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trust company, or its assigns, then all such liabilities remaining unpaid shall at once become due and payable, and bear interest at the rate of 7 per cent per annum from the time of such sale. In case of any exchange of, or substitution for, or addition to said property, or any part thereof, the provisions of this agreement shall extend to such new, exchanged, substituted, or additional property. And the undersigned hereby authorize said trust company, at any time, at the discretion of any officer or agent thereof, to apply any money or moneys which said company may have or hold on deposit or otherwise for the undersigned, toward the payment of said note and other liabilities, whether due or not. The word liabilities herein shall include all liabilities of undersigned, whether of same class as said note, or otherwise, and whether of undersigned alone or jointly with others. The undersigned hereby expresly empower said trust company, at its option, to subscribe for, take and hold as additional collateral to any and all of the indebtedness above named all stockincreases and stock and other special dividends which may be made upon collaterals held hereunder.

The stamp required upon this promissory note is easily determined, the law being that upon promissory notes a stamp is required of the value of 2 cents for a sum not exceeding $100, and for each $100 or fractional part thereof in excess of $100, 2 cents.

The paper following the note presents two phases: In the first place, it is a pledge of certain specific personal property described therein, as security for the payment of the promissory note for $100,000. It, therefore, requires a stamp as a pledge of personal property for the payment of a definite and certain sum of money, to wit, the sum of $100,000. The actual value of the 1,000 shares of Chicago and Northwestern Railway Common Stock, which is deposited and pledged, is not stated, but if it were it would not be material, for the stamp required upon a mortgage or pledge of property given to secure the payment of a definite and certain sum is governed by the sum secured to be paid, and not by the actual value of the property included in the mortgage or pledge. For instance, if A borrows from B $5,000, and gives a note for it to B, and at the same time executes a mortgage or pledge as security for its payment upon property worth $50,000, the stamp upon the mortgage or pledge would not be estimated by the actual value of the property, but by the amount secured to be paid, as set forth in the face of the mortgage or pledge. So, then, the note for $100,000, and the paper executed in conjunction with it, pledging the stock described as security for the payment, do not, so far as I can see, present any difficulty in arriving at the stamp required to be placed thereon under the provisions of the war-revenue act.

As before stated, in the first place, the 1,000 shares of railroad stock are deposited and pledged to the Northern Trust Company as security for the payment of the above and foregoing note,, meaning the note for $100,000. Then follows the stipulation in these words, "and all other liabilities of the undersigned to said trust company, or its assigns, beretofore or hereafter contracted." This presents the second phase of the instrument, and it is the one from which the principal question arises. The provision of the war-revenue act is that a mortgage or pledge of property made as security for the payment of any definite and certain sum of money, lent at the time, or previously due and owing, or forborne to be paid, being payable, * * shall be stamped, etc.

The stipulations in the instrument, aside from those which make it a pledge-for the payment of a definite and certain sum, are in the nature of a guarantee for unliquidated debts or for liabilities to accrue in future. There is no definite or certain sum stated in the instrument, except 38

to the $100,000 note, for which the property stands pledged. In this respect the instrument may be treated not as a pledge, as contemplated in the war-revenue act, but as an agreement that certain collateral held by the bank shall be held as a basis of credit to the owner, or to meet liabilities depending upon the happening of future contingencies. The property thus deposited and held by the bank may or may not become liable as security for a debt of the owner, or it might, in the business dealings of the owner with the bank, be considered one day as collateral security and another day it would not, for the status of his account could, by deposits or credits, be changed from that of debtor to creditor within a day or even within an hour or less time. It seems, of course, that the instruments or agreements like the one under consideration are made to the banks by patrons and depositors with the view of obtaining credit and of constituting security to the bank through the means of property held by the bank for the repayment of overdrafts or other indebtedness or liability which may be incurred, but as long as the depositor or patron has funds in bank to meet his checks or drafts, or does not incur liability to the bank by note or other evidence specifying indebtedness, the bank could not hold any security that he had deposited with it under the terms of this paper. It is only when the contingency arises under the terms of the stipulation or agreement that the property deposited with the bank can be held. Before the provisions. of the war-revenue act would apply, the amount of the indebtedness must be liquidated and rendered certain, and in order to require a stamp upon the paper which pledges the property for the amount of the debt thus rendered certain, the amount for which the property is pledged must be definitely set forth in the face of the pledge itself, or the instrument pledging the property as security should accompany the note or evidence of debt, the payment of which it is intended to secure.

