selling property of old corporation to a new one but no income was received, it being merely a reorganization. (U. S. v. Alpha Portland Cement Co., 257 Fed. 432.)

9. The word "income" in corporation tax act, imposing an excise tax measured by income, means the same as in prior laws imposing a tax on income. (Cleveland, C. C. & St. L. Ry. Co. v. United States, 242 Fed. 18, 1915.) (This case was affirmed in 247 U. S. 195, on the question of profit on sales of property acquired prior to Jan. 1, 1909, and sold afterwards.)

10. See case 2, Income. Same point similarly decided by District Court of Connecticut in Connecticut General Life Insurance Company v. Eaton (218 Fed. 188), and in Connecticut Mutual Life Insurance Company v. Eaton (218 Fed. 206), both cases being affirmed by C. C. A. in 223 Federal 1022, 1915.

11. In the absence of evidence to the contrary, the profits and losses on sales of real estate, acquired by mutual insurance companies through foreclosure of mortgages securing loans made by them, and carried by said companies as assets at a valuation equal to the original cost to the company, should be treated as having been made. or sustained during the year, and the company was chargeable in its gross income with the profits made, and entitled to a deduction of the full amount of the losses. (Connecticut Mutual Life Ins. Co. v. Eaton, 218 Fed. 206, 207, 1914. Affirmed in 223 Fed. 1022, 1915.) 12. Only premiums actually received in cash during the year, and not premiums accruing or becoming due, but not paid within the year, nor money previously received in payment of a premium, but applied within the year to pay a different premium, or a renewal policy, instead of a policy holder, on expiration of his policy, taking his expiration return premium, or dividend in cash as he had a right to do, are "income received within the year" by a mutual insurance company, within excise tax act, section 38, clause 2; an estimation on a "cash," as opposed to a "revenue," basis being contemplated by the act. (Lumber Mutual Fire Ins. Co. v. Malley, 256 Fed. 380, 1916.)

Increase or decrease in book value of bonds held by a mutual insurance company as investment does not affect "income received within the year," within excise tax act, section 38, clause 2. (Id.)

13. Income may be defined as the gain derived from capital, from labor, or from both combined. (Connecticut Gen. Life Ins. Co. v. Eaton, 218 Fed. 188, 1914, and Stratton's Independence v. Howbert, 231 U. S. 399, 1913; but see Maryland Casualty Co., 52 Ct. Cls., 201, 1917, pending in U. S. Supreme Court.)

14. A mutual life company is not under necessity to return as part of gross income under corporation tax act, section 38, interest accrued on policy loans. (Northwestern Mut. Life Ins. Co. v. Fink, 248 Fed. 568, 1917.)

15. The fact that in the ascertainment and apportionment of dividends to its policyholders a mutual life insurance company acted obediently to St. Wis. 1915, section 1952, requiring mutual life insurance surpluses to be apportioned annually to policies, does not estop it as against the collector of internal revenue, or avail against its contention that such dividends were not income within this act.

Mutual life company's return under section 38, imposing excise tax on insurance companies of 1 per cent on net income above $5,000 should not include premiums and interest due but not received.

So-called dividends of a mutual life insurance company doing business on the level-premium plan, consisting merely of the portion of the premium charged in excess of the cost of insurance, returned annually to the policyholders after the first year, so far as they were used to reduce subsequent premiums, were not "income received,” and were not subject to taxation. (Northwestern Mutual Life Ins. Co. v. Fink, 248 Fed. 568, 1917.) See similar decision in case 10 on income.

16. An insurance company is obligated to report in full the total sums received in cash, both amounts received at the home office, and those paid to its lawful agencies during the calendar year.

Income means what has come in, or receipts.

Reserve funds when released are in their very essence income. (Maryland Casualty Co. v. U. S., 52 Ct. Cls. 201, 1917, pending in U. S. Supreme Court; Chicago & Alton R. R. Co. v. U. S., 53 Ct. Cls. 41.)

