Evening star. [volume] (Washington, D.C.) 1854-1972, 1895-04-09
OFFICIALS PUZZLED
How to Construe the Income Tax
Law Now.
SEVERAL GRAVE QUESTIONS ARISE
Amended Regulations to Be Made
for Collectors Guide.
ANTICIPATED AMOUNT OF TAX

The decision of the Supreme Court yes
terday in the income tax case has plunged
the internal revenue officials into almost
inexplicable mysteries and trouble, and the
more the decision is studied the greater
seems to be the difficulties attending a
clear understanding Of its scope. The
declaration that rents and incomes from
real estate are exempt has opened up
questions very difficult Of solution. The
question has arisen and is under serious
consideration whether the effect of the de-
cision is not to include not only rents
proper, but all profits Of whatever charac-
ter growing out of real estate. including
farm products, timber. coal and all mine
products within the exempt class, SO tnat
all real estate, including buildings thereon,
with whatever else is held by law to be a
part of the realty. will be entirely exempt
from the tax? Whether losses sustained
through bad rent debts, the amount OF ex-
pense incurred in collecting rents or re-
pairs on houses are to be deducted from in
comes Is also a mooted question. Under the
decision rents are not to be included In as
sessing the income tax. Suppose, IT IS
asked, q. mans income is of a mixed char
acter, that is, from real and personal prop
erty. The former is exempt. Can ne de-
duct the eXI enSeS necessary Tor the collec-
income from personal property before max
ing return? The question is puzzling the
revenue collectors and a legal opinion on
the point probably will be sought
Another Grave Question.
Another grave question raised by the de-
cision Is whether the roadbed, round
houses, stations etc, of railroads are real
estate or personal property within the
meaning of the law. The laws of several
states are said to differ on this point, and
on several Others of equal Importance
which are involved in the opinion of the
court.
AS seon as a verified copy of the opinion
can be had the internal revenue officials
will begin the preparation of supplement-
ary regulations which will cover in a more
or less general way the opinion OF the
court, leaving the more abstruse questions
to be solved as they are presented. Col
lectorS of the tax in different parts OF the
country already have begun to telegraph
for instructions on many points, at the
same time stating that the crush of those
who desire to make returns has already
begun. All things considered, 1t is now
thought that the loss to the treasury re-
ccipts from the income tax source will even
exceed 80 per cent of the total that had
been expected from this tax, and may
reach a much higher figure.
Fifty Per Cent Reduction.
The estimate in yesterdays Star that the
bonds from taxation will reduce the collec-
tions from the income tax fully so per cent
Is substantiated by a further examination
of the subject by Treasury experts today.
A loss of S15000.O0 revenue is regarded as
a conservative estimate of the effect Of the
elimination of the two items named from
taxation. In some cities the loss will be
far greater than 30 per cent, notably the
city of Washington, where the loss is ex-
pected to reach 75 per cent. Washington,
iS
Rented HOnses in Other Cities.
The proportion of rented houses in other
cities of the country also is very large. In
1890 the rented houses in New York city
was nearly 81 per cent of the whole. In
Boston it was 81 per cent, in Brooklyn 81,
in Cincinnati so, and in Jersey City 81. In
The other large cities the percentages range
down to Sc at Rochester. In New York
city there were 292.956 rented houses, in
Philadelphia 157 SOB, in Chicago 1885, in
Brooklyn 139.O4O. The total number of
rented houses in the United States in 1890
was 1,120,4S7, which during the last five
years has undoubtedly increased very ma
terally. Dwelling houses, however, repre-
sent only small part of the capital invest
ed in buildings of every character which
produce enormous rentals.
Little Was Expected From Bonds.
Comparatively little was expected from
interest on state. county and municipal
bonds, but the total loss, 1t Is thought, Will
not fall short of s15,O0o000 or s20,O00,O00 for
the first year, and this loss is expected to
increase rather than to diminish in sue
ceeding years should the law remain unre-
pealed. The loss of this revenue, however,
is not the only cause of regret among the
officials The fact that the court was even
ly divided on the main constitutional ques-
ton, it is expected, will result in almost
endless litigation, thus very materially
adding to the expense of collecting the tax.
To Modify Instructions.
Commissioner Miller visited the Supreme
Court rcom today and obtained an official
Copy of the income tax decision, prepara-
tory to the issue of the necessary modified
instructions to collectors of internal rev.
enue These instructions are being. care
fully prepared today. and will probably be
telegraphed late this afternoon. The time
for making returns expires Monday, and
much work remains to be done before that
day Returns can be made on the original
blanks issued by the collector as modified
by the decision. In these blanks rents form
one item and bonds part of another. These
two items can be ignored in making the re-
turn. When the returns are already in
they can easily be amended before the date
of payment, July l. According to an off,
cial of the bureau, there will be less trou-
BILE In making the returns conform to the
law as construed by the court than there
will be in securing the returns. Returns
for incomes taxable to the amount of about
81 800 600 have already been filed at the de-
partment but these will probably be re-
duced 80 per cent, and 1t is intmated that
many people will delay their returns be-
yond the 18th instant. even at the risk of
the so per cent penalty, in the hope that
they may escape the tax altogether.