SP CI L TT NTION rected to the cautonary notce on ths page that pob-

shed rungs of the ureau do not have the force and effect
of Treasury Decsons and that they are appcabe ony to facts presented n the pubshed case
Treasury Department : : : : : ureau of Interna Revenue
Interna Revenue uetn
Cumuatve uetn I -2
ULY-D C M R, 1930
IN T IS ISSU
p. .
Introductory Notes
Contents - U
Rungs Nos. 4684-4887
oard of Ta ppeas 1-88
Income Ta
Part 1 (1928 ct) 8 163
Part II (1926 ct) 164-273
Part III (1924 ct) 274-288
Part I (1921 and Pror cts) 289-413
Saes Ta 414-424
state Ta 425-436
Capta Stock Ta 437 146
Msceaneous Ta 447-451
Msceaneous 452-463
Inde 65-474
The rungs reported n the Interna Revenue uetn are for the nformaton of ta payers and (her counse aa
showng the trend of offca opnon n the admnstraton of the ureau of Interna Revenue the rungs other than
Treasury Decsons have none 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 npon whch a partcuar case rests. It s especay to be noted that the same resut w 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 the 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 aganst reachng a concuson n any case
merey an 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 fads 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 ratngs 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 npon a queston n regard to whch
there e sts no prevousy pubshed rung or decson, or for other reason , arc of snch 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 stnatons of fact 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 Re venae are not consecutve.
No unpubshed rung or decson w be cted or reed upon by any offcer or empoyee of the oreao of Interna
Revenue as a precedent n the dsposton of other cases. Uness otherwse specfcay ndcated, a pubshed
ratngs and decsons have receved the consderaton and approva of the Genera Counse for the ureau of
Interna Revenue.
UNIT D ST T S GO RNM NT PRINTING O IC , W S INGTON : 1931
or sae by the Saperntendent of Documents, Washngton, D. C. -
See back of tte for prces
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
The Interna Revenue uetn servce for 1931 w consst of weeky
buetns and semannua cumuatve buetns.
The weeky buetns w contan the rungs and decsons to be
made pubc and a Treasury Department decsons (known as Treas-
ury decsons) pertanng to Interna Revenue matters. The sem-
annua cumuatve buetns w contan a rungs and decsons
(ncudng Treasury decsons) pubshed durng the prevous s
months.
The compete uetn servce may be obtaned, on a subscrpton
bass, from the Superntendent of Documents, Government Prntng
Offce, Washngton, D. C, for 2 per year.
New subscrbers and others desrng to obtan the 1919, 1920, and
1921 Income Ta Servce may do so from the Superntendent of Docu-
ments at prces as foows: Dgest of Income Ta Rungs No. 19
(contanng dgests of a rungs appearng n Cumuatve uetns 1
to 5, ncusve), 50 cents per copy Cumuatve uetns Nos. 1 to 5,
contanng n fu a rungs pubshed snce pr, 1919, to and n-
cudng December, 1921, as foows: No. 1, 30 cents No. 2, 25 cents
No. 3, 30 cents No. 4, 30 cents No. 5, 25 cents.
Persons desrng to obtan the one ssue of Saes Ta uetn for
1920, uetn ST-1-20, and the Cumuatve uetns for anuary-
une and uy-December, 1921, may procure them from the Supernten-
dent of Documents at 15 cents and 5 cents each, respectvey, per copy.
Persons desrng to obtan the Interna Revenue uetn servce for
the years 1922, 1923, 1924, 1925, 1926, 1927, 1928, 1929, and 1930 may
do so at prces as foows:
Cumuatve uetn 1-1 ( anuary- une, 1922) 40 cents
Cumuatve uetn 1-2 ( uy-December, P922)___ ..30 cents
Cumuatve uetn II-1 ( anuary- une, 1923) 30 cents
Cumuatve uetn II-2 ( uyLDecember, 1923) 40 cents
Cumuatve uetn III 1 ( anuary- une, 1924) 50 cents
Cumuatve uetn III-2 ( uy-December, 1924) 50 cents
Dgest No. 13 ( anuary, 1922-December, 1924). 60 cents
Cumuatve uetn I -1 ( anuary- une, 1925) 40 cents
Cumuatve uetn I -2 ( uy-December, 1925). 35 cents
Dgest No. 17 ( anuary-December, 1925) 25 cents
Cumuatve uetn - ( anuary- une, 1926) 40 cents
Cumuatve uetn -2 ( uy-December, 1926) 30 cents
Dgest No. 21 ( anuary-December, 1926) 15 cents
Cumuatve uetn I-1 ( anuary- une, 1927). 40 cents
Cumuatve uetn I-2 ( uy-December, 1927) 40 cents
Dgest No. 22 ( anuary, 1925-December, 1927) -. 35 cents
Cumuatve uetn II-1 ( anuary- une, 1928) -. 35 cents
Cumuatve uetn II-2 ( uy-December, 1928) 60 cents
Cumuatve uetn TII-1 ( anuary- une, 1929)... 60 cents
Cumuatve uetn III-2 ( uy-December, 1929)... 55 cents
Cumuatve uetn I -1 ( anuary- une, 1930) 60 cents
Cumuatve uetn I -2 ( uy-Deoember, 1930) 50 cents
nqures n regard to these pubcatons and subscrptons shoud
be sent to the Superntendent of Documents, Government Prntng
Offce, Washngton, D. C.
00
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
INTRODUCTORY NOT S.
The Interna Revenue Cumuatve uetn I -2, n addton to
a decsons of the Treasury Department (caed Treasury decsons)
pertanng to Interna Revenue matters, contans Genera Counse s
opnons, and rungs and decsons pertanng to ncome, estate,
saes, capta stock, and msceaneous ta es, as ndcated on the tte-
Sage of ths uetn, pubshed n the weeky uetns ( oume I ,
oa. 27 to 52, ncusve), for the perod uy 1 to December 31, 1P30.
It aso contans a cumuatve st of announcements reatng to de-
csons of the Unted States oard of Ta ppeas pubshed n the
Interna Revenue uetn Servce from December 22, 1924, to
December 31, 1930.
Income Ta rungs are prnted n four parts. Rungs under the
Revenue ct of 1928 are pubshed as Part I, the secton headngs
correspondng wth the sectons of that aw and the artce headngs
correspondng wth the artce headngs of Reguatons 74. Rungs
under the Revenue ct of 1926 are pubshed as Part II, the secton
and artce headngs correspondng wth the secton and artce head-
ngs of the Revenue ct of 1926 and Reguatons 69. Rungs under
the Revenue ct of 1924 are prnted as Part III, the secton and
artce headngs correspondng wth the secton and artce headngs
of the Revenue ct of 1924 and Reguatons 65. Rungs under the
Revenue ct of 1921 or earer cts are prnted as Part I , the
secton and artce headngs correspondng wth the secton and
artce headngs of the Revenue ct of 1921 and Reguatons 62.
R I TIONS.
The foowng abbrevatons are used throughout the uetn:
, , C, etc. The names of 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. Income 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.
8. T. Saes Ta Dvson.
( I)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
IY
8. M. Soctor s memorandum.
So. Op. Soctor s opnon.
S. R. Soctor s recommendaton
T. Tobacco Dvson.
T. . M. dvsory Ta oard memorandum.
T. . R. dvsory Ta oard recommendaton.
T. D. Treasury decson.
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 1926, reat-
ng to appeas to the oard of Ta ppeas, the Commssoner may
acquesce n the decson of the oard or he may, f the appea was
heard by the oard pror to the passage of the 1926 ct, cause to be
nsttuted a proceedng n court for the coecton of any part of a
ta determned by the Commssoner to be due but dsaowed by the
oard, provded that such proceedng s commenced wthn ono year
after fna decson of the oard. s to appeas heard by the oard
after the passage of the 1926 ct, the Commssoner may, wthn
s months after the oard s decson s rendered, fe a petton for
a revew of the decson by a Crcut Court of ppeas or by the
Court of ppeas of the Dstrct of Coumba. In order that ta -
payers and the genera pubc may be nformed as to whether or
not the Commssoner has acquesced n a decson of the oard of
Ta ppeas dsaowng a ta determned by the Commssoner to
be due, announcement w be made n the weeky uetn at the
earest practcabe date. Decsons so acquesced n shoud be reed
upon by offcers and empoyees of the ureau of Interna Revenue as
precedents n the dsposton of other cases before the ureau.
or addtona nformaton whch w be of assstance n the use
of the Interna Revenue uetn servce read the Introductory Notes
to the atest Dgest.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
CONT NTS.
Rung.
Treasury decsons:
4292.
4293.
4294.
4298.
4297.
4298.
4299.
4300.
4301.
4302.
Court decsons:
195
198
197
198
109
2C0
201
202 ,
203
204
209..
210--
211..
212..
213..
214..
215..
21S-.
217..
218..
219..
220..
221..
222..
223..
224..
227.
228-
229.
230-
231-
232-
233.
234.
235-
236.
237.
238.
239-
240.
241.
242.
243.
244.
245.
246-
247.
248.
249.
Rung No.
I -28-1700
1 -28-4694
I -28-4695
I -28-4696
I -32-4744
I -32-4745
I -35-4766
1 -37-4779
1 -41-4800
1 -43-4S10
I -49-4859
I -27-4f 6
I -27-I 87
I -28-4693
-28-4092
I -29-4713
I -29-4703
I -29-4705
I -29-4711
1 -29-4712
I -29-4707
I -29-4702
I -20-4704
I -29-1708
I -29-4709
I -30-4720
1 -30-4721
1 -30-4719
I -30-4723
I -31-4728
I -31-4729
I -31-4731
L -89-4TM
I -32-4738
1 -32-4737
I -32-4738
1 -32-4742
I -32-4743
1 -33-4751
I -33-4752
I -33-1753
I -34-4756
I -34-4767
1 -34-4758
1 -34-47C0
I -35-4765
I -35-4768
I -39-4786
1 -40-4792
I -10-1791
I -41-4797
I -41-4798
I -41-4799
I -42-1808
I -42-4807
1 -43-4812
1 -43-4813
I -43-4814
I -11 4 ,:s
I -44-4821
I -44-4822
I -45-4827
I -46-4S37
I -46-4S36
1 -47-4843
1 -47-4842
Page.
102
425
425
426
427
449
449
147
460
89
143
325
417
340
242
4 .-.II
IM
244
375
437
280
90
228
289
348
257
332
253
362
260
275
269
249
283
110
420
422
441
192
299
369
263
272
302
428
351
402
160
297
294
239
314
417
379
408
284
345
430
155
392
398
176
363
342
407
353
Rung.
Counse s memo-
Court decsons Contnued.
250
251
252
253
254
255
256
257
258
259
260
261
262
263
264
265
266
Genera
randa:
6616.
7421.
7505.
7630-
7678.
7773.
7998.
6066.
8156.
8175.
8193.
8209.
8218.
8243.
8253.
8364.
8374.
8375.
8426.
8432.
8446.
8474.
8478.
8521.
8553.
8565.
8573.
8594.
8618.
8623.
h S.
8650.
8655.
8668.
8088.
8689.
8739.
8763.
8784.
8787.
8826.
8868.
8902
oard of Ta ppeas:1
1007.
5191-
Rung No.
Page.
I -47-1844
433
I -48-4849
382
I -48-4850
387
I -19-4856
401
I -49-4854
171
I -50-4864
290
I -50-4866
395
I -50-4867
404
I -51- 877
267
I -51-4874
202
I -51-4873
201
I -51-1872
200
r -51-4871
199
I -52-4881
208
I -52-4S84
366
I -52-4885
384
I -S2-1S86
396
I -38-4781
335
I -28-1090
104
I -44-1823
414
I -32-4733
107
I -29-4710
360
I -33-1750
426
I -32-4734
206
I -27-4685
316
I -31- 727
124
I -33-4747
134
I -28-1691
152
I -34-4759
326
I -31-4726
106
I -30-1718
247
I -41-4798
232
I -42-4804
113
I -32-4739
444
I -36-4771
157
I -36-4770
92
I -39-4784
114
I -37-1776
370
I -37-4775
281
I -41-4795
224
I -40-4790
241
I - M789
1C9
I -13-4811
127
I -45-4826
168
I -44-1819
354
I -45-1828
180
I -48-4S47
164
I -46-4S34
112
I -48-4848
214
I -47-4S11
211
I -16-4S33
93
I. -45-1831
306
I -52-18S3
333
I -51-4870
131
I -49-1855
178
I -50-1861
150
I -50-4863
189
I -50-4862
194
I -51-4875
234
I -51-1876
230
I -52-4882
222
I -49-1852
70
I -52-1879
21
I -29-4701
33
1 The contents contan references to o3rd of Ta ppeas acquesccnces and nonacquoscences pub-
shed ony durng the s months ended Dec. 31,1930, nasmuch as references to the remander of the oard
of Ta ppeas acquescences and nonaoquescences contaned n the cumuatve st heren have been
furnshed n the cumuatve buetns coverng the earor respectve perods.
(v)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
I
oard of Ta ppeas Con.
9661.
9651.
10042
10229..
10292-.
11179.
11812.
12054.
12068-
12398.
12471.
12660-
12663-
12741.
12957.
12977-
13097.
13150-
13402.
13600.
13605-
13686.
13852.
14270-
15798....
16058
16218- .
16259.-.
16597 .
16598- ...
16797 ..
16885 .
17216-..
17414...
17596....
17660
17777..
17824.-
17827
17871...
17872-
18273.-.
18293
18368
18534...
18599
Rung No.
18879-
18884-
19198..
19247 -.
19258
19257
19391. .
19545..
19560-_
19582..
19641
19649-.
19727-.
19803-.
1 I 09_.
19847..
I9. 58-.
19868
19933
20035-.
20078- .
20085
20178-
20202..
20462.-
I -39-4783
I -47-4839
I -30-4716
I -52-4879
I -39-4783
I -36-4769
I -45-4825
I -49-4852
I -30-4718
I -39-4783
I -41-4794
I -36-4769
I -43-4S09
I -30-4716
I -29-4701
I -30-4716
I -34-4754
I -39-4783
I -32-1732
I -34-4754
I -35-4762
I -50-4860
I -29-4701
I -42-4803
I -30-4710
I -31-4725
I -30-4716
I -33-4746
I -40-1788
I -48-4846
I -16-4832
I -52-4879
I -37-4773
I 37-4773
I -32-4732
I -30-4716
I -30-4709
I -40-47S8
I -15-4825
I -51-4809
I -47-4839
1 -47-1 W
I -43-4809
I -10-4788
I -40-4788
I -36-4769
I -36-1769
I -39-4780
I -30-4716
I -46-4832
I -30-4716
I -30-4716
I -50-4860
I -4S-1N40
I -48-4848
I -48-4848
I ) 1848
I -48-4846
I -43-4809
1 36- 1769
I -36-4769
I -35-4782
I -39-4783
I -34-4754
I -33-4746
I -36-4769
I -37-4773
I -33-4746
I -43-4809
I -52-4879
I -37-1773
I -31-4725
I -34-4754
I -43-4809
I -30-4716
I -41-4794
I -41-4794
I -31-4725
I -43-4809
I -52-4879
I -33-4746
Page.
I
41
26,68
26,29
19
13
68
67
a
19
31,76
37
19
45
45
83
47
19
88
79
63
13
45
1
6,61
58
21
68
44,80
2
60
70
70
70
10
6,61
5
20
49
9,42
2, 12,
19,
22,
29, 55
41
17
3,67
54,24
42,79
13
14
6
58
76
76
50.81
33
18
3,39
47
13
19
61
M
13
70
74
67
38
46
40,78
18
16
6,68
87
72
68
15,19
34,88
85
oard of Ta ppeas Con.
20509
20555
20657
20659
20681
20750
20926
20932
20933
20934
20935
20938
20937
20938
20939
20940
20941
20942
20955
21115
21116
21196
21268
21489
21782
21808-
21998
22015
22109
22128
22251
22314
22372
22455
22505
22722.
22753
22754
23120-
23211.
23221.
23609.
23894
23937
24105
24271
24282
24284
24285
24352
24354
24356
24401
24482
24483
24484
24513
24641
24711
24878 ,
25O00
25149 ,
25255
25262
25449
25554
25565
25729
Rung No.
I -35-4782
I -47-4839
I -34-47M
I -40-4788
I -35-4762
I -31-472
I -48-4846
I -36-4769
I -36-4769
I -36-4769
I -36-4769
I -36-4769
I -36-4769
I -S6-4769
I -36-4769
I -36-4769
I -36-4769
I -36-4769
I -32-4732
I -52-4879
I -49-4852
I -39-4783
I -34-4754
I -28-4689
I -30-4716
I -38-4780
I -51-4869
I -29-4701
I -41-4794
I -30-4716
I -27-4684
I -35-4762
I -36-4769
I -30-4718
I -40-4788
I -37-4773
I -30-4716
I -29-4701
I -36-4769
I -36-4769
I -29-4701
I -33-4746
I -41-4794
I -40-4788
I -34-4754
I -35-4762
I -41-4794
I -29-4701
I -29-4701
I -37-4773
I -37-4773
I -48-4848
I -48-4846
I -52-4879
I -39-4783
I -50-4860
I -50-4860
I -50-4860
I -39-4783
I -43-4809
I -27-4684
I -34-4754
I -49-4852
I -43-4809
I -36-4769
I -33-4746
I -49-4852
I -39-4783
I -13-4809
I -37-4773
I -50-4860
I -32-4732
I -51-4869
I -49-4852
I -32-4732
I -51-4869
I -30-4716
I -SO-4716
I -30-4716
I -32-4732
I -49-4852 7
I -39-4783 S
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
II
Rung.
oard of Ta ppeas Con.
26459
16507
26571
26941
27602..
27702...
27701..
27694...
27956..
28421.
28516...
30690
32146..
Rung No.
I -39-1783
I -29-4701
I -34-4754
I -52-1S79
I -52-4879
I -30-4716
1 -41-4794
I -33-4748
I -41-4794
I -34-4754
I -34-4754
I -34-4754
I -27-4684
I -52-4879
I -52-4879
I -30-4716
I -41-4794
I -51-4869
I -46-1832
I -39-4783
I -39-47S3
I -39-4783
I -52-4879
I -48-4846
I -41-4794
I -29-4701
I -31-1725
I -48-1846
I -35-4762
I -49-4852
I -16-4832
I -46-4832
I -40-1788
I -41-4794
I -51-1869
I -27-4684
I O 171.1
I -34-4754
I -34-1754
I 4 4S40
I -31-4725
I -50-4860
I -39-4783
I -41-4794
I -37-4773
I -37-4773
I -45-4825
I -46-4832
I -28-4689
I -33-1746
I -36-4769
I -30-4716
I -41-4794
I -32-4732
I -39-4783
I -41-4794
I -29-4701
I -10-4788
I -30-4716
I -30-4716
I -40-4788
I -45-4825
I -32-4732
I -29-4701
I -36-4769
1 -33-4746
I -47-4839
I -37-4773
I -31-4725
I -51-4S69
I -38-4780
I -30-4716
1 -43-4809
I -29-4701
I -29-4701
I -34-4754
I -28-4689
I -29-4701
I -39-4783
Page.
6
38
3
24
24
72
50
73
47

5
36
84
8
8
57
78
78,80
67,76
14
45
M
35
73, 75
21
15
70
64
18
69.85
25
4
72
6
23
72
77,83
16
3
64
W
66
2
17,30
70
71)
48
67, 76
51,82
84
51
20
38
11
76
71
13
69
59
59
84
49
17
19
37
13
9
28

42
0,59
10
20,48
27
IS
58
51,82
32
43
Rung.
oard of Ta ppeas Con.
33165
33183
33908
33675
33724
33725
33872
33931
33974
34014
34036
34196
34226
34364
34370
34371
35148
35159..
35160
35796
35942
36759-
36771.
37180.
37633.
37745.
37930-
38453.
38607.
39411...
39451
39713..
39872.
39948.
40165.
40963.
41521.
41691.
41867
41873
42492
44954
45481
45556
Offce decsons (I. T.):
2540
2541
2542
2543
2544
2545
2546
2547
2548
2549
2550
2551
2552
2553-
Offce decsons (MS.):
104--
105.-
106
107
108
109
Mmeographs:
3814
3815
3819
Msceaneous-
Rung No.
I -39-4783
61
I -39-4783
15
I -50-4860
22
I -32-4732
31
I -31-4725
44
I -36-4769
68
I -36-4769
68
I -36-4769
25
I -30-4716
64
I -52-4879
15
I -52-4879
29
I -31-4725
54
I -35-4762
63
I -29-4701
18
I -36-4769
38
I -30-4716
22
I -30-4716
22
I -34-4754
47
I -52-1879
6
I -52-4879
6
I -31-4725
I -50-4S80
8
24
1 3 4746
24
19
I -52-4879
4
I -27-4684
72
I -33-4746
75
I -34-4754
79
I -34 1754
47
I -41-4794
47
I -41-4794
67
I -32-4732
39
I -29-4701
25
I -50-1S80
22
I -38-1780
59
I -46-4832
76
I -45-4825
36,37
I -48-4846
61
I -39-4783
7
I -31-4725
83
I -52-4879
4
I -41-4794
47
I -50-4860
71
I -30-4716
46
I -36-4769
47
I -52-4879
76
I -46-4832
50
I -43-4809
73
I -30-4722
347
I -33-1719
299
I -35-4763
126
I -35-4764
142
1 -37-4774
163
I -39-4785
144
I -42-4S05
122
I -43-4810
120
I -44-4817
148
I -44-4 20
360
1 -47-4840
123
I -49-4S53
116
I -50-4805
332
I -52-4880
101
I -28-4699
453
I -32-4740
453
I -37-1777
454
I -41-4801
455
I -45-4829
456
I -49-4857
457
I -29-4715
459
I -30-4717
148
I -34-4755
116
I -40-4835
137
I -28-4697
458
I -29-1714
458
1 -52-4887
461
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
CONT NTS O CUMUL TI ULL TINS (I. T.) 1 TO 5 S. T. OR 1920 ND 1921 INT N L
revenue -, 1-2, n-. n-2, -, m-2, v-, v-2, v-. v-2. v-, v-2, vn-, vn-2, vm-. vm-2,
I -, ND 1 -2.
Cumuatve uetn.
1-655
656-1033
1034-1368
1369-1710
1711-1996
1-112
113-265
266-356
1-383
384-665
666-956
957-1276
1277-1641
1642-1949
1950-2251
2252-2523
2524-2813
2814-3026
3027-3291
3292-3557
3558-3784
3785-4052
4053-4248
4249-4487
4488-4683
4684-4887
Income Ta :
December, 1919 (No. 1)...
anuary- une, 1920 (No. 2)
uy-December, 1920 (No. 3)
anuary- une, 1921 (No. 4)
uy-December, 1921 (No. 5)
Saes Ta :
1920 (ST. 1-20)
anuary- une, 1921
uy-December, 1921
Interna Revenue uetn:
anuary- une, 1922 (No. 1-1)
uy-December, 1922 (No. 1-2)...
anuary- une, 1923 (No. II-)
uy-December, 1923 (No. II-2)
anuarv- unc, 1924 (No. III-)...
uv-December, 1924 (No. III-2).
anuary- une, 1925 (No. I -1)..-
uy-December, 1925 (No. I -2)..
anuary- une, 1926 (No. -)
uy-December, 1926 (No. -2)...
anuarv- 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).
uy-December, 1929 (No. III-2)
anuary- une, 1930 (No. I -)...
uy-December, 1930 (No. I -2)..
(vn)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
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 D C M R
31, 1930, INCLUSI .
I -52-4879
The Commssoner acquesces n the foowng decsons of the
Unted States oard of Ta ppeas:
Ta payer.
.
aron, Theodore
battor Reaty Co
bbeve Cotton Ms
ckerman- ohnson Co
cme M), Inc ---
cme, Pamers DcMooy oundry Co.
corn Refnng Co
dams, va, estate of
dams, va ., e ecutor
dams, . G
dams Motor Co.
damson, Chares ., trustee
damson, enry
daskn, erman -
der Co., The --
der, Segmund
. G. S. Mnng Co.
guar Land ssocaton, The
|a Coa Co
|a nameng oundry Co
kron Rubber Moud Machne Co
abama Coca-Coa ottng Co
abama Cooperage Co
ba o Paper Co
e ander County Natona ank
e ander County Savngs ank
e ander Manufacturng Co
merca Cabes, Inc.1
en, .
en, Mrs. . ...
en et a., ames ., e ecutors
Docket
oard
of Ta ppeas.
No.
oume.
Page.
13055
12
556
3346
3
415
11903
10
646
9265
11
820
1598
6
1065
4211
3
1126
1929
2
253
14544
17
1324
14544
17
1324
4361
5
113
3522
4
589
17780
10
763
21860
17
17
9591
8
460
10847
10
849
3078
4059
8
787
9229
8
1260
3718
3
705
7476
7
305
7343
7
1230
11838
12
1252
1164
1
837
13605
18
1287
1907
4
1184
12075
12
1238
12616
12
1238
5656
9
347
9092
10
213
7290
7
1256
7289
7
1256
8690
8
693
Rung No. 4879 Incudes a acquescence and nonacquescence notces pubshed a the Interna Reve-
nuo uetn servce to und Incudng December 31, 1930.
cquescence reates to a ssues e cept as to tentatve ta .
state ta decson.
()
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
c tr sc NC S Contnued.
Ta payer
en, Lous
erton, Robert
ance Mng Co
ng Cory Co.1
sop, dward ., estate of 2-
sop, dward ., e ecutor 2.
umnum ake Co
mercan uto Trmmng Co. et a.
mercan o Co
mercan Coortype Co
mercan Cream of Tartar Co
mercan Creosotng Co., Inc
mercan eature m Co.
mercan et Co
mercan rut Growers, Inc
mercan awaan Steamshp Co..
mercan-Lace Manufacturng Co..
mercan LaDentee, Inc
mercan Manganese Stee Co
mercan Ms Co
mercan Natona ank of St. Pau.
meroan Packng Co., Inc
mercan Photo Payer Co
mercan Seatng Co.4
mercan Seatng Co.8..
mercan Seedess Rasn 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
mercan Trust Co., trustee
mercan ave Co
mercan Warehouse Co
mes, Chares Lesey, e ecutor
mes, Chares W., estate of
mes, ohn S
mgo Coa Co
namosa armers Creamery Co
nderson, den
nderson, Isabe
nderson, ohn, estate of
nderson Gustafson
nderson- arrngton Coa Co
nderson Lnd Manufacturng Co
nderson, Gustave ., trustee
nderson Lumber Co., .
ndrews, ffe, estate of
ndrews et a., ames M., e ecutors
ngeo Co., G
oard of Ta ppeas.
No.
oume.
Page.
383
2
1313
16431
13
1385
15649
10
457
6606
7
574
6519
7
848
6519
7
848
4669
8444

1193
3430
6
1007
5418
3
824
7901
10
1276
2078
2
847
17777
12
247
4437
11
1271
14882
18
509
9043
11
635
4225
7
13
8293
8
419
611
1
575
8145
7
659
1994
2
460
14702
1
30751

14
476
33212
1173
3
195
1290
2
419
4772
4
649
14676
14
328
15725
15
452
7679
5
954
8368
7
641
10S9S
9
242
2967
2
991
5935
9
571
12962
13
105
29173
18
580
4696
4
1204
20330
19
8
10520
14
1067
10520
14
1067
8895
9
1336
11684
8
598
29352
13
907
16058
19
371
1394
5
27
32561
10
1376
1556
3
531
743
6
759
3074
2
1297
32561
10
1376
9103
15
475
13096
13
651
13096
13
651
10869
12
460
oquescence reates to a ssues e cept the thrd Issue.
state U decson acquescence reates ony to 1912 trust.
cquescence reates to Issues nvovng offcers saares and ega e penses.
cquescence n decson n so far as t reates to ncuson In Invested capta of (1) 125,000 pad by
ta payer n 1915 for Inventon on whch patents were pendng, (2) 500 for counse fees.
cquescence reates to frst ssue of deck
state ta decson.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
3
cqtr SC NC S Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
ngeo rut Co., G
nger, dward
nger Corporaton 1
ngo Caforna Trust Co., trustee
nnston Cty Land Co
nthracte Trust Co., admnstrator estate of ohn
oseph rown, deceased a
ntcch, Grcgo
ntonopos, George
partment Corporaton
ppaachan Reaty Co
ppe ct a., bert ., e ecutors
ppe, acob, estate of
ppeby, |r., Scott
ppegate, Raph ndrew, e ecutor..
ragon Ms
ranas Compress Co.
rcade Department Store, Inc
rchbad, |r., et a., R. W., e ecutors.
rchbod, ohn ., e ecutor s
rcher Paper Co., The
rcher-Strauss Rubber Co
rds Co
rmstead, D. L.
rmstrong, rd
rmstrong, .
rmstrong, .
rt rass Co
rtcr Pant Gass Co
rthurs, W. C
rt Meta Constructon Co
ssocated udng Co
ssocated Denta Suppy Co
ssocated Gas ectrc Co
tkns, ma oster
tkns, ohn ., estate of
tantc Cty ectrc Co.4
tantc Coast Lne R. R. Co
tantc Coast Lne R. R. Co.5
tas Pywood Co
tas Tack Co
tterbury, Grosvenor
ubrey, George
uchncoss, . owand, e ecutor.
udtorum Co
uerbach, Sao
ut Wborg Co
ut Wborg Co.
of New York,
of Uruguay..
10869
25958
25960
19247
1368
4947
19057
3925
4013
26571
29140
9685
7041
7041
25046
7970
18044
4378
6298
4695
8629
342
17194
25188
13023
14750
21952
28227
3297
232
3297
19841
1574
2468
4943
12733
5650
2296
15485
3377
17871
2505
10983
25797
4725
195
4409
24312
4483
1976
16655
24376
24375
24377
ut Wborg Co.
1 cquescence does not reate to decson regardng 1918 ta es of nger Ms.
1 state a decson.
state ta decson acquescence reates to thrd ssue of decson.
cquescence reates to a ssues e cept affaton wth mercan as t ectrc Co.
5 to frst ssue of decson.
8 n the case of Grosvenor tterbury (C. . I -1, 4) recaed.
12
17
17
18
2
3
18
3
3
17
12
10
10
18
10
17
8
18
4
8
1
9
12
13
8
1
6
15
2
3
4
14
9
2
9
9
15
2
9
17
9
1
8
11
5
2
10
17
17
17
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
4
cquescencbs Contnued.
Ta paye
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
erod, erman
yer, Chares
yer, Wam P. ._
.
Co.
ach, L., estate of..
ackus Sons, |r.,
adger Takng Machne I
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 London South merca, Ltd
ank of Rockngham
anna Manufacturng Co
anse, ndrew
anta Refrgerator Co
ardwe, Prtchard Co
arker, George ., estate of
arker, 0.
arkey, G. C
arnard, Mrs. C.
arnes Coa Mnng Co. and Coumbus Coa
Mnng Co
arnett,
arnette, atherne Wknson, soe and ony her
arrows. etcher L
arry, .
arrv, ohn nthony
artey, R.
arton Wson, Inc
artron, .
ass Pubshng Co., . P
astrop Mercante Co., Ltd
atson-Cook Co
aumann ct a.. Ma , e ecutors
aumhoff, George W
cquescence reates to ssues 2 and 4 o decson.
Docket
No.

9357
14883
2778
10449
5928
240
27688
6246
4459
22505
10637
3777
10239
5020
3901
4784
4783
9393
201
3271
5386
2344
3227
1899
4800
999
22015
24282
4682
762
20502
17164
36771
41521
8728
3583
24352
22454
3209
28743
16379
16743
3158
99
1724
2623
11913
2721
11742
8124
5458
6981
1G24
oard of Ta
oume.
10
13
5
5
11
7
3
18
7
10
9
6
8
10
3
12
12
4
2
2
6
2
8
3
10
1
17
3
1
16
15
20
13
3
IS
18
3
18
16
4
1
2
4
13
3
12
7
6
8
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
cquescences Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
ay Rdge Land Improvement Co.
ay State Securtes Co
each musement Corporaton
eacon Coa Co.1
eaver Lumber Co
ecker, S. L
ecker ros
ecker Paper Co
eeer, oseph G
ekns ousehod Shppng Co
e, . R
e, ames
e-Rogers Zenmurray ros. Co.
eamorc, Davd
ee Ise Creamery Co
ee Ise ast Sde Creamery Co..
engrath, W.
emont Stone Co
erdge O Co -
et Raway Co. of Chcago
cms, sr., Thomas
endhcm, . M., estate of
endhem, enretta
endhcm, uus, e ecutor
cnham Ice Cream Co
enne, George ., estate of
entey, .
enton County ardware Co ...
erg Industra coho Co., Davd.
crgfed, Carona
ergfed, Rudoph
erzz ros. Co
ern, Inc., Irvng
ermngham Lumber Co
ernard s, Inc., George
ernd, ohn M
ernsten, . R --
ernsten, anne -
ernstorff, ans
ernuth-Lcmbcke Co
erthod, zabeth
esse, Ma we
essemer Investment Co
est rewery Co...
ettcndorf, oseph W
ettens, bert
ckett-Swett Lvestock Co
ckey, Mton -
g Rapds ectrc Co
g Western O Gas Co.
Co., Raymond R
s ros. Memora Corporaton..
o Packng Tradng Co..
21217
3685
18288
11894
3534
9400
9949
16954
4555
2367
8618
21981
27272
8859
1220
6385
12317
12317
2018
12410
28531
6296
4289
3100
7964
7963
7964
3401
12962
2512
9896
13102
26459
26458
22388
3049
2654
5410
3340
1258
1258
4054
17018
7248
4971
5295
19139
2035
1488
8347
297
14868
7150
15399
1346
17216
16
3
14
9
8
9
10
14
13
19
7
4
3
14
14
3
12
11
0
2
8
8
8
5
13
5
10
13
19
19
16
2
1
8
4
6
(
17
12
3
8
16
3
2
12
1
9
9
15
7
18
1 cquescence reates to second and thrd ssues of decson.
cquescence reates ony to ssues nvovng computaton of net ncome for 1913 and 1919 and e cessve
deprecaton restored to ncome for 1918 and 1919.
state ta decson.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
6
cquercences Contnued.
Tapayer.
Docket
No.
oard of Ta -
ngham, rthur W., e ecutor1
rd, Samue
rkeand, . ...
rmngham Trust Savngs Co., e ecutor.
rn, enry
scayne Trust Co., e ecutor
shop, ohn ., trustee
shop, Martha ., e ecutr 2
shop, Roand P
shop, Samue D., estate of2
shop, Wam T
tter Root Stock arm
by Co., otham
|ornstad, Otto
ack Rver Sand Corporaton5
ack Yates, Inc
acke, . W.
ackstone, D. L., admnstrator
ar eneer Co
ake, ohn . L
tzer, Ma
och, .
odget, anne
odget, Wam, estate of
odget, Wam, estate of2
odget, Wam P
odget et a., Wam P., e ecutors
odget e a., Wam P., e ecutors2
odgett, ohn W
ogg Lttauer, Inc
oom, Davd, estate of4
oom, onas4
oom, onas, e ecutor4
oom ros., Inc
oomfed, rederck
ow et a., dee M., admnstrators2.
ow, George P., estate of2
udworth, Mrs. W. M
ue Rdge Overas Co
ue Rver Pacer Mnng Co
umentha, S.
um s, Inc.5
oadwee, Isabec M
oa s Ros Corporaton
oard, R.
oas, Chares S., estate of
ockhoff, arry W
oercke Runyon
oettcher et a., mma C, e ecutors 1
ogart, Lacey L., admnstrator Leon C.
estate
oggs, Mary Waker, e ecutr 2 --
20303
6721
3464
7440
610
/13686
116885
29173
20069
14007
20069
14008
5777
15577
18115
19933
3442
2282
10401
6703
7461
5443
10076
29393
10344
28934
Rggs
10344
28934
35356
5297
35160
35159
35160
9440
6501
30077
30077
6285
10210
6299
17082
2523
10743
22370
18534
1139
3206
2981
32095
1932
12309
15
4
3
5
1
18
18
14
13
14
13
10
14
12
18
2
2
12
9
3
6
13
13
18
13
13
18
13
3
20
20
20
10
6
16
16
7
6
8
12
7
17
11
16
18
2
3
3
19
2
11
state ta decson acquescence reates to deductons for attorneys fees and e ecutors commssons.
state ta decson.
1 cquescence reates to ssue 2 of decson.
Gft ta decson.
cquescence reates to 1919 saary Issue.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
7
cqttescencbs Contnued.
Ta payer
R. .( estate of 1
oggs uh, Inc
oggs O Corporaton
oge Co., Inc., W. S
oker Cutery ardware Co., Inc
onger- rankn Lumber Co
onaparte, en C, estate of
onneve Lumber Co
onne ros., Inc
onwt Teer Co -- ---
oone, D. W
oone, .
oone, ames D
oone, W.
ooth urnture Carpet Co
orden, Spencer, estate of 1
orden, |r., Spencer, e ecutor 1
osshardt, rank
oston Odsmobe Co
oston Store, Inc., The
oston Structura Stee Co
otsford-Constantne Tyer
oucher-Cortrght Coa Co
ouden, Chares II
owen, an
owman, . .
owman, . W
owman, . Wam1.
ovce tract Co
oyd, .
oyer Co., .
oyne Cty Lumber Co
oynton, Chares T., estate of
oynton, N. - -
oynton Gasone Co
radford Co -
radey, W. C
radshaw, Rosena W
rady, dwn -
raey, . R -
ray- erguson Gn Co
rand, fred
rand, Php R -
randes Investment Co
randes Sons, . L
randenburg, dwn C, e ecutor estate of George
M. Oyster, |r --
randon, D. S
rannum Lumber Co
rauer, Pau, estate of
rauer et a., Mary ., e ecutors
state ta decson. , ,
cquescence reates to deducton of epenses tor annua pcnc.
12309
9269
18119
40165
2208
13267
8077
1652
3657
7806
21859
27 24
28700
3053
3052
3051
3163
426
5909
5909
4436
11239
4216
836
9759
11616
6764
7965
2690
15850
7467
18935
9327
6751
5739
10495
840
9145
5342
6909
6910
8384
47
5621
7434
17221
5399
8572
8432
1545
1546
7390
20124
2836
730
730
oard of Ta ppeas.
oume.
11
11
19
5
12
7
1
2
15
17
9
9
9
9
6
6
6
4
16
7
1
10
7
7
2
16
8
16
9
6
4
10
5
11
14
1
4
7
14
5
5
5
3
3
4
10
2
6
G
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
cquescences Contnued.
Tapayer.
oard of Ta ppeas.
No.
oume.
Page.
2801
4
42
2801
4
42
5844
9
423
5844
9
423
539
1
269
21393
17
704
21393
17
704
78
1
417
14005
10
496
14321
17
711
11406
19365
12
500
28186
11672
11
62
21074
14
1351
27921
17
1173
13658
14
797
20063
14
801
9173
10
306
27702
20
127
27704
20
127
1905
2
53
1904
2
48
3897
7
414
3896
7
414
3897
7
414
11647
8
969
20527
9
1008
13792
13
174
7747
10
510
13932
1
27779
13
981
31427

7994
6
895
499
1
502
3675
4
1129
8191
9
621
11161
10
1036
11224
10
1036
4947
3
486
6056
4
74
16290
14
609
11162
10
1036
12748
13
832
2975
4
56
9748
10
106
7967
8
112
12709
14
609
12703
9
719
11134

1370
21634
4937
4
1191
10995
8
1164
25154
16
485
1037
6
914
ray, zabeth ., admnstratr estate of Rch-
ard ray
rav, Rchard, estate of
remer, ugust . W., estate of1
rehmer et a., Otto T., e ecutors 1
reevoort ote Co
rewer, . R., admnstrator
rewer, Magge, estate of
rewer Co.,
rewster Laundry
rckc, Maude nea 1
rer Coeres a.
rggs Turvas
rggs-Wcaver Machnery Co.
rghton Syndcate No. 1
rnkcrhoff- ars Trust Savngs Co.
rsto, P. L
rtan, .
rtan, Mrs. .
rtt, en|amn T
rtt, Mary ., estate of
roadhead , met N., estate of
roadhcad, Shedon 6., estate of
roadhead, Wam ., admnstrator.
rodbeck, Lucy
ronson, W. S
rookyn Trust Co., e ecutor 1
rooks Sons, M. S
rown, Chares.
rown, dward T
rown, dwn M
rown, enry I
rown, acob ., trustee
rown, ames
rown, ames Crosby
rown, ohn oseph, estate of .
rown, Rves S., e ecutor
rown, R. L
rown, Thatcher M
rown, Water
rown, Warren
rown rown, Inc
rown Co., .
rown Coa Coke Co., R. L..
rown Lumber Co
rowne, dward I., estate of...
rownc, Water D
rownfed, Mnro
rownng, . T
rownng Co., . M. fc M. S
state ta decson.
1 cquescence does not reate to net oss deducton.
cquescence reates to deducton or amounts e panded for resurveyng, mantanng, and markng
boundares of pettoner s property and the erst of removng a boer and nstang a now ono.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
9
cqttbscences Contnued.
Ta payer.
oard of Ta ppea .
No.
oume.
Page.
93
1
320
129
1
342
4055
176
8
1
787
83
7892
6
881
3719
5
1135
3719
6
1135
7447
15
727
6568
9
171
25155
16
485
25157
16
485
25172
16
485
12988
12
434
17660
13
415
8779
15
435
8779
15
435
5855
6
335
2306
3
503
3170
5
947
3170
5
947
6035
9
1155
6035
9
1155
6888
7
993
6888
7
993
7566
7
456
13117
12
51
1311
3
1134
5782
6
1297
4232
4
4
8601
12
879
31919
19
743
12026
13
781
1697
5
553
2749
11
275
2038
3
1158
21311
13
892
2106
2
143
12611
5
1003
8673
13
679
4753
12
1209
3292
3
20
13099
11
1005
13100
11
1005
2650
6
412
9447
10202
10
1345
10755
2952
2
266
5978
4
878
1572
1
1105
989
2
19
14902
15
55
463
1
666
6288
7
495
6287
7
495
6289
7
495
rownsve Matamoros rdge Co
ruce uman Drug Co
ruere, enry
run Coa Co
runer Wooen Co., Inc
runner, rnod W., estate of
runner, mma ., e ecutr
runton Studos, Inc., Robert
rush, George De orest
ryson, C.
ryson, M. T
ryson, T. W
uck, en ., estate of
uck, Truman, estate of 1
uckeye rewng Co
uckeye Producng Co
uedngen, Robert
uena sta ardwood Co
uffao orge Co
uffao Steam Pump Co
ughcr, rederck ., estate of
ugher et a., rederck McLean, e ecutors.
u, rchbad ., estate of
u, rnest M., e ecutor
uard, ernce
uock, .
urgess, Rchard
urg, Oscar
urgo, .
urgueres Co., Ltd., . M
urke, . --
urke, Thomas, estate of
urke ectrc Co.s
urkhart, Rosa
urktt, George W., estate of-
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 -
urtse et a., ertram W., e ecutors
usche, . C - -
uss Co
uter Grocery Co. et a., ames
uter, Inc., ohn W
yfed, Gadys R_.
yrd Prntng Co
yron Shoe Manufacturng Co., Inc.
ywaters, . unter.
) ta decson nonacquescence notce pubshe n Cumuatve uetn III-1, page 52, recaed
1 cquescence reates to ssue 5, as to patent group No. 2, and ssue 6.
) ta decson.
85942 31 2
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
10
cquescences Contnued.
Ta payer.
oard of Ta ppeas.
No.
oume.
Page.
2657
5
604
18143
12
20
3903
5
347
2228
2
109
9820
6
1301
13303
12
1109
32146
18
1059
32146
18
1059
4991
3
602
10655
12
1277
9313
9
1123
21986
16
543
5631
6
561
16617
15
414
373
1
441
304
1
720
16797
18
1109
7111
6
446
7112
6
446
3141
3
1067
4917
4
940
7069
7
1076
5376
4
933
6610
7134

441
7705
5
1160
3031
3
75
6224
8
2S7
6720
4
983
4451
2
1271
9524
12
166
2432
6
539
3032
3
1119
12061
5
45G
12493
12
455
7027
0
457
5562
8496

1397
11072
8
675
11073
8
675
11071
8
675
11070
8
675
11070
8
675
18282
15
1042
18279
15
1042
104
1
38
4222
11744

1157
12954
14
522
9605
11
900
c.
Cadac utomobe Co. of Inos
Carns, .
Caforna rewng ssocaton 1
Caforna Canneres Co
Caforna Deta arms, Inc
Caanan Road Improvement Co
Caoway, uer ., estate of
Caoway et a., Ida C, e ecutors
Camden urngton County Ry. Co
Camden Wooen Co
Cameron, W.
Campcn, rtz
Campbe, . O
Campbe et a., Nancy Carver Lathrop, trustees...
Campbe, Nge Lese
Canaan, arry and ate
Cantne, Martn
Canton rt Meta Co
Canton Stee Ceng Co
Cantre Co., The red -
Canyon Lumber Co
Cape, . W.
Capta Cty Investment Co
Capto ote Co. .
Capto Park ote Corporaton
Capto Securtes Co
Capto Theatre Co
Caps, Mary, deceased, estate of
Capps, Lna
Carbo Petroeum Co.4
Carey, C. W.
Carse Garment Co
Carmchae, D. L
Carmchae, .
Carney, Rchard
Carney Coa Co.
Carpenter, D. M
Carpenter, ohn
Carpenter, Mary
Carpenter, Mary ., admnstratr .
Carpenter, Maud ., estate of
Carr, . Lawrence
Carr, atUeen M
Carro Chan Co.7
Carro Mercante Co., . S
Carter, MacDonad Mer, Inc.
Carter, Warren
cquescence reates to deducton of contrbuton to State rewers ssocaton and affaton wth
the Remar Co.
cquescence does not reate to that part of decson nvovng appcaton of yors decson (1 . T. .,
1135).
state ta decson.
cquescence reates to a Issues of decson e cept fourth Issue.
cquescence reates ony to ssues 2 and 4 n decson.
cquescence reates to ssue No. 2 and wth respoct to fsca year ended May 31,1917,
Nonacquescence notce n case of Carro Chan Co. (C. . I -1, 4) recaed.
No. 1.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
11
cquescenceb Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Case Pow Works, . I
Cass, vn C
Cassdy Co., Inc
Caste, rank ., estate of
Caswe Co., George W
Ceuod Co
Centadrnk ters Co., Inc
Centra musement Co
Centra uto Market
Centra Savngs ank2
Centra States Coa Co
Centra Wsconsn Creamery Co
Chamber of Commerce udng Co
Champon Coated Paper Co
Champon Stove Co
Chander, . .
Channon Manufacturng Co., ames
Chapn Laundry Co
Chappeow dvertsng Co
Chareston Securty Co., e ecutor
Charters Creek Coa Co
Chase, esse
Chatham Phen Natona ank
Chattanooga Mattress Co
Chatterton Son
Cheeseman, W. C
Cherokee Ochre Co
Chcago cceptance Co
Chcago re rck Co
Chcago, Indanapos Lousve Ry. Co
Chcago Insuated Wre Manufacturng Co
Chcago Raway qupment Co
Chcago Starch Co
Chcago Takng Machne Co
Chckasha Cotton O Co
Chds Co., W.
Chshom s Sons Co., Wm. (Chshom Shove Co.).
Choate, |r., Chares ., estate of
Chormann et a., gnes . C, e ecutors
Chormann, rederck, estate of
Choynsk, erbert
Chrstensen, N. P
Chrstopher, L.
Chrstopher Co. of Caforna, L.
Chrstopher Co. of Deaware, L.
Church oes Co
Cncnnat Mnng Co
Ctzens Loan ssocaton
Ctzens Natona ank
Ctzens Trust Co. of Utca
Ctrus Soap Co. of Caforna.
Cty Gas Co. of Norfok
664
19890
9368
24878
13878
f 8543
19459
5214
2418
8327
5006
8735
13350
9598
19279
870
4039
6803
7650
12688
3843
9652
35942
107
3714
6057
20811
9846
12764
11063
11152
2380
f 3964
18438
19427
12363
30165
4127
1840
13552
10345
10345
14448
4380
8931
16085
17448
3526
8427
412
6148
3373
13249
/ 11730
14199
3
16
11
19
1 1
6
2
7
10
4
15
11
10
1
3
8
6
13
4
10
19
1
4
5
15
9
12
10
10
10
4
13
13
13
18
8
3
16
10
10
14
7
13
13
13
4
8
1
5
2
14
9
1 state ta decson.
cquescence reates to cost o bank budng, Its physca fe from date of acquston, and March 1,
1613, vaue.
cquescence In so far as decson determnes that Cty Gas Oo. of Norfok and rgna Raway
Power Co. were affated wth each other.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
12
acquescences Contnued.
Ta payer.
Cty Natona ank
Cty Natona Dank of Commerce
Cty Park rewng Co
Cark, . ., estate of
Cark, rank ., e ecutor
Cark, Grace Scrpps
Cark, Grace Scrpps and Re
Cark, arod
Cark, Le M...
Cark Co
Cark Co., ames T
Ceveand ome rewng Co
Ceveand Snow-Church Co
Ceveand Trndad Pavng Co. of Deaware
Ceveand Trust Co., trustee
Ceveand Wooen Ms -
Cne, Mrs. a Ppes -
Cne, W. D. -
Coates, ane ._ -
Coatsvc oer Works -
Cobb, L. S -
Cockran, . T
Cocks-Cark ngravng Co
Codrngton, the M
Coffn, Irene
Coffn, Wnthrop
Coghn ectrc Co
Cohn Sons Co., M.
Cohn-Goodman Co
Coe, W. C._ --
Coe, Mrs. W. C -
Coeman, ames
Cotz, en|amn
Coege Pont oat Corporaton
Cons, red
Cons, W. C. and C. C
Cons and wfe, W. D
Conson, ohn W
Comer-Grecn Lumber Co.
Coona Creosotng Co., Inc
Coona Trust Co., e ecutor 4
Coumba Theatre Co
Coumbus read Co
Coumbus Cannng Co
Coumbus Coa fe Mnng Co
Covert, Warner L
Combs, sr., W.
Comcy ohnson Co
Commerca Co. of gypt, Ino
Commerca urnture Co
cquescence reates to Issue as to whethor proceeds of a note
that year aso decson as to tth ssue.
cquescence reates to aowance of offcers saares.
cquescence reates to deprecaton aowance.
state ta decson.
Docket
oard of Ta ppeas.
No.
oume.
Page.
28912
17
637
22111
17
637
7973
10
925
820
6
1085
8015
12
425
/ 20103
1 36901

453
536
1
491
1707
2
555
8049
9
460
5785
4
356
3660
5
1291
73
1
87
169
1
234
17294
14
1209
28141
15
1410
6029
8
49
6929
15
934
6930
15
934
5456
3
429
/ 8603
1 16097

1242
7136
9
547
3801
3
215
6604
8
468
4685
6
415
f 11556
5930
1
8
421
I 28049
12498

12
702
1879
3
1071
/ 7361
9238

87
7167
7
475
9134
7
903
9133
7
903
4891
3
835
3004
3
947
764
1
534
26672
16
1426
5986
5
102
11148
7
913
550
1
561
20916
12
256
17777
12
247
24878
19
174
1414
3
622
5823
4
1126
9582
10
1085
3209
3
891
9170
e
623
10182
6
249
11133
8
52
5810
3
1163
6507
8
71
coected n 1919 represents ncome for
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
13
cqt|escbnces Contnued.
Ta payer.

oard of Ta ppeas.
oume.
Commerca Trust Co
Commodore s Pont Termna Co -
Compton, nna L., e ecutr
Compton, orace ., estate of
Comstock-Caste Stove Co
Concord ectrc Co
Concrete ngneerng Co
Conen, Wam
Coney, Tn o Corporaton
Conn, acob
Connectcut ectrc Manufacturng Co
Connectcut Natona Pavements, Inc
Conne, zra ., estate of1
Connorzed Musc Co
Conover Co., C. -
Conrad Co.,
Inc.
Conrad ardware Co
Conrad Shoe Co
Consodated rck Co
Consodated ectrc Lamp Co
Consumer s Coa Co
Consumers Ice Co
Conwav, dran C
Cook, . G---
Cook, ohn ._
Cook, R.
Coon aey State ank 1
Cooper, . . T., estate of
Cooper, . T
Cooper, C.
Cooper, dna
Cooper, Samue
Cooper- rannan Nava Stores Co
Copand, Davd
Corbctt, ott R
Corbett, amton
Cobett, enry L
Corbett, Merrtt
Corman Co
Cornng Gass Works --
Coronado O Gas Co
Corscana Gas ectrc Co
Cosbv-Wrth Saes ook Co
Cotton Concentraton Co
Couch, . C
Couter, |r., Chares
Covert, sther ee/..
Covngton Cotton O Co
Cowe, Matte, and Mona Cowe,
estate Robert Cowe
Cowe. Robert, deceased, estate of
Co e, |r., et aL, fred C, trustees...
Co e, Sopha G
e ecutrces,
31926
13402
8519
8519
3347
4355
19257
815
15693
11978
7549
3448
12368
7179
9830
10042
18293
19582
1584
597
23120
30506
555
8121
12704
1614
1741
6331
3643
11352
12634
3144
2206
2206
959
10068
9557
11836
16643
11837
18733
22491
6227
9826
10503
4499
20175
4625
202
8181
2004S
5534
691
691
6805
2121
18
18
11
11
4
7
19
1
17
16
6
3
11
7
7
13
8
1
17
1
10
11
9
5
4
3
13
9
7
4
4
1
9
15
8
8
8
15
16
13
9
14
6
19
4
1
6
12
12
3
3
6
5
1 state ta decson.
cquescence reates to a ssues e cept aoway note ssue.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
14
cqtescences Contnued.
Ta payer.
oard of 1
No.
oume.
Page.
24513
17
368
28293
17
36S
9706
20230

823
2283
2
747
11362
10
157
11362
10
157
7924
8
1132
10695
1
15374

437
16789

27271
19
881
10695
1
15374

437
16789
18366
19
634
18366
19
634
3381
3
282
7681
10
403
6364
7
322
11306
11
1375
9197
5
1164
9198
5
1169
10557
10
1
2208
5
541
981
8
301
9010
8
949
9010
8
949
981
8
301
128
5085
10
338
13847
17210
15
389
18747
17210
18747
u
389
11601
15
175
6096
12
408
4301
2
1056
12981
14
345
3764
4
1147
2365
14
980
11674
14
19
799
2
510
7052
19619

248
5841
5
670
3717
11
1327
5411
5
737
366
6
826
118
532

773
9450
12
37
11358
31010

133
11974
11
306
14518
31305

600
Coye, rthur
Cragg, Thomas W
Crag O Co
Crak, ohn
Crampton, atharne S., e ecutr
Crampton, Orson L., estate of 1
Cranda orse Co
Crane, rederck G., estate of.
Crane, . T
Crane, Rose P., e ecutr
Crary ct a., Cavert, e ecutors 1
Crary, Louse ., estate of 1
Cravens, Water
Crawford Loan bstract Co
Cray, ames R
Crayton, . S. -
Cremn, .
Cremn, T. O -
Crescent Cap Co., Inc
Crescent Coa Mnng Co
Crews, C. W., estate of
Crews, Davd W., estate of 1
Crews et a., rank .1 ...
Crews, ate Downng, admnstratr .
Crder ros. Commsson Co.
Cry, Dane ., estate of
Cry et a., George Snyder, e ecutors .
Crocker Co., Inc., . S
Croker, |r., Rchard
Crompton udng Corporaton
Cronnger Packng Co
Crosby, verett U
Crosby, Manard
Crosby-Chcago
Cross Investment Co
Crossman, are L
Crothcrs, R.
Crouse, Cavn
Cro we Corporaton
Cro we Lumber Gran Co
Crown Cemetery ssocaton.
Crown Manufacturng Co
Crown Wamette Paper Co
Crugcr Co
Crysta ock Coa Coke Co....
state ta decson
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
15
cq tescences -Contnued.
Dockot
No.
oard of Ta ppeas.
oume.
Crysta Ice Co.
Cuba Grapefrut Co., Inc
Cunan, . S
Cuman, |r., oseph
Cuum, Lous W
Cummngs, W.
Cunnngham Sons Co., R.
Curee, W. 8
Curry et a., bert, admnstrators
Curry, Wam L., estate of
Curts, rank G., estate of
Curts, arret ., deceased, estate of.
Curts, Lous
Curtss, George W
Cusack Co., Thomas
Cushman Manufacturng Co., . T...
Cuyahoga Co., The
13134
7954
15828
16487
5914
29089
2678
10640
7099
1638
17730
17730
4720
442
11164
2327
1987
2143
3721
Co.,
Da, |r., W. ...
Day News Pubshng Co., The
Day Pantagraph, Inc. 1
Darada Reaty Co., Inc
Daton, dward
Daton Gymnasum and Swmmng Schoo, Inc
Day, Davd R., estate of
Dana Co., Inc., Wam
Dane ros. Co
Darng, av N 1
Darng-McDuff Coa Co
Darrow, rank D
Dartt Co., C.
Dastague, . P
Davs, C. R --
Davs, I. M
Davs, Mary Cheney
Davs, Mrs. W. ... -
Davs, Sade S., e ecutr 1
Davs ndrews Co
Davs Co., The
Davs Yarn Co., Inc
Dayton Wrght rpane Co
Dean, nne L
Deck Camp Tank Co -
Deerand Turpentne Co
De ord, Unon C
De orrest, Robert W
Deano, ugene, estate of
Deano, enne W., estate of 1
Deano, Moreau
Deano, Moreau and Wam ., e ecutors
Deatour everage Corporaton
cquescence reates ony to determnaton of pad-n surpus at dae of organzaton and rates
of deprecaton.
1 state ta decson.
14733
14734
21115
4158
4126
5275
1657
194
1373
11064
10840
6302
19866
929
1372
33974
10299
2616
20324
8219
3877
2691
5497
6885
16915
1552
11227
6182
28483
33165
15610
20178
11165
15610
14
6
5
16
3
9
10
(
17
17
6
3
10
4
3
2
3
13
19
4
9
5
2
1
3
11
7
4
15
8
5
19
10
2
16
8
9
2
17
3
10
4
19
10
10
19
10
10
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
16
cqt|escences Contnued.
Ta payer
oard of Ta ppeas.
No.
oume.
Page.
2459
2
102
25964
17
570
6926
7
811
643
2
444
20950
15
225
3331
3
343
US
532

773
12195
11
706
27766
17
927
29111
19
452
29111
19
452
18064
15
806
8112
7
286
5025
7
158
8573
7
279
10563
9
1365
13038
13
587
5663
4
1043
3005
2
729
8630
7
94
13574
14
205
23968
29740

1035
19462
13
1376
5040
10012

1155
12733
14
863
2528
6
732
2528
6
732
13526
11
620
11637
14
1295
156
1
108
5193
8
722
29208
18
790
29208
18
790
548
1
507
8367
10
141
9730
6
1371
4563
3
65
25449
18
63S
1794
2
127
3575
2
983
475
1
641
863
1
1082
3874
11
39
14551
13
921
14387
19152

248
21392
17
1123
21392
17
1123
10300
11
812
13905
16312

256
4468
2
1098
1050
5
766
De Lsser, orace, estate of 1
De, Wam ., estate of
Deto Grass Rug Co. 2
Co.
Denhom Mc ay Co.
Denta Co. of merca..
Denver Crown Ry.
Depost Trust Savngs ank, e ecutor
Derbv. da Portner
DeRoy et a., be ., e ecutors
DcRo v, Lous ., estate of
Derschug, ohn N.
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
Dc an Co
De au , Norman
De cd, Sanford
Dc ore, red
Dewey, Mdred McLean
Damond Pow, eather Down Co ---
Dbbe, Leon N., e ecutor 1
Dbbe, Lous N., estate of 1
Dcenso, epo
Dckey, Water S--
Dckcv Grocerv Co., L. Z
Dck.son, .
Dcknson, acob M., estate of
Dcknson, |r., ct a., acob M., e ecutors
Desng, red D., e ecutor
Detrch, Gustav
Dctrck, erman T
D, Lews
D Cons Co.. -
Dng Cotton Ms
Ds ros. Co
D e Manufacturng Co
Dobson, ames
Dockum, arry
Doerfcr, Magdaen, benefcary, etc
Doernbecher Manufacturng Co
Doerschuck et a., George C, e ecutors and trustees1
Doerschuck, Gustav . L., estate of 1
Doherty Co., en C --- -
Dog, Inc., Wam S
Domenco ante s Sons, Inc
Donaghey Rea state Constructon Co
state ta decson.
cquescence reates to frst Issue In decson.
cquescence reates to ssue 2 of decson.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
17
cqt|escences Contnued.
Ta payer.
oard of Ta ppeas.
No.
oume.
Page.
30943
18
230
9974
12
271
5762
9
1081
25359
12
271
1629
6
455
1629
6
455
11218
12
1102
11220
12
1102
11219
12
1102
18030
12
1102
288
1
372
5738
9
496
13329
9
218
11449
8
676
2276
2
469
31064
19
76
19392
15
570
14954
14
1185
17254
18
374
20169
17
486
20169
17
486
3152
9
1216
18280
15
1042
18281
15
1042
7020
8
955
15815
14
225
17019
10
1150
3121
5
239
3644
4
743
8629
8
919
3351
5
711
29452
18
875
5593
4
24
13565
12
96
12515
13
116
8664
11
796
12163
8
1169
4240
3
41
9762
10
1245
2685
2
463
2684
2
463
2686
2
463
679
2
19
1171
2
19
9354
10
110
3940
4
967
3940
4
967
1842
1
998
17827
18
545
10021
10
39
581
1
556
6413
7
153
4695
4
483
8.
Donadson, R. Goden.
Donadson Co., Inc., L.
Donadson Iron Co
Donadson Reaty Co
Donason, re M.. e ecutor 1
Donason, ohn ., estate of 1
Dorn, Lous, estate of
Dorn, Rene
Dorn, R.
Dorn Co., R.
Dougas, George P. and esse P
Dougas Park ockey Cub
Gouty, . - --
Downg, Robert
Downng Co., T. D
Drayton Ms
Dudey, W. S._
Duffed et a., Dve ., e ecutors
Duke, Nanane
Duanv, George W., estate of1
Duany, |r., et a., George W., benefcares ..
Duncan Co.,
Dunn, esse P
Dunn, Dewtt C
Dunn Co., ohn
Dunn Manufacturng Co
Dunson Ms a
Durabt Stee Locker Co
Durkn, P. rank
Dustn, nne M., estate of3
Dyer et a., George R., e ecutors 1
.
agan Mary ., estate of 1
age Shoe Manufacturng Co., Inc
are s P
ast Lynn Coa Co
ast Market Street ote Co
astern Shoe Manufacturng Co
astaok, 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
dmundson, D. Lee
dwards, Water
gan ausman Co., Inc
ggnk, enry
hrch, |r., ranz, estate of..
1 state ta decson.
1 cquescence reates to ssue wth respect to statute of mtatons.
state ta decson acquescence reates to thrd ssue of decson.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
18
cquescences Contnued.
Ta payer
Dockot
No.
oard of Ta ppeas.
mer mend
kdah, arry
ba Manufacturng Co
ectrc ppance Co
ectro Magnetc Too Co
freth, mv en
as ro., Inc., G.. ---
as Co., oseph ---
kns, Luther
ott, . M-
ott, W. -
s, Wade
m Cty Cotton Ms
m Cty Nursery Co -
mhurst Investment Co
Paso Southwestern Co
Paso ectrc Co
Paso ectrc Ry. Co.
sasser, Neson ., e ecutor1
mpre State nance Corporaton.
mswer, Chares C, estate of
mswer, Lzze, e ecutr 1
ngneers O Co.
ngandcr, . L
ngcman, .
ngeman, M. S
nns- rown Co
ntress rck Co
re Sk Ms
rwn, . C
rwn, Mrs. . C
scave, |r., Wam M
sperson, Mrs. Nes (Mec)
ssanbee Mnes Co
sseen Reaty Corporaton
ttenson Wnng Dry Goods Co
vans, Leroy G
vans, W. L - --
vens oward re rck Co
vergreen Road Land Co
ves, . C - -
wad Co
wng, oseph Neff
change ank Trust Co. of Shreveport, La.,
admnstrator
change Natona ank
yestone, rank
ysenbach, Oscar
.
archd, Marcus D., estate of.
archd, Nee ., e ecut.-
atoute Iron Stee Co_
aketnd Shp Co
atco, George
arow, Samue, estate of1
1 state ta decson.
2270
24271
6995
28543
7096
17552
11954
20482
18036
16693
10639
26136
7636
6503
22557
672
7049
7048
11448
6805
19858
10399
11395
14631
802
6193
5981
8471
10006
13718
10251
10250
2333
7376
2208
14406
362
7347
3221
6797
21644
34226
14068
17174
19198
6463
21107
19022
19022
10547
3706
1601
7268
2
18
6
19
7
15
10
17
12
15
9
15
5
6
11
2
10
10
12
6
18
14
1
8
8
10
9
14
7
7
3
13
5
12
3
6
3
8
16
2
18
13
17
18
12
10
9
9
11
6
3
7
603
1230
74
707
290
147
508
628
1058
494
1404
1075
309
89
101
44
79
79
681
1322
1314
1148
760
1289
1289
1248
588
1124
919
919
51
616
541
739
897
806
1180
867
1042
115
1130
705
429
686
1232
716
416
416
818
44
726
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
19
cqt|escences Contnued.
Tapayer
Docket
No.
oard of Ta ppeas.
oume.
arm Impement Co
armers Merchants Natona ank
armers Merchants Natona ank of Nocona,
Te
armers Merchants State ank
armers ank Trust Co., e ecutor 1
armers Cooperatve ssocaton
armers Cooperatve Co
armers evator Co
armers eed Co. of New York
armers ue Co
armers Loan Trust Co., admnstrator 2
armers Loan Trust Co., e ecutor1
armers Loan Trust Co., e ecutor 1
armers Loan Trust Co. and Isabee W. Tford,
e ecutors
armers Unon Co-Operatve ssocaton
arnsworth, oyt Co
aroU- tte Co
awkes, Lese
ear Co., Inc., red --
edera dvertsng gency, Inc.
edera earngs Co., Inc -
edera Creosotng Co., Inc
edera Gas, O Coa Co., trustees for
edera odng Co
edera Pate Gass Co
eges, Ma
edman, Davd
edman, Ma
e, . ---
eows Medca Manufacturng Co
enner, Chares . and rgna S
erguson, Chares
erry Market, Inc
erry Son, Inc., C. S
bre Contaner Co
bre Yarn Co
cken Tobacco Co., .
dea Investment Co
detv-Phadepha Trust Co., e ecutor
detv-Phadepha Trust Co., e ecutor 1
dety Trust Co.
dety Trust Co.4
ed Co., Marsha
er bre Co T--
nance poraton Deveopment Corporaton
of merca
ncham, dward, estate of 1
ncham, mma, e ecutr .
9823
5570
12990
1811
10914
654
16342
13424
12398
210
1399
18234
20178
11055
16287
737
11305
9327
9835
11512
12957
19391
21196
9233
17777
7888
2003
1055
6036
5604
31263
2089
5592
8980
2216
11313
3671
23211
36759
7475
7244
10440
983
27597
28469
4920
13638
15279
24877
6805
30071
30071
6
8
10
2
10
7
13
13
17
1
3
16
19
3
13
16
1
14
9
19
9
12
15
1
6
13
3
IS
7
5
14
5
18
9
10
10
2
16
17
4
13
14
14
6
16
16
1 state ta decson.
1 Nonacquesoence notce In ths case, pubshed In Cumuatve uetn 1 -2, recaed.
1 state ta decson acquescence reates to ssue 1 of decson.
cquescence reates to deducton of ta es on rea estate and persona property.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
20
cquescences Contnued.
Ta payer.
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
rst Natona ank of Omaha
rst Natona ank of Rchmond et a., admns-
trators 1
rst Natona ank of Rock Rapds, Iowa
rst Natona ank of Seepy ye, Mnn
rst Natona ank of Stoughton, Ws
rst State ank- -
she, enry R
she Marks.
sher, Car G
tchburg Steam ngne Co
ach, ohn
a num Insuatng Co
emng, C. ., estate of 1 -
emng et a., dmund ., e ecutors 1
etcher, Chares ., estate of 1
e be e Co.
nt, rnest P
nt Rver rck Co
ood, Mrs. . D. - - ---
orence Ms, Inc
orda Grocery Co
oyd, T.
oer Wa Paper Co
oey, D. 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, d- -- -
oster, orence
oster, . M., estate of
oster, Mrs. ames Martn, e ecutr 3
oster, Seme - ---
oster Gasse, Ltd
ostora Mng Gran Co
ower, sr., . S
o , Rchard M
4339
1369
6468
980
740
6913
19
8021
1280
2817
9889
30033
32385
687
2334
2790
2581
13912
13912
7594
433
12809
5120
7212
7212
7856
13829
17945
746
24558
10383
151
12221
10103
13118
9944
10236
7141
2881
10576
10577
19064
2521
641
489
3S64
22754
17414
21928
21928
22753
9232
17191
3260
28904
34477
4
5
8
2
2
6
1
7
5
6
9
17
10
6
7
2
5
14
14
7
1
13
5
9
9
9
13
12
2
16
9
1
11
9
12
7
7
7
6
12
12
12
6
1
2
6
19
18
16
16
19
5
11
4
state ta decson.
cquescence reates to Issues 2 and 4 of decson.
/ 28904 1 1S
I 34477 0
1188
76
391
350
309
545
9
817
1174
850
29
1358
288
816
84
586
1176
87
87
968
242
383
676
419
419
514
909
20
31
1366
579
412
903
377
51
1098
209
611
291
104
104
104
21
1230
1223
536
958
819
1390
1390
958
118
1401
427
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
21
cquescences Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
o Sons, Inc., W. P
o Rver Iron Co
rance, George enry, estate of .
rance, Nanne ., e ecutr 1
rancescon Co., . C 2
rancs, T. .1
rank Seeder Co
rank Seeder, Inc
ranke, Osmond ., e ecutor
ranke, Inc., So
ranke Tton, Inc
rankn, Wrt
rankn Ms
rank-Severs Undertakng Co.
raser, rthur C
raser rck Co
raser, George
razer, red
reedom O Works Co.
reeand Catte Co
rees, |r., Peter --
rey, |r., et a., Mtche M., e ecutors Wam .
Scafe estate
redrch Sons Co.,
redman Neckwear Corporaton, L
rend, George
rend, Oscar, e ecutor estate of erman . Meyer.
rschkorn, . S
rshkorn Rea state Co
rost, Chares
rost et a., . Y., e ecutors
ruen Investment Co
uer, O. R
uton, Guy
urst ros. Co
G.
Gaats, erry
Gaagher, Thomas P -
Gaen Paper Co
Gaumbeck, C
Gavn, ohn M., admnstrator.
Gambee, Wheeer
Gamon Meter Co
Gano, M. Rea
Gantz Tank Co
Garber, . .
C...
16389
4743
28558
28558
10585
2525
10614
10615
22514
3182
3253
307
9266
9267
11423
2194
6495
12028
5929
9865
9707
17882
20128
9518
11307
391
3412
19334
5000
1062
7879
14270
26422
10441
1126
10801
9362
3362
10747
21862
1377
10641
820
3972
395
28421
1007
3708
14097
3710
13909
15
5
18
18
10
2
13
13
3
3
1
7
8
7
3
6
10
6
10
8
12
1
2
15
S
1
7
15
16
12
2
11
11
8
17
5
9
0
4
1
19
16
11
11
1 state ta decson.
1 cquescence reates to frst ssue of decson
1 cquescence reates to ssue as to whether the ncome reazed under agreement of December 14,
1918, s ta abe n proportonate amounts to the severa pettoners or whether such proportonate amounts
re ta abe one-haf to the pettoners and one-ha to ther respectve wves.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
22
cquescences Contnued.
Ta payer.
Garden, .
Gardner, .
Gardner Governor Co.1
Gardner Prntng Co
Garretson, Sopha M .
Garrson Co
Garv, the
Gar v, W. W
Gaskns, . W -
Gassner, Lous
Gate Cty Coffn Co.
GatfT Coa Co
Gegcr raverman urnture Co.
Gem State Lumber Co
Genera Lead atteres Co
George, Mke
Georga Car Locomotve Co.1
Georga Creosotng Co., Inc
Georga- orda Land Co
Georga Manufacturng Co
Georga State Savngs ssocaton..
Georga eneer Package Co
Germantown rad Co
Gerst et a., erbert .
Gesse et a., gbert G., e ecutors
Gettys, M.
Gant Tre Rubber Co
Gford, arry N
Gbert Creek Land Co
Ges, da R ---
Ges Co., George .. -
Gen, Margaret
Gespe, Rchard T -
Gespe Coa Co .-
Gam Manufacturng Co
Govch Co., oe.. --
Gson, arry W
Grard Coa Co
Gackncr Reaty Corporaton, ohn..
Gady Manufacturng Co
Gobe-Gazette Prntng Co.
Gobe Outet Co
Goyd, emmon
Goener urnture Co.
Goerke Co., The.
Goethe Co., fred C.
Goconda O Co
Godberg. arry S
Godberg, Lous M.
oard of Ta ppeas.
No.
oume.
Page.
15926
16
592
5218
7
1089
321
5
70
5061
4
37
5818
10
1381
15006
17
460
34371
18
1204
34370
18
1204
4242
4
619
4017
4
1071
4517
3
226
11084
8
726
1906
2
171
3984
2
489
718
2
392
5774
6
124
3131
2
986
17777
12
247
31095
16
1253
1718
5
893
5352
4
748
3479
2
584
5215
3
1336
3879
3888
5365
4
658
5366
5367
12394
15
624
3495
3
441
9412
7
1249
2677
3
334
13848
14
921
1536
1
1066
5387
4
335
1785
2
75
3851
2
1317
12509
13
926
964
1
967
7746
6
864
2395
2
1221
3724
6
105
10338
11
151
227
1
337
3899
18457
16
161
24196
14029
10
165
33183
. 39411

966
3500
2
1290
5992
7
860
13273
15
199
10176
7
955
5389
4
1073
11615
9
1355
cquescence does not reate to that part ot decson nvovng appcaton o yers decson (1 . T.
., 113 ).
1 cquescence reates ony to ssue 1 n decson
state ta decson.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
23
cquescence s Contnued.
Ta payer.
oard of Ta ppeas.
No.
oume.
Page.
243
1
249
11907
12
874
11173
12
874
11463
11
92
11463
11
92
16138
14
1010
16138
14
1010
6335
7
151
5161
8
425
8268
6
1142
8269
6
1142
19840
15
583
4220
8
1277
3264
4
389
3263
4
388
4007
4
165
10124
12
823
21337
9
1209
21338
9
1209
10304
11
833
6631
6
1216
2470
3
311
5224
11
365
8553
5
297
887
1
684
7396
18082

549
24631
8
1166
1356
2374

13
2373
8
13
19327
15
1166
9714
12770
1024
13792
13
174
2584
6
. 395
3659
3
1026
2340
5
1163
8113
7
286
28937
19
455
716
2
672
28937
19
455
4552
6
347
143
1
222
4503
4
1264
1477
2
552
10489
12
383
8433
11850
8
225
3574
3
467
10604
16
396
3836
2
979
10124
12
823
3127
6
442
Godberger, Leo G.
Godman,
Godman, I
Godman, Lous ., estate of 1
Godman et a., Robert P., e ecutors 1
Godschmdt et a., Georgette, e ecutors
Godschmdt, enrv P., estate of 1
Godsmth, Lan M
Godsten, Davd S
Godsten, as
Godsten, Mrs. as
Good Manufacturng Co
Goodn, C. W., estate of
Goodng, Mrs. . G.1
Goodng, Mrs. red W.1
Goodatte, Raymond R
Goodman, mma ., estate of
Goodwn, C. _.
Goodwn, Moe
Goodyear, Chares ., estate of
Gopher Grante Co
Gordon urnture Co
Go6s Prntng Press Co
Gottfred, edwg
Gotteb ros
Gouston dvertsng gency. Inc., rnest .
Graft, George
Gramercy Investng Co. of New York
Gramercy Investng Co. of Pennsyvana
Grand Rapds Natona ank
Grand Rapds Show Case Co
Grant, een M. W., estate of
Grant Constructon Co., George ...
Grant Trust Savngs Co., trustee.
Gras, Rudoph
Graves, George
Gray, Mary C, estate of 1
Grav, |r., .
Grav et a., Rapn W., e ecutors
Gray, W.
Gray 4 Davs, Inc
Gray Prntng Co., The
Graydon, Samue
Great ear Sprng Co. ..-
Great Northern Ry. Co. .
Green O Soap Co
Green Rver Dstng Co..-
Greenbaum, Mchae
Greenebaum, Moses ., e ecutor ..
Greene Co., .
state ta decson.
Revokes nonacnuescenoe pubshed In Cumuatve uetn I-1 at page 7.
1 cquescence reates to deprecaton and obsoescence ad|ustments.
cquescence reates to a Issues of decson e cept Issue Invovng the queston whether the company
as ncome In the ta abe years Interest earned but not pad In those years on obgatons of
ons owned by t.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
24
cquescences Contnued.
Greenve Coa Co
Greenve Opera ouse ssocaton.
Greenve Te te Suppy Co
Greenwood Cemetery ssocaton..
Greevcr, Mr. and Mrs. .
Greyock Ms 1
Gresemer, Chester D
Grffn, P. P
Grffth, . C
Gr, Inc., ugust
Grmmer, enry
Grttman, red
Grover, rthur
Guarantee Constructon Co.
Guarantee Tte Trust Co
Gueph ote Corporaton
Guenther, Pau
Guggenhemcr, . Randoph
Gurnec, Water S., estate of
Gus Sun ookng change Co
Gutterman Sons Co., . M
Gutterman Strauss Co
aag, nora C.
aag, nora C, former e ecutr .
aag, Lous ., estate of
aas, Otto
adaway, ohn --
adden, |r., et a., ohn spnwa, e ecutors .
adden, Mare Torrance, estate of3
adden. T. Irvng, e ecutor...
agerstown Shoe Leggng Co
agerty Shoe Co., P --
a, Chares Ward
a et a.. ohn S., e ecutors -
a Co., Inc., . . - -
aahan, Stephen
aam, dwn C
aenbeck, arry C, estate of
aenbeck, ohn ., e ecutor
aer, Mary 5
amersag, . P
amersag, uan L
amton Chambers Co., Inc
amton Manufacturng Co
ammack, Rsh Sons Co
ammerschmdt ranzen Co
ammersey, Chares
Docket
No.
3784
2311
168
3000
5690
11926
10827
11546
11400
7372
3393
16025
1159
1828
1848
0063
1064
1755
13625
10441
10786
10458
234
26942
36292
26941
36290
26941
36290
3542
12717
9421
9421
16398
463
16023
11650
13552
4612
6848
3582
12470
12470
/14063
25751
13597
13596
131
2507
10516
13751
20501
oard of Ta ppeas.
oume.
3
5
1
2
6
9
10
7
11
9
3
11
3
10
7
2
9
12
13
8
1
1323
887
152
910
587
1281
386
1094
565
381
313
122
508
1145
599
1043
105
418
1295
1066
1187
243
19
982
19
982
19
982
3
72
13
986
10
741
10
741
17
956
1
666
15
1034
6
15
16
71
3
1172
14
584
2
1220
10
1034
10
1034
14
488
15
96
15
96
1
694
3
1045
6
1054
12
811
16
68
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
7, revoted
pubshed n
Nonacquescence notce In the case of . . a Co , Inc (C - 6)
cquescence does not reate to deductbty of chartabe contrbutons.
II-2, page
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
25
cquescencbs Contnued.
ammon, ram ., estate of
ammond, . :
ampton Co
ampton Cotton Ms
ancock Constructon Co. et
ancock nttng Ms
aney and wfe, dgar P
any, W. W
ansen, ans C, estate of
ansen, . fred, e ecutor..
anson, Maud astngs
ardng Gass Co
ardy, George W
arme, enry
armony Grove Ms. Inc
arnsberger s, Inc
arre, fred, e ecutor
arrs, en
arrs, Car C
arrs, Chares L.. admnstrator estate of Wam
L. arrs, deceased 1
arrs, . L
arrs, Sam
arrs, Wam L., deceased, estate of
arrs musement Co. of Mchgan
arrs Co.,
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 at Cap Co -
artey, arry
art-Wood Lumber Co
aske, George S., estate of...
aske, . mory, estate of.. -
aske, athryu M., e ecutr George S. aske
estate
ass, . S.1 -
astngs, ce M
astngs, O.
atcher, . S. -
atze fc ueher, Inc.1 -
aupt, oseph
ausmann, Lous, e ecutor 1
ausmann, Theresa R.,
averstck, dward
estate (
Docket
No.
10914
11163
2054
589
11758
16520
3486
8516
6744
6744
5109
19708
7981
38855
4500
7053
25783
10980
33872
4426
10430
8614
9623
4426
17841
17842
12123
13998
22502
113
3884
6184
834
9032
12781
3916
2021
7400
27725
2984
4335
7102
4335
14817
5106
5107
28742
9501
11454
5781
5931
5931
9882
oard of Ta ppeas.
oume.
10
10
2
2
11
15
5
6
6
6
8
15
5
19
2
7
20
10
19
5
14
11
5
15
16
10
3
5
2
7
2
7
16
5
2
6
2
13
8
8
18
10
6
5
5
13
Page.
43
1036
302
592
1039
613
860
860
670
621
981
376
1200
250
103
1374
895
41
1259
871
190
705
297
216
1062
1019
1171
1300
1300
1352
670
670
632
1297
199
199
837
state ta decson.
1 cquescence reates to second ssue of decson.
35942
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
26
cquescenceb Contnued.
Ta payer
Docket
No.
oume.
awkns, C.
awks Nursery Co
ayes Te te Co., Inc
aynes, Chares ., e ecutor
aynes, rederck
aynes, R. R., estate of
aysett, ohn
azett 4 Moss. Inc
earn, en|amn ., estate of
earn, the D., admnstratr
eath, . --
eathcote, ruce, admnstrator 1
eaton Constructon Co., C. T
ecker, Dane
eddon, Chares
efetz, ascha
eneman Lumber Co
ed, ntonette ., e ecutr of estate
D. ed
ed, Wam D., estate of
eer et a., . S., e ecutors
eer ros. Co.. --
eer Too Co
cman, Isaas W.. estate of .
enderson, Mrs. ce D., e ecutr
enderson, |r., Mrs. S.
enderson, |r., S..
enderson Co., . C
enderson Cotton Ms
enderson Overand Co., Tho
enderson Tre Rubber Co -
ennger et a.,
enrv, ohn
enrv, Matte ., conservatr
enry R. D
enser rewng Co., oseph
epburn, onzo arton, estate of
erad-Despatch Co
erenden, en C, estate of 1 -.
ermabrecht, ohn
eron Meta ed Co
ess ros
W.
ess udng Co.
essenbruch et a., erman M., e ecutors..
essenbruch, Ida M., estate of
euben, Inc., G.
ewett Gran Provson Co. of scanaba.
e ter, Percy
eydrck, L. C
eyn, Otto P
bbard, Spencer, artett Co
418
1469
844
9584
7247
9584
13119
2247
10285
10285
6015
11141
11944
13695
7735
15914
9237
10175
1988
1988
4575
9073
9072
4575
1875
1917
1916
5272
5504
4776
11953
205
6375
7268
3545
11874
9651
4556
6983
752
3236
8039
13936
19251
20345
39003
17907
17907
13125
18683
7878
4120
5503
3788
7431
6
1
4
6
7
6
12
2
9
9
7
8
11
17
15
15
11
3
3
10
9
9
10
2
2
2
6
4
4
12
9
6
7
3
12
8
4
5
6
2
7
16
10
10
13
14
8
7
4
5
1 state ta decson.
1 cquescence reates to ssue as to market vaue on March 1,1913, of tmber owned on tbat date
cquescence reates to rst ssuo of decson.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
27
cquescences Contnued.
Ta payer
Docket
No.
oard of Ta ppeas.
oume.
Page.
ckory Spnnng Co
cko , Lee
cks, ohn ., estate of 1
cks, L. R. and R. ., dstrbutees 1
ggnbotham- aey-Logan Co
gh ct a., orace S., benefcares
ghand musement Co
ghand Land Co., Ltd
ghands Casket Manufacturng Co
et a., G. ., admnstrators 1
, . -
, . L
. Lena G ---
Uenn.eyer, . ., estate of 1 ---
cnmeyer, Mary, e ecutr estate of .
enmever, deceased -
man M. P. G-.
nckey, Raph L
nshaw, R
rsch Dstng Co., S
rst egev Lnseed Co. -
tchcock, abcrt
ochschd, erthod --
. -
R.
ochschd, arod
odges, red G.
oe Co., Inc.,
of rau Co. ..
of rau Co
offman, rnest Gustav, estate of.
offman, . C
oden Martn Lumber Co
ongsworth, Turner Co --
omes, Lea ., estate of
ot et a., ames ., e ecutors _-
ot, Robert L., estate of 1
ot-Grante Ms Co
ot Pad Ms, Inc., . M
oton Co., rank...-
ome enefca ssocaton
ome Industry Iron Works
ome State ank
ong-Cooper Co
ood, Chares
ooper, arry
opkns, ames Robert
opkns, Water L
ortenstne, . L., coadmnstrator
oskns, ohn
oskns Lumber Co., . S
ote Grunewad Co., Ltd
ote Patten Co. et a
367
367
6702
7253
7253
4691
6291
5316
2320
532
4220
1689
6215
5800
1862
1S62
2372
4193
33021
15816
7482
6107
3081
4058
. 3080
4057
7729
7216
6134
4636
7914
6611
826
656
7970
12636
12636
1784
8745
10261
19589
7991
14462
15000
6990
5271
32797
1476
3633
10241
2390
1593
5792
2
1
7
9
9
8
7
3
2
6
8
3
9
8
2
2
2
6
16
14
4
4
9
7
6
12
8

10
14
14
1
9
10
15
8
15
11
4
8
19
2
3
7
3
5
13
439
409
142
1226
1226
566
495
534
100
773
1277
761
132
1159
1322
1322
1265
312
1236
1073
1160
273
787
787
1353
1277
442
1067
1272
474
511
958
705
564
564
1246
1360
1317
1319
1267
121
896
1020
397
693
649
697
299
846
761
943
state ta decson.
1 cquescence reates to thrd ssue of decson
cquescence reates to frst ssue of decson.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
28
cqt|ebcencss Contnued.
Ta payer
Docket
No.
oard of Ta ppeas.
ote Wsconsn Reaty Co.
ouck Co., Ltd...
ouse errmann
ouston et Termna Ry. Co. .
ovey, Peter P
ovey Co., C. ...
oward Theatre Co
owe, red
owe, Thomas
ower Seaman, Inc
ub Dress Manufacturng Co
ub, Inc., The
ub Shoe Co
uber, Wam D
udson, Chares T.. estate of 2
uey, . L
uff, ndrews Thomas
ughes, ohn N
ughes Coa Co
ughes Co., d. S
ughson, rank C
ubert, dmund D., estate of 3.
ume, .
umphrey Co., .
umphres, C. C_.
.
unng Mercante Co
unncutt, Mary L
unt et a., the P., e ecutrces
unt, ohn ., estate of 1
unt, Warner D., estate of a
unter, Mrs. OUe
unter Coa Co
untngton Cearfed Teephone Co. and Sum-
merve Teephone Co
upfe Co., Inc., . Chr. G.4 --
urey, . W
uron udng Co
uron Portand Cement Co
utchng Lumber Storage Co.8
utchns Lumber Storage Co
utchnson, ames M
utchnson, Wam N
utchson, Chares 8
uttersche ruder Gemende et a., trustees, etc.
cquescence reates to thrd Issue of decson.
state ta decson.
state ta decson acquescence reates to Issues concernng checkng account, rea
fond.
cquescence reates to good-w and bad-debt Issues.
cquescence does not reate to that part of decson nvovng appcaton of yers
11755
22220
22221
8159
14090
30958
8494
1677
5448
16310
12489
12492
4196
283
3553
3554
1170
9975
3351
6132
336
9104
7142
6748
14120
6690
11294
11204
11027
15829
18498
3511
29821
15
3621
9801
9801
31968
6292
2503
358
9834
7339
18127
3334
4973
3307
7129
11284
11285
8053
15757
1186).
cquescence reates to deducton of
10
7
13
6
2
4
16
12
12
4
1
2
12
5
4
1
S
8
10
12
9
15
3
17
1
10
12
12
19
7
2
1
9
6
15
4
13
11
11
13
14
estate, and penson
(1 . T.
cost of wardrobe and traveng e penses.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
29
cqotescences Contnued.
Docket
No.
oard of Ta ppeas.
oume.
u ford, C. C
uyer 8
yams Coa Co., Ltd., et a., Robert P
ymans et a., dwn C, e ecutors 1
yme Pantng Manufacturng Co., Lous
I.
Inos Merchants Trust Co., e ecutor 1
Inos Merchants Trust Co., e ecutor estate of
Wam R. Manerre, deceased
Inos Paper o Co
Inos Smetng Refnng Co
Impera urnture Co
Independent etna Sprnker Co
Independent rewng Co. of Pttsburgh
Independent ectrc Machnery Co
Independent Lfe Insurance Co. of merca
Inde Noton Co.
Indana Creosotng Conne
Innes- ehney Optca Co
Internatona eddng Co
Internatona oer Works Co
Inter-Urban Constructon Co
Iron Cty ectrc Co
Iron Cty Improvement Co
Irvng ank-Coumba Trust Co. et a., e ecutors. ..
Irvng ank-Coumba Trust Co. et a., e ecutors .
Irvona Coa Coke Co
Irwn, enne I., e ecutr estate of Mary .
McCah -
Irwn, .
Irwn ue Co., . ...
Co., Inc., Rcub.
png Co.
c
Ives, omes
ack, Cec M
ackng, D. C.
ack s
on, nnette T7
son, Carone Mather, estate of 8.
ackson, George 7
34014
1357
1445
219
17895
2903
11204
3106
770
21180
16929
10588
25755
3242
2742
25295
1023
17777
3368
12733
2322
4387
6103
2138
9651
20055
23184
2547
9392
9030
59
3414
27780
31428
5646
14995
17662
4272
22561
9001
20303
9002
20
8
1
16
5
12
4
4
16
9
15
4
3
17
3
1 .
7
14
3
4
4
4
8
ts
18
2
8
6
1
1
13
5
13
9
18
11
15
11
39
13
217
762
910
818
103
1227
1410
713
521
870
1116
757
90
247
982
863
283
1030
1178
305
833
897
298
875
687
303
45
1055
981
934
726
312
454
1257
1001
1LT)7
1 state ta decson.
1 state ta decson acquescence reates to Issues concernng checkng account, rea estate, and penson
fund.
1 cquescence reates ony to ssue 1 n decson.
1 cquescence reates to oard s nterpretaton of secton 245(b) of the Revenue cts of 1921 and 1924.
1 cquescence doe3 not appy to that part of derson reatng to appe of Guaranty Constructon Co.
(2 . T. ., 114S.
state ta decson acquescence reates to ta abty of 415 shares of Peeress Push Manufacturng
Co. stock and 499 shares of Otto aeger Son, Inc., stock.
T cquescence does not reate to tentatve ta ssue.
1 state ta decson acquescence reates to deductons for attorneys Ices and e ecutors commssons.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
30
cquescenceb Contnued.
Ta payer
oard of Ta ppeas.
No.
oume.
Page.
12944
12945
15996
12
702
17856
29452
18
875
9003
11
1257
9000
11
1257
3089
9
734
10742
11
496
20055
16
897
2509
13
764
4068
2
1071
21943
17
205
25783
20
103
92
1
659
10798
12
1165
14060
16
161
215
4
765
3222
3
1180
1533
2
540
5416
3
854
6801
9
1027
6802
9
1027
9047
10
736
8353
9
232
8352
9
232
7565
7
456
9877
8
992
11250
13
850
8259
5
253
1415
10
95
15301
8
108
9550
11
534
10748
8
857
3839
4
967
7442
I
229
3265
472
7441
10
229
f 7441
I 7442

229
6812
10
411
6812
10
411
9550
11
534
6870
7
556
3839
4
967
32226
15
1314
f 8466
10928

325
6352
7
1054
15298
12
1204
30694
17
366
2898
6
463
1647
2
93
6795

824
8218
ackson, ames .
ackson, Maron M., e ecutor 1
ackson, Ws 1
ackson Tnde
ackson Sanatorum ospta Co
acobs-, Wam M
aeger, Otto, estate of
ames, rthur Curtss
ames, . R
ames Manufacturng Co., D. O
ameson, . M., estate of
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 4
ohnson, . L
ohnson, |r., ohn ., estate of.
ohnson, ate, estate of
ohnson, Nes
ohnson, R. ., estate of
ohnson, Robert G., e ecutor
ohnson, Sarah L., estate of1
ohnson et a., Seymour, e ecutors 1
ohnson, Stephen O., estate of 4
ohnson, T. ._
ohnson, Theodosa, e ecutr
ohnson Locke Mercante Co
ohnston, . T. M -
ohnston, Mary rg, e ecutr 1
ohnston, W.
ohnstone, dward
ohnstown udng and Loan ssocaton.
ohnstown Democrat Co., Inc
oet-Norfok arm Corporaton
ones, . W., admnstrator
state ta decson.
1 cquescence does not reate to tentatve ta Issue.
state ta decson acquescence reates to ta abty o( 415 shares of Peeress Push Manufacturng
Co. stock and 499 shares of Otto aeger Son, Inc., stock.
state ta decson acquescence reates to vaue of stock
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
31
cqt|escences Contnued.
Docket
No.
oard of Ta ppeas.
oume. Page.
ones, Mrs. . W., estate of
ones, George C
ones, enry M
ones, ersche
ones Co., T. P
ones oow Ware Co
ones Lumber Co
ordan Marsh Co
osyn Manufacturng Suppy Co.
oyce- oebe Co., The
ume Reaty Constructon Co
ustus Parker Co
ahn, bert
ahn, ugene S
ahuku Pantaton Co.
aser, rthur
.
atenbach Stephens, Inc.
et a
amper, Lous
anawha Ctv Co
ansas Cty Southern Ry. Co.
ansas Mng Co
ansas Savngs Trust Co. et a., admnstrators
of estate of . W. Shuths, deceased
arges osery Co
arno-Smth Co
arr, dmund
artman, be
asco Ms, Inc
ass, Ma and enne
atz fe csthoff, Ltd.
aua Raway Co., Ltd
aufman, . R
aufman, Mrs. . R
aufman, Ltd., arry S
aufman, Samue R., estate of1
aufman, Straus Co
aufman, Una Lbby, e ecutr 2
aufmann, fred D., estate of2
aufmann, Raymond M., e ecutor 2
aweah Lemon Co
ay, Waace G
ay Manufacturng Co
ean, amton
eeer, Isaac P -
eeer rass Co
eeer Reaty Co.
een, erbert Ide
eenan, atherne P.2
eener s O, Natura Gas ue Co
1 cquescence reates to deducton from ncome of amortzaton of dscount, commsson, and e penses
on bonds sod n pror years.
state ta decson.
8218
4864
7325
12662
944
4294
14751
3275
4458
9809
4267
11758
13770
13842
10430
19156
1289
9426
19702
22231
6100
14630
12054
2835
1827
11384
14619
1525
13244
22355
1259
4707
11101
12811
12812
8154
11845
4698
2649
4698
10007
10907
4583
10102
26365
33608
10745
6379
6218
6218
22262
6352
7862
1
2
12
5
3
6
6
11
13
14
14
12
2
12
14
13
16
3
2
8
13
2
10
15
1
5
13

0
5
2
5
11
11
6
10
18
10
8
9
9
15
7
6
981
451
1286
1226
1218
48
1159
553
749
403
800
127
125
1259
977
609
1009
762
919
665
707
1253
767
449
635
174
359
1115
750
686
1180
1180
31
718
31
412
412
992
534
753
97
914
293
293
1243
1054
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
32
Ta payer
oard of Ta ppeas.
No.
o.ume.
Page.
21916
17
660
10489
12
383
2488
4
1240
16435
13
690
291
2
494
6741
6
990
6891
9
832
7036
9
834
3945
6
771
7092
8
1193
8365
10
141
1796
3
257
12394
15
624
32971
18
1049
7092
8
1193
32971
18
1049
6082
6
1068
8351
9
232
12198
14
931
523
3
659
523
3
659
5244
4
330
5244
4
330
19785
16
1372
7836
8
7837
/
nm
1030
7834
8
1030
1530
1
1019
410
2
63
19018
16
630
14337
14
603
1473
2
838
3182
3
1207
14531
9
1208
10805
13
786
15985
15
1114
15986
15
1114
10990
15
359
6931
4
1294
23937
18
571
11968
8
475
9942
9
502
8283
10
698
8283
10
698
6729
10
308
9695
4
1253
8315
6
884
12288
11
296
8392
8
981
8216
8
981
8409
8
981
8217
8
981
6760
3
1348
2879
3
755
3094
7
771
4482
3
669
, Inc. .
eeney, bert .1
eews Reaty Co.,
em . D
ekaha Sugar Co., Ltd
eer, Ida .
eer Mechanca ngneerng Corporaton
eev, arry P
eey, Thomas
eogg Commsson Co
ey, rmn L., admnstrator 1
ey, Dane -
ey, .
ey, Mare ., estate of
ey, M. W., estate of
ey, Over Warren, estate of
ey, T. eff, coe ecutor 1
esey, S. R -
eso, rgna
emper, ackson ., admnstrator
enefck, Nee, e ecutr estate of Wam ene-
fck, deceased
enefck, Wam, estate of
ennedy, D. ., deceased, estate of
ennedy et a, nne S., e ecutors
ennedy, ohn T
ennngton Co., R.
ennngton Reaty Co
enny ros. Co., The
enosha rut Co
ensngton Water Co
entucky ectrc Lamp Co
entucky Land, Gas O Co
esser, George ., estate of
etcham, . R
eystone Natona ank of Pttsburgh, Pa.
er, . L
er, W.
eser Son Co., Inc.,
by Car oundry Co
mer. George L
mba, Davd
ng, ar
ng, a Dav, e ecutr
ng, Robert Cy estate of
ng, Wam C --
ng Lumber O Co
ng-Parker, Inc
ngsey, Louse
ngston, George M
ngton, ammond L
ngton, O. M
ngton, W. W
ns, braham
rk Coa Co
rkcnda, . P., estate of ...
rtand ros. Co., Inc
cquescence In resut ony of decson.
1 cquescence reates to deprecaton and obsoescence ad|ustments.
state ta decson.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
33
cquescbnces Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
sse, Carone T.1
I a., orence L., admnstrators 2.
ster. Wam ., estate of2.
ster Land Improvement Co. .
au, an Petersom, Dunap, Ino
auber mbrodery Works
eeman Dry Goods Co..
en, orence L.4..
en, Isadore
ne, enry, e ecutor
ng, Mary Cark
se, mer
ug Smth Co --
napp, tte -- -
napp ros. Co
ne, ohn
nffn, Leonard.-
noerschd, . C
nowton, Chares C, estate of
nowton, Isabee ammond, admnstratr .
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., Isse
oee, Wam .
oen ros., Inc
oepf, oseph O
oynos Co
ongsberg, Nathan
onod, arbara
ossar Co., Inc
ountze, nne P
ountze, Luther, estate of
rauss, e ander
21788
3707
11986
18061
3707
11986
18061
12355
6881
12433
2874
4004
4005
6061
6102
10157
10430
16433
1495
11318
5191
2775
19430
7420
7959
20503
18884
18885
18886
18887
1 ss.ss
18884
18885
18886
18887
18888
2441
2936
2936
8844
4384
3308
322
6093
712
14006
4130
6016
9670
18400
11878
16398
3611
15
11
1270
979
11
979
9
671
9
1335
11
779
2
369
6
617
14
1259
18
249
1
1048
10
1234
18
966
7
790
13
1300
12
1306
5
1274
16
68
19
947
19
947
2
1107
3
143
3
143
12
431
5
9
4
1
m
7
917
1
417
13
784
4
520
4
1027
9
1194
16
952
17
928
17
956
5
799
1 cquescence reates to deducton of fees pad to attorneys.
1 cquescence reates to Issue as to whether the Income reazed under agreements of December 14,191S,
to 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 reates to a ssues e cept ssue wth respect to quantnn of aowance of amortzaton n
1918 of costs Incurred n 1919.
cquescence reates to a ponts of decson e cept that pertanng the rear 1919.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
34
cqotbscences Contnued.
Ta payer
oard of Ta ppeas.
oume. Page.
repke, . C.
reg Tannng Co
ru, rancs
uhr et a., urgen...
uhr Sons, urgen.
unke Co., Inc
Ma .
urtz
urtz, Robert
urzman, Samue
ye, Wam
Lacey, Mrs. . L
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
La Montagne s Sons, Inc.,
Lancaster Lens Co.
Landreth Co., . .
Lang, ohn
Lang room Co
Langdon, arret
Langenbach, dward
Langey Co., W. C
Langey Mchaes Co
Lanter, ernard P., estate of 1
Larrowe Mng Co
Larsh, D. L
Lash Co., Lee
Lassen Lumber 4 o Co
Lasster Co., Robert G
Latham, een, admnstratr 1
Latham, . ., estate of1
Lathrop Co., Inc., C. P...
Laurens Trust Co
Lautz Marbe Corporaton
Law Credt Co
Lawer, R. ., estate of
Lawer, Mrs. R. ., e ecutr ...
Lawrence, . M
Lawson, ohn
Lawson, W.
Leach, Mary W
Leach, W.
Lee, Mrs. eanne
Lee, ohn C
10716
3318
16985
13436
13436
3519
11411
15960
11412
15959
10659
16701
25156
12368
15068
2010
1323
14242
9346
8366
10610
11603
15835
14370
8281
9842
2131
2567
6420
20202
2733
12621
6190
3431
15882
21479
21479
6603
3930
6674
508
19395
19395
13566
2284
4510
13416
18690
7300
5985
5984
7
4
10
12
12
3
8
15
16
11
14
2
8
2
10
16
10
11
15
12

2
2
9
23
6
8
16
16
16
5
I

5
17
17
13
2
12
16
16
6 1005
6 1005
1 state ta decson.
oquescence reates to ssue whether Invested capta or 1919 shoud be reduced on account of the 1918
defcency barred by the statute of mtatons.
cquescence reates to a ssues n both decsons e cept nvested capta queston n d
In 11 . T. ., 1.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
35
cquescences Contnued.
Ta payer.
oard of Ta ppea3.
No.
oume.
Page.
7676
6
1132
10911
10
283
7309
6
4
3847
3
193
6607
7
460
19751
15
1401
4867
4
133
16617
15
414
10329
8
1006
5744
7
99
7768
8
974
7769
8
974
849
1
1051
4863
16
250
1083
5
1206
14771
14
830
3156
4
1221
3157
4
1221
13725
13726

14
139
29404
24356
28333

549
6056
4
74
5846
13
871
10587
8
1150
6444
5
892
7435
8
298
6832
5
689
25262
19
99
20462
18
337
20462
18
337
3247
3
422
9987
10
536
9918
16
61
3097
2
788
4639
12
850
7109
15
124
5902
6
41
7416
4
910
2212
2213

617
6257
5
778
4398
6
181
3760
4
155
6842
4
1181
4133
9
447
14501
15
149
8805
8
285
2235
2
308
3489
5
169
38
2
740
13790
14
703
6725
9
24
6800
12738

1390
Lee. Matda oz
Lee Co., Wson
Lefang, . M. --
Leggett. Davd G., deceased, estate of 1
Lehgh udng Corporaton
Lehgh aey Coa Saes Co
Lechner ordan Co.
Leter, Lev Z., estate of.
Leghton ros. Prnt
Leghton Suppv Co.
Leand, enry M
Leand, Wfred C
Lembcke Co., Inc., ernuth..
Lembeck, Gustav W
Leno Land Co..
Leon Iron Co
Leonard, rthur
Leonard, Chares
Co.
tng Co.
ros.
Lester, George
Lester, Lucy C, estate of
Letts, rthur, estate of
Levec, nna L. Stark, e ecutr 2.
Levn, N
Levne, yman
Levne ros. Co., Inc.
Levnsten( .
Levy, che, estate of1
Levy et a., oseph P., e ecutors 1
Levy Co., Ma
Lews, T.
Lew-s Co., Chares C
Lews- a Iron Works
Le ngton Reaty Co
Levdg, . ---
L ommedeu Sons Co., Chares .
Lbby oun, Ltd -
Lberman, Meyer.
Lberty gency Co
Lberty Iron Works
Lberty Lght Power Co
Lckumovtz, Morrs
Ldstone Co., R. D ,
Lebes Co.,
Lebman-Swaney Reaty Co...
Lfe Savng Devces Co
Lggett, . T
Lhue Pantaton Co., Ltd
Ly, . T.
Lmbcrt, Chares P., estate of.
Lmbert Co., Chares P -
1 Nonacquescence notce n ths case, pubshed n Cumuatve uetn I -2, pace 6, recaed.
state ta decson.
1 cquescence reates to ssues 3, 5, and 8 n decson.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
36
cquescenceb Contnued.
Lncon, W. P--
Lncon Cotton Ms.
Lndahr Santarum, Inc
Lndsey-Long Coa fe Lumber Co.
Lnn, Gus
Lsk Manufacturng Co., Ltd.1
Lster, . C
Lster, ames R
Ltaker, . D -
Ltte, Theodore W
Lve Stock Natona ank
Lvermore, Norman
Lvermore Co., Norman
Lvngston, efferson
Loyd, ugustne M
Loyd, dward
Loyd, Wam S
Lobsenz, esse
Locke, Thomas
Lockpot Paper Co
Locks and Canas on Merrmack Rver, Propretors
of the
Lockwood, R. ., estate of
Loeb, Car M__
Loeb, uus
Loetscher, Chrstan, estate of
Loetscher et a., ohn ., e ecutors 1
Loffand, . M
Loffand, T. S
Lofts, . M. and . S., admnstrators
Lofts, S. T. ., deceased, estate of
Logan ryan
Lonergan, ohn
Long, Davd T
Long, M.
Long Isand oundry Co., Inc
Loose, a C., e ecutr
Loose, acob L., estate of
Lopcr, . T
Lord, se
Lord ushnc Co -
Lord Motor Car Co
Lorng et a., ugustus P., e ecutors
Lorng,
Los ngees Cemetery ssocaton
24354
14541
17624
30395
1619
11279
11669
1935
10031
11438
19050
13732
3411
27273
10699
2467
6423
6422
6424
30142
12091
12092
12093
29788
10616
4872
299
3843
3082
9191
9192
3083
4061
14325
14325
13425
13426
7581
7581
4008
6441
20138
7721
2726
8699
8699
10080
17189
10597
12124
4718
39872
12069
293
19
855
16
680
4
1245
5
243
4
76
11
179
15
1048
18
699
3
475
19
881
10
11
7
413
11
428
11
428
18
1184
15
82
15
82
15
82
17
81
8
534
9
601
1
242
4
1269
8
787
8
787
14
228
14
228
10
14
10
14
6
725
6
725
4
12
4
1209
17
584
8
737
2
464
15
169
15
169
12
164
9
807
7
86
5
818
20
440
15
50
2
495
1 cquescence reates to nvested capta ssue.
cquescence reates to frst and second ssues of decson.
state ta decson acquescence reates to a ssues, e cept those nvovng deductons for e ecutors
commssons, attorneys fees, and msceaneous admnstraton c
state ta decsons.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
37
cqussc NC a Contnued.
Ta payer.
Los ngees Towe Servce Co
Los ngees Trust Savngs ank
Loughborough, .
Lousana ockey Cub, Inc
Lousve eneer Ms
Loveace- ubanks Lumber Co
Loveand, Russe
Lovett, oanna, e ecutr estate of Thomas
Lovctt
Lovett, Thomas ., deceased, estate of
Lowe, mv, estate of 1
Lowry. . unt
Lozcr, Charotte C, estate of 1
Lube, aron D
Lubc, braham P
Lube, acob
Lube, Morrs M
Lube, Samue L
Lucas. M
Luce urnture Co
Lukns, . W
Lupton, . T -
Luton Mnng Co., Inc
Lynch Constructon Co
Lynes, my
Lyncs, Samue
/ 8866
23391
2818
8746
14654
10180
15235
1926
2940
2940
39872
11972
7513
26187
26188
26186
26185
26184
12068
6536
2544
31855
13680
3375
7089
7090
7486
11380
Lyon ard Co., Ie
M.
Mabe evator Co.5
Mac dam oster, Inc
MacDonad- atchuck Prntng Co.
MacRae, ugh
Mackay, Mton
Mackenze, R. ., estate of 1
Macke, osephne
MacMan, . R -
Macman Co., The
Madson edze State ank
Maer, Mrs. W. N
Maer, W. N
Magee urnace Co.s
Magnus, Mabee Reynard, Ino
Magure state, Ltd., ohn
Mane Dary Co
Mase, |r., Nchoas
Manckrodt, sr., dward 4
Manckrodt, sr., dward, estate of
Manson Co., . R. -
Maone, dwn
Matter, Maurce
Mande ros
Maney Mng Co
oard of Ta ppeas.
1110
10443
279
4284
19271
6833
11141
20936
6602
5240
1127
7854
7855
5600
119
10390
4675
2422
1750
11032
13719
5225
14502
1977
7704
oume.
9
6
10
13
12
10
10
3
3
20
11
7
16
16
16
16
16
13
0
3
19
12
3
7
7
11
8
19
14
4
1
7
7
11
1
17
4
a
4
14
14
6
14
4
14
state ta decson.
Nonoquescence notce pubshed n Cumuatve uetn I -2, page 0, recaed.
cquescence reates to second Issue of decson.
cquescence reates to frst Issue n decson.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
38
cqubbcevcbs Contnued.
Ta payer
oard of Ta
Manerre, Wam R., deceased, estate of.
Mann, P. L
Mannng, Chares N
Mannng Co., L.
Manomet Cranberry Co
Manora Deveopment Corporaton
Mante, Lee
Manve enckes Co
Marbe Shattuck Char Co
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
rks, Wson
rboro ertzer Co
arn Grocery Co
arqusee, ack
arsh, . W
Marsh ork Coa Co
Marsha, dward
Marsha Spencer Co
Martn, .
Martn, Darwn D 1
Maryott Spencer Loggng Co. et a
Mason Cotton M Co
Mason Machne Works Co
Massachusetts Protectve ssocaton, Inc
Massengae dvertsng gency
Mather Paper Co. 1
atheson, Wam
athew- , W. ---
aths ros. Co
attage, Chares enry
aurer, Chares ., estate of.
aury Mng Co
Maus, nna R. and L. M
Mayer, C. P
Mayer, enry, estate of
Mayer s, Inc
Mc ester- dwards Coa Co
Mc rde, . T., estate of 2
Mc rde, Rose L., admnstratr
Mc rvde Sugar Co., Ltd
McCabe Co., M.
3106
4
103
9123
8
221
8111
7
286
10230
10
633
341
1
706
611
1
575
5808
13
145
215
4
765
14091
1
14092
1
657
32033
1580
6
368
2242
4
867
544
1
1240
.6208
10
763
17780
10
763
3799
10
763
17646
10
763
3858
10
763
17646
10
763
20287
8
1100
10806
7
895
10875
7
895
13912
14
87
7132
6
729
3797
3
82
15384
15
1080
34364
18
597
8419
12
1376
10453
11
685
20308
10
1140
4574
7
454
10617
12
267
3001
6
472
3341
10
1221
448
1
449
289
3
745
19803
18
810
1496
2
26
6514
11
973
1378
3
1
26507
18
674
10032
13
1133
3861
9
338
2116
3
242
14551
13
921
10853
10
1189
1322
3
566
26776
16
1239
18325
37209

1164
3774
6
181
4490
10
1368
4885
8
435
4885
8
435
11102
13
686
21
1
T
Nonacquesccnce notce pubshed n Cumuatve uetn -, page 7, recaed.
1 state ta decson.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
39
cquescen-ces Contnued.
McCah, ugene P., admnstrator estate of Mary
. McCah
McCah, Mary ., estate of...
McCaum, . -
McCann Co., Inc., . ...
McCarthy, ohn rancs, estate of
McCarthy, Water R., e ecutor
McCarthy Sons, Inc., ohn
McCauey Co., C. R
McCoud, Chares
McCogan, deade, admnstratr 1
McCogan, Dane ., estate of 1
McConne, . ... -
McCormck, sr., ohn
McCormck ft a., Robert . --
McCoy- randt Machnery Co
McCreery, enry
McCreery, Water ., estate of
McCutcheon, oward
McDonad, .
McDonad, Mary ., e ecutr 1
McDonad, Mrs. Lvde
McDonad, Patrck ., estate of 1
McDonne, dward
McDonne, . S
Mc etrdge, dward P
Mc etrdge, Georgana
Mc etrdge, Martha G
McGnns, ob
McGynn, . P
McGown- oshee Lumber Co.2.- -
McGrath, . R -
McGrath Co., Wam. --
Mcntosh, Rchard
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
McMnnve Manufacturng Co.
McMun, M. ., estate of
McNaghten et a., Macom, e ecutors.
McNe, Robert . ...
McReynods, oseph.
McWams, . W._.
Mead et a., Wam W., e ecutors.
Meade Cyce Co
Meadow ork Coa Co
oard of Ta ppeas.
No.
oume.
Page.
2547
2
875
2547
2
875
14311
14
805
6578
14
234
8277
14
251
17334
9
525
17334
9
525
354
1
1116
1273
1
937
20405
13
311
3147
10
958
3147
10
958
3211
6
116
22235
16
714
1880
1
1061
1605
2
430
10733
8
909
3557
4
967
19247
18
468
24401
25554

834
25158
16
485
3042
2
1295
9336
9
1340
3042
2
1295
6194
4
49
13546
6
685
11503
9
766
11210
9
759
11209
9
763
6647
4
209
4714
4
1005
10446
10
961
495
6
1089
5317
10
177
15199
16
1400
9832
9
301
121
1
326
2650
6
412
4048
3
1060
10804
13
885
1534
4
487
2221
4
266
3841
2
797
38833
19
486
8015
12
425
5846
13
871
17261
16
479
21189
31121

331
14977
25979

329
7228
6
752
5756
10
887
9770
9
835
1 state ta decson.
a cquescence reates to thrd ssue of decson.
cquescence reates to deducton of oss on account of worthess stock.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
40
c T sc NC Contnued.
Ta payer.
Mechancs ank of rookyn
Mechancs Reaty Co., Inc., and Mechancs Reaty
Co. of Pennsyvana
Megcath, 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
Mcpham, George S
Mercante Trust Co., e ecutor1 -- -
Mercer, ohn
Merchants Natona ank
Merchants Transfer Storage Co
Mcrckens, ugust
Meredth, . T.
Meredth G. W., estate of
Mereen- ohnson Machne Co
Merges Co.,
Merat, Chares
Mcrke room Co
Mcrren, . .5 -
Mertz, dward P
Messenger Pubshng Co
Mesta Machne Co
Metare Cemetery ssocaton
Meta Crafters, Inc
Mctasap Chemca Co
Metcaf, dwn D., estate of
Mctcaf, Morrs
Metro Pctures Corporaton of New ngand4
Metro Pctures m change of Pennsyvana
Metropotan Laundry Co
Metzger.L
Menrer Stee arre Co., Inc
Me can Teegraph Co.5
Meyer, nton I
Meyer, erman ., estate of
Meyer ro. Co.,
Meyers Machne Co., Ward
Meyrowtz, m
Mam each Improvement Co
Mche, George
Mchgan Con Lock Co
Mchgan Lthographng Co
Mchgan Trust Co. et a., e ecutors
Mcke, Tom ---
Docket
No.
9755
2351
7119
2815
9248
7118
3098
3098
2100
7623
5699
1081
9528
8233
8179
30906
10108
1540
4478
3531
11640
12438
10594
4953
19847
5695
1569
2841
437
19842
13569
13348
25479
4437
9682
7749
9093
5737
1062
5384
35796
3241
14869
439
4368
1423
6725
440
oard of Ta |
oume.
1 state ta decson.
state ta decson acquescence reates to Issuo regardng ta abty of proceeds
e cess of M0,000 e empton and ssue as to bequest of works of art to or for,the use of the
St. Lous, Mo.
cquescence n decson regardng promssory note and proceeds of o runs.
cquescence reates to ssues nvovng offcers saares and ega e penses.
cquescence reates to a Issues e cept as to tentatve ta .
2
5
5
5
6
6
6
3
6
7
3
13
6
6
17
7
2
9
5
11
9
3
18
5
2
12
4
15
12
13
16
11
1
2
5
7
10
3
4
4
18
3
14
5
2
1
9
5
of fe nsurance In
Cathoc Cathedra,
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
41
cq n SC NC S Contnued.
Ta payer.
oard of Ta ppeas.
No.
oume.
Page.
1125
1
1145
27
1
311
28889
14
200
709
2
292
1983
2
296
25000
19
423
2933
5
121
3439
9559

625
10638
9
1404
840
5
294
1596
3
726
3465
7
921
4469
6
401
4397
11
854
4397
11
854
17002
12
702
20267
15
13
10123
7
785
7560
5
1060
1028
3
1016
19224
17
380
19224
17
380
3424
13542
10
936
21024
8163
16
75
10579
10
521
468
1
588
388
2
505
10163
13
1303
6284
6
151
10351
10
1311
7597
10
1001
10891
11
731
27862
17
1242
3552
3
163
7124
8
1224
8700
8
368
9080
17824
19
152
12408
10
588
9235
11
934
11590
13
929
13405
12
158
11396
9
16
3310
6
172
2543
2
743
28583
17
1308
8675
6
385
8674
6
385
10542
13
864
14953
1 8
14
1185
3544
749
Mddeton Compress Warehouse Co.
Mdand Coa Co
Mdand Natona Lfe Insurance Co..
Mdand Refnng Co
Mdand aey Raroad Co.1
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
Mer, Day b Co
Mken, George W., estate of1
Mng Moore Mercante Co
Ms, Lucy M., estate of2
Mton, George ., estate of
Mton, |r., George ., e ecutor
Mwaukee rass Manufacturng Co
Mwaukee Woven Wre Works
Mner rees Lumber Co
Mner Lthographng Co., . C
Mnneapos Sash Door Co
Mnneapos Syndcate
Mnnesota Cement Constructon Co
Mtche dvertsng gency, Inc
Mtche uto Co., . P...
Mtten, Robert
Moberv ue Transfer Co.
Mobery O Co
Mobe Devery Co
Mobe Rver Saw M Co
Mobe Towng Wreckng Co.-
Mogg Coa Coke Co
Mone Dspatch Pubshng Co
Monarch Cooperage Co
Monarch ectrc Wre Co
Monk, enry
Monroe Cotton Ms
Monroe urnture Co., Ltd., et a
Montgomery, Lawrence
Moon, nne
Moon, O. L
Moore, nna ., e ecutr
Moore, George
Moore, .
cquescence reates to Issues 2 and 3 of decson.
1 state ta decson.
35942 31 1
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
42
cquescence 8 Contnued.
Ta payer.
Moore, L. C.1
Moore, Tom ( ayette T.)
Moore, Wam, estate of
Moore Stave Co., Lucas
Moore Scrver Co
Moores, arry C
Moorhou6e, braham, estate of
Moorhouse et a., Mary zabeth, admnstrators ..
Moors, ohn
Mooyer, Chrstan, estate of
Mooyer, N a garet ., e ecutr estate of Chrstan
Mooyer, deceased
Moorcfed and wfe, W.
Moreand Co., Thomas
Morgan, Caud
Morgan, ohn
Morgan, Water G
Morrs, omer P
Morrs, ohn T
Morrs aey Stee Co
Morrs Cummngs Dredgng Co
Morrson Wooen Co -
Morrson-Merr Co
Morsman, dgar M., estate of4
Morsman, |r., dgar M., admnstrator.
Morton, . D
Mosby Co., Inc., .
Mosentha, Php ., estate of
Mosentha, Water ., e ecutor
Moser acker, Inc
Mosher Manufacturng Co
Moser, M.
Moser, Moses, estate of
Mossberg Pressed Stee Corporaton
Mossman, Yarnce Co.
Ice Co.
Mountt
Mt. ernon Car Mfg. Co..
Mt. ernon Natona ank.
Movsc, Sdney G
Mudd Motor Co., Ray ...
Mueer Metas Co
Mur, ames S
Muns, Wam . .-
Mutbestos Co
Mumper, ewngs
Mungcr, L. S
3709
13907
18273
10542
5146
678
4209
5101
5101
1021
3404
3404
5721
18367
6290
10978
3449
6510
6525
16604
9492
9596
9543
4358
32075
17660
32075
3559
2781
6994
6994
4475
1 880
5304
17895
8757
3269
11076
11459
20512
14207
237
5967
1192
4395
3648
13917
7598
14053
28479
11
19
13
6
2
3
8
8
1
2
2
4
16
7
10
5
15
9
10
10
2
14
13
14
6
6
12
12
4
7
5
16
9
17
13
2
4
3
3
3
14
6
13
16
979
140
864
1211
368
301
964
964
868
723
723
394
858
495
1138
1035
1273
260
205
351
S
489
108
415
108
1295
722
365
365
1021
187
674
762
1161
45
1246
810
581
834
629
169
165
426
1060
977
168
1 cquescence reates to ssue as to whother the ncome reaze under agreements of Deo. 14, 1918, 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.
1 cquescence reates to deducton of e pendtures for archtect s sorvces n 1329 and 1021.
state ta decson.
state ta decson nonacquescence notce pubshed n Cumuatve uetn 111-1, page 57, re-
caed, n so far as same reates to ssue 2 of decson.
state ta decson nonacquescence notce pubshed n Cumuatve uetn III-1, page 57, recaed.
cepton of
cquescence reates to ssues decded adversey to the Commssoner, wth the e eept__
Invovng deducton of tentatve ta es n determnng the earnngs avaabe for payment of dvdends n
1818 and 1919.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
43
cqt escencbs Contnued.
Ta payer.
Docket
No.
oard of Ta |
oume.
Munger, Trude T...
Munn ote Co.
Munsey Trust Co.,
Munson, Caros W
Munson, dgar, e ecutor estate of arret . Curts,
deceased
Murchson Natona ank
Murphy, .
Murphy, Ray Sater, benefcary
Murphy Transfer Storage Co
Musseman, C.
Musser, R. C
Mutua Chemca Co. of
Mutua Cotton Ms Co
Myer Thread Manufacturng Co., enry
N.
Nabors O Gas Co
Nace, ruce ...
Nartzk, uus ., estate of
Nathan, Morrs, estate of1
Natona ank of atmore
Natona Casket Co
Natona m Pubcty Co
Natona Gauge qupment Co
Natona Grocer Co
Natona Industra coho Co
Natona Land Co
Natona O Products Co
Natona Pano Manufacturng Co.
Natona Ppe oundry Co
Natona Pneumatc Co
Natona Sash Door Co
Natona Straw Works
Natona Takng Machne Saes Corporaton.
Natona Tea Co
Nava Stores qupment Co
Nazareth Cement Co
Neapotan Ice Cream Co
Ne, ames
Neser, C.
Nekonegan Paper Co
Neuberger, Ma and Rudoph
Neusteter Sut Co
Nevns, rank
Nevns, rank ., admnstrator
Nevns, Thomas ., estate of
Newbod Son Co., R. S
New Century Coor Pate Co
Newe, ohn T...
Newyn Coa Co
Newman, Lews D
Newman Theatre Co
16897
13819
27766
16562
442
608
7137
26472
8191
11554
160
4781
10083
16413
3641
7962
10578
4316
11448
3844
19982
1807
13413
562
4853
11130
13570
3333
20486
32997
3651
5788
5065
5272
23189
13003
2446
11793
9290
11796
21064
3035
3036
4001
3344
3350
3350
5698
10986
24094
41675
9753
19138
3694
16
14
17
18
3
1
9
7
1
8
12
15
2
7
12
8
12
3
16
4
14
1
7
10
12
11
19
5
5
16
5
17
16
4
8
8
18
16
8
12
12
12
7
10
17

9
4
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
44
Ta payer.
Co..
Newman, Wam C.1
Newmarket Co
New Oreans Can Co
New Oreans, Te as Me co Ry. Co. .
News Leader Co
Newton, .
Newton, W.
Newton Cotton Ms
New York ower Co
New York, rookyn fe Manhattan each Ry.
New York, Ontaro Western Ry. Co.
New York Takng Machne Co
Nagara Searchght Co., Inc
Nce a earng Co
Nchos, . M
Nchos, ohn W. T., estate of
Nchos et a., George, e ecutors
Nchos, Roy
Nchos Contractng Co
Nckey, . ., estate of
Nckey Sons, . .
Nckev, S. M._
Nckey, W.
N on, ate I
Noe, Rchard
Nokoms Cotton Ms
Noan, Caude
Node orst Co.
Norfok Western Ry. Co .
North mercan Mortgage Co.5
North mercan O Consodated 0
North Iowa rck Te Co
North Mc estcr Coa Co
North Street Trust
Northeastern O Gas Co __
Northern ote Co
Northern Mchgan Transportaton Co.
Northern Natona ank
Northern Trust Co. et a., e ecutors..-
Northern Trust Co., e ecutor 7
Northwest Lumber Co
Northwestern States Portand Cement Co. .
Northwestern Yeast Co. L
oard of Ta ppeas.
No.
oume.
Page.
G530
10
158
1489
2
537
11994
7
1175
400
6
436
33075
18
1212
9626
7
1153
9627
7
1153
10731
12
176
3861
9
338
4945
3
606
974
1
1172
12363
13
154
9505
10
922
2109
5
484
12623
15
1155
9599
10
919
9599
10
919
24016
17
580
13399
15
102
1961
3
173
1235
1236
1237
3
173
1238
1239
1967
3
173
1962
3
173
1186
2
524
3223
3
1180
4557
2
1205
27682
16
1233
9867
12
417
3601
3
597
15798
18
418
8714
16107

68
5655
10
1290
6831
5
200
10545
6
947
2231
3525

332
2768
3
1099
3168
3
255
16691
Id
608
4316
8
685
7127
9
90
10650
15310

1111
5763
10456
t
835
1511
5 232
cquescence does not reate to deducton of amount of bad debt ascertaned to be worthess and charged
ot In 1920.
cquescence reates to second ssue of decson.
Revokes nonacquesoence pubshed n Cumuatve uetn II-1, page 39.
cquescence reates to thrd ssue of decson.
1 cquescence reates to ncome from deprecated vaue of guders.
8 cquescence reates to determnaton of co3t and vaue of o propertes and Improvements thereon for
Dvested capta and depeton purposes, and mathematca cacuaton of nvested capta.
1 state ta decson acquescence reates to trusts of 1912, 1919, and 1921.
cquescence reates to frst, second, thrd, fourth, and s th ssues of decson.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
45
cqt|ebcen ces Contnued.
Docket
oard of Ta ppeas.
No.
oume.
Page.
5122
4
697
19038
16
19038
16
1115
7720
6
56
7719
6
56
9
1
261
18486
16
519
8393
8
981
/ 13042
10
682
1 25747
12
1195
9630
8
521
3114
6
1045
1060
1
1021
12471
18
840
16632
13
1230
11643
11
608
4184
3
1039
30377
12
702
7888
15
273
13600
17
1199
6023
4
1207
15149
14
911
12660
17
1127
2824
12
203
8718
15
560
9622
8
826
532
6
773
532
6
773
1460
5
889
1908
1
1149
9S22
11
101
22421
18
1036
5185
4
78
5185
4
78
7922
9
567
9977
7
1156
3317
1
14729
6
1215
15792

20399
11
101
28294
17
368
5588
9
249
12900
14
1403
3396
3
141
10493
8
382
14690
12
870
4711
7
882
7520
6
358
19402
12
769
4494
5
651
19366
15
870
3946
2
489
North wood Co.,
Norton et a., ram S., e ecutors ..
Norton, ames ., estate of 1
Norve, . R....
Norve, Mrs. . R
Norwood, Caef Co
Noyes, Chares R., estate of
Oates, Mrs. Omer
O ren et a., anche, e ecutors
ther nsh Corporaton, oseph
ccdent Guarantee Corporaton, Ltd..
O Connor Co., .
Oconto as Motor Car 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 rass Co
Oho Grease Co
Oho Sheep Woo Growers ssocaton Co
Okahoma Operatng Co
Od armers O Co
Ods, Mard D ...
Oeet, Israe
Onger ghanders, Inc.-
Onger Mortuary ssocaton
Osen, ohn
Osen Water Towng Co
O Meara, C.
O Nea, en|amn Pascha
O Ne, ohn, estate of 1
O Ne, |r., et a., ohn ., e ecutors 1
O Ne Machne Co --
Oppenhemer, Leon
Opperman Coa Co
Orando Petroeum Co --
Orr, en|amn
Orth, rank L
Ortsefen, dam 1
Osage Steamshp Co., Ltd
Osborne Cark Lumber Co.
Ostrow, Samue D
Ots, ames
Ots Stee Co
O Tooe, ames
Ottoander, C. . W...
rand nght Co., Inc
and Lumber Co
state ta decson.
state ta decson acquescence reates to Issues 2 and 3 of decson.
cquescence does not reate to partnershp ssue.
cquescence reates ony to deducton of contrbuton to church budng fund.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
46
cqt|escences Contnued
Ta payer.
Owen- mes- rnba Co
Owen, rank G., estate of 1
Owen, Lea S., admnstratr
Owens otte Co
Oyster, |r., George M., estate of..
Ozark Ms, Inc
Paauhau Sugar Pantaton Co
Pabst, rdon
Pacfc akng Co
Pacfc Car qupment Co
Pacfc Coast Ppe Co.
Pacfc Coast Redwood Co
Pacfc Novety Co
Pacfc Ppe Suppy Co
Pacfc Reaty Corporaton
Pacfc-Southwest Trust Savngs ank, admns-
trator 1
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-Tc O Co.
Pars Coak, Sut Mnerv ouse --
Parsh, S. W -
Parsh-Watson, M
Parsh-Watson Co., Inc
Parsan, The
Park musement Co
Park os. Rogers, Inc.-
Parker, rthur M., estate of
Parker, dward L
Parker, George S
Parker, een Ptts.
Parker, Nora D
Parker, W. D... -
Parker Wre Goods Co
Parkcrsburg Maretta Sand Co.
Parma Co
Parsha, Wam W
Patapsco aast Co
Patch, radford C
Pate, Zebuon ance
Patterson, George ., estate of
Patterson, G. S
Patterson, W.
1637
19809
19809
1033
7390
4377
13879
2227
84
1093
7901
1847
8162
1943
4526
20657
3028
6055
4279
5502
5447
1181
3382
3382
18436
13896
5500
9504
4684
2833
4894
583
7926
16921
2460
14954
41873
5602
14186
8647
8646
3999
5452
12050
14553
6452
1800
6332
14955
20657
12345
8901
oard of Ta ppeas.
oume.
5
18
18
8
4
6
13
6
2
2
11
5
5
2
5
18
2
5
6
5
3
1
5
5
9
13
6
9
3
2
4
2
15
16
6
14
19
10
14
13
13
11
IS
7
1
4
13
18
If.
7
Page.
921
539
539
1197
108
1179
500
843
391
348
1329
423
1017
870
1223
1314
1001
1067
310
189
403
882
975
975
878
540
189
1236
840
851
605
415
106
587
719
1185
171
854
1185
1239
1239
448
87
429
318
1081
916
1236
1314
716
621
state ta doeson.
cquescence reates to ssue 1 o decson. .
cquescence does not e tend to nt part of the oard s decson whch purports to bod tnat secton
704(a) of the Revenue ct of 192 s appcabe to the case.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
47
cqt|bscenchb Contnued.
Ta payer.
Docket
No
oard of Ta ppeas.
oume. Page.
Patterson Produce Co
Pau, ar. --
Pauson, Peder, estate of
Pauson et a., Wam I., e ecutors
Payne, dward W
Peabody Coa Co.
Pearce et a., rthur P., trustees
Pearce, |r., Chares
Pear, en, estate of
Pear, ernard, soe dstrbutee
Pearsa, Gbert ...
Pearsa Co., Inc
Peavy- yrnes Lumber Co.1
Peavy-Moore Lumber Co.1.
Peavy-Wson Lumber Co.1
Peck s urnture Co. -
Pederson, ans
Pederson, Mare
Peebes et a., W. S., admnstrators
Peeress Pacfc Co.-
Pennsua Shpbudng Co -
Penn Chemca Works..
Penna, P.
Pennngton-Gesser Co
Pennsyvana Co. for Insurance on
Grantng nnutes, e ecutor
Mary . rtt, deceased
Lves and
under the w of
Pennsyvana Sat Manufacturng Co.
Peopes Ice Cod Storage Co
Peopes Trust Co., trustee
Perkns, . ...
Perkns, oten
Perkns Land Lumber Co
Perkns Manufacturng Co.
Permanent Loan and Savngs ssocaton.
Perry, . G
Perry, Mary R
Perry, .
Perry Dormney
Perryman, . R
3994
13927
13571
13571
9065
19256
9615
5606
16433
16433
11997
12722
15824
16354
25984
15823
16355
25986
15822
16356
25985
16108
12329
12328
9380
14376
5741
9247
21861
10082
1904
27199
38453
41691
14365
8472
5152
6851
11363
17041
12741
23894
35148
37930
2268
9023
42492
9022
852
2735
6301
3250
3408
4
11
10
10
12
18
13
6
18
18
10
6
14
14
14
16
14
14
5
10
9
7
17
11
18
10
10
6
U
17
2
9
20
9
1
cquescence does not reate to affaton ssue, e cept wth regard to Peavy-Wson Lumber Co. and
Chrste astern y Co. for 1917, 1918. and 1919.
1 cquescence does not reate to easehod Issue.
cquescence reates to ssues (c), (d), and (e)
state ta decson.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
48
Ta payer
Peruna Co.1
Petauma 4 Santa Rosa R. R. Co.2.
Peters, ohn
Peters Manufacturng Co
Peterson Co., George C
Pevey Dary Co
Pheps, . M
Pheps, Martha ., e ecutr .-.
Pheps, Wam L., estate of .
Pheps-Waters Co.
Phps, dward S_
Phps, George .
Phps, ohn D., estate of8
Phps, oseph dward, e ecutor
Phps, oseph W., estate of1
Phps, Lee -
Phps, T. C
Phmont Reaty Co..
Pho Corporaton, L. .
Phoen Natona ank
Phoen Savngs ank Trust Co.
Pckerng, Lorng
Pckerng, Rose C
Pctora Revew Co., The.
Pedmont Lumber Co
Pedmont-Mt. ry Guano Co
Percc- rrow Motor Car Co
Person Co
Pke County Coa Corporaton 6
Pne, . rank
Pne uff Compress Warehouse Co.
Pne Rdge Mnes Co
Pnhorn, Rchard, estate of
Poneer Laundry Co
Pttard, . T --
Ptts, ohn L., estate of ..
Pttsburgh essemer Coa Co
Pttsburgh Grndng Whee Co -.
Pttsburgh-Northern Coa Co
Panters Nut Chocoate Co. -.
Panz,
Paut
Inc., Theo.
Co., L. S.
5102
12333
13830
25276
2091
1266
161
14749
21953
28226
4803
4803
19419
2376
6352
6352
6352
6352
29493
12802
11758
16673 1
24755
32327 |
13149
13149
5908
5840
4487
6661
11 03
12828
1757
8542
893
21340
7189
27573
7989
2208
6388
4739
1804
32385
5626
9004
2558
2559
2837
8788
10081
7866
16563
of Ta ppeas
oume.
11
11
16
1
1
1
13
6
6
15
9
7
7
7
7
20
9
11
16
14
14
5
5
14
3
8
2
12
4
16
5
5
7
5
5
19
2
6
7
10
s
1 cquescence reates to Issue as to vaue of good w for Invosted capta purposes for 1919.
cquescence reates to that part of decson as to the purchase of ta payer s own bonds at ess than
par whch wero hed as an nvestment.
state ta decson.
cquescence does not reate to Issuo as to whether Pheps-Waters Co. was a transferee of Wsconsn
Chemca Co.
cquescence reates ony to ssue 1 n decson.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
49
cqttescences Contnued.
Ta payer.
Docket
oard of Ta ppeas.
No.
oume.
Page.
3370
7
295
3701
3
1265
3758
3
1265
3757
3
1265
3756
3
1265
4003
3
1023
30916
19
1317
83
1
6
1265
2
1263
11759
11
507
11760
11
507
11761
11
607
3382
5
975
3382
5
975
14460
12
865
17596
14
1389
6849
14
584
2151
3
595
2500
3
595
4148
4
1085
2141
6
78
9222
8
831
2554
2
367
12488
12
510
27350
17
921
27350
17
921
11992
12
190
11991
12
190
11990
12
190
5928
6
110
5792
13
943
9888
10
166
9888
10
166
11945
12
492
10400
11
1313
10400
11
1313
3740
6
835
5422
6
633
5422
6
633
11558
12
702
6862
6
329
6862
6
329
25729
18
377
8858
7
621
4644
7
492
7996
20629
(
322
10192
12
637
9816
9
645
3896
7
414
7755
6
1116
7755
6
1116
11764
7
1237
159
1
202
2951
5
107
2951
5
107
9380
5
386
Pumb, Raph
Punkett, Chares T
Punkett, orence C
Punkett, Lyda
Punkett, Wam C
Pymouth Coa Mnng Co
Poe ey, Inc
Ponset Ms.
Pochronades, Pau
Pomcranz, aron
Pomeranz, braham
Pomeranz, Otto S
Pomons, Denns
Pomons, Spro
Pond, D.
Poor s Pubshng Co
Pope, rthur
Pope, Carence
Pope, Mrs. Carence
Pope Sanatorum Co
Popuar Dry Goods Co
Popuar Prced Taorng Co
Port Townsend Puget Sound Ry. Co
Post, ames
Poston, Carence ., estate of
Poston et a ., oyd ., admnstrators
Pottash, arry
Pottash, Ma
Pottash ros
Potter arms, Inc
Pound ote Co., .
Powe, ope Ives, estate of1
Powe, T. I. are, e ecutor 1
Powe Coa Cc.
Power, Chares . aud ohn M., e ecutors
Power, Thomas C, estate of 1
Power ro., T. C
Powers, Mary ., e ecutr 1
Powers, Rchard ., estate of1
Powers, Samue L
Powers Mayer, Inc
Powers Mayer Manufacturng Co
Pratt et a.. my ., e ecutrces1
Pratt, Wam ., estate of
Pratt Letchworth Co
Premer O Co
Premer Packng Co
Preston, omer M
Preston et a., omer M., admnstrators
Prestwood, . M., estate of
Prestwood, N. ., admnstrator
Prce, Samue
Producers ue Co
Prouty et a., nson ., e ecutor 1
teof1
of 1
1 state ta decson.
cquescence reates to a Issues e cept ursdcton ssue.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
50
cquescences Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume. Pago.
Pugh, sr., Mrs. ohn
Pugh, |r., . C, estate of
Pugh, sr., . C, estate of.-
Pugh, |r., Mrs. . C
Pugh, sr., Mrs. . C, e ecutr
Pugh, L. G
Pugh, Mrs. L. G
Pugh, O. L -
Pugh, Mrs. O. L -
Purce, nne L., e ecutr
Purce, oseph, estate of
Purdv enderson Co
Purtv Oate Co
Purtv Oats Co. of Davenport
Putnam, enretta, deceased, estate of .
Putney Mercante Co., L.
Putze, enry
uadrca Manufacturng Co.
ucay, P.
en Cty Prntng Co
R.
Rade Co., ohn
Radn, tta, admnstratr .
Radn, Samue, estate of
Ranbow Royaty Co
Raegh Smokeess ue Co..
Rammng, R. W
Randoph ote Co
Raner Grand Co
Ransom, Inc., Stephen
Rauh Sons ertzer Co.,
Ravn Corporaton
T ITr:n:
. .
Ravner, Wam.
Raymond- adey Corporaton
Read Phosphate Co
Rea state Trust Co. et a., e ecutors, estate
of George W. Mken 1 _.
Reaty ssocates, as syndcate manager
Reaty Saes Co
Redands Securty Co .
Reed, . M..
Reed, Lea
Reese Drng Co
Rega Shoe Co
Rechenback, arry L
Renhardt, ane R
Renhart, Patrck D
Resner Mfg. Co., W.
Rezensten, Lous, trustee
Rczensteu Trust state, Rosa
Renaker, . . .
Renfro, . T
17156
17174
17155
17173
17156
17158
17157
17153
17154
3838
3838
5198
4364
4365
5273
3195
4053
2814
7196
6985
5576
8175
8175
3619
7767
5983
1580
4236
7904
7905
10720
45481
8284
5128
10238
10123
27921
18145
5703
6776
5110
27009
784
2015
994
16702
12436
8146
8146
13120
6138
17
2
6
0
5
8
8
3
6
6
6
11
12
19
10
4
13
7
17
10
5
6
8
18
1
1
2
15
13
9
9
12
12 51
8 1295
1 state ta decson.
1 cquescence reates to ssue 1 of decson.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
51
cqukscbncks Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Renfro, Mrs. Inez C
Reserve Loan Lfe Insurance Co.1.
Reserve Natura Gas Co. of Lousana.
Retaers re Insurance Co
Retaw Mnes Co
Re Machnery Suppy Co
Revnods, . D
Reynods, .
Rhodes, rownson ampman, Inc..
Rbbon Cff rut Co
Rce edng, Inc
Rch and wfe, C. R
Rchand County udng and Loan ssocaton..
Rchmond osery Ms.
Rchmond Mca Co., Inc.
Rckard, George L
Rcker, George .
Rcks, W. R.
Rffe, enry
Rggs, Leon C, estate of, Lacey L. ogart, admns-
trator.
Rgsby, G. D.
Rke, rederck .
Rker, |r., Samue, e ecutor..
Rnger Co., George
Ro ectrc Co
Rter, oseph
Rver Ra Storage Co
Rvervew State ank
Roanoke Ms Co.
Roberts, . S...
Roberts, rances ., estate of
Roberts, .
Roberts Co., U. N
Roberts, ncent G
Robertson, Chares
Robertson, arry
Robertson, .
Robnson, ndrew P
Robnson Co., . M.
Robnson, . M., estate of
Robnson Shows Co., ohn
Rock Isand Sash fe Door Works.
Rockford rck Te Co.
ckford Maeabe Iron Works..
. Co.
Davd.
cquescence In so far as decson hods that pettoner Is entted to a deducton n the am
cent of the mean of the reserve funds requred by aw and hed at the begnnng and end of the
undmnshed by the amount of e empt Interest.
cquescence reates to cam for pad-n surpus deprecaton pror to ugust 31, 1916, and
ton durng fsca years ended ugust 31, 1917, 1918, 1920. and 1921.
cquescence reates to ssues 2, 3, 4, 6, and 6 n decson.
6138
21489
29554
32965
8704
9006
14185
17707
3733
2208
1791
7829
25575
894
12337
5219
2823
19420
21259
38675
3703
7763
13065
15606
6817
12803
3576
1932
5599
24335
7102
8565
12756
14392
1233
11180
23221
5344
17698
9579
1270
5344
595
5436
17227
14924
5652
6341
13893
7258
3873
2451
29672
10184
8
18
12
15
3
5
3
10
17
2
12
3
6
15
13
15
10
12
3
2
6
18
6
10
9
13
1
12
18
7
10
9
2
7
1
5
13
12
5
4
12
13
4
2
19
11
of 4 per
- years
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
52
cqoescencks Contnued.
Ta payer.
Roden Coa Co
Roe, Chares ., estate of 1
Roebng, ar G., estate of
Roesch, Wam
Roesse Co., Ltd., Lous
Rogers, ate
Rogers, Noah C, e ecutor 1
Rogers, R. M
Rogers, Robert C
Rogers, T. . and ctora
Rofe, Ward G., e ecutor
Romayor Grave Co
Rome Wre Co
Roos, Mortz
Roper, sha
Roper, Mrs. sha
Rose Co., dward
Rosentha, en|amn
Rosentha, annah S
Rosenwad We, Inc
Roshek ros. Co. Roshek Reaty Co.
Rosyn ue Co.s
Ross Co., Inc., .
Ross, ames, estate of 1
Ross-Sper Gove Co
Rosser, Luther Z., estate of1
Roth, Chares ., estate of
Roth ote Co-.- --
Roth Shoe Co., Whtney
Rouse, empstone Co., Inc.4
Rowe, ohn
Rowe, M. D.
Rowe, Mrs. M. D.5
Roya Coeres Co., The
va ue Co
ya 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 of6
Docket
No.
7915
11030
13042
25747
2551
1009
10843
25964
10842
13581
24740
15536
18486
7532
8759
3079
4060
8642
8643
2092
990
991
8596
1844
9074
22072
7281
8590
10212
2161
1508
542
89
7673
10987
3067
9063
9064
233
9386
11481
5736
6356
12569
3795
3795
57
2928
2929
4277
4571
2069
4570
9528
oard of Ta ppeas.
oume.
5
14
10
12
7
2
7
17
7
12
15
16
11
8
7
7
2
2
2
11
2
16
7
8
10
3
3
1
1
2
7
7
1
8
14
10
10
1
9
9
5
6
4
6
13
1 state ta decson.
1 state ta decson acquescence reates to ssues 2 a|
1 cqu ceno| reates to tentatve ta ssue.
cquescence reates to ssue concernng openng nvc
cquescence reates to frst ssue of decson.
state ta decson acquescence reates to Issue re _
ce ess of 10,000 e empton and Issue as to bequest of worts of art to or for the use of the Cathoc Cathedra.
t. Lous, Mo.
r decson.
at December 1, 1917.
ta abty of proceeds of fe Insurance In
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
53
cqttescences Contnu
Ruos, . D
Ruprecht, Chares C
Russe, Chares ., estate of
Russe, Mary I. ., estate of
Russe Mng Co
Russe Whee oundry Co
Ruud Manufacturng Co
Rvan Co
Rvan, ohn C, estate of
Ryan, ate C, e ecutr
Rve each Peasure Park Co., Inc.
Ryman, . ., estate of
Ryman, Nancy -
S.
St. Car Guaranty Tte Co.- ---
St. Lous Maeabe Castng Co. --
St. Lous Screw Co
St. Lous Unon Trust Co., e ecutor. -
Sachs, Chares
Sackett, . T
Sadder, ohn
Safe Guard Check Wrter Corporaton
Sakowtz, Lous
Samon, George
Samon, Water
Saomon, Leon
Sampe at Stores Co., Inc
Sampson, Wam C
Sanborn ros., successors, etc
Sand Sprngs ome
Saner-Ragey Lumber Co
San rancsco Lumber Co
Sanford Cotton Ms.
r, as ., estate of.
Ma
ara Gas Co
..t, Mar|ore L
Maurce
Savannah Rver Lumber Co. et a. 2
Savannah Shp Chandery Suppy Co.
Savnar Co., Inc
Sawyer Mng Co
Sayre Stampng Co
Scafe, Wam ., estate of
Scaes, . L.
Schatznger, crnhard, estate of5
Schatznger, Sabna, e ecutr
Scheer, braham
Scheuer, erman, estate of1
Schck, ndrew, deceased, estate of
Schff, en|amn
oard of Ta ppeas.
No.
oume.
Page.
9119
13
240
22638
16
919
24312
11
947
11250
13
850
183
1
194
2029
3
1168
16278
15
819
54
2
764
1986
2
1130
1986
2
1130
13108
6
1373
1706
5
1288
1705
5
1288
7578
8
688
5490
0
/ 9
ft
15168
11U
2077
2
649
11032
14
323
7561
6
68
7577
4
1074
3796
2
1305
11451
10
1262
10807
7
267
5733
3
838
3115
3
723
3725
4
1109
12231
8
979
6042
13
1366
204
1
73
11082
14
1059
4871
e
198
431
3
927
10643
10
1242
12813
14
1210
6981
8
107
11507
10
1412
3678
4
298
14067
13
705
14354
16130
14
165
26936
14805
13
958
3624
9
465
20924
17
160
3040
2
166
391
1
338
11408
10
1024
11383
12
1353
11383
12
1353
10857
11
836
4621
9
486
3659
3
1026
4742
3
640
1 cquescence does not reate to ssue nvovng tentatve ta ad|ustment.
cquescence reates to affaton for 1917 and ncuson of Savannah Rver Lumber Co. n
roup for 1918-1921.
ta decson.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
54
cquescences Contnued.
Ta payer.
Docket
No.
oard of Ta
oume.
Schng Gran Co
Schemmer Graber Co., The
Schesnger, rmn
Schctt, doph.. -
Schossberg, dwn
Schmck, Wson
Schmd, ohn
Schoekopf, Water
Schoenhet et a., Wam, e ecutors
Schofcd, ohn
Schroth, oseph, estate of 1
Schroth, ua nna, e ecutr 1
Schubert, ndrew
Schutze, . Wam -
Schuz, . ., estate of1
Schuz, mma ane, e ecutr 1
Schuz akng Co
Schwarzer Co., .
Schwng, Samue P., estate of. --.
Schwnn, Ignaz -
Scott, ohn
Scott, Sheby D
Scovc, Georpe S
Scranton ectrc Co.2
Scrpps et a., Wam ., trustees under decaraton
of trust e ecuted by ames . Scrpps
Seaboard Ms, Inc. ( etmann Co., Inc., suc-
cessor)
Secor ote Co
Securtes Investng und, Inc
Securty Trust Savngs ank, trustee
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
8erren, ohn, estate of1
8ervce Recorder Co., The
Seven Nneteen fth venue Co
Severa Co., W.
Sever, Maron Shanwad
Shaffer, ohn C --
Shanwad, Maron D.3
Shamokn aey Pottsvc R. R. Co.
Sharpe, Mary .4
Sharpe, Rchard -
Sharp, W. Z -
Shaw, . W
Shaw, Guthre, e ecutor
1422
13728
10016
2006
1971
11714
6212
9857
9858
34036
3914
3914
6667
21581
5686
5686
2074
667
3633
8441
10418
6180
2443
17872
434
5499
5023
5024
224
10304
6720
9758
9758
13964
4851
1049
5712
8836
8836
2201
6031
1702
14410
1072
14410
4944
17127
17126
10598
15612
9644
8
2
11
7
2
3
10
4
14
19
5
5
4
18
7
7
3
3
3
9
6
9
2
15
1
11
4
10
10
12
5
2
8
7
7
2
5
3
14
9
14
3
17
17
8
13
9
1 state ta decson.
cquescence reates to a Issues e cept affaton wth mercan Gas ectrc Co.
1 cquescence reates to ssue as to whether certan ncome accrung to estate of pettoner s father was
ta abe ncome to pettoner.
cquescence n so far as decson reates to reducton of dstrbutabe royaty ncome to an amount
equa to that found for each of the other two pettoners.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
55
cqotescences Contnued.
Ta payer.
Docket
No.
.-.a d of Ta ppeas.
oume.
Pago.
9644
9
459
6282
7
1156
5187
9
1317
543
6
114
5089
3
461
11814
13
877
12836
13
1296
2161
3
809
17132
15
627
5493
10
211
13698
4
1299
4313
4
23
22257
16
622
22258
16
622
7748
8
103
2875
11
805
3955
4
403
6531
5
1042
3134
2
912
3134
2
912
17777
12
247
1827
2
1253
3655
4
1181
1316
2
23
1362
5
76
24921
16
915
24921
16
915
10430
14
1259
18879
19
683
18879
19
683
10864
7
1256
10864
7
1256
25171
16
485
9708
10
1328
10389
6
1329
1927
8
631
4912
4
1078
9993
10
1186
267
1
105
5329
5
480
f 13973
1
24509
14
878
27247

11068
7
1099
11155
13
846
11155
13
846
4134
5
804
8191
9
621
9312
9
1123
6752
9
1222
5329
5
480
5329
5
480
25149
19
809
3262
4
385
Shaw, ames G., |r., estate of
Sheakey ennedy ros
Sheane uto Co., W. W---
Sheen, esse G
Sheet Meta Constructon Co., Inc
Sheffed Dentfrce Co.1
Shedon Manufacturng Co.,
Sheton et a., Chares ., e ecutors -.
Shepard, Stuart G
Sherdan Meat Co
Sherdan, Thomas .
Sherman Stater Co
Sherrod, rchbad
Sherrod, enry Lambert
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
Shreveport Cresotng Co., Inc
Shuths, . W., deceased, estate of
Shure Co., N
Shutter, Maron D
Shutteworth, Wony Co., Inc
Sbey et a., ohn R., e ecutors
Sbey, Rufus ., estate of
Sckes, Mrs.
Sege, ugene, e ecutor1
Sege, acob, estate of
Sk, Mrs. W. W
Sk, W. W -
S , Mrs. S. - -
Sver Co., Inc., Wam
Sverman, e ander
Smmons Co
Smon, . S
Smon, ate M
Smonds Co., C.
Smons, |r., and wfe, ames
Smons rck Co. .
Snshemer, Sdney W
Sknker et a., Isabea N. e ecutrces
Sknker Thomas ., estate of 2
Sater, Chas. W
Sater, . N., trust
Satterv, Stephen ._ ---
Sne, ohn T --
Smth, ert
Smth, Mrs. ert
Smth, urns Lvman
Smth, Mrs. D. Sydney 8
cquescence reates to aocaton of ta n consodated return.
state ta decson.
s state ta decson acquescence n oard s fndng that transfer of a certan easehod by
I not made to take effect In possesson or en|oyment at or after death.
a does not reate to contrbuton to the Year Cub.
3 pubshed In Cumuatve uetn I-1 at page 8.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
56
cqotescences Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume. Page.
Smth, rancs _
Smth, arry .,
Smth, arry . 1
Smth, |r., Mark --
Smth, Theodore
Smth, Water T
Smth Insurance Servce, Inc.
Smth Son Co., Lee S
Smth Machne Co., .
Smythe, rnest ., estate of.,
Sntzer-Warner Co
rancs S

|urg, Louse
. . W - --
Soomon, arry
Somers Lumber Co
Sonenbck, Davd
Sonora ank Trust Co -
Sooy, Chares
South Chcago Drug Co
South ucd Savngs Loan Co - -.
Southack, ugusta G., estate of
Southern musement Co., Inc
Southern eed Co
Southern Press Coth Mfg. Co..
Southern Sand Grave Co., Inc --
Southern Tre Rubber Co -
Spadng, athernc
Spang-Chafant Co., Inc
Spezer, Lena
Spencer, Mary R
Spencer Lumber Co. et a., .
Sphar rck Co -
Spofford, annah M., admnstratr of estate of
Lucy M. Ms 1
Sporborg, Wam D., admnstrator
Spraguc, 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 rewery, Inc
Standard Gas Products Co
Standard Marne Insurance Co., Ltd
Standard Refractores Co
Standard Sk Dyeng Co
1020
3098
2552
20942
1054
4841
10901
3328
7519
12198
12964
19220
6850
13186
7249
7250
482
20112
2401
3665
7838
2882
15157
19508
6359
/ 13753 1
1 13754 I
13587
13004
6603
22717
7302
10469
2389
25255
7639
2086
1028
7914
6740
4717
12862
4169
10401
12078
14313
9088
6435
10750
1271
10226
10492
9843
4822
3617
3618
11694
1
6
7
19
9
4
9
3
7
14
16
14
11
12
1
15
2
4
7
10
13
14
3
14
6
10
6
18
7
9
3
20
10
2
3
8
8
11
12
3
12
13
14
7
9
9
4
10
5
4
6
9
1 state ta decson
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
57
cquescences Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Standfer Constructon Corporaton, G. M.
Stanfed, Theodore
Staney, ames T
Staney Insuatng Co
Stapey Co., Inc., O. S
Star Porcean Co
Starck, Php ., estate of 1
Starck, Php T., e ecutor estate of Php .
Starck 1
Stark, rthur L., estate of1
Stark rck Co
Starks, Ns O., estate of
Starks, Sanford P
Starks, Sanford P., admnstrator
Starr, C. L
Starr, oward W
Starrett, Pau
State ank of cester
Stearns, rank ., e ecutor.
Stearns, . M., estate of
Steee, Wedees Co
Sten et a., Sade S., e ecutors ..
Stenbach Co
Stene, Cnton R
Stene, George
Stene, oseph ., admnstrator.
Stene, oseph ., estate of
Stene, atherne
Stene, Wam
Stewagon, ohn W., estate of
Stephens ue Co., Ino
Sterng Reaty Co.
Stern, Car..
Stern, m -
Stern, oseph
Stern, ues
Stern, Lous
Stern, Samue --
Stern et a., Samue . ., e ecutors .
Stevenson, D. M
Steverson, . N
Stewart, Mee sperson
Stewart Co., red S
Stewart Co., G. S
Stegtz, Treber Co., Ino
St, George W.._,
Stwater Mng Co
Stwe Paper Co., .
Stockbrdge, M. C
tockbrdge, Mrs. M. C
Stowerck Chocoate Co.
Stott, noch, estate of
Stouts Mountan Coa Co
stato ta decson.
35942 31 5
5550
3076
4056
17323
2983
7685
5002
4051
4051
10587
12582
20933
20934
20933
12739
101
6557
5913 ,
/ 10672
19922 /
16672
19922
10215
4621
2888
20941
20939
20932
20932
20938
20937
28469
15343
26383
6333
19377
2186
5887
2187
19376
5943
2459
14698
11179
27894
5975
3065
653
6521
5687
7301
1866
1867
6030
12195
6542
15
2
13
4
8
8
8
12
19
19
19
9
1
4
8
1(5
16
11
9
3
1(1
19
19
19
19
19
17
13
8
5
s
14
5
6
14
2
9
IS
18
5
2
1
8
6
6
2
2
4
11
4
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
58
cquescences Contnued.
Ta payer.
oard of Ta ppeas.
No.
oume.
Page.
7645
8
317
3877
9
1212
3378
2
1264
5533
7
887
16537
16
1192
3398
8
1170
5069
3
1035
19507
14
902
1909
6
417
1909
6
417
15235
10
1174
32884
18
537
30204

39931
1033
992
2
19
993
2
19
904
2
19
905
2
19
1923
I
1121
9236
11
587
25063
15
1265
6406
4
1198
8790
6
703
18599
19
480
13852
18
983
676
1
1040
13145
10
1325
9079
7
890
531
2
1104
9442
9
984
11810
16
540
8383
12
5
7949
8
861
17814
10348
8
407
5377
7
380
3077
9190
1
787
2786
4
1068
2863
5
990
21268
18
379
21268
18
379
3688
5
264
6322
15
1287
6322
15
1287
10266
19783
9240

966
404
8
4331
3
37
1436
2
223
10221
7
445
7411
5
1293
26851
41474 1
( .
11
Stratton Grocery Co
Straus , Davd, estate of1
Strauss Market, Inc
Strffer, Inc., dward C
troh rewery Co
Stroruberg ectrc Co
Strong, ewat Co., Inc
Strong, orner L
Strong, .
Strong, Stea
Strother Lumber Co., G.
Struthers-Zeger Cooperage Co...
Stryker, rthur
Stumer, ne anche
Stumer, anche G
Stumer, Los M
Stumer (II), Lous M
Suburban Investment Co., The
Sugar Run Coa Mnng Co
Sugarand Industres
Suhr, Chares L
Suvan Grante Constructon Co.
Sumtomo ank, Ltd
Summt Coa Co
Summt Whoesae Grocery Co
Sumpter aey Ry. Co
Sumpter Coca-Coa ottng Co...
Sunfower Packng Corporaton
Sunnvsde Coa Coke Co.2
Sunshne Coak Sut Co
Superheater Co
Superor ngravng Co
Superor Motor Parts Co.s
Superor Pocahontas Coa Co
Susman, Otto
Sutff, S. D
Swaney, wng
Swanston, George, estate of 1
Swanston, Robert, e ecutor 1
Swartz Co., Inc., . R
Sweeney, dward ., estate of 1
Sweeney, esse Gar, e ecutr ..
Sweeney ames Co
Sweet, Gertrude
Sweeten, P. P
Swnehart Tre Rubber Co.. I
Sydco Photopav Corporaton
Syvan ectrc ath, Inc
Syracuse Washng Machne Corporaton.
1 state ta decson
cquescence reates to second Issue of decson.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
59
cquescences Contnued.
Tapayer.
Docket
No.
oard of Ta ppeas.
oume.
T.
Tagabue, Chares ., estate of 1
Tat, ames 1
Takamne Laboratory, Inc
Tacott, enretta ., estate of 1
Tacott et a., . rederck, e ecutors
Tampa ectrc Co
Tarr, rank .
Tavor,
Tayor, a D., e ecutr
Tayor, arret
Tayor, oward M
Tayor, Lous R
Tayor, Moses
Tayor, P. L...
Tayor, T. ., estate of
Tayor Constructon Co., Inc., .
Teague, . -
Te- ectrc Co
Tempe, Water P
Tempeton, eny Co., Ltd
Tennessee bre Co
Ter ush, Davd
Termna Propertes Co
Termna Raroad ssocaton of St. Lous _
Terre, dgar
Te arkana Cotton O Co., Inc ---
Te as Chemca Co
Thes, |r., George.
Thomas, . L
Thomas Shoe Co., The.
Thompson, fred C...
Thompson, . W
Thompson, Meve W.
Thompson, Seetha O. (Mrs. . C.)
Thompson, Sude
Mrs. T. C, e ecutr 1
T. C, estate of 1
W.
W. an
Thompson ack
Thompson Co., ohn R
Thompson Pacfc Coast Co., L.
Thompson Scenc Raway Co., L.
Thompson,
Thompson,
Thompson,
Thompson,
32095
13908
3199
16136
16136
13344
28332
29593
3543
3050
7617
3066
12732
20940
8789
10020
7617
11877
4040
315
12018
6145
18432
10717
4015
39451
26162
28661
3132
1888
6360
3958
9213
209
30690
7412
23609
1895
30691
5280
5280
677
17509
10837
7917
1869
9679
10315
385
18234
19
11
7
15
15
12
3
9
7
2
14
19
7
11
7
13
3
1
10
15
4
19
17
7
1
11
3
6

18
10
18
9
18
3
3
5
10
11
10
2
Thorkdsen, Thomas 385 2
Thorn, Susan ., estate of 5 I 18234 I 16
state ta decson.
1 cquescence reates to Issue as to whether the Income reazed under agreements of December 14, 1918,
s ta abe u 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 reates to ssues nvovng contrbutons to Y. M. C. . and amortzaton of dscount
on bonds.
cquescence reates to amounts receved from partnershp of Thompson Worey durng 1920 and
1822.
state ta decson acquescence reates to ssue 1 of decson.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
60
cqt|escenceb Contnued.
Ta payer.
oard of Ta ppeas.
No.
oume.
Page.
4206
3
1006
7638
12
1306
9898
10
368
521
9
499
21647
16
68
9314
9
1123
9314
9
1123
12456
12
481
3286
3
884
18041
19963
)
437
6378
8
914
8999
11
1257
9195
11
288
85
2
682
2450
2
754
1508
3
868
7452
6
610
14429
12
804
1022
1
868
2959
3
327
2960
3
327
9615
13
160
7068
7
961
2SS9
3870
8
1195
6506
25837
17
690
3440
3
521
11402
16
101
16218
19
208
2317
2
701
20046
12
1343
20047
12
1343
830
1
894
5084
5694
5
371
16030
15
872
15152
15
1107
4897
8
1064
8270
8
981
4524
6
768
3397
10
134
2710
2
1165
1114
4
1169
687
1
653
6585
7
119
12988
12
434
6407
5
1242
3634
3
743
7863
13
932
3470
2
796
19016
17
135
19016
17
135
32599
16
1242
32600
16
1242
20925
18
12S3
Thorpe, een Converse.
Thorwarth, ohn ., estate of
16 West 97th Street Reaty Co., Ine
Threefoot, ., estate of
Tbbs, Wam -
Tetz, Louse C, admnstratr
Tetz, Robert M., estate of
Tfft, Layer Co., Ino
Tford, enry Morgan, deceased, estate of.
Tt, C.
Tton, S. U., estate of
Tnde, rank T.1
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
Tonawanda Power Co.
Tooke, C.
Topeka Tent wnng Co.
Tower Co., .
Towe, George
Towns ospta, Chares .
Townsend, nna M.1
Townsend, . Ray 2
Townsend Lumber Co
To away Tannng Co...
Trace ork Mnng Co
Tracv, Thomas
Transatantc Cock Watch Co
Trathen, Mrs. . Res
Treat ardware Corporaton
Trefrv, W. S
Tr Count v Lght Power Co
Troost venue Cemetery ssocaton.
Tro e Manufacturng Co., The
Troy Manufacturng Co
Trust Co. of Georga, e ecutor..
Tschffey, rederck
Tsvogou, Constantne
Tucker, . G
Tucker, Geneveve.- --
Tucker, enry St. George, e ecutor..
Tucker, Martha S., estate of
Tugren, erbert W ---
Tugren, S. Mnard
Tusa O ygen Co
1 cquescence does not reate to tentatve ta Issue.
state ta decson.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
61
cquescences Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
ank
. Iron Car Co., Inc
Turner, Mrs. W.
Turner Termna Co
Tutte, oward
Tweve ast Thrtv-frst Street ote Co
Twn Cty Sand Grave Co
Two Nnety-Two atbush venue Corporaton.
Tver ppach, Inc
Tyer, May L
Tyer Warehouse Co --
:.
Ucta Investment Co
Uferts, .
Uendorff, Php, estate of
Unoa Rea state Co
Unon Co
Unon Department Store Co
Unon Meta Manufacturng Co
Unon Pate Wre Co
Unon Stock Yards Co
Unon Termna evator Co
Unon Trust Co., e ecutor
Unon Trust Co. of Ceveand, Oho, e ecutor 1
Unted usness Corporaton of merca
Unted Motor Co.
Unted States nveope Co
Unted States dety Guaranty Co
Unted States Merchants Shppers Insurance
Co.a
Unted States Mortgage Trust Co., e ecutor 1
Unted States Payng Card Co
Unted States Refractores Corporaton
Unted States Too Co
Unted States Trust Co. of New York et a., e ecu-
tors 1
Unted States Trust Co. of New York, e ecutor 1
Unted States arnsh Te Co
Unted Studos, Inc
Unted Thacker Coa Co., trustees for
Unty Schoo of Chrstanty
Unversa Stee Co
Untermyer, vn
Utca Motor Car Co
11433
9255
4162
3934
32998
3645
7171
5189
995
10722
512
5792
14034
13686
16885
3457
15630
7835
35
2524
28823
7078
7388
16271
4478
6983
24641
12744
7422
12432
4263
10439
2459
19305
5642
4650
7856
11030
15069
23900
7888
1799
12380
26612
9086
.
12
9
5
3
19
3
11
3
6
10
1
13
11
18
3
14
8
1
4
17
12
14
9
5
19
12
10
5
13
2
15
9
3
9
14
15
15
15
4
16
11
10
ance, dgar . 19545 19
anco Ms Inc 13276 12
ancouver ome Co 5550 4
state ta decson.
f 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 Incurred In 1919.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
62
cquebcences Contnued.
Ta payer
Docket
No
oard of Ta ppeas.
an te amps oand Dutch akers..
an anne Revovng Door Co
anderbt et a., Wam ., e ecutors.
anderbt, Wam ., estate of
an Ceave Trust.
an tten, Chares ---
an eet, Carev
an ook, .
an ook, Mrs. .
an orn Co., Inc., Over -
an Lndey Nursery Co.,
an Lndey Orchard Co.,
an Schack, en L., estate of ..
aucan, Samue M
audreu Lumber Co
aughan, ohn Chares, estate of1
aughan, . W
aughan, Leonard oden, coe ecutor a.
aughan arnes, Inc
ctch, dwn P
rden, M. L
rgna Lumber o Co
rgna Raway Power Co 8
scose Co., The
sta de rroyo
oebe, acob, estate of
ocbe Water W., e ecutor 1
otz, bert L., estate of
otz, atherne L., e ecutr .
on Paten, ar
on Ruck, ar, estate of..
oyer, . L --
1430
9988
13030
13030
13584
13585
30673
8793
2047
9358
9359
8252
3109
3109
7127
18488
6908
10514
21782
10514
7311
1179
5200
3546
9040
11731
3164
10231
W.
Wadsworth, arod ., estate of.. ...
Wadsworth, esse ., e ecutr estate of arod .
Wadsworth, deceased
Wagner, fred T -
Wah, enrv
Wah, W. Wey
Wamanao Sugar Co
Wad, Lous
Waker, |r., . C
Waker, |r., Mrs. . C
Wakcr-Crm Co., Inc., The
Wa, rank-
Wa Ochs, Inc
Waace arnes Co
Wangford, C.
Wangford, mer R
Was Tractor Co
6009
25604
25604
16959
9857
9858
5453
1982
1982
23744
2292
2004
24879
4629
8266
8267
446
7359
3857
3653
231
230
663
2
11
11
11
18
8
2
8
8
9
2
2
0
16
8
10
19
10
6
1
6
3
3
11
7
7
16
16
10
14
1
17
2
2
13
8
6
6
1
4
4
10
4
4
3
state ta decson acquescence reates to trusts of 1912, 1919, and 1921.
) state ta decson.
cquescence In so far as decson determnes that Cty Oas Co. of Norfok and rgna Raway
Power Co. were affated wth each other
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
63
cqttescbncbs Contnued.
Docket
No.
oard of Ta ppeas.
oume.
Wasdorf, Mr. and Mrs. dward
Wash, oseph ., e ecutor 1
Wash, . M
Wash, oseph M
Water, George L., estate of 1
Water et a., oward ., e ecutors estate of
George L. Water, deceased 1
Water Co., Inc., D. N.
Water Co., Inc., et a., D. N.
Water Rea state Co
Ward, amton
Ward, Wm
Warner Co., T. W. (a Deaware corporaton)
Warren Co., The
Warren, b
Washburn, Cheney D
Washngton Cadac Co
Washngton Caterng Co
Washngton ote Co.
Washngton Paper Stock Co
Washngton Pece Dyeng nshng Co.
Wasserman, Isaac, estate of
Watson, C. C
Watson, Martha ., estate of
Watson, Mrs. Myrte
Watsontown rck Co
Watterson ote Co
Wausau Cannng Co
Waynesboro Manufacturers ssocaton...
Weakey Coak Sut Co
Weaver, ee R
Weaver, ee R. .
Weaver, ames
Weaver, M. -
Weaver, M. ., estate of3
Weaver, S. P
Weaver, T. L
Weaver, Water
Webb ocorsesk, Inc
Webb, Leand D.._
Webb Press Co., Ltd.
W
- unke-Lange Coa Co
Wedgwood Sons, Ltd., osah.
Weed, enrv D
Weeks Co., L. S
We- amson Co., Inc
Wener, . L
Wengarten, Davd, estate of 1
Wengarten, Meve D., e ecutor
Wes, . W. D
Wess, Pau
2410
6388
13150
34196
1782
1782
4006
7618
7618
11322
10471
22109
4588
2550
2475
4471
7051
6609
7133
1321
4619
27597
20810
7228
6286
3580
5792
13966
1277
4001
2925
2924
8488
2922
3852
2921
2923
7955
178
1279
2404
2724
7070
5591
9146
3647
2563
2604
9645
13048
14672
10433
10433
11917
10059
4
7
18
18
2
2
4
10
10
8
7
19
3
7
7
a
y

4
16
15
6
7
3
13
14
1
8
2
4
8
2
4
1
2
4
1
1
8
3
9
5
11
3
2
6
r
10
13
13
13
7
state ta decson.
cquescence does not reate to that part of decson Invovng appcaton of the yers
T. .. 113).
Revokes nonacquescence pubshed n Cumuatve uetn -2, page 4.
(1 .
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
64
cquescences Contnued.
Ta payer.
Wessenbach, Mnna .
Wech et a., . Soher, trustees
Wech, rank P
Wesh Packng Co
Wenzc, rnst, estate of
Werbeovsky, braham, e ecutor
Werbeovsky, . ., estate of
Werk Co., M
Werner, enry P ---
Werner Werner Cothng urnshng Goods Co,
Weser ros., Inc
West ay Co., The -
West Corporaton, . C ---
West nd Consodated Mnng Co.
Westergren, Inc., M.
West Pont Investment Co
West 28th Street Corporaton
West rgna Coa Co
West rgna Maeabe Iron Co.
Westermann Pagano, Inc
Western mercan O Co.1
Western ank Trust Co.
Western atcrte Roofng Co
Western Maryand Ry. Co.
Western Star Mng Co... --
Western Wheeed Scraper Co.
Western Znc O de Co
Westand Co
Wharton et a., Gerad ., e ecutors
Wharton, ohn G., estate of
Wheary, George
Whcatey, ames
Wheeer, D.
When Cothng Co
Whsnant, . -
Whte, sa L., estate of 4 --
Whte, |r., ames
Whte, ua
Whte, Robert P
Whte et a., W. T., e ecutors
Whte Trust No. 1, R. . and . ...
Whtehead, CP - -
Whtehouse Leather Products Co., Inc.
Whteey, urt ., estate of
Whtng, C. L., Inc
4004
4005
6061
6102
10157
11134
21634
12587
5199
548
10106
10106
8019
19871
24497
6984
10548
17055
25239
2843
6872
2172
2723
300
6032
14790
16883
3763
14452
28542
29180
39948
33931
6475
2852
12001
8604
19755
26439
26439
4799
9665
21093
428
31522
12768
5622
5623
5554
12768
28141
23948
10673
8472
11046
oard of Ta ppeas.
oume. Page
12
9
1
8
8
15
15
9
12
2
4
3
5
1
4
16
17
2
10
19
19
12
5
14
7
15
13
13
5
8
16
1
17
15
4
4
4
15
15
11
12
10
7
617
1370
800
1169
507
442
442
954
482
1394
483
629
128
1185
436
147
378
1120
1308
17
401
467
889
109
496
972
553
302
302
829
1246
96
973
811
470
995
995
995
470
1410
461
714
1385
1170
1 cquescence reates to second ssue of decson.
1 cquescence reates to reducton by 2 per cent of ncome ta of ta payer for caendar
1 cquescence does not reate to that porton of decson whch hods that secton
ct of 1926 s appcabe to the case.
state ta decson.
cquescence reates to Item (2) of decson.
1918 and 1919.
o) of the |
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
65
cqt|escences Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Whtman, Carence
Whtman, Nathane, deceased, estate of 1
Whtman Sons, Inc., Carence
Whtmeyer, a.-. -- -
Whtmore, vah P
Whtson, Thomas
Whorton et aL, Gen C, e ecutors
Why brow, Carence
Wckens Co
Wckwrc, Theodore ., estate of -.
Wckwre et a., Theodore ., |r., e ecutors
Wedemann rewng Co., George
Wedenbeck, me T
Wess, . C
Wess, Oga.
Wggnton, George P
Wber, George I., estate of
Wber Natona ank of Oneonta, N. Y., e ecutor
and trustee
Wbur, Loyd -
Wdermann Co., C
Wh te et a., ugh, e ecutors and trustees
Wkens Lange
Wkes, . rank
Wkes, . Renwck -
Wkes- arre Lace Manufacturng Co
Wkns, L.
Wknson, W. ., estate of -
Wams, arry . ...
Wams, Robert W., e ecutor of estate of en C.
onaparte
Wams oundry Machne Co -
Wams Steamshp Co
Wamson, e ander
Wamson Rauers Co
Wamson Mng Co --
Ws, Mrs. W. T -
Ws, W. T --
Wmore, Thomas
Wson ros. Co
Wson, Chares Scotto, estate of1
Wson, .
Wson, anne L., e ecutr
Wson, urnture Co.
Wson, .
Wson, osephne ., estate of
Wnant, ohn G-
Wng, R.
Wnshp, Chares N
Wnter Garden, Inc
consn vdro- ectrc Co
f, . . G
f Manufacturng Co
Wofe, mma S., estate of
14110
1399
10316
15888
3090
7086
3478
3094
609
16476
5574
5574
7955
20935
7615
7637
11425
21666
21666
5636
10611
8289
7462
10649
29037
12024
12023
452
4208
16379
16743
4207
1652
10190
8725
2343
11292
1042
15679
15679
32850
8460
4909
6911
4909
11317
18157
25729
28295
24499
6754
8246
9601
2970
8626
16149
16
3
11
e
5
2
7
1
16
10
10
4
19
7
7
9
17
17
5
8
11
15
11
11
1
e
10
6
1
15
7
2
12
6
7
7
18
7
5
12
5
10
15
18
17
17
10
10
10
8
10
15
Nonacquescence notce n ths case, pubshed In Cumuatve uetn I -2, page 6, recaed.
state ta decson.
1 cquescence reates to ssues 2 and 4 of decson.
1 cquescence reates to deducton of Pennsyvana and New ersey Inhertance ta es.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
66
cqt|escences Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Wofe, L. G., admnstrator 1
Wofe, Russe, e ecutor2
Wofe Co., Udopho
Woferman, red, e ecutor
Woferman, Lous, estate of
Women s ppare Co
Wood ros. Thresher Co
Wood, ay
Wood, T.
Woodbury Shoe Co
Woodcffc Sk Ms
Woodmar Reaty Co
Woodruff Lumber Co -
Woodruff Son, ohn T
Woods Sons Co., oseph W
Woods Theatre Co., .
Woods, Wam Stone, estate of
Worcester ank Trust Co. et a., admnstrators..
Wrght, George M
Wrght, erbert N., estate of -
Wrght, O. ., estate of
Wrght, Pear Ross, admnstratr
Wrght. W. ---
Wrght s utomatc Tobacco Packng Machne Co.
Wyatt et a., zabeth C. R., e ecutors..
Wyckoff, Rchard D
Wyman Co., C. C
Wyomng Te Tmber Co
Yahoa Sand Grave Co -.
Yakma op Co
Yae revda Paper o Manufacturng Co...
Yamh ectrc Co
Yeow Popar Lumber Co
Yoder, dward
Yokohama -Ito washa, Ltd
Yost erreL --
Youe, George
Young, I. ., estate of
Young, May S., e ecutr
Young, Mna ., e ecutor -.
Young, S. Marsh -
Young Men s Chrstan ssocaton Retrement
und, Inc.
Youngstown read Co
Younker ros., Inc
Yow, rances Whte
Zegen, rederck
Zenth Mng Co
Zeger, |r., Wam
Zmmerman, . W
Zmmerman, etuu e ...
Zour Drawn Metas Co.
20202
16149
16010
11291
11291
4001
6877
13014
11029
10229
559
30984
7262
6864
9156
11067
7462
14230
20555
14230
12096
12096
4270
1837
17698
32016
10676
21370
24574
2281
9527
3353
29270
9894
3220
2653
2085
20756
7440
3847
4720
1839
36261
41599
1333
5522
5555
6426
5454
123
2513
2145
4908
20
15
15
10
10
8
4
11
9
19
1
17
6
6
8
12
11
13
19
13
12
12
10
1
10
19
8
6
8
2
20
12
3
5
2
18
5
3
6
2
18
2
8
4
10
8
1
5
2
8
state ta decson.
cquescence rates to deducton of Pennsyvana and New ersey nhertance ta es.
state ta decson acquescence reates to frst ssue of decson.
Nonacquescence notce n ths case, pubshed n Cumuatve uetn I -2, page 8, s recaed.
1 cquescence s n the resut ony.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
67
The Commssoner does NOT acquesce n the foowng decsons
of the Unted States oard of Ta ppeas:
Ta payer.
oard of Ta ppeas.
No.
oume.
Page.
24341
16
497
13189
12
692
21808
18
919
9092
10
213
6606
7
574
6519
7
848
6519
7
848
6439
4
568
350
2
498
4437
11
1271
10619
7
1043
4772
4
649
14676
14
328
669
1
839
25960
17
1376
8904
9
1302
8904
9
1302
38607
20
5
8629
8
919
20887
1
20SS
20889
u
954
20890
1
12926
19339
1359
28263
29547

1172
17S71
15
1084
10983
9
1193
11497
12
3
9629
6
875
12169
13
1213
10292
13
1195
10292
13
1195
19727
19
858
1217
1
1135
dams, Wam P
tkn, . ng
abama y-Products Corporaton.
merca Cabes, Inc.1
ng Cory Co.
sop, dward ., estate of
sop, dward ., e ecutor
magamated Sugar Co
mercan press Co
mercan eature m Co.1
mercan Leather Products Co
mercan Seatng Co.4
mercan Seatng Co.
mercan Stee Co
nger Corporaton
nkeny, ohn D., e ecutor 7
nkenv, Lev, estate of 7
nthony, . D
rchbod, ohn ., e ecutor
rnod et a., ohn . .
thens rck Te Co
therton et a., C. ., trustees.
tantc Cty ectrc Co.10
tantc Coast Lne R. R. Co. .
tas Tack Co.1 .
udubon Park Reaty Co..
ud, . W
utomatc re arm Co. of Deaware u_.
utomatc re arm Co. of New York
venue gency Loan Corporaton 14
yers Co., L. S.15
1 Nonacquescence reates to ssue as to tentatve ta .
1 Nonacquescence reates to thrd ssue.
1 state ta decson nonacquescence reates ony to 1017 trust.
1 Nonacquescence n so far as t reates to ncuson In nvested capta of the sum of 193,710.37.
1 Nonacquescence reates to second and thrd ssues of decson.
Nonacquescence reates to decson regardng 1918 taes of nger Ms.
I state ta decson.
state ta decson nonacquescence reates to frst and second Issues of decson.
Nonacquescence reates to fraud penates.
Nonacquescence reates to ssue respectng affaton wth mercan as ectrc Co.
u Nonacquescence reates to second ssue of decson.
u Nonacquescence reates to ssue nvovng reducton of nvested capta on account of dvdend pay-
ment.
u cquescence notce pubshed n Cumuatve uetn III-2, page 3, recaed.
Nonacquescence reates to ssue wth respect to affaton wth venue State ank.
Ths notce, whch was orgnay pubshed n uetn I -41, page 1, was repubshed n Cumuatve
uetn -, page 6, for the reason that the case was erroneousy ncuded n the st of cases acquesced In,
pubshed n Cumuatve uetn I -2, page 1.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
68
Nonacqcescbnces Contnued.
Ta payer.
oard of Ta ppeas.
No.
oume.
Page.
33724
18
105
33725
18
105
25080
17
733
15233
15
862
6858
8
180
9445
10104
8
1236
1S017
11
420
12950
12
652
15810
13
1226
18850
15
1301
17411
17
1002
8624
8625
8
360
5266
7
924
9577
7
924
5266
7
924
17410
17
1002
16379
16743

