Louis Brandeis

“ The stockholders in those corporations which had deferred the distribution of profits earned prior to 1917, either generally from prudence or specifically with a view to stabilizing over a long period the rate of dividend, would be at a great disadvantage as compared with the stockholders in those corporations which had pursued the practice of distributing each year substantially all profits earned. ”

“ The contention was repeated that the dividends were not taxable, because not constituting income. In addition, it was claimed that, if they were taxable at all, it was not at the 1917 rate, but at the rate for 1916. The income tax rate imposed upon individuals for the calendar year 1917 by the 1917 Revenue Act was much higher than that imposed for the year 1916 by the Act of September 8, 1916, c. 463, part I, 39 Stat. 756 (Comp. St. § 6336a et seq.) . The District Court concluded that the dividends were income, and that they were taxable at the 1917 rate. ”

“ Nearly every business with a well-developed accounting system can, at any time, without the formal periodic inventory or closing of its books usual at the end of a fiscal year, determine approximately the amount of its current earnings, the amount accrued since the beginning of its fiscal year, and the part thereof undistributed. ”

“ Many corporations do make such approximate ascertainment of profits monthly, or oftener; and, relying upon their system of cost accounting, they make distributions of current earnings without a closing of the books, as the Phelps Dodge Corporation did in 1917.↑ The decision in this court of Lynch v. ”

“ Eisner, 247 U.S. 347, 38 S.C.t. 546, 62 L. Ed. 1152.↑ The Committee on Accounting Terminology of the American Association of Public Accountants was for years engaged in preparing a list of definitions. ”