same as f the merchandse had been returned. Pantff hed
a contract wth the raroad company whch accorded the rght of trave
by sad agents over ts nes n seng sad merchandse. In such contract,
sad agents were consdered empoyees of the pantff.
1. The ony queston nvoved n ths controversy s whether the sae of
soda pop was made to such agents by the pantff or whether handed on con-
sgnment, or by bament for the beneft of the pantff. In ackson et a. v.
Mcntosh (12 ed. (2d), 676, 1. c, 678), a sae s defned as
change n the benefca ownershp of the thng deat wth, and a prce,
pad or promsed, and certan or capabe of beng ascertaned, are essenta
ngredents of a sae.
ackstone defnes a sae as a transmutaton of property from one man
to another n consderaton of some prce or recompense n vaue. See aso
Wamson et a. v. erry (49 U. S.. 495).
Whether a contract or transacton, as n ths case, amounts to a sae or
a mere bament, or consgnment, s the queston for consderaton.
The evdence showed that the traveng news agent was actuay debted
by pantff on ts books at the rate of 2 per case of 24 bottes, but was
requred to se the bottes at 10 cents per botte, or at the rate of 2.40 per
case. e was requred to do ths upon per of dscharge. Ths was an
e tra compensaton offered as an nducement to engage n the servce.
further compensaton was computed upon the bookkeepng debt of 2
per case. The agent was entted to a 20 per cent commsson, or 40 cents
per case, asde from hs bonus. e coud return unsod goods or coud have
credt for breakage wthout hs faut. The compensaton of the agent depended
upon hs commsson and hs bonus.
Ths queston s argey one of ntent. udged aone by the terms of the
contract, the ntenton to create a bament and not a sae ceary appears,
and entted appeee, n the absence of fraud, to take back the goods upon
consgnee s bankruptcy. (McCaum v. ra-Robnson Cothng Co., 24 ed.
(2d), 35 Ludvgh v. mercan Wooen Co., 188 ed., 30 Ludvgh v. mercan
Wooen Co., 231 U. S., 522.)
The Supreme Court, n Sturm v. oker (150 U. S., 312, L c, 329), sad:
The recognzed dstncton between bament and sae s that when the
Indentca artce s to be returned n the same or n some atered form, the
contract s one of bament, and the tte to the property s not changed. On
the other hand, when there s no obgaton to return the specfc artce, and
the recever s at berty to return another thng of vaue, he becomes a
debtor to make the return, and the tte to the property s changed the trans-
acton s a sae. Ths dstncton or test of a bament s recognzed by ths
court n the case of Powder Co. v. urkhardt (97 TT. S., 110, 1. c, 116).
The agency to se and return the proceeds, or the specfc- goods f not sod,
stands upon precsey the same footng, and does not nvove a change of tte.
n essenta ncdent to trust property s that the trustee or baee can never
make use of t for hs own beneft. Nor can t be sub|ected by hs credtors
to the payment of hs debts.
Ths case was foowed n the eghth crcut n et- enda Shoe Co. v.
Martn (222 ed.. 851, 1. c. 855). See aso 23 R. C. L., sectons 33 and 34.
pages 1214, 1215, and 1216 35 Cyc, 27.
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355
Regs. 52, rt. 6.
In vew of the above, the court must hod that the news agent was actng for
and on behaf of the pantff and that the saes made by such agents were the
saes of the manufacturer. ccordngy, the computaton made by the Govern-
ment on the bass of a sae prce of 2.40 per case was correct
2. Ob|ecton has been made by the Government to the rght of the pantff
to prosecute ths acton upon the ground that the cam here pressed vares
from that nterposed before the Commssoner. There s a dfference but ony
n amount. The same theory s mantaned here.
Orgnay, t was contended that the assessment shoud ony be computed
upon the bass of 70 cents per case nstead of 2.40 per case. Pantff has n
ths court receded from that poston and now contends that the ta shoud be
computed upon the bass of 1.60 per case. Ths does not appear to be such a
change of poston as to deny pantff s rght of acton.
The evdence of the pantff was nsuffcent to show a rght of recovery.
ccordngy, |udgment w be entered for the defendant.
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ST T T RULINGS.
TITL III. ST T T . (1926 ND 1928)
TR NS RS Y D C D NT IN IS LI TIM .
Reguatons 70(1929), rtce 18: Reservaton
of ncome or an annuty.
I -12-4572
T. D. 4285
ST T T TR NS RS.
rtce 18 of Reguatons 70 (1929 edton) amended.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
rtce 18 of Reguatons 70 (1929 edton) s hereby amended by
strkng out ts s th paragraph, and by changng ts second para-
graph to read as foows:
Where the decedent reserved ony a porton of the ncome, ony a corre-
spondng proporton of the vaue of the property shoud be ncuded n the gross
estate. Thus, for e ampe, f the reservaton was one-haf of the ncome, then
one-haf of the vaue of the transferred property shoud be ncuded.
Robt. . Lucas,
Commssoner of Interna Revenue.
pproved March 15, 1930.
. W. Meon,
Secretary of the Treasury.
ST T T R NU CT O 1020 decson of court.
oard op Ta ppeas Concusveness op Decson ursdc-
ton op (, oubt.
Where after the enactment of the Revenue ct of 1926 the Com-
mssoner mas to the e ecutor of an estate notce of an amount
proposed to be assessed n respect of an estate ta mposed by the
Revenue ct of 1921 and thereafter the e ecutor fes a petton
wth the oard of Ta ppeas, the acton of the oard n redeter-
mnng the amount of the ta s fna where no appea s taken
from the oard s decson and a sut to recover back a part of
the amount redetermned by the oard s barred by secton
319(a) of the Revenue ct of 1926 uness t s wthn the cass of
cases e cepted from the provsons of that subdvson.
TITL III. ST T T . (1926)
Reguatons 70: Refund after fng petton
wth oard of Ta ppeas.
I -10-4555
Ct. D. 156
(356)
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357
Regs. 70.
Dstrct Court op the Unted States for the Western Dstrct of
Pennsyvana.
dward . ndey, bon ndey, and deade ndey Davdson, ecutors
and ecutr of the Last W and Testament of ohn ndey, Deceased,
pantffs, v. D. . ener, Coector of Interna Revenue n and for the
Twenty-thrd Dstrct of Pennsyvana, defendant.
anuary 22, 1930.
opnon.
Schoonmaker, udge: Ths Is a sut to recover edera estate ta es aeged
to have been egay e acted by the coector of nterna revenue. |ury tra
was waved and the case heard by the court. On the peadngs and proof
we fnd the foowng facts:
ohn ndey ded December 18, 1921. The pantffs are hs survvng
e ecutors. Ou December 14, 1922, the e ecutors of ths estate fed a edera
ta return wth the coector showng ta due to the amount of 180,235.34,
whch amount was pad. On or about May 3,1928, the Commssoner of Interna
Revenue, after audt and revew of ths return, notfed the e ecutors by
regstered ma, as requred by aw, of a defcency In the estate ta owng
by ths estate n the amount of 12,692.53. On uy 1, 1926, the e ecutors
fed a petton wth the oard of Ta ppeas for a redetermnaton of the
defcency. On March 12, 1927, the oard of Ta ppeas made an order of re-
determnaton as to ths estate ta and entered a |udgment that there was no
defcency n the estate ta . rom ths decson there was no appea to the
crcut court of appeas, as authorzed by aw. On March 31, 1927, the e ecutors
fed wth the Commssoner of Interna Revenue a cam for refundment of
1,368.37 of ther edera estate ta to whch they camed to be entted by
reason of addtona admnstratve e penses ncurred and pad between uy 1,
1926, and November 15, 1926, both dates ncusve. Ths cam was dened by
the Commssoner on uy 6, 1927.
Under these facts, we concude that as a matter of aw the defendant Is
entted to |udgment n hs favor. Let an order for |udgment n favor of the
defendant be submtted.
DISCUSSION.
We gve |udgment n ths case n favor of the defendant, for the reason
that n our opnon the decson of the oard of Ta ppeas concusvey
determned the ta abty of ths estate under the provsons of the Revenue
ct of 1926. The defcency found by the Commssoner havng been de-
termned subsequent to the effectve date of the Revenue ct of 1926, and
the appea to the oard of Ta ppeas havng been aso fed after the ef-
fectve date of sad ct, ths case s to be determned by the provsons
of the Revenue ct of 1926 wth reference to the defcences and overpayments.
(See sectons 319(c), 1111, and 284(e).)
Secton 308(a) of the ct of 1926 provdes that f the Commssoner deter-
mnes that there s a defcency n respect to payment of ta mposed by the
ct, he s authorzed to send notce of such defcency to the ta payer by
regstered ma. Wthn 60 days after such notce, the e ecutor may fe a
petton wth the oard of Ta ppeas for a redetermnaton of the defcency.
Secton 31S(a) of the same ct provdes that f the Commssoner, after
the enactment of the ct ( ebruary 26, 1926), determnes that any assessment
shoud be made wth respect to any estate or gft ta mposed by the Revenue
ct of 1917, the Revenue ct of 1918, the Revenue ct of 1921, the Revenue
ct of 1924, or any such ct as amended, notce of the amount proposed to
be assessed sha be gven the e ecutor, whch notce sha be consdered for
the purposes of the ct a notce under subdvson (a), secton 308 of the ct.
The oard of Ta ppeas was orgnay created by the ct of 1924 to
decde ta appeas. (See secton 900 of that ct.) It was, however, gven no
concusve |ursdcton over these matters, and an aggreved party coud brng
court acton to recover any ega ta aeged to have been pad.
The Revenue ct of 1026, however, changed the stuaton over what t had
prevousy been. y that ct, the decsons of the oard of Ta ppeas were
made fna and concusve of the ta abty, savng ony to the aggreved
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egs. 68, rt. 18.
358
party tbe rght of appea to the crcut court of appeas. (See secton 1003
of the Revenue ct of 1926 e cept as to the cass of cases as provded for n
secton 318(h) of the same ct.)
The provsons of the Revenue ct of 1926 whch woud bar ths acton from
ths court are as foows:
Sbc. 319. (a) If the Commssoner has maed to the e ecutor a notce of
defcency under subdvson (a) of secton 308 and f the e ecutor after the
enactment of ths ct fes a petton wth the oard of Ta ppeas wthn
the tme prescrbed n such subdvson, no refund n respect of the ta sha
be aowed or made and no sut for the recovery of any part of such ta sha
be nsttuted n any court, e cept . (None of these e ceptons ft
the facts of ths case.)
the facts n the nstant case brng t precsey wthn the mtatons of
ths secton. The Commssoner gave notce of defcency to the e ecutors
under subdvson (a), secton 308, after the enactment of the 1926 ct, and
after the enactment of that ct the e ecutors fed a petton wth tbe oard
of Ta ppeas wthn the tme prescrbed by the subdvson. Therefore, the
ta payer coud have no refundment wth respect to ta and coud brng no sut
for recovery of any part of the ta n any court, e cept on the condtons
authorzed by ths secton 319. The facts of the case do not brng the pantff
wthn any of the e ceptons.
The oard of Ta ppeas had authorty under the statute to determne
whether or not there was any defcency ta , or whether or not the ta payer
had overpad hs ta , so that a the matters mght have been ceared before
the oard of Ta ppeas and revewed by the crcut conrt of appeas.
The pantffs n ths ease contend that they shoud not be bound by ths
provson of the statute, because the admnstraton e penses whch they are
now seekng to have credted to them n the ad|ustment of ther ta abty
were ncurred and pad subsequent to the tme of the determnaton of the
ta defcency by the Commssoner of Interna Revenue, and part of the tems
were ncurred after the tme of fng the appea to the oard of Ta ppeas.
We can not agree wth ths contenton. In the frst pace, tbe cam for aow-
ance of addtona admnstraton e penses mght have been brought to tbe
attenton of the oard of Ta ppeas, whch dd not render ts decson unt
after the date of the e pendture of the tems for whch the e ecutors are
camng credt. In the second pace, Congress has undertaken to estabsh a
trbuna to ad|ust the questons of ta abty, a body of e perts empowered
to hear evdence, to make determnatons of defcency of ta , to determne
whether there has been an overpayment of ta regardess of whether or not
the Commssoner has made any determnaton of a defcency. There s a
rght of the aggreved party to appea on the questons of aw to the crcut
court of appeas of the proper crcut. The e ecutors are barred from any
other remedy.
e therefore concude that ths acton w not e, because t s a sut n-
sttuted for the recovery of a ta barred by secton 319(a) of the Revenue
ct of 1926.
TITL I. P RT I. ST T T . (1924)
TR NS RS Y D C D NT IN IS LI TIM .
Reguatons 68, rtce 18: Reservaton of
ncome or an annuty.
I -12-4573
T.D. 4284
ST T T TR NS RS.
rtce 18, Reguatons 68. as amended by Treasury Decson
4184 C. . II-2, 358 , amended.
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359
Regs. 70, rts. 15, 19.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
rtce 18 of Reguatons 68, as amended by Treasury Decson
4184, s hereby amended by strkng out ts ffth paragraph, and by
changng ts second paragraph to read as foows:
Where the decedent reserved ony a porton of the Income, ony a correspond-
ng proporton of the vaue of the property shoud be ncuded n the gross
estate. Thus, for e ampe, f the reservaton was of one-haf of the ncome,
then one-haf of the vaue of the transferred property shoud be Incuded.
Robt. . Lucas,
Commssoner of Interna Revenue.
pproved March 15, 1930.
. W. Meon,
Secretary of the Treasury.
TR NS RS Y D C D NT IN IS LI TIM .
Reguatons 70, rtce 15: Transfers durng I -19-4641
fe. rtce 19: Power to change en|oy- Ct. D. 18-
ment.
estate ta revenue act of 1924 decson of court.
gboss e8tate transfer n trust power of revocaton
Retroactvty.
Where a decedent n 1911 transfers property to another n
trust to pay the ncome therefrom to named benefcares other
than hersef and to pay over the trust fund to others at a tme not
referabe to her death and by the terms of the trust deed she
reserves fu power to change and ater the trust and to name
any benefcares, e cept hersef, other than those desgnated, the
transfer s not compete unt her death. s apped to such a
trust secton 302(d) of the Revenue ct of 1924 s not retroactve
and vod where her death foows the enactment of that ct and
the vaue of the property conveyed n trust shoud be ncuded n
the decedent s gross estate.
Unted States Dstrct Court, Dstrct of Mane, Southern Dvson.
ope aynes rady et a., ecutors of the w of zabeth S. aynes, v.
rank . Mam, Coector of Interna Revenue.
ebruary 2T, 1930.
opnon.
Peters, .: The pantffs Reek to recover the sum of 5,073.69, whch they
aege was wrongfuy coected as ta es upon the estate of ther testatr ,
who ded on ebruary 23, 192-|. On May 16, 1911, she estabshed a trust
for the beneft of her two daughters. The vaue of the trust fund at the date
of the decedent s death was 100,641.79, whch amount was ncuded as a part
of the ta abe gross estate of the decedent by the Commssoner of Interna
Revenue.
The decaraton of trust provdes that the trustees shoud pay the net n-
come to the two daughters durng ther ves, and on the death of ether eav-
ng ssue, the ncome of the deceased daughter to be pad to such ssue. On
the death of ether daughter eavng no ssue the entre ncome to be pad to
the survvng daughter, and on the death of both daughters the ncome to be
pad to the ssue of each daughter, or, f one daughter eaves no ssue, the
entre Income to the ssue of the other and that 21 years after the death
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Regs. 70, rts. 15, 19.
360
of the survvor of the two daughters and Manchester aynes Wheeer, the
prncpa of the fund, whether zabeth S. aynes be then vng or not, sha
be pad over to the persons, and n the proportons, to whom and n whch t
woud then have been dstrbuted under the ntestate aws of Mane then n
force f t had then been persona property and the sad zabeth S. aynes
had then owned t n her own rght and had ded ntestate.
Paragraph 4 of the nstrument contans the most mportant provson n
connecton wth ths case, and s as foows:
4. Sad zabeth S. aynes sha have fu power to make any addtons
to the trust property and to change and ater any or a of the trusts heren
set forth, to name any benefcares other than those above named e cept
hersef, whether by way of addton or substtuton, and to appont another
trustee or other trustees at any tme ether by way of addton or substtu-
ton for the trustee or trustees at any tme actng. ny such change, atera-
ton or appontment sha be made by her deed and sha take effect mme-
datey upon the devery thereof to anyone not hersef who sha at the tme
he actng as a trustee hereunder, or f she be the soe trustee upon her e ecuton
thereof.
On une 12, 1018, actng under the power she reserved n paragraph 4 of the
decaraton of trust, the decedent atered ts terms by provdng that f, before
the termnaton of the trust as prevousy estabshed, there shoud be no
vng ssue of the decedent (the settor of the trust), then the trust shoud
termnate and the property be dstrbuted to other reatves and ther ssue.
The Commssoner of Interna Revenue n assessng the estate ta to be pad
by the pantffs n ther capacty as e ecutors, ncuded the corpus of ths
trust as a part of the vaue of the gross estate of the decedent, camng to be
authorzed and requred to do so by the Revenue ct of 1924, whch provdes as
foows:
Sec. 302. The vaue of the gross estate of the decedent sha be determned
by ncudng the vaue at the tme of hs death of a property, rea or persona,
tangbe or ntangbe, wherever stuated
(d) To the e tent of any nterest theren of whch the decedent has at any
tme made a transfer, or wth respect to whch he has at any tme created a
trust, where the en|oyment 1 hereof was sub|ect at the date of hs death to any
change through the e ercse of a power, ether by the decedent aone or n con-
|uncton wth any person, to ater, amend, or revoke, or where the decedent
renqushed any such power n contempaton of hs death, e cept n case of
a bona fde sae for a far consderaton n money or money s worth
(h) Subdvsons (b), (c), (d), (e), (f), and (g) of ths secton sha
appy to the transfers, trusts, estates, nterests, rghts, powers, and renqush-
ment of powers, as severay enumerated and descrbed theren, whether made,
created, arsng, e stng, e ercsed, or renqushed before or after the
enactment of ths ct.
The pertnent Treasury reguatons nvoved are argey eaboratons of the
statute, artce 19 beng as foows:
rt. 19. Power to change en|oyment. The vaue of property transferred,
other than by a bona fde sae for a far consderaton n money or money s worth,
consttutes a part of the gross estate f at the tme of the decedent s death the
en|oyment thereof was sub|ect to any change through a power, e ercsabe
ether by the decedent aone or n con|uncton wth any person, to ater, amend,
or revoke.
The pantffs take the poston that ths s a transfer ta that s beng m-
posed that the trust n queston was a transfer, not one ntended to take
effect n possesson or en|oyment at or after the death of the decedent (sec.
302(c)) and not sub|ect at the date of her death to any change through the
e ercse of a power to ater, amend, or revoke (sec. 302(d)) that
t was made and competed ong pror to the enactment of the statute mposng
the ta , and to ncude the corpus of the trust n the gross ta abe estate of the
decedent s deprvng the pantffs of ther property wthout due process of
aw because of the retroactve features of the ct.
The pantffs rey upon the case of Nchos v. Coodge (274 T . S., 531
T. D. 4072, C. . I-2, 351 ). That case, however, nvoved the appcaton
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361
Regs. 70, rts. 15, 19.
of the Revenue ct of ebruary 24, 1919, to the partcuar facts there con-
sdered. It went no further than to hod that a past, awfu, competed trans-
acton, not testamentary n character, coud not be used under secton 402(c)
of the ct of 1919 to ncrease the gross estate of a testator for the purpose of
measurng the ta es. The court says
Under the theory advanced for the Unted States, the arbtrary, whmsca,
or burdensome character of the chaenged ta s pan enough. n e cse
s prescrbed, but the amount of t s made to depend upon past awfu trans-
actons, not testamentary n character, and beyond reca. Property of sma
vaue transferred before death may have become mmensey vauabe and the
estate ta , swoen by ths, may eave nothng for dstrbuton.
In odgett v. oden (275 U. S., 142 T. D. 4117, C. . II-1, 324 ) the court
consdered questons reatng to the gft ta features of the aw of 1924, and,
referrng to Nchos v. Coodge n ths anguage, sad:
In Nchos v. Coodge (274 U. S., 531 supra ) ths court ponted out that
a statute purportng to ay a ta may be so arbtrary and caprcous that ts
enforcement woud amount to deprvaton of property wthout due process of
aw wthn the nhbton of the ffth amendment. s to the gfts whch
odgett made durng anuary, 1924, we thnk the chaenged enactment s
arbtrary and for that reason nvad. It seems whoy unreasonabe that
one who, n entre good fath and wthout the sghtest premonton of
such consequence, made absoute dsposton of hs property by gfts, shoud
thereafter be requred to pay a charge for so dong.
In Untermyer v. nderson, (276 U. S., 440 T. D. 4157, 0. . II-1, 326 )
the court says, speakng of the ct of 1924:
nd, further, that so far as appcabe to bona fde gfts not made n antc-
paton of death and fuy consummated pror to uno 2, 1921, those provsons
are arbtrary and nvad under the due process cause of the ffth amendment.
Retroactve features aone of the statute are not the bass of any ega
ob|ecton to t. recent ncome ta es for many years have been retroactve
and, as ponted out by Mr. ustce randes n hs dssentng opnon n
Untermyer v. nderson, t has been setted for more than haf a century that
a aw of Congress mposng a ta may be retroactve n ts operaton. It s the
appcaton of a retroactve statute n such a way as to cause an arbtrary,
whmsca, and burdensome ta n a partcuar case that s ob|ectonabe.
Whenever the court has nvadated an appcaton of the statute for ths
reason, the past transacton has been whoy compete and beyond reca.
In the nstant case an e amnaton of the trust deed dscoses a transacton
not whoy compete and beyond reca. In fact the decedent retaned compete
contro over the trust and ts sub|ect matter n a respects save one she
coud not substtute hersef as a benefcary. She coud not ony change the
benefcares, ther shares and nterests, but she coud change the tme of the
termnaton of the trust, postponng t unt after her death, at whch tme the
corpus coud be dstrbuted to desgnated benefcares.
Consderng the powers over the trust whch the decedent had and retaned
after the Revenue ct was passed and unt her death, t can not be sad that
the appcaton of the statute woud resut n the assessment of ta of any such
character as that condemned n Nchos v. Coodge.
Ths case mght be further dstngushed from Nchos v. Coodge by the fact
that there the court was consderng a transacton not testamentary n char-
acter, whe here the transacton does certany partake of a testamentary
character.
The Supreme Court agan consdered the prncpe nvoved n Nchos v.
Coodge n the cases of Sutonsta v. Saon ta (276 U. S., 260), Chase Natona
ank v. U. S. (278 U. S., 327 Ct. D. 40, C. . III-1, 308 ), and rwck-e v.
Northern Trust Co. (278 U. S., 339 T. . 42G1, C. . III-1, 305 ). oth
partes rey upon these cases, the pantffs camng that to consttute an
e cepton to the prncpe ad down n Ncho v. Coodge t must ap ear that
what amounts to a compete power of revocaton must e st n the settor of a
trust n order to postwe the transfer unt the death of the settor.
It s now setted that a compete power of revocaton postpones the transfer
and takes the case entrey out of the scope of Nchos v. Coodge, but t dues
not foow that other cases of trusts, not havng fu power of revocaton
reserved, may not have powers reserved n the settor such as woud postpone
4090 30 24
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Regs. 67, rt. 1.
362
the operaton of a transfer unt death. It was sad n Chme Natona ank
v. . 8.:
Unt the moment of deuh the decedent retaned a ega nterest n uv
poces whch gave hm the power of dsposng of them and ther proceeds as
competey as f he were hmsef the benefcary of them. The precse queston
presented s whether the termnaton at death of that power and the consequent
passng to the desgnated benefcares of a rghts under the poces freed of
the possbty of ts e ercse may be the egtmate sub|ect of a transfer ta , as
s true of the termnaton by death of any of the other ega ncdents of prop-
erty through whch ts use or economc en|oyment may be controed.
nd, agan
Termnaton of the power of contro at the tme of death nures to the
beneft of hm who owns the property sub|ect to the power and thus brngs
about, at death, the competon of that shftng of the economc benefts of
property whch s the rea sub|ect of the ta , |ust as effectvey as woud ts
e ercse, whch atter may be sub|ected to a prvege ta .
The power to contro the shftng of the economc en|oyment of property s
the egtmate sub|ect of a transfer ta . In ths case the settor hud contro
over the possesson and en|oyment of the property, not ony such as a trustee
woud have but she coud by the e ercse of her reserve powers contro the
shftng of the economc beneft. Upon the none ercse of that power at her
death the tte became compete n the- benefcares named and a transfer
occurred whch s sub|ect to the edera estate ta . The death of the settor
renders the transfer of the property compete and absoute whch before was
not compete.
Where there s such a specfc provson of aw such as s contaned n sec-
ton 302(d) of the ct n queston, e acty appyng to the stuaton here, the
ta must be uphed uness t ceary and unquestonaby comes wthn, the
nhbton of Nchos v. Coohgc. very possbe presumpton s n favor of
the vadty of a statute, and ths contnues unt the contrary s shown beyond
a ratona doubt. (Snkng und Cases, 99 U. S., 700.)
The resut s that |udgment must be for the defendant, wth costs, and ft s
so ordered.
TITL III. P RT II. GI T T . (1924)
TR NS RS SU CT TO T .
Reguatons 67, |t ce 1: Transfers reached. I -21 465
Ct. D. 187
GI T T R NU CT O 1824 D CISION O COURT.
Transfer n Trust efore actmk t of the Revenue ct of
1924 Power of Revocaton.
Where, before (he enactment of the Revenue ct of 1924, an
owner of proerty transfers t by gft n trus for the beneft of
others, reservng by the terms of the trust deed, the rght of revo-
caton, and after te enactment of that ct, she surrenders the
rght of revocaton by approprate nstrument, a transfer occurs
upon such surrender whch s ta abe under secton 319 of the
Revenue ct of 1921.
Court of Cams of the Unted States.
bby . Mean v. The Unted States.
pr 7, f 30.
OPINION.
Wams, udge, devered the opnon of the court.
Ths s a sut to recover a sum of 32,810.42 pad as a gft ta by pantff for
the year 1924 under the provsons of sectons 319 and 320, Revenue ct of
1924. (43 Stat., 253.)
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363
Regs. 67, rt. 1.
On uy 7, 1923, the pantff assgned certan securtes and property to tbe
Centra Unon Trust Co. of New York and Over W. Means, as trustees, under
and by vrtue of three certan ndentures of trust duy e ecuted on that day by
the pantff wth the sad Trust company and sad Over W. Means, as
trustees, for the beneft respectvey of the three chdren of the pantff.
On May 24, 1924, the pantff transferred and assgned certan securtes
and property to the Centra Unon Trust Co. of New York, as trustee, under and
by vrtue of a certan ndenture of trust duy e ecuted on that date by the
pantff wth sad Trust company, as trustee, for the beneft of pantff s
husband, Over W. Means.
In each of sad ndentures of trust the rght of revocaton was reserved to
the pantff. On the 27th day of une, 1924, the pantff, by approprate nstru-
ments, surrendered these rghts of revocaton.
Tbe pantff n the orgna bref and argument rased the queston of the
consttutonaty of the gft ta provsons of the Revenue ct of 1924. Ths
pont has been dsposed of by the Supreme Court of the Unted States n the
case of romey v. McCauffhn, coector (280 U. S., 124 Ct. D. 140, C. R
I1I-2, 392 ), n whch the consttutonaty of the gft ta was sustaned.
Wth the emnaton of ths pont from the case the soe queston eft for
the determnaton of the court s whether the gfts n queston were made before
or subsequent to the effectve date of the Revenue ct of 1924.
y ts terms (secton 1104) the ct took effect upon ts enactment, whch
date s une 2, 1924. If the gfts were made subsequent to that date, they
are ta nbe f, as contended by the pantff, they are made pror to that date
they are, under the authorty of odgett v. oden (275 U. S. 142 T. D. 4117,
C. . II-1, 324 ) and Untermyer v. nderson (276 U. S.. 440 T. D. 4157, C. R
YII-1, 326 ), not sub|ect to the ta , and pantff s entted to the amount of
the ta es, 32,810.42.
