The New York herald., 1921-02-27
u. S. FACES LOSS
OF BILLIONS IN
ESTATE TAKES
Refund of Vast Sums Al
ready Paid Hinges on
Court Decision.
ISSUE OVER INCOME
Deductions Provided For in
Many Cases Amount to
an Exemption.
CITE WOODWARD ESTATE
Executors Seek to Recover
$165,075 on Ground There
Was No Net Income.
CITE WOODWARD ESTATE
s,eciaI Despatch to THE New YORK HEHALp
New York Herald Bureau,
Washington, ID. c., Feb. 70.

s,ecial Despatch to THE NEW YORK HEnALp.
New York Herald Bureau
Washington. ID. c.. Feb. 20.
Hundreds OF millions of dollars In
taxes VIII be lost to the United States
II the courts sustain the contention or
the plaintiffs in the case Of the execu-
tors of Joseph H. Woodward against
the United States. just argued before
the Court of Claims.
The amount sought to be recovered
from the United States by the execu-
tors of the Woodward estate, one OF
whom is Senatw Oscar w. Underwood
of Alabama, is $165,075.
That amount, however, shrinks to
insigniflcance when 1t is remembered
that every estate exceeding $4,000 net
and which has paid an income tax in
the last two years will be able to re-
cover considerable part II not the
whole Of such income tax IN event the
Woodward case is decided in favor of
the plaintiffs and in addition to being
compelled to refund such taxes, the
United States will be unable to collect
millions of dollars which otherwise 1t
would collect as taxes on the net in
comes of estates yet to be adminis-
tered.
No exact estimate can be made Of the
amount the United States may lose in
this way, because the Treasury Depart
ment does not tabulate separately the
amount of taxes collected from incomes
Of estates. but groups them with other
income and profits taxes collected from
individuals, partnerships and corpora
tions. @
Total Near Three Billions.
There can be obtained, however. some
idea of the probable ratio between the
amount involved In the Woodward case
and the total amount which the Gov
ernment may be compelled to refund by
comparing the total income and profits
taxes collected in Alabama, the former
domicle of Mr.. Woodward. with the total
amount of such taxes collected in the
United States during the fiscal year
ended June 80, 1920. The amount of
such taxes collected in the State Of
Alabama during that period was s14.-
413,217. The total In the United States
was s3,s5S.360. 900.
Under the revenue act Of February
"a, 1919. known as the revenue act of
1918. every estate In which the met in
come" exceeds $4,000 Is required to pay
q tax on such income varying from 1
per cent. of the amount by which the
net income exceeds $1,000 and does not
exceed $4,000 to 65 per cent of the
amount by which the net income exceeds
S1,000,0o0.
In addition to the tax on the net in
come of an estate there Is a graduated
"a dad or,t t1a ,f afat
the net value of which exceeds the sum
of $4,000.
Section 214 (a) of the Revenue Act of
1918 provides that in computing net
income there shall be allowed as deduc-
tions: (3) Taxes paid or accrued with
in the taxable year imposed (a) by the
authority of the United States except
income. war profits and excess profits
taxes"
Executors Claim Exemption.
The contention of the executors of the
Woodward estate is that under that
section the amount OF the estate tax paid
by them should be deducted in comput-
ing the net income of the estate and that
as that method Of computation would
leave no net income, they should not
bave been compelled to pay any income
tax, and are therefore entitled to recover
from the United States the amount they
did pay.
That contention 1t Is understood can
be made only In behalf OF those estates
in which tho net value of the estate ex-
ceeds the sum Of $4,000 because It is
only estates Of that value which are
compelled to pay an estate tax, but the
enormous sum of estates falling in that
classification, and the immense aggre-
gate of the claims that may be nled
against the United States II the courts
sustain the contention In the Woodward
case are indicated by the fact that dur
ing the fiscal year ending June 80. 1920.
alone he United States collected the
sum OF s103,635,563 as "estate taxes"
There has been no intimation that
Congress intends to repeal the provi-
sions of the revenue act so far as they
relate to the tax upon the net incomes
of estates, but II Is believed that IL the
Woodward case should be decided finally
in favor OF the plaintiffs the act would
be imperative as TO all large estates