The news scimitar. (Memphis, Tenn.) 1907-1926, 1920-03-20
Why MELONS Are Not Income

II puzzles lots Of people TO hear from
the supreme court that when cor
poration cuts big melon" the stock
holders do not have to pay income
taxes on it, II a man owns stock in
a prosperous enterprise which decides
to distribute its surplus in the fora of
a stock dividend" why should he not
have to report such dividend as tax
able income, just as If he had received
1t in cash?
1.-THE cutting OF an apple into four
parts instead Of two does not Increase
the size of the apple" says the Boston
Post Qnd. Dem,) by way of illustra-
ton. so, the division OF a ,orpora-
TONS assets into 100. 900 shares instead
of $4,000 shares does not increase the
value Of the shares, nor give the share
holder larger equity in the assets"
In the same way, the Sun and New
York Herald Und) points. out that IF
man owns dollar bill and splits it
into two silver half dollars, or into four
quarters, or into ten dimes, or divides
1t as many times as You please, he has
not penny more and not penny less
than when 1t was in the single dollar
bill"
Thus stock dividends represent real
~ capital, and not income, or, as the
Chicago Daily News Qnd.) describes
1t, the promise or posSibilitw of in
come. The fact that the stock dividend
IS 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 dividends are paid on the
stock, of course, they are taxable.
The effect of this decision is Tin
the direction OF removing hampering
burdens and rest rictions from capital
and freeing it to engage in the devel-
hn frRri - Il -NN.fs
the opinion of the New York Mail lind }
and the Mail goes on to say:
To tax investments, in addition tc
taxing earnings in the form of diVi-
bends, is the surest way to discourage
enterprise block expansion and make
the, road to prosperity difficult To
realize that fact 1t is not necessary 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 invade his savings from other
sources or sell his share, perhaps at a
loss"
The far-reaching effect of the deci
sion is illustrated by the Wheeling Reg
lister Dem.) which notes that:
For instance the American Car &
Foundry with total of $31, 324,52l UNI
divided profits is ready to declare stock
dividends equal to $104 a share; Morris
* ~, pdCheTS, are nOlQlnS S0Z, SZ3, 1914
or $1,76O per share; the Standard 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
Biscuit, Pittsburgh Coal and many 9th
| err industries are in similar positions
which means that the courts decree is
| bound to send prices sky-high in the
market as there will now be sharn hAlv-
| ing in order to grab blocks of the com
| mon stock of those companies upon
which stock dividends are sure to be
| paid"
But if the correctness of the decision
| appears 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 news
| papers agree with the minority of the
court, AS. judges disagree. so will
individuals disagree" observes the Min
neapolis Journal Qnd Rep.).
| The decision lis based on neither
| sound law nor sensible logic" declares
| the Sioux City Journal (Rep), which
| further expresses the opinion that 'it
will enable every corporation to dodge
| the payment of income tax on its stock
for its stockholders" and the Nash
| vile Banner Qnd) believes "the deci-
sion will undoubtedly prove unpopular
| Sharply critical, also, is the Pittsburgh
| Press Qnd.):