23 
schuck ies, that Court ruled that debenture bonds 
of the N Brewing Company, issued by the corpora- 
tion to i 5 representing accumulated surplus or un- 
divided ncome to the recipients mn so far as they 
represen ince March 1, 1913. District Judge Chat- 
field, in dl: 
; efore, in the present case, that the plaintiffs 
rece, ayment (in the form of securities available 
for he market, and entirely severed or distin- 
gui control of the property as stockholders) of 
pro mpany wished to distribute as earnings to its 
sto this by distribution of obligation which, like 
ap alled for the payment of cash, and did not 
inv ith merely a different form of holding of 
sto 
But, are not income to the holder. Unless they 
are sold eeds spent, their recipient remains an in- 
vestor. the bonds is the capital value of the in- 
terest re m. Here again the stockholder is in the 
same po e had received a cash dividend and then 
reinveste rities mentioned. The reinvestment nega- 
tives th 
The of opinion has been going on in reference 
to rights It was formerly held that 
“7 received from the sale of rights to sub- 
seri income.” } 
Tha : is incorrect and may be unjust is apparent 
upon its thts” are essentially analogous to stock divi- 
dends, t convertible into stock with the payment 
of a spe share. 
In ei result of the increased capitalization is to 
reduce t h share previously held. To receive and ex- 
ercise a ibe at $100 for a stock worth $200 is equiv- 
alent to ck dividend of a half share and, at the same 
time, in rer half share at its true worth. 
With defects in principle underlying our income 
tax laws ingenious tax-dodgers to “beat the income 
x” 1 cases where a wealthy man has created a 
special hold most of his securities; all the stock 
in this ¢ neld by the man himself. All dividends on 
the secu to the coporation but no dividends are paid 
by the Instead the equivalent is “borrowed” of 
ed. 740, H ATE, 
* Doerschuq 27% ewett pp. 74-75