28 
“\We are of opinion that any profit made on a transaction 
recognizable as a business transaction, i. e., a transaction in 
which the subject matter was acquired with a view to profit- 
seeking, should be brought within the scope of the Income Tax, 
and should not be treated as an accretion of capital .. . 2 
Forest taxation might also be mentioned as affording examples 
of unsound practices based on the error of confusing capital and 
income. Today the trend of opinion in America, and for a 
longer time abroad, is toward a “yield tax” which recognizes that 
the mere storing up of values in growing stumpage is not income. 
The forest yields income only when it is cut. Tt should be noted, 
however, that forests in America are avowedly taxed not under 
the income tax but under the general property tax. It affords 
a good reductio ad absurdum of the general property tax. When 
capital is accumulating and not yielding current income the re- 
peated annual tax on that capital is a very much greater burden 
than on ordinary property yielding an annual income. Instinct- 
ively this is recognized and forest lands are, as a consequence, al- 
most always assessed far below their true value.* 
The foregoing sketch of American experience shows many 
instances where, in a fairly consistent line of progress, items first 
misplaced as capital or income have gradually found or ap- 
proached their true place. The practically attainable goal has not 
yet been reached and it can never be reached until due allowance 
is made for reinvestments. 
The foregoing legal discussions show how the true theory of 
capital and income seems to be slowly working itself out. The 
late Chief Justice Judge Marcus Knowlton, of Massachusetts, 
accepted fully what I regard as the true point of view. Mr. W, 
Strachan embodied it in his law book, The Law of Trust Ac- 
counts. Other legal authorities and many economists have 
tended toward the service concept and in proportion as this trend 
increases just so fast will these tax injustices, ambiguities, mis- 
understandings and objections tend to disappear. 
INCOME STATISTICS 
It is interesting to note that, just as with income taxation 
and forest taxation, experience and injustice have necessitated a 
truer understanding of income, so have statisticians been com- 
pelled by their experience in reckoning income, to recognize a truer 
concept. 
* ‘An excellent discussion of forest taxation is to be found in the Scientific Monthly of 
May, 1926, by Prof. F. R. Fairchild who, more than any other writer, has been 
endeavoring to reform forest taxation to make it harmonize with true concepts of 
capital and income.