The Pacific commercial advertiser. [volume] (Honolulu, Hawaiian Islands) 1885-1921, 1902-07-30
LOSSES ARE
NOT EXEMPT
No Deduction for
Decrease in
Value.
|DOLE'S OPINION
ON INCOME TAX
Persons Who Sold Sugar Stocks at
a Loss Cannot Claim Offset
in Taxes.

Persons who suffered losses by rea-
son of the depreciation in the value of
sugar stocks, and sold their stock below
par will not be allowed 10 deduct the
loss from their total incomes. This is the
opinion of Attorney General Dole upon
hypothetical case. which Assessor
Pratt submitted and which it is said
governs a large number of returns
made by Honolulu people
Beginning with statement of the
case the Attorney General says in a
letter to the assessor:
Il am in receipt of your communi-
cation in which you say: An individual
acquires prior to July l. 1901. a block
of stock for ten thousand dollars. Dur
ing the year ending June 80, 1902. he
sells this same stock for 5000; loss,
| So, 600 Is he allowed this loss in assess
ing his net income for the year to June
80, 1902
The authority which I have been
able to find most closely bearing upon
| the question which you ask is Gray ".
Darlington, 10 Wall, u. s., So, in which
the Supreme Court Of the United States
was divided. Chief Justice Chase and
| Associate Justices Clifford and Brad
| ley dissenting from the opinion OF the
majority of the court delivered by Mr..
Justice Field.
Our income tax law, Act Xxx OF the
Session Laws of 1901, closely follows
the Act Of Congress of March 2, 1867,
IA Stats. at Large"
-
the Hawaiian income tax law, and also
of the act of Congress of March 2,
1887
The majority opinion of that court
written by Justice Field is quoted in
full, relating as 1t does, not to loss,
but gains in the value of treasury
bonds.
The material part of the decision is
here given, following which is the COM
ment of Mr.. Dole:
1.-The mere fact that property has ad-
vanced in value between the date of
its acquisition and sale does not au-
thorize the imposition OF the tax on
the amount of the advance. Mere adj
vance in value in no sense constitutes
the gains, profits. or income specified
by the statute. 1t constitutes and can
be treated merely as increase of capi-
tai
1.-The rule adopted by the. officers of
the revenue in the present case would
justify them In treating as gains OF
one year the increase in the value Of
property extending through any num-
Der of years, through even the entire
century. The actual advance in value
of property over it's cost may, in fact,
reach its height years before its sale:
the value of the property may. in truth,
be less at the time of the sale than at
any previous period in ten years, yet,
if the amount received exceed the
actual cost of the property. the ex-
cess is TO be treated, according to their
views, as gains OF the owner for the
year in which the sale takes place We
are satisfied that no such result was
intended by the statute"
Until the Supreme Court of the
United States reverses itself, it must
be assumed that the six justices who
held the foregoing opinion were right.
and that the three who dissented were
in error.
If a gradual increase in the value of
securities extending over a series Of
years and eliminating in a sale at an
advanced price rs not taxable as gain
profit. or income OF the year IN which
the sale takes place. II would seem to
follow that a gradual depreciation ex-
tending over a series of years and cui-
minating in sale at a reduced price
is not, within the meaning of the act.
a loss actually sustained during the
year in which the sale takes place.
Very respectfully yours.
(SigneO Z. P. DOLE,