1390
24769
17
686
23581
16
510
23581
16
610
12934
5
1008
12934
5
1008
18611
11
420
20085
17
1312
11894
9
280
19593
17
413
12670
12
1365
9561
14
912
10454
6
722
9656
7
424
4289
9
304
21621
16
438
19519
9
593
16311
9
593
6110
10
747
6111
10
747
6998
5
756
15714
13
1354
8326
6
274
15255
15
1092
20303
15
1001
8823
8
603
21808
18
919
19933
18
490
.
aey, . P
aey, Mrs. . P
aker, dward
a Roer earng Co.1
a et a., Water ., coe ecutors._
amberg Cotton Ms Co
ancker.|r., .
ank of Dupn
ank of Itay, San rancsco, Caf-
ank of Topeka
arnes, deade C
arnes et a., Chares G., e ecutors.
arnes, |r., ohn, estate of
arnes, oseph
arnes, oseph, admnstrator
arnes, Wam C
arnette, athernc Wknson, soe and ony her 3.
arron- nderson Co
artett et a., Php C. ., e ecutors
artett, ersche, estate of
arton, Mary L., trustee
arton, Ots, estate of
ates, . W. (Mrs.)
aucum, amma
eacon Coa Co.
eck, Maron . urt .
ehow state Co
ew Cotton Ms 4
emont Iron Works
eowsky, Morrs
et Raway Co. of Chcago .
enedct, ames ., estate of
enson Lumber Co
enson Tm er Co
erger, Mathda W
erger, Water -
erks oundry Manufacturng Co
ern Dve Works
est Stee Castngs Co
ggs, sr., .
ngham, rthur W., e ecutor 7
ngham, Robert W
rmngham Coke y-Products Co ---
ack Rver Sand Corporaton
Revokes acquescence pubshed n Cumuatve uetn III-2, page 4.
1 Nonacquescence reates to frst Issue of decson.
1 Nonacquescence n so far as decson aows pettoners to deduct for the years 1930 and 1021 then ao-
cabe porton of edera estate and rtate transfer ta es pad on shares receved by Ihem by vrtue of a com-
promse agreement modfyng the terms of the w and n e cess of ther shares recevabe under the w.
Nonacquescence n that part of decson aowng speca assessment.
a Nonacquescence reac tn ssues nvovng edera Income ta es added to Income for 1017, 1018, and
t)t . n respect of whch petoner was entted to be rembursed by ts tenant companes.
6 .state ta decson.
7 state ta decson nonacquescence reates to deducton of the amount under paragraph f2), secton
403(a1, Revenue ct of 1021, undmnshed by 21,753.40 of the deductons under paragraphs (1) and (8)
of sad secton.
1 Nonacquescence reates to ssue 1 of decson.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
69
Nonacquescences Contnued.
Ta payer.
ar, dward T
ar, W. ., estate of 1
ar Co., . C
ancv, dth ...
ock, . ates
ock, . ates, e ecutor
ock, rank ., estate of
ock ohner Mercante Co.
ossburg Mercante Co
um s, Inc.
unberg ros. Co.
ydenburgh, a
oger Crawford, Inc
onwt Teer Co
ourne, my ., estate of 4
owman, . Wam 5
oykn, zabeth W
oyne Cty Lumber Co
rackenrdge, George W., estate of
radey, M. ., estate of
raunsten, Louse R
rawner, e ander arrson, estate of .
rawner, rances, e ecutr 1
renneman, Davd
renneman, . L.
renneman, erna L
rant, . S., admnstrator
rcke, Maude nea . --
rer Coeres 7
rttngham, uan .
rttngham, uan G
ronson et a., ames D., trustees 1
rooks, W. .8
rown Co., M ---
ryant Stratton Commerca Schoo, Inc.
uock, . --
urgcs, Rchard
urke ectrc Co.
urton, LawTence mer
yck, W. S -
yers, oward Webster
C.
Cadwaader, ohn, estate of
Cadwaader, |r., et a., ohn, e ecutors
Docket
No.
256S 1
2440
7147
10613
18792
18793
18793
4576
2880
2523
oard of Ta ppeas.
oume.
state ta decson.
1 Nonacquescence reates to ssues as to procedure for handng nstament saes
1 Nonacquescence reates to frst ssue of decson.
Nonacquescence does not reate to deductbty of New York nhertance ta .
Nonacquescence reates to deducton of contrbutons to a trust.
Nonacquescence reates to net oss deducton.
Nonacquescence reates to depeton ssue.
1 Revokes acquescence pubshed n Cumuatve uetn III-1, at page 6.
Nonacquescence reates to ssues 1 and 2, and ssue 5 as to patent group No. 1.
18
4
11
13
11
11
11
4
4
7
17
12137
12
1021
9921
5
834
14745
13
835
26037
10
1300
7883
8
582
18935
16
1157
29784
16
477
4635
7
36
6515
11
148
30638
19
49
13776
16
1330
16092
15
1122
16092
15
11 22
8361
10
544
8323
10
544
8324
10
544
8860
6
651
14321
17
711
11406
19365
12
500
28186
13557
16535
13
375
18435
18535
13
375
7702
7
127
10991
12
31
24864
9
753
43
1
32
28612
16
451
25908
17
275
1697
5
553
2689
5
99
2260
4
842
10319
8
1191
13296
15
1
13296
15
1
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
70
Nonacquescences Contnued.
Tapayer
Caforna rewng ssocaton
Caaway, uer
Cambrdge Ice Co
Campbe, rcher Maynard
Campbe, . L
Campbe Co., ohn
Campe, Mmc L
Capto ote Co.1
Carbo Petroeum Co.s
Carey, C. W.
Carney Coa Co.5.
Carruthers, Mabe G
Carter Co., W. W. ___
Centra Savngs ank 7.
Centra Unon Trust Co. of New York, guardan..
Century Musc Pubshng Co
Chadbourne Moore
Chamberan, en Steee
Chamberan, Seah.
Chambers, nna M - -
Chander, Maran Ots 8
Chapn, W.
Chapn Constructon Co,_
Chcago Lumber Co. of Omaha..
Chcago Portrat Co
Chcago Tte Trust Co. et a., trustees (estate
Lous M. Stumer) :
Cty utton Works
Cty Natona ank
Cark, ames
Ceveand, Panesve shtabua R. R. Co
Ceveand, Panesve astern R. R. Co
Cne, Mrs. a Ppes
Cne, W. D.1
Cngan, Margaret ta T
Cohn Sons C
M.1
Cons-McCarthy Candv Co
Comer-Green Lumber Co.
Connectcut Passumpsc Rvers R. R. Co.12.
Docket
No.
3903
2264
7282
18320
18321
19591
30688
6610
7134
9524
2432
5562
8496
25741
689
5006
26518
12840
17066
16598
24285
29479
16597
24284
29480
17686
26057
16259
2267
3200
28516
21396
22438
15826
19641
11918
4927
4927
6929
6930
4227
7361
9238
4302
20916
8424
9100
oard of Ta ppeas.
oume.
5
347
4
842
9
156
6
60
8
1076
15
458
17
575
4
441
12
166
6
539
10
1397
16
515
1
849
10
1408
17
881
12
647
16
961
19
126
19
126
17
820
16
1248
4
842
3
25
18
916
16
1129
18
395
16
839
19
1080
12
615
4
637
4
637
15
934
15
934
6
8
9
87
4
1280
12
256
492
8
1 Nonacquescence reates to queston of affaton as to the companes ncuded In the unts.
1 Nonacquescence reates ony to that part of decson whch reates to appcaton of the yers decson
0 . T. ., 1135).
1 Nonacquescence reates to fourth ssue of decson.
Nonacquescence reates to ssues 1 and 3 n decson.
Nonacquescence reates to ssue No. 1 n so far as t reates to fsca year ended May 31, 1919.
cquescence notce pubshed n Cumuatve uetn -2, puge 1, recaed.
Nonacquescence reates to obsoescence Issue.
cquescence notce pubshed n Cumuatve uetn I -1, page 10, recaed.
Nonacquescence reates to deducton n 1919 of commssons ncurred n sae of property aso decson
as to fourth ssue.
Nonacquescence reates to 25 per cent penaty for faure to fe a return.
u Nonacquescence reates to ssue whether the consodated return for 1919 started the runnng of the
statute of mtatons as to the Comer-Oreen Lumber Co.
Nonacquescence reates to frst ssue of decson n so far as t hods that the ncome was not reazed
I the year In whch the ta es became due and payabe and aso to the second ssue of decson.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
71
Nonacqt|escenceb Contnued.
Ta payer.
Conne, G. _.
Conne, Mrs. G.
Conneee, C. U
Conover Co., S.
Consodated Investment Co
Consodated Te te Corporaton
Contnenta Screen Co
Converse Cooperage Co
Conwav, . W
Coon aev State ank 1
Corbett Stuart
Corneus Lumber Co
Crabtree Co., . __
Crane, T. I
Crocker Co., . S
Cross Mountan Coa Co
Crown Potteres Co
Cunnngham- eckemeer Suppy Co.
Curran. Maurce
D ramon, enretta
Day Pantagraph, Inc.
Day Record Co
Dane, Chares R
Dane, S.
Darbv, Rufus C
Darne, Inc., R.
Davs, Chas.
Davs, Oscar
Day, enry M
De orest, ua N
Denert, sr., Oscar
Deray Lumber Co
Deto Grass Rug Co.
Dennett, red
DeReuter, Ronad
Derschug, ohn N. 4
Desmond s, Inc
Dckerman ngs, Ino
Deckerhoff, Raffoer Co
Descher, fred
Don, ohn P
Doe, rank P., estate of 5
Doe et Laura . M., e ecutors 5.
Doehne, George, estate of
Don, arret M., estate of 8
Dothan O M Co
Downg, Mary M
Duggan, anna, estate of
Duggan, ames, e ecutor s
Duhme, Ophea, estate of
Duncan Coa Co., W. G
18405
18406
3363
3926
13603
15983
30350
12518
2263
11352
11855
4273
5889
27769
4581
1219
10043
15S3S
793
10644
4126
12058
20037
22044
20036
2265
22314
18622
18625
30198
5857
6937
41867
6926
11498
6243
18064
14465
4928
25079
13121
10985
20681
20681
9344
5594
25565
2394
4706
4706
6858
12347
15
15
4
6
13
16
19
17
4
13
11
5
6
17
5
2
12
14
6
7
9
13
16
10
4
IS
11
11
12
4
11
20
7
7
7
15
15
4
17
18
9
18
18
6
9
19
0
s
8
s
13
1 Nonacquescence reates to Issue nvovng oss of 1,000 on Gaoway note.
1 Nonacquescenee reates ony to ssues nvovng reducng nvested capta by reducng current earnngs
avaabe for dvdends by ta accrued for current year.
1 Nonacquescence reates to second ssue n decson.
1 Nonacquescence reates to ssue 1 of decson.
I stato ta decson.
e Nonacquescence does not reate to deductbty of New York nhertance ta .
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
72
Nonacqt|escenceb Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Dunson Ms
DuPont, Perre 8.
Dustn, nne M.
Dwght Loyd
estate of 2.
nterng Co.
.
17019
10
1160
26996
18
1028
8629
8
919
120
1
179
astern Steamshp Lnes, Inc.
astsde Manufacturng Co..
dgar Co., ames
gyptan Powder Co
dtz Son, Inc.. Marc.
am, arvev .1
kn, Dr. Wn. S
kns, Wam M
son, . R
mery et a., are C, e ecutors
mery, |r., Lews, estate of
sperson, Nes, estate of s
sperson, Mrs. Nes (Mec), e ecutr 8.
cesor-Leader Laundry Co
tenson O Co
ane, veyn rancs
armers Depost Natona ank and ffated
anks
armers Loan Trust Co., e ecutor
armers Loan Trust Co., e ecutor
dety Trust Co.
ed, Marsha
rst Natona ank of rdgeport, Conn., e ecutor.
rst Natona ank of Duuth, admnstrator
rst Natona ank, resno, Caf
rst State ank of rackettve, Te
rst State ank of Wemar -.
rst Trust Savngs ank
tzgerad, Mary
nt, Goerng Co., Ltd
oster, ce sher
oster, . M., estate of
oster, ames ., estate of
oster, Mrs. ames Martn, e ecutr
o , ugene
rancescon Co., . C.7
rancs, rancs, guardan
rancs, |r., rancs
24870
22722
14606
28918
22251
24711
28952
37180
18001
18629
27807
30309
9766
9766
7071
7071
9221
28764
16725
6220
18234
21621
13638
11840
18721
18502
18503
15811
12876
12657
16011
11746
810
20078
10126
12928
11493
21928
20535
10585
16724
16724
Nonacquesoence reates to Issue regardng ursdcton.
state ta decson nonacqucscence reates to frst and second Issues of decson.
state ta decson.
state ta decson nonacquesoence reates to ssue 2 of decson.
Nonacquesoence reates to Issue concernng nvested capta for 1920 and 1921.
Nonacquesoence reates to Issue 1 of decson.
t Nonacquescence reates to thrd ssue of decson.
17
s
16
17
18
16
11
16
15
9
9
11
11
8
16
15
5
10
16
13
15
18
18
13
0
10
11
5
19
7
16
13
16
17
10
15
15
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
73
Nonacquescences Contnued
Ta payer
Docket
No.
oard of Ta ppeas.
oume.
Page.
rank, Wam G., admnstrator
rankn et a., Thomas ., e ecutors and trustees.
resh Pond ee Co
uer, |r., ames W
G.
Gaum, bert ., trustee.
Garber, . .
Garber, M. C
Gardner Governor Co.3
Garneau Co., Inc., oseph
Genera Manfod Prntng Co
Georga Car Locomotve Co.
Gbson, ate oa estate of
Gdeon- nderson Co
Gette, Car W
Gette, atharne
Gnsburg Co., Inc., en
Grard Trust Co., e ecutor 4
Grard Trust Co. et a., e ecutors
Gass, ndrew, estate of
Gechman, Ph
Genn, Thomas --
Goddard, ohn N -
Godfrey, onathan
Gong e Manufacturng Co
Gonzous Creek O Co. (dssoved), trustee for
credtors of
Goodrum, |r., .
Gordon, enry
Grand Rapds Natona ank 5
Grandn, orence
Grandn, George W., trustee -
Grandn, enry
Graves et a., . ., commttee for credtors of
Whttaker acon
Great ear Sprng Co.6 --- -
Great Northern Ry. Co.7..
Greene et a., Rchard T., trustees
Greck Condensed uttermk Co
Greyock Ms 8
Guarantee Constructon Co.
9344
6515
3068
6101
370S
14097
3710
13909
321
40
14577
3131
7402
22365
27010
18754
45556
11298
23208
28361
18121
2262
18621
18720
17584
13393
18613
13838
21116
25740
25742
25742
22631
10489
8433
11850
23973
3691
11926
1828
(
11
9
7
10
11
11
5
1
12
2
7
18
18
14
19
10
16
19
17
4
11
18
15
12
11
12
9
16
16
16
12
12
8
15
7
9
1071
148
156
28
747
979
979
70
75
436
986
1144
329
434
580
81
1100
308
378
147
842
420
775
152
310
420
1191
1119
515
515
515
124
383
225
401
79
1281
1145
Nonacquewence reates to Issue as to whether the agreements of December 14, 1918, and the dscharge
thereof were productve of Income 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).
Nonacquescence reates to thrd ssue of decson.
state ta decson.
cquescence notce pubshed In Cumuatve uetn III-2, page 20. recaed.
Nonacquescence does not reate to deprecaton and obsoescence ad|ustments.
I Nonacquescence reates to ssue nvovng the queston whether the company shoud accrue as Income
to the ta abe years Interest earned but not pad In those years on obgatons of other corporatons owned
by t.
Nonacquescence n decson In so far as the oard hods that It has ursdcton to determne the over-
payment for 1917.
Nonacquescence reates to second Issue of decson.
35942 31 6
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
74
Nonacquescences Contnued.
Ta payer
Docket
No.
oard of Ta ppeas.
oume.
Gud Co., Inc., . .
Guf States Stee Co.
Gwn, ar S.
.
aght, George .
aer, Mary 1
amton, arrs Co
amet Ice Co
anon, Mary
annba Mssour Land Co
arbour-Longmre Co
aran Co., O .
arret Cotton Ms
arrs, zabeth
arrs O Co., C. C
arry Co., S.
artford- armont Co.1
artmann, Chares
aske arker Car Co
ass, . S. -
atzc ueher, Inc.4
aubens, enry, e ecutor
awkns, rank
ay, ane urt
aynes, wood, estate of
eay, enry W
eay, Raymond
eneman Lumber Co. 4
enrch, Samue G., estate of
epershausen et a., George, e ecutors .
epershausen, Php, estate of7
emock oow Coa Coke Co
enaghan, zabeth -
endrcks, armon W
enn, . W., trustee
epburn, C. sher, estate of 7
ermance, . P
erndon, ames
ershey Manufacturng Co.
erzog, Php W
ess ros.8
ewtt Rubber Co
ckey, .
8741
9276
18358
18359
17983
6141
14063
25751
4170
15687
25516
27251
9084
6905
1374
6228
11820
8011
1644
9016
18930
7009
14817
9501
1 1 45 I
11418
2572
19614
11724
19560
19649
10175
2420
24911
24911
8837
27252
4554
4303
9690
11192
32297
28862
32108
6245
8039
325
19107
11
12
14
4
14
12
16
16
9
7
1
5
11
13
4
12
14
9
13
10
17
4
17
13
18
18
11
2
18
18
10
16
4
8
11
11
18
14
10
7
1
11
1 Nonacqueseence reates to Issue concernng deductbty of chartabe contrbutons.
Revokes acquescence pubshed In Cumuatve uetn II1-1, page 19.
1 N onacquescence reates to frst Issue of decson.
onacquescence reates to thrd Issue n decson.
Nonacqueseence In so fur as decson aows pettoners to deduct for the years 1920 and 1921 the:r
aocabe porton of edera estate nnd State transfer ta es pad on shares receved by them bv vrtue of a
compromse agreement modfyng the terms of the w and n e cess of ther shares recevabe under the
w.
Nonacqucsrcnce reates to Issue as to tentatve ta .
1 state ta decson.
Nonacquescence reates to second ssue of decson.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
75
Nonacqt|escences Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
ggnbotham- aey-Logan Co.1
nd, George U
nd, Roph Co .
nman, Thos. P
rsch Co., doph
rech-Wes Manufacturng Co
of rau Co., The
offman, Isabea C, estate of s
offman et a., Meyer C, e ecutors 8
offmann, rederck
ofed, Mary D. Moore
oowav, W. W., admnstrator
oyoke Westfed R. R. Co
ome uders Shppng ssocaton
ome Ice Cream Ice Co
ome Laundry Co
ouston et Termna Ry. Co.4
oward Co., . W. . P
owe, Chares
ubert, dmund D., estate of 5
umphreys, . C
unt, . C
untngton, nne
untngton, Waace
upfe, Co., Inc., . Chr. G.
utchngs, mma urt
utchns Lumber Storage Co.
utchson, Chares
utt Catte Co
utt Contractng Co
ynes, Wam
I.
Inos Merchants Trust Co., e ecutors 5
Inos Rura Credt ssocaton
Impera Coa Coke Co
Independent rewng Co. of Pttsburgh 10
Independent rck Co
Independent Lfe Insurance Co. of merca 11
Indana arbor et R. R. Co
Indana Rong Ms Co
Indana Stove Works 12
Indanapos Street Ry. Co
owe Cabnet Servce Co
4691
19167
19167
18615
3230
30494
6134
5338
3361
10089
28361
8425
7044
37633
6047
8494
19863
27805
11204
4069
19888
25807
25806
9834
19567
3307
8053
26433
26433
21382
11204
5058
21808
3242
8198
25295
21550
37661
12259
8148
8787
1231
12586
8
IS
18
11
7
M
(
3
7
1 )
9
s
10
4
6
15
16
12
)
15
15
15
9
17
1
13
17
17
16
12
3
18
4
11
17
16
13
8
7
1 Nonacquescence reates to frst. second, and fourth ssues of decson.
1 Nonacquescence reates to thrd ssue n decson.
1 state ta decson.
Nonacquescence reates to second and fourth ssues of decson.
state ta decson nonacquescence reates to ssue concernng transfer o stock.
9 Nonacquescence reates to obsoescence ssue.
Nonacquescence n so far as decson aows pettoners to deduct for the years 1920 and 1921 ther
aocabe porton of edera estate and State transfer ta es pad on shares rece ved by them by vrtue of a
compromse agreement modfyng the terms of the w and n e cess of ther shares recevabe under the
w.
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 e pended for tranng to keep n condton for
stunt actng.
10 Nonacquescence reates ony to ssue 2 n decson.
Nonacquescence n assumpton of authorty by the oard to pass upon consttutonaty of secton
245(b) of the Revenue cts of 1921 and 1924 and refusa to admnster same.
Nonacquescence reates to second Issue of decson.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
76
Nonacqt|escences Contnued.
Ta payer.
Industra Loan Investment Co
Ingewood Park Cemetery ssocaton.
Inman, dward
Intcrurban Constructon Co
Irvng ank-Coumba Trust Co. et a., e ecutors 1
.
ackson, nnette T.
ackson, Carone Mather, estate of 5
ackson, George .
ackson, Mnne L., estate of
ackson, Ws . -
ackson Tnde 2
acob ros. Co
aeger, Otto, estate of 1
ames, rthur Curtss 1
ames omstrom Pano Co
efferson Gas Coa Co
Docket
No.
ohnson et a., omer S., e ecutors 8.
ohnson, Stephen O., estate of4
ohnston, Mrs. . ., deceased
ohnston, R. ., her at aw
ones, ohn M., estate of4
ones, Loua ., e ecutr
ones, S.
.
aaua Land Trust.
ab, Lous
ansas Cty Southern Ry. Co. et a.1.
een, erbert Ide
eeney, George ., estate of
eeney, Raymond G., e ecutor.
cews Reaty Co., Inc.7
ehota Mnng Co
eystone Coa Mnng Co
eystone Stee Wre Co
nnett-Odom Co.
rby Lumber Co
rk Co., ames S...
sse, Carone T
sse, Carone T.
20664
3249
2501
2687
7028
20055
9001
20303
9002
4219
9003
9000
18832
20055
2509
18833
14951
33247
9550
9550
14355
14355
39743
39743
27220
28263
29547
19421
19422
12054
8423
11715
14424
11715
14424
10489
1117
10168
17496
20659
44954
30175
18203
21788
oard of Ta ppeas.
oume.
17
6
4
5
6
16
11
15
11
3
11
11
19
315
16
897
13
764
19
322
16
1135
11
534
11
534
12
185
12
185
20
441
20
441
17
1131
19
1172
15
865
15
886
16
665
6
275
15
715
15
715
12
383
3
885
10
295
16
617
19
1124
19
1046
17
916
15
705
15
1270
1 state ta decson nonacquescence reatos to deducton for e ecutors commssons and attorneys
fee .
1 Nonacquescence reates to tentatve ta Issue.
1 state ta decson nonacquescence reates to deducton of the amount under paragraph (2), secton
403(a), Revenue ct of 1921, undmnshed by 21,753.40 of the deductons under paragraphs (1) and (3) of
sad secton.
state ta decson.
state ta decson nonacquescence reates to trust Instruments of 1918 and 1921.
Nonacquescence reates to e cuson from ncome for the year 1919 of addtona compensaton for trans-
portng Unted States mas, awarded by the Interstate Commerce Commsson n 1919.
Nonacquescence does not reate to deprecaton and obsoescence ad|ustments.
Nonacquescence reates to transferee abty.
Nonacquescence reates to deducton of aquot part of cost of mprovements to certan property.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
77
Nonacqt|escences Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
ster et a., orence L., admnstrators
ster, Wam ., estate of .
ster Land Improvement Co.2.
ttery Reaty Co
en, orence L. _
vman,
ohn, ches _.
ohn, Le
uhn, .
vnett, arod .
Lancaster et a., ohn L., recevers-
Lancaster Lens Co.4
Land Improvement fe Suppy Co..
Landreth Co., . .
Langwe Rea state Corporaton..
Lawson, ohn S
Leasng udng Co
Le us, Mary ee urt
Lee Lve Stock Commsson Co
Lee Shoe Co., Inc., ohn
Levne ros. Co., Inc.7
Lews, ohn
Ley Co., Inc., red T
Lbby, Margaretta ., estate of ...
Lberty Insurance ank
Lberty Natona Co
Leber et a., . W., e ecutors
Lghtnng
O Gas Co.
Lsk Manufacturng Co., Ltd.9.
3707
11986
18061
3707
11986
18061
12355
15114
34274
1004
4005
0061
6102
10157
6753
16478
16477
18631
13190
9863
11603
28773
15835
23758
6108
14423
18745
280
10061
6832
26118
18168
28979
5070
22372
9720
8584
23204
10031
11438
19050
20440
24414
29788
11
11
9
14
4
16
16
1 1
12
9
10
18
11
17
10
16
17
7
11
G
19
9
s
14
18
13
11
18
15
8
17
Lvezey, . M._.
oyd, rnest
enz, esse 10
Nonacquescenee reates to ssue as to whether the agreements of December M, 1918, and the dscharge
thereof were productve of Income ta abe for the years nvoved, and, f so, to what e tent.
Nonacquescenee reates to ssue wth respect to queston of aowance of amortzaton n 1918 on costs
ncurred n 1919.
Nonacquescenee reates to queston In decson pertanng to the year 1919.
Nonacquescenee reates to the ssue as to whether a return sgned by the presdent and secretary was
the return requred by statute, the fng of whch started the runnng of the statute of mtatons.
1 Nonacquescenee reates ony to nvested capta ssue.
. Nonacquescenee n so far as decson aows pettoners to deduct for the years 19,20 and 1921 ther
aocabe porton of edera estate and State transfer ta es pad on shares receved by them by vrtue of a
compromse agreement modfyng the terms of the w and n e cess of ther shares recevabe under the w.
Nonacquescenee reates to ssue 6 n decson.
1 state ta decson.
Nonacquescenee reates to deprecaton ssue.
Nonacquescenee reates to thrd and fourth ssues of decson.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
78
Nonacquescences Contnued.
Tapayer.
Docket
No.
oard of Ta ppeas.
oume.
Page.
Lock, Moore Co., Ltd
Loetscher, Chrstan, estate of 1
Loetscher et a., ohn ., e ecutors .
Loewensten ros. Garment Co
Los ngees Sat Lake It. R. Co
Lousana Nava Stores, Inc
Ludngton, Chares ., estate of
M.
Co.
Magee urnace Co.2.
Mahonng Coa R. R.
Ma|estc Coa Co
Macy Co., dward
Manckrodt, |r., dward
Manckrodt, sr., dward
Mata Tempe ssocaton
Manhattan rewng Co
Mann, rankn P., estate of
Mansfed, enry ., estate of 4
Mansfed, Mnne I., e ecutr
Martme Securtes Co.6
Marston, dgar L
Martn dvertsng gency, Inc., Mac...
Mastck, Lzze S.4
Mathews, ohn
Matthessen, Conrad enry
Matthessen, |r., . W
Mc voy Co
McCurg et a., u L., e ecutors
McCormck et a., Cyrus ., e ecutors
McCormck, Nette ower, estate of...
McCutchen, C.
McDonough, ames
McDowe, S. L
McDowe, Mrs. S. L..
McGee, Nee ...
McGown- oshee Lumber Co. ...
McMurtre, dnah
McNe, Robert .7
Meagher, Chares
Mercante Trust Co., e ecutor 8.
Merrcn, . .8..
Merrtt, Thomas ., estate of
Metro Pctures Corporaton of New ngand 10_.
Metropotan Securtes Corporaton
9295
14325
14325
8465
21741
18449
5600
2202
21808
9677
11031
1750
29170
693
6101
12165
12165
324
20955
8115
20509
9583
28250
2125
9216
12468
22731
22731
19819
21462
11272
11271
13292
29938
10446
19740
17261
24105
9528
19847
18502
18503
4437
27956
7
14
14
13
18
18
16
11
4
18
6
14
4
16
6
10
17
17
2
18
11
18
8
20
2
10
13
13
13
16
16
15
15
13
10
8
16
20
13
18
13
11
19
1008
228
228
446
168
533
308
1216
923
919
462
194
1112
408
952
747
335
335
188
558
162
428
209
162
921
1017
335
423
423
569
556
947
947
1181
961
1301
479
68
85
156
1096
1 state ta decson nonacquescence reates to ssues nvovng e ecutors commssons, attorneys fees
and msceaneous admnstraton e penses.
1 Nonacquescence reates to frst ssue of decson.
1 Nonacquescence reates to second ssue of decson.
state ta decson.
Ths notce, whch was orgnay pubshed n uetn I -41, page 1, was repubshed In Cumuatve
uetn -, page 7, for the reason that the case was erroneousy ncuded n the st of cases acquesced
n, pubshed n Cumuatve uetn I -2, page 3.
6 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.
7 Nonacquescence reates to deducton of commsson pad to agents for negotatng ease.
8 state ta decson nonacquescence reates to deductbty of remander vaue of the resduary estate
bequeathed to charty.
Nonacquescence n decson regardng certan shares of stock.
o Nonacquescence reates to tentatve ta ssue.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
79
Nonacqt|escences Contnued.
Ta payer.
oard of Ta ppeas.
oume.
Page.
Me can Teegraph Co.1
Manus Motor Works, Inc
Mddese Ice Co. et a
Mdand aey Raroad Co.a...
Md-West o Co
Man, M.
Mer, Carence
Modern Inventons Corporaton.
Mor, arry C
Moore, L. C
Moore, Tom ( ayette T.)
Moore Corporaton, ohn C
Moore Cotton Ms Co
Morgan, rooks
Morre Co., ohn
Morrs, Caspar W
Morsman, dgar M., estate of 8
Morsman, |r., dgar M., admnstrator 5
Moser, Car
Moser, George
Moser, osephne T
Moser, uus C
Mossman, Yarnee 4 Co.
M. S. C. odng Corporaton et a
Muer, Car, estate of
Murphy et ah. ames C, e ecutors 7
Murphy O Co
Myers, Long Co
N.
Natona ank of Topeka
Natona ectrc Tcket Regster Co.
Natona Pano Manufacturng Co.1.
Natona Products Co
Natona Refnng Co. of Oho et a., The.
Natona Sugar Manufacturng Co
Natona Tank port Co
Neson, C. N., estate of 7
Neuman Co. eta., . L
Nevn, Wam L., e ecutor 7
New ersey Porcean Co
Newman, Lan D
9093
6052
7282
25000
11066
21555
14087
25377
19135
3709
13907
18273
18861
29543
18614
15114
34274
27806
32075
32075
13473
13475
13474
13471
3269
11076
4620
9720
4166
14440
12358
24511
18850
13097
37745
3333
20486
6136
12120
186
10605
3274
7702
18348
31551
29568
15940
10
6
9
19
11
16
13
16
14
11
19
15
17
11
14
16
14
14
12
12
12
12
7
13
6
15
14
15
17
17
18
11
7
n
1
7
3
7
16
10
15
15
213
43.5
156
423
1223
1111
1081
1267
23
979
140
1140
662
420
569
1405
108
108
G72
672
672
672
a
216
1175
952
1195
460
1301
48
42
1103
46
632
611
236
577
1217
127
53
15
1059
369
1 Nonacquescence reates to tentatve ta Issue.
1 Nonacquescence reates to ssue 1 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 to ssue nvovng gfts and sae of certan stock.
state ta decson nonacquescence notce pubshed n Cumuatve uetn II-, page 57, recaed,
n so far as same reates to Issue 2 of decson.
Nonacquescence reates to ssue nvovng deducton of tentatve ta es n determnng the earnngs
avaabe for payment of dvdends n 1018 and 1919.
state ta C
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
80
Nonacquescences Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Newman, Lovd D
Newman et a., Loyd D., e ecutors
Newman, Lous, estate of
Newman, Wam C.1
New Oreans, Te as Me co Ry. Co
New York Trust Co., trustee
Nes re rck Co
960 Park ve. Co., Inc., et a
Node orst Co.
Nord op Ranch
Nordhot, ohn
Norfok nttng Ms Corporaton
North mercan Mortgage Co.4
North mercan O Consodated 5
Northern Trust Co., e ecutor9
Northern Trust Co., e ecutor 7
Northsde aduct Co.
Northwestern Improvement Co
Northwestern States Portand Cement Co. ..
Norton et a., rank ., e ecutors 10
Norwch Worcester R. R. Co
Norwood Lumber Co
Noyes, Chares R., estate of11
Nunnay, .
Nunuay, Wnshp
Oho as Dye nshng Works.
Obct Motor Co
Od Coony R. R. Co
Od Domnon Steamshp Co
Ods, Mard D.12
Onda Gasone Co
dnger Corporaton
O Ne, ohn
O No, Mrs. ohn ( rances).
Ortsefcn, dam 13
Ostcnberg, W. ...
Ott, W M
Ottev, ohn
15936
15939
15939
6530
400
28250
2628
6978
9867
6149
3766
4341
15798
8714
16107
2473
7127
11728
14200
12106
5763
10456
5594
2020
3785
18486
18627
18620
20395
14700
7820
24462
8718
15799
19077
25469
16864
16864
12900
19306
34015
13713
15
15
15
10
6
2(1
(3
7
12
10
4
5
18
12
9
9
14
9
2
6
16
11
11
16
16
6
16
15
13
9
16
16
14
17
15
11
1 Nonacquescence reates to deducton of amount of bad debt ascertaned to be wortbess and charged
off n 1920.
1 Nonacquescence reates to ssues 1 and 4 n decson.
Nonacqescence reates to frst ssue of decson.
Nonacquescence reates to ssue regardng ncome from purchase of own debentures.
I Nonacquescence reates to bass of chargng depeton on cost of defendng tte to o propertes and
to Issue nvovng ncome earned n 1916 and reeased to ta payer In 1917.
state ta decson.
T state ta decson nonacquescence reates to trust created on ebruary 9, 1917.
Nonacquescence n so far as decson determnes that ghand Park Co. and Northsde aduct Co.
were affed wth rgna Raway Power Co.
Nonacquescence reates to ffth ssue of decson.
Nonacquescence does not reate to deductbty of New York nhertance ta .
II state ta decson nonacquescence reates to ssue 1 of decson.
Nonacquescence reates to partnershp ssue.
Nonacquescence does not reate to deducton of contrbuton to church budng fund.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
81
Nonacqt|escences Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Ottumwa Serum Co
Ou udng and Loan ssocaton
P.
Pacfc Coast Ppe Co.1
Pacfc Southwest Trust Savngs ank, e ecutor2
Pametto Coa Co.
Paramount nttng Ms.
Parrett, O. S
Paso Robes Mercante Co.
Payne, Martha
Pearson, rc ,
Peavy- yrnes Lumber Co. .
Peavy-Moore Lumber Co. .
Peavy-Wson Lumber Co. .
Peck s urnture Co.4
Pederson, ans 5 ,
Pederson, Mare 5
Peeress Wooen Ms
Peton, onoro Gbson, e ecutr 1
Peruna Co.
Petauma Santa Rosa R. R. Co.7
Pheps-Watere Co.
Phadepha uartz Co ---
Petech, my Lake, deceased, estate of.
Petsch, Water G., e ecutor
Pke County Coa Corporaton 10.-
Pttsburgh nfe orge Co..
Pttsburgh Provson Packng Co.
Pttsburgh Suppy Co.
15114
34274
3865
7961
12136
9478
18272
20306
29902
6766
11655
28038
32298
27804
15824
16354
25984
15823
16355
25986
15822
16356
25985
16108
12329
12328
12038
7402
5102
12333
13830
19419
6677
5424
6424
7189
7464
9219
15813
32370
18864
14
G
11
14
16
11
17
4
12
18
IS
16
14
14
14
16
14
14
13
7
11
11
15
13
6
6
4
6
16
14
139
620
Nonacquescence reates to Issue 6 of decson.
state ta decson.
Nonacquescence reates to affaton ssue, e cept wth regard to eavy-Wson Lumber Co. and
Chrste S astern Ry. Co. for 1917, 1918, and 1919.
Nonacquescence reates to easehod ssue.
Nonacquescence reates to ssue (a).
Nonacquescence reates to ssue as to whether the oard had ursdcton to hear and determne a
defcency for 1920.
Nonacquescence reates to that part of decson as to the purchase of ta payer s own bonds at ess than
par whch were retred.
Nonacquescence reates to ssue as to whether Pheps-Waters Co. was a transferee of Wsconsn Chem-
ca Co.
Nonacquescence reates to ffth Issue of decson.
1 Nonacquescence reates ony to Issue 2 n decson.
Nonacquescence reates to ssue Invovng speca assessment
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
82
Nonacqt|escenceb Contnued.
Ta payer.
Pttsburgh Unon Stock Yards Co
Pttsburgh ave oundry Constructon Co.
Panters Natona ank
Potter, . - --
Powe Coa Co.1
Prescott et a., Over, e ecutors 1
Prescott, Wm. R
Prndbe, ohn
Prndbe, Loretta
Prtzaff, rederck C
Prosser, Seward
Provdence Worcester R. R. Co
Provdent Trust Co. et a., admnstrators
.
uaker Mad, Inc.
R.
Raston Stee Car Co
Randa, George W., estate of...
Rauh Sons ertzer Co., .4.
Rebadow, nna N
Red Samon Cannng Co
Recb, M. -
Reese, . .
Rey, Warren
Renbod, erman, estate of.
Reance Manufacturng Co.
Remngton Rand, Inc
Remngton Typewrter Co
Renzehausen rederck C
Reserve Loan Lfe nsurance Co. .
Reynods, Mary G., estate of..
Reynods, Php M., estate of.
Rhode Isand Too Co
Rchfed O Co....
Rchmond et Ry. Co
Rggs Natona ank
Rndge Land Navgaton Co.
Roanoke Ms Co.
Robertson Co., . P
Robeson, mma
Robeson, George W
Robeson, Irvng S
9219
15813
32370
9089
22455
7432
11945
7883
18626
15344
15345
6109
8520
6297
7775
4976
11421
7640
18158
5S50
6765
10720
15937
4146
9847
18404
5380
11418
6021
34726
2788
10658
21489
29554
32965
8625
8624
2832
15799
19077
7218
30903
3698
23221
14104
2026S
26267
22126
16
6
18
10
12
8
11
16
16
10
7
5
5
10
15
12
15
15
8
15
7
17
7
11
4
8
18
8
8
3
13
13
17
2
18
14
18
18
18
Nonacquescence reates to ursdcton Issue.
Nonacquescence docs not reate to deductbty of Now York Inhertance ta .
1 state ta decson.
Nonacquescence reates to ssues 3 and 4 of decson.
1 Nonacquescence In decson nvovng ssues regardng (1) the deductbty of reserves to cover a-
bty on outstandng coupons attached to guaranteed premum reducton poces, and (2) the dsaowance
by tno Commssoner as a deducton of 5,642.15 representng ta es pad and other rea es
Nonacquescence reates to March 1, 1013, vaue of water rghts.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
83
Nonacquescences Contnued.
Ta payer.
Robeson, Robert
Robnson Co., . M.1
Robnson, Mrs. C.
Rodenbough, zabeth MrCahan, estate of 1
Rodenbough, mer ., e ecutor of the estate of
zabeth MrCahan Rodenbough, deceased 2
Rofe, Ward G., e ecutor
Root, enry L., estate of 2-
Root, Suse M., e ecutr 2
Rosenbaum ros., Inc
Rosyn ue Co. ...
Rosseter, ohn
Roth, W.
Rothschd Coortype Co
Rouse, empstone Co., Inc.
Rowe, M. D.
Rowe, Mrs. M. D.
Roya Taors
Ruf, rank ., estate of 7
S.
St. Lous Maeabe Castng Co.
St. Lous Natona aseba Cub
Saeger, Wford C
Sage, Margaret Ova, estate of
Sanborn, red C
Sanderson, en|amn ., e ecutor 2
San oaqun rut Investment Co
Sarfcrt, Ma
Sass, Morrs.-
Savannah Rver Lumber Co. et a.e
Scarbrough, . W._
Scarbrough, Mrs. .
Scarbrough, Lemue
Scha, Wam
8choenhet et a., W
Schoette Co., dwn
am,
...
e ecutors2 ,0..
Docket
No.
26269
5652
8271
465
465
18486
2825
2825
13050
. 074
22072
6179
6012
12663
7673
10987
9063
9064
21998
9528
f 5490
1 15168
26798
7562
5882
40963
28979
6988
6989
20801
3436
6922
11354
16130
2( 93
17099
I 24483
/ 17098
24484
/ 17097
24482
/ 9721
I 19163
16626
1941
oard of Ta ppeas.
oume. Page.
18
5
8
1
1
r,
5
5
11
16
12
4
M
7
7
1,8
13
15
6
19
IS
16
5
12
It
17
18
17
s
17
IS
13
14
13
1 Nonacqueseence reates to frst ssue n decson.
1 state ta decson.
state ta decson nonacqueseence reates to ssue 1 of decson.
Nonacqueseence reates to ssue nvovng notce of defcency for fsca year 1917 and speca assessment
Issue.
Nonacqueseence reates to fna ssue of decson.
8 Nonacqueseence reates to second ssue of decson.
1 state ta decson nonacqueseence reates to deductbty of remander vaue of the resduary estat
bequeathed to charty.
Nonacqueseence reates to tentatve ta ssue.
Nonacqueseence reates to affaton of Savannah Rver Tmber Co. and Port Wentworth Lumber Oo.
wth group for 1918-1921.
Ths case was Inadvertenty prnted n uetn I1I-48 as havng been acquesced n by the Com-
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
84
Nonacquescences Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Schreer Co., onrad
Scoto aey Suppy Co
Scowcroft Sons Co., ohn
Scranton ectrc Co.1
Scuy Svrup Co., D.
Seaboard Natona ank of New York, N. Y.p e -
ecutor 1
Seas, ctora D. (Mrs.)
Seas Shppng Co., Inc
Sever, Maron Shanwad3
Shaffer, C.
Shaffran, Moe
Shanwad, Maron, D.
Sharpe, Mary .4
Sheffed Dentfrce Co.6
Shto Co., ohn
Shto Reaty Co
Shoemaker, ora .
Sege, ugene, e ecutor7
Sege, acob, estate of7
Sege, Inc., oe ---
Sver ng Consodated Mnng Co. of Utah.
Smmons Gn Co
Smons rck Co.8.
Smpe ngneerng Co.
Snshemer ros., Inc
Socum et a., erbert erman, e ecutors.
Sma, G. G
Smth, Carence C
Smth grcutura Chemca Co
Smthers, rancs S., estate of
Sowers Manufacturng Co
Spencer, Maron Parsons 9
Standard Lfe Insurance Co. of merca 10.
Stange, . .11
Starbuck, . ., admnstrator.
Stencr Manufacturng Co
Stran ros., Inc.12
3600
27002
29583
17872
10005
9690
18624
20714
22077
41648
14410
9872
29987
14410
17127
11814
6187
6186
25640
18879
18879
1739
15153
21523
13973
24509
27247
15548
22667
40643
29560
6498
5882
27976
3767
13179
665
14464
22194
12475
25842
29779
553
11724
22371
30915
9
17
18
15
10
11
11
16
14
12
18
14
17
13
8
8
16
19
19
1
8
16
14
17
5
6
16
4
11
1
16
11
13
1
13
18
19
1 Nonacquescence reates to ssue respectng affaton wth mercan Oas ectrc Co.
1 state ta decson.
Nonacquescence reates to ssue as to w hether oard had ursdcton to hear and determne defcences.
Nonacquescence wth respect to oard s acton n e cudng from ncome the amount receved from
Mary . Snarpe trust.
I Nonacquescence roates to oss sustaned through obsoescence of trade-mark.
f Nonacquescence roates to deducton for e hauston of fe estate.
state ta decson nonacquescence n oard s determnaton that transfer of a certan easehod by
decedent consttuted a bona fde sae for a far consderaton n money or money s worth.
Nonacquescence reates to contrbuton to the Year Cub.
Revokes acquescence pubshed In Cumuatve uetn II-2, 37.
10 Nonacquescence reates to ssue nvovng the queston of reserve.
II cquescence notce n the case of . U. .Stange (C. . I -2, 4) recaed.
Nonacquescence reates to deducton of net oss for 1921 In computng net Income for fsca year ended
anuary 31, 1024.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
85
Nonacqt|ebcences Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Stephens- damson Manufacturng Co
Stetson Sc son
8tevens, . O
Stevens Thompson Paper Co
Stewart, Davd 1
Stone, George L
Stoney, Mary M. (Mrs.)
Strckand, D.
Strckand, Ove
Strckand, D. . and Ove
Strong, . R., estate of
Sugg, . D., estate of
Sunn, L.
Sunnysde Coa Coke Co.
Superor Motor Parts Co.3
Swenson, Crstna, estate of
wenson, 8. T., e ecutor
Luce W
3. ...:
Sykes, Rchard, estate of 4
T.
Tat, ames
Tayor, Thaa C --
Temoyan et a., nne, trustees
Temoyan, Mrs. ormg, estate of
Termna Raroad ssocaton of St. Lous
Te as Pacfc Ry. Co
Te te M Suppy Co
Thomas, C. R
Thomas, Thomas ., estate of
Thomas, W. ubrey
Thomas Coa Co.
Thompson, Meve W.
Thorn, Susan ., estate of1
Thome, Neae Co., Inc
Tghe, nna M -- -
Tnde, rank T.
Tobn, Chares ..- --
Trppensee Manufacturng Co
Trumbe Refnng Co. of rzona
13462
18641
25010
30443
8736
16318
3501
18309
10756
18628
40707
40708
23159
12468
8860
7483
9442
10348
16177
16177
1S516
12315
12136
13908
17799
22239
22239
26162
28661
9863
10382
7139
4230
4229
8098
23609
18234
12491
13472
8999
25922
13261
11763
17492
26434
32151
16
11
14
6
17
9
11
16
16
16
13
6
6
)
8
14
14
11
12
14
16
11
17
16
16
17
)
6
8
6
(
10
s
16
13
12
11
17
15
11
1 Nonacquescence reates to Issue 1 of decson.
1 Nonacquescence reates to the thrd ssue of decson.
a Nonacquescence reates to fna ssue of decson.
state ta decson.
Nonacquescence reates to Issue as to whether the agreements of December 14,1918, and the dscharge
hereof were productve of ncome ta abe for the years nvoved, and, f so, to what e tont.
Nonacquescence does not reate to ssues nvovng contrbutons to Y. M. C. . and amortzaton of
dscount on bonds.
T Nonacquescence reates to second ssue of decson.
Nonacquescence reates to perod of maon for coecton of 31,20 5.51 assessed on orgna caendar-
year return for 1919 aso concuson that books were kept on accrua bass durng 1918 and 1919.
st ate ta decson nonacquescence reates to ssue 2 of decson.
Nonacquescence reates to tentatve ta ssue.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
86
Nonacquebcences Contnued.
Ta payer.
oard of Ta ppeas
oume.
Page.
Turners as Power ectrc Co.
Turnure, George
U.
Underwood, Lucy C, estate of 1 --
Unted States Merchants Shppers Insurance Co. .
Unted States Refractores Corporaton
Unted States Trust Co. of New York et at., e -
ecutors of rancs S. Smthers, deceased
Upham, Roy
an Schack, en L., estate of 5
an Zandt, acobs Co
rgna Carona Securtes Corporaton et a.
rgna Raway Power Co.8
on Ruck, ar, estate of 7
W.
Wadde, Mary T...
Waggoner, da
Waggoner, R. M
Wagner, Rchard G.
Wacott Lathe Co...
Waden nfe Co
Wado, Chares G., estate of
Waker, Wam a, estate of.
Waters, rances W. (Mrs.)
Waworth, Chares W
Wanamaker, ohn, estate of .
Wardaw, W. C
Warner, red W.
Warren, Wm. C -
Washburn, . L
Washngton ote Co.
Washngton Post Co
We, oseph, estate of 4
We, Sopha, admnstratr ..
26306
10045
2473
10439
5642
665
16105
7127
6863
1.1605
7484
9040
11731
16626
4228
5881
5880
4265
1142
12977
26163
18721
23973
18616
8794
31551
2261
3713
18632
27590
6009
7133
8085
18960
18960
15
9
6
9
9
9
2
17
18
15
11
6
16
4
5
11
16
10
15
15
871
9
1310
13
164
9
671
1
1080
16
950
9
96
8
561
6
84
9
468
14
33
s
629
629
925
1231
1233
775
401
420
788
15
842
963
420
1091
441
1077
965
965
1 Nonacquesoence reates to thrd ssue of decson.
1 Nonacquesoence reates to premum reserve ssue.
Nonacquoscence reates to ssue wth respect to queston of aowance of amortzaton n 1918 on costs
Incurred n 1919.
state ta decson.
state ta decson nonacquesoence 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 S Power Co.
7 Ths case was Inadvertenty prnted In uetn III-48 as havng been acquesced n by the Com-
mssoner.
Nonacquescence reates ony to that part of decson whch reates to appcaton of the yers decson
(1 . T. ., 1135).
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
87
Non acquescence s Contnued.
Ta payer.
oard of Ta ppeas.
No.
oume.
Page.
4004
4005
6061
6
617
6102
10157
11015
16
79
4967
12
66
6475
12
889
12001
14
496
9665
8
1246
30308
15
1375
20035
19
416
30448
19
185
13220
7
600
12446
12
1416
12447
12
1416
18612
11
420
7723
8
651
7724
7725

651
16379
16743
:
1390
19409
1
19941

16
752
29697
3927
13
1150
8500
11
963
8501
11
963
35375
16
1280
8502
11
963
12427
27808
(
508
4166
5
952
11932
13775

38
18618
11
420
18630
11
420
26555
16
737
13739
13
246
12529
15
1225
6149
10
835
16149
15
835
16149
15
835
11291
10
285
11291
10
285
15563
17
109
2050
4
842
18518
11
420
18619
11
420
2266
4
842
Wessenbach, Mnna .1.
Wes ros. Constructon Co
Western change ank
Western Maryand Ry. Co.
Western Wheeed Scraper Co. .
Wheatev, ames .4
Whte, C.
Whte Wes Co ----
Whte age O fe Refnng Co.
Whtehouse, Syb
Whtehurst et a., ohn L
Whtehurst et a., Mary M
Wckersham, Chas.
Wdcner, George D
Wdener, oseph
Wknson, W. ., estate of .
Wams arvey Corporaton.
Wshre O Co., Inc_.
Wson, hu Cement-
Wson, George .
Wson Mrs. enry
Wson, Wam W
Wson Syndcate Trust
Wndfeder, ohn ., estate of
Wnker ro. Co., Isaac
Wnshp, C. R
Wnshp, zabeth T. (Mrs.)
Wre Whee Corporaton of merca.
Wsconsn rdge Iron Co
Wofford, G. T
Wof et a., Ma , trustees
Wofe, mma S., estate of
Wofe, Russc, e ecutor
Woferman, red, e ecutor 8
Woferman, Lous, estate of8
Woodrow Lee Trust
Woodruff, rnest
Woodruff, Geo. C
Woodruff, as. W
Woodward, Davd
Nonacquescence reates to queston n decson pertanng to the year 1019.
Nonacquescence reates to Issues concernng contrbutons to ssocaton o Raway ecutves and
accrua n caendar year 1919 of ncreased compensaton for transportaton of ma, awarded by Interstate
Commerce Commsson on December 23, 1919.
Nonacquescence reates to that porton of decson whch hods that secton 2M(c) of the Revenue
ct of 1928 s appcabe to the case.
Nonacquescence reates to tem (3) n decson.
Nonacquescence reates to ssue 1 of decson.
state ta decson.
Nonac tescence reates to deducton of Connectcut and West rgna nhertance ta es.
1 state ta decson nonacquescence reates to second ssue of decson.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
88
Nonacqt|escences Contnued.
Ta payer.
Docket
No.
oard of Ta ppeas.
oume.
Tage.
Wooston, euah . ., estate of 1
Worste Co., Ltd.-
Wrght, George M. ---
Wrght, Inc., en T
W. T. M. Co.
Wurts-Dundas, Mure
Wyomng Centra ssocaton
Y.
Yorkshre Creamery Co
York Ice Mk Co... -
Young, oward S
Young, ames ., estate of 1
Z.
Zakon, Wam
Zecrbach, Isadore
Zeerbach, Theresa
Znn, rthur
Znn, Martn
11298
14707
24851
12164
8778
13093
26518
9965
20546
If 15114
34274
18348
18000
4976
5450
2028
883
2789
3444
10
15
18
12
11
17
8
14
16
16
5
1100
413
471
1149
722
881
1064
569
533
1428
1004
687
1076
1076
974
969
1 state ta decson.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
INCOM T RULINGS. P RT I.
R NU CT O 1928.
SU TITL . G N R L PRO ISIONS.
P RT I. R T S O T .
S CTION 11. NORM L T ON
INDI IDU LS.
rtce 14: Who s a ctzen. I -43-4816
T.D.4301
INCOM T .
n ct to amend the aw reatve to the ctzenshp and natura-
zaton of marred women, and for other purposes.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
Reference s made to the ct entted n ct reatve to the
naturazaton and ctzenshp of marred women, approved Sep-
tember 22, 1922 (Pubc, No. 346, S ty-seventh Congress, . R.
12022). Whe not an nterna-revenue measure, ths ct was pub-
shed as a Treasury Decson (T. D. 3406, C. . 1-2, 42) for the n-
formaton and gudance of revenue offcers and others concerned n
determnng the ctzenshp under the edera ncome ta cts of
mercan-born women who have marred aens and of foregn-born
women who have marred mercan ctzens.
The ct approved September 22, 1922, was amended by the ap-
pended ct, entted n ct to amend the aw reatve to the ctzen-
shp and naturazaton of marred women, and for other purposes,
approved uy 3,1930 (Pubc, No. 508, Seventy-frst Congress, . R.
10960), whch s aso pubshed for the nformaton and gudance of
revenue offcers and others concerned.
Davd urnet,
Commssoner of Interna Revenue.
pproved October 21, 1930.
. W. Meon,
Secretary of the Treasury.
(PU LIC, NO. 508 S NTY- IRST CONGR SS. . R. 10960.)
n ct to amend the aw reatve to the ctzenshp and natura-
zaton of marred women, and for other purposes.
e t enacted by the Senate and ouse of Representatves of the Unted
tates of merca n Congress assembed. That the ast three sentences of
secton 3 of the ct entted n ct reatve to the naturazaton and ctzeu-
35942 31 7
(89)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
122(a), rt. 51.
90
shp of marred women, approved September 22, 1922 (reatng to the pre-
sumpton of oss of ctzenshp by marred women by resdence abroad), are
repeaed, but such repea sha not restore ctzenshp ost under such secton 3
before such repea.
Seo. 2. (a) Secton 4 of such ct of September 22, 1922, Is amended to read
as foows:
Sec. 4. (a) woman who has ost her Unted States ctzenshp by reason
of her marrage to an aen egbe to ctzenshp or by reason of the oss of
Unted States ctzenshp by her hueband may, If egbe to ctzenshp and If
she has not acqured any other natonaty by affrmatve act, be naturazed
upon fu and compete compance wth a requrements of the naturazaton
aws, wth the foowng e ceptons:
(1) No decaraton of ntenton and no certfcate of arrva sha be re-
qured, and no perod of resdence wthn the Unted States or wthn the
county where the petton s fed sha be requred
(2) The petton need not set forth that It s the ntenton of the pettoner
to resde permanenty wthn the Unted States
(3) The petton may be fed n any court havng naturazaton ursdc-
ton, regardess of the resdence of the pettoner
(4) If there Is attached to the petton, at the tme of fng, a certfcate
from a naturazaton e amner statng that the pettoner has appeared before
hm for e amnaton, the petton may be heard at any tme after fng.
(b) fter her naturazaton such woman sha have the same ctzenshp
status as f her marrage, or the oss of ctzenshp by her husband, as the
case may be, had taken pace after ths secton, as amended, takes effect.
(b) The amendment made by ths secton to secton 4 of such ct of Sep-
tember 22, 1922, sha not termnate ctzenshp acqured under such secton 4
before such amendment.
Seo. 8. Subdvson (f) of secton 4 of the Immgraton ct of 1924, as
amended, s amended to read as foows:
(f) woman who was a ctzen of the Unted States and ost her ctzen-
shp by reason of her marrage to an aen, or the oss of Unted States ctzen-
shp by her husband, or by marrage to an aen and resdence In a foregn
country.
pproved uy 3, 1930.
P RT II -COMPUT TION OP N T INCOM .
S CTION 22(a). GROSS INCOM : G N R L
D INITION.
rtce 51: What ncuded n gross ncome. I -29-4702
Ct. D. 205
ncome ta revenue acts of 1924, 1926, and 1928 decson of court.
Income: empton Lessee: Pubc Doman of Te as.
Income to a essee derved from the sae of o and gas produced
from ands whch are parts of the pubc doman of Te as set apart
for the beneft of the State Unversty, eased by the State under
a statute provdng that rghts acqured under ths act sha be
sub|ect to ta as s other property, s not e empt from edera
ta es.
Unted States Crcut Court of ppeas fob the fth Crcut.
ames W. ags, Coecor of Interna Revenue for the Unted States for the
rst Dstrct of Te as, appeant, v. Group No. 1 O Corporaton, appeee.
une 18, 1930.
opnon.
btan, Crcut udge: ppeee brought sut and recovered |udgment aganst
appeant, as coector of nterna revenue, for the amount of edera ncome
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
91
22(a), rt. 51.
ta es pad under protest. Those ta es were assessed and coected upon net
ncome derved from the sae of o and gas produced from ands whch appeee
hed under ease from the State of Te as. The |udgment was based on the
theory that appeee was an nstrumentaty of the State, and as such was
e empt as to the ncome nvoved from edera ta aton. (38 P. (2d), C80.)
The eased ands from whch the ncome was derved are parts of the pubc
doman of Te as whch ong ago, by consttutona and statutory provsons,
was set apart for the beneft of the State Unversty. In 1917 nn act of the
egsature, chapter 83, provded for the easng of unversty ands for the
deveopment of o, gas, and other natura resources. Lessees were requred
to pay royates of one-eghth for o and one-tenth for gas. y secton 27
of that act rghts acqured under t were decared to be sub|ect to ta aton
as s other property. That egsaton was attacked as beng n voaton of
a consttutona provson whch permtted ony the sae of unversty ands
but the Supreme Court of Te as hed that the statutory eases consttuted saes,
and that the o and gas when approprated by the essees formed no part of
the unversty s permanent fund. Thesen v. Robson, 8 S. W. (2), 046.) The
royaty nterest of the State s not nvoved, as the ncome ta act does not
attempt to reach t.
ppeee, as s admtted, was abe for the ncome ta es assessed aganst t,
uness t can cam e empton as a State nstrumentaty. It may be assumed
wthout beng decded that the State was entted to cam e empton for tsef,
or even for appeee as ts nstrumentaty, n deveopng the pubc doman.
In a scres of cases the Supreme Court of the Unted States has hed that the
State of Okahoma coud not Interfere wth essees of Indan ands by mposng
an occupaton or prvege ta (Choctaw Guf R. R. Co. v. arrson, 235 U. S.,
292) by ta ng such eases (Indan O Co. v. Okahoma, 240 U. S., 522) by
mposng a ta on the gross vaue of the producton of o and gas ess a royaty
nterest ( oward v. O Companes, 247 U. S., 503, and Larae O Co. v. oward,
248 U. S.. 549) or by a ta upon the net ncome derved by a essee from the
sae of hs share of o and gas (Gespe v. Okahoma, 257 U. S., 501). The
ast-cted case, whch revews the prevous ones, hed that the essee of an o
and gas ease of Indan ands was an Instrumentaty of the edera Govern-
ment n carryng out treaty obgatons to the Indans. ppeee s poston s
that the converse of that proposton must be equay true, and that therefore
It Is an nstrumentaty of the State government of Te as n carryng out ts
pubc pocy n deveopng ands whch t hods for the beneft of ts unversty.
In our opnon the Gespe case and the other eases from Okahoma whch
preceded t are not n pont. The State of Te as has no occason to cam m-
munty for tsef, and has not sought to e empt essees of ts unversty ands
from edera ncome ta aton. On the contrary, t has sod the mnera rghts
here nvoved and has provded that the rghts of the purchaser or essee sha
be sub|ect to ta aton as s other property. It can not be doubted that tha
soveregn has the power to sub|ect nterests whch t has sod In pubc ands
to ta aton. ( cner v. Coona Trust Co., 275 U. S., 232 T. D. 4112, C. .
II-1, 207 .) In Shaw v. Gbson-Zahnser O Corporaton (270 U. S., 575), a
case whch aso nvoves an o and gas ease of Indan ands, t was hed that
the ncome of the essee was sub|ect to State ta aton n Okahoma under the
ct of Congress of March 27, 1908 (ch. 199) , whch n secton 4 provded that
a and from whch restrctons have been or sha be removed sha be sub|ect
to ta aton and a other cv burdens as though t were the property of other
persons than aottees of the ve Cvzed Trbes. The anguage makng the
Indan ands sub|ect to ta aton Is no broader or more comprehensve than s
the anguage of the Te as statute makng the rghts of essees of Its unversty
ands sub|ect to ta aton. The State of Te as, by throwng the eases of un-
versty ands open to ta aton generay, wthdrew from the essees a rghts
of e empton whch mght otherwse have e sted. Our concuson s that the
ta es In queston were propery assessed and coected, and consequenty that
t was error to gve |udgment for appeee.
The |udprment s reversed, and the cause remanded for further proceedngs
not Inconsstent wth ths opnon.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
822(a), rt. 68.
92
rtce 58: Sae of stock and rghts. I -86-4770
G. C. M. 8426
R NU CT O 1028.
Where a ta payer deposts stock wth a broker as coatera to
fnance other stock purchases and durng the same year sae Is
made of a ke number of shares as were purchased durng the
year, the stock sod s, under the crcumstances of the nstant case,
the stock whch was purchased and not the coatera stock.
n opnon s requested reatve to the nterpretaton to be paced
upon artce 58 of Reguatons 74 wth respect to the foowng trans-
actons :
The ta payer s an empoyee of the M Company. Durng the
years 1925, 1926, and 1927 he receved 2y y shares of common stock
of the sad company as bonuses. It appears that on ebruary 20,
1928, the ta payer deposted wth hs broker 2ysy shares of common
stock of the M Company as coatera that on the same day he
opened a new account by purchasng 2y shares of common stock
of the M Company that the 2ysy shares were receved wth the
defnte understandng that they were deposted as coatera and
not for sae under any crcumstances, e cept as the ta payer mght
drect or as mght be necessary for protecton of the broker that
durng the year 1928 the ta payer bought and sod Oy shares of the
M Company stock that at a tmes durng the year the ta payer s
coatera was more than suffcent to satsfy the requrements of the
broker and the N Stock change that a saes n 1928 were under-
stood to be from ots purchased durng the year and that a cash
wthdrawas were made wth respect to surpus computed upon the
bass of stock purchases and saes n 1928 wthout reference to the
2y3y shares deposted, whch were at a tmes durng 1928 man-
taned as coatera.
The queston submtted reates to the appcaton to the coatera
stock of that part of artce 58 of Reguatons 74 whch reads as
foows:
When shares of stock n a corporaton are sod from ots purchased at df-
ferent dates and at dfferent prces and the dentty of the ots can not be de-
termned, the stock sod sha be charged aganst the earest purchases of
such stock.
The rue thus ad down has been hed to be a proper one n ap-
proprate crcumstances. (See Stewart v. Commssoner, 17 . T. .,
604, and cases theren cted.) ut t s the vew of ths offce that
there s no substanta bass for the appcaton of the rue n con-
necton wth the coatera stock n the nstant case. It s evdent
that the ta payer used hs 2 y shares of bonus stock as coatera to
secure a oan of money wth whch to fnance the purchase of 2y
shares of stock on margn. The 2y shares purchased on margn were
ater sod. The operaton of purchase and resae was repeated sev-
era tmes, the orgna 2 y shares remanng as coatera at a
tmes ntact n the hands of the broker.
The stuaton here presented dffers materay from that presented
n ovbcrt v. Penrose (38 ed. (2d), 577). In that case stock was
devered to a broker wth nstructons to se the same, whereas n
the nstant case stock was devered to a broker as coatera to
secure a oan n connecton wth other stock transactons. The very
desgnaton or use of property as coatera s of tsef ndcatve
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
93
22(u), rt. 62.
that the property s not to be sod so ong as the terms of the pedge
are comped wth. ccordngy, the Penrose case, athough t was
decded upon ts pecuar facts n favor of the ta payer, can not be
regarded as havng any bearng on the nstant case.
It s, therefore, the opnon of ths offce that where a ta payer
deposts stock wth a broker as coatera to fnance other stock pur-
chases, and durng the same year saes are made of a ke number of
shares as were purchased durng the year, the stock sod s, under
the crcumstances of the nstant case, the stock whch was purchased
and not the coatera stock.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
rtce 62: nnutes and nsurance poces. I 46-4833
G. C. M. 8668
R NU CT O 1028.
Where a wdow has the rght to a statutory share n her
husband s estate at hs death, but renqushes such rght n con-
sderaton of the provsons made for her by the terms of the
w, the consderaton s measured by the vaue of the statutory
share and not the vaue of a common-aw dower nterest u the
deceased husband s reaty kewse, where a husband has the
rght to a statutory share n hs wfe s estate at her death, but
renqushes such rght n consderaton of the provsons made for
hm by the terms of the wfe s w, the consderaton s measured
by the vaue of the statutory share and not the vaue of a tenancy
by curtesy n the ands of the wfe of whch she was sezed durng
coverture.
n opnon s requested reatve to the nterest or estate whch
may be regarded as havng been gven up by a survvng husband
or wfe n consderaton of the provsons made for hs or her beneft
n the w of the deceased spouse.
proper consderaton of the queston presented requres an
anayss of the eadng cases on the sub|ect of purchase by the wdow
who renqushes certan nterests n return for the provson made
for her by her husband s w. These eadng cases, three n number,
are, n the order n whch the opnons were handed down, the cases
of Warner v. Wash (15 ed. (2d), 367, T. D. 4257, C. . III-1,
245), Unted States v. oster (26 ed. (2d), 760, T. D. 4258, C. .
III-1, 247), and en v. randes (29 ed. (2d), 363, T. D. 4256,
C. . III-1, 243).
The frst case, Warner v. Wa h supra, arose n Connectcut. The
pantff s husband, by the terms of hs w, had created a trust fund
from the ncome of whch (wth authorty n the trustee to nvade the
corpus f necessary) the pantff was to receve annuay for fe the
sum of 50,000, whch provson was e pressv made n eu of her
statutory rghts n her husband s estate under the aws of the State of
Connectcut. The pantff accepted the provsons of the w. The
Government ta ed the ncome so receved by the pantff n 1917
and 1918 and the ta was pad. The pantff brought sut n the
Unted States Dstrct Court, Dstrct of Connectcut, to recover the
amount so pad, aegng that the e pa| nents were not ncome but
capta that was beng returned to her nasmuch as under the statutes
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
22(a), rt. 62.
94
of Connectcut she was entted to certan property rghts whch she
renqushed as consderaton for the ncome.
The dstrct court hed that under the decson of the Unted States
Supreme Court n the case of Imon v. Oavt (268 U. S., 161, T. D.
3710, C. . I -1, 123) the payments were ta abe, on the ground
that the gft of ncome of a fund for fe s equvaent to the
use of the fund for fe. The pantff appeaed to the Unted States
Crcut Court of ppeas, Second Crcut, and the decson of the
dstrct court was reversed. In ts opnon the appeate court dened
the anaogy to the case of Irwn . Gavt, sayng:
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, an In consderaton for, the renqushment of vauabe statutory
rghts n the estate, s ncome, bequest, or annuty. Itacs supped.
The court sad further:
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 nsurance company, wth the proceeds of her statutory rghts n the estate
. Itacs supped.
The court concuded ts opnon as foows:
Concededy, 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. Itacs supped.
What were these statutory rghts whch were surrendered by the
wdow as the purchase prce of the ncome
Secton 5274 of the Genera Statutes of Connectcut (1918) reads
as foows:
Sec. 5274. Property rghts of persons marred snce pr 20, 1877. In case
of marrages on or after pr 20, 1877, nether husband nor wfe sha acqure,
by force of the marrage, any rght to or nterest n any property hed by the
other before or acqured after such marrage, e cept as to the share of the
survvor n the property, as provded by aw. The separate earnngs of the
wfe sha be her soe property. She sha have power to make contracts wth
thrd persons, and to convey to them her rea and persona estate, as If un-
marred. er property sha be abe to be taken for her debts,
e cept when e empt from e ecuton, but n no case sha be abe to be taken
for the debts of the husband. The husband sha not be abe for her debts
contracted before marrage, nor upon her contracts made after marrage, e cept
as provded n secton 5275.
Secton 5055 of the same genera statutes reads as foows:
Sec. 5055. Survhwr s property rghts when marred on or after pr SO,
1877. On the death of a husband or wfe marred on or after pr 20, 1877,
the survvor, e cept n cases mentoned n the provso to ths secton, sha be
entted to the use for fe of one-thrd n vaue of a the property, rea and
persona, egay or equtaby owned by the other at the tme of hs or her death,
after the payment of a debts and charges aganst the estate such thrd to be
set out by dstrbutors apponted by the court of probate n any property, rea
or persona or both, accordng to the udgment of such dstrbutors. The rght
to such thrd sha not be defeated by any dsposton of the property by w
to other partes but where there s no w, the survvor sha take such thrd
absoutey, and f there are no chdren of the decedent or representatves ot
chdren, the survvor sha take a of the estate of the decedent absoutey to
the e tent of 2,000, and one-haf absoutey of the remander of sad estate.
Where the husband has by w devsed or bequeathed a porton of hs property
to hs survvng wfe, or where the wfe by w has devsed or bequeathed a
porton of her property to her survvng husband, suc provson sha be taken
to be n eu of the share heren provded for, uness the contrary sha be
e pressy stated n the w, or sha ceary appear theren but n any such
case the party sha have hs or her eecton whether to accept the provson of
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
95
22(a), rt. 62.
such w or take such statutory share, and such eecton sha be made In
wrtng sgned by the party entted to make the same, and odged wth the
court of probate before whch such estate s n settement, wthn two months
after the e praton of the tme mted for the e hbton of cams aganst sad
estate and f not so made such person sha be taken to have accepted the pro-
vsons of the w, and sha be barred of sad statutory share. The wfe sha
aso, when n the opnon of the court of probate t s necessary, be aowed a
reasonabe sum from the estate of the husband for her support and for the
support of her famy durng the settement of s estate but n that case she
sha not take her statutory share t fter the e praton of the tme for whch
such aowance Is made provded, the provsons of ths secton wth regard to
the statutory share of the survvng husband or wfe In the property of the
other sha not appy to any case where, by wrtten contract made before or
after marrage, ether party has receved from the other what was ntended as
a provson n eu of such statutory share nor sha ether party be entted
to such statutory share who wthout suffcent cause had abandoned the other,
and had contnued such abandonment to the tme of the other s death. Itacs
supped.
rom the above-quoted sectons of the Connectcut statutes t s
cear that the nterest whch a wdow has n the estate of her deceased
husband s purey statutory and arses or s gven to her ony upon the
death of the husband and not before such death. It foows, then,
that n the case of Warner v. Wash, supra, the wdow on the death o
her husband had a certan nterest n or rght to a porton of hs
estate gven her by the statutory aw that ths nterest or rght began
mmedatey at hs death and not before and that ths statutory
nterest, rght, or share was what was renqushed by her n return
for the ncome provded for her under the terms of her husband s
w. Ths statutory nterest, rght, or share was, doubtess, caed
her dower rght, but t was more than a mere rght of dower at
common aw.
Dower at common aw s defned by ouver s Law Dctonary as
an estate where the wdow was entted durng her fe to a thrd
part of a the ands and tenements of whch her husband was sezed
n aw or n fact of an nhertabe estate, at any tme durng the cover-
ture, and whch any ssue she mght have had mght by possbty
have nherted. Itacs supped.
wfe s nchoate rght of dower, before t has been consum-
mated by her husband s death, s a mere ntangbe contngent e -
pectancv, and s nether an estate n and nor a vested rght. ( ennett
v. ennett, 318 111., 193,149 N. ., 292.) It s not vested. ( ambn
v. Marchant, 104 an., 689, 180 Pac, 811.) Dower s not vested n
the wdow by contract of marrage, and does not pass to her thereby,
but by statute as to doweres, part of the ntestate aws of the State.
(See Corporaton Conunsson v. Dunn, 94 S. ., 481, 174 N. C, 079.)
Dower s not a vested rght n property and the egsature may n-
crease or dmnsh t or take t whoy away. (Wootton v. eaton,
272 S. W., 8G9.) The nchoate rght of dower s nether a tte nor
an estate n and and s ncapabe of transfer by grant or by con-
veyance, but durng ts nchoate state s an encumbrance upon the
estate of the husband or hs grantees susceptbe ony of e tngush-
ment. (Western States nance Co. v. Ruff, 108 Or., 442, 216 Pac,
1020, 215 Pac, 501. nd see 19 C. ., 493, sec. 105.)
In the case of Stewart v. Stecart (5 Conn., 317) the Supreme
Court of Connectcut hed, nter aa:
every marred woman vng wth her husband at hs death, has
rght of dower n one-thrd of the rea estate, of whch her husband ded
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
22(a), rt. 62.
96
possessed, In hs own rght. y the ngsh aw, the rght to dower
orgnates on the marrage but by our aw, t takes orgn at the husband s
death. Our ancestors dd not thnk t e pedent to restran that free transfer
of rea estate, whch the nterest of the communty requres and for ths
reason, the aw has gven the wfe no en upon, or rght, ega or equtabe,
to the husband s estate, durng hs fe. er condton, In ths respect, Is
ke that of her husband s chdren, or other hers .
In the case of Crofut v. Layton, ecutor, et a. (68 Conn., 91,
85 t., 783), the court sad:
The statute n Connectcut gves the wfe a share of the property
owned by the husband at hs decease. It does not prevent hm durng hs
fe from dsposng of hs property, or encumberng t by awfu agree-
ments.
It s cear that even under the common aw rue regardng dower
the pantff Warner (n Warner v. Wash, supra) had no vested
estate pror to her husband s death. The statute, quoted above,
and the decsons cted, seem to ndcate that she. had no rght nor
nterest unt her husband ded, so that what she surrendered as a
purchase prce for the ncome was purey a statutory rght and not
a rght that had vested n her before her husband ded. Moreover,
dower under the common aw reates soey to ands and tenements
and not to personaty, whereas the statutory rght gven the wdow
under the aws of Connectcut embraces both reaty and personaty.
The crcut court n ts opnon refers to the wdow s dower rghts,
but the conte t ceary ndcates, as do the above-quoted decsons
and the e cerpts from the statutory aw of Connectcut, that the
rghts are greater than the common aw dower rght n and, and are
the entre statutory rghts gven to a wdow by the aws of the State
of Connectcut when she eects to take aganst the terms of her
husband s w.
Warner v. Wash, supra, was foowed ( une 13, 1928) bv the
case of Unted States v. oster, supra, n whch the Crcut Court
of ppeas, rst Crcut, affrmed the |udgment of the Unted States
Dstrct Court, Dstrct of Massachusetts. The queston consdered
by the court was:
Where a wdow accepts the provsons of her husband s w and s pad,
annuay, the entre ncome from hs estate, n eu of her statutory share of
the corpus of the estate, are suc 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 by acceptng the provsons
of the w
The defendant n error was e ecutor of the estate of one Sarah .
Davenport, of oston, who was the benefcarv under the w of her
husband, who ded n 1925. The w provded that the resdue of
the decedent s estate shoud be hed n trust and that the net ncome
was to be pad to the wdow for and durng her fe and that the
provson made for her was to be n eu of dower and a cams
she mght or coud have by any possbty upon the estate. The
Government sought to ta the ncome. The ta was pad and sut
was brought to recover.
In the orgna petton, fed n the dstrct court, the pantff
aeged that Sarah . Davenport had accepted the provsons of her
husband s w, had renqushed a of her dower and statutory rghts
n and to her husband s estate, had accepted n eu thereof the ncome
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
97
22(a), rt. 62.
above referred to, had pad to the estate for her fe nterest n the
resdue a vauabe consderaton, and that as a purchaser for vaue
she was not abe for any ta on the ncome receved n the years n
queston.
The Government s demurrer to the petton was overrued, and the
Government appeaed.
The crcut court of appeas, n ts opnon affrmng the |udgment
of the dstrct court, sad:
y the Genera Laws of Massachusetts (chapter 191, secton 15),
as we as under the earer statutes, a survvng husband or wfe may refuse
to accept the provsons of a w nnd 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 prov-
sons arc e pressy decared to be n eu of such statutory rghts, the sur-
vvor s n the poston of one who ses property to the estate, and acqures
the ega status of a purchaser for a vauabe consderaton. Itacs
supped.
The court sad further, n uphodng the contenton made by the
defendant n error:
Under the prncpes announced by the Supreme udca Court of Massachu-
setts, we thnk that, In the case before us, the payments made to Sarah .
Davenport durng the years n dspute represented purchase money or n-
stament payments by the estate, n consderaton for her share n the corpus
of the C tatc. We thnk, then, that she was a purchaser for vaue. Itacs
supped.
Secton 15 of chapter 191, Genera Laws of Massachusetts (1921),
referred to n the opnon of the court, reads as foows:
Sec. 15. The survvng husband or wfe of a deceased person, e cept as pro-
vded In secton 35 or 36 of chapter 209, wthn s months after the probate
of the w of such deceased, may e n the regstry of probate a wrtng sgned
by hm or by her, wavng any provsons that may have been made n t for
hm or for her, or camng such porton of the estate of the deceased as he or
she woud have taken f the deceased had ded ntestate, and he or she sha
thereupon take the same porton of the property of the deceased, rea and per-
sona, that he or she woud have taken f the deceased had ded ntestate
e cept that f he or she woud thus tnke rea and persona property to nn
amount e ceedng 10,000 n vaue, he or she sha receve In addton to that
amount ony the ncome durng hs or her fe of the e cess of bs or her share
of such estate above that amount, the persona property to be hed In trust nnd
the rea property vested n hm or her for fe, from the death of the deceased
and e cept that f the deceased eaves no kndred, be or she upon such waver
sha take the nterest he or she woud have taken f the deceased had ded
eavng kndred but no ssue. If the rea and persona property of the deceased
whch the survvng husband or wdow takes under the foregong provsons
e ceeds 10,000 n vaue, the 10,000 above gven absoutey sha be pad out of
that part of the persona propecty n whch the husband or wdow s nter-
ested and f such part s nsuffcent the defcency sha, upon the petton
of any person Interested, be pad from the sae or mortgage n fee, n the man-
ner provded for the payment of debts or egaces, of that part of the rea prop-
erty n whch he or she s nterested. Such sae or mortgage may be made
ether before or after such part s set off from the other rea property of the
deceased for the fe of the husband or wdow. If, after probate of such w,
ega proceedngs have been nsttuted wheren ts vadty or effect s drawn
n queston the probate court may, wthn sad s months, on petton and after
such notce as t orders, e tend the tme for fng the aforesad cam and
waver unt the e praton of s months from the termnaton of such pro-
ceedngs.
Secton 35 and secton 3G referred to are not pertnent to the ques-
ton now under consderaton.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
22(a), rt. 62.
98
Secton 17 of the same chapter reads as foows:
Sec. 17. husband sha not be entted to hs curtesy n addton to the
provsons of hs wfe s w, nor a wdow to her dower In addton to the
provsons of her husband s w, uness such pany appears by the w to
have been the Intenton of the testator.
Secton 1 of chapter 189, Genera Laws of Massachusetts, reads as
foows:
Seo. 1. husband sha upon the death of hts wfe hod for hs fe one-thrd
of a and owned by her at any tme durng coverture. Such estate sha be
known as hs tenancy by curtesy, and the aw reatve to dower sha be app-
cabe to curtesy, and no conveyance by a marred woman of rea property sha,
e cept as provded In secton 35 of chapter 209, e tngush or mpar hs tenancy
by curtesy In such property uness he |ons n the conveyance or otherwse
reeases bs rght. wfe sha, upon the death of her husband, hod her
dower at common aw n her deceased husband s and. Such estate sha be
known as her tenancy by dower. To be entted to such curtesy or dower the
survvng husband or wfe sha fe hs or her eecton and cam therefor n
the regstry of probate wthn s months after the date of the approva of
the bond of the e ecutor or admnstrator of the deceased, and sha thereupon
hod Instead of the nterest In rea property gven In secton 1 of chapter 190,
curtesy or dower, respectvey, otherwse such estate sha be hed to be waved.
Such curtesy and dower may be assgned by the probate court In the same
manner as dower s now assgned, and the tenant by curtesy or dower sha
be entted to the possesson and profts of one undvded thrd of the rea estate
of the deceased from her or hs death unt the assgnment of curtesy or dower,
and to a remedes therefor whch the hers of the deceased have In the resdue
of the estate. Rghts of curtesy whch e sted on December 31, 1901, may be
camed and hed n the manner above provded, but In such case the husband
sha take no other nterest n the rea or persona property of hs wfe and,
e cept as preserved heren, curtesy as t e sted pror to anuary 1, 1902, a
aboshed.
Secton 1 of chapter 190, Genera Laws of Massachusetts, reads, n
part, as foows:
Sec. 1. survvng husband or wfe sha, after the payment of the debts
of the deceased and the charges of hs ast sckness and funera and of the
settement of hs estate, and sub|ect to chapter 196, be entted to the foow-
ng share In hs rea and persona property not dsposed of by w:
(1) If the deceased eaves kndred and no Issue, and It appears on deter-
mnaton by the probate court, as herenafter provded, that the whoe estate
does not e ceed 5,000 n vaue, the survvng husband or wfe sha take the
whoe thereof otherwse such survvor sha take 5,000 and one-haf of the
remanng persona and one-haf of the remanng rea property. If the
persona property Is Insuffcent to pay sad 5,000, the defcency sha, upon
the petton of any party In nterest, be pad from the sae or mortgage, n
the manner provded for the payment of debts or egaces, of any nterest of
the deceased In rea property whch he coud have conveyed at the tme of
hs death and the survvng husband or wfe sha be permtted, sub|ect to
the approva of the court, to purchase at atf such sae, notwthstandng the
fact that he or she s the admnstrator of the estate of the deceased person.
further sae or mortgage of any rea estate of the deceased may ater be
made to provde for any defcency st remanng. Whenever It sha appear,
upon petton to the probate court of any party In Interest, and after
such notce as the court sha order, and after a hearng thereon, that the
whoe amount of the estate of the deceased, as found by the nventory and
upon such other evdence as the court sha deem necessary, does not e ceed
the sum of 5,000 over and above the amount necessary to pay the debts and
charges of admnstraton, the court sha Itsef by decree determne the vaue
of sad estate, whch decree sha be bndng upon a partes. If addtona
property s Inter dscovered, the rght or tte to the estate covered by such
decree sha not be affected thereby, but the court may make such further
orders and decrees as are necessary to effect the dstrbuton heren provded for.
(2) If the deceased eaves ssue, the survvor sha take one-thrd of the
persona and one thrd of the rea property.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
99
22(a), rt. 62.
(3) If the deceased eaves no ssue and no kndred, the survvor sha take
the whoe.
rom the above-quoted e cerpts from the statutory aw of Massa-
chusetts t woud appear that the survvng spouse may eect to take
(a) Dower or curtesy rght under chapter 189, secton 1, supra or
(fc) The statutory rght gven by vrtue of the provsons of chap-
ter 190 and chapter 191, supra or
(c) The provsons made for the survvng spouse under the terms
of the w of the deceased spouse.
The aw s cear that (a) and (b) are mutuay e cusve that s,
that the survvng spouse may not take, both (a) and (b). ccord-
ngy, the survvng spouse, n eectng to take aganst the w, may
take ether (a) or (b), but not both. (See Dana v. Dana, 226 Mass.,
297, 115 N. ., 418.)
When the court n the oster case referred to the vauabe
consderaton wth whch the wdow purchased the benefts under
her husband s w t obvousy had n mnd, and based ts opnon
on, the purey statutory share whch a wdow has n the estate
of her deceased husband under the statutes of Massachusetts as ds-
tngushed from any dower rghts she mght have had n ands at
common aw. The court s reference to the nterest n the deceased
spouse s estate gven by secton 15 of chapter 191 of the Genera
Laws of Massachusetts ndcates that the purchase prce was the
fu statutory share whch the wdow mght have f she eected to
take aganst the w or the husband mght have f he eected to take
aganst hs ofe s w. The purchase prce pad to the estate by
the wdow was not merey common aw dower, but a greater statu-
tory nterest, coverng reaty and personaty, f any, and that nter-
est woud seem to be the same n the case o a husband as n the case
of a wfe under the provsons of sad secton 15.
The ne t case, en v. randes, supra, was decded on Novem-
ber 17, 1928, by the Unted States Crcut Court of ppeas, ghth
Crcut, affrmng the decson of the Unted States Dstrct Court,
Dstrct of Nebraska, Omaha Dvson. In that case the husband,
by hs w, bequeathed a sum of money and certan chattes to hs
wdow and drected that the sum of 50,000 per annum be pad to
her durng her natura fe, sad bequests and payments to be n
eu of dower or other dstrbutve share of my estate to whch by
aw she woud otherwse be entted. The wdow accepted under
the terms of the w. The court took the ssue to be 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
The court sad:
In ths ease 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
teas 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 nterest, 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
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
123(a), rt. 62.
100
was a purchaser for vaue of the annutes or yeary payments of 50,000 each,
and to ths end come many ad|udcated cases. Itacs supped.
t the tme the husband ded the foowng sectons of the statu-
tory aw of Nebraska were n force, beng, respectvey, sectons 1268,
1286, 1289, and 1271 of the Revsed Statutes of Nebraska (1913):
1208. Sec. 4. Dower and curtesy aboshed. The estates of dower and cur-
tesy are hereby aboshed. (1907, p. 195 nn. 4904 Comp. 2826.)
1286. Sec. 22. Dsposton of rea property by wU. very person of fu age
and sound mnd, beng sezed n hs own rght of any ands, or any rght thereto,
or entted to any nterest theren, descendabe to hs hers, may devse and
dspose of the same by hs ast w and testament n wrtng and a such
estates not dsposed of by w sha descend as the estate of an ntestate, beng
chargeabe In both cases wth the payment of a debts and any marred woman
may devse and dspose of any rea or persona property hed by her, or to
whch she s entted n her own rght, by her ast w and testament, n wrt-
ng, and may ater or revoke the same In ke manner that a person under no
dsabty may do, and sub|ect to the same restrctons. (R. S., p. 81 1881,
p. 233 nn. 4988 Comp. 2947.)
1289. Sec. 25. Dsposton of persona property by tcUt. very person of
fu age and sound mnd may, by hs ast w and testament, In wrtng, be-
queath and dspose of a hs persona estate remanng at hs decease, and
a hs rghts thereto and nterest theren, and a such estate not dsposed of
by the w sha be admnstered as ntestate estate. (R. S., p. 82 nn. 4991
Comp. 2950.)
1271. Sec. 7. ecton to take under statute or by w. If any rea estate
be devsed by n deceased husband or wfe to the survvng husband or wfe of
such deceased person, or other provson be made for hm or her n the ast
w and testament of such deceased person, he or she sha be entted to hs
or her eecton to take the ands so devsed, or the provson made for hm or
her n the ast w and testament of such deceased husband or wfe, or to
take by nhertance, descent and dstrbuton the nterest n the estate of the
deceased, provded by aw but he or she sha not be entted to both uness It
pany appears by the ast w and testament of the deceased to have been so
Intended by the testator or testatr . (1907, p. 197 nn. 4907 Comp. 2829.)
It s apparent, from a consderaton of the statutory aw of Ne-
braska, quoted above, that the wfe had no vested rght n her hus-
band s reaty or personaty durng hs fetme, but that at once upon
hs death the aw gave her a defnte rght or nterest n hs estate,
f she shoud eect to take aganst the terms of hs w. The opnon
of the court shows that ths statutory rght or nterest, whch began
at the death of the husband, was the purchase prce or consderaton
whch she surrendered for the provsons made for her by the w.
It w be noted further that the statutes of Nebraska make no ds-
tncton between husband and wfe. Where one spouse eects to take
aganst the ast w of the other, the aw gves the survvng spouse
a defnte statutory share n the estate of the deceased spouse. In
acceptng the terms of the w the survvng spouse, the husband or
wfe, renqushes the statutory share and wth t purchases the pro-
vsons made n the w of the deceased spouse.
rom a carefu consderaton of the three cases dscussed above
and of the respectve statutory provsons n connecton therewth,
t seems qute cear that n each nstance the court hed that the
wdow n acceptng the provsons of the husband s w gave up,
not ony and not merey a dower rght, f any, but a defnte statutory
rght or nterest that began at death, a rght or nterest that em-
braced reaty and personaty, f any, and a rght or nterest that was
greater than a mere common-aw dower nterest. Such statutory
rght or nterest woud, naturay, vary wth the dfferng aws of
the severa States, but n the three States n queston t s cear that
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
101
1522(b), rt. 82.
the nterest s a statutory nterest and not merey a common-aw
nterest.
Moreover, snce the aws of the three States concerned make the
same provson for a husband when he eects to take aganst the
wfe s w as t does for the wfe when she eects to take aganst the
husband s w, the anaogy of the three cases woud appy n those
States to such nterest of a husband who accepts the provsons of
hs wfe s w, and such statutory nterest, sometmes caed statutory
curtesy, but whch s greater than a tenancy by curtesy at the com-
mon aw, woud consttute the purchase prce for the provsons
made for the husband n the w. tenancy by the curtesy at
common aw reated soey to ands of whch the wfe was sezed
durng coverture. The statutory nterest of the husband embraces
an nterest n the whoe estate, whether of reaty or personaty, or
both.
It s, therefore, the opnon of ths offce that the three decsons
dscussed above furnsh a controng precedent as foows: Where
a wdow has .the rght to a statutory share m her husband s estate
at hs death, but renqushes such rght n consderaton of the pro-
vsons made for her by the terms of the w, the consderaton
s measured by the vaue of the statutory share and not the vaue
of a common-aw dower nterest n the deceased husband s reaty
and kewse, where a husband has the rght to a statutory share n
hs wfe s estate at her death, but renqushes such rght n consd-
eraton of the provsons made for hm by the terms of the wfe s
w, the consderaton s measured by the vaue of the statutory
share and not the vaue of a tenancy by curtesy n the ands of the
wfe of whch she was sezed durng coverture.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
S CTION 22(b). GROSS INCOM : CLUSIONS
ROM GROSS INCOM .
rtce 82: Proceeds of nsurance Compensa- I -52-4880
ton Pensons. I. T. 2553
R NU CT O 1928.
The nsured now carres Insurance on hs own fe for whch he
has pad a premums to date. e s advsed to surrender ths
Insurance and have the benefcary appy for and purchase an
absoute owner pocy, a premums to be pad by the
benefcary.
No substanta estate ta or ncome ta beneft s obtaned by
surrenderng e stng fe nsurance poces n favor of absoute
owner poces.
n opnon has been requested as to what edera estate ta or
ncome ta beneft, f any, woud be derved by the canceaton of a
fe nsurance pocy taken out by n favor of hs wfe, and n eu
thereof by havng hs wfe take out an absoute owner pocy on
hs fe.
, the nsured, now carres a arge amount of nsurance on hs own
fe for whch he apped and for whch he has pad a premums to
date. e s advsed to surrender ths nsurance and to have hs wfe,
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
22(b), rt. 87.
102
who s the benefcary, appy for and purchase an absoute owner
pocy on hs fe, a premums to be pad by her. It s contended
that n the event of the death of , a over 40,000 of the proceeds
from the present nsurance w be sub|ect to edera estate ta , and
that there s no method of egay obtanng e empton of a the
roceeds from ths ta e cept by means of an absoute assgnment
for vaue receved. urthermore, t s contended that f such an
assgnment s made, the e cess of the proceeds over such vauabe
consderaton and subsequent premums pad by the transferee w be
sub|ect to edera ncome ta . It s camed, however, that by the
use of the absoute owner pocy, no edera estate ta or ncome
ta w be payabe at the death of , thus effectng a consderabe
ta savng.
Under the e stng estate ta reguatons (. e., artce 27, Regua-
tons 70, 1929 edton, as amended by T. D. 4296 whch see on page
427 ), where the decedent does not retan unt hs death any of the
ega ncdents of ownershp n poces of nsurance, taken out by
hmsef, the proceeds of such poces are not requred to be ncuded
n the gross estate of the decedent under the nsurance provsons of
the estate ta aw. urthermore, the proceeds of nsurance pad by
reason of the death of the nsured are whoy e empt from ncome
ta under the e stng ncome ta aw, e cept that:
In the case of a transfer for a vauabe consderaton, by assgn-
ment or otherwse, of a fe nsurance, endowment, or annuty contract, or any
Interest theren, ony the actua vaue of such consderaton and the amount
of the premums and other sums subsequenty pad by the transferee sha be
e empt from ta aton . (Secton 22(b)2 of the Revenue ct of 1928.)
It may be stated, therefore, (1) that where the nsured under a
fe nsurance pocy taken out by hmsef absoutey and rrevocaby
dsposes of a the ega ncdents of ownershp theren other than by
a testamentary dsposton, the proceeds of such pocy are not ta -
abe as part of hs gross estate under the provsons of the estate ta
aw and reguatons pertanng thereto, and (2) that where such
dsposton does not take the form of a transfer for a vauabe con-
sderaton, the entre proceeds of the pocy pad by reason of the
death of the nsured are e empt from ta aton under the ncome ta
aw. Manfesty, then, no substanta edera estate ta or ncome
ta beneft s to be obtaned by the surrender of e stng fe nsurance
poces n favor of so-caed absoute owner poces.
rtce 87: Interest upon Unted States I -28-4700
obgatons. T. D. 4292
INCOM T .
empton of Treasury bs.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
ttenton s nvted to the ct entted n ct provdng certan
e emptons from ta aton for Treasury bs, approved une 17,
1930 (Pubc No. 376, Seventy-frst Congress, . R. 12440 whch
see on page 458 ), whch amends secton 5 of the Second Lb-
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
103
22(b), rt. 87.
erty ond ct, as amended (Pubc, No. 11, Seventy-frst Congress,
une 17,1929), by addng at the end thereof a new subdvson known
as subdvson (d). Ths new subdvson provdes that any gan
from the sae or other dsposton of Treasury bs ssued after the
enactment of the ct approved une 17, 1930, sha be e empt from
a edera, State, and oca ta aton (e cept estate or nhertance
ta es), and that no oss from the sae or other dsposton of such
Treasury bs sha be aowed as a deducton, or otherwse recog-
nzed, for the purposes of any ta mposed by the Unted States or
any of ts possessons. Secton 5 of the Second Lberty ond ct,
as so amended, reads as foows, the ta -e empton provsons beng
contaned n subdvsons (b) and (d) thereof:
Sec. 5. (a) That n addton to the bonds and notes authorzed by sectons
1 and 18 of ths ct, as amended, the Secretary of the Treasury s authorzed
to borrow from tme to tme, on the credt of the Unted States, for the purposes
of ths ct, to provde for the purchase or redempton before maturty of any
certfcates of ndebtedness or Treasury bs ssued hereunder, and to meet
pubc e pendtures authorzed by aw, such sum or sums as n hs |udgment
may be necessary, and to ssue therefor (1) certfcates of ndebtedness of the
Unted States at not ess than par and at such rate or rates of nterest, payabe
at such tme or tmes as he may prescrbe or (2) Treasury bs on a dscount
bass and payabe at maturty wthout nterest. Treasury bs to be ssued
hereunder sha be offered for sae on a compettve bass, under such regua-
tons and upon such terms and condtons as the Secretary of the Treasury
may prescrbe, and the decsons of the Secretary n respect of any ssue
sha be fna. Certfcates of ndebtedness and Treasury bs ssued hereunder
sha be n such form or forms and sub|ect to such terms and condtons, sha be
payabe at such tme, not e ceedng one year from the date of ssue, and may
be redeemabe before maturty upon such terms and condtons as the Secretary
of the Treasury may prescrbe. Treasury bs ssued hereunder sha not be
acceptabe before maturty n payment of nterest or of prncpa on account
of obgatons of foregn governments hed by the Unted States of merca.
The sum of the par vaue of such certfcates and Treasury bs outstandng
hereunder and under secton 6 of the rst Lberty ond ct sha not at any
one tme e ceed In the aggregate 10,000,000,000.
(b) certfcates of ndebtedness and Treasury bs ssued hereunder
(after the date upon whch ths subdvson becomes aw) sha be e empt,
both as to prncpa and Interest, from a ta aton (e cept estate and nhert-
ance ta es) now or hereafter mposed by the Unted States, any State, or any
of the possessons of the Unted States, or by any oca ta ng authorty and
the amount of dscount at whch Treasury bs are orgnay sod by the
Unted States sha be consdered to be Interest wthn the meanng of ths
subdvson.
(c) Wherever the words bonds and notes of the Unted States, or bonds
and notes of the Government of the Uuted States, or bonds or notes of the
Unted States are used n the edera Reserve ct, as amended, they sha be
hed to ncude certfcates of ndebtedness and Treasury bs ssued hereunder.
(d) ny gan from the sae or other dsposton of Treasury bs ssued
hereunder (after the date upon whch ths subdvson becomes aw) sha be
e empt from a ta aton (e cept estate or nhertance ta es) now or hereafter
mposed by the Unted States, any State, or any of the possessons of the
Unted States, or by any oca ta ng authorty and no oss from the sae or
other dsposton of such Treasury bs sha be aowed as a deducton, or
otherwse recognzed, for the purposes of any ta now or hereafter Imposed by
the Unted States or any of ts possessons.
The report of the Commttee on Ways and Means (Report No.
1759, accompanyng . R. 12440) shows that t s the purpose of the
ct approved une 17, 1930, to obvate the necessty, whch e sted
under the aw pror to ts amendment by such ct, of keepng a
compcated system of bookkeepng records n order to ascertan gan
or oss from the sae or other dsposton of Treasury bs as dffer-
entated from the dscount receved on such bs.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
23(o), rt. 151.
104
ttenton s aso nvted to secton 22(b)4 of the Revenue ct of
1928, whch provdes n part as foows:
Sec. 22. (b) cusons from gross ncome. The foowng tems sha not
be ncuded In gross ncome and sha be e empt from ta aton under ths tte:
(4) Interest upon ( ) the obgatons of a State, Terr-
tory, or any potca subdvson thereof, or the Dstrct of Coumba, or ( )
securtes ssued under the provsons of the edera arm Loan ct, or under
the provsons of such ct as amended or (C) the obgatons of the Unted
States or ts possessons. very person ownng any of the obgatons or
securtes enumerated n cause ( ), ( ), or (C) sha, n the return requred
by ths tte, submt a statement showng the number and amount of such
obgatons and securtes owned by hm and the Income receved therefrom,
n such form and wth such nformaton as the Commssoner may requre. In
the case of obgatons of the Unted States ssued after September 1, 1917
(other than posta savngs certfcates of depost), the nterest sha be e empt
ony f and to the e tent provded n the respectve cts authorzng the
ssue thereof us amended and suppemented, and sha be e cuded from gross
ncome ony f and to the e tent t s whoy e empt to the ta payer from
Income ta es
rtce 81 of Reguatons 74, promugated under the Revenue ct
of 1928, provdes that very person ownng obgatons of a State,
Terrtory, any potca subdvson thereof, or the Dstrct of Co-
umba securtes ssued under the provsons of the edera arm
Loan ct or of such ct as amended or obgatons of the Unted
States or ts possessons, must, however, submt n hs ncome ta
return a statement showng the number and amount of such obga-
tons and securtes owned and the ncome receved therefrom.
Under the above-quoted provsons of the Revenue ct of 1928
and Reguatons 74, n the case of Treasury bs ssued after une 17,
1930, (1) the amount of such obgatons and securtes s ther
par (maturty) vaue and (2) the ncome receved therefrom s
the net e cess of the amount reazed durng the ta abe year from
the sae or other dsposton of the bs over the cost or other bass
thereof, no separate computaton of dscount beng necessary. In
such cases, and pendng revson of the ncome ta forms, ta payers
makng ncome ta returns sha submt the statement requred by
secton 22(b) 4 and artce 81 n the form of a rder attached to the
return.
Robt. . Lucas,
Commssoner of Interna Revenue.
pproved unc 25,1930.
. W. Meon,
Secretary of the Treasury.
S CTION 23(c). D DUCTIONS ROM GROSS
INCOM : T S G N R LLY.
rtce 151: Ta es. I -28-4690
G. C. M. 7421
R NU CT O 1928.
The ta mposed on gasone and other ke products of petro-
eum by the State of orda s deductbe for edera Income
ta purposes by the deaer who pays t and not by the consumer.
If, however, the ta s added to or made a part of the busness
e pense of such deaer, t can not be deducted by hm separatey
as a ta .
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
105
523(c), rt. 161.
n opnon s requested n regard to the deductbty, for edera
ncome ta purposes, of the ta es on gasone and other ke products
of petroeum mposed by the aws of the State of orda.
The gasone ta of the State of orda s mposed n accordance
wth the provsons of chapter 9120, Laws of orda, 1923, as
amended by chapter 10025, Laws of orda, 1925, chapter 12037,
Laws of orda. 1927, chapter 14575, Laws of orda, 1929 (effec-
tve uy 1, 1929) and n accordance wth the provsons of chapter
14573, Laws of orda, 1929 (effectve uy 1. 1929).
Secton 1 of chapter 9120, Laws of orda, 1923, as amended,
provdes as foows:
very deaer n gasone or any other ke product of petroeum, under what-
ever name desgnated, n ths State sha pay a cense ta of 5 to the State
and n addton thereto a ta , heren termed gas ta , of 5 cents per gaon for
every gaon of gasone, or other ke products of petroeum sod by hm and
upon whch the ta heren provded as not been pad, or the payment whereof
has not been assumed by a person precedng hm n the handng of sad ot of
products, sad ta of 5 cents per gaon beng made up of four separate ta es,
beng
rst gas ta : ta of 2 cents per gaon for the State of orda, for the
use of the State road department, as provded by aw.
Second gas ta : ta of 1 cent per gaon to be apportoned to the severa
countes of the State n the proporton coected n such countes respectvey.
Thrd gas ta : ta of 1 cent per gaon to be apportoned to each county
n the State n the proporton that the ndebtedness authorzed, ssued and out-
standng n the county for road purposes or for road and brdge purposes by
the county and/or by any speca road and brdge dstrct or dstrcts theren
on pr 1, 1929, bore to Indebtedness of the same cass of a the countes and/or
speca road and brdge dstrcts of the State of orda.
ourth gas ta : ta of 1 cent per gaon to be apportoned equay among
the severa countes of the State.
Secton 1 of chapter 14573, Laws of orda, 1929 (effectve uy
1, 1929), provdes:
That every deaer In gasone or other ke products of petroeum under what-
ever name desgnated In ths State, In addton to a other ta es requred by
aw, sha pay a ta of 1 cent per gaon for every gaon of gasone or other
ke products of petroeum sod by hm n ths State and upon whch the ta
heren provded for has not been assumed by a person precedng hm n the
handng of such products, whch ta sha be pad nto the State treasury to
the credt of the pubc free schoo fund and sha be dstrbuted among the
severa countes of ths State as herenafter provded .
Secton 23(c) of the Revenue ct of 1928 provdes that n comput-
ng net ncome there sha be aowed as deductons ta es pad or
accrued wthn the ta abe year, wth certan e ceptons not here
matera. rtce 151 of Reguatons 74, promugated under the
Revenue ct of 1928, provdes that n genera ta es are deductbe
ony by the person upon whom they are mposed.
In the aws of orda, above referred to, the Legsature of or-
da has not ndcated an ntenton to mpose the ta upon the con-
sumer ether by e pressy statng such ntenton or by provdng for
a refund of such ta to the consumer who uses gasone or other ke
products of petroeum for certan purposes or by ndcatng n any
way that the burden of the ta was paced upon the consumer. Those
aws, on the contrary, evdence a cear ntenton to mpose the ta
upon the deaer.
It s, therefore, the opnon of ths offce that the ta on gasone
and other ke products of petroeum mposed by the State of orda
85942 81 8
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
23(c), rt. 151.1
106
s deductbe, under the provsons of secton 23(c) of the evenue
ct of 1928 and artce 151 of Reguatons 74, by the deaer who pays
t and not by the consumer. If, however, the ta s added to or made
a part of the busness e pense of such deaer, t can not be deducted
by hm separatey as a ta .
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
rtce 151: Ta es. I -31-4726
G.C.M. 8218
R NU CT O 1928.
Rea and persona property ta es mposed by the State of Oho
accrue for ncome ta purposes as of the day precedng the second
Monday of pr.
n opnon s requested as to the proper accn: date of rea and
persona property ta es n the State of Oho.
The provsons of aw whch are matera to the queston submtted
w be found n sectons 5328, 5366-1, 5548, 5548-1, and 5671 of
Page s nnotated Oho Genera Code, 1926 edton.
Under the provsons of aw referred to a rea or persona prop-
erty n the State of Oho beongng to ndvduas or corporatons,
and a moneys, credts, and nvestments n bonds, stocks, or other-
wse of persons resdng n the State are sub|ect to ta aton, e cept
certan property e pressy e empted. The stng of a persona
property, moneys, credts, and nvestments n bonds, stocks, |ont
stock companes, or otherwse, e cept the stock n trade of transent
persons, must be made between the second Monday of pr and the
frst Monday of May, annuay, e cept as otherwse provded. The
stng and vauaton of a such property for ta aton must be made
as of the day precedng the second Monday of pr, annuay, and a
persona property, moneys, credts, and nvestments, e cept as other-
wse provded by aw, must be sted and vaued wth respect to the
ownershp thereof on sad date and n the pace where then ta abe.
ach county s made the unt for assessng rea estate for ta aton
purposes. The county audtor, n addton to hs other dutes, s the
assessor for a the rea estate n hs county for purposes of ta aton,
but ths duty mposed upon the county audtor does not affect the
power conferred upon the ta commsson of Oho n the matter of
the vauaton and assessment of the property of any pubc utty.
The State aw provdes that n the year 1925, and n every s th
year thereafter, t sha be the duty of the county audtor to assess
a the rea estate stuate n the county provded, that f the rea
property n any county or subdvson thereof has been reap-
prased n the year 1922, 1923, or 1924, and upon the appcaton of
the county audtor of sad county the ta commsson or Oho fnds
that the rea property n sad county or subdvson thereof s ap-
prased at ts true vaue n money, then there sha be no genera
reassessment of property n sad county or subdvson n the year
1925. It s the dutv of the county audtor to revaue and assess any
rea estate wthn hs |ursdcton where he fnds there has been a
change n vaue after the year of assessment.
The en of the State for ta es eved for a purposes, n each
year, attaches to a rea property sub|ect to such ta es on the dav
precedng the second Monday of pr, annuay, and contnues unt
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
107
23(c), rt. 151.
such ta es, wth any penates accrung thereon, are pad.
persona property sub|ect to ta aton s abe to be sezed and sod
for ta es. The persona property of a deceased person s abe, n
the hands of an e ecutor or admnstrator, for any ta due on t
from the testator or ntestate.
though the Oho aw provdes that persona property must be
vaued for the purpose of ta aton as of the day precedng the
second Monday of pr, no date s specfed wth respect to the
vauaton of rea property. The Supreme Court of Oho has hed,
however, n State e re. Donakey v. Roose (90 Oho St., 345, 107
N. ., 760), that the assessment of rea property ta es reates back
to the date when the ta es become a en. The court n the course of
ts opnon stated as foows:
Whe secton 5671, Genera Code, f es the date In eneh year that the en
of the State for ta es sha attach, yet It by no means foows that ths re-
qures that the ta evy sha be made on or before that date. In fact, a the
egsaton upon that sub|ect s n drect confct wth such a constructon. On
the contrary, It s cear that the amount of such ta es s to be subsequenty
determned, and such assessment then reates back to the date at whch the
ta es become a en. Ths queston s fuy dscussed and the correct concu
son reached In the case of Looms, Truztec, v. on I hu ct a. (2 Oho N. P.
(N. S.), 423).
Under the provsons of secton 5671 of Page s nnotated Oho
Genera Code, the en of the State for ta es eved for a purposes,
n each year, sha attach to a rea property sub|ect to such ta es
on the day precedng the second Monday of pr.
The Unted States Supreme Court n Unted States v. nderson
(269 U. S., 422, T. D. 3839, C. . -, 179) stated as foows:
In a technca ega sense t may be argued that a ta does not accrue unt
It has been assessed and becomes due but t s aso true that n advance of th
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 rea and persona property n Oho on the day
precedng the second Monday of pr s the event whch deter-
mnes the abty for rea and persona property ta es and f es
the amount thereof, n accordance wth the rue ad down n Unted
States v. nderson, supra. (See G. C. M. 6273, C. . III-1, 168
I. T. 2495, C. . III-2, 98 G. C. M. 6667, C. . III-2, 94 G. C.
M. 6272, C. . III-1, 170 G. C. M. 7190, C. . III-2, 113.)
In vew of the foregong, ths offce s of the opnon that rea and
persona property ta es mposed by the State of Oho accrue for
ncome ta purposes as of the day precedng the second Monday
of pr.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
rtce 151: Ta es. I -32-4733
G. C. M. 7630
R NU CT O 1028.
The motor vehce fue ta mposed by the State of Caforna s
deductbe for edera Income ta purposes by the dstrbutor who
pays It and not by the consumer. If, however, the ta Is added to
or made a part of the busness e pense of such dstrbutor, t can
not be deducted by hm separatey as a ta .
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
523(c), rt. 151.
108
n opnon s requested as to whether the motor vehce fue ta
mposed by the State of Caforna s deductbe for edera ncome
ta purposes by the consumer.
The motor vehce fue ta of the State of Caforna s mposed n
accordance wth the provsons of chapter 267, Statutes of Caforna,
1923, as amended by chapter 359, Statutes of Caforna, 1925, and by
chapters 48, 208, 552, and 779, Statutes of Caforna, 1929 and n
accordance wth the provsons of chapter 795, Statutes of Caforna,
1927.
Chapter 267, Statutes of Caforna, 1923, s entted:
n act to reguate and cense the busness of producng, refnng or ds-
trbutng gasone, dstate and other motor vehce fues, provdng for the
coecton and dsposton of cense ta es .
Secton 1 of chapter 267 defnes motor vehce fue to ncude
gasone, dstate, benzne, naphtha, berty fue, and other voate
and nfammabe quds produced or compounded for the purpose of,
or whch may be used n, operatng or propeng motor vehces.
The same secton defnes dstrbutor to mean and ncude every
person, etc., who refnes, manufactures, produces, or compounds
mot or-vehce fue n the State and ses same n the State aso every
person who mports motor-vehce fue nto the State and ses same
n the State.
Secton 3 of chapter 267 provdes:
very dstrbutor sha from and after September 30. 1023, n addton to
any other ta es provded by aw, pay a cense ta to the State controer of ths
State of 2 cents for each gaon of motor vehce fue refned, manufactured,
produced or compounded by such dstrbutor n ths State and sod and devered
by hn n ths State, or mported by such dstrbutor nto and dstrbuted or
sod by hm n ths State otherwse than n the orgna package or contaner
n whch such motor vehce fue was mported nto ths State, and for each
gaon of motor vehce fue mported nto ths State and thereafter acqured
by such dstrbutor n the orgna package or contaner n whch the same was
mported and thereafter dstrbuted or used by such dstrbutor or sod by hm
otherwse than n the orgna package or contaner n whch the same was
Imported nto ths State and for each gaon of motor vehce fue sod, ds-
trbuted or used by hm from any stock on hand or hed In storage by hm on
September 30, 1923. rom any amount found to be due upon any report here-
under the dstrbutor sha frst be aowed to deduct 1 per cent of the ta
otherwse due hereunder to cover subsequent osses occasoned by evaporaton
and handng.
Secton 4 of chapter 267, as amended by secton 1 of chapter 359,
Statutes of Caforna, 1925, provdes that the cense ta sha be
pad to the State controer and that the ta sha be a en upon a
the property of the dstrbutor.
Secton 6 of chapter 267 provdes that each dstrbutor sha fe
wth the State board of equazaton a statement showng the num-
ber of gaons of motor vehce fue sod. It s further provded
that the State board of equazaton sha compute the cense ta due
and e tend the same upon a ta ro prepared, and sha dever
sad ta ro to the State controer, who sha gve due notce of
the dates when sad ta es w become due.
Secton 7 of chapter 267, as amended by secton 2 of chapter 359,
Statutes of Caforna, 1925, reads n part as foows:
motor vehce fue dstrbuted by any dstrbutor to any of Its servce
statons, or other agences, tank trucks, wagons, boats, barges, or other fac-
tes operated by such dstrbutor n ths State sha for the purposes of tha
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
109
23(c), rt. 151.
act be consdered In the same manner and the same cense ta sha be pad
upon such motor vehce fue as though the same had been sod and devered
by such dstrbutor.
Secton 11 of chapter 267, as amended by secton 4 of chapter 359,
Statutes of Caforna, 1925, provdes as foows:
ny person, frm, assocaton or corporaton who sha buy and use any
motor vehce fue for purposes other than n motor vehces operated, or
ntended to be operated upon the pubc hghways of the State of Caforna
or e port the same for use outsde of ths State aso any person, frm, assoca-
ton or corporaton who sha buy any motor vehce fue and use the same
e cusvey n the transportaton of rura free devery mas, and who sha
have pad any cense ta for such motor vehce fue hereby requred to be
pad, ether drecty or to the vendor from whom t was purchased, or Ind-
recty by the addng of the amount of such ta to the prce of such fue, sha
be rembursed and repad the amount of such ta pad by hm or t .
In Peope v. entura Refnng Co. (Ca.. 1928) (268 Pac, 347),
chapter 267 was under consderaton. The Supreme Court of Ca-
forna hed that the ta mposed thereby was mposed upon the
dstrbutor. The court stated:
The cear ntent of the aw was to evy an e cse or occupaton ta upon ds-
trbutors of motor vehce fue, gvng such dstrbutors, however, ampe oppor-
tunty to fuy ndemnfy themseves by addng the amount of the ta to the
seng prce of the fue and thus n effect coect the ta from the con-
sumer .
Secton 23(c) of the Revenue ct of 1928 provdes that n comput-
ng net ncome there sha be aowed as deductons ta es pad or
ncurred 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.
Ihe ta mposed by chapter 267, Statutes of Caforna, 1923, has
been construed by the Supreme Court of Caforna as an e cse or
occupaton ta eved upon the dstrbutors of motor vehce fue.
Chapter 795, Statutes of Caforna, 1927, mposng an addtona ta
of 1 cent per gaon, s smar to chapter 267. It s, therefore, the
opnon of ths offce that the motor vehce fue ta mposed by the
State of Caforna s deductbe under the provsons of secton
23(c) of the Revenue ct of 1928 and artce 151 of Reguatons 74 by
the dstrbutor who pays t and not by the consumer. If, however,
the ta s added to or made a part of the busness e pense of such
dstrbutor, t can not be deducted by hm separatey as a ta .
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
htc e 151: Ta es. I -40-4789
( so Secton 41, rtce 322.) G. C. M. 8553
R NU CT O 1928.
Under the Massachusetts corporaton e cse ta aw as amended
pr 15, 1927, effectve anuary 1, 1928, n the case of a corpora-
ton whch fed a return for the caendar year 1928 and kept Its
books of account on the accrua bass, there may be deducted In
computng net ncome for that year the amount of e cse ta es
whch accrued as of anunry 1,1928, as we as those whch accrued
as of December 31, 1928.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
23(c), rt. 151.
110
n opnon s requested as to the proper accrua date of the
corporaton e cse ta mposed by chapter 63 of the Genera Laws
of Massachusetts, n the case of a corporaton whch fed a return for
the caendar year 1928 and kept ts hooks of account on the accrua
bass.
Secton 32 of chapter 63 of the Genera Laws of Massachusetts, as
amended by secton 3 of an act approved pr 15, 1927, effectve
anuary 1, 1928 (chapter 258, Laws of Massachusetts, 1927), reads
as foows:
Sec. 32. cept as otherwse provded n secton 34, every domestc busness
corporaton sha pay annuay, wth respect to the carryng on or dong of
busness by It, an e cse equa to the sum of the foowng, provded, that every
such corporaton sha pay annuay a tota e cse not ess n amount than
one-twenteth of 1 per cent of the far vaue of ts capta stock on the day f ed
for determnaton of the vaue of ts corporate e cess:
(1) n amount equa to 5 per thousand upon the vaue of Its corporate
e cess.
(2) n amount equa to 2 z per cent of ts net ncome determned to be
ta abe n accordance wth the provsons of ths chapter.
though both property and ncome are used as a bass for ts ca-
cuaton, the ta s nevertheess an e cse on the commodty of e er-
csng the corporate franchse and not a ta on property or on ncome.
(Sprngdae nshng Co. v. Commonweath, 242 Mass., 37, 136
N. ., 250 Caros Rugges Lumber Co. v. Commonweath, 158 N. .,
899.) It w be noted that the above-quoted secton contans the
provso that every domestc corporaton sha pay annuay a tota
e cse not ess n amount than one-twenteth of 1 per cent of the far
vaue of ts capta stock on the day f ed for determnaton of the
vaue of ts corporate e cess. The mtaton contaned n secton 32
pror to the amendment was not ess n amount than one-twenteth
of 1 per cent of the far cash vaue of a the shares consttutng ts
capta stock on the 1st day of pr when the return caed for by
secton 35 s due. Ths offce has prevousy hed that pror to the
amendment of 1927 the Massachusetts e cse ta accrued on pr 1,
annuay, for pror to that date there coud not be a determnaton
of corporate e cess so as to gve effect to the mtaton prescrbed n
the act. (G. C. M. 6616 whch see on page 335 .) The effect of the
amendment of the act was to f the mtaton o the amount of the
corporaton s ta as one-twenteth of 1 per cent of the far vaue
of ts capta stock on the day f ed for the determnaton of the
vaue of ts corporate e cess. The act approved pr 15, 1927, sec-
ton 1, defnes corporate e cess as foows:
Corporate e cess, n the case of a domestc busness corporaton, e cept as
herenafter provded, the far vaue of ts capta stock on the ast day of the
ta abe year as defned n paragraph numbered 6 of ths secton, ess the vaue
of the foowng on such date.
Thus the date f ed for the determnaton of the vaue of the cor-
porate e cess s the ast day of the corporaton s ta abe year, as
defned n paragraph 6 of secton 30. That paragraph defnes the
term ta abe year as the fsca year or caendar year for whch the
corporaton was requred to make ts ast return to the edera Gov-
ernment due pror to pr 1 of the year n whch the ta s to be
assessed, or, f such return was for a fractona perod, a fu year
ncudng and endng wthn such fractona perod. In the case of
Unted States v. nderson (269 U. S., 422, T. D. 3839, C. . -,
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
I
f23(c), rt. 151.
179), whch nvoved the deductbty of accrued muntons ta es n
computng net ncome under the Revenue ct of 1916, as amended
by the Revenue ct of 1917, the Supreme Court of the Unted States
consdered the queston as to the proper accrua date of ta es. The
partcuar queston nvoved was whether such ta es were deductbe
u 1917, the year n whch pad, or n 1916, the year for whch the ta
was eved. The court n ts opnon stated as foows:
Ony a word need be sad wth reference to the contenton that the ta upon
muntons manufactured and sod n 1916 dd not accrue unt 1917. In a
technca ega sense t may be argued that a ta does not accrue unt It has
been assessed and becomes due but t s aso true that n advance of the
assessment of a ta , a the events may occur whch f the amount of the ta
a u determne the abty of the ta payer to pay t. In thn respect, for
purposes of accountng and of ascertanng true ncome for a gven accountng
perod, the muntons ta here n queston dd not stand on any dfferent foot-
ng than other accrued e penses appearng on appeee s books.
urther ght on the sub|ect s contaned n the decson of the
oard of Ta ppeas n the ppea of . . rown Co. (8 . T.
., 112), whch has been acquesced n by the Commssoner (C. .
TI-1, 5). In that decson t was hed that the e cse ta was a
abty of the pettoner on pr 1, under the aws of Massachu-
setts pror to the amendment here under consderaton, and was
propery accruabe as of that date. The foowng e tract from the
oard s opnon s of especa nterest:
The corporaton e cse ta as Imposed by secton 32 of chapter 63, Genera
Laws of Massachusetts, 1922, s assessed as of pr 1 of the ta abe year. The
bass of the assessment s the e cess of the far cash vaue on that date of the
shares of capta stock over certan deductons pus the net ncome of the cor-
poraton as shown by ts ast edera ncome-ta return. In Uprngdae n-
shng Co. v. Commonweath (242 Mass., 37 136 N. ., 250) the court hed
that ths ta was an e cse on the rght of a domestc corporaton to do busness
or as the court quanty put t, an e cse for the commodty of carryng on
busness.

The basc dea under the accrua system of accountng s that the books sha
mmedatey 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 s due n the sense of beng then
payabe. On the contrary, the accrua system whoy dsregards due dates.
Nether Is t necessary that the amount of an ncurred abty be accuratey
ascertaned n order to accrue t. Itacs supped.
rom the foregong t s apparent that pror to the enactment of
the amendment n 1927 the e cse ta was accruabe on pr 1,
annuay, for that was the date as of whch t was necessary to
determne the far cash vaue of a the shares consttutng the cor-
poraton s capta, and to take one-twenteth of 1 per cent thereof as
a mtaton to appy aganst the sum of (1) an amount equa to 5
per thousand upon the vaue of ts corporate e cess, and (2) an
amount equa to 2y2 per cent of that part of ts net ncome as defned
n chapter 63 whch s derved from busness carred on wthn the
Commonweath of Massachusetts. The phrase net ncome re-
ferred to means net ncome for the ta abe year as requred to be
returned by the corporaton to the edera Government wth certan
ad|ustments thereto. (See paragraph 5, secton 30, chapter 63, Gen-
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
523(e), rt. 171.
112
era Laws of Massachusetts, as amended ood Rubber Co. v. Com-
mssoner of Corporatons, 167 N. ., 670.)
Under the act of the Massachusetts Legsature approved pr
15, 1927, a corporaton fng ts return for the caendar year 1928
s not requred to wat unt pr 1, 1929, to accrue ts abty for
the e cse ta whch s payabe n October, 1929. t the end of the
caendar year 1928 a the events had occurred whch f ed the
amount of the ta and determned the abty of the ta payer to
ay t under the rue ad down n Unted States v. nderson, supra,
ts ta abe year havng cosed, the corporaton coud compute ts
net ncome as requred by the statute, as we as ascertan ts cor-
porate e cess. Thus, on December 31, 1928, t coud determne to
a reasonabe degree of certanty the amount of e cse ta whch
woud be payabe to the State of Massachusetts n October, 1929,
for the date for determnng the corporate e cess and the mtaton
of the ta was moved back from pr 1, 1929, to the end of ts
ta abe year. It s concuded, therefore, that a corporaton, whch
fed ts 1928 ncome ta return on the bass of the caendar year
and has adopted the accrua method of accountng, may accrue
as of December 31, 1928, the corporaton e cse ta pavabe to the
State of Massachusetts n October, 1929. The effect of the change
n the State aw, however, s to permt the ta payer to accrue n
1928 ts e cse ta es for two years.
In accordance wth the aw whch e sted pror to the amendment
of pr 15, 1927, and the nterpretaton paced thereon by ths
offce as we as the oard of Ta ppeas, the e cse ta payabe
n October, 1928, woud have been accruabe on pr 1, 1928. The
new aw was effectve, however, anuary 1, 1928. Ths offce has
prevousy hed that ta es mposed by a State do not consttute an
accrued abty pror to the effectve date of the act under whch
the ta es are eved. (See I. T. 2304, C. . -2, 74 G. C. M. 6075,
C. . III-1, 76.) Consequenty, the abty f ed by the aw as
amended dd not e st n the nstant case unt anuary 1, 1928.
The resut s that e cse ta es for two years accrued n the same
ta abe year. In accordance wth the rue ad down n Unted
States v. nderson, supra, there may be deducted n computng net
ncome (n the case of an ncome ta return fed by a corporaton
for the caendar year 1928) the amount of e cse ta es whch
accrued as of anuary 1, 1928, as we as those whch accrued as of
December 31, 1928.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
S CTION 23(e). D DUCTIONS ROM GROSS INCOM :
LOSS S Y INDI IDU LS.
rtce 171: Losses. I -46 4834
G. C. M. 8628
R NU CT O 192 8.
The ta payer purchased an automobe, whch was used three-
fourths of the tme for busness and one-fourth of the tme for
peasure, and sod t at a oss.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
113
23(e), rt. 171.
The transacton In Its busness aspect shoud be treated as If the
ta payer had purchased for busness use ony an automobe at
three-fourths of the purchase prce, that t deprecated three-
fourths of the tota deprecaton, and that t sod for three-fourths
of the seng prce.
n opnon s requested as to the amount of deductbe oss sus-
taned n the case where a ta payer sod an automobe whch was
used part of the tme for busness and part of the tme for peasure.
The ta payer purchased an automobe on ugust 14, 1927, at a
cost of 2,525a doars. The automobe was used three-fourths of
the tme for busness and one-fourth of the tme for peasure. The
automobe was sod September 24, 1928, for 1,500.2 doars.
Secton 23(e) of the evenue ct of 1928 provdes that n com-
putng net ncome there sha be aowed as deductons n the case of
an ndvdua, osses sustaned durng the ta abe year and not com-
pensated for by nsurance or otherwse (1) f ncurred n trade or
busness or (2) f ncurred n any transacton entered nto for
proft, though not connected wth the trade or busness or (3) of
property not connected wth the trade or busness, f the oss arses
from fres, storms, shpwreck, or other casuaty, or from theft.
There s no doubt that where an automobe s purchased and used
n trade or busness anv oss upon the sae thereof s an aowabe
deducton under secton 23(e). (O. D. 943, C. . 4, 163.) Secton
111 of the Revenue ct of 1928 provdes that the gan from the sae or
other dsposton of property sha be the e cess of the amount rea-
zed therefrom over the bass provded n secton 113, and that the
oss sha be the e cess of the bass over the amount reazed.
Secton 113 provdes that the bass for determnng gan or oss
from the sae or other dsposton of property acqured after eb-
ruary 28, 1913, sha be the cost of such property wth certan e cep-
tons not here matera. Secton 111 further provdes that n com-
putng the amount of gan or oss from the sae or other dsposton
of property the bass sha be dmnshed by the amount of the deduc-
tons for e hauston, wear and tear (referred to heren as depreca-
ton) whch have snce the acquston of the property been aowabe
n respect of such property under the Revenue ct of 1928 or pror
ncome ta aws. Inasmuch as the ta payer n the nstant case
acqured the automobe on ugust 14, 1927, and sod t on Septem-
ber 24, 1928, the tota deprecaton sustaned at the rate of 25 per
cent, computed from the date of acquston to the date of sae, s
703.89a doars. Of ths amount, 240.39.r doars s attrbutabe to
1927, three-fourths of whch (or 180.29a doars) s aowabe as a
deducton for that year, and 463.50a doars s attrbutabe to 1928,
three-fourths of whch (or 347.63a doars) s aowabe as a deduc-
ton for 1928.
There s no specfc provson of the aw outnng the method of
computng the deductbe oss sustaned from the sae of a capta
asset whch s used part of the tme n connecton wth a trade or
busness and part of the tme for peasure. It appears ony reason-
abe, however, that n such cases the ta payer shoud be aowed to
deduct as a busness oss that porton of the oss resutng from the
sae of the capta asset whch s attrbutabe to hs trade or busness.
It s the opnon of ths offce that n the determnaton of such
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
24, rt. 283.
114
porton (. e., the deductbe porton) of the oss resutng from the
sae of an automobe used three-fourths of the tme for busness and
one-fourth of the tme for peasure, the transacton n ts busness
aspect shoud be treated as f the ta payer had purchased for bus-
ness use ony an automobe at three-fourths of the purchase prce,
that t deprecated three-fourths of the tota deprecaton, and that
t sod for three-fourths of the seng prce. ppyng the fore-
gong prncpe, the computaton of the deductbe oss s as foows:
Doars.
Cost of automobe (2,525a doars reduced to thereof) 1,893.75a
Mnus deprecaton aowabe (whch Is of 703.89a doars, tota
deprecaton) 527. 92
ass as reduced by deprecaton aowabe 1,335.83a
Seng prce (1,500a doars reduced to thereof) 1,125. 00a
Deductbe oss 240. SS
C. M. Charest.
Genera Counse, ureau of Interna Revenue.
S CTION 24. IT MS NOT D DUCTI L .
rtce 283: Premums on busness nsurance. I -39-4784
G. CM. 8432
R NU CTS OP 1926 ND 1028.
The deductbty of fe nsurance premums pad by a corpora-
ton on poces taken out by or on behaf of ts offcers and coverng
ther ves depends prmary upon whether they consttute reason-
abe compensaton for persona servces actuay rendered, and
secondary upon whether the corporaton w nether drecty nor
ndrecty beneft under the poces. I. T. 2279 (C. . -, 67)
e paned.
n opnon s requested as to the deductbty n computng net
ncome for 1927 and 1928 of premums pad n those years by Cor-
poraton M and by Corporaton N on fe nsurance poces taken out
by, and coverng the ves of, ther respectve offcers.
The facts n the case are as foows:
ach of fve brothers owns 20 per cent of the capta stock of
Corporaton M and a ke percentage of the capta stock of Corpora-
ton N. Two of the brothers are offcers of one whe three are offcers
of the other corporaton.
The saary of each of these brothers durng the years under consd-
eraton was doars per annum. ach brother devoted hs entre
tme to the busness of the corporaton of whch he was an offcer.
Corporaton M pad premums on fe nsurance poces taken out
by, and coverng the ves of, ts offcers, the pocy of one brother
beng payabe to hs wfe and the pocy of the second brother beng
payabe to hs daughter. Corporaton N pad premums on poces
ta cn out by. and coverng the ves of, ts three offcers, the bene-
fcary n each nstance beng the wfe of the brother coverng whose
fe the pocy was ssued.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
115
24, rt. 283.
It must be noted that generay the premums pad by corporatons
on ndvdua fe nsurance poces taken out by or on behaf of
ther offcers and coverng ther ves consttute addtona ncome to
the offcers and shoud be ncuded n ther returns for the year or
years n whch pad. (O. D. 627, C. . 3, 104 George Matthew
dams v. Commssoner, 18 . T. ., 381 and N. Lorng Danforth v.
Commssoner, 18 . T. ., 1221.) urthermore, the amounts of the
premums must be ncuded n the returns of the offcers, regardess
of the fact that the corporatons payng those amounts may not be
Sermtted to deduct them from ther gross ncome. (Cf. . R. .
)35, C. . III-, 102 G. C. M. 6952, C. . III-2, 192 rauer v.
Commssoner, 6 . T. ., 679, C. . III-2, 6 ayner v. Unted
States, 62 Ct. Cs., 189, T. D. 3880, C. . -, 128 and Unted States
v. Snook, 24 ed. (2d), 844.)
mounts pad by corporatons to ther offcers n the form of
saares, bonuses, or premums on nsurance poces taken out by or
on behaf of ther offcers and coverng ther ves may be taken as
deductons n computng net ncome, provded such payments con-
sttute reasonabe compensaton for persona servces actuay
rendered by the offcers. ( erzz ros. Co. v. Commssoner, 16
. T. ., 1307, C. . III-2, 5 and tas eatng cf: entatng
Co. v. Commssoner, 18 . T. ., 389. Cf. os. Nus bcrum v. Com-
mssoner, 19 . T. ., 868.) owever, n the case of the payment
of premums on nsurance poces no deducton may be taken f
the corporaton s drecty or ndrecty a benefcary under the
pocy. (Secton 215(a)4 of the Revenue ct of 1926 secton
24(a)4 of the Revenue ct of 1928 and os. Nussbaum v. Com-
mssoner, supra.) ccordngy, n the nstant case the two ta payer
corporatons may deduct the premums pad f t can be shown (1)
that the premums were pad n consderaton of persona servces
actuay rendered by ther offcers (2) that the tota amount pad
the offcers, ncudng the premums, was not unreasonabe compen-
saton for ther servces and (3) that the ta payer corporatons
were not drecty or ndrecty benefcares under the poces.
In genera, t may be stated that the deductbty of fe nsurance
premums pad by a corporaton on poces taken out by or on behaf
of ts offcers and coverng ther ves depends prmary upon
whether they consttute reasonabe compensaton for persona servces
actuay rendered, and secondary upon whether the corporaton w
nether drecty nor ndrecty beneft under the poces.
I. T. 2279| hodng that the corporaton there under consderaton
was not entted to a deducton for nsurance premums pad by t
upon poces ssued to ts offcers, shoud be read n the ght of the
rncpes herenbefore stated, the concuson reached n the I. T.
sng supported by the fact that the ta payer n that case dd not
contend, and no showng was made, that the premums pad const-
tuted reasonabe compensaton to the offcers for persona servces
actuay rendered.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
31, rt. 311. 116
P RT III. CR DITS G INST T .
S CTION 31. RN D INCOM CR DIT.
rtce 311: arned ncome credt. I -34-4755
Mm. 3819
Instructons and Iustratons for computng the credt for earned
ncome under the Revenue ct of 1928.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C, uy 31,1930.
Coectors of Interna Revenue, Interna Revenue gents n Charge,
and Others Concerned:
In connecton wth the audt of the ndvdua returns fed on
orm 1040 for the caendar year 1929, where partnershp ncome
computed on the bass of a fsca year ended n 1929 s reported, the
ta sha be computed as provded n secton 182(b) of the Revenue
ct of 1928. Under ths secton of the ct the share of the fsca-
year ncome derved from a partnershp whch s attrbutabe to 1929
sha be added to the other ncome of the partner for the caendar
year 1929. and ta ed at the ower norma ta and surta rates app-
cabe to 1929. and the share of the partnershp ncome attrbutabe
to 1928 sha be ta ed at the ne t hgher norma ta and surta rates
appcabe to 1928. In determnng the credt for earned ncome on
such returns, the earned net ncome aowed an ndvdua sha frst
be aocated to 1928 and 1929 on the bass of the actua earned net
ncome attrbutabe to each of the years, and then a ta sha be com-
puted on the amounts of the aowed earned net ncome aocated to
the two years n the same manner as f such amounts consttuted the
ta payer s entre net ncome for the ta abe year.
To ustrate, f an ndvdua entted to a persona e empton of
3,500 made a return for the caendar year 1929 and reported 4,000
as commssons earned n hs ndvdua capacty, 36,000 as hs share
of the profts from a aw partnershp whch made ts return for the
fsca year ended ugust 31, 1929, and 14,000 as an ndvdua oss,
hs ta woud be 960, computed as foows:
Income ta abe at 1928 rates. Income ta abe at 1929 rates.
Partnershp Income 12. 000 Commssons 4,000
Persona e empton None. Partnershp ncome 24.000
aance ta abe at 5 per cent- 12. 000 Tota 28.000
Norma ta on 12,000 600 osses 14, OOP
Surta on 2(5.000, ess surta Net ncome 14. 000
on 14.000 540 Persona e empton 3,500
Ta at 1928 rates 1.140 aance 10,500
Ta at 1929 rates 240 Norma tn on 10,500 200
Tota 1. 380 Surta on 14,000 40
Credt for earned ncome 420 Ta at m9 rates. . 240
aance of ta 900
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
117 41, rt. 322.
The credt of 420 for earned net ncome s determned as foows:
Porton of 30,000 aocabe to Credt aowed, mted to 25
1928 9,000 per cent of 1,680 420
Persona e empton None. Porton of 30,000 aocabe to
1929 21, 000
aance ta abe at 5 Persona e empton 3,500
per cent 9,000
aance 17, 500
a ta on 17,500 480
on 21,000 610 Surta on 21,000 270
Norma ta on 9,000 450
Surta on 30,000, ess surta Norma ta on 17,500 480
Ta at 1928 rates 1,060 Tota ta at 1929 rates. 750
Ta at 1929 rates 750
Tota 1, 810
In the above computaton t w be noted that the ta payer s
entted to cam the ma mum earned net ncome of 30,000, whch
s aocated to 1928 and to 1929 on the bass of the actua earned net
ncome attrbutabe to 1928 and to 1929, respectvey thus 12/40 of
30,000, or 9,000, s aocated to 1928, and 28/40 of 30,000, or
21,000, s aocated to 1929. The earned ncome credt, nstead of
beng 25 per cent of 1,810, the ta on the aowed earned net n-
come, s mted, pursuant to secton 31(b) of the evenue ct of
1928, to 25 per cent of 800, the ta payer s norma ta , pus 25 per
cent of 880, the surta that woud be payabe f the aowed earned
net ncome consttuted the ta payer s entre net ncome.
The above method shoud be foowed when computng the earned
ncome credt on a returns fed for the caendar years 1929 and
1930 where ncome s reported from a partnershp the ncome of
whch s computed on the bass of a fsca year.
ny correspondence n regard to ths mmeograph shoud refer
to the number of the mmeograph and the symbos IT: : RR.
Robt. . Lucas,
Commssoner.
P RT I . CCOUNTING P RIODS ND M T ODS OP CCOUNTING.
S CTION 41. G N R L RUL .
rtcue 322: ases of computaton.
R NU CT O 1028.
ccrua of ta under Massachusetts e cse ta aw as amended
pr 15,1927. (See G. C. M. 8553, page 109.)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
42, rt. 332.
118
S CTION 42. P RIOD IN W IC IT MS O
GROSS INCOM INCLUD D.
rtce 332: Income not reduced to possesson. I -42 4804
G. C. M. 8364
R NU CT O 1928.
Payment of compensaton was made by transfer of shares of
stock to a ta payer s account on December 29, 1928. Notce of the
transacton was contaned n a etter of the same date, wth whch
was ncosed a check for a baance due. The etter was not re-
ceved unt anuary 2, 1929.
ed, the payments by stock and check consttuted ncome con-
structvey receved by the ta payer In 1928.
n opnon s requested as to whether cash and certan shares of
stock receved by consttuted ncome for 1928 or 1929.
The ta payer, , keeps hs books on the cash recepts and dsburse-
ments bass. e was notfed by the O Company on or about Decem-
ber 30, 1926, that a sum representng compensaton for servces ren-
dered had been deposted to hs account wth the M Company, a
brokerage frm, wth the understandng that he was to eave t on
depost at 4 per cent for two years uness sooner pad by the frm,
and that the payment coud be made n cash or n any of certan
specfed securtes at ther market vaue on the date of payment.
The M Company transferred certan shares of stock at ther market
vaue to the ta payer s account on December 29, 1928, and notfed
hm of the fact n a etter of the same date n whch was ncosed a
check for the sma amount of the dfference between the tota com-
pensaton pus the nterest and the market vaue of the stock. The
etter was not receved by the ta payer unt anuary 2, 1929.
Secton 42 of the Revenue ct of 1928 reads as foows:
The amount of a tems of gross ncome sha be ncuded n the gross ncome
for the ta abe year In whch receved by the ta payer, uness, under methods
of accountng permtted under secton 41, any such amounts are to be propery
accounted for as of a dfferent perod.
rtces 332 and 333 of Reguatons 74 read, n part, as foows:
bt. 332. Income not reduced to possesson. Income whch s credted to the
account of or set apart for a ta payer and whch may be drawn upon by hm
at any tme s sub|ect to ta for the year durng whch so credted or set apart,
athough not then actuay reduced to possesson. To consttute recept n such
a case the ncome must be credted or set apart to the ta payer wthout any
substanta mtaton or restrcton as to the tme or manner of payment or
condton upon whch payment s to be made, and must be made avaabe to
hm so that t may be drawn at any tme, and ts recept brought wthn hs
own contro and dsposton. book entry, f made, shoud ndcate an abso-
ute transfer from one account to another.
bt. 333. ampes of constructve recept. When nterest coupons have
matured and are payabe, but have not been cashed, such Interest, though not
coected when due and payabe, sha be ncuded n gross ncome for the year
durng whch the coupons mature, uness t can be shown that there are no
funds avaabe for payment of the nterest durng such year. The nterest
sha be ncuded n gross ncome even though the coupons are e changed for
other property nstead of eventuay beng cashed. Defauted coupons are
ncome for the year n whch pad. Dvdends on corporate stock are
sub|ect to ta when unquafedy made sub|ect to the demand of the share-
hoder.
The test to be apped to determne constructve recept of ncome
s, n genera, that of avaabty that s, whether the ta payer,
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
119
42, rt. 332.
though not n possesson of the ncome, may demand and be entted
to receve the tems aeged to be ncome to hm.
In the nstant case the ta payer knew n 1926 that on or after
December 30, 1928, he coud demand and woud be entted to
receve from the M Company ether cash or stock, or perhaps both.
e knew that f he was to receve stock then he coud on or after
December 30, 1928, se such stock or otherwse dspose of t as he
mght see ft. e coud have arranged to draw on the M Company for
such cash as was to be pad to hm or he coud have arranged for the
sae of the stock n 1928 by the M Company or for the devery of
the stock ether to hmsef n person or to hs agent. e coud have
presented hmsef before the cose of 1928 at the offce of the M Com-
pany and made demand for the cash or for the stock and he woud
have been entted to receve the same. The facts that a check for
the amount of compensaton due the ta payer n e cess of the vaue
of the stock transferred to hs account was made out to hm on
December 29, 1928, and that the stock was transferred to hs account
on that day are ceary ndcatve that he had the rght of absoute
dsposton of both cash and stock as of that day, and emphasze the
fact that the money and the stock were unquafedy sub|ect to the
demand of the ta payer n 1928. (See Commssoner v. ngham,
85 ed. (2d), 503.)
On the bass of the decson of the court n the ast cted case, the
fact that t was perhaps not convenent or physcay possbe for the
ta payer n the nstant case to appear at the broker s offce n person
before the end of 1928 and demand the cash and stock dd not
destroy hs ega rght to do so. (Compare adey v. Commssoner,
36 ed. (2d), 543 ppea of Lauerman, 3 . T. ., 683.)
In ppea of . . rander (3 . T. ., 231) saary was credted
to but not receved by the ta payer n the ta abe year as an offcer
of a corporaton whch was controed by the ta payer and another
person and whch was abe to pay such saary. The oard hed that
the saary was constructvey receved when credted. In ts opnon
the oard sad, n dscussng the theory of constructve recept of
ncome:
Doubtess, however, there are cear cases of constructve recept,
such, for e ampe, as that of the bond owner who chooses not to cash hs
coupon but to permt t to reman uncut n the possesson of another. e w
not be heard to say that the amount of the coupon s not hs ncome because he
dd not In fact receve t. The recept s entrey wthn hs own contro and
dsposton.
In the case of . C. Loose (15 . T. ., 169, C. . III-2, 32) the
queston was rased whether nterest coupons, whch matured pror
to the death of a decedent on bonds of sovent corporatons and whch
woud have been pad on presentaton but whch were not cashed by
reason of the ness of decedent, consttuted ncome constructvey
receved by hm when the nterest coupons matured. In hodng that
there was constructve recept of the nterest durng the fetme of
the decedent the oard referred to the above-noted rander case
and, after quotng the above e cerpt from the opnon n that case,
sad:
Though the above statement was, n that case, n part obter dcta, we beeve
It to be a correct enuncaton of the aw. contrary hodng woud grant the
ta payer a practcay compete rght of seecton of the year n whch ncome
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
44, rt. 355.
120
woud be reported, somethng not contempated by the Revenue cts. ppyng
the above test, the fact und tme of physca recept have become a mutter
soey wthn hs own contro. Though In ths case decedent was physcay
unabe to attend to the actua operaton of cppng and cashng the coupons,
there s no evdence of menta nfrmty and there appears no reason why ths
operaton mght not have been performed by a propery accredted agent or
why the bonds mght not have been sent to pettoner s home and the matter
of I he cppng of the coupons there attended to. We do not beeve the fact
of the decedent s serous ness aters the ega consequence of hs faure to
cash the coupons. The recept of the cash represented by the coupons was
entrey wthn hs own dsposton and contro.
The fact that the ta payer dd not receve the check unt some
tme n 1929 s not decsve. e coud have personay demanded and
been entted to receve the cash and the stock n 1928. oth cash
and stock were unquafedy avaabe to hm n 1928 and sub|ect to
hs mmedate demand. (See ent v. Commssoner, 6 . T. ., 614
Tod v. Commssoner, 19 . T. ., 1027.)
or the foregong reasons ths offce s of the opnon that the pay-
ments n queston, by stock and check, consttuted ncome construc-
tvey receved by the ta payer n 1928.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
S CTION 44. INST LLM NT SIS.
rtce 355: Gan or oss upon dsposton of
nstament obgatons.
( so Secton 113, rtce 596 Secton 162,
rtce 863.)
R NU CT O 1928.
nvested In the purchase of and contracts at dscounts rang-
ng from 10 per cent to 20 per cent. t the tme of hs death there
was outstandng as an unpad baance of these contracts an amount
of unreazed profts.
ed, the and contracts so purchased, even though payabe n
nstaments, do not consttute nstament obgatons under
secton 44(d) of the Revenue ct of 1928. The transfer of the
contracts to the admnstrator of the estate of s governed by
artce 803 of Reguatons 74 and does not resut n gan or oss.
Under secton 113(a)5 of the Revenue ct of 1928, the bass of
the and contracts In the hands of the decedent s estate s the far
market vaue of such contracts at the tme of the decedent s death.
dvce s requested by , the admnstrator of the estate of , de-
ceased, reatve to the proper treatment for ncome ta purposes of
certan and contracts owned by at the tme of hs death on anuary
24, 1929.
It appears that the deceased, upon retrng from busness, nvested
a arge amount of money n the purchase of and contracts at a ds-
count rangng from 10 per cent to 20 per cent accordng to the
desrabty of the securty. t the tme of the decedent s death there
was st outstandng on the unpad baance of these contracts
doars of unreazed profts. Ths amount represents the dfference
between the cost of the contracts to the decedent and the par vaue
of the outstandng baances of such contracts as of anuary 24, 1929,
the date of the decedent s death. The admnstrator, , s the son and
I -43-4810
I. T. 2547
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
121
44, rt. 855.
ony her of the decedent and the contracts n queston w eventuay
be dstrbuted to hm as a part of hs father s estate.
The specfc queston rased s what effect, f any, I. T. 2515 (C. .
I -1, 125) has upon the stuaton here presented. In I. T. 2515
t was hed that the gan or oss resutng from the transmsson of
nstament obgatons, computed n accordance wth secton 44(d)
of the evenue ct of 1928, shoud be ncuded n the decedent s
return for the ta abe year n whch hs death occurred.
Secton 44(d) of the Revenue ct of 1928 provdes as foows:
Gan or oss upon dsposton of nstament obgaton . If an nstament
obgaton Is satsfed at other than Its face vaue or dstrbuted, transmtted,
sod, or otherwse dsposed of, gan or oss sha resut to the e tent of the
dfference between the bass of the obgaton and (1) n the case of satsfacton
at other than face vaue or a sae or e change the amount reazed, or (2) In
case of a dstrbuton, transmsson, or dsposton otherwse than by sae or
e change the far market vaue of the obgaton at the tme of such dstrbu-
ton, transmsson, or dsposton. The bass of the obgaton sha be the
e cess of the face vaue of the obgaton over an amount equa to the ncome
whch woud be returnabe were the obgaton satsfed n fu.
Whether the rung contaned n I. T. 2515, supra, s appcabe to
the nstant case depends upon an nterpretaton of the term nsta-
ment obgaton appearng n secton 44(d) of the statute quoted
above. The Senate Commttee on nance, n ts report dated May 1,
1928, stated as foows:
Gan or oss upon dsposton of nstament obgatons. Subsecton ( 1) con-
tans new provsons of aw to prevent evason of ta es n connecton wth the
transmsson of nstament obgatons upon death, ther dstrbuton by way
of qudatng or other dvdends, or ther dsposton by way of gft, or n
connecton wth smar transactons. The stuatons above specfed ordnary
do not gve rse to gan and yet at the same tme t s urged that they permt
the recpent to obtan a greaty Increased bass n hs hands for the property
receved, e cept In the case of gfts. It therefore seems desrabe to carfy the
matter. The nstament bass accords the ta payer the prvege of deferrng
the reportng at the tme of sae of the gan reazed, unt such tme as the
deferred cash payments are made. To prevent the evason the subsecton
termnates the prvege of onger deferrng the proft f the seer at any tme
transmts, dstrbutes, or dsposes of the nstament obgatons and compes
the seer at that tme to report the deferred profts. The subsecton aso mod-
fes the genera rue provded n subsecton (a) for the ascertanment of the
percentage of proft n the deferred payments, n those cases n whch the
obgatons are satsfed at other than ther face vaue or are sod or e changed.
The modfcaton permts a compensatng reducton In the percentage of proft
In case the obgatons are satsfed at ess than ther face vaue, or are sod
or e changed at ess than face vaue.
rom the foregong t s apparent that the term nstament
obgaton, as used n secton 44(d) of the Revenue ct of 1928,
contempates an evdence of ndebtedness of a purchaser acqured by
a seer n connecton wth the sae of property. In the nstant case
the and contracts were not so acqured by the decedent, but const-
tuted merey an nvestment by the decedent n and contracts whch
represented a part of the consderaton passng under the terms of
a sae prevousy entered nto by partes other than the decedent.
It s concuded, therefore, that the and contracts n the nstant case,
even though they were payabe n nstaments, do not consttute
nstament obgatons wthn the meanng of that term as used n
secton 44(d) of the statute. It foows that the rung contaned
n I. T. 2515, supra, pertanng to the dsposton of nstament
35942
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
103, rt. 627.
122
obgatons receved n connecton wth the sae of rea estate, s not
appcabe to the nstant case. The transfer of the and contracts to
the admnstrator of the decedent s estate s governed by the prov-
sons of artce 863 of Reguatons 74, wheren t s stated:
No ta abe ncome Is reazed from the passage of property to
the e ecutor or admnstrator on the death of the decedent, even though t may
have apprecated n vaue snce the decedent acqured It.
In accordance wth the provsons of secton 113(a) 5 of the Reve-
nue ct of 1928, the bass of the and contracts n the hands of the
decedent s estate s the far market vaue of such contracts at the
tme of decedent s death. If the far market vaue of a partcuar
contract was ess than the face vaue of the contract, that proporton
of any payment on account of the prncpa of the contract whch
the e cess of the face vaue of the contract over ts far market vaue
at the tme of the decedent s death bore to ts face vaue shoud be
reported as ncome when receved by the decedent s estate. (Shafpa
Reaty Corporaton v. Commssoner, 8 . T. ., 283.)
It s hed that the and contracts n the nstant case do not con-
sttute nstament obgatons wthn the meanng of that term
as used n secton 44(d) of the Revenue ct of 1928 that no gan or
oss resuted from the transmsson of the and contracts to the ad-
mnstrator upon the death of the decedent and that the bass of the
and contracts n the hands of the decedent s estate s the far market
vaue of such contracts at the tme of the decedent s death.
P RT . R TURNS ND P YM NT O T .
S CTION 51. INDI IDU L R TURNS.
rtce 381: Indvdua returns.
R NU CT O 1928.
tenson of perods of mtaton n the case of communty prop-
erty returns for 1928. (See Mm. 3815, page 148.)
SU TITL C SUPPL M NT L PRO ISIONS.
SUPPL M NT . R T S O T .
S CTION 103. MPTIONS ROM T
ON CORPOR TIONS.
rtce 527: Regous, chartabe, scentfc, I -42--1805
terary, and educatona organzatons and I. T. 2546
communty chests.
R NU CT O 1928 ND PRIOR R NU CTS.
The M ssocaton, whch was organzed to assst n enforcng
fsh and game aws, to ntroduce new speces and varetes of
game, and to dssemnate nformaton reatve thereto, and whch
s supported entrey by membershp dues and donatons, s en-
tted to e empton under secton 103(6) of the Revenue ct of
1928 and the correspondng sectons of pror Revenue cts.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
123
103, rt. 528.
n opnon s requested reatve to the ta abe status of the M
ssocaton under the provsons of secton 103(6) of the Revenue
ct of 1928 and correspondng provsons of pror Revenue cts.
The assocaton was orgnay organzed under the name of the
ssocaton, but ater, by act of the Legsature of the State
of R, the name of the assocaton was changed and the scope of ts
actvtes enarged. Its purposes are to secure and enforce proper
restrctons upon the takng and kng of fsh, shefsh, bvaves,
and game to promote the cuture of fsh and game to ntroduce new
speces and varetes of game, and to dssemnate nformaton reatve
thereto. The assocaton has no capta stock, s supported entrey
by membershp dues and donatons, ts ncome s spent n furtherng
the purposes of the assocaton and no part thereof nures to the
beneft of any member. Recognzng the fact that fsh and game are
decreasng n the State of R, the assocaton has secured the enact-
ment of egsaton tendng to mt the takng of fsh and the kng
of game. It has estabshed a chan of game preserves, n whch
are ocated akes for the breedng of fsh. rom these sanctuares
the assocaton furnshes game to repensh the country and fsh to
restock the streams. The assocaton not ony provdes preserves for
game but purchases gran and feeds the brds on ts preserves and
n the varous parts of the State durng the deep snows and seets
when the brds can not reach the ground to feed. The assocaton
hods reguar annua meetngs and such other meetngs as the e ecu-
tve commttee may drect.
The actvtes of the M ssocaton ncude the assstng and en-
couragng of oca sportsmen s cubs to restock streams empoyng
a speca warden to enforce the fsh and gatoe aws assstng the
ureau of oogca Survey n ts study of the woodcock by request-
ng sportsmen to keep records of the number of brds started durng
the open season fng bs of ts own wth the egsature and
attendng egsatve hearngs opposng bs consdered to be aganst
the best nterests of conservaton purchasng and for a fsh hatchery
and presentng t to the State and the hodng of brd dog fed
tras. The assocaton s ncome s receved from dues and s ds-
bursed for operatng e penses. None of the ncome nures to the
beneft of any prvate sharehoder or ndvdua.
In vew of the foregong, t s hed that the M ssocaton s en-
tted to e empton under secton 103(6) of the Revenue ct of
1928 and the correspondng sectons of pror Revenue cts.
rtce 528: usness eagues, chambers of I -47-4840
commerce, rea estate boards, and boards of I. T. 2550
tro.dc.
R NU CT O 1928 ND PRIOR R NU CTS.
The M ssocaton was Incorporated to promote an enarged
acquantance and a more frendy ntercourse among ts members,
and In a reasonabe, awfu, and proper ways to promote the
best nterests of the rado ndustry. It mantans a commttee to
supervse the e change of credt nformaton for the beneft of
members. The nformaton s not genera but represents ony an
nterchange among members and ony concerns trade matters of
such members. The nformaton s not avaabe to any outsde
person or other nterest. The assocaton does not engage In any
busness for proft.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
8105.
124
ed, that the organzaton Is e empt from ta aton under
secton 103(7) of the Revenue ct of 1928 and the correspondng
provsons of the pror Revenue cts.
The purpose of the M ssocaton s to promote an enarged
acquantance and a more frendy ntercourse among ts members,
and n a reasonabe, awfu, and proper ways to promote the best
nterests of the rado ndustry. Its actua actvtes consst of a gen-
era promoton of the rado ndustry the e change of credt nfor-
maton among ts members the ad|ustment of dsputes among the
rado trade through a far trade practce commttee the fosterng
of a code of ethcs and busness through natona e hbts the man-
tenance of a traffc department and a merchandsng bureau and
varous other actvtes for the genera good of the rado ndustry.
Its ncome s derved from ntaton fees, membershp dues, proceeds
from rado trade shows, dstrbuton of bookets, etc.
The assocaton mantans a credt commttee to supervse
the e change of credt nformaton for the beneft of members.
Ths nformaton s not genera but represents ony an nterchange of
nformaton among members and ony concerns trade matters of
such members. It s avaabe ony to the members of the assocaton
upon request and wthout charge. Ths nformaton s not under any
crcumstances avaabe to any outsde person or other nterest.
The actvtes of the credt commttee are ncdenta to the opera-
ton of the assocaton as a busness eague. The assocaton does not
engage n any busness for proft and no part of ts ncome nures
to the beneft of any prvate sharehoder or ndvdua.
In vew of the foregong, t s hed that the M ssocaton comes
wthn the e emptng provsons of secton 103(7) of the Revenue
ct of 1928 and the correspondng provsons of the pror Revenue
cts.
S CTION 105. T L P RIOD M R CING
Y RS WIT DI R NT L WS.
Secton 105. I -31-4727
G. C. M. 8156
R NU CT O 1928.
The ta payer was ncorporated anuary 2, 1029. Its frst return
was fed for the fsca year ended une 80, 1929, the ta beng
computed at the rate of 12 per cent. Subsequenty, Congress by
|ont resouton reduced the rate of ta on the net ncome of cor-
poratons from 12 per cent to 11 per cent for the caendar year
1929. The ta payer contends that the ta shoud be recomputed
at the rate of 11 per cent.
ed, the proper recomputaton requres the use of both the 12
per cent rate and the 11 per cent rate In conformty wth secton
105 of the Revenue ct of 1928. The ta for the fsca year ended
une 80, 1929, shoud frst be computed as If the entre ncome
were receved durng the caendar year 1928, and the ta attrb-
utabe to that year s 6/12ths of that amount. The ta shoud
then be computed as f the entre ncome were receved durng the
caendar year 1929, and the ta attrbutabe to that year s 6/12ths
of that amount. The sum of the ta es attrbutabe to each ca-
endar year as so computed consttutes the ta for the fsca year.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
125
105.
n opnon s requested as to the proper method of computng the
ta n the case of a corporaton whch was ncorporated anuary 2,
1929, and estabshed a fsca year ended une 30.
It appears that the ta payer fed ts frst ncome ta return n
due course, ncudng ncome receved from anuary 2, 1929, the
date of ncorporaton, to une 30, 1929, and computed ts ta ab-
ty at the rate of ta then n effect n the case of corporatons, whch
was 12 per cent. Subsequenty, Congress by |ont resouton known
as . . Res. 133 reduced the rate of ta on the net ncome of cor-
poratons from 12 per cent to 11 per cent for the caendar year
1929. ccordngy, the coector of nterna revenue recomputed
the ta n accordance wth the provsons of secton 105 of the
Revenue ct of 1928, whch outnes the method of computng the
ta when the ta abe perod embraces years wth dfferent aws.
The appcaton of that method requred the use of the 12 per cent
rate and the 11 per cent rate n the recomputaton of the ta . The
ta payer contends that secton 105 of the Revenue ct of 1928 s
not appcabe, and that the ta shoud be recomputed at the rate
of 11 per cent.
Secton 105 of the Revenue ct of 1928, reatng to a ta abe
perod embracng years wth dfferent aws, provdes that f t s
necessary to compute the ta for a perod begnnng n one caendar
5rear (herenafter caed frst caendar year ) and endng n the fo-
owng caendar year (herenafter caed second caendar year )
and the aw appcabe to the second caendar year s dfferent from
the aw appcabe to the frst caendar year, then the ta for the 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 frst 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 proporton of
a ta for the entre perod, determned under the aw appcabe to
the second caendar year and at the rates for such year, whch the
porton of such perod fang wthn the second caendar year s of
the entre perod.
Inasmuch as the ta payer was ncorporated anuary 2, 1929, and
estabshed une 30 as the end of ts fsca year, ts frst return s
for the fu 12-month perod uy 1, 1928, to une 30, 1929, athough
the return ony ncuded ncome receved from anuary 2, 1929, to
une 30, 1929. (See ankers Trust Co. v. owers, 295 ed., 89,
T. D. 3547, C. . I -1, 237 G. C. M. 5695, C. . III-1, 285
Lous yme Pantng Manufacturng Co. v. Commssoner, 5 .
T. ., 910, C. . II-1,15 I. T. 2239, C . . I -2, 58 G. C. M. 2292,
C. . I-2, 78 G. C. M. 2080, C. . I-2, 288 and I. T. 2476, C. .
III-2, 130.)
In vew of the fact that . . Res. 133 was effectve ony for the
caendar year 1929 and the return fed by the ta payer was for the
fu fsca year of 12 months ended une 30, 1929, t s necessary to
compute the ta for a perod begnnng n one caendar year and
endng n the foowng caendar year. s the ta rates n effect
for the second caendar year are dfferent from the rates of ta n
effect for the frst caendar year, secton 105 of the Revenue ct of
1928 must be apped n the nstant case. The rates of ta form a
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
112, rt. 574.
126
part of the ta aw, and as the rates of ta were changed by a |ont
resouton of Congress, whch was approved by the Presdent
December 16, 1929, t must be concuded that the nstant case
nvoves a ta abe perod embracng years wth dfferent aws.
ppyng the foregong prncpes and the provsons of secton
105 of the Revenue ct of 1928 to the nstant case, the ta for the
fsca year ended une 30, 1929, shoud frst be computed as f the
entre ncome were receved durng the caendar year 1928, and the ta
attrbutabe to the year 1928 s 6/12ths of that amount the ta
shoud then be computed as f the entre ncome were receved dur-
ng the caendar year 1929, and the ta attrbutabe to 1929 s 6/12ths
of that amount: the amounts of ta attrbutabe to each year, as so
S CTION 112. R COGNITION O G IN OR LOSS.
In carryng out a pan for the acquston by the M Company
of stock of the N Company, the hoders of the common stock of
the atter company deposted Oy shares under a depost agree-
ment. The stock so deposted was transferred to the O Company,
a new corporaton, n e change for ts entre capta stock. The
pan of reorganzaton between the O Company and the M Com-
pany provded for transfer of the stock hed by the former com-
pany n the N Company to the M Company n e change for the
stock of the atter company. The M Company stock was dstrbuted
pro rata to the stockhoders of the O Company n e change for the
O Company stock hed n depost for them.
ed, no gan or oss s recognzed as the resut of the transfer
to the O Company of the stock of the N Company under secton
112(b)5 of the Revenue ct of 1928 or as the resut of the e change
by the O Company of the N Company stock for stock In the M
Company under secton 112(b)4 of the Revenue ct of 1028.
No gan or oss s recognzed, under secton 112(b)3 of the Revenue
ct of 1928, as the resut of the e change of M Company stock for
the O Company stock hed n depost.
dvce s requested reatve to the effect for ncome ta purposes
of the acquston by the M Company of shares of stock of the N
Company under the foowng crcumstances:
The M Company addressed a etter to the N Company, e pressng
the desre, and outnng a pan, to acqure 10 / shares of the com-
mon stock of the atter company. To carry out the pan of acqurng
the stock the O Company was formed. oders of the common stock
of the N Company deposted such stock n the amount of Oy shares
under a depost agreement, and the stock so deposted was trans-
ferred to the O Company n e change for ts entre capta stock,
SUPPL M NT . COMPUT TION O N T INCOM .
rtce 574: changes n connecton wth cor-
porate reorganzatons.
I -35-4763
I. T. 2542
R NU CT O 1928.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
127
( 112, rt. 577.
consstng of y shares, n accordance wth the terms of the offer and
acceptance dated une , 1930. The pan of reorganzaton between
the O Company and the M Company provded for the transfer of the
stock hed by the former company n the N Company to the M Com-
pany n e change for stock of the atter company. The M Company
stock was then to be dstrbuted pro rata to the depostors n ther
capacty as stockhoders of the O Company n e change for the
stock of the O Company hed n depost for them. The e change
was made on the bass of a fractona share of the preference
stock and shares of common stock of the M Company for each
share of the stock of the N Company so acqured.
The O Company was an e stng corporaton at the date of the
transacton and the transfer to t of the stock n the N Company s
to be recognzed and gven effect under the terms of the statute per-
tanng to such transfers. It s evdent that the depostors of the
stock of the N Company were n contro of the O Company mme-
datey after the transfer of such stock to t n e change for ts own
stock. No gan or oss shoud, therefore, be recognzed as the resut
of such e change n accordance wth secton 112(b)5 of the Revenue
ct of 1928.
The second transacton was that carred out under the pan of
reorganzaton between the O Company and the M Company. In
carryng out such pan the M Company acqured the Oy shares of
stock of the N Company, whch consttuted substantay a the
assets of the O Company. Ths transacton was a corporate re-
organzaton wthn the meanng of secton 112 () of the ct, to
whch both corporatons were partes, and, n accordance wth secton
112(b) 4 of the ct, no gan or oss shoud be recognzed as resutng
from ths transacton. The depostors as the hoders of the stock of
the O Company, a party to a reorganzaton, havng acqured n
e change for that stock stock n the M Company, a party to a
reorganzaton, n accordance wth the provsons of secton 112(b)3
of the ct, no gan or oss shoud be recognzed for ncome ta
purposes as the resut of such e change.
rtce 577: Defntons. I -43-4811
G. C. M. 8565
R NU CT O 19 S.
The M Company n 1928 had outstandng shares of votng com-
mon stock and shares of nonvotng preferred stock. In 1928 the
N Company acqured from the stockhoders of the M Company
a of the votng common stock, but none of the preferred stock, of
the M Company, payng therefor cash to one stockhoder, to some of
the others ts own common stock ony, and to the rest ts own
common and preferred stock.
ecause at east a ma|orty of the nonvotng preferred stock
was not acqured by the second company the transacton was not
a reorganzaton wthn the meanng of secton 112(1)1 of the
Revenue ct of 1928, and the gan to the stockhoders of the M
Company Is recognzed.
The M Company n the year 1928 had outstandng shares of votng
common stock and shares of nonvotng preferred stock. The N Com-
pany n 1928 acqured from the stockhoders of the M Company the
entre outstandng votng common stock of the M Company but
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
5112, rt. 577.
128
faed to acqure any of the nonvotng preferred stock. The consd-
eraton receved for the common stock conssted of shares of
common stock of the N Company, shares of ts preferred stock,
and doars n cash. One of the stockhoders of the M Company
receved a of the cash. Severa other stockhoders receved both
common and preferred stock of the N Company, whe the rest re-
ceved common stock ony.
It s the contenton of the stockhoders of the M Company (wth
the e cepton of the one who receved a the cash) that the acqus-
ton by the N Company of a the common stock of the M Company
consttuted a reorganzaton, and that recognton of gan or oss n
the e change by them of common stock n the M Company for pre-
ferred and common stock of the N Company s prohbted by secton
112(b)3 of the Revenue ct of 1928. The rea ssue n the case,
therefore, s whether the acquston by one corporaton of a or
the votng common stock, but none of the nonvotng preferred stock,
of another corporaton consttutes a reorganzaton wthn the mean-
ng of secton 112() 1 of the Revenue ct of 1928.
The argument of the ta payers may be condensed nto the foow-
ng four ponts:
(1) That the word reorganzaton as used n the varous Reve-
nue cts commencng wth the Revenue ct of 1918 s not a ega
term wth a f ed meanng, but s a genera term whch covers a
casses and knds of corporate read|ustments, and that, snce t has
no defnte f ed meanng, the word s sub|ect to the appcaton of
rues of constructon, one of those rues beng that the nterpretaton
gven a word by the e ecutve department under eary cts s to be
foowed n construng the word under ater cts.
(2) That the word reorganzaton used n secton 202(b) of the
Revenue ct of 1918 was nterpreted by the ureau of Interna
Revenue to mean the acquston by one corporaton of substantay
a the votng common stock of another corporaton. Ths s based
on the statement n artce 1567 of Reguatons 45, 1920 edton, that
the term reorganzaton ncuded cases of corporate read|ustment
where stockhoders e changed ther stock for the stock of a hodng
company, provded the hodng company and the orgna corpora-
ton were thereafter so cosey reated that the two corporatons were
affated as defned n secton 240(b) of the Revenue ct of 1918 and
artce G33 of Reguatons 45, 1920 edton, and on the statement n
artce 633 of Reguatons 45, 1920 edton, that the ownng or con-
trong of 95 per cent or more of the outstandng votng capta
stock woud consttute an affaton wthn the meanng of the
statute.
(3) That when Congress wrote nto the Revenue ct of 1921
a defnton of the ambguous word reorganzaton, t dd not
ntend to e cude the meanng prevousy gven the word by the
Treasury Department, but merey ntended to e tend the meanng
so as to ncude cases where crcumstances prevented one corporaton
from obtanng 95 per cent or more of the stock of another corpo-
raton. The Congressona Record, voume 61, part 6, pages 6549
and 6550, and voume 61, part 7, pages 6561 to 6567, s cted n
support of ths contenton.
(4) That as a consequence the word reorganzaton used n sec-
ton 112() of the Revenue ct of 1928 ncudes the case where one
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
129
112, rt. 577.
corporaton acqures a the votng common stock but none of the
nonvotng preferred stock of another corporaton, snce that word
must be regarded as retanng under the Revenue ct of 1921 and
subsequent Revenue cts the nterpretaton paced upon t by the
Treasury Department n Reguatons 45, 1920 edton.
Carefu study of the Congressona Record, wheren there s re-
ported the dscusson n the Senate of the defnton of reorganza-
tons then proposed to be paced n the Revenue ct of 1921 (pages
6561 to 6568, ncusve, of voume 61, part 7, frst sesson of the
S ty-seventh Congress), fas to dscose any ntenton on the part
of Congress to retan n the meanng of the word reorganzaton
a transacton wheren one corporaton acqured a the votng common
stock, but none of the nonvotng preferred stock, of another cor-
poraton. It may be conceded that the Revenue ct of 1918 frst
mentoned a reorganzaton but faed to defne that word, and that
the defnton gven the word by the ureau ncuded the acquston
by one corporaton of 95 per cent of the votng stock of another
corporaton. It does not foow from ths, however, that when
Congress for the frst tme adopted n secton 202(c) 2 of the Revenue
ct of 1921 a defnton of the word reorganzaton, t ntended to
ncude wthout modfcaton the concept of a reorganzaton pre-
vousy stated n Reguatons 45. In ths connecton t must be noted
that the defnton of reorganzaton frst proposed by the Senate
nance Commttee n the form of an amendment to secton 202 of
. R. 8245, and the defnton proposed by Senator McCumber n the
form of an amendment to the amendment, were stated by Senator
Smmons (Congressona Record, voume 61, part 7, page 6563)
and commented on as foows:
Mr. Smmons. If the Senator w pardon me a mnute to make It cearer, In
the amendment as It was orgnay reported by the commttee ths was the
defnton of reorganzaton, whch meant nothng more than a mere e change
of stock. That s the purpose of ths reorganzaton. It s a reorganzaton
whch means nothng more than a mere e change of stock. When they denned
reorganzaton n the amendment orgnay submtted by the commttee,
they defned t n ths way:
The word reorganzaton, as used n ths paragraph, ncudes a merger or
consodaton (ncudng the acquston by one corporaton of substantaUy a
the stock or substantay a the propertes of another corporaton).
The new amendment whch t s proposed to nsert reads n ths way:
The word reorganzaton, as used n ths paragraph, ncudes a merger or
consodaton (ncudng the acquston by one corporaton of at east a ma-
|orty of the votng stock
Not substantay a, but a ma|orty of the votng stock
and at east a ma|orty of the tota number of shares of a other casses of
stock
Not practcay a, or substantay a, as n the orgna amendment offered
by the commttee, but merey
a ma|orty of the votng stock and at east a ma|orty of the tota number of
shares of a other casses of stock of another corporaton, or of substantay
a the propertes of another corporaton).
That s n the ds|unctve, or of substantay a the propertes but when
t comes to the stock, t s ony necessary under ths amendment that the acqu-
ston by one corporaton sha be of practcay one-haf, whe n the orgna
amendment t was necessary for the corporaton to acqure substantay a.
Thus t s seen that the orgna amendment proposed by the com-
mttee defned a reorganzaton as the acquston by one corporaton
of substantay a the stock of another corporaton. If that defn-
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
5112, rt. 577.
130
ton had fnay been adopted t mght possby have been camed
that Congress ncuded n the meanng of the word reorganzaton
the concept of a reorganzaton prevousy stated by the ureau n
artce 1567 of Reguatons 45, snce the proposed defnton was
smpy a statement of one of the steps then necessary to create an
affated status. On the contrary, however, Congress changed the
defnton so that the word reorganzaton ncuded acquston by
one corporaton- not ony of a ma|orty of the votng stock but aso
a ma|orty of a other casses of stock of another corporaton. Ths
change ceary shows that Congress ntended not ony to re|ect the
defnton of the word reorganzaton prevousy used by the u-
reau, but aso to adopt a very dfferent defnton, whch requred n
addton to the acquston by one corporaton of at east a ma|orty
of the votng stock of another corporaton, the acquston of at east
a ma|orty of a other casses of stock of the other corporaton.
Ths added requrement was undoubtedy wrtten nto the Revenue
ct to protect hoders of nonvotng stock from beng paced n ds-
advantageous postons through the formaton of hodng companes.
(See the dscusson of that pnase of the matter n the pages of the
Congressona Record above cted.)
That ths was the constructon paced by the ureau upon the
defnton of a reorganzaton contaned n secton 202(c)2 of the
Revenue ct of 1921 s shown by artce 1566(b) of Reguatons 62.
In paragraph (b) of that artce the statutory defnton of a re-
organzaton was gven after t foowed s ustratons of reorgan-
zatons. In the s th ustraton the requrement s specfcay made
that n order to consttute a reorganzaton there must be the acqus-
ton by one corporaton of a ma|orty of the votng stock and a
ma|orty of the tota number of shares of a other casses of stock
n the other corporaton. That artce dd not ncude the case of the
acquston by one corporaton of 95 per cent or more of the votng
stock ony of another corporaton, and the e cuson of that former
concept of a reorganzaton has been contnued n Reguatons 65,
69, and 74. In ths connecton t shoud be noted that n the statu-
tory defnton Congress saw ft, when referrng to the amount of a
other casses of stock to be acqured, to make use of the sgnfcant
words at east a ma|orty. The contnued reenactment by Con-
press of the same statutory defnton of reorganzaton gves to the
nterpretaton stated by the Treasury Department n Reguatons 62,
and subsequent reguatons, the status of a we-estabshed prncpe.
It shoud further be noted that n the Revenue ct of 1921 and a
ensung Revenue cts Congress has apparenty regarded reorganza-
tons as transactons requrng treatment dfferent from that accorded
the sub|ect of affaton of corporatons. or e ampe, n secton
202(c) 3 of the Revenue ct of 1921, wheren recognton of gan or
oss was prohbted when one or more persons transferred property
to a corporaton and mmedatey thereafter were n contro of the
corporaton, Congress specfcay defned contro as consttutng the
ownershp of at east 80 per cent of the votng stock and at east 80
per cent of the tota number of shares of a other casses of stock
of the transferee corporaton. In secton 240 of the same ct, how-
ever, Congress ontnued to requre for affaton ether the owner-
shp or contro by one corporaton of substantay a the stock of
another corporaton, or the ownershp or contro by the same n-
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
131
113, rt. 595.
terests of substantay a the stock of two or more corporatons.
Practcay the same dstncton may be found n ater Revenue cts.
Consequenty the ta payers may not successfuy predcate an argu-
ment n favor of the recognton of a reorganzaton n ths case
on an aeged nconsstency between the recognton by the ureau
of an affaton between the M Company and the N Company and
the refusa by the ureau to concede that a statutory reorganzaton
occurred. Congress tsef has prescrbed dfferent rues controng
reorganzatons and affatons.
or the foregong reasons ths offce s of the opnon that the ta -
payer s contentons can not be sustaned.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
S CTION 113. SIS OR D T RMINING G IN
OR LOSS.
rtce 595: Property acqured by gft or trans- I -51-4870
fer n trust on or before December 31, 1920. G. C. M. 8739
R NU CT O 1928.
Gan or oss from sae n 1928 of stock acqured by power of
appontment e ercsed by w of the testator who ded n 1927 must
be determned under secton 113(a)4 of the Revenue ct of 1928.
n opnon s requested reatve to the bass for determnng gan
or oss upon the sae of stock acqured under the crcumstances here-
nafter set out.
, a resdent of the cty of , State of Y, on une , 1927, trans-
ferred certan persona property n trust to the M Company, a cor-
poraton, as trustee. y the terms of ths trust, the trustee was to
pay to the settor, from the net ncome of the trust, certan amounts
annuay, and aso certan other amounts set forth n the trust nstru-
ment. The trust wras to termnate on une , 1932, or on the death
of the settor. Upon the termnaton of the trust the trustee was to
set over and dever the trust estate to the sad settor f he be
vng, or f he be dead, then to such persons and n such amounts as
the settor may by hs ast w desgnate.
On une , 1927, made hs ast w and testament, certan
pertnent parts whereof read as foows:
Cause 1: I have entered nto a trust agreement, dated une , 1927, con-
veyng certan property to the M Company n trust, by the terms of whch
agreement I have provded that upon the termnaton of sad trust the trustee
sha convey, set over and dever the trust estate to me, f I be vng, or f
I be dead, then to such persons and n such amounts as I may by my ast
w desgnate. I now desgnate the foowng persons and the foowng
amounts as beng the persons to whom and the amounts n whch sad trustee
s to convey, set over and dever sad trust estate, f I de before sad trust
sha termnate:
Paragraph 1. To my e ecutors an amount suffcent to pay a my |ust debts
and funera e penses and a nhertance, estate, transfer, successon and
other ta es assessed by the Unted States Government, or any State of the
Unted States, and payabe by them n accordance wth any aw or n accord-
ance wth the provsons of ths w.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
113, rt. 595.
132
The w then made prpvson for a number of specfc bequests
of varous amounts to varous egatees and then made provson
as foows:
Paragraph 11. of the baance of sad trust estate created by sad trust
agreement of une . 1927, f I sha at the tme of my death eave survvng
me a wfe and/or ssue, to them equay per capta, but f I eave no wfe
and/or ssue survvng me then and n that event unto , absoutey and In
fee smpe. Shoud I eave no wfe and/or ssue and shoud not survve
me, then I desre that sad baance of sad trust estate go to my unces, C,
I), and , and ther descendants, and the descendants of my deceased unces
and G, a equay per strpes, and not per capta.
Cause 4: I drect that a nhertance, estate, transfer or successon ta es
assessed by the Unted States Government or any State of the Unted States
sha be pad by my e ecutors, and no charge made aganst any of the specfc
egatees or appontees, so that the sums payabe to the specfc egatees and
appontees sha be net to them.
Cause 5: I hereby nomnate and appont and the M Company, a corpora-
ton of the cty of , State of Y, the e ecutors of ths my ast w and
testament and I gve unto them as such e ecutors the same powers and
authorty wth reference to contro, management and dsposton of my estate,
that I have gven to them as trustees heren. nd I drect that no bond be
requred of (he sad as such coe ecutor.
ded on une , 1927, eavng no wfe and no ssue. The w
was admtted to probate on une , 1927, etters testamentary ssu-
ng to the M Company and , the ta payer.
mong the propertes ncuded n sad trust were z shares of the
capta stock of the N Company, whch passed to the ta payer
pursuant to paragraph 11 of the w, herenbefore quoted. The
dvdends on ths stock were pad to and receved by the trustees
unt the e praton of one year from the date of ssuance of the
etters testamentary to the e ecutors, and thereafter were pad to
the ta payer. The shares of stock stood n the name of the trust
unt December , 1928, when they were transferred to the ta payer
on the books of the corporaton. On or about December , 1928,
the stock was sod by the ta payer and on that date the shares were
transferred to the purchaser on the corporaton s books.
The ta payer contends that he dd not acqure the stock nor was
t dstrbuted to hm unt the certfcates therefor were transferred
to hs name on the books of the corporaton on December , 1928,
and that consequenty the far market vaue of the stock as of that
date shoud be used as the bass for determnng the gan or oss from
the sae of the stock, and that nasmuch as the far market vaue
as of December , 1928, was dentca wth the prce reazed a few
days ater, no ta abe gan accrued from the sae.
The securtes n queston were sod n 1928. The bass of the
stock for the purpose of determnng gan or oss woud be that pre-
scrbed by the provsons of the Revenue ct of 1928.
The securtes were acqured by the ta payer not by bequest under
the terms of the w of , but by vrtue of the power of appont-
ment reserved by n the deed of trust, whch power was e ercsed
by n hs ast w and testament referred to above.
The estates created by the e ecuton of a power take effect precsey n the
same manner as f created by the deed whch rased the power.
(Sugden on Powers, pages 331, 333.)
though the appontee survve the testator, yet he w ony take
from the tme of the testator s death. (Sugden on Powers, page 327.)
roady speakng, the nterests or estates created by the e ercse of a power
of appontment take effect as f created by the Instrument conferrng the
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
133
113, rt. 695.
power, and the appontee or benefcary takes tte under the donor and not
the donee but the apponted Interests or estates vest ony from the tme
provded by the terms of the nstrument of e ecuton. (49 C. ., page 1305 and
see rmor v. rey, 253 Mo., 447, 161 S. W., 829 bersoe v. McOrath, 271 ed.,
095 In re Dows, 167 N. Y., 227 Chanter v. esey, 205 U. S., 466.)
The appontments made woud reate back to the nstrument whch
created the power and the property gven woud pass, not under the w of the
donee, but drecty from the donor as f the power and the w of the donor
were ncorporated In one nstrument. (Couman v. Cassen, 144 t.,
867 and see Securty Tr. d 8. Dep. Co. v. Ward, 93 t., 385 ooper v. ooper,
86 N. ., 161 armon v. Weston, 102 N. ., 470 De ter v. tty. Gen., 112 N.
. 940 O NeU v. Ross, 277 Pnc, 123.)
Secton 113(a)4 of the Revenue ct of 1928 reads as foows:
(a) Property acqured after ebruary 28, 1913. The bass for determnng
the gan or oss from the sae or other dsposton of property acqured after
ebruary 28, 1913, sha be the cost of such property e cept that
(4) ft or transfer n trust before anuary 1, 1921. If the property was
acqured by gft or transfer n trust on or before December 31, 1920, the bass
sha be the far market vaue of such property at the tme of such acquston.
The provsons of ths paragraph sha appy to the acquston of such property
nterests as are specfed n secton 402(e) of the Revenue ct of 1921, or n sec-
ton 302(f) of the Revenue ct of 1924 or the Revenue ct of 1926 (reatng to
property passng under pocer of appontment) regardess of the tme of acqu-
ston. Itacs supped.
Secton 302 of the Revenue ct of 1926 reads as foows:
The vaue of the gross estate of the decedent sha be determned by ncud-
ng the vaue at the tme of hs death of a property, rea or persona, tangbe
or ntangbe, wherever stuated

(f) To the e tent of any property passng under a genera power of ap-
pontment e ercsed by the decedent (1) by w, or (2) by deed e ecuted n
contempaton of, or ntended to take effect n possesson or en|oyment at or
after, hs death, e cept n case of a bona fde sae for an ndequate and fu
consderaton In money or money s worth.
Substantay the same anguage s contaned n secton 302 of the
Revenue ct of 1924 and secton 402 of the Revenue ct of 1921.
rtce 595(a) of Reguatons 74 reads as foows:
Property acqured by gft or transfer n trust on or before December 31,
1920. (a) In computng the gan or oss from the sae or other dsposton of
property acqured by gft or by a transfer n trust on or before December 31,
1920, the bass (e cept as stated n (b) of ths artce) sha be the far mar-
ket vaue of such property at the tme of acquston. The provsons of ths
artce sha appy to

(2) Such property nterests as passed to the ta payer under a genera power
of appontment e ercsed ether by w or by deed e ecuted n contempaton
of death or ntended to take effect n possesson or en|oyment at or after death,
regardess of whether such property Interests were acqured by the ta payer
on or before December 31, 1920, or after that date.
w speaks as of the date of the death of the testator. ded
on une , 1927, so that the power was e ercsed as of that date,
and that date must be deemed the date when the ta payer acqured
the securtes whch came to hm by vrtue of that power of appont-
ment reserved by and e ercsed by the w. (Compare rewster
v. Gage, 280 U. S., 327, Ct. D. 148, C. . I -1, 274 and see dward
. ancy, ecutor, v. Commssoncr, 1 . T. ., 464.)
or the foregong reasons, ths offce s of the opnon that the
bass for determnng the gan or oss upon the sae of sad
stock must be determned n accordance wth the provsons of sec-
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
115, rt. 621.
184
ton 113(a)4 of the Revenue ct of 1928 that such bass was the
far market vaue of the stock at the tme the ta payer acqured the
stock and that such acquston was as of the date of the death
of , namey, on une , 1927.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
rtce 596: Property transmtted at death.
R NU CT O 1928.
Land contracts transmtted at death. (See I. T. 2547, page 120.)
S CTION 115. DISTRI UTIONS Y
CORPOR TIONS.
rtce 621: Dvdends. I -33-4747
G. C. M. 8175
R NU CT O 1928.
In 1928 the M Company dstrbuted 3a doars to Its stock-
hoders. It had outstandng at the tme y shares of common
stock of a par vaue of 100, and concdent wth the dstrbuton
the par vaue of the stock was reduced. t or about the same
tme the authorzed common stock was ncreased to 10|/ shares
wthout par vaue. Of that amount, 6y shares were e changed for
the y shares prevousy outstandng. The dstrbuton on the
common stock prevousy outstandng was separate and dstnct
from the change n the capta stock, and the amount dstrbuted
n cash was not receved by the stockhoders n connecton wth
the e change of stock made n pursuance of certan refnancng
nvovng the change n the capta stock.
ed, the dstrbuton s governed by secton 115(a) and sec-
ton 115(b) of the Revenue ct of 192S and s ta abe as a dv-
dend to the e tent of the earnngs or profts on hand whch
were accumuated after ebruary 28, 1913. ny porton of the
dstrbuton n e cess of such earnngs or profts consttutes a re-
turn of capta, and shoud be apped by the stockhoders to
reduce the cost or other bass of ther stock.
Recommended that I. T. 1833 (C. . II-2, 25) be revoked.
n opnon s requested regardng the status, for ncome ta
purposes, of the sum of Sw doars whch the M Company ds-
trbuted to ts stockhoders n 1928.
cton provdng for the dstrbuton under consderaton was
taken by the stockhoders n meetngs hed on March 6 and March
27, 1928. The corporaton had outstandng at the tme y shares of
common stock of a par vaue of 100 a share, and concdent wth
the dstrbuton the par vaue of the stock was reduced, frst to
85 a share and then to 70 a share. pan of refnancng was
aso carred out at or about the same tme, n connecton wth whch
the authorzed common stock was ncreased to 0y shares wthout
par vaue. Of that amount, 6y shares were e changed for the y
shares prevousy outstandng. though carred out at or about
the same tme, the dstrbuton on the common stock prevousy
outstandng was separate and dstnct from the change n the cap-
ta stock, and the cash dstrbuted was not receved by the stock-
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
135
115, rt. 621.
hoders n connecton wth the e change of stock made n pursuance
of the pan of refnancng nvovng the change n the capta stock
as stated above.
It s contended that the dstrbuton s governed by secton 115(g)
of the Revenue ct of 1928, whch provdes as foows:
Sec. 115. Dstrbutons by Corporatons.

