The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1886-06-26
THE TAXATION OF CAPITAL.
An Important Decision by the Supreme
Court Relating to Tax Assessments,
Stockholders in National Banks May Deduct
Their Bona Eide Debts from the Assessed
Value Of Their Stock.

A decision of unusual public interest was
rendered yesterday in the Supreme Court in the
case of William G. WATSON. as treasurer of
Marion county, against the First National Bank,
of tais city. The important question involved
which the court discusses at great length. was:
I'm the assessment and taxation of shares of
national bank stock, are the own
ers thereof, having no other credits
or moneyed capital from which to deduct their
the assessed value of such shares OF stock" The
court holds that all bona fide debts owing to the
taxpayer may be deducted from the gross
amount of credits Notes. drafts. mortgages
and judgments are all credits within the mean
ing OF the statute.
In reviewing the schedules furnished by as
SCISSORS for the listing of property, the court
dwells specially on Item 81, at the close. which
is as follows:
Credits (by which is meant whatever is due to
the party from any other person. company
corporation, in the shape of labor prop
erty money!, amounting to.-----..------$ ..--.
Less by bona fde Indebtedness (substracted
Leaving a residue of credits amounting to- > ----
This item embraces the court says, the kind
of credits from which the bona fde debts may
be deducted. 1t does not include the two first
items in the schedule, money on hand or on de-
posit, and money loaned on time or on call, nor
the items of bonds and stocks. 1t includes notes,
drafts, mortgages and judgments held or owned
by tax payers. except when they are to secure
money loaned, amounts due for goods and vari-
Gus manufactured articles, sold ut wholesale or
retail, for materials furnished, for work and la
Dor, for professional services, amounts
due upon public improvements, on
accounts of lands sold and all other credits of
every description, due from any person, COM
pany or corporation in the shape of labor. prop
erty or money, except amounts due on loans on
time or on call And this is so whether the
notes, mortgages. judgments and other items of
Indebtedness draw interest or not The court re-
marks that, at the first blush, Section 6235 seems
to be in conflict with this construction of the
law. THAT section" it adds is by way of
limitation upon deductions to be made by the
taxpayer. 1t provides that no person. company
or corporation shall be entitled to any deduction
from the amounts of any bonds, stocks, money
loaned or money at interest We have no
doubt that money at interest was used as the
equivalent of money loaned. In ordinary par
lance money at interest has ref
erence more to money loaned than
to interest bearing notes and the
G213, in giving definition of the terms, per-
sonal estate and personal property, as used in
the acts, provides that they shall include,
amongst other things, all bonds and stocks, all
money at interest and all other credits and in
vestments. Here, evidently. the term money at
interest does not mean accounts and chooses in
action drawing interest but money loaned In
Section 62S6 the term money loaned is used
and not the term money at interest Thus the
terms money loaned and money at interest
seem to be used in the act as convertible terms
IT. however, there were irreconcilable con-
fiict between Sections 6332 and 6336, which pro-
vides the schedule the latter must govern
Upon an examination Of the whole statute, we
n0a of fha 0YlIrI hat he 1,,dix iIt1a1
taxpayer may deduct his bona fide debts, of the
class designated in the act, from all his moneyed
capital and credits, except from the classes spe-
Gifted in the first five items of the schedule
namely-money on hand or on deposit, money
loaned, bonds and shares of stock in corpora
tons"
In considering the statute relating to the linn
itations on the taxation Of shares Of national
bank stock, the court, in answering the ques-
ton as to What is moneyed capital! expresses
the opinion that it has reference to capital in
vested for profit whether in bonds, stocks,
money loaned, or otherwise. and not to debts due
to the tax payer, growing out of the ordinary af
fairs Of business lfe Our statute" the court
says, makes provision for deductiug debts
from the assessed value of shares of national
bank stock but allows such deductions from a
portion of other moneyed capital and thus dis
eliminates against national bank stock" For
convenience. the court makes two divisions of
the moneyed capital of the State-the first Coz
sisting of money hand or deposit, within
or without the State money loaned, bonds issued
by bodies corporate, and shares of stock in COR
porations, including bank stock. The second
division includes all other moneyed capital
The statutory privilege to taxpayers of deduct
ing their debts from the second division Of mon
eyed capital is, practically, to relieve the most
if not the whole, of that capital from taxation,
and leave the burdens to rest upon other prop
erty, including other moneyed capital. A tax
payer having that kind of moneyed capital may
have deduction of his debts from the assessed
value thereof, while another not having such
capital, but having money on hand or loaned
and bonds and stocks, other than shares of
national bank stock, may not have snch de-
duction. If there is any inequality or wrong in
that, as between citizens and Taxpayers. it is a
matter wholly for the Legislature.
Doubtless many holders of shares of national
bank stock may have moneyed capital of the
second division alone, and if so they may deduct
their debts from its assessed value, and thus the
privilege of deducting their debts from the
shares of stock in such cases, can injure no one,
as the debts can be deducted but once That
shares of national bank stock are taxed by
State authority at all is matter of grace or
license. and not Of right. So the Supreme
Court of the United States holds The States,
therefore, must tax shares of stock in accord
ance with that license"
The court decides that the stockholders of the
First National had right to deduct their debts
from the assessed value of their stock. The
that different ruling should be made so that
the case might be appealed to the Supreme
Court of the United States, but this the court
stated that it could not do without disregarding
its honest judgment. Judge Elliott did not par
ticipate in the rendering of the decision