Arizona republican., 1920-03-09
Stock Dividends
 Not Subject To
 Income TaxSays. Supreme Court.
Republican A. p. Leased wireJ

v
 WASHINGTON, March S.-Corpo- ration dividends distributed as stock do not constitute income" and are not subject to federal income taxes the supreme court decided today in five to four decision
 Provisions of the 1916 federal income tax law, levying taxes on stock divi- dends, were declared unconstitutional The decision also nullified similar pro- visions of the present law and will m volve great loss in revenues to the government and refunds of such taxes already collected.
 Large financial interest likewise will be affected and numerous stock dividends of generous proportions are expected to be declared soon.
 Two Dissenting Opinions Given
 In the majority decision by Justice Pitney, Chief Justice White and Just ices McKenna, Vandevanter and Me Reynolds, concurred. Of the four dis senting members, Justice Holmes read Q brief opinion in which he was joined by Justice Day and Justice Brandeis delivered a lengthy opinion in which Justice Clarke concurred.
 In holding stock distributions are not dividends on account of no sepa- ration of corporate assets being in volved, Justice Pitney for the ma jority declared stock shares "are noth- ing except paper certificates" in un-
  profits and, therefore, are not taxable The attempt of congress to tax stock distributions, the majority decided to be unconstitutional and not permitted by the sixteenth, or income tax, con Stitutional amendment. Stock dlV1- dends, the majority held, may be taxed only after stockholders realize on them by sale, in which case the government may levy income taxes on such profits.
 All four dissenting justices contend ed congress had power to tax stock dividends holding such dividends are income" the same as if in cash. The sixteenth amendment, the minority declared, is broad enough to justify the tax.
 Say Majority View Narrow
 Justices Brandeis and Clarke char acterized the majority view as marrow" and bizarre and said it would per init many corporations to escape tax ation on much of what lis actually their income" Declaration of divl- dends in cash or in some other medi- um, the two justices added, lis wholly a matter of financial management and therefore, If a dividend paid in securities represents a distribution of profits congress may of course, tax It as income"
 The other dissenting opinion ex- pressed the belief that the word in comeo in the sixteenth amendment should be read in a sense most obvious to the common understanding at it's adoption. Most people, other than lawyers, it was added, supposed when they voted for it they put at rest the question of direct taxes including Ievies on stock dividends.
 Robs Congress of Power
 WASHINGTON, March S.-Repre- sentative Hull, democrat, Tennessee, author of the income tax law. declared tonight today's decision of the su- preme court mot only destroys the last vestige of congressional power to tax stock dividends" but also annulS the present law for taxation of personal service corporations''-thos in which individual service is the chief factor.
 'The effect" he said, lis that any group of individuals may form arti- ficial entities and screen themselves and avoid a large amount of their just and fair taxation.