$33,000,000 in two or three days in deals involving Sinclair securities. As already noted Attorney-General Daugherty resigned March 28 and there was some talk of discontinuing the investigation. However, it was decided to take some further testimony. Capt. S. L. Scaife, a former special agent of the bureau of investigation under William J. Burns, toid about the aleged enorts of federal officials to block prosecution of war fraud cases. Herbert M. Peck, United States attorney for the western district of Oklahoma, told of the delay in the prosecution against the Miller brothers, who were charged with obtaining 10,000 acres of land from the Indians by fraud. He blamed Mr. Daugherty for the failure to bring civil action for the recovery of the land. Thomas F. Lane, legal adviser of Maj. Gen. Patrick, chief of the army air service, testified on April 3 that the department of justice had approved a compromise in the case of the Lincoln Motors company by which the government lost more than $6,000,000. He also testified concerning the government's war-time transactions with the Japanese-controlled Standard Air Craft corporation. Mr. Lane complained that his desk in the war department had been removed, that documents and other memoranda regarding the war-time frauds had been taken from it and that he himself had been suspended from his position by Secretary of War Weeks. William J. Burns, director of the bureau of investigation of the treasury department, who appeared as a witness on April 4, made the charge that an investigation which the agents of his bureau had made of the smug gling of "dope" into the federal penitentiary at Atlanta, Ga., had been stopped at the instance of the Rev. Heber Votaw, brother-in-law of President Harding and superintendent of prisons at a time when the trail was leading to men who controlled the source of supply. Mr. Burns also charged that at a time when his agents investigating whisky deals in New York were close on the trail of some very prominent men they had been told not to "butt into matters" wholly connected with the treasury department. LAW VIOLATIONS IN CHICAGO. Brice Armstrong, a general prohibition agent attached to the Chicago office, told the committee on April 7 that violators of the prohibition law in Chicago worked under the protection of local politicians, who kept the city wet. Eight breweries, he said, were operating illegally. Because of his efforts to enforce the law his home had been bombed. SENATOR WHEELER EXONERATED. On April 8 Senator Burton K. Wheeler of Montana, the chief prosecutor of the committee, was indicted by a federal grand jury at Great Falls, Mont., on the charge of unlawfully receiving money as a retainer fee to influence the issuing of oil and gas prospecting permits by the secretary of the interior and the commissioner of the general land office in Washington. It was specifically charged that on two occasions the senator had accepted money improperly after he had been elected to the United States senate but before he had qualified for office. The senator denied the charges emphatically and said that they had been worked up by agents of the department of justice who were "out to get him." U The senate on Apr. 9 unanimously voted to investigate the charges against Senator Wheeler. The committee appointed (April 10) for that purpose consisted of Borah, chairin; McLean, Sterling. Caraway and Swanson, committee reported to the senate on May Mr. Wheeler had not agreed to appear before any government official, that he did not do so and did not get paid for doing so. The committee, therefore, exonerated him fully. Senator Sterling filed a minority report declaring that Mr. Wheeler's indictment was justified. The senate on May 23 approved the majority report by a vote of 55 to 5. George W. Storck, an accountant for the bureau of investigation in the department of justice, told the Brookhart committee on April 9 that Joseph F. Guffey, democratic national committeeman from Pennsylvania, had deposited proceeds from the sales of alien property in certain banks from which he then obtained personal loans. Mr. Guffey had been indicted but the case against him was not pushed, the witness said. In the Bosch magneto case he declared that profits amounting to at least $1,000,000 had been made. The attorney-general had taken no action, Mr. Storck asserted. Mal Daugherty and the officials of the Midland National bank at Washington Court House, O., obtained an injunction April 11 restraining Chairman Brookhart and Senator Wheeler from examining the bank's books to verify reports that Attorney-General Daugherty and the late Jess Smith had large accounts there. Cecil H. Kerns, who had been sentenced to the Atlanta federal prison for two years on charges of violating the liquor laws and had been paroled, testified on April 15 that liquor withdrawal permits had been on sale in Ohio at the rate of $17 a case and that the memtributed $50,000 to the republican campaign bers of the liquor ring in that state had confund in 1920 and that others had given $40.000 to the republican campaign