Horace Gray

“ Acting in good faith, and for the best interests of all concerned, the corporation may distribute its earnings at once to the stockholders as income, or it may reserve part of the earnings of a prosperous year to make up for a possible lack of profits in future years, or it may retain portions of its earnings and allow them to accumulate, and then invest them in its own works and plant, so as to secure and increase the permanent value of its property. ”

“ And when the company meet and say that they will not declare a dividend but will carry over some portion of the half year's earnings to the capital account, and turn it into capital, it is competent for them, I apprehend, to do so; and when this is done, everybody is bound by it, and the tenantfor life of those shares cannot complain. The only mode in which a tenant for life could act would be to use his influence with his trustees as to their votes with reference to the proposed arrangement. ”

“ In a word, what the company says is income shall be income, and what it says is capital shall be capital.' 'In most if not in all cases, the inquiry as to the time when the profits were earned by the company is an immaterial one as between the tenant for life and remainder-man. ”

“ Reserved and accumulated earnings, so long as they are held and invested by the corporation, being part of its corporate property, it follows that the interest therein, represented by each share, is capital, and not income, of that share, as between the tenant for life and the remainder-man, legal or equitable, thereof. ”

“ Four years after the testator's death, the company, upon the recommendation of the directors, and out of a fund so reserved in the testator's life-time, and of undivided profits, about half of which accrued before his death, made a bonus dividend, and an allotment of new shares, with liberty to each shareholder to apply the bonus dividend in payment for the new shares. ”

“ Allen, 56 N. Y. 553, the defendant, by a contract made August 11, 1871, under which he transferred to the plaintiffs certain stock in a manufacturing corporation, agreed to pay them 'all profits and dividends of and upon the stock up to the 1st day of January, 1872.' In April, 1872, the corporation declared a dividend of $15 a share, five-sixteenths of which were found by a referee to have been derived from the increase in value of its property between August 11, 1871, and January 1, 1872; and the court below gave judgment for the plaintiff for that proportion of the dividend. ”

“ The only other states, so far as we are informed, in which the Pennsylvania rule prevails, are New Jersey and New Hampshire. Van Doren v. Olden, 19 N. J. Eq. 176; Ashhurst v. Field's Adm'r, 26 N. J. Eq. 1 ”