Great Falls daily tribune., 1920-03-09
of earnings and profits accruing after

of earnings and profits accruing after
March /, 1913.
The court divided five to four, Justice
Pitney rendering the majority oplhloh,
Justices Holmes and Day joining IN one
dissenting opinion, and Justlces 0Aarhe
and Brandeis in another
Uuder the courts ruling the 1ederal
government must refund mllllOns oI uol
lars in taxes collected on stock div1denns
since the 1916 law became effecuv., IN
ternal revenue bureau officials SAID the
exact total OF the refunds could not pc
estimated at this time and that it would
NOT he known until all claims had Deen
filed and computed.
Thousands of Investors Involved
The courts decision was five 70 tour,
Justices Holmes and Day Joining IN one
dissenting opinion and Justices brandeis
and Clarke in another.
The court upheld federal court DEGREES
denying the authority of congress 70 TAX
stock dividends and awarding Myrtle r.
Maeombed S1.3e7 which she had paid
under protest on HOO shares OF new
stock received in January, 1916, as the
stock dividend from the Standard Oll
comnany of California. The case was
one of series in which j. I: Morgan,
Herbert T. Pratt and others had cues
toned the validity Of the act.
Court officials said the case was one
of the most important at this term ana
that determination Of the question IN
yolyed affects thousands of investors.
In Effect Postpones Dividends.
Pitney, in his majority opinion, said
stock dividend ''is in essence not
dividend but rather the opposite,
.tNo part of the assets or the com
pany is separated from the common
fund" he said. nothing distributed ex-
cept paper certificates that evidence az
antecedent increase value in the stock
holders capital interest rate from an
accumulation of profits BY the company
hit profits so far absorbed in the busl-
moss as to render it impractlcable &c
senarate them for withdrawal and dis
tribution.
Far from being realization of prof
it's of the stockholder, it tends rather
to POSTPONE such realization IN that the
| fund represented by the new stock has
been transferred from surplus to cap
ital. and no longer is available tor ac
tual distribution
Company Still Holds Surplus.
"The essentiar and controlling fact !:
that the st0ckholder has received moth
| ing of the company's assets for his sep
arate use and benefit; on the contrary
every dollar Of his original investment
| together with whatever accretions ant
accumulations have resulted from en-
ployment Of his money and that of tn
other stockholders in the business o
the company still remains the propert.
Of the company, and subject to busines
risks which may result in working ou
/ the entire investment. Having regar'
to the very truth OF the matter, t
substance and not to form, he has re
ceived nothing that answers the deflnl
4 ton Of incomes in the meaning Of to
sixteenth amendment.
Sale of Stock Falls Under Law.
we are clear that not only does
stock dividend really take nothing froI
the property of the corporation and add
nothing to that Of the shareholder, bu
that the antecedent accumulation q
profits evidenced thereby, while indica:
| ing that the shareholder is the richie
because of an increase Of his capital. a
the same time shows he has not relize
or received any income in the transat
ton.
''It is said that the stockholder ma
sell the new shares acquired in the stoc
dividends It is equally true that if b