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least a majority of all other shares of a corporation are acquired by another corporation, where all or a part of the assets of one corporation are transferred to another corporation under the control of the same shareholders, where the re-organization is merely a re-capitalization, or, where it constitutes a mere change in identity, name or place of organization. The contra-distinction of stock dividends

" from taxable dividends will, however, always be of interest to the student of taxation law, even if only for the fact that a great line of leading decisions has resulted from that question.

Miscellaneous income.-The last two classes of income included in our classification of income are, for the most part, the "carry-all" clauses of section 213 (a). These provide that gross income shall include the gains, profits or income derived from “the transaction of any business carried on for profit or gains or profits and income derived from any source whatever." Generally, this clause may be said to cover any profits, from any source whatever, which are not specifically covered by the preceding clauses and which come within the accepted definition of "income"; that is, “the gains or profits derived from capital, from labor, or from both combined." There are, under these clauses, a few types of income which have been held to be taxable, which might well be considered before concluding this article.

Chief among these is the taxability of income illegally acquired, which has been held to be taxable under this last clause of Section 213 (a). Thus, in the Appeal of McKenna, 1 B. T. A., 326, the Board of Tax Appeals held that the profits derived from illegal race-track bookmaking constituted taxable income. The Board stated; "the words 'from any source whatever' are as broad and comprehensive as it is possible for language to be. There is no limitation that the gains, profits, and income must be legally received. To read the above-quoted section of the statute as if it were 'from any legal source whatever' would be to

Section 213, Revenue Act of 1926. " Eisner v. Macomber, supra, Stratton's Independence v. Howbert, supra.

read into the statute something which Congress did not see fit to incorporate therein." In this and a later decision by the Board" an interesting viewpoint is expressed by the Board as to what constitutes gross income. It had long been held by the Treasury Department that all profits from particular gambling transactions should be reported, but that the losses suffered in other such ventures could not be deducted therefrom in arriving at net income because the statute only contemplated legally incurred expenses. The Board, recognizing, perhaps, that the taxation of all separate profits without any offset for losses would indeed be a hardship, held that the gross income consisted only of the net earnings for the taxable year, as a whole. In the later case the taxpayer had made profits from betting on races and playing poker and roulette amounting to $26,000, and during the same year had lost on other occasions over $64,000. The Treasury Department contended that his gross income was $26,000, and that no deduction could be allowed for the losses of $64,000. The Board, however, held that he had no actual income from gambling because he suffered a loss for the taxable year, and, therefore, directed the Treasury Department to eliminate the amount of profits from his gross income, but not to allow any of the losses incurred in excess of that amount.“

It may, therefore, be said that income derived from unlawful sources is to be taxed the same as legally acquired profits for, as was stated in one well-considered English case, to hold otherwise "would be giving a very undue favour to persons with whom the legislature is by no means disposed to deal with favour."

Other types of income may fall within these concluding provisions of section 213 (a), but as we have considered virtually all of them in the preceding parts of this article, they will not again be repeated at its conclusion.

Conclusion.This completes our discussion of the legal concept of "income," which has, in this series, been treated

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44 Ibid.

46 Partridge v. Mallandaine (Queens Bench Division), 2 Great Britain Tax Cases 170.

as a synonym of gross income. However, it should be remembered that the tax rates are not applied against this income in its entirety, but are, instead, computed upon the basis of the net income arrived at by the deduction of such expenses and losses as have been allowed by the controlling statute as offsets, or outgo, against the income which we have considered. Legally, these deductions might be termed as exemptions of portions of the income which might be taxed and their nature is to be determined entirely from the wording of the statute which creates them. This being true, an explanation of such deductions belongs rather to a discussion of particular statutory enactment rather than to a consideration of the fundamental legal concepts which stand behind and above the expressions of Congress, such as has been attempted in this series.

In concluding this article we may well revert to the very beginning, and repeat again the classical definition of Mr. Justice Pitney in the Macomber Case; this time, it is hoped with a better understanding of its meaning and a fuller realization of its basic worth:

“ 'Income may be defined as the gain derived from capital, from labor, or from both combined, provided it be understood to include profit gained through a sale or conversion of capital assets. . 'Derived-fromcapital:' the gain-derived-from-capital, etc. Here we have the essential matter; not a gain accruing to capital; not a growth or increment of value in the investment; but a gain, a profit, something of exchangeable value, proceeding from the property, severed from the capital, however, received or drawn by the recipient (the taxpayer) for his separate use, benefit, and disposalthat is income derived from property, nothing else answers the description."


and that is the "legal concept” of “income" far better expressed than it is likely to be by any text writer of this or coming generations.

* Eisner v. Macomber, supra.




(Assistant to the Solicitor, Department of State, Professor

of International Law, National University.)


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N the present paper I shall discuss only those portions of

the proposed convention which relate to dual nationality, existing in the cases of persons born in one country of parents having the nationality of another country. I shall endeavor to treat the subject in a practical way, avoiding as far as possible unnecessary citations of authorities. In the present instance we are interested not so much in what the law is or has been as in what the law should be, although it will, of course, be necessary to consider to some extent the provisions of the various nationality laws now in effect, which give rise to the problem before us.

All who have had to deal much with cases of dual nationality, whether officially or unofficially, realize the great need of having the laws changed in such a way as either to prevent the condition of dual nationality from arising at all, or, if this proves infeasible, to have it terminated in each case when the person concerned reaches majority or shortly thereafter. It is hopeless to attempt to accomplish this by piecemeal legislation or bilateral treaties. It can be settled in a satisfactory way only through the adoption of a multilateral convention, supplemented, perhaps, by special legislation in each country. Whether or not the draft convention prepared at Lima meets the present need aptly and adequately, it serves a very useful purpose in calling attention to the important subject with which it deals and furnishes a starting point and a basis of discussion.

As the various parts of the proposed convention are arranged in an orderly fashion, we may very well begin at


Reprinted from the Proceedings of the American Society of International Law, Washington, D. C., April 23-25, 1925

the beginning of the preamble and consider the several paragraphs in order, omitting those which do not relate to the particular subject now before us.

1. At present two different and even opposing systems exist for the determination of nationality, the one of jus soli and the other of jus sanguinis:

In this paper no attempt will be made to discuss at length the history of the two systems mentioned. Suffice it to say that jus sanguinis, which is the basis of the present laws of nationality of the countries of continental Europe and Asia, is evidently the older of the two. Under jus sanguinis a person is a national of a particular country because his parents are, or one of them is, a national thereof. Under the older civilizations membership in a nation arose from membership in one of the tribes composing it, and membership in a tribe generally came from membership in a clan or family belonging to the tribe.

Jus soli, under which nationality of a particular country arises from the mere fact of birth within its territory, or to be more accurate, within its territory and jurisdiction, seems to have arisen out of the feudal system. It is the basis of the British law of nationality. It is discussed very fully in Calvin's Case, 7 Coke 1, which was tried in the year 1608, in the Exchequer Chamber, before the Lord Chancellor and all the judges of England. In this case it was held that "they that are born under the obedience, power, faith, ligealty or ligeance of the King, are natural subjects, and no aliens." According to this theory it makes no difference whether the residence of the parents within the territory of the country is permanent or temporary, but it is essential that the child be born within the "obedience, power," etc. of the king, or, as we would say, "within the jurisdiction” of the state. This distinction accounts for the exceptions in cases of certain children born within the territory, such as children of foreign diplomatic representatives and children born in places occupied by enemy forces.

Only a few countries have their law of native citizenship based entirely on jus sanguinis. It is understood that Aus

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