The Brattleboro daily reformer. (Brattleboro, Vt.) 1913-1955, 1921-01-15
INVESTED CAPITAL
CASES IMPORTANT
That and Capital Assets
Case May Affect En-
tire Tax Plan
MILLIONS IN REVENUE
DEPEND ON
Both Have Recently Been Argued Be
fore Supreme Court and National Law
Makers A%nxiousIy Wait Their Deci-
mountaineering Principles Involved.
BY DAVID

bA LA Ia ~ AAAA-NSH'
Especial Despatch to The RefOrmer)
Copyright 1921.
WASHINGTON. Jan. 15.-An cal
/ culations as to the size of the budget
needed to run the government. all e.
Inmates as to the amounts that must
! be raised for taxation either by tariff
duties or income taxes may be upset if
the department of justice should lose
two cases which have just been ar
gued before the supreme court of the
United States. The most important
financial litigation in which the govern
mcnt has been engaged is the way Off
Gals at the department of justice de
scribe the cases and it is estimated that
fully $500, O0O, 900 in taxes that already
have been collected may have to be given
back by the government if the outcome
of the cases is unfavorable. Rivaling
in Importance the famous stock-dividend
cases, the two big principles at issue in
the pending cases are of far-reaching
Importance to the business men of the
country as well as to all persons who
have money invested in trust funds.
One is known as the invested capital
case and the other the capital assets
case. The first grows out of the rise
in value of some coal lands from $500
BOO to something like S10,OO0,0OO in Il
few years. The concern in question is
sued stock to the amount OF the ten mil
lion and the government claims that the
new stock is really profit. Lane IN
CreaseS in value through n variety of cir
cUInstances and while in this case. many
| improvements were made the increase in
value came about as it does in 80 many
cases through the increased demand for
products of the soil.
There are hundreds of thousands of
similar circumstances throughout the
country and lust as soon as the case
was put on the calendar for argument.
Il firms promptly filed briefs 10 protect
their own interests. The question of
whether the increased value is profit and
subject to tax or whether it is an in
crease in capital contributed by the soil
iS 80 vital that it may affect the entire
tax question and either require new laws
by congress or now rulings by the treas
ury department.
The other case involves n still more
interesting principle. 1t IS in connection
with the RyerSon estate of Chicago and
the Merchants Trust c.. is seeking to
nave. 4 ruling of the treasury overturned.
Millions of dollars have been held bv the
trust company for the heirs of the RIVER
son estate. That money has trebled in
value when the securities in which the
money was invested have gone up. Now
the trust company felt it ought to sell
the securities and %reinvest the money
thus obtained. The trust mpa CON
tends that the increased amount of mon
ey is simply an addition to capital and
is not profit. 1t further argues that the
individual legateeS may get increased in
comes through payments from the fund,
but that the government taxes those
payments by reaching the individual.
On the other hand, the government