they cost her their market value when she exchanged them? The answer is: No, she did not buy them at that time. What then did they cost her?
When dealing with the subject of the "cost" in dollars and cents of a specific thing to a particular individual, we must ascertain the price paid for it by that individual at the time of its receipt. In this case it can lead to nothing other than the "cost" to the plaintiff of her Series A debenture bonds at the time she received them sometime prior to December, 1922 which is stipulated at $151,136.28. This conclusion is strengthened when it is realized that for present purposes Section 113 does not refer to market value either expressly or by implication, but to "cost" only.
It is argued for the plaintiff that the above conclusion can not be arrived at because Section 202(d) (1) of the Revenue Act of 1921 which provided for treating the property received in an exchange as taking the place of property given up, was repealed by Section 1100 of the Revenue Act of 1924, 43 Stat. 352, and that it was only by virtue of said Section 202 that the exchange might result in a subsequent tax as here assessed. As to this, it is found that the Revenue Act of 1924 provided that:
"(a) The following parts of the Revenue Act of 1921 are repealed * * *
"Title II (called 'Income Tax') as of January 1, 1924."
"Section 1100 * * * (b) The parts of the Revenue Act of 1921 which are repealed by this Act shall * * * remain in force for the assessment and collection of all taxes imposed by such Act, and for the assessment, imposition, and collection of all interest, penalties, or forfeitures which have accrued or may accrue in relation to any such taxes, and for the assessment and collection, to the extent provided in the Revenue Act of 1921, of all taxes imposed by prior income, war-profits or excess-profits tax acts, and for the assessment, imposition, and collection of all interest, penalties, or forfeitures which have accrued or may accrue in relation to any such taxes. In the case of any tax imposed by any part of the Revenue Act of 1921 repealed by this Act, if there is a tax imposed by this Act in lieu thereof, the provision imposing such tax shall remain in force until the corresponding tax under this Act takes effect under the provisions of this Act."
The foregoing presents a repealer and at the same time partially nullifies its effect by continuing repealed parts in full force and effect. This tends to confusion at first glance, but sound reason dictates that the repealer must be read as coupled with exceptions and limited to its clear intent. The exceptions being the parts continued in force, it is found that the Act of 1921 is continued in force as to all taxes imposed by that Act "to the extent provided" by that Act. This includes and continues in effect the provisions of 202(d) (1) wherein the property received stands in the place of the property given up and the sale with which we are here concerned would be taxed on the basis therein contemplated. The more the language of the aforesaid repealer is pondered, the more it appears that Congress did not intend to and actually did not repeal the provisions of Section 202(d) (1) in so far as a tax payer's status was fixed thereby. It follows that the argument for plaintiff in this connection must fall. It is apparently thought by counsel, however, that there is ambiguity in the language used by Congress in the repealer and the intent of Congress must be explored. This was carefully considered by the Court of Claims in Whitney v. United States, 15 F.Supp. 76, and resulted in the same final conclusion as here arrived at.
The pertinent provisions of the Revenue Act of 1924 were carried forward in the Revenue Acts of 1926 and 1928 and the construction given to the Act of 1924 therefore follows through the 1928 Act. This results in the final determination here that the basis upon which plaintiff's tax, arising out of the receipt of payment in 1929 and 1930 for her municipal and state bonds, is the original cost to her of her Series A Forstmann & Huffmann debentures.
Judgment will be entered for the defendant.
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