y . v Us-... ./-/:.

SP CI L TT NTION drected to the cautonary notce on ths page that pc

shed rungs of the ureau do not have the force and eft
of Treasury Decsons and that they are appcabe ony to facts presented n the pubshed cs
Treasury Department : : : : : ureau of Interna Revenue
Interna Revenue uetn
Cumuatve uetn III 1
NU RY- UN , 1929
IN T IS ISSU y
ff t -
Introductory Notes
Content - UI
Rungs Nos 4053--4248- INDI N UNI RSITY
L c me0T -PPCaS t MR S 4
Part (1928 ct) . . . LGOMINGT N-
Part II (192 ct) 157-19
Part I (1924 ct) 197-215
Part I (1921 and Pror cts) 21 -294
Sae. Ta 295-304
state Ta 305-319
Capta Stock Ta 320-322
Msceaneous Ta 323-324
Msceaneous 325-33
Inde 337-348
The rungs reported n the Interna Revenue uetn re for the nformaton of ta payers end ther counse as
shovng the trend of offca opnon n the admnstraton of the ureau of Interna Revenue: the rungs other than
Treasury Decsons have none of 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 ratng embodes the admnstratve appcaton of the aw and Treasury Decsons to the entre
state of facts upon wbch a partcuar case rests. It s especay to be noted that the same resut wU not neces-
sary be reached n another case uness a the matera facts are dentca wth those of the reported case. s t s
not 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 (he reported case- s bearng out 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 ganst reachng a concuson n any case
merey on 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 reason , 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 but smpy appy rungs aready made pubc to certan stuatons of fad whch
are wthout speca sgnfcance. It s 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.
Nn 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
rung and decsons have receved the consderaton and approva of the Genera Counse for the ureau of
UNIT D ST T S GO RNM NT PRINTING O IC . W S INGTON : 1929
for ae by the Superntendent of Documents, Washngton. D. C. - - - See back of tte for prce
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NNOUNC M NT O 1929 ULL TIN S R IC
The Interna Revenue uetn servce for 3929 w consst
of weeky buetns and semannua cumuatve buetns.
The weeky buetns w contan the rungs and decsons to
Ik made pubc and a Treasury Department decsons (known
as Treasury decsons) pertanng to Interna Revenue matters.
The semannua cumuatve buetns w contan a rungs
and decsons (ncudng Treasury decsons) pubshed durng
the prevous s montns.
The compete uetn servce may be obtaned, on a sub-
scrpton bass, from the Superntendent of Documents, Govern-
ment 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 Supern-
tendent of Documents 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 ncudng 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 ue-
tn for 1920, uetn ST-1-20, and the Cumuatve uetns
for atry- une and uy-December, 1921, may procure them
from the Superntendent 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, 192 , 1927, and
1928 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) 30cents
Cumuatve uetn II-2 ( uy-December, 1923) 40eenrs
Cumuatve uetn III- ( anuary- une, 1924) 50cents
Cumuatve uetn III-2 ( uy-December, 1924) 50cents
Dgest No. 13 ( anuary, 1922-December, 1924) 0 cents
nmuatve uetn I -1 ( anuary- une, 1925) 40 cents
Cumuatve uetn I -2 ( uy-December, 1925) 35cents
Dgest No. 17 ( anuary-December, 1925) 25cents
Cumuatve uetn - ( anuary- une, 192 ) 40cents
Cumuatve uetn -2 ( uy-December, 192 ) 30 cents
Dgest No. 21 ( anuary-December, 192 ) 15 cents
Cumuatve uetn I-1 ( anuary- une, 1927) 40 cents
Cumuatve uetn I-2 ( uy-December, 1927) 40 cents
I) gest No. 22 ( anuary, 1925-December, 1927) 35 cents
Cumuatve uetn II-1 ( anuary- une, 1928) 35cents
Cumuatve uetn II 2 ( uy-December, 1928) 50 cents
rumuatve uetn II1-1 ( anuary- une, 1929) 50cents
U Inqures n regard to these pubcatons and subscrptons
shoud be sent to the Superntendent of Documents, Government
Prntng Offce, Washngton. D. G.
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INTRODUCTORY NOT S.
The Interna Revenue Cumuatve uetn III-1, n addton to
a decsons of the Treasury Department (caed Treasury decsons)
pertanng to Interna evenue matters, contans Genera Counse s
opnons, and rungs and decsons pertanng to ncome, estate, saes,
capta stock, and msceaneous ta es, as ndcated on the tte-page
of ths uetn, pubshed n the weeky uetns ( oume III,
Nos. 1 to 25, ncusve) for the perod anuary 1 to une 30, 1929.
It aso contans a cumuatve st of announcements reatng to dec-
sons of the Unted States oard of Ta ppeas pubshed n the
Interna Revenue uetn Servce from December 22, 1924, to une
30, 1929.
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 192 are pubshed as Part II, the secton
and artce headngs correspondng wth the secton and artce head-
ngs of the Revenue ct of 192 and Reguatons 9. 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 5. 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 head-
ngs of the Revenue ct of 1921 and Reguatons 2.
R I TIONS.
The foowng abbrevatons are used throughout the uetn:
, , C, etc. The names of ndvduas.
. 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. Incoroe Ta Unt.
M, N, , Y, Z, etc. The names of corporatons, paces, or busnesses, accord-
ng to content.
Mm. 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.
8. R. Soctor s recommendaton.
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I
T. Tobacco Dvson.
T. . M. dvsory Ta oard memorandum.
T. . It. dvsory Ta oard recommendaton.
T. D. Treasury decson.
m 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 Revenue, 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 192 , 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 192 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 192 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.
Rung.
r decsons:
O
OM
-
40.
41.
42.
43.
44.
45.
48.
47.
0.
51.
52.
53.
54.
55.
5 .
57.
58.
59.
0.
1-
4
5
7.
70
71
72
Genera Counse s
memoranda:
5302
III
-3-1072
542
III- -IG9
5432
III
-1-105
5457
III
-4-4077
III
-1-40 7
5504
III
-2-40 1
5533
III
-2-40 2
5589
III-
12-4148
5 01
III
-5-4088
US ::::::::::::
III
III
-3-4070
Rung No.
III-2-40 5
III-2-40
III-2-40 7
I11-4-4079
III-1-40S0
III--
III-4-4084
III-4-40S3
III-5-4094
III-11-4138
III-11-4143
III-12-1152
n-13-1159
III-13-41 0
II-a-4-r
III-25-424
III- -4099
III- -4100
III- -1101
II1-7-410
III-7-4107
T-7-4108
III-7-4109
III-7-4111
III- -411
n-8-4114
m 8-4118
III-8-4119
III-9-112
TII-9-1127
III-10-4135
III-1I-4140
III-11-4148
TI1-15-1173
III-10-1179
TI-18-4188
TII-18-4189
III-18-4193
III-18-4194
III-19-419S
III-19-4201
III-20-420
III-21-4214
III-21-4215
III-22-1221
III-23-4227
II1-23-4230
III-23-4231
I-24-t23f
III-24-4237
n-24-4238
III-25 4244
III-25-4245
III-25-4248
rage.
2 3
331
1 5
243
245
247
303
20
305
115
323
93
no
n
295
323
209
211
303
21
279
308
25S
287
2:12
138
301
M0
201
2 1
2211
229
271
222
11
224
20
274
317
219
312
257
313
2.35
29
192
189
2 7
330
251
254
2 4
298
314
197
148
134
1 7
173
142
1
83
12
Runsr.
Oenera Counse s
memoranda Con.
5 95
5735
5739
5741
7 1
57 4
577
5782
792
5835
80
5909..
5921..
5952..
971..
020..
041..
042..
0 0.
075.
1 4.
19 .
197.
272.
273.
275.
308.
417
oard of Ta ppeas:
113
1828
1848
1941
218
2187
2390.
2841
3534.
3 3..
3707.
3708.
3709.,
3710..
4437.
4490.
4S3 .
4907.
500 .
M .
5 00.
o: |
042.
100.
149.
218.
475.
530.
78.
911.
937.
994.
1 The contents contan references to oard
ony durng the s months ended une 30,
Ta ppeas acqucscences and nonacqucf
Dshed n the cumuatve buetns coverng
Rung No.
Page.
III-11-4142
III- -4097
203
III-8-4113
127
III-9-4124
1 0
III-7-1105
10S
III-10-4131
III-13-4158
128
103
III-10-4132
2 9
III-13-4157
1 3
II-15-41 9
13
III-11-1139
200
III-11-4137
8
III-18-4187
177
III-1 -4177
179
III-15-4171
172
III-14-41 3
182
III-20-1204
3
I11-22-4220
292
III-17-4183
184
III-19-4197
112
III-18-418
108
III-23-4224
7
III-1 -417
140
III-22-4218
99
III-23-4225
113
III-22-4219
170
III-21-4212
1 8
III-25-4242
8
1II-23-422
132
I11-24-4234
7
III-25-4243
1 2
ITI-9-4120
19
III-17-4I80
18,54
III-17-4180
18,54
III-11-413
0
III-2-1059
43
III-2-4059
43
III-1 -1174
21
UI-21-1208
30
III-17-4180
42
III-8-4112
33, 8
II1-5-408
4
III--4074
47
III-19-4195
25,
III-19-4195
1 ,54
III-19-4195
32,57
III-19-4195
1 ,54
III-8-4112
2,31, 51,57
III-14-41 1
29
III-7-4103
21
III-f-4174
1
III-8-4112
8,52
1II-1-40 3
40, 0
III-1-4053
28,57
III-1 -4174
14
III-I -4174
40
III-19-4195
24
III-2-4a59
8, 2
III-17-4180
24
III-14-41 1
.48
III-21-4208
33,58
II I-2-4059
29
III--t053
49
III-S-1112
3
I11-4-4074
52
III-10-112S
53
nonacquescences pubshed
e remander of the oard of
cences contaned n tbe cumuatve st heren hare been fur-
the earer respectve perods.
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I
Rung.
oard of Ta ppeas
Contnued.
7078
7258
737
7388
7390
7422.
M .
7 8 ._
7704
78 .3
7888... ..
79 1
799
8011
8015
8053
8191...
8198
8277
9421
Rung No.
Page.
rI- -4095
4
m-17-4180
39
III-5-108
14
III- -1095
4
III-24 1232
17
III--3a
4
III-9-II20
49,50
III-10-4128
43
III-20-4203
28
-5-4088
4
I-17-4180
14. 34. 10
III-3-40 8
85,58
III-8-4112
37
III-18-4185
55
III-7-4103
9.30
III-21-1208
22,55
11I-4-4074
,32.42
III-2-4059
55
I11-2-4059
29
I11-12-4147
44
III-19-4195
5
III-1-4053
29
III- -4095
57
III-3-W S
23
III-3-W 8
2
III-3-40 8
2
III-3-40 8
2
III-19-4195
35
III-19-4195
35
III-12-4147
3
II1-44074
0
III-10-4128
M
III-1-4053
25
II-fMOSO
45.81
III-5-4088
22,58
III-5- W8
22,5
III-5-408
22,5
III-5-408
22,5
III-14-41 1
19
III-10-4128
47, 1
I-17-4180
2
III- -4095
5
III-8-4112
54
III-5-408
4
II1-1 -4174
18
II1-3-W 8
24
III-5-408
58
IU-4-1074
30.40,57, 9
v-2-4059
32
III-8-4113
48
ITI-23-4223
2
III- M128
57.58
III-10-4128
0
III-12-4147
34,58
III-1 -4174
10
III-4-4074
50
III-25-4240
12
III-8-4112
4
III-17-4180
29
I11-5-408
28
III-9-4120
33
III-S-4112
17,18
11I-20-4203
31
III-1 -4174
37
I-8-4112
43
III-12-4147
38
III-12-4147
5
vm-awao3
13
I11-7-4103
40,01
III-1 -4174
29
III-10-4128
18,24,54,50
III-8-4112
32
III-1-4053
48
III-19-4195
IS
III-19-4195
18
III- -4095
7
III-8-4112
33
III-19-4195
18
vm-tt-uu
30
III-19-4195
25
n-3 40 8
2
ITI-3-10 8
23
III-24-1232
2
I1I-8-1112

Rung.
oard orTa ppeas
Contnued.
11031...
11032
11055
11155
11173
11180
11218
11219
11220
11250
U2S4 ,
11285
11305
11352
11395
11433
11481
11493
11497
11590
11 55
11 74
11724
11728
11730
11731
11758
11759
117 0
117 1
11814
11838
11874
11877...
11907...
11913...
11918....
11953.
11980
12001
12038
12075
12078
12091.
12092
12093
12137.
121 4
12109.
12195
12198
12221
12259
12347
12358
.12427
12432
1243
1244 .
12447.
12475.
2W .
12515.
12582.
12010.
12 2 .
12 70.
12 88.
12717.
12748.
12809.
12828.
1283 .
12840.
12950.
12954.
13014.
13023.
13038.
13050.
1309 .
13102.
13125.
13149.
Rung No.
Page.
III-10-4128
57
III-25-4240
28,40
III-1 -4174
14
III-7-4103
42
II1-20-4203
17
III-5-408
39
III-19-4195
13
III-19-4195
13
III-19-4195
13
III-14-41 1
23.40
III-1-1053
22
III-1-4053
22
III-25-424
14
III-7-4103
10.53
III-20-4203
13
III-3-40 8
48
III-22-4217
40
III-13-4154
54
III-7-4103
51
III-18-418
31
III-3-40 8
59
III-3-40 8
11
III-21-4208
,00
III-10-4128
58
IU-10-4128
0
III-10-4128
47. 1
III-4-t074
19,3
II M095
37
v unrw
37
III-8-4095
37
III-1 -4174
41, 0
III-3-40 8
1
III-1-4053
20
III-1-4053
45
III-20-4203
17
III-1-4053
3
III-2-1059
52
III-7-4103
20
n-19-4195
25,58
III-21-t208
48, 1
III-4-4074
59
III-3-40 8
1
III-12-4147
43
III-25-4240
27
I11-25-4240
27
III-25-4240
27
III-15-4187
51
III-4-W74
2
III-9-4120
1
III-1-4053
12,43
III-17-1180
24, 42
III-13-4154
15
III-4-4074
5
III-1 -1174
3
III-18-4185
8
III-12-4147
2
III-11-4130
48
III-10-4128
38
III-2-4059
2
I-2-4059
2
III-15-41 7
0
I11-3-4008
17
III-8-4112
13
III-10-4128
43
III-3-40 8
1
III-15-1187
7
III-2-4059
51
III-18-4185
8
III-8-4112
18
III-17-4180

III-1-4053
1
III-19-119
3
III-15-1187
42
III-8-1112
2
III-12-4147
1
III-13-4154
8
III-1-4053
0
III-12-4147
2
III-23-4223
12
TII-2-4059
59
III-17-4180
2
III-7-4103
4
I11-19-4195
20
III-24-4232
SO
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TT
Rung No.
Page.
Rung.
Rung No.
oard of Ta ppeas
13190
13879.
13893.
nan.
I
III-8-1112
vm-s-4112
TII-5-40S8
I -19-4195
III-8-4112
III-9-1120
III-9-4120
III-9-412
III-9-4120
III-9-41
III-11-41
III-14-4I. 1
III-1 -4174
III-M-41M
III-7-4103
III-24-4232
III-24-1232
III-7-1103
III-7-4103
III-15-41 7
III-23-4223
III-74 I3
n-20-4203
III-8-1112
III-20-4203
III-8-4112
III-19-4195
III-19-U95
I - M19S
III-13-4154
III-22-1217
III-1 -1174
n-8-t2
III-14-41 1
III-14-11 1
III-14-11 1
vm-9-4a5
vm-19-nr,
III-10-41- S
III-10-4128
III-17-4180
vrn-8- 7
III-8-4112
III-8-4112
III-19-4195
I-24-4232
III-25-4240
III-10-4123
III-10-4I28
n-21-4208
III-17-4180
III-24-4232
III-18-4185
III-25-4240
11I-18-I185
III-5-)88
III-1-4053
III-19-4195
III-3-40 8
III-19-4195
III-1-4058
III-19-4195
III-5-408
III-20-4203
I11-20-1203
III-17-1180
III 11M195
III-19-4195
III-17-1180
III-8-4112
III-1 -4174
III-15-41 7
III-18-1185
III-1 -1174
III-25-4240
III-25-4240
III-23-4223
III-12-4147
III-17-4180
III-24-4232
III-18-1185
III-1-1053
III-1 -4174
n-19-4195
50
59

7
31
(7
51
57
57
tu
52
20
12
15,53
28
27
27
ta
19
,18
32
15
35
39
35
12
32,57
44, 0
1 ,54
15,29
32

41
15
4
4
32
23
10
14
. ,7
21
29
29
1 ,54
09
SI
9
58
32
50
29
43
27,57
24
M
59
14
45
9
37
12,29
24
24
13
28
11
11
. ,2
23
40
19,55
31
3
32
13,35
35
32
2
3 1
42
40, 0
15
23
oard of Ta| ppeas-
Contnued.
15343. _
15 12
1 13
1 138
1 271
1 312
1 318..
1 389
1 431
1 535
1 17
1 32
1 55
17055
17194
17227
17294
17 0.
17 2.
17983..
18030.
1803
180 1
18082.
18272
18359.
18435.
18535.
187M.
19135.
191 3.
19402.
19420.
19427.
19430.
194 2.
19702.
200 9.
20112.
20124.
20405.
20480
20 29
2091
20950
21259.
22231
22355.
22514.
22731 _
23973
24511.
24877.
24879
25188
2 239
2 359
25S42
2 383
27779.
27780.
27808
28889.
29352
29392
293U3
29404...
29779..
29938.
30958.
31427
31428
32033.
32075..
3535 .
38 75
Offce decsons (I. T.):
2445
244
2447
III-25-1240
III-7-4103
III-25-4240
III-18-4185
III-214208
III-8-4112
I-20-4203
I-21-4208
III-15-41 7
III-11-413
III-25-4240
III-17-4180
III-21-4208
III-1-1053
III-19-4195
III-15-41 7
III-25-1240
III-12-1147
III-12-4147
III-19-1195
III-19-4195
III-7-4103
III-19-4195
III-24-4232
III-5-408
III-19-4195
III-S-4112
III-8-4112
III-11-413
III-11-113
III-25-4240
III-20-4203
III-19-4195
III-10-4128
III-1-4053
III-25-1240
III-18-4185
III-19-4195
III-1 -1174
n-3-40 8
III-1 -4174
III-22-4217
III-1-4053
III-5-108
III-22-1217
III-8-4112
1II-8-1112
III-22-4217
III-24-1232
III-25-4240
III-3-10 8
III-24-1232
III-19-4195
III-12-4147
I11-23-1223
ITI-18-1185
III-23-4223
III-1 -1174
III-19-4195
III-1-1053
III-25-4240
III-15-11 7
III-25-1240
III-1 -4174
III-1 -1174
III-12-4147
III-23-4223
III-3-40 8
III-12-1147
III-12-4147
n-24-1232
III-15-11 7
III-19-4195
III-1 -4174
III-1 -1174
III-1 -1174
III-8-4112
III-20-4203
III-14-11 1
III-25-1240
III-1-4055
1II-2-40 0
II1-3-4009
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III
Rung.
Offce decsons (I. T.)-
Contnued.
244S
2449
2450
24.11
2452.
2453
2454
2455
245
2457
2458.
2459
24 0
24 1
Rung No.
III-3-4071
1II-4-4075
III-4-1078
III-4-W82
II1-5-4087
II-f-4098
III-7-4104
III-8-4115
III-9-4121
III- -4122
III 9-4123
III-10-4129
III-10-4130
III-10-413)
1II-1I-4141
II1-11MU9
III-12-4151
III-13-4155
III-14-41 2
II-o-41 8
III-15-4170
III-1 -1170
III-17-4181
III-19-419
III-20-4205
Page.
188
101
334
283
84
199
102
318
7
89
97
87
98
271
253
98
147
72
SS
85
159
158
9
73
71
Rung.
Offce decsons (I. T.)-
Contnued.
2473..
2474
2475
Offce decsons (MS.):
87.
90
91
Mmeographs:
2725 (rev.).
3091
3 92 ,
3 97
3701
3711
3723
3724
372
3728
3730
3739
Msceaneous,.
Rung No.
III-21-1209
III-24-4233
I -2S-4241
-2 10 3
III-5-4093
T -11-4M4
III-14-41 4
IU-1S-4191
III-23-4228
1II-12-4150
III-5-4092
III-1-4054
III-4-407
III-5- 090
III-21-4210
III-17-4182
III-18-4190
III-19-4199
I -21-42U
III-21-4213
III-24-4235
III-14- 1
III-25-1247
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CONT NTS O CUMUL TI ULL TINS (I. T.) 1 TO 5, S. T. OR 1920 ND 1921, INT RN
R NU 1-1,1-2, 0-1, 0-2, 01-1,10-2, I -1. I -2, -, -2, I-1, I-2, 0-1, O-2, ND 10-L
Cumuatve uetn.
Income Ta :
December, 1919 (No. 1)___ .
auuary- une, 1920 (No. 2)
uy-December, 1920 (No. 3)
anuarv- 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)
uv-December, 1922 (No. 1-2) _.
anuary- une, 1923 (No. II-)
uy-December, 1923 (No. 11-2)..
anuary- une, 1924 (No. III-)..
uy-December, 1924 (No. I-2).
anuary- une, 1925 (No. I -1)..
uy-December, 1925 (No. I -2).
anuary- une, 192 (No. -)...
uy-December, 192 (No. -2)..
anuary- une, 1927 (No. I-1)..
uy-December, 1927 (No. I-2).
anuary- une, 1928 (No. II-1).
uy-December, 1928 (No. II-2)
anuary- une, 1929 (No. III-1)
(I )
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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,
1929, INCLUSI .
1 III-25- 240
The Commssoner acquesces n the foowng decsons of the
Unted States oard of Ta ppeas:
Ta payer.
oard of Ta ppeas.
No.
oume.
Page.
13055
12
558
334
3
415
119 3
10
4
92 5
11
820
rm

10 5
4211
3
112
1929
2
253
43 1
5
113
3522
4
589
17780
10
7 3
9591
8
4 0
10847
10
849
3078
4059

787
9229
8
12 0
3718
3
705
747
7
305
7343
7
1230
11838
12
1252
11 4
1
837
1907
4
1184
12075
12
1238
12 1
12
1238
5 5
9
347
9092
10
213
7290
7
125
7289
7
125
8 90
8
93
383
2
1313
1 431
13
1383
15 49
10
457
0
7
574
.
aron, Theodore.
battor Reaty Co.
bbeve Cotton Ms.
ckerman- ohnson Co
cme Ms, Inc
cme, Pamers DeMooy oundry Co...
corn Refnng Co
dams, . G
dams Motor Co
damson, Chares ., trustee
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
en, .
en, Mrs. . ...
en et a., ames ., e ecutors1
en, Lous
erton, Robert
ance Mng Co
ng Cory Co. _
Rung No. 42-10 Incudes a acquescence and nonacqu
Revenue uetn servce to and Incudng une 30, 1920.
cquMscenee reates to a ssues e cept as to tentatve ta .
state ta decson.
cquescence reates to a ssues e cept the thrd Issue.
escence notces pubshed In the Interna
(1)
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Ta payer.
Docket
No.
oard of Ta ppeas.
oume. Page.
sop, dward ., estate of
sop, dward ., e ecutor1
umnum ake Co
mercan uto Trmmng Co. et a
mercan o Co
mercan Coortype Co
mercan Cream of Tartar Co
mercan eature m Co.5
mercan rut Growere, Inc
mercan- awaan Steamshp Co
mercan Lace Manufacturng Co
mercan LaDentee, Inc
mercan Manganese Stee Co
mercan Ms Co
mercan Packng Co., Inc
mercan Photo Payer Co
mercan Seatng Co. --
mercan Show ntertanment Co
mercan Stee Co
mercan Stone Co
mercan Teegraph Cabe Co
mercan 3 Way Lu fer Prsm Co., Inc
mercan Trust Co., admnstrator 4
mercan ave Co
mes, ohn S
tngo Coa Co
namosa armers Creamery Co
nderson Gustafson
nderson Lnd Manufacturng Co
nderson, Gustave ., trustee
nderson- arrngton Coa Co
nderson, Isabe
nderson, ohn, estate of
nderson Lumber Co., .
ndrews, ffe, estate of 4
ndrews et a., ames M., e ecutors 4
ngeo Co., G
ngeo rut Co., G --
nnston Cty Land Co
nthracte Trust Co., admnstrator estate of ohn
oseph rown, deceased 4
ntonopos, George
ntonopos, ast
ppaachan Reaty Co
ppe et a., bert ., e ecutors
ppe, acob, estate of
ppegate, Raph ndrew, e ecutor
ransas Compress Co
rchbad, |r., et a., R. W., e ecutors.
rchbod, ohn .,
e ecutor 5.
Thc.
rcher Paper Co
rcher-Strauss Rubber Co
rds Co
rmstrong, rd
519
40 9
8444
3430
5418
7901
2078
4137
9043
4225
8293
11
8145
1994
1173
1290
4772
7 79
83 8
10898
29 7
.5935
129 2
4 9
8895
11 84
29352
155
3074
325 1
743
1394
325 1
9103
1309
1309
108 9
108 9
13 8
4947
3925
4013
9 85
7041
7041
7970
4378
4 95
8 29
342
17194
25188
13023
3297

3
10
2
11
11
7
8
1
7
2
3
2
4
5
7
9
2
e
13
4
9
8
13
3
2
10

5
10
15
13
13
12
12
2
a
3
12
10
10
10
8
4
8
1
12

1 state ta decson: acquescence reates ony to 1912 trust.

cquescence reates to ssues nvovng offcers saares and ega e penses.
cquescence n decson n so far as t reates to ncuson n nvested capta of (1) 29,000 pad by
ta payer n 191.1 for nventon on whch patents were pendng, (2) 500 for counse fees.
state ta decson.
state ta decson acquescence reates to thrd ssue of decson.
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3
Tapayer.
Docket
No.
oard of Ta ppeas.
oume.
rmstrong, .
rmstrong, .
rter Pant Gass Co
rthurs, W. C
rt Meta Constructon Co
ssocated Denta Suppy Co
ssocated Gas ectrc Co
tkns. rna oster
t kn:-. ohn ., estate of
tantc Coast Lne R. R. Co
tantc Coast Lne R. R. Co.1
tas Tack Co
tterbury, Grosvenor 2
ubrev, George
uchncoss, . owand, e ecutor.
udtorum Co
uerbach, Sao
ut Wborg Co
ustn, . Pumer, estate of
ustn Co., M.
uther, oseph P
uto Specates Manufacturng Co.
utovent an ower Co
very, Thomas
von .Ms
von Street Trust
yer, Wam P.
.
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
aker Lumber Co
aaban atz Corporaton
afour, Sr Robert
amert, . T
ank of rady.
ank of Commerce
ank of artsve, The
ank of Rockngham
anna Manufacturng Co
arker, George ., estate of
arker, O.
arnes Coa Mnng Co. and Coumbus Coa
Mnng Co
arrows, etcher L
arry, .
arrv, ohn nthony
artey, R.
arton Wson, Inc
232
3297
1574
24 8
4943
5 50
229
15485
3377
2505
10983
4725
195
4409
24312
4483
197
1 55
9357
14883
2778
10449
15928
240
27 88
24
4459
1 230
10 37
3777
10239
5020
3901
4784
4783
9393
201
3271
53S
2344
3227
1899
4800
999
4 82
7 2
8728
3583
3209
3158
99
1724
2 23
11913
2721
11742
1

2
3
4
9
2
9
9
2
9
9
1
8
11
5
2
10
10
13
5
5
11
7
3
10
9

8
10
3
12
12
4
2
2

2
8
3
10
1
3
1
13
3
3
4
1
2
4
13
3
12
1 cquescence reates to frst ssue of decson.
Nonacquescence notce n the case of rosvenor tterbury (C. . I -1, 4) recaed.
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4
Ta payer
astrop Mercante Co., Ltd
atson-Cook Co
atmann et a., Ma , e ecutors.
aumhoff, George W
ay State Securtes Co .
each musement Corporaton.
eacon Coa Co.1
eaver Lumber Co
ecker, S. L
ecker ros
erker Paper Co
e, ames
e-Rogers Zemurray ros. Co.
eamore, Davd -
engrath, W. .
emont Stone Co
erdge O Co
et Raway Co. of Chcago .
ems, sr., Thomas -
endhem, . M., estate of
endhem, enretta
endhem, uus, e ecutor
enham Ice Cream Co
onne, George ., estate of
entey, .
enton County ardware Co
erg Industra coho Co., Davd
ern, Inc., Irvng
ermngham Lumber Co
ernard s, Inc., George
ernd, ohn M
ernsten, . R
ernsten, anne
ernstorff, aas
esse, Ma we
essemer Investment Co
ettcndorf, oseph W
ettens, bert
ckett-Swett Lvestock Co
ckey, Mton
g Rapds ectrc Co
g Western O Gas Co
s ros. Memora Corporaton
rd, Samue
rkeand, .
rmngham Trust fe Savngs Co., e ecutor.
rn, enry
shop, Martha ., e ecutr 3
shop, Roand P
shop, Samue D., estate of
shop, Wam T
tter Root Stock arm
|ornstad, Otto
ack Yates, Inc
acke, . W
ackstone, D. L., admnstrator
oard of Ta ppeas.
No.
oume.
Page.
8124
7
529
5458

1191
981
8
107
1024
3
392
3 85
3
43
18288
14
338
11894
9
280
/ 3534
9400

80
9949
8
5
1 954
9
12 0
4555
10
523
8859
7
21
1220
4
87
385
3
1133
2018
3
U
/ 12410
28531
12
1159
29
11
127
4289
9
304
3100
2
79 4
8
158
79 3
8
158
79 4
8
158
3401
5
97
129 2
13
105
2512
5
314
989
10
8 9
13102
13
1349
3049
2
377
2 54
1
1201
5410
8
71
3340
4
291
1258

323
1258

323
4054
8
787
4971
3
5 7
5295
8
1011
2035
3
378
1488
2
35
8347
12
32
297
1
44
148 8
9
737
7150
9
427
1 134
7
1182
| 721
4
259
209
, 34 4
3
7440
5
245
10
1
41
200 9
14
130
14007
13
784
200 9
14
130
14008
13
784
5777
10
81
18115
12
20
3442
2
873
2282
2
747
10401
12
45
cquescence reates to second and thrd fssues of decson.
cquescence reates ouy to ssues nvovng compuaton of net ncome for 1918 and 1919 and I
ve deprecaton restored to ncome for 1918 and 1919.
1 state ta decson.
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5
Ta payer.
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
odgett, ohn W
togg Lttauer, Inc
oom ros., Inc
oomfed, rederck
udworth, Mrs. W. M
ue Rdge Overas Co
ue Rver Pacer Mnng Co
hunentha, S.
oadwee, Isabee M
oas. Chares S., estate of
ockhoff, arry W.
oercke Runyon
ogart, Lacey L., admnstrator Leon C. Rggs
estate
uh, Inc
Mary Waker, e ecutr 1
oggs, R. ., estate of 1
oge Co., Inc., W. S
oker Cutery ardware Co., Inc
onger- rankn Lumber Co --
onaparte, en C, estate of
onneve Lumber Co
oone, D. W
oone, .
oone, ames D
oone, W.
ooth urnture Carpet Co
orden, Spencer, estate of1
orden, |r., Spencer, e ecutor 1
os hardt, rank -
oston Store, Inc., The
oston Structura Stee Co
otsford-Constantne Tyer
oucher-Cortrght Coa Co
ouden, Chares
owen, an
owman, . W
oyce tract Co
oyd, .
oyer Co., .
oyne Cty Lumber Co
oynton, Chares T., estate of
oynton, N.
oynton Gasone Co
Co
W. C
,aw, Rosena W
r, dwn
state ta cecsoa.
Docket
No.
703
74 1
5443
1007
29393
10344
29392
10344
3535
5297
9440
501
285
10210
299
17082
10743
1139
3200
2981
1932
92 9
18119
12309
12309
2208
132 7
8077
1 52
3 57
3053
3052
3051
31 3
42
5909
5909
443
121
83
9759
11 1
7 4
79 5
2 90
74 7
9327
751
5739
10195
840
9145
5342
909
910
8384
47
5 21
7434
oard of Ta ppeas.
oume.
5
f
3

13
13
13
13
13
3
10
t.
7

8
12
11
2
3
3
11
11
11
5
12
7
1
2
a
u
9
9

4
7
1
10
7
7
2
8
.I

(
10
5
11
14
1
4
7
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Ta payer.
Dorket
No.
oard of Ta ppeas.
oume
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
rannum 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 of 1
rehmer et a., Otto T., e ecutors 1
revoort ote Co
rewer Co.,
rewster Laundry --
rggs Turvas
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 fe Sons, M. S
rooks, W.
rown rown, Inc
rown, Chares -
rown, dward T
rown, dwn M
rown, enry I
rown, acob ., trustee
rown, ames
rown, ames Crosby
rown, ohn oseph, estate of 1
rown, Rves S., e ecutor
rown, Thatcher M
rown, Water
rown, Warren
rown Co., . ...
rown Lumber Co
rowne, dward I., estate of
rowne, Water D
rownfcd, Maro
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
runncr, mma ., e ecutr
state ta decson.
5399
8572
8432
1545
1540
7390
20124
2830
730
730
2801
2801
5844
5844
539
78
14005
11 72
9173
1905
1904
3897
389
3897
11 47
20527
13792
7747
10991
9748
13932
27779
31427
7994
499
3 75
8191
111 1
11224
4947
05
111 2
12748
2975
79 7
12703
11134
21 34
4937
10995
1037
93
129
4055
17
7892
3719
3719
8
5
5
3
3
4
10
2

4
4
9
9
1
1
10
11
10
3
a
7
7
7
8
9
13
10
12
10
13

1
4
9
10
10
3
4
10
13
4
8
9
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2
2

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2

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7
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
rush, George De orest -
uck, en ., estate of
uedngen, Robert - -
uens sta ardwood Co
uffao orge Co
uffao Steam Pump Co
ugher, rederck ., estate of
ugher et a., rederck McLean, e ecutors.
u, rchbad ., estate of
u, rnest M., e ecutor
u ard, ern ce
uock, . -
urgess, Rchard
urg, Oscar
urgo, .
urgueres Co., Ltd., . M
urke, Thomas, estate of
urke ectrc Co.1
urkhart, Rosa
urktt, George W., estate of 2
urey Tobacco Co. of rankfort
urngton Overa Manufacturng Co., The.
urns, . R
urns, Samue
urns, W.
urnsde Stee Co
urr, erome P
urr, Water C
urtee et a., ertram W., e ecutors
usche, . C --
uss Co
uter Grocery Co. et a., ames
uter, Inc., ohn W
y fed, Gadys R
yron Shoe Manufacturng Co., Inc.
ywaters, . unter
y waters, P. .-
ywaters, R. S
Cadac utomobe Co. of Inos
Carns, .
Caforna rewng ssocaton
Caforna Canneres Co
Caforna Deta arms, Inc
Caanan Road Improvement Co
Camden urngton County Ry. Co
Camden Wooen Co --
Cameron, W.
Campbe, . O
Campbe et a., Nancy Carver Lathrop, trustees...
Campbe, Nge Lese...
Canaan, arry and ate
Canton rt Meta Co
5 8
12988
5855
230
3170
3170
035
035
888
888
75
13117
1311
5782
4232
8 01
12 2
1 97
2749
2038
21311
210
12 11
8 73
4753
3292
13099
13100
2 50
9447
10202
10755
2952
5978
1572
989
4 3
288
287
289
2 57
18143
3903
2228
9820
13303
4991
10 55
9313
5 31
1 17
373
304
7111
9
12

3
5
5
9
9
7
7
7
12
3

4
12
13
5
11
3
13
2
5
13
12
3
11
11
0
10
2
4
1
2
1
7
7
7

12

12
3
12
9
(
15
1
1
0
1 cquescence reates to ssue 5, as to patent group No. 2, and ssue .
1 state ta decson.
cquescence reates to deducton of contrbuton to State rewers ssocaton and affaton wth
toe emar Co.
3133 29 2
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8
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Canton Stee Ceng Co- -
Cantre Co., The red
Canyon 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
Carpenter, D. M
Carpenter, ohn
Carpenter, Mary
Carpenter, Mary ., admnstratr
Carpenter, Maud ., estate of
Carro Chan Co.
Carro Mercante Co., . S -
Carter Co., W. W
Carter, MacDonad Mer, Inc
Carter, Warren
Case Pow Works, . I
Cassdy Co., Inc
Ceuod Co
Centadrnk ters Co., Inc
Centra musement Co
Centra uto Market
Centra Savngs ank
Centra States Coa Co
Chamber of Commerce udng Co
Champon Coated Paper Co.-_
Champon Stove Co
Chander, .
Channon Manufacturng Co., .ames
Chnpn Laundry Co
Chappeow dvertsng Co --
Chareston Securty Co., e ecutor
Charters Creek Coa Co
Chatham Phen Natona ank
Chattanooga Mattress Co --
Chatterton Son
Cherokee Ochre Co
Chcago cceptance Co
Chcago re rck Co
Chcago, Indanapos Lousve Ry. Co
Chcago Insuated Wre Manufacturng Co.
7112
3141
4917
70 9
537
10
7134
7705
3031
224
720
4451
9524
2432
3 32
120 1
12493
7027
11072
11073
11071
11070
11070
104
4222
11744
89
12954
9 05
4
93 8
8543
19459
5214
2418
8327
500
8735
9598
19279
870
4039
803
7 50
12 88
3843
9 52
107
3714
057
984
127 4
110 3
11152
2380

4
2
12
8
8
5
a

s
8
8
8

1
1
14
11
3
11
8
2
7
10
4
11
10
1
3
s
8
18
4
10

4
5
9
12
10
10
10
1 cquescence does not reate to that part of decson nvovng appcaton o yers decson (1 . T. .,
ta decson.
cquescence reates to a ssues of decson e cept fourth ssue.
1 cquescence reates ony to ssues 2 and 4 n docson.
Nonacquescence notce n case of Carro Chan Oo. (C. . t -1, 4) recaed
cquescence reates to cost of bank hudug, Ita physca fe from date of acquston, and March 1.
1913, vaue.
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9
Ta payer.
Chcago Raway qupment Co --
Chcago Starch Co
Chds Co., W. ------
Chshom s Sons Co., Wm. (Chshom Shove Co.).
Chormann et a., gnes . C, e ecutors
Chormann, rederck, estate of
Choynsk, erbert
Chrstensen, N. P
Church oes Co
Cncnnat Mnng Co
Ctzens Loan ssocaton
Ctzens Natona ank
Ctzens Trust Co. of Utca
Cty Gas Co. of Norfok
Cty Park rewng Co
Cark, . ., estate of
Cark, rank ., e ecutor
Cark, Grace Scrpps and Re
Cark, arod ._
Cark, L e M --
Cark Co
Cark Co., ames T
eveand ome rewng Co
nd Snow-Church Co
nd Trndad Pavng Co. of Deaware
nd Wooen Ms
ane
Coatesve oer Works
Cobb, L. S
Cockran, . T
Cocks-Cark ngravng Co
Codrngton, the M
Coffn, Irene
oard of Tat ppeas.
Coffn, Wnthrop
Coghn ectrc Co
Cohn Sons Co., M.3... -
n-Goodman Co
Mrs. W. C
W. C
Coeman, ames
Cotz, en|amn
Coege Pont oat Corporaton
Cons, W. C. and C. C
Cons and wfe, W. D
Conson, ohn W
Comer-Green Lumber Co.
Coumba Theatre Co
Coumbus read Co
Coumbus Cannng Co
Coumbus Coa Mnng Co
Co vert, Warner L
Combs, sr., W.
cquescence In so far as fecson determnes that ty as Oo. of Norfok and rgna a way
Power Co. were affated wth each other.
cquescence reates to aowance of offcers saares.
cquescence reates to deprecaton aowance.
Me.
oume.
Page.
39 4
4
452
19427
13
13 4
4127
3
855
1840
3
1070
10345
10
920
10345
10
920
14448
14
9
4380
7
25
352
4
10 7
8427
8
79
412
1
518
148
5
15
3373
2
1239
/ 11730
14199

4 8
7973
10
925
820 .
I
1085
8015
12:
425
53

491
1707
2
555
8049
9
4 0
5785
4
35
3 0
5
1291
73
1
87
1 9
1
234
17294
14
1209
029
8
49
545
3
429
/ 8 03
1 097

1242
713
9
547
3801
3
215
04
8
4 8
4 85

415
5930
8
421
f 1155
12498
12
702
I 28049
1879
3
1071
73 1

87
9238
71G7
7
475
9134
7
903
9133
7
903
4891
3
835
3004
3
947
7 4
1
534
598
5
102
11148
7
913
550
1
5 1
2091
12
25
1414
3
22
5823
4
112
9582
10
1085
3209
3
891
9170

23
10182

249
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10
Ta payer.
Docket
No.
I oard of Ta ppeas.
oume.
Comey ohnson Co
Commerca Co. of gypt, Inc.-
Commerca urnture Co
Compton, nna L., e ecutr
Compton, orace ., estate of -
Comstock-Caste Stove Co
Concord ectrc Co
Conen, Wam
Connectcut ectrc Manufacturng Co -
Connectcut Natona Pavements, Inc
Conne, zra ., estate of 1 -
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 a_
Cooper, . . T., estate of
Cooper, . T
Cooper, C.
Cooper, dna
Cooper, Samue
Cooper- rannan Nava Stores Co
Corbett, ott R
Corbett, amton -
Corbett, enry L
Corman Co
Cornng Gass Works
Corscana Gas ectrc Co
Cotton Concentraton Co - -
Couch, . C
Couter, |r., Chares
Covert, sther ee 1
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
Crampton, atharne S., e ecutr 1
Crampton, Orson L., estate of1
Cranda orse Co
Crane, rederck G., estate of
Crane, Rose P., e ecutr
Cravens, Water
Crawford Loan bstract Co
state ta decson.
cquescence reates to a Issues e cept Gaoway note ssue.
11133
5810
507
8519
8519
3347
4355
815
7549
3448
123 8
7179
9830
11584
97
555
8121
12704
1 14
1741
331
3 43
11352
12 34
3144
220
220
959
100 8
1183
1 43
11837
227
982
4499
4 25
202
8181
20048
5534
91
91
805
2121
970
20230
2283
113 2
113 2
7924
10 95
15374
1 789
10 95
15374
1 789
3381
7 81
8
3
8
u
11
4
7
1

3
11
7
7
8
1
1
10
11
9
5
4
3
13
9
7
4
4
1
9
8
8
8
13
9

4
1

12
12
2
10
10
8
3
10
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11
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Crav, ames R
Cravton, . S. -
Cremr, .
Cremn, T. O
Orescent Cap Co., Inc
Crescent Coa Mnng Co
Crews, C. W., estate of
Crews, Davd W., estate of 1
Crews et a., rank .1
Crews, ate Downng, admnstratr .
Crder ros. Commsson Co
Croker, |r., Rchard
Crompton udng Corporaton
Crosbv-Chcago
Crosby, verett U -
Cross Investment Co
Crossman, are L.. 1
Crothers, R.
Grouse, Cavn
Crowe Corporaton
Crowe Lumber Gran Co. --
ssocaton
Crown
Crown Manufacturng Co.
Cruger Co
Cuba Grapefrut Co., Inc.
Cunan, . S
Cuum, Lous W
Cummngs, W. -- --
Cunnngham Sons Co., R.
Curee, W. 8 --
Curts, rank G., estate of
Curts, arret ., deceased, estate of
Curts, Lous
Curtss, George W ,--
Cusack Co., Thomas --
Cushman Manufacturng Co., . T
Cuyahoga Co., The
D.
Dagger Co.,
Day News Pubshng Co., The --
Day Pantagraph, Inc.1
Darada Reaty Co., Inc
Da on, dward
Daton Gymnasum and Swmmng Schoo, Inc..
Dav, Davd R., estate of --
Dana Co., Inc., Wam
Dane ros. Co
Darng, ay N
Darrow, rank D
Dartt Co., C.
Davs, C. R-.
3 4
1130
9197
9198
10557
2208
981
9010
9010
981
128
5085
13847
09
4301
11 74
37 4
799
7052
19 19
5841
3717
5411
3
118
532
9450
11974
7954
15828
1 487
5914
2 78
10 40
7099
1 38
4720
442
111 4
2327
1987
2143
3721

14733
4734
4158
412
5275
1 57
194
1373
110 4
10840
302
929
1372
10299
7
11
5

10
5
8
8
8
8
10
12
2
14
4
2
10
s
11
5

12
11

3
9
1(1

3
10
4
3
2
3
13
4
9
5
2
1
3
11
7
4
8
5
10
1 state ta decson.
cquescence reates ony to determnaton of pad-n surpus at date of organzaton and rates of
deprecaton.
G
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12
Ta payer.
oard of Ta ppea3.
oume. Page.
Davs, I. M
Davs, Mrs. W. -
Davs, Sade S., e ecutr 1
Davs ndrews Co
Davs Co., The
Davs Yarn Co., Inc
Dean, nne L
Deck Camp Tank Co
Decrand Turpentne Co
Deano, ugene, estate of
Deano, Moreau
Deano, Morcau and Wam ., e ecutors...
Deatour everage Corporaton
DeLsser, orace, estate of1
Deto Grass Rug Co.s --
Denhom Mc ay Co ---
Denta Co. of merca
Denver Crown Ry. Co
Depost Trust Savngs ank, e ecutor..
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 ore, red ...
Dewey, Mdred McLean
Dbbe, Leon N., e ecutor ..
Dbbe, Lous N., estate of .
Dcenso, epo -
Dckey Grocery Co., L. Z
Dcknson, .
Desng, red D., e ecutor
Detrch, Gustav
Detrck, erman T
D, Lews
Dng Cotton Ms.. -
Ds ros. Co
D e Manufacturng Co
Dobson, ames
Dockum, arry --
Doerfer, Magdaen, benefcary, etc
Doernbecher Manufacturng Co
Doherty Co., en C -
Dog, Inc., Wam S
Domenco ante s Sons, Inc
Donaghey Rea state Constructon Co.
Donadson Co., Inc., L. S
Donadson Iron Co
Donadson Reaty Co
Donason, re M., e ecutor 1
2 1
8219
3877
2 91
5497
885
1552
11227
182
15 10
111 5
15 10
10892
2459
92
43
20950
3331
118
532
12195
8112
5025
8573
105 3
13038
5 3
3005
8 30
13574
194 2
5040
10012
2528
2528
1352
15
5193
548
83 7
9730
45 3
1794
3575
475
8 3
3874
14551
14387
19152
10300
13905
1 312
44 8
1050
9974
57 2
25359
1 29
2
8
9
2

8
3
10
4
10
10
10
12
2
7
2
15
3
11
7
7
7
9
13
4
2
7
14
13

11
1
8
1
10

3
2
2
1
1
11
13
11
11
13
2
5
12
9
12

state ta decson.
cquescence reates to frst
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13
Ta payer.
Docket
No.
oard of Ta ppeas.
oume. Page.
Donason, ohn ., estate of 1
Dorn, Loue, estate of
Dom, Rene
Dorn, R.
Dorn Co., R.
Dougas, George P. and esse P...
Dougas Park ockey Cub
Douty, .
Downg, Robert
Downng Co., T. D
Duffed et a., Dve .f e ecutors,
Duncan Co.,
Dunn Co., ohn
Dunson Ms 1
Durabt Stee Locker Co
Durkn, P. rank
Dustn, nne M., estate of
et a., George R., e ecutors .
.
age Shoe Manufacturng Co., Inc.
are, s P
ast Lvnn 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
aa ro., Inc., G
kn., Luther
ott, W.
m Cty Cotton Ms
m Cty Nursery Co
mhurst Investment Co
Paso Southwestern Co
Paso ectrc Co
Paso ectrc Ry. Co.
sasser, Neson ., e ecutor 1
mpre State nance Corporaton..
ngneers O Co
1 29
11218
11220
11219
18030
288
5738
13329
11449
227
14954
3152
7020
17019
3121
3 44
8 29
3351
5593
135 5
12515
8 4
121 3
4240
97 2
2 85
2 84
2 8
79
1171
9354
3940
3940
1842
10021
581
413
4 95
2270
995
709
11954
. 1803
10 39
7 3
503
22557
72
7049
7048
11448
805
10399
11395
14 31
8
12
12
12
12
1
9
9
S
2
14
8
10
5
4
8
5
4
12
13
11
8
3
10
2
2
2
2
2
10
4
4
1
10
1
7
1
2
t)
7
10
12
9
5
t
11
2
10
10
12

14
to statute of mtatons,
to thrd ssue of decson.
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14
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
ngander, . L
ngeman, .
ngteman, M. S
nns- rown Co
ntress rck Co
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..
ves, . C
wng, oseph Neff
yestone, rank
ysenbach, Oscar
.
archd, Marcus D., estate of 1
archd, Nee ., e ecutr 1
atoute Iron Stee Co
aketnd Shp Co
atco, George -
arow, Samue, estate of 1
arm Impement Co
armers Merchants Natona ank
armers Merchants Natona ank of Nocona,
Te
armers Merchants State ank --.
armers ank Trust Co., e ecutor1
armers Cooperatve ssocaton
armers Cooperatve Co --
armers evator Co
armers ue Co
armers Loan Trust Co., admnstrator 2
armers Loan Trust Co. and Isabee W. Tford,
e ecutors
armers Unon Co-Operatve ssocaton.
aro- ttc Co
awkcs, Lese
ear Co., Inc., red
edera earngs Co., Inc.
edera Gas, O fe Coa Co., trustees for
edera odng Co -
edera Pate Gass Co --
eges, Ma
edman, Davd
e, .
eows Medca Manufacturng Co.
. and rgna S-.
enner, Charot
erry Market, Inc.
bre Contaner Co
bre Yarn Co
cken Tobacco Cc
state ta decson.
1 Nonacquescence notce n ths case, pubshed n Cumuatve uetn I -2, recaed.
. .
802
193
5981
8471
1000
10251
10250
2333
737
2208
1440
3 2
7347
3221
797
1 9
140 8
4 3
21107
19022
19022
10547
370
1 01
72 8
9823
5570
12990
1811
10914
54
1 342
13424
210
1399
328
11055
737
11305
9327
9233
7888
2003
1055
03
5 04
2089
55921
8980/
221
3 71
7475
7244
10440
1
8
8
10
0
7
7
3
13
5
12
3
5
3
8
2
13
12
10
9
9
11
a
8
7

8
10
2
10
7
13
13

8
3
13
1
14

9
15
1

13
3
7

9
10
10
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15
Ta payer.
Docket
No.
oard of Ta ppeas.
oume. Page.
dea Investment Co
dety Trust Co -
dety Trust Co.1
ed 4 Co., Marsha
er bre Co
nance poraton Deveopment Corporaton
of merca
nck Co., enry.
nk Co., George
nsver, 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 Los ngees
rst Natona ank of Marow, Oka
Natona ank of Rock Rapds, Iowa
Natona ank of Seepy ye, Mnn
Natona ank of Stoughton, Ws
State ank
she, enry R.
she fe Marks
sher, Car G
tchburg Steam ngne Co
ach, ohn
a num Insuatng Co
emng, C. ., estate of2
emng et a., dmund ., e ecutors 2
eteher, Chares ., estate of3
e be e Co
nt, rnest P
nt Rver rck Co
orence Ms, Inc
orda Grocery Co
oyd, T.
oer Wa Paper Co
oey, D O
ontus Shoe Co
orbes, Rose D
orbes, W. S
orgeus, . W
orrester, D. ruce
orrester, W. S
orrester-Nace o Co
orstmann, uus
ort Orange Paper Co
ort Wayne ngneerng Manufacturng Co
ort Worth Warehouse Storage Co
oster Gasse, Ltd...
ostora Mng Gran Co
ower, sr., . S
o Sons, Inc., W. P
o Rver Iron Co
rancescon Co., . C.s
rancs, T. -
rank Seder Co. -
983
4920
13 38
15279
24877
805
4339
13 9
4 8
980
740
913
19
8021
1280
2817
9889
87
2334
2790
2581
13912
13912
7594
433
12809
5120
7212
7212
785
13829
17945
74
10383
151
12221
10103
.13118
9944
1023
7141
2881
1057
10577
190 4
2521
41
489
38 4
9232
17191
32 0
1 389
4743
10585
2525
10 14
2

13
14
M
-1

8
_
2

1
7
5

9
8
7
2

14
14
7
1
13
5
9
9
9
13
12
L
9
1
11
9
12
7
7
7

12
12
12

1
2

5
11
4
15

Id
2
13
1 cquescence reates to deducton of ta es on rea estate and persona property,
state ta decson.
1 cquescence reates to frst ssue of decson.
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1
Ta payer.
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
rederch Sons Co.,
rend, George
rend, Oscar, e ecutor estate of erman . Meyer.
rschkorn, . S
rost et a., . Y., e ecutors..
ruen Investment Co
uer, O. R... --
uton, Guy
urst ros. Co
a.
Gaats, erry
Gaen Paper Co
Gaumbeck, C
Gavn, ohn M., admnstrator.
Gambee, Wheeer
Gamon Meter Co
Garber, . . -
Garber, M. C.1 -
Gardner, . ---
Gardner Governor Co.
Gardner Prntng Co.
Garretson, Sopha M
Gaskns, . W...
Gassner, Lous
Gate Cty Coffn Co
Gatff Coa Co ----
Geger raverman urnture Co.
Gem State Lumber Co
Genera Lead atteres Co
George, Mke
Georga Car fc Locomotve Co.4
Docket
No.
oard of Ta ppeas
oume.
10 15
22514
3182
3253
307
92
92 7
11423
2194
495
12028
5929
98 5
9707
17882
20128
9518
11307
391
3412
5000
10 2
7879
10441
112
10801
93 2
33 2
10747
1377
10 41
820
3972
395
3708
14097
3710
13909
5218
321
50 1
5818
4242
4017
4517
11084
190
3984
718
5774
3131
18
3
3
1
7
8
7
3

10

10
8
12
1
2
8
4
7
12
2
11
11
2
8
5
9

4
1
11
11
7
5
4
10
4
4
3
8
2
2
2

2
1 state ta decson.
cquescence reates to ssue as to whether the ncome reazed under agreements of December 14, 1018,
Is 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.
cquescence does not reate to that part of decson nvovng appcaton of vars decson (1 . T. .,
1135).
cquescence reates ony to ssue 1 n decson.
G
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17
Georga Manufacturng Co
Georga State Savngs ssocaton.
Georga eneer Package Co
Germantown rad Co
Gerst et a., erbert .
Gettys.M.
Gant Tre fe Rubber Co.
Gfford, arry N.
Ges, da R
Ges Co., George
GUen, Margaret
Gespe, Rchard T ---
Gespe Coa Co
Gam Manufacturng Co
Govch Co., oe.-
Gson, arry W
Grard Coa Co
Gackner Reaty Corporaton, ohn.
Gadv Manufacturng Co
Gobe Outet Co
Goener urnture Co
Goerke Co., The
Goconda O Co..
Godberg, arry S
Godberg, Lous M
Godberger, Leo G
Godman,
Godman, I.
Godman, Lous ., eatate of 1
Godman et. a., Robert P., e ecutors ._
Godschmdt et a., Georgette, e ecutors
Godschmdt, enry P., estate of 1
Godsmth, Lan M
Godsten, Davd S
Godsten, as
Godsten, Mrs. as
Goodn, C. W., estate of 1
Goodng, Mrs. . G. ..
Goodng, Mrs. red W. -
Goodatte, Raymond R
Goodman, mma ., estate of 1
Goodwn, C.
Goodwn, Moe
Goodyear, Chares ., estate of 1
Gopher Grante Co
Gordon urnture Co
Goss Prntng Press Co
Gottfred, edwg ..
Gotteb ros -
Gouston dvertsng gency, Inc., rnest .
Graft, George
Gramercy Investng Co. of New York
oard of Ta ppeas.
No.
oume.
Page.
1718
5
893
5352
4
748
3479
2
584
5215
3
133
I 3879

3888
53 5
4
58
53

53 7
3495
3
441
9412
7
1249
2 77
3
334
153
1
10
5387
4
335
1785
2
75
3851
2
1317
12509
13
92
9 4
1
9 7
774

8 4
2395
2
1221
3724

105
10338
11
151
227
1
337
14029
10
1 5
3500
2
1290
5992
7
8 0
1017
7
955
5389
4
1073
11 15
9
1355
243
1
249
11907
12
874
11173
12
874
114 3
11
92
114 3
11
92
1 138
14
1010
1 138
14
1010
335
7
151
51 1
3
425
82 8

1142
82 9

1142
4220
8
1277
32 4
4
389
32 3
4
388
4007
4
1 5
10124
12
823
21337
9
1209
21338
9
1209
10304
11
833
31
5
121
2470
3
311
5224
11
3 5
8553
5
297
887
1
84
/ 739
18082
-
549
24 31
8
11
/ 135
2374
8
13
1 state ta decson.
Revokes nonacquesoenoe pubshed n Cumuatve uetn I-1 at page 7.
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18
Ta payer.
Gramcrcy Investng Co. of Pennsyvana.
Grand Rapds Natona ank
Grant, een M. W., estate of 1
Grant Constructon Co., George ..
Grant Trust Savngs Co., trustee
Gras, Rudoph
Graves, George
Grav, |r., . .
Gray, W. -
Gray Davs, Inc -
Gray Prntng Co., The
Graydon, Samue
Great ear Sprng Co.1 -
Great Northern Ry. Co.
Green O Soap Co
Greenbaum, Mchae
Greenebaum, Moses ., e ecutor ..
Greene Co., .
Greenve Coa Co
Greenve Opera ouse ssocaton.
Greenve Te te Suppy Co
Greenwood Cemetery ssocaton...
Greever, Mr. and Mrs. .
Greyock Ms 4 ---
Gresemer, Chester D
Grffn, P. P...
Grffth, . C
Gr, Inc., ugust
Grmmer, enry
Grttman, red ---
Grover, rthur .
Guarantee Constructon Co.5.
Guarantee Tte Trust Co
Gueph ote Corporaton
Guenther, Pau
Guggcnhemer, . Randoph
Ournee, Water S., estate of
Gus Sun ookng change Co
Gutterman Sons Co., . M
Gutterman Strauss Co
.
aas, Otto
adaway, ohn
adden, |r., et a., ohn spnwa, e ecutors _
addcn, Mare Torrance, estate of 8
agerstown Shoe Leggng Co
a, Chares Ward
a Co., Inc., . .7
aam, dwn C
aenbeck, arry C, estate of
Docket
No.
2373
2111
13792
2584
3 59
2340
8113
71
4552
143
4503
1477
10489
8433
11850
3574
383
10124
3127
3784
2311
1 8
3000
5 90
1192
10827
1154
11400
7372
3393
1 025
1159
1828
1848
0 3
10 4
1755
13 25
10441
1078
10458
234
3542
12717
9421
9421
4 3
11 50
4 12
3582
12470
oard of Ta ppeas.
oume.
8
9
13
5
3
5
7
2

1
4
2
12
3
2
12
5
3
5
1
2

9
10
7
11
9
3
11
3
10
7
2
9
12
13
3
13
10
10
1

3
2
10
1 state ta decson.
1 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 It.
cquescence n decson n so far as the oard hods that there s no defcency for 1917.
cquescence reates to fourth ssue of decson.
state ta decson nonacquescence notce n ths case pubshed n Cumuatve uetn II-2, page
47, revoked.
Nonacquescence notce n the case of . . a Co., Inc. (C. . -, ), recaed.
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19
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
aenbeck, obn ., e ecutor
amton Chambers Co., Inc
amton Manufacturng Co
ammack, Rsh Sons Co
arnmersehmdt ranzen Co
Mammon, ram ., estate of 1
ammond, .
ampton Co
ampton Cotton Ms
ancock Constructon Co. et a
anev and wfe, dgar P
any, W. W
ansen, ans C, estate of
ansen, . fred, e ecutor
anson, Maud astngs
ardy, George W
armony Grove Ms, Inc
arnsberger s, Inc
arrs, en 7-.
arrs, Chares L., admnstrator estate of Wam
L. arrs, deceased 1
arrs, Sam .
arrs, Wam L., deceased, estate of 1
arrs- mery Co -
arrs Grocery Co., Inc., W.
arrods Motor Car Co -
art Cotton Ms.., --
art, ohn W
artford Connectcut Western R. R. Co
artford- armont Co
artford at Cap Co - -
art-Wood Lumber Co
aske, George S., estate of
aske, . mory, estate of
aske, athryn M., e ecutr George S. aske
estate
ass, . S. --
astngs, ce M.. -- -
astngs, O.
atze ucher, Inc.2
aupt, oseph
ausmann, Lous, e ecutor 1 ...
ausmann, Theresa R., estate of1-
averstck dward
awkns, C.
awks Nurscrv 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
state ta decson.
cquescence reates to second ssue of decson.
12470
131
2507
1051
13751
10914
111 3
2054
589
11758
348
851
744
744
5109
7981
4500
7053
10980
442
8 14
9 23
442
113
3884
184
834
9032
12781
391
2021
901
7400
2984
4335
7102
4335
14817
510
5107
9501
11-151
5781
5931
5931
9882
418
14 9
844
9584
7247
9584
13119
2247
10285
10285
10
1
3

12
10
10
2
2
11
5
0
G

S
5
2
7
II)
5
11
5
10
3

2
7
2
12
7
5
2
t
2
13
8
8
10
(
5

13
0
1
-1

7
t
12
2
9
0
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20
eath, . -
euthcote, ruce, admnstrator 1
eaton Constructon Co., C. T
eneman Lumber Co.
ed, ntonette ., e ecutr estate of 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 Co., . C
enderson Cotton Ms
enderson Overand Co., The
enderson, Mrs. ce D., e ecutr .
enderson, |r., Mrs. S. -
enderson, |r., S.
enderson Tre Rubber Co
ennger et a.,
enry, ohn
cnrv, Matte ., conservatr 1
enry, R. D... - -
enser rewng Co., oseph
erad-Despatch Co
erenden, en C, estate of1
ermabrecht, ohn
eron Meta ed Co
ess ros.
essenbrueh et a.. erman M., e ecutors
esscnbruch, Ida M., estate of --
euben, Inc., G.
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.
gh et a., urace S., benefcares
ghand musement Co
ghand Land Co., Ltd
ghands Casket Manufacturng Co..
U1 et a., G. ., admnstrators 1
, . ...
, . L. -
, Lena G
enmeyer, . ., estate of1
enmeyer, Mary, e ecutr estate of . . -
enmeyer, deceased 1
man M. P. G
nckey, Raph L
t ogey Lnseed Co 1
tcock, abert
Docket
No.
oard of Ta ppeas.
oume.
015
7
11141
8
11944
r 11
13 95
10175

1988
3
1988
3
4575
10
9073
9
9072
9
4575
10
5272
5
5504
4
477
4
1875
2
1917
2
191
2
11953
12
205
9
375

72 8
7
3545
3
11874
12
455
4
983
5
752

323
2
8039
7
17907
10
17907
10
13125
13
7878
8
4120
7
5503
/ T
3788
4
7431
5
3 7
2
3 7
1
702
7
7253
0
7253
9
4 91
8
291
7
531
3
2320
2
532

4220
8
1 89
3
215
9
5800
8
18 2
2
18 2
2
2372
2
4193

7482
4
107
4
1 state ta decson.
1 cquescence reates to ssue as to market vaue on
cquescence reates to frst ssue of decson.
cquescence reates to thrd ssue of decson.
M - N I, of tubar owned oa that t
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21
oard of Tat ppeas
No.
oume.
Page.
3081
4058
8
787
3080
4057
1
787
7729
9
1353
721
7
1277
134

442
4 3
12
10 7
7914
8
1272
11
4
474
82
2
511
5
1
958
7970
10
T05
1784
1
124
8745
9
13 0
102 1
10
1317
7991
8
12 7
15000
11
89
990
4
1020
5271
8
397
147
2
549
3 33
3
97
10241
7
299
2390
3
84
1593
5
7 1
8159
7
70
14090
30958

21
8494

13 4
1 77
2
1099
5448
4
175
12489
12
10
12492
12
510
419
4
2 1
283
1
197
1170
2
83
3553
3554
I 3
1259
9975
12
1
3351
5
711
132
4
370
33
1
542
7142
8
30
748
14120

949
9104
8
20
90
11294

242
11204
12
818
11027
9
31
3511
3
441
15
1
130
3 21
10
1004
9801
12
39
9801
12
39
2503
2
828
292
7
495
ochschfd. erthod.
ochschad, arod
odges, red G
oe Co., Inc., R
of rau Co.1 -
of rau Co
uffman. rnest Gustav, estate of._
offman, . C
oden Martn Lumber Co
ongsworth Turner Co
omes, Lea ., estate of
ot-Grante Ms Co
ot Pad Ms, Inc.. M
oton Co., rank
ome Industry Iron Works
ong-Cooper Co
ood, Chares .
ooper, arry
opkns, Water L
ortenstne. . L., coadmnstrator s-
oskns, ohn
oskns Lumber Co., . S
ote Grune-wnd Co., Ltd
ouckCo.. Ltd... -
ouse errmann
ouston et Termna Ry. Co.
ovey, Peter P ..
ovev Co., C.
we , red
owe, Thomas
ower Seaman, Inc
ub Dress Manufacturng Co
ub Shoe Co
ub, Inc., The
uber, Wam D
udson, Chares I., estate of _
uey, . L
uff, ndrews Thomas
ughes Coa Co
ughes Co., d. S
ughes, ohn N
ughson, rank C
ubert, dmund D., estate of
ume, .
umphres, C. C...
unng Mercante Co
unncutt, Mary L
unt et a., the P., e ecutrces 2.
unt, ohn ., estate of 1
unter Coa Co
unter, Mrs. Oe
cquescence reates to frst ssue of decson.
1 state ta decson.
1 cquescence reates to thrd ssue of decson.
state ta decson acquescence reates to ssues concernng checkng account, rea estate, and penson
fund.
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22
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
untngton Cearfed Teephone Co. and Sum-
rnerve Teephone Co
upfe Co., Inc., . Chr. G.1
urey, . W -
uron Portand Cement Co..
utchns Lumber Storage Co.2.
utchnson, ames M
utchnson, Wam N
utchson, Chares 1
uyer s
yams Coa Co., Ltd., et ah, Robert P
yme Pantng Manufacturng Co., Lous.
Inos Merchants Trust Co., e ecutor 4
Inos Merchants Trust Co., e ecutor estate of
Wam R. Manerre, deceased
Inos Paper o Co
Impera urnture Co
Independent rewng Co. of Pttsburgh 1
Independent ectrc Machnery Co
Inde Noton Co.
Innes- ehney Optca Co
Internatona oer Works Co
Inter-Urban Constructon Co
Iron Cty ectrc Co
Iron Cty Improvement Co
Irwn, enne I., e ecutr estate of Mary .
McCahU
Irwn, .
Irwn ue Co., .
Isaacs Co., Inc., Reub
Isand Lne Shppng Co
Israe, oseph
Ives, ome
.7.
ack, Cec M
ackng, D. C
ackson, nnette T.7.
ackson, George .7..
ackson, ames .
ackson, Ws .7
ackson Tnde.7
ackson Sanatorum ospta Co.
358
9834
7339
3334
4973
3307
11284
11285
8053
1357
1445
219
2903
11204
310
770
1 929
3242
2742
1023
33 8
2322
4387
103
2138
2547
9392
9030
59
3414
27780
31428
5 4
14995
17 2
4272
9001
9002
12944
12945
1599
1785
9003
9000
3089
1
9
8
9
4
11
11
13
12
4
4
9
4
3
-3
7
3
4
4
4
2
8

1
4
13

13
9
11
11
12
11
11
9
1 cquescence reates to good-w and bad-debt ssues.
1 cquescence does not reate to that part of decson nvovng appcaton of yors decson (1 . T.
1135).
cquescence reates to deducton of cost of wardrobe and traveng e penses.
4 state ta decson acquescence reates to ssuos concernng checkng account, rea estate, and
penson fund.
cquescence reates ony to ssue 1 n decson.
cquescence does not appy to that part of decson reatng to appea of Guaranty Constructon Oo.
(2 . T. ., 1145).
cquescence does not reate to tentatve ta ssue.
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23
Ton payer.
Docket
No.
oard ot Ta ppea .
oume.
acobs, Wam M
ames, . R
amestown 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 0
ohnson, dwn M
ohnson, anne W
ohnson et a., omer S., e ecutors 1
ohnson, . L
ohnson, |r., ohn ., estate of
ohnson, ate, estate of
ohnson, Ncs
ohnson, R. ., estate of
ohnson, Robert G., e ecutor
ohnson, Sarah L., estate of
ohnson et a., Seymour, e ecutors 3
ohnson, Stephen O., estate of1
ohnson, T.
ohnson, Theodosa, e ecutr
ohnston, . T. M
ohnston. Mary rg, e ecutr a
ohnston, W.
ohnstown udng and Loan ssocaton
ohnstown Democrat Co., Inc
oet-Norfok arm Corporaton
ones, . W., admnstrator
ones, George C
ones, enry M
ones, ersche
ones oow Ware Co -
ones Lumber Co
ones, Mrs. . W., estate of -
ones Co., T. P.. -
ordan Marsh Co
oeyn Manufacturng Suppy Co
oyce- oebe Co., The
ume Reaty Constructon Co
ustus Parker Co
.
ahuku Pantaton Co...
aser, rthur
1 state bu decson acquescence reates to vaue of stock,
state ta decson.
3133 29 3
10742
40 8
92
10798
140 0
215
3222
1533
541
801
802
9047
8353
8352
75 5
9877
11250
8259
1415
15301
9550
10748
3839
7442
32 5
7441
7441
7442
812
812
9550
870
3839
84
10928
352
15298
2898
1 47
795
8218
48 4
7325
12 2
944
14751
3275
8218
4294
4458
9809
42 7
11758
13770
1915
1289
11
2
1
12
15
4
3
2
3
9
9
10
9
9
7
8
13
5
10
8
11
8
4
10

10
10
10
10
11
7
4
7
12

2
8
8

1
12

8
2
3

11
13
12
2
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1
3
-
0
1
-
2
2

0
3
:
3
3

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24
Ta payer.
atenbach Stephens, Inc
rper, Lous
nawha Cty Co
nsas Mng Co
ansas Savngs fe 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..- -
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 of1
aufmann, Raymond M., e ecutor 1
aweah Lemon Co
ay, Waace G.
can, amton
eeer, Isaac P
eeer rass Co
eeer Reaty Co
eenan, athcrne P.1
eener s O, Natura Gas ue Co
ee vs_Reaty Co., Inc.1
em,
eer,
eer
ec
ee
Docket
No.
.
ngneerng Corporaton.
D_
da .
Mechanca
arry P.
Thomas
eogg Commsson Co
ey, rmn L., admnstrator 1
ey, Dane
ey, .
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 1
ennedy et a., nne S., e ecutors 1
ennngton Co., R.
ennngton Reaty Co
enny ros. Co., The
enosha rut Co
entucky ectrc Lamp Co
entucky Land, Ga O Co
942
19702
22231
100
14 30
2835
1827
11384
14 19
1525
13244
22355
1259
4707
12811
12812
815411
11845
4 98
2 49
4 98
10907
10907
4583
10102
10745
379
218
218
352
78 2
10489
2488
291
741
891
703
3945
7092
83 5
179
7092
082
8351
12198
523
523
5244
5244
783 1
7837/
7834
1530
410
14337 I
1473 I
oard of Ta ppeas.
uuno.
12
14
13
3
o
a
13
a
10
15
1
5
0
5
2
5
11
11
5
10
10
8
9
9
7
0
12
4
2

9
9

8
10
3
8
8
9
14
3
3
4
4
8
8
1
2
14
2
Page.
I state ta decson.
1 cquescence reates to deprecaton and obsaesocnco ad|ustments.
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25
oard o( Ta ppeas.
oume.
Page.
3
1207
9
1208
13
78
IS
359
4
1294
8
475
9
502
10
98
4
1253

884
10
98
10
308
11
29
8
981
8
981
8
981
8
981
3
1348
3
755
7
3
771
9
11
979
11
979
e
71
9
1335
11
779
2
3 9

17
1
1048
10
1234
7
790
5
1274
13
1300
2
1107

3
143
3
143
12
431
5
9
4
3
1
24
7
917
1
417
13
784
4
520
4
1027
9
1194
esser, George ., osten of1
etcham, . R
eystone Natona auk of Pttsburgh, Pa.
er 4 Son Co., Inc.,
Car oundry Co
, Davd
ar
w a Day, e ecutr
ng Lumber O Co
-Parker, Inc
Robert C, estate of-..
Dg, Wam C
vngsey, 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
et a.1., orence L., admnstrators .
ster, Wam ., estate of
gter Land Improvement- Co. .
au, an Petersom, Dunap, Inc.
auber mbrodery Works
Dry Goods Co
en, orence L.
ng, Mary Cark... -
se, mer
napp, tte
nffn, Leonard
napp ros. Co
no , Chester
no et a., Grace M., e ecutors estate of Seymour
. no
no , Seymour ., estate of
no ve rck Co
nutson ardware Co
obbe Co., Inc., Php
och Co., Inc., Iss
oee, Wam . _.
oen ros., Inc
ocpf, oseph O
oynos Co
ongsberg, Nathan..
onod, arbara
3182
14531
10805
10990
931
119 8
9942
8283
9 95
8315
8283
729
12288
8392
821
8409
8217
7 0
2879
3094
4482
3707
1198
180 1
3707
1198
180 1
12355
881
12433
2874
4004
4005
0 1
102
10157
1495
11318
2775
7959
19430
2441
293
293
8844
4384
3308
322
093
712
1400
4130
01
9 70
1 state ta decson.
1 cquescence reates to ssue as to whether the ncome reazed under agreements of December 14, 191S,
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.
1 coneMtrnce reates to n ssues e cept Issue wth respect to queston of aowance of amort utou n
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2
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
rauss, e ander
repke, . C
reg Tannng Co
ru, rancs
uhr et a., urgen...
uhr Sons, urgen.
unke Co., Inc
urtz, Ma
urtz, Robert
urzman, Samue.
Lackawanna Trust Co. et a., e ecutors .
La rancase Pece Dye Works
Lake, . W -
Lam, . W
Lamb Lumber Impement Co
Lamborn, rthur
Lambrecht, Rchard G.
Lancaster Lens Co.2
Lang, ohn
Lang room Co
Langdon, arret
Langenbach, dward
Langey Co., W. C
Langey Mchaes Co
Larrowc Mng Co
Larsh, D. L
Lash Co., Lee
Lassen Lumber o Co
Lathrop Co., Inc., C. P
Laurens Trust Co
Lautz Marbe Corporaton
Law fe Credt Co
Lawrence, . M
Lawson, ohn
Lawson, W.
Lee, Mrs. eanne
Lee, ohn C
Lee, Matda oz
Lee Co., Wson
Lefang, . M.
Lcggett, Davd G., deceased, estate of .
Lehgh udng Corporaton
Lechner ordan Co
Letter, Lev Z., estate of --.
Leghton ros. Prntng Co
Leghton Suppy Co
Leand, enry M
Leand, Wfred C
Lembcke Co., Inc., ernuth
Leno Land Co
Leonard, rthur
Leonard, Chares M
3 11
1071
3318
1 985
1343
1343
3519
/ 11411
1 159 0
f 11412
15959
10 59
123 S
150 8
2010
1323
14242
934
83
11 03
14370
8281
9842
2131
25 7
420
2733
12 21
190
3431
03
3930
74
508
135
2284
4510
5985
5984
7 7
10911
7309
3847
07
48 7
1 17
10329
5744
77 8
77 9
849
1083
315
3157
5
7
4
10
12
12
3
11
14
2
8

13
10
10
12
9
7
2
2
9
3

5
3
5
5
13
2
12

10

3
7
4
15
8
7
8
8
1
5
4
4
state ta decson.
cquescence reates to ssue whether nvested capta (or 1910 shoud be reduced on account of the
1918 defcency barred by the statute of mtatons.
1 Nooacquescence notce n ths case, pubshed n Cumuatve uetn I -2, page , recaed.
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27
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Leaser ros. Co.
Lester, Lucy C, estate of
Levee, nna L. Stark, e ecutr 1
Levn, N
Levne ros. Co., Inc.
Levne, yman
Levy Co., Ma
Lews, T.
Lews- a Iron Works
Le ngton Reaty Co
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
Lebman-Swaney Reaty Co
Lfe Savng Devces Co
Lggett, . T
Lhue Pantaton Co., Ltd
Lmbert, Chares P., estate of
Lmbert Co., Chares P
Lndahr Santarum, Inc
Lndsey-Long Coa Lumber Co
Lnn, Gus
Lster, ames R...
Ltte, Theodore W
Lve Stock Natona ank
Lvermore, Norman
Lvermore Co., Norman --
Loyd, ugustne M
Loyd, dward _.
Loyd, Wam S
Locke, Thomas
Lockport Paper Co
Locks and Canas on Merrmack Rver, Propretors
R. ., estate of -
Loeb, Car M.
Loeb, uus
Loetscher, Chrstan, estate of
Loetscher et a., ohn ., e ecutors
Loffand, . M
Loffand, T. S
Lofts, . M. and . 8., admnstrators.
Lofts, S. T. ., deceased, estate of
Logan ryan
13725
1372
29404
05
10587
444
832
7435
3247
9987
3097
4 39
5902
741
2212
2213
257
4398
37 0
842
4133
8805
2235
3489
38
725
800
12738
1 19
11279
11 9
1935
3411
10 99
24 7
423
422
424
12091
12092
12093
10 1
4872
299
3843
3082
9191
9192
3083
40 1
14325
14325
13425
1342
7581
7581
4008
14
4
8
5
5
8
3
10
2
12
0
4
5

4
4
9
8
2
5
2
9
9
4
5
4
8
10
7
11
11
IS
15
15
8
9
1
4
8
14
14
10
10

4
1 state ta decson.
1 cquescence reates to ssues 3, , and 8 n decson.
1 state ta decson acquescence reates to a ssues, e cept those nvovng deductons
, attorneys fees, and msceaneous admnstraton e penses.
for e ecutors
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28
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Lonergan, ohn
Long Isand oundry Co., Inc
Long, M.
Loper, . T
Lord, se
Lord ushne Co
Lord Motor Car Co
Los ngees Cemetery ssocaton
Los ngees Towe Servce Co
Los ngees Trust fe Savngs ank
Loughborough, .
Lousana ockey Cub, Tnc
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 of1
Luce urnture Co
Lukns, . W
Luton Mnng Co., Inc
Lynch Constructon Co
Lynes, my
Lynes, Samue
Lyon ard Co., Inc. --
M.
Mabe evator Co. ... -
Mac dam oster, Inc
MacDonad- atchuck Prntng Co
MacRae, ugh
Mackay, Mton
Mackenze, R. ., estate of1
Macman Co., The
Madson edze State ank
Maer, Mrs. W. N - -
Maer, W. N
Magee urnace Co.
Magnus, Mabee Reynard, Inc
Mane Dary Co
Mase, |r., Nchoas
Manckrodt, sr., dward 4
Manckrodt, sr., dward, estate of
Maone, dwn -
Mande ros
Mancy Mng Co
Manerre, Wam R., deceased, estate of
Mann, P. L
Mannng, Chares N
Mannng Co., L.
Manomet Cranberry Co
state ta decson.
Nonacquoscence notce pubshed n Cumuatve uetn I -2.
1 cquescence reates to 5econd ssue of docson.
cquescence reates to frst ssue u decson

441
272
7721
10080
17189
10597
12124
4718
293
88
23391
2818
874
14 54
10180
15235
192
2940
2940
11972
7513
53
2544
13 80
3375
7089
7090
748
11380
1110
10443
279
4284
19271
833
11141
5240
1127
7854
7855
5 00
119
4 75
2422
1750
11032
5225
1977
7704
310
9123
SU1
10230
341
8
12
9

10
13
12
10
10
3
3
11
7
9
3
12
3
7
7
11
8
4
I
7
7
11
1
4
2
4
14
5
4
14
4
8
7
10
1
page 5. retaed.
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29
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Page.
Manora Deveopment Corporaton.
nte, Lee
nve enckes Co
Marbe Shattuck Char Co.
Margod Garden Co --
Marne Insurance Co., Ltd
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
Marsh, . W ---
Marsh ork Coa Co.
Marsha, dward
Marsha Spencer Co
Martn, . ,
tn, Darwn D
yott Spencer Loggng Co. et a
on Cotton M Co
ason Machne Works Co
Massengae dvertsng gency
Mather Paper Co.1
Mathews, W.
Maths ros. Co ---
Mattage, Chares enry
Maurer, Chares ., estate of
Maury Mng Co
Maus nna R. and L. M
Maver s, Inc
Mc ester- dwards Coa Co
Mc rde, . T., estate of 1
Mc rde, Rose L., admnstratr
McCabe Co., M.
McCah, ugene P., admnstrator estate of Mary
. McCah --
McCah, Marv ., estate of
McCaum, .
McCann Co., Inc., . .
McCarthy, ohn rancs, estate of
McCarthy, Water R., e ecutor.
McCarthy Sons, Inc., ohn
McCaucy Co., C. R
McCoud, Chares
McCogan, deade, admnstratr
McCogan, Dane ., estate of
McConnc. .
11
5808
215
14091
14092
32033
1580
2242
544
208
17780
3799
17 4
3858
17 4
20287
1080
10875
13912
7132
3797
8419
10453
20308
4574
10 17
3001
3341
448
289
149
514
1378
10032
38 1
211
14551
10853
1322
3774
4490
4885
4885
21
2547
2547
14311
578
8277
17334
17334
354
1273
20405
3147
3147
3211
1
13
4
13

1
1
10
10
10
10
10
10
8
7
7
14

3
12
11
10
7
12
0
10
1
3
2
11
:
13
9
3
13
10
3
5
10
8
8
1
2
2
1 I
14
14

t
1
1
13
10
10

575
145
7 5
57
8 7
1240
7 3
7 3
7 3
7 3
7 3
7 3
1100
895
895
87
729
82
137
85
1140
454
2 7
472
1221
449
745
2
973
1
1133
338
242
921
1189
5
181
13 8
435
435
57
875
875
805
234
251
525
525
111
937
311
958
958
11
Nonacqueseence notce pubshed In Cumuatve uetn -, page 7, recaed.
state a decson.
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30
Ta payer.
McCormck, sr., ohn
McCormok et a., Robert
McCoy- randt Machnery Co
McCrcery. enry
McDonad, Mary ., e ecutr 1
McDonad, Mrs. Lyde
McDonad, Patrck ., estate of1
McDonne, dward
McDonne, . S
Mc etrdge, dward P
Mc etrdgc, Georgana
Mc etrdge, Martha G
McGnns, ob
McGynn, . P
McGown- oshee Lumber Co.2
McGrath, . R
McGrath Co., Wam
Mcntosh Ms
Mc enna, ames P
Mc nnon, L. ., estate of
Mc nght, . udson
Mc nght, R. C
McLean, Carone S
McMchae, Morgan
McMan Meta Co
McMun, M. ., estate of -
Mead et a., Wam W., e ecutors
Meade Cvce Co
Meadow ork Coa Co
Mechancs ank of rookyn
Mechancs Reaty Co., Inc., and Mechancs Reaty
Co. of Pennsyvana--
Mcgeath, Ida
Megeath, S.
Megeath, Samue
Megeath et a., George W
Mene, dward, estate of1
Mene, the G., e ecutr 1
Menhard, Carre W
Meck, .
Meton, ger
Mepham, George S
Mercante Trust Co., e ecutor
Mercer, ohn W ---
Merchants Natona ank
Merckens, ugust
Meredth, . T
Meredth, G. W., estate of
Mercen- ohnson Machne Co
Merges Co.,
Merat, Chares .
Merke room Co
Mertz, dward P
Messenger Pubshng Co -
Mesta Machne Co
Metare Cemetery ssocaton
Docket
No.
1880
1 05
10733
3557
3042
933
3042
194
1354
11503
11210
11209
47
4714
1044
495
5317
9832
121
2 50
4048
10804
1534
2221
3841
8015
7228
575
9770
9755
2351
7119
2815
9248
7118
3098
3098
2100
7 23
5 99
1981
9528
8233
8179
10108
1540
4478
3531
11 40
12438
10594
4953
5 95
15 9
2841
437
oard of Ta ppeas.
oume.
1
2
8

2
9
2
4
8
9
9
9
4
4
10

10
9
1

8
13
4
4
2
12
e
10
9
9
2

5
5
5

7
3
13

7
2
t
5
11
9
3

2
12
4
1 state ta decson.
cquescence reates to thrd ssue of decson.
state ta decson acquescence reates to ssue regardng (nutty of proceeds of fe Insurance n
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,
t. Lous, Mo.
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31
Ta payer.
oard of Ta ppea .
No.
oume.
Pago.
135 9
12
1402
13348
13
23
4437
11
1271
747
1
721
538
2
10 2
9 82
5
1230
7749
7
4
9093
10
213
5737
3
1329
10 2
4
8
5384
4
481
3241
3
1327
148 9
14
10
439
5
979
43 8
2
1314
1423
1
989
725
9
24
440
5
979
1125
1
1145
27
1
311
28889
14
200
709
2
292
1983
2
29
2933
5
121
3439
9559
5
25
10 38
9
1404
840
5
294
159
3
72
34 5
7
921
44 9

401
4397
11
854
4307
11
854
17002
12
702
10123
7
785
75 0
5
10 0
1028
3
101
3424
13542
10
93
21024
10579
10
521
4 8
1
588
388
2
505
101 3
13
1303
284

151
10351
10
1311
7597
10
1001
10891
11
731
3552
3
1 3
7124
8
1224
8700
8
3 8
12408
10
588
11590
13
929
13405
12
158
1139
9
1
7288
3310

172
2543
2
743
Metasap Chemca Co
Metcaf, dwn D., estate of
Metro Pctures Corporaton of New ngand 1
Metro Pctures m change of Pennsyvana
Metropotan Laundry Co..
Metzger, L
Mcurer Stee arre Co., Inc
Me can Teegraph Co.2
Meyer, nton M
Mevcr, 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
Mes 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
Mken, George W., estate of3
Mng Moore Mercante Co
Ms, Lucy M., estate of3
Mwaukee rass Manufacturng Co.
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 O Co
Mobe Devery Co
Mobe Rver Saw M Co
Mogg Coa Coke Co
Monarch Cooperage Co
Monarch ectrc Wre o
Monk, enry
Monroe Coca-Coa ottng Co
Monroe Cotton Ms
Monroe urnture Co., Ltd., et a
1 cquescence reates to ssues nvovng offcers saares and ega e penses.
1 cquescence reates to a Issues e cept as to tentatve a .
state a decson.
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32
Ta payer.
Moon, nne
Moon, O. L
Moore, nna ., e ecutr 1
Moore, George
Moore, .
Moore, L. C
Moore, Wam, estate of1
Moore Stave Co., Lucas
Moore Scrver Co -
Moores, arry C
Moorhouse, braham, estate of
Moorhouse et a., Mary zabeth, admnstrators _
Moors, ohn
Mooyer, Chrstan, estate of1
Mooyer, Margaret ., e ecutr estate of Chrstan
Mooyer, deceased 1
Morefed and wfe, W.
Morgan, Caud
Morgan, ohn
Morgan, Water G
Morrs, omer P
Morrs aey Stee Co.- -.
Morrs Cummngs Dredgng Co...
Morrson Wooen Co
Morrson-Merr 4 Co
Morton, . D
Mosbv Co., Inc., .
Mosentha, Php 3., estate of
Mosentha, Water ., e ecutor
Moser Wacker, Inc
sher Manufacturng Co
er, M.
sberg Pressed Stee Corporaton.
Mossnan, Yarnee 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
Mutbestos Co
Mumper, ewngs
Munn ote Co
Munson, dgar, e ecutor
Curts, deceased
Murchson Natona ank_.
estate of arret .
Murphy, .
Murphy, Ray Sater, benefcary.
Murphy Transfer Storage Co..
Musseman, C.
8 75
8 74
10542
14953
3544
3709
13907
10542
514
78
4209
5101
5101
1021
3404
3404
5721
290
10978
3449
510
525
9492
959
9543
4358
3559
2781
994
994
4475
188
5304
8757
32 9
1107
14207
237
9 7
1192
4395
3 48
13917
7598
14053
13819
442
08
7137
2 472
8191
11554
1 0
oard of Ta
oume.
Page.

385

385
13
8 4
14
1185
8
749
11
979
13
8 4
5
1211
2
3 8
3
301
8
9 4
8
9 4
1
8 8
2
723
2
723
4
394
7
495
10
1138
5
1035
9
1273
9
205
10
351
10
8
2
489

1295

722
12
3 5
12
3 5
4
1021
7
187
5
74
9
11 1
9
45
13
810
2
581
4
834
3
29
3
1 9
3
1 5
14
42

10 0
13
977
14
93
3
185
1
17
9
10
9
521
7
1148
1
41
1 state ta decson.
I cquescence roates to ssue as to whether the Income reated under agreements of December M 1918.
to ta abe n proportonate amounts to the severa pettoners or whether such proportonate amounts aro
ta abe one-haf to the pettoners and ono-haf to ther respectve wves.
I cquescence reates to ssues decded adversey to the Commssoner, wth the e cepton of ssues
n vo vnt deducton of tentatve ta es In determnng the earnngs avaabe for payment of dvdends
n un L u.
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33
R. C
Chemca Co., of merca
Thread Manufacturng Co., enry.
N.
N abors O Gas Co
Naee, ruce
Nartzk, uus ., estate of
Nathan, Morrs, estate of 1
Natona ank of atmore
Natona m Pubcty 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 Takng Machne Saes Corporaton
Nazareth Cement Co
Neapotan Ice Cream Co
Ne, ames
Neubcrger, Ma and Rudoph
Neu teter Sut Co
Nevns, rank
Nevns, rank ., admnstrator..
Nevns, Thomas ., estate of
Newbod Son Co., R. 8
New Century Coor Pate Co
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.4
Newton, . . -
Newton, W.
Newton Cotton Ms
New York ower Co - -
New York, rookyn Manhattan each Ry. Co..
New York, Ontaro Western Ry. Co
Nagara Searchght Co., Inc
Nce a earng Co
Nchos et a., George, e ecutors
Nchos, ohn W. T., estate of -
Nckey, . ., estate of
No.
oume.
Tage.
4781
3
498
10083
12
578
3 41
2
5
Nckey Sons, . .
Nckey, S. M
79 2
10578
431
11448
3844
1807
5 2
4853
11130
13570
3333
2048
3 51
5788
5272
244
11793
9290
3035
303
4001
3344
3350
3350
5 98
1098
9753
19138
3 94
530
1489
11994
400
9 2
9 27
10731
38 1
4945
974
9505
2109
9599
9599
19 1
1235
123
1237
1238
1239
19 7
oard of Ta ppeas.
7
12
8
12
3
4
1
7
10
12
11
8
5
5
4
8
s
8
12
12
12
7
10
0
9
4
10
2
7
t
7
7
12
0
1
10
5
10
10
3
1091
104
85
81
1038
118
88
1241
527
1402
4
37
931
570
1121
437
299-
911
477
8
8 9
8 9
471
1032
835
158
390
158
537
1175
43
1153
1153
17
338
0
1172
923
484
919
919
173
173
173
1 state ta decson.
cquescence does not reate to tentatve ta ssue.
1 cquescence does not reate to deducton of amount of bad debt ascertaned to be
eff In 1820.
1 cquescence reates to second ssue of decson.
1 Revokes nonacquesoenoe pubshed n Cumuatve uetn IM, page 39.
and
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34
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Nckey, W.
N on, ate I
Noe, Rchard
Nokoras Cotton Ms
Node orst Co.1
Norfok Western Ry. Co..
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 Trust Co. et a., e ecutors.
Northern Trust Co., e ecutor
Northwest Lumber Co
Northwestern States Portand Cement Co. .
Northwestern Yeast Co
Northwood Co.,
Norve, . R..
Norve, Mrs. . R._
Norwood, Caef Co -
Oates, Mrs. Omer
O ren et a, anche, e ecutors
O ren Leather nsh Corporaton, oseph
Ocean ccdent Guarantee Corporaton, Ltd
O Connor Co., .
O Day Investment Co
Oet|en, C. G
O ar, P. ., estate of
O are, . rank
Oho g Sandy Coa Co., trustees for
Oho Grease Co
Oho Sheep Woo Growers ssocaton Co
Od armers O Co
Oeet, Israe
Onger ghanders, Inc
Onger Mortuary ssocaton
Osen, ohn
ORen Water 4 Towng Co -
O Meara, C.
O Ne, ohn, estate of4
O Ne, |r., et a., ohn ., e ecutors 4
O Ne Machne Co
Oppenhemer, Leon
Opperman Coa Co
Orando Petroeum Co
Orth, rank L
Osage Steamshp Co., Ltd
cquescence reates to thrd ssue of decson.
state ta decson acquescence reates to trusts of 1912, 1919, and 1921
cquescence reates to frst, second, thrd, fourth, and s th ssues of
state ta decson.
19 2
118
3223
4557
98 7
3 01
5 55
831
10545
2231
3525
27 8
31 8
431
7127
10 50
15310
57 3
1045
1511
5122
7720
7719
9
8393
25747
13042
9 30
3114
10 0
1 32
11 43
4184
30377
7888
023
15149
2824
9 22
532
532
14 0
1908
9822
5185
5185
7922
9977
3317
14729
15792
20399
5588
339
3
2
3
2
12
3
10
5

8
12
10
8

1
13
11
3
12
15
4
14
12
8

5
1
11
4
4
9
7
11
9
3
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)

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2
0
1
3
-
0
1
-
2
2

0
3
:
3
3

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35
Docket
No.
oard of Ta ppeas.
oume.
Osborne Cark Lumber Co
Ostrow, Samue D
Ots, ames - -
Ots Stee Co
OTooe, ames
Ottoander, C. . W
Overand Lumber Co
Owen- mes- mba Co.
Owens otte Co
Oyster, |r., George M., estate of.
Ozark Ms, Inc
10493
8
382
14 90
12
870
4711
7
882
7520

358
19402
12
7 9
4494
5
51
394
2
489
1 37
5
921
1033
8
1197
7390
4
108
4377

1179
P.
Paauhau Sugar Pantaton Co
Pabst, rdon --
Pacfc akng Co
Pacfc Car qupment Co
Pacfc Coast Ppe Co. 1
Pacfc Coast Redwood Co
Pacfc Novety Co
Pacfc Ppe Suppy Co..
Pacfc Reaty Corporaton
Paducah Inos R. R. Co -
Paducah Water Co
Paget, .
Paas de Modes
Pamer, ar M
Pamer, . C
Pantazas, Chares -
Pantazas, ames
Pantnd ote Co. and Pantnd udng Co.
Par-a-Te O Co.
Pars Coak, Sut fe Mnery ouse
Parsh, S. W
Parsh-Watson, M
Parsh-Wateon Co., Inc
Parsan, The
Park ros. Rogers, Inc
Parker, rthur M., estate of.
Parker, George S
Parker, een Ptts
Parker, Nora D
Parker, W. D.
Parker Wre Goods Co
Parkereburg Maretta Sand Co
Parsha, Wam W..
Patapsco aast Co
Patch, radford C
Pate, Zebuon ance
Patterson Produce Co
Patterson, W.
Pau, ar - -
Pauson, Peder, estate of
Pauson et a., Wam I., e ecutors.
Payne, dward W
13879
2227
84
1093
7901
1847
81 2
1943
452
3028
055
4279
5502
5447
1181
3382
3382
1843
1389
5500
9504
4 84
2833
4894
583
24 0
14954
5 02
1418
8 47
8 4
3999
5452
12050
452
1800
332
14955
3994
8901
13927
13571
13571
90 5
13

2
2
11
5
5
2
5
2

5
3
1
S

9
13

9
3
2
4
2

14
10
14
13
13
11
7
1
4
13
1
7
11
10
10
12
1 cquescence reates to ssue 1 of decson.
cquescence does not e tend to that part of the oard s decson whch purports to hod that secton
(a) of toe Revenue ct of 1 28 s appcabe to the case.
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3
Ta payer.
Docket
Ne.
oard of Ta
oume.
trustees.
Pearce et a., rthur P.
Pearce, |r., Chares
Pearsa, Gbert
Pearsa k Co., Ine
Peck, W ber S.1 -
Peebes et a., W. S., admnstrators 1
Peeress Pacfc Co
Pennsua Shpbudng Co
Penn Chemca Works -
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, . -
Perkns Land Lumber Co
rancnt Loan and Savngs ssocaton.
. G - ----
Perry, .
Perry Dormney
Perryman, . R
Persons, ames
Peru Char Works
Petauma Santa Rosa R. R. Co.
Peters Manufacturng Co
Peterson Co., George C
Pevey Dary Co
Pheps, Martha ., e ecutr 1
Pheps, Wam L., estate of1-
Pps, dward S
Phps, George .1
Phps, ohn D., estate of 1
Phps, oseph dward, e ecutor1
Phps, oseph W., estate of 1
Phps, T. C
Phmont Reaty Co
Phoen Natona ank
Phoen Savngs auk Trust Co
Pckerng, Lorng
Pckerng, Rose C
9 15
5 0
11997
12722
110 1
9380
1437
5741
9247
10082
1904
143 5
8472
5152
113 3
17041
22 8
9023
9022
852
2735
301
3250
3408
13830
2091
12
1 1
4803
4803
237
352
352
352
Pctora Revew Co., The
Pedmont Lumber Co ---
Pedmont-Mt. ry Goano Co
Perce- rrow Motor Car Co
Person Co
Pke County Coa Corporaton
Pne uff Compress Warehouse Co.
Pne Rdge Mnes Co
Pnhorn, Rchard, estate of1
Poneer Laundry Co
Pttard, . T
.
11758
L3149
13149
5908
5840
4487
1
11303
12828
8542
1757
893
21340
7189
7989
2208
388
473S
1804
13

10
5
5
10
9
7
11
1
10
10

5
3
11
1
1
1

9
7
7
7
7
9
11
14
14
5

14
8
3
2
12
4

5
7
5

1 state ta decson.
1 cquescence reates to that part of decson as to the purchase of ta payer s own bonds
pur whch wero hed as an nvestment.
|eqmesceaoe reates ony o ssue 1 n decson.
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37
Pttsburgh essemer Coa Co.
Ptteburgh Grndng Whee Co..
Pttsburgh-Northern Coa Co...
Panters Nut Chocoate Co
Panz, Inc., Theo
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, Carence
Pope, Mrs. Carence
Pope Sanatorum Co
Popuar Dry Goods Co
Popuar Prced Taorng Co...
Port Townsend Puget Sound Ry.
Post, ames
Pottash ros
Pottash, arry - --
Pottash, Ma --
Potter arms, Inc
Powe, ope Ives, estate of
Powe, T. L are, e ecutor 1
Powe Coa Co.1
Power, Chares . and ohn M., e ecutors .
Power, Thomas C, estate of
Power fe ro., T. C
Powers, Mary ., e ecutr
Powers, Rchard ., estate of
Powers, Samue L
Powers Mayer, Inc - -
Powers Mayer Manufacturug Co
Pratt, Wam ., estate of
Pratt Letchworth Co
Co.
Premer O Co .
Premer Packng Co
Preston, omer M
Preston et aL, omer M., admnstrators.
Prcestwood, . M., estate of
Prestwood, N. ., admnstrator
Prce, Samue
Producers ue Co
Prouty et a., nson ., e ecutor 1
Prouty, C. C, estate of.-.
Pryor, Luke, estate of1
Purce,
oard of Ta ppeas.
No.
oume.
Page.
5 2
9004
5
45
2558
2559
-
712
2837

105
8788
10081

173
78
10
1158
3370
7
295
3701
3
12 5
3758
3
12 5
3757
3
12 5
375
3
12 5
4003
3
1023
83
1

12 5
2
12 3
11759
11
507
117 0
11
507
117 1
11
507
3382
5
975
3382
5
975
144 0
12
8 5
2151
3
595
2500
3
595
4148
4
1085
2141

78
9222
8
831
2554
2
357
12488
12
510
11990
12
190
11992
12
190
11991
12
190
5928

no
9888
10
1
9888
10
1
11945
12
492
10400
11
1313
10400
11
1313
3740

835
5422

33
5422

33
11558
12
702
8 2

329
8 2

329
8858
7
21
4 44
7
492
799
2(1 29

322
10192
12
37
981
9
45
389
7
414
7755

111
7755

111
117 4
7
1237
159
1
202
2951
5
107
2951
5
107
9380
5
38
3838
4
9 7
state ta decson
cquescence reates o a ssues e cept |ursdcton ssue.
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38
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Purce, oseph, estate of
Purdy enderson Co
Purty Oats Co
Purty Oats Co. of Davenport
Putnam, enretta, deceased, estate of .
Putney Mercante Co., L.
Putze, enry
3838
4
9 7
5198
4
70
43 4
4
585
43 5
4
585
5273
3
823
3195
3
83
4053
8
787
uadrca Manufacturng Co.
ueay, P.
|ueen Cty Prntng Co
.
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 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 Saes Co
Redands Securty Co
Reed, . M
Reed, Lea -
Rega Shoe Co -
Rechenback, arry L
Renhardt, ane R -
Resner Mfg. Co., W.
Rezensten, Lous, trustee -
Rezensten Trust 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, . u
Rhodes, rownson amprnan, Inc
Rbbon Cff rut Co
Rce edng, Inc
Rch and wfe, C. R
Rchand County udng and Loan ssocaton
Rchmond osery Ms.
2814
719
985
557
8175
8175
3 19
77 7
5983
1580
423
7904
7905
10720
8284
128
10238
10123
18145
5703
77
5110
784
2015
994
1243
814
814
13120
138
138
8704
900
3733
2208
1791
7829
894
12337
5219
2823
19420
21259
38 75
77 3
3703
5
8
8
3

11
12
10
4
13
7
10
5

8
1
1
2
13
9
9
12
8
8
12
3
5
3
10
2
12
a

15
state ta decson.
1 cquescence reates to ssue 1 of decson.
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39
Ta payer.
Docket
No.
oard of Ta
oume.
ker, George
cks, W. R
Rffe, enry
Rggs, Leon C, estate of, Lacey L. ogart, admns-
trator
Rgsby, G. D -
Rker, |r., Samue, e ecutor
Rnger Co., George
Ro ectrc Co -
Rter, oseph
Rver dc Ra Storage Co
Rvcrvew State ank
Roberts, R. S
Roberts, rances ., estate of
Roberts, .
Roberts Co., U. N
Roberta, 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
Rock ford rck Te Co --.
Rockford Maeabe Iron Works --.
Rodefer O Co., Davd
Roden Coa Co --
Roebng, ar G., estate of
Roesch, Wam
Roessc fe Co., Ltd., Lous
Rogers, ate
Rogers, R. M
Rogers, Robert C
Romayor Grave Co
Rome Wre Co
Roos, Mortz
Roper, sha
Roper, Mrs. sha
Rose Co., dward
Rosentha, en|amn
Rosentha, annah S
Rosenwad We, Inc
Roshek ros. Co. Roshek Reaty Co.
Ross Co., Inc., . .-
Ross, ames, estate of.
Ross-Sper Gove Co
Rosser, Luther Z., estate of1
Roth, Chares ., estate of
Roth ote Co
Roth Shoe Co., Whtney
Rouse, empstone Co., Inc.
817
12803
357
1932
5599
7102
85 5
1275
14392
1233
11180
5344
17 98
9579
1270
5344
595
543
17227
14924
5 52
341
13893
7258
3873
2451
10184
7915
13042
25747
2551
1009
10843
10842
13581
24740
7532
8759
3079
40 0
8 42
8 43
2092
990
991
859
1844
7281
8 90
10212
21 1
1508
542
89
7 73
10987
10
12
3
2

10
9
13
1
12
7
10
9
2
7
1
5
13
12
5
4
12
13
4
2.
11

10
12
7
2
7
7
12
11
8
7
7
2
2
2
11
2
7
8
10
8
3
1
1
cquescence reates to ssues 2, 3, 4, 5, and n
1 state ta decson.
1 cquescence reates to ssue concernng openng nventory at December 1, 1917.
3133 29-
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40
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Roya Coeres Co., The
Roya ue Co
Roya Wet Wash Laundry, Inc.
Rubens Co., Chares
Rubensten, Gertrude 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
Ruob, . D --
Russe, Cares ., estate of
Russe, Mary I. ., estate of -
Russe Mng Co
Russe Whee oundry 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 Screw Co
St. Lous Maeabe Castng 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
Sand Sprngs ome
Sancr-Ragey Lumber Co..
San rancsco Lumber Co
Sanger, as ., estate of
Santa Mara Gas Co
Sargent, Mar|ore L
Sau, Maurce ---
Savannah Shp Chandery Suppy Co.
Savnar Co., Inc
Sayre Stampng Co
Scafe, Wam ., estate of...
233
938
11481
573
35
125 9
3795
3795
57
2928
2929
4277
4571
20 9
4570
9528
9119
24312
11250
183
2029
54
198
198
13108
170
1705
7578
2077
5490
151 8
11032
75 1
7577
379
11451
10807
5733
3115
12231
3725
042
204
4871
431
10 43
981
11507
3 78
140 7
14805
3 24
3040
391
1
8
14
10
10
1
9
9
5

13
13
11
13
1
3
2
2
2

5
5
14

4
2
10
7
3
3
8
4
13
1

3
10

10
4
13
13
0
1 state ta decson.
1 state tu decson acquescence reates to ssue regardng ta abty of proceeds of fe Insurance n
e cess of 40,000 e empton and ssue as to beques. of works of art to or for the use of tbe Cathoc Cathedra,
St. Lous, Mo.
cquescence does not reate to ssue nvovng tentatve ta ad|ustment.
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41
Docket
No.
oard o( Ta ppeas.
oume.
Scaes, . L.1
Schatznger, crnhard, estate of1
Schatznger, Sabna, e ecutr 1
Scheer, braham
Scheuer, erman, estate of 1
Schck, ndrew, deceased, estate of
Schff, en|amn
Schng Gran Co
Schemmer Graber Co., The
Schesnger, rmn
Schett, doph
Schossberg, dwn
Schmck, Wson
Schmd, ohn
Schoekopf, Water II
Schroth, oseph, estate of--
Schroth, ua nna, e ecutr 1..
Schubert, ndrew
Schuz, . ., estate of1
Schuz, mma ane, e ecutr 1
Schuz akng Co
Schwarzer Co., .
Schwng, Samue P., estate of1
Schwnn, Ignaz ,
Scott, ohn --
Scott, Sheby D
Scove, George S
Scrpps et s., Wam ., trustees under decara-
ton 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, trustee1.
Securty Trust Co., e ecutor1
Segman, George W., e ecutor
Segman, 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 of1
Servce Recorder Co., The
Seven Nneteen fth venue Co
Severa Co., W.
Shaffer, ohn C
Shamokn aey Pottsve R. R. Co..
Sharp, W. Z
Shaw, . W
Shaw, Guthre, e ecutor
Shaw, ames G., |r., estate of
Sheakey ennedy ros
Sheane uto Co., W. W
Sheen, e se G
Sheet Meta Constructon Co., Inc
Ted Dentfrce Co.1
11408
11383
11383
10857
4 21
3059
4742
5939
1422
13728
1001
200
1971
11714
212
3914
3914
7
5 8
5 8
2074
7
3 33
8441
10418
180
2443
434
5499
5023
5024
224
10304
720
9758
9758
139 4
4851
1049
5712
883
883
2201
031
1702
1072
4944
10598
15 12
9 44
9 44
282
5187
543
5089
11814
10
12
12
11
9
3
3
8
2
11
7
2
3
10
4
5
5
4
7
7
a
3
3
9

a
2
5
7
1
11
4
10
10
12

2
a
7
7
2
5
3
9
8
a
13
9
9
7
9
S
3
13
of ta u consodated return.
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42
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Shedon Manufacturng Co., --
Sheton et a., Chares ., e ecutors 1
Sherdan Meat Co..
Sherdan, Thomas ...
Sherman Stater Co
Sherwood, 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.-
Sk, Mrs. W. W
Sk, W. W ---
Sver Co., Inc., Wam
Sverman, e ander
Smmons Co
Smon, . S
Smon, ate M
Smonds Co., C.
Smons, |r., and wfe, ames
Snshemer, Sdney W -
Sknker et a., Isabea N., e ecutrces, et a.1.
Sknker, Thomas ., estate of1
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 ecutor1.
Smth, arry . P -
Smth, Theodore
Smth, Water T
Smth Insurance Servce, I no .-
Smth Son Co., Lee S
Smth Machne Co., .
Smythe, rnest ., estate of
Snyder, Wam
Soof, . W -
Soomon, arry
Somers Lumber Co
Sonenbck, Davd
Sonora ank Trust Co
Sooy, Chares
South Chcago Drug Co
Southack, ugusta G., estate of
Southern eed Co
Southern Press Coth Mfg. Co
Southern Sand Grave Co., Inc
Spadng, athcrne
Spang-Chnfant Co., Inc
Spezer, Lena
Spencer, Maron Parso
1283
21 1
5493
13 98
4313
7748
2875
3955
531
3134
3134
1827
3 55
131
13 2
108 4
108 4
9708
10389
1927
4912
9993
2 7
5329
110 8
11155
11155
4134
8191
9312
752
5329
5329
32 2
1020
3098
2552
1054
4841
10901
3328
7519
12198
1318
482
20112
2401
3 5
7838
2882
15157
359
13587
13004
03
7302
104 9
2389
21 nu
13
3
10
4
4
8
11
4
5
2
2
2
4
2

7
7
10

8
4
10
1
5
7
13
13
5
9
9
9
5

4
1

7
9
4
9
3
7
14
11
1
15
2
4
7
10
13
3

10
5
7
9
3
11
1 state ta decson.
Revokes nonacquescenee notce pubshed n Cumuatve uetn I- at page 8.
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43
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
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, .
Staey, Wmer C
Stamey-Mackey Constructon Co
Standard Gas Products Co
Standard Marne Insurance Co., Ltd
Standard Refractores Co -
Standard Sk Dyeng Co
Standfer Constructon Corporaton, G. M
Stanfed, Theodore --
Staney Insuatng Co
Stapey Co., Inc., O. S -- -
Star Porcean Co
Starck, Php ., estate of
Starck, Php T., e ecutor estate of Php .
Starck 1
Stark, rthur L., estate of1
Stark rck Co.
Starr. C. L
Starr, oward W
Starret, Pau --
State ank of cester
Steee, Wedees Co
Sten et a., Sade S., e ecutors 1
Stenbach Co
Stephens ue Co., Inc
Sterng Reaty Co --
Stern, Car..
Stern, m
Stern, ues
Stern, Lous
Stern et a., Samue . ., e ecutors 1
Stevenson, D. M
Stewart Co., red S--
Stewart Co., G. S
Stcetz, Treber Co., Inc.
St, George W
Stwater Mng Co.
Stwe Paper Co.. . -
Stockbrdge, M. C -
Stockbrdge, Mrs. M. C
Stowerck Chocoate Co
Stott, noch, estate of
Stouts Mountan Coa Co
state t decson.
7 39
208
1028
7914
740
4717
128 2
4109
10401
12078
14313
9088
435
10750
1271
9843
4822
3 17
3 18
11 94
5550
307
405
2983
7 85
5002
4051
4051
10587
12582
12739
101
557
5913
10215
4 21
2888
15343
2 383
333
19377
218
2187
1937
2459
14 98
5975
30 5
53
521
5 87
7301
18
18 7
030
12195
542
10
2
3
s
8
11
12
3
12
13
14
7
9
9
4
5
4
2
13
4
3
3
8
12
9
1
4
8
11
9
3
13
8
5
5
5
5
2
9
5
2
1
8
5

2
2
4
11
4
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44
Ta payer.
oard of Ta ppeas.
oume. Page.
Stratton Grocery Co
Strauss, Davd, estate of1
Strauss Market, Inc
Strffer, Inc., dward C
Stromberg ectrc Co
Strong, Iewat Co., Inc
Strong, .
Strong, Stea..-
Strother Lumber Co., G.
Stumer, ne anche --
Stumer, anche G --
Stumer, Los M
Stumer (II), Lous M
Suburban Investment Co., The
Sugar Run Coa Mnng Co
Suhr, Chares L
Suvan Grante Constructon Co
Summt Whoesae Grocery Co --
Sumpter aev Ry. Co
Sumter Coca-Coa ottng Co
Sunfower Packng Corporaton
Sunny sde Coa Coke Co.1
Superheater Co
Superor ngravng Co
Superor Motor Parts Co.
Superor Pocahontas Coa Co
Susman, Otto
Sutff, S. D
Swaney, wng
Swartz fc Co., Inc., . R
Sweeney ames Co - --
Sweet, Gertrude
Sweeten, P. P ---
Swnehart Tre Rubber Co
Sydco Photopay Corporaton. ---
Syvan ectrc ath, Inc.
T.
Tat, ames 1
Takamne Laboratory, Inc
Tacott, enretta ., estate of 1
Tacott et a., . rederck, e ecutors
Tampa ectrc Co.
Tarr, rank .
Tayor,
Tayor, a D., e ecutr
Tayor, arret ., and Rowe, ohn .
Tayor, Moses
Ta yor, P. L
Tayor, T. ., estate of.
7 15
3877
3378
5533
3398
50 9
1909
1909
15235
992
993
904
905
1923
923
40
8790
7
13145
9079
531
9442
8383
7949
17814
10348
5377
3077
9190
278
28 3
3 88
102
19783
9240
4331
143
10221
7411
13908
3199
1 13
1 13
13344
28332
29593
3543
3050
7 17
30
30 7
8789
10020
7 17
8
9
2
7
8
3

10
2
2
2
2
1
11
4

1
10
7
2
9
12
4
5
5
10
8
3
2
7

11
7
15
II
12
I
9
7
7
U
7
1 state ta decson.
cquescence reates to second Issue of decson.
1 cquescence reates to ssue as to whether the ncome reazed under agreements of Deoemher 14, 1918,
b ta abe n proportonate amounts to the severa pettoners or whether such proportonate amounts ar
ta abe one-haf to the pettoners and one-haf to t her respectve wves.
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45
Ta payer.
Tayor Constructon Co., Inc., .
Teague, .
Te- ectrc Co.. --
Tempe, Water P
Tempeton, eny Co., Ltd
Ter ush, Davd
Terre, dgar
Te arkana Cotton O Co., Inc
Te as Chemca Co
Thes, |r., George --.
Thomas, . L
Thomas Shoe Co., The.-.
Thompson, . W
Thompson, Seetha 0. (Mrs. . C.)
Thompson, W. an
Thompson fe ack
Thompson Co., ohn R
Thompson Pacfc Coast Co., L.
Thompson Scenc Raway Co., L.
Thompson, Mrs. T. C, e ecutr 1
Thompson, T. C, estate of 1
Thompson, W.
Thorkdsen, Thomas
Thorpe, een Converse
315 West 97th Street Reaty Co., Inc
Threefoot, -, estate of
Tetz, Louse C, admnstratr
Tetz, Robert M., estate of
Tfft, Layer Co., Inc
Tford, enry Morgan, deceased, estate of.
Tton, S. U., estate of.. -
Trde. rank T.2
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
Tomfohrde, ndreas, estate of
Tomnson, . G

Docket
No.
oard of Ta ppeas.
Tonawanda Power Co.
Topeka Tent wnng Co.
Towns ospta, Chares .
Townsend, nna M 1
Townsend, . Ray 1
Townsend Lumber Co
To away Tannng Co
Transatantc Cock Watch Co.
Trathen, Mrs. . Res
Treat ardware Corporaton
Trefry, W. S
oume.
Page.
11877
13
238
40-10
3
14
315
1
434
12018
10
1238
145
8
1
18432
4015
4
984
3132
7
773
1888
1
1142
3 0
11
390
3958
3
1030
9213

297
209
1
124
7412
10
390
1895
9
1342
17509
10
1125
10837
11
729
7917
10
57
18 9
2
1
9 79

1203
10315
5280
3
902
5280
3
902
77
5
193
385
2
570
420
3
100
9898
10
3 8
521
9
499
9314
9
1123
9314
9
1123
1245
12
481
328
3
884
378
8
914
8999
11
1257
9195
11
288
85
2
582
2450
2
754
1508
3
8 8
7452

10
14429
12
804
1022
1
8 8
2959
3
327
29 0
3
327
9 15
13
150
70 8
7
9 1
2889
3870
3
1195
50
3410
3
521
2317
2
701
2004
12
1343
20047
12
1343
830
1
894
5084
5
371
5 94
/
4897
3
10 4
8270
8
981
4524

7 8
3397
10
134
state ta decson.
cquescence does not reate to tentatve ta|t ssue.
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4
oume. Page.
Tr County Lght Power Co....
Troost venue Cemetery ssocaton 4
Tro e Manufacturng Co., The
Trov Manufacturng Co
Trust Co. of Georga, e ecutor
Tschffey, rederck --
Tsvogou, Constantne
Tucker, . G -
Tucker, Geneveve
Tunne ton ank
Tur Iron Car Co., Inc
Turner, Mrs. W. -
Turner Termna Co
Tweve ast Thrty-frst Street ote Co
Twn Cty Sand Grave Co
Two Nnety-Two atbush venue Corporaton.
Tyer fe ppach, Inc
Tyer, May L -
Tyer Warehouse Co
II.
Ufcrts, .
Unon Department Store Co.
Unoa Rea state Co
Unon Meta Manufacturng Co.
Unon Stock Yards Co
Unon Termna evator Co
Unon Trust Co., e ecutor
Unon Trust Co. of Ceveand, Oho, e ecutor .
Unted Motor Co
Unted States nveope Co
Unted States dety Guaranty Co
Unted States Merchants Shppers Insurance Co.1.
Unted States Mortgage Trust Co., e ecutor 1
Unted States Refractores Corporaton 3
Unted States Too Co
Unted States Trust Co. of New York et a., e ecu-
tors 1
Unted Thacker Coa Co., trustees for
Unty Schoo of Chrstanty -
Untermyer, vn
Utca Motor Car Co
.
anco Ms, Inc
ancouver ome Co
an do amps oand Dutch akers..
an anne Revovng Door Co
anderbt et a., Wam ., e ecutors.
anderbt, Wam ., estate of
an tten, Chares
an eet, Carey _.
an ook, .
an ook, Mrs. .
2710
1114
587
585
12988
407
3 34
78 3
3470
11433
9255
41 2
3934
3 45
7171
5189
995
10722
512
14034
7835
3457
35
2524
7078
7388
1 271
4478
983
12744
7422
12432
42 3
10439
2459
5 42
4 50
785
7888
1799
2 12
908
1327
5550
1430
9988
13030
13030
8793
2047
9358
9359
2
4
1
7
12
5
3
13
2
12
9
5
3
3
11
8

10
1
11
8
3
1
4
12
14
9
5
12
10

13
2
9
3
9
15
4
11
10
12
4
2
11
11
11
8
2
S
8
state ta decson. . . .
1 cquescence reates to ssue as to osses.
cquescence reates to a ssues e cept ssue wth respect to queston of aowance of amortzaton n
1918 of costs ncurred u 1919.
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47
Docket
No.
oard of Ta
oume.
an orn Co., Inc., Over
an Lndey Nursery Co.,
an Lndey Orchard Co.,
an Schack, en L., estate of 1
audreu Lumber Co
aughan, ohn Chares, estate of 2
aughan, Leonard oden, coe ecutor 2.
aughan arnes, Inc
etch, dwn P
rden, M. L
rgna Lumber o Co
rgna Raway Power Co. - -
scose Co., The
sta de rroyo
oebe, acob, estate of1
oebe, Water W., e ecutor 2
on Paten, ar
oyer, . L
W.
Wadsworth, arod ., estate of
Wadsworth, esse ., e ecutr estate of arod .
Wadsworth, deceased
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
WaUngford, 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, Wm ---
Warren Co., The
Warren, b
Washburn, Cheney D
Washngton Cadac Co
Washngton Caterng Co
Washngton ote Co.4 -
Washngton Paper Stock Co
8252
3109
3109
7127
908
10514
10314
7311
1179
5200
354
9040
11731
31 4
10231
009
009
1 959
5453
1982
1982
2292
2004
24879
4 29
82
82 7
44
7359
3857
3 53
231
230
3
2410
388
1782
1782
400
7 18
7 18
11322
10471
4588
2550
2475
4471
7051
09
7133
1321
9
2
2
9
8
10
10

3
3
11
7
7
10
4
1
2
o
13
8

1
4
4
10
4
4
3
4
7
2
2
4
10
10
8
7
3
7
7
3
9
4
1
ta decson acquescence reates to trusts of 1012,1919, and 1921.
n so far as decson determnes that Cty Gas Co. of Norfok and rgna Raway
affated wth each other.
does not roate to that part of decson nvovng appcaton of the yers decson (1 .
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48

oard of Ta ppeas.
oume.
Washngton Pece Dyeng nshng Co.
Watson, Martha ., estate of
Watson, Mrs. Myrte -
Watsontown rck Co
Waynesboro Manufacturers ssocaton...
Weakey Coak Sut Co
Weaver, ee R... -
Weaver, ee R.1
Weaver, ames
Weaver, M.
Weaver, M. ., estate of 1
Weaver, S. P
Weaver, T. L.
Weaver, Water
Webb ocorsesk, Inc
Webb, Leand D.
Webb
Press Co., Ltd.
Webb, Stuart W
Weber- unke-Lar|ge Coa Co..
Wedgwood Sons, Ltd., osah
Weed, enrv D --
Weeks Co., L. S
We- aason Co., Inc
Wcner, . L - -
Wengarten, Davd, estate of
Wengarten, Meve D., e ecutor
Wess, Pau ._ -
Wessenbach, Mnna _.
Wech et a., . Soher, trustees
Wech, rank P -
Wesh Packng Co -
Wenze, rnst, estate of
Wcrbeovaky, braham, e ecutor.
Werbeovskv, . ., estate of . ..
Werner 4 Werner Cothng urnshng Goods Co.
er ros., Inc
1
ay Co., The.
est Corporaton, . C ...
West nd Consodated Mnng Co.
Westcrgren, Inc., M.
West Pont Investment Co
West 2Sth Street Corporaton
Westermann Pagano, Inc.
Western mercan O Co. _.
Western Maryand Ry. Co. .
Western Star Mng Co
Western Wheeed Scraper Co.
4 19
7228
28
3580
1277
4001
2925
2924
8488
2922
3852
2921
2923
7955
178
1279
7070
2404
2724
5591
914
3 47
25 3
2 04
9 45
13048
14 72
10433
10433
10059
4004
4005
0 1
102
10157
11134
21 34
12587
5199
548
1010
1010
0984
10548
17055
25239
2843
872
2172
2723
300
032
37 3
14452
475
2852
12001
4

7
3
1
8
2
4
8
2
4
2
2
4
1
1
9
3
3
5
11
3
a

13
10
13
13
7
12
9
1
8
8
9
12
2
4
3

1
4
2
10
12
5
14
Revokes nonacquescence notce pubshed In Cumuatve uetn -2, page 4.
state La decson.
1 cquescence reates to second ssue of decson.
cquescence reates to reducton by 2 per cent o ncome ta at ta payer for caendar years 19 3 and 1919.
cquescence does not reate to that porton of decson whch hods that secton 284(c) of the Revenue
rt of 1920 s appcabe to the case.
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49
Ta payer.
Western Znc O de Co
Wharton et a., Gerad -, e ecutors
Wharton, ohn G., estate of 1
Wheary, George
Wheatev, ames .
When Cothng Co
Whte, |r., ames
Whte, ua
Whte, Robert P.
Whtehead, CP
Whtehouse Leather Products Co., Inc
Wkteey, urt ., estate of
Whtng, C. L., Inc
Whtman, Nathane, deceased, estate of
Whtman 4 Sons, Inc., Carence
Whtmeyer, a
Whtmore, vah P
Whtson, Thomas --
Whorton et a., Gen C, e ecutors 1
Whvbrow, Carence -
Wckwre, Theodore ., estate of
Wckwre et a., Theodore ., |r., e ecutors
Wedemann rewng Co., George -
Wese, . C
Wess, Oga
Wggnton, George P
Wbur, Loyd .
Wdermann Co., C
Whte et a., ugh, e ecutors and trustees
Wkes, . rank
Wkes, . Renwck
Wkes- arre Lace Manufacturng Co
Wkns, L.
Wams, arry
Wams, Robert W., e ecutor of estate of en C.
onaparte
Wams Steamshp Co
Wamson, e ander
Wamson 4 Rauers Co
Wamson Mng Co
Ws, Mrs. . T- -
Ws, W. T
Wson ros. 4 Co
Wson, Chares Scotto, estate of1
Wson, .
Wson, anne L., e ecutr 1
Wson urnture Co
Wnshp.Chares N
Wnter Garden, Inc
Wsconsn ydro- ectrc Co
Wof, . . G --- ---
Wof Manufacturng Co
Woferman, red, e ecutor
Woferman, Lous, estate of
S 04
2 439
2 439
4799
9 5
428
5 22
5 23
5554
23948
10 73
8472
1104
1399
1031
15888
3090
708
3478
3094
09
5574
5574
7955
7 15
7 37
11425
5 3
10 11
8289
74 2
12024
12023
452
4208
4207
1 52
8725
2343
11292
1042
15 79
15 79
84 0
4909
911
4909
11317
754
824
9 01
2970
8 2
11291
11291
4001
5877
7
13
t
5
8
1
4
4
4
11
12
10
7
3
11

5
2
7
1
10
10
4
7
7
9
11
11
11
1

1
7
2
12
5
7
7
7
5
12
5
10
10
10
10
8
10
10
II)
8
4
972
302
302
829
1248
973
995
995
995
4 1
714
1385
1170
97
1192
472 |
1274
747
771
725
102
102
4
4 7
4 7
1030
597
771
85
717
717
4 7
593
593
1101
451
747
47
814
125
125
820
15
403
15
1294
237
71
933
1121
11 1
285
285 I
477
43:
reates to tem (2) of decson.
1 Nonacquescence notce In ths case, pubshed n Cumuatve uetn I -2, page , recaed.
state ta decson acquescence reates to frst ssue of decson.
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50
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Wood, ay
Wood, T. ...
Woodcffe Sk Ms -
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.
Wyatt et ah. zabeth C. R., e ecutors ---
Wyman Co., C. C
Wyomng Te Tmber Co
Y.
Yahoa Sand 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
Youngstown read Co
Younker ros., Inc --
Yow, rances Whte
Z.
Zegen, rederck
Zenth Mng Co. -
Zcger, |r., Wam -
Zmmerman, . W. - --
Zmmerman, enne
Zour Drawn Metas Co
13014
11029
559
72 2
8 4
915
110 7
74 2
14230
14230
1209
1209
4270
1837
17 98
10 7
21370
24574
2281
9527
3353
9894
3220
2 53
2085
7440
3847
4720
1839
1333
5522
5555
42
5454
123
2513
2145
4908
11
9
1

8
12
11
13
13
12
12
10
1
10
8

8
2
12
3
5
2
5
3

2
2
8
4
10
8
1
5
2
8
The Commssoner does NOT acquesce n the foowng decsons
of the Unted States oard of Ta ppeas:

oard of Ta ppeas.
Ta payer.
Docket
No.
.
oume.
Page.
13189
12
92
9092
10
213
0
7
574
Nonacquesenco notce n ths case, pubshed n Cumuatve uetn I -2, page 8, s
Nonacquescence reates to ssue as to tentatve ta .
Nonacquescence reates to thrd ssue.
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51
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
sop, dward ., estate of
sop, dward ., e ecutor 1
magamated Sugar Co
mercan press Co
mercan eature m Co.
mercan Leather Products Co_
mercan Seatng Co.
mercan Stee Co
nkeny, ohn D., e ecutor 4
nkeny, Lev, estate of
rchbod, ohn ., e ecutor 5...
tantc Coast Lne R. R. Co.9.
tas Tack Co. ...
udubon Park Reaty Co
ud, . W .
yers Co., L. S.8
.
a et a., Water ., coe ecutors.
amberg Cotton Ms Co
ancker, |.,
ank of .
arnes et a., Chares G., e ecutors..
arnes, |r., ohn, estate of
arnes, oseph .
arnes, oseph, admnstrator
arton, Mary L., trustee
arton, Ots, estate of
ates, . W. (Mrs.)...
eacon Coa Co.
ehow state Co -
emont Iron Works
eowsky, Morrs
et Raway Co. of Chcago 10
erger, Mathda W
erger, Water
erks oundry fe Manufacturng Co.
est Stee Castngs Co
ngham, Robert W
ar, W. ., estate of 4
ar Co., . C --
ock, . ates
ock, . ates, e ecutor
ock, rank ., estate of
ock ohner Mercante Co
ossburg Mercante Co
umberg ros. Co.
519
7
848
519
7
848
439
4
5 8
350
2
498
4437
11
1271
10 19
7
1043
4772
4
49
9
1
839
8904
9
1302
8904
9
1302
8 29
8
919
10983
9
1193
11497
12
3
9 29

875
121 9
13
1213
1217
1
1135
858
9445
10104
18 17
12950
8 24
8 25
52
9577
52
12934
12934
18 11
11894
12 70
10454
9 5
4289
110
111
998
832
8823
2440
7147
18792
18793
18793
457
2880
12137
8
8
11
12
7
7
7
5
5
11
9
12

7
9
10
10
5

8
4
11
11
11
11
4
4
12
1 state ta decson nonacquescence reates ony to 1017 trust.
Nonacquescence reates to tentatve ta ssue.
Nonacquescence n so far as t reates to ncuson n nvested capta of the sum of 198,71 .37.
1 state ta decson.
state ta decson nonaoquescence reates to frst and second ssues of decson.
Nonacquescence reates to second ssue of decson.
1 Nonacquescence reates to ssue nvovng reducton of nvested capta on account of dvdend payment.
Ths notce, whch was orgnay pubshed n uetn I -41, page 1, was repubshed n Cumuatve
uetn -, page , for the reason that the case was erroneousy ncuded n the st of ca3es acquesced n
pubshed n Cumuatve uetn I -2, page 1.
Nonacquescence reates to frst Issue of decson.
M Nonacquescence reates to ssues nvovng edera ncomo ta es added to ncome for 1917, 1918, and
Id respect of whch pettoner was entted to be rembursed by ts tenant companes,
s reates to frst ssue of decson.
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52
oume.
9921
5
14745
13
2 037
10
7883
8
4 35
7
515
11
83 1
10
8323
10
8324
10
88 0

13557
1 535
13
1S435
18535
13
7702
7
248 4
9
43
1
17 0
13
1 97
5
2 89
5
22 0
4
10319
8
oard of Ta ppeas.
ydenburgh, a
ogcr Crawford, Ino
on wt Teer Co.
ourne, my ., estate of 1
oyne Cty Lumber Co
rackenrdge, George W., estate of.
renneman, Davd
renneman, . L.
renneman, erna L
rant, . S., admnstrator
rttngham, uan .
rttgham, uan G
ronson et a., ames D., trustees 1
rown Co., M
ryant Stratton Commerca Schoo, Inc.
uck, Truman, estate of
urke ectrc Co.
urton, Lawrence mer
yck, W. S
yers, oward Webster
Caforna rewng ssocaton .
Caaway, uer .
Cambrdge Ice Co
Campbe, rcher Maynard
Campbe, . L
Capto ote Co.
Carbo Petroeum Co.
Carey, C. W.
Centra Savngs ank 9
Century Musc Pubshng Co
Chapn, W. -
Chapn Constructon Co
Cark, ames ---------
Ceveand, Panesve fe shtabua R. R. Co.
Ceveand, Panesve astern R. R. Co...
Cngan, Margaretta T
Con Sous Co., M.
Cons-McCarthy Candy Co.
Comer-Green Lumber Co.10..
Connectcut Passumpsc Rvers R. R. Co.
Conneee, C. U
Conover Co., S.
3903
22 4
7282
18320
18321
10
7134
9524
2432
500
12840
2207
3200
11918
4927
4927
4227
73 1
9238
4302
2091
8424
9100
33 3
392
5
4
9

8
4
12

10
12
4
3
12
4
4

9
4
12
8
4

Nonacquescence does no reate to deductbty of New York nhertance tar.