(g) Redempton of stock. If a corporaton cances or redeems Its stock
(whether or not such stock was ssued as a stock dvdend) at such tme and
In such manner as to make the dstrbuton and canceaton or redempton a
whoe or n part essentay equvaent to the dstrbuton of a ta abe dvdend,
the amount so dstrbuted n redempton or canceaton of the stock, to the
e tent that It represents a dstrbuton of earnngs or profts accumuated after
ebruary 28, 1913, sha be treated as a ta abe dvdend. In the case of the
canceaton or redempton of stock not ssued as a stock dvdend ths sub-
secton sha appy ony f the canceaton or redempton s made after
anuary 1, 1926.
Secton 115(g), supra, deas wth the canceaton or redempton of
corporate stock as ordnary understood, . e., to compete cancea-
ton or redempton, and does not refer to a mere reducton n the par
vaue of stock. ccordngy, secton 115(g) s not appcabe to
the dstrbuton here under consderaton. The dstrbuton s, how-
ever, governed by secton 115(a) and secton 115(b) of the ct,
whch provde, respectvey, as foows:
Sec. 115. Dstrbutons by Corporatons.
(a) Defnton of dvdend. The term dvdend when used n ths tto
(e cept n secton 203(a)4 and secton 208(c), reatng to nsurance com-
panes) means any dstrbuton made by a corporaton to ts sharehoders,
whether n money or n other property, out of ts earnngs or profts accumu-
ated after ebruary 28, 1913.
(b) Source of dstrbutons. or the purposes of ths ct every dstrbuton
s made out of earnngs or profts to the e tent thereof, and from the most
recenty accumuated earnngs or profts. ny earnngs or profts accumuated,
or ncrease In vaue of property accrued, before March 1, 1913, may be dstrb-
uted e empt from ta , after the earnngs and profts accumuated after
ebruary 28, 1913, have been dstrbuted, but any such ta -free dstrbuton
sha be apped aganst and reduce the bass of the stock provded n sec-
ton 113.
Under sectons 115(a) and 115(b), supra, the dstrbuton n the
nstant case s ta abe as a dvdend to the e tent of the earnngs or
profts on hand whch were accumuated after ebruary 28, 1913
and any porton of the dstrbuton n e cess of such earnngs or
profts consttutes a return of capta, and shoud be apped by the
stockhoders to reduce the cost or other bass of ther stock.
In I. T. 1833 (C. . II-2, 25), a case arsng under the Revenue
ct of 1921, t was hed that a dstrbuton smar to that under
consderaton n the nstant case was governed by secton 202(c) 2
of the Revenue ct of 1921 and by secton 202(e) of the Revenue
ct of 1921, as amended by the ct approved March 4,1923.
I. T. 1833 reads as foows:
The stockhoders of the M Company adopted a resouton n 1923 reducng
the capta stock of the company from 10 doars to 5 doars and reducng
the par vaue of the stock from 2|/ doars to y doars, eavng the number
of outstandng shares the same. It was further resoved that the reducton of
capta stock be effected by payng n cash, out of the capta assets of the
corporaton, the sum of 5 doars per share at such tme aud In such manner
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
115, rt. 621.
136
es the board of drectors may determ ne. In pursuance of ths resouton of
the stockhoders, the board of drectors resoved that the proper offcers of
the corporaton pay to the stockhoders on each share hed by them 5 doars
In cash on presentaton of ther stock certfcates for ndorsement thereon as
to the reducton of the capta stock.
ed, that the dstrbuton shoud not be treated as a dvdend for ncome
ta purposes but that the transacton consttutes a recaptazaton of the
M Company under the provsons of secton 202(c)2 of the Revenue ct of
1921, and that any gan reazed by the stockhoders determned n accordance
wth the provsons of secton 202(e) of the Revenue ct of 1921, as amended
by the ct of March 4, 1923, consttutes ta abe ncome to them for norma and
sur te purposes.
Secton 202 of the Revenue ct of 1921, as amended by the ct of
March 4, 1923 (effectve anuary 1, 1923), provdes n part as
foows:
(c) or the purposes of ths tte, on an e change of property, rea, per-
sona or m ed, for any other such property, no gan or oss sha be recognzed
uness the property receved n e change has a ready reazabe market vaue
but even f the property receved n e change has a ready reazabe market
vaue, no gan or oss sha be recognzed

(2) When n the reorganzaton of one or more corporatons a person receves
n pace of any stock or securtes owned by hm, stock or securtes n a corpora-
ton a party to or resutng from such reorganzaton. The word reorganza-
ton, as used In ths paragraph, ncudes a merger or consodaton (Incudng
the acquston by one corporaton of at east n ma|orty of the votng stock
and at east a ma|orty of the tota number of shares of a other casses of
stock of another corporaton, or of substantay a the propertes of another
corporaton), recaptazaton, or mere change n Identty, form, or pace of
organzaton of a corporaton, (however effected)

(e) Where property Is e changed for other property whch has no ready
reazabe market vaue, together wth money or other property whch has a
ready reazabe market vaue, then the money or the far market vaue of
the property havng such ready reazabe market vaue receved n e change
sha be apped aganst and reduce the bass, provded In ths secton, of the
property e changed, and If n e cess of such bass sha be ta abe to the
e tent of the e cess but when property s e changed for property specfed
In paragraphs (1), (2), and (8) of subdvson (c) as receved In e change,
together wth money or other property of a ready reazabe market vaue
other than that specfed n such paragraphs, the amount of the gan resutng
from such e change sha be computed n accordance wth subdvsons (a)
and (b) of ths secton, but n no such case sha the ta abe gan e ceed the
amount of the money and the far market vaue of such other property receved
n e change.
ven though t be conceded that a reducton n the par vaue of
stock of a corporaton consttutes a recaptazaton under secton
202(c)2 of the Revenue ct of 1921, supra, and under secton 112()
of the Revenue ct of 1928, the mere reducton of the par vaue of
corporate stock (whether or not such reducton s ndorsed on the
stock certfcates), and a cash dstrbuton to the stockhoders n the
amount of the reducton n par vaue of the stock, can not propery
be consdered an e change of stock for stock and money under sec-
ton 202(e) of the 1921 ct, as amended, supra, or under secton
112 (c) 1 of the Revenue ct of 1928.
It s accordngy the opnon of ths offce that I. T. 1833 s erro-
neous, and t s recommended that the same be revoked.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
137
116, rt. 643.
S CTION 116. CLUSIONS OM GROSS INCOM .
rtce 643: Compensaton of State offcers I -46-4835
and empoyees. Mm. 3838
Ta abty of compensaton receved by offcers and empoyees of
a State or potca subdvson thereof, for 1925 and subsequent
years.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C, October 24, 1930.
Coectors of Interna Revenue, Interna Revenue gents n Charge,
and Other Offcers and mpoyees of the ureau of Interna
Revenue Concerned:
In order to nsure greater unformty n the admnstraton of the
Revenue cts n regard to the mposton of the edera ncome ta
upon the compensaton receved by offcers and empoyees of a State,
or ts potca subdvsons, t s desred to drect attenton to the
revsons of artce 88 of Reguatons 69, artce 643 of Reguatons
4, the rungs of ths offce, and to some court decsons whch pertan
to the sub|ect.
The artces of the reguatons referred to above contan substan-
tay the same provsons. rtce 643 of Reguatons 74 reads n
part as foows:
Compensaton pad to ts offcers and empoyees by a State or potca sub-
dvson thereof for servces rendered n connecton wth the e ercse of an
essenta governmenta functon of the State or potca subdvson, ncudng
fees receved by notares pubc commssoned by States, s not ta abe. Com-
pensaton receved for servces rendered to a State or potca subdvson
thereof s ncuded n gross ncome uness (a) the person receves such com-
pensaton as an offcer or empoyee of a State or potca subdvson, and (6)
the servces are rendered n connecton wth the e ercse of an essenta gov-
ernmenta functon. The commssons of recevers apponted by State courts
are sub|ect to ta for 1928 and subsequent ta abe years.
n offcer s a person who occupes a poston n the servce of the State or
potca subdvson, the tenure of whch s contnuous and not temporary and
the dutes of whch are estabshed by aw or reguatons and not by agree-
ment. n empoyee s one whose dutes consst n the rendton of prescrbed
servces and not the accompshment of specfc ob|ects, and whose servces are
contnuous, not occasona or temporary.
States and potca subdvsons thereof have a dua character
and possess two knds of power one that s governmenta and pub-
c and one that s propretary and prvate. In the e ercse of the
former, the State and ts potca subdvsons are cothed wth
soveregnty. In the e ercse of the atter power they are treated as
prvate ndvduas. Coector v. Day, 11 Waace, 113 South
Carona v. U. S., 199 U. S., 437.) In the case of South Carona v.
. S., supra, the court, among other thngs, sad:
It Is aso worthy of remark that the cases n whch the nvadty of a ed-
era ta has been affrmed were those n whch the ta was attempted to be
eved upon property beongng to the State, or one of ts muncpates, or
was a charge upon the menus and nstrumentates empoyed by the State, n
the dscharge of Its ordnary functons as a government.
The court then ctes eaze ank v. enno (8 Wa., 533), Co-
ector v. Day (11 Wa., 113), and U. S. v. R. R. Co. (17 Wa., 322),
to the same effect, and contnues:
35942 31 10
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
116, rt. 643.
138
These decsons, whe not controng the queston before us, ndcate that the
thought has been that the e empton of State agences and Instrumentates
from natona ta aton Is mted to those whch are of a strcty governmenta
character, and does not e tend to those whch are used by the State n the
carryng on of an ordnary prvate busness.
It s seen, therefore, that for an ndvdua s compensaton for
1925 and subsequent years receved from a State or any of ts pot-
ca subdvsons to be e empt from the edera ncome ta , t must
be shown (1) that he s an offcer or empoyee of the State or pot-
ca subdvson and (2) that hs servces are rendered n connecton
wth the e ercse of an essenta governmenta functon. (So. Op.
152, C. . -2, 93.) The e empton e sts not for the beneft of the
ndvdua but to prevent the edera Government from nterferng
wth the e ercse by the State, or ts potca subdvson, of ts
soveregn powers.
The terms offcer and empoyee have been |udcay defned
many tmes. In the case of Met caf ddy v. Mtche (269 U. S.,
514, T. D. 3824, C. . -, 218), the pantffs beow were consutng
engneers, who, ether ndvduay or as copartners, were professon-
ay empoyed to advse States or subdvsons of States wth refer-
ence to proposed water suppy and sewage dsposa systems. The
Supreme Court sad:
We thnk t cear that nether of the pantffs n error occuped any offca
poston n any of the undertakngs to whch ther wrt of error n No. 183
reates. They took no oath of offce they were free to accept any other con-
current empoyment none of ther engagements was for work of a permanent
or contnuous character some were of bref duraton and some from year to
year, others for the duraton of the partcuar work undertaken. Ther dutes
were prescrbed by ther contracts and t does not appear to what e tent, f
at a, they were denned or prescrbed by statute.
n offce s a pubc staton conferred by the appontment of government.
The term embraces the dea of tenure, duraton, emoument and dutes f ed
by aw. Where an offce Is created, the aw usuay f es ts ncdents, ncud-
ng ts term, ts dutes and Its compensaton. (U. 8. v. artwe, 6 Wa., 385
a v. Wsconsn, 103 U. S., 5.) The term offcer s one nseparaby con-
nected wth an offce but there was no offce of sewage or water suppy e pert
or santary engneer, to whch ether of the pantffs was apponted. The con-
tracts wth them, athough entered nto by authorty of aw and prescrbng
ther dutes, coud not operate to create an offce or gve to pantffs the
status of offcers. There were ackng n each nstance the essenta
eements of a pubc staton, permanent n character, created by aw, whose
ncdents and dutes were prescrbed by aw.
Nor do the facts stated n the b of e ceptons estabsh that the pantffs
were empoyees wthn the meanng of the statute. So far as appears,
they were n the poston of ndependent contractors. The record does not
revea to what e tent, f at a, ther servces were sub|ect to the drecton or
contro of the pubc boards or offcers engagng them. In each Instance the
performance of ther contract nvoved the use of udgment and dscreton
on ther part and they were requred to use ther best professona sk to
brng about the desred resut. Ths permtted to them berty of acton
whch e cudes the dea that contro or rght of contro by the empoyer whch
characterzes the reaton of empoyer and empoyee and dfferentates the
empoyee or servant from the ndependent contractor. (Chcago, Rock Isand
Pacfc Ry. Co. v. ond, 240 U. S., 449, 456 Standard O Co. v. nderson,
212 U. S 215, 227.)
ust what nstrumentates of a State or ts potca subdvson
are e empt from ta aton by the edera Government can not be
stated n terms of unversa appcaton. ut the Supreme Court
of the Unted States has repeatedy hed that those agences through
whch the State or ts subdvson mmedatey or drecty e ercses
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
139
116, rt. 643.
ts soveregn powers are mmune from the ta ng power of the
edera Government. It may be admtted that the reserved rghts
of the States, such as the rght to pass aws, to gve effect to aws
through e ecutve acton, to admnster |ustce through the courts,
and to empoy a necessary agences for the egtmate purposes o
State government, are not the proper sub|ects of the ta ng power
of Congress. ( eaze ank v. enno, 8 Wa., 533.) When, how-
ever, the queston s approached from the other end of the scae,
t s apparent that not every person who uses hs property or de-
rves a proft n hs deangs wth the government of the State or ts
potca subdvsons may cothe hmsef wth mmunty from ta a-
ton on the theory that ether he or hs property s an nstrumentaty
of government wthn the meanng of the rue. (See Thomson v.
Pacfc Raroad, 9 Wa., 579 Raroad Co. v. Penston, 18 Wa.,
5 atmore Shpbudng Dry Dock Co. v. atmore, 195 U. S.,
375.) s cases arse yng between the two e tremes, t becomes
necessary to draw the ne whch separates the actvtes havng
some-reaton to government, whch are nevertheess sub|ect to ta a-
ton, from those whch are mmune. There s, however, no formua
of unversa appcaton whch can be used n determnng the
queston. There can ony be apped the gudng prncpe due to
the essenta requrement of our consttutona system that the ed-
era Government must e ercse ts authorty wthn the terrtora
mts of the States, but t must admnster ts affars wthn ts
own sphere- and not unduy nterfere wth the e ercse by the State
or ts subdvsons of ther soveregn powers. Ta aton affects n
some measure the cost of operaton of the government of the State
or ts potca subdvsons, but the mtaton on ta aton can not
be so vared or e tended as serousy to mpar ether the ta ng
power of the government whch mposes the ta or the approprate
e ercse of the functons of the government affected by t. (See
South Carona v. U. S.. supra.)
In the case of nt v. Stone Tracy Co. (220 U. S., 107), the
Supreme Court sad:
It Is no part of the essenta governmenta functons of a State to provde
means of transportaton, suppy artfca ght, water and the ke. These
ob|ects are often accompshed through the medum of prvate corporatons,
and, though the pubc may derve a beneft from such operatons, the com-
panes carryng on such enterprses are, nevertheess, prvate companes, whose
busness s prosecuted for prvate emoument and advantage. or the purpose
of ta aton they stand upon the same footng as other prvate corporatons
upon whch speca franchses have been conferred.
The true dstncton s between the attempted tn aton of those operatons
of the States essenta to the e ecuton of ts governmenta functons, and tchch
the State can ony do tsef, and those actvtes whch are of a prvate charac-
ter. The former, the Unted States may not nterfere wth by ta ng the
agences of the State n carryng out ts purposes the atter, athough reguated
by the State, and e ercsng deegated authorty, such as the rght of emnent
doman, are not removed from the fed of egtmate edera ta aton. Itacs
supped.
In decdng whether or not any partcuar actvty n whch a State
or ts potca subdvsons may be engaged s a governmenta func-
ton, the atttude of the edera rather than the State authortes
shoud govern. (See St. Lous Cotton Compress Co. v. rkansas,
260 U. S., 346 oston Mane Raroad v. . S., 265 ed.. 578,
T. D. 3004 ose Tte Trust Co. v. vans, 295 ed., 223, T. D.
3551 C. . III-, 504 .)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
116, rt. 643.
140
Street raways. Whe the operaton of a street raway may be
a pubc necessty, t s not an nstrumentaty of the cty n the ds-
charge of ts ordnary functons as a government. If t s not an
nstrumentaty of government, t s not, n accordance wth the
decsons quoted above, removed from the sphere of edera ta aton,
and the compensaton of the offcers and empoyees thereof must be
ncuded n gross ncome. (See So. Op. 152, C. . II-2, 93 S. M.
2232, C. . III-2, 83 I. T. 2405, C. . II-1, 72 Cty of Seatte
et a. v. Poe, Coector, et a., 4 ed. (2d), 27C, T. D. 3701, C. .
I -1,290.)
Waterworks Lght and power pants. or reasons smar to
those stated n the above-cted cases, t s hed that the suppyng of
water, ght, and power to the nhabtants of a communty and the
operaton or refrgeratng pants consttute the dscharge of a pro-
pretary functon, and the compensaton of the offcers and empoyees
of such pants s sub|ect to the edera ncome ta , e cept such as
are empoyed n the sewerage department and the department sup-
pyng water to the fre department of the cty, as the operaton of
a sewerage department and a fre department consttutes the dscharge
of an essenta governmenta functon. (See S. M. 2232, C. . III-2,
83 I. T. 2324, C. . -2 31 I. T. 2405, C. . II-1, 72 Cty of
Wnona v. otzet, 169 ed., 321.)
State banks. The operaton of a State bank has aso been hed to
be the dscharge of a propretary functon and, therefore, the com-
pensaton of ts offcers and empoyees s sub|ect to ta . (The ank
of North Dakota v. Gunder Oson, Coector, 33 ed. (2d), 848.)
arbors. The constructon, ownershp, and operaton by a State,
or ts potca subdvsons, of wharves, pers, eevators, termnas,
cng pants, tramways, and warehouses and raroad connectons
between docks, pers, and other port structures and man ne tracks
and other port factes to promote shppng and commerce are hed
to be the e ercse of a propretary and not an essenta governmenta
functon. (S. M. 2232, C. . III-2, 83 Packet Co. v. eokuk, 95
U. S., 80.) The compensaton of offcers and empoyees engaged n
these actvtes and of harbor pots s ta abe. (See rungs on
pots n C. . I-2, pages 39 to 58. so Geo. . ew v. U. S., 35
ed. (2d), 977 Ct. D. 144, C. . I -1, 252 .)
ppontees of State courts. s a genera rue the tenure of offce
hed by masters apponted by State courts to hear and report on
specfc cases, by recevers, audtors, e amners, guardans of estates
of ncompetent persons, and apprasers s not or suffcent duraton
to warrant consderng them offcers of a State or ts potca sub-
dvsons, and ther dutes are not such as to consttute them em-
poyees thereof. Ther compensaton s, therefore, sub|ect to ta .
(I. T. 1245, C. . 1-1, 103 I. T. 1305, C. . 1-1, 104 I. T. 2030,
C. . III-, 117 S. M. 5287, C. . -, 222.)
In the case of Phppus W. Mer v. . D. McCaughn, Coector
(22 ed. (2d), 165) (affrmed 27 ed. (2d), 128 T. D. 4241, C. .
II-2, 2C6 ), the court stated as foows:
The compensaton must not merey come to a State offcer or
empoyee, but It must come to hm from the State, to be e empt. Uness ths
second ne s drawn, and drawn where we have drawn t, t s dffcut to
determne where t shoud be drawn. moment s thought w brng to mnd
scores of Instances n whch the recpent mght we be hed to be such offcer
or empoyee, but In whch the compensaton does not come drecty or n-
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
141
116, rt. 643.
drecty from the State, otherwse than In the sense that he woud not be In
the en|oyment of t, were It not for the reaton of offcer or empoyee of the
State whch he en|oys.
ere what the pantff receves comes whoy from the surety companes
upon whose fnanca resources he reports. It s true the corporaton does
not pay t drecty to hm, but to the cerk of court, from whom he receves
t.
State, county, and muncpa hosptas. Where the use of the
factes of the hospta s not mted to charty patents but t
receves and treats other patents for pay, even though t charges
for such servces ony the actua cost thereof, the operaton of such
hospta s hed to be the e ercse of a propretary functon. The
compensaton of the offcers and empoyees of such an nsttuton s
sub|ect to ta . (I. T. 2357, C. . I-1, 52.)
Pubc parks and paygrounds. cty n mantanng parks and
recreaton paygrounds s not actng n a governmenta capacty.
The compensaton of offcers and empo| ees receved n connecton
wth such actvtes s ta abe. ugustne v. Town of rant, 249
N. Y.| 1 )8, 1C3 N. ., 732.)
Irrgaton dstrct t. unctons of rrgaton dstrcts are pro-
pretary rather than governmenta and the compensaton pad to
ndvduas for servces rendered to such dstrcts s sub|ect to ta .
( ased upon prncpe enuncated n nt v. Stone Tracy Co.,
supra.)
Rura credt board. The functons of a rura credt board have
been hed to be of a propretary character and the compensaton of
ts offcers and empoyees s, therefore, sub|ect to ta . (S. M. 5490,
C. . -, 37.)
Independent contractors. rchtects, engneers, awyers, etc., who
engage n prvate practce and who aso serve the State or ts potca
subdvsons w, as a genera rue, be hed to be ndependent con-
tractors on the authorty of Metcaf tf ddy v. Mtche, supra . C.
repke v. Commssoner of Interna Revenue (32 ed. (2d), 594,
Ct. D. 114, C. . III-2, 287) Davd II. ar, Commssoner of
Interna Revenue, v. Mary . yers, ecutr of state of oward
T . yers (35 ed. (2d), 826, Ct. D. 146, C. . I -1, 247). Ther
compensaton w, therefore, be sub|ect to ta .
Ta coectors. Persons apponted to coect denquent ta es are
not offcers nor empoyees of a State or ts potca subdvsons and
the compensaton receved for such servces s sub|ect to ta . (G. C.
M. 809, C. . -2, 28.)
In the case of the Snger Manufacturng Co. v. Rahn (132 U. S.,
518), the court sad:
the reaton of master and servant e sts whenever the empoyer
retans the rght to drect the manner n whch the busness sha be done, as
we as the resut to be accompshed, or, n other words, not ony what sha
be done, but how It sha be done.
When a ta payer cams the beneft of an e empton from ta aton,
the burden s upon hm to show ceary that he s wthn the e emp-
ton camed. (Phoen re and Marne Insurance Co. v. Tennessee,
161 U. S., 174 Chcago, urngton : ansas Cty R. R. v. Guffey,
120 U. S., 569 Metcaf c6 ddy v. Mtche. 269 U. S., 514 T. D. 3824,
C. . -, 218 .) In regard, therefore, to the admnstratve dffcu-
tes nvoved n cases where a State or ts potca subdvson engages
n actvtes whch are party propretary and party governmenta,
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
141, rt. 42.
142
t can ony be stated that t devoves upon the ta payer to substantate
from some knd of records hs dvson of hs tme between the two,
such as the number of months, days, etc., devoted to each. If he can
furnsh no bass for the dvson of hs tme or saary whch appears
at a reasonabe, the tota amount shoud be ncuded n ta abe
ncome. In the case of a supervsng offca of such m ed actvtes,
t s suggested that there be furnshed the appropraton made and
used for each of the actvtes under hs supervson as a possbe
gude to the apportonment of hs saary to governmenta and pro-
pretary actvtes where hs tme s not devoted separatey to each
of the m ed actvtes.
Correspondence and nqures regardng ths mmeograph shoud
refer to the number and symbos IT: : RR.
S CTION 141. CONSOLID T D R TURNS O CORPOR -
TIONS 1929 ND SU S U NT T L Y RS.
In case the Income and deductons of a foregn sudsdary of
the type specfed In secton 141(h) of the Revenue ct of 1928 are
Incuded In a consodated return fed by a domestc corporaton,
the amount of ta es pad to a foregn country or to a possesson
of the Unted States by the foregn subsdary w be treated the
same as f t had been pad by the affated group or a domestc
corporaton.
dvce s requested as to the appcabty of secton 131(f) of the
Revenue ct of 1928, whch deas wth the bass of computng the
credt for ta es of a foregn subsdary of whch a ma|orty of the
votng stock s owned by a domestc corporaton, and secton 141(h)
of the ct, whch permts the ncuson n a consodated return of
the ncome and deductons of a 100 per cent owned foregn subsdary
ncorporated under the aws of a contguous foregn country, n the
case where the ncome and deductons of a foregn subsdary of the
atter cass are ncorporated n a consodated return. The specfc
queston s whether n such a case the credt for foregn ncome
ta es pad by the subsdary s mted to the same proporton of
the ta es aganst whch the credt s taken whch the amount of
dvdends receved from the subsdary bears to the amount of the
entre net ncome of the parent company, as provded by secton
131(f), or whether the foregn ncome ta es pad by the subsdary
are sub|ect to the mtatons specfed n secton 131(b).
Secton 141(h) of the Revenue ct of 1928 reads as foows:
Subsdary formed to compy wth foregn aw. In the case of a domestc
corporaton ownng or controng, drecty or ndrecty, 100 per centum of the
capta stock (e cusve of drectors quafyng shares) of a corporaton organ-
zed under the aws of a contguous foregn country and mantaned soey for
the purpose of compyng wth the aws of such country as to tte and operaton
of property, such foregn corporaton may, at the opton of the domestc cor-
poraton, be treated for the purpose of ths tte as a domestc corporaton.
Davd urnet, Commssoner.
SUPPL M NT D. TU NS ND P YM NT O T .
I -35-4764
I.T. 2543
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
6

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
143
148, rt. 811.
In ths connecton attenton Is drected to artce 42 of Reguatons
75, whch reads as foows:
The credt aowed a domestc corporaton for ta es pad or accrued durng
the consodated return perod to any foregn country or to any possesson of
the Unted States (under secton 131 of the ct) shn be computed and aowed
as f the affated group were the ta payer.
Under the quoted provsons, n case the ncome and deductons of
a foregn subsdary of the type specfed n secton 141(h) are
ncuded n a consodated return fed by a domestc corporaton,
the amount of ta es pad to a foregn country or to a possesson of
the Unted States by the foregn subsdary w be treated the same
as f t had been pad by the affated group or a domestc corpora-
ton. In such case the credt for foregn ta es w not be mted
by the provsons of secton 131(f), but the credt shoud be com-
puted under the provsons of secton 131 (a) and (b).
S CTION 148. IN ORM TION T SOURC .
rtce 811: Return of nformaton as to pay- I -49-4859
ments of 1,500. T. D. 4302
( so rtce 812 and rtce 817.)
INCOM T .
rtces 811, 812, and 817, Reguatons 74, amended.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
The frst sentence of artce 811, Reguatons 74, as amended by
Treasury Decson 4278 (C. . III-2, 138), s hereby further
amended to read as foows:
persons makng payment to another person of f ed or determnabe
Income of 1,500 or more n any caendar year must render a return thereof to
the Commssoner for such year on or before ebruary 15 of the foowng
year, e cept as specfed n artces 813-815.
The second sentence of artce 812 of Reguatons 74, as amended
by Treasury Decson 4278, s hereby further amended to read as
foows:
eads of branch offces and subcontractors empoyng abor, who keep the
ony compete record of payments therefor, shoud fe returns of nformaton n
regard to such payments drecty wth the Commssoner.
The ast sentence of artce 817, Reguatons 74, as amended by
Treasury Decson 4278, s hereby further amended to read as
foows:
Such forms accompaned by orm 1096 shoud be forwarded to the Com-
mssoner of Interna Revenue, Sortng Secton, Washngton, D. C, on or before
ebruary 15 of each year.
D vn urnet,
Commssoner of Interna Revenue.
pproved December 2,1930.
. W. Meon,
Secretary of the Treasury.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
6

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
148, rt. 818.
144
rtce 812: Return of nformaton as to payments
to empoyees.
R NU CT O 1928.
mendment of artce 812, Reguatons 74. (See T. D. 4302,
page 143.
rtce 817: Return of nformaton as to foregn tems.
R NU CT O 1028.
mendment of artce 817, Reguatons 74. (See T. D. 4302,
page 143.
rtce 818: Informaton as to actua owner. I -39 4785
L T. 2545
R NU CT O 1828.
rtce 818 of Reguatons 74 has no appcaton to cases where
the actua owners of dvdends on corporate stock are not known,
and t Is mpossbe for a broker, who s the record owner of the
stock, to dscose the name of the actua owners. Such dvdends
(pror to the runnng of the State statute of mtatons In favor
of the broker) are not propery ta abe as Income to the broker.
The broker havng actua possesson of the dvdends shoud
make a fu dscosure to the Government of the names of the
actua owners thereof, If and when the dentty of the actua
owners s dscovered, or In the ne t nformaton return made after
the dscovery of such dentty.
Pror to the dscovery of the dentty of the actua owners n
such cases, the broker shoud e ecute orm 1087, settng out
theren the fact that t hods such dvdends for partes whose
dentty s unknown and can not be estabshed as a resut of
reasonabe search and Inqury. The reason for the nabty to
estabsh such dentty, as we as the efforts made n respect
thereto, shoud aso be stated.
dvce s requested as to the treatment for ncome ta purposes
of dvdends receved by a broker for the account of others and
hed by the broker pendng the estabshment of tte by the actua
owners.
revenue agent e amned the partnershp return of the M
rokerage Co. and the returns of the ndvdua partners for the
year 1928. In connecton wth hs nvestgaton the revenue agent
rases the queston as to whether the dvdends receved by the part-
nershp durng the ta abe year wth respect to stock, the actua
cwner of whch s unknown, shoud be treated as ncome of the part-
nershp and ta ed to the ndvdua members accordngy. It s con-
tended on behaf of the members of the partnershp that dvdends
receved under such crcumstances are not the property of, or ncome
to, the broker for the perod n queston, and that, f the partnershp
shoud ever obtan tte, t woud ony be after the runnng of the
State statute of mtatons n favor of the broker. It s stated that,
as a matter of fact, n the case under consderaton the partnershp
pad out a substanta proporton of such dvdends to the actua
owners shorty after the end of the year, when the names and
addresses of the actua owners were ascertaned.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
6

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
145
148, rt. 818.
It appears that frequenty t s mpossbe for a broker to ascertan
mmedatey the actua owners of stock, the record tte of whch s
n the name of the broker. It further appears that generay de-
mands for payment of the dvdends are made upon the broker by
the actua owners of the stock wthn the frst haf of the year fo-
owng the year n whch sad dvdends are pad to the broker, and
that the dvdends are hed by the broker n speca accounts and are
pad to the actua owners upon demand. In some cases, however,
a certan porton of the dvdends receved by the broker s not
demanded and pad n the foowng year, and the actua owners of
the money never make demand. In cases where the actua ownershp
of the stock s not dscosed to the broker pror to the runnng of
the State statute of mtaton upon the rght of the actua owner
t) demand payment of dvdends, t s conceded that such moneys
woud upon the happenng of that event represent gan to the broker
and shoud be reported as ncome.
Wth respect to undentfed dvdends (where the State statute of
mtaton has not run), nformaton s requested as to the appca-
bty and nterpretaton of artce 818, Reguatons 74, whch reads
n part as foows:
Dvdends on stock are prma face the ncome of the record owner
of the stock. Upon recept of dvdends by a record owner, he shoud mmed-
atey e ecute orm 1087 to dscose the name and address of the actua owner.
orm 1087 shoud be fed wth the Commssoner of Interna Revenue, Sortng
Secton, Washngton, D. C. Uness such a dscosure s made, the record owner
w be hed abe for any ta based upon such dvdends. (See artce 831.)
It s we setted that as between the stockhoder of record, who
transfers hs stock, and the transferee, who fas to have the transfer
recorded on the corporate records, such transferee s the true owner
of the stock and dvdends decared thereon. (S. M. 4281, C. .
I -2, 187, Rchardson v. Shaw, 209 U. S., 365.) or coecton of
authortes see 14 C. ., pages 752, 753, and 778. See aso Rchards
v. Robn (162 N. Y., 12).
fter carefu consderaton of the matter, ths offce has reached
the concuson that the above-quoted artce of the reguatons has
no appcaton to cases where, as n the nstant case, the actua owners
of the dvdends are not known and t s mpossbe for the broker
to dscose the name of the actua owners. ccordngy, such dv-
dends (pror to the runnng of the State statute of mtatons n
favor of the broker) are not propery ta abe as ncome to the
broker.
It s evdent, however, that the dvdends are ncome to some one,
and the broker havng actua possesson of same shoud make a fu
dscosure to the Government of the names of the actua owners
thereof, f and when the dentty of the actua owners s dscovered,
or n the ne t nformaton return made after the dscovery of such
dentty.
Pror to the dscovery of the dentty of the actua owners n such
cases, the broker shoud e ecute orm 1087, settng out theren the
fact that t hods such dvdends for partes whose dentty s
unknown and can not be estabshed as a resut of reasonabe search
and nqury. The reason for the nabty to estabsh such dentty,
as we as the efforts made n respect thereto, shoud aso be stated.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
6

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
185, rt. 921.
146
SUPPL M NT . ST T S ND TRUSTS.
S CTION 162. N T INCOM .
rtce 863: Decedent s estate durng admnstraton.
R NU CT O 1028.
Land contracts transmtted at death. (See I. T. 2547, page 120.)
SUPPL M NT . P RTN RS IPS.
S CTION 185. RN D INCOM .
rtce 921: arned ncome credt of partners. I - 49-4853
I. T. 2551
R NU CT O 1828.
partner s share of the net gan derved by the partnershp from
the sae of Its capta assets and the Interest receved by t from
ta -e empt securtes shoud be Incuded n the tota amount of a
partner s profts from the partnershp n computng hs earned
ncome from that source.
rung s requested whether capta net gan and nonta abe
ncome shoud be ncuded n the partnershp net profts n determn-
ng the earned ncome of the partners, the busness beng one n
whch both persona servces and capta are matera ncome-pro-
ducng factors.
Secton 31(a) of the Revenue ct of 1928 provdes:
or the purposes of ths secton
(1) In the case of a ta payer engaged n a trade or busness n
whch both persona servces and capta are matera ncome producng fac-
tors, a reasonabe aowance as compensaton for the persona servces actuay
rendered by the ta payer, not n e cess of 20 per centum of hs share of the
net profts of such trade or busness, sha be consdered as earned ncome.
Itacs supped.
Secton 185 of the Revenue ct of 1928 reads as foows:
In the case of the members of a partnershp the proper part of each share
of the net Income whch conssts of earned Income sha be determned under
rues and reguatons to be prescrbed by the Commssoner wth the approva
of the Secretary and sha be separatey shown n the return of the partner-
shp and sha be ta ed to the member as provded In ths suppement.
The terms profts and gans have been treated as synony-
mous. (See Lynch v. ornby. 247 U. S., 339.) In Law Opnon
1061 (C. . 4, 160) the term profts s defned as any returns
on an nvestment, whether fowng from the ownershp of the prop-
erty nvested n, or from the sae of such property. In the same
opnon s quoted, among other thngs, the foowng defnton of
proft:
the Incomngs of the concern after deductng the e penses of earn-
ng them ncome of whatever character t may be over and above the costs
and e penses of recept and coecton: . (32 Cyc, 585, 591.)
s Congress has used the term net ncome very metcuousy
throughout the ct whenever statutory ta abe ncome s meant, t
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
6

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
147
212, rt. 1042.
s evdent that the anguage of the ct n secton 31(a) quoted
above, namey, the net profts of such trade or busness, can
normay mean but one thng, and that s the commerca or book
profts rather than statutory net ncome or statutory net ncome ess
capta gans. oth the gan derved by a partnershp from the
sae of capta assets and the nterest receved by t from ta -e empt
securtes are a part of ts commerca or book profts and are, there-
fore, to be ncuded n each partner s share of the net profts of
such trade or busness. Ths cass of ncome shoud be ncuded n
the tota amount of a partner s profts from the partnershp n com-
putng hs earned ncome from that source.
SUPPL M NT . NONR SID NT LI N INDI IDU LS.
S CTION 212. GROSS INCOM .
rtce 1042: cuson of earnngs of foregn I -37-4779
shps from gross ncome. T. D. 4299
INCOM T .
empton from ta aton of earnngs of shps documented under
the aws of raz.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
Sectons 212(b) and 231(b) of the Revenue ct of 1928 provde
that there sha be e empt from ta aton the ncome of a nonresdent
aen or foregn corporaton whch conssts e cusvey of earnngs
derved from the operaton of a shp or shps documented under the
aws of a foregn country whch grants an equvaent e empton to
ctzens of the Unted States and to corporatons organzed n the
Unted States.
raz grants an equvaent e empton to ctzens of the Unted
States and corporatons organzed n the Unted States. ccord-
ngy, artce 1042 of Reguatons 74. as amended bv Treasury Dec-
sons 4269 (C. . III-2, p. 146) and 4289 (C. . I -1, p. 160),
s hereby further amended so as to ncude raz (from December
30, 1928, ony, when the razan aw, desgnated as Decree No.
5623, went nto effect) n the st of countres whch e empt from
ta aton so much of the ncome of ctzens of the Unted States non-
resdent n such foregn countres and of corporatons organzed n
the Unted States as conssts of earnngs derved from the operaton
of a shp or shps documented under the aws of the Unted States,
and to e cude raz (from December 30, 1928) from the st of
countres whch do not grant such e empton.
Davd urnet,
Commssoner of Interna Revenue.
pproved September 10, 1930.
. W. Meon,
Secretary of the Treasury.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
6

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
275.
148
rtce 1042: cuson of earnngs of foregn I 11 4817
shps from gross ncome. I. T. 2548
R NU CT OP 1928.
Under the proposed aw of Ceyon (a rtsh Crown coony),
evyng an ncome ta on revenues accrung to steamshp companes
whose vesses ca at ports n Ceyon, that country does not satsfy
the equvaent e empton requrements of secton 212(b) and secton
231(b) of the Revenue ct of 1928. The recproca arrangement
wth Great rtan wth respect to the e empton of shp earnngs
does not ncude the rtsh domnons or the Crown coones.
SUPPL M NT L. SS SSM NT ND COLL CTION O D ICI NCI S.
S CTION 275. P RIOD O LIMIT TION UPON
SS SSM NT ND COLL CTION.
Secton 275. I -30-4717
( so Secton 51, rtce 381 or Secton 322, Mm. 3815
rtce 1257.)
Communty property returns Ta abe years 1927 and 1928
Statute of mtatons e tended.
Treasukt Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C, uy S, 1930.
Coectors of Interna Revenue, Interna Revenue gents n Charge,
and other Offcers and mpoyees of the ureau of Interna
Revenue Concerned:
Reference s made to the |ont resouton of the Congress ( . .
Res. 340) approved by the Presdent une 16, 1930, whch provdes
as foows:
Resoved by the Senate and ouse of Representatves of the Unted States
of merca n Congress assembed, That the 3-year perod of mtaton pro-
vded n secton 277 of the Revenue ct of 1920 upon the assessment of ncome
ta es Imposed by that ct for the ta abe year 1927, and the 3-year perod of
mtaton provded n secton 284 of the Revenue ct of 1926 n respect of re-
funds and credts of ncome ta es mposed by that ct for the ta abe year 1927
sha be e tended for a perod of one year In the case of any marred ndvdua
where such ndvdua or hs or her spouse fed a separate Income ta return
for such ta abe year and Incuded theren ncome whch under the aws of
the State upon recept became communty property.
Sec. 2. The 2-year perod of mtaton provded n secton 275 of the Revenue
ct of 1928 upon the assessment of ncome ta es mposed by Tte I of that ct
for the ta abe year 1928, and the 2-year perod of mtaton provded In secton
322 of the Revenue ct of 1928 n respect of refunds and credts of ncome
ta es mposed by that ct for the ta abe year 1928 sha be e tended for a
perod of one year n the case of any marred ndvdua where such ndvdua
or hs or her spouse fed a separate ncome-ta return for such ta abe year
and ncuded theren ncome whch under the aws of the State upon recept
became communty property.
Sec. 3. The perods of mtatons e tended by ths |ont resouton sha, as
so e tended, be consdered to be provded n sectons 277 and 284 of the
Revenue ct of 1920 and sectons 275 and 322 of the Revenue ct of 1928,
respectvey.
Sec. 4. Nothng heren sha be construed as e tendng any perod of mta-
ton whch has e pred before the enactment of ths |ont resouton.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
6

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
149
322, rt. 1257.
The provsons of ths |ont resouton are appcabe to the cases
of marred ndvduas for the ta abe years 1927 and 1928 where
such ndvduas or ther spouses fed separate ncome ta returns
for such ta abe years and ncuded theren ncome whch under the
aws of the State upon recept became communty property. The
States havng communty property aws are rzona, Caforna,
Idaho, Lousana, Nevada, New Me co, Te as, and Washngton.
Under the provsons of the |ont resouton, the perods of mta-
ton for assessng ta es n the cases specfed n the |ont resouton
for the ta abe years 1927 and 1928 (ncudng fsca years ended
durng those years) are four years and three years, respectvey,
after the returns were fed and the perods of mtaton for aow-
ng a refund or credt of ta es overpad on such returns for those
years, or for the fng of a proper cam therefor, are four years and
three years, respectvey, from the tme the ta es were pad. Under
the provsons of sectons 275 and 822 of the Revenue ct of 1928,
such perods of mtaton for assessng ta es and aowng refunds
and credts for the ta abe year 1929 are two years. Consequentv,
the perods of mtaton for a three ta abe years w ordnary
e pre durng 1932.
The provsons of the |ont resouton are not appcabe to cases
n whcn an eecton was made to fe a |ont return but ony to those
cases n whch, as stated n the |ont resouton, separate returns
were fed and communty ncome was ncuded theren.
The communty property ncome ssue s now before the Supreme
Court of the Unted States and a fna decson s e pected n ampe
tme to permt an ordery ad|ustment of a communty property
returns wthn the perods of mtaton as e tended by the |ont
resouton. Pendng such decson, the procedure set forth n
Mmeograph 8723 (C. . III-1, 89) w be foowed n the audt
of separate returns reportng communty ncome for 1927 and subse-
quent ta abe years.
Correspondence and nqures regardng ths mmeograph shoud
refer to the number and the symbos IT: : RR.
Robt. . Lucas,
Commssoner.
SUPPL M NT O. O RP YM NTS.
S CTION 322. R UNDS ND CR DITS.
btce 1257: Lmtatons upon the credtng and
refundng of ta es pad.
R NU CT O 1928.
tenson of perod of mtaton n the case of communty prop-
erty returns for 1928. (See Mm. 3815, page 148.)
btce 1257: Lmtatons upon the credtng and
refundng of ta es pad.
R NU CT O 1928.
ppcaton to reopen cam for refund on dfferent ground as
bass for sut on such new ground. (See Ct. D. 248. pa re 407.)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
6

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
506. 150
TITL n. M NDM NTS TO 1926 INCOM T .
S CTION 506. W I RS T R PIR TION
O P RIOD O LIMIT TIONS.
Secton 506. I -50-4861
G. C. M. 8784
R NU CT O 1928.
waver of the perod of mtaton upon the assessment of
Income ta for the fsca year ended uy 31, 1926, e ecuted ebru-
ary 21, 1930, the statutory perod for assessment havng e pred
December 15, 1929, Is not a vad waver of the statute of mta-
tons for the assessment of the ta .
n opnon s requested n the case of the M Company for the
ta abe year ended uy 31, 1926, wth respect to the foowng
queston:
Whether a waver of the perod of mtaton upon the assessment of Income
ta e ecuted ebruary 21, 1930, the statutory perod for assessment for the
year mentoned havng e pred December 15, 1929, s a vad waver of the
statute of mtatons for the assessment of the ta .
The queston arses n connecton wth the nterpretaton to be
paced upon Genera Counse s Memorandum 7515 (C. . I -1,171).
In the Genera Counse s memorandum referred to the queston
consdered was whether overpayments of ta apped as credts to
an outstandng assessment duy made pror to une 2,1924, and wth
respect to whch a tmey cam for abatement had been fed, were
refundabe, nasmuch as the credts were made after coecton had
become barred. In hodng that the credts were not refundabe, t
was sad n part as foows:
The fact that the credts were made In part durng the tme that
secton 1106(a) of the Revenue ct of 1926 was In e stence and the fact that
the coecton of the 1918 ta aganst whch the credts were made was barred
pror to the enactment of the Revenue ct of 1928 are consdered to be
Immatera. It s true that ths offce has e pressed the opnon that a waver
e ecuted by a ta payer on March 8, 1926, after the statute of mtatons upon
assessment had run and after the date of the enactment of the Revenue ct
of 1920, contanng secton 1106(a), s Ineffectve for the purpose of e tendng
the perod of mtaton for assessment (G. G. M. 5601.) That memorandum,
based upon the provsons of secton 1106(a), s now beeved to be erroneous,
nasmuch as secton 1100(a) of the Revenue ct of 1926 was retroactvey
repeaed by secton 612 of the Revenue ct of 1928 as of ebruary 26, 1926. In
effect, the aw as It now stands s as though secton 1106(a) had never
e sted.
It s the opnon of ths offce, therefore, that an overpayment of ta for one
year credted aganst an outstandng assessment of ta (duy assessed pro
to une 2, 1924) for another year after the statutory perod for coecton o
the ta assessed had e pred, whether the credt was made before or after the
enactment of the Revenue ct of 1926, but not ater than one year after the
enactment of the Revenue ct of 1928, aganst whch assessment an abatement
cam was fed by the ta payer, can not egay be refunded because of the
provsons of secton 611 of the Revenue ct of 1928. Genera Counse s
Memorandum 5601 and a other memoranda nconsstent herewth are revoked.
Itacs supped.
It w be noted that the foregong memorandum, n so far as t re-
ates to the vadty of wavers, merey refers to wavers gven durng
the tme the provsons of secton 1106(a) of the Revenue ct of
1926 were n effect. That secton has no bearng upon the queston
here nvoved. In the nstant case the statutory perod of mtaton
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
6

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
151
506.
dd not e pre unt n December, 1929, whch was after the enact-
ment of the Revenue ct of 1928 and after secton 1106(a) of the
Revenue ct of 1926 had been repeaed by that ct. Therefore, the
queston as to the vadty of the waver referred to s governed en-
trey by the provsons of secton 278 of the Revenue ct of 1926,
as amended by secton 506 of the Revenue ct of 1928. That secton,
as so amended, reads n part as foows:
(c) Where before the e praton of the tme prescrbed In secton 277 for
the assessment of the ta , both the Commssoner and the ta payer have con-
sented n wrtng to ts assessment after such tme, the ta may be assessed
at any tme pror to the e praton of the perod agreed upon. The perod so
agreed upon may be e tended by subsequent agreements In wrtng made before
the e praton of the perod prevousy agreed upon.

(f) ny agreement whch woud be wthn the provsons of subdvson (c)
of ths secton but for the fact that It was e ecuted after the e pra-
ton of the perod of mtaton e tended by such agreement, sha be vad
and effectve accordng to ts terms f entered Into after the enactment of the
Revenue ct of 1928 and before anuary 1, 1929. Itacs supped.
Under the provsons of subdvson (c), an assessment s author-
zed after the e praton of the perod prescrbed n secton 277 ony
where before the e praton of such perod a consent n wrtng s
entered nto agreeng to a ater assessment of the ta . Snce the
agreement here nvoved was e ecuted after the e praton of the
perod of mtaton prescrbed n secton 277, t s cear that there s
no authorty for the makng of an assessment at ths tme pursuant
to the provsons of paragraph (c).
The ony remanng queston to be consdered s whether the waver,
whch woud be wthn the provsons of subdvson (c) but for the
fact that t was e ecuted after the e praton of the perod of m-
taton, s rendered vad and effectve accordng to ts terms by vrtue
of the provsons of subdvson (f). ut here agan, t w be noted
that the agreement was entered nto after anuary 1, 1929. so that
the agreement s not rendered vad under the provsons of that
paragraph. It mght be argued that the waver must be consdered
vad snce the statute does not specfcay decare t to be nvad.
ut such a constructon s untenabe, for t not ony fas to gve any
effect whatsoever to the word before as used n subdvson (c),
but renders the provsons of subdvson (f) surpusage. Wavers
e ecuted after the bar of the statute woud, under such a constructon,
be vad, no matter when e ecuted and regardess of the fat of sub-
dvson (f) as to when they sha be vad. It s obvous that such
was not the ntenton of Congress.
It s a we-setted prncpe of statutory constructon that when a
statute mts a thng to be done n a partcuar mode, t ncudes the
negatve of any other mode. Raegh Gaston Raroad Co. v.
Red, 13 Wa., 269, 270 Scott v. ord, 52 Or., 288, 296 otany
Worsted Ms v. U. S., 278 U. S., 282, Ct. D. 39, C. . III-1, 279.)
y construng subdvson (c) aone n the ght of ths prncpe, any
agreement entered nto after the bar of the statute s nvad. The
pan purpose of subdvson (f) then s to render such agreements
vad and effectve accordng to ther terms ony n cases where they
are entered nto before anuary 1, 1929. rom ths t foows that
any assessment made at ths tme n the nstant case woud be after
the e praton of the perod of mtaton wthn the meanng of
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
6

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
607.
152
the statute, and that rrespectve of the agreement entered nto after
anuary 1,1929, the payment of such assessment woud consttute an
overpayment of ta and woud be refundabe upon the fng of a
cam therefor n accordance wth the provsons of secton 607 of the
evenue ct of 1928.
It s accordngy the opnon of ths offce that under the facts
rected the waver of the perod of mtaton upon assessment for
the fsca year ended uy 31, 1926, s nvad.
C. M. Chabest,
Genera Counse, ureau of Interna Revenue.
TITL I . DMINISTR TI PRO ISIONS.
S CTION 607. CT O PIR TION O P RIOD
O LIMIT TION G INST UNIT D ST T S.
Secton 607. I -28-4691
G.C.M. 8193
R NU CT O 1028.
eopardy assessment of a defcency In ta for 1918 and notce
and demand for payment thereof were made wthn the statutory
perod of mtaton upon assessment and coecton. Shorty after
the e praton of such statutory perod n March, 1024, the ta payer
fed a cam for abatement of the fu amount of the defcency and
furnshed a surety bond. Ths cam was aowed n part, and pay-
ment of the baance of the defcency was made. cam for refund
for the amount of such payment was fed on the ground that the
payment of the addtona ta for 1918 was made after the runnng
of the statute of mtatons on coecton.
ed, snce the amount sought to be refunded was pad n accord-
ance wth the contract represented by the bond, the cam for refund
shoud be dened.
n opnon s requested as to whether the ta payer s entted to a
refund for the ta abe year 1918 of an amount coected after the
e praton of the statutory perod of mtaton on coecton of ta es.
It appears that fed an ndvdua ncome ta return for 1918
on March 20, 1919. |eopardy assessment of a defcency n ta of
6a doars was made on the ebruary, 1924, st. tmey notce
and demand for the payment of ths defcency was forwarded to the
ta payer on ebruary 16, 1924. On March 24, 1924, whch was four
days after the e praton of the statutory perod of mtaton on
coecton, the ta payer fed a cam for the abatement of the fu
amount of the defcency. Ths cam was predcated upon the ground
that a tmey appea had been taken to, and was then pendng oefore,
the Commssoner. surety bond n the e act amount of the de-
fcency was furnshed to the coector to secure the payment of the
amount camed n abatement. The condton of the bond reads as
foows:
Now, therefore, the condton of the foregong obgaton s such that If the
prncpa sha on notce and demand by the coector duy pay 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, and sha otherwse we and truy perform and observe a the pro-
vsons of aw nnd the reguatons, then the obgaton Is to be vod, but other-
wse to reman n fu force and vrtue.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
6

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
153
607.
The cam for abatement was prompty acted upon durng 1924
and aowed for the aggregate amount of 2 doars, whch eft an
amount to be pad of 4a doars. Upon payment by the ta payer
of ths baance of 4a doars, together wth nterest, the coector
reeased the above-mentoned bond. The coector has certfed that
payment of ths baance was made by the ta payer on anuary 31,
1925.
On anuary 22,1929, the ta payer fed a cam for refund for 1918
n the sum of 4a doars, n whch t was set out that the payment
of the addtona ta for 1918 n that amount was made after the
e praton of the perod of mtaton upon coecton. Such cam
was fed wthn four years after the date of payment on anuary 31,
1925. The queston s rased whether the cam shoud be aowed.
Snce the cam for abatement, whch was submtted by the ta -
payer on March 24, 1924, was fed after the e praton of the statu-
tory perod of mtaton upon coecton, the abatement cam dd not
stay coecton of the ta , and the case does not fa wthn the pur-
vew of secton 611 of the Revenue ct of 1928. In vew of the fact
that coecton of the defcency for 1918 became barred by the statute
of mtatons pror to anuary 31, 1925, when the payment n ques-
ton was made, t becomes necessary to consder the vadty of the
bond whch was gven to secure the payment of the amount covered
by the cam for abatement.
The assessment of the addtona ta for 1918. the notce and
demand for payment thereof, and the appea to the Commssoner
were a made wthn the statutory perod of mtaton upon assessc
ment and coecton of 1918 ta es. though the cam for abate-
ment and the bond were not fed unt after the bar of the statute,
they were condtoned upon the outcome of the ta payer s appea,
and the bond was gven to secure the payment of such ta found by
the Commssoner to be due. It s we estabshed that a bond
gven before coecton of a ta s barred by the statute of mtatons
creates a abty for the ta whch s not sub|ect to the mtaton
upon coecton of ta es prescrbed by the statute. The contract
under the bond s substtuted for the ta abty. s was sad
by the Supreme Court of the Unted States n the case of Unted
States v. The ohn arth Co. et a. (279 U. S., 370, Ct. D. 65, C. .
III-1, 189):
The makng of the bond gves the Unted States a cause of. acton separate
and dstnct from an acton to coect ta es whch t aready had.
Numerous cases may be cted n support of ths prncpe. Is the
fact that the bond was gven by the ta payer after the bar of the
statute of mtatons matera Under the decson of the Unted
States Dstrct Court for the astern Dstrct of rgna n the case
of Unted States v. . ogshre, Son Co., Inc., and dety
Casuaty Co. (37 ed. (2d), 720) t was not. The acton n that case
was nsttuted by the Government to recover on a bond e ecuted by
ogshre as prncpa and the bondng company as surety, whch
bond was condtoned to pay, on demand by the coector, such ta as
the Commssoner found to be due. n addtona ta for the year
1917 was assessed wthn the statutory perod. The bond was gven
n November, 1923, when coecton or the ta was barred by the
statute of mtatons. The defendant nterposed a demurrer to the
85942 31 11
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
6

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
607.
154
pantff s petton, t beng camed that the acton coud not be
mantaned for the reason that at the tme of the e ecuton of the
bond the ta to whch the bond referred was barred of coecton by
sut or dstrant. The court ponted out that the case dffered from
the ohn arth Co. case n that the bond was gven wthn the
statutory perod for coecton n the arth case whe n the og-
shre case the bond was not gven unt after the coecton of the
ta became barred by the statute of mtatons. The defendant s
demurrer was overrued, the court statng n part as foows:
If the effect of the mtaton perods In the revenue statutes Is not
ony to bar the remedy, but to e tngush the abty, obvousy ths acton may
not be mantaned. There s no such provson n any of the statutes. The ct
of ebruary 26, 1920 (sec. 1106(a), ch. 27, 44 Stat, 9, 113 (26 U. S. C. ., 1249,
note)), dd provde a bar of the abty as we as of the remedy, but the ct
was repeaed as of the date of ts enactment, May 29, 1928 (ch. 852, sec. 612,
45 Stat, 791, 875), so that the case as made s ths: In November, 1923, the
defendant was ndebted to the Government n the prncpa amount demanded
n ths acton, but the Government was wthout remedy because of the statute
of mtatons. t that tme, the defendant vountary promsed to pay the
Indebtedness on condton that the Commssoner woud ree amne Its ta
returns for the year n queston, and such ree amnaton showed the amount
camed to be due, and t e ecuted a bond to secure the performance of ts
promse. The Supreme Court n Prce v. Unted States (269 U. S.
at page 499, 46 S. Ct, 180, 70 L. d., 373) has hed that ta es due the Unted
States are debts. y the repea of secton 1106(a) of the ct of 1926, supra,
the Congress n effect has decared aganst the e tngushment of the abty
of the ta payer, though preservng the bar of the statute as aganst coecton
by sut or acton. Snce, therefore, the abty contnued, It Is dffcut to see
upon what prncpe the ta payer shoud be dened the rght, even after the
bar of the statute, to dscharge hs debt, and, If he agrees to do so upon a con-
tngency whch afterwards happens, t woud seem to me that he shoud be
hed, wthout regard to whether or not the bar of the statute appes to the
orgna debt. There mght have been ground for argument If the assessment
had not been made wthn the statutory perod, on the theory that wthout a
wrtten waver of the mtaton. It coud not be made after the bar became
effectve, and, unt made, no debt was due but, concededy, It was made here
In good tme, and out of t the amount of the debt due was f ed. The debt
survved, though the rght to enforce t was ost. The new wrtten promse to
pay restored the rght to coUect, and the bar of the statute, as aganst the
coecton of the ta , s thus no onger a defense as aganst the bond.
Ths offce s of the opnon that the decson n the ogshre case
s sound and represents the correct vew. In ne wth such decson
s that of the Court of Cams n Mascot O Co., Inc., v. Unted
States, decded une 2,1930 (42 . (2d), 309, Ct. CI., see Ct. D.
198, on page 242. ).
Wth respect to whether there s a good consderaton for the gv-
ng of a bond after the e praton of the perod of mtaton on co-
ecton, reference s made to Wston on Contracts (1924 edton),
oume I, secton 160, whch reads n part as foows:
There can be tte doubt that the genera doctrne that a precedent debt
was suffcent consderaton for a subsequent promse furnshed the bass for
the present doctrne aowng the enforcement of promses to pay debts barred
by the statute though such promses are supported by no new consderaton.
Secton 162, wth respect to the revva of ndebtedness, reads n
part as foows:
In a recent ngsh case Lord ustce Mesh sad In words often quoted:
There must be one of these three thngs to take the case out of the statute.
ther there must be an acknowedgment of the debt, from whch a promse to
pay s to be mped or, secondy, there must be an uncondtona promse to
pay the debt or, thrdy, there mu.t fee a condtona promse to pay the debt,
and evdence that the condton has oeen performed. Itacs supped.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
6

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
155
(Ctng Mtche s Cam, L. R., 6, ch. 822, 828, quoted n Gusty v.
Donan, 159 Mass., 245, 247, 34 N. ., 360 38 m. St. Rep., 419.)
The statute of mtatons dd not e tngush the ta payer s a-
bty for payment of the ta . though tne remedy for coecton
of the ta was unenforceabe, the ta payer s obgaton to pay the
ta st e sted at the tme the bond was furnshed, and ths e stng
abty consttuted a suffcent consderaton for the agreement by
the ta payer to pay such amount as mght be determned to represent
ts correct ta abty. In Campbe v. ot (115 U. S., 620, 625)
the Supreme Court of the Unted States sad:
It s unformy conceded, that the debt s a suffcent consderaton for a new
promse to pay, made after the bar has become perfect. Itacs supped.
In the nstant case ths new promse, whch was condtona, be-
came absoute upon satsfacton of the condton. The Commssoner
abated a porton of the addtona ta for 1918. Payment of the
baance shoud be treated as a fufment of the ta payer s obga-
ton under the bond. It s, therefore, the opnon of ths offce, snce
the amount sought to be refunded was pad n accordance wth the
contract represented by the bond, that the ta payer s cam for
refund shoud be dened.
C. M. Chaeest,
Genera Counse, ureau of Interna Revenue.
Secton 607. I -44-4818
Ct. D. 242
D R L T S R NU CT O 1928 D CISION O COURT.
Sut ond Overpayment op Ta as Defense.
payment n dscharge of the obgaton created by a bond gven
n connecton wth a cam for the abatement of a ta and cond-
toned for the payment of the ta found to be due s not a payment
of a ta , and such payment made after the e praton of the perod
of mtaton appcabe to the coecton of the ta s not an over-
payment requred to be credted or refunded pursuant to secton
607 of the Revenue ct of 1928.
Dstrct Court of the Unted States for the astern Dstrct of
Pennsyvana.
akey D. McCaughn, as Coector of Interna Revenue of the Unted States
for the rst Coecton Dstrct of Pennsyvana, v. Phadepha arge Oo,
a Corporaton, and the Natona Surety Co., a Corporaton.
September 24, 1030.
SUR RUL OR UDGM NT OR W NT O SU ICI NT ID IT O D NS .
rkpatrck, .: The defense most strongy nssted on s based on secton
607 of the Revenue ct of 1928. That secton provdes In substance that ny
ta 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 . The defendant s poston Is
that f, as a resut of ths sut, the ta payer shoud be compeed to pay any
money to the Government, It woud be Immedatey recoverabe as an over-
payment under the above secton, snce both sdes agree that the tme to com-
mence drect proceedngs for the payment of the ta In queston e pred on
pr 29, 1924, by force of the mtaton contaned n the Revenue ct of 1918.
Ths argument presupposes that the payment of a sum of money to the Gov-
ernment by the ta payer as a resut of ths sut woud be the payment of a
ta . In a pror opnon n ths case ths court ponted out that the obgaton
created by the bond whch Is the cause of acton n ths sut s not a ta
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
6

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
611.
156
abty but a contractua one. The decson of the Supreme Court In . 8. y.
ohn arth Co. (279 U. 8., 870 Ct. D. 63, O. . III-1, 189 ) was based upon
the same constructon. The court sad: The makng of the bond gves the
Unted States a cause of acton separate and dstnct from an acton to coect
ta es whch t aready had. The statutes now peaded to bar the sut can not
be e tended by Impcaton to a sut upon a subsequent and substtuted con-
tract. ny payment In dscharge of the obgaton created by the bond n
sut woud not be a payment of ta , and secton 607 of the Revenue ct of 1928
s whoy nappcabe.
If, yedng to the defendant s Insstence that we shoud ook through the
form to the substance, we shoud hod that the payment of any sum of money
under ths sut was the payment of a ta , It woud not hep the defendant,
because t woud not be a ta pad after the e praton of the perod of
mtaton propery appcabe thereto. y the gvng of the bond the ta -
payer whoy waved the mtaton and there was no onger any perod of
mtaton propery appcabe to the ta . s the court n the ohn arth
case sad, The ob|ect of the bond was not ony to prevent the mmedate co-
ecton of the ta but aso to prevent the runnng of tme aganst the Govern-
ment. 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.
The remanng defenses may be brefy dsposed of.
(1) The correctness of the orgna assessment s chaenged, but coatera
attack on an assessment of ncome ta may not be had n an acton on a bond
for payment of an amount fnay ad|udcuted by the Commssoner of Interna
Revenue (Gray Motor Co. v. U. ., 16 ed. (2d), 807 T. D. 3994, C. . I-1,
149 ) or, as n ths case, a bond to pay any part of such ta found by the
Commssoner to be due.
(2) When the bond was gven, proceedngs for the mmedate coecton of
the ta were waved by the Commssoner. Ths was suffcent consderaton.
(3) The aw of suretyshp does not requre notce and demand npon the
prncpa, where hs obgaton s absoute and uncondtona. The defaut s
conceded and the surety had notce and demand was made upon t.
(4) ursdcton s apparent from the fact of the record.
The defendant n ths case has fed an affdavt and thereafter a suppementa
affdavt. It may be assumed that he has e hausted a the defenses whch he
beeves that he has, and that there are no further facts whch can ad hm.
Nothng s to be ganed by aowng another amended affdavt to be fed, and,
therefore, |udgment may be entered for the pantff In the amount of the cam,
wth Interest, the affdavt and suppementa affdavt beng ad|udged nsuffcent.
S CTION 611. COLL CTIONS ST Y D Y
CL IM IN T M NT.
Secton 611. I -29-4703
Ct. D. 200
ncome ta revenue act of 1928 decson of court.
Sut Co-ecton Lmtaton Cam fob batement Cbedt
of Overpayment.
credt of an overpayment s a payment wthn the meanng
of secton 611 of the Revenue ct of 1928, whch wthdraws the
statute of mtaton upon coecton as a ground for the recovery
back of a ta credted under the condtons theren stated.
Court of C.amb of the Unted States.
oston Pressed Meta Co. v. The Unted States.
une 2, 1930.
opnon.
Gkeen, udge, devered the opnon of the court.
Ths s an acton to recover, ta es on the ground that they were pad after
the e praton of the perod of mtatons.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
6

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
157
5611.
The pantff fed Its edera Income ta return for the year 1917 on March
80, 1918. n addtona assessment for sad year was made n December,
1919, and a further addtona assessment on anuary 7, 1921, n the amount of
6,277.77. cam for the abatement of sad ta n the sum ast mentoned
was fed ebruary 24, 1921, whch was re|ected n fu on ugust 20, 1924. Of
ths amount, pantff pad n cash 2,432.83 on une 5, 1925, eavng a baance
owng for sad year n the amount of 3,844.94.
The pantff fed ts ncome tu return for 1918 on une 16, 1919, dscosng
a ta of 30,532.27. Ths ta was pad n nstaments, the ast payment beng
made on December 7, 1919. n addtona ssessment for sad year was made
on anuary 17, 1921, n the amount of 13,299.65. cam for the abatement of
sad addtona ta n the same amount was fed on ebruary 24, 1921, and
re|ected ugust 20, 1924. On March 3, 1924, pantff fed a cam for refund
for 25,000 for the year 1918. Ths cam on ugust 27, 1924, was re|ected n
e amount of 2,469.86 and aowed for 22,530.14. Ths aowance of 22,530.14
upon the cam for refund was apped by the coector as foows: 13,299.65
to the unpad addtona assessment for the year 1918 above referred to
5,385.55 as a credt aganst an addtona ta for the year 1920 and 3,844.94
was credted anuary 7, 1925, nganst the unpad addtona assessment for the
year 1917. It w be observed In connecton wth ths ast credt that t was
made after the statute of mtatons had e pred wth reference to the ta es of
1917, T)ut before the passage of the 1926 Revenue ct, and t s for ths amount
and on account of ts appcaton after the e praton of the perod of mtatons
that pantff brngs ths sut.
We have heretofore hed, n the case of Oak Worsted Mtts v. Unted Sate
(68 C. Cs., 539 Ct. D. 176, C. . I -1, 343 ), upon smar facts, that
where a ta has been assessed n tme, a pea n abatement has been fed,
the coecton of the ta stayed, the pea n abatement determned, and the
amount found to be due coected, there can be no recovery of the amount so
coected, notwthstandng the coecton was made after the perod of mta-
tons for the coecton of the ta had e pred. Ths hodng was based upon
sectons 607 and 611 of the Revenue ct of 1928. See Oak Worsted Ms v.
Unted States, supra Gotham Can Co. v. Unted States (68 C. Cs., 749)
and Mascot O Co. v. Unted States, No. -07, decded une 2, 1930 see Ct. D.
198, on page 2421. It s contended on behaf of pantff that ths case
dffers from those cases n that the amount whch s sought to be recovered
was coected by takng t out of a refund aowed and credtng t upon a
ta for a prevous year as to whch the mtaton for coecton had e pred,
and that the amount so credted can be recovered under the provsons of
secton 609(a) of the Revenue ct of 1928, whch reads as foows:
Sec. 609. rroneous credts. (a) Credt aganst hared defcency. ny
credt aganst a abty n respect of any ta abe year sha be vod f any
payment n respect of such abty woud be consdered an overpayment under
secton 607.
We do not thnk ths contenton s we founded, but consder t cear that
under the e press anguage of secton 609 the credt s treated as a payment
In respect of such abty aganst whch ( aganst the abty ) the credt
s tacen. When the coector apped part of the money whch was due on the
refund to another ta , the reaton of pantff and defendant to the transacton
so far as ths queston s concerned was n aw the same as f the coector
had receved cash from the pantff and by the e press anguage of secton
609 the queston of whether t s to be consdered an overpayment, and hence
recoverabe, s to be determned under secton 607, whch n turn under ts
provsons depends on secton 611. We therefore consder the queston nvoved
n the case at bar the same as that heretofore decded n the cases cted.
It foows that pantffs petton must be dsmssed, and t s so ordered.
Secton 611. I -36-4771
G. C. M. 8375
NU CTS O 1921 ND 1928.
n abatement cam whch was fed wthn the statutory perod
of mtaton upon coecton may be entertaned, even f t was
fed after the e praton of 10 days after notce and demand,
where the ta payer has not had the beneft of the provsons of
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
6

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
5611-1
158
subdvson (d) of secton 250 of the Revenue ct of 1921. c-
cordngy, the abatement cam fed n the nstant case n pr,
1924, stayed the coecton of the ta , so that the case comes wthn
secton 611 of the Revenue ct of 1028.
The opnon of ths offce s asked reatve to the request of the
M Company that ts cam for refund for 1918 be aowed under the
crcumstances herenafter set forth.
On ugust 11, 1919, the ta payer fed ts return of ncome and
frofts ta for 1918, showng a ta abty of 75.40a doars,
n March, 1924, an addtona ta was assessed n the sum of 9.15a
doars. The frst notce and demand for payment of ths add-
tona ta was ssued on March 26, 1924. The ta payer fed a
cam n abatement under date of pr 24, 1924, whch cam was
re|ected on Schedue , dated May , 1926. On uy 21, 1926,
there was credted aganst the addtona assessment for 1918 an
overpayment for 1919 n the sum of .37a doars. There remaned
outstandng a baance n the sum of 8.78a doars, and on uy 26,
1926, demand was made upon the ta payer for the payment of ths
baance, together wth the 5 per cent penaty and nterest at the rate
of 1 per cent a month for faure to pay the addtona ta when
due. Under date of ugust 6,192G, the ta payer pad the prncpa
amount of the baance due and submtted an offer n compromse
n the sum of 1.1a doars n eu of the proposed nterest and
Senaty. Ths compromse offer was re|ected as nsuffcent. Under
ate of ebruary 15, 1927, an addtona sum of .13a doars was
offered n compromse of the penaty and nterest. The ta payer
was notfed under date of May 4, 1927, that ts offer n compromse
had been accepted by the Commssoner, wth the advce and consent
of the Secretary of the Treasury.
Under date of May 31, 1927, a cam for refund was fed by the
ta payer, t beng stated that the addtona ta had been pad
under duress and threat of sezure of property and that the amount
shoud be refunded n accordance wth the decson n the case of
owers v. New York bany Lghterage Co. (273 U. S.. 346 T.
D. 4009, C. . I-1, 268 ). Ths cam for refund was re|ected on
Schedue , dated ebruary , 1928. On ebruary 5, 1929, the
ta payer requested that ts refund cam be reopened, n vew of
the decson of the Supreme Court of the Unted States n the case
of RusseU et a. v. Unted States (278 U. S., 181 T. D. 4260.
C. . III-1, 206 ). The ta payer was advsed under date or
ebruary 11, 1929, that the acton of the ureau n re|ectng the
cam woud be sustaned, t beng stated that the cam n abate-
ment fed by the ta payer n pr, 1924, stayed the coecton of
the ta so that the case came wthn the provsons of secton 611
of the Revenue ct of 1928. The ta payer now refers to the pro-
vsons of secton 250(d) of the Revenue ct of 1921 and contends
that nasmuch as the cam n abatement was not fed wthn 10 days
after notce and demand, the cam s unauthorzed by aw.
The cam n abatement was fed as a resut of a |eopardy assess-
ment, but t was not fed wthn 10 days from the recept of the
frst notce and demand for the ta . Was the cam n abatement
fed under the condtons outned above suffcent to brng the case
wthn the scope of secton 611 of the Revenue ct of 1928
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
6

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
159
611.
So far as matera to the nstant case, secton 250(d) of the
Revenue ct of 1921 provdes as foows:

If upon e amnaton of a return made under the Revenue ct of 1916, the
Revenue ct of 1917, the Revenue ct of 1918, or ths ct, a ta or a defcency
In ta Is dscovered, the ta payer sha be notfed thereof and gven a perod
of not ess than 30 days after such notce Is sent by regstered ma n whch
to fe an appea and show cause or reason why the ta or defcency shoud
not be pad. Opportunty for hearng sha be granted and a fna decson
thereon sha be made as qucky as practcabe. ny ta or defcency In
ta then determned to be due sha be assessed and pad, together wth the
penaty and Interest, f any, appcabe thereto, wthn 10 days after notce and
demand by the coector as herenafter provded, and In such cases no cam
n abatement of the amount so assessed sha be entertaned: Provded, That
In cases where the Commssoner beeves that the coecton of the amount
due w be |eopardzed by such deay he may make the assessment wthout
gvng such notce or awatng the concuson of such hearng.
rtce 1006 of Reguatons 02 reads n part as foows:
Where a ta payer has been gven an opportunty to appea and has not
done so, as above set forth, and an assessment has been 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 entertaned.
Where an assessment has been made wthout gvng the ta payer an oppor-
tunty to appea or wthout awatng a decson on an appea that has been
perfected, a bona fde cam In abatement of the assessment, fed wthn 10
days after notce and demand by the coector, may be entertaned.
It w be noted that t s provded that no cam n abatement
sha be entertaned where the ta payer has been gven an oppor-
tunty to appea and has not done so, or where an appea has been
taken and an assessment made n accordance wth the fna decson
on such appea. Ths anguage s mandatory. It s aso provded
n artces 1012 and 1031 of Reguatons 62 that a cam n abate-
ment sha not be entertaned where the ta payer has had the beneft
of the provsons of secton 250(d) of the Revenue ct of 1921.
Inasmuch as a |eopardy assessment was made n the nstant case,
the ta payer was not gven an opportunty to appea. Not havng
had the beneft of the provsons of secton 250(d) of the Revenue
ct of 1921, the ta payer coud have propery fed a cam n abate-
ment. If an abatement cam had been fed by the ta payer wthn
10 days after notce and demand by the coector, the ta payer woud
not have been caed upon to pay the 5 per cent penaty and nterest
at the rate of 1 per cent a month whch s provded n subdvson
(e) of secton 250. s above ponted out, demand was made upon
the ta payer to pay such penaty and nterest and an offer n com-
promse was submtted n eu thereof, whch offer was fnay
accepted by the Commssoner.
It s provded n artce 1006, quoted above, that where an assess-
ment has been made wthout gvng the ta payer an opportunty to
appea, a bona fde cam n abatement of the assessment, fed wthn
10 days after notce and demand by the coector, may be entertaned.
It s not provded that f such a cam s fed on the eeventh day
after notce and demand, or subsequent thereto, the cam w not
be entertaned. There s no provson n the statute that such a
cam shaU be fed wthn 10 days after notce and demand. ta -
payer who does not fe an abatement cam wthn the 10-day perod
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
6

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
5611
160
s abe to pay the penaty and nterest for denquency n payment
of the ta , but an abatement cam whch s fed wthn the statutory
perod of mtaton upon coecton may be entertaned after the
e praton of 10 days after notce and demand where the ta payer
has not had the beneft of the provsons of subdvson (d) of
secton 250.
Under date of March 24, 1926, the ta payer n ths case was
advsed that ts abatement cam had been carefuy consdered by
the ureau and that t woud be re|ected. When the ta payer sub-
mtted ts offer n compromse of nterest and penaty, the reason
gven for faure to pay the addtona ta for 1918 when due was
that the ta payer had been awatng notfcaton as to the acton
taken upon the cam n abatement of the ta n queston. In vew
of the crcumstances of the case, t s beeved that nether the ta -
payer nor the ureau can be heard to say that the abatement cam
was fed too ate to be consdered. Inasmuch as the nstant abate-
ment cam was fed pror to the e praton of the perod of mta-
ton upon coecton and was duy consdered by the ureau, ths
offce can not accept the ta payer s contenton that the cam was
unauthorzed by aw. There s no bass, therefore, for aowng the
ta payer s cam for refund.
C. M. Chaeest,
Genera Counse, ureau of Interna Revenue.
Secton 611. I -39 786
Ct. D. 231
ncome ta revenue act of 1028 decson of court.
Sut Coecton Lmtaton Cam foe batement Consttu-
tonaty.
Secton 611 of the Revenue ct of 1928 wthdraws the statute
of mtaton upon coecton as a ground for the recovery back of a
ta pad under the condtons theren stated. Coecton of a ta
has been stayed wthn the meanng of that secton where actua
deay has resuted from the fng of a cam for abatement, and
the presumpton s that the deay n coecton s caused by the
cam. s so construed the secton s consttutona.
Unted States Crcut Court of ppeas fob the Second Crcut.
Dane Reeves, Inc., appeant, v. Chares W. nderson, Indvduay and as
Coector of Interna Revenue for the Thrd Dstrct of New York, appeee.
uy 24, 1930.
OPINION.
I|. and, Crcut udge: The ta payer fed ts return for 1919 on March 11,
1920, and durng the year pad the ta es dscosed. The Commssoner assessed
a defcency n March, 1924: the coector made demand for t on pr 5, 1924
the ta payer fed a cam for abatement on the 16th of that month. There
matters rested wthout change unt September 28, 19255, when the cam was
re|ected, and on November 14, 1925, the ta payer pad the defcency, wth
Interest, under throat by the coector. fter proper premnary steps ths
sut was brought aganst the coector n November, 1927. The queston Is
whether the deay n coectng the ta from March 11, 1920, the date of the
return, to November 14, 1925. made the coector s act a tort on whch a cause
of acton arose for money had and receved.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
6

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
161
5611.
In spte of the e traordnary dfferences In udca opnon whch the stua-
ton has evoked dfferences whch ony the Supreme Court can eventuay
sette the underyng facts are not compcated. Secton 250(d) of the Revenue
ct of 1918 set a mtaton of fve years after return upon the Commssoner s
power to determne and assess the amount of the ta . The same secton
In the ct of 1021 reduced the perod to four years, but kept t at fve as to
assessments under the ct of 1918. Unt 1924 the Treasury had no onger
perod wthn whch to coect ta es through the courts than to assess them,
bo that f the Commssoner assessed the ta on the ast day of the proper
perod, he coud begn no sut or proceedng n court to coect t. e had
not In practce pad much attenton to ths feature of the aw because he sup-
posed unt ebruary, 1927, that he had power for an ndefnte tme after
assessment to dstran, and ths was ordnary remedy enough. The decson
of the Supreme Court n Dowers v. N. Y. d bany Lykterage Co. (273 U. S.,
346 T. D. 4009, C. . I-1, 26S ), whch hed that dstress was barred aong
wth suts and proceedngs, dsapponted ths assurance and there was there-
after no way to coect, once the tme to assess had e pred. Sectons 607 and
611 of the ct of 1928 were passed after ths decson the frst made the
assessment or payment of any ta after the erod of mtaton had e pred
an overpayment and gave the ta payer a credt or refund for It, thus
eavng matters as they bad been, e cept to repea secton 110t(a) of the ct
of 1926. The second secton e cepted from the operaton of the frst a ta es
assessed before the ct of 1924 went nto effect, upon condton that the ta payer
had fed a cam for abatement whch had stayed coecton.
The dstncton was a far one. Secton 278(d) of the ct of 1924 had gven
the Treasury s years after assessment to coect, and whe t took unt an-
uary, 1929, fnay to sette t that ths apped ony to assessments made after
une 2, 1924, the effectve date of the ct of 1924 (Russe v. 17. 8., 278 U. S.,
181 T. D. 4260, C. . III-1, 206 ), that had apparenty been aready dvned
as a possbty. So t foowed that whe the Treasury had s years after
assessment to coect ta es assessed after une 2, 1924, t had ony four or fve
years from the return as to a assessed theretofore. though the Comms-
soner had msconceved the aw as to these, Congress made no effort to recam
them by remposton the deay remaned a fna bar. Ony In case the ta -
payer had postvey caused the Treasury s nacton by demandng a rehearng,
was hs advantage taken from hm. Congress refused to convert ndugence
Into mmunty certany nothng coud be more reasonabe. We have ony to
determne whether the pan conceved n ths sprt has mscarred.
Specfcay the arguments by whch ths e empton Is sought to be secured
are, frst, that coecton was not stayed by the cam for abatement. If by
ths s meant that the cam rased no ega bar to coecton, the argument s
unanswerabe t dd not. So far as we can dscover, no statute before 1924
gave such an effect to a cam for abatement e cept secton 234(a) 14 of the
ct of 1918. Ths had to be fed wth the return and not n response to an
assessment, and was mted to nventory osses and rebates. Secton 611 cer-
tany dd not refer to these. Secton 279 of the ct of 1924 dd ndeed provde
for a compusory stay of coecton, but ony n the case of |eopardy assessments
eved under secton 274(d) of that ct. sde from the mted scope of ths
secton, t dd not reach the ony assessments touched by secton 611, those
eved before une 2, 1924. Thus, f we construe stayed to mean a ega bar,
we shoud gve the secton no scope whatever. Patenty t must refer to those
cases n whch the coector dd not proceed wth enforcement whe the Com-
mssoner was engaged n passng upon the cam for abatement such a stay
has n practce been recognzed as ancary to the Commssoner s power to
remt. (Tte 26, sec. 149, U. S. Code.) ad he nssted upon coecton before
dsposng of the cam, the ta payer woud wth some |ustce have been voca
n protest. It s ungenerous now to compan that he dd not do so.
Ne t the pantff says that f stayed means a vountary stay, the record
must show that the cam was the cause of t, and does not The assessment
was coectbe as soon as made no effort was n fact made to coect It t the
cam was dsposed of the sequence of the two suggests a casua reaton be-
tween them. Moreover, to suppose that the coector meanwhe wthhed acton
for any other reason than because hs coecton mght turn out to be unwar-
ranted, Is to assume that he was sack n hs duty. We are entted to assume
the opposte. rtce 1032 of Reguatons 45 puts coecton n hs dscreton
In such crcumstances hs nacton woud have been wthout e cuse e cept
for the cam. Regardess of the eventua burden of proof on the ssue, the
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
6

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
162
presumpton Is that the deay was caused by the cam and there waa no
proof to meet t.
The ne t pont demands more attenton. The argument runs as foows |
Secton 607 provdes that a ta assessed or pad after the perod had e pred
shoud be credted or refunded. Secton 611 s merey an e cepton from th
provson It does not gve any rght to the Treasury to hod money whch It
had no rght to hod before. Secton 607 was passed to be rd of the effect o
secton 1106(a) of the ct of 1926, whch had provded that athough the e pra-
ton of the perod of mtaton of a ta e tngushed the debt, the Commssoner
shoud not credt or refund It uness It was not In fact due when the ta payer
pad t Ths secton we hed not to prevent on acton for money had ( Uau
Co. v. owers, 25 ed. (2d), 637) t foows that at that tme the ta payer
coud have got a refund by acton, though he coud not from the Comms-
soner. that secton 607 has done Is to restore the admnstratve remedy
whch secton 1106(a) took away, eavng the ta payer n possesson of a
remedes, e cept aganst the Commssoner (611), n cases where he had In-
duced the deay. Snce, however, the remedy of an acton at aw e sted a
aong, and snce t dd not therefore need any assstance from secton 607,
secton 611 Is rreevant. It was not ntended as an affrmatve mtaton upon
pree stng remedes.
Ths argument s not dependent aone upon the word refund n secton
607 t has a broader hstorca bass, and It must be confessed that t Is
pausbe. We thnk It Impossbe, however, so to read secton 611, for severa
reasons. Secton S226 of the Revsed Statutes as amended In 1026 (sec. 1113)
requres the fng of a cam for refund or credt as a condton precedent to
sut aganst the coector. It certany woud be an unusua thng to requre
as a condton precedent an appcaton whch by hypothess coud not be
granted. ut even f we assume that Congress mght have wshed st to
Impose the abortve cam for abatement as a condton on the acton, the
consequences are absurd. Nobody has a cam for refund who has not a pos-
sbe rght of acton. The tme for presentng the cam Is three or four years
(Tte 26, sec. 1065), and the tme wthn whch to sue s fve ( . S., 3226), so
that the tme to fe the cam e pres frst. The effect of secton 611, whch
forbad such cams, woud ony be that ta payers shoud not get that cash from
the Commssoner whch they st coud get by way of |udgment It Is dffcut
to con|ure any reason whch Congress coud have had for forbddng the more
commodous way of settng such controverses and st e posng the Treasury
to actons at aw whch must resut n e acty the same thng. It woud take
the strongest possbe anguage to force us to such a concuson.
The anguage of secton 607 does not go far enough. It makes the ta es
descrbed an overpayment that aone was enough to create a cause of
acton at aw, though t was not necessary, as thngs stood. The econd cause
In the sentence changed the stuaton formery created by secton 1106(a)
of the ct of 1926, the effect of whch had been to drve the ta payer to sut.
Secton 611 enacted that the e cepted assessments and payments shoud not
be consdered as an overpayment, and In so dong postvey struck the founda-
ton from under any recovery by acton, by credt, or by refund It was more
than an e cepton to the second cause of secton 607 t deat wth the merts
of the recovery as we as wth the remedes avaabe.
Ths dsposes of the ony questons that seem to us Important, for we can not
so regard the argument aganst the vadty of the statute, though t s very
earnesty presented. Ta payers In the pantff s poston do ndeed ose an
Immunty once acqured they ose It we w assume arguendo by the mere
fat of the statute Congress has seen ft n effect to Impose the ta upon them
de novo at a tme ong after the events took pace on whch t depends. Ths
s charged to be In voaton of the ffth amendment, and so t mght be, If
there had been no orgna ta , no cam for abatement, no deay of the
Treasury In the dsposa of that cam, and a consequent oss of a remedes.
Were the ffth amendment a remorseess pattern whch a egsaton must ft,
the argument mght even so be troubesome mght Indeed be concusve. ut
consttutona mtatons are not ndfferent to the occasons of the statutes
they affect. They represent a mood rather than a command, that sense of
moderaton, of far pay, of mutua forbearance, wthout whch States become
the prey of facton. They are not the rues of a game ther meanng s ost
when they are treated as though they were. It s qute true that the secton
took away a defense from the pantff he s rght to compan uness we can
queston the knd of defense t was. The moment we do, It must appear to
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
6

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
163
613.
any far person that he ought not to have It. What the Treasury ost through
Its procrastnaton, It ost forever, even though It was under an honest mstake
as to ts remedes. If the ta payer dd nothng to provoke or encourage ts
deay, perhaps t was far that hs abtes once dead shoud not be revved
there s a deep Instnct behnd any statute of mtatons. ut f he asked
for reconsderaton because e had been unawfuy treated, and f hs compant
was entertaned, then by vrtue of an equay deep Instnct, t s unfar to
aow hm to treat that conduct as a faut whch he was the means of procurng.
e ought not, n short, to be abe to avod hs share of the pubc burdens
because the authortes consented to gve hm a consderate hearng. It does
not hep to ca the bar of the statute a vested rght that s at best a fgure
of speech, whch does not haow everythng that s past, a defaut n peadng
as we as a homestead. One s grp on an antagonst, enmeshed n a net of
statutes, may be a vested rght, but t s not a consttutona rght. The
Supreme Court went much further n Unted States v. cnsze (206 U. S., 370)
and Raferty v. Smth (247 U. S., 226).
Nor does t make any dfference that the Senate struck out the ouse pro-
vson for the future coecton of such assessments wthn a year. The argu-
ment s that the ta Is not unform under secton 8 of rtce I of the Const-
tuton, and aso apparenty that It s dscrmnatory. s to the second, we can
see no reason why Congress shoud not draw the ne between what had been
cosed and what had not If the Treasury had for four years or more faed to
coect, that mght be thought tme enough, even though the ta payer had been
the cause of the deay there comes a tme to end a thngs. The whoe noton
of a mtaton nvoves some dscrmnaton, whch n actua ncdence must ap-
pear, and Indeed be, arbtrary. s for secton 8 of rtce I, t has repeatedy
been hed to requre ony terrtora unformty. (The ead Money Cases, 112
U. S., 580, 595 La ee Iron Work v. . S., 256 U. S., 377, 392 T. D. 3181,
C. . 4, 373 .)
We have qute deberatey avoded the ctaton of those decsons whch have
htherto deat wth these questons. Those n the dstrct court are so many
and so confctng that t woud serve no purpose merey to enumerate them. In
the Crcut Courts of ppea at present the pantff woud wn n the fth
( . S. v. urden, Smth Co., 33 ed. (2d), 229) and ose n the Nnth ( untey
v. Oe f enks, 32 ed. (2d), 857 Ct. D. 110, C. . III-2, 158 Ooodce v.
Graham d oster, 35 ed. (2d), 586 Ct. D. 132, C. . III-2, 160 ). pparenty
he woud aso ose n the Court of Cams, though we have not been favored
wth the ctaton n an avaabe form. (Gotham Can Co. v. . S.) So far as
the courts have gone, there s therefore a preponderance of authorty n favor
of the decson beow.
udgment affrmed.
S CTION 613. LI N OR T S.
Secton 613. I -37-4774
I. T. 2544
R NU CT O 1928.
The act of March 26, 1930, enacted by the Genera ssemby of
entucky, effectve as of that date, s accepted by the ureau of
Interna Revenue as comng wthn the purvew of subsecton
(b) (1) of secton 3186, Revsed Statutes, as amended, as further
amended by secton 613 of the Revenue ct of 1928, reatve to the
fng of notces of edera ta ens wth certan desgnated county
or other offcas.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
6

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
201, rt. 1545. 164
INCOM T RULINGS. P RT IL
R NU CT O 1926.
TITL II. INCOM T .
P RT I. G N R L PRO ISIONS.
S CTION 201. DISTRI UTIONS Y
CORPOR TIONS.
rtce 1545: Dstrbutons n qudaton. I -48- 847
G. C. M. 8623
R NU CT O 1026.
In 1919 owned 49,996 shares of the outstandng 50,000 shares
of the capta stock of the N Company. In 1922 the O Corpora-
ton, the ta payer, was organzed and acqured, from , 30,000
shares of the N Company stock and sundry other hodngs n e -
change for substantay a of ts capta stock. ded and the
contro of the ta payer passed to hs hers. In 192(5 the N Com-
pany sod substantay a of ts capta assets to the P Company
for 14a doars. Later In 1926 t sod to the ta payer ts resdua
assets and decared two dvdends payabe n 1926, yedng the
ta payer 5 doars and doars. In November, 1926, the ta -
payer purchased the remanng shares of the N Company, voted to
dssove that corporaton, and receved O doars In qudaton for
ts shares.
The two dvdends frst pad n 1926 were not receved as dv-
dends wthn the meanng of secton 201(a) of the Revenue ct of
1926, but were receved n qudaton wthn the meanng of secton
201(c) of that ct.
n opnon s requested whether dvdends decared by the N Com-
pany and receved by the O Corporaton, the ta payer n the nstant
case, n the amounts of 5,7 doars and a doars consttute ordnary
dvdends and are, therefore, nonta abe, or whether the dvdends
consttute a dstrbuton n qudaton.
In 1919 owned 49,996 shares of the 50,000 outstandng shares of
the N Company. In 1922 the O Corporaton, the ta payer heren,
was organzed. Substantay a of ts capta stock was ssued to
n e change for 30,000 shares of the N Company and varous
other propertes of . owned and controed the 0 Corporaton
unt he ded and the contro passed to hs hers.
On ugust 10, 1926, the drectors of the N Company authorzed
the sae of substantay a ts capta assets, ncudng the good w
and frm name, to the P Company. On November 1, 1926, a b of
sae for such assets, n the sum of 14. : doars, was e ecuted. Wth
these assets, the P Company began busness on the same day.
The drectors of the N Company authorzed that ts assets, other
than those aready sod, be sod to the ta payer n the nstant case.
The N Company then decared a dvdend payabe n November,
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
6

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
165
201, rt. 1545.
1926. The ta payer receved 5a doars on account of ths dstrbu-
ton. Later the N Company decared another dvdend of a profts
on hand payabe to the stockhoders n November, 1926, and the ta -
payer receved on account of ths dstrbuton doars. The ta -
payer then purchased the remanng shares of the N Company s
capta stock, voted to dssove the N Company, and receved 10a
doars n qudaton for ts shares of the N Company s capta
stock.
The ta payer n ts ncome ta return consdered the frst two
dstrbutons receved from the N Company n 1926 as a dstrbu-
ton of dvdends receved n the ordnary course of busness and,
therefore, nonta abe.
Secton 201(a) of the Revenue ct of 1926 reads n part as foows:
The term dvdend when used n ths tte means any dstrbu-
ton made by a corporaton to ts sharehoders, whether n money or n other
property, out of ts earnngs or profts accumuated after ebruary 28, 1913.
Secton 201(c) of the same ct reads n part as foows:
mounts dstrbuted n compete qudaton of a corporaton sha be treated
as In fu payment n e change for the stock, and amounts dstrbuted n parta
qudaton of a corporaton sha be treated as n part or fu payment n
e change for the stock.
In the case of emch, Coector, v. eman (276 U. S., 233, T. D.
4217, C. . II-2, 238) the court had for decson the queston
of whether the amount pad to the stockhoders out of earnngs and
profts accumuated after ebruary 28, 1913, was to be treated as a
dvdend under secton 201(a) of the Revenue ct of 1918, or as
payment made n e change for stock wthn the meanng of secton
201(c) of the same ct. Mr. ustce Sanford, speakng for the
court, sad:
It s true that f secton 201(a) stood aone ts broad defnton of the term
dvdend woud apparenty Incude dstrbutons made to stockhoders n the
qudaton of a corporaton athough ths term, as generny understood and
used, refers to the recurrent return upon stock pad to stockhoders by a gong
corporaton n the ordnary course of busness, whch does not reduce ther
stock hodngs and eaves them n a poston to en|oy future returns upon the
same stock. (See Lynch v. ornby, 247 . S., 339, 344-346, and Langataff v.
Luca (D. C), 9 ed. (2d), 691, 694.)
owever, when secton 201(a) and secton 201(c) are read together, under
the ong-estabshed rue that the ntenton of the awmaker s to be deduced
from a vew of every matera part of the statute ( ohsaat v. Murphy, 96
U. S., 153, 159), we thnk It cear that the genera defnton of a dvdend
In secton 201(a) was not Intended to appy to dstrbutons made to stock-
hoders n the qudaton of a corporaton, but that t was ntended that
such dstrbutons shoud be governed by secton 201(c), whch, deang spe-
cfcay wth such qudaton, provded that the amounts dstrbuted shoud
be treated as payments n e change for stock and that any gan reazed
thereby shoud be ta ed to the stockhoders as other gans or profts. Ths
brngs the two sectons Into entre harmony and gves to each ts natura
meanng and due effect. The Treasury reguatons correcty Interpreted the
ct as makng secton 201(a) appcabe to a dstrbuton made by a gong
corporaton to ts stockhoders n the ordnary course of busness, and secton
201(c) appcabe to a dstrbuton made to stockhoders n qudaton of the
corporaton. nd ths s n accord wth the rungs of the oard of Ta
ppeas. ( ppea of Greenwood, 1 . T. ., 291, 295 ppea of Chander,
8 . T. ., 146, 149.)
The nstant case s governed by secton 201 of the Revenue ct
of 1926. That secton s not dentca wth secton 201 of the
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
6

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
5201, rt. 1545.
166
Revenue ct of 1918. owever, that partcuar porton of secton
201 of the Revenue ct of 1918 dscussed by the court n the e-
mch case s emboded n secton 201 of the Revenue ct of 1926.
The ta payer n the nstant case nssts that the moneys reazed
by vrtue of the frst two dvdends decared by the N Company n
November, 1926, are dvdends wthn the meanng of secton 201(a),
eupra. In that porton of the emch case, herenbefore quoted,
t s ponted out that secton 201(a) s appcabe to a dstrbuton
made n the ordnary course of busness by a gong concern.
In aantne Prvate Corporatons, Chapter , page 775, s
ths statement:
ut a company s for a practca purposes dead when t goes out of bus-
ness, as where It ses a of ts assets ncudng ts good w.
In the nstant case, pror to the two dstrbutons made n 1926,
the N Company had sod ts good w, frm name, and ceased to do
busness n the ordnary way. corporaton that has sod ts good
w, frm name, and has ceased to do busness s a dead and not a
gong concern. In the case of Whte, Potter dk Page Manufacturng
Co. and Others v. enry . Pettea Importng Co. and Others,
reported n 30 ed., 864, the court sad:
So ong as a corporaton remans a gong concern that s to
say, contnues to transact ts ordnary busness .
The ordnary busness of the N Company coud not be transacted
after ts frm name, good w, and the ma|or porton of ts assets had
been sod. In Words Phrases, second seres, voume 2, page 746, s
found ths defnton of a gong busness or concern:
Gong busness s a term apped to a corporaton whch s st prose-
cutng ts busness wth the prospect and e pectaton of contnung to do so,
. It means that t contnues to transact ts ordnary busness.
The N Company was not pursung ts usua and ordnary busness
when the dstrbutons n queston were made. In omes edera
Ta es, 1923 edton, page 1368, s found ths statement:
corporaton that has substantay retred from busness s one that
has changed ts status, as for nstance, by dvestng tsef of a contro over
and management of the property formery empoyed by t n the dong of
busness, and has reduced ts actvtes accordngy.
If a corporaton has substantay retred from busness, t s not a
gong concern conductng ts busness n the ordnary and usua way.
On November 1, 1926, the P Company began busness as successor
to the N Company. It appears to ths offce that the dstrbutons
made after November 1, 1926, by the N Company were not dstrbu-
tons made by a gong concern n the ordnary course of busness.
Ths beng true, the frst two dstrbutons made were not dstrbu-
tons wthn the meanng of secton 201(a) of the Revenue ct of
1926.
Secton 201(c) does not specfcay prescrbe |ust what consttutes
a dstrbuton n qudaton. It must, therefore, be decded whether
the dstrbuton n queston, n the nstant case, s a dstrbuton n
qudaton wthn the meanng of the secton of the statute heren-
before quoted. In Genera Counse s Memorandum 5180 (C. .
II-2, 110) the headnote reads n part as foows:
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
6

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
167
201, rt. 1545.
Whore dvdends were decared by a corporaton pror to any acton taken
tmcard parta or compete dssouton, amounts thereafter pad to satsfy the
dvdend obgaton created by the decaraton can not be consdered as pad n
canceaton or redempton of the stock . Itacs supped.
Does the nstant case come wthn the purvew of ths rung or
had the N Company pror to decarng the frst dstrbuton taken
affrmatve acton toward compete qudaton resouton by
stockhoders authorzng the drectors to qudate a corporaton does
not necessary mean that thereafter the corporaton s n the process
of qudaton. Conversey, the fact that the stockhoders have not
passed a resouton authorzng the drectors to proceed to qudate
or dssove the corporaton does not of necessty mean that the cor-
poraton s not n the process of qudaton. In Genera Counse s
Memorandum 6590 (C. . III-2, 169) the queston nvoved was
whether certan dvdends receved by the ta payer were ta abe as
ordnary dvdends or shoud be consdered as dvdends n quda-
ton. In hodng that the amount receved was receved n quda-
ton t was sad:
It s enough f t can be sad that the corporaton s honesty engaged
In reducng Its assets to cash and s not engagng n any new busness.
In the case of W. . Gud et a. v. Commssoner of Interna
Revenue (19 . T. ., 1186) the oard sad:
We can not presume qudaton to be In process merey because a resouton
of the stockhoders authorzed the drectors to take such acton. Lqudaton
s not a technca status whch can be assumed or dscarded at w by a co-
poraton by the adopton of a resouton by ts stockhoders, but an e stng
condton brought about by affrmatve acton, the norma and necessary resut
of whch s the wndng up of the corporate busness.
In the case of Rohr v. Stanton Trust Savngs ank of Great
as (245 Pac, 947, 948) the court defned the word qudaton
as The act or operaton of wndng up the affars of a frm or com-
pany by gettng n the assets, settng wth ts debtors and credtors,
and appropratng the amount of profts or oss. Ths defnton
was approved n the case of GUma v. arker (254 Pac, 174, 177).
Subsequent to ugust 10,1926, every act of the N Company was con-
sstent wth a program of qudaton. The capta assets had been
sod and after November 1,1926, a new corporaton, the P Company,
was operatng as successor to the N Company. Ten days after the
P Company started to do busness the N Company began to dstrbute
ts capta and earnngs. These facts support the concuson that the
dvdends decared were but steps n a pan of compete qudaton.
Therefore, the 5a doars and doars receved by the ta payer by
vrtue of the two dvdends decared by the N Company n November.
1926, consttute a dstrbuton n qudaton wthn the meanng o
secton 201(c).
It s the opnon of ths offce that the frst two payments receved
n November, 1926, were not receved as dvdends wthn the mean-
ng of secton 201(a) of the Revenue ct of 1926, but were receved
n qudaton wthn the meanng of secton 201(c) of the same ct.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
6

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
202, rt. 1561.
168
S CTION 202. D T RMIN TION O MOUNT
O G IN OR LOSS.
rtce 1561: Determnaton of the amount of I -45-4826
gan or oss. G. C. M. 8573
R NU CTS O 1924 ND 192 6.
In 1924 the ta payer retred equpment acqured pror to 1007
and set up on ts books under the account oss on retred road
and equpment an amount whch was camed as a deducton
from gross Income n the 1924 return. In 1925 t retred add-
tona equpment acqured pror to 1907 and set up n the account
oss on retred road and equpment an amount whch was
camed as a deducton n determnng the ncome ta abty for
1925.
In ad|ustng the bass of property sod or otherwse dsposed
of In 1924 ad|ustment shoud be made for such e hauston, wear
and tear as has been aowed by the Commssoner n respect of
such property as a deducton n returns fed for a pror years
commencng wth the year 1909. In determnng the oss sus-
taned on the retrement or other dsposton of property n the
ta abe year 1925, deprecaton must be deducted from the cost
bass back to the tme of the acquston of the property. Whether
or not amounts accounted for as deprecaton sustaned for any
pror year under the accountng rues of the Interstate Commerce
Commsson consttute deprecaton actuay sustaned for the pur-
pose of determnng the ncome ta abty s a queston of fact
whch s to be determned under the crcumstances of each case.
n opnon s requested as to the e tent to whch deprecaton for
pror years must be taken nto account n ad|ustng the cost bass for
the purpose of determnng the oss sustaned on the sae or other
dsposton durng the ta abe year 1924 of property acqured pror
to March 1, 1913. The queston arses n the case of the M Raway
Co.
In 1924 the ta payer retred certan equpment acqured pror to
1907 and set up on ts books under the account oss on retred road
and equpment the amount of doars, whch was camed as a
deducton from gross ncome n the 1924 return.
Pror to uy 1, 1907, t was optona wth raroad companes
under the accountng rues of the Interstate Commerce Commsson
to charge off deprecaton on equpment, but snce that date the
commsson has made t mandatory for raroads to charge off such
deprecaton. Under the rues of the commsson the computaton
of oss sustaned on the retrement of equpment s based on the
servce fe of each unt retred. or e ampe, f a ta payer has
accrued deprecaton snce uy 1, 1907, on a certan unt of property
on the bass of an estmated fe of 40 years, and t becomes necessary
to retre that unt after 30 years of use, so that the servce fe s
shorter than the estmated fe by 10 years, under the requrements
of the Interstate Commerce Commsson the ta payer must compute
the oss on the bass of the servce fe and prorate such oss accord-
ng to the number of months pror and subsequent to uy 1, 1907.
n ustraton as to how the oss s computed may be set forth as
foows:
Unt acqured May 1, 1893.
Unt retred uy 1, 1924.
Tota months n servce, 374.
Months n servce pror to uy 1, 1907, 170.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
6

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
169 202, rt. 1561.
Cost 610.45
Savage 98.92
Gross oss 511. 53
In the foregong computaton the amount representng depreca-
ton pror to uy 1, 1907, n the accountng cassfcaton s 232.51,
derved from the formua 170/374 511.53. Deductng the depre-
caton pror to uy 1, 1907, from the gross oss eaves a baance
of 279.02. The amount of deprecaton accrued pror to uy 1,
1907, . e., 232.51. s charged to the proft and oss account No.
619 oss on retred road and equpment under the Interstate
Commerce Commsson cassfcaton of accounts.
It appears that the Income Ta Unt has consstenty hed that
any amount charged to the above-stated account represents depreca-
ton accrued pror to uy 1, 1907, and as such s not an aowabe
deducton n any ta abe year, ncudng the ta abe year 1924.
It has been contended by the ta payer that the bass for the deter-
mnaton of gan or oss on the sae or other dsposton of property
under the Revenue ct of 1924 shoud not be reduced on account
of deprecaton pror to March 1, 1913. It s aso contended that
the deprecaton pror to uy 1, 1907, s an arbtrary charge set
up on ts books n accordance wth the requrements of the Inter-
state Commerce Commsson and s not based upon any facts as to
the actua physca condton of the equpment as of uy 1, 1907,
and that the acton of the ta payers settng up such charges shoud
not be consdered as an admsson that deprecaton as such was
actuay sustaned.
The pertnent provsons of the Revenue ct of 1924 are as
foows:
Sbo. 202. (a) cept as herenafter provded In ths secton, the gan from
the sae or other dsposton of property sha be the e cess of the amount
reazed therefrom over the bass provded n subdvson (a) or (b) of sec-
ton 204, and the oss sha be the e cess of such bass over the amount
reazed.
(b) In computng the amount of gan or oss under subdvson (a) proper
ad|ustment sha be made for (1) any e pendture propery chargeabe to
capta account, and (2) any tem of oss, e hauston, wear and tear, obso-
escence, amortzaton, or depeton, prevousy aowed wth respect to such
property. Itacs supped.
Sec. 204.

(b) The bass for determnng the gan or oss from the sae or other ds-
poston of property acqured before March 1, 1913, sha be ( ) the cost of
such property or ( ) the far market vaue of such property as
of March 1, 1913, whchever Is greater.
In Soctor s Memorandum 4249 (C. . I -2, 15) t was rued
that deprecaton prevousy aowed wth respect to property
wthn the meanng of secton 202(b) of the 1924 ct contempates
that an ad|ustment of the bass s to be made
ony for deductons whch have n pror years been actuay granted
by the Commssoner n computng the net ncome of the ta payer. The de-
ducton for deprecaton must, accordngy, not ony have been aowabe, but
the Commssoner must have actuay granted the deducton n determnng
net ncome for pror years. deducton s not aowed unt t s passed
upon and approved by the Commssoner. Deprecaton, however, may be
prevousy aowed, athough t has not been taken n a return, as ts aow-
ance, for e ampe, In a cam for refund.
85942 31 12
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
6

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
202, rt. 1561.
170
Ths rung was carefuy consdered at the tme t was ssued
and ths offce sees no reason for any change theren.
In stuatons of the type heren outned the edera revenue aws
pror to the |rear 1909 contaned no provsons under whch the
Commssoner was requred to consder deprecaton deductons.
ccordngy, deprecaton deductons have actuaty been aowed
by the Commssoner ony n connecton wth ncome returns begn-
nng wth the year 1909, the effectve date of the Corporaton cse
Ta ct of 1909. Deprecaton deductons actuay aowed by the
Commssoner n ncome returns snce 1909, or n the makng of re-
funds for any years pror to 1924, consttute deprecaton pre-
vousy aowed by the Commssoner wthn the meanng of the
Revenue ct of 1924 as that ct s nterpreted by Soctors Mem-
orandum 4249, supra. In ths connecton, t s noted that Congress,
n at east two nstances n the Revenue ct of 1924, referred to the
1909 ct as mposng an ncome ta . See sectons 277(a)2 and
281(a).
Secton 202(b) of the 1924 ct provdes smpy that ad|ustment
of the bass sha be made for deprecaton prevousy aowed
wth respect to such property. Ths anguage s unambguous,
and f deductons prevousy aowed means, as hed n Soc-
tor s Memorandum 4249, supra, deprecaton deductons actuay
granted by the Commssoner n computng net ncome of the ta -
payer, t s pan that deductons aowed by the Commssoner un-
der the 1909 ct consttute deprecaton prevousy aowed wth
respect to such property wthn the meanng of the anguage used
n the 1924 ct. The opnon of ths offce s that n ad|ustng the
bass of property sod or otherwse dsposed of n 1924, ad|ust-
ment shoud be made for such e hauston, wear and tear as has been
aowed by the Commssoner n respect of such property as a de-
ducton n returns fed for a pror years commencng wth the
year 1909, and that ths ad|ustment shoud be made even though
the ncome woud be nonta abe wthout the deducton referred to.
It appears aso that the ta payer n 1925 retred addtona equp-
ment acqured pror to 1907 for whch t set up on ts books under
the account oss on retred road and equpment the amount of
y doars, whch s now camed as a deducton n determnng ts
ncome ta abty for 1925. Ths fgure s made up prmary of
that porton of cost whch has been aocated to deprecaton pror
to 1907 n the ad|ustment of the ta payer s accounts under the rues
of the Interstate Commerce Commsson. The Revenue ct of 1926,
secton 202(b), whch appes to the ta abe year 1925, pany pro-
vdes that ad|ustment of the bass sha be made not ony for
deprecaton aowabe n respect of such property under ths ct
and pror ncome ta aws (as dstngushed from deductons pre-
vousy aowed by the Commssoner) but aso In addton, f the
property was acqured before March 1, 1913, the bass (f other than
the far market vaue as of March 1, 1913) sha be dmnshed
n the amount of e hauston, wear and tear actuay sus-
taned before such date. Itacs supped. ccordngy, n deter-
mnng the oss sustaned on the retrement or other dsposton of
property n the ta abe year 1925, deprecaton must be deducted
from the cost bass back to the tme of the acquston of the property.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
6

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
171
204, rt. 1594.
Whether or not amounts accounted for as deprecaton sustaned
for any pror year under the accountng rues of the Interstate Com-
merce Commsson consttute deprecaton actuay sustaned for
the purpose of determnng ncome ta abty s a queston of
fact whch s to be determned under the crcumstances o each case.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
S CTION 203. R COGNITION O G IN OR LOSS
ROM S L S ND C NG S.
rtce 1575: changes n reorganzatons for stock or
securtes and other property or money.
R NU CT O 1926.
Stock e changed for cash and bonds of another corporaton, a
party to a reorganzaton. (See Ct. D. 254, beow.)
S CTION 204. SIS OR D T RMINING G IN OR
LOSS, D PL TION, ND D PR CI TION.
rtce 1594: Property acqured by gft or trans- I -49-4854
fer n trust on or before December 31,1920, or by Ct. D. 254
bequest, devse, or nhertance.
( so Secton 203, rtce 1575.)
INCOM T R NU CT O 1926 D CISION O COURT.
1. oard of Ta ppeas ndng of act auaton of Prop-
erty cqured by equest.
The fndng of the oard of Ta ppeas of the apprased vaue
for the purpose of the edera estate ta of property acqured by
bequest Is a fndng of Its far market vaue at the tme of acqus-
ton by the ta payer, whch Is the bass provded by secton
204(a)5 of the Revenue ct of 1026 n determnng gan or oss
from the sae of property acqured by bequest after ebruary 28,
1913.
2. oard of Ta ppeas ndng of act Concusveness of
ndng.
There beng evdence to support a fndng of fact by the oard of
Ta ppeas, such fndng w not be dsturbed on appea to the
Crcut Court of ppeas.
3. Gan or Loss Sae Reorganzaton Recognton of Gan
Computaton Cash and onds Receved for Stock.
Where a ta payer e changes stock of a corporaton for cash and
bonds of another corporaton, a party to a reorganzaton, the
amount reazed from the dsposton of the stock, as provded by
secton 202(c) of the Revenue ct of 1926, s the sum of money
receved pus the far market vaue of the bonds receved, but the
recognzed ta abe gan, computed under secton 203(d) 1 of the
Revenue ct of 1926, s mted to the cash receved.
4. Decson ffrmed.
The decson of the oard of Ta ppeas (15 . T. ., 227)
affrmed.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
6

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
204, rt. 1594.
172
Unted States Cbcut Coubt of ppha-s, ghth Cbotttp.
Davd Wams, appeant, v. Commssoner of Interna Revenue, appeee.
On petton to revew decson of the Unted States oard of Ta ppeas.
efore enton, ooth, und Gabdneb, Crcut udges.
October 10, 1930.
opnon.
ooth, Crcut udge, devered the opnon of the court.
Ths s a petton to revew an order of the oard of Ta ppeas whch
redetermned the defcency of the pettoner s ncome ta for the year 1925.
The facts eadng up to the order are substantay as foows: Pettoner s
a resdent of Duuth, Mnn. November 4, 1918, hs wfe ded testate, eavng
an estate whch ncuded among ts assets 827 shares of the capta stock of
the Red Cff Land Lumber Co., Ltd. (heren caed the ed Cff company),
of whch the pettoner receved as hs share 275 shares. The ed Cff
company pror to pr, 1918, was the owner of arge tmber tracts n Canada.
t that tme t sod ts hodngs to the bern-Pacfc Lumber Co., Ltd. (heren
caed the bern-Pacfc company), n e change for 24,000 shares of the
atter s capta stock and these shares consttuted the assets of the Red
Cff company on November 4, 1918. The bern-Pactc company acqured
and owned a oggng pant, for whch t ssued 6,000 shares of ts capta
stock. These and hodngs and ths oggng camp consttuted the assets of
the bern-Pacfc company. t the tme of the death of Mrs. Wams the
capta stock of the Red Cff company had no market vaue but the Probate
Court of St. Lous County, Mnn., n the admnstraton of the estate found
that the stock of the Red Cff company was worth 194.64 a share. Ths
fndng was based upon an apprasa made by two apprasers apponted by
sad probate court, and the apprasa was based n part, at east, upon reports
whch had been made by crusers and engneers of the company.
Ths vauaton of the stock of the Red Cff company was adopted by the
e ecutors of the w of Mrs. Wams n makng ther return of the vaue
of the stock for edera estate ta purposes.
The shares whch the pettoner receved of the Red Cff company he sur-
rendered ater to the qudatng commttee of that company, and receved
In e change 1,653 shares of the stock of the bern-Pacfc company. In 1925
the pettoner sod a hs shares of ths stock for 131,413.50, of whch 69,426
was pad n cash and 61,987.50 was pad n bonds of the purchasng cor-
poraton. The face vaue of the bonds was 68,875. The purchasng corpora-
ton was the new bern-Pacfc company, and had been organzed to take
over the propertes of the od company of that name.
The pettoner n makng hs ncome ta return for the year 1925 set up
the cost of the stock of the Red Cff company on the bass of the 1918 apprased
vaue above gven, and on ths bass the sae n 1925 refected a gan of 69,426.
n amended return was put n by the pettoner, n whch he set up the cost
of the Red Cff stock on a dfferent bass and on ths amended bass
the sae n 1925 refected a oss of 22,067.55 and he accompaned hs
amended return wth a cam for refund In the amount of the dfference be-
tween the Income ta as shown by the orgna return and as shown by the
amended return. The amount of ths dfference was 4,497.17. Ths cam
was dsaowed by the Commssoner, and a defcency n the ncome ta of
pettoner was found In the sum of 346.59. Ths concuson of the Comms-
soner was affrmed by the oard of Ta ppeas. The present appea
foowed.
One of the contentons of pettoner Is that the oard of Ta ppeas faed
to make any fndng as to the far market vaue of the stock of the Red Cff
company In 1918, the date when pettoner acqured t, and that therefore
there s no bass for the order made by the oard redetermnng the defcency.
We thnk ths contenton can not be sustaned. It s true that the oard
of Ta ppeas In ts fndngs of fact does not state specfcay that the
far market vaue of the stock of the Red Cff company In November, 1918,
was 194.64 per shsre. ut t does fnd that ths was the vauaton f ed
by the probate court n accordance wth the aws of the State of Mnnesota
for estate and nhertance ta purposes, and that ths fgure was adopted by
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
6

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
173
204, rt. 1594.
the e ecutors of the estate In makng return for edera estate ta purposes.
It aso redetermnes the ta defcency at e acty the same fgure as the Com-
mssoner, who had adopted the vauaton above mentoned and had based
hs defcency fgure thereon. Under these crcumstances we thnk It woud
be hypercrtca to hod that the oard of Ta ppeas had made no fndng
of vauaton of the stock.
ut ths s not a. rtce 1594(c) of Reguatons No. 65 (October 6,
1924) of the Treasury Department reatng to ncome ta reads In part as
foows:
In the case of property acqured by bequest, devse, or nhertance
ts vaue as apprased for the purpose of the edera estate ta or In the case of
estates not sub|ect to that ta , Its vaue as apprased In the State court for
the purpose of State nhertance ta es sha be deemed to be ts far market
vaue when acqured.
These reguatons have the force and effect of aw when not n confct
wth statutory provsons on the same sub|ect matter. Unted States v,
aton, 144 U. S., 677 Unted States v. Grnwud, 220 U. S., 506 Maryand Cos.
Co. v. Unted States. 251 T . S., 342, 349 Daeuffer-Lcbcnnan rewng Co. v.
Unted States, 3G . (2d), 5CS.)
In the case at bar we fnd no confct between the reguaton quoted and the
statutory provson, secton 204 (a)5 of the Revenue ct of 1926, readng as
foows:
Sec. 204. (a) The bass for determnng the gan or oss from the sae or
other dsposton of property acqured after ebruary 28, 1913, sha be the cost
of such property e cept that

(5) If the property was acqured by bequest, devse, or nhertance, the
bass sha be the far market vaue of such property at the tme of such
acquston.
Gvng effect, therefore, to the reguaton provson, t s cear that the
fndng of the oard of Ta ppeas reatve to the apprased vaue of the
stock for the purpose of the edera estate ta s a fndng of ts far market
vaue when acqured by appeant.
nother contenton of pettoner s that the oard of Ta ppeas n
makng ts fndngs and concusons proceeded on an erroneous theory of aw,
vz, that the oard was bound to approve the vauaton of the Commssoner
uness the presumpton n favor of ts correctness was overcome by con-
vncng proof by the pettoner.
We sha not undertake to foow counse for pettoner n ther dscusson
as to the theoretca status of presumptons In the aw of evdence. It w
suffce to ascertan whether the rungs and acton of the oard of Ta
ppeas reatve to the evdence In the nstant case were n accord wth we
estabshed prncpes.
Rue 30 of the oard of Ta ppeas reads as foows:
urden of proof. The burden of proof sha be upon the pettoner,
e cept that n respect of any new matter of fact peaded n hs answer, t
sha be upon the respondent.
Ths rue has been enforced by the oard n numerous cases. ( . M.
Lyon, 1 . T. ., 378 een Ptts Parker, 14 . T. ., 1185, 1197.) nd
smar hodngs have been made by the courts. ( roum v. Commr., 22 .
(2d), 797 very v. Commr., 22 . (2d), 6 T. D. 4116, C. . II-1, 155
shoff v. Commr., 27 . (2d), 91 Coon uto Co. v. Commr., 85 . (2d), 504
(C. C. . 8) Wckwre v. Renecke, 275 U. S., 101 T. D. 4120, C. . II-1,
316 Renecke v. Spadng, 280 U. S., 227 Ct. D. 154, C. . I -1, 305 .)
The presumpton n favor of the Commssoner s fndng may be overcome
by evdence. (Water R. McCarthy, r., 9 . T. ., 525 Unted States v.
Rndskopf, 105 U. S.. 418 Wokore v. Renecke, supra Renecke v. Spadng,
supra Coon uto Co. v. Commr., supra dety Coumba Tr. Co. v.
Lucas, 7 . (2d), 146.)
The vaue at whch securtes are returned for estate ta purposes s prma
face the vaue for the purpose of computng gan or oss on subsequent sae.
( rtce 1594(c) of Reguatons No. 05, supra zabeth . ray, 4 . T. .,
42.)
Wth these prncpes n mnd, et us e amne the procedure n the case
at bar. Pettoner offered a consderabe amount of evdence n an endeavor
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
6

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
204, rt. 1594.
174
to prove that the far market vaue of the Red Cff company stock In Novem-
ber, 1918, was greater than 194.64 per share. The apprasers In the probate
court n arrvng at ths vaue per share of stock had used as a bass stump-
age vaue of the tmber owned by the Red Cff company at 1 per thousand.
The evdence ntroduced by pettoner before the oard of Ta ppeas was
unost entrey drected to the stumpage vaue of the tmber n November,
1918. Tesmony of e perts n the umber busness wTas receved tendng to
show that the stumpage vaue was as hgh as 2 per thousand. Ths testmony
of the e perts was of two knds: (1) Ther opnons based upon ther persona
knowedge of the tmber on the ands n queston or near-by ands (2) ther
opnons based upon an aeged sae n 1911 of the tmber on the very ands
n queston, and ther knowedge of any changes n vaue between 1911 and
1918.
It s the contenton of pettoner that a of ths e pert testmony was
strcken from consderaton or hed to be of no weght by the oard of Ta
ppeas on the erroneous ega theory above mentoned. We thnk the record
does not bear out ths contenton. We fnd nothng In the opnon of the
oard of Ta ppeas or esewhere n the record to ndcate that the e pert
testmony of the frst cass was not consdered and gven due weght s
to the e pert testmony of the second cass, there are e pressons n the
opnon of the oard of Ta ppeas whch ndcate that t was accorded
but tte f any weght. Such rung, If one was made, was not wthout
reasonabe bass. In the frst pace, the sae was remote seven years pror
to the date at whch the vauaton was to be f ed. Ths nfrmty was
attempted to be cured by testmony that the vaue of stumpage had changed
tte, f any, durng the 7-year perod. In the second pace, the aeged sae
tsef was of doubtfu character. Whe saes of and are not nfrequenty
hed to be evdence of vaue of the and, the saes so contempated are com-
peted saes, . e., where the consderaton s pad. In the sae In queston the
consderaton was ony party pad and the purchase contract was then
abandoned by both partes. Such a stuaton has many of the nfrmtes
of a mere offer to buy. (See Sharp v. Unted States, 191 U. S., 341.)
In addton to a ths, t must be borne n mnd that ths method of ascer-
tanng the vaue of the stock of the Red Cff company was at best an ndrect
one. The testmony thus offered was not as to the vaue of the stock, but
as to the vaue of the assets of the corporaton whch had ssued the stock.
The vaue per share of corporate stock can sedom be found -by dvdng the
vaue of the assets by the number of shares. Many other consderatons enter
among them, the abtes, the outstandng contractua obgatons, the
character of the management, whether the market for such assets s actve,
suggsh, or sporadc. In vew of these uncertan eements, not rendered
certan by any evdence on the part of pettoner, and n vew of the very
doubtfu probatve vaue of the aeged sae and the testmony of the e perts
based thereon, we thnk t was not reversbe error on the part of the oard
of Ta ppeas to e cude such evdence from consderaton.
nother contenton of pettoner s that the ntroducton of any substanta
evdence by pettoner caused the presumpton n favor of the Commssoner s
fndng to dsappear, and that apart from ths presumpton there was nothng
on whch to base the fndngs and concuson of the oard of Ta ppeas.
We thnk ths contenton Is based upon a msapprehenson of the evdence
contaned In the record. There was evdence before the oard tendng to
estabsh the fact that a vauaton had been f ed on the stock of the Red
Cff company by the probate court n 1918 after an apprasa tendng to
estabsh the further fact that ths vauaton had been adopted by the pet-
toner n makng return for the edera estate ta on hs wfe s estate tendng
to estabsh the further fact that the vauaton so f ed was correct accordng
to the best of pettoner s |udgment n 1918. Ths was substanta evdence
and was consdered by the oard of Ta ppeas aong wth the other evdence
not e cuded. The vew of the oard after such consderaton s thus
e pressed n the opnon fed :
On the whoe, the evdence before the oard tends to support the fndngs
of the probate court ns beng the nearest approach to a true vauaton for
sad stock on November 4, 1918, that coud be made under condtons e stng
at that tme. The acton of the respondent n respect of bs determnaton
of the vaue of ths stock s approved.
It s the we-estabshed rue that f there s any substanta evdence to
support a fndng of the oard of Ta ppeas, such fndng w not be
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
175
204, rt. 1594.
dsturbed. The foowng cases announce the rue In the eghth crcut
Mattn v, Oommr, (28 . (2d), 748), Denver Lve Stook Com. Co. v. Oommr.
(29 . (2d), 543), endrok Coa Dook Co. v. Commr. (29 . (2d), 559),
Conkn-Zonne-Loom Co, v. Oommr, (29 . (2d), 698), eeders Suppy Co.
v. Commr. (81 . (2d), 274), Powers Mfg. Co. v. Commr. (34 . (2d), 255).
rror Is aso assgned as to the e cuson of certan testmony by the wt-
ness canon. Ths matter Is not propery before us for consderaton, Inas-
much as no offer to prove was made. Such offer was necessary whether we
gve effect to the rue of evdence apparenty governng the oard of Ta
ppeas (Revenue ct 1926, sec. 907(a) McCurey v. Nat. av. d Tr. Co.,
858 ., 154) or to the rue n ths crcut ( edera Sur. Co. v. Standard O
Co., 82 . (2d), 119). urthermore, ater In the tra the wtness Scanon
was aowed to answer questons of the same genera Import.
Pettoner fnay contends that the oard of Ta ppeas erred n ts
method of computng the saes prce of the stock of pettoner In the Red Cff
company. The oard hed that the saes prce was the vaue of the bonds
and cash receved that the cost of the stock was the far market vaue In
November, 1918 that the gan was the dfference between the two, but that
the gan to be recognzed was mted by the amount of cash receved n ac-
cordance wth secton 203(d) of the Revenue ct of 1926, readng as foows:
Seo. 203. (d)(1) If an e change woud be wthn the provsons of para-
graph (1), (2), or (4) of subdvson (b) f t were not for the fact that the
property receved n e change conssts not ony of property permtted by such
paragraph to be receved wthout the recognton of gan, t ut aso of other
property or money, then the gan, If any, to the recpent sha be recognzed,
but In an amount not In e cess of the sum of such money and the far market
vaue of such other property.
The pettoner argues that n computng the saes prce the vaue of the
bonds receved shoud be entrey emnated, because under the statute If pe-
ttoner had e changed hs stock soey for bonds no gan or oss coud be
recognzed, as provded by secton 203(b)2, readng as foows:
Sec. 208. (b) (2) No gan or oss sha be recognzed f stock or securtes
In a corporaton a party to a reorganzaton are, n pursuance of the pan of
reorganzaton, e changed soey for stock or securtes n such corporaton or
In another corporaton a party to the reorganzaton
and that paragraph (d) of the same secton Is to be construed n harmony
wth paragraph (b)2 and when so construed It means that no gan sha
be recognzed to the e tent of property receved whch s permtted by that
paragraph, but f other property or money s aso receved, then a gan sha
be recognzed In respect of such other property and money.
We thnk ths argument of pettoner s based upon a confuson of the
statutory provsons reatng to the computng of gan or oss wth the pro-
vsons reatng to the recognzng of gan or oss. The sectons estabshng
the method of computng the gan or oss are sectons 202 and 204. Whether
such gan or oss sha be recognzed after t has been computed, and to what
e tent, depends upon secton 203, the openng sentence of whch reads:
(a) Upon the sae or e change of property the entre amount of the gan
or oss, determned under secton 202, sha be recognzed, e cept as heren-
after provded n ths secton.
Certan parts of secton 203 provde that no gan or oss sha be recognzed
n specfed cases, e. g., subdvson (b), paragraphs (1), (2), (3), (4), (5):
subdvson (c) subdvson (e), paragraph (1). Other parts of secton 203
provde that a porton ony of the gan sha be recognzed, e. g., subdvson
(b), paragraph (5) subdvson (d), paragraphs (1), (2) subdvson (e),
paragraph (2). Subdvson (f) provdes for cases n whch no oss sha be
recognzed, addtona to the cases covered by subdvson (b), paragraphs (1),
(2), (8), (4), (5). In none of these subdvsons ((b), (c), (d), (e), (f)) of
secton 203, however, s there any method provded or suggested for ascertan-
ng gan or oss other than the method provded n sectons 202 and 204.
The anguage of these two sectons s smpe. Secton 202, so far as here
matera, reads as foows:
Sec. 202. (a) cept as herenafter provded n ths secton, the gan from
the sae or other dsposton of property sha be the e cess of the amount re-
azed therefrom over the bass provded In subdvson (a) or (b) of secton
204, and the oss sha be the e cess of such bass over the amount reazed.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
204, rt. 1602.
176
(c) The amount reazed from the sae or other dsposton of property
sha be the sum of any money receved pus the far market vaue of the
property (other than money) receved.
Secton 204, so far as here matera, reads as foows:
Sec. 204. (a) The bass for determnng the gan or oss from the sae
or other dsposton of property acqured after ebruary 28, 1913, sha be
the cost of such property e cept that

(5) If the property was acqured by bequest, devse, or Inhertance, the
bass sha be the far market vaue of such property at the tme of such
acquston.
nd as f to set at rest the proposton that secton 203 reates soey to the
recognton of gan or oss and not to the determnaton or computaton thereof,
secton 202(d) provdes:
(d) In the case of a sae or e change, the e tent to whch the gan or
oss determned under ths secton sha be recognzed for the purposes of ths
tte, sha be determned under the provsons of secton 203. Itacs ours.
We thnk the oard of Ta ppeas correcty computed the gan n accord-
ance wth the provsons of sectons 202 and 204, and correcty mted the
gan to be recognzed as ta abe n accordance wth the provsons of secton
203 (d). There Is no showng that pettoner was ta ed on any gan In
e cess of the cash receved.
Our concuson s that the order of redetermnaton of the oard of Ta
ppeas shoud be affrmed, and t Is so ordered.
INCOM T R NU CT O 1920 D CISION OP COURT.
Deducton Depeton O and Gas Wes Income from Sae.
Income arsng from the sae of o and gas property may not
be taken nto consderaton n computng the aowance for depe-
ton under secton 204(c)2 of the Revenue ct of 1920.
Dstrct Court of the Unted States fob the Western Dstrct of Okahoma.
Darby-Lynde Co., a Corporaton, pantff, v. oe C. e ander, Coector of
Interna Revenue for the Dstrct of Okahoma, defendant.
auoht, D. .: The pantff n ts petton aeges that on anuary 1, 1926,
It was the owner of certan producng and nonproducng o and gas propertes
ocated In the State of ansas, a of whch were acqured subsequent to
ebruary 28, 1913. and on about uy 1, 1926, sod sad propertes to the Darby
Petroeum Co., a corporaton, for an agreed prce of 1,000,000, and receved
therefrom the entre purchase prce, whch, after the deductons from such pur-
chase prce as authorzed by aw, resuted n a ta abe ncome to the pantff
company n the sum of 752,285.96, whch amount of ta abe ncome was
ncuded In and accounted for n Item No. 8 of the gross ncome as set forth
n ncome ta return fed for the year 1926.
The pantff further aeges that In makng sad ncome ta return for the
caendar year of 1926, and after Incudng the tem reazed from the sae of the
o and gas propertes as above set forth, t reported and rendered a tota n-
come n the amount of 982,385.58 that n makng sad return, the pantff
camed certan deductons, but the ony one n controversy here beng tem
21, Depeton of mnes, o and gas wes, tmber, etc., In the amount of
44,233.47 that ncuded n sad tem was the amount of 42,447.43 as depeton
camed for and on account of and out of the propertes herenbefore mentoned,
whch were sod on uy 1, 1926 that such depeton so camed was based
and computed upon the proceeds receved from actua saes pf o and gas
produced from sad propertes that n computng the net ncome derved from
rtce 1602: ass for aowance of depeton
and deprecaton.
I -45-4827
Ct. D.245
September 25, 1930.
OPINION.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
177
204, rt. 1602.
a the operatons of the pantff company, the tota deductons amounted to the
sum of 208,641.62, whch, deducted from the gross ncome, eft a net ncome
for the caendar year of 1926 n the amount of 773,753.06, upon whch amount
the pantff computed the tota amount of ta for the ta abe year n the
amount of 104,443.28.
Pantff further aeges that at a tmes herenbefore set forth the Revenue
ct of 1926 was n fu force and effect, and was appcabe to the computaton
of the ta ed abty of ths pantff, and that secton 204(c)2, for the aow-
ance unto the pantff n eu of depeton of 27 per centum of the gross
ncome from the property durng the ta abe year, appes, sad secton beng
as foows:
In the case of o and gas wes the aowance for depeton sha be 27
per centum of the gross ncome from the property durng the ta abe year.
Such aowance sha not e ceed 50 per centum of the net Income of the ta -
payer (computed wthout aowance for depeton), from the property, e cept
that n no case sha the depeton aowance be ess than t woud be f com-
puted wthout reference to ths paragraph.
nd that n computng the amount of ta abe ncome for the caendar year
1926, the pantff nadvertenty faed to compute the aowance as f ed by
aw, thereby resutng n an understatement of the deducton propery aowabe
to the pantff, and an overstatement of net ncome of the pantff company
for the ta abe year of 1926, and a proportonate overstatement of the amount
of ta due thereon.
The pantff further aeges that upon dscoverng sad understatement of
the amount of aowance for depeton, and consequent overstatement of the
net Income for sad year, that It fed an amended ncome ta return for sad
year of 1926, askng that t be permtted a deducton for depeton on the bass
of 27 per cent of the ncome derved from the sae of property, and for the
recovery of the ta so pad of 35,072.81.
The defendant fed Its demurrer, aegng sad petton fas to state facts
suffcent to consttute a cause of acton n favor of pantff and aganst the
defendant
The queston nvoved In ths demurrer s whether the amount receved from
the sae of o and gas property may be taken nto consderaton In computng
the aowance for depeton under secton 204(e) 2 of the Revenue ct of 1926.
. Ths demurrer has been carefuy brefed both by counse for the Government
and pantff, and whe ther brefs consst more n earned arguments, based
upon the hstory of ths egsaton, than upon any constructon of a court
of competent |ursdcton drecty n pont, the court s of the opnon that
secton 204, above cted, has reference to the ncome derved from the property
durng the ta abe year, and not from the ncome derved from the sae of the
property durng the ta abe year.
In en on edera Income Ta aton (1929), a most e haustve and earned
te t on that sub|ect, the author says n dscussng the above cause:
The ncome bass for computng depeton on o and gas propertes repaced
the dscovery vaue bass for 1925 and subsequent years, and the provson
that depeton on the ncome bass sha not be ess than the deducton woud
be f computed on the bass of the vaue at the basc date has no reference
to dscovery vaue. The deducton s not sub|ect to any mtaton because
of the amount returnabe as of any basc date, regardess of the amount
of depeton prevousy sustaned. It s not necessary, In order to take the
deducton on the ncome bass, that any entry be made on the books or any
amount charged off for depeton. Ony the Income derved from the o
and gas propertes s to be consdered In computng the amount of the deduc-
ton, and ncome arsng from the sae of such propertes s not a part of
the ncome from the propertes for ths purpose.
The author, as a bass for ths concuson, ctes Interna Revenue uetn,
desgnated, uetn 6-1 C. . I-1 , page 19, under G. C. M. 1023, wheren
the Genera Counse for the ureau of Interna Revenue n construng ths
ct, sad:
Income arsng from the sae of o and gas property or any nterest
theren, may not be taken nto consderaton n computng the aowance for
depeton under secton 204(c)2 of the Revenue ct of 1926.
nd aso n Cumuatve uetn I-2, page 21 G. C. M. 2315 , In an opnon
by the same authorty, the same poston s taken aso n Cumuatve ue-
tn II-2, page 115 G. C. M. 5104 .
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
8204, rt. 1602.
178
Whe these opnons from the Revenue Department are not concusve
upon the courts, they certany are persuasve, and ndcate ceary not ony
the rungs of the Department, but n ths case they ndcate the theory whch
Congress had n mnd at the tme of the enactment of the egsaton.
sde from the foregong, ths court Is of the opnon that a carefu readng
of the secton Invoved In ths case w show that the constructon whch
has been paced upon t by the Revenue Department s the proper construc-
ton, and that gross ncome from property has a dstnct meanng as compared
to gross ncome from the sae of property.
The demurrer Is sustaned and e cepton aowed pantff.
rtce 1602: ass for aowance of depeton I -49-4855
and deprecaton. . C. M. 8763
R NU CTS O 1924 ND 1928.
The capta bass for depeton purposes n the case of a ta -
payer who was a essee of mnng propertes pror to March 1,
1913, and n 1017 purchased the propertes, s the sum of the unde-
peted porton of the capta vaue of ts easehod nterest as of
March 1, 1913, pus the amount e pended to acqure the essor s
fee nterest.
n opnon s requested whether a essee who purchases the essor s
fee subsequent to March 1, 1913, and cams depeton on that cost s
aso entted to depeton based on the March 1, 1913, vaue of the
easehod.
The ta payer was a essee of certan coa mnes through eases
entered nto pror to March 1, 1913. In years subsequent to 1913
varous propertes desgnated as propertes purchased after March
1, 1913, whch had been eased to the company were purchased by
the ta payer. The eases were ordnary mnng eases provdng
for royaty payments on the bass of mneras removed, and con-
taned the usua cause provdng for mnmum royaty payments,
wth reverson n case of breach of covenants. In computng the
depeton aowance for the years 1924 to 1927, ncusve, the Income
Ta Unt aowed a certan rate per ton based on ta payer s ease-
hod nterest n the propertes as of March 1, 1913. It s contended
by the ta payer that n addton to such aowance t s aso entted
to an aowance for depeton based on the cost of the propertes
acqured subsequent to March 1, 1913. st dfferent method of
treatment has been suggested whch s based on the argument that
the subsequent purchase had the effect of mergng the easehod
estate nto the fee smpe estate, that the bass for depeton shoud
be the cost of the greater estate (fee) wthout regard to the cost or
vaue of the esser estate (easehod), and that as a consequence such
cost shoud not be ncreased by the undepeted March 1, 1913, vaue
of the ta payer s nterest n the eased propertes.
Secton 201(c) of the evenue ct of 1924 and of the Revenue
ct of 1926 provdes, n part, as foows:
(c) The bass upon whch depeton, e hauston, wear and tear, and obso-
escence are to be aowed In respect of any property sha be the same as
s provded n subdvson (a) or (b) for the purpose of determnng the gan
or oss upon the sae or other dsposton of such property
Secton 204 (a) and (b) of the same cts provdes, so far as
hereto pertnent, as foows:
(a) The bass for determnng the gan or oss from the sae or other
dsposton of property acqured after ebruary 28, 1913, sha be the cost
of such property .
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
179
204, rt. 1602.
(b) The bass for determnng the gan or oss from the sae or other ds-
poston of property acqured before March 1, 1913, sha be ( ) the cost of
such property ( ) the far market vaue of such property as of
March 1, 1913, whchever s greater .
The nstant ease may be consdered as a ease and not as a sae
of mnera n pace. (Compare on aumbach v. Sargent Land
Co., 242 U. S., 503 Rosenberger v. McCaughn, 20 ed. (2d), 139,
T. D. 4058, C. . I-2, 178, affrmed 25 edf. (2d), 699, T. D. 4171,
C. . II-2, 253 and see urkett v. Commssoner, 31 ed. (2d),
667 S. M. 1365, C. . 2, 143.)
easehod s property. (See Lynch v. hoorth-Stephens Co.,
267 U. S., 364, T. D. 3690, C. . I -1, 162 art. 1572(a), Regs. 65
and 69 and compare tterbury, 1 . T. ., 169, C. . TII-1, 3
state of Leon C. Rggs, 2 . T. ., 668, C. . III-1, 39.)
In Soctor s Memorandum 2931 (C. . I -1, 33) ths offce hed
that where a corporaton whch owned a coa easehod acqured the
remander nterest t shoud captaze that porton of the easehod
cost aocabe to that porton of the orgna term of the ease une -
pred at the date of the acqurement of the remander.
Depeton s an annua aowance to enabe a ta payer to recoup
the e hauston of hs nvestment, so that depeton s competed
when the capta nvestment has been returned. Such e hauston
of the nvestment s not dependent on the manner of ownershp but
on the amount of capta the ta payer has nvested n the property
beng depeted or e hausted. That beng so, the merger of the
easehod wth the fee has no drect bearng on the e hauston of
nvested capta. Whe a mnng ease does not convey tte to
mneras n pace, the Supreme Court of the Unted States has hed
that t does create a rea and substanta nterest n such mneras
even to a essee whose ony fnanca obgaton to the owner of the
fee s to pay for the mneras as they are mned. That court has
hed that such an nterest s property, the vaue of whch on March
1, 1913, s capta whch shoud be returned to essee free from ta
through depeton deductons from gross ncome. The entre capta
vaue of such mnera ands s dvsbe between the essor and the
essee n proporton to the nterest of each severay consdered.
(See Lynch v. worth-Stephens Co., supra.)
These severa nterests, essened n capta vaue for ta purposes
by sustaned depeton, contnued n the nstant case down to the
year 1917, when the essee bought the essor s nterest. In the ab-
sence of a surrender of ts easehod rghts by the essee pror to the
purchase of the essor s nterest, the effect of such purchase ordnary
consdered was the acquston by the essee of an nterest n the
mnera property n addton to that aready owned by t under the
ease. Whe the purchase of the fee by the essee had the effect of
mergng ts easehod tte nto the fee tte acqured by t, the fact
s that the entre nterest n the mnera property was acqured n
two separate transactons.
or the foregong reasons t s the opnon of ths offce that the
capta bass for depeton purposes to the ta payer s the sum of the
undepeted porton of the capta vaue of ts easehod nterest as
of March 1, 1913, pus the amount e pended to acqure the essor s
fee nterest n 1917.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
206, rt. 1622.
180
S CTION 206. N T LOSS S.
rtce 1622: Cam for aowance of net oss. I -45-4828
( so Secton 240, rtce 634.) G. CM.8618
R NU CTS O 1021, 1924, ND 1926.
group of-affated corporatons showed a consodated oss
for the years 1922 and 1923 and consodated net ucome for the
years 1924 and 1925. Computed on a separate bass, some of
the corporatons sustaned osses for each of the four years, whe
other members of the group sustaned osses n one or more of the
years. One subsdary was dssoved In 1923 two were ncor-
porated In 1924 and one was ncorporated n 1925.
ed, wth respect to the number of returns requred for the
caendar years 1922 to 1925, ncusve, of the affated group, that
ony one return for each of the years mentoned shoud be requred
of sad group. The net oss aowabe to members of the group
for 1922 may be brought forward and deducted from the net
ncome aocated to the member for 1923. ut snce the group
as a whoe had no net ncome for 1923, the entre net oss for
1922 aocabe to each member must be brought forward to 1924.
s to 1924, the 1924 ct governs, and the oss aocabe to each
member for 1922 s, under secton 206(e) of sad ct, to be used
as a deducton n determnng the member s net ncome for 1924,
snce the sad net oss was not absorbed n 1923. The year 1924
s treated as the thrd year In the computaton. Sad
net oss may not be used as a deducton n 1924 beyond the pont
where there Is Income to the member to absorb t that s, t
may not be used to produce a oss whch woud enter nto the com-
putaton of consodated net ncome. Ths s true for ether the
second or the thrd year, In vew of the anguage of secton
206 (a) and (b). Net osses aocated to the members for 1923
may be brought forward as provded n secton 206(f). Snce
there s no substanta dfference between the net oss provsons
of the Revenue cts of 1924 and 1926, the prncpes above stated
are equay appcabe n brngng forward osses to be apped
aganst ncome aocabe to members n 1925.
tent to whch Law Opnon 1113 (O. . III-2, 36) was revoked
by Genera Counse s Memorandum 8132 (C. . I -1, 287) Ind-
cated and dscussed.
n opnon s requested as to the proper appcaton of secton
204 of the Revenue ct of 1921 and secton 206 of the Revenue cts
of 1924 and 1926 to the facts n the nstant case.
The M Company s the parent of a group of affated corpora-
tons, whch group e sted wth mnor changes durng the years
1922 to 1925, ncusve. The affated group showed a conso-
dated oss for the years 1922 and 1923 and consodated net ncome
for the years 1924 and 1925. Certan of the corporatons sustaned
osses computed on a separate bass n each of the four years n
queston, whe other members of the group sustaned osses n one
or more of the years. Changes wthn the group were as foows:
One subsdary, the N Company, was dssoved on une 30, 1923.
In the caendar year 1924 two new subsdary companes were
ncorporated, namey, the O Company on anuary 24, 1924, and
the P Corporaton on pr 25, 1924, and n the caendar year 1925
one subsdary company was ncorporated, namey, the Corpora-
ton, on November 12, 1925. The assets of the dssoved company
were absorbed by the other affated companes and the assets of the
newy ncorporated companes were acqured from other companes
n the group for whch the new companes ssued ther stock.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
181
206, rt. 1622.
Wth respect to the number of returns requred for the caendar
years 1922 to 1925, ncusve, of the affated group of whch the
ta payer s the parent company, ths offce s of the opnon that ony
one return for each of the years mentoned shoud be requred of
sad group. Ths concuson s based on Swft Co. v. Unted
States (38 ed. (2d), 365) and Sweets Co. of merca, Inc., v.
Commssoner (40 ed. (2d), 436). It s the opnon of ths offce
that the oard s decson n utomatc re arm Co. v. Comms-
soner (13 . T. ., 1195), n so far as t deat wth the rght of
two companes to fe a consodated return for a fu ta abe year
where one of the companes was n e stence for ony part of a year,
s overrued by Sweets Co. of merca, Inc., v. Commssoner, supra.
The queston rased wth respect to the effect of Swft Go. v.
Unted States on Law Opnon 1113 (C. . 111-2, 36) has aready
been consdered to some e tent by ths offce n Genera Counse s
Memorandum 8132 (C. . I -1, 287). Genera Counse s Memo-
randum 8132 was based upon a case nvovng the caendar years
1922 and 1923, hence fang under secton 204 of the Revenue ct
of 1921. n affated group to whch were added two new corpora-
tons durng 1922 (one by stock purchase, the other by the forma-
ton of a new corporaton through the transfer of assets from a
member aready wthn the group) sustaned a consodated net oss
for that year. The group as t e sted on December 31, 1922, con-
tnued through the caendar year 1923, wth ony one change, namey,
a new corporaton was organzed to take over certan rea estate.
The affated group desred to deduct the consodated net oss for
1922 from the consodated net ncome for 1928.
Reyng on Sweets Co. of merca, Inc., v. Commssoner and
Swft Co. v. Unted States, supra, t was hed that the addton of
new members to an affated group of corporatons durng a ta abe
year dd not create a new ta payer, or end the ta abe year of the
group so as to requre the fng of a return for the perod begnnng
wth the date of such addton that a consodated net oss of an
affated group for one year mght not be deducted n ts entrety
from the consodated net ncome of the group for the frst succeed-
ng ta abe year that the porton of the net oss for the year
aganst the porton of the consodated net ncome aocated to such
corporaton for the frst succeedng ta abe year that Law Opnon
1113, supra, n so far as t was nconsstent wth the above concuson
was revoked.
The queston has arsen as to what e tent Law Opnon 1113 was
revoked by Genera Counse s Memorandum 8132. It seems pert-
nent to pont out what prncpes were ad down n the sad aw
opnon and to what e tent those prncpes are n confct wth the
court s decson n the Swft case. Law Opnon 1113 nvoved cer-
tan stuatons arsng under secton 204 of the Revenue ct of 1918.
our questons were submtted to the Soctor of Interna Revenue
for an e presson of opnon. The four questons, wth ther an-
swers, are quoted beow:
1. Where the consodated return of an affated group for the year 1919
dscoses a net ncome, but one or more of the members of the group sustaned
an operatng oss for that year, what appcaton shoud be gven to the
provsons of secton 204
propery aocabe
shoud be apped
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
206, rt. 1622.
182
It Is concuded that where the consodated return of an affated
group dscoses a net Income, there has been no net oss wthn the meanng
of secton 204, athough one or more members of the group, consdered sepa-
ratey, sustaned an operatng oss for the year.
2. Where the consodated return of an affated group for the year 1919
dscoses a net oss and the same corporatons, and ony those corporatons,
were affated for the precedng ta abe year, what appcaton shoud be gven
to the provsons of secton 204
Where n such crcumstances the consodated group as an entty sustans
a net oss, the reasonabe and ogca appcaton of the statute requres that
the amount of the net oss shoud be computed on the bass of the consodated
return, and that the net oss so computed shoud be avaed of by the con-
sodaton as a group. Such a concuson Is In accord wth ogc and reason,
and, In my opnon, s authorzed by the wordng of the statute.
It s hed that where the consodated return of an affated group
for the year 1919 dscoses a net oss and the same corporatons, and ony those
corporatons, were affated for the precedng ta abe year, the amount of such
net oss, computed on the bass of the consodated return, shoud be apped
aganst the consodated net ncome of the group for the precedng ta abe year.
3. Where two or more corporatons were affated for the year 1919 but were
not affated for the precedng ta abe year, and the consodated return for
the year 1919 dscoses a net oss, what appcaton shoud be gven to the pro-
vsons of secton 204, (a) In case each member of the affated group sustaned
a net oss for the year 1919, and (b) n case one or more of the members
of the group sustaned a net oss but other members of the group derved
a net ncome for that year

It s my opnon
(a) That f each member of the affated group sustaned a net oss for
that year, the amount of the net oss of each member, determned after the
emnaton of a Intercompany transactons, shoud be apped aganst Its
net ncome for the precedng ta abe year but
(b) That f one or more members of the affated group sustaned a net oss
for the year and other members of the group derved a net Income, the amount
of the net oss dscosed by the consodated return shoud be apportoned among
the severa members of the group whch, consdered separatey, sustaned net
osses n proporton to the amount of the net oss sustaned by each, and the
part of the net oss attrbutabe to each shoud be apped aganst ts net
ncome for the precedng ta abe year.
4. Where two or more corporatons were not affated for the year 1919
but were affated for the precedng ta abe year, what appcaton shoud be
gven to the provsons of secton 204 n case one or more of the corporatons
whch were Incuded n the affated group for the precedng ta abe year
sustaned a net oss for the year 1919

It s concuded that where two or more corporatons were not
affated for the year 1919 but were affated for the precedng ta abe year,
and one or more of the corporatons whch were ncuded In the affated
group for the precedng ta abe year sustaned a net oss for the year 1919,
the amount of such net osses shoud be apped aganst the consodated net
ncome of the affated group for the precedng ta abe year. If, however,
the amount of the net oss of a member e ceeds that proporton of the con-
sodated net ncome for the precedng ta abe year attrbutabe to t, the
amcunt of the e cess sha not be aowed to further reduce the consodated
net ncome for the precedng ta abe year, but sha be apped aganst the
Income of such corporaton or the consodated group of whch It Is a member
for the succeedng ta abe year.
The concusons, as above stated, were based upon the foowng
premse:
Where a snge busness enterprse, athough operated through
severa corporatons, s owned or controed by the same person or groups of
persons, a consodated return of net ncome and nvested capta s necessary
n order that the nvested capta and net ncome of the entre group may be
accuratey determned otherwse, the ncome of the dfferent corporatons coud
be fcttousy Increased or decreased through Intercompany transactons whch
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
183
206, rt. 1622.
do not affect the true Income of the group. (See artce 631 of Reguatons
45 and 62.) In vew of ths stuaton the statute requres n the case of affated
corporatons a consodated return of net ncome and nvested capta and
requres aso that the ncome and e cess-profts ta es must be computed and
determned on the bass of the Income and Invested capta dscosed by such
consodated return. The secton does not, however, make of the affated
group a snge ta abe entty. In so far as the payment of the ta s concerned
t provdes that where the ta s assessed on the bass of a consodated return,
t sha be computed In the frst Instance as a unt, and sha then be assessed
upon the respectve affated, corporatons n such proporton as may be agreed
upon among them, or, n the absence of any such agreement, then on the bass
of the net ncome propery assgnabe to each. The ct does not provde that
te affated group Is a snge ta payer on the contrary, snce each mem-
ber of the affated group s a corporaton, sub|ect to the ta mposed by the
ct, t s a ta payer wthn the meanng of that term as defned n secton 1.
In ts dscusson of the proper appcaton of secton 204 of the
Revenue ct of 1918, where affated corporatons are nvoved, the
court n ts opnon n the Swft case sad:
The consodated group, as such, Is not a ta payer but a ta -
computng unt and the corporatons whch are members of the affated group
for the year, or became members durng the year, ose ther separate Identty
whe so affated ony for the purpose of computaton of the ta upon one
Income and one Invested capta whch Is composed of the Income and Invested
capta of such corporatons combned, but, when t comes to the assessment
and coecton of the ta so computed It Is assessed aganst and coected from
the severa corporatons consttutng the affated group, In proporton to the
net ncome propery assgnabe to each, uness there s an agreement among
them as to a dfferent apportonment. n affated group as a ta -computng
unt may, In some respects, be kened unto a partnershp under the 1918
and subsequent Revenue cts.
The vews that we have e pressed are aso supported by Interna Revenue
Law Opnon 1113, rendered by the Soctor of Interna Revenue and pubshed
In 1924. Notwthstandng ths was the offca decaraton of the ureau, the
contenton made on behaf of the defendant n ths case forces ts counse to
repudate t. We have set out a part of the Soctor s opnon above referred
to n a note attached to ths opnon, on account of ths reference thereto.
We thnk t can not fary be camed that the reference n secton 240(a)
to a consodated return of net ncome and to the computaton of the ta
n the frst Instance as a unt mpes the adopton of a compete economc
unt theory, 1. e., the obteraton and dsregard of corporate structures In the
determnaton of ta abe ncome, and aso such modfcatons of other prov-
sons of the statute as may be necessary to gve due effect to the ogca con-
sequences of the acceptance of that theory. If It had been the ntenton of
Congress to so modfy the genera prncpes ad down n the other prov-
sons of the ct, we thnk there woud be found approprate quafyng phrases
n the ct settng forth the modfcatons whch woud be requred to gve
effect to ths theory of consodaton. In the enactment of secton 240 Congress
was smpy ayng down the prncpe that where a group of companes con-
sttuted a snge busness unt, the net ncome, determned In accordance wth
the genera prncpes of aw, shoud be combned, osses beng offset aganst
gans, and the rate of ta shoud be determned by the reaton between such
combned net ncome and the nvested capta of the group as a whoe, each cor-
poraton beng at a tmes separatey recognzed and ndvduay abe for
ts proporton of the ta accordng to the net Income propery assgnabe to t.
It seems cear from the above that the hodng wth reference to
queston 2 n Law Opnon 1113, that where a consodated return
for 1919 dscoses a net oss and the same corporatons, and ony
those, were affated for the precedng ta abe year, the amount of
ta abe year, s n drect confct wth the decson of the court and
s revoked by Genera Counse s Memorandum 8132, supra. The
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
208, rt. 1622.
184
concusons reached wth reference to questons 1, 8, and 4 are
consstent n prncpe wth the court s decson, the concuson n
answer to queston 4 beng prnted n a footnote to the court s opn-
on. It must be noted, however, that the court dd not approve the
method of computaton suggested n the aw opnon, but submtted
an e ampe ndcatng how the net osses of members of the group
shoud be determned and apped.
nother pont n the court s decson and n Law Opnon 1118
whch requres some eucdaton s the e tent to whch ntercompany
transactons are to be emnated n determnng the net ncome or
the net oss propery assgnabe to each corporaton for the purpose
of appyng the net oss provsons of the varous cts. The court
n ts e ampe, after settng out the net ncome and the net oss
of dfferent corporatons for the years 1918 and 1919, sad:
The resuts, as shown above, are of course determned on a consodated
bass that Is, after the emnaton of Intercompany transactons pertanng
to the varous members of the groups.
Law Opnon 1113 says:
the amount of such net osses of the separate members to be
computed after the emnaton of a Intercompany transactons.
rtce 637 of Reguatons 45 defnes consodated net ncome as
foows:.
Sub|ect to the provsons coverng the determnaton of ta abe net ncome of
separate corporatons, and sub|ect further to the emnaton of ntercompany
transactons, the consodated ta abe net ncome sha be the combned net
ncome of tne severa corporatons consodated, .
rtce 636 of Reguatons 62 and 65 and artce 635 of Regua-
tons 69 defne consodated net ncome as foows:
Sub|ect to the provsons coverng the determnaton of ta abe net ncome
of separate corporatons, and sub|ect further to the emnaton of ntercompany
transactons (whether or not resutng In any proft or oss to the separate
corporatons), the consodated ta abe net ncome sha be the combned net
Income of the severa corporatons consodated.
The reguatons defnng consodated net ncome are n agreement
wth the prncpes underyng the preparaton of a consodated
proft and oss statement. Such a statement shoud show ony trans-
actons wth outsders and shoud not ncude any transactons wthn
the group. Otherwse, a consodated proft and oss statement from
the standpont of the group woud present a greaty dstorted pcture,
snce there woud be many dupcatons of ncome and deductons
where saes and purchases took pace wthn the group.
owever, from a practca standpont, n determnng consodated
net ncome t s ony necessary to emnate from the combned net
ncomes of the severa corporatons, determned separatey, the
unreazed profts and osses n ntercompany transactons. Inter-
company profts and osses whch have been reazed to the affated
group through fna transactons wth outsde nterests do not change
the consodated ta abe net ncome, and, consequenty, n the audt
of consodated cases t has not been the practce n computng the
net ncome of each member of the group before consodaton to
emnate the ntercompany transactons.
so n those cases where t s necessary to aocate the ta on a
consodated return to each of the members of the affated group
on the bass of the net ncome propery assgnabe to each, and n
determnng that part of a consodated net oss attrbutabe to each
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
185
206, rt. 1622.
corporaton n appyng the prncpes of Law Opnon 1113 n
carryng forward net osses, t has been the practce of the Income
Ta Unt to emnate from the ncome and deductons of each cor-
poraton ony unreazed ntercompany profts and osses, usuay n
the nventores. other ntercompany transactons are not ds-
turbed, for the reason that they do not affect the consodated net
ncome.
To emnate a ntercompany transactons, whether or not they
affect the consodated ta abe net ncome, n determnng the net
ncome propery assgnabe to each member of the affated group,
woud gve rather absurd resuts, showng arge osses for some
members of the group and e cessve ncome for others.
It s the opnon of ths offce that the practce of the unt, as above
ndcated, over the ong perod durng whch consodated returns
have been requred, carres out the ntent of Congress n determnng
the net ncome (or oss) propery assgnabe to each and s not
dsturbed by the court s decson.
The nstant case nvoves the years 1922 and 1923, whch fa under
the Revenue ct of 1921 the year 1924, whch fas under the Rev-
enue ct of 1924 and the year 1925, whch fas under the Revenue
ct of 192G.
The net oss of each member of the group whch sustaned such a
oss n 1922, computed n the manner outned n the e ampe worked
out by the court n the Swft case, shoud be carred forward and
deducted from the net ncome of such member n 1923. (Secton
204(b), Revenue ct of 1921, G. C. M. 8132, supra.) ut snce the
group as a whoe sustaned a consodated oss for 1923, t foows
that no member of the group had a net ncome for 1923 from whch
the net oss may be deducted, and the 1922 net oss of the member
must be carred forward to 1924. (Secton 206(e), Revenue ct of
1924.)
The mportant queston n ths case s: May the net oss brought
forward from 1922 be camed as a deducton from gross ncome for
1924 by the member wthout mtaton, and thus n certan cases
create a oss for sad year whch woud be apped aganst the ncome
of other members of the group n computng consodated net n-
come or, s the deducton to be mted to an amount equa to the
net ncome of the member separatey computed before the net oss
deducton s taken, thus preventng the e cess from beng apped
aganst the net ncome of the other members of the group
The answer must be found n sectons 232 and 206 of the Revenue
ct of 1924, whch provde as foows:
Sec. 232. In the case of a corporaton sub|ect to the ta mposed by secton
230 the term net ncome means the gross Income as denned n secton 233
ess the deductons aowed by sectons 234 and 206, and the net ncome sha
be computed on the same bass as s provded n subdvson (b) of secton 212
or n sect on 226.
Sec. 200. (a) s used n ths secton the term net oss means the e cess
of the deductons aowed by secton 214 or 234 over the gross ncome, wth the
foowng e ceptons and mtatons:

(3) The deducton for depeton sha not e ceed the amount whch woud be
aowabe f computed wthout reference to dscovery vaue
(4) The deducton provded for n paragraph (6) of subdvson (a) of
secton 234 of amounts receved as dvdends sha not be aowed
35942 31 13
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
|206, rt, 1622.
186
(5) There sha be Incuded u computng gross Income the amount of Interest
receved free from ta under ths tte, decreased by the amount of Interest
pad or accrued and osses sustaned whch s not aowed as a deducton by
paragraph (2) of subdvson (a) of secton 214 or by paragraph (2) of sub-
dvson (a) of secton 234.
(b) If, for any ta abe year, t appears upon the producton of evdence
satsfactory to the Commssoner that any ta payer has sustaned a net oss,
the amount thereof sha be aowed as a deducton n computng the net Income
of the ta payer for the succeedng ta abe year (herenafter n ths secton
caed second year ), and f such net oss Is n e cess of such net ncome
(computed wthout such deducton), the amount of such e cess sha be aowed
as a deducton n computng the net Income for the ne t succeedng ta abe
year (herenafter n ths secton caed thrd year ) the deducton n a
cases to be made under reguatons prescrbed by the Commssoner wth the
approva of the Secretary.

