The Columbian. [volume] (Bloomsburg, Pa.) 1866-1910, 1895-05-17
INCOME TAX EXEMPTION.
Collector Grant Herring Receives Some In.
structions From Treasury Department.

The following letter from the com.
missioner OF internal revenue to Col.
lector Grant Herring, Of this district,
will be interesting to people who are
studying the income tax law:
TREASURY DEPARTMENT,
Office of the Commissioner Of
Internal Revenue.
WAsHINGToN, d. e., May 8, 1895.
Grant Herring Esq, Collector rath
District, Scranton, Pennsylvania.
SIR-In reply to your letter of the
a7th ultimo, and subsequent telephone
message, relative to tax law
of rents and royalties derived from
coal mines and other real estate, and
referring to the profits acquired from
lease. hold or subordinate estates by
persons whose tenure and rights are
fixed by all of the various forms of
contracts and conveyances, you are
advised as follows:
All rents, profits and income deriv-
ed from land, and its immediate pro.
duct, acquired by the owner of the
freehold or dominant estate, are eX-
empt from taxation as income of said
| owner.
This exemption extends to all rents
paid for the use of real estate, either
in money or portion of the products
of the land, and applies alike to all
coal, oil, mineral and other substances
taken from land. Rents and plohts
acquired by the owner of lease mold
or subordinate interests in real estate
do not fal within the exemption
extended to rents and income
of real estate, and are, therefore, sub
ject to taxation as income under the
law and regulations providing for the
return and payment of tax on income.
The line between taxable and non
taxable profits growing out Of royalties
paid for and profits acquired in the
mining of coal is illustrated by the
following examples
A. as owner in fee of land contain
ing deposits of coal or mineral, mines
and sells said coal or mineral and ac-
quires a profit therefrom. Such profit
is the direct income from real estate
and not subject to the income tax.
A sells the coal contained in a por.
ton of the land to B, by conveyance
vesting absolute title in B. to all coal
found on said land, with the right to
exter and mine and remove the same.
B becomes, by virtue of such transfer,
the owner of real estate, and his profits
growing out of the mining and sale OF
the coal purchased, woIld be income
from real estate not subject to taxa
ton.
A leases or rents another portion ol
land to c, with the right to enter and
mine coal for the payment of a definite
amount, either for certain period oil
time, or for each ton Of coal mined
The profits acquired by A, the owner
of the land, would be rent, royalty ol
income from the land, not subject tC
taxation, but all the profits acquired
by c from the mining and sale of saC
coal or sub leasing of said right, would
be profits growing out Of chattel in
terest in land, and not income from
real estate incident to the ownership
thereof, and are subject to taxation.
The exemption can be extended
only to the profits acquired by tn,
owner of the free, hold estate, and al
of the profits of the "working inter
est" in the hands of lessees, contrac
t tors and of all other persons, are sub
ject to income tax.
Respectfully yours,
Wy \NrYcnN