The Richmond palladium and sun-telegram. [volume] (Richmond, Ind.) 1907-1939, 1921-03-28
HIGHER VALUE
TAXABLE AS
INCOME, RULE
Increase in Valuation of Capt.
tai Investment May Be
Taxed, Supreme Court De-
cision Says Today.
LOSS IS NOT TAXED
tsy Associated Press,

tBy Associated Press)
WASHINGTON, March 2S.- The
government won string of victories
today in income tax devisions handed
down by the supreme court.
Solicitor-General Frierson declared
that the governments position had
been upheld completely The effect
of the rulings he added was that any
gain derived from corporate bond or
capital asset investments was taxable
as income, the amount of income sub
ject to such taxation still to be esti-
mated from March i, 1913.
Increase in the value of corporate
bonds originally acquired and held for
investment is taxable under the rev
enue act of 1916, the supreme also
ruled today.
The supreme court reversed the de-
cision of federal courts of Connecticut.
which held against the government on
the question whether an income tax
could be levied against an increase in
securities purchased and held as an
investment, but ruled that the tax
could only be imposed on the actual
gain. Thousands of cases of income
assessments come within this decision
OF the court upon which depended the
necessity of the government refunding
millions of dollars in taxes.
Increase of a value of a capital in.
vestment is taxable as income under
the revenue act of 1916, the supreme
court today held
The courts decision was given in
the appeal of David NJ. Goodrich from
ruling of the internal revenue bu
reau assessing him upon the increased
, value of stocks purchased to prior to
| 1913. Action of the revenue officials
was affirmed by the supreme court in
the transaction showing a gain.
The court ruled that the transaction
| showing an actual loss could not be
taxed since there was no gain derived
Vast Sum Inyoived.
Taxes estimated to aggregate UP to
S100, 100000 are involved in action OF
the supreme court iR the two cases
covering the question of whether aug
mented value of an investment is in
come"
In one case the court was asked by
counsel whether the revenue Act OF
| 1916 was constitutional insofar as il ia
construed to tax as income capital
! increment realized by the conversion
of capital investments into cash.
Thousands of individuals who had
| invested in securities prior to the
! World war and who, on the general
advance in market prices in that pc
riod, had sold their holdings at great
profit, were naturally interested in
the outcome. 1t was common knowl-
edge that the fear of being compelled
to turn over the bulk of their profits
to the government in the form of
taxes prevented many paper million
aires" from realizing on their held
ings. incidentally, many were wiped
out in the slump which followed the
signing OF the Versailles peace treaty
The legal point involved. however,
concerned not only individuals but
corporations and partnerships which
had invested surplus of capital in sol
id securities and sold them on a ris-
ing market.
Value SIumps
In the case of David NJ Goodrich VS..
William H. Edwards, collector OF in
ternal revenue for the Second New
York district, tax was assessed on
stock which was sold at loss, but
which was old at price above that
quoted for it on March l, 1913-the
date set in the statute as that from
which prices would be computed. New
York courts upheld the government
The second case came from Coz
necticut where the federal courts sus
tanned Frederick F. Brewster in his
contention that an increase in the val
ue of an investment was not Income.
Brewster made a slight actual profit
over the price paid for his securitit
and a heavy profit when computed
from the value on March 1, 1913
In both cases counsel argued tha
bonds are property without refer
ence to cost or market value; the
bonds themselves are their owners
capital assets and his capital interest
therein is not limited to their cost
The government took the stand thai
income must be interpreted as rep
resenting any gain accruing to thc
taxpayer within the period under con
sideration. Prior to the adoption oi
the 18th amendment, the court wa
told. income was considered by the
government branches to include gains
and profits derived from the sale o.