(e) If for the ta abe year 1922 a ta payer sustaned a net oss In e cess
of hs net ncome for the ta abe year 1923 (such net oss and net Income beng
computed under the Revenue ct of 1921), the amount of such e cess sna
be aowed as a deducton n computng net ncome for the ta abe year 1924
n accordance wth the method provded n subdvsons (b) and (c) of ths
secton.
Secton 232 of the Revenue ct of 1924 dffers from the cor-
respondng sectons of the Revenue cts of 1918 and 1921, n that
t provdes that a net oss s to be treated as a deducton from gross
ncome, the former cts contanng no such provson.
Secton 206 of the Revenue ct of 1924 dffers from secton 204
of the Revenue ct of 1921, n that t provdes that a net oss sha
be aowed as a deducton n computng net ncome of the ta -
payer n the second year, the 1921 ct provdng that the net
oss sha be u deducted from the net ncome of the ta payer. The
two cts are smar n provdng that any net oss not absorbed n
the second year s to be aowed as a deducton n computng
the net ncome of the ta payer for the thrd year.
The foowng genera prncpes have been estabshed. The net
oss deducton s gven to any ta payer. ach member of an
affated group s a ta payer and t aone s entted to the benefts
gven by secton 204 of the Revenue ct of 1921 and secton 206
of the Revenue cts of 1924 and 1926 based on ts separate ncome
or oss e cept as such ncome or oss may be affected by the mta-
tons mposed by secton 240 of the varous cts, tence secton
206(b) does not gve the net oss deducton to an affated group
fng a consodated return. (Swft do Co. v. Unted States, supra
Sweets Co. of merca, Inc., v. Commssoner, supra.)
The consodated ta abe net ncome of an affated group s the
combned net ncome of the severa corporatons consodated, sub-
|ect to the provsons coverng the determnaton of ta abe net
ncome of separate corporatons, and sub|ect further to the emna-
ton of ntercompany transactons (see dscusson above). ( rtce
636, Reguatons 62, and subsequent reguatons.)
Secton 232 defnes the net ncome of a ta payer for a gven
ta abe year. net oss for any ta abe year s defned n secton
204 of the Revenue ct of 1921 and secton 206(a) of the Revenue
cts of 1924 and 1926. It shoud be borne n mnd that secton 240
of the varous cts s to be treated as a mtaton of the net oss
sectons, preventng, for nstance, a member whch, separatey con-
sdered, had a net oss for a ta abe year n whch the group had a
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
187
206, rt. 1622.
consodated net ncome, from carryng such net oss forward and
deductng t n determnng net ncome for the succeedng year.
Swft Co. v. Unted States, supra.)
rom the above genera prncpes t s ceary deducbe that
under the Revenue cts of -1924 and 1926 the net osses sustaned
by members of the group for pror years may enter nto the compu-
taton of consodated net ncome ony to the e tent that the net
oss s aowed as a deducton n determnng the net ncome of the
member entted to cam the deducton.
or the second year, under the cear provsons of secton
206(b), the deducton s mted to an amount not greater than the
e cess of the gross ncome over the deductons aowed by secton
234. Secton 206(b) then provdes that the porton of the net
oss not absorbed n the second year sha be aowed as a deduc-
ton n computng the net ncome for the thrd year. per-
pe ng queston arses n appyng ths provson where the ta -
payer s a member of an affated group fng a consodated return.
The ta payer may have an operatng oss for the thrd year con-
sdered ndependenty from pror years. The operatng oss may
at the same tme be a statutory net oss as defned by secton 200(a).
Such oss, of course, may enter nto the computaton of consodated
net ncome for the thrd year. ut, may the unabsorbsd net
oss carred over from the second year ncrease the aready
e stng oss and thereby further reduce the consodated net n-
come for the thrd year If the ta payer were not a member
of an affated group no queston woud arse. The unabsorbed
oss carred over from the second year woud apse. The net
oss carred over from the second year coud not be used to cre-
ate a net oss for the thrd year under the pan provsons of
secton 206(a).
Snce, as prevousy has been ponted out, the consodated net
ncome s the combned net ncome of the severa corporatons con-
sodated wth the necessary emnaton of ntercompany transac-
tons, t foows that any deducton not avaabe n computng the
net ncome of a member may not enter nto the computaton of
consodated net ncome. The unabsorbed net oss carred over
from the second year may not be avaed of by the ta payer to
produce a net oss because of the provsons of secton 206(a), and
t foows that the deducton s not avaabe to the group.
The above vew s consstent wth that orgnay taken by the
oard of Ta ppeas n Natona Sag Co. v. Commssoner (16
. T. ., 1310), n whch two corporatons were affated durng
1924, and fed a consodated return. One member, consdered sep-
aratey, had a net oss for 1924, and t sought to brng forward ts
net osses for 1922 and 1923 and use them as a deducton n com-
putng net ncome, thereby ncreasng ts oss for 1924. The effect
voud have been to appy the member s net oss for a three years
aganst the net ncome for 1924 of the other member of the group.
The oard hed that ony the 1924 oss of the member entered nto
the computaton of consodated net ncome for that year, sayng:
In the case before us, the pettoner had no net ncome for 1924
from whch t coud deduct the osses of 1922 and 1923, and the osses of those
years may not be deducted from the net ncome of another ta payer
even though t be an affated corporaton and ncuded n a consodated
return .
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
206, rt. 1622.
188
It Is at east Interestng to know that our concuson In ths matter, that
the net oss of one year may not be carred forward and treated n such a
manner as to Increase the net oss of another year, Is n ne wth the Intent
of the egsature as refected In the report of the Senate nance Commt-
tee on the Revenue ct of 1024. In reportng upon the provsons of secton
S06(b), the commttee stated as foows:
Ths subdvson corresponds to secton 204(b) of the e stng aw. It
shoud be notced that n the b t s provded that the amount of the net
oss sha be used as a deducton n computng net ncome for the succeedng
ta abe years t s not aowabe, however, as a deducton n computng the
net oss of the succeedng ta abe year, snce to do ths woud aow the bene-
fts of the net oss to be taken not ony In the two succeedng ta abe years
but for an Indefnte tme unt It was absoutey wped out.
It seems cear from the foregong that Congress Intended that the net oss
of one year shoud be aowed as a deducton n computng the net ncome of
the succeedng year, ony to the e tent that the net oss dd not e ceed the net
ncome of the atter year, and that Congress dd not Intend such oss shoud
be aowed as a deducton n the succeedng ta abe year f there was no net
ncome In that year from whch to make the deducton, snce to do so woud
serve ony to ncrease the net oss of the atter year, resutng n an accumu-
aton or pyramdng of osses unt absoutey wped out.
Whe the oard specfcay overrued Natona Sag Co. v. Com-
mssoner, n ts second abama y-Products Corporaton decson
(18 . T. ., 919), the poston taken by the oard n the Natona
Sag Co. case s the poston taken by the ureau at ths tme the
case havng been appeaed by the ta payer. The second decson
by the oard n abama y-Products Corporaton v. Commssoner
has been nonacquesced n by the Commssoner see on page 67 ,
and petton for revew by the Crcut Court of ppeas has been
fed. The Moore Cotton Ms Co. case (17 . T. ., 662), non-
acquesced n by the Commssoner (C. . I 1, 71), whch n-
voves the Revenue ct of 1921, but whch contans anguage ncon-
sstent wth the foregong concusons, has been appeaed by the
Commssoner.
In summarzng, the net oss aocabe to members of the group for
1922 may be brought forward and deducted from the net ncome
aocated to the member for 1923. ut snce the group as a whoe
had no net ncome for 1923, the entre net oss for 1922 aocabe to
each member must be brought forward to 1924. s to 1924, the
1924 ct governs, and the oss aocabe to each member for 1922 s,
under secton 206(e) of sad ct, to be used as a deducton n com-
putng the member s net ncome tor 1924, snce the sad net oss was
not absorbed n 1923. The year 1924 s treated as the thrd year
n the computaton.
ut sad net oss may not be used as a deducton n 1924 beyond
the pont where there s ncome to the member to absorb t that s,
t may not be used to produce a oss whch woud enter nto the com-
putaton of consodated net ncome. Ths s true for ether the
second or the thrd year, n vew of the anguage of secton
206 (a) and (b). Net osses aocated to the members for 1923 may
be brought forward as provded n secton 206(f). Snce there s
no substanta dfference between the net oss provsons of the
Revenue cts of 1924 and 1926, the prncpes above stated are
equay appcabe n brngng forward osses to be apped aganst
ncome aocabe to members In 1925.
C. M. Chabest,
Genera Counse, ureau of Interna Revenue.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
189 208, rt. 1651.
S CTION 208. C PIT L G INS ND LOSS S.
rtce 1651: Defnton and ustraton of I -50-4863
capta net gan. G. C. M. 8787
R NU CTS O 192 4 ND 1920.
The capta gan provsons of secton 208 of the Revenue cts
of 1924 and 1926 are not appcabe to a ta payer engaged n de-
veopng rea estate and marketng the property by subdvson and
sae by ots.
n opnon s requested on the ssue whether for the ta abe years
1924, 1925, and 1926 the ta payer was entted to the beneft of the
provsons of secton 208 of the Revenue cts of 1921 and 1926, wth
respect to profts reazed n those years on the sae of ots n a certan
rea estate deveopment.
Durng the years under consderaton the ta payer reazed profts
aggregatng doars from the sae of rea estate ots n tract
No. , ocated n the vcnty of the cty of R. Ths property
conssted of y acres of farm and o and whch the ta payer n-
herted on the death of hs mother n March, 1013. rom 1913 to
1919 appro matey one-fourth of the acreage was devoted to the
producton of o, some wes beng operated drecty by the ta payer,
others under ease. The remander of the acreage was farmed. Due
to the growth of the cty of R that porton of the acreage nearest
the cty became too vauabe for the purposes for whch t was beng
used and the ta es on the property grew burdensome.
In 1919 the ta payer entered nto a contract wth a frm of at-
torneys wth a vew to puttng the property on the market by sub-
dvdng t and seng t n ots. Under ths contract the frm
assumed charge of the sae of the ots on a commsson bass. The
whoe acreage was not subdvded at once but a sma porton was
potted, mproved, and sod, foowed by another porton as soon
as the precedng porton was sod. The ta payer personay entered
nto arge contracts for the gradng, pavng, sewerng, etc., of the
varous subdvsons as they were prepared for the market. Gas
mans, water mans, and ght conduts were nstaed. The ta -
payer purchased arge amounts of equpment for gradng, cement
m ng, pavng, and other thngs necessary to prepare the property
for the market. Men were hred, materas were purchased n great
quanttes, tract offces were but, a pay-ro system was nstaed, a
of whch were pad for by the ta payer s ndvdua checks when the
correctness of the abtes therefor was certfed to by the frm of
attorneys. advertsng bs were pad by the ta payer. In
the course of pacng the varous subdvsons on the market the ta -
payer constructed at east dwengs of dfferent szes as nduce-
ments to prospectve buyers to buy and bud.
The ta payer concedes that the profts reazed from the sae of
mprovements made wthn two years pror to the date of sae s
sub|ect to ta under sectons 210 and 211 of the 1926 ct, but con-
tends that the profts on the sae of the ots are ta abe as profts on
the sae of capta assets as provded by secton 208 of the 1924 and
1926 cts. The ta payer asserts that he was not personay engaged
n the rea estate busness, snce a saes were e ecuted by the frm of
attorneys under ther contract, and that the and was nether hed
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
208, rt. 1651. 190
prmary for sae n the course of any trade or busness, nor were the
saes made n accordance wth any trade or busness as contempated
by the provsons of secton 208(a) 8 of the 1924 and 1926 cts, for
the reason that the and was farmed or devoted to o operatons up
to the tme t was deveoped and paced on sae n ots. The ta -
payer contends that the subdvson of the farm nto ots and the
sae of the ots consttuted a qudaton, and no more, of hs reaty
hodngs.
Secton 208(a)8 of the 1924 ct reads as foows:
The term capta assets means property hed by the ta payer for more
than two years (whether or not connected wth hs trade or busness), but
does not Incude stock n trade of the ta payer or other property of a knd
whch woud propery be ncuded In the Inventory of the ta payer f on hand
at the cose of the ta abe year, or property hed by the ta payer prmary
for nae n the course of hs trade or busness.
Secton 208 (a) 8 of the 1926 ct contans the same provson n
dentca anguage.
Irrespectve of how the and was acqured, or to what use t was
put pror to the tme the ta payer began to subdvde and se the
and by ots, the ta payer s operatons, |udgng by ther magntude,
and by the mprovement of the property, couped wth the erecton
and sae of dwengs, consttuted a typca subdvson operaton,
dfferng n few partcuars from the ordnary ot subdvson pro|-
ect. The fact that the seng was not done by the ta payer per-
sonay s not mportant. In smar operatons conducted by cor-
poratons, the actua work of seng, of management, and of atten-
ton to many detas s unformy done by subordnates and not by
the offcers of the corporaton.
Whether the ta payer was or was not n the rea estate busness,
t s perfecty obvous that he was engaged and very heavy engaged
n the busness of subdvdng and, mprovng and seng ots, and
that n the course of that busness he dd more than merey qudate
hs reaty hodngs. Moreover, ths contnued over a ong perod
of tme, and ths busness undoubtedy must have demanded con-
sderabe of hs tme, attenton, and, to a certan e tent, hs persona
supervson. No contracts were et wthout hs approva he sgned
a checks, and a orders for materas. s was sad by ths offce
n Genera Counse s Memorandum 6630 (C. . III-2, 79), The
Department has ong mantaned that the typca subdvson pro|-
ect, requrng consstent effort and attenton over a consderabe pe-
rod of tme, s ceary a busness enterprse. The ta payer s conten-
ton that he was engaged n farmng and n the producton of o and
n varous other nes of endeavor does not meet the pont. man
may be engaged at the same tme n varous busness enterprses.
(See G. CM. 6630, supra.)
Compare, aso, the case of ohn M. Wech, sr. (19 . T. ., 394),
where the oard, n nterpretng the cause reatve to property hed
prmary for sae n the course of a trade or busness, sad We
thnk that t means that where a person s engaged n busness and
n the conduct of that busness ses property whch s hed for sae
n the busness, such person may not cam the beneft of the capta
gans provson of the statute. nd, further on, ut the evdence
shows further that the pettoner had over a seres of years sub-
dvded dfferent tracts of and and hed the ots n such subdvsons
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
191
208, rt. 1651.
for sae. In other words, ths ast was an mportant (but not the
ony) factor n nducng the oard s opnon that the pettoner was
engaged n the rea estate busness.
The ta payer contends that Congress, n addng the phrase or
property hed by the ta payer prmary for sae n the course of hs
trade or busness, as contaned n secton 208 of the 1924 ct (and
n the 1926 ct) ntended to permt the sae of and, whch had en-
hanced n vaue, wthout the fear of a prohbtve ta on the unrea-
zed ncrement that had been earned over a seres of years. Whe
that s undoubtedy true, st Congress ceary stated that among
capta assets, as defned n sad secton 208, was not to be ncuded
property hed prmary for sae n the course of the ta payer s
busness. When the ta payer decded, n 1919, to subdvde and se,
and proceeded to subdvde and se the property on a systematc
scae of great magntude e tendng over a perod of years, t s cear
that he began to engage n a busness enterprse, and that thence-
forth he hed the property prmary for that purpose. In Genera
Counse s Memorandum 1736 (C. . I-2, 11), where a trust was
engaged n seng ots t owned and the proceeds from the saes were
ordnary dstrbuted to the benefcary so that the pro|ect came to
an end when a the ots were sod, the trust was hed to be engaged
n busness. Moreover, t has been hed n some cases that a corpo-
raton s engaged n busness though t s organzed merey to qu-
date the estate of a deceased person ( dgar states Corporaton v.
Unted States, 65 Ct. Cs., 415, T. D. 4180. C. . II-2, 381 Conham
odng Co. v. Wcuts, 21 ed. (2d) 91, T. D. 4090, C. . I-2,
374) or merey to hod property for utmate sae (Tarmar Coa Co.
v. ener, 34 ed. (2d), 725).
In ths connecton the attenton of ths offce s drected to the
decson of the oard of Ta ppeas n the case of bert . eeney
(17 . T. ., 560), and nqury s made as to the appcabty of
that decson to the nstant case. The opnon of the oard n the
eeney case was acquesced n by the Commssoner (C. . I -1, 29).
That case nvoved the appcaton of the capta gan provson of
the Revenue ct of 1921, whch s found n secton 206 of that ct.
Snce the nstant case turns on the queston whether the reaty sod
by the ta payer comes wthn the scope of the words property hed
by the ta payer prmary for sae n the course of hs trade or
busness, as contaned n secton 208(a)8 of the 1924 ct and the
1926 ct, whch phrase s not found n secton 206 of the 1921 ct,
and snce the oard s decson n the eeney case dd not nvove
an nterpretaton of that phrase, ths offce s of the opnon that
nether the opnon of the oard nor the acquescence theren by the
Commssoner appes to or contros the nstant case.
or the foregong reasons ths offce s of the opnon that the
ta payer was engaged n the rea estate busness, that he hed the
ots n queston prmary for sae n the course of such busness, and
that the profts reazed therefrom may not be treated as capta gan
and ta ed under the provsons of secton 208 of the Revenue cts
of 1924 and 1926.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
5212, rt. 23. 192
P RT II. INDI IDU LS.
S CTION 212. N T INCOM O INDI IDU LS
D IN D.
rtce 23: ases of computaton. I -83-4751
( so Secton 1208.) Ct. D. 222
INCOM ND C SS PRO ITS T S R NU CTS O 1918 ND 1928-
D CISION O COURT.
1. Net Income: Instament Saes.
Sectons 212(d) and 1208 of the Revenue ct of 1926 requre the
ncuson n computng ncome for the years n whch the Insta-
ment saes method of accountng s empoyed of amounts receved
n those years from Instament saes made n pror years, notwth-
standng the profts upon such saes were reported as ncome by the
ta payer n such pror years n whch t empoyed the straght
accrua method of accountng.
2. Invested Capta, Instament Saes Unreazed Profts.
Where the nstament saes method of accountng s empoyed,
unreazed profts at the begnnng of a ta abe year from nsta-
ment saes effected n pror years n whch the ta payer empoyed
the straght accrua method of accountng shoud be e cuded from
the computaton of nvested capta for such year.
Court of Cams of the Unted States.
ohn M. rant Co. v. The Unted Statet.
pr 7, 1930.
OPINION.
Ltteton, udge, devered the opnon of the court.
Pantff contends that by secton 212(d) of the Revenue ct of 1926 (26
. S. C. ., secton 953), Congress dd not Intend that payments receved In
years subsequent to a change from the accrua method of accountng to the
Instament saes method of accountng shoud be ncuded In ta abe net
ncome under the nstament saes bass of determnng net ncome that sec-
ton 1208 of the Revenue ct of 1920 ( 26 U. S. O. ., secton 953(a)) was
wthout sgnfcance e cept to make secton 212(d) retroactve n Its appca-
ton and whether Congress authorzed the ncuson n ta abe net ncome on
the nstament saes bass for 1918 and 1919 profts reazed from nstament
saes In 1917 and pror years, depends entrey upon the provsons of secton
212(d).
We thnk It Is cear, from a consderaton of these two sectons and the
egsatve hstory of the Revenue ct of 1926, that the statute e pressy
requres the Incuson In ta abe net Income n the years n whch the Insta-
ment saes method of accountng Is empoyed of amounts receved In those
years from Instament saes made In pror years, notwthstandng the profts
upon such saes were reported as Income by the ta payer In such pror years
In whch t empoyed the straght accrua method of accountng. ( um s,
Inc., 7 . T. ., 737, and Mayer d Co., 9 . T. ., 815.)
It Is further contended that If the statute requres the Incuson In Income
of payments receved In years subsequent to the change to the Instament
saes method of accountng, t Imposes a drect ta upon capta wthout
apportonment among the severa States n proporton to ther popuaton, n
voaton of secton 9, rtce I, of the Consttuton. There s no mert n ths
contenton. The amounts ta ed represent profts on nstament saes effected
n years pror to 1918, and the ta , therefore. Is necessary one upon ncome,
and not upon capta. Such amounts do not ose ther character as ncome
merey because, under n new method of accountng whch the ta payer eected
to adopt, t s requred to treat them as Income In a year other than the one In
Whch they were orgnay reported under ts method of accountng. Profts
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
193
212, rt. 23.
earned subsequent to the s teenth amendment to the Consttuton do not
become capta of a nature such aa may not be sub|ected to ncome ta ,
athough such Imposton may resut In ta aton of such Income a second tme.
The amounts whch the defendant Incuded In pantff s ta abe Income for the
years Invoved consttuted Income under the s teenth amendment and, such
beng the case, t s wthn the power of Congress to prescrbe the tme, the
manner, and the method of accountng for such ncome for ta purposes. No
attempt s made by the statute to defne new ob|ects of ncome. It smpy
provdes that those ta payers who choose to report ther Income In accordance
wth ts provsons must report the ncome as t s reduced to possesson n
cash, notwthstandng the fact that some part of t had prevousy been
returned and ta ed under the accrua method of accountng empoyed n
earer years, and t s no defense to say that doube ta aton resuts.
(Tennessee v. Whtworth, 117 U. S. 129, 137 cUmch v. eman, 276 U. S.,
233 T. D. 4217, C. . II-2, 238 .)
Pantff contended In argument that the tota ta e acted by the defendant
n the ta abe years was n e cess of the proft from such saes and asserted
that, to the e tent of such e cess, t was a ta upon capta. There are no
facts to support ths contenton and counse fnay admtted that, n ths case,
ths dd not occur. We need not, therefore, consder whether n any case of a
change from the accrua to the nstament saes method of accountng a ta n
e cess of the proft upon the sae mght be e acted.
On the second queston, we are of opnon that unreazed profts on nsta-
ment saes made n 1917 and pror years shoud be e cuded from the computa-
ton of nvested capta for 1918 and 1919. Ths queston was consdered by
the Unted States oard of Ta ppeas n um s, Inc., supra, wheren t was
sad:
The Commssoner emnated from nvested capta of 1918, 1919, and 1920,
the profts ncuded n the outstandng 1917 nstament accounts recevabe,
at the begnnng of each of those years, as unreazed and not propery Incud-
abe In earned surpus. The pettoner opposes ths acton of the Commssoner
on the ground that the entre profts on nstament saes of 1917 were returned
and ta ed as ncome of that year. We thnk that the acton of the Comms-
soner s correct. or the years n queston, the nstament saes
method has been used n computng ncome. y the use of that method a of
the profts actuay reduced to possesson n those years are to be returned as
ncome of those years. The fact that some of these profts have been returned
n pror years s to be gnored, and they are, for the purposes of the ta , to be
treated as a part of the earnngs of the years n whch they are reduced to
possesson. Obvousy, the pettoner may not ncude n nvested capta of
any ta abe year, as earned surpus, the earnngs of that year and subsequent
years.
Ths s n accordance wth the practce of the Department n ts computa-
ton of nvested capta when the Instament saes method of accountng s
empoyed. In Soctor s Memorandum 632, of November 23, 1918, t was hed
that the unreazed proft contaned n nstaments unpad at the begnnng of
the ta abe year must be e cuded from surpus and undvded profts n com-
putng nvested capta for e cess-profts ta purposes.
or smar reasons we are of opnon that unreazed profts on nstament
saes made n 1918 shoud be e cuded from the computaton of nvested capta
for 1919. ( . . radford Pano Co., 15 . T. ., 1045.) In ths case the
oard of Ta ppeas sad:
The pettoner, however, has chosen to take advantage of the postponement
of the payment of ncome ta es unt the Instament payments upon ts saes
have been actuay coected. It thus procures the advantage of postponng
ta es unt cash coectons have been made, and, havng secured such advan-
tages, t shoud not compan f the accountng system resuts In some counter
dsadvantages.
In um s, Inc., the oard has estabshed the rue that un-
reazed and unta ed gans represented by accounts recevabe may not be n-
cuded n surpus by a ta payer reportng on the Instament-saes bass.
ke course of reasonng brngs us to the concuson that ad|ustments of surpus
for nvested capta purposes may be propery made In accordance wth the
accountng methods made necessary by the ta payer reportng upon an n-
stament-saes bass .
PantfT s not entted to recover. The petton must, therefore, be dsmssed,
and t s so ordered.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
213(a), rt 31.
194
S CTION 213(a). GROSS INCOM D IN D:
INCLUSIONS.
rtce 31: What ncuded n gross ncome. I -50-4862
G. C. M. 8826
R NU CT O 1926.
Renewa commssons on nsurance premums receved by a trust
created under the w of the decedent are ncome sub|ect to ta
to the e tent that the sums receved after the ta payer s death
e ceed the far market vaue of the contract rght at the decedent s
death. Recommended that I. T. 1563 (C. . II-, 49) be modfed.
n opnon s requested wth reference to the ta abty of
renewa commssons on nsurance premums.
It appears that at the tme of hs death on ugust , 1926,
was manager of a branch offce of the M Lfe Insurance Co.
under a wrtten contract whch gave hm stated percentages of the
annua renewa premums on a poces of nsurance wrtten
through hs offce. These commssons attached to a premums
pad for the frst 10 years of the fe of every pocy so wrtten or
unt the nsured ceased to pay such premums, whchever frst
occurred.
The contract rght to receve a percentage of future renewa
premums was ncuded as a part of decedent s estate for edera
estate ta purposes and was vaued, for that purpose, at 5a doars
pus.
The decedent s w created a trust to whch the percentages of
renewa premums were payabe, each year, after the decedent s
death. Ihe trust faed to fe a return for 1927, and a denquent
return on orm 1040 was prepared n the coector s offce for the
caendar year 15 27, showng undstrbuted net ncome of doars,
beng the fu amount of commssons on nsurance renewa pre-
mums receved durng that year.
The trustee contends that the trust s not sub|ect to ta on the
commssons unt the fu vaue of the contract, as set forth n the
estate ta return, s receved.
In Nchos v. Unted States (64 Ct. Cs., 241 certorar dened
277 U. S., 584) the decedent had been a partner n a frm operatng
as seng agents on commsson. Pror to hs death the frm had,
as agents, secured contracts for the sae of goods beongng to thrd
partes. Shorty after hs death the survvng partners coected
the commssons for securng the contracts. There was pad to the
decedent s estate as the decedent s share n these commssons the
sum of 78,322.36. The Commssoner determned that ths sum
was the vaue of the decedent s nterest n the partnershp for estate
ta purposes. The Court of Cams hed that under these crcum-
stances the rght to receve from the partnershp the dstrbutve
share to whch the decedent was entted passed at the tme of hs
death to the e ecutors as a part of the corpus of hs estate, and that
the same tem coud not aso be treated as ncome.
In Wam P. odget et a. v. Commssoner (13 . T. ., 1243
acquescence, C. . III-1, 5) Wam P. odget ded on une 28,
1923. e was a member of a partnershp, the artces of whch
provded that for a year after a partner s death the busness shoud
contnue, and that the decedent s estate shoud be entted to the
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
195
213(a), rt. 31.
same share of the net profts of the busness for that year as he
woud have receved f vng. Ths rght had been ncuded as a
part of hs estate for estate ta purposes at a vaue of 49,346.15, and
t was stpuated before the oard that ths was the true vaue of
the rght as of the date of the decedent s death. The e ecutors
receved a tota of 54,766.41 from the partnershp for the estate s
share n the profts durng the year after the decedent s death. Of
ths amount, 21,283.50 was receved before December 31, 1923, and
the baance durng the year 1924, a of whch was dstrbuted by
the e ecutors to the two resduary egatees n 1924. It was hed
that ony the e cess receved by the estate over the far vaue of
the rght at the decedent s death was ncome to the estate. The
opnon states:
It has been estabshed by numerous decsons of the oard, as we as of
the courts, that for edera Income-ta purposes the e ecutors of the estate
of a decedent take over the assets of the decedent Incudng choses n acton
at ther far market vaue on the date of the decedent s death and not at the
cost of cuch assets to the decedent. ( rank . Cark, e ecutor, 12 . T. .,
425 Dorothy Payne Whtney Straght, e ecutr , 7 . T. ., 177 Wam .
rank, admnstrator, 6 . T. ., 1071 ankers Trust Co. v. owers, 23 ed.
(2d), 941 Nchos v. Unted States, 64 Ct. Cs., 241, wrt of certorar dened
pr 16, 1928, 277 U. S., 584.)
The rght of the estate of Wam odget to receve the year foowng
the death of Wam odget the same share of the net profts of odget Co.
whch Wam odget woud have been entted to receve had he survved
was a vauabe contractua rght or chose In acton consttutng a part of
the assets of Wam odget whch passed on hs death to the e ecutors of
hs estate. If the e ecutors had sod the rght to receve such profts for
49,346.15 It s apparent that the estate woud have reazed no ta abe
ncome from the transacton. The rght whch the e ecutors receved to
coect these profts was a capta asset of the estate and the vaue of such
asset receved by the e ecutors consttuted the bass for determnng a gan
or oss upon the dsposton thereof. Ony the e cess receved on the dsposton
of the asset consttuted ta abe ncome. (Water R. McCarthy, e ecutor,
9 . T. ., 525 state of . Pumer ustn, 10 . T. ., 1055.) Compnre aso
orence L. en (6 . T. ., 617), wheren t was hed that payments
receved under an annuty do not consttute ta abe Income e cept to the
e tent that they e ceed the cost of the annuty. so compare Wam .
andcrbt et a., e ecutors (11 . T. ., 291), wheren It was hed that nterest
accrued to the date of decedent s death on securtes owned by hm and dv-
dends decared pror to hs death but payabe after hs death on stocks owned
by hm were a part of the corpus or prncpa of hs estate.
The stuaton whch obtans n these proceedngs s substantay dfferent
from that n rnest M. u, e ecutor (7 . T. ., 993). In that case t was
hed that the profts of the partnershp receved by the estate were abe to
ncome ta when receved by the e ecutors. It dd not appear n that case
that the choses In acton whch passed to the e ecutors at the date of the
death of the decedent had a far market vaue. No specfc vaue was assgned
to the chose n acton. In the present proceedngs the vaue of the chose n
acton s stpuated.
Ony 21,283.50 of the profts of the partnershp for the year foowng the
date of the death of Wam odget was pad over to the e ecutors durng
the year 1923. Ths s ess than the capta vaue of the rght to receve such
profts. It coud not be determned at the cose of 1923 that the e ecutors
woud receve any further amount from the partnershp. The amount receved
n 1923 must, therefore, be consdered smpy the return of a part of the capta
represented by the chose n acton. In 1924 the e ecutors receved and ds-
trbuted to the benefcares under the w 5,420.26 of profts from the partner-
shp n e cess of the vaue of the rght to receve them at (he date of the
death of the decedent. Ths e cess was ceary ta abe to the benefcares,
two-ffths to Wam P. odget and three-ffths to anne . odget.
It woud appear from these cases (see aso T. D. 4177, C. . II-2,
134 G. C. M. 5060, C. . II-2, 64 and G. C. M. 4983, C. . II-2,
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
5213(a), rt. 31.
196
136) that, n the nstant case, ony the e cess of the amount of com-
mssons receved over the far market vaue of the contract rght at
the decedent s death woud consttute ncome sub|ect to ta . the
servces for whch the commssons were payabe had been competey
performed n the nstant case pror to the decedent s death, so that,
n ths respect, the case s perhaps more neary on a fours wth
Nchos v. Unted States than was the odget case, where the profts
earned durng the year after the decedent s death ncuded profts
from new busness.
It may be contended, however, that n the nstant case the renewa
commssons were entrey dependent on the contnued payment of
premums by pocyhoders after the decedent s death, that a mere
contngent rght of ths nature s not truy property or corpus
at the tme of the decedent s death, rrespectve of how much vaue
may be assgned to t for estate ta purposes, and that consequenty
the commssons actuay receved must be ncome n ther entrety.
owever, though t s qute true that, wth respect to any one pocy,
t was mpossbe to foresee whether or not the premums woud
contnue to be pad, t s aso true that wth respect to a arge number
of poces (and n the nstant case a arge number were nvoved)
t was certan that many pocyhoders woud contnue ther pay-
ments and by consutng past records showng the average termna-
ton rate of renewas due to the death of pocyhoders or ther fa-
ure to pay premums whe vng, to determne, wth a not un-
reasonabe degree of accuracy, the tota amount that woud be pad.
The stuaton, therefore, s not comparabe wth the case, for
e ampe, of a contngent remander where the queston of whether
or not the remanderman w get anythng at a s ordnary a
mere gambe. (Sec umes v. U. 8.. 276 U. S., 487 O. D. 727,
C. . 3, 53.) Moreover, the degree of probabe accuracy attanabe
s far greater than can be secured n the case of computng the
vaue of an annuty for a snge fe where fe e pectancy tabes are
used (see en v. Commssoner, 6 . T. ., 617, acquescence C. .
II-1, 17), whch tabes, though accurate when coverng many ves,
are nevertheess key to be very wde of the mark n forecastng
the probabe duraton of a snge fe. Speakng generay, the
rght to receve the commssons from a arge number of poces
s aso far ess contngent n nature than s the rght of the estate
of a deceased partner to receve, for a year after the decedent s death,
the same share of the net profts of the busness that the decedent
woud have receved f he had ved, yet n the odget case, supra,
the Commssoner has acquesced n the vew that ony the e cess
of the sum receved by the decedent s estate over the far market
vaue of the rght at the decedent s death s ncome to the estate. In
many of such partnershp cases nothng at a woud be receved
by the estate because no profts woud he earned, whereas, n the
nsurance cases, t s usuay a practca certanty that numerous
premums w be pad.
It s true that n dwards v. eth (231 ed., 110), Woods v.
Leweyn (252 ed., 106), and Workman v. Commssoner (41 ed.
(2d), 139) the courts, reyng on the contngent nature of the
cam, hed that commssons on renewa premums pad after
March 1, 1913, for work performed pror to that date, were ta abe
ncome n ther entrety. owever, these cases nvove ony the
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
197
213(a), rt. 31.
queston of whether renewa commssons receved by the person
who actuay performed the servces are ncome n ther entrety
to hm. The nstant case nvoves the queston of whether the com-
mssons are ncome, n ther entrety, to a new ta abe entty,
namey, a benefcary of the decedent s estate. In cases nvovng
a decedent s estate, or a benefcary thereof, the argument for cap-
tazng the far market vaue of the rght s much stronger. In
the frst pace, the ureau has tsef captazed the rght by gvng
t a vaue for estate ta purposes. In the second pace, the courts
are thoroughy famar, apart from ncome ta aw, wth the vew
that, on the death of a decedent, hs choses n acton come to hs
estate as capta.
It s nterestng to note that the queston nvoved n the nstant
case was recenty consdered by the Supreme Court of Wsconsn
n the case of Ierzberg et a. v. Wsconsn Ta Commsson (194
Ws., 126, 215 N. W., 936), and t was hed that, on the decedent s
death, the far market vaue of hs rght to renewa commssons
was sub|ect to State nhertance ta , and that payments receved
by the estate after hs death were not sub|ect to the State ncome
ta unt, at east, the far market vaue of the rght at the decedent s
death had been recovered. In so hodng, the court dd not rey
on any pecuarty of the State aw, but cted Nchos v. Unted
States, supra, and owers v. erbaugh- mpre Co. (271 U. S., 170,
T. D. 3881, C. . -, 199) as authorty for ts concusons. More-
over, the case of the same oseph erzberg estate was before the
oard of Ta ppeas, for the years 1924, 1925, and 1926, on the
queston of whether the renewa commssons, for the purpose of
edera ncome ta , consttuted ncome, n ther entrety, to hs es-
tate, and ths offce agreed to stpuate to the effect that the estate
coud reaze no ncome unt the amount of renewa commssons
receved by t e ceeded the amount at whch the contract had been
vaued for edera estate ta purposes. The oard accordngy
decded the case on the bass of such stpuaton on May 29, 1930.
In dredge v. Unted States (31 ed. (2d), 924) the court hed
that annua payments receved by an assgnor of optons for mn-
ng eases, measured by the quantty of ore produced under such
eases, under a contract entered nto pror to March 1, 1913, const-
tuted ta abe ncome ony to the e tent of the e cess of the amount
receved over the March 1, 1913, vaue of the contract rght to such
payments, and that, when the recpent ded n 1918, the contract
rght was agan captazed to the e tent of ts far market vaue
at the date of hs death, ony the e cess of the amount receved over
such vaue consttutng ncome to hs estate. Wth respect to the
March 1, 1913, vaue queston, the court sad:
There s no reason why such a rght, transferabe, and avng a hgh, fary
defnte vaue, shoud not be regarded as property owned on March 1, 1913.
It s regarded as property by busness men and by the estate ta coector.
Identfcaton of property wth thngs tangbe s prmtve egn psychoogy.
(See Commons, Lega oundaton of Captasm, C. II.) There s no ques-
ton that a ta payer can deduct from a 1919 payment the March 1, 1913, present
vaue of hs rght to that payment, f on March 1, 1913, the rght was evdenced
by a nonnterest-bearng note. (Ruth Iron Co. v. Commssoner (C. C. .), 28
. (2d), 30.) nd we have hed smary where ta payer had on March 1,
1913, an nsurance pocy evdencng hs rghts to the future payment. (Lucas
. e ander (C. C. . C), 27 . (2d), 237.) It does not dstngush these cases
In prncpe that the payments there were to be defnte n amount, snce In
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
1213(a), rt. 31.
198
the present case payments were sure to be made, engneers coud cacuate
wth far defnteness what the payments woud be, and oskod s ormua
makes aowance for the chance of error. In Patt v. owers (D. C.) (13 .
(2d), 051), where ta payer In 1909 acqured a contract rght to 15 annua pay-
ments, t was hed that the obgaton owned on March 1, 1913, was property
or capta, and that a 1919 payment was ta abe ony as to the e cess over
the March 1, 1913, present vaue of the rghts to that payment. These cases
are not nconsstent wth dwards v. eth (C. C. .) (231 ., 110) and Woods
v. LeweUyn (C. C. .) (252 ., 106). There no attempt was made to prove
the 1913 present vaue of a contract rght the ta payer urged that the poet
1913 payments were pre 1913 ncome In toto merey because the servces whch
they compensated had been performed before 1913.
Wth respect to the queston of agan captazng the contract
rght at the decedent s death, the same court sad:
In case No. 5211, the stpuated vaue of the contract rght n 1918, at
testator s death, w be the bass for further cacuatons, rather tan the
1913 vaue. Secton 213(b)3 (40 Stat, 1065) e empts the vaue of property
acqured by gft, bequest, devse, or descent from gross ncome of the estate
. ven f dredge s w had not e pressy bequeathed hs contract
rght aong wth other resduary property to the e ecutor trustees, we shoud
bod that a dsposton of property by e ecutors Is wthn the meanng of ths
secton, both on a far constructon of the act and In vew of the unusuay
cear egsatve sancton of the eary admnstratve nterpretaton to ths
effect. (See ankers Trust Co. v. owers (D. O.), 23 . (2d), 941 (1926 ct)
ppea of Straght, 7 . T. ., 177.)
To hod that the renewa commssons are ncome n ther entrety
to the estate woud necesstate a dsapprova of the reasonng of the
Court of Cams n Nchos v. Unted States, supra, where the court
sad:
When, therefore, an Item s propery determned to consttute a
part of the gross estate of a decedent for estate ta purposes It can not by
any sort of reasonng be made to consttute a part of the ncome of the same
estate. It s a part of the corpus.
In vew, therefore, of Nchos v. Unted States, supra dredge v.
Unted States, supra and odget v. Commssoner, supra, and the
cases cted theren, and n vew of the other cases cted n ths
memorandum, t s the opnon of ths offce that ony the e cess of
sums receved after the decedent s death over the far market vaue
of the contract rght at the decedent s death s ncome, sub|ect to
ta . ccordngy, t s recommended that I. T. 1563, whch hods
that the sums are ncome n ther entrety, be modfed to accord wth
ths opnon.
owever, as stated n the dredge case, t does not foow that
nothng s ta abe unt the trust has receved payments to an aggre-
gate amount e ceedng the capta vaue of the contract. The court
sad:
In our |udgment, the rue propery appcabe n the crcumstances of the
Instant case s that ncome ta s due upon so much of each annua payment
as represents appro matey a proportonate amount of the proft on the whoe
transacton, ooked at from the standpont of March 1, 1913. The frst pay-
ments are ceary not whoy a return of cost. Whe for practca reasons t
may be desrabe so to dea wth them f there be a very hgh degree of un-
certanty as to what f any mnmum proft w resut from the transacton,
as n most cases of qudatng dvdends, ths s not true n respect to te
case.
Lkewse, n the nstant case, t s the opnon of ths offce that
ncome ta s due upon so much of each annua payment as repre-
sents appro matey a proportonate amount of the proft on the
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
199
5213(a), rt. 31.
whoe transacton ooked at from the standpont of the date of the
decedent s death. In other words, f the vaue of the contract at the
date of the decedent s death s assumed, for purposes of ustraton,
to be 100,000, and the tota amount e pected to be recovered thereon
s assumed to be 150,000, the rato of capta return to totc recepts
woud be 2 to 3, and one-thrd of each annua payment woud be
ncome to the trust unt the tota amount of 100,000 had been
recovered, after whch a future payments woud be ncome.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
rtce 31: What ncuded n gross ncome.
R NU CT O 1920.
Income to essee from sae of o and gas produced from pubc
doman ands n the State of Te as set apart for the beneft of the
State Unversty. (See Ct. D. 205, page 90.)
rtce 31: What ncuded n gross ncome. I -51-4871
Ct. D. 262
ncome ta revenue act op 1926 decson of supreme court.
Communty Income State of rzona Returns.
husband and wfe domced n the State of rzona may make
separate returns of communty ncome under the Revenue ct of
1920, each reportng one-haf of the ncome whch under the aws
of that State becomes upon ts acquston communty property.
Supreme Court of the Unted States. No. 106. October Term, 1030.
red O. Ooode, Coector of Interna Revenue for the Dstrct of rzona, v.
/. . och.
On cerUfcate from the Unted States Crcut Court of ppeas for the Nnth Crcut
November 24, 1930.
Mr. ustce Roberts devered the opnon of the court.
Ths cause presents the same queston as respects the return for ta aton
of communty ncome of a husband and wfe, ctzens of rzona, as was
presented n No. 15 Ct. D. 259, on page 202 , affectng spouses who are ctzens
of the State of Washngton.
ere och and hs wfe fed separate returns for 1927, each returnng one-
haf of the communty Income the Commssoner of Interna Revenue assessed
a defcency on the theory that och aone shoud have returned the entre
Income och pad under protest, and brought sut aganst the coector n the
dstrct court to recover the sum so pad. The coector demurred. udgment
went for pantff. The coector appeaed to the crcut court of appeas,
whch certfed questons to us. Ths court ordered the entre record sent up.
What we sad n No. 15 appes here f, under the aw of rzona, the wfe s
nterest In communty property s, n ega effect, the same as n Washngton.
The coector asserts that the rzona aw of communty property cosey
resembes that of Caforna (cf. U. 8. v. Robbng, 269 U. S., 315 T. D. 3817,
C. . -, 188 ) but concedes that n many respects ts provsons are smar
to those of the aw of Washngton.
We have e amned the statutes1 and authortes cted, and have concuded
that they present no sgnfcant dfferences from the Washngton system. In
La Tourette v. La Tourette (15 rz., 200) t was sad:
1 Not prnted.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
8213(a), rt. 31.
200
The aw makes no dstncton between the husband and wfe In respect
to the rght each has n the communty property. It gves the husband no
hgher or better tte than t gves the wfe. It recognzes a marta communty
wheren both are equa.
s In Washngton, each spouse has unmted testamentary power over hs
d her nterest n the communty, and upon faure to e ercse It, such Interest
passes to the descendants of the decedent.
The rzona Supreme Court has kened the communty to a partnershp.
( orsnthe v. Pascha, 34 rz., 380.) The husband as agent may not act n
fraud of hs wfe s rghts, and f he attempts to do so, she has a remedy n
the courts. (Grsty v. udgens, 23 rz., 339.)
nough has been sad to show that our concuson In No. 15 hods here,
and that the wfe has such equa nterest n communty Income as to entte
her to treat one-haf thereof as her ncome, and fe a separate return therefor
under sectons 210(a) and 211(a) of the Revenue ct of 1926.
Perhaps we ou ht aso to note that what s sad n No. 15 wth respect to
e ecutve constructon and egsatve hstory appes n ths case.
or the reasons above gven, and more fuy stated n the opnon In No. 15,
the |udgment of the dstrct court s affrmed.
The Chef ustce and Mr. ustce Stone took no part n the consderaton
or decson of ths case.
rtce 31: What ncuded n gross ncome. I -51-4872
Ct. D. 261
INCOM T U NU CT O 1026 D CISION O SUPR M COURT.
Communty Income State of Lousana Returns.
husband and wfe domced In the State of Lousana may
make separate returns of communty ncome under the Revenue
ct of 1926, each reportng one-haf of the ncome whch under
the aws of that State becomes upon ts acquston communty
property.
Supreme Court of the Unted States. No. 86. October Term, 1930.
acob O. ender, Coector of Interna Revenue for the Dstrct of Lousana,
v. Wam Pfaff.
On wrt of certorar to the Unted States Crcut Court of ppeas for the fth Crcut.
November 24, 1930.
Mr. ustce Roberts devered the opnon of the court.
The queston presented n ths case s the same as that deat wth n Nos. 15
Ct. D. 259, on page 202 , 84 Ct. D. 260, on page 201 , and 106 Ct. D. 262, on
page 199 . The ony varant s that here we are concerned wth the communty
property aw of Lousana. The case comes here on certorar to the fth Cr-
cut Court of ppeas, whch affrmed (38 ed. (2d), 649) a |udgment of the
dstrct court (38 ed. (2d), 642) n favor of the respondent, whereby respond-
ent recovered the amount of an addtona assessment pad under protest. s n
the other cases, the Commssoner made ths addtona assessment on the theory
that under the aw of Lousana the whoe communty ncome s to be treated
as the ncome of the husband.
If the test be. as we have hed t s, ownershp of the communty ncome,
ths case s probaby the strongest of those presented to us, n favor of the
wfe s ownershp of one-haf of that ncome. The reevant statutes of Lousana
are noted n the margn.1 So caed common property ncudes a property
acqured In any manner by husband and wfe durng marrage e cept donatons
made to one of the spouses, and e cept the wfe s earnngs and actons for
danuges when she Is vng apart from her husband, or carryng on a separate
busness or trade. The statutes speak of a marrage supernducng as a matter
Not prnted.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
201
213(a), rt. 31.
of rght partnershp or communty of acquets or gans. Repeatedy the
statutes refer to the reaton as a partnershp or communty. The de-
csons of the Supreme Court of Lousana ceary recognze the wfe s owner-
shp of one-haf of a the communty Income. They unequvocay decare that
the wfe s haf nterest n such communty property Is not a mere e pectancy
durng the marrage. (Phps v. Phps, 160 La., 813.)
s In the case of other States, whose aw we have dscussed n connecton
wth ths matter n No. 15, No. 106, and No. 84, each spouse may by w
dspose of ony hs or her one-haf of the communty and s poweress to affect
the other s haf. In ease of death ntestate one-haf descends to the hers of
the decedent, and the other spouse s poweress to prevent ths.
Whe the husband s the manager of the affars of the marta partnershp,
the mtatons upon the wrongfu e ercse of hs powers over communty prop-
erty are more strngent than n many States whch have a communty system.
In Lousana, f the husband proves, by reason of fnanca dffcutes or the
ke, an unft manager, the wfe may brng about an mmedate dssouton and
qudaton of the communty property. (Wof v. Lowry, 10 La. nn., 272
Webb v. e, 24 La. nn., 75 rown v. Smythe, 40 La. nn., 325.) nd when
the wfe sues for a separaton of the property she s entted to an accountng
from the husband for communty ncome or property n hs hands and to re-
mbursement and retrbuton for any act done by hm In fraud of her rghts.
( v. , 115 La., 489 Whte v. Whte, 159 La., 1065.)
In concuson, t may be noted that the Supreme Court of Lousana has cted
our own decsons n Warburton v. Whte (176 U. S., 484) and rnett v. Reade
(220 U. S., 811), Indcatng that the e poston of the wfe s rghts and of the
nature of the communty theren contaned correcty states the Lousana
doctrne.
Inasmuch, therefore, as, n Lousana, the wfe has a present vested nterest n
communty property equa to that of her husband, we hod that the spouses are
entted to fe separate returns, each treatng one-haf of the communty ncome
as Income of each of them as an Indvdua as those words are used n
sectons 210(a) and 211(a) of the Revenue ct of 1926.
The udgment of the crcut court of appeas s affrmed.
The Chef ustce and Mr. ustce Stone took no part n the consderaton or
decson of ths case.
rtce 81: What ncuded n gross ncome. I -51-4873
Ct. D. 260
ncome ta revenue act of 192 decson of surreme codrt.
Communty Income State of Te as Returns.
husband and wfe domced n the State of Te as may make
separate returns of communty ncome under the Revenue ct of
1926, each reportng one-haf of the ncome whch under the aws
of that State becomes upon ts acquston communty property.
Supreme Court op the Unted States. No. 84. October Term, 1930.
George C. opkns, Coector of Interna Revenue for the Second Dstrct of
Te as, v. O. W. acon.
On wrt of certorar to the Unted States Crcut Court of ppeas for the fth Crcut.
November 24, 1930.
Mr. ustce Roberts devered the opnon of the court
Ths case comes here on wrt of certorar to the Crcut Court of ppeas of
the fth Crcut. It nvoves the same questons wth respect to communty
ncome under Te as aw as are Invoved n Nos. 15 Ct. D. 259, on pa e 2021
and 106 Ct. D. 262, on page 199 under the aw of rzona and Washngton.
Respondent was assessed addtona Income ta for 1927, because he and
hs wfe had made separate returns and had each returned one-haf of the
communty ncome, whereas the Commssoner of Interna Revenue asserted
85942 31 14
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
213(a), rt. 8L
202
that the respondent must return the whoe thereof. Respondent pad under
protest, brought sut In the dstrct court (27 ed. (2d), 140), and recovered
|udgment. The coector appeaed and the crcut court of appeas affrmed
the |udgment. (38 ed. (2d), 651.)
In vew of our decson In No. 15, the ony matter to be e amned here Is
whether under the communty property system of Te as the wfe has a mere
e pectancy, as she woud under the aw of Caforna (cf. Unted States v.
Robbns, 269 U. S., 315 T. D. 3817, C. . -, 188 ), or on the contrary has
a propretary vested nterest In the communty property such as makes her an
owner of one-haf of the communty ncome.
The statutes contan sweepng provsons as to what sha be Incuded In
communty property. They provde that each spouse sha have testamentary
power over hs or her respectve nterest n the communty property. In the
event of faure to e ercse such testamentary power they provde that the
property sha go n the frst Instance to the descendants of the deceased spouse.
They provde, as s usua n States havng the communty system, that the
husband sha have power of management and contro such that he may dea
wth communty property very much as f t were hs own. In spte of ths,
however, t s setted that In Te as the wfe has a present vested nterest In
such property. ( rnod v. Leonard, 114 Te ., 535.) er Interest s sad to
be equa to the husband s. (Wrght v. ays, 10 Te ., 130.) It Is hed that
the spouses rghts of property n the effects of the communty are perfecty
equvaent to each other. ( rnod v. Leonard, supra.) These e pressons as
to the wfe s nterest are confrmed by the authortes hodng that f the
husband, as agent of the communty, acts n fraud of the wfe s rghts, she Is
not wthout remedy n the courts. (Stramer v. Coe, 15 Te ., 211 Martn v.
Moran, 32 S. W., 904 Watson v. arrs, 130 S. W., 237 Davs v. Davs, 186
S. W., 775.)
The appcabe statutory provsons are noted n the margn.1
In vew of what has been sad n No. 15, t remans ony to say that the
Interest of a wfe n communty property n Te as s propery characterzed
as a present vested nterest, equa and equvaent to that of her husband, and
that one-haf of the communty ncome Is therefore Income of the wfe. She
and her husband are entted to make separate returns, each of one-haf of
such ncome. The |udgment of the crcut court of appeas s affrmed.
The C r ustce and Mr. ustce Stone took no part n the consderaton
or decson of ths case.
rtce 31: What ncuded n gross ncome. I -51-4874
Ct. D. 259
ncome ta revenue act of 1926 decson of supreme court.
Communty Income State of Washngton Returns.
husband and wfe domced n the State of Washngton may
make separate returns of communty ncome under the Revenue
ct of 1926, each reportng one-haf of the ncome whch under the
aws of that State becomes upon ts acquston communty
property.
Supreme Coubt of the Unted States. No. 15. Octobeb Term, 1930.
urns Poe, Coector of Interna Revenue for the Dstrct of Washngton, v.
. . Seaborn.
On certfcate from the Unted States Crcut Court of ppeas for the Nnth Crcut.
November 24, 1930.
opnon.
Mr. ustce Roberts devered the opnon of the court.
Seaborn and hs wfe, ctzens and resdents of the State of Washngton,
made for the year 1927 separate ncome ta returns, as permtted by the
Revenue ct of 1926 (ch. 27, secton 223 (U. S. C pp., Tte 26, secton 964) )
1 Not prnted.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
203
213(a), rt. 31.
Durng and pror to 1927 they accumuated property comprsng rea estate,
stocks, bonds, and other persona property. Whe the ren estate stood n s
name aone, t s undsputed that a of the property, rea and persona, con-
sttuted communty property and that nether owned any separate property or
bad any separate ncome.
The ncome comprsed Seaborn s saary, nterest on bank deposts and on
bonds, dvdends, and profts on saes of rea and persona property. e and
hs wfe each returned one-haf of the tota communty Income as gross ncome
and each deducted one-haf of the communty e penses to arrve at the net
ncome returned.
The Commssoner of Interna Revenue determned that a of the ncome
shoud have been reported n the husband s return, and made an addtona
assessment aganst hm. Seaborn pad under protest, camed a refund, and,
on Its re|ecton, brought ths sut.
The dstrct court rendered |udgment for the pantff (32 ed. (2d), 916)
the coector appeaed, and the crcut court of appeas certfed to us the
queston whether the husband was bound to report for Income ta the entre
ncome, or whether the spouses were entted each to return one-haf thereof.
Ths court ordered the whq|e record to be sent up.
The case requres us to construe sectons 210(a) and 211(a) of the Revenue
ct of 1926 (U. S. 0. pp., Tte 26, sectons 951 and 952), an appy them, as
construed, to the nterests of husband and wfe In communty property under
the aw of Washngton. These sectons ay a ta upon the net ncome of
every ndvdua.1 The ct goes no further, and furnshes no other standard
or defnton of what consttutes an ndvdua s ncome. The use of the word
of denotes ownershp. It woud be a straned constructon whch, n the
absence of further defnton by Congress, shoud mpute a broader sgnfcance
to the phrase.
The Commssoner concedes that the answer to the queston nvoved n the
cause must be found n the provsons of the aw of the State, as to a wfe s
ownershp of or nterest n communty property. What, then, s the aw of
Washngton as to the ownershp of communty property and of communty
ncome, ncudng the earnngs of the husband s and wfe s abor
The answer s found n the statutes of the State, and the decsons nterpret-
ng them.
These statutes provde that, save for property acqured by gft, bequest, de-
vse, or nhertance, a property however acqured after marrage, by ether
husband or wfe, or by both, s communty property. On the death of ether
spouse hs or her nterest s sub|ect to testamentary dsposton, and fang
that, t passes to the ssue of the decedent and not to the survvng spouse.
Whe the husband has the management and contro of communty persona
property and ke power of dsposton thereof as of hs separate persona
property, ths power s sub|ect to restrctons whch are nconsstent wth
dena of the wfe s nterest as coowner. The wfe may borrow for communty
purposes and bnd the communty property. ( edng v. cter, 86 Wash., 194.)
Snce the husband may not dscharge hs se arate obgaton out of communty
property, she may, sung aone, en|on coecton of hs separate debt out of
communty property. ( dety Depost Co. v. Cark, 144 Wash., 520.) She
may prevent hs makng substanta gfts out of communty property wthout
her consent. (Parker v. Parker, 121 Wash.. 24.) The communty property Is
not abe for the husband s torts not commtted n carryng on the busness
of the communty. (Schramm v. Steee, 97 Wash., 309.)
The books are fu of e pressons such us the persona property Is ust
as much hers as hs (Marston v. Rue, 92 Wash., 12 )) her property rght
In It (an automobe) s as great as hs (92 Wash., 138) the tte of one
spouse was a ega tte as we as that of the other (Mahe v.
Whttaker, 10 Wash., 663).
Wthout further e tendng ths opnon, t must suffce to say that t s cear
the wfe has. In Washngton, a vested property rght n the communty prop-
erty, equa wth that of her husband and n the ncome of the communty,
ncudng saares or wages of ether husband or wfe, or both. descrpton
of the communty system of Washngton and of the rghts of the spouses, and
of the powers of the husband as manager, w be found n M:arburton v. Whte
(176 U. S., 484).
The anguage has been the same In each ct snce that of ebruary 24, 1919 (40
Stat., 1057).
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
213(a), rt. 31.
204
The ta payer contends that If the test of ta abty under sectons 210 and
211 s ownershp, t s cear that ncome of communty property s owned by
the communty and that husband and wfe have each a present vested one-haf
nterest theren.
The Commssoner contends, however, that we are here concerned not wth
mere names, nor even wth mere technca ega ttes that cang the wfe s
nterest vested s nothng to the purpose, because the husband has such broad
powers of contro and aenaton, that whe the communty asts, he s essen-
tay the owner of the whoe communty property, and ought so to be con-
sdered for the purposes of sectons 210 and 211. e ponts out that as to
persona property the husband may convey t, may make contracts affectng t,
may do anythng wth t short of commttng a fraud on hs wfe s rghts.
nd though the wfe must |on n any sae of rea estate, he asserts that the
same s true, by vrtue of statutes, n most States whch do not have the com-
munty system. e asserts that contro wthout accountabty s ndstn-
gushabe from ownershp, and that snce the husband has ths, quoad com-
munty property and ncome, the ncome Is that of the husband under sec-
tons 210-211 of the ncome ta aw.
We thnk n vew of the aw of Washngton above stated ths contenton
s unsound. The communty must act through an agent. Ths court has sad
wth respect to the communty property system (Warmrton v. Whte, 176
U. S., 404) that property acqured durng marrage wth communty funds
became an acquet of the communty and not the soe property of the one n
whose name the property was bought, athough by the aw e stng at the tme
the husband was gven the management, contro, and power of sae of such
property. Ths rght beng vested n hm, not because he was the e cusve
owner, but because by aw he was created the agent of the communty.
In that case, t was hed that such agency of the husband was nether a
contract nor a property rght vested n hm, and that t was competent to the
egsature whch created the reaton to ater t, to confer the agency on the
wfe aone, or to confer a |ont agency on both spouses, f t saw tt a wth-
out nfrngng any property rght of the husband. (See aso rnctt v. Reade,
220 U. S., 311, at 319.)
The reasons for conferrng such sweepng powers of management on the
husband are not fur to seek. Pubc pocy demands that n a ordnary cr-
cumstances, tgaton between wfe and husband durng the fe of the com-
munty shoud be dscouraged. Lawsuts between them woud tend to subvert
the marta reaton. The same pocy dctates that thrd partes who dea
wth the husband respectng communty property sha be assured that the
wfe sha not be permtted to nufy hs transactons. The powers of partners,
or of trustees of a spendthrft trust, furnsh apt anaoges.
The obgatons of the husband as agent of the communty are no ess rea
because the pocy of the State mts the wfe s rght to ca hm to account In
a court. Power s not synonymous wth rght. Nor s obgaton cotermnous
wth ega remedy. The aw s nvestture of the husband wth broad powers by
no means negatves the wfe s present nterest as a coowner.
We are of opnon that under the aw of Washngton the entre property and
Income of the communty can no more be sad to b that of the husband than
t coud rghty be termed that of the wfe.
We shoud be content to rest our decson on these consderatons. oth
partes have, however, reed on e ecutve constructon and the hstory of the
ncome ta egsaton as supportng ther respectve vews. We sha, therefore,
dea wth these matters.
The ta payer ponts out that foowng certan opnons of the ttorney
Genera,2 the decsons and reguatons of the Treasury have unformy made
the dstncton that whe under Caforna aw the wfe s nterest n commu-
nty property amounts to a mere e pectancy contngent on her husband s death
and does not rse to the eve of a present nterest, her nterest under the aws
of Washngton, rzona, Te as, and some other States s a present vested one.
They have accordngy dened husband and wfe the prvege of makng sep-
: Opnon of ttorney Genera Pamer, September 10, 1920 (32 Op. . G., 298) opnon
of ttorney Genera Pamer, ebruary 26. 1921 (32 Op. . G., 435).
Tbe opnon of ttorney Genera Stone, of October 9, 1924 (34 Op. . G., 395), and ba
etter of anuary 27, 1925, referrng thereto (see T. D. 3(570 C. . I -1, 19 ) dea ony
wth estate ta , and e press no opnon on the queston here Invoved.
See opnon of ctng ttorney Genera Mtche, of uy 16, 1927, as a resut of whch
ths and other suts were ntated (35 Op. . G., 265).
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
205
213(a), rt. 31.
arate returns of one-haf the communty Income n Caforna, but accorded that
prvege to resdents of such other State.
e rees further upon the fact that Congress has thrce. snce these decsons
and reguatons were promugated, reenacted the Income ta aw wthout change
of the verbage found n sectons 210(a) and 211(a), thus gvng egsatve
sancton to the e ecutve constructon. e stands aso on the fact that twce
the Treasury has suggested the nserton of a provson, whch woud mpose
the ta on the husband n respect of the whoe communty ncome, and that
Congress has not seen ft to adopt the suggeston.
On the other hand, the Commssoner says that, granted the truth of these
assertons, a dfferent stuaton has been created as respects 1926 and subsequent
years. or n the 1926 ct there was nserted a secton whch pany nd-
cated an ntent to eave ths queston open for the future n States other than
Caforna, whe cosng t for past years. The secton s coped n the margn.
We attrbute no such ntent to the secton as s ascrbed to t by the Com-
mssoner. We thnk that athough Congress had twce refused to change the
wordng of the ct so as to ta communty ncome to the husband n Washng-
ton and certan other States, n vew of our decson n Unted States v. Robbng
(269 U. S., 315 T. D. 3817. C. . -, 188 ), t fet we mght overturn the
e ecutve constructon and assmate the stuaton n Washngton to that we
had determned e sted n Caforna. Secton 1212 therefore was merey
nserted to prevent the serous stuaton as to resettements, addtona assess-
ments and refunds whch woud foow such a decson.
The same comments appy to the |ont resouton No. 88, Seventy-frst
Congress, on whch the Commssoner rees.
It s obvous that ths resouton was ntended to save the Government s
rght of resettement, In event that the proposed test suts, of whch ths s one,
shoud be decded n favor of the Government s present contenton. See the
report of the Ways and Means Commttee on the resouton (Congressona
Record, une 11, 1930, pages 10923-10925).
On the whoe, we fee that, were the matter ess cear than we thnk t s,
on the words of the ncome ta aw as apped to the stuaton n Washngton,
we shoud be constraned to foow the ong and unbroken ne of e ecutve
constructon, appcabe to words whch Congress repeatedy reempoyed n
cts passed subsequent to such constructon (New York v. Inos, 278 U. S.,
867 Natona Lead Co. v. Unted States, 252 U. S., 140 Unted States v. arrar,
281 U. S., 624), reenforced, as t s, by Congress refusa to change the word-
O. D. 426. pr, 1920 C. . 2, 941 T. D. 8071, ugust 24, 1920 C. . 3. 221 T. D.
8138, March 3, 1921 C. . 4, 288 Reguatons 62. artce 31, 1921 Revenue ct.
ct of November 28, 1921 (42 Stat., 227) ct of une 2, 1924 (13 Stat, 253) ct
of ebruary 26, 1926 (44 Stat., 9).
8 The provson desred by the Treasury was as foows: Income receved by any com-
munty sna be Incuded In the gross Income of the spouse havng management and contro
of the communty property. Ths cause was n the 1921 ct as passed by the ouse.
It was strcken out n the Senate. When the 1924 ct was ntroduced t contaned the
same provson, whch was strcken out by the Ways and Means Commttee and not
renserted.
Sbc. 1212. Income from any perod before anuary 1, 1925, of a marta communty n
the ncome of whch the wfe has a vested Interest as dstngushed from an e pectancy,
sha be hed to be correcty returned If returned by the spouse to whom the ncome
beonged under the State aw appcabe to such marta communty for such perod. ny
spouse who eected so to return such ncome sha not be entted to any credt or refund
on the ground that such Income shoud have been returned by the other spouse. (U. 8. C,
Supp. II, Tte 26, secton 964a.)
That the 3-year perod of mtaton provded In secton 277 of the Revenue ct of
1926 upon the assessment of ncome ta es Imposed by that ct for the ta abe year 1027,
and the 8-year perod of mtaton provded n secton 284 of the Revenue ct of 1920 In
respect of refunds and credts of Income ta es mposed by that ct for the ta abe year
1927 ba be e tended for a perod of one year n the ca6e of any marred ndvdua
where such Indvdua or hs or her spouse ed a separate Income-ta return for such
ta abe year and ncuded theren Income whch under the aws of the State upon recept
became communty property.
Sec. 2. The 2-year perod of mtaton provded In secton 275 of the Revenue ct of
1928 upon the assessment of ncome ta es mposed by Tte I of that ct for the ta abe
year 1928, and the 2-year perod of mtaton provded In secton 322 of the Revenue ct
of 1928 In respect of refunds and credts of Income ta es mposed by that ct for the
tn abe year 1928 sha be e tended for a perod of one year n the case of any marred
Indvdua where such Indvdua or hs or her spouse fed a separate ncome-ta return
for such ta abe year and ncuded theren Income whch under the aws of the State upon
recept became communty property.
Sec. 3. The perods of mtatons e tended by ths ont resouton sha, as so e tended,
be consdered to be provded In sectons 277 and 284 of the Revenue ct of 1920 and
sectons 275 and 322 of the Revenue ct of 1928. respectvey.
Sbc. 4. Nothng heren sha be construed as e tendng any perod of mtaton whch
has e pred before the enactment of ths ont resouton.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
7

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
213(a), rt. 36.
206
ng of the cts to make communty ncome n States whose aw s ke that of
Washngton returnabe as the husband s ncome.
The Commssoner urges that we have, n prncpe, decded the nstant
queston n favor of the Government. e rees on Unted States v. Robbns
(269 U. S., 315 T. D. 3817, C. . -, 188 ), Corss v. owers (281 U. S., 370
Ct. D. 188, G. . I -1, 254 ), and Lucas v. ar (281 U. S., 111).
In the Robbns case, we found that the aw of Caforna, as construed by
her own courts, gave the wfe a mere e pectancy and that the property rghts
of the husband durng the fe of the communty were so compete that he was
n fact the owner. Moreover, we there ponted out that ths accorded wth
the e ecutve constructon of the ct as to Caforna.
The Corss case rased no ssue as to the ntent of Congress, but as to ts
power. We hed that where a donor retans the power at any tme to revest
hmsef wth the prncpa of the gft, Congress may decare that he st owns
the ncome. Whe he has techncay parted wth tte, yet he n fact retans
ownershp, and a ts ncdents. ut here the husband never has ownershp.
That s n the communty at the moment of acquston.
In the ar case a husband and wfe contracted that any property they had
or mght thereafter acqure n any way, ether by earnngs (Incudng saares,
fees, etc.), or any rghts by contract or otherwse, sha be treated and con-
sdered and hereby s decared to be receved, hed, taken, and owned by us as
ont tenants . We hed that assumng the vadty of the contract
under oca aw, t st remaned true that the husband s professona fees,
earned n years subsequent to the date of the contract, were hs Indvdua
ncome derved from saares, wages, or compensaton for persona servces
under sectons 210, 211, 212(a), and 213 of the Revenue ct of 1918. The
very assgnment n that case was bottomed on the fact that the earnngs
woud be the husband s property, ese there woud have been nothng on whch
t coud operate. That case presents qute a dfferent queston from ths,
because here, by aw, the earnngs are never the property of the husband, but
that of the communty.
nay, the argument s pressed upon us that the Commssoner s rung
w work unformty of ncdence and operaton of the ta n the varous
States, whe the vew urged by the ta payer w make the ta fa uneveny
upon marred peope. Ths argument cuts both ways. When t s remembered
that a wfe s earnngs are a part of the communty property equay wth
her husband s, t may we seem to those who ve In States where a wfe s
earnngs are her own, that t woud not tend to promote unformty to ta the
husband on her earnngs as part of hs Income. The answer to such argument,
however, s, that the consttutona requrement of unformty s not ntrnsc,
but geographc. ( ngs v. Unted States, 232 U. S., 261 ead Money Cases,
112 U. S., 580 nowton v. Moore, 178 U. S., 41.) nd dfferences of State
aw, whch may brng a person wthn or wthout the category desgnated by
Congress as ta abe, may not be read Into the Revenue ct to spe out a ack
of unformty. orda v. Meon, 278 U. S., 12.)
The dstrct court was rght In hodng that the husband and wfe were
entted to fe separate returns, each treatng one-haf of the communty
ncome as ther respectve Incomes, and ts udgment s affrmed.
The Chef ustce and Mr. ustce Stone took no part n the consderaton
or decson of ths case.
rtce 36: Long-term contracts. I -32-4734
G. CM. 7998
R NU CT OP 1026.
ta payer Is not entted to report hs ncome from hs servces
as an archtect on the competed contract bass on the ground that
he Is pad party In advance of servces rendered under contracts
e tendng over more than one year.
n opnon s requested as to whether the ta payer s entted to
report ncome from hs contracts as an archtect, for the years 1925 to
1927, on the competed contract bass under the provsons of artce
36 of Reguatons 69.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
8

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
207
213(a), rt. 38.
The ta payer s an archtect and hs busness ncudes the drawng
of pans to be used n the constructon of budngs and the furnsh-
ng of the necessary supervson to secure the foowng of such pans
by the buder. The ta payer does no budng or constructng hm-
sef. egnnng n 1925 he was engaged to a substanta e tent as
an archtect for budngs takng more than one year to construct.
Under hs contracts draftng and supervsory servces were requred
for perods e tendng over more than one year. Under the contracts
the ta payer receved 60 per cent of the fee upon the competon of
the drawngs, whch ncuded the specfcatons and genera workng
drawngs, e cusve of detas. t the tme that ths 60 per cent of
the fee was receved ess than 60 per cent of the costs aocabe to
such contracts had been ncurred or pad. In a number of nstances
ony 50 per cent of the costs had been pad or ncurred when 60 per
cent of the fee was receved, and n one nstance ony 40 per cent
of the costs had been ncurred or pad.
The ta payer contends that the ncome thus refected for the frst
year s e cessve, because there s not charged aganst the ncome
a far share of the cost of earnng the same, whe the ncome refected
for the subsequent year or years s unduy depressed because more
than a far share of the cost of earnng that porton s charged
aganst t. The ta payer does not contend, however, that the costs
ncurred durng the ater perod are ncapabe of fary accurate
ascertanment at the outset. In other words, the ta payer does not
contend that he was compeed to make more drawngs than he con-
tempated when the contracts were entered nto, or that supervson
was more e tensve and hence more costy than he e pected. y
choce the ta payer contracted to be pad n advance when he bar-
ganed for and receved 60 per cent of the fee at a tme when ony
50 per cent or ess of the cost had been ncurred or pad. The ta -
payer, begnnng wth the year 1925, has kept hs books upon the
competed contract bass and has made ncome ta returns on that
bass, camng the rght to do so by vrtue of artce 36 of Regua-
tons 69. That artce provdes n part as foows:
Long-term contracts. Income from ong-term contracts s ta abe for the
perod n whch the ncome s determned, such determnaton dependng upon
the nature and terms of the partcuar contract. s used heren the term
ong-term contracts means budng, nstaaton, or constructon contracts
coverng a perod n e cess of one year. Persons whose ncome s derved n
whoe or In part from such contracts may, as to such ncome, prepare ther
returns upon the foowng bases:

(6) Gross ncome may be reported n the ta abe year n whch the contract
s fnay competed and accepted f the ta payer eects as a consstent prac-
tce so to treat such ncome, provded such method ceary refects the net
ncome.
The ta payer contends that hs contracts were ong-term con-
tracts upon the ground that they were constructon contracts cover-
ng a perod n e cess of one year. The ta payer aso contends that
he drew the pans and supervsed the erecton of the budngs, and
that he was accordngy the constructor of the budngs. It s the
vew of ths offce that the ta payer dd not bud or construct any-
thng, but smpy drew the pans and supervsed the work of con-
structon n so far as necessary. The person who had the construc-
ton contract was the budng contractor. It s true that the servces
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
8

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
6213(a), rt. 42.
208
performed by the ta payer under the contracts were concdent wth
the actua work of budng, but the work done by the ta payer
coud not be caed budng or constructon work. It was rather n
the nature of persona servces. The case of In re arrngton
(1 ed. (2d), 749), whch hed that engneerng contracts mght
be reported on the competed contract bass, was decded under
artce 3G of Reguaton 45, n whch the ony requrement was that
the person so reportng be engaged n contractng operatons. It
was conceded by the court, however, that under subsequent regua-
tons, n whch a more restrcted defnton of ong-term contracts s
gven, the engneerng frm coud not have reported ts ncome on the
competed contract bass.
One of the reasons why permsson to report on a competed con-
tract bass s gven n the case of budng, nstaaton, and con-
structon contracts s the fact that there are changes n the prce of
artces to be used, osses and ncreased costs due to strkes, weather,
etc., penates for deay, and une pected dffcutes n ayng founda-
tons whch make t mpossbe for any constructon contractor no
matter how carefuy he may estmate, to te wth any certanty
whether he has derved a gan or sustaned a oss unt a partcuar
contract s competed. Ths stuaton, however, does not obtan n
the case of archtects. None of the foregong vcsstudes affect
them. If after pans have been drawn the owner desres to have
them materay changed, thus causng the archtect addtona work
and e pense, the custom s to charge an addtona fee to cover the
same, and the addtona fee s generay provded for by contract.
The fact that there may be some dsproporton n the net ncome
reported each year, due among other thngs to the fact that the
archtect s pad party n advance of servces rendered, does not
|ustfy a resort to the competed contract method of reportng n-
come. s the contracts n the nstant case ony nvoved the draw-
ng of pans and the supervson of constructon to accord therewth,
t can not be hed that the ta payer s ncome was derved from
budng, nstaaton, or constructon contracts wthn the meanng
of the reguatons.
It s therefore the opnon of ths offce that the ta payer s not
entted to report hs ncome as an archtect on the competed con-
tract bass.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
rtce 42: Sae of persona property on I -52-4881
nstament pan. Ct. D. 263
( so Secton 271, rtce 1211.)
INCOM T R NU CT O 1028 D CISION OP COURT.
1. Income Sae of Persona Property Instament Pan.
Where a ta payer transfers the tte of persona property to the
purchaser, recevng 35 per cent of the purchase prce In cash In the
ta abe year n whch the sae s made and promssory notes for
the baance payabe n a subsequent year, the sae s not one on
the nstament pan wthn the meanng of secton 212(d) of the
Revenue ct of 1926 or of artce 42 of Reguatons 45, reatng to
the ncome ta , and a the proft on the sae s ncome n the year
of the sae.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
8

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
209
213(a), rt. 42.
8. Ta Labty dvsory Letter Concusveness Redeterm-
naton Commssoner s uthorty.
n advsory etter of a Commssoner to a ta payer based on a
supposttous case that a transacton reported n an unaudted
return s a sae on the nstament pan s not concusve on hs
successor In offce. In the absence of a bndng agreement between
the ta payer and the Commssoner, the Commssoner has the
authorty to ree amne and redetermne the ta abty of a
ta payer.
Court of Cams or the Unted States.
orace Overbey, ecutor of the state of ohn T. Overbey, Deceased, and
nnette . Overbey, v. The Unted States.
November 3, 1930.
opnon.
Whaey, udge, devered the opnon of the court.
bref statement of the facts of the case shows that ohn T. Overbey and
nnette . Overbey, husband and wfe, were resdents of the State of Te as n
1919, and the property heren referred to was communty property under the
aws of that State. They owned 613 shares of stock n the Wchta aey
Refnng Co., a Te as corporaton, whch stock had cost them 42,283.39. On
uy 5, 1919, the pantffs sod and transferred that stock to certan ndvduas
for 122,600, payabe 15 per cent n cash and. the baance n 17 equa monthy
nstaments. The nstaments were evdenced by the promssory notes of the
respectve purchasers, bearng 6 per cent nterest. No coatera was gven by
the purchasers to secure the notes. Durng the year 1919 the pantffs receved
86 per cent of the tota seng prce. On ugust 6, 1919, a of the physca
assets of the Wchta aey Refnng Co. were sod and transferred to the
Te homa O Refnng Co., and on the same day the board of drectors of the
Wchta aey Refnng Co. e ecuted a consent to the corporate dssouton of
that company, and on ugust 15, 1919, a certfcate of dssouton of the company
was fed wth the secretary of state.
The pantffs fed ther ncome-ta returns wheren they showed ths trans-
acton as an Instament sae and returned as Income for 1919 ony the amount
of cash receved that year.
Commssoner of Interna Revenue Wams, on pr 28, 1920, on the facts
as they were stated to hm by the nterested partes, and hs understandng of
the aw thereon, wrote to Congressman Parrsh e pressng the opnon that It
was an nstament sae and the stockhoders were wthn ther rghts n report-
ng In ther ncome-ta returns for 1919 ony the ncome from the payments
made durng 1919. Mr. Wams was the Commssoner unt and ncudng
pr 9, 1921. Mr. Mard . West was ctng Commssoner from that date
unt May 27, 1921, when Mr. ar became Commssoner. Under date of
May 13, 1921, whe ctng Commssoner West was n charge, the ureau of
Interna Revenue upon consderaton of further facts n the case and a re-
consderaton of the aw, hed that ths was not an nstament sae and a of
the proft on the sae was ncome from 1919. n addtona ta was assessed
aganst the pantffs, whch was duy pad. Subsequenty, on ebruary 24,
1925, whe Commssoner ar was n charge, the ureau of Interna Revenue
affrmed ths decson. Cams for refund were duy fed and re|ected.
The pantffs contend ths s a sae under the nstament pan as provded
n Reguatons 45 (artce 42) of the Treasury Department.
Pror to the ct of 1926 (secton 212(d)) there was no e pressed egsatve
authorty for the nstament saes method on whch to compute ncomes.
( um s, Inc., 7 . T. ., 737.) Unt then the ony methods provded by the
statutes were the cash recepts or dsbursement bass and the accrua bass.
The Commssoner of Interna Revenue n 1918, wth the approva of the Secre-
tary of the Treasury, n order to meet a thrd cass of eases, ssued Reguatons
45, artce 42, whch permtted returns to be made under certan condtons on
a parta payment or Instament bass. Reguatons 45, artce 42, reads
as foows:
Sae of persona property on nstament pan. Deaers In persona prop-
erty ordnary se ether for cash or on the persona credt of the buyer or
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
8

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
213(a), rt. 42.
210
on the nstament pan. Occasonay a fourth type of sae Is met wth, In
whch the buyer makes an nta payment of such a substanta nature (for
e ampe, a payment of more than 25 per cent) that the sae, though nvov-
ng deferred payments, s not one on the nstament pan. In saes on
persona credt, and n the substanta payment type |ust mentoned, obgatons
of purchasers are to be regarded as the equvaent of cash, but a dfferent
rue appes to saes on the Instament pan. Deaers n persona property who
se on the nstament pan usuay adopt one of four ways of protectng
themseves n case of defaut: (a) Through an agreement that tte s to re-
man n the seer unt the buyer has competey performed hs part of the
transacton (b) by a form of contract n whch tte s conveyed to the
purchaser mmedatey, but sub|ect to a en for the unpad porton of the
purchase prce (c) by a present transfer of tte to the purchaser, who at
the same tme e ecutes a reconveyance n the form of a chatte mortgage to
the seer or (d) by conveyance to a trustee pendng performance of the
contract and sub|ect to ts provsons.
It s cear from the facts In the nstant case that the pantffs do not
brng themseves wthn the provsons of Reguatons 46. Tte dd not re-
man n the seer unt the fna payment was made no en for the unpad
porton of the purchase prce was gven and there was no conveyance to a
trustee pendng the performance of the contract. If the pantffs are to
recover, they must come under secton 212(d) of the Revenue ct of 1926,
whch s made to retroactvey appy, n computng ncome, to the ct of 1918.
Secton 212(d) and secton 1208 of the Revenue ct of 1926 read as foows:
Sec. 212. (d) Under reguatons prescrbed by the Commssoner wth the
approva of the Secretary, a person who reguary ses or otherwse dsposes
of persona property on the nstament pan may return as ncome therefrom n
any ta abe year that proporton of the Instament payments actuay receved
n that year whch the tota proft reazed or to be reazed when the payment
s competed, bears to the tota contract prce. In the case (1) of a casua
sae or other casua dsposton of persona property for a prce e ceedng
1,000, or (2) of a sae or other dsposton of rea property, If n ether case
the nta payments do not e ceed one-fourth of the purchase prce, the n-
come may, under reguatons prescrbed by the Commssoner wth the approva
of the Secretary, be returned on the bass and In the manner above pre-
scrbed n ths subdvson. s used n ths subdvson the term nta pay-
ments means the payments receved n cash or property other than evdences
of Indebtedness of the purchaser durng the ta abe perod n whch the sae
or other dsposton s made.
INST LLM NT S L S.
Sec. 1208. The provsons of subdvson (d) of secton 212 sha be retro-
actvey apped n computng ncome under the provsons of the Revenue
ct of 1916, the Revenue ct of 1917, the Revenue ct of 1918, the Revenue ct
of 1921, or the Revenue ct of 1924, or any of such cts as amended. ny
ta that has been pad under such cts pror to the enactment of ths ct,
f n e cess of the ta mposed by such cts as retroactvey modfed by
ths secton, sha, sub|ect to the statutory perod of mtatons propery ap-
pcabe thereto, be credted or refunded to the ta payer as provded n
secton 284.
The pantffs do not brng themseves under the provsons of secton 212(d),
as t s admtted the purchase prce was more than a thousand doars, and
more than 25 per cent (. e., 35 per cent) of the consderaton was pad n
the ta abe perod.
If, however, they are not strcty wthn the provsons of the statute, the
pantffs contend the etter from Commssoner Wams, defnng the transac-
ton as a sae on the nstament bass, s bndng on hs successors In offce
and can not be dsturbed. The facts show Commssoner Wams had no
cam before hm when he wrote hs etter to Congressman Parrsh wth the
statement of what were supposed to be the correct and true facts. s etter
was advsory and based on a supposttous case. Income-ta returns of
the pantffs hnd been fed but not audted. s a matter of fact, the facts
presented to Commssoner Wams dd not correspond to the rea facts of
the transacton, as afterwards dscosed upon nvestgaton by Commssoner
ISar. Certan essenta facts were erroneousy stated to Commssoner
Wams. The stock sod wus never hed by a trustee as securty for the
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
8

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
211
213(b), rt. 72.
payment of the notes the tte to the physca assets of the company dd
not reman vested In the corporaton through the trustee for the beneft of
the stockhoders makng the sae, unt the ast nstament was pad a of
the assets of the Wchta aey Refnng Co. were conveyed to the Te homa
O Refnng Co. and the former corporaton surrendered ts charter before
the frst Instament fe due. owever, t makes no matera dfference whether
Commssoner ar beeved hs predecessor s rung to be erroneous n aw
or fact the Commssoner had the authorty to e amne the returns and
determne the ta . ven though the returns had been e amned, n the ab-
sence of a bndng settement, the Commssoner had the authorty to ree -
amne and redetermne the ta abty of the pantffs. (Sweets Co. of
merca, Ino., v. Commssoner of Interna Revenue, 40 ed. (2d), 436, and
cases cted Mohenny v. Commssoner of Interna Revenue, 39 ed. (2d),
856 Yokohama LIto washa, Ltd., 5 . T. ., 1248 ames Couzens, 11
. T. ., 1040 Younker ros., Inc., 8 . T. ., 333.)
The petton s dsmssed. It Is so ordered.
S CTION 213(b). G OSS INCOM D IN D:
CLUSIONS.
rtce 72: Proceeds of nsurance Compen- I -47- 841
saton Pensons. O. C. M. 8635
R NU CT O 1926 ND PRIOR R NU CTS.
The ta payer s the wdow of , who ded testate on March 20,
1011. Under the terms of the decedent s w, whch were accepted
by the ta payer In eu of her dower and/or statutory rghts, the
ta payer receved an annuty, persona property, cash, and the
use durng her fe of three parces of rea estate.
ed, that the wdow receved the benefts n part as purchaser
and n part as donee benefcary. The capta to be returned to
the ta payer as the March 1, 1913, bass of the purchased porton
of the annua payments s an aocabe porton of her dower
and/or statutory nterest as of March 20, 1911, reduced by the
entre annua payments receved by her between that date and
March 1, 1913.
n opnon s requested whether an annuty receved by a wdow
under a w, n eu of her dower and/or statutory rghts, can be
ascrbed a March 1, 1913, vaue for determnng the ta abe ncome,
f any, from the annua payments receved.
The ta payer s the wdow of , who ded testate on March 20,
1911. Under the terms of the decedent s w, whch were accepted by
the ta payer n eu of her dower and/or statutory rghts, the ta -
payer receved an annuty of 12a doars, persona property vaued at
1.2a doars, doars n cash, and the use durng her fe of three
peces of rea estate havng a tota vaue of 100.68a doars. The ta -
payer was 49 years of age at the tme of her husband s death. The
e amnng offcer has determned the vaue of the ta payer s dower
and/or statutory rghts to be 2,000.32 doars.
The ta payer states that snce her dower and/or statutory nterest
n her husband s estate was used not ony to purchase an annuty but
aso other property of consderabe vaue, the cost of the annuty to
her s ess than ts vaue on the date the annuty was acqured. She
aso states that because of the ow cost of the annuty to her, the
March 1,1913, vaue of the annuty was greater than cost, despte the
fact that amost two years had eapsed between the date of purchase
(March 20,1911) and the basc date (March 1, 1913).
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
8

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
213(b), rt. 72.
212
The proposton that the wdow s a purchaser of the benefts under
her deceased husband s w (ncudng annutes) s now too we es-
tabshed for argument. (Warner v. Wash, C. C. . (2d), 15 ed.
(2d), 307, T. D. 4257, C. . III-1, 245 Unted States v. oster,
0. C. . (1st). 20 ed. (2d). 700, T. D. 4258, C. . III-1, 247
en v. randes, C. C. . (8th). 29 ed. (2d), 303, T. D. 4250, C. .
III-1, 243 I. T. 2480, C. . III-2, 141.) Wth ths proposton
as a startng pont, the ta payer contends that she shoud not be
treated n any dfferent manner than any other purchaser of property
pror to March 1,1913. That s to say, t s argued that she s entted
to use as the bass of the property acqured by her upon the e change
the cost or March 1, 1913, vaue of the property, whchever s greater,
as provded n secton 204(b) of the Revenue ct of 1920 and the
correspondng secton of pror Revenue cts. On the bass of these
contentons, she reaches the concuson that the March 1, 1913, vaue
of her annuty rghts s greater than the cost, and that as a conse-
quence she s entted to treat such vaue as the capta to be returned
to her through the annua payments.
Wth the ta payer s concuson on ths pont ths offce can not
agree. The ta payer s whoe theory s that she e changed property
(her dower and/or statutory nterest) havng an estabshed vaue for
other property (benefts under the w1) whch had a greater vaue,
but that whe the resutng gan s not sub|ect to ncome ta , because
the transacton occurred pror to March 1, 1913, the capta bass
shoud be treated as the March 1. 1913, vaue of the rght to receve
the annua payments under the w. Ths theory presupposes a
cosed transacton and woud necesstate the concuson that had the
purchase or e change occurred subsequent to March 1, 1913, the ta -
payer woud have been sub|ect to ta upon the gan resutng from
such purchase or e change. In the three crcut courts of appeas
decsons, above referred to, the courts specfcay hed that the
capta to be returned to the wdow was the vaue of her statutory
nterest n her deceased husband s estate. The very fact that the
courts reached ths concuson woud appear to consttute a suffcent
answer to a ta payer who s contendng for a dfferent capta bass.
The ta payer contends, however, that snce the three decsons dd
not nvove purchases pror to March 1,1913, they are not controng
of ths phase of the nstant case.
Whe t s true that the three decsons dd nvove purchases made
subsequent to March 1, 1913, t s the opnon of ths offce that sec-
ton 204(b), supra, must be read n the ght of the concusons
reached by the courts n those decsons. Under those decsons there
s no more warrant for treatng such a transacton as cosed when
entered nto pror to March 1, 1913, than there s for treatng t as
cosed when entered nto subsequent to that date. Snce, under the
three crcut courts of appeas decsons, supra, the wdow who pur-
chases benefts under her deceased husband s w subsequent to
March 1,1913, can not treat the vaue of the rght to receve the entre
benefts under the w as her capta to be recovered, t foows that
the wdow who purchases pror to the basc date has no greater rght
n ths respect.
In ths same, connecton t shoud be noted that after carefu con-
sderaton of the appcabe decsons, the concuson was reached n
1. T. 2480. supra, that the wdow who accepted the provsons of her
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
8

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
213
213(b), rt. 72.
deceased husband s w n eu of her dower and/or statutory rghts
receved the benefts n part as purchaser and n part as donee bene-
fcary. To the e tent that the wdow s regar ded as a purchaser,
she s a purchaser of vaue for vaue that s, wth her capta (her
dower and/or statutory nterest) she purchased rghts or benefts
under the w hewng an equa vahe. The e cess of the vaue of the
provsons under the w over the purchased provsons consttutes a
S ft the ncome from whch s ta abe under Irwn v. Gavt (268
. S., 161, T. D. 3710, C. . I -1, 123).
Secton 215 (b) of the Revenue ct of 1926 and the correspondng
secton of pror Revenue cts provdes as foows:
mounts pad under the aws of any State, Terrtory, Dstrct of Coumba,
possesson of the Unted States, or foregn country as ncome to the hoder of a
fe or termnabe nterest acqured by gft, bequest, or Inhertance sha not be
reduced or dmnshed by any deducton for shrnkage (by whatever name
caed) n the vaue of such nterest due to the apse of tme, nor by any de-
ducton aowed by ths ct for the purpose of computng the net Income of an
estate or trust but not aowed under the aws of such State, Terrtory, Dstrct
of Coumba, possesson of the Unted States, or foregn country for the
purpose of computng the ncome to whch such hoder Is entted.
ppyng the foregong, t appears that the corpus of the gft
provsons under the w (the ncome from whch was used to make
up a porton of each annua payment) consttuted an ne haustbe
asset (secton 215(b), supra) not sub|ect to ta n the frst nstance
(secton 213(b) 3 of the Revenue ct of 1926 and the correspondng
secton of pror Revenue cts), but the ncome from such gft corpus
s sub|ect to ta n ts entrety. (Irwn v. Gavt, supra.)
It foows that nether the gft corpus nor the ncome therefrom
are of any sgnfcance n attemptng to ascertan the wdow s re-
coverabe capta as of March 1,1913. ecause of ts terms, however,
secton 215(b), supra, does not appy to the purchased provsons
under the w.
ccordngy, the ony effect that secton 204(b), supra, has upon
the nstant case s that a computaton of the wdow s unrecovered
capta as of March 1 1913, must be made for the purpose of com-
parng that amount wth the far market vaue as of that date of her
rght to receve a return of her capta over the years of payment.
The ta payer s unrecovered capta as of March 1,1913, may be ascer-
taned n the nstant case by deductng from her capta on March
20, 1911, the annua payments receved between March 20, 1911, and
March 1, 1913. It s obvous that because of the dscount factor the
cost (unrecovered capta) must be greater than the far market
vaue of the rght to receve the same amount of capta n deferred
payments.
The fact that the vaue of the wdow s benefts under the w can
not be treated as the capta to be returned to her does not, however,
necesstate the concuson that the benefts under the w can not be
assgned a vaue for any purpose. or e ampe, n the nstant
case, the wdow receved an annuty, the use of rea property for fe,
cash, and persona property. er capta (the vaue of her dower
and/or statutory nterest) was used to purchase a of these benefts.
If t becomes necessary to determne the cost of one or more of the
dfferent benefts under the w, t s obvous that an aocaton of
her purchase prce or capta must be made to the severa benefts
receved. (Cf. St. Lous Screw Co., 2 . T. , 649, C. . II-1, 28.)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
8

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
214(a)9, rt. 203.
214
In other words| t can not be sad that she used the capta to pur-
chase the annuty aone and that the other benefts under the w
were gfts, or vce versa. aung the benefts under the w for
purposes of aocaton does not confct wth the court decsons whch
deny the rght to use such vaue as the capta bass of the benefts.
It s therefore the opnon of ths offce that the capta to be re-
turned to the ta payer as the March 1, 1913, bass of the purchased
porton of the annua payments s an aocabe porton of her dower
and/or statutory nterest as of March 20, 1911, reduced by the entre
annua payments receved by her between that date and March
1, 1913.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
rtce 88: Compensaton of State offcers and empoyees.
R NU CT O 1026.
Ta abty of compensaton receved by offcers and empoyees of
a State or potca subdvson thereof, for 1925 and subsequent
years. (See Mm. 3838, page 137.)
S CTION 214(a)9 D DUCTIONS LLOW D
INDI IDU LS: D PL TION.
rtce 203: mount returnabe through depe- I -48-4848
ton and deprecaton deductons n the case G. C. M. 8650
of essee
R NU CTS O 1021, 1924, ND 1026.
On ebruary , 1901, the owners of certan property e ecuted
an o and gas ease for a perod of 12 years, wth prvege of
renewa and rght of assgnment. On May , 1908, the essee as
vendor, and two ndvduas as vendees, e ecuted an opton agree-
ment. On October , 1900, the essee and a corporaton e ecuted
an nstrument transferrng to the corporaton a the nterest,
rght, and tte whch he hed. On ugust , 1917, the essee ded.
Royaty payments to the estate were made by the vendee pursuant
to the October , 1900, contract, for the years 1923 to 1920, ncu-
sve. The essee s estate reported none of these payments as
ncome n ts returns for the years n queston, on the theory that
such amounts were returns of capta.
ed, the essee s estate has no depetabe nterest. The deceased
transferred a of hs nterest for the baance of the term and for
a renewa perods, contractng ony that he mght receve back
the ease when and f the transferees shoud choose to abandon t
and thereby cease to compy wth ts terms. That nstrument
dvested the decedent of hs entre estate, dd not save hm a
reversonary nterest, and therefore operated as an assgnment.
The ta payer, hs estate n admnstraton, s therefore not entted
to depeton. covenant of the transferee to erect a drng rg
and keep same n operaton does not change the character of the
nstrument from assgnment to subease. The ta payer, however,
s entted to recover the far market vaue of the contract of
October , 1906, as of the date of the decedent s death n 1917.
n opnon s requested whether the ta payer s entted to an
aowance for depcton n connecton wth payments receved by t
and representng per cent of the net proceeds of certan foregn
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
8

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
215
214(a)9, rt. 203.
o propertes. Other questons presented w be answered n the
course of ths opnon.
On ebruary , 1901, certan ctzens of a foregn country, known
as the hers, were the owners of portons of the estate of . On
that date those hers e ecuted an o and gas ease grantng to C,
now deceased, the rght to e pore for and remove o and other
mneras from the subso of the estate for a perod of 12 years, or
unt ebruary , 1913, wth prvege of renewa and rght of
assgnment.
On May , 1906, C as vendor and D and as vendees e ecuted
an opton agreement n part as foows:
Memorandum of greement, between C, herenafter caed the vendor, party
of the frst part, and D and , herenafter caed the vendees, partes of the
second part:
I. The vendor agrees to se and transfer to the vendees or ther assgns at
ther opton e ercsed on or before ugust , 1906, a ease e ecuted to the
vendor, reatng to certan property stuated n the country of known as
the estate, dated ebruary , 1901, and e tendng durng 12 years there-
after, together wth a persona property beongng to the vendor, ocated
on sad premses, such ease to be vad and unencumbered.
II. In case ths opton s e ercsed, the vendees or ther assgns w e ecute
to the vendor an agreement assurng to hm a royaty upon a products of the
sad property e tracted under the sad ease durng ts sad perod, equa
to per cent of the net profts actuay derved by them from the marketng
and sae thereof (the e penses of brngng such products to the surface of the
so not to be charged), and w assume the obgatons of sad ease.
III. In further consderaton of ths opton the vendees agree that they
w forthwth oan to the vendor 2.5a doars, wthout nterest, repayabe
September , 1906, takng as coatera securty debentures of the M Trust,
of the par vaue of w pounds, such oan to be evdenced by a bank coatera
note In the usua form.

. The vendor w, n every possbe way, but at the e pense of the vendees,
assst them n securng any e tensons of the sad ease desred by the vendees.
If any such e tensons sha be obtaned by the vendees at an e pense of not
to e ceed 2.5a doars, currency, the royaty specfed n Cause II hereof
sha contnue durng the e tended perod or perods wthout the vendor bear-
ng any porton of such cost, but f the cost of obtanng such e tensons sha
e ceed 2.5a doars, currency, then the vendor sha bear per cent of
such e cess cost, whch sum sha be payabe out of hs royates as and when
they may become due to hm, provded that no part of any payments n e cess
of such 2.5a doars, currency, sha be chargeabe to the vendor wess he
sha have consented to Its beng made, and aso provded that f the vendees
or ther assgns sha agree to advance any sums to the owners of the property
n antcpaton of royates, no porton of such sums sha be chargeabe aganst
the vendor.
I. It s aso agreed that If at any future tme the vendees or ther assgns
sha determne to permanenty cease the e poraton and e potaton of the
propertes eased, then nstead of abandonng sad ease to the owner they
sha transfer t wthout charge to C ths not to affect any persona property
beongng to the vendees or ther assgns.
y a etter dated une , 1906, C was advsed that the opton
I am nstructed by Messrs. D and , by communcaton ust receved from
them, to advse you that they have eected and do hereby eect to e ercse
the opton contaned n the contract between them and yoursef, dated May ,
1906, wth reference to the ease upon the estate, and to compy wth the
terms of ths contract. They w very shorty submt to you drafts of the
necessary papers for your e ecuton.
On October , 1906, C, on hs own behaf, and G, as presdent of
the N Company, a corporaton organzed under the aws of State
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
8

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
214(a)9, rt. 203.
216
of R, wth ts prncpa pace of busness n the cty of S, met n
that cty before and e ecuted an nstrument wheren, after den-
tfcaton of the partes of the ease of ebruary , 1901, and the
ands theren mentoned, t was provded as foows:
rst: C by these presents cedes and transfers to sad N Company a the
Interest, rght, and tte whch he hods and owns by vrtue of or whch are
derved from the sad contract both for the entre tme whch remans for
ts performance, that s to say, unt the day of ebruary, 1913, and durng
the entre tme for whch the sad contract may be renewed by the owners
of sad ands after the makng of ths nstrument It beng provded that the
sad company sha obgate and bond Itsef to compy and carry nto effect
fathfuy each and every one of the obgatons contracted by hm n the
sad contract wth the owners of sad ands.
Second: It s further mutuay agreed between both partes that O or hs
assgns sha receve from the sad company n consderaton and as the
prce for ths transfer, and that the sad N Company for Itsef and n the
name of ts successors, sha pay to C free from a contrbuton or deduc-
ton for the e tracton and brngng to the surface of the products of the
sad ands n sum equa to per cent of the net profts whch sha be ob-
taned from the sae of the products whch may be e tracted from the sad
ands n conformty wth the provsons of the sad contract of ebruary
, 1901, and, moreover, the sad company bnds tsef and agrees that f by
reason of any e tenson or prorogaton of the sad contract and after Its
termnaton the sad company sha fnd t necessary to award any arger
compensaton than that provded In ths contract, and f t sha e ceed the
sum of 2. doars, currency, that then and In that event the same
sha be charged to the undvded product account after ebruary , 1913,
and n such maner that the proporton whch C ought to bear of the sad
e penses sha be pad out of that whch he ought to receve from the profts
and when the same sha become payabe nevertheess, ths agreement and
condton sha not be appcabe n case sad company sha accord any ad-
vance payment to the owners of sad ands on account of rent due for
e poraton or e potaton thereof.
Thrd: C decares moreover that he has not aready encumbered nor sub-
|ected to any responsbty the rghts acqured by vrtue of sad contract of
ebruary , 1901, and that unt the makng of ths nstrument he has com-
ped on hs part wth each and every one of the obgatons and agreements
contaned theren, and that f It sha become necessary, at the request of sad
N Company, or ts assgns, he w e ecute whatever documents may be proper
to the end of carryng nto fu effect ths cesson and transfer.
ourth: G says that In the capacty In whch he appears, and by vrtue
moreover of the sad authorzaton whch the sad company has conferred by
resouton adopted by the board of drectors thereof on the of une of
the current year, and whch appears spread upon the mnutes of the sad
board, y-hch have been e hbted to me, and whch have been coped by me,
the undersgned notary, are as foows:

y vrtue of the foregong G by these presents agrees that n the name
and on behaf of the sad N Company he accepts n ts favor ths nstrument of
cesson and transfer n each and every part and obgates the sad company:
1st. To pay to C and to hs assgns the compensaton e pressed n the
second cause of ths nstrument.
2nd. To add to the pant erected on sad property, as soon as may be poss-
be, a compete standard drng rg, and to operate t contnuousy uness
prevented by causes beyond ts contro.
3rd. To assume and carry out a the agreements, terms, and condtons
e pressed n the sad contract of ebruary , 1901, whch C has obged
hmsef to carry out.
On ugust , 1917, C ded ntestate, and thereafter hs two sons,
I and , were apponted admnstrators of hs estate. The estate
sted as an asset for estate ta purposes the contract of October ,
1906.
In 1922 a test we was sunk and arge producton resuted. The
per cent payments to the estate made pursuant to the October ,
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
8

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
217
214(a)9, rt. 208.
1906, contract for the years 1923 to 1926, ncusve, were n the fo-
owng amounts: 1923, 182.85a doars 1924, 110.18a doars 1925,
I76.73a doars and n 1926, 186.61a doars. The estate reported
none of the amounts as ncome n ts returns for the years n ques-
ton, on the theory that such amounts were returns of capta. The
e amnng revenue agent treated the entre amounts as ncome n the
years n whch receved and recommended correspondng defcences
aganst the estate.
On these facts the foowng questons arse: (1) Whether C re-
taned an nterest n the easehod estate transferred by the nstru-
ment of October , 1906 (2) f so, whether hs estate s entted
to a reasonabe aowance for depeton for 1923 and 1924 based on
the dscovery vaue of that nterest (3) f so, whether hs estate
s aso entted to percentage depeton for 1925 and 1926 (4) f
not, whether the estate may nevertheess recover the vaue of the con-
tract of October , 1906, as of ugust , 1917, the date of the
decedent s death and (5) f so, what s the correct method of aow-
ng such recovery
The ta payer, recognzng that the nstrument of October , 1906,
faed by ts terms to retan for C any nterest n the easehod
estate, contends that the entre contract between C and the D nterests
can be gathered ony from consderng together the opton of May
, 1906, the acceptance thereof dated une , 1906, and the nstru-
ment of transfer dated October , 1906 that the paragraph n the
opton readng as foows
I. It s aso agreed that If at any future tme the vendees or ther assgns
sha determne to permanenty cease the e poraton and e potaton of the
propertes eased, then nstead of abandonng sad ease to the owner they sha
transfer t wthout charge to C ths not to affect any persona property
beongng to the vendees or ther assgns
became part of the contract of transfer that such paragraph was
effectve to retan n C a reversonary nterest n the easehod estate
and to consttute the nstrument of transfer a subease that such
reversonary nterest was nherted by the estate and that t s a
property nterest n respect of whch depeton aowances may be
made. The ta payer aso contends that the nstrument of October
, 1906, havng ncorporated theren the foowng paragraph
To add to the pant erected on sad property, as soon as may be possbe,
a compete standard drUng rg, and to operate t contnuousy uness pre-
vented by causes beyond ts contro
thereby requred of the transferee a greater burden than that m-
posed upon the orgna essee by the orgna ease and that such
addtona requrement necessary created a new tenancy, a sub-
tenancy, and therefore rendered t mpossbe for the nstrument of
transfer to consttute a smpe assgnment of the easehod estate.
t the outset t s necessary to note that the opton agreement of
May, 1906, and ts acceptance of une , 1906, consttuted a pre-
mnary contract, and that by the terms of that contract a subsequent
nstrument of transfer was contempated. The opton agreement and
the acceptance thereof dd not consttute the fna contract between
the partes. On the contrary, pursuant to those premnary negota-
tons the contract of October , 1906, was e ecuted. It s e tremey
doubtfu, therefore, whether a the documents prevousy quoted may
35942 31 15
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
8

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
214(a)9, rt. 203.
218
be consdered together n determnng the contract of transfer of the
easehod estate. It s famar aw that the fna and utmate agree-
ment of partes to a contract s presumed to have been competey e -
pressed n the fna wrtten nstrument e ecuted pursuant to pre-
mnary negotatons, and, consequenty, antecedent agreements w
not be receved n contradcton of the terms of the fna contract.
Generay, upon e ecuton of the fna nstrument premnary con-
tracts are superseded and become vod. Snce the contract of Octo-
ber , 1906, by ts terms retaned no reversonary nterest n C and
conveyed hs entre nterest, t may we be questoned whether the
paragraph of the opton agreement reed upon bv the ta payer may
be treated as part of the contract of transfer. Lackng such treat-
ment, the nstrument of October , 1906, was obvousy an assgn-
ment.
It s unnecessary, however, to rest the decson n ths case upon
that ground aone, for even f t be conceded that the premnary
nstruments and the fna contract must be construed together n
order to determne the compete contract of the partes and ther
rghts arsng therefrom, t does not necessary foow that the
nstrument of transfer was a subease rather than an assgnment.
In ths connecton t shoud be noted that n the nstrument of
October , 1906, the deceased ceded and transferred to the N Com-
pany a the nterest, rght, and tte whch he hed or owned from the
sad contract (the contract of ease theren prevousy dentfed)
both for the entre tme whch remaned for ts performance and
durng the entre tme for whch the sad ease mght be renewed by
the owners of the ands. No defnte reservaton of any porton of
the term or of any other reversonary nterest appears: on the con-
trary, the transferee agreed to bond tsef to carry out the provsons
of the ease.
Consequenty, the deceased ceary parted wth hs entre nterest
n the easehod estate for the remander of the term and for the
perod of any renewa that mght be secured. ence, even f the
paragraph n the opton provdng for reconveyance or the ease to
C be construed most strongy n favor of the ta payer, t amounts to
nothng more than a covenant gvng C the rght to reenter the
premses n case of abandonment of the ease by the transferee and
consequent faure to fuf ts covenants. In short, by construng
a nstruments together and by gvng the specfed paragraph fu
effect, the resut s that the deceased conveyed a hs remanng term,
reservng a rght of reentry upon abandonment and consequentbreach
of the condtons of the ease by the transferees.
It s a genera rue n the Unted States that a rght of reentry on
condton broken, whatever the condton, does not create an estate n
ands, or even a contngent reversonary nterest theren t s a mere
chose n acton. The rue s thus stated n St. oseph St. Lotas
Raroad Co. v. St. Lous, Iron Mountan Southern Raway Co.
(135 Mo., 173, 36 S. W., 602, 33 L. R. ., 607) :
The rght of entry for condton broken s not an estate In ands,
or even a possbty of reverter. It s a mere chose n acton. (6 m. ng.
nc. Law, 903, Schuenberff v. arrman. 21 Wa., 44 ooper v. Cwmmngs,
4 Me., 859 Ted. Rea Prop., secton 277, note 1 4 ent, Comm. (8th ed.),
126, 123 1 Washb. Rea Prop., 474 Southard v. Raroad Co., 26 N. . Law,
21.)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
8

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
219
214(a)9, rt. 203.
The foregong rue has been e tensvey apped n cases where the
orgna essor sued the transferee of a ease for rent, the defense
beng that the nstrument of transfer, athough t passed the essee s
entre estate, was a subease because t contaned a covenant gvng
the essee rght of reentry upon the faure of the transferee to pay
rent or to perform other covenants n the ease or n the nstrument
of transfer, and consequenty that there was nether prvty of con-
the great ma|orty of cases the nstrument was hed to be an assgn-
ment for the reason that the entre estate was passed, and the rght
of reentry on covenant broken was not an nterest n and or a rever-
sonary nterest n the easehod estate, and accordngy the pan-
tffs had |udgment on the theory that prvty of estate e sted be-
tween the essor and the transferee. These same cases aso recognze
that whe the nstrument of transfer operated as an assgnment creat-
ng prvty of estate between the essor and transferee, t mght nev-
ertheess contan covenants creatng the reatonshp of andord and
tenant between the assgnng essee and the transferee that s,
the assgnment mght contan covenants (n addton to those n the
orgna ease) for the performance of whch the transferee woud
be bound to the orgna essee and for the breach of whch the essee
mght assert hs rght to reenter. The frst case ceary to e press
ths rue was Stewart v. Long Isand Raroad Co. (102 N. Y., 601, 8
N. ., 200), wheren the court sad:
The rues reatng to the effect of an assgnment of a ease are so we setted
that t s hardy necessary to do more than refer to them. Where a essee
assgns hs whoe estate, wthout reservng any reverson theren n hmsef,
a prvty of estate s at once created between hs assgnee and the orgna
essor, and the atter has a rght of acton, drecty aganst the assgnee, on
the covenant to pay rent, or any other covenant n the ease whch runs wth
the and but f the essee subets the premses, reservng or retanng any
such reverson, however sma, the prvty of the estate s not estabshed, and
the orgna andord has no rght of acton aganst the subessee, there beng
nether prvty of contract nor of estate between them. Where a essee of and
eases the same and to a thrd party, the queston has often arsen whether the
second ease s n ega effect an assgnment of the orgna ease, or a mere
subease. The queston has frequenty, and probaby most generay, arsen
between the essee and hs transferee, and much confuson w be avoded
by observng the dstncton between those cases and cases where the queston
has been between the transferee and the orgna andord. In the atter cass of
cases the rue s we setted that f the essee parts wth hs whoe term or
nterest as essee, or makes a ease for a perod e ceedng hs whoe term,
t w, as to the andord, amount to an assgnment of the ease and the
essence of the nstrument as an assgnment, so far as the orgna essor s
concerned, w not be destroyed by ts reservng a new rent to the assgnor,
wth a power of reentry for nonpayment, nor by ts assumng, by the use of
the word demse or otherwse, the character of a subease and the assgnee,
so ong as he contnues to hod the estate, s abe drecty to the orgna essor
on a covenants n the orgna ease whch run wth the and, ncudng the
covenant to pay rent. (Tay. Land. Ten. (7th ed.), 109 cks v. Dawnng,
1 Ld. Raym., 99 Pamer v. dwards, 1 Doug., 187 Smth v. Mapeback, 1 Term.
R.. 441 Porter v. rench, 9 Ir. Law R., r 14 Parmenter v. Webber, 8 Taunt.,
593 Doe v. ateman, 2 arn. d., 168 Woaston v. akeo, 3 Scott, N. R.,
616 Puck v. Dggcs, 5 gh (N. S.), 31 eaumont v. Marqus of Sasbury,
19 eav., 108 Thorn v. Woocombe, 3 arn. do., 586.) ut, as between the
orgna essee and hs essee or transferee, even though the orgna essee
demses hs whoe term, f the partes ntend a ease, the reaton of andord and
tenant, as to a but strct reversonary rghts, w arse between them.
The effect, therefore, of a demse by a essee for a perod equa to or e ceedng
hs whoe term, s to dvest hm of any reversonary rght, and render hs essee
partes
acton. In
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
8

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
214(a)9, rt. 203.
220
abe, as assgnee, to the orgna essor but at the same tme the reaton of
andord and tenant s created between the partes to the second demse If they
bo Intended.
In Se ton v. Chcago Storage Co. (129 111., 318, 21 N. ., 920) the
The genera prncpe as hed by a the authortes s that, where the essee
assgns hs whoe estate, wthout reservng to hmsef a reverson theren, a
prvty of estate s at once created between hs assgnee and the orgna essor,
and the atter then has a rght of acton drecty aganst the assgnee on the
covenants runnng wth the and, one of whch s that to pay rent but If the
essee subets the premses, reservng or retanng any reverson, however sma,
the prvty of estate between the subessee and the orgna andord s not
estabshed, and the atter has no rght of acton aganst the former, there
beng nether prvty of contract nor prvty of estate between them. The chef
dffcuty has been In determnng what consttutes such reservaton of a rever-
son. The more recent ngsh decsons, and a of the te tbooks treatng of
the queston whch have been accessbe to us, hod that, where a of the
essee s estate s transferred, the nstrument w operate as an assgnment
notwthstandng that words of demse nstead of assgnment are used, and
notwthstandng the reservaton of a rent to the grantor, and a rght of reentry
on the nonpayment of rent or the nonperformance of the other covenants
contaned In t.
In Crag v. Summers (47 Mnn., 189, 49 N. W., 742, 15 L. R. .,
236) the syabus by the court stated
Whenever a essee grants or transfers the whoe term for whch the premses
were eased to hm, eavng no reversonary Interest n hmsef, t amounts
to an assgnment, and s not a subease. Ths resuts by operaton of aw,
wthout regard to the form of the nstrument. mere reservaton of rent,
or of a rght of reentry for a breach of any of the condtons of the ease,
w not change the ega reatons of the partes, and the Introducton of
covenants nto the nstrument, whatever may be ther effect between the Im-
medate partes thereto, does not change the ega effect of gvng up the
reverson
and the opnon of udge anderburgh e pounded the rue as foows:
The doctrne that reservaton of rent, or a rght of reentry, s
to be construed as a suffcent reverson, s decared by the ast-named wrter
to be contrary to setted authorty. nd the rue s summed up by Mr.
Wood (voume 1, page 179, note) as foows: The weght of authorty sup-
ports the rue that, n order to create a ease Instead of an assgnment,
there must be a reservaton of a reverson In the essor, and that no form
of an nstrument can dspense wth ths requste. mere reservaton of
rent, or of a rght of reentry for a breach of any of the condtons of the
ease, w not change the ega reatons of the partes, and the
Introducton of covenants Into the nstrument does not change the ega effect
of gvng up the reverson. (Woodhu v. Rosentha, 61 N. 382.) It a
aso we setted that the same nstrument may In aw create an assgnment
of the term, as between the orgna essor and the assgnee, and aso the
reaton of andord and tenant between the partes to the second demse.
(Stewart v. Raroad Co., 102 N. Y., 608, 8 N. . Rep., 200, and cases.) ut
ths s the resut of contract ony, and not concusve on the orgna essor,
who comes Into prvty of estate by reason of the grant or assgnment of the
whoe terra. (Semton v. Storage Co., 129 111., 827, 21 N. . Rep., 920, and
cases.) Ths dstncton seems to be ost sght of In some of the cases.
To the same effect are Smey v. an Wnke (6 Ca., 605) Lee v.
Payne (4 Mch., 106) edford v. Terhune (30 N. Y., 453. 86 m.
Dec, 394) Loyd v. Cozens (2 shmead (Pa.), 181) dams v.
each (7 Leg. Int. (Pa.), 178) Inre ayey (177 ed., 522) Tayor
v. Marsha (255 111., 545, 99 N. ., 638) oden v. Tdwe (37
Oka., 553, 133 Pac, 54, 49 L. . . (N. S.), 869) and Gette
ros. v. rstocrat Restaurant (239 N. Y., 87, 145 N. ., 748).
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
8

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
221
215, rt. 293.
rom these cases t s cear that n the great ma|orty of State
courts and the one edera court where the queston has been
drecty presented a transfer by a essee of hs entre nterest s
regarded as an assgnment dvestng hm of hs easehod estate and
vestng same n the assgnee, regardess of covenants grantng the
orgna essee rght of reentry upon breach of covenants contaned
ether n the orgna ease or n the nstrument of transfer. The
test appears to be whether the entre remanng term s granted,
and f that test s met the nstrument s an assgnment regardess
of coatera covenants gvng a rght of reentry or a rght to demand
reconveyance of the ease. In such case prvty of estate e sts ony
between the orgna essor and the transferee, and the ntermedate
essee has no estate, no nterest n the easehod, whch may be made
the sub|ect of depeton.
In the ght of the foregong, t s cear that the ta payer n ths
case has no depetabe nterest. The deceased transferred a of
hs nterest for the baance of the term and for a renewa perods,
contractng ony that he mght receve back the ease when and t
the transferees shoud choose to abandon t and thereby cease to
compy wth ts terms. That nstrument dvested C of hs entre
estate, dd not save hm a reversonary nterest, and therefore op-
crated as an assgnment. The ta payer, hs estate n admnstra-
ton, s therefore not entted to depeton. (L. T. Waer v. Com-
mssoner, 40 ed. (2d), 892, affrmng 16 . T. ., 574 crod v.
Commssoner, C. C. . fth Crcut, not yet reported, affrmng
17 . T. ., 933.)
The above-quoted decsons kewse consttute a suffcent answer
to the ta payer s contenton that the covenant of the transferee to
erect a drng rg and keep same n operaton changed the char-
acter of the nstrument from assgnment to subease.
though the ta payer s not entted to depeton aowances,
t s entted to recover the far market vaue of the contract ot
October , 1906, as of the date of the decedent s death n 1917. In
dredge v. Unted States (31 ed. (2d), 924) the Crcut Court of
ppeas for the S th Crcut hed that the far market vaue upon
the date of the decedent s death of a contract smar to the one n
the nstant case mght be recovered by treatng as capta a propor-
ton of each annua payment, whch proporton was the rato of the
far market vaue of the contract on the date of the decedent s death
to the tota payments e pected to be receved under the contract.
The remanng porton of each annua payment was hed to be
ncome. That authorty s regarded as controng n ths case.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
S CTION 215. IT MS NOT D DUCTI L .
rtce 293: Premums on busness nsurance.
R NU CT O 1026.
Insurance premums pad by a corporaton as part of reasonabe
compensaton for persona servces actuay rendered. (See G. C. M.
8432, page 114.)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
8

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
6217, rt. 318.
222
S CTION 217. N T INCOM O NONR SID NT
LI N INDI IDU LS.
rtce 318: Interest. I -52- 882
( so Secton 233, rtce 550.) G. C. M. 8902
R NU CT OP 1926.
Interest receved by a foregn corporaton on a refund of a
edera ncome ta s ta abe as ncome from sources wthn the
Unted States.
n opnon s requested as to whether nterest receved on a refund
of a edera ncome ta by a foregn corporaton represents ta abe
ncome from sources wthn the Unted States.
The ta payer, a foregn corporaton organzed and e stng under
the aws of and wth prncpa offce n the country of Y, receved
n the year 1927 a refund of edera ta es n the tota amount of
doars, wth nterest thereon n the amount of .37a doars.
Secton 233(b) of the Revenue ct of 1926 n so far as appcabe
provdes:
In the case of a foregn corporaton, gross ncome means ony gross ncome
from sources wthn the Unted States, determned n the manner
provded n secton 217.
Secton 217(a) n so far as appcabe provdes:
In the case of a nonresdent aen ndvdua the foowng tems
of gross ncome sha be treated as ncome from sources wthn the Unted
States:
(1) Interest on bonds, notes, or other Interest-bearng obgatons of resdents,
corporate or otherwse .
That the nterest on the refund receved by the ta payer s not
nterest on a bond or note s apparent. Therefore, the determnaton
of the queston presented depends upon whether the nterest receved
shoud propery be construed to be nterest on nterest-bearng
obgatons of resdents, corporate or otherwse. Secton 284(a)
of the Revenue ct of 1926 provdes:
Where there has been an overpayment of any Income, war-profts, or e cess-
profts 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 of such e cess sha be
refunded mmedatey to the ta payer.
Secton 1116 of the Revenue ct of 1926 provdes:
(a) Upon te aowance of a credt or refund of any nterna-revenue ta
erroneousy coected nterest sha be aowed and pad
on the amount of such credt or refund at the rate of 6 per centum per annum
from the date such ta was pad to the date of the aowance of
the refund .
rom the above t s evdent that the statutory scheme requres
that n the case of an overpayment of ta es the amount so overpad
sha be refunded. Secton 1116, supra, provdes that nterest sha
be pad on the amount refunded from the date of the overpayment.
The use of or other nterest-bearng obgatons ndcates that a
bera constructon shoud be paced on that partcuar porton of
secton 217(a) herenbefore referred to. The term obgatons
has a broad and comprehensve ega sgnfcance. mong other
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
8

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
223
217, rt. 318.
thngs, an obgaton may be e pressed, mped, mperfect, cond-
tona, |ont, severa, or statutory. strct constructon shoud not
be paced on a word or decaraton that s used n the Revenue ct
when the word or decaraton so used has a broad meanng. It s to
be presumed that Congress when t enacted the aw was famar
wth and knew the meanngs of the terms used. In ack s Law
Dctonary, second edton, page 842, the foowng defnton of the
word obgaton appears:
The bndng power of a vow, promse, oath, or contract, or of aw, cy,
potca, or mora, ndependent of a promse that whch consttutes ega or
mora duty, and whch renders a person abe to coercon and punshment for
negectng t.
When t s determned that a ta s overpad that s, when the
Commssoner approves the schedue of refunds and credts the
abty of the Government to refund or credt the amount so over-
pad becomes f ed and determned, and the rght of the ta payer to
such nterest as s aowed by the statute kewse becomes f ed and
determned. The Government has, then, recognzed ts obgaton
to refund the amount of ta es overpad, aong wth nterest, as pro-
vded n secton 1116, supra. The obgaton thus recognzed s a
statutory nterest-bearng obgaton. The ta payer s the obgee
and the Unted States s the obgor. In the case of the mercan
scose Corf oraton et a. v. Commssoner (19 . T. ., 937) the
oard of Ta ppeas recognzed that nterest on the refund of ed-
era ncome ta es s nterest upon an obgaton of the Unted States
and s ta abe ncome to a domestc corporaton.
It s contended by the ta payer that n any event such an obga-
ton of the Unted States s not an obgaton of a resdent, cor-
porate or otherwse, wthn the meanng of secton 217, supra.
Ths offce, however, has ndcated a contrary vew. In Genera
Counse s Memorandum 3845 (C. . II-1, 178) the foowng
anguage was used:
Whe secton 217 (a) , Revenue ct of 1924 whch s den-
tca wth secton 217(a) of the Revenue ct of 192G , s not, and does not
purport to be, an e haustve cassfcaton of tems of ncome derved from
sources wthn the Unted States, ncome derved from obgatons of the
Unted States physcay present n the Unted States s as unmstakaby
ncome derved from sources wthn the Unted States under that secton
as t s under fundamenta prncpes. Obgatons of the Unted States are
bonds, notes, or other nterest-bearng obgatons of resdents, corporate or
otherwse, wthn the meanng of secton 217(a) 1, Revenue ct of 1924, by
reason of the facts that (1) the Unted States s a corporaton (D on v.
Unted State , 1 rock., 177, ed. Cas. No. 3,934: Unted States v. Maurce, 2
rock., 90, 26 ed. Cns. No. 15,747 In re Merrams state, 203 U. S., 179), and
(2) the Unted States s resdent wthn the terrtory of ts consttuent States.
If a resdence must be assgned to the Unted States as a soveregn State, cer-
tany the sent of government or the terrtory of the consttuent States of the
Unon must be consdered that resdence.
In vew of the foregong, t s the opnon of ths offce that the
nterest receved by the ta payer n the nstant case s ta abe as
ncome from sources wthn the Unted States, wthn the meanng
of sectons 233(b) and 217(a) of the Revenue ct of 1926.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
8

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
222, rt. 381.
224
S CTION 222. CR DIT OR T S IN C S
O INDI IDU LS.
rtce 381: nayss of credt for ta es. I -41 4795
G. C. M. 8478
R NU CT O 1026.
The chffre d affares ta es of rance mposed upon bankers, or
on ndvduas or corporatons seng goods whch they have manu-
factured or purchased, are not ncome ta es wthn the meanng
of sectons 222(a) and 238(a) of the Revenue ct of 1926 and,
therefore, do not consttute an aowabe credt aganst edera
ncome ta under those sectons.
n opnon s requested whether certan ta es pad by a ta payer
to the Repubc of rance consttute an aowabe credt aganst the
edera ncome ta under secton 222 of the Revenue ct of 1926.
Durng the year 1927 O Company, a partnershp of whch the
ta payer was a member and whch was engaged n the bankng bus-
ness, pad to the Repubc of rance 13y2d francs n ta es desgnated
as mpot sur e chffre d affares, and for the same year pad 2ar
francs n ta es whch were termed ta e specae sur e chffre
d affares.
n opnon s requested as to whether these ta es pad to the
rench Government may be aowed as a credt aganst the Unted
States ncome ta under the provsons of secton 222(a)4 of the
Revenue ct of 1926.
In addton to the opnon requested as to the chffre d affares
ta es pad by bankers an opnon s requested as to the same cass
of ta es pad by ndvduas or corporatons upon a turnover repre-
sented by the amount of saes actuay made of goods whch they
have manufactured or purchased.
The ta desgnated mpot sur e chffre d affares s eved under
the provsons of the decree of the Repubc of rance dated De-
cember 28, 1926. In Saes Ta Laws of oregn Countres pre-
pared by the Legsatve Reference Servce of the Lbrary of Con-
gress, the chffre d affares ta s referred to as foows:
aturc of ta . The ta consstng of the evy of the percentage payment of
the turnover (. e., the amount of saes made of every busness).
ass of tarn. The ta s eved as foows: (1) In the case of persons seng
goods or ob|ects (2) n the case of persons engaged n transactons other than
aes (contractors, carrers, bankers, mddemen, etc.). On the turnover repre-
sented by the amount of fees or profts actuay receved n any manner or
under whatsoever name (commerca fee, rent, nterest, dscount, etc.).
In rench sca Legsaton, by Dane Neurrsse and oseph
ezos, the ta s referred to as foows:
The ta on turnover was created by the aw of the 25th of une, 1920 (now
emboded n the decree of December 28, 1926). It s a ta on a commerca
nsactons, coected from the trader but borne utmatey by the consumer,
other words, ths ta s charged on a commerca undertakngs, whether a
proft Is reazed or not
In a codfcaton entted Chffre d ffares Ta es by a rench
author, Guhot, the decree of December 28, 1926, ncudes the chf-
fre d affares ta es among a arge varety of e cse ta es such as
stamp ta es, customs dutes, . e., regstry ta es, mortgage ta es,
mportaton ta es, eto. In tracng the egsaton pertanng to
chffre d affares ta es from 1920 through 1926, the aws sted
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
8

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
225
222, rt. 381.
by ths author ncude ta es on u ures, pubcatons, e ports and
mports, automobes, raw product e portatons, frearms, |ewery.
The ta desgnated ta e specae sur e chffre d affares s
eved under the provsons of artces 23 and 24 of secton 1, Chap-
ter II, of a decree of the Repubc of rance dated October 15, 1926,
whch decree codfed aws reatve to the scheduar ta es and the
genera ncome ta . In rench Income Ta Laws, pubshed by
the mercan Lbrary n Pars, artces 23 and 24 are transated as
foows:
rt. 23. part from the ta on ndustra and commerca profts, as s
estabshed n the precedng artces, there s a speca ta on the busness
turnover made by enterprses havng for ther prncpa ob|ect the reta sae
of commodtes or merchandse, when ths turnover e ceeds 1,000,000 francs,
after deductng the amount of e ports to foregn countres, gera, the coones
and protectorates.
bt. 24. The same ta s appcabe to bankng or credt estabshments, as
we as to enterprses of nsurance, savngs and captazaton, when ther
turnover e ceeds 1,000,000 francs.
s regards bankng and credt estabshments, the turnover must be taken
as the sum of brokerage, commssons, remttances, saares, rent, nterests,
dscounts, premums, and other defntey acqured profts, rght of custody,
etc., e cudng revenue from movabe securtes hed.
In rench sca Legsaton t s stated:
In addton to the ta on ndustra and commerca profts a speca ta a
eved when the tota busness recepts, saes abroad e cuded, amount to more
than 1,000,000 francs In the caendar year.
In a document prepared by the Legsatve Reference Servce
entted Ta aton of Incomes, Corporatons and Inhertances,
and prnted as Senate Document No. 186, S ty-eghth Congress,
second sesson, the ta on commerca profts s referred to as foows:
Independenty of the ta on profts derved from ndustra and commerea
undertakngs, a speca ta s mposed on the amount of busness transacted
by undertakngs havng for ther prncpa ob|ect the reta sae of provsons
or goods, when the amount of such busness e ceeds 1,000,000 francs, not
ncudng e ports to foregn countres, to gera, or to rench coones and
protectorates.
In Speca Crcuar No. 209, dated March 24, 1930, ssued by the
ureau of oregn and Domestc Commerce, Department of Com-
merce, the rench ta es are cassfed as foows:
Whenever a foregn company has an estabshment n rance for the purpose
of dong busness there, t s abe to ta aton. rench ta es are mposed on
revenue, on transactons, and on consumpton. Revenue or drect ta es em-
brace the State schedued ta es and the genera ncome ta .
The scheduar ta es are:
The ta on ndustra and commerca profts, rate 15 per cent.
The ta on mproved rea estate, rate 18 per cent.
The ta on unmproved rea estate, rate 18 per cent.
The ta on wages, saares, etc., rate 10 per cent.
The ta on ncome from bera professons, rate 12 per cent.
The ta on ncome from transferabe securtes, rate 18 per cent for rench
securtes and foregn under abonnement, or sub|ect to a speca regme of
regstraton, and 25 per cent for foregn securtes not under abonnement or
not sub|ect to a speca regme.
The ta on agrcutura profts, rate 12 per cent.
Supermposed upon a the precedng ta es, when pad by an Indvdua, Is
the genera Income ta . Ths s a purey persona ta , and does not touch
corporatons. It s eved on the tota amount of net annua ncome of each
ta abe person, after deductng nterest on debts, the amount of drect ta es
pad by hm, and busness osses suffered. The rate s 33 per cent, but t
s ony appcabe to ncreasng fractons of the net ncome, begnnng wth one
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
8

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
222, rt. 381.
226
twenty-ffth of the porton between 10/WO and 20,000 francs (of 1.8 per cent)
up to 550,000 francs, n e cess of whch sum the fu rate s appcabe. Reef
s aowed for ncome up to 10,000 francs, ncudng abatements for dependents.
ddtona centmes arc added to the prncpa amount of the State ta es on
rea estate for the Departments and communes.
The e 1e ou transactons and on consumpton, or ndrect ta es, are the
regstraton, stamp, and busness turnover ta es those on the consumpton of
certan products and on monopoes and customs dutes.
The busness turnover ta s eved on the vaue of goods mported nto
rance and aso on the saes prce whenever the same goods are resod n
rance. Goods made n rance and sod there are sub|ect to the same ta .
The rate s 2 per cent on ordnary artces. There s a 6 or 12 per cent ta on
u ury artces (accordng to whether they are cassfed as u ures by reason
of ther prce or ther nature), whch s coected ony on the sae to the
consumer and not whoesae transactons. When the tota recepts of a reta
busness, or bank or nsurance enterprse e ceed 1.000,000 francs n the caendar
year, t must pay a ta on the e cess whch progresses from 2.4 per 1,000 on
recepts between 2 and 10 mons to 6 per 1,000 on recepts over 200 mons.
Secton 222(a) of the Revenue ct of 1926 provdes:
(a) The ta computed under Parts I and II of ths tte sha be credted
wth:
(1) In the case of a ctzen of the Unted States the amount of any ncome,
war-profts, and e cess-profts ta es pad or accrued durng the ta abe year to
any foregn country or to any possesson of the Unted States and

(4) In the case of any such ndvdua who s a member of a partnershp or
a benefcary of an estate or trust, hs proportonate share of such ta es of
the partnershp or the estate or trust pad or accrued durng the ta abe year
to a foregn country or to any possesson of the Unted States, as the case
may be.
(5) The above credts sha not be aowed n the case of a ctzen entted
to the benefts of secton 262 and n no other case sha the amount of credt
taken under ths subdvson e ceed the same proporton of the ta (computed
on the bass of the ta payer s net ncome wthout the deducton of any ncome,
war-profts, or e cess-profts ta any part of whch may be aowed to hm as a
credt by ths secton), 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 hs entre
net ncome (computed wthout such deducton) for the same ta abe year.
Secton 238(a) of the Revenue ct of 1926 provdes for a credt
n the case of corporatons smar to that aowed ndvduas under
secton 222(a) of the Revenue ct of 1926.
The term ncome ta es as used n the foregong sectons means
a ta on ncome.
In Strat on18 Independence v. otcbert (231 U. S., 399) the court
n defnng ncome stated that ncome may be defned as the gan
derved from capta, from abor, or from both combned.
In sner v. Macomber (252 U. S., 189, T. D. 3010, C. . 3, 25)
consderaton was gven to the meanng of the term ncome. The
court stated that t had tte to add to the defnton n Stratton a
Independence v. owbert, provded t be understood to ncude
proft ganed through a sae or converson of capta assets, to whch
t was apped n the Doye case (Doyk v. Mtche ros. Co., 247
U. S., 179).
That the eement of gan s an essenta one n the determnaton
of ncome s hed n the case of Merchants Loan Trust Co. v.
Smetanka (255 U. S., 509, T. D. 3173, C. . 4, 34), wheren the def-
nton n sner v. Macomber was quoted wth approva.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
8

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
227
223, rt. 401.
In moers v. erbaugh- mpre Co. (271 U. S., 170, T. D. 3881,
C. . 1, 199) the court, n consderng the queston of what s
ncome, stated as foows:
The transacton here n queston dd not resut n gan from capta and
abor, or from ether of them, or n proft ganed through the sae or converson
of capta.
It s cear that the chffre d affares ta s not a ta on ncome
wthn the meanng of secton 222 of the Revenue ct of 1926. That
ta , whch was pad by the ta payer n the nstant case, and whch
s requred to be pad by bankers n genera, s a ta on the amount
of busness, or turnover, as measured by amounts receved from spec-
fed sources. s apped to ndvduas or corporatons seng goods
whch they have manufactured or purchased, the ta s measured
by the amount of saes.
In Unted States v. Phadepha, etc., Co. (262 ed., 188), whch
nvoved a case under the Corporaton cse Ta ct of ugust 5,
1909, the court sad:
Wo are concerned whoy wth an e cse ta . Whether t s a scentfcay
accurate concept of t or not, the concept of It as a charge for the prvege
of foowng an occupaton or trade, or carryng on a busness, gves us a
fary good workng dea of what It s. It s, n consequence, an ndrect
ta , and has no reference to earnngs or ncome, e cept that the sum of such
earnngs or ncome may (as anythng ese may) be made the measure of
the ta .
(See aso yton v. Unted States, 3 Da., 171 Pacfc Insurance
Co. v. Soue, 7 Wa., 433 nt v. Stone Tracy Co., 220 U. S., 107
Spreckes Sugar Refnng Co. v. McCmn, 192 U. S., 397 Choctaw
Guf R. R. Co. v. arrson 235 U. S., 292.)
The ta e specae sur e chffre d affares s a speca ta on the
amount of busness, or turnover, n e cess of 1,000,000 francs. The
measure of the ta s smar to that used n the case of the chffre
d affares ta . The fact that ths ta s mposed under the decree
of the Repubc of rance dated October 15, 1926, whch codfes
aws reatve to scheduar ta es and the genera ncome aw, does
not make t an ncome ta wthn the ntendment of secton 222 of
the Revenue ct of 1926.
In vew of the foregong, t s the opnon of ths offce that the
ta es n queston, mposed upon bankers, or on ndvduas or cor-
poratons seng goods whch they have manufactured or purchased,
are not ncome ta es wthn the meanng of sectons 222(a) and
238(a of the Revenue ct of 1926, and, therefore, do not consttute
an aowabe credt aganst the edera ncome ta under those
sectons.
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 1926.
tenson of perods of mtaton n the case of communty
property returns for 1927. (See Mm. 3815, page 148.)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
8

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
281, rt. 518. 228
P RT n. CORPOR TIONS.
S CTION 231. CONDITION L ND OT R
MPTIONS O CORPOR TIONS.
rtce 517: Regous, chartabe, scentfc, terary, and
educatona organzatons and communty chests.
R NU CT O 1826.
Corporaton organzed to assst n enforcng fsh and game aws
and whch s supported by membershp dues and donatons. (See
L T. 2546, page 122.)
rtce 518: usness eagues, chambers of I -29-4704
commerce, and boards of trade. Ct. D. 206
INCOM T R NU CT O 1926 D CISION O COURT.
1. Corporaton empton usness League.
corporaton organzed to do and whch does busness whch
Incudes nes of work ordnary performed by mercante agences,
trust companes, attorneys at aw, credt men and coecton
agences, wth a vew of makng a proft, whose artces of ncor-
poraton provde that a earnngs not consumed n operatng
e penses sha be kept n a fund to be dsbursed from tme to tme
by the board of drectors to further the purpose of the corpora-
ton, two-thrds of whose tota ncome Is derved from trans-
actons from whch profts fow and are not Incdenta to other
actvtes, and whose net profts have become a surpus fund that
s used to further ts actvtes and s avaabe for payng for
servces to stockhoders from whom t does not receve the fu
cost of such servces, s not entted to e empton from Income ta
under secton 231(7) of the Revenue ct of 1926.
2. Decson ffrmed.
The decson of the oard of Ta ppeas (14 . T. ., 862)
affrmed.
Unted States Crcut Court of ppeas, ghth Crcut.
Northwestern obbers Credt ureau v. Commssoner of Interna Revenue.
On petton to revew decson of the Unted States oard of Ta ppeas.
efore an akenburqh and Gardner, Crcut udges, and Munger, Dstrct
udge.
anuary 10, 1930.
OPINION.
Munoer, Dstrct udpe, devered the opnon of the court.
Ths appea Is taken from a decson by the Unted States oard of Ta
ppeas (Northwestern obbers Credt ureau, 14 . T. ., 862) determnng
the amount of ta due from the appeant for the fsca year endng une 30,
1026. In that case t was decded that the appeant was not an e empt cor-
poraton wthn the provsons of secton 231(7) of the Revenue ct of 1926.
(20 U. S. Code, 982.)
Ths appea chaenges that porton of the decson. Secton 230 of the
Revenue ct of 19 0 mposed a corporaton ta upon the net annua ncome of
corporatons, but secton 231 provded for the e empton of (7) usness
eagues, chambers of commerce, or hoards of tnde, not organzed for proft
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
8

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
229
231, rt. 618,
and no part of the net earnngs of whch nures to the beneft of any prvate
sharehoder or ndvdua. ppeant Is a Mnnesota corporaton, and snce
t8 Incorporaton In 1906 has been engaged n busness wth headquarters at
St. Pau. Its artces of ncorporaton contan the foowng provsons:
The genera nature of the busness of ths corporaton sha be to operate
a bureau for the conduct, management, preservaton, care and dsposton of
the busness, property and assets of persons, copartnershps and corporatons
whch sha become fnancay embarrassed, nsovent or bankrupt, and In con-
necton therewth, through ts offcers or other persons, attorneys or agents
empoyed by t to act for and represent credtors at credtors meetngs or
other meetngs In the seecton of recevers, trustees or other agents for the
care or management, or sae or other dsposton of the property of such n-
sovents, bankrupts or others who are n embarrassed crcumstances and to
act generay for credtors and others n the preservaton, management and
dsposton of the property and assets of such Insovents, bankrupts or others
In embarrassed crcumstances, and n the ad|ustment, coecton and securng
of such cams.
To obtan and furnsh to ts stockhoders and such other persons as sha
desre ts servces, Informaton as to the fnanca standng and other nforma-
ton affectng the credt and ratng of the customers and proposed customers
of ts stockhoders and other patrons, and operate a department for ths purpose.
To act generay n the Interest of the |obbng trade n the preventon and
prosecuton of mposton, n|ustce and fraud, and take such awfu steps as t
sha deem proper and necessary to Induce the passage of such aws as w pro-
mote the genera wefare and securty of the trade, and to act generay for
credtors n the ad|ustment, coecton and securng of cams.
Ths corporaton Is not organzed for the purpose of any pecunary gan for
stockhoders, and t sha not decare or pay any dvdend upon ts capta
stock. earnngs not consumed n operatng e penses sha be kept n a fund
to be dsbursed from tme to tme upon the order of the hoard of drectors to
further the purposes of the corporaton. Ths corporaton sha not se or
negotate the sae of any stocks, bonds or securtes of any knd as an nvest-
ment and sha not be conducted as a fnanca nvestment for proft.
ppeant was authorzed to ssue 1,000 shares of ts capta stock, each share
beng of the vaue of 10, and no stockhoder was aowed to hod more than
1 share. The shares have been hed by bankers, manufacturers, and |obbers.
The amount of capta stock outstandng une 30, 1925, was 1,980, represented by
198 shares, and on une 30, 1926, t was 2,170, representng 217 shares. ppe-
ant has never decared or pad any dvdends to ts sharehoders.
In the ncome ta return made by appeant for the fsca year nvoved, t
states ts gross proft from ts operatons as foows:
ureau earnngs 53. 999. 45
Postage, statonery, and stenographc servces 12,133. 05
Interchange department earnngs 30, 511.10
nanca statement earnngs 535. 79
Commssons 12,199.61
Msceaneous ncome and bad debts recovered 524. 97
Tota 109,904.03
ppeant camed deductons temzed as foows:
Ltgaton e pense _ 800. 00
Saares and wages 53, 129. 36
d|ustment department e pense 2,371.34
udtng and accountng 515.03
Msceaneous management e pense 1, 587. S3
Postage and enveopes 5,770.16
Statonery and suppes 5, 2((. 87
Insurance 1. 709. 50
Teephone and teegraph 1,287. 34
change 851. 74
Prntng and advertsng 508. 25
Lega 179. 85
Dues 1. 852.13
Msceaneous 990. 02
nanca statement e pense 1,179.11
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
8

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
231, rt. 518.
230
ent and ght.
Ta es
ad debts
Deprecaton
4, 802.98
916. 50
18, 938. 72
1,536. 81
Tota
_ 103.843.03
ppeant s baance sheet showed assets of 571,623.45 at the cose of the
fsca vear, ncudng 405,955.29 of trust estate funds and accounts, and a
surpus of 40,361.14.
The genera nature of the work done by appeant s the nvestgaton and
supervson of the busness of reta merchants In Mnnesota, North and South
Dakota, and n portons of Mchgan, Wsconsn, Iowa, Nebraska, and Montana
for the prmary beneft of |obbers and credtors. One of ts actvtes s the
furnshng to Its sharehoders of nformaton about the busness record of
merchants. ppeant obtans from a arge number of ts sharehoders ther
severa trade e perences wth the merchant, such as the hghest credt e -
tended to hm, the amount then owng by hm, the amount past due from hm,
and hs manner of payng bs, and furnshes a tabuaton of such nforma-
ton to the nqurng sharehoder and to the sharehoders contrbutng to the
Informaton. The tem of 30,511.16 n the earnngs of appeant represents the
compensaton t receved for such reports. In ts supervson of the deangs
between |obbers and retaers, appeant often acts as a qudatng agent for
merchants who are Insovent or are n fnanca dffcuty. prncpa part
of appeant s busness conssts n ts procurng the e ecuton of trust agree-
ments by merchants under whch appeant acts as a trustee to manage the
busness, coect the assets, and pay the debts of such merchants. or such
servces appeant charges 7 per cent of a amounts pad to credtors.
nother actvty of a smar nature conssts n appeant s procurng the
appontment n State or edera courts of ts manager as a trustee In bank-
ruptcy or as a recever of the estates of merchants, and n conductng quda-
ton proceedngs as such offcer, and for ths It coects the fees aowed by the
courts. ppeant acts for any credtor n these proceedngs, whether or not
they are sharehoders n appeant. The tems of 53,999.45 and 12,199.61 In
the gross earnngs represent the Income from these actvtes of appeant.
Other work done by appeant conssts In advsng wth |obbers and retaers
furnshng attorneys, audtors, and agents to nvestgate the busness of reta
merchants and for such servces t charges a fee to the |obber requestng the
Investgaton. It aso undertakes to act as a manager of the busness of reta
merchants, wth the ob|ect of protectng the credtors and aso wth the ob|ect
of restorng the merchant to a sound busness bass, f possbe. ppeant
advances ts money or credt for that purpose, besde payng for servces of
attorneys, nvestgators, and for other hep. In the handng of (he varous
forms of estates by appeant It has advanced as hgh as 150,000 n years past.
The 18,938.72 Item of bad debts sted represents some advancements whch
had not been repad to appeant at the tme of ts return. Mnor actvtes
of appeant consst n advsng credt men, adng reta merchants In book-
keepng, gvng advce as to nsurance, as to the return of goods ordered,
gvng notfcaton of mportant |udca decsons, and ssung crcuars and
pamphets on sub|ects of trade nterest. When a |obber can not obtan a
statement of the fnanca condton of a merchant whch s regarded as a
pro er one, appeant, on request of the |obber, endeavors to procure a state-
ment by persona soctaton of the merchant, but appeant does not make
It a genera busness to carry fnanca statements of retaers.
Under the terms of secton 231(7) of the Revenue ct of 1926, the appeant
was not entted to e empton, If t was organzed for proft. Its artces of
Incorporaton stated that the nature of ts busness was, n substance, to fur-
nsh statements of fnanca standng to act generay for the |obbng trade
n the preventon and prosecuton of fraud to represent, by means of ts
offcers, agents, and attorneys, credtors at meetngs for the seecton of
trustees and recevers to manage and dspose of the busness of persons, frms,
and corporatons fnancay embarrassed to act generay for credtors and
others n the ad|ustment and coecton of cams and n the management and
dsposton of assets of nsovents, bankrupts, and others n fnanca dffcuty.
The nature of the busness whch appeant has transacted shows the e ercse
of a these powers. It Is qute apparent that the actvtes authorzed are such
transactons as are ordnary carred on for the purpose of makng an ncome.
The busness whch appeant was authorzed to do, and whch It has done,
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
8

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
231
231, rt. 518.
Incudes nes of work ordnnry performed by mercante agences, trust com-
panes, attorneys at aw, credt men and coecton agences, wth a vew of
makng a proft. There s no cam that appeant ntended to transact ths
work wthout makng a proft, and the fact that t has been proftabe s shown
by the amount of a net Income for the year n queston of 11,129.33, and by a
surpus of 46,361.14, wth a capta stock of 2,170.
ppeant paces some reance upon the portons of Us artces of Incorpora-
ton whch state that the corporaton s not organzed for the purpose of any
pecunary gan for stockhoders, and s not to be conducted as a fnanca
nvestment for proft. ut another porton of the artces provdes that a
earnngs not consumed n operatng e penses sha be kept n a fund to be ds-
bursed from tme to tme by the board of drectors to further the purposes of
the corporaton, and ceary contempates that the corporaton may make an
e cess of earnngs over e penses, and ths consttutes a proft. (Rubber Co. v.
Goodyear, 76 U. S., 788, 804.) The testmony shows that the corporaton has
been operated at a very substanta proft n some years and at a oss In other
years. The net profts have become a surpus fund and are used by appeant
to further ts actvtes, but appeant contends that no part of the earnngs
nure to the beneft of any sharehoder or ndvdua. It s true that no dv-
dend has been pad drecty n money or property, but the sharehoders have
receved very substanta assstance by the use made of the surpus by the
appeant. One of the defntons gven by Webster s Internatona Dctonary
of the word nure s to serve to the use or beneft (see aso Sayer v.
ackson. 105 Oka., 212, 232 Pac, 412), and a proft can resut to the stock-
hoders n other ways than dvdends. ( ouston et d Termna Ry. Co. v.
Unted States, 250 ed., 1.)
The furnshng of nformaton to sharehoders of the fnanca condton
of retaers as shown by the trade e perences of the other members Is not
aways sef-supportng, and vares about 2,000 a year, and may run over or
short. ppeant gves to ts sharehoders the gratutous servce, whch t says
Is effcent and vauabe, of ts attorneys, audtors, and agents n nvestgatng
the affars of reta merchants, n the terrtory served by t. ppeant obtans
rembursement of some of ths e pense, but t has suffered what It terms a
tremendous oss In each year of Its e stence because of ths servce. ppe-
ant s servces n endeavorng to rehabtate merchants who are n straghtened
crcumstances nvoves advancement for attorneys, nvestgatons, and to the
estates. ppeant does not receve the fu cost of ths servce. The e pense
of notfcaton to Its sharehoders of Important |udca decsons, of tranng
gven to credt men, of advce to retaers on the sub|ect of ther credts and
modes of bookkeepng, of dstrbuton of terature and books, of advce to mer
chants as to nsurance and the furnshng of pamphets on that sub|ect, and
of correspondence and other efforts to overcome so-caed trade evs ncdent
to returnng merchandse, takng un|ust deductons, and matters of a smar
nature s a borne by the appeant. In years when there are no net earnngs,
the surpus fund s avaabe to pay for a of these servces as we as to pay
any defct arsng n the other nes of busness done by appeant. Share-
hoders and other ndvduas receve the beneft of these servces, whch are
vauabe and reasonaby necessary to the proper conduct of ther busness. To
the e tent that they are provded at the cost of appeant and not compensated
for by the recpents, they are a burden and oss to the net profts accrued and
accrung to appeant. The net earnngs of appeant n ths way nure to the
beneft of ts sharehoders and to prvate ndvduas.
ppeant ctes the case of Trndad v. Sagrada Orden (263 T . S., 578 T. D.
8548, O. . III-, 270 ), but that case arose under the provsons of a statute
smar to the provsons of secton 231(6) of the Revenue ct of 1926. The
statute nvoved dd not make an absence of organzaton for proft a condton
of e empton, but based the e empton on the purpose of ts organzaton and
operaton. On that case t was aso stpuated that no part of the net ncome
was apped to the beneft of any stockhoder or ndvdua, and that no part
of ts property beonged to any of Its members, even n case of dssouton.
ppeant aso rees upon the case of ansas Cty ay Deaers ss n v. Crooks
(28 ed. (2d), 909), approved by ths court n Crooks, Coector, v. ansas Cty
, ay Deaers ss n (37 ed. (2d), 83, Dec. 16, 1029). In that case the assoca-
ton had nether capta stock nor sharehoders, and operated as a mutua socety
for the beneft of ts members. It operated no busness, but empoyed men to
ook after the affars of Its members. Ths court revewed the decson n
Trndad v. Sagrada Orden (263 U. S., 578), Waynesboro Manufacturers sso-
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
8

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
5234, rt. 561.
232
oaton (1 . T. ., 911), Unty Schoo of Chrstanty (4 . T. ., 61), and
other cases, and found that the recept of a sma net ncome dd not prevent
ts e empton from ta aton, f that ncome was ony Incdenta to the man
purposes of the assocaton. The evdence n ths case s convncng that the
chef, and not the Incdenta, purposes of appeant nre represented by ts actv-
tes for whch t receved ts gross ncome of 109,904.03. In the ay Deaers
case t was aso stpuated that no part of the surpus coud Inure to the
beneft of any member or other ndvdua.
fter a consderaton of the cases cted and a comparson of the facts Invoved
In those cases wth the facts nvoved n ths case, the concuson has been
reached that appeant was organzed for proft, that a part of ts net earnngs
Inured to the beneft of prvate sharehoders or Indvduas, and that t was
therefore not e empt from ta aton under secton 231(7) of the Revenue ct
of 1926. Other questons are presented, but t Is not necessary to consder
them In vew of what has been sad. The decson of the oard of Ta ppeas
w be affrmed.
rtce 518: usness eagues, chambers of commerce,
and boards of trade.
R NU CT O 1926.
ssocaton promotng rado ndustry. (See I. T. 2550, page 123.)
S CTION 233. GROSS INCOM O CORPOR TIONS
D IN D.
rtce 550: Gross ncome of foregn corporatons.
R NU CT O 1926.
Interest on refund of edera ncome ta . (See G. C. M. 8902,
page 222.)
S CTION 234. D DUCTIONS LLOW D
CORPOR TIONS.
rtce 561: owabe deductons. I -41-4796
G. C. M. 8253
R NU CTS O 1921, 1924. ND 1926.
The ta payer acqured certan contracts for the purchase of
natura or wet gas from producers for the purpose of e tractng
therefrom casng-head gasone.
ed, that the ownershp of the contracts to purchase natura
or wet gas after ts producton from the o or gas we does not
entte the ta payer to an aowance for depeton under the
Revenue cts of 1921, 1924, and 1926.
n opnon s requested as to whether the M Company, the ta -
payer, s entted to a depeton aowance n computng net ncome
under the foowng crcumstances:
The ta payer was ncorporated n December, 1922. t the tme
of ts ncorporaton t acqured by assgnment certan contracts for
the purchase of natura or wet gas for the purpose of e tractng
therefrom what s known as casng-head gasone. The ta payer
does not own or operate any o or gas wes or any o or gas produc-
ng propertes, but ts soe busness s the e tracton of casng-head
gasone from natura or wet gas. The contracts whch the ta payer
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
8

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
233
234, rt. 561.
acqured by assgnment and the contracts whch t subsequenty
entered nto wth owners or essees of o and gas propertes contan
the foowng provsons:
Whereas, sad essee ta payer desres to purchase and secure from sad
essor owner or essee of o propertes a of the natura gas whch may be
produced on sad propertes for the purpose of manufacturng or e tractng
gasone therefrom and to se the same, and/or to se dry gas for commerca
purposes.

The essor, for the consderaton and upon the terms and condtons heren
stated, hereby eases and agrees to dever to the sad essee and essee agrees
to accept, a the natura gas produced from the above descrbed premses for
and durng the entre perod of tme It sha produce gas therefrom, .

s fu consderaton for sad gas so sod by essor to essee, sad essee agrees
as foows, to-wt:
To pay to sad essor per cent of the tota proceeds receved by t from
the saes of a gasone e tracted by t from sad gas.
The queston presented s whether the ta payer has, by reason of
ts ownershp of the contracts, the rght to an aowance for depe-
ton. Secton 234(a)9 of the Revenue ct of 1921 provdes n part
as foows:
In the case of mnes, o and gas wes, other natura deposts, and tmber, a
reasonabe aowance for depeton and for deprecaton of mprovements, ac-
cordng to the pecuar condtons In each case .
The same anguage s contaned n secton 234(a)8 of the Revenue
cts of 1924 and 1926.
The Income Ta Unt contends that the ta payer has, under the
provsons of the above contracts, smpy agreed to purchase a part
of the product of the owner or essee of the o and gas property, and
that the purchase of the product does not gve the ta payer any rght
to or nterest n the o and gas suffcent to support ts cam for a
depeton aowance. The ta payer, on the other hand, contends that
the contracts gve t the e cusve rght to a the wet gas that a
partcuar we or property may produce that the contract beng an
e cusve one s n the nature of an assgnment or subease of a
porton of the operator s nterest n the property and that, as such
nterest decreases through producton of the gas, the ta payer sus-
tans depeton. In other words, the ta payer contends that a con-
tract gvng t the rght to e tract casng-head gasone from the
natura or wet gas vests n the ta payer a property nterest sub|ect
to depeton.
In rthur . Coye v. Commssoner (17 . T. ., 368 page 14, ths
uetn ) the oard of Ta ppeas hed that where the pettoners
had sod the o and gas produced on the property owned by them,
they, and not the purchaser of the o and gas, were the ones entted
to the aowance for depeton. The provsons of the contract n
that case wth respect to the sae of the o and gas were, so far as
matera here, as foows:
Sad partes of the frst part hereby se to the party of the second part,
and the sad party of the second part hereby purchases sub|ect to the royaty
nterests aforesad a o produced or that may be produced on sad ease
for the perod commencng at mdnght December 1-2, 1921, and endng at
mdnght October 1-2, 1922, whether sad o be produced from the we now
e stng on sad premses or other wes that may be dred durng sad
35942 31 16
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
234, rt. 564.
234
perod, a sad o to be retaned by the party of the second part as pro-
duced, and satd party of the second part agrees to pay for a such pro-
ducton wthout regard to the quaty thereof, the sum of s hundred and
twenty-fve thousand doars ( 625,000) n payments as foows:
On the bass of the foregong decson, t s evdent that a sae of
a the o and gas produced on a gven tract of and does not gve
the purchaser thereof the rght to an aowance for depeton. e-
cause of the smarty between the provsons of the contract n
the Coye case and the nstruments here under consderaton, t s
apparent to ths offce that the reasonng of the oard n that case
wth respect to the sae of the o and gas s appcabe to the nstant
case. ccordngy, the ownershp of the contracts by the ta payer
n the nstant case dd not vest n t any greater ega or equtabe
estate n the o and gas producng propertes than was vested n
the purchaser n the Coye case, where the vendors and not the
vendee were recognzed as beng entted to the aowance for
depeton.
The fact that the contracts n the nstant case desgnated the
partes as essor and essee nstead of vendor and vendee s not
determnabe of the queston. ( eryford v. Davs, 102 U. S., 235.)
The controng factor s the rea ntenton of the partes as de-
termned from the entre nstrument. ere, the nstrument under
consderaton specfcay provded for a sae by the owner or opera-
tor of the o and gas we of a part of ts product after ts produc-
ton. The contract ceary contempated that the owner or operator
was n effect to reduce the gas to ts possesson before the sae
coud become effectve. In other words, there was a sae of natura
or wet gas at the we as and when produced by the operator.
On the bass of the ta payer s contentons every purchaser of o
or gas after producton woud be entted to cam an aowance for
depeton, especay n cases where the agreement was to purchase
a o and/or gas produced as s common n case of ppe ne com-
panes and refners.
It s, therefore, the opnon of ths offce that the ta payer s not
entted to an aowance for depeton under the Revenue ct of
1921, 1924, or 1926.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
rtce 564: Interest. I -51-4875
G. C. M. 8868
R NU CTS OP 1924 ND 1926.
The words obgatons of the Unted States the In-
terest upon whch s whoy e empt from ta aton under ths tte
refer to the obgatons themseves and not to any partcuar ta -
payer or cass of ta payers who owned same. The words under
ths tte are sgnfcant and refer to Tte II, whch reates to
ncome ta . Therefore, as an ncome ta (. e., the surta ) Is Im-
posed upon the nterest receved upon such obgatons, e cept frst
Lberty oan 3 per cent bonds and a other Unted States obga-
tons ssued pror to September 24, 1917, the nterest s not whoy
e empt from ncome ta regardess of who owns the obgatons.
ccordngy, nterest pad or accrued on ndebtedness Incurred to
purchase or carry obgatons of the Unted States, the nterest upon
whch s not whoy e empt from ncome ta , s deductbe.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
235
234, rt. 564.
n opnon s requested whether nterest pad or accrued by a
corporaton on ndebtedness ncurred to purchase or carry certan
obgatons of the Unted States s an aowabe deducton under
secton 234(a)2 of the Revenue cts of 1924 and 1926.
The ta payer corporaton s engaged n the busness of buyng
and seng securtes on behaf of tsef and ts customers, and ts
nvestments ncude Unted States Lberty bonds, Unted States
certfcates of ndebtedness, and Unted States Treasury bonds.
The foowng amounts, whch represent nterest pad on money
borrowed to purchase or carry the aforesad securtes, were ds-
aowed as deductons from gross ncome by the Income Ta Unt:
Doars.
1924 4.15a
1925 8.27a
1926 4. 38k
1927 I.OS||
Secton 234(a)2 of the Revenue cts of 1924 and 1926 reads as
foows:
In computng the net ncome of a corporaton sub|ect to the ta mposed
by secton 230 there sha be aowed as deductons:

(2) nterest pad or accrued wthn the ta abe year on ts ndebtedness,
e cept on Indebtedness ncurred or contnued to purchase or carry obgatons
or securtes (other than obgatons of the Unted States Issued after Septem-
ber 24, 1917, and orgnay subscrbed for by the ta payer) the nterest upon
whch Is whoy e empt from ta aton under ths tte.
The ta payer has protested the acton of the Income Ta Unt
and as the bass of ts protest contends that the statute, so far as t
appes to the nstant case, shoud be construed as f t read as
foows:
corporaton s entted to deduct from ts gross ncome a nterest pad
or accrued wthn the ta abe year on ts ndebtedness, e cept on ndebtedness
ncurred or contnued to purchase or carry obgatons or securtes the nterest
upon whch s whoy e empt from ta aton under ths tte.
Interest on obgatons of the Unted States ssued subsequent to
September 24, 1917, s e empt from edera ta aton, e cept as to
(a) estate and nhertance ta es and (b) graduated addtona n-
come ta es, commony known as surta es, and e cess profts and war
profts ta es, mposed upon the ncome or profts of ndvduas,
partnershps, assocatons, or corporatons. (See T. D. 2836, C. .
1, 85.)
y reason of the repea of the war profts and e cess profts ta
provsons of aw, nterest receved on Lberty oan bonds and sm-
ar obgatons of the Unted States owned by corporatons s whoy
e empt from edera ncome ta commencng wth the year 1922.
(I. T. 1244, C. . 1-1, 99.)
The queston presented s whether the statutory words the nter-
est upon whch s whoy e empt from ta aton under ths tte
refer to the obgatons of the Unted States or to the partcuar
ta payer or cass of ta payers ownng the same.
rtce 561 of Reguatons 65 and the correspondng artce of
Reguatons 69 provde that:
In genera the deductons from gross ncome aowed corporatons are the
same as aowed Indvduas, as to nterest pad see artce 121 .
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
240, rt. 632.
236
rtce 121 reads n part as foows:
Interest pad or accrued wthn the year on Indebtedness may be deducted
from gross ncome, e cept that nterest on ndebtedness ncurred or contnued
to purchase or carry securtes, such as muncpa bonds and frst Lberty oan
3 per cent bonds, the nterest upon whch s whoy e empt from ta , s not
deductbe. Snce other obgatons of the Unted States ssued after September
24, 1917, are not whoy e empt from ta aton under ths tte. Interest pad
on ndebtedness ncurred or contnued to purchase such obgatons (whether or
not orgnay subscrbed for by the ta payer) s deductbe n accordance wth
the genera rue.
Congress n usng the words obgatons of the Unted States
the nterest upon whch s whoy e empt from ta aton
under ths tte ceary was referrng to the obgatons themseves
and not to any partcuar ta payer or cass of ta payers who owned
the same. The use of the words under ths tte s sgnfcant.
The tte referred to s Tte II, reatng to ncome ta . Therefore,
as an ncome ta (. e., the surta ) s mposed upon the nterest re-
ceved upon such obgatons e cept, of course, frst Lberty oan
Sy2 per cent bonds and a other Unted States obgatons ssued
pror to September 24, 1917, such nterest s not whoy e empt from
ncome ta regardess of who owns the obgatons. Wth respect to
Unted States Treasury certfcates and Treasury bs ssued subse-
quent to une 17, 1929, and une 17, 1930, however, see Treasury
Decson 4276 C. . I-2, 83 and Treasury Decson 4292 page
102, ths uetn , respectvey. T. D. 4292 appears n Interna
evenue uetn I 28, page 2.
It s, therefore, the opnon of ths offce that nterest pad or
accrued by the ta payer corporaton on ndebtedness ncurred to pur-
chase or carry obgatons of the Unted States, e cept as to frst
Lberty oan 3y2 per cent bonds and a other obgatons of the
Unted States ssued pror to September 24, 1917, s an aowabe
deducton under secton 234(a)2 of the Revenue cts of 1924 and
1926.
C. M. Chakest,
Genera Counse, ureau of Interna Revenue.
S CTION 240. CONSOLID T D R TURNS O
CORPOR TIONS.
rtce 632: Consodated returns. I -51-4876
G. C. M. 8889
R NU CT O 1026.
Upon the sae of a subsdary corporaton s stock to outsde nter-
ests no ad|ustment to the gan or oss bass of such stock n the
hands of the parent corporaton s permssbe on account of the
pror gans of the subsdary, whether such gans are reported In
a consodated return or n a separate return, or on account of the
pror osses of the subsdary whether such osses are reported n
a consodated return or n a separate return.
Genera Counse s Memorandum 7765 (O. . I -1, 223) modfed.
n opnon s requested as to the effect of the decson of Unted
States Dstrct Court, Southern Dstrct of New York, n the case of
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
237
240, rt. 632.
T nted Pubshers Corf oraton v. nderson (42 ed. (2d), 781), on
Genera Counse s Memorandum 77C5, n whch memorandum an
opnon was e pressed reatve to the proper ad|ustments to be made
to the gan or oss bass of stock of a subsdary corporaton n the
hands of a parent corporaton.
That memorandum deat wth four probems, each of whch arose
upon a separate statement of facts. Ony the fourth statement of
facts s of nterest at ths tme. Ths statement of facts s as foows:
4. Corporaton Y owned a the stock of Corporaton Z durng the year 1925,
and Corporaton Y derved a gan n e cess of the oss sustaned by Corpora-
ton Z durng such ta abe year. consodated return was fed by the two
corporatons In 192a. In anuary, 1926, Corporaton Y sod a the stock of
Corporaton Z. Corporaton Z was dssoved Immedatey after the sae of ts
stock.
In the memorandum t was ponted out, nter aa, that uness the
bass of the stock of Corporaton Z n the hands of Corporaton Y
was ad|usted by the osses suffered by Corporaton Z and taken as
deductons by Corporaton Y n a consodated return, the resut
woud be to dscrmnate aganst affated corporatons n smar
crcumstances whch had fed separate rather than consodated
returns. The concuson reached reatve to the severa stuatons
presented was stated n the foowng anguage:
It Is therefore the opnon of ths offce that no ad|ustment to the gan or oss
bass of a subsdary corporaton s stock n the hands of the parent corporaton
Is permssbe on account of the pror gans of the subsdary, whether such
gans are reported n a consodated return or n a separate return, or on ac-
count of the pror osses of the subsdary where the osses are reported n a
separate return, but that an ad|ustment to the gan or oss bass of a subsdary
corporaton s stock n the hands of the parent corporaton s necessary where
the osses of the subsdary are reported n a consodated return and used as
an offset aganst the ncome of the parent corporaton and t appears that the
osses coud not have been avaed of by the subsdary as net osses or other-
wse had ts ncome been reported In separate returns nstead of beng reported
In a consodated return.
Subsequent to the pubcaton of Genera Counse s Memorandum
7765, the same queston nvoved n the above-quoted statement of
facts arose n the Unted States Dstrct Court, Southern Dstrct
of New York, n the case of Unted Pubshers 1 Corporaton v.
nderson, supra. The decson of the court n that case was adverse
to the poston taken n Genera Counse s Memorandum 7765. In
vew of these crcumstances, the queston has arsen as to what e tent
Genera Counse s Memorandum 7765 shoud be modfed.
In the Unted Pubshers Corporaton case the facts were stated
by the court as foows:
In the perod 1917-1921 the pantff acqured the entre capta stock of
ourna of Commerce Co. at an aggregate prce of 180,226.50. Durng the
year endng pr 80, 1922, t advanced to ths subsdary 80,805.35. In May,
1922, t sod Its entre hodngs n the subsdary to outsde Interests. The
consderaton receved was 100,000, but as part of the bargan the pantff
canceed and reeased the 80,865.35 debt owed by the subsdary. In sub-
stance and effect, therefore, the net amount receved on the sae of the shares
was ony 19,134.65.
It further appears that durng the years endng pr 80, 1919, to pr 30,
1922, ncusve, the pantff fed consodated ncome ta returns wheren were
ncuded the operatons of ths subsdary. The tota osses of the subsdary
for these four years had been 170,471.78, and ths sum had been deducted
from the pantff s gross Income for these years.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
240, rt. 634.
238
In ts opnon the court used the foowng anguage:
In prncpe ths case can not be dstngushed from Remngton Rand, Inc., v.
Commssoner of Interna Revenue (C. C. .) (33 . (2d), 77, certorar dened
n 280 U. S., 591, 50 S. Ct., 39. 74 L. d., 639). It was there hed that where a
parent corporaton sod ts stock hodngs n a subsdary, the e cess of the
seng prce over the cost of the stock was ta abe us a proft reazed by the
parent. The fact that the parent had for severa years fed consodated
returns was hed Immatera, as was aso the fact that the subsdary had
accumuated earnngs durng these years, whch earnngs had been ncuded
n the consodated earnngs and thus ta ed. The Government s contenton
was uphed n both respects. ere we have the e act converse. ere the sae
of the stock was at a oss, and the operatons of the subsdary had been
conducted at a oss over the years when consodated returns were fed. The
ta payer s therefore warranted n nsstng, frst, that upon the sae of the
ourna of Commerce stock t suffered a oss of 161,091.85, to the same effect
as upon the sae of any other property and, second, that the fact that the
ourna of Commerce Co. s operatng osses had been taken advantage of by
the pantff n ts payment of ta es on the consodated bass s of no
consequence. Itacs supped.
It s evdent from the above-quoted anguage that the court dd not
consder any queston of dscrmnaton as between affated corpora-
tons whch fed consodated returns and affated corporatons
whch fed separate returns. The court dd specfcay state that the
subsdary s osses taken n the consodated return were of no conse-
quence, when consderng the oss of the parent corporaton on the
sae of the subsdary corporaton s stock.
The court s decson affects ony the fourth probem consdered n
Genera Counse s Memorandum 7765, and does not requre the
revocaton or modfcaton of the concusons reached n the other
three probems. ccordngy, Genera Counse s Memorandum 7765
s hereby modfed to accord wth the opnon e pressed by the court
n the Unted Pubshers Corporaton case by revokng the argu-
ment and concuson n connecton wth the fourth probem. The
concuson reached n Genera Counse s Memorandum 7765 s, there-
fore, amended to read as foows:
It s therefore the opnon of ths offce that upon the sae of a subsdary
corporaton s stock to outsde nterests no ad|ustment to the gan or oss bass
of such stock n the hands of the parent corporaton s permssbe on account
of the pror gans of the subsdary, whether such gans are reported n a
consodated return or n a separate return, or on account of the pror osses
of the subsdary whether such osses are reported n a consodated return
or n a separate return.
C. M. Cn R 8T,
Genera Counse, ureau of Interna Revenue.
etce 634: Change n ownershp durng ta abe year.
R NU CT O 1926.
ocaton of net osses of group of corporatons. (See G. C. M.
8618, page 180.)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
239
270, rt. 1204.
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.
D R L T S R NU CT O 1928 D CISION O COURT.
Dstbant Labty for Refusa to Surrender Ta payer s
Property Defen ses.
In an acton brought aganst a person n possesson of property
of a ta payer, sub|ect to dstrant, upon whch a evy has been
made, to enforce abty mposed by secton 1114(e) of the Reve-
nue ct of 1926 for faure to surrender such property, nether
the bar of the statute of mtatons upon coecton from the
ta payer nor the provsons of secton 1106 of the Revenue ct
of 1926 are avaabe as a defense.
Unted States Dstrct Court, Southern Dstrct of New York.
Unted States of merca, pantff, v. mercan change Irvng Trust Co.,
ohn . Martn, |r., and . 0. rmstrong, defendants.
Co e, D. .: Ths s a moton by the pantff for |udgment on the peadngs.
The acton s brought by the Government to recover from the three defendants
named the sum of 3,664, beng the amount of a ta defcency assessed aganst
ohn . Murray dvertsng gency, Inc. (hereafter referred to as Murray Co.),
for 1917, wth penates and nterest. The sut was commenced December 3,
1928, under secton 1114, subdvsons (e) and (f), of the 1926 Revenue ct,
readng as foows:
ny person n possesson of property or rghts to property, sub|ect to
dstrant, upon whch a evy has been made, sha upon demand by the coector
or deputy coector makng such a evy, surrender such property or rghts to such
coector or deputy, uness such property or rght s, at the tme of such demand,
sub|ect to an attachment or e ecuton under any |udca process. ny person
who fas or refuses to so surrender any of such property or rghts sha be
abe n hs own person and estate to the Unted States n a sum equa to
the vaue of the property or rghts not so surrendered, but not e ceedng the
amount of the ta es (ncudng penates and nterest) for the coecton of
whch such evy has been made, together wth costs and nterest from the date
of such evy.
The term person as used n ths secton ncudes an offcer or empoyee of
a corporaton or a member or empoyee of a partnershp, who as such offcer,
empoyee, or member s under a duty to perform the act n respect of whch
the voaton occurs.
On pr 1, 1918, the Murray Co. fed an ncome ta return for 1917, and
pad the ta shown to be due thereon of 4,387.02. On une 16, 1922, an
amended consodated return for the same year was fed, and an addtona
ta of 2,834.12 pad. Subsequenty, and n ebruary. 1924. the Commssoner
made a further assessment aganst the company of 23,187.82, whch ater was
abated to 3,664. Ths atter amount has never been pad, and s st out-
standng. On une 26, 1928, and on subsequent dates, to and ncudng ugust
20, 1928, varous dstrant warrants, notces of evy, and demands were served
on the defendant Trust company, and the defendants, Martn and rmstrong,
offcers thereof, requrng them to pay to the coector of nterna revenue at
New York the amount of the ta due from the Murray Co., wth penates
and Interest. It s admtted n the |ont answer of the defendants that, at
the tmes when the dstrant warrants, notces of evy and demands were
served, the defendant Trust company was Indebted to the Murray Co. n an
amount greater than the sum demanded by the coector, and that such
rtce 1204: Coecton of ta by dstrant.
( so Secton 1106, rtce 1341.)
I -41-4797
Ct. D. 234
September 10,1930.
OPINION.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
270, rt. 1204.
240
amount was not sub|ect to any en, attachment, or e ecuton eved thereon
under any |udca process.
It s the contenton of the defendants that the ta was barred by mtaton
when the dstrant warrants, notces of evy, and demands were served, and
that the statute of mtaton s avaabe as a defense n the pendng sut.
Unquestonaby, ta payments may be recovered back from the Government when
Iegay coected after the statute of mtaton has run. (New York t bany
Lghterage Co. v. owers, 273 U. S., 346 T. D. 4009, C. . I-1, 268 Russe
v. U. S., 278 U. S., 181 T. D. 4260, O. . III-1, 206 .) Ths does not mean,
though, that ta payers may resst the coecton by dstrant of ncome ta es
(Graham v. Dupont, 262 U. S., 234 T. D. 3486, O. . II-, 226 ), even though
the ta tsef s barred by mtaton. ( Uay v. owers, 25 ed. (2d), 637
certorar dened, 48 S. Ct, 601.) s stated by udge Manton n the Uay case,
at page 638:
The appeant (. e., ta payer) may pay the ta and sue for ts recovery,
and f the ta Is ega, obtan a |udgment for ts payment.
If, then, the Murray Co. coud not have prevented the coecton by dstrant
of the ta In queston, even though barred by mtaton, a fortor the defend-
ant Trust company s n no poston to resst the dstrant warrant, or to refuse
to compy wth the coector s demand. Secton 1114 of the 1920 ct, subdv-
son (e), provdes that
ny person n possesson of property sha, upon demand,
surrender such property uness at the tme of such demand,
sub|ect to an attachment or e ecuton under any |udca process.
The ony e cuse recognzed by the statute for faure to corn y wth the
demand s mted to an attachment or e ecuton under any |udca process
and 1 can see no reason for broadenng the secton to ncude other defenses
not permtted by the statute tsef. Ceary, t was not ntended that the
merts of a ta cam shoud be tgated whenever a demand was served on a
thrd party under the secton. I thnk ths s manfest not ony from the
anguage of the secton tsef but aso from the report of the Senate nance
Commttee, No. 52, e panatory of the proposed egsaton. Ths report reads
as foows, at page 58:
The e stng aw permts dstrant upon persona property of a denquent
ta payer even though n possesson of another person. The commttee amend-
ment specfcay makes t the duty of the possessor to surrender the property
upon whch a evy s made, and mposes upon hm, n addton to any crmna
abty, a cv abty, f he fas to do so, equa to the vaue of the property
but not e ceedng the amount of ta , a abty smar to that of an e ecutor
who pays debts before he pays a debt due the Unted States.
I do not thnk, therefore, that the defendants were n a poston to set up
the statute of mtatons as a defense to the sut.
ut t s contended by the defendants that the abty for the ta was
whoy e tngushed by secton 1106(a) of the 1926 ct, enacted ebruary 26,
1926, provdng that
The bar of the statute of mtatons n respect of any nterna
revenue ta sha not ony operate to bar the remedy but sha e tngush
the abty.
Ths secton of the 1926 ct was, however, repeaed as of the date of Its
enactment by secton 612 of the 1928 ct, whch provded as foows:
Secton 1106(a) of the Revenue ct of 1926 s repeaed as of ebruary
26, 1926.
ven If secton 1106(a) dd anythng more than to decare the e stng aw
(whch I very much doubt), I am cear that Congress had ampe power to
remove or ater the statutory bar thereby created. ( or an e panaton of
secton 1106(a) reference s made to the statement of Senator Reed n the
Congressona Record, voume 67, part 4, page 3531, and the report of the ouse
conferees, reportng the amendment n ts fna form, n ouse of Representa-
tves Report No. 356, S ty-nnth Congress, frst sesson, page 55.) The
ta payer can have no |ust compant aganst such egsaton, for, as stated by
udge Mack n Rega Coa Co. v. owers (37 ed. (2d), 373, 377 Ct. D. 133,
C. . III-2, 162 ), recenty affrmed by the C. C. . Second Crcut
It s we setted that there s no vested rght to rey upon a statute of
mtaton to defeat a debt or other persona obgaton the egsature whch
mposed the bar may remove t.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
241 273 and 274, rt. 1232.
I am satsfed, therefore, that secton 1100(a) of the 1920 ct has In no way
affected the poston of the defendants wth respect to the pendng acton.
Reance s aso paced on Updke v. U. ., decded by the Supreme Court
May 19, 1930. Ths case dffers from the present case n that (1) the acton
there was aganst transferees of a corporaton s assets, after dssouton, to
coect ta es assessed under secton 280 of the 1920 ct, whereas n the present
acton the sut s to compe thrd partes to surrender property of a ta payer
under secton 1114(e) of the 1 20 ct and (2) the Updke case was hed to be
an acton to recover ta es qua ta es, whereas the present sut s aganst thrd
partes who do not stand n the shoes of the ta payer, and are, therefore, not
permtted to set up defenses ordnary avaabe to ta payers n actons brought
aganst them to recover ta es.
The moton of the pantff for |udgment s, therefore, granted.
S CTION 271 MIN TION O R TURN ND
D T RMIN TION O T .
rtce 1211: amnaton of return and determna-
ton of ta by the Commssoner.
R NU CT O 1926.
uthorty to ree amne and redetermne ta abty. (See Ct. D.
263, page 208.)
S CTIONS 273 ND 274. D ICI NCY IN T .
rtce 1232: ssessment of a defcency. I -40-4790
G. C. M. 8521
R NU CT O 1926.
Where the return fed by the ta payer for 1022 was nether sgned
nor acknowedged, a 60-day defcency notce for W22 may be ssued
at the present tme, even though a defcency notce was maed to
the ta payer for the years 1921 to 1926. ncusve, In whch no
change of ta abty was shown for 1922.
n opnon s requested whether a 60-day defcency notce for the
ta abe year 1922 may be ssued at the present tme under the foow-
ng crcumstances:
return was fed by the ta payer for the ta abe year 1922 on
March 15, 1923, whch was nether sgned nor acknowedged as
requred by aw. Under the Supreme Court s decson n Lucas v.
PUod Lumber Co. (281 U. S., 245 50 S. Ct., 297), such a return
was not suffcent to start the runnng of the statute of mtatons
upon assessment and coecton of ta for the ta abe year 1922.
The queston presented s whether a 60-day defcency notce for
the ta abe year 1922 may be ssued at the present tme, n vew of
the fact that on December 23, 1929, a defcency notce was maed
to the ta payer n accordance wth the provsons of sectons 274 and
283 of the Revenue ct of 1926, advsng the ta payer of the deter-
mnaton of defcences for the ta abe years 1921, 1923, 1924, 1925,
and 1926. Petton was fed wth the oard on ebruary , 1930,
and the case s now pendng. The year 1922 was ncuded n the
notce but no change n ta abty was shown theren.
Sectons 274 and 283 of the Revenue ct of 1926, under the pro-
vsons of whch the defcency notce referred to above was maed
to the ta payer, provde n subdvson (a) that f the Comms-
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
277 and 278, rt. 1272.
242
soner determnes that there s a defcency n ta the Commssoner
s authorzed to send notce of such defcency to the ta payer by
regstered ma. Where notce of such determnaton as been
maed to the ta payer, subdvson (e) of secton 274 provdes that
the oard sha have |ursdcton to redetermne the correct amount
of the defcency even though the amount so determned s greater
than the amount of the defcency, notce of whch has been maed
to the ta payer. Wth e ceptons not here matera, subdvson (f)
of secton 274 provdes that f after the enactment of ths ct the
Commssoner has maed to the ta payer notce of a defcency, as
provded n subdvson (a), and a petton s fed by the ta payer,
the Commssoner sha have no rght to determne any addtona
defcency n respect of the same ta abe year. Subdvson (g) of
secton 274 provdes that the oard n redetermnng a defcency n
respect of any ta abe year sha consder such facts wth reaton to
the ta es for other ta abe years as may be necessary correcty to re-
determne the amount of such defcency, but n so dong sha have
no |ursdcton to determne whether or not the ta for any other
ta abe years has been overpad or underpad.
s prevousy noted, the 60-day defcency notce maed to the ta -
payer on December 23, 1929, showed no change n ta abty for
the ta abe year 1922. There was, therefore, no notce of the de-
termnaton of a defcency whch woud gve the oard of Ta p-
peas |ursdcton wth respect to the ta abe year 1922. Under
smar facts t has been so hed by the oard n numerous cases.
(See Unon Termna -evator Co. v. Commssoner, 14 . T. .,
In vew of the foregong, ths offce s of the opnon that a 60-
day defcency notce to the ta payer for the year 1922 may be s-
sued at the present tme.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
S CTIONS 277 ND 278. P RIOD O LIMIT TION UPON
SS SSM NT ND COLL CTION O T .
rtce 1271: Perod of mtaton upon assessment
of ta .
R NU CT OP 1926.
tenson of perod of mtaton n the case of communty
property returns for 1927. (See Mm. 3815, page 148.)
rtce 1272: Perod of mtaton upon co- I -28-4692
ecton of ta . Ct.D. 198
federa ta es coecton decson of court.
Coecton Lmtaton Guaranty.
Where n ta payer, to obtan tme for payment of ta es whe
consderaton s gven to ts cam for abatement, makes a depost
n a bank, after the e praton of the statutory perod of mtaton
on coecton, as a guarantee of the payment of the ta es In contro-
versy, by vrtue of whch the bank agrees that t w pay the
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
243
277 and 278, rt. 1272.
amount of such ta es upon fna determnaton by the Comms-
oner, and, subsequenty, the ta payer makes payment of the ta es
and obtans a reease of the depost, the ta payer can not recover
the amount of such payment made pursuant to the guaranty.
Coubt of Cams of the Unted States.
Mascot O Co., Inc., v. The Unted States.
une 2, 1930.
M ND D OPINION.
Gbeen, udge, devered the opnon of the court.
Ths acton s begun to recover ta es whch had been pad after the perod
of mtatons had run aganst ther coecton. Counse for pantff supports
Its case by the same ne of argument that was presented to ths court n Oak
Worsted Ms v. Unted States (68 C. Cs., 539 Ct. D. 151, C. . I -1, 328
and Gotham Can Co. v. Unted States (68 C. Cs. 749 Ct. D. 176, C. .
I -1, 343 ), n both Instances adversey to the pantffs theren. In the Oak
Worsted Ms case, supra, we hed that sectons 607 and 611 of the ct of 1928
prevented a recovery. In the Gotham Can Co. case, supra, we hed that secton
1106(a) of the ct of 1926 was of no beneft to the pantff where the ta es
In queston had been coected pror to the tme when the revenue b of 1928
went nto effect uness t was shown that the ta es were overpad. It was
e pressy stated, however, In that decson that the court dd not pass on the
effect of the provson n the revenue b of 1928 whch repeaed secton 1100(a)
of the ct of 1926 as of the date of Its enactment. In the ease at bar, t appears
that the ta es n controversy were coected after the 1926 ct went nto force.
The decson n the Gotham Can Co. case s therefore not controng heren
because t does not determne the constructon or effect of secton 110G(a)
when the ta es were coected after the perod of mtatons had e pred and
the 1926 ct was n force. ut we do not fnd t necessary to determne the
queston eft open by the Gotham Can Co. case for the reason that the defend-
ant sets up an entrey new and dfferent defense from anythng peaded n
the two cases cted above and Inssts that the facts shown n support of ths
defense are suffcent by themseves and aone to warrant a udgment In Its
favor.
Ths defense s that the evdence shows that the pantff as made a depost
n a bank as a guarantee of the payment of the ta es n controversy when
fnay determned. In consderaton of ths depost, the bank advsed the
coector of nterna revenue that t woud pay the amount of ta es fnay
determned by the Commssoner to be due from the pantff, the case was hed
up unt determnaton had been made, and thereafter when such ta es were
fnay determned the pantff pad the amount thereof and obtaned a reease
of the depost. The defendant contends that the prncpes ad down n the case
of Unted States v. The ohn arth Co. (279 U. S., 370 Ct. D. 65, C. . III-1,
189 ) n any event prevent the pantff from recoverng the refund n contro-
versy. In that case the Government brought sut to enforce a bond gven by
the defendant and Its surety for the payment of ta es, and the defense was made
that payment was e acted after the coecton of the ta was barred by the
statute of mtatons. The court sad that nether the statute of mtatons
nor secton 1108(a) of the Revenue ct of 1926 apped to an acton upon a
bond, and the sgners of the bond were not reeved from the obgaton arsng
out of that nstrument. The court further sad that
the ta payer was permtted by a bond temporary to postpone the
coecton and to substtute for hs ta abty hs contract under the bond.
The ob|ect of the bond was not ony to prevent the mmedate coecton of the
ta but aso to prevent the runnng of tme aganst the Government.
udgment was accordngy rendered aganst the ta payer.
It Is true that n the case ast cted the bond was fed pror to the tme when
the statute of mtatons e pred and n the nstant case the depost was made
In the bank and the guaranty gven of payment after the statute had run
aganst the coecton of the ta . We are nevertheess cear that ths does not
ater the stuaton, and that the prncpes announced n the ohn arth Co.
case, supra, determne the case at bar. In the Instant case, the depost was
made and the guaranty gven pror to the enactment of the 1926 ct. Conced-
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
277 and 278, rt. 1272. 244
ng for the purposes of the argument ony that when the 1926 ct was passed,
secton 1106(a) thereof e tngushed the abty for ta es coected after the
statute of mtatons had run and enabed a sut to be brought to recover the
amount pad, t st must be sad that the abty e sted pror to the enact-
ment of that ct. In fact, the passage of secton 1106(a) showed that Con-
gress recognzed that the abty dd e st. Ths, as we observed n the Gotham
Can Co. case, was n pursuance of the we-known prncpe so we estabshed
as to need no ctaton of authortes that the statute of mtatons or other
bar aganst a remedy for the coecton of a debt does not e tngush the a-
bty therefor.
s the abty for the ta st e sted at the tme when the depost was
made n the bank for ts payment, the contract whch the bank made to pay
whatever amount mght fnay be determned to be the ta , was made upon
a vad consderaton both as to the pantff and the bank. The bank dd not,
t s true, pay the ta tsef as the agreement provded. The pantff pad
the ta and thereby dscharged the abty of the bank. ut whether pad
by pantff or the bank, the resut was the same. The coecton was not made
on the ground that a ta was due, but was based on a vad contract to pay a
certan amount when t was determned by the Commssoner. The ta f ed
the sum to be pad, but the payment and coecton was by vrtue of the contract
and not by reason of the ta abty, and the payment therefore can not be
recovered by pantff. We hardy thnk t s necessary to cte authortes to
show that the mora obgaton to pay a vad debt s suffcent ega consdera-
ton for a subsequent new promse to pay f made ether before or after the bar
of the statute has become compete, and that the new promse based upon such
mora obgaton s bndng upon the debtor and may be shown In avodance
of the statute of mtatons. ut see the numerous decsons, both State aud
edera, sted on ths pont under secton 5(19, page 1099, of 37 Corpus urs.
Counse for pantff urge that the waver whch was e ecuted the day foow-
ng that on whch the depost was made n the bank s nvad, frst, because t
was e ecuted after the statute of mtatons had run, and, second, because t
was so restrcted by ts terms as not to appy to the condtons n the case at
bar. ut these matters do not affect defendant s rght to retan the money
pad pursuant to the guaranty. Whe we have no necessty for consderng
them, t mght be sad that n the case of Chares II. Stange v. Unted States
(68 C. Cs., 39 ) Ct. D. 138, C. . 1II-2, 268 ) we hed that a waver was not
nvad smpy for the reason that t was e ecuted after the e praton of the
perod of mtatons.
Wthout consderng the other questons arsng n the case, we hod that by
reason of the depost and guaranty the pantff s not entted to recover heren
and t s ordered that ts petton be dsmssed.
rtce 1272: Perod of mtaton upon co- I -29-4705
ecton of ta . Ct. D. 201
ncome ta revenue act of 1926 decson of court.
ssessment Coecton Waver ssessment Pror to Waver.
consent by a ta payer to wave the statute of mtaton on
the assessment of a ta contempates aso the coecton of the ta
aud waves the bar of the statute as to the coecton thereof,
athough the waver was gven after the ta was assessed.
Court of Cams of the Unted States.
Roy Ttcomb, Inc., v. The Unted States.
pr 7, 1930.
opnon.
LnTLfrroN, udge, devered the opnon of the court.
Ths s a sut to recover 5,720.42, corporaton ncome and profts ta , and
781.25, nterest thereon, pad n uy and ugust, 1926. The bass of pantffs
cam s that the ta and nterest were pad after the e praton of the perod
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
245
277 and 278, rt. 1272.
of mtaton for ther coecton. The defendant Inssts that under sectons 607
and 611 of the Revenue ct of 1928 no recovery can be had.
We thnk the cam of pantff, that the ta was barred at the tme t was
coected, s wthout mert. Pantff argues that at the tme the wrtten con-
sent was entered nto between t and the Commssoner on une 7, 1924, the
statute of mtaton of fve years had e pred and that ths consent dd not
operate to gve the Commssoner any rght to assess and coect any further
ta that, for a ke reason, the wrtten consent entered nto on November 20,
1926, gave the Commssoner no rght n respect of the ta and nterest n ques-
ton. Pantff further contends that n any event the wrtten consents waved
the statute of mtaton ony as to the tme wthn whch the Commssoner
mght make assessment of ta and, therefore, gave hm no rght to coect.
The statutory perod of mtaton of fve years reatng to ta es for the year
1918 had not e pred on une 7, 1924, for the reason that the return requred
by the statute was fed on une 16, 1919, the tentatve return, whch was fed
on March 28, 1919, not havng set n moton the statute of mtaton. ( or-
shem ros. Drygoods Co., Ltd., v. Unted States, 280 U. S., 453. decded ebruary
24. 1930 Ct. D. 167, C. . L -1, 260 .)
The frst consent of une 7, 1924, dd not provde any defnte e praton
date, but, In vew of the second consent on November 20, 1025, ths s unmpor-
tant. (Pctora Prntng Co., 12 . T. ., 1407 Grreyock Ms v. Commssoner
of Interna Revenue, 31 ed. (2d), 65 Ct. D. 98, C. . III-2, 2531.)
The facts show that the assessment was made on March 13, 1924, and on
March 27, 1924, neary three months before the 5-year statute of mtaton
had e pred, pantff fed a cam for the abatement of the entre addtona
assessment.
We are of opnon that a consent e tendng the tme for assessment of ta es
kewse e tended the tme for coecton of such ta . (Watt omes ard-
ware Co., 8 . T. ., 872 Sunshne Coak t Sut Co., 10 . T. ., 971 W. P.
rown d Sons Lumber Co. v. Commssoner of Interna Revenue, C. C. . 6th
Cr. par. 668, vo. 1, 1930 P. . ed. Ta Servce.) It s evdent that at the
tme the consent of une 7, 1924, was entered nto between the pantff and
the Commssoner, t was ntended that the tme for coecton shoud be
e tended, because the ta had aready been assessed and pantff s cam for
the abatement thereof was pendng before the Commssoner. On the date
ths consent was entered nto, ony eght days of the 5-year mtaton perod
for coecton remaned, and It seems evdent that the purpose of the pantff
n e ecutng ths consent was to be reeved from payng the |eopardy assess-
ment unt ts abatement cam coud be acted upon and that the purpose of
the Commssoner n ts e ecuton was to enabe hm to consder and decde
upon the merts of the abatement cam before enforcng payment.
fter ths consent was entered nto the Commssoner made an e amnaton
of pantff s records and reduced the assessment 13,161.90. It s kewse
true that the second consent of November 20, 1920, contempated an e tenson
of tme for coecton because the matter of the cam for abatement had not
been competey ad|usted, snce It appears that on October 23, 1920, the Com-
mssoner fnay determned the correct ta abty for 1918 to be 16,201.01,
thereupon abatng a further sum of 2,206.58 of the addtona assessment of
21,088.90 for 1918. cept for the consents the Commssoner woud have
been precuded from coectng any porton of the addtona assessment for
1918 after une 15, 1924. (New York d bany Lghterage Co. v. Unted States,
278 U. S., 846.) y these consents, the ast of whch was n effect at east
unt December 81, 1926, the pantff obtaned a postponement of the coecton
of the addtona assessment for 1918 unt ts abatement cam was fnay
acted upon and the assessment materay reduced. It woud be a van act
for the partes to consent to the assessment of a ta that had aready been
assessed wthn the perod of mtaton provded by the statute or to consent
ony to an assessment of a ta that coud not be coected.
Consents such as we have here must be construed n the ght of the cond-
tons e stng at the tme they are entered Into and we thnk under the facts
shown by the record the partes Intended by these consents that the Comms-
soner shoud have the rght to coect the ta for 1918 at any tme pror to the
date agreed upon.
The assessment of the addtona ta for 1918 appears to have been a |eopardy
assessment wthout fu compance wth the provsons of secton 250 of the
Revenue ct of 1921, nasmuch as the pantff was permtted to fe an abate-
ment cam whch was consdered n connecton wth a more thorough e am-
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
277 and 278, rt. 1272.
246
naton by the Commssoner. The Commssoner dd not make hs fna deter-
mnaton n respect of the ta abty of pantff unt October 28, 1926, when
he fnay decded the pantff s cam for abatement. In cuses such as ths,
where the assessment was made pror to une 2, 1924, the date of the enactment
of the Revenue ct of 1924, and an abatement cam was fed whch the Com-
mssoner consdered and fnay decded after the enactment of the Revenue
ct of 1924, the oard of Ta ppeas had |ursdcton of a petton by the
ta payer to contest the correctness of the Commssoner s decson. oseph
Oameau Co. (1 . T. ., 75), Termna Wne Co. (1 . T. ., 698), and secton
283(e) of the Revenue ct of 1926 specfcay provded for such proceedng.
In those cases the oard of Ta ppeas hed that when the Commssoner
made a |eopardy assessment he had not determned that any assessment
shoud be made wthn the meanng of secton 280 of the Revenue ct of 1924
unt he fnay decded the cam for abatement. The case of W. P. rown f
Sons Lumber Co. v. Commssoner, supra, affrmng the decson of the oard
of Ta ppeas, s of smar mport.
Pantff contends that the anguage of the consent of November, 1925,
wth reference to the mang of the notce and the appea to the Unted
States oard of Ta ppeas shows concusvey that t had no reference
to the assessment whch had been made but ony to a further assessment.
We thnk ths argument s wthout mert, nasmuch as the pantff had a
rght to appea to the oard of Ta ppeas from the Commssoner s dec-
son upon ts abatement cam. y ths consent the pantff evdenty con-
tempated that It mght take the case to the oard n the event that the
Commssoner s decson upon ts abatement cam shoud not be satsfactory.
There s no ndcaton n ths case that the partes antcpated any further
assessment for 1918, but, on the contrary, they had n mnd the Comms-
soner s decson makng fna the |eopardy assessment that had aready been
made, whch decson dd not occur unt October, 1926. t the tme both
consents were entered nto the partes were endeavorng to ascertan whether
the assessment of the addtona ta for 1918, whch had aready been made,
was correct and what porton, f any thereof, shoud be pad by the ta -
payer. The case of Peeress Paper o Manufacturng Co. v. Routzahn (22
ed. (2d), 459), cted by pantff, s not n pont. The court dd not decde
the queston presented n ths case. The consent there nvoved reated to
1917 and e pred by mtaton under the Commssoner s rung on pr 1.
1924. Snce the credt whch was n queston was not made unt after that
date, the court hed that the 1917 ta was barred and that the credt was
unawfu. Nether does the decson of the Unted States oard of Ta
ppeas n Lambom et a. (13 . T. ., 177) support pantffs contenton.
In that case, the oard hed that the consent n the case of rthur .
Lamborn e tendng the tme for assessment and coecton e pred on une
16, 1925, and the Commssoner s determnaton was not made unt October
19, 1925.
It mght be argued that the provsons of secton 278(e)2 of the Revenue
ct of 1924 and the decson n Russe v. Unted States (278 U. S., 181 T. D.
4260, C. . III-1, 206 ) had reference ony to assessments competey per-
fected before une 2, 1924 that It was not Intended to appy subdvson
(e) (2) to |eopardy assessments pror to that date but not competed by due
consderaton and decson by the Commssoner unt after une 2, 1924, n
whch case the oard of Ta ppeas had |ursdcton to revew the Com-
mssoner s decson. owever, t s not necessary for us to consder ths
queston. Under the provsons of the consent of November 20, 1925, the
Commssoner had unt March 1, 1927, whch was 60 days after December
81, 1926, wthn whch to coect the amount of the addtona assessment
for 1918 fnay determned to be due. Snce the amount of 5,720.42, whch
was the baance of the assessment In e cess of the amount dscharged by
abatement and credt, was coected on uy 8 and ugust 7, 1926, the pan-
tff s not entted to recover.
In vew of our concuson that the ta was not barred at the tme t was
coected, t s not necessary to pass upon the pantffs cam made n argu-
ment that snce the ta was pad after ebruary 26, 1926, secton 1106(a)
of the Revenue ct of 1926 had e tngushed any abty therefor and that
secton 612 of the Revenue ct of 1928, repeang secton 1106 of the Revenue
ct of 1926, coud not revve a abty for the ta .
The petton must be dsmssed, and t s so ordered.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
247
277 and 278, rt. 1272.
rtc e 1272: Perod of mtaton upon co-
ecton of ta .
R NU CT O 1926.
I -30-4718
G. C. M. 8243
Defcences n ncome ta for 1920 and 1922 were duy assessed
aganst the ta payer on December 27, 1923, and on May 27, 1926, a
60-day defcency etter was maed to hm wth respect to hs ta
abty for those years. On uy 19, 1926, the ta payer fed a
petton wth the oard of Ta ppeas, and on pr 19, 1929,
a stpuaton was entered nto n regard to the defcences due.
On pr 25, 1929, the oard entered ts order of redetermnaton
showng the correct defcences. The perod of mtaton upon
coecton of the ta for 1920 and 1922 had not e pred pror to
the enactment of the Revenue ct of 1926.
ed, that the coecton of the outstandng ta es w not become
barred unt anuary, 1933. Where a 60-day etter s maed to a
ta payer and a petton s fed wth the oard of Ta ppeas n
accordance wth the Revenue ct of 1926, and the runnng of the
statute of mtatons s not peaded by the ta payer before the
oard, the ta payer can not successfuy resst coecton of the
amount determned by the oard after the oard s decson has
become fna, on the ground that the perod of mtaton upon
coecton of the ta n queston had e pred pror to the mang
of the 60-day defcency etter by the Commssoner.
The opnon of ths offce has been requested as to whether coec-
ton of outstandng defcences n ta for 1920 and 1922 aganst ,
the ta payer, may be enforced at ths tme.
Defcences for 1920 and 1922 were assessed aganst the ta payer
n the respectve amounts of 1.03a doars and 32.40a doars, the
assessment st beng sgned by the Commssoner on December 27,
1923. 60-day etter was maed to the ta payer under date of May
27, 1926, wth respect to the ta payer s ta abty for the years
under consderaton. On uy 19, 1926, the ta payer fed a petton
wth the oard of Ta ppeas. On pr 19, 1929, a stpuaton
was entered nto before the oard n whch t was agreed that the
defcences due for 1920 and 1922 were n the amounts of 3.84a
doars and .23a: doars, respectvey. Ths stpuaton further
rected:
It s understood and agreed that the Commssoner may assess and coect
the foregong defcences mmedatey upon the ssuance by the oard of ts
order of redetermnaton wthout regard to the restrctons, f any, contaned
n secton 274(a) of the Revenue ct of 1926 or secton 272(a) of the Revenue
ct of 1928.
On pr 25, 1929, the oard entered ts order of redetermnaton
showng the correct defcences to be n the amounts set forth n the
above-mentoned stpuaton. oowng the oard s order there was
ssued a certfcate of overassessment for 1922 reducng the ta as-
sessed for that year to accord wth the oard s order. It s ths
reduced assessment and the defcency assessed for the year 1920 n
the sum of 1.03a: doars whch are now outstandng: and wth respect
to whch an opnon s requested.
The assessments for 1920 and 1922 were made on December 27,
1923, and were tmey. The return for the year 1920 was fed sub-
sequent to ebruary 27, 1921 consequenty, the 5-year perod of
mtaton upon coecton prescrbed by the Revenue ct of 1921
had not e pred pror to ebruary 26, 1926. the date of the enactment
of the Revenue ct of 1926. The return for the year 1922 was fed
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
277 and 278, rt. 1272.
248
n March, 1923. Therefore, the 4-year perod of mtaton upon
coecton of 1922 ta es had not e pred pror to the enactment of
the Revenue ct of 1926. Under such crcumstances coecton coud
have been made n any event wth respect to both years at any tme
wthn s years after assessment, or unt December 27, 1929. (See
subdvsons (d) and (e) of secton 278, Revenue ct of 1926.)
Secton 277(b) of the Revenue ct of 1926 provdes as foows:
The runnng of the statute of mtatons provded n ths secton or n
secton 278 on the makng of assessments and the begnnng of dstrant or a
proceedng n court for coecton, n respect of any defcency, sha (after the
mang of a notce under subdvson (a) of secton 274) be suspended for
the perod durng whch the Commssoner s prohbted from makng the
assessment or begnnng dstrant or a proceedng n court, and for 60 days
thereafter.
The 60-day etter was maed to the ta payer on May 27, 1926, and
the runnng of the statute of mtatons upon the coecton of the
ta es n queston was suspended for the perod durng whch the
Commssoner was prohbted from coectng such ta es and for 60
days thereafter. It was appro matey 2 years and 11 months after
the mang of the 60-day etter before the oard entered ts order
of redetermnaton, and, therefore, the runnng of the statute of
mtatons was suspended for a perod of appro matey 3 years and
1 month. s the perod of 6 years after assessment was e tended n
accordance wth the provsons of secton 277(b), quoted above, co-
ecton of the defcences n ta assessed n December, 1923, w not
become barred unt anuary, 1933.
The concuson reached heren, that coecton of the outstandng
ta es referred to s not barred by the statute of mtatons, s based
upon the fact that the perod of mtaton upon coecton had not
e pred pror to the enactment of the Revenue ct of 1926 and the
runnng of the statute of mtatons was suspended for the perod
durng whch the Commssoner was prohbted from coectng the
ta es and for 60 days thereafter. There s another reason, however,
why coecton s not barred. Where a 60-day etter s maed to a
ta payer and a petton s fed by the ta payer wth the oard of
Ta ppeas n accordance wth the provsons of the Revenue ct of
1926, and the runnng of the statute of mtatons s not peaded
by the ta payer before the oard, the ta payer can not success-
fuy resst coecton of the amount determned by the oard after
the oard s decson has become fna, on the ground that the perod
of mtaton upon coecton of the ta n queston had e pred
pror to the mang of the 60-day defcency etter by the Comms-
soner. s stated above, the ta payer n the nstant case fed hs
petton wth the oard of Ta ppeas on uy 19,1926 the oard s
order of redetermnaton was based upon the stpuaton entered
nto by the ta payer and the Commssoner and the ta payer dd
not fe any petton for the revew of the oard s decson. The
ta payer s therefore bound by the oard s decson, whch has
become fna.
C. M. Charest,
Genera Counse, ureau of Interna Re-venue.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
249
( 277 and 278, rt. 1272.
rtce 1272: Perod of mtaton upon co- I -32-4735
ecton of ta . Ct. D. 216
INCOM T R NU CT O 192G D CISION O COURT.
ssessment Coecton Waver ssessment Pror to Waver.
consent by a ta payer e tendng the perod of mtaton on
the assessment of a ta contempates aso the coecton of the ta
and e tends the perod of mtaton on the coecton thereof,
athough the consent was gven after the ta was assessed.
Dstrct Court of the Unted States for the Western Dstrct of
Pennsyvana.
Washngton Coa d Coke Co., a Corporaton, pantff, v. D. . cner, Coector
of Interna Revenue for the Twenty-thrd Dstrct of Pennsyvana, de-
fendant.
une 16, 1930.
opnon.
Mc cab, .: Ths Is an acton In assumpst to recover 142,561.48, ta es
aeged to have been Iegay coected from pantff by defendant, together wth
Interest thereon. ury tra was waved and the facts were neary a agreed
upon. The court fnds the foowng fndngs of fact and concusons of aw:
1. The pantff at a tmes herenafter mentoned was and Is a domestc
corporaton, organzed and e stng under the aws of the State of Pennsyvana,
mantanng ts offce and prncpa pace of busness In the borough of Dawson,
n sad State.
2. D. . ener, the defendant, s, and ever snce on or about the 1st day of
ugust, 1921, has been, the duy commssoned, quafed, and actng coector
of Interna revenue n and for the twenty-thrd dstrct of Pennsyvana.
3. On or about the 15th day of March, 1919, the pantff fed wth the then
coector of nterna revenue n and for the sad twenty-thrd dstrct of Penn-
syvana, wthout fraud or wfu error, ts tentatve consodated Income,
war-profts, and e cess-profts ta return for the caendar year 1918, and on
une 16, 1919, fed, wthout fraud or wfu error, ts fna consodated return
for sad year, showng an aggregate ta abty, computed on the bass of the
net ncome set forth n sad return, of 1,738,879.51. ttached to sad return
was an addendum captoned Petton of the Washngton Coa Coke Co. for
assessment under the provsons of secton 328 of the Revenue ct of 1918,
whch set forth the facts and crcumstances whch the pantff aeged entted
t to the benefts of secton 328 of the Revenue ct of 1918.
4. On or about September 3, 1919, the Commssoner assessed aganst the
pantff as ncome, war-profts, and e cess-profts ta es for the caendar year
1918, the tota aggregate amount of ta as computed on the net ncome set forth
In the above-mentoned fna return, to wt, the sad sum of 1,738,879.51.
5. The pantff pad under protest to the then coector of nterna revenue n
and for sad twenty-thrd dstrct of Pennsyvana, ncome, war-profts, and
e cess-profts ta es amountng to 1,492,907.16, temzed as foows:
Date. mount
Mar. 17, 1919 408, 278.42
une 17, 1919 338,205.16
Sept. 15, 1919 373,561.40
Dec. 12, 1919 372, 922.18
Tota 1, 492,967.10
The amount of e cess and war profts ta pad equaed 50 per cent of the
pantff s net ncome for 1918.
6. On or about anuary 17, 1924, the pantff was advsed by the Comms-
soner that an audt of ts return by hs offce resuted n an overassessment of
85942 31 17
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
277 and 278. rt, 1272.
250
60,062.01 for the caendar year 1918. e Issued a certfcate of overassess-
ment for ths amount and transmtted t to the defendant, who, on or about
uy 24, 1024. abated ths amount of the 1918 ta .
7. On or about March 28, 1924, the Commssoner determned that pantff
had overpad ts 1919 Income and profts ta es n the amount of 8,703.06. The
Commssoner accordngy Issued a certfcate of overassessment for that
amount. On or about uy 7, 1924, the defendant credted the sad overpay-
ment aganst the outstandng assessment of 1918 ta .
8. On or about une 14, 1926, the pantff was notfed by the Commssoner
that Its ta abty for 1918 had been further reduced by the amount of
80,221.44. The Commssoner accordngy ssued a certfcate of overassess-
ment for that amount, whch he transmtted to the defendant, who n turn
abated ths addtona amount of 1918 ta .
9. On or about une 14, 1926, the pantff was notfed by the Commssoner
that t had overpad ts ta for 1919 In the further sum of 7,743.81. The
Commssoner ssued a certfcate of overassessment and transmtted t to the
defendant, who n turn credted ths overpayment on or about October 15, 1926,
aganst the outstandng baance of 1918 ta .
10. On une 28, 1926, the pantff pad to the defendant under protest the
baance of the ta outstandng on ts books for 1918, to wt, 89,182.03.
11. On November 13. 1926, pursuant to notce and demand from the defend-
ant, the pantff pad under protect Interest n the amount of 36,932.47 on the
above stated baance of ta for 1918.
12. The foowng s a summary of the assessments, coectons, credts
apped, and abatements:
Sept. 3, 1919. Orgna assessment 1, 738. 879. 51
Nov. 13, 1926. Interest assessment 36. 932.47
1, 775,811.98
408, 278. 42
338, 205.16
373,561. 40
372,922.18
.__ 60,062. 01
8. 703. 06
80, 221. 44
7,743. 81
89,182. 03
36. 932. 47
1, 775, 811. 98
13. The Commssoner reduced Invested capta for 1918 by the sum of
97,004.76 by assumng a tentatve ncome, e cess, and war profts ta , pro-
ratng t to the dates of payment of dvdends, and deductng such assumed
pro rata accrua from tentatve pro rata earnngs n order to determne the
amount of earnngs avaabe for dvdends. y ths method the pantff s ta
abty was ncreased n the sum of 6,829.14, wth nterest thereon of 2,881.90,
or a tota of 9,711.04.
14. On or about uy 5, 1928, the pantff fed wth the Commssoner, on the
form prescrbed by hm for that purpose, wrtten cam for the refund of
0,829.14, wt nterest, on the ground that the coecton thereof by the defend-
ant was erroneous, ega, and vod, and specfed theren that the Commssoner
had erroneousy reduced nvested capta for 1918 by the amount of 97,004.70,
by appyng a tentatve ta for 1918 aganst current earnngs, thus reducng
current earnngs avaabe tor dvdends. Under Commssoner v. Pttsburgh
nfe d orge Co. (30 ed. (2d), 522), defendant concedes that pantff s en-
tted to recover sad 9,711.04, wth nterest on 0,829.14 from une 28, 1926,
and on 2,881. ) from November 13, 1920, as provded by aw.