fund in Kentucky. committee on April 16 and gave testimony Gaston B. Means again appeared before the tending to involve A. Mitchell Palmer, the alien property custodian, in the alleged misdoings of the department of justice under Attorney-General Daugherty. He said that he had obtained his information from the late Jess Smith. Capt. H. L. Scaife, another former witness, was again a witness before the committee on April 19. He said that Speaker Gillett of the house of representatives received some of a large quantity of liquor seized in the union station in Washington in the spring of 1919. Mr. Gillett told the committee on April 21 that the story was false. He explained how it originated in a perfectly innocent transaction. On April 25 the committee inquired into the alleged failure of the department of justice to enforce the anti-trust laws, particularly against the wholesalers' associations. Morris A. and William J. Panco of Chicago were among the witnesses who testified as to this matter. Without a record vote the senate adopted on April 26 a resolution declaring Mal S. Daugherty in contempt of the senate for refusing to respond to two subpoenas directing him to appear before the Brookhart committee investigating the department of justice. Mr. Daugherty was arrested in Cincinnati. O.. May 28, by John J. McGrain. deputy ser geant at arms of the senate. He thereupon applied for a writ of habeas corpus, which was granted by Judge Smith Hickenlooper of the United States District court for southern Ohio, and after a brief hearing Daugherty was released on a bond of $5.000. THE GROSSMAN CASE. The liquor situation came before the Brookhart committee on April 9 when James A. Finch, pardon attorney of the department of justice, testified as to the reason why the sentence of Philip Grossman, a Chicago saloonkeeper, had been commuted by President Coolidge though Grossman had not served a day of the year in prison to which he had been condemned by Judge Kenesaw M. Landis for violation of the liquor law. Mr. Finen daimed that the evidence against Mr. Grossman did not justify his conviction and that this was the reason why he had never been jailed. It was alleged that the two Illinois senators and several prominent Chicago politicians had interceded for him, but that President Harding on two occasions had refused to pardon him. Ex-Judge Landis testified on May 2 that Grossman kept an ordinary saloon in a district in Chicago that bred criminals and was convicted on the testimony of six witnesses, after a restraining order had been issued to close his saloon. He said that the saloon was still open and doing business when the pardon came. The former judge cond mned the intercession of the politicians in the case. He referred to the special assistant attorney-general, Charles W. Middlekauff, as one of those who had recommend d the pardon of Grossman, who had been convicted on Mr. the testimony of unreliable witnesses. Middlekauff appeared before the committee on May 6 and declared that ex-Judge Landis had made "untruthful, unwarranted and misleading" statements in regard to the recommendation which Mr. Middlekauff made for the commutation of the Grossman sentence. He declared that the records showed that only two witnesses had testified against Grossman and that their testimony had been discredited. or Judges James H. Wilkerson and George A. Carpenter of the United States District court for northern Illinois decided on May 15 that the president was without power to pardon in contempt cases and the marshal was dered to take Mr. Grossman into custody. This was done and Grossman began serving his sentence at the house of correction, Chicago. However, on a writ of habeas corpus. issued by Justice McKenna of the United States Supreme court. Grossman was released on $5,000 bail. The Daugherty investigating committee adjourned June 19 without fixing a date for resuming the hearing. CONGRESSIONAL INVESTIGATIONS. In April, 1924, there were eleven committees of the senate and five of the house engaged in investigations of various kinds. The investigations ordered by congress, with the name of the chairman of each committee, were as follows: SENATE COMMITTEES. Special committee to investigate the indict- Subcommittee of committee on foreign relations to investigate American activities of the soviet government-Senator William Special committee to investigate internal Special committee to investigate charges against two members of congress-Representative Theodore E. Burton, rep., Ohio. Special committee to investigate operations of army air service, naval bureau of aeronautics and air mail service-Representative Florian Lampert, rep., Wisconsin. Special committee to investigate shipping Special committee to investigate charges of immediate direction of the secretary of the Smithsonian institution, who is the executive officer of the board and the director of the institution's activities. The institution aids investigators by making grants for research and exploration, providing for lectures, initiating scientific projects and publishing scientific