I am unwilling to construe a paper like the one we are considering as of such a character as to require a revenue stamp. Take a case like this: Suppose a man, who has valuable securities, such as Government bonds, etc., desires to obtain credit at a bank; he goes to the bank and deposits these securities as a basis of credit, and he stipulates, as in the case under consideration, that if at any time he should fail to pay any debt he owes the bank, either by note, overdraft, or otherwise, the bank may hold this property, and, under certain conditions, may sell it to make good the owner's indebtedness. This does not constitute a pledge of property for the payment of a debt such as is contemplated by the act in question. The law does not say that all mortgages and pledges of property shall require a stamp, but only such mortgages and pledges as are made to secure the payment of definite and certain sums of money loaned at the time, previously due and owing, or forborne to be paid, being payable. Mortgages or pledges are sometimes given for indemnity where persons become surety upon official bonds. It is frequently the case that the principal will execute a mortgage or piedge of property to his surety to indemnify him against loss on account of the conduct of the principal. Such mortgage or pledge is not for the security of any sum until the official shall make default and the amount of his default shall be ascertained. Consequently, such instruments do not require a stamp when they are executed, because they are not to secure the payment of a definite and certain sum, but the sum which they are to secure is dependent upon a contingency which may never happen.

The same in case of these deposits. The owner of the property deposited may never become liable to the bank. He may not make an overdraft or become otherwise indebted to the bank, and if he does, as

before stated, how is the amount of the stamp to be determined when the paper itself states no definite or certain sum? Certain instruments and papers are required by the provisions of the war-revenue act to be stamped. Still, if a man does not make the instrument or paper he is not taxed by the law. Promissory notes are required to be stamped, and yet if a man borrows money and does not give a note he does not have to bear the burden of a stamp. So it is as to a lease or agreement made for the renting of land. If it is made in writing, it has to have the stamp; but one may rent land by parole, and if he does, of course there is no stamp, because the instrument required to be stamped is not executed. And numbers of other cases might be instanced of the same character.

I hold, therefore, that a paper or instrument like this one, stipulating that certain securities or other property shall be held as indemnity or as a basis of credit or a guarantee generally, without specifying particular property as security for the payment of a definite and certain sum, is not liable to tax under the provisions of the war-revenue act.

I can not agree to the proposition that the paper or instrument under consideration, in addition to being a pledge of property for the payment of debt, is also to be construed as a power of attorney and stamped as such. A power of attorney is an instrument by which the authority of one person to act in the place and stead of another as attorney in fact is set forth. The language of this instrument does not constitute the party holding the property as security the attorney in fact of the owner. It only authorizes the holder in case of default to make the securities available for the purposes for which they were deposited, and in order to do this authority to sell and to transfer, etc., is given. This is not a power of attorney. It is only a necessary element of the instrument in order that it may be utilized to the end that it was executed.

I do not think it necessary to consider the second instrument or paper submitted, the question involved in it being substantially the same as the one I have discussed.

Respectfully, yours,

Approved:

JAS. E. BOYD, Assistant Attorney-General.

JOHN K. RICHARDS, Acting Attorney-General.

COMMERCIAL BROKERS.

(See also BROKERS; and DECISIONS 19571, p. 18; 19744, p. 284; 19870, p. 58; 19998, p. 62; 20033, p. 141; 20167, p. 70; 20274, p. 73.)

(19575.)

Special tax-Commercial brokers.

Persons representing cigar manufacturers who are furnished with samples and send orders to factories, receiving a commission for furnishing orders, liable as commercial brokers.

TREASURY DEPARTMENT,

OFFICE OF COMMISSIONER OF INTERNAL REVENUE,

Washington, D. C., June 27, 1898.