1 state ta decson.
Nonacquescence reates to ssues 1 and 2, and ssue 5 as to patent group No- I.
Nonacquescence reates to queston of affaton as to the companes ncuded n the unts.
1 Nonacquescence reates ony to that part of decson whch reates to appcaton of the yers decson
(1 . T. ., 1135).
e Nonacquescence reates to fourth ssue of decson.
T Nonacqtfosconce reates to ssues 1 and 3 n decson.
Nonacquescence reates to obsoescence Issue.
1 Nonacquescence reates to 25 per cent penaty for faure to fe a return.
Nonacquescence reates to ssue whether the consodated return for 1919 started the runnng of the
Itatute of mtatons as to tho Comer-Green Lumber Co.
Nonacquescence reates to frst Issue of decson n so far as t hods that the ncome was not reazed
unt the year n whch the taes became due and payabe and aso to the second ssue of decson.
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53
Tapayer.
Conway, . W
Coon aey State ank 1
Corbett 4 Stuart
Corneus Lumber Co
Crabtree Co., . ..
Crocker Co., . S
Cross Mountan Coa Co
Crown Potteres Co
Curran, Maurce
D.
D ramon, enretta.
Day Pantagraph, Inc. .
Darby, Rufus C. -
Davs, Chas.
Davs, Oscar
Dav, enry M
De orest, ua N -
Denert, r., Oscar
Deto Grass Rug Co.
Dennett, red
DeReuter, Ronad - --
Dckerman ngs, Inc --
Don, ohn P ---
Doehne, George, estate of
Don, arret M., estate of ---
Downg, Mary M
Duggan, anna, estate of 8
Duggan, ames, e ecutor 5
Duhme, Ophea, estate of
Duncan Coa Co., W. G...
Dunson Ms --
Dustn, nne M., estate of.
Dwght Loyd Snterng Co
.
kn, Dr. Wm. S
mery et a., arc C, e ecutors
mery, |r., Lews, estate of
sperson, Nes, estate of
spcrson, Mrs. Nes (Mee), e ecutr
cesor-Leader Laundry Co
Depost Natona ank and ffated
anks
dety Trust Co.
rst State ank of rackettve, Te
, State ank of Wemar
ank..
oard of Ta ppeas.
No.
oume.
Page.
22 3
4
842
11352
13
132
11855
11
540
4273
5
215
5889
5
732
4581
5
537
1219
2
587
10043
12
1412
793
5
180
10 44
7
00
412
9
1173
22 5
4
842
18 22
11
420
18 25
11
420
30198
12
1 1
5857
4
1059
937
11
51
92
7
811
11498
7
1173
243
7
00
4928
4
447
10985
9
177
9344

1071
5594
9
450
2394

97
470
8
482
470
8
482
S58
8
180
12347
13
72
17019
10
1150
8G29
8
919
120
1
179
18 29
11
420
97
9
328
97
9
328
7071
11
1283
7071
11
1283
9221
8
183
220
5
520
13 38
13
109
1287
9
975
12 57
1 10
39
1 011

1174
11
1034
810
5
178
Nonacquescenee reates to ssue nvovng oss of 1,000 on Gaoway r___
1N on acquesce nee reates ocy to ssues Invovng reducng nvested capta by reducng current earnngs
avaabe for dvdends by ta accrued for current year.
1 Nonacquescenoe reates to second ssue n decson.
Nonacquesceooe does not reate to deductbty of New York nhertance ta .
state ta decson.
Nonacquescenee reates to Issue regardng ursdcton.
state ta decson nonacquescence reates to frst and second ssues of decson.
Nonacquescenee reates to ssue concernng nvested capta for 1920 and 1921.
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54
Docket
No.
oard of Ta t
oume.
oster, ce sher
oster, ames ., estate of 1
rancescon Co., . p.
rank, Wam G., admnstrator
rankn ct a ., Thomas ., e ecutors and
resh Pond Ice Co.
uer, |r., ames W --
G.
Gaum, bert ., trustee
Garber, . . .
Garter, M. C. -
Gardner Governor Co.4
Garneau Co., Inc., oseph
Genera Manfod Prntng Co --
Georga Car Locomotve Co. -
Gbson, ate oa, estate of 1 --
Gette, atharne
Grard Trust Co., e ecutor 1
Genn, Thomas ---
Goddard, ohn N
Gonzous Creek O Co. (dssoved), trustees for
credtors of
Goodrum, |r., . -
Graves et a., . ., commttee for credtors of
Whttaker acon
Great ear Sprng Co. -
Great Northern Ry. Co.7
Greene et a., Rchard T., trustees
Grcck Condensed uttermk Co -
Greyock Ms
Guarantee Constructon Co.
Gud Co., Inc., .
Guf States Stee Co -
Gwn, ar S
.
n, |r.,
adden, Mare Torrance, estate of
aght, George W...
amton, arrs Co
annba Mssour Land Co.
1012
11493
10585
9344
515
7282
30 8
101
3708
14097
3710
13909
321
40
14577
3131
7402
18754
11298
22 2
18 21
13393
18 13
22 31
10489
8433
11850
23973
3 91
1192
1828
1848
8741
927
18358
18359
17983
9421
9421
141
4170
15 87
9084
7
13
10

9
7
10
11
11
5
1
12
2
7
14
10
4
11
12
11
12
12
15
7
9
2
11
12
14
10
10
4
12
9
1 state ta decson.
s Nonacquescence reates to thrd ssue of decson.
1 Nonacquescence 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.
Nonacquescence reates ony to that part of decson whch reates to appcaton of the yers decson
(1 . T. ., 1135).
1 Nonacquescence reates ony to ssue 3 n decson.
Nonacquescence does nut reate to deprecaton and obsoescence ad|ustments.
7 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.
1 Nonacquescence n decson n so far as the oard hods that t has |ursdcton to determne the over-
payment for 1917.
Nonacquescence reates to second ssue of c
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55
Ta| payer.
Docket
No.
oard of Ta ppeas.
oume.
Page.
arbour-Longmre Co
aran Co., O.
arret Cotton Ms
arrs, zabeth
arrs O Co., C. C
arry Co., S.
artmann, Chares
aske arker Car Co.
ass, . S.1
atze ueher, Inc.2
awkns, rank
aynes, wood, estate of
eneman Lumber Co.3
enrch, Samue G., estate of
emock oow Coa Coke Co
endrcks, armon W
enn, . W., trustee
epburn, C. sher, estate of 4
ermance, . P
erzog, Php W
ess ros.
ewtt Rubber Co
ckev, .
ggnbotham- aey-Logan Co.
nman, Thos. P
rsch Co., doph
of rau Co., The
offman, Isabea C, estate of 4
offman et a., Meyer C, e ecutors 4.
offmann, rederck
ofed, Mary D. Moore
oyoke Westfed R. R. Co
ome uders Shppng ssocaton..
ome Laundry Co
ouston et Termna Ry. Co.7.-.
ubert, dmund D., estate of8
umphreys, . C
upfe Co., Inc., . Chr. G.
utchns Lumber Storage Co.10
utchson, Chares 11
Inos Merchants Trust Co., e ecutor ...
Inos Rura Credt ssocaton
Independent rewng Co. of Pttsburgh I _
Independent rck Co
905
1374
228
11820
8011
1 44
18930
7009
14817
9501
11454
2572
11724
10175
2420
8837
4554
4303
9 90
11192
245
8039
325
19107
4 91
18 15
3230
134
5338
33 1
10089
8425
7044
047
8494
11204
40 9
9834
3307
8053
11204
5058
3242
8198
7
1
5
11
13
4
14
9
13
10
4
13
11
2
10
4
8
11
11
10
7
1
11
8
11
7

3
7
9
8
4

12
9
9
4
13
12
3
4
11
314
1027
734
420
937
211
14
1087
1352
993
842
79
1229
40
117
1257
190
138
420
747
729
424
420
5
420
707
442
13 1
9 4
1302
127
903
45
13 4
818
5
944
705
1187
818
1178
870
802
1 Nonacquescence reates to frst ssue of decson.
3 Nonacquescence reates to thrd ssue n decson.
1 Nonacquescence reates to ssue as to tentatve ta .
state ta decson.
1 Nonacquescence reates to second ssue of decson.
Nonacquescence reates to frst, second, and fourth Issues of decson.
7 Nonacquescence reates to second and fourth ssues of decson.
state ta decson nonacquescence reates to ssue concernng transfer of stock.
Nonacquescence reates to obsoescence ssue.
M Nonacquescence reates ony to that part of decson whch reates to appcaton of the yers decson
(1 . T. ., 1135).
Nonacquescence reates to deducton of amount epended for tranng to keep n condton for
u Nonacquescence reates ony to ssue 2 n decson.
3133 29
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5
Ta payer.
Indana Rong Ms Co
Indana Stove Works 1
Indanapos Street Ry. Co
Indvdua Towe Cabnet Servce Co.
Ingewood Park Cemetery ssocaton..
Innan, dward II
Interurban Constructon Co.
ackson, nnette T.
ackson, George .
ackson, Mnne L., estate of8
ackson, Ws .
ackson Tnde8
ohnson et a., omer S., e ecutors _
ohnson, Stephen O., estate of4
ohnston, Mrs. . ., estate of
ohnston, R. ., her at aw
.
een, erbert Ide
eews Reaty Co., Inc.
ehota Mnng Co
eystone Coa Mnng Co.
ster et a., orence L., admnstrators _
ster, Wam ., estate of
ster Land Improvement Co.7.
en, orence L.8.
yman,
uhn, .
ynett, arod _
Lancaster et a., ohn L., recevers-
Lancaster Lens Co.
Lawson, ohn S
Lee Lve Stock Commsson Co
Lee Shoe Co., Inc., ohn
Levne ros. Co., Inc.10
Docket
No.
122.r 9
8148
8787
1231
1258
3249
2501
7028
2I5S7
9001
9002
4219
9003
9000
9550
9550
14355
14355
8423
10489
1117
101 8
3707
1198
180 1
3707
1198
180 1
12355
4004
4005
0 1
102
10157
753
18 31
13190
11 03
108
280
100 1
832
oard of Ta ppeas.
oume.
13
8
7
11
11
3
11
11
11
11
12
12

12
3
10
11
11
0
4
11
12
9
10
10
7
11
5
Nonacquescence reates to second ssue of decson.
N on acquescence reates to tentatve ta ssue.
state ta decson.
state ta decson nonacquescence reates to trust nstruments of 1918 and 1921.
1 Nonacquescence does not reate to deprecaton and obsoescence ad|ustments.
Nonacquescence reates to ssue as t o 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.
Nonacquescence reates to ssue wth respect to queston of aowance of amortzaton n 1918 on costs
Incurred n 1919.
Nonacquescence reates o queston n decson pertanng to the year 1919.
Nonacquescence reates to the ssue as to whether a return sgned by the presdent and secretary wa
the return requred by statute, the fng of whch started the runnng of the statute of MrataUoos.
w Nonacquescence reates to ssue n decson.
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1
3
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0
1
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2
2

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8
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57
Ta payer.
Lev Co., Inc., red T
Leber et a., . W., e ecutors
Lghtnng Creek O fe Gas Co
Loyd, rnest
Lock, Moore Co., Ltd
Loetscher, Chrstan, estate of1
Loetscher et a., ohn ., e ecutors
Loewensten ros. Garment Co
M.
Mc voy Co
McCIung et a., u L., e ecutors
McCornck et a., Cyrus ., e ecutors .
McCormck, Nette ower, estate of a...
Docket
No.
oard of Ta ppeas.
McGee, Nee
McGown- oshee Lumber Co.
McMurtre, dnah
Magee urnace Co.4
Mahonng Coa R. R. Co
Maey Co., dward
Manckrodt, |r., dward
Mauckrodt, sr., dward 3...
Manhattan rewng Co
Mann, rankn P., estate of
Martme Securtes Co.
Martn dvertsng gency, Inc., Mac
Mathews, ohn
Matthessen, |r., . W
Mercante Trust Co., e ecutor
Metro Pctures Corporaton of New ngand 7
Me can Teegraph Co.1
Mants Motor Works, Inc
Mddese Ice Co. et a
Md-West o Co -
Mer, Carence
Mor, arry C
Moore, L. C.
Morgan, rooks
Morsman, |r., dgar M., admnstrator 10
Morsman, dgar M., estate of 10
Morsman, |r., dgar M., admnstrator 10
Moser, Car . --
Moser, George
Moser, osephne T
Moser, uus C
1 state ta decson nonacquescence reates to Issues nvovng e ecutors commssons, attorneys
hen, and msceaneous admnstraton e penses.
state ta decson nonacquescence n so far as decson hods as nonta abe the vaue of property
paced n trust under the nstrument of uy 27, 1918.
Nonacquescence reates to second ssue of decson.
Nonacquescence reates to frst ssue of decson.
Ths notce, whch was orgnay pubshed n uetn I
uetn -, page 7, for the reason that the case
pubshed n Cumuatve uetn I -2, page 3.
state ta decson nonacquescence reates to deductbty of remander vaue of the resduary estata
bequeathed to charty.
7 Nonacquescence reates to tentatve ta ssue.
Nonacquesoence reates to ssue as to tentatve ta .
Nonacquescence reates to Issue as to whether the
thereof were productve of ncome ta abe for the years
u state ta decson.
181 8
9720
8584
23204
24414
9295
14325
14325
84 5
921
124 8
22731
22731
/ 13292
1 29938
1044
19740
5 00
2202
9 77
11031
1750
93
101
324
8115
9583
2125
9528
4437
9093
052
7282
110
14087
19135
3709
13907
18 14
170 0
32075
32075
13473
13475
13474
13471
oume.
9
13
8
7
14
11
13
10
13
13
13
13
10
8
11
4

14
1
t
10
2
11
8
2
13
11
10
5
9
11
13
14
11
11
13
14
14
12
12
12
12
II, page 1, was repubshed n Ounuatve
e reason that the case was erroneousy ncuded n the st of cases acquesced In
ts of December 14,1918, am the dscbarge
roved, and, f so, to what e tent.
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58
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Mossman, Yarnee fe Co.
M. S. C. odng Corporaton et aL-
Muer, Car, estate of
Murphy et a., ames C, e ecutors .
Myers, Long Co
N.
Natona Pano Manufacturng Co.s.
Natona Products Co
Natona Refnng Co. of Oho et a., The_
Natona Sugar Manufacturng Co
Natona Tank port Co
Neson, C. N., estate of2
New Oreans, Te as Me co Ry. Co.,-_
Newman, Wam C.s
Nchos et a., George, e ecutors
Nchos, ohn W. T., estate of
Nes re rck Co
9 0 Park ve. Co., Inc., et a
Node orst Co.
Nord op Ranch
Nordhot, ohn
Norfok nttng Ms Corporaton
Northern Trust Co., e ecutor 1
Northern Trust Co., e ecutor 7
Northsde aduct Co.
Northwestern States Portand Cement Co.e_
Norton et a., rank ., e ecutors 10
Norwch Worcester R. R. Co
Norwood Lumber Co
Nunnay, .
Nunnay, Wnshp
O.
Od Coony R. R. Co
Ongcr Corporaton
Ottey, ohn
Ou udng and Loan ssocaton.
32 9
1107
4 20
9720
41
12358
24511
3333
2048
13
12120
18
10 05
3274
7702
400
530
9599
9599
2 28
978
98 7
149
37
4341
2473
7127
11728
14200
57 3
1045
5594
2020
3785
18 27
18 20
7820
254 9
18 23
38 5
7
13

14
11
7
11
1
7
3
7

10
10
10

7
12
10
4
5
9
9
9
2

11
11

9
11
0
Pacfc Coast Ppe Co. 79 1 I 11
f 9478
Pametto Coa Co - 18272 11
11 2030
Nonacquescence reates to Issue nvovng deducton of tentatve ta es n determnng the earnngs
avaabe for payment of dvdends n 1918 and 1919.
1 state ta decson.
Nonacquescence reates to tentatve ta ssue.
Nonacquescence reates to ssues 1 and 4 n decson.
8 Nonacquescence reates to deducton of amount of bad debt ascertaned to be worthess and charged off
In 1920.
8 Nonacquescence reates to frst ssue of decson.
7 state ta decson nonacquescence reates to trust created on ebruary 9,1917.
1 Nonacquescence u so far as decson determnes that ghand Park Co. and Northsde aduct Co.
were affated wth rgna Raway Power Co.
9 Nonacquescence reates to ffth ssue of decson.
Nonacquescence docs not reate to deductbty of New York nhertance ta .
Nonacquescence reates to ssue of decson.
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59
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Parrett, O. S
Paso Robes Mercante Co
Peeress Wooen Ms
Peton, onoro Gbson, e ecutr 1
Petauma Santa Rosa R. R. Co.s
Pctsch, my Lake, deceased, estate of
Petsch, Water G., e ecutor 1
Pke County Coa Corporaton
Pttsburgh nfe orge Co
Pttsburgh ave, oundry Constructon Co.
Potter, .
Powe Coa Co.4
Prescott et a., Over, e ecutors
Preseott, Wm. R
Prtzaff, rederck C
Prosser, Seward -
Provdence Worcester R. R. Co
Provdent Trust Co. et a., admnstrators 1
uaker Mad, Inc.
R.
Randa, George W., estate of_
Rauh Sons ertzer Co., .
Reeb, M.
Rey, Warren
Reance Manufacturng Co
Remngton Rand, Iuc
Remngton Typewrter Co
Renzehausen, rederck C
Reynods, Mary G., estate of
Reynods, Php M., estate of
Rhode Isand Too Co
Rndge Land Navgaton Co
Robertson Co., . P
Robnson Co., . M.7
Robnson, Mrs. C.
Rodenbough, zabeth McCahan, estate of 1
Rodenbough, mer ., e ecutor of the estate of
zabeth McCahan Rodenbough, deceased 1
Root, enry L., estate of 1
Root, Suse M., e ecutr 1
Rosenbaum ros., Inc
Rosseter, ohn
Roth, W.
Rouse, empstone Co., Inc.8
Ruf, rank ., estate of
7
11 55
12038
Tn:
13830
5424
5424
7189
74 4
ms )
7432
11945
7883
18 2
109
8520
297
7775
497
11421
5850
7 5
10720
9847
5380
021
3472
2788
10 58
8 25
8 24
2832
3 98
14104
5 52
8271
4 5
4 5
2825
2825
13050
179
012
7 73
10987
9528
4
12
13
7
11

t
4
( .
t
10
12
8
11
10
7
5
5
10
12
s
7
7
11
4
8
8
8
3
2
14
5
s
1
1
5
5
1 I
12
1
7
13
1 state ta derson.
Nonacquescence reates to that part of decson as to the purchase of ta payer s own bonds at ess than
par whch were retred.
1 Nonacquescence reates ony to s ue 2 n decson.
4 Nonacquescence reates to |ursdcton ssue.
Nonacquescence does not rcte to deductbty of New York nhertance ta .
1 Nonacquescence reates to ssues 3 and 4 of decson.
7 Nonacquescence reates to frst ssue n decson.
Normcquescence reates to na ssue of decson.
-ute ta decson nonacquescence reates to deductbty of remander vaue of the resduary estate
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Tapayer.
Docket
No.
oard or Ta ppeas.
oume.
s.
8t. Lous Maeabe Castng Co.1
Saeger, Wford C
Sage, Margaret Ova, estate of _
Sarfert, Ma
Morrs
Scha, Wam
Schoette Co., dwn
Schreer Co., onrad
Scuy Syrup Co., D.
Seaboard Natona ank of New York, N. Y., e -
ecutor
Seas, ctora D. (Mrs.)
Shaffer, C.
Sheffed Dentfrce Co. ---
Shto Co., ohn
Shto Reaty Co...
Sege, Inc., oe
Sver ng Consodated Mnng Co. of Utah
Snshemer ros., Inc
Socum et a., erbert erman, e ecutors
Smth, Carence C
Smth grcutura Chemca Co
Smthers, rancs 8., estate of
Standard Lfe Insurance Co. of merca4.
Stange, . .
Stanton, |r., ohn, estate of
Starbuck, . ., admnstrator..
Stetson son..
Stevens, . G
Stevens Thompson Paper Co.
Stone, George L
Stoney, Mary M. (Mrs.)
Strong, . R., estate of
Sugg, . D., estate of
Sunn, L.
Sunnysde Coa Coke Co.a
Superor Motor Parts Co.7
Swft, Luce W
Swft Co., C.
T.
Tat, ames 1
Te as Pacfc Ry. Co
Te te M Suppv Co
Thomas, C. R
Thomas, Thomas ., estate of.
Thomas, W. ubrey
5490
151 8
75 2
5882
343
922
9721
191 3
1941
3 00
10005
9 90
18 24
9872
11814
187
18
1739
15153
498
5882
37 7
13179
5
12475
25842
29779
553
5892
11724
873
1 318
3501
1075
18 28
124 8
88 0
7483
9442
10348
1851
12315
13908
98 3
10382
7139
4230
4229
9
9

5
12
18
13
10
11
11
12
13
8
8
1
8

4
11
1
IS
13
It
14

9
11
13

9
8
11
12
11
9
8
8

8
1 Nonftcqufscenoe reates to tentatve ta ssue.
state ta decson.
1 Nonacquescence reates to oss sustaned through obsoescence of
Nonacquescence reates to Issue Invovng the queston or rest
cquescence notce In the case of . . Stange (C. . I -2, 4)
8 Nonacquescence reates to thrd Issue of decson.
7 Nonacquescence reates to fna Issue of decson.
Nonacquescence reates to ssue as to whether the agreements of December 14, 1018, and t
s Invoved, and, f so, to what e tent.
thereof were productve of ncome ta abe for the years 1
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1
Ta payer.
Thomas Coa Co.1-.
Tghe, nna M
Tnde, rank T. __
Turnure, George .
U.
Underwood, Lucy C, estate of
Unted States Merchants Shppers Insurance Co.4.
Unted States Refractores Corporaton s
Unted States Trust Co. of New York et a., e -
ecutors of rancs S. Smthers, deceased
an Schack, en L., estate of
an Zandt, acobs Co
rgna Carona Securtes Corporaton et
rgna Raway Power Co.7
W.
Wadde et a., Mary T
Waggoner, da
Waggoner, R. M
Wagner, Rchard G
Wacott Lathe Co
Waker, Wam a, estate of.
Waters, rances W. (Mrs.)
Waworth, Chares W
Wardaw, W. C
Warner, red W
Warren, Wm. C
Washngton ote Co. ---
Washngton Post Co
oard of Ta ppeas.
No.
oume.
Page.
8098
10
39
13-172
12
72
8999
11
1257
10045
9
871
Wessenbach, Mnna .
Western change ank
Western Maryand Ry. Co.10 ...
Western Wheeed Scraper Co. .
Wheatey, ames .12
Whtehouse, Syb
2473
10439
5 42
0 5
7127
8 3
11 05
7484
9040
11731
4228
5881
5880
42 5
1142
23973
18 1
8794
22 1
3713
18 32
09
7133
8085
4004
4005
0 1
102
10157
49 7
475
12001
9 5
13220
9
13
9

9
9
9
2
15
11

4
5
11
4
10
12
12
14
8
7
Nonacquescence reates to second ssue of decson.
Nonacquescence reates to tentatve ta Issue.
state tat decson.
Nonacquescence reates to premum reserve Issue.
Nonacquescence reates to Issue wth respect to queston of aowance of amortzaton In 1918 on costs
Incurred In 1919.
state tat decson nonacquescence reates to trust created on ebruary 9, 1917.
Nonacquescence In so far as decson determnes that ghand Park Co. and Northsde aduct Co.
were affated wth rgna Raway Power Co.
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 Issues concernng contrbutons to ssocaton of Raway ecutves and
accrua In caendar year 1919 of ncreased compensaton for transportaton of ma, awarded by Interstate
Commerce Commsson on December 23, 1919.
11 Nonacquescence reates to that port on of decson whch hods that secton 284 (c) of the Revenue ct
of 1920 s appcabe to the case.
Nonacquescence reates to tem (3) In decson.
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2
Ta payer.
Whtehurst et a., ohn L
Whtehurst, et a., Mary M
Wckersham, Chas.
Wdener, George D
Wdcner, oseph
Wson, hu Cement
Wson, George
Wson, Wam W
Wson Syndcate Trust
Wndfeder. ohn ., estate of
Wnshp, C. R
Wnshp, zabeth T. (Mrs.)
Wsconsn rdge Iron Co
Wof et a., Ma , trustees
Woferman, red, e ecutor 2
Woferman, Lous, estate of
Woodruff, rnest
Woodruff, Geo. C
Woodruff, as. W.
Woodward, Davd
Wooston, euah . ., estate of 1
Wrght, Inc., en T
W. T. M. Co - --
Wyomng Centra ssocaton
Y.
Young, ames ., estate of
Z.
Zakon, Wam
Zeerhach, Isadore
Zeerbach, Theresa
Znn, rthur
Znn, Martn
Docket
No.
1244
12447
18 12
7723
772-1
7725
8500
8501
8502
12427
2780S
41
18 18
18 30
13739
1 1 )
11201
11291
2050
18518
18 19
22
1 1298
121 4
8778
13093
99 5
2054
497
5450
2028
883
2789
3444
oard of Ta ppeas.
oume.
12
141
12
141
11
420
8
51
8
51
11
9 3
11
9 3
11
9 3
14
508
5
952
11
420
11
420
13
24
10
835
10
285
10
285
4
842
11
420
11
420
4
842
10
1100
12
1149
11
722
8
10 4
5
1004
7
87
2
107
2
107
3
974
3
9 9
state ta decson.
state ta decson nonacquescence 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 II. COMPUT TION O N T INCOM .
S CTION 22(a). GROSS INCOM : G N R L
D INITION.
rtce 51: What ncuded n gross ncome. III-20-4204
G. C M. 020
R NU CTS O 1924. 192 , ND 1928.
The ncome derved by a restrcted member of the Otoe Trbe
of Indans from and conveyed to hm by deed e ecuted by a non-
competent member of the trbe and approved by the Secretary of
the Interor, sub|ect to a restrcton as to aenaton wthout the
consent of the Secretary of the Interor, s not e empt from ta a-
ton. Genera Counse s Memorandum 2715 (C. . II-1, 5 )
revoked.
n opnon s requested concernng the correctness of the con-
cuson reached n Genera Counse s Memorandum 2715, that the
ncome derved by a restrcted member of the Otoe Trbe of Indans
from and conveyed to hm by deed e ecuted by a noncompetent
m ruber of the trbe and approved by the Secretary of the Interor,
sub|ect to a restrcton as to aenaton wthout the consent of the
Secretary of the Interor, s e empt from ta aton under the Reve-
nue cts of 1924 and 192 .
In ths connecton attenton s drected to the case of Shaw v.
Gbaov-Zahnser O Corporaton (27 U. S., 575), decded pr 9,
1928, n whc the Supreme Court of the Unted States had before
t a case nvovng the ta abty by the State of Okahoma under
ts gross producton ta aw of the o producton of a essee from
and owned by an Indan under the supervson of the Secretary of
the Interor. The and n that case was acqured for the Indan from
a non-Indan ctzen and had prevousy been sub|ect to ta aton by
the State. It was purchased sub|ect to the approva of the Secretary
of the Interor, who as a condton of hs approva requred that the
deed of conveyance shoud provde that the and coud not be aen-
ated by the Indan grantee before a gven date wthout hs consent
and approva. The mposton of the restrcton on aenaton thus
mposed by the Secretary was one authorzed bv ct of Congress.
(Secton 1, ct of May 27, 1908, 35 Stat., 312.) The Secretary, how-
ever, dd not provde that the purchased and shoud be e empt from
ta aton, the restrcton on aenaton beng the ony condton m-
( 3)
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522(a), rt. 51.
4
posed by hm. One of the defenses of the essee of sad and wag
that the restrcton n tsef consttuted an e empton of the and
and ts uses from ta aton. The Supreme Court sad:
the mere act of the Secretary n mposng the restrcton s not the
e ercse of any power whch may resde n Congress to e empt them (ands
purchased for an Indan) from ta aton.

Ltte need be sad as to the power of the Secretary of the Interor to
e empt the and and ts uses from ta aton. The power, f t e sts, s one
conferred by Congress, but nether t nor the Secretary has n terms purported
to make or authorze such an e empton.
No such acton s to be mped from hs authorzed acton n
restrctng the power of the Indan grantee to aenate the and.
Restrcted purchased and s to be dstngushed from restrcted
aotted and (whch atter conssts of and acqured by an Indan
aottee from the Unted States or from an Indan trbe n the ds-
trbuton of trba ands). Some of the aotments of Indan and
have been accompaned by the mmedate ssuance of patents n
fee, sub|ect to a restrcton on aenaton for a perod of years m-
posed drecty by an ct of Congress. otted and so restrcted,
though patented to the Indan aottees n fee, has been protected
from State ta aton, on the ground that the restrcton contnues a
supervsory contro of the and n the edera Government durng
the contnuance thereof as a part of the machnery for the settement
of Indan affars, and for that reason consttutes an nstrumentaty
of the edera Government wth whch the States may not nterfere
by ta aton or otherwse. (The ansas Indana, 5 Wa., 737
Unted States v. Rckert, 188 U. S., 432 Gespe v. Okahoma,
257 U. S., 501, and other cases.) The decson n Shaw v. Gbson-
Zahnuer O Corporaton, supra, vews wth favor the contnuance
of the protecton from State ta aton of restrcted aotted: Indan
and on the edera nstrumentaty theory. or reasons whch are
smar to those ndcated, the ttorney Genera n an opnon dated
March 20. 1925 (34 . G., 439), pubshed by ths offce as Treasury
Decson 3754 (C. . I -2, 37), rued that ncome from aotted1
and, restrcted by Congress aganst aenaton, s not sub|ect to the
edera ncome ta aws durng the restrcted perod, and ths rue
has been foowed contnuousy by the ureau snce the date of ts
f)romugaton, but t does not purport to e tend to purchased
ands sub|ect ony to a restrcton on aenaton mposed by the Secre-
tary of the Interor.
s stated, the case of Shaw v. Gbson-Zahnser O Corporaton,
supra, nvoved purchased and whch had been acqured for the
Indan from a non-Indan ctzen of the State of Okahoma, and
such and had, therefore, prevousy become a part of the ta abe
property of Okahoma. In Genera Counse s Memorandum 2715
the and nvoved was acqured by a restrcted Indan by a convey-
ance n fee smpe to hm from hs mother, who aso was a restrcted
Indan, who n turn had acqured the rght to such and by a patent
ssued under the genera aotment. ct of 1887 (24 Stat,, 388), pur-
suant to the terms of whch ct the patent provded that the and
shoud be hed n trust for a perod of 25 years. otted ands
acqured by such trust patents have been hed to be restrcted aot-
ted ands wthn the meanng of Treasury Decson 3754. (See
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5
522(a), rt. 58.
S. If. 5 32, C. . -, 193.) In the hands of the mother the and
and ts uses were, therefore, e empt from ta aton under the ttor
ney Genera s rung, as ands restrcted drecty by ct of Congress.
Whe the transfer of such and from the mother to the son was a
transfer from one restrcted Indan to another, the restrcton as to
the son came by way of the act of the Secretary of the Interor and dd
not represent a restrcton mposed drecty by Congress. urther-
more, the acquston thereof by the son represented an acquston
whch n aw was by way of purchase. Consequenty, under the
rung of the Supreme Court n Shaw v. Gbson-Zohw er O Cor-
poraton, supra, the restrcton mposed by the Secretary of the
Interor dd not carry wth t an e empton from ta aton wthn the
meanng of Treasury Decson 3754, and such restrcton was merey
one on aenaton and nothng more.
Snce Genera Counse s Memorandum 2715 s not n harmony wth
the decson n Shaw v. Gbson-Zahnser O Corporaton, supra, that
memorandum s hereby revoked. The ncome from and so acqured
by a restrcted Indan that s, from purchased and s sub|ect
to the ncome ta mposed by the Revenue cts of 1924 and ater
Revenue cts.
C. M. Charest,
Genera Counse, ureau of Interna , Revenue.
rtce 58: Sae of stock and rghts. III-24-4233
I. T. 2474
R NU CT O 1928.
Warrants Issued by the M Company evdencng the stockhoders
rghts to subscrbe for addtona shares were dated May 1, 1928,
and were maed on that date to stockhoders of record on pr
14, 1928. The stock of the company sod e -rghts on the N
Stock change begnnng pr 27, 1928.
ed, the date whch shoud be used for makng the apporton-
ment requred by artce 58, Reguatons 74. s pr 14, 1928, It
beng the stockhoders of record on that date to whom the stock
rghts were ssued.
dvce s requested as to the date when rghts to subscrbe to stock
are to be consdered as ssued under artce 58 of Reguatons 74,
whch artce provdes that where a corporaton ssues to ts stock-
hoders rghts to subscrbe to ts stock and the stockhoder ses hs
rghts to subscrbe, the cost or other bass of the stock n respect of
whch the rghts are ssued sha be apportoned between the rghts
and the stock n proporton to the respectve vaues thereof at the
tme the rghts are ssued, and the bass for determnng gan or oss
from the sae of a rght on one hand or a share of stock on the other
w be the quotent of the cost or other bass assgned to the rghts
cr the stock, dvded, as the case may be, by the number of rghts
ssued or by the number of shares hed.
It appears that under the 1928 stock aotment of the M Company
warrants evdencng the stockhoders rghts to subscrbe for add-
tona shares were dated May 7, 1928, and were maed on that date
to stockhoders of record on pr 14, 1928. The stock of the M
Company, however, sod e -rghts on the N Stock change be-
gnnng pr 87,1928.
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22(a). rt. 2.

It further appears that the resouton under whch the stock
rghts accrued to the stockhoders was passed by the board of d-
rectors of the M Company on March c28, 1928. The resouton, so far
as pertnent, reads:
Resoved that stockhoders regstered on the books of the company at the
cose of busness on the 14th of pr, 1928, sha have the prvege of subscrb-
ng, to the e tent of per cent of ther then respectve hodngs, at par, on
or before the , 1928, to an amount not e ceedng shares of the capta
stock of the company .
Wth respect to the queston whether pr 14, pr 27, or May
1, 1928, shoud be used for makng the apportonment requred by
artce 58 of Reguatons 74, t s hed that pr 14, 1928, s the date
whch shoud be used, t beng the stockhoders of record on that date
to whom the stock rghts were ssued by the M Company. The
reasons for seectng that date are stated by the ureau n Genera
Counse s Memorandum 1394 (C. . I-1, 35), as foows:
The date when such a separaton of capta nterest resutng n a cost
attrbutabe to the stock rght occurs s the date when the stock rght comes
nto e stence separate and dstnct from the shares of stock wth respect
to whch It s ssued, whch n turn s the date the rghts accrue to sharehoders
of record. Unt that date the sae of a share of stock carres wth t any
rght n connecton therewth, and there s no dmnuton n the vaue of the
shares. On that date, however, the rghts accrue to and vest n sharehoders
of record, a porton of the capta nterest s separated from the shares and
vests n the sharehoders ndvduay . It s on that date that there
frst arses a cost of the rght, thereby consttutng a bass for determnng
gan or oss resutng from the sae of such rght. The porton of artce 39
(of Reguatons 9 or artce 58 of Reguatons 74) referred to ays down the
ue for determnng such cost or bass and reates to the date when such cost
arses.
The date on whch stock rghts accrue to stockhoders wthn the
meanng of Genera Counse s Memorandum 1394, supra, s, so far
as a genera rue may be ad down, the date whch determnes the
stockhoders who are entted to the rghts n the nstant case,
pr 14, 1928. It was the stockhoders who were the owners of
record of the stock of the M Company on that date who were entted
to the stock rghts. The fact that the warrants evdencng the stock-
hoders rghts to subscrbe for addtona shares were not dated or
maed unt May 1, 1928, s mmatera, snce the determnng date
s that upon whch the rghts are ssued and not the date upon
whch the warrants evdencng the rghts are sent to the stockhoders.
In Genera Counse s Memorandum 1394, supra, t appears that
mmedatey after the stock rghts accrued to the stockhoders the
shares of stock themseves sod e -rghts, but that was an ncdenta
and not a controng factor. ccordngy, n the nstant case t s
regarded as mmatera that the stock of the M Company dd not
se e -rghts on the N Stock change unt pr 27, 1928.
rtce 2: nnutes and nsurance poces.
R NU CT O 1928.
Combned fe nsurance and annuty contracts referred to as
Lfe annuty wth death beneft contract and Partcpatng fe
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7 22(b), rt. 82.
ncome pocy wth prncpa sum payabe at death. (See G. C. M.
395, beow.)
S CTION 22(b). GROSS INCOM : CLUSIONS
ROM GROSS INCOM .
rtce 81: cusons from gross ncome. III-9-4121
I. T. 245
R NU CT O 1028.
mounts receved under the Tyson- tzgerad ct of May 24,
1928, by offcers and former offcers (other than offcers of the
Reguar rmy, Navy, or Marne Corps), physcay dsabed n ne
of duty n the Word War, are e empt from edera ncome ta as
pensons.
rtce 82: Proceeds of nsurance Compen- III-24-4234
saton Pensons. G. C. M. 395
( so Secton 22(a), rtce 2.)
R NU CTS O 192 ND 1928.
Certan combned fe nsurance and annuty contracts referred
to as Lfe aunuty wth deat beneft contract and Partc-
patng fe ncome pocy wth prncpa sum payabe at death
shoud be treated, n part, as annuty contracts wthn the meanng
of secton 213(b)2 of the Revenue ct of 192 and secton 22(b)2
of the Revenue ct of 1928, purchased wth that porton of the tota
premum or consderaton pad whch can be fary aocated to the
annuty feature.
n opnon s requested as to whether certan contracts referred to
as the Lfe annuty wth death beneft contract ssued by the M
Lfe Insurance Co. and the Partcpatng fe ncome pocy wth
prncpa sum payabe at death ssued by the O Lfe Insurance Co.
are annuty contracts wthn the meanng of secton 213(b)2 of the
Revenue ct of 192 and secton 22(b) 2 of the Revenue ct of 1928.
The contract ssued by the M Lfe Insurance Co. provdes, so far
as matera to the present dscusson, as foows:
nnuty payments. Ths company hereby bnds tsef to pay to (heren
caed the annutant) the sum of 350 on the 1st day of December, 1928, f the
sad annutant be then ave and a ke yeary payment on the 1st day of De-
cember n each year thereafter, durng the subsequent fetme of the sad
annutant.
Dath beneft. The company further agrees that on recept at ts offce n
the cty of of due proof of the death of the sad annutant, t w pay
to (heren caed the benefcary) or In the event of her death, to the e ecu-
tors, admnstrators or assgns of the annutant the sum of ten thousand ( 10,-
000) doars (heren caed the death beneft) together wth a proportonate part
of the annuty payment for the fractona perod between the date on whch the
ast annuty payment becomes due and the date of the death of the annutant
provded, however, that the amount payabe at the death of the annutant sha
not be ess than the premum herenafter set forth after deductng therefrom
the tota annuty payments receved by the annutant.
Partcpato-n n proft. . annuty payments, ncudng the proportonate
payment on the death of the annutant, sha be ncreased by such dvdends as
nay be aotted by the company out of ts surpus nterest earnngs.
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822(b), rt. 83.
8
Ths pocy s ssued n consderaton of the payment of the sum of ten thou-
sand fve hundred ( 10,500) doars (heren caed the premum), the recept
of whch s hereby acknowedged.
Cash vaue. Ths pocy may be surrendered to the company at any tme,
provded there s no ega restrcton to the contrary, for a sum equa to the
amount of the death beneft as set forth on the frst page hereof. The company
sha have the rght to defer the payment of any surrender vaue of ths pocy
for a perod not e ceedng 90 d ys from the date of the appcaton therefor.
The provsons of the contract ssued by the O Lfe Insurance Co.
are substantay dentca.
The contenton has been made that the contracts n queston are
annuty contracts n ther entrety that, as a matter of practce, the
snge premum s not aocated n part to the annuty feature and n
part to the death beneft and that, therefore, the tota premum or
consderaton pad s to be returned e empt from ta aton before any
of the annuty payments are to be treated as gross ncome. Ths
contenton s not sound. The contracts unformy provde for the
payment to the annutant of a stated sum annuay, and aso for
the payment of a specfed amount to a named benefcary upon proof
of death of the annutant. It s obvous that the contracts consst
of two features the annuty feature and the fe beneft feature.
The nsurance companes ssung such contracts state that the pre-
mum or consderaton pad for such a contract s severabe and can
be aocated to the two features.
In vew of the foregong, t s concuded, wth respect to the com-
bned fe nsurance and annuty contracts of the character of the
ones n queston, that where the nsurance companes are abe to
make a far aocaton of the tota premum or consderaton pad for
a partcuar contract between the annuty feature and the fe n-
surance feature thereof, and the porton of the premum or consdera-
ton aocated to the annuty feature s e hausted as the annua
annuty payments are made, the contract shoud be treated, n part,
as an annuty contract wthn the meanng of secton 213 (b)2 of the
Revenue ct of 192 and secton 22(b)2 of the Revenue ct of 1928,
purchased wth that porton of the tota premum or consderaton
pad whch s fary aocated to the annuty feature and that the
annutant shoud be permtted to recover e empt from ta aton the
amount of the premum or consderaton aocated to the annuty
feature before beng requred to return as gross ncome any part of
the annuty payments.
C. M. Chare8t,
Genera Counse, ureau of Interna Revenue.
rtce 83: Gfts and bequests. III-11-4137
G. C. M. 5881
R NU CT O 1928.
The amount of an award receved from the M oundaton by
an ndvdua ta payer n recognton of noteworthy accompsh-
ments consttuted a gft wthn the meanng of secton 22(b)3 of
the Revenue ct of 1928, and s e empt from ncome ta .
n opnon s requested as to the ta abty under the Revenue
ct of 1928 of an award receved by an ndvdua ta payer from
the M oundaton.
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22(b), rt. 85.
The certfcate of ncorporaton of the oundaton staes that
te corporaton sha have for ts partcuar ob|ects the promoton
of pubc wefare, the advancement of bera thought, and the fur-
therance of peace through |ustce for the beneft of the peope of
the Unted States and of other natons, and to that end t s author-
zed to soct, receve, hod, and mantan an endowment fund, and
to appy the ncome therefrom n such manner as n the |udgment
of ts drectors sha best carry out the purposes of the corporaton.
It s further stated that the corporaton sha e empowered to
award przes, to grant schoarshps, to pubsh reports, to engage
n research, to make studes of soca, economc, potca, and ndus-
tra probems, and to do and perform any and a tngs necessary
and approprate to a corporaton created for the purposes heren-
above provded.
Secton 22(b) of the Revenue ct of 1928 provdes that the foow-
n , tems sha not be ncuded n gross ncome and sha be e empt
from ta aton:
Z Gft , bequests, and evtes. The vaue of proper -/ acqured by gft,
bequest, devse, or nhertance (but the ncome from such property sha be
m-uded n gross ncome).
It appears that the award was made to the ta payer n recognton
(f hs achevements n scence and hs servces m promotng the
pubc wefare. n award of ths knd made by one to whom no
servces have been rendered s a gratuty as dstngushed from
compensaton for servces. Ceary the award was not a com-
pettve prze. Ths offce s of the opnon, therefore, that the
amount receved by the ta payer consttuted a gft wthn the mean-
ng of secton 22(b)3 of the Revenue ct of 1928, and s e empt
from ncome ta .
C. M. Charebt,
Genera Counse, ureau of Interna Revenue.
rtce 85: Dvdends and nterest from edera III-17-4181
and banks, edera ntermedate credt banks, I. T. 2470
and natona farm-oan assocatons.
R NU CT O 192S.
The e empton from edera ta aton of ncome derved from frst
mortgages e ecuted to edera and banks under the provsons of
secton 20 of the edera arm Loan ct of uy 17, 11)1 (39 Stat.,
SCO), as amended, s a contnung e empton, and such ncome
shoud be e cuded from the gross ncome of an ndvdua to whom
such mortgages have been sod, under the provsons of secton
22(b)4 of the Revenue ct of 1928.
Inqury s made as to the ta abty of ncome derved from mort-
gages e ecuted to edera and banks.
In ths connecton reference s made to the foowng provsons of
secton 2 of the edera arm Loan ct of uy 17, 191 , as
amended:
rst mortgages e ecuted to edera and banks .sha be deemed
and hed to be nstrumentates nf the Government of the Unted States, and
as such they and the ncome derved therefrom sha be e empt from edera
ta aton. Itacs supped.
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23(a), rt. 121.
70
The queston s rased as to whether ths provson e empts from
ta aton the ncome derved from such mortgages regardess of the
fact that the edera and bank may have sod them to an ndvdua.
Specfc reference s made to the case of a bank whch has sod a
number of these mortgages to ndvduas wthout recourse on such
bank.
In the opnon of ths offce, the e empton provded for n the
provson of aw above quoted s a contnung e empton. The n-
come derved from the mortgages e ecuted to the edera and banks
shoud, therefore, be e cuded from gross ncome under the provsons
of secton 22(b)4 of the Revenue ct of 1928 and artce 85 of
Reguatons 74.
S CTION 22(c). GROSS INCOM : IN NTORI S.
rtce 101: Need of nventores. III-1-4054
Mm. 3 92
Certfcate of nventory, orm 112 .
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C, December 21, 1928.
Coectors of Interna Revenue, Interna Revenue gents n Charge
and Others Concerned:
The use of orm 112 , certfcate of nventory, whch ta payers
were requred to fe wth ther returns f engaged n a trade or bus-
ness n whch the producton, purchase, or sae of merchandse was
an ncome-producng factor, w be dscontnued for the caendar
year 1928 and thereafter. Corporatons shoud therefore be n-
structed to furnsh the nformaton requested n queston 10 on page
4 of orm 1120 n eu of fng orm 112 wth ther returns.
ueres regardng ths mmeograph w refer to the number of
the mmeograph and to the symbos IT: : RR.
. . Mres.
ctng Commssoner.
S CTION 23(a). D DUCTIONS ROM GROSS
INCOM : P NS S.
rtce 121: usness e penses. III-3-40 9
( so Secton 101, rtce 501.) I. T. 2447
R NU CT O 1928.
When became connected wth the M Company he took wth hm
nto the organzaton a number of persons, one of whom was , who
had been assocated wth hm n other enterprses. s one of the
condtons of s empoyment, he was gven an opton to purchase
2y shares of common stock of the company at a share. e
panned n case a proft shoud resut from hs purchase and sae
of the stock to pay 50 per cent of such proft to those who asssted
hm n rehabtatng the company. Durng 1928 he purchased 2y
shares and sod them at a proft, pacng the proft n a speca ac-
count for payment n accordance wth hs pan. pad doars
from ths account to and the other person assocated wth hm.
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71
23(a), rt. 121
ed, that, nasmuch as dd not hod the 2|/ shares of stock for
more than two years pror to ther sae, and as the perod for
whch the opton to purchase the stock was hed by hm may not
be added to the perod for whch he hed the stock, he may not
eect to have the proft from the sae of such shares ta ed to hm
as capta gan under secton 101 of the Revenue ct of 1928.
ed, aso, that the amounts pad by to and the other per-
sons n accordance wth hs pan are not deductbe from gross n-
come by as an ordnary and necessary busness e pense.
dvce s requested whether under the foowng crcumstances
may eect to have the proft derved by hm durng 1928 from the
sae of certan shares of stock ta ed to hm as capta gan under sec-
ton 101 of the Revenue ct of 1928 and whether the amounts pad
by hm to and other persons are deductbe as an ordnary and
necessary busness e pense.
The M Company had been n a poor fnanca condton for severa
years pror to , 192-, when became connected wth t. e
took wth hm nto the organzaton as e ecutve, admnstratve, and
operatng offcas a number of persons, one of whom was , who had
been assocated wth hm n other enterprses. s one of the cond-
tons of s empoyment, he was gven an opton e prng n 1927 to
purchase a or any part of 2y shares of the common stock of the
company at a share, whch prce at that tme was greater than
ts market vaue. Ths opton was subsequenty e tended to De-
cember 81, 192-. panned from the frst that n case he and hs
assocates were abe to rehabtate the company so that a proft
woud resut from the purchase of the stock under the opton and ts
sae on the market, he woud retan 50 per cent of such proft and
pay the remander to those who asssted hm n rehabtatng the
company, even though some of the persons were not n ts drect
empoy. , however, made no bndng commtment to any of such
persons. Durng 1928 purchased 2y shares of stock under the op-
ton and sod them at a proft, pacng the proft n a speca account
for payment n accordance wth hs pan. e pad doars from
ths account to and the other persons assocated wth hm.
In order that gan from the sae of property may be ta ed as cap-
ta gan under secton 101 of the Revenue ct of 1928, the property
sod must have been, among other thngs, hed by the ta payer for
more than two years. owever, under secton 101 (c)8, n the fo-
owng cases a perod pror to the perod for whch the property t-
sef was hed s to be ncuded n determnng the perod for whch
the ta payer has hed property for the purposes of secton 101:
(a) In determnng the perod for whch the ta payer has hed
stock or securtes receved upon a dstrbuton where no gan s
recognzed to the dstrbutee under secton 208(c) of the Revenue
cts of 1924 and 192 and secton 112(g) of the Revenue ct of
1928, there s to be ncuded the perod for whch he hed the stock
or securtes n the dstrbutng corporaton pror to the recept of the
stock or securtes upon such dstrbuton:
(b) In determnng the perod for whch the ta payer has hed
property receved on an e change, the perod for whch he hed the
property e changed s to be ncuded, f under secton 113 of the
Revenue ct of 1928 the property receved has, for the purpose of
3133 20
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23(c), rt. 151.
72
determnng gan or oss, the same bass n whoe or n part n hs
hands as the property e changed
(c) If property s acqured from any other person, and under sec-
ton 113 of the Revenue ct of 1928 has the same bass n whoe or
n part for the purpose of determnng gan or oss as t woud have
n the hands of the person from whom acqured, there s to be
ncuded n determnng the perod for whch the ta payer has hed
such property the perod for whch t was hed by such other person.
Inasmuch as dd not acqure the 2y shares of stock unt he e -
ercsed hs opton to purchase such stock n 1928, he dd not hod the
shares for more than two years pror to ther sae. The perod for
whch the opton to purchase the stock was hed by hm does not come
wthn any of the cases under secton 101(c) 8 n whch a perod pror
to the perod for whch the property tsef was hed s to be ncuded
n determnng the perod for whch the property was hed for the
purposes of secton 101. Therefore, the perod for whch the opton
was hed may not be added to the perod for whch he hed the stock,
and he may not eect to have the proft from the sae of the stock
ta ed to hm as capta gan under secton 101.
Provson s made n secton 23(a) of the Revenue ct of 1928 for
the deducton from gross ncome of busness e penses whch ncude
the ordnary and necessary e pendtures drecty connected wth
or pertanng to the ta payer s trade or busness. oth and are
offcers of the M Company and ther busness conssts of renderng
servces n ther offca capacty to the corporaton, for whch they
receve compensaton from that organzaton. The amounts pad by
to and the other persons wth whom he was assocated do not
come wthn the provsons of secton 23(a). Therefore, such,
amounts are not aowabe deductons n s return as an ordnary
and necessary busness e pense.
S CTION 23(c). D DUCTIONS ROM GROSS
INCOM : T S G N R LLY.
rtce 151: Ta es. III-13-4155
I. T. 24 5
R NU CTS O 1920 ND 1928.
The 2 cents per gaon gasone ta mposed by the Sate of
Mchgan s mposed upon the owners or drvers of motor vehces
and s deductbe as a ta n the ncome ta returns of the owners
or drvers by whom t s pad and to whom t s not refunded.
If the ta s added to or made a part of the busness e cuses
of such owners or drvers, t can not be deducted separatey as a
ta .
Inqury s made as to whether a gasone ta pad as requred by
the Mchgan statute, approved anuary 29, 1925, s deductbe n
the ncome ta returns of the dstrbutors or of the purchasers of
the gasone.
It appears that the purpose of the statute n queston s to mpose
a prvege ta for the use of the pubc hghways by the owners or
drvers of motor vehces, based upon the use, wthn the State of
Mchgan, of gasone as that term s defned n the statute.
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73
23(o), rt. 151.
Secton 2 of the statute reads as foows:
ta of 2 cents per gaon Is hereby Imposed on a gasone sod or used n
ths State by any deaer, whcb ta sha be pad by such deaers to the secre-
tary of state on or before the 20th day of each month. It s the ntent of ths
act to mpose a ta upon the owners of motor vehces usng a combustbe type
of engne upon the pubc roads and hghways by requrng them to pay for
the prvege thereof, n addton to the genera motor vehce cense ta , at
the rate of 2 cents per gaon for a motor vehce fue so used, whch ta s to
be coected as herenafter prescrbed.
Secton 5 reads n part as foows:
The purchaser of gasone used for any purpose other than the operaton of
motor vehces on the streets and hghways of the State, and muncpates and
the edera Government usng gasone n muncpa and edera owned motor
vehces, respectvey, sha be entted to the refund of the ta pad thereon
upon fng a sworn cam wth the secretary of state, on forms prescrbed by
hm, wthn 0 days from the date of purchase as shown by the nvoce.
s t appears from the anguage of the statute that the ta s m-
posed upon the owners or drvers of certan motor vehces operated
on the pubc roads and hghways of the State, and not upon the gas-
one dstrbutors, as such, t s hed that the ta s deductbe as a
ta n the ncome ta returns of the owners or drvers of motor ve-
hces by whom t s pad and to whom t s not refunded. If the
ta s added to or made a part of the busness e penses of such own-
ers or drvers of motor vehces, t can not be deducted separatey as
a ta .
rtce 151: Ta es. I-19 19
I. T. 2471
R NU CT O 1928.
The gasone ta mposed by the State of Connectcut under the
provsoas of secton 4 of the act of 1925, as amended, s mposed
upon the dstrbutor. The ta so pad by a dstrbutor s deductbe
as a ta for ncome ta purposes by the dstrbutor who pays t,
and not by the purchaser. If t s added to or made a part of the
busness e pense of such dstrbutor, t can not be deducted sepa-
ratey as a ta .
If the ta s mposed on, and pad by, the purchaser under the
provsons of secton 5 of the act of 1925, as amended, t s deduct-
be for ncome ta purposes by the purchaser who pays t drecty
to the State, and not by the dstrbutor. If t s made a part of
the busness e pense of such purchaser, t can not be deducted
separatey as a ta .
queston s rased as to the deductbty for edera ncome ta
purposes of the gasone ta mposed by the State of Connectcut.
The ta n queston s mposed by chapter 145 of the Pubc cts
of 1925, as amended by chapter 2 of the Pubc cts of 1927, entted
n act provdng for a ta upon gasone and other products used
n the propeng of motor vehces.
Secton 4 of the act provdes n part as foows:
On or before the 1st day of the caendar month succeedng the
fng of such report, each dstrbutor sha pay to the treasurer of the State
a ta of 2 cents upon each gaon of such fues sod or used n ths State durng
the precedng caendar month, provded a fues sod to any retaer for resae
or use for motor boats sha be e empt from the payment of such ta upon
atsfactory evdence to the commssoner of motor vehces that a such fues
are ntended for and w be used ony for the propeng of motor boats. On
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23(c), rt. 1 1.
74
or before the 1st day of each caendar month, the commssoner of motor
vehces sha transmt to the treasurer of the State such nformaton as sha
show a tu es due from each dstrbutor under the provsons of ths act
Secton 5 of the act contans the foowng provson:
ny dstrbutor who sha contract to make any dstrbuton of fues to any
person, frm or corporaton, to be used commercay or for the purpose of
manufacture, may appy to the commssoner of motor vehces for a permt to
make such sae wthout ta , on a form provded by the commssoner for
such purpose. If any porton or the whoe of such fues so purchased
sha be ta abe under the provsons of ths act, the purchaser sha be charged
wth the ta provded for n ths act and sha pay the same n accordance wth
the provsons hereof.
Secton of the act contans the foowng provsons:
money pad to the treasurer of the State under the provsons of secton 4
hereof sha be e pended under the drecton of the hghway commssoner for
(e constructon, mantenance or reconstructon of State hghways, wthout
specfc appropraton by the genera assemby for such purpose.
Secton 23(c) of the Revenue ct of 1928 provdes n part that n
computng 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 anguage of the Connectcut statute, above quoted, t s
apparent that the gasone ta mposed by the State of Connectcut
under the provsons of secton 4 of the act of 1925, as amended, s
mposed upon the dstrbutor. In accordance wth secton 23(c) of
the Revenue ct of 1928 and artce 151 of Reguatons 74, the gaso-
ne ta so pad by a dstrbutor s deductbe as a ta for ncome ta
purposes by the dstrbutor who pays t, and not by the purchaser.
If, however, the ta n queston s added to or made a part of the bus-
ness e pense of such dstrbutor, t can not be deducted separatey as
a ta .
ut f the ta s mposed on, and pad by, the purchaser under the
provsons of secton 5 of the act of 1925, as amended, then the ta s
deductbe for ncome, ta purposes by the purchaser who pays t
drecty to the State, and not by the dstrbutor. If the. ta s made
a part of the busness e pense of such purchaser, t can not be de-
ducted separatey as a ta .
rtce 151: Ta es. III-20-4205
I. T. 2472
R NU CT O 1928.
The gasone ta mposed by the State of Oho under the pro-
vsons of the Genera Code (Page s nnotated Genera Code, o.
I. Part Second (Cv I, Tte I (Ta aton), Chapter 9 (Pubc
Uttes. ranchse Ta on Corporatons)) s an e cse ta m-
posed upon the sae and use of motor vehce fue sod or used by
any deaer, and the ta so mposed s deductbe by the deaer who
pays t and not by the purchaser. If the ta n queston s added
to or made a part of the busness e pense of such deaer, t can not
be deducted separatey as a ta .
rung s requested as to whether the gasone ta eved by the
State of Oho s deductbe by the deaer or by the purchaser.
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75 23(c), rt. 1 1.
The Oho gasone ta s eved n accordance wth the provsons
of the Genera Code (Page s nnotated Genera Code, o. I, Part
Second (Cv), Tte I (Ta aton), Chapter 9 (Pubc Uttes,
ranchse Ta on Corporatons)). Secton 5527 of the aw provdes
that for the purpose of provdng revenue for mantanng the man
market roads and ntereounty hghways of the State n passabe
condton for trave, for reparng the damage caused to such hgh-
way system by motor vehces used on the same, for wdenng e st-
ng surfaces on such hghways where such wdenng s rendered
necessary by the voume of motor vehce traffc thereon, for re-
surfacng such hghways where e stng surfaces have become worn
or rutted, for enabng the severa countes and muncpa corpora-
tons of the State propery to mantan and repar ther roads and
streets, and suppementng revenue aready avaabe for such pur-
poses and arsng from drect ta aton and from regstraton fees
of motor vehces, and for dstrbutng equtaby upon those persons
usng the prvege of drvng motor vehces upon such hghways
and streets a far share of the cost of mantanng and reparng
the same, there s eved and mposed on the sae and use of each
gaon of motor vehce fue sod or used by any deaer, as that term
s defned n the aw, wthn the State of Oho, an e cse ta of
2 cents.
owever, the sae of motor vehce fue s not sub|ect to such ta
(a) f such motor vehce fue s sod n tank car ots to be used
whoy for purposes other than propeng motor vehces on the pub-
c hghway (b) f such motor vehce fue s e ported orsod for
e portaton from the State of Oho to any other State, or to any
foregn country (c) f such motor vehce fue s sod by a deaer
to the Unted States Government or any of ts agences or (d) f
such motor vehce s n process of transportaton n nternatona or
nterstate commerce, e cept n so far as the same may be permtted
under the provsons of the Consttuton of the Unted States and
cts of Congress.
Under the provsons of sectons 5529 and 5530 of the aw each
deaer s requred, not ater than the 15th day of each caendar month,
to fe wth the Ta Commsson of Oho a statement under oath of
a motor vehce fue sod or used by hm n the State durng the
precedng caendar month and n turn the ta commsson must
transmt a monthy statement to the audtor of state. Upon recept
of ths statement requred each month from the ta commsson fur-
nshng nformaton n regard to the sae of gasone n the State of
Oho, the audtor of state computes the ta due from each such deaer
at the rate of 2 cents per gaon.
Secton 23(c) of the Revenue ct of 1928 provdes n part that n
computng 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.
s t appears from the foregong sectons of the Oho Genera
Code that the gasone ta n queston s an e cse ta mposed upon
the sae and use of motor vehce fue sod or used by any deaer n
the State of Oho, t s hed that the ta so mposed s deductbe by
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23(c), rt. 151.
7
the deaer who pays t and not by the purchaser. If, however, the
ta n queston s added to or made a part of the busness e pense of
such deaer, t can not be deducted separatey as a ta .
rtce 151: Ta es. I-23-4224
( so Secton 41, rtce 322.) G. C. M. 075
R NU CTS O 1 2 ND 1928.
Treatment of accruas of Wsconsn ncome ta es for the years
1920, 1927, and 1928.
n opnon s requested as to whether or not deductons by ta -
payers on the accrua bass, n respect of the ta abe year 1927, under
sectons 214(a) 3 and 234 (a) 3, Revenue ct of 192 , for Wsconsn
ncome ta es accrued wthn the ta abe year shoud
be computed under the Wsconsn ncome ta act as t stood on the
statute book of Wsconsn at the cose of the ( edera) ta abe year
1927, or as t stood on the statute book of Wsconsn after the cose
of such year. Certan essentay reated ssues are nvoved whch
requre consderaton n addton to the specfc ssue thus rased.
The Wsconsn ncome ta act (Wsconsn Statutes, 1925, chapter
71) was amended by Laws of Wsconsn, 1927, chapter 539 (approved
ugust 10, 1927, pubshed ugust 17, 1927, effectve on pubcaton),
to provde for a ta assessabe and payabe n each year upon the
ta abe ncome of each ta payer determned by averagng the
net ncome or oss reported bv the ta payer on hs current return
wth the net ncomes or osses for the two prevous years, e cept that
the ta abe ncome assessed n the year 1928 sha be the average of
the net ncomes or osses for the years 192 and 1927 or for the cor-
respondng two fsca years. (Wsconsn ncome ta act, secton
71.10.) s thus amended the Wsconsn ncome ta act stood on the
statute book of Wsconsn on December 31, 1927.
The Wsconsn ncome ta act, as amended by Laws of Wsconsn,
1927, chapter 539, was further amended by Laws of Wsconsn, 1928,
chapter 4 (approved ebruary 1, 1928, pubshed ebruary 2, 1928,
effectve on pubcaton). Under ths amendment, as under the pre-
cedng amendment, the ta was mposed upon the ta abe ncome
determned by averagng the net ncome or oss reported by the
ta payer on hs current return wth the net ncomes or osses for
the two prevous years, e cept that the ta abe ncome assessed n
the year 1928 sha be the average of the net ncomes or osses for the
years 192 and 1927 or for the correspondng two fsca years. Laws
of Wsconsn, 1928, chapter 4, added to ths provson the requre-
ment that n the determnaton of such average the net ncome or
oss of 192 sha be gven two-thrds weght and the net ncome
or oss of 1927 one-thrd weght.
The ta abe year of a ta payer s, by the edera ncome ta aws
themseves, made the ta payer s annua accountng perod ,
and the computaton of the ta payer s net ncome s by those aws
requred to be made upon the bass of that accountng perod
n accordance wth the method of accountng reguary empoyed
n keepng the books of such ta payer. (Secton 41, Revenue ct
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77
23(c), rt. 151.
of 1928 secton 212, Revenue cts of 192 , 1924, 1921, and 1918.)
oth by force of necessty as we as for reasons of convenence, the
commerca and mercante communty generay does not keep ts
books, or measure ts ncome, on the bass of cash recepts and ds-
bursements, but does so on the bass of accruas, treatng approprate
book accounts and bs recevabe (abtes owed the busness,
treated as assets n possesson) as tems of true ncome property
receved n e change for property or servces rendered and treatng
the obgatons assumed by, or mposed upon the ta payer havng
a due reatonshp to such tems of ncome (abtes owed by the
busness, treated as havng aready dmnshed the assets) as tems
of rea e pense or outgo. The system of accrua accountng pro-
ceeds on the bass of e pected recepts and e pected e pendtures
as true ncome and true deductons therefrom. The necessty there-
fore arses of approprate accountng ad|ustments when t becomes
cear the e pectatons w not be reazed.
In determnng whether under the accrua method of accountng
a possbe future e pense or outgo may be taken as a true e pense
or outgo (and thus be charged aganst possbe future recepts con-
sttutng tems of rea ncome under the method of accountng), the
crteron to be apped s necessary the status of the possbe future
e pense or outgo durng the partcuar accountng perod or ta abe
year. Certany the crteron can not be the status thereof at any
tme ater than the cose of the accountng perod, for t s of that
tme, and as of no ater tme, that the accountng records must speak
both under sound prncpes of accountng and under the requre-
ments of the edera ncome ta aws. s respects a abty rased
by aw n the form of a ta upon the ncome of the accountng perod
(or as under the Wsconsn ncome ta act the average of the ncomes
of the accountng perod and of precedng accountng perods), the
crteron of a proper accrua for that accountng perod s necessary
the status of the ncome ta abty at the cose of the accountng
perod (or as under the Wsconsn ncome ta act at the cose of the
ast of the accountng perods wth respect to whch the ta abty
s rased). t that tme a the events have occurred whch f and
determne the ncome of the accountng perod (or as under the
Wsconsn ncome ta act the tota ncomes of the accountng perods
n queston). t that tme, and as of no earer tme, has that whch
s the sub|ect matter of the ta the ncome of the accountng perod
(or as under the Wsconsn ncome ta act the average of the ncomes
of the accountng perods)- come nto e stence and as of that tme,
and as of no earer tme, s the amount and character thereof deter-
mnabe. nd whe the amount thereof may not actuay have been
determned, a that s requred to f and determne t s a mathe-
matca cacuaton.
There s on that day upon the statute book of Wsconsn an ncome
ta act whch mposes a ta upon the ta payer n respect of the aver-
age of the ncomes for severa perods, the ast of whch s the perod
n queston. On that day for the frst tme the average becomes a
f ed and determnabe amount. In respect of that average, the Ws-
consn ncome ta act has mposed a abty for ta . ust as the
average tsef s on the cosng day of the perod for the frst tme
f ed and determnabe, so the abty s tsef on that day for the
frst tme f ed and determnabe. Ths abty thus f ed and de-
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23(c), rt. 151.
78
termnabe consttutes a proper accrua for the accountng perod n
queston, precsey as does the ncome or tems thereof for the same
perod. Unted States v. nderson, 2 9 U. S., 42-2, T. D. 3839
(C. . -. 179).)
ust as the actua coecton and recept of an tem n a book ac-
count resutng from the sae by the ta payer of goods are not neces-
sary under the accrua method of accountng to a proper accrua as
a rea tem of ncome, so an actua assessment and payment of an
ncome ta are not necessary to ts accrua as a rea tem of e pense.
oth the book account tem and the ncome ta tem may not yet be
due nether may ever actuay be pad the abty on the book
account as we as the abty for the ncome ta may be e tngushed
by operaton of aw yet none of these crcumstances can ater the
fact that as of the cose of the accountng perod both are proper
accruas.
It resuts that ta payers, sub|ect to ta under the Wsconsn n-
come ta act and empoyng the accrua method of keepng ther
books, may propery accrue the Wsconsn ncome ta es whch, durng
or at the cose of the partcuar ta abe year n queston, then for
the frst tme become f ed and determnabe and wth respect to whch
a abty then for the frst tme becomes f ed and determnabe, and
may accordngy deduct such ta es for the ta abe year, under sec-
tons 214(a)3 and 234(a)3, Revenue ct of 192 . and correspondng
provsons of other cts, for the purposes of the edera ncome ta .
Thus n respect of the ta abe year 1927, such a ta payer shoud
accrue the ta determnabe under the Wsconsn ncome ta act as
t stood on the statute book of Wsconsn upon the cosng day of hs
ta abe year. ta payer whose ta abe year 1927 coses on or before
ugust 1 ,1927. shoud accrue ta es n accordance wth the provsons
of Wsconsn Statutes, 1925, chapter 71. ta payer whose ta abe
year 1927 coses on or after ugust 17, 1927, shoud accrue ta es n
accordance wth the provsons of Wsconsn Statutes. 1925, chapter
71, as amended by Laws of Wsconsn, 1927. chapter 539. No such
ta payer may accrue for the ta abe year 1927 Wsconsn ncome
ta es n accordance wth the amendment of the Wsconsn ncome ta
act by Laws of Wsconsn, 1928, chapter 4, snce that amendment was
not aw at the cose of any ta payer s ta abe year 1927. The amount
of Wsconsn ncome ta es whch are accruabe by Wsconsn ta -
payers must, therefore, be determned n each nstance under the
Wsconsn ncome ta act as t stood on the statute book on the cosng
ay of the ta payer s ta abe year.
Ony two amendments have been dscovered affectng the computa-
ton of the Wsconsn ncome ta after December 31. 1925, namey,
Laws of Wsconsn. 1927, chapter 539, and Laws of Wsconsn, 1928,
chapter 4. ssumng these to be the ony reevant amendments, the
system of accruas may he summarzed as foows:
(1) Ta abe year 192 : ccrue accordng to computaton made
under Wsconsn Statutes, 1925, chapter 71
(2) (a) Ta abe year 1927. endng on or before ugust 1 , 1927:
ccrue accordng to computaton under Wsconsn Statutes, 1925,
chapter 71
(b) Ta abe year 1927, endng on or after ugust 17, 1927: ccrue
accordng to computaton under Wsconsn Statutes, 1925, chapter 71,
as amended by Laws of Wsconsn, 1927, chapter 539
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23(c), rt. 1 1.
(3) (a) Ta abe year 1928, endng on or before ebruary 1, 1928:
ccrue accordng to computaton under Wsconsn Statutes. 1925,
chapter 71, as amended by Laws of Wsconsn. 1927. chapter 539
(b) Ta abe year 1928, endng on or after ebruary 2, 1928: c-
crue accordng to computaton under Wsconsn Statutes, 1925,
chapter 71, as amended by Laws of Wsconsn, 1928, chapter 4.
The ta es thus accrued for the ta abe year 192 , the ta abe year
1927, and the ta abe year 1928 (n cases where the ta abe year 1928
ended on or before ebruary 1, 1928) were ether not assessed or pad
at a by vrtue of Laws of Wsconsn, 1927, chapter 539, or were
actuay assessed and pad n an amount other than the amount
accrued by vrtue of Laws of Wsconsn, 1928, chapter 4.
The Wsconsn ta payer who propery accrued durng the ta abe
year 192 (or where hs ta abe year 1927 ended on or before ugust
1 . 1927, durng the year 1927) the Wsconsn State ncome ta must,
durng the subsequent ta abe year (the ta abe year n whch
ugust 17,1927, fas),make,under the acerua method of accountng,
a credt to proft and oss n order to refect the fact that the abty
for ta es theretofore shown on the books s no onger e stent, and
that the e tngushment of that abty resuts n gan or proft.
Under the accrua method of accountng ths gan or proft s a rea
pan or proft. ust as the entry, as of the moment t arose, on the
books of the abty to pay the ta represented under the accrua
method a rea e pense or outgo, so does the entry necessary to refect
the e tngushment of the abty under the crcumstances of ths case
represent under the accrua method of accountng a rea tem of ncome.
Congress n ts prescrpton of the method of computng ta abe
ncome dd not enact that ncome actuay receved shoud con-
sttute gross ncome, or that e penses actuay pad shoud const-
tute deductons therefrom, nor dd t requre a computaton on the
bass of cash recepts and dsbursements. In permttng a dversty
of methods of computng ta abe ncome Congress n secton 212,
Revenue ct of 192 , and correspondng provsons of other cts,
dd requre the computaton of ncome n accordance wth the
method reguary empoyed n keepng the books of such ta payer.
The statute thus conformed tsef to busness usage and practce, and
thus permtted the use of the accrua method of computng ncome.
When the ta payer thus reguary empoys a method of keepng hs
books, he must, under the statute, compute hs ncome accordngy.
e can not for one purpose ava hmsef of the prncpes of an
accrua method of accountng n order to take a deducton as a rea
e ense or outgo and at the tme repudate the prncpes of the
accrua method of accountng n order to prevent an tem necessary
requred by the accrua method to be shown on hs books as an tem
of rea ncome from beng so treated and thus ncuded n ta abe
ncome under the statute. The mandate of the statute s pan:
The net ncome sha be computed n accordance wth
the method of accountng reguary empoyed n keepng the books of
such ta payer. Snce the ta payer, f e keeps hs books on the
accrua method, must credt the amount of the ta (accrued durng
the pror year, but not payabe under the statute effectve durng the
current ta abe year) to proft and oss, t foows that the amount
thereof must enter nto the computaton of net ncome as a consttuent
of gross ncome. Sectons 212(b) and 213(a), Revenue ct of 192 ,
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523(c), rt. 151.
80
and correspondng provsons of other cts. (Chcago, Rock Isand
Pacfc Raway Co. v. Commssoner, 13 . T. ., 988 mercan
Natona Co., Recever, v. Unted States, 274 U. S., 99, T. D. 4099
(C. . I-2, 193).) ( nd see the Great Northern Raway Co. v.
Lynch, 292 ed., 903, T. D. 3147 (C. . 4, 277).)
Nor can the ta payer arbtrary depart from the accrua system
reguary empoyed by hm n order to effectuate the e cuson from
proft and oss of the amounts here n queston, and thus e cude the
tem from gross ncome. Snce the mandate of secton 212(b), Reve-
nue ct of 192 , and correspondng provsons of other cts, s that
f the method of accountng empoyed does not ceary refect the
ncome, the computaton sha be made n accordance wth such
method as n the opnon of the Commssoner does ceary refect the
ncome, such an arbtrary departure from, and voaton of, every
sound prncpe of the accrua method coud scarcey be caed any-
thng ese than the abandonment of a method. In any event, the
opnon of the Commssoner woud certany be that the method
not ony faed ceary to refect the ncome but actuay dstorted t
Under the crcumstances of ths case, certany the e ercse of the
dscreton vested n the Commssoner, to the end that the ta thus
propery accrued n the pror year and not payabe under the statute
effectve n the current year s taken up as gross ncome, s so frmy
grounded upon sound prncpes both of the theory and the practce
of accountng that he s we wthn the powers granted hm by the
edera ncome ta aws. (Chcago, Rock Is md Pacfc Raway
Co. v. Commssoner and mercan Natona Co., Recever, v. Unted
States, supra.)
Correspondng ad|ustments are aso requred n subsequent years
(the ta abe year n whch ebruary 2, 1928, fas) n respect of
the Wsconsn ncome ta es accrued durng the ta abe year 1927 (n
case that ta abe year ended on or after ugust 17, 1927) or accrued
durng the ta abe year 1928 (n case that ta abe year ended on or
before ebruary 1, 1928). In so far as the ad|ustments reate to the
varaton between the method of computaton prescrbed by Laws of
Wsconsn, 1927, chapter 539, and the method of computaton pre-
scrbed by Laws of Wsconsn, 1928, chapter 4, t s atogether possbe
that the ad|ustment w resut n a debt to proft and oss nstead of
a credt to that account. The debt w resut n the year of ad|ust-
ment n an addtona aowabe deducton to the ta payer n com-
putng the ta abe net ncome, whe the credt w resut n the year
of ad|ustment n an tem of ncome n computng ta abe net ncome.
ttenton s drected to the fact that Laws of Wsconsn, 1927,
chapter 39, became effectve on the date of ts pubcaton, namey,
ugust 17, 1927, and not on ugust 10, 1927, the date of ts approva,
or on ugust 12. 1927. Laws of Wsconsn, 1928, chapter 4, kewse
took effect upon pubcaton, ebruary 2, 1928. cts of the Wscon-
sn Legsature become aw when approved by the governor. (Con-
sttuton, rtce , secton 10.) ut no genera aw sha be n
force unt pubcaton. (Consttuton, rtce II, secton 21.)
(Cf. Wsconsn Statutes, secton 4975.) The operaton and comng
nto force of a Wsconsn genera aws (among whch are the n-
come ta aw and a amendments thereto) are, therefore, suspended
unt pubcaton. Pror to ts comng nto force, a suspended aw
generay charges a persons wth notce of ts e stence, of what a
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81
23(c), rt. 151.
suspended, and of the perod of suspense, and a persons are then
bound thereby n respect of a contracts, acts, etc., to be performed n
whoe or n part after the aw comes nto force. (Damond Gue Co.
v. Unted States Gue Go., 187 U. S., 11 Stne v. ennett, 13 Mn-
nesota, 153, 157 Smth v. Morrson, 22 Pck., 430, 432 ord v. Ch-
cago Mk Shpped ssocaton, 55 Inos, 1 G, 181 Dunne v.t
Rock Isand County, 283 111., 28.) ( nd see Peope e re. Graham
v. Ings, 1 1 111., 25 .)
In Wsconsn, the consttutona requrement as to the pubcaton
of a genera aws s specfcay desgned to gve notce. (O Connor
t. ond du Lac, 109 Ws., 253, 85 N. W., 327 Smth v. oyt, 14 Ws.,
252 Mead v. agna, 15 Ws., 15 Ms v. efferson, 20 Ws., 50
State v. rear, 142 Ws., 320, 125 N. W., 9 1 State v. Messmore, 14
Ws., 1 3.) nd that requrement has gven rse to a consttuthma
custom and practce under whch reance s specfcay paced upon
pubcaton n determnng the e stence of aws. Under such a
speca consttutona custom and practce, t s unnecessary to con-
sder generay whether a proper accrua may be made of a ta pur-
suant to a statute whch at the cose of the ta abe perod s sus-,
pended. Unt pubcaton, ta payers generay can not be presumed
to know of the e stence of the aw, nor be charged wth the requste
notce of ts e stence and hence pror to such pubcaton a proper
accrua may not be made of a ta computed thereunder or mposed
thereby.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
rtce 151: Ta es. III-25-4241,
I. T. 2475
R NU CT O 1028.
The motor vehce fue ta mposed by the State of rgna Is
deductbe n the ncome ta return of the purchaser who pays t
and to whom t s not refunded. If the ta s added to or made a
part of the busness e pense of the purchaser, t can not be deducted
separatey as a ta . I. T. 2157 (C. . I -1, 35), n so fur as t
hods that the motor vehce fue ta mposed by the State of r-
gna s deductbe ony by the deaers, s revoked.
rung s requested n regard to whether the gasone ta m-
posed by the State of rgna s deductbe n the edera ncome
ta returns of the ndvdua purchasers of gasone.
The ta n queston s eved under an act of the genera assemby
of the State approved March 2 , 1923. as amended bv acts approved
March 21,1924, March 10, 192 , March 13, 1928, and March 2 , 1928.
In secton 2 of the act, as amended, t s provded that n addton
to the ta es provded by e stng aw, every deaer, who s engaged
n the State of rgna n the sae, dstrbuton, or use of motor
vehce fues, sha not ater than the 20th of each caendar month
render to the motor vehce commssoner a statement on forms pre-
scrbed by sad commssoner whch sha show the quanttes of
motor vehce fues sod and devered, or used, wthn the State of
rgna durng the precedng caendar month, and such deaer sha
at the same tme pay the ta or ta es eved n the act on a motor
vehce fues sod and devered, or used, as shown by such statement.
It s requred that bLs sha be rendered to a purchasers of motor
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523(c), rt. 151.
82
vehce fues by deaers seng the same, whch bs sha contan a
statement prnted thereon In a conspcuous pace that the abty to
the State for the ta or ta es mposed by the act has been assumed,
and that the deaer w pay the ta or ta es thereon on or before the
20th day of the foowng month.
Secton 3 of the act, as amended, provdes:
There s hereby eved a ta of 4 cents per gaon on a motor vehce fues,
ns heren defned, whch are sod and devered, or used, n ths State, and are
not under the protecton of the nterstate commerce cause of the Consttuton
of the Unted States. ut nothng heren sha be construed to e empt from
ths ta any dstrbutor of gas or os on the gas used n makng such ds-
trbuton.
In addton to the ta herenabove n ths secton eved, there s hereby eved
an addtona ta of cent per gaon on a motor vehce fues, as heren de-
fned, whch are sod and devered, or used, n ths State, and are not under
the protecton of the nterstate commerce cause of the Consttuton of the
Unted States. ut nothng heren sha be construed to e empt from ths ta
uny dstrbutor of gas or os on the gas used n makng such dstrbuton.
It s provded n secton 4 of the act, as amended, that per
cent of the revenue derved from the ta eved under secton 3 s
approprated for the constructon of roads and pro|ects comprsng
the State hghway system and sha be apped to no other purpose.
Thrty-three and one-thrd per cent of the revenue derved from the
ta on motor vehce fues s approprated prmary for the mante-
nance of roads and brdges embraced n, at the tme of the passage of
the act, or whch may thereafter be added to, the severa county hgh-
way systems of the State, as specfed n the act, and sha be appor-
toned quartery among the severa countes of the State as requred
by the State aw. ny baance remanng after such mantenance
may then be apped to the constructon or reconstructon of the roads
and brdges embraced n such county hghway systems.
It s further provded n secton 7 of the act, as amended, that
any purchaser who sha buy n quanttes of 5 gaons or more at
any one tme any motor vehce fues as defned n the act for the
purpose of, and the same s actuay used for, operatng or propeng
boats, shps, statonary gas engnes, tractors used for agrcutura
purposes, etc., and motor equpment beongng to countes and towns
used e cusvey n muncpa actvtes, or who sha purchase and
use any of such fues for other commerca use e cept n motor vehces
operated or ntended to be operated n whoe or n part on any of
the pubc hghways, etc., of the State, on whch motor fues the ta
or ta es mposed by the act sha have been pad, sha be rembursed
and repad the amount of such ta or ta es pad by hm, upon present-
ng to the drector of the dvson of motor vehces an affdavt accom-
paned by a tcket or other document from the deaer or reta ds-
trbutor, showng such purchase, whch affdavt sha set forth the
tota amount of such fues so purchased and used by such consumer
other than n motor vehces operated or ntended to be operated
upon the pubc hghways, etc., of the State, and how used.
The act, as amended, provdes n secton 9 that f any deaer as
defned n the act sha fa to pay the ta or ta es on motor vehce
fues due by such deaer under the provsons of the act, on or
before the 20th day of the month n whch such payment s due, there
sha be automatcay added thereto a penaty equa to 25 per cent
of the sad ta , to be pad or coected when the sad ta s pad or
coected.
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83
23(c), rt. 153.
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 e cept those specfed n that secton.
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 aw of the State of
rgna mposng the ta on motor vehce fues, referred to above,
t appears that the ta s ntended to be mposed upon the purchasers
of motor vehce fues used as a propeng power for motor vehces
upon any of the pubc hghways, etc., of the State. In vew of the
facts that the deaer s requred to state on the bs that the ta
mposed by the gasone ta aw of the Stae of rgna has been
assumed by hm, that the ta es coected from purchasers of gaso-
ne used for purposes other than the operaton of motor vehces on
the pubc hghways, etc., of the State are to be refunded to them,
and that the ta s to be apped to the constructon, mantenance,
and upkeep of the hghways, streets, etc., of the State, t appears
that the State egsature ntended n enactng the act mposng the
ta es n queston to mpose such ta es upon purchasers of motor
vehce fues used as a propeng power for motor vehces upon
any of the pubc hghways, etc., of the State.
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 rgna s
deductbe n the ncome ta return of the purchaser who pays t and
to whom t s not refunded. If, however, the ta s added to or made
u part of the busness e pense of such purchaser, t can not be
deducted separatey as a ta . The rung appearng as I. T. 2157, n
so far as t hods that the motor vehce fue ta mposed by the State
of rgna s deductbe ony by the deaers, s hereby revoked.
rtce 153: Ta es for oca benefts. III-12 148
( so Secton 23 (k), rtce 202.) G. C. M. 5589
LL R NU CTS.
Treatment of assessments aganst oca benefts.
n opnon s requested as to the proper treatment for ncome ta
purposes of amounts pad as ta es assessed aganst oca benefts, such
as sdewaks and other smar mprovements. Inqury s aso made
as to whether any dstncton shoud be made between assessments
eved on the bass of the vauaton of the property and assessments
eved on a front-foot bass.
The rue of genera appcabty n the treatment of such ta es
s contaned n artce 153 of Reguatons 74 and the correspondng
artces of pror reguatons, and s to the effect that so-caed (a es,
more propery assessments, pad for oca benefts, such as street,
sdewak, and other ke mprovements, mposed because of and
measured by some beneft nurng drecty to the property aganst
whch the assessment s eved, do not consttute an aowabe deduc-
ton from gross ncome. Snce, then, these speca assessments are not
deductbe tems, how shoud they be treated
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23(k), rt. 201.1
84
In those cases where the oca mprovement upon ts competon
s owned by the abuttng property owners, the amount of the speca
assessment pad by any ta payer measures the cost of the mprove-
ment to hm, and, f the mprovement s used n hs trade or busness,
such cost may be recovered through deprecaton aowances spread
over the fe of the mprovement, as n the case of any other asset
owned by the ta payer and used n hs trade or busness.
Snce, n those cases where the oca mprovement s not owned by
the abuttng property owners, the property aganst whch the speca
assessment s eved s drecty benefted by the mprovement, the
amount e pended therefor s consdered a capta e pendture prop-
ery chargeabe to the property benefted, and accordngy may be
added to the cost or other bass of such property. If the property
whch s benefted thereby s used by the ta payer n hs trade or
busness, the amount e pended shoud be aocated between the and
and the budng thereon n proporton to the vauaton of each, and
that part of the e pendture whch s attrbutabe to the budng
may be recovered through deprecaton aowances spread over the
fe of the budng, whereas that part of the e pendture whch s
attrbutabe to the and (such part beng consdered as a part of the
cost or other bass of the and, a nondeprecabe asset) may not be
recovered through deprecaton aowances. Where the property
whch s benefted s not used n trade or busness for e ampe, the
persona resdence of a ta payer the amount pad as a speca as-
sessment shoud be captazed, but no part thereof, whether attrbu-
tabe to the budng or to the and, may be recovered through de-
precaton aowances.
There appear to be no reasonabe grounds for makng a dstncton
between speca assessments for oca benefts eved on the bass of
the vauaton of the property benefted and such assessments eved
on a front-foot bass. In ether case the same prncpes as to cap-
tazaton of the amounts e pended and the recovery thereof through
deprecaton aowances shoud be apped.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
S CTION 23(k). D DUCTIONS ROM GROSS
INCOM : D PR CI TION.
rtce 201: Deprecaton. III-5-4087
I. T. 24.02
R NU CT O 1 28.
If a trust nstrument provdes that the ncome of the trust com-
puted wthout regard to deprecaton s to he dstrbuted to the des-
gnated benefcares, such benefcares w be entted to the de-
precaton aowance to the e cuson of the trustee. If, how-
ever, the nstrument provdes that the trustee n determnng the
dstrbutabe ncome sha frst make due aowance for keepng
the trust corpus ntact by retanng a reasonabe amount of the
current ncome for that purpose, the aowabe deducton w be
granted n fu to the trustee.
dvce s requested as to the nterpretaton to be paced on secton
23 (k) of the Revenue ct of 1928 n so far as t reates to the appor-
tonment of the deprecaton deducton between the trustee and the
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85
23(k), rt. 201.
benefcares n the case of property hed n trust. Ths secton of
the statute provdes as foows:
Deprecaton. reasonabe aowance for the e hauston, wpar 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 re-
mander 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 n trust the aowabe deducton sha be appor-
toned between the ncome benefcares and the trustee n accordance wth
the pertnent provsons of the nstrument creatng the trust, or, In the absence
of such provsons, on the bass of the trust ncome aocabe to each.
s w be noted, the aowabe deducton for deprecaton n te
case of property hed n trust s to be apportoned betw een the ncome
benefcares and the trustee n accordance wth the pertnent pro-
vsons 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.
or e ampe, f a trust nstrument provdes that the ncome of the
trust computed wthout regard to deprecaton s to be dstrbuted
to the desgnated benefcares, such benefcares w be entted to
the deprecaton aowance to the e cuson of the trustee. If, how-
ever, the nstrument provdes that the trustee n determnng the
dstrbutabe ncome sha frst make due aowance for keepng the
trust corpus ntact by retanng a reasonabe amount of the current
ncome for that purpose, the aowabe deducton w be granted
n fu to the trustee.
rtce 201: Deprecaton. III-15 1 8
I. T. 24 7
R NU CT O 1928.
The property of those Massachusetts trusts whch fe edera
ta returns as corporatons s not hed n trust wthn the
meanng of the ast sentence of secton 23(k) of the Revenue ct
of 1928.
dvce s requested as to whether the ast sentence of secton
23 (k) of the Revenue ct of 1928 appes to those Massachusetts
trusts whch fe edera ta returns on corporaton forms and pay
ta es at corporaton rates.
Secton 23 of the Revenue ct of 1928 provdes that n computng
net ncome there sha be aowed as deductons:
fk) Deprecaton. reasonabe aowance for the e hauston, wear and
tear of property used n the trade or busness, Incudng 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 n trust the aowabe deducton
sha be apportoned between the ncome benefcares and the trustee n accord-
ance wth the pertnent provsons of the nstrument creatng the trust, or, n
the absence of such provsons, on the bass of the trust ncome aocabe to
each.
The ast sentence of the subsecton |ust quoted appes ony to
property hed n trust. Whe under oca aw a Massachusetts
trust of the type descrbed s, for some purposes, a trust, and may,
for other purposes, consttute a partnershp, such an organzaton
under the Revenue cts s nether a trust nor a partnershp but s
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25, rt. 295.
8
an assocaton and, therefore, s a corporaton. (Secton 1, Revenue
ct of 1918 secton 2(2), Revenue ct of 1921 secton 2(a)2,
Revenue cts of 1924 and 192 : secton 701 (a)2, Revenue ct of
1928 urk-Waggoner O ssocaton v. opkns, 2 9 U. S., 110,
T. D. 3790, C. . -, 147.) It s a corporaton, moreover, not
merey wth respect to ts ta rate but for other ta purposes as we
( . R. R. 43, C. . 5, 230 G. C. M. 21, C. . -2, 5), for under
the sectons of the Revenue cts |ust cted an assocaton s a cor-
poraton wthout quafcaton or restrcton. Therefore, the prop-
erty of the assocaton must be treated, under secton 23(k) of the
Revenue ct of 1928, as though the assocaton were ncorporated
under the corporaton statutes of the State and ega tte to ts
property were vested n the assocaton as a dstnct ega entty.
It foows that such property s not hed n trust wthn the
meanng of the ast sentence of secton 23(k), and that that sentence
does not appy to such Massachusetts trusts as are assocatons under
the Revenue cts.
rtce 202: Deprecabe property.
R NU CT O 1928.
ssessment for street mprovements on front-foot or vauaton
bass. (See G. C. M. 5589, page 83.)
S CTION 23(n). D DUCTIONS ROM GROSS INCOM :
C RIT L ND OT R CONTRI UTIONS.
rtce 2 1: Contrbutons or gfts by ndvduas.
R NU CT O 1928.
Navy and Marne Memora ssocaton. (See I. T. 24 0, page 98.)
S CTION 25. CR DITS O INDI IDU L
G INST N T INCOM .
rtce 295: Date determnng e empton. III-25 4242
G. C. M. 275
R NU CT O 1928.
Secton 25(e)3 of the Revenue ct of 1028, whch provdes that
In the case nf nn ndvdua who des durng the ta abe year the
persona e empton sha be determned by hs status at the tme
of hs death, s e cusve n ts terms and can not be apped n
con|uncton wth secton 25(e)2 of the ct, whch provdes for au
apportonment of the e empton where there s a change n the
status of the ta payer durng the ta abe year.
n opnon s requested as to the credt for persona e empton
aowabe to a ta payer under the foowng crcumstances:
It appears that the ta payer and hs wfe ved together unt
March 30, 1928, at whch tme they separated under the terms of a
set enent agreement whch was duy recorded among the records
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87
41, rt. 321.
of the cty of R. The ta payer ded on une 3, 1928. The M Com-
pany as e ecutor requests nformaton as to the proper e empton to
be camed for the decedent n hs 1928 ncome ta return. The hus-
band had no dependents, and coud not be cassed as the head of a
famy after the separaton.
Secton 25(e) of the Revenue ct of 1928 provdes n part :
(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 amount 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 n famy bears to 12 months. or the purposes of ths paragraph
a fractona part of a month sha be dsregarded uness t amounts to more
than haf a month, n whch case t 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 at 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.
It s suggested that secton 25(e)2 s appcabe n the nstant case,
and that the ta payer s persona e empton shoud be apportoned
n accordance wth the number of months durng whch he was
marred and vng wth hs wfe and the number of months durng
whch he dd not have that status.
Ths suggeston s not sound. Secton 25(e)3 of the Revenue ct
of 1928, provdng that n the case of an ndvdua who des durng
the ta abe year the persona e empton sha be determned by hs
status at the tme of death, s e cusve n ts terms and s ceary
appcabe n the nstant case. Ths provson can not be apped n
con|uncton wth secton 25(e)2, provdng for the apportonment
of the e empton where there s a change n the status of the ta -
payer durng the ta abe year. Thus, where there s both a change
of status and death wthn the ta abe year, secton 25(e)3 must
govern.
Inasmuch as the ta payer separated from hs wfe on March 30,
1928, and ded une 3, 1928, hs status at the tme of hs death was
that of a snge person. ccordngy, the persona e empton aow-
abe n hs 1928 ncome ta return s 1,500.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
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. III-10-4129
I. T. 2459
R NU CT O 19 - 8.
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, 1928:
3133 20 7
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43, rt. 342.
88
Country or cty.
unt.
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terms of
Unted
States
money.
Country or cty.
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aue In
terms of
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ustra
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ugara
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ranc
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ranc ..
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Shangha tae__
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W. 192745
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1. 027844
rtce 322: ases of computaton.
R NU CT OP 1028.
ccruas of Wsconsn ncome ta es. (See G. C. M. 075, pa go 7 .)
S CTION 43. P RIOD OR W IC D DUC-
TIONS ND CR DITS T N.
rtce 342: When charges deductbe. 111-21-4209
I. T. 2473
LL R NU CTS.
The ad|ustments referred to In Genera Counse s Memorandum
52 5 (C. . II-2, 55) on account of freght charges on shpments
of umber In the case of umber companes on the accrua bass re-
qure a revson of the estmated freght charges for the year In
whch the shpments were made and not for the year n whch the
amount of the freght charges s defntey ascertaned.
rung s requested reatve to the proper nterpretaton of Gen-
era Counse s Memorandum 52 5.
The queston at ssue nvoves the foowng porton of Genera
Counse s Memorandum 52 5, supra:
Under the crcumstances shown n the nstant case, t must be concuded that
umber companes whch keep ther accounts and render ther returns on an
accrua bass shoud be permtted to deduct as an accrued abty for the
year n whch the shpments are made the amount of freght charges thereon,
where such charges are determned n accordance wth the practce above nd-
cated, sub|ect to proper ad|ustments beng made when the actua freght charges
arc fnay ascertaned.
In ths connecton t s stated that a number of accountants and
attorneys for umber companes have nterpreted Genera Counse s
Memorandum 52 5 to mean that estmated freght charges set up
n accordance wth the standard practce shoud not be ad|usted
for the year n whch the shpments are made, but that the neces-
sary ad|ustments shoud be refected n the return for a subsequent
year. Ths s not the proper nterpretaton. The ad|ustments re-
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1, rt. 381.
ferred to n Genera Counse s Memorandum 52 5 requre a revson
of the estmated freght charges on shpments of umber n the case
of umber companes on the accrua bass for the year n whch the
shpments were made and not for the year n whch the amount of
the freght charges s defntey ascertaned.
P RT . R TURNS ND P YM NT O T .
S CTION 51. INDI IDU L R TURNS.
rtce 381: Indvdua returns. III-9-4122
I. T. 2457
R NU CTS O 1920 ND 1028.
n amendment of the Cv Code of Caforna passed by the
Caforna Legsature, approved by the governor pr 28, 1927, n
effect uy 29, 1927, reads as foows:
Secton 1. new secton s hereby added to the cv code to be known as
secton 1 1a thereof to read as foows:
1 1a. The respectve nterests of the husband and wfe n communty prop-
erty durng contnuance of the marrage reaton are present, e stng and equa
nterests under the management and contro of the husband as s provded n
sectons 172 and 172a of the cv code. Ths secton sha be construed as
defnng the respectve nterests and rghts of husband and wfe In communty
property.
The Supreme Court of Caforna n the case of Stewart v. Stewart,
uy 18, 1928 (2 9 Pac, 439), 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.
In vew of secton 1 1(a) of the Caforna Cv Code, and pend-
ng fna ad|udcaton n court of the queston as to whether the
Government may ta to the husband the entre communty ncome
whch under the State aw s under hs management and contro,
husband and wfe domced n Caforna may each hereafter n
renderng orgna separate returns report one-haf of the ncome
from communty property acqured on and after uy 29, 1927.
Where communty property was acqured pror to that date, the
ncome therefrom may not be dvded for ncome ta purposes but
s ta abe to the husband n ts entrety, regardess of when such n-
come s receved. usband and wfe may hereafter report n orgna
separate returns one-haf of saares, wages, and fees earned by ether
spouse on and after uy 29, 1927, whch are communty property.
rtce 381: Indvdua returns. III-17-4182
Mm.3723
Communty property returns 1927 and subsequent years.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C, pr ,1929.
Coector of Interna. Revenue, Interna Revenue gents n Charge,
and other Offcers and mpoyees Concerned:
In order that ta payers n communty property States may be
advsed as to the poston of the ureau wth respect to ncome ta
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1, rt. 381.
90
returns requred to be fed n those States, and that a unform treat-
ment as to the audt of these returns may e st, the present stuaton
s summarzed and nstructons ssued as foows:
The ttorney Genera n an opnon dated September 10, 1920 ( 32
Op. . G., 298, T. D. 3071 (C. . 3, 221)), the date beng stated as
ugust 24 n the Treasury decson, wth respect to Te as, and n
an opnon dated ebruary 2 , 1921 (32 Op. . G., 435, T. D.
3138 (C. . 4, 238)), wth respect to Washngton, rzona, Idaho,
New Me co, Lousana, and Nevada, hed that n renderng ncome
ta returns husband and wfe mght each report one-haf of the
ncome whch under the aws of the respectve States becomes,
smutaneousy wth ts recept, communty property. These opn-
ons were reconsdered by the ttorney Genera because of the decson
of the Unted States Supreme Court n the case of Unted States v.
Robbng (2 9 U. S.. 315, T. D. 3817 (C. . -, 188)), and under date
of uy 1 , 1927 (35 Op. . G., 2 5), he wthdrew the former
opnons n a etter addressed to the Secretary of the Treasury,
statng that the decson n the case of Unted States v. Robbns has
rased very substanta doubt as to the soundness of the two former
opnons, eavng the Treasury Department to take any poston t
may consder proper under the aws of the severa States wth re-
spect to the reportng of communty ncome.
(1) The poston of the ureau s that communty ncome can not
be dvded for ncome ta purposes, but must be returned, and the ta
n respect thereof pad, by the spouse (usuay the husband) havng
under the aws of the State the management and contro thereof
owever, pendng fna ad|udcaton n court of ths queston husband
and wfe domced n rzona, Idaho, Lousana, Nevada, New Me -
co, Te as, and Washngton may each hereafter n renderng orgna
separate returns report one-haf of the ncome whch smutaneousy
wth ts recept becomes communty property. usband and wfe
domced n Caforna may dvde the communty ncome ony to the
e tent and as provded by I. T. 2457 (see on page 89).
(2) The audt of returns fed upon the so-caed communty prop-
erty bass for 1927 and subsequent ta abe years w be governed
by the foowng rues:
(a) In a cases where such returns are n the process of audt, the
return of the husband w be assocated wth the return of the wfe
and the returns audted concurrenty.
(b) Where ssues other than that of the communty property
bass are nvoved, the usua procedure (e cept as herenafter stated)
w be foowed wth respect to the other ssues, wth a vew to ther
settement. In such cases the 30-day etter from the nterna reve-
nue agent n charge or the coector w ncude a paragraph statng
specfcay that consderaton of the communty property ssue s
to be postponed pendng the fna court decson on the queston,
uness pror to such decson t becomes necessary to ma a forma
notce of defcency ( 0-day etter) because of the runnng of the
statute of mtatons on assessment, or because of the ta payer s
nonacquescer.ee n the proposed ad|ustment of the other ssues.
( ) If the ad|ustment of a of the other ssues resuts n no
change n ta abty, the returns w be fed n the coector s
offce or the Income Ta Unt n Washngton, as the case may be,
after the usua revew, and the returns w be appropratey fagged
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91
51, rt. 381.
n the fes so that they may be ready wthdrawn and assembed
for a suppementa audt n the event the fna decson of the court
susrans the ureau s poston. ( ut see paragraph ( ) beow.)
(d) If the ta payer acquesces n te proposed ad|ustment of the
other ssues and such ad|ustment resuts n a change n ta abty,
the admnstratve fe n the case, after the usua revew, w be
appropratey abeed and pendng the fna court decson w be
hed n the offce of the nterna revenue agent n charge. Ths
type of cases w be treated bv coectors n the same manner as pro-
test cases and w be transmtted to the approprate nterna reve-
nue agent n charge. The ta payer w be advsed to protect hs
nterests wth respect to any overpayments by fng a cam for re-
fund wthn the statutory perod of mtaton propery appcabe
thereto.
(e) or the purpose of securng the ta payer s acquescence n
(he proposed ad|ustment of the other ssues the usua forms ( orm
870, 873, etc.), wavng the rght to fe a petton wth the oard
of Ta ppeas and consentng to the assessment and coecton of
a defcency or acceptng an ndcated overassessment, may be used.
(/) If the ta payer does not acquesce n the proposed ad|ustment
of a of the other ssues and such ad|ustment resuts n an over-
assessment the admnstratve fe w be abeed and hed as n
paragraph (d) above. so the ta payer w be advsed to protect
hs nterests wth respect to any overpayment by fng a tmey cam
for refund.
((f) If the ta payer does not acquesce n the proposed ad|ustment
of a the other ssues and such ad|ustment resuts n a defcency, the
case w be forwarded to the Income Ta Unt n Washngton for
the mang of a 0-day defcency etter, and the proposed defcency
stated n such etter w ncude the porton of the defcency attrb-
utabe to the poston of the ureau stated n paragraph (1) above
wth respect to the communty property ssue. Coectors w treat
a such cases as protest cases.
(h) Those returns whch are cosed and fed, or whch may here-
after be accepted and sent to the fes as propery prepared (e cept
for the communty property ssue), w be fagged n the fes as n
paragraph (c) above. Ths paragraph does not appy to those cases
whch may have been fnay cosed under secton 110 (b) of the
evenuo ct of 102 or secton 0 of the Revenue ct of 1928.
() If the fna decson of the court s n favor of the ureau s
poston the return gent to the fes w be sub|ect to a suppementa
audt ony n those cases where the addtona ta w be suffcent n
amount to |ustfy the tme and e pense n takng such acton.
) cosng agreement on orm 8 w not be entered nto for
1927 or any subsequent year n any case contrary to the poston
stated n paragraph (1) above, pror to the fna court decson.
(k) In the event of a fna court decson sustanng the ureau s
poston, every effort shoud be made to obtan the consent of the wfe
(for e ampe) to appy the ta pad by her upon the communty
ncome aganst the addtona ta due from the husband.
( ) Cams for refund based on a dvson of ncome under the
communty property aws w be hed n the cams contro secton
of the Income Ta Unt, and no refund w be aowed for 1927 or
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53, rt. 403.
92
any subsequent year contrary to the poston stated n paragraph (1)
of ths mmeograph.
(m) If n any case the statutory perod for assessment s about to
e pre, wavers w be asked and, f not receved, the case w be
forwarded to the Income Ta Unt n Washngton n suffcent tme
for the mang of a 0-day defcency etter upon the bass of the
poston stated n paragraph (1) above pror to the e praton of
the statutory perod of mtaton.
ueres regardng ths mmeograph or procedure n connecton
therewth w be drected to IT: : C .
D. . ar, Commssoner.
rtce 382: orm of return. TII-5-409O
Mm. 3701
Change n orm 1040 for caendar year 1928.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C, ebruary 1, 1929.
Coectors of Interna Revenue, Interna Revenue gents n Charge,
and Others Concerned:
Reference s made to orm 1040, Indvdua ncome ta return
for caendar year 1928. The headng of coumn 9, Schedue D, of
ths form reads Net gan or oss ( nter 12/2 per cent as Item 49).
The matter n parentheses shoud read ( nter 12y2 per cent as
Item 47).
D. . ar, Commssoner.
S CTION 53. TIM ND PL C OR
ILING R TURNS.
rtce 403: tensons of tme n the case of III-2-40 0
foregn organzatons, certan domestc corpo- I. T. 244
ratons, and ctzens of Unted States resdng
or traveng abroad.
( so Secton 23 , rtce 1121.)
R NU CT O 2 .
foregn corporaton havng a pace o busness n the Unted
States may be granted an e tenson of tme for fng ts return for
1928 unt the 15th day of the s th month foowng the cose of
ts ta abe year wthout the requrement that a tentatve return
be fed and at east one-fourth of the estmated ta be pad.
If a further e tenson s requred, t w be necessary to fe
a tentatve return not ater than the 15th day of the s th month
foowng the cose of the ta abe year and to pay at east one-
fourth of the estmated ta due.
Secton 23 of the Revenue ct of 1928, reatng to the payment
of the ta , appes to a foregn corporaton whether or not t has
an offce or pace of busness n the Unted States.
The M Company s a foregn corporaton havng a pace of bus-
ness n the Unted States and a hsca year ended September 30,
1928. The corporaton desres to secure an e tenson of tme n whch
to fe ts return for the fsca year ended September 30, 1928, and
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93
55, rt. 421.
refers to artce 444 of Reguatons 9, wheren foregn corporatons
are granted an e tenson of tme unt the 15th day of the s th
month foowng the cose of the ta abe year n whch to fe returns
under the Revenue ct of 192 . Informaton s desred as to whether
or not t s necessary to fe a tentatve return on the 15th day of the
thrd month foowng the cose of the fsca year n order that such
e tenson sha be operatve. Informaton s aso desred as to
whether n case a further e tenson s apped for t w then be
necessary to fe a tentatve return. The queston s aso rased
as to whether secton 23 of the Revenue ct of 1928 appes to a
foregn corporaton havng an offce or pace of busness n the
Unted States.
In vew of the practce of the ureau as ndcated by the pro-
vsons of artce 444 of Reguatons 9, pertanng to returns
requred to be fed under the Revenue ct of 192 , wheren t s
recognzed that foregn corporatons shoud have addtona tme
to fe ther ncome ta returns, and under authorty of secton
53(a)2 of the Revenue ct of 1928, an e tenson of tme to March
15, 1929, s granted the corporaton n whch to fe ts return.
Snce under secton 23 (a) of the Revenue ct of 1928 payment
of the ta s not requred unt the 15th day of the s th month fo-
owng the cose of the ta abe year, t w be unnecessary for the
corporaton to fe a tentatve return and to pay at east one-fourth
of the estmated ta due on the 15th day of the thrd month foow-
ng the cose of ts fsca year. In case a further e tenson of tme s
necessary, the corporaton shoud make appcaton therefor to the
coector before the e praton of the present e tenson perod. In
that case t w be necessary for the corporaton to fe a tentatve
return not ater than March 15, 1929, and to pay at east one-fourth
of the estmated ta due as shown by such tentatve return. Inter-
est on any defcency n the ta on such frst nstament w begn
to run from March 15, 1929.
Secton 23 of the Revenue ct of 1928, provdng for the pay-
ment of ta by a foregn corporaton, appes to a foregn corpo-
raton whether or not t has an offce or pace of busness n the
Unted States. foregn corporaton may eect to pay the ta
n four equa nstaments, the frst nstament beng due on the
15th day of the s th month foowng the cose of the ta abe
year.
S CTION 55. PU LICITY O R TURNS.
rtce 421: Inspecton of returns. III-12-4152
T. D. 42 4
mendng Treasury Decson 385 Pubcaton of Interna rev-
enue ta refund decsons.
Treasury Department,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
Treasury Decson 385 C. . -, 10 , as amended (beng
reguatons prescrbed by the Secretary and approved by the Pres-
dent and appcabe to the nspecton of returns under the Revenue
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101, rt. 501.
94
ct of 1928 and pror Revenue cts), s amended by addng at the
end thereof the foowng new paragraph:
20. The Commssoner of Interna Revenue sha cause to be prepared a
wrtten decson n every case n whch an ovorassessment (whether resutng
n a refund, credt, or abatement) of an ncome, war-profts, e cess-profts,
estate, or gft ta s aowed, n e cess of 20,000, and such decson sha be
consdered a pubc record and sha be open to nspecton, durng reguar hours
of busness, n the offce of the Commssoner of Interna Revenue or such offce
as he may desgnate. Such decson sha gve the amount of the overassess-
ment and sha be accompaned by a bref summary of the reevant facts and
a ctaton of the authortes appcabe thereto, or, n a case n whch a decson
of a court or of the oard of Ta ppeas has become fna, by a ctaton of the
court or oard decson. Under no crcumstances sha the provsons of ths
paragraph be construed as makng any return, or any part thereof, open to
nspecton, or as authorzng the source of any ncome, gans, or profts, or the
specfc transactons resutng n osses or e pendtures, to be made pubc nor
sha any of the nformaton contaned In any return or reatng thereto be
made pubc e cept n accordance wth, and to the e tent necessary In carryng
out. these reguatons.
. W. Meon,
Secretary of the Treasury.
pproved March 14,1929.
erbert oover.
The Whte ome.
CUTI ORD R.
Pubcaton of nterna revenue ta refund decsons.
Pursuant to the provsons of secton 55 of the Revenue ct of
1928 and secton 257 of the Revenue ct of 192 . t s hereby ordered
that decsons of the Commssoner of Interna Revenue aowng a
refund, credt, or abatement of ncome, war-profts, e cess-profts,
estate, or gft ta es, n e cess of 20,000, sha be open to nspecton
n accordance, and upon compance, wth the reguatons prescrbed
by the Secretary of the Treasury and approved by me, bearng even
date herewth.
erbert oover.
The Whte ouse,
March U, 1929.
SU TITL C SUPPL M NT L PRO ISIONS.
SUPPL M NT . R T S O T .
S CTION 101. C PIT L N T G INS
ND LOSS S.
rtce 501: Defnton and ustraton of capta
net gan.
R NU CT O 1928.
Sae n 1928 of stock purchased durng the same year under an
opton hed for a perod of years pror to ts e ercse. (See I. T,
2447, page 70.)
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101, rt. 501.
rtce 501: Defnton and ustraton of IIT-14 41 2
capta net gan. I. T. 24
R NU CT O 1928.
- Pursuant to a resouton adopted anuary , 1029, by the
governng commttee of the M Stock change. Increasng ts
membershp, the ta payer, a member of the e change snce March,
191 ), became entted on ebruary , 1929, to the rght or prv-
ege of transferrng hs proportonate part of the addtona mem-
bershps created. In March, 1929, such proportonate part was
sod for cash.
ed, the nterest n the new membershp was capta and ts
acquston by the ta payer dd not resut n the recept of ncome.
or capta gan purposes, the nterest n the new membershp
was property hed for over two years, and the gan resutng from
ts sae may at the eecton of ta payer be ta ed as capta gan,
n accordance wth secton 101 of the Revenue et of 1928.
n opnon s requested as to the treatment for ncome ta pur-
poses to he accorded to the acquston and sae by n 1929 of a
one-quarter nterest n a new membershp n the M Stock change.
It s stated that on March , 1919, acqured a membershp n
the M Stock change by payng to the person from whom the
membershp was transferred b doars, and that upon beng ad-
mtted to the e change, by transfer of ths membershp, he pad to
the e change the ntaton fee then requred.
Under the provsons of the consttuton of the e change the
membershp of the e change sha not be ncreased e cept by acton
of the governng commttee, whch sha prescrbe the number by
whch the membershp sha be ncreased and the terms of adms-
son. In accordance wth these provsons, a resouton was
adopted by the governng commttee on anuary , 1929, whch
resouton so far as pertnent reads:
Rewred, That the membershp of the e change be ncreased by 275 member-
shps and th t each member of the e change (or the ega representatves of
edv member who may then have ded) on the date ths resouton sha become
effectve, after It s submtted to the e change pursuant to the const tut Ion,
sha have the rght or prvege of transferrng hs proportonate part of such
addtona membershps wthn three years of sad date to an appcant for
membershp who s approved by the commttee on admssons pursuant to the
consttuton, t beng understood that no such appcant sha he consdered
by the commttee on admssons unt he has contracted to purchase the propor-
tonate part of such addtona membershps beong ng to 4 members of the
e change, and nt n eecton to membershp such appcant sha pay to he
e change the ntaton fee prescrbed by the consttuton at the tme of hs
eecton .
Pursuant to the resouton referred to, became entted on eb-
ruary , 1929, to the rght or prvege of transferrng hs propor-
tonate part of the addtona membershps created by the resouton.
Inasmuch as the membershp of the e change on ebruary , 1 29,
was 1,100, and 275 addtona membershps were created, hs propor-
tonate part of the addtona membershps was equa to one-quarter
of a new membershp. On ebruary , 1929, the frst day on whch
the nterests of the members n the addtona membershps coud be
transferred for a monetary consderaton, contracted to transfer
hs nterest n the new membershps to , for the sum of 9a doars.
On March , 19:29. was duy eected to membershp n the e change
and pursuant to hs agreement pad the sum of 9 doars n cash
Upon consderaton of the varous aspects of the questons pre-
sented, ths offce has reached the concuson that the one-quarter n-
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101, rt. 501.
9
terest n the new membershp to whch became entted under the
resouton of anuary , 1929, represented under the foregong facts
a proportonate part of hs orgna nvestment n hs membershp
n the e change. Pror to the tme that resouton became effectve,
hs membershp represented a 1/1100 nterest n the e change, where-
as after the resouton became effectve that same nterest was repre-
sented not by hs membershp aone but four-ffths by hs membershp
and one-ffth by hs proportonate part of the addtona member-
shps created. s membershp thereafter represented but a 1/1375
nterest n the e change and hs one-quarter nterest n a new mem-
bershp a 1/5500 nterest, the two together representng the same
1/1100 nterest n the e change whch hs membershp represented
before the new membershps were created. Ths anayss of the
stuaton s n accord wth the reguatons whch were adopted by
the e change n connecton wth the transfer of these nterests n the
new membershps. The reguatons provde that unt a member
has transferred ns rght any transfer of hs membershp must carry
wth t hs nterest n the addtona membershps, and that any
agreement to transfer a membershp n the e change by a member
who has not dsposed of hs rght sha be presumed to be an offer
to transfer hs membershp and ns rght. The essence of the stua-
ton s that upon the creaton of the new membershps n 1929 there
may have been some change by way of addton n that whch there-
tofore evdenced s nterest n the e change| but there was no rea
change by way of addton or otherwse m hs nterest n the
e change. Snce hs nterest n the e change remaned unaffected,
the transacton dd not resut n any ta abe ncome beng receved.
The transacton whereby acqured a one-quarter nterest n a
new membershp was n many respects smar to the acquston by
a stockhoder from hs corporaton of a stock dvdend, the acton
of the e change n ncreasng the e stng membershps beng akn
to a corporaton ncreasng ts authorzed capta stock, and ssung
a stock dvdend payabe n such newy authorzed stock. In sner
v. Macomber (252 U. S., 189, T. D. 3010, C. . 3, 25) the foowng
anguage quoted by the Supreme Court from Towne v. sner (245
U. S., 420), as to the nature of a stock dvdend, succncty sums up
the effect of the creaton by the e change of the new membershps:
stock dvdend The creaton of new membershps reay takes nothng
from the property of the corporaton, and adds nothng to the nterests of the
sharehoders members . Its property s not dmnshed, and ther nterests
are not ncreased. The proportona nterest of each sharehoder
Imember remans the same. The ony change s n the evdence whch rep-
resents that nterest, . (Gbbon v. Mahon, 13 U. 8., 549, 559. 5 0.)
In short, the corporaton s no poorer and the stockhoder member s no
rcher than they were before. (Logan County v. Unted States, 1 9 U. S., 255,
2 1.) If the pantff ganed any sma advantage by the change, t certany
was not an advantage of 417,450, the sum upon whch he was ta ed.
What hs happened Is that the pantff s od certfcates have been spt up In
effect and have dmnshed n vaue to the e tent of the vaue of the new.
rom what has been sad t foows that the one-quarter nterest
n the new membershp was capta and ts acquston by dd not
resut n the recept of ncome that the nterest acqured represented
one-ffth of the nvestment n hs orgna membershp n the e -
change and so had a cost bass of doars (5a.- doars -5- 5) that
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97
103, rt. 52 .
for capta gan purposes the nterest n the new membershp was
property hed for over two years, . e., snce March , 1919 (artce
501, Reguatons 74): and that the gan of 8a doars (9a doars
doars) resutng from the sae of the nterest may at hs eecton
be ta ed as capta gan at the rate of 12/ per cent, n accordance
wth secton 101 of the Revenue ct of 1928 and artce 501 of Regu-
atons 74.
S CTION 103. MPTIONS ROM T
ON CORPOR TIONS.
rtce 525: udng and oan assocatons III-9-4123
and cooperatve banks. I. T. 2458
R NU CTS O 1920 ND 1928.
n organzaton otherwse quafed w not be dened e empton
as a budng and oan assocaton under secton 231(4) of the
Revenue ct of 192 and secton 103(4) of the Revenue ct of
1928 because the hoders of Instament shares (both borrowers and
nonborrowers) are not entted to vote.
rung s requested as to whether the M udng and Loan
ssocaton s entted to e empton under secton 231(4) of the
Revenue ct of 192 and secton 103(4) of the Revenue ct of 1928.
In the opnon rendered November 19, 1928, by the Supreme Court
of the Unted States n the case of The Unted States v. The Cam-
brdge Loan udng Co. (49 Sup. Ct, 39, T, D. 4252, C. .
II-2, 290), affrmng the |udgment of the Unted States Court of
Cams of une , 1927 ( 3 Ct. CI., 31), t was stated that the ed-
era statutes reatng to the e empton of budng and oan assoca-
tons speak of domestc assocatons, that s, assocatons sanc-
toned by the severa States, and such edera statutes must be
taken to accept wth the quafcatons e pressy stated what the
States are content to recognze. egnnng wth the Revenue ct
of 1921, Congress ncorporated n the e emptng provsons of the
statute the quafyng phrase substantay a the busness of whch
s confned to makng oans to members.
It appears that the M udng and Loan ssocaton was ncor-
porated n ebruary, 192 , under the budng and oan assocaton
aws of the State of R that t has made oans ony to persons who
subscrbed for stock equa to the fu amount of ther oans that the
hoders of nstament stock (both borrowers and nonborrowers) are
not permtted to vote but that nonborrowng nstament share-
hoders may convert ther matured nstament stock nto fu-pad
stock, whch stock carres the rght to vote. Whe the hoders of
nstament stock are not permtted to vote, the dena to an nsta-
ment sharehoder of the rght to vote does not dsquafy hm as a
member of the assocaton.
In vew of the fact that substantay a the busness of the asso-
caton s confned to makng oans to members and that t meets a
the other tests of e empton, t s hed that the assocaton s entted
to e empton under secton 231(4) of the Revenue ct of 192 and
secton 103(4) of the Revenue ct of 1928. ccordngy, the asso-
caton w not be requred to fe returns for 192 and subsequent
years so ong as t does not change ts purposes or ts method of dong
busness.
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103, rt. 29.
98
rtce 525: udng and oan assocatons TII-12 4149
and cooperatve banks. I. T. 24 3
R NU CT O 1928.
I oans made by the M udng and Loan ssocaton under
the so-caed dvded mortgage system each oan Is covered by two
mortgages, one wth respect to the porton of the oan covered by
subscrpton for shared and one wth respect to the pnrt not so
covered. The oan s a snge transacton, one appcaton beng
made, one voucher drawn, and one recept book gven.
The dvded mortgage oan n ts entrety s a member oan, and
the present e empt status ef the organzaton as a domestc budng
and oan assocaton w not he affected by the makng of such oans.
dvce s requested reatve to the effect upon the present e empt
status of the M udng and Loan ssocaton of oans made under
the so-caed dvded mortgage system. The queston s whether
n vew of ths system t can be sad that substantay a the busness
of the assocaton s confned to makng oans to members, a statutory
requrement of e empton under secton 103(4) of the Revenue ct
of 1928.
It appears that under the so-caed dvded mortgage system
each oan s covered by two mortgages, one mortgage wth respect to
the porton of the oan covered by subscrpton for shares and one
mortgage wth reference to the part of the oan not covered by sub-
scrpton for shares. The porton of the oan not covered by sub-
scrpton for shares s caed a fat oan, ths porton of a dvded
mortgage oan beng from 33 3 per cent, to 40 per cent of the tota
oan. The dvded mortgage oan s a snge transacton, one app-
caton for a oan beng made, one voucher drawn, one recept book
gven, one account opened on the books of the assocaton, and one
number gven to the oan. The two mortgages are e ecuted and
recorded smutaneousy. The mortgage coverng the fat oan s
made for three years and contans an agreement that the nterest
sha be pad monthy, and that the prncpa sha be due f defaut
s made n any of the payments due on ether mortgage. The avowed
purpose of the dvded mortgage oan s to make the payments
smaer to the borrower, t beng stated that a reguar oan of 4,500
requres monthy pa| ments of 49.50, whe a dvded mortgage oan
of 4,500 ( 1,500 representng the fat oan and 3,000 represent-
ng the porton of the oan covered by subscrpton for shares) re-
qures a payment of 40.50 per month.
Snce the dvded mortgage oan s a snge transacton athough
covered by two mortgages, and snce each borrower subscrbes for
shares of the assocaton, t s hed that the dvded mortgage oan
s n ts entrety a member oan, and the present e empt status of the
organzaton as a domestc budng and oan assocaton w not be
affected by the makng of such oans.
rtce 529: Cvc eagues and oca assocatons III-10-4130
of empoyees. L T. 24 0
( so Secton 23 (n), rtce 2 1.)
R NU CT OP 1928 ND PRIOR R NU CTS.
The Navy and Marne Memora ssocaton s entted to e -
empton under the provsons of secton 103(8) of the Revenue
ct of 1928 and correspondng sectons of pror Revenue cts.
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99
113, rt. 59 .
Contrbutons made to such assocaton by ndvduas are deduct-
be from gross ncome n the manner and to the e tent provded by
secton 23(n) of the Revenue ct of 1928 and correspondng sec-
tons of pror Revenue cts.
rung s requested as to the status of the Navy and Marne
Memora ssocaton wth respect to edera ncome ta .
It appears that the assocaton was formed for the purpose of
rasng a fund of money wth whch to erect a natona monument n
Washngton, D. C, on a ste n ast Potomac Park desgnated by
Congress, ommemoratng the country s sea servces. The monument
s to be sutaby nad n the memora patform wth the nsgnas
of every State n the Unon, and the offca seas of the Unted
States Navy and the merchant marne are to be paced on two sdes
of the monument. The entre actvtes of the assocaton have been
drected toward the securng of contrbutons to make up the neces-
sary fund. None of the ncome of the assocaton may nure to the
beneft of any prvate member or ndvdua. Its entre ncome s
receved through contrbutons and s to be e pended for meetng
the overhead e penses of the assocaton and for erectng the
monument.
ased on these facts, t s hed that the assocaton s entted to
e empton under the provsons of secton 103(8) of the Revenue
ct of 1928 and the correspondng sectons of pror Revenue cts.
It s not, therefore, requred to fe returns of annua ncome.
The e empton referred to does not appy to ta es eved under
other ttes or provsons of the respectve Revenue cts, e cept n
so far as e empton s granted e pressy under those provsons to
corporatons enumerated n secton 103 of the Revenue ct of 1928
and n sectons 231 of the Revenue ct of 192G and pror cts.
The Congress of the Unted States by a |ont resouton approved
ebruary 1 , 1924 (43 U. S. Statutes at Large, p. 14, chapter 3 ),
authorzed the erecton of the memora on pubc grounds of the
Unted States, wth the resut that tte to the memora w rest
n the Government of the Unted States. ny contrbuton to the
assocaton to be used for the purpose of erectng the memora s
therefore a contrbuton for the use of the Unted States for e -
cusvey pubc purposes. ccordngy, t s hed that contrbutons
to the assocaton by ndvduas are deductbe by such ndvduas,
n arrvng at ther ta abe net ncome, n the manner and to the
e tent provded by secton 23(n) of the Revenue ct of 1928 and
correspondng sectons of pror Revenue cts.
SUPPL M NT . COMPUT TION O N T INCOM .
S CTION 113. SIS OR D T RMINING
G IN OR LOSS.
btce 59 : Property transmtted at death. III-22-4218
G. C. M. 195
R NU CT O 1928.
Where under a genera bequest a bank as e ecutor dstrbuted
shares of stock to tsef as trustee, the bass to be used for determn-
ng gan or oss n the event of the sae thereof by the trustee and
the bass n the event the trustee transfers the stock to the bene-
fcary of the trust and the benefcary ses t s the far market
vaue of the stock at the tme of ts dstrbuton by the e ecutor.
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5113, rt. 59 .
100
It appears that the M ank was the e ecutor of the w of ,
deceased, and that as e ecutor t dstrbuted to tsef, as trustee,
certan corporate stock under a genera bequest. dvce s requested
as to the bass to be used for determnng gan or oss n the event the
bank, as trustee, now ses the stock and the bass n case t transfers
the stock to the benefcary of the trust, as t s authorzed by the
terms of the w to do, and the benefcary ses the stock.
Secton 113(a)5 of the Revenue ct of 1928 reads, n part, as
foows:
Property acqured after ebruary 28, 191S. The bass for determnng tho
gau 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

