Evening star., 1934-04-30
MITCHELL INCOME
TAX FIGHT BEGINS
BEFORE S. BOARD
Former New York Banker
Seeks to Avoid Paying
Million.
DEFENSE CLAIMS GOOD
FAITH IN STOCK DEALS
Exoneration of Charges in New
York Held Indication Levies
Are Not Due.

Fighting to avoid payment of
Sl,275, ,644.52 income tax for 1929 and
1880, attorneys for Charles E.
Mitchell, former board chairman of
the National City Bank of New York,
brought before the United States
Board of Tax Appeals this morning
Mitchells intricate stock transactions
sensationally publicized in the Stock
Exchange investigation by the Senate
Banking Committee last year.
Substantially the same transactions
involved in the present case resulted
in Mitchelrs Indictment and trial in
New York Federal Court a year
ago. A jury acquitted him after "a
hours deliberation.
The present hearing, expected to
consume the better part of two weeks,
is on an appeal by Mitchell from
deficiency and penalty payments
ordered by the commissioner of in
ternal revenue
Mitchell Is Present.
Mitchell. formerly one of the most
powerful figures in the banking world,
was in the hearing room. Nationally
known financiers associated with
Mitchell and with the House Of Nor
gan, through which he dealt. are
expected to testify later in the hearing.
William Wallace, chief of Mitchell's
counsel, in an opening statement this
morning, frankly admitted the Gov
ernment's contention that Mitchell
made two stock sales in order to
establish losses of S2,872 .305.50 and
of S758,9l825 in 1929 and 1890. re-
spectively. to avoid payment of taxes
on these amounts.
Another Government contention
that Mitchell failed to report in 1929
a $685. 66667 receipt from the National
City Co. affiliate of the National City
Bank, also was admitted by his coun-
sci.
Wallace contended, however. that all
three transactions were made in good
faith and without fraudulent intent.
Evidence Of Mitchell's honest inten-
tions will constitute his entire presen-
tation to the board, Wallace said.
Facts of the transactions are con-
tained in stipulations printed in a
35-page pamphlet.
Exoneration Cited.
Through his attorneys, Mitchell also
Is claiming that his exoneration of
fraudulent intent by the New York
Federal Court jury is a bar to the
present attempt by the commissioner
Of internal revenue to collect the al
legged tax deficiencies. He also pleads
the statute of limitations and on the
constitutional ground of double jeop-
ardy.
Mitchell is claimed to have failed to
pay S729.7C9,S4 in taxes on his 1929
income, and s12l.7I984 on his 1880
income. Penalties for these alleged
deficiencies total S42521484. Wallace
told the board that Mitchell had a
personal fortune of S2O,0O0,000 before
the stock market crash of 1929. and
that he is now several million dollars
ito the red"
The first stock transaction made
in order to show a loss in Mitchell's
income tax return, Wallace explained,
was the sale December 20, 1929, to
his wife of 1890 shares of National
City Bank stock.
Paper Loss Incurred.
He bought this stock at 1857 a
share and sold it to his wife at S212,
the attorney declared. MitchelIs
contention is that he took this more
than s2,000,000 loss so that a paper
loss incurred in an attempt to bolster
falling market in the banks stock
might show on his income tax returns.
Wallace said the sale to Mrs. Mitchell
was outright and was made ION ad-
vice of counsel" He claimed that
Mitchells repurchase of the 1890
shares more than two years later
had no relation whatever to the 1929
sale to Mrs. Mitchell.
The second point on which the
Government bases its claim to collect
deficiency taxes from Mitchell was the
payment to him July /, 1929 of two
thirds of a million dollars as his share
in the distribution of a management
fund, the purpose of which was recog-
milton of special efforts by National
City Bank Co. officials.
Wallace explained that the amount
Mitchell received was his share of
accumulations in the funds up to the
calendar year 1929. At that time
81 100000 was distributed.
Then the stock market crash came,
the board was told, bringing losses
which wiped out accumulations for
the entire year. Accordingly, the
board of directors, by resolution, de-
clared that payments made in the
mid-year distribution should be con-
sidered as advances to be paid out
of future management funds accu-
mutations. Since that time there
have been no such accumulations.