Eagle River review. [volume] (Eagle River, Wis.) 1890-1927, 1925-07-16
DEATH TAXES AS
BUSINESS KILLERS
Assistant Treasury Secretary
Tells Fable Of Fate of Two
Successful Men.

Men cannot be expected to continue
TO work. day after day, increasing the
productiveness of this country and
benefiting others, If they know that
ON death the major portion of their
earnings will be dissipated in Federal
estate and state inheritance taxes, de-
clares Charles S. Dewey, Assistant
Secretary Of the Treasury. in the
American Bankers Association Jour
nal He says:
Il am going to relate a fable In
terms of modern business conditions.
John Henry and Walter Brown were
aggressive, Woodworking men, ana
each had started business for himself.
"At the time this history opens,
John Henry had just died, leaving his
entire estate to his son, John Henry.
Jr., and had appointed his old friend.
Walter Brown, as executor. Prior TO
his death John Henry had moved to
California, leaving his business in the
hands of his son under whom 1t had
continued to make excellent Roadway.
The father had been doing a little
specializing in OIL This venture had
not proved successful and he was In.
debted in the sum of $500 900.
Executor Walter Brown. on exami-
nation of the estate. found the follow
ing situation:
Capital stock OF Henry & Co.,
Inc, Michigan Corpn. Sc. 900 900
Personal debts due banks ... 500 600
walter Brown soon made the I'M,
pleasant discovery that in addition to
the personal Indebtedness of $500 900,
and administration expenses of $780,
900. the following death duties must
be paid
California inheritance tax. 5S5, 700
Michigan Inheritance tax ....... 122, 900
added to the personal debt and ad.
ministration expenses, this made q
grand total liability OF 1885, 200.
The year was 1920 Money was tight
Other manufacturing companies in the
same line which might have been in
terested In a purchase had no money
for extensions nor were the banks in
q position to handle a loan of this
type. Here was a most successful
business, built up from small begin
ntngs by one man and carried on to
further successes by his son, about TO
be placed under the hammer.
SIS there any justice in taxation that
may force a man and his family TO
lose the fruits of his entire hfe's labor,
and permit others to benefit? AS last
resort. Henry. Jr., was forced into a
bond issue. A loan. to settle the
debts, administration expenses and
death duties, of $2,25O,OOO was nego-
tiated, upon the following basis:
'"The capital stock of the company
was left at 100000 represented by
$4,000 shares. First mortgage per
cent bonds we're offered the public
with a bonus OF two shares Of stock
with each $1,000 bond The banker.
to protect his bond customers. kept
1000 shares to assure control of
management, and John Henry. Jr.. re-
ceived the balance of 1880 shares.
John now has good job as general
manager Of his fathers old company,
bat they do not pay him very much.
Nov we must return to Walter
Brown, executor of John Henry. Sr.
WGlter had always kept close to his
own manufacturing business. The
more he considered his own situation,
the more closely 1t seemed to him to-
resemble that Of his old friend.
"He therefore called lawyer and
made a complete schedule of his as
sets, requesting that an estimate of
administration expenses and death
duties be made The schedule of as
sets was as follows:
Capital stock, Walter Brown Co.,
Mich. Corp. ..,::.:.''..........$ "a 0O0. 600
California real estate ....... 900 900
TaI-exempt bonds. Mimi. Mont
ana Colo. .......s.............. SOC, 600
LotAi s''sss'''s's...s..-. % 5Uh.hU0
Within a few days Mr. Browns
lawyer made the following report:
Debts and admin. expenses 49, $500. 900
Fed. estate tax........ S710625
Cal. inheritance tax 443194
Mich. inheritance tax. $50, 400