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U.S. Supreme Court

Railroad Company v. Collector, 100 U.S. 595 (1879)

Railroad Company v. Collector

100 U.S. 595


1. The tax on interest paid by corporations under sec. 122 of the internal revenue law, as amended by the Act of July 13, 1888, 14 Stat. 138, is an excise tax on their business, to be paid by them out of their earnings, income, and profits.

2. In order that its payment might be secured, this tax was laid on the subjects to which these earnings were applied in the usual course of business of such corporations -- namely, dividends, interest on funded debt, construction, or some reserve fund held by the company.

3. Such a tax is not invalidated by the provision that the amount of it may be withheld from the dividend or the interest due or payable to the stockholder or the bondholder, who is a citizen or a subject of a foreign government, with no residence in this country.

This is a suit by the Michigan Central Railroad Company against Charles W. Slack, collector of internal revenue for the third collection district of Massachusetts, to recover a tax or duty of $860.33, paid to him, under protest, on the twenty-eighth day of February, 1870, which tax was assessed on or about the 19th of that month on sterling bond interest paid by said company in London in gold, in the previous month of January, by cashing certain coupons which then fell due.

The coupons were attached to certain sterling bonds issued by said company, to the amount of �95,700, and negotiated by their agents in London in 1852, or early in 1853. The bonds were due in July, 1872, and paid at maturity, in gold, in London.

So far as the company knows, not one of them was ever held by any person in the United States, or by other than nonresident aliens, and the interest accruing was regularly paid in gold in full in London, without rebate or reservation of the United States internal revenue tax.

Appeal was duly made to the Commissioner of Internal Revenue before this suit was brought.

The court below found for the defendant, whereupon the company brought the case here, and assigns for error that the court below erred in finding that Congress had power to impose

Page 100 U. S. 596

the tax in controversy, and that, upon the facts, judgment must be for the defendant.

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