The pantff contends that the gfts were made on the dates of the e ecuton
of the trust ndentures and the transfer of the propertes to the trustees, whch
dates were pror to une 2, 1 24, and that the forma surrender of the rghts of
revocaton ater, une 27, 1924, by the pantff was mmatera and n no way
affected the date on whch the propertes were transferred by gft.
The Government, on the other hand, contends the transfer by gft wthn
the meanng of the statute was on une 27, 1924, when the pantff by forma
act waved, canceed, and annned the rght prevousy reserved to revoke the
varous ndentures of trust.
The ta es n queston were mposed under the foowng sectons of the
Revenue ct of 1924:
Sec. 319. or the caendar year 1924 and each caendar year thereafter, a
ta equa to the sum of the foowng s herehy mposed upon the transfer by a
resdent by gft durng such caendar year of any property wherever stuated,
whether made drecty or ndrecty, and upon the transfer by a nonresdent
by gft durng such caendar year of any property stuated wthn the Unted
States, whether made drecty or ndrecty:
Sec. 320. If the gft s made n property, the far market vaue thereof at
the date of the gft sha be consdered the amount of the gft. Where property
s sod or e changed for ess than a far consderaton n money or money s
worth, then the amount by whch the far market vaue of the property e ceeded
the consderaton receved sha, for the purpose of the ta mposed by secton
319, be deemed a gft, and sha be ncuded n computng the amount of gfts
made durng the caendar year.
The appcabe reguatons of the Treasury Department (artce 1 of Regua-
tons 67), promugated November 8, 1924, provde:
The creaton of a trust, where the grantor retans the power to revest n
hmsef tte to the corpus of the trust, does not consttute a gft sub|ect to ta ,
but the annua ncome of the trust whch s pad over to the benefcary sha
be treated as a ta abe gft for the year n whch so pad. Where the power
retaned by the grantor to revest n hmsef tte to the corpus s not e ercsed,
a ta abe transfer w be treated as takng pace n the year n whch such
power s termnated.
Whe the egn effect of the reservaton of the rght of revocaton n a trans-
fer of property by gft under the Revenue ct of 1924, as to the effectve date
of such transfer, has not been passed upon by the Supreme Court, that court
has, we thnk, n numerous cases where practcay the same queston has arsen,
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Regs. 67, rt. 1.
364
n construng the transfer of property under other Revenue cts announced
a rue that s both appcabe and controng n the nstant case.
In Saton ta v. Satonsta (276 U. S., 2(50) the Supreme Court nterpreted
a Massachusetts statute, whch mposed a ta on a property passng by
w, ntestate successon, or gft made or ntended to take effect n possesson
or en|oyment after the death of the grantor or donor. The ta was made
appcabe ony to property or nterests theren passng or accrung upon the
death of persons who de subsequenty to the passage hereof. The statute was
enacted n 1910.
t varous dates between 1005 and 1907, P. C. rooks by ndenture trans-
ferred to trustees certan property upon trust, to pay the ncome to hm for
fe or, at hs opton, to aow t to accumuate, and upon the death of hmsef
and hs wfe to pay the ncome to hs chdren, grantees n the trust ndentures.
The trust nstrument provded that ts terms mght be changed and the trust
termnated n whoe or n part by the grantor, the sad P. C. rooks, wth the
concurrence of one trustee. The settor ded after the enactment of the 1916
statute, wthout havng e ercsed the powers of revocaton contaned n the
deeds of trust, and the ta provded n the statute was mposed on the proceeds
of the trust estates.
The vadty of the ta was chaenged by the benefcares of sad trust
estates and t was contended that the statute as nterpreted deprved them of
property wthout due process because they were ta ed on an nterest they had
aready receved before the enactment of the ta ng cts. It was urged they
had vested nterests or remanders sub|ect ony to beng dvested by the e ercse
of the reserve power, whch never happened, and that as ther remanders
vested before the enactment of the ta ng statutes these coud not be consttu-
tonay apped to them under the rue announced by the Supreme Court n
NchoU v. Coodge (274 U. S., 531 T. D. 4072, C. . I-2, 351 ).
In passng upon ths queston the court sad:
In Nchos v. Coodge, t was hed that durng the estate ta sectons of the
Revenue ct of 1919 whch ta the prveege of transmsson, Nchos v.
Coodge, supra New York Trust Co. v. sner, 256 U. S., 345 property of whch
a donor had made an outrght conveyance severa years before the enactment of
the statute coud not, on hs death after ts enactment, be ncuded as part of
hs ta abe gross estate at ts vaue at the tme of hs death. ut we are here
concerned, not wth a ta on the prvege of transmsson, not wth an attempt
to ta a donor s estate for an absoute gft made when no ta was thought of,
and to do so at the probaby apprecated vaue whch the gft now bears, but
wth a ta on the prvege of successon, whch aso may consttutonay bo
sub|ected to a ta by the State whether occasoned by death (Stebbns v. Rey,
supra) or effected by deed ( enney v. New York, 222 U. S., 525 Chaner v.
ese|t, supra Ncke v. Coe, supra).
The present ta s not ad on the donor, but on the benefcary the gft
ta ed s not one ong snce competed, but one whch never passed to the
benefcares beyond reca unt the death of the donor.
power of appontment reserved by the donor eaves the transfer, as to hm,
ncompete and sub|ect to ta . ( uc . Wsconsn, 240 U. S., 625.) The
benefcary s acquston of the property s equay ncompete whether the
power be reserved to the donor or another. nd so the property passng to the
benefcares here was acqured ony because of defaut n the e ercse of the
power durng the donor s fe .
The same queston was dscussed bv the Supreme Court n Chase Natona
ank v. Unted States (278 U. S., 327 Ct. D. 40. C. . III-1, 308 ).
Secton 401 of the Revenue ct of 1921 mposed a ta on the transfer of the
net estate of every decedent dyng after the passage of the ct, and secton 402
provded that n vaung the gross estate from whch the net ncome s
computed, there sha be ncuded the amount, over an e empton, recevabe
by a other benefcares as nsurance under poces taken out by the decedent
upon hs own fe.
fter the effectve date of ths ct a Mr. rown procured three nsurance
poces on hs fe, n each of whch hs wfe was named as benefcary. e
reserved to hmsef n each pocy the rght to change benefcares. e ded
wthout havng e ercsed the powers of revocaton, and the benefcary named
was pad the amount of the poces. In computng hs net estate sub|ect to
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365
Regs. 67. rt. 1.
the transfer ta under the provsons of sectons 401 and 402 of the ct, the
Commssoner ncuded the proceeds of these poces ess e emptons.
It was contended on behaf of the estate that the part of the ta es based on
the proceeds of the nsurance poces were egay assessed and coected, on
the ground (1) the decedent had no nterest whch coud or dd cease at hs
death, and no nterest passed from hm to any benefcary upon hs death, snce
ther nterest n the poces had vested n them some years prevous to hs
death (2) the decedent nether owned the poces, nor dd he e ercse by w
or deed, to take effect at death, any rghts of ownershp over these poces
he nether dsposed of them nor authorzed another to dspose of them there
was no cessaton of hs nterest upon hs death, and no transfer of such nterest
to another, snce the property rghts n the poces were aready n the bene-
fcares pror to hs death.
In passng upon the queston, the court sad:
It s true, as emphaszed by pantffs, that the nterest of the benefcares
n the nsurance poces effected by decedent vested n them before hs death
and that the proceeds of the poces came to the benefcares not drecty from
the decedent but from the nsurer. ut unt the moment of death the decedent
retaned a ega nterest n the poces whch gave hm the power of dspos-
ton of them and ther proceeds as competey as f he were hmsef the bene-
fcary of them. The precse queston presented s whether the termnaton at
death of that power and the consequent passng to the desgnated benefcares
of a rghts under the poces freed of the possbty of ts e ercse may be
the egtmate sub|ect of a transfer ta , as s true of the termnaton by death
of any of the other ega ncdents of property through whch ts use or economc
en|oyment may be controed.
power n the decedent to surrender and cance the poces, to pedge
them as securty for oans and the power to dspose of them and ther pro-
ceeds for hs own beneft durng hs fe whch sub|ects them to the contro
of a bankruptcy court for the beneft of hs credtors (Cohen v. Samues, 245
U. S., 50) and whch may, under oca aw appcabe to the partes
here, sub|ect them n part to the payment of hs debts (N. Y. Domestc Rea-
tons Law, ch. 14, Conso. Laws, sec. 52 tU v. Domeyer, 175 N. Y., 205
Guardan Trust Co. v. Straus, 139 pp. Dv., 884, affd 201 N. Y., 546), s by no
means the east substanta of the ega ncdents of ownershp, and ts termna-
ton at hs death so as to free the benefcares of the pocy from the poss-
bty of ts e ercse woud seem to be no ess a transfer wthn the reach of
the ta ng power than a transfer effected n other ways through death.
We thnk the rue apped n Satonsta v. Saton ta (276 U. S., 260) to a
successon ta s equay appcabe to a transfer ta where, as here, the power
of dsposton s reserved e cusvey to the transferor for hs own beneft.
Such an outstandng power resdng e cusvey n a donor to reca a gft
after t s made s a mtaton on the gft whch makes t ncompete as to the
donor as we as to the donee, and we thnk that the termnaton of such a
power at death may aso be the approprate sub|ect of a ta upon transfers.
In Renecke, Coector, v. Northern Trust Co. (278 U. S., 339 T. D. 4261,
C. . III-1, 305 ), a testator n hs fetme conveyed property n trust to
pay the ncome to hmsef, and on hs death to pay t to desgnated persons
unt termnaton of the respectve trusts, wth remanders over. ach trust
nstrument reserved to the settor aone the power to revoke the trust created
by t, and provded that upon the e ercse of that power the corpus of the trust
must be returned to hm by the trustee. The trusts were not n contempaton
of death and were created before the effectve date of the Revenue ct of
1921, but the settor ded after that date wthout havng revoked them. The
court hed the estate ta eved on the corpus of the trust under sectons 401
and 402 of the Revenue ct of 1921 vad, and sad:
s to the two trusts, It s argued that snce they were created ong before
the passage of any statute mposng an estate ta , the ta ng statute f apped
to them s unconsttutona and vod, because retroactve, wthn the rung of
Nchos v. Coo ge (274 U. S., 531). In that case t was hed that the prov-
sons of the smar secton (402) of the 1918 ct (40 Stat., 1097), makng t
appcabe td trusts created before the passage of the ct, was n confct wth
the ffth amendment of the edera Consttuton and vod as respects transfers
competed before any such statute was enacted. ut n Chase Natona ank v.
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Regs. 63, rt. 20.
366
Unted Sates, decded ths day , the decson s rested on the ground,
earer suggested wth respect to the fourteenth amendment n Satonsta v.
Satonsta (276 U. S., 260-271), that a transfer made sub|ect to a power of
revocaton n the transferor, termnabe at hs death, s not compete unt hs
death. ence secton 402 us apped to the present transfers s not retroactve,
snce hs death foowed the passage of the statute. or that reason, stated
more at ength n our opnon n Chase Natona ank v. Unted States, supra,
we hod the ta was rghty mposed .
In these cases the precse queston determned by the cotrt was the effectve
date, wthn the meanng of the ta ng statutes, of the transfer of property
where the donor n trust nstruments had resented to hmsef the unrestrcted
rghts of revocaton.
The court hed n each case that the transfer was made when the possbty
of the e ercse of the rghts of revocaton ceased to e st that unt that tme
the gft was ncompete both to the donor and to the donee.
The fact that n the cases cted the rghts of revocaton were termnated and
the gfts made compete by the death of the donors s, n our opnon, whoy m-
matera. The mportant fact s that the property was transferred and be-
came sub|ect to the transfer ta on the date of the termnaton of the rghts
of revocaton. It was the freeng of the property transferred from the poss-
bty of the e ercse of the rghts of revocaton that effected the transfer
and sub|ected the corpus of the gfts to the ta es mposed on such transfers.
Whe the ta es n queston here were mposed under the gft ta provsons
of the ct of 1024 and n that respect are dstngushed from the transfers
of property consdered by the court n Satonsta v. Satonsta, Chase Natona
ank v. Unted Staes, and Renecke v. Northern. Trust Co., supra, the queston
nvoved s dentca wth that before the court n each of these cases.
It s our opnon, therefore, that the date of the transfer by gft of the
property n queston was on une 27, 1924, when the pantff canceed and
formay surrendered the powers of revocaton reserved to hersef n the n-
struments of trust. Ths beng subsequent to the enactment and approva by
the Presdent of the Revenue ct of 1924, the ta es heren were egay and
propery assessed and the Commssoner was correct n denyng the cam
for refund.
Pantffs petton s hereby dsmssed. It Is so ordered.
rtce 20, Reguatons 63, as amended by Treasury Decson
4183 C. . II-2, 368 , amended.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, I). C.
To Coectors of Interna Revenue and Others Concerned:
rtce 20 of Refatons 63, as amended by Treasury Decson
4183, s hereby amended by strkng out ts ast paragraph.
Robt. . Lucas,
Commssoner of Interna Revenue.
pproved March 15, 1930.
. W. Me |n,
Secretary of the Treasury.
TITL I . ST T T . (1921)
TR NS RS Y D C D NT IN IS LI TIM .
Reguatons 63, rtce 20: Reservaton of
ncome.
estate ta transfers.
I -12-4574
T. D. 4283
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367
Regs. 63(1922), rt. 105.
Reguatons 63 (1922), rtce 105: Scope of I -13-4581
repea. Ct. D. 165
T T T / NU CT O 1921 D CISION OP COURT.
Ta Rr.P .4T. Savng Cause Meanng oh ccrued.
The ta upon the estate of a decedent who ded wthn one year
pror to November 23, 1921, the date of the enactment of the Reve-
nue ct of 1921, accrued under the Revenue ct of 1918 wthn the
meanng of the savng cause contaned n secton 1400(b) of the
Revenue ct of 1921, whch provded that parts of the Revenue ct
of 1918 whch were repeued by the Revenue ct of 1921 remaned
n force for the assessment and coecton of a the ta es whch had
accrued under the Revenue ct of 1918 at the tme such parts
ceased to be n effect.
Unted States Dstrct Court, Dstrct of New eesey.
anche O ren and Robert C. Roebng, ecutors of the state of ar O.
Roebng, deceased, pantff, v. dward L. turgess, Coector of Interna
Revenue for the rst Unted Mates Coecton Dstrct of New ersey,
defendant.
ebruary 19, 1930.
OPINION.
Runton, Dstrct udge: The above entted acton was nsttuted n ths
court to recover the sum of 211,285.57, together wth nterest, and camed
to have been erroneousy assessed and coected under the Revenue ct of
1918.
Mr. Roebng ded May 29, 1921. The return fed by hs e ecutors for
edera estate ta purposes showed 236,870.88 due, and ths amount was pad
n due course of admnstraton n three nstaments.
Later, and because the Revenue ct of 1918, whch was n force at the tme
Mr. Roebng ded, had been repeaed by the Revenue ct of 1921, before the
tme provded for the payment of the ta n the earer ct had arrved, the
e ecutors fed ther cam for refund.
Ths cam the Commssoner refused, and n consequence thereof the e ec-
utors nsttuted ther acton.
The defendant demurred to the petton settng forth the above facts
argument has been had thereon, and the partes awat the court s concusons.
The portons of the two statutes nvoved, so far as they are pertnent to the
matter n dspute, read as foows:
The frst e cerpt s from the Revenue ct of 1918 (ch. 18, 40 Stat., 1057) :
Sec. 401. That (n eu of the ta mposed by Tte II of the Revenue ct of
1916, as amended, and n eu of the ta mposed by Tte I of the Revenue ct
of 1917) a ta equa to the sum of the foowng percentages of the vaue f
the net estate (determned as provded n secton 403) s hereby mposed upon
the transfer of the net estate of every decedent dyng after the passage of ths
ct, whether a resdent or nonresdent of the Unted States:
( ere foow the rates.)
The second s from the Revenue ct of 1921 (ch. 136, 42 Stat, 227):
Sua 1400. (a) That the foowng parts of the Revenue ct of 1918 are
repeaed, to take effect (e cept as otherwse provded n ths ct) on anuary 1,
1922, sub|ect to the mtatons provded n subdvson (b) :
Tte I (caed state Ta ) on the passage of ths ct
(b) The parts of the Revenue ct of 1918 whch are repeaed by ths ct
sha (uness otherwse specfcay provded n ths ct) reman n force for the
assessment and coecton of a ta es whch huve accrued under the Revenue
ct of 1918 at the tme such farts cease to be n effect, and for the mposton
and coecton of a penates or forfetures whch have accrued or may accrue n
reaton to any such ta es. In the case of any ta mposed by any part of the
Revenue ct of 1918 repeaed by ths ct, f there s u ta mposed by ths ct
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Regs. 63(1922), rt. 105.
368
n eu thereof, the provson mposng such ta sha reman n force unt the
correspondng ta under ths ct takes effect under the provsons of ths ct.
The queston to be decded s whether or not n the case of a decedent who
ded ess than one year pror to the passage of the Revenue ct of 1921, the
abty of hs estate to pay the edera estate ta mposed by the Revenue
ct of 1918 was destroyed by the repea of that ct subsequent to decedent s
death but before the ta , by the terms of the ct, became due and payabe.
Pantffs cam for e empton from ta revoves argey around the meanng
and constructon to be gven to the word accrue or accrued.
y the terms of the Revenue ct of 1918, a ta s mposed upon the transfer of
the net estate of every decedent who des after ts passage, and ths ta s
consttuted a en for 10 years upon the decedent s gross estate. Therefore, snce
Mr. Roebng ded after the passage of the 1918 ct and before ts repea, a
ta was mposed upon the transfer of hs net estate.
Construng practcay dentca anguage n the 1916 ct, the court n Page v.
Sknner (298 ed., page731, at page 732 T. D. 3600, C. . 1II-1, 485 ), sad:
The mposton took effect at the tme of death and the ta became at
once a en on the property of the estate, enforceabe by sae, f not pad, on
proceedngs n court.
The decedent s persona nterest n hs property ceased wth hs death and
ths death occurred whe the 1918 ct was n fu force and effect. nd
n speakng of the nature of the ta mposed under the provsons of the 1918
ct, Chef ustce Taft, n T. t. C. . v. Davs (264 U. S., 47), at page 50, says:
What was beng mposed here was an e cse upon the transfer of an estate
upon death of the owner. What ths aw ta es s not the nterest
to whch the egatees and devsees succeeded on death, but the nterest whch
ceased by reason of the death. ( notcton v. Moore, 178 U. S., 41, 48, 49.)
Mr. ustce omes, n the case of dcards v. Socum (264 U. S., 61, 62 T. D.
3584, C. . III-, 479 ), n speakng of ths ta , says:
ut ths s not a ta upon a resdue, t s a ta upon a transfer of hs net
estate by a decedent . It comes nto e stence before and s nde-
pendent of the recept of the property by the egatee. It ta es, as anson,
Death Dutes, puts t n a passage cted n 178 U. S., 49, not the nterest to
whch some person succeeds on a death, but the nterest whch ceased by reason
of the death.
The nature of the ta beng as above defned, vz, a ta on the nterest whch
ceased by reason of the death of decedent, t foows that a that was requred
n ths case to perfect such nterest for the mposton of a ta was the death
of Mr. Roebng. and wth hs death ths ta came nto beng as a en
authorzed by Congress and capabe of dscharge n but one of two ways, vz,
through payment of the ta or through approprate congressona acton.
It s the cam of the pantffs, and advanced by them as a reason for the
return f ths ta aready pad by them, that n the wordng and provsons of
the 1921 Revenue ct, Congress has so egsated that the estate of Mr.
Roebng has been freed of any and a abty for the payment of such ta
and that n consequence such ta was pad n error and shoud he returned.
s heretofore stated, Mr. Roebng ded May 29, 1921, at whch tme the
provsons of the Revenue ct of 1918 were n fu force and effect. ad
there been no succeedng ct empoyng the anguage of the Revenue ct
of 1921, the queston now under consderaton woud never have arsen.
The 1921 ct repeaed that porton of the ct of 1918 whch mposed an estate
ta and provded for a dfferent estate ta operatve when the ater ct went
nto effect. In addton thereto, the ct of 1921 contaned a so-caed savng
cause, practcay the same as that contaned n the ct of 1918, and whch
apparenty had as ts desgn a contnung operaton of a ta ng provsons
of the 1918 ct, e cept such as were beng specfcay repeaed and not wthn
the purvew of the savng cause.
The anguage upon whch the pantffs rey for ther reef s that contaned
n secton 1400(b), herenabove set forth, and ther contenton s that n ths
ct of 1921 there s no provson that the earer ct shoud reman n force fur
the assessment and coecton of a ta es, uness those ta es had accrued,
and that nasmuch as Mr. Roebng ded wthn one year pror to the enactment
of the 1921 ct, no ta es had accrued aganst hs estate, snce they were nor
due and payabe unt .me year after hs death and the repeaer of the 1921
ct had been enacted durng such ntervenng perod.
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369 (Regs. 63(1922), rt. 106.
In other words, ther contenton s that f Mr. Roebng had ded at any tme
durng the fe of the 1918 ct pror to November 23, 1920, or after the enact-
ment of the ct of November 23, 1921, hs estate woud be propery sub|ect to
ta , but because he ded between November 23, 1920, and November 23, 1921,
sad estate s n no sense abe for such ta because the same was not due
unt May 29, 1922, under the provsons of the 1918 ct, one year after the
decedent s death, and on that date the ct of 1921 was n effect, provdng
ony for the preservaton of the en of such ta es arsng under the earer ct
as had accrued by November 23, 1921.
Ths ne of reasonng narrows the fed of nqury and presents for souton
the smpe queston as to whether or not the ta here nvoved had accrued on
November 23, 1921.
If t had so accrued, the payments heretofore made were proper and are
not sub|ect to return. If, on the other hand, the ta s to be consdered as not
havng accrued unt a year subsequent to Mr. oebng s death, when t became
due and payabe, then the ta was mpropery coected and shoud be returned.
Whe dfferng n certan respects from the case under consderaton, there
are yet many ponts of smarty n the case of ortz v. Woodman (218 U. S.,
205). Ths case had to do wth a egacy ta mposed by the Revenue ct of
1898, and made due and payabe one year after death. The testator ded n
March, 1902. The 1898 ct was repeaed by a ater ct, whch became effectve
on uy 1, 1902, but ths ater ct by ts provsons saved ta es whch had been
mposed pror to uy 1, 1902.
Woodman s e ecutors made the same cass of ob|ecton to payng the ta n
ther matter as s made by the Roebng e ecutors n the case now beng
consdered, vz, that under the ct of 1898 the ta was not mposed and
not a abty unt t was due and payabe.
In dscussng ths controversy, the court sad:
No further event coud make ther tte more certan nor ther possesson
and en|oyment more secure. The aw, then unrepeaed and n fu force,
operated to fasten, at the moment ths rght of successon passed by death, a
abty for the ta mposed upon the passage of every such nhertance or
rght of successon. The tme for schedung or stng was practcay dentca
wth the tme for payment, and the stng or schedung was requred to be
done by the e ecutor charged wth payment, but mght be and was postponed
for reasons of grace and of convenence. That s amost unversa under any
ta ng system. The abty attaches at some tme before the tme for pay-
ment. ut the abty for the payment of the ta e acted under secton 29 of
the ct of une 13, 1898, accrued or arose at the moment the rght of successon
by death passed to the defendants n error, and the occurrence of no other fact
or event was essenta to the mposton of a abty for the statutory ta
upon the nterest thus acqured.
Much has been urged because the ta was not due and payabe when
the repeang ct took effect, and the contenton s that because not due and
payabe no ta had been theretofore mposed wthn the ntent of the savng
cause. What we have aready sad answers ths. ut et us see the very
unreasonabe resut whch woud ensue f we are requred to say that by
ta or duty mposed under secton 29 Congress meant a ta or duty due and
payabe when the repeang ct shoud go nto effect.
No one questons but that one effect of ths savng cause woud be to save
nny such ta as was due and payabe one year before uy 1, 1902. Ths
beng so, t woud be very un|ust f the ta n the atter case s saved and the
other unremtted, nasmuch as the thng made sub|ect to the ta woud n
each case be the same, namey, the transmsson of a benefca rght to the
possesson and en|oyment of a egacy or dstrbutve share at the death of a
testator or ntestate. In the one case the ta pad upon the rght passng by
death woud be preserved. In the other a ta upon a ke nhertance woud
be remtted. The ony dfference woud be that n one case the tme for
payment had arrved, whe n the other t had not, though n the atter case
the utmate obgaton to pay was equay as certan and f ed as n the frst
case. Itacs ours.
In the case of annery v. WTcuts (25 ed. (2d), 951, 957) the court sad:
The pantff aso sued to recover the 2,011,060.96 that was pad by the
admnstrator as an estate ta on more than 10,500,000 n vaue of property
whch Mrs. owned and possessed at the tme of her death. s to that, t
s argued that no estate ta had accrued upon Mrs. s estate under the
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Regs. 63(1922), rt. 105.
370
Revenue ct of 1918 (40 Stat., 1057) at the tme of ts repea by the ct of
1921 (42 Stat., 227), and that the repeang ct saved ony accrued ta es. Ths
same queston, under Revenue cts n ke terms, was consdered and decded
by ths court n Page v. Sknner (D. C.) (293 ., 468 T. D. 3529, C. . II-2.
322 ). We re|ected the contenton as unsound, for the reasons there stated.
We therefore thnk the court dd not err n denyng reef n that respect.
nd the anguage of the dstrct court n the case of Page v. kmer (298
ed., 470), to whch reference s herenabove made, s as foows:
Counse for pantff aso suggests another constructon of the two cts,
whch woud resut In a hatus, the practca effect of whch woud be that
ths estate woud whoy escape ta aton. Such a proposton can ony be
sustaned where e pressed by Congress n the most e pct terms. I fnd
nothng to show that such was the ntenton of Congress, and n fact t Is
drecty contrary to the egsatve pocy snce ths partcuar cass of ta es
was frst created, and overooks secton 13 of the Revsed Statutes (Comp.
St., 14). If the ct of 1918 had never been passed, then the former ct woud
have apped wthout queston, and under secton 13 t dd appy, as the
repeang part does not e pressy otherwse provde. The pantff s n
error n not dstngushng the mere admnstratve features of the ct from
the more mportant part that mposes the ta .
Ths ast mentoned case was affrmed by the crcut court, as w appear by
reference to 298 ed., 731 T. D. 3600, C. . III-, 485 .
In the case of Guaranty Trust Co. of Ncc York, as ecutor, dc., of Ro y M.
Smth, DeCd., v. Commssoner of Interna Revenue (Docket No. 16038, U. S.
oard of Ta ppeas 10 . T. ., 314 ), promugated pr 30, 1929, the
oard, n dscussng a pror case, rnest M. u, r. (7 . T. ., 993), quoted
the anguage used by t on that occason, as foows:
Under the Revenue ct of 1918 the same stuaton mght arse, n respect of
an estate a upon the estate of a decedent dyng wthn one year pror to the
repea of Tte I on November 23, 1921, by secton 1400 of the Revenue ct
of 1921. Subsecton (b) saved from repea the assessment and coecton of
a ta es whch have accrued under the Revenue ct of 1918 at the tme such
parts cease to be n effect. Whatever may be sad of the use of the word
mposed n the repeang ct of 1902 and the word accrued In 1400(b),
Revenue ct of 1921, t seems cear that the ogc of the decson n ortz v.
Woodman, supra, s essentay appcabe to a stuaton arsng under, the atter
provson. The fact that 1898 ct mposed a egacy ta and the 1918 ct
mposed an estate ta s unmportant. ( nowton v. Moore, 178 U. S., 41 3 m.
ed. Ta Rep., 2084 New York Trust Co. v. sner, 256 U. S., 345 3 m. ed.
