236 F. 661 | 8th Cir. | 1916
The writ of error in this case challenges a judgment which Hornby, the plaintiff below, recovered against Lynch, the collector, for the return to him of $171, which the collector had assessed against him as an additional income tax under the Tariff Act of October 3, 1913, c. 16, § II, A, 38 Stat. 166, 3 U. S. Comp. Stat. 1913, §§ 6319, 6320, 6321, and which he had paid under protest. The facts were alleged in the complaint of Hornby, and they were admitted by demurrer. They are set forth in detail and are numerous, but the result of them is that Hornby was the owner of 434 shares of the capital stock of the Cloquet Lumber Compahy from 1906 until 1915. That company was a corporation of Iowa, which for more than a quarter of a century has been engaged in purchasing timber lands, manufacturing the timber into lumber, and selling it. It had a capital stock of $1,000,000, divided into 10,000 shares, of the par value of $100 each. On March 1, 1913, by the increase of the value of its timber lands and
Counsel for the United States complains that the complaint does not state facts sufficient to constitute a cause of action, because it does not state the original cost of the timber or other property which the Cloquet' Company acquired before and owned on March 1, 1913. But that omission is immaterial, because it does state the value of the property which that company owned and was interested in on March 1, 1913, • which was converted into money and distributed to its stockholders in-1914, and that this conversion and distribution diminished the value of its property as it was on March 1, 1913, and as it was just before the conversion and distribution, by $410,000, and diminished the value of Mr. Hornby’s stock as it was on March 1, 1913, and as it was just before the sale and distribution, by $17,794. As none of the property which the Cloquet Company or Hornby held on March 1, 1913, whether it was original capital or previously earned surplus, income, gains, or profits, was intended to be made or was made taxable as income by the Income Tax Law of 1913, the complaint stated facts sufficient to show that this $17,794 was not so taxable.