The Wheeling intelligencer. [volume] (Wheeling, W. Va.) 1903-1961, 1921-05-17
Increased Value of Capital
Assets Cannot Be Added
to Invested Capital, Ac-
cording to Decision of u.
S. Supreme Court

Washington, May l6.~ThrouCA de-
riSlnnS of tho Suprrm" court t"oaS' t"o
government won two important victories
in controversies involving Interpretation
of income provisions OF the revenue acts
Of 1916 and 1917.
Increased lalu" Of CHpltai dSS"t
could not be added (" "lnV"Strd CAPITA
the court ruled in tho app"n! OF IN" Ia
Relrc Iron Works. a West Virginia and
Ohio concern. from a ruling ny trcaSui1
officials. but on the contrary must be
considered in computing thu profits or
the corporations on which tho taxes were
TO be assessed
In tho other decision III" court ruled
,hat inhcritnncc or succession tax PAID
70 n state could not be deducted from
tho met estate" taxed under the reVe-
nue. act.
The La Belle Iron Works suit was
characterized 10y high government OF
fetal as tho most important legal SUIT
affecting federal finances TO arise IN sew
cral decades.
The Decision.
Tho specific point ut iSSu" was wheth-
or orc lands in the MeSaba region IN
Minnesota, purchased for $l9O.Voo prior
10 1904. could he returned by the IRON
ronuany at.a now valuation Of $lN,-
ODU,UNU IN l5l I, lilc A''''S b~'''o
cred BY a stock issue and "arrled under
invested capital
wv, think the meaning Of the act
as TO invested capital is perfectly
clear" said Justice Pitney in delivering
thr courts decision. 1T defined TINS
term to mean (one) actual cash PAID h'
t2). then actual cash valu" at tn" time
Of naylncnt Of assets other than caSh
paid in. and t%l paid in or earned sur
plus and undivided profits used or en-
plovcd in the business. but not I" INCLUDE
money or other property borrowed.
when speaking OF III" capital OF 4
business corporation or partnership
such nS the act deals with, 10 invest
imports Il laying out OF money or
mOncy's worth with a View 70 obtaining
income or profit from the conduct or d
business.
I'm order TO adhere 10 this restricted
meaning and avoid exaggerated Enlua-
tiun. the craftsman OF the net rc"orteu
,o the test of including nothing but
money or moneys worth. actually con-
,ributrd or converted IN Exchange or
sbarcs Of stock or actually acquired
through tho business activities or the
rrruurat;un and coming III ab extra by
u,,y of ,nrrraS" over th" oriClnal STOCK.
How consistently this was carried out
h,rumrS evident as tn" section (St'. -"i)
is examined III detail.
Hundreds ut millions OF dollars IN
taxes hung "n The decision. th"r" being
partnerships or corporations which dld
no, have on their books an Item SHOW
ing material sums resulting from ap-
prrCiated value Of capital assets.
inheritance Tax Case.
The inheritarcr tax case was br"nGht
to tho suprrmN court by executors OF
the estate "r the lat" j. TIarsen Purdy
of New York. No less than five states
had collected taxes on the turnover OF
portions OF tn: cStat" within their juriS-
dlctjon. and tn" executors, claimed that
all these sums should not be deducted
before federal taxes on the net estate"
could be legally computed. Refusal Of
tax collectors to agree to this conten-
tionu was upheld in turn by the treas
ury department and the federal courts.
and today by the supreme court
The met estate" contemplated in the