Atlanta tri-weekly journal. [volume] (Atlanta, Ga.) 1920-19??, 1920-03-23
Why "MeLons

1t puzzles lots of people to hear from the
supreme court that when corporation cuts
big melon" the stockholders do not have
to pay income taxes on it. II a man owns
stock in prosperous enterprise which de-
cides to distribute it's surplus in the form
of a "stock dividend" why should he not
have to report such a dividend as taxable
income, just as if he had received it in
cash?
''The cutting of an apple into four parts
instead of two does not increase the size OF
the apple" says the BOSTON POST Ind.
Dem.) by way of illustration. 80, the di-
vision of a corporations assets into 100000
shares instead of $4,000 shares does not in
crease the value of the shares, nor give the
shareholder larger equity in the assets
In the same way, the SUN AND NEW YORK
HERALD (Ind) points out that IF a man
owns a dollar bill and splits it into silver
half dollars or into four quarters, or into
ten dimes, or divides it as many times as
you please, he has not a penny more and
not a penny less than when it was In the
single dollar bill"
Thus stock dividends represent really
capital, and not income, or, as the Chicago
DAILY NEWS Ind.O describes it, the
promise or possibility of income. The fact
that the stock dividend is a gift--a melon
does not alter the essential feature OF the
situation, since the gift takes the form OF
a paper title to dividends, should they be
earned II d1VlQ6nQS are pdlQ on CHe StOCh,
of course they are taxable.
The effect of this decision is "in the dl-
rection of removing hampering burdens and
restrictions from capital and freeing 1t to
engage in the development of the country's
industries" in the opinion of the NEW
YORK MAIL Gnd.), and the mail goes on
to say:
"To tax investments. in addition to tax
ing earnings in the form of dividends, is the
surest way to discourage enterprise, block
expansion, and make the road to prosperity
difficult. To realize that fact 1t is not neces-
sary to go further than the consideration
that in order to pay an income tax on a
share of stock given him in lieu of dividend,
it would be necessary for the holder to in
wade his savings from other sources or sell
his share, perhaps at loss.''
The far-reaching effect of the decision is
illustrated by the WHEELING REGISTER
(Dem.), which notes that:
"For instance the American Car and Foun-
dry with total of S31,324,521 undivided
profits is ready to declare stock dividends
equal to $104 share; Morris & Co., pack
ers, are holding $52,823,864 or SLIGO per
share; the Stndard Oil companies of Indiana,
New York and Ohio have big dividends on
which the tax as earnings has been paid and
can be distributed as stock dividends, while
the Republic Iron and Steel, National Bis
cult, Pittsburg Coal and many other indus
tries are in similar positions, which means
tnat the courts decree is bound to send
prices skyhigh in the market, as there will
now be sharp buying in order to grab blocks
of the common stock Of those companies
upon which stock dividends are sure to be
paid"
But if the correctness of the decision ap-
pears obvious from the arguments above
quoted, it must be remembered that four of
the nine supreme court justices dissented,
and held that stock dividends were taxable.
Many newspapers agree with the minority
of the court. 'As judges disagree, so will
individuals disagree observes the MINNIE
APOLIS JOURNAL (Ind. Rep.)
The decision sis based on neither sound
law nor sensible logic" declares the SIOUX
CITY JOURNAL (Rep), which further ex-
presses the opinion that cit will enable
every corporation to dodge the payment of
income tax on it's stock for it's stockholders, -
and the NASHVILLE BANNER (Ind) be-
l1eves the decision will undoubtedly prove
Unpopular" Sharply critical. also is the
PlTTSBURG PRESS (Ind.):
The supreme court is evidently deter
mined says the PRESS, "that wealth must
be cherished The legal nendn1nn
which seemed to be swinging few years ago
strongly against privilege now seems to be
swinging back hard
The FARGO COURIER-NEWS (Non-par+
League) dissents so strongly that it is even
moved to suggest "some popular curb on
the supreme court" It continues: