and Susan R. Park, of this amount to their respective accounts upon the books of the company, merely evidenced the indebtedness of the company to them, and did not constitute the receipt of income by them. Income means actual cash or its equivalent received, as opposed to contemplated revenue due or unpaid. Maryland Casualty Co. v. United States, 52 Ct. Cl. 201, 209, affirmed 251 U. S. 342, 345, 40 Sup. Ct. 155, 64 L. Ed. 297.

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 chargeable 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 be 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 lawsults. 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.

[6] The petition is denied as to its claim for refunder of the tax upon the regular dividend except as to the normal tax. Section 5b (Comp. St. § 6336e) reads:

"For the purpose of the normal tax only the income embraced in a personal return shall be credited with the amount received as dividends upon the 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."

1

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.

[7] The general rule is that claimants are not entitled to interest against the United States, but this does not apply to actions like the present (Erskine v. Van Arsdale, 15 Wall. 75, 21 L. Ed. 63; National Home v. Parrish, 229 U. S. 494, 33 Sup. Ct. 944, 57 L. Ed. 1296), and plaintiffs are entitled to interest upon the amount herein found to have been erroneously exacted.

A certificate that there was reasonable and probable cause for the collector of internal revenue to receive this money will be made.

(293 F.)

NORTHERN PAC. RY. Co. v. LYNCH, Collector.

(District Court, D. Minnesota. April 7, 1920.)

Internal revenue 9-Interest accruing before January 1, 1909, not taxable. Where a railroad company begun making advances to another railroad in 1908, and continued to do so until 1911, but the interest accruing was not entered up, either on its books or on those of the other railroad company, until 1911, when the advances, with interest, were repaid, the interest accruing before January 1, 1909, was not taxable under Act Aug. 5, 1909.

At Law. Action by the Northern Pacific Railway Company against one Lynch, Collector, to recover taxes paid under Act Aug. 5, 1909 (36 Stat. 11). Judgment for plaintiff.

Charles W. Bunn, of St. Paul, Minn., for plaintiff.
Alfred Jaques, of Duluth, Minn., for defendant.

MORRIS, District Judge. Pursuant to stipulation of the parties waiving a jury duly filed, this case came on for hearing before the undersigned without a jury at St. Paul, on the 22d day of March 1920; Charles W. Bunn appearing for plaintiff, and Alfred Jaques for the defendant. The court, having heard the parties, finds as facts:

(1) The item, interest on advances to Spokane, Portland & Seattle Railway Company ($1,603,707.50), was interest accrued before January 1, 1909, on advances which the plaintiff made for construction of the railway of the Spokane, Portland & Seattle Railway Company. This railway was a joint enterprise of the plaintiff and the Great Northern Railway Company, and its construction was provided for in an agreement between the Northern Pacific Railway Company and the Great Northern Railway Company, made on the 1st day of January, 1908, and a further agreement contemporaneously made between the said two railway companies and the Spokane, Portland & Seattle Railway Company, dated on the same day. It was specially agreed in said contracts that advances of money made by either the Northern Pacific Railway Company or Great Northern Railway Company for carrying on the said joint enterprise should be repaid, with interest at the rate of 5 per cent. per annum from the time of making each advance. These advances commenced on or about the date of said contracts, and continued until some time in the year 1911. The interest accruing on the advances was not entered up, either on plaintiff's books or those of the Spokane, Portland & Seattle Railway Company until the construction work was completed in 1911, when the advances made by the Northern Pacific Railway Company, with interest, were repaid by the Spokane, Portland & Seattle Railway Company according to the terms of said contract. The item of interest in question is the amount of interest which accrued on said advances prior to the 1st of January, 1909, and which was settled and paid in the year 1911.

(2) The plaintiff on the trial abandoned the claim made in the complaint on account of the item of $263.18.

For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes

1

(3) The other item included in this suit was definitely ascertained and vested in the plaintiff before the 1st day of January, 1909, and was on that day the property of the plaintiff.

The court directs judgment in favor of the plaintiff against the defendant in the sum of $16,040.98, together with interest at the rate of 6 per cent. from the 12th day of September, 1917, the date of plaintiff's payment to defendant under protest.

WEST VIRGINIA PULP & PAPER CO. v. BOWERS, Collector of Internal

Revenue.

(District Court, S. D. New York. August 1, 1923.)

Internal revenue 11-Increase in number of shares of corporate stock not issuance of stock, warranting assessment of tax; “original issuance of stock." Acts of a corporation, entailing no essential change in the capital with which it does business, or rights of stockholders, except that each stockholder has an increased number of shares, does not constitute an original issuance of stock on organization, or reorganization, so as to warrant' assessment of a tax.

At Law. Action by the West Virginia Pulp & Paper Company against Frank K. Bowers, Collector of Internal Revenue for the Second District of the State of New York. On motion for judgment of dismissal. Motion denied.

Stetson, Jennings & Russell, of New York City, for plaintiff.
Wm. Hayward, U. S. Atty., of New York City, for defendant.