16. On or about May 24, 1928, the pantff fed wth the Commssoner, on
the form prescrbed by hm for that purpose, wrtten cam for the refund of
133,858.42, wth nterest, on the ground that the coecton thereof by the de-
fendant was erroneous, ega, and vod, and specfed theren that the ta was
not due and owng to the Unted States, because at the tme of the coecton the
tme n whch to coect sad ta had ong snce e pred and that the ta had
been e tngushed. though more than s months bad e pred snce the cam
was fed, the Commssoner has nether aowed nor re|ected sad cam.
Tota assessment
Mar. 17, 1919. Pad
une 17, 1919. Pad
Sept. 15, 1919. Pad
Dec. 12, 1919. Pad
uy 24, 1924. bated
uy 7, 1924. 1919 credt apped
Oct. 15, 1926. bated
Oct. 15, 1926. Credt apped
une 28, 1926. Pad
Nov. 13, 1926. Interest pad
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
251
277 and 278, rt. 1272.
17. On ebruary 7, 1924, pantff and the Commssoner of Interna Revenue
entered nto an agreement n wrtng, known as an ncome and profts ta waver
for 1918, on orm 672 M, readng as foows:
ebruary 2, 1924.
(Date)
INCOM ND PRO ITS T W I R.
In pursuance of the provsons of subdvson (d) of secton 250 of the
evenue ct of 1921, Washngton Coa Coke Co. of Dawson, Pa., and the
Commssoner of Internn Revenue, hereby consent to a determnaton, assess-
ment, 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 sad company for the
year 1918 under the Revenue ct of 1921, or under pror Income, e cess-profts,
or war-profts ta cts, or under secton 38 of the ct entted n ct to
provde revenue, equaze dutes, and encourage the ndustres of the Unted
States, and for other purposes, approved ugust 5, 1909. Ths waver a
effectve unt March 15,1925.
Washngton Coa Coke Co.
Ta payer.
y M. . Strawn, ce Presdent.
ttest:
os. . Strawn,
Secretary and Treasurer.
sea. D. . ener,
Commssoner s. a.
18. Defendant forwarded the pantff s cam for speca assessment to the
Commssoner of Interna Revenue In due course. The defendant dd not
coect the outstandng unpad assessment unt after the pantff s cam
for speca assessment had been fnay acted upon by the Commssoner of
Interna Revenue. The Commssoner advsed the pantff under date of
pr 16, 1925, that ts cam for speca assessment had been dened. The
Commssoner notfed pantff of hs fna determnaton of pantff s Income,
war-profts, and e cess-profts ta abty under date of une 14, 1926, In
whch pantff s request for reconsderaton of ts cam for speca assessment
was dened. The Commssoner s fna determnaton had been preceded by
an e amnaton of pantff s books by a revenue agent n 1923, and by con-
sderaton of brefs fed by pantff settng forth why the net Income reported
on Its return for 1918 was n e cess of ts statutory net ncome, and why Its
nvested capta shoud be ncreased, or speca assessment shoud be granted.
Numerous conferences were hed, begnnng n 1921, between duy authorzed
representatves of the pantff and the Commssoner, the ast of such con-
ferences beng hed on anuary 28, 1926.
The Commssoner dened pantff s request for speca assessment, but
aowed pantff s contentons on other partcuars In part, resutng In the
abatement of ta enumerated In the stpuaton of agreed facts.
CONCLUSIONS O L W.
1. Pantff s entted to recover 9,711.04, wth nterest on 6,829.14 from
une 28, 1926, and on 2,881.90 from November 13, 1926, beng that part of
pantff s cam aeged In paragraph 14 of the statement of cam.
2. Pantff s not entted to recover anythng e cept as set forth In con-
cuson 1.
3. The word assessment as used n the agreement of December 7, 1925,
ncudes coecton.
OPINION.
Mc cab, .: On une 16, 1919, pantff fed ts fna return of ncome, war
and e cess profts for the caendar year 1918, showng ta abty of
1,738,879.51. On September 3, 1919, the Commssoner made assessment
aganst pantff for the amount shown on ts return. On uy 16, 1924, wth-
out any agreement e tendng tme, the then e stng statute of mtatons
woud have prevented the coecton of any ta from pantff for the year
1918, remanng unpad. y two agreements, dated ebruary 7, 1924, and
anuary 5, 1925, the tme for assessment and coecton of ta es aganst pan-
tff was e tended unt March 15, 1926. On December 7, 1925, the tme for
makng assessment was e tended unt December 31. 1926. On une 28 and
November 13, 1926, pantff, after notce from the Commssoner, and under
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
277 and 278, rt. 1272.
252
protest, pad defendant the baance of the ta assessed, wth Interest, amount-
ng to 126,114.50. If the agreement of December 5, 1926, dd not e tend
the tme for coecton from March 15, 1920, to December 81, 1920, the ta es
pad were egay coected from pantff and It woud be entted to recover
the same wth nterest. If the agreement ncuded coecton, pantff woud
not be entted to recover. Does the word assessment ncude coecton
The anguage of the agreement s:
Income and Profts Ta Waver or Ta abe Years nded Pror to
anuary 1, 1922.
December 7, 1925.
In pursuance of the provsons of e stng Interna revenue aws Washngton
Coa Coke Co., a ta payer of Dawson, Pa., and the Commssoner of Interna
Revenue hereby wave the tme prescrbed by aw for makng any assessment
of the amount of ncome, e cess-profts, or war-profts ta es due under any
return made by or on behaf of sad ta payer for the year 1918 under e stng
Revenue cts, or under pror Revenue cts.
Ths waver of the tme for makng any assessment as aforesad sha
reman n effect unt December 81, 1926.
The word assess or assessment has dfferent meanngs. It s admtted
that such words n the present agreement woud Incude the rght to coect
a ta assessed subsequent to the date thereof. It conferred the rght to
reassess, add to, or reduce the assessment made (whch was done In ths case).
In the ta ng cts It Is frequenty used as conveyng the rght of coecton.
In Stange v. Unted States (C. C. . Ta Servce, 1929, o. I, p. 8865 Ct, D.
138, C. . III-2, 268 ) the Court of Cams, In an opnon by udge Green,
hed that the word assess was broad enough to Incude coect, sayng:
It shoud be sad aso that the words assess and assessment, when used
wth reference to ta es, often Incude the coecton thereof as a necessary
sequence. In fact, the term assess s used at tmes to ncude a the steps
nvoved n mposng a ta on property en v. Mo ay, 120 Ca. 832), and
to assess often means to evy a ta (see cases cted under note 76, 5 C. ., 813),
the two words beng used wth practcay the same meanng (dem, 76(b) ),
and the words to evy aways ncude the coecton of a ta . The same
rue appes to the word assessment, and the partes evdenty ntended that
the word assessment shoud aso cover the coecton of the ta .
or the reasons stated above, we thnk that the waver removed the bar
of the statute of mtatons not ony as to assessment but as to coecton of
the ta .
Wth what ntent dd the partes use the word assessment n the contract
of December 7, 1925 The acts of the partes n pursuance thereof s the
strongest evdence of ther ntenton. Ths s a we-estabshed, unversa
rue for the nterpretaton of contracts where the meanng s doubtfu. There
s no evdence that the Commssoner at any tme Indcated that an addtona
assessment mght be made. On the contrary, he notfed pantff on anuary
17, 1924, that ts assessment had been reduced 6,062.01, and on une 14, 1926,
whch was subsequent to the agreement under consderaton, that the assess-
ment had been further reduced 80,221.44. On une 14, 1926, the Commssoner
notfed pantff that he had fnay determned the amount of ts ta , that t
appcaton for reconsderaton of Its petton for speca assessment had been
dened. Conferences between the partes e tended over many years, the ast
beng anuary 28, 1926. Pantff made no cam for abatement and no cam
for a refund was made unt May 24, 1928. These facts are rather persuasve
that the partes ntended the word assessment n ther contract of December
7, 1925, to Incude the word coect.
Partes are not ordnary Incned to do van thngs. There beng no attempt
or ntent on the part of the Commssoner to add to pantffs assessment. It
woud have been a van thng to make an agreement grantng a prvege whch
there was no ntenton to use. On the other hand, pantff, no doubt, hoped
to have ts assessment reduced by vrtue of ts petton for a speca assessment
or otherwse, and n the meantme dd not desre to pay the baance of ta
assessed and. therefore, waved assessment, ntendng aso thereby to wave
coecton of the ta , whch had been assessed. cosey anaogous case s
that of Roy Ttcomb, Inc., v. Unted States (C. C. . Ta Servce, 1930, o.
I, p. 8537 see Ct. D. 201, on page 244 ). In ths case the Court of Cams
had before It these facts: |eopardy assessment for 1918 made on March 3,
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
253
280, rt. 1291.
1924, wthn the 8-year perod prescrbed by the ct of 1921. On une 7, 1924,
an unmted assessment waver was gven. On November 20, 1925. ar rther
assessment waver was gven e tendng the tme unt December 81, 1926. The
court hed that coectons made n uy and ugust, 1926, were not barred and
consequenty the ta payer coud not recover, sayng:
We are of opnon that a consent e tendng the tme for assessment of
ta es kewse e tended the tme for coecton of such ta . (Watt 6 omes
ardware Co., 8 . T. ., 872 Sunshne Coak Sut Co., 10 . T. ., 971
W. P. rown Sons Lumer Co. v. Commssoner of Interna Revenue, C. C. .
6th Cr., par. 668, o. I, 1930, P. . ed. Ta Servce.) It s evdent that at
the tme the consent of une 7, 1924, was entered nto between the pantff
and the Commssoner, t was ntended that the tme for coecton shoud be
e tended, because the ta had aready been assessed and pantff s cam for
the abatement thereof was pendng before the Commssoner. On the date
ths consent was entered nto, ony eght days of the 5-year mtaton perod
for coecton remaned, and It seems evdent that the purpose of the pantff
n e ecutng ths consent was to be reeved from payng the |eopardy assess-
ment unt ts abatement cam coud be acted upon and that the purpose of
the Commssoner In ts e ecuton was to enabe hm to consder and decde
upon the merts of the abatement cam before enforcng payment.
y these consents, the ast of whch was n effect at east unt
December 81, 1926, the pantff obtaned a postponement of the coecton of
the addtona assessment for 1918 unt ts abatement cam was fnay acted
upon aud the assessment materay reduced. It woud be a van act for the
partes to consent to the assessment of a ta that had aready been assessed
wthn the perod of mtaton provded by the statute, or to consent ony to
an assessment of a ta that coud not be coected.
Consents such as we have here must be construed In the ght of the cond-
tons e stng at the tme they are entered nto and we thnk under the facts
shown by the record the partes ntended by these consents that the Comms-
soner shoud have the rght to coect the ta for 1918 at any tme pror to
the date agreed upon.
There s no Indcaton n ths case that the partes antcpated
any further assessment for 1918, but, on the contrary, they had n mnd the
Commssoner s decson makng fna the |eopardy assessment that had aready
been made, whch decson dd not occur unt October, 1926. t the tme both
consents were entered Into the partes were endeavorng to ascertan whether
the assessment of the addtona ta for 1918, whch had aready been made,
was correct and what porton, f any thereof, shoud be pad by the
ta payer.
or the reasons gven I concude that the agreement of December 7, 1925,
e tended the tme for coecton unt December 81, 1926, and, therefore, that
the statute of mtatons was not a bar at the tme the ta es were pad.
Let an order drectng the entry of |udgment n accordance wth the fndngs
of fact, concusons of aw, and ths opnon be submtted.
S CTION 280. CL IMS G INST TR NS-
RR D SS TS.
rtce 1291: Cams n cases of transferred I -30-4719
assets. Ct.D.211
( so Secton 1001.)
INCOM T R NU CT OP 1926 D CISION O COURT.
1. Transferee Rght to Revew or Labty.
transferee s a ta payer wthn the meanng of sectons 274
and 1001 of the Revenue ct of 1926 and has the rght to a revew
by the oard of Ta ppeas and by the Crcut Court of ppeas
of hs abty, as determned under secton 280 of that ct.
2. Transferee Labty Under Secton 280 Consttutonaty.
Secton 280 of the Revenue ct of 1926 reatve to the abty
of a transferee for a ta s consttutona.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
280, rt. 1291.
254
8. Transferee tent op Labty.
transferee s abe under secton 280 of the Revenue ct of
1926 for the unpad ta of the transferor to the e tent of the dstr-
buton made to hm, even though proceedngs have not been nst-
tuted aganst other transferees.
4. Decson ffrmed.
The decson of the oard of Ta ppeas (15 . T. ., 1218)
affrmed.
Unted States Crcut Court of ppeas for the Second Crcut.
nne O. Phps et a., as ecutors of the state of I. L. Phps, deceased, v.
Commssoner of Interna Revenue.
ppea from an order of the Unted States oard of Ta ppeas.
efore Manton, Swan, and ugustus N. and, Crcut udges.
une 9, 1930.
opnon.
Ths proceedng nvoves defcences In ncome and profts ta es for the years
1918 and 1919, whch the Commssoner of Interna Revenue assessed aganst a
dssoved corporaton and proposes to assess aganst a former stockhoder of
6ad corporaton, who receved on dstrbuton of the corporate assets qudat-
ng dvdends arger than the amount of sad defcency ta es. The proposed
assessment havng been confrmed by an order of the oard of Ta ppeas,
the e ecutors of sad stockhoder, deceased, have pettoned for revew.
ffrmed.
The fndngs of fact and opnon of the oard appear n 15 . T. ., 1218.
The facts were stpuated. In September, 1919, Coonbe Garment Co., a Penn-
syvana corporaton, was dssoved, and a Its property was dstrbuted among
ts 11 stockhoders In proporton to ther respectve hodngs. Pror thereto
the corporaton had fed Its returns and pad the ta es theren ndcated for the
caendar years 1918 and .1919. Subsequenty a defcency ta for each of sad
years was assessed aganst the corporaton, and on une 16, 1926, the Comms-
soner notfed I. L. Phps, a former stockhoder, that he pro osed to assess
aganst hm as a transferee the entre amount of sad defcency ta es, pur-
suant to the provsons of secton 280 of the Revenue ct of 1920 (44 Stat, 61
26 U. S. C. ., sec. 1009). Sad Phps had receved as qudatng dvdends
more than the amount of sad ta es. No proceedng was ntated by the Com-
mssoner to assess or coect from any other stockhoder. The e ecutors of
the estate of I. L. Phps, deceased, pettoned the oard of Ta ppeas for
a redetermnaton, but the oard confrmed the Commssoner s acton.
Swan, Crcut udge: The appeants frst chaenge the consttutonaty of
secton 280 of the Revenue ct of 1926 and, secondy, assert that, even f t be
consttutona, ther abty s ony for a pro rata share of the corporaton s
unpad ta es.
efore passng to a consderaton of these prmary contentons t Is necessary
to dspose of a |ursdctona queston, athough not urged by the appeee.
That queston Is whether a transferee s gven the same rght of |udca
revew of the oard s decson as s a ta payer. The statute provdes for
revew by the court upon petton fed by ether the Commssoner or the ta -
payer (26 U. S. C. ., sec. 1224) and t may be argued that by the anguage
of secton 280 Congress has dfferentated between ta payers and transferees
by referrng to the abty of the atter as the abty, at aw or n equty,
of a transferee of property of a ta payer, n respect of the ta m-
posed upon the ta payer. ut secton 280 drect. ) that the abty of the trans-
feree sha be assessed, coected, and pad n the same manner and sub|ect to
the same provsons and mtatons as n the case of a defcency n a ta m-
posed by ts tte anguage whch ndcates, n our opnon, a cear ntenton to
gve to a transferee the same rght as a ta payer n respect to seekng a revew
of a proposed assessment by appea to the oard of Ta ppeas and to the court.
The precse pont now under consderaton was dscussed n Routzahn v. Tyroer
(36 . (2d), 208) (C. C. . 0), and we agree wth the vew there e pressed that
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
255
280, rt. 1291.
the statutory defnton of ta payer (26 U. S. C. ., sec. 1202) Is not ser-
ousy Inaccurate as apped to a transferee. Ths vew fnds added support In
the anguage of the Supreme Court n Unted States v. Updke, decded May 19,
1930 Ct. D. 192, C. . I -1, 228 , where Mr. ustce Sutherand sad:
Indeed, when used to connote payment of a ta , t puts no undue stran
upon the word ta payer to brng wthn ts meanng that person whose prop-
erty, beng mpressed wth a trust to that end, s sub|ected to the burden. Cer-
tany t woud be hard to convnce such a person that he had not pad a ta .
We concude, therefore, that the appeants are rghtfuy here.
The consttutonaty of secton 280 s attacked upon the ground (1) that t
confers |udca powers upon an admnstratve offcer, and (2) deprves the
transferee of hs property wthout due process of aw n voaton of the ffth
amendment. There s not ackng |udca authorty n support of these con-
tentons. (Occnsboro do. Co. v. Lucas, 18 . (2d), 798 (D. C. W. D. y.)
Md-Contnent Petroeum Corp. v. e ander, 35 . (2d), 43 (D. C. W. D. Oka.)
Cf. eand v. Wknson, 33 . (2d), 901, 962 (D. C. W. D. Ws.) Ct. D. 53,
C. . III-1, 116 .)
ut n Routsahn v. Tyroer, supra, the Crcut Court of ppeas for the S th
Crcut sustaned the vadty of the secton. See aso The Consttutonaty of
the Transferee Provsons of the Revenue cts (29 Coumba L. Rev., 1052).
We agree wth the s th crcut. Due process s afforded because a hearng s
provded before ths court n the event of dssatsfacton wth the determnaton
of the oard of Ta ppeas, to say nothng of the aternatve remedy of an
acton to recover the ta after payment. Nor s |udca power mpropery
deegated. That the coecton of ta es by summary process s a remedy whch
antedates the Consttuton and does not voate ts provsons as to the separa-
ton of powers s a doctrne too we estabshed to requre the ctnton of
authortes. Nor s such summary procedure confned to the coecton of ta es
qua ta es. It e tends to coecton of a debt due the Government from a de-
fautng coector of customs and hs suretes. ( urray s Lessee v. oboken
Land e. Co., 18 ow., 272.) Wthn the prncpes aby dscussed by Mr.
ustce Curts n that case, we thnk the procedure provded by secton 280
s sustanabe. That secton, as sad by the Supreme Court n Unted States v.
Updke, supra, prescrbes a mode of procedure aganst transferees of the
property of a ta payer. There s every reason for havng the premnary steps
admnstratve and summary, because that s the ony effcent method of coect-
ng prompty the ta due from the transferor, when he has made drect coecton
Impossbe by transferrng hs property. nforcement of the transferee s
abty by court process had been found neffectve to prevent oss of revenue
and ta evason. So Congress provded a new and summary procedure. See
ouse Report No. 2, Seventeth Congress, pages 31-32. That the obgaton of
the transferee s not drecty and prmary to pay hs own ta , but s based
upon hs abty at aw or n equty to pay the ta of another, shoud make
no dfference, n our opnon, n the vadty of the procedure Congress has
provded for coecton. The Commssoner s determnaton of the transferee s
abty, and the e tent of t, s not dfferent In knd from the audtng of the
amount due from the defautng coector In Murray s essee. That whch s
pad resuts n the end n the coecton of a ta , though from the transferee
rather than from the person orgnay abe. It s a method of coectng
revenue and, though summary, t does not operate so harshy upon the
transferee, In vew of the recourse he may have to the courts to correct
admnstratve errors, as to fa outsde the pae of permssbe egsaton.
avng determned that the secton s consttutona, t becomes unnecessary
for us to consder the Commssoner s contenton that by avang of ts pro-
vsons n seekng a redetermnaton by the oard of Ta ppeas, the appe-
ants are estopped from questonng ts consttutonaty a doctrne whch was
accepted n Cappen v. Commssoner (14 . T. ., 1269), and foowed by
the oard n the decson now under revew, but dsapproved n outzahn v.
Tyroer, supra.
There remans the queston of the e tent of the appeants abty. They
contend that t s mted to ther decedent s pro rata share of the corporaton s
ta , whe the Commssoner contends that each stockhoder s severay abe
up to the amount of the qudatng dvdend he receved. The Commssoner s
contenton Is correct. artctt v. Drew (57 N. Y., 587) s precsey n pont.
Ths was an acton n the nature of a credtor s b brought by a |udgment cred-
tor of a New ersey corporaton, after the return of an e ecuton unsatsfed,
to reach money dstrbuted by the corporaton to Drew, a arge stockhoder and
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
284, rt. 1305.
256
a resdent of New York. Drew contended that the sut coud not be man-
taned aganst hm aone, but a stockhoders must be brought In, to the end
that each mght contrbute hs proporton to the payment of the pantff s debt.
The court re|ected ths contenton, sayng:
It s a very pan proposton that the stock and property of every
corporaton s to be regarded as a trust fund for the payment of Its debts, and
Its credtors have a en and the rght to prorty of payment over any stock-
hoder. (2 Story q. ur., sec. 1252.) Where stock and property has been
dvded between stockhoders before a the debts of the corporaton have been
dscharged, f any one stockhoder s compeed to pay more than hs far share
of any unpad debt, he may resort to hs assocates for equtabe contrbuton
but wth that proceedng the credtor has nothng to do, uness he chooses to
ntervene to sette equtes that may e st between hs debtors. (Page 589.)
The defendant, Drew, s found to be n possesson of the assets
of the dssoved or nsovent corporaton more than suffcent to pay the pantff
her demand, and the aw requres that he shoud pay It.
Ths case was foowed n astngs v. Drew (70 N. Y., 9) and Snger v.
utchnson (183 111., 606). (See aso mbrough v. Daves, 104 Mss., 722
Wams v. Commerca Nat. ank, 49 Ore., 492 etcher Corporatons, sec. 5060
and sec. 4127, where t s sad that the weght of authorty s In accord.) The
artett case was cted wth approva n atch v. Dana (101 U. S., 205, 212),
whch aowed recovery by a credtor from a snge stockhoder of the atter s
unpad stock subscrpton, for whch no ca had been made by the corporaton,
aganst defendant s ob|ecton that a stockhoders shoud be |oned.
It s true that by cross b the stockhoder who s sued may brng n other
stockhoders and obtan contrbuton. ( etcher, d., sec. 4102.) Ths s a
matter of procedure to avod a mutpcty of suts and do compete |ustce
between a the partes concerned. ut the e tent of the defendant s abty
to the credtor s not dmnshed by the fact that defendant may have a rght
of contrbuton, whch, for convenence, may be enforced n the credtor s sut
rather than n an ndependent acton. Ths s demonstrated beyond queston,
to our mnds, by appeants concesson that If other stockhoders are nsovent
or beyond the |ursdcton, the credtor need not pursue them and the abty
of stockhoders who are partes w be correspondngy ncreased beyond ther
pro rata shares of the credtor s cam. The abty of one who receves cor-
porate assets mpressed wth a trust for payment of corporate debts e tends
to the fu vaue of such assets. That there may be rghts of contrbuton f
those assets are taken from hm does not dmnsh hs abty, nor concern
the credtor. (See atch v. Dana. 101 U. S., 205, 214 Marsh v. urroughs, 1
Woods, 4(53, 468.) If Unted Mates v. rmstrong (28 . (2d), 227) (C. C. .
8) can be thought contrary to ths concuson, we can not yed to t.
Secton 280 of the Revenue ct of 1926 permts the Commssoner to coect
from a transferee accordng to hs abty and wthout regard to rghts
of contrbuton he may have aganst others. Wth such rghts the Government
s not concerned n ts coecton of revenue. They are not affected by the
Commssoner s acton and may be prosecuted n the proper forum. The order
of the oard s affrmed.
S CTION 284. CR DITS ND R UNDS.
rtce 1305: Lmtatons upon the credtng and
refundng of ta es pad.
R NU CT O 1926.
tenson of perod of mtaton n the case of communty prop-
erty returns for 1927. (See Mm. 3815, page 148.)
rtce 1305: Lmtatons upon the credtng and refund-
ng of ta es pad.
R NU CT O 1928.
Ta egay coected. (See Ct. D. 213, page 260.)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
3
:
5
9

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
257 81106, rt. 1341.
TITL . O RD O T PP LS.
S CTION 1001. COURT R I W O O RD S
D CISION.
Secton 1001.
revenue act of 1926.
Rght of transferee to revew of hs abty as determned under
secton 280. (See Ct. D. 211, page 253.)
TITL L G N R L DMINISTR TI PRO ISIONS.
S CTION 1106. IN L D T RMIN TIONS
ND SS SSM NTS.
rtce 1341: na determnaton and assess- I -30-4720
ment of ta or penaty. Ct. D. 209
D R L T S R NU - CT O 1026 D CISION O COURT.
Sut ursdcton Cosng greement adty.
Where a ta payer an the Commssoner have e ecuted a cosng
agreement pursuant to secton 1106(b) of the Revenue ct of
1926, cause (2) of that subdvson bars a sut to recover any
part of the ta covered by the agreement (where there s no
showng of fraud or mafeasance or msrepresentaton of fact
materay affectng the determnaton or assessment made), even
though t was assessed by reason of a provson of the Revenue
ct that has been decared unconsttutona.
Court or Cams of the Unted States.
The ankers Reserve Lfe Co. v. The Unted States.
une 16, 1930.
opnon.
Ltteton, udge, devered the opnon of the court.
Ths sut was nsttuted to recover 27,727.71, the entre amount of ncome
ta assessed, coected, and pad for the year 1924 under the provsons of
sectons 242 to 245, ncusve, of the Revenue ct of 1924.
Pantff s a fe nsurance company organzed under the aws of the State
of Nebraska, wth offce and pace of busness at Omaha.
It was assessed and pad ncome ta for the caendar year 1924 of 27,727.7 L,
of whch 1,200.40 represented addtona ta and nterest thereon of 174.36.
The addtona ta and nterest were pad anuary 17, 1928.
The aforementoned ta was determned, assessed, and coected for 1924
under secton 245(a)2 of the Revenue ct of 1924 and n accordance wth
the provsons of Treasury Reguatons 65, artce 681. In so determnng and
assessng the ta n queston, the Commssoner of Interna Revenue n-
cuded n pantff s gross ncome for 1924 the amount of the ta -e empt Interest
of 449,345.36 receved by t n that year and dmnshed the 4 per cent of the
mean of pantff s reserve fund of 496,738.05 by the amount of ta abe
nterest receved by t. The Commssoner s computaton of the ta a-
bty for 1924 s set forth n deta n hbt , attached to the petton,
whch need not be set forth here, but, by reference, s made a part of thg
fndng.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
51106, rt. 1341.
258
Subsequent to the determnaton, assessment, and payment of the ta and
Interest n queston, pantff and the Commssoner, wth the approva of the
Secretary of the Treasury, on ebruary 25, 1928, e ecuted an agreement to
the fna determnaton and assessment of ts ta for the caendar year 1924
under and n pursuance of secton 1106(b) of the Revenue ct of 1926. Ths
agreement was as foows:
Ths agreement made n dupcate under and n pursuance of secton
1106(b) of the Revenue ct of 1926, by and between ankers Reserve Lfe
Co., a ta payer resdng at. or havng ts prncpa offce or pace of busness at
Nneteenth and Dougas Streets, Omaha, Nebr., and the Commssoner of
Interna Revenue, wth the approva of the Secretary of the Treasury:
Whereas there has been a determnaton and assessment of twenty-seven
thousand, seven hundred twenty-seven doars and seventy-one cents ( 27,-
727.71), as the amount of ta or ta , nterest, and penaty due the Unted
States of merca from sad ta payer on account of ncome for the (character
of ta ) caendar year 1924 (perod covered)
Whereas sad ta payer has pad the amount of ta or ta , nterest, and
penaty so determned and assessed, together wth a accrued nterest or
penaty demanded wthout assessment and
Whereas sad ta payer has accepted any abatement, credt, or refund based
on such determnaton and assessment, and has accepted the |udgment made
wth respect to any and a cams fed n connecton therewth
Now, ths agreement untnesseth, that sad ta payer and sad Commssoner
of Interna Revenue, wth the approva of the Secretary of the Treasury, hereby
mutuay agree that such determnaton and assessment sha be fna and
concusve.
In wtness whereof the above partes have subscrbed ther names to these
presents n dupcate.
t the tme the foregong agreement was e ecuted, pantff dd not know
that the Natona Lfe Insurance Co. had begun an acton on uy 15, 1925,
contestng the vadty of secton 245(a)2 of the Revenue ct of 1921, nor dd
t know at the tme of the e ecuton of the agreement that sad acton was
pendng n the Supreme Court of the Unted States.
The petton n ths case was fed September 3, 1929.
une 4. 19128. the Supreme Court of the Unted States In Natona Lfe In-
surance Co. v. Unted States (277 U. S., 508 T. D. 4206, C. . II-2, 296 ),
hed that under secton 245(a)2 of the Revenue ct of 1921, a fe Insurance
company was entted to deduct from ts gross ncome the fu 4 per cent of
the mean of ts reserve fund requred to be hed by aw wthout dmnuton
by the amount of nterest receved by t from ta -e empt securtes. There-
after, on une 12, 1928, pantff fed a cam for refund for the amount of
27,553.35. ta . and 174.36. nterest, pad, basns Its cam on the decson
of the Supreme Court n Natona Lfe Insurance Co., supra. Ths cam for
refund was dened by the Commssoner of Interna Revenue on ugust 10,
1928, on the ground that the ta abty of pantff was setted by agreement
of March 22. 1928. e ecuted under and n accordance wth the provsons of
secton 1106(b) of the Revenue ct of 1926.
Defendant (emurs to the petton, upon the ground that the facts set forth
theren do not consttute a cause of acton aganst the Unted States, and rases
the ssue whether, under the aegatons set forth n the petton and under the
agreement of March 22, 1928, ths court has |ursdcton to determne ths sut
and to annu, modfy, or set asde the determnaton and assessment of pan-
tff s tu for the year 1924 as made by the Commssoner of Interna Revenue.
It s agreed that f ths court s not precuded from entertanng ths sut
by the cosng agreement of March 22, 1928. e ecuted under the provsons of
secton 1106(h) of the Revenue ct of 1926, pantff s entted to recover.
Under the decson of the Supreme Court n Natona Lfe Insurance Co.,
supra, pantff woud e entted to a deducton of 496,738.05, beng 4 per cent
of ts meun reserve of 12,418,451.21, whch woud resut n deductons of
228,918.53 n e cess of Its ncome.
Pantff contends that the decson of the Supreme Court In Natona I fe
Insurance Co., supra, n whch t was hed that secton 245(a)2 of the Revenue
ct of 1921. whch s the same as secton 245 of the Revenue ct of 1924. was
unconsttutona, nufed secton 1106(b) of the Revenue ct of 1926, Invov-
ng fna settement agreements theretofore e ecuted by nsurance companes,
wth respect to and to the e tent that nsurance companes e ecutng such
agreements had not been permtted to deduct 4 per cent of the mean of
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
259
1106, rt. 1341.
ther reserve funds from ther genera ncome, undmnshed by the Income from
ther ta -e empt securtes.
In support of ths contenton pantff argues that Congress aone can author-
ze the assessment and coecton of a ta that ths power can not be e ercsed
e cept wthn the mts of the Consttuton and, therefore, any ct of Congress
whch transcends the mtatons of the Consttuton s vod ab nto.
It s further argued that snce secton 245(a)2 was unconsttutona, there
was no aw n e stence whch authorzed the assessment of the ta aganst
pantff, and, snce there was no aw under whch the ta coud be mposed,
the money pad by t was not n ega contempaton a ta , the agreement
sgned by pantff and the Commssoner, and approved by the Secretary of
the Treasury, was never bndng n so far as t reated to payments made as
a ta computed under secton 245(a)2.
The queston s whether, n vew of the provsons of secton 1100(b) of the
Revenue ct of 1920, ths court has |ursdcton to entertan ths sut. Ths
secton provdes that f after a determnaton and assessment n any case the
ta payer has pad n whoe any ta , based on such determnaton and assess-
ment, and an agreement s made n wrtng between the ta payer and the
Commssoner, wth the approva of the Secretary of the Treasury, that such
determnaton and assessment sha be fna and concusve, then (e cept upon
a showng of fraud, mafeasance, or msrepresentaton of fact materay
affectng the determnaton and assessment thus made) the case sha not be
reopened or the determnaton and assessment modfed by any offcer, empoyee,
or agent of the Unted States, and no sut, acton, or proceedng to annu,
modfy, or set asde such determnaton or assessment sha be entertaned by
any court of the Unted States.
We thnk t s pan, n vew of the agreement entered nto between the
pantff and the Commssoner wth the approva of the Secretary of the
Treasury, that under ths secton ths court s wthout |ursdcton to entertan
ths sut. The sut s brought for the e press purpose of settng asde the
determnaton and assessment by the Commssoner and to recover the amount
pad as ta and nterest for the caendar year 1924. Ths s prohbted by the
postve provsons of secton 1106(b), and ths court has no authorty to gnore
the provsons of that secton. Congress has authorty to prescrbe the cond-
tons upon whch the Unted States may be sued. It has done so n anguage
that s too cear to admt of doubt and under the we-estabshed prncpe
that one who Insttutes a sut aganst the Unted States must brng the case
wthn the authorty of some ct of Congress or the court can not e ercse
|ursdcton over t, pantff s precuded from mantanng ths acton. ( etna
Lfe Insurance Co. v. aton, decded by the court for the dstrct of Con-
nectcut on pr 9, 1930 Ct. D. 178, C. . I -1, 245 .) There s no showng
of fraud, mafeasance, or msrepresentaton of fact materay affectng the
determnaton or assessment made n ths case and the pantff s In no dfferent
stuaton than t woud be f the sut were barred by the statute of mtaton.
In such a case the egaty of the assessment and coecton woud be of no
assstance to pantff.
The purpose of the statute In provdng for cosng agreements was to enabe
the ta payer and the Government fnay and competey to sette a contro-
verses n respect of the ta abty for a partcuar year or years and to
protect the ta payer aganst a further demand by the reopenng of a case
as a resut of a dfferent vew of the matter beng taken by the Government
offcers or as the resut of subsequent court decsons pror to the e praton
of the statute of mtatons, and to prevent the fng of addtona cams
for refund or the nsttuton of sut by the ta payer for the same reasons.
Congress thus e pressy authorzed the partes by agreement to shorten the
perod of mtaton for the determnaton, assessment, and coecton of a ta
and for the fng of cams for refund, abatement, credt, and the Insttuton
of sut for the recovery of the amount pad.
The decson of the Supreme Court n Natona Lfe Insurance Co. case, so
far as concerns the pantff s rght to mantan ths sut, had no effect upon
the vadty of the provsons of secton 1106(b) of the Revenue ct of 1926.
The pantff can ony ook to Congress for reef or for authorty to mantan
a sut for the recovery of any amount assessed and pad as a ta for the
caendar year 1924.
The demurrer s sustaned and the petton s dsmssed. It s so ordered.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
1106, rt. 1341.
260
rtce 1341: na determnaton and assessment of ta or
penaty.
R NU CT O 1926.
vaabty of provsons of secton 1106 of the Revenue ct of
1926 as a defense n an acton to enforce abty for refusa to sur-
render ta payer s property. (See Ct. D. 234, page 239.)
rtce 1341: na determnaton and assess- I -31 4728
ment of ta or penaty. Ct. D. 213
( so Secton 284. rtce 1305.)
D R L T S R NU CT O 1926 D CISION O COURT.
1. Sut ursdcton Cosng greement adty.
Where a ta payer and the Commssoner have e ecuted a
cosng agreement pursuant to secton 1106(b) of the Revenue
ct of 1926, cause (2) of that subdvson bars n sut to recover
any part of the ta covered by the agreement (where there s no
showng of fraud or mafeasance or msrepresentaton of fact mate-
ray affectng the determnaton or assessment made), even though
t was assessed by reason of a provson of the Revenue ct that
has been decared unconsttutona.
2. Refund Lmtaton Ta Iegay Coected.
Secton 284(b) of the Revenue ct of 1926 prohbts a refund
of a ta uness the cam for refund was fed wthn the tme
prescrbed by that secton, athough the amount sought to be
refunded was egay coected.
Court of Cams of the Unted States.
Wsconsn Natona Lfe Insurance Co. v. The Unted States.
une 16, 1930.
OPINION.
Ltteton, udge, devered the opnon of the court.
Pantff brngs ths sut to recover 2,116.98, ncome ta pad for 1923,
together wth nterest on 1,058.49 thereof from March 5, 1924, and 1,058.46
thereof from une 12, 1924 and 6,042.91. Income ta pad for 1924, and
5,979.18, ncome ta pad for 1925, wth nterest from the severa dates when
payments aggregatng these amounts were made.
The amounts mentoned are aeged to have been erroneousy and Iegay
assessed and coected, and are sought to be recovered under the decson of
the Supreme Court n Natona Lfe Insurance Co. v. Unted States (277 U. S.,
508 T. D. 4206, C. . II-2, 296 ). The amounts n controversy were deter-
mned, assessed, coected, and pad under the provsons of sectons 242 to 245,
Incusve, of the Revenue ct of 1921 and subsequent Revenue cts provdng
for the determnaton of the net ncome of fe Insurance companes.
s to the amounts determned, assessed, and pad as ncome ta for 1924 and
1925, pantff and the Commssoner of Interna Revenue, wth the approva
of the Secretary of the Treasury, entered nto a cosng agreement under the
provsons of secton 1106(b) of the Revenue ct of 1926.
s to the year 1923, the Commssoner, upon consderaton of a cam for
refund and upon audt of the pantff s return subsequent to the decson of
the Supreme Court n Natona Lfe Insurance Co. case, supra, determned that
pantff had no ta abe ncome for that year and that t had overpad the
amount of 4,933.99 ta and 115.49 nterest. e further determned that the
refund of 2,116.98 of the tota ta pad was barred by the statute of mta-
ton provded n secton 284(b) of the Revenue ct of 1926. The remanng
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
261 1106, rt. 1341.
amount of 2,817.01 of the tota overpayment, together wth Interest of 115.49,
was refunded and Interest thereon of 578.11 was pad.
The defendant demurs to the petton on the ground, frst, that the petton
fas to state facts suffcent to consttute a cause of acton aganst the Unted
States secondy, that the petton fas to state facts suffcent to consttute
a cause of acton wthn the ursdcton of ths court.
Pantff s a fe nsurance company organzed under the aws of the State
of Wsconsn, wth ts prncpa offce and pace of busness at Oshkosh.
or the caendar year 1923 pantff made an ncome-ta return showng a
ta abe ncome of 33,871.91, upon whch a ta at 12 per cent, amountng to
4,233.93, was duy assessed and pad. March 22, 1927, the Commssoner of
Interna Revenue determned the ta abe ncome for ths year to be 39,471.91,
and on pr 30, 1927, made an addtona assessment of 700.06 and nterest
of 115.49, whch addtona assessment the pantff pad. une 21, 1928,
pantff fed a cam for refund of 5,049.48, beng the tota ta and Interest
assessed and pad for 1923, upon the ground that t was not abe for any
ta under the decson of the Supreme Court n Natona Lfe Insurance Co. v.
Unted States, supra. Upon consderaton of pantff s cam for refund and
upon further audt of the return for ths year, n accordance wth the decson
In the Natona Lfe Insurance Go. case, the Commssoner determned that
pantff had no ncome sub|ect to ta , and further determned that there
had been an overpayment of 4,933.99 ta and 115.49 Interest theretofore
assessed.
The Commssoner hed that 2,116.98, representng two payments of
1,058.49 on March 5, 1924, and 1,058.46 on une 12, 1924, on the ta orgnay
returned and assessed was barred by the statute of mtaton contaned In
secton 284(b) of the Revenue ct of 1926. The baance of the orgna and
addtona assessments of ta and nterest, totang 2,932.50, was refunded and
nterest thereon In the amount of 578.11 was pad.
or the caendar year 1924 pantff was assessed a ta of 6,030.47 and
nterest of 6.44 on a tota net ncome of 48,291.77, whch ta and Interest were
pad.
Incuded In and treated as a part of pantff s gross ncome for 1924 was
nterest of 99,394.88 receved by t on ta -e empt securtes. Pantff s mean
reserve fund for 1924 was 2,574,135.34, 4 per cent of whch amounted to
102,965.41. In accordance wth the provsons of the statute and the regua-
tons of the Commssoner of Interna Revenue there was added to and treated
as a part of pantff s gross ncome the ncome receved by t from ta -e empt
securtes, and n determnng the net ncome the Commssoner dmnshed 4
per cent of the mean of pantff s reserve fund of 102,965.41 by the amount of
ta -e empt nterest receved.
or the caendar year 1925 pantff was assessed a ta of 5,974.51 and
nterest of 4.67 on a tota net ncome of 47,796.11.
Incuded n and treated as a part of pantff s Income for 1925 was e empt
nterest of 99,439.24. Pantff s mean reserve fund for 1925 was 3,016,710.55,
4 per cent of whch amounted to 120,668.42. In accordance wth the pro-
vsons of the statute and the reguatons of the Commssoner of Interna
Revenue there was added to and treated as a part of pantff s ncome the
e empt Interest, and n determnng the net ncome the Commssoner dmnshed
4 per cent of the mean of pantff s reserve fund of 120,608.42 by the amount
of the ta -e empt nterest receved durng the year.
The assessments for the ta abe years n queston were made aganst pantff
pursuant to secton 245(a)2 of the Revenue cts of 1921 and 1924.
fter the determnaton and assessment by the Commssoner of the ta and
nterest due for the years 1924 and 1925, and the payment thereof by the
pantff, the pantff and the Commssoner of Interna Revenue, wth the
approva of the Secretary of the Treasury, on September 27, 1927, e ecuted
an agreement n respect of the ta and nterest for these years under and
pursuant to the provsons of secton 1106(b) of the Revenue ct of 1920, whch
agreement was as foows:
GR M NT S TO IN L D T RMIN TION ND SS SSM NT O T .
Ths agreement, made n dupcate under and n pursuance of secton 1106(b)
of the Revenue ct of 1926, by and between Wsconsn Natona Lfe Insurance
Co., a ta payer resdng at or havng ts prncpa offce or pace of busness at
14-16 Washngton ouevard, Oshkosh, Ws., and the Commssoner of Interna
Revenue, wth the approva of the Secretary of the Treasury:
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
51106, rt. 1841.
262
Whereas there has been a determnaton and assessment of tweve thousand
twenty-two doars and nne cents ( 12,022.00), as the amount of ta or ta ,
Interest, and penaty due the Unted States of merca from sad ta payer on
account of ncome (character of ta ) for the (perod covered) years 1924
and 1925
Whereas sad ta payer has pad the amount of ta or ta , Interest, and
penaty so determned and assessed, together wth a accrued Interest or
penaty demanded wthout assessment and
Whereas sad ta payer has accepted any abatement, credt, or refund
based on such determnaton and assessment, and has accepted the ad|ustment
made wth respect to any and a cams fed n connecton therewth
Note, ths agreement wtnesseth, that sad ta payer and sad Commssoner
of Interna Revenue, wth the approva of the Secretary of the Treasury
hereby mutuay agree that such determnaton and assessment sha be fna
and concusve.
In wtness whereof the above partes have subscrbed ther names to these
presents n dupcate.
t the tme the foregong agreement was e ecuted pantff dd not know that
the Natona Lfe Insurance Co. had begun an acton on uy 15, 1925, contest-
ng the vadty of secton 245(a)2 of the Revenue ct of 1921, nor dd t
know at the tme of the e ecuton of the agreement that sad acton was pend-
ng n the Supreme Court of the Unted States.
On une 4, 1928, the Supreme Court of the Unted States, n the case of
Natona Lfe Insurance Co. v. Unted States, supra, hed that under secton
245(a)2 of the Revenue ct of 1921 a fe nsurance company was entted to
deduct from ts gross ncome 4 per cent of the mean of ts reserve wthout
dmnuton by the amount of ta -e empt nterest receved. computaton of
pantff s ncome for 1924 and 1925 n accordance wth the decson of the
court n that case woud resut n deductons of 51,103.11 and 51,643.13,
respectvey, n e cess of the ncome for these years.
une 23, 1928, pantff fed wth the Commssoner of Interna Revenue a
cam for refund of the entre ta and nterest pad for 1924 and 1925, on the
ground that It was not abe for any ta under the decson of the Natona Lfe
Insurance Co. case. These cams for refund were re|ected by the Commssoner
ugust 7, 1928, on the ground that he was precuded from makng a refund by
the cosng agreement of September 27, 1927.
Wth respect to the years 1924 and 1925, as to whch there was a cosng
agreement under secton 1106(b) of the Revenue ct of 1926, the same con-
tentons are made on behaf of the pantff n ths case as were made by pan-
tff n ankers Reserve Lfe Co. v. Unted States, 08, ths date decded see
Ct. D. 209, on page 257 . or the reasons stated by the court In the case of
anker Reserve Lfe Co., supra, t s hed that as to the years 1924 and 1925
the defendant s demurrer s we taken and s sustaned.
s to the caendar year 1923, there was no cosng agreement under the
provsons of secton 1106(b) of the Revenue ct of 1926, but wth respect
to pantff s rght to mantan ths sut to recover 52.116.98 of the tota ta
pad for that year the stuaton s no dfferent. It s admtted that refund of
ths amount was barred by the statute of mtaton provded n secton 284(b)
at the tme cam for refund was fed, but t s nssted on behaf of pantff
that secton 284(b) of the Revenue ct of 1920, prohbtng a refund of ta un-
ess the cam for refund was fed wthn the tme prescrbed by that secton
(whch was not done n ths ca. e), can ony appy to a ta assessed under a
consttutona ct and can not appy to amounts egay coected and hed
y the Government that the money whch was pad to the Government as a
ta for 1923 was not a ta , was wthout consderaton, and s now retaned
by the Government wthout warrant of aw that the Government, havng
admtted that the pantff had no ta abe ncome and no ta abty for the
year 1923, s now estopped from peadng the statute of mtaton as a bar
to the pantff s rght to a refund of the amount n queston for that year.
These contentons are wthout mert. The statute of mtaton on the rght
to a refund or to recover an amount assessed and coected as a ta can not be
made to depend upon the queston whether there was any ega authorty
for the assessment and coecton. If the pantff were correct n ts conten-
ton In ths case the statute of mtaton woud be practcay of no force
or effect. The statute of mtaton s ursdctona In ths court, and when
It appears, as here, that the tme wthn whch a person may brng sut
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
263
1106, rt. 1341.
aganst the Unted States has e pred, or that pantff has not comped wth
the requrements necessary to gve hm a rght to mantan a sut, ths court
Is wthout ursdcton to entertan t. The decson of the Supreme Court n
the Natona Lfe Insurance Co. case gave fe nsurance companes that had
pad a ta under the provsons of secton 245(a)2 of the Revenue ct
of 1921 and subsequent cts contanng smar sectons no greater rght to
recover the ta so pad, and barred by the statute of mtaton, than the
rght whch they or other ta payers had to recover amounts otherwse errone-
ousy or Iegay coected, or coected wthout authorty of aw.
The demurrer Is sustaned and the petton s dsmssed. It Is so ordered.
rtce 1341: na determnaton and assess- I -34-4756
ment of ta or penaty. Ct. D. 225
federa ta es revenue act of 1926 decson of court.
Sut ursdcton Cosng greement adty.
Where a ta payer and the Commssoner have e ecuted a
cosng agreement pursuant to secton 1100(b) of the Revenue
ct of 1026, the agreement, by vrtue of cause 2 of that subdv-
son, Is a defense to a sut to recover any part of the ta covered by
the agreement (where there Is no showng of fraud or mafeasance
or msrepresentaton of fact materay affectng the determnaton
or assessment made), even though It was assessed by reason
of a provson of the Revenue ct that has been decared
unconsttutona.
Unted States Crcut Court or ppeas for the Second Crcut.
etna Lfe Insurance Co., appeant, v. Robert O. aton, Coector of Interna
Revenue, appeee.
ppea from Unted States Dstrct Court tor the Dstrct of Connectcut
uy, 1930.
OPINION.
rom a udgment sustanng a demurrer to the compant of etna Lfe
Insurance Co. n an acton aganst a coector of nterna revenue to recover
ncome ta es aeged to have been unawfuy e acted the etna Lfe Insurance
Co. appeas. Reversed.
ugustus N. and, Crcut udge: Ths appea Invoves the rght of the
etna Lfe Insurance Co. to recover from aton personay, who s coector
of nterna revenue, 376,340.37, corporaton Income ta es for the years 1923
and 1924, whch he coected from t.
etna had fed ts returns for ncome ta es for the years 1922, 1923, and
1924, pad the ta es thereunder, and fed cams for refunds, aggregatng
102,532.86, on account of certan deductons whch t camed. None of the
tems sought to be refunded form any part of the 376,340.37, to recover whch
the present acton was brought. Items other than ths 376,340.37 were n
dspute durng the Government audts and from tme to tme were aowed and
dsaowed. nay a refund of 89,831.08, wth nterest amountng to
11,152.58, was aowed n 1927, and checks were sent to the ta payer n
repayment. ccompanyng the checks was a etter ncosng a prnted orm
S66 , suggestng to etna that It mght enter nto a wrtten agreement makng
the determnaton and assessment of ta abty fna and concu-
sve. The varyng fortune whch the refundng cams of etna had nready
suffered very key mpressed t wth the desrabty of havng the amount
of ts ta es no onger open to a reaudt. t a event, and whatever may have
been the reason, a so-caed cosng agreement was sgned by t on December
23, 1927, In whch the Commssoner of Interna Revenue |oned under date of
anuary 14, 1928. The agreement rected that there had been a determnaton
and assessment of a named sum as the amount of ta due on account of ncome
for the years 1922, 1923, and 1924 that the ta payer had pad the ta so
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
1106, rt. 1341.
264
determned, had accepted any refund based on the assessment, and had
accepted the ad|ustment made wth respect to any and a cams fed n
connecton therewth. The agreement provded that the ta payer and
Commssoner of Interna Revenue wth the approva of the Secre-
tary of the Treasury mutuay agree that such determnaton and
assessment sha be fna and concusve.
In Nutona Lfe Insurance o. v. Unted States (277 U. S., 508 T. D. 4206,
C. . II-2, 290 ) the provsons of the Revenue ct of 1921, ayng an ncome
ta upon fe nsurance companes, were under consderaton. The ct ta ed
a Interest and dvdends ess a deducton (1) of ncome derved from ta -
e empt securtes (2) of a further sum equa to 4 per centum of the company s
ega reserve, dmnshed, however, by any nterest whch t mght receve
from ta -e empt securtes. ma|prty of the Supreme Court hed that ths
was nn ndrect way of ta ng the ncome of Unted States, State, and muncpa
bonds that so far as t affected State and muncpa bonds It wns uncon-
sttutona nnd so far as t affected Unted Stntes bonds was contrary to the
manfest purpose of the statute.
etna receved ts frst notce of the foregong decson n atnna Lfe
Insurance Co. v. Unted States on une 6, 1928, and a week ater fed wth
the defendant heren a cam for a refund of ta es for the years 1923-1926
founded upon that case. t the tme etna e ecuted the cosng agreement
It was not aware that any queston had arsen between the Government and
any other party as to the rght of the Government to offset from the deducton
of 4 per centum of the ega reserves of fe nsurance companes any nterest
whch these companes mght receve from ta -e empt securtes. In other
words. etna supposed secton 245(a)2 under whch the deductons were fgured
was consttutona.
The refundng cam for the years 1925 and 1926 was granted, for the reason
that no cosng agreement had been entered nto for those years, but t was
dened or the years 1923 and 1924, on the ground that the agreement was a
bar.
The cosng agreement sgned by the Commssoner on anuary 14, 1928,
was made under the authorty of secton 1106(b) of the Revenue ct of 1926,
whch read as foows:
If after a determnaton and assessment n any case the ta payer has pad
n whoe any ta or penaty, or accepted any abatement, credt, or refund
based on such determnaton and assessment, and an agreement s made n
wrtng between the ta payer and the Commssoner, wth the approva of
the Secretary, that such determnaton and assessment sha be fna and
concusve, then (e cept upon a showng of fraud or mafeasance or msrepre-
sentaton of fact materay affectng the determnaton or assessment thus
made) (1) the case sha not be reopened or the determnaton and assess-
ment modfed by any offcer, empoyee, or agent of the Unted States, and (2)
no sut, acton, or proceedng to annu, modfy, or set asde such determnaton
or assessment sha be entertaned by any court of the Unted States.
If nterest from ta -e empt securtes had not been deducted from 4 per
centum of the company s ega reserves n cacuatng the ta es for 1923 and
1924. the ta es actuay pad for those years woud have been reduced by
f376.340.37 -the sum sought to be recovered n ths acton. It was because of
an erroneous assumpton on the part of etna that secton 245(a) of the
Revenue ct emboded a vad requrement as to the mode of cacuatng ta es
on the Income of fe Insurance companes that the overpayments of 376,340.37
were made. No fraud, mafeasance, or msrepresentaton of fact affectng the
assessment s camed.
etna set up I he foregong matters n ts compant aganst the coector n
an acton of ndebtatus assumpst, to whch the atter nterposed a demurrer
on the ground:
(1) That the compant dd not state facts suffcent to consttute a cause of
acton
(2) That under secton 1106(b) of the Revenue ct of 1926, the assessment
of the Commssoner was fna and concusve
(3) That under secton 1106(b) of the Revenue ct of 1926, by reason of
the cosng agreement, the court was wthout ursdcton to determne the Issue
In ths acton or to annu the assessment of the Commssoner.
udge urrows, before whom the demurrer was argued, fed a memorandum
In whch he hed that the prohbton n subsecton (2) of secton 1106(b)
was a mtaton on the powers granted under secton 24 of the udca Code
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
265
1106, rt. 1341.
and deprved the court of ursdcton. e thereupon sgned an order In
genera terms that sad demurrer be and the same hereby s sustaned, and
a |udgment was entered to that effect accordngy. rom ths |udgment
etna appeas and makes two man contentons:
(1) That the cosng agreement was not concusve as to ta es coected under
unconsttutona provsons of the revenue aws.
(2) Secton 1106(b), supra, dd not deprve the dstrct court of |ursdcton
of ths acton aganst the coector.
It s to be notced that the Revenue ct of 1921, under whch ncome tu es
were ad upon etna, was not hed unconsttutona. The Supreme Court ony
decared nvad the porton of subdvson (2) of secton 245(a) whch under-
took to abate the 4 per centum deducton by the amount of nterest receved
from ta -e empt securtes. Secton 1403 of the same ct e pressy provdes
that f any provson of the ct be hed nvad, the remander of the ct sha
not be affected thereby. Consequenty the ct for the ta aton of fe n-
surance companes stands smpy wth the abatement provson e cded and
the statutory provsons that a cosng agreement sha not be reopened or
annued e cept for fraud appy e propro vgore.
It s evdent from the hstory of the secton of the Revenue ct authorzng
cosng agreements that they were ntended fnay to sette the ncome ta es
for the years n queston and to prevent reaudts of assessments. etna s
counse concede that t woud cover a matters such as:
(a) rrors of arthmetc and computaton
(b) Interpretaton of the Revenue cts
(c) ppcaton of the Revenue cts to the facts of a partcuar case,
ncudng the questons that occason so many cases n the Crcut Court of
ppeas and the Supreme Court
(d) What ncome and what deductons are Incuded wthn the terms of the
Revenue cts
(e) ccountng vaues and deprecaton and dvdends to pocyhoders
(f) Rungs by the Treasury Department.
In vew of the foregong concesson and on genera prncpes, why shoud
appeant e cept from the settement ta es based upon a snge provson of the
ct hed to be unconsttutona Not because the coecton was unwarranted,
for a coecton based upon a wrong nterpretaton of the meanng or scope of
he statute woud be equay unwarranted. In ether case a sum of money
woud be e acted wthout authorty of aw upon an assumpton that the author-
ty e sted. The ogc of such a constructon of secton 1106(b) as appeant
seeks woud destroy ts ob|ect, for everythng woud be eft open that was not
specfed or was not at east wthn the mnds of the partes when the cosng
agreement was made. ut the secton n terms covers everythng e cept fraud
and can have tte use f t permts new questons to be rased after a cosng
agreement s e ecuted. The agreement was made pursuant to the statute and
s bound to be gven the effect theren prescrbed. Secton 1106(b) e cudes
mstakes of fact (and a fortor of aw) as grounds for rescsson. Ony fraud,
mafeasance, or msrepresentaton are mentoned as a bass for attackng the
assessment, and none of these s aeged to have e sted.
There can be no doubt that the ta payer coud ad|ust a cam for repayment
of ta es coected under a provson of aw afterwards hed to be unconsttu-
tona and we can see no reason why a statute can not provde that a settement
wth a ta ng offca sha embrace a matters affectng an assessment. If
etna had not wshed to prevent the presentaton of future cams n reassess-
ments by the Commssoner, t doubtess woud not have e ecuted the cosng
agreement. avng done so, It was necessary bound by the consequences of
such a mutua undertakng. ny precedents reed on by pantff, to the
effect that a reease, though genera n ts terms, does not cover matters not
wthn the contempaton of the partes, are besde the mark, for here the
statute prescrbes |ust what effect a cosng agreement sha have upon the
assessment and says that (1) the case sha not be reopened or the determna-
ton modfed by any offcer, empoyee, or agent of the Unted States and
(2) no sut, acton, or proceedng to annu, modfy, or set asde such
determnaton or assessment sha be entertaned by any court of the Unted
States.
We are cear that by the cosng agreement the partes n fact ntended to
sette a questons reatng to the vadty of the assessments for 1923 and
1924 and that rrespectve of ths the Revenue ct made the agreement a statu-
tory bar.
35492 31 18
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
1106, rt. 1341.
266
ut the appeant argues that the coector Is a wrongdoer, outsde the pro-
tectng causes of secton 1106(b), and may thus not ava hmsef of defenses
open to the Unted States, for whch he was purportng to act. Ths contenton,
n our opnon, has no mert. In Tucker v. e ander (275 U. S., 228 T. D.
3973, C. . I-1, 287 ), where the suffcency of a cam for a refund of ta es n
an acton aganst a coector was before the Supreme Court, ustce Stone, who
wrote the opnon, sad:
Ltera compance wth statutory requrements 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.
nd n rnson v. Murphy (109 U. S., at p. 243) the court remarked that the
common aw acton aganst a coector for e acton of unawfu ta es has
been converted nto an acton based entrey on a dfferent prncpe that of a
statutory abty, nstead of an mped promse whch, f not orgnated by
the act of Congress, |et s reguated, as to a ts ncdents, by e press statutory
provsons. It Is evdent that secton 1106(b) appes to actons aganst
coectors as we as to those aganst the Unted States.
We kewse fnd no mert n appeant s contenton that secton 1106(b) was
repeaed by secton 606 of the Revenue ct of 1928, approved after the cosng
agreement was e ecuted. Secton 606(c) contaned the provson That such
repea sha not affect any agreement made before such repea takes effect.
Ths cause saved the cosng agreement both as to ts vadty and as to ts
effect under secton 1106(b).
Whe udge urrows sgned an order n genera terms sustanng the
demurrer to the compant, hs memorandum ndcates that he regarded the
words of subdvson (2) of secton 1106(b), that no sut, acton, or proceed-
ng to annu, modfy, or set asde such determnaton or assessment sha be
entertaned by any court of the Unted States as deprvng the dstrct court
of |ursdcton. Whether the cause had such an effect s a cose queston and
one whch, n ankers Reserve Lfe Co. v. Unted States (unreported) see Ct.
D. 209, on page 257 , the Court of Cams has answered n the affrmatve.
The words of subdvson (2), supra, n our opnon, estabshed a rue of aw
defnng the duty of the court and dd not mt ts |ursdcton.
In aunteroy v. hum (210 U. S., at page 234), a aw of Msssspp makng
deangs In futures a msdemeanor and provdng that such contracts sha
not be enforced by any court was under consderaton. ustce omes,
wrtng for the Supreme Court, sad:
Whether a gven statute s ntended smpy to estabsh a rue of sub-
stantve aw, and thus to defne the duty of the court, or s meant to mt ts
power, s a queston of constructon and common sense. When t affects a
court of genera |ursdcton and deas wth a matter upon whch that court
must pass, we naturay are sow to read ambguous words, as meanng to eave
the |udgment open to dspute, or as ntended to do more than to f the rue
by whch the court shoud decde.
gan, n urnet v. Desmorncs (226 U. S., at page 147), ustce omes sad:
When a court has genera |ursdcton to try the queston whether an
aeged rght e sts the rues that determne the e stence of the rght ordnary
govern the duty ony of the court, not ts power. Its |udgment that the rght
s estabshed can not be mpeached coateray by proof that the |udgment was
wrong. or nstance, a common-aw court ought not to gve |udgment for the
pantff upon a paro promse wthout consderaton, but f t does so, the
|udgment s not open to coatera attack.
ven words In a statute that mght seem to affect the power of the court,
such as no acton sha be brought n the statute of frauds, are assumed
wthout queston merey to f the aw by whch the court shoud decde

In cases where ta es are unawfuy coected, the dstrct court ordnary
has |ursdcton to dspose of the rghts of the partes. It seems reasonabe
to hod that t has such power here and that secton 1106(b)2 s nothng
more than a statutory provson whch makes a cosng agreement a defense
to te acton. The resut of hodng that there was no |ursdcton woud be
to aow etna to brng other actons, for ony a decson on the merts s res
|udcata. ( ughes v. Unted States, 4 Wa., 232 Shaw v. roadbent, 129
N. Y., 114.)
ut whe the |udge made an order sustanng the demurrer generay, he
sgned a |udgment orderng the rng of hs memorandum, whch ony sustaned
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
267
1113, rt. 1351.
the demurrer for ack of ursdcton. Ths we thnk mted the dsmssa to
that pont and makes It necessary to reverse the |udgment and remand the
case wth drecton to dsmss on the ground that the compant states no
cause of acton. ( ouse v. Muen, 22 Wa., 42.)
The stuaton s dfferent from that n Patterson v. armngton St. Ry. (76
Conn., 628). There the demurrer stated many grounds, some forma and some
substanta. The memorandum fed by the tra |udge sustaned the demurrer
upon ony a porton of these grounds, but a were enumerated n the |udgment.
On appea the udgment was hed to embrace a the grounds. In the case at
bar the |udgment was genera but the memorandum fed pursuant to t re-
ated ony to ack of ursdcton. Consequenty that must be regarded as the
ony bass for the |udgment, whch was not therefore a decson upon the merts.
The |udgment Is reversed and the case Is remanded wth drecton to dsmss
because the compant states no cause of acton.
S CTION 1113. LIMIT TIONS UPON SUITS ND
PROC DINGS Y T T P Y R.
rtce 1351: Suts for recovery of ta es erro- I -51-4877
neousy coected. Ct. D. 258
D R L T S LIMIT TIONS UPON SUITS D CISION OP COURT.
1. Sut Lmtaton.
sut for the recovery of an amount admttedy an overpayment
for one year whch s credted aganst the amount of a penaty due
for another year s a sut for the recovery of a ta sub|ect to the
mtatons provded n secton 3226 of the Revsed Stntutes. n
accordance wth whch a sut must be begun wthn fve years from
the date of payment of the ta or two years from the date of the
re|ecton of the cam for refund.
2. Decson Dstngushed.
The decson n Peeress Paper o Mfg. Co. v. Routzahn (22
ed. (2d), 459) dfferentated.
Unted States Dstbct Court for the Northern Dstrct or Oho, astern
Dvson.
The enkns Steamshp Co., pantff, v. Car . Routzahn, Coector of Interna
Revenue, defendant.
On demurrer to answer.
ugust 13, 1930.
OPINION.
West, Dstrct udge: Pantff s demurrer to the answer as a whoe must
be overrued If any suffcent defense appears. In my opnon, paragraph 7
states a compete defense under R. S. 3226 (secton 156, Tte 26, U. S. C).
Counse s cam that the acton s not to recover a penaty but s for money
ordered refunded on account of pantff s overpayment of ta es for another
year, Is not borne out by the averments of the petton. When the Govern-
ment wthhed the money and apped t n satsfacton of the penaty, t
effected coecton of the penaty e acty as f t had receved pantff s check.
Ths sum can not be recovered uness cam for ts refund was made and
re|ected and pantff prompty fed such cam. n acton w not e
uness commenced wthn the tme f ed by aw and here It was commenced
too ate, accordng to the answer.
I do not understand that the case of Peeress Paper o Mfg. Co. v. Rout-
zahn (22 . (2d), 459) s to the contrary. The pont there decded was that
after the coecton of ncome ta es had become barred by the 5-year statute
of mtatons the Government coud not crcumvent the aw by wthhodng
from the ta payer a refund due to hm for overpayment of the ta for some
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
1113, rt. 1351.
268
other year and appyng the amount thereof upon the ta es, coecton of
whch was barred. That queston s not presented here, for on pr 9,
1024, when, accordng to the answer, the amount sought to be recovered was
pad to and coected by the Government by means of the wthhodng and
appcaton thereof to an aeged ta abty for 1922, the coecton of the
atter was not barred by the statute.
Demurrer overrued. ceptons to pantff.
- On moton for rehearng.
September 8, 1930.
West, Dstrct udge: I have agan e amned the contenton of pantff s
counse that R. S. secton 3226 (20:150 U. S. C.) has no appcaton n a case
ke ths, and that t was so decded by udge ones n the Peeress case (22 .
(2d), 459). rom an e amnaton of the peadngs and brefs n that case I
am satsfed that no such decson was made or ntended. second addtona
assessment n respect of the ta for 1917 had been made n March, 1924, and
was protested by the ta payer. In September, 1924, a certfcate of overassess-
ment of ta es for 1918 was ssued, whch on October 23, 1924, the coector ap-
ped n parta dscharge of sad addtona assessment. Cam for refund of
the amount so apped was fed anuary 23, 1920 ths was re|ected September
3, 1926, and the acton was commenced on October 1, 1926.
s the ta payer prompty made cam for refund and brought sut wthn a
month of ts re|ecton, and wthn two years after the msappcaton of the
overassessment to the satsfacton of the barred abty for the addtona
assessment, no queston arose under secton 3226, the provsons of whch when
propery construed were comped wth. The Government suggested no defense
under that secton unt t fed ts bref, whch contaned the untenabe conten-
ton that the tme for fng cam for refund and acton to recover dated, not
from October 23, 1924, when the msappcaton occurred, but from December
15, 1919, when the fna nstament of the 1918 ta es was pad by the Peeress
company. Upon that vew, of course, pantff woud be too ate but no serous
attenton was pad to the proposton.
I can not agree that where a refund has been msapped on an ostensbe
abty for a ta or penaty appearng on the books, a sut to recover s not
for a ta or penaty aeged to have been coected egay or wthout author-
ty or that such an acton s not controed by secton 3226. That queston s
presented n the nstant case but n the Peeress case, where the requrements
of the secton had been comped wth by the ta payer, t coud not arse so
as to ca for decson. In rady v. . S. (24 . (2d), 205), the Peeress dec-
son s cted to the pont that a refund can not propery be apped on a ta
the coecton of whch was then barred by the statute, whch, as I have pre-
vousy sad, I thnk was the rea queston ad|udcated.
In vew of the fact that a cam for refund of the money msapped had been
fed and re|ected, the anguage n the opnon upon whch counse has sezed,
to the effect that no re|ected cam for refund was nvoved, must refer to the
cam for overassessment whch had been aowed, not re|ected. nd when, In
the same connecton, the court sad that the money had been wrongfuy ap-
ped by defendant as a credt aganst a barred ta abty, no nference can
be drawn that the court beeved, et aone decded, that t was such a cam as
was not wthn the mtatons of secton 3226.
There s nothng n the Natona Too Co. case whch requres comment.
ppcaton for rehearng dened.
rtce 1351: Suts for recovery of ta es erroneousy
coected.
R NU CT OP 1926.
ppcaton to reopen cam for refund on dfferent ground as bass
for sut on such new ground. (See Ct. D. 248, page 407.)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
269
1116, rt. 1371.
S CTION 1116. INT ST ON R UNDS ND
CR DITS.
rtce 1871: Interest on refunds and credts. I -31-4731
Ct. D. 215
INCOM T R NU CT O 1920 D CISION O COURT.
1. Interest Credt Computaton ddtona ssessment
Made Under Constructon.
n addtona assessment of ta for 1918 made In 1926, after the
enactment of the Revenue ct of 1926, Is not made under the
Revenue ct of 1926 wthn the meanng of secton 1116(a) of
that ct, but Is made under the Revenue ct of 1918, whch Im-
posed the ta .
2. Same Due Date Constructon.
The words due date used n secton 1116(a) of the Revenue
ct of 1926 mean the orgna date f ed by the ct mposng the
ta for the puynent thereof and not the date on whch the coector
makes demand pursuant to an addtona assessment.
Court of Cams or the Unted States.
Rversde 16 Dan Rver Cotton Ms, Inc., v. The Unted States.
ebruary 10, 1930.
OPINION.
Ltteton, udge, devered the opnon of the court.
Pantff seeks to recover 115,913.77 as nterest on . 391,402.47, overpayment
of ta for 1920, whch was apped as a credt aganst an addtona ta for
1918 assessed on November 6, 1926. It contends that under secton 1116 of the
Revenue ct of 1926 the amount of 391,402.47 for 1018, aganst whch a por-
ton of the overpayment for 1920 was credted, was an addtona assessment
made under the 1926 ct and that, therefore, nterest shoud be computed from
the date of the overpayment n December, 1921, to the date of the addtona
assessment on November 6, 1926 that the cear and unmstakabe anguage of
secton 1116 s that when any overpayment s apped as a credt aganst an
addtona assessment made under the Revenue ct of 1926, nterest sha be
aowed on the amount so credted from date of payment to the date of the
addtona assessment. On the other hand, the defendant takes the poston
that under secton 1110 nterest on the overpayment for 1920 apped as a credt
aganst the defcency for 1918, whch was assessed on November 6, 1926, can
be computed ony to the due date of the ta aganst whch the credt s taken
and not to the date of the addtona assessment of the defcency that snce
the due date of the 1918 ta was pror to the overpayment used as a credt,
no nterest may be recovered. In support of ths poston the defendant Inssts
that the words addtona assessment made under used n secton 1116 of
the Revenue ct of 1926 were ntended to mean addtona assessment made n
conformty wth the Revenue ct of 1921 and subsequent cts or an addtona
assessment of a ta mposed by those cts that the words due date used n
the secton mean the orgna date f ed by aw for the payment of ta and not
the date on whch the coector makes demand pursuant to addtona assess-
ment.
Secton 1116 of the Revenue ct of 1926, so far as matera here, provdes
as foows:
Upon the aowance of a credt or refund nterest sha be a-
owed and pad on the amount of such credt or refund at the rate of 6 per
centum per annum from the date such ta , was pad to the date of
the aowance of the refund, or n the case of a credt, to the due date of the
amount aganst whch the credt s taken, but f the amount aganst whch
the credt s taken s an addtona assessment made under the Revenue ct of
1921, the Revenue ct of 1924, or ths ct, then to the date of the assessment of
that amount.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
1116, rt. 1371.
270
(b) s used n ths secton
(1) The term addtona assessment means a further assessment for a
ta of the same character prevousy pad n part, and ncudes the assessment
of a defcency under Tte II or Tte III of the Revenue ct of 1924 or of
ths ct.
We thnk a proper constructon of ths secton s that Congress Intended n
the case of a credt of an overpayment aganst an addtona ta for 1921, or
subsequent years, nterest shoud be aowed from the date of payment of such
ta to the date of the assessment of such addtona amount that on an over-
payment for any year pror to 1921 credted aganst a defcency for any other
year nterest shoud be aowed from the date of the overpayment to the due
date of the amount aganst whch the credt s taken and that the words due
date used n the secton mean the date f ed by the statute for the payment
of the ta , or the severa nstaments thereof that s, that the due date of
a ta s not changed because there s an addtona assessment, that the due
date here referred to s the srae as that of the orgna assessment, namey,
March 15, 1919, the date f ed by aw for fng of a caendar-year return, or,
f pad n nstaments, then the date provded for the payment of the nsta-
ments. (See The Doar Savngs ank v. Unted States, 19 Wa., 227 Unted
States v. Chambern, 219 U. S., 250 Unon Pacfc R. R. Co. v. Rowers, 21 ed.
(2d), 856, affrmed 24 ed. (2d), 788 T. D. 4163, C. . II-1, 273 .) Generay
speakng the term due date means that an account w be pad at the
tme f ed for ts payment. (Tyson v. Renecke, 25 Ca. pp., 696.) The varous
Revenue cts defntey f ed the due date of the ta mposed by them. See
secton 250, Revenue ct of 1918 and 1921, and secton 270, Revenue cts
of 1924 and 1926. In our opnon t was the date for payment provded n
those cts to whch Congress had reference when t used the words due date
n secton 1116 of the Revenue ct of 1926.
The Revenue ct of 1921, secton 250(b), was the frst statute to requre
the payment by ta payer of nterest upon a defcency assessment other than
the usua nterest requred to be pad because of the fng of a cam for abate-
ment or credt, for faure to pay after notce and demand, and for neggence.
Such ct provded for the payment of nterest at the rate of of 1 per centum
per month on a defcency from the tme the ta was due, or, f pad In nsta-
ments, from the tme the nstaments were due to the date pad. Secton
3324(a) of the Revenue ct of 1921 provded for the payment of nterest upon
a refund or credt at the rate of of 1 per centum per month. The Revenue
ct of 1924, secton 1019, provded for the payment of nterest on a refunds
and credts from the date the ta was pad to the date of the aowance of
the refund, or, In the case of a credt, to the due date of the amount aganst
whch the credt was taken, and provded that f the amount aganst whch
the credt was taken was an addtona assessment, then to the date of the
assessment of that amount. In secton 1116 of the Revenue ct of 1926 t
was provded that f the amount aganst whch the credt was taken was an
addtona assessment made under the Revenue ct of 1921, the Revenue
ct of 1924, or of ths ct, then to the date of the assessment of that amount.
y ths change t seems manfest that t was Intended to provde for the pay-
ment of nterest upon the amount of a credt f taken aganst an addtona
assessment of a ta for the year 1921, or subsequent years, to the date of
assessment of such addtona ta , but f the addtona assessment was of a
ta for a year pror to 1921, nterest woud be pad ony from the date of the
overpayment to the date on whch the ta payer shoud have pad the ta
aganst whch credt s apped. In other words, t was not the purpose of
Congress to requre the payment of Interest on an overpayment durng the
tme when the ta payer was ndebted to the Government In an equa amount
upon whch he was payng no nterest.
We thnk we are not gong beyond the cear ntent of the ct when we hod
that the words addtona assessment made under In secton 1116 have
reference to the assessment of ta es mposed by the Revenue ct of 1921 and
subsequent cts, or addtona assessments made n conformty wth those
cts, athough such addtona assessments may be made n 1926 after the
pror cts have been repeaed, e cept for the assessment and coecton of
ta es accrued thereunder. In Stoddard v. Chambers (2 ow., 284) the court
sad Now an act under a aw means n conformty wth t. To the same
effect was Ms v. Stoddard (8 ow., 345) R ey v. age of owe (64
ed., 453). The reports of the congressona commttees may be ooked to
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
271
1116, rt. 1371.
for ght In the constructon of egsaton where the egsatve ntent Is In
doubt. (Ohwoh of the oy Trnty v. Unted States, 143 U. S., 457 nns v.
Unted States, 194 U. S., 487 Northern Pacfc Ry. Go. v. State of Washngton,
222 U. S., 370 McLean v. Unted States, 226 U. S., 874 Lapna v. Wams,
232 U. 8., 78.) The Revenue ct of 1926 as t passed the ouse contaned the
same provson n secton 1116 thereof wth reference to the payment of
nterest on refunds and credts as secton 1019 of the Revenue ct of 1924
The nance Commttee of the Senate, S ty-nnth Congress, frst sesson, added
to the provson of secton 1116 wth reference to the payment of Interest on
credts aganst addtona assessments the words made under the Revenue ct
of 1921, the Revenue ct of 1924, or of ths ct, and n ts report, No. 54,
accompanyng . R. 1, whch became the Revenue ct of 1926, stated as
foows:
Secton 1116: The ouse b reenaeted wthout change the e stng aw
reatng to the payment of nterest on refunds and credts. Under e stng
aw, n the case of a credt taken aganst an addtona assessment, the
ta payer s aowed nterest from the date of hs overpayment to the date of
the addtona assessment. In the case of ta es mposed by cts pror to the
Revenue ct of 1921, the ta payer pays no nterest n the case of tnderpay-
ment up to the date of assessment. Consequenty, It frequenty happens that
a ta payer who owes the Government money, upon whch he s payng no
Interest, s coectng nterest upon money whch the Government owes hm.
Ths stuaton s remeded by aowng nterest In the case of a credt under
an ct pror to the Revenue ct of 1921 ony to the date on whch the
orgna ta aganst whch the credt s taken was due.
The change n ths secton was approved by the Senate and was agreed to
In conference.
The statement of the managers on the part of the ouse, S ty-nnth
Congress, frst sesson, accompanyng the conference report on the Revenue
ct of 1926, Is found on page 56 of sad conference report, and s as foows :
The ouse b reenaeted wthout change the e stng aw reatng to
payment of nterest on refunds and credts. Under e stng aw, In the case of
a credt taken aganst an addtona assessment, the ta payer Is aowed
nterest from the date of hs overpayment to the date of the addtona assess-
ment. In the case of ta es mposed by cts pror to the ct of 1921, the
ta payer (e cept as provded n secton 283 of ths b) pays no nterest n
the case of underpayment up to the date of assessment. Consequenty, t
frequenty happens that a ta payer who owes the Government money, upon
whch he s payng no Interest, Is coectng nterest upon money whch the
Government owes hm. Ths amendment remedes ths stuaton by aowng
Interest n the case of a credt under an ct pror to the Revenue ct of 1921
ony to the date on whch the orgna ta aganst whch the credt s taken
was due.
These reports ceary evdence the Intent that nterest shoud be pad on the
amount of a credt apped upon an addtona assessment for 1921 and sub-
sequent years to the date of such assessment, otherwse to the due date of
the ta aganst whch the credt s apped.
Pantff ays much stress upon the provsons of sectons 280 of the Revenue
ct of 1924 and 283 of the Revenue ct of 1926 as showng, as t nssts, that
the addtona assessment here nvoved was an assessment made under the
Revenue ct of 1926. but, n our opnon, ths contenton s wthout force. The
Revenue ct of 1924 repeaed the Revenue ct of 1921 but provded that that
ct shoud reman n force for the assessment and coectons of a ta es
mposed by such ct, and the Revenue ct of 1926 repeaed the Revenue ct
of 1924 but contaned a smar provson reatng to the prevous ct n force
for the assessment and coecton of a ta es mposed thereby. Secton 280
of the Revenue ct of 1924 and secton 283 of the Revenue ct of 1926 reated
to the procedure to be foowed n the determnaton, assessment, and coecton
of defcences under those cts. These sectons dd not confer the authorty
to make an assessment for pror years that authorty was conferred by the
pror Revenue cts, whch were retaned n force for that purpose, and t was
ths that Congess had n mnd when t provded In secton 1116 as to the
payment of Interest on credts n case of an addtona assessment made
under certan cts.
The Revenue ct of 1924 created the Unted States oard of Ta ppeas
and entrey changed the procedure to be foowed In determnng, assessng,
and coectng ta es, and It was for ths reason that sectons 280 of the Rev-
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
51116, rt. 1371.
272
enue ct of 1024 and 283 of the Revenue ct of 1928 were enacted. These
sectons are procedura and there Is nothng n them that woud |ustfy the
concuson that an assessment made n 1926 of an addtona ta for the year
191S was an assessment made under the 1926 ct, wthn the meanng of
secton 1116.
The court Is of the opnon that the pantff s not entted to recover. The
petton must therefore be dsmssed, and t s so ordered.
rtce 1371: Interest on refunds and credts. I -34-4757
Ct.D.226
INCOM T R NU CT OP 1026 D CISION O COURT.
Interest Refund Computaton Consttutonaty.
Where a refund s aowed under the provsons of the Revenue
ct of 1924 but pad after the enactment of the Revenue ct of
1920, secton 1110 of the atter ct s appcabe, n accordance
wth whch nterest on a refund of ncome ta s aowabe to the
frst date on whch the Commssoner sgns the schedue of
ovenssessment n respect thereof. s so construed the secton s
consttutona.
Court or Cams of the Unted States.
George . nd v. The Unted States.
une 2, 1930.
OPINION.
Ltteton, udge, devered the opnon of the court.
The overpayment n ths case was aowed wthn the meanng of secton 1019
of the Revenue ct of 1924 as construed by the court n rard Trust Co. v.
Unted States (270 U. S., 163 T. D. 3919, C. . -2, 209 ) pror to ebruary 26,
1920, the date of the enactment of the Revenue ct of 1926.
The Commssoner of Interna Revenue sgned the frst schedue of overassess-
ments October 15, 1925, and approved the schedue of refunds and credts cert-
fed to hm by the coector and authorzed the dsbursng cerk of the Treasury
Department to pay the amounts found to be refundabe on December 2, 1925.
The refund was not pad unt March 10, 1926, and nasmuch as the Revenue ct
of 1926 had become effectve pror to that date, the Commssoner hed that
under the provsons of secton 1116(c) of the 1926 ct, whch makes the prov-
sons of the secton aowng Interest ony to the frst date on whch the Comms-
soner sgns the schedue appcabe to a refunds pad after ts passage, nterest
was payabe ony to October 15, 1925, the frst date on whch he sgned the
schedue of overassessments n respect thereof. Pantff cams addtona n-
terest from October 15 to December 2, 1925, the atter date beng the date on
whch the court n rard Trust Co., supra, hed that the overpayment was
aowed under the provsons of the Revenue ct of 1924, and that, Inasmuch as
the Commssoner had aowed the refund pror to the passage of the Revenue
ct of 1920, the ct, by ts terms, s not appcabe to refunds certfed for
payment pror to ts enactment.
Puntff further contends that f secton 1116 of the Revenue ct of 1926
appes to the computaton of nterest on overpayments aowed pror to ts
passage, t deprves hm of a vested rght, n voaton of the ffth amendment
to the Consttuton, and amounts to the takng of prvate property wthout |ust
compensaton.
In support of hs cam that the provsons of secton 1110 of the Revenue ct
of 1926 are not appcabe to the refund n ths case, the pantff nssts that
the ony meanng whch can be drawn from paragraph (a) of secton 1116, pro-
vdng for the payment of Interest upon the aowance of a refund, and
paragraph (c), whch makes the entre secton appcabe to any refund pad
after the enactment of the ct even though such refund was aowed pror to
such date, s that f a refund, whch s pad after the passage of the ct, was
aso aowed (that s, f the second schedue was sgned) after the passage of
the ct, then and ony then sha nterest be computed to the frst date on whch
the Commssoner sgned the schedue, even though under the 1926 ct the date
of aowance that s, the frst date he sgned the schedue was pror to the
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
273
1208.
passage of the ct In other words, It Is Inssted that secton 1019 of the 1924
ct appes In a cases where the Commssoner sgned the second schedue
whe each ct was n force.
Upon ths bass pantff Inssts that secton 1116 shoud be construed as
provdng that upon the aowance of a cam for refund nterest sha be
pad to the frst date on whch the Commssoner sgned the schedue of over-
assessment and ths rue sha appy to any refund pad after the enactment
of ths ct, even though the frtt schedue teas sgned pror to the passage of
ths ct that the phrase even though Is nterpreted to be one of Incuson,
and by ts use s ntended to f the boundary ne of what s ncuded wthn
and what s beyond the operaton of the 1928 ct that, as thus construed, the
secton can ony appy to refunds whch have progressed no further than the
frst stage, namey, entered on the frst schedue sgned by the Commssoner
that there s nothng In the anguage of the ct whch warrants a more Incu-
sve nterpretaton that f Congress had ntended that Interest on a refunds
pad on or after ebruary 26, 1926, shoud be cacuated under the provsons
of the 1926 ct, t woud have provded that the secton shoud appy to every
refund thereafter pad.
There s no ambguty n the secton. Its anguage s too cear to admt
of doubt. It provdes that upon the aowance of a refund nterest sha be
pad to the frst date on whch the Commssoner sgns the schedue of over-
assessments and that n any case where the refund has not been pad at the
tme of the enactment of the ct, even though t has been aowed, nterest
sha be pad ony to the date of the sgnng of the frst schedue. Pror to the
enactment of ths secton the date of the aowance of tho refund and the date
to whch Interest was payabe under the 1924 ct had been determned by the
court In Orard Trust Co. v. Unted States, supra, to be the date on whch
the Commssoner sgned the schedue of refunds and credts certfed to hm
and authorzed the dsbursng cerk to pay the same. The pan purpose of
secton 1116 of the 1926 ct was to shorten the nterest perod to the frst date
on whch the Commssoner sgned the schedue of overassessments notwth-
standng both the frst and the second schedues had been approved pror to
ebruary 26, 1926. It changed the rue announced n the Orard Trust Co.
case. We are of opnon, therefore, that there Is no mert In the pantff s
cam that the secton s not appcabe to ths case.
In the opnon of the court there Is no mert n the cam of pantff that
secton 1116 Is unconsttutona. cept as gven by Congress, pantff had
no rght to nterest nor dd he have a rght to mantan a sut for the recov-
ery of nterest that coud not be taken away even though such sut had been
authorzed by e stng aw at the tme t was commenced. The aowance of
nterest by the soveregn s a matter of grace, dependng upon ts consent, whch
t can wthdraw or modfy at any tme. The ct n queston shoud therefore
be construed as wthdrawng the consent of the Unted States for the recovery
of nterest n e cess of that granted by the ct n effect at the tme the
refund was pad. ( eers v. rkansas, 20 ow., 527 Raroad Co. v. abama,
101 U. S., 832 Unted States v. enszen Co.. 206 U. S., 370 Unted States v.
Magnoa Petroeum Co., 276 U. S., 160 T. D. 4153, C. . II-1, 287 .)
Secton 1116 dd not change or affect n any way the settement of ta
accounts whch had been accompshed fnay by payment. It estabshed a
new bass for the computaton of nterest to be pad n those cases where the
refund had not been pad pror to the enactment of ths secton.
Pantff s not entted to recover, and the petton s dsmssed. It s so
ordered.
TITL II. G N R L PRO ISIONS.
S CTION 1208. INST LLM NT S L S.
Secton 1208.
revenue act of 1026.
Incuson n computng ncome for years n whch nstament
saes method of accountng s empoyed of amounts receved n those
years from nstament saes made n pror years. (See Ct. D. 222,
page 192.)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
208, rt. 1651. 274
INCOM T RULINGS. P RT IIL
R NU CT O 1924.
TITL n. INCOM T .
P RT I. G N R L PRO ISIONS.
S CTION 202. D T RMIN TION O MOUNT
O G IN OR LOSS.
rtce 1561: Determnaton of the amount of gan
or oss.
R NU CT O 1924.
d|ustments for e hauston, wear and tear. (See G. C. M. 8573,
page 168.)
S CTION 204. SIS OR D T RMINING G IN OR
LOSS, D PL TION, ND D PR CI TION.
rtce 1602: ass for aowance of depeton and
deprecaton.
NU CT O 1924.
ass for depeton where a essee of mnng property pror to
March 1, 1913, ater purchased the essor s fee tte. (See G. C. M,
8763, page 178.)
S CTION 206. N T LOSS S.
rtce 1622: Cam for aowance of net oss.
R NU CT O 1924.
ocaton of net osses of group of corporatons. (See G. C. M.
8618, page 180.)
S CTION 208. C PIT L G INS ND LOSS S.
rtce 1651: Defnton and ustraton of capta net gan.
R NU CT O 1924.
Ta payer engaged n deveopng and marketng rea estate. (See
G. C. M. 8787, page 189.)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
275 219, rt. 341.
P RT II. INDI IDU LS.
S CTION 213(a). GROSS INCOM D IN D:
INCLUSIONS.
rtce 31: What ncuded n gross ncome.
R NU CT O 1924.
Income to essee from sae of o and gas produced from pubc
doman ands n the State of Te as, set apart for the beneft of the
State Unversty. (See Ct. D. 205, page 90.)
S CTION 213(b). GROSS INCOM D IN D:
CLUSIONS.
rtce 72: Proceeds of nsurance Compensaton
Pensons.
R NU CT O 1924.
nnuty n eu of wdow s dower. (See G. C. M. 8655, page 211.)
S CTION 214(a)9. D DUCTIONS LLOW D
INDI IDU LS: D PL TION.
rtce 203: mount returnabe through depeton and
deprecaton deductons n the case of essee.
R NU CT O 1924.
ssgnment of essee s nterest. (See G. C. M. 8650, page 214.)
S CTION 219. ST T S ND TRUSTS.
rtce 341: states and trusts. I -31-4729
Ct. D. 214
INCOM T R NU CTS O 1918. 1921, ND 1924 D CISION O COURT.
Deducton Trust Chartabe request.
Where a w provdes tnt so much of the Income from a trust
fund as may e necessary sha he used by sad trustee for the
proper and comfortabe support of my son and that upon the
son s death a chartabe corporaton be organzed and the prnc-
pa fund and a ncome unused for the son s support be dstrb-
uted to It, the ncome of the trust eft at the end of each year
after the son had been provded for s not, wthn the meanng of
secton 219(b) of the Revenue cts of 1918, 1921, and 1924, pad
to or permanenty set asde for a chartabe corporaton pursuant
to the terms of the w creatng the trust, and, therefore, the In-
come from the trust In e cess of the amounts actuay dstrbuted
for the care and support of the son Is not deductbe from the
gross Income of the trust under that subdvson.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
5219, rt. 341.
276
Dstrct Court of the Unted States for the Western Dstrct of entuckt,
at Lousv e.
Chares P. Moorman ome for Women, The LousvUe Trut Co., Trustee of
Chares P. Moorman Trust and Treasurer of Chares P. Moorman ome for
Women, for the Use and eneft of the Chares P. Moorman ome for Women,
pantffs, v. Unted States of merca, defendant.
une 19, 1930.
OPINION.
Dawson, udge: In ths acton a refund of Income and profts ta es a
sought for the caendar years 1918, 1919, 1920, 1922, and 1924, aeged to have
been wrongfuy coected by the Unted States. The facts out of whch ths
tgaton grows are as foows:
Chares P. Moorman, a weathy ctzen of Lousve, y., ded on the 13th
day of ebruary, 1917, eavng a w, the matera causes of whch are as
foows:
Thrteenth. I drect my e ecutor wth the approva of the commttee afore-
sad to dvde a the rest and resdue of my estate rea and persona Into
two equa parts and I devse and bequeath one of such parts to The Lousve
Trust Co. In trust for my son, Chares P. Moorman, r., for and durng hs
natura fe sub|ect to the foowng mtatons so much of the Income accrung
from ths porton as may be necessary sha be used by sad trustee under the
drecton of the commttee for the proper and comfortabe support of my son
Chares and after hs death the prncpa and unused ncome of ths share
sha be dsposed of as In ths w herenafter drected.
I devse and bequeath the other of sad two equa parts to The Lousve
Trust Co. In trust for my granddaughter, Lucy zabeth Moorman, for and
durng her natura fe sub|ect to the foowng mtatons so much of the
ncome from sad porton as may be necessary sha be used by the trustee under
the drecton of sad commttee for the proper and bera support of my sad
granddaughter and her famy shoud she have one. I drect that the ncome
from ths porton not devoted to the support of my granddaughter as aforesad
sha be accumuated by the trustee and hed as the property and estate of
my sad granddaughter unt such accumuatons sha have reached the amount
of 200,000. When my granddaughter arrves at the age of 23 years sad
200,000 sha be pad to her as her absoute estate but n the event the accumu-
atons do not amount to such sum at sad tme, then the trustee sha contnue
to appy the surpus ncome as aforesad unt sad amount sha have been
accumuated at whch tme It sha be pad to her. So ong as my grand-
daughter ves she sha receve such porton of the Income of ths trust as Is
requred for her bera support and that of her famy f any as herenbefore
provded.
Shoud my sad granddaughter de at any tme eavng ssue survvng her,
ths trust sha contnue unt the youngest of such ssue vng at her death
attans the age of 21 years, and so much of the Income from ths porton of my
estate as the commttee may deem proper sha be used by the trustee for sup-
port and educaton of such Issue unt the tme above desgnated when ths trust
sha cease and the prncpa and accumuated Income of ths share of my estate
sha be dstrbuted per strpes, among such ssue.
Shoud my granddaughter de eavng no ssue survvng her or shoud such
Issue de wthout Issue survvng before attanng the age of 21 years, then the
share eft for my sad granddaughter n ths w sha be empoyed for the same
uses and purposes as the share of my son Chares P. Moorman, r., and pass
under ths w as sad share passes.
fteenth. Upon the death of my son Chares or upon the death of my grand-
daughter Lucy zabeth Moorman wthout ssue survvng her and attanng
the age of 21 years, as provded In cause 13 above (whchever sha frst occur)
I drect the commttee herenbefore created to organze under the aws of the
State of entucky a corporaton to be known as the Chares P. Moorman ome
for Women.
Sad commttee sha consttute the board of drectors or governng body of
sad corporaton and n the event of the death, resgnaton or nabty of any
of sad partes to act, the remanng drectors sha f such vacancy wth ke
powers n the successor or successors.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
277
219, rt. 341.
Sad board sha contnue In the management and drecton of the corpora-
ton and ts affars unt such tme as the members thereof sha have formu-
ated a pan for the perpetua conduct of the Insttuton and the corporaton. I
gve to the members of the board the uttermost nttute n decdng the method
by whch the affars of the charty hereby created sha be utmatey drected
and controed wth no mt as to the tme In whch ther |udgment s to be
e ercsed.
The corporaton above mentoned sha purchase property n or near Lous-
ve, y., convenent to some car ne and mprove and equp the same so as to
provde a home for as many poor dependent aged women as the ncome of the
estate w take care of and mantan.
The cost of the property wth a mprovement and equpment as we as
addtons may be taken from the prncpa of my estate a charges for mante-
nance w be met out of the ncome.
The e tent of the work undertaken and the magntude of the property ac-
qured w depend on the amount of the estate avaabe to such use. The
porton out of whch my son Chares s provded for must accrue to sad home.
The porton out of whch my granddaughter s provded for w resut to such
ob|ect ony on the contngency stated n cause 13 of ths w.
My purpose s to endow and dedcate to humanty a home for ndgent od
women, who otherwse woud be forced to spend ther decnng years In want
and msery. Ths purpose I have chershed for many years.
I have been fortunate n that, from a boyhood of poverty, I have attaned
to consderabe weath, my wfe s dead, my ony vng chd has been and
must aways be sady affcted physcay wth no need for anythng save the
means of hs physca comfort, and provdng for hm kndy attenton, and
these I have heren secured to hm. My granddaughter s gven by ths w
a that I consder shoud be the porton of any gr, or woman, and shoud
she eave ssue t s provded for. t the same tme, I have ampy provded
for her mother wth whom she ves.
I fee that Lousve and efferson County where I have ved the greater
part of my fe and whch has been the scene of my actvtes and success de-
serve the generous dsposton I hod for them.
The detas of workng out the greatest good for the greatest number aong
the nes heren set out, s eft to those Intrusted wth the management and
drecton of the home.
The home as estabshed and aways to be conducted sha be nonsectaran,
e tendng to a the cass mentoned ts whoesome and protectng nfuence, and
wth ony the condton that the benefcares sha be whte and for not ess
than fve years pror to admsson to the home sha have been resdent of
efferson County, y.
Upon the organzaton of the corporaton as above drected, the Lousve
Trust Co. as trustee w contnue to hod the entre estate wth powers of
nvestment and renvestment, and sub|ect to the condtons as to the drecton
and approva of the commttee as herenbefore set out, w pay over to the
corporaton for purposes Indcated a of the net ncome not requred n the
e ecuton of the trusts mposed by cause 13 of ths w.
When the members of the board of drectors organzed as heren provded
have formuated and carred nto fu e ecuton the pan for the perpetua con-
duct of the charty as hereby created, then the Lousve Trust Co., trustee, w
transfer and convey to sad corporaton a of my estate not herenbefore other-
wse dsposed of n fee smpe.
I do not want ths chartabe use to fa. If my pan sha be hed for any
reason nsuffcent or ega, then a court of equty sttng In and for efferson
County, y., sha appont trustees to carry out the purposes set forth heren.
cton In such respect to be Insttuted and mantaned by the Lousve Trust
Co. as trustee, under ths w, or In event of ts faure so to do by any ctzen
of efferson County, y.
The e ecutor, wth the approva of the commttee, dvded the estate as
drected In cause 13 of the w, and thereafter the Lousve Trust Co. hed
one-haf of the estate n trust for Chares P. Moorman, |r., as drected In cause
13. Chares P. Moorman, |r., ded on uy 3. 1025. The estate eft n trust for
hm each year up to hs death produced consderaby more Income than was
used for hs support by the trustee under the drecton of the commttee, as
drected n the w. or the years 1918. 1919, and 1920. the books of the
trustee showed ths surpus at the end of each year as une pended ncome of
the Chares P. Moorman, |r., trust.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
219, rt. 341.
278
On uy 20, 1921, and practcay four years before the death of Chares
P. Moorman, |r., the Chares P. Moorman ome for Women was organzed
as a entucky corporaton, to carry out the chartabe purposes e pressed
In the ffteenth cause of the w, and shorty thereafter the une pended
ncome for each of the years 1918, 1919, and 1920 was entered upon the books
of the Trust company, whch was aso the e ecutor under the w, to the
credt of the Chares I . Moormnn ome for Women, and smar entres
were made of the une pended ncome for each of the years 1921, 1922, 1923,
and 1924. The record does not show that the corporaton took any steps
to carry out the purposes of ts organzaton unt after the death of Chares
P. Moorman, |r.
In makng ts ncome ta return for each of the years 1918, 1919, 1920,
1922, and 1924, the Lousve Trust Co., as trustee for Chares P. Moorman,
|r., reported as ncome receved by that trust for the use and beneft of
Chares P. Moorman, |r., ony that part of the tota ncome of the trust whch
was e pended for hs use and beneft durng the respectve years. The une -
pended ncome for each of those years was treated and reported as havng
been permanenty set asde to the Chares P. Moorman ome for Women, and
therefore e empt from ta aton under the Revenue cts appcabe to the
respectve years. The Commssoner re|ected ths contenton, and requred the
entre ncome derved from the Chares P. Moorman, |r., trust for each of the
years to be reported as ncome receved for hs use and beneft. The acton
of the Commssoner resuted n the coecton of the ta es for whch refund
s sought n ths case.
or the years 1918, 1919, and 1920 the appcabe statute s the Revenue ct
of 1918 for the year 1922, the Revenue ct of 1921 and for the year 1924,
the Revenue ct of 1924 and the rght of the pantff to recover depends upon
the proper constructon of the appcabe provsons of these cts and of causes
13 and 15 of the Moorman w.
y secton 219 of each of the cts referred to, trust estates are made ta abe
enttes, and the trustee s charged wth the duty of makng the return and
payng the tu . The pertnent provsons of each of those cts foow:
R NU CT O 1918.
Sec. 219. (b) The net ncome of the estate or trust sha be
computed n the same manner and on the same bass as provded n secton
212, e cept that there sha aso be aowed as a deducton (n eu of the deduc-
ton authorzed by paragraph (11) of subdvson (a) of secton 214) any part
of the gross ncome whch, pursuant to the terms of the w or deed creatng
the trust, Is durng the ta abe year pad to or permanenty set asde for the
TTnted States, any State, Terrtory, or any potca subdvson thereof, or
the Dstrct of Coumba, or any corporaton organzed and operated e -
cusvey for regous, chartabe, scentfc, or educatona purposes, or for
the preventon of cruety to chdren or anmas, no part of the net earnngs
of whch nures to the beneft of any prvate stockhoder or ndvdua.
R NU CT O 1021.
Sec 214. (a) That n computng net ncome there sha be aowed as
deductons:

(11) Contrbutons or gfts made wthn the ta abe year to or for the
use of: ( ) ny corporaton, or communty chest, fund, or founda-
ton, organzed and operated e cusvey for regous, chartabe, scentfc,
terary, or educatona purposes no part of the net earnngs of whch
nures to the beneft of any prvate stockhoder or ndvdua.
Sec. 219. to) The net ncome of the estate or trust sha be com-
puted n the same manner and on the same bass as provded n secton 212,
e cept that (n eu of the deducton authorzed by paragraph (11) of sub-
dvson (a) of secton 214) there sha aso be aowed as a deducton, wthout
mtaton, any part of the gross ncome whch, pursuant to the terms of the
w or deed creatng the trust, s durng the ta abe year pad or perma-
nenty set asde for the purposes and n the manner specfed In paragraph (11)
of subdvson (a) of secton 214.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
279
219, rt. 341.
R NU CT O 1924.
Sec. 219. (b) The net Income of the estate or trust sha be com-
puted In the same manner and on the same bass as provded n secton 212,
e cept that
(1) There sha be aowed as a deducton (n eu of the deducton author-
zed by paragraph (10) of subdvson (a) of secton 214) any part of the
Income, wthout mtaton, whch pursuant to the terms of the w or
creatng the trust, Is durng the ta abe year pad or permanenty set
asde for the purposes and n the manner specfed n paragraph (10) of sub-
dvson (a) of secton 214, or s to be used e cusvey for regous, chartabe,
scentfc, terary, or educatona purposes, .
Paragraph (10) of subdvson (a) of secton 214 of the Revenue ct of 1924
so far as appcabe to the ssue n ths case s n substantay the same an-
guage as paragraph (11) of subdvson (a) of secton 214 of the Revenue
ct of 1921.
The quoted anguage of secton 219 of the ct of 1918 makes t cear that
the trust Income, to be e empt from ta aton as a chartabe contrbuton, must,
durng the ta abe year, be pad to or permanenty set asde for a corporaton
organzed and operated e cusvey for chartabe purposes, and that such pay-
ment or permanent settng asde must be pursuant to the terms of the nstru-
ment creatng the trust. In other words, the Instrument creatng the trust
must make t cear that t was the ntenton of the creator of the trust that
such Income shoud, durng the ta abe year, be pad to the chartabe corpora-
ton or permanenty set asde to t durng such ta abe year. The statute
makes t very dear that It was not the ntenton of Congress to make the
ta abty of the Income for any ta abe year depend upon the dscreton of
the trustee n payng or permanenty settng asde the ncome of the trust to
the chartabe purpose durng that ta abe year, but to depend soey upon the
provsons of the nstrument creatng the trust.
s I vew the aw, f the Instrument creatng the trust ceary provdes that
the Income of the trust sha, as t accrues each ta abe year, be pad or
permanenty set asde to the chartabe corporaton, t w be e empt from ta -
aton for each of the ta abe years, notwthstandng the trustee may have
faed or negected ether to pay t or permanenty set t asde. On the other
hand, f It appears from the nstrument creatng the trust that t was not the
ntenton of the creator that any part of the ncome of the trust shoud, durng
the ta abe year, be pad to or permanenty set asde for the chartabe corpo-
raton, the acton of the trustee In payng or settng asde same durng that
year woud not operate to e empt t from ta aton.
Secton 219(b) of the Revenue ct of 1921, whe t enarges the e emptons
granted to trusts by the correspondng secton of the ct of 1018, for the
purposes of ths case s not materay dfferent, and what has |ust been sad
wth reference to secton 219(b) of the ct of 1918 appes wth equa force
to the correspondng secton of the ct of 1921.
Secton 219(b) of the Revenue ct of 1924 grants the e empton, not ony n
cases where the ncome has been pad to or permanenty set asde for the
chartabe purpose durng the ta abe year, but aso n those cases where
the ncome receved durng the ta abe year s to be used e cusvey for the
chartabe purpose. s n the cts of 1918 and 1921. however, the determnng
factor s the nstrument creatng the trust, and not the dscreton of the trustee.
Therefore, under the 1924 ct, uness t ppenrs from the Instrument creatng
the trust that the ncome for whch e empton s sought s set asde n the
Instrument creatng the trust e cusvey for a chartabe purpose, or under
the terms of that nstrument s to be pad durng the ta abe year or perma-
nenty set asde durng that year for the chartabe purpose, t s not e empt.
Therefore, I thnk we may dsregard the manner n whch the trustee
handed on ts books the ncome of the trust eft at the end of each year after
Chares P. Moorman, |r., had been provded for. The vta queston s: ow
dd the creator of the trust, Chares P. Moorman, sr., ntend that ths surpus
ncome shoud be hed and used durng the fe of Chares P. Moorman, |r.
y cause 13 of the w t s pany apparent that t was the ntenton of the
testator that the entre ncome of the Chares P. Moorman, |r., trust shoud, f
necessary.be used for the proper and comfortabe support of the cestu que trust.
It was not the ntenton of the testator that the Income of the trust for any
partcuar year coud be used for the support of the cestu que trust for that
year ony, but hs rghts under the trust were cumuatve. If n any one year
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
219, rt. 341.
2S0
It was deemed necessary by the commttee named In the w to e pend more
money for the proper and comfortabe support and care of the cestu que trust
than the ncome of the trust fund for that year, t was not ony the rght but
the cear duty of the trustee to suppy the defcency from any surpus whch
may have accumuated n pror years. The ncome of the Chares P. Moorman,
|r., trust whch the testator ntended to pass on to the chartabe purpose named
n cause 15 was not the surpus ncome eft at the end of each caendar year,
but smpy the surpus of that ncome eft une pended at the death of Chares P.
Moorman, |r. Unt that tme the rst and e cusve charge upon that ncome
was the proper and comfortabe support of the testator s affcted son, and the
trustee under the w hed t for that purpose e cusvey. t the end of any
caendar year the trustee coud not know what demands the commttee woud
make on the ncome of the trust durng the succeedng year, nor coud t be
foretod wth certanty what the ncome of the succeedng year woud be,
and no doubt t was knowedge of ths fact whch prompted the creator of the
trust to make avaabe for the support of hs affcted sun the entre ncome of
the trust so ong as the son shoud ve.
It w be observed that by cause 15 of the w the testator drected that
the commttee named n the w shoud organze a corporaton to be known as
the Chares P. Moorman ome for Women, upon the death of my son
Chares, etc. If t had been the ntenton of the testator that the surpus
ncome of the trust at the end of each year shoud be pad to the Chares P.
Moorman ome for Women provded for n cause 15 of the w, or perma-
nenty set asde to t, there woud have been no reason for hm to drect that
the corporaton shoud be organzed ony upon the death of hs son, or upon
the happenng of another contngency not matera n ths case. I doubt f t
woud be mportant under the aw that the corporaton was not n e stence
durng the years 1918, 1919, and 1920, nor operatng durng 1922 and 1924. f
t had been the ntenton of the testator that the surpus ncome at the end of
each year shoud be rrevocaby set asde for ts uses. In such a case I am
of the opnon that the phrase organzed and operated, used n the statutes,
woud propery, be construed to refer to the corporate powers of the cor-
poraton, rather than to a requrement that the corporaton shoud actuay be
n e stence and operatng durng the ta abe year. The fact, however, that
the testator provded for the organzaton of the corporaton after the death of
hs son tends to emphasze the purpose e pressed n cause 13, to charge a
of the ncome of the trust durng the fe of the son wth hs support and care.
Suppose, before the death of Chares, Lucy zabeth Moorman had ded
wthout ssue survvng her and attanng the age of 21 years, and afterwards
the Chares P. Moorman ome for Women had been organzed and put nto
operaton and her one-haf of the estate had been turned over to the home as
drected n the w. In that event, woud the trustee have had the rght to
turn over to that home the une pended ncome of the Chares P. Moorman, |r.,
trust for any caendar year durng hs fe It seems to me, for t to have done
so n such a stuaton, woud have been a cear voaton of cause 13 of the
w. Its payment to the home woud have paced t beyond the reach of the
trustee, had ts e pendture become necessary for the support and care of
Chares P. Moorman, |r. If the trustee was wthout rght to pay such surpus
ncome over to an organzed and operatng Chares P. Moorman ome for
Women durng the fe of Chares P. Moorman, |r., t seems to me necessary
to foow that the trustee was wthout power, by book entres, to fnay and
competey dvest tsef as trustee for Chares P. Moorman, |r., of such surpus
Income, and vest It n the Chares P. Moorman ome for Women, or to hod It
soey and e cusvey for the beneft of such home, when organzed and
operatng.
I, therefore, concude that under the w the entre ncome of the Chares
P. Moorman, |r., trust was receved and hed by the trustee durng each of the
years n queston as ncome for the use and beneft of Chares P. Moorman, |r.,
and that such ncome was sub|ect to ta aton.
The cases of Lederer v. Stockton (260 U. S., 3 T. D. 3407, C. . 1-2, 156 )
and oocr , Coector, v. Socum (20 ed. (2d), 350 T. D. 4122, C. . II-1,
247 ), reed upon by the pantffs, seem to me ceary dstngushabe from the
case at bar.
It foows from what has been sad that I am of the opnon that the pan-
tffs arc not entted to recover, and counse may prepare |udgment conformng
to the vews heren e pressed and submt same for entry.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
281 234, rt. 567.
P RT m. CORPOR TIONS.
S CTION 231. CONDITION L ND OT R
MPTIONS O CORPOR TIONS.
rtce 517: RegouS| chartabe, scentfc, terary, and
educatona organzatons and communty chests.
R NU CT O 1924.
Corporaton organzed to assst n enforcng fsh and game aws
and whch s supported by membershp dues and donatons. (See
I. T. 2546, page 122.)
rtce 518: usness eagues.
R NU CT O 1924.
ssocaton promotng rado ndustry. (See I. T. 2550, page 123.)
S CTION 234. D DUCTIONS LLOW D
CORPOR TIONS.
rtce 561: owabe deductons.
R NU CT O 1924.
Casng-head gasone contracts. (See G. C. M. 8253, page 232.)
rtce 564: Interest.
R NU CT O 1924.
Interest pad to carry nterest-e empt obgatons or securtes.
(See G. C. M. 8868, page 234.)
rtce 567: Depostors guaranty fund. I -37-4775
G. C. M. 8474
R NU CTS O 1918. 1921, ND 1924.
mounts assessed aganst State banks operatng n the State
of Te as to mantan the depostors guaranty fund are aowabe
deductons from gross ncome as busness e penses of the year In
whch the depost was made. Soctor s Memorandum 8877 (C. .
I -2, 79) modfed.
n opnon s requested reatve to the proper acton to be taken
n connecton wth certan requests for the reopenng of cams for
refund of ncome ta fed n behaf of nsovent State banks ocated
n the State of Te as. These requests are based on the contenton
that there shoud be aowed as a deducton from gross ncome the
amounts assessed aganst the banks to mantan the depostors
guaranty fund. The cams, whch were tmey fed, were re|ected
n accordance wth Soctor s Memorandum 3877 (C. . I -2, 79).
35492 31 19
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
55273 and 274, rt. 1233.
282
In the requests for the reopenng of the cams reance s paced
on the decson of the Unted States oard of Ta ppeas n frst
State ank of rackcttve (9 . T. ., 975), n whch t was hed
that the amount coected by the State of Te as from the bank for
the mantenance of the depostors guaranty fund was deductbe
as a busness e pense. That decson was nonacquesced n by the
Commssoner (C. . II-1,37).
In rst State ank of Wemar v. Commssoner (10 . T. .,
396, nonacquescence, C. . II-2, 47), the oard reached the same
concuson as n the case of rst State ank of rackettve. In
both cases pettons for revew were fed n the Unted States Cr-
cut Court of ppeas, fth Crcut. Upon further consderaton
of the ssues presented n the two appeas, motons for dsmssa of
the appeas were fed, at the nstance of the Government, on Novem-
ber 12,1929, and the appeas dsmssed by order of the court.
In vew of the acton taken by the Government n connecton wth
the two appeas, t s the opnon of ths offce that n cases where
an appcaton for reopenng a cam for refund has been made by a
Te as State bank whch contrbuted to the depostors guaranty fund
of that State and such appcaton s based n whoe or n part on
the decsons of the oard referred to above, the cam may be re-
opened and aowed to the e tent covered by the oard s decsons.
The reopenng and aowance shoud be made ony f the requre-
ments ot Treasury Decson 4235 (C. . II-2, 76) have been fuy
met. Soctor s Memorandum 3877 s hereby modfed to conform
wth ths opnon.
C. M. Charest,
Genera Counse ureau of Interna Revenue.
S CTION 240. CONSOLID T D R TURNS O
CORPOR TIONS.
rtce 634: Change n ownershp durng ta abe year.
R NU CT O 1024.
ocaton of net osses of group of corporatons. (See G. C. M.
8618, page 180.)
P RT . P YM NT, COLL CTION, ND R UND O T ND
P N LTI S.
S CTIONS 273 ND 274. D ICI NCY IN T .
rtce 1233: Coecton of a defcency.
R NU CT OP 1924.
Wthdrawa of Comm. -soner s acquescence. Meanng of fna
decson of the oard of Ta ppeas. (See Ct. D. 255, page 290.)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
283
277 and 278, rt. 1271.
S CTIONS 277 ND 278. P RIOD O LIMIT TION UPON
SS SSM NT ND COLL CTION O T .
ncome ta revenue act of 1924 decson of court.
1. Defcency ssessment Lmtaton.
Where n. ta payer duy fes a petton to the oard of Ta
ppeas pursuant to secton 274(a) of the Revenue ct of 1924,
appeang from the determnaton of the Commssoner set forth
In hs defcency etter, and as a ground for the appea specfes
that the Commssoner erred n refusng to aow a deducton on
account of a bad debt, the ta on -whch represented ony part of
the defcency, and the oard, havng found the bad debt deductbe,
reduced the defcency accordngy and entered ts order redetermn-
ng It, the ta payer took hs appea from the defcency determned
by the Commssoner, whch must be regarded as an entrety, and
the perod wthn whch an assessment of the amount redetermned
by the oard s requred to be made Is e tended as provded n
secton 277(b) of that ct.
.2 Decson ffrmed.
The decson of the oard of Ta ppeas (10 . T. ., 493)
affrmed.
Unted States Crcut Court of ppeas for the Nnth Crcut. No. 5946.
Chares . ooy v. Commssoner of Interna Revenue.
Upon petton to revew an order of the Unted States oard of Ta ppeas.
efore Detrch and Wbur, Crcut udges, and Norcross, Dstrct udge.
Detrch, Crcut udge: ppeant seeks revew of an order of redeter-
mnaton entered by the oard of Ta ppeas, October 4, 1928, affectng hs
Income and profts ta es for the caendar year 1919. The soe queston nvoved
s of the appcaton of the statute of mtatons, and the facts are undsputed.
Pursuant to the provsons of secton 274(a) of the Revenue ct of 1924, the
Commssoner, on anuary 29, 1925, maed to appeant a notce of defcency n
hs ta return for 1919, n the sum of 1,605.85. In due tme, on Mnrch 28,
1925, he fed wth the oard of Ta ppeas hs petton appea prayng for a
revew, and as a ground therefor he specfed that the Commssoner had erred
In decnng to aow a deducton he had made n hs return of 5,000 on
account of bad debts. On ebruary 2, 1928, after hearng, the oard fed Its
opnon hodng that the aowance shoud have been made, and that n so far
as t was affected by that tem the determnaton of the Commssoner was erro-
neous. ctng pursuant to the oard s rue No. 50, the Commssoner, on uy
28, 1928, fed wth the oard a proposed redetermnaton n harmony wth
Its decson, and on October 1, 1928, appeant fed an aternatve proposed
redetermnaton, wheren he contended, as he now contends, that Inasmuch as
hs return had been fed on or before March 15, 1920, and the Commssoner had
faed to nssess, demand, or coect the ta es on or before May 14, 1925,
he was barred by the provsons of sectons 277(a) and 277(b) of the Revenue
ct of 1924 from determnng, assessng, demandng, or coectng
any ncome ta for the year 1919. Upon consderaton of the opposng app-
catons the oard, aowng 5,000 for bad debts, entered the order now appeaed
from, by whch It hed the defcency n appeant s return to be 798.28 nstead
of 1,605.85, as had been determned by the Commssoner.
The determnaton of the Commssoner was a unt, and from t appeant
took hs appea. Whether It was susceptbe to dvson we need not decde,
rtce 1271: Perod of mtaton upon assess-
ments of ta .
I -32-4736
Ct.D.217
pr 28, 1930.
OPINION.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
277 and 278, rt. 1271.
284
for appeant dd not attempt to dvde t. The anguage of hs petton to the
oard s: The above-named ta payer hereby appeas from the determnaton
of the Commssoner of Interna Revenue set forth n hs defcency etter, etc.
The defcency etter referred to advsed appeant that: n audt of your n-
come ta return for the year 1919 n connecton wth an e amnaton of your
books of account and records dscoses a defcency n ta amountng to
1.01)5.85. True, as a ground for hs appea he assgned the dsaowance of hs
camed deducton for bad debts, but that consderaton does not ater the fact
that hs appea was from the Commssoner s determnaton of hs defcency
In the amount of 1,605.85. It coud as reasonaby be argued that an appea from
a fna |udgment for a stated snge amount does not operate as a supersedeas
merey because appeant assgns as error ony the ncuson n the verdct of
nterest or some other tem consttutng a part of the amount of the |udgment
Moreover, the vew for whch appeant contends not ony has no e press
statutory sancton but n practce woud mpose upon the Commssoner the
burden of makng assessments and coectons n pecemea and woud resut
n addtona e pense and ntoerabe confuson. In computng ncome tu es a
statutory rate must be seected approprate to the tota amount of ta abe n-
come, consdered as a snge unt, and unt there s a determnaton of such
ncome, n many cases, at east, no computaton can be ntegenty or safey
made. The consderaton may not be of great moment In the present nstance,
but genera rues are not to be gnored because of speca cases. nd even here
we note that, whereas n hs petton appeant contended that the aowance
of the bad debts woud operate to reduce the Commssoner s determnaton of
defcency to 718.28, the oard, after aowng the deducton, hed the defcency
to be 798.28 and the correctness of Its computaton or fndng appeant does
not now chaenge.
rtce 1271: Perod of mtaton upon assess- I -43-4812
ments of ta . Ct. D. 239
ncome ta revenue act of 1924 decson of court.
1. Commssoner s Determnaton of Defcences Correctness.
The Commssoner s determnaton of a defcency s prma face
correct.
2. ssessment Lmtaton ppea to oard of Ta ppeas.
Where the ta payer and the Commssoner consent n wrtng to
e tend the perod wthn whch assessment of the ta for 1918
meht be made as provded for In secton 278(c) of the Revenue
ct of 1924 and a notce of defcency has been maed to the ta -
payer by the Commssoner wthn sad perod as e tended n
accordance wth secton 274 of the Revenue ct of 1924 and the
pettoner has fed an appea wth the oard of Ta ppeas wthn
the tme prescrbed by secton 274(a) of that ct, the perod
wthn whch an assessment can be made s e tended by the
number of days between the date of the mang of such notce and
the date of the fna decson by the oard as provded by secton
277(b) of the Revenue ct of 1924.
3. Decson ffrmed.
The decson of the oard of Ta ppeas (11 . T. ., 1036)
affrmed.
Court of ppeas of the Dstrct of Coumba. No. 4914.
Neman-Marcus Co. v. Robert . Lucas, Commssoner of Interna Revenue.
efore Martn, Chef ustce, and Rosb and an Orsoe, ssocate ustces.
May 5, 1930.
OPINION.
Ths appea from the oard of Ta ppeas nvoves ncome and profts ta es
for the caendar year 1918 n the sum of ,415.29. Two contentons were ad-
vanced frst, that the evdence before the oard was nsuffcent to ustfy the
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
285 277 and 278, rt. 1271.
fndng of a defcency and, second, that the tme wthn whch an assessment of
a defcency mght have been made e pred pror to the date of the determna-
ton by the oard.
ppeant s return for the caendar year 1918 was fed une 15, 1919. Under
then e stng aw the tme wthn whch the assessment coud be made woud
have e pred fve years thereafter that s, on une 15, 1924. On ebruary 8,
1924, appeant and the Commssoner of Interna Revenue e ecuted a wrtten
Income and profts ta waver, e tendng for one year the tme prescrbed
by aw for the determnaton, assessment, and coecton of appeant s ncome
and profts ta for 1918. On pr 20, 1925, a smar wrtten waver was en-
tered Into e tendng the tme unt December 31, 1925, provded that If a notce
of a defcency In ta shoud be sent to the ta payer by regstered ma before
that date and (1) no appea shoud be fed therefrom wth the oard of Ta
ppeas, then the date shoud be e tended 60 days, or (2) f an appea shoud
be fed wth the oard, then the date woud be e tended by the number of
days between the date of the mang of the notce of the defcency and the
date of the fna decson by the oard. On October 23, 1925, a waver smar
to that of pr 20, 1925, was entered Into, under whch the date of e praton
was e tended to December 31, 1926. On November 27, 1925, the Commssoner
maed a defcency notce to the ta payer. Wthn 60 days thereafter (on
anuary 25, 1926), appeant fed Its appea wth the oard of Ta ppeas,
as provded by secton 274(a) of the Revenue ct of 1924 ( 43 Stat., 253, 297).
The contenton as to the suffcency of the evdence s wthout mert. rom
the ora argument t appeared that no evdence was ntroduced by appeant,
and that the oard under ts rues and practces accepted the decson of the
Commssoner as prma face correct. In ths the oard was ceary rght.
Unted States v. ndeson, 269 U. S., 422 T. D. 3839, C. . -, 179 Wckwre
v. tenecke, 275 U. S., 101 T. D. 4126, C. . II-1, 3161 Wamsport Co. v.
Unted States, 277 U. S., 551 T. D. 4172, C. . II-2, 323 very v. Comms-
soner, 22 . (2d), 6 T. D. 4116, C. . II-1, 155 rown v. Commssoner, 22
. (2d), 797 Reck v. ener, 25 . (2d), 453 W. . enderson Iron Works
Suppy Co. v. ar, 58 pp. D. C, 114, 25 . (2d), 538 shoff v. Commssoner,
27 . (2d), 91 Green s dvertsng gency v. ar, 331 . (2d), 96.)
The frst waver of ebruary 8, 1924, e tended the tme for assessment for
one year, or unt une 15, 1925. efore the e praton of that perod, the ct
of une 2, 1924 (43 Stat., 253), was passed. Under secton 900 of that ct
the oard of Ta ppeas was created. Secton 274(a) provded, n part,
that f the Commssoner shoud determne that there was a defcency the ta -
payer shoud be notfed, but such defcency sha be assessed ony as heren-
after provded. Secton 277(b) provded that the perod wthn whch an
assessment was requred to be made by subdvson (a) of the secton shoud be
e tended (1) by 60 days f a notce of such defcency had been maed to the
ta payer under subdvson (a) of secton 274 and no appea had been fed wth
the oard of Ta ppeas, or, (2) f an appea had been fed, then by the
number of days between the date of the mang of the notce and the date
of the fna decson by the oard.
Secton 278(c) provded, In part, as foows:
Where both the Commssoner and the ta payer have consented n wrtng
to the assessment of the ta after the tme prescrbed In secton 277 for ts
assessment the ta may be assessed at any tme pror to the e praton of the
perod agreed upon.
Secton 280 provded that If after the passage of the ct the Commssoner
shoud determne that any assessment shoud be made n respect of any ncome,
war-profts, or e cess-profts ta mposed under the Revenue ct of 1916, the
Revenue ct of 1917, 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 nterest, penaty, or other addton to the ta ) shoud be
computed as If the Revenue ct of 1924 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 n case
of denquency n payment after notce and demand) as In the case of the ta es
Imposed by ths tte, e cept as otherwse provded n secton 277.
Secton 278(c) was carred forward nto the Revenue ct of 1926 ( ct of
ebruary 26, 1926, 44 Stat., 9.)
The changes n the aw subsequent to the fng of appeant s frst waver
are procedura n character. In orshcm ros. Co. v. Unted States and
Whte v. ood Rubber Co., decded ebruary 24, 1930, by the Supreme Court
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
1014 and 1015, rt. 1351.
286
of the Unted States (280 U. S., 453 Ct. D. 167, C. . I -1, 260 ), the court,
speakng of smar wavers, sad:
The corporatons nsst that the wavers were not merey wavers e -
tendng the statutory perod, but were bnd:ng contracts whch mted the
tme n whch the Commssoner coud assess and coect the ta es and that
no change n the aw made after the date of the contracts and enargng the
tme for coecton can affect ther rghts. They urge that the 1924 and 1926
cts dd not purport to e tend the perods thus mted by contract and that. If
construed as e tendng such perods, the provsons of these cts are uncon-
sttutona. They concede that, n the absence of contract, a egsature may
consttutonay engthen or shorten the perod n whch a rght may be
enforced by ega proceedngs.
The court re|ected ths contenton, sayng, The nstruments were nothng
more than what they were termed on ther face wavers and that was a
to whch the Commssoner was authorzed to consent.
s to the appcabty of the cts of 1924 and 1926, the court sad:
Secton 277(a)2 of the 1924 ct e pressy deat wth ta es due under
the cts of 1918 and 1921 and t reenacted the 5-year mtaton wth the
e press quafcaton cept as provded n secton 278. Secton 278(c) re-
enacted the provson as to the e tenson of tme by the consent of the Com-
mssoner and the ta payer and consttuted the soe statutory authorty for
the waver of the perod of mtaton for ta es due under the 1918 and 1921
cts. It unquestonaby apped to wavers thereafter to be e ecuted and no
reason appears why t dd not equay appy to wavers e ecuted pror to the
passage of the ct.
The wavers n the present case, therefore, are vad. Notce of defcency
sent appeant on November 27, 1925, under the provsons of the ct of une
2, 1924 ( 43 Stat., 253), havng been foowed by an appea to the oard of Ta
ppeas, the perod wthn whch an assessment coud be made was e tended
by the number of days between the date of the mang of such notce and the
date of the fna decson by the oard. (Secton 277(b).)
The decson s affrmed.
TITL . G N R L DMINISTR TI PRO ISIONS
S CTIONS 1014 ND 1015. LIMIT TIONS UPON SUITS
ND PROC DINGS Y T T P Y R.
ncome ta revenue acts of 1921 and 1924 decson of coubt.
1. Sut Lmtaton ng of Seoond Cam fob Refund.
Where a ta payer fes wthn the statutory perod a cam for
refund whch s re|ected and subsequenty fes a second cam
wthn the statutory perod based upon the same ground as the
frst cam, the acton of the Commssoner n re|ectng the second
cam does not start the runnng of the 2-year perod of mtaton
upon a sut by the ta payer, provded by secton 3226, Revsed
Statutes, as amended, whch began to run upon the re|ecton of the
frst cam, and entte t to brng a sut wthn the perod of two
years from the date of the re|ecton of the second cam.
2. Refund Cam Lmtaton Date of Payment by Check.
The date a coector receves a check n payment of a ta and not
the date the check s cashed starts the runnng of the perod pre-
scrbed by secton 252 of the Revenue ct of 1921 wthn whch a
cam for refund must be fed.
btce 1351: Suts for recovery of ta es erro-
neousy coected.
I -29-4707
Ct. D.204
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
287
1014 and 1015, rt. 1351.
Codbt ov Cams op the Unted States.
. tman d Co. v. The Unted States.
pr 30, 1930.
ooth, Chef ustce, devered the opnon of the court.
en|amn tman devsed to the pantff corporaton rea property, ocated
In the cty of New York, havng at the tme t was receved an agreed vaue
of 5,381,500. The pantff corporaton n ts ncome-ta return for the
caendar year 1913, the year n whch t receved the above devse, dd not
report the vaue of the same as ta abe ncome. On anuary 5, 1923, the
Commssoner of Interna Revenue assessed an addtona ncome ta predcated
upon the ncuson of the vaue of the devse receved by the corporaton from
en|amn tman as aforesad.
On uy 2, 1923, the pantff devered to the coector a check n payment
of the addtona ta assessed on anuary 5, 1923, and fve days ater . e., on
uy 7, 1923 fed a refund cam In whch a refund of the addtona ta was
asked for the foowng reasons:
Such assessment s based n part upon the vaue of devse under the w of
en|amn tman, who ded on the 7th of October, 1913, to the undersgned
ta payer. The devse for the purposes of ncome ta for 1913 was vaued at
5,381,500, wth the resutant ta thereon of 53,815. The undersgned cams
that under the aw under whch sad assessment s purported to have been
made a devse under a w or a gft to a corporaton s not ncome and s not
ta abe under sad aw, and the undersgned cams that the sad sum shoud
be refunded for the causes above stated.
The pantff s check of uy 2, 1923, was deposted for coecton uy 17,
1923, and ts refund cam of uy 7, 1923, was dened by the coector anuary
17, 1924, and ts dena affrmed on November 6,1924. most three and one-haf
years ater . e., on une 27, 1927 the pantff corporaton fed a second
refund cam, n whch a refund of the addtona ta assessed on anuary 5,
1923, was asked for the foowng reasons:
Income as determned by T. D. etter of an. 5, 1923 (IT: C : PU-2300)
ncudes 5,381,500, beng vaue of devse acqured by the corporaton October
7, 1913, at the decease of . tman. It s contended that the recept of ths
devse dees not represent Income and that the ta pad thereon was n error
and shoud be refunded. hearng s requested before proper offcas of the
Treasury Department n the event that there s any queston regardng the
aowance of ths cam.
The petton n ths case, assertng a cam for 51,972, wth Interest, was
fed on une 26, 1929, pantff corporaton seekng to recover the amount of
addtona ncome ta es assessed aganst t on anuary 5, 1923, because the
Commssoner egay ncuded the vaue of the tman devse of 1913 as
ncome.
The pantff concedes that under secton 3226, Revsed Statutes, as amended
by secton 1014 of the Revenue ct of une 2, 1924 (43 Stat., 253), the cause of
acton s barred by mtaton, uness Its second refund cam fed une 27, 1927,
and re|ected by the Commssoner November 30, 1927, saves ts rghts.
The essenta precedent steps to the |ursdcton of ths court are of course
not n ssue. Te fng and subsequent re|ecton of a refund cam, or faure
of the Commssoner to act thereon for s months, and sut thereafter wthn
two years must be dscosed by the facts, for, as conceded by the partes, the
statute of mtatons In ths court s |ursdctona. The pantff n ts anay-
ss of secton 3226, Revsed Statutes (supra), emphaszes the termnoogy of
the ct and stresses the provson unt a cam for refund or credt has been
duy fed wth the Commssoner, nsstng that the second refund cam meets
the requrements of the ct n ths respect and was duy fed as theren
requred. Wth ths contenton we are unabe to agree. The frst refund cam
met a the requrements of the statute and was reguar n form and substance.
We have set forth the cam n order to dscose that t was for an aeged
ega ta e acton predcated e cusvey upon the ncuson of the tman
devse as ncome, and embraces precsey the same and dentca facts upon
whch the present sut s rested.
The second refund cam, fed amost four years after the frst, rases no new
Issue, nvoves no addtona assessment made subsequent to the fng and
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
0