17. Plaintiff was a public waterworks company, which received from its consumers amounts for service connections and extensions, the greater part of which it expended in making the connections and extensions. It sues to recover the tax paid under protest on the amount of such receipts without deduction of the expenditures. Held, that such receipts were part of the corporation's "gross income," and did not fall within any of the deductions provided for, and that plaintiff was liable for the tax on the full amount of such receipts, which, in fact, were invested in permanent improvements, adding to the value of the property.

The fact that plaintiff was a public utilities corporation, which, under the laws of the State, was not the owner of the property, but merely entrusted with the use thereof, which it must devote to the public, does not entitle it to more favorable treatment than other corporations; it being a corporation organized for profit, having a capital stock represented by shares, and the act making no exceptions in favor of public utilities.

Nor does the fact that the State commission had ruled that service connections paid for by consumers were not to be included within the valuation of the company, on which it was entitled to a fair

return, show that payments for those connections are not to be included as part of the corporation's gross income. (Union Hollywood Water Co. v. Carter, 238 Fed. 329, 1917.)

18. The "mining leases" involved in these cases were not equivalent to sales of property, and the moneys paid by the lessees to the respondents were not converted capital, but rents or royalties, and as such were income proper to be included in measuring their taxes under the corporation tax law. (Von Baumbach v. Sargent Land Co., 242 U. S. 503, 1917, reversing 219 Fed. 31. Followed in U. S. v. Biwabik Mining Co., 247 U. S. 116.)

19. Actual value, and not book value, must be considered in determining the income.

The amount received from the sale of stock owned by a corporation and carried on its books at a value of $1 held not taxable as income where the evidence showed the stock had a greater value.

"Income" means the flow of capital service, and is not synonymous with receipts. (United States v. Guggenheim Exploration Co., 238 Fed. 231, 1917.)

20. A railroad corporation purchasing stock in another corporation for investment prior to January 1, 1909, is taxable with respect to so much of the profit upon the sale of the stock as accrued after December 31, 1908. (C., C., C. & St. L. Ry. Co., v. United States, Affirmed by Supreme Court in 247 U. S. 195,

242 Fed. 18, 1917.)

1918.

The market value of the stock on December 31, 1908, may be determined by an inventory taken as of that date, and the stipulated fact of the market value of the stock on that date may be accepted as supplying the lack of an inventory.

Id.

21. Where a New Jersey corporation engaged in insurance business was required by New Jersey commissioner of banking and insurance to provide reserve for all policies written though premiums were not fully paid, all sums paid into reserve must be excluded in computing corporate income for taxation. (Prudential Ins. Co. v. Herold, 247 Fed. 681, 1918.)

So-called dividends paid by stock company engaged in writing insurance, to nonparticipating stockholders, can not be considered in computing company's income for taxation under corporation excise tax act of 1909. Id.

22. The act employs the term "income" in its natural and obvious sense, as in quoting something distinct from principal or capital and conveying the idea of gain or increase arising from corporate activities.

While a conversion of capital may result in income, in the sense of the act, where the proceeds include an increment of value, such is not the case where the increment existed when the act took effect.

In distinguishing preexisting capital from income subject to the act it is a mere question of method whether a deduction be made from gross receipts in ascertaining gross income, or from gross income, by way of depreciation, in ascertaining net income.

Before the corporation tax act a lumber company bought timberland to supply its mills, and after the act it manufactured part of the timber into lumber, which it sold. Held, that the amount by which the timber so used had increased in value between the date of purchase and the effective date of the act was not an element of income to be considered in computing the tax.

The income is to be determined from the actual facts, as to which the corporate books are only evidential. (Doyle v. Mitchell Bros. Co., 235 Fed. 686, affirmed in 247 U. S. 179, 1918.)