papers. It has administrative charge of the national museum, the national gallery of art, the international exchange service, the national zoologieal park. the astrophysical ob servatory and the regional bureau for the international catalogue of scientific literature. The institution's original endowment of $541.000 has been increased by gifts and accumu lated interest. The secretary of the institu tion is Charles D. Walcott. THE SMITHSONIAN INSTITUTION IN WASHINGTON. The Smithsonian institution was established by statute in 1846. under the terms of the will of James Smithson, who bequeathed his fortune in 1826 to the United States for the "increase and diffusion of knowledge among men." From the income of the fund a building, known as the Smithsonian building, was erected in Washington, D. C.. on land given by the United States. The institution is legally an establishment having as its members the president and vice-president of the United States, the chief justice and the president's cabinet. It is governed by a board of regents consisting of the vice-president. the chief justice, three members of the United States senate, three members of the house of representatives and six citizens appointed by joint resolution of congress. It is under the REVENUE ACT OF 1924. TITLE I.-GENERAL DEFINITIONS. Section 1. This act may be cited as the "Revenue Act of 1924." means an indi Sec. 2. (a) When used in this act(1) The term "person" vidual, a trust or estate, a partnership, or a corporation. (2) The term "corporation" includes associations, joint-stock companies, and insurance companics. (3) The term "domestic", when applied to a corporation or partnership means created or organized in the United States or under the law of the United States or of any s.a or territory. (4) The term "foreign" when applied to a cor a corporation or partnership means poration or partnership which is not do mestic. the (5) The term "United States" when used in a geographical sense includes only states, the territories of Alaska and Hawaii, and the District of Columbia. (6) The term "secretary" means the secretary of the treasury. (7) The term "commissioner" means the commissioner of internal revenue. (8) The term "collector" of internal revenue. means collector (9) The term "taxpayer" means any person subject to a tax imposed by this act. (10) The term "military or naval forces of the United States" includes the marine corps, the coast guard, the army nurse corps. female, and the navy nurse corps, female. (b) The terms "includes" and "including" when used in a definition contained in this act shall not be deemed to exclude other things otherwise within the meaning of the term defined. TITLE II.-INCOME TAX. Sec. 200. When used in this title- (e) The term "stock" includes the share in an association, joint-stock company or insurance company. includes "shareholder" a term (f) The member in an association, joint-stock company or insurance company. Distributions by Corporations. when or Sec. 201. (a) The term "dividend" used in this title (except in paragraph (9) of subdivision (a) of section 234 and paragraph (4) of subdivision (a) of section 245) means any distribution made by a corporation to its shar holders, whether in money or in other property, out of its earnings or profits accumulated after Feb. 28, 1913. (b) For the purposes of this act every distribution is made out of earnings profits to the extent thereof, and from the most recently accumulated earnings or profits. Any earnings or profits accumulated, or i.1crease in value of property accrued, before March 1, 1913, may be distributed exempt from tax, after the earnings and profits accumulated after Feb. 28, 1913, have bee distributed, but any such tax-free distribution shall be applied against and reduce the basis of the stock provided in section 204. (c) Amounts distributed in complete liquidation of a corporation shall be treated as in full payment in exchange for the stock, and amounts distributed in partial liquidation of a corporation shall be treated as in part or full payment in exchange for the The gain or loss to the distributee stock. resulting from such exchange shall be determined under section 202, but shall be rec203. In the case of amounts distributed in ognized only to the extent provided in section partial liquidation (other than a distribution within the provisions of subdivision (g) of section 203 of stock or securities in connec tion with a reorganization) the part of such distribution which is properly chargeable to capital account shall not be considered a distribution of earnings or profits within the meaning of subdivision (b) of this section for the purpose of determining the taxability of subsequent distributions by the corporation. a (d) If any distribution (not in partial or complete liquidation) made by a corporation to its shareholders is not out of increase in value of property accrued before March 1, 1913, and is not out of earnings or profits, then the amount of such distribution shall be applied against and reduce the basis of the stock provided in section 