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Merchants' Loan & Trust Co. v. Smietanka, 255 U.S. 509 (1921)

Merchants' Loan & Trust Co. v. Smietanka

No. 608

Argued January 11, 12, 1921

Decided March 28, 1821

255 U.S. 509


1. A provision in a will creating a trust that accretions of selling value shall be considered principal and not income cannot render them nontaxable under the income tax law. P. 255 U. S. 516.

2. A trustee, invested by will with full dominion over an estate, in trust to pay the net income to the testator's widow for life, and afterwards to use it for the benefit of his children and to pay over their shares as they reached a certain age, sold certain corporate stock, part of the original assets, for a price greater than their cash

Page 255 U. S. 510

value on March 1, 1913. Held (no earlier value being involved) that the gain after March 1, 1913, was taxable a income, for the year when the sale was made, to the trustee as a "taxable person," under the Income Tax Law of September 8, 1916, as amended by the Law of October 3, 1917. P. 255 U. S. 516. Cf. Goodrich v. Edwards, post, 255 U. S. 527; Walsh v. Brewster, post, 255 U. S. 536.

3. Income, within the meaning of the Sixteenth Amendment, the Income Tax Act of 1913, 1916, 1917, and the Corporation Tax Act of 1909, is a gain derived from capital, from labor, or from both combined, including profit gained through sale or conversion of capital assets. P. 255 U. S. 517. Eisner v. Macomber, 252 U. S. 189, 252 U. S. 207.

4. It includes the gain from capital realized by a single isolated sale of property held as an investment, as well a profit realized by sales in a business of buying and selling such property. P. 255 U. S. 520. Gray v. Darlington, 15 Wall. 63, and Lynch v. Turrish, 247 U. S. 221, distinguished.


The case is stated in the opinion.

Page 255 U. S. 514

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