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"If stock," however, "is hypothecated as security for the payment of money simply by the delivery of the certificates to the lender, or deposited as a basis of credit without a mortgage or other written instrument being executed or made, whereby the said stock is pledged to secure the payment of a definite and certain sum of money," no tax is imposed on such transaction.

3. As modifying the foregoing rulings to a certain extent, attention is called to the amendment of February 28, 1899, to the war-revenue act, which is in the following language:

Whenever any bond or note shall be secured by a mortgage or deed of trust, but one stamp shall be required to be placed upon such papers: Provided, That the stamp tax placed thereon shall be the highest rate required for said instruments, or either of them.

A pledge of stock or other personal property has been ruled to be within the purview of the above amendment, so that when a promissory note or bond is secured by an instrument of pledge but one tax accrues, and that tax is the higher required on either instrument. Stamps representing this higher tax may be placed on either instrument, as parties may elect.

(84.)

G. W. WILSON, Commissioner.

Stamp tax-Assignments of mortgages.

The tax on an assignment of a mortgage is reckoned upon the amount secured by the assignment at the time it is executed.

TREASURY DEPARTMENT,

OFFICE OF COMMISSIONER OF INTERNAL REVENUE,

Washington, D. C., March 30, 1900.

SIR: This office is in receipt of your letter of the 26th instant, in which you state the following:

A mortgage of $5,000 is assigned by A to B. At the time of the assignment there was $600 interest due on the mortgage. B pays A for the mortgage $5,600. This amount is named in the assignment of the mortgage as the consideration for the transfer.

Should the tax be based upon the original principal of the mortgage, $5,000, or should it be based upon the consideration of the transfer, namely, $5,600, which includes $600 of interest on the mortgage?

In reply, you are advised that this document should be stamped on a basis of $5,600. This office holds that a tax accrues upon an assignment of a mortgage based upon the amount of money remaining secured by said assignment; in other words, the assignment is taxable in the same amount as would accrue were a new mortgage made at the time instead of an assignment.

Respectfully,

Mr. DANIEL FINN, Middletown, N. Y.

G. W. WILSON, Commissioner.

· (243.)

Stamp tax-Assignments of mortgages, leases, and policies of insurance. A tax accrues on every assignment of a mortgage based upon the amount of money remaining secured thereby; on a lease based upon the unexpired term; on a policy of life insurance based upon the amount of insurance remaining in force under the assignment, on a fire, marine, and casualty insurance policy based upon the unearned premium. TREASURY DEPARTMENT,

OFFICE OF COMMISSIONER OF INTERNAL REVENUE,

Washington, D. C., November 13, 1900. SIR: I have to acknowledge the receipt of your letter of the 9th instant, in which you asked to be advised whether revenue stamps are required upon an assignment of a mortgage, executed and delivered subsequent to July 1, 1898, the mortgage having been issued and recorded prior to that date and therefore not taxable.

In reply, you are advised that such an assignment is taxable. Every assignment or transfer of a mortgage, lease, or policy of insurance, is subject to taxation and the tax accrues as an assignment on the day that the assignment is issued, and it accrues without respect to the question whether or not the original mortgage was taxable because of its having been issued prior to July 1, 1898. The law states that the rate on the assignment is the same as that imposed on the original instrument, and this means not that the original instrument must have been issued subsequent to the day when the war-revenue act took effect and, therefore, taxable, but the rate which is fixed by the requirements of the act on such original instruments. This is for the purpose of ascertaining the rate of taxation applicable, not the fact that the original should or should not have been stamped.

It is, therefore, held by this office that when a mortgage, a lease, or a policy of insurance is assigned or transferred subsequent to July 1, 1898, a tax accrues, and it is one that would accrue on an original instrument, if executed, instead of an assignment of an original instrument. The rate is one fixed by the law on the original instruments, respectively. Therefore, when a mortgage is assigned, a tax accrues based upon the amount of money remaining unpaid at the time of the assignment, and the rate is the one applicable to mortgages or pledges, as set forth in the paragraph in Schedule A relating to mortgage or pledge.

When a lease is assigned, the assignment is based upon the unexpired term of the lease, according to the rate set forth in the paragraph in Schedule A relating to leases.

When a policy of life insurance is assigned, a tax accrues based upon the amount of insurance in force at the time of the assignment, at the rate set forth in the paragraph in Schedule A relating to life insurance. The tax on fire, marine, and casualty insurance is one based upon the premium, and when one of these instruments is assigned a tax accrues based upon the unearned premium at the time of the assignment, for it

is considered that this is the amount of premium necessary to effect such insurance for the term covered by the assignment. Therefore, the tax on this insurance should be computed upon the unearned premium at the rate applicable to these policies, as set forth in the paragraphs in Schedule A relating to these instruments.

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As to the method of post stamping instruments after twelve months from date of issue, and dissenting from opinion of Judge Edward Stake, of the fourth judical circuit court of Maryland, that a retroactive intention is not expressed in the act of June 13, 1898.

TREASURY DEPARTMENT,

OFFICE OF COMMISSIONER OF INTERNAL REVENUE,

Washington, D. C., April 3, 1900. SIR: Yours of the 26th ultimo is received, in which you refer to Treasury decision 21539 as to post stamping instruments after twelve months, and ask whether in such cases the cash should be taken and reported on Form 58, or the person presenting the instrument be allowed to affix the stamp, and in the latter case who shall cancel the stamp?

