Albuquerque morning journal. [volume] (Albuquerque, N.M.) 1903-1926, 1921-03-29
Where Securities Are Sold at
a Gain, the Increase is
Taxable As "InCome," Is
Courts Ruling.
ALL CONVENTIONS
OF u. S. UPHELD
Decision Will Go Far Toward
Relieving the Treasury of
Much Litigation, is Claim
of FrierS0n.

Three victories were won by
the government today in the
supreme court interpreta-
ton Of the term Income"
for the assessment of taxes
under the income and excess
profits act. The court held
that any gain derived from
corporation securities or cor
porate assets, and any in
crease in the value of a cap
ital investment, when real
lied, is taxable as income.
The opinions were endorsed
by the entire court.
Solicitor General Frierson inter-
preted the opinion as upholding all
the contentious of the government.
He believed elimination of prob
lens involved in cases decided
would go far toward relieving the
treasury department of inconVen-
fences resulting from the multi
angIed tax litigation facing it for
the last year
Gases Are Advanced.
No estimate could be obtained -
to the amount affected by the
courts action. Apparently with Il
view of early clearing the docket
of all important tax questions, the
court before recessing until April
Ill, advanced to that date hearing
Of arguments in the insurance divi-
dend case, the corporation re-
organization case and the Inherit
ance tax case. The first involves
taxation of dividends applied as
partial payment to insurance pre-
miums, the second applies to stock
received from the reorganization
of a corporation--in this case the
Dupont Powder company and the
last, whether inheritance tax can
be deducted from taxable income
The "key case" selected for de-
cision today was the appeal brought
by the Merchants Loan and Trust
company, as trustee of the estate
of Arthur Ryerson, of Chicago,
from decisions of Illinois courts up
holding assessments levied by in
ternal revenue officials on profits
realized through sale of certain
trust assets Included in the trust
fund we're $500 shares of stock In
Joseph T. Ryerson and Son, a cor
poration, which were valued 1T
$561,0 March I. 1918, but which
we're sold in 1917 for $1,280,00O.
Collection of a tax on the difference
in value between March, 1913, and
the date of sale, as income, was up
held by the courts decision.
Word Income Defined.
The word Income" was defined
by the supreme court in a case un-
der the corporation excise tax Of
1909, Justice Clark said, as "a gain
derived from capital, from labor or
from both"
1T is obvious that unless this de-
finition be modified it rules the
case at bar" the opinion said, "and
notwithstanding the arguments
heard, we continue entirely salts
| fled with that definition. Since the
fund so taxed was the amount re-
allied from the sale of stock in
1917, less the capital investment as
of March l, 1913. it is palpable
that it was gain or profit pro-
duced by or derived from that
investment and thereby became the
realized gain which has been re-
peatedly declared to be taxable in
come
Contention Dismissed.
The opinion quickly dismissed
contention that the word Income"
as used in the sixteenth constitu-
tional amendment did not include
gain realized by single transaction
but only profits realized by one en-
gagged in buying and selling as
business.
1T is sufficient to say of this
contention" the court ruled that
no such division was recognized
in the civil war income tax act or
in the income tax of 1894. The ar
gument which is pressed upon us
fails to convince us that a con-
struction should be adopted which
would in a large measure defeat
the purpose of the amendment.
Plainly the gain we are con-
sidering was derived from the sale
of personal property, and very GER
tainly the comprehensive last
clause (in section %: gains or
profits and income from any
source whatever, must also in
clude it. if the trustee is a taxable
person within the meaning of the
act"
The reasoning used in the case
of the Ryerson estate was held to
cover the courts decision in the
appeal brought by David NJ.
Goodrich of New York, involving
taxation of profits on investment
capital, except that in one transac-
ton, Mr.. Goodrich showed q loss
fCnptiruad an poga TI,,Un