The Birmingham age-herald. [volume] (Birmingham, Ala.) 1902-1950, 1921-11-22
GOVERNMENT WINS
IN DECISION ON
INCOME TAX CASES
viii 90 Far Toward UnraveI-
ing Many Perplexing Prob
lens and Mean Recov-
cry of Millions
Bx Associated Pre.s

Washington, November 21.-Deci-
sions Of the supreme court today up
holding government contentious in
three income tax cases WILL in the
opinion of Solicitor General Beck and
treasury officials. 30 far toward un-
raveiing many perplexIng questions
arising In stock dividend controver-
sizes and result in the recovery
by the government or many millions
of dollars.
Two of the cases were similar and
involved taxation as income of stock
issued stockholders of the Ohio OIL
and the. Prairie Oil and Gas compa
MES by the Illinois and the Prairie
Pipe Line companies, respectively.
The pipe line companies were organ.
ICED by the oil company after de-
cision of the supreme court that the
Interstate commerce and reoeral COM
missions had Jurisdiction over com
panies operating pipe lines. The
government contended the stock
should be classed as income and
taxed as such. The contention was
opposed by the companies and va
rions stockholders, including John D..
Rockefeller.
Majority Opinion
Justice Pittney delivered the ma
Jority opinion of the court, Justice
vandeventer and MacReynolds dis
senting. The majority opinion said
The new stock represented assets
of the oil company standing in the
place of the pipe line properties that
before had constituted portions of
their surplus assets and 1t was capa-
BILE of division among the stockhold-
ers as the pipe line properties were
not. The distribution con-
stituted in the case of each individ-
ual, gain in the form of actual ex-
changeable assets .. 1t was,
In substance and effect, not merely
in form, dividend of profits by the
corporation and individual income to
the stockholders"
The third case in which a decision
was handed down grew out of the
organization of e. !. Dupont. Denmors
Powder company of Delaware by the
parent company of the same name Of
New Jersey The court, in holding
the new stock, which was distributed
among the stock holders of the par
emit company. subject to the income
tax law, said:
became Treasury Assets
THE new common stock became
treasury assets OF the old company
and was capable of distribution as
the manufacturing assets whose
place 1t took were not. Its distrl-
button transferred TO the several
stockholders new Individual property
rights which they severally were en-
titled to retain and enjoy, or to sell
and transfer with precisely the same
substantial benefit to each as IL the
old company had acquired the stock
by purchase from strangers. =. /.
He tthe stockholder) received as his
separate property part of the ac-
cumulated profits OF the old company
in which previously he had only a
potential and contingent interest.
TT thus appears that in substance
and fact, as we'll as in appearance.
the dividend received by claimant
was gain, profit derived from his
capital Interest in the old company
not IN liquidation OF the capital but
in distribution of accumulated prof
Its of the company. Hence 1t consti-
tuted individual income within the
meaning of the income tax law"
Estimates were that the govern
ment would obtain at least $50, 900, :
600 in taxes from the litigants in the
cases decided today and the adjudi-
cation of many claims which have
been pending in the treasury depart
ment awaiting the outcome would to-
tai many millions of dollars in ad-
dit inn