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
1014 and 1016, rt. 1361.
288
dena of the frst, and cond not by any possbty occason a reopenng of
pantffs ta abty and whe the Commssoner may not be In a poston to
foresta the fng of dupcate cams for refund, secton 8226, Revsed Statutes,
manfesty does not contempate the repetton of contentons for refund n
such a way and at such tmes as to to the runnng of the mtaton perod.
The purpose of mtng suts to recover aeged ega ta e actons s evdent,
and f pantff by repeatng ts contentons n two refund cams may estabsh
|ursdcton to sue, despte the mtaton prescrbed n the aw, tgaton woud
be proonged Indefntey. The act of the Commssoner n re|ectng the second
refund cam s wthout ega sgnfcance, for when t was fed and afterwards
re|ected pantff s rght to sue had apsed by mtaton.
The queston of payment of ta es by check and the date of payment when
so pad was fuy dscussed by the court n the case of Second Natona ank of
Sagnaw, Trustee, v. Unted States, No. -38, decded pr 7, 1930 T. D. 4238,
C. . II-2, 356 , and theren t was hed that the day on whch the coector
receves the check w be consdered the date of payment so far as the ta payer
Is concerned, uness the check s returned dshonored. There can be no doubt
that a sut nsttuted under the frst refund cam wthn the statutory perod
of mtaton woud have propery nvoked the |ursdcton of ths court, and
beng so, the second refund cam, n the absence of addtona assessments or
controversy arsng thereafter, was nsuffcent to revve a cause of acton,
whch must be brought under the statute wthn the 2-year perod.
Other ssues are rased and dscussed n pantff s bref. In vew of the
foregong, t s unnecessary to dscuss them. The petton w have to be ds-
mssed. It s so ordered.
rtce 1351: Suts for recovery of ta es erroneousy
coected.
R NU CT O 1924.
ppcaton to reopen cam for refund on dfferent ground as bass
for sut on such new ground. (See Ct. D. 248, page 407.)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
289 5201, rt. 1541.
INCOM T RULINGS. P RT I .
R NU CT O 1921 OR PRIOR R NU CTS.
TITL II. INCOM T .
P RT I. G N R L PRO ISIONS.
S CTION 201. DI ID NDS.
btce 1541: Dvdends. I -29-4708
Ct. D. 207
INCOM T R NU CT O 1021 D CISION O COURT.
1. Dvdend Constructve Recept.
Dvdends decared n 1922 and payabe on December 31 of that
year, checks In payment of whch are maed on that date and re-
ceved n due course on anuary 2, 1923, by a stockhoder, whose
books are kept on the bass of cash recepts and dsbursements, are
requred under secton 201(e) of the Revenue ct of 1921 to be
ncuded n gross ncome n 1922 when they were unquafedy
sub|ect to the demand of the stockhoder.
2. Decson Reversed.
The decson of the oard of Ta ppeas (8 . T. ., 603)
reversed.
Unted States Crcut Court of ppeas, S th Crcut.
Commssoner of Interna Revenue v. Robert W. ngham.
Petton to revew an order of Unted States oard of Ta ppeas.
efore Denson, Moorman, and cks, Crcut udges.
November 8, 1029.
opnon.
cks, Crcut udge: Petton to revew an order of the oard of Ta
ppeas. The ta payer, Robert W. ngham, was, n December, 1922, a
mnorty stockhoder n certan corporatons a of whch decared dvdends
n that year payabe ether on December 30 or December 31, 1922. On those
dates the severa corporatons ssued dvdend checks payabe to the ta payer
and forwarded them to hm by ma. They were receved n due course on
anuary 2, 1923, and the aggregate amount thereof, to wt, 02,324.01, was re-
ported by the ta payer n hs ncome ta return for 1923. The Commssoner
hed that these dvdends were ta abe as Income for 1922 and determned
the ta accordngy. Ths resuted n a defcency for 1922 of 8,988.53. The
ta payer appeaed to the oard of Ta ppeas. The oard n a ma|orty
opnon reversed the hodng of the Commssoner and hed that these dv-
dends were not ta abe for the year 1922, the oard beng of the opnon that
they shoud have been returned for 1923.
We thnk the hodng of the Commssoner was correct. Sectons 201(a),
201(e), 212 (a) and (b), and 213(a) of the Revenue ct of 1921, chapter 130,
42 Statutes at Large, 227, et seq., are reevant.
y secton 213(a) dvdends are Incuded In gross ncome and by secton
201(e) dvdends, there desgnated as a ta abe dstrbuton made by a cor-
poraton to ts sharehoders (sec. 201(a)), are returnabe In the gross ncome.
Secton 213(a) s appcabe to the respondent s return, he havng kept hs
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
201, rt. 1542.
290
books upon the recepts and dsbursement bass on the caendar-year perod
(sec. 212(b)), provdes generay that gross ncome for ta purposes sha be
aocated to the year n whch receved but by specfc e cepton nserted In
that secton n parentheses,, ta abe dstrbutons made by corporatons to ts
sharehoders (dvdends) are e cuded from such provson, the reason for such
e cuson of course was that an entrey dfferent bass for f ng the ta year
for dvdends had aready been estabshed n secton 201(e), whch secton
must contro. (It s prnted n the margn.1)
Secton 201(e) f es the perod for a return of dvdends n the gross ncome
as of the date when the cash tacs ours or other property s unquafedy
made sub|ect to ther (sharehoders ) demands. We get a cearer vew when
we ay to one sde certan e traneous fndngs of the oard. It s nether
mportant (e cept n one partcuar herenafter mentoned) that the dvdends
were remtted by check, nor that the checks were receved n 1923. Remt-
tance by check, though a convenent busness method, s not recognzed by the
statute. The Important thng s that the sharehoder dd receve a dvdend,
not when or how. avng receved It, the statute (sec. 201(e)) requred that
t be Incuded n hs gross ncome as of the date, not when receved but when
the cash (for ths was a cash dvdend) was unquafedy made sub|ect to hs
demand. We thnk ths was In the year 1922. The dvdend was decared
and payabe n 1922. It foows, therefore, that the respondent mmedatey
and before the e praton of the year 1922 became a credtor of the corpora-
tons. Chesapeake Deaware Cana Co. v. Unted States, 250 U. S., 123,
126 ranch v. esup, 106 U. S., 468, 475 State v. ograph Co., 236 ed., 454,
458 (O. C. . 2).) s a credtor he had a rght to demand hs debt In money,
for debts are payabe In money. In other words, the cash was sub|ect to hs
demand. The corporatons were then abe. e was not requred to take the
checks even when Issued, for they were not payment as a matter of aw. That
the checks were ssued s reevant ony as emphass upon the proposton that
at that tme the cash was admttedy and unquafedy sub|ect to the respond-
ent s nstant demand. (Rogers v. Durant, 140 U. S., 298, 301 u v. asson
Nat. ank, 123 U. S., 105, 111.) That t was not convenent and was perhaps
physcay mpossbe for hm to appear at the offces of the varous corporatons
before the year cosed and demand the cash dd not destroy hs ega rght
to do so.
The vew here taken preserves both secton 201(e) and the e cepton In
secton 213(a) and forestas the possbty of an unequa burden as between
ta payers returnng dvdend ncomes from the same corporatons whch by
some eventuaty have been receved In dfferent years.
The decson of the oard of Ta ppeas s reversed and the mandate w
drect a new order n accordance herewth.
rtce 1542: Source of dstrbuton. I -50-4864
Ct.D.255
ncome ta revenue acts of 1817 and 1924 decson of cocet.
1. Dvdends Dstrbuton Statutobt Constructon.
dvdend decared out of profts accumuated pror to March
1, 1913, and credted to stockhoders accounts before ugust 6,
1917, but to be pad to the stockhoders when and as drected by
the offcers or drectors, whch dvdend was pad party In 1918
and party In 1919, s not a dstrbuton made pror to ugust 6,
1917, wthn the meanng of secton 31(b) added to the evenue
ct of 1916 by secton 1211 of the evenue ct of 1917, and a pro
rata share of the profts of each of the years 1918 and 1919 for the
fractona part of the year pror to the respectve dates of payments
of sad dvdend beng suffcent for the payments of the dvdend,
the dvdend s deemed to have been pad from such profts and s
ta abe to the recpent as ncome for the years n whch t was
receved.
Sec. 201. (e) or the purposes of ths ct, a ta abe dstrbuton made by a cor-
poraton to Its sharehoders or members sha be ncuded n the gross Income of the
dstrbutees as of the date when the cash or other property s unquafedy made sub|ect
to ther demands.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
291
201, rt. 1643.
2. Commssoner s cquescence Wthdrawa Lmtaton.
The acquescence of the Commssoner n a decson of the oard
of Ta ppeas may be wthdrawn by hm at any tme durng the
year aowed by secton 274(b) of the Revenue ct of 1924 wthn
whch to brng an acton after the oard s dsaowance of the
defcency determned by hm.
8. na Decson Meanng.
The fna decson of the oard of Ta ppeas specfed In
secton 274(b) of the Revenue ct of 1924 refers to the Order
ettng determnaton under rue 50 of the oard.
Dstrct Court of the Unted States for the Western Dstrct of Wsconsn.
The Unted States of merca, pantff, v. . . Stange, defendant.
September 20, 1930.
OPINION.
cton at aw by the Government to recover ncome ta es from . . Stange
1,187.01 for the caendar year 1918 and 959.67 for the year 1919.
IUse, Dstrct udge: The cause was submtted on an agreed statement of
facts and a ury waved. The facts stated n the stpuaton are adopted as the
court s fndngs of fact. The controversy arses over dvdends decared and
pad to the defendant by the . . Stange Co. pursuant to a resouton of the
drectors, as foows:
Whereas, pror to the enactment of the edera ncome ta aws
our m and factory pant account whch for a number of years had been car-
red at the nomna sum of 25,000 and
Whereas, n order to estabsh a proper bass of accountng due to sad oss,
It was necessary to rase the vaue of our m and factory pant from 25,000
to a far vaue of 150,000, as shown by entry on our books under date of
ebruary 13, 1912, and
Whereas, sad ncreased vauaton was on sad date erroneousy credted to
surpus account, be t
Resoved, That we charge surpus account wth the sad sum of 125,000
and pace ths amount to the credt of the stockhoders, to be pad to the stock-
hoders when and as drected by the offcers or drectors, and the secretary s
hereby nstructed to have proper entres made on the books of the company
under date of anuary 27,1917, to conform herewth.
That resouton was adopted anuary 27, 1917, and on that date there was
credted to defendant s account, on the books of the company, hs proportonate
share of the 125,000, and payments were made by the corporaton to the
defendant In qudatng hs share on ugust 8, 1917, September 5, 1917, and of
7,000 on November 20, 1918, and 5,857.14 on anuary 13, 1919. Defendant
omtted the ast two tems from hs ncome returns for the years 1918 and
1919, respectvey. If they are ta abe as ncome as of those years, there s
no dspute but that the amounts sought to be recovered heren are correct.
Proratng the earnngs or profts of the . . Stange Co. n each of the years
1917, 1918, and 1919 to the dates of payments of sad dvdends, respectvey,
there were more than suffcent most recenty accumuated undvded profts n
1917 and earnngs or profts In 1918 to pay the amounts of sad dvdend at the
dates respectvey when actuay pad to the defendant by the . . Stange Co.
In the years 1917, 1918, and 1919.
Defendant endeavors to dstngush ths case from Mason v. Routzahn (275
U. S., 175 T. D. 4131, O. . II-1, 194 ), Leweyn v. arbson (31 ed. (2d),
740 (C. C. . 3d) Ct. D. 52, C. . III-1, 222 ), and . 8. v. Phps (24 ed.
(2d), 195 (O. O. . 3d)), on the ground that the dvdend was credted to
defendant s ndvdua account on anuary 27, 1917, whch consttuted a dstr-
buton made wthn the meanng of secton 31(b) of the Revenue ct of 1916
(as added to by secton 1211 of the ct of October 3, 1917 (40 Stat., 300, 337,
338)), pror to ugust 6, 1917, and hence the dstrbuton shoud be consdered
as made from profts accumuated pror to March 1, 1913, and e empt from ta .
It s consdered, however, that the method of bookkeepng empoyed may not
overrde the pan terms of the resouton whch paced n the hands of the
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
201, rt. 1542.
292
offcers or drectors the authorty to determne when and how the payment of
the dvdend shoud be made. Grantng the contenton that such payment
coud not be postponed beyond a reasonabe tme, It Is to be noted that the cor-
poraton has made the payments presumaby n compance wth the resouton
and such payment shoud be deemed a practca constructon and an nterpre-
taton of the resouton, under whch the 7,000 dvdend was pad to defendant
November 20. 1018, and the 5,857.14 dvdend on anuary 13, 1919. In prncpe
there s no dstncton seen between ths case and one n whch the dvdend
was decared n anuary, 1917, payabe n Instaments, two of whch were pay-
abe at the tmes these were pad. If ths be correct, the rue enuncated n the
cases cted s fuy appcabe and the dstrbuton occurred when the payments
were made and not when the dvdend was decared. It s so hed.
The Commssoner so hed, and determned there were defcences for the
years 1918 and 1919 n the sums here n controversy.. Defendant appeaed to
the oard of Ta ppeas, three members of whch (apparenty a dvson of
the oard) on March 18, 1925, fed a document contanng three headngs:
ndngs of fact, Decson, and Opnon. Under the headng Decson
appears the foowng paragraph:
D CISION.
The determnaton of the Commssoner s dsapproved and the oard deter-
mnes that no part of the dvdend decared on anuary 27, 1917, s ta abe to
the ta payer heren as ncome. The amount of the defcency to be assessed
w be setted on consent or on seven days notce under rue 50.
On une 22, 1925, apparenty pursuant to the ast sentence In the Decson,
one member of the dvson of the oard sgned and fed an Order settng
determnaton, whch, after rectng the decson of the oard on March 18,
the fng by the Commssoner of notce of settement, and a proposed determna-
ton, no ob|ectons by the ta payer, proceeds: Ordered, that there s no de-
fcency n ta due from the ta payer for the years 1917, 1918, and 1919.
Thereafter the Commssoner acquesced n the rung of the oard and n
Interna Revenue uetn I , No. 30, page 1 ( uy 27, 1925) C. . I -2, 4 ,
made a pubc announcement of such acquescence. On March 4, 1926, the Com-
mssoner wthdrew hs acquescence, whch was pubshed n the uetn, o-
ume , No. 12, March 22, 1920 C. . -, 7 . The Commssoner n both n-
stances acted upon advce of the Soctor of the Interna Revenue and aso
caused ths acton to be brought, n whch a summons was Issued and paced In
the hands of the marsha for servce on defendant on March 18, 1926, but the
summons named the defendant as . . Spanze and was attempted to be
served by a devery of a copy to C. . Stange, the son of defendant, at the offce
of the corporaton on March 25, 1926.
Defendant cams: 1. That the aw gves the Commssoner the rght to eect
to acquesce or to start acton and havng eected to acquesce, hs decson
became fna and not sub|ect to wthdrawa 2. that ths acton Is barred by
secton 274(b) of the Revenue ct of 1924, whch provdes In part: No part
of the amount determned as a defcency by the Commssoner but dsaowed
as such by the oard sha be assessed, but a proceedng In court may be begun,
wthout assessment, for the coecton of any part of the amount so dsaowed.
Such, proceedng sha be begun wthn one year after the fna decson
of the oard, and may be begun wthn such year even though the perod of
mtaton prescrbed n secton 277 has e pred.
Revertng to the contenton that the acquescence of the Commssoner was
not sub|ect to wthdrawa, the court s of opnon that R. S. 3229, empowerng
the Commssoner to compromse cv or crmna cases wth the advce and
consent of the Secretary of the Treasury, Is Inappcabe not ony because t was
not proceeded under, but aso because n ths Instance there was no compro-
mse no mutua concesson. urthermore, no statutory authorty for promu-
gatng or makng a record of the Commssoner s acquescence e sts so far as
the court Is advsed. The statutory scheme contempates ether acquescence of
the Commssoner whch contnues more than a year, or the begnnng of acton
wthn that tme. If acquescence asts out the year, the rght of acton Is
barred otherwse It Is not. There beng no provson of aw gvng effect to
acquescence for a ess perod than one year, the announcement of It had no
bndng force and wthdrawa thereof coud be made at any tme wthn the
year.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
293
5201, rt. 1542.
Turnng to the questons whether the to of the 1-year mtaton com-
menced on March 18 or une 22, 1925, the statutory pan seems to be pan. s
ndcated n the above statement, the fndngs and decson of March 18 seem
to have been made by a dvson of the oard and the order settng determna-
ton, pursuant thereto, on une 22, by one of the dvson. Whether the fna
decson was deayed 30 days by force of the provsons of secton 900(f) of the
Revenue ct of 1924
Upon the e praton of 80 days after a decson by a dvson,
such decson, and the fndngs of fact made n connecton therewth, sha be-
come the fna decson and fndngs of the oard, uness wthn such perod the
charman has drected that such decson sha| be revewed by the oard
has not been argued by counse. In fact, the stpuaton of facts states: On
March 18, 1925, sad oard of Ta ppeas made fndngs of fact and rendered
a decson and opnon. owever, copes of same ncudng the fndngs are
attached and by reference made a part of the stpuaton, the same as f set
out n fu. Thus the stpuaton n effect characterzes the decson as that
of the oard. Defendant s counse entered ther forma appearance heren by
notce dated March 29, 1926, and served an answer on pr 12, 1926, so that
a rreguartes n the name of defendant and n nsuffcent servce of the
summons upon hm were cured and defendant had appeared n court, pror to
pr 17, before the 30-day deay mentoned e pred. It woud seem, therefore,
that If the court s correct In ts Inference from the fact that but three members
of the oard decded ths appea, ther decson was that of a dvson rather
than that of the oard, that ths acton was brought suffcenty eary to avod
the mtaton of one year.
owever, t beng qute wthn the possbtes that the court In ts own
survey has overooked ether factua tems or statutory provsons appcabe,
t s deemed best to meet the queston upon the grounds presented by counse.
Secton 900(h) of the Revenue ct of 1924 authorzes the oard of Ta
ppeas to prescrbe rues of evdence and procedure, and under ths authorty
rue 50 was promugated and effectve at the tme now under consderaton.
y that rue procedure s outned, foowng a decson by the oard drectng
the computaton of a defcency In an ndcated manner, and n a genera way
may be sad to contempate the e change and fng by the partes of proposed
determnaton, the appearance of the partes on the day stated, and the sette-
ment of determnatons at that tme.
Under sectons 273 and 274 of the ct of 1924, defcences, and determna-
tons, and assessments of defcences are contempated to be stated In terms of
sums of money. There Is no gansayng that the decson of March 18, 1925,
wth the phrase, the amount of the defcency to be assessed w be setted on
consent or on seven days notce under rue 50, ceary contempated addtona
acton by the oard subsequent to the entry of Its fndngs, decson, and
opnon on that day. It s true that because of the narrowness of the queston
n dspute, whch n ths Instance amounted to tte more than a queston of
aw, that whch remaned to be done was mnstera In ts nature and concern-
ng t no dspute coud we arse. owever, that s because of the nature of
ths partcuar controversy and does not affect the character of the decson of
March 18 as premnary and Its order settng determnaton, of une 22,
as ts fna decson n the matter.
The anaogy contended for by defendant s counse, between the mandate of a
crcut court of appeas to a dstrct court to enter a udgment or decree not
Inconsstent wth ts decson, dscussed n Moore v. N. Y. Cotton change
(270 U. S., 593), uf Refnng Co. v. . 8. (269 U. S., 125), and Ro Grande
Western R. R. Co. v. Strngham (239 U. S., 44), s not so cose, as I vew t, as
the anaogy between these fndngs and ths opnon, and the |udgment to be
entered thereon n ths court. Whe a readng of ths opnon woud ndcate
ceary what |udgment s to be entered, no one woud cam that the fng of
ths opnon was the fna decson of ths court. udgment of the court entered
pursuant to drectons gven n ths opnon w be ts fna decson settng the
tme for appea to run.
It s true that n secton 900(h) of the ct of 1924 we fnd the requrement
that the oard sha make a report In wrtng of ts fndngs of fact and de-
cson n each case. ut In secton 274(b) of the ct we fnd that the year
wthn whch the Commssoner must begn sut begns to run upon the fna
decson of the oard. ence no escape s seen from the concuson that the
oard had ampe authorty to promugate rue 50, governng the procedure
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
201, rt. 1548.
294
after a decson of the oard ookng toward the settement of the resut of ts
fndngs, premnary decson and opnon, n the fna decson statng those
resuts n sums of money as contempated by secton 274 of the ct. No doubt
ths s what was done n ths case, and the fna decson was rendered une 22,
1925, and ths case begun we wthn the year s mtaton.
udgment may be entered In favor of the pantff and aganst the defendant
n the sum of 2,096.68, wth nterest at 6 per cent on the sum of 1,187.01 from
March 15, 1919, and on the sum of 959.67 from March 15, 1920, together wth
costs of the acton.
ktce 1548: Sae of stock receved as dvdend. I -40 4791
Ct. D. 233
ncome ta revenue acts ob 1916 and 1918 decson of cot|bt.
Income Gan Sae of Stock Receved as Dvdend.
Proft derved by a stockhoder from the sae of stock receved
as a dvdend s ta abe ncome to hm under the Revenue cts of
1916 and 1918.
Court of Cams of the Unted States.
Wam O. eckers v. The Unted State .
une 2, 1930.
opnon.
ooth, Chef ustce, devered the opnon of the court.
The pantff purchased n 1915 stock of the W. eckers nne 4 Chemca
Works of the vaue of 325,000. In 1916 the pantff receved from the corpora-
ton a stock dvdend of the vaue of 325,000, and n 1917 another stock
dvdend of the vaue of 325,000 was decared by the corporaton. In 1917
the pantff sod hs entre hodngs In the corporaton for 1,419,583.50,
recevng a cash payment n 1917 of 891,250 and 528,333.50 n 1918. In 1922
the Commssoner of Interna Revenue assessed aganst the pantff addtona
ta es amountng to 159,517.57 for 1917 and 429,856.78 for 1918. In computng
gan and proft reazed from the above transacton the Commssoner foowed
artce 1547, Reguatons 45 (1920 edton), as foows:
et. 1547. Sae of stock receved as dvdend. Stock n a corporaton re-
ceved as a dvdend does not consttute ta abe ncome to a stockhoder n such
corporaton, but any proft derved by the stockhoder from the sae of such
stock Is ta abe ncome to hm. or the purpose of ascertanng the gan or
oss derved from the sae of such stock, or from the sae of the stock wth
respect to whch It s ssued the cost (used to Incude aso, where requred,
the far market vaue as of March 1, 1913), of both the od and new shares Is
to be determned n accordance wth the foowng rues:
(1) Where the stock ssued as a dvdend s a of substantay the same
character or preference as the stock upon whch the stock dvdend s pad,
the cost of each share of both the od and new stock w be the quotent of
the cost, or far market vaue as of March 1, 1913, If acqured pror to that
date, of the od shares of stock dvded by the tota number of the od and
new shares.
(2) Where the stock ssued as a dvdend Is n whoe or n part of a
character or preference materay dfferent from the stock upon whch the
stock dvdend Is pad, the cost, or far market vaue as of March 1, 1913, f
acqured pror to that date, of the od shares of stock sha be dvded between
such od stock and the new stock, or casses of new stock. In proporton, as
neary as may be, to the respectve vaues of each cass of stock, od and new,
at the tme the new shares of stock are Issued, and the cost of each share of
stock w be the quotent of the cost of the cass to whch such share beongs
dvded by the number of shares n that cass.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
295
201, rt. 1548.
(3) Where the stock wth respect to whch a stock dvdend s ssued was
purchased at dfferent tmes and nt dfferent prces, and the dentty of the
ots can not bo determned, any sae of the orgna stock w be charged to
the earest purchases of such stock (see artce 39), and any sae of dvdend
stock ssued wth respect to such stock w be presumed to have been made from
the stock ssued wth respect to the earest purchased stock, to the amount of
the dvdend chargeabe to such stock.
The addtona assessment of 159,517.57 for the ta abe year 1917 was pad
In part by credtng overassessmeuts of 10,500 and 62,400 found to be due the
pantff for 1915 and 1916. The baance of the addtona assessment, to wt,
86,617.57, was pad n cash and under protest. The addtona assessment of
429,856.78 for 1918 was pad under protest to the coector uy 19, 1922.
If the pantff s entted to recover, the amount of the |udgment shoud
be 150,267.57, wth Interest, . e., overpayments for 1917 of 86,617.57, and
for 1918, 63,650. The pantff nssts that he s entted to recover the above
sums under the provsons of the Revenue cts of 1917 and 1918 and the
estabshed reguatons of the Commssoner then appcabe to computng gau
and proft reazed from the sae of stock as ths stock was acqured and sod.
In the bref of pantff the contenton s stated as foows:
Under the statutory provsons appcabe to the ta aton of such a proft,
as orgnay and correcty nterpreted by the reguatons of the Treasury De-
partment, the bass of the computaton of the proft was 975,000 (1. e., tho
aggregate of the orgna cost.pus the amounts at whch the stock dvdends
were returnabe as ncome under the separate and dstnct provsons n those
same cts wth respect to the ta aton of stock dvdends). The proft was the
dfference between that amount and the tota seng prce of 1,419,583.50, or,
444,583.50.
cept for the decson of the Supreme Court In the case of sner v.
Macomber (252 U. S., 189 T. D. 3010, C. . 3, 25 ), wheren It was hed that
stock dvdends coud not under the Consttuton be ta ed as Income for the
year n whch receved, the pantffs argument woud be sustanabe. The
Revenue cts of 1916 and 1918 ta ed stock dvdends as Income of the ta abe
year n whch receved. The Commssoner n formuatng reguatons to carry
the cts nto effect, pror to the decson n sner v. Macomber (supra),
adopted a bass for computng gan and proft reazed from the sae of such
stock, predcated upon the dfference between the stock s vaue for ncome
ta aton and the purchase prce receved by the owner for It. The correctness
of ths reguaton Is not chaenged. Stock ta ed on the bass of Income vaue
was manfesty to be accorded the vaue upon whch Income ta es had been
assessed when t became essenta to determne gan and proft accrung from
the sae of the same stock otherwse doube ta aton woud foow. The mere
statement of ths fact demonstrates the soundness of the reguatons of 1917
and 1918. In 1920, however, when the Commssoner audted the returns for
1917 and 1918 and made hs determnaton of pantff s ta abty, the
Supreme Court had hed the statute ta ng stock dvdends to be unconsttu-
tona. Such stock receved as a dvdend was, therefore, not sub|ect to Income
ta aton at the tme dstrbuted, and the Commssoner emnated from pan-
tff s net ncome for the years 1917 and 1918 the above stock dvdends as
ta abe ncome for those years, eavng ony the ascertanment of the gan
and proft reazed by the pantff from the sae of a the stock heren
Invoved. The reguatons of the Commssoner coverng a transacton smar
to the one In ssue, promugated at a tme when stock dvdends were ta abe
as ncome no onger, In so far as wordng was nvoved, remaned precsey
appcabe, and the Commssoner promugated the reguatons heretofore cted
(artce 1517, supra) to meet the stuaton. These reguatons, n our opnon,
accompsh substantay the precse resut obtaned by the appcaton of the
reguatons of 1917 and 1918, set out as an append to ths opnon. In
determnng the addtona ta whch the pantff seeks to recover, the Com-
mssoner foowed the reguatons promugated after the decson n sner v.
Macomber, supra, whch reguaton was, In our opnon, a proper nterpretaton
of the Revenue cts of 1916 and 1918 the pantff s orgna stock was ac-
qured for a cash outay of 325,000. Ths was the cost to hm of hs entre
hodngs, and from the seng prce receved ths sum was deducted. Secton
2(a) of the Revenue ct of 1916 (39 Stat., 757) provded:
the net ncome of a ta abe person sha Incude gans, profts,
and ncome derved from saares, wages, or compensaton for persona servce
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
201, rt. 1548.
296
of whatever knd and In whatever form pad, or from professons, vocatons,
busnesses, trade, commerce, or saes, or deangs In property, whether rea or
persona, growng out of the ownershp or use of or nterest In rea or per-
sona property, aso from nterest, rent, dvdends, securtes, or the transac-
ton of any busness carred on for gan or proft, or gans or profts and
Income derved from any source whatever: Provded, That the term dv-
dends as used n ths tte sha be hed to mean any dstrbuton
by a corporaton, out of Its earnngs or profts accrued snce March
1, 1913, and payabe to ts sharehoders, whether n cash or In stock of the
corporaton , whch stock dvdend sha be consdered Income, to
the amount of Its cash vaue.
The Revenue ct of 1918 smary defned ta abe ncome, and aso pro-
vded that the term dvdends shoud ncude stock dvdends. The Supreme
Court In sner v. Macomber, supra, hed the statute unconsttutona n so
far as t requred the Incuson In ta abe ncome of the stock dvdend, and,
on page 212, sad:
It s sad that a stockhoder may se the new shares acqured n the
stock dvdend and so ho may, f he can fnd a buyer. It s equay true that
f he does se, and n dong so reazes a proft, such proft, ke any other,
Is ncome, and so far as t may have arsen snce the s teenth amendment Is
ta abe by Congress wthout apportonment.
Proft reazed from the sae of stock s concededy ta abe, and t Is df-
fcut to perceve wheren the computaton of the Commssoner n ascertan-
ng the ta abe proft n ths case s n anywse erroneous or ega. The
Revenue cts of 1916 and 1918 mpose a ta upon gans and profts arsng
from saes or deangs n property, rea or persona, or gans or profts and
ncome derved from any source whatever. Ths provson of the statute was
not affected by the decson of the court In sner v. Macomber, and the
anguage ceary authorzed the coecton of the ta here n queston upon
the sae by the pantff of hs stock. It s true that secton 31(a) of the
Revenue ct of 1916 (40 Stat., 337) defned the term dvdends as ncudng
stock dvdends and set up a rue for the measurement of the vaue of stock
dvdends as Income, and the reguatons of the Commssoner responded to
the egsaton. The sner v. Macomber case rendered the whoe proceedngs
as to the ncuson In ncome of the cash vaue of stock dvdends nvad, but
In so dong t may not be sad that Congress reeased from ta aton gans or
profts derved from saes or deangs n property and from any source what-
ever, or that the Commssoner was forestaed under the Revenue cts ater
n force from promugatng reguatons consstent wth aw, formng a correct
bass for the ascertanment of gans and profts derved from saes of stock,
dvdends, or otherwse. The statutes reed upon by the pantff gave egs-
atve vaue to stock receved as a dvdend for ncome ta aton. The
queston of gan and proft from the sae of stock remaned undsturbed, and
whe n ths partcuar nstance the effect of the Commssoner s reguatons
may resut eventuay n the payment of substantay the same amount of
ta as Congress dd mpose under the Revenue cts of 1916 and 1917 upon
stock dvdends, because the pantffs stock dvdends were free dstrbutons,
nevertheess t s not to be asserted that In a Instances a smar stuaton
woud preva. eyond doubt pantff s nvestment s represented by the snge
cash e pendture of 325,000, and, foowng the sae of a hs stoek, he had
accumuated n cash the dfference between hs cash nvestment and what he
receved when the stock was sod. The proft measured by the dfference be-
tween the cost of the orgna stock and the saes prce of that stock and the
shares receved as a stock dvdend was none the ess ta abe Income because
the statutes hed Invad attempted to ta the stock dvdend at the tme It
was receved. fter the decson n the Maeomber case the stuaton wth
reference to the ta aton of gans and profts was the same as If the statutes
had never undertaken to ta a stock dvdend. (Norton v. Sheby Count /,
118 U. S., 425, 442.)
In vew of ths record t s dffcut to perceve wheren under the Revenue
cts pantff may cam a deducton from the saes prce of a vaue f ed by
the terms of an ct whch the Supreme Court hed to be unconsttutona
The petton w be dsmssed. It s so ordered.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
297
202, rt. 1561.
S CTION 202. SIS OR D T RMINING
G IN OR LOSS.
rtce 1561: ass for determnng gan or I -40-4792
oss from sae. Ct. D. 232
INCOM T NU CT O 1921 D CISION O COT T.
Gan or Loss Deprecabe Property March 1, 1913, aue.
The March 1, 1913, vaue of deprecabe property purchased pror
to March 1, 1913, s deemed to be the cost thereof reduced by de-
precaton accrued or sustaned pror to March 1, 1913, n the
absence of other evdence as to the March 1, 1913, vaue.
Unted States Crcut Court op ppeas for the Nnth Crcut. No. 5955.
oseph O. oepf, Roand P. shop, and Wam T. shop, pettoners, v.
Commssoner of Interna Revenue, respondent.
Upon pettOD to revew orders of the Unted States oard of Ta ppeas.
une 20, 1930.
OPINION.
Norcross, Dstrct udge: Ths s a petton to revew orders of the Unted
States oard of Ta ppeas, redetermnng ncome ta es of pettoners for the
year 1922. The controng facts are conceded, and a queston of aw s pre-
sented whether or no, n determnng the gan n 1922 on the sae of property
acqured pror to March 1, 1913, when the bass s cost or March 1, 1913, vaue,
whchever s greater, t s requred under secton 202(b) of the Revenue ct
of 1921 that the cost bass be reduced by deprecaton accrued or sustaned
pror to March 1, 1913.
In 1905 pettoners purchased a tract of 6.24 acres of and n the cty of
Los ngees for a consderaton of 94,010.74. In 1907 they put up a concrete
budng on the property at a cost of 94,134.19. Durng the foowng two
years other mprovements were erected at a cost of 5,565.65. The property,
ncusve of and and mprovements, was sod n 1922 for 500,000, the net to
pettoners beng 476,179.90. The respondent determned the March 1, 1913,
vaue of the property to be 345,463.54, resutng n a net ta abe gan of
152,901.39, or 50,967.13 to each of the appeant partners. Pettoners ap-
peaed from the Commssoner s determnaton to the Unted States oard
of Ta ppeas. The oard determned that the Commssoner shoud have
taken the vaue of the and as of March 1, 1913, shown to have been 382,-
707.80, and to that shoud have added the deprecated vaue of the mprove-
ments as of that date, and the tota woud be the vaue of the property for
the purpose of a bass for determnng the amount of ta abe gan. The far
market vaue of the mprovements as of March 1, 1913, was found to be 88,-
401.91, representng a deducton from the cost prce for deprecaton of
11,297.93.
The porton of the Revenue ct of 1921 matera to ths case reads:
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
(b) The bass for ascertanng the gan derved or oss sustaned from the
sae or other dsposton of property, rea, persona, or m ed, acqured before
March 1, 1913, sha be the same as that provded by subdvson (a) but
(1) If ts far market prce or vaue as of March 1, 1913, s n e cess of
such bass, the gan to be Incuded n the gross ncome sha be the e cess of
the amount reazed therefor over such far market prce or vaue.
The far market vaue of the property n queston on March 1, 1913, was
materay greater than the combned cost of the and and mprovements. The
effect of appeants contenton s that the far mnrket vaue as of
March 1, 1913, Is to be determned by takng the ncreased vaue of the and
35942 31 20
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
202, rt. 1561.
298
and the cost of the Improvements. The property sod was the and wth the
Improvements, and the whoe was reaty. The statute Is deang wth the
queston of the gan derved or oss sustaned from a sae or other dsposton
of property. There s nothng n the statute tsef requrng the vaue of the
property as of March 1, 1913, to be determned n accordance wth the conten-
ton of appeants. Where the vaue of property consstng of and and mprove-
ments s to be determned as of a certan date, manfesty any deprecaton In
the vaue of the mprovements occasoned by usage or otherwse s a matter to
be consdered. It Is the vaue of the property as a whoe whch Is to be
determned.
ppeants contend that because the ct of 1921 was sent wth respect to
deprecaton of Improvements, and the subsequent cts of Congress of 1924 and
1926 ( 43 Stat., 253 44 Stat., 9) e pressy made provson for takng nto
account such deprecaton, Congress ntended, when t adopted the 1921 statute,
to e cude from consderaton any deducton from the cost of Improvements
constructed pror to March 1, 1913. Pror to the sad ct of 1924, Reguatons
62 of the Treasury Department, among other matters, contaned the foowng
provson:
In any case proper ad|ustment must be made n computng gan or oss from
the e change or sae of property for any deprecaton or depeton sustaned and
aowabe as a deducton n computng net ncome.
It s conceded by counse for appeants that the acton taken by the oard of
Ta ppeas fnds support n the Treasury Department reguatons, but It s
urged that reguatons are wthout force where they are n confct wth e press
statutory provson. Department reguatons, to have the force of aw, must
be wthn mts prescrbed by Congress. (Unted States v. rmaud, 220 U. S.,
506 Unted States v. Morehead, 243 U. S., 607 Unted States v. ohnson, 35
ed. (2d), 256.) The reguaton n queston does not appear to be n confct
wth the provsons of the ct of 1921.
Counse for appeants cte e cerpts from reports of the Ways and Means
Commttee of the ouse of Representatves, recommendng passage of the sad
cts of 1924 and 1926, the reports of the Senate nance Commttee adoptng
the same, or substantay the same anguage. It s camed that these reports
estabsh that Congress recognzed that deprecaton upon Improvements pror
to March 1, 1913, was not provded for under the statute of 1921.
The report of the ouse commttee recommendng adopton of the 1924
statute contans ths statement:
There s no provson n the e stng aw whch corresponds to ths secton
(202) of the b. The purpose n embodyng In the aw ths secton s to show
ceary the method of determnng the amount of gan or oss from the sae or
other dsposton of property
(2) There s no provson n the e stng aw whch corresponds to sub-
dvson (b), but the rue ad down theren s substantay the same as the
constructon paced upon the e stng aw by the Treasury Department.
Under ths provson tems such as deprecaton and obsoescence
prevousy aowed wth respect to the property are to be subtracted from
the cost of the property n determnng the gan or oss from ts subsequent
sae.
rom ths t woud appear that t was the vew of the congressona commttee
that the ct of 1924 was specfcay e pressng what was mped by the ct
of 1921, and as so construed by the Treasury Department.
The reports of the Senate and ouse commttees recommendng passage of
the ct of 1926 contan the foowng statement:
When property s acqured pror to March 1, 1913, the present aw provdes
that n the case of a sae of sueh property the bass for determnng gan or oss
sha be cost or March 1, 1913, vaue, whchever s hgher and aso pro-
vdes that n makng ad|ustments for deprecaton, etc., proper ad|ustment
sha be made for deprecaton, etc., prevousy aowed. Owng to the fact
that there was no ncome ta pror to March 1, 1913, n cases where property
was acqured pror to that date no deprecaton has been aowed, and the
ta payer may receve too arge a ba.ss for determnng gan or oss. The
amendment proposed provdes that the deductons for deprecaton, etc., to be
made n such eases sha be such deductons as were actuay sustaned wth
respect to such property, whch woud ncude such deprecaton as had
occurred pror to that date.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
299
5203, rt. 1582.
The ct of 1024 contans the foowng provson:
(b) In computng the amount of gan or oss under subdvson (a) proper
ad|ustment sha be made for (1) any e pendture propery chargeabe to
capta account and (2) any tem of oss, e hauston, wear and tear,
obsoescence, amortzaton, or depeton, prevousy aowed wth respect to such
property.
It Is cear, we thnk, from the commttee reports recommendng adopton of
the 1926 ct that t was found necessary or advsabe to emnate the e presson
M prevousy aowed as t was contaned n the statute of 1924. s there
had been no occason for aowng deprecaton pror to March 1, 1913, because
there was no ncome ta pror to that date, the e presson prevousy aowed
In the 1924 statute had occasoned doubt or confuson as to whether or no
deprecaton occurrng pror to March 1, 1913, coud be consdered. owever,
ft does not foow therefrom that the statute of 1921 propery construed dd
not authorze and requre a deducton for deprecaton n mprovements occur-
rng pror to March 1, 1913, n determnng the gan on mproved rea property
acqured and mproved pror to such date and subsequenty sod. It s our
opnon that the ct of 1921 shoud be so construed. Whe the queston here
Invoved was not drecty presented n the case of Unted States v. Ludcy (274
T . S., 295 T. D. 4046, C. . I-2, 157 ), the opnon In that case Is authorty
for the prncpe that the reducton of the cost bass by deprecaton may be
requred wthout e press provson therefor n the Revenue ct.
Orders affrmed.
rtce 1563: Sae of property acqured by gft on or before
December 31,1920, or by bequest, devse, or nhertance.
R NU CT O 1921.
Stock purchased out of communty funds n Te as by husband
who ater made gft to hs wfe of hs communty nterest n the
stock. (See G. C. M. 8209, page 326.)
rtce 1568: changes of property for other I -33-4749
property and money. I. T. 2541
R NU CT O 1821.
I. T. 1833 (C. . II-2, 25) s revoked, n vew of Genera Counse s
Memorandum 8175 (see page 134).
S CTION 203. IN NTORI S.
rtce 1582: auaton of nventores. I -83-4752
Ct. D. 223
INCOM T R NU CT O 1918 D CISION O SUPR M COURT.
1. Inventores ase Stock Method.
Where a ta payer engaged n the fabrcaton and erecton of
stee pates for budngs, brdges, tanks, etc., orders matera
from the ms and fabrcates the pates for each structure or con-
tract, and does not carry fnshed products In stock but keeps a
suppy on hand n order to nsure the prompt and ordery e ecuton
of contracts, from whch suppy matera s taken as and when
needed and the stock subsequenty repenshed, nventores of the
ta payer s stock of unfabrcated stee are necessary to a proper
determnaton of ts ncome, and the use of a constant prce or
nomna vaue for ths so-caed norma quantty of materas or
goods on hand s not n aceord wth the reguatons reatng to
the Income ta and does not truy refect ncome.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
203, rt. 1582.
300
2. Decson Revebsed and Decson ffrmed.
The decson of the crcut court of appeas (33 ed. (2d), 53)
reversed. The decson of the oard of Ta ppeas (11 . T. L,
877) affrmed.
SUP M COU T O T UNIT D ST T S. NOS. 323 ND 324. OoTO T M, 1929.
Robert . Lucas, Commssoner of Interna Revenue, pettoner, v. ansas Cty
Structura Stee Co.
On certorar to the Crcut Court of ppeas for the ghth Crcut.
pr 14, 1930.
Mr. ustce bandes devered the opnon of the court
The ansas Cty Structura Stee Co., a Mssour concern, appeaed to the
Unted States oard of Ta ppeas from determnatons by the Commssoner
of Interna Revenue whch made an ncrease of 7,656.74 n the company s
1918 ncome ta and of 15,953.36 n ts 1920 ncome ta .1 These addtons
were due whoy to changes made by the Commssoner n the nventory
vauaton of matera carred n stock. The company vaued at a constant
prce a the matera whch dd not e ceed n quantty what was sad to be the
norma stock on hand. The Commssoner revaued ths at current market
prces. The changes resuted n ncreasng the December, 1918, nventory
by 165,849.46 and the December 31, 1920, nventory by 117,113.61. The oard
of Ta ppeas sustaned the Commssoner s acton. (11 . T. ., 877.) Its
decson was reversed by the Unted States Crcut Court of ppeas for the
ghth Crcut. (33 . (2d), 53.) Ths court granted wrts of certorar (280
U. S., 543).
Secton 203 of the Revenue ct of 1918 ( eb. 24, 1919, ch. 18, 40 Stat, 1057,
1060) provdes: That whenever n the opnon of the Commssoner the use
of nventores 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 conformng
as neary as may be to the best accountng practce n the trade or busness
and as most ceary refectng the ncome. Reguatons 45 (1920 edton, as
amended by Treasury Decson 3296 C. . 1-1, 40 ) provde, n artce 1581,
that nventores at the begnnng and end of each year are necessary n every
case n whch the producton, purchase, or sae of merchandse s an ncome-
producng factor. rtce 1582 decares that the bass of vauaton most
commony used by busness concerns and whch meets the requrements of the
Revenue ct s (a) cost or (b) cost or market, whchever s ower that
goods taken n the nventory whch have been so Intermnged that they can
not be dentfed wth specfc nvoces w be deemed to be the goods
most recenty purchased that the ta payer must satsfy the Commssoner
of the correctness of the prces adopted and that (d) Usng a constant
prce or nomna vaue for a so-caed norma quantty of materas or goods
n stock s not n accord wth the reguatons.
The company s engaged n the fabrcaton and erecton of stee pates for
budngs, brdges, tanks, etc. It does not carry fnshed products n stock, but
fabrcates the pates for specfc structures or contracts. It orders matera
from the ms for each structure or contract but t aso keeps a suppy on
hand n order to nsure the prompt and ordery e ecuton of contracts n
vew of deay, etc., ncdent to shpments from the ms and other e gences
1 Other matters were n dspute before the Commssoner and the oard, but these are
the ony dsputed Items carred to the Crcut Court of ppeas and presented for our dec-
son. No. 323 nvoves the ta for 1918 No. 324, that for 1920. cept for the years
and the amounts the facts In the two cases are Identca.
Tho system foowed, If ntended as a method of Inventory, Is known to accountng as
the base stock, mnmum, or cushon method.
Ths provson was Incorporated In every Revenue ct snce 1918 (1921, ch. 130, sec.
203, 42 Stat., 227, 231 1924, ch. 234, sec. 205, 43 Stat., 253, 200 1920 ch. 27, sec. 203.
44 Stat., 9, 16 1928, ch. 852, sec. 22(c), 45 Stat., 791, 799). though no smar pro-
vson was made n earer cts, reguatons of the Department supped It. (Interna
Revenue ureau Reguatons 31, arts. 2 (3) and (4) Reguatons 33, art. 101 Regua-
tons 33 (revsed), nts. 91. 92, 120.)
4 The provson reatve to the vauaton of Inventores at a constant prce was. In effect,
a restatement of a Treasury rung promugated In September, 1919, as dvsory Ta
oard Rung No. 05 (T. . R. 65, C. . 1, 61).
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
301
203, rt. 1582.
affectng the avaabty for use when needed of matera ordered for a partc-
uar |ob. Matera s taken from ths 6uppy as and when needed and the
stock s subsequenty repenshed.5 On December 81, 1916, the quantty n
stock was 5,554 tons. The company then nventored t at cost 1.70 per
hundredweght f. o. b. Pttsburgh. t the cose of each year thereafter unt
1921, the company nventored ts stock on hand up to 5,554 tons at that
prce, regardess of ts actua cost or the market, and the e cess, f any. at
cost or market prce, whchever was ower. In the ta years n queston, the
market was much hgher. It s not shown what the actua cost of the stock then
on hand was, or that any of t had cost as tte as 1.70.9 The Commssoner
therefore revaued the entre stock at market prce, wth the consequent
ncrease In the ta es companed of.
rst: Whether n a partcuar busness nventores are necessary for the
determnaton of ncome s a practca queston eft by the statute to the
udgment of the Commssoner. On that queston, he and the company dd
not dffer. In every year t, wthout any queston or protest, used nventores
n makng ts return. The dspute was merey on the method of vauaton to
be adopted for that part of the stock whch t cas ts norma stock. Through-
out, the company vaued at cost or market prces a stock n e cess of 5,554
tons and snce 1921 has so vaued a the stock on hand.
It s not contested that f nventores are necessary n order to determne
the company s ncome, the base stock method does not fuf the desderata.
The edera ncome ta system s based upon an annua accountng perod.
Ths requres that gans or osses be accounted for n the year n whch they
are reazed. The purpose of the nventores Is to assgn to each perod ts
profts and osses. In years of rsng prces, the base stock method causes
an understatement of ncome for t dsregards the gans actuay reazed
through qudaton of ow prce stock on a hgh prce market. In tmes of
fang prces, t causes an overstatement of ncome for t gnores the osses
whch resut from the consumpton of hgh prce stock. Ths method may,
ke many reserves whch busness men set up on ther books for ther own
purposes, serve to equaze the resuts of operatons durng a seres of years.
ut t s nconsstent wth the annua accountng requred by Congress for
ncome ta purposes. It resuts In offsettng an nventory gan of one year
aganst an nventory oss of another, obscures the true gan or oss of the ta
year, and, thus, msrepresents the facts. It does not conform wth the genera
or best accountng methods and s apparenty obsoete.7 The company ds-
cams any defense of the base stock method and the ower court dsapproved t.
Second: It s urged, however, that the nventory requrement Is not appcabe
to the company s stock to the e tent of 5,554 tons that the company Is not a
deaer, manufacturer, or producer, but rather a contractor or buder that ts
ncome resuts from the performance of ts constructon contracts that the ma-
tera n ts stand-by stock has no reaton to these contracts, the contract
prces, or the company s profts that the matera from ths stock s ony bor-
rowed for specfc |obs and s prompty repaced n knd that t s not an
ncome-producng factor, but s ke the company s machnery and equpment
and that any accreton to the vaue of ths matera s of no consequence unt
a fna qudaton. The contentons are nconsstent wth the company s
practce and are unsound.
The company s purchase and producton of stee pates s obvousy an
ncome-producng factor. Throughout the years the company has varyng
amounts of matera on hand. The vaue of the partcuar matera used, at the
The stpuated facts recte: When such matera Is used It Is charged to the contract
at Its repacement cost and Is prompty repaced wth matera of a ke knd and In a ke
quantty. The phrase charged to the contract evdenty means that t Is so charged
In those accounts on the company s books whch are desgned to gude t n determnng
the cost of a partcuar |ob.
In September, 1017, the Government f ed the prce of structura shapes, f. o. b. Ptts-
burgh, at 3 per hundredweght and of tank pates at 3.25. fter renqushment of Gov-
ernment contro, the prces fe. Those n 1920 were, for structura stee, 2.45, for tank
pates, 2.65. In 1921 the prces fe to 1.50.
7 In a we-reasoned report, the dvsory Ta oard, n 1919, rued that the base
stock, mnmum, or cushon method dd not wthstand the changng tests of
tme and coud not be approved. Snce then, a reguatons of the Department e pressy
prohbted ts use. See Reguatons 45. artce 1582 Reguatons 62, artce 1582 Regu-
atons 65, artce 1612 Reguatons 69, artce 1612 Reguatons 74, artce 102. No
case has been found n whch any busness concern has chaenged the correctness of these
prohbtons and they have been approved by accountants. (1 Montgomery, Income Ta
Procedure (1926 ed.), 712 en, edera Income Ta aton (1929), par. 14:13 (d),
p. 870.)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
204, rt. 1601.
302
tme of use, pany affects Its profts. That the matera s repaced In knd
and ts amount kept wthn some mts s not e ceptona and s of no sgnf-
cance. Most concerns strve ordnary to carry no more stock than s re-
qured for the safe and proftabe conduct of the busness. They pan nether
to run short nor to overstock. They repace suppes as they are consumed.
nd the cost or vaue of the new matera s propery refected n the ater
nventores and returns. There Is nothng pecuar about the 5,554 tons, e cept
that that happened to be the amount of stock on hand on December 31, 1916.
It s not a permanent stock, ke machnery or equpment Nor s t merey de-
peted by borrowng and prompty restored to that f ed sze. On the contrary,
the stock has fuctuated from about 3,000 tons n 1918 to 11,000 tons In 1920.
There s no stand-by stock set asde and earmarked as such. The matera s
a commnged and s ndscrmnatey used n producton, as and when needed.
No reason s gven for e ceptng 5,554 tons no more and no ess. To draw an
artfca ne at that amount woud dstort the computaton of ncome n the
accountng perods, athough the errors mght be equazed In a seres of years.
Snce nventores are propery deemed necessary, the e cepton of that or any
amount s nothng but the use of the dscarded base stock method.
The company s case fas far short of meetng the heavy burden of provng
that the Commssoner s acton was pany arbtrary. Compare Lucas v.
mercan Code Co. (280 U. S., 445, 449 Ct. D. 168, C. . I -1, 314 ) WUams-
port Wre Rope Co. v. Unted States (277 U. S., 551, 559 T. D. 4172, C. .
II-2, 323 ).
Reversed.
The Chef ustce dd not take part In ths case.
S CTION 204. N T LOSS S.
rtce 1601: Net osses, defnton and compu- I -34-4758
taton. Ct. D. 227
INCOM T R NU CT O 1918 D CISION O COURT.
Deducton Net Loss Tbade or usness.
oss n 1921 of an amount Invested n 1920 In stock by a
physcan reguary engaged In the practce of hs professon, who
asde from that Investment engaged n but three transactons n
1920, 1921, and 1922 n the purchase and sae of stocks, eases, and
rea estate, s not a oss resutng from the operaton of any
trade or busness reguary carred on by the ta payer wthn the
meanng of secton 204(a) of the Revenue ct of 1921, and the
e cess of the oss sustaned n 1921 over hs Income for that year
s not a proper deducton n the succeedng ta abe year under sec-
ton 204(b) of that ct.
Coubt or Cams of the Unted States.
MoLan Rogers v. Unted States.
une 2, 1930.
OPINION.
Wams, udge, devered the opnon of the court.
The pantff n ths case sues to recover 2,272.35, whch s aeged to be an
overpayment of ta es for the years 1922 and 1923.
The pantff durng the years n queston was a practcng physcan and
urgeon at Cnton, Oka. e had been ocated at Cnton for severa years and
The quanttes on hand at the end of each of the severa years were:
Dec. Tons.
1910 5,554
1917 5. 298
191S r . 87
1919 6, 937
1920 7, LMf
1921 4,512
Dec. 31
1922-.
192 _.
1924 _
1925-.
1920-
Tons.
9,341
8,732
10.411
7. 202
8,128
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
303
204, rt. 1601.
en|oyed a ucratve practce In hs professon. or appro matey 10 years pror
to 1921 the pantff from tme to tme Invested the surpus ncome from hs
professon n stocks and bonds, os, mnng, and rea estate.
In October, 1920, he purchased 126 shares of stock of the Weatherford M-
ng Co., an Okahoma corporaton, for whch he pad the sum of 36,250. The
shares purchased by the pantff represented one-quarter of 505 shares In the
company purchased by the pantff and three copurchasers. fter the purchase
of these shares by the pantff and hs assocates the mng company became
Invoved n fnanca dffcutes. eavy obgatons had been ncurred and the
company was facng bankruptcy. acng ths stuaton and not beng n a
poston to do the refnancng necessary to put the company on a sovent bass,
the pantff and hs copurchasers, who owned practcay a the shares of
stock, entered nto a contract wth . W. Maney and ohn Maney, whereby t
was agreed the sad Messrs. Maney woud take over and undertake the opera-
ton of the company and assume a outstandng abtes In return for the
surrender of the shares of stock then owned by the pantff and hs three co-
purchasers. The sad agreement was carred out, and n December, 1922, the
pantff surrendered to Messrs. Maney the 126 shares of stock n the com-
pany acqured by hm as aforesad.
The pantff n ths transacton suffered a tota oss of the amount orgnay
pad by hm for the sad shares, to wt, 36,250.
In hs ncome-ta return for the caendar year 1921 the pantff deducted the
sum of 5,625 of the oss sustaned n the aforesad stock, n hs return for the
year 1922 he deducted 12,867, and n hs return for the year 1923 he deducted
14,516 of such osses.
The Commssoner of Interna Revenue dsaowed the deductons for the
years 1922 and 1923, and on December 15, 1925, assessed an addtona ta
aganst the pantff n the sum of 1,992.82. Thereafter, and on May 13, 1926,
the sad Commssoner made a further assessment aganst pantff n amount
of 279.53, coverng nterest on the aforesad addtona ta .
On une 4, 1926, pantff pad to the coector of nterna revenue the amount
of the aforesad assessments, totang 2,272.35, and, on une 12, 1926, fed a
cam for refund thereof, whch was re|ected on ugust 27, 1926.
The pantff cams he was entted to the deductons taken by hm for the
years stated by vrtue of the provsons of secton 204 (a) and (b) of the
Revenue ct of 1921 (42 Stat., 227), whch reads:
S c. 204. (a) That as used n ths secton the term net oss means
ony net osses resutng from the operaton of any trade or busness reguary
carred on by the ta payer (Incudng osses sustaned from the sae or other
dsposton of rea estate, machnery, and other capta assets, used n the
conduct of such trade or busness).
Sue. 204. (b) If for any ta abe year begnnng after December 31, 1920,
t appears upon the producton of evdence satsfactory to the Commssoner
that any ta payer has sustaned a net oss, the amount thereof sha be de-
ducted from the net ncome of the ta payer for the succeedng ta abe year
and f such net oss Is n e cess of the net ncome for such succeedng ta -
abe year, the amount of such e cess sha be aowed as a deducton n comput-
ng the net ncome for the ne t succeedng ta abe year .
rtce 1601 of Treasury Reguatons No. 62 reads:
1601. et osses, defnton and computaton. The term net oss as
used n the statute means ony a net oss resutng from the operaton durng
the ta abe year of any trade or busness reguary carred on by the ta -
payer. Incuded theren are osses from the sae or other dsposton of rea
estate, machnery, and other capta assets used n the conduct of such trade
or busness. In order to be entted to chvm an aowance for a net oss the
ta payer must have suffered an actua net oss n a trade or busness durng
the ta abe year .
The words trade or busness as used n the statute n connecton wth
osses has been hed by the courts to mean and refer to a reguar occupaton
or cang of the ta payer for the purpose of vehood or proft. ( nt v. Stone
Tracy Co., 220 U. S., 107, 171 en v. Commonceath, 188 Mass., 59, 74
N. ., 287.)
Whe t has been recognzed and hed by the courts and by the oard of
Ta ppeas that a person can be engaged In more than one trade or busness
and that t s not necessary that the trade or busness n whch a deducton s
sought forms a ta payer s prncpa trade or busness, t s requred that hs
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
204, rt. 1601.
304
actvtes sha be such that they may of themseves be regarded as an occupa-
ton or busness. snge soated actvty or transacton Is not suffcent to
consttute a busness or trade. ( . . arrngton, 1 . T. ., 11 rdon
Pabst, G . T. ., 843 arry . vtman, 7 . T. ., 500.)
In Mente v. sner (266 ed., 161) the court sad:
We thnk that the anguage osses ncurred In trade s correcty construed
by the Treasury Department as meanng n the actua busness of the ta -
payer as dstngushed from soated transacton. If t had been Intended to
permt a osses to be deducted It woud have been easy to say so. Some
effect must be gven to the words n trade.
The pantff contends that asde from foowng hs professon as physcan
and surgeon he was aso a broker and captast, and that the oss sustaned
n the purchase of the shares of stock n the Weatherford Mng Co. resuted
from hs actvtes n such avocaton.
Secton 204 (a) and (b) of the Revenue ct of 1921 provdes that a oss,
In order to be deductbe as a net oss, must not ony have been Incurred
from the operaton of a trade or busness, but from a trade or busness
reguary carred on by the ta payer.
Under the rue that a trade or busness reguary carred on must be hed to
mean a vocaton and not occasona or soated transactons, we are of the
opnon the oss sustaned by the pantff n the transacton Invovng the pur-
chase of the shares of stock n the Weatherford Mng Co. was not a oss
sustaned from the operaton of a trade or busness reguary carred on by hm
wthn the meanng of the statute.
Durng the year 1920, n whch the pantff purchased the shares of the
Weatherford Mng Co., he had no other transacton of any knd In stocks and
eases, and had no rea estate transacton. The purchase of these shares const-
tuted hs soe and ony transacton as a captast and broker.
or the year 1921 he purchased one-haf nterest n a ease and royaty In
efferson County, Oka., for the sum of 500. e dd not purchase or se any
rea estate durng the year.
Durng the year 1922 he made no purchase or sae of stocks or eases and hs
actvty as a broker and captast was confned to the purchase of a 240-acre
farm n Dewey County, Oka.
or the three years 1920,1921, and 1922, asde from the purchase of the shares
n the Weatherford Mng Co., the pantff engaged In but three transactons
n the purchase and sae of stocks, eases, and rea estate. Ths was the e tent
of hs actvtes n the avocaton of broker and captast and fas far short of
the requrements of secton 204(a), that as used n ths secton the term net
oss means ony net osses resutng from the operaton of any trade or busness
reguary carred on by the ta payer
These transactons were undoubtedy merey the occasona Investment by
the pantff of the ncome derved from hs professona practce as a doctor
and surgeon. They were soated transactons and do not consttute the oper-
aton of a trade or busness reguary carred on by the pantff.
In vew of our decson that the oss sustaned by the pantff dd not resut
from the operaton of a trade or busness reguary carred on by hm, It w
not be necessary for us to dscuss or pass upon the other ponts rased In
the case.
The Commssoner was correct n hs rung denyng the deducton sought by
the pantff and n denyng the cam for refund.
Pantff s petton s dsmssed. It s so ordered.
Green, udge, and ooth, Chef ustce, concur.
Ltteton, udge, dssentng: Whe the facts proved by pantff as to hs
actvtes n connecton wth hs purchases and saes of rea and persona prop-
erty over a perod from 1914 to 1923, ncusve, are not as satsfactory as I
shoud desre, or as mght easy have been estabshed had these matters been
gone nto at the tme the testmony was taken, I am, however, of the opnon
that the facts estabshed n reaton to the pantffs transactons outsde of
hs professon as a physcan are suffcent to |ustfy the concuson that these
transactons and the tme spent by hm n connecton therewth consttuted a
busness reguar v carred on wthn the meanng of secton 204 of the Revenue
ct of 1921 (42 Stat., 227).
It s estabshed that pantff empoyed a cerk and a busness manager to
ook after hs transactons outsde of hs professon as a physcan and surgeon.
or a number of years he had one Caros Sewe, a busness man In hs empoy,
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
305
204, rt. 1601.
to ook after hs busness Interests. Grace Irwn, who was an offcer of the
Cnton ospta and Tranng Schoo, where the pantff was prncpay
engaged as a physcan and surgeon, asssted hm n keepng hs records reatng
to hs busness transactons, and, as Caros Sewe, who had been n the pan-
tff s empoy, had moved to Caforna, L. Tooker was empoyed as pant fTs
busness manager subsequent to the ta abe years here nvoved. Pantff
devoted about one-thrd of hs tme to hs busness matters outsde of hs pro-
fesson. Ths fact s estabshed by the testmony of the pantff and one
other wtness, and t s not contradcted. The pantff devoted the forenoon
of each day amost e cusvey to hs professon as a physcan and surgeon.
I do not thnk that pantff can be regarded as a captast or as a broker,
but I do thnk that hs busness deangs over the years from 1914 to 1923,
ncusve, and the tme devoted thereto, as estabshed by the facts, are suffcent
to consttute a busness enttng hm to the benefts of the net-oss provson of
secton 204 of the Revenue ct of 1921. The transactons whch the pantff
had were not few and soated, athough he may have had ony one or two
transactons n a partcuar year. Such transactons must be vewed n the
ght of a of the pantff s smar busness nterests, the character of those
nterests, and the tme and attenton devoted thereto by hmsef and those em-
poyed by hm. ( ysenbach, 10 . T. ., 716 roke, 17 . T. ., 711 Crane,
17 . T. ., 720 aker, 17 . T. ., 733.) The purpose of secton 204 was to
reeve from the harsh rue that requred one s ta abty to be determned
soey from the happenngs of a 12-month perod. It s a reef provson and
shoud be beray construed. (Marston, 18 . T. ., 658.) Treasury Decson
2090 woud seem to Incude pantff wthn the terms of the defnton of a oss
ncurred n trade as defned by the Treasury Department. In that Treasury
decson t s sad: The term n trade as used n the aw s hed
to mean the trade or trades n whch the person makng the return Is engaged
that Is, n whch he has nvested money otherwse than for the purpose of
beng empoyed n soated transactons and to whch he devotes at east a part
of hs tme and attenton. In Treasury Decson 1989 t s stated: In trade
s synonymous wth busness. usness has been defned as That whch occu-
pes and engages the tme, attenton, and abor of any one for the purposes of
a vehood, proft or mprovement that whch s hs persona concern or n-
terest empoyment, reguar occupaton, but t s not necessary that t shoud
be hs soe occupaton or empoyment. ad the purchase by the pantff n
1920 of the 126 shares of stock of the Weatherford Mng Co. at a cost of
36,250 and the surrender thereof at a oss n that amount n December, 1922,
been the ony transacton had by the pantff over a perod of years outsde
of hs professon, I shoud agree that he woud not be entted to the benefts
of the net oss provson of secton 204. ut even asde from the varous other
deangs In pror and subsequent years, ths was not the ony busness transac-
ton he had outsde of hs professon n 1920, for It appears that n that year
he purchased 65 resdence ots n Cnton, Oka., and sod a porton of them,
and In 1922, when he surrendered the stock n the Weatherford Mng Co.
and sustaned the oss, he aso purchased a 240-acre farm In Dewey County,
Oka., and sod the same n that year. Wth the e cepton of the year 1915, It
appears that he had busness transactons In the purchase or sae, or both pur-
chase and sae, of rea or persona property n every year from 1914 to 1926.
In vew of the facts estabshed wth reference to the number of transactons
engaged In by the pantff, the fact that he devoted about one-thrd of hs tme
to these matters and the fact that he empoyed others to assst hm, I am of
opnon that under the statute he shoud have the beneft of whatever net oss
he sustaned n 1922 as a deducton from hs ncome for that year and that
whatever e cess remans shoud be deducted from hs ncome for 1923.
It s cear from the evdence that pantff dd not sustan the net oss unt
December, 1922, and hs acton n usng a porton of t to reduce hs Income for
1921 was not |ustfed.
Defendant nssts that nasmuch as the pantff has not estabshed a the
essenta facts necessary to a computaton of the amount of the net oss whch
may be used to reduce the net ncome for 1922 and 1923, as requred by the
provsons of secton 204(a) (Schesnger, 5 . T. ., 943 Montgomery, 17
. T. ., 1308), the court shoud dsmss the petton even f t fnds that he was
engaged n a busness reguary carred on wthn the meanng of that secton.
It appears that the Commssoner of Interna Revenue made no e amnaton of
pantff s books and records n connecton wth hs dsaowance of the oss
camed and made no computaton of what the deductbe net oss In 1922 and
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
204, rt. 1602.
306
1923, f there was one, woud be but entry of |udgment as to the amount of the
net oss, If any, can be wthhed to enabe the partes to stpuate the facts
necessary to such determnaton or to enabe the pantff to estabsh the amount
of such oss by proof of the necessary facts.
It s further nssted by the defendant that secton 204 of the Revenue ct of
1921 confdes n the Commssoner of Interna Revenue a dscretonary power In
the aowance of a cam for net osses and that hs acton s not sub|ect to
revew by ths court. There s no mert n ths contenton. The estabshment
of the oss s an ordnary queston of fact of a nature whch the courts con-
stanty revew n suts for the refund of ta es. The provsons of the statute
that If for any ta abe year begnnng after December 31,1920, t appears upon
the producton of evdence satsfactory to the Commssoner that any ta payer
has sustaned a net oss repose n the Commssoner no such dscretonary
power as may not be revewed by the courts. ( oye ave Co. v. Unted States,
69 C. Cs., 129.)
It seems to me, therefore, that the court shoud hod that the pantff s
entted to recover and that entry of |udgment shoud be wthhed to enabe the
partes to submt a computaton of the amount of the deductbe net oss.
rtce 1602: Cam for aowance of net oss.
R NU CT OP 1921.
ocaton of net osses of group of corporatons. (See G. C. M.
8618, page 180.)
rtce 1602: Cam for aowance of net oss. I -45-4831
( so Secton 240, rtce 634.) G. C. M. 8686
R NU CT O 1921.
ffect of the consodated returns provsons of the statute upon
the net oss provsons where the affated status of the severa
corporatons changed durng the ta abe years n queston.
n opnon s requested reatve to the appcaton of the net oss
provsons of the Revenue ct of 1921 n the case of Company
and affated corporatons.
Durng the caendar year 1921 Company , Company , and
Company C were affated by reason of the fact that Company
owned a of the stock of the other two companes. Durng the
same year Company D, Company , Company , and Company G
were affated by reason of the fact that the stock of the atter
three companes was owned by Company D. Ths condton pre-
vaed from anuary 1, 1922, to pr 12, 1922, at whch tme the
stock of Company was acqured by Company D, thereby brngng
Company and ts two subsdares nto the affated group of
whch Company D was the parent corporaton. On uy 14, 1922,
Company was organzed and became a member of the affated
group because a of ts stock was ssued to Company , then a
subsdary of Company D. On October 14, 1922, Company I was
organzed and at the tme of the organzaton t acqured from Com-
pany D a of the stock of the severa subsdary corporatons owned
by that company. Company D was then qudated and ts charter
surrendered. The affated status of the severa corporatons estab-
shed on October 14, 1922, contnued throughout the caendar
year 1923.
Throughout the caendar years 1921 and 1922, the severa corpo-
ratons and/or affated groups above mentoned sustaned net osses.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
307
5204, rt 1602.
or the year 1923 the affated corporatons consdered as a group
derved a consodated net gan. The gans and osses of the severa
corporatons, consdered separatey and by groups, are as foows:
1921.
an. 1 to pr.
12, 1922.
an. 1 to Doc.
31,1922.
1923.
1
2
3
4
I Doars.
79,852.49
60,468. 90
-39. 394. 58
Doars.
-48, 691. 56
26,369. 63
7,923. 59
( pr. 13,1922)
Doars.
-129,032.64
69,879. 51
20,997. 50
I Doars.
Company .
137,163.08
4, 404. 12
-8, 212. 36
cZptSy c-:::::::::::::::::::::::::::::::
-179,715.97
-14.398.34
-67, 761. 50
20.00
80, 886. 69
-157,868.01
-1,979.86
-SO, 117.44
31,877.49
-20.00
-26,251.37
29,823.04
167,591.71
Company ( uy 14, 1922)
-32,309.87
-1,344.17
113.601.06
-12,929.71
Comuauy I (Oct 14.1922)
-229,897. 49
237,577.83
Motb. ffated groups are represented by the arrangement of the doar fgures.
Sgn represents oss.
Sgn represents net Income.
The rea questons presented are reatve to the number of con-
sodated returns to be fed for the years here n queston and the
proper appcaton of the net oss provsons of the Revenue ct
of 1921 (secton 204) to the stuaton here presented. Wth respect
to the number of consodated returns to be fed, where a change n
the number of consodated returns occurs, artce 634 of Regua-
tons 62, as amended by Treasury Decson 4023 (C. . I-1, 259),
provdes n part as foows:
Where there are more than two corporatons affated at the begnnng of the
ta abe year, and due to a change In stock ownershp or contro the affated
status of one or more Is termnated, but there reman at east two corporatons
affated durng the entre year, the parent or prncpa corporaton shoud fe
a consodated return for the entre year, e cudng from Its return the Income
of the corporatons whose affated status Is termnated from the date of the
change In stock ownershp or contro or where two or more corporatons are
affated at the begnnng of the ta abe year, and through change In stock
ownershp or contro addtona corporatons become affated, the parent
or prncpa corporaton shoud fe a consodated return and ncude the
ncome of such corporatons from the date of change of stock ownershp or
contro. In ether case, the subsdary or subordnate corporaton whose
status s changed durng the ta abe year shoud make a separate return for
that part of the ta abe year durng whch t was outsde of the affated group.
The queston of whether a new consodated return s requred
where an aready e stng affated group of three or more corpora-
tons acqures a new member or where one of the affated corpora-
tons drops out durng the course of the year has been the sub|ect of
consderaton by the courts. In Swft Go. v. Unted States (38
ed. (2d), 365, at page 375) the Court of Cams stated:
In ths connecton t ought to be stated that we thnk a proper construc-
ton of secton 240 of the Revenue ct of 1018 (40 Stat., 1082), wth reference
to consodated returns. Is that If there s an affated group that contnues
throughout the ta abe year and the separaton from the group of one of Its
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
204, rt. 1602.
308
members durng the year, or the addton to the group of a new member durng
the year, does not end the ta abe year of the consodated group for the purpose
of the determnaton of the consodated net Income and nvested capta
for the computaton of the ncome and profts ta , that a consodated return
for the caendar year or the fsca year, as the case may be, shoud be fed
by the consodated group Incudng the ncome and nvested capta of the
corporaton whch became separated, or was added to the group durng the
year to the date of the separaton, or the addton, as the case may be. The
consodated group, as such, s not a ta payer but a ta -computng unt, an
the corporatons whch are members of the affated group for the year, or
became members durng the year, ose ther separate dentty whe so affated
ony for the purpose of computaton of the ta upon one ncome and one
nvested capta whch Is composed of the ncome and Invested capta of
such corporatons combned, but, when It comes to the assessment and coec-
ton of the ta so computed, t s assessed aganst and coected from the
severa corporatons consttutng the affated group, n proporton to the net
Income propery assgnabe to each, uness there s an agreement among them
as to a dfferent apportonment.
In Sweets Co. of merca, Inc., v. Commssoner (40 ed. (2d),
436) the Crcut Court of ppeas for the Second Crcut used the
foowng anguage:
It s true that In Swft Co. v. Unted States, supra, the parent or prn-
cpa corporaton contnued the same and the new member whch was added
for a part of the ta abe year, was a subsdary whe n the case at
bar t may perhaps be sad that the addton of the rgna corporaton sub-
sttuted a new parent company, athough the New York corporaton (the
parent of Lance Cough Drop Co.) contnued n the same reaton to It
as before. The affaton between these two companes contnued unt ther
merger, and we can see no reason why ther ta shoud not be computed upon
a consodated return for ths entre perod, whether the addtona member
whch |oned the group for part of the perod be a parent or a subsdary
company.
In ths connecton see aso Genera Counse s Memorandum 8132
(C. . I -1, 287).
On the bass of the foregong, t s evdent that two consodated
returns were requred for the year 1922 (the ony year before ths
offce n whch the number of affated corporatons changed): (1)
consodated return for the perod from anuary 1, 1922, to pr
12, 1922, ncusve, n whch the ncome or osses of Companes ,
, and C shoud have been reported (2) a consodated return for
the perod from anuary 1 to December 31, 1922, ncusve, n whch
shoud be ncuded the entre ncome or osses of Companes D, ,
, and G for that perod. Ths return shoud aso have ncuded
the ncome of Companes , , and C from pr 13, 1922, to De-
cember 31, 1922, the ncome of Company from uy 14, 1922, the
date of ts organzaton, to December 31, 1922, and the ncome of
Company I from October 14, 1922, the date of ts organzaton, to
December 31, 1922.
It therefore appears that for the entre caendar year 1921 a con-
sodated return shoud have been fed by each of the two affated
groups e stng n that year, two consodated returns for the two
groups n 1922, as above ndcated, and one consodated return for
the entre caendar year 1923, n whch the ncome or osses of a the
corporatons shoud have been reported.
The more dffcut queston to be decded s n connecton wth the
appcaton of secton 204, the net oss provson of the Revenue ct
of 1921, to the stuaton here presented.
It shoud be noted at the outset that the perod from anuary 1
to pr 12,1922, shoud be treated as a ta abe year for the purposes
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
309
204, rt. 1602.
of secton 204 of the Revenue ct of 1921, so far as Companes ,
, and C are concerned. The perod from pr 13, 1922, to Decem-
ber 31, 1922 shoud aso be treated as a ta abe year for the pur-
fose of secton 204 so far as these three companes are concerned,
n ths connecton see Pennsyvana Chocoate Co. v. Leweyn (27
ed. (2d), 762). (See aso Pennsyvana ectrc Stee Castng Co.
v. Commssoner, 20 . T. ., 602.)
In Swft Co. v. Unted States, supra, and Sweets Co. of merca,
Inc., v. Commssoner, supra, the effect of secton 240 was consdered
n connecton wth the appcaton of secton 204 of the Revenue ct
of 1918. In Genera Counse s Memorandum 8132, supra, the decson
of the Court of Cams n the Swft case and the decson of the Cr-
cut Court of ppeas n the Sweefs company case were apped to a
smar stuaton arsng under the Revenue ct of 1921. ccordngy,
the two court decsons above referred to are to be treated as bndng
on the ureau not ony under the Revenue ct of 1918 but aso under
the Revenue ct of 1921. In Swft Co. v. Unted States, the
Court of Cams used the foowng anguage:
It mght be argued that the poston we have taken heren, as to the sepa-
rateness of each member of the affated group as a ta payer, s not consstent
when we refuse to gve to one member of the affated group, who sustaned
a net ass n 1919, the beneft of ths net oss as a deducton from 1918 ncome
when the affated group In 1919, when combned, had a consodated net
ncome. The answer to ths s that n such a case, for the purpose of compu-
taton, secton 240 s a mtaton of secton 204 and that, n the computaton
under secton 240, osses of one company must be offset aganst the ncome of
the other companes before t can be determned whether there Is a net oss
of any company n 1919 whch may be apped aganst ts ncome for 1918.
Obvousy, f ths were not done, the net oss whch had been used to offset the
Income of the other companes In the consodated group woud be aowed
agan to reduce the Income of the company whch sustaned the oss when ap-
pyng It to the ncome of the pror year, and we thnk Congress dd not ntend
a doube deducton of ths character.
ppyng the prncpes heren announced, that when deductng a consodated
net oss for 1919 from a consodated net Income for 1918, the separate dentty
of each corporaton whch was a member of the affated group must be kept
n mnd, the e ampe set forth n a footnote w ustrate the method whch,
In our opnon, shoud be used In appyng a consodated net oss for 1919
aganst the consodated net ncome for 1918.
The case of the pantff now before us s somewhat compcated by reason
of the fact that the partes have stpuated ony the tota consodated
net ncome for 1918, and the tota consodated net oss for 1919, and the refund
to whch the pantff and ts affated corporatons woud be entted by the
appcaton of ths net oss for 1919 to the net ncome for 1918 as apped by
the Commssoner, and, further, by the fact that there was an agreement be-
tween the corporatons as to the aocaton of the ta , but we w frst appy
the foregong prncpes to the aocaton of the ta to the severa affated
corporatons on the bass of the net ncome assgnabe to each. In the frst
pace, the Unon Meat Co., whch became a member of the affated group
on March 21. 1919, whch membershp was ended on une 2, 1919 (referred
to n the e ampe as Corporaton ), shoud be ncuded n determnng the
consodated net oss for 1919, and ts oss determned n the manner ndcated
n the e ampe herenbefore gven. Of course ths net oss w not be used
n the consodated computaton for 1918 for the reason that ths corpora-
ton was not a member of the 1918 group, but t w serve to reduce the
amount aocabe to the other companes.
In the ne t pace, Lbby, McNe Lbby, whch was a member of the
affated group for 11 months n 1918 (referred to n the e ampe as Cor-
poraton D), shoud aso be ncuded n the 1918 computaton that s. the
consodated net ncome as heretofore determned and agreed upon by the
partes, before the appcaton of the 1919 net osses, w be unchanged.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
204, rt. 1602.
310
The ne t step s to determne the net osses of the companes n 1919,
whch are to be apped n the deducton of ther respectve net ncomes In
1918. In 1918 the consodated net ncome of a the companes
was appro matey 42,000,000, and the consodated net oss for
1919 was 23,000,000. The pantffs net Income for 1918 was 22,000,000,
and Its net oss for 1919 was 29,000,000. The tota net oss In 1919, before
beng offset by ncome from the other companes, was 32,000,000. The net
oss of the pantff whch t coud use n reducton of ts 1918 net ncome
woud be 29/32 of 23,000,000, or a tte ess than 21,000,000. Ths 21,000,000
net oss coud be used n reducton of the 22,000,000 net ncome of the pantff,
and eave a net ncome of 1,000,000 for 1918. In the same way, the other
companes havng a net oss n 1919 woud have the aowabe net oss deter-
mned and apped aganst ther respectve net ncomes for 1918. Of course,
where a net oss occurred n 1919 and the correspondng company aso had
a oss n 1918, the aowabe 1919 net oss woud not be used n reducton of the
consodated net Income for 1918. nd, smary, no net oss for 1919 shoud
be cnrred back to 1918 n e cess of a partcuar company s net Income for
1918. The e cess woud go to 1920. Lkewse, the aowabe net osses of the
other companes woud be determned and apped n a manner smar to
that shown n the e ampe herenbefore frst gven, and, from the net
oss shown as to a members of the group, the consodated net ncome of
the group woud bo determned. The ta woud then be computed on a
consodated bass.
The e ampe referred to n the above-quoted anguage reads n
part as foows:
In ths e ampe Corporaton D n 1918 drops out n that year, as dd Lbby,
McNe Lbby n the case before us, and Corporaton n 1919 came nto
the group and was separated therefrom n 1919, as was the Unon Meat Co.
n ths sut.
1918.
Net ncome 5,000
Net ncome 8,000
C Net ncome 3,000
D Net ncome 4,000
Consodated net Income 20,000
. 1919.
Net oss 6,000
Net ncome 2,000
C Net oss 2,000
Net oss 2,000
Consodated net oss 8,000
The resuts, as shown above, are of course determned on a consodated bass
that s, after the emnaton of ntercompany transactons pertanng to the
varous members of the groups.
It w be noted, frst, that of the companes n the group for 1919, Corpora-
tons , C, and have sustaned net osses, whereas Corporaton has reazed
a net ncome. Were t not for the fact that the companes are affated, each
coud appy ts net oss aganst ts net ncome for 1918, and the respectve
e cess, f any, woud be carred forward to 1920 but snce the companes are
affated n 1919, and a part of the osses have aready been apped as an offset
or n reducton of the ncome of another member of the group, It s obvous
that t woud be mproper to aow these corporatons to appy the entre
amount of ther net osses aganst ther respectve net ncomes of the precedng
perod the ony amount to be apped s the consodated net oss or e cess of
ndvdua osses for 1919, over ndvdua ncomes for 1919. To treat the matter
otherwse woud be to permt doube deductons to the e tent of the Income of
the company whch had an ncome for 1919.
Secondy, Corporaton D was a member of the consodated group for 1918,
and had a net ncome, but was not n the affated group for 1919, whereas
Corporaton was a member of the affated group n 1919, and had a net oss,
but t was not a member of the affaton n 1918. What consderaton shoud
therefore be gven to these companes rst, what consderaton shoud be
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
311
2C4, rt. 1602.
gven to Corporaton , and what dsposton shoud be made of the net oss
uffered by It In 1919 It was a member of the affated group In 1919, and
therefore a part of the consodated net oss may propery be attrbuted to It.
That Is, of the companes In the group for 1919, Corporaton had a net
ncome of 2,000, and the other three companes had net osses whch e tn-
gushed s net Income and produced a consodated net oss. Snce, from what
has been heretofore sad, an Indvdua member of the group In 1919 can not
get the beneft of Its Indvdua net oss suffered n 1919 as a deducton from ts
1918 net Income, uness there Is a consodated net oss for 1919, the conso-
dated net oss must frst be determned for the entre affated group In 1919.
In the e ampe gven above, ths shows a consodated net oss of 8,000, whch
may be sad to have resuted from the net osses of Corporatons , C, and
In the respectve amounts of 6,000, 2,000, and 2,000. Snce each may be sad
to have contrbuted to the e tngushment of Corporaton s Income, the
consodated net oss shoud be apportoned In the rato of osses suffered, or
60 per cent to , 20 per cent to C, and 20 per cent to . On ths bass, the
net osses of the respectve companes whch may be carred back to 1918 and
aowed as deductons to the respectve companes are, 4,800 C 1,600 and
1,600. Corporaton s net oss woud then be used to reduce Its net Income
of 5,000 for 1918, and Corporaton C s net oss to reduce ts net ncome of 3,000
n 1918 thus showng ther reduced ncomes as 200 and 1,400, respectvey.
If the net oss of ether of the companes had e ceeded Its ncome, then the e -
cess woud not have been aowabe as a deducton n 1918, but woud have been
carred forward and aowed as a deducton from that partcuar company s net
Income n 1920. On ths theory, Corporaton s net oss woud, of course, not
affect the consodated net ncome computaton n 1918, for the reason that It
was not a member of the affated group, and the company dd not e st n
the group to whch the net oss mght be apped. It woud go to Corporaton
In whatever capacty It e sted n 1918. s a resut of the foregong, the
appcaton of the consodated net oss for 1919 aganst the consodated net
Income for 1918, shown n the e ampe gven, produces the foowng resut
In 1918:
Net Income 200
Net Income 8,000
C Net Income 1,400
D Net ncome 4,000
Consodated net Income 13,600
In connecton wth ths e ampe, t s noted that n Genera Coun-
se s Memorandum 8132, supra, the foowng statement s made:
Due to the fact that the Court of Cams n Its decson gave a detaed e -
ampe of how the concusons reached n the decson shoud be apped, It s
not deemed necessary that ths offce go Into a detaed dscusson of the app-
caton of the decson to the present case. owever, n appyng the e ampe
to the facts In the nstant case t shoud be noted that the court assumed that
each of the corporatons affated n 1918 (comparabe to 1923 n the nstant
case) had a net Income. If one of the members had sustaned a oss, thereby
reducng the consodated net ncome, t woud foUow from the court s reason-
ng that the net ncome of each corporaton whch had a net Income for 1923
must be proportonatey reduced before deductng the net oss attrbutabe to
that corporaton for 1922. It deveoped In the Swft case that severa of the
subsdary corporatons sustaned osses In 1918. In the fna stpuaton upon
whch |udgment was based, the procedure ndcated above was foowed and
the stpuaton was accepted by the court.
The appcaton of the Swft Co. decson, together wth the
e ampe theren set out, to the crcumstances of the nstant case pro-
duces the resuts herenafter noted n connecton wth the severa
companes.
or the year 1921 t s evdent that a of the companes n both
affated groups sustaned net osses and that the consodated net
osses are but the sum of the separate osses. Under such crcum-
stances the aocaton of the consodated net oss to the separate
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
204, rt. 1602.
312
companes s made by assgnng to each company the separate oss
suffered by t. ccordngy, each company s entted to carry for-
ward ts separate oss n 921 and deduct the same from ts propor-
tonate part of the consodated net ncome, f any, for the succeedng
and ne t succeedng ta abe years.
In connecton wth the 1921 net oss of Company , t appears
that n the succeedng ta abe year of Company as determned
under the Pennsyvana Chocoate Co. case, supra, and as above nd-
cated, the consodated group of whch Company was a member
sustaned a net oss n the sum of 14,398.34a doars, a of whch
was attrbutabe to Company , snce the oss sustaned by t for
ths perod was the ony oss sustaned and was n e cess of the
ncome of the other two companes. s a consequence, there was no
ncome aganst whch to appy the 1921 net oss of Company n
the sum 79,852.49a doars. The same s true of the ne t succeedng
ta abe year, as above ndcated, snce t appears that the conso-
dated group of whch Company was a member for that year suf-
fered a net oss of 229,897.49a doars, and that Company aso
sustaned a oss for ths perod.
In the case of Company , ts 1921 net oss of 00,468.90a doars
can not be carred forward aganst ncome for the two succeedng
ta abe years, because, whe that company, separatey consdered,
derved net ncome for those two years n an amount more than suf-
fcent to absorb the net oss, separatey consdered, for 1921| the
osses of the other companes wth whch Company was affated
were more than suffcent to offset the ncome of Company . In
other words, as the Court of Cams sad, for the purpose of compu-
taton, secton 240 s a mtaton of secton 204 and n
the computaton under secton 240, osses of one company must be
offset aganst the ncome of the other companes before t can be
determned whether there s a net oss of any company .
The same treatment shoud be afforded Company C wth respect
to ts 1921 oss.
In the case of Company D, ts 1921 oss of 67,761.50a doars can
not be carred forward aganst 1922 ncome because the consodated
group of whch t was a member n 1922 sustaned a consodated
net oss and furthermore that company, consdered separatey, aso
sustaned a oss for that year. Obvousy Company D s 1921 oss
can not be carred forward to the ne t succeedng ta abe year
(1923), because the e stence of the company termnated on October
14, 1922.
In the case of Company , ts 1921 net oss n the sum of 20as
doars can not be carred forward aganst consodated net ncome
ether for 1922 or 1923. In 1922 the affated group of whch t
was a member sustaned a consodated net oss, and whe the af-
fated group of whch t was a member n 1923 derved conso-
dated net ncome, no part of such consodated net ncome was
attrbutabe to Company , snce that company, consdered sep-
aratey, sustaned a oss for that year. The same consderatons
appy to the 1921 oss of Company , whch company s n e acty
the same poston as Company .
In the case of Company G, ts 1921 oss of 19,223.62a doars
can not be carred forward aganst the 1922 ncome of that com-
pany, separatey computed, because n that year the affated group
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
313
204, rt. 1602.
of whch t was a member sustaned a net oss and the separate n-
come of Company G for 1922 was used as an offset aganst the osses
of the other companes n the affated group. In ths respect t
s n the same poston as Companes and C, supra. Company
G s 1921 oss may. however, be carred forward aganst the propor-
tonate part of the 1923 consodated net ncome attrbutabe to
that company. The sum of the separate ncomes of the companes
havng an ncome n 1923, and wthout ad|ustment of the osses
of the other companes, s 284,991.27a) doars. The separate n-
come of Company G s 29,823.04a| doars. The consodated net
ncome s 237,577.85a doars, whch fgure s determned by deduct-
ng from 284,991.27a doars, the sum of the osses of the severa
companes, or 47|413.44a doars. The proportonate part of the
consodated net ncome attrbutabe to Company G may be com-
puted n the foowng manner:
The 1921 oss shoud therefore be deducted from 23,121.78a do-
ars, the proportonate part of the 1923 consodated net ncome
attrbutabe to Company G.
In the case of Company reatve to carryng forward the oss
sustaned by t durng ts frst consodated return perod n 1922,
. e., ts ta abe year from anuary 1, 1922, to pr 12, 1922, t ap-
pears that Company was the ony company n that affated group
whch sustaned a oss, and as a consequence the consodated net
oss s a attrbutabe to Company and may be carred forward
by t. The consodated net oss s 14,398.34a doars. Ths oss
can not be carred forward aganst ncome for the ne t ta abe
year, because the affated group of whch Company was a mem-
ber for the ne t ta abe year sustaned a consodated net oss and
Company , separatey consdered, aso sustaned a oss durng
that year. The oss may, however, be carred forward and apped
trbutabe to Company for the ne t succeedng ta abe year (1923).
The proportonate part of the 1923 consodated net ncome at-
trbutabe to Company shoud be computed n the same manner
as was used n connecton wth Company G, supra.
Snce Companes and C, separatey consdered, derved ncome
n the frst consodated return perod n 1922, those companes have
no osses to carry forward. The same s true of these two companes
for the ne t consodated return perod for 1922, and aso for Com-
pany G for the year 1922.
In case of Company , reatve to carryng forward the oss sus-
taned by t for the ne t consodated return perod, . e., the perod
from pr 13, 1922, to December 31, 1922, the oss sustaned by
Company n the sum of 129,032.G4a) doars was offset n part by
the ncome of some of the other companes wth whch t was aff-
ated durng that perod. ccordngy, the oss of Company to be
carred forward s not the fu oss sustaned by that company but
s a proportonate part of the consodated net oss computed n
substantay the same manner as Company s proportonate part
of the consodated net ncome before 1923 was computed. The oss
85942 31 21
29,823.04
284,991.27
237,577.83 23,121.78
consodated net ncome at-
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
212, rt. 23.
314
to be carred forward when determned, shoud, of course, be apped
aganst the e cess of the proportonate part of ts consodated net
ncome attrbutabe to Company for 1923 after ad|ustment for the
net oss whch had prevousy been carred forward from the pre-
cedng ta abe year. The osses of the remanng companes for
1922 are smar to one or more of the nstances above set out and t
s beeved that they may be ready dsposed of on the bases theren
stated.
The stuaton, then, may be summarzed as foows: Company G
s the ony company whch can carry forward ts 1921 oss. Com-
pany haa two osses n ts two ta abe years occurrng n 1922,
whch t may carry forward aganst 1923 ncome. Company aso
has a oss n 1922 whch may be carred forward aganst 1923 n-
come. None of the other companes have any osses n 1921 or 1922
that can be carred forward aganst ether 1922 or 1923 ncome.
It s therefore the opnon of ths offce that the net oss provsons
of the Revenue ct of 1921 shoud be apped n accordance wth
the foregong opnon.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
P RT II. INDI IDU LS.
S CTION 212. N T INCOM O INDI IDU LS
D IN D.
rtce 23: ases of computaton. I -41-4798
Ct. D. 235
ncome ta revenue act of 1918 decson of court.
1. Deducton Interest ccrua ass.
ta payer keepng ts accounts on the accrua bass Is not
entted to deduct n 1920 nterest pad In that year whch
accrued n pror years on Its obgatons, nor Is It entted to deduct
In 1919 nterest that accrued In pror years on obgatons the
Interest on whch Is due and payabe on ther maturty n 1919.
2. Decson ffrmed.
The decson of the oard of Ta ppeas (15 . T. ., 948)
affrmed.
Unted States Crcut Court of ppeas for the fth Crcut. No. 5754
tter d dor Lumber Co., pettoner, v. Commssoner of Interna Revenue,
respondent.
Petton for revew of decson of Unted States oard of Ta ppeas, Dstrct of Te as.
efore ryan and oster, Crcut udges, and Grubb, Dstrct udge.
pr 21, 1930.
opnon.
Grubb, Dstrct udge: Ths s an appea from the oard of Ta ppeas,
and presents a snge queston, whether pettoner (the ta payer), usng the
accrua method of computng net Income, Is entted to deduct, n 1920, Interest
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
315
212, rt. 23.
pad durng that year whch accrued In pror years on Its obgatons. The
facts are not n dspute. Pettoner, a Te as corporaton, In 1914 gave two
seres of notes, secured by deeds of trust on ts corporate property. One seres
conssted of 10 notes of 5,000 each, payabe three and a haf years after date,
wth Interest payabe at dfferent dates, a fang due n 1917. Part of the
Interest had been pad In cash, the baance and the prncpa was qudated
In 1920 by a new seres of notes. The second seres conssted of two, e ecuted
pr 1, 1914, due fve years after date, the nterest thereon due at maturty,
on pr 1, 1919. On pr 1, 1920, both prncpa and Interest were qudated
by new notes. Pettoner kept ts books of account and made ts Income ta
returns upon the accrua bass, whch fary refected ts net ncome. In Its
return for 1919 t camed as a deducton on account of nterest pad or accrued
22,982.36. In Its return for 1920 t camed as a deducton for nterest
104,806.56. It was aowed a deducton for accrued nterest n 1919 n the
amount of 30,611.14. Ths created a net oss for 1919 of 9,943.95, whch was
aowed as a deducton from gross ncome of pettoner n 1920, pettoner
havng shown a oss n ts 1918 return. or 1920 t was aowed as a deduc-
ton for nterest 48,862.54, and dsaowed 55,944.02, whch was nterest on
ts ndebtedness ncurred n pror years to 1920 and pad n 1920. It s from
the dsaowance of ths amount that t appeas. Pettoner contends that the
Interest for pror years s deductbe In 1920 when pad, or, at east, that the
nterest, due on the two notes n pr, 1919, was accrued and deductbe n
that year, whch woud have ncreased the oss n that year, and have been
deductbe as such In 1920. Respondent s poston s that, as pettoner kept
ts books and rendered ts returns on the accrua bass, the nterest s deduct-
be ony n the years n whch t accrued as an e pense of the busness, and
coud not be accumuated for pror years and deducted from ncome n 1920,
when pad.
Secton 234(a)2 of the Revenue ct of 1918, the appcabe statute, provdes
for the deducton of nterest on the ta payer s ndebtedness wth certan e -
ceptons, not pertnent. rtce 3 of Treasury Reguatons 45 provdes that each
year s return both as to gross ncome and deductons sha be compete n tsef
that e penses, abtes, or defct of one year can not be used to reduce ncome
of a subsequent year that a ta payer makng a return on an accrua bass has
the rght to deduct a authorzed aowances, whether pad n cash or set up
as a abty, and that If he does not wthn any year pay or accrue any of
hs e penses, nterest, ta es, or other charges, and makes no deducton therefor,
he can not deduct from the ncome of the ne t or any subsequent year any
amounts then pad n qudaton of the prevous year s abtes. The regua-
ton has been carred forward under subsequent Revenue cts, and the Treas-
ury decson (No. 2433), anaogous to t, has been approved by the Supreme
Court n the ease of Unted States v. nderson (269 U. S., 422 T. D. 3S39,
O. . -, 179 ). In that case the Supreme Court hed that a ta payer who
made hs return on the accrua bass coud deduct a muntons ta ony n the
year durng whch the busness was done on whch the ta was mposed, though
t was not pad unt the ne t year. The Supreme Court sad (page 440) :
It was to enabe ta payers to keep ther books and make ther returns ac-
cordng to scentfc accountng prncpes by chargng aganst ncome earned
durng the ta abe perod the e penses ncurred and propery attrbutabe to
the process of earnng ncome durng that perod. The appeee s
true ncome for the year 1916 coud not have been determned wthout deductng
from ts gross ncome for the year the tota oss and e penses attrbutabe to
the producton of that ncome durng the year. The reserve for muntons
ta es set up on Its books for 1916 must have been deducted from recevabes,
for muntons sod n that year before the net resuts of the operaton for the
year coud be ascertaned. The ta payer beng unabe to make ts return on
a strct recepts and dsbursements bass, and not havng attempted to do so,
coud not have comped wth secton 13(d) and Treasury Decson 2433 by de-
ductng ether accruas of nterest or e penses aone wthout the other, or
wthout deductng other reserves made on ts books to meet abtes, such as
muntons ta , ncurred n the process of creatng ncome.
See aso Unted States v. Mtche (271 U. S., 9 T. D. 3865, C. . -, 233 )
mercan State Co. v. Unted States (274 U. S., 99). We thnk these cases and
the reguatons ceary estabsh the rue that, as to ta payers makng ther
returns on the accrua bass, deductons attrbutabe to the busness of a par-
tcuar year must be apped aganst the ncome they hep to create from the
busness of that year, and not aganst that of a subsequent year In whch
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
213(a), rt. 31.
316
payment was made. The cases reed upon by pettoner are cases In whch
abty was contngent and not f ed and certan, and cases n whch It dd
not appear that the ta payer made hs returns upon the accrua bass, and are
dfferent from the cases cted, and from the facts of the Instant case.
In ths case the pettoner kept ts hooks and made ts returns on the accrua
bass, whch refected true ncome. The nterest on the notes was a f ed a-
bty of a defnte amount, ascertanabe at the end of each year. Whe the
nterest was not pad annuay, and was not due annuay, t was earned
annuay. ach year s nterest was rataby earned by the use of the prncpa
sum n the busness of the ta payer durng the year of ts use. It was an
e pense of creatng the Income for each separate year, and the net Income of
the busness for a partcuar year coud be ascertaned ony by deductng from
gross ncome the tem of annua nterest. The year of the payment of the
nterest and the year when the Interest matured have no mportance where the
accountng s on the accrua bass. Scentfc accountng requres the deducton
to be made from the gross ncome, whch the Item of e pense heped to create,
and that requres the deducton for annua Interest to be made from the gross
ncome of the year In whch the prncpa served to create t.
Under the Revenue ct of 1918, and the Treasury reguatons, as construed
by the decsons cted, we thnk the pettoner was not entted to deduct from
ts gross ncome for the ta year 1920 any accumuated Interest for pror
years, nor any Interest maturng n pr, 1919, and whch was pad n 1920,
but ony such Interest as accrued durng the ta year of 1920 on the ndebted-
ness evdenced by the two seres of notes. If ths Is not permssbe under
the Revenue ct of 1918, the fact, If t be a fact, that the pettoner coud not
have accrued nterest annuay and rataby under earer Revenue cts, before
t was due and pad, Is of no ava to hm n ths case, e cept as an unconvnc-
ng argument aganst the concuson we have arrved at, and whch eads to
an affrmance of the order appeaed from.
ffrmed.
S CTION 213(a). GROSS INCOM D IN D:
INCLUSIONS.
btce 31: What ncuded n gross ncome. I -27-4685
G. C. M. 8066
R NU CT O 1021 ND PRIOR R NU CTS.
The aotted and nherted surpus ands of mnor aottees and
mnor hers of aottees of the Creek Indan Trbe of ess than haf
or of no Indan bood, ncudng freedmen, have been ta abe from
and after 60 days from the passage of the ct of May 27, 1908
(85 Stat., 312) a aotted and nherted homesteads remaned
nonta abe durng the contnuance of the 21-year perod from the
date of the orgna homestead deed, e cept that In the case of
ssue born after March 4, 1900, to a Creek aottee of haf or more
Indan bood such homesteads are e empted for a further perod
unt the remova of restrctons by apse of tme, death, or the
net of the Secretary of the Interor, provded, however, that e emp-
ton ceases upon the passage of the and out of Creek Indan owner-
shp. The ct of May 27, 1908, sub|ectng the persons and prop-
erty of mnor aottees and mnor hers of nottees of ess than
haf or of no Indan bood to the |ursdcton of the oca probate
courts, wth the provso that mnorty shoud contnue to the age
of 21 years for maes and to the age of 18 years for femaes, dd not
operate as a restrcton upon the aenaton of the mnors aotted
or Inherted ands.
The opnon of ths offce s requested whether mnor members of
the Creek Trbe of Indans of ess than haf or of no Indan bood
are durng mnorty ta abe on ncome derved from the foowng
casses of ands owned by them:
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
317
213(a), rt. 31.
(a) omesteads aotted drecty to them
(b) Surpus ands so aotted and
(c) Lands nherted from the orgna aottees.
The ands n queston were aotted n severaty out of the ands of
the Creek Trbe of Indans, one of the ve Cvzed Trbes, under
the authorty of the ct of Congress of March 1,1901 (31 Stat., 861),
as suppemented by the ct of une 30, 1902 (32 Stat., 500). ach
member of the trbe was entted to an aotment of 40 acres, to be
known as a homestead, and a surpus aotment of 120 acres, more
or ess. Secton 7 of the orgna ct and secton 16 of the suppe-
menta ct are substantay dentca and contan the foowng pro-
vson drecty appcabe to homestead aotments:
ach ctzen sha seect from hs aotment 40 acres of and, or a quarter of
a quarter secton, ns a homestead, whch sha be and reman nonta abe, In-
aenabe, and free from any ncumbrance whatever for 21 years from the date
of the deed therefor, and a separate deed sha be ssued to each aottee for hs
homestead, n whch ths condton sha appear.
The surpus and of a aottees, generay, was restrcted as to
aenaton, e cept wth the approva of the Secretary of the Interor,
for a perod of fve years after the approva of the suppementa
ct ( une 30, 1902). No provson was orgnay made for the
e empton from ta aton of surpus ands. Congress ater provded,
n secton 19 of the ct of pr 26, 1906 (34 Stat., 137, 144), as
That a ands upon whch restrctons are removed sha be sub-
|ect to ta aton, and the other ands sha be e empt from ta aton as ong
as the tte remans n the orgna aottee.
Wth partcuar reference to mnors, t was provded n secton 4
of the orgna ct that otments for any mnor sha
not be sod durng hs mnorty. Ths referred to aotments made
n the name of the mnor. Wth respect to nherted ands, t was
provded by secton 22 of the ct of 1906 that the nterests of mnor
hers mght be sod by the guardan on the order of the proper pro-
bate court. It was provded n the case of fu-bood Indan hers
ony that conveyances of nherted ands shoud be sub|ect to the
approva of the Secretary of the Interor.
In a genera way, wthout pontng out further refnements, the
foregong are the pertnent provsons of aw to be referred to n
order to show for hstorca purposes the stuaton whch e sted
pror to the ct of Congress of May 27, 1908. The orgna home-
strcted as to aenaton and were e empt from ta aton on that ac-
count, asde from whatever effect was to be gven, as to homesteads,
to the specfc nonta abty provson for 21 years from the dates of
the homestead deeds. Inherted homestead ands of mnor hers of
ess than fu Indan bood, though sub|ect to sae on order of the
froper probate court wthout the approva of the Secretary of the
nteror, woud appear to have contnued nonta abe for the reman-
der of the 21-year perod specfed n the orgna homestead deed,
whe the nherted surpus ands of such mnor hers woud appear
to have become ta abe on the passage of the tte from the orgna
aottees n accordance wth secton 19 of the 1906 ct as above
quoted.
foows:
stead and surpus aotments
were re-
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
213(a), rt. 31.
318
The ct of May 27, 1908, s entted n ct for the remova of
restrctons from part of the ands of aottees of the ve Cvzed
Trbes, and for other purposes. It provdes n secton 1:
That from and after 60 days from the date of ths ct the stntns of the ands
aotted heretofore or hereafter to aottees of the ve Cvzed Trbes sha, as
regards restrctons on aenaton or ncumbrance, be as foows: ands,
Incudng homesteads, of sad aottees enroed us ntermarred whtes, aa
freedmen, and as m ed-bood Indans havng ess than haf Indan bood,
ncudng mnors sha be free from a restrctons. Itacs sup-
ped.
Secton 4 of the ct provdes:
That a ands from whch restrctons have been or sha be removed sha be
sub|ect to ta aton and a other cv burdens as though t were the property
of other persons than aottees of the ve Cvzed Trbes: Provded, That
aotted ands sha not be sub|ected, or hed abe, to any form of persona
cam, or demand, aganst the aottees arsng or e stng pror to the remova
of restrctons, other than contracts heretofore e pressy permtted by aw.
It woud seem that the meanng of the term restrctons as used
n secton 4 has drect reference to the use of the term n secton 1
and means restrctons on aenaton or ncumbrance, whch, f the
anguage of secton 1 be taken as t s wrtten, were entrey removed
from a ands of persons of ess than haf Indan bood, or of no
Indan bood, ncudng mnors. ppyng ths constructon, there
can be no doubt that the surpus ands of mnor members of the Creek-
Trbe of ess than haf Indan bood, ncudng freedmen, became
ta abe from and after 60 days from May 27, 1908. s to home-
steads, there can perhaps be no doubt that Congress ntended that
the remova of such restrctons thereon shoud operate to render
them ta abe, but ths was ater found to confct wth the specfc
grant, above quoted, of nonta abe status to such ands by the aot-
ment cts to run for 21 years from the dates of the homestead deeds.
In Choate v. Trapp (224 U. S., 665) the Supreme Court sad, at
pages 673 and 674, that:
The rght to remove the restrcton was n pursuance of the power
under whch Congress coud egsate as to the status of the ward and engthen
or shorten the perod of dsabty. ut the provson that the and shoud
be nonta abe was a property rght, whch Congress undoubtedy had the power
to grant. That rght fuy vested n the Indans.
Under the provsons of the ffth amendment there was no more
power to deprve hm of the e empton than of any other rght n the prop-
erty.
(See aso ngsh v. Rchardson, 224 U. S., 680.)
Therefore, as to the homestead aotments of a Creek aottees of
ess than haf Indan bood, or of no Indan bood, ncudng mnors,
the nonta abe status was hed to run after the ct of 1908 for the
remander of the 21-year perod orgnay f ed n the aotment
cts.
Wth respect to the nherted ands of such mnors of ess than
haf or of no Indan bood: Secton 1 of the ct of May 27, 1908,
removed the restrctons on aenaton of a aotted ands, home-
stead and surpus, of aottees of no Indan bood, or of ess than
haf Indan bood, vng on uy 26, 1908 (. e., 60 days from and
after May 27, 1908), and any such ands as have passed to the hers
of any such aottee, ncudng mnor hers, have passed as unre-
strcted ands. so as to the surpus aotments of a aottees of
haf Indan bood and ess than three-quarters Indan bood, secton
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
319
5213(a), rt. 81.
1 removed a restrctons as to aenaton thereof, and, as a conse-
quence, any such ands as have passed to the hers, ncudng mnors,
of any such aottee kewse have been free from restrctons n ther
hands. other aotted homestead and surpus ands were con-
tnued as restrcted n the ownershp of the orgna aottee unt
pr 26, 1931, uness the restrctons shoud be sooner removed by
the Secretary of the Interor. Secton 9 of the ct provded, how-
ever :
That the death of any aottee of the ve Cvzed Trbes sha operate to
remove a restrctons upon the aenaton of sad aottee s and:
Provded further. That f any member of the ve Cvzed Trbes of one-haf
or more Indan bood sha de eavng ssue survvng, born snce March 4, 1906,
the homestead of such deceased aottee sha reman naenabe, uness re-
strctons aganst aenaton are removed therefrom by the Secretary of the
Interor for the use and support of such ssue, durng ther fe or
ves, unt pr 26, 1931 n the event the ssue herenbefore pro-
vded for de before pr 26, 1931, the and sha then descend to the hers,
accordng to the aws of descent and dstrbuton of the State of Okahoma,
free from a restrctons: Itacs supped.
ccordngy, a nherted surpus ands of mnor hers of aottee3
of the Creek Trbe of ess than haf or of no Indan bood have been
unrestrcted n ther hands, and foowng the foregong constructon
of the term restrctons as used n secton 4 ot the ct such n-
herted surpus ands have been ta abe n ther hands. nherted
homesteads of such mnor hers born on or before March 4,1906, have
been and are unrestrcted, and ths s aso true of a mnor hers born
after March 4, 1906, who are not to be cassfed as the ssue, . e.,
nea descendants, of an aottee of haf or more Indan bood, but
such nherted homesteads, despte such remova of restrctons, must
be consdered to have remaned nonta abe for the remander, f any,
of the 21-year perod from the date of the homestead deed to the
orgna aottee, snce such grant of nonta abty was the grant of a
property rght to the aottee (Choate v. Trapp, supra), or at east so
ong, not e ceedng the remander of such 21-year perod, as such
homestead and remans n the ownershp of Creek Indan nterests.
(Compare nk v. oard of Commssoners, 159 Pac, 470, affd. 248
U. S., 399 Shock v. Sweet, 145 Pac, 388, affd. 245 U. S., 192.) s to
the nherted homesteads passng as restrcted to the ssue born
after March 4,1906, of a Creek aottee of haf or more Indan bood,
such ands have remaned restrcted under the ct of 1908 as to
aenaton, for the use and support of such ssue, unt pr 26, 1931,
uness sooner removed by the Secretary of the Interor or unt the
decease of such ssue, and such ands may be consdered to have re-
maned nonta abe to the e praton of 21 years from the date of the
orgna homestead deed or to the remova of restrctons, whchever
s ater, but not beyond the tme when they sha have passed from
Creek Indan ownershp.
To summarze the foregong nterpretaton of the effect of the ct
of 1908 as to the aotted and nherted ands of mnor aottees and
mnor hers of aottees of the Creek Trbe of ess than haf or of no
Indan bood, t may be sad that: aotted and nherted surpus
ands have been ta abe from and after 60 days from the passage
of such ct | and a aotted and nherted homesteads remaned non-
ta abe durng the contnuance of the 21-year perod from the date
of the orgna homestead deed, e cept that n the case of ssue born
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
5213(a), rt. 31.
320
after March 4,1906, to a Creek aottee of haf or more Indan bood
such homesteads are e empted for a further perod unt the remova
of restrctons by apse of tme, death, or the act of the Secretary of
the Interor, provded, however, that e empton ceases upon the pas-
sage of the and out of Creek Indan ownershp.
On behaf of the ta payers nvoved n the nstant case, who, dur-
ng the ta abe years 1915 to 1921, ncusve, were mnors, and who
were or are of ess than haf Creek Indan bood, or of no Indan
bood (Creek freedmen), t has been urged that ther aotted or
nherted surpus ands dd not become ta abe after the passage of
the ct of 1908, despte the provsons of sectons 1 and 9 of the ct,
for the reason that wthn the meanng of secton 4 restrctons on
ther ands contnued for the perod of ther mnorty by reason of
addtona provsons made n the ct of 1908 affectng mnors of
the ve Cvzed Trbes. ttenton has been drected to the pro-
vsons of sectons 2 and 6 of the 1908 ct, whch w be referred to
heren n reverse order. Secton 6 provdes n part as foows:
That the persons and property of mnor aottees of the ve Cvzed Trbes
sha, e cept as otherwse specfcay provded by aw, be sub|ect to the |urs-
dcton of the probate courts of the State of Okahoma. The Secretary of the
Interor s hereby empowered, under rues and reguatons to be prescrbed
by hm, to appont such oca representatves wthn the State of Okahoma who
sha be ctzens of that State or now domced theren as he may deem neces-
sary to nqure nto and nvestgate the conduct of guardans or curators hav-
ng n charge the estates of such mnors, and whenever such representatve or
representatves of the Secretary of the Interor sha be of opnon that the
estate of any mnor s not beng propery cared for by the guardan or curator,
or that the same s n any manner beng dsspated or wasted or beng permtted
to deterorate In vaue by reason of the neggence or careessness or ncom-
petency of the guardan or curator, sad representatve or representatves of
the Secretary of the Interor sha have power and t sha be ther duty to
report sad matter n fu to the proper probate court and take the necessary
steps to have such matter fuy nvestgated, and go to the further e tent of
prosecutng any necessary remedy, ether cv or crmna, or both, to preserve
the property and protect the nterests of sad mnor aottees and t sha be
the further duty of such representatve or representatves to make fu and
compete re|wrts to the Secretary of the Interor. such reports, ether to
the Secretary of the Interor or to the proper probate court, sha become pubc
records and sub|ect to the nspecton and e amnaton of the pubc, and the
necessary court fees sha be aowed aganst the estates of sad mnors. The
probate courts may, n ther dscreton, appont any such representatve of the
Secretary of (he Interor as guardan or curator for such mnors, wthout fee
or charge.
The remander of secton 6, asde from provsons as to the appro-
praton of necessary funds, has to do prmary wth aottees havng
restrcted ands, restrctons n the sense used theren havng
evdenty the same meanng as n secton 1 of the ct, . e., restrc-
tons havng to do wth the aenaton or ncumbrance drecty
appcabe to ands.
Secton 2 has to do prmary wth rues for the easng of
restrcted ands, the word restrctons agan seemng ceary to
mport the same meanng as n the mmedatey precedng secton 1,
vz, restrctons on aenaton or ncumbrance. Secton 2 s
mportant n consderng the above-quoted provsons of secton 6 n
that ts thrd provso contans the defnton that
the term mnor or mnors, as used n ths ct, sha ncude a
maes under the age of 21 years and a femaes under the age of 18 years.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
1

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
321
213(a), rt. 81.
avng removed a restrctons on aenaton and ncumbrance,
from the standpont of the edera Government, n respect of the
aotted ands of mnors of ess than haf Indan bood, the com-
msson by Congress of the persons and property of such mnors to
the |ursdcton of the State probate courts may be presumed to have
been no more than an ndcaton of the norma ega procedure whch
woud have resuted n any event under the Okahoma probate aws
n respect of the admnstraton of the estates of mnors domced
n Okahoma, sub|ect, however, to the snge mtaton that mnorty
shoud n a cases contnue to the age of 21 years for maes and to
the age of 18 years for femaes. Ths meant that the aotted ands
of such mnors were thereafter to be conveyed ony upon approva of
the State probate courts and that such |ursdcton of sad probate
courts shoud contnue unt such mnors actuay reached the ages of
18 or 21, as the case mght be. The specfcaton of ages of ma|orty,
therefore, served to prevent the operaton of the State rues or
emancpaton from the dsabtes of mnorty as n the case of
marrage efferson v. Wnker, 26 Oka., 653, 110 Pac, 755 Trey
v. Damea, 37 Oka., 606,133 Pac, 614), or by decree of a State court
Truskett v. Cosser, 236 U. S., 223, and arbre v. ood, 228 ed.,
658).
Whe, n the case of mnor members of the Creek Trbe of ess
than haf Indan bood, ther persons and property were whoy
commtted to the |ursdcton of the State probate courts, sub|ect
ony to the specfc mtaton on the Okahoma aws to cut short
the perod of mnorty, the oca representatves n Okahoma of the
Secretary of the Interor were authorzed, as ndcated by the above
quotaton from secton 6, to nqure nto and nvestgate the con-
duct of guardans or curators havng n charge the estates of such
mnors, and n case they shoud be of the opnon that any such
estates were beng dsspated or wasted or beng permtted to
deterorate n vaue by reason of the neggence or careessness or
ncompetency of the guardan or curator, sad representatves were
requred to report sad matter n fu to the proper probate court
and take the necessary steps to have such matter fuy nvestgated,
and go to the further e tent of prosecutng any necessary remedy,
ether cv or crmna, or both, to preserve the property and protect
the nterests of sad mnor aottees.
The functon of these oca representatves was n the character
of egsatvey authorzed ne t frends Cark v. Degraffenred
et a. udges, 64 Oka., 177, 166 Pac, 736), and, as hed n the cted
case, they mght even appea of ther own moton to the hgher
State courts from the orders of the county probate courts, f they
deemed the nterests of sad mnors requred t, there ben nothng
n ths ct of Congress above cted and quoted mtng ther dutes
n prosecutng remedes to the wshes of the guardan or probate
|udge, or ether of them . owever, t woud appear, as
there s no specfc provson n secton 6 to the contrary, that n so
actng such representatves were to render ther functons, at east
n so far as concerns mnors of ess than haf or of no Indan bood,
entrey n accordance wth the State probate aws, the atter beng
mted by Congress n ther appcaton to such mnors ony by the
specfc provson referred to as to the contnuance of the perod ot
mnorty.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
5213(a), rt. 31.
322
It s urged that such specfcaton of defnte ages of ma|orty
from whch the State courts shoud not depart, couped wth the
powers conferred on the oca representatves of the Secretary of
the Interor, ceary amounted to restrctons affectng the aenaton
and ncumbrance of the aotted and nherted ands of mnors of
ess than haf or of no Indan bood, and that n effect Congress
nstead of removng a edera restrctons on aenaton merey
substtuted the oca probate courts as the governmenta agency
through whch to e ercse a contnued contro over the aotted and
nherted ands of such mnors durng ther mnorty. It has
accordngy been urged that the aotted and nherted ands of such
mnors dd not upon the enactment of the ct of 1908 consttute
and from whch restrctons have been removed
wthn the meanng of secton 4 of sad ct.
The queston, therefore, s whether the mnorty of an aottee or
her of ess than haf or of no Indan bood operated as a restrcton
on hs aotted or nherted ands. If so, then under secton 4 such
ands remaned e empt from ta aton durng the contnuance of
mnorty as defned by edera statute. It s dffcut to conceve the
mrpose of Congress n secton 1 of the 1908 ct n statng that a
ands, ncudng homesteads, of sad aottees enroed as
freedmen, and as m ed-bood Indans havng ess than haf Indan
bood ncudng mnors sha be free from a restrctons, and n
statng n secton 9 that the death of any aottee sha
operate to remove a restrctons upon the aenaton of sad
aottee s and, f t s to be taken that Congress meant that ta
provsons concernng mnorty shoud at the same tme be con-
strued to be contnued restrctons on and. In order to gve a con-
sstent effect to the anguage of the ct as a whoe, t woud seem
that the ogca nterpretaton thereof conveys the dea, rather, that
whatever mtaton there remaned after the ct of 1908 on the
ega power of such mnor Creeks to aenate ther aotted or n-
herted ands resuted not from restrctons drecty paced upon the
ownershp of the and tsef, but arose from the usua dsabtes of
mnors to enter nto contracts, and that Congress provded n re-
spect of mnorty ony that the perod of such dsabtes shoud
not be cut off before such mnors reached the respectve ages nd-
cated. The authorzaton of the oca representatves of the Secre-
tary of the Interor to nqure nto the conduct of guardans n the
handng of such estates dd not resut n a restrcton on the and, be-
cause ther actvtes as egsatvey authorzed ne t frends appear to
have been desgned ony to nsure that the propertes were beng
propery and effcenty admnstered for the beneft of such mnors
n accordance wth the aws of the State of Okahoma. In McNee
v. Whtehead (253 ed., 546) (C. C. . 8th Cr.), the court sad:
It Is conceded here that, f sectons 1, 4, and 9 stood aone, the
ands n queston woud be ta abe but t s argued that the defnte prescrp-
ton of ages of mnorty and the sub|ecton of the ands of mnors so defned
to the orders of the oca probate courts amount to the mposton of another
restrcton upon aenaton, wth ts accompanyng e empton from ta aton,
notwthstandng the remova of a restrctons n sectons 1 and 0. We do
not thnk the argument s sound. Where Congress so unmstakaby manfested
an ntenton to remove a restrctons, It woud take anguage more cear than
that before us to ndcate that It Imposed another at the same tme. In one
sense the defnton of mnorty and the commsson of |ursdcton to the pro-
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
323
213(a), rt. 31.
bate courts of the State consttute a mtaton or restrcton but the purpose
was to avod the rues, sometmes oosey apped, of estoppe, waver, and
ratfcaton n respect of the acts of mnors and to prevent premature ma-
|orty by decree of a court or by marrage as provded by State statutes.
Ths was but a recognton and strengthenng of the ordnary dsabtes of
mnorty n behaf of those of Indan bood, not an e cepton to the remova
of restrctons upon aenaton generay.
The case of McNee v. Whtehead had to do wth nherted ands
of mnor Choctaw Indans of ess than haf Indan bood, whose
nherted ands had descended free from restrctons under sectons
1 and 9 of the 1908 ct, and the nonta abe status of whch, home-
stead and surpus ake, had ended wth the orgna aottee. Sec-
ton 29, ct of Congress of une 28, 1898 (30 Stat., 507). Conse-
uenty the ony ground on whch ta e empton coud be camed
or such nherted ands was founded upon the cam that under the
ct of 1908 the provsons made as to mnorty consttuted restrc-
tons on and wthn the meanng of secton 4 of that ct. What
was there sad n respect of the effect of mnorty n connecton wth
nherted ands seems entrey appcabe to the aotted surpus
ands of mnors of ess than haf or of no Creek Indan bood, for
snce secton 1 of sad ct purports to remove ther aotted and
restrctons entrey the provsons as to mnorty can have no greater
effect as to ther aotted ands than to nherted ands. The Su-
preme Court of Okahoma n respect of the ta abty of nherted
ands has foowed McNee v. Whtehead, supra, n Grady County v.
Lenochan (80 Ok., 169, 195 Pac, 116) and Pontotoc County v.
rashears (91 Ok. 24, 215 Pac., 763). (See aso Unted States v.
Shock, 187 ed., 870.) No decson has been found nvovng the
aotted ands of mnors of the cass ndcated deang drecty wth
the effect from the vewpont of ta aton of the provsons respectng
mnorty heren dscussed, but snce t s fet that there s no reason-
abe ground for a dstncton n favor of the aotted ands of such
mnors, t s the opnon of ths offce that such ands come wthn
the prncpe of McNee v. Whtehead, supra, and that the aotted
and nherted surpus ands of mnor Creek aottees or hers are
not e empted from ta aton by the provsons reatng to mnorty
n the ct of 1908.
number of decsons of the Supreme Court of Okahoma have
been cted whch, t s camed, have rued that mnorty s a restrc-
ton on aenaton under the 1908 ct. It may be sad that n a
cases comng before that court where t has appeared that aottees
of the cass here dscussed have, whe under the respectve ages of
ma|orty f ed by secton 2 of sad ct, attempted to convey ther
aotted ands wthout havng secured the approva of the proper
probate court, t has been hed that such attempted conveyances are
nu and vod. ( efferson v. Wncer, 26 Ok., 653, 110 Pac, 755
Trey v. Darnea, supra gan v. Ingram, 58 Ok., 766, 161 Pac,
225 rewer v. Perryman, 62 Ok., 176, 162 Pac, 791 Mortgage
Debenture Co. v. urrow, 75 Ok., 94, 182 Pac, 238 Tda O Co.
v. annagan, 87 Ok., 231, 209 Pac, 729 Grffn v. Gabrath, 247
Pac, 339, and others.) In some of these cases the e presson has
been used that mnorty s n the nature of a restrcton on aena-
ton. The actua ground of decson n these cases has been that the
edera age mts of mnorty can not be dsregarded or avoded,
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
213(a), rt. 81.
324
despte the rues of the State statutes regardng emancpaton by
marrage, or for the ratfcaton of contracts made durng mnorty,
etc., rather than that the and tsef was restrcted as to aenaton.
Ths must be so n vew of the. adopton by the Okahoma Supreme
Court of the decson of the edera Crcut Court of ppeas for
the ghth Crcut n McNee v. Whtehead.
Partcuar menton shoud be made of the case of Parker, Supern-
tendent, v. Rchard (250 U. S., 235), on whch consderabe reance
has been paced by the ta payers. Ths case arose out of secton 9 of
the 1908 ct, whch, n addton to anguage n ts frst sentence pro-
vdng that death sha operate to remove restrctons on certan
ands on whch restrctons were contnued under sad ct whe
n the hands of the orgna aottee, provdes aso n the frst provso
whch mmedatey foows that conveyances of the nterests of fu-
bood hers of such deceased aottee sha not be vad uness ap-
proved by the State probate court. In vew of the provsons of
secton 6, commttng mnors to the |ursdcton of the probate
courts, t has been hed that the requrement n secton 9 of the
approva of conveyances of fu-bood hers by such courts has refer-
ence ony to adut fu-bood hers. arrs v. e, 254 U. S., 103,
113.) The Supreme Court hed n Parker, Superntendent, v.
Rchard that such approva requred before a conveyance of hs
nherted nterest by Rchard, a fu-bood adut her, coud be vad,
represented a contnued restrcton on aenaton on hs nterest,
despte the apparent defnte remova of restrctons from the de-
ceased aottee s ands n the frst sentence of the secton.
It s urged that ths case shows that the approva of the State
probate courts, wherever, and so ong as, t s requred n respect of
any aotted or nherted ands, operates as a restrcton on aenaton.
Ths does not foow, and Parker v. Rchard s dstngushabe
n that t appes ony to adut fu-bood hers, who as aduts woud
have none of the ega dsabtes of mnorty. Such a requrement
as to aduts may operate as a restrcton on aenaton mposed upon
the and. ut n the case of mnors the approva of conveyances
made necessary by secton 6, at east n the case of mnors of haf
or of no Indan bood, s due soey to the persona ega dsabty
of such mnors to contract.
To summarze: It s the opnon of ths offce that the aotted and
nherted surpus ands of mnor aottees and mnor hers of aottees
of the Creek Indan Trbe of ess than haf or of no Indan bood,
ncudng freedmen, have been ta abe from and after 60 davs from
the passage of the ct of May 27, 1908 (35 Stat., 312) that a
aotted and nherted homesteads remaned nonta abe durng the
contnuance of the 21-year perod from the date of the orgna
homestead deed, e cept that n the case of ssue born after March 4,
190G, to a Creek aottee of haf or more Indan bood, such home-
steads are e empted for a further perod unt the remova of re-
strctons by apse of tme, death, or the act of the Secretary of the
Interor, provded, however, that e empton ceases upon the passage
of the and out of Creek Indan ownershp and that the ct of
May 27, 1908, sub|ectng the persons and property of mnor aottees
and mnor hers of aottees of ess than haf or of no Indan bood
to the |ursdcton of the oca probate courts wth the provso that
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
325
213(a), rt. 31.
mnorty shoud contnue to the age of 21 years for maes and to the
age of 18 years for femaes, dd not operate as a restrcton upon tho
aenaton of the mnors aotted or nherted ands.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
rtc e 31: What ncuded n gross ncome. I -27-4686
Ct.D. 195
ncome ta revenue act of 1921 decson of court.
1. Communty Income Wfe s arnngs Pbenupta gree-
ment.
prenupta agreement between a husband and wfe vng to-
gether and domced In Caforna to contrbute ther earnngs to a
common fund and to share equay a ncome and e penses, In
accordance wth whch ther property, accumuatons, earnngs,
and ncome have contnuousy snce ther marrage been combned
n a common fund from whch a e penses of both have been pad,
does not have the effect of changng the character of the separate
earnngs of the wfe from communty ncome to separate ncome
and they are requred to be returned by hm to whom they are
ta abe under the Revenue ct of 1921.
2. Decson ffrmed.
The decson of the oard of Ta ppeas (11 . T. ., 1294)
affrmed.
Unted States Crcut Court of ppeas for the Nnth Crcut.
. . echer v. Robert . Lucas, as Commssoner of Interna Revenue.
Upon petton to revew an order of the Unted States oard of Ta ppeas.
efore udkn, Detrch, and Wbur, Crcut udges.
March 31, 1930.
OPINION.
Detrch, Crcut udge: In ths proceedng we are asked to revew an order
of the oard of Ta ppeas approvng the acton of the Commssoner of
Interna Revenue n aggregatng, for the purpose of computng the ncome ta ,
the persona earnngs of pettoner and hs wfe, and chargng the pettoner
wth the whoe of the ta so computed. The ta es n queston were for the
caendar years 1922 and 1923 and at a tmes the pettoner and hs wfe were
resdents of Caforna and the earnngs were for servces rendered n Caforna.
It s therefore conceded that n the absence of some agreement aterng ther
status the Incomes of both husband and wfe consttuted property of the com-
munty and were by the Commssoner correcty ta ed. (Unted States v.
Robbns, 269 U. S., 315 T. D. 3817, C. . -, 188 .)
Reance s had upon an ora agreement made pror to the marrage of
pettoner and hs wfe, whch occurred on December 5, 1903, at Los ngees,
Caf., under whch, to use the anguage of hs bref, t was understood that
both woud contnue n busness, that a earnngs, ncome, and propertes
acqured by both durng ther marred fe woud be owned by them 50-50,
and that they woud be equa partners n a respects, equay ownng and en-
|oyng ther earnngs and acqustons of property. In accordance
wth ths agreement, ther propertes, accumuatons, earnngs, and ncome
have contnuousy snce date of marrage been combned n a common fund,
from whch a e penses of both have been pad, as evdenced by ont bank
accounts created mmedatey after marrage where a saares, earnngs, and
profts from whatsoever source were deposted and aganst whch account each
was authorzed by wrtten contract wth the bankng nsttuton to draw.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
213(a), rt. 31.
326
ssumng that ths statement by pettoner of the scope and nature of the agree-
ment, and what was done under t, s correct, we are of the opnon that the
vew taken by the Commssoner and the oard of Ta ppeas was rght. d-
mttedy, t s qute unmportant that the understandng orgnated before
marrage, for under the setted rue n Caforna a post-nupta agreement of
ke character woud be of equa effcacy. In every matera respect, therefore,
the case s ke ar v. Roth (22 ed. (2d). 932 T. D. 4152. C. . II-1, 215 ),
and t s rued by our decs on theren. See aso Lucas, Commssoner, v.
ar (U. S. Sup. Court Dec. March 17, 1930).
The ta payers, husband and wfe, domced n the State of
Te as, fed ncome ta returns for 1923 to 1925, ncusve, on the
communty property bass. In 1916 the husband purchased certan
shares of corporate stock out of funds consttutng communty
property under the aws of Te as. On November 1, 1920, the
husband made a gft to hs wfe of hs communty nterest n the
stock. In 1923 ths stock was acqured by another corporaton n
a transacton resutng n a ta abe gan to the stockhoders.
The transfer of hs communty Interest n the stock by the
husband to the wfe made the stock her separate property under
the aws of Te as. The gan reazed from ts sae or other dspos-
ton consttuted the wfe s separate property and shoud be so
reported by her for ncome ta purposes. The wfe had a present
vested nterest n one-haf of the stock mmedatey upon ts
acquston u 1916. ccordngy, the bass to be used n ascertan-
ng the gan or oss wth respect to the sae or other dsposton
by the wfe of her one-haf nterest so acqured s one-haf of the
cost of the stock n 1916. The bass to be used n ascertanng the
gan or oss wth respect to the sae or other dsposton of the one-
haf of the stock acqured by gft from her husband pror to
December 31, 1920, s, under secton 202(a)2 of the Revenue ct of
1921, the far market vaue of one-haf of the stock on November
1, 1920, the date she acqured t by gft. Genera Counse s
Memorandum 1565 (C. . I-1, 187) s hereby revoked.
n opnon s requested as to whether the husband may, under
the aws of Te as, transfer by gft to the wfe shares of stock form-
ng a part of the communty estate. Opnon s aso requested as to
whether the gan or oss from the sae or other dsposton of the
stock s communty ncome, and as to the bass to be used n ascer-
tanng gan or oss from the sae or other dsposton of the stock.
The ta payers, husband and wfe, domced n the State of Te as,
fed ncome ta returns for the years 1923 to 1925, ncusve, on the
communty property bass. In 191G the husband purchased from
the M Company, at par, capta stock of the company amountng to
a doars, the purchase beng made out of funds whch consttuted
communty property under the aws of Te as. On November 1,
1920, he made a gft of hs communty nterest n the above-men-
toned stock to hs wfe, so that she became the owner of the entre
w doars worth of stock n the company. In 1923 the N Corpora-
ton acqured a of the common capta stock of the sad M Com-
pany, whch transacton resuted n a ta abe gan to the stockhod-
ers of the M Company.
In the nstant case the foowng questons reatve to the compu-
taton of the gan or oss from the sae or other dsposton of the
stock are submtted:
ffrmed.
rtce 31: What ncuded n gross ncome.
( so Secton 202, rtce 1563.)
I -34-4759
G. C. M. 8209
R NU CT O 1921.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
327
1213(a), rt. 31.
(a) Whether the transfer by the husband of hs communty n-
terest n ths stock to hs wfe took the stock out of the category of
communty property and made t the separate property of the wfe.
In other words, coud the husband dvest hmsef of hs communty
nterest by makng the gft n ths manner
(b) If the answer to (a) s n the affrmatve, woud the gan re-
azed on the sae or other dsposton of the stock n 1923 consttute
communty ncome, dvsbe for ta purposes between husband and
wfe
(c) What s the bass of the stock for the purpose of ascertanng
the gan or oss from the sae or other dsposton n 1923 Shoud
one-haf of the stock, made the sub|ect of the gft n 1920, take the
vaue as of the date of the gft (artce 15C3, Reguatons G2), or
shoud the bass reman the cost n 1916, namey, doars
It s not dsputed that the stock became communty property
when t was acqured by the husband by purchase wth communty
funds.
rtce 4614 of the Revsed Cv Statutes of Te as for 1925, re-
atng to the wfe s separate property, reads n part as foows:
property of the wfe, both rea and persona, owned or camed by her
before marrage, and that acqured afterward by gft, devse or descent, as aso
the ncrease of a ands thus acqured, and the rents and revenues derved
therefrom, the nterest on bonds and notes beongng to her and dvdends on
stocks owned by her, sha be the separate property of the wfe. ( cts
1848, p. 77 G. L., vo. 3, p. 77 const., art. 16, sec. 15 cts 1913, p. 61 cts 1917,
p. 436 cts 1921, p. 251.)
rtce 4619 of the Revsed Cv Statutes of Te as for 1925, per-
tanng to communty property, reads as foows:
property acqured by ether the husband or wfe durng marrage, e cept
that whch s the separate property of ether, sha be deemed the common prop-
erty of the husband and wfe, and durng coverture may be dsposed of by the
husband ony. the effects whch the husband and wfe possess at the tme
the marrage may be dssoved sha be regarded as common effects or gans,
uness the contrary be satsfactory proved. ( cts 1840, p. 3 G. L., vo. 2,
p. 177 cts 1913, p. 61.)
The Supreme Court of Te as hed n rnod v. Leonard (273
S. W.| 799) that the rents and revenues derved from the wfe s sepa-
rate ands not beng a part of the wfe s separate property under the
consttuton, and the egsature beng wthout authorty to enarge
or dmnsh such property, the portons of the acts of 1917 and 1921
enacted by the egsature, whereby they attempted to make the rents
and revenues of the wfe s separate ands a part of her separate
estate, were nvad. It was apparent, however, from that decson
and another decson rendered by the supreme court the same day n
Gohman, Lester Go. v. Whtte et u ., No. 4066 (273 S. W., 808),
that the remanng portons of the acts were vad.
Wth respect to the dsposton of the communty property the
aw specfcay provdes that durng coverture the communty
property may be dsposed of by the husband ony. It has been the
rung of the Te as courts from the earest decsons that a hus-
band can gve to hs wfe, as her separate estate, any porton of hs
separate estate or any porton of communty estate. (Pok v. Mead,
3 S. W. (2d), 112 Rey v. Wson, 86 Te as, 240, 24 S. W., 394
Caube v. eaver- ectra Refnng Co., 115 Te as, 1, 274 S. W.,
120.) Other cases may be summarzed as foows: Property con-
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
218(a), rt. 31.
328
veyed to a wfe to her soe and separate use becomes her separate
property, whether the consderaton was pad from separate or
communty funds. (Morrson v. Cark, 55 Te as, 437.) hus-
band can make a conveyance to the wfe of hs separate property,
or of the communty property, so as to vest the tte n her as sep-
arate property, provded the rghts of credtors are not encroached
upon. ( rown v. rown, 61 Te as, 56 ott v. Wrght, 132 S. W.,
960.) vountary conveyance by a husband to hs wfe of com-
munty property vests the property n the wfe separatey. (Story
v. Marsha, 24 Te as, 305, 76 m. Dec, 106: Lews v. Smon, 10
S. W., 554, 72 Te as, 470 vans v. Opperman, 13 S. W., 312, 76 Te as,
293.) deed to the wfe, of property purchased by the husband,
wth communty funds, mports, n the absence of evdence of a
dfferent purpose, that t was the ntenton that the property shoud
become the separate estate of the wfe and a husband may make a
gft or grant of the communty, or hs separate property, to hs
wfe, by a conveyance drecty to her, wthout the nterventon of
trustees. (Story v. Marsha, supra aso rmstrong v. Turbeve,
216 S. W., 1101.)
In vew of the foregong, t s the opnon of ths offce that the
transfer by gft by the husband to the wfe of shares of stock hed
as communty property n the nstant case s vad under the aws
of Te as.
Wth respect to the second queston submtted, t shoud be noted
that the evsed Statutes of Te as do not provde that the proft
derved from the sae of persona property of the wfe s separate
property, nor do they provde that such proft s communty
property.
The genera theory of communty property n Te as s that t s
acqured durng coverture through the efforts of one or the other
spouse, or through the |ont efforts of both, and to some apprecabe
e tent the sk, abor, or supervson of one or both the spouses,
was e pended n the producton or acquston of the property.
It s aso a genera rue n Te as that property consttutng the
separate estate of the husband or wfe may undergo mutatons and
changes wthout osng ts character as the separate property of the
partcuar spouse.
The rea ssue whch arses under the second queston s whether
the proft from the casua sae or other dsposton of the separate
persona property of a wfe domced n Te as, and whch s recog-
nzed as the gan or proft derved from the converson of a capta
asset under the edera Revenue cts, s to be consdered as a
proft or ncome resutng from the sk, abor or supervson of
one or both the spouses, and hence communty ncome, or whether
the reazed apprecaton n vaue of the wfe s separate property s
but a mutaton and change of the separate property and hence st
a part of the separate property of the wfe.
In Rose v. ouston (11 Te as, 324, 62 m. Dec, 478 (1854)),
the Supreme Court of Te as hed that a note gven for the purchase
money of the wfe s separate property was aso the wfe s separate
property. In the course of ts opnon n that case the court sad:
Wheeer, .: The queston to be determned Is, whether the note gven for
the purchase money of the wfe s separate property was aso the separate
property of the wfe. nd ths queston, t s conceved, has been setted by
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
329
213(a), rt. 31.
the repeated decsons of ths court. It has been decded not ony that prop-
erty receved In e change for the separate property of one of the partes to
the nupta contract remans separate property but that property purchased
wth money whch was obtaned upon the sae of the separate property of ether
husband or wfe aso remans separate property: (Love v. Robertson, 7 Te ., 6
56 m. Dec., 41 Montyre v. Chappe, 4 Id., 187.) The consequence Is, that
to mantan the character of separate property t s not necessary that the
property of ether husband or wfe shoud be preserved n spece or In knd.
It may undergo mutatons and changes, and st reman separate property
and so ong as It can be ceary aud ndsputaby traced and dentfed, ts
dstnctve character w reman.
In D on v. Sanderson (72 Te ., 359, 10 S. W., 535), the Supreme
Court of Te as had for consderaton the queston of whether money
receved as a prze on a ottery tcket purchased wth the separate
money of one of the spouses was communty property, and the
court hed that the prze money consttuted communty property.
owever, n the course of ts opnon the court made the foowng
pertnent observatons:
That the prze came not by gft, devse, or descent, s too cear.
It came as the fortutous resut of a contract based on vauabe consderaton
pad, and Is but the proft on a venture, whch, ke other proft, not resutng
from the ncreased vaue of a thng bought wth the separate means of one
party to the marta unon, becomes the common property of the husband and
wfe. Property purchased wth money, the separate property of husband or
wfe, or taken In e change for the separate property of ether, becomes the
separate property of the person whose money purchases or whose property Is
gven In e change, In the absence of some agreement, e press or Imped, to
the contrary and, f the thng purchased or taken n e change ncreases n
vaue, ths necessary nures to the beneft of ts owner. Such a state of fact,
however, s not before us, and we are constraned to hod that a proft reazed
on purchase of the ottery tcket became communty property. Itacs
supped.
In Sparks v. Tayor (99 Te ., 411,90 S. W., 485 6 L. R. . (N. S.),
881), the Supreme Court of Te as used the foowng anguage:
marred woman may, when |oned by her husband, se or mort-
gage her separate property. She may, wth her separate funds, buy rea or
persona property from her husband or another, whch w be her separate
estate. She may borrow money, and by mortgage bnd her separate estate for
Its payment, or she may make her separate property surety for her husband s
debt or for the debt of a thrd person wth her husband s concurrence. Thus
t w be seen that the power of the husband and wfe to contract wth refer-
ence to ther property rghts s ampe to sustan ths transacton, and we can
see no ega obstace to the makng of such contract In Te as. If the and
n Oho had been sod, nstead of beng mortgaged, the money derved therefrom
woud have been the separate property of Mrs. Tayor, and, whe Tayor woud
have had the possesson and contro of t, he woud have been charged as trus-
tee wth proper care and nvestment of t for her. Then for what reason can
t be sad that the money rased by a mortgage upon her property, by agreement
wth the husband, shoud not, at east as between the husband and wfe, be her
separate property Is t consstent to say the wfe can borrow money on her
rea estate for her husband or for a thrd person, but has not the power,
wth her husband s consent, to borrow money on her own account Logcay
the authorty whch woud enabe a wfe to perform an act for the beneft of
another woud sustan a ke act when done for her own advantage. Itacs
supped.
See aso Mtche v. Mtche (80 Te ., 101, 15 S. W., 705), nvov-
ng the proft from the sae of cty ots, and Strngfeow v. Sorres
(82 Te ., 277, 18 S. W., 689). nvovng the ncreased vaue of catte
separatey owned by one of the spouses.
85942 31 22
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
213(a), rt. 31.1
330
In Stephens v. Stephens (292 S. W., 290), the Court of Cv
ppeas of Te as used the foowng anguage:
Profts made on an nvestment of the separate funds of one of the spouses
become communty property (D on v. Sanderson, 72 Te ., 359. 10 S. W., 538
535 , 13 m. St. Rep., 801 ones v. pperson, 69 Te ., 586, 7 S. W., 4SS Smth
v. aey, 66 Te ., 553, 1 S. W., 627) but the ncreased or enhanced vaue of
the thng purchased wth separate funds, and the ncreased or enhanced vaue of
the separate property of ether the husband or the wfe, consttute separate
property. (D on v. Sanderson, supra Strngfeow v. Sorres, 82 Te ., 277,
18 S. W., 689 vans v. Purnton, 12 Te . Cv. pp., 158, 34 S. W., 350 rnod
v. Leonard, 114 Te ., 535, 273 S. W., 799.)
In ones v. pperson (69 Te ., 586, 7 S. W., 488), the Supreme
Court of Te as hed that the profts from a mercante busness
conducted by a wfe, who had used both her separate property and
the credt of her husband, were communty property. In that case
t was very evdent that the sk, abor, or supervson of the wfe,
together wth the credt of the husband, were matera factors n
the reazaton of the proft. Whether ths s st the aw of Te as
under more recent statutes, whch removed many of the restrctons
upon the power of the wfe to contro her separate property, s
sub|ect to grave doubts. (Cf. Sparks v. Tayor, supra Pok v. Mead,
supra and Sayor v. Sayor, 20 S. W. (2d), 229.)
It s evdent from the foregong decsons that the Te as courts
have drawn a dstncton between the profts whch arse because
of the sk, abor, or supervson of one or both of the spouses
e pended n acqurng property (possby ncudng the profts from
busness ventures and nvestments) and the profts whch arse from
the casua dsposton of separate property n such a way as to smpy
reaze the ncreased vaue of the separate property, whch proft s
treated as consttutng a part of the separate property.
It shoud aso be evdent from the foregong decsons that the rue
estabshed by the Te as courts s often very dffcut of appcaton,
and that the ne of dstncton drawn s suffcenty narrow that n-
consstent concusons under dfferng statements of fact are easy
possbe. In Genera Counse s Memorandum 1565 (C. . I-1,187),
the concuson was reached that under the aws of Te as the profts
derved from the sae of the separate persona property of the hus-
band were communty property and hence ta abe to the husband and
wfe n equa shares. In Genera Counse s Memorandum 6351 (C. .
III-2, 188), the concuson was reached that cash bonuses pad to a
wfe vng wth her husband and domced n Te as n consderaton
of her e ecuton of o eases on rea estate, owned by her as her sepa-
rate property, consttuted separate ncome of the wfe and shoud be
so returned by her for edera ncome ta purposes.
The concuson reached n Genera Counse s Memorandum 1565
was based argey upon an nterpretaton of certan anguage used n
an opnon of the ttorney Genera dated ugust 24, 1920, and pub-
shed as Treasury Decson 3071 (C. . 3, 221), whch anguage reads
as foows:
It s to be noted that the ncrease of separate persona property and the reve-
nues derved therefrom are not the separate property of the owner of the per-
sonaty, but are communty property (Carr v. Tucker, 42 Te ., 330 pperson, v.
ones, 65 Te ., 425 arr v. Smpson, 117 S. W., 1041). They are therefore
ncome to the communty, to wt: Gans, profts, and ncome
from busnesses, commerce, or saes or deangs n property growng
out of the ownershp or use of or nterest n such property.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
331
( 213(a), rt. 31.
Ths opnon of the ttorney Genera was subsequenty wthdrawn
by hm on une 16, 1927. (See 35 Op. . G., 265.) ut n any
event, from a carefu study of the above-quoted anguage and the
cases cted theren ths offce s now of the opnon that the construc-
ton paced upon that anguage by Genera Counse s Memorandum
1565 was erroneous. In the three cases cted n the ttorney Gen-
era s opnon the Te as courts apped the genera rue that the
profts derved from the use of sk, abor, or supervson of one or
both the spouses was communty ncome, even though the property
whch had been sub|ected to the sk, abor, or supervson was the
separate property of one of the spouses. There s nothng n ether
the opnon of the ttorney Genera or n the court decsons cted by
hm to ndcate that he had n mnd the specfc queston here pre-
sented, or the dstnctons whch the Te as courts have unformy
drawn between the two stuatons.
It s, therefore, the opnon of ths offce that the gan reazed from
the sae or other dsposton of the wfe s separate persona property
(corporate stock) consttuted a part of her separate property and
shoud be so reported by her for edera ncome ta purposes. It
s aso the opnon of ths offce that Genera Counse s Memorandum
1565 s nconsstent wth the vews e pressed n Genera Counse s
Memorandum 6351 and ths memorandum. ccordngy, Genera
Counse s Memorandum 1565 s hereby revoked.
Wth respect to the bass to be used n ascertanng gan or oss
from the sae or other dsposton of the stock, t shoud be noted that
one-haf of the stock was acqured by the wfe through gft on No-
vember 1,1920, from the husband, who had acqured a of the stock
n 1916 at a cost of doars to the communty. Under the aw of
Te as the nterest of each spouse n separate property as we as
the nterest n communty property s a present vested nterest.
(Mc ay on Communty Propertv, 2d edton, secton 865.) s
stated n dwards v. rown (68 Te ., 369, 4 S. W., 380), t s a
setted aw n that State that the nterests of the husband and wfe
n the communty property are equa. (See aso Wrght v. ayes,
10 Te ., 1030.) In ascertanng the gan or oss derved by the wfe
from the sae or other dsposton of the stock n the nstant case,
consderaton must be gven to the fact that she had a vested nterest
n one-haf of the stock mmedatey upon acquston by the husband
n 1916, as ths stock was purchased out of communty funds at a
prce of doars. The bass of one-haf of the stock whch repre-
sented her vested nterest n the communty funds used to purchase
the stock woud accordngy be one-haf doars.
Secton 202(a)2 of the Revenue ct of 1921, wth respect to the
property acqured by gft, provdes as foows:
In the case of such property, acqured by gft after December 31, 1920, the
bass sha be the same as that whch t woud have n the hund.s of the donor
or the ast precedng owner by whom t was not acqured by gft. In
the case of such property acqured by gft on or before December 31, 1920, the
bass for ascertanng gan or oss from a sae or other dsposton thereof sha
be the far market prce or vaue of such property at the tme of such
acquston.
s one-haf of the stock n the nstant case was acqured by the
wfe by gft pror to December 31, 1920, the bass of that one-haf
of the stock n respect of whch the wfe had no pror vested nterest
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
5213(a), rt. 51.
332
s, therefore, the far market vaue of such one-haf at the tme of
ts acquston by gft, namey, November 1, 1920.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
rtce 31: What ncuded n gross ncome.
R NU CT O 1921.
Interest accrued on securtes transferred by one bank to another
bank at tme of merger. (See Ct. D. 230, page 402.)
rtce 31: What ncuded n gross ncome. I -50-4865
I. T. 2552
R NU CT O 1921.
I. T. 1563 (C. . II-, 49), whch hods that renewa commssons
on nsurance premums receved after the ta payer s death are ncome
to hs estate n ther entrety, s modfed n so far as nconsstent
wth Genera Counse s Memorandum 8826 (see page 194).
rtce 51: When ncuded n gross ncome. I -30-4721
Ct. D. 210
ncome ta revenue act of 1021 decson of court.
1. Income Commssons on Loans When Ta abe.
Where a ta payer, keepng ts books on the accrua bass, makes
rea estate oans on whch n addton to the nterest a commsson
s charged, the borrower recevng the amount of the oan ess the
dscount and commsson, the commssons on the oans accrue at
the tme of the makng of the oans and consttute ta abe Income
n the year the oans are made.
2. Decson ffbmed.
The decson of the oard of Ta ppeas (15 . T. ., 219)
affrmed.
Unted States Crcut Court of ppeas fob the Seventh Crcut. No. 4253.
Octobeb Tebm, 1929, pr Sesson, 1930.
Coumba State Savngs ank, pettoner, v. Commssoner of Interna Revenue,
respondent.
Petton for revew of order of Unted States oard of Ta ppeas.
efore schueb, Page, and Sparks, Crcut udges.
une 10, 1930.
schueb, Crcut udge: The pettoner sought redetermnaton of Its ed-
era ncome and profts tu es for the years 1921 and 1922. Pettoner was a
banker, a arge part of ts busness beng the makng of rea estate oans, and
for these oans takng from the borrower notes wth rea estate mortgage
securty, chargng (he borrower not ony nterest on the oan, but a commsson
for Its servce n makng the oan. Ths commsson was usuay deducted from
the amount of the oan, and the baance pad the borrower. s opportunty
presented, pettoner woud se the notes. or a the tme n queston pet-
toner s books were kept on the accrua bass, the commssons as earned beng
entered n ts books as ncome or proft. Its ta returns for these years were
made on ths bass.
The facts found by the oard of Ta ppeas were stpuated, and appear In
Coumba, etc., ank, pettoner, v. Commssoner of Interna Revenue, respond-
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
333
213(b), rt. 72.
ent (IS . T. ., 219), where the opnon of the oard, contrary to pettoner s
contentons, aso appears.
In ts petton for redetermnaton pettoner asserts that ts returns for these
years, as respects these commssons, erroneousy assume that the commssons
accrued at the tme of the makng of the oans whereas pettoner contends that
the Income or proft dd not accrue at that tme, but ouy f and when the oan
was ether repad, or the notes sod at a prce showng a gan over what pet-
toner pad out thereon and pettoner nssts that they shoud be treated as
bank or trade dscounts, as to whch t has been hed that no ncome was derved
unt coected or accrued. ( ppea of Chatham k Phcn Natona ank,
1 . T. ., 460 ppea of The ank of artsve, 1 . T. ., 920.)
We are of opnon that the oard very propery dstngushed the facts here
from cases where notes and securtes are purchased at a dscount, or such
where banks dscounted the nterest n advance. In the nstant case pettoner
was actng n the two capactes of ender of the money and of oan broker.
It charged ts commsson for the servce of procurng the oan, and ths was
earned at the tme the oan transacton was cosed. ad the borrower receved
the fu amount of the oan, and then pad the commsson, or had t pad the
commsson ndependenty of the oan, there coud be no queston but that t
consttuted ncome at that tme, ta abe as of that tme even f on a cash bass.
If nstead of payng cash the borrower gave hs note for the commsson,
whch was accepted and regarded as good, t woud represent an earnng then
accrued and then ta abe, f on the accrua bass. The note whch pettoner
took on makng the oan represented not ony the amount advanced the borrower,
but aso the amount of pettoner s commsson. Ths, as we as the advance,
was secured to be pad by the mortgage gven, and drew nterest from the date
of the notes, and we can see no escape from the concuson that t represented
an accrued proft or ncome respondng to every test for determnng whether
t s then ta abe, where books are kept and a returns made on the accrua
bass.
ar, Commssoner, v. rst Trust and Savngs ank of Mam (39 . (2d),
462) s ceary dstngushabe by the there rected fact that respondent keeps
ts books and makes ts returns on the cash bass. nd, further, as stated by
the oard of Ta ppeas In passng on that case, the ta payer s books treated
the commsson as unearned unt such tme as the notes were pad or sod.
(11 . T. ., 1034.)
The reported opnon of the oard of Ta ppeas, as we as ts concuson
and order, has our approva, and Its order s accordngy affrmed.
nnuty n eu of wdow s dower. (See G. C. M. 8655, page 211.)
wfe, In acceptng the provson made for her under the terms
of her husband s w, gves up no rght n and to the personaty,
under the aw of the State of New York as t e sted n 1922, the
ye r the husband ded. Consequenty, to that e tent she s not a
purchaser of the provson made for her under the w. Where she
accepts the provson of the w and renqushes her dower rght n
and to reaty stuated n Ontaro, Canada, she s to that e tent a
purchaser as of the tme of her husband s death.
R NU CT OP 1921 ND PRIOR R NU CTS.
ktce 72: Proceeds of nsurance Compensa-
ton War pensons.
I -52-4883
G. C. M. 8689
R NU CT O 1821.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
5213(b), rt. 72.
334
n opnon s requested reatve to the e tent to whch , wdow
of the decedent, , can be regarded as a purchaser of the provson
made for her under the terms of s w.
, a resdent of the cty of R, New York, ded testate, on uy ,
1922. In hs w he made, nter aa, the foowng provson for
hs wfe:
eventh: It s further my w and I hereby drect that after the payment
of the egaces herenbefore specfed and aso after my sad e ecutors sha have
set asde the sum of doars as heren specfed, n trust for the ves of my
two chdren, a the rest, resdue and remander of my estate, of every name and
nature, I hereby drect my e ecutors, or the survvor of them, to dvde nto
four equa parts and to dspose of the same as foows:

(2) The other one-haf part of my sad resduary estate I gve, devse and
bequeath to my e ecutors, n trust, to nvest and renvest the same n frst-cass,
nterest-bearng securtes as herenafter specfed, and to pay over the nterest
and ncome thereof to my wfe, , as ong as she may ve.
nd t s further my w and I hereby drect my sad trustees that n case
my wfe sha so desre, she sha have the rght and prvege of takng and
appropratng to her own use so much of the prncpa of sad sum as she may
wsh, n addton to the nterest and ncome thereof, my ntenton beng that my
wfe sha be the soe |udge ns to whether te nterest and ncome of sad part
s suffcent for her needs, and n case she fnds that sad ncome s not suffcent,
she sha have the rght to use so much of the prncpa of sad fund as she may
desre, and ony the resdue of the prncpa of sad fund so remanng at her
death sha be dsposed of as heren ne t nrovded.
(3) I hereby gve to my sad wfe, and e pressy nvest her wth power
and authorty to dspose of one-haf of the baance of sad fund so nvested In
trust for her by her ast w and testament n such manner as to her may seem
best and the other one-haf of the baance of sad trust fund I hereby gve,
devse and bequeath to my ega hers and assgns forever.
Thrteenth: The provsons that I have made n ths my ast w and testa-
ment for and on behaf of my sad wfe are n eu of dower and a dower
rghts.
The decedent eft personaty but no rea property n the State of
New York. The ony reaty of whch he ded sezed was ocated n
Ontaro, Canada.
Secton 190 of the rea property aw of New York, n force at the
tme of the decedent s death, reads as foows:
wdow sha he endowed of the thrd part of a the ands whereof her
husband was sezed of an estate of nhertance, at any tme durng the marrage.
Secton 15 of the decedent estate aw of New York, n force at the
tme of the death of the decedent, reads as foows:
very mae person of the age of 18 years or upwards, and every femae of
the age of 10 years or upwards, of sound mnd and memory, and no others, may
gve and bequeath hs or her persona estate, by w n wrtng.
The aw n the State of New York, at the tme of the decedent s
death, was that a man, beng of sound and dsposng mnd, not moved
by undue nfuence and not under restrant, mght, f he observed the
formates of the aw governng the e ecuton of a ast w and testa-
ment, dspose of hs property as he desred. (See eyzer v. Morrs,
97 N. Y. S., 131.) The ony e cepton was as to dower, and that
dower was confned to such and as the husband was sezed of durng
marrage. It s noted that the aw of New York has snce been
changed n ths respect. (See Laws of New York, 1929, ch. 229,
sec. 4.) Ths change s effectve, however, ony wth respect to
deaths occurrng after ugust 31, 1930, and ws e ecuted after
that date. It foows that under the aw of the State of New York,
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
335
t 214(a)3, rt. 131.
f the decedent had chosen to bequeath hs personaty to others than
hs wfe, she woud have had no statutory rght to take personaty
aganst the w, there beng then no statutory provson n New York
whch gave her an nterest n hs estate e cept a dower nterest n
and. Consequenty, n acceptng the provson made for her under
the terms of the w, she gave up no rght n and to the personaty
under the aws of New York, and to that e tent she was not a pur-
chaser of the provson made for her under the w.
ut the decedent, at the tme of hs death, was sezed of and n
Ontaro.
The rght of a wdow to dower s determned by the aw of the
State n whch the and s stuated, regardess of the domce of
the partes and the pace of marrage. (See Thompson on Rea
Property, 1924, voume 1, secton 808 Roesse v. Roesse, 148 N. Y.
S., 659 In re ays, 181 ed., 674 Thomas v. Woods, 173 ed.,
585.)
In order to determne whether the wdow was entted to dower
n the Ontaro and due consderaton must be gven to the statutes
and the decsons ot the courts of Ontaro. Secton 1, of the dower
act of Ontaro, chapter 100, reads as foows:
wdow, on the death of her husband, may tarry In hs chef house for
40 days after hs death, wthn whch tme her dower sha be assgned her,
If t has not been assgned her before, and n the meantme she sha have
her reasonabe mantenance and for her dower sha be assgned to her the
thrd part of a the ands of her husband, whereof he was sezed at any
tme durng coverture, e cept such thereof as he was so sezed of n trust
for another. (Revsed Statutes of Ontaro, 192T, chapter 100, secton 1.)
The courts of Ontaro have decded that the wdow must eect
between dower and a devse to her under the w, especay where,
as n the nstant case, provson s made for the wdow e pressy
n eu of dower. (See err v. Leshman, 8 Gr., 435 ecker v.
ammond, 12 Gr., 485 Stewart v. unter, 2 Ch. Cham., 336
Lapp v. Lapp, 19 Gr., 608 Lee v. Mc vney, 18 Gr., 527 McGregor
v. McGregor, 20 Gr., 450.)
In the nstant case the wdow accepted the provson of the w
and renqushed her dower rght n and to the reaty n Ontaro.
To the e tent of the vaue of that dower rght as of the tme of the
husband s death, the wdow was a purchaser of the provson made
for her under the w ths n accordance wth the decsons n the
cases of Warner v. Wash (15 ed. (2d), 367, T. D. 4257, C. .
III-1, 245), . S. v. oster (26 ed. (2d), 760, T. D. 4258, C. .
III-1, 247), en v. randes (29 ed. (2d), 363, T. D. 4256,
C. . III-1,243), and wth I. T. 2480 (C. . III-2,141).
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
S CTION 214(a)3. D DUCTIONS LLOW D:
T S.
rtce 131: Ta es. I -88-4781
G. C. M. 6616
R NU CT O 1021.
The Massachusetts corporaton e cse ta accrues on pr 1.
The e cse ta assessed as of pr 1, 1921, aganst the M Com-
pany, whch s on an accrua-fsca year bass, ts fsca year endng
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
214(a)3, rt. 131.
336
March 31, accrued wthn the ta payer s fsca year ended March 31,
1922, and consttuted a proper deducton for that year. The e cse
ta assessed as of pr 1, 1922, had not accrued on March 31, 1922,
and therefore may not be deducted n the return for the fsca year
ended on that date. ( s to the change n the Massachusetts aw,
see chapter 258, cts and Resoves of Massachusetts, 1927, approved
pr 15, 1927, effectve anuary 1, 1928.)
n opnon s requested as to the accrua date of the Massachusetts
corporaton e cse ta .
The statute mposng the ta s found n chapter 63 of the Gen-
era Laws of Massachusetts, 1921. The aw was adopted n 1919 and
certan amendments were made n 1920. Pertnent provsons are as
foows:
DOM STIC CO POR TION .
Sec. 32. cept as otherwse provded n sectons 33 and 34, every domestc
busness corporaton sha pay annuay, wth respect to the carryng on or dong
of busness by t, an e cse equa to the sum of the foowng, provded that
every such corporaton sha pay annuay a tota e cse not ess n amount
than one-twenteth of 1 per cent of the far cash vaue of a the shares const-
tutng ts capta stock on the 1st day of pr, when the return caed for by
secton 35 s due :
(1) n amount equa to 5 per thousand upon the vaue of ts corporate
e cess.
(2) n amount equa to 21/ per cent of that pnrt of ts net ncome, as defned
n ths chapter, whch s derved from busness carred on wthn the Common-
weath.

Sec. 35. very domestc busness corporaton sha, wthn the frst 10 days
of pr, make a return as of pr 1st, sworn to by ts treasurer or assstant
treasurer, or n ther absence or ncapacty by any other prncpa offcer, n
such form as the commssoner prescrbes, gvng (a) a copy of suc parts as
he may desgnate of the edera return or returns for the year on the ncome
of whch the ta s to be assessed, whch t has made sngy or wth one or more
other corporatons, (6) such other data as he requres to determne the propor-
ton of net ncome derved from busness carred on wthn the Commonweath,
(c) such nformaton as he requres for the determnaton of the corporate
e cess. Whenever the tme for fng ts edera return has been e tended, the
commssoner may e tend the tme for fng such return.

SS SSM NT ND COLL CTION.
Sec 44. The commssoner sha determne, from the returns requred by
ths chapter and from any other avaabe nformaton, the net ncome derved
from busness carred on wthn the Commonweath and the corporate e cess
of every domestc busness corporaton, and the net ncome derved from bus-
ness carred on wthn the Commonweath of, and the corporate e cess em-
poyed wthn the Commonweath by, every foregn corporaton, and sha assess
thereon the ta provded for n ths chapter. cept as otherwse provded In
ths chapter, the part of sad ta whch s based upon the vaue of the corporate
e cess, or corporate e cess empoyed wthn the Commonweath, sha be
assessed and coected n the same manner and wth the same powers as pro-
vded n ths chapter for the ta aton of corporate franchses, and sha be
sub|ect to the other admnstratve provsons thereof. e sha not determne
the ncome of any such corporaton, whch has fed a return wthn the tme
prescrbed by aw, to be In e cess of the ncome shown by such return, wthout
notfyng the corporaton and gvng t an opportunty to e pan the apparent
ncorrectness of the return. or the purpose of verfyng any such return, the
commssoner may, wthn two years after September 1 of the year n whch
such return was due, e amne personay or by deputy or agent the books and
papers of the corporaton, whch sha be open to such offcer for verfcaton.

Sec 70. The sae or transfer, otherwse than n the ordnary course of trade
and In the reguar and usua prosecuton of the corporaton s busness, of any
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
337
214(a)3, rt. 131.
part or the whoe of the assets of a domestc busness corporaton sha be
frauduent and vod as aganst the Commonweath, uness such corporaton
ha, at east fve days before the sae or transfer, notfy the commssoner of
the proposed sae or transfer and of the prce, terms and condtons thereof,
and of the character and ocaton of sad assets. Whenever such a corporaton
sha make such a sae or transfer, the ta mposed by ths chapter sha
become due and payabe at the tme when the commssoner s so notfed, or,
If he Is not so notfed, at the tme when he shoud have been notfed.
Ths secton sha not appy to saes by recevers, assgnees under a vountary
assgnment for the beneft of credtors, trustees In bankruptcy, or pubc offcers
actng under udca process.
Corporate e cess s defned by secton 30, subsecton 3, as the
far cash vaue of a the shares consttutng the capta stock of the
corporaton on the 1st day of pr, ess certan specfed deductons.
Net ncome and ta abe year are defned by secton 30, subsec-
tons 5 and 6, as foows:
5. Net ncome, e cept as otherwse provded n sectons 34 and 39, the net
Income for the ta abe year as requred to be returned by the corporaton to the
edera Government under the edera Revenue ct of 1918 and, n the case of
a domestc busness corporaton, such Interest and dvdends, not so requred to
be returned as net ncome, as woud be ta abe f receved by an nhabtant of
ths Commonweath ess, both n the case of a domestc busness corporaton
and of a foregn corporaton, nterest, so requred to be returned, whch Is
receved upon bonds, notes and certfcates of ndebtedness of the Unted States.
6. Ta abe year, the fsca or caendar year for whch the corporaton
was requred to make Its ast return to the edera Government due pror to
pr 1 of the year n whch the ta Is to be assessed, or, f such return was for
a fractona perod, a fu year, ncudng and endng wth such fractona
perod.
Secton 48 provdes that the ta s payabe n October.
The Massachusetts courts have defntey decded that the ta s
an e cse ta and not a ta on property or ncome. recent case s
Macaen Co. v. Commonweath (163 N. ., 75), decded September
28, 1928. It appears that the statute was amended n 1925 to ncude
n net ncome nterest on Government bonds, farm oan bonds, and
bonds or notes of countes and muncpates. The consttutonaty
of the statute, n so far as t ncuded nterest from Government
securtes n net ncome, was attacked. The court, n uphodng the
consttutonaty of the statute, cted a ong ne of cases and sad that
the ta here attacked s a pure e cse as dstngushed from a prop-
erty ta . It s decared by G. L., chapter 63, secton 32, to be an
e cse 1 wth respect to the carryng on or dong of busness by the
corporaton. It s not a ta on property and net ncome.
In dscussng the effect of ncudng Lberty bond nterest, etc., n the
net ncome the court sad:
It s pan and Is conceded by the Commonweath that these provsons of the
aw were foowed n computng the e cse. It s equay pan that the e cse
was arger than t woud have been f the ncome from the ta e empt secur-
tes had not been added to other Items n makng up the factor of net ncome.
Ths ncome, however, was not ta ed t smpy was empoyed In connecton
wth other factors n ascertanng the measure for computng the e cse wth
respect to the carryng on or dong of busness by the pettoner.
Whe ths decson has been reversed by the Unted States Su-
preme Court on the ground that the statute ndrecty mposed a ta
on the ncome of Government and ta -e empt muncpa securtes
(see Macaen Co. v. Commonweath of Massachusetts, 279 U. S.,
620, 49 S. Ct, 432), t s not beeved that the reversa affects the
poston taken by the Massachusetts courts that the ta s a snge
e cse.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
214(a)3, rt. 131.
338
The ony Massachusetts case found whch dscusses the perod cov-
ered by the ta s Sprngdae nshng Co. v. Commonweath (242
Mass., 37, 130 N. ., 250). The facts were stpuated, from whch
t appears that a ta was assessed on the pettoner as of pr 1.
1920, and pad. On uy 29, 1920, the pettoner dsposed of a of
ts assets and busness, and thereafter the commssoner of corpora-
tons and ta aton assessed a ta as of a date fve days before such
sae, based upon the pettoner s net ncome from anuary 1, 1920,
to the date of sae. The court sad:
Ths s a petton under G. L., chapter 63, secton 77, for the abatement of a
ta aeged to have been e acted egay. The pettoner, a corporaton organ-
zed under the aws of ths Commonweath, confessedy was carryng on bus-
ness wthn ths Commonweath up to uy 29, 1920. On that date t conveyed
a ts assets and busness to a Deaware corporaton. No notce of ths sae
was gven to the ta commssoner or any other offcer of the Commonweath
before November 16, 1920. On September 21, 1920, at a stockhoders meetng
hed Id Massachusetts, the dssouton of the pettoner as a corporaton was
authorzed. On November 12, 1920, petton for dssouton was fed and de-
cree grantng same was entered on March 10, 1921. The fsca year of the pet-
toner was cotermnous wth the caendar year. The ast return of net ncome
rendered by the pettoner to the edera Government ne t pror to pr 1,
1920, covered the perod from anuary 1, 1919, to December 31, 1919, both n-
cusve. The ta here n ssue was n truth measured n respect of ncome
for the perod anuary 1, 1920, to u y 29, 1920. both ncusve, under St. 1919,
chapter 355, as amended by St. 1920, chapter 549, now G. L., chapter G3.
The ta s an e cse and not a property ta . It s so decared n secton 2
of sad chapter 355. There s no reason to doubt the accuracy of the name
gven to t by the Genera Court. (S. S. Whte Co. v. Commonweath, 212 Mass.,
35, 43, 98 N. ., 1056, nn. Cas. 1913C, 805.) It s n substance as we as n
name an e cse. It s mposed upon every domestc corporaton wth respect
to the carryng on or dong busness by t. Sad chapter 355 foows both n
form and substance the system of rasng revenue for the support of govern-
ment from domestc corporatons by e cse rather than by property ta , whch
ong has been estabshed n ths Commonweath. ( aton, Crane Pke Co.
v. Common weath, 237 Mass., 523, 527, 130 N. ., 99 ar paca Co. v. Com-
monweath, 212 Mass., 156, 98 N. ., 1078, and eases there coected eows
as Power Co. v. Commonweath, 222 Mass., 51, 109 N. ., 891, nn. Cas.
1910C. S34.)
Ths ta s a snge e cse measured by the sum of a percentage on ts cor-
porate e cess added to a percentage on ts net ncome as those terms are defned
n the act. Secton 2. though both property and ncome are used as a bass
for ts cacuaton, the ta Is nevertheess an e cse on the commodty of e er-
csng the corporate franchse and not a ta on property or on ncome. The
ta here assaed was eved n respect to the dong of busness durng the
caendar year begnnng on anuary 1, 1920. Ths s the pan effect of sad
chapter 355. That act was approved on uy 24, 1919. y secton 33 t went
nto effect on anuary 1, 1920. The frst return under the act was requred to
be fed by the corporaton durng the frst 10 days of pr, 1920, as of the 1st
day of that pr. Secton 4. The tems of that return ncuded the corporate
e cess as of that 1st day of pr and the net ncome for the ta abe
year as requred to be reported by the corporaton n ts ast pror return
to the edera Government. That ast pror return was and of necessty
must have been for the caendar year 1919. The net e cse ta , beng that here
n queston, was eved n respect to the dong of busness durng the caendar
year begnnng wth anuary 1, 1920. Ths part of the e cse s eved for a
perod of tme that s past and not for a perod n the future. The effect of
the statute was to mpose an e cse for the commodty of carryng on busness
by a domestc corporaton for a ess perod than one year, n cases where such
busness was not carred on for an entre year. That ths was the purpose of
the Genera Court s manfest from the present phrase of the aw n G. L.,
chapter 03, secton 30, subsecton 6. or many years the corporate e cse ta
was eved upon domestc corporatons wth respect to ther corporate e cess on
a day certan. (Martn h. a Co. v. Commonweath, 215 Mass., 326, 102 N. .,
364.) If there was no corporate e cess on that date for any reason, no e cse
was due even though the commodty of carryng on busness had been e ercsed
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
339
214(a)3, rt. 131.
durng a consderabe fracton of the precedng ta year. (Commonweath v.
Lancaster Savngs ank, 123 Mass., 493.)
The Income perod estabshed by sad chapter 355 Is not concdent wth the
assessment day respectng the corporate e cess. ut that does not affect the
vadty of the e cse. Income naturay Imports duraton of tme for ts meas-
urement and property a snge date for ts ascertanment. ( mba v. Cottng,
229 Mass., 541, 118 N. ., 866, L. R. . 1918C, 1189.)
Consderaton of the hstory of the corporate e cse ta aw does not affect
ths concuson. It does not ead to doube ta aton for the same perod. It
Is smpy the estabshment of a new and dfferent standard for measurng the
e cse, whch ooks n part to a perod that s past and not aone to the corporate
e cess on a gven date.
The pettoner en|oyed the commodty of carryng on busness as usua unt
uy 29, 1920. The hodng of a stockhoders meetng n September, 1920, aso
was an act of carryng on busness. These corporate actvtes are egay sub-
|ect to an e cse. (Od Domnon Co. v. Commonweath, 237 Mass., 269, 129
N. ., 613.) It Is not necessary to determne whether the pettoner was sub|ect
to the ta unt dssoved.
The present e cse rghty was eved as of uy 24, 1920. It was provded
by St. 1910, chapter 187, secton 1, as amended by St. 1919, chapter 349, secton
19, now G. L., chapter 63, secton 76, that

The pettoner became sub|ect to the terms of ths secton because t sod and
transferred a Its assets and busness on uy 29, 1920, wthout notce to the
ta commssoner. Ths secton appes to an e cse ta aready ad athough
not due. ut It appes equay to any e cse ta not assessed but whch rghty
may be eved for any perod endng wth such sae, athough the norma tme
for such evy has not yet arrved. oaton of ths secton acceerates the
tme for assessment as we as for coecton. Snce by the terms of ths secton
the e cse became due fve days before the sae, namey, on uy 24,1920, Interest
was recoverabe from that date. Itacs supped.
Whe the anguage used by the court does not eave the queston
of the perod covered by the ta n case of a corporaton whch con-
tnues m busness entrey free from doubt, the concusons to be
drawn from the decson are (1) that the ta s a snge e cse meas-
ured by the sum of a percentage on ts corporate e cess on pr 1
and a percentage on ts net ncome for the ta abe year precedng
pr 1 (2) that the ta s an e cse on the commodty of e er-
csng the corporate franchse for the ta abe year, that s, the
fsca year or caendar year for whch the corporaton was requred
to make ts ast return to the edera Government due pror to pr
1 of the year n whch the ta s to be assessed, or, f such return was
for a fractona perod, a fu year ncudng and endng wth such
perod. Ths ast concuson seems to be we supported by the thrd
paragraph of the opnon quoted above.
It foows that the ta accrues on pr 1. Not unt that date
have a the events occurred (determnaton of net ncome for the
ta abe year and determnaton of the corporate e cess) whch f
the amount of the ta and determne the abty of the corporaton
to pay t. Unted States v. nderson, 269 U. S., 422 (T. D. 3839,
C. . -, 179).) If the corporaton dscontnues busness, the
accrua of the ast ta whch the corporaton w be caed upon to
pay s governed by secton 76. The accrua date s acceerated by
the sae or transfer of the corporaton s assets.
ng pr 1 as the accrua date of the ta shoud resut n few
admnstratve dffcutes. That date s consstent wth the Massa-
chusetts decsons deang wth the nature of the ta and the perod
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
214(a)4, 5, 6, rt. 142.
340
covered by t, as we as edera court decsons and the rungs of
the ureau.
In the case of the M Company here under consderaton t appears
that the ta payer has adopted the accrua method of accountng and
fes ts returns on a fsca-year bass, ts fsca year endng March 31.
The ta payer contends that t s entted to a deducton for ta es
n ts ncome ta return for the fsca year ended March 31, 1922, of
both the e cse ta pad on the bass of the assessment as o pr 1,
1921, and the e cse ta pad on the bass of the assessment as of
pr 1,1922. Ths contenton s untenabe. The e cse ta assessed
as of pr 1, 1921, accrued wthn the ta payer s fsca year ended
March 31, 1922, and consttuted a proper deducton for that year.
The e cse ta assessed as of pr 1, 1922, had not accrued on March
31, 1922, and therefore may not be deducted n the return for the
fsca year ended on that date.
The accrua of Massachusetts corporaton e cse ta es for the year
1928 and subsequent years s governed by chapter 258, cts and Re-
soves of Massachusetts, 1927, approved pr 15, 1927, effectve
anuary 1, 1928.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
S CTION 214(a)4,5, ND 6. D DUCTIONS
LLOW D: LOSS S.
rtce 142: ountary remova of budngs. , I -28-4693
Ct. D. 197
INCOM T R NU CT O 1918 D CISION O COURT.
1. Deducton Loss Demoton of udngs.
Where a ta payer purchases mproved rea estate and four
months ater razes the budngs as a condton precedent to
securng a ong-term ease whch contans an obgaton on the part
of the essee to pay the stpuated rentas and to erect at ts own
e pense a new budng n pace of the budngs destroyed, the
ta payer sustans no oss n the destructon of the budngs de-
ductbe under secton 234(a)4 of the Revenue ct of 1918.
2. Decson ffrmed.
The decson of the oard of Ta ppeas (16 . T. ., 749)
affrmed.
Unted States Crcut Court of ppeas fob the Second Crcut.
nahma Reaty Corporaton v. Commssoner of Interna Revenue.
ppea from an order of the oard of Ta ppeas.
efore Manton, Learned and, and Chase, Crcut udges.
May 5, 1930.
OPINION.
The nahma Reaty Corporaton pettons to revew an order redetermnng
Income and e cess profts ta es. Ordor affrmed.
Manton, Crcut udge: The apprunt, a New York corporaton, fes ths
appea from an order of redetermnaton of ts ncome and e cess profts ta es
for the year 1920, by the oard of Ta ppeas, entered May 81, 1929.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
341
214(a)4, 5, 6, rt. 142.
In 1918, the prncpa stockhoder of the appeant acqured fve ots of and
wth budngs thereon n New York Cty, und on one of these the budng
was mmedatey removed and repaced wth a modern budng at a cost of
115,000. The other budngs were atered and rented for commerca uses.
e aocated part of the purchase prce of Uese propertes to budngs and,
e cept n the case of the budng constructed by hm and on whch he had
actua cost fgures, apprased the vaues. In hs Income ta returns for 1914
and 1915 he camed a deprecaton of 25 per cent per year on the cost fgures,
and ths was dsaowed, but deprecaton on hs cost fgures at the rate of
2 per oent per year was aowed. The deprecaton thus f ed by the Com-
mssoner resuted n a deprecated cost for the budngs as of anuary, 1920,
of 250,099.80 the cost of the ots on whch they were ocated was 2,795,-
964.78, a tota of 3,046,064.03.
On anuary 30, 1920, ths stockhoder conveyed to the appeant the prop-
erty referred to for a consderaton of 3,046,064.03, the vauatons beng stated
on the bass of the cost of the budngs to hm, ess deprecaton as aowed
by the Commssoner, and the vaue of the and as stated. consderaton
was pad to ths stockhoder by the assumpton by appeant of a mortgage of
2,265,000 then encumberng the property and the payment of the baance n
cash.
t the tme of the conveyance, the budngs on the property were under ease
to varous tenants, and appeant contnued to ease them to such tenants and
reazed Income therefrom unt May, 1920, when t eased these propertes
to the eckscher udng Corporaton for a term of 21 years, renewabe for
an addtona 21 years at the opton of ether party, and, at the opton of the
essee, for a thrd term of 21 years. t the same tme there was a budng and
oan agreement e ecuted wth the corporaton whereby t was agreed that tha
budngs on the property be destroyed and there be erected thereon a 24-story
offce budng, and the appeant agreed to oan the essee a sum not to e ceed
3,250,000. It was agreed that the essee was entted to savage from the od
budngs. The annua rent was 250,000 for the frst seven years, 275,000 for
the ne t seven years, and 200,000 for the ast seven years. In the event of
renewa, the annua net rent for the budng was 260,000 for the ground,
300,000 or such other sum as mght be f ed by arbtraton. The budngs
were demoshed n une and uy, 1920, and a new budng erected thereon.
The budngs when demoshed were assessed by the cty of New York, for the
purpose of ta aton, at 204,000. In 1920, the pettoner wrote off as a oss on
ts books 250,099.30, the vaue of the demoshed budngs, and camed a de-
ducton n ts ncome and profts ta return. The oard sustaned the Com-
mssoner n dsaowng t.
The Revenue ct of 1918 (ch. 18, sec. 234(a)4, 40 Stat., 1077) aows a
deducton for oss sustaned durng the ta abe year and not compensated for
by Insurance or otherwse and secton 215(b) provdes that In computng n. t
ncome no deducton sha n any case be aowed n respect of any amount pad
out for new budngs or for permanent mprovements or betterments made to
ncrease the vaue of any property or estate. The Treasury Department, In
Reguatons 45, provded n the case of vountary remova of budngs that
when a ta payer buys rea estate upon whch Is ocated a budng whch he
proceeds to raze wth a vew to erectng thereon another budng, t w be
consdered that the ta payer has sustaned no deductbe oss by reason of the
demoton of an od budng and no deductbe e pense on account of the cost
of such remova, the vaue of the rea estate, e cusve of od mprovements,
beng presumaby equa to the purchase prce of the and and budngs pus the
cost of removng the useess budng. The budngs were demoshed as part
of the pan to erect a new budng on the entre pot. The ong-term ease of the
and, wth the rentas as stated, was a vauabe asset to take the pace of the
demoshed budngs. The conveyance for a term of years to the essee had for
one of ts prme purposes the razng of the budng and the erecton of a new
and vauabe budng on the and.
Reguatons 45, as quoted, has been a Treasury reguaton under the Revenue
ct of 1921 (Reg. 62, art. 142), 1924 (Reg. 65, art. 142), and 1920 (Reg. 09,
art. 142). It s not n confct wt e press statutory provson and has the
force and effect of aw. (Maryand Casuaty Co. v. Unted States (1919), 251
U. S., 342.) In Lberty akng Co. v. ener (1930) (37 ed. (2d), 703. Thrd
Crcut Ct. D. 194, C. . I -1, 231 ), a smar queston was presented.
There property purchased had budngs thereon, whch were demoshed to
make way for new budngs, and the court hed that Reguatons 45, whch
t found egay promugated, sustaned the poston of the Commssoner n
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
214(a)7, rt. 151.
342
decnng to permt a deductbe oss because of the demoton of the od
budng.
Under the provsons of the ease, appeant s essee, at ts own e pense, was
obged to repace the budngs demoshed wth a new offce budng, whch
became the property of the appeant at the end of the term. Whe secton
234(a) of the evenue ct of 1018 permts the deducton of osses sustaned
durng the ta abe years, the appeant dd not sustan a oss. Pecan ay
Lumber Co. v. ar (1929), 31 ed. (2d), 15.) The remova of the budngs
was a part of thp cost of acqurng the ease and wth t came the obgaton of
the tenant to pay the rent. The cost of acqurng an asset can not be regarded
as deductbe as a oss or busness e pense for the year n whch It s pad or
ncurred. Moreover, secton 215(b) of the evenue ct of 1918 provdes that
there may be no deducton for any amount pad out for new budngs or for
permanent mprovements or betterments to ncrease the vaue of any property
or estate, and ns the asset acqured was a ong-term ease, whch provded an
obgaton to pay stpuated rentas and erect a new budng n pace of the
budng demoshed, there may be no deducton aowed. There was neces-
sary contaned In the ease permsson on the part of the appeant to permt
the essee to destroy the od budngs. The acquston of somethng from
whch ncome w be derved n the future as a vaue n money s worth n
the same sense as somethng whch w produce ncome In praesent there was
a compensatng vaue for the oss of the budngs whch must be recognzed as
havng money s worth. There was a substtuton of assets rather than a oss
sustaned In the destructon of the budngs.
Order affrmed.
S CTION 214(a)7. D DUCTIONS LLOW D:
D D TS.
rtce 151: ad debts. I -46-4836
Ct. D. 247
INCOM T R NU - CT O 1921 D CISION O COURT.
1. Deducton Debts Recoverabe n Part Sut ursdcton
Commssoner s Dscreton.
The crcut court of appeas has |ursdcton to revew on appea
the acton of the Commssoner and the oard of Ta ppeas n
dsaowng a deducton under secton 214(a)7 of the Revenue ct
of 1921 for a porton of a debt recoverabe ony n part. The
dscreton gven the Commssoner under that paragraph to aow
a debt to be charged off In part when satsfed that t s recoverabe
ony In part shoud not be nterfered wth by the courts uness
pany arbtrary or unreasonabe.
2. Deducton ad Debt Debtor s Obgaton Secured.
Where a ta payer advances coatera n order to protect the
account of a borrower wth hs brokers and ater purchases the
stock whch the securtes had been deposted to cover on margn,
eavng the borrower ndebted to the ta payer as the resut of the
transacton, and the ta payer takes the borrower s obgaton to
pay the debt wthn a year under an agreement that the borrower
woud aso pay monthy the Interest and carryng charges on the
stock and woud pay any oss on the stock f It was sod wthn a
year at ess than the purchase prce per share, the nsovency of
the borrower n the ta abe year does not effect a oss on hs
ndebtedness deductbe from gross ncome under secton 214(a)4
or secton 214(a)7 of the Revenue ct of 1921 where t s not
shown whether the borrower kept up hs payments under hs
contract or whether any of the stock was sod wthn the ta abe
year and where It does not appear that the stock was not sod
wthn a year from the date of the agreement for an nmount
suffcent to satsfy the ndebtedness camed as a oss.
3. Decson ffrmed.
The decson of the oard of Ta ppeas (14 . T. ., 1405)
affrmed.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
343
214(a)7, rt. 151.
Unted States Crcut Court of ppeas, S th Crcut. No. 5502.
rank Stranahan, pettoner, v. Commssoner of Interna Revenue, respondent.
Petton to revew an order of the Unted States oard of Ta ppeas.
une 27, 1030.
Moorman, Crcut udge: Ths Is a petton to revew an order of redeterm-
naton entered by the oard of Ta ppeas assessng a defcency n ncome
ta es aganst the pettoner for the year 1921 n the amount of 61,744.19.
The assessment was based upon dsaowances of osses camed to have been
sustaned on oans to Carence . are and to the effery-DeWtt Co.
The are oan arose n ths way: In 1920 are was carryng an account
wth a brokerage frm on the margn. mong the stocks whch he had pur-
chased was stock of the Owens otte Co. are borrowed securtes from
pettoner of the appro mate vaue of 125,000 for the purpose of depostng
them as addtona securty on hs oans. Pettoner arranged wth the brokers
to have the account paced n hs name so that the securtes woud not be-
come abe for stock transactons other than the one nvovng the Owens
otte Co. stock. Ths stock contnued to fa, and the brokers, nsstng upon
addtona margn, threatened to cose out the account f further securty was
not furnshed. The pettoner, desrng to save the securtes he had oaned to
are, purchased the otte company stock outrght at the prevang market
prce of 27 a share, and pad the brokers, n addton, about 98,000, the
baance due on the account n whch that stock was carred. are agreed
to repay ths 98,000 to pettoner wthn a year wth Interest, to pay at the
end of each month carryng charges on the stock, and to pay any oss that
pettoner mght sustan from a further decne In the prce of It. It was
agreed that are shoud have the rght to purchase wthn one year, at 45.57
a share, any and a of the stock that pettoner n the meantme had not sod,
and that If any of It was sod wthn the year at a prce above 27 a share,
he shoud have credt upon hs Indebtedness for the dfference between that
prce and the prce at whch t was sod.
are became nsovent n the atter part of 1921. The record does not
show whether he kept up hs payments under hs contract wth pettoner, or
whether any of the stock was sod wthn the year for whch the oss s
camed. Nor does anythng appear to Indcate that the stock was not sod
wthn a year from the date of the agreement for an amount suffcent to
satsfy the ndebtedness of 98,000 camed as a oss.
The transacton was smar In Its nature to those nvoved n eber.no v.
Commssoner (38 ed. (2d), 810 (6 C. C. .)). We decded In that case that If
there were osses they dd not come wthn subsecton 4 of secton 214(a) of
the ct of 1918, because they were not ncurred n trade or busness, and. fur-
ther, that the deductons camed were not aowabe under subsecton 7, sec-
ton 214(a), of the ct, because the coatera stock was not sod and osses
were not sustaned wthn the ta abe year. The reasons gven for that dec-
son are controng here. y payng for the otte company stock, settng the
account n whch It was carred, and takng are s obgaton for the e cess
over the market prce so pad under an agreement that he woud pay the In-
terest and carryng charges thereon at the end of each month, woud pay any
oss on the stock If t was sod at ess than 27 a share wthn a year, and
shoud have the rght to pay for It at 45.57 a share at any tme wthn a year,
or f any part of t was sod shoud be credted upon hs ndebtedness wth the
amount for whch t was sod n e cess of 27 a share, the pettoner put hm-
sef for a ega purposes n the shoes of the broker. e became the credtor
of are In the pace of the broker, hodng the otte company stock as securty
|ust as the broker had done. ence the nsovency of are occurrng durng
the year coud not effect a oss on the ndebtedness, so ong as there remaned
the rght of recourse upon the otte company stock. Nothng, as we have sad,
appears In the record to show that t was sod wthn the year or that tstkng
nto account Its vaue as a securty there was a defnte or fna determnaton
that any part of the debt was worthess. Obvousy there was no ascertaned
oss.
The other cam of oss s based upon a note of the effery-PeWtt Co. It s
Inssted that ths note became worthess n part durng the ta abe year and
that the Commssoner shoud have aowed a deducton therefor under sub-
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
214(a)7, rt. 151.
344
secton 7, secton 214(a). of the ct of 1918. That provson of the ct confers
a rght to a deducton where a debt has been ascertaned to be worthess durng
the ta abe year and s charged off the books. It aso authorzes the Comms-
soner to aow a deducton when he s satsfed that the debt s recoverabe
ony n part. It s contended by the Government upon the authorty of W-
atn port Wre Rope Co. v. Unted States (277 U. S., 551 T. D. 4172, C. .
II-2, 323 ). and other oases, that ths court s wthout |ursdcton to revew
the dsaowance by the Commssoner and oard of Ta ppeas of a cam
recoverabe ony n part. In the Wamsport case sut was brought n the
Court of Cams to recover an aeged overpayment of ta es because the Com-
mssoner had refused to make a speca assessment under secton 328 of the
ct of 1918. The court was deang n that case, n part, wth the |ursdcton
of the Court of Cams as such, and t hed that no |ursdcton had been con-
ferred on that court to determne the matter n ssue ether by statute ante-
datng the Revenue ct of 1918 or by the ct of une 2, 1924, creatng the
oard of Ta ppeas. s a probabe reason for not conferrng such |ursdc-
ton, the court ponted out that the makng of a speca assessment uuder the
appcabe statute was a matter that caed not ony for e perence and speca
knowedge of cass probems, but aso for the reachng of concusons upon
consderatons not susceptbe of proof. Ths consderaton, wth the anguage
of the statute, ed to the concuson that Congress had ntended to gve to the
decsons of the Commssoner and the oard of Ta ppeas n speca assess-
ments a fnaty that coud not be chaenged n the courts n the absence of
fraud or other rreguartes.
The case at bar presents crcumstances dstngushng t from the case |ust
referred to. Power to revew the decsons of the oard of Ta ppeas s
e pressy confded n the Crcut Courts of ppeas and the Court of ppeas
of the Dstrct of Coumba. (26 U. S. C, 1226.) urthermore, many of the
compe tes that are encountered n a speca assessment are not presented n
the determnaton of the recoverabty n part of a debt. The atter s often
as susceptbe of proof as entre worthessness. It s admtted that the Com-
mssoner s decson on ths cam was revewabe by the oard. We do not
construe the permssve form of the authorty gven hm to aow the deduc-
ton to be a mtaton on the power gven to the courts to revew the decson
of the oard thereon, nor do we thnk any restrcton on that power s to be
nferred from the Wamsport case or the earer case of ar v. Osteren
(275 U. S., 220 T. D. 4120, C. . II-1, 181 ). Ceary, there s none n Ser-
schen v. Unted States (266 U. S., 221) and Unted States v. Wams (27S
U. S., 255), whch were rested upon entrey dfferent statutes.
though there s power n the courts to revew the acton of the oard n
dsaowng a deducton based upon a debt recoverabe ony n part, It s
cear from the anguage of the statute that the admnstratve authortes, the
Commssoner and the oard, are gven a wder dscreton n determnng
whether such aowances shoud be made than s gven them wth respect to
debts ascertaned to be worthess and charged off wthn the ta abe year.
Deductons of the atter are aowed as a matter of aw, but the statute pro-
vdes as to the former that when satsfed that a debt s recoverabe ony
n part, the Commssoner may aow such a debt to be charged off In part.
Thus t woud seem that the dscreton that s gven the Commssoner and
oard of Ta ppeas In passng on cams of ths knd shoud not be nter-
fered wth by the courts uness pany arbtrary or unreasonabe. (Cf. Lucas
v. mercan Code Co., 280 U. S., 445 TCt. D. 168. C. . I -1, 3141, and
Lucas v. ansas Cty Structura Stee Co., 281 U. S., 204, decded pr 14, 1930
Ct. D. 223, page 299, ths uetn .)
It appears n ths case that n November, 1920, the effery-DeWItt Co. was
ad|udcated a bankrupt. The tota amount of Its abtes as shown by ts
schedues was . 895,909.39, and t sted assets amountng to 802,057.66. Com-
mssoners apponted by the court apprased ts assets at 302,518.50. Pror
to the ad|udcaton some of the arger credtors of the company, under the
drecton of the pettoner, formuated a pan to organze a new company and
acqure the assets of the od. The ob|ect of formng ths new company was to
suppy t wth addtona capta and carry on the same busness that the od
company had been engaged n. The pettoner was Interested n the contnua-
ton of that busness because a consderabe porton of the product of the od
company had been sod to a company whch he had organzed and was operat-
ng. The credtors |onng n ths pan consented to accept preferred stock n
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
345
S214(a)7, rt. 154.
the new company for ther cams aganst the od. Credtors who dd not par-
tcpate In t receved payment of ther cams n fu where the cams were
ess than 100, and those havng cams from 100 to 400 agreed to accept
25 per cent of ther face vaue. commttee representng the new organ-
zaton bought the assets of the od at the bankruptcy sae for 150,000, an
amount suffcent presumaby to satsfy the mnor credtors accordng to the
pan of settement agreed upon. The new company proceeded to Issue pre-
ferred stock of the par vaue of 10 a share to the partcpatng credtors of
the od company to the e tent of the face vaue of ther cams. No stock was
acqured by anyone e cept those credtors recevng t n e change for ther
cams. The pettoner and the Champon Spark Pug Co., whch was organ-
zed to promote the sae of the product of the od company, and of whch pet-
toner was presdent, oaned the new company suffcent funds to enabe t to
carry on ts operatons. The frst year It operated t reported net earnngs n
e cess of 9 per cent of ts outstandng capta stock. These earnngs were put
back nto the busness, but n 1927 t decared a dvdend of 6 per cent. The
frst sae of ts stock was made n une, 1923, at 3.50 a share, and the second
sae n November of 1923 at 5 a share. It does not appear that any part
of the stock whch the pettoner receved has ever been sod, or what t s
worth.
Nether the Commssoner nor the oard of Ta ppeas was satsfed from
the foregong facts that pettoner s debt aganst the effery-DeWtt Co. was
recoverabe ony In part n 1921. It can not be determned from the evdence
what pettoner woud have receved n a dstrbuton of the assets of that
company had ts affars been wound up ndependenty of the reorganzaton
pan. In fact, t was not unt after settement had been made wth a
credtors of the company e cept those partcpatng n the reorganzaton that
the bankruptcy proceedngs were Insttuted, and It was a part of the pan, as
found by the oard of Ta ppeas, to put the company nto bankruptcy, for a
nomna sae of ts assets and a nomna purchase of them by the credtors
commttee satsfyng the requrements of the aw. Under these crcumstances
It can not be sad that the sum whch the new company pad for the od repre-
sented the true vaue of the assets sod. The od company had an estabshed
busness. The market for the product of the reorganzed company was aready
estabshed. It made money from the begnnng of Its operaton. In ts bank-
ruptcy schedues t sted assets of practcay the same amount as Its ndebted-
ness. The commssoners apponted by the court apprased them, doubtess for
the purpose of qudaton, at more than 300,000, and ths dd not ncude
ntangbe assets nor the good w of the busness as a gong concern. There
was accordngy no showng by the pettoner of any defnte vaue of these
assets, and hence we can not say that the acton of the Commssoner was
pany arbtrary.
The order of the oard of Ta ppeas s affrmed.
rtce 154: Worthess securtes. I -43-4813
Ct. D. 240
INCOM T R NU CT O 1921 D CISION O COURT.
1. Deducton ad Debts onds.
onds purchased snce ebruary 28, 1913, and ascertaned to be
worthess n part and charged off n the ta abe year are bad debts
recoverabe ony In part wthn the meanng of secton 234(a) 5
of the Revenue ct of 1921 n respect of whch a deducton s a-
owed under that paragraph In the amount of the dfference between
ther cost and ther market vaue at the cose of the ta abe year.
2. Decson Reversed.
The decson of the oard of Ta ppeas (13 . T. ., 467)
reversed.
35942 31 23
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
214(a)7, rt. 154.
346
Coubt of ppeas of the Dstrct of Coumba. No. 4941.
Commonweath Commerca State ank v. Commssoner of Interna Revenue.
efore Martn, Chef ustce, and Robb and an Obsde, ssocate ustces.
ppea from a decson by the oard of Ta ppeas Invovng ncome ta es for the
caendar year 1921 n the amount of 3,358.08.
May 5, 1930.
OPINION.
On uy 10, 1916, appeant, ocated at Detrot, Mch., purchased Impera
Russan Government 6 per cent bonds, at par vaue of 40,000. On May 81,
1917, t purchased Impera Russan Government 5 per cent bonds at par
vaue of 11,000.
In March, 1917, the Impera Russan Government was overthrown and In
1918 the Sovet Government repudated the fnanca obgatons of the Impera
Government, ncudng the above-mentoned bonds then hed by appeant
Severa tmes durng the year 1921, the State bank e amner of the State of
Mchgan drected appeant to wrte off ts books the above-descrbed bonds to
the fu e tent of ther par vaue. ppeant comped. Ths acton was
approved by the State bank commssoner.
The oard of Ta ppeas found that at the cose of the year 1921 each
cass of the above-descrbed bonds was quoted on the e change at about 10
per cent of ther par vaue.
ppeant kept ts books on a cash recepts and dsbursements bass. In ts
return for the year 1921 t deducted as a bad debt oss the amount of 51,000,
representng ts tota nvestment n the Russan bonds. The queston here (as
stated by appeant) s whether the oard erred n dsaowng ths amount, or
90 per cent thereof, as a debt ascertaned to be worthess and charged off.
Secton 234(a)5 of the Revenue ct of 1921 (42 Stat., 227, 255) provded, n
part, that n computng the net ncome of a corporaton sub|ect to the ta
Imposed by secton 230 there sha be aowed as deductons:
Debts ascertaned to be worthess and charged off wthn the ta abe year
(or In the dscreton of the Commssoner, a reasonabe addton to a reserve
for bad debts) and when satsfed that a debt s recoverabe ony n part, the
Commssoner may aow such debt to be charged off n part .
The Treasury Department, charged wth the duty of nterpretng and gvng
effect to ths statute, adopted certan reguatons, the pertnent provsons of
whch are as foows:
rt. 151. ad debts. ad debts may be treated n ether of two ways
(1) by a deducton from Income n respect of debts ascertaned to be worthess
n whoe or n part, or (2) by a deducton from ncome of an addton to a
reserve for bad debts. Where banks or other corporatons whch are
sub|ect to supervson by edera authortes (or by State authortes mantan-
ng substantay equvaent standards) n obedence to the specfc orders, or
n accordance wth the genera pocy of such supervsory offcers, charge off
debts n whoe or n part, such debts sha, n the absence of affrmatve ev-
dence ceary estabshng the contrary, be presumed, for Income ta purposes,
to be worthess or recoverabe ony n part, as the case may be.
rt. 154. Worthess securtes. onds purchased snce ebruary
28, 1913, when ascertaned to bo worthess, may be treated as bad debts to the
amount actuay pad for them.
Secton 234(a)5 of the ct of 1921 was reenacted wthout change n the
Revenue ct of une 2. 1924 (43 Stat., 253, 284), and In the Revenue ct of
ebruary 20, 1926 (44 Stat., 9, 42). The artces of the Treasury reguatons
to whch we have referred were readopted wthout change n Reguatons 65,
under the ct of 1924, and n Reguatons 69, under the ct of 1926. The Treas-
ury Department, In conformty wth the foregong reguatons, had consstenty
permtted the hoders of bonds smar to those here Invoved, when ascertaned
to be worthess, to be treated as bad debts.
In anuary, 1928, the oard of Ta ppeas, n the case of rst Natona
ank of St. Pau v. Commssoner (10 . T. ., 32), hed that such a bond Is not
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
347
214(a)7, rt. 155.
a debt wthn the meanng of the bad debt provson of the ct of 1921 and sub-
sequent cts. That rung accounts for the acton of the Commssoner of
Interna Revenue n refusng to permt a deducton n the present case. Pror
to that tme the rungs had been n harmony wth the vews of the Treasury
Department. ( ppea of The Murchson Natona ank, 1 . T. ., 617
ppea of Samue rd, 4 . T. ., 259.)
In omada v. Unted States (215 U. S., 392, 396), the court, quotng wth
approva from Unted States v. ermanos (209 U. S., 837, 339), sad:
We have sad that when the meanng of a statute s doubtfu great weght
shoud be gven to the constructon paced upon t by the department charged
wth ts e ecuton. Robertson v. Downng, 127 U. S., 607 Unted States v.
eaey, 160 U. S., 136.) nd we have decded that the reenactment by Con-
gress, wthout change, of a statute whch had prevousy receved ong con-
tnued e ecutve constructon s an adopton by Congress of such constructon.
Unted States v. ak, 204 U. S., 143, 152.)
smar observaton was made n Natona Lead Co. v. Unted States (252
U. S., 140, 146):
The reenactng of the drawback provson four tmes, wthout substanta
change, whe ths method of determnng what shoud be pad under It was
beng constanty empoyed, amounts to an mped egsatve recognton and
approva of the e ecutve constructon of the statute (Unted States v. P U-
b ck, 120 U. S., 52 Unted States v. . ak d ro., 204 U. S., 143, 152 Unted
States v. Oerecedo ermanos y Compana, 209 U. S., 337), for Congress Is pre-
sumed to have egsated wth knowedge of such an estabshed usage of an
e ecutve department of the Government.
In Logan v. Davs (233 U. S., 613, 627) the court sad t s a setted rue
that the practca nterpretaton of an ambguous or uncertan statute by the
e ecutve department charged wth ts admnstraton Is entted to the hghest
respect and w not be dsturbed e cept for very cogent reasons.
To the same effect are McLaren v. escher (256 U. S., 477, 481), ern Rver
Co. v. Unted States (257 U. S., 147, 154), Paducah Water Co. v. Commssoner of
Interna Revenue ( pp. D. C, , 33 . (2d), 559, 560 Ct. D. 94, C. . III-2,
806 ), Cornng Gass Works v. Lucas ( pp. D. C, , 37 . (2d), 798, 800),
mercan uto Trmmng Co. v. Lucas ( pp. D. C, , 37 . (2d), 801, 803).
In the present case, the contemporaneous and contnued nterpretaton by the
Treasury Department was both equtabe and reasonabe, and apparenty met
wth the approva of Congress, as otherwse we must assume there woud have
been a change n the wordng of the statute. There s no cogent reason for now
adoptng the more technca nterpretaton whch the oard has paced upon the
statute. It foows, therefore, that the oard erred n not aowng a deducton
of 90 per cent of the cost of the bonds as a bad debt.
Decson reversed.
rtce 155: eserve for bad debts. I -30-4722
I. T. 2540
R ND CT O 1021.
In vew of the Commssoner s acquescence n the decson of the
Unted States oard of Ta ppeas n the ppea of rst Natona
ank of Omaha (17 . T. ., 1358 whch see on page 20 , Genera
Counse s Memorandum 938 (C. . I-2. 20G), reatve to the
treatment of bad debts by the reserve method (see queston and
answer numbered III), s modfed n so far as t s n confct wth
the oard s decson n the foregong appea.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
214(a)9, rt. 184.
348
I -29-4709
Ot. D. 208
INCOM T R NU CT O 1018 D CISION O COU T.
1. Deducton mobtzatton Computaton actes ban-
doned.
Where artces are acqured for the producton of war materas
wthn the purvew of secton 234(a)8 of the Revenue ct of 1918
and are abandoned durng the postwar perod, the deducton aow-
abe under that secton on account of amortzaton s the dfference
between the cost of the factes and ther savage vaue at the tme
abandoned, due ad|ustment for deprecaton beng made.
2. Same actes Contnued n Use n Postwab Perod.
Where artces are acqured for the producton of war materas
wthn the purvew of secton 234(a)8 of the Revenue ct of 1918
and are contnued n use durng the postwar perod as a part of the
ta payer s pant, the deducton aowed under that secton on ac-
count of amortzaton s the dfference between the cost of the
factes and the resdua vaue thereof durng postwar years.
Such resdua vaue (to be not ess than the savage vaue- of the
property nor greater than the estmated cost of repacement under
norma postwar condtons ess deprecaton) s the estmated vaue
n use of the property n the computaton of whch a comparson of
the producton obtaned through the use of such factes durng
the postwar perod wth the producton attaned durng the war
perod and a comparson of the abor condtons of the ta payer s
pant durng these perods are factors whch shoud be consdered.
8. Same Resdua aue qua to Cost.
No oss Is sustaned and therefore no deducton Is aowabe under
secton 234(a)8 of the Revenue ct of 1918 n respect of property
the resdua vaue of whch durng postwar years s as great as the
cost.
Unted States Crcut Coubt of ppeas kob the Second Cbcutt.
Unted States of merca, appeant, v. The rggs Manufacturng Co., appeee.
ppea from the Dstrct Court for the Dstrct of Connectcut.
The acton was brought by the rggs Manufacturng Co. to recover for
Income and proft ta es aeged to have been Iegay assessed and coected.
Decree for pantff defendant appeas Reversed.
Manton, Crcut udge: Ths acton s to recover ncome and proft ta es
aeged to have been Iegay coected for the year 1918. The bass of the
acton Is a cam of erroneous computaton by the Commssoner of Interna
Revenue n deductng from gross ncome aowabe on account of amortzaton
the cost of certan factes camed to have been constructed for the produc-
ton of war materas wthn secton 234 (a) and (8) of the 1918 Revenue ct
(40 Stat., 1057). udgment was entered for the appeee for 9,655.27. ppeee
s a Connectcut corporaton havng a manufacturng pant, engaged n 1913
n manufacturng cotton yarns, tre fabrcs, and tent duck. Part of ts products
conssted of artces contrbutng to the prosecuton of the war.
There are 21 tems wth respect to whch the appeee camed deducton
from gross ncome on account of amortzaton of the cost. of the Items,
e cept a warp compressor, were used n the pant durng the perod foow-
ng the war and unt March, 1921. The warp compressor was abandoned at the
pr 7, 1930.
OPINION.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
349
214(a)9, rt. 184.
cose of the war and was found to have a market vaue of 30. mong the
tems schedued was one of tenement houses for empoyees repar to a furnace
a garage but for fre engne an ce house mprovements on a dam roof on
a boer house and a water tank for a m, a of whch were camed to
have been used ess durng the postwar perod than durng 1918. The other
tems were used n the operaton of the pant as a whoe after the war perod.
Durng 1918 the pant was n operaton and empoyed an average of 217 n
1921, an average of 180 n 1922, an average of 178 n 1923, an average of
178 and n 1924 an averags of 178. The hours of pant operaton were as
foows:
1918 2, 770
1919 2, 797
1920 2,465
1921 2,023
The producton, e pressed n pounds, durng the same perod, was 1,469.449
n 1918 1,708,394 n 1919 1,313,336 n 1920 600,794 n 1921 571,584 n 1922
631,681 In 1923 440,603 n 1924.
The workng hours er week In 1918 were 55, but, as a resut of a strke
n 1919, n the succeedng years It was reduced to 48 hours.
The statute provdes (sec. 234(a), 40 Stat., 1057) :
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:

