The Bismarck tribune. [volume] (Bismarck, N.D.) 1916-current, 1925-03-31
C0UZENS TAX
TILT LIKELY
TO HIT FORD
Years of Litigation May
Follow as Result of
Treasury Suit
BY HARRY Il. HUNT
NEA Service Writer

Washington, Mar. Establishment
of an arbitrary $10,000,000 or SO in
income tax against Senator Couzens,
to cover theoretical undervalua-
ton of the 1913 worth of his stock
in the Ford Motor Company, may
result in situation where the gov
eminent, instead Of collecting few
additional millions, would have to
refund to Couzens the taxes he did
pay as result of his profit on that
transaction.
Perhaps Secretary Mellon would
not object to that result. For it
would, in that case, be a demon
stration of his claim that high
taxes defeat themselves and de-
prive the government of revenue in
stead of adding to treasury receipts.
No more interesting demonstra'
ton of the Mellon tax theory
could possibly be staged in this
country, nor one that would SO
thoroughly catch public attention
and interest.
Briefly, the situation is this:
When negotiations were under way
by Ford to buy out the stock of the
minority interests in the flivver in
dustry, the minority stockholde
agreed to sell at $4,000 per share,
provided a ruling was procured in
advance from the Treasury Depart
ment of n value for the stock, as of
1913, satisfactory to the minority
owners.
Under the revenue law the 1913
value would be taken as basis for
determining profit on the stock
subject to the federal income tax.
Such ruling was obtained by
Ford from the treasury The 1913
value was fixed at $4,000 per share.
And as result Of this valuation
the sale was consummated.
Ford paid $12,500 per share for
the stock and Couzens and his
minority associates paid Uncle
Sam income tax on $4,000 per share
profit, this being the increase in
value of the stock between 1913
and 1919 as figured by the govern
ment's own ext erts.
In rebuttal to the departments
claim that the figure of $1,000 was
more than the. stock was worth in
1913, that it's real value then was
only about $500 share, and that
tax must be paid on $4,000 per
share profit instead of $4,000 per
share, the following claim, legal
sharks suggest, might be establish
ed.
!. re-determnation by the govern
ment of a satisfactory value for the
stock, as of 1913, was one of the
material considerations entering in
to the sale.
1t was a very definite, perhaps
even determining factor, in the
sale. Had the government then Fix
ed the figure Secretary Mcllun now
suggests would have been proper,
Couzens' net return would have been
some $10,000,000 less. 1t seems
quite likely the sale never would
have been made. at that figure.
establish and enforce a lower 1913
profits on the sale to Ford, it is
claimed the validity of the whole
transaction could be set aside and
Couzens reinstated in the ownership
of his Ford stock, should he SO de-
sire.
For the valuation previously fix
ed by the department constituted
very definite and valuable consider
alton and formed a basic part of
the agreement on which the sale was
concluded.
In event this contention was up
held in the courts, the government
instead of collecting additional tax
es from Couzens would have to re-
fund taxes heretofore collected on
the sale.
, And Henry Ford would have to
make an accounting to Couzens on
profits made during the last half
dozen years.
Which would bring Ford into the
fight and insure litigation lasting
years beyond the span of the present
administration.
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