Evening star., 1933-05-24

! planning that he felt his own "ignor
ancep had created an Impression o.
wrongdoing or misrepresentation"
Keyes said the involved transaction
was the inevitable result Of revalua.
ton of assets made necessary BY tn
admission of q new partner. 8. Parker
Gilbert, on January 2, 1881.
Pecora hammered away with ques.
tions. but Keyes, . methodical appear
ing man. who spoke crisply and with.
out hesitation, repeated his account
over and over. He testified that the
s2I 600, 600 loss could, as the law tnen
stood, have been deducted from the
firms taxable income In 1881, 1882 OF
1898.
Had Enough Loss.
"Three or four million dollars" Of
the s21 900 900, he said, was deducted
from profits in 1s3l-a year In which
the parners paid no tax:
"Was part of this s2l .00o. 900 de-
ducted in 1892" asked Senator Adams
Democrat, of Colorado.
| mo. SIR" Keyes replied.
"You did not need that?"
mo, sir"
You had loss enough?" Adams con-
tinued.
yes" Keyes answered.
Morgan's office manager testified the
1892 revenue act would prevent tne oe
duction for tav purposes OF any par!
of the remaining $lS,00o,0o0 loss 1rom
any 1888 profits. 49, =,
Pecora asked whether the aate OF
January 2. 1881, was adviseoiy nxeo a.
the date of the admission OF MI e'h-
bert into the firm?"
ayes. sir" Keyes replied. "1t Is the
mariners privilege to fix the date o.
the admission into the firm"
But. he said, there had been otnel
times when revaluation due 10
change in partnership had caused MI
Arm to pay higher income tax.
1--WE had a change in 1927 by the
retirement of the late Dwight W. MOT.
row." he said, land that return was
substantial write-up and an increase II
value which had to be included because
of the dissolution of the partnership.
What tax did you have to pay tha'
year?" asked Senator Couzens.
Some six or seven million dollars
the total" Keyes told him.
During the long questioning OF keyes
Senator Couzens commented:
well, it is perfectly practicable ane
perfectly easily done to create q new
partnership every year when 1t Is ao'
vantaeeous to do so and sell out tt
the new partnership If it creates loss
in the interests of the partners. I an
not charging that is done, but that Is
very simple procedure"
Fault Of Tax Law.
We'll" observed Senator Glass, "i1
that could have been done and shoulc
1t have been done and the law per-
mitted it to be done, the fault, II any
is in the law and not in any intent or
the part of your firm to cheat the Gov
ernment, is that not SOP"
Keyes agreed.
While Keyes was ON the stand, Nor
gan sat Just behind him. In his own
last testimony of the day. Pecora and
Morgan had exchanged questions AND
answers for almost an hour on whether
Morgan partners, who hold over 15C
business directorships, might not finC
that interests of these firms conflicteC
at times with those Of Morgan & Co
The banker insisted he saw mo con-
fiict," adding with smile that business
relations wouldn't continue very long u
only one side profited.
Pecora swung the questioning tc
loans to individuals"
Were any loans. personal loans, made
to officers and directors of chartered
banks?"
"Yes," Morgan answered, and Pecora
produced list of such loans and be-
gan to read them into the record, but
Davis, counsel for Morgan, interveneo
to point out this invaded privacy oi
individual citizens. At an executive
session later, the committee decided te
put the list of loans to bankers into
the investigation record. Pecora haC
contended it would be pertinent to know
whether a commercial bank Officer
might come under influence of pri-
vate bank through such loans.
Before the crowded committee cham
Der was emptied for the day, Pecora
also quoted from q report made by
Newell Shield, revenue agent, on Oc-
tober Is, 1882, in which the tax loss
claimed for the first two days of jan
uary. 1881, was questioned.
by forming a new firm on January
2, 1881" Pecora said, "and recording
the losses based on the sale of the assets
to the new firm, the loss became a 1881
loss, which. under the then existing
law could have been carried forward
to apply against 1888 income"
II never saw that report" Keyes said
adding he thought Shield erred in fail
ing to mention that the accounting
method used in estimating the loss was
nrc,p1od until q cha y,Uo in 90 no ~ n or hin