The Birmingham age-herald., 1921-03-29


 Solicitor General Frierson, who was present to hear the opinions read, in terpreted them as upholding in every particular the contentious of the govern ment. He believed elimination of prob 1ems involved in cases decided today would go far toward relieving the treas ury department of inconveniences it has suffered as result of multi-angled tax litigation facing it for the past year. No estimate could be obtained tonight as to the amount in dollars and cents af- fected by the court action.
 Apparently with view of early clear ing the docket of all important tax ques- tions, the court, before recessing until April Il, advanced to that date hearing of argument the insurance cases, the corporation reorganizing case and the in- heritance tax case The first involves taxation of dividends applied as the partial payment to insurance premiums, the second applying to stock received from the reorganization of corporation --in this case, the DuPont Powder com pany, and the last, whether inheritance taxes can be deducted from taxable in- come.
 KEY CASE" SELECTED
 The "key case'' selected by the court for decision today was the appeal brought by the Merchants Loan and Trust com pany. as trustees of the estate of Ar thur Ryerson, of Chicago, from decisions of Illinois courts upholding assessments levied by internal revenue officials upon profits realized through the sale of cer- tain trust assets. Included in the trust fund were 9,50U shares of stock in Jo- seph P. Ryerson & Son, a corporation which were valued at $561, 600, on March 1, 1913, but which were sold in 1917 for $1,2s0000. Collection of tax on the diff ference in value between March, 1913 and the date of sale as income was up- held by the court in the decision rem dered today.
 The word income" was defined by the supreme court in case under the cor poration excise tax act of 1909, Justice Clark said, as "a gain derived from capi- tai, from labor or from other combines.
 "This definition. frequently approved by this court" the opinion continued received an addition in the latest in- come tax decision (Eisner vs. Macomber), which is especially significant in it's ap- plication in such case as we have here. The definition was then to read: Income may be defined as gain de- rived from capital, from labor or from both combined provided it be under stood to include profits gained through sale or conversion of capital assets
 "It is obvious that unless this defi- milton be modified it rules the case at bar, and notwithstanding the arguments heard in this case we continue entirely satisfied with that definition. Since the fund so taxed was the amount realized from the sale of stock in 1917, less the capital investment as of March 1, 1915, it is palpable that it was gain or profit produced by or derived from that investment and thereby became the realized gain which has been repeatedly declared to be taxable income within the meaning of the constitutional amendment and the acts of Congress.
 WORD "INCOME''
 The opinion quickly dismissed a con tention that the word income" as used in the sixteenth amendment did not in- clude the gain realized by single trans action, but only profits realized by one engaged in buying and selling as busi- ness.
 sIt is sufficient to say of this con tention," the court ruled, "that no such distinction was recognized ip~ the Civil war income tax act or in the income act<of 1894. The interesting and ingen- ous argument which is pressed upon us fails to convince us that construction shall be adopted which would in large measure defeat the purpose of the amendment.
 Plainly, the gain we are considering was derived from the sale of personal property. and very certainly the compre- hensfve last clause Gin Section 9. Gains or profits and income from any source whatever must also include it if the trustee is taxable person within the meaning of the act.
 The reasoning used in the case of the Ryerson estate was held to cover fully the courts decision in the appeal brought by David M. Goodrich of New York, in- volving taxation of profits on investment capital. except that in one transaction MT. Goodrich showed an actual loss from the price he had paid for the securities The ruling of the tax assessors that the value as Of March 1. 1913, which was be- low the cost price in 1912 and the sub- sequentF sale price in 1916, only would be considered was reversed by the supreme court.
 sThe act under which the tax was assessed provides that the net income of the individual shall include gains and profits" the opinion said
 Thus 1t Is very plain that this statute imposes the income tax on proceeds Of personal property to the extent only that gains derived therefFom. and since no rain was derived on this transaction no tax could be assessed against the vendor"
 In the third case settled today-Walsh, (Continuea on page Two)