Bisbee daily review., 1921-05-17
COURT DECIDES CAPITAL ASSET I TAXABLE UNDER
 LAW IF NATION
Increased Value Cannot Be Added To Invested Capi-
 ital, Ruling States
GOVERNMENT WINS SUIT
Second Decision, Affecting Inheritance Taxes Paid State
 Termed Most Important

WASHINGTON, May Through decisions of the supreme court today the government won two important interpretation of income provisions ot the revenue acts Of 1916 and 1917.
 Increased value of capital asset could not be added to invested cap- ital" the court ruled in the appeal of the La Belle Iron Works. an Ohio con cern, from a ruling by treasury off clals, but, on the contrary. must be considered in computing profits of the corporation on which the taxes were to be assessed.
 In the other decision, the court ruled tkat inheritance or succession taxes. paid to a state, could not be deducted from the met estate taxed under the revenue act
 This suit was characterized by a high government official as the most important legal suit affecting federal fipances to arise in several decades. {"
 The specific point at issue was whether ore lands in the Mesabe range of Minnesota. purchased for S190,000 prior to 1904, could be re- turned by the iron company at new valuation of S10,000,000 in 1917, the increase being covered by stock issue and carried under inveSesd cap- :tal.
 We think the meaning of the act as to invested capital is clear" said Justice Pitney in delivering the de- cision. Tt defined this erm to mean (1) actual cash paid in. (2) actual cash value at the time of 7avment of assets other than cash paid and (3) paid in or earned sur employed in the business but not to include money or other property bor- rowed
 When speaking of the capital of a business corporation or partnership, to invest imparts a laying out of mon ey or moneys worth with a view to obtaining income or profit from the conduct of business.
 ITO adhere to this restricted mean ing and avoid exaggerated valuation, the craftsman of the act resorted to the test of including nothing but money or moneys worth, actually contributed or converted in exchange fol shares of capital stock, or actu- ally acquired through the business activities of the corporation Or part nershi2 and coming in as extra, by way of increase over the original cap ital stock. How consistently this was carried out becomes evident as the section (section 207) is examined.
 "The same controlling thought is carried into the rroviso. Every line showed evidence of legislative pur- rose to confine the account to such items as were paid for in stock or for shares for it. and to their values at time of such payment
 Hundreds of millions of dollars in taxes hung on the decision, there be- ing but a few partnerships or corpor- ations which did not have on their books m item showing material sums resulting from appreciated value of capital assets.
 The inheritayce tax case was brought to the supreme court by eN ecutors of the estate of the late J.
 arsen Purdy of New York.
 No less than five states had col lected tax on the turnover of portions of the estate within their jurisdiction and the executors claimed all these sums should be deducted before fed eral taxes on the met estate" could be legally computed. Refusal of tax collectors to this contention was up held by the treasury department and the federal courts. and today by the supreme court.