Upon the gains, profits, and income." The tax of 1861 was 66 upon the annual income of every person residing in the United States." That of 1862 was "upon the annual gains, profits, or income. of every person" there residing. Those imposed by the later Acts were "upon the annual gains, profits, and income of every person residing in the United States, or of any citizen of the United States residing abroad," except that "or" took the place of "and" in this clause in the Act of 1864, and "annual" was omitted in the Act of 1867, as in the present Act. "Derived from any kind of property," etc. This clause to "whatever" was the same in the previous Acts, except that "interests" stood in place of "interest" in the Acts of 1864 and 1865; and the Act of 1861 read "derived from any kind of property, or from any profession," etc. "A tax of two per centum." The rate and the amount exempted differed in the preceding Acts, the first tax being three per cent upon the excess of income over $800. "And a like tax shall be levied," etc. This clause was added by the Act of 1866, and retained in the Act of 1867, both Acts having the additional words. "not citizens thereof " at the end of the sentence, and the Act of 1870, which contained the same clause in substance, concluded with "and not a citizen thereof." The words "from all property owned and" are new in the present statute. "Income."→ The income from a "business" is different from that from a "profession, trade, or employment." The income from a business "is the net result of many combined influences: the use of the capital invested; the personal labor and services of the members of the firm; the skill and ability with which they lay in, or from time to time renew, their stock; the carefulness and good judgment with which they sell and give credit; and the foresight and address with which they hold themselves prepared for the fluctuations and contingencies affecting the general commerce and business of the country. To express it in a more summary and comprehensive form, it is the creation of capital, industry, and skill.” Wilcox v. County Commissioners, 103 Mass. See Commonwealth v. Ocean Oil Co., 59 Opinion of Justices, 5 Met. 596; People v. Supervisors, 18 Wend. 605. Hon. James C. Carter has recently said (see 50 Albany Law Journal, p. 300): “A tax laid directly upon property may and often does invade the principal sum, for it has to be paid whether the property has been productive of profit or not; whereas a tax upon income never invades the principal." The instructions under the old Act were that residents should make return in the district where they resided at the time of making return, resi dence being that during the year for which income was derived; and if any person resided abroad, his return was to be made in the district where he last resided. 7 Int. Rev. Rec. 59. The place where a person voted, or was entitled to vote, was formerly held to be his residence, and, if not a voter, the place where the tax on personal property was paid. Bout. 273. The wife of an alien was held to be an alien, though a citizen before marriage. If she resided. abroad, the profits and income from stock, etc., held by a trustee here were not to be returned; if she resided here, she was liable to the tax imposed upon every citizen residing here. 6 Int. Rev. Rec. 66. It was held that an alien residing abroad was entitled to the same exemption as a native-born or naturalized citizen. 6 Int. Rev. Rec. 18. It was held that income from personalty held by a trustee for persons not citizens and not residing here was not taxable; but note the provisions of this section (27) and of § 29 of the present Act. Income from an inherited estate in a foreign country of one who had become a citizen there in order to receive the estate was held to be taxable. 3 Int. Rev. Rec. 140. Where the gains of an association were its sole property, and not divisible among its members, the association was held to be a person within the meaning of the law, and required to make a return. 10 Int. Rev. Rec. 39. Where a person died before the end of the income year, the gains, income, etc. during that portion of the year he was in life were held subject to taxation as income. Mandell v. Pierce, 3 Cliff. 134; see 14 Int. Rev. Under the Act of 1870, which imposed a tax on gains, profits, and income for 1871, and no longer, the amount of a promissory note taken in 1871, on the sale in that year of a patent right, but not due until some time in 1872, and paid in that year, was held not taxable as income for 1871. United States v. Schillinger, 14 Blatch. 71. Promissory notes, book accounts, etc. due during the year are evidences of debt. Whether or not they are "gains, profits, or income" for that year within the statute depends upon their value intrinsically, or their convertibility into money, property, or available assets. If they have only a nominal, and not a real, value or convertible quality, and a man has realized nothing from them, and therefore does not return them as a part of his income, because he fairly and honestly believes they are not real gains or profits, he cannot be convicted of an untrue return. United States v. Frost, 9 Int. Rev. Rec. 41. In Philadelphia & Reading Railroad Co. v. Barnes, 12 Int. Rev. Rec. 112, 7 Phila. 543, it was decided that, as the law stood before the Act of 1870, the dividends and interest paid by railroad companies after January 1, 1870, were not liable to a tax, and that the Act of July 14, 1870, could not be accepted as a legislative exposition of the meaning of the former law, so far as it applied to the present case. In Merchants' Ins. Co. v. McCartney, 12 Int. Rev. Rec. 122, 1 Lowell, 447, it was held that surplus earnings laid aside by a bank before the first income tax law, and profits of sales of real estate bought before that time, were not liable to the income tax when divided afterward, and that under 13 St. at Large, 281, 282, an insurance company holding shares in a bank is not liable to a tax upon a dividend declared by the bank, and on which the bank had paid a full income tax. In United States v. Erie Ry. Co., 24 Int. Rev. Rec. 76, a tax on interest paid to non-resident aliens was held illegal, as being a tax on the nonresident aliens themselves, and therefore on property beyond the jurisdiction of the taxing power. See this section; Bartholomay Brewing Co. v. Wyatt, [1893] 2 Q. B. 499. Of the English law it was said, in Attorney General v. Black, L. R. 6 Exch. 78, 85: "It seems almost impossible that any net could be extended more widely; every possible source of income seems included;" and see Ibid., p. 308. Many points under the English law on gains, profits, and income are presented in Ellis's Income Tax Acts (3d ed.). Betting is a vocation. Partridge v. Mallandaine, 18 Q. B. D. 276. |