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SHARES OF STOCK.

(217.)

Stamp tax-Shares of stock.

Shares of stock after issue given or surrendered to the company taxable as a transfer, and when afterwards sold by the company taxable at the same rate.

TREASURY DEPARTMENT,

OFFICE OF COMMISSIONER OF INTERNAL REVENUE,

Washington, D. C., September 26, 1900.

SIR: I have to acknowledge the receipt of your letter of the 27th ultimo, inclosing a report from Revenue Agent Kincaid in regard to the payment of tax on shares of stock by the Home Extension Mining Company, whose main office is in Boston.

From the report of Revenue Agent Kincaid the following facts appear: Under the laws of West Virginia, this company was organized for the purpose of purchasing, developing, or selling mines, building sites, etc., in Colorado. Its capital stock is fixed at 1,000,000 shares of $1 value each. A large quantity of mining property was previously purchased and individually held by the promoters and officers of the company as formed. After the completion of the organization, a portion of the deeds of the property hereinbefore referred to was duly transferred to the company in exchange for 499,950 shares of its original capital stock, representing fully paid up stock and not subject to further assessment. The company now being without working capital (or the promoters wishing to realize money for the stock), these men surrender to the company, it is claimed absolutely, 300,000 shares, to be sold and reissued to purchasers, the proceeds thereof to go into its treasury. This is the stock now being sold in Leadville, Colo., as well as in Boston.

I have examined the stock book of the company, and find, as stated in the sworn statement of its treasurer, Mr. Emery, attached hereto, that the stubs of the original certificates, not the certificates themselves, bear stamps representing 5 cents per $100, or fractional part thereof. I find, however, that the returned certificate for 300,000 shares is pasted on to its original stub. Against this certificate the certificates sent to Colorado are, as it were, charged without a new one for any balance of shares remaining being issued.

I find that a large number of blank certificates-in fact, all that go to Colorado-are sent in the care of the Leadville Bank, duly signed by the officers, but unstamped, for the reason given me that it is not known what number of shares they should be filled out for until the transaction is completed by the salaried agent of the company, Mr. Gaines, at Leadville, and, as stated by Deputy Collector Harris, of Leadville, then the certificates themselves are stamped at the rate of 2 cents per $100 or fraction thereof, instead of the surrendered one, a part of which they represent and which remains in the company's office in Boston.

Under the above state of facts you are advised that the certificate for 300,000 shares, when surrendered or given to the company, should have been stamped at the rate of 2 cents per $100 of par value as a transfer, and as this does not appear to have been done you will call on the company to make return of the same for assessment. This stock, when

sold by the company, seems to have been correctly stamped at the rate of 2 cents per $100 of par value, as it was not an original issue. The stamping of the stubs of the original issue instead of the certificates was irregular, but it involved no deficiency in payment of tax, and, therefore, it need not be further noticed.

The questions of Mr. Wyman, counsel for the company, are answered as follows:

1. When there is an original issue of stock, where should the stamps be placed on the stubs or on the certificates?

The stamps on an original issue of stock should be placed on the certificates and not on the stubs.

2. An original issue of stock is duly stamped by a corporation and delivered to the owners of said stock. Query: (a) If any portion of this original stock is surrendered to the corporation by the owners without cost to it, and for its own use, does such surrendered stock require stamping at all; and if so, at what rate for said transfer to itself? (b) If, for the benefit of the corporation, any of said surrendered stock is sold to other parties, do such certificates require the 2-cent or 5-cent stamp rate?

(1) When original stock after issue is surrendered to a company for its own use, it is a transfer and must be stamped at the rate of 2 cents per $100 of face value or fractional part thereof. (2) When such stock is afterwards sold or transferred by the company, the certificate must be stamped at the same rate stated above.

3. In the above case should the stamps for certificates sold be placed on the surrendered certificate, or on the new certificates, or on the stubs of the new certificates?

In the above case the surrendered certificate should bear the stamps at the rate as stated, and when the stock is afterwards sold the new certificate should bear stamps as above stated.

This is not the same case as the ordinary sale or transfer of stock by one stockholder to another. In that case the surrendered certificate, called in the law the transfer certificate, must bear the stamps (unless a stamped bill of sale has been issued) and the certificate issued in lieu thereof requires no stamps. In none of the cases are stamps to be placed on the stubs of certificates.

Question 4 appears to have been sufficiently answered above.

Respectfully,

G. W. WILSON, Commissioner.

Mr. F. D. SEWELL, Revenue Agent, Boston, Mass.

WAREHOUSE RECEIPTS.

(179.)

Stamp tax-Warehouse receipts.

When bills for storage are taxable as warehouse receipts.

TREASURY DEPARTMENT,

OFFICE OF COMMISSIONER OF INTERNAL REVENUE,

Washington, D. C., July 17, 1900. SIR: Your letter of the 13th instant, inclosing a letter from James Hay, president of the Merchants' Warehouse Company of Philadelphia, has been received.

Please advise Mr. Hay that a receipt given for the payment of storage after the storage has ceased is not taxable as a warehouse receipt, but that a bill for storage rendered at the time the goods are received on storage, or during the continuance of such storage, is an acknowledgment that certain goods have been received and are held on storage, and requires a 25-cent stamp as a warehouse receipt.

Respectfully,

G. W. WILSON, Commissioner.

Mr. P. A. MCCLAIN, Collector Internal Revenue, Philadelphia, Pa.

(186.)

Stamp tax-Warehouse receipts.

Definition of taxable warehouse receipts.

