196 A.D. 613 | N.Y. App. Div. | 1921
Lead Opinion
The relator on January 1, 1919, owned certain stocks and bonds of the fair market value of $70,000. On the 1st of May, 1919, the relator gave these securities away. It does not appear from the record whether these stocks were given for charitable purposes or not, and no question arises under the exceptions in reference to such gifts. At the time the gift was made the securities concededly had a fair market value of $72,000. The relator did not include the increment in value upon them in the body of his return, nor did he pay a tax thereon, but he disclosed the facts as above stated in a rider attached to the return, claiming in such rider that he was not liable to taxation under the statute, and that the regulation of the State Comptroller attempting to reach this result was unlawful and void. The Comptroller has made an assessment against the relator upon the sum of $2,000, the conceded
Chapter 627 of the Laws of 1919 adds article 16 to the Tax Law, which contains the sections of the Tax Law herein set forth. Section 351 declares that “ a tax is hereby imposed
Obviously sections 353, 354 and 355 are to be read together and construed as defining income as required by section 351, and when we find in section 353 that “ for the purpose of ascertaining the gain derived or loss sustained from the sale or other disposition of property ” we are to understand “ other disposition of property ” to relate to the methods of disposition provided for in the subsequent sections, dealing with exchanges and with reorganizations, mergers or consolidations of corporations, or with “ dealings in property ” as contained in section 359. In the latter section it is provided that “ gross income ” includes “ gains, profits and income derived from ü * * professions, vocations, trades, businesses, commerce, or sales, or dealings in property, * * * growing out of the ownership or use of or interest in such property.” The purpose of the statute is to levy a tax upon incomes derived from “ professions, vocations, trades, businesses, commerce, or sales, or dealings in property,” and the United States Supreme Court defines “income” as the “gain derived from capital, from labor, or from both combined.” (Doyle v. Mitchell Brothers Co., 247 U. S. 179, 185, and authority there cited.) So long as property remains in the hands of its owner any increase in value is an increase of the capital; it is derived or realized as income only when the property is disposed of, and the method of establishing “ the gain derived or loss sustained from the sale or other disposition of property” is set forth in sections 353, 354 and 355 of the Tax Law. It is the deriving of the income, not the increase in value, that is made subject to the tax, and how it can be held that the relator, in giving away his property, derived an income subject to taxation from a sale or dealing in property or a sale or other disposition of property (§§ 359, 353) is not easy to understand. There was no gain derived to the relator in giving away his property. In law it was a loss of property; it was a talcing out of his estate not only the capital, which was invested prior to 1919, but the increase in value which had followed, just as much as though a fire had destroyed the property represented by the securities and no insurance sui’vived. Suppose, for instance, the relator had sold the
The determination of the Comptroller should be reversed and the tax adjusted upon the basis of the relator’s contention.
Dissenting Opinion
Determination of the Comptroller reversed, with fifty dollars costs and disbursements, and the matter remitted for disposition in accordance with the opinion.