293 F. 129 | S.D. Ohio | 1921
By the act of 1913 (38 Stat. 114) dividends were taxable if paid after March 1, 1913, whether from profits theretofore accrued or thereafter. Lynch v. Hornby, 247 U. S. 339, 38 Sup. St. 543, 62 L. Ed. 1149. But by the act of 1916 taxable dividends were limited to those made out of earnings or profits accrued since March 1, 1913. And, I take it, whatever claims the corporation had upon that date, whether arising from profit or otherwise, are to be considered as capital then accrued, for the purposes of this act, and that profit since accrued means after-acquired gain, which did not then exist, and that the mere fact that a
Although the dividends were not income simply because credits to the extent thereof had been created, yet when the plaintiffs subsequently drew, as they did, against those credits and obtained the money -thereon, then they did become income; and therefore they are properly charge-, able with the income tax upon what they actually received and drew. The evidence before the court being not in.shape to accurately adjust this account, the court ruled at the hearing that unless the parties could agree, an auditor would be appointed to make the calculation. But thereupon Mr. Matthews, counsel for plaintiffs, stated that plaintiffs would have no objection to the item representing income for 1916 being taxed; that, inasmuch as it would have to he paid at some time, it might as well be paid now. Accordingly, there being no objection upon the part of plaintiffs, they may be charged with the appropriate tax upon the credits which they received, respectively, upon the books of the company as the result of the earnings; that is to say, the dividends declared in regular course as distinguished from this distribution of the $85,000 resulting from the settlement of the lawsuits. The plaintiffs may have judgment for so much of their claims, respectively, as is based upon the collection of income tax on their pro rata shares of the $85,000 distributed.
“For the purpose of tbe normal tax only tbe income embraced in a personal return shall be credited with tbe amount received as dividends upon tbe stock or from the net earnings of any corporation, joint-stock company or association, trustee,, or insurance company, which is taxable upon its net income as hereinafter provided.”
There is no doubt but that this concern of John D. Park & .Sons Company was taxable on its net income; and therefore let the plaintiffs be credited in an account as upon.an amended return for the year 1916, with the dividends received, so far as the normal tax is concerned, but the dividends will be included in computing the amount of the surtax.
A certificate that there was reasonable and probable cause for the collector of internal revenue to receive this money will be made.
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