Source: http://openjurist.org/print/24534
Timestamp: 2013-12-19 06:44:56
Document Index: 384834603

Matched Legal Cases: ['art\n61', '§ 641', '§ 22', '§ 22', '§ 26', '§ 931', '§ 22', '§ 4', '§ 22', '§ 26']

311 US 60 United States v. Stewart
61 S.Ct. 102
85 L.Ed. 40
UNITED STATESv.STEWART.
Rehearing Denied Dec. 16, 1940.
See 311 U.S. 729, 61 S.Ct. 390, 85 L.Ed. —-.
During the year 1930 respondent purchased farm loan bonds issued by joint-stock land banks under the Federal Farm Loan Act of 1916, 39 Stat. 360, 12 U.S.C.A. § 641 et seq. The purchases were made for the prospective increment to the bonds and not for their interest. At the time the purchases were made the banks were in receivership. The bonds were acquired at prices substantially below par. In making these purchases respondent relied upon statements contained in circulars and bulletins issued by the Farm Loan Board, reasonably believing that he was purchasing securities the profit upon which in case of sale would be exempt income. A part of the bonds so purchased, with their appurtenant coupons, was sold in 1931; and a part was surrendered in that year to the receiver of the issuing bank in exchange for cash paid to respondent 'under and pursuant to the covenants contained' in the bonds. Each of these transactions resulted in a profit to respondent.1 The Commissioner held that those gains were taxable income. Consequently respondent included them in his income tax return for the year 1931 and claimed a refund. On disallowance of that claim, this suit for refund was instituted. The District Court determined that the gains so realized were income and taxable. 24 F.Supp. 145. The Circuit Court of Appeals reversed.
If those two sections are controlling, it is clear that respondent is taxable on these gains, for they fall squarely within the definition of gross income contained in § 22(a) and they are not 'interest'2 within the meaning of § 22(b)(4). But respondent places his main reliance on § 26 of the Federal Farm Loan Act, 12 U.S.C.A. § 931, which provides that 'farm loan bonds issued under the provisions of this Act (chapter), shall be deemed and held to be instrumentalities of the Government of the United States, and as such they and the income derived therefrom shall be exempt from Federal, State, municipal, and local taxation.' It is urged that the gains here involved were 'income derived' from the bonds within the meaning of that section.
The Revenue Act of 1916, 39 Stat. 756, was enacted shortly after the Farm Loan Act by the same Congress and at the same session.3 Sec. 2 of that Act, like § 22(a) of the 1928 Act, included in taxable income 'gains, profits, and income derived from * * * sales, or dealings in property.' And § 4 of that Act, like § 22(b)(4) of the 1928 Act, exempted from taxation 'interest upon * * * securities issued under the provisions of the Federal Farm Loan Act.' It is clear that 'all acts in pari materia are to be taken together, as if they were one law.' United States v. Freeman, 3 How, 556, 564, 11 L.Ed. 724. That these two acts are in pari materia is plain. Both deal with precisely the same subject matter, viz., the scope of the tax exemption afforded farm loan bonds. The later act can therefore be regarded as a legislative interpretation of the earlier act (Cope v. Cope, 137 U.S. 682, 688, 11 S.Ct. 222, 224, 34 L.Ed. 832; Cf. Stockdale v. Atlantic Insurance Company, 20 Wall. 323, 331, 332, 22 L.Ed. 348) in the sense that it aids in ascertaining the meaning of the words as used in their contemporary setting.4 It is therefore entitled to great weight in resolving any ambiguities and doubts. Cf. United States v. Stafoff, 260 U.S. 477, 480, 43 S.Ct. 197, 199, 67 L.Ed. 358. In that view the express exemption of interest alone makes tolerably clear that capital gains are not exempt.
In support of the contrary view great stress is placed on the legislative history of § 26. Extensive references are made to the hear