The issuer of the instrument or party in interest should purchase, affix, and cancel the stamp. You have no duty in such case except to supply the stamp in return for the purchase price. It would be a superfluous act for you to note on the instrument that the tax has been paid, but the penalty has not been remitted, and the instrument is not validated.

I note what you say as to the hardship of the law in imposing a penalty of $10, which can not be remitted after twelve months; that if the law could be amended so as to impose a penalty of double the tax it would be desirable.

You state that a number of farmers have brought unstamped deeds to you which only required a 50-cent stamp. You would like to be able to advise them that they can avoid the penalty by paying the stamp tax on the old deeds and have new deeds executed and properly stamped. So far as concerns the Government, no objection could be made to the course suggested in any case where the omission of the stamp was without fraudulent intent. In such cases, as stated in Treasury decision 21539, the stamp tax will be accepted, and if the holder of the instrument is satisfied to allow it to remain invalid, it is not the concern of the Government. Such invalidity is a sufficient penalty of itself for the omission to stamp at time of execution. The new instrument, of course, if stamped when executed, incurs no penalty. The grantee or mort

gagee should, however, consider the possibility of an adverse right being acquired in good faith between the dates of execution of the first and second instruments. The law specifically protects such right by the last proviso to section 13 of the act of June 13, 1898. Except for such possibility, the second proviso to the section declares that the instrument, post stamped within twelve months in the manner prescribed, "may be used in all courts and places in the same manner and with like effect as if the instrument had been originally stamped." These words plainly imply the intention of Congress that an instrument validated in accordance with law should have full force and effect from date of execution, save 'for any right acquired in good faith before stamping. There was reason why this intent should have been entertained and specifically expressed. The act is a revenue measure, and Congress undoubtedly took into consideration human infirmities, through which there would be inadvertent omissions to stamp instruments. A way was provided, therefore, for the correction of such omissions and the complete validation of the instruments in all respects as if the omission had not occurred, which was demanded by every consideration of justice and sound policy.

This office does not accept the decision of Judge Stake, of the Maryland State court (printed in TREASURY DECISIONS, ruling No. 53, March 1, 1900), as sound law, although it is apparently in the interest of the Government. It is believed to be defective because founded upon the erroneous proposition that a retroactive intention is not expressed in the act of June 13, 1898, section 13.

Respectfully,

G. W. WILSON, Commissioner.

Mr. JOHN C. LYNCH, Collector Internal Revenue, San Francisco, Cal.

(94.)

Post stamping of instruments.

Duties of registers and recorders of deeds when receiving unstamped instruments for

record.

TREASURY DEPARTMENT,

OFFICE OF COMMISSIONER OF INTERNAL REVENUE,

Washington, D. C., April 12, 1900. SIR: Your letter of the 9th instant is received, in regard to deeds and other instruments sent to you for record, not stamped or not sufficiently stamped. You say that the grantee often sends you a deed requesting you to attach revenue stamps, which, of course, you can not do; that the grantor often can not conveniently get the stamps. You state that you have been put to trouble and expense of postage in correspondence made necessary by such omissions. You ask if you would be justified in recording a deed which is not stamped, leaving the grantee to take his chances.

In reply, I have to say I do not think you would be justified in

admitting such instruments to record. Section 14 of the war-revenue act provides that no instrument required by law to be stamped, from which the proper stamp is omitted, shall be recorded, or used as evidence in any court, until properly stamped. Section 15 declares that it shall not be lawful to record or register any instrument, paper, or document required by law to be stamped unless a stamp or stamps of the proper denomination shall have been affixed and canceled in the manner prescribed by law; and the record of unstamped instruments, if made, shall not be used in evidence.

The grantor, or person who makes or issues the instrument, is the proper person to affix and cancel the stamp. If he omits to do so, he incurs a penalty of not more than $100 under section 7 of the act; but if the omission is inadvertent, he may, under section 13, present the instrument to the collector within twelve months from date of issue, pay the stamp tax, and the collector may then affix and cancel the stamp and remit the penalty of $10. The grantee may also pay the stamp tax, if he chooses, and present the instrument for post stamping.

This office would advise that when you receive an unstamped instrument for record which is subject to stamp tax you return it to the sender to be stamped as the law requires; and, in stating the amount of your fee, it would seem that you would be authorized to include whatever amount is necessary to reimburse you for postage and time occupied in the correspondence made necessary by the omission of the stamp. If this practice is adopted, you will avoid the personal loss complained of, while at the same time preventing a possibly much greater loss to grantees which might occur through admitting an invalid instrument to record.

Respectfully,

G. W. WILSON, Commissioner.

Mr. HENRY F. ABBOTT, Register of Deeds, Ossipee, N. H.

(166.)

Penalties for failure to stamp instruments, documents, etc.

Collectors may remit such penalties in certain cases.-Commissioner of Internal Revenue can not remit such penalties nor refund them when collected with authority.

TREASURY DEPARTMENT,

OFFICE OF COMMISSIONER OF INTERNAL REVENUE,

Washington, D. C., June 28, 1900. SIR: The claim of for the refunding of $10, penalty paid for failure to stamp a certificate of acknowledgment as a notary public on a deed of release, is hereby rejected.

Where penalties have been incurred for failure to stamp instruments, section 13 of the act of June 13, 1898, provides that if within twelve months after failure to stamp the instruments, the parties failing to stamp them shall bring them to the collector and pay the proper stamp charges thereon, and it shall appear to the satisfaction of the collector

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