SIR: In reply to the letter addressed to you on the 20th instant by Hanna Brothers, at Dayton, Ohio, which you referred to this office on the

22d instant, stating that they represent cigar manufacturers who furnish them with samples, which they take out on the road, paying their own traveling expenses and sending the orders to the factories, and that "they receive a commission for furnishing the orders," you will please inform them that they are required to pay special tax as commercial brokers under subdivision 4 of section 2 of the act of June 13, 1898.

Respectfully, yours,

N. B. SCOTT, Commissioner.

Mr. B. BETTMANN, Collector First District, Cincinnati, Ohio.

(19615.)

Special tax-Commercial brokers.

Warehouse receipts for grain transferred through elevators liable-Brokers must pay special tax at branch offices.

TREASURY DEPARTMENT,

OFFICE OF COMMISSIONER OF INTERNAL REVENUE,

Washington, D. C., July 1, 1898.

SIR: I reply as follows to the several questions submitted in your letter of the 21st ultimo:

(1) A member of the board of trade, "usually denominated a commission man," is to be regarded as a commercial broker, and subject to special tax under paragraph 4 of section 2 of the act of June 13, 1898, if he negotiates sales or purchases of goods "as a broker."

If it is denied by any such "commission man" that he transacts such business as a broker, you will please obtain and send to this office a statement of the grounds on which such denial is based.

(2) When grain coming from some local station is transferred through an elevator into cars for shipment, and a warehouse receipt showing weight and grade is issued, the stamp tax of 25 cents must be paid on such receipt. Although the grain to be transferred through the elevator is, as you state, "in the warehouse bins perhaps only a few hours," it is to be regarded as "on storage" within the meaning of these words in the last paragraph of Schedule A of the act.

(3) A firm of brokers whose main office is, you say, in Peoria, and who "have a branch office at Omaha," are required to pay the special tax of $50 as brokers both at Peoria and at Omaha. A separate special-tax stamp is required to be taken out for both places.

Respectfully, yours,

N. B. SCOTT, Commissioner. Mr. A. J. DAUGHERTY, Collector Fifth District, Peoria, Ill.

(19763.)

Stamp tax-Broker's note.

Original note or memorandum of sale alone subject to tax of 10 cents, broker to affix stamp; duplicate or copy not taxed, but should state that the original was duly stamped-Memorandum accompanying offer to purchase subject to tax when offer is accepted.

TREASURY DEPARTMENT,

OFFICE OF COMMISSIONER OF INTERNAL REVENUE,

*

Washington, D. C., July 26, 1898.

SIR: This office is in receipt of a letter, dated July 8, from Kraus & Stetten, of New York, * saying that they are merchandise brokers; that they render a contract to both buyer and seller, and asking whether or not they are required to stamp both buyers' and sellers' contract with a 10-cent stamp under paragraph 17 of Schedule A of the act of June 13, 1898, which recites:

Contract: Broker's note, or memorandum of sale of any goods or merchandise, stocks, bonds, exchange, notes of hand, real estate, or property of any kind or description issued by brokers or persons acting as such, for each note or memorandum of sale, not otherwise provided for in this act, ten cents.

The original note or memorandum of sale is alone subject to the tax of 10 cents when made by a broker or one acting as such, and the said tax is payable by said broker or one acting as such; the duplicate or copy of the original memorandum of sale is not taxed.

It makes no difference, under the act of June 13, 1898, whether the broker sends or delivers the original memorandum of sale, duly stamped, to the purchaser or to the seller, or whether he retains the same, acting as broker, for both buyer and seller. The duplicate or copy of the original note or memorandum of sale should state that the original was duly stamped.

In this connection, I will state that a mere memorandum, accompanying an offer to purchase, is subject to the tax only provided the offer is accepted, and should be stamped by the broker on the acceptance of the offer.

Persons engaged in the general business of merchandise brokers are commercial brokers, and are required to pay the special tax under paragraph 4 of section 2 of the act of June 13, 1898.

Respectfully, yours,

Mr. CHAS. H. TREAT,

G. W. WILSON, Acting Commissioner.

Collector Second District, New York, N. Y.

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