Brown v. Long
| Decision Date | 01 July 1922 |
| Citation | 136 N.E. 188,242 Mass. 242 |
| Parties | BROWN v. LONG, Com'r of Corporations and Taxation. |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
OPINION TEXT STARTS HERE
Report from Superior Court, Middlesex County; Jabez Fox, Judge.
Proceeding by Harry A. Brown against Henry F. Long, Commissioner of Corporations and Taxation, for abatement of an income tax. Reserved, and reported to the Supreme Judicial Court, on condition that, if a demurrer to the complaint should be sustained, final judgment should be rendered for respondent, and otherwise that judgment should be entered directing respondent to abate the sum of $93.90 from complainant's tax. Judgment for complainant.
Defendant was assessed with an income tax on the difference between the selling price of certain shares of stock and their value on January 1, 1916, on which date their value was less than the amount paid by him therefor. It was complainant's contention that only the difference between the amount paid by him and the selling price was subject to the tax.
Qua, Howard & Rogers and Francis M. Qua, all of Lowell, for complainant.
J. Weston Allen, Atty. Gen., and Alexander Lincoln, Asst. Atty. Gen., for defendant.
The complainant purchased shares of stock at various times between 1868 and 1904 at prices aggregating $4,600. The value of these shares on the 1st of January, 1916, was $1,470. They were sold in 1920 for $4,996.32. The question is whether the complainant lawfully was taxable for income on the difference between the cost and sale price, or on the difference between the value on the 1st of January, 1916, and the sale price. The answer depends on the true meaning of the Forty-Fourth Amendment to the Constitution, authorizing the net income tax and the statutes imposing the income tax. The pertinent words of the amendment are:
‘Full power and authority are hereby given and granted to the general court to impose and levy a tax on income in the manner hereinafter provided. * * *’
The relevant provisions of the statute are (G. L. c. 62, § 5):
‘Income of the following classes received * * * during the preceding calendar year shall be taxed as follows: * * * (c) The excess of the gains over the losses received by the taxpayer from purchases or sales of intangible personal property * * * shall be taxed at the rate of three per cent. per annum. * * *’
And (section 7):
‘* * * In determining gains or losses realized from sale of capital assets, the basis of determination, in case of property owned on January first, nineteen hundred and sixteen, shall be the value on that date, and in case of property acquired thereafter, the value on the date when it is acquired.’
‘Income,’ in the amendment and statute, expresses a comprehensive idea. It is to be given a broad meaning. It must be rationally construed and not stretched to include purely theoretical as distinguished from practical conceptions. Income as a subject of taxation imports an actual gain. It must mean an increase of wealth out of which money may be taken to satisfy the pecuniary imposition laid for the support of government. Tax Commissioner v. Putnam, 227 Mass. 522, 116 N. E. 904, L. R. A. 1917F, 806.
[3] Plainly gain derived from the sale of stock comes within the meaning of the word ...
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