The Abbeville press and banner. [volume] (Abbeville, S.C.) 1869-1924, 1921-05-20
GOVERNMENT WINS
COURT VICTORIES


the government won two important
victories in controversies involving
Interpretation of income provisions
of the revenue acts of 1915 and 1917
Increased value of capital asset
could not be added to invested cap
;tal" the court ruled in the appeal
of the La Belle Iron Works, an Ohio
concern, from a ruling by treasury
officials but on the contrary must be
considered in computing the profits
of the corporation on which the tax
es were to be assessed. In the other
decision, the court ruled that inheri-
tance taxes paid to state could not
be deducted from the met estate"
taxes under the revenue act.
The La Belle Iron works suit was
characterized by a high government
official as the most important legal
suit affecting federal finances to arise
in several decades The specific point
at issue was whether ore lands in the
Mesabi range of Minnesota purchas-
ed for 100000 prior to 1904, could
be returned by the iron company at
new valuation of $1O,O00,O00 in
1917, the increase being covered by
a stock issue and carried under in
vested capital.
Meaning Perfectly Clear
1--WE think the meaning of the act
as to invested capital is perfectly
clear" said Justice Pitney in deliv-
ering the court decision" it
defined this term to mean 1) actual
cash paid in, (2) the actual cash val
ue at the time of payment of assets
other than cash paid in, and (a) paid
in or earned surplus and undivided
profits used or employed in the busi-
ness but not include money or other
property borrowed.
"When speaking Of the capital Of
business corporation or partnership
such as the act deals with to invest
imports laying out of money or
moneys worth with a view to OBJ
tanning income or profit from the
conduct of a business.
"In order to adhere to this restrict
ed 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 converted in
exchange for shares Of capital stock,
or actually acquired through the
business activities of the corporation
or partnership and coming in alb ex-
ira by way of increase over the orig
inal capital stock. How consistently
this was carried out becomes evident
if the section (sect:on 207) is exam
ined in detail. :.
"The same controlling thought is
carried into the proviso. Every line
shows evidence of a legislative pur-
pose to confine the account to such
tens as were paid for in stock or
shares specifically issued for it, and
to their values at time of such pay
ment.'"
Millions in Balance.
Hundreds of millions of dollars in
taxes hung upon the decision, there
being but few partnerships or cor
porations which did not have on
their books an item showing material
sums resulting from appreciated
value OF capital assets.
The inheritance tax case was
brought to the supreme court by ex-
ecutors of the estate of the late j.
Harsen Purdy of New York. No less
than five states had collected taxes
on the turnover of parts of the estate
within their jurisdiction and the ex-
ecutors claimed that all these sums
should be deducted before federal
taxes on the "net estate" could be
legally computed. Refusal of tax col
lectors to agree to this contention
was upheld in turn by the treasury
department and the federal courts
and today, by the supreme court.
The "net estate" contemplated in
the act the opinion said was the en-
tire residue remaining to be distrib-