TREASURY DEPARTMENT,

OFFICE OF COMMISSIONER OF INTERNAL REVENUE,

Washington, D. C., July 27, 1900. SIR: I have to acknowledge the receipt of your letter of the 21st instant, in which you refer to internal-revenue ruling 179, published in TREASURY DECISIONS of July 19, 1900. It appears from your letter that you do not think this ruling is clear enough in defining taxable warehouse receipts.

The ruling, which you characterize as not "readily intelligible," is as follows:

A receipt given for the payment of storage after the storage has ceased is not taxable as a warehouse receipt, but a bill for storage rendered at the time the goods are received on storage, or during the continuance of such storage, is an acknowledgment that certain goods have been received and are held on storage, and requires a 25-cent stamp as a warehouse receipt.

It should perhaps be added to the above, for the sake of abundant clearness, that if any other form of warehouse receipt has been issued and stamped in any case where a bill is rendered the bill itself would not be taxable as a receipt.

Following the opinion of the Attorney-General, the ruling of this

office is that any instrument is a warehouse receipt that is issued by a warehouseman, and from which the fact that certain goods, merchandise, or property are deposited in his warehouse and held on storage for some particular person or persons can be reasonably inferred.

Respectfully,

Mr. WALTER C. REID,

G. W. WILSON, Commissioner.

Secretary and Treasurer American Warehousemen's Association,

New York, N. Y.

TOBACCO, CIGARS, CIGARETTES, AND SNUFF.

(28.)

Special tax-Leaf tobacco dealer.

A person who confines his business strictly to buying leaf tobacco and shipping it to foreign countries, and there selling it, is not required to pay special tax under the internal-revenue laws as a dealer in leaf tobacco on account of such business.

TREASURY DEPARTMENT,

OFFICE OF COMMISSIONER OF INTERNAL REVENUE,

Washington, D. C., January 30, 1900.

SIR: In reply to your verbal inquiry as to the special-tax liability of "a person buying leaf tobacco exclusively for export by himself," you are hereby advised that if he does not sell in this country either to dealers in leaf tobacco or to manufacturers of tobacco, snuff, or cigars, or to any other persons in the United States, any leaf tobacco, but confines his business therein strictly to buying leaf tobacco and shipping it to foreign countries and there selling it, he is not required to pay special tax under the internal-revenue laws as a dealer in leaf tobacco on account of such business.

Respectfully,

G. W. WILSON, Commissioner.

Mr. PARK AGNEW, Collector Sixth District, Alexandria, Va.

(54.)

Violation of internal-revenue laws.

Operation of forfeitures in case of property belonging to innocent parties used for

fraudulent purposes.

TREASURY DEPARTMENT,

OFFICE OF COMMISSIONER OF INTERNAL REVENUE,

Washington, D. C., March 1, 1900.

The appended opinion of the United States district court of the eastern judicial district of Pennsylvania is promulgated for the information of collectors of internal revenue and others concerned.

G. W. WILSON, Commissioner.

UNITED STATES v. TWO HUNDRED AND THIRTY PATENTED MACHINESUNITED STATES DISTRICT COURT, EASTERN DISTRICT OF PENNSYLVANIA-INFORMATION FOR FORFEITURE-NO. 4 OF 1899.

Statement.

The suit was in rem to forfeit under the provisions of section 3400, Revised Statutes, the machinery, implements, apparatus, and other materials in the passession of W. M. Jacobs & Co., cigar manufacturers in the ninth district of Pennsylvania, charged with frauds upon the Government.

The machines were covered by patent rights and were not the property of Jacobs & Co., but were claimed by John R. Williams & Co., who leased them to Jacobs & Co. for an annual rental price.

The owners of the machines contended that their property was not liable to forfeiture, as they were innocent of frauds themselves and did not know that the machines would be used by the lessees in fraud of the Government; they further denied the right of the Government to claim the forfeiture of the machines and to sell them to purchasers under a judgment of forfeiture, with right to use them in disregard of the patent rights of the owners of the title.

The decision is clear in respect to the principle of absolute forfeiture of such property without regard to its ownership.

MCPHERSON, district judge:

In July, 1899, the firm of William H. Jacobs & Co. was carrying on the business of manufacturing cigars in Lancaster, Pa., and was using for that purpose 220 patented machines known as "suction tables" and "bunching machines." Upon the 10th day of that month the collector of internal revenue for the ninth collection district seized these machines, alleging that the firm had violated the laws regulating the manufacture of cigars. Shortly afterwards the district attorney filed an information in this court, seeking to condemn the machines for three separate violations of section 3400 of the Revised Statutes. That section reads as follows:

"Every manufacturer of cigars who removes or sells any cigars without payment of the special tax as a cigar-manufacturer, or without having given bond as such, or without the proper stamps denoting the tax thereon; or who makes false or fraudulent entries of the manufacture or sale of any cigars; or makes false or fraudulent entries of the purchase or sale of leaf-tobacco, tobacco-stems, or other material used in the manufacture of cigars; or who affixes any false, forged, spurious, fraudulent, or counterfeit stamp, or imitation of any stamp, required by law to any box containing any cigars, shall, in addition to the penalties elsewhere provided in this Title for such offenses, forfeit to the United States all raw material and manufactured or partly manufactured tobacco and cigars, and all machinery, tools, implements, apparatus, fixtures, boxes, barrels, and all other materials which shall be found in his possession, or in his manufactory, and used in his business as such manufacturer, together with his estate or interest in the building or factory, and the lot or tract of ground on which such building or factory is located, and all appurtenances thereunto belonging."

The illegal acts charged in the information were that William M. Jacobs & Co. had removed their cigars without affixing proper stamps, had affixed counterfeit stamps to certain boxes containing cigars, and had made false and fraudulent entries of the manufacture and sale of

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