(8) In the case of budngs, machnery, equpment, or other factes,
constructed, erected, nstaed, or acqured, on or after pr 6, 1917, for the
producton of artces contrbutng to the prosecuton of the present war,
there sha be aowed a reasonabe deducton for the amortzaton
of such part of the cost of such factes as has been borne by
the ta payer, but not agan ncudng any amount otherwse aowed under
ths tte or prevous cts of Congress as a deducton n computng net
ncome.
Secton 1309 of the same ct authorzes the Commssoner to make a
needfu rues and reguatons for the enforcement of the foregong prov-
sons. Ths the Commssoner dd. s to war factes abandoned durng
the postwar perod, he rued that the savage vaue, f any, be deducted from
the cost n ascertanng the amortzaton. In the case of the warp com-
pressor, tem 2, he found the cost to be 1,733.70 and the savage vaue 30.
The Government concedes that the amortzaton aowance on ths Item shoud
be 1,703.70, representng the dfference between the orgna cost and the
resdua postwar vaue, ess amounts aready aowed for deprecaton.
The reguatons further provde n substance that for war factes sod dur-
ng the postwar perod the resdua postwar vaue was the dfference between
the cost of such factes and the seng prce thereof, wth ad|ustment for
deprecaton. or war factes contnued n use durng the postwar perod,
the resdua vaue shoud be ascertaned by rndng the orgna cost and deduct-
ng therefrom what s the postwar resdua vaue of each tem to the ta -
payer. ut t must be found that each tem was acqured for the producton
of war materas wthn the purvew of the statute. The deducton aowabe
under the statute n respect to these factes may be dffcut to compute In
order to ascertan ther postwar resdua vaue ndependenty from the opera-
ton of the entre pant. ut n ascertanng thnt vaue, t shoud be computed
as an estmated vaue of the factes n terms of the actua use n the
manufacturng pant of the appeee. Ths s not an arbtrary cassfcaton.
The utty of the ob|ect s ts vaue. ( ouver s Law Dctonary.) Such
property may have a vaue n use as we as an e changeabe vaue, and
where t s contnued n use n the manufacturng pant, ts far and reasonabe
vaue for that purpose represents ts resdua vaue and shoud and can be
f ed as the vaue n use to the ta payer rather than the vaue whch a stranger
mght pace upon the facty. Such vaue may be measured n terms of
producton the facty s vauabe to the manufacturng pant because t
ads n producton. One machne may be more vauabe than another because
producton may be Increased through ts use. Wth ths knowedge and from
the e perence of manufacturers, the Commssoner argues that a comparson
of the producton durng the postwar perod wth the producton attaned
through the use of the factes durng the war perod and a comparson of the
1922.
1923
1924.
1,982
2,134
1,514
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
S214(a)9, rt. 184.
350
abor condtons n the ta payer s pant durng these perods, are factors whch
shoud be consdered. Ths Informaton and data were supped by ths ta payer.
tabuaton set out n the Government s e hbts Indcates the percentage ot
reducton of abor empoyed from 1918 to the end of the postwar perod as
neary as great as the percentage of reducton n pounds of materas manu-
factured. Ths s accounted for n part by the fact that the manufacture
of heaver materas, such as tre fabrc and tent duck, was abandoned dur-
ng the postwar perod and the appeee manufactured the ghter fabrcs
and contnued throughout the postwar perod. More abor to the pound was
requred. The Commssoner consdered both the quantty of producton and
the amount of abor requred n the manufacturng process n computng the
postwar vaue n use. In hs cacuatons, he found, n 1923, the operators
for the man hours of abor were 74 per cent of 1918 and consderng the
reducton n hours of abor and the number of pounds produced, the 1923
producton was 49 per cent of that of 1918, thus takng the average of 74
per cent of man hours and 49 per cent of pounds produced, he found 61
per cent as the percentage n the postwar use. rom ths he found 61 per
cent of the cost of 13 tems whch he aowed as resdua factes n the
postwar perod, and the resut he found to be a far resdua postwar vaue
to be aowed n computng amortzaton. The dfference between ths resdua
vaue as determned and the cost was a reasonabe aowance on account
of amortzaton of the cost of these tems. Ths cacuaton resuted In the
concuson by the Commssoner of an amount not ess than the sae or
savage vaue of the factes and not greater than the cost of the repace-
ment. The cost of the tems was 18,383.29, 61 per cent of whch s 11,213.81,
whch the Commssoner found to be the far resdua vaue. Ths, deducted
from the cost, gves the amount of amortzaton of the cost on these tems of
7,169.28. Ths method of cacuaton has been adopted by the Commssoner
and approved by the oard of Ta ppeas for a perod of over 10 years.
( ppea of Manve- enckes Co., 4 . T. ., 765 Nun- ush d Wedon Shoe Co.,
15 . T. ., 918 Standard Refractores Co., 6 . T. ., 24.) See aso ott
v. Unted States (16 ed. (2d), 164). We fnd no reason to dffer from these
concusons.
There were other tems whch we thnk shoud have been dsaowed as resd-
ua factes. The tem for tenement houses as charged durng the postwar
perod. ppeee ncreased ts empoyees houses from 70 n 1918 to 79 In 1924.
The percentage of vacances decreased durng that perod and the appeee de-
rved more ncome from rentas n each year of the postwar perod than n the
1918 perod. furnace n the head weaver s house consttutes another tem.
Ths furnace was empoyed to the same e tent n the postwar perod as n
prevous years and as a facty was ndspensabe then. The oam Is that
t was too arge, but t was |ust as necessary durng the postwar perod as n
the prevous years. nother tem, a garage for re engne, s sted. It was
acqured durng the atter part of 1918 for the purpose of housng a new fre
engne and three automobes. It was used n the postwar perod for housng
the fre engne and the t-hree automobes. n tem for ce house for storng
ce each year was used n the postwar perod as n the prevous years. Its use
was not decreased durng ths perod. It was acqured after the cessaton of
hosttes but was not acqured for the producton of war materas. There
were mprovements to a (am used for the protecton of the entre pant durng
the food seasons of 1919 and subsequent years. The mprovements afforded
dranage for the cears and tenement houses, but t was used as much n the
postwar perod, because of the use of the tenement houses, as durng the prevous
perod. new roof repaced the od upon the boer house. It had gven way
durng the war perod t was a permanent mprovement to the pant for use
durng subsequent years. new water tank was but for m No. 4. It was
used to repace an od tank for fre protecton. Ths was but wthout regard
to war work. These seven tems had a resdua vaue as great as the cost
and no oss was sustaned by reason of such mprovements. The deductons for
these seven tems shoud have been dsaowed.
The provsons of the statute |ustfed the Department n the reguatons
whch were made. The Commssoner s concusons were |ustfed wthn the
reguatons and the statutes. The dscreton vested n the Commssoner was
not abused. (Secton 1309, 1918 Revenue ct rewster v. Gage, U. S. Sup. Ct_,
an. 0, 1930 Ct. D. 148, C. . I -1, 274 Logan v. Davs, 233 U. S., 623
oske v. Comngors, 177 U. S., 457.) The reguatons were reasonaby adopted
to accompsh the purpose of the statute and they have the force and effect of
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
351
214(a)10, rt. 201.
aw. (Unted States v. nderson, 269 U. S., 423 T. D. 3839, C. . -, 179
Rouss v. owers, 30 ed. (2d), 628.)
It Is apparent that the machnery necessary to the appeee s pant contnung
manufacturng, as It dd, durng the postwar perod woud have had to be
repaced wth smar factes f t had savaged or sod the machnery as scrap
ron or second hand. The statute and the reguatons made thereunder pro-
Tded for the deductons for amortzaton where machnery has been actuay
sod or abandoned by a ta payer at the cose of the postwar perod, but they
have no appcaton where factes have been contnued In use, nor does the
statute have appcaton to Items other than those actuay n use as factes
n the makng of materas durng the war perod. The whoe cost of factes
used durng the war perod may not be charged aganst the war ncome, but a
part of such cost may be charged aganst such Income when t s shown there
has been a parta oss durng the postwar perod, even though they have been
used durng the atter perod. Congress dd not ntend that the oss shoud
be charged off as savage or scrap ron and the ta payer contnue to have a
consderabe use thereof. We agree wth the Commssoner s cacuatons and
resutng amortzaton.
The udgment beow Is reversed and a decree w be entered accordngy.
udge L. ard concurrng In the resut.
S CTION 214(a) 10. D DUCTIONS LLOW D:
D PL TION.
rtce 201: Depeton of mnes, o and gas I -35-4765
wes deprecaton of mprovements. Ct.D.229
ncome ta revenue act of 1921 decson of court.
1. Deducton Depeton ssgnment by Lessee Subease.
n nstrument whereby the essees of an o and gas ease for a
cash consderaton se, assgn, set over, transfer, and dever
ether the ease or an undvded one-haf nterest theren to
another consttutes an assgnment or sae. nd a covenant by
the assgnee to pay the essees as further consderaton an e -
cess royaty of one-eghth of a the o and gas produced from the
eased premses does not make the conveyance a subease. ccord-
ngy, the essees are not entted to depeton deductons based
on dscovery vaue from the cash consderaton receved In the
transacton.
2. Decson ffrmed.
The decson of the oard of Ta ppeas (16 . T. ., 574)
affrmed.
Unted States Crcut Coubt of ppeas fob the fth Crcut. No. 5823.
L. T. Waer and Mrs. L. T. Waer v. Commssoner of Interna Revenue.
Petton for revew of decson of Unted States oard of Ta ppeas. (Dstrct of
Lousana.)
efore ryan and oster, Crcut udges, and Grubb, Dstrct udge.
May 16, 1930.
opnon.
ryan, Crcut udge: Ths s a petton to revew a decson of the oard of
Ta ppeas whch re|ected the cam of pettoners that they were entted,
under secton 214(a) 10 of the Revenue ct of 1921 (42 Stat., 241), to deduc-
tons from ther net ncome for the years 1921 and 1922 for depeton of certan
o and gas eases based on dscovery vaue, and whch hed them abe for
defcences upon ther net ncomes for those years wthout makng aowances
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
214(a)10, rt. 201.
352
for such depeton. The decson of the oard was based upon the concuson
that certan Instruments affectng the eases, whch pettoners contended were
subeases, consttuted assgnments or saes, and that consequenty pettoners
were not entted under the Revenue ct above cted to a reasonabe aowance
for depeton.
partnershp, of whch pettoners were members, acqured from the owners
n 1919 n number of o and gas eases n unproven terrtory, ncudng the
quarter secton of aud here nvoved. In March, 1921, o wns dscovered on
40 acres of ths quarter secton, and wthn 30 days thereafter that partnershp
entered nto a contract wth the Gand O Co. by whch the former dd se,
as.sgn, set over, transfer, and dever unto the atter an undvded haf
nterest n ther ease for the consderaton of 600,000, whch was mmedatey
pad n cash. In pr, 1921, o was aso dscovered on the remanng 120 acres,
and wthn 30 days thereafter an nstrument smar n terms was e ecuted
conveyng the whoe nterest of the partnershp to the Oho O Co. The
consderaton for ths conveyance was 3,000,000 n cash, 1,000,000 out of the
frst o produced, whch has been pad, and a one-eghth e cess royaty.
If these nstruments consttute assgnments or saes as dstngushed from
subeases, pettoners concede that the decson of the oard was correct on the
other hand, f they were subeases, the decson was wrong.
n assgnment of a ease occurs where a essee parts wth hs entre Interest
In the demsed premses or a part thereof for the une pred term of the orgna
ease. (16 R. C. L., 824, 826 35 C. ., 988, 989.) If the assgnor conveys es-|
than hs entre Interest n the whoe or a part of hs ease, so that there st
remans n hm a reversonary nterest, th transacton amounts to a subease.
(14 R. C. L., 826.) It foows that the Gand O Co., by acqurng the en-
tre nterest of pettoners n the undvded haf of the premses descrbed n
the conveyance to t, hods by assgnment and not by subease. The Oho O
Co., by acqurng the entre nterest to the whoe of the premses descrbed n
the conveyance to t, kewse hods by assgnment, uness the provson for
the payment by t of one-eghth e cess royaty operates to make that conveyance
a subease. The one-eghth royaty, whch the Oho O Co. agreed to pay, was,
as t was stated to be, a part of the consderaton. faure to pay t woud
not, under the terms of the conveyance, take away the rght of the purchaser
to contnue to take the other seven-eghths of the o of whch upon producton
It became the absoute owner. Pettoners cte Logan v. State Grave Co.
(158 La., 105) and oard of Commssoners v. Pure O Co. (167 La., 801) to
sustan the proposton that In Lousana royaty under an o and gas ease s
rent. The hodng In the frst cted case was that a mne may be eased for
a certan porton of what Is produced therefrom, and that It s Immatera that
such porton s caed royaty nstead of rent, or that t s reserved ony on
royaty bass. In that case there was no other consderaton than the royaty,
and the reaton that e sted was that of andord and tenant. In the other
case the facts were much the same. We thnk those cases are far from decd-
ng that wthout e cepton royaty can aways be sad to be rent. In both of
these cted cases t was ceary the Intenton of the partes to reserve royaty
In eu of rent, whe n ths case, as aready stated, the Intenton was to requre
the payment of royaty as part of the purchase prce. urthermore, t s argued
that there s a dfference between the common aw and the cv aw In respect
of eases, n that under the former the essee has an estate and the essor a
reversonary nterest, whe under the cv aw the essor retans tte and the
essee acqures ony the use or en|oyment of the eased property. ut so far
as matera here, there s no dfference n the rghts of the essor and the essee
under ether system of aws. In Smth v. Sun O Co. (165 La., 907), the convey-
ance In queston was hed to be a subease nstead of an assgnment, but t was
sad that the essor had not dsposed of a Its rghts under the orgna ease,
but had granted an nterest ess than Its own and mposed obgatons under pen-
aty of reverson, among whch were provsons to the effect that the rghts of
the essee shoud revert to and revest n the essor whenever the essee shoud
cease to deveop the ease. In the ast cted case the rghts of the partes to a
ease under the cv aw were quoted at ength, and t was recognzed that under
the cv aw, as we as at common aw, the essor coud cede hs ease In whoe
or In part. The Sun O Co. case s easy dstngushabe from ths case on
the facts.
Our concuson s that the decson of the oard of Ta ppeas was correct
and It Is therefore affrmed.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
353 215, rt. 293.
rtce 203: mount returnabe through depeton and
deprecaton deductons n the case of essee.
R NU CT O 1921.
ssgnment of essee s nterest. (See G. C. M. 8650, page 214.)
S CTION 215. IT MS NOT D DUCTI L .
rtce 293: Capta e pendtures. I -47-4842
Ct.D.249
ncome ta revenue act of 1921 decson of court.
1. Deducton Commssons Pad n Purchasng Securtes.
Commssons pad n purchasng securtes by a person engaged
n the busness of buyng, hodng, and seng securtes on her
own account are a capta e pendture and not a busness e pense
deductbe under secton 214(a) 1 of the Revenue ct of 1921.
2. Decson ffrmed.
The decson of the oard of Ta ppeas (12 . T. ., 265)
affrmed.
Unted States Crcut Court op ppeas, fth Crcut.
Mar|ore Post utton v. Commssoner of Interna Revenue.
Petton for revew of decson of the Unted States oard of Ta ppeas.
efore Waker, ryan, and oster, Crcut udges.
March 25, 1930.
OPINION.
oster, Crcut udge: The ony queston presented In ths case s whether
commssons pad to brokers for the purchase of securtes shoud be consdered
part of ther cost or an e pense of dong busness.
The fndngs of fact made by the oard of Ta ppeas recte that pet-
toner s an ndvdua resdng n Pam each, a., and engaged n the
busness of buyng, hodng, and seng reates, securtes, etc. The evdence
on whch ths was based fas to show that the pettoner s engaged In bus-
ness In the sense that she buys and ses securtes for others and t woud
appear that she does so merey for her own account. She keeps her books and
made her returns on the cash recepts and dsbursements bass. Durng 1921
she purchased certan securtes and pad a commsson thereon amountng
to 7,478.88, and sought to deduct ths as an e pense of dong busness. The
Commssoner of Interna Revenue dsaowed ths as an tem of e pense and
determned a defcency accordngy. On appea to the oard of Ta ppeas
the Commssoner was affrmed.
The Revenue ct of 1921, secton 212, provdes that the ndvdua ncome
sha be computed n accordance wth the method of accountng reguary
empoyed n keepng the books of the ta payer but f the method empoyed
does not ceary refect the ncome the computaton sha be made upon such
bass and n such manner as n the opnon of the Commssoner does ceary
refect the ncome. Secton 214 of the ct aows as deductons a ordnary
and necessary e penses pad or ncurred durng the ta abe year n carryng
on any trade or busness. The Treasury Department s Reguatons 62, artce
293, provdes: Commssons pad n purchasng securtes are a part of the
cost prce of such securtes. Commssons pad n seng securtes are an
offset aganst the seng prce.
The pettoner can derve no rght to charge the commssons to e penses
from her method of keepng books uness they ceary refect the ncome.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
217, rt. 323.
354
It has been a setted rue of the Treasury Department that commssons pad
In purchasng securtes are a capta e pendture as part of the cost prce
of the securtes. Ths rung has unformy been approved by the oard of
Ta ppeas. We are not referred to any controng decson to the contrary
nor to any decson that s persuasve. The rue Is far and reasonabe. It Is
cear that the ta payer suffers no hardshp by the rue, as the commsson
pad n purchasng the securtes may be deducted from the profts or added
to the osses when the securtes are eventuay sod.
We concur In the rung of the oard of Ta ppeas.
ffrmed.
S CTION 217. N T INCOM O NON SID NT
LI N INDI IDU LS.
rtce 323: Sae of persona property. I -44-4819
G. C. M. 8594
R NU CTS O 1913, 1916, 1917, ND 1918.
The ta payer was a copartnershp organzed under German
aws and havng ts prncpa pace of busness n South merca.
Its practce was for ts prncpa offce to cabe the quantty and
prces of hdes and woo offered for sae to Its representatve n the
Unted States, by whom these offers woud be submtted to prospec-
tve buyers n the Unted States. ds receved were cabed to
the prncpa offce by ts representatve, who, upon recept of cabe
acceptance, sent a etter to the purchaser confrmng the sae on
account of the ta payer.
The pace of the saes descrbed and the source of the ncome
therefrom were the Unted States. The entre net Income of a
busness carred on n the Unted States by the ta payer was
ta abe under the Revenue ct of 1913. The entre net Income
receved from a sources wthn the Unted States was ta abe
under the Revenue cts of 1916, 1917, and 1918.
The case of Compana Genera de Tabaeos de pnos v.
Coector (279 U. S., 306) s concusve that for determnng the
pace of sae n decdng the source of ncome the substance of the
sae s the agreement to se.
Genera Counse s Memorandum 2467 (C. . II-2, 188) and
a other memoranda of the Genera Counse Inconsstent herewth
are modfed or revoked.
Recommended that Offce Decson 1100 (C. . 5, 118) I. T.
1569 (C. . n-1, 126) I. T. 2068 (C. . III-2, 164) be modfed
or revoked.
n opnon s requested whether certan transactons of the M
Company gave rse to ncome from sources wthn the Unted States
wthn the meanng of the Revenue cts of 1913,1916,1917, and 1918.
The M Company, a copartnershp organzed under German aw,
had ts prncpa pace of busness n South merca, and branch
offces n many countres, among whch were branches n the ctes
of S and T, ocated n ths country. The copartnershp, under the
Tradng wth the nemy ct, apped n 1917 to the War Trade
oard for a cense to do busness. It theren stated that t had n
the cty of S a manager and two saesmen and n the cty of T a
manager. It descrbed ts mport busness as consstng of mport-
ng South mercan woo ana hdes for manufacturers and deaers
ocated n ths country. The buk of these transactons was on buy-
ng orders for drect shpment to the purchasers aganst 90-day
banker s etters of credt. In a etter wrtten by (who was at
one tme the cty of S manager of the M Company) t s stated as
foows t
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
355
217, rt. 323.
My dutes conssted of keepng the M Company nformed of market cond-
tons, to se woo and hdes for ther account n the Unted States and Canada,
and to buy any goods they ordered for e port, unt the arrva of In 1910,
when he took the e port end off my hands.
typca transacton of the mport busness nto the Unted States woud
take pace as foows: I woud receve a cabe from the M Company offerng
a certan quantty of merchandse (hdes or woo) at a certan prce. I woud
submt these offerngs to the varous cents and cabe the hghest prce obtan-
abe for whatever quantty the cent chose to bd on. In repy to ths I
woud receve a cabe acceptng or re|ectng the proposton.
If the busness was accepted, I woud send a etter to the purchaser con-
frmng the sae for account of the M Company.
The terms of payment were 90 days drafts aganst confrmed etter of credt
through a frst-cass bankng house.
The cent n hs turn woud cause hs bank to open ths etter of credt n
favor of the M Company. Up to ugust, 1914, a these credts were nvar-
aby In pounds sterng on a London bank. rom then on they were doar
credts on Unted States banks or bankers, even when opened through Canada,
where a arge part of the hde busness was done.
The cty of S manager of the copartnershp, upon the recept of a
cabe from the South mercan offce of the copartnershp, statng
the quantty and prce of the hdes and woo offered for sae, woud
submt these quanttes and prces to prospectve buyers n the Unted
States. The cty of S manager woud then receve a bd from pros-
pectve buyers of the hghest prce they were wng to pay for
specfed quanttes. These bds the manager woud transmt by
cabe to the South mercan offce and upon recept of a cabe
acceptng or re|ectng the proposton the cty of S manager
woud f the busness was accepted send a etter to the
purchaser confrmng the sae on account of the M Company.
Congress may, f t chooses, evy a ta upon a ncome derved
by a nonresdent from the Unted States. (DeGanay v. Lederer,
250 U. S., 376.) The Revenue ct of 1913 ays a ta upon the
entre net ncome from a property owned, and of every busness,
trade, or professon carred on n the Unted States by persons re-
sdng esewhere. (Secton II- , subdvson 1, made appcabe to
partnershps by Secton II-D, thrd paragraph.) (See aso Secton
II- .) The M Company was admttedy carryng on busness n the
Unted States durng the ta abe years 1913, 1914, and 1915, and
accordngy the entre net ncome of a busness carred on n the
Unted States by t durng such years, ncudng, of course, that from
transactons of the type here presented, s sub|ect to ta as prescrbed
by the Revenue ct of 1913.
somewhat dfferent ssue s presented under the Revenue cts of
1916, 1917, and 1918. These cts ay a ta upon the entre net
ncome receved from a sources wthn the Unted States
by every ndvdua, a nonresdent aen. (Secton 1(a) of the Rev-
enue ct of 1916, made appcabe to copartnershps by secton 8
of the Revenue ct of 1916, as amended by secton 1204, Revenue
ct of 1917, and secton 213(c), Revenue ct of 1918, made app-
cabe to copartnershps by secton 218, Revenue ct of 1918.) Under
these cts the ttorney Genera of the Unted States has rued that
the entre proft made by a foregn corporaton from the sae n the
Unted States of merchandse produced or purchased outsde the
Unted States s ta abe ncome from sources wthn the Unted
States. (Opnons of the ttorney Genera of anuary 21, 1924,
34 Ops. . G., 93, and of November 3, 1920, 32 Ops. . G., 336,
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
217, rt. 823.
356
accepted and apped bv T. D. 3576, C. . III-, 211, and T. D.
3111, C. . 4, 280 O. t). 651, C. . 3, 265.) The oard of Ta
ppeas has taken the same vew. ( rkn v. Commssoner,
. T. ., 402 ppea of Yokohama -Ito washa, Ltd , 8
. T. ., 1248.) (See aso Reguatons 45, artce 91.)
Whether the ncome from the transactons here under consderaton
s from sources wthn the Unted States s, therefore, determnabe
by whether the saes occurred n the Unted States.
The purpose and resut of every sae of goods s to transfer the
property n them from the seer to the buyer. t east so far as
commerca transactons are concerned, ths s effected by a bargan,
agreement, or contract between the seer and the buyer. Ths con-
tract may tsef transfer the property n the goods from seer to
buyer, but uness the goods at the tme of the contract are n beng,
and at the tme specfc and ascertaned, the contract tsef w not
transfer the property n the goods, and, even though the goods are
n beng and specfc and ascertaned at the tme of the contract, the
contract w not transfer the property uness t manfests an n-
tenton so to do.
The term sae n both ordnary and ega speech s used ndf-
ferenty sometmes to descrbe the sum of the acts whch begn wth
the makng of a contract and end ony wth the fna act of per-
formance of that contract, at other tmes to descrbe the bargan or
contract whereby the seer transfers or agrees to transfer the prop-
erty, and at other tmes to descrbe the transfer of property n the
goods from a seer to a buyer, or the event or act upon the dong
or occurrence of whch the property n the goods passes from seer
to buyer. Where some of the acts or events, a of whch are some-
tmes caed the sae and at other tmes one or severa of whch are
sometmes caed the sae, occur at geographcay dstant paces, the
probem arses of determnng at precsey whch pace the sae
occurs. The aw s necessary forced to choose one of the acts or
events nvoved n the sae and descrbe t as the sae, and the pace
of ts occurrence as the pace of sae.
ence, there s consderabe dversty n the |udca decsons
respectng what s the sae, and accordngy respectng what s the
pace of sae. The ony reconcng prncpe to be deduced from the
decsons s that the act or event havng the most cogent reatonshp
to the ega ssue presented for resouton n a partcuar fed s
deemed the sae, and the pace where that act or event occurs s
deemed the pace of sae. Thus, n the fed of consttutona aw,
where the |ursdcton of the Unted States or of one of ts consttuent
States s n queston, the substance of the sae s deemed the contract
between the seer and buyer under whch the property n the goods
s ether presenty or utmatey transferred. Thus n Norfok d
Western Raway Co. v. Sms (191 U. S., 441, 447) the Supreme Court
of the Unted States sad:
sae reay conssts of two separate and dstnct eements: frst, a contract
of sae, whch s competed when the offer s made and accepted and, second,
a devery of the property, whch may precede, be accompaned by, or foow
the payment of the prce, as may have been agreed upon between the partes.
The substance of the sae s the agreement to se and ts acceptance.
In that case the court hed that the bargan s made and the con-
tract of sae competed as such when the contract to se s made, even
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
357
217, rt. 823,
though the property n the goods s not transferred unt after shp-
ment, devery, and payment. (See aso Robbns v. Sheby County
Ta ng Dstrct, 120 U. S., 489 sher v. Te as, 128 U. S., 129
rennan v. TtusvZe, 153 U. S., 289 Cadwe v. North Carona,
187 U. S., 622: Dozer v. abama, 218 U. S., 124 Crenshaw v,
rkansas, 227 U. S., 389.) gan, n Rearck v. Pennsyvana (203
U. S., 507, 512), the Supreme Court sad:
Commerce among the severa States s a practca concepton not drawn
from the wtty dverstes ( Yates v. Oough Yev., 33) of the aw of saes.
(Stcft d Co. v. Unted States, 196 U. S., 375, 398, 399.) The brooms were
specfcay approprated to specfc contracts, n a practca. If not In a technca,
sense.
In determnng the nature of a sae and ts reaton to the |ursdc-
ton of the edera Government, or of one of the consttuent States,
the courts ook to the essenta character of the transacton rather
than to ts ncdents. (Western Unon Te. Co. v. oster, 247 U. S.,
105 Te as New Oreans Raroad Co. v. Sabne Tram Co., 227
U. S., 111.) s respects a sae of goods, technca rues as to the
passng of tte and the assumpton of rsk have no bearng n deter-
mnng the |ursdctona queston. ( mercan press Co. v. Iowa,
196 U. S., 133.) (See aso Superor O Co. v. Msssspp, 50 S. Ct.,
169.)
On the other hand, the word sae s frequenty, partcuary n
the aw of saes, used to descrbe the transfer of property from one
person to another for a consderaton of vaue. ( rnod v. North
mercan Chemca Co., 232 Mass., 196, 122 N. ., 283.) (Saes act,
secton 1(2) cf. secton 1, ngsh sae of goods act.) In Wheeer
Lumber rdge Suppy Co. of Des Mones, Iowa, v. Unted States
(50 S. Ct., 419) the Supreme Court used the word n ths atter
sense. or a coecton of cases usng the word as meanng the
contract, see Wamson et a. v. erry (8 ow. 495, 544), and for
coecton of cases usng the word n both and varous other meanngs
see note, 44 L. R. . (N. S.), page 437.
In determnng the source of ncome from the sae of goods, the
queston s presented whether the essenta character of the trans-
acton s decsve, or whether the technca rues as to the passng of
the property n the goods and the assumpton of rsk are decsve.
Ths ssue was presented to the Supreme Court of the Unted States
n Compaa Genera de Tabacos de pnos v. Coector (279 U. S.,
306), under secton 10, Phppne ncome ta aw n every substan-
ta partcuar the same as the correspondng provsons of the Reve-
nue ct of 1916, Revenue ct of 1917, and Revenue ct of 1918.
The case was presented on a stpuaton rectng that the merchandse
was sod n the Unted States by the agency theren of the pan-
tff s Phppne branch, the sae beng sub|ect to confrmaton and
absoute contro as to prce and other terms and condtons thereof,
by the pantff s Phppne branch. The court sad:
Whe the stpuaton states that the merchandse was sod n the Unted
States by pettoner s agency there, ths statement can not be taken wthout
quafcaton t must be read wth the mtaton mmedatey foowng, that
such saes were sub|ect to confrmaton and absoute contro as to prce and
other terms and condtons by pettoner s Phppne branch. It does not
appear whether the confrmaton was. In each case, gven by the Phppne
branch drect to the buyer or was otherwse the fna act consummatng the
saes wthD the Phppne Isands, or whether, as the tra court and pet-
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
217, rt. 323.
358
toner seem to have assumed, t was a mere approva or ratfcaton of the
negotatons had by pettoner s mercan agent, and authorty to hm to
confrm or otherwse compete the saes n the Unted States. Certany, If the
former, the fna acts of pettoner makng effectve the saes, whch were the
source of the proft, took pace n the Phppne Isands as an ncdent to
and part of ts busness conducted there. (See oder v. utman, 109 U. S.,
81, 89 Loyd Thomas Go. v. Grosvenor, 144 Tenn., 349 Chares . Stckney Co.
v. Lynch, 163 Ws., 353 huenfedt v. unkermann, 20 ed., 357.)
If, n fact, the saes were thus made n the Phppne Isands, we thnk t
unmportant whether the merchandse sod was e ported before or after ts
sae t coud not be serousy contended, and ndeed pettoner does not
contend, that a proft derved from such transactons woud not be sub|ect to
the ta . or, n such a case, the entre transacton resutng n a proft, wth
the e cepton of the negotatons n the Unted States precedng the sae,
woud have taken pace n the Phppnes. Instead, pettoner asks us to
construe the stpuaton so as to brng It wthn the rung of the ttorney
Genera apped to a state of facts where every act effectng the sae took
pace outsde the ta ng |ursdcton. The ambguous phraseoogy of the
stpuaton fang to dscose precsey how the busness was done, we may not
specuate as to ts actua character. (See Cochran v. Unted States, 254 U. S.,
887, 393.)
The decson s concusve that the technca rues as to the passng
of the property n the goods and the assumpton of rsk are not
determnatve of the pace of sae and the source of ncome from
the sae of goods. The essenta character of the transacton the
contract of sae s the decsve factor n determnng the pace of
sae for the purpose of determnng the source of ncome. Ths s
made cear by, frst, the unequvoca statement of the court that the
pace where the goods are when the property n them s trans-
ferred s mmatera, the court sayng If, n fact, the saes were
thus made n the Phppne Isands, we thnk t unmportant
whether the merchandse sod was e ported before or after ts sae
second, the anguage used by the court s approprate ony to the
contractua phase of a sae, not to the property passng phase.
Thus, confrmaton and absoute contro as. to prce and other
terms and condtons, whether the confrmaton was, n each
case, gven by the Phppne branch drect to the buyer or was other-
wse the fna act consummatng the saes wthn the Phppne
Isands, or whether t was a mere approva or ratfca-
ton of the negotatons had by pettoner s mercan agent, and
authorty to hm to confrm or otherwse compete the saes n the
Unted States and the fna acts of pettoner makng effectve
the saes contempate the process of contractng n respect of
transferrng the property n goods, not the process of actuay
transferrng the property n goods thrd, the concuson of the
court s mmedatey foowed by specfc reference to four cases,
none of whch concerns n the east the actua transfer of property n
goods, but each of whch concerns the makng of a contract and the
pace where the acts requste to the formaton of a contract occur
(e press dstncton beng taken between the pace where the con-
tract s made and the pace where t s to be performed), two of
the cases nvovng contracts for the transfer n the future of the
property n goods, and e pressy dstngushng between the con-
tractua phase, and determnng that the contractua phase s the
decsve one. Compana Genera de Tabacos de pnas v. Co-
ector s therefore concusve that, for the purpose of determnng
the pace of sae so far as ths s decsve of the source of ncome,
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
2

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
359
217, rt. 323.
the substance of the sae s the agreement to se. Norfok
Western Raway Co. v. Sms, 191 U S., 441. 447.)
The rungs pubshed as I. T. 1569, G. C. M. 2467, 0. D. 1100, and
I. T. 2068, beng nconsstent wth ths decson of the Supreme
Court, requre modfcaton or reversa.
In the nstant case, the course of busness s for the representatve
of the M Company n the Unted States to offer merchandse at
certan prces to prospectve buyers. The buyers thereupon desg-
nate to the representatve of the M Company wthn the Unted
States the goods, and the prces at whch, they are wng to buy.
The quanttes and prces thus desgnated by the prospectve buyer
to the representatve of the M Company consttute offers to buy.
The representatve of the M Company thereupon cabes ths nfor-
maton to the South mercan headquarters of hs frm, and they
cabe back to the representatve (not to the prospectve buyer who
s the offeror) ther acceptance or re|ecton of the offer. Ony when
the representatve n the Unted States of the M Company transmts
to the prospectve buyer the frm s acceptance s there any accept-
ance or any contract. When and where he transmts the etter to
the purchaser confrmng the sae for account of the M Company,
a contract of sae s there and then made, and t s under and n per-
formance of that contract that the property n the goods s trans-
ferred. No communcaton or transmtta of an acceptance by the
M Company to ther agent n the Unted States coud consttute an
acceptance of any offer made by an mercan buyer, and, therefore,
at the most, the contract or contracts were made wthn the Unted
States.
The saes n the nstant case are therefore the substanta equva-
ent of the second aternatve stated by the court n Compana Gen-
era de Tabacos de pnos v. Coector, namey, the saes beng sub-
|ect to confrmaton and absoute contro as to prce and other terms
and condtons by the seer s South mercan offce, the confrma-
ton was, n each case, a mere approva or ratfcaton of
the negotatons had by the seer s mercan agent, and
authorty to hm to confrm or otherwse compete the saes n the
Unted States. Thus, n the nstant case, the fna acts of the seer
ncdent to the saes, the fna acts makng effectve the saes, and
the confrmaton or competon of the saes, occurred n the Unted
States, and, accordngy, t s the opnon of ths offce that, under
the crcumstances of ths case, the pace of the saes and the source
of the ncome from the saes were the Unted States.
In vew of the foregong. Genera Counse s Memorandum 2467 and
a other memoranda of ths offce nconsstent herewth are modfed
or revoked. It s recommended that O. D. 1100,1. T. 1569, and I. T.
2068 be modfed or revoked.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
218, rt. 332.
3G0
rtce 323: Sae of persona property. I 11 1820
I. T. 2549
R NU CTS O 1913, 1916, 1917, ND 1918.
Offce Decson 1100 (C. . 5, 118), I. T. 1569 (C. . II-, 126),
and I. T. 2068 (C. . III-2, 164) are modfed or revoked n so far
as nconsstent wth Genera Counse s Memorandum 8594, on
page 354.
S CTION 218. P RTN RS IPS ND P RSON L
S R IC CORPOR TIONS.
rtce 332: Dstrbutve shares of partners. I -29 4710
( so Secton 219, rtce 343.) G. C. M. 7678
R NU CT O 1921.
The death of a partner termnates the partnershp of whch he
Is a member, notwthstandng the provson of the partnershp
agreement that no accountng s to be made In the event of the
death of a partner pror to the termnaton of the partnershp year.
Where the accountng year of the partnershp and the accountng
year of a deceased member thereof concde, the decedent s share
of the net earnngs of the partnershp as of the date of hs death,
whether actuay dstrbuted or not, s ncome ta abe to hm.
ded December , 1923. The decedent pror to hs death
empoyed the cash recepts and dsbursements method of accountng
and fed hs returns on the caendar-year bass. t the tme of hs
death the decedent was a partner n the frm of M Company, and
owned a 50 per cent nterest theren. Ths partnershp kept ts
books and fed ts returns on the caendar-year bass. or the
caendar year 1923 the ncome of the partnershp was 9.8a doars.
The decedent woud have been entted to 4.9a doars of ths ncome
had he ved unt the end of the ta abe year. In the 1923 ncome
ta return fed on behaf of the decedent, ncudng the decedent s
ncome for the perod from anuary 1 to December 6, 1923, the date
of hs death, 4.56a doars of ths amount was returned as ncome
ta abe to the decedent, and the ta thereon was pad. On ebru-
ary , 1929, the e ecutor of the estate on behaf of the decedent fed
a cam for refund of the ta , contendng that ths amount was not
ta abe to the decedent. In support of ths contenton there were
cted the decson of the oard of Ta ppeas n the ppea of R.
W. rchbad, |r., et a., e ecutors (4 . T. ., 483, C. . T-1, 1),
and Genera Counse s Memorandum 2308 (C. . I-2, 229). In the
cam t was further contended that as ths tem was set up n the
estate ta return as part of the decedent s gross estate and an estate
ta pad thereon, t was not ta abe to the estate for ncome ta
purposes. . (Nchos v. Unted States, 64 Ct. Cs., 241.) The cor-
rectness of ths atter contenton s conceded and needs no further
dscusson.
It s the opnon of ths offce that the refund cam on behaf
of the decedent shoud be re|ected on authorty of the decson of
the oard of Ta ppeas n the case of Maurce L. Godman et a.,
e ecutors, v. Commssoner (15 . T. ., 1341). It s contended
that the prncpe of the Godman case s not appcabe to the
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
361
218, rt. 332.
nstant case for the reason that n the Godman case the partnershp
termnated upon the death of the partner, whereas n the nstant case
the partnershp agreement e pressy provded that shoud ether
partner de before the e praton heren provded for (. e., Decem-
ber 31, 1923) t sha not work a dssouton of the frm .
ven though t be conceded that by the terms of the M partnershp
agreement the partnershp dd not termnate upon the death of
, the prncpe of the rchbad case woud not, n the opnon of
ths offce, be appcabe to the nstant case, for the reasons stated
by the oard n the Godman case, to wt:
In that the rchbad case, a partner, who had reguary made
hs ncome-ta return on a caendar-year bass, was a member of a partner-
shp whch had kept ts accounts on the bass of fsca years endng anuary
31 of each year. The partner ded on ugust 15, 1920. The queston pre-
sented was whether the e ecutors of a deceased partner shoud return for
the year 1920 not ony the share of decedent n the partnershp ncome for
the fsca year endng anuary 31, 1920, but aso the share of the profts of
the partnershp from ebruary 1, 1920, to ugust 15, 1920, the date of dece-
dent s death, and the consequent dssouton of the partnershp. The oard
hed that the ony ncome from the partnershp to be ncuded n the return
for the decedent for the caendar year 1920 was the dstrbutve share of
the partnershp to whch he was entted for the fsca year ended anuary 31,
1920. There s not nvoved n the case at bar any confct ou account of
the partnershp beng on a fsca-year bass and the partner on a caendar-
year bass here the accountng perods concde. Nor s there nvoved the
queston of a partner beng requred to report more than 12 months ncome
on account of the operatons of a partnershp.
In the case of ndrews et a. v. Stnson (98 N. ., 222) the Su-
preme Court of Inos sad:
Where there are provsons n the artces of agreement or w for the con-
tnuance of the busness after the death of one of the partners, t s sometmes
naccuratey sad that the death of the partner does not dssove the partner-
shp. If the busness s carred on after the death of the partner under such
arrangement or by the agreement of the hers or persona representatves of
the deceased, there Is, n effect and n aw, a new partnershp, of whch the
survvors and the e ecutors or hers are the members, the new members becom-
ng abe, as the od, to the credtors of the frm. (22 m. ng. ncy. of
Law (2d ed.), 201, and cases cted 1 Woerner s m. Law of dmnstraton
(2d ed.), sec. 123 change ank v. Tracy, 11 Mo., 594 McOrath v. Cotcen,
57 Oho St., 385, 49 N. , 338 MattUon v. arnham, 44 Mnn., 95, 46 N. W.,
847 ones Cunnngham s Pr. (2d ed.), 82 T. Pars. Partn. (3d ed.), 439.
See aso 1 ates on Partnershp, sec. 62 Owens v. Macka, 33 Md., 382.)
reference to the authortes w dscose that, whe the above rue of aw s not
foowed n some |ursdctons, the weght of authorty, as we as sound
reason, s n accord therewth. Under ths reasonng, t must be hed that the
agreements entered Into by the e ecutors and survvng partners created a
new partnershp.
It s evdent from the foregong statement of the court that the
weght of |udca authorty warrants the concuson that the death
of termnated the partnershp of whch he was a member, not-
wthstandng the provsons of the partnershp agreement to the
contrary. It s equay evdent that the nstant case fas squarey
wthn the prncpe ad down by the oard of Ta ppeas n
the Godman case. urthermore, under secton 218 of the Revenue
ct of 1921, the dstrbutve shares of the partners n the net ncome
of the partnershp, whether dstrbuted or not, must be returned as
ncome by the respectve partners and are ta ed to them ndvduay.
The purpose of the statute may not be defeated by an agreement
85942 81 24
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
218, rt. 332.
362
between the partners. In ths connecton see ppea of Ormsby
Mc nght Mtche (1 . T. ., 143, 148) and Mtche v. owers
(15 ed. (2d), 287, certorar dened, 45 S. Ct, 473). It neces-
sary foows that the decedent s share of the net earnngs of the
partnershp as of the date of hs death, whether actuay dstrbuted
or not, was ncome ta abe to hm. (See G. C. M. 6658, C. . III-2,
309.)
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
rtce 332: Dstrbutve shares of partners. I -30-4723
Ct. D. 212
ncome ta revenue act of 1921 decson op court.
1. Income Sae Cash and Deferred Payments Partnershp
Property.
Where a ta payer nnd another, members of a partnershp
sharng equay n the profts thereof, se property In 1921 for cash
and deferred annua Instaments wthout nterest, and the other
partner, pursuant to an agreement between them, receves In add-
ton to hs share of the cost of the property a hs share of the
proft from the transacton n cash out of the frst Instament,
the ta payer to accept the deferred payments for hs share of the
profts, one-haf of the part of the nta payment that Is ta abe
as proft from the sae s Income to the ta payer, under secton 218
of the Revenue ct of 1921, as a part of hs dstrbutve share of
the partnershp ncome for 1921.
2. Decson ffrmed.
The decson of the oard of Ta ppeas (10 . T. ., 919)
affrmed.
Unted States Crcut Court of ppeas, fth Crcut.
Chares C. Ruprecht v. Commssoner of Interna Revenue.
Petton for revew of decson of the Unted States oard of Ta ppeas.
efore ryan and oster, Crcut udges, and Sbey, Dstrct udge.
March 24, 1930.
opnon.
oster, Crcut udge: refy stated, the matera facts found by the oard
of Ta ppeas are these: Pettoner and ames . Gardner were |onty
engaged n acqurng and seng deposts of fuer s earth, dvdng the profts
equay. In 1921 they acqured a depost from Thomas oyd at the cost of
23,500.68. Tte was taken n the name of pettoner, and the same year t was
sod to the Standard O Co. for 123,560.68, showng a proft of 100,000. The
O company made a cash payment of 73,560.68, and agreed to pay the baance
n yeary payments of 10,000 wthout nterest Gardner nssted on havng
a hs share n cash out of the frst payment and he receved about 61,500,
whch ncuded a proft of 25,000, whch woud have gone to pettoner had
the cash payment been dvded accordng to the partnershp agreement Pet-
toner, however, agreed to accept the deferred payments for hs share of the
profts.
Pettoner dd not account for any part of the proft receved by the partner-
shp n 1921 but subsequenty accounted for hs share as receved. In 1926
the Commssoner of Internu Revenue hed that pettoner shoud have
accounted for one-haf of the proft receved by or accrung to the partnershp
In 1921 and determned a defcency n pettoner s Income ta amountng to
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
363
218, rt. 332.
17,426.25. Ths was based on the concuson that the entre proft shoud have
been accounted for In 1921. The oard of Ta ppeas hed wth the Com-
mssoner as to the 25,000 cash receved n 1921 but reversed hm as to the
baance and determned a defcency of 7,151.65 for the year 1921.
Whe pettoner was undoubtedy n good fath and w suffer hardshp, the
aw appyng s pan. Secton 218(a) of the Revenue ct of 1921, whch gov-
erns, provdes that each partner sha be abe for and must ncude In hs
Indvdua return hs dstrbutve share of the partnershp profts for the ta abe
year, whether dstrbuted or not. That pettoner agreed to aow hs partner
to take a the cash proft receved n 1921 does not ater hs accountabty.
It s mmatera to pettoner whether Gardner accounted for a the proft n
1921. If one partner shoud absorb the entre proft receved n one year the
Government mght we be deprved of surta es due by another partner, f hs
dstrbutve share were added to hs ndvdua ncome. To permt partners to
dstrbute the profts otherwse than accordng to the partnershp agreement
ard thus escape ther abty mposed by aw woud dsrupt the scheme of
ta aton adopted by Congress.
ffrmed.
rtce 332: Dstrbutve shares of partners. I -46-4837
Ct. D. 246
ncome ta revenue act of 1921 decson of court.
1. Partnershp Dssouton Dstrbutve Shares Computa-
ton.
Where a partnershp havng a ta abe year the same as that of
the partners s dssoved durng the ta abe year and ts assets
transferred n the ta abe year to a corporaton n e change for ts
stock, whch Is dstrbuted to the partners n proporton to ther
partnershp nterests, there must be ncuded In computng the net
Income of each partner under secton 218 of the Revenue ct of
1921 hs proportonate share of the net Income of the partnershp
durng the ta abe perod termnatng wth the dssouton of the
partnershp, and It s mmatera that the Income of the partnershp
Is not dstrbuted, that at the tme of the e change of the assets
there s a decrease In ther vaue n e cess of the net ncome of the
partnershp, and that a oss s antcpated from the partnershp
Investment.
2. Decson ffrmed.
The decson of the oard of Ta ppeas (15 . T. ., 668)
affrmed.
Unted States Crcut Court of ppeas fob the rst Crcut.
rthur . are, pettoner for revew, v. Commssoner of Interna Revenue.
oster . are v. Same.
rthur . are, ecutor, v. Same.
ppeas from oard of Ta ppeas.
efore ngham, Wh.son, and Morrs, udges.
March 5, 1930.
OPINION.
Morrs, .: These are three appeas from a decson of the oard of Ta
ppeas denyng the pettoners a redetermnaton of an aeged defcency n
ther ncome ta es for the year 1923.
The amounts nvoved are, respectvey, 717.23 n the case of rthur .
are 736.41 n the case of oster . are and 4,045.47 n the case of
rthur . are, e ecutor.
The three cases depend upon the same state of facts and were heard together.
The Indvdua pettoners and the decedent were members of a partnershp
formed anuary 1, 1923, and dssoved by death of ugene . are, one of
the partners, on uy 1, 1923.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
218, rt. 332.
364
Pror to anuary 1,1023, ugene . are was a rea estate operator engaged
In the busness of purchasng and, erectng busness bocks thereon, and seng
the competed budngs. On anuary 1, 1923, he took nto partnershp hs two
sons, oster . are and rthur . are. ach of the sons was to have a
one-quarter Interest In the profts and ugene . are one-haf Interest
The father, ugene . are, contrbuted capta n the busness to the amount
of 151,219.74, representng hs nvestment at that tme n hs ndvdua bus-
ness. e had under constructon a budng on Carendon Street In oston, the
constructon of whch was taken over by the partnershp and competed shorty
before une 14, 1923. The budng was sod on the ast-mentoned date at a
proft to the partnershp of 70,793.37.
Pror to une 30, 1923, the partnershp acqured a tract of and on Coumbus
venue, oston, at a cost of between 110,000 and 120,000. The partnershp
ntended to erect on ths ot an 8-story budng. t the tme of the death of
ugene . are the ot had been e cavated and the contract et for puttng n
the foundaton. There was a mortgage of 30,000 on the and. In addton to
the Coumbus venue property the partnershp owned mortgages of about
15,000 and aso had cash whch t was usng n the Coumbus venue pro|ect.
The survvng partners coud not se the ot n the condton n whch t
stood at the date of ther father s death. They fnay determned to proceed
wth the pro|ect, mtng the budng to three stores. It was competed uy,
1924. The budng as erected never earned e penses. In 1928 an addtona
mortgage was paced upon the property and fve stores added. of the
partnershp funds were Invested n ths enterprse.
In 1923, pror to the death of ugene . are, the partners had caused a
corporaton to be formed under the name of ugene . are Sons, Inc. Its
stock had not been ssued on uy 1, 1923. On September 14, 1923, the stock
was ssued and dvded between the estate of the decedent, oster . are,
and rthur . are, n the amounts of 5,000, 2,500, and 2,500, respectvey.
of the partnershp assets were transferred to the corporaton, whch
assumed a of the abtes of the partnershp. There has been no sae of
the stock and the corporaton contnues to own the Coumbus venue property.
The soe queston presented s whether or not the pettoners must ncude n
ther ndvdua ncome ta return ther respectve dstrbutve shares of the
partnershp Income under the provsons of secton 218(a) of the Revenue ct
of 1921, whch provdes as foows:
That ndvduas carryng on busness In partnershp sha be abe for
Income ta ony n ther ndvdua capacty. There sha be ncuded n com-
putng the net ncome of each partner hs dstrbutve share, whether dstrbuted
or not, of the net ncome of the partnershp for the ta abe year, or, f hs net
ncome 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 partnershp s com-
puted, then hs dstrbutve share of the net ncome of the partnershp for any
accountng perod of the partnershp endng wthn the fsca year or caendar
year upon the bass of whch the partner s net ncome s computed.

(c) The net ncome of the partnershp sha be computed n the same manner
and on the same bass as provded In secton 212.
Secton 212 provdes for the computaton of the net ncome of Indvduas by
Incudng theren gross ncome as defned n secton 213 and deductng therefrom
the tems aowed by secton 214.
Secton 213(a) provdes that gross ncome sha ncude among other thngs
profts and ncomes derved from saes or deangs n property, whether rea or
persona, growng out of the ownershp or use of, or nterest n, 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 6uch tems sha be ncuded n the gross
ncome for the ta abe year n whch receved by the ta payer e cept when a
dfferent method of accountng Is authorzed under other provsons of the aw
not mportant to be consdered n ths case.
In computng net ncome the deductons aowed under secton 214(a) are
the ordnary and necessary e penses pad durng the ta abe year n carryng
on any trade or busness Interest pad or accrued wthn the ta abe year
on ndebtedness e cept on Indebtedness ncurred or contnued to purchase or
carry on obgatons or securtes ta es pad or accrued wthn the ta abe
year, osses sustaned durng the ta abe year f ncurred In trade or busness,
debts ascertaned to be worthess, etc.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
365
218, rt. 332.
The cam of the pettoner 1b that the partnershp ceased to e st upon the
death of ugene . are on uy 1, 1923, and that n accordance wth chapter
486, Massachusetts cts of 1022, the survvng partners had no rght to pos-
sess the partnershp property for any but partnershp purposes that they
bad the rght to wnd up the partnershp affars, and, on settng the accounts
between partners after dssouton, the foowng statutory rues must be
observed:
( Massachusetts cts of 1922, ch. 480, sec. 40.)
In settng accounts between the partners after dssouton, the foowng
rues sha be observed, sub|ect to any agreement to the contrary:
(a) the assets of the partnershp are
I. The partnershp property.
II. The contrbutons of the partners necessary for the payment of a a-
btes specfed n cause (6) of ths secton.
(6) The abtes of the partnershp sha rank In order of payment as
foows:
I. Those owng to credtors other than partners.
II. Those owng to partners other than for capta and profts.
III. Those owng to partners In respect of capta.
I . Those owng to partners n respect of profts.
It s urged by pettoners that the partnershp havng been dssoved durng
the ta abe perod the survvng partners and the estate of the deceased part-
ner had no ndvdua rghts n the partnershp assets unt the partnershp
was wound up and the assets dstrbuted n accordance wth the unform
partnershp aw whch has been adopted by the Massachusetts Legsature.
Ctng odget v. smermat (277 U. S., 1, 12).
It s further urged that under the provsons of secton 218 of the Revenue
ct, supra, the pettoners coud not be ta ed for the reason that the proper
ta must be measured by the dstrbutve share of each partner and that
no share of the profts was dstrbutve unt the baance of the assets over
return of capta was ascertaned.
Secton 218(a) provdes that there sha be ncuded n computng the net
ncome of each partner hs dstrbutve share, whether dstrbuted or not, of
the net Income of the partnershp for the ta abe year.
There Is no suggeston n ths anguage that the word dstrbutve was used
n a narrow, technca sense. The conte t appears to precude such a narrow
constructon. If the word dstrbutve were to be mted to the share each
partner receves from actua dstrbuton of profts, ether from a gong con-
cern or upon dssouton of the partnershp, the words of the statute whether
dstrbuted or not becomes meanngess. ach partner has a potenta rght
to hs share of undvded profts. Pany, the word dstrbutve s used n
the sense of proportonate. It s the partner s proportonate share of the
net ncome of the partnershp ganed durng the ta ng perod that Is ta abe
whether dstrbuted or not. Losses suffered durng the same perod are aowed
as deductons from partnershp gross ncome In arrvng at net profts.
( omes, ed. Ta es, 1923 ed., 207.)
It appears from the record that the partnershp was wound up on the 14th
day of September, 1923, when the nterests of the severa partners were con-
veyed to a corporaton and stock receved In e change therefor. The partner-
shp ceased to e st after September 14, 1923. It had no assets and no ab-
tes. ach partner took hs share of partnershp property, Incudng net ncome,
In corporate stock.
The pettoners contend that the partners had no dstrbutve share of part-
nershp profts because there was a decrease In the vaue of the capta assets
and that the capta oss was suffcent n the e change of the assets for the
capta stock of the corporaton to wpe out the profts prevousy made.
s we understand the facts, the partnershp had made a net proft of 70,-
703.37 pror to uy 1, 1923. Its assets were beng used n another enterprse
whch was not competed unt uy, 1924. Whether ths second enterprse
woud resut n a gan or oss coud not be ascertaned wthn the ta ng perod.
ny contenton that net Income for the ta abe year 1923 woud be wped out
by osses e pected In future years s untenabe. Income ta es are eved upon
the net Income for an annua accountng perod. Gans In one perod may not
be offset by osses In another therefore there was no deductbe oss In 1923
uness t was sustaned when partnershp assets were e changed for corporate
stock.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
219, rt. 345.
366
Whatever may have been the par vaue of the stock receved by the partners,
t represented ther entre Interests n the partnershp assets. Incudng any
net ncome. There was no sae of the stock durng the ta ng perod. The
fact that ony 10,000 par vaue of stock was ssued s not controng. They
may as we have ssued shares of stock of no par vaue. Under secton 202,
Revenue ct of 1921, no oss s deductbe n such a transacton. Ths court
so hed n the case of Tsvogou v. Unted States (31 ed. (2d), 706, 708).
In each case the order of the oard of Ta ppeas s affrmed.
S CTION 219. ST T S ND TRUSTS.
rtce 341: states and trusts.
R NU CTS O 1918 ND 1021.
Deducton, the trust nstrument showng that t was not ntended
that any part of the ncome shoud durng the ta abe year be pad
to or permanenty set asde for the chartabe corporaton. (See
Ct. D. 214, page 275.)
rtce 343: Decedent s estate durng admnstraton.
R NU CT O 1921.
Share of decedent n partnershp ncome for perod endng
wth hs death. (See G. C. M. 7678, page 360.)
rtce 345: states and trusts ta ed to I -52-4884
benefcares. Ct. D.264
ncome ta revenue act of 1921 decson of court.
1. Income Income Ta ed to enefcary Payment by state
Durng dmnstraton.
n amount of Income of an estate of a decedent pad durng the
perod of admnstraton to a resduary egatee under a w, whch
mght have been deducted from the gross ncome of the estate n
accordance wth secton 219(c) of the Revenue ct of 1921 a-
though the w dd not e pressy provde for the payment of n-
come to hm, shoud be ncuded n computng the net ncome of
the egatee under secton 219(d) of that ct
2. Decson ffrmed.
The decson of the oard of Ta ppeas (16 . T. ., 193)
affrmed.
Unted States Crcut Court of ppeas fob the Second Crcut.
Samue Rker, as ecutor under the Last W and Testament of armon W.
endrcks, deceased, v. Commssoner of Interna Revenue.
Petton for revew of an order of the oard of Ta ppeas redetermnng a defcency of
11,016.34 In Income tares of armon W. endrcks for the year 1923. ffrmed.
efore Manton, L, and, and Chase, Crcut udges.
May 19, 1930.
opnon.
Chase, Crcut udge: armon W. endrcks, now deceased, was the resd-
uary egatee under the w of dth endrcks. The pettoner s the e ecutor
of hs estate. Durng 1923 the estate of dth endrcks was st unsetted
and n process of admnstraton. or that year, t fed an Income return
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
367
219, rt. 345.
n whch t Incuded 33,000 of ts ncome whch had In fact been pad by the
estate darng that year to armon W. endrcks. The Commssoner of
Interna Revenue reduced the ta abe ncome of the estate by that amount
and created the defcency here nvoved by addng that sum to the ta abe
ncome of armon W. endrcks .
So far as armon W. endrcks took under the w of dth, he dd so by
vrtue soey of the foowng cause:
ourthy: the rest, resdue, and remander of my property and a the
property over whch I have the power of appontment by vrtue of the prov-
sons of the w of my sad mother, anny endrcks, I gve, devse, mt,
and appont unto my brother, armon W. endrcks, absoutey forever.
There s no suggeston n the record that ths sum was not propery pad to
armon W. endrcks . The dfference between the pettoner and the re-
spondent s that the pettoner cams t was a payment nonta abe as ncome
to armon because It was a transfer of part of the corpus to hm, the payment
of Income to hm not beng requred by the terms of the w, and It Is thought
that f ths payment had remaned n the estate unt fna settement It woud
hnve become a part of the resduary corpus and been pad to hm as such
whe the respondent cams that snce It was Income of the estate and actuay
pad to armon W. endrcks whe the estate was n process of admnstra-
ton t was ta abe as hs ncome when receved by hm.
No one does, or coud, consder the 33,000 as anythng but Income to the
estate. We agree that the estate was not bound to pay any of ths ncome
to armon W. endrcks before fna settement. Notwthstandng ths, t dd
n fact pay the above sum out of ts ncome to hm n 1923, and there s nothng
to ndcate n the sghtest that ths was not a perfecty proper thng to
do In the dscreton of those n charge of the estate. Presumaby t was done
under some order of dstrbuton but at any rate for reasons unknown, and
now Immatera anyway, he was pad ths part of the estate s ncome n 1923
Instead of beng compeed to wat for It unt admnstraton had fuy taken
pace. t the tme the Revenue ct of 1921 (42 Stat., 222) controed and
contaned the foowng:
Sec. 219. (a) That the ta mposed by sectons 210 and 211 sha appy
o the Income of estates or of any knd of property hed n trust, ncudng
(1) Income receved by estates of deceased persons durng the perod of
admnstraton or settement of the estate
(2) Income accumuated n trust for the beneft of unborn or unascertaned
ersons or persons wth contngent Interests
(3) Income hed for future dstrbuton under the terms of the w or
trust and
(4) Income whch s to be dstrbuted to the benefcares perodcay,
whether or not at reguar ntervas, and the ncome coected by a guardan
of an nfant to be hed or dstrbuted as the court may drect.

(c) In cases under paragraphs (1), (2), or (3) of subdvson (a) or n
any other case wthn subdvson (a) of ths secton e cept paragraph (4)
thereof the ta sha be Imposed upon the net ncome of the estate or trust
and sha be pad by the fducary, e cept that n determnng the net ncome of
the estate of any deceased person durng the perod of admnstraton or
settement there may be deducted the amount of any ncome propery pad or
credted to any egatee, her, or other benefcary. In such cases the estate or
trust sha, for the purpose of the norma ta , be aowed the same credts as
are aowed to snge persons under secton 216.
(d) In cases under paragraph (4) of subdvson (a), and In the case of
any Income of an estate durng the perod of admnstraton or settement
permtted by subdvson (c) to be deducted from the net Income upon whch
ta Is to be pad by the fducary, the ta sha not be pad by the fducary,
but there sha be Incuded n computng the net ncome of nch benefcary
that part of the ncome of the estate or trust for Its ta abe year whch, pur-
suant to the nstrument or order governng the dstrbuton, s dstrbutabe
to such benefcary, whether dstrbuted or not, or, If hs ta abe year Is
dfferent from that of the estate or trust, then there sha be ncuded n com-
putng hs net Income hs dstrbutve share of the ncome of the estate
or trust for Its ta abe year endng wthn the ta abe year of the benefcary.
In such cases the benefcary sha, for the purpose of the norma ta , be
aowed as credts, n addton to the credts aowed to hm under secton 210,
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
231, rt. 518.
3G8
hs proportonate share of such amounts specfed In subdvson (a) and (b)
of secton 216 as are receved by the estate or trust.
Snce the sum n controversy was. propery pad by the estate to the ut-
mate benefcary, though the testatr had not e pressy provded for the pay-
ment of ncome to hm, t mght have been deducted from the ta abe ncome of
the estate In accordance wth subdvson (c) above. The pettoner earnesty
nssts that the estate was merey gven the rght to eect whether to deduct
or not, and havng eected not to deduct ths amount from Its ta abe Income
f ed ts status as ncome ta abe as such to the estate aone. We agree
that the statute gave the estate permsson ony to make the deducton and, If
the words of the statute dd not themseves ampy show ths to be so woud
have an added reason for hs concuson n the fact that n 1924 Congress
changed the aw to make such a deducton compusory. Revenue ct of 1924,
secton 219(b)3. Yet we do not agree that any eecton as to deducton
by the estate coud have any bearng on the ta aton of ths amount to the
benefcary or do more than, f taken, reeve the estate of the necessty for
nta payment of ncome ta es pro tanto. In subdvson (d) Is found the
provson for ta ng ths payment as ncome to the benefcary whether the
estate takes the permtted deducton or not. The mportant part s ,
and n the ease of any Income of an estate durng the perod of admnstraton
or settement permtted by subdvson (c) to be deducted from the net ncome
upon whch the ta s to be pad by the fducary, the ta sha not be pad
by the fducary, hut there sha be ncuded In computng the net ncome of each
benefcary that part of the ncome whch, pursuant to the nstru-
ment or order governng the dstrbuton, s dstrbutabe to such benefcary
. Ths covers by e press reference the estate Income whch was
pad to armon W. endrcks. The statute s not confned to what has
actuay been deducted, but It ncudes what s permtted by subdvson (c)
to be deducted. We must treat the 33,000 pad to armon W. endrcks
as permtted to be deducted, snce t was propery pad and t fas wtha
the statutory requrement that the ta sha not be pad by the fducary
but by the benefcary.
The statute presents no new theory of ncome ta aton by requrng such
a payment to be treated as ncome n the hands of armon W. endrcks.
See Ircn v. Gavt (268 U. S., 161 T. D. 3710, C. . I -1, 123 ), rewster
v. Gage (2S0 U. S., 327 Ct. D. 148, C. . I -1, 274 ), cner v. eaty (17 ed.
(2d), 743 T. D. 4021, C. . I-1, 189 ). In Taft v. owers (278 U. S., 470
Ct. D. 49, C. . III-1, 226 ), t was hed that the ncrease n vaue of a gft
from the tme the property was acqured by the donor to the tme t was
sod by the donee coud be reached as Income ta abe to the donee.
udgment affrmed.
P RT III. CORPOR TIONS.
S CTION 231. CONDITION L ND OT R
MPTIONS O CORPOR TIONS.
rtce 517: Regous, chartabe, scentfc, terary, and
educatona organzatons and communty chests.
R NU CT O 1021 ND PRIOR R NU CTS.
Corporaton organzed to assst n enforcng fsh and game aws
and whch s supported by membershp dues and donatons. (See
I. T. 2564, page 122.)
rtce 518: usness eagues.
R NU CT OP 1821 ND PRIOR R NU CTS.
ssocaton promotng rado ndustry. (See I. T. 2550, page 123.)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
3G9
231, rt. 521.
rtce 521: Loca mutua nsurance companes I -33-4753
and ke organzatons. Ct. D. 224
premum ta es ncome ta revenue acts of 1916. 1917, and 1918.
Corporaton empton Lke Organzaton.
company wrtng heath and accdent nsurance Is not a ke
organzaton e empt from ncome ta es under secton 11 (a) 10 of
the evenue ct of 1916 and secton 231(10) of the Revenue ct
1918 and t s therefore not e empt from the ta es on the ssuance
of nsurance poces under secton 504(d) of the Revenue ct of
1917 and secton 503(d) of the Revenue ct of 1918.
Dstrct Court of the Unted States for the Dstrct of ansas, Second
Dvson, at Wchta.
The Lberty Lfe Insurance Co., a Corporaton, substtuted as successve pantff
to the armers Merchants Mutua Lfe and Casuaty ssocaton, a Cor-
poraton, pantff, v. W. . L. Peppere, Coector of Interna Revenue,
defendant.
pr 5, 1930.
opnon.
opkns, D. .: The acton s one n whch the pantff seeks to recover
from the coector of nterna revenue certan ta es aeged to have been
egay assessed and coected for the perod from December, 1917, to December,
1920, ncusve. It appears to have been fed n 1923 and contnued from tme
to tme up unt November 30, 1928, when tra by |ury was waved and the
case submtted to the court for decson on an agreed statement of facts and
brefs by the partes. The chef contenton by pantff s that The armers
Merchants Mutua Lfe and Casuaty ssocaton, a ansas corporaton, was
e empt from the payment of the ta es assessed and coected because It was
a ke organzaton to those e empted under subdvson 10 of secton 11
(chapter 463(a)) of the Revenue ct of 1916 (sec. 6336(k), U. S. Comp. Stat.,
1916), subdvson 10 of secton 231 of the ct of 1918, as ater changed by the
retroactve provson of secton 1013(b) of the Revenue ct of 1924, whch
reads:
Tenth. armers or other mutua ha, cycone, or fre nsurance company,
mutua dtch or rrgaton company, mutua or cooperatve teephone company,
or ke organzaton, the Income of whch conssts soey of assessments, dues,
and fees coected from members for the soe purpose of meetng e penses.
The armers Merchants Mutua Lfe and Casuaty ssocaton was organ-
zed for the foowng purposes:
That the members may assocate themseves together for the purpose of
makng nsurance on the ves of ndvduas, and aganst persona n|ury,
dsabement or death resutng from n|ury, and to make nsurance on the heath
of ndvduas, and to receve money for such purpose, and for .e pense of man-
agement, by vountary donaton or contrbuton, or to coect the same by
reguar dues or assessments on the members.
It Is argued that the assocaton was organzod soey for the mutua beneft
of t pocyhoders that t at no tme wrote any other than heath and
accdent poces that ts soe ncome was derved from assessments on ts
members and that t had no outsde nvestments, no capta stock or stock-
hoders, and that no one connected wth It receved any beneft or compensaton
other than for actua servces performed or mutua benefts under the poces
whch t ssued that It was a sma organzaton operatng In terrtory trbu-
tary to Topeka, ans., and as such w:s recognzed by the coector of nterna
revenue.
I have gven carefu consderaton to the above and other contentons of the
pantff, but am of the opnon The armers Merchants Mutua Lfe and
Casuaty ssocaton was not n ke organzaton of a purey oca character
entted to e empton under provson of the statutes mentoned, such organza-
tons e empted beng armers or other mutua ha, cycone, or fre nsurance
companes, mutua dtch or Irrgaton companes, mutua or cooperatve tee-
phone companes.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
5233, rt. 541.
370
(See ankers and Panters Mutua Insurance ssocaton v. Waker, 279
ed., 53, C. C. . 8th Cr. T. D. 3318, C. . 1-1, 250 Commerca eath 4
ccdent Co. v. Pckerng, 281 ed., 539, Dst. Ct. Southern Dst. of 111. T. D.
8313, C. . 1-1, 256 Sheby County Mutua Reef ssocaton v. choaner, 21
ed. (2d), 252, Dst. Ct. Southern Dst. of 111. T. D. 4050, C. . I-2, 242 .) .
Other questons are aby and ucdy presented n the brefs but need not be
determned, snce f The armers Merchants Mutua and Casuaty ssocaton
coud not tsef recover the ta es pad, ts successor woud have no rght to
do so.
n order may be drawn accordngy for |udgment In favor of the defendant
and aganst the pantff.
S CTION 233. GROSS INCOM O CORPOR -
TIONS D IN D.
rtce 541: Gross ncome. I -37-4776
G. C. M. 8446
R NU CT O 1921.
The cemetery ots sod In 1921 by the ta payer were sod under
an e press agreement wth the purchasers that the ots woud
receve perpetua care n accordance wth the rues and reguatons
of the ta payer. by-aw of the ta payer provded e pressy
that 10 per cent of the saes prce of each ot sod shoud go
Into a fund for perpetua care and such a fund was created by
the ta payer and a trustee of the fund was desgnated. The
statutory aw of Washngton provdes that the ta payer may
by ts by-aws provde for an Irreducbe fund or perpetua care
fund and that such by-aw, when enacted, can not be amended
n any manner e cept for the purpose of ncreasng the fund,
and that such fund wth the ncome arsng therefrom sha be
used ony for the purpose for whch t was Intended and as mted
by the statute.
Such part of the seng prce of cemetery ots sod n 1921
as passed nto the rreducbe fund or perpetua care fund dd not
consttute part of the ta payer s gross ncome and coud not
therefore be a part of ts ta abe ncome.
In 1921 the M Cemetery Co. was engaged n the busness of seng
cemetery ots and graves and n the operaton of the cemetery from
whch such propertes were sod. The contract of sae contaned the
foowng:
The sad party of the frst part agrees that sad ot or ots sha receve
perpetua care In accordance wth the rues and reguatons of sad M Cemetery
Co. wthout addtona cost to the party of the second part.
rtce III of the artces of ncorporaton of the ta payer con-
tans the foowng:
There sha be frst set asde n a separate fund, to be hed by some bank or
trust company organzed under ether State or edera charter and sub|ect to
ether State or edera supervson, a certan f ed percentage of the saes
prce of a cemetery ots sod, as the perpetua care fund, whch fund sha
be set asde pror to the settng asde of funds for the payment of dvdends on
the preferred stock and after ts retrement.
Secton 10 of the by-aws of the ta payer contans the foowng:
There sha be set asde n a trust fund, to be hed by the trustee wth
whch funds for the payment of dvdends on the retrement of the preferred
stock sha be deposted, an amount equa to 10 per cent upon the saes prce
of each and every cemetery ot sod mmedatey upon the coecton thereof,
the ncome of whch sha be used as a perpetua care fund for a ots n
the cemetery of the corporaton as covered by property conveyed thereto under
date of , 1919, by , and a trust agreement sha be provded under
whch the Income therefrom sha be apped n the manner, ether drect or
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
371
233, rt. 541.
through a cemetery assocaton, or otherwse, as may he determned by the
board of trustees of the corporaton, towards the perpetua mantenance and
care of such cemetery and a ots sod theren, and whch fund can not be In
any way reduced or dverted, but sha be a perpetua fund, to be hed by the
trustee as provded for n these by-aws, and the orgna artces of ncorpora-
ton, and ts successor.
Secton 11 of the by-aws contans the foowng:
In order to carry nto effect the provsons of the orgna artces of ncor-
poraton and of these by-aws, the corporaton sha appont a trustee to admn-
ster the trust and snkng fund on account of the perpetua care fund and
for the payment of dvdends on and the retrement of the preferred stock,
whch trustees sha be a bank or trust company dong busness at ,
wthn County, Wash., and operatng ether under State or edera
charter, and sub|ect to State or Natona supervson. The frst trustee sha
be the ank of Washngton, whch sha act as trustee of the perpetua
care fund and of the fund for the payment of dvdends on and the retrement
of the preferred stock. In case of ts refusa to act or ts resgnaton, then
and n that event the board of trustees of the corporaton sha appont a suc-
cessor, whch must be a bank or trust company operatng under ether State
or Natona charter, and dong busness at -, Wash., and n case of a
wrtten demand made upon the board of trustees, sgned by the hoders of
shares of the preferred stock then outstandng equa to 90 per cent thereof and
the hoders of shares of the common stock equa to 50 per cent thereof, the board
of trustees sha forthwth appont a successor to sad trustee. y unanmous
vote of the board of trustees, any trustee may be removed and a new trustee
havng the quafcatons provded for n the orgna artces and n these
by-aws may be apponted.
The queston s thus presented whether the funds segregated from
the sae prce for a ot consttuted a trust fund and whether the
amounts so set asde shoud be e cuded from the gross saes prce of
the ots and consequenty not consdered n the computaton of the
ta payer s ta abe net ncome.
In the case of the Los ngees Cemetery ssocaton (2 . T. .,
495, C. . III-2, 32), the ta payer sod pots n the cemetery. If
the purchaser desred to pay an addtona sum for mantenance of
the pot, the ta payer woud enter nto an agreement to care for the
pot n perpetuty. Under the Caforna statute such funds were
not to be used for any other purpose and the ta payer was requred
to nvest the fund as requred by the statute. The oard hed that
such amounts receved by the ta payer dd not consttute gross n-
come as that term was defned n sectons 213 and 233 of the Revenue
ct of 1918. The Commssoner acquesced n that decson.
In the case of Greenwood Cemetery ssocaton (2 . T. ., 910,
C. . III-2, 20), the ta payer had a f ed prce for each ot and a
separate charge for perpetua care of the ot purchased, and when
saes of ots were made t charged the purchaser the prce of the ot
and the charge for perpetua care as separate tems. y agree-
ment wth the purchasers, the amounts pad for perpetua care were
hed as a trust fund, the ncome from whch was aone avaabe for
use n carng for the ots. The oard dsaowed a defcency deter-
mned by the Commssoner on the authorty of the case of Los
ngees Cemetery ssocaton, supra, and the decson was ac-
quesced n.
In the case of the Sprngdoe Cemetery ssocaton (3 . T. -
223, C. . III-2, 49), the ta payer agreed wth the purchasers of
the ots to care for the ots durng the e stence of the cemetery.
The charter of the ta payer contaned a provson that the ta -
payer n ts by-aws shoud appy the net proceeds of saes, after pay-
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
233, rt. 541.
372
ment of ts obgatons, e penses, and nterest, to keep the grounds n
repar and good order, but there was no provson for appropratng
any part or the proceeds of saes of ots to a perpetua care fund.
fund was, n fact, set up nformay on an estmate of 25 cents
per square foot. The oard hed that there was no trust fund
estabshed and that the amounts approprated to the fund coud not
be deducted from the sae prce of the ots, nasmuch as the fund
was a vountary one whch mght be reduced or wped out at any
tme, and that the ta payer s abty to the purchasers of ots was,
f any, one for breach of contract.
In the case of Metare Cemetery ssocaton (4 . T. ., 903,
C. . III-2, 35), there was a specfc understandng between the
ta payer and the purchasers of ots that moneys receved by the
ta payer for perpetua care of the ots woud be hed n trust for
that specfc purpose. The oard found that these funds were
hed n trust and therefore gave rse to no ta abe ncome to the
ta payer. That case foowed the rue ad down n the case of
Los ngees Cemetery ssocaton, supra, and was acquesced n.
In the case of Troost venue Cemetery ssocaton (4 . T. .,
1169, C. . III-2, 52), the deeds gven by the ta payer to pur-
chasers of ots made no reference to perpetua care, to a trust fund,
or to apportonment of the purchase prce, but the recepts gven
purchasers dvded the purchase prce, part of whch was to go
to perpetua mantenance n accordance wth an agreement be-
tween the ta pa| er and a trustee custodan of the fund. The oard
hed that the porton of the purchase prce pad to the trustee was
rrevocaby n the possesson of the trustee and was deductbe as an
ordnary and necessary busness e pense. That decson was
acquesced n.
In the case of Ingewood Park Cemetery ssocaton (6 . T. .,
386), each deed for a cemetery ot contaned the foowng:
Sad ot s granted wth rght to the grantee for perpetua care thereof by
and at the e pense of sad cemetery assocaton.
y proper corporate acton 25 per cent of the tota monthy re-
cepts from saes was set apart as a perpetua care fund, whch was
deposted n the bank n a separate account. Purchasers were as-
sured that ths fund for perpetua care woud be mantaned. The
oard found, as the aws of Caforna prevented the use of the
fund n any other manner, that the amounts so set apart for perpetua
care consttuted a trust fund from the nstant they passed nto the
hands of the ta payer, and that addtons to the corpus of the
fund coud not be ncuded n statutory nvested capta as earned
surpus. That decson was not acquesced n (C. . III-2, 65).
In the case of Portand Crematon ssocaton (10 . T. ., 65),
nches, urns, and vauts were sod by the ta payer. y corporate
resouton a certan percentage of the recepts from such sae was
set asde as a mantenance fund, and purchasers were assured that a
Drton of the purchase prce woud be paced n such fund. The
oard hed that there was no trust fund estabshed that the a-
bty to the purchasers was no more than a contractua abty
that there were no grounds on whch a court of equty woud mpy
a trust or admnster t and that the entre recepts from saes con-
sttuted gross ncome.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
373
233. rt. 541.
On revew by the Crcut Court of ppeas, Nnth Crcut, the
court reversed ths decson of the oard and hed that a trust had
been created, and that the amounts that went nto the trust fund dd
not consttute ncome. Portand Crematon ssocaton v. Com-
mssoner, 31 ed. (2d), 843.)
In the case of Troost venue Cemetery Co. v. Unted States (21
ed. (2d), 194), the queston arose whether sums receved by a
cemetery company from purchasers of ots and by t pad nto a
perpetua mantenance trust fund, and the nterest accrung upon
such fund were ncome sub|ect to ta aton. The court found that
a proporton of the purchase prce of a ot was pad by the pur-
chaser to the pantff and at once pad over by the pantff to a
trustee. The court hed that such sums passed through the hands of
the pantff ony as a representatve of the purchasers of ots, that
the trust fund was hed absoutey by the trustee and was not sub-
|ect to any contro by the pantff, and was rrevocaby and perpet-
uay devoted to the mantenance and beautfcaton of the cemetery.
The court sad:
Certany the proceeds of saes of property are to be Incuded n the gross
ncome of the seer, f the amounts receved are for the use and beneft of
the seer but that s not true of any part of the proceeds whch s not re-
ceved for the seer s use and beneft, but merey passes smutaneousy nto
nd out of hs hands to a thrd party, who hods t, not for the use and bene-
ft of the seer, but for the use and beneft of the buyer. That s ths case.
So ths amount was not a part of the pantff s gross ncome, and coud not,
therefore, be a part of ts ta abe net Income.
In the case of mercan Cemetery Co. v. Unted States (28 ed.
(2d), 918), by the terms of an agreement wth the cty of Wchta
permttng operaton of a cemetery, a trust fund was estabshed at
a certan amount per acre, the prncpa of whch was to be hed n-
voate as a perpetua care fund, a responsbe trust company beng
made trustee. Ths agreement was assumed when the ta payer was
ncorporated. Under the aws of ansas t s mandatory on a ceme-
tery company to set asde not ess than 10 per cent of the purchase
prce of each ot for the permanent mantenance of the cemetery.
trust fund was estabshed n accordance wth the agreement. In
the purchase of ots the ta payer nserted n the deeds a provson for
the perpetua care of the ots as provded for n the agreement wth
the cty. The queston arose whether the amounts pad to the trus-
tee were to be consdered a part of the ncome of the ta payer, or,
f consdered as part of the ncome, whether deducton shoud be
aowed on account of such payments. The dstrct court hed that
the severa decsons of the oard of Ta ppeas had estabshed
a rue on the sub|ect as foows:
The moneys derved from the sae of cemetery ots sha be treated
as ncome, and no part of that Income mny be deducted, for ta aton purposes,
smpy because the cemetery corporaton has made a genera agreement for
perpetua mantenance.
The court went on to say, however. If, on the other hand, a trust
s created, and a ta payer s bound, ether by statute or ts agree-
ment, to pay certan sums nto a trust fund, and f such trust fund
s entrey beyond ts contro, and f the prncpa and ncome from
such trust can not nure to the beneft of the pantff, then the sums
pad nto the trust are not consdered as a part of the pantff s n-
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
233, rt. 541.
374
come. The court aso sad In the common acceptaton of the term
ncome t s dffcut to see how the defendant can successfuy as-
sert that those sums whch a pantff paces n an rrevocabe trust,
for the beneft of the ot owners, can be consdered as a part of ts
ncome. The court hed n that case the trust beng rrevocabe,
and both tre prncpa and ncome beng forever beyond the reach
of the pantff for ts own use, the amounts pad to the trustee by
reason of the statute, or by reason of ts contracts wth the cty of
Wchta and the owners, s not ta abe ncome.
The nstant case arses under the aws of the State of Washng-
ton. Secton 3766 of emngton s Comped Statutes of Washng-
ton (1922), reatve to cemetery assocatons, and n force n 1921,
reads as foows:
Such assocaton sha be authorzed to purchase or take by gft or devse,
and hod and e empt from e ecuton and from any appropraton to pubc
purposes, for the soe purpose of a cemetery not e ceedng 80 acres, whch sha
be e empt from ta aton If ntended to be used e cusvey for bura purposes,
and n no wse wth a vew to proft of the members of such assocaton:
Provded, That when the and aready hed by the assocaton s a practcay
used, then the amount thereof may be ncreased by addng thereto not e ceedng
20 acres at a tme. Such assocaton may by Us by-acs provde that a stated
percentage of the moneys reazed from the sae of ots, donatons or other
sources of revenue, sha consttute an rreducbe fund, whch fund may be
nvested n such manner or oaned upon such securtes as the assocaton or the
trustees thereof may deem proper. The nterest or Income arsng from the
Irreducbe fund, provded for In any by-aws, or so much thereof as may be
necessary, sha be devoted e cusvey to the preservaton and embeshment
of the ots sod to the members of such assocaton, and where any by-aw has
been enacted for the creaton of an rreducbe fund as heren provded for t
can not thereafter be amended n any manner whatever e cept for the purpose
of ncreasng such fund. fter payng for the and a the future recepts
and ncome of such assocaton sub|ect to the provsons heren for the creaton
of an rreducbe fund, whether from the sae of ots, from donatons, rents or
otherwse, sha be apped e cusvey to ayng out, preservng, protectng and
embeshng the cemetery and the avenues eadng thereto, and n the erecton
of such budngs as may be necessary or convenent for the cemetery purposes,
and to payng the necessary e penses of the assocaton. No debts sha be
contracted n antcpaton of any future recepts e cept for orgnay purchas-
ng, ayng out and embeshng the grounds and avenues, for whch debts so
contracted such assocaton may ssue bonds or notes and secure the same by
way of mortgage upon any of ts ands, e ceptng such ots as sha have been
conveyed to the members thereof and such assocaton sha have power to
adopt such rues and reguatons as they sha deem e pedent for dsposng of
and for conveyng bura ots. Itacs supped.
In 1921 the ots were sod under an e press agreement wth the
purchasers that the ots woud receve perpetua care n accordance
wth the rues and reguatons of the ta payer. by-aw of the ta -
payer provded e pressy that 10 per cent of the saes prce of each
ot sod shoud go nto a fund for perpetua care. Such fund was
created by the ta payer and a trustee of the fund was desgnated.
The statutory aw of Washngton provded that the ta payer mght
by ts by-aws provde for an rreducbe fund or perpetua care fund
and that such by-aw, when enacted, coud not be amended n any
manner e cept for the purpose of ncreasng the fund, and that the
nterest or ncome arsng from the fund shoud be devoted e -
cusvey to the preservaton and embeshment of the ots sod.
rom the foregong t seems cear that a trust fund was created n
whch the purchaser of a ot had such an equtabe nterest as mght
be enforced upon appcaton to a court of equty by petton askng
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
375
234, rt. 561.
for specfc performance, and that such trust fund was rrevocabe,
both as to prncpa and ncome therefrom. Snce the trust fund s
rrevocabe and mted by the agreement wth the purchaser of the
ots, by the by-aws of the ta payer, and by the statutes of Wash-
ngton, t s thus paced beyond the contro of the ta payer and can
not nure to ts beneft. It necessary foows that such part of any
moneys receved from the sae of ots, passng nto the rreducbe
fund or perpetua care fund, dd not consttute part of the ta payer s
gross ncome and coud not therefore be a part of ts ta abe ncome.
Ths offce s of the opnon that n saes of cemetery ots made
n 1921 by the ta payer, where part of the seng prce of a ot went
nto an rreducbe fund or perpetua care fund, such part of the
seng prce dd not consttute ta abe ncome of the ta payer n the
nstant case.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
S CTION 234. D DUCTIONS LLOW D
CORPOR TIONS.
rtce 561: owabe deductons. I -29-4711
Ct.D. 202
INCOM T R NU CT O 1918 D CISION O COURT.
Deducton Loss rom Rebates.
Where a ta payer durng the year 1918 ses and devers Its
product packed n coth sacks under contracts provdng, n con-
formty to a practce of severa years, that the prce named ncudes
the sacks, whch the ta payer agrees to repurchase f returned n
servceabe condton, payments made n 1919 by the ta payer to ts
customers n the repurchase of sacks sod to them n 1918 under
such contracts are not rebates wthn the meanng of secton
234(a) 14 of the Revenue ct of 1918 and therefore no oss on
account of such payments s deductbe n 1918 under that sub-
secton.
Dstrct Court of the Unted States for the Western Dstrct of Mssour,
Western Dvson.
Dewey Portand Cement Co., a Corporaton, pantff, v. Noah Crooks, as Co-
ector of Interna Revenue, defendant.
May 29, 1930.
ST T M NT O T C S , INDINGS O CT, M MOR NDUM OPINION, ND CON-
CLUSIONS O L W.
Ots, Dstrct udge: Ths s an acton to recover aeged e cess ta es n the
sum of 18,755.86, pad for the year 1918. Recovery of ths amount s sought
under and by vrtue of the provsons of secton 234(a)14 of the Revenue ct
of 1918, whch, so far as Is here pertnent, reads as foows:
t the tme of fng return for the ta abe year 1918 a ta payer may fe
a cam n abatement based on the fact that he has sustaned a substanta
oss (whether or not actuay reazed by sae or other dsposton) resutng
from any matera reducton (not due to temporary fuctuaton) of the vaue
of the nventory or 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 the ta covered by such cam sha not be requred unt
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
234, rt. 561.
376
the cam Is decded . If no such cam Is fed, but It s shown to
the satsfacton of the Commssoner that durng the ta abe year 1919 the
ta payer has sustaned a substanta oss of the character above descrbed then
the amount of such oss sha be deducted from the net ncome for the ta abe
year 1918 and the ta es mposed by ths tte and by Tte III for such year
sha be redetermned accordngy. ny amount found to be due to the ta -
payer upon the bass of such redetermnaton sha be credted or refunded to
the ta payer n accordance wth the provsons of secton 252.
More partcuary pantffs cam s based upon that part of the above-quoted
provson of the Revenue ct of 1918 whch provdes for a refund where the
ta payer has sustaned a substanta oss resutng 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.
The case was tred to the court, a |ury havng been waved by wrtten stpu-
aton. rom the agreed statement of facts offered n evdence I make the
foowng
INDINGS O CT.
L
The pantff s a corporaton organzed n 1906, under the aws of the State
of West rgna, and was durng a of the tme mentoned n the petton
and now s duy censed to transact busness n the State of Mssour. The
pantff s offce and prncpa pace of busness s at ansas Cty n sad State.
Pantff was and s engaged n the manufacture and sae of Portand cement.
II.
The pantff has at a tmes made ts edera ncome ta returns on the
caendar-year bass and has kept ts books and records on an accrua bass.
III.
On or about the 15th day of pr, 1919, the pantff fed wth the coector
of nterna revenue at ansas Cty, Mo., ts corporaton ncome and profts
ta return for the year 1918, on orm 1120, as requred by the Revenue ct
of 1918, and pad the ta shown due thereon n the amount of 7,372.09.
I .
On the September, 1924, assessment st, the Commssoner of Interna Revenue
made an addtona assessment aganst the pantff for the year 1918 n the
amount of 26,780.56. The addtona assessment was arrved at by ncreasng
pantff s net ncome n the amount of 78,026.55, whch was shown on ts
books as sack redempton fund and not reported as ncome n ts sad return
for the year 1918. The addtona assessment was pad to the coector of
nterna revenue at ansas Cty, Mo., n two payments, as foows: 23,212.50
on October 22, 1924, and 3,567.97 on ebruary 20, 1925.
.
On October 3, 1927, the pantff fed a cam for refund of the addtona
assessment In the amount of 26,780.56. On ebruary 29, 1928, the pantffs
cam for refund was re|ected.
I.
On December 18, 1923, the ta payer and the Commssoner of Interna
Revenue entered nto a waver agreement e tendng the perod for determna-
ton, assessment, and coecton of any ta due for the year 1918 for a perod
of one year from the date thereof.
II.
The pantff durng the year 1918 and for many years pror thereto devered
ts product, Portand cement, packed In coth sacks, bearng the name and trade
mark of pantff stamped thereon n arge etters, whch was the genera
custom of the cement ndustry n deverng ts product.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
377
15234. rt. 561.
III.
The pantff for many years pror to 1918 and durng the perod from
anuary 1, 1918, to September 16, 1918, sod Its product under contracts con-
tanng a cause readng as foows:
Sacks. The prce named ncudes the sacks n whch the cement s to be
shpped. Coth sacks of Dewey brand devered hereunder w be repurchased
sub|ect to the seer s nspecton and count, at 10 cents each, f returned prompty
In servceabe condton at Dewey, Oka. Sacks that have been wet or are
worthess w not be repurchased.
I .
The pantff begnnng wth September 16, 1918, and throughout the re-
mander of 1918, sod Its product under contracts contanng the aforesad
cause, but wth the amount stated theren, changed from 10 cents to 25 cents.
.
Pursuant to the aforesad agreement, the pantff repurchased from cus-
tomers, at east 90 per cent of the tota sacks sod to them.
I.
The sacks sod durng the perod from September 16 to December 31, 1918,
were stamped n such a manner as to ceary dentfy them as sacks whch
the pantff had agreed to repurchase at 25 cents. Sacks presented by others
than customers for repurchase were not bought at the prce agreed upon n
pantff s contract wth customers.
II.
Pror to September 16, 1918, the pantff recorded on ts books the saes of
cement devered n coth sacks by debtng the customer s accouut wth the
seng prce of the cement, pus 10 cents for each sack, and credtng the seng
prce of the cement to cement saes and 10 cents to sack nventory. When
the sacks were repurchased, sack nventory was debted 10 cents for each
sack and a correspondng credt made to the customer s account.
III.
egnnng wth September 16, 1918, entres to refect transactons nvovng
coth sacks were paced upon pantff s books by debtng customer s account
wth the seng prce of cement, pus 25 cents for each sack and credtng
seng prce of the cement to cement saes and 25 cents to sack redempton
fund. n addtona entry was made debtng sacks n hands of customers
10 cents and credtng a ke amount to sack Inventory. When sacks were
repurchased, sack redempton fund was debted and the customer s account
credted wth 25 cents. n addtona entry was made whereby sack nven-
tory was debted 10 cents for each sack repurchased and a correspondng
credt made to sacks n the hands of customers.
I .
Durng the perod from September 16 to December 31, 1918, the pantff
devered to ts customers 606,453 sacks of Portand cement, packed n coth
sacks, and the charge therefor ncuded 25 cents for each sack. Durng the
sad perod there were returned to the pantff 86,276 sacks, eavng a baance
of 520,177 sacks n the hands of the customers, the tota amount charged for
sad sacks beng 130,044.25. Of ths amount, 52,017.70 was actua cost to
the pantff, eavng a baance of 78,020.55, whch the Commssoner of
Interna Revenue added to pantffs return as ta abe ncome.
.
Durng the year 1919, the pantff repurchased 392,052 sacks of the sad
520,177 outstandng and pad to ts customers the sum of 98,013.
35942 31 25
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
234, rt. 561.
378
I.
The sum of 98,013 s 58,807.80 n e cess of the orgna cost to pantff
Of sad 520,177 sacks. New sacks of the same type as the sacks repurchased
from customers woud have cost appro matey 20 cents each f purchased
from the manufacturers durng the perod from September 16 to December 31,
1918. The sacks repurchased from customers durng 1919 were from 1 to 6
years od. The average fe of a sack s s years.
M MOR NDUM OPINION.
Of the possbe questons n ths case there s one ony that requres con-
sderaton. That queston s ths: Were the payments made by the pantff
to ts customers n the repurchase of sacks sod to them n 1918 under the
contracts t had wth them rebates wthn the meanng of secton 234(a)14
The term rebates as used n secton 234(a) 14 requres defnton. arous
defntons may be found n the works of genera and ega e cographers.
Webster s Internatona Dctonary defnes a rebate as a deducton abate-
ment remsson or payment back to remove a porton of (a charge). It s
defned n ouver s Law Dctonary, voume 3, page 2819, as an aowance
by way of dscount or drawback. In connecton wth edera statutes for-
bddng carrers to grant rebates the word has been defned as mpyng a
comparson wth, a measurement by, and a departure from, a determned
standard. (Standard O Co. of Indana v. Unted States, 164 ed., 377, 390.)
rom these genera defntons t appears that t s essenta to the dea of
a rebate that upon a sae of goods or servces somethng be returned to the
purchaser out of the purchase prce for the purpose of accompshng a re-
ducton n the purchase prce. There s every reason to beeve that ths
genera defnton s the one ntended by the Congress for the word rebates
as used n secton 234(a) 14. That Is ceary ndcated by the egsatve
hstory of the secton.
The secton was adopted n contempaton of e traordnary condtons ob-
tanng n 1918, when t was e pected, by reason of the termnaton of the
Word War, a great reducton n vaues woud ensue. It was ntended to
permt ta payers to cam osses by reason of these great reductons n vaues,
both In connecton wth merchandse on hand and n connecton wth mer-
chandse whch had been sod. s to the atter cass of merchandse, where
purchasers thereof, contempatng the probabe reducton n vaues, e acted
from the seer contracts provdng for rebates In the event of a fang market
and because of the probabe fang market, t was thought |ust to provde that
such rebates so pad shoud be aowed as osses. That that was the ntenton
of the Congress appears from the decaraton made by Senator Smmons, char-
man of the nance Commttee, n advocatng the adopton of the measure.
e sad (Congressona Record, voume 57, part 3, page 8133) :
I refer to the amendment or amendments reatng to shrnkage n nven-
tores and net osses. Market vaues are fang and ths decne
w undoubtedy proceed at a constanty ucceeratng rate. Under such cr-
cumstances the aowance for fang nventores, as amended by the con-
ferees, w afford the greatest reef from a heavy ta es whch the b
mposes.
In genera terms, where durng the year 1919, by reason of a decne n
vaues, the Inventores upon whch the ncomes for the year 1918 were based
have shrunk so as to make t apparent that the ta whch woud be pad n
1919, based upon these hgh nventores, woud be based upon vaues that no
onger e st, vaues that have dsappeared, whch w never be reazed, the
b permts a reducton to the e tent of the decne n the nventory vaues
and provdes that the ta for the precedng year sha be redetermned and
pad upon the new bass of vaue, nstead of upon the orgna nventory bass.
Whe the anguage quoted from the statement of Senator Smmons Is par-
tcuary appcabe to the frst part of secton 234(a) 14, obvousy t Invoves
aso an e panaton of the part of that secton wth whch we are here mme-
datey concerned.
The Crcut Court of ppeas for the ghth Crcut smary has e paned
the genera purpose of ths secton. (Gover Co. v. Coects of Interna Rev-
enue (8 C. C. .), 34 ed. (2d), 605. 007.) See aso ennngsen Produce Co.
v. Commssoner of Interna Revenue (D. C. C. C. .) (37 ed. (2d), 821, 822
Ct. D. 171, C. . I -1, 317 ).
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
379 234, rt. 561.
avng n mnd the meanng of the word rebates as used n ths secton,
as that meanng s made cear both from the genera defntons of the word
and from the ght thrown upon t by the egsatve hstory and |udca con-
structon of the secton, t can not be sad that what the pantff dd con-
sttuted payment of rebates to ts customers. It sod sacks to ts customers for
25 cents each. It agreed to purchase them back at the same prce, f the
customers desred to rese them to the pantff. It dd repurchase sacks at
that prce. There s here none of the characterstcs of rebates. specay
a there absent the essenta eement of prce reducton by means of repayment
of a part of the prce pad. Moreover, a true rebate does not ncude the
return of the artce purchased, but assumes ts retenton by the purchaser.
urthermore, none of the reasons on account of whch secton 238 was adopted
appy here. The agreement to repurchase was not at a nfuenced or brought
nbout by any change n market condtons whch mght have sub|ected pur-
chasers to oss on account of a fang market.
Snce the payments by way of repurchase of ts sacks theretofore sod to
Its customers were not rebates n any sense, pantff can have no reef under
the secton of the statutes reed on by t here.
CONCLUSION O L W.
Upon the facts found, pantff s not entted to recover. It dd not sustan
any oss n 1018 by reason of payments of rebates under contracts entered
Into n connecton wth saes made n that year. Payments made by t n
repurchasng sacks sod to ts customers were not rebates.
udgment shoud be for defendant. decree may be prepared accordngy
and submtted for approva and entry. n e cepton s aowed to the con-
cuson of aw herenbefore announced.
rtce 561: owabe deductons.
R NU CT O 1021.
Casng-head gasone contracts. (See G. C. M. 8253, page 232.)
rtce 561: owabe deductons. I -42-4806
Ct. D. 237
INCOM T R NU CTS O 1918 ND 1921 D CISION O COURT.
1. Deducton usness penses Payments to a und Re-
S D OR S L -INSU NC .
mounts pad by an empoyer Into a fund set up, pursuant to a
resouton of an ndustra commsson of a State, as a reserve for
sef-nsurance, whch s used for pnyment of compensaton and other
benefts under the workmen s compensaton act of the State, are not
deductbe from gross ncome as a busness e pense under secton
234(a) 1 of the Revenue cts of 1918 and 1921.
2. Decson ffrmed.
The decson of the oard of Ta ppeas (13 . T. ., 189)
affrmed.
Unted States Crcut Court of ppeas, Tenth Crcut.
Sprng Canyon Coa Co., appeant, pettoner, v. Commssoner of Interna
Revenue, respondent.
ppea from the Unted States oard of Ta ppeas.
efore Cottera, Phps, and MoDebmott, Crcut udges.
September 5, 1930.
opnon.
McDermott, Crcut udge, devered the opnon of the court.
The workmen s compensaton aw of Utah requres certan empoyers to pay
certan compensaton to n|ured empoyees. To secure the empoyees n such
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
234, rt. 561.
380
compensaton, the statute gves an empoyer the opton to (1) nsure tsef
aganst abty to ts empoyees ether In the State nsurance fund or a prvate
nsurance company, or (2) y furnshng annuay to the commsson sats-
factory proof of fnanca abty to pay drect the compensaton n the amount
and manner and when due as provded for n ths act. In the atter case, the
commsson may n ts dscreton requre the depost of acceptabe securty,
Indemnty or bond to secure the payment of compensaton abtes as they are
ncurred.
The pettoner eected to become a sef-nsurer about uy 1, 1919: the
commsson approved but requred a 50,000 surety bond as a guaranty of Its
abty to respond to ts obgatons under the aw. t the same tme, appar-
enty, the pettoner estabshed the fund hereafter referred to. On November
19, 1920, the Industra commsson ssued ts speca order drected to pet-
toner, rectng that the pettoner had prevousy been authorzed to pay com-
pensaton drect to ts empoyees and become what s known as a
sef-nsurer that t had been drected to set up reserves for the purpose of
such payments n an amount equa to the premums that woud be pad f sad
company were nsured n the State nsurance fund that coa mnng was a
hazardous busness and the commsson desred to protect n|ured empoyees
It was therefore ordered that the pettoner set nsde an amount of monoy
equa to that whch woud be requred as premums from sad company were It
nsured wth the State nsurance fund, sad amount to be used for the payment
of compensaton, medca and other benefts of the workmen s compensaton act
and for such ncdenta e penses as may be necessary for the proper admnstra-
ton and carryng out of such requrements: and (that It)
contnue to set up such reserve unt the further acton of ths commsson
ether modfyng or annung ths order.
The pettoner estabshed a wefare or compensaton nsurance fund and
together wth two other empoyers empoyed one . D. rown to
assume charge of a admnstratve dutes n connecton wth such funds.
rown dd not ntermnge the funds of hs three empoyers, but dd set up a
separate offce and organzaton perodcay he rendered a statement to hs
empoyers of the amounts requred to be set asde the empoyers gave hm
checks therefor, and pettoner s checks were deposted n a separate bank
account denomnated The Sprng Canyon Wefare und. rom ths fund,
rown pad cams of empoyees and e penses of admnstraton, and nothng
ese. arnngs accrung to the fund were added thereto. Durng the years n
queston, the addtons to the fund e ceeded the dsbursements. The pettoner
carred the baance n the fund as an asset, offset by a charge to reserve for
nsurance. Durng the years 1920 and 1921, when nvested capta was a factor
n computng ta es, the respondent ncuded the baance n the fund as a part
of the Invested capta of pettoner.
Nether the ncome of the pettoner, nor Its rght to deduct payments made
out of the fund, s n dspute. The queston s whether the pettoner s entted
to deduct a sums pad nto ths reserve fund, wthout regard to the amount of
abtes, ncurred or pad, to ts empoyees. The years Invoved are 1920,
1921, and 1922.
Deductons from ncome may not be made uness authorzed by the statute.
The pettoner cams the rght to make ths deducton under secton 234(a),
Revenue ct 1918 (40 Stat., 1057), and the correspondng secton n the ct of
1921 (42 Stat., 227). That subsecton reads n part:
That n computng 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 .
The brefs of the partes are devoted argey to the queston of whether the
fund s hed n trust, and f so. whether t s revocabe. These questons need
not be determned. Whe the prmary purpose of the fund s to secure empoyees
In ther compensaton, payments from the fund dscharge ega obgatons of the
empoyer. nd whe the empoyer may not revoke the trust as ong as obga-
tons to empoyees are outstandng, any e cess n the fund at the end of 1920 s
avaabe to pay ega obgatons of the empoyer Incurred or due n 1921. So,
at a tmes, the empoyer has the beneft of the accruas to the fund, n that
such accruas are avaabe to pay ts ega obgatons. It s argued that the
pettoner has the rght to treat payments nto the fund as e penses, and In
event t ater revoked the arrangement, to then charge tsef as ncome wth any
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
381
234, rt. 561.
baance repossessed that Is to say, the pettoner desres to seect the ta abe
year Into whch ths ncome sha be charged. The same genera argument was
made, wthout success, In Corss v. owers (281 U. S., 376 Ct. D. 1SS, C. .
I -1, 254 ).
There s another reason. Ta aton s a practca matter, and form must gve
way to substance. In sner v. Macomber (252 U. S., 189, 211 T. D. 3010, C. .
8, 25 and owers v. erbaugh- mpre Co. (271 U. S., 170 T. D. 3881, O. .
-, 199 ) It was hed that n determnng what consttutes ncome, substance
rather than form s to be gven controng weght. The same rue shoud
appy to e penses and n truth and substance the sums set asde by the
pettoner were not e penses of the busness. They were sums set asde
as requred by the commsson, and were n fact reserves aganst contngent
osses. The order of the commsson twce speaks of them as such the pet-
toner carred the fund on ts books as an asset, offsettng t by a correspond-
ng amount refected as a reserve for workmen s compensaton nsurance. True,
It was more than a bookkeepng entry t was an actua reserve, akn to that
requred of nsurance companes, but nevertheess a reserve. It s sgnfcant
that the reserves of nsurance companes are deductbe by vrtue of a separate
subsecton whch does not e tend to mnng companes. Reserves to cover
contngent abtes are not aowabe as deductons. (Lucas v.
mercan Code Co., 280 U. S., 445 Ct. D. 168, C. . I -1, 314 Unted
States v. nderson, 269 U. S., 422 T. D. 3S39, C. . -, 179 .)
The precse queston came before the oard of Ta ppeas In May, 1925.
( ppea of Pan- meroan de Co., 1 . T. ., 1249.) The oard hed that
euch payments were not deductbe as an e pense, sayng:
The ta payer aso urges that t s Improper to dscrmnate between one
who pays premums to an nsurer and one who bears hs own rsk. The df-
ference s one of fact n the one case the e pense of premums s pad or
ncurred and n the other t s not. The dscrmnaton, f such t be, s sef-
mposed. Snce the statute does not permt a ta payer to deduct as an e pense
an amount whch he fears he may some day be caed upon to spend, there can
be no sancton for such a deducton.
To the same effect see In re Thompson Scenc Ry. Co. (2 . T. ., 664) Id.
(9 . T. ., 1203) In re Greenve Coa Co. (3 . T. ., 1223). It thus appears
that at east snce May, 1925, the Commssoner and the oard have unformy
hed that a sef-nsurer may not deduct an amount equvaent to premums t
mght have, but dd not, e pend. Congress has reenacted secton 234 snce,
wthout change n ths regard, thereby recognzng and adoptng the estabshed
practce. (Luckenbach S. S. Co. v. Unted States, 2.80 U. S., 173 Unted States
v. ackson, 280 U. S., 183 Natona Lead Co. v. Unted States, 252 U. S., 140
Unted States v. nderson, 269 U. S., 422, 439 supra .) Pettoner ctes ater
decsons of the oard of Ta ppeas whch t contends are nconsstent wth
the decsons above set out. Wthout revewng them or e pressng an opnon
thereon, we need ony say that the present case s not auaogous to a trust set
up by an empoyer to assst empoyees n sckness or od age, where he Is
under no obgaton so to do nether s t governed by Portand Crematon
ssocaton v. Commssoner (9 C. C. .) (31 . (2d), S43), where a cemetery
corporaton, In consderaton of the purchase of a ot, agreed to pay a porton
of the prce nto a perpetua mantenance fund.
The whoe ob|ect of sef-nsurance s to avod the e pense of nsurance
premums. If the pettoner had eected to nsure ts rsks n the State fund
or a prvate company, t woud have e pended the premum and shfted the
rsk nstead, t retaned the rsk and kept the premum. avng eected not
to e pend the premum, t can not charge a correspondng sum as an e -
pense. The e penses ncurred and deductbe were the sums pad ts n-
|ured workmen, and not the amounts set asde for ther protecton the
pettoner s not entted to deduct as an e pense a sum of money whch t
mght have e pended for nsurance premums, but dd not.
The petton to revew s dened.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
234, rt. 561.
382
btce 561: owabe deductons. I -48-4849
Ct. D. 261
INCOM T R NU CT O 1918 D CISION O COURT.
1. Deducton usness pense Loss Corporate Payment
Pursuant to greement n Settement of Dspute etween
Stockhoders.
payment made by a corporaton to one of ts stockhoders,
who had brought sut soey to estabsh hs rght to subscrbe
to hs proporton of stock representng an ncreased captazaton
and to have t ssued to hm at par, pursuant to a compromse
agreement between ts two stockhoders n settement of the ds-
puted rght to subscrbe and other matters n controversy between
them whoy of ther concern, s not deductbe as a busness
e pense under secton 234(a) 1 of the Revenue ct of 1018 or as a
oss under paragraph 4 of that subdvson.
2. Decson ffrmed.
The decson of the oard of Ta ppeas (15 . T. ., 210)
affrmed.
Unted States Crcut Court of ppeas for the Second Crcut.
One undred ve West fty-fth Street, Inc., pettoner, v. Commssoner of
Interna Revenue, respondent.
efore L. and, Chase, and Mack, Crcut udges.
OPINION.
Petton for revew, pursuant to the Revenue ct of 1026 (ch. 27, sectons
1001, 1002, 1003, 44 Stat., 0, 109, 110) of an order of redetermnaton of the
oard of Ta ppeas promugated ebruary 6, 1929, determnng a defcency
In Income and profts ta es for the year 1920. ffrmed.
The facts were never n dspute. rom the fndngs of the oard of Ta
ppeas It appears that the
Pettoner Is a corporaton organzed and e stng under the aws of the
State of New York, wth ts prncpa pace of busness at 22 ast orty-nnth
Street, New York Cty.
The corporaton was organzed n 1916 wth an authorzed capta stock
of 60,000, consstng of 600 shares of a par vaue of 100 each.
of the capta stock of the corporaton was subscrbed and pad for n
cash by arod C. Mathews and ohn . earn, n equa proportons. George
. Gespe was attorney for both partes and for the corporaton. e, wth
hs offce assocate, a Mr. McCarthy, hed 10 shares each of earn s stock n
order to quafy them as drectors of the company. Upon Incorporaton earn
became presdent of the company, and Mathews secretary and treasurer.
Immedatey after ncorporaton the company proceeded to erect a budng
at 105 West fty-ffth Street (from whch t took ts name) and undertook
the remodeng and reconstructon of a budng at 100 Centra Park South.
The orgna pad-n capta was found nsuffcent to fnance the pro|ects under-
taken and from tme to tme as addtona capta was requred funds were
advanced by Mathews, such advances beng treated as oans to the company.
In anuary, 1917, the capta stock of the company was ncreased by an
amendment to the certfcate of ncorporaton by 60,000, or a tota captaza-
ton of 120,000. The aws of the State of New York provde that when new
stock s to be ssued each stockhoder has the rght to subscrbe to an amount
of new stock equa n proporton to the stock aready hed by hm, n order
to permt each stockhoder s votng power to reman n reatvey equa pro-
porton. Mathews mmedatey subscrbed to hs pro rata nterest n the new
stock and pad for the same, thereupon becomng the hoder of 60,000 par
vaue capta stock. Iearn ether refused or negected to e ercse hs sub-
scrpton rghts to the new stock. In the meantme, the two budng opera-
tons prevousy referred to had proceeded to competon and one of theu. the
105 West fty-ffth Street property, had been sod. The stock of the company
at ths tme had greaty ncreased n vaue. t ths pont earn demanded
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
383
234, rt. 561.
that he be permtted to subscrbe for hs addtona 30,000 worth of stock
wthout any ncrease n prce. Mathews took the poston that he was too ate
that hs rghts to subscrbe had e pred that the company dd not then need
the money and that earn, by hs refusa and negect, had ost hs rght to
subscrbe. Ths cam was a source of constant frcton between earn and
Mathews.
Durng the absence of Mathews n May, 1918, earn, presdent of the com-
pany, caed a meetng of the board of drectors, at whch there were present
Messrs. Gespe, McCarthy, and earn the three drectors present beng a
ma|orty, eected McCarthy presdent pro tem, and as such he ssued the
remanng 300 shares of the company s stock to Mr. earn. earn, however,
nstead of payng the subscrpton prce nto the company s treasury, deposted
30,000 n payment therefor nto a speca fund over whch he had soe contro.
Upon Mathews return and wth knowedge of what had transpred n hs
absence, he mmedatey protested aganst the ssuance of the addtona shares
of stock to earn and on uy 9, 1918, after demandng Its return and can-
ceaton, commenced an acton n the Supreme Court of New York to have the
stock decared vod. temporary n|uncton aganst the usng or votng of
the stock was apped for, whch n|uncton, after approprate hearng, was
made permanent. The order upon appea by earn was duy affrmed by the
appeate dvson n the fa of 1918. (See 186 pp. Dv., 883, 172 N. Y. 8., 907.)
The acton came up for tra n une, 1919, before the appeate dvson. In
October, 1919, |udgment was entered n favor of Mathews and aganst earn,
canceng as spurous the stock Issued to the atter. In December, 1919, earn
commenced a new acton aganst Mathews and the corporaton, gvng hs
verson of the facts and askng for a |udgment drectng that the corporaton
ssue 300 shares of the stock to hm on payment by hm to the company of
30,000. Ths acton was never tred and, as a resut of negotatons had
between the partes, earn s ca as set forth n hs acton and a other
matters n dspute between hm and Mathews were setted n an agreement
dated December 16, 1920. Pursuant to ths agreement the corporaton pad to
earn the sum of 40,480, whch t deducted on ts books and n the return
fed for that year, as an e pense.
Ths settement agreement above referred to was entered nto December
16, 1920, between Mathews and earn. It rectes the dspute between the
partes regardng earn s rght to subscrbe, and that certan detas of cor-
porate management theren agreed upon were for the best nterests of the
corporaton. y ts terms the partes agreed upon the offces to be hed by
them and ther respectve saares. budng property owned by the corpora-
ton was not to be sod pror to 1924 for ess than a specfed prce. The
corporaton was to engage n no new enterprses and was to be dssoved as
soon after the seng of the property as was convenenty possbe. Provson
was made for meetng obgatons, runnng e penses, and a reserve, the re-
manng surpus to be dstrbuted as dvdends. Pendng tgaton nsttuted
by earn (as set out above) was setted and ad|usted by payment of 30,000
by Mathews to earn or at the atter s opton by the corporaton transferrng
certan ots then under a contract of sae for 47,500 to earn, and to turn
over the proceeds of such sae ( 15,000 cash and a purchase money mortgage
of 32,500). If earn eected to take the ots, Mathews agreed to oan earn
a specfed sum of money for a tme stated. earn was to e ecute a reease
n the tgaton pendng. The stock over whch the dspute arose was to
reman treasury stock and nothng contaned n the contract was to pre|udce
the rghts of ether party n any future ssue of such stock.
y an nstrument dated December 17, 1920, and attached to the contract
earn acknowedged recept of 40,480 from the pettoner corporaton n fu
settement of the dsputed rght to subscrbe.
Chase, Crcut udge: The pettoner cams that the 40,480 pad earn was
ether a mantenance e pense or a oss deductbe under the provsons of the
Revenue ct of 1918 (ch. 18, 40 Stat., 1057, 1077). The appcabe porton of
the statute 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:
(1) the ordnary and necessary e penses pad or ncurred durng the
ta abe year n carryng on any trade or busness.

G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
234, rt. 561.
(4) Losses sustaned durng the ta abe year and not compensated for by
nsurance or otherwse.
The cam that the payment to earn was a deductbe oss s founded.
t the tme of ths settement payment the corporaton had the stock and
coud have defeated hs acton by ssung t to earn at any tme, snce hs
sut was brought soey to estabsh hs rght to subscrbe for t and have t
ssued to hm. Moreover, t coud have receved from earn 30,000 n cash
for the stock. It eected to keep t, freed from hs cam, forego the 30,000,
and pay hm 40,480 n addton. In reaty, t saw ft to make avaabe to
hm 70,480 whch t woud and coud have had In e change for whatever
rght he had to subscrbe for the stock at par. Possby t was worth what t
cost to get rd of hs cam. If t coud se the stock for as much or more t
coud repensh ts treasury whenever t chose. ut as to that the record
s sent and no ssue turns upon the fact whatever t may be. The pettoner,
n any event, dd not prove a oss, for t kept the stock and there was nothng
more than a dstrbuton of assets to a mnorty stockhoder to preserve the
e stng stock hodng rato of 2 to 1 between the two soe owners of the
corporaton. It was merey a matter affectng the capta structure of a
corporaton whch, whenever the two stockhoders who owned t coud agree,
was hut n puppet n ther hands. The rghts of no one ese were affected and
the corporaton, athough ts assets were dmnshed, ost no more than t
woud have ost had the same sum been dstrbuted to ths stockhoder by
dvdends eo nomne on the stock he aready owned. s ownershp of that
stock was the bass of hs cam of rght to purchase the new stock at par
that s, t ost nothng.
Nor was t an ordnary or necessary e pense n carryng on ts trade or
busness. part from the fact that the capta structure of ths corporaton
was not (he trade or busness t carred on, the payment to earn was, as we
have aready seen, whoy gratutous so far as t was concerned. It was qute
unnecessary to pay hm anythng. ad he been abe to have estabshed hs
cam fuy, the corporaton need ony have ssued the stock to hm and taken
hs 30,000. It had no fnanca nterest n a transacton that had for ts
ob|ect and attaned by ts resut nothng more than the settement of a dspute
between ts stockhoders over the rght of one of them to subscrbe for ts
stock.
We do not overook the fact that n the settement other matters were ad-
|usted between Mathews and earn, but from the fndngs of fact t appears
that those matters were whoy the concern of the two stockhoders, who to-
gether were n fu and compete contro of the corporaton, were treated as
such n the settement agreement to whch they aone were partes, and that
earn acknowedged recept of 40,480 from the pettoner corporaton n
fu settement of the dsputed rght to subscrbe. No more s requred to
make t pan that the 40,480 now sought to be deducted was pad soey to
permt the stock to reman n vrtua contro of the ma|orty stockhoder of
the corporaton. The pettoner rees on Murray ospta v. Rastnussen
(G. C. .) (20 ed. (2d), 29), but the payments there aeged were made to
sette controverses n whch the corporaton tsef had a fnanca nterest.
udgment affrmed.
rtce 561: owabe deductons. I -52-4885
Ct. D. 2G5
ncome ta revenue act of 1018 decson of supreme court.
Deducton ddtona Compensaton pense Incurred fter
Years When Servces Were Performed.
reasonabe amount of addtona compensaton pad by a corpo-
raton n 1920 for servces performed n prevous years, the ega
obgaton to pay for whch was not ncurred n those years but
arose by vrtue of a resouton of the drectors n 1920, s deductbe
n the atter year under secton 234(a)1 of the Revenue ct of 1918
as a busness e pense pad or ncurred In that year.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
385
234, rt. 661.
Supreme Coubt of the Unted States. No. 250. October Term, 1929.
Robert . Lucas, Commssoner of Interna Revenue, pettoner, v. Om ore
rush Co.
On wrt o certorar to the Unted States Crcut Court of ppeas for the ourth Crcut.
pr 14, 1930.
Mr. Chef ustce ughes devered the opnon of the court.
The O bre rush Co. appeaed to the oard of Ta ppeas from the
determnaton by the Commssoner of Interna Revenue of a defcency n the
ncome ta of the corporaton for the year 1920. The oard of Ta ppeas
sustaned the rung of the Commssoner (8 . T. ., 422), and ths decson
was reversed by the crcut court of appeas. (32 . (2d), 42.)
The queston reates to e tra compensaton granted by the drectors of the
corporaton n the year 1920 to the presdent and treasurer, of 24,000 each.
In the ncome ta return for that year, the corporaton deducted these tems
from the gross ncome and the Commssoner of Interna Revenue dsaowed
the deducton. The oard of Ta ppeas hed that, f the addtona compen-
saton was gven for servces performed n pror years, t was not deductbe
n the year 1920 and f, as the oard concuded, It was aowed for servces
rendered n 1920, t was n e cess of reasonabe compensaton for that year
and hence coud not be deducted.
The Crcut Court of ppeas found that the concuson of the oard of Ta
ppeas that the addtona compensaton was aowed for servces performed
n the year 1920 was wthout evdence to support t that the compensaton
was for past servces. It was further decded that the amount of the add-
tona payment was reasonabe n the crcumstances shown and was deductbe
In the return for 1920, the year n whch t was aowed and pad.
rom the facts as found by the crcut court of appeas t appears that the
presdent of the corporaton had been n offce from 1908 and Its treasurer
from 1907. oth of these offcers had devoted ther entre tme to the nterests
of the corporaton. ach year they had personay guaranteed bank oans
to the corporaton of consderabe amounts. In addton to ther ordnary
e ecutve dutes, the presdent and treasurer had charge of a arge purchases,
of a saes, and had drected the genera poces of the corporaton. Pror to
ther admnstraton, the busness of the corporaton had been In a chaotc
state and had been conducted at a oss, but under ther management the gross
saes had ncreased from about 374,000 n 1909 to 1,273,000 n 1920. The
net resuts were changed from an operatng oss of about 4,000 n 1908 to net
earnngs (after deducton of saares, ncudng the amounts here n queston)
of about 158,000 n 1920. No dvdends were pad unt 1910, but dvdends
were Increased from 4,500 n 1911 and 1912 to 423,275 n 1920, represented
by a 50 per cent stock dvdend of 300,000 and cash dvdends aggregatng
123,275, or 25.98 per cent, on the outstandng captazaton at the begnnng
of that year. The net ncome n 1920, after a deducton of a e penses, In-
cudng offcers saares, represented a return of 21.13 per cent on nvested
capta of about 750,000, as determned by the Commssoner of Interna
Revenue. The corporaton had advanced to a eadng pace In the brush trade.
In 1919 and 1920, the presdent and treasurer had receved saares of 12,000
and 15,000, respectvey. In 1918 ther combned saares were appro matey
25,000. The record does not dscose what they receved n 1915, 1916, and
1917, but n 1914 they together receved 16,000 n 1913, 11,000 n the thr e
precedng years, 10,000, and before that tme they receved 6,000.
On May 6, 1920, the board of drectors unanmousy voted to pay to each
of these offcers 24,000, the resouton n each case e pcty statng that
t was pad as e tra compensaton for hs past servces to ths company as
an offcer thereof and n any other capacty.
The books of the corporaton were kept on an accrua bass, and durng
May, 1920, proper entry was made credtng the accounts of the presdent and
treasurer wth the addtona compensaton thus voted.
It Is unnecessary to revew the facts more n deta, as the Government,
adoptng the vew that the addtona compensaton, as stated n the resouton
of the board of drectors and as found by the crcut court of appeas, was for
servces performed n pror years, concedes on behaf of the Commssoner that
the payments were reasonabe for such servces. The soe queston, therefore,
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
234, rt. 567.
386
whch the Government presents s whether these payments were propery
deductbe n the return for the year 1920.
The statute appcabe to the return s the Revenue ct of 1918 (ch. 18, 40
Stat., 1057). Secton 234(a) of that ct provdes (d., p. 1077) :
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:
(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 payments n the present nstance were actuay made n the year 1920.
The e penses represented by these payments were ncurred n that year, for t
s undsputed that there was no pror agreement or ega obgaton to pay the
addtona compensaton. Ths compensaton for past servces, t beng admtted
that t was reasonabe n amount n vew of the arge benefts whch the cor-
poraton had receved as the fruts of these servces, the corporaton had a
rght to pay, f t saw ft. There s no suggeston of attempted evason or
abuse. The payments were made as a matter of Interna pocy, havng ap-
proprate regard to the advantage of recognton of sk and fdety as a
stmuus to contnued effort. There was nothng n the ncome ta aw to pre-
cude such acton. On the contrary, the payments fe drecty wthn the
provson of secton 234(a) as a reasonabe aowance for compensaton for
persona servces actuay rendered. The statute does not requre that the
servces shoud be actuay rendered durng the ta abe year, but that the
payments therefor sha be proper e penses pad or Incurred durng the ta abe
year.
It s urged that under secton 212(b) of the Revenue ct of 1918 (d.. 1064,
1065) the Commssoner was entted to dsaow the deducton n the return
for 1920, upon the ground that f t were aowed the return woud not ceary
refect the ncome for that year. It s sad that the basc prncpe to be
apped s that the true net ncome s to be ta ed. Secton 212(b) provdes:
(b) The net ncome sha be computed upon the bass of the ta payer s
annua accountng perod (fsca year or caendar year, as the case may be)
n accordance wth the method of accountng reguary empoyed In keepng
the books of such ta payer but f no such method of accountng has been so
empoyed, or f the method empoyed does not ceary refect the ncome, the
computaton sha be made upon such bass and n such manner as n the
opnon of the Commssoner does ceary refect the ncome .
Ths secton reates to the method of accountng the Commssoner may
make the computaton on a bass that does ceary refect the ncome, f the
method empoyed by the ta payer does not. ut ths secton does not |ustfy
the Commssoner n aocatng to prevous years a reasonabe aowance as
compensaton for servces actuay rendered, when the compensaton was
propery pad durng the ta abe year and the obgaton to pay was ncurred
durng that year and not prevousy. In the present nstance, the e pense
coud not be attrbuted to earer years, for t was nether pad nor ncurred
In those years. There was no earer accrua of abty. It was deductbe
n the year 1920 or not at a. eng deductbe as a reasonabe payment,
there was no authorty vested n the Commssoner to dsregard the actua
transacton and to read|ust the ncome on another bass whch dd not respond
to the facts.
The case of Unted States v. nderson (269 U. S., 422 T. D. 3839, C. . -,
179 ) s not n pont, as there the abty for the muntons ta at a f ed
rate had accrued n the earer year (1916) nnd was a charge on the busness
of that year, athough the precse amount was ascertaned and was payabe n
1917. In mercan Natona Co. v. Unted States (274 U. S., 99 IT. D. 4099,
C. . I-2, 193 ) there was a contract provdng defntey for the payment
Compare Lucas, as Commssoner of Interna Revenue, v. mercan Code Co.
(280 U. S., 445 Ct. D. 168, C. . I -1, 314 ).
udgment affrmed.
rtce 5G7: Depostors guaranty fund.
R NU CTS OP 1918 ND 1921.
mounts pad bv Te as State banks to mantan depostors guar-
anty fund. (See 6. C. M. 8474, page 281.)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
387 240, rt. 631.
S CTION 239. CORPOR TION R TURNS
rtce 621: Corporaton returns.
R NU CT O 1918.
Tentatve return unverfed return. (See Ct. D. 266, page 396.)
S CTION 240. CONSOLID T D R TURNS O
CORPOR TIONS.
rtce 631: ffated corporatons. I -4 -4850
Ct. D. 252
INCOM T R NU CT O 1018 decson of court.
1. Consodated Return ffaton Stock Ownershp co-
nomc Contro.
Where one corporaton owns 70.9 per cent of the capta stock of
another t does not own or contro substantay a of the stock of
the other wthn the meanng of secton 240(b) 1 of the Revenue ct
of 1918, and the two corporatons are not affated wthn the
meanng of that secton athough they are operated as a snge eco-
nomc unt. Ownershp of stock and not actua economc contro Is
determnatve of affaton wthn the meanng of that secton.
2. Decsons Reversed.
The decson of the oard of Ta ppeas (4 . T. ., G37) and
the decson of the Dstrct Court (34 ed. (2d), 316) reversed.
Unted States Crcut Court of ppeas, S th Cntcurr.
Unted States of merca, appeant, v. The Ceveand, Panesve astern
Raroad Co., Inc., appeee.
ppea from the Unted States Dstrct Court of the Northern Dstrct of Oho, astern
Dvson.
uy 1, 1930.
OPINION.
Mack, Crcut udge: 1 ppea from a |udgment for defendant entered
on the peadngs n an acton by the Unted States under secton 283(|) of
the Revenue ct of 1926 (44 Stat., 9, 65, 26 U. S. C. ., sec. 1064(|)) to
recover ncome and profts ta es for the years 1918 and 1919. The 1926 ct
provded that when, pror to ts effectve date, a hearng was had before the
oard of Ta ppeas, there coud be no revew by the Crcut Court of
ppeas, but that the Commssoner mght wthn one year brng sut for
the coecton of any amount dsaowed by the oard. In such a sut, the
fndngs of the oard are prma face evdence of the facts. In the case at
bar the fndngs of the oard were ncorporated n the answer. Defendant
moved for |udgment on the peadngs. Snce, for the purposes of such mo-
ton, a facts propery peaded and not dened are to be taken as true, the
statutory presumpton may be dsregarded, and the fndngs of the oard,
whch are not controverted by the Government, consdered merey as part
of the facts stated n the compant nnd answer. These may be brefy
summarzed as foows:
Defendant, the Ceveand, Panesve astern Raroad Company, an
Oho corporaton, was organzed n 1895 to construct an nternrban raway
between Ceveand and Panesve, Oho In the foowng year t acqured
and began to operate such a raway. In 1901, ts charter was nmended so
as to authorze t to e tend Its ne to shtabua, Oho t acqured rghts of
way and other property for ths purpose. or some reason t was decded
to have ths e tenson constructed by a separate corporaton. In pr, 1901,
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
5240, rt. 631.
388
the Ceveand, Panesve shtabua Co., herenafter caed the shtabua
company, was organzed n 1902, t acqured the rghts of way from de-
fendant and constructed the road between Panesve and shtabua. Upon
ts competon, the trans of the two companes were operated between Ceve-
and and shtabua, over the tracks of defendant from Ceveand to Panes-
ve and over the tracks of the shtabua company from Panesve to
shtabua, under a seres of traffc agreements between the two companes.
rom 1906 on, the propertes of the two companes were operated as a snge
raroad. The busness of both companes was controed and managed by
the same offcers from defendant s offce nt Woughby, Oho. Defendant
owned and operated the repar shops at whch a repars were made on the
equpment of both companes and supped a eectrc power. abor,
suppes, and materas used n the operaton of both roads were hred or
purchased and a bookkeepng and fnancng done by defendant The shta-
bua company dd not pay for these servces and suppes but defendant
rendered monthy nvoces for the e pense of operatng the shtabua ne
based upon an arbtrary apportonment of the tota e pense of operatng
bo companes. These nvoces were never pad, but annua demand notes
were gven to defendant for the amount of aggregate nvoces these notes
kewse were never pad, so that durng the ta years concerned the shta-
bua company owed defendant more than 240,000 on ths account, as we
as about 120,000 for other advances.
The drectors and offcers of the two companes were dentca e cept that
defendant had two more drectors than the shtabua company. Durng the
years n queston defendant owned 7,000 of the outstandng 10,000 shares
of stock of that company and 150,000 prncpa amount of frst mortgage
shtabua company bonds ts chef stockhoder, moreover, owned 282,000
of such bonds, out of a tota ssue of 1,000,000. Interest on the bonds was
n defaut. egnnng n 1907, the shtabua company sent to ts stock-
hoders notce of the annua meetngs together wth pro es runnng to the
presdent and treasurer of defendant. t stockhoder meetngs of the shta-
bua company durng the caendar years concerned, 7.68S shares were voted
n 1918. and 8,315 In 1919. Of these, defendant n 1918 voted the 7.090 whch
t owned and 541 shares through pro es, and n 1919, ts own 7,000 shares
and 1,187 pro es, so that durng these years It actuay voted more than 99
per cent of the stock voted at these meetngs. The outstandng 2,910 shares
of the shtabua company, not owned by defendant, were hed In sma bocks
by appro matey 100 persons.
Upon these facts, the oard of Ta ppeas, reversng the rung of the
Commssoner, hed that the shtabua company and defendant were affated
durng the ta abe years 1918 and 1919. ( ppea of Ceveand, Panesve
astern Raroad, 4 . T. ., 037.) The dstrct court adopted the concu-
son of the oard and entered udgment accordngy. (34 P. (2d), 316.) The
Government contends that the queston whether or not defendant and the
shtabua company were affated s a queston of aw, and that under a
proper nterpretaton of secton 240(b) of the Revenue ct of 1918 (40 Stat.,
1082) and artces 631 and 633 of Reguatons 45, there was no affaton.
Respondent contends that the patent purpose of the statute wns to ta bus-
ness unts as such and therefore the Government s contenton that ownershp
of stock s aone determnatve and actua economc contro must be
dsregarded, s unsound.
Secton 240(h) of the Revenue ct of 1918 (40 Stat., 1057, 1082) provdes:
(b) or the purpose of ths secton two or more domestc corporatons
sha be deemed to be affated (1) f one corporaton owns drecty or con-
tros through cosey affated nterests or by a nomnee or nomnees substan-
tay a the stock of the other or others, or (2) f substantay a the stock
of tw-o or more corporatons s owned or controed by the same nterests.
(1) ew provsons n any of the Income ta statutes enacted snce the
ratfcaton of the s teenth amendment have requred a greater amount of
tgaton and |udca abor for ther carfcaton than those reatng to
nvested capta n the ct of 1917 and subsequent cts, and those at-
temptng to defne corporate affaton n the ct of 1918 and ater stat-
utes. We sha at the outset endeavor to ascertan the purpose and meanng
of secton 240(b) by resort to the egsatve hstory of that secton and then
by e amnaton of the confctng nterpretatons gven t both by the oard
of Ta ppeas and the courts.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
389
240, rt. 631.
The frst requrement that affated corporatons fe a consodated return
of net ncome and nvested capta appeared n an admnstratve reguaton
promugated by the Commssoner pursuant to the War Revenue ct of October
3, 1917 (40 Stat., 300), n whch reguaton affaton was stated to e st
When one such corporaton owns drecty cr contros through cosey
affated nterests or by a nomnee or nomnees, a or substantay a of
the stock of the other or others, or when substantay a of the stock of two
or more corporatons s owned by the same ndvdua or partnershp, and both
or a of such corporatons are engaged n the same or a cosey reated bus-
ness or (2) when one such corporaton (a) buys or ses to another products or
servces at prces above or beow the current market, thus effectng an artfca
dstrbuton of profts, or (b) n any way so arranges ts fnanca reatonshps
wth another corporaton so as to assgn to t a dsproportonate share of net
Income or nvested capta.
It s apparent that ths reguaton embraced affatons not ony on the bass
of stock ownershp or contro but aso on that of economc nterdependence or
domnaton, and sought to ta the busness unt Irrespectve of the form that
the corporate structure assumed or of the method by whch contro was acheved.
(See rownsve Coa t Coke Co. v. ener (D. C), 38 . (2d), 248 ag et
a., The edera Income Ta (1921), 188 et seq.)
When the b whch was to become the Revenue ct of 1918 ( . R. 12863
. R. Doc. 1267, September 3, 1918, S ty-ffth Congress, second sesson, page
19), was pendng before Congress, the Senate nance Commttee thought t
desrabe to ncorporate theren the departmenta reguaton concernng con-
sodated returns. In reportng to the Senate, t stated:
Provson has been made n secton 240 for a consodated return, n the
case of affated corporatons, for purposes both of ncome and profts ta es.
year s tra of the consodated return under the e stng aw demonstrated
the advsabty of conferrng upon the Commssoner e pct authorty to re-
qure such returns.
So far as ts mmedate effect s concerned consodaton ncreases the ta
n some cases and reduces t n other cases, but ts genera and permanent
effect s to prevent evasons whch can not be bocked n any other way.
( fter dscussng methods of evason.) Whe the commttee s convnced that
the consodated return tends to conserve, not to reduce, the revenue, the com-
mttee recommends ts adopton not prmary because It operates to prevent
evason of ta es or because of ts effect upon a revenue, but because the
prncpe of ta ng as a busness unt s sound and equtabe and convenent
both to the ta payer and to the Government. Itacs ours.
Senate Report 617, to accompany . R. 12863, December 6, 1918, S ty-ffth
Congress, thrd sesson, pages 8-9. See aso earngs before the Senate nance
Commttee on . R. 12863, September 28, 1918, S ty-ffth Congress, second
sesson. Part II, pages 21-23. (Cf. ppea of armers, etc., ank, 5 . T. .,
520, 525.) The proposed Senate amendment survved the conference and became
secton 240 of the ct. (S. Doc. 385, S ty-ffth Congress, thrd sesson, page
27, secton 240 . Rep. 1037, d. conference report, page 15 see aso 57 Cong.
Rec, 255.) Its egsatve hstory makes cear that t was the ntenton of
Congress to Incorporate the e stng practce nto the statute. (See S. Doc. 391,
S ty-ffth Congress, thrd sesson, page 5.) Pursuant thereto, the Commssoner
promugated greaty ampfed reguatons for the fng of consodated returns
based upon the prncpe of evyng the ta accordng to the true net ncome
and nvested capta of a snge busness enterprse, even though the busness
s operated through more than one corporaton. (Reguatons 45 (1920 ed.),
artce 631.)
The statute, however, had not ncorporated the entre departmenta regua-
ton, but ony the frst part thereof the dffcutes and ambgutes n the word-
ng of the secton were at once apparent. It was recognzed n the new regua-
tons that the words substantay a the stock can not be nterpreted as
meanng any partcuar percentage, but must be construed accordng to the
facts of the partcuar case. Ownershp or contro of 95 per cent of the
outstandng votng stock was made concusve of affaton, but t was provded
that where ownershp or contro of 50 per cent or more e sted, a fu ds-
cosure of a the facts was to be made. The same nterests was stated
to mean the same ndvdua or partnershps, athough no provson was made
for the ownershp of a corporaton or corporatons by a combnaton of nd-
vduas and other corporatons. (Reguatons 45 (1920 ed.), artce 633.)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
240, rt. 631.)
390
efore turnng to the decsons for further ght, t mght be we to note
brefy the changes made n ths secton by subsequent cts. Other than to
Incorporate nunc pro tunc the departmenta practce nto the ct of 1917, the
ct of 1921 made no change. (42 Stat., 227, 200, sec. 240(c) see Reguatons
62, artces 631, 633.) The ct of 1924 (sec. 240(c), 43 Stat., 233, 288 (28
T . S. C. ., sec. 993 note)) removed one ambguty by requrng ownershp of
at east 95 per cent of the votng stock of the corporatons concerned and the
aternatve of contro was dropped. The eastc phrase same nterests
was retaned, but the new reguatons nterpreted t to ncude corporatons as
we as ndvduas and partnershps. (Reguatons 65, artces 631, 633.) The
subsequent statutes retaned ths modfed form.
(2) In summary, t may be seen from ths hstory of secton 240(b) that
athough Congress obvousy attempted to adopt the e stng Treasury prac-
tce whch consdered as affated any group of corporatons engaged n smar
busnesses and operated as an economc unt, the statute whch fnay emerged
from the egsatve m predcated affaton entrey upon stock ownershp
or contro. Much of the dffcuty n reconcng the confctng nterpretatons
of the secton may be attrbuted to |udca endeavors to effectuate ths une -
pressed purpose by readng t nto the oose dchotomy of ownershp and contro
or by stretchng the phrase same nterests.
(3) The numerous decsons of the oard of Ta ppeas on what consttutes
affaton present every varety of opnon. The oard has contnuay
wavered between hodng that ega ownershp of stock s mmatera, contro
meanng actua contro, ega or not (. ppea of Isse och f Co., Inc., 1 .
T. ., 625), and hodng that conceded actua contro under whch profts are
apportoned but whch s based on frendshp or acquescence Instead of stock
ownershp s not suffcent. ppea of Rshe Phonograph Co., 2 . T. .,
229.) It has been stated that contro secured through socted pro es s not
affaton ( ppea of Tunne R. R., 4 . T. ., 596), wth whch hodng may
be compared ts determnaton of affaton n the case at bar. The ambguty
of secton 240(b) has been repeatedy recognzed and the rue formuated that
each case s a separate probem. ( ppea of Mdand Refnng Co., 2 .
T. .. 292, 295.) Ltte, f any, further gudance may be obtaned from ths
confctng mass of opnon.
(4) Secton 240(b) has been before the courts n some 19 cases. rom the
very outset, the vew has been taken that affaton s a matter of |udca
constructon and not of admnstratve reguaton, and that the Commssoner
e ceeded hs authorty n rung that a defnte percentage of stock ownershp
was concusve of affaton. (In re Temtor Corn d rut Products Co. CD. C),
299 ., 326, affrmed Schafy v. Unted States, 4 . (2d), 195 (C. C. . 8th)
Unted States v. Whye (D. C). 19 . (2d), 260 Great Lakes ote Co. v.
Commssoner, 30 . (2d). 1 (C. C. . 7th).) Smary, t was eary |udcay
determned that stock meant votng stock (In re Temtor Com rut
Products Co., supra Ice Servce Co. v. Commssoner, 30 . (2d), 230 (CC
2d)), and that the secton was not unconsttutona as beng arbtrary. (Unted
States v. Whye, supra.) eyond ths, the cases may be grouped In accordance
wth the answers they furnsh to the questons: (a) To what e tent s contro of
stock broader than ownershp and (b) how much s substantay a In
practce, the answ er gven to the frst queston usuay makes t unnecessary to
dea wth the second. nd t s Immatera, for present purposes, to nqure
whether a partcuar case nvoved ownershp or contro of the stock of corpora-
ton by corporaton , or ownershp and contro of the stock of both and
by the same nterests. (See Great Lakes ote Co. v. Commssoner, 30 .
(2d), 1, 4 (C. C . 7th).)
(a) Some fve cases may be dsregarded, snce the facts ceary reveaed
ether compete ega ownershp of votng stock, or compete ack of owner-
shp and/or contro. The remanng decsons fa roughy nto two casses
those hodng that ownershp and contro are practcay synonymous and
that affaton can e st ony where substantay the entre benefca nterest
n the stock s n the hands of the same ndvduas or corporatons or one
corporaton owns substantay a the stock of another, and those hodng
that actua contro of an economc busness unt, obtaned through stock
contro based on acquescence, bood reaton, or pro y, s suffcent.
In Lavensten Corp. v. Comm r (25 . (2d), 375 (C. C . 4th)), whch was
the frst case to revew a determnaton of the oard of Ta ppeas based
on secton 240(b), two ndvduas owned the entre stock of two corporatons
operated as a unt the stock of the frst corporaton, together wth certan
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
391
240, rt. 631.
of ts assets, had been pedged wth credtors. The atter had the rght to
and dd appont three of ts drectors. dvded oard dened affaton
the court, n reversng, recognzed the dchotomy n the statute between own-
ershp and contro. It conceded that the credtors had contro, but
hed that the benefca ownershp of the stock whch remaned n the pedgor-
stockhoders was suffcent to support affaton.
In ameda Inv. Co. v. McLaughn (D. C.) (28 . (2d), 81) (affrmed on
another pont, 33 . (2d), 120 (C. C. . 0th), wthout dscusson of affa-
ton), and n Montana Mercante Co. v. Rasmusson (D. C.) (28 . (2d), 916),
there was nsuffcent stock ownershp, athough there was actua contro
through the acquescence of mnorty stockhoders. The court dened the
e stence of affaton on the ground that the statute requred that the bene-
fca ownershp be n the same partes and that actua contro, obtaned n
any other fashon, was mmatera.
Ths vew that substanta dentty of nterest n the enterprse must e st
Is perhaps best set forth n two cases decded n the second crcut, both re-
vewng decsons of the oard of Ta ppeas. In Ice Servce Co. v. Com-
mssoner (C. C. .) (30 . (2d), 230), corporaton owned 68 per cent of
the stock of corporaton the two companes had the same offcers and
drectors and were operated from the same offces as a busness entty. Cor-
poraton was a New York corporaton, and under the aw of that State the
hoders of two-thrds of the shares competey contro the company and may
cause a dssouton. Nevertheess, the court dened affaton, pontng out
that there was a dstncton between contro of the corporaton and contro
of the stock, and. reyng on the abandonment of the word contro n ater
e venue cts, hed that actua economc contro of the |ont enterprse was
mmatera. Ths decson was foowed n Com r of Interna Rev. v. rsch
d Co. (30 . (2d), 645 (O. C. . 2d) Ct, D. 66, C. . III-1, 267 ), n whch
ack of suffcent actua stock ownershp by the same nterests n two corpora-
tons, one of whch was apparenty a mere department of the other, was hed
to precude affaton. Ths nterpretaton of the statute was foowed n
Godsten ros. musement Co. v. Whte (33 . (2d), 787 (D. O. Mass.) Ct.
D. 05, C. . III-2, 327 ) Natona Tank d port Co. v. U. 8. (35 . (2d), 381
(D. C. S. D. Ga.)) and mercan uto Trmmng Co. v. Lucas ( pp.
D. C ) (37 . (2d), 801). In the Natona Tank case, the domnant
corporaton suffcenty controed the aeged affated company to warrant
prosecuton for voaton of the Sherman anttrust aw nevertheess, the court
hed the two companes not to he affated. The most recent appcaton s
found n Wadhams d Co. v. Unted States (67 Ct. CI., 235 Ct. D. 121, C. .
III-2, 332 ), n whch corporaton owned a but 20 per cent of the stock
of corporaton , and had prorty rghts to purchase the outstandng stock
affaton was kewse dened.
The more bera vew of the statute, namey, that contro Is more compre-
hensve than ownershp and may be based on pro es, dentty of nterest, or
perhaps mere acquescence of the mnorty, was frst announced n Great Lakes
ote Co. v. Comm r (30 . (2d), 1 (C. C. . 7th )). In that case one corporaton
controed the empoyees, contracts, funds, and genera busness poces of four
other companes 71 per cent of the stock of the frst was owned by the dom-
nant company or ts empoyees, 50 per cent of the second, 71 per cent of the
thrd, and 95 per cent of the fourth. The court hed the ve companes affated
wthn secton 210(b). somewhat smar resut was ndependenty reached
In Pecan Ice Co. v. Comm r (37 . (2d), 285 (C. C. . 5th)), n whch the
contro of two corporatons admttedy operated as an economc unt was
acheved through famy reatonshp the court hed the two companes
affated wthn the second subdvson of the statute, on the ground that the
essenta test was whether the companes were so controed as to make possbe
an arbtrary apportonment of profts. Smary, In Uman Mfg. Co. v. Unted
States (67 Ct Cs., 104), one company owned a of the preferred and 80 per
cent of the common stock of another, the remanng 20 per cent havng been
gven as part compensaton to a saesman n ts empoy who had gven the
frst company an opton thereon. The two companes concededy were operated
as a snge enterprse, and n these crcumstances the Court of Cams hed
them affated, approvng a number of decsons of the oard of Ta ppoas
n whch affaton had been based upon contro secured by tes of bood,
frendshp, and/or nterest.
Commssoner of Interna Rev. v. ohn Shto Co. (39 ed. (2d), 830), de-
cded by ths court pr 10, 1930, presented a very dfferent stuaton. There
the stock was one-haf common and one-haf preferred here t was a of one
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
240, rt. 632.
392
cass, common. There, though the preferred stock had votng rghts, neverthe-
ess the nterest of the preferred stockhoders n ther corporaton was f ed,
certan, and unchangeabe t was unaffected by the reatve ta abtes of
the two companes. ere, the rghts of the mnorty stockhoders coud be
and were materay affected thereby, as we as by the manner n whch the
ma|orty nterest coud cause the two companes to dea wth one another fnan-
cay and otherwse. There the fact of a contro of cosey affated nterests,
the mnorty ownershp of preferred stock, was ceary evdenced by grant of
pro es of the entre mnorty Interest to a commttee, the charman of whch
was the head of the controng corporaton here a arge part of the mnorty
nterest gave no pro es whatsoever.
(b) It w be seen from the foregong cases that the ambguty nherent In
the words substantay a s resoved accordng to the vew taken of the
necessty for actua ega or benefca ownershp of stock. In the usua stua-
ton, ustrated by the case at bar, there s actua ega or benefca ownershp
of a consderabe percentage of stock, generay 50 per cent or more, and
contro n some fashon ether of the remanng votng stock or of the actua
conduct of the busness. nough shares may thus be ncuded n contro to
amount to substantay a. Consequenty, a determnaton of the frst
queston usuay resoves the second.
(5) fter an ntensve study of the hstory of secton 240(b) of the ct of
1018 and the confctng nterpretatons whch have been gven t, we have
arrved at the foowng concusons: Whe the underyng purpose was to
ncorporate the departmenta reguaton purportng to ta as an economc unt
any group of companes so operated as to make arbtrary apportonment of
Income possbe, nevertheess, Congress made determnatve not actua contro of
the reated companes, or of the subsdary by the parent company, but the sub-
stanta ownershp or contro of ther stock, or of the stock of the subsdary by
the parent company. Under a reasonabe nterpretaton of the statute, the
aforesad underyng purpose can not be gven fu effect, athough, of course,
the emnaton, n subsequent cts, of the aternatve of contro woud not
affect the nterpretaton to be gven to the ct of 1918.
2 ppyng these concusons to the case at bar we fnd that the two cor-
poratons, aeged to have been affated and so found by the oard of Ta
ppeas and the dstrct court, were concededy operated as a snge nterurban
road, that there was a compete Identty of contro of the busnesses, and that
the |ont operatng e penses were arbtrary apportoned. Defendant actuay
owned 70.9 per cent of the stock of the shtabua company, and voted, by means
of socted pro es, over 99 per cent of the stock that was voted at the annua
meetngs. Ths stock, however, consttuted ony 77 per cent to 84 per cent of the
tota Issue whch can not be deemed substantay a of the soe cass of
stock ssued by the subsdary corporaton, wthn the far meanng of the ct
We gve no consderaton to the pro y stock. ven f It mght be thought
that these pro es n ths case consttuted, pro tanto, such stock contro as sec-
ton 240(b) contempates, yet, ceary, there was nether ownershp nor contro
of any knd over the other 16 per cent to 23 per cent of votng stock. Whe
the grant of pro es by some and the faure by others to vote at the annua
meetngs mght be deemed an acquescence n defendant s economc contro of
the shtabua company, that n our udgment, and under the great weght of
the decsons, does not suffce for affaton.
In these crcumstances a fndng of affaton can not be sustaned.
Reversed and remanded.
rtce 032: Consodated returns. I 11 4821
Ct. D. 248
ncome ta revenue act of 1921 decson of court.
1. Consodated Return Separate Returns ecton Change
of ass Commssoner s Permsson.
Where corporatons are not affated durng the frst s months
of the caendar year 1922 but are affated wthn the meanng of
secton 240 of the Revenue ct of 1921 durng the ast s months
of that year and fe separate returns coverng the entre caendar
year 1922, subdvson (a) of that secton requres the fng of
separate returns for the year 1923 where permsson to fe a con-
sodated return s not granted by the Commssoner.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
393
240, rt. 632.
2. Decson Reversed.
The decson of the oard of Ta ppeas (I . T. ., 1192) re-
versed.
Unted States Crcut Coubt of ppeas, ghth Cecut. No. 8827. Mat
Term, . D. 1930.
Robert . Lucas, Commssoner of Interna Revenue, appeant, v. St. Lous
Natona aseba Cub, appeee.
On petton to revew decson of the Unted States oard of Ta ppeaa.
uy 19, 1930.
Ths s a petton to revew the order of the oard of Ta ppeas redeter-
mnng defcency of the ncome ta of the appeee for the years 1922 and 1923.
The queston at ssue s whether the pettoner, the St. Lous Natona
aseba Cub, and the Syracuse aseba Cub, both of them corporatons,
whch were not affated for the frst s months of the caendar year 1922,
but were affated durng the ast s months, and whch fed separate ncome
returns for that year, were entted to fe a consodated return for the year
1923 wthout havng obtaned the pror permsson of the Commssoner.
The mportant facts are as foows: rom anuary 1, 1922, to uy 8, 1922,
the pettoner owned or controed 50 per cent of the stock of the Syracuse
aseba Cub. On uy 3, 1922, the pettoner acqured the remanng 50 per
cent of the stock, and throughout the baance of that year and throughout the
caendar year 1923 contnued to own and contro the same. oth corporatons
fed separate returns of Income for the year 1922. or the year 1923 the
pettoner fed a consodated return coverng both ts own Income and that of
the Syracuse aseba Cub. No permsson to fe ths consodated return had
been obtaned from the Commssoner of Interna Revenue. The Commssoner
re|ected the consodated return for the year 1923, on the ground that both
corporatons had fed separate returns for the year 1922 and had obtaned no
permsson from the Commssoner to make a change.
The reevant statutory provsons are as foows:
Secton 240(a) of the Revenue ct of 1921:
That corporatons whch are affated wthn the meanng of ths secton
may, for any ta abe year begnnng on or after anuary 1, 1922, make separate
returns or, under reguatons prescrbed by the Commssoner wth the approva
of the Secretary, make a consodated return of net ncome for the purpose
of ths tte, n whch case the ta es thereunder sha be computed and deter-
mned upon the bass of such return. If return s made on ether of such bases,
a returns thereafter made sha be upon the same bass uness permsson to
change the bass s granted by the Commssoner.
ta abe year was defned by secton 200 of the ct of 1921 as foows:
The term ta abe year means the caendar year, or the fsca year endng
durng such caendar year, upon the bass of whch the net ncome s computed
under secton 212 or 232. The term fsca year means an accountng perod of
12 months endng on the ast day of any month other than December. The
frst ta abe year, to be caed the ta abe year 1921, sha be the caendar year
1921, or any fsca year endng durng the caendar year 1921.
Reguatons of the Treasury Department, No. 62, artce 632, reatng to
consodated returns, ssued ebruary 15, 1922, reads as foows:
Consodated returns. ffated corporatons, as defned n the statute and
n artce 633, for the ta abe perod begnnng pror to anuary 1, 1922, are
requred to fe consodated returns, and for a ta abe perod begnnng on or
after anuary 1, 1922, may eect to fc such returns. The return for the frst
ta abe perod begnnng on or after anuary 1, 1922, may be made ether upon
a consodated bass or as separate corporatons, regardess of the manner n
whch returns for prevous years were fed, but an eecton so made sha be
bndng upon the ta payer as to the manner of reportng for subsequent years,
uness e press permsson s obtaned from the Commssoner to make a change
n the method of reportng. In appyng for permsson to make such change
the ta payer shoud submt a statement n the form of an affdavt e ecuted
by a person quafed to sgn the return (see sec. 239), settng forth the reasons
for makng the request.
85942 31 20
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
240, rt. 632.
394
nd artce 634, pror to the amendment of une 14, 1927, reads as foows:
Change n ownershp durng ta abe year. (a) Where corporatons are
affated at the begnnng of a ta abe year but due to a change n stock
ownershp or contro durng the year the affated status s termnated, or (b)
where corporatons are not affated at the begnnng of the ta abe year but
through change of stock ownershp or contro durng the year become affated,
a fu dscosure of the crcumstances of such changes of stock ownershp sha
be submtted to the Commssoner. Ordnary n such cases the parent or
prncpa company, under the condtons descrbed n (a) above, shoud e cude
from ts return the ncome and nvested capta of such subsdary or subordnate
company from the date of the change of stock ownershp, and under the con-
dtons descrbed n (b) above, shoud ncude n ts return the ncome and
Invested capta of such subsdary or subordnate company from the date of
the change of stock ownershp. In ether case the subsdary or subordnate
corporaton whose status s changed durng the ta abe year shoud make a
separate return for that part of the ta abe year durng whch t was outsde
of the affated group.
Where, n accordance wth the procedure set forth above, a return s made
by a corporaton for a perod ess than a year, the ta sha be computed n
accordance wth sectons 226 and 239 and the artces thereunder. In any case
In whch the change of consodated status s for a perod so short as to be
neggbe, a consodated return or separate returns for the entre perod, as
the case may be, may be fed In such cases, however, there shoud accompany
the return a compete statement settng forth the changes n the affated status
occurrng durng the ta abe year.
The oard of Ta ppeas hed that there had been no eecton by the two
corporatons to fe separate returns for the year 1922 that the caendar year
1923 was the frst ta abe year for whch an eecton of bass coud be made
It therefore reversed the order of the Commssoner fndng that there was a
defcency for the year 1923. It hed that there was a defcency for the year
1922, but ths htter determnaton s not questoned. The order as to the year
1923 s the one here for revew.
The bass for the rung of the oard of Ta ppeas seems to be that because
the affaton n 1922 was for a part of the year ony, there coud be no eecton
under the statute for that year.
We thnk the case s controed by the decson of ths court n the case of
dety natona ank rf Trust Co. v. Commssoner (39 . (2d), 58). In
that case, whch was under the 918 Revenue ct, a queston arose whether
corporatons whch were affated for ony a porton of a ta abe year shoud
make separate return for the porton of the year n whch they were not
affated, and a consodated return for the porton of the year n whch they
were affated. The same defnton of ta abe year appears n the 1918
Revenue ct as n the 1921 ct, and the reguatons of the Treasury Depart-
ment were substantay the same. It was contended n that case that the aw
dd not contempate any dvson of a ta abe year, and that the Commssoner
was not authorzed to requre a consodated return for a porton of the year
In whch the corporatons were affated and separate returns for the baance
of the year. Ths court hed, however, that such a dvson of the year was
proper, and that the Commssoner was authorzed to requre dfferent returns
for the dfferent portons of the year. In ts opnon the court, speakng of the
Revenue ct of 1918, sad:
Our constructon of the statute s that corporatons whch were affated
for any substanta perod durng the year were requred to make a conso-
dated return. Of course, f the affaton dd not e st durng the whoe of
the year, the consodated return woud cover the porton ony durng whch
the affaton e sted. We thnk ths constructon s consstent wth the word-
ng of the statute. It aso fufs the canon of statutory constructon that
where the meanng s not perfecty cear from the words used, a reasonabe
constructon shoud be gven whch w carry out the ob|ect and purpose of
the statute.
urthermore, ths constructon s the one whch has been paced upon the
statute from the begnnng by the Commssoner of Interna Revenue n the
reguatons ssued from tme to tme. Secton 240 has been reenncted by Con-
gress, wth mnor changes, In the Revenue cts of 1921, 1924, and 1926 and
presumaby Congress knew the constructon paced upon the secton by the
Commssoner of Interna Revenue and the Secretary of the Treasury yet no
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
395
250, rt. 1005.
change has been made In the wordng to ndcate that the reguatons of the
Commssoner requrng fractona year returns by affated corporatons under
crcumstances smar to those n the case at bar were not u accordance wth
the proper constructon of the secton. Ths departmenta constructon, appar-
enty adopted by Congress, whe not concusve, s yet persuasve. (Lucken-
bach S. S. Co. v. Unted States, 280 U. S., 173.)
It s true that n that case the affated corporatons were requred by the
Revenue ct of 1918 to make consodated return, whereas n the case at
bar affated corporatons under the Revenue ct of 1921 had an opton
whether to proceed on the separate return bass or on the consodated return
bass, but ths dfference n the aws, n our opnon, s not matera. The
broad queston determned n the dety company case was that a ta abe
year was dvsbe as far as makng returns was concerned, where corporatons
were affated for ony a porton of the year. We see no reason for changng
that hodng.
ssumng t to be correct, and appyng t to the case at bar, the two cor-
poratons n queston had an opton as to the porton of the year 1922 n whch
they were affated ether to make separate returns or a consodated return.
They made separate returns. That acton on ther part was an eecton and
havng made an eecton of separate returns, they coud not for the ne t year,
1923, make a consodated return e cept by permsson of the Commssoner,
because secton 240(a) of the Revenue ct of 1921 provdes, If return s
made on ether of such bases, a returns thereafter made sha be upon the
same bass uness permsson to change the bass s granted by the Comms-
soner. We thnk, therefore, that the two corporatons were requred to
make separate returns for the year 1923, no permsson to change havng been
granted by the Commssoner.
The order of the oard of Ta ppeas s reversed, wth nstructons to
affrm the order of determnaton made by the Commssoner.
rtce 634: Change n ownershp durng ta abe year.
R NU CT O 1921.
ocaton of net osses of group of corporatons. (See G. C. M.
8618, page 180.)
rtce 634: Change n ownershp durng ta abe year.
R NU CT O 1021.
ppcaton of net oss provsons where affated status changed
durng ta abe year. (See G. C. M. 8686, page 306.)
P RT I . DMINISTR TI PRO ISIONS.
S CTION 250. P YM NT O T S.
rtce 1005: Defcency n payment Interest I -50 4866
and penaty. Ct. D. 256
ncome ta revenue act of 1918 decson of court.
Interest udgment.
In a udgment n favor of the Unted States for the amount of
a defcency, where the return s made n good fath and the under-
statement of the amount of the ta n the return s not due to any
faut of the ta payer, nterest s propery ncuded, as contempated
by secton 250(a) of the Revenue ct of 1918, at the rate of 6 per
cent per annum from the due date of the ta to the date of the
|udgment.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
250, rt. 1012.
396
DST ICT COURT O T UNIT D ST T S O T W ST RN DISTRICT O WISCONSIN.
Unted States of merca, pantff, v. . . Stange, defendant.
October 21, 1930.
SUPPL M NT L OPINION.
Lube, D. .: Shorty after the fng of the orgna opnon In ths matter
Ct. D. 255, page 290, ths uetn , defendant s counse submtted a memoran-
dum bref ob|ectng to and statng grounds for ther ob|ecton to the ncuson
n the |udgment n ths case of nterest at the rate of 6 per cent from the dates
when the ta es were pad. Counse for pantff have fed a repy bref.
Whe counse for defendant endeavored to dstngush ths case from Mason v.
Routsahn (275 U. S., 175 T. D. 4131, C. . II-1, 194 ) and other cases
referred to n the man opnon h3ren, they aso reed argey upon the prov-
sons of secton 274(b) of the Revenue ct of 1924, n so far as that secton
requred the acton to be begun wthn one year after the fna decson of the
oard of Ta ppeas. The same secton upon whch they reed for ths
mtaton provdes:
The court sha ncude n ts |udgment nterest upon the amount
thereof at the rate of 6 per centum per annum from the date prescrbed for
the payment of the ta to the date of the |udgment.
It s of course nconsstent for defendant s counse to cam that one provson
of subdvson (b) of secton 274 s appcabe whe another one s nappcabe.
owever, ths s not deemed determnatve of the queston now presented.
Secton 250(a) of the Revenue ct of 1918 contempates the coecton of
Interest at the rate of one-haf of 1 per cent per month durng any deay after
the due date requested by the ta payer.
Whe subdvson (b) of secton 250, ct of 1918, provdes that there sha be
no penaty mposed f the return s made In good fath and the understatement
of the amount n the return s not due to any faut of the ta payer, t s cear
to my mnd that Congress dd not deem the mposton of smpe nterest at the
rate of 6 per cent as a penaty. So construng that statute, and partcuary In
the ght of ngs v. Unted States (232 U. S., 261), ote v. udson Navga-
ton Co. (8 ed. (2d), 859, 867), and Sawyer Tannng Co. v. O eefe Shoe Co.
(D. C. Mass.) (23 ed. (2d), 717), t s concuded that there was no error n
the drecton of the orgna memorandum In ths case wth respect to nterest,
and t s therefore adhered to.
n e cepton s aowed to the defendant.
rtce 1006: ppeas and hearngs.
R NU CT O 1921.
ntertanment of abatement cam fed wthn the statutory
perod where ta payer has not had the beneft of subdvson (d) of
secton 250 of the Revenue ct of 1921. (See G. C. M. 8375, page 157.)
rtce 1012: ssessment of ta . I -52-4886
( so Secton 239, rtce 621.) Ct. D. 266
INCOM T R NU CT O 191S D CISION O SUPR M COURT.
1. ssessment Lmtaton Commencement of Perod Tenta-
tve Retuun Unverfed Return.
Nether the so-caed tentatve return for the ta abe year 1918
nor a return not sgned or sworn to by anyone s the return re-
qured to e fed by the provsons of secton 239 of the Revenue
ct of 391S and nether the fng of the tentatve return Dor the
fng of the unsgned and unsworn return starts the runnng of
the 5-ycar perod wthn whch the amount of ta due must be
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
397
250, rt. 1012.
assessed under secton 250(d) of that ct The acceptance of a
return defectve because unsupported by oath and a ater adequate
verfcaton of It by the corporate offcers do not cure the defect
so as to make the defectve return effectve as of the tme of
rng.
2. Decson Reversed.
The decson of the Crcut Court of ppeas, S th Crcut
(33 ed. (2d), 245), reversed.
Sdp eme Court of the Unted States. No. 356. October Term, 1929.
Robert . Lucas, Commssoner of Interna Revenue, pettoner, v. The Pod
Lumber Co.
On wrt of certorar to the Unted States Crcut Court o ppeas for the S th Crcut.
pr 14, 1930.
Mr. ustce McReynods devered the opnon of the court.
Usng therefor what s known as orm 1031T, on March 14, 1919, re-
spondent, Pod Lumber Co., e ecuted and ted wth the coector of nterna
revenue a tentatve return and estmate of corporate ncome and profts tu es
for 1918, sgned and sworn to by ts presdent and treasurer. t the same
tme t remtted 1,000, one-fourth of the estmated ta es, and requested an
e tenson of 45 days wthn whch to present a tna report as requred by aw.
May 31, 1919, t odged wth the coector another return for 1918, made out
upon orm 1120, whch contaned varous statements n respect of gross
ncome, deductons, credts, etc., but was not sgned or sworn to by anyone.
In answer to a request from the Commssoner of Interna Revenue, re-
spondent s presdent and treasurer swore to and fed wth hm, September 17,
1923, the foowng affdavt concernng the return of May 31:
We, the undersgned, hereby affrm that our names shoud have appeared
on our ncome ta return for 1918, and whch to the best of our knowedge
and beef Is correct. We are unabe to furnsh dupcate sgned report, beng
unabe to ocate copy, beevng same to have been destroyed wth other
records.
Two years ater October 23, 1925 the Commssoner notfed the company
of a defcency assessment amountng to 9(13.34. frmng that any cam
for such ta had been e tngushed by the 5-year statute of mtatons, t
appeaed to the oard of Ta ppeas. They hed that nether the tentatve
return of March, 1919, nor the ater unsworn one, was adequate to set the
statute of mtatons n moton and affrmed the Commssoner s rung. The
crcut court of appeas concuded that the unsworn return was adequate and
upon that ground reversed the acton of the oard wthout e pressng any
opnon concernng the effect of the tentatve return.
The Revenue ct of 1918 (ch. 18, 40 Stat., 1057, 1081, 10S3) provdes
Sec 239. That every corporaton sub|ect to ta aton under ths tte and
every persona servce corporaton sha make a return, statng specfcay the
tems of ts gross ncome and the deductons and credts aowed by ths tte.
The return sha be sworn to by the presdent, vce presdent, or other prncpa
offcer and by the treasurer or assstant treasurer.
Sec. 250. (d) 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 the return was
due or was made. In the case of such fase or frauduent returns, the amount
of ta due may be determned at any tme after the return s fed, and the
ta may be coected at any tme after It becomes due.
The Revenue ct of 1924 (ch. 234, 43 Stat., 253, 287, 299, 301), by secton
239(a), requres corporatons to make returns ke those prescrbed by the
ct of 1918. Secton 277(a) drects that e cept as provded n secton 278,
whch reates to fase or frauduent returns, and certan subdvsons of sec-
tons 274 and 279, not presenty mportant, ta es for 1921, and afterwards,
sha be assessed wthn four years after return fed aso that ta es for
1918, etc., sha be assessed wthn fve years after return fed. Secton 280
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
252, rt. 1032.
398
decares If hereafter the Commssoner determnes that any assessment shoud
be made n respect of any ncome, war-profts, or e cess-profts ta mposed by
the Revenue cts of 1916, 1917, 1918, or 1921, the amount whch shoud be
assessed (whether as defcency or as nterest, 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 n 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.
Respondent mantans that the 5-year statute of mtatons began to run
aganst the cam for 1918 ta es when the tentatve return of March 14, 1919,
was fed wth the coector, or when he receved the unverfed return. May
31, 1919, and therefore the defcency assessment of October 23, 1925, was out
of tme.
The argument based upon the supposed effect of the frst or tentatve return
s the same as that consdered and re|ected n orshem ros., etc., v. Unted
States Ct. D. 167, C. . I -1, 260 and Whte, Coector, v. ood Rubber Co.
(2S0 U. S., 453 Ct. D. 167, C. . I -1, 2C0 ).
That the so-caed return of May 31, 1919 unsupported by oath, dd not
then meet the defnte requrements of secton 239 s manfest. ut respondent
says the defect was cured or became mmatera snce the ta offcers accepted
and hed the return for severa years, and In 1923 requested and obtaned an
adequate verfcaton by the proper corporate offcers.
Under the estabshed genera rue a statute of mtaton runs aganst the
Unted States ony when they assent and upon the condtons prescrbed. ere
assent that the statute mght begn to run was condtoned upon the presenta-
ton of a return duy sworn to. No offcer had power to substtute somethng
ese for the thng specfed. The return so ong as t remaned unverfed by
oath of proper corporate offcers dd not meet the pan requrements. The
necessty for metcuous compance by the ta payer wth a named condtons
n order to secure the beneft of the mtaton was dstncty ponted out n
orshem ros., etc., v. Unted States, supra.
The oard of Ta ppeas reached the proper resut. The |udgment of the
court beow must be reversed.
Reversed.
S CTION 252. R UNDS.
rtce 1031: uthorty for refund, credt, and abatement
of ta .
R NU CT O 1921.
Date when the runnng of the perod of mtaton begns, payment
beng made by cheek. (See Ct. D. 204, page 286.)
rtce 1032: Cams for abatement of ta es erro- I 11 1822
neousy assessed. Ct. D. 244
D R L T S R NU CT O 1918 D CISION O COURT.
ond adty.
bond gven to the Unted States n connecton wth a cam
for the abatement of n ta and condtoned for the payment of the
ta found to be due s not nvad by reason of the fact that there
s no specfc statutory authorty for the fng of such cam or
the acceptance of such bond.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
899
252, rt. 1032.
Unted States Dstrct Court for the Northern Dstrct op Inos,
astern Dvson.
Unted States of merca, pantff, v. Converse Cooperage Co., a Corporaton
Yooona Cooperage Co., a Corporaton and Gobe Indemnty Co., a Corporaton.
une, 1930.
opnon.
Water C. Lndey, Dstrct udge: The Gobe Indemnty Co., as surety, and
the Converse Cooperage Co. and the Yocona Cooperage Co., as prncpas,
defendants n a sut upon a bond e ecuted n the capactes aforesad, de-
murred to pantff s decaraton.
Under the averments of the decaraton, on pr 15,1921, the prncpas fed
ther tentatve, and on December 12, 1921, ther fna consodated corporaton
ncome and profts ta return for the year 1920. On the atter date they fed
wth the coector aso a cam for abatement of a of the ta shown on the
fna return, e cept an Instament pad when they fed the tentatve return.
Upon the fng of the cam n abatement, n order to deay or stay the coec-
ton of the ta shown upon the return, the prncpas fed the bond, whch s
the bass of the present sut. It was condtoned upon the payment by the
prncpas, upon notce and demand, of such ta as the Commssoner of In-
terna Revenue, after consderaton of the cam In abatement, shoud fnd
to be due. Coecton of the ta was deayed by the coector of nterna
revenue unt after the Commssoner of Interna Revenue had consdered the
cam of abatement and re|ected It on November 2, 1926. On anuary 7, 1927,
notce and demand for payment was served upon the prncpas n the bond,
and payment not beng made sut resuted.
Defendants grounds for demurrer are: rst, that there was no statutory
authorty for the acceptance of the bond, and that the same s therefore vod
second, that the bond was obtaned by duress, and s therefore vod and, thrd,
that the bond s condtoned for the payment of the ta determned by the
Commssoner to be due that under the statute the Commssoner n case of a
consodated return must assess the same upon the respectve affated corpora-
tons n such proportons as may be agreed upon, or n the absence of such
agreement, upon the bass of the net ncome propery assgnabe to each that
ths acton not havng been taken, and the ta havng been assessed |onty
for the gross sum, no ega assessment has been made, and no breach of the
bond has accrued, and that the acton s therefore prematura
There was no specfc statutory authorty for the coector of nterna
revenue to accept the bond sued upon. ut n Unted States v. Tngey (5
Peters, 115) the Supreme Court had before t a bond e ecuted by a purser n
the Navy under the statute that provded for the gvng of such bond con-
dtoned to perform the dutes of purser. The bond there before the court
contaned condtons other than those prescrbed by statute, and the queston
submtted to the court was whether a bond vountary gven, contanng a
condton varant from the condton specfcay prescrbed by Congress, s
vad. The court hed that a vountary bond, taken by authorty of the
proper offcers of the Treasury Department to secure the fdety n offca
dutes of an agent n the dsbursement of pubc money, s a bndng contract
between hm and hs surety on the one hand and the Unted States upon the
other, athough such bond may not be prescrbed or requred by any postve
aw that the rght to take such a bond Is an Incdent to the dutes of such a
department, and that the Unted States havng a potca capacty to take t,
the court coud see no ob|ecton to Its vadty n a mora or ega vew.
In Moses v. Unted Staes (160 U. S., 571) the court had before t a bond
e ecuted by a dsbursng offcer of the War Department, for the e acton of
whch and the acceptance of the same by the Secretary of War there was no
statutory authorty. There the defendant aeged that there beng no statute
or reguaton drectng or permttng the e acton of a bond, n such a stua-
ton the bond was vod. The court reaffrmed the doctrne n the case frst
cted, and hed the bond vad, sayng: The consderaton or the condton of
the bond must not be n voaton of aw t must not run counter to any statute
t must not be ether maum prohbtum or maum n sc. Otherwse and for a
purposes of securty, a bond may be vad though no statute drects ts dev-
ery. To the same effect s the case of Unted States v. radey (10 Pet., 343).
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
5252, rt. 1032.1
400
Under sectons 3218 and 3220 of the Revsed Statutes, as amended by secton
1310 of the Revenue ct of 1918, the Commssoner of Interna Revenue Is
authorzed, sub|ect to the reguatons prescrbed by the Secretary of the
Treasury, to remt, refund, and pay back a ta es erroneousy or Iegay
assessed or coected, a penates coected wthout authorty, and a ta es
that appear to be un|usty assessed or e cessve In amount, or n any manner
wrongfuy coected. The coector s charged wth the whoe amount of
ta es, and credted wth a payments nto the Treasury, and wth the amount
of ta es transferred to other coectors, and wth the amount of ta es of such
persons as may have absconded, or become nsovent. pparenty It Is the
purpose of the aw to gve to the Commssoner of Interna Revenue wde
authorty n the matter of coectng, rebatng, and refundng ta es, sub|ect
to the rght of the Secretary of the Treasury to make reguatons. The
Revenue ct of 1918 contans no specfc provson requrng the fng of
cams n abatement The fng of such matters was eft to reguaton by
admnstratve rues.
The concuson Is that Congress has tacty approved of the e ercse of ds-
cretonary admnstratve power n the coecton and abatement of ta es. ust
as the Secretary of the Treasury In the case of Unted States v. Tngey and the
Secretary of War n the case of Moses v. Unted States were hed to be repre-
sentatves of the soveregn, who mght, n the admnstraton of ther offce,
propery accept bonds, for whch there was no statutory authorty, so the
Secretary of the Treasury and the Commssoner of Interna Revenue, n ths
case charged wth the coecton, abatement, and refundng of revenue, and
mpedy, at east, vested by Congress wth wde dscreton In the procedure of
performng hs admnstratve dutes as a representatve of the Government,
had the rght to accept wth the cam for abatement a bond condtoned for the
payment of the ta f the cam shoud thereafter be dened and the ta as-
sessed. Such acton upon the part of the prncpas n gvng the bond, and
of the Commssoner n acceptng the same, reeved the coector of takng such
steps as mght be necessary to protect her abty to the Government for the
ta es shown by the return, protected the ta payer aganst vgorous mmedate
acton to coect the ta , whch the coector mght have fet mpeed to take,
In vew of her abty to the Government, and worked ony an advantage to
both partes. It furnshed an opportunty for the Commssoner to take suff-
cent tme carefuy to revew the ta return and the cam for abatement wth-
out endangerng the chance of recovery of the ta t reeved the ta payers
of the proba e necessty of payng the ta and fng a cam for refund. No
good reason occurs to ths court why such contracts made wth the Government
n ts sovere.gn capacty shoud not be sustaned as vad contracts.
Nor can the court say from the averments of the decaraton that any duress
was nvoved n the aeged e acton and acceptance of the bond n queston.
s the Supreme Court sad In the case of Moses v. Unted States (160 U. S.,
571), We thnk the bond was a vountary bond n the sense that It was not
Iegay e torted from the defendant owgate, under coor of offce or by
threats from a superor offcer that the Unted States through the Secretary
of War had the rght to demand a bond wth condtons such as the bond In
queston contans, and that t dd not cease to be a vountary bond merey
because Leutenant owgate dd not gratutousy and wthout request proffer
t and ask that t be receved, or because he was reuctant to gve t, and ony
gave t upon the demand of the Secretary. Nothng appears n the averments
of ths decaraton to show that the bond n queston was gven under any
crcumstances other than those surroundng a vountary transacton. If there
be facts whch prove that the bond was obtaned by duress, they must be peaded
and proved as a matter of defense.
Such must be the concuson aso as to the contenton that ths acton Is
premature that the Commssoner of Interna Revenue has erroneousy faed
to compy wth the statute In denyng the cam for abatement and orderng
assessment. If he has faed to compy wth the statute as to aocaton of the
ta , that fact consttutes matter of defense. The court s not at berty to go
behnd the averments of the decaraton to the effect that the assessment was
duy mnde or to read nto the decaraton an averment that the Commssoner
dd not propery aocate the ta among the two prncpas.
ccordngy, the demurrer w be overrued.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
401 301, rt. 713.
TITL III. W R-PRO ITS ND C SS-PRO ITS T
OR 1921.
P RT II. IMPOSITION O T .
S CTION 301. IMPOSITION O T .
rtce 713: Computaton of ta on ncome I -49-4856
from Government contracts. Ct. D. 253
C SS PRO ITS T R NU CT O 1918 D CISION O COURT.
Government Contract Canceaton mount Receved Under
Subsequent greement.
Where a ta payer and the Government enter Into a contract
for rmy coats between pr 6, 1917, and November 11, 1918,
whch s not competey performed on the atter date and agree n
1919 upon a settement contract by whch the ta payer receves
an agreed sum for a coats whch had been competey made under
the war contract and a ess sum for a the other coats caed
for by the settement contract, the payment receved by the ta -
payer n 1919 under the agreement Is Income attrbutabe to a Gov-
ernment contract wthn the meanng of secton 301(c) of the
Revenue ct of 1918.
Dstrct Court of the Unted States fob the astern Dstrct of
Pennsyvana.
. . rgchbaum Co. v. Unted States of merca.
uy 17, 1930.
OPINION.
Dcknson, .: Ths case s a procedura mongre. We have treated und
entted t as f an acton n assumpst, wth a fed statement of cam as
prescrbed by the Pennsyvana practce act of 1915. (12 P. S., sec. 382 et seq.)
We do ths both because we do not know what ese to do wth t, and further
because ths s n accord wth the wshes of the partes.
There are no facts n controversy. The queston presented s a cear-cut
queston of aw. short outne fact statement w present t. The pantff
had a war contract for rmy coats, some of whch had been made and were
ready for devery some of whch had not been made, and some not competed.
The cose of the war ended a need for the coats, and the Unted States can-
ceed the contract, as the e presson s used. The Secretary of War, under
the authorty gven hm by aw to ad|ust wth contractors cams under such
condtons, agreed n 1919 wth the pantff upon a settement by whch the
pantff receved an agreed sum for a coats whch had been competey made
under the war contract, and a ess sum for a the other coats caed for by
he contract. proft accrued to the pantff, and the present dspute s over
what ta shoud be assessed upon ths part of pantff s tota ta abe ncome.
mong the many horrors of war s the nequaty of the burdens whch t m-
poses. To the many t s the occason for sacrfce to others not merey a
source of gan, but often of nordnatey great gans. It Is aowabe to sup-
pose Congress had ths n mnd when t enacted the aws whch contro n ths
case. t a events the aws were passed. thought In them s that, when
an ncome ta comes to be eved, Income the source of whch was a war
contract shoud pay a hgher rate than other forms of ncome.
The pantff here may be sad to have had two contracts. One, the frst n
tme, was beyond doubt a war contract. If the proft, whch ater was receved
by the pantff, came from ths contract, the ta whch t has pad was propery
assessed. The other contract was made after the war, and whatever gans
fowed from t are admttedy to be ta ed at a ower rate. Ths ndcates
ceary enough the queston presented for a rung.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
326, rt. 831.
402
We can not wthhod the statement that the argument addressed to us on
behaf of the pantff s so admrabe n form and substance that t Is wth a
feeng very much ke regret that we fnd ourseves unconvnced by It. We
accept the proposton e haustvey mantaned that the contracts are two, In
the sense that the frst was ended by the second, and thereafter the respectve
rghts of the partes were to be determned whoy by the second contract
We accept aso the doctrne that Congress aone can mpose a ta , and that
no e ecutve nor admnstratve board nor the courts by constructon can add
to a ta mposed by Congress. The queston s what ta the ct of Congress
mposes, not what mght, or In the opnon of some one, shoud, have been
mposed. It was necessary to empoy words to e press the knd of ncome
upon whch the h gher ta was to be pad, and whatever these words mean,
so s the aw. The anguage of a aws, however, and emphatcay of the
ta aws, s drected to those whose obedence s demanded, and the meanng
ascrbed to the anguage used shoud be what he who s to obey woud be |ust-
fed n e tractng therefrom. Dstnctons and doctrnes whch have pace In
the aw as a scence shoud not pervert what the anguage of a statute ceary
means. The aws to be here construed mpose a ta on ncomes, and a ta abe
ncome mpes gans. These gans must have a source, and the source whch
Congress had n mnd was a war contract. Congress chose the phrases de-
rved from and attrbutabe to war contracts. Were the gans whch came
to the pantff derved from or attrbutabe to the war contract nto
whch t had entered The ta ng offcas and the oard of Ta ppeas hed
that they were, and we thnk they rghty so hed. Ceary f there had been
no such contract there woud have been no gans. The truth, to whch we agree,
that the ega remedy of the pantff, f t had been compeed to enforce ts
contractua rghts through and by an acton at aw, woud have been upon the
second contract, does not change the other truth that the source of the gans
recovered woud have been the earer war contract.
we are abe to see n the second contract was an agreement upon the sum
to whch the pantff had a rght under the frst contract. In other words,
t was an agreed assessment of the damages fowng from the noncompance
on the part of the defendant wth the war contract. It s agan true, as aready
more than once stated, that the ega obgaton to pay the agreed sum was
the agreement to so pay. Ths agreement s found n the second contract, and
the frst may we be sad to be merey the nducement to the makng of the
second, but, as aso before sad, the ega obgaton whch s the bass of an
acton s not necessary the test of the source of the gans whch the pantff
may recover n such acton. It s a comfort to know that the concuson reached
has the sancton of the approva of udge and n oe Co. v. Commssoner
(30 . (2d), 030). We see no nconsstency n the rungs of the oard n
the nstant case and that n the Goss case (11 . T. ., 365), nor does the
reasonng of the opnon n the atter case support the argument (abe athough
t s) addressed to us by counse for the pantff.
We are of opnon that the pantff has dscosed no cause of acton, and
|udgment shoud go aganst t. In vew of the peadngs, we now enter no
forma |udgment, but eave to counse to submt what s termed n the peadngs
a proper decree or |udgment n accordance wth ths opnon.
P RT . IN ST D C PIT L.
S CTION 326. IN ST D C PIT L.
rtce 831: Meanng of nvested capta. I -35-4768
( so Secton 213(a), rtce 31.) Ct.D. 230
ncome and e cess profts ta es revenue acts of 1918 and 1921
decson of court.
1. Invested Capta Income Interest ccrued on Securtes
Transferred.
Where a corporaton, keepng ts books on the bass of cash
recepts and dsbursements, acqures a the assets of another cor-
poraton by e changng stock for stock, among whch assets are
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
3

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
403
326, rt. 831.
certan securtes on whch Interest had accrued pror to ther
transfer, the agreement under whch the corporatons were merged
provdng that the securtes shoud be taken over at face vaue
and that the Items of accrued nterest shoud not be taken nto
consderaton In apprasng the assets, such earned nterest may
not be Incuded In the computaton of nvested capta under secton
326 of the Revenue cts of 1918 and 1921 and s Income to the
transferee corporaton when coected.
2. Decson ftcbmkd.
The decson of the oard of Ta ppeas (11 . T. ., 118)
affrmed.
Unted States Cacurr Coukt op ppeas, S th Crcut. No. 5361.
Pontac Commerca t Savngs ank, pettoner, v. Commssoner of Interna
Revenue, respondent.
Petton to revew an order of the Unted States oard of Ta ppeas.
une 28, 1930.
cks, Crcut udge: Petton by Pontac Commerca Savngs ank to
revew the decson of the oard of Ta ppeas affrmng the acton of the
Commssoner of Interna Revenue n assessng, on redetermnaton, defcences
n ncome ta es aganst t n the sum of 6,954.96 for 1920 and 7,690.50 for
1921. Pontac Savngs ank had a capta of 500,000 and a surpus of appro -
matey 100,000. rst Commerca ank of Pontac had a capta of 200,000
and a surpus of appro matey 90,000. On October 15, 1919, these banks
agreed to and shorty dd consodate, wth a capta of 750,000 and a surpus
of 150,000. Ths capta was contrbuted n the rato of 2 by Pontac Savngs
ank to 1 by rst Commerca ank. Pettoner amended ts charter, changed
Its name to Pontac Commerca Savngs ank, ncreased ts capta stock to
750,000 and ssued 250,000 of ts stock to the stockhoders of the rst Com-
merca ank n e change for the stock of that bank. The assets of the rst
Commerca ank were transferred to pettoner and thereupon the rst Com-
merca ank went out of e stence. Its busness has contnued as a branch
bank under the charter of pettoner. owever, the merger agreement provded
that the vaue of the assets of each bank be determned by a commttee of three
drectors from each bank. It was further provded:
2. That an apprasa of the rea estate, furnture, f tures, equpment, and
bond Investments that have a fuctuatng vaue be made n such manner as the
commttee of the drectors, herenabove mentoned, sha determne that the
accrued nterest tem be not taken nto consderaton, as each Insttuton does
not credt nterest on ts oans unt pad, and the date of payng Interest on
savngs account are the same the notes and dscounts to be taken over at face
vaue, e cept such tems thereof as are e cepted and dsapproved by the sad
commttee of drectors, above mentoned. Itacs ours.
It was further provded:
4. of the notes and mortgage Investments of each nsttuton sha be
taken over by the consodated nsttuton at face vaue .
mong the assets acqured by pettoner from the rst Commerca ank
were certan nterest-bearng securtes upon whch nterest not yet due or
payabe had accrued at the date of the merger n the sum of 43,068.59. These
nterest tems were coected by pettoner n the year 1920 and pettoner kept
ts accounts and made ts ta returns upon the cash recept and dsbursement
bass. The Commssoner determned that ths nterest so coected consttuted
Income to pettoner, upon whch he made a ta assessment as above ndcated.
Pettoner appeaed to the oard of Ta ppeas and nssted that these tems
were not ta abe Income but represented nvested capta. The oard confrmed
the decson of the Commssoner, and we concur.
The securtes n queston were tangbe property (Revenue ct 1918, ch. 18,
40 Stat., 1057. sec. 825(a)) and the accrued nterest at the tme of the transfers,
beng ncdenta to the securtes themseves, shoud aso be regarded as tan-
gbe property. and the actua cash vaue thereof, If the securtes and accrued
nterest had been accepted by pettoner for Its stock, mght be regarded as
Invested capta. (Revenue ct 1918, ch. 18, sec. 326(a), par. 2.) ut pet-
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
f331, rt. 941.
404
tIoner s dffcuty s, assumng as dd the oard of Ta ppeas that the effect
In fact of the merger agreement was that pettoner acqured these securtes for
ts stock, t yet remans that the accrued Interest upon the securtes was
specfcay omtted In determnng the capta furnshed. Ths was done by
agreement as above shown, and the partes were competent to agree as to what
shoud consttute the new capta structure. Ths nterest havng been assgned
to pettoner, and yet havng been omtted from the capta account, when
coected by pettoner necessary became ncome to pettoner |ust as t woud
have been to the Pontac Savngs ank f coected before the transfer of the
securtes. These nterest tems when coected fe wthn the term gross
Income as defned n secton 213(a), evenue ct 1918. We do not thnk t
can ava pettoner that the nterest accrued whe the securtes were n the
hands of ts transferors. (See Taft v. mcerg, 278 U. S., 478, 482 Ct. D. 49,
C. . III-1, 226 .) It was no ess ncome when coected by the unted bank
than t woud have been f coected by one of the unts thereof before the con-
sodaton. Cases cted to the effect that ncome such as profts, commssons,
etc., earned durng the fe of a decedent but not due or payabe at hs death are
not ta abe as ncome when coected, are not partcuary hepfu. There a
no anaogy between the status of the estate of a decedent and the stuaton
presented here.
On pr 18, 1921, pettoner and the Oakand County Savngs ank agreed
to and shorty thereafter dd consodate. Ths merger was accompshed by
substantay the same method, procedure, and agreement, as above ndcated
n the case of the Pottac ank and the Commerca ank. rectaton of
detas woud be superfuous. It s enough to say that the new bank thus or-
ganzed was to have a capta of 1,000,000 and a surpus of 200,000 to be
contrbuted n the rato of 3 by pettoner to 1 by the Oakand ank and that
among the assets acqured by pettoner from the Oakand ank were securtes
upon whch nterest, not yet due and payabe, had accrued n the sum of
40,641.54, whch nterest pettoner coected n the year 1921 and upon whch
as ncome the Commssoner assessed a ta . The determnatve facts beng
substantay the same as n the case of the consodaton of the Pontac Savngs
ank and rst Commerca ank, the same resut foows.
The decson of the oard of Ta ppeas s therefore n a thngs affrmed.
rtce 831: Meanng of nvested capta.
R NU CT O 1918.
Unreazed profts at begnnng of a ta abe year from nstament
saes effected n pror years. (See Ct. D. 222, page 192.)
P RT I. R ORG NIZ TIONS.
S CTION 331. R ORG NIZ TIONS.
rtce 941: auaton of asset upon change of I -50-4867
ownershp. Ct. D. 257
C SS PRO ITS T R NU CT O 1918 decson of court.
1. Invested Capta Reorganzaton auaton of ssets
Contro of 50 Per Cent oh More n the Same Persons.
Whore owns 52 per cent and , C, and D own 48 per cent of
the capta stock of a corporaton and subsequent to a transfer
fter March 3, 1917, of ts property to a new corporaton n e -
change for n the capta stock of the atter owns ess than 50
per cent of the stock of the new corporaton, , C, and D ownng
the remander, the transacton Is wthn the provsons of secton
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
405
331, rt. 941.
831 of the Revenue ct of 1918, whch prohbts the new corpora-
ton from vaung the property so acqured at a greater amount n
computng Its nvested capta than the od corporaton coud have
vaued It In computng Its Invested capta.
2. Decson ffrmed.
The decson of the oard of Ta ppeas (12 . T. ., 158)
affrmed.
Unted States Crcut Court of ppeas for the Seventh Crcut.
Monarch ectrc Wre Co., pettoner, v. Commssoner of Interna Revenue,
respondent.
Petton for revew of order of Unted States oard of Ta ppeas.
efore schuer, vans, and Sparks, Crcut udges.
ebruary 26, 1930.
opnon.
Sparks, Crcut udge: Ths s a petton by Monarch ectrc Wre Co. to
revew an order of the oard of Ta ppeas entered ugust 14, 1928, and
Invoves ncome and e cess profts ta es for the year 1920 n the amount of
6,104.03.
The uncontroverted facts reatng to ths ssue are as foows:
In 1906 one Nathan Deutsch owned the entre capta stock of the Monarch
ectrc Wre Co., an Inos corporaton organzed n 1902 (not the pet-
toner heren). In the atter part of 1906 Deutsch sod a 16 per cent nterest
n ths company to each of the three Schwab brothers, L. S. Schwab, . S.
Schwab, and . G. Schwab, and retaned for hmsef the remanng 52 per cent
controng nterest. In the atter part of the year 1919 the Schwab brothers
began negotatons for the purchase of Deutsch s stock. oth partes deat at
arm s ength through ther respectve attorneys. n agreement, dated anuary
1, 1920, was fnay perfected, by the terms of whch the name of the company
was changed to Schwab ectrc Co. a new corporaton, the pettoner heren,
was organzed and acqured a the assets sub|ect to the abtes of the
Schwab ectrc Co., wth the e cepton of certan ndebtedness of Deutsch
whch was canceed and 25,300 n Lberty bonds whch was pad drecty to
Deutsch. esdes the Lberty bonds and the canceaton of hs ndebtedness,
Deutsch receved from pettoner 300,000 par vaue of ts preferred stock
(beng ts tota authorzed preferred stock). Ths preferred stock had votng
rghts, and was entted to cumuatve dvdends of 6 per cent per annum, the
payment of the dvdends beng guaranteed ndvduay by the three Schwab
brothers. The Schwab brothers further agreed that ths preferred stock woud
be redeemed at a certan amount each year, the ast maturty of whch s to
be pr 1, 1937.
The Schwabs further agreed wth Deutsch that unt 100,000 of the pre-
ferred stock was redeemed ther aggregate annua saares woud not e ceed
36,000, and unt 150,000 par vaue of preferred stock was redeemed ther
aggregate annua saares woud not e ceed 45,000, and unt 200,000 par
vaue of preferred stock was redeemed ther aggregate annua saares woud
not e ceed 54,000.
The three Schwabs receved from pettoner a ts common stock, whch
gave the Schwabs u 52 per cent nterest and votng contro.
The assets conveyed to pettoner by the Schwab ectrc Co. had a far
market vaue, n the amount agreed upon between Deutsch and the Schwabs
and admtted by respondent, and were refected as nvested capta n the pet-
toner s ncome ta returns as foows:
Leasehod 75, 000. 00
udng 300,000.00
Machnery 46, 075. 52
Good w 75, 000.00
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
331, rt. 941.
406
These assets were taken over by the pettoner at the above fgures. The
Schwab ectrc Co. had carred the assets at a much ower vauaton, and no
good w was carred as an asset by t.
Respondent, n computng pettoner s nvested capta, vaued the assets
acqured by pettoner from the Schwab ectrc Co. on the same bass as they
stood on the books of that company, nstead of at ther market vaue. Pet-
toner contends that for the year 1920 t s entted to have ts nvested capta
computed on the actua cash vaue of the property pad n for ts stock on
anuary 1, 1920, and that the mtaton of secton 331 of the Revenue ct of
1918 Is not appcabe. The Commssoner contends that the mtaton of
secton 331 s appcabe. Ths s the ony Issue Invoved.
The matera porton of secton 331 of the Revenue ct of 1918 (40 U. S.
Stats., 1095) s as foows:
Sec. 331. In the case of the reorganzaton, consodaton, or change of own-
ershp of a trade or busness, or change of ownershp of property, after March
3, 1917, f an nterest or contro n such trade or busness or property of 50 per
centum or more remans n the same persons, or any of them, then no asset
transferred or receved from the prevous owner sha, for the purpose of deter-
mnng nvested capta, be aowed a greater vaue than woud have been
aowed under ths tte n computng the nvested capta of such prevous owner
f such asset had not been so transferred or receved:
Pettoner contends that nasmuch as Nathan Deutsch, on anuary 1, 1920,
owned more than 50 per cent of the stock of the Schwab ectrc Co., and after
the reorganzaton or change of ownershp he owned ess than 50 per cent n the
new corporaton, such transacton does not come wthn the provsons of the
statute. Wth ths contenton we can not agree. In our |udgment the wordng
of the statute s not ambguous n ths partcuar. It e pcty says that f
an nterest or contro of 50 per centum or more remans n the same persons.
or any of them tacs ours , then the statute appes. efore the rencor-
poraton Deutsch, t s true, owned and controed more than 50 per cent of the
stock but t s aso true that he, wth ether one or more of the Schwabs, at that
tme owned and controed more than 50 per cent of the stock. fter the ren-
corporaton we fnd the persons hodng the stock In the new corporaton are
dentca wth the stockhoders n the od, and that Deutsch, wth ether one or
more of te Schwabs, st owns and contros more than 50 per cent of the stock
of the new corporaton and ths brngs the transacton squarey wthn the
statute.
We are thoroughy convnced that the reorganzaton and transfer of stock
was a bona fde transacton n every partcuar, and that there was no effort
whatever on the part of pettoner or ts stockhoders to crcumvent the Gov-
ernment but of course these facts are not suffcent to overcome the pan and
unambguous terms of the statute.
The order of the oard of Ta ppeas s affrmed.
schueb, Crcut udge: I concur n ths opnon.
Secton 331 was drawn to meet reorganzaton, consodaton, or change of
ownershp of a trade or busness, or change of ownershp of property, after
March 3, 1917. The form of ownershp s mmatera. It may be ndvdua,
partnershp, or corporate. To my mnd the evdent ntent of the secton s,
that f, after any such change, any person or persons, sngy or coectvey,
sha hod n the reorganzed busness as much as 50 per cent of the entre
nterest or contro theren, and are the same person or persons who, sngy or
coectvey, hed as much as 50 per cent nterest or contro n the od busness,
the reorganzed busness sha, not, for the purpose of determnng nvested
capta, be aowed a greater vaue on any of ts assets than woud have been
aowed, upon the same assets, to the od busness had there been no
reorganzaton.
ere not ony 50 per cent, but the entre ownershp and so the entre contro
or nterest n the consodated busness s n the same persons, and n none
others, as was the entre nterest and contro n the od busness.
It foows that, for the purposes of the Revenue ct of 1918, secton 331 pre-
cudes to the reorganzed corporaton a captazaton dfferent from that whch
woud have been permssbe to the od corporaton had ths reorganzaton not
taken pace.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
407
1318,1319,1320, rt. 1050.
TITL m. G N R L DMINISTR TI PRO ISIONS.
S CTIONS 1318, 1319, ND 1320. LIMIT TIONS UPON
SUITS ND PROS CUTIONS.
ncome ta a revenue acts decson of court.
Sut Cam for Refund Suffcency.
sut to recover an Interna revenue ta can be mantaned
ony upon such grounds as are set out In the cam for refund duy
fed as a necessary prerequste to sut. n appcaton, fed after
the tme has run to fe a cam for refund, askng that the cam
for refund be reopened and aowed on a dfferent ground, can not
be used as a bass for a sut on such new ground.
Unted States Dstrct Coubt fob the Northern Dstrct of Te as.
W. . Gonme, ecutor, v. Geo. 0. opkns, Coector.
twe , .: ury was waved. n agreed statement of facts evdence
that the ta payer, S. . urnett, fed hs return for the year 1918 on March
16, 1919, showng a ta due of 11,712.18. Ths amount was pad n
nstaments.
urnett ded n 1922. On March 13, 1924, an addtona ta of 92,498.42
was assessed aganst the estate for the year 1918. On March 27, 1924, a cam
for abatement of sad addtona assessment was fed, and on March 27, 1925,
an abatement was aowed n the sum of 37,692.13. On pr 18, 1925, the
coector, defendant, demanded payment of the baance of 54,806.29, pus
Interest, and on pr 28, 1925, the e ecutors pad, under protest, 58,377.47.
On September 25, 1925, a cam for refund on bank 843, whch contaned
ths prnted headng, mount to be refunded or such greater amount as s
egay refundabe, was made for 25,517.23. On anuary 30, 1926, the
Commssoner wrote the pantff: Tour cam for the refundng of 25,517.23,
part of Indvdua ncome ta for the year 1918, has been e amned. The
bass of your cam s: 1. That the March 1, 1918, vaue of catte, ess depre-
caton, sod n 1918, shoud be aowed as a deducton from saes. 2. The
dstrbuton of certan property on communty bass. conference was ar-
ranged upon request and hed n ths offce, December 22, 1925, at whch
tme the contested ssues were dscussed. fter carefu consderaton of the
nformaton submtted wth the cam and at the conference, t s hed by
ths offce that the evdence submtted reatve to the frst ssue s too meager
to warrant a change In the audt as prevousy made. s advsed at the
conference, the decson of the Te as Supreme Court n whch t s hed
that the ncome of o royates whch was separate property of ether the
wfe or the husband was communty ncome, has not been accepted by ths
offce. The representatve recognzed the decson of the offce and agreed
to accept ths decson of ths ssue. Snce you have not been assessed an
amount n e cess of the correct ta abty, the cam w be re|ected.
The re|ecton of the cam w offcay appear on the ne t schedue to
be approved by the Commssoner.
On November 25, 1929, pantff fed wth the Commssoner an appcaton
for the reopenng and the aowance of the cam for refund, aegng that the
coecton was barred and settng out certan dates whch woud tend to show
that fact. On ebruary 24, 1930, the appcaton was dened, the Commssoner
statng among other thngs, In ths connecton t s hed by the ureau that
the precse ground upon whch the refund or credt of ta es s demanded must
be stated n the cam for refund or credt, and a sut to recover the ta es can
not be based upon an entrey dfferent and dstnct ground than that presented
n the cam. Ctng authortes. The atter then contnues, a revew of
rtce 1050: Suts for recovery of ta es erro-
neousy coected.
I -47-4843
Ct. D. 248
October 1, 1930.
OPINION.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
1318, 1319, 1320, rt. 1050. 408
the entre fe of the cases dscoses that the ony cam fed subsequent to the
payment of the ta on pr 28, 1925, was the cam for refund of 25,517.23,
fed on September 25, 1925, whch was based on the foowng grounds, vz,
(1) that the March 1, 1913, vaue of catte, ess deprecaton, sod n 1918 shoud
be aowed as a deducton from saes, and (2) dstrbuton of certan property
on the communty bass.
The etter then contnues: Reatve to the cause refund of ta es egay
coected, shown on the former cam for refund ( orm 843), you are advsed,
t s ntended to cover cases n whch, through gnorance of the aw or the proper
method of computaton, camants mght nsert ncorrect amounts, and, on
e amnaton of the cam, t Is found that ta payer s entted to more than the
amounts specfed on the tems set forth as grounds for refund.
There were no wavers concernng assessment or coecton. The pantff
and hs secretary testfed that they had never receved any other notces con-
cernng the re|ecton of the cam.
The case presents a doube mtaton. It s not now contended that the
Government was not entted to the addtona coecton that the coector made,
but t Is contended that the coecton was made after the debt was barred.
When a ctzen s caed upon for a ta payment that he consders ega he
must, before sung for ts recovery, ask for a refund. Such request must be
based upon the ground that s e pected to be aeged n a sut f the refund s
refused. It s unnecessary to menton, at ths ate hour, that the soveregn
may not be sued uness t consents. The provsons authorzng sut must be
observed. Ltera compance wth statutory requrements 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. ( ng County Savngs Insttuton v. ar, 116 U. S., 200 Maryand
Casuaty Co. v. . S., 251 U. S., 342 Nchos v. U. S 7 Wa., 122: Red Wng
Matng Co. v. WUUsuts, 15 . (2d), 688 T. D. 3980, C. . I-1, 225 Tucker
v. e ander, 15 . (2d), 356, 275 U. S., 228 T. D. 3973, C. . I-1, 287
Dodge v. Osborn, 240 U. S., 118.)
The system whch the Congress provdes for the coecton of revenue and for
the remedyng of errors In such coecton, s f ed and not varabe. It s for
unversa observance, for the ctzen s beneft, and for the beneft and gudance
of a constanty changng army of offcers. (Cheatham v. 17. 8., 92 U. 8., 85
cks v. ames, 48 ., 542 Rock Isand Raroad Co. v. U. S., 254 U. S., 141
Ct. D. 2, C. . 4, 342 .)
Pantff contends that ths fundamenta rue has been so construed as to
admt such an amendment as was wthn the facts shown n the orgna cam.
In support of ths poston he ctes: Dreyfuss Dry Goods Co. v. Lnes (24 .
(2d). 29 T. D. 4039, C. . I-2, 264 ) Lehgh d Wkes wrre Coa Co. v. U. 8.
(38 . (2d), 637) Neuand v. owers (38 . (2d), 842) Leach v. Nchos (not
yet reported, uy, 1930).
qneston of aw that has been so recenty reterated by the Supreme Court
In Tucker v. e ander (275 U. S., 228) ought not to be consdered unsetted, or
as havng confusng e ceptons. It s true that one Is somewhat embarrassed
when one dscovers that for haf a century the appcaton for refund has been
consdered a |ursdctona matter for the entrance of court, to fnd that t has
been stated we can perceve no vad reason why the requrements of the
reguatons may not be waved for that purpose. ut Mr. ustce Stone was
speakng about that partcuar case whch showed that the sut coud be ds-
mssed nnd a new sut brought before the statute woud run, and n that sort of
a stuaton he saw no mproprety n aowng the representatve of the Govern-
ment and the representatve of the ctzen to stpuate for the ncudng of a
ground that had not been presented to the Commssoner. e stated, however,
that such wavers, f aowed, woud defeat the ony purpose of the statute and
mpose a abty upon the Unted States whch otherwse woud not e st
consequences whch do not attach to the waver here. So, the rue may now be
stated to be, that the tgant must come nto court upon the same grounds that
e presented to the Commssoner uness he and the agent of the soveregn agree
upon the statement of an addtona ground. Ths can ony be done when the
ctzen woud have tme to dsmss hs sut and nsttute a new sut after havng
presented the addtona ground to the Commssoner before the e praton of
the barrng statute.
The cases cted by the pantff e hbt no marked e cepton to ths sautary
and we-founded procedure.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
409
1324, rt. 1040.
udge Thatcher, n Neuand v. owers, sad: The ta payer dd state the
facts as requred by the reguatons then n force upon whch e now predcates
hs rght to recover under the statute subsequenty enacted. gan, the ta -
payer s statement of hs cam dscosed that hs return for the year 1915 was
fed n the year 1917 and that he was not notfed unt more than fve years
thereafter of the addtona assessment.
In Lehgh Wkes arre Coa Co. v. . S., udge ohnson sad: The answer
to ths ob|ecton Is that t was mpossbe for the pettoner to specfy the ground
for refund, for the reason that the deceased pettoner s return had not yet been
audted and the pettoner was unabe to state at the tme the specfc ground for
ts cam for the refund on ebruary 10, 1925, or wthn the perod of the statute
of mtatons. The aw does not compe a person to do an mpossbe thng, and
here the thng was mpossbe, not because of any act of the pettoner, but be-
cause of the faure of the Commssoner to audt the pettoner s return wthn
the perod of the statute of mtatons.
In Dreyfuss Dry Goods Co. v. Lnes, Crcut udge Waker wrtng, t was
sad: It was pany dscosed by pantffs cam for refund that a sut or
proceedng for the coecton of the addtona ta was barred when the payment
of t was e acted from pantff. s the cam for refund companed of the
ega coecton from pantff of the amount pad under protest, and set forth
a facts reed on to support the cam, as requred by the above-mentoned
reguaton, t can not be supposed that the Commssoner was deceved or msed
by a faure of the cam to menton a provson of aw appcabe to those facts.
It seems to me that t s mpossbe to fnd wthn the four corners of the
appcat on for refund any facts that put the Commssoner upon notce that
there was a coecton after t was barred. The facts shown n the agreed
statement upon ths tra were not e hbted n that appcaton. There Is no
evdence of the date of the return, nor of who made the return. superman,
or omnscence, mght have made use of some ega mcroscope for the detect ng
of unmentoned dates, but the aw does not requre the mpossbe of ts agents.
The Commssoner was passng upon an appcaton for the refund of appro -
matey 25,000 upon two separate and dstnct grounds, and there was not the
sghtest ntmaton, nor any dscoverabe nformaton, that the statute of m-
taton mght be nvoved. It woud be nether good nor safe aw to requre
such perspcuty.
The pantff aso contends that the appcaton made n 1929. whch dd gve
dates and facts, whch woud show mtaton, and whch specfcay mentoned
mtaton, was In tme because the Commssoner had not gven the 90-day
notce of re|ecton. Sectons 3226 and 3228. The etter quoted above s suff-
centy e pct to warrant the statement that t s the present tense. It Is not
a prophecy of what the Commssoner may do. It means, and I thnk says,
your cam s re|ected. Whe I woud have some dffcuty n foowng
Nchos v. U. S. (37 . (2d), 38), I do not beeve that that case s n pont on
th s queston. The court there seems to have been consderng secton 3226 as
determnatve of the tme when the statute began to run aganst a sut.
nay we have a sut for an amount more than doube the cam that was
fed wth the Commssoner, and a reason for recovery urged that s whoy
foregn to the facts and questons and reasons that were presented to hm.
udgment w be entered for the defendant.
S CTION 1324. INT R ST ON R UNDS
ND UDGM NTS.
rtce 1040: Interest on refunds and |udgments. I -42-4807
Ct.D.238
ncome ta revenue acts of 1918 and 1921 decson of court.
1. Interest Credt When Cam s owed.
cam for credt Is aowed wthn the meanng of secton
1324(a) of the Revenue ct of 1921 on the date when the Com-
mssoner sgns the schedue of refunds and credts certfed to
hm by the coector authorzng the dsbursement cerk of the
Treasury to pay the amounts shown to be refundabe.
35942 31 27
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
1324, rt. 1040.
410
2. Interest Credts Offset Interest Due from Ta payer.
In makng credts of overpayments of ta es aganst ta es due
for subsequent years the Government has the rght to offset the
Interest due from the ta payer under secton 250 (a) and (e) of
the Revenue cts of 1918 and 1921 from the due dates of the
ta es aganst the nterest to whch the ta payer s entted under
secton 1324 of the Revenue ct of 1921 upon the aowance of
the cred|ts.
Court of Cams of the Unted States.
ndrews Stee Co. v. The Unted States.
une 2, 1930.
opnon.
Ltteton, udge, devered the opnon of the court.
There s no controversy wth reference to the nterest pad by the Comms-
soner upon the amounts refunded. The controversy reates to the computaton
of nterest upon the overpayments for 1917 and 1918 credted aganst the ta
due for other years.
The frst queston Is as to the date on whch the Commssoner aowed the
credt wthn the meanng of secton 1324 of the Revenue ct of 1921. The
defendant contends that the credt was aowed on ugust 25, 1922, the date
when the Commssoner frst sgned the schedue of overassessments for trans-
msson to the coector, whe the pantff contends that the credts were
aowed wthn the meanng of the ct on September 6, 1922. when the
Commssoner sgned the schedue of refunds and credts certfed to hm by
the coector authorzng the dsbursng cerk of the Treasury to pay the
amounts shown to be refundabe, and nterest
The second queston s whether, In provdng for the payment of Interest on
credts to the date of the aowance of cam for credt, the ct Intended to gve
the Government the rght to coect nterest on the unpad nstaments of the
ta reported and cue on the return of the ta payer for years pror to 1921
aganst whch unpad Instaments the credts were apped.
s to the frst queston, reatng to the date on whch the Commssoner a-
owed the credt, the poston of the pantff s correct. (Grard Trust Co. v.
Unted States, 270 U. S., 163 T. D. 3919, C. . -2, 209 Swft Co. v.
Unted States, 68 C. Cs., 97 oston uck Co. v. Unted States, 27 ed. (2d),
895. affrmed 35 ed. (2d), 560 West Lcec.hburg Stee Co. v. Unted States,
-203 tas Powder Co. v. Unted States, -151 and Pottstown Iron Co. v.
Unted States, -229, decded by ths court pr 7, 1930.)
On the second Issue, the pantff contends that t s entted to addtona
nterest on the amounts credted aganst the orgna ta for 1919 and 1920 from
the due dates of the ta for those years to whch the Commssoner computed
Interest to September 0, 1922, the date when the Commssoner aowed the
credt that t s entted to addtona nterest upon the amounts credted
aganst the addtona assessment of 1,596 for 1920 from ugust 25, 1922, the
date when the Commssoner frst sgned the schedue of overassessments, to
September 6, 1922, the date when he aowed the credt. The defendant nssts
that t was not ntended by the enactment of secton 1324(a) of the Revenue
ct of 1921 to provde for the payment of nterest on overpayments of ta
credted aganst a ta due for subsequent years wthout chargng a correspond-
ng amount of nterest on the amount due and unpad, and that t s mmate-
ra whether Interest be computed to the due date of the orgna ta aganst
whch the sum was credted or to the date of the aowance of the credt, snce
each computaton of nterest offsets the other. In other words, t s the con-
tenton of the defendant that the ta Is a debt and that the Unted States has
a common-aw rght to charge the ta payer Interest on the ta from the date
t s due.
The defendant computed and pad nterest on the overpayment for 1917.
13,773.53 of whch was credted to addtona assessments for the years 1910
to 1913, ncusve, and 91,885.66 of whch was credted aganst the unpad
orgna 1919 ta , and on the overpayment for 1918, 170,300.21 of whch was
apped as a credt aganst the unpad orgna Instaments of ta for 1920
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
411
1324, rt. 1040.
and 1,596 of whch was credted aganst an addtona assessment for the
years 1909 to 1917, ncusve, and the pantff cams addtona nterest upon
the amounts so credted as foows:
1917.
INT R ST LLOW D ND P ID Y GO RNM NT.
mount of
overpayment.
mount
credted.
mount
refunded.
Interest aowed.
Interest.
rom
To-
150,532.63
13,773.53
91.885.66
15,669. 50
Oct. 12,1920
Oct. 12.1920 1
None.
Sept. 6,1922
ug. 25,1922
1,788.05
1,544.62

DDITION L INT R ST CL IM D Y PL INTI

Interest camed.
rp.
3,332.67
mount
credted.
rom
To-
ddtona
Interest.
13,773.53
91.885.06
ug. 25,1922
Oct. 12,1920
Sept. 6,1922 do
27.17
10,485.12
INT R ST LLOW D ND P ID Y OO RNM N
1918.
Interest aowed.
T.
mount of
overpayment.
mount
refunded.
mount
credted.
rom
To-
Interest.
783, 977. 28
612,081.07
125. MR. 80
22,577.21
11,288. 10
11,288. 10
1, 596. 00
Oct. 12,1920
Oct. 12,19201
Sept. 6, 1922
Mar. 15.19211
une 15,1921
Sept.15,1921
Dec. 15,1921
ug. 25,1922
69,844.31
3,190.39
914.22
826.41
795.73
178.97
do.
do. .
do.