Ta Rep., 3110.) The 1918 ct s smar to the earUer ct n that the one
year for coecton was provded n a separate secton (sec. 406) from that
of mposton (sec. 401), and hence may kewse be regarded as ad|ectve
rather than substantve. The ortz case has been foowed In Cochran v.
Unted States (254 U. S., 387 3 m. ed. Ta Rep., 3092), and n many dec-
sons of ower edera courts, and n vew of the remova of any doubt whch
may have been suggested by the obter dctum of Unted States v. Woodward,
supra (T. D. 3195, C. . 4, 153 (see Cathencood v. Unted States, supra T. D.
3516, C. . II-2, 114 ), t remans authorty for the vew that death dutes
are mposed at death, become a abty and accrue at that tme, and survve n
subsequent repea of the ta ng statute, notwthstandng that they become pay-
abe thereafter.
We are of the opnon that the ta Imposed by the Revenue ct of 1918
upon the transfer of the net estate of the decedent, Ro y M. Smth, accrued
at the date of her death wthn the meanng of secton 1400(b) of the Revenue
ct of 1921, and that t was saved by that secton.
Snce the argument n ths case, there have been at east two opnons de-
vered upon practcay the same ponts whch are here nvoved one by the
Court of Cams n the case of Io-ward M. anna, as ecutor, dc., of . Me-
ve anna, Dec d., v. The Unted States Ct. D. 135, C. . III-2, 407 ,
wheren the court speaks n part as foows:
It w be observed that the argument of pantff s based upon a defnton
of the word accrued, and t s camed that the constructon for wch pantff
contends s supported by te decsons of the Supreme Court n Unted States v.
Woodward (256 T . S., 632) and Unted States v. Mtche (271 T . S., 9, 10 T D.
3865, C. . -, 233 ). In connecton wth the appcaton of these decsons
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371
Regs. 63(1 22), rt. 105.
some confuson of thought seems to ave arsen. The queston for determna-
ton n the case at bar s not how the word accrued may have been used n
some part of the 1918 statute, but how t s used and what meanng shoud be
gven t n the provsons of the 1921 statute, whch we are caed upon to con-
strue. When ths s kept n mnd, we thnk t w ceary appear that these
cases do not support the poston of pantff.
The word accrue as used n the aw has two meanngs: It s often apped
to a present enforceabe demand, and as often, f not more often, means smpy
to arse or to come nto e stence. In merson v. The Shawano Cty (10 Ws.,
433) t s sad:
The verb to accrue s often used to convey the same dea as the verb
to arse. cause of acton may be sad to arse when the contract
out of whch t grows s entered nto or made.
In Page v. Sknner (298 ed., 731, 735), the crcut court of appeas had
occason to pass on the meanng of a provson n the ct of ebruary 24, 1919,
commony referred to as the Revenue ct of 1918. The 1918 ct by secton
1400(a) thereof repeaed the estate ta of 1916, but n (b) of the same secton
provded:
(b) Such parts of cts sha reman n force for the assessment and coec-
ton of a ta es whch have accrued thereunder, and for the Imposton and
coecton of a penates or forfetures whch have accrued and may accrue
n reaton to any such ta es, . Itacs ours.
though the wordng s sghty changed, there can be no queston but that
the word accrued s used n the same sense as n the smar provson of the
1921 ct, whch has heretofore been set out, and the crcut court of appeas
sad further n the ast-named case wth reference to the 1918 ct:
Nether are we n doubt as to the meanng of the word accrued, found
n subparagraph (b) as contended by counse amc curae, who appear for
another estate n ke condtons, that t s equvaent to arsng under and
refers to a ta es, ncudng estate ta es, and s not a restrcton to
those that were due and payabe pror to ebruary 25.
In the case of wbank ct a., Trustee, fc, v. The Unted States, n the south-
ern dstrct of Indana, the court, n an opnon devered December 30, 1929,
speaks as foows:
The estate ta es, under the ct of 1918, were due and payabe one year from
the date of the death of testator. There was, however, contaned n the ater
ct, a savng cause, whch s desgnated as secton 1400(b) of sad ct, whch
provdes as foows:
The parts of the Revenue ct of 1918 whch are repeaed by ths ct sha
(uness otherwse specfcay provded n ths ct) reman n force for the
assessment and coecton of a ta es whch have accrued under the Revenue
ct of 1918 at the tme such parts cease to be n effect, . .
The constructon paced upon the provsons of ths savng cause w de-
termne the soe queston presented upon the demurrer n ths cause. If, as
contended by the pantffs, the above savng cause s to be construed so as to
reeve a persons from the payment of any estate ta es, who ded wthn the
one year mmedatey precedng the 23d day of November, 1921, the date of
the approva of the Revenue ct of 1921, then the demurrer must be overrued
and the compant hed to state a cause of acton.
The savng cause n the ct of 1921 appes to a ta es whch have accrued
under the Revenue ct of 1918, and t s the contenton of the pantffs that the
word accrued, as used n that cause, means that such tu es must have been
due and payabe at the tme of the takng effect of the ct of 1921, that s, on
November 23d of that year. Snce the ta es pad by pantffs were not due
and payabe unt the e praton of one year from the date of the death of the
sad Maott, and the takng effect of the ct of 1921 was wthn that year,
the pantffs contend that the savng cause n the ct of 1921 does not appy
and that no estate ta es shoud have been pad, such estate ta es not beng
due and payabe at the tme of the takng effect of such ct. Ths court s
caed upon to defne the meanng of the word accrued, as used n the savng
cause.
Pantffs contend that the meanng of the word accrued, as used n such
savng cause, must be due and payabe, and cte Unted States v. Woodward
et a. (256 U. S., 632, 65 L. d., 1131 41 Sup. Ct., 615 Unted States v.
Mtche et a. (271 U. S., 9 70 I,. d., 799 46 Sup. Ct., 418) n support thereof.
It w be observed, n the consderaton of these cases, that the queston de-
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Regs. 70, rt. 14.
372
termned by the court was whether or not the estate ta es pad were aow-
abe as deductons from ncome ta returns, under the cts of 1916 and 1918.
The queston to be here determned s not how the word accrued may have
been used n some sectons of the ct of 1916 and 1918, but how such word
was used n the secton of the ct of 1921, whch Is to be construed n ths
acton. In some sectons of the Revenue ct, Congress has specfcay defned
the meanng of the word accrued as beng the due date, as apped to the
partcuar secton or paragraph n queston, thereby recognzng the fact to be
.that such word does not aways mean the due date. (Sec. 214(a)3 42 Stat.,
239.) The fact that the word accrued s not defned by Congress n secton
1400(b) of the Revenue ct of 1921 eads to the nevtabe concuson that t
must be defned so as to gve effect to the ntent of Congress when such secton
was enacted. It can not be serousy contended that Congress, by the enact-
ment of the ater aw, ntended to reeve the estates of a persons dyng
wthn a snge year, that s, wthn one year mmedatey precedng the 23d
of November, 1921, from the payment of any estate ta es, whe the estates of
a persons dyng pror to sad one year perod and mmedatey foowng sad
one year perod are sub|ect to the payment of such ta es.
In my opnon, Mr. Roebng s death was the one and ony thng necessary
to brng ths ta nto fu beng and mpose t as a en upon hs estate. In
other words, that at the very nstant he ded the ta accrued and thus met
the condtons mposed by the statute. The fact that the representatves of
the estate are aowed a year wthn whch to pay the ta appears to me to
be nothng more or ess than a matter of grace, and the vountary estabshment
of a tme mt wthn whch the Government agrees to refran from pressng
for payment.
To me, t s nconcevabe that Congress coud have ntended to effect
so nequtabe a resut as woud be the case f pettoners theory and con-
tenton be correct, vz, to e empt from a ta aton whatever the estate of
those decedents who happen to have ded wthn the narrow mts of a certan
snge year and to mpress such ta unabated n any way upon the estates of
those who may have ded one day pror, or one day subsequent, to that certan
year.
True, such anguage mght have been used by Congress n ts repeang and
savng sectons as woud have compeed the concusons contended for by
pettoners or forced a contrary resut ony at the e pense of an unnatura
nd artfca nterpretaton of the words empoyed.
It appears to me, however, that n the crcumstances of the nstant case
no such unnatura or artfca nterpretaton s made necessary, but that n
gvng to each word and phrase an nterpretaton whch s both natura and
warranted, not straned or forced, a concuson may be reached whch s not
ony ogcn, but whch carres nto effect that whch was evdenty the ntenton
of Congress.
In my opnon the demurrer must be sustaned.
GROSS ST T G N R L.
Reguatons 70, rtce 14: Dower and curtesy. I -3-4508
Ct. D. 147
ST T T R NU CT O 1921 D CISION O COURT.
Gross state Wdow s Statutory Interest Mssoub.
Where a wdow eects to accept a bequest under the w of her
deceased husband n eu of her nterest n hs estate under the
aws of Mssour an thereby becomes a purchaser for vaue of the
bequest, the vaue of her statutory marta nterest n hs estate
s propery ncuded n determnng the vaue of hs gross estate
under secton 402 of the Revenue ct of 1921.
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Regs. 70, rt. 14.
Unted States Crcut Court of ppeas, ghth Crcut.
foah Crooks, Coector of Interna Revenue of the Unted States, appeant, v.
a C. Loose, appeee.
ppea from the Dstrct Court of the Unted States for the Western Dstrct of Mssour.
December 5, 1929.
opnon.
ooth, Crcut udge, devered the opnon of the court.
Ths s a sut brought by the appeee aganst the coector of nterna
revenue for the s th dstrct of Mssour (appeant heren) to recover a
edera estate ta refund. The coector demurred to the petton. The
demurrer was overrued. The coector eected to stand on the demurrer, and
|udgment was entered for pantff. Ths appea foowed.
The petton aeged substantay as foows: September 18, 1923, acob L.
Loose, a resdent of ansas Cty, Mo., ded testate, eavng a wdow (appeee),
but no chdren or other descendants. The w was duy admtted to probate,
and the wdow was apponted e ecutr , and she quafed.
Under the statutes of Mssour and decsons of ts courts, the appeee n
case of ntestacy of her husband woud have been entted to one-haf of a
the property owned by her husband, whether rea, persona, or m ed. The
tota vaue of the estate of acob L. Loose at hs death was 2,319,456.75.
y the terms of the w the wdow was made soe resduary benefcary. The
w further provded that the e ecutr shoud pay out of the resduum of the
estate a edera estate ta es, and that a other benefcares shoud receve
ther bequests or devses free from any such ta .
The tota net estate of acob L. Loose for purposes of edera estate ta aton,
ncudng the vaue of the wdow s statutory marta nterest or estate, was
1,550,028.68. The amount of the edera estate ta due upon sad sum was
107,403.44. Ths amount was pad by appeee as e ecutr . The tota net
estate of acob L. Loose, e cusve of the wdow s statutory marta nterest
or estate, was of the vaue 390,300.31 on whch sum the edera estate ta
woud be 6,112.
The estate has been cosed and the e ecutr dscharged.
ppeee duy made demand on the Commssoner of Interna Revenue for
the return of that part of the ta whch was pad and coected on that porton
of the estate represented by the vaue of her statutory marta nterest or
estate, whch part of the ta was aeged to be 101,291.44. Interest aso was
demanded. The demand was refused, and the present sut was brought.
The ground of the demurrer was that the petton faed to state facts
suffcent to consttute a cause of acton.
y the statutory aw of Mssour, the wdow has the rght to renounce the
provson made for her n the w n whch case she takes under the prov-
sons of the statutes. aure to renounce the provson made for her by the
w s hed equvaent to an eecton to take under the w. (Young v. oard-
man, 97 Mo., 181 Ross v. rst Presb. Church, 197 S. W., 561 (Mo.) O ren
v. Sedaa Trust Co., 5 S. W. (2d), 74 (Mo.).)
In the case at bar the wdow eected to take under the w.
The man queston at ssue s whether the vaue of the statutory marta
nterest or estate of the wdow was propery ncuded n tha vaue of the gross
estate of acob L. Loose.
Secton 401 of the Revenue ct of 1921 reads, so far as here matera, as
foows:
Sec. 401. a ta s hereby mposed upon the transfer
of the net estate of every decedent dyng after the passage of ths ct.
Secton 402 (a) and (b) reads as foows:
Sec. 402. That the vaue of the gross estate of the decedent sha be de-
termned by ncudng the vaue at the tme of hs death of a property, rea
or persona, tangbe or ntangbe, wherever stuated
(a) To the e tent of the nterest theren of the decedent at the tme of hs
death whch after hs death s sub|ect to the payment of the charges aganst
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Regs. 70, rt. 14.
374
hs estate and the e penses of ts admnstraton and s sub|ect to dstrbu-
ton us part of hs estate
(b To the e tent of any nterest theren of the survvng spouse, e stng
ft the tme of the decedent s death as dower, curtesy, or by vrtue of a
statute creatng an estate n eu of dower or curtesy.
In Renecke v. Trust Co. (278 U. S-, 339 T. D. 4261, C. . III-1, 305 ) the
court sad:
In ts pan and scope the ta s one mposed on transfers at deat or made
n contempaton of death and s measured by the vaue at death of the nterest
whch s transferred.
See aso Chase Nat. ank v. Unted States (278 D. S., 327 Ct D. 40, C.
. III-1, 308 ).
The vta queston, then, s, Was there a transfer n the case at bar
We thnk the queston s no onger an open one n ths crcut.
If, n the case at bar, there had been no w and the wdow had taken her
statutory marta nterest or estate, there woud have been a transfer and the
vaue of the statutory marta nterest or estate woud have been ncuded n the
vaue of the gross estate of the deceased husband. ( en v. engyeer, 32 .
(2d), 60 (C. C. . 8) Ct. D. 92, C. . III-2. 387 .)
It s true the enggeer case nvoved the wdow s statutory marta nterest
or estate under the statutes of Nebraska, but the statutes of Nebraska and
Mssour are not so dssmar n respect to the matters nvoved as to render
the prncpes stated n that ense nappcabe to a smar state of facts n
Mssour. See Crooks v. bbard (33 . (2d), 567 (C. G. . 8) Ct D. 79,
C. . III-2, 395 ).
If, n the Cse at bar, the provsons made n the w for the wdow had
been renounced by her, and she had taken under the statutory provsons,
there woud have been a transfer, an the vaue of her statutory marta
nterest or estate woud have been ncuded n the vaue of the gross estate
of the husband. It was so hed In Unted States v. Wate (33 . (2d). 507
(C. C. . 8) Ct D. 79, C. . III-2,395 ). whch Invoved the Mssour statutes.
nay, ths court has hed, n Unted States v. Dets (33 . (2d), 576),
that where a survvng husband was named us resduary henefcary under
hs wfe s w, there beng no chdren or ssue of deceased chdren, and he
proved the w and dstrbuted the estate n accordance wth ts terms, the
vaue of the resdue taken by hm was propery ncuded n the vaue of the
gross estate of the deceased wfe and t was hed that ths was rght, whether
t was assumed that the husband too: the whoe resdue under the w, or
one-haf of the resdue under the Nebraska statute and the baance under
the w, f the atter assumpton coud be made. On ether assumpton It w s
hed that there was a transfer wthn the meanng of the edera estate
ta .
It s contended by the appeee that the Detz case Is not decsve of the
case at bar, because a pont now rased was not n the Detz case. refy
stated, the pont s, that the wdow n the case at bar took under the w,
not as a recpent of the testator s bounty, but as a purchaser for vaue
that she surrendered, as a consderaton for the provson n her behaf In
the w, her statutory marta nterest or estate whch became consummate at
her husband s death. In answer to ths contenton t shoud be noted: rst,
the vta facts n the Detz case were dentca wth those n the case at bar
the concuson from the facts was that there was a transfer at the moment
of the death of the testator, and, therefore, that the vaue of the survvng
spouse s nterest or estate shoud be ncuded n determnng the vaue of the
decedent s gross estate. The same facts In the case at bar ead rresstby
to the same concusons.
In the Detz case t was contended that the survvng husband, upon the
death of hs wfe, took whether under the w or by operaton of aw was sad
to be Immatera an nterest or estate In rea and persona property, whch
nterest or estate had teretofore beonged to the husband by vrtue of the
marta reaton and that the husband was retanng sad nterest or estate.
In the case at bar t s contended that the survvng wfe, upon the death
of her husband, took, by operaton of aw, an nterest or estate n rea and
persona property, whch nterest or estate had therefore beonged to the wfe
by vrtue of the marta reaton and that she e changed sad nterest or
estate for the provson of the w.
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375
Regs. 70, rt. 14.
In both cases the contenton s n substance the same, vz, that there was
no transfer, no shftng of the economc benefts of property at the tme
of the death of the decedent spouse. The contentons thus made are erroneous
(a) n fang to dstngush between the nchoate nterest or estate e stng
before the death of the decedent spouse and the consummate nterest e stng
after such death (b) n fang to recognze that the change from the nchoate
to the consummate nterest or estate was brought about by the transfer,
the shftng of economc benefts at the moment of deat of the decedent
spouse (c) n assumng that the edera estate ta s upon the nterest or
estate, nchoate or consummate, nstead of upon the transfer, the shftng
of economc benefts.
Second, the edera estate ta aw Is not concerned prmary wth the
character of the nterest or estate acqured by the benefcary, or ts subsequent
status but the aw s prmary concerned wth the ceasng of the nterest
of the decedent n the property wth the shftng of economc benefts of
property from the decedent. If there s such a ceasng of the Interest of the
decedent, such a shftng of economc benefts, the edera estate ta cones
nto pay.
Thrd, the contenton of the appeee woud seem to be sef-destructve.
Concedng for the sake of the argument that the wdow was a purchaser of the
provson made for her n the w, wth what dd she make the purchase p-
peee says wth the surrender of her statutory marta nterest or estate. ut
that nterest or estate dd not become consummate unt the death of the hus-
band. t that moment what changed the nterest or estate from an nchoate
to a consummate one was a transfer from the husband of hs nterest n the
property whch was sub|ect to the nchoate nterest or estate of the wfe. ut
at the moment of such transfer the edera estate ta accrued upon the
transfer and became a en upon the property of the estate Page v. Sknner,
298 ., 731 (C. C. . 8) T. D. 3000, C. . III-, 485 ) so that f the wdow
e changed ths consummate statutory marta nterest or estate for a provson
of the w, she e changed somethng that was aready burdened wth the en
of the edera estate ta . y no egerdeman coud ths ta burden be escaped.
It makes no dfference, therefore, whether we consder the wdow as takng
drecty from the testator by the w as a benefcary or as a purchaser by the
use of her consummate, en-burdened statutory marta nterest or estate.
It may be added that such a hodng as appeee contends for woud aow
any testator to nufy the effect of secton 402(b) of the edera state Ta
ct by smpy ncudng n hs w a provson for the survvng spouse equva-
ent to the statutory provsona The survvng spouse coud then eect to
take under the w, and the tem of vaue contempated by secton 402(h)
woud not be ncuded n the gross estate. We do not thnk the edera estate
ta statute s so crudey vunerabe.
ppeee contends that the aeged purchase aready adverted to was e empt
from the edera estate ta by vrtue of secton 402 (c) and (e) and secton
403 (a )3. carefu readng of these provsons w show that the saes theren
referred to have nothng u common wth the aeged purchase and sae reed
upon by appeee. Those provsons refer to transactons by whch a person
had parted wth the contro or the economc benefts of some porton of hs
estate durng ds fetme. (See McCaughn v. Carver, 19 . (2d), 126 ergu-
son v. Dckson, 300 ., 961.) In the case at bar there was no such transacton
by the husband of appeee.
The cases of Warner v. Wash (15 . (2d), 367 T. D. 4257, C. . III-1,
245 ), Unted, States v. oster (26 . (2d), 760 T. D. 4258, C. . III-1,
247 ), and en v. randes (29 . (2d), 363 (O. C. . 8) T. D. 4256, C. .
III-1, 243 ), cted by appeee, are not n pont. Those cases arose under
the ncome ta aw. The queston nvoved was whether a wdow who had
surrendered her statutory marta rght n her husband s estate and taken n
en thereof an annuty provded for her n the w, was obged to ncude the
amount of ths annuty each year n her ncome ta return. It was hed that
these yeary amounts, to the e tent of the vaue of the renqushed statutory
rght, were capta and not ncome, and need not be ncuded. The wdow
was hed to be a purchaser of the annuty provded n the w but no queston
under the edera estate ta aw was nvoved.
Our concuson s that, though the appeee eected to take under the w,
yet the vaue of her statutory marta nterest or estate n the estate of her
deceased husband was propery ncuded n the vaue of hs gross estate. It
foows that the |udgment must be reversed. It s so ordered.
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Regs. 70, rts. 15, 16. 376
TITL I . ST T T . (1918 )
TR NS RS Y D C D NT IN IS LI TIM .
Reguatons 70, rtce 15: Transfers durng I -19-4633
fe. rtce 16: Nature of transfer. Ct. D. 181
estate ta revenue act of 1018 decson of court.
Gross state Transfer n Contempaton of Death Retro-
actvty Consttutonaty.
Secton 402(c) of the Revenue ct of 1918, n so far as t requres
that there sha be ncuded n the gross estate the vaue of property
transferred by a decedent n contempaton of death after the en-
actment of the Revenue ct of 1916 and before the enactment of the
.Revenue ct of 1918, s consttutona.
Court of Cams of the Unted States.
Seth M. Mken, Oerrsh . MU.cn, and arod . atch, as ecutors of
the state of Seth M. Mken, Deceased, v. The Unted States.
ebruary 17, 1930.
opnon.
Green, udge, devered the opnon of the court.
Ths s a sut to recover 812,165.42 aeged to have been wrongfuy coected
as addtona estate ta es.- Pantffs fed a cam for refund thereof, whch
was dened by the Commssoner.
The facts n the case are not n dspute.
The pantffs are e ecutors of the estate of Seth M. Mken, who ded on
March 5, 1920. In December, 1916, the testator transferred by way of gft
2.713 shares of capta stock of Mnot Ms (Inc.). fter the death of the
decedent the pantffs red a return for the purposes of the ta upon hs estate.
In so dong they faed to ncude the 2,713 shares of stock above referred to.
The Commssoner hed that ths stock had been transferred n contempaton
of death and that the vaue thereof shoud have been ncuded as a part of
the gross estate. or the purpose of the edera estate ta he f ed the vaue
thereof at the tme of the decedent s death n the sum of 3,308,720.54. y
reason of ths acton an addtona ta of 812,165.42 was assessed aganst the
estate of the decedent. The pantffs pad ths add tona ta and, ther
appcaton for refund thereof havng been dened, now brng ths sut, but do
not contend that the stock nvoved was not transferred n contempaton of death.
The ssue n the case s whether the Commssoner correcty ncuded the
shares of stock above referred to n the gross estate.
The decedent ded n March. 1920, and the Commssoner apped the provsons
of the Revenue ct of 1918 n determnng the ta aganst hs estate, the 1916
ct beng then repeaed. The transfer was by way of gft, and secton 402 of
the Revenue ct of 1918 drects that the gross estate of the decedent sha be
ascertaned by ncudng (among other thngs) the vaue at hs death of a
property
To the e tent of any nterest theren of whch the decedent has at any tme
made a transfer, or wth respect to whch he has at any tme created a trust,
n contempaton of or ntended to take effect In possesson or en|oyment at or
after hs death (whether such transfer or trust s made or created before or
after the passage of ths ct), e cept In case of a bona tde sae for a far con-
sderaton n money or money s worth.
Ths anguage s so pan and defnte that t s cear that ths secton ap-
pes to the transfer under consderaton n ths case, athough t was made
pror to the passage of the 1918 ct. Pantffs do not queston ths con-
structon of the statute, but contend that when apped to gfts made pror
to the tme when the Revenue ct of 1918 went nto force, the statute s
unconsttutona. Ths consttutes the queston to ho determned n the case.
Nchos v. Coodye (274 U. S-, 531 T. D. 4072, C. . I-2, 351 ) s cted
as supportng the contenton of the pantffs. In that case t appeared that
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377
Regs. 70, rts. 15, 16.
the decedent and her husband ad n uy, 1907, transferred certan prop-
erty wthout consderaton to trustees, who agreed to hod t and pay the
ncome to the settors, then to the survvor, and thereafter to dspose of It
u a manner not necessary here to repeat. On pr 6, 1917, the settors
assgned to ther chdren ther entre nterest n the property. In May, 1917,
the decedent and her husband conveyed absoutey certan other property to
ther chdren, but we are here concerned ony wth the appcaton of the
aw made by the Supreme Court to the transfer frst above set forth. The
death of the decedent occurred u anuary, 1921. er e ecutors made a re-
turn under the evenue ct of 1918 (approved ebruary 24, 1919) whch
dd not ncude the property frst transferred. The Commssoner hed that
under the provsons of secton 402(c) of sad ct, whch are above set forth,
the vaue of a ths property at her death must be ncuded n the gross
estate.
The Supreme Court found that the transfer was not made n contempaton
of death and hed that secton 402(c)
n so far as t requres that there sha be ncuded n the gross
estate the vaue of property transferred by a decedent pror to ts passage
merey because the conveyance was ntended to take effect n possesson or
en|oyment at or after hs death, s arbtrary, caprcous and amounts to
confscaton
and n gvng ts reasons for hodng the statute arbtrary sad:
n e cse s prescrbed, but the amount of t s made to depend upon past
awfu transactons, not testamentary n character and beyond reca. Prop-
erty of sma vaue transferred before death may have become mmensey
vauabe, and the estate ta , swoen by ths, may eave nothng for dstrbu-
ton. Rea estate transferred years ago, when of sma vaue, may be worth
an enormous sum at the death. If the deceased eaves no estate there can be
no ta f, on the other hand, he eaves . 10, both that and the rea estate
become abe. Dfferent estates must bear dsproportonate burdens deter-
mned by what the deceased dd 1 or 20 years before he ded. See rew v.
owers (12 ed. (2d), 625 T. D. 3789, C. . I -2, 258 ).
One fact whch s rected above s not found n the case at bar. In the
Cdodge case, supra, the transactons are sad to be not testamentary n
character, by whch we understand the court to mean that they were not
made n contempaton of death as a part of a pan of dstrbutng the estate
of the grantor by conveyance nstead of by w. In fact the court, n another
part of the opnon, states e pressy that the transfers were not made n
contempaton of death. It s true that the court sad n ths connecton that
undoubtedy, Congress may requre that property subsequenty transferred
n contempaton of death be treated as part of the estate for purposes of
ta aton. Counse for pantffs argue that t s a far nference from ths
anguage that conveyances made pror to the ta ng statute under such cr-
cumstances woud not be sub|ect to ta aton, but we thnk that what the court
ntended to have understood was that there was no doubt about such transfers
beng sub|ect to the ta when made after the enactment of the statute, but
as to those made pror thereto t was an open queston when they were made
n contempaton of death.
s the transfer under consderaton n the case at bar was made n con-
tempaton of death, t became necessary to determne ths queston.
If we consder ony cases where the statute s not retroactve, we fnd n the
anguage heren above quoted from the Coodfe case that undoubtedy, Con-
gress may requre that property subsequenty transferred n contempaton of
death be treated as part of the estate for purposes of ta aton. If ths be
true, It s qute cear that such a statute s not arbtrary and caprcous
and can not be hed unconsttutona on that ground, athough on frst con-
sderaton t mght appear that some of the anguage used n the CooUge case
and n other cases mght appy thereto as a reason for hodng t nvad.
ut when we appy the statute to transfers made n contempaton of death,
the whoe aspect of the case s changed, and the reasons whch the court
gave for hodng the conveyances n the Coudge case not sub|ect to ta do
not appy n the case at bar.
In the nstant case, the maker of the transfer, as n practcay a cases
where a conveyance s made n contempaton of death, was usng the con-
veyance to dspose of or dstrbute hs property nstead of a w. s purpose
4000 30 25
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Regs. 70, rts. 15, 16.
