The Federal Reporter with Key-Number Annotations, Volume 250: Cases Argued and Determined in the Circuit Courts of Appeals and District Courts of the United States, August-October, 1918. Page: 4
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250 FEDERAL REPORTER
amount of income among other things, "interest actually paid within
the year on its bonded or other indebtedness, * * * not exceeding
the paid up capital stock of such corporation, * * * outstanding
at the close of the year." It is clear that net income is made by the law
the mere measure of the excise tax and that the law defines what net
income for this purpose shall consist of. The fact, if it were a fact,
that the imposition of the tax in the statutory method might result,
in certain cases, in double taxation, or in other inequity, or that the net
income defined by the statute might differ from an accountant's defini-
tion of net income, is not important in applying the statute. The law
imposed an excise tax, imposed upon the doing of business in a corpo-
rate capacity, and measured in amount by its net income as therein de-
It may be that the tenant companies organized the terminal company
to provide a convenient joint agency for the performance of certain of
their duties as carriers, and with no view to profit to be derived from
its organization. It was, however, legally organized as a corporation,
capable of earning and paying dividends to its stockholders, and the
fact that it has not done so does not make it the less a corporation en-
gaged in business and organized for profit, within the meaning of the
corporation tax law. Profit from its organization and operation could
result to its stockholders in other ways than in dividends. If the tenant
companies chose to avail themselves of an agency, owned by them,
which did business in a corporate capacity, then under the act of Au-
gust 5, 1909, they became liable through it for the payment of an ex-
cise tax for this privilege. The voluntary payment of part of the tax
concedes this. Boston Terminal Co. v. Gill, Collector, 246 Fed. 664,
- C. C. A. -.
The tenant companies made use of the facilities and services of the
terminal company in two ways: First, by the use of its property; and,
second, through the services of its employs. Compensation for the
services of its employes was returned by the payment by the tenant
companies of a pro rata part of its actual operating expenses. The
only other return from the tenant companies to the terminal company
provided for was the payment of interest and sinking fund install-
ments. Unless these represented compensation for the use of the ter-
minal company's property, there was none. The property so used was
owned by the terminal company, not by the tenant companies, and
compensation for its use was properly due to the terminal company as
owner. Upon withdrawal from such use by a tenant company, its
obligation to continue interest and sinking fund payments ceased.
This is persuasive that the consideration for such payments was the
user of the property of the terminal company. When the sinking fund
installments fully paid the mortgage indebtedness, the property became
the unincumbered property of the terminal company. The payments
of interest by the tenant companies were not voluntary, even as to the
terminal company. The tenant companies cd enanted with the termi-
nal company to make such payments, and, in case of default, a provi-
sion was made in the agreements for the exclusion of any that default-
ed from the privileges they enjoyed in the terminal company's facili-
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The Federal Reporter with Key-Number Annotations, Volume 250: Cases Argued and Determined in the Circuit Courts of Appeals and District Courts of the United States, August-October, 1918., legislative document, 1918; Saint Paul, Minnesota. (digital.library.unt.edu/ark:/67531/metadc38821/m1/19/: accessed February 21, 2017), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.