DDITION L INT R ST CL IM D Y PL INTI

Interest camed.
do.
P
75,55a 03
mount
credted.
rom
To
ddtona
nterest.
125, 140.80
22,577. 21
11,288. 10
11,288. 10
1,596.00
Mar. 15,1921
une 15,1921
Sept. 16,1921
Dec. 15,1921
ug. 25,1922
Sept. 6,1922
11,090.08
1,602.05
681.66
492.31
3.15
do.
do. .
do. .
do.
S months after fng cam for credt.
1 Date the schedue of over assessments was frst sgned by Commssoner.
Date on whch the Commssoner sgned and approved the schedue of refunds and credts certfed
by the coector and authorzed the dsbursng cerk to pay.
1 Due dates of Instaments of the ta shown on the orgna return far 1920 aganst whch the credt was
apped.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
1324, rt. 1040.
412
The queston of nterest on the overpayment of 13,773.53 for 1917 credted
aganst addtona assessments for 1910 to 1913, ncusve, and on 1,596 of the
overpayment for 1918 credted aganst addtona assessments for 1909 to 1917,
ncusve, s entrey dsposed of by our decson on the frst ssue. Interest on
these credts shoud therefore be computed from October 12, 1920, to September
6, 1922. There s eft under the second ssue the questons whether pantff Is
entted to nterest upon that porton of the 1917 overpayment of 91,885.66
credted aganst the unpad nstaments of the or.gua ta reported for 1919,
upou whch the Commssoner computed no nterest, and whether t Is entted
to addtona nterest upon that porton of the 1918 overpayment amountng to
170,300.21 credted aganst the unpad nstaments of the orgna ta reported
for 1920 ms set forth n the above tabuaton, and upon whch the Commssoner
aowed and pad nterest from s months after the fng of the cam for
credt to the dates on whch the nstaments of the orgna ta for 1920 were
due.
s shown n fndngs 3 and 4, pantff pad none of the ta due on the return
for 1919, and pad ony a porton of the nstaments of the ta reported on the
return for 1920. In appyng a porton of the 1917 overpayment as a credt
aganst the unpa d baance of the orgna ta for 1919, and a porton of the
overpayment for 1918 aganst the unpad baance of the nstaments of the
orgna ta for 1920, the Commssoner aowed no nterest on the 1917 over-
payment credted aganst the 1919 ta and aocated the amount of the 1918
overpayment credted to te unpad porton of the four nstaments of the ta
for 1920 and aowed nterest on the amounts so aocated and credted to the
dates on whch the nstaments became due n March, une, September, and
December. 1921. Pantff nssts that t shoud have been pad Interest upon
these credts from October 12, 1920, to September 6, 1922.
We are of opnon that pantff s not entted to any addtona nterest upon
the amounts credted aganst the unpad porton of the orgna ta reported
and due upon the returns for 1919 an 1920. We thnk the Commssoner of
Interna Revenue was correct n refusng to compute nterest n respect of these
tems to the date of the aowance of the credt, not because of any common-aw
rght to charge nterest on ta es due and offset such nterest aganst nterest
provded by the statute n the case of credts but because of the provsons of
secton 250 (a) and (e) of the Revenue cts of 1918 and 1921, whch provde
that f any nstament of the ta shown upon the return s not pad when
due, the whoe amount of the ta unpad sha become due and payabe upon
notce and demand by the coector, and that f any ta remans unpad after
the date when t s due, and for 10 days after notce and demand, nterest sha
be added from the tme t became due.
Subdvson (h) of secton 250 of the Revenue ct of 1921 (42 Stat., 264)
makes the provsons of subdvson (e), wth reference to nterest and penaty
for faure to pay, appcabe to the assessment and coecton of the ta whch
has accrued under the Revenue ct of 1917 or the Revenue ct of 1918. Ths
secton aso provdes that n the case of frst nstaments the nstructons
prnted on the return sha be deemed suffcent notce of the date when the ta
s due and suffcent demand, and the ta payer s computaton of ta on the
return sha be deemed suffcent notce of the amount due. Secton 1324 of the
Revenue ct of 1921 provded for the payment of nterest to the ta payer upon
the aowance of a cam for credt at the rate of one-haf of 1 per cent a month
to the date of aowance, frst, If the amount was pad under specfc protest from
the date of the payment of the ta . Ths provson does not appy to ths ssue.
Secondy, the nterest was payabe f the amount used as a credt was not pad
under protest but pursuant to an addtona assessment, from the tme the
addtona assessment was pad. Ths provson has no appcaton to the tems
now under dscusson. Thrdy, t was provded that nterest shoud be pad
to the date of the aowance upon the amount used as a credt from s months
after the fng of the cam for credt f the amount was not pad under protest
nor pursuant to an addtona assessment. The tems credted aganst the
orgna ta for 1919 and 1920 fa under ths provson of the statute. The
Revenue cts of 1918 and 1921 s|ecfcay provde for the coecton of nterest
by the Government upon faure of the ta payer to pay the Instaments of the
ta reported when due and there s no provson n ether statute reevng t
from ths abty because of the fng of a cam for credt. We have n ths
case, therefore, a stuaton where the pantff was abe for nterest upon that
porton of the ta reported on the orgna returns but not pad when t was
due and whch was satsfed by the credtng of a porton of overpayments of
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
413
1324, rt. 1040.
ta for pror years upon whch credts the Government was abe for Interest.
In makng the credts of the overpayments for 1917 and 1018 aganst the unpad
nstaments of the orgna ta for 1919 and 1920 the Commssoner, therefore,
correcty offset nterest for whch the pantff was abe aganst Interest for
whch the defendant was abe. Whether the Commssoner was correct In
chargng the pantff wth nterest on the unpad nstaments for 1919 and
1920 at the rate of one-haf of 1 per cent a month Instead of 1 per cent a month
we are not caed upon to decde, because ths matter s not n controversy. In
dong so he foowed artce 1035, Reguatons 62, whch provdes that the fng
of a cam for credt aganst the ta due on another return sha be sub|ect to
the same rues wth respect to the addton of nterest and penaty as f the
ta payer had fed a cam for abatement of the ta aganst whch credt s
desred. In any event pantff has no rght to compan because the Comms-
soner charged t ony wth the amount of nterest for whch the Government
was abe on that porton of the overpayments apped as a credt.
Pantff s abty for nterest under the provsons of secton 250 (a) and
(e) of the Revenue ct of 1918 n respect of the unpad porton of the orgna
ta reported on the return for 1919, amountng to 91,885.66, arose pror to
the date on whch the defendant became abe for nterest upon the overpay-
ment of that amount for 1917. No nterest at a was therefore aowabe upon
ths tem.
On the other tem of 170,300.21 of the overpayment for 1918 credted aganst
the unpad nstaments of the orgna ta reported for 1920, the Commssoner
aowed Interest from a date s months after the fng of the cam for credt
to the dates on whch the 1920 nstaments became due. rom and after such
dates the Interest for whch the pantff was abe upon these nstaments
offset the nterest for whch the defendant was abe and no addtona nterest
s aowabe.
Pantff s entted to recover 30.32, beng addtona nterest of 27.17 on
the credt of 13,773.53 from ugust 25, 1922, to September 6. 1922, and 3.15
as addtona nterest on the credt of 1,590 from ugust 25, 1922, to September
6, 1922, for whch |udgment w accordngy be entered. It Is so ordered.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
S L S T RULINGS.
TITL . T ON DMISSIONS ND DU S. (1926)
Where payments for cub prveges are f ed and defnte n
amount and must be pad by a persons beongng to any par-
tcuar cass or subcass of membershp or by a members generay,
such payments are ta abe as cub dues or membershp fees.
n opnon s requested whether certan payments requred by the
Cub for cub prveges are ta abe as cub dues or membershp
fees.
Secton of the amended certfcate of ncorporaton of the Cub
reads as foows:
Dues sha be assessed aganst each resdent membershp for the genera pur-
pose, mantenance and support of the corporaton. Such dues may be n-
creased by a by-aw duy adopted and sha be pad In such amounts and at
such tmes and n such manner as sha from tme to tme be f ed and pro-
vded for n the by-aws. Such dues sha be assessed aganst and pad by the
person n whose name the membershp stands upon the books of the corporaton
and sha be a en upon and aganst the membershp provded aways, that
such dues and assessments sha not be ess than ten doars ( 10) and not
more than one hundred ffty doars ( 150) per year.
Secton thereof contans these provsons, vz:
In addton to the contrbutons otherwse heren provded for, the board of
governors may aso provde for the payment of a reasonabe charge for amuse-
ments, prveges, arrangements or factes furnshed by the cub to be pad
for by the members who desre to make use of the same and may prohbt or
e cude a members not payng such charges from usng the same.
t a meetng, the board of drectors of the cub f ed a rate
schedue for the varous casses of membershp n the cub effectve
durng the year 1929. n e tract from that schedue reatng to
resdent members reads as foows, vz:
Resdent Members. It was reguary moved and seconded that the resdent
membershp for the ensung year woud be the same as ast year, 25.
Membershp In country cub s requred by by-aws.
Gof prvege frst member of famy, 30.
ddtona gofng prvege n famy, 15 each.
owever, these payers woud not be entted to use the course from Saturday
noon to Sunday noon.
ddtona members of the famy desrng gofng prveges may have fu-
fedged gof prveges wth no e cuson by payng 30.
Reguatons 48, rtce 40: Dues or member-
shp fees.
T ON DU S R NU CT O 1826.
I -44-4823
G. C. M. 7505
(414)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
415 Regs. 43, rt. 40.
It appears that ths nformaton was communcated to the member-
shp n the foowng terms, vz:
Schedue of Dues fob 1929, Countby Cub.
R SID NT M M RS.
(Membershp requred.)
Dues 25.00
rst gof prvege for famy 30.00
Tota 65. 00
ddtona gof prveges n famy, 15 each, wth e cuson from Saturday
noon to Sunday noon.
y payng 30 each, no e cuson.
In the case of Thompson v. Wyandanch Cub (127 N. Y. S., 195,
200) the court dscussed the meanng of the word dues, as foows:
Wth reference to cubs and other membershp corporatons the
meanng of the word dues s setted. It means the obgaton nto whch
the members enter to pay a sum to be f ed, usuay by by-aws, at recurrng
ntervas, for the mantenance of the organzaton. very cu,b has ts nta-
ton fee and some have fees for other speca prveges. In a cases the pay-
ment s vountary. very cub has ts dues f ed by tsef, payabe perodcay,
and creatng a debt by the member to the cub.
In the case of Wed v. Nchos (9 ed. (2d), 977) the queston
under consderaton was whether the payment by a cub member of
7.50, representng an addtona fee for the prvege of payng
gof for s months, coud propery be hed sub|ect to the ta m-
posed on cub dues or membershp fees. In commentng upon the
meanng of the words, the court sad:
It seems cear that n cause (b) the words n queston must refer
to defnte obgatons ncdenta to membershp n the cub. Presumaby the
same e presson s used n the same sense throughout the secton. If so, the
words dues or membershp fees, In cause (a), were meant to cover ony
f ed and defnte charges appcabe to a members of each partcuar cass of
membershp. Ths seems to me to be the underyng ntenton of the secton.
The court thus drew a dstncton between payments made n sat-
sfacton of a defnte obgaton ncdenta to membershp n the
cub and payments made by members for addtona prveges. It
dfferentated defnte obgatons ncdenta to membershp from
casua and uncertan charges for prveges, concudng that the for-
mer are ta abe and the atter not. The rue whch the court pre-
scrbed embodes two requstes whch must be met before payments
made by cub members may property be regarded as dues or mem-
bershp fees, wthn the meanng of the decson. rst, the pay-
ment must be made n satsfacton of a f ed and defnte charge
and, second, the charge must be appcabe to a members of each
partcuar cass of membershp. It woud appear that f ed and
defnte charges of ths character are those whch members must pay
perodcay for the contnuance of any partcuar cass of member-
shp. If the perodca payments so requred are appcabe to a
members of each partcuar cass, the two condtons requred for
ta abty under the court decson ast mentoned are compete.
Casua and uncertan payments, on the other hand, are not requstes
to membershp but are made from tme to tme for speca prveges.
They vary n amount and purpose and are purey optona.
In the nstant case the rate schedue for 1929, adopted by the
board of drectors at ts meetng, and communcated to the cub
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Reg . 43-11, rt. 5.
416
membershp as the dues schedue for that year, sets forth f ed and
defnte charges wthn the meanng of the Wed v. Nchos decson,
supra. The charges aso meet the second and remanng test adopted
by the court n that case, n that they are appcabe to a members
of the partcuar cass. urthermore, these sums are ceary mem-
bershp payments under secton of the amended artces of ncor-
)oraton quoted herenbefore and, f unpad, the amounts become
ens upon and aganst the membershp. They are easy dstn-
gushabe from other charges, uncertan n amount and casua n
ther character, for amusements and prveges, n the common ac-
ceptaton of the word, provded for n secton of the same nstru-
ment. The manner of settng up these amounts s not matera,
nor s the reference to them as payments for prveges concusve
as to ther character. In a such cases the ureau shoud ook
through the form to the substance. cub can not secure avodance
of ths ta for ts members by separatng purey membershp pay-
ments nto ther consttuent parts. Once the member decdes the
e tent of hs payments and f es the scope of hs membershp the
approprate charges become dues or membershp fees wthn the
meanng of the aw, and are ta abe.
It s therefore the opnon of ths offce that the payments of f ed
and defnte charges by a members of a partcuar cass or subcass
of the Cub, for cub prveges, are ta abe as cub dues or mem-
bershp fees.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
TITL . T ON DMISSIONS ND DU S. (1924)
T ON DU S.
Reguatons 43-11, rtce 5: Soca cubs. I -32-4737
Ct. D. 218
T ON DU S R NU CTS O 1921 ND 1924 D CISION O COURT.
Soca Cub Chabacteb or Organzaton.
The Traffc Cub of Chcago, whose purpose as stated In Its
artces of Incorporaton s to cutvate frendy and soca rea-
tons and promote better persona acquantance among ts mem-
bers, whch mantans cub rooms, havng a compete servce of a
knd that goes wth a fuy equpped soca cub where members
spend ther tme and whose actvtes embrace card payng, gof,
outngs, baseba, dances, dnner and uncheon partes, and varous
other soca features, 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.
Dstrct Court or the Unted States foe the Northern Dstrct of Inos,
astern Dvson.
dmond . emng, pantff, v. Mabe O. Renecke, Unted States Coector
of Interna Revenue, rst Dstrct of Inos, defendant.
une 20, 1930.
opnon.
Water C. Lndey, Dstrct udge: Upon revew of the evdence I am of
the opnon that the Traffc Cub of Chcago s a soca cub or organsaton
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
417
Iegs. 49(1921), rt. 96.
wthn the meanng of the ct that Its soca features were not subordnate
and merey Incdenta to the actve furtherance of a dfferent and predomnant
purpose, but were a matera purpose of the organzaton.
It w serve no good purpose to revew a of the evdence, but t s suf-
fcent to know that the cub mantaned cub rooms n the ote La Sae,
Incudng a man dnng room, a ounge, three commttee rooms, a ades
room, and wash room that n the ounge there were sofas and armchars,
brary tabe, pano, vctroa, rado, and bookcases contanng books. Shower
baths were supped, and opportuntes afforded for the payng of checkers
and cards uncheon was served reguary every day and dnner n the evenng.
Lades were gven cub prveges, e cept between the hours of 11 a. m. and
5 p. m. Durng the greater porton of the ta abe perod members payed
cards n the afternoon, havng a speca room set asde for ths purpose. Some
35 soca affars were promoted durng the ta abe perod, Incudng gof, out-
ngs, dances, an outng to Grand each, Mch., Chrstmas dnner. Thanksgvng
uncheon, dnner dances, and other smar entertanments. pparenty, many
of the so-caed open forum and busness meetngs were not devoted to any
busness of atrustc purposes, but were chefy soca entertanments. base-
ba team was outftted and represented, the cub durng the baseba season.
Recommendatons wore made that the board of governors present a 10(1 cup
for (he champon 41If payer. Whether ths recommendaton was adopted or
not does not appear from the mnutes. Permsson was gven to the ndoor
entertanment commttee to conduct card games. The sports and pastmes
commttee was n charge of outngs. The cub consdered at one tme the
formaton of a gee cub. The outng at Grand each, Mch., covered three
days. aseba games were payed between the Traffc Cub of Chcago and the
teams of varous other cubs. Partes were panned for the season for n-
stance, a harvest party n October, a card party n November, and a stag party
n December of one year. arous other features, a eadng to the concuson
that soca actvtes were a matera part of the cub s purpose, appear n the
record. The facts are convncng to the effect that a matera part of the cub s
purpose was as stated n ts artces of ncorporaton, to cutvate frendy
and soca reatons and to promote better persona acquantance among ts
members. The amendment to the artces of ncorporaton made for the
assessment of certan of the ta es s not suffcent to overcome the effect of
the facts bearng upon the ssue.
ccordngy, there w be a |udgment dsmssng the pantff s sut and n
bar of hs acton and for costs.
TITL . T ON TR NSPORT TION ND OT R
CILITI S. (1917 ND 1918)
T ON TR NSPORT TION R NU CTS O 1917 ND 1918 D CISION O
SUPR M COURT.
empton Servce Rendered to a State.
Where a vendor, who has engaged to se and dever umber
(needed for pubc brdges) to a county at a desgnated pont n the
county f. o. b. at a stated prce, shps the umber by ra to that
pont preparatory to there effectng the requred devery and for-
wards the bs of adng to the county, and the atter, conform-
aby to the vendor s ntenton, surrenders the bs of adng to
the carrer, pays ts transportaton charges, receves the umber
from It, deducts from the f. o. b. prce at destnaton the transpor-
taton charges pad to the carrer and remts the baance to the
vendor, the transportaton of the umber to the pace of devery
s not a servce rendered to the county but to the vendor, and
the transportaton s therefore not e empt from the ta under
secton 502 of the Revenue ct of 1917 and secton 500(h) of the
Revenue ct of 1918.
MPTIONS.
Reguatons 49 (1921), rtce 9C: Government
agences.
I -27-4687
Ct.D. 196
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Regs. 49(1921), rt. 96.
418
Supreme Coubt of the Unted States.
Wheeer Lumber, rdge Suppy Co. of Des Mones, Iowa, v. Unted State
of merca.
On certfcate from the Court of Cams.
May 26, 1930.
OPINION.
Mr. ustce an Devanteb devered the opnon of the court.
The Court of Cams has certfed to us a queston concernng whch It
desres nstructon for the proper dsposton of the above-entted cause now
pendng before t. Late n the ast term we dsmssed the certfcate In the
beef that the queston propounded embraced the whoe case, and so coud
not be answered consstenty wth the appcabe statute or wth the con-
sttutona mtatons on our ursdcton. ut before the term cosed we
vacated the order of dsmssa and hed the matter for further consderaton.
The facts shown n the certfcate are us foows: In the years 1918, 1919,
1920, and 1921 the pantff, a corporate deaer n brdge materas, engaged
to se and dever to each of severa countes n the States of Iowa and
Nebraska a quantty of umber, whch n each nstance was needed and us-d
by the purchasng county n the constructon or repar of brdges aong pubc
hghways wthn the county. The pantff was to shp the umber from
paces outsde the State to desgnated ponts wthn the purchasng county
and there dever the same to the county f. o. b. at stated prces. The pan-
tff fufed ts engagement as made. The shppng was done by raroad under
bs of adng cang for devery by the carrer to the pantff, or on ts
order, at destnaton. The pantff forwarded the bs of adng to the
county cerk and when the shpments reached ther destnaton the county
cerk, actng for the county and conformng to the pantffs ntenton, pre-
sented the bs of adng to the carrer, pad the transportaton charges,
accepted the umber, deducted the transportaton charges from the stpuated
f. o. b. prce, and remtted the baance to the pantff.
The edera revenue aws n force at the tme mposed on the transmrtaton
of freght by ra or water a ta of 3 per cent of the amount pad for that
servce requred that the ta be pad by the person payng for the servce
and authorzed the carrer to coect the ta on behaf of the Government
but decared that transportaton servce rendered to a State shoud be e empt
from the ta . (Revenue ct 1917, ch. 63, sees. 500, 501, 502, 503, 40 Stat.,
300. 314, 315 Revenue ct 1918, ch. 18, sees. 500 (a) and (h), 501(a), 502. 40
Stat., 1057, 1101, 1102, 1103.) In the admnstratve reguatons ssued under
those aws the e empton of transportaton servce to a State was construed
as ncudng such servce to her potca subdvsons, such us countes,
ctes, towns, and other muncpates.
No ta on the transportaton servce was demanded or pad when the trans-
portaton charges were pad. ut thereafter the coector of nterna revenue
assessed such a ta aganst the pantff and the pantff pad t under protest.
ppcaton was then made by the pantff to have the amount refunded
but the appcaton was dened by the Commssoner of Interna Revenue.
The sut n the Court of Cams was brought by the pantff aganst the
Unted States to recover the amount coected on the ta tfat e acton beng
assaed on two grounds: One that the transportaton servce was rendered
to the purchasng countes, and therefore was e empt from the ta , and the
other that, as the countes pad the carrer ts transportaton charges, the
abty, f any, for the ta dd not attach to the pantff.
The certfcate further shows that the court referred the case to a com-
mssoner, who, n accord wth the reference, reported speca fndngs of fact
and that both partes conceded the correctness and accuracy of the report.
In makng the certfcate the court accepted and summarzed the facts reperted
by ts commssoner.
The queston certfed, somewhat shortened n words but not atered In
substance, Is:
Where a vendor, who has engaged to se and dever umber needed for
pubc brdges to a county at a desgnated pont n the county f. o. b. at
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
419
Regs. 49(1921), rt. 98.
Stated prce, shps the umber by ra to that pont preparatory to there effect-
ng the requred devery and forwards the bs of adng to the county, and
the atter, conformaby to the vendor s ntenton, surrenders the bs of adng
to the carrer, pays ts transportaton charges, receves the umber from It,
deducts from the f. o. b. prce at destnaton the transportaton charges pad to
the carrer, and remts the baance to the vendor s the transportaton of the
umber to the pace of devery a servce rendered to the county (State)
wthn the meanng of the e emptng provsons of secton 502 of the Revenue
ct of 1917 and secton 500(h) of the Revenue ct of 1918, and wthn the
prncpe recognzed and apped n Panhande O Co. v. Msssspp (277
U. S., 218)
The statute provdng for certfcaton of questons by the Court of Cams
s secton 3(a) of the ct of ebruary 13, 1925 (ch. 229, 43 Stat., 936, 939),
whch reads:
That n any case n the Court of Cams, ncudng those begun under
secton 180 of the udca Code, that court at any tme may certfy to the
Supreme Court any defnte and dstnct questons of aw concernng whch
nstructons are desred for the proper dsposton of the cause and there-
upon the Supreme Court may gve approprate nstructons on the questons
certfed and transmt the same to the Court of Cams for ts gudance n the
further progress of the cause.
Ths s a new provson. Smar provsons have permtted partcuar ed-
era courts to certfy questons to ths court, but ths provson s the frst
gvng suc authorty to the Court of Cams.
There are two reasons why a certfcaton by that court whch embraces the
whoe case can not be entertaned by ths court. One s that to accept such a
certfcaton and proceed to a determnaton thereon, n advance of a decson
by that court, woud be an e ercse of orgna |ursdcton by ths court con-
trary to the consttutona provson whch prescrbes that ts |ursdcton
sn be appeate n a cases other than those affectng ambassadors, other
pubc mnsters and consus, and those In whch a Stae sha be a party.
( rtce III, secton 2, cause 2.) The other s that the statute permts a
certfcaton ony of defnte and dstnct questons of aw.
ven the restrcted certfcaton permtted by the statute nvokes acton
whch s rater e ceptona n the appeate fed. ut that such acton s
appeate s now setted. ary and ong contnued usage amountng to a
practca constructon of the consttutona provson requres that t be so
regarded.
Ia secton 6 of the ct of pr 29, 1802 (ch. 31, 2 Stat., 156), Congress made
provson for restrcted certfcatons from the crcut courts to ths court n
advance of a decson by the former. That provson remaned In force and
was gven effect for 70 years. Many certfcatons n both cv and crmna
cases were entertaned and deat wth under t. Indeed, t was the ony
mode n whch questons of aw n cases of severa casses coud be brought
to ths court durng that perod.
ut n e ercsng that |ursdcton ths court unformy rued that It coud
not entertan the certfcatons uness they were of dstnct questons of aw
and not of the whoe case, for otherwse t woud be assumng orgna |urs-
dcton wthhed from t by the Consttuton. (Whte v. Turk, 12 Pet, 238,
239 Unted States v. Stone, 14 Pet., 524, 525 Ncsmth v. Shedon, 6 ow., 41,
43 Wcbutcr v. Cooper, 10 ow., 54, 55 The ca, 7 Wa., 571, 573 Unted
Staes v. Pcrrn, 131 U. S., 55, 58 atmore f Oho R. R. Co. v. Interstate
Commerce Commsson, 215 U. S., 216, 224.)
nd n appyng the provson of 1802 and other ater provsons permttng
certfcatons, ths court, whe hodng, on the one hand, that t can not be
requred through certfcatons thereunder to pass upon questons of fact, or
m ed questons of aw and fact or to accept a transfer of the whoe case
or to answer questons of ob|ectonabe generaty whch nstead of presentng
dstnct propostons of aw cover unstated matters urkng n the record or
questons that are hypothetca and specuatve, has dstncty hed, on the
other hand, that the certfcaton of a defnte queston of aw s not rendered
ob|ectonabe merey because the answer may be decsve of the case, and aso
that the mportance or controng character of the queston certfed, f t be
a queston of aw and sutaby specfc, affords no ground for decnng to
accept the certfcaton. (Unted Sates v. Mayer, 235 U. S., 55, CO, and cases
cted.)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Regs. 47, rt. 13.
420
The practce and rungs ust descrbed are equay appcabe to certfca-
tons under the provson reatng to the Court of Cams.
Upon further consderaton of the present certfcate In the ght of that
practce and those rungs, we are of opnon that the certfcate s not open
to any vad ob|ecton and shoud be entertaned. The queston certfed a
a dstnct and defnte queston of aw and ts materaty s adequatey shown.
Nether n form nor n effect does t embrace the whoe case. It does not n-
cude any queston of fact, but, on the contrary, treats the facts as fuy
ascertaned and defntey states those out of whch t arses. No doubt, wth
these facts ascertaned, an affrmatve answer to the queston woud be de-
csve of the case. ut f the answer were n the negatve the case woud be
eft where another queston of aw rased by the pantff s petton and
mooted n the Court of Cams, but not certfed, woud need to be resoved
by that court before a |udgment coud be gven.
We thus are brought to the souton of the certfed queston. Counse for
the Government concede, and rghty so, that the e empton accorded to a
State by secton 502 of the Revenue ct of 1917 and secton 500(h) of the
Revenue ct of 1918 shoud be construed as e tendng to her countes, as s
done n the admnstratve reguatons. The Court of Cams, evdenty
entertanng ths vew of the e empton, nqures whether the transportaton
descrbed n the queston s a servce rendered to the comty wthn the mean-
ng of those sectons. The transportaton s had at the vendor s nstance and
s hs means of gettng hs umber to the pace of sae and devery. e en-
gages to dever f. o. b., not at the pace of shpment, but at the pace of
destnaton, whch s the pace of sae and devery. There s no devery,
and therefore no sae, unt after the transportaton s competed. Upon these
facts, rected n the queston, we are of opnon that the transportaton s not
a servce rendered to the county In the sense of the sectons cted, but Is a
servce rendered to the vendor. Concedng that the sectons are parts of a ta -
ng scheme, and assumng that they are ntended to recognze and fuy res ect
the consttutona mmunty of a State agency, such as a county, from edera
ta aton, we thnk they nether requre such transportaton to be regarded
as a servce to the county nor operate to e empt such transportaton from
the ta .
The ta s not ad on the sae nor because of the sae. It s ad on the
transportaton and Is measured by the transportaton charges. True, t ap-
pears that here the transportaton was had wth a vew to a defnte sae
but the fact remans that the transportaton was not part of the sae, but
premnary to t, and whoy the vendor s affar. (Unted States v. Norme,
239 U. S., 344, 348.) It foows that the ta on the transportaton can not
he regarded as a ta or burden on the sae. (Corne v. Coyne, 192 T . 8.,
418.)
s the ta s not ad on the sae or n any wse measured by t, the case
of Panhande O Co. v. Msssspp (277 U. S., 218), referred to n the queston
and reed on by the pantff, Is not n pont.
ueston answered No.
TITL I . CIS T S. (1918 ND 1921)
IMPOSITION O T .
Reguatons 47, rtce 13: Other automobes. I -32-4738
and motor cyces. Ct. D. 219
e cse ta es revenue acts of 1918 and 1921 decson of court.
Other utomobes Combnaton eabses and mbuances.
Motor-propeed combnaton hearses and ambuances are ta abe
under secton 900(2) of the Revenue cts of 1918 and 1921 as
other automobes at the rate of 5 per cent of the prce for
whch they are sod.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
421
Regs. 47, rt. 13.
Coubt of Cams of the Unted States.
The Sayers f Scov Co., a Corporaton, v. Unted States.
pr 30, 1930.
OPINION.
Wams, udge, devered the opnon of the court.
The pantff seeks to recover the sum of 2,434.84, whch t s aeged, waa
wrongfuy assessed and coected as e cse ta es under secton 900 of the
Revenue cts of 1918 and 1921. The ta es were eved and coected on the
manufacture and sae by the pantff, durng the perod from anuary, 1920, to
ebruary, 1923, of certan motor-propeed combnaton hearses and ambuances.
The queston to be determned s whether such motor-propeed vehces are
sub|ect to the 3 per cent ta mposed by subdvson (1), secton 900, n the
respectve Revenue cts of 1918 and 1921, or at the rate of 5 per cent ta
mposed by subdvsons (2) thereof.
The pantff durng the tme n queston was engaged n the busness of
manufacturng and seng hearses, ambuances, mousnes, passenger cars, and
combnaton hearses and ambuances.
The ta es n queston were eved on the manufacture and sae by the pantff
of combnaton hearses and ambuances, there beng no queston rased as to the
ta es assessed and coected on hearses and ambuances manufactured and sod
as such, respectvey.
The vehces on whch the ta es sought to be recovered were coected were
desgned and constructed n such manner that they were adaptabe for use, and
were used, by those to whom they were sod as ether hearses or ambuances, or
both hearses and ambuances.
Secton 900 of the Revenue ct of 1918 (40 Stat., 1122) provded:
That there sha be eved, assessed, coected, and pad upon the foowng
artces sod or eased by the manufacturer, producer, or mporter, a ta equva-
ent 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 motorcyces (ncudng tres, nner tubes, parts,
and accessores therefor, sod on or n connecton therewth or wth the sae
thereof), e cept tractors, 5 per centum .
(The provsons of secton 900 of the Revenue ct of 1921 are dentca.)
Pertnent artces of Reguatons No. 47, promugated by the Treasury Depart-
ment for the proper admnstraton of these cts, are:
rt. 11. utomobes: Scope of ta . n automobe truck, automobe wagon,
or other automobe s a sef-propeng vehce desgned to transport aong hgh-
ways and reads persons or property or both.
Where such vehce s capabe of transportng both property and persons,
the prmary use for whch t s desgned w contro as to whether t s ta abe
at 3 per cent under subdvson (1) as an automobe truck or automobe
wagon, or at 5 per cent under subdvson (2) as an other automobe.

rt. 12. utomobe trucks and automobe wagons. The ta s 3 per cent
of the prce for whch automobe trucks and automobe wagons are sod by
the manufacturer. It appes to automobe trucks and automobe wagons
prmary desgned or adapted for transportaton of property aong hghways
and roads, athough persons may ncdentay be transported at the same
tme, . utomobe hearses are ta abe as automobe trucks or auto-
mobe wagons.

rt. 13. Other automobes and motor cyces. The ta s 5 per cent of the
prce for whch such artces are sod by the manufacturer. It appes to auto-
mobes prmary desgned for carryng persons, athough property may nc-
dentay be transported at the same tme, as outned n artce 11, and to other
automobe chasss as defned n artce 15.
utomobes that are desgned and prmary adapted for the transportaton
of persons as dstngushed from property are ta abe as other automobes.
or e ampe, ambuances .
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Regs. 47, rt. 15.
422
Under artce 13 of Reguatons No. 47, ambuances are ta abe under subd-
vson (2) at the rate of 5 per cent of the saes prce. utomobe hearses
under artce 12 are ta abe at the rate of 3 per cent.
The pantff n ts returns made monthy for the perod from anuary, 1920,
to ebruary, 1923, Incusve, reported ts saes of such combnaton hearses and
ambuances as saes of hearses, and pad ta es thereon at the rate of 3 per cent.
The Commssoner ater hed that the proper rate on the saes of such vehces
s 5 per cent and assessed and coected the addtona ta es n queston.
The provsons of the reguatons that hearses are ta abe at a rate of 3 per
cent and ambuances at a rate of 5 per cent are reasonabe and seem to be a
correct nterpretaton of the statutes mposng these ta es. The pantff does
not contend that ambuances, as such, are not propery ta abe at the 5 per cent
rate. It does contend, however, that the vehces n queston can not be prop-
ery cassfed as ambuances. It Is urged that they are desgned, manufactured,
and sod prmary for use as hearses, and that ths s controng n determnng
the appcabe ta rate that ther use as ambuances s secondary and nc-
denta to the prmary purpose for whch they are ntended and, n fact, used
that as sod by the pantff they are hearses and not ambuances.
Unfortunatey for the pantff s contenton, It has stpuated (page 2, type-
wrtten record of the evdence) that the motor vehces n queston are comb-
naton hearses and ambuances. The court s bound by ths stpuaton and has
found the facts accordngy. They are manufactured and sod as combnaton
hearses and ambuances.
If they are ambuances, they are none the ess so because they can be and
are aso used for other purposes. These vehces as sod and devered by the
pantff to ts customers are competey equpped ambuances In every sense
of the word. efore they can be used as hearses t s necessary to remove the
accessores and ambuance equpment wth whch they are provded when de-
vered to purchasers.
We thnk the decson of the Commssoner that such motor-propeed com-
bnaton hearses and ambuances are propery sub|ect to the ta at the rate of
5 per cent under the provsons of the Revenue cts of 1918 and 1921 s correct.
The pantff s petton shoud be dsmssed. It s so ordered.
CIS T S R NU CTS O 1918 ND 1921 D CISION O St P M
COURT.
1. Pabts Defnton.
part for an automobe truck, automobe wagon, other
automobe or motor cyce, wthn the meanng of secton 900(3) of
the Revenue cts of 1918 and 1921, Is any artce desgned or
manufactured 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 s not such a commerca com-
modty as woud ordnary be sod for genera use and whch s
prmary adapted ony for use as a component part of such vehce.
2. ccessores Defnton.
n accessory for an automobe truck, automobe wagon,
other automobe or motor cyce, wthn the meanng of secton
900(3) of the Revenue cts of 1918 and 1921, s any artce de-
sgned to be attached to or used n connecton wth such vehce
to add to ts utty or ornamentaton and whch s prmary
adapted for use n connecton wth such vehce whether or not
essentn to Its operaton.
8. Component Parts Ta abty.
Component parts of artces ta abe under secton 900(3) of
the Revenue cts of 1918 and 1921, whch parts are specay
desgned, manufactured, and sod for use on such artces and are
not adapted to any other purpose or use, and have reached such a
stage of manufacture that they are adapted for ready repacement
and use, are ta abe under those subdvsons when sod separatey.
UTOMO IL P RTS ND CC SSORI S.
Reguatons 47, rtce 15: Defnton of
parts.
I -32-4742
Ct. D. 220
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
423
Regs. 47, rt. 15.
Supreme Coubt op the Unted States. Nos. 127, 275, 350, 351, 352
Unversa attery Co. et a. v. The Unted States.
Certorar to the Court of Cams.
May 26, 1930.
OPINION.
Mr. ustce an Devanter devered the opnon of the court. t
These are cases brought aganst the Unted States to recover ta es pad under
secton 900 of the Revenue cts of 1918 and 1921 (ch. 18, 40 Stat., 1122 ch.
136, 42 Stat., 291), upon saes of artces whch the revenue offcers regarded
as parts or accessores for motor vehces the sue of whch s sub|ected to a
ta by subdvsons 1 and 2 of that secton. In each case the facts were found
specay and |udgment was gven for the defendant. In a ths court granted
certorar.
We pass the detas reatng to protests, cam to a refund, and admnstratve
dena of those cams, and come drecty to the terms of the secton under whch
the ta es were e acted. It provdes:
Sec. 900 That there sha be eved, assessed, coected, and pad upon
the foowng artces sod or eased by the manufacturer, producer, or mporter,
a ta equvaent to the foowng ercentages 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 motorcyces (ncudng tres, nner tubes, parts,
and accessores therefor, sod on or n connecton therewth or wth the sae
thereof), e cept tractors. 5 per centum
(3) Tres, nner tubes, parts, or accessores, for any of the artces enumer-
ated 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.
The camants do not manufacture or se any of the vehces enumerated n
subdvsons 1 and 2, but each does manufacture and se the artce on saes
of whch the chaenged ta was assessed and coected. These saes were a
to persons other than a manufacturer or producer of any of the enumerated
vehces. In each case the queston presented s whether the artce sod s a
part or accessory for such a vehce wthn the meanng of subdvson 3.
Takng the three subdvsons together, t s apparent that the words parts
and accessores have the same meanng n a that they comprehend artces
havng some reaton to the enumerated motor vehces and that t s because
of that reaton that the ta s ad on ther sae.
Subdvsons 1 and 2, wth the ntroductory provson, contempate that parts
and accessores may be sod aong wth the vehce by the manufacturer of the
atter, and show that where ths s done the ta Is to be pad by the manu-
facturer of the vehce. Subdvson 3, wth the ntroductory provson, con-
tempates that parts and accessores may be sod separatey from the vehce
by the manufacturer of the former to others than a manufacturer of the atter,
as where the sae s for repacement purposes, and shows that the ta on such a
sae Is to be pad by the manufacturer of the parts and accessores. nd t s
Impct n the three subdvsons, wth (he ntroductory provson, that where
parts and accessores are sod by ther manufacturer to a vehce manufacturer
to be resod aong wth the vehce by the atter, the sae by the former Is to be
ta free, whe the resae by the atter, when ncdenta to the sae of the vehce,
s to be ta ed aganst the atter, as aready ndcated.
Thus the scheme of ta aton emboded n these provsons centers around
the motor vehces enumerated theren. Ther sae s the prncpa thng that
Is ta ed, and the sae of parts and accessores for such vehce s ta ed
because the parts and accessores are wthn the same fed wth the vehces and
used to the same ends.
The admnstratve reguatons ssued under secton 9(10 unformy have con-
strued the term part n that secton as meanng any artce desgned or
manufactured for the speca purpose of beng used as, or to repace, a com-
ponent part of such vehce, and whch by reason of some characterstc s not
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Regs, 47. rt. 15.
424
such a commerca artce as ordnary woud be sod for genera use, but a
prmary adapted for use as a component part of such vehce. The regua-
tons aso have construed the term accessory as meanng any artce de-
sgned to be used n connecton wth such vehce to add to Its utty or orna-
mentaton and whch Is prmary adapted for such use, whether or not essen-
ta to the operaton of the vehce.
Ths constructon of those terms has been adhered to n the Interna Revenue
ureau for about 10 years, and t ought not to be dsturbed now uness t be
pany wrong. We thnk t Is not so, but s an admssbe constructon. Cer-
tany t woud be unreasonabe to hod that artces equay adapted to a varety
of uses and commony put to such uses, one of whch s use n motor ve-
hces, must be cassfed as parts or accessores for such vehces. nd t
woud be aso unreasonabe to hod that artces can be so cassfed ony
where they are adapted soey for use n motor vehces and are e cu-
svey so used. (Magone v. Wedner, 159 U. S., 555, 559.) We thnk the vew
taken n the admnstratve reguatons s reasonabe and shoud be uphed.
It s that artces prmary adapted for use In motor vehces are to be regarded
as parts or accessores of such vehces, even though there has been some
othar use of the artces for whch they are not so we adapted.
It remans to appy that vew to the cases n hand.
In No. 127 the camant was ta ed on the sae of storage batteres to dvers
deaers. In the petton t was aeged that batteres of the type sod were not
prmary adapted for use n motor vehces, but on the contrary were, and ong
had been, used for varous other purposes partcuary named. Ths was a
matera ssue but the court, athough fndng that the batteres were, and had
been for severa years, used for the purposes aeged, made no fndng as to
whether they were prmary adapted for use n motor vehces or were equay
adapted for the other uses named. There shoud have been a defnte fndng
on the matter. The other fndngs are such that, n vew of that omsson, the
|udgment shoud be reversed and the case remanded for compete fndngs and
fcuch further proceedngs as may be approprate.
In No. 275 the artces sod were storage batteres. There s a speca fndng
that the batteres were of a type specay sutabe for use on automobes as
repacements and were not adapted to any other prmary purpose or use. Wth
ths matter of fact so found the |udgment shoud be affrmed.
In No. 350 the ta was on saes of gascoators, a devce used on Interna com-
buston engnes to stran drt, water, and foregn matter from the gasone
before t reaches the carburetor. The petton aeged that gascoators were
r,ot parts or accessores of motor vehces but commerca artces sod for gen-
era use and used on varous nterna combuston engnes other than those n
motor vehces. Ths was a matera Issue. The fndngs make no defnte
response to t but eave the matter where confctng nferences may be drawn
respectng t. ecause of ths, the |udgment shoud be reversed and the case
remanded for defnte and compete fndngs and such further proceedngs as
may be approprate.
In No. 351 the artces sod were gears, fe be shafts and fe be housngs,
a beng repacement parts for speedometers used on motor vehces. It s
conceded that speedometers are accessores but t Is nssted that parts of a
speedometer can not be such. We thnk they can. The fndng s that these
parts were specay desgned, manufactured, and sod for use on automobes
and are not adapted to any other purpose or use. It s not questoned that
w-hen sod they had reached such a stage of manufacture that they were adapted
for ready repacement and use so It Is not as f the process of manufacture
were not compete. speedometer conssts of dstnct and separate parts, and
we perceve no reason why one or more of these when manufactured and sod
for the purpose shown by the fndng shoud not take the same cassfcaton as
speedometers. The |udgment shoud be affrmed.
In No. 352 the ta was ad on saes of bars, brackets, and fttngs for use as
repacement parts for bumpers for automobes. They were desgned, manufac-
tured, and sod for such use and were not adapted for any other. It Is sad that
whe bumpers are accessores, these parts can not be so regarded. We thnk
they are on the same pane as the parts of speedometers |ust deat wth. The
udgment shoud be affrmed.
In Nos. 127 and 350 |udgments reversed and cases remanded for further
fndngs.
In Nos. 275, 851, and 352 |udgments affrmed.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
ST T T RULINGS.
TITL III. ST T T . (1926)
PROP RTY LD OINTLY.
Reguatons 37, rtce 27 Reguatons 63, bt- I -28-4694
ce 23: Property hed |onty or as tenants by the T. D. 4293
entrety.
estate ta property hed as |ont tenants and as tenants by the
entrety.
rtce 27, Reguatons 37 (revsed anuary, 1921), and artce
23, Reguatons 63, as amended by Treasury Decson 3951 C. .
I-1, 314 , amended.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
rtce 27 of Reguatons 37 (revsed anuary, 1921), and artce
23, Reguatons 63, as amended by Treasury Decson 3951, are
hereby amended by strkng out the foowng sentence:
Ths provson appes ony to a |ont tenancy, or a tenancy by the entrety,
created subsequent to the passage of the Revenue ct n force and effect at
the tme of the decedent s death.
Robt. . Lucas,
Commssoner of Interna Revenue.
pproved uy 3, 1930.
. W. Meon,
Secretary of the Treasury.
Reguatons 68 and 70, rtce 22: Property I -28-4695
hed |onty or as tenants by the entrety. T. D. 4294
ST T T PROI RTY hed as |ont tenants and tenants by the
NTIR TY.
rtce 22 of Reguatons 68, as amended by Treasury Decson
4248 C. . II-2, 358 , amended.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
The ast sentence of artce 22 of Reguatons 68, added thereto by
Treasury Decson 4248, s amended to read as foows:
The statute e tends to ont ownershps wheren the rght of survvorshp
e sts, regardess of when such |ont ownershps were created.
Robt. . Lucas,
Commssoner of Interna Revenue.
pproved uy 3, 1930.
. W. Meon,
Secretary of the Treasury.
85942 31 28 (425)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Regs. 70, rt. 10. 426
Reguatons 70(1929), rtce 22: Property I -28-4696
hed |onty or as tenants by the entrety. T. D. 4295
ST T T PROP RTY LD S OINT T N NTS ND T N NTS Y T
NTIR TY.
rtce 22 of Reguatons 70 (1929 edton) amended.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
rtce 22 of Reguatons 70 (1929 edton) s hereby amended by
substtutng n eu of the frst sentence thereof the foowng:
The foregong provsons of the statute e tend to |ont ownershps wheren the
rght of survvorshp e sts, regardess of when such |ont ownershps
created.
Robt. . Lucas,
Commssoner of Interna Revenue.
pproved uy 3, 1930.
. W. Meon,
Secreta y of the Treasury.
GROSS ST T .
Reguatons 70, rtce 10: Character of nter- I -33-4750
ests ncuded. G. C. M. 7773
The husband, a resdent of Te as, ded eavng a w by whch
he devsed to hs wfe and two chdren hs entre separate estate
together wth the entre communty estate owned by hmsef and
wfe. The wfe eected to take under the w.
ed, that the nterest whch the wfe has, under the aws of
Te as, n the communty estate s not a part of the deceased hus-
band s gross estate wthn the meanng of secton 302(a), Revenue
ct of 192G, notwthstandng the wfe eected to take under the
w.
In the atter part of the year 192G, , a resdent of Te as, ded
testate, beng survved by hs wfe, , and two chdren, C and D.
t the tme of hs death owned propert whch consttuted hs
separate estate under the aws of Te as, and he and hs wfe, ,
owned other property whch consttuted communty property.
The pertnent provsons of s w, n whch he named , C, and
D as benefcares, are as foows:
I do hereby drect that a my |ust debts, funera e penses, and e penses
of my ast sckness be pad by my e ecutr out of my estate as soon as
practcabe nfter my decease.
1 do hereby gve, devse and bequeath to the sad , my sad wfe, and to
my chdren, C and D, share and hnre ake, a the rest and resdue of my
estate, rea, persona and m ed and of whatsoever knd and wherever stuate,
that I may own or n any way be entted to or nterested n at the tme of my
decease, ncudng the entrety of the communty property of mysef and the
sad . not merey my Interest theren, and a my separate property and
estate, to be thers n equa shares n fee smpe forever.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
427
Regs. 70(1929), rt. 27.
In the event the sad does not eect to take under ths w, then I do
hereby gve, devse and bequeath a of my separate property and estate and
a of my Interest In the communty property and estate of mysef and my
sad wfe, , to my chdren, C and D, share and share ake In fee smpe
forever.
eected to take under the w.
The queston presented s whether the nterest whch had n
the communty estate under the aws of Te as and whch was ds-
posed of n the w s, under the provsons of secton 302(a) of the
Revenue ct of 1926, a part of s gross estate.
queston smar to the one here nvoved was consdered by the
Unted States Dstrct Court for the Northern Dstrct of Te as n
ncent v. Unted States and Underwood v. Reed. The ncent case
was tred n the ort Worth dvson, and |udgment was rendered
for the pantff on anuary 24, 1928. The Underwood case was
tred n the Daas dvson, and |udgment was rendered n favor of
the pantff on March 5, 1929. In each of those cases the court
hed wthout wrtten opnon that the nterest of the wfe n the com-
munty estate was not a part of her deceased husband s gross estate.
The Government dd not appea from those decsons.
In vew of the court s decsons n the ncent and Underwood
cases, whch are appcabe to the nstant case, t s the opnon of
ths offce that the vaue of s nterest n the communty property
s not a part of s gross estate wthn the purvew of secton 302(a)
of the Revenue ct of 1926, notwthstandng the fact that she eected
to take under the w.
rungs of ths offce whch are n confct wth ths memo-
randum are hereby revoked.
C. M. Charest,
Genera Counse, ureau of Interna Revenue.
INSUR NC .
Reguatons 70(1929), rtce 27: Insurance re- I -32-4744
cevabe by other benefcares. T. D. 4296
ST T T INSUR NC .
rtce 27, Reguatons 70 (1929 edton), amended.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
rtce 27 of Reguatons 70 (1929 edton) s hereby amended by
strkng out ts second paragraph.
Robt. . Lucas,
Commssoner of Interna Revenue.
pproved ugust 6, 1930.
Water . ope,
ctng Secretary of the Treasury.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Regs. 63, rt. 44.
428
TITL I . ST T T . (1921)
D DUCTIONS PROP RTY PR IOUSLY T D.
Reguatons 63, rtce 44: Deducton of the
vaue of transfers ta ed wthn fve years.
I -34-4760
Ct.D.228
ST T T R NU CT O 1021 D CISION O COURT.
Deducton Pror Ta ed Property.
Where amounts deductbe from the gross estate of a decedent
under paragraphs and 3 of secton 403(a) of the Revenue ct
of 1921 are pad from property of a pror decedent prevousy
ta ed, athough e cusve of such property there was at a tmes
suffcent persona property n the decedent s estate avaabe to
the e ecutors for payment of a such amounts, the deducton
aowabe under paragraph 2 of sad secton for prevousy ta ed
property shoud not bo reduced on account of deductons aowabe
under paragraphs 1 and 3.
Dstrct Court of the Unted States for the Northern Dstrct of Ca-
forna, Southern Dvson. t Law.
ohn Parrott, |r., Mary my Parrott Wams, and dward . Tobn, as -
ecutors of the hast W and Testament of ohn Parrott, Deceased, pan-
tffs, v. The Unted States of merca, defendant.
M MOR NDUM OPINION ON ORD RING UDGM NT ON SP CI L INDINGS OR PL INTI S.
St. Sure, Dstrct udge: ohn Parrott, the mmedate decedent, heren-
after caed decedent, ded testate anuary 20, 1918. s mother, bby M.
Parrott, referred to hereafter as pror decedent, ded, testate, October 6, 1917,
decedent beng a benefcary under her w resutng n hs Inhertance of rea
and persona property to the vaue of 519,919.52. Ths vaue formed part of
the gross estate of the pror decedent and edera ta pad thereon, and aso
formed part of the gross estate of decedent. In addton to the nhertance
so vaued, the other gross estate of decedent, consstng entrey of persona
property, was vaued, on audt of the Interna Revenue Commssoner, at
1,428,596.15.
The edera estate ta return by the e ecutors of decedent, showng net
estate 1,137,984.10, was accompaned by payment of ta of 98,558.09. The
audt of the Commssoner found a net estate of 1,378,596.15, wth an add-
tona ta of 28,873.45. pr 23, 1923, the e ecutors pad 21,880.36 thereof,
and the baance, 6,993.09, wth 1,109.63 nterest ( 8,102.72), under protest,
November 25, 1924, wth cam for abatement and cam for refund thereof as
ta es egay coected. These cams were fnay dened by the Comms-
soner March 0, 1925, by etter to the e ecutors. Ths sut resuted.
The ncrease of the net estate determned by the Commssoner and resut-
ng In addtona ta of 28,873.45 was n part made through the reducton
by hm of the deducton of 519,919.52, camed as pror ta ed property de-
ductbe under paragraph 2, secton 403(a), Revenue ct of 1921 (42 Stats.
L., 279) by the amount of 79,484.45. made up of admnstraton e penses,
etc.: 76,984.45, deductbe under paragraph 1, secton 403(a) and 2,500,
chartabe bequest deductbe under 403(a), paragraph 3, of the same ct. on
the assumpton that the vaue of the deducton ( 519,919.52) under paragraph
2, secton 403(a), was reduced as aready deducted under paragraphs 1 and
3 of subdvson (a) of ths secton (sec. 403 (a), par. 2) because the technca
utmate source fund for rembursement to the e ecutors of advances for the
payment of admnstraton e penses, chartabe bequest, etc. ( 79,484.45), was
September 7, 1929.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
429
Regs. 63, rt. 44.
derved from the proceeds of mortgage of pror ta ed rea property by the hers
of decedent.
cusve of the pror ta ed property, vaued at 519,919.52, there was at a
tmes n the genera estate, and aso u the resdue of the estate, persona prop-
erty of vaue of more than a mon doars, avaabe to the e ecutors for pay-
ment of a these charges and n e cess of the determned vaue of pror ta ed
property and the property and money necessary to satsfy the specfc bequests
under the w.
cept that here we have property and not funds n bank, and e cept that
the pror ta ed property was actuay and techncay the source fund for pay-
ment, It seems to me that the stuaton s dentca wth that n Seaboard
Natona ank, ecutor, v. Commssoner (11 . T. ., 1386 at 1396), and that
there resuted here, as there, no actua reducton of vaue aready deducted
under paragraphs 1 and 3 of subdvson (a) of ths secton of
pror ta ed property under paragraph 2, secton 403(a), ct of 1921, by the
whoe or any part of 79,48-1.45.
owever, the e ecutors conceded and pad wthout protest part of the ta es
resutng from the Increase of the net estate by the reducton of pror ta ed
property, n the proporton (26.68285 per cent) whch the pror ta ed property
bore to the entre estate of decedent, on ther appcaton of the Caforna
statute (1516 Code of Cv Procedure) that a the property of a decedent
sha be chargeabe wth the payment of the debts of the deceased, the e penses
of admnstraton e cept as otherwse provded n ths code and n
the cv code. There sha be no prorty as between persona and
rea property for the above purposes. ssumng that generay ther theory
was correct but that the partcuar statutes appcabe were 1560 and 1562, Code
of Cv Procedure, as construed n state of Truver (145 Ca., 508) and state
of Pabb (200 Ca., 252 at 259), an order ( pr 9, 1929) was made for further
proof by pantffs as to proper funds appcabe and avaabe for the payment
of e penses Invoved n ths proceedng, as such appcaton and avaabty
have been determned by the State court In ths or anaogous estate proceedngs
under w, wth partcuar regard to the status of the pror ta ed property as
comprsng soey or n part such proper fund. Such proof conssted In a cert-
fed copy of the w of decedent and memorandum as to specfc bequests and
resdue In estate of ohn Parrott, deceased, the atter beng a compaton of
fgures from the Commssoner s audt whch formed part of the agreed state-
ment of facts. Ths proof showed, on the theory of proportonate abty, a
technca reducton of the pror ta ed property fang Into the resdue of the
estate of decedent of 28.96 per cent of the admnstraton e tenses, etc. ( 76,-
984.45), or 22,294.70 but no reducton on account of the 2,500 chartabe
bequest, because payabe out of the genera funds of the estate under 1357, Cv
Code, paragraphs 2 and 5, and resuted n the fndng of 7,549.04 as e cess ta
and Interest nstead of the 8,102.72 here sued for after pantffs concesson
and payment of the 26.68285 per cent of the addtona ta mposed by the
Commssoner as prevousy set forth.
ut both theores proceed on the abty of the pror ta ed property as
part of the decedent s estate for payment of the e penses and bequest Invoved,
proper on the determnaton by settement of account or dstrbuton under
admnstraton or probate, to affect the resutng shares to be taken by hers
or dstrbutees. No such queston s here at Issue. We are attemptng to
appy a ta ng statute whch aows certan casses of e pendtures as deduc-
tons to an estate before sub|ectng the transfer of the net estate to ta and
at the same tme prevent any part of the same estate from beng sub|ected to
the same knd of ta wthn a 5-year perod, and to carry out the ntent
of Congress that admnstratve e penses shoud be aoced as deductons and
that pror ta ed property shoud not agan be ncuded n the net estate of
the second decedent. ( ohn . rchbod, ecutor, 8 . T. ., 919 at 928.)
Ta ng statutes shoud be nterpreted from a reasonabe vewpont (Ooud v.
Goud, 245 U. S., 151 Rodcnbough v. . S., 25 ed. (2d), 13), and substance
rather than form s to be regarded In ther appcaton (Unted States v.
Phes, 257 U. 8., 156 T. D. 3270, C. . 5, 37 , and cases cted.)
If the vaue of decedent s estate whch came nto the bunds of the
e ecutors at the tme of decedent s death was suffcent n amount to cover a
e pendtures deductbe under paragraphs 1 or 3, a doube deducton woud not
resut from the aowance under paragraph 2 of an amount equa to the vaue
at whch the pror ta ed property was ncuded n the gross estate of the
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Regs. 63, rt. 27.
430
pror and present decedents. The statute deas wth vaues and not wth
specfc earmarked peces of property. Seaboard Natona ank of New York,
ecutor, 11 . T. ., 1386 at 1396.) ere It was shown that there was ampe
vaue n the e ecutors hands at the tme of decedent s death to meet many
tmes over a the e penses nvoved as we as to satsfy the specfc bequests
under the w, and wth ths I thnk the e ecutors have proved the estate
entted to the deducton.
I am of the opnon that the e ecutors were entted to the deducton of
the found vaue of the pror ta ed property under paragraph 2, and to the
further deducton of the fu nmount of the admnstraton e penses, etc.,
under paragraphs 1 and 3, secton 403(a), ct of 1981.
Pantffs may therefore have |udgment as prayed for, wth Interest at
6 per cent from November 25, 1924, to |udgment, and proper costs of sut on
speca fndngs to be fed. (Revenue ct of 1928, sec. 615 udca Code, 152
udca Code, 177b.)
TITL I . ST T T . (1918)
GROSS ST T INSUR NC .
Reguatons 03, rtce 27: Ta abe nsurance. 1 3-4814
Ct. D. 241
ST T T R NU CT OP 1918 D CISION O COURT.
1. Gross state Proceeds of Insurance Pad to Desgnated
enefcary Poces Issued efore any edera state
Ta ct.
Subdvson (f) of secton 402 of the Revenue ct of 1918 re-
qures the ncuson n the vaue of the gross estate of proceeds
of poces of Insurance, n e cess of the e empton theren pro-
vded, taken out by the decedent upon hs own fe pror to the
enactment of any edera estate ta ct n whch a desgnated
benefcary s named and the power to change the benefcary re-
served to the nsured durng hs fetme.
2. Decson paned.
The decson of the Supreme Court (Letcehm v. rck, 268
C. S., 238 (T. D. 3715) C. . I -1, 322 ) e paned.
Unted States Crcut Court of ppeas for the Thrd Crcut.
D. . ener, Coector of Unted States Interna Revenue for the Twenty-
thrd Dstrct of the State of Pennsyvana, appeant, v. ot C. Gran4n,
dmnstrator D. . N., 0. T. . of the Last W of Wam ames Grandn,
Deceased, appeee.
ppea from te Dstrct Court of the Unted States for the Western Dstrct of
Pennsyvana.
September 26, 1930.
OPINION.
Davs, Crcut udge: The queston n ths case s whether or not two n-
surance poces taken out n hs fetme by the decedent, Wam . Grandn,
one for 10,000, ssued December 31, 1894, and the other for 250,000. ssued
December 30, 1906, shoud be ncuded n the gross estate of the nsured, who
ded December 30, 1920, and shoud be ta ed under the provsons of secton
402(f) of the Revenue ct of 1918, whch reads as foows:
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

G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
431
Regs. 63, rt. 27.
(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 Insurance under poces taken out by the decedent upon hs own fe.
There were two other poces taken out by hm on hs fe for 20,000 each,
ssued, respectvey, on uy 14, 1919, and uy 30, 1919. arret C. Grandn,
wdow of the Insured, was the benefcary named n these poces, and she
receved from a four of them 300,000. cudng the statutory e empton
of 40,000 aowed to her by the statute, the coector ncuded the remander
of 260,000 n the gross estate and assessed and coected a ta of 5,210.26
In consequence. cam for refund was fed, but the Commssoner of Interna
Revenue dd not take any acton on the cam for s months and ths sut
was then brought for the recovery of the ta .
The ta payer contends that snce these two poces were ssued before the
ct was passed, one n 1894 and the other n 1906, they are not ta abe under
the aw ad down n the case of Lev yn v. rck (268 U. S., 238 T. D. 3715,
C. . I -1, 322 ). In that case, n the dstrct court, the tra |udge hed that
a ta on the net proceeds of the poces (the w provdng that a nhertance
dutes and ta es shoud be pad out of the capta of hs resduary estnte)
was n effect takng property wthout due process of aw and so was unconsttu-
tona. The Supreme Court, after speakng of the serous questons and doubts
n dscussng the mts of the powers of Congress n such cases, sad:
Not ony are such doubts avoded by construng the statute as referrng
ony to transactons takng pace after 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 Impose an une -
pected abty that If known mght have nduced those concerned to avod t
and to use ther money In other ways. (Schwab v. Doye, 258 U. S., 529, 534.)
Ths case and the foowng ones (Unon Trust Co. v. Warde, 258 U. S., 537
T. D. 3338, C. . 1-2, 310 Levy v. Warde, 258 U. S., 542 and no v.
Mc gott, 258 U. S., 546) go far toward decdng the one now before us. They
aso ndcate that the Revenue ct of 1924 (ch. 2, sec. 302(h), 43 Stat., 250,
305), makng (g) (the equvaent of (f) above) appy to past transactons,
does not hep but If anythng hnders the coector s constructon of the pres-
ent aw. (Smetanka v. rst Trust f Savngs ank, 257 U. S., 602 T. D. 3321,
C. . 1-1, 210 .)
Ths decson Indcates that n nsurance poces, at east, under sectons 401
and 402 of the Revenue ct of 1918, the test of ta abty depends upon
whether the pocy was Issued before or after the ct was passed. The
statute referrng ony to transactons takng pace after It was passed does
not Impose a ta on the proceeds of poces ssued before t was passed.
Not ony does ths seem to be the test from the anguage used by the Supreme
Court n the rck case, but the facts of that case make ths perfecty cear.
There were 11 poces on Mr. rck s tfe, aggregatng 474,629.52. t the
tme of hs death 4 of these poces were payabe to Mrs. rck and 7 to hs
daughter. The frst was taken out n 1874 and the ast In 1901. Some of them
were orgnay made payabe to Mr. rck s estate, wth no provson for
change of benefcary, but were subsequenty assgned to Mrs. rck and Mss
rck wthout reservaton of power to revoke the assgnment. These doubtess
vested absoutey In Mrs. rck and Mss rck. Others were assgned to Mss
rck wth power reserved to revoke the assgnment. It Is evdent, therefore,
that n those n whch the power to change the assgnment was reserved, Mr.
rck retaned the power to contro the benefcary. The transfer n these dd
not actuay take pace unt the death of Mr. rck, for an outstandng power
resdng e cusvey n the Insured or donor to reca a gft after It Is made
or to change the benefcary n an nsurance pocy s a mtaton on the gft
or the nterest whch the benefcary has n the pocy whch makes the transfer
ncompete as to the donor as we as to the donee. So ong as the power to
change the benefcary In an Insurance pocy remans In the nsured, the poss-
bty of ts e ercse remans and the transfer s ncompete. In other words,
the transfer n such case s not competed and does not take pace unt the
reserved power Is e ercsed or termnated by the death of the Insured, when
a the rghts of the desgnated benefcares pass to them freed from the poss-
bty of the e ercse of that power. It Is upon ths transfer, at death or other
termnaton of the power, that the ct operates. ( uen v. Wsconsn, 240
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Regs. 63, rt. 27.
432
U. S., 625 Satonsta v. Satonsta, 276 U. S., 260 Chase Natona ank v.
Unted States, 278 U. S., 327, 334 Ct. D. 40, C. . III-1, 308 .)
In the case of Renecke v. Northern Trust Co. (278 U. S., 339 T. D. 4261,
C. . III-1, 305 ), seven trusts were created. Two of them, caed the two
trusts, as dstngushed from the other fve desgnated as the fve trusts,
were created n 1903 and 1910, respectvey, ong before the Revenue ct of
1921 was passed. The fve trusts were created n 1919, two years before
that ct was passed. In the two trusts, the settor reserved n hmsef
aone the power of revocaton of the trusts. In the fve trusts, the power
was reserved to ater, change or modfy the trusts, but t was to be e er-
csed by hmsef and others whose nterests were adverse to hs. These fve
trusts, because of the adverse nterests, the court hed, for a practca pur-
poses, had passed as competey from any contro by the decedent whch mght
nure to hs own beneft as f the gft had been absoute.
The settor ded wthout havng revoked the two trusts or wthout havng
modfed any of the fve trusts, e cept one n an mmatera manner. of
them were created before the Revenue ct of 1921, under whch the ta was
mposed, was passed, and a of them were ake so far as ta abty Is con-
cerned e cept the two trusts reserved n the settor aone the power to revoke
and the fve trusts reserved that power n hm and others. The Supreme
Court hed that the transfer n the fve trusts was compete when they were
created and took effect then and so they were not ta abe. ut the transfer
n the two trusts was not compete unt the settor ded on May 30. 1922, and
so they consttuted part of hs gross estate and were propery ta ed. The test
of ta abty of these trusts was made to depend, not upon whether or not the
trusts were created before or after the passage of the ct, but upon whether
or not the settor had so retaned contro of them as to make them part of hs
gross estate at the tme of hs death, and ths he had done n the two trusts
by reservng n hmsef aone power to revoke them.
The decson n ths case s controng n the case at bar uness te aw as
apped to nsurance poces dffers from that as apped to trusts. oth of
them, trusts and nsurance poces, are ta ed under the same secton of the
statute, but under dfferent subsectons. In no case has the Supreme Court sad
or even ntmated, so fur as we have been abe to dscover, that a dfferent
prncpe appes n the ta aton of trusts from that apped to (he ta aton of
nsurance poces, under secton 402 of the ct n queston.
It Is true that the ony practca dfference between the facts of the Renecke
case and the rck case s that, n the rck case, nsurance poces, and n the
Renecke case, trusts, were nvoved. In the rck case, there were 11 nsurance
poces n e stence at the tme of hs death. In 8 of those, Mr. rck had no
power to change the benefcary or assgnment, but n 3 of them he had that
power, and thus mantaned hs power of contro over those unt hs death.
In the- Renecke case, there were 7 trusts. In 5 of them, the decedent had no
power to ater, change or modfy when he ded, but n 2 of them he had
power to do so, and because he had reserved such power, the Supreme Court hed
that these 2 were part of hs gross estate and were ta abe under the ct, but
that the 5, n whch such power was not reserved, were not part of hs gross
estate and were not ta abe. owever, n the rck case, the fact that power
had been reserved to revoke the assgnment n 3 poces seems not to have
been brought to the attenton of the Supreme Court and the case was dsposed
of wthout reference to ths queston, but n the cases of the Chase Natona
ank and Renecke, supra, the effect of the reservaton of power was drecty
n ssue and the cases turned on ths pont.
The case at bar, therefore, s controed by those cases. In the two poces
n queston, athough ssued before the ct was passed, the nsured reserved the
rght to change the benefcary, and so the transfers dd not take pace unt
Mr. Grandn s death. ccordngy they consttuted a part of hs gross estate
and were ta abe.
The |udgment of the dstrct court Is reversed and a new tra granted.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
433
Regs. 37, rt. 41.
GROSS ST T D DUCTIONS.
Reguatons 37, rtce 41: dmnstraton
e penses.
I -47-4844
Ct. D. 250
e8tate ta revenue acts of 1918 and 1024 decson of court.
1. Gross state Deducton dmnstraton penses.
n amount pad out of Income to e ecutors for servces In the
management of a trust estnte created by the decedent In hs w
Is not deductbe under secton 403 of the Revenue ct of 1918 as
admnstraton e penses n computng the net estate sub|ect to ta .
2. Refund Lmtaton dmnstraton penses.
Under secton 3228 of the Revsed Statutes as amended e ecutors
have four years from the date of the payment of ta n whch to
secure the aowance and payment of such admnstraton e penses
as are proper deductons from the gross estate and to present re-
fund cams for the aowance of the same and f they are not
abe to cose ther estates wthn that perod the e penses ncurred
and pnd after that perod can not be camed as the bass for
a refund.
Dstrct Court of the Unted States for the Western Dstrct of
Pennsyvana.
rthur . raun and George C. Moore, ecutors of the Last W and
Testament of Thomas . Gven, deceased, pantffs, v. C. G. Lerceyn,
formery Coector of Interna Revenue for the Twenty-thrd Dstrct of
Pennsyvana, defendant.
Schoonmaker, .: Ths s an acton to recover estate ta es mposed by the
Revenue ct of 1918, aeged to have been egay coected by the defendant
as coector of Interna revenue. |ury tra was waved and the case heard by
the court.
On the peadngs and proofs, we make the foowng fndngs of fact:
The pantffs are e ecutors of the ast w and testament of Thomas .
Gven, deceased, ate of the cty of Pttsburgh, Pa., who ded une 28, 1919,
possessed of an estate sub|ect to edera estate ta under the provsons of the
Revenue ct of 1918.
The pantffs fed an estate ta return dscosng a net ta abe estate In
the sum of 3,944,439.02, and a ta due on the transfer to the egatees n the
sum of 452,610.24. Ths ta was pad to the defendant 115,915.27 thereof
on December 1, 1920 and 336,694.97 thereof on December 24, 1920.
On audt of ths return the Commssoner of Interna Revenu found the net
estate sub|ect to ta to be 3,328,053.56 and the ta thereon due to be 353,-
988.57 whereupon the Commssoner refunded to the pantffs at dvers dates
from pr 18, 1923, to March 22, 1928, the sum of 98,621.67.
The pantffs admt ta abty on a net estate of 3,220,629.14, camng
that the estate s entted to an aowance and deducton for admnstratve
e penses In addton to the amounts aowed by the Commssoner n the sum
of 107,424.40, made up of the foowng tems:
Items of admnstraton e penses camed by the e ecutors not
aowed by the Commssoner: ecutors compensaton pad n
1923 and 1924 from the ncome and not In corpus of the estate,
and for whch credt was camed by pantffs n ther ncome
ta returns for the years 1923 and 1924, and aowed as an
e pense Item n computng ncome ta for those two years 100,000.00
ccountants compensatons and e penses of Rchter Co., pad
anuary 81, 1930.
opnon.
In anuary, 1928.
7, 678. 65
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Regs. 37, rt. 41.
434
ookkeepng e penses of . D. Reynods, October, 1027, to
December, 1928, nc 175.00
Msceaneous e penses n 1927 and 1928 transfer ta on securtes
sod, nsurance, attorneys e penses, rent of safe-depost bo 2,077. 34
109,930. 99
Less 1917 ta receved by the pantff and not ncuded by the
Commssoner n the net estate sub|ect to ta 2,506.59
107,424. 40
On November 29, 1924, the pantffs fed a cam for refundment wth the
Commssoner of Interna Revenue, camng a reducton n ta abty In
the sum of 400,959.93. Ths cam the Commssoner re|ected on uy 8, 1927,
e cept as to the 98,621.07 above mentoned.
The pantffs fed no other cam for refundment wth the Commssoner,
but on or about March 5, 1929, they fed wth the Commssoner a suppe-
menta statement and affdavt n support of ther cam for refundment thereto-
fore fed, whch camed that the net estate shoud be further reduced n the
amount of 107,424.40 for addtona e penses of admnstraton from October
1, 1927, to December 31, 1928, and for e ecutors fees pad durng the years
1923 and 1924, and whch charged aganst ncome of the estate as per the tems
herenbefore specfed.
y hs w ( h. ), Gven devsed hs estate to the pantffs, hs e ecutors
n trust, to manage hs estate and pay the net ncome thereof to hs sster,
nne Gven err, durng her fe, and at her death he gave the estate absoutey
to the pantffs hs e ecutors. The wdow of the decedent took agaust hs
w and shared n the estate under the ntestate aws of Pennsyvana.
In arrvng at the net estate sub|ect to ta , the Commssoner aowed as a
credt on admnstraton e penses the sum of 400,000 for e ecutors fees whch
they pad from the corpus of the estate, but re|ected as nn admnstraton e pense
a further sum of 100,000 camed by the e ecutors as an admnstraton
e pense, but whch was pad by them from the ncome of the estate n the years
1923 and 1924 and whch was camed by them as e ecutors fees pad on
account of ncome n the ncome ta returns of ths estate fed by the e ecutors
for the years 1923 and 1924, they havng taken credt for 25,000 thereof n
1923 and for 75,000 thereof n 1924. These tems were aowed by the Com-
mssoner as e penses n managng the estate n determnng the net ncome
of the estate sub|ect to ta n the years 1923 and 1924.
y agreement dated May 19, 1925, and fed n the offce of the cerk of the
Orphans Court of egheny County, Pa., at No. 594, September term, 1923,
and at No. 301, pr term, 1925, a the partes Interested n ths estate agreed
that the bnance of commssons camed by the e ecutors for servces rendered
and to be rendered was 150,000, to be payabe out of the corpus of the estate.
t the date of ths agreement there had aready been pad to them 250,000
from the corpus of the estate, and 100,000 from the Income of the estate,
makng a tota commsson of 500,000.
s to the msceaneous e penses Incurred and pad by the e ecutors after
the re|ecton of the refundment cam, the fact of ther payment s not
dsputed, but they are ob|ected to, because they do not come wthn the cam
for refundment fed November 29, 1924. Certany no refundment cam
coverng these specfc Items was fed wthn four years from,the date of the
payment of the estate ta .
There s another ob|ecton to these tems whch was not made by the defend-
ants, however, . e., we fnd no evdence n the record from whch we can
defntey nocate these e pense tems to admnstraton e penses rather than
e penses of managng the estate under the trust created by the w.
CONCL-SIONS O L W.
We concude ns a matter of aw that there has been no overpayment of estate
ta by the pantffs, and that they are not entted to recover. Let an order
for |udgment In favor of the defendant be submtted.
DISCUSSION.
The pantffs cam credt twce for the 100,000 tem for e ecutors fees
her n dspute, once n the computaton of the ncome ta due from the estate In
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
435
Regs. 37, rt. 41.
the years 1923 and 1924, and agan here as a charge for admnstraton e pense
In cosng ths estate.
Under the w of Thomas . Gven, they have dutes both as e ecutors
proper and as trustees under the w durng the fe of decedent s sster
as e ecutors, t s ther duty to coect the debts due the estate, pay the funera
e penses and the debts owng by the estate, and then put the estate n shape
for dstrbuton. That part of t gong to Mrs. err they have to manage
durng her fe. The partes nterested n the estate have agreed that 400,000
be aowed from the corpus of the estate for e ecutors fees. It seems ke a
very arge and bera fee, but at any rate the Commssoner has aowed It as
an admnstraton e pense. The partes have aso agreed to the payment of
100,000 from ncome as an e ecutors fee, and we thnk thereby have con-
cusvey bound themseves to the fndng that such a fee s a proper charge
on ncome for servces n managng the estate. The resut s that you have
the e ecutors recevng by agreement of the partes 400,000 for servces as
e ecutors proper and 100,000 for servces as trustee n the w. That s ther
own eecton and they ought not now n good conscence to cam the 100,000
tem as an admnstraton e pense. The 100,000 was pad from the Income of
the estate earned some four or fve years after the death of decedent and the
corpus of the estate has not been dmnshed one cent by the payment of ths
amount
The Commssoner coud not egay aow ths deducton from the gross
estate n determnng the net estate, because t was not pad from the gross
estate. There was ony 400,000 pad from the gross estate as e ecutors
fees, and that s a the estate s egay entted to deduct. No |udgment as to
the correctness of cam of ths 100,000 as an admnstraton e pense proper can
be predcated on the confrmaton by the Orphans Court of egheny County
of the e ecutors account contanng ths Item of 100,000, because of the fact
that t was pad from ncome and not prncpa of the estate. If any concuson
coud be drawn therefrom, t must be that t was a proper charge aganst
ncome and not aganst the prncpa of the estate.
The gross estate, as t descended under the w and the ntestate aws of
Pennsyvana, has been dmnshed by the payment of e ecutors fees by
400,000, the amount aowed by the Commssoner, and has suffered no dmnu-
ton by reason of the payment of ths 100,000.
We therefore concude that ths tem may not be egay deducted as an
admnstraton e pense In computng the net estate sub|ect to ta under the
provsons of secton 403 of the Revenue ct of 1918.
s to the msceaneous e penses aeged to have been ncurred durng the
years 1927 and 1928, there s no evdence In ths case from whch we can
fnd that they were admnstraton e penses wthn the meanng of ths secton.
They are not e paned by the evdence at a, and we thnk t mght propery
be nferred, f any nference can be drawn at a, that they were e penses n-
curred n the admnstraton of the trust devoved upon the e ecutors under
the w as they reate to bookkeepng e penses, accountants fees, transfer ta es
on securtes sod, rent of safe-depost bo a n the years 1927 and 1928.
There s another reason why the pantffs can not recover n ths case,
even f ther cams were otherwse vad. No cam for refundment coverng
the specfc tems nvoved n ths sut was made wthn four years from the
date of the payment of the ta , as requred by aw. y secton 1310 of the
Revenue ct of 1921, cams for refundment must be presented to the Com-
mssoner wthn four years after the payment of the ta . Ths secton, by ts
terms, apped retroactvey to cams for refundment under the Revenue cts
of 1916, 1917. and 1918. These provsons of the ct of 1921 were repeaed
by secton 1100 of the Revenue ct of 1924. Secton 1012 of the ct of 1924
agan f ed the mtaton perod at four years, but contaned no retroactve
provsons as to 1916, 1917, 1918 ta es. Ths secton In ts turn was repeaed
by secton 1200 of the Revenue ct of 1926, whch by Its secton 1112 amended
secton 3228 of the Revsed Statutes f ng the mt of tme for fng
cams for refundment wth the Commssoner at four years from the
date of the payment of ta . rom a of whch we concude that the 4-year
mtaton has been In force snce November 10, 1921, the enactment date
of the 1921 Revenue ct, and that the pantffs had that 4-year perod n
whch to secure the aowance and payment of such admnstraton e penses
as were proper deductons from the gross estate of the decedent and present
refundment cams for the aowance of the same.
The refundment cam (Pffs hbt No. 1), fed November 29, 1924,
camed deducton of 500,000 for e ecutors commssons, but at that date
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Regs. 37, rt. 41.
436
that sum had not been pad nor aowed by the Orphans Court. t No. 594,
September term, 1923, of that court, the e ecutors camed credt for the pay-
ment of 100,000 for e ecutors compensaton. In the account fed at No.
301, pr term, 1925, credt was camed for an addtona 250,000 for e -
ecutors compensaton. y agreement dted May 19, 1925, the partes agreed
to the aowance of an addtona 150,000 as e ecutors commsson, and
therefore at the date of fng the refundment cam of November 29, 1924, ony
100,000 had actuay been pad to the e ecutors. We may say of ths so-caed
refundment cam that t was n the nature of a forecast of what the ad-
mnstraton e penses mght amount to, rather than a cam for e penses that
had actuay been aowed by the Orphans Court and pad.
The practca effect of ths statutory mtaton s that the e ecutors have
four years from the date of the payment of ta n whch to get ther admn-
straton e penses aowed and pad and f they arc not abe to cose ther
estates wthn that perod, the e penses ncurred and pad after that perod
can not he camed by way of a refundment.
The msceaneous e penses pad n 1927 and 1928 are aso ceary barred
by the statute of mtatons, even f they were proper admnstraton e penses.
In ths concuson we foow the rung of the Crcut Court of ppeas of
the Second Crcut n the case of Ordway, ec, v. Unted States.(not reported
opnon found n the Unted States Day, ssue of anuary 24, 1930) and
cases there cted.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
C PIT L STOC T RULINGS.
TITL II. SP CI L T S. (1924)
MPTION ROM T .
Reguatons 64(1924), rtce 29: empt organ- I -29-4712
zatons and nsurance companes. Ct. D. 203
C PIT L STOC T INCOM T R NU CTS O 1921 ND 1924
D CISION O COURT.
empton Insurance Company.
corporaton engaged In the nsurance busness but whch n
addton thereto conducts another and dstnct busness, that of
seng mortgages and guaranteeng the payment of prncpa and
nterest, from whch t derves a substanta ncome, s not an
nsurance company wthn the meanng and ntent of secton 246
of the Revenue cts of 1921 and 1924, and s therefore not e empt
from the cap ta stock ta under secton 1000(b) of the Revenue
ct of 1921 and 700(b) of the Revenue ct of 1924. The mere fact
that a corporaton has a charter from a State whch permts t to
do an Insurance busness does not make t an nsurance company
for purposes of edera ta aton.
Unted States Dstrct Court, astern Dstrct of New York.
orne Tte Insurance Co., pantff, v. Unted States of merca, defendant.
une U, 1930.
opnon.
Gaston, D. .: Ths case s presented upon an agreed statement of facts.
There are three causes of acton set forth n the compant, each Invovng
the same prncpe of aw. The pantff seeks to recover from the defendant
In each case a sum of money aeged erroneousy to have been coected by
the coector of nterna revenue for the frst dstrct of New York from the
pantff under protest, and aeges e empton of capta stock ta abty under
secton 1000 of the 1921 act so far as the frst and second causes of acton are
concerned, and under secton 700 of the 1924 ct as to the thrd cause of
acton.
The ground of recovery contended s that by vrtue of secton 246 of the
Revenue ct of 1921 and sectons 243 and 246 of the Revenue ct of 1924,
the pantff as an Insurance company was not sub|ect to the mposton of
any capta stock ta .
ssentay and bascay the queston for determnaton s whether the
pantff company s an nsurance company wthn the meanng of the Revenue
cts n queston. If the answer to that queston s n the affrmatve, then
the pantff s entted to the reef whch t seeks heren.
The term nsurance company s not defned n ether statute. Recourse,
therefore, must be hud to such provs:ons of the statute, f any, as may
dscose the Intenton of Congress n that regard.
(437)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Regs. 64(1924), rt. 29. 438
Secton 1000 of the Revenue ct of 1921 provdes:
Sec. 1000. (a) (42 Stat., 295.) That on and after uy 1, 1922, In en of
the ta mposed by secton 1000 of the Revenue ct of 1918
(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 pre-
cedng year endng une 30 as s n e cess of 5,000. In estmatng the
vaue of capta stock the surpus and undvded profts sha be Incuded

Sec. 1000. (b) (42 Stat., 295.) The ta es mposed by ths secton sha
not appy to any nsurance company sub|ect to the ta Imposed
by secton 246.
It Is to be noted that the capta stock ta thus defned sha not appy
to any nsurance company sub|ect to the ta mposed by secton
246. Itac mne. Thus apparenty not a so-caed nsurance companes
but ony such as are sub|ect to the ta mposed by secton 246
are to be reeved from the capta stock ta .
Secton 246 referred to reads as foows:
Sec. 246. () (42 Stat., 262.) That, In eu of the ta es mposed by sec-
tons 230 and 1000, there sha be eved, coected, and pad for the caendar
year 1922, and for each ta abe year thereafter, upon the net ncome of
every nsurance company (other than a fe or mutua nsurance company)
a ta us foows:
(1) In the case of such a domestc nsurance company the same per-
centage of ts net ncome as s mposed upon other corporatons by secton
230
(2) In the case of such a foregn nsurance company the same percentage
of ts net Income from sources wthn the Unted States as s mposed upon
the net Income of other corporatons by secton 230.
(b) In the case of an nsurance company sub|ect to the ta mposed by
ths secton
(1) The term gross ncome means the combned gross amount, earned
durng the ta abe year, from nvestment ncome and from underwrtng
ncome as provded In ths subdvson, computed on the bass of the under-
wrtng and nvestment e hbt of the annua statement approved by the
Natona Conventon of Insurance Commssoners
(2) The term net ncome means the gross ncome as defned n para-
graph (1) of ths subdvson ess the deductons aowed by secton 247
(3) The term nvestment ncome means the gross amount of ncome
earned durng the ta abe year from Interest, dvdends and rents, computed
as foows:
To a nterest, dvdends and rents receved durng the ta abe year, add
nterest, dvdends and rents due and accrued at the end of the ta abe year, and
deduct a nterest, dvdends and rents due and accrued at the end of the pre-
cedng ta abe year
(4) The term underwrtng ncome means the premums earned on nsur-
ance contracts durng the ta abe year ess osses ncurred and e penses
Incurred.
(5) The term premums earned on nsurance contracts durng the ta abe
year means an amount computed as foows:
rom the amount of gross premums wrtten on nsurance contracts durng
the ta abe year, deduct return premums and premums pad for rensurance.
To the resut so obtaned add unearned premums on outstandng busness at
the end of the precedng ta abe year and deduct unearned premums on out-
standng busness at the end of the ta abe year
(6) The term osses ncurred means osses ncurred durng the ta abe
year on Insurance contracts, computed as foows:
To osses pad durng the ta abe year, add savage and rensurance recov-
erabe outstandng at the end of the precedng ta abe year, and deduct savage
and rensurance recoverabe outstandng at the end of the ta abe year. To
the resut so obtaned add a unpad osses outstandng at the end of the
ta abe year and deduct unpad osses outstandng at the end of the precedng
ta abe year
(7) The term e penses ncurred means a e penses shown on the annua
statement approved by the Natona Conventon of Insurance Commssoners,
and sha be computed as foows:
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
439
Regs. 64(1924), rt. 29.
To a e penses pad durng the ta abe year add e penses unpad at the
end of the ta abe year and deduct e penses unpud at the end of the preced-
ng ta abe year. or the purpose of computng the net Income sub|ect to the
ta mposed by ths secton there sha be deducted from e penses ncurred as
defned n ths paragraph a e penses ncurred whch are not aowed as deduc-
tons by secton 247.
Sectons 247 and 230 referred to theren are as foows:
Sec. 247. (a) (42 Stat., 263.) That n computng the net ncome of an n-
surance company sub|ect to the ta mposed by secton 246 there sha be a-
owed as deductons:
(1) ordnary and necessary e penses ncurred, as provded n para-
graph (1) of subdvson (a) of secton 234
(2) Interest as provded n paragraph (2) of subdvson (a) of secton
234
(3) Ta es as provded n paragraph (3) of subdvson (a) of secton 234
(4) Losses Incurred
(5) ads debts n the nature of agency baances and bs recevabe
ascertaned to be worthess and charged off wthn the ta abe year
(6) The amount receved as dvdends from corporatons as provded n
paragraph (6) of subdvson (a) of secton 234
(7) The amount of nterest earned durng the ta abe year whch under
paragraph (4) of subdvson (b) of secton 213 s e empt from ta aton under
ths tte, and the amount of nterest aowed as a credt under subdvson (a)
of secton 236
(8) reasonabe aowance, for the e hauston, wear and tear of property,
as provded n paragraph (7) of subdvson (a) of secton 234
(9) In the case of such a domestc nsurance company, the net ncome of
whch (computed wthout the beneft of ths paragraph) s 25,000 or ess, the
sum of 2,000 but f the net ncome s more than 25,000 the ta mposed by
secton 246 sha not e ceed the ta whch woud be payabe If the 2,000 credt
were aowed, pus the amount of the net ncome n e cess of 25,000.
(b) In the case of a foregn corporaton the deductons aowed n ths
secton sha be aowed to the e tent provded n subdvson (b) of secton 234.
(c) Nothng n ths secton or n secton 246 sha be construed to permt
the same tem to be twce deducted.
The provsons of the Revenue ct of 1924 are dentca n prncpe though
somewhat dfferent n other respects.
It s thus seen that the ssue s narrowed to the queston as to whether the
pantff s an nsurance company sub|ect to the ta mposed by secton
246, or s t, for the purposes of the Revenue cts, an ordnary
corporaton.
What s the nature of the pantff s busness It was organzed under
artce 5 of the nsurance aw of the State of New York (Laws of 1892, chapter
690) and fed ts certfcate of ncorporaton n the offce of the superntendent
of nsurance of the State of New York op or about pr 5, 1906. It has snce
the date of ts ncorporaton been sub|ect to the e amnaton and supervson of
the superntendent of nsurance of the State of New York and has fed annua
reports wth the superntendent of nsurance of the State of New York. Its
busness has conssted n the nsurance of ttes to rea estate and n the
guaranteeng of rea estate mortgages. In respect to ts tte nsurance
busness, t may be sad that pantff ssued poces of tte Insurance after
havng e amned and prepared abstracts of the ttes n reaton to rea
estate and chattes rea. It s not wth respect to that department of the
pantff s busness that controversy Is rased, but rather as to the other
functons e ercsed n the guaranteeng of rea estate mortgages.
In conductng ths mortgage guaranty busness, pantff s practce requres
an appcant for such guaranteed mortgage to appy for a frst mortgage oan
upon the appcant s property, and for such nspectons, e amnatons, ap-
prasa and other acts as are necessary and ncdenta thereto. The appcant
agrees to pay the pantff s charges for such servces. Then foows n due
course the preparaton by the pantff of a bond and a mortgage to be e ecuted
by the appcant. The pantff pays the appcant the face vaue of the bond
ess ts charges for ts servces, retanng the bond and the mortgage as se-
curty for the repayment of the oan. The bond and the mortgage are then
sod by the pantff for the face vaue thereof. t the same tme the pantff
devers to the purchaser a pocy of mortgage guaranty. The terms of the
pocy guarantee the payment of the prncpa of the bond at maturty, nter-
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Regs. 64(1924), rt. 29.
440
est to be pad perodcay but at a rate ower than that stpuated n the
bond, and guarantee the mortgage to be a vaued frst en upon a good and
marketabe tte In fee to the rea estate In queston. The pantff s re-
qured aso to coect the nterest and prncpa of the bond and the mortgage
under the agreement, retanng as compensaton for ts guaranty a nterest
coected n e cess of the rate guaranteed by the pantff. Ths e cess of
nterest generay s one-haf of 1 per cent of the face amount of the bond.
It s the practce of the pantff soon after the acquston of these mortgages
to se them at an average perod of wthn two months from acquston.
rom the agreed statement of facts t appears that a substanta part of the
busness carred on by the pantff conssted of the sae of guaranteed mort-
gages. It s the contenton of the defendant that n such crcumstances, snce
the guaranteeng of rea estate mortgages s not nsurance, a corporaton engaged
n such busness s not entted to be cassed as an nsurance company for
purposes of edera ta aton under the provsons of sectons 246 and 247 of
the Revenue cts of 1921 and 1924.
What dd Congress ntend y secton 230 of the Revenue ct of 1921
(42 Stat., 252), Congress mposed an ncome ta upon the net ncome of
every corporaton based upon ts gross ncome from whatever source derved.
(Sec. 213- 42 Stat., 238.) Sectons 246 and 247 make those atter sectons
nappcabe to nsurance companes. The e cepton, therefore, must be strcty
construed. (Unted States v. D on, 15 Pet., 141 ank of Commerce v. Ten-
nessee, 161 U. S., 134.)
The defendant argues n bref that the ncome of an ordnary nsurance
company derved from ts busness of makng and seng nsurance contracts,
conssts of ts premum ncome (resutng from the ssuance of ts poces),
and secondy, ts nvestment ncome (derved from nvestment of ts capta,
surpus, and undvded profts). These two casses of ncome are ndeed the
gross ncome of an nsurance company as defned n secton 246.
If now the provsons of secton 247 are anayzed, t s found that n com-
putng the net ncome of an nsurance company sub|ect to the ta mposed
by secton 246, ony such deductons are permtted as represent osses and
e penses ncurred n the producton of the gross ncome defned n secton 246.
It woud seem, therefore, thtt Congress dd not ntend by sectons 246 and 247
to e empt from ta aton any ncome not cassfed as the ncome of an nsur-
ance company under sad secton 246. The nference drawn by the Govern-
ment then s that snce a substanta part of the ncome of the pantff s
nether premum ncome nor nvestment ncome, t s not that knd of ncome
whch Congress has made characterstc or typca or ndeed the ncome of an
nsurance company. The Government s syogsm mght be stated thus:
nsurance companes (under the Revenue cts) are those the soe ncome
of whch conssts of premum ncome and nvestment ncome.
Pantff company s not one the soe ncome of whch conssts of premum
and nvestment ncome.
Therefore, the pantff s not an nsurance company such as Congress ntended
to reeve from the payment of the capta stock ta .
Reasonabeness s gven to ths concuson, the defendant nrgues, because
Congress dd not ntend that any ncome not cassfed as the ncome of an n-
surance company (. e., premum ncome and nvestment ncome) shoud be
e empt from ta aton.
smar stuaton as that nvoved heren s reported n Lousve Tte Co.
v. Iauus (27 ed. (2d), 413 T. D. 4233, C. . II-2, 388 ). In that case the
pantff was engaged n the dua busness of nsurng ttes to rea estate and of
seng and guaranteeng mortgages. It was sad:
Congress was undoubtedy undertakng, In secton 246, to provde for the
ta aton of a the ncome of nsurance companes sub|ect to ts provsons.
In so dong t provded for the ta aton of ony that ncome ordnary under-
stood to be en|oyed by nsurance companes, vz, premum ncome and ncdenta
Income, fowng from the nvestment of ts capta and surpus. If t had been
the ntenton of Congress to gve these companes whch were conductng not
ony an nsurance busness, but aso some separate and dstnct busness, the
beneft of secton 246, undoubtedy provson woud have been made for reportng
and ta ng the ncome derved from such separate and dstnct busness. To
assume otherwse woud be to mpute to Congress a deberate ntenton to
e empt the ncome of some busnesses from ta aton atogether, smpy because
they were conducted by a corporaton aso engaged n the nsurance busness.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
441
Regs. 64, rt. 11.
I thnk, therefore, we must concude that f nn Insurance company, In add-
ton to Its Insurance busness, conducts a separate and dstnct busness, from
whch It obtans a substanta ncome, t s not sub|ect to ta aton under secton
246, nor e empt from ta aton under secton 1000.
The court then stated that the mortgage sae department or busness of the
Lousve Tte Co. was whoy dstnct from ts tte nsurance busness, and
added:
Of course, a guaranty of the payment of the obgaton of another, accord-
ng to the terms thereof, s not an nsurance contract any more than s the In-
dorsement of a negotabe Instrument an nsurance contract.
guaranty s defned to be a promse to answer for the payment of some
debt or the performance of some duty n case of the faure of another person,
who n the frst nstance was abe for such payment or performance. (4
Words and Phrases 3179, and cases theren cted.)
In ths respect t dffers from Insurance, whch Is a contract Invovng a
drect not an Indrect obgaton. contract of Insurance Is a persona contract
of ndemnty between the Insured and the underwrter. The contract of nsur-
ance does not attach tsef to the thng nsured, nor go wth t when t s
transferred. (Northern Trust Co. v. Snyder, 76 ed., 34.)
Pantff s contract of guaranty certany fas wthn the former cass and
not the atter. It obgates the pantff to pay the fu amount of the prncpa
and Interest upon defaut of the mortgagor and not merey to ndemnfy the
hoder of the mortgage to the e tent of a oss that mght be sustaned by hm.
It foows that such of pantff s ncome as Is derved from ts busness of
guaranteeng rea estate mortgages shoud not be e empt from ta aton, and
yet It woud be If pantff were hed to be an Insurance company wthn the
Intent and meanng of the Revenue cts n queston, for such ncome s nether
Investment ncome nor underwrtng Income as defned n secton 246.
It may be sad In concuson that the mere fact that the pantff has a
charter from the State of New York, whch permts t to do an nsurance
busness, does not make t an nsurance company wthn the meanng of sec-
ton 246. (Lousve Tte Co. v. Lucas, 27 ed. (2d), 413.)
The fndngs of fact w be the stpuated facts.
The moton for |udgment on behaf of the defendant Is granted.
TITL . SP CI L T S. (1921)
Reguatons 64, rtce 11: ass of the ta : I -32-4743
Carryng on or dong busness. Ct. D. 221
C PIT L STOC T R NU CTS OP 1918 ND 1921- D CISION OP COURT.
Dong usness.
corporaton organzed for the purpose of acqurng and unfy-
ng the management of corporatons engaged In the theatrca bus-
ness and whch actvey engages In the prosecuton of the busness
for whch t was Incorporated s dong busness and a sub|ect
to the capta stock ta Imposed by the Revenue cts of 1018 and
1921.
dstbct coubt of the unted states, noethebn dstrct ot nos,
astern Dvson.
Orpheum Crcut, Inc., v. Mabe O. Renecke, Coector of Interna Revenue,
rst Dstrct of IMnoU.
May 6, 1930.
opnon.
Woodward, Dstrct udge: In ths sut pantff seeks to recover capta
stock ta es aeged to have been erroneousy and egay coected. Pantff
85942 31 29
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Regs. 64, rt. 11. , 442
pad to Mabe G. Renecke, coector of nterna revenue, the sum of 20,595 for
the ta abe year begnnng uy 1, 1923, and endng une 30, 1924, and the sum
of 21,00(5.90 for the ta abe year begnnng uy 1, 1924, and endng ane 30,
1925 n a, 41,601.90. The ta es were pad under protest. Cams for refund
were made and dened.
The soe queston presented Is whether pantff was carryng on or dong
busness durng the ta abe years n queston wthn the meanng of secton
1000 of the Revenue ct of 1921 (42 Stat., 294) and secton 700 of the Revenue
ct of 1924 ( 43 Stat., 325), a of whch mpose on domestc corporatons an-
nuay a speca e cse ta wth respect to carryng on or dong busness at
the rates prescrbed In such sectons.
Pantff s a domestc corporaton organzed under the aws of the State of
Deaware. Its charter powers authorzed It generay to engage n every phase
of the theatrca and amusement busness, ncudng the purchase and operaton
of theaters and the purchase und sae of stocks of corporatons so engaged.
Pursuant to ts corporate purpose, pantff, pror to uy 1, 1923, acqured
a of the capta stock of 32 corporatons operatng theaters n varous ctes
of the Unted States, and other shares, ess than a, n 6 other theatrca com-
panes. On anuary 24, 1925, t further acqured 50 per cent of the common
stock of the Photo and Press ureau, and on pr 29, 1925, acqured 500 shares
of the Chcago Orpheum Co.
Its transactons durng the perods n queston may be summarzed as
foows:
DURING T T L Y R 1923-24.
(1) Pror to the ta abe year pantff had ssued ts god notes, redeemabe
at 103. 1,800,000 of whch were outstandng on uy 1, 1923. Durng the ta -
abe year t bought n the open market ts god notes of a par vaue of 100,000
at ess than 103, reazng a proft of 1,862.75 on the transacton.
(2) Pror to the ta abe year pantff had ssued Its preferred stock redeem-
abe at 110. Durng the ta abe year t purennsed n the open market, at eas
than 110, and retred 526 shares of ts preferred stock, on whch t reazed a
proft of 9,343.79. The number of shares purchased and retred was n e cess
of ts charter requrements.
(3) It receved from ts subsdares advances on account of dvdends the
sum of 1,760,670.02 n the aggregate. These advances or oans were qudated
by dvdends subsequenty decared.
(4) On ebruary 8, 1923, a resouton was adopted by the board of drectors
appontng one ncent genera bookng manager, under the drecton of the
e ecutve commttee and the board of drectors. Pror to that date the
bookng had been done under the supervson of one eck. Whe the dutes
of ncent are not further defned by resouton, yet the evdence shows that,
durng the ta abe year, be dd the same knd of work as that performed by
eck, namey, the bookng of acts and e hbtons for a subsdares, e hbtng
companes, that was done n New York.
(5) It owned shares n the ppodrome musement Co., fuy pad for.
Durng the ta abe year t advanced to the ppodrome company n the form
of assessments the sum of 16,451.88. These advances were charged to
proft and oss and were merey payments made to meet current operatng
defcts of ths subsdary.
(6) It assumed the abtes of one of ts subsdary companes to two other
of ts subsdary companes, (a) It assumed the abty of the Decatur
musement Co. (a dssoved company) to the Champagn Orpheum Co. In the
sum of 15,992.74. (b) It assumed the abty of the Duuth Improvement Co.
(a dssoved company) to the Grand Rato Theatre Co. n the sum of
45,197.75.
(7) On uy 11, 1922, t became guarantor of a ease on certan rea estate
n Des Mones, Iowa, made to . . ahane, as essee, of the Des Mones
Orpheum Co., a subsdary. The ease e tended through and beyond both
ta abe years now n queston. Durng both these ta abe years pantff
remaned as guarantor on such ease.
(8) It owned shares of stock n the . . eth Theatres Co. On ebruary
8, 1923, t receved a proposa from one Goodman to purchase these shares.
y resouton of that date the e ecutve commttee was authorzed to procure
an apprasa of the eth propertes. The stock was sod to Goodman darng
November, 1924, nt a proft of 1,028,269. It s far to nfer that negotatons
for ths sae were n progress durng the ta abe year.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
4

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Regs. 64, rt. 11.
DT INO T T L T O 1924-2 .
(1) It bought In the open market ts god notes of a par vaue of 257,700 at
ess than 103, reazng a proft of 3,352.11 on the transacton.
(2) It purchased n the open market ts preferred stock, at ess than 110,
reazng a proft of 23,241 on these transactons.
(3) It receved reguar oans or advances from ts subsdares on account
of dvdends aggregatng hundreds of thousands of doars. These oans or
advances were qudated by dvdends subsequenty decared.
(4) The genera bookng manager under the drecton of the e ecutve
commttee and the board of drectors contnued ther actvty n bookng acts
and e hbtons for a subsdares, e hbtng companes, that was done n
New York.
(5) It acqured 50 per cent of the common stock of the Photo and Press
ureau and 500 shares of stock of the Chcago Orpheum Co.
(0) It purchased 5 certfcates of depost aggregatng 450,000.
(7) On the certfcates of depost mentoned n No. (6) t receved Interest
of 8,037.50.
(8) Incudng nterest receved on certfcates of depost and nterest receved
from notes upon the sae of ts stock n the . . eth New York Theatres Co.,
receved nterest n the amount of 04,000.
(9) It consummated the sae of 6,004 shares of . . eth New York The-
atres Co., negotatons for whch sae were opened upon ebruary 8, 1923, payng
7,500 for apprasng the eth propertes.
(10) It assumed and pad 14,588.28 of an operatng defct of the ppo-
drome musement Co., a subsdary corporaton.
(11) Its guaranty of the Des Mones ease contnued.
CONTROL ND M N O M NT O SU SIDI RI S.
One of the purposes for whch pantff was formed was to secure contro
and management of ts subsdares. To that end t acqured a of, or the con-
trong nterest n, the capta stock of between 30 and 40 corporatons dong
a theatrca and amusement busness. The man offce of pantff and the
man offce of a of the subsdares was In the same sute of rooms n Chcago
durng the two ta abe years. The e penses ncdent to the mantenance of the
head offce was prorated among the varous subsdares and pad by them.
ach oca theater remtted weeky to the home offce the e cess of ts recepts
over dsbursements pus a workng baance. Its offcers acted n varous
capactes for the entre group of subsdares. One offcer handed the ega,
Insurance, and fnanca matters, another had charge of the bookng for the
entre group, and another handed a of the pubcty.
Pror and subsequent to the ta abe years the evdence shows that pantff
was engaged n a course of busness whch was admttedy dong busness
wthn the meanng of the cts n queston. The evdence fas to show that
there was any change n pocy or an abandonment of the corporate purpose
pror to the ta abe year. Taken n connecton wth the actua busness
transactons durng the ta abe years n queston, t may fary be nferred
that there was no change In pocy pror to or durng the ta abe years.
In the case of aton v. Phoen Securtes Co. (22 ed. (2d), 497) the
court says:
We do not thnk that anythng w be ganed by an e tended dscusson of
the decson on ths tanged sub|ect.
The court s of opnon that ths case s rued by the foowng cases: on
aumbach v. Sargent Land Co. (242 U. S., 503) dwards v. Che Copper Co.
(270 U. S., 452 T. D. 3857, C. . -, 410 ) Phps v. Internatona Sat Co.
(274 U. S., 718) (reversng Internatona Sat Co. v. Phps, 9 ed. (2d), 389
T. D. 3673, C. . I -1, 328 ).
y a number of decsons n the crcut courts of appea, wthn the rue ad
down n the cases cted, the pantff was carryng on or dong busness and
was sub|ect to the capta stock ta .
The Supreme Court has set up pan standards as to when a corporaton s
actve and when t s passve. The actvtes engaged n by the pantff were
not those narrow actvtes such as are ncdent to the ownershp of property.
Its corporate fe was not dormant and pa sve.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
T. D. 4235.
444
It was organzed to acqure and unfy the management of other corporaton
engaged In the theatrca busness. When, durng the ta abe years n queston,
t acqured the stock of a corporaton engaged n the theatrca busness t was
dong the very busness for whch t was organzed. It dd not acqure such
stock as an nvestment It acqured such stock to procure contro and to brng
under ts management another theatrca corporaton. In dcards v. Che
Copper Co., supra, the court says:
It was organzed for proft and was dong what It prncpay was organzed
to do n order to reaze proft. The case must be e ceptona when such
actvtes of such corporatons do not amount to dong busness n the sense
of the statutes.
The anguage of the court s appcabe to the case now under consderaton.
The purchase of pantff s own god notes and Its preferred stock and the
recept of advances or oans from ts subsdares consttute dong busness.
(Phps v. Internatona at Co., 274 U. S., 718.)
The payment by pantff of operatng osses of one of ts subsdares the
assumpton by pantff of the abty of two subsdares to other subsdary
companes the outstandng obgaton of pantff under the Des Mones ease
the negotatons for sae of stock n the . . eth New York Theatres Co.
and the eventua sae thereof the recept of nterest the appontment of
e ecutve and fnanca commttees and the actve partcpaton by the e ecu-
tve commttee, the board of drectors, and the offcers of pantff n the
management of ts affars the purchase of certfcates of stock a go to show
that pantff was not a quescent corporaton but was actvey engaged n the
prosecuton of the busness for whch It was ncorporated.
The court fnds the ssues for the defendant. ndngs of fact and concu-
sons of aw In conformty wth ths opnon w be prepared and presented.
TITL . SP CI L T S. (1918 ND 1921)
Treasury Decson 4235: Lmtatons upon the I -32-4739
reopenng and aowance of cams barred G. C. M. 8374
from sut n court.
Reopenng of refund cams.
Capta stock ta returns were fed by the ta payer for the ta abe
perods ended une 30, 1921, une 30, 1922. and une 30, 1923, and
capta stock ta es were assessed and coected for these ta abe
perods. The ta payer fed tmey cams for refund for these
eerods to cover aeged overpayments of capta stock ta es, t
eng stated n each cam that evdence woud be submtted to be
consdered n connecton therewth. Under date of une 27, 1927,
these refund cams were re|ected n fu, for the reason that no
data had been receved |ustfyng a change n the returns as org-
nay fed. On uy 16, 1927, there was fed wth the Income Ta
Unt an audt report on the ta payer corporaton for the years 1920
to 1924, ncusve. On the same date there was aso fed a voum-
nous bref of M Corporaton and affated companes for the years
ended December 31, 1921, and December 31. 1922, whch bref gave
the vauatons of the varous propertes or the ta payer corpora-
ton for the ta abe perods nvoved, ncudng baance sheets, proft
and oss statements, etc. fter a consderaton of a the nforma-
ton submtted t was determned that the ta payer corporaton
overpad capta stock ta for the perods specfed.
Under date of une 24, 1929, the attorney for the recevers of the
ta payer corporaton made a forma appcaton for the reopenng
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
445
T. D. 4235.
of these refund cams under the provsons of Treasury Decson
4235 (C. . II-2, p. 76). The Commssoner was requested to re-
open the cams and to consder the above-mentoned Dref as ev-
dence n support of the poston that the ta payer had overstated the
vaue of ts assets and net ncome n payng capta stock ta es for
the perods nvoved heren.
Treasury Decson 4235, supra, whch reates to the reopenng
of refund cams, reads n part as foows:
L Cams Dsaowed Pror to May 29, 1028, n Whch the Perod of Lm-
taton fob rngng Sut has pred.
(a) If a cam for refund or credt of an nterna revenue ta was dsaowed
pror to May 29, 1928, and f the perod of mtaton for brngng sut n court
has e pred, such cam w be reopened f, but ony If

(4) The cam s based upon a queston of fact and ether (a) evdence of
such fact was presented, n respect of the ta abe year nvoved, pror to the
e praton of such perod of mtaton, .
(6) In no event w any such cam be reopened
(1) Uness an appcaton for reopenng has been fed wth the Commssoner
of Interna Revenue on or before anuary 31, 1929 and

(3) Uness the specfc ground upon whch the refund or credt s aowabe
was stated n the cam, or n an amendment thereof made pror to the e pra-
ton of the perod of mtaton upon the fng of a cam for refund or
credt: .
vdence wth respect to the overvauaton of the company s assets
was submtted by the ta payer pror to the e praton of the statu-
tory perod of mtaton for brngng sut. The ta payer s cams
for refund were dsaowed on une 27, 1927, whch date s pror
to May 29, 1928. The perod of mtaton for brngng sut e pred
on une 27, 1929. No sut has been brought by the ta payer. The
ta payer s appcaton for reopenng was fed wth the Commssoner
under date of une 24, 1929. n appcaton for reopenng was not,
therefore, fed on or before anuary 31, 1929, as provded n para-
graph (b) (1) of Treasury Decson 4235, quoted above.
It may be roted that the perod of mtaton for brngng sut
had not e pred when the appcaton for reopenng was fed by the
ta payer. Wth respect to the reopenng of a re|ected refund cam
pror to the e praton of the statutory perod of mtaton, t s
provded n Paragraph III of Treasury Decson 4235 as foows:
ny cam whch has been dsaowed w be reconsdered and aowed, at
any tme pror to the e praton of the statute of mtatons for brngng sut,
f t ceary appears that the cam shoud be aowed on the merts. No reopen-
ng or appcaton for reopenng w e tend the perod wthn whch sut must
be brought, nor w a reconsderaton of a cam be consdered ns a reopenng.
It w be seen that the nstant cams for refund mght have been
reconsdered and aowed at any tme on or before une 27, 1929,
f such cams had been determned to be aowabe on the merts
and f t had been determned that the specfc ground upon whch
the cams were aowabe was set out by the ta payer pror to the
e praton of the perod of mtaton upon the fng of such refund
cams. The appcaton for reopenng was fed on une 24, 1929,
and no defnte acton has yet been taken wth respect thereto. It s
e pressy provded that no appcaton for reopenng w e tend the
perod wthn whch sut must be brought. There s no authorty
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
T. D. 4235.
446
for reopenng and aowng, after the e praton of the perod of
mtaton for brngng sut, a cam for refund whch was dsaowed
pror to the enactment of the Revenue ct of 1928, e cept n accord-
ance wth the provsons of Paragraph I of Treasury Decson 4235.
It has been made to appear that the requrements of that paragraph
have not been met n the nstant case.
In vew of the foregong, t s concuded that the nstant cams
for refund may not be reopened and aowed and t s therefore
unnecessary to decde whether the specfc ground upon whch
the refund cams were aowabe was stated n the cams, or other-
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
MISC LL N OUS T RULINGS.
TITL IIL ST MP T S. (1926)
SC DUL -5. P SS G TIC TS.
Reguatons 71, rtce 54: Passage tckets
ssued to prvate ndvduas.
I -41-4799
Ct. D. 236
ST MP T S R NU CT O 192ft D CISION OP COURT.
Passage Tckets.
Where a company ownng and operatng a steamshp enters nto
a wrtten agreement wth a membershp corporaton for a pgrm-
age from New York to ermuda and return by the terms of whch
It dsposes of the entre passenger accommodaton of the vesse
for a ump sum, provded the passengers equa a certan number,
and at a fat rate for a passengers n e cess thereof, and the
membershp corporaton ssues, pursuant to the authorty of the
agreement whch s decared to be n accordance wth the genera
terms and condtons of the reguar ocean steamshp passenger
tcket, membershp cards to be used as dentfcaton of the
guest on board, the dentfcaton tckets when taken n connecton
wth the agreement tsef consttute passage tckets wthn the
meanng of secton 800, Schedue , subdvson 5, of the Revenue
ct of 1926, and are hed to have been ssued by the steamshp
company, whch s abe for the stamp ta es thereon mposed by
that subdvson.
Unted States Dstrct Court, Southern Dstrct of New York.
Consuch Lne of Treste, pantff, v. rank . owers, Coector of Interna
Revenue, defendant.
Co e, D. .: Ths s a moton by the defendant for |udgment on the peadngs.
The acton s to recover a ta payment made under protest October 10, 1927, and
representng passage tcket ta es aeged to have been Iegay assessed aganst
the pantff. The facts are smpe and not n dspute.
On May 27, 1926, the pantff, ownng and operatng the steamshp Prcsdente
Wson, by wrtten agreement, reserved for Saaam Tempe, a New ersey
membershp corporaton, the steamer s fu compement of passenger accom-
modaton n a casses on the steamshp Presdente Wton for a summer
pgrmage to ermuda, from ugust 25 to ugust 30, 1926, at a cost, based
on a mnmum of 400 passengers, of a ump net sum of 30,000. The berth-
ng capacty of the vesse was stated to be n e cess of 400, and a fat rate of
35 was specfed to cover a passengers booked n e cess of the mnmum
number 400. It was aso provded that there shoud be an nta depost of
5,000, and the baance of the tota passage money, ncudng passengers
booked n e cess of 400, shoud be pad on ugust 21, pror to the commence-
ment of the voyage. The agreement further contaned the two foowng causes:
(10) Membershp cards: It s understood thnt each guest w be provded by
you wth a membershp card on whch w appear the berth and cabn assgned
and w be used as dentfcaton of the guest on board.
September 10, 1930.
OPINION.
(447)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Regs. 71, rt. 54.
448
(12) Contract as drawn up Is In accordance wth the genera terms and con-
dtons of the reguar ocean steamshp passenger tcket on fe In ths offce and
at the dsposa of your commttee at a tmes.
The membershp card referred to n cause 10 was Issued by Saaam Tempe,
and was stated on Its face to be an Identfcaton tcket. It contaned the
name of the passenger, and the berth and stateroom occuped, and bore the
prnted sgnature of Curts . Merr, Potentate. On the reverse sde were
a number of condtons and nstructons for passengers, among whch was
the foowng:
Whe t Is the am of Saaam Tempe to gve a passengers the best pos-
sbe servce and attenton throughout, responsbty must be decned by
Saaam Tempe for damages or deays on the pgrmage, or through mpos-
ton of quarantne, customs nspecton, or any casuaty or untoward ncdent
whch may be occasoned by crcumstances beyond the contro of Saaam
Tempe. Transportaton s furnshed by the Consuch Lne n accordance wth
ther genera rues.
The ta was assessed under secton 800, Tte III, of the Revenue ct of
1926, provdng n part as foows:
there sha be eved, coected, and pad, for and n respect of
the severa nstruments mentoned and descrbed In
Schedue of ths tte by any person who makes, sgns, Issues,
ses, or for whose use or beneft the same are made, sgned, Issued,
sod, the severa ta es specfed n such schedue.
Schedue , subdvson 5, reads as foows:
Passage tcket, one way or round trp, for each passenger, sod or Issued
In the Unted States for passage by any vesse to a port or pace not n the
Unted States, Canada, or Me co, If costng not e ceedng 30, 1 costng
more than 30 and not e ceedng 60, 3 costng more than 60, 5. Ths
subdvson sha not appy to passage tcket costng 10 or ess.
There were 451 persons n the pgrmage, and the Commssoner, Interpret-
ng the agreement as a passage tcket for 451 persons, dvded the ump sum
of 30,000 by 451, and n that way arrved at a fgure of about 67 as the cost
of passage per person. e thereupon assessed aganst the pantff a passage
tcket ta of 5 for each of the 451 passengers, or a tota of 2,255, whch, to-
gether wth 133.30 nterest, was pad by the pantff to the coector, and now
forms the bass of ths acton.
It s the contenton of the pantff that the agreement was n no sense a
passage tcket wthn the meanng of the 1926 ct but was a charter of the
vesse s fu compement of passenger accommodaton n a casses, and that
f any tcket ta was propery payabe t shoud have been assessed aganst
Saaam Tempe, whch had charge of the dstrbuton of the dentfcaton
tckets to those makng the pgrmage, and not aganst the pantff.
I thnk the Commssoner was rght n hs nterpretaton of the agreement.
The statute mposes a ta n respect of passage tckets sod or ssued In
the Unted States, and drects payment of the ta by any person who makes,
sgns, ssues, ses such passage tckets, or for whose use or beneft the
same are made, sgned, ssued, sod. y the terms of the agreement, the
pantff dsposed of the entre passenger accommodaton of the vesse for
a ump sum of 30,000, provded the number of passengers dd not e ceed
400. It was aso provded that there shoud be a fat rate of 35 for a
passengers n e cess of 400. Ceary, that was an agreement for a buk
sae of passage tckets, even though at the tme t was made no standard form
of tcket was e ecuted and the number of passengers was eft Indefnte. The
statute does not requre any partcuar form for the tcket and the number of
passengers makng the pgrmage was subsequenty accuratey determned at
451. The management, contro, and operaton of the vesse was entrey In the
hands of the pantff, and the agreement contans nothng to ndcate that
those makng the pgrmage were to be other than passengers. urthermore,
the ssuance of memershp cards to be used as dentfcaton of the guest
on board was specfcy authorzed, and the agreement was decared to be
n accordance wth the genera terms and condtons of the reguar ocean
steamshp passenger tcket. The dentfcaton tckets were Issued pursuant
to the authorty of ths agreement, and, when taken n connecton wth the
agreement tsef, consttuted passage tckets wthn the meanng of the statute
and, as thus construed, they served ss tokens to enabe the persons havng
charge to recognze the bearers as partes who are entted to be
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
449 egs. 8, rt. 92.
receved on board. ( unby v. anderbt, 17 N. T., 306, 813.) These tckets
must be hed to have been ssued by the pantff as fuy as f actuay sgned
n ts own name.
I fnd no faut wth the acton of the Commssoner n aocatng the ump
sum of 30,000 among the 451 passengers.
The moton of the defendant to dsmss on the ground of nsuffcency of the
compant s, therefore, granted.
TO CCO.
Reguatons 8 (1928), rtce 110: Contents of I -32-4745
statutory packages. T. D. 4297
P C G S O TO CCO PRODUCTS.
Manufacturer may substtute hs name and address for hs
regstered factory number, dstrct, and State on nserts paced n
statutory packages. Reguatons 8, revsed, amended accordngy.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
The second paragraph of artce 110(a) of Reguatons No. 8,
revsed pr, 1928, s hereby amended to read as foows:
The manufacturer s regstered factory number, dstrct, and State or hs name
and address sha appear upon each card, coupon, certfcate, or other nsert
paced wthn a statutory package of tobacco, snuff, cgars, or cgarettes.
Robt. . Lucas,
Commssoner.
pproved ugust 8, 1930.
Water . ope,
ctng Secretary of the Treasury.
Reguatons 8, rtce 92: onds. I -35-4766
T. D. 4298
Tobacco ta New bond requred. rtce 02, Reguatons 8,
amended.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C.
To Coectors of Interna Revenue and Others Concerned:
rtce 92 (a) 3 of Reguatons 8, revsed pr, 1928, s hereby
amended by nsertng between the second and thrd sentences thereof
the foowng new sentence:
new bond sha be requred Immedatey upon payment of any abty
under a bond by the surety thereon, f the prncpa contnues busness.
Davd urnet,
Commssoner of Interna Revenue.
pproved ugust 23, 1930.
Odgen L. Ms,
ctng Secretary of the Treasury.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Regs. 9, Sec. 39.
450
OL OM RG RIN .
Reguatons 9, Secton 39: Oeomargarne defned. I -29-4718
Ct. D. 199
OL OM RG RIN T CT O UGC T 2. 1888, S M ND D D CISION OP
COURT.
Oeomargarne egetabe O No nma ats.
compound, desgnated Rch Nut Shortenng, consstng of
vegetabe os, artfca coorng matter and other ngredents,
e cudng anma fats, not ony made n mtaton or sembance
of butter but cacuated or Intended to be sod as butter or for
butter s oeomargarne and propery ta abe as such under the
ct of ugust 2, 1886, as amended.
Unted States Crcut Court of ppeas, ghth Crcut.
The arrow-Tayor utter Co., a Mssour Corporaton, appeant, v. Noah
Crooks, Unted States Coector of Interna Revenue for the S th Dstrct
of Mssour, appeee.
ppea from the Dstrct Court of the Unted States for the Western Dstrct of Mssour.
May 28, 1930.
OPINION.
Sanborn, Dstrct udge, devered the opnon of the court.
The appeant, The arrow-Tayor utter Co., brought ths acton at aw
In the court beow to recover ta es pad by t, whc It cams were egay
assessed under the ct of ugust 2, 1880 (24 Stat., 209), as amended by the
ct of May 9, 1902 (32 Stat, 194. Tte 26, U. S. C, ch. 7), reatng to the
ta aton of products cassed as oeomargarne. |ury was waved and the
case tred by the court. The court hod that the product whch was known as
Rch Nut Shortenng and was composed of a m ture of vegetabe-os, sat,
benzoate of soda, water, and artfca coorng matter, was ta abe under the
ct In queston, and that the ct was vad, and entered |udgment for the
appeee. rom ths |udgment ths appea was taken.
We are vrtuay precuded by the rues of ths court from consderng te
questons sought to be rased by the appeant. Rue 24 of the rues of ths
court (188 ed., v) provdes that an appeant s bref sha contan:
specfcaton of the errors reed upon, whch, In cases brought up by wrt of
error, sha set out separatey and partcuary each error asserted and ntended
to be urged and n cases brought up by appea the specfcaton sha state, as
partcuary as may be, In what the decree s aeged to be erroneous. Snce
an appea has now been substtuted for a wrt of error n actons at aw, that
porton of the rue reatng to cases brought here by wrt of error appes to
ths case.
In Cty of Lncon v. Sun apor Street-I ght Co. (59 ed., 756, 758), ths
court ceary stated the reasons for the rue, sayng, among other thngs:
If the rue s observed, the arguments of counse and the consderaton of
the court are concentrated upon the mportant questons n controversy, nstead
of beng scattered and dsspated by the argument and consderaton of numer-
ous sde ssues, that, If at a matera, are generay governed by the decson
of the man questons, and n ths way a |ust resut s more speedy and
certany attaned.
The court ponted out that the rue In effect requres counse to specfy from
the errors assgned n the court beow, whch are frequenty numerous, those
upon whch they w rey for reversa, and that the rue w be enforced by
the court, to the end that the vta Issues n the case may be ceary presented.
The observance of ths rue has been requred by ths court snce the decson
n that case, and faure to observe t s aone ground for affrmance. ( nser
v. Unted States, 231 ed., 856 Lohtnan v. Stockyards Loan Co., 243 ed., 517
Cty of Oodfed v. Roger, 249 ed., 39 Day-West Mnng Co. et a. v. Savage,
253 ed., 54a)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
451
Regs. 9, Sec. 39.
The bref of the appeant does not compy wth the rue. Under the Memo-
randum of ponts and authortes In the bref, certan genera propostons of
aw whch were urged by the appeant n the court beow and rued aganst
t are stated, and, under each such statement, reference s made to certan
assgnments of error by number, as, for e ampe, ssgnments 1, 2, and 3.
Ths s obvousy not the specfcaton of errors requred by the rue referred to.
owever, to avod any feeng that the resut of ths case mght have been
dfferent had ths rue not been voated, t may as we be sad that we are
of the opnon that the tra court was |ustfed n enterng |udgment for the
appeee. The consttutonaty of the ct n queston was sustaned by the
Supreme Court of the Unted States n MtCray v. Unted States (195 U. S., 27).
The appeant contended that the ct dd not appy to substtutes for butter
made of vegetabe o. The court beow hed that t dd, and we thnk that
that s a reasonabe constructon of the ct. In that connecton, It s of some
nterest to note that n ts opnon n the McCray case, on page 43, the Supreme
Court, n quotng that porton of the ct whch the appeant here cams
e cudes vegetabe-o butter substtutes, does so as foows: and a m tures
and compounds of taow, beef-fat, suet, ard, ard-o, vegetabe-o and annotto.
The |udgment s affrmed.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
MISC LL N OUS RULINGS.
OL OM RG RIN .
I -28-4699
MS. 104
Schedue of oeomargarne produced and materas used durng the month of May,
1930, as compared wth May, 1929.
May, 1930.
Tota producton of uncoored oeomargarne
Ingredent schedue for uncoored oeomargarne
utter -
Cocoanut o -
Cottonseed o.- - -
Dervat ve of gycerne
dbe taow -
Lecthn
Mk
Mustard o
Neutra ard
Oeo o
Oeo stearnc
Oeo stock
Pam o
Peanut o
Sat
oda (benzoate of)--
Soya bean o -
Tota...
Tota producton of coored oeomargarne
Ingredent schedue for coored oeomargarne:
utter
Cocoanut o
Coor -
Cottonseed o
Dervatve of gycerne -
Lecthn
Mk...
Neutra ard -
Oeo o -
Oeo stearne
Oeo stock
Pam o.
Peanut o
Sat
Soda (bcnoate of)
Tota
23,683.188
119,121
12,827,632
1,990. MS
10,840
200
62
6,623.061
2,175
1,034,263
2, 787, 024
492,782
91.688
28,473
490, 581
1,990,508
6,288
214,268
28, 709.091
1. 128.356
1.989
408,412
1,467
124,983
19
2
312,264
us.
289, 591
13,015
6,489
10,684
15,527
95.649
97
1,378,250
(452)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
453
Msc.
I -32-1740
MS. 105
Schedue of oeomargarne produced and materas used durng the month of une,
1930, as compared wth une, 1929.
une, 1930.
uno, 1929.
Tota producton of uncoorod oeomargarne
Ingredent schedue for uncoored oeomargarne:
utter
Cocoanut o
Corn o
Cottonseed o
Dervatve of gycerne
dbe taow
Lecthn
I tsene coucentrate -
Mk
M:stard o -
Neutra ard --- -
Oeo o
Oeo stearne
Oeo stock
1 o.
ut o.
t.
Soda (
Soya bean c
Tota.
Tota producton of coored oeomargarne..
Ingredent sch
utter
Cocoanut o
Coor
Cottonseed o
Dervatve of gycerne.
Mk
Neutra ard
Oeo o
Oeo stearne
stock
(benzoate of).
bean o.-
21,000.190
99.
11,468,1
1,781.
5.787,
1.
MS,
2,604.
505.
89,
29,
387.
1,766.
6.
190.
25, 562,099
2.589
295,670
1. 1.12
100.078
10
287.087
107.780
240,285
11,590
8,828
20.393
12.284
78,673
84
291
1,166,752
23, 084.734
192,775
11.674, 104
1.993,477
. sod
6,118.116
630
1.402.912
3. 437,207
605.734
70,518
75,742
366. 636
1, 870, 503
7,403
27,717.357
905.746 1,210.847
2. 236
364.610
1,679
130.430
368.491
153.
335.979
18.398
18.630
17.999
15.802
98,160
137
1,515,678
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Msc.
454
I -37-4777
MS. 106
Schedue of oeomargarne produced and materas used durng the month of uy,
19S0, as compared wth uy, 19S9.
Tota producton of uncoorcd oeomargarne
Ingredent schedue for uncoorcd oeomargarne:
utter
Cocoanut o
Corn o
Cottonseed o
Dervatve of gycerne
dbe taow
gg yoks (fresh)
Lecthn
Lcsene concentrate
Mk .....
Mustard o
Neutra ard
Oeo o
Oeo stearne
Oeo stock
Pam o
Peanut o
Sat.
Soda (benzoate of).
Soya bean o -
Tota.-
Tota producton of coored oeomargarne
Ingredent schedue for coored oeomargarne:
utter - --
Cocoanut o
Coor
Corn o
Cottonsoed o -
Dervatve of gycerne
Mk
Neutra ard
Oeo o
Oeo stearne
Oeo stock -
Pam o..
Peanut o
Sat
Soda (benzoate of) -
Soya bean o
Tota.
uy, 1930.
Pounds.
20,149.391
11,190,994
31,447
1,497,873
12,034
103
44
5, 594.907
1.172
925,304
2,368.911
426.520
110,383
32.942
432, 191
1.722, 079
13, 221
176.912
24, 625,600
827,066
1,361
263,777
1,194
420
89,125
20
242.008
99,771
225,006
14.094
9,160
18,564
10.289
72,813
74
48
1,047,728
Of the amount produced, 11,417 pounds were reworked.
Of the amount produced, 3,608 pounds were reworked.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
455 Mso.
I -41-4801
MS. 107
Schedue of oeomargarne produced and materas used durng the month of ugust,
1930, as compared wth ugust, 1929,
ugust,
1929.
Tota producton of uncoorod oeomargarne _
Pounds.
27,008,714
Ingredent schedue for uncoored oeomargarne:
utter
103,955
, 217, 172
26, 107
2, 812, 100
14, 912
225,482
14,269,639
2,255,770
gg yok
o
1,000
660
Lecthn
44
Mk
5, 909,243
1.717
839,800
2,489,342
466, 976
1 4. 640
32,365
465, 143
1,894,162
7,202
206,253
7, 738,652
1, 335
1,548,604
Oeo o
8, 548,849
582,389
Oeo stock
76, 735
95.028
405,116
2,207, 793
16,440
32
Sat
Tota
28,591,243
32,973,504
Ingredent schedue of coored oeomargarne:
867, 521
1,393,343
3,434
261,386
1.150
93.669
28
3,439
445, 510
Coor
1,662
131,083
dbe taow _
19
420
Mk
264.068
128,151
231, 697
10,789
18,647
26, 191
11,582
77,550
89
404,981
167,062
373,868
13.055
18,284
35.883
17.053
109,205
158
Oeo o
Tota _
1, 128, 450
1,721,641
1 Of the amount produced, 32,057 pounds were reworked.
1 Of the amount produced, 1,206 pounds were reworked.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Msc.
456
1 15-1829
MS. 108
Schedue of oeomargarne produced and materas used durng the
September, 19S0, as compared wth September, 1929.
September, September.
1930. 1929.
Tota producton of uncoored oeomargarne
Ingredent schedue for uncoored oeomargarne:
utter
Cocoanut o
Cora o
Cottonseed o
Dervatve of gycerne
dbe taow
gg yok --
Lecthn
Mk
Mustard o
Neutra ard
Oco o
Oeo stearne
Oco stock -- -
Pam o.
Peanut o
at
esame o -
8oda (bonroate of)
Soya bean o
Pound .
27.483, 217
123,352
15,472, 145
91,195
2.030.997
21,545
70
870
7.492,524
2,280
920.080
3,210.089
. .27. 117
139,800
37.173
574, 476
2,395,633
9,175
9.583
306,316 I
Tota .
33,365.380 35,337,847
Tota producton of coored oeomargarne
Ingredent schedue for coored oeomargarne:
utter
Cocoanut o
Coor
Corn o
Cottonseed o -
Dervatve of gycerne
Lecthn
Mk
Neutra ard..
Oeo o
Oeo stearne -
Oeo stock - _
Pam o
Peanut o -
Sat
Soda
Soya bean o -
1 1,071,118 1,582.6 7
Tota.
3,013
34. ., 713
1,551
195
119,734
36
25
306.306
123.036
287,556
11,912
7,015
30,954
15,143
9a 767
1,323,940
1 Of the amount produced, 14,453 pounds were reworked.
1 Of the amount produced, 834 pounds were reworked.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
457
Msc.
I - 9-4857
MS. 109
Schedue of oeomargarne produced and materas used durng the month of October,
1930, as compared wth October, 1989.
Tota producton of uncoorcd oeomargarne
Ingredent schedue for uncoorcd oeomargarne:
utter
Cocoanut o
Corn dL
Cottonseed o _ _
Dervatve of gycerne _
dbe taow _
yok...
Oeo stock...
Pam o
Peanut o
Sat.
Sesame o--
Soda (bemoate of)
Soya bean o _.
Tota
Tota producton of coored
Ingredent schedue for coored oeomargarne:
utter
Tocoanut o
Coor
Cottonseed o
Dervatve of gycerne
Lecthn
Mk
Neutra ard _ -
Oeo o
Oeo stearne -
Oeo stock
Pam o
Peanut o
Sat
Sesame o
Soda (beraoate of)
Soya bean o
Tota
October,
1930.
Pounds.
31,022, 184
127,277
17,858,869
8,663
2,369, 723
18,607
60
1,470
8, 719, 262
2,981
1,034,883
3, 285,931
556, 115
90,515
43,651
661, 915
2,625,411
17, 747
9,434
343,333
37,673,637
1,169, 207
3,771
391,591
1,479
135,269
61
41
346,347
133, 705
296,524
11,081
1,748
7, 775
17, 874
97,353
8
131
1,099
1, 445,842
Of the amount produced, 57,792 pounds were roworkod.
Of the amount produced, 2,073 pounds were reworked.
35942
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Msc.
45S
MISC LL N OUS.
I -28-4697
. R. 12440, PU LIC, NO. 376, S NTY- IRST CONGR SS.
n ct provdng certan e emptons from ta aton for Treasury bs.
e t enacted by the Senate and ouse of Representatves of the
Unted States of merca n Congress assembed, That secton 5 of
the Second Lberty ond ct, as amended (Pubc, No. 11, Seventy-
frst Congress, une 17, 1929), s amended by addng at the end
thereof a new subdvson to read as foows:
(d) ny gan from the sae or other dsposton of Treasury bs Issued
hereunder (after the date upon whch ths subdvson becomes aw) sha be
e empt from a ta aton (e cept estate or nhertance ta es) now or hereafter
mposed by the Unted States, any State, or any of the possessons of the Unted
States, or by any oca ta ng authorty and no oss from the sae or other
dsposton of such Treasury bs sha be aowed as a deducton, or otherwse
recognzed, for the purposes of any ta now or hereafter mposed by the Unted
States or any of ts possessons.
pproved une 17, 1930.
I -29-4714
. . R S. 340, PU LIC R SOLUTION NO. 88, S NTY- IRST
CONGR SS.
ont resouton e tendng the tme for the assessment, refund,
and credt of ncome ta es for 1927 and 1928 n the case of marred
ndvduas havng communty ncome.
Resoved by the Senate and ouse of Representatves of the Unted
States of merca n Congress assembed, That the three-year perod
of mtaton provded n secton 277 of the Revenue ct of 1926
upon the assessment of ncome ta es mposed by that ct for the ta -
abe year 1927, and the three-year perod of mtaton provded n
secton 284 of the Revenue ct of 1926 n respect of refunds and
credts of ncome ta es mposed by that ct for the ta abe year 1927
sha be e tended for a perod of one year n the case of any marred
ndvdua where such ndvdua or hs or her spouse fed a separate
ncome-ta return for such ta abe year and ncuded theren ncome
whch under the aws of the State upon recept became communty
property.
Sec. 2. The two-year perod of mtaton provded n secton 275
of the Revenue ct of 1928 upon the assessment of ncome ta es
mposed by Tte I of that ct for the ta abe year 1928, and the
two-year perod of mtaton provded n secton 322 of the Reve-
nue ct of 1928 n respect of refunds and credts of ncome ta es
mposed by that ct for the ta abe year 1928 sha be e tended
for a perod of one year n the case of any marred ndvdua where
such ndvdua or hs or her spouse red a separate ncome-ta
return for such ta abe year and ncuded theren ncome whch under
the aws of the State upon recept became communty property.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
459
Msc.
Sec. 3. The perods of mtatons e tended by ths |ont resou-
ton sha, as so e tended, be consdered to be provded n sectons
277 and 284 of the Revenue ct of 1926 and sectons 275 and 322 of
the Revenue ct of 1928, respectvey.
Sec. 4. Nothng heren sha be construed as e tendng any perod
of mtaton whch has e pred before the enactment of ths |ont
resouton.
pproved une 16, 1930.
I -29-4715
Mm.3814
Speca dvsory Commttee Com. Mmeograph 3558 amended.
Treasury Department,
Offce of Commssoner of Interna Revenue,
Washngton, D. C, uy 2, 1930.
Coectors of Interna Revenue, Interna Revenue gents n Charge.
Offcas and mpoyees of the ureau of Interna Revenue, and
Others Concerned:
ffectve as of uy 1, 1930, Commssoner s Mmeograph 3558,
pubshed n Cumuatve uetn I-2, page 403, and reatng to the
organzaton of the Speca dvsory Commttee, s amended to read
as foows:
ffectve as of ugust 1, 1927, there s estabshed n the offce of the Com-
mssoner a commttee to be hereafter desgnated as the Speca dvsory
Commttee, consstng of a charman, members, and a requred personne to
perform the dutes ncdent thereto.
The genera purpose of ths body sha be to e amne Into the reasons under-
yng the accumuaton of contested ncome, profts and estate ta cases n
the ureau and before the Unted States oard of Ta ppeas, and the
preventon thereof.
In connecton wth such genera purpose It w consder and act upon,
sub|ect to the approva of the Commssoner, the foowng casses of cases:
(a) Cases pendng In the ureau on whch the advce of the Commssoner
s desred as to questons of ureau pocy
(b) Cases arsng out of the mang of defcency notces as prescrbed by
the varous Revenue cts.
(c) Cases, not fang In (a) and (b) above, submtted to t by the offce of
the Commssoner.
The functons heretofore performed by the 60-day conference unts of the cor-
poraton audt dvson and the persona audt dvson, and a porton of the
functons heretofore performed by the revew dvson of the offce of the
Genera Counse of the ureau of Interna Revenue, wth such modfcatons
as may be deemed necessary, w become a part of the functons of the
commttee.
Compete records sha be mantaned by the commttee of Its acton on
cases. The commttee sha not reconsder any case on whch the revew
dvson of the Genera Counse s offce has taken acton pror to uy 1, 1930,
In the absence of newy dscovered evdence, or recent court or oard decsons
n whch the ureau has acquesced, or changes In the aw and reguatons.
Robt. . Lucas,
Commssoner.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Msc.
460
I -41-4800
T. D. 4300
Certfcates reatng to e empton of veterans from payment of
edera Income ta , as requred by Word War eterans ct.
Treasury Department,
Washngton, D. C, October 8,1930.
To the Commssoner of Interna Revenue, Coectors of Interna
Revenue, ard Others Concerned:
Secton 200 of the Word War eterans ct, 1924, as amended,
and further amended by secton 11 of the amendatory ct approved
uy 3, 1930, provdes n part as foows:
Provded, That no dsabty aowance under ths paragraph sha
be payabe to any person not entted to e empton from the payment of a
edera Income ta for the year precedng the fng of appcaton for such
dsabty aowance under ths paragraph.

The Secretary of the Treasury Is hereby drected, upon the request of the
drector to transmt to the drector a certfcate statng whether the veteran
who s appyng for a dsabty aowance under ths paragraph was entted
to e empton from the payment of a edera ncome ta for the year precedng
the fng of appcaton for the dsabty aowance, and such certfcate sha
be concusve evdence of the facts stated theren.
The Commssoner of Interna Revenue, the Deputy Commssoner
of Interna Revenue n charge of the Income Ta Unt, and the
coectors of nterna revenue for the severa nterna revenue coec-
ton dstrcts are hereby authorzed to prepare and sgn an appro-
prate certfcate upon a request therefor by the Drector of the
eterans ureau.
The certfcate w be n the foowng form:
Treasury Department,
Date
To the Drector, U. 8. eteran ureau:
Ths Is to certfy that Mr. , of
( street ) (Cty (State)
was (not) entted to e empton from the payment of a edera Income ta for
the caendar year 19 .
y drecton of the Secretary.
(Tte)
The regona ad|udcaton offcers of the eterans ureau have
been authorzed by the drector to make requests for such certfcates
whenever desred. The form provded by the eterans ureau for
makng such requests w have appended thereto a form for the cer-
tfcate. It w, therefore, not be necessar|r for the Department to
provde any forms for that purpose. rrangements have been made
whereby the requests w be transmtted by the regona ad|udcaton
offcers to the coectors of nterna revenue for the respectve coec-
ton dstrcts n whch the appcants resde.
In those cases where the appcant dd not fe a return for the year
precedng the fng of the appcaton, or n cases where the appcant
fed a return whch s retaned n the coector s offce, such nvestga-
ton as appears necessary w be made by the coector s offce and the.
requred certfcate w be prepared n that offce for the sgnature of
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
461
Mso.
the coector. In those cases where the appcant fed a return whch
s not retaned n the coector s offce such nvestgaton as appears
necessary w be made by the Income Ta Unt and the requred
certfcate w be prepared n that unt for the sgnature of the
deputy commssoner.
fter the certfcates have been sgned they w be transmtted
drect to the respectve regona ad|udcaton offcers from whom they
were receved.
Ooden L. Ms,
ctng Secretary of the Treasury.
1I -52-4887
Dsoarments 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 ds-
barment.
Cause.
bbott, Lese
New York, N. Y_.
New York, N. Y..
Not. 28,1929
an. 2,1930
Charged wth faure to pay the edera Income
ta es assessed aganst respondent for the
years 1920, 1923, 1925, and 1928. Charges
found proven.
Charged wth recevng money from cents to
pay ther edera Income ta es wth fang
to pay such money to the coector of Interna
revenue and wth Issung fase and forged
edera Income ta recepts to such cents.
Charges found proven.
erger. . Mar|ore..
oywood, Caf-
Worcester, Mass..
Norfok, Nebr
pr. 8,1930
Charged wth knowngy advsng and counse-
ng cents to make fase edera ncome ta
returns and wth knowngy preparng fase
ncome ta returns for such cents. Charges
found proven.
rodsky, yman M_
May IS, 1930
Mar. 26,1930
May 14,1930
Charged wth appropratng funds of hs em-
poyer to hs own use. Charges found
proven.
Chambers, W.
Charged wth the preparaton of fase edera
ncome ta returns for ta payers. Charges
found proven.
Cooper, Merton _._
ormery Chcago,
111., now opn,
Mo.
Charged wth ssung frauduent checks and
recevng goods, moneys, and hoto accommo-
datons on such worthess checks. Charges
found proven.
Davdson, ohn L
Chcago, I
an. 2,1930
Charged wth frauduenty convertng funds
beongng to cents to hs own use. Charges
found proven.
Daz, uan
Dworak, .
Tampa, a.
an. 14,1930
pr. 21,1930
Charged wth havng been convcted of the
crme of forgery. Charges found proven.
Omaha, Nebr
Charged wth preparng a fase fnanca state-
ment for a corporaton, whch was used to
Induce persons to purchase shares of stock
n such corporaton. Charges found proven.
ayden, dward .
oywood, Caf..
pr. t, 1930
Charged wth knowngy advsng and counse-
ng cents to make fase edera ncome ta
returns and wth knowngy preparng fase
Income ta returns for such cents. Charges
found proven.
Ths rung (4887) ncudes aso rungs Nos. 4688, 4C98, 4706, 4724, 4730, 4741, 4748,
4761, 4767. 4772, 4778, 4782, 4787, 4703, 4802, 4808, 4815, 4824, 4830, 4838, 4845, 4851,
4858, 4868, and 4878. 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-
month perod anuary 1-Deccmber 31, 1930, Incusve, and n suspensons In effect durng
the 0-month perod uy -December 31, 1030, Incusve. It does not ncude those barred
from practce by reason of dsapprova of ther appcaton for enroment.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
Msc.
Name.
ddress.
Date of ds-
barment.
Cause.
abach, . ar .
McOratb, ames ..
Meakn, ohn
Mer, Mchao
Swanwck, ohn T..
Terry, 0. C
Whte, oward ._
Readng, Pa-
ormery Savan-
nah, Ga., now
asthampton,
Mass.
ormery New-
ark, N. ., now
Lnden, N. .
atmore, Md
Toedo, Oho
ormery Long
each, Caf.,
now Los nge-
es, Caf.
Now York, N. Y..
Oct. 10,1929
Oct. 10,1929
Oct. 10,1929
Oct. 31. 1930
Sept. 18,1929
an. 17.1930
une 13.1930
Charged wth msappropratng 1,000 of
partnershp funds and wth makng fa )
representaton to hs partners that such
1,000 had been pad to Government offcas.
Charges found proven.
Charged wth havng obtaned 500 from cent
n ta caso upon fase representaton that
such 500 was to be pad to Government
offca. Charges found proven.
Charg wth havng been convcted on an
ndctment for brbery. Charges found
proven.
Charged wth embezzement of funds of cents.
Charges found proven.
Charged wth makng fase ncome ta returns
n hs own ta matters. Charges found
proven.
Charged wth preparng fase ncome ta re-
turns for cent wth ntent to ad such cent
to evade the payment of ncome ta es.
Charges found proven.
Charged wth havng msapproprated trust
funds to hs own use, and wth havng been
convcted and sentenced to serve a term n
State prson by Stato court for such crme.
Charges found proven.
SUSP NSIONS.
The Secretary of the Treasury, after due notce and opportunty
for hearng, has ordered the suspenson from practce before the
Treasury Department for the perod stated n each case of the
foowng-named attorneys and agents:
Name.
ddress.
Perod of sus-
penson.
Cause.
Cathrae, W am
Morrson.
Crag, ames W
Lemon, George L
mth, ugh Nor-
man.
Tnkof, Paysof I
usts, a
Washngton, D. O.
ormery rmng-
ham, a., now
acksonve, a.
Chcago, 111.
Chcago, III _
1 year, from
Oct. 4, 1929.
90 days, from
pr. 9, 1930.
6 months, from
Mar. 18,1930.
90 days, from
une 13,1930.
1 year, from
une 4, 1930.
Charged wth makng fase Income ta returns
for ta payers. Charges found proven.
Charged wth hodng hmsef out as beng
nfuenta wth the offcers of the Interna
Revenue ureau as an Inducement to cm-
poy respondent as assocate counse n ta
cases pendng before the Interna Revenue
ureau. Charges found proven.
Charged wth soctng empoyment n ed-
era ta matters from persons wth whom
respondent had no prevous assocaton
aso charged wth offerng of spt fees wth
aymen n ta cases n whch empoyment
shoud be procured for respondent by such
aymen. Charges found proven.
Charged wtb empoyng a soctor to soct
empoyment n edera ta matters and
dvdng fees wth such soctor. Charges
found proven.
Charged wth havng fed wth the coector
of nterna revenue an atered surety bond,
and wth preparng fase edera Income
ta returns. Charges found proven.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
463
Msc.
Resgnatons from enroment to practce 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.
ddress.
Desgnaton.
Date of
acceptance.
Mettert, OrvUe C
ormery ort Wayne, Ind.,
now Detrot, Mch.
Sept. 26,1930
ormery Yankton, S. Dak.,
do
Oct. 8,1930
now Los ngees, Caf.
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
IND .
(See Cams.)
(See Corporatons.)
batement, cams for
ffated corporatons
ens, nonresdent, saes n Unted States
mendments:
Reguatons 8
rtce 92
rtce 110
Reguatons 37, artce 27
Reguatons 63, artce 23
Reguatons 68, artce 22..
Reguatons 70
rtce 22
rtce 27.
Reguatons 74
rtce 811 - --
rtce 812.
rtce 817
rtce 1042...
mortzaton, computaton .
nnutes, n eu of dower or curtesy, ncome.
rchtect, ong-term contracts, bass of reportng ncome.
rzona, communty property and ncome, returns
ttorneys and agents:
Dsbarments and suspensons
atons from enroment
, oss from
.
ad debts:
onds, Impera Russan Government
Debtor s obgaton secured deducton
Reserve method, 1921 ct, treatment
anks:
ssessments for depostors guaranty fund, Te as.
onds:
batement cams .
Russan, bad debt deducton
Tobacco ta , new, when requred ....
raz, equvaent e empton, earnngs from documented shps.
udngs, demoton, osses
usness e penses:
ddtona compensaton, servces rendered n pror years-
Commssons, securtes purchase
Corporate payment n settement of stockhoders dspute.
Rutag
No.
Page.
(4819
354
(4820
360
4766
449
4745
449
4694
425
4694
425
4695
425
4696
426
4744
427
4859
143
4859
143
4859
143
4779
147
4709
348
4833
93
4841
211
4883
333
4734
206
4871
199
4887
461
4887
463
4834
112
4813
345
4836
342
4722
347
4775
281
(4691
152
4818
155
4822
398
4813
346
4766
449
4779
147
4693
340
4885
384
4842
353
4849
382
(465)
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
466
usness e penses Contnued.
Insurance premums, corporaton offcers, deducton
Reserve fund, empoyer s nsurance, workmen s compensaton.
usness eague. (See empt corporatons.)
C.
Caforna:
Communty property
Gasone ta , deducton
Capta e pendtures, commssons pad n purchasng securtes..
Capta gans and osses, rea estate deveopment saes
Capta stock ta :
ass of ta : Carryng on or dong busness
empton of nsurance companes not appcabe
Insurance company wth addtona busness
Reopenng of refund cams, mtaton
Cemetery assocatons, Washngton, perpetua care fund
Certfcate of e empton, Word War veterans, procedure
Ceyon, equvaent e empton, 1928 ct
Chffro d affares ta es, rance, credt for ...
Ctzenshp, mercan-born women marryng aens
Cams:
batement
onds. (Sec onds.)
Coecton stayed, refund mtaton
Credt or refund. (See Credt or refund.)
Cosng agreements. (-See Ta es: na determnaton and
mert.)
Commssons:
ank, rea estate oans, when ta abe
Insurance premum renewas.
Securtes purchase, deducton
Communty property and ncome:
rzona
Caforna
Lousana
Returns for 1927 and 1928, assessment and refund mtaton,
perod e tended
Te as
Deceased spouse, estate ta es
usband s share donated to wfe, status of ncome from..
Washngton
Compensaton:
ddtona, servces rendered n pror years
Constructve recept. (See Constructve recept.)
State offcers and empoyees. (See State.)
Consodated returns. (See Returns.)
Constructve recept:
Compensaton, stock and check, maed end of year
Dvdend payabe one year, check receved ne t year
Contracts, Government, canceed, amount receved under subse-
quent agreement
Corporatons:
ffaton, economc contro, stock ownershp dstngushed
empton. (See empt corporatons.)
oregn, nterest receved on ta refund, ncome
Court decsons:
etna Lfe Insurance Co. v. aton, coector
man Co. v. Unted Staes
nahma Reaty Corpraton v. Commssoner I
Rung
No.
4784
4806
4686
4733
4842
4863
4743
4712
4712
4739
4776
4800
4817
4795
4816
4703
4771
(4786
4721
4862
4865
4842
4871
4686
4872
4717
4873
4750
4759
4874
4885
4804
4708
4856
4850
4882
4756
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
467
decsons Contnued.
ndrews Stee Co. v. Unted States.
ankers Reserve Lfe Co. v. Un
ass, coector, v. Group ro. 1
eckers v. Unted States
echer v. Lucas, Commssoner
ender, coector, v. Pfaff
oston Pressed Meta Co. v. Unted Sates
rant Co. v. Unted States
raun e at., e ecutors, v. Leweyn, coector
Coumba State Savngs ank v. Commssoner
Commssoner v. ngham
Commonweath Commerca State ank v. Commssoner
Conne, e ecutor, v. opkns, coector
Consuch Lne of Treste v. owers, coector
Darby-Lynde Co. v. e ander, coector
Dewey Portand Cement Co. v. Crooks, coector
are e a. v. Commssoner .
emng v. Renecke, coector
Ooode, coector, v. och
arrow-Tayor utter Co. v. Crooks, coector
ener, coector, v. Grandn
nd v. Unted States
ome Tte Insurance Co. v. Unted States
opkns, coector, v. acon
utton v. Commssoner
enkns Steamshp Co. v. Rouzahn, coector
rschbaum Co. v. Unted States
oepf et a. v. Commssoner
Lberty Lfe Insurance Co. v. Peppere, coector
Lucas, Commssoner, v. ansas Cty Structura Stee Co
Lucas, Commssoner, v. O bre rush Co
Lucas, Commssoner, v. Pod Lumber Co
Lucas, Commssoner, v. St. Lous Natona aseba Cub
Mascot O Co., Inc., v. Unted States
McCaughn, coector, v. Phadepha arge Co. et a
Mer dor Lumber Co. v. Commssoner
Monarch ectrc Wre Co. v. Commssoner
Moorman ome for Women et a. v. Unted States
Neman-Marcus Co. v. Lucas, Commssoner
Northwestern obbers Credt ureau v. Commssoner_
One undred ve West fty-ffth Street, Inc., v. Commssoner.
Orpheum Crcut, Inc., v. Renecke, coector.
ts, v. vcutttnt
Overbey, e ecutor, v. Unted States.
Parrott et a. v. Unted States
Phps et a., e ecutors, v. Commssoner
Poe, coector, v. Seaborn
Pontac Commerca Savngs ank v. Commssoner
Reeves, Inc., v. nderson, coector
Rker, e ecutor, v. Commssoner
Rversde Dan Rver Cotton Ms, Inc., v. Unted Sates
Rogers v. Unted States
Roy Ttcomb, Inc., v. Unted States
Ruprecht v. Commssoner
Sayers Scov Co. v. Unted States
Sooy v. Commssoner
Sprng Canyon Coa Co. v. Commssoner
Stranahan v. Commssoner
Unted States v. mercan change Irvng Trust Co. et a
Unted Sates v. rggs Manufacturng Co
Unted States v. Ceveand, Panesve astern Raroad Co.,

Staes v. Converse Cooperage Co. e a.
Rung
No.
4807
409
4720
257
4702
90
4791
294
4686
325
4872
200
4703
156
4751
192
4844
433
4721
332
4708
289
4813
345
4843
407
4799
447
4827
176
4711
375
4837
363
4737
416
4871
199
4713
450
4814
430
4757
272
4712
437
4873
201
4842
353
4877
267
4856
401
4792
297
4753
369
4752
299
4885
384
4886
396
4821
392
4692
242
4818
155
4798
314
4867
404
4729
275
4812
284
4704
228
4849
382
4743
441
4881
208
4760
428
4719
253
4874
202
4768
402
4786
160
4884
366
4731
269
4758
302
4705
244
4723
362
4738
420
4736
283
4806
379
4836
342
4797
239
4709
348
4850
387
4822
398
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
468
Court decsons Contnued.
Unted Staes v. Stange
Unversa attery Co. et a. v. Unted States
Waer v. Commssoner
Washngton Coa Coke Co. v. ener, coector
Wheeer Lumber, rdge Suppy Co. of Des Mones, Iowa,
v. Unted States
Wams v. Commssoner
Wsconsn Natona Lfe Insurance Co. v. Unted States
Courts, |ursdcton of. (See ursdcton.)
Credt or refund:
Cams
ass of subsequent sut, prerequste
Date of aowance
Lmtaton perod. (See Lmtaton perod.)
Interest. (See Interest.)
Lmtaton perod. (See Lmtaton perod.)
Credts:
arned ncome
Computaton nstructons and ustratons, 1928 ct_-
Partners , capta net gan and nonta abe ncome..
oregn ta es. (See Credts: Ta es.)
Ta es, foregn-
ffated group
rance, chffre d affares
Curtesy, annuty n eu of, ncome
Decedents:
states. (See states and trusts.)
Land contracts transmtted at death
Defcences, ta es. (See Ta es.)
Defntons:
Oeomargar ne
Reorganzaton
Depeton:
Mnes, essee s deducton
O and gas
ass for aowance
Lessee s aowance
Depostors guaranty fund, banks assessments, deducton
Deprecaton, gan or oss bass, ad|ustments. (See Gan or oss.)
Dsbarments. (See ttorneys and agents.)
Dscount, bank, rea estate oans, when ta abe
Dstrant, coecton of ta es. (See Ta es: Coecton.)
Dstrbutons, qudatons. (See Lqudaton.)
Dvdends:
Cash, par vaue of stock reduced
Lqudaton. (See Lqudaton.)
Payabe one year, check receved ne t year, constructve re-
cept
Presumpton as to earnngs from whch pad
Stock receved as, sae of, ta abe gan
Dower, annuty n eu of, ncome
Due date, addtona assessment, constructon
Dues and ntaton fees:
Cub prveges, ta abty
Soca cub, ta abty
Rung
No.
4864
14866
4742
4765
4735
4687
4854
4728
4843
4807
4755
4853
4764
4795
4833
4810
4713
4811
4855
4827
4796
(4765
4848
4775
4721
4747
.4749
4708
4864
4791
4833
4841
14883
4731
4823
4737
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
469
.
arned Income credts. (See Credts.)
quvaent e empton, foregn shp s earnngs
raz
Ceyon
state ta :
Deductons
dmnstraton e penses
Refund, admnstraton e penses, mtaton
Gross estate
Insurance
Property prevousy ta ed, deducton
Separate and communty property, Te as
Insurance recevabe by other benefcares, Reguatons
70 amended
Property hed |onty or as tenants by the entrety
states and trusts:
Decedent s estate durng admnstraton, partnershp nterest
of decedent
Income ta abe to benefcares
Unused trust ncome set asde for chartabe Insttuton,
deducton
cess-profts ta es. (See Ta es: War-profts and e cess-
profts.)
changes:
Reducton of par vaue of stock, cash dstrbuton
Reorganzaton, gan or oss
empt corporatons:
usness eague
sh and game assocaton
eath and accdent nsurance companes
Insurance company wth addtona busness
Rado ndustry promoton -.
empton:
Certfcates of, Word War veterans, procedure
Corporatons. (See empt corporatons.)
Income, Treasury bs
.
sca years, ended n 1929, frst return, fractona perod, ta
computaton
sh and game assocaton, e empton
orda gasone ta , deducton
oregn corporatons. (See Corporatons.)
ractona year, frst return, ta computaton
rance, chffre d affares ta es, credt for
G.
Gan or oss:
ass for determnng, deprecaton ad|ustments
change of property. (See change of property.)
Land contracts transmtted at death
Reorganzaton. (See Reorganzaton.)
Saes. (See Saes.)
4779
147
4817
148
4844
433
4844
433
4814
430
4760
428
4750
426
4744
427
4694
425
4695
425
4696
426
4710
4884
4729
(4747
4749
4763
4811
4854
4704
4805
4753
4712
4840
4800
14697
4700
4727
4805
4690
4727
4795
4826
4810
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
470
Rung
No.
Gasone ta . (See Ta es: Motor vehce fue.)
Gfts, communty nterest of husband transferred to wfe, Te as,
sae of
Government contracts. (See Contracts.)
L
Income from sources wthn Unted States:
Interest on refund receved by foregn corporaton
Nonresdent aens, saes n Unted States
Indans, Creek, mnor aottees and hers, ncome
Informaton at source:
Dvdends, stock, hed by brokers pendng ownershp ds-
cosure
ng requrements, artces 811, 812, and 817, Reguatons
74, amended
Informaton returns. (See Returns.)
Instament:
Obgatons, and contracts transmtted at death
Saes. (See Saes.)
Insurance:
Premums
Corporaton offcers poces, deducton
Renewa commssons
Proceeds, absoute owner pocy purchased by benefcary..
Insurance companes, e empton. (See empt corporatons.)
Interest:
ccrua-
Securtes transferred n merger, nvested capta
When deductbe
Credts
Date of aowance
Offset of nterest due from ta payer
Overpayment aganst addtona assessment
Indebtedness to purchase ta -e empt securtes, deducton
udgments
Refunds
Date of aowance
oregn corporaton s, ncome
Inventores, base stock method
Invested capta:
Instament saes, unreazed profts
Interest accrued on securtes transferred n merger
Reorganzaton, vauaton of assets
.
udgments, nterest. (See Interest.)
ursdcton, courts :
Revew of Commssoner s dsaowance, bad debt deducton..
Sut to recover ta covered by cosng agreement
.
entucky, edera ta ens, fng of notces
L.
Land contracts transmtted at death, gan or oss
Leases, pubc doman, Te as, essee s ncome, ta abty
4759
4882
/4819
4820
4685
4785
4859
4810
4784
4862
14865
4880
4708
4798
4807
4S07
4731
4875
4866
4757
4S82
4752
4751
4768
4867
4836
342
4720
257
4728
260
4756
263
4774
163
4810
4702
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
471
ssgnment, e cess royaty consderaton as subease, de-|
peton deducton
Income from eased pubc doman, Te as
Lens, edera ta es, fng of notces, entucky
Lmtaton perod:
ssessment of ta es
ppea to oard, e tenson
Commencement date where tentatve or unverfed
return fed
Communty property returns, 1927 and 1928
Defcency, reducton and redetermnaton by oard
Coecton of ta es
ond furnshed wth abatement cam after statutory
perod
Dstrant, faure to surrender ta payer s property
Guaranty depost after statutory perod
Petton fed wth oard, 6-ycar perod, 1926 ct
Waver for assessment, effect of
Credt or refund
Cams
dmnstraton e penses
Commencement date
Reopenng of
Ta egay coected
Coecton stayed by abatement cam
Communty property returns, 1927 and 1928
Suts
Recovery of ta es
Re|ected cams, commencement of 2-year perod
Wavers
ssessment, effect on coecton
ecuton after e praton of statutory perod, vadty.
Lqudaton, dstrbutons, ordnary dvdends dstngushed
Losses:
utomobe, sae of
udng demoton
Corporate payment n settement of stockhoders dspute
Rebates
Lousana, communty property and ncome, returns
M.
Manufacturer s e cse:
Component parts, ta abty
Other automobes, cassfcaton.
Parts or accessores, cassfcaton
Soca cub dues, ta abty
Marred women, naturazaton and ctzenshp
Massachusetts corporaton e cse ta , accrua date
Motor vehce fue ta . (See Ta es.)
N.
Naturazaton, mercan-born women marryng aens,.
Net osses:
ffated group, aocaton, change of status durng ta abe
year
k transactons asde from reguar busness
Rung
No.
4765
4702
4774
4812
4886
4714
4717
4736
4691
4797
4692
4718
4705
4735
4844
4707
4739
4728
4786
/4714
14717
4877
4707
14705
14735
4861
4847
4834
4693
4849
4711
4872
4742
4738
4742
4737
4816
14781
14789
4816
4828
14831
4758
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
472
Rung
No.
o.
Oho property ta es, accrua date
O and gas, depeton. (See Depeton.)
Oeomargarne:
Defnton
Statstcs of producton and materas used
May, 1930 and 1929.
une, 1930 and 1929
uy, 1930 and 1929. -.
ugust, 1930 and 1929-
September, 1930 and 1929.
October, 1930 and 1929
Ownershp certfcates, stock dvdends hed by broker, owners
undentfed
Partnershps:
Dssouton, dstrbutve shares, computaton
Dstrbutve shares, saes, cash and deferred payments, com-
putaton
arned ncome credt. (See Credts.)
Termnaton by death of member, effect of contnung agree-
ment
Premums, nsurance. (Sec Insurance.)
Property ta es. (See Ta es.)
Pubc doman of Te as, essee s ncome from
Rado, assocaton for promoton of ndustry, e empton
Raroads, equpment retred, gan or oss bass, deprecaton ad-
|ustment.
4726
4713
4699
4740
4777
4801
4829
4857
4785
4837
4723
4710
4702
4840
4826
4721
4711
4747
4749
Rea estate, oans, bank dscount and commssons, when ta abe.I
Rebates, osses
Recaptazaton, reducton of par vaue of stock, cash dstrbuton.
Refunds. (See Credt or refund.)
Reguatons, amendments. (See mendments: Reguatons.)
Reorganzaton:
Defnton
changes. (See changes.)
auaton of assets, nvested capta
Reserves:
ad debts, 1921 ct, treatment.
Insurance of empoyer, workmen s compensaton, deducton..
Resgnaton from enroment. See ttorneys and agents.)
Returns:
Communty ncome. (See Communty property and n-
come.)
Consodated-
ffaton determnaton I
Change of affated status durng ta abe year
Credt for foregn ta es
ecton to fe, change of bass, Commssoner s per-
msson ,.
Subsdary s stock sae, parent s gan or oss bass
Informaton
roker, stock dvdend hod pendng ownershp ds- I
cosure I 4785 I 144
4811
4867
4722
4806
4850
/4828
14831
4764
4821
4876
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
473
Returns Contnued.
Informaton Contnued.
ng requrements, artces 811, 812, and 817, Regua-
tons 74, amended
Tentatve or unverfed, assessment mtaton perod
Russan bonds, bad debt deducton
8.
Saes:
Communty nterest of husband donated to wfe
Instament
Change from accrua bass, ncome treatment
Persona property
Nonresdent aens, ncome from Unted States sources
Partnershp property, cash and deferred payments, com-
putaton
Property acqured pror to March 1, 1913, gan or oss
Stock-
cqured by power of appontment under w, gan or
oss
Purchases and saes wth smar stock as coatera
Receved as dvdend, ta abe gan
Reorganzaton e changes. (See changes.)
Subsdary s, parent s gan or oss bass
Soca cub dues. (See Dues.)
Speca dvsory Commttee, organzaton of
Stamp ta es, passage tckets
State:
Offcers and empoyees, compensaton, 1925 and subsequent
years, ta abty
Ta es
Massachusetts e cse, accrua date
Oho property, accrua date
Stock:
changes. (See changes.)
Saes. (See Saes.)
Suts:
Coecton of ta es, bonds supportng abatement cam,
mtaton
Courts |ursdcton. (See ursdcton.)
Lmtaton perod. (See Lmtaton perod.)
Recovery of ta es
ssessment made under cosng agreement
Cam for refund, prerequste
Coecton stayed by abatement
Suspensons. (Sec ttorneys and agents.)
T.
Ta abe perod, years wth dfferent aws, rst return, ta com-
putaton
Ta es:
ssessment, mtaton perod. (See Lmtaton perod.)
Coecton
Dstrant, faure to surrender ta payer s property, m-
taton
Lmtaton perod. (See Lmtaton perod.)
35942 31 31
Rung
No.
4859
4886
4813
4759
4751
4881
74819
| 4820
4723
4792
4870
4770
4791
4876
4715
4799
4835
(4781
4789
4781
4818
/4720
4728
4843
/4703
14786
4727
4797
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g

e
474
Rung
No.
Pago.
Ta es Contnued
Credts. (See Credts.)
Defcences
Commssoner s determnaton, correctness
Notce, earer notce showng no change of abty
Reducton and redetermnaton by oard, assessment
mtaton
cse. See Manufacturer s e cse.)
Massachusetts corporaton, accrua date
na determnaton and assessment, cosng agreement, sut
to recover ta , court s |ursdcton
oregn, credts for. (Sec Credts.)
Gasone. (See Ta es: Motor vehce fue.)
Motor vehce fue
Caforna
orda
Property, Oho, accrua date
Redetermnaton, Commssoner s authorty
Stamp. (See Stamp ta es.)
State. (See State.)
Suts. (See Suts.)
Tobacco, bond, new, when requred Reguatons 8 amended.
War-profts and e cess-profts, Government contract can-
ceed, amount receved under subsequent agreement
Te as:
Communty property. (See Communty property.)
Pubc doman, essee s ncome from
State banks, depostors guaranty fund, deducton of assess-
nents..:
Tobacco:
Packages, statutory, contents of, Reguatons 8 amended..
Ta . (See Ta es: Tobacco.)
Transferred assets, cams aganst, transferee s abty
Transportaton, servce rendered to a State, e empton
Treasury bs, e empton
U.
Unted States oard of Ta ppeas:
Decsons of
Lst of acqueseenccs and nonacquescences
Wthdrawa of Commssoner s acquescence, mtaton.
na decson, meanng of
ndngs of fact
Petton fed n accordance wth 1926 ct, 6-year perod,
mtaton
W.
Waver of statute of mtatons. (Sec Lmtaton perod: Wav-
ers.)
Washngton:
Cemetery assocatons, perpetua care fund
Communty property and ncome, returns
Word War veterans, e empton certfcates, procedure
4812
4790
4736
/4781
14789
4720
4728
4756
4733
4690
4726
4881
4766
4856
4702
4775
4745
4719
4687
4697
4700
4879
4864
4864
4854
4718
4776
4874
284
241
283
335
109
257
260
263
107
104
106
20S
449
401
00
281
449
253
-117
45S
102
1-8S
290
290
171
247
370
202
460
o
G
e
n
e
r
a
t
e
d

f
o
r

L

n

Z
h
a
n
g

(
N
e
w

Y
o
r
k

U
n

v
e
r
s

t
y
)

o
n

2
0
1
3
-
0
1
-
2
2

0
4
:
0
5

G
M
T


/


h
t
t
p
:
/
/
h
d

.
h
a
n
d

e
.
n
e
t
/
2
0
2
7
/

n
u
.
3
0
0
0
0
0
8
9
0
5
4
3
4
4
P
u
b

c

D
o
m
a

n
,

G
o
o
g

e
-
d

z
e
d


/


h
t
t
p
:
/
/
w
w
w
.
h
a
t
h

t
r
u
s
t
.
o
r
g
/
a
c
c
e
s
s
_
u
s
e
#
p
d
-
g
o
o
g