378
was to make ths dsposton before death ntervened to termnate hs contro
thereof. In Its effect t dffered but tte from dsposton by w. If another
owner of property dsposed of a of hs property by w, the aw requred
from hs estate a ta based on the vaue thereof. What reason can be gven
why the estate of the man who transfers a part of hs property n contem-
paton of death shoud not pay the same ta as the one who transfers It by
w None, we thnk, but on the contrary It appears that a provson for
ta ng property so conveyed In contempaton of death as part of the estate
s reasonabe and |ust, and makes for equaty between ta payers, rather
than nequaty, whch woud otherwse e st. If these concusons are
correcty drawn. It s cear that such a ta s not arbtrary or caprcous.
nother forcbe and dstnct reason for hodng such a ta vad s, as
stated n the Coodge case, that t s necessary to prevent evason. It Is
perfecty evdent that f the owner of an estate, after he had reason to
beeve that death was ngh, coud n contempaton thereof dstrbute hs
property by gft nstead of by w, the means of avodng the estate
ta woud be so apparent and easy, avodance woud become the rae and
the payment of the ta the e cepton. Moreover, n such event, those who were
nterested n estates conveyed by w coud |usty compan of the unfar and
un|ust stuaton n whch they were paced as compared to those who were
purposey avodng the estate ta . It s we setted that when the genera
purpose of a egsatve act s wthn the admtted power of the Government
that the egsatve body, as sad n Purty tract Co. v. Lynch (226 13. S.,
392, 201), may adopt such measures havng reasonabe reaton to that end
as It may deem necessary n order to make ts acton effectve and further
n the same case: It does not foow that because a transacton separatey
consdered s nnocuous t may not be ncuded n a prohbton the scope of
whch s regarded as essenta n e egsatve |udgment to accompsh a
pufpose wthn the admtted power of the Government. Ths s especay
true where the purpose of the ct s n part to prevent evason, and whe
so far ony transactons occurrng after the passage of the ct have been
dscussed, t ought aso to be sad u ths connecton that the provson h
the statute whch made t appy to pror transactons was undoubtedy n-
tended to prevent evason by makng conveyances before the ct eoud go nto
force. Such provsons have been hed vad n tarff cts.
It may he thought at frst that t s not necessary to eaborate these reasons
for hodng that the ta on gfts made n contempaton of death s not ar-
btrary when the Supreme Court has aready hed that the ta s consttutona
when apped to transactons pror to the enactment of the aw whch mposed
t, but these matters are here dscussed because they show that the grounds
for hodng such a ta not to be arbtrary are e acty the same whether the
statute s apped to a transfer made after ts enactment or before t went nto
effect, and vce versa no reason can be gven for hodng the statute to be
arbtrary when apped to transactons that took pace before ts enactment
that woud not appy equay we to those whch occurred after t went nto
force.
It s urged on behaf of pantffs that the retroactve features of the ct
voate the due process cause of the ffth amendment, and that the ct
further voates the due process cause of the same amendment by the manner
n whch the gross estate s computed: aso that the ct, n. so far as t appes
to property not owned by the decedent at the tme of hs death but transferred
by way of gft pror thereto, mposes a drect ta whch s vod for want of
apportonment. These statements are genera and the matters whch form
the prncpa bass for the attack on the ct may be more specfcay stated
as foows:
rst, that the vaue of property whch the decedent has ceased to own n
other words, the property of another s used to measure the amount of the
ta .
Second, that the ta as mposed by the ct s not a ta on the transfer of the
property of the decedent but a ta on property tsef not owned by hm at
the tme of hs death.
Thrd, that the decedent when he parted wth the tte to ths property coud
not antcpate that the ta now sought to be eved woud be mposed.
It s perfecty cear that the frst two of these matters mght be urged wth
as much force n a case where the ct. after ts enactment, was apped to
a transfer u contempaton of death as they coud to a transfer made pror
thereto. Iu both cases the vaue of property whch the decedent had ceased
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379
Regs. 70, rts. 16,16.
to own s used to measure the ta n both cases the matters stated n the
second ob|ecton f appcabe at a woud appy equay. When we e amne
the thrd ob|ecton cosey we fnd that t can be made aganst a or neary
a cts whch have provded for the retroactve appcaton of ta es, and f
hed to be suffcent by tsef and aone to render the ct n queston nvad,
the same rue apped woud make a retroactve ta ng statutes unconsttu-
tona. The answer, then, to the frst two of these ob|ectons s that the
Supreme Court has hed that these matters w not nvadate a ta upon a
transfer made n contempaton of death. Possby the thrd ob|ecton, n vew
of what has been stated, needs no further answer. It may be contended,
however, that some of the anguage used by the ma|orty opnons n the
cases of odgett v. odcn (275 U. S., 142 T. D. 4117, C. . II-1, 3241)
and Untermycr v. nderson (270 U. S., 440 T. D. 4157, C. . II-1, 32 )
tends to support the cam that no retroactve estate ta s vad, but these
statements are genera and must be hed appcabe ony to the partcuar facte
n the cases as to whch the opnons were rendered. Unt the Supreme Court
shoud specfcay so state, we can not beeve that t ntended by anythng
t has sad n these two cases ast cted to overrue the genera prncpe that
a aw of Congress mposng a ta may be retroactve n ts operaton, whch
has prevaed so ong as to be consdered setted doctrne. We thnk t s not
wthout sgnfcance that n each case the court made t cear that t was not
rung on a case where the transfer was made n contempaton of death,
and that the court has n three cases, where the vadty of retroactve estate
and gft ta es was nvoved, emphaszed the fact that n the case under con-
sderaton the transfer n queston was not made n contempaton of death.
y reason of ths feature of the case at bar we concude that (ho ta n
queston s not unconsttutona.
Counse for defendant contends that the ta n fact was not retroactve but
was merey a contnuaton wth a changed rate of the statute tat had prev-
ousy been n force, but the concusons we have heretofore reached make t un-
necessary to consder ths proposton.
It foows that pantffs petton must be dsmssed, and t s so ordered.
Wams, udge Ltteton, udge and ooth, Chef ustce, concur.
G aam, udge, concurrng n the resut:
The pettoners are e ecutors of the estate of Seth M. Mben, deceased. The
ta ng ct of 1916 was passed on the 8th day of September, 1916. In December
of 1916 the sad Mken made a gft n contempaton of death and trans-
ferred 2,713 shares of the stock of Mnot Ms, Inc., to hs three chdren.
etween the date of the gft and the date of hs death the ct of 1918 was
passed, becomng effectve n ebruary, 1919. The testator ded on March 5,
1920. The ct of 1916 and the ct of 1918 each contaned provsons evyng a
ta on gfts made durng fe but n contempaton of death. The pertnent
sectons of the cts are n footnote.
It w be seen from an e amnaton of these sectons n the two statutes that
they are verbatm e cept the anguage (n the ct of 1918) at any tme and
whether such transfer or trust s made or created before or after the passage
of ths ct. Under the facts here t s to be noted
(1) That the gft n ths case was not made before the passage of the ct
of 1916 but after, and woud ceary have been ta abe under that ct had the
1918 ct been passed or f the testator had ded the day before the passage
of the ct of 1018.
(2) That as ths gft was made n contempaton of death, t woud not
make any dfference when the testator ded. It was abe for ta when he dd
de, uness Congress by some act reeved the property of abty to ta aton,
and the nchoate abty havng aready attached, It s a reasonabe construc-
ton of the retroactve cause as to ths case and smar ones that Congress at
east ntended the provson to reach such cases and had them n mnd, there-
fore Intendng by the ct of 1918 to contnue nto the ct of 1918 an nchoate
abty ncurred under the ct of 1916. If ths be true, t s reasonabe to hod
that t dd not ntend to repea the ct of 1916 as to such cases.
(3) ut. we are not eft wth ony ths vew to stand upon. Congress n the
ct of 1918, after repeang certan ttes of the cts of 1916 and 1917, among
them Tte II of the ct of 1916, whch ncuded the sectons quoted n foot-
note, used ths anguage (40 Stat., 1150) :
Such parts of cts (meanng cts repeaed) sha reman n force for the
assessment and coecton of a ta es whch have accrued thereunder,
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Regs. 70, rts. 15, 16.
380
Provded-, That, e cept as otherwse provded n ths ct, no ta es sha be co-
ected under Tte I of the Revenue ct of 1916 (whch contans the sectons
nvoved here) as nmended by the Revenue ct of 1917, or Tte I or II of the
Revenue ct of 1917, n respect to any perod after December 31, 1917. (Note
the anguage, e cept as otherwse provded n ths ct. ) Provded, further,
That the assessment and coecton of a estate ta es whch have
accrued under Tte II of the Revenue ct of 1916 sha be accordng
to the provsons of Tte I of ths ct (whch contans the sectons nvoved
here). In the case of any ta mposed by any part of an ct heren repeaed,
f there s a ta mposed by ths ct n eu thereof, the provsons mposng
such ta sha reman n force unt the correspondng ta under ths ct takes
effect under the provsons of ths ct.
The ta here was mposed by a part of the ct of 1916 and the ta mposed
by the provson of that ct was mposed by ths ct (1918) n eu thereof,
and, therefore, the provsons mposng such ta (1910) sha reman n force
unt the correspondng ta under ths (1918) ct takes effect under ts
provsons.
Whatever ths provson may mean generay, t covers ths case, and seems
to show an ntenton to carry forward the provson of the ct of 1916 nto
the ct of 1918 and make t effectve under the provsons of that ct by re-
enactng t, and that as to such reenactnents the provson as to repea woud
not be effectve. Ths vew of the matter s strengthened by the addtona
anguage n secton 402(c) of the ct of 1918, vz, whether such transfer or
trust s made or crea ted before or after the passage of ths ct.
ccordng to the constructon presented by the pettoners, we woud have
ths stuaton, namey, that had the donor ded the day before the ct of 1918
became effectve there woud have been no queston of abty, but f he bad
ded the day after the passage of that ct there woud be no abty, because
the ct of 1916 had been repeaed and the abty reeased thereby. Rather
than hod that Congress contempated such an effect by the repeang cause
of the ct of 1918, t s more reasonabe to hod that Congress by reenactng
the very words of sectons 201 and 202(b) of the ct of 1916 nto the ct of
1018 ntended the 1918 ct, as to these sectons, to be a contnuaton of the
1916 ct, and that as to these sectons of the ct of 1916 whch were thus
reenacted t ntended that the repea shoud not appy. Ths constructon
mposes no hardshp upon them.
Under the facts of ths case there s nothng caprcous or arbtrary n the
retroactve cause as thus construed. Where the subsequent ct from ts
provsons gves reasonabe grounds for hodng thut t was a contnuaton of
the prevous ct, even though there has been a forma repea, t w be hed
to be a contnuaton of the od ct wth modfcaton contaned n the new.
See the foowng cases: Campbe v. Caforna (200 U. S.. 87) Steamshp Co.
v. offe (2 Wa., 450, 458, 459) Guf, Coo, d Sma e Raway Co. v. Denns
(224 U. S., 503, 507) Wrght v. Oakey (5 Metcaf, 406) and ear Lake and
Rver Water Works Irrgaton Co. v. arand (164 U. S., 1, 11, 12).
In the case of Campbe v. Caforna (200 U. S., 87), In whch the court
cted wth approva the offe and Wrght coses, the court spoke of the genera
and contnung nature of the egsaton contaned n the statute. The egsa-
ton nvoved n the Campbe case was an nhertance ta aw.
The facts n the case of Steamshp Co. v. offe, supra, whch s a eadng
case, were that a pot under a contract authorzed by statute earned certan
pot fees. The act authorzng the fees was repeaed. The court n hodng
that the second act was a contnuaton of the frst n spte of the repeang
cause, sad:
The new act reenacts substantay a the provsons of the org-
na act, reatng to pots and pot reguatons for the harbor of San rancsco.
It sub|ects the pots to smar e amnatons t requres ke quafcatons
t prescrbes neary the same fees for smar servces and t aows haf-
potage fees under the same crcumstances as provded n the orgna act.
The new act took effect smutaneousy wth the repea of the frst
act ts provsons may, therefore, more propery be sad to be substtuted n
the pace of, and to contnue n force wt modfcatons, the provsons of the
orgna act, rather than to have abrogated and annued them.
nd tne court n ts opnon quotes the foowng anguage of Chef ustce
Shaw n Wrght v. Oakey (5 Metcaf, 406) :
but these repeas went nto operaton smutaneousy wth the
revsed statutes, whch were substtuted for them, and were ntended to repace
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381
Regs. 70, rts. 15, 16.
them, wth such modfcatons as were ntended to be made by that revson.
Tere was no moment n whch the repeang act stood n force wthout beng
repaced by the correspondng provsons of the revsed statutes. In practca
operaton and effect, therefore, they are rather to be consdered as a contnu-
ance and modfcaton of od aws than as an abrogaton of those od and the
reenactment of new ones.
In Guf, Coo. Santa e Raway Co. case, supra, where there was nvoved
a statute contanng a smutaneous repea and reenactment of a pror statute,
the court sad:
Durng ts pendency n ths court the egsature of the State passed a new
statute, embodyng the provsons of the pror aw, wth some modfcatons,
and aso n terms repeang t. The pont was then made that the repeang
cause termnated the r|rt to recover and therefore that the acton coud no
onger be mantaned. nd whe the queston whether the smutaneous re-
enactment and repea of the pror aw nterrupted ts contnuty was a queston
of oca aw, t was fuy consdered, and the concuson wus reached that n
practca operaton and effect there was no repea, hut ony a contnuance of
the pror aw, .
In the ear Lake and Rver Water Works Irrgaton Co. case, supra, t s
sad:
though there s a forma repea of the od by the new statute,
st tere never has been a moment of tme snce the passage of the act of
1888 when these smar provsons have not been n force. Notwthstandng,
therefore, ths forma repea, t s, as we thnk, entrey correct to say that
the new act shoud be construed as a contnuaton of the od wth the modfca-
ton contaned n the new act.
The court cted wth approva Steamshp Co. v. offc, supra.
In a of these cases t was hed that the mere repea does not make the
queston of the appcaton of a statute a moot queston, and that f the subse-
quent act s of the genera and contnung nature of the egsaton contaned
n the prevous act, they shoud be treated as one act.
I am the more mpeed to ths constructon of the ct as t emnates the
queston of consttutonaty of the ct of 1918. In passng upon the con-
sttutonaty of a aw t has been the undevatng rue of the Supreme Court
to so construe the ct nvoved as to uphod, f possbe, ts consttutonaty.
It s a rae of whch the courts must be carefuy mndfu n the performance of
hs gravest and most decate duty. It s we setted that among other
matters to be taken nto consderaton, as to two nterpretatons of a statute,
the one destroyng and the other savng the consttutonaty of the ct, t s
the court s duty to adopt the atter. The rght of the edera courts to decare
:n ct of Congress unconsttutona has been uphed and accepted, though there
have been charges of |udca usurpaton at dfferent perods n the hstory of
the country, even wthn the ast decade, but the annument of an ct on con-
sttutona grounds must be avoded f possbe, am the courts have even gone
the ength of gvng very straned constructons to statutes n order to accom-
psh ths purpose. (See Unted States v. n uen Moy, 241 U. S., 304, 401,
402, and Unted states v. Deaware udson Co., 213 U. S., 366, 407, 408.)
There s st another vew of ths case. s staed, ths s a case of a gft
n contempaton of death. In ths t dffers from the cases of Nchos v.
Coodye (274 U. S., 531, 541), n whch the court sad:
The rght to become benefcay entted s not the occason for
t. There s no cam that the transfers were made n contempaton of death
or wth purpose to evade ta aton.
nd n odgett v. oden (275 U. S., 142, 146), the court sad:
transferred by gfts nter vvos, and not n contempaton of
death, .
In Untermyer v. nderson (276 U. S., 440, 445) t was stated:
t nd, further, that so far as appcabe to bona fde gfts not made
n antcpaton of death and fuy consummated pror to une 2, 1924, those
provsons are arbtrary and nvad under the due process cause of the ffth
amendment.
It thus seems that n these three cases, n hodng a ta ng ct for the purpose
of rasng revenue unconsttutona under the partcuar facts of those cases,
the ease of gfts made n contempaton of death was e pressy reserved,
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Regs. 70, rt. 16.
382
and the anguage of the court seems to ndcate that n those cases, f the gfts
had been made n contempaton of death, the decson mght have been
dfferent.
s t has been the |wcy of ths court not to ad|udge an ct of Congress un-
consttutona, and of the Supreme Court, as heretofore stated, to construe an
ct so as to uphod ts consttutonaty f possbe, and n vew of the nter-
pretaton whch I gve the ct of 1818 as a contnuaton of the ct of 1916 as
far as the sectons of the ct n dspute here are concerned, and the evdent
e cepton from the three decsons mpra of gfts made n contempaton of
death, I concur u the resut reached by the court.
TR NS R Y D C D NT IN IS LI TIM .
Reguatons 70, rtce 10: Nature of transfer. I -20 4647
Ct. I). 186
ST T T R NU CT O 1918 D CISION O SUPR M COURT.
Gross state Transfer to Take ffect at Death Reservaton
of Income Durng Lfe Ta abty.
transfer of property by a decedent n trust to pay the ncome
therefrom to I durng s fetme and after s decease to |ay the
ncome to the settor durng her fetme and after her decease to
pay the trust fund to desgnated persons, s not a transfer n-
tended to take effect n possesson or en|oyment at or after her
death wthn the meanng of secton 401 c) of the Revenue ct of
191S.
Supreme Court of the Unted States.
Water . May et a., ecuors, etc-, Pettoners, v. D. . encr, Coector of
Interna Revenue for the Twenty-thrd Dstrct of Pennsyvana.
On wrt of certorar to the Unted States Crcut Ccmrt of ppeas Tor the Thrd Crcut.
pr 14. 1930.
OPINION.
Mr. ustce McReynot||s devered the opnon of the court.
y a wrtten nstrument dated October 1, 1917, Pauno May, wfe of arney
May. transferred, set over and assgned to hm and others, as trustees (wth
power to change the nvestments), certan descrbed securtes bonds, notes,
corporate stocks, and money n trust, to coect the ncome therefrom and after
dschargng ta es, e penses, etc., to pay the baance to arney May durng hs
fetme, and after hs decease, to Paune May durng her fetme, and after
her decease, a the property n sad trust, u whatever form or shape t may be,
sha, after the e penses of the trust have been deducted or pad, be dstrbuted
equay among her four chdren, ther dstrbutees, or appontees.
Mrs. May ded March 25, 1920. Thereafter the Commssoner of Interna
Revenue, purportng to proceed under authorty of the Revenue ct of 1918
(Tte I , 40 Stat., 1057, 1096, 1097), demanded that her e ecutors pay add-
tona ta es reckoned upon the vaue of the property hed under the above-
descrbed trust nstrument. avng pad the requred sum. the e ecutors
pettoners here asked that t e refunded. y order of ebruary 20, 1924,
the Commssoner dened ther request In support of ths acton he sad
Ths trust was ncuded n decedent s gross estate on fna audt and revew
on the ground that t was ntended to take effect n possesson or en|oyment at
or after death. In ths case the prncpa of the trust fund coud not take effect
n possesson unt the death of the decedent. ccordng to the provsons of
the trust agreement, f the decedent s husband ded before her, the ncome was
to be pad to her unt her death. The gft of the prncpa, therefore, coud not
take effect durng the decedent s fetme. Ths case comes teray wthn the
terms of the statute, an It has been hed by a number of courts n dfferent
States that, such a transfer as ths s ta abe, these cases beng decded under
statutes usng the same anguage as s contaned n the edera estate ta aw.
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383
Regs. 70, rt. 22.
Seekng to enforce ther cam, the e ecutors sued the coector n the dstrct
court, western dstrct of Pennsyvana |udgment n hs favor was affrmed by
the crcut court of appeas. The matter s here upon certorar.
The record fas ceary to dscose whether or no Mrs. May survved her hus-
band. pparenty she dd not. ut ths s not of speca mportance, snce the
refund shoud have been aowed n ether event.
The transfer of October 1, 1917, was not made n contempaton of deat
wthn the ega sgnfcance of those words. It was not testamentary n
character and was beyond reca by the decedent. t the deat of Mrs. May
no nterest n the property hed under the trust deed passed from her to
the vng tte thereto had been defntey f ed by the trust deed. The
nterest theren whch she possessed Immedatey pror to her death was
obterated by that event.
Secton 401, Revenue ct of -1918, ays a charge upon the transfer of the
net estute of every decedent dyng after the passage of ths ct, and secton
402 drects that the vaue of the gross estate of the decedent sha c
determned by ncudng the vaue at the tme of hs death of a property,
rea or persona, tangbe or Intangbe, wherever stuated (c) to
the e tent of any nterest theren of whch the decedent has at any tme made
a transfer, or wth respect to whch he has at any tme created a trust, n
contempaton of or ntended to take effect n possesson or en|oyment at or
after hs death .
The statute mposes an e cse upon the transfer of an estate upon death
of the owner. (Y. M. C. . v. Davs, 264 U. S., 47, 50 Nchos v. Coo dne,
274 U. S., 531, 537 T. D. 4072, C. . I-2, 351 .)
In Renecke v. Northern Trust Co. (27S U. S., 339, 347, 348 T. D. 4261, C. .
III-1, 305 ), the estate ta prescrbed by the Revenue ct of 1918 was
under consderaton. Ths court sad
In ts pan and scope the ta s one mposed on transfers at death or made
n contempaton of death and s measured by the vaue at death of the nterest
whc s transferred. One may freey gve hs property to another
by absoute gft wthout sub|ectng hmsef or hs estate to a ta , but we are
asked to say that ths statute means that he may not make a gft nter vvos,
equay absoute and compete, wthout sub|ectng t to a ta f the gft takes
te form of a fe estate n one wt remander over to another at or after the
donor s death. It woud requre pan and compeng anguage to |ustfy so
ncongruous a resut and we thnk t s wantng n the present statute.
In the ght of the genera purpose of the statute and the anguage of
secton 401 e pcty mposng the ta on net estates of decedents, we thnk
t at east doubtfu whether the trusts or nterests n a trust ntended to he
reached by the phrase n secton 402(c) to take effect In possesson or en|oy-
ment at or after hs death, ncude any others than those passng from the
possesson, en|oyment or contro of the donor at hs death and so ta abe
transfers at death under secton 401. That doubt must be resoved n favor
of the ta payer.
The |udgment of the crcut court of appeas s erroneous and must ho
reversed. The cause w be remanded to the dstrct court for further pro-
ceedngs n conformty wth ths opnon.
Reversed.
TITL II. ST T T . (1916)
GROSS ST T PROP RTY LD OINTLY.
Reguatons 70, rtce 22: Property hed |onty I -24-4G71
or as tenants by the entrety. Ct. D. 100
ST T T R NU CTS O 1916 ND 1921 D CISION O SUPR M COURT.
Gboss state: state by the nttbety Consttutonaty.
Secton 202(c) of the Revenue ct of 1916 and secton 402(d) of
the Revenue ct of 1921, n so far as they requre that the vaue of
pro|erty transferred by the decedent to hmsef and spouse as ten-
ants by the entrety be ncuded n determnng the vaue of the
decedent s gross estate, are consttutona.
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Regs. 70, rt. 22.
384
SUPR M COU T OP T UNIT D ST T 6. NOS. 428, 546, 547.
ames . Tyer, |r., et a., v. Unted States.
On wrts of certorar to the Crcut Courts of ppeas for the Thrd and ourth Crcuts.
LMay 19, 1030.
O INION.
Mr. ustce Sutherand devered the opnon of the court.
These cases present the queston whether property owned by husband and
wfe as tenants by the entrety may e ncuded, wthout contravenng the Con-
sttuton, n the gross estate of the decedent spouse for the purpose of comput-
ng the ta upon the transfer of the net estate mposed by the Revenue
cts of 1916 (ch. 463, 39 Stat., 756, 777-778), and of 1921 (ch. 136, 42 Stat.,
27, 277-278).
In No. 428, whch arose under the ct of 1916, the decedent had been a res-
dent of Maryand. t I he t me of hs death, e and hs wfe owned as tenants
by the entrety shares of stock n a West rgna corporaton dong busness
n Maryand. The decedent had been the soe owner of the stock and created
the tenancy by a conveyance e ecuted n 1917. The stock was ncuded n the
gross estate of the decedent at ts vaue at the tme of hs death The tota
ta assessed was pad, and the admnstrators brought sut to recover the por-
ton of the amount so pad attrbutabe to the stock, together wth nterest.
The tra court gave |udgment aganst the Government (28 . (2d), 887), whch
was reversed by the court of appeas (33 . (2d), 724).
In No. 540, whch arose under the ct of 1921, the decedent and hs wfe,
resdents of Pennsyvana, hed tte to certan ground rent and to certan rea
estate n that State whch had been conveyed to them as tenants by the entrety.
The propery had been acqured wth the husband s separate funds and no part
of the purchase prce was furnshed by the wfe. The decedent ded n 1923.
eavng hs wfe as soe benefcary under hs w. The admnstrators fed
an estate ta return whch dd not ncude the property nterests above descrbed.
The Commssoner of Interna Revenue added ths property to the gross estate
and assessed a defcency of ta es on that account. The oard of Ta ppeas
hed there was no defcency. (5 . T. ., 1004.) Sut thereupon was nsttuted
by the Commssoner n a edera dstrct court. That court hed that the
see on of the ct whch authorzed t e ncuson of the property was unconsttu-
tona, and gave |udgment aganst the Government. Ths |udgment the court of
appeas affrmed. (35 . (2d), 339.)
In No. 547, whch aso arose under the ct of 1921, the decedent owned rea
estate n Pennsyvana, of whch State she was a resdent. In 1923 the property
was conveyed to a thrd person, who. n turn reconveyed t to the decedent and
her husband as tenants by the entretes. fter the death of the decedent,
the Commssoner, for the purpose of computng the estate ta , ncuded n her
gross estate the vaue of the rea estate so hed. On appea, the oard of Ta
ppeas hed (hs ncuson to be erroneous. (10 . T. ., 1100.) The Com-
mssoner fed a petton for revew wth the court of appeas, and that court
affrmed the acton of the oard upon the authorty of No. 546, whch had
|ust been decded. (35 . (2d), 343.)
In each case the estate was created after the passage of the appcabe ct
and none of the property consttutng t had, pror to ts creaton, ever beonged
to the survvng spouse.
The reevant provsons of the two cts are the same, and t w be suffcent
to quote from the ct of 1916:
Sec. 201. That a ta (herenafter n ths tte referred to as the ta ), equa
to the foowng percentages of the vaue of the net estate, to be determned
as provded n secton 203, s hereby mposed upon the transfer of the net
estate of every decedent dyng after the passage of ths ct, whether a resdent
or nonresdent of the Unted States:
Sec. 202. That the vaue of the gross estate of the decedent sha be deter-
mned by ncudng the vaue at the tme of hs death of a property, rea or
persona, tangbe or ntangbe, wherever stuated:
(c) To the e tent of the nterest theren hed |onty or as tenants n (by)
the entrety by the decedent and any other person or deposted n banks or
other nsttutons n ther |ont names and payabe to ether or the survvor,
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385
Regs. 70, rt. 22.
e cept such part thereof as may be shown to have orgnay beonged to such
other person and never to have beonged to the decedent.
The appcabe provson of secton 202(c) s e pct, and the ntent of Con-
gress thereby to mpose the chaenged ta s not open to doubt. The soe
queston s n respect of ts consttutona vadty. The attack s upon two
grounds (1) that so far as the tu s based upon the ncuson of the vaue
of the nterest n the estate hed by the decedent and spouse as tenants by
the entrety, t s an unapportoned drect ta and voates rtce I, secton 2,
cause 3, and secton 9, cause 4, of the Consttuton (2) that such a ta
umounts to a deprvaton of property wthout due process of aw n voaton
of the ffth amendment.
