Doyle v. Mitchell Brothers Co.

Citations

• 247 U.S. 179
• 38 S. Ct. 467
• 62 L. Ed. 1054
• 1918 U.S. LEXIS 1968

Syllabus

<p>The purpose of the Corporation Tax Act of August 5, 1909, c. 6, 36 Stat. 11, 112, § 38, is not to tax property as such, or the mere conversion of property, but to tax the conduct of the business of corporations organized for profit by a measure based upon the gainful returns from their business operations and property from the time the act took effect. ■</p> <p>The act employs the term “income” in its natural and obvious sense, as importing.something distinct from principal or capital, and con-' veying the idea of gain or increase arising from corporate activities.</p> <p>While a conversion of capital may result in' income, in the sense of the act, where the proceeds include an increment of. value, such is not the case where the increment existed when the act took effect.</p> <p>In distinguishing preexisting capital from income subject to the act, it is a mere question of method whether a deduction be made from gross receipts in ascertaining gross income, or from gross income, by way of depreciation, in ascertaining net income.</p> <p>Before the Corporation Tax Act, a lumber company bought timber land to supply its mills, and after the act it manufactured part of the timber into lumber, which it sold. Held, that the amount by which the timber so used had increased in value between the date of purchase and the effective date of the act was not an element of income to be considered in computing the tax:</p> <p>The principle upon which the removal of minerals by mining companies • has been held not to produce a depreciation within the meaning of the act is inapplicable to the case of a company engaged in the business of manufacturing and selling lumber, from timber supplied by its own timber lands, and which sells the lands incidentally after the timber is removed.</p> <p>The income is to be determined from the actual facts, as to which the corporate books are only evidential.</p>