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, the 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 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.
It s fundamenta that the dutes of a testamentary trustee, where
a trust s created by w and the e ecutor under the w s nomnated
as the trustee, are to be dstngushed from those of the e ecutor.
Thus n 11 R. C. L., ecutors and dmnstrators, paragraph 4,
t s stated:
There s no ega obstace to the same persons beng apponted as e ecutors
and trustees. uestons of consderabe dffcuty and mportance
may arse n determnng the e act ne of demarcaton between the two offces.
The abty of a surety on the admnstraton bond of an e ecutor s generay
mted to matters strcty pertanng to the e ecutor s dutes as such, and not
to breaches of trust n regard to hs addtona powers as testamentary trustee.
One fundamenta dfference between an e ecutor and a trustee s, that the
dutes of the former pertan to the offce, and those of the atter to the person.
In accordance wth ths dstncton a person admnsterng the estate of a
decedent as an e ecutor s sad to act as such by vrtue of hs offce but n
servng as trustee he s deemed to act as the donee of a trust power.
When the bank dstrbuted the stock to tsef, as trustee, ts
functons as e ecutor n respect of the dstrbuted property ceased
and ts dutes as trustee commenced. So far as the trust was con-
cerned, ths dstrbuton of the stock was the dstrbuton to the
ta payer referred to n secton 113(a)5, supra, and n accordance
wth the provsons of that secton the far market vaue of the stock
at that tme s the bass to be used for determnng gan or oss n the
event of a sae thereof by the bank as trustee.
fter the dstrbuton the bank acted soey as a donee of a trust
power wth equtabe abtes to the benefcary. Upon the date
of such dstrbuton the benefcary of the trust became entted to
the ncome from a f ed and determned bock of stock wth a rght
to utmate possesson of that stock. The rghts of the benefcary
attached nstanter to the specfc property then transferred n trust.
Such rghts were substanta and enforceabe, arsng through the
trust reatonshp, and gvng the benefcary property nterests of
vaue. They were not postponed unt the trustee surrendered the
corpus of the trust estate. mong those nterests was ncuded the
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101
115, rt. 28.
rght to receve the ncome produced by the trust property whch, t
has been decded, gves the benefcary an equtabe nterest n the
fund producng the ncome. (Roper on Legaces, voume 2, page
147 , and cases cted. Cf. Irvnn v. Gavt, 2 8 U. S., 1 1, 45 S. Ct.,
475 T. D. 3710, C. . I -1, 123 .)
The nterposton of a trustee prevented the ega tte from vest-
ng n the benefcary unt the termnaton of the trust, but that
d not ater the fact that upon the vestng of the trust estate the
benefcary became substantay the owner of the property. It s
therefore the opnon of ths offce that there was a dstrbuton of the
trust property to the benefcary wthn the ntendment of secton
113(a)5, supra, when the e ecutor renqushed the property to tsef
as trustee, and that the surrender of such property by the trustee at the
termnaton of the trust s not such a dstrbuton as s contempated
by that secton. It foows that when the bank as e ecutor dstrb-
uted the stock to tsef as trustee under the genera bequest, the stoc k
took as ts bass ts then far market vaue, not ony for the determ-
naton of gan or oss to the trustee but aso for the determnaton of
gan or oss to the benefcary after the ega tte has merged n hs
equtabe ownershp through the surrender by the trustee of the
corpus of the trust. (Cf. rewster v. Gage, 30 ed. (2d), 04,
C. C. ., 2d Crcut, ebruary, 1929 see Ct. D. 50, on page 220.)
To hod otherwse woud resut n undue dscrmnaton between
benefcares (such as the benefcary n the nstant case) under trusts
created by genera bequest and smar benefcares under trusts
created by specfc bequest. It s cear that under the provsons of
secton 113 (a) 5, supra, a specfc bequest of persona property n
trust under the crcumstances e stng n the nstant case woud re-
qure the bequeathed property to take as ts bass n the hands of
both the trustee and the benefcary ts far market vaue at the date
of the testator s death. If t were now hed that a genera bequest
under smar crcumstances resuted n the property takng as a
bass ts far market vaue at the tme t s surrendered by the trustee
to the benefcary, the specfc egatee woud be dscrmnated aganst
to the e tent of beng requred to pay a ta on any ncrease n vaue
between the date of the testator s death and the date of the sur-
render of the securtes by the trustee, whe the genera egatee woud
entrey escape such ta . Such dscrmnaton shoud not be per-
mtted to resut uness specfcay requred by the terms of the statute.
C. M. Charest,
Genera Counse, ureau of Interna, Revenue.
S CTION 115. DISTRI UTIONS Y CORPOR TIONS.
etce 28: Stock dvdends. III-4-4075
I. T. 2449
R NU CT O 1928.
When the entre stock of two stockhoders of a corporaton s
purchased by the corporaton and a part of such stock s dstrbuted
as a dvdend to the remanng stockhoders, the dvdend s a stock
dvdend and s not sub|ect to ta n the hands of the recpents.
dvce s requested as to whether a dvdend pad by the M Com-
pany to ts stockhoders n treasury stock of the corporaton s sub|ect
to ncome ta n the hands of the stockhoders.
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144, rt. 7 1.
102
The M Company, a corporaton wth 900y shares of common stock
outstandng of - par vaue, purchased out of surpus n 1925 the
entre hodngs of two of ts stockhoders, amountng to 114 / shares,
for per share, whch stock was hed n the treasury of the com-
pany unt December , 1928, when the drectors adopted a resou-
ton decarng a dvdend of 10 per cent of such treasury stock, or
11.4 / shares, dstrbutabe to the remanng stockhoders accordng
to ther respectve hodngs. The dvdend was forthwth pad.
It s hed that the dvdend pad by the M Company n the treasury
stock whch t purchased from ts stockhoders has the same status
for ncome ta purposes as a dvdend pad n unssued stock. The
dvdend, beng pad n the corporaton s own stock, was a stock
dvdend. ccordngy, the dvdend was not sub|ect to ncome ta
n the hands of the stockhoders. (Secton 115(f), Revenue ct of
1928.)
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 91: nayss of credt for ta es. III-1-4055
I. T. 2445
R NU CT O 1928.
The ta mposed on domestc corporatons operatng n cuador,
by Tte III, artce 14, of the 1928 ta aw enacted by the Repubc
of cuador, s an ncome ta wthn the meanng of secton 131(a) 1
of the Revenue ct of 1928.
SUPPL M NT D. R TURNS ND P YM NT O T .
S CTION 143. IDUCI RY R TURNS.
rtce 741: ducary returns.
R NU CT O 1928.
mpoyees trust. (See G. C. M. 0 0, page 108.)
S CTION 144. WIT OLDING O T
T SOURC .
rtce 7 1: Wthhodng ta at source. III-7-4104
I. T. 2454
R NU CT O 1928.
The credt for ta wthhed at the source, s not merey a credt
aganst norma ta , but n a credt aganst the tota amount of
ncome ta as computed n the ta payer s return, whether such
amount s norma ta . norma ta and surta , or surta ony.
queston s rased reatve to the credt for ta wthhed at the
source on nterest on ta -free convenant bonds.
Secton 144(d) of the Revenue ct of 1928 provdes that the
ncome upon whch any ta s requred to be wthhed at the source
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103
144, rt. 7 1.
sha be ncuded n the return of the recpent of such ncome,
but any amount of ta so wthhed sha be credted aganst the
amount of ncome ta as computed n such return. Ths anguage
s cear and defnte and admts of but one nterpretaton, and that
s, that the amount of the credt s mted ony by the amount of
the ta whch s requred to be wthhed at the source. No reference
s made to the rate used n computng the ta n the ta payer s re-
turn or the amount of hs net ncome as shown n such return. s
the amount of ta whch s requred to be wthhed s governed by
the form of ownershp certfcate accompanyng the nterest coupons,
the amount of credt to whch a ta payer s entted depends upon
the form of ownershp certfcate submtted by hm.
The amount of the ta requred to he wthhed s not a norma
ta , notwthstandng the fact that at one tme the ta requred
to he wthhed was at the same rate as the norma ta mposed upon
a ctzen or resdent of the Unted States on the frst 4,000 of hs
net ncome n e cess of hs credts ncudng those for persona
e empton and dependents. It s hed, therefore, that the credt
for ta wthhed at the source s not merey a credt aganst norma
ta . but s a credt aganst the tota amount of ncome ta as com-
puted n the ta payer s return, whether the amount of ncome ta
as computed n such return s norma ta , norma ta and surta , or
surta ony.
rtce 7 1: Wthhodng ta at source. III-13-415
G. CM. 577
R NU CT O 1928.
Where, under the provsons of a trust ndenture securng nn
Issue of god notes, the obgor agrees to pay the edera ncome
ta of 2 per cent and to remburse the obgee for a porton of the
ta mposed on the nterest n e cess of 2 per cent, wthhodng
from nonresdent aen ndvduas and nonresdent foregn cor-
poratons s requred at the rate of ony 2 per cent.
n opnon s requested as to whether, n vew of the covenant con-
taned m the 5 per cent god notes ssued by the M Company, the
debtor corporaton s requred to wthhod a edera ncome ta of
ony 2 per cent n the case of nonresdent aen ndvduas and non-
resdent foregn corporatons, or whether wthhodng s requred at
hgher rates. The corporaton reported ony 2 per cent wthhed on
ts orm 1012 fed for uy, 1928. It has been suggested that the
form shoud be revsed to show an addtona ta of 3 per cent wth-
hed n the case of nonresdent aen ndvduas and an addtona
ta of 10 per cent wthhed n the case of nonresdent foregn
corporatons.
The trust ndenture, under whch the notes were ssued, contans
a covenant whereby the corporaton agrees to satsfy the nterest
wthout deducton for ta es e cept edera ncome ta n e cess of
2 per cent per annum. The trust ndenture contans a further cove-
nant whereby the corporaton agrees that n addton to the Unted
States ncome ta of 2 per cent per annum upon ncome derved from
nterest pad on ts notes, whch t agrees to pay as provded n sec-
ton , t w remburse any person or corporaton (other than a
ctzen or resdent of the Unted States) havng pad the same, any
3133 29 8
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144, rt. 7 5.1
104
Unted States edera ncome ta , to the e tent of 3 per cent per
annum n the case of ndvduas and y2 per cent per annum n
the case of corporatons, on ncome derved from the nterest pad
on the notes, provded that appcaton s made therefor at the offce
of the trustee n the cty of R or at the offce of the agency of the
corporaton n a foregn country wthn days after the payment
of such ta , and provded that the appcaton s accompaned by an
affdavt settng forth the ownershp Toy the appcant of the notes,
together wth the number or numbers thereof, that the appcant at
the tme the ta was pad was not a ctzen or resdent of the Unted
States, and that such ta was pad by reason of the dervng of n-
come from such notes. De corporaton contends that t has assumed
a abty n e cess of 2 per cent, and, therefore, that t s requred
to wthhod ony 2 per cent at the source.
Secton 144(a) of the Revenue ct of 1928 requres that n any case
where bonds or smar obgatons of a corporaton contan a con-
tract or provson by whch the obgor agrees to pay any porton of
the ta mposed by the ncome ta tte of that ct on the obgee,
or to remburse the obgee for any porton of the ta , or to pay
the nterest wthout deducton for any ta whch the obgor may be
requred or permtted to pay thereon or to retan therefrom under
any aw of the Unted States, the obgor sha deduct and wthhod
a ta of 2 per cent of the nterest upon such bonds or other obga-
tons. It s provded, however, that f the abty assumed by the
obgor does not e ceed 2 per cent of the nterest, wthhodng sha
be at the rate of 5 per cent n the case of nonresdent aen ndvdu-
as, and 12 per cent n the case of nonresdent foregn corporatons.
In vew of the provsons of the covenant under whch the obgor
agrees, n addton to payng the Unted States ncome ta to the e -
tent of 2 per cent per annum upon ncome derved from nterest pad
on the notes, to remburse the obgee for a porton of the ta n
e cess of 2 per cent mposed on the nterest and pad by a nonres-
dent aen ndvdua or a nonresdent corporaton, the abty as-
sumed by the obgor e ceeds 2 per cent. Therefore, under secton
144(a) of the Revenue ct of 192 , wthhodng s requred at the
rate of ony 2 per cent. s ths was the rate at whch ta was wth-
hed and reported on orm 1012 for uy, 1928, t w not be neces-
sary for the M Company to revse such form.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
rtce 7 5: Ownershp certfcates for bond III-5- 092
nterest. Mm. 3 91
( so Sectons 148 and 149, rtces 814 and 831.)
New forma of ownershp certfcates, wthhodng returns and
nformaton returns.
Treasury Department,
Offce of Commssoner of Interna Revenot,
Washngton, D. C, December 21, 1928.
Coectors of Interna Revenue:
ffectve upon recept of revsed forms, the use of ownershp cer-
tfcates now known as orms 1000, OOO , and 1001 w be dscon-
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105
144, rt. 7 5.
tnued, and there w be substtuted therefor orms 1000 and 1001,
both Revsed anuary, 1929. orm 1000, prnted on whte paper,
w be used by a casses of owners e cept nonresdent aens. orm
1001, prnted on coored paper, w be used e cusvey by non-
resdent aens.
None of the obsoete forms shoud be dstrbuted after recept of
the revsed forms. Persons makng requests for orms 1001 after
you have receved a suppy of the new forms shoud be advsed of the
revson, and that orm 1001, formery prnted on yeow paper and
used as an e empton certfcate, w be used n the future by
nonresdent aens. Persons who used the od orm 1001 for cam-
ng e empton from wthhodng w n the future use orm 1000,
ne 1. anks, payng agents, and others requestng suppes shoud
be advsed of these changes n the forms of ownershp certfcates.
orm 1012 has aso been revsed and shoud be used by a wth-
hodng agents makng returns for ebruary, 1929, and thereafter.
orms 1001 and 1001C have been dscontnued, and orm 1002
w be used by nonresdent aens for the purpose of camng e emp-
ton from wthhodng from ncome pad durng the caendar year
1928.
orm 1097, return of nformaton of payments of dvdends made
durng the caendar year, has been dscontnued, and orm 1099 re-
vsed to ncude a ne on whch dvdends shoud be reported, as
requred by Treasury Decson 423 C. . II-2, 71 . It s not
necessary that the same orm 1099 show saary and dvdends pad
to the same person. If more convenent the payor may fe separate
returns on orm 1099, but each group of returns must be accom-
paned by orm 109 .
ny nqures wth respect to ths mmeograph shoud be marked
for the attenton of IT: R: N.
. . Mkes,
ctng Commssoner.
ktce 7 5: Ownershp certfcates for bond III-12-4150
. nterest. Mm. 2725 (Rev.)
( so Secton 148, rtce 814.)
Incompete and otherwse mpropery e ecuted ownershp certf-
cates not to be accepted by banks and other coectng agents.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C, March 13,1929.
To anks and Other Co ectng gents:
The attenton of the ureau of Interna Revenue has been nvted
to the fact that n many nstances ndfference and careessness have
been shown by owners n e ecutng ownershp certfcates accom-
panyng coupons presented to banks and other coectng agents for
coecton of nterest on bonds and other obgatons of debtors, and
a o that banks and other coectng agents have been acceptng n-
compete and mpropery e ecuted ownershp certfcates wth such
coupons deposted for coecton and have been transmttng same
to debtors for payment.
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144, rt. 7 5.
10
ecenty changes have been made n the forms of ownershp cer-
tfcates and the reguatons pertanng to ther use, wth a vew to
the smpfcaton of the admnstraton of the wthhodng prov-
sons of the statute.
The use of ownershp certfcate, orm 1000 , has been dscon-
tnued, and the use of orm 1001 by ctzens and resdents of the
Unted States has been dscontnued. orm 1000 (revsed anuary,
1929), prnted on whte paper, w be used by a ctzen or resdent
ndvdua, fducary, or partnershp. orm 1001 (revsed anuary,
1929), prnted on green paper, w be used by a nonresdent aen
ndvdua, a nonresdent foregn partnershp, a nonresdent foregn
corporaton, and n behaf of an unknown owner.
The use of orms 1001 and 1001C, formery fed by nonresdent
aen ndvduas for the purpose of camng the beneft of the per-
sona e empton and credt for dependents to whch they were
entted, has been dscontnued and orm 1002 has been substtuted
therefor. Ths form shoud be used for the caendar year 1928 and
subsequent years.
The wthhodng provsons of the Revenue ct of 1928 are em-
boded n sectons 144 and 145 of that ct. Secton 148 requres
returns of nformaton n certan cases, among whch are sted
payments of nterest upon bonds, mortgages, deeds of trust, or other
smar obgatons of corporatons, and aso nterest upon the bonds
of foregn countres and nterest upon the bonds of and dvdends
from foregn corporatons.
The attenton of banks and other coectng agents s nvted to
paragraph (c) of secton 148, whch reads as foows:
When necessary to make effectve the provsons of ths secton, the name
and address of the recpent of ncome sha be furnshed upon demand of the
person payng the ncome.
The reguatons ssued by the ureau nterpretng sectons 148
nd 144 of the 1928 ct provde that the ownershp certfcates n
the case of payments of nterest, regardess of amount, upon
bonds and smar obgatons of corporatons, when duy fed,
sha consttute and be treated as returns of nformaton, and that
f a bondhoder fas to fe proper ownershp certfcate n the
case of payments of nterest on regstered bonds, the wthhodng
agent sha make out such certfcate n each nstance and fe t wth
hs monthy return. The reguatons further provde that f the
person recevng a payment (banks or coectng agents) fang
wthn the provsons of the statute for nformaton at the source s
not the actua owner of the. ncome receved, the name and address
of the actua owners sha be furnshed upon demand of the nd-
vdua, corporaton, or partnershp payng the ncome, and n defaut
of a compance wth such demand the payee becomes abe to the
penates provded n secton 14 of the Revenue ct of 1928.
anks and other coectng agents are not requred by aw or
reguatons to accept nterest coupons for coecton. If, however,
as a matter of convenence to ther customers, they do accept nterest
coupons for coecton, t s ther duty to see that the ownershp
certfcates whch are e ecuted by the owner of the coupons are
propery fed out. These ownershp certfcates can not be accepted
as returns of nformaton uness they are propery fed out, and
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107
144, rt. 7 5-
debtors recevng coupons from banks or coectng agents wth
ncompete or otherwse mpropery e ecuted ownershp certfcates
are, under the foregong quoted provsons of secton 148, author-
zed to demand that the name and address of the owner of the
coupons accompaned by ncompete or otherwse mpropery e e-
cuted ownershp certfcates sha be furnshed.
If banks and other coectng agents accept coupons for coec-
ton to whch are attached ncompete or otherwse mpropery e e-
cuted ownershp certfcates, such banks or coectng agents become
a party to the fng of ncompete returns of nformaton and sha
upon demand of the debtor furnsh the name and address of the
owner of the coupons so that such ownershp certfcates may, when
fed, be accepted as returns of nformaton n accordance wth the
provsons of the reguatons ssued under secton 148 of the Revenue
ct of 1928.
ctzen or resdent of the Unted States who presents for co-
ecton coupons detached from corporaton bonds whch contan a
ta -free covenant s requred to e ecute an ownershp certfcate.
Ths certfcate serves a doube purpose. It s used as a return of
nformaton wth respect to the ncome of the owner of the bond,
and aso as a gude to the debtor corporaton n the matter of payng
ta at the source. orm 1000 (revsed anuary, 1929) contans
three nes so desgnated as to ndcate to the debtor corporaton
whether or not ta sha be pad n behaf of the bondhoder or, f
pad, whether at the rate of 1/ per cent or 2 per cent of the nterest
reported on the form. The bondhoder, therefore, shoud be n-
structed to e ercse care to see that the amount of nterest receved
s entered on the proper ne, as t serves as a notce both to the debtor
corporaton and to the Government as to the ndvdua s abty
for ta . n ndvdua who at the tme of presentng hs coupons
for coecton knows that he w not be requred to pay any ncome
ta shoud, n |ustce to the debtor corporaton, use ne 1 of certf-
cate, orm 1000, n order that no ta w be pad to the Government
upon ncome whch s not sub|ect to ta . If, however, an ndvdua
does not dscover hs nonabty to ta unt after the cose of the
ta abe year, t s not too ate to rectfy the matter, as orm 1000
(revsed anuary, 1929), showng the nterest correcty entered on
ne 1, may be substtuted for the orm 1000 prevousy fed.
Debtor corporatons, acceptng ownershp certfcates whch n-
dcates that ta shoud be pad, even though they appear to have
been erroneousy e ecuted, become abe for such ta uness cor-
rected certfcates are fed.
It s desred that bankng nsttutons whch accept nterest coupons
for coecton brng these facts to the attenton of ther customers,
n order that debtor corporatons may not be requred to pay ta to
the Government upon ncome whch s not sub|ect to ta .
ueres regardng ths mmeograph or procedure n connecton
therewth shoud refer to the number of the mmeograph and the
symbos IT: :RR.
D. . ar, Commssoner.
.-
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148, rt. 811.
108
S CTION 148. IN O M TION T SOURC .
rtce 811: Return of nformaton as to pay-
ments of 1,500.
( so Secton 143, rtce 741.)
III-18-418
G. C. M. 0 0
NU CT O 1928.
If an empoyees trust comes under the provsons of secton 1 5
of the Revenue ct of 1928, no fducary return on orm 1041 s
requred. If the trustee, however, dstrbutes to any benefcary
of the trust n any ta abe year an amount equa to or n e cess
of 1,500 (or 3,500 f the benefcary s marred) of the amount
contrbuted to the fund by the empoyer and/or of earnngs of the
fund, the trustee s requred under secton 148 of the Revenue ct
of 1928 to fe an nformaton return on orm 1099 n respect of
such dstrbuton.
Inqury s made as to whether the trustee of an empoyees trust
comng under secton 1 5 of the Revenue ct of 1928 must fe a
fducary return on orm 1041, or whether ony an nformaton
return on orm 1099, under secton 148, w be requred.
In the case of trusts created by empoyers as a part of a stock
bonus, penson, or proft-sharng pan for the e cusve beneft of
some or a of ther empoyees that s, empoyees trusts comng
under secton 1 5 of the Revenue ct of 1928 a fducary return on
orm 1041 s not essenta, but n some cases an nformaton return
on orm 1099 w be requred under secton 148 of the ct and
artces 811 and 812 of Reguatons 74, n respect of payments of n-
come made by the trust. The Revenue ct of 1928 and the regua-
tons both contempate that the payments reported on such nforma-
ton return ( orm 1099) shoud be payments of ncome ony. Under
secton 219(f) of the Revenue cts of 1921, 1924, and 192 , t was
provded that the amount actuay dstrbuted or made avaabe to
the dstrbutee of a stock bonus or proft-sharng trust shoud be
ta abe to hm n the year n whch dstrbuted or made avaabe,
to the e tent that t e ceeded the amounts pad n by hm. s a
resut, the dstrbutee was ta ed not ony upon hs share of the
amount contrbuted to the trust by the empoyer and upon hs share
of the earnngs of the fund, but was aso ta ed upon any appreca-
ton n the vaue of stock dstrbuted, though such vaue had not
been reazed by sae. Ths stuaton was changed by secton 1 5 of
the Revenue ct of 1928, whch provdes that ony the amount con-
trbuted to the fund by the empoyer and a earnngs of the fund
sha be ta ed to the dstrbutee n the years n whch dstrbuted or
made avaabe to hm. Thus, any apprecaton n the vaue of stock
dstrbuted to an empoyee s not ta ed unt the gan s reazed.
(See the ouse report on the revenue b, p. 22.) ccordngy, the
nformaton requred under secton 148 of the Revenue ct of 1928
and artces 811 and 812 of Reguatons 74 s not as to dstrbutons
of 1,500 or 3,500 over and above the amounts contrbuted by the
respectve benefcares, but concerns dstrbutons of 1,500 or 3,500
from amounts contrbuted by the empoyer and from earnngs of
the fund.
It s therefore concuded that the trustee of an empoyees trust
comng under the provsons of secton 1 5 of the Revenue ct of
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109 189, rt. 941.
1928 s not requred to fe a fducary return on orm 1041, but f
the trustee dstrbutes to any benefcary of the trust n any ta abe
year an amount equa to or n e cess of 1,500 (or 3,500 f the bene-
fcary s marred) of the amount contrbuted to the fund by the
empoyer and/or of earnngs of the fund, the trustee s requred
under secton 148 of the Revenue ct of 1928 to fe an nformaton
return on orm 1099 n respect of such dstrbuton.
0. M. Chakest,
Genera Counse, ureau of Interna Revenue.
rtce 814: Return of nformaton as to nterest
on corporate bonds.
R NU CT O 1028.
orms. (See Mm. 3 91, page 104.)
rtce 814: Return of nformaton as to nterest
on corporate bonds.
R NU CT O 1928.
Ownershp certfcates to be propery e ecuted before acceptance
by banks or other coectng agents. (See Mm. 2725 (revsed March,
1929), page 105.)
S CTION 149. IN ORM TION Y CORPOR TIONS.
rtce 831: Return of nformaton as to payments
of dvdends.
R NU CT O 1928.
orms. (See Mm. 3 91, page 104.)
SUPPL M NT . P RTN RS IPS.
S CTION 189. P RTN RS IP R TURNS.
rtce 941: Partnershp returns. III-7-4105
G.C.M. 57 1
R NU CT O 1928.
husband and wfe may egay enter Into a partnershp n the
State of New York.
n opnon s requested as to whether a husband and wfe may
egay enter nto a partnershp n the State of New York, as the
court decsons of that State are confctng.
The decsons of the ower courts of the State of New York are n
confct n regard to ths queston. owever, the Court of ppeas
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322, rt. 1254.
110
n the case of Suan v. Cafe (122 N. Y., 308, 25 N. ., 488) consd-
ered a number of these confctng decsons and hed that the
provsons of the second secton of chapter 90 of the Laws of 18 0,
whch provdes that marred woman may carry on
any trade or busness on her soe and separate account,
were ntended to free the proceeds of her trade from her husband s
marta rght and not to dsabe her from enterng nto any contracts
wth hm that she mght make wth others, and that ths status
permts her to engage n a busness wth her husband as a partner
sub|ect to a the abtes as such. Ths case s consdered as the
controng case.
It s therefore the opnon of ths offce that a husband and wfe
may egay enter nto a partnershp n the State of New York.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
SUPPL M NT I. OR IGN CORPOR TIONS.
S CTION 23 . P YM NT O T .
rtce 1121: Date on whch ta sha be pad by foregn
corporatons.
R NU CT OP 1928.
Payment of ta by a foregn corporaton havng pace of bus-
ness n the Unted States where e tenson of tme s granted for
tng return. (See I. T. 244 , page 92.)
SUPPL M NT O. O RP YM NTS.
S CTION 322. R UNDS ND CR DITS.
rtce 1254: Cams for refund by ta payers. III-13-4159
T. D.42 5
INT RN L R NU T S.
Reguatons appcabe to cams for credt and refund.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To a Coectors of Interna Revenue and Others Concerned:
(1) cam for refund or credt of any nterna revenue ta , or
for refund of nterest or penates, erroneousy or egay coected
shoud be made on the form prescrbed by the Treasury Department
( orm 813), and shoud be fed wth the coector of nterna revenue,
athough a cam w not be consdered defectve soey by reason
of the fact that t s not made on the form or that t s fed wth the
Commssoner of Interna Revenue. The cam must set forth n
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I ( 322, rt. 1254.
deta and under oath each ground upon whch a refund or credt s
camed, and facts suffcent to apprse the Commssoner of the e act
bass thereof. ny cam whch does not compy wth the requre-
ments of the precedng sentence w not be consdered for any pur-
pose as a cam for refund or credt.
(2) No refund or credt w be aowed after the e praton of
the statutory perod of mtaton appcabe to the fng of a cam
therefor e cept upon one or more of the grounds so set forth n a
cam, or an amendment thereof, fed pror to the e praton of such
perod.
(3) These reguatons sha take effect on May 1, 1929, and sha
be appcabe to a cams fed on or after such date, and a other
reguatons are modfed n so far as they are nconsstent wth these
reguatons.
D. . ar,
Commssoner of Interna Revenue.
pproved March 27, 1929.
. W. Meon,
Secretary of the Treasury.
rtce 1254: Cams for refund by ta payers. III-13-41 0
T.D.42
INT RN L R NU T S.
Lmtatons on the perfecton of ncompete or mperfect cams
for credt and refund.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. 0.
To a Coectors of Interna Revenue and Others Concerned:
(1) cept as provded n paragraph (2), a refund or credt of
any nterna revenue ta w not be aowed n any case after the
e praton of the statutory perod of mtaton appcabe to the
fng of a cam therefor (computed wthout regard to the fng
of any so-caed nforma or defectve cam) uness pror to the
e praton of such perod a forma cam has been duy fed whch
compes wth a the requrements of the reguatons appcabe at
the tme such cam was fed, nor w any cam whch does not
compy wth such reguatons be consdered for any purpose as a
cam for refund or credt. (See e. g. Reg. 14 art. 103(5, Reg. 45
and 2 art. 130 , Reg. 5 art. 1304, Reg. 9 art. 1254, Re r. 74
Law Opnon 111 C. . III-, 350 T. D. 42 5 page 110, ths
uetn .)
(2) refund or credt may be aowed after the e praton of
such statutory perod of mtaton, even f no forma cam has been
fed pror thereto, n any case n whch a so-caed nforma or
defectve cam, duy fed pror to the e praton of such perod and
statng specfcay the grounds for the refund or credt, s perfected
by the fng of a cam pror to May 1, 19: 9, whch compes wth the
requrements of Treasury Decson 42 5, but (a) ony the grounds
set forth n such forma cam whch were aso set forth n such n-
forma or defectve cam w be consdered, and (b) no cam n
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S322, rt. 1254. 112
respect of whch a sut n court has been commenced at any tme may
be so perfected.
D. . ak,
Commssoner of Interna Revenue.
pproved March 27, 1929.
. W. Meon,
Secretary of the Treasury.
rtce 1254: Cams for refund by ta payers. III-19--4197
G. CM. 053
R NU CTS O 1918, 1921, 1924, 192 , ND 1928.
orm 1118, used by a ta payer n furnshng Informaton requred
n support of a credt camed on an orgna return for foregn
ta es pad, can not be regarded as an nforma cam for credt or
refund wthn the nreanng of secton 252 of the Revenue ct of
1918 and correspondng sectons of ater cts.
n opnon s requested as to whether a further credt or refund of
edera ncome and profts ta es for 1918 shoud be aowed n the
case of the M Company on account of a payment by that company of
a doars to the Domnon of Canada under ts usness Profts
War Ta ct of 191 . cam for credt or refund was fed on
November , 1925, more than fve years after the edera return for
1918 was due. The cam was aowed n the amount of doars
because t was fed wthn four years from the tme the overpayment
of 1918 ta es n such amount was made, but was re|ected for the
baance. The specfc ssue presented s whether the baance of the
amount determned to have been overpad for 1918 can be aowed on
the bass of orm 1118 fed n October, 1922, n support of the credt
for ta es pad to foregn countres camed n the orgna return for
1918. In other words, can orm 1118 be consdered an nforma
cam for credt or refund
The credt for ta es pad to foregn countres, aowed under sec-
ton 238 of the Revenue ct of 1918, s one of the tems whch s
requred under secton 239 to be stated specfcay on the return and
s a deducton from ncome ta . The amount of ths credt s com-
puted by the ta payer, but uness the ta payer meets the condtons
set forth n secton 238(b) the credt camed w not be aowed.
orm 1118, whch was prescrbed by the Commssoner under the
authorty of secton 238(b), cas for nformaton and supportng
evdence desgned to satsfy the Commssoner that the ta payer s
entted to the credt whch t has computed and camed. It s noth-
ng more than a schedue contanng nformaton supportng one of
the tems stated specfcay n the return.
orm 1118 s not a cam for credt wthn the meanng of sec-
ton 252 of the Revenue ct of 1918 or correspondng sectons of the
ater cts. It s cear from the anguage used n these sectons that
the credt aowed thereunder s the amount of an overpayment
of ta on one return aganst ta due on another return. On the other
hand, the credt aowed under secton 238 s merey a deducton
from the ta mposed for the ta abe year of the amount of ncome
and profts ta es pad or accrued durng such ta abe year to a foregn
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113
322, rt. 1254.
country or possesson of the Unted States on ncome from sources
theren, whch s aowabe ony on condton that certan substantat-
ng nformaton s furnshed. orm 1118, as stated above, has been
prescrbed for the use of the ta payer n furnshng the nformaton
requred under the aw n support of the credt camed.
Snce there s no authorty for treatng orm 1118 as an nforma
cam for credt or refund wthn the meanng of secton 252 of the
Revenue ct of 1918 and correspondng sectons of the ater cts,
no further credt or refund for 1918 may be aowed n the case of the
M Company.
C. M. Chabest,
Genera Counse, ureau of Interna Revenue.
rtce 1254: Cams for refund by ta payers. III-23-4225
G. C. M. 197
R NU CT OP 1028.
surety company may not fe a vad cam for refund to recover
the whoe or a porton of an ncome ta assessed aganst a ta -
payer and pad by the surety company n accordance wth the
provsons of the bond e ecuted by t.
The opnon of ths offce s requested as to whether a vad cam
for refund may be fed by a surety company whch wrote a bond n
connecton wth a cam n abatement fed by a ta payer, where the
cam was re|ected n part and the surety company pad the amount
for whch the cam was re|ected.
It appears that durng 1920 the M Company took over the busness
and the assets of the N Company, the ta payer, and the ta payer
corporaton was thereafter dssoved n accordance wth the pro-
vsons of secton 221 of the genera corporaton aw of the State
of New York. On une , 1921, the ta payer fed ts corporaton
ncome and profts ta return for the year 1920, whch return showed
no ta due. In October, 192 ), after an audt of the ta payer s ac-
counts, an assessment was made aganst the ta payer for the year
1920 n the sum of a doars. cam n abatement coverng ths
assessment was fed under date of October , 1925, the ta payer
gvng a bond to secure the payment of the ta . Ths bond was
sgned by the O Company as surety. 0-day etter was addressed
to the ta payer under date of May , 192 , n whch the ta payer
was advsed that ts cam n abatement had been aowed for 4a
doars and re|ected for 2a doars. On uy , 192 , a petton
was fed wth the oard of Ta ppeas, whch was dsmssed be-
cause t was not fed wthn the 0-day perod prescrbed by the
statute. The amount for whch the cam n abatement was re|ected
was pad by the surety company on ebruary , 1927.
Under date of ugust , 1928, there was fed by the surety com-
pany wth the coector a cam for refund for the year 1920 n the
sum of doars, beng a porton of the assessment aganst the ta -
payer whch was pad by the surety company as set out above. There
was attached to the cam : statement n support of cam for refund
of ta es erroneousy assessed aganst the N Company, ta payer, for
the year 1920, wheren t was set out that the cam was based upon
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322, rt. 1254.
114
an appcaton for assessment under sectons 327 and 328 of the Reve-
nue ct of 1918 and on the further ground that certan deductons
from net ncome were erroneousy dsaowed. The merts of the
cam are not under consderaton at ths tme, but the queston has
arsen as to whether the surety company had a rght to fe a cam
for refund under the crcumstances stated.
The surety company rees upon a purported assgnment to t by
the ta payer of any cam whch the ta payer mght have aganst
the Government by reason of the payment of the ta n queston.
Secton 3477 of the Revsed Statutes provdes that a transfer or
assgnment of any cam aganst the Unted States may be made
ony after the aowance of such a cam, the ascertanment of the
amount due. and the ssuance of a warrant for the payment thereof.
No cam havng been aowed to the ta payer n ths case, the pro-
vsons n the agreement e ecuted by the ta payer to the effect that
the surety company shoud be subrogated (after the payment of
any oss) to a the rght, tte, and nterest n and to such cam
were nvad and of no effect.
Where a ta payer gves a bond to secure the payment of a ta
assessed aganst hm, he assumes an obgaton whch s separate and
dstnct from hs abty under the revenue aws. oth the ta payer
and the surety on the bond become sub|ect to an entrey dfferent knd
of abty, whch s vountary and contractua. It s n form a drect
obgaton, not to pay a ta , but to pay a specfed sum defeasbe ony
upon payment by the ta payer of a certan amount to be f ed by the
subsequent acton of the Commssoner. In a sut upon such a bond,
nether the ta payer nor the surety company may queston the vad-
ty of the assessment. See, n ths connecton, the case of Gray Motor
Co. v. Unted States (1 ed. (2d), 3 7 T. D. 3994, C. . I-1,149 ),
decded by the Crcut Court of ppeas for the fth Crcut, from
whch the foowng quotaton s taken:
y gvng bond the company postponed payment of the amount admtted to be
due by the return and secured mmunty from dstrant of ts assets. To contest
the amount of ta found to be due by the Commssoner n ths proceedng
woud be to permt a coatera attack upon the assessment, somethng not
countenanced by the aw.
ta payer who s dssatsfed wth the determnaton of the Com-
mssoner may, wthn 0 days after the mang of a notce of a def-
cency n ta , fe wth the oard of Ta ppeas a petton for a
redetermnaton of the defcency. surety company upon a bond
condtoned for the payment of ncome ta s gven no rght to contest
the correctness of the proposed assessment. Shoud the surety com-
pany pay more than the amount specfed n the bond t mght have an
acton for money had and receved, but where the condtons of the
bond have been comped wt and the surety company has been caed
upon to pay the amount set out n the bond ts rght of acton, f any,
s aganst the prncpa on the bond and not aganst the Government.
In the case of an overpayment of ta the ta payer has the rght to
fe a cam for refund n the manner prescrbed by the statute. The
varous Revenue cts provde that refunds of ta es sha be made
to the ta payer, and the reguatons set out the manner n whch
cams for refund may be fed by the ta payer. In the case of the
ta payer s death, certfed copes of the etters of admnstraton or
etters testamentary or other smar evdence must be anne ed to the
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115
322, rt. 125 .
cam to show the authorty of the admnstrator, e ecutor, or other
fducary by whom the cam s fed. It s aso provded that where
an amount of ta n e cess of that propery due has been pad by a
wthhodng agent the credt or refund of such e cess amount sha be
made to the wthhodng agent uness the amount of such ta was
actuay wthhed by the wthhodng agent. (See artces 1252 and
1254 of Reguatons 74.) The surety company n the nstant case has
not shown any reatonshp whch woud support the fng of a re-
fund cam by that company. There s no provson of aw authorz-
ng a surety company to fe a cam for refund to recover the whoe
or a porton of the ncome ta assessed aganst a ta payer, whch
assessment has been pad by the surety company n accordance wth
the provsons of the bond e ecuted by t.
In vew of the above, t s the opnon of ths offce that the cam
for refund fed by the surety company n the nstant case was not a
vad cam.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
rtce 125 : Cams for refund n case of |udg- III-11-4138
ment obtaned aganst the Unted States. T. D. 42 2
UDGM NT CL IMS.
Cams for payment of |udgments aganst the Unted States to
be fed wth Commssoner n dupcate.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. G.
To Cokctars of Interna Revenue and Others Concerned:
Cams for the payment of |udgments rendered by Unted States
dstrct courts and the Unted States Court of Cams aganst the
Unted States representng ta es, penates or other sums, shoud be
e ecuted on orm 843 n dupcate and fed drecty wth the Com-
mssoner of Interna Revenue, Washngton, D. C. The camant
shoud state the grounds of hs cam under oath, gvng the names
of a partes to the sut, the cause of acton, the date of ts commence-
ment, the date of the |udgment, the court n whch t was recovered,
and ts amount. To ths affdavt there shoud be anne ed two cert-
fed copes of the fna |udgment, and an temzed b of the costs
pad, recepted by the cerk or other proper offcer of the court. In
the case of a |udgment rendered by the Court of Cams, there may
be submtted n eu of a certfed copy of the fna |udgment, a cer-
tfcate of |udgment ssued by the cerk of the court and two copes
of the court s opnon, f any was rendered.
D. . ar,
Commssoner of Inferna Revenue.
pproved March 8, 1929.
. W. Meon,
Secretary of the Treasury.
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04. 11
TITL I . DMINISTR TI PRO ISIONS.
S CTION 04. SUITS TO R STR IN N ORC M NT O
LI ILITY O TR NS R OR IDUCI RY.
Secton 04. III-1 - 179
Ct.D. 53
INCOM T R NU CT O 1928 D CISION OP COURT.
Coecton In|uncton Tran sfebee.
Secton 04 of the Revenue ct of 1928 prohbts the mantenance
of a sut (even though commenced pror to the passage of that ct)
to restran the coecton of the amount of the abty of a trans-
feree n respect of a ta assessed under secton 280 of the Revenue
ct of 192 .
Unted States Dstbot Court, Western Dstrct of Wsconsn.
Car . O. eand, companant, v. onzo . Wknson, Coector of Interna
Revenue for the Dstrct of Wsconsn, defendant.
November 22, 1928.
OPINTON.
On ugust 8, 1927, companant fed hs b, seekng to have set asde assess-
ments made aganst hm as the transferee of Stoughton Lumber ssocaton of
a defcency ta aganst the assocaton, amountng to 109. 5 for the year 1918
and . 2,948.48 for the year 1919, and seekng o en|on the defendant from co-
ectng such assessment by dstrant or otherwse. The assessments were made
by the Commssoner of Interna Revenue under the provsons of secton 280
of the Revenue ct of 192 , provdng that the abty at aw or In equty of a
transferee of property of a ta payer n respect of the ta sha be assessed, co-
ected, and pad n the same manner and sub|ect to the same provsons and
mtatons as n the case of a defcency n the ta mposed by that tte. Sec-
ton 280 of the Revenue ct of 192 s attacked by the companant as uncon-
sttutona n that t attempts to vest the Commssoner of Interna Revenue wth
|udca functons n that t deprves pantff of hs property wthout due
process of aw: deprves hm of the rght of tra by |ury, and undertakes to
vest |udca power n the Commssoner contrary to secton 1 of rtce III
of the Consttuton. The b aeges that nether of the sums nvoved s
camed to be or s n any way a ta due from the pantff to the Unted States,
but on the contrary s camed to be due from companant on account of hs
aeged ega and equtabe abty as transferee of the assets of the Stoughton
Lumber ssocaton that sad assocaton, n whch the companant hed
shares out of 200 shares of the capta stock, was dssoved November 7, 1921,
n whch dssouton the assets of the corporaton were dstrbuted n proporton
to ther respectve stock hodngs. ow much property or money was receved
by the companant n that transacton s not dscosed. s ground for equ-
tabe |ursdcton companant says that he has no money wth whch to pay the
aeged cams that hs property conssts of rea estate whch can ony be ds-
posed of wth great sacrfce, and standng and growng crops and a sma quan-
tty of ve stock that there Is no market for standng and growng crops, and
that the ve stock woud, under market condtons then e stng, produce but a
sma porton of the amount requred to pay the cams n queston. The
b aeges that companant s ndebted for money borrowed n e cess of
0,000, but aso dscoses that hs rea estate conssts of 200 acres of agrcutura
and, besdes two dweng houses n the cty of Stoughton, Dane County, Ws.,
a of whch are free and cear of encumbrances e cept the en created by fug
the ta cam nvoved.
On ugust 8, 1927. a restranng order was ssued returnabe 10 days there-
after, but no hearng was had and same contnued n effect unt u| ust 23,
1928, at whch tme respondent fed a moton to dsmss, settng up the grounds:
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117
04.
1. That pantff has a pan, adequate, and compete remedy at aw 2, that
secton 04 of the Revenue ct of 1928 prohbts the mantenance of ths sut
and, 3, that the petton sets forth no facts whch woud entte companant
t-| (he reef prayed for.
Luse, Dstrct udge: The b dscoses that pror to ts dssouton the
S .oushton Lumber ssocaton was carefu to nave ts 1919 busness e amned
b a fed man of the Interna Revenue Department to determne the an mnt
of ncome ta for whch the assocaton mght be abe, apparenty wth a
vew to avodng the very dffcuty whch now presents tsef, and that fact
naturay ensts the sympathy of a court of equty but s deemed nsuffcent
to consttute one of those e ceptona cases whch woud make secton 3224
R. 8. nappcabe to a ta ease, or secton 04 of the Interna Revenue ct
of 1928 nappcabe to ths case f vad and otherwse appcabe. Compan-
ant apparenty has rea estate whch s unencumbered save for the en of the
-am here nvoved and the court s unabe to perceve why companant coud
not, wthout dffcuty, make a oan on the securty of such rea estate not-
wthstandng the e stence of such en f money so rased was apped to the
e tngushment of the en. Secton 04 of the Revenue ct of 1928 s qute
manfesty a companon secton to secton 3224 R. S., and no doubt f the former
secton s vad and otherwse appcabe, t mts the equtabe |ursdcton of
courts to en|on the coecton of a abty at aw or n equty of a transferee
of the assets of a ta payer as effectvey as the atter secton dd n the case
of a ta . Secton 3224 R. 8. has been apped n a Its rgor n numerous cases,
some of whch are cted and revewed n Graham v. Dupont (2 2 U. S., 234, 254
T. D. 348 , O. . II-, 22 ). Ony e traordnary and e ceptona crcum-
stances make nappcabe the provsons of secton 3224 R. S. ( aey v.
George, 259 U. S., 1 T. D. 3347, C. . 1-2, 342 Dodye v. Osoorne, 240 U. S
118 v. Waace, 257 U. S., 310.)
Secton 04 of the Revenue ct of 1028 provdes, so far as matera, that
no sut sha be mantaned In any court for the purpose of restranng the
assessment or coecton of (1) the amount of the, abty, at aw or n equty,
of a transferee of property of a ta payer n respect of any ncome, war-profts,
e cess-prcfts or estate ta , .
Manfesty the foregong secton s appcabe by ts terms to ths sut, notwth-
standng t was passed after t was commenced. (SmaUwood et a. v. Gaardo,
275 U. S.. 5 .)
Companant strongy urges the reasonng and concusons of udge Dawson
n Owensboro Dtcher d Grader Co. v. Luca (18 ed. (2), 798) In support of
hs contenton. The cogent reasonng of udge Dawson eadng to hs concu-
son that secton 280 of the ct of 192 , n so far as t assgns to admnstratve
offcers the power to determne the abty of a transferee of a ta payer, Is
nvad as a grant of |udca power, seems we ngh nescapabe. owever,
assumng such nvadty, we have to dea n the nstant case wth secton
04 of the ct of 1928, and there s no escapng the concuson that t was
ntended by Congress to appy to |ust such cases as we now have before us.
It s we setted that secton 3224 R. S. apped so as to prevent n|unctons
Issung to restran the coecton of a ta , even though the aw mposng such
ta was unconsttutona. ( aey v. George, 259 T . S., 1 .) The ony e cep-
tons to that rue are cases where the so-caed ta was n reaty a penaty
n the nature of punshment for a crmna offense, as n Lpke v. Lederer
2r,9 t . g.. 557), and those wheren e traordnary crcumstances e sted makng
secton 3224 nappcabe, as n v. Waace (259 U. S., 44). (See Graham v.
Oupon/. 2 2 T . 8., 234, 257.) The nstant case s not such a one as woud const-
tute such an e cepton. The queston presented, then, s whether secton 04
of the 1028 Revenue ct shoud be gven the same effect n Its fed as secton
3224 R. S. has heretofore been gven n ts.
It s true that n determnng the abty at aw or n equty of a
transferee of a ta payer, the ta ng authortes e ercse a power not e ercsed
In determnng and coectng a ta from a ta payer. The determnaton of
the ta ng authortes, however, s not fna nor s t made so by the secton
In queston. It s ntended thereby to nsure the Government a contnuance
and unnterrupted revenue, eavng to the transferee the duty to pay and then
sue to recover. It must be borne In mnd that whe the abty of a trans-
feree may not be a ta abty n the ordnary sense, nevertheess It s a
abty for a ta In other words, the Government s seekng to coect what
Is prmary a ta and contnues to be a ta athough because of the Inabty
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0t , rt. 1301.
118
to coect from the ta payer proper t seeks to requre hs transferee to pay.
rom the standpont of the Government the money sought n ths case s as
much an tem of revenue as t woud be were the proceedngs to coect drected
toward the Stoughton Lumber ssocaton. ence from ts standpont the
same necessty e sts for the coecton of ta abtes restng upon trans-
ferees as e sts n the case of ta payers. s restated n Graham v. Dupont
(2 2 U. S., 234) at page 255:
The system prescrbed by the Unted States n regard to both customs
dutes and nterna revenue ta es, of strngent measures not |udca, to coect
them, wth appeas to speca trbunas and suts to recover back moneys egay
e acted, was n system of correctve |ustce ntended to be compete, and
enacted under the ght beongng to the Government to prescrbe the condtons
on whch t woud sub|ect tsef to the |udgment of the courts n the coecton
of ts revenues. In the e ercse of that rght, t decares by secton 3224 that
ts offcers sha not be en|oned from coectng a ta camed to have been
un|usty asssessed, when those offcers, n the course of genera |ursdcton over
the sub|ect matter n queston, have made the assessment and cam that t
s vad.
In ths vew, t seems that secton 04 may and shoud be gven effect ac-
cordng to ts terms, n the same manner as has secton 3224, as a part of the
system of correctve |ustce, ntended to be compete, pacng the transferee
n the same category as a ta payer n so far as he Is requred to frst pay
the ta abty and thereafter seek recovery back.
The moton to dsmss w be granted.
S CTION 0 . CLOSING G M NTS.
rtce 1301: Cosng agreements reatng to III 1 107
ta abty n respect, of nterna-revenue Mm. 3 97
ta es.
greement as to fna determnaton of ta abty under secton
0 of the Revenue ct of 1928.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, I). C, anuary 9, 1929.
Coectors of Interna Revenue, Interna Revenue gents n Charge,
and Other Offcers and mpoyees Concerned:
1. ttenton s nvted to the foowng nstructons suppementng
and e panng the procedure outned n mmeograph dated uv
5, 1928 (Co. No. 3 52, R. . No. 4 3 C. . II-2 79 ), wth
respect to cosng agreements under secton 0 of the Revenue ct
of 1928.
2. greements to he secured ony where ta abty s changed.
It shoud be noted that the procedure referred to provdes that agree-
ments on orm 8 be secured ony n those cases where the ta
reported on the return or returns under consderaton s ether n-
creased or decreased. Where a return s accepted as correct, or where
no changes are made n returns forwarded from the ureau for fed
or offce audt orm 8 w not be submtted for sgnature and
cosng agreements w be entered nto ony upon the ta payer s
subsequent appcaton therefor. Revenue agents w secure agree-
ments, however, coverng a years ncuded n ther reports f a
change n abty s recommended for any year.
ppcatons for cosng agreements receved by coectors w be
forwarded to the ureau, attenton of IT: C: P-2, for preparaton of
orms 8G , uness the return nvoved s one that has been retaned
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n the coector s offce for fng, n whch event the nstructons n
paragraph 9 of Mmeograph 3 52 w be foowed.
3. Ta abty ony to be stated on orm 8 . Cosng agree-
ments secured from ta payers and forwarded to the ureau for com-
peton must correcty state the prncpa sum of ta abty for
the year or years nvoved, computed n accordance wth the nstruc-
tons n paragraph 5 of Mmeograph Co. No. 3 52, R. . No. 4 3.
The practce observed n some nstances of ncudng penaty and
nterest amounts on orm 8 or of statng thereon amounts desg-
nated as net osses shoud be mmedatey dscontnued.
4. Statute of mtatons. The abty stated on orm 8 sha
ncude ony the net ta egay assessed or assessabe, and/or co-
ectbe, and sha not ncude an amount the assessment or coecton
of whch s barred by the statute of mtatons.
). Sgnatures and evdence of authorty to sgn. Care shoud be
observed n obtanng proper sgnatures to cosng agreements and
satsfactory evdence of the authorty of the person sgnng the
agreement where such evdence s requred as provded n paragraphs
15 and 1 of Mmeograph Co. No. 3 52, R. . No. 4 3. The m-
portance of strct compance wth the provsons of ths paragraph
can not be too strongy urged.
. Nature of evdence ndvduas. n agreement e ecuted on
behaf of an ndvdua ta payer by an attorney or agent must be
accompaned by a power of attorney specfcay authorzng sad
attorney or agent to sgn the form.
7. Nature of evdence, fducares. The authorty of admnstra-
tors and e ecutors to e ecute a cosng agreement must be evdenced
by attested copes of the etters testamentary or of the order of the
court and a certfcate to the effect that such authorty remans n
fu force and effect as of the date the agreement s sgned. gree-
ments sgned by benefcares of an estate w be acceptabe f ac-
companed by a court certfcate evdencng dscharge of the admns-
trator or e ecutor and a statement showng the names and addresses
of the benefcares and the proportonate share of each n the estate.
Trustees must submt wth the sgned agreement a true copy of the
deed or decaraton of trust under whch they derve ther authorty.
If one or more trustees have been succeeded by others who sgn the
agreement, documentary evdence showng such successon must be
submtted.
8. Corporatons. Paragraph 1 of Mmeograph Co. No. 3 52
s hereby amended by revokng the frst two sentences and substtut-
ng n eu thereof the foowng:
If the ta payer s a corporaton the a|rreement sha be sgned wth the cor-
porate name foowed by the sgnature and tte of such offcer or offcers of the
corporaton as are empowered under the aws of the State n whch the corpora-
ton s ocated to sgn for the corporaton, n addton to whch the sea, f any,
of the corporaton must be aff ed. If the corporaton has no sea an affdavt
reottg such fact shoud accompany the sgned agreement. When a sgned
agreement receved ether n the fed or Washngton offces of the ureau
bears no sea and s unaccompaned by the affdavt menoned. the empoyee
handng the case shoud satsfy hmsef that the person who sgned the agree-
ment s an rffrer of the corporaton. If ths can not be done by a comparson of
the sgnature on the agreement wth sgnatures appearng on other papers n
the fes, the agreement shoud be returned to the ta payer wth the request that
the sea be aff ed or that the affdavt heren before mentoned be furnshed.
3 33 29 9
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9. Corporatons n prooess of dssouton or quuatcm, and. ds-
soved corporatons. greements n ths type of case sha be sgned
nd the authorty of the person sgnng sha be evdenced n accord-
ance wth the provsons of paragraph 1 of Mmeograph Co. No.
3 52, . . No. 4 3. certfed copy of the mnutes of the meetng
of the board of drectors at whch acton was taken reatve to ds-
souton or qudaton w be suffcent f the names of the person
desgnated to wnd up the affars of the corporaton appear theren.
n affdavt rectng that the authorty of the person sgnng the
agreement remans n fu force and effect as of the date of sgnng
must aso be furnshed.
10. Corporaton n receversMp. greements of corporatons n
the hands of a recever sha be sgned by such recever and hs author-
ty to act sha be evdenced by a certfed copy of hs appontment.
11. Corporatons: Change of name, merger, etc. Where a corpora-
ton has changed ts corporate name snce fng ts return for the
year covered by the agreement. orm 8 sha be prepared n the
name stated on the return for the sgnature and sea of the corpora-
ton under ts present name, as ndcated by the foowng e ampe:
Ths agreement, mode In dupcate -under and n pursuance of secton 08
of the Revenue ct of 1028 by and between ohn Doe Co., Inc.

Sgned ths 15th day of October, 1928.
Doe St Roe Manufacturng Co., Inc.,
ormery ohn Doe Co., Inc.,
y ohn Doe, Presdent.
TDoe Roe Manufacturng
Co., Inc. (Sea)
The agreement sha be accompaned by a certfed copy of the
mnutes of the meetng of the board of drectors at whch acton was
taken reatve to changng the corporate name.
Where a corporaton snce fng ts return for the year covered
by the agreement has been succeeded by another corporaton as the
resut of a merger. orm S sha be prepared n the same manner as
ndcated n the above e ampe, e cept that the words successor to
sha be substtuted for the word formery n the sgnature.
greements n ths type of case sha be accompaned by an aff-
davt rectng the manner n whch the assets of the corporaton
whose abty s cosed by the agreement wore acqured by the cor-
oraton sgnng the agreement form. In en of an affdavt a cerfc-
ed copy of the purchase agreement, merger agreement, or contract
of sae may be submtted.
12. Consodated retwms. speca orm 8 (see attached e -
hbt) w be used n consodated cases. If no change n affatons
s made the consodated ta abty shoud be shown on the speca
agreement form, rrespectve of the manner n whch the ta may be
assessed among the affated companes.
If the affatons have been changed a separate agreement w
be prepared on the prnted orm 8 for each company rued not
affated and the speca orm 8 w be drawn up to cover the ta
abty of the companes eft n the consodaton.
n e cepton to the rue requrng separate agreements from com-
1 anes hed nonaffated w be noted where the change n affaton
ms resuted n two or more affated groups. In ths type of case
the speca orm 8 w be prepared for each group.
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18. Preparaton of Speca orm 8 . orm 8 n ts speca
form (see attached sampe form) for use n consodated cases w
not be prnted but sha be prepared specay to meet the requre-
ments of the partcuar case. The form must be typed n dupcate
and the paper used for both the orgna and the dupcate must be
of a weght at east equa to that used for the prnted form. ach
corporaton ncuded n the affated group must be sted on the form
as partes to the agreement and space must be provded for the sg-
nature of each such corporaton so sted. The anguage of the form
must foow e acty the anguage of the sampe form attached
hereto.
14. Statement of perod covered by agreement. n accurate state-
ment of the perod or years covered by an agreement s essenta.
The cosng date of fsca years sha be stated and where a perod
other than a caendar or fsca year s nvoved both the frst and ast
dates of such perod shoud appear on the agreement form.
The foowng e ampe, whch assumes a change from a fsca year
to a caendar year, w serve as a gude to the proper statement on
orm 8 of the perod covered by an agreement:
or the fsca years ended uy 31, 1923, and uy 31, 1924, the perod
ugust 1, 1924, to December 31, 1924, and the years 1925 and 192 .
15. Correctons, erasures, etc. greement forms submtted to the
ureau for competon must be accuratey prepared and free from
erasures or correctons of any knd. If an error s made n the
preparaton of orm 8 , such form shoud be destroyed and a cor-
rect form prepared for submsson to the ta payer for sgnature.
greements shoud be typewrtten whenever such method of prepa-
raton s practcabe, both to factate ther revew n the ureau
and to nsure that the dupcate n every nstance w be an e act
copy of the orgna.
1 . Correspondence concernng the provsons of ths mmeograph
shoud refer to the number thereof and the symbos IT: : C .
. . Mres,
ctng Commssoner.
Treasury Department, U. S. Interna Revenue. orm 8 0 C .
GR M NT S TO IN L D T RMIN TION O T LI ILITY.
greement, made In dupcate under and n pursuance of secton 00 of the
Revenue ct of 1928, by and between
Name and address. State of Incorporaton.
ohn Doe Co., Wnmsport, Pa West rgna.
ohn Doe Manufacturng Co., Scran ton, Pa Deaware.
ohn Doe Mng Co., Readng, Pa Deaware.
ohn Doe Stee Processng Co., Pttsburgh, Pa Deaware.
ohn Doe Ms, Newark, N. New ersey.
Ta payers affated under the provsons of secton 240 of the Revenue ct of
, havng ther prncpa offces or paces of busness at the addresses gven
and for whch a consodated return of ncome has been ted for the
and the Commssoner of Interna Revenue
Whereas, there has been a determnaton of the ta abty of sad ta -
payers n respect of ta for the n the prncpa
snm of ( ) and
Whereas, snd ta payers hereby agree to ths determnaton and consent to
the assessment and coecton of any defcency n ta ncuded n the amount
of the prncpa ta abty so determned, together wth any penaty or
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122
nterest appcabe thereto as provded by aw, and/or to accept any abate-
ment, credt, or refund made n accordance wth such determnaton, together
wth any nterest due thereon as provded by aw.
Now, ths agreement WITN SS T , that sad ta payers and sad Comms-
soner of Interna Revenue hereby mutuay agree that the prncpa amount
of such abty so determned sha be fna and concusve f and when ths
agreement s approved by the Secretary of the Treasury or the Undersecretary.
In wtness whereof, the above partes have subscrbed ther names to these
presents n dupcate.
Sgned ths day of , 192-
sea. ohn Doe Co.
(Parent)
y
Sgned ths day of , 192-.
sea. ohn Doe Manufacturng Co.
(Subsdary.)
y
Sgned ths day of , 192-
sea. ohn Doe Mng Co.
(Subsdary.)
y
Sgned ths day of , 192-
sea. ohn Doe Stee Processng Co.
y
(Subsdary.)
Sgned ths day of , 192-
sea. ohn Doe Ms.
y
Sgned ths . day of , 192_
(Subsdary.)
Commssoner of Interna Revenue.
The above agreement has been approved by the Secretary of the Treasury
n accordance wth the provsons of secton 0 of the Revenue ct of 1928,
the approva beng speccay enumerated on
Schedue No
Dated
rtce 1301: Cosng agreements reatng to III-2 210
ta abty n respect of nterna-revenue Mm. 3711
ta es.
greement as to fna determnaton of ta abty under sec-
ton 0 of the Revenue ct of 1928.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C, ebruary 21, 1929.
Coectors of Interna Revenue., Interna Revenue gents n Charge,
and Other Offcers and mpoyees Concerned:
ffectve mmedatey a fna agreements w be competed by
addng on the reverse of the dupcate copy of orm 8 C the fo-
owng:
I have e amned the return and rec- I have revewed the return and ap-
ommend the acceptance of the agree- prove the proposed agreement
ment.
Recevng offcer. Revewng offcer.
Tte. Tte.
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I certfy that the audt of the return has been competed, that the case has
been cosed, aud that the proposed agreement s n accordance therewth.
ead, Cearng Dvson.
The offcer securng the agreement w sgn as recevng offcer and
w state hs tte n suffcent deta to dentfy the offce n whch the
agreement s receved. The empoyee responsbe for the revew of
the case and the accompanyng agreement w sgn as revewng off-
cer. In so far as possbe, n those cases n whch agreements are
obtaned n the fed, the sgnature of the recevng offcer shoud be
that of the revenue agent or deputy coector makng the e amna-
ton upon whch the agreement s predcated. In certan cases where
ths w not be possbe, due to the fact that the agreement s re-
ceved n response to a 30-day etter, and the ocaton of the agent
or deputy woud not warrant the forwardng of the agreement to
such offcer for sgnature, the person responsbe for the ssuance of
the 30-day etter shoud sgn as recevng offcer.
The recevng offcer who w sgn n cases of agreements receved
n Washngton n response to 30-day etters w be the audtor
who prepared the etter, and n cases setted by stpuaton the con-
feree w sgn. greements receved after the ssuance of 0-day
etters w be sgned as recevng offcer by the empoyee responsbe
for the handng of the case n provng secton. The recevng off-
cer who w sgn agreements prepared n the ureau n cosed cases
at the subsequent request of the ta payer w be the empoyee
responsbe for the preparaton of the agreement form.
In a cases the sgnature and tte of the empoyee responsbe for
the revew of the case and agreement w be aff ed n the space
provded.
ny nqures n regard to ths mmeograph shoud refer to the
number thereof and the symbos IT: : C .
D. . ar, Commssoner.
rtce 1301: Cosng agreements reatng to I-24r-4235
ta abty n respect of nterna-revenue Mm. 3739
ta es.
greement as to fna determnaton of ta abty under secton
0 of the Revenue ct of 1928.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C, May 25,1929.
Coectors of Interna Revenue, Interna Revenue gents n Charge,
and Oter 0offcers and |npoyees Concerned:
It s deemed nadvsabe to soct or obtan cosng agreements
( orm 80 ) n cases where there s reason to beeve that fraud has
been commtted uness and unt the case has been consdered by the
Genera Counse and t has been determned that no crmna proceed-
ngs w be nsttuted aganst the ta payer.
Paragraph 5 of Mmeograph 3 52 (C. . II-2, 79), dated uy 5,
19 28, s, therefore, hereby amended so as to read as foows:
5. Reguar procedure w be observed n advsng the ta payer of the amount
of any proposed defcency.
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124
(a) cept n the case of fraud, the notce w be accompaned by orm 8 0
propery fed out as to the secton and year of the Revenue ct and the name
and address of the ta payer, and statng as the ta abty the amount shown
on the return, ncreased or decreased by any pror defcences or overassess-
ments as ndcated by stamps on the return, pus the amount of the proposed
defcency.
ampe:
Ta reported on return 10,000. OO
ddtona ta prevousy assessed 2,000. OO
12,000. OO
Ovcrassessment aowed 4,000. OO
8,000.00
Proposed defcency 1,500.00
Labty stated on orm 8 9,500. OO
( ) If, In the course of a fed audt, t appears that the ta payer may be
guty of fraud and, therefore, may be abe to the fraud penates and possbe
crmna prosecuton, the e amnng offcer shoud not seek to secure the e ecu-
ton by the ta payer of a orm 8 . In such cases the coector or Interna
revenue agent n charge shoud not forward orm 8 to the ta payer, nor
shoud the form be forwarded to the ta payer wth a 30-day notce of defcency
n any case n whch crmna prosecuton may be contempated. In a such
cases, orm 80 w be furnshed the ta payer ony after t has been deter-
mned that no crmna proceedngs w be nsttuted.
. . Mkes,
ctng Commssoner.
rtce 1301: Cosng agreements reatng to TII-21-4211
ta abty n respect of nterna-revenue Mm. 3728
ta es.
greement as to fna determnaton of ta abty under secton
0 of the Revenue ct of 1928.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C, May , 1929.
Coectors of Interna Revenue, Interna Revenue gents n Charge,
and Other Offcers and mpoyees Concerned:
1. orm 8G , greement as to fna determnaton of ta abty,
revsed ebruary, 1929, w be furnshed on a requstons receved
after ths date. The form has been materay changed to adapt t
for use wth wndow enveopes and to separate the agreement as to
abty from the consent to mmedate assessment and coecton of
a defcency, both of whch have heretofore been ncuded n the
thrd paragraph of the agreement form. In the present revson the
consent provson referred to appears at the bottom of the form as a
Waver of restrcton on assessment and coecton of defcency,
ths arrangement permttng the use of one form for both purposes
where a ta payer agrees to the fndngs of the e amnng offcer and
desres to fnay cose hs case by agreement under secton 0 of the
Revenue ct of 1928. In the preparaton and use of the revsed
form, the foowng nstructons w be observed n addton to those
ssued n Mmeograph 3 97, dated anuary 9, 1929 (see on page 118).
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125
0 , rt. 1301.
2. orm 8 , revsed, w be used n a cases where the ta payer
consents to the assessment and coecton of a proposed defcency and
agrees that the determnaton made by the e amnng offcer sha be
fna and concusve. In such cases, the ta payer s sgnature w be
secured to the agreement and to the waver on both the orgna and
dupcate of the form.
3. Where a ta payer consents to mmedate assessment and coec-
ton of a proposed defcency but docs not desre to enter nto an
agreement under secton 0 of the Revenue ct of 1928, orm 8 ,
revsed, w not be used. Ths s because the waver prnted on the
form s so worded as to be approprate ony where the ta payer aso
enters nto an agreement as to fna determnaton of ta abty.
ccordngy, n cases referred to n ths paragraph the consent to
assessment and coecton of a defcency w be obtaned by revenue
agents on orm 870 and by coectors on orm 903. The nvest-
fatng offcer s report n ts type of case w state the reason ascrbed
y the ta payer for hs refusa to e ecute orm 8 .
4. Where fna agreements are secured n cases where the report
of the nvestgatng offcer dscoses an overassessment ony, the sg-
nature of the ta payer on the waver porton of orm 8 , revsed,
s not necessary and shoud not be obtaned.
5. orm 8 , revsed, s desgned to permt the use of wndow
enveopes n mang agreements to ta payers after ther approva
by the Secretary of the Treasury. In order that ths purpose may
not be defeated, the person preparng the form shoud be carefu
to pace the name and address of the ta payer on the nes n the
space provded. The frst ne w be used for the name, the second
ne for the street addres:, and the thrd ne for the cty and State.
. ttenton s nvted to Mm. 3711, dated ebruary 21, 1929
(see on page 122), whch drects that agreements be competed by a
certfcate on the reverse of the dupcate orm 8 . It s mpera-
tve that ths certfcate be propery sgned, as provded n the
mmeograph mentoned, on every agreement submtted to the u-
reau. Sgnatures shoud be n nk the use of crayons and rubber
stamps shoud be strcty avoded. The sgnatures of two dfferent
offcers are essenta one empoyee shoud not sgn both as recevng
offcer and revewng offcer. In every nstance the tte of the
offcer sgnng the certfcate shoud be stated. Under no crcum-
stances shoud there be any ateraton n the wordng of the cer-
tfcate whch s prnted on orm 8 , revsed, as t appears n Mm.
3711.
7. Paragraph 2 of Mm. 3 97, supra, captoned greements to be
secured ony where ta abty s changed, s hereby modfed to
e cept from ts provsons cases n whch the prncpa amount of
abty for the year under consderaton e ceeds 50,000. In such
cases, e amnng offcers w submt orms 8 for ta payers sgna-
tures at the competon of nvestgatons dscosng no change n ta
abty.
8. Correspondence concernng the provsons of ths mmeograph
shoud refer to the number thereof and to the symbos IT: : C .
D. . ar, Commssoner.
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07.
12
S CTION 07. CT O PIR TION O P RIOD
O LIMIT TION G INST UNIT D ST T S.
Secton 07. III-5-4088
G. C. M. 5 01
R NU CT O 1028.
waver e ecuted by a ta payer March 8, 192 , after the statute
of mtatons upon assessment had run and after the date of the
enactment of the Revenue ct of 192 , s Ineffectve for the purpose
of e tendng (he perod of mtaton for assessment. The defcency
In ta assessed on the bass of the waver was therefore errone-
ousy assessed, and the amount coected on account of such assess-
ment consttutes an overpayment under the provsons of secton 07
of the Revenue ct of 1928.
n opnon s requested reatve to the case of the M Company,
wheren the ta payer wthn the appcabe perod of mtaton fed
a cam for refund of doars coected on account of a defcency
n ta assessed on March 19, 1927. The assessment was made upon
the bass of a waver e ecuted March 8, 192 , after the statute of
mtatons upon assessment had run and after the date of the enact-
ment of the Revenue ct of 192 .
The ta payer contends that the waver s nvad, for the reason
that under the provsons of secton 110 (a) of the Revenue ct of
192 the abty for a defcency n ta for the year under consdera-
ton was e tngushed pror to the date the waver was e ecuted.
It s provded n that secton that the bar of the statute of mta-
tons 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. In vew of the e press wordng of the statute, t s the
opnon of ths offce that wavers e ecuted after the statute of mta-
tons had run and durng the tme that the provsons of secton
110 (a) of the Revenue ct of 192 were n force are nvad for
ether assessment or coecton.
ccordngy, the waver e ecuted by the ta payer n the nstant
case was neffectve for the purpose of e tendng the statutory perod
of mtaton for assessment. The defcency n ta assessed on the
bass of the waver was therefore erroneousy assessed, and the
doars coected on account of such assessment consttutes an over-
payment under the provsons of secton 07 of the Revenue ct of
1928 and shoud be refunded.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
Secton 07.
revenue act op 1928.
Overpayment credted aganst outawed addtona ta for pror
year. (See G. C. M. 5 5, page 130.)
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( 07.
Secton 07. III-8-4113
G. C. M. 5739
R NU CT OP 1928.
so-caed cam for overassessment fed for the years 191
and 191S. n whch the ta payer made appcaton for the credt
of a porton of uu aeged overpayment of ncome ta es for those
years aganst an addtona ncome ta assessed for 1917, can not
be consdered as a waver e tendng the perod for coecton of the
addtona ta for 1917. ny payment on aecouut of 1917 ta es
made afrer e praton of the appcabe statutory perod consttutes
an overpayment wthn the meanng of secton (107 of the Revenue
ct of 1 )28.
n opnon t- requested reatve to the vadty of the coecton
from the M Company of an addtona ncome ta for the year 1917.
The facts of the case are as foows:
1. The ta payer company fed ts return for the ta abe year 1917
on pr 1, 1918.
2. ssessment of the addtona ncome ta for 1917 was made on
March 20, 1923.
3. The ta payer company was dssoved as of anuary , 1921.
t the tme of the dssouton certan funds were paced n the hands
of a trustee to cover any addtona ncome ta es found to be due
from the company.
4. On September 27, 1923, the ta payer fed a so-caed cam
for overassessment for the years 191 and 1918, and n the cam
specfcay drected that a porton of an aeged overpayment of
ncome ta es for those years be apped as a credt aganst the add-
tona ncome ta assessed for 1917. The cam for overassessment
was dsaowed.
5. Demand was made on the trustee and on the stockhoders of the
dssoved corporaton for payment of the addtona 1917 ta . Pay-
ment was refused on the ground that the statutory perod for co-
ecton had e pred. bond, however, was gven.
. On or about anuary , 1925, the amount of the ta was pad
under protest.
7. No waver or cam n abatement was ever fed wth respect to
1917 ta es.
The so-caed cam for overassessment, mentoned above, was
nothng more than a cam for credt for the years 191 and 1918,
wth a request that part of an aeged overpayment of ncome
ta es for those years be apped as a credt aganst the unpad 1917
assessment.
Under the provsons of secton 250(d) of the Revenue ct of 1921,
the perod of mtaton for coecton of the nstant ta e pred on
pr 1. 1923, uness the tme was e tended by a waver. No waver
was fed by ta payer, uness the request that part of an aeged over-
payment of ncome ta es for 191 and 1918 be apped as a credt
aganst the 1917 ta es can be deemed to be a waver by the ta payer
of ts rghts under the statute. The words of the statute are uness
both the Commssoner and the ta payer consent n wrtng to a ater
determnaton, assessment, and coecton of the ta . The ta payer
made appcaton for the aowance of a credt, whch was refused.
Such appcaton can not be taken or construed to be anythng other
than t purported to be, namey, a request that an amount camed to
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07.
128
be due to the ta payer from the Government shoud, f aowed, be
apped, n part, as a credt aganst the 1917 ta . There was no con-
sent to a coecton of the addtona 1917 ta after the e praton
of the fve-year perod, or to a coecton by any other means than
by the appcaton of a credt, whch was refused. The nstant case
s, n some respects, anaogous to that of Natona Too Go. v. Rout-
zahn (28 ed. (2d), 914). In that case the court sad, n part:
I do not thnk that the ta payer, by camng credt for ta es due for the
years 191 and 1917 aganst an overpayment for the year 1918, as an nduce-
ment to the coector not to dstran, consttuted a waver of the statute of
mtatons nor an estoppe from camng the beneft of that statute. It coud
hardy be sad that one entted to the beneft of a statute of mtatons may
be hed to have waved t by anythng short of an e press or mped ntenton
to do so. The ta payer s consent to a ater appcaton of overassessment for
1918 to the payment of ta es for the years 191 and 1917 created nether an
e press nor mped waver of the statutory mtaton. Such an agreement
was not, n my |udgment, a vountary foregong of the tme f ed by aw for
coecton of the ta .
In vew of the foregong, ths offce s of the opnon that the co-
ecton n the nstant case of the addtona ncome ta for 1917 was
made after the e praton of the statutory perod propery appcabe
thereto, and that the amount coected consttuted an overpayment
wthn the meanng of secton 07 of the Revenue ct of 1928.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
Secton 07. III-10-4131
G. C. M. 57 4
R NU CT OP 1928.
Ta payer s return for 1918 was fed on March 20, 1919. No
waver was fed, and an assessment of addtona ta was made
n ebruary, 1924. On March 15. 1924, a cam n abatement was
fed, whch was re|ected on November 14, 1924. The addtona
ta was coected party on ugust 2, 192 , aud party on anuary
29, 1927.
Ta payer s return for 1919 was fed on March 13, 1920. No
waver was fed, and an assessment of addtona ta for that
perod was made n anuary, 1925. cam n abatement was
fed on ebruary 10. 1925, whch was re|ected October 19, 1925.
The addtona ta was coected n anuary, 192 .
Ta payer ded November 13, 1919. On October 21, 1924, hs
e ecutor requested a cosng of the returns of decedent n accord-
ance wth the provsons of secton 277 (a)3 of the ct of 1924.
ed, payment of the addtona ta es assessed for the years
1918 and 1919 does not come wthn the scope of secton 07 of
the Revenue ct of 1928.
n opnon s requested reatve to the appcabty of sectons
07 and 11 of the Revenue ct of 1928 to certan cams for refund
fed n the case of by the M Company, the e ecutor of s estate.
The facts are as foows:
ded November 13, 1919. On October 21, 1924, hs e ecutor re-
quested a cosng of the returns of the decedent for the caendar years
1918 and 1919 n accordance wth the provsons of secton 277(a)3
of the ct of 1924.
s return for 1918 was fed on March 20, 1919. No waver was
fed for that year. n assessment of addtona ta was made n
ebruary, 1924. On March 15, 1924, a cam n abatement was fed,
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129
5 07.
whch was re|ected on November 14, 1924. The addtona ta was
coected party on ugust 2, 192 , and party on anuary 29, 1927.
s return for 1919 was fed by hs e ecutor on March 13, 1920.
No waver was fed for that year. n assessment of addtona ta
for that perod was made n anuary, 1925. cam n abatement
was fed on ebruary 10, 1925, whch was re|ected October 19, 1925.
The addtona ta was coected n anuary, 192 .
Under these facts the queston s presented whether the case as t
reates to 1918 fas wthn the scope of secton G of the Revenue
ct of 1928 or whether the addtona ta for 1918 represents an over-
payment as defned by secton 07 of the Revenue ct of 1928, nas-
much as t was not coected wthn the 1-year perod provded n
secton 277(a)3 of the Revenue ct of 1924 or the 5-year perod
provded n secton 250(d) of the Revenue ct of 1921.
The queston s aso presented whether or not the ta n queston
fo 1919 represents an overpayment as defned by secton 07 of the
Revenue ct of 1928, n vew of the fact that athough assessment
was made wthn the 1-year perod from the date of request for a
cosng n accordance wth secton 277(a)3, coecton was not made
wthn that perod.
These questons w be dscussed n the order presented.
1. s no waver was fed for 1918, the 5-year perod for assessment
and coecton provded by secton 250(d) of the Revenue ct of 1921
e pred on March 20, 1924. s ths was before the 1924 ct became
a aw, secton 277 (a)3 of the 1924 ct does not affect the perod
wthn whch coecton coud be made. The fng of a cam n
abatement n and of tsef does not suspend the runnng of the statute
of mtatons. Consequenty the addtona ta for 1918, coected n
192 and 1927, was coected after the tme wthn whch coecton
coud awfuy be made under the statute, and the payment of such
ta after the e praton of the perod of mtaton propery app-
cabe thereto woud be consdered as an overpayment wthn the
ntendment of secton 07 of the ct of 1928, were t not for the pro-
vsons of secton 11 of the 1928 ct. Ths secton reads as foows:
If any nterna-revenue ta (or any nterest, penaty, addtona amount, or
addton to such ta ) was, wthn the perod of mtaton propery appcabe
thereto, assessed pror to une 2, 1924, and f a cam n abatement was fed,
wt 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 enactment
of ths ct) sha not be consdered as an overpayment under the provsons
of secton 07, reatng to payments made after the e praton of the perod
of mtaton on assessment and coecton.
Inasmuch as the assessment was made before une 2, 1924, and a
cam n abatement was fed, and the coecton of the ta was thus
stayed, the payment of the ta after the e praton of the perod of
mtaton can not be consdered as an overpayment under the pro-
vsons of sad secton 07. Ths offce has e pressed the opnon, n
Genera Counse s Memorandum 4 39 (C. . II-2, 88), that f
enforcement of coecton was wthhed or deayed whe the cam n
abatement was pendng before the ureau, there was a stay of co-
ecton wthn the contempaton of secton 11. It foows that co-
ecton of the ta for 1918. now camed as refundabe, was stayed by
reason of the fng of the cam n abatement. Ths offce s there-
fore of the opnon, n vew of the provsons of secton 11, supra,
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1 11.
130
that payment of the addtona ta for 1918 was not an overpayment
wthn the ntendment of secton 07 of the Revenue ct of 1928.
2. The addtona ta for 1919 was assessed n anuary, 1925. s
the return was fed March 13, 1920, the assessment was propery
made wthn the 5-year perod of mtaton. Under the provsons
of secton 250(d) of the 1921 ct, assessment and coecton coud be
made at any tme wthn fve years from the tme when the return
was fed. Ths perod had not e pred when the ct of 1924 was
enacted. y secton 277(a)3 of the atter ct the coecton by a
proceedng n court was mted to the shorter of two perods, namey,
the 5-year perod or a perod of one year datng from the tme when
the e ecutor requests that such coecton be made. oth perods
had e pred when coecton of the addtona 1919 ta was made n
anuary, 192 . Secton 277 (a)3, t w be noted, reates ony to
coecton by a proceedng n court. There remaned another method
of coecton, by way of dstrant. The Supreme Court, n the case
of owers v. New York bany Lghterage Co. (273 U. S.. 34 ,
T. D. 4009, C. . I-1, 2 8), sad that there are two methods of
coectng ta , one by sut, a |udca proceedng, and the other by
dstrant, an e ecutve proceedng. The atter method of coecton
was not affected by the provsons of secton 277(a)3 of the 1924
ct. Inasmuch as the assessment was propery and tmey made
subsequent to the enactment of the Revenue ct of 1924, the Gov-
ernment had, under the provsons of secton 278(d) of that ct, s
years from the date of the assessment wthn whch to make coec-
ton of the ta by dstrant. The ta was pad n anuary, 192 , or
we wthn the -year perod. The payment, therefore, does not
come wthn the scope of secton 07 of the ct of 1928.
C. M. Cbarest,
Genera Counse, ureau of Interna Revenue.
S CTION 11. COLL CTIONS ST Y D Y
CL IM IN T M NT.
Secton 11. III-5-4089
( so Secton 07.) G. C. M. 50 5
R NU CT O 1928.
Where an abatement cam accompaned by a bond s fed after
the e praton of the statutory perod of mtaton on coecton,
such cam and bond can not be hed to stay coecton so that the
case w fa wthn the scope of secton 11.
The credtng of an overpayment for 1920 aganst an addtona
ta for a pror year at a tme when coecton of such addtona
ta was barred by the statute of mtatons s vod under secton
09.
Where an abatement cam accompaned by a bond s fed after
the coecton of an outstandng ta s barred, and the bond s
thereafter reeased by the Government, sut may not be nsttuted
on the bond aganst the surety company.
The ta payer fed an ncome ta return for Ihe year 1917 on
May 1, 1918 on anuary 19, 1923, a waver was fed whch e tended
the statutory perod of mtaton on assessment and coecton of
ta es for the year 1917 to anuary 19, 1924 on anuary 15, 19 4, an
addtona ta was assessed for the year 1917 and on ebruary 2,
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131
11.
1924, the ta payer fed a cam n abatement for the fu amount of
the addtona ta , the cam beng accompaned by a bond.
On ugust 18, 1924, the ta payer was advsed that hs cam n
abatement for the year 1917 woud be aowed n part. The baance
of the addtona ta assessed anuary 15, 1924, was taken care of by
appyng to the account a part of an overpayment made by the ta -
payer on account of ta es for the year 1920. The schedue of over-
assessment upon whch ths tem for 1920 appeared was sgned by the
Commssoner on March 13, 192 . The bond was reeased by the
Government on May 17, 192 .
The opnon of ths offce s requested upon the foowng questons:
(1) Whether, where an abatement cam accompaned by a bond s
fed after the e praton of the statutory perod of mtaton on
coecton, such cam and bond may be hed to stay coecton so
that the case w fa wthn the scope of secton 11 of the Revenue
ct of 1928.
(2) Whether the fact that the abatement cam fed n ths case
was accompaned by a bond, even though such abatement cam and
bond were fed after the e praton of the statutory perod of mta-
ton on coecton, had the effect of takng the credt out of the cass
of credts whch s contempated by secton 09(a) of the Revenue
ct of 1928.
(3) Whether sut may be nsttuted by the Government aganst the
surety company on the bond n the event t s determned that the
credt referred to s vod under secton 09.
The questons w be answered n the order n whch they are set
out above.
(1) Secton 11 of the Revenue ct of 1928 provdes that f a ta
was propery assessed pror to une 2, 1924, and f a cam n abate-
ment 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 enactment of the Revenue ct of 1928)
sha not be consdered as an overpayment under the provsons of
secton 07, reatng to payments made after the e praton of the
erod of mtaton on assessment and coecton. Under the facts
erenabove stated, f no cam n abatement had been fed but pay-
ment of the addtona ta had been made on ebruary 2, 1924, un-
doubtedy such payment woud have consttuted an overpayment of
ta under secton 07. The mere fng of a cam n abatement does
not satsfy the provsons of secton 11. Ths s true whether the
a tmey assessment was made pror to une 2, 1924, and f coecton
was stayed upon the fng of a cam n abatement. Uness coecton
was stayed, wthn the meanng of secton 11, the payment of the
ta after the e praton of the perod of mtaton upon coe ton
must be treated as an overpayment. Where coecton of a ta s
barred pror to the fng of a cam n abatement the ega rght to
enforce coecton of the ta s not stayed as the resut of the cam
beng fed. (See G. C. M. 4879, C. . II-2, 90.)
(2) Secton 009(a) of the Revenue ct of 1928 provdes wth
respect to a credt aganst a barred defcency as foows:
ny credt aganst a abty n respect of any ta abe year sha be vod
f any payment In respect of such abty woud be consdered an overpayment
under secton G07.
Secton 11 s appcabe ony f
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5 11.
132
Secton 07, whch deas wth the effect of the e praton of the
perod of mtaton aganst the Unted States, provdes that any
ta assessed or pad 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
fded wthn the perod of mtaton for fng such cam.
s above stated, the perod of mtaton on assessment and co-
ecton of ta es due by the ta payer for the year 1917, as e tended
by waver, e pred on anuary 19, 1924. There was a tmey assess-
ment of an addtona ta on anuary 15, 1924, but coecton thereof
was not made pror to the e praton of the statutory perod. In
March, 192 , more than two years after the e praton of the perod
of mtaton upon coecton of ta es due for 1917, a part of an
overpayment for the year 1920 was apped aganst the outstandng
baance of the addtona ta assessed for the year 1917. Ths case
not fang wthn the provsons of secton 11, referred to above,
t foows that the appcaton or credtng of the overpayment for
the year 1920 aganst the addtona ta for 1917 at a tme when
coecton of the addtona ta was barred by the statute of mta-
tons was vod under secton 09(a), quoted above. It havng been
determned that the appcaton of the overpayment for 1920 aganst
the addtona ta for 1917 was erroneous under the Revenue ct
of 1928, proper ad|ustment of the ta payer s account shoud be made
n accordance wth such determnaton.
(- 5) The fna queston to be answered s whether sut may be
nsttuted by the Government aganst the surety company on the
bond. The addtona ta n the nstant case was not actuay pad
by the ta payer after the e praton of the statutory perod of m-
taton nor has any reance been paced upon the bond. part of an
overpayment for 1920 was apped aganst the addtona ta for
1917 at a tme when coecton of the addtona ta was barred, and
shorty thereafter the bond whch had been gven by the ta payer
was reeased. Snce the coecton of the outstandng ta for 1917
was barred when the bond was fed, and snce the bond was reeased
by the Government n May, 192 , t s the opnon of ths offce that
sut may not now be nsttuted by the Government aganst the surety
company.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
Secton 11. III-23-422
G. C. M. 308
R NU CT O 1028.
The ta payer n ebruary, 1923, fed a bref protestng a pro-
posed assessment of addtona tu and askng for speca assess-
ment. In March, 1923, t fed a document prepared on abatement
orm 843, referrng to the bref and aso protestng the proposed
assessment. The addtona ta was assessed n March, 1924,
wthn the perod of mtaton propery appcabe thereto.
ed, that the document fed was not an abatement cam, and
therefore secton 11 of the Revenue ct of 1928 s not appcabe.
n opnon s requested as to whether secton 11 of the Revenue
ct of 1928 s appcabe under the foowng crcumstances:
On anuary , 1923| the Commssoner sent to the ta payer a
etter proposng an addtona assessment of doars for tne year
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133
.
1917 and stated theren that, n accordance wth secton 250(d) of
the Revenue ct of 1921, the ta payer was gven 30 days wthn
whch to fe an appea and to show cause why the defcency proposed
shoud not be pad, but that no abatement cam by the ta payer
woud be entertaned. On ebruary , 1923, the ta payer fed a
bref protestng ths proposed assessment and askng for speca
assessment. On March , 1923, a document on abatement orm 843
referrng to the bref and aso protestng the proposed assessment
was fed. The addtona ta was not assessed unt amost a year
ater, on March , 1924, but was assessed wthn the perod of mta-
ton propery appcabe thereto.
The queston to be decded s whether the protest aganst the pro-
posed assessment of ta fed March , 1923, n con|uncton wth
the bref theretofore fed on ebruary , 1923, was an abatement
cam. If ths -queston s answered n the negatve, then the pay-
ment of the ta made on uy 10, 1924, after the perod of mtaton
on coecton thereof had e pred, consttutes an overpayment under
secton 07 of the 1928 Revenue ct and w have to be refunded.
Secton 11 of the Revenue ct of 1028 provdes as foows:
If any Interna-revenue ta (or any nterest, penaty, addtona amount, or
addton to such ta ) was, wthn the perod of mtaton propery appcabe
thereto, assessed pror to une 2, 1824, and f a cam n abatement was fed,
wth r wthout .bond, and tf the coecton of tny part thereof was stayed, then
the payment of such part (made before or wthn owe year after the enactment
of ths ct) Sha not be consdered as an overpayment under the provsons
of secton 07, reatng to payments made after the e praton of the perod of
mtaton on assessment and coecton.
Secton 250(d) of the Revenue ct of 1921 provdes n part as
foows:
If upon e amnaton of a return made under the Revenue ct of 1 1C, the
Revenue ct of 1917, the Revenue ct of 1918, or ths ct, a ta or a defcency
In tu s dscovered, the ta payer sha be notfed thereof wnd gven a perod of
not eas than 30 days after such notce s sent by regstered ma n whch So
ae an appea and show cause or reason why the ta or defcency shoud not
be pad. Opportunty for hearng sha be granted and u ana decson thereon
sha be made as qucky as practcabe. ny ta or defcency n ta then
determned to be due sha be assessed and pod, together wth the penaty nnd
nterest, f any, appcabe thereto, wthn 10 days after notce and demand by
the coector as herenafter provded, and n such cases no cUru n a tenent
of the amount so assessed sha be entertaned:
rtce 100 of Reguatons 2 provdes n part as foows:
Where a ta payer has been gven an opportunty to apea and has not done
so, as above set forth, and an assessment has beea made, or where a ta payer
has appeaed and an assessment n accordance wth the fna decson on such
appea has been made, no cam n abatement of the assessment sha be enter-
taned.
Snce the ta payer was gven an opportunty to appea front the
proposed assessment by the etter of anuary , 1923. t coud not
under the provsons of the statute |ust quoted have propery fed an
abatement cam. When ths fact s consdered as we as the fact
that the so-caed cam was fed n con|uncton wth the bref
aready on fe and before any addtona ta ad been assessed, t
becomes apparent that the document fed was not an abatement
cam wthn the meanng of the statute but merey a protest aganst
a proposed assessment. It s aso to be noted that the Commssoner,
on October , 1923, and pror to the makng of the addtona assess-
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13.
134
ment, advsed the ta payer that ts appcaton for speca assessment
had been aowed and resuted n an addtona ta ess than that
orgnay proposed. Ths offce s of the opnon, therefore, that
the document fed was not an abatement cam, and that secton 11
s not appcabe under the facts stated.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
S CTION 13. LI N O T S.
Secton 13. III-1-405
G. C. M. 5432
R NU CT O 1928 ND PRIOR R NU CTS.
notce of en fed by a coector wth the proper offca covers
a the property and rghts of property, whether rea or persona,
beongng to the denquent ta payer, and operates as a en on
bank deposts of. a ta payer and on debts due a ta payer though a
specfc notce of the en has not been served on the bank or on
the debtors of the denquent ta payer.
h opnon s requested as to whether a notce of an ncome ta
en duy fed and recorded operates as a en on bank deposts of
the ta payer and on debts due to the ta payer when specfc notce
of the en has not been served on the bank or on the debtors.
Under the provsons of secton 318 , Revsed Statutes, as amended
by secton 13 of the Revenue ct of 1928, an ncome ta en covers
a property and rghts to property, whether rea or persona,
beongng to the denquent ta payer. Ths same provson was con-
taned n secton 318 n ts orgna form and aso n ts amended
forms as appearng n the ct of March 4, 1913 (37 Stat., 101 ), and
n the ct of ebruary 2 , 1925 (43 Stat., 994), so that an outstand-
ng ncome ta en, whether notce thereof was fed before or after
the enactment of the Revenue ct of 1928, must be regarded as
coverng a property and rghts to property of the denquent
ta payer.
The provsons of secton 318 , Revsed Statutes (n ts orgna
and ts amended forms), have often receved |udca constructon, as,
for e ampe, n the foowng cases: Osterberg v. Unted Trust Co.
(93 U. 8., 424), Unted Mates v. Snyder (149 U. S., 210), Unted
States v. aufman (2 7 U. S., 408), Unted States v. en (14 ed.,
2 3), Unted States v. Curry (201 ed., 371), In re Wyey Co. (292
ed., 900), eyward v. Unted States (2 ed. (2d), 407), In re at-
more Pear omny Co. (5 ed. (2d), 553), and Sherwood v. Sher-
wood (5 ed. (2d) , 991).
The cted cases as a whoe fuy sustan the vadty of the Gov-
ernment s en for ta upon the property and rghts to property of
a denquent ta payer and whe those cases ad|udcated snce March
4, 1913 (when secton 318 , Revsed Statutes, was frst amended to
requre the fng of a notce of the ta en to make the same vad
as aganst mortgagees, purchasers, and |udgment credtors), do not
specfcay pass upon the queston submtted, they recognze, by
mpcaton at east, the vadty of ta ens notces of whch were
fed n the manner prescrbed by the statute.
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135
13.
It w be noted from a readng of secton 318 , Revsed Statutes,
as amended by the ct of ebruary 2 , 1925 (n whch amended
form the phraseoogy of the 1913 form was preserved n totdem
verbs, there beng nserted n approprate paces n the second
provso thereof a desgnaton of certan oca offcers of the States
of Connectcut, Rhode Isand, and ermont as among those wth
whom notce of ta en mght be fed), that a coector was under
no obgaton to furnsh a copy of the notce of en to any bank
or debtor of the denquent ta payer. The coector s duty under
the aw was performed fuy when he fed the notce of the en
n the offce of the pubc offca authorzed under the statute to
receve the same for fng. The dentca stuaton s e stent wth
respect to notces of en fed snce the enactment of the Revenue
ct of 1928. s an admnstratve pocy based on a desre the
better to protect the nterests of the Unted States and to enabe
depostares (such as banks, trust companes, and other hoders of
assets or credts of denquent ta payers ) to become advsed of the
e stence of ta ens, coectors have been permtted to furnsh
depostares wth copes of the notce n e ceptona cases. These
copes are not furnshed n a cases. Indeed, they coud not be,
for n a great ma|orty of cases where notces of en are fed the
e act ocaton of the ta payers property s unknown to the coector
fng the notces. Nether s the copy, whenever furnshed to a
prvate person (whether corporate or ndvdua, as dstngushed
from the pubc offcer desgnated by aw as the proper recpent of
the orgna notce), furnshed because of any ega rght to receve
the same. It s ntended merey as an nformatve document respect-
ng the cam of the Unted States upon the property and rghts to
property of the denquent ta payer. The queston submtted for
opnon must therefore be answered n the affrmatve.
In ths, connecton reference s made to another process n the n-
terna revenue practce whch often s confused wt the fng of
notces of en. The process of dstrant authorzed by secton 3187,
Revsed Statutes, et seq., s one of the processes by whch an e stng
en for ta es may be enforced. Under secton 3187, as amended by
secton 101 of the Revenue ct of 1924, a bank account s sub|ect
to dstrant. Coectors are drected when evyng upon a smpe
contract debt, such as a bank or other depost, to attach to the
orgna notfcaton form, addressed to the depostary, a copy of the
warrant of dstrant and of the notce of en. Whenever dstrant
of a bank account s sought to be made, the depostor s entted to a
copy of the notce of en. In connecton wth the process of ds-
trant, attenton s drected to secton 1114(e) of the Revenue ct
of 192 , whch ndcates ceary the duty of a hoders of assets
beongng to a denquent ta payer, or n whch he. has ega rghts,
to surrender the same to the coector upon the servce of a dstrant
warrant n order to avod the abty mposed by ths secton upon
one who decnes to honor the coector s evy.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
3133 29 10
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5 14.
13
S CTION 14. INT R ST ON O RP YM NTS.
Secton 14. III-15-41 9
G. C. M. 5835
R NU CT O 1928.
Where an nstament of ta s overpad and the overpayment
s credted aganst the unpad nstaments, eavng outstandng a
part of the tota ta assessed for the year, there has been no over-
payment n respect of any nterna-revenue ta wthn the mean-
ng of secton G14 of the Revenue ct of 1928 upon whch nterest
s aowabe.
n opnon s requested reatve to the aowance of nterest under
secton 14 of the Revenue ct of 1928 upon an overpayment by the
M Lfe Insurance Co. of the frst two nstaments of ts ncome ta
for the year 1927.
It appears that on March 15, 1928, the ta payer fed ts return of
ncome for the year 1927, showng a tota ta due of 28(te doars.
The ta payer eected to pay ths ta by quartery nstaments and
pad the frst nstament of 70a doars at the tme of fng the re-
turn. On une 4, 1928, the Supreme Court of the Unted States ren-
dered a decson n the case of Natona Lfe Insurance Co. v. Unted
States (277 U. S., 508 T. D. 420 , C. . II-2, 29 ), n whch t
was hed that fe nsurance companes are entted to a deducton of 4
per cent of the mean of the reserve funds specfed n secton 245(a)2
of the Revenue ct of 1921 wthout dmnuton on account of nterest
from ta -e empt securtes, and that the ct was nvad n so far as
t undertook to abate the 4 per cent deducton by the amount of
nterest receved from ta -e empt securtes. Reyng upon ths dec-
son, the ta payer fed an amended ncome ta return for the year
1927 on une 15, 1928, showng a tota ta due of 120a doars, or
quartery nstaments of 30a doars each. payment havng been
made on March 15, 1928, n the sum of 70a doars on the bass of the
orgna return, the baance of 40a doars, whch remaned after
deductng from the amount pad the frst nstament of 30a- doars
due on March 15, 1928, under the amended return, was credted
aganst the second and thrd nstaments cacuated to be due under
the amended return. Ths sum of 40a doars satsfed the second
nstament of 30a doars due on une 15, 1928, and eft a baance
of 10a doars to be apped aganst the thrd nstament due on
September 15, 1928.
The ta payer s camng nterest n the sum of .75a doars, com-
puted as foows: The amount of . 0a: doars, representng nterest
at the rate of per cent per annum on the sum of 40a doars from
March 15, 1928, to une 15, 1928, and the amount of .15a doars,
representng nterest on the sum of 10. doars from une 15, 1928,
to September 15, 1928.
Wth respect to nterest on overpayments, secton 14 of the
Revenue ct of 1928 provdes n part as foows:
(a) Interest sha be aowed and pad upon any overpayment n respect
of any nterna-revenue ta . at the rate of C per centum per annum, as
foows:
(1) In the case of a credt, from the date of the overpayment to the due
da e of the amount aganst whch the credt s taken. .
The queston to be determned s whether nterest s aowabe upon
an overpayment of an nstament of ta where such overpayment
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137
14.
s credted aganst the remanng unpad nstaments and s not n
e cess of the entre ta assessed for the year n queston.
Secton 321 of the Revenue ct of 1928 provdes as foows:
If the ta payer has pad as an nstament of the ta more than the amount
determned to be the correct amount of such nstament, the overpayment
sha be credted aganst the unpad nstaments, f any. If the amount
aready pad, whether or not on the bass of nstaments, e ceeds the amount
determned to be the correct amount of the ta , the overpayment sha be
credted or refunded as provded n secton 322.
Secton 322 provdes that where there has been an overpayment
of any ncome ta , the amount of such overpayment sha be credted
aganst any ncome, war-profts, or e cess-profts ta or nstament
thereof then due from the ta payer, and any baance sha be re-
funded mmedatey to the ta payer. s stated above, the e cess
payment of the frst nstament of ncome ta for 1927 made by the
ta payer n the nstant case was apped aganst the second and
thrd nstaments, and the amount so pad does not e ceed the
amount estmated to be the tota amount of the ta due under the
amended return. Ths procedure s n accordance wth the prov-
sons of secton 321 of the Revenue ct of 1928, quoted above. It s
to e noted that there s no baance to be refunded to the ta payer
under the provsons of secton 322, whch secton covers Refunds
and credts.
The Supreme Court of the Unted States, n the case of ar v.
Unted States e re. rkenstock et a. (271 U. S., 348, T. D. 388 ,
C. . -, 142), hed that where a ta s pad n quartery nsta-
ments, nterest s payabe under the Revenue ct of 1924 ony on the
e cess over the tota amount of the ta . Secton 1019 of the Revenue
ct of 1924 provdes that upon the aowance of a credt or refund
of any nterna-revenue ta erroneousy or egay assessed or co-
ected nterest sha be aowed on the amount of such credt or re-
fund as set out theren. Secton 14 of the Revenue ct of 1928 pro-
vdes that nterest sha be aowed and pad upon any overpayment
n respect of any nterna-revenue ta . It s camed by the ta -
payer n ths case that the dfference n the wordng of these two sec-
tons makes nappcabe to the nstant case the decson of the
Supreme Court n the case of ar v. rkenstock, cted above, and
that nasmuch as secton 321 of the Revenue ct of 1928 refers spe-
cfcay to an overpayment of an nstament, nterest may be a-
owed on such an overpayment under secton 14.
Ths offce s of the opnon that the prncpes enuncated by the
Supreme Court wth reference to the appcaton of secton 1019 of the
Revenue ct of 1924 appy wth equa force to secton 14 of the
Revenue ct of 1928. Under secton 5 of the Revenue ct of 1928,
a ta payer may eect to pay the ta n nstaments, but f a ta payer
antcpates the quartery nstaments and pays the whoe ta n a
snge payment, he can not be sad to be entted to nterest on the
antcpated nstaments as upon an overpayment of ta under sec-
ton 14. There s no provson n the Revenue ct of 1928 for the
refund to the ta payer of any e cess payment of a quartery nsta-
ment when the whoe ta for the year has not been pad. It s be-
eved that the provson of secton 14 wth respect to the aowance
of nterest upon any overpayment does not appy to any payment n
e cess of the correct amount of a quartery nstament whch the
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15.
138
Government s authorzed to treat as a payment on account of the
entre ta . In other words, where an nstament of ta s overpad
and that overpayment s credted aganst the unpad nstaments,
eavng outstandng a part of the tota ta assessed for the year, there
has been no overpayment, n respect of any nterna-revenue ta
wthn the meanng of secton 14. It foows that, under the facts
above set out, the ta payer n the nstant case s not entted to any
nterest n connecton wth the payment of the frst two nstaments
of ts ncome ta for the year 1927.
C. M. Charest,
Genera-.G ounse, ureau of Interna Revenue.
S CTION 15. INT R ST ON UDGM NTS.
Secton 15. III-8-4114
Ct. D.-44
D R L T S R NU CT O 1928 D CISION. O COURT.
UW.M NT INT R ST R TRO CTI ITY.
Secton 15(a) -of the Revenue ct of 1928, provdng for the
aowance of nterest n any- |udgment for any overpayment of ta
to a date precedng the date of the refund.check by not more than,
30 days, s not appcabe where-fna. |udgment was entered pror
to the effectve date of that secton.
Court op Cams of the.Unted States.
The . S. Whte Denta Manufacturng Co. of Pennsyvana v. The Unted
States.
anuary 7, 1929.
opnon.
Ths case s before us on defendant s demurrer to the petton, frst, on the
ground ttut petton does not consttute a cause of acton wthn the |ursdc-
ton of ths court second, petton fas to state facts suffcent to consttute
a caus of fcton aganst defendant.
The foowng are the facts:
Ths court rendered |udgment n the case of S. S. Whte Denta Manufactur-
ng Co. of Pennsyvana v. The Unted States ( 1 C. Cs., 143, 1 5 T. D. 4059.
C. . I-2, 108 ) on-November 10, 1925, and thereby awarded to the pantff
the sum of . 83,813 59, wth nterest.
On May 1 , 1927, the Supreme Court affrmed the |udgment of ths court
In the case of The Unted States v. S. S. Whte Dena Manufacturng Co. o
Pennsyvana (274 U. S., 398), and Its mandate was ted n ths court on une
27, 1927. and contaned the foowng drecton:
The court, upon due consderaton of the premses, fnd n favor of the
pantff, and do order and ad|udge that the pantff, as aforesad, s entted
to recover and sha have and recover of and from the Unted States the sum
of eghty-three thousand eght hundred thrteen doars and ffty-nne cents
( 83,813.59), wth nterest thereon at the rate of per cent per annum from
November 14, 1923, to the date of ths |udgment.
On uy 1, 1927, the pantff fed wth the Commssoner of Interna Reve-
nue ts |udgment refund cam for 83,813.59 for payment and asked nterest
thereon at the rate of per cent per annum from November 14, 1923, to the
date of the Supreme Court mandate on une 27, 1927.
The Commssoner of Interna Revenue n due course forwarded sad |udg-
ment cam to the Comptroer Genera of the Unted States for settement, and
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139
15.
under date of November 10, 1927, pantff requested the Comptroer Genera,
by etter, to wthhod payment of ts cam pendng dsposton of an addtona
cam by the Genera Counse s Offce, and nformed the Comptroer Genera
that he woud be prompty notfed of such dsposton of the addtona cam,
at whch tme you can then proceed to sette ths cam for 83,813.59 wth
nterest from November 14, 1923, to une 27, 1927.
On May 29, 1928, the Revenue ct of 1928, Pubc 5 2, was approved. Sec-
ton 15 of sad ct, amendng secton 177 of the udca Code, as amended, s
as foows:
(a) Secton 177 of the udca Code, as amended s amended to read as
foows:
Sec. 177. (a) No nterest sha be aowed on any cam up to the tme
of the rendton of |udgment by the Court of Cams, uness upon n contract
e pressy stpuatng for the payment of nterest, e cept as provded In sub-
dvson (b).
(b) In any |udgment of any court rendered (whether aganst the Unted
States, a coector or deputy coector of nterna revenue, a former coector or
deputy coector, or the persona representatve n case of death) for any over-
payment n respect of any nterna revenue ta , nterest sha e aowed at the
rate of per centum per annum upon the amount of the overpayment, from the
date of the payment or coecton thereof to a date precedng the date of the
refund check by not more than 30 days, such date to be determned by the
Commssoner of Interna Revenue.
(b) Subsecton (a) of ths secton sha take effect on the e praton of 30
days after the enactment of ths ct.
On une 29, 1928, pantff fed wth the Comptroer Genera of the Unted
States a etter dated une 28, 1928, n whch pantff stated that the ureau
of Interna Revenue bad acted upon the addtona cam and requested Comp-
troer to proceed to sette ts |udgment cam for 83,813.59, wth nterest.
Under date of uy 10, 1928, the Comptroer Genera of the Unted States
setted pantff s |udgment cam n the amount of 101,999.97, and hed that
the proper amount of nterest aowabe n ths case was 18,18 .38, beng
nterest from November 14, 1923, to une 27, 1927, the date of mandate of the
Supreme Court.
Pantff, under date of uy 13, 1928, wrote to the Comptroer Genera
of the Unted States requestng reconsderaton of sad settement on the
ground that addtona nterest s due pantff under sad secton 015 of the
Revenue ct of 1928, supra, for the perod from une 27, 1927, to uy 11, 1928,
and requested that t be permtted to cash the Treasury check for 101,999.97
wthout pre|udce of ts rghts on account of pantff s cam for addtona
nterest on ts sad |udgment cam.
The Comptroer Genera reped by etter of uy 13, 1928, nformng pantff
that no ob|ecton woud be nterposed to cashng sad check that such acton
woud be wthout pre|udce to ts rght to seek further revew of the cam for
addtona nterest.
On ugust 7, 1928, the Comptroer adhered to hs orgna settement and
refused to pay pantff the addtona nterest requested from une 27, 1927,
to uy 10, 1958, on the ground that pantff was not entted to nterest dn ng
that perod under the provsons of secton 15 of the Revenue ct of 1928. On
ugust 17, 1928, pantff requested the Comptroer Genera n wrtng to re-
consder hs decson of ugust 7, 1928. Under date of September 1, 1928, the
Comptroer Genera, by etter to pantff, agan adhered to hs decson of
ugust 7, 1928, and refused to pay the addtona nterest.
It Is the contenton of pantff that secton 15 of the Revenue ct of 1928
s appcabe and that t shoud be pad the addtona nterest from une 27,
1927, the date of the mandate of the Supreme Court, to uy 10. 1928. On the
date of the mandate of the Supreme Court, une 27, 1927, secton 177 of the
udca Code, as amended (44 Stat., 119), provded for the aowance of the
nterest n any |udgment of any court to date of entry of fna |udgment. The
Comptroer Genera ho aowed nterest to pantff. We thnk the Comptroer
was correct, for the reason that secton 15 of the Revenue ct of 1928 was
gven no retroactve effect by Congress.
The Supreme Court n the case of Unted States v. Magnoa Petroeum Co ,
decded ebruary 20, 1928 (27 U. S., 1 0 T. D. 4153, C. . II-1, 287 ), hed:
Statutes are not to be gven retroactve effect or construed to change the
status of cams f ed n accordance wth earer provsons uness the egsa-
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1 .1
140
tve purpose so to do pany appears. (Unted States v. cth, 3 Cranch, 399,
413 Whte v. Unted States, 191 U. S., 545, 552 Shwao v. Doye, 258 U. S-, 529,
534 T. D. 3339, C. . 1-2, 3121.)
Defendant s demurrer that the petton faa to state facts suffcent for cause
of acton aganst the Unted States w be sustaned. Petton s dsmssed.
It s so ordered.
Secton 15. III-1 -4175
G. C. M. 1 4
R NU CT O 1928.
Unformty of practce wth re.speet to |udgments n suts for the
recovery of nterna revenue ta es. Interest, costs, certfcates of
probabe cause, etc.
To ttorneys for the ureau of Interna Revenue and Othen
Concerned:
Under date of December 31, 1925, the Comptroer Genera of the
Unted States promugated a decson to the effect (1) that |udg-
ments aganst the Unted States for refund of nterna revenue ta es
shoud be forwarded to hm by the Commssoner of Interna Revenue
for settement n accordance wth the ct of ebruary 18, 1904
(33 Stat., 41), and (2) that |udgments aganst coectors for the
refund of such ta es shoud be pad, when a certfcate of probabe
cause has been ssued, together wth nterest and costs of sut, by
the Commssoner of Interna Revenue under the authorzaton gven
hm by secton 3220, Revsed Statutes, as amended.
y etter dated ugust 15, 1928, the Comptroer Genera was
requested to advse the Secretary of the Treasury wth respect to the
foowng:
(1) Whether court costs woud be approved for payment n connecton wth
|ud nents when rendered aganst coectors of nterna revenue or drecty
aganst the Unted States and rrespectve of whether such costs are specfcay
provded for by the |udgment, or whether they shoud be dsaowed wth
respect to both types of |udgment, f not awarded In the |udgment
(2) Whether nterest woud be approved for payment f not specfcay
provded for n the |udgment as to ether type of case.
(3) Whether the payment of |udgments aganst coectors woud be approved
f not supported by certfcates of probabe cause.
The decson of the Comptroer Genera wth respect to these
questons, whch s contaned n a communcaton dated September
17, 1928 (8 Comp. Gen., 12 ), may be summarzed as foows:
(1) Court costs n suts aganst the Unted States w be approved for
payment where the Unted States has put n ssue the rght of the pantff to
recover, but ony where the |udgment specfcay provdes for costs and then
ony such costs as are actuay ncurred for wtnesses, and for summonng
the same, and fees pad to the cerk of the court, as provded n secton 152 of
the udca Code of March 3, 1911 (3 Stat., 1138 U. S. C, Tte 28, chapter
7. secton 258). Consent |udgments can not carry costs uness ssue was
oned.
(2) Court costs n suts aganst coectors mny foow as a part of a |udg-
ment aganst a coector and may be pad by the Unted States when ncuded
n the |udgment or when so provded by the State statutes of the |ursdcton
n whch the |udgment was rendered.
(3) Interest may be pad as a matter of course uuder secton 15 of the
Revenue ct of 1928 rrespectve of whether the |udgment s rendered aganst
the Unted States or a coector.
(4) udgments aganst coectors may not be pad by the Unted States
uness and unt the certfcates of probabe cause provded for by secton 989
of the Revsed Statutes are furnshed.
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141
15.
Ths decson furnshes the bass for the foowng smpe sugges-
tons whch f observed w emnate the msunderstandngs, the
deays, and the avodabe accumuatons of nterest whch have
frequenty characterzed the payment of |udgments for refund of
ta es:
(1) udgments for the recovery of nterna revenue ta es, whether
n suts aganst coectors or aganst the Unted States, shoud con-
tan a specfc recta of the date or dates of payment of the ta
whch the court hods to have been egay coected. Ths s
necessary n order to avod a dsputes as to the date or dates from
whch the nterest s to be computed.
(2) Such |udgments shoud kewse contan one of the foowng
genera provsons wth nterest wth nterest accordng to
aw wth nterest thereon from the date or dates of payment
as requred by aw or wth nterest n accordance wth the pro-
vsons of secton 15 of the Revenue ct of 1928.
(3) udgments n suts aganst coectors of nterna revenue or
ther representatves shoud ncude as a part thereof the certfcate
of probabe cause authorzed by secton 989 of the Revsed Statutes,
provded, of course, the case s a proper one for the entry of such
a certfcate. The certfcate need not be a separate document. The
foowng s a sumcent compance wth the statute and may be
ncuded n the |udgment: u The court hereby certfes
that there was probabe and reasonabe cause for the act of the
defendant, the coector of nterna revenue, n demandng and
coectng from the pantff the nterna revenue ta , for the refund
of whch ths |udgment s entered.
(4) udgments n suts aganst the Unted States for refund of
ta es shoud be specfc wth respect to the aowance of costs. If
the Government has |oned ssue n such sut, and f, n the dscre-
ton of the court, costs are to be ncuded, t s suggested that the
|udgment provde: Wth costs actuay ncurred for wtnesses, and
for summonng the same, and fees pad to the cerk of the court.
( or such fees see ct ebruary 11, 1925, 43 Stat., 857, U. S. C,
Tte 28, chapter 1 .)
(5) Upon recept of advce from the Department of ustce that
no appea w be taken by the Government from a |udgment for
the refund of ta es, pantffs counse shoud be advsed to prompty
fe wth the Commssoner of Interna Revenue, Washngton, D. C,
a |udgment cam for refund n accordance wth artces 1255 ana
125 of Reguatons 74. Deay n the fng of |udgment cams
resuts n the unnecessary accumuaton of nterest. (See secton
15 of the Revenue ct of 1928.)
In addton to the foregong, t s aso suggested that arrangements
be made n each case to have pantffs counse, upon the recept
of payment, satsfy the |udgment upon the offca records. n
unsatsfed |udgment aganst a coector consttutes a coud upon hs
prvatey owned property. aure to secure satsfacton of such
|udgments eventuay sub|ects a coector to unnecessary embarrass-
ment.
The suggestons contaned heren are made n order to brng about
a greater degree of unformty n |udgments rendered n nterna
revenue cases to the end that such |udgments may ceary provde
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701, rt. 1314.
142
for a detas requste to the e pedtous payment thereof, wth the
consequent avodance of unnecessary correspondence, deay to the
annoyance of a concerned, and the payment of unnecessary nterest.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
TITL G N R L PRO ISIONS.
S CTION 701.-D INITIONS.
ktc e 1314: ssocaton dstngushed from III-2-40 1
trust. G. C. M. 5504
R NU CT O 1928.
trust created for the purpose of ownng and operatng an offce
budng propery made returns as a corporaton for 1927 and
pror years. On uy 1, 1928, the organzaton sod and conveyed
a ts rea estate, recevng (herefor cash and promssory notes.
Snce the sae the actvtes of the trustees have conssted merey
of the recept and dstrbuton of payments of prncpa or nter-
est on sad notes. It s contended that from uy 1, 1928, the
trust shoud be ta ed as a strct trust.
ed, the assocaton st e sts, and Is ta abe as a corpora-
ton on the ncome receved.
n opnon s requested as to the ta abe status of the M udng
Trust. , , .
It appears that the trust was created n 19 for the purpose of
ownng and operatng an offce budng n the cty of R. Orgnay
the benefcares controed the trust, but on une 1,1923, the decara-
ton of trust was amended so as to gve the trustees compete contro,
e cept that the consent of the benefcares must be obtaned n order
to amend the nstrument. In other respects, however, the orgna
provsons of the decaraton of trust were eft substantay un-
changed.
The amended nstrument provdes that the trustees sha have
e cusve management and contro of the trust property, ncudng
the power to make eases, to erect, tear down, ater, or rebud bud-
ngs, to borrow money, to se or e change the property, and to n-
vest and renvest any and a moneys n ther hands n any manner,
whether authorzed by aw for trust funds or not. Nether tho
trustees nor the benefcares are personay abe for any debts or
abtes, but a persons deang wth the trustees are to ook ony
to the, property of the trust. No wdower, wdow, her, or devsee
of any benefcary has any rght of dower or any other rea property
rghts n the trust property, the rghts of the benefcares beng soey
aganst and through the trustees. The nterests of the benefcares
are represented by recepts, whch are transferabe on the books
of the trust ke corporate stock. acances among the trustees are
fed by the remanng trustees.
In uy, 1928, the organzaton sod and conveyed, as of uy 1,
1928, a ts rea estate, consstng of the and and offce budng,
recevng as consderaton therefor 3a doars n cash and 10 proms-
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143 701, rt, 1314.
sory notes, 9 notes for doars each and 1 note for 2 doars, a
bearng nterest at 5 per cent. These notes are payabe seray on
uy 1 of each year, the frst note for doars beng payabe uy
1, 1929. the fna note for 2 doars beng payabe uy 1, 1938.
The trustees have as assets the promssory notes above referred to,
havng an aggregate face vaue of IC doars, and a nomna amount
of cash.
It s stated that snce the sae of ts rea estate n uy, 192s, the
actvtes of the trustees have conssted merey of the recept and
dstrbuton of payments of prncpa or nterest on sad notes. It
s therefore contended that from uy 1, 1928, at east, the trust
shoud be ta ed as a strct trust.
It appears that for 1927 and pror years the trustees fed returns
as a corporaton, on the theory that notwthstandng the fact that
snce une 1, 1923, the benefcares have not had postve contro, the
trust was nevertheess engaged n a busness enterprse, and was
therefore ta abe as an assocaton n accordance wth artce 1504
of the reguatons. It s contended, however, that the trust has not
been propery ta abe as a corporaton snce une 1, 1923, because
of the ack of contro by the benefcares, because the trust does
not suffcenty resembe a corporaton n form of organzaton,
because the care and renta of an offce budng does not amount to
carryng on a busness, and because, n any event, the busness eement
s mmatera. In ths connecton, t s suggested that the Supreme
Court stressed the carryng on of busness n echt v. Maey (2 5
U. S., 144 T. D. 3595, C. . III-, 489) smpy because t was
deang wth an e cse ta mposed on the prvege of carryng on or
dong busness, and that n a three trusts there consdered the
benefcares controed the trustees.
The answer to ths argument s that athough echt v. Maey s a
capta stock ta case, the court was dscussng busness n ts capacty
as an eement of an assocaton rather than n ts capacty as a
further prerequste to ta abty once an assocaton s found to
e st. Ths s shown by the fact that the court dstngushes Crocker
v. Maey (249 U. S., 223), an ncome ta case, on the ground that n
that case no busness was engaged n, and, therefore, n the absence
of contro, no assocaton e sted, whereas n echt v. Maey the
court hods that the busness eement s present, and therefore an
assocaton was created, n spte of the fact (to quote from the
opnon) that such a shght measure of contro may be vested
n the benefcares that they mght be deemed strct trusts wthn the
rue estabshed by the Massachusetts courts. The court then assumes
wthout argument that the busness eement s aso present n ts
second aspect, namey, as a further prerequste to capta stock tu
abty once the e stence of the assocaton s estabshed.
It s qute mmatera whether n fact the benefcares had suffcent
contro n the trusts nvoved n echt v. Maey to consttute the
trusts assocatons rrespectve of the busness eement, because the
court assumed for the purpose of argument that they dd not have
suffcent contro for that purpose, and rested ts decson on the
ground that the trusts were carryng on busness n quas corporate
form and therefore were assocatons.
It shoud be noted, moreover, that the capta stock ta provsons
of the Revenue ct of 1918 (under whch the court hed the trusts
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5701, rt. 1314.1
144
were assocatons) dd not menton the word assocatons. They
provded smpy that every corporaton sha pay a speca e cse
ta wth respect to carryng on or dong busness measured by the
vaue of ts capta stock. Unncorporated assocatons were ta ed
under these provsons for the same reason they are sub|ect to ncome
ta , namey, because the Revenue cts provde (under Genera
defntons ) that the term corporaton ncudes assocatons,
|ont-stock companes, and nsurance companes. Snce for both the
capta stock ta and the ncome ta ths one defnton s the source
of the authorty to ta unncorporated assocatons as corporatons,
t must be true that the essenta eements of an assocaton are the
same wth respect to each ta . It foows that carryng on busness
coud not render an unncorporated organzaton ta abe as a corpora-
ton for capta stock ta cases uness t aso rendered t ta abe as a
corporaton for ncome ta purposes and snce the court, n Uecht v.
Maey, reed on the busness eement to determne the very e stence
of the assocatons, t foows that the same reance may be paced
on the busness eement for ncome ta purposes. That the court
dd so rey on the busness eement s further shown by the foowng
quotaton from the opnon:
We concude, therefore, that when the nature of the three trusts here In-
voved Is consdered, as the pettoners are not merey trustees for coectng
funds and payng them over, but are assocated together n much the same
manner as the drectors n a corporaton for the purpose of carryng on busness
enterprses, the trusts are to be deemed assocatons wthn the meanng of
the ct of 1918 ths beng true ndependenty of the arge measure of contro
e ercsed by the benefcares n the echt and aymarket cases, whch much
e ceeds that e ercsed by the benefcares under the Wachusett Trust.
I Itacs supped.
It s we setted that where a court rests ts |udgment on two
grounds, ether of whch s suffcent to sustan the |udgment, each
prncpe used s of equa force as a precedent n future cases. (Unon
Pac. R. Co. v. Mason Cty, etc., 199 U. S., 1 0 orda Cent. R. Co. v.
Schutte, 103 U. S., 118.) It foows, a fortor, that f a |udgment
may rest on ether of two grounds, but, n fact, the court puts t
upon ony one of those grounds, the prncpe actuay used by the
court s authortatve for future cases, and s not a dctum smpy
because another ground may e st on whch the decson coud have
been based. It s qute mmatera, therefore, whether suffcent con-
tro was present n a three trusts n the echt case to |ustfy hod-
ng them assocatons, snce the court n fact dd not rey on the
contro feature.
The prncpe that contro s not essenta has been ncorporated n
artce 1504 of Reguatons 9 and has been uphed by the oard of
Ta ppeas n the case of . . Landreth Co. (11 . T. , 1).
That ownng and rentng an offce budng s carryng on a bus-
ness enterprse s aso estabshed by echt v. Maey (the echt trust
beng so engaged n that case) as we as by nt v. Stone-Tracy Co.
(220 U. S., 107) and Zonne v. Mnneapos Syndcate (220 U. S.,
187).
The M udng Trust, moreover, s organzed n quas corporate
form. The trustees, ke the drectors of a corporaton, have carred
on, or drected the carryng on, of the actvtes for a group of
benefcares, who, ke the stockhoders of a corporaton, take no
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145
701, rt. 1314.
actve part n the management, but share n the profts. Certfcates
of benefca nterest, resembng shares of corporate stock, have been
ssued, whch are freey transferabe ke corporate shares, so that,
ke a corporaton, the organzaton contnues to e st wthout regard
to changes n ts personne. though the corpus of the trust con-
ssted many of reaty, the benefca nterests are n effect decared
to be persona property, so that n ths respect, aso, they resembe
corporate stock. Lke stockhoders and drectors, moreover, the
benefcares and trustees are decared to be free from persona
abty for the debts of the organzaton. In fact, the trust
resembes a corporaton as much as dd the . . Landreth trust
(11 . T. ., 1), where kewse there was no provson for eecton
of offcers or for meetngs and, for that matter, t has as many
quas corporate features as the echt trust n eckt v. Maey, f
the contro provsons of that trust, whch the court gnored as mma-
tera, be dsregarded. Ths offce has hed many tmes that organ-
zatons bearng no more, or ess, resembance n form and structure
to a corporaton than the M udng Trust bears, are assocatons.
(See, for e ampe, S. M. 4180, C. . I -2, 274 G. C. M. 1881, C. .
II-1,42.)
In vew of the foregong, t s evdent that the trust must, n any
event, be cassfed as an assocaton unt the offce budng was sod
n uy, 1928. Secton 704 of the Revenue ct of 1928 affords no
reef, because (among other reasons) no return as a trust was fed,
as requred by subdvson (a), and the trust was not mted to a
snge trustee, as requred by subdvson (b).
The soe remanng queston s whether the assocaton s changed,
pso facto, nto a strct trust by the sae of the budng and the
consequent reducton of the actvtes of the trustees to coectng
and dstrbutng the nterest and prncpa due, or to become due,
by vrtue of the purchase money notes. Ths offce s of the opnon
that n the absence, at east, of some forma change n the trust
nstrument so restrctng the powers of the trustees that they may
not propery carry on a busness, the assocaton contnues as such
unt t has been entrey qudated and ts property dstrbuted to
the benefcares. ssumng, for the sake of argument, that the
trustees are not now engaged n busness, and that n the absence
of contro by the benefcares the busness eement s essenta to
create an assocaton n the frst nstance, t does not foow that once
the assocaton s estabshed the remova of the busness eement w
of tsef change the organzaton nto a strct trust. It s we setted,
both at common aw and under the Unform Partnershp ct, that
the presence of a busness enterprse s essenta, n the frst nstance,
to the creaton of a partnershp. (30 Cyc, 370 Meehan v. aentne,
145 U. S., 11 Unform _Partnershp ct, sec. (1).) ut the
partnershp does not termnate the moment the partners cease to
engage n actve busness. ven f the cessaton of actve busness
were hed to effect a technca dssouton of the partnershp, t s
we estabshed that a partnershp, though dssoved, s not term-
nated unt qudaton s competed. Secton 30 of the Unform
Partnershp ct provdes:
On dssouton the partnershp s not termnated, but contnues unt th
wndng up of partnershp affars s competed.
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g701, rt. 1314.
14
Ths was true, aso, at common aw. Rowey on Partnershp,
secton 592, states:
That the partnershp contnues, even after dssouton for the purpose of
settng ts affars, s so frmy setted that the ctaton u fu of the numerous
authortes to that effect s practcay unnecessary. (Ctng a great many
cases.)
In Over v. Lynn (130 Mass., 143) a statute provded that part-
ners n mercante or other busness may be |onty ta ed
under ther partnershp name, n the pace where ther busness s
carred on, for a the persona property empoyed n such busness,
e cept shps or vesses, and when so |onty ta ed each partner
sha be abe for the whoe ta . The pantff was formery a
member of the frm of Stephen Over, r., Co., the frm beng
dssoved by the act of the partners n 18 9. In 1872 and 1873 the
assessors assessed to Stephen Over, r., Co. ta es for those
years amountng to 2,208, whch were pad by the pantff under
protest, and he then brought sut to recover them. The court hed
he coud not recover, sayng:
We assume that the assessors ntended, as the form mpes, to
ta the property of the frm and that ths s to be regarded as a dstnct and
ndependent ta .
The dssouton of a frm does not mmedatey termnate ta
e stence for a purposes. It st subssts for the purpose of cos-
ng up ts concerns. Such dssouton does not e empt the frm property from
ta aton t does not work a dvson or separaton of the property so that the
share of each partner can he ta ed to hm, hut t contnues to be the property
of the frm. We are of opnon that, for the purposes of ta aton, the frm con-
tnues to e st unt ts affars are wound up, or unt the frm property s
dsposed of.
In arber v. arnes (52 Ca., 50) pantff and defendant were
partners. The pantff brought sut for dssouton and accountng,
aegng that he had advanced money over and above the amount
contrbuted by the defendant, and that defendant coected sums due
the frm and approprated same to hs own use. The defendant set
up a pea of the statute of mtatons, aegng that an attachment
was eved May 4, 1874, and everythng beongng to the frm was
sezed that the attachment was reeased, and the attachment sut
setted by the credtors of the frm meetng and appontng one of
ther number assgnee, who took charge of the property, dsposed of
t, and pad the credtors 90 per cent of ther ndebtedness that the
frm never dd any busness after the day the attachment was eved
that the. frm was therefore dssoved by operaton of aw n May,
1874, and, consequenty, pantff s sut to have the frm decared ds-
soved was barred by the statute of mtatons. The ower court
granted nonsut on ths ground. The upper court reversed the
|udgment, sayng:
The sezure of the partnershp property and the appcaton of the
property to the payment of the credtors of the frm, and the fact that the
pant ft- and defendant dd not do busness after the attachment was eved,
dd not of themseves necessary and concusvey operate as a dssouton of
the partnershp. The commencement of the acton by the pantff and
defendant aganst unt nderson to recover a debt aeged to be due to
the frm the acton not yet havng been determned tends to rebut any
nference of the dssouton of the partnershp arsng from the facts above
stated.
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147
703.
In other words, accordng to ths court, the cessaton of busness
does-not even dssove a partnershp (to say nothng of termnatng
t), so ong as t has outstandng debts to be coected. (See aso
oster v. a dc aton, 4 umph. (Tenn.), 34 Wams v. Mad-
son County ank, 33 Ga. pp., 570, 12 S. ., 895.)
In the case of ordnary corporatons t aso appears that athough
a certan thng or set of crcumstances may be necessary to create a
corporaton n the frst nstance, the ater remova of the essenta
.part does not pso facto dssove the corporaton. Thus, under the
aws of many States, one person aone can not organze a corpora-
ton, but f the corporaton s once formed by the correct number, the
purchase of a of,the stock by a snge ndvdua does not dssove
the corporaton. (14a C: ., 1113 Lousve ankng Co. v. sen-
man, 94 y., 83, 21 S. W., 531.) Nor does the fact that there are
ess stockhoders than the charter requres nvadate the acts of the
corporaton. (Cook on Corporatons, secton 31 Wech v. Im-
porters , etc., ank. 122 N. Y., 177, 25 N. ., 2 9.) One reason gven
by the courts for ths vew s that at any tme the stock may be sod
to others, and the proper number of stockhoders be acheved agan.
The same reasonng appes to the nstant case, for the power of the
trustees-under the trust nstrument to engage n actve busness has
. not been removed. There s nothng to prevent them from buyng
another offce budng wth the proceeds of the notes or wth money
borrowed by ther hypothecaton. Moreover, even where an ord-
nary corporaton has been formay dssoved, ncome earned n the
-process of qudaton s ta abe to the corporaton. (S. R. 3119, C.
. I -1,233 O. D. 231,1 C. ., 213 O. D. 821, 4 C. ., 279 . R. R.
1115, C. . 1-2, 200.)
In vew, of the foregong, t must be concuded that n the absence,
at east, of a forma amendment of the trust nstrument revokng
the rght of the trustees to engage n busness, the assocaton st
e sts, and s ta abe as a corporaton on the ncome receved. If
such an amendment shoud be adopted, the queston woud arse
. whether a new ta abe entty n the nature of a strct trust s created,
to whch the property of the assocaton may be sad to have been
transferred. On ths pont no opnon need be e pressed at ths tme.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
S CTION 703. D DUCTION O ST T ND
IN RIT NC T S R TRO CTI .
Secton 703. III-12-4151
I. T. 24 4
R NU CT O 1928.
Where an estate fed an ncome ta return for 1925 camng
a deducton for State nhertance ta es pad, and no deducton for
nhertance ta es was camed by the benefcares n ther returns,
the deducton for.such ta es s aowabe ony to the estate, under
the provsons of secton 703, Ievenue ct of 1028. The fact
that the estate may now fe an amended return n whch no de-
ducton for uch ta es s camed, and that the benefcares may
fe amended returns camng a deducton for such ta es, s of
no consequence, snce the orgna returns are controng.
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704.
148
rung s requested reatve to the appcaton of secton 703
of the Revenue ct of 1928 to the ease of the estate of .
It appears that the estate of fed a return for the year 1925,
camng a deducton of doars on account of nhertance ta es
pad durng that year to the State of S, and that a deducton for
such ta es was not camed by the benefcares n ther returns.
The estate now proposes to fe an amended return for 1925 n behaf
of the estate n whch no deducton for the nhertance ta es s
camed, contendng that te deducton may then be taken pro rata
by the benefcares n amended returns.
Secton 703 so far as matera to the queston under consderaton
provdes:
(a) In determnng the net ncome of an her, devsee, egatee, dstrbutee, or
benefcary (herenafter n ths secton referred to as benefcary ) or of an
estate for any ta abe year, under the Revenue ct of 192 or any pror Revenue
ct, the amount of estate, nhertance, egacy, or successon ta es pad or
accrued wthn such ta abe year sha be aowed as a deducton as foows:
(1) If the deducton has been camed by the estate, but not by the benefcary,
t sha be aowed to the estate
(2) If the deducton has been camed by the benefcary, but not by the estate,
t sha be aowed to the benefcary
(b) s used n ths secton, the term camed means camed
(1) In the return .
Inasmuch as t appears that the estate camed the deducton for
the nhertance ta es n queston n the orgna ncome ta return
fed by the estate, and a deducton for such ta es was not camed
by the benefcares n ther orgna returns, and snce n the opnon
of ths offce the orgna returns are the controng returns under the
provsons of secton 703, above quoted, t foows that the deduc-
ton on account of the nhertance ta es pad to the State of S has
been camed by the estate, but not by the benefcary, and therefore
under secton 703 of the Revenue ct of 1928 t sha be aowed to
the estate and can not be aowed to the benefcares.
S CTION 704. T ILITY O TRUSTS S
CORPOR TIONS R TRO CTI .
Sucton 704. III- -409G
G. C. M. 542
R NU CT OP 1028.
1. Where (he trusts bus eected o be ta ed as a trust under sec-
ton 704(b) and a oss has been sustaned, the benefcares shoud
be aowed to deduct ther proportonate shares thereof.
2. Where a benefcary purchases an nterest n the trust durng
a ta abe year, he s not, n genera, ta abe wth respect to t pro-
portonate share of the ncome of the trust earned pror to the
acquston of hs nterest.
3. The cost recovery method may not be used by the trust n
determnng ts ncome from the sae of the property rrespectve of
whether or not the trustee has eected to have the concern ta ed
as a trust under secton 704(b).
4. trust havng a fsca yonr endng durng the caendar year
1928 does not meet the requrements of secton 704(b) for any part
of that fsca year.
5. Where a trust, sts created, has more than one trustee aud tte
to the property becomes vested n one trustee, t does not meet the
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149
704.
requrements of secton 704(b) for the year of change and the year
or years pror to the year of change. or years foowng the year
of change, however, the trust meets the requrements.
. Where the decaraton of trust does not confne the purposes
and actvtes of the trust to the requrements of secton 704(b)
but the actua actvtes meet such requrements, the rght of eec-
ton e sts.
7. The fact that budngs were erected on the property of the
trust does not destroy the rght of eecton.
n opnon s requested wth reference to certan questons arsng
n connecton wth the audt of cases under secton 704(b) of the
Revenue ct of 1928. These probems w be dscussed n the order
presented.
Secton 704(b) of the Revenue ct of 1928 provdes:
or the purpose of the Revenue ct of 192 and pror Revenue cts, a trust
sha, at the opton of the trustee e ercsed wthn one year after the enact-
ment of ths ct, be consdered as a trust the ncome of whch s ta abe
(whether dstrbuted or not) to the benefcares, and not ns an assocaton, f
such trust (1) had a snge trustee, and (2) was created and operated for the
soe purpose of qudatng rea property as a snge venture (wth such powers
of admnstraton as are ncdenta thereto, ncudng the acquston, mprove-
ment, conservaton, dvson, and sae of such property), dstrbutng the pro-
ceeds therefrom n due course to or for the beneft of the benefcares, and
dschargng ndebtedness secured by the trust property, and (3) has not made
a return for the ta abe year as an assocaton.
(1) ssumng that the trustee of a trust whch meets the requre-
ments of secton 704(b) has eected to be ta ed as a trust, and the
operatons of the trust for the year resut n a oss, may the benefc-
ares deduct ther proportonate shares of such oss
Once an eecton s made under secton 704(b) to have the concern
ta ed as a trust, t s treated, under that secton, more ke a partner-
shp than ke a strct trust, n spte of the fact that the word trust
s used. The ncome s ta abe to the benefcares whether ds-
trbuted or dstrbutabe, whereas, n the case of a strct trust, ncome
whch s not dstrbuted or dstrbutabe s ta ed to the trust as an
entty. Consstency seems to requre, therefore, that the benefcares
shoud be aowed to deduct ther proportonate shares of the osses
of the trust, provded, of course, that the bases of the nterests of
the benefcares n the trust must be reduced by the amount of the
oss deductons whch are granted them. Otherwse they woud, n
effect, get the beneft of the deductons agan when they dspose of
ther nterests. The vew that they are entted to the deductons s
further strengthened by the rungs to the effect that where a trust
serves ony as a medum or condut for the coecton and dstrbuton
of ta -e empt ncome, the benefcares are not ta abe on the sums
so dstrbuted to them. (See I. T. 20 7, C. . III-2, 78.) Where
the benefcares of a trust are ta abe on the ncome thereof whether
dstrbuted or dstrbutabe, t s obvous that the trust s more
neary n the nature of a mere condut or medum than where ta a-
ton of the benefcares depends on the dstrbuton or dstrbut-
abty of the ncome.
(2) ssumng that a trustee has eected to be ta ed as a trust,
and such eecton has been granted, what s the effect of the purchase
of an nterest n the corpus of the trust durng a ta abe year that
s, s the benefcary ta abe wth respect to a proportonate share of
the ncome of the trust earned pror to the acquston of hs nterest
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704.1
150
In genera, t s the opnon of ths offce that the benefcary s not
ta abe wth respect to a proportonate share of the ncome of the
trust earned pror to the acquston of hs nterest. The proper per-
son to pay the ta on ncome earned pror to the tme the benefcary
acqured hs nterest s the pror benefcary. So far as a genera
formua can be gven for these eas s t s beeved to be as foows:
In computng the gan or oss on the sae or other dsposton of the
nterest of any benefcary| the e cess, f any, of hs proportonate
amount of the actua earnngs of the trust, whether dstrbuted or
not, durng the tme he was a benefcary, over the sum of the dstr-
butons actuay made to hm, sha be added to hs orgna bass
whereas, f the actua dstrbutons made to hm e ceed hs propor-
tonate amount of the earnngs of the trust, whether dstrbuted or
not, durng the tme he was a benefcary, such e cess sha reduce
hs orgna bass. On the sae or qudaton of hs nterest, hs gan
or oss w be the dfference between the amount receved through
the sae or qudaton and the ad|usted bass of hs nterest.
(3) Irrespectve of whether or not an eecton s made, may the
cost recovery method be used by the trust n determnng ts ncome
from the sae of property
In Genera Counse s Memorandum 4842 (C. . II-2, 103), t
was hed that where secton 704(b) s appcabe, and the trustee
as eected to have the concern ta ed as a trust, the cost recovery
method may not be used by the trust n determnng ts ncome from
the sae of the property, and that ths s so rrespectve of whether
or not the trust nstrument prohbts dstrbutons to the benefcares
unt after the cost of the entre venture has been recovered. It s
the opnon of ths offce that the same answer must be made f the
trustee has not eected to have the concern ta ed as a trust. In that
event, t w ordnary be ta abe as a corporaton, but the rue
ad down n artce 43 of Reguatons 45, 2, 5, and 9 appes
equay whether the and s handed by an ndvdua, a trust, or a
corporaton. That rue requres that the sae of each ot be treated
as a separate transacton, and e pressy forbds a method that woud
permt recovery of the capta n the entre tract before net ncome
s reazed.
(4) Does a trust havng a fsca year ended durng the caendar
year 1928 meet the requrements of secton 704(b) for that ta abe
perod
Secton 1 of the Revenue ct of 1928 provdes that the provsons
of Tte I sha appy ony to the ta abe year 1928 and succeedng
ta abe years. Secton 48(a) provdes that ta abe year means
the caendar year, or the fsca year endng durng such caendar
year, and that the frst ta abe year, to be caed the ta abe year
1928, sha be the caendar year 1928 or a ay fsca year endng durng
(he caendar year 1928. Secton 701(b) makes that subdvson ap-
pcabe ony for the purpose of the Revenue ct of 192 and pror
Revenue cts, and n Genera Counse s Memorandum 4842, supra,
t was hed that ths phrase specfcay e cudes from ts operaton
the ta abe year 1928 and a succeedng ta abe years, snce the Reve-
nue ct of 192 or any pror Revenue ct can have no appcaton
to ta es for any ta abe year subsequent to the ta abe year 1927.
Snce the ta abe year 1928 e pressy ncudes any fsca yea
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151
( 704.
endng durng the caendar year 1928 (secton 48), t woud seem
to foow that a trust havng a fsca year endng durng the caendar
year 1928 does not, for that fsca year, or for years foowng, meet
the requrements of secton 704(b). owever, the effect of secton
105 of the Revenue ct of 1928 s st to be consdered. It provdes:
If t s necessary to compute the ta for a perod begnnng n one caendar
year and endng n the foowng caendar year nm the
aw appcabe to the second caendar year Is dfferent from the aw appcabe
to the frst caendar year, then the a under thn tte for t e perod endng
durng the second caendar year sha be the sum of: (1) the same proporton of
a ta for the entre perod, determned under the aw appcabe to the rst
caendar year and at the rates for such year, whch the porton of such perod
fang wthn the frst caendar year s of the entre perod and (2) the same
pro| orton of a ta for the entre perod, determned under the aw appcabe
to the second caendar year and at the rates for Mch year, whch the porton
of such perod fang wthn the second caendar year s of the entre perod.
Itacs supped.1
It s we setted that provsons ke secton 105, when read n con-
necton wth provsons ke secton 1 and secton 48, ncorporate the
aw of the former Revenue ct as a part of the ater ct. In other
words, wherever a fsca year endng n the caendar year 1928 s con-
cerned, the Revenue ct of 1928 governs, but the 192 ct, to some
e tent, s ncorporated nto the 1928 ct for the purpose of de-
termnng the ta for the 1927 porton of the year. It s the 1928
ct, however, that governs for the 1927 porton of the fsca year as
we as for the 1928 porton of that fsca year. (See T. . ord
Gran Co. v. ar, pr. 2, 1928, Ct. of ppeas, Dstrct of Coumba,
25 ed. (2d), 53 I. T. 1875, C. 13. II-2, 238.)
Moreover, secton 105 tsef provdes that the ta under ths tte
(. e., under the Revenue ct of 1928) sha be the sum of, etc.. show-
ng that the ta s ad under the 1928 ct. Now, secton 704(b), by
Its own terms, s appcabe ony for the purpose of the Revenue ct
of 192 and pror Revenue cts. To permt a trustee to eect under
that secton as to any part of a fsca year endng n 1928 woud be
appyng that secton for the purpose of the Revenue ct of 1928, and
ths s specfcay prohbted by the secton tsef. It foows, there-
fore, that secton 704(b) has no appcaton to any fsca year endng
,n the caendar year 1928. If a trust s ta abe as an assocaton apart
from 704(b), t s ta abe as an assocaton for any fsca year endng
n the caendar year 1928, and the trustee can not eect to have t ta ed
as a trust for any part of that fsca year. ut (and heren the true
appcaton of secton 105 becomes apparent) the corporate rate for
the 1927 porton of the year w be 13 per cent, as t was under the
Revenue ct of 192 , whe the corporate rate for the 1928 porton
of the year w be 12 per cent.
(5) Whether a trust whch, as created, had more than one trustee,
and pursuant to the authorty contaned n the decaraton, the tte
to the property becomes vested n one trustee durng the fe of the
trust, meets the requrements of secton 704(b) for the (1) year of
change n the number of trustees. (2) year or years pror to the year
of change, and (3) year or years subsequent to the year of change
It s the opnon of ths offce that for the year of change and the
year or years pror to the year of change, the trust does not meet the
requrements of secton 704(b). Certany durng the years pror to
3133 29 11
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704
the change, and durng the frst porton of the year of change, the
trust does not have a snge trustee. Now, snce ta abe years are
treated as unts, there can be no reasonabe |ustfcaton for hodng
that the ater change to a snge trustee brngs the trust wthn the
requrements for the perod t had more than one trustee. nd snce
each year s a unt, t s equay mpossbe, wthout specfc authorty,
to hod that for the ater porton of the year of change the trustee
may eect to have the concern ta ed as a trust. or years foowng
the year of change, however, the trust meets the requrements, and,
snce the ta abe years are dstnct unts, t s mmatera that for
pror years the trust had more than one trustee. Ths s n harmony,
moreover, wth the thrd condton under secton 704(b), whch re-
qures that the trust sha not have made a return for the ta abe
year as an assocaton. There s no requrement that t sha not
have made such a return e cept durng the year n queston.
( ) In the ase where the decaraton does not confne the purposes
and actvtes of the trust to the requrements of secton 704(b) but
the actua actvtes meet such requrements, does the rght of eecton
st
In the opnon of ths offce, the answer s n the affrmatve. It
s true that the second condton requres that the trust be created
and operated for the soe purpose of qudatng rea property,
but t s beeved the actua actvtes are better evdence of the
purpose of creaton than the trust nstrument.
(7) ssumng that the trust meets the requrements of secton
704(b) n a other respects, does the fact that the trust has erected
houses or other budngs on the property and sod the mproved
property destroy ts rght of eecton
In vew of the fact that condton (2) n secton 704(b) specfcay
ncudes mprovement as ncdenta to the soe purpose of
qudatng rea property, t s the opnon of ths offce that the
fact that houses or other budngs were erected on the property does
not destroy the rght of eecton.
C. M. Chabest,
Genera Counse, ureau of Interna Revenue.
Secton 704. T -25-4243
G. C. M. G417
R NU CT O 1928.
The date of pubcnton of I. T. 20 1 (C. . I-2, 5), namey.
ugust 11, 1924. , under .secton 704(a) of the Revenue ct of 1028,
the effectve date of vcht v. Muey (2 5 . S., 144, T. D. 3095,
C. . I 1, 489), for ncome a purposes, wth respect both to
reguatons and rungs.
n opnon s requested n connecton wth the admnstraton of
secton 704(a) of the Revenue ct of 1928, as to the date the prn-
cpe announced n echt v. Maet/ s to be treated as beng effectve
for ncome ta purposes.
Secton 704(a) provdes as foows:
If a ta payer fed a return as a trust for any ta abe year pror to the ta -
abe year 1925 such ta payer sha be ta abe as a trust for such year and
not as a corporaton, f such ta payer was consdered to be ta abe as a trust
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153
11704.
and not as a corporaton ether (1) under the reguatons In force at the tme
the return was made or at the tme of the termnaton of Its e stence, or (2)
under any rung of the Commssoner or any duy authorzed offcer of the
ureau of Interna Revenue appcabe to any of such years, and nterpretatve
of ny provson of the Revenue ct of 1918, 1921, or 1924, whch had not been
worsed or revoked pror to the tme the return was made, or under any
such rung made after the retarn was fed whch had not been reversed or
revoked pror to the tme of the termnaton of the ta payer s e stence.
It s apparent from a study of ths subsecton, and from a survey
of the commttee reports and of the stuaton n genera, that secton
704(a) was enacted to abrogate the retroactve effect of echt v.
Maey, supra, wth respect to trusts that had reasonaby reed on
the Department s own nterpretaton of the aw before that decson
was promugated. The Department, reyng on Crocker v. Medey
(249 U. S., 223, T. D. 281 ), had prevousy rued that contro by the
benefcares was essenta n order that a trust shoud be cassfed as
an assocaton. In echt v. Maey the Unted States Supreme Court
hed that, where the trustees are carryng on busness n quas cor-
porate form, the trust s an assocaton regardess of the e tent of
contro vested n the benefcares. The effect of ths decson was
that many busness trusts whch, n reance on the Department s
nterpretaton of Crocker v. Maey, had fed returns and pad ta es
as strct trusts, were, for past as we as for future years, sub|ect to
ta es as corporatons. Secton 704(a) was therefore nserted n the
Revenue ct of 1928 n order to reeve these ta payers from recass-
fcaton for the perod durng whch they had reed on Treasury
reguatons or ureau rungs. It was accordngy provded, n effect,
that f a ta payer had fed a return as a trust for any ta abe year
up to, and ncudng, the ta abe year 1924 (n whch year the decson
n echt v. t aey was rendered), such ta payer shoud be ta abe
as a trust for such year f t was consdered to be ta abe as a trust
ether under the reguatons or rungs n force when the return was
made or when ts e stence termnated. Snce the purpose of the sub-
secton s to ad trusts that had reed on the Department s nterpre-
taton of the aw, t s apparent that the phrase, consdered to be
ta abe as a trust, means consdered by the Treasury Department
to be ta abe as a trust. Indeed, the phrase coud not we mean
consdered by the courts to be ta abe as a trust under
the reguatons or under any rung of the
Commssoner, for the courts were nterpretng the Revenue cts
themseves, not Treasury reguatons or rungs, and one reason for
the enactment of secton 704(a) was because the few court decsons
durng ths eary perod were deemed nconsstent wth each other.
(Report of Senate Commttee on nance, pp. 44, 45.)
It becomes necessary to determne, therefore, under secton 704(a),
at what date a busness trust was frst consdered by the Department
to be ta abe as a corporaton under the reguatons and rungs,
regardess of the contro eement.
Consderng, frst, the reguatons, t appears that when the de-
cson of the Supreme Court n echt v. Maey was rendered, artces
1502, 1503, and 1504 of Reguatons 2 were n force, and provded
as foows:
m 1502. suodaton. ssocatons and ont-stock companes ncude asso-
catons, common aw trusts, and organzatons by whatever name known, whch
act or do busness n an organzed capacty, whether created under and pur-
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704.
154
suant to State aws, agreements, decaratons of trust, or otherwse, the net
Income of whch, f any, s dstrbuted or dstrbutabe among the members or
sharehoders on the bass of the capta stock whch each hods or, where there
s no capta stock, on the bass of the proportonate share or capta whch
each has or has nvested n the busness or property of the organzaton.
corporaton whch has ceased to e st n contempaton of aw but contnues ts
busness n corporate form s an assocaton or corporaton wthn the meanng
of .secton 2, but f t contnues ts busness n the form of a trust, t becomes
sub|ect to the provsons of secton 219.
rt. 1503. ssocaton dstngushed from partnershp. n organzaton rhe
membershp nterests n whch are transferabe wthout the consent of a the
members, however the transfer may be otherwse restrcted, and the busness
of whch s conducted by trustees or drectors and offcers wthout the actve
partcpaton of a the members as such, s an assocaton and not a partner-
shp. partnershp bank conducted ke a corporaton and so organzed that
the nterests of ts members may be transferred wthout the consent of the
other members s a |ont-stock company or assocaton wthn the meanng of
the statute. partnershp bank the Interests of whose members can not be
so transferred s a partnershp.
rt. 1504. ssocaton dstngushed from trust. Where trustees hod rea
estate sub|ect to a ease and coect the rents, dong no busness other than ds-
trbutng the ncome ess ta es and smar e penses to the hoders of ther
recept certfcates, who have no contro e cept the rght of tng a vacancy
among the trustees and of consentng to a modfcaton of the terms of the trust,
no assocaton e sts and the cestus que trust are abe to ta as benefcares
of a trust the ncome of whch s to be dstrbuted perodcay, whether or not
at reguar ntervas. ut n such a trust f the trustees pursuant to the terms
thereof have the rght to hod the ncome for future dstrbuton, the net ncome
s ta ed to the trustees nstead of to the benefcares. See secton 219 of the
statute and artces 341-348. If, however, the cestus que trust have a voce
n the conduct of the busness of the trust, whether through the rght perod-
cay to eect trustees or otherwse, the trust s an assocaton wthn the
meanng of the statute.
These artces are dentca wth the correspondng artces n
Reguatons 45 (1920 edton), e cept that the ast sentence n artce
1502, supra, s not contaned n artce 1502 of Reguatons 45 (1920
edton). It s apparent that these artces, on ther face, are as
much, or more, consstent wth the vew that contro by the benef-
cares s not- essenta to the e stence of an assocaton as wth the
contrary vew. rtce 1502 does not menton contro at a artce
1503 mpes that contro by the benefcares n the sense of ther
actve partcpaton n the conduct of the busness tends to show that
the organzaton s not an assocaton and the frst sentence of ar-
tce 1504 pany mpes that ether the carryng on of busness by
the trustees or contro by the benefcares w necesstate cassfca-
ton as an assocaton. Ony n the ast sentence of artce 1504 s
there any mpcaton that, even where the trust s engaged n bus-
ness, contro by the benefcares may aso be essenta to the e stence
of an assocaton and the mpcaton to that effect s ess apparent
than the contrary mpcaton e pressed n the frst sentence of the
same artce. The most that can fary be sad s that these artces
are not, on ther face, absoutey contrary to the vew that contro by
the benefcares, n some sense, may be an essenta eement of an
assocaton, and that an e amnaton of the ureau rungs shows
that, after the decson n Crocker v. Maey and pror to the decson
n ccht v. Maey, a trust was not, by the Department, co-nsdered
to be ta abe as a corporaton under the regu-
atons n force uness the benefcares, n some sense, dd contro
the trust.
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155
( 704.
On the other hand, artce 7 of Reguatons 50 and artce 8 of
Reguatons 4, appyng to capta stock ta es under the Revenue
cts of 1918 and 1921, dd contan unequvoca statements that, n
order to consttute an assocaton, the benefcares of a trust must have
a voce n the contro or management of ts affars. These artces,
whch are dentca, provded as foows:
Massachusetts trusts. The test of abty n a cases nvovng trusts of the
Massachusetts type s whether the cestus que trustent have by the terms of the
trust agreement a voce n the management or contro of the trust. Where the
trustees are n compete contro of the busness, the benefcares havng no
contro e cept the rght of fng vacances among the trustees or of consentng
to a modfcaton of the terms of the trust or of dssovng the trust, no as-
socaton e sts. If, however, the cestus que trustent have a voce n the
contro or management of the busness of the trust, whether through the
rght to eect trustees perodcay or to remove the trustees or to restrct the
trustees as to the management of the trust or otherwse, the trust s an assoca-
ton wthn the meanng of the statute. Where the trustees hod n ther
own rght a suffcent number of the certfcates of benefca nterest to
consttute contro as between the benefcares, the trust w be hed to be
an assocaton regardess of the powers conferred upon the trustee by the
Instrument creatng the trust.
The decson of the Supreme Court n echt v. Maey was promu-
gated as a Treasury decson on May 28,1924 (T. D. 3595, C. . III-,
489), and 10 days ater the above-quoted artce of the capta stock
ta reguatons was amended by Treasury Decson 3598 (C. . III-,
489) to read as foows:
In order to gve effect to the decson of May 12, 1924, by the Unted States
Supreme Court n the ease of echt v. Maey and n the other cases named
theren (Nos. 99, 100, 101, and 119 October Term, 1923), artce 7 of Regua-
tons 50 (revsed edton, approved une 21, 1920) and artce 8 of Reguatons
4 are amended so as to read as foows:
Trusts. Two dstnct casses of trusts are recognzed by the Department,
namey, hodng trusts and operatng trusts.
odng trusts are those n whch the trustees are merey hodng property
for the coecton of the ncome and dstrbutng t among the benefcares and
are not engaged, cther by themseves or n connecton wth the benefcares,
n the carryng on of any busness. Such trusts are not assocatons wthn the
meanng of the aw and are not sub|ect to the ta .
Operatng trusts are those n whch the trustees are not restrcted to the
nere coecton of funds and payng them over to the benefcares but are
assocated together n much the same manner as drectors n a corporaton for
the purpose of, and are aetuay engaged n, carryng on some busness enter-
pr. e. These trusts, whether of the Massachusetts type or otherwse, are to be
deemed assocatons wthn the meanng of the ct, ndependenty of any contro
e ercsed by the benefcares, and sub|ect to the ta .
The ncome ta reguatons reatng to assocatons were not for-
may amended unt the promugaton of Reguatons 5 on October
, 1924, but on uy 10, 1924, I. T. 20 1 (C. . III-2, 5) (frst pub-
shed on ugust 11, 1924, n uetn 111-32, 1) was ssued, provd-
ng that:
The genera rue n regard to hodng trusts and operatng trusts whch s
announced n the decson of the Supreme Court n echt
v. Maet/ and n Treasury Decson 3598 the amendment of the cnpta stock
reguatons |ust quoted above s appcabe under a ttes of the Revenue cts
of 1918 and 1921.
It s unmstakabe, therefore, that, from the date of I. T. 20 1,
an operatng trust was, by the Department, consdered to be ta -
abe as a corporaton under the reguatons n
force, not ony for capta stock ta purposes but for ncome ta
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5704.
15