The decsons of the courts of Maryand and Pennsyvana foow the
common aw and are n accord n respect of the character and ncdents of
tenancy by the entrety. In ega contempaton the tenants consttute a
unt nether can dspose of any part of the estate wthout the consent of
the other and the whoe contnues n the survvor. In Maryand, such a
tenancy may e st n persona property as we as n rea estate. These
decsons estabsh a State rue of property, by whch, of course, ths court
s bound. Warburton v. Whte, 176 U. S., 484, 406.)
1. The contenton that, by ncudng n the gross estate the vaue of
property hed by husband and wfe as tenants by the entrety, the ta pro
tanto becomes a drect ta that s, a ta on property and therefore n-
vad wthout apportonment, proceeds upon the ground that no rght n such
property s transferred by death, but the survvor retans ony what he
aready had. Secton 201 mposes the ta upon the transfer of the net
estate and f that secton stood aone, the ncuson of such property n
the gross estate of the decedent probaby coud not be |ustfed by the terms
of the statute. ut secton 202 defntey ncudes the property and brngs
t. wthn the reach of the words mposng the ta so that a bass for the
consttutona chaenge s present. Pror decsons of ths court do not sove
the probem thus presented, though what was sad n Cuse Natona ank v.
Unted States (278 U. 8., 327, 337-339 Ct. D. 40, C. . III-1, 3081)
Renecke v. Northern Trust Go. (278 U. S., 339, 348 T. D. 4261, O. . III-1,
305 ) and Satonsta v. Satonsta (276 U. S., 260, 271) consttutes hepfu
ad n that drecton.
Death dutes rest upon the prncpe that death s the generatng source
from whch the authorty to mpose such ta es takes ts beng, and t s
the power to transmt or the transmsson or recept of property by death
whch s the sub|ect eved upon by a death dutes. ( nowton v. Moore,
178 U. S., 41, 56, 57.) ut mere names and defntons, however mportant
as ads to understandng, do not concude the awmaker, who s free to gnore
them and adopt hs own. ( amuth v. Unted States. 279 U. S., 231, 242.)
ta ad upon the happenng of an event, as dstngushed from ts tangbe
fruts, s an ndrect ta whch Congress, n respect of some events not neces-
sary now to be descrbed more defntey, undoubtedy may mpose. If the
event s death and the resut whch s made the occason of the ta s the
brngng nto beng or the enargement of property rghts, and Congress
chooses to treat the ta mposed upon that resut as a death duty, even
though, strcty, n the absence of an e presson of the egsatve w, t
mght not thus be denomnated, there s nothng n the Consttuton whch
stands n the way.
The queston here, then, s not whether there has been, n the strct sense
of that word, a transfer of the property by the death of the decedent,
or a recept of t by rght of successon, but whether the death has brought
nto beng or rpened for the survvor, property rghts of such character
as to make approprate the mposton of a ta upon that resut (whch
Congress may ca a transfer ta , a death duty, or anythng ese t sees ft),
to be measured, n whoe or n part, by the vaue of such rghts.
ccordng to the amabe fcton of the common aw, adhered to n Pennsy-
vana and Maryand, husband and wfe are but one person, and the pont
made s, that by the death of one party to ths unt no nterest n property
hed by them as tenants by the entrety passes to the other. Ths vew,
when apped to a ta ng set, seems qute unsubstanta. The power of ta -
aton s a fundamenta and mperous necessty of a government, not to be
restrcted by mere ega fctons. Whether that power has been propery e er-
csed n the present nstance must be determned by the actua resuts brought
about by the death, rather than by a consderaton of the artfca rues
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Regs. 37(1917), rt, II. 38C
whch demt the tte, rghts, and powers of tenants by the entrety at common
aw. See Moo v. mes (173 U. 8., 509, 516) SfUton ta v. SaUonztaU (supra),
page 271.
Ta aton, as t many tmes has been sad, s emnenty practca, and a
practca mnd, consderng resuts, woud have some dffcuty n acceptng the
concuson that the death of one of the tenants n each of these cases dd not
have the effect of passng to the survvor substanta rghts, n respect of the
pvo erty, theretofore never en|oyed by such survvor. efore the death of
the husband (to take the Tyer case, No. 428) the wfe had the rght to
possess and use the whoe property, but so, aso, had her husband she coud
not dspose of the property e cept wth her husband s concurrence her rghts
were hedged about at a ponts by the equa rghts f her husband.
t hs death, however, and because of t, se, for the frst tme, became en-
tted to e cusve possesson, use, and en|oyment she ceased to hod the
property sub|ect to quafcatons mposed by the aw reatng to tenancy by
the entrety, and became entted to hod and en|oy t absoutey as her own :
and then, and then ony, she acqured the power, not theretofore possessed,
of dsposng of the property by an e ercse of her soe w. Thus the death of
one of the partes to the tenancy became the generatng source of m-
portant and defnte accessons to the property rghts of the other. These
crcumstances, together wth the fact, the e stence of whch the statute re-
qures, that no part of the property orgnay had beonged to the wfe, are
suffcent, n our opnon, to make vad the ncuson of the property n the
gross estate whch forms the prmary base for the measurement of the ta .
nd In that vew the resutng ta attrbutabe to such property s pany
ndrect
2. The attack upon the ta ng ct as consttutng a voaton of the ffth
amendment s whoy wthout mert. The pont made s that the ta Is so
arbtrary and caprcous as to amount to confscaton, and, therefore, to resut
n a deprvaton of property wthout due process of aw. The ta , as we have
|ust hed, fas wthn the power of ta aton granted to Congress, and the
chaenge becomes one not to the power, but to an abuse of t. The possbty
that a edera statute passed under the ta ng power may be so arbtrary
tnd caprcous as to cause t to fa before the due process of aw cause of
the ffth amendment must be conceded ( mshabrr v. Unon Pac. R. R.. 240
U. S., 1, 24. and cases cted Nchos v. Cootfffe, 274 T . S.. 531, 542), but the
present statute s not of that character.
To ncude n the gross estate, for the purpose of measurng the ta , the vaue
of property, no part of whch orgnay beonged to one spouse, but whch
came to the tenancy, medatey or mmedatey, as a pure gft from the other,
and whch, as a consequence of the atter s death, was reeved from restrctons
mposed by the aw n respect to tenancy by the entrety so as to produce
n the survvor the rght of soe propretorshp, s obvousy nether arbtrary
nor caprcous. The evdent and egtmate am of Congress was to prevent
an avodance, n whoe or n part, of the estate ta by ths method of dsposton
durng the fetme of the spouse who owned the property, or whose separate
funds had been used to procure It and the provson under revew s an
nd|unct of the genera scheme of ta aton of whch t s a part, entrey
approprate as a means to that end. (Toff v. owers, 278 U. S-, 470, 482
(Ot. D. 49, C. . II-1. 226 .)
No. 42S, |udgment affrmed.
No. 546, |udgment reversed.
No. 547, |udgment reversed.
T GROSS ST T .
Reguatons 37 (1917). rtce II. I -24-4670
Ct. D. 191
ST T T R NU CT O 1916 D CISION O COURT.
1. Guoss state Devse s Leu of Dowe: entucky and Oho.
Where, under the aws of entucky and Oho, there has been an
eecton to take property devsed u eu of dower, the vaue of the
property so taken shoud be ncuded n the gross estate under sec-
ton 202(a) of the Revenue ct of 19:6.
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387 Regs. 37(1917), rt. II.
2. n | NT fftrued.
The |udgment of the dstrct court (32 ed. (2d), 817 (Ct. D. 57
(C. . III-1, 817 )) affrmed.
Unted States Crcut Coukt of ppeas fob the Second Cbcut.
orence S. Sohuette, as ecutr of the state of arry S. arkness,
deceased, pantff-appeant, v. rank . owers, Coector of Interna
Revenue for the Second Dstrct of New York, defendant-appeee.
ppea from the Dstrct Court of the Unted Staes for the Southern Dstrct of
New York.
efore L. and, Swan, and ugustus N. and, Crcut udges.
pr 7, 1930.
opnon.
cton by the e ecutr of the estate of arry S. arkness to recover an
aeged overpayment of the edera estate ta mposed by the Revenue ct of
1916 as amended (39 Stat., 777, 1002). The facts were stpuated, and the case
was tred by the dstrct court sttng by consent wthout a |ury. rom a
|udgment dsmssng the compant the pantff appeas.
ffrmed.
The decedent, a resdent of the State of New York, ded testate on anuary
23, 1919, eavng as pnrt of hs estate ands stuated n entucky and n Oho.
Under te aw of each State, hs wdow was entted to dower. s w,
whch was admtted to probate n the Surrogates Court of New York County,
after drectng that hs debts be pad, gave a hs property to hs wow, who
as soe e ecutr Is the present pantff. In the edera estate ta return she
was requred by the Commssoner of Interna Revenue to ncude the vaue of
her dower nterest n sad ands. Ths resuted n the mposton of an add-
tona ta amountng to 10,396.73, whch sum. wth nterest from the date of
payment, she seeks to recover from the defendant coector of nterna revenue.
The wdow took no proceedngs to have dower assgned to her. She accepted
and receved a the property gven her by the w and the defendant contends,
by reason of statutory provsons e stng n entucky and n Oho, that she
thereby renqushed her dower and took the ands as devsee. The dstrct
court s opnon, hodng that the ta had been egay assessed, s reported n
32 . (2d), 817.
Swan, Crcut udge: The Revenue ct of 1916 (39 Stat., 756, 777) mposes,
by secton 201, a ta upon the transfer of the net estate of every decedent
dyng after the passage of ths ct. It s not a egacy or successon ta upon
the benefts receved by the egatee, but s a ta upon the prvege of transfer-
rng the property of the owner at death, measured by the vaue of the nterest
transferred. (Y. M. O. . v. Davs, 204 U. S., 47, 50 Chase Natona Rank v.
Unted States, 278 U. S., 327. 334 Ct. D. 40, C. . III-1. 3081.) The two
succeedng sectons, so far as matera to the ssue now presented, read as
foows:
Sec. 202. That the vaue of the gross estate of the decedent sha be deter-
mned by ncudng the vaue at the tme of hs death of a property, rea or
persona, tangbe or ntangbe, wherever stuated:
(a) to the e tent of the nterest theren of the decedent at the tme of hs
death whch after hs death s sub|ect to the payment of the charges aganst
hs estate and the e penses of ts admnstraton and s sub|ect to dstrbuton
as part of hs estate.
Sec. 203. That for the purpose of the ta the vaue of the net estate sha be
determned
(a) In the case of a resdent, by deductng from the vaue of the gross
estate
(1) Such amounts for funera e penses, admnstraton e penses, cams
aganst the estate, support durng the settement of the estate of
those dependent upon the decedent, and such other charges aganst the estate,
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Regs. 37(1917), rt. II.
388
as are aowed by the aws of the |ursdcton, whether wthn or wthout the
Unted States, under whch the estate s beng admnstered .
The appeant s argument sets up a doube ne of defense: (1) That the
wdow took her dower nterest as doweress and not as devsee and (2) rhat
even f she took as devsee, the vaue of her dower nterest can not be ncuded
n the gross estate of the decedent under the Revenue ct of 1916.
It s conceded that f she took as doweress the vaue of her dower can not be
ncuded n computng the ta . Such was the hodng n Randoph v. Crag
(267 ., 993) (D. C. N. D. Tenn.), whch was cted wth approva n rscoe v.
Crag (32 . (2d), 40, 41 (C. C. . 6) T. D. 4074, C. . I-2, 3691), and s. n
our opnon, ndubtaby correct. To be ncuded n the gross estate as defned
by secton 202(a) the property must be (1) an nterest of the decedent at the
tme of hs death, (2) sub|ect to payment of e penses of admnstraton and
charges aganst hs estate, and (3) sub|ect to dstrbuton as part of hs estate.
These three condtons are to be read con|unctvey. (Unted- States v. ed,
255 U. S., 257, 262.) If dower made consummate by the husband s death s
not renqushed, at east the second and thrd of these condtons are not
satsfed, for dower s nether sub|ect to charges aganst the estate and e penses
of ts admnstraton nor to dstrbuton as part of the estate. Snce the decson
of Randoph v. Crag, supra, the Government as conformed ts practce to ths
nterpretaton of the statute (T. D. 3156 artce 14 of Reguatons 70) and
the amendment of the aw to provde e pressy for the ncuson of dower n
the case of decedents dyng subsequent to ebruary 24, 1910 (secton 402(b),
Revenue ct of 1918, 40 Stat., 1097), dscoses at east a egsatve doubt
whether ths resut coud have been effected wthout a change of the pror ct.
See Unted State v. ed (255 T . S., 257, 2651 : Smetank-a v. rst Trust
Savngs ank (257 U. S., 602, 007 T. D. 3321, C. . 1-1, 210 ).
Our frst nqury, therefore, s to determne whether the appeant ren-
qushed her dower.- In ths we must ook to oca aw. (Randoph v. Crag,
supra De aughn v. ntchnson, 165 U. S., 566. 570 Unted States v. obbns,
269 U. S., 135, 320 T. D. 3S17, C. . -, 188 .) er contenton s that the
oca aw does not put a wdow to eecton between her rghts under the w and
her rghts as doweress. where the testator has gven her hs entre estate
after payment of hs debts.
The statutes appcabe to the entucky and may be found n Carro s
entucky Statutes, 1922. Secton 2132 provdes that a wdow sha have an
estate for fe n one-thrd of her deceased husband s rea estate, uness the
rght to such dower nterest sha have been burred, forfeted or renqushed.
Secton 2136 decares that a conveyance or devse by way of |onture may bar
the wfe s nterest n the property and estate of the husband. Secton 1404
provdes that a wdow may renqush what s gven her by the w, and there-
upon receve her dowabe and dstrbutabe share as f no w had been made
but such renqushment must be made wthn 12 months after probate. The
secton concudes wth the foowng sentence:
Nothng heren sha precude the wdow from recevng her dowabe and
dstrbutabe share, n addton to any devse or bequest made to her by w,
f such s the ntenton of the testator, pany e pressed n the w, or neces-
sary nferabe therefrom.
The wdow dd not renqush the provson made for her by the decedent s
w, and t s conceded, as t must be n the ght of entucky cases, that f
the statute put her to eecton, her faure to renounce the w operated as
a surrender of her dower rghts. See Order v. ubanks (75 y.. 510) : npe
v. nooes (113 y., 165) Smth v. Perkns (14S y., 387) Perry v. Wson
(183 y., 155). The statute abrogates the common aw rue and substtutes
a presumpton that a testamentary provson s ntended to be n eu of dower.
( uhcn v. uhen, 87 y., 247 oss v. Stortz, 177 y., 541: Perry v. Wson.
supra.) ut, by vrtue of the ast sentence of secton 1404. ths statutory
presumpton may be overrdden by the testator s ntenton, pany e pressed.
or necessary nferabe from the w. So the probem s whether n w
whch gves everythng to the wdow, sub|ect to payment of the testator s debts,
dscoses by necessary nference an ntenton that she may have her dower
rghts n addton to the rghts conferred by the w.
Whatever mght he our ndependent vew were the queston res Integra,
: we thnk t s forecosed by entucky decsons. In arrson v. Ta/Ior s
dm r (.r 1 8. W., 103), a testator (rave everythng to hs wfe, who quafed as
| e ecutr . ganst a credtor s attempt to sub|ect the decedent s and to
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389 Regs. 37(1917), rt. II.
payment of the debt, the wdow pendod dower and homestead. Ths was
hed to set forth no defense, the court sayng
It s we setted that a person can not cam under a w, and aso aganst
t and, nasmuch as appeant accepted the provsons of the w of her
husband, she takes the entre property sub|ect to hs debts, and can not cam
ether homestead or dower aganst hs credtors.
Ths was approved and foowed n Schnabe v. chnabc s r. (108 y.,
536), where the w drected payment of debts and gave everythng to the
wdow. The dspute was whether she coud cam homestead, not dower,
aganst credtors but the prncpe apped s the same, namey, that she
was put to an eecton between the testamentary provsons and her statutory
rghts. (Watson v. Chrstan, 75 y., 524 see aso Chambers v. Davs, 15
. on., 522 nson v. nns, 81 y., 363 esewettcr v. ress, 70 S. W.,
1065: arboe v. at/den, 133 y., 378.) The appeant argues that these
decsons as to credtors are rreevant because n the case at bar the tes-
tator s personay was more than suffcent to pay a debts. Whe there s
no e press fndng on the sub|ect, ths fact may doubtess be assumed from the
sze of the edera estate ta dscosed by the record. ut we can not see
how ths dstncton mpars the reevancy of the cases cted. The w Itsef
must dscose the facts whch requre the necessary nference that the wdow
s to have both dower and testamentary gft otherwse she s put to her
eecton. In those cases, as here, the w shows nothng as to the amount
of the debts. It made the wdow soe benefcary of a the property, but the
cases hod that that fact dd not save her from the necessty of an eecton.
Smary, n Grder v. nbanks (75 y., 510), by acceptng the w, the
wdow, though soe benefcary, ost dower n property conveyed by her hus-
band durng hs fe wthout her |onder n the deed. See aso Smth v. Perkns
(148 y., 387) (where she ost dower n and as to whch the husband
ded ntestate). In short, we can not doubt that under the aw of entucky
the wdow, though soe benefcary, ost a rght to dower by acceptng the
provsons of the w. We fnd nothng n ecy v. a (19 S. W., 581), upon
whch appeant strongy rees, nconsstent wth ths concuson. There the
w provded that the wdow was to have the ncome of a the testator s
reaty unt a son became 21, when the reaty was to be dvded among hs
chdren. If the wdow remarred before the dvson, the e ecutor was to
coect the ncome for the chdren, and the wdow was gven her dower
nterest. ppyng the necessary nferabe cause of the statute, the
court reasoned that f she was to have dower n case of remarrage, t surey
coud not be ntended that she shoud have ess f she remaned a wdow.
That ths case s not n confct wth other opnons of the court s e pressy
stated n ayes v. owes, supra.
The statutory provsons appcabe to the Oho and are smar to those of
entucky. They may be found n Throckmorton s Oho Genera Code, 1929.
Secton 8606 decares that a wdow who has not renqushed or been barred
of dower sha have t. Sectons 10566 et seq. requre her to eect whether to
take the testamentary provson or to be endowed. If she fas to make such
eecton, she sha be deemed to have eected to take under the w (secton
10571) and, f she eects under the w, she s barred of dower (secton
10572) , uness as provded n secton 10569, whch reads as foows:
Set. 10569. No wdow or wdower sha be entted both to dower and the
provsons of the w n her or hs favor uness t pany shows that such
provson was ntended to be n addton to dower and a dstrbutve share
of the estate.
Thus the statutory rue n Oho, as n entucky, requres an eecton,
uness the w pany shows that the testamentary gt was ntended to
be n addton to dower.
Nether the ndustry of counse, as evdenced by ther admrabe brefs,
nor our own ndependent nvestgaton has brought to ght any controng
Oho decson. In a ter v. mcyer (19 Oh. St., 490), the sut was for con-
structon of a w to determne whether the testator s wdow took a fee or ony
an estate for fe n a hs property. On behaf of partes camng as re-
mandermen, t was argued that even f the w gave her a fee she ost t
by fang to eect between the w and her rght of dower, the statute then
n force provdng that n case of noneecton she shoud be deemed to take
her statutory rghts (dower and a dstrbutve share of the personaty). fter
decdng that the w gave her ony a fe estate, the court decared that the
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Regs. 87(1917), rt. II. 390
queston of noneectou became comparatvey unmportant, but n dsposng
of the case sad:
We are unanmous, however, te te opnon, that, under the crcumstances
of ths case, the wdow must e hed to take under tbe w, and that, there-
fore, her representatves are entted to no part of the persona estate. The
crcumstances I aude to are these: rst. The provson made for her by
the w ncudes her dower, and s, therefore, tantamount to a provson n
addton to dower, and enttes her to hod the dower nterest freed from the
cams of the testator s credtors. Second. She n fact accepted and en|oyed
the provson, athough she never made the statutory eecton n court.
Thrd. She was never cted to appear n court, and ded wthn the tme
aowed by aw for that purpose. What woud be our hodng as to the effect
of the wdow s noneectou, n a case where ether or any of these crcumstances
shoud be wantng, we do not at present undertake to say.
In awkns v. arrows (8 Crc. Dec., 251), the husband eft a hs estate to
hs wdow, who ded before she had eected and before the w was probated.
The court hed that the statutory rue that noneecton meant she took dower
dd not appy, and sad, quotng a ter v. owyer, that The devse to her
ncudng her dower, was equvaent to a provson n addton to dower.
On the other hand, n Moore v. Stede (1 Dsney, 281) (Cncnnat Superor
Ct, 1857) t was hed that where a testator devses a hs rea estate to hs
wfe for fe or n fee and she eected to take under the w she renqushed
her dower n ands sod on e ecuton aganst the husband durng hs fe.
n opnon of the attorney genera of Oho s aso cted to the effect that a de-
vse of the entre tee puts s wdow to her eecton. (1 Opns. tty. Gen. Oho,
834.) See aso Laohmors state (26 Oh. Ns Prus (N. S.), 387).
If the testator had gven everythng to hs wfe wth an e press provson
that hs gft was n eu of dower, t coud scarcey be camed that she coud
take under the w and retan aso her dower rghts. See In rc Osgooffs state
(173 Pac, 152) (Utah). The statute creates a presumpton that the testa-
mentary gft s n en of dower uness the w pany shows a contrary
ntenton, or, as e pressed n Cony v. Lamb (45 Oh. St., 203. 207), under our
statute, the w s to be regarded as assumng to dspose of dower, uness
the contrary ceary appears. It s dffcut to say that the w tsef shows
a contrary ntenton. It s true that enforcng dower rghts w not defeat
the husband s testamentary scheme, uness t be assumed that bs drecton to
pay debts means that he wshes her dower to be used for that purpose f
necessary. Such an assumpton seems most unreasonabe. ut what s there
on the face of the w to overcome the statutory presumpton In 40 Oyc,
1971. t s sad that no eecton s necessary when the wdow s donee under
the w of the entre estate but the ctatons scarcey support the te t, and
none are under statutes ke that of Oho. If we ook to decsons under
smar statutes of other States, a the cases we have dscovered favor tbe
contenton of the appeee.
In arnard v. a Rver ftnvnys atk (135 Mass., 326), the wdow brought
a wrt of dower aganst one who had possesson of and sod under an e ecuton
aganst her husband. s w had gven her a hs property, and the defendant
contended that by acceptng the w she had ost her rght to dower. The
Massachusetts statute was dentca wth secton 10569 of the Oho Code,
above quoted. In sustaung the defense, the court sad:
We do not thnk that t pany appears by a w whch gves the whoe
of a husband s estate to hs wfe, apponts her soe e ecutr , and provdes
that there sha be no apprasa of the estate, and that no bond sha be requred,
that t was hs ntenton that such provson shoud be n addton to her dower.
It s argued that the w shows an ntenton to gve the utmost beneft to
the wfe and that t w be for her beneft, and not to the detrment of the
estate, for her to have the dower demanded. suffcent answer s, that ths
does not appear by the w.
Ths case was cted wth approva n Matthews v. Thompson (186 Mass., 14,
24). It has partcuar sgnfcance, not ony because the statute construed was
te same as that of Oho but aso because n Carry v. Lamb, supra, the Oho
court e pressy approved uffnpton v. Pa Rver Nat. an c (113 Mass., 24(5),
whch s aso reed upon n the arnard case.
In 4fvetf v. uffbce (98 N. . L., 416), the testator eft hs whoe estate to
hs wfe she camed e empton of the vaue of her dower r|fht n cacuatng
the State transfer ta . Ths was refused, the court sayng that as she takes
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391 Regs. 37(1917), rt. II.
the entre property, ths provson, t woud seem, was made n eu of dower,
and the acceptance by the wdow of the provsons In the w barred her dower
rght. In ohn s state (56 Utah, 17), the testator gave 5 to each of hs
chdren and the resdue of hs estate to hs wfe. It was hed that the wdow
took under the w soey and was ta abe under the State nhertance ta
for te entre amount receved, snce t dd trot appear from the w that the
provson was n addton to dower and the statutory presumpton for her was
n eu of dower. See aso Medds v. ernvy (176 Mo.. 200). where the testator
save 1 to each of hs chdren and a the resdue of hs estate to hs wfe
after the payment of my debts, and the court approved an Instructon that
the wdow takng the and under the w e pressy sub|ect to debts took t
cum nnere and her hers are estopped to deny that the rea estate was sub|ect
to sae for the payment of the testator s debts.
ven If we were dsposed to gve a dfferent answer, ths current of |udca
authorty under smar statutes s too strong for us to fee |ustfed n decarng
a dfferent rue for Oho n the absence of controng Oho decsons. We
concude that the Oho aw s the same as that of entucky and that appeant
renqushed her dower n both parces of and by acceptng the provsons of
the w.
The appeant argues that even f ths be true, the vaue of the dower rghts
can not be ncuded n computng the edera estate ta , because whatever
rghts the estate obtaned by the wdow s renqushment were not an nterest
of the decedent at the tme of hs death. The ogc of ths contenton must be
conceded. The constructon whch the appeee urges resuts n mposng the
same estate ta whether the decedent be a bacheor or a marred man whose
wdow survves hm yet t can hardy be sad that a marred man s nterest
n rea estate at the moment of death and before hs wdow has eected whether
to take dower or to accept hs testamentary provson for her, s dentca wth
the nterest he woud have had were he a bacheor. The resut can be obtaned
ony by appyng the cton of reatng the renqushed dower rghts back to
the moment of the decedent s death a fcton, t s urged by appeant, whch
shoud not be apped to favor a ta , where statutes are to be construed narrowy
and n favor of the ta payer. Whe not unmndfu of the force of ths
contenton, we do not thnk t can preva. Logc must yed to hstory.
Wthout e cepton, save for a decson n Nebraska, State nhertance aws
ave been construed to entte the wdow to no deducton from the gft
receved under the w on account of the vaue of renqushed dower. See
Dana. v. Dana (226 Mass., 297) rnett v. ugbee (98 N. . L., 416) In re
ohn e state (56 Utah, 12) : State v. Lane (134 rk., 71) In re rp s
state (147 N. 297) (Ind., 1925): Matter of oton (200 N. Y. Supp., S25)
Matter of Stuyvesant (72 N. Y. Msc., 295) Matter of R eman (42 N. Y. Msc.,
649) contra, In re Sandford e state (91 Neb., 752). It s urged that these
State aws mpose a ta upon the egatee s prvege of successon, not upon the
decedent s prvege of transferrng the nterest whch ceased by reason of
the death, as does the edera ct (Y. M. G. . v. Davs, 264 U. S., 50.) ut
we can not see the vadty of ths dstncton. The State aws ta ony the
prvege of succeedng to an nterest of the decedent, and they measure t by
ts vaue at the tme of death. See Matter of Pen fod (216 N. Y., 163). ence
the State cases seem entrey reevant, and we thnk the edera egsaton must
be read n the ght of them. If so, ts anguage may embrace an nterest
e stng at death by the fcton of reaton when dower s renqushed.
The ony case decded under the edera aw, Tte Guarantee Trust Co. v.
dwards (290 ., 617) (D. C. S. D. N. Y.), rees upon State decsons and
accords wth the decson beow. It was cted wth approva n rscoe v.
Crag (32 . (2d), 40) (C. C. . ) supra . We thnk t correct
It s suggested that such a constructon of the Revenue ct of 1916 rases
doubts as to ts consttutonaty. The argument s not eaborated and we see
no substanta bass for t. Compare, under the ater cts. Unted States v.
Wate (33 . (2d), 567) (C. C. . 8) ICt. D. 79, C. . I1I-2, 3 5 Uen v.
ermeer (32 . (2d), 69) (C. C. . 8) fCt D. 92, C, . I -2, 387 ,
or the reasons .stated the |mgment s affrmed.
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MISC LL N OUS T RULINGS.
TITL III. ST MP T S. (1926)
SC DUL -3. STOC TR NS R T .
Reguatons 71, rtce 31: ass of ta .
