Hays v. Gauley Mountain Coal Co 327

• Court: U.S. Supreme Court
• Writing for the Court: PITNEY
• Citation: Hays v. Gauley Mountain Coal Co 327, 247 U.S. 189, 38 S.Ct. 470, 62 L.Ed. 1061 (1918)
• Decision Date: 20 May 1918
• Parties: HAYS, Collector of Internal Revenue for District of West Virginia, v. GAULEY MOUNTAIN COAL CO. No 327

247 U.S. 189

38 S.Ct. 470

62 L.Ed. 1061

HAYS, Collector of Internal Revenue for District of West Virginia,

v GAULEY MOUNTAIN COAL CO.

No 327.

Argued March 4, 5, and 6, 1918.

Decided May 20, 1918.

Mr. Solicitor General Davis, of Washington, D. C., for petitioner.

Mr. Henry B. Closson, of New York City, for respondent.

Mr. Justice PITNEY delivered the opinion of the Court.

Suit by the Gauley Mountain Coal Company against the Collector to recover taxes alleged to have been unlawfully collected under Corporation Excise Tax Act of August 5, 1909 (chapter 6, 36 Stat. 11, 112, § 38). The District Court gave judgment in favor of defendant, which was reversed by the Circuit Court of Appeals (230 Fed. 110, 144 C. C. A. 408), whereupon a writ of certiorari was allowed. The case was submitted together with several other cases decided this day, arising under the same act.

The agreed facts are in substance as follows: The Company is a mining corporation organized under the laws of the state of West Virginia. The business of trading in stocks is not included among its corporate powers, nor does it appear that, with a single exception, it ever bought or sold any. On December 9, 1902, it purchased certain shares of another mining corporation for $800,000, and sold them October 16, 1911, for $1,010,000, this sum being less by $214,933.33 than the purchase price plus interest at 6 per cent., but greater by $210,000 than cost ignoring interest. The Commissioner of Internal Revenue held that a proportion of the $210,000 represented by the ratio of the 1,019 days that elapsed between January 1, 1909, when the Corporation Excise Tax Act became effective, and October 16, 1911, the date of the sale, to the 3,233 days that elapsed between the date of purchase and the date of sale, consitituted income of the corporation for the year 1911 within the meaning of the act. The apportioned sum, $66,189.30, reduced to $52,506 by certain deductions not now in question, was made the basis of an additional assessment at 1 per cent. upon the latter sum and this assessment, having been collected by duress, formed the subject of the present suit.

The decision of the Circuit Court of Appeals, and the principal contentions made by respondent in support of it, are based upon the decision of this court in Gray v. Darlington, 15 Wall. 63, 21 L. Ed. 45. That case arose under the act of Congress of March 2, 1867 (14 Stat. 477, c. 169, § 13), which provided that a certain tax should be levied, collected, and paid annually upon the amount over $1,000 of the gains, profits, and income of every person, declaring that 'the tax herein provided for shall be assessed, collected, and paid upon the gains, profits, and income for the year ending the thirty-first of December next preceding the time for levying, collecting, and paying said tax.' There was this further provision, 'That, in estimating the gains, profits, and income of any person, there shall be included all income derived from interest upon notes, bonds, and other securities of the United States; profits realized within the year from sales of real estate purchased within the year or within two years previous to the year for which income is estimated * * * all other gains, profits, and income derived from any source whatever,' with an exception that need not be stated. It appeared that plaintiff acquired certain United States bonds in the year 1865 and sold them in 1869 at an advance of $20,000 over their cost, and was taxed upon this amount as gains, profits, and income for the latter year. This court held that by the true construction of the act, except as to gains and profits from trade and commerce and sales of real property, the statute only applied to such gains, profits, and income as were strictly acquisitions made during the year preceding that in which the assessment was levied and collected. We do not regard the decision as controlling, because the language of the act now under consideration is different in material particulars. As pointed out in Doyle, Collector, v. Mitchell Brothers Co., this day decided, 247 U. S. 179 38 Sup. Ct. 467, 62 L. Ed ——, it imposes annually a special excise tax with respect to the carrying on or doing business by the corporation 'equivalent to one per centum upon the entire net income over and above five thousand dollars received by it from all sources during such year,' to be ascertained by taking gross income and applying certain exceptions and deductions. 'Gains, profits, and income for the year ending the thirty-first day of December next preceding' (act of...