The sun. [volume] (New York [N.Y.]) 1833-1916, 1916-05-24
WAR TAX FIGHT won
BY TRUST COMPANY.
%. 8. Judge Hough Decides
Burden Cannot Be Put on
All Of Capital.
WILL HAVE WIDE EFFECT

Judge Charles NJ. Hough Of the United
States District Court In a ruling made
from the bench yesterday held that the
special war tax on bankers Of October
-. 1914. could not be applied to the
entire working capital. surplus and un-
divided profits Of trust companies. The
Judge accordingly directed the Jury TO
return . verdict for the plaintiff in the
suit through which the Farmers Loan
and Trust Company sought to recover
from the collector OF Internal revenue
for the Second district 5000 paid by
the trust company under the special tax
act
The suit brought by the Farmers
Loan and Trust Company Is the first
Of q series Of similar actions to be tried.
The plaintiffs In the other suits and
the mounts asked by each are Central
Trust Company. s13,654; Guaranty
Trust Company. &22, o69 Title Guarantee
and Trust Company. $11,0o4; United
States Trust Company. 3l0,72s; Trans
atlantic Trust Company, 500 United
States Mortgage and Trust Company.
sam Bankers Trust Company. $o,S42 ;
Lawyers Title and Trust Company. So
SIS Empire Trust Company. S2.065. All
Of the plaintiffs regard Judge Hough's
ruling In the Farmers Loan and Trust
Company case as n sweeping victory, but
a. the Government has announced its In
tention Of taking an appeal, the others
will wait until the United States STU
preme Court has finally passed on the
issue before bringing their suits to trial.
Judge Hough's decision Is OF interest
TO trust companies throughout the coun-
try. which will save "A vast amount OF
money in wal taxes II the ruling Is
sustained. Already. It is estimated. the
trust companies have paid in about
$500, 900 In special war taxes.
The special war tax act of October 22,
1914, provides for the payment by
'bankers'' OF a tax OF 81 for each $1,000
Of capital used or employed. the act ex-
planning that surplus and undivided
profits shall be included In estimating
the working capital. 1t Is contended by
the trust companies that this act only
applies to capital employed In actual
banking transactions and not TO capital
invested In mortgages. title insurance,
trust fund administration the other
forms of investment which go to maxi
up the greater part of "A trust COM
pany's business. The trust companies
are willing to pay a tax on the very
small part OF their capital used In bank
ing transactions. but insist that the re-
mainder should be exempt from assess
ment.
In unfolding this contention Judge
Hough referred to the decisions In favor
Of trust companies which brought similar
suits during the Spanish American war
to avoid the payment OF the special tax
imposed on bankers AT that time. Judge
e. Henry L.acombe. then on the Federal
bench, decided that Investments in real
estate bonds and mortgages and other
securities dealt In by the trust companies
could not be regarded as a banking bus!-
ness.
Gordon A~uch!ncloss. special assistant
70 the Attorney-General, argued the case
for the Government. He was assisted
by Assistant United states Attorney Ben
A. Matthews. l.. II. Blonc of the law
arm OF Ge1ler, Rolston 4 Koran OF 30
Exchange place appeared for the
Farmers Loan and Trust Company.