I -7 535
G. C. M. 7542
The ta accrues at the tme of makng the sae or
transfer of the ega tte to shares or certfcates of stock
or transfer of the rght to receve such shares or certfcates.
rung s requested whether, under the crcumstances rected
herenafter, there was a transfer of a rght to receve shares of cor-
porate stock whch was sub|ect to the stamp ta on transfers mposed
by Schedue S, Tte III, Revenue ct of 1926.
The facts n the case are substantay as foows: Three men
owned the entre capta stock of the S Company. These men
entered nto a contract wth an nvestment banker under the terms of
whch they agreed to cause the busness and assets of the sad com-
pany, an Inos corporaton, to be conveyed to a new Deaware
corporaton, of the same name, n consderaton for the ssuance to
them of shares n the new company equvaent to ther hodngs n the
e ecuton.
Schedue -2, Tte III, Revenue ct of 192G, mposed a stamp
ta on each orgna ssue of certfcates or shares of stock by any
corporaton. Schedue -3 of that tte and ct mposed a stamp
ta on a saes or transfers of ega tte to shares or certfcates of
stock, ncudng rghts to subscrbe for or to receve such shares or
certfcates.
The stamp ta mposed by Schedue -2 has been pad n the
nstant case on the orgna ssue of the stock n the new company.
The queston to be decded s whether the transfer ta mposed by
Schedue -3 s aso due upon the theory that when the busness and
assets of the od company were transferred to the new company
the former had the rght to receve the new stock of the atter and
that when ths new stock was ssued drect to the stockhoders there
was nvoved n the transacton the transfer to them of that rght
from the od company.
In the case of Marcon Wreess Teegraph Co. of merca v.
Duffy (273 ed., 197 T. D. 3219, ST. C. . 1921, 55 ), the Marcon
Company sod certan property to the Rado Corporaton n con-
sderaton for the ssuance to t of a f ed number of shares of the
capta stock of the purchasng corporaton. Pror to the ssuance of
the stock certfcates the Marcon Company authorzed the Rado
Corporaton to ssue the shares drect to the stockhoders of the Mar-
od company. The terms
agreement were carred nto
(392)
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393
Regs. 71, rt, 31.
con Company. The queston n ssue was whether, under those cr-
cumstances, the Marcon Company had a rght to receve the stock.
The court sad:
In consderng the queston at ssue we must not gnore the substanta
dfference between a corporaton and ts stockhoders. (Gbbons v. Mahon, 136
U. S., 549 Peterson v. Chcago, Rock Isand t Pac. Ry. Co., 205 U. S., 364
Lynch v. ornby, 247 U. S., 339-344 sner v. Macomber, 252 U. S., 189, 214
T. D. 3010, C. . 3, 25 .) The property sod to Rado was the pantff s
property, and coud be sod ony by t. To effect the sae the consent of the
stockhoders was necessary, but t, and not the stockhoders, hed the ega
tte, and t aone coud vest such tte n the purchaser. The stockhoders
eventuay woud share In the consderaton of the sae, but ths coud be
brought about ony by means of dvdends or smar methods of dstrbuton.
The stock ssued by Rado to the pantff s stockhoders was the consderaton
for the property sod to t by the pantff. ad the pantff receved the
stock, as seemngy was orgnay contempated, and dsposed of t, whether
to ts stockhoders or to other partes, a ta such as was here mposed woud
have had to be pad. Undoubtedy t was wthn the power of the pantff,
upon obtanng the necessary authorty, to drect Rado tc ssue the stock to
ts (pantff s) stockhoders. ut ths authorty resouton of the pantff s
board of drectors was nothng ess than a transfer of pantff s rghts to
such shares of stock and s covered by one of the quoted methods of trans-
ferrng shares or certfcates of stock ta abe under subdvson 4, vz, a
transfer of rghts to subscrbe for or to receve such shares.
There s no doubt whatever concernng the ega soundness of cer-
tan fundamenta prncpes whch formed the bass of the court de-
cson n the Marcon case, namey, (1) that there s a substanta
dfference between a corporaton and ts stockhoders (2) that where
ega tte to property s n the name of the corporaton t and not the
stockhoders can vest such tte n a purchaser and (3) that a cor-
poraton whch conveys a ts property to another corporaton n
e change for the ssue to t of snares of stock n the new company
has an undenabe rght to receve such new stock when and as
ssued. These same prncpes are refected n many other court
decsons. or e ampe, n the case of Touston et Termna
Ry. Co. v. U. S. (250 ed. 1), four raroad companes organzed
a termna company, subscrbng and payng for ts capta stock n
four equa parts. In order to fnance the organzaton, t was
necessary to borrow a arge sum of money. The four raroad com-
panes arranged that annua nterest and snkng fund requrements
of a oan from a trust company to the termna company shoud be
pad by them n equa parts to the trust company. One of the ques-
tons n ssue was whether these payments were ncome to the term-
na company. The court sad (p. 5) :
It seems cear that payments of nterest made under such an
arrangement were made n eu of compensaton for the en|oyment of the prop-
erty used and were n the nature of rent receved by the termna company and
o be accounted for as part of ts ncome, as rent woud be. The fact that the
payments were to be made drecty to the Centra Trust Co. by the tenant com-
panes s not mportant, f there e sted an obgaton on the part of the tenant
companes to the termna company to make them for ts beneft, and f the
consderaton of such obgaton was the prvege accorded the tenant com-
panes to use the property of the termna company.
The effect of the arrangement was the same as f the tenant companes had
e pressy agreed to pay renta for the use of the premses n the amount of the
nterest and snkng fund payments, and, to avod crcuty, the payments by
mutua consent were made drect to the mortgagee. If the owner of a budng,
as a condton of securng a oan on It, shoud consent that the mortgagee mght
coect the rents and appy them n reducton of the mortgage debt, the owner
4090 30 26
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Regs. 71, rt. 31.
394
woud st be requred to report them as ncome, though they were never. In
fact, pad to hm. e woud beneft from ther payments, as much as f they
had been pad to hm drect.
In the smar case of amton v. entucky Indana Termna
R. R. Co. (289 ed., 20 T. D. 3518, C. . II-2, 58 ) the court hed
as foows:
We are not mpressed wth the Termna company s contentous
that t acted ony as dstrbutng agent n the coecton of the nterest payments
from the propretary companes. The Termna company owned the termna
propertes sub|ect to the payment of the mortgages thereon. The nterest money
was thus pad to and used by the Termna company for meetng charges
aganst ts own property, defaut In whose payment mght we resut n the
oss of the property. ad the Interest payments been made by the propretary
companes drecty to the bondhoders or the mortgage trustee, the payments
woud have been none the ess ncome of the Termna company.
Substantay th same concusons have been reached n cases of
reatons between essor and essee corporatons. In the case of
Rensseaer S. R. Co. v. Irwn (239 ed., 739) the pantff, a essor,
contended that, havng eased and turned over to another company
a ts property wth a provson that the dvdends on the stock
were to be pad by the essee drecty to the stockhoders of the essor,
the essor company dd not receve any net ncome. In the course
of ts opnon the court used ths anguage, vz:
It seems to me very cear that these moneys agreed to e pad to the stock-
hoders are rents receved n ega effect by the pantff corporaton, and are
net ncome of the corporaton, sub|ect to any ega deductons under the aw m
queston, and that the provson for payment drect to the stockhoders s a
convenent mode and manner of makng dstrbuton to the stockhoders. I do
not thnk ths pantff corporaton, by makng such an agreement, coud or dd
dvest tsef of ts corporate rghts, powers, and abtes n regard to the
money to be pad for the use of the property, and sub|ect to ta aton, State and
Natona, f pad drecty to the corporaton.
To the same effect s the decson n the case of aoch . Georga
Ry. ectrc Co. (246 ed., 387), wheren the court sad:
The dfference between the way the rent under the ease here n queston
was pad and the way the same aggregate amounts woud have been pad, If
the ease had made the nstaments payabe to the corporaton tseW. Is we
of method and not of substance. Where the crcumstances of a corporaton are
such that t can and does adopt the pocy of dstrbutng among ts stock-
hoders as prompty as practcabe net ncome accrung from the corporate
busness or property, an arrangement whereby ts debtor, who contrbutes the
whoe or a part of ths ncome, makes the desred dstrbuton of t among the
corporaton s stockhoders amounts to no more than the corporaton procurng
ts debtor to render a servce for t the net resut beng that the debtor, n-
stead of remttng or payng what t owes drect to the credtor, makes the
payment to others as drected by the credtor. credtor as trny receves
payment of what s due hm when, pursuant to hs drecton, the debtor makes
payment to another, as he does when payment s made drecty to hmsef.
gan, n the case of West nd Street Ry. Co. v. Mattey (246 ed.,
G25), ths anguage was nsed by the court, vz:
The payments made to stockhoders as above were made by the essee for ts
use of the corporaton s property, not of te stockhoders property. Though
they have each an nterest n sad property, they have bo drect nterest such as
makes them ts owners.
The property has been put nto the essee s hands by the essor corporaton,
and the payments to be made by the essee for ts use have been agreed on,
not between the essee and the essor s stockhoders, but between t and the
essor corporaton to whch the property beongs. That agreement e pressy
refers to and treats these payments to stockhoders as part of the agreed rent
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395
Regs. 71, rt. SI.
for te property. Under It no stockhoder coud assert rghts as essor, for
want of any such nterest n the eased property as woud have enabed hm to
ease t or agree upon a rent for t.
In the case of Rockefeer v. U. S. (257 IT. S., 176 T. D. 3271, C.
. 5, 34 ) t was shown that two corporatons, each caed the o
company, were engaged n producng, buyng, and seng crude
petroeum, and transportng t through ther ppe nes. . new
corporaton was formed, to whch the ppe ne propertes were con-
veyed. The mew corporaton, caed the ppe ne company, ssued
a of ts capta stock to the stockoders of the od corporatons. In
the course of ts opnon the Supreme Court sad:
Under the facts as rected we deem It to be too pan for dspute that n both
eases the new ppe ne company shares were n substance and effect dstrbuted
by the o company to ts stockhoders as muc h so n the case of the ansas
company, where the new stock went drecty from the ppe ne company to the
stockhoders of the o company, as n the case of the Oho company, where
the new stock went from the ppe ne company to the o company and by t
was transferred to ts stockhoders. Lookng to the substance of thngs, the
dfference s unessenta. In each case the consderaton moved from the
o company n ts corporate capacty, the new company s stock ssued n
e change for t was dstrbuted among the o company s stockhoders n ther
ndvdua capacty, and was a substanta frut of ther ownershp of stock
n the o company, n effect a dvdend out of the accumuated surpus.
See aso recent decson of Court of Cams n the case of Stange
v. U. decded November 4, 1929 Ct. D. 138, C. . III-2, 268 ,
where upon a smar condton of affars that court apped and
foowedf the Rockefeer decson, supra.
Upon carefu consderaton of the varous court decsons quoted
herenbef ore, t s hed that a corporaton s entted to receve shares
of new stock when and as ssued by another corporaton to whch t
has transferred ts property n e change for stock. Ths s true
whether or not a contract s entered nto before the new stock s
ssued provdng for the ssue of the same drecty to the stock-
hoders of the od corporaton. s was stated by the court n the
Rensseaer decson, supra, an od corporaton can not, by makng
such a premnary arrangement, dvest tsef of ts nherent corpo-
rate rghts, powers, and abtes. In such a case the new stock
beongs prmary to the od corporaton, not to ts stockhoders.
Ther rght to receve the new stock comes to them through the od
corporaton. The ssue of the new stock drecty to them has sub-
stantay the same effect as f t were ssued to the od corporaton
and as t the od corporaton had, n turn, transferred the shares to
ts stockhoders. Ths beng so, and the soundness of the prncpe s
deemed to be we attested by the court decsons quoted herenbefore,
t s entrey mmatera to the queston n ssue whether the dstrbu-
ton of the new stock s f ed by an agreement entered nto before
the new stock s ssued or by a resouton of a board of drectors
passed after the corporaton s rght to receve the new stock was
estabshed by forma agreement. In ether case the od company
had the rght to receve the new stock and, rrespectve of whether
t was ssued drecty to ts stoekhodersy there was necessary n-
voved n the transacton a transfer of the rght to receve the new
stoek from the od corporaton to ts stockhoders whch s sub|ect
to the stock transfer ta .
CM. Charest,
Genera Counse, ureau of Interna Revenue.
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Regs. 71, rt. 34.
396
SC DUL -3. S L S ND TR NS RS O STOC .
Reguatons 71, rtce 34: Saes and trans- I -21 4654
fers sub|ect to ta . G. C. M. 8050
The transfer of stock of other corporatons owned by mergng
or consodatng companes to the name of the merged or conso-
dated corporaton s sub|ect to the transfer ta .
rom the evdence presented t appears that the Company and
the Company were consodated eary n the year 1929 under sec-
ton 86 of the stock corporaton aw of New York. It s stated that
the Company owned the entre common stock of the Company
and that at the tme of the consodaton t owned nothng ese. The
two companes were ntmatey assocated. It s decared that the
effect of the consodaton was merey to emnate the Company,
the Company contnung under the same name, wth the same
assets, busness, and management. Representatves of the Com-
pany contend that from the standponts of reates and facts there
was no consodaton and no merger of the corporatons but merey a
wpng out of the Company and that, therefore, no stock transfer
ta s or was due.
Secton 86 of the stock corporaton aw of New York, under the
terms of whch the two companes were consodated, provdes that
ny two or more corporatons, organzed under the aws of ths State, for
the purpose of carryng on any knd or knds of busness whch a corporaton
organzed under artce 2 of ths chapter mght carry on may be consodated
nto a snge corporaton by the fng of a certfcate whch sha be entted
and ndorsed Certfcate of consodaton formng the , pursuant
to secton 86 of the stock corporaton aw . ere foow detas
to be emboded n the certfcate.
Secton 89 of the same aw provdes as foows, vz:
Upon the fng of such certfcate of consodaton n the offce of the secre-
tary of state a the rghts, prveges, franchses and nterests of each of the
consttutent corporatons, and a the property, rea, persona and m ed, and
a the debts due on whatever account to ether of them, as we as a stock
subscrptons and other thngs n acton beongng to ether of them, sha be
taken and deemed to be transferred to and vested n such new corporaton,
wthout further act or deed and a cams, demands, property and every other
nterest sha be as effectuay the property of the new corporaton as they were
of the consttuent corporatons, and the tte to a rea estate, taken by deed or
otherwse, under the aws of ths State, vested n ether of such consttuent
corporatons, sha not be deemed to revert or be n any way mpared by reason
of the consodaton, but sha be vested n the new corporaton.
Schedue -3, Tte III, Revenue ct of 1926, and correspondng
provsons of earer revenue aws mpose a stamp ta upon saes or
transfers of capta stock. The ta s not mposed upon the nstru-
ment tsef but upon the varous acts rected n the aw whch effect
a change n the ownershp or tte of shares or certfcates of stock.
Where the transfer s brought about whoy by operaton of aw
there s no act nvoved to whch the ta attaches. ( rtce 35 (q),
Reguatons 71.) So the underyng queston to be decded s whether
upon the merger or consodaton of a corporaton the tte to shares
or certfcates of stock hed by t vests n the merged or consodated
corporaton whoy by operaton of aw. In Law Opnon 1119 (not
pubshed) the foowng concusons were reached, vz:
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397
Regs. 71, rt. 34.
merger agreement s a contract resutng from a mutua agreement of the
partes, by whch a the assets of one corporaton are transferred to another
corporaton nto whch the frst corporaton s merged. Whether or not the aw
under whch the merger s effected requres the e ecuton of some forma n-
strument n order to transfer tte to the property of the corporaton whch
goes out of e stence to the corporaton nto whch t s merged s mmatera.
The aw tsef does not transfer tte to the property. It merey provdes the
method by whch the partes may effect a transfer that s, by mutua assent
of a ma|orty of those n nterest and a compance wth certan formates.
When such an agreement s made and the necessary formates are comped
wth, the aw says tte w be deemed to be transferred.
There s no fundamenta dfference between a transfer effected by means of
a merger agreement and one effected by any other contact. y such agree-
ment, when ratfed, not ony the ega tte to, but the benefca nterest n,
the stock n queston s transferred from the merged corporaton to and vested
n the mergng corporaton. Such transfer s brought about by vountary
acts of the partes n nterest. Such beng the case, the transacton fas
squarey wthn the provsons of the aw, and the transfer s therefore sub|ect
to ta .
In the bref recenty fed by representatves of the Company
they take the poston that no transfer ta s or was due n the nstant
case because of the fact that a of the propertes were n reaty
owned by the Company, ther argument beng that there must
be a rea change of ownershp n order to make the transfer ta abe.
In support of ths poston they cte ureau rungs to the effect that
transfers of stock from the maden name to the marred name of a
stockhoder and from the name of an od frm to a new frm name,
where the personne of the od and the new frms do not change,
are not sub|ect to the transfer ta . They seek to draw anaoges
from those rungs whch they beeve warrant the same rung
n the nstant case. Wth regard to these contentons, the terms
of the aw tsef seem to be a compete answer. It mposes the ta
On a transfers of ega tte to shares or certfcates of
stock whether enttng the hoder n any manner to the beneft of
such stock or not.
There s no transfer nvoved where an od certfcate bearng a
maden name s e changed for a new certfcate bearng the marred
name of the same stockhoder. ( rtce 35, Reguaton 71.) Ths
s so because the dentty of the person hodng the stock n her own
rght precudes any dea of a transfer, . e., a change n ega tte.
nd ths s true aso wth respect to an od frm and a new frm
where there s no change n personne. In the nstant case, on the
other hand, there were two companes whch were coe stent. They
were separate ega enttes. eng separate and dstnct, the change
n ownershp of stock requred a change n ega tte. Ths change,
. e., transfer of ega tte, s sub|ected to the ta by the e press terms
of the aw. The dentty of benefca nterest e stng before and
after the transacton s an mmatera factor.
The representatves of these two companes aso contend that the
transfers sought to be ta ed resuted by operaton of aw and
pont out that under the reguatons (artce 35, Reguatons 71)
transfers of shares or certfcates of stock whch resut whoy by
operaton of aw are not sub|ect to the ta . t frst bush secton
89 of the New York stock corporaton aw woud seem to end
some support to ths contenton. Ths secton provdes that upon
the fng of a certfcate of consodaton a the rghts, propertes,
and nterests of each of the consttuent corporatons sha be taken
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Regs. 71, rt. 34.
398
and deemed to be transferred to and vested n such new corporaton,
wthout further act or deed.
In vew of the representatve s contenton that the transfer was
brought about by State nstrumentaty, a communcaton was ad-
dressed to the deputy commssoner, dvson of fnance, department
of ta aton and fnance, bany, N. Y., requestng nformaton as to
whether under the aws of New York: any dstncton s made n
transfer cases between shares hed by mergng and by consodatng
corporatons. The deputy commssoner submtted the queston to
the attorney genera of New York, who, under date of March 12,
1930, rendered an opnon from whch the foowng are pertnent
e tracts, vz:
n agreement to consodate fs a contract resutng from the mutua agree-
ment of the corporatons to be consodated by whch a ef the assets of those
eorporatfons become one snge fund and consttute the assets of the new
corporaton whch s to resut. Whether or not the aw under whch, the con-
sodaton Is effected requres the e ecuton of some forma nstrument n order
to transfer tte to those assets from the corporatons whch go out. of e stence
to the new corporaton s mmatera. The aw tsef under the above prov-
son does not transfer tte to the property but merey provdes a method by
whch the partes themseves may effect a transfer. When such agreement 18
made and the necessary formates comped wth, the aw says that tte w
be deemed to be transferred.
The transfer of the assets from the severa funds n order to form one snge
fund s the man ob|ect of a merger or consodaton. It s to brng the assets
together for a more effcent admnstraton thereof, whether t be to cut down
costs or emnate competton. Ths s the man motve of the partes, but by
reason of a short cut provded by aw t s accompshed by another ncdenta
act whch deas wth the corporate enttes, . c., the fng of the prescrbed
certfcate.
The queston now to be consdered s whether the change n tte s effected
by operaton of aw, presumng that f t be so the transfer of the shares
wth whch we are concerned woud not be amenabe to ta . The answer seems
to be that t s not accompshed by operaton of aw, because f t were not
for the e stence of the provson of aw the mmedate resut ntended by the
partes woud have to be brought about entrey by acts of the partes them-
seves. change by operaton of aw s a change whch the aw makes n
certan nterests regardess of whether or not the partes who act have ths
partcuar change n mnd, the aw smpy sayng that f you do a certan act,
regardess of what s attempted to be accompshed by such act, the tte to
your property w be affected n a certan way, ether presenty or upon the
happenng of some event n the future. Operaton of aw s not somethng
whch s substtuted by aw for the acts of ndvduas when the ndvduas
are actng to accompsh the very resut to whch ther acts are drected. The
partes when operaton of aw s apped are actng to accompsh somethng
whoy dfferent, but the change by operaton of aw occurs because they have
acted. They do not act to m ke use of the provson of aw to accompsh te
purpose they ntend, for f a specfed act n that drecton were necessary t
coud not be sad that the resut Is accompshed by operaton of aw.
It woud seem, therefore, that the transacton s wthn the provsons of
secton- 270 of the ta taw, whch mposes a ta on a saes, or agreements to
se, or memoranda of saes, and aM deveres or transfers of shares or certf-
cates of stock, or certfcates of rght to stock, or certfcates of depost repre-
sentng certfcates ta abe under ths artce, n any domestc or foregn asso-
caton, company or corporaton, or certfcates of nterest n busness eon-
ducted by a trustee or trustees , and the certfcates of shares of stock
whch are hed as assets by the consodatng corporatons are sub|ect to the
same ta upon ther transfer to the tte of the new corporaton beng effected.
In vew of the foregong, t s hed that the transfer of stock of
other corporatons owned by mergng or consodatng companes to
the name of the merged or consodated corporaton s sub|ect to the
transfer ta m queston and that t s mmatera whether the stock
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399
Regs. 71, rt. 34.
- hed s owned absoutey or s hed as a trustee. In a such cases
-,. nae acton by nterested partes n nvaraby requred. oards of
drectors must act. Stockhoders must approve. n agreement for
de merger or consodaton must be e ecuted. these acts by the
partes n nterest are requred n order to accompsh the merger or
consodaton, wth the resut that the transfer of stock owned by the
mergng or consodatng corporatons s not affected whoy by oper-
aton of aw but s brought about, n part at east, by acts of the
partes.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
Reguatons 71, rtce 34: Saes and trans- I -19-4G3G
fers sub|ect to ta . G. C. M. 7188
The transfer of stock from ohn oo as e ecutor to ohn Doe
as trustee or from the name of the decedent to ohn Doe, trustee,
drect Is sub|ect to ta .
t the tme of hs death Mr. M owned 7,502 shares of the capta
stock of a company. Mr. N was the e ecutor under the w of the.
deceased and he s aso trustee of a resduary trust created by tho
w. Mr. N desres nformaton as to whether the transfer of stock
from the name of the decedent to hmsef as trustee under the w as
drected by the probate court s sub|ect to the stock transfer ta .
Secton -3, Tte III, Revenue ct of 1926, mposes a stamp
ta upon saes or transfers of capta stock. Labty to the ta
s ncurred upon any one of the severa acts specfed n the aw,
That s to say, where the sae or transfer of stock s effected by
any such act of the partes the ta becomes due. owever, there art
some transfers whch are brought about whoy by operaton of aw,.
There beng no act to whch the ta attaches, the transfer n such a
case s not ta abe. The rue on the sub|ect s emboded n artce
35 (q), Reguatons 71, wch reads as foows:
Transfers of shares or certfcates of stock whch resut whoy by operaton
of uw are not sub|ect to the ta . Transfera of ths character are those whch
the aw Itsef w effect wthout any vountary act of the partes, such as
transfer of stock from decedent to e ecutor.
The transfer of stock from the name of Mr. M (the decedent) to
Mr. N, as e ecutor, woud be effected whoy by operaton of aw and
n such an event t woud come squarey wthn the terms of the rue
quoted and woud not be ta abe.
The ta abty of the transfer of the stock from Mr. N as e ecutor
to Ma . N as trustee or the transfer from the name of the decedent
to the name of the trustee depends entrey upon whether any act of
the partes s requred to effect the same or whether the transfer s
brought about whoy by operaton of aw. In other words, f
ether transfer woud be effected by aw wthout any act of the
partes no ta . wond be due.
In case of a transfer of stock from the name of a decedent to the
name of hs e ecutor, t s obvous that there can be no act of transfer
from one to the other because the decedent s dead. transfer ord-
nary mpes a transacton between vng persons. It beng neces-
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Regs. 71, rt. 34.
400
sary that the tte to stock hed by a decedent be vested n some vng
person, the aw steps n and by ts operaton vests tte thereto n the
e ecutor. The e ecutor s n reaty the persona representatve of
the deceased. In such a case the aw tsef effects the transfer, and
there beng no act to whch the ta attaches no ta s due.
The transfer of stock to or by trustees s ordnary sub|ect to the
ta (artce 34(c), Reguatons 71). Ths s so because n the usua
course some act by the partes s requred to effect the transfer.
owever, under artce 35(h) of those reguatons the foowng
transacton s not sub|ect to the ta , vz:
Te transfer of shares or certfcates of stock from the name of a deceased
or resgned trustee to the name of a substtuted trustee apponted n accordance
wth the terms of the trust agreement, whch s a transfer resutng whoy by
operat:on of aw.
In the case of the Corporaton ths offce had occason to consder
the ta abty of transfers of stock where there was a successon of
trustees by reason of death or resgnaton of one of them. The suc-
cesson was f ed by a decaraton of trust. It was hed that a trans-
fer of ega tte to shares or certfcates of stock under the crcum-
stances provded for n the nstrument under consderaton appeared
to be qute dfferent from an ordnary transfer between ndvduas or
from one group of trustees to other trustees or persons, the atter
transacton beng ordnary sub|ect to the stamp ta . The dstnc-
ton drawn was that an ordnary transfer from one ndvdua or a
group of trustees to other persons s effected by vountary acts of the
partes whe n the case under consderaton the transfer woud be
effected by operaton of aw as a resut of the desgnatng of subst-
tuted trustees n accordance wth the terms of the decaraton of
trust. In the ordnary concepton of the term transfer t appears
to be understood to refer to a transacton between vng partes, one
of whom must dever or transfer to another, and t does not appy to
cases of devouton of tte as a resut of death or wthdrawa.
ouver defnes the term operaton of aw as a term apped to
ndcate the manner n whch a party acqures rghts wthout any act
of hs own. It woud seem that when a trustee s apponted to take
the pace of a resgned or deceased trustee that hs successon to the
tte to the shares of stock whch were hed by hs predecessor woud
be automatc under the terms of the decaraton of trust and such tte
woud devove upon hm by operaton of aw.
The Department has hed that the transfer of shares or certfcates
of stock from the name of a deceased or resgned trustee to the name
of a substtuted trustee apponted n accordance wth the terms of a
trust agreement s a transfer resutng whoy by operaton of aw,
and s therefore not ta abe. owever, n order that the transfer
may be e empt the new trustee must succeed to the trust estate n
accordance wth the terms of the trust nstrument tsef that s.
from the effect whch the aw gves to the trust nstrument. Where
acton by an outsde party s requred n order to gve effect to the
transfer to a partcuar trustee, the transfer s by vountary act
of the partes and not by operaton of aw.
In secton 281 of Perry on Trusts the foowng rue s stated:
If a testator n hs w appont hs e ecutor to be a trustee, t s as f
dfferent persons had been apponted to each offce.
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401
Regs. 71, rt, 34
In the case of Wams v. CusMng (34 Mane, 370) the court sad:
Whether the e ecutor and trustee s or s not the same s mmatera.
Legay they are to be vewed as equay dstnct, whether these trusts are
hed by one or more.
See aso Parsons v. Lyman, 5 atchf., 170 enry v. . S., 251
U. S., 393.)
The prncpes so enuncated must be apped and foowed n a
cases of ths character. Transfers between vng persons ncur
abty to the ta . Where the person n whose name stock s hed
s dead or has resgned or wthdrawn and the aw tsef so operates
as to effect the transfer, no ta s due. The necessty for acton by
outsde persons and ther partcpaton n the transacton render
the transfer ta abe.
