Tulsa daily world. [volume] (Tulsa, Indian Territory [Okla.]) 1905-1919, 1919-01-26

por., n,man the duties imposed
brn hy the proposed law NJ
"a, address Mas h'ghly Nalu'h'".
20, long for cation ms
p"' ,,d IA the clrarcst exposition
rh'W.. law In its present status ~
",,.,u,ed. and viii do inuch u
~ ~. prevalent misconceptions ol
and settle many DOUBTS lh
VI lind. of the taxpayer Mi
s,,th sad; ,,.,,.,
rh,,, ,ne understanding thht ] hw
,..n..tur the proviSiunh ui ln' Wv
..,d by the senate, ! am pl"hN'u
"'.rr,ii,ed 20 offer you whhl !
ur me limited time ~ my '''
can ,r thr general subject ni ~
p"H'' ,,tton nH contained ~ "r
..,,l upon by the propuLcu T'N'
,,.,,r, of Incon~ Tns lrrnih''"n
,,rcme court ~ the nliod
u pnllork va Farm Loan
-, =, lb7 T. = 42p. h"ld ul'-
l'u,,,,,,,,nnl the income tax law
V'seI mot because Of lack of hu-
,.,, IA congress to lay hs on
u"". t,u because said TAX was
hn,I,.d "A direct tax on property
not "npportioned among
~" .,,.I states" The amend
w ,,,roforc, was designed To do
9TH tho necessity for hppot'
1,,r, thus freeing frosn all 70
.n,,,p the previously existing nu-
,,o,,i, 10 liy IA" tax
,t,hourn the amendment was
.,',,.I February 2b. 1913. cougrrHh
,.t complete the first revenue
a,s,,r, in pursuance thereof unul
~. f,Ii,u.nl October, This act, ny
..n,,s. terms, was made retroactive
,nh,, n wa. made to apply to IN
IA acrruing from and hfter
NH /. 1913. II was. evidently
30 congressional intent, as rN-
.,..,cd I'M that and Subsequent rev.
- ,ne,stircs and approved by the
court. 10 regard all accumulhtlonH
a,n,c,tv. Income and acccssionS
90 wealth AS ~ the approximate date
Of the adoption ot thr hihenuih'"'
r,riiI and that only income
thereafter Rccrulng was ruhjo'l I"
,",,tIn, As such. II In for this reh-
snn that We find In the present IN
come tax law. ana In others pasa'u
since the adoption OF tho amen"
n,eni. the provision that IN thc case
Of sale of property acquired prior TO
March /. 1919 the value ms or thet
date shall be deducted from the SAFE
ntire TO ascertain the amount OF any
taxable income or profit,
Capital and Income Diaricts
In Inc bill now pending before
enarress as wSll ns In each OF the
acts passed pursuant to tho amend
uent tho distinction between income
Ard capital has been repeatedly dis-
regarded. /, has been said that
capital" In tho source OF Income
and that income is the fruit OF
capital" capital may diminish or
Increase and may he changed from
. one form Of investment to another
If n man buys "A farm for 10 600,
he Keeps u "A year. collects shOO
rent on II and sells II for $4,000,
how much income has he received
Just $500 Tho $1,000 gain realized
on the sale IN capital. 1t represents
an accrctiun OF cnpital and for years
has been treated ny tho best ac-
countan,s and economists as capital
and not income. The $500 Is In
come because II II n result or fruit
OF tho investment,--ls something
which the invostor did not have be-
fore The $4,000 sales price IL
merely u change In tho form OF the
capital. from farm land - cash.
But our income tar, laws including
the ono now pending, expressly lay
the tar upon gains or profit realized
on sales or exchanges OF property
and the commissioner of Internal
revenue collects tax on such capital
rains Accruing since March 1918.
What thu final decision will he on
The question NJ tho right OF congress
70 thus include In the law subjects OF
TAXATION other than income is a mat
ter Of interest TO lawyers and tax
payers generally. A decision which !
nave looked 10 as an encouraging
\ precedent Ia that OF Gray vs.. Darling
ton. l5 Wall GO, wherein tho United
States supreme court II considering
the Income tax law ot 1867, held that
profit made on sale OF bonds which
had been held for a number OF years
was not income In tho year IL the
nle, and further. that The mere
fac, that property has advanced In
value between the date OF its ac-
quisi,ion and sale does not author
he the imposition OF "a tax on the
smount Of the advance. Mere ad-
vance In value In no sense constl.
'ntes the gains. profits or inco&ic
specified In the statute. II constitutes
AND can be treated merely AZ increase
OF capital"
In this connection, two senate
amendments To the pending bill may
oe noted one II subd tb) of section
.us' providing; "(b) when property
exchanged for other property, the
property received In exchange shall,
iof the purpose OF determining gain
OF loss be treated hs tho edaivrient
o' cash tn tho amount OF Its fair
mafsss value. II any, but when In
connection with the reorganization.
merg"t or consolidation OF a corpora
uon person receives, In place OF
Nock or securities owned by him.
new stock or securities OF no greater
aggregate par or face value. or when
spefson or persons owning property
reeve In exchange for such prop
WY stock of corporation formed
hkc over such property no gain
W lohH shnll be deemed 10 occur from
me exchange. and the new stock or
.snriNes received shall he treated as
hlng the place OF the atock. securi-
VS. or property exchange
lhe first clause of this paragraph
winch treats M the equivalent ~ cash
esunposed profit made In a trade Of
properties and levies the tax nc-
eeordinFly IL In my opinion. open to
u'e" objections Firstly. n IL purely
capital Transaction and any gain
net' may he is merely an Increase
~ chhilM' under the holding In
gray w Darlington. Supra. There Ia
% income gecnntiv ~. aii.gad M n