Evening star., 1933-06-23
The Mitchell Acouittal.

The acquittal of Charles E. Mitchell
in New York of the charges of defraud-
ing the Government through his in
come tax returns is a tribute to the
ingenuity of lawyers whose business it
has been to devise legal methods to take
full advantage of the income tax law. 1t
certainly is reflection upon the loose
manner in which the law was drawn
by Congress, particularly with reference
to the capital losses clauses. The at
tention of the public during recent
months has been focused upon the weak
nesses in the income tax law through
the Serce Banking Committees in
vestigation. Mr.. Mitchells indictment
and trial grew out of the testimony he
gave before the committee, showing
that he had paid no income tax for
the year 1929 and had avoided doing
SO by selling stock to member of his
family and taking a loss of $4,000, 900
on the transaction, which he deducted
from his income tax. The member of
his family turned out to be his wife.
He avoided payment of income tax In
1880 by sale of stock to a friend.
The manner in which income taxes
have been avoided in recent years by
men of great wealth through the use CT
so-called capital losses provisions of the
income tax law was further revealed to
the public when the Senate Committee
delved into the operations of j. p
Morgan & Co. and found that not one
OF the twenty partners of that huge
firm, all men of wealth, had paid in
come taxes in 1881 and 1892 At least
one OF the partners took advantage of
the provision of the law to sell stock to
member of his family to write off a
loss. And the partnership, by reorgan-
1zation with new partner, had been
able to take the losses merely by trans
ferring the assets of the old firm to
the new and writing off the losses.
With these object lessons before it,
the Congress undertook recently to
write into the tax sections of the new
industrial recovery act changes in the
income tax laws which would make it
impossible for Mr.. Mi chell, Mr.. Morgan
and other men of wealth to avoid the
payment Of income taxes, at least in
the same way they avoided them in
recent years. Under the new law the
old privilege of carrying over and de-
Quoting from income for the taxable
year loss sustained in the preceding
tax year is repealed This amend
ment is effective as of January l, 1888.
Another of the provisions of the new
law takes away from the taxpayer the
former privilege Of carrying over losses
from sales or exchanges of stocks and
bonds which are not capital assets and
applying these losses against gains from
similar transactions in the succeeding
tax year. The new law also aims to
make impossible the avoidance of in
come taxes by members of partnerships,
for example, the members of j. P Nor
gan & Co. Losses to the partnership
through the sale of stocks and bonds
which are not capital assets, are not to
be permitted to be deducted by the in
dividual members in computing income
tax returns. And further, private bank
ers are denied exemption from the
stock loss limitations provided in the
act of 1882, under which losses from
the sale or exchange of stock not cap
ital assets may be applied only against
gains from similar transactions and
cannot be used to reduce income from
other sources.
How well the present revisions Of the
income tax laws have plugged the holes
through which large incomes have
escaped taxation remains to be seen.
Another provision of the recently en-
acted law may make it far easier TO
know just what is going on when the
time comes to pay income taxes. That
provision calls for publicity Of income
tax returns. under such regulations as
the President may lay down. The be
lief is general that since Congress dele
gated TO the President this power of
making income tax returns public, the
Chief Executive will exercise It