James Clark McReynolds

“ The Federal Farm Loan Act (sections 16 and 13) empowers joint-stock land banks to invest their funds 'in the purchase of qualified first mortgages on farm lands.' The obvious meaning is that loans might be made on such security. Loans, so made, become 'securities issued under the provisions of the' act, and interest upon them is wholly exempt from taxation under title 2, Revenue Act of 1921. ”

“ When, as in the instant case, joint-stock land banks are affiliated with banking corporations that do have taxable incomes, the question assumes importance, as the interest deduction, if allowed, reduces the tax liability of the affiliated group-even then, however, it in no way affects the joint-stock land banks included in such consolidation. ”

“ As security for the payment of said joint-stock land bank bonds said joint-stock land banks, as provided in the Federal farm loan act, deposited with the proper farm loan registrars farmers' promissory notes evidencing loans to said farmers, which in turn were secured as to payment by said farmers' first mortgages on their farms. ”