Great Falls tribune. [volume] (Great Falls, Mont.) 1921-current, 1921-05-17
U.s.. WINS TWO
TAXATION SUITS
Millions Gained From
Labelle Iron Co.
by Decision. r.

Washington. May 16-Through deci-
sions OF the supreme court Monday the
government won two important vic
tories in controversies involving inter
pretations OF income provisions of the
revenue acts of 1915 and 1917.
Increased value of a capital asset
could not be added to Invested capital
the court ruled in the appeal Of the
Labeile Iron Works, an Ohio concern.
from u ruling by treasury officials. but
on the contrary must be considered in
computing the profits of the concern
on which the taxes were to be assessed
Include Inheritance Tax.
In the other decision, the court ruled
that inheritance of succession taxes
paid to a state, could not be deducted
from the met estate taxed under the
revenue act"
The Labelle 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 Mesabe range
OF Minnesota, purchased for $4,000
prior to 1901, could be returned by the
iron company at a new valuation of
so, 900 900 in 1917. the increase being
covered by stock issue and carried
under invested capital Said Justice
Pitney in delivering courts decision:
Invested Capital"
We think the meaning of the
act as to invested capital is per-
fectly plain 1t defined this term
to mean (onel actual cash paid in,
(two) the actual cash value at the
time of payment of assets other
than cash paid in. and (three) paid
in or surplus and undivided profits
used or employed in the business.
but not to include money or other
property borrowed.
When speaking of the capital of
business corporation or partner
ship. such as the act deals with.
ito invest imports laying out OF
money or moneys worth with
view to o,obtaining income or profits
from the conduct Of a business.
Money Crux of Law.
In order to adhere to this re-
strictel meaning and avoid exag-
gerated valuation, the craftsmen 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 ac-
tivities of the corporation or part
nership. and coming in alb extra
by way of increase over the origin
al capital stock. How consistently
this was carried out becomes evi-
dent as the section (section 2O7).
is examined in detail
Hundreds of millions of dollars in |
axes hung upon the decision. there be-
ng but few partnerships or corpora
ions which did not have on their books !
IN item showing material sums result
ng from appreciated value Of capital
ssets.
The court was unanimous in it's de-
islon except that Justice McReynolds
'oncurred only in the result. Associate
ustlce Pitney read the opinion.
Dry Act Again Upheld.
The requirement that the prohibition
be ratified within seven
ears by three -fourths Of the states
|oes not invalidate the entire meas
ire. the supreme court Monday ruled
The decision was given in the ap-
zeal OF J. ]. Dillon of San Francisco.
rom decisions in lower courts refus-
NJ his petition for a writ of habeas
orpus on the ground that the limita-
ion made the amendment invalid.
Dillon was arrested while transports
ng case of wine to the home of ito
wner. His counsel asserted that, ac-
ording to the amendment, Originally
roposed by Senator Harding placedsa
imitation on the action Of the state
.Eislatures and was therefore uncon-
titutional.
Effective Jan. /. 1920.
We find that proposal and ratifi-
alton of an amendment are treated as
uccecding acts in common endcavor.
he opiniop said, "and there is fair
(Cod d(tnusd on Page Two1