Evening star., 1935-04-01
MELLON ASSUMES
RESPONSIBILITY IN
TAX DEDUCTIONS
Testifies Strange Income
Tax Law Made Stock
Deal Necessary.
DECLARES HE CONDUCTED
SALE OF COAL COMMON
Says Pittsburgh Security Ap-
peared to Be Outstanding One
With Respect to Loss.
BY the Associated Press,

ny tHc AnSOClNteu FIcSS.
PITTSBURGH, April 1.-Andrew
w. Mellon took the responsibility on
the witness stand at his income tax
hearing for the deductions made in
his 1881 income tax report.
The financier said the country's
strange" laws governing income
taxes made necessary the transac-
tions which the Government claims
were fraudulent, but which Mellon
claims were legitimate.
Called Unexpectedly to the stand
by his chief counsel, Frank j. Hogan.
Mellon was questioned concerning the
sale of a huge block of Pittsburgh
Coal common stock on which ne
claimed a tax loss of s5.600,000.
Who conducted \the sale" asked
Hogan.
'I did, myself" said Mellon.
Mellon Describes Transaction.
The former Secretary Of the Treas
TRY spoke slowly in o low but dis
tinct tone.
Tell us how it came about" con-
tinued Hogan, referring to the Pitts
burgh Coal sale.
Il had under consideration the
question of my tax return for the year
in the office of Mr.. johnson tHoward
M. johnson. Melons confidential sec
retary)." said the banker II had had
large losses and shrinkage in my in
vestmentS. I also had large capital
gain profits upon which I was obliged
to pay a capital gain tax.
Il desired to select some security or
securities for the purpose of the de-
duction allowable in that respect. The
strange law which made me liable for
q capital gain tax also allowed the
privilege of reduction, so the Pitts
burgh Coal stock appeared to me the
outstanding stock with respect to loss"
The S0-year-old three-tirne Secre-
tary of the Treasury was the first wit
ness called today at the resumption Of
the hearing before the Board Of Tax
Appeals now In It's seventh week. The
Government claims Mellon owes a tax
and assessment Of $3,0s9, 900, but the
banker contends he paid the Govern
ment $4,000 too much.
johnson, Early Witness.
Johnson. Melons secretary, was a
witness early in the hearing and re-
lated how he made out all the finan-
cier's income tax returns. He had
testified that in 1891 Mellon glanced
at his report, but did not study it.
nna1 1e%A mn ch
sold to the Union Trust Co. and later
repurchased by the Coalesced Co.,
Melons family holding corporation.
The Government describes it as
shadow SALE" deliberately planned to
evade tax payment.
AT the time, could not sell the
stock on the exchange" the banker
testified. 1T was so large block as
to be impossible then and the only
place where might effect sale was
the Union Trust.
After a regular meeting of the
Union Trust Executive Committee" he
continued, II went over to the bank
and took the Pittsburgh Coal ques-
ton UP with Mr. Oh. Co. McEldowney,
who was head Of the bank, and I said
would like to sell to the Union Trust
the Pittsburgh Coal common stock.
Sale Is Agreed Upon.
HE asked one or two questions con-
cerning the amount and shares of
stock and with those questions he con-
sidered the matter. I said I would
sell at market price and mentioned in
round figures 100000. 50 he consid-
cred and said, All right, send it out
and we will take it,
Hogan asked If anything was said
was mentioned.
Mellon replied:
THAT comprises everything substan-
TALLY that I said. After that went
Continued on Page 8, Column ~