KNOX, District Judge. 'In a case such as this, there is little use for a court of first instance to enter upon a discussion of its views as to the interpretation to be placed upon a particular taxing statute. Any decision of mine will be but a conduit through which a more authoritative ruling will be had, and for such reason I forbear to elaborate upon my conclusions. It is enough to say that in my judgment the acts of plaintiff giving rise to the assessment of the tax in question are not within the purview of the statute upon which defendant relies. What plaintiff did, in my opinion, is not to be regarded as an original issuance of stock, either upon organization or reorganization. No essential change in the capital with which plaintiff does business has taken place, and the rights of its stockholders have been neither increased nor lessened. They continue to hold their respective portions of the original issue of stock, save that such portions are now evidenced by an increased number of pieces of paper, and these they may have without their corporation being subjected to the tax assessed against it. Defendant's motion for judgment of dismissal is denied, and, unless defendant desires to litigate the allegations of fact set up in the complaint, there is no reason why plaintiff should not have judgment for the sum sued for.

For other cases see same topic-& KEY-NUMBER in all Key-Numbered Digests & Indexes

R. H. MARTIN, Inc., v. EDWARDS, Collector of Internal Revenue.
(District Court, S. D. New York. March 10, 1922.)

Internal revenue 9-Investment held more than "nominal capital invested," within statute.

Where a corporation, acting as sole selling agent for asbestos mines, settled for domestic shipments, less its commissions, as soon as the invoices could be checked up, but did not guarantee any of the accounts, and also bought and sold merchandise on its own account, the proportion of its gross profits from trading on its own account being 23 per cent. in 1915, 9.8 per cent. in 1916, and 45 per cent. in 1917, its capital in 1917 being over $51,000, it had more than a "nominal capital invested" in the business, and was therefore not within Internal Revenue Act 1917, § 209 (Comp. St. 1918, § 6336%j), and Regulations of the Commissioner of Internal Revenue, approved October 3, 1917, arts. 73 and 74, providing for the taxation of businesses having only a nominal capital, and the fact that during the year 1917 it received more than it paid out did not show that it was not using its capital.

At Law. Action by R. H. Martin, Inc., against William H. Edwards, Collector of Internal Revenue, Second District of New York. Judgment for defendant.

George H. Corey, of New York City, for plaintiff.

William Hayward, U. S. Atty., and Richard S. Holmes, Asst. U. S. Atty., both of New York City, and H. M. Darling, Asst. U. S. Atty., of Washington, D. C., for defendant.

AUGUSTUS N. HAND, District Judge. The plaintiff brings this suit to recover the sum of $8,348.50, the amount of an excess profits tax alleged to have been erroneously assessed under the Revenue Act of 1917, and paid to the defendant under protest. The plaintiff corporation acted as sole agent for the Martin Bennett Asbestos Mines, located at Thetford Mines, in the Province of Quebec. Under a written agreement, dated June 14, 1913, made between the Martin Bennett Asbestos Mines and Robert H. Martin, it was provided that invoices and bill's of lading for each shipment of ore made by the Martin Bennett Asbes'tos Mines to its customers were to be sent direct to R. H. Martin, who had no responsibility to effect collection. In the case of export ship

For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes

(293 F.)

ments, Martin was to remit the amount of his sale, less commissions and interest, as soon as he had negotiated with his bankers the drafts against such shipments. In the case of domestic shipments he was to make settlement by sending his check less commission and interest as soon as the invoice could be properly checked up and accounted.

The written memorandum stated that Martin did not guarantee any of the accounts, and in the event of their not being paid upon the date of maturity, he was entitled to charge the whole amount with interest back to the Martin Bennett Asbestos Mines. The foregoing arrangement evidently contemplated that Martin should discount the drafts in the case of foreign shipments and pay the amount of the invoice in case of domestic shipments retaining only his commissions and interest. The plaintiff was organized for the purpose of carrying on the agency business of Robert H. Martin and his son and residuary legatee, Alexander R. Martin. It was incorporated with a capital of $25,000, and assumed the agreement of Robert H. Martin heretofore mentioned, which he had made with the Martin Bennett Asbestos Mines. It paid Alexander R. Martin, as president of the company a salary of $5,000, which was concededly less than the value of his services to the company.

Plaintiff seeks to recover taxes alleged to have been overpaid upon the theory that taxes should have been computed pursuant to section 209 of the Revenue Act of 1917 (Comp. St. 1918, § 63363⁄4j). This section provides:

"That in the case of a trade or business having no invested capital or not more than a nominal capital there shall be levied, assessed, collected and paid, in addition to the taxes under existing law and under this act, in lieu of the tax imposed by section two hundred and one, a tax equivalent to eight per centum of the net income of such trade or business in excess of the following deductions: In the case of a domestic corporation $3,000, and in the case of a domestic partnership or a citizen or resident of the United States, $6,000; in the case of all other trades or business, no deduction."

Article 73 of the Regulations of the Commissioner of Internal Revenue, approved October 3, 1917, provides that:

"Agents and brokers requiring and using no capital or merely a nominal capital in their business are taxable under article 15 [same as section 209] but commission houses regularly employing a substantial amount of capital, whether to lend to principals or to carry goods on their own account, are not deemed to be agents or brokers.

Article 74 provides that:

* * The term nominal capital as used in section 209 means in general a small or negligible capital whose use in a particular trade or business is incidental. The following will not be construed as business having a nominal capital for purposes of excess profits tax:

"(a) A business which because of conditions arising from the war or exceptional opportunities for profits earns a disproportionately high rate of profits during the taxable year, if it belongs to a class which necessarily and customarily requires capital for its operation.

* *

"(b) Corporations which although their capitalization is nominal employ a substantial amount of capital in their business."

During the year 1915, the plaintiff purchased on its own account merchandise to the amount of $94,021.72, and sold such merchandise for $98,626.31. In 1916, such purchases on its own account amounted