purposes as we, qute rrespectve of any contro e ercsed by the

benefcares. The reason that the ncome ta reguatons were not
formay amended unt the ssuance of the new reguatons n October
was doubtess because, as ponted out above, such reguatoas had
never been nconsstent on ther face wth the vew that contro was
not essenta to the e stence of an assocaton, and amendment, there-
fore, was not necessary. urthermore, f the ncome ta reguatons
had been nconsstent wth that vew, t mght we have been con-
sdered that they were amended, by mpcaton, by the pubcaton of
echt v. Ma-ey as a Treasury decson, |ust as an act of a egsa-
ture, though no menton s made of pror acts, w nevertheess
modfy or revoke those that are nconsstent wth the ater act.
It may be contended that f the foregong s true, there was no
occason to change artce 1504 n Reguatons 5. ut that does not
foow. The change s easy |ustfed as beng ntended to carfy
what otherwse mght requre some study to determne. urther-
more, the change not ony carfed the poston of the Department
that the busness eement was suffcent wthout contro, but, ke
Treasury Decson 3598, supra, t dscarded the contro test atogetter,
by provdng n effect that contro by the benefcareS| wthout
busness, was nsuffcent to consttute an assocaton. Ths conces-
son, whch was not requred by echt v. Maey, was emnated
some 10 months ater by Treasury Decson 3748 (C. . I -2, 7).
It s apparent from the foregong that under the strct etter of
secton 704(a), the date of pubcaton of echt v. Mae/ as a
Treasury decson coud we be taken as the date when ts prncpe
frst became effectve for ncome ta purposes, on the theory that the
Treasury decson revoked or modfed a pror nconsstent ncome
ta rungs (and nconsstent ncome ta reguatons, too, f there
had been any such).
owever, the sprt of the subsecton requres that ta payers be
protected who fed returns as trusts n reasonabe reance on the
Department s atttude at the tme. echt v. Maey was a capta
stock ta case, and though, on strct theory, under the genera def-
nton n the Revenue cts that the term corporaton ncudes
assocatons, |ont-stock companes, and nsurance companes, the
essenta eements of an assocaton for ncome ta purposes and for
capta stock ta purposes must be the same, t can not be sad, n
vew of the fact that ncome ta reguatons and capta stock ta
reguatons, defnng the term assocaton, were both n e stence n
somewhat dfferent anguage, that ether the pubbcaton of echt v.
Maey as a Treasury decson, or the pubcaton of Treasury Dec-
son 3598, supra, amendng the capta stock ta reguatons, made t
cear to ta payers that a busness trust, uncontroed by ts benef-
cares, was, for ncome ta purposes, consdered by the Treasury
Department to be ta abe as a corporaton
under the reguatons n force. That t was so consdered was made
entrey cear, however, by I. T. 20 1, supra, and t s, therefore, the
opnon of ths offce that ugust 11, 1924, the date of pubcaton of
that rung, s, under secton 704(a), the effectve date of echt v.
Ma ey, for ncome ta purposes, wth respect both to reguatons and
rungs.
C. M. Charest,
Gen era Counse, ureau of Interna Revenue.
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157 20 . rt. 1 24.
INCOM T RULINGS. P RT .
R NU CT O 192 .
TITL n. INCOM T .
P RT I. G N R L PRO ISIONS.
S CTION 20 . N T LOSS S.
rtce 1 24: Net osses for 1923 and 1924. III-4-4077
G. C. M. 5457
R NU CT O 192 .
Ta payer vountary changed Its accountng perod from a fsca
year endng October 31 to the caendar year, and sustaned a net
oss for the perod from November 1, 1923, to December 31, 1923.
ed, that the ta payer may deduct the net oss sustaned durng
the perod from November 1 to December 31, 1923. from the ncome
of the caendar year 1925, there beng no net ncome derved n
1924. Recommended that Offce Decson 445 (C. . 2, 58), Offce
Decson 855 (C. . 4, 54), I. T. 1211 (O. . 1-1, 47), ppeas
and Revew Recommendaton 743 (C. . 1-1, 45), ppeas and Re-
vew Recommendaton 1128 (O. . 1-2, 34), I. T. 14 5 (C. . 1-2,
3 ), and I. T. 1509 (C. . 1-2, 39), n so far as they are nconsstent
wth ths rung, be revoked.
In 1923 the ta payer vountary changed ts accountng perod
from a fsca year endng October 31 to the caendar year and sus-
taned a net oss of doars for the perod from November 1, 1923,
to December 31, 1923. net oss was sustaned by the ta payer for
the caendar year 1924, but net ncome was derved n 1925. It s
contended that the net oss for the two-month perod n 1923 can not
be carred forward and apped aganst the net ncome for the suc-
ceedng and ne t succeedng ta abe years.
In the recent case of the Penn#/vanm Chocoate Co. v. C. O.
LeweUyn (27 ed. (2d), 7 2, T. D. 4200, C. . II-2, 244), the
Dstrct Court for the Western Dstrct of Pennsyvana hed that
u net oss sustaned n an 11-month perod resutng from a voun-
tary change n accountng perod, approved by the Commssoner,
may be apped aganst the net ncome for the precedng ta abe year,
such perod of ess than 12 months beng a ta abe year
wthn the meanng of secton 204(b) of the Revenue ct of 1918.
fter comparng a number of oard of Ta ppeas decsons upon
ths sub|ect, the court used the foowng anguage:
avng due regard to the varous statutes n whch the term s
used by Congress, I thnk the words ta abe year, when fary nterpreted,
mean ta abe perod, whether for 12 months or ess. ny doubt or ambguty
regardng the meanng of ta abe year has been removed n secton 200
of the Revenue cts of 1924 and 192 . y an e press provson these cta
contan net oss or reef provsons somewhat smar to those contaned n
secton 204(b) of the ct of 1918.
The return of ths ta payer for the perod from ebruary 1, 1919, to Decem-
ber 31, 1919, was requred both by ct and reguatons. It woud appear rea-
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208, rt. 1 51.1
158
sonaby cear that that became the tme unt for the perods of the ta , and
thus the ta abe year. If there s doubt on the sub|ect t shoud be con-
strued n favor of the ta payer. The cts of 1924 and 192 do not e pan
or restrct the appcaton of the cts of 1918 and 1921, but seem rather to
e pan a provson n the former, the constructon of whch was doubtfu.
It s my concuson, therefore, that the term ta abe year ncudes a
perod of ess than 12 months when a ta payer vountary, but sub|ect 10 and
wth the approva of the Commssoner, changes ts accountng perod from a
fsca to a caendar year bass, and that the ta payer s, therefore, entted to
appy the net oss sustaned durng that perod aganst the net ncome for
the fsca year endng anuary 31, 1919.
It s evdent that the appcaton of the foregong decson to the
nstant case requres the recognton of the perod from November
1, 1923, to December 31, 1923, as a ta abe year. Consequenty,
the net oss n the sum of doars sustaned durng the two-month
perod shoud be apped aganst the net ncome derved n the ca-
endar year 1925, there beng no net ncome derved n 1924.
It s recommended that Offce Decson 445 (C. . 2, 58), Offce
Decson 855 (C. . 4, 54), I. T. 1211 (C. . 1-1, 47), ppeas and
Revew Recommendaton 743 (C. . I 1, 45). ppeas and Revew
Recommendaton 1128 (C. . 1-2, 34), I. T. 14 5 (C. . 1-2, 3 ), and
I. T. 1509 (C. . 1-2, 39), n so far as they are nconsstent herewth,
be revoked.
C. M. Charest.
Genera Counse, ureau of Interna Revenue.
S CTION 208. C PIT L G INS ND LOSS S.
rtce 1 51: Defnton and ustraton of III-1 -417
capta net gan. I. T. 24 9
R NU CT O 192 .
Ta payer purchased two vacant ots, one n 1923 and the other
In 192 . ary n 1927 he erected a fng staton on each ot,
and ater durng the same year the entre propertes were sod at
a proft.
ed, nasmuch as the ots were capta assets, wthn the
meanng of secton 208 of the Revenue ct of 192 , the ta payer
may eect to have the porton of the proft from the sae whch s
aocabe to the ots ta ed to hm as a capta gan. Snce the
tng stntous were erected ess than two years pror to ther
sae, the| were not hed by the ta payer for more than two years
and were not capta assets wthn the meanng of secton 208.
dvce s equested as to whether the ta payer may eect to have
the gan reazed from the sae of certan propertes ta ed to hm
us capta gan under secton 208 of the Revenue ct of 192 or
whether such gan must be treated by hm as ordnary ncome.
It appears that the ta payer purchased two vacant ots, one ot
beng purchased n 1923 and the other n 1925. ary n 1927 he
erected a fng staton on each ot. Subsequenty, n 1927, the
entre propertes were sod at a proft.
Subdvson (a) (8) of secton 208 of the Revenue ct of 192
provdes n part as foows:
The term capta assets means property hed by the ta payer for mure,
than two years (whether or not connected wth hs trade or busness), but
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159
212, rt. 22.
dws not Incnde stock tn trade of the ta payer or other property of a knd
whch 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.
Subdvson (b) of the same secton provdes:
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 Imposed by sectons 210 and
211 of ths tte, a ta as foows:
parta ta sha frst be computed upon the bass of ths ordnary net
ncome at the tates 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 an.
Inasmuch as the ots were capta assets wthn the meanng of
secton 208 of the Revenue ct of 192 , the ta payer may eect to
Inve the porton of the proft from the sae whch s aocabe to the
ots ta ed to hm as a capta gan under that secton. Snce the
tng statons were erected ess than two years pror to ther .sae,
they were not hed by the ta payer for more than two years ana
were not capta assets wthn the meanng of secton 208. Therefore
the ta payer may not eect to have the porton of the proft whch
s aocabe to the fng statons ta ed to hm as capta gan under
secton 208, but must treat such porton as ordnary ncome.
P RT II. INDI IDU LS.
S CTION 212. N T INCOM O INDI IDU LS
D IN D.
rtce 22: Computaton of net ncome. TII-15-4170
. T. 24 8
R NU CT OP 192 .
Durng 1927 the ta payer sod shares of stock for 24| doars.
The purchaser pad 3a doars cash. s part of the consderaton
he nasumed an unpad baance of doars due from ta payer on
the purchase prce of the stock.
ed, the effect of the assumpton by the purchaser of the unpad
baance due from the ta payer a consdered to be the same as
that of the assumpton of an e stng mortgage n connecton wth
a sae of property as provded n artce 44. Reguatons 9, as
amended by Treasury Decson 42(55 (see on page 1G5).
dvce s requested as to the proper treatment, for ncome ta
purposes, of a sae of stock made by durng the year 1927.
It appears that the stock n queston was sod for a tota con-
sderaton of 24a doars, of whch amount 3,r doars was pad
by the purchaser n cash durng 1927. s part of the consderaton
the purchaser assumed an unpad baance due from the ta payer on
the purchase prce of the shares of stock n the amount of doars.
The queston s rased as to whether the amount st assumed shoud
he consdered as part of the nta payment on the sae receved
by the ta payer durng 1927, or whether t he treatment of such amount
shoud be smar to that of a mortgage assumed by the purchaser as
provded n the ast paragraph of artce 44 of Reguatons 9, as
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5213(a), rt. 31.
1 0
amended by Treasury Decson 4255 (see on page 1 5). Such para-
graph, so far as pertnent, provdes:
In the sae of mortgaged property the amount of the mortgage, whether
the property s merey taken sub|ect to the mortgage or whether the mortgage
Is assumed by the purchaser, sha be ncuded as a part of the purchase
prce, but the amount of the mortgage, to the e tent It does not e ceed the
bass to the vendor of the property sod, sha not be consdered as a part of
the Inta payments or of the tota contract prce, as those terms are
used In secton 212(d), n artces 42 and 45, and n ths artce.
ed, the effect of the assumpton by the purchaser of the unpad
baance due from the ta payer on the stock mentoned s consdered
to be the same as that of the assumpton of an e stng mortgage
n connecton wth a sae of property. ppyng ths rue to the
nstant case, t foows that the amount of doars n queston dd
not consttute a part of the nta payment receved by the ta payer
n 1927.
rtce 23: ases of computaton.
R NU CT OT 192 .
ccrua of rea and persona property ta es. (See . 0. M. 278,
page 1 8.)
rtce 23: ases of computaton.
R NU CT O 192 .
ccrua of Te as property ta es. (See G. 0. M. 272, page 170.)
rtce 53: ases of computaton.
R NU CT O 192 .
ccruas of Wsconsn ncome ta es. (See G. C. M. 075, page 7 .)
S CTION 213(a). GROSS INCOM D IN D:
INCLUSIONS.
rtce 31: What ncuded n gross ncome. III-9-4124
G. C. M. 5741
R NU CTS O 1921, 1924, ND 192 .
mounts receved under the terms of a w eavng property n
trust and provdng that the ncome from such trust shoud be
pad to a desgnated benefcary, the daughter of the testator,
represent ncome to the recpeut and consttute her separate prop-
erty under the aws of Te as.
The w of devsed certan propertes to trustees, a proporton
of the ncome from whch was to be pad perodcay to hs daughter,
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8213(a), rt. 31.
, the ta payer. No part of the corpus of the trust was to be pad
to her. The amounts receved by her from the trustees durng the
ta abe years n queston consttute the ncome the status of whch
s n controversy. The ta payer and her husband, C, are resdents
of the State of Te as.
Two questons are presented for opnon:
1. Was the ncome receved by from the trustees for the years
1923, 1924, 1925, and 192 ta abe ncome
2. Was such ncome her separate property or was t communty
property under the aws of Te as
The frst queston must be resoved n the affrmatve. The Supreme
Court, n the case of Irwn v. Gavt (2 8 U. S., 1 1, T. D. 3710, C. -
I -1, 123), hed that amounts receved under the terms of a w
eavng the resdue of an estate n trust and provdng that the ncome
from the trust estate be pad to a desgnated person, are ta abe as
ncome. The facts n the nstant case are ceary anaogous, and t
therefore cear that the trust ncome receved by was ta abe.
To ascertan whether the ncome under consderaton was the
separate property of the wfe or was communty property recourse
must be had to the aws of Te as.
The consttuton of the State of Te as, n rtce I, secton 15,
ceary defnes what s the separate property of the wfe. The pert-
nent provsons are as foows:
property, both rea and persona, of the wfe, owned or camed by her
before marrage, and that acqured afterwards by gft, devse, or descent, sha
be her separate property and aws sha be passed more ceary defnng the
rghts of the wfe, n reaton as we to her separate property as that hed n
common wth her husband.
The Supreme Court of Te as, n rnod v. Leonard (114 Te ., 535,
278S. W.,799 (1925)),stated that ths anguage had been ncorporated
n the consttuton of 1845, and retaned n a the consttutons of that
State adopted snce. In construng that secton the court sad:
The pan and obvous mport of the anguage of the consttuton s to pre-
scr)e a test by whch to determne when an acquest by the wfe becomes a
porton of the wfe s separate estate. The test durng coverture reates to the
method by whch the property s acqured. If the method be by gft, devse, or
descent to the wfe, then the consttuton makes the property beong to the wfe s
eptrate estate. If the method of acqurng durng marrage be dfferent, then
the property fas wthout the cass of separate estate of the wfe, as f ed by
the consttuton. We thnk the supreme court was dong no more than gvng
effect to the words of the consttuton when t sad:
ut of the property whch a wfe may acqure durng marrage, none be-
comes her separate estate, e cept such as Is derved by gft, devse or descent.
( ze v. Dodson, GO Te ., 332.)
In the same case the court sad that t coud conceve of no sound
reason for concudng that the terms of the consttuton of 1845 were
not meant to furnsh the soe measure of the wfe s separate estate.
Itacs supped. The court aso sad that the egsature coud not
enarge or dmnsh the separate property of a wfe, as so defned n
the consttuton. Secton 15 of rtce I of the consttuton of the
State of Te as, then, remans the test whether property acqured by a
wfe subsequent to coverture s her separate property or s communty
property.
It s the opnon of ths offce that the ncome n the nstant case,
pad to the ta payer by the trustees, under the terms of the w
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213(a), rt. 31.
1 2
of her father, was acqured by devse as that word s used n the
consttuton of the State of Te as. That the ncome was not prop-
erty acqured by gft, bequest, devse, or descent wthn the mean-
ng of secton 213(b)3 of the varous Revenue cts (/Twn v. Gavt,
supra) s deemed mmatera. The ta payer receved the ncome
under the terms of a devse n the w of her father. The ncome
was not acqured by purchase or by any other smar means whereby
property s acqured. It thus comes wthn the defnton of sepa-
rate property of a wfe as set forth n the above-mentoned secton
of the Te as Consttuton.
Ths concuson s supported by decsons of the Supreme Court
of Te as. In the case of McCeand v. McCeand (37 S. W., 350),
a testator had created a spendthrft trust for hs son. The estate
was eft to trustees, wth drectons to pay over certan ncome to
the son monthy for hs support. The son s wfe n a proceedng
n dvorce sought to recover an nterest n the trust estate by vrtue
of the communty property aws. The court dened recovery, and
sad, moreover, the wfe s not entted to receve any nterest n
the amounts receved by the appeant, McCeand, from the e ecu-
tors, because these amounts were hs separate property, devsed to
hm by the w, n whch the wfe had no communty nterest.
Ths decson was adverted to by the Supreme Court of Te as n
the case of offman v. Rose (217 S. W., 424, 428), where the court
sad that on the McCeand case the wfe coud not recover any
nterest n the ncome as a part of the communty estate.
Ths offce therefore has reached the concuson that the ncome
n the nstant case was ta abe to the wfe and consttuted her
separate property under the aws of Te as.
C. M. Chakest,
Genera Counse, ureau of Interna Revenue.
rtce 31: What ncuded n gross ncome.
R NU CT O 192 .
Income from restrcted Indan and conveyed by one member of
the Otoe Trbe of Indans to another member of the trbe, the deed
contanng restrctons as to aenaton by the grantee. (See G. C. M.
0020, page 3.)
rtce 31: What ncuded n gross ncome.
R NU CT O 102 .
Combned fe nsurance and annuty contracts referred to as Lfe
annuty wth death beneft contract and Partcpatng fe ncome
pocy wt prncpa sum payabe at death. (See G. C. M. 395,
page 7.)
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1 3
213(a), rt. 32.
rtce 32: Compensaton for persona
servces.
R NU CTS O 1024 ND 192 .
III-13-4157
G. C. M. 5792
In October, 1924, the stock of the M Company, an operatng
corporaton, whch was entrey owned by the N Company, a hodng
corporaton, was sod to the O Company. In November, 1924, after
consummaton of the sae, a resouton was adopted by the board
of drectors of the hodng corporaton authorzng the payment
of addtona compensaton to offcers and empoyees of the oper-
atng corporaton n recognton of ong and fathfu servces.
payment of doars was made to the ta payer, an e ecutve of
the od operatng corporaton, toward (he end of 1924, and a pay-
ment of 2 doars was made n 1925.
ed, the payments n queston were not gfts to the ta payer
but addtona compensaton for servces prevousy rendered and
consttuted ta abe ncome.
n opnon s requested reatve to the ta abty of a payment
made to by the N Company, doars of whch was receved n 1924
and 2 doars of whch was receved n 1925.
The ta payer, , was an e ecutve of the M Company, an operat-
ng corporaton, whose stock was entrey owned by the N Company, a
hodng corporaton wth very few stockhoders. On October ,
1924, the capta stock of the operatng corporaton was sod by the
hodng corporaton to the O Company, the consderaton beng
specfed as securtes of the O Company.
On November , 1924, after consummaton of the sae of the oper-
atng corporaton stock, the foowng resouton was adopted by the
board of drectors of the hodng corporaton, and ater approved
by the stockhoders:
The drectors of the N Company request that the stockhoders of
the company authorze them, n recognton of the ong and fathfu servces of
the offrer and empoyees of the M Company, to pay the offcers and empoyees
to be desgnated by the board of drectors addtona compensaton to be decded
by the board of drectors, and that they be authorzed to set asde for such com-
pensaton a sum not to e ceed W doars. Itacs supped.
Ths resouton was nduced, n part, by the fact that the O Com-
pany made radca changes n the terms and condtons of empoy-
ment of the empoyees of the M Company, some of whom severed
ther connecton wth the O Company at that tme. It was aso
nduced, n part, by a frendy feeng for the empoyees of the
operatng corporaton, due to many years of assocaton.
fter the passage of the resouton, t was found that there were no
avaabe cash funds from whch to make the payment. The hodng
corporaton s stock n the operatng corporaton had a been trans-
ferred to the O Company, and as the hodng corporaton had no qud
assets, the hodng corporaton actng through ts stockhoders de-
cded to rase the funds to make the payment by the sae of some of
the O Company bonds. commttee of stockhoders of the hodng
corporaton was formed, and the O Company, on the order of the sad
stockhoders actng for the hodng corporaton, turned over to the
commttee O Company bonds to an appro mate amount of Oar
doars, ths beng part of the consderaton for the sae of the operat-
ng corporaton stock. The bonds were sod, and the proceeds then
pad by the commttee to the offcers and empoyees of the od operat-
ng corporaton, ncudng the ta payer, . In makng the payment
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8213(a). rt. 32.
1 4
the commttee was actng for the hodng corporaton and n pur-
suance of the resouton of November , 1924.
The payment to the ta payer n the nstant case must be regarded
not as a gft but as compensaton pad for servces prevousy ren-
dered. Whether or not such a pa| ment s a gft must|epend upon
the ntenton of the partes and the facts and crcumstances surround-
ng the transacton.
The very purpose of the payment n queston precudes the dea of
a gft, nasmuch as there was a consderaton for the payment,
namey, the ong and fathfu servces of the offcers and empoyees
of the M Company, whch were to be pad for by ths addtona
compensaton. (See I. T. 1202, C. . 1-1, 71 I. T. 1 00, C. . II-,
184 O. D. 570, C. . 3, 144.)
rom the wordng of the resouton of November , 1924, whch
was passed by the board of drectors of the hodng corporaton and
approved by the stockhoders, and n pursuance of whch the payment
was made, t appears that t was the ntenton of the hodng corpo-
raton to make payments to offcers and empoyees to be desgnated
by the board. The dstrbuton was made and ntended to be made
as addtona compensaton to those who had rendered servces to
the od operatng corporaton that s, to those from whom the hod-
ng corporaton had receved a consderaton n the past. Payment
was to be made n accordance wth the deserts of the persons to be
benefted by the payment. The payment was thus to be n the nature
of a bonus, whch s not a gft or gratuty, but a sum pad for serv-
ces or upon a consderaton n addton to or n e cess of that whch
woud ordnary be gven. (See Noe v. Parrott, 15 ed. (2d), 9,
T. D. 3908, C. . -2, 149, and cases there cted and Woods db Sons
Co. v. Commssoner, 8 . T. ., 705, C. . II-1, 34.)
The nstant case, n many essenta features, s anaogous to that of
ones et a . v. Commssoner (10 . T. ., 202). In the atter case
the ta payer pettoners had receved certan amounts out of a fund
created by former stockhoders of the empoyer corporaton from
the proceeds from the sae of ther stock, whch fund was created for
the purpose, among others, of makng payments to certan offcers
and empoyees of the corporaton on account, of the sudden termna-
ton of the busness assocaton and n recognton of the efforts and
devoton of these offcers and empoyees n the accesson n the vaue
of the stockhoders property. The amounts so receved were re-
garded by the pettoners as gfts and e cuded from gross ncome
m ther returns. The oard of Ta ppeas hed that the amounts
consttuted ta abe ncome.
The nstant case s aso somewhat smar to the case of Mount v.
Commssoner (10 . T. ., 115 ), where the amount gven to an
empoyee after he resgned was hed to be addtona compensaton
kewse to the case of eatty v. Commssoner (7 . T. ., 72 ),
where the addtona compensaton was n consderaton of past
servces and, therefore, not a gft. ( nd see O. D. 1029, C. . 5, 85.)
n addtona fact showng the nature of the payments s obtaned
from the anguage used n the mnutes of the commttee showng
passage of the resouton authorzng the secretary of the commttee
to make the payments. Ths mnute reads as foows:
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213(a), rt. 44.
Upon moton duy seconded and carred, the secretary was authorzed to
reease the checks n payment of certan bonuses to the amount of 10 doars,
as per memorandum on fe.
The ta payer aeges that the amount pad n 1924 was n the
nature of a Chrstmas gft. The tme of the year when ths part
of the payment was made can not, pso facto, transmute t nto a
Chrstmas gft. The dea wth the O Company was practcay
consummated about November , 1924. The resouton n queston
was passed on November , 1924, and by the tme the frst part of
the payment coud be made the Chrstmas season of 1924 was reached.
Such part of the payment merey happened to be made durng the
Chrstmas season. The tme when t was made had nothng to do
wth ts nature or purpose.
The nstant case s ceary dstngushabe from the appea of
state of Davd R. Day (3 . T. ., 1042, C. . II-1, 8). In
the Day case the oard of Ta ppeas hed that the ntenton of
the empoyer to make a gft was cear, as was the ntenton of the
empoyer n the case of Spang-C haf ant Co., Inc., v. Commssoner
(9 . T. ., 858, C. . TI-1, 28), and n the case of Rosseter v.
Commssoner (12 . T. ., 254), nonacquesced n by Commssoner
(C. . II-2, 51). In the nstant case t s qute as cear that the
payment to the ta payer was ntended as addtona compensaton.
In vew of the foregong, ths offce s of the opnon that the
amounts pad to the ta payer n 1924 and 1925 by the N Company
were not gfts, but consttuted ta abe ncome.
C. M. Chakest,
Genera Counse, ureau of Interna Revenue.
rtce 44: Sae of rea property nvovng III-2-40 7
deferred payments. T. D. 4255
INCOM T .
rtce 44 of Reguatons 9 amended.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, I). C.
To Coectors of Interna Revenue and Others Concerned:
The ast paragraph of artce 44 of Reguatons 9 s hereby
amended to read as foows:
In the sae of mortgaged property the amount of the mortgage, whether the
property s merey taken sub|ect to the mortgage or whether the mortgage s
assumed by the purchaser, sha be ncuded as a part of the purchase prce,
but the amount of the mortgage, to the e tent It does not e ceed the bass to
the vendor of the property sod, sha not be consdered as a part of the nta
payments or of the tota contract prce, as those terms are used n secton
212(d), n artces 42 and 45, and n ths artce. Commssons and other seng
e penses pad or ncurred by the vendor are not to e deducted or taken nto
account n determnng the amount of the Inta payments, the tota contract
prce, or the purchase prce.
. . Mres.
ctng Commssoner of Interna Revenue.
pproved anuary 8,1929.
. W. Meon,
Secretary of te Treasury.
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214(a), rt. 101.
1
S CTION 213(b). GROSS INCOM D IN D:
CLUSIONS.
rtce 72: Proceeds of nsurance Compensaton
Pensons.
R NU CT O 1928.
Combned fe nsurance and annuty contracts referred to as Lfe
annuty wth death beneft contract and Partcpatng fe ncome
pocy wth prncpa sum payabe at death. (See G. C. M. 395,
page 7.)
S CTION 214(a) 1. D DUCTIONS LLOW D INDI-
IDU LS: USIN SS P NS S.
rtce 101: usness e penses. III-2-40 2
G. C. M. 5533
R NU CT O 192 .
pendtures made by moton pcture actors n entertanng
newspaper reporters are not deductbe as ordnary and neces-
sary e penses drecty connected wth or pertanng to tber
busness.
pendtures made by such actors for the upkeep and operaton
of ther automobes are aowabe deductons as busness e penses
to the e tent that they represent the cost of transportaton actuay
requred n carryng on ther busness.
n opnon s requested regardng the deductbty of certan e -
pendtures ncurred by and hs wfe n connecton wth ther
busness as moton pcture actors.
It appears that and hs wfe, the ta payers, spend consderabe
sums annuay n entertanng newspaper reporters at uncheons,
dnners, and the theater. The contenton s made that actors must
do entertanng of such nature n order to obtan favorabe pubcty
and mantan ther popuarty wth the pubc that the cost of such
entertanng s, n reaty, an e pense for advertsng and that the
amount thereof shoud be aowed as a deductbe busness e pense.
pendtures are aso made by the ta payers for the mantenance
of an automobe and the empoyment of a chauffeur. though
s empoyed under contract, he must furnsh much of hs own trans-
portaton, and hs wfe, who does free ance actng, must furnsh
a of hers. The automobe s used by the ta payers not ony n
gong from ther home to ther studos, but aso n gong from ther
studos to the studo-ranch, and n gong from pace to pace to make
tests for parts n new pctures. The ta payers aso use the car n
gong to vew pctures, whch s a part of ther research work. Ther
pan s to see as many pctures as possbe n order to detect errors,
gather new deas, and thus mprove ther own actng. The chauffeur
drves the automobe on the varous trps descrbed and aso drves
aone on errands n connecton wth the ta payers busness.
It s the opnon of ths offce that e pendtures made by and
hs wfe n entertanng newspaper reporters are not ordnary nd
necessary e penses drecty connected wth or pertanng to ther
busness and, therefore, shoud not be aowed as deductons for
busness e penses. (See artce 101 of Reguatons 9.) The e -
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1 7
214(a), rt. 101.
penses are not those of advertsng, as that term s generay used.
They are, n fact, ncurred n deveopng persona good w among
pubcty wrters. It s e pected by the ta payers that, as a resut
of such entertanng, they w receve favorabe pubcty n the
newspapers, that ther popuarty wth the pubc w thereby be
promoted, that the demand for fms whch they have heped to
produce w be ncreased, and that ther ncome from the producers
w, n turn, be affected. Whe the e pendtures may be benefca
to the ta payers busness, they are too remote from that busness
and too persona n character to be consdered busness e penses
wthn the meanng of the statute. Persona popuarty, ke broad
acquantanceshp, good heath, good reputaton, and proper per-
sona appearance, may pay a more or ess mportant part n the
successfu conduct of any busness, yet t s, nevertheess, a persona
attrbute, and sums e pended for ts advancement must be regarded,
for ta ng purposes, as persona e penses. The aw makes no e -
cepton n the case of a ta payer who, by reason of hs carryng
on a certan busness, s obged to spend more for persona e -
penses than he woud otherwse but for the carryng on of such
busness. (O. D. 1032, C. . 5, 172.)
pendtures made by the ta payers for the upkeep and operaton
of ther automobe shoud be aowed as deductons to the e tent
that they represent the cost of transportaton actuay requred n
carryng on ther busness. rtce 105 of Reguatons 9 authorzes
the deducton of automobe e penses ncurred by professona men
n makng professona cas. The same rue may be apped wth
respect to actors. Thus, the use of the automobe n gong from the
ta payers studos to the studo-ranch for the purpose of actng s a
busness use, and, f other means of transportaton are not provded,
the cost of operatng the automobe for such purpose, shoud be
aowed as a deducton. ( . R. R. 2 , C. . 3, 131 ay v. Com-
mssoner, 10 . T. ., 534, C. . II-1, 17.) If, however, other
transportaton s supped by the movng-pcture producers, use of
the automobe s not necessary, even though convenent, and the
e pense of ts operaton s not deductbe. The cost of transporta-
ton from the ta payers home to ther studos s a persona e pense
and shoud not be deducted. ( ppea of rank . Suvan, 1 .
T. ., 93.) It has been hed that e penses ncurred, not n the
course of empoyment but n search for empoyment, are persona
e penses (I. T. 1397, C. . 1-2, 145) hence, e pendtures made
by s wfe for transportaton n seekng empoyment as a free
ance actor are not deductbe. pendtures ncurred n connec-
ton wth educatona or research work are aso persona. (I. T. 1520,
C. . 1-2, 145.)
The e pense of empoyng a chauffeur shoud be regarded n the
same manner as the e pense of operatng an automobe. If the
e pendture s not ordnary and necessary wth respect to the ta -
payer s busness, t shoud not be deducted as a busness e pense. On
the other hand, f the e pendture appears ordnary and necessary,
n vew of a surroundng crcumstances, t shoud be aowed as
a deducton. ( ay v. Commssoner (supra).) In determnng to
what e tent a chauffeur s empoyed for busness purposes a smar
-12
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214(a)8, rt. 131.
1G8
test shoud be apped as n determnng the e tent to whch an auto-
mobe s empoyed for busness purposes.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
rtce 112: When charges deductbe.
R NU CT O 192 .
reght charges of umber manufacturers keepng books on accrua
bass. (See I. T. 2473, page 88.)
S CTION 214(a) 3. D DUCTIONS LLOW D
INDI IDU LS: T S.
rtce 131: Ta es. III-21-4212
( so Secton 212, rtce 23.) G. C. M. 273
R NU CT OP 1928.
In the State of Inos, the abty for rea and persona
property ta es s ncurred on pr 1 of each year, and accord-
ngy snch ta es accrue on that date for ncome ta purposes.
Genera Counse s Memorandum 1240 (C. . I-1, 5). Gen-
era Counse s Memorandum 8244 (C. . II-1, 82), and a other
Genera Counse s memoranda nconsstent herewth are revoked.
Ts offce has been requested to reconsder Genera Counse s
Memorandum 3244, on the ground that sad memorandum s contrary
to the decson of the Unted States oard of Ta ppeas n . a.
rawn Co. v. Commssoner (8 . T. ., 112), n whch decson the
Commssoner has acquesced C. . II 1, 5).
rom the Inos evsed btatutes, t appears that before the 1st
day of une of each year the county assessor s requred to assess the
vaue of both rea and persona property as of the 1st day of pr
and dever the assessment books to the county cerk on or before the
1st day of uy. The assessments are revewed and equazed as pro-
vded by aw, and on or before the 7th day of September are de-
vered to the county cerk. The county cerk s then requred to
ascertan the rates per cent requred to be e tended upon the assessed
vauaton of the ta abe property n the respectve towns, townshps,
dstrcts, ncorporated ctes, and vages n hs county as equazed
by the State ta commsson for the current year to produce the sev-
era amounts certfed for e tenson by the ta ng authortes n the
sad county. There s no date specfed by the statute upon whch the
property ta es are due and payabe, but they are requred to be pad
upon demand by the coector, and n the case of negect or refusa
to pay the ta the property s sub|ect to dstrant. It s further
provded that to each coector s book a warrant, under the hand and
offca sea of the county cerk, sha be anne ed, commandng the
coector to coect from the severa persons named n sad boo the
severa sums entered n the coumn of totas opposte ther respectve
names. (Smth- urd Inos e vsed Statutes, 1925, ch. 120. sees.
94 to 330.)
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1 9
214(a)3, rt. 131.
The revsed statutes specfcay provde that:
the owner of property on the 1st day of pr In any year sha
be abe for the ta es of that year.
The purchaser of property on the 1st day of pr sha be consdered as the
owner on that day. (Ch. 120, sec. 287.)
In Peope e re. McCvough v. Lades of Loretto (24 111., 403,
92 . ., 908), the Supreme Court of Inos had before t for con-
sderaton the foowng state of facts: The Lades of LoretLo was
a corporaton, not for pecunary proft, organzed under the aws of
Inos for educatona and chartabe purposes. It purchased cer-
tan rea estate on une 22, 1909, and camed that the property w as
e empt from ta aton. The court sad n part:
Severa ob|ectons to the suffcency of the evdence to brng the property
wthn the aw e emptng property from ta aton were presented by tha
audtor to the board of revew and certfed to ths court but, nasmuch as
there s a fata ob|ecton to the petton, regardess of the evdence, the other
ob|ectons w not be consdered. The corporaton was not the owner of the
ots n queston on the 1st day of pr, 1909, but acqured the same by war-
ranty deed on une 22, 1909. The en of the State for ta es of the year 1909
attached to the property on the 1st day of pr of that year, when It waa
sub|ect to ta aton, and. beng charged wth the en, t was not reeved there-
from by the fact that the corporaton acqured tte afterward. If the property
was afterward devoted to regous or educatona purposes, that fact dd not
remove the en or dscharge the obgaton. Peope v. t. rancU cademy
(238 111., 2 , 84 N. ., 55).
See aso Peope v. Cathoc shop of Chcago (311 111., 11, 142
N. .. 520), to the same genera effect.
In . . rown Co. v. Commssoner, the oard of Ta ppeas
consdered the queston of when property ta es n Massachusetts may
be deducted by a ta payer keepng ts accounts on an accrua bass.
The pettoner kept ts books and fed ts ncome ta return on the
bass of a fsca year endng une 30. In Massachusetts rea estate
s assessed n the town where t es, to the person who s cther the
owner or n possesson thereof on the 1st day of pr of each year.
Persona estate s assessed to the owner n the town where he s a
resdent on pr 1. The oard reached the concuson that the
property ta es pad by the pettoner n October, 1922, were abtes
of the pettoner on pr 1 of that year, and under the accrua bass
were deductbe from gross ncome for the fsca year endng une
30. 1922.
The oard reed n part on the decson of the Supreme udca
Court of Massachusetts n Rchardson v. oston (148 Mass.. 508, 20
N. ., 1 ), decded under a statute that f ed May 1, nstead of
pr 1, as the day as of whch property shoud be assessed. That
case nvoved the foowng facts: Certan rea estate n oston
was assessed as of May 1,1883, to the then owner. On May 25. 1883,
the Commonweath took the property under the rght of emnent
doman. The court hed that the owner on May 1 was personay
abe for the ta as of that day, though the en had been ost,
snce the Commonweath was, after May 25, both the owner of the
property and entted to the ta .
In both Peope em re. McCvough v. Lades of Loretto and n
Rchardson v. oston, supra, the courts hed n effect that the owner-
shp or possesson of property on a certan day created a abty for
payment of the ta , and, as sad n the Rchardson case, wth refer-
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214(a)3, rt. 131.
170
ence to the owners on that day, The faure to actuay assess and
coect the ta on that day docs not affect ther ega poston.
The Unted States Supreme Court sad n Unted States v. nder-
son et a. (2 9 U. S., 422, T. D. 3839 (C. . -, 179)):
In a technca ega sense t may be argued that a ta does not accrue unt
t as 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.
The ownershp of property n Inos on pr 1 s the event
whch determnes the abty for property ta es, and f es the
amount, athough not ascertanabe on that date. s the oard sad
n the rown case:
The basc dea under the accrua system of accountng s that the books sha
Immedatey refect obgatons and e penses defntey ncurred and ncome
defntey earned wthout regard to whether payment has been made or whether
payment s due. penses ncurred n the operatons for a partcuar year
are propery accrued n the accounts for that year, athough payment may not
be due unt the foowng year. Under the accrua system, the word accrued
does not sgnfy that the tem Is due n the sense of beng then payabe On
the contrary, the accrua system whoy dsregards due dates. Nether s t
necessary that the amount of an ncurred abty be accuratey ascertaned
n ord r to accrue t. Itacs supped.
In vew of the foregong, t s the opnon of ths offce that n the
State of Inos the abty for property ta es s ncurred on pr
1 of each year, and accordngy that such ta es accrue on that date
for ncome ta purposes.
Genera Counse s Memorandum 1240, Genera Counse s Memoran-
dum 3244, and a memoranda of ths offce nconsstent herewth are
revoked.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
rtce 131: Ta es.
R NU CT O 192 .
Gasone ta mposed by the Mchgan statute, approved anuary
29. 1925. (See I. T. 24 5, page 72.)
r.Tc 131: Ta es. III-22-4219
( so Secton 212, rtce 23.) G. C. M. 272
R NU CT OP 1920.
In the State of Te as, the abty for property ta es s ncurred
on anuary 1 of each year. ccordngy, for ncome ta purposes,
such ta s accrue on that dae.
n opnon s requested as to the date of the accrua of certan
property ta es mposed by the aws of Te as.
or 924 the ta payer fed ts ncome ta return on an accrua-
caendar year bass. Thereafter t changed to an accrua-fsca year
bass, and fed a return for the perod anuary 1 to une 30, 1925.
On ths return the ta payer deducted one-haf of the State, county,
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171
214(a)3, rt. 131.
and cty property ta es mposed wth reference to property hed or
owned on anuary 1,1925. Ths deducton was camed on the theory
that one-haf of these ta es accrued pror to une 30, 1925. The
ta es were not payabe unt October 1 and coud be pad wthout
ncurrng a charge for denquency up to ebruary 1 of the foow-
ng year. The contenton s made that no part of such ta es accrued
pror to une 30, 1925.
rom the Te as Revsed Cv Statutes t appears that a property
must be sted for ta aton between anuary 1 and pr 30 of each
year, when requred by the assessor, wth reference to the quantty hed
or owned on the 1st day of anuary n the year for whch the property
s requred to be sted or rendered. ny property purchased or
acqured on the 1st day of anuary sha be sted by or for the person
purchasng or acqurng t. ach assessor of ta es s requred be-
tween the 1st day of anuary and the 30th day of pr of each year
to proceed to take a st of the ta abe property n hs county and
assess the vaue thereof. The assessor s requred pror to the frst
Monday n une or as soon thereafter as practcabe to submt to the
board of equazaton for hs county for nspecton, approva, correc-
ton, or equazaton a the sts of property rendered to hm. fter
the approved st s returned to the assessor he s requred to make a
ro or book, as requred by the comptroer, from the corrected st.
On or before ugust 1 he must submt ths ro or assessment book
to the county board of equazaton. fter the board of equazaton
has returned the ro or assessment book, a copy thereof must be
devered to the ta coector. On or before October 1, or as soon
thereafter as the coector s abe to obtan the assessment ro or
book, he s requred to begn the coecton of ta es. (Revsed Cv
Statutes of Te as, 1925, tte 122, chapter , artce 7151 chapter 7,
artces 7189, 7218, 7219. 7222, and 7224 chapter 8, artce 7255.)
In the case of Wnters et a. v. Independent Schoo Dstrct of
vant (208 S. W., 574), t was hed by the Te as Court of Cv
ppeas that the ownershp of property on the 1st day of anuary
of any year creates a abty on the part of the owner for ta es
eved upon such property for that year.
The Unted States Supreme Court sad n Unted States v. nder-
son et a. (2 9 U. S., 422-433, T. D. 3839 (C. . -, 179)) :
In a technca ega sense t may be argued that a tu dues not accrue unt
t has been assessed and becomes due: but It Is 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.
The ownershp of property n Te as on anuary 1 s the event
whch determnes the abty for property ta es, and f es the
amount, athough not ascertanabe on that date. (See G. C. M.
273, on page 1 8.)
ccordngy, t s the opnon of ths offce that n the nstant case,
the abty for property ta es havng been ncurred on anuary 1,
the ta es accrued on that date for ncome ta purposes. It foows
that a of the property ta es, rather than one-haf thereof, for whch
the ta payer became abe on anuary 1, 1925, were propery deduct-
be from gross ncome for the s -month perod ended une 30,
1925.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
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214(a)10, rt. 251. 172
rtce 131: Ta es.
R NU CT O 1928.
ccruas of Wsconsn ncome ta es. (See G. C. M. 075, page 7 .)
rtce 133: Ta es for oca benefts.
R NU CT O 1928.
Treatment. (See G. C. M. 5589, page 83.)
S CTION 214(a)8. D DUCTIONS LLOW D
INDI IDU LS: D PR CI TION.
rtce 1 2: Deprecabe property.
R NU CT O 1928.
ssessment for street mprovements on front-foot or vauaton
bass. (See G. C. M. 5589, page 83.)
S CTION 214(a) 10. D DUCTIONS LLOW D INDI-
IDU LS : CONTRI UTIONS OR GI TS.
rtce 251: Contrbutons or gfts.
R NU CT O 1928.
Navy and Marne Memora ssocaton. (See I. T. 24 0, page 98.)
rtce 251: Contrbutons or gfts. III-15-4171
G. C. M. 5959
R NU CT O 192 .
coege fraternty havng a fraternty bouse whch s used as a
meetng pace and for entertanments, and at whch many of Its
members ve, Is prmary a soca organzaton and Is not organzed
e cusvey for scentfc, terary, or educatona purposes. Con-
trbutons to such an organzaton are not deductbe n computng
net ncome.
The queston s submtted whether the amount contrbuted by to
the M fraternty at R Coege s deductbe by hm n computng net
ncome, under secton 214(a) 10 of the Revenue ct of 192 .
Secton 214(a) 10 provdes n part as foows:
In computng net ncome there sha be aowed as deductons to ndvduas :
(10) Contrbutons or gfts made wthn the ta abe year to or for the use
of:
( ) ny corporaton, organzed and operated e cusvey for
scentfc, terary, or educatona purposes, , no part of the
net earnngs of whch nures to the beneft of any prvate sharehoder or
Indvdua .
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173 219, rt. 343.
states that the M fraternty, wth ts varous chapters, s the
usua type of coege fraternty that at R Coege, where the amount
of hs contrbuton was spent, the fraternty owns a chapter house,
whch was but from contrbutons from ts members, and whch con-
tans vng rooms, dnng rooms, seepng rooms, study rooms, and a
brary for ts undergraduate members. The contenton of s that
the fraternty s strcty a cutura and educatona organzaton, con-
trbutng drecty to the character and quaty of the student fe of
the coege, and e stng soey as an ad|unct of the coege that t
woud not e st e cept for the coege and that n ts absence the
coege tsef woud have to provde the factes and features whch
t now furnshes. ccordng to s statements, the fraternty s not
organzed for proft there are no profts nurng to any member of
the fraternty and the fraternty generay operates at a oss.
raterna socetes, as organzed n the varous unverstes and
coeges, have a soca purpose n a marked degree. Wth a fraternty
house as a meetng pace, as the vng quarters of many of ts mem-
bers, as the pace where meas are served to ts members, and as the
headquarters of ts entertanments, t s prmary a soca center for a
group whch has a these vared actvtes of a dstnctve soca na-
ture as the man reason for the e stence of a fraternty.
In the opnon of ths offce the M fraternty s not organzed and
operated e cusvey for scentfc, terary, or educatona purposes.
It must be concuded, therefore, that the contrbuton made by to
the M fraternty s not deductbe by hm n computng hs net ncome
under secton 214(a)10 of the Revenue ct of 192 .
C. M. Charest,
Genera. Counse, ureau of Interna Revenue,
S CTION 219. ST T S ND TRUSTS.
mcL 342: Method of computaton of net III-1-4057
ncome and ta . G. C. M. 5479
R NU CTS O 1024 ND 192 .
y the terms of the w of , trustees were drected to cary
on and manage the busness carred on by the testator durng hs
fetme u the manner whch n ther |udgment and dscreton
they shoud deem to be for the best nterests of the trust estate,
and to dstrbute the net ncome of the trust estate remanng,
after provdng for any necessary charges, dsbursements, and
e pendtures, to named benefcares. The testator durng hs fe-
tme made due aowance for the deprecaton of the busness prop-
erty, but the w contaned no e press requrement that the
trustees shoud make such aowance.
od, that the w shoud be nterpreted as authorzng the
trustees, n determnng the amount of the ncome of the trust
estate to be dstrbuted currenty to the benefcares, to set asde
from the gross ncome of the trust estate reasonabe amounts for
the deprecaton of the busness property, nnd that ony the ncome
actuay dstrbuted to the benefcares shoud be ncuded n ther
ndvdua returns.
n opnon s requested as to whether the benefcares of the trust
estate of shoud ncude n ther ndvdua returns for the ta abe
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219, rt. 342.
174
years 1924 and 1925 ony the ncome of the trust actuay dstrbuted
to them, or whether ther shares shoud be ncreased each year by the
amounts set asde by the trustees from the gross ncome of the trust
estate to provde for the deprecaton of the trust property.
It appears that and C are benefcares of the trust estate of ,
created under the w of , who ded n 1923. The trustees have
construed the provsons of the w as authorzng, n the determ-
naton of the amounts to be dstrbuted to the benefcares, the settng
asde from the gross ncome of the warehouse, genera storage, safe
depost, movng, and packng busness conducted by them as trustees,
of reasonabe amounts to provde for the deprecaton of the trust
property. The benefcares have acquesced n the acton taken by
the trustees, and the surrogate s court has approved the accountng
of the trustees rendered n accordance wth ther constructon of the
provsons of the w.
The pertnent parts of the w of creatng the testamentary
trust n whch and C are named as benefcares are as foows:
Twenty-thrd: I authorze, drect, and empower the trustees or such of them
as may quafy or the survvor of fhen to c. rry on, conduct, manage, super-
vse, and contnue the warehouse, genera storage, safe depost, movng, and
packng busness and any and a other busness now carred on and conducted
by me n the premses at , durng the term of the trust or trusts created
by ths, my w, or so ong as such busness sha yed a reasonabe net proft,
and by reason of my absoute fath and confdence n ther abty and n-
tegrty. I do hereby authorze, drect, and empower them o so carry on. con-
duct, manage, supervse, and contnue sad busness n any manner whch n
ther |udgment and dscreton they sha deem to be for the best nterests of the
trust estate, .
Twenty-fourth : I authorze and empower the trustees, or such of them as
may quafy or the survvor of them to pay a ta es, assessments, water rates,
nsurance, and other charges of every knd, nature, and descrpton ncurred
or to be ncurred n connecton wth the busness conducted n the premses at
, and any budng or budngs used n connecton therewth, and from
tme to tme to dsburse such sum or sums as n the |udgment of the trustees
may be necessary to mprove, enarge, or bud nddtons thereto and to keep
the sad premses n good repar.
Twenty-seventh : I authorze, drect, and empower the trustees to coect and
receve a of the ncome and profts of the busness remanng after payment
of any e penses and dsbursements n connecton wth such busness, and, after
provdng for a necessary charges, dsbursements, and e pendtures, to ds-
trbute such net ncome as foows:
To my wfe, 1). four-twefths (4/12) thereof to my daughter, C. three-
twefths (:/12) thereof to my daughter, , three-twefths (3/12) thereof and
to my son. , two-twefths (2/12) thereof, durng the fe of my wfe, D. or
unt she remarres.
Twenty-eghth: In case my wfe sha remarry I drect that, from and
after the date of her remarrage, she sha cease to be a trustee of the trust
estate, and that, from and after such date, or n case she sha not remarry,
then, from and nfer (e date of her death, I drect my trustees to dstrbute
such net ncome of the trust estate as foows:
To my daughter, C, three-eghths (3/8) thereof: to my (aughter, , three-
eghths (3/8) thereof and to my son, , two-eghths (2/8) thereof, for a
perod of ten (10) years after the death or remarrage of my wfe, D.
Secton 219(b)2 of the Revenue cts of 1924 and 192 provdes
as foows:
There sha be aowed as an addtona deducton n computng the net n-
come of the estate or trust the amount of the ncome of the estate or trust
for ts ta abe year whch s to be dstrbuted currenty by the fducary to
the benefcares, and the amount of the ncome coected by a guardan of
an nfant whch s to be hed or dstrbuted as the court may drect, but
the amount so aowed as a deducton sha be ncuded n computng the net
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175
219, tt. 342.
ncome of the benefcares whether dstrbuted to them or not. ny amount
aowed as u deducton under tbs paragraph sha not be aowed as a deduc-
ton under paragraph (3) n the same or any succeedng ta abe year.
In order to determne the amount of the ncome of the trust estate
dstrbutabe currenty to the benefcares t s necessary to ook to
the provsons of the w. It s contended by the benefcares that
the testator durng hs fe n computng the ncome from the ware-
house busness made due aowance for the deprecaton of the bus-
ness property, and, snce the w provdes that the trustees carry on,
conduct, manage, supervse, and contnue the busness, t was the
testator s ntenton, and the w shoud be so construed, that the
busness shoud be carred on by the trustees n the same manner n
whch t was carred on by the testator, and that they shoud con-
tnue to make due aowance for deprecaton.
The twenty-thrd cause of the w drects the trustees to carry
on, conduct, manage, supervse, and contnue the busness so ong as
the busness yeds a reasonabe net proft, and empowers them to
contnue the busness n any manner whch n ther |udgment and
dscreton they sha deem to be for the best nterests of the trust
estate. The twenty-seventh cause authorzes the trustees to coect
the ncome from the busness and after the payment of e penses, ds-
bursements, and provdng for a necessary charges of the bus-
ness, to dstrbute the net ncome.
The genera rue as to the duty of trustees n preservng the corpus
of a trust s stated n Stevens v. Mecher (152 N. Y., 551, 4
N. ., 9 5) :
Ordnary the duty devoves upon tenants n common n possesson, fe
tenants, or trustees for equtabe fe tenants, of preservng the premses,
defrayng the e penses of ordnary repars, and of payng the ta es and the
accrung nterest upon mortgages whch may encumber the premses. (In re
bertson. 113 N. Y.. 434, 439, 21 N. ., 117.)
See aso Spencer v. Spencer (219 N. Y., 459, 4 5, 114 N. ., 849).
The court n these cases n statng the genera rue refers ony to
the payment of ta es, nterest accrung on mortgages, repars and
current e penses, and does not ncude the settng asde from gross
ncome of reasonabe amounts to provde for the deprecaton of
property. It therefore foows that uness the testator e pressy
Srovdes n hs w for the settng asde of reasonabe amounts for
eprccaton, or uness the words net ncome when construed
wth a of the provsons of the w dscose that t was the testator s
ntenton that an aowance shoud be made for deprecaton, the
trustees are not authorzed to wthhod ncome of the trust estate
from the benefcares n order to provde for deprecaton. In the
nstant case, snce there s no e press requrement n the w that
reasonabe amounts from the gross ncome of the trust be set asde
to provde for the deprecaton of the trust property, t s necessary
to construe the w as a whoe to ascertan the testator s ntenton.
The testator n ths case was a successfu busness man, who durng
hs fetme made due aowance for the deprecaton of hs busness
property, and n hs w drected the trustees to carry on, manage,
and contnue the busness then carred on by hm n any manner
whch n ther |udgment and dscreton they deemed to be for the
best nterests of the trust estate. It s hghy mprobabe that ths
successfu and prudent busness man ntended that the trustees
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223, rt. 401.
17
shoud dstrbute the entre ncome of the busness wthout provson
for deprecaton, wth the resut that eventuay the busness cond
not contnue.
Under the terms of the w the trustees are gven wde dscreton
n operatng the busness, and the twenty-thrd cause of the w
empowers them to contnue the busness n any manner whch n
ther |udgment and dscreton they sha deem to be for the best
nterests of the trust estate. It s customary n a busness of ths
nature to make due aowance for deprecaton, and t s recognzed
as a sound busness prncpe. To say that the twenty-thrd cause
of the w does not empower the trustees to make such aowance
woud be tantamount to sayng that the testator and trustees dd not
consder such acton to be for the best nterest of the busness, whch
s refuted, however, by the fact that the testator hmsef dd make
due aowance for deprecaton. It shoud be noted that part of the
property used n connecton wth the busness ncudes typewrters,
offce furnture, and automobes, and t s manfesty unreasonabe
that the testator or the trustees woud consder t for the best nter-
ests of the trust estate to aow deprecaton of ths property to con-
tnue wthout makng aowance therefor from the gross ncome o
the busness.
The decsons of the oard of Ta ppeas n the cases of Mary
P. no St.-tfanson (1 . T. ., 979), CD. Woodard (2 . T. .,
432), eene R. MeConne (3 . T. ., 2 0), L. Whtcomb (4 . T.
., 80), Sopha G. Co e (5 . T. ., 2 1, C. . I-1, 2) , rthur .
emng ( . T. ., 900) are not controng n the nstant case,
snce those cases nvoved the aowabty of certan deductons to
the benefcares of trust estates and not the queston of what shoud
be ncuded n the gross ncome of the benefcares.
In vew of the foregong, t s the opnon of ths offce that the
w shoud be nterpreted as authorzng the trustees, n determnng
the amount of the ncome of the trust estate to be dstrbuted cur-
renty to the benefcares, to set asde from the gross ncome of the
trust estate reasonabe amounts for the deprecaton of the busness
property, and that ony the ncome actuay dstrbuted to the bene-
fcares shoud be ncuded n ther ndvdua returns.
C. M. Charest,
Genera Counse, ureau of Interna Revenue
S CTION 223. INDI IDU L R TURNS.
rtce 401: Indvdua returns.
R NU CT O 1 2 .
Income from communty property of husband and wfe domced
n Caforna acqured on and after uy 29, 1927. (See I. T. 2457,
page 89.)
rtce 401: Indvdua returns.
R NU CT O 192 .
Instructons reatng to communty property returns. (See Mm.
8723, page 89.)
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231, rt. 18.
P RT III. CORPOR TIONS.
S CTION 231. CONDITION L ND OT R
MPTIONS O CORPOR TIONS.
rtce 515: udng and oan assocatons and III-18-4187
cooperatve banks. G. C. M. 5009
R NU CTS O 1921, 1824, ND 192 .
n assocaton organzed and operatng under e budng and
oan statutes of the State of ansas for the past 10 years has
requred rrowers to subscrbe for shares of rura credt nsta-
ment stock n an amount equa to ther oans. Subscrptons for
Wh shares consttute the borrowers members of the assocaton.
ed, that the assocaton s entted to e empton under secton
231(4) of the Revenue ct of 1920 and the correspondng provsons
of the Revenue cts of 1921 and 1924.
n opnon s requested n the case of the M udng and Loan
ssocaton (herenafter referred to as the ssocaton) as to whether
the decson of the Supreme Court of the Unted States n the case
of the Unted States v. The Cambrdge Loan udng Co. (278
U. S., 55, 49 S. Ct,, 39, T. D. 4252, C. . II-2, 290) w cause
the ureau to grant e empton to the ssocaton and to the other
permanent stock assocatons n the State of ansas under secton
231(4) of the Revenue cts of 1921, 1924, and 192 . The man
ssue nvoved s whether the borrowers of the ssocaton who
subscrbed for shares of rura credt stock thereby became members
of the ssocaton, for f they dd not the statutory requrement that
substantay a the busness of an e empt budng and oan assoca-
ton be confned to makng oans to memn|rs was not met.
In the case of the Unted States v. The Cambrdge Loan tfe ud-
ng Co , supra, the Supreme Court of the Unted States sad:
It s argued that, even admttng a that has been sad thus far,
a State can not make a bunk e empt merey by cang t a budng and oan
assocaton. No doubt e travagant cases mght be magned. ut these asso-
catons are we known and a State s not key to be paty to a scheme to
enabe a prvate company to avod edera ta aton by gvng t a fase name.
Tbe statutes speak of domestc assocatons that s, assocatons sanctoned
by tbe severa States. They must be taken to accept, wth the quafcatons
e pressy stated, what the States are content to recognze, uness there s a gross
msuse of the name. The State of Oho has recognzed and st recognzes the
respondent as beongng to the cass whch ts name ndcates. ery possby
the company has straned ts prveges to near the mt, but we are not pre-
pared to condemn the nomencature adopted by the State.
Thus the Supreme Court ad down the prncpe that a corporaton
organzed and operatng under State aws whch reasonaby defned
and quafed such corporaton as a budng and oan assocaton
shoud be regarded a domestc budng and oan assocaton
wthn the meanng of the varous Revenue cts. In bref, n deter-
mnng e empton, the Supreme Court consdered the reatonshp
e stng between the Cambrdge company and the State of Oho
rather than the specfc acts of that company. In accordance wth
ths vew, t becomes necessary to determne the queston of member-
shp n the ssocaton by consderng the ega reatonshp whch
e sted between the ssocaton and ts rura credt sharehoders.
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231, rt. 1 .
178
Pror to 1915 the ssocaton, whch was ncorporated under the
budng and oan aws of the State of ansas on March , 19 , and
has snce operated n accordance wth such statutes, ssued perma-
nent, fu-pad, prepad, and nstament shares. In 1915 the ansas
Legsature provded that budng and oan assocatons mght ssue
rura credt shares, both fu-pad and nstament, and that amounts
to the credt of such rura credt shares shoud be e empt from a
State ta aton (Laws of 1915, ch. 9 , pars. 1 and 7). The ansas
aw further provded that a dvdends on such shares shoud be
dstrbuted semannuay, and that the funds rased by the sae of
such shares shoud be oaned when possbe on proper securty on
farms n the State of ansas, but that a surpus funds mght
be oaned on any other securty permtted to budng and oan asso-
catons n ansas. The ssocaton mmedatey adopted by-aws
authorzng the ssuance of rura credt shares and the payment of
dvdends thereon, and thereafter ssued ony permanent stock and
rura credt shares, both fu-pad and nstament. The practca
effect of such acton was to permt the ssocaton to oan on farms
as we as cty property and to reeve a sharehoders, e cept the
permanent sharehoders, from State ta aton on the amounts pad n
on ther shares. It must be noted that both the statute and the
by-aws of the ssocaton provde for the ssuance of rura credt
shares and the payment of dvdends thereon. So aso do the pass-
books record payments made by, and the dvdends credted to, the
rura credt nstament sharehoders. It must further be noted that
no provson n the statutes, the by-aws of the ssocaton, or the
rura credt certfcates requres the pa ment of dvdends on the
rura credt shares regardess of earnngs uness profts are avaabe
no dvdends are dstrbuted to any cass of sharehoders.
Consderng these facts, t s beeved that the reaton between the
rura credt sharehoders and the ssocaton s that of sharehoder
and corporaton rather than that of debtor and credtor. Whe t s
true that the permanent stock guarantees the payment of dvdends to
the rura credt sharehoders, ths s ony another way of sayng that
the rura credt sharehoders are preferred as to dvdends. The
facts that rura credt shares are ssued, that dvdends are pad
thereon ony out of the ssocaton s profts, that no provson re-
qures the payment of dvdends on rura credt shares out of the
capta of the ssocaton, and that the borrowers subscrbe to rura
credt nstament shares to the fu amount of ther oans, ead to the
concuson that the subscrber to such shares s n fact a member of
the ssocaton.
Ths concuson s supported bv the case of brahams v. Medcott,
County Treasurer (8 ansas, 0 , 119 Pacfc, 375). In ansas
persona property, ncudng the cash wthdrawa vaue of shares of
stock n budng and oan assocatons, was ta ed at rather a hgh
rate, and no offsets were permtted aganst the vaue of such prop-
erty. Credts, meanng the rght to demand money ether pres-
enty or n the future, were ta ed at a consderaby ower rate, and
debts coud be offset aganst them. The appeant had subscrbed
and pad for fu-pad stock n the Capta udng and Loan sso-
caton, whch was a permanent stock assocaton and whch had
guaranteed payment of per cent dvdends on a stock other than
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179
231. rt. 21.
permanent stock. The appeant contended that hs fu-pad stock
was therefore a demand for money rather than representatve of an
nterest n the ssocaton, and that he was entted to offset certan
debts aganst the cash wthdrawa vaue of hs budng and oan
shares. The court hed that hs nterest was that of a preferred
sharehoder rather than that of a credtor. Snce the ssocaton
n the nstant case ssued permanent stock, ths authorty woud nd-
cate that the rura credt sharehoders, beng preferred as to dv-
dends, were n a poston smar to that or ordnary preferred
sharehoders.
Snce the ssocaton was organzed under and has been operated
under the budng and oan statutes of the State of ansas, snce
for the past 10 years t has requred borrowers to subscrbe for shares
of rura credt nstament stock n an amount equa to ther oans,
and snce subscrptons. for such shares consttuted the borrowers
members of the ssocaton, t s concuded that the ssocaton and
others smary operated are entted to e empton as domestc bud-
ng and oan assocatons under secton 231(4) of the Revenue cts
of 1921, 1924, and 182 .
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
rtce 515: udng and oan assocatons and
cooperatve banks.
R NU CT O 192 .
mendment of artce 515, Reguatons 9. (See T. D. 4253,
page 2 3.)
rtce 515: udng and oan assocatons and
cooperatve banks.
R NU CT O 102 .
Dena of rght of nstament sharehoders to vote. (See I. T.
2458, page 97.)
rtce 519: Cvc eagues and oca assocatons of
empoyees.
R NU CT O 102 .
Navy and Marne Memora ssocaton. (See I. T. 24 0, page
98.)
rtce 521: Loca benevoent fe nsurance III-1 -4177
assocatons, mutua rrgaton and tee- G. C. M. 5921
phone companes, and ke organzatons.
R NU CT O 192 ND PRIOR CTS.
ppro matey 50 per cent of the money receved annuay
by a cty fremen s protectve assocaton s derved from the so-
caed sae of tckets to a dance gven for the beneft of ts mem-
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231, rt. 521.
180
bers. Most of those who purchase tckets do so as an evdence of
good w to the fremen and wth no Idea of dervng persona
beneft therefrom.
ed, that substantay a of such amounts are contrbutons
and shoud not be ncuded n ncome for the purpose of deter-
mnng whether the assocaton s entted to e empton under the
provsons of secton 231(10) of the Revenue ct of 192 and
smar provsons of pror Revenue cts.
Genera Counse s Memorandum 12 8 (O. . I-1, 83) revoked
In so far as nconsstent herewth.
n opnon s requested as to the status of the M remen s Pro-
tectve ssocaton under the e empton provsons of the varous
Revenue cts.
It appears that the assocaton was ncorporated n 1914 under the
genera statutes of the State of R. mong ts stated ob|ects, as set
forth n ts consttuton and by-aws, are:
To create and mantan oyaty among ts members, to promote harmony
and a fraterna snrt, and to protect them from any n|ustce and mposton.
The assocaton has three casses of members actve, fe, and
honorary. ctve members are fremen of the cty and county of S,
apponted under oca cv servce rues and n actve servce. Lafe
members are those former actve members who, whe n good stand-
ng wth the assocaton, have been retred from the fre department
on penson. onorary members arc ctzens granted nomna mem-
bershp by vote of the actve members, n recognton of mertorous
servce n the nterest of the assocaton. Lfe members pay no dues
or assessments, and receve ony a fract ona part of the death bene-
fts provded as an attrbute of membershp for actve members.
onorary members pay no dues or assessments, take no part n the
government of the assocaton, and are not egbe for the reef
or death benefts provded for the actve and fe members and ther
benefcares.
Upon the death of any actve member of the assocaton n good
standng, the secretary-treasurer s empowered and nstructed to
draw mmedatey from the funds of the assocaton an amount for
the benefcary of the deceased member. The assocaton recoups
amounts so wthdrawn on the pay day ne t foowng the wth-
drawa, through a fat assessment on each member of the assocaton.
The reef fund of the assocaton s derved e cusvey from the
proceeds of dances, concerts, or other soca actvtes, and from cash
donatons. Ths fund consttutes a separate and dstnct account.
Upon the death of an actve member of the assocaton n good
standng, the treasurer s empowered and nstructed to draw mme-
datey from the reef fund an amount for the benefcary of the
deceased member. Payment from the reef fund of an amount to
the benefcary of a fe member s aso authorzed. The certfcate
of membershp n the assocaton s an nsurance pocy and evdences
the member s rght to a specfed amount of nsurance. The asso-
caton e tends persona reef to needy members wthn the broad
dscreton of a speca nvestgatng commttee. Such reef s pay-
abe from the reef fund and s mted to a specfed amount n any
one case.
The 1927 fnanca statement submtted by the assocaton shows
the foowng recepts durng the year:
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181
231, rt. 521.
Doars.
ssessments 0a
ues - 53.32
Interest 8. 5.r
nnua fremen s ba 137. Ida
Tota recepts 2 8. 98a
Secton 231(10) of the Revenue ct of 192 e empts from ta aton:
enevoent fe Insurance assocatons of a purey oca character. or
ke organzatons but ony f 85 per centum or more of the ncome eonssts
of amounts coected from members for the soe purpose of meetng osses and
e penses.
Snce the M remen s Protectve ssocaton s a benevoent fe
nsurance assocaton or ke organzaton operatng ony n the cty
and county of S, ts rght to e empton under the provsons of sec-
ton 231(10) depends on whether or not 85 per cent or more of ts
ncome conssts of amounts coected from members for the soe pur-
pose of meetng osses and e penses.
y the enactment of secton 231(10) Congress ntended to e empt
from ncome ta es oca benevoent assocatons of the type here
consdered whch were operated by and for ther members. In vew
of that purpose t seems unreasonabe that Congress ntended that
e empton shoud be dened to an assocaton, otherwse quafed
therefor, by reason of the assocaton s recept of amounts contrb-
uted to t Such amounts shoud not therefore be ncuded n ncome
as contempated by secton 231(10).
It appears n the nstant case that substantay a the amounts
reazed from so-caed sae of tckets for the assocaton s beneft
dance consttute contrbutons by the ctzens of S to the assocaton,
for the beneft of the fremen of the cty. Most of those who pur-
chase tckets do so as an evdence of good w to the fremen and wth
no dea of dervng persona beneft therefrom. The fact that an
unmted number of tckets s dstrbuted (many tmes n e cess of
the capacty of the ha where the dance s hed) at prces rangng
a.- hgh as each, and that ony a very sma percentage of such
tckets s ever used, ends ampe support o the above concuson.
nayss of the fnanca statement of the assocaton deveops
the fact that appro matey 50 per cent of the money receved annu-
ay by t arses from the so-caed sae of tckets to the beneft
dance. y the e cuson of substantay a of such recepts from
ncome as contempated by secton 231(10), t becomes apparent
that more than 85 per cent of the ncome of the assocaton conssts
of amounts coected from members for the soe purpose of meetng
osses and e penses.
It foows that the assocaton shoud be granted e empton under
the provsons of secton 231(10) of the Revenue ct of 192 . Gen-
era Counse s Memorandum 12 8 (C. . I-1, 83), to the e tent that
t s nconsstent wth ths memorandum, s hereby revoked.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
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238, rt. 11.1
182
S CTION 238. CR DIT OR T S IN C S
O CORPOR TIONS.
rtce 11: Credt for foregn ta es. TII-14 41 3
G. C. M. 5971
R NU CTS O 1924 ND 192 .
rtsh ncome ta assessabe for the rtsh year of assessment,
pr - pr 5, on the average ncome of three years endng on
that (ay of the year mmedatey precedng the year of assessment
on whch the accounts of the sad trade have been usuay made
up, s propery accruabe as at (he end of the thrd year n the
average, and where the ta for the rtsh year of assessment s
based on the ncome of the precedng year, the ta accrues as at
the end of such precedng year.
n opnon s requested reatve to the credt to be aowed the
M Company under secton 238 of the Revenue cts of 1924 and 192
on account of ta es pad to Great rtan. The specfc queston
nvoved s the tme of accrua of rtsh ncome ta es for a gven
year of assessment, pr - pr 5, whch ta es are measured by
the average ncome of three years endng on that day of the year
mmedatey precedng the year of assessment on whch the accounts
of such trade have been usuay made up, or on the 5th day of
pr precedng the year of assessment.
The books of the M Company are kept on an accrua bass and
are cosed on a caendar-year bass. The corporaton estabshed a
branch offce n ngand on September 1, 1922. The operatons
durng 1922 and 1923 resuted n osses, but for the years 1924 and
1925 the busness of the branch offce resuted n a proft. The
proft of the thrd year, 1924, whch was reported n the ta payer s
1924 edera ncome ta return, was averaged wth the osses for
1922 and 1923 by the rtsh Inand Revenue Department n arrv-
ng at the statutory ncome on whch the rtsh ta of pounds
was assessed durng the fsca year 1925-2G. The proft of the fourth
year, 1925, from the rtsh branch offce, whch was reported as
ta abe ncome n the ta payer s 1925 edera ncome ta return,
was averaged by the rtsh Inand Revenue Department wth the
1923 oss and the 1924 ncome n determnng the amount of assess-
ment for the rtsh fsca year 1920-27. The ta computed on ths
statutory ncome was 10a pounds. The ta payer cams that the
rtsh ta of pounds s an accrua as of December 31, 1924,
and that the ta of 10a pounds s an accrua as of December 81, 1925,
athough n both cases the assessments were made and the ta pad
after the cose of the year. These accruas are camed as credts
aganst ta due the Unted States for 1924 and 1925, respectvey.
The prncpe enuncated n the decson of the Supreme Court n
the case of Unted States v. nderson (2 9 U. S., 422, T. D. 3839,
C. . -, 179) and the appcaton of that decson as made n
Soctor s Memorandum 4499 (C. . -, 5 ) are reed on by the
ta payer as a bass for camng the accruas as of the ast day of
the thrd year enterng nto the average. The ta payer further
submts that t s the ntenton of the Revenue cts of 1924 and 192
to permt the appcaton of (he credt for foregn ta es n the same
year n whch the Unted States ta s mposed upon the earnngs
that rtsh ta es are propery and accuratey accruabe at the cose
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183
238, rt. 11.
of the perod over whch the net ncome upon whch the ta s based
s averaged and that ampe provson s made n secton 238(b) of
the Revenue cts of 1924 and 192 for proper ad|ustment n the
event the accruas shoud dffer from ater payments.
It s the opnon of ths offce that rtsh ncome ta assessabe
for the rtsh year of assessment, pr - pr 5, on the average
ncome of three years endng on that day of the year mmedatey
precedng the year of assessment on whch the accounts of the sad
trade have been usuay made up, s propery accruabe as at the
end of the thrd year n the average.
Such a rue w not cause any change n the tme of accrua of
rtsh ncome ta es n the year n whch the rtsh ncome ta
aw does away wth the 3-year average and treats the ncome of
the year precedng the year of assessment as the statutory ncome
n respect of whch the ta s to be assessed. Ths change took
pace, e cept n the case of ta payers who eected to contnue the
3-year average under certan condtons and for a certan perod,
wth respect to the year of assessment begnnng pr , 1927, and
endng pr 5, 1928. The ncome reported for assessment n the
return for that year was the actua ncome for the precedng year.
In the case of the M Company ths woud be the caendar year 192 ,
and the ta woud be accruabe at the end of that year.
It shoud be noted that the ouse of Lords n the cases of Natona
Provdent Insttuton v. rown (1921, 2 . C, 222, 8 T. C, 57) and
WheUn v. ennng (1924, 10 T. C, 2 3) ad down the prncpe
that the rtsh ncome ta on the type of ncome nvoved n those
cases s ntended to be on the profts and gans formng ncome n
the year of assessment, though not measured by the ncome of that
year, and f, therefore, a person has no ncome from a gven source
n the year of assessment or has ceased to own the source, there s
no ncome on whch to base the ta , and no ta can be eved or
coected n respect of a none stng ncome. In vew of those dec-
sons there was nserted n the rtsh nance ct of 192 a prov-
son whch prevented the prncpe enuncated n those decsons
reatve to ncome assessabe under Case III (nterest, dscounts, etc.,
not ta ed at source and profts of an uncertan vaue) and Case
(ncome from Domnon and foregn possessons) of Schedue D
from beng thereafter apped n respect of such ncome, and whch
made t cear that that prncpe never was appcabe to ncome
assessabe under Cases I (profts of trade, manufacturng, etc.),
II (ncome from professons, vocatons, and empoyments not con-
taned n any other schedue), and I (msceaneous profts not
fang under foregong cases and not ta ed under any other sched-
ue) of Schedue D.
Secton 22 of the rtsh nance ct of 192 , whch remedes
ths stuaton, s as foows:
22. (1) Where It s provded by the ncome ta acts that ncome ta n respect
of profts or gans or ncome from any source or n respect of the property n
ands, tenements, eredtnments or hertages s to be computed by reference
to the amount of the profts or gans or ncome of some perod precedng the
year of assessment, then, notwthstandng that no profts or gans or Income
arse from that source or that property for or wthn the year of assessment,
Income ta as so computed sha be charged for that year, and secton 1 f
the ncome ta act. 1918, sha be construed to have effect accordngy, .
3133 29 -18
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288, rt. 11.
184
(3) The foregong provsons of ths secton sha be deemed aways to have
had effect In reaton to profts or gans fang wthn Cases I, II,
or I of Schedue D.
The provson contaned n the second paragraph quoted above
removes any ob|ecton whch mght have e sted, n vew of the two
decsons referred to heren, for treatng the ta as an accrua n the
ast year of the 3-year average.
Genera Counse s Memorandum 2983 (C. . II-1, 110) s hereby
revoked n so far as t s n confct wth the foregong.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
rtce 11: Credt for foregn ta es. TII-17-4183
G. C. M. 042
R NU CT O 192 .
domestc corporaton payng the ta on Income Imposed by the
Repubc of Che, under the provsons of Decree-Law No. 755 of
December 1 , 1925, and Law No. 4113 of anuary 2 , 1027, modfed
and reenacted by Decree-Law No. 225, dated ebruary 17, 1927,
may cam such ta as a credt aganst ta es due the Unted States,
sub|ect to the mtaton provded by secton 238(a) of the Revenue
ct of 192 .
The M Company, a domestc corporaton, has fed a cam for re-
fund of ncome ta for 192 and a cam for credt for 1927, on the
ground that the corporaton was entted to credt the ta shown to
be due on ts ncome ta returns, orm 1120, fed for those years,
wth the amount of certan ta es pad to the Repubc of Che.
Request s made for an opnon as to whether the ta es so pad are
ncome ta es and may be taken as a credt under secton 288 of the
Revenue ct of 192 .
The cam for refund for 192 s based upon a payment of Chean
ncome ta amountng to 18o| doars, of whch 1 a doars repre-
sented ta es pad to the Chean Government on the genera profts
of the corporaton and 2a doars represented ta wthhed at the
source. The cam for credt for 1927 s based upon a payment by
the corporaton of Chean ncome ta totang 83a doars, of
whch 32o doars were ta es pad to the Chean Government on
the corporaton s genera profts and a doars represented ta wth-
hed at the source. The tems of ncome ta referred to as wth-
hed at the source consttute ta wthhed and pad at the source
to the Chean Government by Chean corporatons on nterest and
dvdends due the M Company.
It appears that Decree-Law No. 755, mposng an ncome ta , was
enacted by the Government of Che December 1 , 1925. y Law
No. 4113, dated anuary 2 , 1927, the Chean Natona Congress
modfed the Decree-Law No. 755, and by Decree-Law No. 225, dated
ebruary 17, 1927, the pree stng aws were modfed and reenacted
nto the present ncome ta aw, readng n part as foows:
rt. 2. There s estabshed for government revenue an annua ta on Income.
rt. 3. ceptng provson to the contrary n the present aw, every per-
son domced or resdent n Che sha pay a ta on ther ncomes from what-
ever source, whether the source thereof s stuated wthn or wthout the coun-
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185
238, rt. 11.
try, and persons nonresdents of Che are sub|ect to the ta on the Income whch
they derve from sources wthn the country.

bt. 14. ta of 5 per cent s estabshed, to be determned, coected and
pad annuay on the ta abe net ncome derved from busness and Industry.
rokers censed or otherwse, commsson merchants, auctoneers and buders
are aso sub|ect to the ta of ths category on the net ncome resutng from
ther respectve occupatons.
grcutura e potaton carred on by companes of any knd, whch are
egay consttuted, and those carred on by persons who are not the owners
of the property nor ther representatves, sha kewse be sub|ect to ths ta .
Partners or assocates who do not contrbute capta sha be e empt from
the foregong ta .
bt. 15. ncome, benefts and profts, whatever ther orgn, nature and
desgnaton, the ta ng of whch s not e pressy provded for n other pro-
vsons of ths aw, sha be ta ed In accordance wth the rate and other
provsons of ths category.
Under artce 4 , reatng to surta , t s provded:
bt. 4 . n addtona ta on ncome sha be apped, coected and pad
n the foowng cases:
(a) Socedades, empresas, or |urdca persons consttuted outsde the coun-
try, havng branch offces, agents or representatves n Che, sha pay a surta
of 3 per cent on the ncome or profts of a ther busness or nvestments n
Che.
The ta estabshed by the foregong cause sha be pad as a speca ta by
the above-mentoned persons or enttes not sub|ect to the ta es of any of the
categores created by ths aw.
The persons to whch the above causes have reference may use as a voucher
for the payment of sad ta , the tota amount of the per cent ta whch they
are obged to wthhod from the profts or dvdends pad n the country to
ther stockhoders.
Wth respect to ncome ta wthhed at the source, t s provded
n artce 11 and artce 12:
bt. 11. ta of per cent Is mposed, to be determned, coected and pad
annuay, on the ncome from movabe capta consstng of Interest, dvdends,
pensons or any other products derved from the ownershp, possesson or hod-
ng by ndetermnate tte of securtes, whatever may be ther names, not other-
wse e pressy e cepted, Incudng Income from:

(b) Mortgage credt bunk bonds and those of other nsttutons, governed h.v
the aw of ugust 29, 18 0, as amended.

(d) onds, debentures or credt certfcates of prvate empresas.