23. A corporation engaged in the brokerage business, which bought and carried securities for customers on margins, receiving interest payments from them on account of the margins, must list all such interest as part of its gross income, and in computing its net income can not, though it incurred indebtedness for the purchases and paid interest on the balance due, deduct interest on such indebtedness in excess of the amount of its paid-up capital, for such indebtedness was that of the corporation, and not its customers. (Altheimer & Rawlings Inv. Co. v. Allen, 248 Fed. 688, 1918.) Judgment of the United States District Court, 246 Fed. 270, affirmed. (Certiorari denied in U. S. Supreme Court, Nov., 1918, 248 U. S. 578.)

24. Whether the determination of the capital assets on December 31, 1908, should be made by taking an inventory upon the basis of market values then existing, or whether the entire increment accruing between the time of acquiring and the time of disposing of the assets should be prorated as if it had arisen through a series of gradual and imperceptible augmentations is a matter of detail to be settled according to the best evidence obtainable and in accordance with valid departmental regulations. The act measured the tax by the income received within the year for which the assessment was levied, whether it accrued within that year or in some preceding year while the act was in effect; but it excluded all income that accrued prior to January 1, 1909, although afterwards received while the act was in effect. (Hays v. Gauley Mt. Coal Co., 247 U. S. 189, 1918. Reversing 230 Fed. 110 and affirming decision of the district court.)

25. Interest payments of railway companies which organized and purchased stock of a terminal railway company on account of mortgage given by such terminal company held part of terminal company's income for purpose of determining the amount of its tax under the corporation excise tax act of August 5, 1909. (Houston Belt & Terminal Ry. Co. v. United States, 250 Fed. 1, 1918, C. C. A. affirming decision of the district court.)

26. The term "income" must be accepted as those more or less periodic earnings, as distinguished from permanent sources of wealth; hence, where the sole stockholder of a corporation which furnished the capital released a debt in favor of the corporation, such sum should be treated as capital rather than income, though such a release can not be treated as a mere matter of bookkeeping, but as adding to the corporate assets. (United States v. Oregon-Washington R. & Nav. Co., 251 Fed. 211, 1918.)

27. Under corporation tax act August 5, 1909, where property is sold by a corporation at an advance over the original purchase price, the amount of such advance is a gain or profit received during the year, for the purpose of computing its net income. (Scott v. Schwab, 255 Fed. 57, 1919.)

28. Where life insurance companies conducted on the mutual plan issue policies providing for a definite premium, which is usually fixed somewhat above the amount required to insure safety, and when a certain time has passed and it is found that a less sum may safely be taken for a specific year, the premium for that year is reduced to the lower sum, and the insured is allowed to invest the difference, if he care to do so, in additional paid-up insurance such amount of excess premium returned to the policyholder is not taxable as net income of the insurance company. In company bookkeeping the premiums are frequently entered at their full amount and the amounts of the rebate are entered as "dividends." They are in no true sense dividends, however they may be called, but abatements of premium. (Opinion of Judge Hand in New York Life Ins. Co. v. Anderson, U. S. D. C. So. Dist. of New York, 1919.) This case as reported in 257 Fed. 576 was further heard on a question of accounting only and is now on appeal on a question of so-called dividends. (See also case 3, this heading, on the authority of which Judge Hand relied.) Income of insurance companies, see cases 2, 3, 4, 5, 10, 11, 12, 13, 14, 15, 16, 21, 28-Income.

Income of mining companies, see cases 1, 1a, 13, 18-Income. "Paid-up capital stock."

After citing the cases of Central Bonding & Casualty Insurance Co. v. Mosely (174 S. W. 1037), Williams v. Brewster (117 Wis. 370), Willis v. St. Paul Sanitation Co. (16 L. R. A. 281), Houston Belt & Terminal Co. v. United States (250 Fed. 1), Altheimer & Rawlings Investment Co. v. Allen (248 Fed. 688), Boston Terminal Co. v. Gill (246 Fed. 664), Armstrong v. Union Trust & Savings Bank (249 Fed. 268), and Anderson v. Forty-Two Broadway (239 U. S. 69), the court continued:

Therefore the conclusion is imperative, after a careful analysis of the law and a consideration of the principles involved in all cases cited by both sides, that the "paid-up capital stock" of the corporation, as used in section 38 of the act, means