In the nstant case the decedent, n hs w, apponted Mr. N as
e ecutor. Upon the death of the decedent and the probate of hs
w the estate became vested n the e ecutor as such. The aw
operated to transfer the shares of stock hed by the decedent to the
e ecutor. No act of any party was requred to accompsh ths
resut. No transfer ta was due. The fact that the stock was not
actuay transferred to the name of the e ecutor does not affect the
operaton of the aw to vest the tte n hm.
The w aso apponted the sad Mr. N as trustee of the resduary
trust. s e ecutor, Mr. N was the persona representatve of the
deceased. e hed the estate of the deceased as such. s trustee,
he acted n an entrey dfferent capacty. The transfer of the stock
from hs name as e ecutor to hs name as trustee woud be an admn-
stratve act requred of hm as e ecutor. The w drected the
transfer of the stock to Mr. N as trustee, but t dd not of tsef
accompsh that ob|ect. Nor dd the aw so operate as to effect the
transfer. In the reguar course the estate frst had to be admn-
stered. The assets and abtes had to be marshaed. The resd-
uary trust coud become effectve ony n case the assets e ceeded
the abtes. These severa facts requred the nterventon of the
probate court and admnstratve acton by the e ecutor. In takng
such acton the e ecutor not ony transferred ega tte to the stock
but aso the benefca nterest theren. s e ecutor he had charge
of the estate of the deceased. s trustee he hed the resduary trust.
In order that he coud serve as trustee t was frst necessary that the
transfer of the stock be made. The fact that ths one man served
n both capactes s mmatera to the ssue. The necessty for the
nterventon of the probate court to effectuate the transfer of the
stock from the e ecutor to the trustee and for acton by the e ecutor
woud render the transacton ta abe.
These same acts aso serve to render ta abe the transfer of the
stock from the name of the decedent to the name of the trustee drect.
True, the decedent s dead and can not hmsef brng about the trans-
fer, but, on the other hand, nether hs w nor the aw can effect the
transfer wthout acton by other partes. cton by the probate
court and by the e ecutor s requred. Ths requrement and the
acton taken make the transacton ta abe.
So, whether the transfer of the stock be from Mr. N as e ecutor
to Mr. N as trustee, or from the name of the decedent to Mr. N as
trustee, drect, the resut s the same, for n ether case acts of partes
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egs. 71, rt. 34.
402
aro requred to effect the transfer and thus take the transacton out
of the e empt cass of transfers brought about whoy by operaton
of aw.
or the reasons ndcated t s hed that ether of the transactons
n queston s sub|ect to the stamp ta .
C. M. Chabest,
Genera Counse, ureau of Interna Revenue.
Reguatons 71, rtce 34: Saes and trans- I -19-4635
fers sub|ect to ta . G. C. M. 5711
Rung No. 6, Cumuatve uetn I -1, page 338, s hereby
amended so as to read as foows:
Where stock s transferred from the name of a decedent to the estate of
the decedent, thus: rom ohn Doe to state of ohn Doe, deceased.
Ta abe, uness It be shown that due to oca aw, the transfer s, In effect,
to the e ecutor or admnstrator, as such.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
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MISC LL N OUS RULINGS.
OL OM RG RIN .
I -2-4502
MS. 98
Schedue of oeomargarne produced and materas used durng the month
November, 1929, as compared urth November, 1928.
Novcm r,
1020.
Novera T,
1028.
Tot producton of uncoorcd oeomargarne
Ingredent sehedne for uncoored ooomargarno:
dbe
eg vok
Mk
Mustard o
Ncutra ord
Oeo o
Oeo sten
Oeo stock
Pam o
Pam-kerne o _
Peanut o
amt
Soda
Soya been o-.
Tota.
Tota producton of coored oeomargarne
Ingredent scheduo for coored oeomargarne:
utter
Cocoanuto
Coor
Cottonseed o
Mk
Neutra ard
Oeo o
Oeo stearne
Oeo stock
Pam o
Peanut o
Sat
Soda
Tota.
Pound:
31,708.818
20,126,25)
206,018
10,107,5.11
2,087,009
1,605
510
0,015,077
5,605
1,087.733
4.034,510
647,571
84,073
110,000
504,317
2,581,010
0,078
3,076
234,055
15,521,515
2,347, 13f
2,570
8, 258, 0 5
1,301)
1,071,330
3,568,446
487,370
105,437
06, 123
1,020
aM,457
2,405, 734
d, : 1
87,001,057
1,728,074
2,0G3, 087
3,
03. .,
1.
186,
170,
176,
373,
8,
6,
29,
37,
135,
s,esp,oo6
1,442,957
2,370
501,578
1.047
273, 172
672,613
271,7 s
514,045
16, I DO
7,468
21,1175
32,655
141,015
141
2, 405,430
(403)
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#
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Msc.
404
I -6- 527
MS. 99
Schedue of oeomargarne produced, and materas used durng the month of
December, 1929, as compared wth December, 192S.
December,
1929.
December.
1928.
Pound .
31, 226, 440
Pound:
Ingredent schedue for nncoored oeomargarne:
27. 324. 000
379,269
17,342,324
3, 326, 213
1,470
100
222,810
14,340,625
2,205.202
1,417
Mk
8,709,481
6,110
1,879,076
3,531,307
454, 127
80,510
99,623
7,865,147
1,000
2,110, 445
3, 495. 261
469,95.1
92, 172
9,952
620
896, 251
2,152, 464
9,612
Sat
476,677
2,690, 568
19,863
7. 169
Soda
Soya bean o
39,002. 887
33,642,931
Ingredent schedue for coored oeomargarne:
1,656,466 1.574,700
Mk
3,209
574,662
2,083
184,736
459.508
188,222
398,939
10.316
5,150
35,325
28,049
135,161
155
1,492
498,054
1,764
316. 4(
758,475
324. 471
577,811
17,790
6,990
30,540
32.777
155,321
146
Sat
Tota -. - -
2,023,513
2,722.100
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#
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405
Msc.
I -11-45G1
MS. 100
Schedue of oeomargarne produced and materas used durng the month of anuary,
1930, as compared wth anuary, 1929.
anuary,
1980.
anuary,
1929.
Ingredent schedue for uncoored oeomargarne:
Pounds.
31,021,542
PouTds.
28,029,386
utter
232,634
17,904,830
2,4(f), S .r)
1,705
8,803,960
6,438
1,641,831
3,211,016
499, 792
70,485
45,199
70
487,922
2,695,626
10,129
2,385
231,736
15,004,322
2,120,946
2.070
7,658,571
790
2,022,740
3,358,916
380,801
83,397
106,237
850
635,896
2,202,250
8,894
Sat
Soda
Tota
37,781,833
33,718,416
Ingredent schedue for coored oeomargarne:
1,518,491 1 1,444.230
2,945
584,662
1,120
450,993
27,799
161,948
477,533
164,702
327,899
6,665
11,390
35,395
283
34, 186
116,388
103
Coor.
1,734
162,676
430,894
164, 239
328,474
Mk
Oeo o
8,360
5,230
41,472
Sat
28,674
123,989
173
1,883,422
1,816,404
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Msc.
406
I -14-4591
MS. 101
Schedue of oeomargarne produced and materas used durng the month of ebruary,
1930, as compared wth ebruary, 1929.
ebruary,
1930.
ebruary,
1929.
1 od producton of uncoored oeomargarne.-
Ponndt.
27,014, 7S3
Pound.
27,578, 7W
Ingredent scheduo for uncoored oeomargarne:
214,539
13, 837, 727
2,192,785
227, 437
14, 7 9, 335
2,139, 074
2,545
7, 368, .19
015
I.8W.787
3.364. 40S
21. 138
77,624
107,812
O . 381
2,28 1,351
Cocoauut o-
dbe taow
M
Mk
7,325, 465
4, 957
1.498.404
4,4 8,338
sn :
M, 826
25. 134
441,517
2,212,728
871
7,631
1.387
Oeoo
32,823, 610 33,269, 650
1,387, m | 1.3 4.593
, 27
Tota producton of coored oeomargarne
Ingredent schedue for coored oeomargarne:
3.030
518.4 2
1,734
158, 622
388,306
144, 690
304, 109
9.62
8, 470
80,607
23, 649
113, 753
134
2. 641
431,80:1
2,03
174.370
468, 392
161.32 .
349, 007
Oeo stock -
.so
8,378
2,689
28.3 8
167.
86
Sut . , ,, .
1, 725, 201
1.746.930
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#
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407
I -19-4637
MS. 102
, due of oeomargarne produced and materas used durng the month of
March, 1930, at compared wth March, 1929,
March,
1930.
March,
1929.
Pound .
ug -dent schedue (or uneoored oeomargarne:
24,085.505
28,191,553
otter
168. 3S3
13,674,453
2, 418, 256
9.660
2,025
240. M
15,075,828
2, 185, 4 51
Coeosnut o
Cottonseed o
dhe taow. -
1
. rv.-.
Letsene coneeu Irate
6, 726, 70S
6,140
L 250, 776
2, 619,456
509,911
89,294
41,467
1.674
344,294
2, 032. 837
7,802
14.323
7,611,609
Nc:rra ard
L 772, 650
3,612,217
Oeoo
Oho stearM ._
465,961
79, SS
( eo stock _
Pam o
100, 788
Pam-kerne ot
5 , ua
8at
2,305,. :
9. 692
Tota
28,897,338
34,030,220
1. 526,729
afreuent schedue for coored oeomargarne:
1,337,399
otter
1,570
489.403
1,2( 0
f, 308
Cottonseed o
1,056
148.618
32
2,185
201, 471
376,491
380
133, 135
324, 181
8,989
7,285
8,817
521,3: n
Pam o
w, mt
172, 9 5
3 , 779
13.922
13,8
45,670
27, 547
118, IL 7
168
a not ofr:::::::::::::::::::::::::::::::::::::::::::: :::: : :
107. 436
136
Tota
1, 627, 143
2, 015. 553
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#
p
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Msc.
408
I -23-4665
MS. 103
Schedue of oeomargarne produced and materas used durng the month of pr,
1930, as compared wth pr, 1929.
Ingredent schedue for uncoorc oeomargarne:
utter -
Cocoanut o
Cottonseed o
Dervatve of gycerne._ _
dbe taow -
/edthn_ -
Lctsene concentrate
Mk.... - -
Mustard o...
Neutra ard - --
Oeo o -
Oeo stearne.
Oeostock
Pam o --
Peanut o -
Sat... -
Soda (benzoate of)
Soya bean o
Tota.
Tota producton of coored oeomargarne
Ingredent schedue for coored oeomargarne:
utter
Cocoanut o.. --
Coor - -
Cottonseed o.
Dervatve of gycerne
Mk
Neutra ard
Oeo o
Oeostearne
Oeostock
Pam o
Peanut o
Sat
Soda (benzoate of)
Tota.
pr, 1930.
141.376
923, 303
311,597
Lt, IISO
1,320
77
133
497.919
2,705
309, 358
181, O
449,007
184,099
29,643
412,933
321,477
7,159
184,185
32, 927, 579
1, 346, 617
2,
455,
L
171,
404,
150,
352,
9,
.
18,
17,
112,
pr, 1929.
Pounds.
27,237,173
229, P32
14,472,411
2,189.680
1,580
7,395.456
1,500
1,651,987
3,638,191
480,8411
73, 114
103,216
499,770
2,199,979
8,961
32,946,638
1,466. 441
840
459. 6ft)
1,885
171, 846
451,148
174,848
369,417
14,667
12,587
43,893
28.035
113,546
121
1,703,177 1,840,532
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#
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409
Regs. 5, rt. 57.
N RCOTIC L W.
Reguatons 5, rtce 7: Regstry numbers. I -16-4607
1T.D.4288
rtce 7, Narcotc Reguatons No. 5, reatng to regstry numbers
of persons regstered under the arrson Narcotc Law, amended.
Treasttrt Department,
Offce of Commssoner of Prohbton,
Offce of Commssoner of Interna. Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
To provde for the contnuous assgnment of the same regstry
numbers to persons regstered under the arrson Narcotc Law, as
amended, n order that the dentfcaton of such regstrants may be
factated, artce 7 of Reguatons No. 5 s hereby amended by em-
natng the words On or before uy 1 of where they appear n
the thrd sentence of that artce, and nsertng the words or suc-
ceedng before the words fsca year n the ast sentence thereof.
The artce, as amended, w read as foows:
Regstry numbers. Upon approva of the appcaton the coector -w assgn
a regstry number to the appcant. The numbers are ssued seray wthout
regard to casses. The number as assgned s retaned by the appcant so
ong as appcatons contnue to be made each year and approved. One regstry
number w cover a casses at the same ocaton e cept cass 4, for whch a
separate regstry number w be assgned. person appyng for regstraton
n casses 4 and 5 ony w be assgned the same number for both casses.
separate number w be assgned to each pace of busness n the case of one
engaged n busness at two or more addresses. regstry number assgned a
person who dscontnues the busness or professon covered by such number
w not be assgned to any other person appyng for regstraton durng the
same or succeedng fsca year.
. M. DOR N,
Commssoner of Prohbton.
Robt. . Lucas,
Commssoner of Interna Revenue.
pproved pr 8, 1930.
. W. Meon,
Secretary of the Treasury.
Reguatons 5, rtce 57: Monthy returns. I -13-4582
2 T. D. 4-286
rtce 57. Narcotc Reguatons No. 5, reatng to monthy re-
turns of whoesae deaers n ta abe narcotc drugs and prepara-
tons, amended.
Treasury Department,
Offce of Commssoner of Prohbton,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue, Narcotc gents n Charge,
Whoesae Deaers n Ta abe Narcotcs, and Others Concerned:
To provde for the makng, by whoesae deaers, of detaed sem-
annua reports of stocks of ta abe narcotc drugs and preparatons
1 Ths decson s nso pubshed under Prohbton Treasury Derson 52.
Ths decson s aso pubshed under Prohbton Treasury Decson 50.
4090 30 27
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Regs. 5, rt. 57.
410
on hand, artce 57 of Reguatons No. 5, deang wth narcotcs, s
hereby amended by addng, after Paragraph II of the subdvson of
the sad artce 57 reatng to whoesae deaers, Paragraph Ia, Iv-
ventory of stock, and nc ng n Paragraph III, Returns, appro-
prate references to Paragraph Ia. The added Paragraph Ia,
Inventory of stock, and Paragraph III as amended w read as
foows:
Ia. Inventory of stock. very whoesae deaer s, as of une 30 and De-
cember 31 of each year, requred to make a detaed record, on orm St-
revsed, of ta abe narcotc drugs on hand. separate entry must be made
wth respect to each and every dfferent knd of drug or preparaton, and each
and every dfferent knd or sze of package. ach entry sha show, n the
frst coumn of the form, the name and tota quantty of the drug or preparaton
and the sze of the ndvdua package, n terms of pounds, ounces, grans, ps
or tabets (ndcatng sze), f n sod form, or n gaons, quarts, pnts or
ounces f n qud form. In the second coumn there sha be shown the number
of packages, and n the remanng coumns there sha be shown the tota nar-
cotc content of a the packages covered by the entry.
III. Returns. very whoesae deaer sha on the 1st day of each month,
or wthn 15 days thereafter, prepare and forward to the coector for the ds-
trct copes of a records requred by Paragraphs I, II, and Ia. The records
so requred and the copes hereby requred may be made smutaneousy
through the current use of carbon paper, the dupcate copes of orms 811a,
811b and 811c to be retaned on fe by the whoesae deaer and the orgna
copes to be furnshed as stated. Wth these copes sha be furnshed a snge
orm 811 whch sha show the foowng nformaton:
ace. On page 1, orm 811, w be reported:
1. The name of the whoesae deaer.
2. s regstry number and the coecton dstrct.
3. s compete address.
4. The month for whch the return s rendered.
5. The tota number of ncosures ( orms 811a, 811b and 811c) contaned n
the return.
Nummary. The whoesae deaer w report on page 3, orm 811, n terms of
ndvdua stamped packages the tota number:
1. On hand at begnnng of month.
2. Receved durng month.
3. Tota avaabe.
4. Dsposed uf durng month.
5. On hand at cose of month.
6. Tota accounted for.
Sworn statement. The whoesae deaer must swear that the statements
and detas of the return are correct and true. The name of the ndvdua
who e ecutes and sgns the statement must appear theren and hs offca
capacty must be ndcated. duy effectve power of attorney for a manager
or other than member of the frm or duy eected offcer must be furnshed
the coector.
Dupcate eo/ |/. dupcate copy of orm 811 wth the sworn statement duy
e ecuted as n the case of the orgna copy must be retaned on fe wth the
record requred by Paragraphs I, II, and Ia.
Subparagraph 4 of Paragraph I , Msceaneous nstructons, s
amended to ncude orm 811c revsed, readng as foows:
4. orm 811 must be used as a |acket or outsde sheet for orms Sa. 811b
and 811c revsed (when orm 811c revsed Is requred), whch sha consttute
the nsde sheets.
very person, frm, or corporaton regstered, on December 31,
1929, n cass 2 (whoesae deaer) under the arrson Narcotc Law,
as amended, must prepare under oath or affrmaton, n dupcate, an
nventory on orm 811c of a narcotc drugs and preparatons com-
ng wthn the scope of the aw, e cudng e empt preparatons, on
hand as of December 31, 1929. The orgna must be forwarded to the
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411
Msc.
Commssoner of Prohbton, attenton Narcotc Unt, on or before
pr 15. 1930, and the dupcate kept on fe by tbe deaer n s eh a
way as to be ready accessbe to nspecton by authorzed offcers.
orms 811c for use n connecton wth the nventory as of December
31, 1929, w, at an eary date be forwarded drect from the offce
of the Commssoner of Prohbton to the whoesae deaers.
. M. Doean,
Commssoner of Prohbton,
obt. . Ltoas,
Commssoner of Interned Reveme.
pproved March 18, 1930.
. W. Meon,
Secretary of the Treasury.
I -14-4594
rT. D.4287
na paragraph of Treasury Decson 4286 above , requrng
nventores of narcotc drugs as of December 31, 1929, revoked.
Treasury Department,
Offce of Commssoner of Prohbton,
Offce of Commssoner of Interna Revenue,
Washngton, D. G.
To Coectors of Interna Revenue, Narcotc gents n Charge,
Ir Iwesae Deaers n Ta abe Narcotcs, and Others Concerned:
The fna paragraph of Treasury Decson 4286, ssued under date
of March 18, 1930, requrng whoesae deaers n ta abe narcotc
drugs to submt nventores of such drugs n ther possesson on
December 31, 1929, s hereby revoked.
Inventores w be furnshed by whoesae deaers of such drugs
n ther possesson on une 30,1930. and semannuay thereafter.
. M. Doran,
Commssoner of Prohbton.
. . Mres,
ctng Commssoner of Interna Revenue.
pproved March 31, 1930.
. W. Meon,
Secretary of the Treasury.
MISC LL N OUS.
I -1-4494
. . R S. 133. PU LIC, NO. 23, S NTY- IRST CONGR SS.
ont resouton reducng rates of ncome ta for the caendar
year 1929.
Resoved by the Senate and ouse of Representatves of the
Unted States of merca n Congress assembed. That, n eu of
Mch rates of ncome ta specfed n the Revenue ct of 1928
(Unted States Code, Suppement III, tte 26, chapter 24) as are
1 Ths decson Is aso pubshed mer Prohbton Treasury Decson 51.
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Msc.
412
set forth n the foowng tabe, whch under such ct are appcabe
to the caendar year 1929, the rates appcabe to such year sha
be those set forth n such tabe:
Sectons of Revenue ct of 1928.
Descrpton of ta .
New rate
appcabe
to caendar
year 1929.
Rate
under
1928 ct.
Per cent.
Per cent.
I
3
5
12
1 on
Sectons 11 and 161 T . S. 0. Sup. m, tte 26,
sectons 2011 and 2161 .
Norma ta on ndvduas and
on estates and trusts.
1 I
11
Secton 13 U. S. C. Sup. I, tte 26, secton
2013 .
Ta on corporatons
Secton 201 U. S. C. Sup. I, tte 26, secton
2201
Ta on fe nsurance companes.
11
13
Secton 204 U. S. C. Sup. I, tte 26, secton
2204 .
Ta on nsurance companes
other than fe or mutua.
11
13
Secton 211 U. S. C. Sup. IU, tte 26, secton
2211 .
Norma ta on nonresdent
aens.
of
on
1M
3
5
Sectons 144 and 145 T . S. C. Sup. I, tte 20,
sectons 2144 and 2145 .
1
5
12
Sec. 2. Ths |ont resouton sha take effect as of anuary 1, 1929.
pproved, December 16, 1929.
1I -2G-46S0
Dsbarments and suspensons from practce before Treasury Department of
attorneys and agents
DIS RM NTS.
The Secretary of the Treasury, after due notce and opportunty
for hearng, has ordered the dsbarment from further practce before
the Treasury Department of the foowng-named attorneys and
agents:
Name.
ddress.
Date of
dsbarment.
Cause.
bbott, Lese
New York, N. Y..
New York, N.Y..
Nov. 25, 1929
an. 2, 1930
Charged wth faure to pay the edera ncome
ta es assessed aganst respondent for the
years 1920, 1923, 1925, and 1926. Charg.s
found proven.
ayer, Lous
Charged wth recevng money from cents to
pay ther edera ncome ta es wth fang
to pay such money to the coector of nterna
revenue and wth ssung faso and forced
edera ncome ta recepts to such cents.
Charges found proven.
erger, . Mar|ore..
rodsky, yman M.
oywood, Caf.
Worcester, Mass..
pr. 8, 1930
May 13, 1930
Charged wth knowngy advsng and counse-
ng cents to make fase edera ncome ta
returns and wth knowngy preparng faso
ncome ta returns for such cents. Charges
found proven.
Charged wth appropratng funs of hs em-
poyer to hs own use. Charges found
proven.
Ths rung (4080) ncudes n rungs Nos. 4493, 4503, 4509, 4515, 4522, 452S.
4533, 4539, 4549, 4557, 4562, 4571, 4584, 4592. 4600, 4606: 4615, 4622, 4038, 4648,
4055, 4001, 1060, 4072, and 4077. These rungs have been thus consodated because
pubcaton of each one separatey woud be argey dupcaton.
a Ths st ncudes a attorneys and agents dsbarred from practce durng the 12-
month perod .Iny 1. 1929 une 30, 19:10. ncusve, and a suspensons n effect durng
the 0-month perod anuary 1 une 30, 1930. ncusve. It does not ncude those
baed from practce by rcuson of dsapprova of ther appcaton for enroment.
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413
Msc.
Name.
ddress.
Date of
dsbarment.
Cause.
Chambers, W. ...
Cooper, Merton .
Davdson, ohn L_.
Da, uan
Dworak, .
ayden, dward II
abacb, . ar...
McOrath, ames ..
Meakm, ohn
Swanwck, ohn T..
Terry, G. C
Whte, oward .
Norfok, Nebr
ormery Chcago,
111., now opn,
Mo.
Chcago, 111
Tampa, a
Omaha, Nebr
oywood, Caf-
Readng, Pa.
ormery Savan-
nah, Oa., now
asthampton,
Mass.
ormery New-
ark, N. ., now
Lnden, N. .
Toedo, Oho
ormery Long
each, Caf.,
now Los nge-
es, Caf.
New York, N. Y..
Mar. 26, 1930
May 14,1930
an. 2, 1930
an. 14, 1930
pr. 21,1930
pr. 5, 1930
Oct. 10, 1929
Oct. 10,1929
Oct. 16,1929
Sept. 18,1929
an. 17,1930
une 13,1930
Charged wth the preparaton of fase edera
ncome ta returns for ta payers. Charges
found proven.
Charged wth ssung frauduant checks and
recevng goods, moneys, and hote accommo-
datons on such worthess checks. Charges
found proven.
Charged wth frauduenty convertng funds
beongng to cents to hs own use. Charges
found proven.
Charged wth havng been convcted of the
crme of forgery. Charges found proven.
Charged wth preparng a fase fnanca state-
ment for a corporaton, whch was used to
nduce persons to purchase shares of stock
n such corporaton. Charges found proven.
Charged wth knowngy advsng and counse-
ng cents to make fase edera ncome ta
returns and wth knowngy preparng fase
ncome ta returns for such cents. Charges
found proven.
Charged wth msappropratng 1,000 of
partnershp funds and wth makng faso
representaton to hs partners that such
1,000 had been pad to Government
offcas. Charges found proven.
Charged wth havng obtaned oO0 from cent
n ta cse upon fase representaton that
such S500 was to bo pad to Government
offca. Charges found proven.
Charged wth havng been convcted on an
ndctment for brbery. Charges found
proven.
Charged wth makng faso ncome ta returns
n hs own ta matters. Charges found
proven.
Charged wth preparng fase ncome ta re-
turns for cent wth ntent to ad such cent
to cvado the payment of ncome ta es.
Charges found proven.
Charged wth havng msapproprated trust
funds to hs own use, and wth havng been
convcted and sentenced to serve a term n
State prson by State court for such crme.
Charges found proven.
SUSP NSIONS.
The Secretary of the Treasury, after due notce and opportunty
for hearng, has ordered the suspenson from practce before the
Treasury Department for the perod stated n each case of the
foowng-named attorneys and agents:
Name.
ddress.
Perod of sus-
penson.
Cause.
Cathrae, Wam
Morrson.
Crag, ames W
oster, Robert M...
rohock, bert .
usts, a
Washngton, D. 0.1
Washngton.D.C,
and West Pam
each, a.
ormery Cam-
den, N. ., now
Moorestown,N.
., and Pha-
depha, Pa.
1 year, from
Oct. 4, 1929.
90 days, from
pr. 9, 1930.
rom eb. 18,
1928, to une
17, 1930.
90 days, from
Mar. 20,1930.
Charged wth makng fase ncome ta returns
for ta payers. Charges found proven.
Charged wth hodng hmsef out as beng
nfuenta wth the offcers of the Interna
Revenue ureau as an nducement to em-
poy respondent as assocate counse n ta
cases pendng before the Interna Revenue
ureau. Charges found proven.
Charged wth havng carred on mproper
and unethca negotatons wth empoyees
of the Interna Revenue ureau reatvo to
a ta case. Charges found proven.
Charged wth spttng fees n a edera ta
case wth a person who was nether a awyer
accountant, nor engaged n the edera u
practce. Charges found proven.
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Msc.
414
Name.
Lomon, George h
Lore, arry T.
Merteus, Theodore
.
Shapro, rnest M_.
Smth, ugh Nor-
man.
Wnston, Gus
ddress.
ormery rmng-
ham, a., now
acksonve, .
D.O.
San rancsco,
Caf.
Chcago, 111
Wchta, :
Perod of s
6 months, from
Mar. 18,1930.
0 days, from
eb. 12,1930.
30 days, from
Ian. 30, 1980.
90 days, from
Mar. 6, 1930.
90 days, from
une 13,1930.
6 months, from
Nov. 25, 1929.
Causo.
Charged wth soctng empoyment n ed-
era ta matters from persons wth whom
respondent had no prevous assocaton
aso charged wth offerng a spt fee wth
aymen rn ta cases n whch empoyment
shoud be procured for respondent by such
aymen. Charges found proven.
Charged wth havng attempted ta seeruc
empoyment n a edera ncome ta mat-
ter by mproper representatons. Charges
found proven.
Charged wth soctng empoyment n ed-
era ta matters. C ar sea found proven.
Charged wth soctng empoyment as a . n
practtoner n a edera ta case of whch
the respondent ganed knowedge whe
empoyed n the Interna Revenue ureau.
Charges found proven.
Charged wth empoyng a soctor to soct
empoyment n edera ta matters and
dvdng fees wth such soctor. Charges
found proven.
Charged wth faure to return baance of
money receved from cent after paymt
cent s ncome ta es. Charges found
proven.
Resgnaton from enroment to practce before the Treasury Department.