(g) Money deposts, whether on tme or at sght.

bt. 12. Whenever possbe, the ta estabshed In the present category shaU
be wthhed before payng the ncome, n conformty wth the provsons of
artce 9, by the person, frm, company, empoyer or offce who s charged wth
payng dvdends, Interest, pensons or other returns ta ed under the present
aw, whatever may be the name gven t n genera use or for purposes of
payment.
Secton 288(a) of the Revenue ct of 192 provdes that n the case
of a domestc corporaton the ncome ta mposed on corporatons
sha be credted wth the amount of any ncome, war-profts, and
e cess-profts ta es pad or accrued durng the same ta abe year to
any foregn country, or to any possesson of the Unted States. It
s aso provded that the amount of such credt sha n no case e ceed
the same proporton of the ta (computed on the bass of the ta -
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240, rt. 32.
18
payer s net ncome wthout the deducton of any ncome, war-profts,
or e cess-profts ta es mposed by any foregn country or possesson
of the Unted States), aganst whch such credt s taken, whch the
ta payer s net ncome (computed wthout the deducton of any such
ncome, war-profts, or e cess-profts ta ) from sources wthout the
Unted States bears to ts entre net ncome (computed wthout such
deducton) for the same ta abe year.
y the use of the term ncome ta es n secton 238(a) s meant
a ta on ncome. In sner v. Macomber (252 U. S., 189. T. D. 3010,
C. . 3, 25) consderaton was gven to the meanng of the term n-
come, and reference was made to the defnton n Stratton s Inde-
pendence v. owbert (231 U. S., 399). wheren t was stated that
ncome may be defned as the gan derved from capta, from abor,
or from both combned. The Supreme Court stated n sner v.
Macomber, supra, that t had tte to add to that defnton provded
t be understood to ncude a proft ganed through a sae or conver-
son of capta assets, to whch t was apped n the Doye case (247
U. S., 183).
In vew of the fact that the aw enacted by the Chean Government
decares that there s estabshed for government revenue an annua
ta on ncome and provdes that the ta sha be mposed upon a
ncome, benefts, and profts, whatever ther orgn, nature, or desg-
naton and further provdes for the mposton of a ta on ncome
derved from movabe capta consstng of nterest, dvdends, etc.
the ta s ceary a ta on ncome and profts and s therefore an
ncome ta wthn the meanng of secton 238. The M Company may
therefore take the amount of ta es pad to the Chean Government
as a credt aganst ta due the Unted States sub|ect to the mtaton
contaned n secton 238(a), and ts cams for refund and credt
shoud be dsposed of accordngy.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
S CTION 240. CONSOLID T D R TURNS O
CORPOR TIONS.
kttc,e 32: Consodated returns. III-3-4070
( so Sectons 24 and 247, rtce 91.) G. C. M. 5 09
R NU CT O 102 .
Insurance companes ta abe under sectons 248 and 24 of the
Revenue ct of 192 may not be ncuded In the same consodated
return wth a corporaton ta abe under secton 230 of that ct.
queston has been rased as to the correctness of I. T. 2355
(C. . I-1, 98), whch hods that
Where a ta s tssessed upon the bass of a consodated return, and one of
the affated companes, on the bass of a separate return, woud be entted
to the ower rate of ta aowed domestc nsurance companes under the
provsons of secton 24 (a) of the Revenue ct of 192 , no part of the
consodated net ncome w be ta abe at such ower rate uness the group
of affated corporatons as a whoe can quafy as a domestc nsurance
company
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187
240. rt. 832.
The facts of the case n whch the queston has arsen are a
foows:
The M Company, the O Company, and the P Company fed a so-
caed consodated return for the caendar year 1925. f he M Com-
pany and the P Company are fre nsurance companes. The O
Company was ncorporated une , 191-, for the purpose of hod-
ng tte to a pece of rea estate whch the M Company desred to
acqure for the purpose of erectng thereon a budng for ts own
occupancy. In 1925 the O Company sod ths pece of rea estate
and reazed a proft thereon. In the so-caed consodated return
fed for 1925 by the three corporatons ths proft was not ncuded
n ta abe ncome. The rate of 12 2 per cent as provded by secton
24 of the Revenue ct of 192 was used n computng the ta on
the so-caed consodated net ncome.
The Revenue ct of 192 contaned no defnte drecton aa to the
appcaton of the consodated returns secton n cases where nsur-
ance companes were affated wth companes other than nsurance
companes, and the Revenue ct of 1928 had not been enacted when
I. T. 2355 was beng consdered. Secton 141 of the Revenue of
1928 ( . R. 1), as passed by the Senate, aso faed to contan
specfc anguage n ths regard. ut, as fnay passed, the Revenue
ct of 1928 contaned a provson whch s descrbed n the conference
report ( ouse of Representatves. No. 1882, May 25, 1928, p. 17)
as foows:
p ouse recedes wth a carfyng amendment to subdvson (e) of the
Senate amendment provdng specfcay that an nsurance company sub|ect
to the ta Imposed by secton 201 or 204 sha not be Incuded n the same con-
sodated return wth a corporaton sub|ect to the ta mposed by secton 13.
Ths, beng a carfyng provson, may, t s beeved, be taken as
an e presson of the egsatve ntent wth regard to the correspond-
ng secton of the Revenue ct of 192 . It s the opnon of ths
offce, therefore, that secton 240 of the Revenue ct of 192 shoud
be construed so as to prohbt the ncuson of corporatons ta abe
under sectons 243 and 24 of that ct n a consodated return wth
corporatons ta abe under secton 230 thereof.
In vew of the foregong t s recommended that I. T. 2355 (supra)
be revoked.
s prevousy stated, two of the affated corporatons n the
nstant case, the M Company and the P Company, are fre nsurance
companes. The statute does not prevent these companes from
makng a consodated return. It may very we be that the thrd
corporaton n ownng property to be used for an offce budng by
the nsurance companes was carryng on no busness other than that
whch coud have been carred on by a fre nsurance company. ut
ths does not make t a fre nsurance company. It ssued no con-
tracts of nsurance, and t receved no ncome of the type descrbed
n secton 24 of the Revenue ct of 192 . It can not be cassfed
wth the other affated corporatons as a fre nsurance company.
(S. M. 5501, C. . -, 102 G. C. M. 2 40, C. . I-2, 259.) It s,
therefore, ta abe under secton 230 of the 192 ct, and may not be
ncuded n a consodated return wth the M Company and the P
Company.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
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270. rt. 1205.
188
rtce 32: Consodated returns. III-3-4071
I. T. 2448
R NU CT O 1928.
I. T. 2355 (C. . I-1, 98), ho dng that where a ta s assessed
upon the bass of a consodated return, and one of the affated com-
anes, on the bass of a separate return, woud be entted to the
ower rate of ta aowed domestc nsurance companes under the
provsons of secton 24 (a) 1 of the Revenue ct of 192 , no part of
the consodated net ncome w be ta abe at such ower rate uness
the group of affated corporatons as a whoe can quafy as a domes-
tc nsurance company, s revoked, n vew of Genera Counse s
Memorandum 5 09, on page 18 .
S CTIONS 24 ND 247. T S ON INSUR NC
COMP NI S.
rtce 91: Ta on nsurance companes.
R NU CT O 1920.
Insurance companes fng consodated returns wth companes
other than nsuran :e companes. (See G. C. M. 5 09, page 18 .)
P RT I . DMINISTR TI PRO ISIONS.
S CTION 257. R TURNS TO PU LIC
R CORDS.
rtce 1090: Inspecton of returns.
R NU CT O 192 .
Inspecton of refunds. (See T. D. 42 4, page 98.)
P RT . P YM NT, COLL CTION, ND R UND O T ND
P N LTI S.
S CTION 270. D T ON W IC T
S LL P ID.
rtce 1205: Lens and enforcement of ta ens by b
n equty.
R NU CT O 102
Notce of ta en fed by a coector. (See G. C. M. 5432, page
134.)
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189 277 and 278, rt. 1272.
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- III-23-4280
ton of ta . Ct. D. 5
( so Secton 110 , rtce 1341.)
D R L T S LI ILITY ON OND D CISION O SUPR M COURT.
Sut Lmtaton ond.
sut, commenced after the e praton of the statutory perod
wthn whch suts for the coecton of a ta may be begun, to re-
coTer on a bond gven pror to the e praton of such perod n
connecton wth a cam for abatement of the ta and condtoned
for the payment of the ta found to be due a not barred by the
statute of mtatons appcabe to the coecton of ta es, nor s
the abty on the bond e tngushed by secton 110 (a) of the
Revenue ct of 192 .
Supreme Court of the Unted States. No. 52 .
he Unted State , pettoner, v. The ohn arth Oo. and the Unted Statu
dety 4 Guaranty Oo.
On wrt of certorar to the Crcut Court of ppeas for the Seventh Crcut
May 18, 1920.
OPINION.
Mr. Chef ustce Taft devered the opnon of the court.
Ths was a sut by the Unted States, through ts dstrct attorney for the
eastern dstrct of Wsconsn, aganst the ohn arth Co., a corporaton of
Wsconsn, and the Unted States dety Guaranty Co., a corporaton of
Maryand. The sub|ect matter of the sut Is the recovery of the amount due
on a bond n the sum of 0,000 whereby the respondents bound themseves
onty and severay to pay the Unted States the sum theren named under
the foowng crcumstances and condtons:
On une 25, 1919, the Unted States Commssoner of Interna Revenue
assessed ncome and profts ta es aganst the arth company for the year
1918 n the sum of 12 ,182.81, and of ths sum the company pad 74,7 4.40.
On September 15, 1919, and March 17, 1925, the company fed cams for the
the foowng crcumstances and condtons:
The arth company as prncpa, and the Unted States dety Guaranty
Co. as surety. In consderaton of the Unted States refranng from and sus-
pendng the coecton of ta es thus outstandng aganst the arth company for
the year 1918. pendng consderaton and ad|udcaton of the foregong cams
for abatement, e ecuted and devered a bond on September 20, 1919, bndng
them to pay on notce and demand by the coector any part of
such ta found by the Commssoner to be due, wth nterest at the rate of
12 per cent per annum from the tme such ta woud have been due, had no
such cam been fed.
The arth company fed ts cam of abatement on the ground that t had
sustaned a substanta oss resutng from a matera reducton of the vaue
of ts nventory for the ta abe year and from actua payment after the cose
of the ta abe year of rebates n pursuance of contracts entered nto durng
such year upon saes made durng the year.
On March 25, 192 , the Commssoner consdered the cams, aowed about
10,000, and re|ected the rest In the sum of 20,842.32. The art company
was notfed and payment under the bond of the ta as determned, wth
Interest thereon, requested on ebruary 27, 192 . and on pr 5 and 20, 1920,
but the arth company refused to pay. On ugust 10 and 27, 192 , the Guar-
anty company was notfed of the re|ecton of the abatement cams In the sum
above stated, and of the amount and Interest due. but that company aso
refused payment. The sut was authorzed by the Commssoner of Interna
Revenue.
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55277 and 278, rt. 1272.
190
To the petton respondents fed a demurrer for the reason that
the acton was not commenced wthn the tme mted by aw, whch tme a
prescrbed by secton 250(d) of the Revenue cts of 1918 and 1921, and
sectons 277(a)2, 278(d), and 278(e) of the Revenue ct of 1924, and sectons
277(a)3, 278(d), 278(e), and 1108(a) of the Revenue ct of 192 .
The dstrct court sustaned the demurrer, the Unted States eected to stand
on ts compant, and udgment was entered dsmssng the compant.
The Unted States carred e |udgment on wrt of error to the crcut court
of appeas, whch after an unsuccessfu effort to certfy to ths court certan
questons, whch were dsmssed (27 U. S., 0 ), heard the wrt of error and
nfmed the |udgment of the dstrct court. (27 P. (2d), 782.) The ease s now
here on wrt of certorar.
Paragraph 14(a). secton 234(a), of the Revenue ct of 1918 (ch. 18. 40
Stat., 1057), provdes that:
t the tme of fng return for the ta abe year 1918 a tarpayer may fe
a cam n abatement, based on the fact that he has sustaned a substanta
oss resutng from any matera reducton 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. In such case, payment
of the amount of ta covered by such cam sha not be requred unt the
cam s decded, but the ta payer sha accompany hs cam wth a bond n
doube the amount of the ta covered by the cam, wth suretes satsfactory
to the Commssoner, condtoned for the payment of any part of such ta
found to be due. wth nterest. If any part of such cam s dsaowed then
the remander of the ta due sha on notce and demand by the coector be
pad by the ta payer wth nterest at the rate of 1 per cent per month -from
the tme the ta woud have been due had no such cam been fed.
In secton 250(d) the provson s:
cept n the case of fase or frauduent returns wth ntent to evade the
ta , 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,
and no sut or proceedng for the coecton of any ta sha be begun after
the e praton of fve years after the date when te return was due or was
made.
Secton 250(d) refers to a faure of the Commssoner of Interna Revenue
to pass upon the return made by the ta payer and to assess the ta . It s
the determnaton precedng the assessment that Is referred to n that secton.
If there s no determnaton and assessment wthn fve years after the return
s made, or after the return shoud have been made, then the statute bars an
assessment and the coecton of the ta due.
ut secton 250(d) does not appy to the proceedng under paragraph 14(a),
whch reates to a case n whch there s a return wth a resutng assessment,
as there was here, and the ta payer seeks to reduce the assessed ta by
presentng a cam for an abatement of part of t, and to avod the coecton
of that part pendng acton on the cam for abatement by gvng a bond.
In ths case there was a return and there was an assessment, but the bond
was gven we wthn the fve years after the return, and when the bond was
gven t requred the obgors, f the abatement was not aowed, to pay nterest
from the tme such ta woud have been due had no such cam been fed. In
other words, the mtaton of secton 250(d) has no appcaton to a stuaton
foowng a cam of abatement and the gvng of bond.
The pan purpose of paragraph 14(a) was to effect a substtuton for the
obgaton arsng under the return and assessment to pay the ta , of the con-
tract entered nto n the bond to pay any part of the ta found to be due upon
the subsequent determnaton of the Commssoner, and ths wth nterest at
the rate of 1 per cent per month from the tme the ta woud have been due,
had no such cam been fed.
Of course t Is not dffcut n the somewhat compcated provsons to sug-
gest, as on behaf of respondent t has been suggested, that some other than
the ordnary nference to be gven to ths get of facts shoud be drawn, but
the common sense vew of the return and the deay n the payment due after
the cam of abatement and the gvng of the bond s as aready stated. The
makng of the bond gves the Unted States a cause of acton separate and ds-
tnct from an acton to coect ta es whch t aready had.
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191
284, rt. 1304.
The statutes now peaded to bar the sut can not be e tended by mpcaton
to a sut upon a subsequent and substtuted contract. The postponement of
the coecton of the ta es returned was a waver of the statutory mtaton of
fve years that woud have apped had the vountary return of the ta payer
stood and uo bond been gven. If there Is any mtaton appcabe to a sut
on the bond, It s conceded that t has not yet become effectve.
Secton 250(d) of the Revenue ct of 1921 (ch. 13 , 42 Stat., 227, 2 5)
repeats the mtaton of 1918, addng thereto uness both the Commssoner
and the ta payer consent n wrtng to a ater determnaton, assessment, and
coecton of the ta , and ke secton 250(d) of the ct of 1918 has no
reevancy or effect here. The Revenue ct of 1924, secton 277(a)2 (ch. 234,
43 Stat., 253), repeats a smar mtaton of fve years. Secton 110 (a) of
the Revenue ct of 192 (ch. 27, 44 Stat., 9, 113), provdes that 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. Ths ast ct was repeaed as of the date of ts enactment. (See
secton 12, ch. 852, 45 Stat, 791, 875.)
The Government contends that ths restores and gves fe to the ta
retroactvey. It s not necessary for us to e amne ths cam, for the reason
that the ct of 192 does not affect, and was not Intended to affect, the obga-
ton arsng out of the bond. Such bonds are not referred to n the amendments
of 1921 or 1924 or 192C, nor n any way s the ta payer e pressy or mpedy
reeved from such contracts. To avod the resut usuay ensung from the
return whch he hmsef made, the ta payer was permtted by a bond tempo-
rary to ostpone the coecton and to substtute for hs ta abty hs con-
tract under the bond. The ob|ect of the bond was not ony to prevent the m-
medate coecton of the ta but aso to prevent the runnng of tme aganst
the Government. The ta payer has obtaned hs ob|ect by the use of the bond,
and he shoud not ob|ect to makng good the contract by whch he obtaned the
deay he sought.
It Is hardy necessary to refer to authorty to |ustfy ths concuson, but
s sustaned by Unted States v. Onken ros. (23 . (2d), 3 7 T. D. 4108,
C. . I-2, 270 ) Gray Motor Co. v. Unted State (1 . (2d). 3 7 (T. D. 3994,
C. . I-1, 1491) Unted States v. Rennods (27 . (2d), 902) McCaughn v.
Phadepha arge Co. (27 . (2d), 28 T. D. 4199, C. . II-2, 1 8 )
Unted States v. Unted States dety d varanty Co. (221 ed., 27) Ray-
mond v. Unted States ( ed. Cas. No. 1159 ).
The |udgment of the crcut court of appeas shoud be reversed and the
cause remanded for further proceedngs.
Reversed.
S CTION 284. CR DITS ND R UNDS.
rtce 1304: Cams for refund by ta payers.
R NU CT O 1920.
orm 1118. (See G. C. M. 053, page 112.)
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1104. rt. 1331.
192
TITL I G N R L DMINISTR TI PRO ISIONS.
S CTION 1104. MIN TION O OO S
ND WITN SS S.
G N R L DMINISTR TI PRO ISIONS R NU CT O 192 D CISION
O COURT.
amnaton op Records Records or Thrd Persons.
Secton 1104 of the Revenue ct of 192 authorzes the Comms-
soner, by an agent desgnated for the purpose, to requre the
producton of the books and records of one person bearng upon
the ta abty of another person under nvestgaton.
Unted States Crcut Court of ppeas, ghth Crcut.
O. W. rownton, appeant, v. Unted States of merca, appeee.
ppM from the Dstrct Court of the Unted State for the Western Dstrct of Mssour.
ooth, Crcut udge, devered the opnon of the court.
The facts nvoved n the present appea are few and undsputed. Durng an
Investgaton and hearng beng hed n ansas Cty, Mo., In anuary, 1928,
by the Commssoner of Interna Revenue, through hs agent, reatve to the
ta abty of rank DeMayo and esse DeMayo, hs wfe, for the years 1924-
192 , ncusve, a summons sgned by sad agent was served upon appeant
requrng hm to appear and testfy In sad matter, and to brng wth hm any
and a books, papers, and documents In hs possesson showng transactons for,
wth, or on behaf of sad rank DeMayo and esse DeMayo, and especay
any papers, recepts, or documents pertanng to the recept by teegraph of
500 by rank DeMayo from Denver, Coo., on or about ebruary 1 , 192 .
ppeant was the cty superntendent of the Western Unon Teegraph Oo. at
ansas Cty, Mo. e appeared at the tme and pace specfed, but dd not
produce the documents requested. Ths faure to obey the summons was there-
after reported to the Unted States Dstrct Court for the Western Dstrct of
Mssour by the Unted States dstrct attorney n a petton whch prayed that
a wrt of attachment be ssued to brng the appeant before the court for
such acton as mght be deemed proper. n order of attachment was Issued.
ppeant appeared before the court, a hearng was had, and an order was
made requrng appeant to appear before the nterna revenue agent and to
produce the documents requested. Owng to certan nadvertent omssons
n the order, a ater order was Issued ebruary 23, 1928. Ths order, after
rectng the facts, contaned the foowng:
It s therefore ordered by the court that the sad G. W. rownson forthwth
appear before the sad arry D. each and produce a records of the Western
Unon Teegraph Co. showng the recept of fve hundred ( 00) doars by
rank DeMayo, whch was wred to hm by way of the Western Unon Tee-
graph Co. from Denver, Coo., on or about ebruary 1 , 192 , and that he
stand commtted n the common |a of ackson County, Mo., at ansas Cty,
uness and unt he compes wth the foregong order of ths court, to whch
order and commtment the sad G. W. rownson e cepts.
The present appea was taken from ths order.
t the outset the queston of ursdcton, though not rased by counse, yet
suggests tsef by reason of the form of the order appeaed from. ewed as
an order of commtment for contempt Its fnaty may we be doubted. Its
rtce 1331: amnaton of records and wt-
nesses.
III-23-4227
Ct. D. 4
pr 24, 1929.
OPINION.
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193
1104, rt. 1331.
character mght be caed condtona, aternatve, or antcpatory ns. Such
orders are generay hed not appeaabe. (18 C. ., sec. 15 , pp. 99-100 ones
|. Crag, 127 U. 8., 213 Cty of Paducah v. ast Tenn., do., Co., 229 U. S., 47 .)
nd ths Is especay true If the order Invoves possbe punshment for con-
tempt. (Semrow v. Semrow, 4 N. W., 44 (Mnn.) rnkey v. rnkey, 47
N. Y., 40 Sherwood v. Sherwood, 32 Conn., 1 Cherry v. Cherry, 253 Mass.,
172: ure v. Tayor, 12 Mss., 155.)
The order under dscusson s, however, dua In ts nature. It frst uncon-
dtonay orders the wtness to appear and testfy and to produce certan
papers t secondy commts the wtness to |a condtonay. We thnk that
for the purpose of determnng nppeaabtty the frst part of the order, whch
Is compete n tsef, shoud aone be consdered. That such an order Is appea-
abe we thnk Is estabshed. (Perman v. Unted States, 247 U. S.. 7 s v.
/. C. C, 237 U. S., 434, 442 Unted States v. rst Natona Dank, 295 ., 142,
affrmed 2 7 U. S., 57 T. D. 354 , C. . III-, 422 .) In the case ast cted
the Supreme Court entertaned an appea from an order of the dstrct court
drectng a wtness to appear and testfy and to produce books and papers In a
case very smar to the case at bar. The affrmance of the order necessary
nvoved a hodng that the order was appeaabe.
We turn to the merts. The statutory provsons under whch authorty a
camed by appeee for the proceedngs n the present case are as foows:
Secton 1247, Tte 2 , . S. C. amnaton of books, papers, and records
takng testmony. The Commssoner of Interna Revenue, for the purpose
of ascertanng the correctness of any return or for the purpose of makng a
return where none has been made, s authorzed, by any revenue agent or n-
spector desgnated by hm for that purpose, to e amne any books, papers,
records, or memoranda bearng upon the matters requred to be Incuded In
the return, and may requre the attendance of the person renderng ths return
or of any offcer or empoyee of such person, or the attendance of any other
person havng knowedge In 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.
Ths provson frst appeared n secton 1305 of the Revenue ct of 1918 (40
Stat., 1142). It was reenacted as secton 1308 In the Revenue ct of 1921 (42
8tat., 310), as secton 1004 of the Revenue ct of 1924 (43 Stat., 340), as sec-
ton 1104 of the Revenue ct of 192 (44 Stat., 118), and agan as secton 18
of the Revenue ct of 1928 (45 Stat, 878).
Secton 2817, Tte 2 , U. S. C. . ursdcton of oours. ( ) If any per-
son s summoned under the Interna-revenue aws to appear, to testfy, or to
produce books, papers, or other data, the dstrct court of the Unted States
for the dstrct n whch such person resdes sha have |ursdcton by appro-
prate process to compe such attendance, testmony or producton of books,
papers, or other data.
The equvaent of ths provson appeared n secton 1318 of the Revenue
ct of 1918 (40 Stat., 1148). It agan appeared In secton 1310 of the Revenue
ct of 1921 (42 Stat., 310) and agan as secton 1025(a) n the Revenue ct
of 1924 (43 Stat., 348). It aso appears as secton 1122(a) n the Revenue ct
of 192 (44 Stat., 121) and as secton 17(a) n the Revenue ct of 1928 (45
Stat., 877).
Other reevant provsons of the statutes w be referred to ater.
It s the contenton of appeant that the statutes above quoted do not e -
pressy authorze the Commssoner of Interna Revenue to requre the produc-
ton of the books and papers of any person e cept the one whose ta abty Is
beng nvestgated that f Congress had ntended to gve the Commssoner such
authorty t woud have used e pct anguage to that effect. It s contended
further that where such authorty has been gven as to other cognate matters,
e pct anguage has been used. Secton 94, Tte 2 , U. S. 0., Is cted. That
secton contans the foowng provson:
nd f any person, on beng notfed or requred as aforesad, sha refuse
or negect to render such st or return wthn the tme requred as aforesad,
or whenever any person who s requred to dever a monthy or other return
of ob|ects sub|ect to ta fas to do so at the tme requred, or devers any
return whch, n the opnon of the coector, Is erroneous, fase, or frauduent,
or contans any undervauaton or understatement, or refuses to aow any
reguary authorzed Government offcer to e amne the books of such person,
nrm or corporaton, t sha be awfu for the coector to summon such person,
or any other person havng possesson, custody, or care of books of account
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51104, rt. 1331.
194
contanng entres reatng to the busness of such person or any other person
he may deem proper, to appear before hm and produce such books at a tme
and pace mmed n the summons, and to gve testmony or answer nterroga-
tores, under oath, respectng any ob|ects or ncome abe to ta or the returns
thereof.
That provson was orgnay contaned n secton 3173, Revsed Statutes, and
reated to matters somewhat dfferent from that now under dscusson. ow-
ever, the provson has attery been e pressy made appcabe to matters
such as the present one.
y secton 1244. Tte 2 . U. S. C, t s provded:
admnstratve, speca, or stamp provsons of aw, ncudng the aw
reatng to the assessment of ta es, so far as appcabe, are hereby e tended
to and made a part of ths ct.
Ths same provson appears n the Revenue cts of 1918, secton 13 (40
Stat., 1142) 1921, secton 1300 ( 42 Stat., 308) 1924. secton 1000 (43 Stat.,
339) and 192 , secton 1100 (44 Stat, 111).
It s further contended by appeant that secton 94, Tte 2 . U. S. C. (R. S.
8173), above quoted, does not tsef authorze the Government offca, n Inves-
tgatng the return of a specfed person, to requre a thrd person to produce
hs own books. We are unabe to agree wth these severa .contentons of
counse for appeant.
The hstory of the aw of evdence ends no support to such contentons. or
more than 300 years It has been a ma m that the pubc has a rght to every
man s evdence. Prveges of e empton are e ceptons to the rue. (Wgmore
on vdence, sectons 2190-2193. See ar v. Unted States, 250 U. S., 273
Consodated, fc, Co. v. ermont, 207 U. S., 41 Wson v. Unted States, 221
U. S., 3 1 In re Meador, 1 ed. Oas. No. 9375.)
Ths testmona duty to attend and dscose appes equay to the producton
of documents: and the process for documents w be mped wherever test-
mona compuson n genera s predcated by a statute. (Wgmore on vdence,
secton 2193 and note.)
Congress, we thnk, has made no such dstnctons as counse for appeant
suggests n the authorty granted to varous nvestgatng bodes. On the con-
trary, Congress n passng enactments grantng authorty to such bodes to take
evdence, and the Supreme Court In construng such enactments have taken
the broad vew that when a duy authorzed governmenta agency s makng
an nvestgaton and s authorzed to summon wtnesses and requre the pro-
ducton of books and papers, such authorty e tends not ony to the producton
of the books and papers of te party or corporaton under nvestgaton, but aso
to the producton of the reevant books and papers of thrd partes or corpora-
tons, a sub|ect, of course, to the mtatons and condtons contaned n the
fourth and ffth amendments to the Unted States Consttuton.
ae v. enke (201 U. S., 43) was an appea from an order of a Unted
States crcut court dsmssng a wrt of habeas corpus. ae had been served
wth a subpwna duces tecum to testfy before a edera grand |ury whch was
nvestgatng the corporaton of whch he was secretary-treasurer and to pro-
duce books and papers of hs corporaton. e refused, and was commtted for
contempt. The |udgment was affrmed.
Wson v. Unted States (221 U. S., 3 1) was a wrt of error to revew a
|udgment of a Unted States crcut court commttng Wson for contempt
edera grand |ury was nvestgatng aeged voatons of sectons 5440 and
5480, Revsed Statutes, by Wson and others. subpwna duces tecum addressed
to the corporaton was served on Wson to produce a etter-press copybook of
the corporaton of whch he was presdent. e refused, and was commtted for
contempt. In affrmng the |udgment the court sad (p. 382) :
What then Is the status of the books and papers of a corporaton, whch
has not been created as a mere nstrumentaty of government, but has been
formed pursuant to vountary agreement and hence s caed a prvate corpora-
ton They are not pubc records n the sense that they reate to pubc trans-
actons, or, n the absence of partcuar requrements, are open to genera
nspecton or must be kept or fed n a speca manner. They have reference
to busness transacted for the beneft of the group of ndvduas whose asso-
caton has the advantage of corporate organzaton. ut the corporate form
of busness actvty, wth ts chartered prveges, rases a dstncton when the
authorty of government demands the e amnaton of books. That demand
e pressed n awfu process, confnng ts requrements wthn the mts whch
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195
1104, rt. 1331.
reason Imposed In the crcumstances of the case, the corporaton has no prv-
ege to refuse. It can not resst producton upon the ground of sef-crmnaton.
though the ob|ect of the nqury may be to detect the abuses t has commtted,
to dscover ts voatons of aw, and to Infct punshment by forfeture of
franchses or otherwse, t must submt ts books and papers to duy consttuted
au horty when demand s sutaby made. Ths s nvoved n the reservaton
of the vstatora power of the State, and In the authorty of the Natona
Government where the corporate actvtes are In the doman sub|ect to the
powers of Congress.
(P. 385:)
Nor s t an answer to say that n the present case the Inqury before the
grand |ury was not drected aganst the corporaton tsef. The appeant had
no greater rght to wthhod the books by reason of the fact that the corpora-
ton was not charged wth crmna abuses. That, f the corporaton had been
so charged, he woud have been compeed to submt the books to nspecton,
despte the consequences to hmsef, suffcenty shows the absence of any bass
for a cam on hs part of persona prvege as to them t coud not depend
upon the queston whether or not another was accused. The ony queston
was whether as aganst the corporaton the books were awfuy requred In
the admnstraton of |ustce. When the appeant became presdent of the
corporaton and as such hed and used Its books for the transacton of ts bus-
ness commtted to hs charge, he was at a tmes sub|ect to Its drecton, and
the books contnuousy remaned under ts contro. If another took hs pace
hs custody woud yed. e cou d assert no persona rght to retan the cor-
porate books aganst any demand of government whch the corporaton was
bound to recognze.
See Drer v. Unted States (221 U. S., 394) to same effect.
Wheeer v. Unted States (22 T . S., 478) was an appea and wrt of error
to revew dena of wrt of habeas corpus and commtment for contempt by a
Unted States dstrct court. edera grand |ury was nvestgatng Wheeer
and another for voaton of the statute prohbtng the use of the Unted States
ma In a scheme to defraud. subpoena duces tecum was ssued to the cor-
poraton, Wheeer Shaw. Inc., to produce books and papers. The corporaton
had gone out of e stence. Wheeer refused. Commtment for contempt fo-
owed. udgment was affrmed.
s gee Co. v. Unted States (2 2 U. S., 151) was an appea and wrt of error
to revew an order of a Unted States dstrct court denyng a petton for return
of papers produced by an offcer of two corporatons before a edera grand |ury
In response to a subpoena duces tecum, addressed to the corporatons requrng
them to appear and produce named papers. The nvestgaton before the grand
ury was as to charges of fraud n mportatons by the two cor| oratons. In
affrmng the order denyng return the court quoted wth approva from Wson
v. Unted States, supra, as to the status of corporate book s and papers.
We thnk that the power granted to the Commssoner of Interna Revenue
by the statutes above quoted to requre the attendance of wtnesses and the
producton of books and papers n matters propery under nvestgaton by hm
s smar to the power vested by anaogous statutes n edera grand |ures to
perform smar acts, such as are Iustrated by the cases above cted and that
the statutes nvoved, grantng such power to the Commssoner, shoud receve
a ke bera constructon n vew of the ke mportant ends sought by the
Government.
We have been cted to but one case whch appears to be drecty n pont:
Unted Sates v. rst Natona ank (295 ., 142). That case arose under
the Revenue ct of 1921, but the provsons of that ct and of the ater cts
of 1924 and 192 are substantay the same so far as they reate to the ques-
tons now beng consdered. In the ease ast cted the ta abty of Wam
. anon and wfe was beng nvestgated by the authorzed agents of the
Commssoner of Interna Revenue. The bank was subpoenaed to appear wth
ts books and papers bearng upon the ta abty of Mr. anon and hs wfe.
The bank refused. The court after a hearng made an order requrng the bank
to appear and furnsh the Informaton. In ts opnon the court, after ctng
and quotng from the statutes heretofore gven, sad:
The petton sets out that the sad anon and hs wfe have not made
fu, true, and correct statements of ther respectve Incomes of the years 1918,
1919, 1920, 1921, and 1922, nnd that the edgers and other books of the bank
contanng the accounts of the sad anons w be of matera assstance to
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110 . rt. 1341.
19
the Unted States n arrvng at the true and correct Incomes of sad Indvduas
of the respectve years that summons to appear and testfy and produce the
books had been served on D. P. ester, |r., as presdent of the bank, and that
the sad bank and Its offcers had faed to appear at the tme and pace desg-
nated n the summons, and they now refuse to appear and permt the duy
authorzed agents of the nterna revenue of the Unted States to have access
n any manner to the records and accounts of sad bank and prays for the
assstance of the court to requre the bank offcers and empoyees to testfy and
the bank to produce ts books and accounts.
Sad bank refuses to testfy and produce the books, and contends that t
s protected by the fourth amendment to the Consttuton from dong so. s
I understand the fourth amendment, t protects the partes to crmna prose-
cuton aganst unreasonabe searches and sezures of ther papers, and I do
not understand ths to authorze a thrd party, who has books and papers
whch may be reevant to the nqury, to refuse to produce such books and
papers because of ths amendment. Ths Is not a queston of a search and
sezure of a party s books and papers, but of whether a wtness who has In
formaton as to a party s deangs may be requred to testfy to those facts,
and produce book entres as to such entres n connecton wth and supportng
such testmony.
The case was appeaed to the Supreme Court. That court affrmed the order
of the court beow (2 7 U. S., 57 ) on the authorty of ssgee v. Unted State ,
ae v. enke, Wheeer v. Unted States, and Wson v. Unted States, above
cted.
It s suggested by counse for appeant that t does not appear that the
order made by the dstrct court n Unted States v. rst Natona ank, supra,
requred the producton of the books of the bank. We thnk that ths does
ceary appear both by the e cerpts from the opnon of the court above quoted
and by the fact that the affrmance by the Supreme Court was based upon the
hodngs n the ssgee, ae, Wson, and Wheeer cases a of whch nvoved
the producton of books and papers and not merey the gvng of testmony.
The affrmance, based e pressy upon those cases, estabshes, we thnk, the
proposton that the power of the Commssoner of Interna Revenue, under the
statutes aready cted, to e amne corporate books and papers Is anaogous
to the power of the edera grand |ures n the cases cted and estabshes
further that the fact that the corporaton whose books and papers are requred
to be produced s not under nvestgaton s mmatera.
Our concuson Is that the steps taken by the Commssoner and by the court
to secure the desred evdence were authorzed and reguar.
Order affrmed.
S CTION 110 . IN L D T RMIN TIONS ND
SS SSM NTS.
rtce 1341: na determnaton and assessment
of ta or penaty.
R ND CT O 192 .
Recovery on bond gven n connecton wth a cam n abatement
(See Ct. D. 5, page 189.)
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197
( 203, rt. 1579.
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 203. R COGNITION O G IN OR LOSS
ROM S L S ND C NG S.
rtce 1579: Invountary converson of III-3 4072
property. G. C. M. 5302
R NU CT O 1824.
Money receved In payment for property taken by condemna-
ton proceedngs ncudes the amount deducted from the award
to pay ndebtedness on such property. The e cess of the gross
amount awarded, ess ega e penses ncurred In defendng the
property, over the amount e pended for actua repacement, Is the
ma mum amount of gan whch may be recognzed from the con-
verson, the actua gan dependng on the cost or other appcabe
bass of the property converted.
The ta payer was compusory dvested of ts property by the
Unted States. Compensaton therefor was determned by a com-
msson apponted for the purpose. The ta payer appeaed from
the commsson s fndng, and the court handed down a decson
hodng that the ta payer was entted to the sum of 507a doars.
rom the award of 507a doars, the Government wthhed the sum
of 103a doars, made up as foows:
Doars.
Indebtedness to Government 92 r
Interest 5
Ta es (k
103
The ta payer ncurred e penses n the ega proceedngs totang
35a| doars, whch, added to the sum of 103ar doars aforesad, makes
a tota of 138a| doars. Thus the net amount whch nured to the
ta payer after a deductons and e penses was 3 9a doars. The
ta payer e pended n the acqurement of a new pant 378a doars.
Inasmuch as ths atter amount e ceeded the net sum whch nured
to the ta payer from the court s award, t s contended that under
the provsons of secton 203(b) 5 of the Revenue ct of 1924 no
ta abe ncome was derved from the transacton.
Secton 203(b)5 of the Revenue ct of 1924 provdes, n part, as
foows:
If property (as a resut of an e ercse of the power of requston
or condemnaton ) Is compusory or nvountary converted nto
money whch Is forthwth In good fath, under reguatons
e pended n the acquston of other property smar or reated n servce or
use , no gan or oss sha be recognzed. If any part of the money
s not so e pended, the gan, f any, sha be recognzed, but In an amount not
In e cess of the money whch s not so e pended.
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203. rt. 1579
198
The prncpa queston rased s whether under the facts stated
a or ony part of the money nto whch the ta payer s property
was nvountary converted was e pended n the acquston of the
new pant. If a of the money was so e pended, no gan or oss
to the ta payer woud be recognzed under the provsons of sec-
ton 203(b) 5.
The mportant word of secton 203(b) 5, from the standpont of
the queston rased, s money. The ta payer contends that the
word shoud be construed narrowy so as to ncude onv cash actuay
receved. To accept ths contenton, however, woud be to render
ta abty dependent upon the mere form of the consderaton,
and woud work aganst unformty. Under the ta payer s con-
tenton, f n the nstant case the ta payer had receved the fu
consderaton n cash, and had then out of the cash pad ts debts,
there woud have been a ta abe gan, but because the Government
set off the ta payer s ndebtedness to t and pad ony the net amount
due, there s no ta abe gan. Such a resut s not compeed even
by the tera anguage of the ct. The ct does not specfy money
receved by the ta payer, and the anomaous resut referred to
woud be avoded by treatng money receved by a partes as
wthn the ntent of the statute. ut assumng that ony money
receved by the ta payer s ntended, there s adequate precedent for
regardng money not actuay pad to a ta payer n cash, but de-
voted to satsfacton of hs obgatons, as constructvey receved
by hm. In the nstant case the sum wthhed by the Government
was wthhed to pay obgatons of the ta payer, and therefore
shoud be regarded as constructvey receved by t.
The same effect can be gven to the statute by construng the word
money n a broad nstead of a narrow sense. There s consder-
abe precedent for such constructon. s sad n 40 Corpus urs,
page 1489:
The word money may have a very broad meanng It may be used as a
generc term, n a genera and comprehensve sense, or n a arge sense. In ta
generc sense t s a word of a very comprehensve mport. The term
has dfferent meanngs dependng upon whether t appes to cons or paper
currency or whether It refers to debts or credts.
broad constructon s supported by the hstory of the Reveuue
ct. In the correspondng provsons of the ct of 1921 (secton
214(a) 12 and secton 234(a)14), the word money s not used,
but nstead the term used n one pace s cash or ts equvaent,
and n another proceeds. These atter e pressons woud cover the
credts nvoved n the nstant case. The ogc of the stuaton woud
ndcate that bv money n the 1924 ct Congress meant the same
thng descrbed as cash or ts equvaent and proceeds n the
prevous ct. That such was the ntended meanng s suggested
by the report of the Commttee on Ways and Means of the ouse
of Representatves on the Revenue of 1924, wheren (pages 18
and 14) t s stated:
Paragraph (5) corresponds to sectons 214(a) 12 and 234(a) 14 of the e stng
aw. The e stng aw e empts from ta the proceeds from an nvountary
converson of property, but fas to grant an e empton If the property s
repaced n knd by the nsurance company or smar person. The b
e empts the gan from an nvountary converson whether the repacement to
made by the ta payer or by the nsurance company.
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199
207 rt 1 31.
Under the e stng aw If ony a porton of the proceeds from an nvountary
converson s used n the repacement, then ony a correspondng part of the
gan or oss s not recognzed. In the b the gan from the transacton s
recognzed, but n an amount not to e ceed the une pended porton of the
proceeds.
The report of the Senate Commttee on nance on the Revenue
of 1924 (page 15) contans the same e panaton.
These e panatons ndcate no purpose to adopt a narrower sub-
sttute for the e pressons cash or ts equvaent and proceeds.
On the contrary, the use n the commttee reports of the word pro-
ceeds (note partcuary the ast word of the quoted matter) nd-
cates that to the commttee the word money n the pendng b
meant proceeds.
The apparent opnon of Congress that the word money aone
n the new ct woud convey the same meanng as the e presson
cash or ts equvaent appearng n the prevous statute s sup-
ported by the court decsons. It has been hed that money s a
broader and a more generc term than cash (McGovem v. U. S..
272 ed., 2 2, 2 3 (G C. .)), and that money or money s worth
means cash or ts equvaent (Gett v. Chcago Tte Trust Co.,
82 N. ., 891, 904). The framers of the ct were presumaby famar
wth the broad constructon gven to the word money by the courts.
ven though ths broad constructon of the word money were
not reed upon and the other prncpes, prevousy mentoned,
were not resorted to, the same resut woud foow under the vew
that where the consderaton from the nvountary converson of
property s other than money, the case s, to the e tent of such other
consderaton, beyond the purvew of secton 203(b)5. Under ths
vew, the gan, f any, woud be recognzed regardess of the dspos-
ton of the proceeds, to the e tent of the amount of the consderaton
receved other than n money.
In the opnon of ths offce, ony part of the money nto whch
the ta payer s property was nvountary converted was e pended
n the acquston of the new pant, and therefore any gan nurng
to the ta payer from the transacton may be recognzed n an amount
not n e cess of the dfference between the gross amount awarded
to the ta payer, 507a doars, ess ega e penses of 35a doars, or a
baance of 472a doars, and the amount e pended for repacement,
378a doars, the dfference beng 94a doars. Ths does not mean
that the 94a doars s ta abe gan. The ta abe gan must st be
determned on the bass of the cost or other appcabe bass of the
property converted. 94a doars s merey the argest amount that
can be recognzed n any event.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
S CTION 207. ISC L Y RS.
rtce 1 31: sca years endng n 1924. III- -4098
I. T. 2458
R NU CT O 1924.
Mmeograph 8308, ampe II (C. . I -1, 7), n so far as t
hods that ncome dstrbuted by a trust at the cose of ts fsca year
3133 29 14
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218(a), rt. 48.
200
ended anuary 81, 1924, s ta abe to a benefcary keepng hs books
on a caendar-year bass at the dfferent rates prescrbed by the
Revenue cts of 1921 and 1924, s revoked, n vew of Genera
Counse s Memorandum 5735, on page 203.
P RT II. INDI IDU LS.
S CTION 218(a). GROSS INCOM D IN D:
INCLUSIONS.
rtce 31: What ncuded n gross ncome.
R NU CT O 1924.
Income of trust estate under w pad to husband or wfe n
Te as. (See G. C. M. 5741, page 1 0.)
rtce 31: What ncuded n gross ncome.
R NU CT O 1924.
Income from restrcted Indan and conveyed by one member of
the Otoe Trbe of Indans to another member of the trbe, the deed
contanng restrctons as to aenaton by the grantee. (See G. C. M.
020, page 3.)
rtce 32: Compensaton for persona servces.
R NU CT O 1924.
Payments made by a hodng corporaton to an offcer of an oper-
atng company as addtona compensaton for servces rendered.
(See G. C. M. 5792, page 1 3.)
rtce 47: nnutes and nsurance poces.
R NU CT O 1924.
nnua payments under testamentary provson to a wdow n
eu of dower. (See T. D. 425 , page 243.)
rtce 48: Improvements by essees. III-11-4139
G. C. M. 58
R NU CTS O 1918 ND 1924.
Payment by a essee of a speca assessment for constructon of
a pubc drveway s anaogous to the makng of an Improvement
on the eased premses by the essee n pursuance of an agreement
wth the essor and resuts n ta abe ncome to the essor n ac-
cordance wth, and to the e tent provded by, artce 48 of Regua-
tons 5. Recommended that Offce Decson 373 (O. . 2, 123)
be revoked.
n opnon s requested as to whether the amount of a speca
assessment on certan property owned by a ta payer, whch was pad
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201
(5218(a), rt. 48.
n 1924 by the essee of the property, consttuted ncome to the
ta payer.
The ta payer s the owner of certan mproved rea estate n the
cty of Y, whch was eased to the M Company for a perod of 198
years from ugust 1, 1913, at a stpuated annua renta. The ease
provded n part that the essee was to pay a ta es, speca assess-
ments, and other charges accrung aganst the property. It further
provded that the essee was to construct a budng on the property
sutabe to produce a renta ncome suffcent to guarantee the rent
provded n the ease, by May, 192-, whch date was ater changed to
May, 193-. Durng 1924, the essee pad a speca assessment eved
aganst the property by the cty of Y for an mprovement known as
the Drve. The specfc queston at ssue s whether the essor
derved ta abe ncome on account of ths payment, and f so, n
what amount.
rtce 110 of eguatons 5 provdes that ta es pad by a tenant
to or for a andord for busness property are addtona rent and
consttute a deductbe tem to the tenant and ta abe ncome to the
andord, the amount of the ta beng deductbe by the atter.
Offce Decson 373 reads as foows:
ssessments for oca benefts pad by a tenant for bs andord accordng to
agreement are hed to bp ddtona rent pad by the tenant, and therefore
deductbe from hs gross ncome, provded the tenant uses the property for
busness purposes. The amount so receved by the andord s ta abe ncome
to hm, but because of ts nature s not an aowabe deducton from hs gross
ncome.
In accordance wth ths rung, t s contended that the payment by
the M Company of the speca assessment here under consderaton
consttuted to the fu e tent thereof ta abe ncome to the essor
for 1924.
There s a cear dstncton between a ta and a speca assessment
for oca benefts. s stated n De C rcg v. arter sphat Pawng
Co. (1 7 111.. 215, 47 N. ., 3 7) :
ta s mposed for a genera or pubc purpose. It s eved for
the purpose of carryng on the government. It s a charge on ands and other
property whch essens ts vuue, and n the proporton n whch the owner s
requred to pay s hs pecunary abty dmnshed. Ths s the sense n whch
the term ta aton s used and understood. On the other hand, a speca
assessment contans none of the dstnctve features of a ta . It s assessed or
eved for n speca purpose, and not for a genera purpose. It s not a charge
on property whch reduces ts vaue. The assessment s made n the rato of
advantages accrung to the property n consequence of the mprovement. In
no case can the assessment e ceed the advantages accrung to the property
assessed. It s therefore regarded but an equvaent or compensaton for the
ncreased vaue the property w derve from the mprovement the assessment
Is eved to dsrharge.
In ths connecton see aso appea of Cadwe Mng Co. (3 . T.
., 1232 .
The Revenue cts and reguatons dstngushed between ta es
and speca assessments, provdng that ta es are deductbe from
gross ncome, but that payments of assessments made for the pur-
pose of constructng oca benefts are n the nature of capta e -
pendtures and are not deductbe. (Secton 214(a)8 of the Reve-
nue ct of 1924 and artces 131-133 of Reguatons 5.)
The Supreme Court of the Unted States n the case of Duffy v.
Centra Raroad Co. of New ersey (2 8 U. S., 55, T. D. 3704, C. .
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214(a)3, rt. 133.
202
I -1, 143) hed that e pendtures made by a corporate essee, as
requred by the ease, to create addtons and betterments to the
eased property and not for upkeep, were not deductbe from gross
ncome as mantenance or operatng e penses, nor were they de-
ductbe as rentas or other payments requred to be made as a
condton to the contnued use or possesson of the property, snce
renta s used n the evenue ct of 191 n the usua sense m-
pyng a f ed sum, or property amountng thereto, payabe at stated
tmes for the use of property, and other payments means pay-
ments e|usdem geners wth rentas, such as ta es, nsurance, nter-
est on mortgages, and the ke. The court hed that the e pendtures
to create addtons and betterments to the eased property con-
sttuted a capta nvestment by the essee. oowng the prnc-
pe of the Duffy decson, t must be concuded that the payment by
the essee of the amount of the speca assessment here under con-
sderaton can not propery be consdered as addtona rent pad by
the essee.
In vew of the concuson |ust reached, t s the opnon of ths
offce that the payment by the essee of the speca assessment was
anaogous to the makng of an mprovement on the eased premses
by the essee n pursuance of an agreement wth the essor, and so
resuted n ta abe ncome to the essor n accordance wth the pro-
vsons of artce 48 of Reguatons 5. s the essor s propretor-
shp s sub|ect to the rghts of the essee durng the term of the
ease, the essor n 1924 receved ncome ony to the e tent of the
estmated vaue of the mprovement sub|ect to the ease. ( rtce
48, Reguatons 5.)
It s recommended that Offce Decson 378, whch s n confct
wth the concusons reached heren, be revoked.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
S CTION 214(a) 1. D DUCTIONS LLOW D INDI-
IDU LS: USIN SS P NS S.
rtce 112: When charges deductbe.
R NU CT O 19 24.
reght charges of umber manufacturers keepng books on accrua
bass. (See I. T. 2473, page 88.)
S CTION 214(a)3. D DUCTIONS LLOW D
INDI IDU LS: T S.
rtce 133: Ta es for oca benefts
R NU CT O 1924.
Treatment. (See G. C. M. 5589, page 83.)
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203 219, rt. 341.
S CTION 214(a)8. D DUCTIONS LLOW D
INDI IDU LS: D PR CI TION.
rtce 1 2 : Deprecabe property.
R NU CT O 1924.
sse.-sment for street mprovements on front-foot or vauaton
bass. (See G. C. M. 5589, page 83.)
S CTION 214 (a) 10. D DUCTIONS LLOW D INDI-
IDU LS: CONTRI UTIONS OR GI TS.
rtce 251: Contrbutons or gfts.
R NU CT O 1924.
Navy and Marne Memora ssocaton. (See I. T. 24 0, page
98.)
S CTION 219. ST T S ND TRUSTS.
rtce 341: states and trusts. III- -4097
G. C. M. 5735
R NU CT O 1924.
Income of a trust for ts fsca year ended anuary 31, 1924,
dstrbutabe to a benefcary makng bs returns on a caendar-
year bass must be ncuded n the return of the benefcary for the
caendar year 1924 and s ta abe n fu to the benefcary at the
rates prescrbed by the Revenue ct of 1924 for the caendar year
1924. Recommended that Mmeograph 3308, ampe (C. .
I -1, 7), be revoked n so far as t s Inconsstent wth ths
memorandum.
n opnon s requested as to the method under the Revenue ct
of 1924 of ta ng ncome dstrbutabe to the benefcary of a testa-
mentary trust where the return of the trust s fed on a fsca-year
bass and the return of the benefcary s fed on a caendar-year
bass.
The facts of the nstant case are as foows:
, who ded n 190-, devsed hs estate n trust, the ncome thereof
to be pad prncpay to hs wdow, , and to hs sons, C and D, the
atter beng the ta payer benefcary n ths case. The w pro-
vded n part that the sons were to receve from the net ncome of the
estate from doars to 3a doars per annum, dependng on ther
age. When they reached the age of y years, eacn was to receve
one-haf of the net ncome of the resduary estate, remanng after
deductng the ncome whch was to be pad to the decedent s wdow
and other ndvduas, under the w. The w further provded
that f ether son shoud de wthout eavng ssue, the e ecutors
and trustees were.to set asde 20a doars, and to pay the ncome
therefrom to the wdow of such son durng her fe. The trustees had
the power, f they saw ft, to pay to the sons as they reached the age
of z years, one-thrd of ther respectve shares of the prncpa of
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219, rt. 341.
204
the estate hed n trust for them. The trustees were gven the
usua powers of managng and nvestng. The trust fed ts returns
upon the bass of a fsca year ended anuary 31, whe D fed hs
return upon the caendar-year bass.
Two questons arse n the case, whch are answered n the order
stated.
(1) In what year must D report the porton of the ncome of the
trust for ts fsca year ended anuary 81, 1924, dstrbutabe cur-
renty to hm
The answer to ths queston s found n secton 219(e) of the
Revenue ct of 1924, whch provdes:
Sec. 219. (e) If the ta abe year of a benefcary s dfferent from that of
the estate or trust, the amount whch he s requred, under paragraph (2) of
subdvson (b) of ths secton, to ncude n computng hs net ncome, sha
be based upon the ncome of the estate or trust for ts ta abe year endng
wthn hs ta abe year.
It appears, therefore, that D s requred to ncude n hs return for
the caendar year 1924 the amount of ncome of the trust for ts en-
tre fsca year ended anuary 31, 1924. dstrbutabe to hm pursuant
to the terms of the w, whether dstrbuted or not.
(2) Is the amount of ncome so ncuded by D n hs return for the
caendar year 1924 ta abe at the rates prescrbed by the Revenue ct
of 1924 for the caendar year 1924 or s t to be ta ed partay at
such rates and partay at the rates prescrbed by the Revenue ct
of 1921 for the caendar year 1923 as provded by secton 207 (b)
of the 1924 ct n the case of the dstrbutve share of the ncome of a
Sartner n a partnershp havng a fsca year begnnng n one caen-
ar year and endng n another caendar year, the rates of ta for
such caendar years Deng dfferent
The Income Ta Unt ned, n accordance wth Mmeograph 3308,
ampe II, that of the ncome of the trust for ts fsca year ended
anuary 31, 1924, dstrbutabe currenty to D. 11/12 shoud be ta ed
at the rates prescrbed by the Revenue ct or 1921 for the caendar
year 1928 and 1/12 at the rates prescrbed by the Revenue ct of
1924 for the caendar year 1924.
Secton 207(b) of the Revenue ct of 1924 provdes n part:
If a fsca year of a partnershp begns n one caendar year and ends n aa-
other caendar year, and the aw appcabe to the second caendar year s
dfferent from the aw appcabe to the frst caendar year, then (1) the rates
for the caendar year durng whch such fsca year begns sha appy to an
amount of each partner s share of such partnershp net ncome (determned un-
der the aw appcabe to such caendar year) equa to the proporton whch the
part of such fsca year fang wthn such caendar year bears to the fu fsca
year, and (2) the rates for the caendar year durng whch such fsca year
ends sha appy to an amount of each partner s share of such partnershp
net ncome (determned under the aw appcabe to such caendar year) equa
to the proporton whch the part of such fsca year fang wthn such caendar
year bears to the fu fsca year.
Trusts and partnershps dffer n essenta respects. The pro-
vsons reatng to the ta abty of ndvduas carryng on bus-
ness n partnershp and the provsons under whch the ncome of a
trust s ta abe to the trust benefcares are contaned n separate
sectons. (See sectons 218 and 219, Revenue ct of 1924.) There
s no authorty n the ct for appyng the provsons made ap-
pcabe n the case of partnershps to trusts. It foows that secton
207(b) does not appy to the facts of the nstant case.
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205
(231, rt. 21.
Ths offce s therefore of the opnon that the porton of the n-
come of the trust for ts fsca year ended anuary 81, 1924, whch
D was requred under secton 219(e) of the Revenue ct of 1924 to
ncude n hs ndvdua return for the caendar year 1924 s ta abe
to hm at the rates prescrbed by the Revenue ct of 1924 for the
caendar year 1924. It s recommended that Mmeograph 8308, -
ampe II, n so far as t s nconsstent wth ths memorandum, be
revoked.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
btce 342: Method of computaton of net ncome and ta .
R NU CT O 1984.
Income to be returned by benefcares where w authorzed trus-
tees to set asde reasonabe amounts for deprecaton of the trust
property. (See G. C. M. 5479, page 173.)
P RT III. CORPOR TIONS.
S CTION 231. CONDITION L ND OT R
MPTIONS O CORPOR TIONS.
btce 515: udng and oan assocatons and cooperatve
banks.
R NU CT O 1024.
mendment of artce 515, Reguatons 5. (See T. D. 4258, page
2 3.)
rtce 515: udng and oan assocatons and cooperatve
banks.
R NU CT O 1924.
ansas assocaton requrng borrowers to subscrbe to shares of
rura credt nstament stock. (See G. C. M. 5909, page 177.)
rtce 519: Cvc eagues and oca assocatons of
empoyees.
R NU CT O 1984.
Navy and Marne Memora ssocaton. (See I. T. 24 0, page
98.)
rtce 521: Loca benevoent fe and mutua nsur-
ance companes and ke organzatons.
R NU CT O 1924.
Cty fremen s protectve assocaton recevng money from so-
caed sae of tckets to dances. (See G. C. M. 5921, page 179.)
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5 277 and 278, rt. 1272. 20
S CTION 238. CR DIT OR T S IN C S
O CORPOR TIONS.
rtce 11: Credt for foregn ta es.
R NU CT O 1924.
Tme of accrua of rtsh ncome ta es. (See G. C. M. 5971,
page 182.)
P RT . P YM NT, COLL CTION, ND R UND O T ND
P N LTI S.
S CTION 270. D T ON W IC T
S LL P ID.
rtce 1204: Lens and enforcement of ta ens by b
n equty.
R NU CT O 1924.
Notce of ta en fed by a coector. (See G. C. M. 5432,
page 134.)
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-4-4088
ton of ta . T. D. 42 0
INCOM ND PRO ITS T S R NU CT O 1924 D CISION O 8UPR M
COURT.
1. Coecton Sut1 Lmtaton.
The perod of mtaton wthn whch sut must be brought for
the recovery _of Income and profts ta es mposed by the Revenue
ct of 1918, assessed pror to the enactment of the Revenue ct
of 1924, Is not e tended by secton 278 of the atter ct.
2. udgment Reversed.
udgment of the Unted States Crcut Court of ppeas (22 ed.
(2 1), 249 (T. D. 4107 C. . I-2, 1S3 )) reversed.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton. D. C.
To Coectors of Interna Revenue and Others Concerned:
The foowng decson of the Supreme Court of the Unted States,
n the case of en|amn Russe et a. v. The Unted States of
merca, s pubshed for the nformaton of nterna revenue offcers
and others concerned.
D. . ar,
Commssoner of Interna Revenue.
pproved anuary 19, 1929.
. W. Meon.
Secrefay of the Treasury.
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207
277 and 278, rt, 1273.
Supreme Court of the Unted States.
en|amn Russe et a., pettoners, v. The Unted States of merca.
On wrt of certorar to the Unted State Crcut Court of ppeas for the fth Crcut.
anuary 2, 1929.
OPINION.
Mr. ustce McReynods devered the opnon of the court.
The Unted States by b fed anuary 23, 1925, sought to recover from
pettoners, stockhoders of the Pne Lumber Co., addtona ncome and proft
ta es for the year 1918 assessed aganst that corporaton n March, 1924.
The company made a return to the coector for 1918 on une 12, 1919, and
afterwards pad the amount ndcated thereby.
Pettoners camed the sut was barred under the mtaton specfed by the
appcabe statute. They succeeded In the dstrct court but the crcut court
of appeas hed another vew and reversed the decree dsmssng the b.
The statutory provsons whch requre speca consderaton are prnted
beow.
Revenue ct. 1918 (eh. 18, 40 Stat., 1057, 1083) :
Seo. 250. (d) cept n the cast1 of fase or frauduent returns wth ntent
to evade the ta , the amount of ta duo under any return sha be determned
and assessed by the Commssoner wthn fve years after the return was due
or was made, and no sut or proceedng for the coecton of any ta sha be
begun after the e praton of fve years after the date when the return was
due or was made.
Revenue ct. 1921 (eh. 13 , Tte 11 Income Ta , 42 Stat.. 227. 2 5) :
Sec. 250. (d) The amount of ncome, e cess-profts, or war-profts ta es due
under any return made under ths ct for the ta abe year 1921 or succeedng
ta abe years sha be determned and assessed by the Commssoner wthn
four years after the return was fed, and the amount of any such ta es due
under any return made under ths ct for pror ta abe years or under pror
Income, e cess-profts, or war-profts ta cts, sha be determned
and assessed wthn fve years after the return was fed, and no
sut or proceedng for the coecton of any such ta es due under ths ct or
under pror Income, e cess-profts, or war-profts a cts, sha be
begun, after the e praton of fve years after the date when such return was
fed, but ths sha not affect suts or proceedngs begun at the tme of the
passage of ths ct.
Revenue ct, 1924 (ch. 234, Tte II (effectve anuary 1, 1924), 43 Stat.,
253. 29f, 300. 301, 303. 352) :
Sec. 277. (a) cept as provded n secton 278 and n sUbd son (b) of
secton 274 and n subdvson (b) of secton 279 ( 274 and 279 are not here
Important)
(1) The amount of Income, e cess-profts, and war-profts ta es Imposed
by the Revenue ct of 1921, and by such ct as amended, for the ta abe
year 1921 and succeedng ta abe years, and the amount of Income ta es m-
posed by ths ct, sha be assessed wthn four years after the return was
fed, and no proceedng In court for the coecton of such ta es sha be
begun after the e praton of such perod.
(2) The amount of ncome, e cess-profts, and war-profts ta es mposed
by the Revenue ct of 1918, and by any such ct as amended,
sha be assessed wthn fve years after the return was fed, and no proceed-
ng In court for the coecton of such ta es sha be begun after the e praton
of such perod.
Seo. 278. (a) (b) (c)
(d) Where the assessment of the ta Is made wthn the perod prescrbed
n secton 277 or n ths secton (the Itaczed words are unmportant here),
such ta may be coected by dstrant or by a proceedng n court, begun
wthn s years after the assessment of the ta . Nothng In ths ct sha be
construed as preventng the begnnng, wthout assessment, of a proceedng In
court for the coecton of the ta at any tme before the e praton of the
perod wthn whch an assessment may be made.
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277 and 278, rt. 1272. 208
(e) Ths secton sha not (1) authorze the assessment of a ta or the coec-
ton thereof by dstrant or by a proceedng In court f at the tme of the
enactment of ths ct such assessment, dstrant, or proceedng was barred by
the perod of mtaton then n e stence, or (2) affect any assessment made,
or dstrant or proceedng n court begun, before the enactment of ths ct.
Sec. 280. If after the enactment of ths ct the Commssoner determnes
that any assessment shoud be made n respect of any Income, war-profts, or
e cess-profts ta Imposed by the Revenue ct of 191 , the Revenue ct of
1017, the Revenue ct of 1918, or the Revenue ct of 1921, or by any such
ct as amended, the amount whch shoud be assessed (whether as defcency
or as Interest, penaty, or other addton to the ta ) sha be computed as f ths
ct had not been enacted, but the amount so computed sha be assessed,
coected, and pad n the same manner and sub|ect to the same provsons and
mtatons (ncudng the provsons In case of denquency n payment after
notce and demand) as n the case of the ta es mposed by ths tte, e cept
as otherwse provded n secton 277.
(Tte I) Sec. 1100. (a) The foUowng parts of the Revenue ct of 1921
are repeaed, to take effect (e cept as otherwse provded In ths ct) upon
the enactment of ths ct, sub|ect to the mtatons provded n subdvsons
(b) and (c)
Tte II (caed Income Ta ) as of anuary 1, 1924
(b) The parts of the Revenue ct of 1921 whch are repeaed by ths ct sha
(e cept as provded n sectons 280 and 31 (31 s not Important here) and
e cept as otherwse specfcay provded In ths ct) reman In force for the
assessment and coecton of a tu es Imposed by such ct, and for the asso
ment, mposton, and coecton of a nterest, penates, or forfetures whch
have accrued or may accrue n reaton to any such ta es, and for the assess-
ment and coecton, to the e tent provded n the Revenue ct of 1921, of a
ta es Imposed by pror ncome, war-profts, or e cess-profts ta cts, and for
the assessment, mposton, and coecton of a Interest, penates, or forfetures
whch have accrued or may accrue n reaton to any such ta es.
rom the foregong t appears: Under the ct of 1918 both assessment and
sut wthn fve years were necessary. The ct of 1921 requred that ta es
Imposed thereby shoud be assessed wthn four years that ta es payabe under
the cts of 1918, and earer ones, shoud be assessed wthn fve years and
t mted the perod wthn whch any sut mght be brought to fve years
after the return. Wth the e ceptons specfed by secton 278, the ct of 1924
requres that assessment of ta es ad by t or the ct of 1921 and any sut
to coect the same sha come wthn four years after the return aso In re-
spect of ta es due under the cts of 1918. etc., that no assessment or sut
sha be permtted ater than fve years after the return.
The e ceptons to the genera rue of secton 277 whch are specfed by sec-
ton 278, and here Important, reate to those cases ony where there has been
assessment but no sut and pettoners aver that these e ceptons do not appy
where the assessment was made pror to une 2, 1924.
ccordng to the genera mtatons contaned In the cts of 1918, 1921, and
1924, the tme wthn whch sut mght have been brought upon the assessment
of March, 1924, aganst the Pne Lumber Co. e pred une 12, 1924 fve years
after the return date. nd uness the ct of 1924 repeaed the od mtaton
and estabshed another, pettoners must preva. The Unted States cam that
secton 278, ct of 1924, e tended the mtaton to March, 1930 s years
after the a ses ment. Pettoners deny that the ct of une 2, 1924, shoud
be so construed. They mantan that t dd not e tend the perod for sut
where an assessment had been made pror to ts passage, and say that secton
278 (e), (2), e pressy negatves the contrary theory.
When the Revenue ct of 1924 passed many partes were abe for ta es
Imposed by former cts 1921, 1918, etc. aganst some there were assessments
others had not been assessed. It made provson concernng ta es thereafter
to accrue aso for those aready due. It dstngushed between e stng assess-
ments and those whch were to foow. It estabshed a oard of Ta ppeas
and gave the rght of appea thereto whenever thereafter the Commssoner
shoud pro ose to assess for defcency. It thus created a radca dstncton
between assessments pror to une 2. 1924, and ater ones, whch, generay
at east, f ob|ected to, coud not be made wthout assent of the oard. To
secure proper acton by the oard mght requre consderabe tme, and ths
was provded for by e tendng the mtaton to s years after assessment.
ut the ta payer was afforded protecton aganst any mproper acton by the
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209
277 and 278, rt. 1 72.
Commssoner through an appea before any assessment coud be actuay Im-
posed a new and vauabe rght.
Secton 1100, ct of 1924, kept n force e cept as otherwse provded n sec-
tons 280 and 31 (31 s unmportant here) and e cept as otherwse specfcay
provded n ths ct those parts of the ct of 1921 whch provded for assess-
ment and coecton of ta es mposed by that ct or earer ones. Secton 280
pany reates ony to assessments made subsequent to une 2, 1924 but coun-
se for the Unted States mantan that wthn the meanng of secton 1100
modfcaton of the ct of 1921 was specfcay provded by sectons 277 and
278 when read n con|uncton.
Secton 277, as above shown, mts suts for ta es mposed by the ct of 1918
to fve years after the return, e cept (secton 278) n certan cases where an
assessment has been made. In the e cepted cases the perod for sut s e tended
to s years after the assessment. ut secton 278 further provdes that t
sha not authorze the coecton of a ta after the same has been actuay
barred by the appcabe statute, and further that t sha not affect any assess-
ment made pror to une 2, 1924.
Manfesty, but for secton 278 pettoners woud be free from abty under
the fve-year mtaton n the ct of 1918, contnued by the ct of 1921. If
secton 278 refers ony to assessments made after une 2, 1924, pettoners are
not abe.
If an assessment made before that date comes wthn the ambt of secton
278, ts effect woud be retroactve and certany t woud produce radca
change n the e stng status of the cam aganst the pettoners woud e tend
for some fve years a abty whch had amost e pred. Unted State r.
Magnoa Petroeum Co. (27 U. S., 1 0) decares Statutes are not to be gven
retroactve effect or construed to change the status of cams f ed n accord-
ance wth earer provsons uness the egsatve purpose so to do pany
appears. No pan purpose to change the status of the cam aganst pet-
toners as t e sted |ust before une 2, 1924, can be speed out of the words
n secton 278 or otherwhere.
Paragraph (e), (2), of secton 278 e pressy drects that that secton sha
not affect any assessment made before une 2, 1924. Counse for the Unted
States mantan that to e tend the t|me for brngng sut thereon does not
affect an assessment wthn the meanng of the paragraph. We can not
agree. Some rea force must be gven to the words used they were not
empoyed wthout defnte purpose. The rather obvous desgn, we thnk, was
to deprve secton 278 of any possbe appcaton to cases where assessment
had been made pror to une 2, 1924.
The egsatve hstory of the ct of 1924 ends support to the concuson
whch we have reached. The changes ntroduced nto the ct of 192 can not
authorze constructon of the earer one not consonant wth the anguage there
empoyed.
The |udgment s reversed. The cause w be remanded to the crcut court
of appeas for further proceedngs n conformty wth ths opnon. Reversed.
ncome ta ee vbnub acts of 1921 and 1924 decson ob court.
1. ssessment and Coecton Lmtaton- Commencement of
The perod of mtaton provded by secton 2 0(d) of Ihe Reve-
nue ct of 1921 wthn whch the amount of ta es due must be
assessed and coected runs from the date of fng a competed
return and not from the date of fng a tentatve return.
2. Coecton Lmtaton Waveb.
Where the rght to assess and coect ta es for the year 1918.
whch woud otherwse e pre on une 14, 1924, s e tended by an
agreement n wrtng to une 14, 1925, an assessment made before
the ater 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.
btce 1272: Perod of mtaton upon coec-
ton of ta .
III- -4099
Ct. D. 35
Perod.
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277 and 278, rt. 1272.
210
Unted States Crcut Court of ppeas fob the fth Crcut.
orsem ros. Dry Goods Co., Ltd.. appeant, v. Unted States of merca,
appeee.
ppea from te Dstrct Court of the Unted States tor tue Western Dstrct of
Lousana.
t December 21, 1928.
OPINION.
ryan, Crcut udge: Ths was a sut by appeant to recover back the
amount of tu es whch t pad under protest upon Its Income, war profts, and
e cess profts for the year 1918. It was based on the soe gtound that the
Government forced coecton of the ta es after the runnng of the statute of
mtatons. The dstrct court hed that the ta es were coected wthn the
penod prescrbed by aw. and entered |udgment dsmssng te sut.
On March 15, 1919, appeant fed a tentatve ta return for the year 1918,
and receved an e tenson of tme for fng ts competed return, whch was
made on une 14, 1919. On Marc 1, 1924, appeant and the Commssoner of
Interna Revenue sgned a wrtten or prnted nstrument n the foowng
form:
In pursuance of the provsons of subdvson (d) of secton 250 of the
Revenue ct of 1921, orsem ros. Dry Goods Co.. Ltd., of Shreveport, La.,
and the Commssoner of Interna Revenue, hereby 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 by or on behaf of the sad orshem ros.
Dry Goods Co. for the year 1918 under the Revenue ct of 1921, . Ths
waver s n effect from the date t s sgned by the ta payer and w reman
In effect for a perod of one year after the e praton of the statutory perod
of mtaton, or the statutory perod of mtaton as e tended by any waver
aready on fe wth the ureau, wthn whch assessments of ta es may be
made for the year or years mentoned.
The addtona ta es here nvoved were assessed by the Commssoner on
une 11. 1925, and were pad under protest on dates ater than une 14, 1925.
Under secton 250(d) of the Revenue ct of 1921, It was requred that ta es
for pror years, ncudng 1918, shoud be returned and assessed wthn ve
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 and no sut or proceedng for the coecton of any such ta es
sha be begun, after the e praton of fve years after the date when such
return was fed. s a fna return was made on une 14, 1919, the statute of
mtatons, unaffected by the wrtten consent, woud have run on une 14,
1924. It s suggested n argument that the statutory perod of mtatons
began to run from the date of the tentatve return n March of 1919 but we are
of opnon that the return meant by the statute was, the fna or competed
return. The consent n wrtng, entered nto by appeant and the Comms-
soner, had the effect of e tendng the mtaton of the statute for one year,
or unt une 14, 1925. The Revenue ct of 1924, whch became effectve on
une 2, 1924, by secton 278(d) provdes that a ta whch had been assessed
wthn the perod prescrbed by aw coud be coected by dstrant or by a
proceedng n court begun wthn s years after the assessment thereof. a
the ta es here nvoved were assessed on une 11, 1925, they were assessed
wthn the statutory perod of fve years as e tended by the wrtten consent
of appebmt and the Commssoner. In Unted States v. Crooks (18 . (2),
449) ths court hed that, f the statutory perod of mtatons had not e pred
at the tme of the passage of the Revenue ct of 1924, and f the assessment of
the ta had been tmey made after ts passage, the perod for coecton was
e tended for s years from the date of the assessment. resut of that
decson s that the coecton of ta es n the nstant case was not barred by
the statute of mtaton. The consent n wrtng smpy served to enarge the
perod of mtatons and otherwse to eave unchanged the provsons of aw
reatng to coecton as we ns o determnaton and assessment of the ta es.
The form adopted s n strct compance wth secton 250(d) of the ct of
1921, and t was not ntended by that secton to authorze an agreement by the
Commssoner to change the e stng rghts of the partes. Postponement of
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211
281, rt. 1307.
the perod of mtaton was a that was authorzed by the aw or attempted by
the consent n wrtng. Ths case does not In anywse dffer In prucpe from
the case of Unted States v. Crooks, supra.
The |udgment s affrmed.
S CTION 281. CR DITS ND R UNDS.
rtce 130 : Cams for refund of ta es erroneousy
coected.
R NU CT O 1924.
orm 1118. (See G. C. M. 058, page 112.)
rtce 1307: Lmtatons upon the credtng III- -4100
and refundng of ta es pad. Ct. D. 3
I COM ND PRO ITS T S R NU CT O 1924 D CISION O COURT.
Credts and Refunds Lmtatons.
Secton 281(c) authorzes a refund, where the perod of mta-
ton provded n secton 281(b) of the Revenue ct of 1924 has
e pred, of ony so much of an overpayment of ta es as resuts
from a faure of the ta payer to take adequate deductons n any
year by reason of whch nvested capta s decreased by the Com-
mssoner n a subsequent year.
Dstrct Coubt oy the Unted States for the Western Dstrct vt
Pennsyvana.
Southwestern C I Gas Co., pantff, v. The Unted States of merca, defendant.
September 15, 1 28.
opnon.
Gbson, Dstrct udge: The facta n the nstant case have been stpuated
by the partes, and the court has adopted the stpuaton as ts fndng of facts,
as foows:
ndng or acts.
1. The pantff, the Southwestern O Gas Co., Is a corporaton organzed
under the aws of the State of Deaware, wth Its prncpa pace of busness
at Pttsburgh, Pa., and was such corporaton at a tmes matera heren.
2. C. G. Leweyn was the duy authorzed and actng Unted States co-
ector of nterna revenue for the twenty-thrd dstrct of Pennsyvana, at
Pttsburgh, Pa., from the frst date matera heren up to ugust 1, 1921,
on whch date he was succeeded n offce by . . ener, the present Incumbent.
3. On pr 30, 1918, pantff duy fed ts return of corporate ncome
and profts ta es for the caendar year 1917, showng thereon a tota ta
abty of 3 ,405.21, whch sum was duy assessed aganst and pad by the
pantff to the defendant on une 14, 1918.
4. On or about une 15, 1919, pantff vountary fed an amended ta
return tor the year 1917, whch sad amended return dscosed a tota tn
abty of 54,588.25, or 18,181.04 n e cess of the amount shown by ts
orgna return. The amended return so fed conssted of corporaton ncome
ta return, orm 1031, and corporaton e cess profts ta return, orm 1103.
Sad amended return dscosed a net ncome of 115,1 1.7 , and an nvested
capta for the year of 148,144.22.
5. Under date of ebruary 2 , 1920, the Commssoner of Interna Revenue
advsed the pantff that the tota amount of ts ta abty for the year
1917 was 54,873.94, whch amount was 18,4 8.73 In e cess of the amount of
ta shown by ts orgna return. Sad addtona amount of ta of 18,4 8.78
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281. rt. 1307.
212
was duy assessed n pr, 1920, and was pad by the pantff une 4, 1920.
In hs determnaton of pantff s ta abty for the year 1917 of 54,873.94,
the Commssoner made no ad|ustments whatever to pantff s net Income
of 115,1 1.7 , as shown by amended return fed by t, and an nvested capta
of 145,584.01.
. Thereafter, pantff fed ts ncome and profts ta return for the year
1918. Its correct ta abty for that year was fnay determned by the
Commssoner and pad by the pantff upon the bass of an nvested capta
of 208,904.11. In arrvng at ths amount of nvested capta, the Comms-
soner decreased the nvested capta shown on the pantff s 1918 return by
the sum of 0,505.08, due to the faure of the pantff to take adequate de-
ductons from gross ncome for depeton n pror years. Of sad decrease of
0,505.08, the sum of 4,579.33 s attrbutabe to the faure of the pantff to
take adequate deducton for depeton n 1917.
7. On ebruary 2, 1925. pantff fed a cam for refund n an unstated
amount for the year 1917. ttached to sad cam for refund was a etter
dated anuary 27, 1925, n whch, among other thngs t was stated:
In support thereof the foowng propostons are submtted:
(a) That there was an overpayment of our ta es for the caendar year
1917.
(b) That the Commssoner s requred, under secton 281(c) of the Rev-
enue ct of 1924, to refund the amount found to have been pad n e cess of
the correct amount.
8. y ureau etter dated pr 28, 1925, pantff was advsed, among other
thngs, as foows:
You are advsed that nasmuch as your cam was not fed wth the coec-
tor of nterna revenue for your dstrct unt ebruary 2, 1925, whch Is subse-
quent to the e praton of the perod of mtaton for makng refunds for the
year 1917, t Is of no effect and w, therefore, be re|ected n the ne t schedue
to be approved by the Commssoner.
Sad cam for refund was re|ected on Schedue of Over assessments, No.
14449, sgned by the Commssoner on May 11, 1925. Sad Schedue of Over-
assessments, No. 14449, dscoses that there was aowed to the pantff, on
account of ta es pad by t for the year 1917, an overassessment or reducton
of ta abty n te amount of 2,857.50. Ths overassessment or refund of
2,857.50 was aowed by the Commssoner under the provsons of secton
281(c) of the Revenue ct of 1924, and was pad by Treasury check on ugust
14, 1925. The aforesad sum of 2,857.50 was arrved at by a computaton
wheren there was empoyed a net ncome of 110,582.43 and an Invested cap-
ta of 145,594.01. The former fgure was arrved at by reducng the net ncome
of 115,1 1.7 , shown on pantff s amended 1917 return, by 4,579.33, referred
to n paragraph , supra. The htter fgure was arrved at by takng the n-
vested capta shown by the pantff on ts amended 1917 return, and makng
a mnor ad|ustment thereof (whch ad|ustment s not here n controversy),
referred to n paragraph 5, supra.
9. On pr 1, 1927, pantff s representatve caed on and ntervewed a
representatve of the Commssoner at Washngton, and at that tme presented
an appcaton dated March 30, 1927, for the reconsderaton of the Comms-
soner s prevous re|ecton of the ta payer s cam for refund. Thereafter, by
etter dated ugust 31, 1927, the Commssoner advsed the pantff n part as
foows:
Your request dated March 30, 1927, for the reopenng of your 1917 refund
cam has been granted under the provsons of Treasury Decson 3240 and
the merts of the cam reconsdered.
Your cam w reman cosed on the bass of the ad|ustment made n your
ta abty as set forth n offce etter dated pr 28, 1925.
10. The pantff s correct ta abty for the year 1917 s as shown by com-
putaton attached as hbt to pantff s compant, provded, however,
the defendant does not concede that sad computaton dscoses the correct
amount egay refundabe to the pantff.
11. Ths sut was nsttuted anuary 9, 1928.
Opnon.
It s apparent from the fndng of facts that the pantff, n the settement of
ts 1917 ta es, has pad to the defendant the sum of 11, 84.28 more than
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213
281, rt. 1307.
was actuay due. Ths admsson appears In defendant s answer. The over-
payment a admtted on behnf of the defendant, but counse for the atter
urges that pantff Is precuded from the recovery of the e oess payment by
sut by the statute of mtatons. The provsons of aw upon whch they rey
are the foowng:
ST TUT S.
The Revenue ct of 102 , approved ebruary 28, 102 , provdes In part as
foows:
Sbo. 1118. (a) Secton 322 of the Revsed Statutes, as amended, Is reen-
acted wthout change, as foows:
Sbo. 822 . No sut or proceedng sha be mantaned n any court for the
recovery of any Interna-revenue ta aeged to have been erroneousy or -
egay assessed or coected, or of any penaty camed to have been coected
wthout authorty, or of any sum aeged to have been e cessve or In any
manner wrongfuy coected unt a cam for refund or credt has been duy
fed wth the Commssoner of Interna Revenue, accordng to the provsons
of aw n that regard, and the reguatons of the Secretary of the Treasury
estabshed n pursuance thereof but such sut or proceedng may be man-
taned, whether or not such ta , penaty, or sum has been pad under protest or
duress. No such sut or proceedng sha be begun before the e praton of
s months from the date of fng such cam uness the Commssoner renders
a decson thereon wthn that tme, nor after the e praton of ve years from
the date of the payment of such ta , penaty, or sum, uness such sut or pro-
ceedng s begun wthn two years after the dsaowance of the part of such
cam to whch such sut or proceedng reates. The Commssoner sha
wthn 90 days after any such dsaowance notfy the ta payer thereof by
ma.
The Revenue ct of 1024, approved une 2, 1024, provdes In part as foows:
Sec. 1012. Secton 3228 of the Revsed Statutes, as amended, s amended
to read as foows:
Sec. 82 8. (a) cams for the refundng or credtng of any nterna-
revenue ta aeged to have been erroneousy or Iegay assessed or coected,
or ef any penaty aeged to have been coected wthout authorty, or of any
um aeged to have been e cessve or n any manner wrongfuy coected
must, e cept as provded n secton 281 of the Revenue ct of 1024, be pre-
sented to the Commssoner of Interna Revenue wthn four years ne t after
the payment of such ta , penaty, or sum.
Sec. 281. (a) Where there has been an overpayment of any ncome, war-
profts, or e cess-profts ta mposed by ths ct, the ct entted n ct to
provde revenue, equaze dutes, and encourage the ndustres of the Unted
8tates, and for other purposes, approved ugust , 1000, the ct entted n
ct to reduce tarff dutes and to provde revenue for the Government, and for
other purposes, approved October 3, 1013, the Revenue ct of 101 , the Revenue
ct of 1917, the Revenue ct of 1918, or the Revenue ct of 1021, or any such
ct as amended, the amount of such overpayment sha be credted aganst any
ncome, war-profts, or e cess-profts ta or nstament thereof then due from
the ta payer, and any baance of such e cess sha be refunded Immedatey to
the ta payer.
(b) cept as provded n subdvsons (c) and (e) of ths secton, (1) no
such credt or refund sha be aowed or made after four years from the tme
the ta was pad, uness before the e praton of such four years a cam there-
for s fed by the ta payer, nor (2) sha the amount of the credt or refund
e ceed the porton of the ta pad durng the four years mmedatey precedng
the fng of the cam or, f no cam was fed, then durng the four years Imme-
datey precedng the aowance of the credt or refund.
(c) If the Invested capta of a ta payer Is decreased by the Commssoner,
and such decrease s due to the fact that the ta payer faed to take adequate
deductons In prevous years, wth the resut that there has been an overpay-
ment of ncome, war-profts, or e cess-profts ta es n any prevous year or
years, then the amount of such overpayment sha be credted or refunded,
wthout the fng of a cam therefor, notwthstandng the perod of mtaton
provded for In subdvson (b) has e pred.
Counse for defendant pont out that pantff s 1017 ta was pad on une 4,
1920, that no cam for a refund of the overpayment was made upon the Com-
mssoner of Interna Revenue unt anuary 27. 1025, more than four years
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(281. rt. 1307.
214
ater the payment of the 1917 ta es, and assert that such deay defeats pan-
tff s present acton. It further asserts that the Commssoner fnay re|ected
pantff s cam for refund of the overpayment on pr 28, 1925, the forma
re|ecton schedue beng sgned on May 11, 1925, and that pantffs acton,
nsttuted on anuary 9, 1928. was not begun ether wthn a perod of fve years
from the date of the overpayment or wthn two years from the date of the re-
|ecton of the cam by the Commssoner, as requred by secton 1113 of the
ct of 192 , supra.
The pantff, n answer to defendant s contenton, asserts that ts cam to
the Commssoner was wthn the scope of secton 281(c) of the Revenue ct
of 1924. supra, and therefore no mtaton e sted aganst t. It further con-
tends that the date of the Commssoner s fna re|ecton of ts cam was not
pr 28, 1925, but ugust 31, 1927, as the Commssoner, pursuant to pantff s
request made pror to the e praton of (wo years foowng the orgna re|ec-
ton, had reopened the |udgment and reconsdered the cam. We fnd the ast
of these contentons to be sustaned by the fndngs of fact, and that the cam
was actuay reopened and reconsdered, and fnay decded on ugust 31, 1927,
and consequenty pantff s acton s not barred by secton 322 , It. S., as re-
enacted by secton 1113 of the Revenue ct of 192 , and secton 281 (a) and (b)
of the Revenue ct of 1924, f t fe wthn the scope of secton 2S(c) of the
ct of 1924.
The decson n respect to the date of the Commssoner s re|ecton of pan-
tff s cam brngs us to a consderaton of the contentous of the partes n
respect to the scope of secton 281(c) of the ct of 1924, supra. The ntenton
of Congress n ths paragraph of secton 281 s pan wthout any reference to
egsatve hstory. The decrease of the nvested capta of a ta payer for the
year 1918 by the Commssoner obvousy ncreased the ta for that year. If the
decrease was due to the faure of the ta payer to cam proper deductons from
hs gross Income n precedng years, then t s apparent that he has pad
tn on amounts whch were not part of hs Income durng such years, and,
from the standpont of abstract |ustce, that he s entted to the return of the
ta so pad on such amounts If he Is to he coed upon to pay the ncreased
ta Imposed by the Commssoner s acton. ut, wthout such a provson of
aw as the paragraph under consderaton, the return of the overpayments
woud be mpossbe by reason of the e praton of the tme wthn wheh a
cam for refundment coud be made. To remedy ths n|ustce of Increasng
the ta payer s ta es on account of hs mstakes n accountng wthout gvng
hm the beneft of the sums aready receved by reason of those mstakes, the
provson n queston was enacted.
readng of the paragraph, 281 (c) of the ct of 1924, n convecton wth
an e amnaton of the stpuated facts, w make It pan that the nstant
case presents the stuaton whch Congress had n mnd n the enactment of
the paragraph. In the determnaton of the 1918 ta es, the Commssoner
reduced pantff s nvested capta, as carred on Its books, to the e tent of
0,505.08, due to the faure of the pantff n prevous years to propery set
off depeton aganst ts Invested capta. The pantff had erroneousy n-
cuded the amounts of such depeton as part of ts gross ncome durng such
prevous years wthout camng any deductons for them. The acton of the
Commssoner n ths correcton of pantff s accountng methods had the
effect of ncreasng pantff s ta for 1918 and gave t the rght to a refund
of the overpayment whch resuted from ts faure to deduct depeton from
Its gross ncome.
No substanta dsagreement e sts between the partes heren as to the ap-
pcabty of secton 281(c) of the ct of 1924 to pantffs 1917 ta . The
actua dspute s n respect to the e tent and method of the appcaton. The
Commssoner, when he determned pantff s 1918 ta . not ony corrected
pantff s return by reducng nvested capta n amount of 0,505.08. depe-
ton ncuded n gross ncome, hut aso made certan other correctons of the
return whch ncreased pantff s nvested capta for ta aton purposes. The
net resut of a the correctons was an ncrease of nvested capta for the
year 1917 from 145,594.01, shown by pantff s return, to 279.83S.21. The
pantff contends that t has the rght n the nstant sut to recover the fu
amount of the dfference between the sum pad as Its 1917 ta and the sum
actuay due, as shown by a cacuaton based upon an nvested capta of
279,83S.21 and a net ncome of 110,582.43, ess the sum of 2,857.50 returned
by the Commssoner. Pantff pad a ta based upon an nvested capta of
145,584.01 and a net Income of 110,582.43, and the amount t cams heren
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215
281, rt. 1307.
Is 14,481.7 , ess 2,857. 0 aready pad It by the Commssoner, or 11, 24.2 .
On the other hand, counse for the defendant assert that pantff has aready
receved the ony refund of ts 1917 ta whch was ega at the tme ts cam
was fed wth the Commssoner. They nsst that the overpayment con-
tempated by secton 281(c), supra, s one whch has been made whoy as a
resut of the faure of the ta payer to take adequate deductons from hs
gross ncome, and s not, as here, one made by reason of the faure of the
pantff to report the fu amount of ts nvested capta. Pantffs depeton
for the year 1917 amounted to 4,579.33 and was not deducted from pantffs
gross ncome on ts ta return. s a resut of such faure to deduct ths
amount, say counse, pantff, under secton 281(c), supra, was entted to have
the amount of the depeton deducted from ts gross ncome for 1917, and ts
tares for that year, wth that deducton made, cacuated n accordance wth
Its return upon whch they were fnay pad. The Commssoner, by secton
281(c), supra, was authorzed to correct the overpayment resutng from the
faure to take such deducton, wthout regard to the mtatons prescrbed
by secton 281(b) of the ct of 1924, and other cts cted, and dd repay the
amount due to that faure by returnng 2,857.50 to pantff but, counse
contend, the Commssoner s power to return overpayments of 1917 ta es s
strcty mted. cept n case of an overpayment resutng from a faure
to take adequate deductons, and a subsequent reducton of nvested capta
by the Commssoner n consequence, the Commssoner s specfcay pro-
hbted by secton 281(b) from aowng any refund or credt uness a cam
therefor has been made wthn four years from the date of payment of the
ta . Nor s the power of the court any greater. Secton 1113 of the Revenue
ct of 1928, reenaetng secton 322 . R. S., defendant asserts, prevents the
court from entertanng a sut aganst the Unted States uness pror demand
be made upon the Commssoner for the return of the amount overpad wthn
four years from the date of payment, and sut be brought wthn fve years
from the date of payment or wthn two years from the Commssoner s refusa
of the cam.
The pantffs contenton a, n substance, that havng had ts Invested
capta for 1918 reduced by the Commssoner, and such decrease havng been
made by reason of ts faure to take proper deductons n 1917 and prevous
years, Its stuaton has brought It wthn the scope of secton 281 (c) of the ct
of 1924, whch reeves t of makng cam upon the Commssoner, and mts
ts acton, f at a, to a perod of two years after the Commssoner has re|ected
ts cam. avng the rght to a return of the overpayment of 1917 ta es, due
to faure to take proper deductons, t cams t Is entted to a correcton of
a errors n the cacuaton of Its 1917 ta es, no matter how arsng, and so
entted to the |udgment sought n the nstant acton.
fter gvng the cam our carefu consderaton, we have concuded that
pantff has msapprehended the effect of secton 281(c) of the ct of 1924.
That paragraph e cepted from the four years mtaton perod of cam for
refund upon the Commssoner ony overpayments resutng from a faure of
the ta payer to take adequate deductons n prevous years, and such over-
pa|ments ony when they had been made to appear as such by the decrease
of the ta payer s nvested capta by the Commssoner n consequence of the
faure to take such deductons. In the present acton pantff seeks to recover
an overpayment whch appears as such not by reason of a decrease, but by an
Increase, n pantff s nvested capta. It w be remembered that the Com-
mssoner, In the ad|ustment of the 1918 ta es, not ony decreased the nvested
capta, as reported by pantff, by subtractng the amount of depeton In
prevous years, but aso otherwse Increased It, so that the net resut was a arge
Increase. The overpayment due to the Inadequate deducton for depeton n
1917 has aready been returned to pantff. s to the baance of the overpay-
ment, the sub|ect of ths sut, t s not wthn the scope of secton 281(c) of
the ct of 1924 and s sub|ect to the statutes of mtaton quoted supra. Thorn
statutes prevent recovery by the pantff.
udgment w be entered for the defendant.
3133 20 15
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200, rt. 1523. 21
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 200. D INITIONS.
rtce 1523: Persona servce corporaton. III-7-410
Ct.D. 38
ncome ta revenue act of 1918 decson op court.
Persona Servce Cassfcaton usness of Operatng a
Schoo.
corporaton empoyng a arge number of teachers In addton
to Its two stockhoders n Its busness of operatng a boardng and
day schoo and whch boards and odges appro matey 35 per cent
of ts students s not entted to cassfcaton as a persona servce
corporaton under secton 200 of the Revenue ct of 1918.
Dstrct Court of thb Unted States for the Dstrct of astern
Pennsyvana.
The Shpey Schoo, a Corporaton, v. akeey D. McCaughn, Unted States
Coector of Interna Revenue for the rst Coecton Dstrct of
Pennsyvana.
September 13, 1928.
opnon.
Ths Is an acton n assumpst for the recovery of 2,58 .0 , wth nterest,
beng an addtona ta assessed aganst the pantff on account of e cess
profts and ncome ta es for the year 1918, capta stock ta es for 1919 and
1920, and penaty. No part of the ta s due If the pnntff s entted to
cassfcaton as a persona servce corporaton. The case was tred by the
court, a ury tra havng been waved n wrtng by the partes.
INDINGS O CT.
1. The Shpey Schoo s a Pennsyvana corporaton ncorporated In 1911.
In the same year t succeeded to the busness and purchased a of the assets,
furnture and f tures, good w, and cash of a then e stng schoo owned by
the Msses annah T. Shpey, zabeth . Shpey, and atherne M. Shpey,
who had been engaged n the busness of operatng a grs boardng and day
schoo at ryn Mawr, Pa., snce 1893.
2. t the date of the ncorporaton and purchase Mss ce owand and
Mss eanor C. rowne became assocated wth the schoo, wth the ob|ect
and purpose of graduay becomng the owners of t, and, under an agreement
made at or about the tme of the ncorporaton, they each purchased 25 shares
each of the capta stock, and from 1911 to 191 were e cusvey occuped n
earnng the operatons of the schoo n ts varous departments and In teachng
casses. In 191 the Msses Shpey retred whoy from the management of
the schoo and Mss owand and Mss rowne acqured for the consderaton
of 150,000 a the remanng shares of capta stock of the corporaton as we
as the rea estate whch beonged, not to the corporaton, but to the Msses
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200, rt. 1523.
Shpey. They st own a the stock wth the e cepton of three shares whch
are outstandng n order to quafy a thrd drector.
3. or the fsca year endng une 30, 1919, the schoo budngs and property
and rea estate were eased by the corporaton for a term of one year for cash
renta of 10,000 and payment of ta es and repars. Durng the year n ques-
ton the pantff corporaton owned house furnshngs and schoo equpment,
tabe and bed nen, chnaware, sverware, aboratory equpment, and other
tangbe persona property vaued appro matey at 25,000 to 30,000. They
carred some cash on hand at a tmes and durng the year on at east one
occason borrowed the sum of 25,000 for the purpose of meetng current e -
penses, buyng food and suppes, etc., to carr.y t unt the semannua payments
of tuton came n.
4. Durng the fsca year Invoved the pantff conducted the busness as a
preparatory schoo for grs. It had at that tme 205 pups, of whom 12 were
day pups and 79 boarded at the schoo. most a of the ncome of the
schoo was derved from semannua payments caed tuton. The boarders
pad an average of 1,100 a year and the day pups 300. It appears that
the boardng feature of the schoo was not a source of proft but was man-
taned as a part of the genera pocy of the schoo In order to attract pups
from varous parts of the country, t beng consdered that a student body of
such a character was desrabe. In addton to board and odgng, the grs
who ved at the schoo receved certan attenton whch the day schoars dd
not get. They took ther meas wth the teachers and were requred to speak
rench at the tabe, and were taken upon educatona trps to varous parts
of the neghborng country. They were aso requred to take certan athetc n-
structon. The schoo empoyed 31 teachers n addton to Mss ownnd and Mss
rowne. These teachers came nto drect contact wth the.students In the
cass rooms, n the dnng room, and n connecton wth the varous schoo
actvtes. Certan of them known as house mothers ved n the schoo bud-
ng and were at a tmes more or ess In persona contact wth the boardng
pups.
5. Of the Income of the schoo some 700 was derved from the sae of te t-
books to the pups. Ths practce was for the purpose of convenence and to
save tme n gettng the requred books and was merey Incdenta to the man
busness of the schoo.
. Mss owand and Mss rowne were reguary engaged n the actve
conduct of the affars of the schoo to the e cuson of a other occupatons.
They drew saares of ,500 a year each. They conducted a of the busness
of the schoo, were engaged n overseeng the educatona work, and n addton
taught n one or two casses and mantaned cose persona contact wth the
grs at the schoo, through persona acquantance wth ndvduas and through
meetng wth cass groups once every week for a dscusson of educatona and
other matters connected wth schoo fe.
DISCUSSION.
The queston nvoved s whether or not the pantff s a persona servce
corporaton wthn the defnton contaned n secton 200 of the Revenue ct
of 1918, whch Is as foows:
The term persona servce corporaton means a corporaton whose ncome
Is to be ascrbed prmary to the actvtes of the prncpa owners or stock-
hoders, who are themseves reguary engaged n the actve conduct of the
corporaton, and whose capta (whether Invested or borrowed) s not a mate-
ra Income producng factor.
In Metropotan usness Coege v. ar (24 ed. (2d), 17 ) persona servce
cassfcaton was dened to a arge busness coege havng a student body of
some 5,000 and a teachng force of more that 50 members. The decson
was paced upon two grounds: rst, where the day to day busness of edu-
catng students s carred on by a arge body of sked teachers and not by
the prncpa stockhoders of the company aone, the corporaton ncome s
not prmary attrbutabe to the actvtes of the prncpa stockhoders. The
persona servce nvoved s that rendered by the teachers and not by the
owners. If ths basc prncpe be accepted, then t does not In the east
affect the stuaton that the owners themseves dd some teachng or man-
taned consderabe persona contact wth the students. In the case at bar,
t must be obvous from a readng of the testmony that the dutes of both
Mss owand and Mss rowne were prmary busness and e ecutve
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201, rt. 1 41.
218
rather than educatona. ut f t had appeared that, n addton to ther
other dutes, they had acted as fu-tme teachers, t woud make no dfference
n the concuson. s was sad In the Metropotan usness Coege case,
The teachng body Is here a sked workng force, wthout whch the ncome
woud have been restrcted to such as woud arse from a student body whch
these three men aone mght hande. That anguage s strcty appcabe
here. Under the prncpe on whch the decson rests empoyment of ny num-
ber of stenographers, messengers, or other empoyees n ke capactes woud
not bar (e concuson I hat the persona actvtes of the managng stock-
hoders were a prmary factor n producng the ncome, but the whoe pont
of the decson s that teachers who come nto contact wth the student body
arc n an entrey dfferent cass. Ther functons are not merey ncdenta
to the actvtes of the managng stockhoders.
The other pont upon whch the Metropotan usness Coege case was
decded was that the capta of the company was a matera ncome-producng
factor. Ths s aso true n the case at bar. ppro matey 35 per cent of
the students n the schoo were boarders. The corporaton sod these students
food and space for odgng. It s no doubt true that durng the year n
queston the schoo ost money on Its boarders, but the queston Is whether
the capta of the schoo whch was used for ths purpose produced a ma-
tera part of the schoo s ncome, and t s cear that t dd. It may aso be
true that the prncpa reason that hoarders were taken was n order to carry
out a genera pocy deemed benefca to the schoo. I hardy thnk that ths
was the ony reason and I do not understand that ether Mss owand or
Mss rowne meant to gve the mpresson that f they had come to a def-
nte concuson that the boarders coud never be anythng but a source of
fnanca oss they woud have contnued to take them n order to carry out
the poces In queston. The fact s that charges for tuton, whch covered
board and odgng, were consderaby ncreased n a subsequent year. t a
events, I am unabe to reach the vew that the boardng and odgng of a
porton of the pups durng the ta abe year was so entrey ncdenta to the
prmary functon of the-schoo that t can not be descrbed as a matera
ncome-producng factor.
udgment may be entered for the defendant.
S CTION 201. DI ID NDS.
rtce 1541: Dvdends. III-8-4115
I. T. 2455
R NU CT O 1921.
transfer from surpus to capta account to pay the uncaed
porton of the par vaue of outstandng stock hed to consttute a
stock dvdend.
n opnon s requested as to whether a transfer by the M Com-
pany from surpus to capta account to pay the uncaed porton of
the par vaue of outstandng stock consttuted a stock dvdend or a
ta abe dvdend.
Pror to une , 1923, the corporaton had outstandng ts entre
authorzed capta stock of 100.000 shares of a par vaue of 25a)
doars per share. On ths stock ony 12a doars per share had been
pad n, the baance of 13a doars per share beng sub|ect to
ca. t meetngs of the stockhoders and the drectors, hed on
une , 1923, resoutons were passed by both stockhoders and
drectors, authorzng an ncrease n the authorzed capta stock
from 100,000 shares to 800,000 shares and the transfer from surpus
to capta account of an amount suffcent to pay the uncaed porton
of the par vaue of the then outstandng stock. There was no cash
dstrbuton.
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219
201, rt. 1541.
In the cases of C. . Mchaes v. McLaughn and G. . Mchaes,
ecutor, v. McLaughn, both reported n 20 ed. (2d), 959, the
Unted States Dstrct Court for the Northern Dstrct of Caforna
hed that a smar acton by the corporaton nvoved n those cases
consttuted a stock dvdend. In the course of ts opnon the court
sad:
Tha corporaton was In a fourshng condton and had accumuated a
arge surpus. Its rght to ca for the 20 per share remanng
unpad was contngent upon a forma ca n accordance wth the
provson of secton 334 of the Cv Code of Caforna. (Los ngees thetc
Cub v. Spres, 1 Ca., 177.) No such ca was made at the tme when the
resouton n queston here was passed. Unt such ca was made the ohgaton
dd not rpen nto a debt to start the runnng of the statute of mtatons.
(Spencer v. nderson, 193 Ca., 1.) t the tme when the resouton was
passed, therefore, the abty of the stockhoders was contngent and had not
been formay f ed by any acton of the corporaton.
The ncdenta e tncton of the contngent and, n vew of the
e stng surpus, remote abty to pay 20 a share n the event of forma
ca can not be regarded as an ndvdua gan sub|ect to ta .
The Government dd not appea from the decson n the Mchaes
eases.
In the nstant case t appears that the facts cosey resembe those
reed upon by the court n the Mchaes cases. The M Company
had a surpus n 1923 of over y doars. Its rght to the 13s doars
per share remanng unpad was contngent upon a forma ca by
the drectors. ( rt. I, by-aws sec. 7797, owe s Mchgan
Statutes, nn. De ter, etc., v. M/erd, 3 Mch., 91: asey re- n-
gne Co. v. Dovovan, 57 Mch., 318, 23 N. W., 828.) Unt such ca
was made the obgaton dd not rpen nto a debt so as to start the
runnng of nterest ( owe s Mchgan Statutes, supra, sec. 7797),
and no ca had been made when the resoutons n queston were
passed.
In vew of the foregong, the decson of the court n the Mchaes
cases appears to be appcabe n the nstant case. It s hed, there-
fore, that the transfer n 1923 by the M Company from surpus to
capta account of 13# doars to pay the uncaed porton of the par
vaue of ts outstandng stock consttuted a stock dvdend.
kttce 1541: Dvdends. III-19-4198
Ct, D. 58
INCOM T R NU CT O 1921 D CISION O COURT.
1. Dvden o Rghts to Purchase Stock.
Where a corporaton acqures the capta stock of another cor-
poraton and ssues to ts stockhoders rghts to purchase the stock,
the vaue of the rghts receved by a stockhoder consttutes a ta -
abe dvdend under secton 201 of the Revenue ct of 1921.
2. Decson ffrmed.
The decson of the Unted States oard of Ta ppeas (13
. T. ., 23 ) afrmed.
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220
Unted States Crcut Court of ppeas fob the Second Obcdt.
state of dwn D. Metcaf (Carre W. Metcaf, dwn . Metcaf, arod .
Metcaf, and Staney W. Metcaf, as ecutors) v. Commssoner of Interna
Revenue.
pr 8, 1929.
OPINION.
Manton, Crcut udge: The pettoners, e ecutors of the estate of dwn
D. Metcaf, appea from the determnaton of the oard of Ta ppeas, whch
hed they must pay an Income ta on the sae of rghts n 1921 (Revenue ct
192 , ch. 27, 44 Stat., 9, 109, 110). The decedent was a stockhoder of the
Southern Pacfc Co. and hs e ecutors receved purchase rghts to shares of
stock of the Pacfc O Co. under the foowng crcumstances: On December
1, 1920, the board of drectors of the Southern Pacfc Co. advsed ts stock-
hoders of a pan they adopted for the separaton of ts Caforna o propertes.
The essenta feature of the pan was the organzaton of the Pacfc O Co.,
wth a capta stock of 3.500,000 shares of no par vaue. It aocated 1 share
of stock of the Pacfc O Co. to each share of the Southern Pacfc Co. The
atter company subscrbed for shares of the Pacfc O Co. at 1 per share and
turned over to the Pacfc O Co. the Caforna propertes and receved a pur-
chase prce of 47,250,000. Ths eft In the treasury of the Pacfc O Co. a
fund for workng capta. The Southern Pacfc Co. then ssued to each of ts
stockhoders the rght per share to subscrbe to 1 share of capta stock of
the Pacfc O Co. at 15 per share. The stock of the Southern Pacfc Co.
and the Pacfc O Co. were sted on the New York Stock change and actvey
bought and sod. On ebruary 7, 1921, the Southern Pacfc Co. stock was
sod wth rghts and quoted at 9G ow, 97 hgh on ebruary 8, t was sod
-rghts at 78 ow, 79 hgh. The rghts were sod on ebruary 8 at 33
ow and 34 hgh. The subscrpton cost of 15 per share woud make the
rghts worth 18 per share. The estate sod ts rghts for 18 a share.
It s argued that f the estate had sod ts Southern Pacfc stock, ncudng
Its rghts, at the market on ebruary 7, 1921, t woud have suffered a oss of
5.50 per share, because when the decedent ded. In 1915, the stock wa assessed
for the New York transfer nhertance ta at 102.50 per share, and on ebruary
7 t was seng at 97. It s sad that f on ebruary 8 t sod Its shares of
stock as we as ts rghts, It woud have receved 97 rghts 18 and stock 79
and t s argued that, seng ts rghts aone, t suffered a proportonate oss.
The queston presented Is whether, by the seng of these rghts, the pettoner
receved ta abe ncome under secton 211 of the Revenue ct of 1921 (42 Stat.,
227). s the term dvdend s used n the ct of 1921, secton 201 defnes
t as meanng any dstrbuton by a corporaton to ts stockhoders or members,
whether In cash or other property, out of ts earnngs or profts accumuated
snce ebruary 28, 1913. y secton 213 gross ncome ncudes dvdends pad
to dstrbutees. The Commssoner contends that these rghts were the equva-
ent of dvdends receved and as such abe to ta .
stock dvdend of a corporaton ssung It s not ta abe ncome. (Toumc v.
sner, 245 U. S., 418 sner v. Macomber, 252 U. S., 189 T. D. 3010, O. . 3.
25 .) Ths was hed to be so because a stock dvdend takes nothng from the
property of the corporaton and adds nothng to the nterest of the sharehoder.
In Peabody v. sner (247 U. S., 347), the Unon Pacfc Raroad Co. decared
a dvdend party n cash and party n preferred and common stock of the
atmore Sc Oho Raroad Co. The ta Imposed on ths dvdend was pad
under protest. The Supreme Court approved the ta , sayng the ease was not
rued by Towne v. sner (supra), snce the dvdend of the atmore Oho
shares was not a stock dvdend but a dstrbuton In spece of a porton of
the assets of the Unon Pacfc and t s governed for a present purposes by
the same rue appcabe to the dstrbuton of a ke vaue of money. In
Unted States v. Phes (257 U. S., 15 T. D. 3270, C. . 5, 37 ), the New ersey
Dupont Co. decded to reorganze n Deaware. Its funded debt and capta
stock were In e cess of 0,000,000. The new corporaton was to have a capta
of 240,000,000. The assets and good w of the od were transferred to the
new at 120,000,000 the sharehoders of the od receved 2 shares of common
stock of the new company n e change for 1 share of the od. The offcers of
the two corporatons were the same. The dvdend n stock was hed to be
ta abe. y ths e change, the court sad, the partes were actng n the
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5201, rt. 1 41.
e ercse of ther rghts for the very purpose of pacng the common stockhoders
ndvduay p possesson of new and substanta property rghts n ease, n
reazaton of ther former contngent rght to partcpate eventuay In the
accumuated surpus. Its dstrbuton transferred to the severa
stockhoders new ndvdua property rghts whch they severay were entted
to retan and en|oy, or to se and transfer, wth precsey the same substanta
beneft to each as f the od company had acqured the stock by purchase from
strangers. In Rockefeer v. Unted States (257 U. S., 17 T. D. 3271, C. .
, 34 ), the Prare O Co. of ansas organzed a ppe ne company to take
over Its ppe ne property. The new company turned over a ts stock to the
o company and the stock was dstrbuted to the stockhoders of the Prare
company the Oho O Co. dd kewse. The pantff brought separate suts
to recover the ta es mposed upon the transfer to them of the shares of the
ppe ne company. In affrmng a |udgment of the Court of Cams uphodng
a ta on the ncome, the court hed that the new stock represented assets of
the o companes whch were formery ther ppe ne propertes, part of ther
surpus assets. The dstrbuton of the stock consttuted, n the case of each
Indvdua, a gan n the form of e changeabe assets for hs separate use In
pace of hs former contngent nterest In the corporate surpus. Ths was an
Increase n weath, for the gan n vaue In the form of new ppe ne stock
caused a dmnuton n vaue of the o stock. In Cunan v. Waker (2 2 U. S.,
134 T. D. 3508, C. . II-2, 55 ), the pantff n 1915 owned 2 , 45 capta
stock of the armers Petroeum Co., for whch he pad cash. ctng as one of
the trustees n qudaton, he turned over the assets of the armers company
to two new corporatons one a ppe ne company and the other a producng
company. af the assets went to each company and from each of the trustees
receved a the stock and bonds Issued In each one mon fve hundred doars
In stock and one mon fve hundred In bonds. Then a thrd corporaton was
formed n Deaware, and the trustees turned over the stock of the Te as com-
pany, recevng n turn 3,000,000 of the stock of the Deaware company. The
trustees dstrbuted ,000,000 n stock pro rata accordng to the stockhoders
of the armers Petroeum Co., and the pantff s share was worth 1,598,400.
The coector assessed the ta on the gan over the orgna nvestment. In
affrmng the |udgment sustanng the ta , the court hed that the stock receved
was not a stock dvdend that the pantff s gan was the resut of a dvdend
In qudaton not essentay dfferent from the ordnary dvdend. If the assets
had been dsposed of for cash, there woud be no doubt that the subsequent
dstrbuton woud be of profts. The dstrbuton beng of stock of a company
to whch the assets had been transferred, the case was controed by the Rocke-
feer and Phes cases (supra). The Deaware corporaton, as a hodng
corporaton, dffered from the od company, whch was a ppe ne and producng
company. It dffered aso n that t was organzed under the aws of another
State. The gan was not an ncdent of a reorganzaton and the pantff s
gan was hed to have been reazed In 191 and must be ta ed as ncome of
that year. In Marr v. Unted Sates (2 8 U. S., 53 T. D. 3755, C. . I -2,
11 ), the pantff owned preferred and common stock of the Genera Motors
Co. e pad for ths In cash In 1913, the par vaue amountng to 7 ,400. In
191 , the Genera Motors of Deaware was formed and In the transfer he
receved stock of the new corporaton vaued at 400,8 .57. The Government
Imposed a ta on the dfference 324,4 .57. In a sut to recover the ta pad,
the court affrmed the |udgment for the defendant, pontng out that the New
ersey company had outstandng 15,000,000 of 7 per cent preferred stock of
the par vaue of 100 per share and 15,000,000 of common stock of the par
vaue of 100. The new company had an authorzed capta stock of 20,000,000
of per cent nonvotng preferred and 82, 00,000 n common stock a beng 100
par vaue. The od company had a arge surpus, and on each share of pre-
ferred 1 shares of preferred stock of the new corporaton was gven and for
each share of common 5 shares of common stock of the new company. The
new company took over the busness and assets of the od company, whch was
dssoved. the new securtes ssued n e cess of the captazaton of the
od company represented ncome earned by t and when dstrbuted the gan was
ta abe. The gan was represented by securtes wth essentay dfferent
characterstcs and n an essentay dfferent corporaton and t was hed to
be ncome under the authorty of the Phes, Rockefeer, and Cunan cases.
Thus, where a stockhoder receves a dstrbuton of the assets of a corpora-
ton In cash or In stock of a dfferent enterprse, such dstrbuton s for ta ng
purposes a dvdend. No sound dstncton can be drawn between a dstrbuton
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(201, rt. 1543.
222
of stock of another corporaton and one of vauabe rghts to purchase such
stock. ach may be sod at ts seng prce. The rghts ths pettoner sod
netted 18 per rght. They amounted to a dstrbuton of assets of the com-
pany of whch t was a stockhoder, |ust as much as an actua dstrbuton of
stock of the atmore Oho Raroad by the Unon Pacfc Co. dd n the
Pebody case. There was a dstrbuton of spece of a porton of the assets
of the Southern Pacfc Co. dstrbuton of earnngs or assets of a corpora-
ton s a dstrbuton, whether or not so determned.
In Mes v. Safe Depost Co. (259 U. S., 247 T. D. 33 5, C. . 1-1, 721 ), re-
ed upon by the pettoner, the guardan of an nfant hed for the nfant certan
shares of the artford re Insurance Co. Ths company had outstandng 20,000
shares of the par vaue of 100. It was decded to ssue 20,000 addtona shares,
wth the prvege to stockhoders to take the new shares n proporton to ther
hodngs n the com puny at 180 a share. The rghts there nvoved were
smar to the rghts here consdered. They were not dvdend rghts, but the
rghts there nvoved were to purchase stock n the company gruntng the
rghts, whereas n the case at bar the rghts were to purchase stock n another
company. Ths dstncton s made cear n the Peabody, Phes, and Marr
cases, to whch we have referred. The Commssoner, n determnng the de-
fcency predcated t upon a determnaton that the vaue of the rghts dd not
draw from the capta of the Southern Pacfc Co. but from ts surpus.
(Wckwre v. Renecke, 275 U. S.. 101 T. D. 412 , C. . II-1, 31 .) The
oard propery hed that the ncome receved, as a resut of the sae of the
rghts n queston, consttuted ta abe Income.
ffrmed.
rtce 1543: Dstrbutons out of earnngs or III-15-4173
profts accumuated pror to March 1, 1913. Ct. D. 52
INCOM T R NU CT O 101 D CISION O COURT.
Dvdend Ta abty Dstrbuton Made Interpretaton.
dstrbuton Is made, wthn the meanng of the second sentence
of secton 31(b) of the Revenue ct of 1910, added thereto by sec-
ton 1211 of the Revenue ct of 1917, on the date of payment of a
dvdend and not on the date of ts decaraton.
Unted States Crcut Court of ppeas for the Thrd Crcut.
0. G. Leweyn, ormery Coector of Interna Revenue for the Twenty-thrd
Dstrct of Pennsyvana, appeant, v. Raph W. arbson, appeee.
ppea from the Dstrct Court of the Unted States for the Western Dstrct of
I ennsyvana.
March 11, 1929.
opnon.
Davs, Crcut udge: Ths s an appea from a |udgment of the dstrct
court orderng to the appeee a refund of ncome ta es ar.sng out of an e tra
dvdend decared by the arbson-Waker Refractores Co., ugust 3, 1917, and
pad ugust 25, 1917.
There are 15 cases n a but by agreement a of them are controed by the
|udgment n the case of Raph W. arbson v. C. G. Leweyn.
On ugust 3. 1917, the arbson-Waker Co. decared an e tra dvdend of
per cent on ts common stock payabe on ugust 25, 1917, out of the surpus of
the company accumuated pror to March 1. 1913. The dvdend was accordngy
pad on ugust 25, 1917. The queston at ssue s, When was the dstrbuton
made of the dvdend the duy t was decared, ugust 3, 1917, as the appeee
contends, or the day t was pad, ugust 25, 1917, us the coector contends
Secton 31(a) of the Revenue ct of 191 (added to the ct of 191 by secton
1211 of the ct of October 8, 1917. 40 Stat., 300, 337. 838) provdes:
That the term dvdends as used n ths tte sha be hed to mean any
dstrbuton made or ordered to be mad by a corporaton out of Its
earnngs or profts accrued snce March 1. 1913, and payabe to ts sharehoders,
whether n cash or n stock of the corporaton whch stock dvdend
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223
201, rt. 1543.
sha be consdered Income, to the amount of the earnngs or profts .so ds-
trbuted.
Secton 31(b) of that ct provdes that:
ny dstrbuton made to the sharehoders or members of a corporaton
In the year 1917 or subsequent ta years, sha be deemed to have been
made from the most recenty accumuated undvded profts, or surpus, and
sha consttute a part of the annua ncome of the dstrbutee for the year In
whch receved . Ths subdvson sha not appy to any dstrbuton
made pror to ugust , 1017, out of earnngs or profts accrued pror to
March 1, 1013.
It w be seen that ugust 0, 1017, s the cruca date and the queston
s, Was ths dstrbuton made when decared on ugust 3, 1017, or when
pad on ugust 25, 1017 If t was made on the former date, t was not ta abe,
but f made on the atter date, t was ta abe and the |udgment shoud be
reversed, for the provsons of secton 31(b) woud not appy to the dstr-
buton.
dstrbuton made and a dstrbuton ordered to be made are not
the same thng. dstrbuton made s a competed act. It nvoves the
order and the e ecuton thereof, or the decaraton and payment. Conse-
quenty, when the Congress sad that ths subdvson sha not appy to any
dstrbuton made pror to ugust , 1017, t doubtess had n mnd both the
decaraton and the payment thereof, for f t had not, t woud have sad,
ths subdvson sha not appy to any dstrbuton made or ordered to be
made, n accordance wth ts anguage whch t used n secton 31(a) n
defnng dvdends. In the report of Senator Smmons, to whose commttee
n the Senate ths b was referred, he spoke on page 21 of dvdends decared
and pad. ccordngy, the commttee, whch consdered and reported ths
ct, and the Congress dstngushed between the decaraton and the payment
of a dvdend. We agree wth the Crcut Court of ppeas for the S th
Crcut that a dstrbuton made means dvdends pad and not merey
decared. (Routzahn v. Mason, 13 ed. (2d), 702.) The anguage nvoved
s cear, precse, and unambguous and n our opnon resort to the egsatve
hstory of the ct s unnecessary n order to determne Its meanng. ( dwards
v. Dougas, 200 U. S., 204, 210 T. D. 3707, C. . -. 158 .)
In the case of Unted States v. Phps (24 ed. (2d), 105), we sad the
queston was whether dstrbuton shoud be consdered made when the
dvdend s decared, as contended by the pantff, or when the dvdend s
pad, as contended by the Government. We hed, foowng Mason v. Routzahn
(275 C. S., 175, 178 T. D. 4131, C. . II-1, 104 ), that the date of payment,
not the date of th decaraton of the dvdend, s the date of dstrbuton.
The earned dstrct |udge hed that n construng the words, dstrbuton
made, In determnng the rae of ta es, rather than the e empton of ta es,
the above cases woud contro, but that the hstory of the enactment of the
secton shows that, n an e empton case, the words dstrbuton made refer
to the decaraton and not to the payment of (he dvdend.
Ths concuson does not seem we founded. When the same word or phrase
s used n the same secton of an ct more than once, and the meanng s cear
as used n one pace, t w be construed to have the same meanng In the ne t
pace. (Ryan v. State, 174 Ind., 4 8 ames v. De os, 1 N. . L., 285, 203.)
We do not thnk that the hstory of the ct or the e empton provsons requre
a dfferent nterpretaton of the words dstrbuton made, when consderng
the e empton of ta es, than that gven to them by the Supreme Court n
determnng the rate of ta es.
Whe a statute mposng ta es s construed most strongy aganst the Govern-
ment (Goud v. Goud. 245 U. S., 151), t s aso true that a statute aowng
e emptons s construed strcty n favor of the Government ( ank of Commerce
v. Tenne ee, 1 1 U. S., 134. 14 ). When the secton under consderaton Is so
construed, the |udgment must be reversed and a new tra awarded.
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8202, rt. 15 1.
224
S CTION 202. SIS OR D T RMINING
G IN OR LOSS.
rtce 15 1: ass for determnng gan or
oss from sae.
III-18-4188
Ct, D. 54
INCOM T R NU CT O 1918 D CISION O COURT.
Inventores ass of auaton Commssoner s Consent.
Secton 202(a)2 of the Revenue ct of 1918 does not authorze
a ta payer to change, wthout the consent of the Commssoner, the
bass of vaung nventores of merchandse from cost to market
vaue, the atter beng hgher than cost.
The ames Cark Dstng Co. of Cumberand, Md., for the Use of ames Cark
and Safe Depost t Trust Co. of atmore, a Corporaton, as ecutor of the
W of ohn eatng, v. The Unted States.
Snnott, udge, devered the opnon of the court.
On uy 24, 192 , pantff brought ths acton aganst the defendant, for the
use of ames Cark and ohn eatng, to recover the sum of 1,253.92 pad as
addtona Income and proft ta es for the year 1918. fter the commence-
ment of acton ohn eatng ded and, by order of the court, hs e ecutor, Safe
Depost Trust Co. of atmore, a corporaton, was substtuted as pantff.
Pantff was for years engaged n the busness of manufacture and seng
the whsky. Unt May, 1921, ames Cark and ohn eatng were the soe stock-
hoders of the pantff company, each ownng one-haf of the capta stock. In
May, 1921, pnnff dstrbuted ts assets to ts two stockhoders, on condton
that they woud ndemnfy pantff aganst oss n connecton wth edera
ta es, and thereafter Cark and eatng sod a the capta stock.
rantfT carred t unsod manufactured product on ts books nt cost. ow-
ever, n the year 1919, after the passage of the Revenue ct of 1918 (40 Stat.,
1057), pantff changed ts Inventores for the caendar year 1918. substtutng
market vaue for cost vaue the former beng hgher than the atter and
made ts ta return for 1918 In accordance wth the atered nventores. so
It fed ad|usted returns for 1917 and pror years. The Commssoner of Interna
Revenue never gave pantff permsson to use for nventory purposes any other
bass than cost. Of the ta es pad by pantff, I he sum sued for heren,
1,253.92, resuted from the acton of the Commssoner of Interna Revenue In
computng pantff s nventores at cost nstead of at market vaue.
Pantff fed wth the coector of nterna revenue a cam In the name of
the pantff for the use of ames Cark and ohn eatng for refund of sad
sum of 1,253.92, beng the amount of ncome and profts ta es for the year
1918, e acted from and pad by pantff as a resut of computng such ta es on
the bass of cost nstead of nventory vaue at market. Sad cam for refund
was dsaowed by the Commssoner of Interna Revenue, uy 9, 1925.
The foowng are the pertnent sectons of the Revenue ct of 1918 (40 Stat.,
1057) :
Seo. 213. That for the purposes of ths tte (e cept as otherwse provded
n secton 233) the term gross ncome
(a) Incudes sans, profts, and ncome derved from saares, wages, or
compensaton for persona servce of whatever knd and n whatever
form pad, or from professons, vocatons, trades, busnesses, commerce, or saes,
or deangs n property, whether rea or persona, growng out of the ownershp
or use of or nterest In such property aso from nterest, rent, dvdends,
securtes, or the transacton of any busness carred on for gan or proft, or
gans or profts and ncome derved from any source whatever. The amount of
a such Items sha be ncuded n the gross Income for the ta abe year In
whch receved by the ta payer .
Court of Cams of the Unted States.
ebruary 4, 1929.
OPINION.
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225
202, rt. 15 1.
Sbo. 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.
Sec. 203. That whenever n the opnon of the Commssoner the use of n-
ventores s necessary n order ceary to determne the ncome of any ta -
payer, nventores sha be taken by such ta payer upon such bass as the
Commssoner, wth the approva of the Secretary, may prescrbe as conform-
ng as neary as may be to the best accountng practce n the trade or bus-
ness and as most ceary refectng the ncome.
The Treasury Department promugated reguatons from tme to tme pre-
sentng methods to whch nventores must conform for ta purposes. of
them contaned substantay the same provsons, requrng nventores to be
taken or vaued ether (a) at cost or (b) at cost or market prce, whchever
s ower, e cept the Treasury Decson 329 C. . 1-1, 40 , promugated
March 8, 1922, permtted deaers n securtes to vaue the nventores ether
(a) at cost or (b) at cost or market, whchever s ower, or (c) at market
vaue. See Treasury Decson 2 09, December 19, 1917 Treasury Decson
2 90, anuary 2. 1918 Treasury Decson 2831, pr 1 , 1919 Treasury Dec-
son 3108, December 30, 1920 C. . 4, 49 Treasury Decson 329 , March 3,
1922.
Pror to ebruary 24, 1919, the effectve date of the Revenue ct of 1918
(40 Stat, 1057), pantff carred a stock of whsky on ts books at cost. Dur-
ng the years 1917 and 1918 the market prce of whsky greaty ncreased n
vaue, due to ncreased cost, war-tme prohbton of ts manufacture, and the
approach of genera prohbton, so that whsky manufactured n 1913, 1914,
1915, and 191 , athough carred on the pantff s books at cost, was worth
consderaby more at market prce from anuary 1, 1917, and reached a st
hgher vauaton on anuary 1, 1918, and was sod durng 1918 for a st hgher
fgure.
The resut of the ownershp of the whsky throughout the entre perod of
s years from 1913 to 1918, ncusve, was that te pantff receved on the
saes made n 1918 a proft whch was the resut of a gradua ncrease n vaue
coverng the whoe perod.
Pantffs poston s that, on beng compeed to pay the ta es n dspute,
Its capta has been confscated under the guse of ta ng ncome. Ths pos-
ton Is negatved by the anguage of the statute, secton 213, supra, whch pro-
vdes that gans, profts, and Income sha be ncuded n the gross ncome for
the ta abe year In whch receved by the ta payer.
Pantff s contenton s answered n the cases of Merchants Loan Trust Co.
r. Smetanka (255 U. 8., 509 T. D. 3173, C. . 4, 34 ) and Goodrch v. d-
wards (255 U. S., 527 T. D. 3174, 0. . 4, 40 ). In the Smetanka case the
property n queston ncreased n vaue from 5 1,798 on March 1, 1913, to
1,280,99 . 4 on ebruary 2, 1917. In the dwards case the property had n-
creased In vaue from 95 on March 1, 1913, to 13,931.22 n March, 191 .
In both of these cases the Supreme Court hed that the apprecaton n vaue
was ncome and ta abe when converted nto money. The Smetanka and
dwards cases, supra, nvove the Revenue ct of 191 , contanng anguage
practcay Identca wth secton 213, supra, of the ct of 1918. The anguage
s quoted In ths Smetanka ease, page 51 :
Secton 2(a) of the ct of September 8, 191 (39 Stat, 757 40 Stat, 300,
807, sec. 212), appcabe to the case, defnes the ncome of a ta abe person
as Incudng gans, profts and ncome derved from saes, or dea-
ngs n property, whether rea or persona, growng out of the ownershp
or use of or nterest n rea or persona property, or gans or
profts and ncome derved from any source whatever.
Pantff avods the force of the Smetanka and dwards cases by contend-
ng that secton 202(a)2, supra, of the Revenue ct of 1918
pressy authorzed the use, at the ta payer s opton, of In-
ventory vaue, . e., market vaue, nstead of cost, as the bass for ascer-
tanng the gan derved from saes.
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202. rt. 15 2.
22
If ths were the case t woud render nugatory the anguage of secton 203,
supra:
Inventores sha be taken by such ta payer upon such bass as
the Commssoner, wth the approva of the Secretary, may prescrbe as con-
formng as neary us may be to the best accountng practce n the trade or
busness and as most ceary refectng the ncome.
We thnk thut secton 202(a)2, must be read In connecton wth secton 203,
supra, and when so read t s apparent that both the use and the bass of
nventores were matters eft to the admnstratve dscreton of the Comms-
soner.
We have decded ths day that the bass of nventores was specay con-
fded by Congress to the Commssoner and Secretary. (Rver-sde Mfg. Co. v.
Unted States, No. -324.) Our opnon s further strengthened by the quota-
ton n defendant s bref from the ouse report on the revenue b for 1918
( ept. No. 7 7, 5Lh Cong.. 2d sess., p. 4), as foows:
In determnng gan or oss from the sae or dsposton of property, rea,
persona, or m ed, the b provdes that the bss sha be as foows:
In the case of property acqured before March 1, 1913, the far market prce
or vaue of such property as of that date and n the case of property acqured
on or after that date, (1) the cost thereof, or (2) the nventory vaue, f the
nventory s made In accordance wth the rues |nd reguatons to be pre-
scrbed by the Commssoner of Interna Revenue n order that the nventory
may ceary refect the ncome.
In many cases the ony way that the net ncome can be determned s
through the proper use of nventores. Ths s argey true n the case of
manufacturng and merchandse concerns. The b authorzes the Comms-
soner to requre nventores whenever n hs opnon the same s necessary n
order ceary to refect the ncome of the ta payer.
In connecton wth the dfferent reguatons of the Treasury Department
referred to above, requrng nventores to be taken ther (a) at cost or
(b) at cost or market prce, whchever s ower, It s sgnfcant that n each
succeedng Revenue ct, snce 1918, Congress has reenacted, wthout change,
the provsons of secton 203 of the Revenue ct of 1918. (See sec. 203 of the
Revenue ct of 1921, 42 Stat., 227 sec. 205 of the Revenue ct of 1924, 43 Stat,
253 sec. 205 of the Revenue ct of 192 . 44 Stat., 9 sec. 22(c) of the Revenue
ct of 1928. approved May 29, 1928.) It has been hed that where a statute
has been construed by the e ecutve departments of the Government and
has been reenacted wthout change, that such reenactment s an adopton of
such constructon by Congress:
It s a famar and we-estabshed rue that where a statute that has
been construed by the courts has been reenacted n the same or substantay
the same terms, the egsature s presumed to have been famar wth ts
constructon and to have adopted t as a part of the aw uness a dfferent
ntenton s ndcated, and the same prncpe s apped to statutes and pans
of statutes whch have been reenacted after they have been construed by the
egsatve or e ecutve departments of the Government. ( dwards, Coector,
v. Wabash Ry. Co., 2 4 ed., 10 T. D. 3002, ST-1-20, 93 .)
We concude 1nat the Commssoner was correct n re|ectng the cam for
the refund. The petton w be dsmssed. It s so ordered and ad|udged.
INCOM T R NU CT O 1021 D CISION O SUPR M COURT.
1. Income Gan ass Gft fter December 31. 1920 CONSTI-
TUTION LITY.
The provson of secton 202(n)2 of the Revenue ct of 1921 that
the bass for ascertanng the gan derved from a sae of property
SIS OR D T RMINING G IN OR LOSS.
IN NTORY.
rtce 15 2: Sae of property acqured by gft
after December 81, 1920.
III-10-4135
Ct. D. 49
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227
202, rt. 1 2.
acqured by gft after December 31, 1920, sha be the same as that
whch t woud have n the hands of the donor s consttutona.
2. udgment ffrmed.
udgment of the crcut court of appeas (20 ed. (2d), 5 1
(T. D. 4003 C. . I-2, 1 4 )) affrmed.
Supreme Coubt of the Unted States.
1 . zabeth C. Taft, pettoner, v. rank . owers, Coector of Interna
Revcntw for the Second Dstrct of the State of New York.
17. Gbert C. reenway, |r., pettoner, v. rank . owers, Coector of Interna
Revenue for the Second Dstrct of the State of New York.
On wrts of certorar to the Unted States Crcut Court of ppeas for the Second Crcut.
ebruary 18, 1929.
OPINION.
Mr. ustce MoRetnods devered the opnon of the court
Pettoners, who are donees of stocks, seek to recover ncome ta es e acted
because of advancement n the market vaue of those stocks whe owned by the
donors. The facts are not n dspute. oth causes must turn upon the effect of
paragraph (2), secton 202, Revenue ct, 1921 (ch. 13 , 42 Stat., 227), whch
prescrbes the bass for estmatng ta abe gan when one dsposes of property
whch came to hm by gft. The records do not dffer essentay and a state-
ment of the matera crcumstances dscosed by No. 1 w suffce.
Durng the caendar years 1921 and 1922 the father of pettoner, zabeth
C. Taft, gave her certan shares of Nash Motors Oo. stock then more vauabe
than when acqured by hm. She sod them durng 1923 for more than ther
market vaue when the gft was made.
The Unted States demanded an ncome ta reckoned upon the dfference be-
tween cost to the donor and prce receved by the donee. She pad accordngy
and sued to recover the porton mposed because of the advance n vaue whe
the donor owned the stock. The rght to ta the Increase n vaue after the
gft Is not dened.
bstracty stated, ths s the probem:
In 191 purchased 100 shares of stock for 1,000, whch he hed unt 1923,
when ther far market vaue had become 2,000. e then gave them to , who
sod tem durng the year 1923 for 5,000. The Unted States cam that under
the Revenue ct of 1921 must pay ncome ta upon 4,000 as reazed profts.
She mantans that ony 3,000 the apprecaton durng her ownershp can be
regarded as ncome that the Increase durng the donor s ownershp Is not
ncome assessabe aganst her wthn ntendment of the s teenth amendment.
The dstrct court rued aganst the Unted States the crcut court of
appeas hed wth them.
ct of Congress approved November 23, 1921 (ch. 13 , 42 Stat., 227, 229, 237) :
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
(1)
(2) In the case of such property, acqured by gft after December 31, 1920,
the bass sha be the same as that whch It woud have In the hands of the
donor or the ast precedng owner by whom t was not acqured by gft If the
facts necessary to determne such bass are unknown to the donee, the Com-
mssoner sha, f possbe, obtan such facts from such donor or ast precedng
owner, or any other person cognzant thereof. If the Commssoner fnds It
mpossbe to obtan such facts, the bass sha be the vaue of such property
as found by the Commssoner as of the date or appro mate date at whch,
accordng to the best nformaton the Commssoner s abe to obtan, such
property waa acqured by such donor or ast precedng owner. In the case of
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202, rt. 15 2.
228
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 te tme of such acquston
Seo. 213. That for the purposes of ths tte (e cept as otherwse provded
n secton 233) the term gross ncome
(a) Incudes gans, profts, and ncome derved from saares, wages, or
compensaton for persona servce or gans or profts and Income
derved from any source whatever. The amount of a such tems (e cept
as provded n subdvson (e) of secton 201) sha be ncuded n the gross
ncome for the ta abe year n whch receved by the ta payer, uness under
methods of accountng permtted under subdvson (b) of secton 212, any
such amounts are to be propery accounted for as of a dfferent perod but
(b) Does not ncude the foowng tems, whch sha be e empt from
ta aton under ths tte
(1) (2)
(3) The vaue of property acqured by gft, bequest, devse, or descent
(but the ncome from such property sha be Incuded n gross In-
come) .
We thnk the manfest purpose of Congress e pressed In paragraph (2),
secton 202, supra, was to requre the pettoner to pay the e acted ta .
The ony queston sub|ect to serous controversy s whether Congress had
power to authorze the e acton.
It s sad that the gft became a capta asset of the donee to the e tent of
ts vaue when receved and, therefore, when dsposed of by her no part of that
vaue coud be treated as ta abe ncome n her hands.
The s teenth amendment provdes
The Congress sha have power to ay and coect ta es on ncomes from
whatever source derved wthout apportonment among the severa States and
wthout regard to any census or enumeraton.
Income s the thng whch may be ta ed Income from any source. The
amendment does not attempt to defne ncome or to desgnate how ta es may
be ad thereon, or how they may be enforced.
Under former decsons here the setted doctrne s that the s teenth amend-
ment confers no power upon Congress to defne and ta as ncome wthout
apportonment somethng whch theretofore coud not have been propery re-
garded as ncome.
so, ths court has decared Income may be defned as the gan derved
from capta, from abor, or from both combned, provded t be understood
to ncude proft ganed through a sae or converson of capta assets. ( sner
v. Macombcr, 252 U. S., 189, 207 T. D. 8010, C. . 3, 25 .) The gan derved
from capta, wthn the defnton, s not a gan accrung to capta, nor
a growth or ncrement of vaue n the nvestment, but a gan, a proft, somethng
of e changeabe vaue proceedng from the property, severed from the capta
however Invested, and comng n, that Is, receved or drawn by the camant
for hs separate use, beneft, and dsposa. (Unted States v. Phes, 257
U. S., 15 , 1 9 T. I). 3270, C. . 5, 37 .)
If, Instead of gvng the stock to pettoner, the donor had sod It at market
vaue, the e cess over the capta he nvested (cost) woud have been Income
therefrom and sub|ect to ta aton under the s teenth amendment. e woud
have been obged to share the reazed gan wth the Unted States. e hed
the stock the Investment sub|ect to the rght of the soveregn to take part
of any Increase n ts vaue when separated through sae or converson and re-
duced to hs possesson. Coud he. contrary to the e press w of Congress, by
mere gft enabe another to hod ths stock free from such rght, deprve the
soveregn of the possbty of ta ng the apprecaton when actuay severed,
and convert the entre property Into a capta asset of the donee, who Invested
nothng, as though the atter had purchased at the market prce nd after
a st further enhancement of the property, coud the donee make a second
gft wth ke effect, etc. We thnk not.
In truth, the stock represented ony a snge nvestment of capta that made
by the donor. nd when through sae or converson the ncrease was separated
therefrom. It became ncome from that nvestment In the hands of the recpent
sub|ect to ta aton accordng to the very words of the s teenth amendment.
y requrng the recpent of the entre Increase to pay a part nto the Pubc
Treasury, Congress deprved her of no rght and sub|ected her to no hardshp.
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229
202, rt. 15 3.
She accepted the gft wth knowedge of the statute and, as to the property
receved, vountary assumed the poston of her donor. When she sod the
stock she actuay got the orgna sum nvested, pus the entre apprecaton,
and out of the atter ony was she caed on to pay the ta demanded.
The provson of the statute under consderaton seems entrey approprate
for enforcng a genera scheme of awfu ta aton. To accept the vew urged
In behaf of pettoner undoubtedy woud defeat, to some e tent, the purpose
of Congress to take part of a gan derved from capta nvestments. To pre-
vent that resut and Insure enforcement of ts proper pocy, Congress had power
to requre that for purposes of ta aton the donee shoud accept the poston
of the donor n respect of the thng receved. nd n so dong, t acted nether
unreasonaby nor arbtrary.
The power of Congress to requre a succeedng owner, n respect of ta a-
ton, to assume the pace of hs predecessor s ponted out by Unted States
v. Phes (257 U. S., 15 , 171)
Where, as n ths case, the dvdend consttutes a dstrbuton of profts
accumuated durng an e tended perod and bears a arge proporton to the
par vaue of the stock, f an nvestor happened to buy stock shorty before
the dvdend, payng a prce enhanced by an estmate of the capta pus the
surpus of the company, and after dstrbuton of the surpus, wth correspond-
ng reducton n the Intrnsc and market vaue of the shares, he were caed
upon to pay a ta upon the dvdend receved, t mght ook n hs ease ke
a ta upon hs capta. ut t s ony apparenty so. In buyng at a prce
that refected the accumuated profts, he of course acqured as a part of the
vauabe rghts purchased the prospect of a dvdend from the accumuatons
bought dvdend on as the phrase goes and necessary took sub|ect to the
burden of the ncome ta proper to be assessed aganst hm by reason of the
dvdend f and when made. e smpy stepped nto the shoes, n ths as n
other respects, of the stockhoder whose shares he acqured, and presumaby
the prospect of a dvdend Infuenced the prce pad, and was dscounted by
the prospect of an ncome ta to be pad thereon. In short, the queston
whether a dvdend made out of company profts consttutes ncome of the
stockhoder s not affected by antecedent transfers of the stock from hand
to hand.
There s nothng n the Consttuton whch ends support to the theory that
gan actuay resutng from the ncreased vaue of capta can be treated as
ta abe ncome In the hands of the recpent ony so far as the ncrease occurred
whe he owned the property. nd Irwn v. Oavt (2 8 U. S., 1 1, 1 7 T. D.
8710, O. . r -1, 123 ) s to the contrary.
The udgment beow s affrmed.
The Chef ustce took no part n the consderaton or decson of these causes.
ktob 15 3: Sae of property acqured by III-11-4140
gft on or before December 31, 1920, or by Ct. D. 50
bequest, devse, or nhertance.
INCOM T R NU CT O 1921 D CISION OP COURT.
1. Gan ob Loss ass Property cqured by equest.
egatee under a w acqures property wthn the meanng of
secton 202(a)3 of the Revenue ct of 1921 at the date of the
testator s death, and the far market vaue of the property at that
tme, and not ts vaue at the date of dstrbuton, s the bass pro-
vded by that secton n ascertanng proft or oss on the sae of the
property.
2. udgment Reversed.
The |udgment of the dstrct court (25 ed. (2d), 915) reversed.
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202, rt. 15 3.
230
Unted States Crcut Court of ppeas for the Second Cbodt.
. rankn rewster, defendant n error, v. ert P. Gage, Coector of Interna
Revenue, pantff n error.
Wrt of error to the Dstrct Court or the Western Dstrct of New York. cton b|
. rankn rewster pantff, aganst ert P. Gage, coector of Interna revenue,
defendant, to recover Income ta es aeged to have been egay coected as addtona
taes. udgment for pantff: defendant appeas. Reversed.
ebruary 4, 1929.
OPINION.
Manton, Crcut udge: Ths acton was brought to recover ncome ta es a-
eged to have been erroneousy and egay coected as addtona ta es for the
years 1920, 1921, and 1922. Defendant n error fed hs return for these years
and reported profts to Mm reazed on the sae of securtes whch he receved as
a resduary egatee under hs father s w. s ncome or proft dffers n
amount accordng to the date of the death of hs father May 20, 1918 or the
date of dstrbuton pr 19, 1920. The court beow hed the proft was de-
termnabe by subtractng from the sae prce the vaue of the stock so sod at
te date of dstrbuton.
Secton 213 of the Revenue ct of 1918 (40 Stat, 10 5), In referrng to the
term gross ncome, provdes that t does not ncude The vaue of property
acqured by gft, bequest, devse, or descent (but the ncome from such property
