Northern R. Co. of New Jersey v. Lowe 250 F. 856

NORTHERN R. CO. OF NEW JERSEY v. LOWE, Internal Revenue Collector.

(Circuit Court of Appeals, Second Circuit.

February 13, 1918.)

No. 164.

Internal Revenue <&wkey;7 — Income Tax — Income of Corporation.

A railroad company, although not engaged in business, but which has leased all of its property for a long term, or for the life of its franchise, the rental to be paid by the lessee as interest on its bonds and a fixed dividend on its stock, direct to the bondholders and stockholders, is subject to tax on such rental, under Income Tax Act Oct. 3, 1913, c. 16, § 2G (a), 38 Stat. 172, which imposes such tax on “the entire net income arising or accruing from all sources”; the mode of payment provided in the lease being .merely for convenience in distributing the rental.

In Error to the District Court of the United States for the Southern District of New York.

Action by John B. Lowe, Jr., Collector of Internal Revenue, against the Northern Railroad Company of New Jersey. Judgment for plaintiff, and defendant brings error.

Affirmed.

Stetson, Jennings & Russell, of' New York City (William C. Cannon and Raymond G. Brown, both of New York City, of counsel), for plaintiff in error.

Francis G. Caffey, U. S. Atty., of New York City (Ben A. Matthews', Asst. U. S. Atty., of New York City, of counsel), for defendant in error.

Before WARD and HOUGH, Circuit Judges, and LEARNED HAND, District Judge.