Albuquerque morning journal. [volume] (Albuquerque, N.M.) 1903-1926, 1921-05-17
GOVERNMENT
VICTOR IN
TWO TAX
SUITS
Increased Value of a Capt.
tai Asset Should Not Be
Added to Invested Capt.
tal," Is Court Ruling.
TREASURY OFFICIALS
DECISION Is UPHELD
Inheritance Taxes Paid to
the State Can't Be De-
Quoted From the "Net
Estate Taxed" Decision.

Washington, May 16. -
Through decisions of the su-
preme court today the gov
ernment won two important
victories in controversies in
volving Interpretation of in
come provisions of the rev.
enue acts of 1916 and 1917.
Increased value of a cap
ital asset could not be added
to Invested capital" the
court ruled in the appeal of
the LaBelle Iron Works, an
Ohio concern, from a ruling
by treasury officials, but on
the contrary must be con-
sidered in computing profits
Of the corporation on which
the taxes were to be as
sessed.
In the other decision, the court
ruled that 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 affect
ing federal finances to arise in sew
eral decades
Specific Points At Issue.
The specific point at issue was
whether ore lands in the Mesabe
range Of Minnesota, purchased for
$4,000 prior to 1904 could be re-
turned by the iron company at a
new valuation of ten million dol
lars in 1917, the increase being COW
cred by a stock issue and carried
under invested capital.
I'VE think the meaning of the
act as to invested capital is clear, -
said Justice Pltney in delivering
the decision. 1t defined this
term to mean. % actual cash paid
in; CD actual cash value at the
time of payment of assets other
than cash paid, and (3) paid In or
earned surplus and undivided prof.
It's used or employed in the bust
ness but not to include money or
other property borrowed.
Capital of Corporation.
When speaking Of the capital
of business corporation or part
nership, to invest imports laying
out of money or moneys worth with
view to obtaining income or profit
from the conduct of a business" he
said.
ITO adhere to this restricted
meaning and avoid exaggerated
valuation, the craftsman of the act
resorted to the test of including
nothing but money or moneys
worth, actually contributed or con-
Verted in exchange for shares of
capital stock, or actually acquired
through the business activities of
the corporation or partisanship
and coming in alb extra, by way of
increase over the original capital
stock. How consistently this was
carried out becomes evident as the
section, (section 207) is exam
ined. -
Effect of the Decision.
The same controlling thought
Is carried into the proviso. Every
line showed evidence of a iegfsla-
tive purpose to eonfine the account
to such items as were paid for in
stock or for shares issued for It,
and to their values at time of such
payment .
Hundreds of millions of dollars
in taxes hung on the decision,
there being but few partnerships
or corporations which did not
have on their books an items howing
materials sums resulting from ap-
preeiated value of capital assets.
The inheritance tax case was
brought to the supreme court by
executors of the estate of the late
]. Harsen Purdy of New York.
No less than five states had COL
lected tax on the turnover of por-
tions of the estate within their
jurisdiction, and the executors
claimed all these sums should be
deducted before federal taxes on
the met estate" could legally COM
puted. Refusal of tax collectors to
this contention was upheld by the
treasury department and the fed
eral courts, and today by the su-
preme court.