sha be ncuded n gross ncome). nd secton 202(a) of the Revenue ct
of 1918 (40 Stat., 10 0) provdes that for the purpose of ascertanng the gan
derved or oss sustaned from the sae or other dsposton of property, the
bass sha be, In the case of property acqured before March 1, 1913, the far
market prce or vaue of such property as of that date, and, n the case of pro|v
erty acqured on or after that date, the cost thereof. Secton 202(a) of the
Revenue ct of 1921 (42 Stat., 229) provdes that n ascertanng proft or oss
on the sae or other dsposton of property acqured after ebruary 28, 1913,
that
In the case of such property, acqured by bequest, devse or nhertance, the
bass sha be the far market prce or vaue of such pro erty at the tme of such
acquston.
The queston presented to us Is whether the defendant n error acqured,
as such resduary egntee, the securtes whch he sod at the date of hs father s
deat or the date of the order of dstrbuton. Upon death, the e ecutor or
admnstrator of an estate obtans ega tte and mantans t durng a sutabe
perod of admnstraton, but he hods the property so obtaned as a trustee for
the proper admnstraton for a the partes nterested theren. The ega tte of
a persona property of a decedent, ncudng chattes and choses n acton, vests
n the persona representatve as of the date of death of the decedent. (Schouer
on Ws, sec. 20 1.) ut a egatee under a w, sub|ect to the use of the prop-
erty for the purpose of admnstraton, acqures that to whch he s entted
at the nstant of the testator s death. (Matter of Lansng, 182 N. Y., 238:
a v. a, 49 Conn., 52 Cook v. McDowe, 32 N. . quty, 351 arvey v.
oa , 29 a., 1 8.) When the testator makes hs w, he makes hs gft. The
rghts of the egatee are thus f ed. Of course, hs property s sub|ect to hs
debts and the resduary egatee s rghts to the property he may obtan must stand
proportonatey the burden of that obgaton. ( ood v. ane, 130 N. ., 514.)
ut the egatee obtans a rght whch he may convey or devse by w. s s
an equtabe tte. The e ecutor (or admnstrator, f t be a case of Intestacy)
must account as the w (or aw) drects and perform hs trust accordngy.
When the decree of dstrbuton s made, t reates back to ths orgna rght
and dstrbuton gves to the dstrbutee no new tte to the property but ony
asserts the property to whch tte sha attach. (Wager v. Wager, 89 N. Y., 1 1:
oster v. fed, 20 Pck. (Mass.), 7 Thompson v. Thomas, 30 Mss., 152.)
qutabe assets are governed by the same rues as ega assets. (Perry on
Trusts ( th ed.), sec. 357.) The owner may se and dspose of them or make
conveyance thereof by w. (West v. urke, 219 N. Y., 7 Sanders v. Sovtter,
13 N. Y.. 97.) The ega tte whch s outstandng n the e ecutor durng the
perod of admnstraton has no vaue n and of tsef and had It been sought
to have been made the sub|ect of a sae, carryng no rght to equtabe tte, t
woud have commanded no prce nor nterfered wth the carryng out of the
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202, rt. 15 3.
trust of the admnstrator. To Ignore the gun upon so much of the sod tte
as was equtabe woud be a subordnaton of that whch s rea and substanta
to that whch Is nether. It coud not have been the ntent of Congress to take
the ega tte apart or separate from that whch woud pass as earnngs to one
who s entted to the equtabe tte or benefca nterest n the property. It
surey was not the ntent of Congress that the acquston of a mere ega tte
shoud competey wpe out or render unta abe the gan whch had been ac-
qured by the equtabe ownershp and whch was, n fact, reazed upon the sae
made when the date of dstrbuton arrved. Moreover, t woud be an un-
fortunate constructon, whch s not demanded by the statute, that woud pace
t wthn the power of persona representatves and the rea owners, namey,
the egatees or dstrbutees, to defer dstrbuton n order to escape ta . Ths
shoud be avoded. requenty the persona representatves and the bene-
fcares are the same persons or members of the same famy, and the tempta-
ton woud be opened, where there s a perod of rapdy ncreasng vaues, to
defer dstrbuton unt, n the |udgment of a concerned, the peak n the mar-
ket had been reached so that thereafter saes of the dstrbuted property woud
regster tte or no proft and perhaps osses. It woud not do to permt hers
and devsees to brng about a postponement of the acquston of property for
such purposes. ers and devsees to reaty have ega tte vested n them at
the date of decedent s death. It s |ust and reasonabe to pace both casses of
property upon the same bass wthout a dstncton restng soey upon whether
the property be reaty or personaty. The Treasury Department n consderng
the Revenue cts snce 1913 and the e empton from ncome ta of property
acqured by gft, bequest, devse, or descent (sec. 4, ct of 1910, 39 Stat., 358
sec. 1200, ct of 1917, 40 Stat., 329 sec. 213(b) (sub. dv. 3), ct of 1918, 40
Stat., 10 5 ct of 1921, 42 Stat., 238 ct of 1924, 43 Stat., 2 8 ct of 192 , 44
Stat., 24) has consstenty hed that the basc date for the computaton of gan
or oss on the sae of property so acqured s that of the decedent s death. ( ar.
44, Reguatons 33, 1918 art. 15 2 of Reguatons 45, 1919 art 15 2 of Regua-
tons 45. 1920 art. 15 3 of Reguatons 2, 1922 art. 1594 of Reguatons 5,
1924 and art. 1594 of Reguatons 9, 1928.) Great weght w be gven to
contemporaneous constructon of an ct of Congress by department offcas who
are caed upon to act under and carry out ts provsons, partcuary f there
be uncertanty or ambguty. ( voendg v. Washngton Co., 2 5 U. S., 322
Nat. Lead Co. v. Unted States, 252 U. S., 140: Unted States v. ermanos, 209
C. 8., 337 Unted States v. nne, 185 U. S., 23 .)
Three decsons were referred to n the court beow and are urged upon us
here. Matter of . W. Matthessen, |r. (2 . T. ., 921) ce sher oster v.
Commssoner (7 . T. ., 1137) and Matthessen v. Unted States (n the Court
of Cams, reported n the Commerce Cearng ouse edera Ta Servce for
1927, vo. I, p. 7535). In the Matter of Matthessen, |r., supra, the ta payer
was a resduary egatee under the w of hs father, who ded ebruary 11, 1918,
In Inos, and on March 13, 1918, the e ecutors, trustee, and benefcares agreed
upon a dstrbuton of the estate sub|ect to a provson for refundng pro rata
to the e ecutor suffcent funds wherewth to meet abtes of the estate.
Shares of corporate stock whch remaned In the father s name on November
12. 1918, were made out n the name of Matthessen, the son. On November 19,
1918, he sod the stock. The oard hed that he acqured t at the date of the
agreed dstrbuton and not at the date of hs father s death. The oard sad
that t was true the ta payer dd acqure a rght on the death of the testator,
but that rght was not a property rght n the stock whch was the sub|ect matter
of the transacton nvoved n the appea. The most that the ta payer, as resdu-
ary egatee, coud do was to demand at the tme of the death of the testator a
proper admnstraton of the estate and a dstrbuton of the assets as they re-
maned after a debts and cams were setted. ut under the aw, the rght to
a dstrbutve share of personaty n an estate of an ntestate vests nntanter n
the her upon the death of the owner and not from the tme of dstrbuton. Ds-
trbuton gves the dstrbutee no new tte but ony ascertans the property to
whch the tte attaches. (Chrste v. Raroad Co., 104 Iowa, 207.) Unted States
v. ones (23 U. S., 10 ). reed upon by the oard, nvoved a successon ta .
No account was taken of the vestng n nterest, but ony the queston of the
vestng In possesson and en|oyment, and t s not n pont. The court dd say
that persona property dd not pass drecty from the decedent to the egatees or
dstrbutees but goes prmary to the e ecutor or admnstrator. Ths, of
course, means that possesson and en|oyment by the egatee was postponed. It
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203, rt. 1 82.
232
was there hed that, unt the dstrbuton, the dstrbutee certany was not
entted to receve or en|oy any part of the property. oster v. Commssoner
(7 . T. ., 1137) foowed the Matthessen case. Later, Matthessen, after pay-
ng the ta , brought the acton n the Court of Cams to recover the ta es found
by the oard and aso a arger sum, the cam beng that hs acquston dd not
occur unt hs certfcates of stock were handed to hm and transferred on the
books of the ssung corporaton. The Court of Cams foowed I he oard s
decson, reyng upon Unted States v. ones (23 U. S., 112). ut for the
reasons whch we have advanced, we can not agree wth the decsons n the
Matthessen case, ether by the oard of Ta ppeas or n the Court of Cams.
These reasons are more persuasve to us and, wth the departmenta construc-
ton |ustfed by the rues of aw, ead us to drect that the |udgment beow be
reversed.
udgment reversed.
S CTION 203. IN NTORI S.
rtce 1582: auaton of nventores III-8-411
CtD.43
INCOM T R NU CT OP 1918 D CISION O COURT.
Inventory auaton Reducton by mount or ntcpated
Loss.
ta payer obgated under frm saes contracts at the end of
1919 to se ts product at a prce ess than cost and ess than the then
market prce may not nventory at ess than cost merchandse on
hand at the end of the year, sutabe for fng the contracts but
not specfcay set asde for them, n order to refect a oss whch
t estmated t woud sustan n the performance of such contracts.
Dstrct Court of the Unted States for the astern Dstrct of
Pennsyvana.
Swng-Thomas Convertng Co., a Corporaton, v. akeey D. tcCaughn,
Coector of Interna Revenue.
October 9, 1928.
OPINION.
Ths Is an acton at aw to recover 24,338.07, aeged to have been erro
neousy coected from the pantff as ncome ta es for the year 1919. The
ta payer took an appea to the Unted States oard of Ta ppeas from a
defcency n ta proposed to be assessed aganst It by the Commssoner of
Interna Revenue. The Unted States oard of Ta ppeas hed the proposed
acton of the Commssoner was awfu and the ta was thereupon assessed
and coected. Thereafter the pantff Insttuted ths sut, whch was tred
before the court, |ury havng been waved by wrtten stpuaton.
INDINGS O CT.
1. The ta payer s a Pennsyvana corporaton wth ts prncpa offce at
Chester, Pa. It s engaged In the busness of mercerzng cotton yarn. It buys
from southern spnners cotton yarn In the warped form known n the trade as
natura or gray yarns. It mercerzes ths yarn and then wnds It, pacng t
on cones, and ses ts output to the knttng trade for use n makng stockngs.
2. It was the reguar and constant practce of the ta payer durng the year
1919, and for many months pror thereto, n every case of the sae of yarn,
If t dd not have suffcent yarn on hand to f the order sod, mmedatey to
cover the contract by purchasng natura yarn necessary to take care of the
sae.
3. etween September 25, 1918, and May 25, 1919, the ta payer In the ord-
nary course of ts busness entered nto a number of contracts for the sae of
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233
203, rt. 1582.
mercerzed yarn to one Carence L. Meyers, of Phadepha, Pa., a of whch
yarn shoud have been devered to Meyers n the ordnary course of busness
by the mdde of 1919. Deveres were not made, however, n accordance wth
the understandng of both partes, and some of the yarn owed Meyers was uot
devered unt after December 31, 1919.
4. The ta payer accepted orders from and sod mercerzed yarn to many
persons besdes Carence L. Meyers, of Phadepha. Its transactons wth
Meyers durng 1919 were from 10 to 15 per cent of ts entre transactons.
5. Durng the perod from ebruary, 1919, to pr, 1920, prces of cotton
yarn both natura and mercerzed advanced very greaty. Certan knds of
yarn doubed and trebed n prce durng the perod.
. Some of the natura yarn whch had been purchased aganst the Meyers
contracts was used n fng orders receved from others than Meyers at ater
dates.
7. On December 31, 1919, the cose of the ta payer s ta abe year, the ta -
payer was under bndng contracts to se Carence L. Meyers 53,198 pounds
of mercerzed yarn at prces much under the then market prces. On that
date the ta payer had on hand appro matey 40,000 pounds of yarn of a
quaty and grade sutabe for fng the Meyers contracts. None of ths yarn
was, however, specfcay set asde for the fng of those contracts and the
ta payer was free to do wth t as he wshed. The ta payer s nventory at
the cose of 1919 was taken upon the bass of cost. Inasmuch, however, as the
ta payer was obgated to se to Meyers 53,198 pounds of mercerzed yarn at
ess than the then market prces and at ess than the cost of the appro matey
40,000 pounds of yarn on hand avaabe for fng the contracts, the nventory
of a yarn on hand at December 31, 1919, was wrtten down to the e tent of
53,198, whch amount represents the estmated oss whch the ta payer was
of the opnon that t had sustaned upon the Meyers contracts.
8. To take care of Its estmated oss of 53,198, the ta payer opened a speca
account known as the C. L. Meyers Speca ccount and charged off ths
estmated amount as a oss and made a counter-entry n Its profts and oss
edger. The ncome-ta return form for 1919 dd not contan any provson for
the entry of such an tem as a deducton and the ta payer accordngy reported
ts nventory as reduced by 53,198.
9. The Meyers contracts were competed by deveres commencng anuary
2. 1920. and endng on May 20, 1920. Most but not a of the 40,000 pounds of
yarn on hand at December 31, 1919, sutabe for fng the Meyers contracts
was used n the makng of these deveres some natura yarn was purchased
after December 31, 1919. and used n makng the deveres.
10. The Commssoner has added to the ta payer s net Income reported for
1919 the 53,198 n queston and has proposed the assessment of an addtona
ta of 28,242. for sad year.
Note. The above fndngs were ntroduced as evdence as the facts found by
the Unted States oard of Ta ppeas. Ths court aso so fnds. To the
above may be added the foowng based on testmony produced at the tra:
11. Durng the year 1919 deveres of raw products to the pantff were
deayed from 0 to 90 days. The amount of raw products upon hand remaned
about constant durng the year 1919. The manufacture of the products pro-
duced by the pantff requred appro matey 30 days from the recept of the
raw matera. Nether the pantff s contracts wth Meyers nor ts contracts
for the purchase by t of natura yarn were sub|ect to canceaton. There was
no agreement between the pantff and Meyers e tendng the tme for deveres
under the contracts. Durng 1919 Meyers was contnuay cang on the
pantff for more prompt deveres but never suggested to the pantff that
he woud brng sut by reason of ts defaut or that he woud hod t abe
therefor. yarn necessary to f the Meyers contract was purchased by the
pantff durng the year 1919.
DISCUSSION ND CONCLUSION.
t the cose of the year 1919, the pantff found tsef under bndng contracts
entered Into durng that year for the sae of ts product at a prce ess than
the cost of manufacture and ess than the market prce of smar merchandse
at the cose of the year. It conceved (and t now so contends) that n makng
ts Income ta return It was entted to take as a deducton a sum equa to the
oss whch t estmated t woud sustan by the performance of such contracts.
It proceeded to do so by subtractng from the vaues shown by Its nventory
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204, rt. 1 02.
234
taken at the end of 1919, at cost, the amount of such estmated oss. Ths re-
suted n the entre nventory beng at a fgure beow ether cost or market
vaue. I am of the opnon that rhe ta payer dd not have the rght to take ts
estmated oss In the contracts n queston as a deducton for the year 1919, nor
was the method by whch t endeavored to effectuate ts cam authorzed by
aw.
The Revenue ct of 1918 authorzes the deducton of osses sustaned durng
the ta abe year. rtce 141 of Reguatons 45 (ssued n connec-
ton wth the Revenue ct of 1918) provded that osses camed durng any
ta abe year Must usuay be evdenced by cosed and competed transactons.
Most busness osses resut from transactons coverng a perod of tme of ap-
precabe e tent. It s obvous that, n order to determne n what year a oss
has accrued so as to be deductbe, some f ed pont n the transacton produc-
ng the oss must be taken and t s desrabe that t genera rue appcabe to
a cases must be estabshed. The rue estabshed by the reguatons s rea-
sonabe and n accordance wth the purposes and ntent of the ct. The
pantff s poston s practcay that the tme of accrua for purposes of a
deducton s the tme when t becomes reasonaby certan that the oss w be
ncurred. I say reasonaby certan, because n a transacton of ths knd there
can be no absoute certanty, and, whe the pantff n hs argument refers to
absoute certanty, he does not reay mean so much. It s a matter of ordnary-
knowedge that t sometmes occurs that for varous reasons partes may be
reeved of mprovdent or unproftabe contracts, or more favorabe terms
granted, or contracts apparenty bndng nufed on ega grounds. The safe
and certan rue s that ad down by the reguatons. Ths concuson s sup-
ported bv the current of |udca authorty. (New York Lfe Insurance Co. v.
dwards, 271 U. S.. 109 T. D. 3872. C. . -, 305 . 8. v. Whte Dena Co.,
274 U S.. 398 T. D. 4059, C. . I-2, 198 Lcwcyn v. ectrc Reducton Co.,
275 U. S.. 243.) In rewer v. Orr (19 ed. (2d), 230) the court sad It s,
we thnk, ndsputabe that osses occurrng n trade or busness whch are
deductbe as such n computng net Income are ony such osses as have been
reazed. Ths has aso been the consstent hodng of the oard of Ta p-
peas n numerous cases. It may or may not be true that a statement for bauk-
ng or credt purposes whch dd not take nto account the probabty of the
oss woud be an ncorrect statement, but that queston s besde the pont, be-
cause for credt purposes the mportant pont s the probabty of a oss ac-
crung and t s unmportant e acty when t occurs. or ta purposes the
e act tme when t occurs s an mportant consderaton.
s to the ta payer s rght to reduce hs nventory by the estmated oss, ths
queston to a arge e tent s bound up wth that |ust dscussed, but t shoud
be sad that the ta payer s procedure n ths case was not authorzed by aw.
If artces 1582 and 1584 of Reguatons 45 be carefuy read t w be seen
that market vaue can be used as a bass for vauaton ony when t s ower
than cost. Otherwse cost must be used. It foows that the provson of
artce 1584 for n vauaton ower than market under certan abnorma cond-
tons s ony avaabe to the ta payer when the market s ower than the cost.
ven f t were avaabe when the cost was the ower of the two vaues, t
woud not appy here, because there s no evdence that the ta payer had
reguary sod such merchandse as s heren nvoved at prces ower than the
current bd prce.
udgment may be entered for the defendant.
S CTION 204. N T LOSS S.
rtce 1 02: Cam for aowance of net oss. 111-4-4078
I. T. 2450
R NU CTS O 1918 ND 1921.
Offce Decson 445 (C. . 2. 58), Offce Decson 855 (C. . 4, 54),
I. T. 1211 (C. . 1-1, 47), ppeas and Revew Recommendaton
743 (C. . 1-1, 45), ppeas and Revew Recommendaton 1128
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204, rt. 1 04.
(C. . 1-2, 34), I. T. 14 5 (C. . 1-2, 3 ), and I. T. 1509 (C. . 1-2,
39), n a far as they are nconsstent wth Genera Counse s Memo-
randum 5457, pubshed on page 157, are revoked.
rtce 1 04: Net osses, for what perods III-21-4215
aowed. Ct. D. 2
INCOM T NT CT O 1918 D CISION O COURT.
Deducton Net Loss sca Year nded fter December 81,
1919.
No part of a net oss sustaned n a fsca year endng ebruary
28, 1920, may be deducted under subsecton 204(b) of the Revenue
ct of 1918, whch provdes for the deducton of a net oss ony
where the ta abe year n whch t s sustaned fas whoy wthn
the perod theren specfed.
Unted States Dstrct Court, astern Dstrct op New York.
De aven Manufacturng Co., pettoner, v. Unted State of merca,
respondent.
March 30, 1920.
OPINION.
Cooper, .: Pantff brngs sut to have Its ncome ta es for Its fsca year
endng ebruary 28. 1919, redetermned pursuant to the provsons of secton
204(b) of the Revenue Law of 1918. /
Pantff s a corporaton. It keeps ts books of account and makes ts ncome
ta returns on the bass of a fsca year endng on the ast day of ebruary
of each year. Durng the fsca year endng ebruary 28, 1919, ts net ncome
was 83,181.27. and t pad an ncome and e cess profts ta thereon 30,242.54.
Durng the fsca year endng ebruary 29, 1920. t sustaned a net oss of
51,04 . 4. It now cams the rght to deduct under secton 204(b) so much of
the net oss as It sustaned durng the 10 months of the year 1919 (March to
December, ncusve) from the net ncome of the former year endng ebruary
28. 1919, and to have ts ta es for the former year redetermned, and upon such
redetermnaton to recover the sum of 2 ,72 .84. e cess ta es pad.
Secton 204(b) reads as foows:
If for any ta abe year begnnng after October 31. 1918, and endng pror
to anuary 1, 1920. t appears upon the producton of evdence satsfactory to
the Commssoner that any ta payer has sustaned a net oss, the amount of
such net oss sha under reguatons prescrbed by the Commssoner wth the
approva of the Secretary be deducted from the net ncome of the ta payer
for the precedng ta abe year and the ta es mposed by ths tte and by
Tte III for such precedng ta abe year sha be redetermned accordngy.
ny amount found to be due to the ta payer upon the bass of such redetermna-
ton sha be credted or refunded to the ta payer n accordance wth the
provsons of secton 252. If such net oss s n e cess of the net ncome for
such precedng ta abe year, the amount of such e cess shn under regua-
tons prescrbed by the Commssoner wth the approva of the Secretary be
aowed as a deducton n computns the net ncome for the succeedng ta abe
year.
Ta abe year s defned n secton 200 of the ct as foows:
The term ta abe year means the caendar year or the fsca year endng
urng such caendar year, upon the bass of whch the net ncome s computed
under secton 212 or secton 232. The term fsca year means an accountng
I rod of 12 months endng on the ast day of any month other than December.
The facts are stpuated. The decson turns upon the constructon of the
statute. In consderng the meanng of the ct the sub|ect w be dscussed as
of the date of the passage of the ct, and, as far as possbe, the verbs used w
be used n the present tense.
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204, rt. 1 04.
23
Pantff contends that the 10 months March to December, 1919, Incusve , of
ts ta abe year endng ebruary 29, 1920, comes wthn the terms of secton
204(b) propery construed.
Defendant cams that pantff does not come under ths secton because Its
ta abe year s not whoy ncuded wthn the 14 months perod from October
81, 1918, to anuary 1, 1920, specfed n the secton.
The Revenue ct of 1918 was not passed unt ebruary 14, 1919. The
armstce termnatng actve hosttes of the Word War was entered nto on
November 11, 1918, and, whe ths was not a treaty of peace, Congress waa
satsfed that the war was over and that a perod of defaton of vaues had
begun.
To gve reef from the defaton and subsequent osses was the purpose of
Congress n ncudng the aforesad secton 204(b) n the Revenue ct of 1918.
In the appea of the Norfok nttng Ms Corporaton (5 . T. ., 792), the
oard of Ta ppeas sad wth reference to provsons n ths secton:
The purpose of Congress n enactng ths provson seems too obvous to be a
matter of debate ts purpose was to provde that ta payers sufferng osses
durng the perod between November 1, 1918, and December 31, 1920, were to be
aowed reef from ta aton by credtng such osses frst aganst 1918, when
ta payers were beeved to have en|oyed the beneft of war prces and to have
made arge profts and carred proportonatey heavy burdens of ncome and
proft ta es, and, n the event that profts of 1918 were nsuffcent to absorb
the oss, the baance thereof, or so much of t as possbe, shoud be absorbed by
the profts of the year 1920, when t was e pected that busness condtons and
commodty prces mght agan become norma.
On the face of the statute, gvng the words ther usua and ordnary mean-
ng, t s not to be doubted that ony those ta payers come under secton 204(b)
who have a ta abe year begnnng after October 81, 1918, and endng pror to
anuary 21 1 , 1920. Ceary ths e cudes a ta payers whose ta abe year
does not come whoy wthn the 14 months perod, and woud, of course, e -
cude the pantff. Such constructon woud aso e cude ten-eevenths of a
ta payers who have a fsca year other than the caendar year, because ony
those ta payers havng a fsca year endng November 30 woud have ther
entre ta abe year wthn the 14 months perod. It s amost common know-
edge that a arge number of ta payers have a ta abe year, that s, a fsca
year, whch s not whoy wthn the 14 months perod.
In fact the statute Itsef n another secton, namey, secton 205(b) of the
same Revenue ct of 1918, pany ndcates that Congress knew at the tme of
the enactment of ths statute that there were ta payers whose fsca year began
n one caendar year and ended n another and part of whch was outsde of the
14 months perod.
Secton 202(b) of the same ct aso refers to the ta payers havng a ke
fsca year.
It s cear, therefore, that Congress, n attemptng by secton 204(b) to pro-
vde reef for ta payers who woud suffer defaton osses durng the 14 months
perod, ether nadvertenty used anguage whch on ts face e cuded a ta -
payers whose ta abe year dd not begn and end wthn the 14 months perod
or deberatey Intended to e cude such ta payers. The soe queston n ths
case s what was the ntent of Congress.
Pantff asserts that f the statute s construed as the Government contends,
t works dscrmnaton, n|ustce, and nequaty to the many ta payers whose
fsca year begns or ends outsde the 14 months perod, and that no such con-
structon shoud be gven a statute f a more reasonabe meanng avodng such
nequates can be found n the statute tsef or when the ob|ect sought to be
attaned and ev to be remeded are to be consdered. Pantff has authorty
for ts contenton.
In eydenfedt v. Daney God Sver Mnng Co. (93 U. S., 34) the Unted
States Supreme Court sad:
If a tera nterpretaton of any part of t (statute) woud operate un|usty
or ead to absurd resuts or be contrary to the evdent meanng of the ct, taken
as a whoe, t shoud be re|ected.
In nowton v. Moore (178 U. S., 41) the court, n an opnon by Mr. ustce
Whte, sad:
We are, therefore, bound to gve heed to the rue that where a partcuar
constructon of a statute w occason great nconvenence or produce Inequaty
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237
204, rt. 1 04.
or In|ustce, that vew s to be avoded f another and more reasonabe nterpre-
taton s present n the statute.
Of ke mport are: Church of the oy Trnty v. U. S. (143 U. S., 457) |
Scandnavan etng Co. v. sbestos d Rubber Works of merca (257 ed.,
937) Ro ford nttng Co. v. Moore et a. (2 5 ed., 177) ankers Trust Co.
v. owers (295 ed., 89).
There seems to be no reason on the face of thngs why Congress shoud have
any greater soctude for those ta payers who had the entre ta abe perod
wthn the 14 months and were gven reef than for those whose ta abe perod
was party wthn and party wthout such perod and who were dened such
reef.
ut a consderaton of the stuaton of ncome-ta payers ndependent of
secton 204(b) of the ct n queston shows that under that secton there s no
such dscrmnaton and nequaty n favor of some ta payers and aganst
others as the face of the statute seems to ndcate.
If, for nstance, a ta payer has for hs ta abe year the fsca year endng
une 30, 1919, even wthout the provson of subdvson 204(b) the ta payer can
and does appy the osses for the eght months from October 31, 1918, to une 30,
1919. aganst the profts of the precedng four months from une 30, 1918, to
October 31, 1918. So far as the osses for the remanng s months of 1919, the
frst s months of the ne t fsca year, namey, une 30 to December 31, are
concerned, wthout the provson of secton 204(b), the ta payer may appy the
osses of these s months aganst the profts of the remanng s months of
the second fsca year, vz, the s months from anuary 1, 1920, to une 30, 1920.
It s not to be ost sght of that Congress e pected the perod of defaton
woud end on December 31, 1919, and that the year 1920 woud be one of profts.
So that n effect the ta payer havng hs fsca year endng une 30, 1918, may
have hs osses for the entre 14 months perod apped, as to the frst 8 months,
aganst a profts of the 4 months of 1918, and, as to (he other mouths, aganst
the profts of the frst months of 1920 Thus a very arge porton of the
supposed dscrmnaton dsappears.
The ta payer does not, of course, n hs accountng, segregate bs profts
and osses accordng to these portons of a year wthn and wthout the 14
months perod and then offset one aganst the other. s accountng perod
s one contnuous 12 months perod, but hs rghf to mt hs ta es to hs
profts n the ta abe year as a whoe accompshes the same resut as f he
dd segregate or aocate the osses of the porton wthn the 14 months and
offset them aganst the profts of the porton wthout that perod.
ta payer ke the pantff, whose fsca year ends ebruary 28, s n a
smar stuaton. s oss durng the 1 months from October 31, 1918, to
ebruary 28, 1919, s deductbe aganst profts of the 8 months of 1918 from
ebruary 28 to October 31, and hs osses for the remanng 10 months of 1919,
namey, from ebruary 28, 1919, to December 31, 1919, may be offset aganst
the e pected profts of the 2 months, anuary and ebruary of 1920.
True, a ta payer havng a fsca year endng ebruary 28, ke pantff, may
not fare qute as we as a ta payer whose fsca year ends une 30, but t s
not aways possbe to make aws whch appy wth equa effect to a persons.
ut the ta payer whose fsca year corresponds wth the caendar year can
not offset hs osses ncurred n the caendar year 1919 aganst the profts of
ether 1918 or 1920, or any part of ether of such years, e cept under secton
204(b). Wthout secton 204(b) the ta payer havng a fsca year whch dd
not begn and end wthn the 14 months perod woud have a decded advan-
tage over the ta payer wth a caendar year or wth a fsca year begnnng
and endng wthn such perod.
If the ta payer havng a ta abe year begnnng n one caendar year and
endng n another may aso ava hmsef of the provsons of 204(b), n a
sense he has a doube reef, whe the ta payer whose ta abe year concdes
wth the caendar year or comes whoy wthn the 14 months perod has ony
the reef provded n secton 204(b). cept for 204(b) there woud be thus
an nequaty or dscrmnaton runnng aganst ta payers havng a caendar
year or fsca year wthn the 14 months perod. Secton 204(b) s Intended
to remove such dscrmnaton and restore such ta payers to a poston of
reatve equaty wth the others.
It s reasonaby cear, then, that by secton 204(b) Congress dd not, ether
rough nadvertence or desgn, create nequaty among ta payers, but, on
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204, rt. 1 04.
238
the contrary, dd remove nequaty, whch, because of changed economc con-
dtons, woud otherwse have arsen under e stng aw.
The authortes cted by pantff to support ts contenton that the etter
of the aw must be overrdden f a contrary ntent s manfest from the whoe
statute or because of the ob|ect to be attaned or the ev to be remeded
have, therefore, no appcaton here.
That Congress dd not ntend to ncude wthn the provsons of secton
204(b) ta payers whose ta abe year was not whoy wthn the 14 months
perod may aso be gathered from the hstory of the egsaton.
When the Revenue ct of 1918 passed the ouse of Representatves n ts
frst form there was no net oss provson n the b. fter the b reached
the Senate and had been referred to the proper commttee and reported to the
Senate by that commttee, the Senate adopted certan amendments to the b
suggested by the commttee. One of the amendments was the nserton of a
provson to gve reef aganst net osses due to defaton of vaues. Ths
amendment was nserted under the desgnaton Net osses, n secton 204,
and partcuary n subdvsons (b) and (c), whch read as foows:
(b) If for any ta abe year begnnng after December 31, 191 , and endng
not ater than December 31, 1918, t appears upon the producton of evdence
satsfactory to the Commssoner that any ta payer (other than a fe nsurance
company) has sustaned a net oss, the amount of such net oss sha under
reguatons prescrbed by the Commssoner wth the approva of the Secretary,
be aowed as a deducton n computng the net ncome of the ta payer for
the succeedng ta abe year.
(c) If for any ta abe year endng after anuary 1, 1919, t appears -
that any ta payer has sustaned a net oss, the amount of
such net oss be deducted from the net ncome of the ta payer for
the precedng ta abe year.
(Congressona Record, pages 513-518, voume 57, part 1, S ty-ffth Con-
gress, thrd sesson.)
The ouse dd not agree wth ths Senate amendment nor wth certan other
amendments, and conference commttees apponted by the two branches of
Congress fnay compromsed varous dsputed matters and among them secton
204(b). s fnay agreed upon by the conference commttees and enacted n
the anguage now appearng n the statute, secton 204(b) seems to be a com-
bnaton of sectons 204(b) and 204(c) of the Senate amendments. The perod
of tme to be covered by the net oss provson was fnay mted to a ta abe
year begnnng after October 31, 1918, and endng pror to anuary 1, 1920.
nd the oss was to be deducted, not from the succeedng ta abe year, as was
provded n the Senate amendment, secton 204(b), but from the precedng
ta abe year, as was provded n the Senate amendment secton 204(c), wth
the addton that f the oss n the ta abe year whoy wthn the 14 months
perod was greater than the proft of the precedng ta abe year, the e cess
coud be offset aganst the proft of the succeedng ta abe year.
fter such agreement by the conference commttees, the charman of the
ouse commttee, Congressman tchn. made a report wth reference to the
varous thngs the conference commttee had done and ncuded theren was
the foowng concernng ths secton 204(b) as agreed upon by the conference
commttee:
nother nnovaton to whch I have referred whch the Senate put n the
b was the net oss provson. s I sad, the Senate had the tme unmted
for the future, and t reached back to the ta es of 191 that s, the Senate
provson permtted a redetermnaton of the ta es as far back as 191 and for
a tme n the future. The conferees fnay concuded that the best thng to do
was to mt t to the transton perod n other words, the one year 1919. The
nventory and net oss reef provsons are emergency provsons and the con-
ferees agreed to treat them n that way.
The net oss provson s ths. If a busness or trade shows In 1919 (or) n
ts fsca year, between October 31, 1918, and anuary 1, 1920, whch ncudes
the caendar year of 1919, a net oss Instead of a net proft, t can take that oss
from the ncome upon whch t pad the ta es for 1918 and have the 1918 ta
redetermned, |ust ns I have e paned n the case of the nventory, and have
the dfference between the ta pad and the ta as redetermned refunded to t.
In other words, f the trade or busness makes 500,000 cear net proft n
1918 and ths year 1919, dnng the transton perod, nstead of mnkng a pmft
f oses 100,000, then we permt that busness to go to the Commssoner and
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239
204, rt. 1 04.
ask for a redetermnaton of ts ta for 1918. The Commssoner w deduct
.from the ncome of 500,000 as returned for 1918 the 100,000 oss, eavng
400,000. Upon the bass of 400,000 ncome the 1918 ta w be recomputed
and the dfference between the ta pad on the 500,000 and the ta computed
on 400,000 ncome w be returned to the ta payer.
ad secton 204(c) of the Senate amendment remaned n the ct, pantff
and a other ta payers woud have come wthn ts terms, for the anguage
any ta abe year endng after anuary 1, 1919, was broad enough to cover
every ta payer and every ta abe year. ut t wns emnated because the
ouse of Representatves woud not accept t.
The fact that a reef provson broad enough to ncude a ta payers was
nserted by the Senate n the b and such a provson emnated before pas-
sage aud the present narrower provson substtuted mtng the reef to
those ta payers whose fsca year comes whoy wthn the 14 mouths tme
mts of statute as enacted, warrants the concuson that Congress- ntended to
e cude a ta payers e cept those whose fsca year comes wthn such 14
months perod.
One further nference drawn from the statute mtates aso aganst the
pantffs contenton. If the statute coud be construed as pantff contends,
to ncude ta payers ke pantff whose fsca year s party wthn and party
wthout the 14 months perod, the statute woud not be a harmonous whoe.
If the reef provsons of secton 204(b) were to run to ta payers whose
ta abe year was not whoy wthn the 14 months perod, then t coud not
run to the entre ta abe year of such ta payers but ony to the fractons or
portons thereof wthn such perod. If a ta payer had a fsca year ke that
of the pantff, whch ended on ebruary 28, there woud be 4 months of one
ta abe year wthn the 14 months perod and 10 months of the ta abe year
wthn the same perod.
If Congress had ntended that a ta payers shoud have the beneft of the
remeda provsons of 204(b) to make the provsons effectve, a formua or
method woud be necessary for determnng or proratng the osses for so
mnch of each ta abe year as come wthn the 14 months perod or a pro-
vson woud be necessary requrng ta payers to take an nventory at the end
of the porton of the year comng wthn the 14 months perod. Or at east
there woud have been need for a provson that the Commssoner of Interna
Revenue coud devse by reguaton or otherwse some method of so determn-
ng or proratng the net osses for fractona parts of a ta abe year. ut
rhe statute s sent on that pont.
True, secton 201(e) provdes for determnng rataby the amount of profts
earned durng a porton of a year for the purpose of f ng profts out of whch
dvdends are deemed payabe, but ths provdes no method of prorntng osses.
Nor was there any appcabe provson n prevous Revenue cts for proratng
osses. There w be no presumpton that Congress nadvertenty negected
or omtted any sub|ect or cass of persons from the provsons of any ct of
Congress, nor that Congress hasty enacted egsaton. On the contrary, the
opposte presumpton must|weva.
The absence of any provson for determnng or proratne net osses for frac-
rona parts of a year apparenty s sgnfcant. If there are no fractona parts
of a ta abe year wthn the terms of secton 204(b), there s no need for
provson for determnng or proratng the net osses durng such fractona
parts of the ta abe year. Conversey, f there s no provson for determnng
or proratng osses, t s a reasonabe nference that there s no ntent to ncude
that whch woud make such provson necessary.
One more of pantffs contentons remans to be consdered. That s the
contenton that t has been authortatvey hed by both the court and the
oard of Ta ppeas that despte the provsons of secton 204(b) and secton
200. a perod of ess than 12 months has been hed to bp a ta abe year wthn
rhe meanng of secton 201(b). P antff rees unon Pennsyvana Chocoate-
Co. v. Leveyn (27 ed. (2d). 7 2 T. T). 4200. C, . IT-2. 2441) : . 8. v.
Carro Chan Co. (8 ed. (2d). 520): T7. 8. v. 8 m on Computvn Scae Co.
(T . C. W. D. y.. no opnon, overrung decson of the oard of Ta ppeas),
and npon appea of Norfok nttng Ms Corp (5 . T. .. 792). appea
of Lynch Constructon Co. (3 . T. .. 313). appea of Purty Oats Co. (4 .
T. .. 585). appea of Dwrabt 8tce Locker v. CommnMnner (5 . T. .. 239),
appea of mner Wooen Co. ( . T. .. 881).
Pant ff. therefore, contends that snce the ta abe year of secton 204(b)
may nnder the above authortes be ess than a fu 12 months year, that sec-
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5213(a), rt. 31.
240
ton shoud be so construed as to cover so much of the ta abe year as cornea
wthn the 14 months perod of the secton. In the case at bar, that woud
brng 10 months from ebruary 28, 1919, to December 31, 1919, wthn the
provsons of secton 204(b).
The dffcuty wth pantff s poston Is that the cases upon whch pantff
rees are dstngushabe from the case at bar In two respects, vz:
(1) The ess than 12 months perod was a fu accountng perod or fsca
or ta abe year, arsng ether because the ta payer had not been n busness
12 months, or because of dssouton before the e praton of the fu 12 months
fsca year, or because of a change of ta abe year wth the consent of the
Commssoner, makng the frst new fsca and ta abe year one of ess than
12 months, and,
(2) The whoe of the ess than 12 months perod was wthn the 14 months
perod of secton 204(b).
These dstnctons seem to entrey dfferentate pantff s case from the
authortes on whch t rees and mt ther appcaton to the fact that a
ta abe year may, under the crcumstances of these cases, be ess than 12
months.
That Is reay no support at a for pantffs contenton. s accountng
perod and fsca and ta abe year are ake 12 months, and the same 12 months.
They do not come whoy wthn the 14 months perod.
Despte the 10 yenrs snce the enactment of ths aw there s ony one derson
construng secton 204(b) In a case wth n ta abe year of 12 months whch s
party wthn and party wthout the 14 months perod. Ths s the nns-
rown case, . T. ., decded March 8, 1928.
In that case the fsca year began before the 14 months are ended wthn
t, whe n the case at bfr t begns wthn and ends after that perod. Ths
dstngushes the case n deta hut not n prncpe. In other respects the
facts are ake and the decson s n the cosest anaogy.
The oard of Ta ppeas hed n the nns- rown case that the ta payer
dd not come wthn the provsons of secton 204(b).
or the reasons set forth heren t must be hed thnt secton 204(b) runs
ony to ta payers whose ta abe year fas whoy wthn the 14 months perod
of the secton, and as pantff s ta abe year does not fa whoy wthn that
perod, pantff must be defeated.
udgment may be entered dsmssng the. compant on the merts.
P RT II. INDI IDU LS.
S CTION 213(a). GROSS INCOM D IN D:
INCLUSIONS.
rtce 31: What ncuded n cross ncome. III-8-4119
( so Secton 219. rtce 341.) Ct.D.4
INCOM T NU CTS O 1918 ND 1921 D CISION O COURT.
1. Income Trust Lff. state empton Gft.
mounts receved under the terms of a w as modfed by an
agreement of compromse and settement by whch a fe nterest In
a trust Is gven to a desgnated person wth power to appont the
prncpa by w are ta abe as ncome under the Revenue cts of
1918 and 1921 and are not e empt as property acqured by gft,
bequest, devse, or descent.
2. Deducton hauston of Lfe state.
fe benefcary to whom Income of a trust created by w s
dstrbuted Is not entted to deduct therefrom an aowance for
e hauston of the vaue of the fe estate under the Revenue cts
of 1918 and 1921.
3. Decson o owed.
The decson n the case of Irwn v. GavU (2 8 U. S., 1 1 (T. D.
3710 C. . I -1, 123 )) foowed.
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241
213(a), rt. 31.
Unted States Crcut Court or ppeas, ourth Crcut.
Martha 0. Codman, appeant, v. oshua W. Mes, ormer Coeotor of Inter na
Revenue for the Dstrct of Maryand, appeee.
Martha C Codman, appeant, v. Gaen L. Ta, Coector of Interna Revenue
for the Dstrct of Maryand, appeee.
ppeas from the Dstrct Court of tbe Unted States for the Dstrct of Maryand at
atmore.
October 22, 1928.
OPINION.
obthcott, Crcut udge: These suts were Insttuted by the appeant, who
was the pantff beow, aganst the appeees, who were defendants beow, to
recover Income ta es pad by the pantff under protest on Income receved n
the years 1918, 1919, 1920, 1921, and 1922. oth suts nvove the same ques-
tons, athough the ta es were pad under dfferent Revenue cts and to dfferent
coectors of nterna revenue at atmore, Md., defendant Tat havng suc-
ceeded defendant Mes as coector durng the years named.
In 1902 Mara P. Codman, of rsto, R. I., ded, eavng a w by whch she
created certan trusts. The pantff was the soe her-at-aw and ne t-of-kn
and contested the probatng of the w when t was offered n the probate court
for the town of rsto, R. I. In due course a compromse was brought about
and a persons nterested, whether as e ecutors, trustees, hers-at-aw, ne t-
of-kn, egatees, or devsees, entered nto an agreement of compromse and
settement, by whch the contest was termnated and the nterests of the dfferent
persons setted.
y the terms of the agreement the resdue of the property went to Robert M.
Morse and dmund D. Codman, to coect the rents and recepts and, after
payng e penses, to pay one haf of the ncome to the pantff durng her fe
and the other haf to one Catherne . Codman durng her fe. On the death
of ether, one-haf of the fund was to be transferred as the deceased shoud
by w appont and n defaut of appontment to her hers. The resdue con-
ssted of persona property and rea estate and was a stuate n oston, Mass.
Durng the years nvoved the trustees pad to the sad Martha 0. Codman
one-haf of the net ncome from sad trusts. Martha C. Codman, n makng
ber ncome ta returns for these years, respectvey, dd not ncude n her
gross ncome the amount pad to her by the trustee, for the reason that she
had contended that the sad payments consttuted a gft, devse, bequest, or
nhertance, and were, therefore, not to be ncuded n gross ncome under the
Revenue cts of 1918 and 1921. Upon revew and reaudt of these returns
the Commssoner of Interna Revenue determned that the sums so pad to her
were a part of her gross Income and added them to the amount of Income shown
on the respectve returns, thus gvng rse to the addtona ta es Invoved n
ths tgaton.
The ta es for the years 1918, 1919, and 1920 were computed under the Rev-
enue ct of 1918. The ta es for the years 1921 and 1922 were computed under
the Revenue ct of 1921.
The pantff then brought these suts. demurrer was fed to the decara-
ton, whch demurrer was sustaned, and an amended decaraton was fed,
to whch a demurrer was agan fed, whch was sustaned by the court beow,
and |udgment was drected for the defendant. rom ths acton ths appea
was taken.
It s contended for the pantff that because the ncome ceased wth her
death, even though she had the rght of appontment as to the prncpa, she
was entted to have a deducton from the ts because of e hauston. Wth
ths contenton we can not agree.
That the amount pad to the pantff s ncome s ceary setted by the
Supreme Court of the Unted States n the case of Iron v. Gavt (2 8 U. S.,
1 1). carefu study of ths case woud seem to sette the queston of e haus-
ton, deprecaton, or obsoescence aganst the pantff s contenton. The attor-
neys for the pantff contend that the Irwn case arose under the ct of 1913,
yet the prncpes there setted are the same as those here Invoved.
Whe the anguage of the ct of 1913 n provdng for deductons s not n
the Identca form of the anguage empoyed n the cts of 1921 and 1922,
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(213(a), rt. 81.
242
there Is a provson In a the cts requrng an aowance or deducton for
the e hauston of property by ts use n busness. In the atter cts, the
provsons, whch emnated from ta abe ncome the vaue of property acqured
by gft, bequest, devse, etc., metcuousy provded that the ncome from
such property shoud be ncuded n the gross ncome for ta aton. The ne
of demarcaton between property so conveyed and the ncome from such prop-
erty, whch shoud reman sub|ect to ta aton whether n the hands of the
orgna owner or after t had passed nto the hands of the benefcary, was
carefuy drawn. The prncpa dfference as reatng to the case n hand be-
tween the ct of 1913 and the ater cts was In the desgnaton of the person
who shoud make the return and pay the ta es. There s nothng In the
anguage of the ater statutes that ndcates that, because the returns were to
be made by the benefcary under a trust and the ta es pad by such bene-
fcary, t was ntended to deny to the Government the rght to coect the ta
n the same manner and to the same e tent as before. It was made cear,
however, that the mere gft, devse, or bequest of the property was not to
furnsh a bass for coectng addtona ta es upon ncomes. In secton 219 of
the Revenue cts governng ths case, subdvson a4, t s provded that the
nterest to be dstrbuted to benefcares perodcay, whether or not at reguar
Intervas, and ncome coected by a guardan of an nfant to be hed or ds-
trbuted as the court may drect, s made sub|ect to the ta . It s true that n
a sense the ncome conveyed to the pantff for fe s propery desgnated as
property, but t ceary retans ts character as ta abe ncome, and there s
no provson n the aw nor any terms empoyed n the statute to ndcate an
ntenton upon the part of Congress to reeve such ncome from t e norma ta
eved upon Incomes merey because ts payment ceased after a term of years.
If by speca provson the pantff had been entted to receve the specfc
amounts equang each year s ncome as bequest or gfts and not Income eo
nomne, appeant s contenton mght have been we taken, but n such nstance
the estate tsef woud have been sub|ect to the ta . The contenton that the
vaue of the estate was each year depeted by e hauston s ntrgung ratter
than ogca. What the pantff receved and was entted to receve was not
the corpus of the property but the ncrement annuay accrung therefrom. It
s nowhere suggested that the corpus of the property, from whch the ncome
was derved, was n any way depeted. There s no destructon or dmnuton
by use of the property whch furnshes the source of the ncome, and to aow
an abatement for any porton of the ta es accrung each year because of the
mted tme of the pantff s en|oyment of the ncome woud not ony defeat
the reterated purpose of Congress as e pressed n varous provsons of the
ct but woud nvte as we as permt, to an unmted e tent, subterfuges
whereby those entted to arge ncomes coud avod ther |ust obgatons to
the Government.
The rght of the Government to coect a ta on the earnngs of the estate
ether n the hands of the trustees or the dstrbutees can not be questoned,
and the effect, as far as the pantff s concerned, woud be the same, n ether
event.
The money was ncome n the hands of the trustees and we know of nothng
In the aw that prevented ts beng pad and receved as ncome by the donee.
(Irwn v. Oavtt, supra.)
In ttraton s Independence v. owbert (231 U. S., 399) the queston of a
day essenng of en|oyment or user s dscussed, and the court says:
ut the same s true of the earnngs of the human bran and hand when
unaded by capta, yet such earnngs are commony deat wth n egsaton as
ncome. So t may e sad of nnny manufacturng corporatons that are ceary
sub|ect to the ct of 1909 especay of those that have to do wth the produc-
ton of patented artces athough t may be foretod from the begnnng that
the manufacture w be proftabe ony for a mted tme, at the end of whch
the capta vaue of the pant must be sub|ect to matera depeton, the annua
gans of such corporatons are certany to be taken as ncome for the purpose
of measurng the amount of the ta .
In vew of the concuson reached by us on the merts of the case, It s not
necessary to dscuss the questons rased by the Government as to whether the
peadngs show a suffcent compance wth the statute governng the fng
of n cam for refund.
The court beow propery sustaned the demurrer and the |udgment s
accordngy affrmed.
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243 213(a), rt. 47.
btce 31: What ncuded n gross ncome.
R NU CT O 1921.
Income of trust estate under w pad to husband or wfe n
Te as. (See G. C. M. 5741, page 1 0.)
btce 47: nnutes and nsurance poces. III-4-4079
T. D.425G
ncome ta revenue acts of 1918. 1921, and 1924 decson of court.
Income nnuty n Leu of Wdow s Statutory Rghts.
Where a wdow under the aws of a State eects to accept annua
payments for fe as provded n the w of her husband n eu of
the nterest n hs estate f ed by the aws of the State, she s a
purchaser for vaue of an annuty and such annua payments re-
ceved by her are e empt from ncome ta under the Revenue cts
of 1918, 1921, and 1924 to the e tent that such payments are a
return of the vaue of her statutory Interest In hs estate.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
The foowng decson of the Unted States Crcut Court of
ppeas, ghth Crcut, n the cases of rthur . en, Coector
of Interna Revenue, v. Mrs. rthur D. randes (Mrs. oseph ef-
man), and Unted States of merca v. Mrs. rthur D. randes
(Mrs. oseph ef man), s pubshed for the nformaton of nterna
revenue offcers and others concerned.
D. . ar,
Commssoner of Interna Revenue.
pproved anuary 1 , 1929.
. W. Meon,
Secretary of the Treasury.
Unted States Cbout Court op ppeas, ghth Cbcut.
rthur . en, Coector of Interna Revenue for the Dstrct of Nebraska,
pantff n error, v. Mrs. rthur D. randes (Mrs. oseph efman), defend-
ant n error.
Unted States of merca, pantff n error, v. fr . rthur D. randes (Mrs.
oseph efman), defendant n error.
Id error to the Dstrct Court of the Unted States for the Dstrct of Nebraska.
November 17, 1928.
OPINION.
Poock, Dstrct udge, devered the opnon of the court.
Defendant n error, pantff beow, was the wfe of rthur D. randes, of
Omnha. Nebr. rthur D. randes, a man of arge weath, ded testate une
10, 191 . y the aws of the State, Mrs. randes was entted to receve as
her dower rght out of the estate a very arge sum of money or property
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213(a), rt. 47.
244
measured In money at the sum of 483,727.79. Of no part of ths amount
coud the w of her husband deprve her wthout her consent. t hs decease
It became her nterest n hs estate, due and payabe to her out of hs estate.
y the terms of hs w provson was made for her, as foows:
ghth. I gve and bequeath to my beoved wfe, Zerna randes, ten thou-
sand doars ( 10,000), to be e pended by her for chartabe and benevoent
purposes.
Nnth. I gve and bequeath to my beoved wfe, Zerna randes, a my
automobes and househod furnture and effects, for her soe use and beneft
absoutey forever.
Tenth. 1 gve and bequeath to my beoved wfe, Zerna randes, ffty
thousand doars ( 50,000) per annum, to be pad to her each year n equa
quartery nstaments, for her soe use and beneft durng her natura fe
sad bequest and payments to be n eu of dower or other dstrbutve share
of my estate to whch by aw she woud otherwse be entted.
Thrteenth. Pendng the admnstraton of my estate, the foregong bequests
sha be pad by my e ecutors, and thereafter they sha be pad by my trustees
provded, however, ony the net ncome and profts from my property sha be
avaabe to pay the bequests mentoned n the seventh, tenth, eeventh, and
twefth paragraphs hereof. Shoud such ncome and profts be nsuffcent at
any tme to pay the bequests mentoned n sad paragraph n fu, each of sad
bequests sha bear a proportonate part of such defcency. defcency
arsng durng any year may be made up out of the ncome and profts for any
sueeeed ng year or years. -
The wdow eected, as she mut do to deprve her of her rght n the estate,
to take under the w the 50,000 per annum and renqush to the estate her
nterest theren. On these annua payments of 50,000 there was charged and
coected by the Government ncome ta es for dfferent years aggregatng
24,S74.40. Deemng the coecton of these amounts from the source stated not
ta abe under the aw, a cam for refund was made and dened, and ths acton
nsttuted by her to recover the same.
To the petton of pantff the coector of nterna revenue nterposed a
demurrer, whch was overrued and dened, and thereafter the coector eectng
to stand on hs demurrer and not pead further, |udgment was entered for
pantff for the amounts theretofore pad as ncome on the payments made,
and the coector brngs error.
rom the foregong statement t s apparent the queston of mert presented
for decson s ths: In case a wdow, under the aws of the State of Nebraska,
eects to accept annua payments or nstaments of money as provded n the
w of her husband n eu of that nterest n hs estate f ed by the aws of
the State, are such annua payments ta abe ncome to her unt the aggregate
of such payments sha equa or e ceed her nterest n the estate as by the
statutory aw of the State provded
In ths case the vaue of her nterest n the estate was we peaded and
admtted by the demurrer to be 483,737.79. To ths sum, out of her husband s
estate, the wdow was absoutey entted under the aw of that State. s t
was her ndvdua property on her husband s decease, and as by hs ast w
and testament he proposed to her the payment of 50,000 per annum out of the
estate n eu of her absoute statutory Interest, whch she was entrey free to
accept or re|ect, and as she decded to and dd eect to take the offer made her
by the w of her deceased husband, t s qute too cear for argument she was
a purchaser for vaue of the annutes or yeary payments of 50,000 each, and
to ths end come many ad|udcated cases. Lord v. Lord (23 Conn., 327),
Securty Co. v. ryant (52 Conn., 311), Green v. Sausbury ( De. Ch., 371),
Moore v. den (80 Me., 301), Poard v. Poard (1 en (83 Mass.), 490), In re
Gotzan (34 Mnn., 159), ank of Commerce v. Chambers (90 Mo., 459), Re ua
v. Graham (187 111.. 7), Schaffenacker v. e (320 111., 31), In re state of
Strahan (93 Neb., 828), In re state of Sanford (91 Neb., 752), orden v. enks
(140 Mass., 5 2), and a weath of other cases.
The ta es n queston were coected on the annua payments of 50,000 made
to pantff for the years 1920 to 1924, both ncusve. Therefore, the ncome
ta aws nvoved are those of 1918. 1921, and 1924.
It s freey conceded f the wdow had taken the amount of her nterest
In the estate and wth that sum had purchased an annuty of 50,000 per
annum for a perod of years such annutes when pad to her woud not have
been ta tbe to her under the aw, for the aws above referred to so provde.
G
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245
213(a), rt. 47.
In ega effect Is that not precsey what was done In ths case She took her
property by her acqured under the aws of the State, turned the same over
to her husband s estate under an agreement she shoud receve as the pur-
chase prce of her Interest 50,000 per annum from the estate. That Is to sny,
her nvested capta was the vaue of her nterest n her husband s estate,
to-wt, 483,727.79. y the e pendture of ths sum, the same beng her own
money, she purchased an annuty of 50,000 per annum from those representng
her husband s estate to be pad out of that estate. Ceary, n such case, under
the aw, she shoud not be requred to pay any ncome ta on the annua payments
receved unt her capta nvested n the annutes sha have been returned
to her. fter that tme, t s conceded, she shoud pay ta . To ths concu-
son come the ad|udcated cases n whch the facts are dentca or smar to
the facts of ths case. See Warner v. Wash (15 ed. (2d), 3 7), from the
Crcut Court of ppeas for the Second Crcut oster, ecutor, v. Unted
States, Dstrct Court Mass. November 21, 1927, affrmed by Crcut Court of
ppeas for the rst Crcut under tte Unted tates v. oster, ecutor,
decded une 13. 1928. It a Inssted by the Government ths case s smar
In ts facts to that of Irunn v. Gavt (2 8 U. S., 1 1 T. D. 3710, C. . I -1,
123 ). ut as w be seen by a readng and consderaton of the case above
cted, the facts of that case and the Instant case are ceary and ready ds-
tngushabe from ths and a ke cases.
We are of the opnon the |udgments n these cases are rght and must be
affrmed.
rtce 47: nnutes and nsurance poces. III 4-4080
T. D.4257
INCOM T R NU CTS O 191 ND 1918 D CISION OP COURT.
Income nnuty n Leu of Wnow s Statutory Rghts.
Where under the w of a deceased husband an annuty for fe
Is payabe to hs wdow and ths provson Is made In eu of her
statutory rghts n hs estate under the aws of the State and s
so accepted by her, the renqushment of her statutory rghts Is
the purchase prce of her annuty and the annua payments re-
ceved by her are e empt from ncome ta under the Revenue
cts of 191 and 1918 to the e tent that they are a return of the
vaue at her husband s death of her statutory rghts.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, b. 0.
To Coectors of Interna Revenue and Others Concerned:
The foowng decson of the Unted States Crcut Court of p-
peas, Second Crcut, n the case of va . Warner v. ames .
Wash, Coector of Interna Revenue, s pubshed for the nforma-
ton 01 nterna revenue offcers and others concerned.
D. . ar,
Commssoner of Interna Revenue.
pproved anuary 1 , 1929.
. W. Meon,
Secretary of the Treasury.
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213(a), rt. 47.
24
Unted States Crcut Court of ppeas fob the Second Crcut. No. 5
October Term, 102 .
va . Warner, pantff n error, v. ames . Wash, as Coector, etc, defend-
ant n error.
Iu error to the Dstrct Court of tbe Unted States (or the Dstrct of Connectcut.
November 8, 192C
efore ough, Manton, and Mack, Crcut udges.
Mack, Crcut udge: Under the w of pantffs deceased husband, a arge
and ampe trust fund was created, out of the ncome, and, f necessary, out of
the prncpa, of whch pantff was to receve 50,000 a year for fe. Ths
provson was e pressy made n eu of her statutory rghts n the estate
under the aws of Connectcut and was so accepted by her. She personay
was compeed to pay edera ncome ta on the 50,000 for each of the years
1917 and 1918. er cams for refund were re|ected. demurrer to her com-
pant, seekng recovery of the ta es so pad, was sustaned, and the compant
dsmssed, on the authorty of Irwn v. Oavt (2 8 U. S., 1 1 45 S. Ct., 475.
9 L. d., 897 T. D. 3710, C. . I -1, 123 ).
The condtons n the two cases are not, however, as the dstrct |udge
stated, Identca on the contrary, n the Gavtt case there was absent the vta
eement, present here, of a very vauabe consderaton for the so-caed
bequest, the wdow s renqushment of her statutory rghts. There the soe
queston was whether ncome, payabe to a son-n-aw quarter-annuay for fe,
but not e ceedng a number of years, out of a trust fund created by the w,
was property acqured by bequest or ncome wthn the meanng of the Revenue
cts here the queston s whether an annuty, payabe frst out of ncome, but,
If necessary, out of prncpa, of a smar trust fund, but acqured soey n en
of, and n consderaton for, the renqushment of vauabe statutory rghts n
the estate. Is ncome, bequest, or annuty. If t be a bequest, t woud be e empt
under Revenue ct 191 . secton 4 (39 Stat., 758), as amended by Revenue ct
of 1917. secton 1200 (40 Stat.. 329 Comp. St.. secton 33 d ). and Revenue
ct 1918, secton 213(b) (3), beng 40 Stat., 10 5 (Comp. St., secton 33 sff)
If a purchased annuty, t s not ta abe unt ts cost has been retunn-d.
Revenue ct 191 , secton 4 Revenue ct 1918, secton 213(b) (2).
We need not consder whether t s a bequest: furthermore, we need not
consder whether or not. because of the death of pantff s husband before
March 1, 1913 a fact conceded In argument, though not apparent from the
peadngs or because the amount payabe annuay Is f ed, or because t Is
aso payabe out of prncpa, f necessary ( eatty v. ener D. C , 10 .
2d , 390), the Gavt case s dstngu shabe. or what we have here s, n fact
and n ega effect, the purchase of an annuty, n no way dfferng from an
annuty purchasabe by the wdow from an Insurance company, wth the pro-
ceeds of her statutory rghts n the estate, e cept ony that n such a pur-
chase she woud have an unsecured obgaton, whereas here the obgaton s
secured by the ncome and prncpa of the trust fund. That such a ren-
qushment of dower rghts s a purchase of the w provson s we and ong
estabshed. ( urrdge v. caby, 1 Pere Wms, 127 (1710) Iscnhart T.
rown, 1 dw. Ch. (N. Y.), 413 (1832) Re ua v. Graham, 187 111., 07, 58 N. .,
: r 7, 52 L. R. ., 41 (1900).) That a purchased annuty, even f ncome, ts
e empt as and to the e tent that t s a return of premums pad therefor
that s, unt the purchase prce sha have been returned s determned by the
e press provsons of the cts above cted, as construed by the ureau of
Interna Revenue. (I. T. 1484, Int. Rev. Cum. u. 1-2. 1922, p. .) Oon-
cededy, the annutes, ncudng those of 1917 and 1918, dd not equa the
purchase prce, the vaue at her husband s death of the wdow s statutory rghts.
Reversed and remanded.
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247
213(a). rt. 47.
rtce 47: nnutes and nsurance poces. III-4-4081
T. D. 4258
INCOM T R NU CTS O 1918 ND 1821 D CISION O COURT.
1. Income nnuty n Leu of Wdow s Statutory Rghts.
Where a wdow accepts the provsons of her husband s w
and s pad annuay the entre ncome from a resduary trust n
eu of her statutory share of the corpus of the estate, she s a
purchaser for vaue of the annua payments receved by her and
such payments are not ta abe ncome under the Revenue cts
of 1918 and 1921 to the e tent that they are a return of the vaue
of the property whch she renqushed by acceptng the provsons
of the w.
2. Decson Dstngushed.
The decson n Irwn v. Gavt (2 8 U. S., 1 1 (T. D. 3710
C. . I -1, 123 )) dstngushed.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
The foowng decson of the Unted States Crcut Court of p-
peas, rst Crcut, n the case of Unted States of merca v. W-
fred oster. ecutor, s pubshed for the nformaton of nterna
revenue offcers and others concerned.
D. . ar,
Commssoner of Interna Revenue.
pproved anuary 1 , 1929.
. W. Meon,
Secretary of the Treasury.
Unted States Crcut Court of ppeas for the rst Crcut.
Unted States of meroa, defendant, pantff n error, v. Wfred oster,
ecutor, pantff, defendant n error.
une 13, 1928.
OPINION.
ae, .: Sarah . Davenport, of oston, was the benefcary under the
w nf her husband, Orando . Davenport, who ded on the 11th day of anu-
ary, 192n. The w provded that the resdue of the decedent s estate shoud
be hed n trust and, after payment of e penses of admnsterng the trust, the
ncome was to be pad over to Sarah . Davenport, for and durng her fe
and that the provson made for her shoud be n en of dower and a cams
she mght or coud have by any possbty upon the estate.
The wfe accepted the provsons made for her n the w, and receved the
net ncome of the trust durng the years 1919 to 1923, ncusve, namey 113.-
811.S2. Ths sum Sarah . Davenport ncuded n her ncome ta returns for
the above years as a part of her gross ncome.
On May 28, 1923, Sarah . Davenport ded Wfred oster was duy qua-
fed and apponted her e ecutor. Contendng that the amounts pad to Sarah
. Davenport under the trust provsons were erroneousy ncuded by her n
her gross ncome, the e ecutor fed a cam for refund. The Commssoner of
Interna Revenue re|ected ths cam. The e ecutor then brought a petton
3138 29 17
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5213(a), rt. 47
248
In the nature of a sut to recover the edera Income ta es for the years 1919
to 1923 upon the amounts whch she accepted and receved from the estate of
her husband, Orando . Davenport, n eu of dower and every and a cams
she may or can have, by any possbty, upon my estate.
The defendant demurred. On November 7, 1927, the Dstrct Court of Massa-
chusetts entered ts decree, overrung the demurrer and gvng |udgment to
the pettoner for the sum of 20,2 .09. The case comes before us on wrt
of error upon the petton for same by the Unted States. The substanta
queston Invoved s presented on the second assgnment of errors. It s ths
Where a wdow accepts the provsons of her husband s w and Is pad,
annuay, the entre ncome from hs estate, n eu of her statutory share
of the corpus of the estate, are such annua payments ta abe ncome to her
before or unt the aggregate amount of such annua payments equas and
e ceeds the vaue of the property she renqushed bv acceptng the provsons
of the w
The pantff, the e ecutor, contends that, by the provson of the husband s
w, Sarah . Davenport acqured the ega status of a purchaser for vaue
that the bass for determnng whether she reazed any ta abe gan or ncome
s the vaue of a statutory share of the corpus of the estate as of the date
she was entted to receve t that the annua payments receved by Sarah .
Davenport durng the years n dspute dd not e ceed the vaue of her statu-
tory share n the corpus of the estate and that those payments by the trustee
represented returns of capta, not ncome.
The Government urges that ths contenton of the pettoner overooks secton
213(b)3 of the cts of 1918 and 1921, whch provdes that, athough the vaue
of the property acqured by gft, bequest, devse, or nhertance sha not be
ncuded n the gross ncome, the ncome from such property sha be ncuded
n the gross ncome. It contends that Mrs. Davenport, the ta payer, acqured
her rght to the ncome by bequest that the cost to her of her dower rght
was nothng, she havng acqured t by marryng and that, whe ths was a
va|d consderaton, t does not represent a fnanca cost or outaw Pretct v.
W son, 108 . S., 22 oye v. Mtche ros. Co., 247 T . S., 179.)
The edera ncome ta aws recognze the ega status of the ta payer as
created by oca aw, and f the ta es n accordance wth such aw. y the
Genera Laws of Massachusets, chapter 191, secton 15, as we as under the
earer statutes, a survvng husband or wfe may refuse to accept the pro-
vsons of a w and take hs or her statutory share n the corpus of the
estate as f the deceased had ded ntestate. When the survvng husband or
wfe accepts the provsons of the w, whether or not such provsons are
e pressy decared to be n eu of such statutory rghts, the survvor s n
the poston of one who ses property to the estate, and acqures the ega
status of a purchaser for a vauabe consderaton.-
In Poard v. Poard (1 en, 490, 491), speakng for the Supreme Court
of Massachusetts, Chef ustce geow sad:
The bequest n ths case to the wdow of the testator s made n e press
terms n eu of dower, and on condton that she renqushes a her rght
and tte thereto.
wfe can not be deprved of her dower e cept by her own consent. There-
fore, when she accepts a provson n her husband s w as a substtute for
ths e stng ega rght, the aw regards her as standng n the ght of a pur-
chaser for a vauabe consderaton, and entted to receve the whoe of the
sum gven by the w, for whch she has renqushed her fe estate n one-
thrd of the testator s rea estate, n preference to other egatees, who, beng
ony ob|ects of the bounty of the testator, and not havng any ega cam on
hs estate, are regarded as vounteers, and are not aowed to take unt the
wdow has receved the fu amount of the bequest to her.
(Towe v. Swasey, 10 Mass., 100, 105 arnum v. ascom, 122 Mass., 282, 288,
288. 289.)
In orden v. cnks (140 Mass.. 5 2. 5 4). speakng for the court. udge
Devens sad:
The wdow Is a purchaser for vaue n acceptng the provsons of the w,
and s not treated as a gratutous ob|ect of the testator s bounty. y renqush-
ment of her dower, the estate acqures a vauabe rght of property. Whether
the provsons be more or ess, so far as the testator, the wdow and a pure
benefcares under the w are concerned, t s the rght of the testator to
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249
213(a), rt. 47.
ffT what consderaton he peases for the renqushment of dower, and for
the wdow to accept or re|ect It.
Under the prncpes announced by the Supreme Court of Massachusetts, we
thnk that, n the case before us, the payments made to Sarah . Davenport
durng the years n dspute represented purchase money or nstament
payments by the estate, n consderaton for her share n the corpus of the
estate. We thnk, then, that she was a purchaser for vaue.
rtce 347 of the Reguatons 45, reatng to the edera ncome ta , provdes :
In ascertanng whether an estate or trust comes wthn any one of the eases
ust enumerated, the provsons of the edera statutes and reguatons rather
than the provsons of the w or trust and the provsons of State aws sha
determne what tems consttute ta abe Income or aowabe deductons the
provsons of the w or trust and of State aws sha determne the aocaton
of tems of gross Income or deducton that Is, to whch of the dfferent
nterests makng up the whoe such tems sha be charged or aowed.
In the case at bar the oca aw gave Sarah . Davenport the status of a
purchaser for vaue. The edera ncome ta aw recognzes that statu .
We thnk t cear that she was not abe for the payment of any of the ta es
n dspute that It Is not a queston whether the ncome of the Orando .
Davenport estate was abe for ths ta or whether t entrey escaped the ta .
for we are consderng ony the ta abty or nonta abty of Sarah . Daven-
port. Cases have arsen under the ncome ta aw n whch the queston was
whether the ndvduas to whom the trustee pad over the ncome of the trust,
or the trustee hmsef, was abe for the ta . ut ths s not such a case.
The trustee woud not be ta abe n ths case, as t happens, because the
entre resdue of the Orando . Davenport estate, ncudng the share n the
corpus of the estate purchased from Sarah . Davenport, was under ths w
permanenty set asde for the beneft of chartabe nsttutons. Revenue
ct of 1918, secton 219(b).
In Lederer v. Stockton (2 0.U. S., 3 T. D. 3407, C. . 1-2, 15 ), n speakng
for the Supreme Court, Chef ustce Taft sad:
Ths resduary fund was vested n the hospta. The death of the annutant
woud competey end the trust. or ths reason, the trustee was abe safey
to make the arrangement by whch the hospta has reay receved the beneft
of the ncome sub|ect to the annuty. s the hospta Is admtted to be a
corporaton whose ncome when receved s e empted from ta aton under
secton 11(a), we see no reason why the e empton shoud not be gven effect
under the crcumstances. To aow the technca formaty of the trust, whch
does not prevent the hospta from reay en|oyng the ncome, woud be to defeat
the benefcent purpose of Congress.
In the case before us, Sarah . Davenport had no Interest In the corpus of
the estate unt the death of her husband, the testator, on anuary 11, 1915. t
that date she was entted to receve her statutory share n the corpus of the
estate, and acqured her property rghts n t. Durng the years n ds-
pute the annua payments receved by Sarah . Davenport dd not e ceed the
vaue of her statutory share In the corpus of the estate at the far market
vaue of the property at the tme of ts acquston.
The dstrct court decded ths ease on the authorty of Warner v. Wah
f 15 ed. (2d), 3 7, 3 8 see T. D. 4257, on page 2451). In that case, speakng
for the Crcut Court of ppeas for the Second Crcut, udge .Mack sad :
Under the w of pantff s deceased husband a arge and ampe trust
fund was created, out of the ncome, and, f necessary, out of the prncpa,
of whch pantff was to receve 50,000 a year for fe. Ths provson was
e pressy made n eu of her statutory rghts n the estate under the aws of
Connectcut, and was so accepted by her. She personay was compeed to
pay edera ncome ta on the 50,000 for each of the years 1917 and 1918. er
cams for refund were re|ected. demurrer to her compant, seekng re-
covery of the ta es so pad, was sustaned, and the compant dsmssed on
the authorty of Irwn, v. davt (2 8 U. S., 1 1, 45 S. Ct., 475, 9 L. d.. 897).
The condtons -n the two cases are not. however, as the dstrct |udge
stated. Identca on the contrary. In the Gavt case there was absent te
vta eement, present here, of a very vauabe consderaton for the so-caed
bequest, the wdow s renqushment of her statutory rghts. There the soe
queston was whether ncome, payabe to a son-n-aw quarter-annuay for
fe, but not e ceedng a number of years, out of n trust fund created by the
w, was property acqured by bequest or Income wthn the meanng of
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4213(a), rt. 47.
250
the Revenue cts here the queston s whether an annuty payabe frst
out of ncome, but, f necessary, out of prncpa, of a smar trust fund,
but acqured soey n eu of, and n consderaton for, the renqushment of
vauabe statutory rghts In the estate, s ncome, bequest, or annuty.
That a purchased annuty, even f Income, s e empt as and to the e tent
that t s a return of premums pad therefor that s, unt the purchase
prce sha have been returned s determned by the e press provsons of the
cts above cted, as construed by the ureau of Interna Revenue.
In the nstant case the Government contends, as t dd n the Warner case,
that the prncpe announced by the Supreme Court n Irwn v. Oavt (2 8
U. S., 1 1) appes, and that the payments made to Mrs. Davenport are the
ncome produced by the property acqured by he bequest: ctng aso ener v.
eatty (17 ed. (2d), 743), affrmed by Unted States Supreme Court (48
Supreme Court Reporter, 320).
We thnk the nstant case s ceary dstngushed from Irwn v. Oavt.
In that case Gavt was a son-n-aw of the testator and had no statutory
rghts n the testator s estate. e had no vested nterest n the corpus of
the estate. The Income n dspute arose under the Revenue ct of October
3, 1913 and there was a queston whether the sums receved by Gavt were
Income ta abe to hm. The Supreme Court ceary mted ts decson to
the Revenue ct of 1913 and the facts of that case. The essenta queston
was whether or not any ta attached to the ncome of the corpus of the trust
that was not ta abe n the hands of Gavt and the other benefcares.
Speakng for the court, Mr. ustce omes sad:
The statute In Secton II, , subdvson 1, provdes that there sha be
eved a ta upon the entre net ncome arsng or accrung from a sources n
the precedng caendar year to every ctzen of the Unted States. If these
payments may propery be caed ncome by the common understandng of that
word and the statute has faed to ht them t has mssed so much of the
genera purpose that t e presses at the start. . Congress ntended to use ts
power to the fu e tent. ( sner v. Macomber, 252 U. S., 189, 203 T. D. 3010,
C. . 3, 25 .)
y the ater cts Congress provded that the ta shoud appy to ncome
of estates and trusts and shoud be pad by the trustee n certan cases
where the trustee coud not be reached by the earer ct. In the nstant case
we do not have to consder the possbty of the Government osng ts rghtfu
ta upon ncome whch Congress ntended shoud be ta ed. It s not a queston
of a statute fang to ht somethng whch ought to be ta ed. Under the
statute wth whch we are deang a trust, s the sub|ect of ta aton |ust as an
ndvdua. We thnk the Government must ook to the trustee for ts ta
and that the trust woud ceary be tu abe upon ths ncome f t were not
e pressy e empted because of ts chartabe character.
In ener v. eatty, supra, t was contended that ncome receved by the
ta payer under the w of the decedent was e empt from ta aton because that
ncome consttuted a bequest. In the nstant case the ground of the e emp-
ton s not that the ncome receved s a bequest, but that such ncome s e empt
because t represents purchase money or a return of capta. In that case
the record dscosed facts smar to those n Irwn v. Gavt, supra.
In the Warner case udge Mack dscusses fuy both cases to whch we
referred, and ponts out the cear dstncton between those two cases and the
case before hm.
Whe n the Warner case the court had before t an annuty, the provson
reatng to the annuty was made e pressy n eu of statutory rghts of the
benefcary n the estate we thnk the prncpes announced n that case are
controng In the case before us, and that the dstrct court was rght n over-
rung the demurrer and orderng |udgment to be entered for the pantff.
The |udgment of the dstrct court s affrmed.
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251
1214(a) 1, rt. 109.
S CTION 214(a) 1. D DUCTIONS LLOW D:
USIN SS P NS S.
rtce 105: Compensaton for persona servces.
R NU CT O 191 .
Unusua and e travagant amounts pad by a corporaton to ts off-
cers n the guse of compensaton for servces but havng no sub-
stanta reaton to the measure of ther servces and beng whoy
dsproportonate to ther vaue. (See Ct. D. 39, page 279.)
rtce 109: Rentas.
R NU CT O 1918.
Revocaton of Offce Decson 373 (C. . 2, 123), regardng assess-
ments for oca benefts pad by tenant for andord. (See I. T. 24 2,
page 25 .)
rtce 109: Rentas. III-24-4237
Ct. D. 8
INCOM T R NU CTS O 1918 ND 1921 D CISION O COURT.
1. Deducton Renta Permanent Improvements Tenant at
W.
The cost borne by a tenant from month to month n makng
permanent mprovements to the occuped premses s not deduct-
be In ts entrety as a busness e pense of the ta abe year In
whch they were made, where the tenant contnued Its occupancy
beyond that year.
2. Decson ffrmed.
The decson of te Unted States oard of Ta ppeas
(7 . T. ., 399) affrmed.
Court of ppeas of the Dstrct of Coumba. No. 4720.
The George. . owman Co. v. Commssoner of Interna Revenue.
pr 1, 1929.
an Obsde, ssocate ustce: Durng the year 1920 the appeant corpo-
raton, a whoesae and reta deaer n chnawnre, gassware, and kndred nrt-
ces, dong busness n the cty of Ceveand, Oho, rented for storage purposes a
budng known as the age Street warehouse.
y stpuaton fed n the hearng before the oard of Ta ppeas, ebru-
ary 28, 1927, It was agreed, among other thngs, that the budng beonged o
ugusta . owman, owner of 490 shares out of a tota of 5,0 7 shares of
stock In sad corporaton and that she s the wfe of George . owman,
owner of more than 50 per cent of the capta stock of the corporaton. The
stpuaton, among other thngs, contaned the foowng statement of facts:
The pettoner has not, and dd not have durng sad year, a ease on the
age Street warehouse, but occuped the same as a month to month tenant,
payng therefor a monthy renta of 1,750. There s not now. and there as
never been, any defnte arrangement as to the duraton of pettoner s tenancy
of sad warehouse nor for the rembursement of the pettoner for any amounts
e pended by t for repars, mprovements, or betterment of sad age Street
warehouse.
To better adapt the warehouse to the use of appeant company, t Instaed
certan mprovements, consstng of an eevator. re doors, parttons, and
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214(a), rt. 109.
252
pumbng, at a cost of 7,084. 9. Te corporaton n makng return of Its In-
come and profts ta for the year endng anuary 81, 1921, deducted from ts
ta the tota cost of the mprovements as busness e pense. The Commssoner
dsaowed the deducton, on the theory that the mprovements represented a
capta e pendture whch coud be recovered ony by annua deducton for de-
precaton e tendng over the usefu fe of he property. The oard sustaned
the decson of the Commssoner, and from the decson ths appea was taken.
The provsons of the Revenue ct of 1918 (40 Stats., 1057) and the Revenue
ot of 1921 (42 Stats., 227) are dentca n so far as they reate to the ques-
ton here nvoved. Reference hereafter made to the ct w appy to the 1918
statute.
y secton 234(a) 1 of the ct, a corporaton n computng ts net ncome may
make among others the foowng deductons: the ordnary and necessary
e penses pad or ncurred durng the ta abe year n carryng on any trade
or busness, ncudng rentas or other payments requred to be made
as a condton to the contnued use or possesson of property to whch the
corporaton has not taken or s not takng tte or n whch t has no equty.
Secton 215 of the ct provdes: That n computng net Income no deduc-
ton sha n any case be aowed n respect of (| ) ny amount
pad out for new budngs or for permanent mprovements or betterments made
to ncrease the vaue of any property or estate. Ths provson of the statute
ncudes amounts pad out In any case by ether an owner or a tenant of
any property or estate, not merey to keep the property gong, but for
permanent mprovements and whch may not be consdered as mere upkeep,
but as nvestment, ncreasng the vaue of the property or estate. (Duffy v.
Centra Raway Co. of N. .. 2 8 U. S., 55 T. D. 3704, C. . I -1, 143 .)
Secton 234(a) provdes that the ta payer, n makng hs return, may
deduct (7) reasonabe aowance for the e hauston, wear and tear of
property used n trade or busness. Incudng a reasonabe aowance for
obsoescence.
It s the aw that a tenant who makes permanent mprovements on eased
property, wth the e pectaton of usng the mprovements n hs trade or
busness durng the term of the ease, may not deduct the cost as e pense n
a snge year but can recover ony ther cost by annua durges for deprecaton.
(Duffy v. Centra Raroad Co. of . ., supra Natona Cty ank of Seatte v.
Unted State , 4 Court of Cams Rep.. 23 : certorar dened, 27 U. S., 20.)
It s sought, however, to dstngush the nstant case from the decsons cted
on the ground that n those cases the ease was for a f ed number of years,
whe n the present case the tenancy was merey from month to month. We are
of opnon that the perod of the ease s not controng where t s shown that
the tenancy e tended for a perod substantay beyond the ta abe year n
whch the ad|ustment for the mprovements s camed. In the present case
the tenancy was st contnung at the tme the stpuaton was made n 1927.
and, for auuht that appears In the record, t Is st n e stence. It may we
be that f the tenancy had termnated pror to or at the end of the ta abe year
a dfferent case woud be presented but the ta ng authortes are not confned
to any f ed or rgd rue n appyng the statute, snce each case must depend
argey upon ts own facts. To meet contngences that may arse n the ad-
mnstraton of the compe revenue aws the Department, by awfu authorty,
has estabshed rues and reguatons, of whch artce 109. among other thngs,
provdes: The cost borne by a essee n erectng budngs or makng perma-
nent mprovements on ground of whch he s essee s hed to be a capta
nvestment and not deductbe as a busness e pense. In order to return to
such ta payer hs nvestment of capta, an annua deducton may be made
from gross ncome of an amount equa to the tota cost of such mprovements
dvded by the number of years remanng of the term of ease, and such deduc-
ton sha be n eu of a deducton for deprecaton. Ifthe remander of the
term of ease s greater than the probabe fe of the budngs erected, or of the
mprovement made, ths deducton sha take the form of an aowance for
deprecaton.
The method of computng deprecaton aowance s provded n artce 1 5, as
foows: The capta um to be repaced shoud be charged off over the usua
fe of the property ether n equa annua nstaments or n accordance wth
any other recognzed trade practce, such as an apportonment of the capta
cum over unts of producton. Whatever pan or method of apportonment s
adopted must be reasonabe and shoud be descrbed n the return.
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214(a)3, rt. 133.
It w be observed that ths furnshes an equtabe bass for the protecton
of a partes concerned. In the case of tenancy, the fe of the mprovement
ran be estmated n years and a proportonate deprecaton aowed for each year,
and f the tenancy e pres before the e praton of the fe perod of the m-
provement, the dfference between the deprecaton aready aowed and the
cost of the mprovement represents the credt to whch the ta payer s entted
for the year n whch the ease termnates. Ths was the method empoyed
by the Commssoner and approved by the oard n the present case. The
oard n ts opnon defned the rue appcabe to eases, and especay to an
ndetermnate ease ke the one before us, as foows: If the pettoner s
tenure e tends over the perod of the usefu fe of the mprovements, t w
bave recovered ts cost through the annua aowance for e hauston f the
tenure shoud for any reason termnate pror to the usefu fe of the mprove-
ments, pettoner w then be entted to a deducton from gross ncome of the
une tngushed cost of such mprovements. In ether event pettoner w
have obtaned the deducton to whch, under the statute, he s entted.
Ths procedure s n accord wth the rue announced n the Duffy case, as
foows: In respect of the 999-year eases, the addtons and betterments w
a be consumed In ther use by the essee wthn a fracton of the term, and, as
to them, aowances for annua deprecaton w suffce to meet the requrements
of the statute. In the case of the per eases, the mprovements may and prob-
aby w outast the term, and, as to them, deductons may more propery take
the form of proportonate annua aowances for e hauston.
The aw makes no dstncton between an owner and a tenant. If the owner
s operatng the property and makes repars, the cost may be deducted from
hs ncome and profts ta es for the current year. If, however, the mprove-
ments are permanent, he may ony deduct for the proportonate amount as
deprecaton. The same rue appes, and shoud appy, to a tenant operatng
a property for proft. If the Improvement he makes amounts merey to repars,
the same rue of deducton woud appy as n the case of the owner. If, on
the other hand, the mprovement whch ho makes for hs own use and con-
venence Is permanent, he shoud be requred to compy wth the rue of
deprecaton as adopted n ths case.
The decson of the oard of Ta ppeas s affrmed wth costs.
rtce 111: When charges deductbe.
reght charges of umber manufacturers keepng books on accrua
bass. (See I. T. 2473, page 88.)
S CTION 214(a)3. D DUCTIONS LLOW D:
T S.
Offce Decson 373 (C. . 2, 123), hodng that assessments for
oca benefts pad by a tenant for hs andord accordng to agree-
ment are addtona rent pad by the tenant, and therefore are de-
ductbe from hs gross ncome, provded the tenant uses the property
for busness purposes and that the amount so receved by the and-
ord s ta abe ncome to hm, but because of ts nature s not an
aowabe deducton from hs gross ncome, s revoked, n vew of
Genera Counse s Memorandum 58 (see on page 200).
R NU CT O 1921 ND P IOR R NU CTS.
rtce 133: Ta es for oca benefts.
( so Secton 214(a) . rtce 109.)
III-11-4141
I. T. 24 2
R NU CT O 1918.
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214(a)4, , 8, rt. 141.
254
rtce 138: Ta es for oca benefts.
R NU CT O 1921 ND PRIOR CTS.
Treatment. (See G. C. M. 5589, page 83.)
S CTION 214(a)4,5, . D DUCTIONS LLOW D:
LOSS S.
rtce 141: Losses. III-24-4238
Ct. D. 9
INCOM T R NT CT O 1918 D CISION O COURT.
1. Deducton Loss Good W Prohbton.
Loss of the vaue of good w s not sustaned n 1919, wthn the
meanng of secton 234(a)4 of the Revenue rt of 1918, by reason
of the dscontnuance of the manufacture of beer n that year on
account of prohbton egsaton, where the busness of manu-
facturng and seng near beer s contnued for severa years
thereafter, though at a yeary oss, n the same pace, under the
same name, and wth the same physca assets as prevousy used
n the manufacture and sae of beer.
2. Same.
No oss of vaue of good w s sustaned wthn the meanng of
secton 234(a)4 of the Revenue ct of 1918 unt t s reazed by
a sae or other dsposton of the busness or property to whch t
s attached.
Court of Cams of the Unted States.
Dck ros. unoy rewng Co., a Corporaton, v. The Unted States.
May , 1929.
OPINION.
Snnott, udge, devered re opnon of the court.
Pantff from the year 1S83 to une 30. 1019, when prohbton became effec-
tve, was engaged n the busness of manufacturng and seng beer. The vaue
of pantff s good w on March 1, 1913, was 119,940.10. ( ndng III.)
On uy 1, 1919, on the advent of prohbton, pantff dscontnued Its bus-
ness of manufacturng and seng beer and engaged n the busness of manufac-
turng and seng what s commony known as near beer, and contnued n sucb
busness unt the year 1925, usng n such manufacture and sae of near eer
the same physca assets as t had prevousy used n the manufacture and sae
of beer. Whe pantff was engaged In the manufacture and sae of near beer
from uy 1, 1919, unt the year 1925. t operated each year at a oss. In the
year 1925 pantff ceased the manufacture and sae of near beer and qudated
ts assets and abtes and termnated busness operatons.
In the year 1920 pantff pad ncome and e cess-profts ta es for the year
1919 n the sum of 2,293.40, whch s the amount nvoved n ths case. It s
pantff s contenton that ts good w, whch on March 1, 1913, had a vaue of
119,940.10, became entrey worthess durng the ta abe year 1919 on account
of prohbton, and that durng that year t thereby sustaned a oss n that
amount, and s entted to deduct such oss from ts gross ncome for ts ta abe
year 1919, and to have refunded 2,293.4 ta es pad for 1919, pursuant to the
terms of subsecton (4) of secton 234(a) of the Revenue ct of 1918 (40 Stat..
1057), the pertnent parts of whch read as foows:
Sec. 234. (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:
(4) Losses sustaned durng the ta abe year and not compensated for by
nsurance or otherwse.
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255
214 (a)4, , , rt. 141.
We have dened pantffs request for two addtona fndngs of fact, whch
t cams necessary fow, as concusons of utmate fact, from the stpuated
ndng I.
The re|ected fndngs are as foows:
1. Durng the year 1919, by reason of the passage of prohbton egsaton,
pantff s goof w was made worthess and of no vaue.
2. Durng the year 1919 pantff sustaned a oss n the amount of
119,940.10.
We are confronted wth the queston: Dd pantff s good w become worth-
ess durng the year 1919 because t was deprved by prohbton of the rght to
manufacture and se beer, athough t contnued, as a gong concern unt 1925,
to manufacture and se near beer under the od frm name and at the same
pace of busness In other words, dd pantff s good w consst soey of ts
rght to manufacture and se beer
Good w has been varousy defned by the courts. favorte defnton,
repeated n many decsons, s the probabty that od customers w resort
to the od pace. It has been referred to as an asset, separate and dstnct from
Its stock of goods, or capta, consstng of the advantage nurng to the frm
because of genera pubc patronage as a favor whch the management of a
busness wns from the pubc every advantage whch the frm may have ac-
qured wth the name of the frm or busness, ts ocaton or reputaton.
The Supreme Court n Menendez v. ot (128 T . S., 521) says wth reference
to good w:
Good w was defned by Lord don, n Cruttwe v. Lye (17 es., 335,
34 ), to be nothng more than the probabty that the od customers w re-
sort to the od pace but ce Chanceor Wood, n Churton v. Dougas
( ohnson, . C, 174, 188), says t woud be takng too narrow a vew of what
s there ad down by Lord don, to confne t to that, but that t must mean
every postve advantage that has been acqured by the od frm n the progress
of ts busness, whether connected wth the premses on whch the busness
was prevousy carred on, or wth the name of the ate frm, or wth any other
matter carryng wth t the beneft of the busness.
The Supreme Court n Metropotan ank v. St. Lous Dspatch Oo. (149
T . S., 44 ) defnes good w as foows:
Undoubtedy, good w s n many cases a vauabe thng, athough there
s dffcuty In decdng accuratey what s ncuded under the term. It s
tangbe ony as an ncdent, as connected wth a gong concern or busness
htvng ocaty or name, and s not susceptbe of beng dsposed of nde-
pendenty. Mr. ustce Story defned good w to be the advantage or beneft,
whch s acqured by an estabshment, beyond the mere vaue of the capta,
stock, funds, or property empoyed theren, n consequence of the genera pubc
patronage and encouragement whch t receves from constant or habtua
customers, on account of ts oca poston, or common ceebrty, or reputaton
for sk or affuence, or punctuaty, or from other accdenta crcumstances or
necessty, or even from ancent partates or pre|udces. (Storv, Part., sec.
99.1
It Is apparent from the varous defntons of good w, and partcuary from
the two ctatons, supra, from the Supreme Court, that many attrbutes other
than the goods sod enter nto the defntons and composton of good w. It
must be obvous, therefore, that whe pantff contnued as a gong concern
at ts od pace of busness and under ts od frm name, wth many other ad-
vantages acqured n the progress of ts busness, as suggested n Menendez v.
ot and Metropotan ank v. St. Lous Dspatch Co., supra, that ts good w,
but up durng many years, n part at east st adhered to the frm unt It
ceased operatons n 1925.
It s doubtess true that ths good w was dmnshed n vaue on account
of the change from beer to near beer, but we are ony concerned wth the ques-
ton whether pantff s good w became worthess n 1919, for n the case of
Unted States v. S. S. Whte Denta Manufacturng Oo. (274 U. S., 398 T. D.
4059. C. . I-2, 198 ), cted by pantff, commentng upon the statute n
queston, the Supreme Court sad:
The statute obvousy does not contempate and the reguatons
forbd the deducton of osses resutng from the mere fuctuaton n vaue of
property owned by the ta payer.
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214(a)4, 5, , rt..141.
25
It s pantff s contenton because t suffered a oss each year n ts near-
beer operatons, as s shown n ndng I. that It foows that ts aood w
became worthess n the year 1919. s a the eements whch made up psn-
tff s good w, wth the e cepton of ts rght to manufacture and se beer,
remaned wth the frm unt t termnated busness n 1925, t mght we be
argued that pantff s oss woud have been even greater than t was durng
ts near-beer operatons but for the vaue of the remnant of good w whch
remaned as an nseparabe part of ts busness unt 1925. We can not escape
the concuson that pantff s good w was of some postve advantage to the
frn n the manufacture and sae of near beer, and that therefore the year
1919 was not the Identfabe event, - as the Supreme Court terms t n Unted
states v. 8. 8. Whte Denta Manufacturng Co., supra, whch f ed the oss of
pantff s good w.
In ths connecton t may be we to recur to the statement of the Supreme
Court n Metropotan ank v. St. Lous Dspatch Co., supra, that good w
s not susceptbe of beng dsposed of ndependenty. The same was the
reasonng of the Crcut Court of ppeas n Red Wng Matng Co. v. Wcuts
(15 ed. (2d), 20, 33 T. D. 3980, C. . I-1. 225 ).
The oss of good w, n connecton wth secton 234(a)4, supra, of the
Revenue ct of 1918, has been the sub|ect of two decsons by the Unted States
oard of Ta ppeas, from whch we quote, as foows:
Good w beng merey an ncdent of a gong busness, nseparaby attached
to tangbe property and ncapabe of segregaton and ndependent dsposton,
t s dffcut to conceve upon what theory an aowance for the oss of ts
aeged vaue can be made as a deducton under secton 234(a) , ndependenty
of the tangbe property or busness to whch t s attached. If, and when,
tn busness or property of whch the good w s an ncdent s dsposed of,
the gn derved or the oss sustaned by reason of the vaue, or oss of vaue,
of the good w must of necessty be refected n the return receved from the
dsposton of such busness or property. In the nstant case the busness or
property was not dsposed of but was contnued and n use, and athough ts
vaue may have been materay reduced, due to the operaton of the prohb-
ton aw, no deductbe oss has been sustaned by the pettoner. See rederck
C. Renzehausen v. Commssoner (8 . T. ., 87). (Garneau Co., 8 . T. .,
1045.)
In a suppementa bref, pettoner presents the aternatve proposton that
It s entted, under the provsons of secton 234(a)4 of the Revenue ct of
1918. to deduct from ncome the oss, based on March 1, 1913, vaue, arsng
out of the destructon of ts ntangbes by prohbton egsaton athough t
contends that the oss shoud be spread over the years 1918 and 1919 n con-
formty wt the same prncpe whch woud appy n the case of obsoescence.
It s dffcut to apprehend that the camed deductons may )e brought wthn
the provsons of the statute upon whch the pettoner rees. They provde
for the deducton of ony such osses as are sustaned durng the ta abe
year and surey the facts do not support a fndng that pettoner has sustaned
such a oss as to brng t wthn those provsons. oss s sustaned, wthn the
meanng of the statute, ony when It Is a reazed oss and s evdenced by a
competed and cosed transacton (appea of . . Schwarzer, 3 . T. .. 535
appea of Od 7 Dstng Co., 3 . T. ., 134 and . . e v. Commssoner,
7 . T. ., 2 3) and unt the nvestment s converted nto terms of money by
sae or other dsposton, or ts worthessness otherwse demonstrated, there a
nether oss nor gan and ncome s nether greater nor ess. (Margod Oar-
den Co. v. Commssoner, . T. .. 3 8.) Pettoner contnued n busness after
the advent of prohbton and ts good w contnued as an nseparabe part
of the busness. There coud be no oss n respect of the good w unt the
busness s termnated by sae or other dsposton, and nether of these events
occurred wthn the ta abe years n queston. (Cf. rederck C. Renzehausen
v. Commssoner, supra.) It s teray true that prohbton whoy destroyed
the predomnatng and most ucratve feature of ts busness and that after
the advent of prohbton t carred on wth a mere remnant of ts former
busness n new marts of trade. ut the most favorabe vew to the ta payer
to be had n these crcumstances s that the March 1. 1913, vaue of ts good w
was greaty dmnshed by prohbtory egsaton but a oss of ths character s
not wthn the statute. (Morand ros., 8 . T. ., 12 .)
We concude that the Commssoner was correct n denyng pantff s refund.
The petton w be dsmssed. It s so ordered and ad|udged.
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214(a)8, rt. 1 1.
S CTION 214(a)8. D DUCTIONS LLOW D:
D PR CI TION.
mcus 1 1: Deprecaton. III-20-420
Ct, D. 0
INCOM T R NU CT OP 191R D CISION O SUPR M COORT.
Deducton Deprecaton Lessee.
essee of rea estate and budngs under a 99-year e se
renewabe forever Is not entted to a deducton for deprecaton
under secton 214(a)8 of the Revenue ct of 1918 on budngs
erected by the essor, the essee havng no capta nvestment
theren.
Supreme Coubt of the Unted States.
ary . Wess, Coector of Interna Revenue, pettoner, v. . arry Wener.
0. . Routzahn, Coector of Interna Reveme, pettoner, v. . arry Wener.
On wrts of certorar to the Crcut Court of ppeas for the S th Crcut.
pr 22, 1929.
OPINION.
Mr. ustce omes devered the opnon of the court.
These are suts brought by Wener, the respondent, to recover amounts that
he says shoud have been aowed as deductons from hs ncome ta es but that
were dsaowed. The pettoners, the defendants, prevaed n the dstrct court
(17 . (2d), 50), but the |udgment was reversed by the crcut court of appeas
(27 . (2d), 200), and a wrt of certorar was granted by ths court.
Wener was n the busness of takng ong eases of property and subettng.
e hed 13 eases for 99 years, renewabe forever. e camed the rght to
make an annua deducton from s ncome ta for estmated deprecaton of
the budngs, reyng upon secton 214(a)8 of the ta ng ct (Revenue ct of
1928, ch. 18 40 Stat., 1057, 10 , 10 7), whch granted deducton of a reason-
abe aowance for the e hauston, wear and tear of property used n Ue trade
or busness, ncudng a reasonabe aowance for obsoescence. e was a-
owed a sums pad for repars but nothng for the estmated obsoescence for
whch he had not pad.
It may be taken for the purposes of decson that Wener undertook o keep
the budngs up to ther present condton, to pay rent even f the budngs
were destroyed, and that hs obgatons were sanctoned by a abty to forfe-
ture. It s argued wth much eaboraton that not ony covenants but economc
necessty requred the respondent to keep the budngs up to the mark and that
the amount needed for ths purpose shoud be aowed.
The ncome ta aws do not profess to embody perfect economc theory. They
gnore some thngs that ether a theorst or a busness man woud take nto
account In determnng the pecunary condton of the ta payer. They do not
charge for apprecaton of property or aow a oss from a fa n market vaue
uness reazed n money by a sae. (Unted States v. 8. S. Whte Denta Co.,
274 U. S., 398, 401 T. D. 4059, C. . I-2, 198 .) stockhoder does not pay
for accumuated profts of hs corporaton uness he receves a dvdend.
That s the genera prncpe upon whch these aws go. It s true that they
aow for obsoescence of budngs, etc., where the oss s of materas, not of
money, but there, as esewhere, the oss must be actua and present, not merey
contempated as more or ess sure to occur n the future.
If the ta payer owns the property the oss actuay has taken pace. ut
wth Wener t had not, and t mght never fa on hm, as was ponted out by
the dstrct |udge. Some of the eases were assgned and others surrendered to
the essor. In such cases It woud be a mere specuaton to suppose that depre-
caton was taken n account n the transactons. Probaby other and dom-
nant consderatons nduced the acts. The event showed that n those cases
there was no true bass for Wener s cam.
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214(a), rt. 251.
258
The crcut court of appeas, nterpretng Unted States v. Luey (274 U. S..
295 T. D. 404 , O. . I-2, 157 ), sad that the purpose of the Revenue ct
s to ta ony gan, and that the amount thus aowed to be set asde s not
gan, but s capta that has gone nto gross ncome. ut t s very cear that
as yet the capta of the essee has not gone nto t, and upon the consderatons
|ust mentoned t s not. enough that he has made a contract that very possby
may not be carred out to repace that capta at some future tme. If, as we
thnk, such a contract s not enough to cause the essee a present oss by wear
and tear, the fact, whch may be assumed, that the property was used by hm
In hs busness, does not matter. Of course he must show an nterest n the
property and a present oss to hm to make the statute appy.
In Lunch v. wort -Stephens Co. (2 7 U. S., 304 T. D. 3G90, C. . I -1,
1 2 ), a statutory provson for deductng from gross ncome reasonabe
aowance for depetons of mnes was hed appcabe to a essee bound to mne
a mnmum tonnage and to pay a stated royaty. In such a case the whoe
vaue of the ease s n the rght to remove the ore that s, to destroy as
rapdy as may be the rea ob|ect of the ease.
ut n the case of a house or shop, the vaue s not In the rght to destroy
and the destructon s ony an undesred, gradua, and subordnate ncdent of
the use. The dmnuton n the vaue of a mne to the essee s conspcuous,
necessary, and ntended, and s the very source of the gross ncome of the essee
from whch t s deducted, whereas the wear and tear of a house or shop n any
gven year may be ony recognzabe by theory and, as has happened n ths
case, may cost the essee nothng whe the premses are In hs hands.
It does not matter that n Oho, where the propertes e. these ong eases are
treated as n many respects ke conveyances of the fee. The ct of Congress
has ts own crtera, rrespectve of oca aw, that ook to certan rather
severe tests of abty and e empton and that do not aow the deductons
demanded whatever the essees may be caed. We understand ths to be the
vew taken by the Department for a ong tme and we are of opnon that t
shoud not be dsturbed.
udgment of crcut court of appeas reversed. udgment of dstrct court
affrmed.
rtce 1 2: Deprecabe property.
R NU CT O 1921 ND PRIOR CTS.
ssessment for street mprovements on front-foot or vauaton
bass. (See G. C. M. 5589. page 83.)
S CTION 214(a) 11. D DUCTIONS LLOW D:
C RIT L CONTRI UTIONS.
rtce 251: Chartabe contrbutons. III-7-4109
Ct.D. 41
INCOM T R NU CT O 1918 D CISION O COURT.
1. Deducton Chartabb Contrbutons Lmtaton Incomm
op Indvdua s usness Ta ed as That of a Cobpobaton.
Where the net ncome of the busness of an ndvduu s at hs
opton ta ed as that of a corporaton as provded n secton 330 of
the Revenue ct of 1918 the deducton from hs gross ncome a-
owed for chartabe contrbutons under secton 214(a) 11 of that
ct s mted to 15 per cent of hs net ncome e cudng that part
of t ta ed as corporate ncome pursuant to secton 330.
2. udgment ffrmed.
The |udgment of the dstrct court (2 ed. (2d), 1014 T. D.
4175 C. . -St, 280 ) U affrmed.
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214(a), rt. 251.
Unted States Crcut Court of ppeas fob the Second C cut.
Reuben Sadotcsky, pantff n error (pantff beow), v. Ohares W. nderson,
Coector of Interna Revenue, defendant n error (defendant beow).
December 10, 1928.
OPINION.
ugustus N. and, Crcut udge: The soe queston before us Is tbe e tent
to whch chartabe gfts and donatons made by the pantff durng the years
1918 and 1919 may be deducted n cacuatng hs ncome ta . There are two
causes of acton, one affectng hs ncome for 1918, and one for 1919, but as they
each are governed by the same prncpes, our dscusson may be mted to the
Income of the frst year.
Durng 1918 the pantff receved net ncome from a cothng manufacturng
busness, whch he owned, amountng to 493,718.70. rom other sources,
such as saares, nterest, rents, and dvdends, he derved a net ncome of
125,01 .94, makng an aggregate net ncome of 18,735. 4. s chartabe
gfts and contrbutons durng the year were 70, 04.92.
On une 2 , 1919, pantff ncorporated hs manufacturng busness and
thereupon e ercsed the opton granted to hm by secton 330 of the Revenue
ct of 1918 to have the net ncome from that busness for the year 1918, to
wt, 493,718.70, ta ed as the net ncome of a corporaton s ta ed.
Secton 330 of the Revenue ct of 1918, whch was approved ebruary 24,
1919. contaned the foowng provson:
In the case of the organzaton as a corporaton before uy 1, 1919, of any
trade or busness n whch capta s a matera ncome-producng factor and
whch was prevousy owned by a partnershp or ndvdua, the net ncome of
such trade or busness from anuary 1, 1918, to the date of such reorganzaton
may at the opton of the ndvdua or partnershp be ta ed as the net ncome
of a corporaton s ta ed under Tte II and III n whch event the net ncome
and nvested capta of such trade or busness sha be computed as f such
corporaton had been n e stence on and after anuary 1, 1918, and the unds-
trbuted profts or earnngs of such trade or busness sha not be sub|ect to
the surta mposed n secton 211, but amounts dstrbuted on or after anuary
1, 1918, from the earnngs of such trade or busness sha be ta ed to the
recpents as dvdends, and a the provsons of Ttes II and III reatng to
corporatons sha so far as practcabe appy to such trade or busness:
Provded, That ths paragraph sha not appy to any trade or busness the net
ncome of whch for the ta abe year 1918 was ess than 20 per centum of ts
Invested capta for such year: Provded further, That any ta payer who takes
advantage of ths paragraph sha pay the ta mposed by secton 1000 of ths
ct and by the frst subdvson of secton 407 of the Revenue ct of 191 . as
f such ta payer had been a corporaton on and after anuary 1, 1918, wth a
capta stock havng no par vaue.
The Commssoner of Interna Revenue hed that the ta upon the net ncome
from the pantff s busness n 1918 was, notwthstandng the e ercse of the
opton, assessabe aganst and payabe by pantff, the ndvdua, and not by
the corporaton, but n f ng the amount to be deducted for chartabe con-
trbutons n computng the net ncome of the ta payer he aowed ony 15 per
cent of 125,01 .94, whch was pantff s ncome from other sources than the
busness afterwards ncorporated, nstead of aowng hs contrbutons to the
e tent of 15 per cent of hs entre ncome from a sources. The method of
cacuaton adopted by the Commssoner made a dfference n pantffs ta
for the year 1918 of 23, 8.70, whch he seeks to recover n ths acton.
The pantff contends that the statute aowng a deducton of 15 per cent
of hs net ncome for chartabe contrbutons s appcabe to hs entre net
ncome that the ncome derved from the busness, though payabe at corporate
rates, s st hs ncome and not that of a corporaton, and that he may, there-
fore, en|oy as to t the benefca provsons of the secton whch aow a
deducton of the chartabe contrbutons of an ndvdua ta payer n cacu-
atng hs net ncome to the e tent of 15 per cent thereof. Secton 214(a)
of the Revenue ct of 1918 reads as foows:
Contrbutons or gfts made wthn the ta abe year to corporatons organ-
zed and operated e cusvey for regous, chartabe, scentfc, or educatona
purposes, or for the preventon of cruety to chdren or anmas, no part of
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219, rt. 341.
2f0
the net earnngs of whch Inures to the beneft of any prvate stockhoders or
ndvdua, to an amount not n e cess of 15 per centum of the ta -
payer s net ncome as computed wthout the beneft of ths paragraph.
udge Thacher sustaned the rung of the Commssoner, and we can see no
escape from hs reasonng. The ta payer n avang hmsef of the provsons
of secton 330 and ncorporatng hs busness e ercsed a vauabe opton. e
avoded the hgh surta rates of 1918 whch woud have been eved on ncome
had t been ta ed aganst hm as an ndvdua. e was sub|ected to nothng
but the corporate ta on a undstrbuted net earnngs that had remaned
n the busness and secured the corporate rate of 12 per cent. Secton 330
provdes that n such an event the net ncome of the busness be ta ed as
the net ncome of a corporaton s ta ed under Ttes II and III. The pro-
vsons reatng to the ta aton of the ncome of corporatons ncude no deduc-
ton for chartabe contrbutons. Ths fact n connecton wth the anguage of
the statute as to how the ncome from the busness s to be ta ed seems to
determne the case aganst the ta payer.
ut t s sad that the ncome though ta ed as that of a corporaton remaned
the ncome of an Indvdua nnd was so returned under the rung of the Com
mssoner that secton 330 merey f ed new percentages for the ta and dd
not deprve the pantff of the deductons aowed by secton 214(a) for
chartabe contrbutons. It s true that the busness ncome remaned that of
an ndvdua, but secton 330 not ony says that t sha be ta ed as the net
ncom. of a corporaton s ta ed but that t sha be computed as f such
corporaton had been n e stence on and after anuary 1, 1918. y ths
anguage the method of computaton and rate and mode of ta aton are brought
under sectons 232 to 23 of the ct and the ta payer receves no benefts from
secton 214(a).
The fact that the aowance of chartabe gfts was not cut off where ncome
of ndvduas derved from capta gans was ta ed at speca rates ume
secton 20 of the Revenue ct of 1921 and that t was smary avaabe
where dvdends of pror years were receved n 1917. or subsequent years,
but ta ed at pror years rates, can not e tend the deducton to ncome derved
from pantff s cosng busness. The opton n those cases reated merey to
rates and was accompaned by no anguage provdng for the computaton
of he ncome as that of a corporaton.
Whe the ncome n beongs to the pantff, yet. under the scheme of ta a-
ton prescrbed by the statute, t Is as fuy dvded as though the corporaton
had been n e stence a aong. ad that been the case, the 15 per cent
deducton coud ony have been taken upon the 125,01 .94 of Income arsng
from sources other than the manufacturng busness and the busness ncome
woud have been computed wth no such aowance. The Commssoner
propery computed the pantff s ncome upon ths hypothess and accordngy
made no deducton for chartabe contrbutons In cacuatng the ta abe ncome
from the busness.
udgment affrmed.
rtce 251: Chartabe contrbutons.
R NU CT O 1 21.
Navy and Marne Memora ssocaton. (See I. T. 24 0, page 98.)
S CTION 219. ST T S ND TRUSTS.
rtce 341: states and trusts.
It NU CTS O 1918 ND 1921.
owance for e hauston of fe estate. (See Ct. D. 4 , page 240.)
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21 , rt. 345.
rtce 345: states and trusts ta ed to
benefcares.
III-9-4127
Ct,D.48
ncome ta revenue) act of 1918 decson of court.
1. Income Lke enefcary Deducton of Loss 10 state.
Under secton 210(d) of the Revenue ct of 1918 there must be
ncuded n computng the net ncome of a fe benefcary the
entre amount dstrbuted to hm wthout deducton of a oss on
the sae of capta assets of the trust estate.
2. Decson oowed.
The decson of the crcut court of appeas n the case of at-
ze v. Mtche (8 ed. (2d), 428 (T. D. 3 8 C. . I -1, 191 )
foowed.
Unted States Crcut Coubt of ppeas, oubth Cbcutt.
Water W. be, zabeth M. be, and Mary be Morgan, appeants, v.
Gaen L. Tat, Coeotor of Interna Revenue, appeee.
ppeas from the Dstrct Court of the Unted States for the Dstrct of Maryand, at
atmore.
Northoott, Crcut udge: These are appeas from |udgments of the Ds-
trct Court of the Unted States for the Dstrct of Maryand, at atmore, n
favor of the appeee, the coector of nterna revenue for the dstrct of Mary-
and, n actons at aw brought to recover addtona edera ncome ta pad
for the years 1918 and 1919.
The stpuated facts are as foows:
dwn . be, the husband of the appeant zabeth M. be, and the
father of the appeants Water W. be and Mary be Morgan, ded n
1904, eavng a w whch was fuy admtted to probate n Maryand.
Under the terms of ths w each of the three appeants, who were pantffs
beow and w be here referred to as pantffs, was entted to receve, and
dd receve, n the years 1918 and 1919, n quarter-yeary nstaments oue-
fourth of the net proceeds of the rents, ssues, ncome, and profts of the dwn
. be estate, after payng the e penses of admnsterng and managng the
property, and after deductng a reasonabe commsson for the trustee. The
amount so receved for the year 1918 by each of the pantffs, was 28,071.49,
and for the year 1919 was 27,795.47.
Durng the years 1918 and 1919 the trust estate receved ncome from many
dfferent sources. so t sustaned osses upon the sae of securtes thereto-
fore owned and hed by the trust as capta assets. In the year 1918 ths oss
was 45,094, and n the year 1919 t was 49,914. ) ..
In proper tme the appeant, Mary be Morgan, fed a return for the
year 1918, and nstead of reportng the sum of 28,071.49, the amount of net
ncome of the trust estate actuay receved, reported n the ta abe ncome
one-fourth of the net ncome receved by the trust estate ess capta osses
that the estate had sustaned, or the sum of 15,913.92. and each of the appe-
ants fed a return for the year 1919 on the same bass. The Commssoner of
Interna Revenue hed that the ta abe ncome receved by the appeants was
the amount actuay receved under the terms of the w out of the gross ncome
of the estate, nstead of one-fourth of the net ncome of the estate as
cacuated by the trustee under the edera Revenue ct, as a resut of whch
the appeee coected, under protest, the sum of 2,274.98 from the appeant
Mary be Morgan, for the year 1918, and 1,921.23 for the year 1919, and
13,59 .93 from the appeant Water W. be, for the year 1919. and 1, 8.08
from the appeant zabeth M. be for the year 1919. Refund cams were
duy fed and re|ected.
Genera ssue peas were fed by the defendant, and the court, sttng as a
ury under wrtten wavers of tra by |ury, tred a of the cases at one tme
under the stpuaton of facts, no further proof beng taken, and granted the
defendant s prayer for |udgment n each case, rung as a matter of aw that
anuary 14, 1929.
OPINION.
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219, rt. 345.
2 2
there was no evdence under whch the pantff mght recover, and entered
verdcts and |udgments n favor of the defendant.
That part of the Revenue ct of 1918 whch s pertnent to the queston here
rased s subdvson (d) of secton 219, and reads as foows:
(d) In cases under paragraph (4) of subdvson (a), and n the case of
any ncome of an estate durng the perod of admnstraton or settement per-
mtted by subdvson (c) to be deducted from the net ncome upon whch ta
s to be pad by the fducary, the ta sha not be pad by the fducary, hut
there sha be ncuded n computng the net ncome of each benefcary hs
dstrbutve share, whether dstrbuted or not, of the net ncome of the estate
or trust for the ta abe year, or, f hs net Income for such ta abe year s
computed upon the bass of a perod dfferent from that upon the bass of
whch the net ncome of the estate or trust s computed, then hs dstrbutve
share of the net ncome of the estate or trust for any accountng perod of
such estate or trust endng wthn the fsca or caendar year upon the bass
of whch such benefcary s net ncome s computed. In such cases the bene-
fcary sha, for the purpose of the norma ta , be aowed as credts n add-
ton to the credts aowed to hm under secton 21 , hs proportonate share of
such amounts specfed n subdvsons (a) and (b) of secton 21 as are receved
by the estate or trust.
It s admtted that the reguatons of the Treasury Department wth res ect
to ths secton are n accord wth the Government s contenton here, that the
pantffs were not entted to deduct the osses of the estate from the amount
actuay dstrbuted to them, but t s contended by appeants that the con-
structon gven ts secton by the Department s erroneous, and that the
reguatons promugated n accordance wth such erroneous constructon have
no weght.
It s aso admtted that the Revenue ct of 1921 s cear on the pont here
rased, and does not permt the deducton here camed. It s contended by
the Government that the ct of 1921 was passed by Congress to avod the un-
certanty and ambguty e stng under the ct of 1918, whe appeants contend
that the passage of the ct of 1921 showed that Congress ntended to change
the aw.
queston to be consdered n determnng what bass of ta aton Congress
ntended to adopt n deang wth trust estates of ths character s whether the
fducares and benefcares are separate enttes.
It seems cear to us that n ths case the fducares and the benefcares are
entrey separate enttes. ( azc v. Mtche, 8 ed. (2), 428 T. D. 3 8,
C. . I -1. 191 : Merchants Loan Trust Co. v. Smetanka, 255 U. S.. 509
T. D. 3173, C. . 4, 34 .)
The anguage of the statute s there sha be ncuded n computng t he
net ncome of each benefcary hs dstrbutve share of the net ncome of
the estate or trust. Congress, had t seen t to do so, coud have adopted the
bass Inssted upon by the ta payer, but t dd not n our opnon do ths.
The amount actuay dstrbuted to the benefcares coud not have ncuded
any part of the capta of the trust estate, for any such dstrbuton woud
have been contrary to the e press provsons of the trust.
The prncpe controng ths queston was succncty stated In atze v.
Mtche, supra, as foows:
Therefore the dstrbutve share whch Congress must have had n mnd
and Intended to be ta ed was the dstrbutve share of the ncome aotted to
her under and n accordance wth the terms of the trust.
In ths connecton, the Court of ppeas of the Dstrct of Coumba In
Whtcomb v. ar (25 ed. (2), 528) hed:
Therefore the payment made by the trustee to appeant was n fact and
aw the dstrbutve share of the ncome to whch she was entted as fe
tenant, and conssted n no part of capta deprecaton restored to her. It
was therefore ta abe n her hands.
It s argued that the oss n the capta of the trust estate s n reaty a
oss to those who receve the entre Income of the estate ess e penses of
admnstraton. We do not thnk so. s was sad n the case of atze v.
Mtche, supra :
Wse and prudent management of the trust estate may dctate the sae
of worthess securtes, or those whch yed a sma return, and the purchase
of others whch yed a arger return. Such an e change, whe It may show
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( 231, rt. 515.
a bookkeepng oss n the securtes sod, may ncrease future returns upon the
whoe trust estate, and nstead of entang any oss upon te benefcary may
ncrease the ncome to be dstrbuted to hm thereafter.
Ths precse queston was rased n the Unted States Dstrct Court for the
Dstrct of Massachusetts ( atze v. Casey, 1 ed. (2), 29 T. D. 3 42, C. .
III-2, 184 ), and udgment gven for the Government. Ths |udgment was
affrmed by the Crcut Court of ppeas for the rst Crcut ( atze v.
Mtche, supra), and certorar was dened by the Supreme Court ( atze v.
Mtche, 2 8 U. S., 90).
See aso Whtcomb v. ar, supra.
We agree wth the reasonng and the concuson reached n these cases, and
te |udgments are accordngy affrmed.
udng and oan assocatons, e empton of. rtces 515
of Reguatons 45 (1920 edton), 2, 5, and 9 amended.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. 0.
To Coectors of Interna Revenue and Others Concerned:
rtce 515 of Reguatons 45 (1920 edton), as amended by Treas-
ury Decson 3179 (C. . 5, 200), s hereby further amended to read
as foows:
budng and oan assocaton organzed pursuant to and operatng n ac-
cordance wth the aws of the Unted States or a State or Terrtory thereof s
entted to e empton.
Cooperatve banks wthout capta stock organzed and operated for mutua
purposes and wthout proft are e empt. Credt unons such as those organzed
under the aws of Massachusetts, beng n substance and n fact the same as
cooperatve banks, are kewse e empt from ta .
rtces 515 of Reguatons 2, 5, and 9 are hereby amended to
read:
budng and oan assocaton organzed pursuant to and operatng n ac-
cordance wth the aws of the Unted States or a State or Terrtory thereof,
substantay a the busness of whch assocaton s confned to makng oans
to members, s entted to e empton.
Cooperatve banks wthout capta stock organzed and operated for mutua
purposes and wthout proft are e empt. Credt unons such as those organzed
under the aws of Massachusetts, beng n substance and n fact the same as
cooperatve banks, are kewse e empt from ta .
. . Mres,
ctng Commssoner of Interna Revenue.
pproved anuary 7, 1929.
. W. Meon,
Secretary of the Treasury.
P RT III. CORPOR TIONS.
III-2-40 5
T.D.4253
ncome ta .
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281, rt. 18. 2 4
btce 15: udng and oan assocatons and cooperatve
banks.
R NU CT O 1 21.
ansas assocaton requrng borrowers to subscrbe to, shares of
rura credt nstament stock. (See G. C. M. 5909, page 177.)
rtce 518: usness eagues. III-25-4244
Ct. D. 70
INCOM T R NU CT O 1018 D CISION O COURT.
1. Cobpoeaton empton usness League.
corporaton, organzed by severa nsurance companes to prnt
and suppy to them at cost standardzed forms, poces, and other
suppes, whch n 1918 ncreases ts charges over cost creatng a
surpus that was e pended for repacements and addtons, s not
e empt from ncome ta as a busness eague under secton 231(7)
of the Revenue ct of 1918.
2. Decson affrmed.
The decson of the Unted States oard of Ta ppeas (9
. T. ., 251) affrmed.
Unted States Crcut Court of ppeas for the Seventh Crcut.
Unform Prntng d Suppy So. v. Commssoner of Interna Re-venue.
Petton for revew of order of Unted States oard of Ta ppeas.
L pr 10, 1929.
opnon.
atze, Dstrct udge: The pettoner, Unform Prntng Suppy Co.,
chaenges the correctness of an order of the Unted States oard of Ta
ppeas, wheren pettoner s ordered to pay a defcency n ncome and profts
ta es for the year 1918 n the sum of 34,0 0.8 . The decson of sad oard
was promugated on the 23d day of November, 1927.
The pettoner Is a corporaton organsed and e stng under and by vrtue
of the aws of the State of Inos, wth ts prncpa offce n the cty of Chcago,
111. It was organzed pror to the year 1918 and was dong busness durng
the entrety of that year.
It appears that, pror to 1915, varous fre nsurance companes had ther
forms, poces, terature, and other suppes prnted by varous persons and
at varous puces throughout the Unted States. It aso appears that practcay
each nsurance company used forms, poces, and terature whch were dfferent
from those of other companes. If, therefore, an agent n any ocaty repre-
sented more than one nsurance company, he was compeed tu keep a suppy
of dfferent forms, poces, etc., for each company represented by hm. Ths
entaed a tremendous e pense upon the company and occasoned consderabe
waste.
pan was devsed by many of the eadng nsurance companes whereby
unform forms, poces, etc., were to be used by a such companes. These
forms, poces, and other suppes of such companes were to be prnted by a
cooperatve company of ther own, and supped to such companes at actua
cost. s a resut of ts pan, the pettoner company was organzed for the
purpose of dong the prntng and furnshng the suppes for such companes.
It s the pocy of the pettoner to prnt and dstrbute forms, poces, etc., at a
prce whch s suffcent ony to pay the e penses of operaton and mantenance
of the pant and organzaton. owever, t was antcpated that n 1919, and
subsequent years, t woud be necessary for the company to spend substanta
sums n repacement of and addtons to the pant and equpment. Therefore,
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231, rt. 518.
In order to provde the necessary funds for such contempated e pendtures, the
prce charged for forms, poces, etc., was Increased over the actua cost durng
the year 1918, resutng n a surpus of 74,521. 2 for that year. Ths amount
was subsequenty e pended for repacements and addtons. Ths surpus s
taken as the bass upon whch the defcency ta es ordered pad are cacuated.
Te ony queston for ths court to determne s whether or not the pettoner
s such an organzaton as s e empt from ta aton under secton 231(7) of
the Revenue ct of 1918, whch provdes as foows:
Sbo. 231. That the foowng organzatons sha be e empt from ta aton
under ths tte .
(7) usness eagues, chambers of commerce, or boards of trade, not organ-
zed for proft and no part of the net earnngs of whch nures to the beneft of
any prvate stockhoder or Indvdua
It s the contenton of the pettoner that t Is a busness eague and s, there-
fore, e empt from ta aton by vrtue of the above provson of the Revenue
ct.
Snce the enactment of the Revenue Law n 1913, there as been contaned
theren a provson for the e empton of busness eagues, chambers of com-
merce, and boards of trade, not organzed for proft/ The Treasury Depart-
ment has ssued reguatons from tme to tme, snce the enactment of sad
aw. defnng the term busness eagues and gvng e ampes thereof.
rtce 518 of Treasury Reguatons 45, made and promugated pursuant to
secton 1309 of the Revenue ct of 1918, reads as foows:
bt. 518. usness eagues. busness eague s an assocaton of persons
havng some common busness nterest, whch mts ts actvtes to work for
such common Interest and does not engage n a reguar busness of a knd ord-
nary carred on for proft. Its work need not be smar to that of a chamber
of commerce or board of trade. n assocaton engaged n furnshng nforma-
ton to prospectve Investors, to enabe them to make sound nvestments, s not
such a eague, snce ts members have no common busness nterest, and It s
not e empt, even though a of ts ncome s devoted to the purpose stated.
cearng house assocaton, not organzed for proft, no part of the net ncome of
whch nures to any prvate stockhoder or ndvdua, s e empt provded ts
actvtes are mted to the e change of checks and smar work for the com-
mon beneft of ts members. n assocaton of persons who are engaged n the
busness of carryng freght and passengers by boats propeed by steam, whch
Is desgned to promote the egtmate ob|ects of such busness, and a of the
ncome of whch s derved from membershp dues and s e pended for offce
e penses and the saary of a secretary-treasurer, s e empt from ta . n n-
corporated cotton e change, whose shares carry the rght to dvdends, s or-
ganzed for proft and s not e empt.
The constructon gven ths statute by the Treasury Department has been
substantay the same snce ts enactment. Ths constructon, e tendng over
a ong perod of tme, when not pany erroneous, must be treated as read nto
the statute. (New aven Raroad v. Interstate Commerce Commsson, 200
U. S., 3 1.)
The oard, In ths case, adopted the constructon gven n Reguatons 45,
artce 518.
The pettoner was organzed under the genera corporaton aws of Inos,
and s engaged n the prntng busness, whch, accordng to the aws under
whch t s ncorporated, may be operated for a proft.
In accordance wth the genera pan of pettoner company, adopted at the
tme of ts ncorporaton, a forms, poces, etc.. were furnshed to ts stock-
hoders at actua cost pror to the year 1918. Durng that year, however, a
Mn n e cess of the actua cost was charged for the entre output of pettoner
company, resutng In a proft or net earnng for the year n the sum of
74,521. 2. True, such profts or net earnngs were nvested n machnery and
addtons, but that does not mean that such profts or net earnngs dd not
nure to the beneft of the stockhoders, so as to e empt pettoner from the
payment of ta es. The vaue of the property of pettoner was enhanced to
the e tent of the profts earned durng that year. Therefore, such profts or
net earnngs dd nure to the beneft of the stockhoders. The property of
pettoner company may be sod at any tme, and the proceeds thereof dvded
among the stockhoders.. In other words, the profts or net ncome s ncuded
n the vaue of the property owned by pettoner company, and upon utmate
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1234, rt. 5 2.
2
dssouton, the proceeds may be dvded among ts stockhoders. ( emper
Mtary Schoo v. Crutchey, 274 ed., 125 T. D. 81 4, 0. . 4, 2 .)
It necessary foows, therefore, that pettoner was organzed for proft,
and that the profts or net ncome of pettoner company for the year 1918 dd
nure to the beneft of the stockhoders, thereby removng t from that cass of
ta payers whch s e empt under secton 231(7) of the Revenue ct of 1918.
The order of the oard of Ta ppeas s affrmed.
rtce 519: Cvc eagues.
R NU CT O 1921 ND PRIOR R NU CTS.
Navy and Marne Memora ssocaton. (See I. T. 24 0, page 98.)
rtce 521: Loca mutua nsurance companes and ke
organzatons.
R NU CT O 1 21 ND PRIOR R NU CTS.
Cty fremen s protectve assocaton recevng money from so-
caed sae of tckets to dances. (See G. C. M. 5921, page 179.)
S CTION 234. D DUCTIONS LLOW D
CORPOR TIONS.
rtce 5 2: Donatons. III-18-4189
Ct.D.55
INCOM T R NU CT O 1921 D CISION O COURT.
1. Deducton Corporaton Chartabe Contrbutons.
Contrbutons by a corporaton to chartabe corporatons are not
deductbe from gross Income as ordnary and necessary e penses
under secton 234(a) 1 of the Revenue ct of 1921.
2. Decson oowed.
The decson of the Court of Cams of the Unted States n the
case of Consodated as ectrc Lght rf Power Co. of atmore
v. Unted States ( 5 Ct. of Cs.. 252 (T. D. 4182 0. . 1I-2,
204 )) foowed.
Court or Cams of the Unted States.
fred . Sweet, Inc., v. The Unted States.
ebruary 4, 1929.
opnon.
Moss, udge, devered the opnon of the court.
Pantffs predecessor, Lunn Sweet Co., a corporaton e stng under the
aws of the State of Deaware, fed ts ncome and e cess-profts ta return for
the fsca year endng November 30, 1921, n whch t camed as deductons from
gross ncome the foowng contrbutons: To the Y. M. O. ., 1 ,875 to the
T. W. C. . at Lewston, Me., 500 to the ndroscoggn County Y. M. C. ., 200
and to the Mane Centra ospta at Lewston, Me., 2,500. These deductons
were camed as ordnary and necessary busness e penses. n addtona ta
was assessed by the Commssoner of Interna Revenue coverng the tota amount
of sad contrbutons, to wt, 22,023.72, whch addtona ta was pad under
protest. cam for the refund of sad amount was duy fed and was re|ected.
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240, rt. 33.
Ths acton s for the recovery of same. In 1923 sad Lunn Sweet Co. wao
reorganzed under the name of Lunn Sweet (Inc.), whch atter corporaton was
reorganzed In 1923 under the name of McLaughn-Sweet (Inc.), and n an-
uary. 1927, t changed ts corporate name to fred . Sweet. (Inc.). pantff n
ths sut.
It s provded by secton 234(a) of the Revenue ct of 1921 (42 Stat., 254) :
That n competng the net ncome of a corporaton sub|ect to the ta mposed
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
aowance for saares or other compensaton for persona servces actuay
rendered .
The sune provson had been carred nto the earer cts.
It s pantffs contenton that the contrbutons n queston fa wthn the
meanng of the term ordnary and necessary e penses.
It w be observed that under the ct of 1921, as we as the ct of 1918,
Congress provded for deductons by ndvduas for contrbutons or gfts of
the nature and character of the contrbutons made by pantff n ths case.
See secton 214(a) of the ct of 1921, subparagraph 11 (42 Stat., 241), and
secton 214(a) of the ct of 1918, subparagraph 11 (40 Stat., 10 8). owever,
Congress has never e tended ths deducton to corporatons. On the contrary,
It has e pressy refused to do so. When the Revenue ct of 1918 was under
consderaton n the ower ouse of Congress, an amendment was offered
provdng for the deducton by corporatons of gfts or contrbutons smar
to te rghts granted to Indvduas. Ths amendment was the sub|ect of
actve dscusson on the foor of the ouse and on a vote was defeated. (Cong.
Record ( ouse), vo. 50, part 10, pp. 1042 -7-8 September 17, 1918.) In the
ght of ths specfc acton there can be no doubt as to the ntenton of Congress
on the sub|ect n controversy. In the case of Consodated Gas ectrc Lght d
Power Co. of atmore v. The Unted States, decded n ths court on pr 2,
1928, Invovng the dentca queston presented n ths case, the court, n an
opnon by Chef ustce Campbe, sad:
ut t was not an ordnary e pense, nor was t a necessary one. The amount
was what the corporaton thought proper to subscrbe, and whether to be
subscrbed at a, was a vountary act.
It Is suffcent for ths case to say that Congress has authorzed
certan deductons, and the court can not e tend the terms they have em-
poyed.
Concedng that pantff company was benefted by the constructon and
mantenance of the nsttutons tor whch the contrbutons were made, t was
merey an ndrect beneft such as woud be en|oyed by the genera pubc n
that communty. owever praseworthy the act of pantff company n ts
contrbutons, Congress has not authorzed ther deducton from the gross n-
come of corporatons, but on the contrary has specfcay decned to do so.
Ta ng statutes may not be e tended by mpcaton beyond the cear mport
of the anguage used. (Omd v. Goud, 24o T . S., 151 Unted States v.
erram, 2 3 U. S., 179.)
Pantff Is not entted to recover and the petton w be dsmssed.
S CTION 240. CONSOLID T D R TURNS O
CORPOR TIONS.
rtce 33: When corporatons are affated. III-23-4231
Ct. D.
ncome ta revknub act of 1918 decson of court.
1. Consodated Return When Corporatons are ffated.
Ownershp by the same nterests of 94.85 per cent of the shares
of stock of one corporaton and 55. 3 per cent of the shares of
another corporaton s not suffcent to authorze affaton under
secton 240 of the Revenue ct of 1918. The fact that the mnorty
s acquescent and permts the ma|orty to manage the busness does
not prove actua contro of the stock of the mnorty, nor does a
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2 8
contro based upon frendshp or professona reatons satsfy the
statute.
2. Decson Reversed.
The decson of the oard of Ta ppeas (7 . T. ., 707)
reversed.
Unted States Crcut Court of ppeas for the Second Crcut.
Commssoner of Interna Revenue, pettoner on revew, v. doph rsdh d
Co., Inc.. respondent on revew.
ppea from the oard of Ta ppeas. Petton fed by the Interna revenue coector
to revew a determnaton as to a ta Imposed upon doph rsch Co., Inc. Petton
granted, wth drectons that the determnaton of the oard of Ta ppeas be
reversed.
efore Manton, Learned and, and ugustus N. ard, Crcut udges.
ebruary 4, 1928.)
OPINION.
Manton, Crcut udge: The respondent was ncorporated under the aws of
the State of New York on ugust 18, 1919. The razan Rubber Pantaton
Deveopment Co. was aso ncorporated In New York on uy , 1919. oth
corporatons had ther pace of busness at a common address n New York
Cty. doph rsch and hs brother were engaged as partners n busness as
mporters from South merca, havng branches there. doph r.sch had
a 0 per cent nterest n the frm and hs brother 40 per cent. They then
ncorporated n 1919 as doph rsch Co., Inc. 15 per cent of the stock
was transferred to ther nephew. The capta stock was 400,000. The assets
and abtes of the partnershp were transferred to the corporaton. The
razan company was engaged In workng pantatons n raz. Pror to
ts ncorporaton, tte to ths pantaton was In the name of doph rsch.
It was ncorporated for 20,000 shares, of the par vaue of 100, and was Issued
as foows: 7.85 per cent to doph rsch, 27 per cent to hs brother, and
5.15 per cent to hs nephew. In 1920 there was an aggregate of 4,240 shares
owned and controed as foows: doph rsch. 43.47 per cent hs brother
13.21 per cent the oomberg famy and others, 44.37 per cent. The affars
of the razan company were handed by the rsch brothers, frst through
the partnershp and ater through the corporaton doph rsch Co., Inc. No
reguar set of books were kept regardng the affars of the razan company,
that s, there was no edger, cash book, or saes book, and snce 1913 It had
no separate bank account.
actvtes were commenced and managed entrey by the rsch com-
pany funds necessary for the conduct of the affars of the razan company
were advanced by the raeh company by cabe, by transferrng or openng a
bank credt aganst whch a draft woud be made by peope In raz. Saes
were made through and n the name of the rsch company and the proceeds
were credted on the books of the rsch company. In a word, the razan
company was conducted as a department of the rsch company s busness. No
stock of ether company was sod to the genera pubc. Mr. oomberg was
the persona attorney of the rsch brothers and had been ntmatey asso-
cated wth them for years, and was the attorney who ncorporated the raz-
Ian company. Tte Commssoner refused to permt the two corporatons to
fe a consodated return for the year 1920, upon the cam that they were
affated corporatons wthn the provsons of secton 240(b) of the Revenue
ct of 1918, and assessed a defcency of 12,38 .24. Ths resut was reversed
by the oard of Ta ppeas, whch hed there was affaton and determned
the defcency to be 2,8 4.01. Ths dfference s the amount of ta nvoved on
ths appea.
Secton 240(b) provdes that two or more domestc corporatons sha be
deemed to be affated (1) If one corporaton owns drecty or contros through
cosey affated nterests or by a nomnee or nomnees substantay a.the
stock of the other or others, or (2) f substantay a the stock of two or
more corporatons s owned or controed by the same nterests.
The rsch brothers owned together 94.85 per cent of the shares of stock of
the respondent and 55. 3 per cent of the razan company. We may regard
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245, rt. 82.
the rsch brothers as of the same nterest. Substantay a was not
Intended to be Interpreted as beng any partcuar percentage but must be
apped to the partcuar facts of each case. We hed n Ice Servce Corp. v.
Commssoner of Interna Revenue, decded anuary 7, 1929. that 75 per cent
was not a contro of substantay a of the stock. In the Revenue cts
of 1924. 192 (secton 240(c), 43 Stat., 253, 44 Stat., 9), and 1928 (secton
141(d), secton 142(c), Pubc No. 5 2, Seventeth Congress), Congress has sub-
sttuted for substantay a of the stock the words at east 95 per cent of
the stock.- It was the apparent ntent of Congress that the test of unty of
contro of substantay a the stock of the corporaton depended upon whether
there coud be made ntercompany arrangements affectng nvested capta or
net ncome of the separate members and thus enabe them to be consdered as
a unty. Congress recognzed that an equtabe and convenent way of deang
wth such a stuaton was to treat a group of corporatons thus controed as
a busness unty and hence to provde for a consodated return. conso-
dated return can be carred out where there are no confctng nterests
among the stockhoders and, as affated corporatons, they are requred to
fe a consodated return of the net ncome and nvested capta and the ta es
are computed and determned on the bass of such return and assessed n the
frst nstance as a unt. Thus the corporate entty can be dsregarded ony
where there s no dvergent nterest among the stockhoders. Stockhoders of
two or more corporatons, f the same persons, and ther hodngs n dfferent
corporatons are n. the same proporton, bear the utmate burden of ta es
equay and equtaby regardess of whether t rests prmary upon one or the
other of the affated corporatons, f ony such corporatons be deemed aff-
ated, but t Is where the proportons of the stockhoders are dfferent that
nequtes resut. The razan company appears to have stockhoders to the
e tent of 43.37 per cent who own no stock n the respondent. These stock-
hoders woud suffer dsadvantages and mght receve benefts through the
operatons of the respondent n whch they have no nterest or representaton.
Thus there s no far bass of affaton of ownershp and there s no contro
of substantay a of the stock by the same nterests. (Montana Mercante
Co. v. Rasmusncn. 28 ed. (2d), 91 : ameda Inv. Co. v. McLaughn, 28
ed. (2d). 81: appeas of Goud Couper Co., 5 . T. ., 515.) The man-
agement of the busness of the corporaton s not the contro requred by
the statute. It refers to stock contro. The fact that the mnorty s acqu-
escent and permts the ma|orty to manage the busness does not (prove actua
contro over the mnorty nterest. Nor does a contro based upon frendshp
or professona reatons satsfy the statute. The contro of the stock owned
by the same nterest refers to benefca Interest. Ths meanng s consstent
wth the purpose of the statute to e tend to those sub|ect to the hazard of
the enterprse, when they are substantay one and the same, the beneft of
the consodated reports. ecause the mnorty stockhoders of the razan
company hod no stock n the respondent, n no way was the stock of the
mnorty of that company controed wthn the proper statutory acceptaton
of that term.
The necessary stock ownershp or contro requred by the statute not e stng
n the present case, t was error for the oard of Ta ppeas to hod that
the respondent and the razan company were affated corporatons entted
to fe a consodated return.
The order s reversed, wth drectons to assess the ta n accordance wth
ths opnon.
S CTION 245. T ON LI INSUR NC
COMP NI S.
rtce 82: Reserve for deferred dvdends. III-10-4132
G. C. M. 5782
R NU CT O 1918.
The-annua net addtons to the deferred dvdend reserves man-
taned by the ta payer, a stock fe nsurance company n Nebraska,
are not deductbe under secton 234(a)10 of the Revenue ct of
1918.
Recommended that Soctor s Opnon 40 (C. . 3. 274), n so
far as t pertans to queston 1. be revoked.
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124 , rt. 82.
270
The M Lfe Insurance Co., a stock fe nsurance company organ-
zed under the aws of Nebraska, fed cams for the refund of
profts ta for the years 1918 and 1919, based on the contenton that
the Income Ta Unt erred n refusng to permt t to ncude n ts
nvested capta for those years the reserve mantaned for the pay-
ment of deterred dvdends. Upon consderaton of ths queston t
was concuded that ths reserve represented earned surpus and un-
dvded profts wthn the statutory defnton of nvested capta, and
shoud be ncuded n computng the nvested capta of the ta payer.
The Income Ta Unt reaudted and read|usted the profts ta a-
bty of the ta payer for the years 1918 and 1919. owever, at
the same tme the Income Ta Unt aso read|usted the ta payer s
ncome ta abty for those years (by dsaowng as a deducton
under secton 234(a) 10 of the Revenue ct of 1918 the net addton
made by the ta payer to the deferred dvdend reserve for the years
1918 and 1919 and ncreasng ts ncome ta abty accordngy)
and correspondngy reduced the profts ta refundabe. The cor-
rectness of the acton of the Unt n the atter partcuar s the
queston under consderaton. The queston, brefy stated, s: re
the annua net addtons to the deferred dvdend reserves mantaned
by the ta payer deductbe under secton 234(a) 10 of the Revenue
ct of 1918 Ths secton authorzes, n the case of nsurance
companes, the deducton of the net addton requred by aw to be
made wthn the ta abe year to reserve funds .
Ths queston was prevousy consdered n Soctor s Opnon 40,
n whch opnon t was concuded that the reserves mantaned by
fe nsurance companes n the State of Nebraska for the protecton
of deferred dvdend poces were reserves requred by aw n ascer-
tanng the net addton to reserve funds deductbe n computng the
net ncome sub|ect to ta under the, Revenue ct of 191 .
It s apparent from a readng of Soctor s Opnon 40 that the
concuson theren reached was based on the reasonng and concu-
son of the Supreme Court n the case of the Maryand Casuaty Co.
v. Unted States (251 U. S.. 34 2). owever, n the nore recent dec-
sons of the Supreme Court, notabv. n the case of Unted States v.
oston Insurance Co. (2 9 U. S., 197, T. D. 3792, C. . -, 300)
and n the case of the New York Lfe Insurance Co. v. dwards, Co-
ector (271 U. 109, T. D. 3872, C. . -, 305), the prncpes an-
nounced by the Supreme Court n the case of the Maryand Casuaty
Co. v. Umted States were substantay modfed. In ths connecton
reference s made to the case of the Mnnesota Mutua Lfe Insurance
Co. v. Unted States, decded by the Court of Cams on December 3,
1928. In that case the Court of Cams sustaned the acton of the
Commssoner n dsaowng as a deducton from gross ncome under
secton 234 (a) 10 of the Revenue ct of 1918 and the correspondng
sectons of pror Revenue cts, the net addtons to the pantff s de-
ferred dvdend reserves, a reserve mantaned by the pantff and
requred by the aw of Mnnesota. In the course of ts opnon the
court sad:
In New York Lfe Insurance Co. v. duads (271 U. 109) the Supreme
Court agan pped the prncpes of the McCoaeh and oston Insurance Co.
cases. On page 11 of the opnon the court sad :
Overpayments by deferred dvdend pocyhoders for 1912 amounted to
8,198,918. The coector refused to deduct ths sum from the tota recepts and
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271
250, rt 1008.
demanded the prescrbed ta of 1 per centum thereon. We thnk he acted
propery. oth courts beow so hed.