The foowng-named person has tendered hs resgnaton from
enroment to practce before the Treasury Department. The Sec-
retary of the Treasury has accepted hs resgnaton and ordered hs
name strcken from the m of attorneys and agents enroed to
practce before the Treasury Department. e s therefore no onger
entted to practce before the Treasury Department.
Name.
ddress.
targoaUoa.
Date of
acceptance.
rookyn, N. Y
pr. 4, 1930
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IND .
1 Rung
No.
batement, cams. (See Cams.)
ccountng methods, accrua bass:
Change from accrua to nstament bass
Commssoner s nventory correcton bass for re|ecton
uture sae profts
ffated corporatons. (See Corporatons.)
abama gasone ta , deducton
ens, nonresdent nsurance company, aocaton of overhead
e penses
mendments:
Reguatons 5
rtce 7
rtce 57
Reguatons 43
rtce 40
rtce 41
Reguatons 62
rtce 89
Reguatons 63
rtce 20
Reguatons 65
rtce 89
Reguatons 68
rtce 18
Reguatons 69
rtce 89
Reguatons 70
rtce 18
Reguatons 74
rtce 1042
Treasury Decson 3856
ssessment, ta es. (See Ta es.)
ssocatons, awaan hu, cassfcaton
ttorneys and agents:
Dsbarments and suspensons
Resgnaton from enroment
.
ad debts, reserves, rea estate on nstament pan, deducton
anks:
ssessments, Depostors Guaranty und Commsson, South
Dakota
usness e pense deducton, ncome party ta e empt, a-
owance
edera |ont-stock and, nterest on bonds, deducton
equeathed property, sae of. (See Saes.)
equests, sae of. (See Saes.)
everages sod n cosed contaners, bass of ta , sae by vendor _ _
onds:
batement cam, coecton mtaton
change of. (See changes.)
Surety, nterest upon defaut
4657
4580
4593
4542
4553
4607
4582
4623
4624
4619
4574
4619
4573
4619
4572
4619
4625
4664
4680
4680
4569
4576
4610
4614
4634
4629
4526
(415)
G
e
n
e
r
a
t
e
d
f
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r
L
n
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h
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n
g
(
N
e
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Y
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U
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2
0
1
3
-
0
1
-
2
2
0
3
:
5
3
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3
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0
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8
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5
4
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4
4
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#
p
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416
Rung
No.
Page.
ooks and records, nspecton subsequent to e ecuton of cosng
agreement
reach of contract, |udgment affrmed ater year, oss deducton..
udngs, demoton, osses
usness e penses:
ddtona compensaton, servces rendered n pror years
owance where ncome party ta -e empt
ssessments, depostors guaranty fund, South Dakota banks.
Contngent compensaton, when deductbe
ntertanment of empoyees
Insurance premums, empoyees group contract
C.
Caforna, communty property. (See Communty property and
ncome.)
Capta gan| and osses, royaty rghts
Cams, abatement:
ond. (See onds.)
Coecton stayed
Constructon of stayed
Credt of overassessment aganst barred ta es
Cosng agreements. (See Ta es: na determnaton and assess-
ment.)
Coectors, e tensons of tme for fng returns, nstructons
Coorado motor fue ta , deducton
Commerce Department, nspecton of returns
Communty property and ncome:
Caforna, sae by estate, gan or oss bass
Te as, rents from husband s separate reaty
Compensaton:
ddtona, servces rendered n pror years
Contngent, busness e penses, when deductbe
State offcers and empoyees. (See State.)
Consodated returns. (See Returns.)
Constructve recept, profts credted to stockhoders wthout
forma dvdend decaraton
Copper mnes. (See Mnes.)
Corporatons:
ffaton, consodated returns. (See Returns.)
Dstrbutons. (See Dstrbutons.)
Domestc
Cuban 8 per cent ta , credt
Operatng foregn copper mnes, source of proft
Refund cam, survvng drector sung as trustee, estoppe-.
Saes-
Property acqured after December 31, 1920, gan or oss
bass
Subsdary s stock, gan or oss bass
Court decsons:
etna Lfe Insurance Co. v. aton, coector
rdsey Cub v. Durey, coector
tkns v. Lucas, Commssoner
ustn Co. v. Commssoner
eo v. Unted States
ndey et a., e ecutors and e ecutr , v. ener, coector
ar v. yers, e ecutr
ock d ohner Mercante Co., a Corporaton, v. Unted
States
rady e a., e ecutors, v. am, coector
rewster v. Gage, coector
Commssoner v. Remngton Rand, Inc
Cooper v. Unted States :
Corss v. owers, coector
4612
4590
4683
4570
4610
4576
4540
4568
4645
4519
4534
4552
4506
4602
4625
4674
4658
4570
4540
4546
4577
4598
4681
4613
4521
4631
4611
4567
4660
4491
4555
4501
4540
4641
4520
4521
4579
4659
G
e
n
e
r
a
t
e
d
f
o
r
L
n
Z
h
a
n
g
(
N
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w
Y
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)
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2
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1
3
-
0
1
-
2
2
0
3
:
5
3
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7
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3
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0
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0
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8
9
0
5
4
3
4
4
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#
p
d
-
g
o
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g
e
417
Court decsons Contnued.
Crooks, coector, v. Loose
De os et a., e ecutors, v. Commssoner
rst Natona ank of Chcago v. Unted States
orshem ros. Drygoods Co., Ltd., v. Unted States
rench Mortgage ond Co. v. Woodworth
Guy v. Commssoner
adey v. Commssoner
arvey, Inc., v. Crooks, coector
ennngsen Produce Co. v. Commssoner
ewes v. aton coector
Insurance Tte Guarantee Co. v. Commssoner
ames v. Unted States
Lberty akng Co. v. ener, coector
Lve Stock Natona ank v. Unted States
Lucas, Commssoner, v. mercan Code Co., Inc
Lucas, Commssoner, v. North Te as Lumber Co
Maas Wadsten Co. v. Unted Staes
May et a., e ecutors, v. ener, coector
Means v. Unted Staes
Mken et a., e ecutors, v. Unted Sates
Moran v. Lucas, Commssoner
Nes ement Pond Co. v. Unted Staes
Oak Worsted Ms v. Unted States
O ren and Roebng, e ecutors, v. Sturgess, coector
Osburn Caforna Corporaton v. Wech, coector
Renecke v. Spadng
Remngton Rand, Inc., v. Commssoner
Roberts Sash Door Co. y. Unted States
Rockwood, trustee, v. Unted States
Schuctte, e ecutr , v. ouers, coector.
Seabrght Woven et Co. v. am, coector
Second Natona ank of Sagnaw, trustee, v. Unted States
Shea v. Lucas, Commssoner
Tyer et a. v. Unted Sates
Unted States v. mercan Can Co
Unted States v. Detrot Can Co
Unted States v. Mssour Can Co
Unted States v. Updke e a
eeder v. Commssoner
ova v. Commssoner
Whe, coector, v. ood Rubber Co
Zmbas v. nderson
Courts, |ursdcton of. See ursdcton.)
Credt or refund:
Cams-
Corporaton, charter e pred, survvng drector sung as
trustee
Lmtaton. (See Lmtaton perod: Credt or refund.)
Speca assessment request as bass, nterest
Interest on. ( S ee Interest.)
Lmtaton perod. (See Lmtaton perod.)
Suts, coecton stayed by abatement cam
Wavers, fng subsequent to e praton of statutory perod.
Credt :
arned ncome, professona fees
Persona e empton, change of status durng ta abe year...
Ta es, foregn:
ccrua, Commssoner s determnaton
Cuba, 8 per cent corporaton profts ta
Cuba, 8 per cent corporaton profts ta
ng
No.
4508
4554
4614
4589
4640
4583
4546
4634
4605
4639
4547
4621
4683
4493
4590
4593
4529
4647
4653
4633
4599
4646
/4534
14632
4581
4613
4548
4521
4629
4681
4670
4570
4630
4599
4671
4580
4580
4580
4675
4566
4569
4589
4556
4681
4529
4534
4552
4617
4603
4646
4577
4577
G
e
n
e
r
a
t
e
d
f
o
r
L
n
Z
h
a
n
g
(
N
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Y
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U
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r
s
t
y
)
o
n
2
0
1
3
-
0
1
-
2
2
0
3
:
5
3
G
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2
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3
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0
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0
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8
9
0
5
4
3
4
4
P
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#
p
d
-
g
o
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418
D.
Decedents, nstament obgatons transferred to e ecutors, gan
or oss
Defcences n ta . (See Ta es: Defcences.)
Defntons:
ccrued
Dues or membershp fees
Deaware, dssoved corporaton, |eopardy
Depeton:
Lessor s deducton, burden of proof
Mnes, essor s deducton, burden of proof
Depostors guaranty fund, assessment deducton, South Dakota
banks
Deprecaton:
Resdence, gan or oss bass
Trust estate, benefcary s aowance
Dsbarments. (See ttorneys and agents.)
Dscount, oans, net ncome computaton
Dstrbutons, corporatons, ta -free, gan or oss bass of stock,
reducton, 1926 ct
Dstrct of Coumba gasone ta , deducton
Dvdends:
Optona stock or cash dstrbuton
Profts credted to stockhoders wthout forma decaraton-..
Stock, optona 6tock or cash dstrbuton
Dues and ntaton fees:
Cub dues, nstaments pad on, Reguatons 43, amended
Dues or membershp fees, defned
.
arned ncome, credt . (See Credts.)
ntertanment e penses, empoyer s, deducton
quvaent e empton, earnngs from documented vesses, Span..
state ta :
Concusveness of oard of Ta ppeas decson court s
|ursdcton
Deducton for ncome ta . (See Ta es: state and n-
hertance.)
Gross estate
Dower nterest, entucky and Oho
state by the entrety, consttutonaty
Refund after rng petton wth oard of Ta ppeas
Scope of repea, 1918 ct
Transfers
y decedent n hs fetme.
Gft n trust, rght of revoceton
In contempaton of death
Intended to take effect at death
Rght of revocaton or modfcaton.
Wdow s statutory nterest, Mssour
states and trusts:
Decedents, estate durng admnstraton, wdow s support,
prorty over edera ta eu, Georga
Partnershp contnued by decedent s estate, orda
State nhertance ta es, deductons. (See Ta es: state and
nhertance, deducton.)
Trusts, revocabe, grantor s ta abty
stoppe, sut to recover ta es pad
Rung
No.
Page.
4489
125
4581
367
4611
352
4652
234
4548
305
4548
305
4576
82
4597
129
4650
117
4543
123
4565
179
4517
94
4651
144
4546
266
4651
144
14623
351
4624
351
4G11
352
4568
298
4619
160
4555
376
4670
386
4671
383
4555
376
4581
367
4572
356
4573
358
14574
366
4653
362
4633
376
4647
382
4641
359
4508
372
4507
158
4628
219
4659
m
G
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r
a
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(
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)
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2
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1
3
-
0
1
-
2
2
0
3
:
5
3
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8
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4
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419
Rung
No.
Page.
vason of surta by ncorporaton, n|uncton to restran ta
coecton
change rates, foregn. (See oregn.)
changes:
onds for other property, payabe n future
Reorganzaton. (See changes: Stock.)
Stock, reorganzaton, gan or oss.
4640
empt corporatons, rura and savngs assocatons, Indana.
tenson of tme, fng of returns, coectors nstructons
edera |ont-stock and banks, bond nterest, deductbty..
ees, professona, earned ncome
na determnaton and assessment. (See Ta es.)
orda, partnershp contnued by deceased member s estate-
oregn :
change, rates prevang December 31, 1929
Ta es, credt for. (See Credts: Ta es.)
Gan or oss:
ass of stock reduced by ta -free dstrbuton, 1926 ct
changes of property. (See changes.)
Instament obgatons, decedent s return
Reorganzatons. (See Reorganzatons.)
Saes. (See Saes.)
Transfer of tte to trustee, sae dstngushed
Gasone ta . (See Ta es: Motor vehce fue.)
Georga, wdow and mnor chdren s support, prorty over ta
en
Gft ta , rght of revocaton renqushed
Good w, obsoescence
Gross ncome:
Compensaton
Pots, rgna
State offcers and empoyees. (See State.)
Constructve recept. (See Constructve recept.)
awaan hu, ta abe status
ead of famy, change of ta payer s status durng ta abe year.
usband and wfe:
Change of status durng ta abe year, persona e empton
Returns. (See Returns.)
Idaho motor fue ta , deducton
Indana:
Gasone ta , deducton
Rura oan and savngs assocatons, e empton
Inhertance ta es, deducton of. (See Ta es: state and nher-
tance.)
In|unctons, restrant of ta coecton, assessment where surta
evason
246
4567
281
4490
181
4547
279
4554
284
4560
184
4578
194
4679
128
4506
126
4614
318
4617
121
4628
219
4512
122
4565
179
4489
125
4069
195
4507
158
4653
362
4681
302
4491.
252
4664
177
4603
119
4603
119
4559
103
4525
95
4079
128
4640
246
G
e
n
e
r
a
t
e
d
f
o
r
L
n
Z
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g
(
N
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Y
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k
U
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s
t
y
)
o
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2
0
1
3
-
0
1
-
2
2
0
3
:
5
3
G
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3
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0
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8
9
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5
4
3
4
4
P
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#
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420
Rung
No.
Page.
Inspecton:
ooks and records. (See ooks and records.)
Returns. (See Returns.)
Instament obgatons, gan or oss on dsposton
Instament saes. (See Saes.)
Insurance, premums, empoyees group contract, deducton
Insurance companes, foregn, aocaton of overhead e penses
Interest:
onds, edera |ont-stock and bank s, deducton
Defcences pad on nstament pan
Refunds, speca assessment request bass of cam
Surety bond, defaut
Inventores:
Commssoner s correcton bass of re|ecton, accrua bass
Proof of bass
.
eopardy assessment. (See Ta es: ssessment.)
udgments, osses. (See Losses.)
ursdcton, courts :
ppea pendng before oard
oard of Ta ppeas decson
Invested capta, speca assessment appcaton, revew of
ureau s determnaton
.
ansas gasone ta , deducton
entucky, gross estate and dower nterest
L.
I/eases, mnng, mnmum royaty payments, when deductbe
Legacy ta es, deducton of. (See Ta es: state and nhertance.)
Lessors, mnes, depeton deducton, burden of proof
Lmtaton perod:
ssessment of ta es-
Commencement date where tentatve return fed
Defense rased n appeate court
Coecton of ta es
ssessment where no return fed
ond wth abatement cam
Commencement date where tentatve return fed
Sut, transferees, trust fund doctrne
Credt or refund
Cams, commencement date
Coecton stayed by abatement cam.
Credt aganst barred assessement where coecton
stayed by abatement cam
1918 ta es, 6-year coecton perod, 1924 ct
Wavers
Consent agreements subsequent to e praton of stat-
utory perod, vadty
ed subsequent to e praton of statutory perod
1918 ta es, 6-year coecton perod, 1924 ct --
Successor for merged corporaton, Pennsyvana,
vadty
Loan dscount, net ncome computaton
Losses:
udng demoton
udgments, when deductbe
4489
4645
4553
4614
4545
4529
4526
4580
4583
4621
4555
4493
4505
4670
4643
4548
14534
4589
4660
4675
4629
4589
4675
4630
4534
4552
4589
4683
4552
4589
4588
4543
4683
4590
G
e
n
e
r
a
t
e
d
f
o
r
L
n
Z
h
a
n
g
(
N
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w
Y
o
r
k
U
n
v
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r
s
t
y
)
o
n
2
0
1
3
-
0
1
-
2
2
0
3
:
5
3
G
M
T
/
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t
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:
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/
2
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2
7
/
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3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
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D
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a
n
,
G
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#
p
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o
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e
421
Losses Contnued.
Lcense, four mng process, worthess
Partnershp, member s return on dfferent bass, deducton.
Rebates, when deductbe
Wash saes, tradng by e change member on own account.
M.
Mnes:
Copper, operated by domestc corporaton, ource of profts
Depeton aowance. (See Depeton.)
Leases. (See Leases.)
Mssour, gross estate, wdow s statutory nterest
Motor vehce fue ta . (See Ta es.)
N.
Narcotcs aw:
Returns of whoesae deaers
Reguatons 5 amended
Treasury Decson 4286 amended
Nebraska motor vehce fue ta , deducton
Net ncome:
ases of computaton, Commssoner s determnaton
Domestc corporaton operatng foregn copper mnes, source
of proft
Net osses, affated group, membershp changes durng ta abe
year
New ersey motor fue ta , deducton ,
New York transfer ta , accrua date
Nonresdent aens. (See ens.)
North Dakota gasone ta , deducton
0.
Obsoescence, good w
Oho, gross estate and dower nterest
O and gas, royaty rghts, sae of, capta gan
Oeomargarne:
Statstcs of producton and materas used
November, 1929 and 1928
December, 1929 and 1928
anuarv, 1930 and 1929
ebruary, 1930 and 1929
March, 1930 and 1929
pr, 1930 and 1929 .
Overhead e penses, foregn nsurance companes, aocaton
P.
Partnershp:
state of deceased partner as member, orda .
Losses, member s return on dfferent bass, deducton
Pennsyvana, waver e ecuted by successor for merged cor-
poraton, vadty
Persona:
empton. (See Credts.)
Resdence, sae of, gan bass
Pots, compensaton, rgna
Premums, nsurance. (See Insurance companes.)
Prorty of edera ta es. (See Ta es: edera prorty.)
Professona snger, royates from sae of phonograph records,
profts ta es
Protest, request for speca assessment as
4683
4583
4605
4518
4598
4508
4582
4594
4551
464G
4598
4676
4596
4564
4511
4681
4670
4519
4502
4527
4561
4591
4637
4665
4553
4628
4583
4588
4492
4491
4556
4529
G
e
n
e
r
a
t
e
d
f
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L
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a
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g
(
N
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w
Y
o
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k
U
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)
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2
0
1
3
-
0
1
-
2
2
0
3
:
5
3
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3
0
0
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0
0
8
9
0
5
4
3
4
4
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,
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#
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422
Rng
No.
Page.
R.
s, ncome ta , 1929, reducton
Rea estate, nstament saes. (See Saes: Instament.)
Rea property, nstament saes. (See Sates.)
Rebates, when osses deductbe
Refunds. (See Credt or refund.)
Regstry numbers, narcotc Reguatons 5, amended
Reguatons:
mendments. (See mendments: Reguatons )
Inspecton of returns.
Reease of e cess ta wthhed pror to 1929 reducton rate ..
Remander nterests, sae of, gan or oss bass
Rentas:
usband s separate reaty, Te as
Royates, mnmum payments, when deductbe
Reorganzaton, e changes of stock. (See changes
Repea, scope of
Reserves, bad debts, rea estate nstament f
Resdence, sae of, gan or oss bass
Resgnaton from enroment. (See ttorneys and agents.)
Returns:
mended
Dssoved corporaton, change from accrua to nsta-
ment bass
Subsdary s ncome wthout affaton perod
Consodated (see aso Corporatons: ffaton)
ddton of members durng ta abe year
ecton to fe
Subsdary s
Income wthout affaton perod
Stock, gan or oss bass from parent s sae
tenson of tme for fng. (See tenson of tme: ng
of returns.)
usband and wfe, eecton of |ont or separate return bass,
tme mtaton
Inspecton of, reguatons governng.
ont. (See Return: usband and wfe.)
Tentatve, assessment and coecton mtaton perod
Whoesae deaers n ta abe narcotc drugs-
Reguatons 5, amended
Treasury Decson 4286, amended
Revocatons, returns of whoesae deaers n ta abe narcotc
drugs, Treasury Decson 4286 amended
Royates:
Mnng eases, mnmum payments, when deductbe
Professona snger, ncome from sae of phonograph records,
profts ta es
Sae of. (See Saes.)
S.
Saares. (See Compensaton.)
Sae and repurchase:
Wash saes, tradng by e change member on own account.
Saes:
equests
Gan or oss bass
Property, date of acquston determned
uture, profts accrua
Gft property, gan or oss bass
74494
1.4497
4605
4607
4625
4532
4498
4658
4643
4581
4569
14492
(45S7
4657
4499
4676
4682
4499
4620
4618
4625
4589
4582
4594
4594
4643
4556
4518
4520
4668
4593
4579
G
e
n
e
r
a
t
e
d
f
o
r
L
n
Z
h
a
n
g
(
N
e
w
Y
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k
U
n
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r
s
t
y
)
o
n
2
0
1
3
-
0
1
-
2
2
0
3
:
5
3
G
M
T
/
h
t
t
p
:
/
/
h
d
.
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a
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d
e
.
n
e
t
/
2
0
2
7
/
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u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b
c
D
o
m
a
n
,
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o
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w
w
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#
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o
g
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423
Saes Contnued.
Instament
ccounts recevabe acqured by transfer, subsequent
payments, treatment
Change from accrua bass, computaton of ncome
Rea property
Reserves for bad debts, deducton
Roofs and roofng materas
Persona resdence, gan bass
Property acqured
fter December 31, 1920, gan or oss bass
y power of appontment, gan or oss bass
Property transmtted at death
Communty property, Caforna, estate s gan or oss
bass
Remander nterest, gan or oss bass
Stock rghts, gan or oss bass
Rea estate, nstament. (See Saes: Instament.)
Resdence, gan or oss bass
Royaty rghts, capta gan
Securtes, sae and repurchase. (See Sae and repurchase.)
Stock-
cqured wth bond warrants, gan or oss
ffated corporaton, gan or oss bass
change of. (See changee.)
Gan or oss bass reduced by ta -free dstrbuton, 1926
ct
Purchases and saes on ong and short accounts,
ta abe gan
Reorganzaton e changes. (See changes.)
Rghts, gan or oss computaton --
Subscrpton warrants, gan or oss
Subsdary s, parent s gan or oss bass
Transfer of tte to trustee, sae dstngushed
Trust property
Deprecaton, gan or oss computaton
Sod durng donor s fetme, gan or oss
Savng cause, ta repeaed
South Carona gasone ta , deducton
South Dakota banks, depostors guaranty fund, assessments,
deducton
Span, equvaent e empton, earnngs from documented shps
Speca assessment. (See Speca cases.)
Speca cases, speca assessment:
Commssoner s dscretonary power, court s |ursdcton
Redetermnaton and reassessment
Request for, bass for refund cam
Stamp ta es:
Stock transfers
Rung No. 6 (C. . I -1, 338) amended
State:
Inhertance ta , deducton,
ance.)
Offcers and empoyees, compensaton
Lawyer empoyed by cty
Pots, rgna
Stock:
Dvdends. (See Dvdends: Stock.)
change of. (See changes.)
Ta es: state and nhert-
Rung
No.
Pago
4513
123
4663
173
4569
301
4609
207
4492
268
/4613
250
4644
131
4514
132
4674
142
4498
136
4544
138
4597
129
4519
199
4524
80
4521
268
4565
179
4586
81
/4599
271
4639
276
4524
351
4620
223
4669
195
4650
117
4500
198
4581
367
4627
110
4576
82
4619
160
4529
348
4632
4529
348
(4535
392
4636
399
14654
396
4635
402
4501
247
4491
252
G
e
n
e
r
a
t
e
d
f
o
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L
n
Z
h
a
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g
(
N
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w
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k
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t
y
)
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2
0
1
3
-
0
1
-
2
2
0
3
:
5
3
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M
T
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3
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8
9
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4
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#
p
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o
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e
424
Stock Contnued.
Rghts to subscrbe to, sae of. (See Saes: Stock.)
Saes. (See Saes.)
Stock rghts:
Decedent s, gan or oss bass
Sae of. (See Saes.)
Subscrpton warrants, stock, sae of. (See Saes.)
Suts:
In|unctons. (.See In|unctons.)
Lmtaton perod. (See Lmtaton perod.)
Recovery of ta es
ssessment made under cosng agreement
Coect on stayed by abatement cam
Corporaton, charter e pred, survvng drector sung as
trustee, estoppe
Speca assessment appcaton, ureau s dscretonary
power, court s |ursdcton
Surta , evason of. (See vason of surta by ncorporaton.)
Suspensons. (See ttorneys and agents.)
T.
Ta es:
ssessment
eopardy
ond of dssoved or successor corporaton
Commssoner s dscreton, oard revew
Reducton after mtaton perod, vadty
Lmtaton perod. ( See Lmtaton perod.)
Coecton
In|uncton to restran
Lmtaton perod. (See Lmtaton perod.)
Sut. (See Suts.)
Surety s defaut, nterest on bond
Credts for. (See Ta es.)
Defcences
Interest on, ta pad on nstament pan
Surety s defaut, nterest on bond
state. (See state ta .)
state and nhertance, deducton, by whom deductbe,
effect of 1928 ct
edera, prorty, wdow and mnor chdren s support,
Georga
na determnaton and assessment
Cosng agreements, sut to recover ta
urther nspecton of ta payer s books
Msrepresentaton based on mstake of fact
Reassessment
fter speca assessment, no cosng agreement
fter ta refund, Commssoner s authorty
oregn, credt for. (See Credts: Ta es.)
Gasone. (See Ta es: Motor vehce fue.)
Income
Reducton of rates, caendar year 1929
Reease of e cess ta wthhed pror to 1929 reducton
rates
Motor vehce fue
abama
Coorado
Dstrct of Coumba
Idaho
Indana
ansas
Rung
No.
4544
4631
4534
4681
4493
4652
4566
4566
4640
4526
4545
4526
4538
4507
4631
4612
4604
4632
4660
(4494
4497
4532
4542
4602
4517
4559
4525
4505
G
e
n
e
r
a
t
e
d
f
o
r
L
n
Z
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a
n
g
(
N
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w
Y
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k
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r
s
t
y
)
o
n
2
0
1
3
-
0
1
-
2
2
0
3
:
5
3
G
M
T
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p
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3
0
0
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0
0
8
9
0
5
4
3
4
4
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a
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s
s
_
u
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e
#
p
d
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g
o
o
g
e
425
Ta es Contnued.
Motor vehce fue Contnued.
Nebraska
New ersey
North Dakota
South Carona
Tennessee
ermont
Wyomng
Redetermnaton and reassessment wthn prescrbed perod,
Commssoner s authorty
Stamp. (See Stamp ta es.)
State, New York transfer
Transfer ta , New York
War-profts and e cess-profts, professona snger, ncome
from sae of phonograph records
Wthhodng at source. (See Wthhodng at source.)
Tennessee gasone ta , deducton
Te as:
Communty property. (See Communty property and n-
come.)
Transfer of tte to trustee, sae dstngushed
Transfer ta , New York, accrua date
Transferees, trust fund doctrne, sut, mtaton
Trusts:
Deprecaton aowance. (See Deprecaton.)
Revocabe, grantor s ta abty
Sae of corpus durng donor s fetme, gau or oss
U.
Unted States oard of Ta ppeas:
Decsons of
Concusveness courts |ursdcton
Lst of acquescences and nonacquescences
ndngs of fact
ursdcton, Commssoner s answer, waver
Refund after fng petton wth
Revew of Commssoner s dscreton n |eopardy assessments
.
ermont motor fue ta , deducton
rgna pots, compensaton
W.
mtatons. (See Lmtaton perod:
(See Saes.)
Waver of statute of
Wavers.)
Warrants to subscrbe to stock
Wash saes oss deducton..
Wdow and mnor chdren s support, prorty over ta en,
Georga
Wthhodng at source:
Caendar year 1929, ta rate appcabe
Reease of e cess ta wthhed pror to reducton of 1929
rates
Wyomng gasone ta , deducton
4551
4596
4511
4627
4537
4587
4531
4534
4564
4564
4556
4537
4669
4564
4675
4659
4500
4555
376
./s
1-78
4547
279
4583
308
4555
376
4566
256
4587
105
4491
252
4518
145
4507
158
4497
79
4532
154
4531
97
4090 30 28
O
G
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e
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d
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L
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g
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Y
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r
k
U
n
v
e
r
s
t
y
)
o
n
2
0
1
3
-
0
1
-
2
2
0
3
:
5
3
G
M
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.
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0
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0
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8
9
0
5
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G
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