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· 9/3/1912

Stratton's Independence, Ltd. v. Howbert

Citations

  • 207 F. 419

Syllabus

<p>1. Trial (§ 177*)—Peremptory Instruction—Motion by Both Parties—Eeeeot.</p> <p>Where, in an action tried to a jury, both parties move for a peremptory instruction, the case becomes one of law for the court and the right to a verdict by the jury is waived.</p> <p>[Ed. Note.—For other cases, see Trial, Cent. Dig. § 400; Dec. Dig. § 177.*]</p> <p>2. Internal Revenue (§ 7*)—Corporation Tax Act—“Net Income”—Mines.</p> <p>The words “net income,” as used in Corporation Tax Act Aug. 5, 1909, c. 6, 36 Stat. 112 (U. S. Comp. St. Supp. 1911, p. 946), imposing a corporation tax of 1 per cent, on the net income of corporations, do not contemplate an allowance in favor of a corporation operating a mine for ore in place extracted from the property; the net income being the value of what is extracted after deducting the cost of extraction and treatment and the cost of administering the corporation, with a reasonable reservation for contingencies.</p> <p>[Ed. Note.—For other cases, see Internal Revenue, Cent. Dig. §§ 8-10; Dec. Dig. § 7.*</p> <p>For other definitions, see Words and Phrases, vol. 5, pp. 4779, 4780.]</p> <p>3. Internal Revenue (§ 7*)—Corporation Tax Act-—Mines—Allowance por Depreciation—“Net Income.”</p> <p>In -determining the net income of a corporation operating a mine, on which the corporation is taxable under Corporation Tax Act Aug. 5, 1909, c. 6, 36 Stat. 112 (U. S. Comp. St. Supp. 1911, p. 946), the corporation is not entitled, under the provision authorizing a reasonable allowance for depreciation of the property, to a deduction for ore in place extracted from the property.</p> <p>[Ed. Note.—For other cases, see Internal Revenue, Cent. Dig. §§ 8-10; Dec. Dig. § 7.*]</p> <p>4. Internal Revenue (§ 2*)—Corporation Tax—Apportionment.</p> <p>Corporation Tax Act Aug. 5, 1909, c. 6, 36 Stat. 112 (U. S. Comp. St. Supp. 1911, p. 946), imposing a corporation tax on the net income of corporations, is not unconstitutional as imposing a direct tax not apportioned accord

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From Wikipedia, the free encyclopedia

1913 United States Supreme Court case

Stratton's Independence, Ltd. v. Howbert, 231 U.S. 399 (1913), was a case before the U.S. Supreme Court that addressed the question of corporate taxation .[1]

Case

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The case was argued on October 21, 1913, and decided on December 1, 1913.

Stratton's Independence, Limited, a British corporation that owned and operated mines in Colorado , sued in a district court to recover taxes it had paid under protest in accordance with the provisions of the Corporation Tax Act of 1909 . During the year 1909, the firm had had gross sales of $284,682.85 and costs of $190,939.42, resulting in a profit of $93,743.43. In 1910, the figures had been similar.[1]

Plaintiff's argument

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Stratton's contended that the mining and sale of ore was an essentially different sort of activity than manufacturing, because it involved the depletion and sale of capital, and should therefore not be taxed in the same way, because taxing the sale of ore amounted to taxing capital.[1]

Majority opinion

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Justice Pitney , in the majority opinion, stated that the case raised three questions. The first was whether or not the Corporate Tax Act applied to mining corporations. The second question raised was whether or not proceeds from mining activities constituted "income" by the definition of the act. The final question related to whether or not ore sales were considered income and therefore if the mining corporation could deduct the value of the ore in place before it was mined as depreciation. The court answered the first two questions in the affirmative, but not the third. Mining, Justice Pitney argued, is generally comparable to manufacturing, and is certainly a business; hence, the gains from this activity should be considered income for the purposes of taxation.[1]

Chief Justice White , Justice McKenna , and Justice Holmes dissented on the third question.[1]

Significance

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The case represented one of the Supreme Court's early attempts to define the term “income.”[2]

Justice Pitney's description of income as “the gain derived from capital, from labor, or from both combined” has been widely quoted, as has his comment that “the corporation tax act of 1909 was not intended to be and is not, in any proper sense, an income tax law.”[3] [4]

The case has been cited (unsuccessfully) in such cases as _Hill v. United States _ and _Cameron v. Internal Revenue Service _, in support of the argument that a tax on an individual's income is unconstitutional, even though the decision in Stratton did not rule either corporate or individual income tax unconstitutional.[5] [6]

References

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  1. 1 2 3 4 5 Stratton's Independence, Ltd. v. Howbert, 231 U.S. 399 (1913).
  2. ↑ Rosenberg, Joshua David; Daher, Dominic (February 2008). The Law of Federal Income Taxation . West Academic. ISBN  9781634594141 .
  3. ↑ "What Is Constitutional Taxable Income ?" . Tax Freedom. Retrieved July 28, 2016.
  4. ↑ "WHERE DOES INCOME COME FROM ?" . Tax Freedom. Retrieved July 28, 2016.
  5. ↑ Rosenberg, Joshua; Daher, Dominic (2008). The Law of Federal Income Taxation . Hornbook. ISBN  9781634594141 .
  6. ↑ Federal Income Tax Laws Correlated and Annotated . John Byrne & Company. 1922.

External links

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How courts have described this case

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  • upon final payment and actual delivery of deed to purchaser, legal title relates back to date deed was executed

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