Whe both the Penn Mutua and the dwards cases dd not nvove the ssue
of net addtons to reserve funds requred by aw, we abstract from the opn-
ons the governng prncpe that the purpose of Congress n the ta ng ct was
to restrct the aowabe deductons to the cass of reserves requred as aganst
the contngent abty on outstandng poces. Deferred dvdends, as the
term mports, are retaned by the company for years. The queston of an
annua aocaton of deferred dvdends s contngent upon the prosperty of
the company, and the statutory requrement as to a reserve aganst the abty
s, t seems to us, no more than a whoesome provson that the stated annua
fnanca condton of the company n ths respect sha be mantaned.
In vew of the cases whch have been decded, we thnk the petton as to
these tems of the cam must be dsmssed.
The Court of Cams n ts opnon does not ndcate that the partc-
uar anguage of the Mnnesota statute requrng the mantenance of
a deferred dvdend reserve was mportant n determnng the ques-
ton decded, but rests ts decson on the prncpe that the deferred
dvdend reserve was not one requred to be hed aganst the contn-
gent abty on outstandng poces. owever, f t be conceded
that the anguage of the statute under whch the reserve was man-
taned was a determnng factor n that case, t s the opnon of ths
offce that the provsons of the Nebraska statutes upon whch Soc-
tor s Opnon 40 s based are so neary dentca wth those of the
Mnnesota statutes consdered by the Court of Cams n the Mnne-
sota Mutua case that a dstncton between nsurance companes
operatng under the provsons of the Nebraska statutes and com-
panes operatng under the provsons of the Mnnesota statutes s not
|ustfed.
It s accordngy recommended that Soctor s Opnon 40, n so
far as t pertans to queston 1, be revoked, and that the acton of the
Income Ta Unt n the nstant case be sustaned.
C. M. Crarest,
Geera Counse, ureau of Interna Revenue.
rtce 82: Reserve for deferred dvdends. III-10-4133
I. T. 24 1
R NU CT O 1918.
Soctor s Opnon 40 (C. . 3, 274), n so far as t pertans to
queston 1, s revoked, n vew of Genera Counse s Memorandum
5782 (see on page 2 9).
P RT I . DMINISTR TI PRO ISIONS.
S CTION 250. P YM NT O T S.
rtce 1008: Coecton of ta by sut. III-11- :14
Ct. D. 51
INT RN L revenue aws sut on bond decson of court.
1. bt ond batement Cam Surety Defense.
Labty on a bond, gven n support of a cam for abatement
and condtoned for the payment of the ta assessed so far as the
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250, rt. 1008.
272
Commssoner shoud not abate t, arses as soon as the cam for
abatement Is dsaowed, and the nvadty of the ta Is not a
defense to a sut on the bond.
2. Same stoppe.
Where a cam n bankruptcy to whch the Unted States s not
a party s fed n the name of the Unted States by the surety on
a bond condtoned to pay the assessment, nether an order of the
bankruptcy court e pungng the cam nor the refusa of the Unted
States to prove the cam aganst the trustee n bankruptcy creates
an estoppe n a sut upon the bond.
3. Same Party Pantff.
sut upon a bond n favor of a named coector and hs suc-
cessors n offce as obgees may be brought by hs successor n
offce.
Unted States Crcut Court of ppeas for the Second Crcut.
rank . otoert, Coector of Interna Revenue, appeant, v. mercan
Surety Co., appeee.
anuary 7, 1929.
opnon.
efore Manton, L. and, and ugustus N. and, Crcut udges.
ppea from a |udgment of the Dstrct Court for the Southern Dstrct of
New York dsmssng n compnt at aw upon a bond gven to secure te
payment of ta es.
L. C. ancke, Inc., a New York corporaton, fed an ncome ta return u
New York for the year 1917, upon whch on anuary 3, 1920, the Commssoner
of Interna Revenue assessed an addtona ta on the assessment sts for
December, 1919, and transmtted the assessment to dwards, then coector for
New York, on anuary 13, 1920. dwards notfed the corporaton of the
assessment and demanded payment on ebruary 17, and the corporaton on
March 2 comped n part and fed a cam for the abatement of the remander.
On December 24, 1920, the corporaton as prncpa and the defendant as surety
e ecuted and devered a bond to dwards n favor of hmsef and hs successors
n offce as obgees, rectng that the corporaton had been assessed the sura
remanng due, and had asked dwards to suspend coecton of the assessment
for one year, that t mght pay so much as remaned unpad wth Interest
thereon unt pad as requred by aw, shoud the cam for abatement In
dsaowed. The condton of the bond was that the corporaton shoud pay
the baance aforesad to the coector at the e praton of the e tended perod.
The corporaton was ad|udcated a bankrupt on May 20, 1921, and on
September 15, 1921. the Commssoner dened the greater part of the cam for
abatement. The trustee n bankruptcy on November 22, 1921. pettoned the
referee to determne what amount was due from the bankrupt as ta es and the
referee gave notce of the proceedng to the pantff, who had then succeeded
n offce to dwards. The defendant thereupon demanded that the Unted
States fe Its cam In bankruptcy, but both the Unted States and the pantff
faed to do so. Thereupon the defendant fed : cam as surety n the name
of the Unted States for the ta as assessed, the trustee ob|ected to t, and the
dstrct court e punged t.
Upon a tra before a |ury of one the partes stpuated the foregong facts,
together wth more not necessary to set forth, and the dstrct |udge drected
a verdct for the defendant, on whch the |udgment appeaed from was entered.
L. and, Crcut udge: Secton 250(b) of the Revenue ct of 1918 pro-
vded that f the Commssoner shoud determne that the amount pad by a
ta payer was ess than shoud have been pad, the baance shoud be pad
upon notce and demand by the coector. Secton 3187 of the Revsed Statutes
provded that f any person was abe to pay ta es whch for 10 days after
notce and demand t negected to pay, the coector mght dstran upon hs
chattes and and. It s qute true that n an acton at aw to recover a ta
the Unted States must prove that the ta Is due . S. v. Rndnkopf, 105
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273
2 0, rt. 1008.
C. S., 418 Crnkenbeard v. . S., 21 Wa., 5), though the assessment makes
a prma face case ( ecker v. I . S., 21 ed. (2), 1003 (C. C. ., 5) T. D.
410 , C. . I-1, 175 ). ut the duty s nevertheess mposed to pay the
assessment and carres the sancton of the dstress whch the ta payer has no
means of avodng.
The bond n sut was a substtute for the duty to pay the assessment and
was ntended to hod off the dstress. The condton was not that the L. O.
ancke Co. shoud pay the ta due but the ta assessed so far as the Com-
mssoner houd not abate t wthn the year. Ths s pan from the anguage
of the rectas whch the condton ncorporated by the word aforesad.
These say that the coector whose duty t s to coect the assessment has
assessed the ta , and that the ta payer wshes hm to suspend the coecton
thereof. The words reed upon by the appeee, unt pad as requred by
aw, do not modfy ths anguage, but refer to the payment of the assessment
requred by secton 250(b). Ths beng true, the bond became due as soon as
the Commssoner dened the rebate, and the defendant was abe for Its prn-
cpa s defaut. (Gray Motor Co. v. . 8., 1 ed. (2), 3 7 (O. C. ., 5) T. D.
8994, C. . I-1. 149): 17. S. v. Onken ros. Co., 23 ed. (2), 3 7 T. D. 4108,
G. . I-2, 270): oCauohn v. Pha. arge Co., 27 ed. (2), 28 T. D. 4199,
C. . II-2, 1 8 .)
The earned dstrct |udge agreed so far, but t seemed to hm that the cr-
cumstances of the bankruptcy estabshed equtes whch forbade the re-
covery. Ths appears to us erroneous for severa reasons. The Unted States
was not estopped by the order e pungng the cam t was not a party to the
bankruptcy proceedngs on the contrary, t steadfasty refused to be drawn
nto them. The surety coud not concude t by a sut whch t woud not under-
take, whatever mght be ts abty for refusng to undertake t. pparenty
the appeee supposes that the case s ke those n whch a person secondary
abe may, when sued, vouch n the prncpa and so f as between them
the fact and e tent of hs abty. (Washngton Gas Lght Go. v. Dstrct
of Coumba. 1 1 U. 8., 31 L. ayer s Sons Co., 2 ed. (2), 02, 07 Oceanc
Steam Nov. Co. v. Compana Transatantc , 134 N. Y., 4 1.) ut that s qute
another matter from estoppng the obgee by a |udgment between the surety
and the prncpa, a resut whch woud take the coecton of the cam out
of the obgee s hands and sub|ect hm to the event of a sut whch he has
no duty to promote.
Moreover, the ssues decded by the bankruptcy court were rreevant n
any event they concerned, and coud concern, ony the queston whether the
ta had been propery assessed, not whether t had been assessed at aL Snce
the condton of the bond was the payment of the assessment, t made no dffer-
ence even f the order of the bankruptcy court had created a good estoppe
aganst the pantff. It seems ndeed a harsh rue that the Government shoud
coect a ta whch ts courts have aready decded not to be due, yet ths s
e acty the consequence of secton 3224 of the Revsed Statutes. (U. S. Code,
Tte 2 , sec. 1 4 Graham v. Dupont, 2 2 U. S., 234 T. D. 348 , C. . II-,
22 Uay Co. v. owers, 25 ed. (2), 37 (0. C. ., 2).) The unmpeded
coecton of a naton s ta es s a condton of ta fe, and It must serve as a
redress to such ctzens as are wronged that they have recourse to ts courts
after payment.
Nor dd t make a dfference that the pantff and the Unted States refused
to prove the cam aganst the trustee n bankruptcy. ( ank v. Satvyer, 177
Mass., 490 (sembe).) We need not consder upon what condtons a surety may
secure the ad of a court of equty to compe the obgee to proceed aganst the
prncpa equty does not do so, when the obgee s deay w not pre|udce the
surety s rghts aganst the prncpa. No such n|ury was possbe here secton
57-1 of the ankruptcy ct gave to the defendant fu protecton, of whch t
avaed tsef, wth the actve assstance of the pantff so far as ay n hs
power.
The most dffcut queston n our vew s whether the pantff coud sue upon
the bond. In the case of paro contracts, the rue seems to be we setted snce
owen v. Norrs (2 Taunt, 374) that when a pubc offcer s the promsor, sut
must be brought n the name of hs prncpa. ( anbrdt/e v. Downe, Mass.,
253 (a wrtten contract) Irsh v. Webster, 5 Me., 171 (a note) aUsombe v.
orthrup, 9 Mnn., 172 (a note) Unted States v. Gordn, 287 ed. Rep., 5 5,
CT0.) So far as we can fnd, the doctrne has never been e tended to specates,
and In the absence of some enabng statute the obgee named n a bond must
sue upon t. ( qutabe Surety Co. v. oard of Commssoners, 25 ed. Rep.,
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250, rt, 1008. 274
773, 775 (C. C. ., 5) yres v. Toand, 7 arrs and ohnson, 3 Wton
Donney, 19 R. I., 113 Peope v.. Ladaw, 120 Mch., 358 armngton v. obert,
74 Me., 41 enrcvs v. nyert, 137 N. Y., 488 Owens v. Oa. L. Ins. ( ., 1 3
y., 507.) Moreover, ths rue has been e tended to prevent sut by the succes-
sors n offce of the obgee, though they are named as such In the bond (Sumner
v. Steward, 2 N. ., 39 (sembe) Stevens v. ay, Oush., 229 McDowe v.
emph, GO N. C, 9 ), and such s no doubt the common aw. On the other
hand, n Tyer v. and (7 ow., 573, 585), Presdent Tyer was aowed to sue
upon bonds gven to Presdent an uren and hs successors on behaf of orphan
Indans, and the decson has never snce that tme been questoned, e cept In
Stevens v. ay ( Cush., 229). The case arose on demurrer to a decaraton
upon whch the defendant assgned fve severa grounds. The court, observng
that the defects assgned were not to the form but to the substance of the
decaraton, nevertheess consdered them severay. The second ground was
that the pantff showed no tte to the bonds or any nterest whch woud
authorze hm to sue, and ts dsposton was summary and wthout dscusson.
Yet, whe t s not cear |ust what the ground of the decson was, the defect
appeared on the face of th decaraton and was certany ground for demurrer
f vad, so that we must concude that the court meant to decare a new rue
n such nstances whch we fee not ony authorzed but bound to accept.
The stuaton s an nstance of the unwngness or ncapacty of the com-
mon aw to recognze an offce as a ega person, and even the cassc e cepton,
a corporaton soe, has been crtczed on hstorca grounds by Mr. . W. Mat-
and wth great acumen and schoarshp. Yet, whatever the source, and how-
ever aen n ts orgn, nobody can queston that fctona personaty got a
pace n our aw, though the tendency to-day be aganst t. Of the convenence
of recognzng an offce as a ega person n cases ke that at bar there can be
no queston: the purpose of such bonds s to create an obgaton n favor of
the ncumbents, as they succeed each other and the e stence of many statutes
whch permt what the common aw dened are evdence of ts need. smar
stuaton arses upon the abatement of an acton brought by a pubc offcer
who des or retres pendente te, and the common aw was foowed n U. 8. v.
outwe (17 Wa.. 04), . 8. v. Chander (122 U. S., 43), Warner aey
Stock Co. v. Smth (1 5 U. S., 28) and U. S. e re ernardn v. utterworth
(1 9 U. S., 00). The ct of ebruary 8. 1899 (U. S. Code, Tte 28, secton
780), was passed to reeve the dffcuty so created and answered so far as
edera offcas were concerned (Caedonan Coa Co. v. aker, 19 U. S., 432),
though t dd not cover the substtuton of State offcas (Puman Co. v. Groom,
231 U. S.. 571), uness the State statutes gave the power ( orham Mfg. Co. v.
Wende. 2 1 U. S., 1). These were a, Indeed, cases where the substtuton
sought was of partes defendant, and there s a dfference n the case of partes
pantff, snce n the frst case the wrongfu act ad s not that of the subst-
tuted defendant, whe the rght sued upon generay n fact devoves upon the
successor, vrtute offc. Uness we hod that Tyer v. and covers the case
we are forced to a curousy anomaous concuson. ad dwards sued the
bond pendng hs term of offce, the pantff coud have been substtuted upon
hs retrement yet dwards must sue to the use of the pantff because e
retred before the wrt ssued, and n such an acton the pantff may not be
substtuted. thngs are ndeed possbe, and perhaps we shoud tenacousy
cng to the etter, but t seems to us that after Congress has decared ts pocy
broady, we are wnrranted n assumng that Tyer v. and covers what mght
otherwse have been regarded as casus omssus.
The |udgment s reversed, and snce the case was tred upon stpuated facts,
the cause s remanded wth nstructons to drect |udgment for the pantff.
rtce 1008: Coecton of ta by sut. III-18-4193
Ct. D. 5
INSOL NCY D R L T S D CISION O SUPR M COURT.
Insovency edera Ta es Prorty Over State Ta es.
Secton 84 of the Revsed Statutes estabshes prorty of pay-
ment of ta es due to the Unted States over those due to a State
In the case of an nsovent debtor.
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275
250, rt. 1008.
Supreme Court or the Unted States.
County of Spokane and County of Whtman, Wash., Pettoners, v. The Unted
States of merca.
On wrt of certorar to the Supreme Court of the State of Washngton.
pr 8, 1929.
OPINION.
Mr. Chef ustce Taft devered the opnon of the court.
Ths case presents the queston of the prorty of payment of debts due to
the Unted States over those due to a State or ts agences aganst the same
fund for State ta es, under secton 84 of the Revsed Statutes of the Unted
States.
In ugust, 1922, a recever for the Cuton-Moyan-Rey uto Co., an nso-
vent corporaton, was apponted by the Superor Court of Spokane County,
Wash. Under the order of the court the recever sod the persona property
of the-corporaton and reduced the same to cash, whch he hed for dstrbuton.
On March 1, 1921, and March 1, 1922, Spokane and Whtman Countes of the
State of Washngton had assessed aganst the persona property of the company
the tota amounts of ,195.88 and 410.3 . respectvey but the ta es were not
pad and the proceeds of the subsequent sae of assets by the recever were
deposted n court. On September 23, 1924, Spokane County assessed the money
n the hands of the recever for the years 1923 and 1924, and eved ta es
thereupon n the tota amount of 1,390.10. On December 20, 192 , Spokane
County made a further assessment and evy on the moneys In the hands of the
recever for the years 1925 and 192 n the tota amount of 1,229.52.
The Unted States Commssoner of Interna Revenue, on ebruary 28, 1928,
and May 2, 1923, assessed edera ncome ta es and penates for the years
1917, 1918, 1919, and 1920 n the tota amount of 70,2 8.58. ut none of these
ta es or penates were pad.
The funds n the hands of the recever are nsuffcent to pay n fu the
cams of the Unted States and Spokane and Whtman Countes. y proper
peadngs, ssues were made presentng the queston of the comparatve pror-
tes n dstrbuton of the fund n hs hands. The superor court hed that the
two countes were entted to prorty not ony as to the county ta es eved
ganst the corporaton but for the county ta es for 1923-1920 assessed on the
money n the recever s hands. On an appea to the Supreme Court of Wash-
ngton, the |udgment was reversed and prorty awarded to the Unted States.
(147 Wash., 17 .)
Secton 34 of the Revsed Statutes provdes n part that whenever any
person ndebted to the Unted States s Insovent, or whenever the estate of
any deceased debtor, n the hands of the e ecutors or admnstrators, s nsuff-
cent to pay a the debts due from the deceased, the debts due to the Unted
States sha be frst satsfed.
The Consttuton, rtce I, secton 8, provdes that Congress sha have
power to ay and coect ta es and to make a aws whch sha be necessary
and proper to carry ths and ts other powers nto e ecuton. rtce I of
the Consttuton decares that the Consttuton and the aws made n pursuance
thereof sha be the supreme aw of the and.
The consttutona vadty of the prorty of cams of the Unted States
aganst Insovent debtors, decared n secton 34 , was estabshed by ths court
very eary n the hstory of the Government. (Unted States v. sher, 2 Cranch,
858.) ut t was not estabshed as between debts owng to the States and
debts owng to the Unted States unt after a crtca controversy betwpen
those who ooked to the mantenance of the supremacy of the Natona Govern-
ment and those who were an ous to sustan undmnshed the power of the
States.
Secton 34 R. S. was secton 5 of an ct entted n ct to provde more
effectuay for the settement of accounts between the Unted States, and
recevers of pubc money, enacted n 1797 (ch. 20 1 Stat., 515). It was
amended by an ct of 1799 (sec. 5, ch. 22 1 Stat., 7 ).
The anguage has been vared very tte snce these orgna enactments.
The whoe ct of 1797 came up for consderaton n Unted States v. sher.
There seems to have been a dvson among the |udges. Chef ustce Marsha
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250, rt. 1008.
27f
devered the opnon of the court, whch uphed the prorty of the Unted
States as aganst the cams of the States and hed that the ct e tended not
ony to revenue offcers and persons accountabe for pubc money, but to
dtbtors generay. The Chef ustce sad (p. 305) :
If the ct has attempted to gve the Unted States a preference In the case
before the court, t remans to nqure whether the Consttuton obstructs Its
operaton.
The Government s to pay the debt of the Unon, and must be authorzed
to use the means whch appear to Itsef most egbe to effect that ob|ect. It
has. consequenty, a rght to make remttances by bs or otherwse, and to take
those precautons whch w render the transacton safe.
Ths cam of prorty on the part of the Unted States w, t has been
sad, nterfere wth the rght of the State soveregntes respectng the dgnty
of debts, and w defeat the measures they have a rght to adopt to secure
themseves aganst denquences on the part of ther own revenue offcers.
ut ths s an ob|ecton o the Consttuton tsef. The mschef suggested,
so far as t can reay happen, s the necessary consequence of the supremacy of
the aws of the Unted States on a sub|ects to whch the egsatve power
of Congress e tends.
Ths case was decded n 1805. Later that year the queston arose In a
Pennsyvana State court. (Unted States v. NohoU, 4 Yeates, 251.) Nchos
was ndebted to the Unted States, and on une 9, 1798, e ecuted a mortgage
to the Unted States supervsor of the revenue for the use of the Unted States.
There was a evy upon the ands of Nchos and they were sod for 14,530.
The money was deposted n the hands of the prothonotary of the court, sub|ect
to the court s order. Nchos made an assgnment for the beneft of hs
credtors and a commsson of bankruptcy ssued aganst hm. The ttorney
Genera reed on ths same tfth secton of the ct of 1797, and the ssue arose
whether n the dstrbuton of that fund the aws of Pennsyvana gvng a
preference to that State n the payment shoud preva over the edera ct of
1797. Mr. ustce Yeates, speakng for the court, sad (p. 259) :
Congress have the concurrent rght of passng aws to protect the Interest
of the.Unon, as to debts dne to the Government.of the Unted States arsng
from the pubc revenue but n so dong, they can not detract from the uncon-
troabe power of ndvdua States to rase ther own revenue, nor nfrnge on,
or derogate from the soveregnty of any ndependent State. The rghts
of the Genera Government to prorty of payment, and the rghts of Indvdua
States, are contempated as subsstng at the same tme, and as perfecty
compatbe wth each other. Ths can ony be effected by gvng preference to
each e stng en, accordng to ts due prorty In pont of tme. I know of
no other mode whereby the severa confctng cams can wth |ustce be
protected and secured.
The coeagues of udge Yeates concurred wth hm, but one of them e pressed
regret that the opnon n the sher case, supra, devered prevousy, had not
been furnshed for comparson. The decsons n the sher and the Nchos
cases created much popuar e ctement, and, unted wth other Issues of a
smar character as between the supporters of the edera Government and
the State Governments, ed to much concern over the open defance of the
decsons of ths court, unt the ssues were dsposed of n the case of Unted
Stat e v. ud|e Peter (5 ( ranch, 115). See the account of the tgaton n
Chares Warren s Supreme Court n Unted States story, voume 1. pages
372, 538 et seq. our years after the decson In the Nchos case, a revew
of that case was sought n ths court on a wrt of error. When It came to be
heard after nne years more of Inacton, t was dsmssed for ack of |ursdc-
ton, on the ground that the record dd not dscose the nsovency of the debtor
so as to make secton 34(1 appcabe, and thus was emnated the edera
queston. (4 Wheat.. 311.)
No queston of the constructon of secton 34 seems to have come before
ths court agan unt n ed v. Unted States (9 Pet., 182) t was sought
to make certan trustees abe from ther own funds, because they had made
dsbursements out of a bankrupt s estate, as to whch the Unted States was
entted to prorty. It was ob|ected that the dstrbuton had been made under
order of the parsh court In an acton n whch the Unted States was not a
party. Ths court hed that the Unted States was not bound to become a party
and sad (p. 201) :
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277
2 0, rt. 1008.
The oea aws of the State coud uot, and dd not, bnd them (the Unted
States) In ther rghts. They coud not create a prorty n favor of other
credtors n cases of nsovency, whch shoud supersede that of the Unted
States.
The power of the Congress of the Unted States n gvng preference to the
debts of the Government of the Unted States over those of the separate States
Is very ceary brought out In Lane County v. Oregon (7 Wa., 71), and may
we be referred to here, because there are some e pressons n that opnon
whch, taken away from ther conte t, have been used to gve an erroneous
vew.
fter dscussng the ta ng powers of the Natona and State Governments,
the court, speakng by Chef ustce Chase, sad of the State power of ta aton
(p. 77):
It s ndeed a concurrent power, and n the case of a ta on the same
sub|ect by both Governments, the cam of the Unted States, as the supreme
authorty, must be preferred but wth ths quafcaton t s absoute. The
e tent to whch t sha be e ercsed, the sub|ects upon whch t sha be
e ercsed, and the mode n whch t sha be e ercsed, are a equay wthn
the dscreton of the egsatures to whch the States commt the e ercse of
the power. That dscreton Is restraned ony by the w of the peope e -
pressed n the State consttutons or through eectons, and by the condton
that t must not be so used as to burden or embarrass the operatons of the
Natona Government.
In Unted Staes v. Snyder (140 U, S., 210), the queston was rased whether
the ta system of the Unted States coud be made sub|ect to the recordng
ens of the States. Ths court sad (p. 214) :
the grant of the power and ts mtaton are whoy nconsstent
wth tho proposton that the States can by egsaton nterfere wth the
assessment of edera ta es .
In Unted States v. San uan County (280 ed., 120 T. D. 3298, C. . 1-1,
S0 ), and n Stover v. Scotch s Coa Co. (4 . (2d), 748 T. D. 3 , C. .
I -1, 325 ), secton 84 came drecty under consderaton, and the prorty
of the Unted States aganst that of the States was fuy sustaned. It was aso
sustaned by an unreported decson of the Dstrct Court of the astern Ds-
trct of Washngton, n a proceedng reatng to the very ta es here nvoved,
but the |udgment was reversed for ack of |ursdcton because the |ursdcton
of the State courts had frst attached. (erryweather v. Unted States, 12 .
(2d), 407.)
Pettoners rey on errs v. Chc-Mnt Gum Co. (14 De. Oh., 232), where
there were severa camants a mortgagee, the State, and the Unted States.
Under R. S. 318 the mortgagee was gven prorty over the Unted States. y
State aw, the State was preferred to the mortgagee. The chanceor aowed the
cams n the order of the State, the mortgagee, and the Unted States, hodng
that when the Government agreed by secton 818 to take rank after the mort-
gagee, t must necessary foow that t s subordnate n rank to those who re
superor to ts mmedate senor. The chanceor observed that hs concuson
arose out of the pecuar facts of the case, and that t was unnecessary for
hm to venture nto the broad fed of consttutona aw. Wthout concurrng
n the concuson of the chanceor, t s enough to say that as there s no such
thrd credtor here, the case s not n pont. Moreover, t Is contended by the
Government that the reatve prortes coud have been mantaned n that
case by settng apart suffcent funds to pay the mortgage before payng the
edera ta es and then provdng for payment of the State ta out of the sum
so set apart.
In Unted States v. Natona Surety Co. (2 4 U. S.. 73), the queston was
whether n the dstrbuton of a bankrupt s estate the Unted States had prorty
over a surety company entted to subrogaton under secton 84 8 of the
Revsed Statutes. Upon ths pont ths court sad (p. 7 ) :
The prorty secured to the Unted States by secton 34 s prorty over
n other credtors that s, prvate persons and other pubc bodes.
fter these cases came the case of Unted States v. Okahoma (2C1 U. 3.,
2 3), n whch the queston was of the appcaton of secton 34 to the quda-
ton of a State bank under the State aw and of prorty of debts of the
Unted States n such case. Ths court found that the secton dd not appy,
because there dd not appear to be Insovency of the bank as used theren.
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50, rt. 1008.
278
ut the court had to consder the meanng and effect of the secton, and
sad (p. 2 0) :
Where the debtor Is dvested of hs property n one of the modes specfed
n the ct, the person who becomes nvested wth the tte s made trustee for
the Unted States and bound frst to pay ts debt out of the debtor s property.
( easton v. armers ank of Deaware, 12 Pet., 102, 133 185.) The prorty
gven the Unted States can not be mpared or superseded by State aw.
Secton 34 was fuy consdered n the case of Prce v. Unted States (2 9
U. S., 492 T. D. 3820, C. . -, 318 ). and ts hstory from 1789 ceary
traced. See aso Unted States v. utterworth- udson Corp. (2 9 U. S.. 504
T. D. 3825, C. . -, 321 ) ramce v. U. S. dety Co. (209 U. S., 483)
Strpe v. Unted States (2 9 U. S.. 503). In these cases the word debts
used n the secton was hed to ncude ta es. The court sad n the Prce case,
ctng an opnon of Mr. ustce Story (p. 499) :
The cam of the Unted States does not rest upon any soveregn preroga-
tve but the prorty statutes were enacted to advance the same pubc pocy
whch governs n the cases of roya prerogatve that s, to secure adequate
pubc revenue to sustan the pubc burdens. (Unted States v. State ank
of North Carona, Pet., 29. 35.) nd to that end secton 84 s to be con-
strued beray. Its purpose s not to be defeated by unnecessary restrctng
the appcaton of the word debts wthn a narrow or technca meanng.
The foregong ctatons certany make t cear that the Unted States has
power, n order to coect ts ta es and ts revenues and debts due t, to confer
prorty for them over those of the States.
There remans ony to determne what prorty t has conferred. It may
wthhod t or vary t, and t has sometmes done so. When n ths case dd
the prorty attach and appy It was sad n Unted States v. Okahoma (2 1
U. S., 253, 2 0) that n a case ke ths t apped when the recever was
apponted. The appontment was on ugust 28, 1922. The ta es and penates
due the Unted States, amountng to 70,2 8.58, were assessed on Pebruay 28,
1923, and May 2. 1923, and therefore the prorty of the Unted States attached
on or before those dates. No assessment by the countes upon specfc property
n the hands of the recever was made unt September 23, 1924. The cam
of the Unted States, therefore, had prorty over such cams.
ssessments for Spokane County for ,195.38. and of Whtman Conwy fur
410.3 , were made n 1921 and 1922 before the recever was apponted. What
s the effect of those cams aganst the fund n court In Wberg v. Yakma
County (132 Wash., 219). t s hed that the amount of the ta s the persona
obgaton of the person who owned the property at the tme of the assessment
and that the ta s to be coected, f the property st contnues n the hands
of the person aganst whom t was assessed, from the property f that specfc
property does not e st n such hands, the amount of the ta may be coected
as a en upon a the rea and persona property of the person assessed, and
may be coected from the other persona or rea property of such person n.
sezure, dstrant, or other specfc proceedngs. It woud seem to foow
that a en for these partcuar ta es coud not nterfere wth the prorty
of the Unted States, for there Is nothng n ths record to show that dstrant
by the sherff or any of the necessary procedure mentoned n the statute
oowed.
rom the |udgment of the ma|orty of the Supreme Court of Washngton n
ths case, we must nfer that the ens of the two countes for the ta es eved
before the recever was apponted and not coected were not specfc. Ths s
reay a State queston. It s e paned by the concurrng opnon of udge
Parker, as foows:
I concur n the resut reached n the foregong ma|orty opnon soey upon
the ground that ths ta debt due to the Unted States, vewed apart from any
supportng en rght, has prorty over ths ta debt due the State of Wash-
ngton, vewed apart from any supportng en rght. It seems to me that each
of these two ta debts prmary came nto e stence by the evy of a ta n
personam, and not by the evy of a ta n rem. I thnk a crtca readng of
the revenue egsaton of the respectve soveregntes, the Unted States and the
State, and the record n ths case showng the manner of evyng In these
respectve ta es, w render ths pan. The revenue egsaton of each has
prescrbed procedure by whch ts personam ta debts may be made specfc ens
upon property of one personay owng such ta debt. Ths record. I thnk,
warrants the concuson that nether the Unted States, the State of Washng-
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too, nor Spokane County for the State of Washngton has ever, by the prescrbed
statutory procedure, perfected Its Inchoate ta en rght aganst any of the
property of whch the funds here n queston are the proceeds. I therefore vew
these respectve ta debts whoy apart from any supportng en rght. Thus I
thnk the queston of whch sha be frst satsfed out of these funds s deter-
mnabe by the anguage of secton 34t , quoted n the ma|orty opnon, and
hence must be determnabe n favor of the Unted States.
Whatever mght have been the effect of more competed procedure In the
perfectng of the ens under the aw of the State, upon the prorty of the
( nted States heren, the atttude of the State court reeves us of consderaton
of t.
udgment affrmed.
rtce 1010: Lens and enforcement of ta ens by b
n equty.
R NU CT Of 1921 ND PRIOR S NT CTS.
Notce of ta en fed by a coector. (See G. C. M. 5432,
page 134.)
rtce 1011: Compromse of ta cases. I1I-7-4107
( so Secton 214(a), rtce 105.) Ct. D. 39
INCOM ND PRO ITS T 8 R NU CTS O 191 ND 191T D CISION
O SUPR M COURT.
1. Compromse greement wth Subordnate Offca or
ureau.
n nforma agreement between a representatve of a ta payer
and a subordnate offca of the ureau of Interna Revenue
whereby dsputed tems of ta abty are ad|usted aud whch
s put nto effect by the fng of an amended return and payment
of the ta so agreed upon does not precude such ta payer from
recoverng by sut any porton of the ta so pad n e cess of that
egay due.
2. Deductons Compensaton Percf.ntaok or Profts.
Unusua and e travagant amounts pad by a corporaton to ts
offcers In the guse of compensaton for servces but havng no
substanta reaton to the measure of ther servces and beng
whoy dsproportonate to ther vaue are not n reaty payment
for servces and can not be regarded as ordnary and necessary
e penses wthn the meanng of secton 12(a) of the Revenue
ct of 191 even though pad n accordance wth an agreement
between the corporaton and ts offcers.
uprkme Court of the Unted Sta.ks.
otany Wonted M , Pettoner, v. The Unted Statet.
On wrt of certorar to tho Court of Cams.
anuary 2, 1929.
opnon.
Mr. ustce Sanford devered the opnon of the court.
The otany Worsted Ms, a New ersey corporaton engaged In the manu-
facture of wooen and worsted fabrcs. m de a return of ts net ncome for
the ta abe year 1917 under the Revenue ct of 191 and the War Revenue
ct of 1917. y secton 12(a) of the Revenue ct t was provded that In
3133 29 19
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280
ascertanng the net ncome of a corporaton organsed to the Unted States
there shoud be deducted from ts gross ncome a the ordnary and neces-
sary e penses pad wthn the year n the mantenance and operaton of Its
busness and propertes. Under ths provson the Ms deducted amounts
aggregatng 1,5 5,739.39 pad as compensaton to the members of ts board
of drectors, n addton to saares of 9,000 each. It pad an ncome ta
computed n accordance wth ths return. Thereafter, n 1920. the Comms-
soner of Interna Revenue assessed an addtona ncome ta aganst t. Of
ths. 450,994.0 was attrbutabe to hs dsaowance of 783, 5 .00 of the
deducton camed as compensaton pad to the drectors, on the ground that
the tota amount pad as compensaton was unreasonabe and the remander
of the deducton as aowed represented far and reasonabe compensaton.
The Ms, after payng the addtona ta , fed a cam for refund of ths
450,994.0 . The cam was dsaowed: and the Ms thereafter, n Septem-
ber, 1924, by a petton n the Court of Cams, sought to recover ths sum
from the Unted States, wth nterest aegng that the dsaowance of part
of the compensaton pad the drectors was Iega. fter a hearng on the
merts the court, upon ts fndngs of fact, dsmssed the petton upon the
ground that the addtona ta was mposed under an agreement of sette-
ment whch prevented a recovery. ( 3 C. Cs.. 405.) nd ths wrt of cer-
torar was granted.
The frst queston presented Is whether the Ms s precuded from recover-
ng the amount camed by reason of a settement.
Secton 3229 of the Revsed Statutes provdes that:
The Commssoner of Interna Revenue, wth the advce and consent of
the Secretary of the Treasury, may compromse any cv or crmna case
arsng under the nterna-revenue aws nstead of commencng sut thereon
and. wth the advce and consent of the sad Secretary and the recommenda-
ton of the ttorney Genera, he may compromse any such case after a sut
thereon has been commenced. Whenever a compromse s made n any case
there sha be paced on fe n the offce of the Commssoner the opnon of
the Soctor of Interna Revenue, wth hs reasons therefor, wth
a statement of the amount of ta assessed, and the amount actuay
pad n accordance wth the terms of the compromse.
The Government dd not cam that there had been a compromse under ths
statute, but contended n the Court of Cams that, rrespectve thereof, an
agreement of settement had been entered nto between the Ms and the Com-
mssoner under whch the Ms had accepted the parta dsaowance as to
the compensaton pad the drectors, and had aso receved concessons as to
other dsputed tems the beneft of whch t st en|oyed, and was therefore
estopped from seekng a recovery.
s to ths matter the fndngs of fact show that after tte Ms had pad the
amount of the ta shown by ts orgna return an nvestgaton of ts books
dscosed to the Commssoner the necessty of makng an addtona assessment,
to be determned by the settement of questons reatng to the compensaton
(or, as t was termed, bonus) pad to the drectors, deprecaton charged off on
ts books, and reserves charged to e penses. fter much correspondence and
numerous conferences e tendng over severa months between the attorney and
assstant treasurer of the Ms and the chef of the speca audt secton of the
ureau of Interna Revenue and others of hs offca assocates, a compromse
was agreed to as to a the dfferences, by whch the amount to be aowed as
reasonabe compensaton to the drectors and as deprecaton were agreed upon,
and the cam as to reserves was aowed. Thereupon the Ms prepared and
fed an amended return based upon the fgures agreed upon n the conferences,
wth documentary evdence whch t had agreed to furnsh: and the addtona
assessment was made In accordance wt (hs return.
The court, n sustanng the Government s contenton, sad:
Wth the payment of the ta under the crcumstances surroundng ths case
the agreement, whch s mentoned n the record as a genteman s agreement,
became n ega effect an e ecuted contract of settement and that, as the
Ms was seekng to recover on account of the partcuar tem whch t re-
garded as unfavorabe to ts nterests, and at the same tme hod to the advan-
tage derved from the settement of other tems n dspute Invoved n the same
genera settement, t shoud not be aowed a recovery.
The Ms contends that the Commssoner had not been gven, at the tme n
queston, any authorty, ether n e press terms or by mpcaton, to compromse
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ta eases e cept as provded In secton 8229 that ths statute u grantng such
authorty under specfc mtatons as to the method to be pursued, negatved
hs authorty to effect a vad and bndng agreement In any other way thut as
the Government coud not have been estopped by the unauthorzed transactons
of ts offcas, the Ms kewse coud not be estopped thereby and further,
that the fndngs are nsuffcent to estabsh an estoppe.
The Government does not here chaenge any of these contentons. In the
bref for the Unted States fed n ths court the Soctor Genera states that
the queston whether such an nforma ad|ustment of ta es as was made In ths
case Is bndng on the ta payer s submtted for decson In deference to t e
opnon of the Court of Cams and the mportance of the queston but no argu-
ment s made n support of the Government s prevous contenton that the Ms
was estopped from questonng the settement. nd, on the contrary, t s stated
that efore and snce the date of the aeged settement n ths case Congress
has evdenty proceeded on the theory that no ad|ustment of a ta controversy
between representatves of the ureau of Interna Revenue and a ta payer
s bndng uness made wth the formates and wth the approva of the offcas
prescrbed by statute. The authorty of offcers of the Unted States to compro-
mse cams on behaf of or aganst the Unted States s strcty mted.
The statutes whch authorze concusve agreements and settements to be
made n partcuar ways and wth the approva of desgnated offcers rase the
nference and ad|ustments or settements made In other ways are not bndng.
nd, further, that No ground for the Unted States to cam estoppe s ds-
cosed n the fndngs.
Independenty of these concessons, we are of the opnon that the nforma
settement made n ths case dd not consttute a bndng agreement. Secton
8229 authorzes the Commssoner of Interna Revenue to compromse ta cams
before sut, wth the advce and consent of the Secretary of the Treasury, and
requres that an opnon of the Soctor of Interna Revenue settng forth the
compromse be fed n the Commssoner s offce. ere the attempted settement
was made by subordnate offcas In the ureau of Interna Revenue. nd
athough t may have been ratfed by the Commssoner n makng the addtona
assessment based thereon, t oes not appear that It was assented to by the
Secretary, or that the opnon of the Soctor was fed n the Commssoner s
offce.
We thnk that Congress ntended by the statute to prescrbe the e cusve
method by whch ta cases coud he compromsed, requrng therefor the con-
currence of the Commssoner and the Secretary, and prescrbng the formaty
wth whch, as a matter of pubc concern, t shoud be attested n the fes of
the Commssoner s offce and dd not ntend to ntrust, the fna settement of
such matters to the nforma acton of subordnate offcas n the ureau.
When a statute mts a thng to be done n n partcuar mode, t Incudes the
negatve of any other mode. (Raegh f O. Raroad o. v. Red, 13 Wa.,
2 9, 270 Scott v. ord, 52 Or., 288, 290.)
It Is pan that no compromse Is authorzed by ths statute whch s not
assented to by the Secretary of the Treasury. (Leach v. Nchos (C. C. .),
23 . (2d), 275, 277.) or ths reason, f for no other, the nforma agreement
made In ths case dd not consttute a settement whch n tsef was bndng
upon the Government or the Ms. nd, wthout determnng whether such
an agreement, though not bndng n tsef, may when e ecuted become, under
sume crcumstances, bndng on the partes by estoppe, t suffces to say that
here the fndngs dscose no adequate ground for any cam of estoppe by the
Unted States.
We therefore concude that the Ms was not precuded by the settement from
recoverng any porton of the ta to whch t may otherwse have been entted.
Ths brngs us to the queston whether on the fndngs of fact the Ms s
entted to recover the porton of the addtona ta attrbutabe to the ds-
aowance of 783,05 .00 of the amount pad to the drectors whch t had
camed as a deducton.
Under secton 12(a) of the Revenue ct of 1910 the Ms was not entted
to ths deducton uness the amount pad consttuted a part of ts ordnary
and necessary e penses n the mantenance and operaton of ts busness and
propertes. nd n ths sut the burden of estabshng that fact rested upon
It n order to show that t was entted to the deducton whch the Comms-
soner had dsaowed, and that the addtona ta was to that e tent egay
assessed. The Court of Cams, however, made no fndng that the amount ds-
aowed by the Commssoner consttuted a part of the ordnary and necessary
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250, rt, 1011.
282
e penses of the Ms. The fndngs are sent as to ths utmate fact essenta
to a recovery by the Ms and ony show certan crcumstanta facts reatng
to the payment made to the board of drectors.
Where the Court of Cams does not make a fndng upon the utmate ques-
ton of fact upon whch the rghts of the partes depend, but merey makes
fndngs as to subsdary crcumstanta facts whch bear upon t, such fndngs
w not support a |udgment uness the crcumstanta facts as found are such
that the utmate fact foows from them as a necessary nference and may be
hed to resut as a concuson of aw. See Unted States v. Pugh (99 U. S,
2 5, 2 9) Wnton, v. mos (255 U. S., 373, 395).
The fndngs show that fur many years t has been the practce of many
corporatons engaged n the wooen manufacturng busness to base the com-
pensaton of the drectors and e ecutve offcers upon a percentage of profts.
Upon the organzaton of the Ms n 1890 the stockhoders adopted a by-aw
provdng that at the cose of the busness year the net profts shoud be ds-
trbuted by payng a dvdend of per cent to stockhoders and appyng the
baance remanng as foows: (a) Pacng 5 per cent n a reserve fund (b)
payng 25 per cent as a bonus to the board of drectors and (c) payng 70
percent as addtona dvdend to the stockhoders. The stockhoders amended
ths by-aw n 1903 by ncreasng the bonus of the board of drectors to 40 per
cent n 1905, by provdng, nstead of a bonus, that compensaton equa
to 40 per cent shoud be pad to the board of drectors for ther servces : and
n 1908, by reducng such compensaton to 32 per cent (that s, 30.08 per cent of
the net profts). Ths by-aw remaned n force unt after the ta abe year
1917 and durng the entre perod compensaton was pad to the drectors
n accordance therewth. rom the outset the determnaton of the tota
amount of profts and of the aggregate amount payabe to the board of drectors
was made by the board tsef and t kewse determned the bass of the
apportonment among the severa drectors of the aggregate amount payabe
to the board as a whoe. No contract was made wth any drector as to what
hs compensaton shoud be other than such as was Imped from hs eecton
and servce as a member of the hoard n accordance wth the by-aw and the
customary practces of the company, whch each knew. t a tmes each
drector aso hed a poston as an e ecutve offcer or manager of a department
of the Ms.
The gross assets of the Ms ncreased from 1,114,149. 3 n 1890 to 28,893.-
777.12 n 1917 and ts net assets, ncudng reserves, from 37,13 .35 to
10,999,8 2.48. Its net ncome ncreased from 784,334.44 n 1910 to 7,953,512.80
n 1917 and the amount pad the drectors, In pursuance of the by-aw,
Increased, wth some fuctuatons, from 2 8,444.19 n 1910 to 400,935.1S n
1915. 93, 17.1 n 191 , and 1,5 5,739.39 n 1917. In 1917 there were 10
members of the board, so that f the tota amount had been apportoned rataby,
each woud have receved 15 ,573.93. nd n that year each member of the
board, n addtot to the part of the aggregate n fact apportoned to hm
Indvduay, aso receved a saary of 9,000.
The fndngs do not show the nature or e tent of the servces rendered by
the board of drectors or ts ndvdua members, eher as drectors, e ecutve
offcers, or department managers the amounts apportoned and pad to each
drector the bass of apportonment, whether the nature and e tent of ther
ndvdua servces, the amount of ther stock hodngs, or otherwse the
vaue of ther servces or the reasonabeness of the purported compensaton.
We do not fnd t necessary to determne here whether the amounts pad by
a corporaton to ts offcers as compensaton for ther servces can not be
aowed as ordnary and necessary e penses wthn the meanng of secton
12(a) merey because, and to the e tent that, as compensaton, they are
unreasonabe n amount. owever ths may be, t s cear that e traordnary,
unusua, and e travagant amounts pad by a corporaton to ts offcers n the
guse and form of compensaton for ther servces, but havng no substanta
reaton to the measure of ther servces and beng uttery dsproportoned to
ther vaue, are not n reaty payment for servces, and can not be regarded
as ordnary and necessary e penses wthn the meanng of the secton and
that such amounts do not become part of the ordnary and necessary e -
penses merey because the payments are made n accordance wth an agree-
ment between the corporaton and ts offcers. ven f bndng upon the
partes, such an agreement does not change the character of the purported
compensaton or consttute It. as aganst the Government, an ordnary and
necessary e pense. (Compare 20 Treas. Dec., Int. Rev., 330 acobs rf Dores
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250, rt, 1012
T. nderson (C. C. .). 228 ed.. 505, 500 Unted States v. Phadepha nt-
tng Ms Co. (C. C. .), 2T3 ed., 57, 058 T. D. 3203, C. . 5, 210 and
ecker ros. v. Unted States (C. C. .), 7 . (2d), 3, 0.)
In the ght of ths prncpe, t Is cear that the fndngs do not show, as a
matter of necessary nference resutng as a concuson of aw. that the amount
pad the drectors n e cess of the 782,083.33 aowed by the Commssoner
consttuted part of the ordnary and necessary e penses of the Ms. On the
contrary, as ths amount so greaty e ceeded the amounts whch, as a matter
of common knowedge, are usuay pad to drectors for ther attendance at
meetngs of the board and the dscharge of ther customary dutes, and was
much greater than the amounts that had been pad n pror years, and as there
s no showng as to the amounts pad the ndvdua drectors, n addton to
the saares of 9,000 whch each receved presumaby for s servces as an
e ecutve offcer or department manager or as to the nature, e tent, or vaue
of ther servces, the fndngs rase a strong nference that the unusua and
e traordnary amount pad to the drectors was not n fact compensaton for
ther servces, but merey a dstrbuton of a f ed percentage of the net profts
that had no reaton to the servces rendered.
Therefore, as the Ms has not sustaned the burden of showng that the
amount dsaowed by the Commssoner was n fact part of ts ordnary and
necessary e penses, the |udgment must, for ths reason, e affrmed.
M-. ustce omes agrees wth the resut.
rtce 1012: ssessment of ta . III-4-4082
I. T. 2451
R NU CT O 1918.
though the orgna consodated return may have been ncom-
pete and ncorrect as to detas, t contaned suffcent facts respect-
ng the gross ncome and aowabe deductons and credts of the M
Company, an affated subsdary, to consttute the return requred
of that corporaton and started the runnng of the statute of mta-
tons for assessment of the ta due from that corporaton. The f-
ng of an amended consodated return dd not operate to e tend
the perod of mtaton.
Durng the year 1918 the M Company and certan other corpora-
tons were affated, as subsdares, wth the O Company as the
parent company. On September , 1919, a consodated return. orm
1120, was fed for 1918. on whch the name of the M Company ap-
peared as one of the subsdares. Ths return showed a tota ta of
38a doars, aganst whch an tem of an doars, representng an aeged
credt due the corporaton, was apped, and the baance of 37a doars
was assessed.
n amended consodated return for 1918 showng a tota ta of
ony 20# doars was fed uy . 1923. Durng March, 1924. a
defcency of 122a doars was assessed aganst the parent company on
the bass of the consodated returns. Durng 192 and 1927 over-
assessments aggregatng 121a doars n favor of the parent company
were aowed and schedued. n assessment of 2a doars was made
aganst the M Company durng uy. 1927, such assessment ben
based on an aocaton of the ta then determned to be due to the
varous members of the affated group. though more than fve
years had eapsed snce the orgna return was fed n September.
1919, and no wavers had been fed by the M Company, the poston
was taken that, as the orgna return was ncompete, the statute of
mtatons for assessment dd not begn to run unt the compete
amended return was fed n uy, 1923, and that the assessment of
2a doars was, therefore, vady made.
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252, rt. 103 . 284
n e amnaton of the orgna consodated return dscoses that
a schedues reatng to ncome and deductons were propery and
competey fed n, and that the return was accompaned by severa
supportng schedues whch show n deta the tems of gross ncome,
deductons, and credts and the baance sheets of each company, n-
cudng the ta payer company. The amended consodated return
was made out n substantay the same manner as the orgna re-
turn, e cept that addtona deductons and credts were camed and
certan mnor changes made, and t was accompaned by amended
and addtona schedues whch, f accepted, woud have had the
effect of materay reducng the ta as shown by the orgna return.
Whe the orgna return may have been ncompete and even
ncorrect as to some of the detas, t contaned suffcent facts respect-
ng the gross ncome and aowabe deductons and credts of the M
Company to consttute the return requred of that corporaton by
secton 239 of the Revenue ct of 1918 and, accordngy, started the
runnng of the statute of mtatons for assessment of the ta due
from that corporaton. The fng of the amended consodated re-
turn dd not operate to e tend the perod of mtaton. Reference
s made n ths connecton to the decson of the Unted States oard
of Ta ppeas n the case of . . a Co., Inc. (3 . T. ., 1172),
whch has been acquesced n by the Commssoner (C. . I-1, 3).
In vew of the foregong, t s hed that the statutory perod of
mtaton for assessment of the ta due from the M Company for
the year 1918 e pred fve years from the date the orgna con-
sodated return was fed, or on September . 1924. and that assess-
ment of the defcency of 2a doars was, therefore, barred when the
amount was assessed n uy, 1927.
rtce 1012: ssessment of ta .
R NU CT O 1921.
Commencement of mtaton perod where tentatve return fed.
(See Ct. D. 35, page 209.)
S CTION 252. R UNDS.
rtce 103 : Cams for refund of ta es erroneousy
coected.
NU CTS O 1 18 ND 1821.
orm 1118. (See G. C. M. 053, page 112.)
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285
301, rt. 718.
TITL m. W R-PRO ITS ND C SS-PRO ITS T
OR 1921.
P RT II. IMPOSITION O T .
S CTION 301. IMPOSITION O T .
Where the Urst return of a corporaton under the Revenue ct of
1917 ncuded ncome receved from November 15. I91G. the date of
ts ncorporaton, to May 31, 1917. the return was no for a ta abe
year of 12 months, and the war e cess profts ta for that year
s that proporton of the ta computed upon the net ncome re-
ceved durng such fsca year whch the tme from anuary 1, 1917,
to May 31, 1917, bears to 12 months. The same rato shoud aso
e used In computng the 4 per cent ncome ta Imposed by secton
4. Tte I, of the Revenue ct of 1917.
n opnon s requested n the case of the M Corporaton, the ta -
payer, as to the proper fracton to be used n determnng the amount
of the war e cess profts ta and the 4 per cent war ncome ta m-
po ed by the Revenue ct of 1917 for the perod ended May 31, 1917.
The ta payer corporaton, havng estabshed a fsca year endng
May 31, fed ts frst return, whch ncuded ncome receved from
November 15. 191 . the date of ts ncorporaton, to .May 31, 1917.
It s the contenton of the ta payer that the porton of the war e cess
profts ta appcabe to that part of the fsca year fang wthn
the caendar year 1917 shoud be based on the rato of the number of
months fang wthn 1917 to 12 months, nstead of to the number
of months n the perod durng whch the ncome ncuded n the
return was receved, namey, G1/ months. The same contenton s
made wth respect to the computaton of the 4 per cent ta .
Tte II of the Revenue ct of 1917 mposes a war e cess profts ta
upon the ncome of every corporaton n addton to the ncome ta
mposed under the Revenue cts of 191 and 1917.
In secton 200 of the 1917 ct t s stated that the term ta abe
year means the 12 months endng December 31. e ceptng n the
case of a corporaton or partnershp whch has f ed ts own fsca
year, n whch case t means such fsca year. It s aso stated that the
frst ta abe year sha be the year endng December 31, 1917. e cept
that n the case of a corporaton or a partnershp whch has f ed
ts own fsca year, t sha be the fsca year endng durng the caen-
dar vear 1917. It s provded, however, that f a corporaton or part-
nershp pror to March 1 1918. makes a return coverng ts own fsca
year, and ncudes theren the ncome receved durng that part of
the fsca year fang wthn the caendar year 191 . the ta for such
ta abe year .sha be that proporton of the ta computed upon the
et ncome durng such fu fsca year whch the tme from anuary
1,1917. to the end of such fsca year bears to the fu fsca year.
The foowng artce of Reguatons 41. reatve to the war e cess
profts ta , s of mportance n consderaton of the queston.
rtce 718: Iustraton of computaton where
return s for perod of ess than 12 months.
III-11-4142
G. C. M. 5 95
R NU CT O 1917.
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801, rt. 718.
28
bt. 19. Computaton of ta for fsca year, part of whch fas wthn the
caendar year WI . If a corporaton or partnershp pror to March 1, 1918,
makes a return for a fsca year, part of whch fas wthn the caendar year
191 , the ta for the frst ta abe year sha be that proporton of the ta
computed upon the net ncome for such fsca year whch the number of
months from anuary 1, 1917, to the end of such fsca year bears to the entre
number of months n such fsca year.
In the case of Lous yme Pantng Manufacturng Co. v. Com-
mssoner (5 . T. .. 910, C. . II-1, 15), the oard of Ta p-
peas hed that where a corporaton on a caendar-year bass ds-
soved March 31. 1919, the return whch ncuded the ncome from
anuary 1 to that date was a return for a fu year of 12 months,
and the ta payer was entted to the entre specfc e empton of
3,000 under the Revenue ct of 1918. The queston whether a return
ncudng the ncome receved by a decedent up to the date of hs
death, whch occurred durng the ta abe year, was a return for a
fu year or for ony a fractona part of a year was consdered by
the Crcut Court of ppeas for the Second Crcut n ankers 1
Trust Co. v. owers (295 ed., 89, T. D. 3547, C. . III-, 237).
The court hed that the return, whch ncuded the decedent s ncome
receved from anuary 1, 1921, to pr 4, 1921, the date of death,
and whch was fed for the decedent by hs e ecutors, was a return
for the fu caendar year and not a return for a perod of ess than
year. The decsons referred to are deemed controng n the case
of a return fed bv a corporaton for the ta abe year n whch t was
ncorporated. (See I. T. 2239. C. . I -2, 58 G. C. M. 2292. C. .
I-2, 78 and G. C. M. 2080, C. . I-2, 288.)
It foows therefore n the nstant case that the ta payer s frst
return, whch ncuded ncome receved from November 15, 191 . the
date of ts ncorporaton, to May 31, 1917, was a return for a ta abe
year of 12 months rather than a return for a fractona part of a year.
Snce the ta payer s return for the perod ended May 31, 1917, was
for a ta abe year of 12 months, the ta shoud be computed on the
tame bass and n the same manner as f the corporaton had been n
e stence durng the entre 12-month perod.
ppyng the foregong prncpes, the war e cess profts ta for
the ta abe year ended May 31, 1917. s that proporton of the ta
computed upon the net ncome receved durng the fsca year whch
the tme from anuary 1, 1917, to May 31, 1917, namey, 5 months,
bears to 12 months. The same rato shoud aso be used n comput-
ng the 4 per cent ncome ta mposed by secton 4 of Tte I of the
Revenue ct of 1917.
C. M. Cakest,
Genera Counse, ureau of Interna Revenue.
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287 1318, 1319, and 1320, rt. 1050.
TITL III. G N R L DMINISTR TI PRO ISIONS.
S CTIONS 1318. 1319. ND 1320. LIMIT TIONS
UPON SUITS ND PROS CUTIONS.
federa ta es mtatons upon suts decson of couut.
Sut Lmtaton Cam for Refund.
Where strct compance wth secton 322 of the Revsed
Statutes as amended s nssted upon by the Government a sut
can not be mantaned for the recovery of any ta aeged to have
been egay coected uness a pror cam for a refund has been
duy fed, and a sut can not be mantaned upon a ground dfferent
from that presented n such cam for refund.
Dstrct Court of the Unted States for the Western Dstrct of Mssour,
Western Dvson.
Menrath rokerage Co., pantff, v. oaft Crooks, Coector of Unted States
Interna Revenue, S th Coecton Dstrct of Mssour, defendant.
Pantff brngs ths acton to recover 14,052.29, wth nterest, aeged to
have been wrongfuy assessed and coected us ncome and e cess-profts ta
for 1917. The tota amount assessed aganst pantff, after an earer payment
whch the pantff vountary made and whch s not n queston, was, for the
year mentoned, 23,985. 0. The pantff pad ths amount under protest
une 30. 1923. September 11, 1923, pantff fed a cam for refund of the
amount pad, whch was aowed to the amount of 7,049.28 and on May 19,
1924, re|ected as to the baance. It s conceded n effect that pantff s
entted to |udgment f, as t cams, t shoud have been assessed under secton
209 of the Revenue ct of October 3, 1917, as a trade or busness havng no
nvested capta or ony a nomna capta uness t shoud be dened |udg-
ment because of faure of compance by t wth the requrements of secton
322 of the Revsed Statutes as amended by the Revenue ct of 1924.
I sha frst consder the second of the two questons nvoved.
1. Secton 322 , as amended (43 Stat., 343), provdes that
No sut or r roeeedng sha tt- mantaned n any court for the recovery of
any nterna revenue ta aeged to have been erroneousy or egay assessed
or coected unt a cam for refund or credt has been duy fed
wth the Commssoner of Internu Revenue, accordng to the provsons of aw
In that regard, and the reguatons of the Secretary of the Treasury estabshed
n pursuance thereof.
Undoubtedy ths means, where strct compance wth the statute s nssted
upon by the Government, not ony that a sut can not be mantaned uness a
pror cam for a refund has been duy fed but that a sut can not be mantaned
npen a cam of a dfferent nature than that shown to have been fed. So t
has been hed. (Tucker v. e ander. 15 ed. 2d). 35 . 357 ( ghth Crcut
Court of ppeas T. D. 3973. C. . I-1. 2S7 ).) Whe ths case ater was
reversed by the Supreme Court of the Unted States (275 U. S., 228), the decson
reversng t does not queston the prncpe stated but hods that the Govern-
ment may by stpuaton wave strct compance wth the statute.
The pantffs petton as amended peads the fng and re|ecton of three
psrate and dstnct cams. It peads, n the twefth paragraph
That on or about September 10, 1923. pantff fed wth the
defendant a cam for refund whch sad cam for refund was
aowed for 7, 49.28 and re|ected for 1 ,33 .32 on May 19, 1924.
rtce 1050: Suts for recovery of ta es
erroneousy coected.
III-7-4111
Ct. D. 42
September 12. 1928.
OPINION.
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1318, 1319, and 1320, rt, 1050. 288
nd t peads n the same paragraph (by way of amendment aowed at the
ncepton of the tra)
That the pantff dd on pr 10. 1925. te a cam wth the
Commssoner of Interna Revenue requestng that pantffs cam for refund
be reopened, reconsdered and aowed on the bass of cassfcaton under
secton 209 of the Revenue ct of 1917 and that pantff dd
on or about pr 29, 1925, fe an addtona etter wth the Commssoner of
Interna Revenue protestng aganst the decson of the Commssoner contaned
n hs etter of pr 23, 1925. refusng to reconsder ths case for the year
1917 under the provsons of secton 209 of the Revenue ct of 1917
and more than s months have eapsed snce the cams contaned n the etters
of pr 10, 1925. and pr 29, 1925. were fed.
So three cams for refund are aeged that of September 10. 1923. that of
pr 10, 1925, and that of pr 29. 1925. The defendant admts that the aega-
tons are suffcent to gve the court |ursdcton.
s to the proof concernng the cams for refund.
The agreed statement of facts sets out that the cam of September 10. 1923,
was made. The cam tsef pantff dd not ntroduce. Defendant, however,
offered t on cross-e amnaton. It was on Treasury Department Interna
Revenue Servce orm 843 and states as grounds for refund
ssessment under secton 209 of the Revenue ct of 1917 was dened ths
corporaton upon a mere techncaty, and the amount of ta due shoud, there-
fore, be determned under secton 210 of the Revenue ct of 1917.
The aeged cam of pr 10, 1925, was sought to be proved by the ntroduc-
ton of a etter of that date from pantffs attorneys to the Commssoner of
Interna Revenue, n whch, after acknowedgment of recept of a etter of
pr 7 re|ectng cams for further aowance, Is n the foowng anguage:
We beeve the ta payer s entted to cassfcaton under secton 209 of
the Revenue ct of 1917. Our poston s supported by cases cted .
It s, therefore, respectfuy requested that ths case be reopened, recon-
sdered and aowed on the bass of the cassfcaton under secton 209 of
the Revenue ct of 1917 . Otherwse our cent has nstructed us to
nsttute sut .
The aeged cam of pr 2S , 1925. was sought to be proved by the ntro-
ducton of a etter of that date from pantff s attorneys to the Commssoner of
Interna Revenue, n whch, after a protest aganst the Commssoner s decson,
refusng reconsderaton, s the anguage
The queston of the rght of our cent to assessment as a persona servce
corporaton under the Revenue ct of 1918 for the years 1918, 1919, and 1 20
s pendng before the Soctor of Interna Revenue .
In vew of the pendency for the years 1918, 1919, and 1920 n the offce of
the Soctor, t s requested that you refer a the papers n the case for the
year 1917 to the Soctor s offce n order that t may be consdered at the same
tme.
In ths connecton we beeve you must agree that our cent s entted to
further consderaton of hs ease for the year 1917 n vew of r ctng cases I.
To ths ast etter the Commssoner of Interna Revenue reped as foows,
under date of May 7, 1925:
umphreys Day,
Munsey udng,
Washngton, D. C.
Srs : Recept s acknowedged of your etter dated pr 29, 1925, requestng
that the fe of Menrath rokerage Co.. ansas Cty, Mo., for the year 1917, be
forwarded to the Soctor of Interna Revenue for consderaton wth the re-
turn of that corporaton for years 1918, 1919, and 1920. for whch yeurs per-
sona servce cassfcaton under the provsons of secton 200 of the Revenue-
ct of 1918 was camed.
The records of the ureau ndcate that the 1917 case of Menrath rokerage
Co. was prevousy consdered by the Commt tee on ppeas and Revew and the
ta payer s cam for assessment of e cess profts ta under the provsons of
secton 209 of the Revenue ct of 1917 dened. The ta was assessed and
a cam for refund fed, the bass of whch was request for reef under the
provsons of secton 210 of the Revenue ct of 1917. Snce the queston of
assessment under secton 209 of the Revenue ct of 1917 has prevousy been
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289 1318, 1319, and 1320, rt. 1050.
gven consderaton n a rung by the Commssoner, and no evdence has been
submtted to warrant a change n the decson rendered, your request to have
the 1917 fe forwarded to the Soctor of Interna Revenue s dened.
Respectfuy,
. G. rght, Deputy Commssoner.
y . . Cutb, Read of Dvson.
Now, the present sut s based upon secton 209. The cam for refund of
September 10, 1923, was based on secton 210. That cam, therefore, does not
support ths sut under the authorty of the Tucker case, supra. re the etters
of pr 10, 1925, and pr 29, 1925, suffcent Was ether a cam for
refund fed wth the Commssoner of Interna Revenue accordng to
the provsons of aw n that regard, and the reguatons of the Secretary of the
Treasury estabshed n pursuance thereof
The queston dvdes tsef thus: Were the etters cams for refund at a
f cams for refund, were they accordng to the provsons of aw and the
reguatons of the Secretary of the Treasury
It seems to me that n no true sense can ether of these etters be caed a
cam for a refund. They do nut even purport to be cams. The frst s a
request for the consderaton of a re|ected cam and ou a ground dfferent from
that stated n the orgna cam. The second s u request for a reference of
the whoe matter to the Soctor of the Treasury Interna Revenue . nd
whether they were cams, certany they were not n accordance wth the
reguatons.
rtce 103 , Reguatons 2, Treasury Department, Unted States Interna
Revenue, provdes that
Cams by the ta payer for the refundng of ta es and penates erroneousy
or egay coected sha be made on orm 843. the facts reed
upon n support of the cam shoud be ceary set forth under oath.
The affdavt may be made by an agent of the person assessed, but n such case
a power of attorney must accompany the cam .
None of the requrements of ths artce of the reguatons was comped wth
n connecton wth ether the second or thrd aeged cam for refund.
Notwthstandng the postve mandate of the statute that no sut sha be
mantaned unt a cam for refund has been duy fed
accordng to the reguatons of the Secretary of the Treasury
t s urged here that nevertheess ths sut can be mantaned because pantff s
contenton that t shoud be assessed under secton 209 was severa tmes pre-
sented and was as often re|ected before the sut was fed. The reason of the
rue, t s sad, was fuy satsfed by the facts. The cam that the assessment
shoud be made under secton 209 was urged, t s contended, frst before the
tu was coected at the tme of the assessment, athough of that there seems
no proof n the record. It was urged, second, n a bref submtted n connecton
wth the cam for refund of September 10, 1923, athough of that aso there s
no proof n the record. It was urged for a thrd tme and agan for a fourth
tme n the etters of pr 10, 1925, and pr 29, 1925. So, t s argued, the
cam of appcabty of secton 209 was fuy and ceary paced before the
Commssoner and had been fuy consdered and re|ected by hm.
ut t was not suffcent that what was done was wthn the reason o the rue.
Men must turn square corners when they dea wth the Government. If t
attaches purey forma condtons to ts consent to be sued those condtons must
be comped wth. Rock Isand, etc., R. Go. v. Unted States, 254 U. S., 141,
143.) The words of the statute and the reguatons (and. as I thnk s the pan
mport of the case cted, that ncudes the procedure and the form prescrbed by
the reguatons, 254 U. S., 141, 142, 143) mark the condtons of the camant s
rght. tera compance wth statutory requrement that a cam or appea
be fed wth the Commssoner before sut s brought for a ta refund may be
nssted upon by the defendant, whether the coector or the Unted States.
(Tucker v. e ander, 275 U. S., 228.)
In ths case the pantff dd not turn the square corners f ed by he
statute. It dd not compy wth the forma condtons mposed. What t
dd was not wthn the procedure outned by the reguatons.
I woud be frmy of the opnon that for these reasons the pantff had not
made out a case were t not for the decson of the Supreme Court of the Unted
States n the Tucker case reversng the same case n the Court of ppeas of the
ghth Crcut, athough not questonng the prncpe stated by the crcut court
of appeas that strct compance wth the statute must be comped wth.
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1318, 1319, and 1320, rt. 10 0. 290
The Supreme Court sad n ths case:
The statute and the reguatons must be read n the ght of ther purpose.
They are devsed, not as traps for the unwary, but for the convenence of Gov-
ernment offcas n passng upon cams for refund and n preparng for tra.
aure to observe them does not necessary precude recovery. If compance
s nssted upon, dsmssa of the sut may be foowed by a new cam for refund
and another sut wthn the perod of mtatons. If the Commssoner s not
deceved or msed by the faure to descrbe accuratey the cam, as obvousy
he was not here, t may be more convenent for the Government and decdedy u
the nterest of an ordery admnstratve procedure that the cam shoud e ds-
posed of upon ts merts on a frst tra wthout mposng upon the Government
and ta payer the necessty of further ega proceedngs.
Now t s cear from the etter of the Commssoner, dated May 7, 1925, and
herenabove set out, that the cam of the pantff that t shoud have been
assessed under secton 209 at some tme was presented, consdered, and re|ected.
It s cear aso from the record that pantff s contenton that It shoud have
been assessed under secton 209 was repeatedy caed to the attenton of the
Commssoner, athough not n the precse form requred by the reguatons. If
the statute and the reguatons must be read n the ght of ther purpose,
then t seems to me that snce the purpose of the statute essentay was satsfed
t must very ceary appear that the Government has nssted upon a strct com-
pance wth the statute and reguatons before the case can be dsmssed on
that ground. ow has t so nssted n ths case . Not by the answer, for that
was ony a genera dena. Not by any moton, for no moton based upon such
nsstence s In the record. So far as the record goes, t dscoses no nsstence
on ths pont e cept n an ob|ecton to the aeged cam of pr 10. 1925. re-
peated to the aeged cam of pr 29, 1925, hut ths ob|ecton wan fu and
unoubtedy contaned n of the nsstence that voud te requred. The ob|ec-
ton was n ths anguage:
We ob|ect to the admsson of ths etter n evdence for the reason that
t s whoy foregn to the cam made n ths case that It Is not a part of the
orgna cause of acton : that t s too remote from the cam upon whch ths
acton s based: that there s no reference n the cam for refund to such a
cam for the further reason that If ths be consdered as an ndependent cam
for refund t s whoy foregn to ths case: that t doesn t appear to be not
offered as an amendment to the orgna cam for refund and s not n the
form requred by statute and prescrbed by reguaton by the Commssoner
of Interna Revenue.
My concuson upon ths branch of the case, and I have reached that con-
cuson reuctanty, s that there was not here that tera compance wth
statutory requrements upon whch the Government has the rght to nsst
and that t has nssted upon such tera compance.
I proceed, however, to a dscusson of the remanng branch of the case and
to a decson of the ssue theren nvoved so that f It shoud be determned
that I m n error as to the dsposton of the queston nvoved n the branch
of the case above dscussed, a further hearng w not be made necessary.
2. The evdence ceary warrants the concuson that pantff shoud hove
been assessed under secton 209. The evdence overwhemngy estabshes
the cam of pantff that t was dong ony a brokerage busness and that
the capta empoyed by t was nomna wthn the meanng of the statute
and the decsons construng the statute. Its stockhoders were engaged e
cusvey n ths brokerage busness. Such capta ms was empoyed was used
ony ncdenty to the rea busness of the pantff. It produced no ncome, t
was not used nor ntended to be used for proft. These concusons are sup-
ported by a of the evdence. The Government ntroduced no evdence ds-
putng them and they are not negatved by any testmony deveoped on the
cross-e amnaton of pantff s wtnesses. Where such facts e st the assess-
ment shoud be under secton 209. (Opnon of udge Woodrough, Dstrct
of Nebraska, Oartan rf effrey Co. v. en. Coector, not reported affrmed
Carna rf - effrey Co. v. en. Coector. 5 ed. (2d), 1011 opnon of udge
arrett. Southern Dstrct of Georga, n erander rf Garrett v. Unted States,
. S. Day, ug. 19. 1927. p. 8 opnon of udge Schoonmaker. Western Ds-
trct of Pennsyvana n urst. nthony rf Watkns. Inc.. v. ener. Coector,
U. S. Day. pr 4. 1928. n. 4: Gordon rf Co. v. Lnes, Coertor, 25 ed. (2d),
894.) If the pantff had strcty comped wth secton 322 and the regua-
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291
1324, rt. 040.
tons of the Treasury Department as to ts cam for refund t woud be en-
tted to |udgment for the amount asked. 14,052.29, wth nterest.
The case must be dsmssed. It s so ordered.
S CTION 1324. INT R ST ON R UNDS
ND UDGM NTS.
rtce 1040: Interest on refunds and |udg- III-9-412
ments. Ct. D. 47
nterna revenue ta es revenue act of 1921 decson of court.
Interest Refund Cam fob Refund.
etter addressed to the Commssoner contanng a request
for speca assessment s not a cam for a refund wtn the mean-
ng of secton 1324(a) of the Revenue ct of 1921, and nterest
on a refund resutng from speca assessment s not aowabe
under that secton, whch provdes for nterest ony upon the
aowance of a cam.
Coubt of Cams of the Unted States.
tavfer, sheman Co., Ltd., v. The Unted Sates.
October 15, 1928.
OPINION.
Mobs, udge, devered the opnon of the court.
The soe queston for determnaton n ths case Is whether or not the etter
from pantff to the Commssoner of Interna Revenue, dated October 4, 1920,
may properv be treated as a cam for refund wthn the meanng of secton
1324(a) of the Revenue ct of 1921 (42 Stat., 227) and secton 1113 of the ct
of 192 (44 Stat.. 11 ). The pertnent anguage of secton 1324(a) s as
foows:
That upon the aowance of a cam for the refund of or credt for nterna
revenue ta es pad, nterest sha be aowed and pad upon the tota amount
of such refund or credt .
Secton 1113(a) of the ct of 192 s an amendment to secton 322 of the
Revsed Statutes and reads n part as foows:
No sut or proceedng sha be mantaned n any court for the recovery of
any nterna revenue ta aeged to have been erroneousy or egay assessed
or coected, or of any sum aeged to have been e cessve or n any
manner wrongfuy coected unt a cam for refund or credt has been duy
fed wth the Commssoner of Interna Revenue, accordng to the provsons
of aw n that regard, and the reguatons of the Secretary of the Treasury
estabshed n pursuance thereof: .
It s cear, therefore, that uness the etter n queston can be construed as a
cam for refund, ths court Is wthout |ursdcton n the case.
The purpose of the etter of October, 1920, was to fe amended separate
returns. It s evdent from Its conte t that pantff had been dened the rght
to fe consodated returns. The attenton of the Commssoner was caed to
the great amount of ta es we are now compeed to pay, whch we beeve s
far greater than any arge corporaton has pad. It s then stated, In vew
of the foregong, and snce we are not permtted to fe consodated returns, we
respectfuy request that you take our returns of une 30. 1918, une 30, 1919.
and une 30, 1920, under consderaton for assessment under the reef sectons
of the ct of October 3, 1917, and the 1918 Revenue ct. Ths s the ony
request contaned n the etter, the remander of whch may propery be con-
sdered as an argument for the grantng of the request. It s n no sense a
cam for a refund of ta es. It s nothng more nor ess than an appcaton
for speca assessment under the reef provsons of the Revenue cts of 1 )17
and 1918. ( ndng II.) The Commssoner comped wth pantff s request,
and as a resut of the speca assessment a certan sum was refunded. No
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132-1, rt.- 1040.
292
Interest whatever was coectbe under the ct of 1921 upon the aowance of a
refund. The rght of ta payers to receve nterest on amounts refunded as
egM or erroneous coectons was frst recognzed and provded for by secton
1324(h) of the ct of 1921 above quoted, and under the terms of that ct
nterest was aowed ony upon the aowance of a cam for refund. The etter
of October, 1920, was not a cam for refund, and can not e so construed. The
petton s hereby dsmssed.
SN|fOTT, udge: Graham. udge: and ooth, Chef ustce, concur.
Grek.n. udge, concurrng:
In determnng whether the etter of the pantff to the Commssoner of Inter-
na Revenue, dated October 4, 1920. may he treated as a cam for refund, t s
necessary to consder the Treasury reguatons n force at the tme. These
reguatons requred that a cam for refund shoud be made upon a certan
form : that a the tacts reed upon n support of the cam shoud be ceary
set forth theren under oath and that t shoud be accompaned by the co-
ector s recept or the canceed check showng payment of the ta . Treasury
reguatons of ths nature have unformy been uphed by the courts. The
decsons on ths pont are so numerous as to make ctatons unnecessary. The
provsons of a Treasury reguaton may. of course, be waved : and t may be
sad that t has not been the practce of the Treasury to nsst on the requre-
ment that te cam shoud be made upon a partcuar form, but the etter of
the pantff comped wth absoutey none of the requrements. It merey
asked that the pantff s ta es be assessed on a dfferent bass. In the recent
case of Tucker v. e ander (275 1 . S.. 228), n a sut brought to recover a ta
refund, the Supreme Court sad :
Ltera compance wth statutory requrements that a cam or appea be
ed wth the Commssoner before sut s brought for a ta refund may be
nssted upon by the defendant, whether the coector or the nted States.
Ctng severa Supreme Court cases.
Some cam s made, however, that rhe acton of the Commssoner n redeter-
mnng the ta n accordance wth a request contaned n the pantffs etter of
October 4, 19 _ 0. operated as a waver of the provsons of the aw. In the case
ast cted t was stpuated that f the court found that a certan deducton had
been erroneousy made, |udgment shoud be for the pantff, and rhe court hed
that ths stpuaton and agreement waved the requrements of the reguatons.
ut there s absoutey no evdence n the case at bar to show that anythng u
te nature of a waver was done or made on the part of the Government. The
Commssoner proceeded to reassess the ta as he mght have done ether wth or
wthout the etter. To hod that ths acton o )erated as a waver of te us
of a cam or refund woud be to engraft wthout authorty an e cepton to
the aw. Ths. I thnk, we can not do.
The orgna ntent of Congress that Interest shoud be pad ony upon te
aowance of a cam for refund s shown by the fact that Congress subsequenty,
by the ct of 1924, amended te aw so that nterest was coectbe smpy usm
te aowance of a refund. Ths amendment, however, s of no ad to the pan-
tff, snce t was hed n Unted Mate v. Magnoa Petroeum Co. (27 U. S
10(1 T. D. 4153, C. . II-1, 2871) that t had no retroactve effect.
rtce 1040: Interest on refunds and |udg- III-22-4220
ments. G. C. M. G041
R NU CT O 1921.
Interest s not aowabe, under the provsons of secton 1324(a)
of the Revenue ct of 1921. on that porton of an overpayment of
ta whch represents a payment made after the fng of the ta -
payer s cam for refund.
Te opnon of ths offce s requested as to the amount of nterest
whch was aowabe upon an overpayment of ta by te ta payer
for the year 1917 under the foowng statement of facts:
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293
1324, rt. 1040.
The ta payer s return for 1917 was fed on pr 1, 1918, and
showed an e cess-profts ta abty of 25.5a doars. On une 18,
1918, a payment was made n the sum of 17a doars and an abate-
ment cam was fed to cover the baance of the assessment. Ths
cam n abatement was based on an appcaton for reassessment
under secton 210 of the Revenue ct of 1917. Under date of une 5,
1920, the ta payer fed a cam for refund for 1917 n the sum of
. a doars, n whch the hstory of the ta payer s busness was set
out at ength, reference was made to the fndngs of the revenue agent,
and speca assessment was requested under the reef provsons of
the statute. The cam n abatement was aowed for 4.9a doars
and re|ected for 3. a doars, and the cam for refund was re|ected
n fu. The sum of 3. doars, beng that part of the abatement
cam whch was re|ected, was pad by the ta payer wthout protest
on December 10, 1920. No cam for refund for the year 1917 was
fed subsequent to ths payment.
The ta payer s ta abty for 1917 was subsequenty redeter-
mned under the provsons of secton 210 of the Revenue ct of 1917,
and an overassessment was found n favor of the ta payer n the
sum 10.2a doars. The schedue of overassessnents upon whch ths
tem appeared was sgned by the Commssoner on November 1, 1922,
and the schedue of refunds was approved on December 12, 1922.
It appears that nterest has been aowed and pad, under secton
1324(a) of the Revenue ct of 1921, on . a doars from December
5, 1920, to December 12, 1922. Ths sum represents that porton
of the amount pad by the ta payer pror to the fng of the cam
for refund whch s n e cess of the ta payer s correct ta abty,
and nterest has been computed thereon from s months after the
date of the fng of the refund cam to the date the schedue of re-
funds was approved by the Commssoner. No nterest was aowed
on 3. a doars for the reason that no cam for refund was fed after
payment was made of that amount of ta .
The computaton of nterest upon the refund aowed n the nstant
case was governed by secton 1324(a) of the Revenue ct of 1921,
whch reads n part as foows:
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: (3) f no protest was
made and the ta was not pad pursuant to an addtona assessment, from
s months after the date of fng of such cam for refund or credt.
The aowance of nterest as herenabove descrbed was, n the
opnon of ths offce, n entre accord wth the provsons of sec-
ton 1324(a) of the Revenue ct of 1921. No nterest was aow-
abe on the overpayment of 3. a doars made December 10, 1920,
because that amount was pad wthout protest and not pursuant to
an addtona assessment, and no cam for refund as to that payment
was ever fed. Such overpayment was made by the ta payer more
than s months after the cam for refund of une 5, 1920, n respect
of the payment of ta made on une 18, 1918. vas fed. cam
for refund fed by a ta payer can be treated as a cam for the
refund of nterna revenue ta es pad wthn the meanng of sec-
ton 1324(a) of the Revenue ct of 1921 ony wth respect to ta es
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1324, rt. 1040.
294
pad before the fng of such cam. n appcaton for a refund
can be made ony after payment of the amount whch t s sought to
have refunded.
The concuson of ths offce, supported by the e press anguage
of secton 1324(a) of the Revenue ct of 1921, s that nterest has
been correcty computed on the refund made to the ta payer n the
nstant case.
C. M. Chahest,
Genera Counse, ureau of Interna Revenue.
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S L S T RULINGS.
TITL I. CIS T S. (192 ND 1924)
S L S Y T M NU CTUR R.
Reguatons 47. rtce 4: Dscounts and e penses. III-19-4202
T. D.42 7
Manufacturer s cse Ta es Dscounts and penses.
rtce 4 of Reguatons 47, reatng to the e cse ta es on saes
by the manufacturer (sees. 00 and 903. Revenue ct of 1920),
amended.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. G.
To Coectors of Interna Revenue and Others Concerned:
rtce 4 of Reguatons 47 (revsed March, 192 ), reatng to the
e cse ta es on saes by the manufacturer, as mposed under the
provsons of sectons 00 and 903 of the Revenue ct of 192 ,
amended by Treasury Decson 4005, dated pr 2,1927 C. . T-1,
298 , s hereby agan amended to read as foows:
rt. 4. Dscount and e penses. dscount not provded for at the tme of
sae but made subsequenty thereto, can not be deducted In determnng the
prce upon whch the ta s to be computed.
n ad|ustment n prce, where artces are sod over a perod of tme, under
an agreement for a quantty rebate, or an agreement for u so-caed whoesae
bonus, . e., a rebate on goods resod by a dstrbutor or deaer to so-caed sub-
deaers, s hed not to be a dscount made subsequenty to the sae, and the
ta , f orgnay computed on the gross prce, may be ad|usted n the return
for the month n whch the prce s fnay determned. If n such cases the ta
assumed to be due on the orgna seng prce has been bed to the deaer
aur by hra to the purchaser as a separate tem, and coected from (he pur-
chaser, the overcoecton of ta arsng from the ad|ustment of the sae prce
under the contract between the manufacturer and the deaer must be refunded
to the purchaser.
Where artces are sod under an agreement for a rebate on goods remanng
unsod n the hands of the deaer, and whch were purchased by such deaer
wthn a defntey specfed perod, n case of a decne In the market, a reduc-
ton n prce made n accordance wth such agreement s not consdered a
dscount made subsequenty to the sae, and f the manufacturer refunds to the
deaer a porton of the orgna or tentatve prce, together wth the amount for
tt vch he was rembursed to cover the ta thereon, he may -take credt on hs
return for the month n whch such ad|ustment n prce s made, for the amount
of overpayment on the orgna sae, resutng from the prce ad|ustment.
Commssons to agents and other e penses of sae are not deductbe from
the prce.
reght and devery charges are ta abe as part of the saes prce when
the prce to the purchaser ncudes transportaton and devery charges pad
by the manufacturer, or when the amount charged the purchaser, whether
3133 28 20
(295)
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Reg. 47, rt. 1 .
29
bed as a separate tem or not, does not represent the actua transportaton
charges.
reght and devery charges are not a part of the saes prce sub|ect to
ta , when the goods are sod and actuay become the property of the purchaser
at the factory or are sod f. o. b. cars at pace of manufacture and the trans-
portaton charges are pad by the purchaser as a specfc tem n addton to
the prce.
D. . ar,
Commssoner of Interna Revenue.
pproved May 8, 1929.
. W. Meon,
Secretary of the Treasury.
Reguatons 47, rtce 1 : Parts or accessores. III-22-4221
Ct. D. 3
e cse ta revenue acts of 1021 and 1924 decson of court.
Partn or ccessores fob utomobes Transmsson
Lnngs.
Transmsson nngs competey prepared aud cut nto strps of
the requred ength for use on ord automobes and sod n pack-
ages e cusvey for such use are ta abe as parts or acces-
sores for automobes under secton 900(3) of the Revenue ct
of 1921 and secton 00(3) of the Revenue ct of 1924.
Court op Cams of the Unted States.
dvance utomobe ccessory s Corporaton, a Corporaton, v. The Unted
States.
October 22, 1928.
OPINION.
Moss, udge, devered the opnon of the court.
Durng the perod nvoved n ths controversy pantff was engaged In the
manufacture of transmsson nngs for ord automobes, and the sae of
same to the automobe |obbng trade. etween the dates une 1, 1922, and
ebruary 2 , 192 , pantff pad ta es n the aggregate sum of 32,7 8.35, same
havng been assessed under the provsons of subdvson (3) of secton 900 of
the Revenue ct of 1921 and subdvson (3) of secton 00 of the Revenue
ct of 1924. On une 7, 192 , pantff fed a cam for the refund of sad
ta es, whch cam was re|ected by the Commssoner of Interna Revenue.
Ths s an acton for recovery of sad amount.
Secton 900 of the Revenue ct of 1921 (42 Stat., 227) s as foows:
That from and after anuary 1, 1922, there sha be eved, assessed, co-
ected, and pad upon the foowng artces sod or eased by the manufacturer,
producer, or mporter, a ta equvaent to the foowng percentages of the
prce for whch so sod or eased
(1) utomobe trucks and automobe wagons (ncudng tres, nner tubes,
parts and accessores therefor, sod on or n connecton therewth or wth the
sae thereof), 3 per centum
(2) Other automobes and motor cyces (ncudng tres, nner tubes, parts,
nnd accessores therefor, sod on or n connecton therewth or wth the sae
thereof), e cept tractors, 5 per centum
(3) Tre, nner tubes, parts, or accessores for any of the artces enumerated
n subdvson 1) or (2), sod to any person other than a manufacturer or
producer of any of the artces enumerated n subdvson (1) or (2), 5 per
centum.
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297
Reg. 47, rt. 1 .
rtces 14 and 15 of Treasury Reguatons No. 47, reatng to the admnstra-
ton of the above ct, are as foows:
rt. 14. The words tres, nner tubes, parts, or accessores
sha be understood to embrace ony such tres, nner tubes, parts, or acces-
sores as hare reached such a stage of manufacture that they consttute
artces commony or commercay known as tres, nner tubes, parts, or
accessores, and sha not be understood to embrace raw materas used In t e
manufacture of such artces.
bt. 15. Defnton of parts. part for nn automobe truck, automo-
be wagon, other automobe, or motor cyce s any artce desgned or manu-
factured for the speca purpose of beng used as or to repace a component
part of any such vehce, and whch by reason of some pecuar characterstc
Is not such a commerca commodty as woud ordnary be sod for genera use,
and whch s prmarv adapted ony for use as a component part of such
vehce.
Secton 00 of the ct of 1924 s smar n substance to that of 1921, and
the reguatons reatng to same, so far as the queston nvoved here s con-
cerned, are dentca.
The queston for determnaton s whether or not pantff s product, as
prepared and sod, consttuted a part of a ord automobe wthn the meanng
of the cts above mentoned.
Pantff was engaged In the busness of makng repacement parts for ord
automobes, prncpay transmsson nng, tmers, and, for a porton of the
tme, shock absorbers. Matera for the transmsson nng, a woven product,
was purchased by pantff n ros from the manufacturer. Pantff deat wth
three types of nng (1) the Whte Strpe. whch s a pan woven nng
(2) the etbak, whch s the same type of nng, e cept that pantff paced
a fet backng on t, to act as a cushon and (3) the Cork etbak, whch
s the same as the etbak, wth the e cepton that cork dsks are paced by
pantff n the woven portons of the nng. The nng s then cut nto
strps of 2 feet each n ength, whch Is the standard ength of the ord trans-
msson band. There beng three transmsson bands n a ord automobe,
these strps, so prepared, are paced three n a package for sae, together wth
the requste number of rvets by whch the nng s attached to the band.
The attachment of sad nng requres no sk whatever, and conssts merey
n propery pacng the rvets and. n some nstances, trmmng the edges of the
nng to the e act ength of the band. It was sod ony through the automobe
|obbng trade, e cusvey for use on ord automobes.
It s the contenton of pantff that the product n queston was merey repar
matera, and as such s not sub|ect to the ta . We are unabe to agree wth
ths contenton. In a genera sense It s a repar matera. In ths connecton
t shoud be noted that a neggbe porton, about 3 per cent, of pantff s
product s sod n buk, and no ta s e acted as to ths porton. owever
smpe may have been the preparaton to whch ths artce was sub|ected, t
was a process whch eft nothng further to be done, e cept to pace the rvets,
and trm the edges where the matera |oned. It was compete Cor the use for
whch t was ntended. rom a casua readng of the statute, t s pan,
we thnk, that the word parts as used n the statute can be gven no other
than the ordnary meanng of thut word as t s customary used, and appyng
that rue we have reached the concuson that the partcuar artces nvoved n
ths case, and upon whch pantff pad ta es for a number of years, fa
wthn the meanng of the term parts. (Worth ros. Co. v. Lcdere 251
D. S.. 507.)
The petton w be dsmssed, and t s so ad|udged and ordered.
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Reg. 47, rt. 1 .
298
UTOMO IL P RTS ND CC SSORI S.
Reguatons 47, rtce 1 : Parts or acces-
sores.
III-25-4245
Ct. D. 71
e cse ta es revenue act of 1924 decson of court.
1. Pabts or ccessores fob utomobes Storage atteres.
Storage batteres manufactured and desgned to meet the e act
specfcatons requred for use n furnshng the motve power for
eectrcay-propeed automobe trucks, advertsed for ths purpose
and sod for ths specfc use, are sub|ect to ta as parts or ac-
cessores for automobes under secton 00(3) of the Revenue
ct of 1924.
2. Decson 1 o|.o ved.
The decson n Coe Storage attery Co. v. Unted States ( 5
C. GIs., 1 4 (T. D. 4159 C. . II-1. 299 )) foowed.
Court of Cams of the Unted States.
dson Storage uttery Co. v. fet Unted States.
dson Storage attery Suppy Co. v. The Unted States.
dson Storage attery Oarage, Inc., v. The Unted States.
Graham, udge, devered the opnon of the court.
There are nvoved here s eases whch by order of the court dated May 11,
1928, were consodated. Two suts each brought by the three corporatons by
agreement were brefed, argued, and submtted ns one case.
The detas of the reatons and operatons of these corporatons are set out
n the fndngs, and It s not necessary for the decson to rehearse them here.
They are seekng a refund of ta es assessed on storage batteres manufactured
and sod for motve power for eectrcay-propeed automobe trucks.
The queston nvoved s whether or not storage batteres manufactured and
desgned to meet, and meetng, the e act specfcatons requred for use n
furnshng motve power for eectrcay-propeed automobe trucks, advertsed
for ths purpose, and sod for ths specfc use, are sub|ect to e cse saes ta
as parts of automobe trucks under secton 00 of the Revenue ct of 1924
(43 Stat., 322). We hod that they are abe.
There have been a number of cases smar to the nstant cases decded by
ths court and apparenty there w be others of a smar knd that s to say,
cases Invovng a ta on the manufacture of batteres of dfferent knds, whch
to a greater or esser degree and n one form or another, wth and wthout
attachments and wth and wthout changes, are used on automobes and auto-
mobe trucks. In each case there s an attempt by a constructon of the
statute and by proof of sght dfferences n the facts, the use, the method of
attachment, somethng necessary to be done to attach the battery to the frame,
to show that the pantff n nterest was not sub|ect to ta aton. These efforts
to show e empton from ta aton, for that s what they amount to, grow out of
refnements and straned constructons of the ct of Congress.
Secton 900 of the Revenue cts of 1918 and 1921 (42 Stat.. 291), after pro-
vdng for a saes ta on automobes, automobe trucks, motor cyces, etc..
provdes (3) for a saes ta where tres, nner tubes, parts or accessores for
any of the artces enumerated n subdvson (1) or (2) are sod to any
person other than the manufacturer or producer of any of the artces enu-
merated n subdvson (1) or (2), secton 00 of the Revenue ct of 1924.
The tgaton grows out of constructon put upon parts and accessores.
These statutes were passed by Congress for the purpose of rasng revenue for
the conduct of the Government. They were necessary acts of soveregnty, and
these and a ta ng statutes must be construed, as far as possbe, to ef-
May , 1929. ,
OPINION.
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299
Reg. 47, rt. 1 .
fectuare that purpose. Whe It s true that If there s a doubt as to the ta -
payer s abty t shoud be resoved In hs favor, t s aso true that n con-
sderng the condtons out of whch ths doubt grows the purpose of the statutes
roust be gven fu consdefaton.
urthermore, t s to be assumed that Congress, f t ntended to gve Un
e empton, woud have so stated, or have mted the anguage of the statutes
so as to afford ceary an e empton, and therefore, when t uses the generc
word parts, whch must be taken n ts broadest sgnfcaton to effectuate the
purpose of the statutes, t ntended t to be used n ts wdest and genera
sense and not n a technca or mted sense.
Congress dd not ntend that the appcaton of the cts shoud be based
upon such a abyrnth and tange of dstnctons n ts appcaton.
In I orfft ros. Co. v. Lederer (251 U. 8., 507-510). the court n dscussng
the meanng of the words any part n the muntons ta ct (sec. , 01, eh.
4 3, 39 Stat, 781), whch provdes that every person manufacturng certan
artces and shes or any part of the artces mentoned sha
pay an e cse ta . etc.. sad :
Is not every eement (we use the word for want of a better) u
the aggregaton or composton or amagamaton (whchever t s), of a she, a
part of t If not, what s t nd what Is the test to dstngush a part from
not a part
nd further, speakng of the contenton that forgngs were not a part of a
she, the court sad :
Congress dd not ntend to sub|ect ts egsaton to such artfca-
tes and make t dependent upon dstnctons so refned as to make part of
n she not the ta abe part of the aw.
See aso the case of orged Stre Whee Co. v. Leweyn (251 U. S.. 511),
affrmng the Worth case, and construng the same statute.
s was sad by the court n Carbon Stee Co. v. Leweyn (251 T . 8., 501. 505),
n construng the same statute as that nvoved n the Worth case, the rue of
constructon can not be carred to reduce the statute to empty decaratons.
The rue of constructon w not be pressed so far as to reduce a ta ng statute
to a practca nuty by permttng easy evason.
It s far to assume that f Congress had ntended n the use of the word
parts to e empt the seer where the thng sod was used n connecton wth
the operaton of an automobe, automobe truck, or motor cyce, because of the
fact that the artce sod coud be used for other purposes, or that ony a sma
porton of the producton of the seer was used n connecton wth automobes,
or automobe trucks, or because the artce sod coud be used for other pur-
poses, or because t had been sod and used for other purposes before the passage
of the ct, or because t requred somethng to be done by the purchaser to
attach t to the automobe or because, whe shpped, a the parts that con-
sttuted the artce sod were not put together or were shpped n dfferent
packages and requred somethng to be done by the purchaser n order to appy
them, t woud have stated as much n the ct. avng faed to do ths, t s
far to assume that t dd not ntend that a mted meanng shoud be gven
to the word parts. See Unted States v. Rndskopf (105 U. S., 4181 : Unted
States v. nderson (2 9 U. 8.. 422. 443 T. D. 3839, C. . -, 179 ) Meteaf ,f
ddy v. Mtche (2 9 U. S., 514. 520 T. D. 3824, C. . -, 218 ) Unted
States v. Mtche (271 U. 8- 9, 12 T. D. 38 5. C. . -, 233 ) and Wckwre.
etc., v. Renecke (275 U. S.. 101 T. D. 412 . C. . II-1, 31 ).
urther, the cts authorzed the Commssoner of Interna Revenue to muke
rues and reguatons for carryng them nto effect. It s recognzed that Con-
gress In enactng such statutes coud not go nto a the detas of admnstra-
tve appcaton and defnton, and therefore ntrusted ths to the Commssoner
of Interna Revenue. It s to be assumed that the Commssoner In makng the
reguatons e ercsed the care and farness and the knowedge of the sub|ect
requred for preparng the reguaton. nd so the courts have hed that f the
reguaton s reasonabe and does not voate the sprt and purpose of the ct
nvoved, t shoud be uphed, and aso that where the reguaton appes, where
the ta payer seekng reef comes wthn the anguage of the reguaton, the
burden s upon hm to show ceary and satsfactory that the reguaton s
unreasonabe and voates the sprt and purpose of the ct another way of
sayng that where a ta payer cams that he has been egay assessed and
ta ed the burden upon hm s to estabsh the Iegaty.
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300
The Commssoner of Interna evenue has undertaken to defne parts and
accessores. In the rapd changes that are beng made n the constructon of
automobes, automobe trucks, etc., an the parts and accessores use n the
I eraton of them, by nventons, mproved constructon, and the appcaton to
hem of artces used for other purposes wth or wthout sght changes, or
whch had prevousy been used for other purposes, t s ready apprecated
that the reguatons and defntons must, as far as possbe, have a genera
appcaton and coud not possby be so e pressed as to cover a possbe
e gences and every dversty of crcumstances and, therefore, n the nterest
of securng to the Government the ncome whch the ta ng cts were desgned
to provde, cases such as ths must be approached n the ght of what has
been stated.
It s aso cear that no genera rue can be ad down n cases ke the nstant
one, and that each of these cases nvovng dfferent artces must rest upon
ts own facts and the far and reasonabe appcaton to t of the statute and
the reguatons.
Ths court has decded severa cases nvovng pas and accessores, com-
mencng wth the twater ent case ( 2 O. Cs., 419), whch hed that tmers
and cos were not to be cassfed as parts of automobes smpy because they
mght be used on automobes, n the absence of proof that at the tme when
sod t was ntended that the artces shoud be used on automobes, and where
aso there had been no settng asde or aocaton by advertsng or otherwse
of tmers or cos for automobe use. It w be seen that that case stood upon
ts facts and must be eft there. It was ntended to estabsh no bndng rue,
and n so far as t may be construed to be n confct wth the vews heren
stated, t s hereby modfed.
In the pror case of Martn Rockna fth Whee Co. v. Unted States ( 0 C.
Cs., 40 IT. D. 371 , O. . I -1, 3171), there was nvoved a semtraer whose
body overapped the frame of the drawng vehce. It was a separate artce, not
used n connecton wth the operaton of the automobe, etc.. but attached to t
and moved by t, and contrbuted nothng to the operaton of an automobe or
ts use, and was not a part of ts structure when n operaton.
The ne t case, the Natona Rubber er Co. v. Unted States ( 3 C. Cs..
337), concerned a substance used to f up the nsde of worn-out tubes, and was
nothng more than the appcaton e ternay of a substance to proong the fe
of a tube, as the repantng of a car proongs the fe of the body. It was not
an ntegra part of the machne, nor was t a part of ts orgna constructon.
It mght be that to-morrow ths matera woud be utzed by some nvented
process to make compete tres to be used as such n the operaton of an auto-
mobe. It unquestonaby woud then become a part. Ths ustrates the
shftng sands upon whch the constructon of the statute rests. ach of these
cases, t aso appears, rested on ts own facts.
The ast case decded by ths court was Coe Storage attery Co. v. Unted
States ( 5 C. Cs., 1 4 T. D. 4159, C. . II-1, 299 ), n whch on October 29.
1928. a wrt of certorar was dened by the Supreme Court. In that erase t
was hed that a storage battery especay adapted und so desgned and adver-
tsed as to meet the essenta requrements of motve power Is a part or acces-
sory of an automobe, and ths was hed to be true of the battery n that case.
It was further hed that where the devce or battery s necessary to the accom-
pshment of the functonng In a certan way of the combnaton of varous
eements and parts of the muchne, t s a part or accessory of the machne,
and that where the manufacturer who seeks the custom of the automobe trade
advertses the speca quates of hs product and cams ts advantageous use
as a part of an automobe or automobe truck, the battery comes wthn the
statute and reguaton of the Commssoner.
The decson n that case s controng n ths. Whe the dson battery
mght not, perform e acty the same functon as the Coe battery, t possesses a
the characterstcs necessary for a battery, n that n the automobe ndustry
t s utzed for furnshng motve power for automobe trucks. The par-
tcuar cass of batteres ta ed here was e tensvey advertsed for ths use by
the pantffs and when sod those batteres were shpped drect to the consumers
of batteres for the operaton and propuson of eectrc street trucks. The
facts estabsh that severa casses of automobe trucks used storage batteres
for motve power, and that they woud serve no usefu purpose wthout the
battery. The pantffs batteres, whch were ta ed, coud be and were apped
to these uses. It aso appeared that some of the trucks when sod were equpped
wth dson batteres. The fact that these batteres n votage requrements
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301
Reg. 43-11, rt. 5.
are used for other purposes does not affect the ssue, Nor s the matter of the
assembage of batteres n standard trays reevant. The facts ceary show
that the dson battery possesses a the necessary characterstcs of a battery
for furnshng, and does furnsh, motve power to automobe trucks. The
fact that these batteres can be used for other purposes s not Important. There
are many parts of an automobe that can be and are used for other purposes.
The form of battery ta ed here was ceary specay adapted and desgned
and advertsed to meet the requrements of motve power on automobe trucks.
The pantffs were ony ta ed for batteres sod n connecton wth the op-
eraton of automobe trucks. The cases reed upon n pantffs bref dea
wth the ta cassfcaton of an entre product and the ncdenta use n-
dependent of the prncpa use. ad the Commssoner of Interna Revenue
ta ed the pantffs on a ther storage batteres, rrespectve of ther adaptabe
use, t woud have presented a dfferent ease. ut ths was not done n these
cases. The batteres ta ed were the batteres admttedy sod for use n the
operaton of automobe trucks, advertsed for that use, and when sod shpped
drect to the consumers for that use.
It foows that the pantffs can not recover. ut. further, the pantffs
have ceary faed to estabsh any rght to e empton or to show to the
satsfacton of the court that the Commssoner s reguaton under whch ths
ta was assessed and coected was unreasonabe, much ess n voaton of the
sprt and purpose of the ct. We thnk t was atogether reasonabe and n
fu accord wth the sprt and purpose of the ct.
The petton n each of the sad s eases submtted, vz, Nos. -359 and
-322. 358 and -324. and -403 and -323. shoud be dsmssed, and t s so
ordered.
TITL . T ON DMISSIONS ND DU S. (1924)
Reguatons 43-11, rtce 5: Soca cubs. III-8-4118
Ct. D. 45
T ON DU S R NU CTS O 1921 ND 1024 D CISION O COURT.
Soca Cub Character of Organzaton.
manufacturers cub, whch s organzed under an act that
states the purpose of cubs organzed thereunder to be the man-
tenance of a cub for soca en|oyment, whose charter provdes that
the purpose of the organzaton, among other thngs, s to mantan
a cub for soca en|oyments and whch makes eaborate provsons
for soca functons and partcpates n a great varety of soca
actvtes, s a soca cub wthn the meanng of secton 801 of the
Revenue ct of 1921 and secton 501 of the Revenue ct of 1924,
the dues to whch are ta abe under those sectons.
Court or Cams of the Unted States.
ohn tter v. The, Unted States.
October 8, 1928.
opnon.
Green, udge, devered the opnon of the court.
Pantff brngs ths sut to recover 22 pad to the coector of nterna revenue
at Phadepha n 1924 and 1925 as ta es upon dues to the Manufacturers
Cub of Phadepha, the Commssoner of Interna Revenue havng rued that
the soca features of sad cub form a matera purpose of the organzaton
and that t s a soca cub wthn the meanng of the edera Revenue ct n
force at that tme. The queston n the case s whether ths rung was correct.
To set out a of the actvtes of the Manufacturers Cub woud e to unduy
e tend ths opnon, but a st of some of the most mportant features n a
soca way s, we thnk, suffcent for the decson of the case.
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Reg. 43-11, rt. 5.
302
Ths cub was ncorporated n 1887 under the aws of The State of Pennsy-
vana. The act under whch t was ncorporated provdes, among other thngs,
for the creaton of corporatons for the encouragement and protecton of trade
and commerce. Provson I of ths corporaton act states the purpose of
cubs organzed thereunder to be for The mantenance of a cub for soca
en|oyments, and the charter provdes that the purpose of the assocaton s to
mantan the cub for soca en|oyments, to brng the manufacturers of the cty
of Phadepha and vcnty nto more corda and soca reatons, and to
enabe them to act untedy n a affars of nterest to ther ndustres. It
appears, however, that the membershp of the cub s not confned to persons
connected wth the manufacturng ndustry.
The cub occupes a 10-story and basement stone budng, whch cost appro -
matey 2,700,000.
In the basement of ths budng s a barber shop. Turksh bathroom, bowng
aey, poo and bard room, and a arge grroom. On the frst foor there
s a arge obby and a arge watng room equpped wth comfortabe chars
and ounges, a cerk s offce, teephone booths, and a sma room used for quck
unch and refreshments. On the second foor there are drectors and com-
mttee rooms, a arge brary and readng room, and a arge assemby room.
On the thrd foor s an audtorum used for arge meetngs, conventons, ec-
ures, entertanments, etc., whch s avaabe for prvate functons, and s
rented to prvate partes for soca purposes. The fourth, ffth, s th, and
seventh foors contan 74 rooms, prncpay used as bedrooms, sutes of rooms
and vng quarters for cub members who desre to ve at the cub and guests
havng approprate cards. On the eghth foor s the genera dnng room, n
whch ades are permtted to be present wth members. There s aso a wng
of the dnng room whch can be cut off, makng a arge prvate dnng room
for sma meetngs and conferences. The tenth and top foor contans the man
a-the-year-round dnng room.
parta st of the ceebratons, soca actvtes, and speca events for the
entertanment of members s found n ndng I . It s too ong for repet-
ton n the opnon and ncudes a great varety of entertanments, such as
dnners for guests of honor and dnners wth entertaners, uncheons, smokers,
dances, muscaes, and moton pctures. owng aeys and a poo and bard
room were provded whch were supervsed by speca commttees. The bowng
aeys were aso used for utercub bowng tournaments. The factes of the
cub were avaabe and used for weddng partes, receptons, and other soca
functons whch cub members mght desre. The fees receved for such pr-
vate functons formed a porton of the cub revenue.
It s probabe that there are few cubs of a purey soca nature anywhere n
ths country that make such eaborate provsons for soca en|oyments. It
may be that the other actvtes of the cub, whch are shown n the fndngs
of fact and whch are aso too numerous to be set out n the opnon, were more
e tensve than those of a soca nature. mong them was the pubcaton of a
|ourna known as The Manufacturer, and whe mosty devoted to busness
matters, t contaned a department concernng the soca fe of the cub. In
a genera way the actvtes of the cub may be separated nto three dvsons:
rst, those connected wth busness, partcuary n manufacturng nes
second, those of a cvc nature, havng for ther ob|ect some pubc beneft
and thrd, those of a purey soca nature. The soca actvtes were so e ten-
sve as to make t cear that they were and are a matera par of the actvtes
of the cub organzaton and not merey ncdenta to ts man purpose. In such
a case, under the reguatons of the Treasury Department and the rungs of
the Commssoner of Interna Revenue, the organzaton s a soca cub wthn
the meanng of the aw. We thnk ths rung s correct.
The petton must be dsmssed. It s so ordered.
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303 fReg. (m ), rt. 8.
TITL . SP CI L T S. (1921)
S CTION 1001(11). P SS NG R UTOMO IL S.
muatons 59(1922), rtce 31: ass of ta . T- -4101
Ct. D. 37
SP CI L T S R NU CT O 1921 D CISION O COURT.
Occupatona Ta es Rentng utomobes Drve It Your-
sef Pan.
Secton 1001(11) of the Revenue ct of 1921 appes to a corpora-
ton carryng on the busness of rentng automobes under what s
commony known as the drve t yoursef pan.
Court of Cams of the Unted States.
aundrrs System Washngton Co., a Corporaton, v. The Unted States.
December 3, 1928.
opnon.
Secton 1001(11) of the Revenue ct of 1921 (42 Stat., 29 ) was n force
durng the perod nvoved n ths case and s as foows:
Persons carryng on the busness of operatng or rentng passenger automo-
bes for hre sha pay 10 for each such automobe havng a seatng capacty
of more than two and not more than seven, and 20 for each such automobe
havng a seatng capacty of more than seven.
The pantff contends that ths provson s ambguous and that Congress dd
not ntend thereby to mpose a ta npon persons who et automobes wthout
drvers to those who ntend to do ther own drvng.
We can not agree wth ths contenton. The aw appears to us to be pan
and unambguous. We thnk t cear that t appes to persons and corporatons
who, n the anguage of the stpuaton and as set out n the fndngs, were
engaged n the busness of ettng or rentng passenger automobes wthout
drvers under an agreement by whch they were to receve payment for the
tse of the cars.
The Commssoner correcty assessed the ta n controversy aganst the
pantff and It s ordered that ts petton be dsmssed.
TITL I. T ON R G S. (1918)
R G S SOLD IN OTTL S OR OT R CONT IN RS.
Reguatons 52(1919). rtce 8: ass of ta : TII-4-4084
Sae prce. T. D. 4259
T ON R S R NU CT O 1018 D CISION O SUPR M COURT.
1. Saes Ta Measure of Ta .
Where a manufacturer of beverages, upon whch saes ta es are
Imposed by Tte I, secton 28, of the Revenue ct of 1918, sod
and nvoced such product to hs customers at a specfc prce wth
the understandng that the ta was ncuded n that prce, such
prce consttutes the measure of the ta .
2. Decson ffrmed.
Tbe decson of the Court of Cams ( 4 Ct. Cs., 252 (T. D.
4105 C. . I-2. 324 )) affrmed.
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Reg. 52(1919), rt. 8.
304
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, I). C.
To Coectors of Interna Revenue and Others Concerned :
The foowng decson of the Supreme Court of the Unted
States, n the case of Lash s Products Co., Pettoner, v. The Unted
States, s pubshed for the nformaton of nterna revenue offcers
and others concerned.
D. . ar,
Commssoner of Interna Revenue.
pproved anuary 19, 1929.
. W. Meon,
Secretary of the Treasury.
Supreme Coubt of the Unted States.
Lath s Products Co.. pettoner, v. The Unted States.
(On wrt of certorar to the Court of Cams.)
anuary 2, 1929.
OPINION.
Mr. ustce omes devered the opnon of the court.
Ths Is a sut to recover the amount of certan ta es pad under the Revenue
ct of 1918 ( ct of ebruary- 24. 1919, ch. 18, sec. 28. 40 Stat.. 1057, 111 ).
y secton 28 there Is mposed on soft drnks, sod by the manufacturer,
n bottes or other cosed contaners, a ta equvaent to 10 per
centum of the prce for whch so sod. Ths ta was pad by the pettoner,
cacuated at 10 per centum of the sum actuay receved by t for the goods
sod. ut the pettoner had notfed ts customers beforehand that t pad the
10 per cent ta and t contends that n ths way t passed the ta on and that
the true prce of the goods was the sum receved ess the amount of the ta .
The phrase passed the ta on s naccurate, as obvousy the ta s ad
and remans on the manufacturer and on hm aone. ( chman f Co. v. /. 8.
Dawes d Son Co., 12 . (2d), 154.) The purchaser does not pay the ta . e
pays or may pay the seer more for the goods because of the seer s obgaton,
but that s a. St the queston as to the meanng of the statute remans.
The pettoner supports ts poston by a reguaton of the Commssoner that
when the ta s bed as a separate Item t Is not to be consdered as an
ncrease n the sae prce. Naturay a decate treatment of a ta on saes
mght seek to avod addng a ta on the amount of the ta . ut t s no ess
natura to avod ncetes and to f the ta by the actua prce receved.
Congress coud do that as propery as t coud have added one-tenth to the
ta on the prce as f ed by the other tems determnng the charge to the
buyer. The prce s the tota sum pad for the goods. The amount added
because of the ta s pad to get the goods and for nothng ese. Therefore
It s part of the prce, and f the statute were taken teray, as there woud
be no reason for not takng t f t were now passed for the frst tme, there
mght be dffcuty n acceptng the Commssoner s dstncton even f the ta
were made a separate Item of the b. ut f, n vew of the hstory n the
Soctor Genera s bref, we assume wth hm that the practce of the Com-
mssoner has been ratfed by Congress, we agree wth hs argument that the
pettoner must take the prvege as t s offered. It dd not b ts ta as a
separate tem, and the Commssoner s reguatons notfed t that f the saes
prce of a ta abe beverage Is ncreased to cover the ta , the ta s on suck
ncreased saes prce. athough they purported to make a dfferent rue when
the ta s bed as a separate tem. There has been some dfference of
opnon n the ower courts, but we regard the nterpretaton of the aw as
pan.
udgment affrmed.
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ST T T RULINGS.
TITL I . ST T T . (1921)
GROSS ST T . TR NS R Y D C D NT IN IS LI TIM .
Reguatons 3. rtce 17: Nature and tme III-5-4094
of transfer. T. D. 42 1
estate ta revenue act of 1021 decson of supreme court.
1. Gross state Transfer to Take ffect at Death Power of
Revocaton Retroactvty.
Where a decedent creates a trust before September 8, 191 . by
the terms of whch the ncome therefrom s payabe to hmsef
for fe and after hs death to a desgnated benefcary, wth re-
manders over upon termnaton of the trust, and there s reserved
to the settor aone a power of revocaton, upon the e ercse of
whch the trustee s requred to return the corpus of the trust to
hm, the transfer s not compete unt hs death. s apped to
such a trust secton 402(c) of the Revenue ct of 1921 s not retro-
actve and vod where hs death foows the enactment of that ct,
and the vaue of the property so conveyed n trust shoud be n-
cuded n the decedent s gross estate.
2. Gross state: Transfer to Take ffect fter Death
Power to Modfy Trust Gpr Inter vos.
Where u decedent conveys property to a trustee n trust to pay
the ncome to n thrd person wth remanders over after the death
of the settor and there s reserved to the settor the power to ater,
change, or modfy the trust, whch was to be e ercsed by hm and
the fe benefcary, actng |onty, the transfer s a competed gft
nter vvos and, not havng been made n contempaton of death,
s not sub|ect to the estate ta mposed by the Revenue ct
of 1921.
Treasury Department,
Offce of Commssoner of Interna Revenue.
Washngton, I). C.
To Coectors of Interna Revenue and Others Concerned:
The foowng decson of the Supreme Court of the Unted States,
n the case of Mabe G. Reneeke, Coector of Interna Revenue, v.
The Northern. Trust Co., ecutor under the Last W and Testa-
ment of . C. artett, Deceased, s pubshed for the nformaton
of nterna revenue offcers and others concerned.
D. . ar.
Commssoner of Interna Revenue.
pproved anuary 30, 1929.
. W. Meon.
Secretary of the Treasury.
(305)
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Reg. 3, rt 17.
30
Supreme Court of the Unted States.
Mabe O. Renecke, Coector of Interna Revenue for the rst Dstrct of
Inos, pettoner, v. The Northern Trust Co., ecutor under the Last W
and Testament of . C. artett, Deceased.
On wrt of certorar to the Unted States Crcut Court of ppeas for the Seventh
Crcut.
anuary 2, 1929.
OPINION .
Mr. ustce Stone devered the opnon of the court.
Respondent e ecutor brought sut n the Dstrct Court for Northern Inos
to recover from pettoner, a coector of nterna revenue, the amount of a ta
aeged to have been egay assessed and coected upon the estate of
respondent s testator under the Revenue ct of 1921 (eh. 13 , 42 Stat, 2271.
udgment of the dstrct court for the e ecutor, upon an overrued demurrer,
was affrmed by the Court of ppeas for the Seventh Crcut. (24 . (2d). 91.)
Ths court granted certorar pr 23, 1928. (277 U. S., 579.)
Respondent s testator ded May 30. 1922. On varous dates between 1903
and 1919 he estabshed seven trusts by deed whch are conceded not to have
been n contempaton of death. Two of them were created respectvey u
1903 and 1910. They are dentfed n the record as trusts No. 1831 and No.
3048, and referred to here as the two trusts. y them the ncome from
the trusts was reserved to the settor for fe and on hs death the ncome of
each trust was to be pad to a desgnated person unt the termnaton
of the trust as provded n the trust nstrument, wth remanders over. y
the terms of each trust there was reserved to the settor aone a power of
revocaton of the trusts, upon the e ercse of whch the trustee was requred
to return the corpus of the trust to hm.
The remanng fve trusts, desgnated n the record as trusts Nos. 4477. 4478.
4479, 4480. and 4481. referred to here as the fve trusts, were created n
1919. before the passage of the Revenue ct of 1921, but after the enactment of
the smar provsons of the estate ta of the Revenue ct of 1918. (40 Stat..
109 , 1097.) y each, fe nterests n the ncome, on terms not now m-
portant, were created. In one the fe nterest was termnabe fve years after
the death of the settor or on the death of the desgnated fe benefcary
shoud she survve that date, wth a remander over. In the other four, fe
nterests n the ncome were created, termnabe fve years after the settor s
death or on the death of the respectve fe tenants, whchever shoud frst
happen, wth remanders over. The settor reserved to hmsef power to super-
vse the renvestment of trust funds, to requre rhe trustee to e ecute pro es
to hs nomnee, to vote any shares of stock hed by the trustee, to contro
a eases e ecuted by the trustee, and to appont successor trustees. Wth
respect to each of these fve trusts a power was aso reserved to ater, change
or modfy the trust. whch was to he e ercsed n the case of four of them
by the settor and the snge benefcary of each trust, actng |onty, and n
the case of one of the trusts, by the settor and a ma|orty of the benefcares
named, actng |onty.
The settor ded wthout havng revoked ether of the two trusts and wth
the benefcares and fe tenants desgnated n the trusts survvng hm, and
wthout havng modfed any of the fve trusts e cept one. and that n a manner
not now matera.
The Commssoner, n f ng the amount of the estate for ta purposes,
ncuded the corpus of a seven trusts. Secton 401 of the statute mposes a
ta at a graduated rate upon the transfer of the net estate of every decedent
dyng after the passage of the ct. y 402 It s provded that n cacuatng
the ta there sha be ncuded n the gross estate a property, tangbe and
Intangbe (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 (whether such transfer or trust s made or
created before or after the passage of ths ct) .
s to the two trusts, t s argued that snce they were created ong before
the passage of any statute mposng an estate ta the ta ng statute f apped
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307
Reg. 3, rt. 17.
to them s unconsttutona and vod, because retroactve, wthn the rung of
Nchos v. Coodge (274 U. S 531 T. D. 4072, C. . I-2, 351 ). In that
case t was hed that the provsons of the smar secton 402 of the 1918 ct
(40 Stat, 1097), makng t appcabe to 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 No. 77 (Chase Natona ank v. Unted States, U. 8., ), decded
ths day, the decson s rested on the ground, earer suggested wth respect
to the fourteenth amendment n otonstM v. Satonsta (27 T . S., 200, 271),
that a transfer made before the enactment of the statute now n queston and
sub|ect to a power of revocaton n the transferor, termnabe at hs death, s not
compete unt hs death, and hence secton 402, as apped to t, s not retro-
actve where hs death foows 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 that the ta was rghty mposed on the transfers of the corpus
of the two trusts and as to them the |udgment of the court of appeas shoud
be reversed.
It s argued by respondent that secton 402 by ts terms does not mpose any
ta on the transfers nvoved n the fve trusts and that, even f sub|ect to
the provsons of that secton, they antedated the passage of the 1921 ct, and
the secton as to them s retroactve and vod, athough they were created after
the enactment of the correspondng sectons of the 1918 ct. The Government
argues that secton 402 appes to a these transfers and s not retroactve as
to them because of the reserved powers to manage and to modfy the trusts,
whch dd not termnate unt the death of the decedent after the passage of the
statute, and that even wthout such reserved powers the transfers of the reman-
der nterests were a sub|ect to the ta because, wthn the anguage of secton
402, they were ntended to take effect n posseason or en|oyment at or after
hs death.
s the ta can not be supported uness the statute appes n one of the two
ways suggested by the Government, we must necessary determne the effect
of the reserved powers and the meanng and appcaton of the phrase quoted
from secton 402. If t be assumed that the power to modfy the trust was
broad enough to authorze dsposton of the trust property among new bene-
fcares or to revoke the trusts, st t was not one vested n the settor aone,
as were the reserved powers n the case of the two trusts. e coud not
effect any change n the benefca nterest n the trusts wthout the consent,
n the case of four of the trusts, of the person entted to that nterest, and
n the case of one trust wthout the consent of a ma|orty of those so entted.
Snce the power to revoke or ater was dependent on the consent of the one
entted to the benefca, and consequenty adverse, nterest, the (rust, for a
practca purposes, had passed as competey from any contro by decedent
whch mght nure to hs own beneft as f the gft had been absoute.
Nor dd the reserved powers of management of the trusts save to deceent
any contro over the economc benefts or the en|oyment of the property. e
woud equay have reserved these powers and others had he made hmsef
the trustee, but the transfer woud not for that reason have been ncompete.
The shftng of the economc nterest n the trust property whch was the sub-
|ect of the ta was thus compete as soon as the trust was made. s power
to reca the property and of contro over t for hs own beneft then ceased
and as the trusts were not made n contempaton of death, the reserved powers
do not serve to dstngush them from any other gft nter vvos not sub|ect
to the ta .
ut the queston much pressed upon us remans whether, the donor havng
parted both wth the possesson and hs entre benefca nterest n the prop-
erty when the trust was created, the mere passng of possesson or en|oyment
of the trust fund from the fe tenants to the remandermen after the testator s
death, as drected, and after the enactment of the statute, s ncuded wthn
Its ta ng provsons. That queston, not necessary nvoved, was eft un-
answered n Shukert v. en (273 U. S., 545 T. D. 4071, C. . I-2, 3491).
There the gft of a remander nterest, havng been made wthout reference
to the donor s death, athough t dd n fact vest n possesson and en|oyment
after hs death, was hed not to be a transfer ntended to take effect n pos-
sesson or en|oyment at or after the donor s death, and for that reason not to
be sub|ect to the ta . ut here the gft was ntended to so ake effect, athough
the transfer whch effected t preceded the death of the settor and was tsef
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Reg. 3(1922), rt. 27.
308
not sub|ect to tbe ta uness made so by the crcumstance that the possesson
or en|oyment passed as ndcated.
In ts pan and scope the ta s one mposed on transfers at death or made
In contempaton of death and s measured by the vaue at death of the nter-
est whch s transferred. (Cf. Y. M. G. . v. Davs, 2 4 U. S.. 47, 50 dward
v. Socum, 2 4 U. S.. 1, 2 T. D. 3584, C. . III-. 479 . . Y. Trust Co. v.
mner, 25 U. S.. 345. 349.) It s not a gft ta and the ta on gfts once
mposed by the Revenue ct of 1924 (ch. 234, 43 Stat., 313) has been repeaed
(44 Stat., 12 ). 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 the form of a fe
estate n one wth remander over to another at or after the donor s death. It
woud requre pan and compeng anguage to |ustfy so ncongruous a re-
sut and we thnk t s wantng n the present statute.
It Is of sgnfcance, athough not concusve, that the ony secton mpos-
ng the ta . secton 401, does so on the net estate of decedents and that the
msceaneous tems of property requred by secton 402 to be brought nto
the gross estate for the purpose of computng the ta , uness the present
remanders be an e cepton, are ether property transferred n contempaton
of death or property passng out of the contro, possesson, or en|oyment of
the decedent at hs death. They are property hed by the decedent n |ont
tenancy or by the entrety, property of another sub|ect to the decedent s power
of appontment and nsurance poces effected by the decedent on hs own fe,
payabe to hs estate or to others at hs death. The two sectons read together
ndcate no purpose to ta competed gfts made by the donor n hs fetme
not n contempaton of death, where he has retaned no such contro, possesson,
or en|oyment. 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 In a trust ntended
to be reached by the phrase n secton 402(c), to take effect n possesson or
en|oyment at or after ds death. ncude any others than those passng from
the possesson, en|oyment, or contro of the donor at hs death and so ta abe
us transfers at death under secton 401. That doubt must be resoved n favor
of the ta payer. (Goud v. Goud. 245 U. S.. 151. 153 Unted States v. M r-
ram, 203 U. S., 179. 187 T. D. 3535, C. . 11-2, 87 .) Doubts of the const-
tutonaty of the statute, f construed as contended by the Government, woud
requre us to adopt the constructon, at east reasonaby possbe here, whch
woud uphod the ct. (Unted States v. Deaware d udson Co., 213 . S.,
3 . 407 Unted Sates v. Standard rewery, 251 U. S.. 210. 220 Unted State
v. n ne Mo/, 241 U. S., M. 401, 402 Panama Raroad Co. v. ohnmn,
2 4 . S.. 375, 390.)
The |udgment beow as to the two trusts, Nos. 1831. 3048. reversed. s to the
fve trusts. Nos. 4477, 4478. 4479, 4480, and 4481. affrmed.
ST T T R NU CT O D CISION O SUPR M COURT.
Gross state Proceeds of Insurance Pad to Desgnated ene-
fcares Consttutonaty.
Subdvson (f) of secton 402 of the Revenue ct of 1921. n so
far as t requres the ncuson n the vaue of the gross estate of
proceeds of poces of Insurance taken out by the decedent upon
hs own fe n whch desgnated benefcares are named and the
power to change them reserved to the nsured, s consttutona.
INSUR NC .
Reguatons 3(1922). rtce 27:Ta abe
nsurance.
III-7-4108
Ct. D. 40
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309 Reg. 3.1 22), rt. 27.
Supreme Cort of the Unted States.
The Chase natona ank of the Cty of New York, ames . ymmers, Grave
. Drake, et a., etc., v. The Unted Staes.
On certfcate from the Court of Cam .
anuary 2, 1929.
OPINION.
Mr. ustce Stoke devered the opuon of the court.
Ths case comes here from the Court of Cams, under secton 288. Tte 2S,
I ntet States Code (43 Stat., 939), on certfed questons of aw concernng
whch nstructons are desred for the proper dsposton of the cause. The
facts certfed are:
On September 13, 1922, after e effectve date of the Revenue ct of 1921,
erbert W. rown procured three nsurance poces on hs fe aggregatng
200.0OO, each namng hs wfe as benefcary. ach pocy reserved to the
nsured the rght to change the benefcary. premums on the poces were
pad by the nsured. On pr 10. 1924, he ded testate, eavng the pantff
beow hs e ecutor and an estate sub|ect to the estate ta mposed by the
Revenue ct of 1921 (eh. 13 , 42 Stat., 227). The ta as assessed by the
Commssoner ncuded 9,14 .7 mposed by reason of the ncuson n the
estate of the proceeds of the three nsurance poces, ess 40,000 e empton
authorzed by the statute. The e ecutor pad the ta and upon dena of a cam
for refund brought the present sut n the Court of Cams to recover the ta
as Iegay assessed.
The questons certfed are:
ueston I: Whether the ta mposed by the fna cause of secton 402(f),
Revenue ct of 1921 (42 Stat., 278), on fe nsurance poces payabe n terms
to benefcares other than the decedent or hs estate s a drect ta on
property and vod because not apportoned.
ueston II: Whether the 9,14 .7 ta mposed bears such an unreasonabe
reaton to the sub|ect matter of the ta as to render It vod.
Smar questons were mooted by counse but not decded n LetrcUm v.
rck (2 8 U. S., 238, 251 T. D. 3715, C. . I 1. 322 ).
Secton 401 of the Revenue ct of 1921 mposes a ta upon the transfer
of the net estate of every decedent dyng after the passage of the ct, and
secton 402 provdes:
That the vaue of the gross estate of the decedent sha be determned by
Incudng the vaue at the tme of hs death of a property tangbe
or ntangbe (f) To the e tent of the amount recevabe by the
e ecutor as nsurance under poces taken out by the decedent upon hs own
fe: and to the e tent of the e cess over 40,000 of the amount recevabe
by a other benefcares as nsurance under poces taken out by the decedent
upon hs own fe.
y secton 40 the e ecutor s requred to pay the tu but f so pad be s
gven by secton 40S the rght to recover from the benefcares a part of the ta
and by secton 409 they are made personay abe for a share of f not so pad.
In tt- present case there s no queston of the constructon of the statute.
The ta Is pany mposed by the e pct anguage of sectons 401 and 402(f)
f those sectons are consttutonay apped. Pantff chaenges the vadty
of the ta on the ground that It s not an e cse or prvege ta but a drect
ta on property, the Insurance poces or ther proceeds, and so s nvad
because not apportoned as requred by rtce I, sectons 2. 9, of the edera
Consttuton, and that n any case the measure of the ta and the methods of
securng ts payment are so arbtrary and caprcous as to voate the due
process cause of the ffth amendment.
The statute n terms tn es transfers. Lke provsons n earer cts have
been generay uphed as mposng a ta on the prvege of transferrng the
property of a decedent at death, measured by the vaue of the nterest trans-
ferred or whch ceases at death. (Cf. T. M. C. . v. avn, 2 4 U. S., 47, 50:
dwards v. Sorum. 2 4 U. S.. 1. 2 T. D. 3584, C. . III-. 4791 : New York
Trust Co. v. sner, 250 U. S., 345, 349 ehos v. Coodae. 274 T . S., 531
T. D. 4072, C. . I-2, 351 .)
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Reg. 3(1922), rt. 27.
310
It s true, as emphaszed by pantff, that the nterest of the benefcares
n the nsurance poces effected by decedent vested n them before hs
death an that the proceeds of the poces came to the benefcares not
drecty from the decedent but from the nsurer. ut unt the moment of
dent the decedent retaned a ega nterest n the poces whch gave hm the
power of dsposton of them and ther proceeds as competey as f he were
hmsef the benefcary of them. The precse queston presented s whether the
termnaton of by death of that power and the consequent passng to the desg-
nated benefcares of a rghts under the poces freed of the possbty
of ts e ercse may be the egtmate sub|ect ot a transfer ta . as s true of
the termnaton by death of any of the other ega ncdents of pro|erty
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 proceeds for
hs own beneft durng hs fe whch sub|ects I hem to the contro of a bank-
ruptcy court for the beneft of hs credtors (Cohen v. Samues, 245 D. S., 50
-ee urngham v. Grouse, 228 U. S.. 459). and whch may, under oca aw
appcabe to the partes here, sub|ect them n part to the payment of h.s
debts (N. Y. Domestc Reatons Law, ch. 14. Conso. Laws, sec. 52 te v.
Domeycr, 175 N. .. 205 Guardan Trust Co. v. Straus, 139 pp. Dv.. 884,
aff 201 N. Y., 54 ), s by no means the east substanta of the ega ncdents
of ownershp, and ts termnaton at hs death so as to free the benefcares
of the pocy from the possbty of ts e ercse woud seem to be no ess a
transfer wthn the reach of the ta ng power than a transfer effected In other
ways through death.
In Satonsta v. Sutonsta. (27 . S., 2(101. a ta had been mposed by State
statute on the successon to a remander nterest whch had vested under a
trust created before the enactment of the ta ng ct. It was ob|ected that
the ta was vod as retroactve and hence n confct wth the fourteenth
amendment of the edera Consttuton under the rung n Nchos v. Coo upc.
supra. ater apped n ntermer v. nderson (27 U. S., 440 T. D. 4157, C. .
II-1, 32 1). ut by the provsons of the trust ndenture n power of ds-
poston of the remnnder had been reserved to the settor to be e ercsed
by hm at any tme durng hs fe, wth the concurrence of one trustee, and
we hed that the freeng of the remander of the possbty of the e ercse of
that power, through ts termnaton by the de:th of the settor, effected a
transfer whch was the approprate sub|ect of a successon a and that the
ta was not retroactve snce the termnaton of the power whch was prerequ-
ste to the compete successon dd not occur unt after the enactment of the
statute. The court sad (p. 271) :
So ong as the prvege of successon has not been fuy e ercsed t may
he reached by the ta . See Cahen v. retcster (203 IT. S., 543) : On- v. Oman
(183 T. S.. 2781 : Chanter v. esey, supra : Mofftt v. ey, supra : Ncke v. Coe,
supra. nd n determnng whether t has been so e ercsed technca ds-
tnctons Ivtweeu vested remanders and other nterests are of tte ava, for
the shftng of the economc benefts and burdens of property, whch s the
sub|ect of a successon ta . may even n the case of a vested remander be
restrcted or suspended by other ega devces. power of appontment re-
served by the donor eaves the transfer, as to hm. ncompete and sub|ect to
ta . (Suen v. Wsconsn, 240 U. S., 25.) The benefcary s acquston of
the property s equay ncompete whether the power be reserved to the donor
or another.
That, t s true, was sad of a successon ta . and we are here concerned
wth a transfer ta . The dstncton was there mportant, for t was at east
doubtfu whether upon the death of the settor there was any such termnaton,
as to hm. f a power of contro over the remander such as woud have been
sub|ect to a ta eved e cusvey on transfers, snce the power was not vested
n hm aone, but n hm and another. See Renevke v. Northern Trust Co.
( . S.. ), decded ths day. ut we thnk that the rue apped n Saton-
sta v. Satonsta. supra, to a successon ta s equay appcabe to a transfer
ta where, as here, the power of dsposton Is reserved e cusvey to the trans-
feror for hs own beneft. Such an outstandng power resdng e cusvey n
a donor to reca a sft after It 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 deat may aso be the approprate sub|ect of
a ta upon transfers.
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311
Reg. :5(1922 , rt. 27.
ut tUe pantff says that the ta here must be deemed to be n ta on
property because the benefcares nterests n the poces were not transferred
to them from the decedent, but from the nsurer, and hence there was nothng
to whch a transfer or prvege ta coud appy. Obvousy, the word trans-
fer In the statute, or the prvege whch may consttutonay be ta ed, can
not be taken n such a restrcted sense as to refer ony to the passng of par-
tcuar tems of property drecty from the decedent to the transferee. It must,
we thnk, at east ncude the transfer of property procured through e pend-
tures by the decedent wth the purpose, effected at hs death, of havng t pass
to another. Secton 402(c) ta es transfers made n contempaton of death.
It woud not, we assume, be serousy argued hat ts provsons coud he evaded
by the purchase by a decedent from a thrd person of property, a savngs bunk
book, for e ampe, and ts devery by the seer drecty to the ntended bene-
fcary on the purchaser s death, or that the measure of the ta woud be the
cost and not the vaue or proceeds at the tme of death. It Is of some sg-
nfcance aso that by the oca aw appcabe to the nsurer and the nsured
n ths case, a benefcary s rghts n the pocy and ts proceeds are deemed
to be the proceeds of the premums e pended by the nsured and as such
recoverabe In fu by one havng an equtabe cam attachng to the premums.
( omes v. Oman, 138 N. Y., 3 9.)
The pettoner ponts to no requrement, consttutona or statutory, that the
termnaton of the power of dsposton of property by death whereby the
transfer of property s competed, whch we have sad Is here the sub|ect of
the ta , must be preceded by a transfer drecty from the decedent to the
recpent of hs bounty, of the pro erty sub|ect to the power. nd we see no
necessty to debate the queston whether the poces themseves were so trans-
ferred, for we thnk the power to ta the prvege of transfer at. death can not
be controed by the mere choce of the formates whch may attend the donor s
bestowa of benefts on another at death, or of the partcuar methods by whch
hs purpose s effected, so ong as he retans contro over those benefts wth
power to drect ther future en|oyment unt hs death. 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 compe-
ton 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 . (Chanter v. esey, 205 I). 8.. 4 .) To make a
dstncton between a genera power and a mtaton n fee s to grasp t a
shadow whe the substance escapes. (Sugden. Powers (8th d.), 39 see
Gray, Perpetutes (3d d.. 1915), sec. . 2 (b).) nd the none ercse of the
power may be as much a dsposton of property testamentary n nature as woud
be ts e ercse at death. ( uen v. Wsconsn, 240 II. S.. 25 cf. Unted States
v. Robbns. 2 9 U. S., 315, 327 T. D. 3817, 0. . -, 1881 Cohen v. Samue ,
supra.)
The ob|ecton urged by pantff under the second queston, that the statutory
method of f ng the ta and securng ts payments nfrnges the ffth amend-
ment, need not detan us. It s sad that both the ta on those who share n
the decedent s estate and that pad by the benefcares s arger than t other-
wse woud be f the proceeds of the nsurance had not been ncuded n the
decedent s gross estate. ut the ncrease n the ta to both s a consequence
of ncudng the amount of the poces n the gross estate n determnng the
net whch s made the measure of the graduated transfer ta . The ob|ecton
amounts to no more than sayng that f the transfer of the poces or ther
proceeds be ta ed, they shoud not be ncuded wth the other property of the
estate n determnng the rate of the ta . s t s the termnaton of the
power of dsposton of the poces by decedent at death whch operates as an
effectve transfer and s sub|ected to the ta , there can be no ob|ecton to
measurng the ta or f ng ts rate by ncudng n the gross estate the vaue
of the poces at the tme of death, together wth a the other nterests of
decedent transferred at hs death. (Stebbns v. Rey, 2 8 U. S., 137.) The
Incuson n the gross estate of gfts made n contempaton of death under
secton 402(c) has a ke effect.
Other ob|ectons to the operaton of the statute are not dscussed ether
because they are not of weght or are not presented by the certfed facts.
The questons propounded by the Court of Cams n form suggest that the
ta s one Imposed by the statute upon the poces. Ths we have shown s
not the case. It s the transfer, whch s a concomtant of the crtera ad down
3133 29 21
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Reg. 3, rt. 47.
312
by the statute for mposng the ta , whch s the sub|ect of the ta . The ta
s not n the poces, but we answer the questons as If nqurng about the trne
sub|ect of the ta .
oth questons are answered, No.
Mr. ustce McReynods concurs n the resut.
Mr. ustce Sutherand and Mr. ustce uter dssent.
D DUCTIONS TR NS RS OR PU LIC, C RIT L , TC., US S.
Reguatons 3. rtce 47: Transfers for pubc, II1-19-4201
chartabe, regous, etc., uses. Ct. D. 59
estate ta revenue act of 1921 decson of court.
Deducton Chartabe equest Inhertance Ta es.
Where, by the terms of a w, nhertance ta es are payabe out
of a fund gven for chartabe uses whch Is deductbe from the
vaue of the gross estate under secton 403(a)3 of the Revenue ct
of 1921, the amount of the deducton under that subsecton s the
amount of the chartabe gft wthout reducton by the amount of
such ta es.
Dstrct Court of the Unted States. Dstrct or Massachusetts.
. Preston Cark, ecutor, v. Unted States of merca.
uy 31, 1928.
OPINION.
Morton, .: The provsons of the Revenue et of 1921, secton 403, under
whch ths case arses are substantay the same as those of the ct of 1918,
under whch dtcard v. Sooun (204 U. S., 1 T. D. 3o84, C. . III-, 479 )
was decded. nd the essenta queston s how far ths case s governed by
that decson. In dwards v. Soe-urn. the testatr made certan persona ega-
ces and certan specfc bequests to charty. s to some of the egaces she
provded that they shoud be pad free of nhertance ta es. She gave the
rest and resdue to charty. The w contaned no other provsons regardng
the payment of nhertance ta es. y the aw- of New York, the State of
domce, they were under such crcumstances payabe from the rest and resdue.
The coector contended that so much of the rest and resdue as was requred
to pay the edera nhertance ta es was not gven to charty and was not
therefore an aowabe e empton n computng the ta abe estate. It was
hed that ths was not the correct vew nnd that the entre rest and resdue was
e empt, even though part of t mght be requred and used to pay ta es.
In the present case the testator gave a certan fund to charty and certan
other funds and property to ndvduas and he e pressy drected that n-
hertance ta es shoud be pad n equa portons from the fund gven to charty
and from the funds not so gven. pparenty the amount of the ta was about
0,000. for about 30,000 appears to have been payabe from the gft to charty.
The Commssoner hed that ths amount was not gven to charty and he
accordngy aowed an e empton, not of the whoe charty fund, but ony of
that fund ess the 30,000 used to pay the ta . Upon ths 30,000 the addtona
ta n queston was eved.
The Government undertakes to dstngush dwards v. Socum, because there
the w contaned no e press provson chargng the ta es on the resduary
gft to charty, that resut beng brought about by operaton of aw, whe here
the w tsef makes one-haf the ta es chargeabe on the charty fund. Ths
poston s sad to be supported by a dctum of udge . N. and, who decded
dwards v. foeum n the ower court. In dwardt v. Socum the court was
pany of opnon that the ncdence of the ta shoud not be consdered n
the evyng of t. It (the statute) manfesty assumes that the net estate
w be ascertaned before the ta s computed. Itacs mne. ( omes, .,
2 4 U. S., at 3.) s further remarked beow, the (Government s) theory
departs from the ong-estabshed practce of the aw not to regard the nct.
deuce of a ta n the evyng of a ta . (Ibd, p. 3.)
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313
Reg. 37, rt. 53.
_ These prncpes seem to me to have been dsregarded n the assessment of
ths addtona ta . ere, as n dwards v. ocutn, n order to compute the
e empton accuratey accordng to the Government s contenton, an agebrac
formua woud have to be used, nvovng as there ponted out two mutuay
dependent ndetermnates (p. 3) a constructon (f the statute whch was
re|ected both by the court of appeas (287 . R., 051) and by the Supreme
Court. It Is qute true, as argued, that a sght change n the wordng of the
w woud make the amount of the ta not e empt but we are deang wth
the w as t stands. In Y. M. C. . v. Davt (204 U. S.. 47) the ta appears
to have been assessed on the prncpe for whch the pantff contends. In the
Revenue ct f 1924 the correspondng secton was changed In ne wth the
Governmeufs contenton a sght Indcaton perhaps that us t prevousy stood
the secton was not understood by Congress to have that meanng. (Revenue
ct of 1924, sec. 303(a)3.)
udgment for pantff.
TITL I ST T T . (1918)
D DUCTIONS C RIT L ND SIMIL R U STS.
Reguatons 37. rtce 53: Pubc, cha- III-21 1214
tabe, and smar bequests. Ct. D. 1
ST T T R NU CT O 1918 D CISION O SUPR M COI RT.
1. Deducton Remander to Charty Upon a Lfe Interest
Lfe Tenant s Power to Use Prncpa.
Where a testator gves the resdue of hs estate to hs wfe for
fe wth authorty to use from The prncpa any sum that may
be necessary to sutaby mantan her n as much comfort as she
now en|oys and after her death bequeaths the prncpa for char-
tabe corporatons, and where the ncome from the resduary estate
s suffcent to mantan the wdow as requred, the provson for
her mantenance does not make the gfts to charty so uncertan as
to precude the deducton thereof under secton 403(a)3 of the
Revenue ct of 1918.
2. Same auaton of Lfe Interest.
Where a remander upon a fe nterest s gven to chartabe
corporatons, the vaue of the fe nterest at the death of the testa-
tor, for the purpose of determnng the amount of the deducton for
chartabe gfts under secton 403(a)3 of the Revenue ct of 1918,
must be estmated by the use of mortuary tabes notwthstandng
the accdent of the fe tenant s death wthn the year granted for
fng the return.
Supreme Court ok the Unted States.
Ithaca Trust Co.. ecutor and Trustee Under the W of dwn 0. Stewart,
pettoner, v. The Unted States.
On wrt of certorar to the Court of Cams.
pr 8, 1929.1
opnon.
Mr. ustce omes devered the opnon of the court.
Ths Is a sut to recover the amount of ta es aeged to have been egay
coected under the Revenue ct of 1918, ebruary 24, 1919 (ch. 18 40 Stat.,
1057), n vew of the deductons aowed by secton 403(a)3 (40 Stat., 1098).
The Court of Cams dened the cam ( 4 C Cs., 8 ), and a wrt of certorar
was granted by ths court.
One une 15. 1921. dwn C. Stewart ded, appontng hs wfe and the Ithaca
Trust Co. e ecutors and the Ithaca Trust Co. trustee of the trusts created by hs
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Reg. 70, rt. 2 .
314
w, e gave the resdue of hs estate to hs wfe for fe wth authorty
to use from the prncpa any sum that may be necessary to sutaby mantan
her n as much comfort as she now en|oys. fter the death of the wfe
there were bequests n trust for admtted chartes. The case presents two
questons, the frst of whch s whether the provson for the mantenance of
the wfe made the gfts to charty so uncertan that the deducton of the amount
of those gfts from the gross estate under secton 403(a)3, supra, n order to
ascertan the estate ta , can not be aowed. ( umes v. Unted States, 27
U. S., 487, 494 T. D. 4185. C. . II-2, 378 .) Ths we are of opnon must
be answered n the negatve. The prncpa that coud be used was ony so
much as mght be necessary to contnue the comfort then en|oyed. The stand-
ard was f ed n fact and capabe of beng stated n defnte terms of money.
It was not eft to the wdow s dscreton. The ncome of the estate at the death
of the testator and even after debts and specfc egaces had been pad was
more than suffcent to mantan the wdow as requred. There was no uncer-
tanty apprecaby greater than the genera uncertanty that attends human
affars.
The second queston s rased by the accdent of the wdow havng ded wthn
the year granted by the statute, secton 404, and reguatons, for fng the
return showng the deductons aowed by secton 403, the vaue of the net estate
and the ta pad or payabe thereon. y secton 403(a)3 the net estate ta ed
s ascertaned by deductng among other thngs gfts to charty such as were
made n ths case. ut as those gfts were sub|ect to the fe estate of the
wdow, of course ther vaue was dmnshed by the postponement that woud
ast whe the wdow ved. The queston s whether the amount of the dmnu-
ton, that s, the ength of the postponement, s to be determned by the event
as It turned out, of the wdow s death wthn s months, or by mortaty tabes
showng the probabtes as they stood on the day when the testator ded.
The frst mpresson s that t s absurd to resort to statstca probabtes when
you know the fact. ut ts s due to naccurate thnkng. The estate so far
as may be s setted as of the date of the testator s death. See ooper v. rad-
ford (178 Mass., S)5, 97). The ta s on the act of the testator, not on the re-
cept of property by the egatees. (Youw Men s Chrstan ssocaton v. Davs,
204 U. S., 47, 50 nocon v. Moore, 178 U. a., 41, 49, and passm New York
Trust Co. v. sner, 250 U. S 345, 348, 349 dwards v. Sovu-m, 2 4 U. S., 1
LT. D. 3584, O. . III-, 479 .) Therefore the vaue of the thng to be ta ed
must be estmated as of the tme when the act s done. ut the vaue of prop-
erty at a gven tme depends upon the reatve ntensty of the soca desre for t
at that tme, e pressed n the money that t woud brng n the market. See
Internatona arvester Co. v. entucky (234 U. S.. 210, 222). Lke a vaues,
as the word s used by the aw, t depends argey on more or ess certan
propheces of the future, and the vaue s no ess rea at that tme f ater
the prophecy turns out fase than when t comes out true. See Lcreyn t.
ectrc Reducton Co. (275 U. S.. 243. 247) New York v. Suae (239 U. S.. 57,
1). Temptng as t s to correct uncertan probabtes by the now certan
fact, we are of opnon that t can not be cone, but that the vaue of the wfe s
fe nterest must be estmated by the mortuary tabes. Our opnon s not
changed by the necessary e ceptons to the genera rue specfcay made by
the ct.
udgment reversed.
ST T T R NU CT O 1018 D CISION O COURT.
Gross state: Proceeds of Insurance: Poces Issued efore
ny state Ta ct.
The amount receved by an e ecutor as nsurance under poces
taken out by the decedent upon hs own fe before the enactment of
any edera state Ta ct shoud be ncuded n determnng the
vaue of the gross estate under secton 402(f) of the Revenue ct
of 1918.
GROSS ST T INSUR NC .
Reguatons 70. rtce 2 : Insurance n
favor of the estate.
III-2o-4248
Ct. D. 72
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315
Reg. 70, rt. 20.
Court of Cams of the Unted States.
ohn L. Mmnaugh, r., ecutor of the W of ohn L. mnau h, deceased, v.
The Unted State .
December 3, 1028.
OPINION.
Mobs, udge, devered the opnon of the court.
Pantff, ohn L. Munaugh, |r., e ecutor of the w of ohn L. Mmnagh,
deceased, fed an estate-ta return for the estate of decedent and pad on the
ner vaue of sad estate the ta shown to be due thereon the sum of 05, 14.45.
Thereafter tht- onnssoner of Interna Revenue assessed aganst sad esute
an addtona ta of 44,077.3 , whch was pad. Pantff fed a cam for re-
fund n the sum of 41.257.:- t, whch was re|ected. Ths acton s fur the re-
covery of sad amount.
The bass of pantffs cam s the aeged error of the Commssoner In the
vauaton paced upon three certan parces of rea estate and upon the vaue
of certan msceaneous property, and aso upon the vaue of 350 shares of
stock n the Pametto Natona ank: and upon the further ground that the
Commssoner erroneousy ncuded n the gross estate the amount of the pro-
ceeds of fe nsurance pad on poces taken out by pantff s decedent on hs
own fe.
The parce of rea estate ocated on the northwest corner of Man and
ampton Streets, Coumba, S. C, known as the store property, was vaued by
the e ecutor n hs return at 157,500, and by the Commssoner at 300,000:
the property ocated at the southeast corner of sad streets, known as the hote
property, was vaued by the e ecutor at 157,500, and was ncreased by the
Commssoner to 250.000: and the parce ocated at the southwest corner of
Standng and arnwe Streets was vaued by the e ecutor at 15,000, and
was ncreased by the Commssoner to 20, M ).
The e ecutor returned the shares of stock n the Pametto Natona ank as
of no vaue, and the Commssoner determned ts vaue to be 50,500. The
msceaneous property referred to, consstng of stock of merchandse, f tures
n storeroom, accounts due, devery trucks, and other persona property, was
vaued by the e ecutor at 105,18 .25, and was ncreased by the Commssoner to
225,000.
In computng the vaue of the gross estate the Commssoner ncuded the
proceeds of certan fe nsurance poces aggregatng 50,000, whch pantff
contends was error.
t the recent hearng of ths case, the queston havng arsen as to the |urs-
dcton of ths court to nqure nto the acton of the Commssoner n determn-
ng the vaue of property for the purpose of computng the estate a , counse
for the partes hereto were requested by the court to te brefs on that sub|ect,
and they have done so. Whatever doubt may have e sted on ths pont, It
seems now from an e amnaton of the authortes cted by counse on both
sdes to be a setted prncpe that the courts have |ursdcton to revew the
determnaton of the Commssoner on the queston of the vaue of property
for purposes of ta aton. The Department of ustce has consstenty foowed
the rue that the Commssoner s fndngs n ths respect are ony prma face
correct and are not concusve on the courts. Inasmuch as the partes are
In agreement on ths pont, no further dscusson of the queston w be
nduged.
The two arger parces of property, known as the store property and the
hote property, were each vaued n the return at 157,500. Pantff s own
evdence estabshes a vaue for the stoc property of not ess than 202,500
and for the hote property not ess than 210,000. s to a three parces of
rea estate, and as to the msceaneous persona property, the evdence ampy
sustans the vaues determned by the Commssoner.
The Commssoner determned the vaue of the Pametto Natona ank stock
to be 170 per share. Pantff contends that sad stock had no vaue as of
the date of the death of the testator. anuary S), 1921. The Pametto Natona
ank faed n uy, 1923. some two and one-haf years after the deat of
pantff s decedent, and ts assets and abtes were taken over by the Coum-
ba Natona ank, and ts entre surpus and capta, amountng to 1,250,000,
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Reg. 70, rt. 2 .
31
were t once charged off. There was much worthess paper n the assets of the
bank. Stockhoders of the Coumba Natona ank contrbuted 250,000 to
cover the osses of the defunct bank. Later a further assessment of 500,000
was made aganst snd stockhoders. rom these facts concernng the con-
dton of ts affars n uy, 1923, t was the concuson of pantff s chef
wtness on that sub|ect that the stock had no vaue In anuary, 1921. It
appears, however, that the apprasers apponted by the probate court of the
county of decedent s resdence vaued sad stock at 52,500 for the 350 shares
as of ebruary 28, 1021, and other evdence shows that saes of such stock were
made at 170 on or about auuary 9, 1921. Sad stock was not sted on any
stock e change. In computng the gross vaue of decedent s estate the Comms-
soner determned the vaue of sad stock to be 59,500. It s the contenton
of pantff that t had no vaue. The burden s on pantff to prove ts con-
tenton. The evdence does not estabsh pantff s cam that t had no vaue,
nor s t satsfactory shown that t had a ess vaue than that determned by
(e Commssoner.
The remanng queston for consderaton s the contenton of pantff that
the proceeds of certan poces of fe nsurance on the fe of pantff s dece-
dent, amountng to 50,000, shoud not have been ncuded n the gross estate
by the Commssoner n computng the vaue of sad gross estate. In support of
ths contenton pantff rees whoy upon the decson of the Unted States
Supreme Court n the case of Leweyn v. rck (2 8 U. S., 238 T. D. 3715, C.
. I -1, 322 ), pantff s contenton beng that the court n that case hed
that fe nsurance taken out before the passage of any estate ta aw may not
propery be ncuded n the gross estate. The queston n ths ease Is ceary-
dstngushabe from that nvoved n the rck case. In that case there were
outstandng at the tme of the death of the testator, enry C. rck, 11
poces of nsurance upon hs fe, 4 of whch were payabe to hs wfe and 7 to
hs daughter. The foowng facts wth reference to sad poces were agreed:
enry C. rck ded on December 2, 1919, and hs w was admtted to
probate on December . There were outstandng poces upon hs fe, four
payabe to hs wfe and seven to hs daughter. The tota amount receved
under them was 474,029.52, and as hs estate apart from ths was more than
10,000,000. an addtona ta of 108,057.88. or 25 per cent of the sum receved
ess the statutory deducton of 40,000, was requred to be pad. the
poces were taken out before the Revenue ct was passed. The argest one.
for 114,000, was a pad-up pocy ssued n 1901, payabe to Mrs. rck wthout
power n Mr. rck to change the benefcary.- nother, smar so far as
matera, was for 50,000. Others were assgned or the benefcary named
rck s estate) was changed to rck s wfe or daughter before the date of
the statute. premums were pad by Mr. rck, and some seem to have been
pad after the statute went nto force.
Pantff s contenton s obvousy based upon what we conceve to be a
msconcepton of the meanng of certan anguage appearng n the opnon of
the court n that case, to wt:
Not ony are such doubts avoded by construng the statute as referrng
ony to transactons takng pace offer t was passed, but the genera prncpe
that the aws are not to be consdered as appyng to cases whch arose before
ther passage s preserved, when to dsregard t woud be to mpose an
une pected abty that f known mght have nduced those concerned to
avod It and to use ther money n oLher ways. Our tacs.
The transactons takng pace after t was passed obvousy refer to trans-
actons wth respect to the poces after they were taken out. In that case t
was sought to mpose the estate ta upon fe nsurance on the fe of the
testator, payabe, ether by orgna contract or by assgnment, to the wfe and
daughter. The testator, pror to the enactment of any state Ta ct, had
dvested hmsef and hs estate of every vestge of nterest n sad poces or
the proceeds thereof, and these are the transactons whch the court was con-
sderng when t used the anguage quoted above. In the present case the
poces were a payabe to the estate of the decedent, and the proceeds thereof
n the hands of hs e ecutor were, under the provsons of secton 402(a) of
the evenue ct of 1918 (40 Stat., 1057), sub|ect to the payment of the
charges aganst hs estate, and the e penses of ts admnstraton, and
sub|ect to dstrbuton as part of hs estate. The prncpe that the proceeds
of fe nsurance payabe to a decadent or hs estate consttute assets of the
estate seems to be we setted. It has been hed that even when the pocy s
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317
Reg. 37(1917), rt. II.
payabe to a benefcary, the proceeds of such pocy are st assets of the
estate f the decedent has reserved the power to change the benefcary.
(Cohen v. Samue , 245 U. S., 50: ather v. Mes. 2 8 ed.. 92: noeder s
state, 140 NT. Y.. 377. 35 N. 01 oorhees state, 193 N. Y. Supp.. 1 8). Other
cases to the same effect are cted n defendant s bref. We are of the opnon
that the proceeds of the Insurance poces nvoved heren were propery
ncuded by the Commssoner n the gross estate of pantff s decedent. It
foows, from the vews herenabove e pressed, that the pantff s petton must
be dsmssed. It s so ad|udged and ordered.
TITL II ST T T . (191 )
T GROSS ST T .
Reguatons 37(1917), rtce II. III-18-4194
Ct. D.57
estate ta revenue act of 191 decson of court.
Gross state Devse n Leu of Dower.
Where, under the aws of entucky and Oho, there has been an
eecton to take property devsed n eu of dower, the vaue of the
property so taken shoud be ncuded In the gross estate under sec-
ton 202(a) of the Revenue ct of 191 .
Unted States Dstrct Court, Southern Dstrct of New York.
orence S. chuette. as ecutra of the state of arry 8. arkness,
Deceased, pantff, v. rank . owers, Ooeotor of Interna Revenue for
the Second Dstrct of New York, defendant.
cton at aw for refund of aeged e cess of edera estate ta . Tra wtUout a |ury
upou stpuaton of facts.
anuary 29, 1929.
opnon.
Coeman, Dstrct udge: The soe queston presented s whether the edera
estate ta shoud have been reduced because of the e stence of the wdow s
dower rghts. The testator, arry S. arkness, ded on anuary 23, 1919,
eavng a w n whch, after drectng the payment of hs debts, he gave hs
entre estate, rea and persona, to hs wdow, who has snce quafed as
e ecutr and s the present pantff. part of the rea estate vaued at
218,333 was ocated In entucky, and another part vaued at 13,0 5 was
ocated n Oho. Under the statutes of both these States the wdow had a
dower rght for whch the Treasury Department refused to make any deducton
n f ng the amount of the ta . It was stpuated that f an aowance shoud
have been made for these dower nterests, the ta pad was 10,39 .73 n
e cess of what t shoud have been and |udgment shoud be granted to the
pantff In that sum.
Under the present aw as emboded n the Revenue ct of 1019. whch
became effectve on ebruary 24, 1919. about a month after the testator s death,
ths queston coud not arse, because that ct e pressy provdes that there
sha be no deducton on account of the e stence of dower rghts. The statute
In effect at the tme of ths testator s death, Revenue ct of 191 , whch
governs ths decson, made no menton of dower rghts, but provded n
secton 202
That the vaue of the gross estate of the decedent sha be determned by
Incudng 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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Reg. 37(1917), rt, II.
318
hs estate and the e penses of ts admnstraton and s sub|ect to dstrbuton
as part of hs estate.
Ths provson has been hed to requre a deducton from the vaue of the
rea property equa to the vaue of the wdow s dower because the atter does
not pass by successon at the husband s death. (Randoph v. Crag, 2 7 ed.,
993.) It has, however, been hed by udge . N. and, sttng as a dstrct
udge, that even I hough there may have been dower rghts at the tme of the
testator s death, f the wdow thereafter waves them no deducton from the
vaue of the property Is proper under ths secton. Tte Guarantee t Trust
Co. v. dwards, 290 ed., 17 appea dsmssed 2 3 U. S., 872.)
In the present case there was no admeasurement of dower, but the wdow
takng a the rea property has sod the parts here nvoved. Two ponts are
argued: (1) Dd she eect to wave her dower, and (2) f she dd. does that
prevent the deducton whch woud otherwse be proper under Randoph v. Crag,
supra
(1) The entucky statutes provde:
fter the death of ether the husband or wfe, the survvor sha have an
estate for hs or her fe n one-thrd of a the rea estate of whch he or she,
or anyone for hs or her use. was sezed of an estate n fee smpe durng the
coverture, uness the rght to such dower or nterest sha have been barred,
forfeted, or renqushed. (Carro s entucky Statutes. 1922, sec. 2132.)
When a wdow cams her dowabe and dstrbutabe share of her husband s
estate, she sha be charged wth the vaue of any devse or bequest to her by
hs w or she may, though under fu age, renqush what s gven her by
the w, and I hereupon receve her dower and dstrbutabe share as f no
w had been made but such renqushment must be made wthn 12 months
after the probabe, etc. Nothng heren sha precude the wdow from
recevng her dowabe and dstrbutabe share, n addton to any devse or
bcque made to her by the w, f such s the ntenton of the testator, pany
e pressed n the w, or necessary nferabe therefrom. (Carro s entucky
Statutes, 1922, sec. 1404.)
The Oho statutes provde:
wdow or wdower who has not renqushed or been barred of t, sha
be endowed of an estate for fe n one-thrd of a the rea property of whch
the deceased consort was sezed as an estate of nhertance at any tme durng
the marrage. (Throckmorton s Oho Genera Code, 192 , sec. 8 0 .)
If provson be made for a wdow or wdower In the w of the deceased
consort, after the probate of such w the probate court forthwth sha ssue
a ctaton to such wdow or wdower to appear and eect whether to take such
provson or to be endowed of the ands of the deceased consort and take the
dstrbutve share of the persona estate. (Throckmorton s Oho Genera
Code, 1920. see. 105 .)
Such eecton must be made wthn one year from the date of the servce
of such ctaton. (Id., sec. 105 7.)
No wdow or wdower ha 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 sure of the estate.
(Id., sec. 105 9.)
If the wdow or wdower fas to make such eecton
then t sha e deemed that she or he has eected to take under the w and
persons may dea wth property of the decedent , n accordance therewth
. (Sec. 10571.)
If the wdow or wdower eects to take under the w, she or he sha be
thereby barred of dower and such share or personaty and sha take under the
w aone uness as provded n secton 105 9 . (Sec. 10572.)
It s thus seen that under the statutes of entucky the wdow can not accept
a gft under her husband s w and retan her dower rghts uness hs ntenton
that she have both be pany e pressed n the w or necessary nferabe
therefrom and under the Oho statutes ths s kewse true, uness the w
pany shows the testator s ntenton that she have both. In both States
where an eecton on her part s necessary f she fas to make one e pressy,
she s presumed to take under the w and to have waved her dower.
Counse for pantff aby and ncsvey argues that under these statutes
a wdow s not put to eecton between the provsons of the w and her dower
rghts where a testator has gven her hs entre estate after the payment of
hs debts. Unfortunatey, however, the weght of authorty n those States a
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319
Reg. 37(1917), rt. II.
aganst hs contenton. (Carpenter s ecutors v. Reams, 4 y. Law (Part 2),
825 arrson v. Tayor s m., 51 S. 193 Schnabe v. Schnabe s ecu-
tor, 108 y., 53 U af o/ v. Chrstan, 12 ush, 524 rder v. ubanks, 75
y., 517 Opnons of ttorney Genera of Oho, 1920, vo. 1, page 8834.) Ths
s more true of entucky than of Oho, but counse Cor both sdes seem to agree
that the same rue shoud be apped and the stpuaton of facts does not
make t possbe to drect |udgment based on any dstncton between the two
States. On a queston of ths sort we ought to be guded by the decsons n
the courts of the State whch has enacted the aw nvoved, rather than by
our own constructon. I therefore hod that the pantff was requred to
eect and dd actuay eect to take under the w and to wave her dower
rghts.
(2) The effect of pantff s waver of her dower upon the rght of the
estate to cam a deducton under the Revenue ct has been estabshed by
udge . N. and s decson n Tte Guarantee Trust Co. v. dwards, supra.
ere aso counse for pantff advances cogent reasons for permttng the de-
ducton even after the waver of t|e dower rghts, but I fee that the aw s
setted so far as ths dstrct s concerned by the above decson. Whe t s
true that n that case there was an e press provson n the w requrng
an eecton, that s no ground for dstngushng the case, because f my con-
cusons above are correct, there was an eecton n the present case brought
about by provsons of the statutes rather than of the w. udge and s
decson has been foowed by the Unted States oard of Ta ppeas ( acobs
v. The Commssoner of Interna Revenue, . T. . decson No. 319 ), and s
supported by a decson of the Unted States Dstrct Court for the astern
Dstrct of Tennessee I rscoe v. Crag, decded une 20, 1927 T. D. 4074,
C. . I-2, 309 ).
udgment w therefore be drected for the defendant. There havng
been no |ury sworn, t w be necessary to make fndngs, whch w be the
same as the stpuaton of facts, and I drect they be setted on notce.
I fee constraned to e press apprecaton of the e ceptona mert of the
brefs submtted by counse for the pantff and by the assstant dstrct
attorney.
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C PIT L STOC T RULINGS.
TITL II. SP CI L T S. (1924)
Reguatons 4(1924), rtce 11: ass of the I11-24-4 43
ta : Carryng on or dong busness. Ct. D. 07
capta stock ta revenue act os1 1924 decson of court.
Dong usness odng Corporaton.
hodng corporaton whch assumes the management, drects
the poces, and actvey partcpates n the everyday affars of
Its subsdary s dong busness and s sub|ect to the capta
stock ta tm 8ed by the Revenue ct of 1924.
Court of Cams of the Unted Statcs.
Ward Mkng Corporaton v. The Unted States.
December 3. 1928.
OPINION.
ooth. Chef ustce, devered the opnon of the court.
In ths ta case the pantff, a Maryand corporaton, sues to recover 59,085
assessed and pad by t upon the capta stock of the corporaton for the years
endng une 30, 1925. and une 30, 1920. The appcabe secton of the Revenue
ct of 1924, under whch the ta es were coected (43 Stat., 325). reads as
foows:
Sec. 700. (a) On and after uy 1. 1924. In eu of the ta mposed by sec-
ton 1000 of the Itevenue ct of 1921
(1) very domestc corporaton sha pay annuay a speca e cse ta
wth respect to carryng on or dong busness, equvaent to 1 for each 1,000
of so much of the far average vaue of ts capta stock for the precedng year
cudng une 30 as s n e cess of 5,000. In estmatng the vaue of capta
stock the surpus and undvded profts sha be ncuded:
(b) The ta es mposed by ths secton sha not appy n any year to any
corporaton whch was not engaged n busness (or. n the case of a foregn
corporaton, not engaged n busness n the Unted States) durng the precedng
year endng une 30 .
The pantff s rght of recovery . predcated upon an aegaton that t was
not engaged In busness durng the ta abe years n queston. The record
nvoves two corporatons, the Ward akng Co. and the Ward akng Corpora-
ton, the atter, . e.. the pantff, comng nto e stence, as pantff contends,
as a hodng company, mtng ts actvtes substantay to the snge purpose
of recevng and dsbursng dvdends from Its stock hodngs n the Ward
akng Co.
On December . 1923. Wam Ward transmtted to George S. Ward, pres-
dent of the Ward akng Co.. a wrtten offer to pun-base not ess than 51 per
cent of the stock of hs company. The prce was t ed at 10(1 ter share for
preferred and 200 per share for common stock. The usua guarantees for the
performance of the contract were wrtten nto the offer and the same was to
e pre on December 31. 1923. wth an e press reservaton to accept stock on the
same terms subsequent to that date. cceptance of the offer was aso con-
dtoned upon the resgnaton of the drectors and offcers of the bakng com-
(320)
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321
Reg. 4(1924), rt. 11.
pany, as we as the rght to verfy the stated vaue of the stock as of November
19. 1923.
Wthout repetton of tedous detas and fgures ndcatng vaue, t Is suff-
cent to say that Mr. Ward by the offer desred to secure a ma|orty of the
bakng company stock n order to organze a new corporaton, through whch
he antcpated fnancng the transacton, and set up a hodng company. The
offer was accepted and the transacton carred out as per agreement. The
pantff corporaton was duy organzed and ncorporated under the aws of
Maryand. It s now and has been snce ts organzaton the owner of prac-
tcay a the outstandng stock of the Ward akng Co.
The ssue n ths case s not a new one. Contentons dentca n a respects
have been many tmes before the courts, and we thnk the precedents are
ampe and pont out wth a degree of e actness the estabshed rues for de-
termnng the fact whether the corporaton camng e empton from ta aton
was or was not engaged n busness. If the actvtes of the corporaton
were of a passve character restrcted to the management and contro of ts
own pecuar affars, and do not e tend to the affars of the parent corporaton
ft such a way as to make the atter n fact more of a subsdary and dependent
organzaton than an ndependent organzaton, t may not escape the cassf-
caton of one engaged n busness. The charter of the pantff corporaton was
comprehensve t authorzed a broad ed of corporate actvty, and f t so
empoyed ts corporate powers as to assume the management of, drect the
poces, and actvey partcpate n the everyday affars of the parent company,
the corporaton was obvousy dong more than coectng and dsbursng dv-
dends receved upon the stock whch t owned. If such be the case the hodng
company s, as a matter of fact, the domnant factor n the mutua nterests
of the two companes, and upon ts actvtes the course pursued depends. s
the Supreme Court sad n the Che Copper Co. case (270 U. S., 452, 455 T. D.
3857, C. . -, 410 ) : The actvtes and stuaton must be |udged as a
whoe. Lookng at them as a whoe we see that the pantff was a good dea
more than a mere condut for the Che poraton Co. It was ts bran or
at east the efferent nerve wthout whch that company coud not move. In
the on aumbach case (242 U. S.. 503. 51 ), the Supreme Court sad: The
far test to be derved from a consderaton of a of them s between a cor-
poraton whch has reduced ts actvtes to the ownng and hodng of property
and the dstrbuton of ts avas and dong ony the acts necessary to contnue
that status, and one whch s st actve and s mantanng ts organzaton
for the purpose of contnued efforts n the pursut of proft and gan and such
actvtes as are essenta to those purposes. Ths court had a case somewhat
smar In prncpe before It n the Chevroet Motor Co. v. The Unted States
t 4 C. Cs., 211 T. D. 4123, C. . II-1, 329 , wheren one corporaton was
actve not ony n ts own affars, but oaned and empoyed ts corporate powers
n promotng the affars of another corporaton, a case where mutuaty of
nterest nduced recproca actvtes, and n that case, as we beeve n ths,
the pantff company was engaged n and dong busness.
The record heren dscoses that the pantff company was, as camed,
organzed to acqure the stock of the Ward akng Co. To accompsh the
purchase thereof the pantff borrowed from the Ward akng Co. and from
banks arge sums of money, and pro|ected tsef nto the actve management of
ts subsdary. If rea estate was acqured by the Ward akng Co. to e pand
ts busness, the pantff company frst passed upon the wsdom and necessty
for so dong. Patent rghts were purchased by the Ward akng Co. upon the
recommendaton of the pantff. The e tent and pocy of advertsng cam-
pagns were revewed by the pantff, and throughout a the years Invoved
the pantff contnued to partcpate and take a vey and drectng nterest
n practcay every step taken by the bakng company. These transactons,
Invovng sometmes sums n e cess of a mon doars, everyone of whch,
from the standpont of mportance, requred the e ercse of busness actvty,
the empoyment of much more effort than attenton to ts stock hodngs, are
convncng proof that the pantff not ony dd engage n busness, but had n
mnd as the one purpose of ts organzaton the drecton and contro of the
Ward akng Co. s a matter of fact, we thnk the record warrants an n-
ference that, foowng the organzaton of the pantff corporaton, the Ward
akng Co. mted ts actvtes to bakng bread, and the pantff drected and
controed ts fsca and genera busness poces n a ther aspects wthout
nterference from the company. The cases, as sad by the Supreme Court,
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Reg. 4(1924), rt. 11.
322
must be e ceptona, when such actvtes of such corporatons o not amount
to (n r busness n re sense of the statutes.
Pantff, we thnk, msconceves the appcabty of many of the cases cted
to sustan ts contenton too many to |ustfy detaed revew. The mere fact
that one corporaton dd ths and another that s not aone decsve of the ssue.
The courts, we thnk, estabsh the prncpe that a corporaton may not escape
ta aton upon ths ground, when t s manfest from the record that It Is
actvey engaged In e pandng he trade, Increasng the ussets and dvdends
of the corporaton whose stock s ts ony asset, by assumng management and
contro of ts subsdary. It was not aone advce gven by the pantff that
determned poces the pantff assumed, but t contnuousy bused tsef wth
the bakng company s affars, and took advantage of ts corporate powers to
mantan a corporate organzaton for the soe purpose of dong the dentca
thng t dd do. It s not the voume of busness done, but rather the dong of
busness, the act of engagng contnuousy n busness actvtes whch are not
merey ncdenta, but substanta and redound n ncreased profts by reason of
ther performance.
It woud be dffcut to read the record heren and come to any other cof-
euson than the one whch seems to estabsh the fact that the pantff heren
was an actve, aggressve organzaton, endng a ts energy and busness
acumen to the e panson of the bakng busness and renchng out for Increased
voume of recepts n every egtmate way, for the soe purpose of augmentng
by ts own actvtes the vaue of the great amount of bakng company stock It
hed.
The petton w be dsmssed. It s so ordered.
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MISC LL N OUS T RULINGS.
TITL IIL ST MP T S. (1924)
Reguatons 71, rtce 39: Returns by cear- III-25- 424
ng houses. T. D. 42 8
ST MP T S TR NS S O STOC .
Reguatons 71, artce 89, amended.
Treasury Department,
Offce of Commssoner of Interna, Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
rtce 39 of Reguatons 71 s hereby amended by addng thereto
the foowng:
(g) Where the methods provded by ether subdvson (a) or (b) of ths
artce are foowed, an ndorsement shoud be attached to, or stamped on,
a certfcates of stock presented to the transfer agent coverng transfers
whch are to be made on the books of any corporaton, readng us foows:
It s hereby certfed that requste edera stamps on the transfer of
shares of ths certfcate have been aff ed to cearng house sheet dated
fed wth the Stock change Cearng ouse.
f
Member Stock change.
. . Mres,
ctng Commssoner of Interna Revenue.
pproved une 17, 1929.
Ogden L. Ms,
ctng Secretary of the Treasury.
TO CCO.
Reguatons 8(1928), rtce 54: Canceaton III-11-4143
of tobacco and snuff stamps. T. D. 42 3
C NC LL TION O TO CCO ND SNU ST MI S.
Tobacco and snuff stamps of denomnaton 4 ounces and smaer
bo aff ed us to sea the packages and as to be broken before con-
tents are removed, need not be further canceed. Reguatons No.
8. revsed, amended accordngy.
(323)
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Reg. 8 (1928), rt. 54.
324
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. O.
To Coector of Interna Rerenue and Others Concerned:
The frst sentence of artce 54 of Reguatons No. 8, revsed pr
24, 192 . s amended to read as foows:
(a) cept as provded u subdvson (d) of ths artce n respect to stamp
aff ed to such packages of tobacco and snuff as are specfed theren, each
stamp aff ed to a package of manufactured tobacco or snuff by the manu-
facturer thereof sha be canceed n the foowng manner.
t the end of artce 54 a new subdvson s added, as foows:
(d Stamps of the proper denomnaton and cass whch are so aff ed to
packages of tobacco or snuff weghng not more than 4 ounces as effectuay to
sea the packages and render t mpossbe to remove the contents wthout
breakng the stamps need not be canceed as provded n subdvson (a).
D. . ar.
Comm-ss-wner of Interna Revenue.
pproved March 8, 1929.
. W. Meon,
Secretary of the Treasury.
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MISC LL N OUS RULINGS.
OL OM RG RIN .
III-2-40 3
MS. 8
Schedue of oeomargarne produced and materas used, durng the month of
November, 1928, as compared wth November, 1927.
November,
1928.
Tota producton of uncoored oeomargarne
Ingredent schedue for unconred oeomargarne:
utter
Coooamt o-
Corn o
Cottonseed o
dbe taow
Mk -
Mustard o
Neutra ard
Oeo o --
Oeo stearn
Oeo stock.
Pam o
Pam-kerne o
Peanut oL
Sat ,
Sesame of_
Pounds.
29,120, 253
234, 55
521,015
347, 130
2, 70
258,005
1,390
971, 330
5 2,44
487,370
105,437
95, 123
1, 20
54,457
405,734
ana etract.
10,134
Tota.
35, 59, 00
Tota producton of coored oeomargarne
Ingredent schedue for coored oeomargarne:
utter
Cocoanut o
Coor
Cottonseed o
Mk.
Mustard o
Neutra ard
Oeo o
Oeo stearne -
Oeo stock .
Pam o
Pam-kerne o
Peanut o
Sat
Soda
1,442,957
2,37
504,578
1, 47
273,472
72, 513
274,708
14,545
1 , 100
7,4 8
24,075
Tota.
32, 55
141.045
2,4 5. 430
(325)
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Mso.
32
III-5-4093
MS. 87
Schedue of oeomargarne produced and materas used durng the month of
December, 1928, as compared wth December, 1927.
Decern her,
1928.
December,
1927.
Ingredent schedue for uncoored oeomargarne:
Pound .
27.324. 90
2 .035,8 9
utter
222,810
14.340. 2S
222. 227
18.083,320
9.000
1,999,.(89
,800
.874,898
5.092
2,149. 42
3,48 , 720
417,034
124,938
32.874
23, 07
44.220
2,1 9, 7 0
14.9 3
NG
23
dbe taow _
2,205,202
Mk
7,8 5,147
1.000
2,110.445
3,495. 201
409,953
92.172
79.952
1120
59 ,251
2. 152.4 4
Oeo stearne
Oeo stock
Sat
Soda
9,012
ana e tract - -
Tota
33. 42. 931
31.1 3,983
Tota producton of coored oeomargarne
1,574.700
1.425,082
Ingredent schedue for coored oeomargarne:
.4 0 1, 43
498,054 | 485,821
1.7 4 1.897
Coor
31 , 4 (1
758, 47
324. 471
577,811
1 4,777
488.297
153,798
321, 21
28,880
14,110
24.218
4.222
82, 105
110.083
184
Mk
17.790
,990
30, 40
Sat
32,777
155,321
140
Soda _
Tota
2,722,100
1.821,324
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327
Msc.
III-
11-4144
MS. 88
Schedue of oeomargarne produc and materas used durnn the month of
anuary, 1929, as compared wth anuary, 1928.
03133
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328
III-14-41 4
MS. 89
Schedue of oeomargarne produced and materas used durng the month of
ebruary, 1929, as compared wth ebruary, 1928.
ebruary,
1929.
ebruary,
192S.
Pounds.
27, 78,790
Pound .
2 . 223. 558
nrre en schedue for unooored oeomargarne:
utter. , .
( oeoanut o I W
Corn o 1
Cottonseed o
dbe taow -
Mk.
Mustard o
Neutra ard
Oeo o
Oeo stearne.
Oeo stock .
Pam o -
Pam-kerne o .
DUt of -
227,437
789. 33
Peanu
Sat..
oda.
ana e tract.
Tota..
Tota producton of coored oeomargarne
duc for coored oeomargarne:
Inpredent s
utter
Cocoanut o
Coor
Cottonseed o..
Mk.. _..
Neutra ard
Oeo of ...
Oeo stearne
Oeo stock
Pam o
Pam-kerne o..
Peanut o
Sat
oda..__
Tota..
139, 974
2, 44
388.419
91
889,787
3 4,405
421.138
77. 24
107,812
04. 381
28 .351
9,927
33.2 9. I M
211,09
13, 43.340
8, 0
1,927, 22
11,889
7, 4 , 89
3,18S
2,142,143
8,239.093
393.473
100.4 5
79,2
2 . 424
88. 10
2, 120, 38
9,001
19
32,049, 734
1,3 4.593
2, 44
431,80
2,03
174,370
4 .392
1 1.32
349.007
11,890
8.378
2, 89
S, 5 8
107. 939
8
1,74 ,930
1, 400, 7 2
505
4 5,95
1. 7
18 ,2 2
470.8 5
188, 501
309.033
15.010
7,24
24,302
2,802
31,13
111,341
143
1,81 ,748
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329
Msc.
III-
18-4191
MS. 90
Schedue of oeomargarne produced and materas used durng the month of
March, 1929, as compared wth March, 1928.
March,
1928.
Tota producton of uncoored oeomargarne
Ingredent schedue for uneoored oeomargarne:
utter.
Cocoanu o.
Corn o..
Cottonseed o.
dbe taow..
Mk
Mustard o
Neutra ard..
Oeo o.
Oeo stearne
Oeo stock
Pam o
Pam-kerne o.
Peanut o
Sat.
Soda
ana e tract.
Tota.
Tota producton of coored oeomargarne
Ingredent schedue for coored oeomargarne:
utter
Cocoanut o
Coor
Cottonseed o
Mk
Neutra ard
Oeo o
Oeo stearne
Oeo stock
Pam o.
Pam-kerne o
Peanut o
Sat
Soda
Soya-bean o.
Tota
Pounds.
28,191, 553
240, 501
v 075. 28
, IN:., 151
1,7 5
, 11,508
772, 550
812.217
4 5,9 1
79,585
100, 798
5 9, 143
305,3 3
9, 92
34,030. 220
1, 52 , 729
1,
511,
2,
201,
521,
172,
385,
13,
I3
45,
30
185
474
330
9 5
79
922
320
:
27,
118,
2,015.553
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330
III-23-4228
MS. 91
Schedue of oeotnargarne produced and matera u (d durng the mouth of
pr, 1929, as compared wth pr. 1928.
pr, 1929. pr, 1928.
Pound).
Tutn producton of uncoored oeomargarne - 27,237,173
Ingredent schedue for uncoored oeomargarne:
utter _
Cocoanut o
Corn o
Cottonseed o
dbe taow
Mk..
229,932
14.472,411
Mustard o..
Neutra ard -.
Oeo o
Oeo stearne.
Oeo stock
Pam o.
Pam-kerne o.
Peanut o
Sat.
2,189, 80
1, 80
7, 395, 45
1, 00
1, 1,987
3. 38, 191
480,8 1
73,114
103,21
Soda
ana e tract.
499, 770
2, 199, 979
8,9 1
Tota : 32,94 , 38
Toa producton of coored oeomargarne
Ingredent schedue for coored oeomargarne:
utter
Cocoanut o --
Coor..
Cottonseed o...
Mk
Neutra ard
Oeo o
Oeo stearne..
Oeo stock
Pam o..
Pam-kerne o. -
Peanut o
Sat
Soda
Tota _
1, 41)0, 441
840
459. 99
1,885
171,84
451,148
174, 848
309,417
14, 7
12,587
43,893
2 ,03
113,548
121
1. MO. 532
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MLso.
MISC LL N OUS.
III-2-40
T. D.4254
ncome and profts ta es.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. 0.
To Coectors of Interna Revenue and Others Concerned:
The ast sentence of subdvson (b) of rtce I, Treasury Dec-
son 41 8 (Treasury Decsons, o. 53, No. 2 , p. 5 C. . 1I-2,
413 ), s hereby amended to read as foows:
cept where the ta has aready been pad, the owner w be requred n
each case to furnsh a bond as provded n subdvson (f) of ths artce.
. . Mres,
ctng Commssoner of Interva Revenue.
pproved anuary 7, 1929.
. W. Meon,
Secretary of the Treasury.
II1-14-41
T . R. 15848. PU LIC, NO. 1034. S NTI T CONGR .S.S.I
n ct makng appropratons to suppy urgent defcences n
certan appropratons for the fsca year endng une 30, 1929, and
pror fsca years, to provde urgent suppementa appropratons
for the fsca year endng une 30. 1929. and for other purposes.

