The Redwood gazette. [volume] (Redwood Falls, Minn.) 1873-1940, 1921-01-19

ment of the Constitution and the legis-
lation passed by the Congress after
! the ratification of the Amendment.
The Sixteenth Amendment to the
Constitution provides: "The Congress
shall have power to lay and collect
| taxes on incomes, from whatever
] source derived, without apportionment
among the several states, and with
out regard to any census or enumera-
ton"
The statute specifically imposes a
tax upon net income which "shall in
rived from sales or dealing in proper
ty," and then provides: "(c) For the
purpose Of ascertaining the gain de-
rived from the sale or other DISPOSE
ton of property, real, personal, or
mixed, acquired before March 1, 1913,
the fair market price or value of such
property as of March /, 1918, shall
be the basis for determining the am
cunt of such gain derived
It is the contention of the plaintiff
that the statute is unconstitutional
| in so far as it taxes as income the
increased value of investments when
realized by sale, and that such a tax
is a direct tax upon capital or property
not authorized by the Sixteenth
| Amendment and not tax upon in
come. In other words, that such gains
do not come within the definition of
income as the word is used in the Six
| teenth Amendment.
On the other hand, it is the conten-
| ton of the Government that such
gains do constitute income properly
taxable under the Income Tax Law of
1916.
We are therefore brought to a con-
sideration of the scope of the Six
teenth Amendment, because there is no
question but that prior to the adop-
ton of this Amendment the Congress
had no power to tax as income gains
arising from the sale of property
where the owner thereof was not
dealer or trader in such property so
as to justify an excise tax upon his
business.
Scope of Sixteenth Amendment.
The Sixteenth Amendment does not
extend the taxing power to new SUBJ
jects. In Evans v. Gore, 253 u. S.
245, at page 261, Mr.. Justice Van De-
vanter in delivering the opinion of the
supreme Court SAID:
.Thus the genesis and words Of the |
Amendment unite in showing that it
does not extend the taxing power to
new or excepted subjects, but merely
removes all OCCASION otherwise exist
ing for an apportionment among the
states Of taxes laid on income, wheth-
err derived from one source or anoth-
err"
And again, in Eisner v. Macomber,
supra, at page 206, Mr.. Justice Pitney,
in discussing the scope Of the Amend
ment, said:
Gas repeatedly held, this did not ex-
tend the taxing power to new SUBJ
jects, but merely removed the neces-
sity which otherwise might exist for
an apportionment among the states
of taxes laid on income.
A proper regard for it's genesis, as
we'll as its very clear language, re-
quires also that this amendment shall
not be extended by loose construction,
so as to repeal or modify, except as
applied to income, those provisions of |
the Constitution that require an ap-
portionment according to population
for direct taxes upon property, real
and personal. This limitation still has |
an appropriate and important func-
tion, and is not to be overridden by |
Congress or disregarded by the courts. |
"In order, therefore, that the clause |
cited from Article of the Constitu- |
ton may have proper force and effect, |
save only as modified by the amend |
ment, and that the latter also may
have proper effect, it becomes essen
tional to distinguish between what is |
and what is not income, as the term |
is there used; and to apply the dis
tinction, as cases arise, according to /
truth and substance, without regard to |
form. Congress can not by any defin- |
ition it may adopt, conclude the mat
ter, since it cannot by legislation alter I
the Constitution from which alone it |
derives it's power to legislate, and |
within whose limitations alone that |
power can be lawfully exercised"
In the case at bar it therefore ssbe-
comes essential to distinguish between I
what is and what is not income as
the term is used in the Sixteenth |
ton according to truth and substance +
Article of the original Constitution,
Section 2, clause 8, and Section g.
clause 4, may have proper force and
effect save only as modified by the Six
teenth Amendment.
The question, therefore, is simply |
this-Is gain in value realized from
the sale of property income?
Question before the Court.
The question before us was passed
s,rx<,,a hxy tho C,,1,rn,e,<, f,,,f ~, S,,. f1o