Evening journal., 1921-11-22

new stock they received under the
reorganization plan.
The decisions may affect abou,
two thousand person who were
stockholders in 1915 when the stock
was Issued.
A great amount OF the stock has
been pooled since it was issued. 10
assure control Of the company in
friendly ownership and has never
been sold.
The suit IN which the Supreme
Court decision was made. as stated
In these columns yesterday. was
brought by c. W. prcn.s against
The United States Ia the Court OF
Claims TO recover tax Of s562s
paid by him under protest. The ;av
was based upon a stock distribution
made by "a 1. DUPONT de Nomours
Powder Company In October. 1915.
The governments contention was
that the stock distribution was o
property dividend liable TO the addi-
tional taxes provided by the income
tax act OF October 3, 1913.
The complainants contention waf
that the stock distribution was q
mere readjustment OF the sccuritiei
Of r. ] DUPONT de Nemours Powder
Company, made pursuant TO a nnan-
clal reorganization OF its business
and was not income upon which
Congress was empowered by the six
teenth amendment 20 impose tax.
The stock Of distribution was val
ued by the Bureau OF Internal Reeve
nue. at $34750 per share.
The United States Court OF Claims
decided I'm favor OF Phellis. but tho
government appealed TO the United
States Supreme Court. which. today
In holding the new stock subject 20
tho income tax law. said:
1.-THE new common stock became
treasury assets OF the old company,
and was capable OF distribution. as
the manufacturing assets. whose
place IL took. were not. It's distri-
button transferred 20 the several
stockholders new individual proper
" rights which they severally were
entitled 10 retain and enjoy. or "a
sell and transfer. with precisely the
same substantial benefit 10 each as
n the old company had acquired tho
stock by purchase from strangers.
He Cthe stockholder), received
as his separate property a part OF
the accumulated profits OF the old
company. in which previously he
had only a potential and contingent
interest
ut thus appears that in substance
and fact, as well as in appearance.
the dividend received los claimant
was a gain. a profit. derived from
his capital interest in the old COM
pany. not in liquidation OF the cap
ital, but in distribution OF accumu-
lated profits Of the company. Hence
It constituted individual income
within the meaning OF the income
tax law"
The Court also held John D.
Rockefeller and others. who partici-
pated with him in the distribution
by the Ohio oil companies and by
the Prairie Oil and Gas Company
TO their stockholders OF stock. re-
spectively, In the Illinois Pipe Line
Company and the Prairie Pipe Line
Company must pay income tax upon
the same.
Estimates were that the govern.
ment would hold at least $4,000, OOl
In taxes from the liugants in tn
cases decided yesterday. and the adju
/ dication OF many claims whien r.
been pending in the Treasury De
partment, awaiting the outcome
would total many millions OF dol
lars in addition.
Il is estimated that. IN 1915 the
p. l. dupont de Nemours Pow
der Company OF New Jersey. held a
surplus OF over s75.OOO.OO0. Then Il
incorporated the new company in
Delaware. TO which Il sold its as
sets. taking in exchange the latter
company's shares OF stock, amount
ing 10 s12O.OOO.OOO. OF this amount
the New Jersey Company reserved
enough to retire its bonded Indebted
ness. preferred stock. and the equiv
alent OF Its common stock. The shares
which remained had a market value
OF over s2O0,OOO.O0O and were dis
tributed TO stockholders in the orr
ginal New Jersey Company.