TR SURY D P RTM NT.
UR U O INT RN L R NU .
Refundng ta es egay coected: or an addtona amount for
refundng ta es egay or erroneousy coected, as provded by
aw, ncudng the payment of cams for the fsca year 1929 and
pror years, 75,000,000: Provded, That a report sha be made to
Congress by nterna-revenue dstrcts, and aphabetcay arranged,
of a dsbursements hereunder n e cess of 500 as requred by
secton 3 of the ct of May 29. 1928 (45 Stat., p. 99 ). ncudng
the names of a persons and corporatons to whom such payments
are made, together wth the amount pad to each: Provded. That
no part of the foregong appropraton sha be used to pay any
refund of an ncome or profts ta pursuant to a cam aowed after
the enactment of ths ct n e cess of 20,000 (other than payments
n cases n whch a sut n court or a proceedng before the oard of
Ta ppeas has been or sha be nsttuted or payments n cases
determned upon precedents estabshed n decsons of courts or the
oard of Ta ppeas) uness a bearng has been hed before a
commttee or offca of the ureau of Interna Revenue and the
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332
decson of the Commssoner of Interna Revenue n any such refund
aowance n e cess of 20,000 sha be a pubc record.

pproved March 4, 1929.
III-18-4190
Mm. 3724
mendments to the conference and practce requrements of the
ureau of Interna Revenue.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C, pr 1 , 1929.
Offcas of the ureau of Interna Revenue, Coectors of Interna
Revenue, Interna Revenue gents n Charge, and Others Con-
cerned:
The frst sentence of Paragraph I of the Conference and Prac-
tce Requrements of the ureau of Interna Revenue, revson of
uy 1, 1925. pubshed n pamphet form and n Cumuatve ue-
tn I -2, page 320, s hereby amended to read as foows:
Power ov ttorney Requrements.
I . ny power of attorney offered n evdence n any case w be accepted
ony f t s n reguar form, and ony one power of attorney sha be n effect n
any case for a desgnated ta abe year or years, and n such power sha be
ncuded the names of a attorneys or agents to whom the ta payer has dee-
gated authorty to represent hm.
Paragraph I s amended to read as foows:
New Power of ttorney Requred When New or ddtona ttorneys or
gents Retaned.
I. In any case n whch a power of attorney has been fed for a gven ta -
abe year or years and the ta payer .subsequenty desres to authorze other or
addtona attorneys or agents to represent hm before the ureau wth respect
to the same ta abe year or years, a new power of attorney must be fed, whch
sna Incude the names of a attorneys or agents who are authorzed to act for
such ta payer. Such new power of attorney sha contan a cause specfcay
revokng any and a powers of attorney prevousy fed wth respect to the
ta abe year or years desgnated theren. owever, the revocaton by a prn-
cpa or hs ega representatves of authorty to prosecute a matter w not be
effectve, so far as ths ureau s concerned, wthout the assent of the head of
the offce before whch the matter s pendng. Where a matter has been sus-
pended pendng the furnshng of evdence for whch a ca as been made on an
attorney or agent, faure on hs part to take acton thereon wthn three monrbs
from the date of suspenson may be deemed by the admnstratve offcer before
whom the case s pendng cause for refusa to further recognze the authorty of
the attorney or agent, wthout notce to hm. (See aso tte Checks n pay-
ment of refunds n suppement hereof.)
D. . ar, Commssoner.
III-19-4199
Mm. 372
Procedure wth respect to submttng nqures to the ureau of
Interna Revenue regardng ta abty.
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333
Msc.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C, pr 2 , 1929.
To Offcas and mpoyees of the ureau of Interna Revenue,
Coectors of Interna Revenue, Interna Revenue gents n Charge,
and Others Concerned:
Requests are beng receved day for rungs and advce upon
abstract cases or prospectve transactons nvovng questons of n-
come ta and profts ta abty. These requests are so numerous
and the nsstence on prompt acton so great that t s deemed
advsabe at ths tme not to make a rung n respect to any nqury
e cept under the foowng crcumstances:
(a) The transactons must be competed and not merey proposed
or panned.
(b) The compete facts reatve to the transacton, together wth
abstracts from contracts, or other documents, necessary to present
the compete facts, must be gven.
(c) The names of a the rea partes nterested (not dummes
used n the transacton) must be stated, regardess of who presents
the queston, whether attorney, accountant, ta servce, or other
representatve.
(d) request for a rung must be sgned by the ta payer, or, n
case he s represented by an attorney or agent, the request must be
accompaned by propery e ecuted power of attorney. anks, how-
ever, w not be requred to furnsh powers of attorney wth respect
to nqures affectng ther depostors.
(e) copy of a rung addressed to a ta payer w not be furnshed
to hs attorney or agent uness the ureau s specfcay authorzed
to do so by the ta payer.
D. . ar, Commssoner.
I11-21-4213
Mm.3730
Recordng of powers of attorney.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, 1). C. Ma / , 1029.
Offcas of the ureau of Interna Revenue, Coectors of Interna
Revenue, Interna Revenue gents n Charge, and Others
Concerned:
In order that an authentc record may be mantaned of the agents
and attorneys who are authorzed to represent ta payers before the
ureau of Interna Revenue, a powers of attorney fed subsequent
to the date of ths mmeograph w be mmedatey forwarded by
the recevng offce to Washngton marked for the ttenton of
IT: :Sr.
Pror to the forwardng of powers of attorney by the fed offces
any necessary record w be made.
ueres regardng ths order shoud be marked for the attenton
of IT: : C .
D. . ar, Commssoner.
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834
III-25-4247
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.
Ceveand, Thomas
.
Cordn, Cophas W-.
Drabbe, R. ng
rost, Chares
Gbson, Wru.Parck.
adery, May ..
Lndsay, rent .
McNamara, Chares
L.
Neu, dmund
Okahoma Cty,
Ok a.
ormery Saw-
t e, Caf., now
Los ngees,
Caf.
Newark, N.
New York, N. Y..
New York, N. Y._
Chattanooga,
Toun.
Los ngees, Caf
Sept. 19,1928 Charged wth msappropraton of funds of hs
empoyer, obtanng money by fase pre-
tenses, and drunkenness. Charges found
proven.
Sept. 19,1925 I Charged wth havng been dsbarred from
practce before the Interor Department
for dsreputabe conduct. Charges found
proven.
Mar. 21,1929 I Charged wth beng nterested In and proftng
by a fraud perpetrated upon a ta payer cent
by a partner of sad respondent. Charges
found proven.
uy 2,1928 I Charged wth havng been accused and con-
vcted of the crme of arson n the State of
Connectcut and sentenced to serve a term
of from one to three years In a, and charges
found proven.
an. 12,1929 Charged wth soctng empoyment from ta -
payers wth whom he had no prevous con-
tact, and wth preparng fase return for a
ta payer, recevng and keepng fees for such
work, whch was abandoned by ta payer,
who empoyed another practtoner to prepare
a correct return. Charges found proven.
ug. 30,1928 I Charged wth preparng and fng fase ncome-
ta returns. Charges found proven.
pr. 2 ,1929 I Charged wth havng presented fase and ms-
eadng evdence n a ta case. Charges
found proven.
Chcago. I I Dec. 21,1928 Charged wth wrtng threatenng etters to a
cent n a ta case, demandng an e tortonate
fee, and fasey statug In such etters that a
representatve of the Government had to be
pad out of such fee, and that such ta payer
woud go to |a If such fee were not pad.
Charges found proven.
ansas Cty, Mo..I pr. 20,1929 Charged wth wrtng and mang an anony-
mous etter to an offcer of the Interna
Revenue Servce whch contaned fase stte-
ments that certan ta payers had faed to
make proper returns of ther ncome ta es,
thereby causng useess e amnaton of
records of such tapayers aso charged wth
soctng empoyment n edera ta matters
from persons wth whom he had no prevous
contact. Charges found proven.
pr. 13,1929 Charged wth preparng and fng fase edera
Income ta returns for ta payers. Charges
found proven.
uy 2,1928 Charged wth havng been convcted n the
Unted States Dstrct Court for the Western
Dvson of the Western Dstrct of Mssour
for the voaton of secton 14S, Unted States
Crmna ( ode, and sentenced to a term of
10 months n |a, and charges found proven.
Ths rung (4247) ncudes aso rungs Nos. 4058. 40 4, 4073, 408f, 4091. 4102,
4110, 4117, 4125, 4134, 4145. 4153, 4158. 41 5. 4172, 4178. 4184, 4192, 4200, 4207, 421
4222, 4229, and 4239. These rungs have been thus consodated because pubcaton of
each one separatey woud be argey dupcaton.
Ths st ncudes a attorneys and agents dsbarred from practce durng the 12-
mouth perod uy 1, 1928 .me 31), 1929, ncusve, and a suspensons In effect durng
the 0-month perod anuary t-.Iune 30, 1929, ncusve. It docs not Incude those barred
from practce hy reason of dsapprova of ther appcaton for enroment.
Overmyer, Chares
G
Showen, rank G__
Wchta, ans...
ormery ansas
Cty, Mo., now
Ottawa. ans.
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335
Mso.
dsbarments contnued.
Name.
ddress.
Date of
dsbarment.
Cause.
Newark, N.
pr. 28,1829
pr. 29,1928
Charged wth havng been ndcted for em-
bezzement of funds of a cent and convcted
and sentenced to serve a term n prson on
such convcton. Charges found proven.
Suvan, .
ormery W-
mngton, N. C,
now Sumter,
8. C.
Charged wth preparng fase ncome ta
returns for a cent, and mang etters
soctng empoyment n ta matters to ta -
payers wth whom respondent had no pre-
vous contact. Charges found proven.
Waton, . M
Detrot. Mch
pr. 38,1929
ug. 4,1928
Charged wth msappropraton of cents
money n ta cases. Charges found proven.
Watts, Chares ....
Mwaukee, Ws..
Charged wth makng fase ncome ta returns
for ta payers aso charged wth makng fase
and mseadng statements of facts n brefs
fed wth the ureau of Interna Revenue
n ta cases aso charged wth advsng the
ta payer to make a fase ncome ta return,
who foowed such advce and fed a fase
ncome ta return. 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 foow-
ng-named attorneys and agents:
Name.
ddress.
Perod of sus-
penson.
Cause.
erenter, Php ._
oster, ohn C.
Washngton, D. C.
Washngton, D. C
Levne, Samue New York, Y
Shreveport, La...
Magure, ohn .
May, arry P
Seher, Chares .
ormery of Wash-
ngton. D. C,
now Los nge-
es, Caf.
atmore, Md
I
Yusman, en|amn., Phadepha, Pa
f months, from
Mar. 21, 1929.
30 days, from
pr. 27, 1929.
f months, from
Sept. 21, 1928.
months, from
Mar. 11, y29.
fO davs, from
Dec. f, 1928.
0 days, from
an. 3, 1929.
f months, from
uy 20, 1928.
Charged wth addressng and mang etters
soctng empoyment n ta matters to
ta payers wth whom respondent had had
no prevous contact. Charges found
proven.
Charged wth addressng and mang cr-
cuar etters, soctng empoyment n
edera ta matters, to ta payers wth
whom respondent had no prevous contact.
Charges found proven.
Charged wth preparng fase ncome ta
return for a ta payer. Charges found
proven.
Charged wth makng fase ncome ta re-
Lnns for a ta payer aso wth makng
fase statements of facts n a bref of protest
n a ta case. Charges found proven.
Charged wth soctng empoyment n
edera ta matters o ta payers wth
whom he had no prevous busness or
persona assocaton. Charges found
proven.
Charged wth wrtng, addressng, and ma-
ng posta cards, soctng empoyment n
ta matters from ta payers wth whom he
had no prevous busness or persona asso-
caton. Charges found proven.
Charged wth soctaton of empoyment n
edera ta matters, preparng and fng
bref n a ta case contanng fase state-
ments of fact, and other msconduct n a
ta case. Charges found proven.
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33
DIS RM NTS T RMIN T D.
The Secretary of the Treasury has ordered that the order of ds-
barment entered aganst the foowng-named persons be termnated
as of the date ndcated and that ther names be restored to the ro
of attorneys and agents egbe to practce before the Treasury
Department:
Name. ddress. Remarks.
ackney, ames II .St. Petersburg, a Dsbarment ordered Oct. 24, 1927 dsbarment term-
nated and good standng restored May 31, 1929.
orton, Rodney formery Savannah, Dsbarment ordered uy 25, 1923 dsbarment term-
ta., now ackson- nated and good standng restored an. 8, 1929.
ve, a.
Resgnaton from enroment to prartee before the Treasury Department.
The foowng-named persons have tendered ther resgnatons
from enroment to practce before the Treasury Department. The
Secretary of the Treasury has accepted the resgnatons and ordered
ther names strcken from the ro of attorneys and agents enroed
to practce before the Treasury Department. They are therefore no
onger entted to practce before the Treasury Department.
Name.
eknap, Roscoe II.
Carpenter, Wn-
throp L.
Carro, Chares ..
Daer. Davd
Descoteaun, Oeorge
N.
Duuham, U. Oard-
ner.
rench. are M...
rench, erbert -
Oynn, Raegh I....
acobs, Wam
Robert.
pnger, W. M...
Porter. Oeorge W...
Robnson, Wam
.
Saunders, Davd
Shute, ames I
Thayer, dW rd W
Wams. urt
ddress.
oston, Mass.
. . do
.do..
.do
.do..
.do.
-do.
Desgnaton.
gent
Date o
tootpUuot,
Re
.do
.do.
-do
do.
Yusman, en|amn.
Wubngton, D. C...
oston, Mass. ..
M n n e a p o I s ,
Mnn.
ormery St. I ous,
Mo., now os-
ton. Mass.
oston, Mass
do
ormery Mwau-
kee, Ws., now
Madson, Ws.
Phadepha. Pa..
do
do
do.
do
.do
do.
.do
do
do
do
.do.
do
.do.
.do
an. 3,1929 . Wthout pre|udce.
do Do.
do
. do
do.
..do..
..do..
..do.
.do.
.do
May s, 1929
an : 1929
pr. . 1929
an. . 1929
do
do
May M, 1929
..do....
pr. 14.1M
Do
Do.
Do
Do.
Do.
Do
On.
Do.
Do.
Do.
Do.

Do.
Do
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IND .
.
batement, cams. (See Cams.)
ccountng perod, change n, fractona perod net oss deduc-
ton
ctors, entertanment and automobe e penses, deducton
ffated corporatons. (See Corporatons.)
gents. (See ttorneys and agents.)
en Property Custodan, ncome and profts ta es, computa-
ton, Treasury Decson 41 8 amended
mendments:
Conference and practce requrements
Reguatons 8 (1928)
rtcG 54
Reguatons 45 (1920 edton)
rtce 515
Reguatons 47 (192 )
rtce 4
Reguatons 2
rtce 51
Reguatons 5
rtce 515
Reguatons 9
rtce 44
rtce 515
Reguatons 71
rtce 39
Treasury decsons
385
41 8...
nnutes:
Combned fe nsurance and annuty contracts, ncome
e empton
Wdow s acceptance under w n eu of dower
ssessments:
Loca benefts
Lessee s payment deducton, essor s ncome
Ta es. (See Ta es.)
Treatment
ssocatons:
udng and oan. (.See empt corporatons.)
Dstngushed from trust
ffectve date of erh v. Maey decson
ttorneys and agents:
Dsbarments termnated
Dsbarments and suspensons
Powers of attorney, recordng of
Resgnatons from enroment
utomobes:
Drve t yoursef pan speca ta es
penses, moton-pcture actors, deducton
Rung
No.
/4077
(4078
40 2
40
4190
4143
40 5
4202
40 5
40 5
40 7
40 5
424
4152
40
4234
4079
4080
4081
/4139
(4141
4148
40 1
4243
4247
4247
4213
4247
4101
40 2
(337)
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338
.
anks:
Cooperatve. (See Cooperatve banks.)
edera and, ncome from frst mortgages, ta e empton
Ownershp certfcates, e ecuton requrements
enefcares, capta oss of trust estate, deducton
equests:
Income from estate n trust, ta abty
Sae of, gan or oss bass --
Trust estate ncome, wfe s separate property, Te as
everages sod n cosed contaners: Prce ncudng ta
onds:
batement cam
Sut on
Lmtaton
Ta nvadty as defense
Ta -free, credt for ta pad at source
udng and oan assocatons. (See empt corporatons.)
ureau of Interna Revenue, conference and practce requre-
ments, amendments
usness e penses:
Contrbutons to chartabe organzatons
Dstrbuton of empoyee s profts to busness assocates
ntertanment, automobe, etc., moton-pcture actors
reght charges, umber manufacturers estmated accruas
ad|ustment
Permanent mprovements, month to month tenant
usness eague. (See empt corporatons.)
C.
Caforna, communty property and ncome, returns
Capta e pendtures, assessments aganst oca benefts
Capta net gans and osses:
Saes
Lots wth mprovements made durng 2-year perod
Stock, sao n year of purchase, treatment of opt on perod-
Stock e change membershp ncrease
Capta stock ta , bass of ta : Carryng on or dong busness ..
Certfcate of nventory ( orm 112 ), dscontnued
Chartabe contrbutons. (See Contrbutons.)
Che, ncome ta , credt for
Cams:
batement
ond, sut on
Lmtaton perod
Ta nvadty as defense
batement, coecton stayed
ng subsequent to e praton of coecton perod
Protest aganst assessment and request for speca assess-
ment as bass, suffcency
Credt or refund. (See Credt or refund.)
udgment, orm 843, nstructons
Refund or credt. (See Credt or refund.)
Cosng agreements. (.See Ta es: na determnaton and as-
sessment.)
Coectng agences, ownershp certfcates, e ecuton requrements.
Coege fraternty, contrbutons to, deductbty
Communty property and ncome:
Caforna, returns
Returns. (See Returns.)
Te as, trust estate ncome under w
Rung
No.
4181
4150
4127
4119
/4140
4218
4124
4084
4230
414
4104
4190
4189
40 9
40 2
4209
4237
4122
4148
417
40 9
41 2
423
4054
4183
4230
414
4089
422
4138
4150
4171
4122
4124
G
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4
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339
Compensaton:
ddtona, dstrbuton of empoyee s profts to busness asso-
cates. :
Offcers of corporaton, saary deducton, reasonabeness
Persona servces, hodng corporaton s payments to operat-
ng company s offcers
Compromse, agreement wth subordnate Government offca,
effe
Conference and practce requrements, ureau of Interna Reve-
nue, amendments
Connectcut, ta on motor vehce fue, deducton
Consodated returns. (See Returns.)
Contrbutons:
Chartabe
usness e pense .
Indvdua s busness ncome ta ed as corporaton s, de-
ducton
Coege fraternty
Navy and Marne Memora ssocaton
Cooperatve banks, e empton
Corporatons:
ffaton
Consodated returns. (See Returns.)
Contro based on frendy and professona reatons
Chartabe contrbutons, busness e pense
Credt for ta es. (See Credts.)
Dstrbutons. (See Dstrbutons.)
Domestc, cuador 1928 ta , credt
empton. ( See empt corporatons.)
oregn, returns and payment of ta , e tenson of tme
Persona servce, schoo, boardng and day
Court decsons:
be e a. v. Ta, coector :
dvance utomobe ccessores Corporaton v. Unted
Staes
en, coector, v. randes (Mrs. oseph efman)
otany Worsted Ms v. Unted States
overs, coector, v. mercan Surety Co
owman Co. v. Commssoner : .
rewster v. Gage, coector
rownson v. Unted States
Chase Natona ank of the Cty of New York e a., etc., v.
Unted States
Cark Dstng Co. et a. v. I nted States
Cark, e ecutor, v. Unted States
Codman v. Mes, former coector
Codman v. Tat, coector
Commssoner v. doph rsch Co., Inc
County of Spokane and County of Whtman, Wash., v. Unted
Sates
e aven Manufacturng Co. v. Unted States
Dck ros. uncy rewng Co. v. Unted Sates
dson Storage attery Co. v. Unted States
dson Storage attery (avage Co. v. Unted States
dson Storage attery Suppy Co. v. Unted States
wng-Thomas Convertng Co. v. McCaughn, coector
eand v. Wknson
ser v. Unted Staes
orshem ros. Dry (oads Co., Ltd., v. Unted States
Greenway v. owers, coector 1
Ithaca Trust Co., e ecutors, v. Unted States
Lash s Products Co. v. Unted States
Leweyn, former coector, v. arbson
Ru)ng
No.
40 9
4107
4157
4107
4190
419
4189
4109
4171
4130
40 5
4231
4189
4055
40 0
410
4127
4221
4079
4107
414
4237
4140
4227
4108
4188
4201
4119
4119
4231
4193
4215
4238
4245
4245
4245
411
4179
4118
4099
4135
4214
4084
4173
G
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340
Rung
No.
Page.
Court decsons Contnued.
Menrath rokerage Co. v. Crooks, coector
Metcaf et a., e ecutors, v. Commssoner
Mmnaugh v. Unted States
Renecke, coector, v. Northern Trust Co., e ecutor
Rovtzahn, coector, v. Wener
Russe et a. v. Unted Staes
Sadowsky v. nderson, coector
Saunders System Washngton Co. v. Unted Staes
Schuette, e ecutr , v. owers
Shpey Schoo v. McCaughn, coector
Southwestern O fc Gas Co. v. Unted States
S. S. Whte Denta Mfg. Co. of Pennsyvana v. Unted States..
Stanffer, sheman Co., Ltd., v. Unted States
Sweet, Inc., v. Unted States
Taft v. owers, coector
Unform Prntng Suppy Co. v. Commssoner
Unted States v. oster, e ecutor
Unted States v. randes (Mrs. oseph ef man)
Unted Staes v. ohn arth Co
Unted Sates v. Unted States dety t Guaranty Co
Ward akng Corporaton v. Unted States
Warner v. Wash, coector
Wess, coector, v. Wener
Credt or refund:
ppropratons suppyng defcences, 1929 and pror years.
Cams
ass of subsequent sut, prerequste
Incompete or mperfect cams perfected, mtaton
Informa, orm 1118 as bass
Lmtaton perod for fng. (.See Lmtaton perod.)
Overassessment and credt as waver..
Reguatons appcabe, requrements
Speca assessment etter as bass, nterest
Surety company s recovery of ta es pad under bond
Interest on, overpayment made after fng cam
udgment cam, orm 843, nstructons
Lmtaton perod. (See Lmtaton perod.)
Overassessment credted aganst outawed ta
Waver fed subsequent to e praton of statutory perod,
vadty
Credts:
oregn ta es. (See Credts: Ta es.)
Persona e empton
Change of status and death durng ta abe year
Decedent, change of status n same year
Ta es
oregn-
Che
cuador, 1928, corporaton ta
Great rtan, tme of accrua
Wthhed at source
Credts aganst ta es. (See Credts: Ta es.)
D.
Decedents, persona e empton. (See Credts.)
Deprecaton:
ssessments aganst oca benefts
Lessee, budngs erected by essor
Massachusetts trusts property, 1928
ct
Trust property, benefcares and trustee apportonment I
4111
287
4198
219
4248
314
4094
305
420
257
4083
20
4109
258
4101
303
4194
317
410
21
4100
211
4114
138
412
291
4189
2
4135
22
4244
2 4
4081
247
4079
243
4230
189
4230
189
423
320
4080
245
420
257
41
331
4111
287
41 0
111
4197
112
4113
127
4159
110
412
291
4225
113
4220
292
4138
115
4089
130
4088
12
4242
8
4242
8
4183
184
4055
102
41 3
182
4104
102
4148
83
420
257
41 8
85
4057
173
4087
84
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841
Dsbarments. (See ttorneys and agents.) ,
Dstrbutons:
Corporatons, treasury stock dvdend, ta abty
Dvdends. (See Dvdends.)
Dvdends:
Dstrbuton made, nterpretaton
Stock-
Surpus transfer, stockhoders unpad subscrptons
Treasury, ta abty
Stock subscrpton rghts
Donatons, corporaton to chartabe organzaton
Dues, soca cub, what s
.
cuador, 1928 corporaton ta , credt
mpoyees trut, return requrements
state and nhertance ta es, deducton. (See Ta es.)
state ta :
Chartabe bequest, nhertance ta es payabe from, deduct-
bty --
Deductons, chartabe bequests
Gross estate and dower nterest
Insurance proceeds, poces ssued before any estate ta ct.
Insurance ta abe
Lfe nterest vaued by mortaty tabes
Transfers, effectve at or after death
states and trusts:
Capta oss, deducton by benefcares
hauston of vaue of fe estate, benefcary s deducton
aowance
Testamentary trust, deprecaton reserves contnued by trus-
tees, benefcares ta abty ---
amnaton of records and wtnesses, requrements of thrd
partes
change rates (see aso oregn e change), foregn, December 31,
1928
empt corporatons:
udng and oan assocatons-
rtce 515, reguatons amended
orrowers subscrbng to rura credt nstament stock,
ansas
Instament sharehoders dened vote
ansas
Loans made under dvded mortgage system
usness eagues, prntng and furnshng suppes for members
Cty fremen s assocaton, funds from sae of dance tckets..
Cooperatve banks, artce 515, Reguatons 9, amended
Navy and Marne Memora ssocaton
empt ncome. (See empton.)
empton:
Corporatons. (See empt corporatons.)
Income
nnuty and nsurance contracts, combned
oundaton award
Indans, Otoe, restrcted aotments
Mortgages e ecuted to edera and banks
tenson of tme, fng of returns, corporatons, foregn, pace of
busness n Unted States
.
Rung
No.
4075
4173
4115
4075
4198
4189
4118
4055
418
4201
4214
4194
4248
4108
4214
4094
4127
4119
4057
4237
4129
40 5
4187
4123
4187
4149
4244
4177
40 5
4130
4234
4137
4204
4181
40 0
edera and banks. (See anks.)
edera ta es. (See Ta es.)
G
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342
ducares, returns. See Returns.)
na retermnaton and assessment. (See Ta es.)
remen s assocaton, muncpa, funds from sae of dance tckets,
e empton
sca year ended n 1924, trust ncome reported n tenefcary s
caendar-year return, ta rate
oregn corporatons. (See Corporatons.)
oregn e change, rates prevang December 31, 1928
orms:
843, |udgment cams, nstructons
1000 and 1001, ownershp certfcates, revsed an., 1929 ..
1012, revsed, wthhodng returns
1040, ndvdua ncome ta return for caendar year 1928,
change n
1099, revsed, nformaton returns
112 , certfcate of nventory, dscontnued
oundaton award, ta abty
raterntes, coege, contrbutons to, deductbty
reght charges, umber manufacturers estmated accruas ad-
|ustment
: G.
Gan or oss:
. Invountary converson, money receved n payment,
constructon
Saes. (.See Saes.)
Gasone ta . See Ta es: Motor vehce fue.)
Gfts:
Compensaton payments by hodng corporaton to operat-
ng company s offcers
oundaton award
Income from estate n trust, ta abty
Good w, oss of vaue ncdent to prohbton egsaton
Great rtan, ncome ta , tme of accrua, credt
Gross ncome:
nnutv under w n eu of wdow s dower
Compensaton, addtona, hodng cor oraton s payments
to operatng company s offcers
oundaton award
Income from estate n trust
Indans, Otoe, restrcted aotments
Insurance and annuty contracts, combned ,
Mortgages e ecuted to edera and banks, ncome from
Pensons, Word War offcers physcay dsabed
Trust estate ncome under w, wfe s separate property,
Te as
.
usband and wfe:
Partnershps. (.See Partnershps.)
Separaton and death of spouse durng ta abe year, persona
e empton credt
Inos, ta es, rea and persona property, accrua 4212
Improvements by essee, oca benefts assessment, deducton, (4139
essor s ncome 4141
Income ta es. (.See Ta es.)
Indans, Otoe, ncome from restrcted aotments 4204
4177
4097
14098
4129
4138
4092
4092
4090
4092
4054
4137
4171
4209
4072
4157
4137
4119
4238
41 3
4079
4080
4081
4157
4137
4119
4204
4234
4181
4121
4124
4242
3
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343
Rung
No.
Indvdua ncome ta return for caendar year 1928 ( orm 1041),
change n
Informaton at source:
mpoyees trust
Ownershp certfcates, e ecuton requrements
Informaton returns. (See Returns.)
Inhertance ta es, deducton. (See Ta es: state and n-
hertance.)
In|uncton, restrant of ta coecton, transferees and fducares..
Inqures regardng ta abty, procedure for submttng
Insovency, edera ta es, prorty
Inspecton of returns. (See Returns.)
Instructons, fna ta determnaton, cosng agreements under
secton 0 , 1928 ct
Insurance, ta abe, gross estate
Insurance companes:
ffaton wth nonnsurance company, consodated returns.
Lfe, Nebraska, reserve for deferred dvdends, deducton
Interest:
udgments
1928 ct, retroactvty
Suts for ta recovery, unformty of practce
Notes, ta -free covenant, wthhodng rate appcabe
Overpayment of ta nstaments credted to unpad baance,
aowance
Refunds
Overpayment made after fng cam
Speca assessment etter bass of cam
Ta -free bonds, credt for ta pad at source
Inventores:
ass of vauaton, change wthout Commssoner s consent._
Certfcate of ( orm 112 ), dscontnued
Losses, antcpated, under sae contract obgaton, deducton.
Invountary converson of property, money receved n pay-
ment, constructon
udgments:
Cams, orm 843, nstructons
Interest on, 1928 ct retroactvty
Suts for ta recovery, nterest and costs, unformty of practce.
.
ansas, budng and oan assocatons.
L.
Leases:
ssessments
Improvements pad by essee.
4090
418
4150
4179
4199
4193
407
4108
(4070
4071
4132
4133
4114
4175
415
41 9
4220
412
4104
4194
4054
411
4072
4138
4114
4175
4187
/4139
4141
14139
4141
Loca benefts, deducton, essor s ncome
Deprecaton. (See Deprecaton.)
Legacy, sae of, gan or oss bass 4218
Lens, edera ta es, notce fed by coector, copy to banks and
debtors | 405
Lfe nterest vaued by mortaty tabes 4214
3133 29 23
229
99
134
313
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344
Rung
No.
Lmtaton perod:
ssessment of ta es
Commencement date where tentatve return fed
Orgna return ncompete, effect of amended return
Coecton of ta es
Commencement date where tentatve return fed
1918, assessment made pror to e praton date as e -
tended by waver
Sut, assessment pror to 1924 ct and wthn 5-year
perod
Credt or refund
Cams, ncompete or mperfect, perfecton of
ducary requestng cosng of decedent s returns,
appcaton of secton 07, 1928 ct
Invested capta ad|ustments
Suts-
ond supportng abatement cam
Recovery of ta , pror refund cam
Wavers
Cam for overassessment and credt as
ng subsequent to e praton of statutory perod,
vadty
1918 ta es, assessment made pror to e tended e prat on
date
Loca benefts, assessments aganst:
Payment by essee, deducton, essor s ncome
Treatment
Losses:
Good w, ncdent to prohbton egsaton
Inventory. (.See Inventores: Losses.)
Trust estate s capta, deducton by benefcares
Lumber manufacturers freght charges, estmated accruas ad-
|ustment
M.
Manufacturer s e cse:
utomobe parts, storage batteres as
atteres, storage, hed parts of automobes
Dscounts and e penses
Parts or accessores, transmsson nngs as
Massachusetts trusts, deprecaton aowance
Mchgan, ta on motor-vehce fue, deducton
Money, proceeds from nvountary converson, constructon..
Mortgages, frst, e ecuted to edera and banks, ncome, e emp-
ton -
Moton-pcture actors, entertanment and automobe e pend-
tures, deducton
Motor vehce fue ta , deducton:
Connectcut
Mchgan
Oho
rgna
4099
4082
4099
4099
4083
41 0
4131
4100,
1/414
4230
4111
4113
4088
4099
1/4139
4141
4148
4238
4127
4209
N.
Navy and Marne Memora ssocaton, contrbutons
Nebraska, fe nsurance companes, reserve for dvdends, deduc-
ton
4245
4245
4202
4221
41 8
4155
4072
4181
40 2
419
4155
4205
4241
4130
1/4132
114133
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345
Net osses:
sca year ended 1920
ractona year, change of accountng perod, appcaton
aganst ater year s ncome
New York, husband and wfe, partnershps
Notes, nterest. (See Interest.)
Notce of ta en, copy furnshed banks and debtors
O.
Oho, ta on motor-vehce fue, deducton
Oeomargarne:
Statstcs of producton and materas used-
November, 1928 and 1927
December, 1928 and 1927
anuary, 1929 and 1928
ebruary, 1929 and 1928
March, 1929 and 1928
pr, 1929 and 1928...
Otoe Indans, ncome from restrcted aotments.
Overpayment of ta es. (See Ta es.)
Ownershp certfcates:
ecuton requrements
orms 1000 and 1001, revsed an., 1929 .
Rung
No.
4215
/4077
4078
4105
405
4205
40 3
4093
4144
41 4
4191
4228
4204
4150
4092
4105
4121
4237
4190
4213
4190
407
4199
4238
Partnershps, husband and wfe, New York
Pensons, Word War offcers physcay dsabed, e empton
Permanent mprovements, month to month tenant, busness
e penses
Persona e empton. (See Credts.)
Persona servce corporatons. (See Corporatons.)
Powers of attorney:
Conference and practce requrements
Recordng of
Practce requrements, ureau of Interna Revenue, amendments..
Prorty of edera ta es. (See Ta es: edera.)
Procedure:
na ta determnaton, cosng agreements under secton
0 , 1928 ct
Submttng nqures regardng ta abty
Prohbton egsaton, oss of good w vaue ncdent to
Property ta es. (See Ta es.)
R.
Rea estate:
Deferred-payment saes. (See Saes: Deferred-pavment.)
Sae of. (See Saes.)
Refunds. (See Credt or refund.)
Reguatons:
mendments. (See mendments: Reguatons.)
Inspecton of returns, Treasury Decson 385 amended 4152
Procedure for submttng nqures regardng ta abty 4199
Rentas, permanent mprovements by month to month tenant,
busness e penses r 4237
Reserves:
Deprecaton, practce contnued by trustees, benefcares
ta abty 4057
Lfe nsurance companes, Nebraska, deducton 4133
Resgnatons from enroment. (See ttorneys and agents.) |
25 1
173
2(39
71
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34
Returns:
Communty ncome see aso Communty property and
ncome)
Caforna, how reported
1927 and subsequent years, nstructons
Consodated
Insurance companes affated wth nonnsurance
company
Orgna ncompete, e tenson of assessment perod
by amended return
Stock contro based on frendy and professona reatons
Corporatons, foregn, pace of busness n Unted States,
e tenson of tme
tenson of tme for fng. (See tenson of tme: ng of
returns.)
ducares, empoyees trust --.
sca year. (See sca year.)
Indvdua
Caendar year 1924, ncome from trust on fsca-year
bass
Income ta , caendar year 1928 ( orm 1040), change n.
Informaton (see aso Informaton at source)
mpoyees trust
orm 099 revsed
Inspecton of, reguatons governng, Treasury Decson 385
amended
Wthhodng, orm 1012 revsed
Saares. (See Compensaton.)
Saes:
equests, gan or oss bass
Capta gans and osses. (See Capta gans and osses.)
Deferred-payment, rea estate, artce 44, Reguatons 9,
amended
Gft property, gan or oss bass
Rea estate
Deffrred-payment. (See Saes: Deferred-payment.)
Improvements made wthn 2-year perod, capta gan.
Rghts to subscrbe to stock of another corporaton
Stock-
Cash and assumpton of unpad baance, ta treatment.
Net gan or oss, treatment of opton perod
Rghts, date of ssuance, determnaton of
Subscrpton rghts. (.See Saes: Rghts to subscrbe.)
Stock e change membershp ncrease nterest, capta gan__
Schoo, boardng and day, persona servce corporaton
Snuff, stamps, canceaton, artce 54 of Reguatons 8 (revsed)
amended
Speca assessment, etter as bass of refund cam, nterest
Speca ta es (see aso Ta es), automobes, Drve t yoursef
pan
Stamp ta es:
Canceaton of tobacco and snuff stamps, artce 4 of Regu-
atons 8 (revsed) amended
Transfers of stock artce 39 of Reguatons 71 amended
State ta es:
Income, Wsconsn, accrua date
Property, accrua date
Inos
Te as
RuDg
No.
4122
4182
/4070
14071
4082
4231
40 0
418
f4097
14098
4090
418
4092
4152
4092
/4140
14218
40 7
413
417
4198
4170
40 9
4233
41 2
410
4143
412
4101
4143
424
4224
4212
4219
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347
Rung
No.
Stock:
Dvdends. (See Dvdends: Stock.)
Rghts to subscrbe to, sae of. (See Sae : Stock rghts.)
Saes. (See Saes.)
Stock e change membershp ncrease, member s capta gan
Street mprovements assessment, capta e pendture and depre-
caton recovery
Subscrpton rghts, sae of. (See Saes: Rghts to subscrbe to
stock.)
Suts:
Coecton of ta es
batement cam fed subsequent to e praton of m-
taton perod, surety s abty
ssessment pror to 1924 ct and wthn 5-year perod,
mtaton
ond supportng abatement cam, mtaton
Recovery of ta es
ffect on amount compromsed wth subordnate Gov-
ernment offca
udgments, nterest and costs, unformty of practce
Refund cam as bass
Restrant of enforcement of transferee s abty
Surety company s refund cam, ta es pad under bond
Suspensons. (See ttorneys and agents.)
T.
Ta es:
ssessment, mtaton perod. (See Lmtaton perod.)
Capta stock. (See Capta stock ta es.)
Coecton
batement cam fed subsequent to e praton of m-
taton perod..
Compromse agreement wth subordnate Government
offca, effect
Lmtaton perod, commencement date where tentatve
return fed
Suts. (See Suts.)
Computaton
Income and profts, property n custody of en Prop-
erty Custodan, Treasury Decson 41 8 amended
Trust ncome, fsca year 1924, reported n benefcary s
caendar-year return
Credts for. (See Credts.)
state and nhertance, deducton
owance n benefcary s amended return where org-
nay camed by estate
edera, subsequent amended return, benefcares pro
rata deducton
state. (See state ta .)
edera
Lens. (See Lens: edera ta es.)
Prorty over State ta es
41 2
4148
4089
4083
414
14230
4107
4175
4111
4179
4225
4089
4107
4099
40
4097
4098
4151
4151
na determnaton and assessment, cosng agreements
under secton 0 , 1928 ct, nstructons
oregn
Credts for. (See Credts.)
cuador, 1928 corporaton ta , credt
Gasone. (See Ta es: Motor vehce fue.)
Income, accrua and deducton, Wsconsn
Lens for edera ta es. (See Lens: edera ta es.)
4193
274
407
118
4210
122
4211
124
4235
123
4055
102
4224
7
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Ta es Contnued.
Motor vehce fue
Connectcut
Mchgan
Oho
rgna
Overpayment
Instament credted to unpad.baance, nterest aowance.
Invested capta ad|ustments, refund mtaton perod-.
Payment, foregn corporatons, tme for fng return e tended.
Prorty of edera. (See Ta es: edera.)
Property
ccrua date
Inos
Te as
Refund or credt. (See Credt or refund.)
Speca (see aso Speca ta es), automobes, Drve t your-
sef pan
Stamp. (See Stamp ta es.)
State. (See State.)
Suts. (.See Suts.)
War ncome and profts, return for fractona year, computaton.
Wthhodng at source. (See Wthhodng at source. I
Te as:
Communty property and ncome, trust estate ncome under
w, separate property
Ta es, property, accrua
Tobacco, stamps, canceaton, artce 54 of Reguatons 8 (revsed)
amended
Transferees, suts to restran ta coecton ..
Trusts:
ssocaton dstngushed
ffectve date of ech v. Maey decson
Deprecaton, benefcares and trustee apportonment
Income, fsca year 1924, reported n benefcary s caendar-
year return, ta rates
Massachusetts, deprecaton aowance
Rea estate operatons, status after saes competed
Ta abe as corporatons, 1928 ct
ppcaton of secton 704(b)
ffectve date of ech v. Maey decson
U.
Unted States oard of Ta ppeas, decsons, st of acques-
statute of
.
:hce fue, d
W.
mtatons.
(See Lmtaton perod:
Waver of
Wavers.)
War ncome and profts ta . (See Ta es.)
Wsconsn, ta es, ncome, accrua and deducton
Wthhodng at source:
ond nterest, ta -free, credt appcaton...
Note nterest, ta rate appcabe 415
Returns, orm 1012 revsed 4092
Word War pensons to physcay dsabed offcers, e empton . 4121
Rung
Page.
No.
419
4155
4205
4241
73
72
74
81
41 9
4100
40 0
13
211
92
4212
4219
1 8
170
4101
303
4142
285
4124
4219
1 0
170
4143
4179
323
11
40 1
4243
4087
/4097
(4098
41 8
40 1
142
152
84
203
199
85
142
4090
4243
148
152
4240
1
4241
81
4224
7
4104
102
103
104
7
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