The sun. [volume] (New York [N.Y.]) 1833-1916, 1916-04-05
TAXING OF INVESTOR
: ABROAD Is OPPOSED
Bankers Fear Injury to Amer
ican Stocks by New In
come Ruling.
STEP CHALLENGED HERE

Announcement Of xhe latest ruling Of
Ne Treasury Department. placing nom
seDident aliens owning American securi-
~ under the provisions Of tho Federal
Income tax law. caused great concern
= he financial district yesterday. Most
q me bankers and others dealing with
eereign investors eaid that the ruling
~ como as a surprise To thein. Some
exDreesed tho opinion that tho Treas
NY Department WIS attempting 10 as
0ane entirely unwSrranted powers.
Nhe ruling. signed by Commissioner
q Revenues Osborn. It was explained.
WNs made under the decision Of the
Omitted States supreme Court IN a test
caseNthat OF Brushaber Va Tho Union
Pacific Railroad Company.
Julien r. Davies OF the aw Arm Of
Davies. Aucrbach 4 Cornell. who
shaber case. said yesterday that there
Wa nothing IN rho Supreme Court de-
o1uscn on that case to Justify the Treas
my circular.
rear Irreparabie Injury.
N was said that the American In
vestment Bankers Association would op-
pooe the change. A number of promi-
nent banking institutions either sent men
or asked their agents IN Washington TO
investignte the Treasury Departments
action. Fea was expressed that the
ruling would irreparably inJure the field
- H.. ala. -,.a 4. h.An
Bankers were also troubled by the
fAct tina the ruling. which provides for
deduction of the income tax NJ the
source on property of non-rcsiden
aliens, was made effective as Of Janu-
ary /. Since that time IA great many
payments have been made to foreign
security holders with no provision for
the payment OF the tax. il was hoped
that the operation of the ruling might
at least be postponed until May l to
give the bankers in this country a chance
% prepare for II.
Mr.. Davies. in speaking OF the Brush
cher case. said
There was no question In that case
relative to the income accruing to nom
resident aliens, and the construction of
the income law In reference TO taxation
Of nonresident aliens was MT before
the Supreme Court In that case. Prob
ably the Commissioner thinks some gen-
oral expression In the opinion may have
. bearing upon this particular question,
but ] do not see how this can be.
Sees Reverse Of RUINS.
"Under date Of October 20. 1918. J.. c.
NcReynolds. then Attorney-General. and
now . Justice OF the Supreme Court,
w an opinion TO the Secretary Of the
Treasury TO the effect that the provi-
0dons of the income tax law did not lay
q tai upon tho interest accruing on
bonds held and owned by a nonresident
foreigner, and his opinion was followed
by a ruling from the Commissioner OF
Internal Revenue TO the effect tina; in.
terest from bonds and dividends on stock
Of domestic corporations owned by non.
resident aliens are not subject to the In.
como tax, whether such bonds and stock
are physically located within or wlthou,
the United states. or whether they are
in the possession of agents or trustees
In some %fduciary capacity In the United
States or otherwise.
"All that can be said upon the subjec,
u that the present Commissioner OF In
ternal Revenue has reversed the former
ruling. and now holds that property is
subject to income tax which previously
has been considered to be exempt.
II cannot consider that this change
Of view is justified by the opinion OF
the Supreme Cou In the Brushabei
case. The correctness OF the present
position OF the Government u rest
upon the construction OF tho act.
Question of Where Owned.
The real po,n, 10 whether interest OF
bonds and dividends upon shares Of
stock OF domestic corporations are prop
erty owned within the United States
The general rule ia that debts are
considered TO ave a situs at the domi
Gle of the creditor or owner OF tn
debt. and not where tho evidence Of thu
debt Is situated.
Dividends upon shares OF stock, wher
declared. become debts due from the cor
poration to the stockholders. 1t woulC
seem that the true rule would be tina
debts due from tho corporation TO
nonresident. allen stakeholder, although
In the form Of declared dividends. wer,
not property within the United States
but were property at the homo Of tn,
creditor.
II know Of nothing in the BrushabeI
case that eve remotely touches &
disposition of the principle Of the stu,
OF debts, or decides the proposition tina
the situs OF debts Is where the evi
dence of the debt IL. and not al th'
place Of residence OF the creditor or per