The Brattleboro daily reformer. (Brattleboro, Vt.) 1913-1955, 1918-01-16
RULING
ON INCOME TAX
Investment or Speculative
Buyers Not Allowed to
Write Off Depreciation
TO COLLECT TAXES
ON ALL DIVIDENDS
This Will Continue Until a Case Is
Taken Into the Supreme Court-Main
Question Is Over the Inclusion Of
Stock Dividends.

NueStLoH is over the inclusion OF
Stock Dividends.
WASHINGTON, Jan lG.-Taxpaycrs
who buy and sell securities for invest.
ment or speculation are not dealers in
securities within the purview of the in.
tcrnal revenue decision covering returns
of securities at market value or cost,
the treasury department announces.
Therefore investment and speculative
buyers in the New York stock market
cannot write off depreciation in their
securities in making tax returns.
The treasury holds that "a dealer in
securities i'm order to come within the
meaning Of Treasury decision 1903
must be merchant of securities,
whether un individual, partnership or
corporation with an established place
Of business, whose principal business is
the purchase of securities and their re-
sale 20 customers. Taxpayers who buy
or sell for Investment or speculation
aud Gin their individual capacity Off
GERS of corporations or members Of
partnerships which deal in securities
are not dealers.
The latest decision defines dealers
hut it gives no new light on the doubt.
full legality of returns made on the
basis of market value. If as a result
of the supreme court decision il is de-
tcrmined that return of income upon
the basis of inventories at market value
is not permitted BY law dealers in mer-
cbandisc or securities who have made
returns upon such basis will he required
To make revised returns based on in
rcutortes taken at cost.
All returns must be filed before
March I next and the cases pending are
not % be- argued before the supreme
court before March I. In view of this
fact dealers must specify in their re-
turns whether they are made at market
value or cost.
Grave doubt has arisen among OIL
cials here of the legality of collecting
income taxes and -urtaNcs on any divi-
dords paid in stock. The recent deci-
sion OF the supreme court To the effect
that this tax could not Toe collected on
Northumberland ul-stocA~ been IN
-dcrst00T gCneIaITy 10 apply 0nIT 70
dividends paid in stock under the rev.
cnuc laws prior 70 the war revenue
law passed at the last session of con.
prcso But il is the belief of some OF
the trainers of the new law that nc
income tax can be levied even against
dividends paid in stock since the new
war revenue law became effective.
I'm the new war revenue law div
idend- are explicitly defined TO mean
"auv distribution made or ordered e
hc made 10y corporation, joint stock
company, association or insurance com
pauv. out Of it's earnings of profits
and payable to its sharehold
iur2, whether In cash or in stock of th'
corporation. joint stock company, aSso
/ citation or insurance company, which
| stock dividend shall be considered IN
come of the earnings or profits dis
tributed.'
/ IL IL contcndcd now b. some of TIL
/ men who framed the law that the dc
/ ciSiou Of the supreme court must 10
considered rs applying 70 all so-callet
/ dividends paid in stock. regardless 0
/ the specific definition of what shall b
considered a dividend. This construc
tion would mean the loss of con1idcrabl
revenue TO the government.
The bureau Of internal revenue
charged with the collection Of all q
the taxes provided in the war revenu
law, guided hy the language Of the Law
will collect taxes on dividends paid
stock despite the supreme court dee
sion. This will continue until ii
questioned and taken to court. In ii
end the supreme court will have to d
eide whether the specific inclusion
stock dividends in the definition
i"diyidcuds in the war revenue la
would remove stock dividends from Il
effect Of the opinion rendered recen
~. having to do with such dividen
under former tax laws.