204, and if in excess of such basis, such excess shall be taxable in the same manner as a gain from The prothe sale or exchange of property. visions of this paragraph shall also apply to distributions based from depletion reserves on the discovery value of mines. (e) Any distribution made by a corpora which personal classified as was tion, service corporation under the provisions of the revenue act of 1918 or the revenue act of 1921, out of its earnings or profits which were taxable in accordance with the provisions of section 218 of the revenue act of and 1918 or section 218 of the revenue act of (d) The terms "paid or incurred" "paid or accrued" shall be construed accord-1921, shall be exempt from tax to the dising to the method of account ng upon the tributees. basis of which the net income is computed The deductions under section 212.or 232. and credits provided for in this title shall be taken for the taxable year in which "paid or accrued" or "paid or incurred," dependent upon the method of accounting upon the basis of which the net income is computed under section 212 or 232, unless in order to clearly reflect the income the deductions so or credits should be taken as of a different of the stock, to the extent that it represents period. (c) The term "withholding agent" means any person required to deduct and withhold any tax under the provisions of section 221 or 237. (f) A stock dividend shall not be subject to tax, but if before or after the distribution of any such dividend the corporation roceeds to cancel or redeem its stock at such time and in such manner as to make the distribution and cancellation or redemption in whole or in part essentially equivalent to the distribution of a taxable dividend, the amount distributed in redemption or cancellation a distribution of earnings or profits accumu. lated after Feb. 28. 1913, shall be treated more persons this paragraph shall apply only as a taxable dividend. (g) As used in this section the term "amounts distributed in partial liquidation" means a distribution by a corporation in complete cancellation or redemption of a part of its stock, or one of a series of distributions in complete cancellation or redemption of all or a portion of its stock. Determination of Amount of Gain or Loss. Sec. 202. (a) Except as hereinafter provided in this section, the gain from the sle or other disposition of property shall be the excess of the amount realized therefrom over the basis provided in subdivision (a) or (b) of section 204, and the loss shall be the excess of such basis over the amount realized. (b) In computing the amount of gain or loss under subdivision (a) proper adjustment shall be made for (1) any expenditure properly chargeable to capital account, and (2) any item of loss. exhaustion, wear and tear obsolescence. amortization or depletion, previously allowed with respect to such property. (c) The amount realized from the sale or other disposition of property shall be the sum of any money received plus the fair market value of the property (other than money) received. (d) In the case of a sale or exchange, the extent to which the gain or loss determined under this section shall be recognized for the purposes of this title shall be determined under the provisions of section 203. (e) Nothing in this section shall be construed to prevent (in the case of property sold under contract providing for payment in installments) the taxation of that portion of any installment payment representing gain or profit in the year in which such payment is received. Recognition of Gain or Loss from Sales and Exchanges. Sec. 203. (a) Upon the sale or exchange of property the entire amount of the gain or loss, determined under section 202, shall be recognized, except as hereinafter provided in this section. (b) (1) No gain or loss shall be recognized if property held for productive use in trade or business or for investment (not including stock in trade or other property held primarily for sale, nor stocks, bonds, notes, choses in action, certificates of trust or beneficial interest, or other securities or evidences of indebtedness or interest) is exchanged solely for property of a like kind to be held either for productive use in trade or business or for investment, or if common stock in a corporation is exchanged solely for common stock in the same corporation, or if preferred stock in a corporation is exchanged solely for preferred stock in the same corporation. (2) No gain or loss shall be recognized if stock or securities in a corporation a party to a reorganization are, in pursuance of the plan of reorganization, exchanged solely for stock or securities in such corporation or in another corporation a party to the reorganization. (3) No gain or loss shall be recognized if a corporation a party to a reorganization exchanges property, in pursuance of the plan of reorganization, solely for stock or securities in another corporation a party to the reorganization. (4) No gain or loss shall be recognized if property is transferred to a corporation by one or more persons solely, in exchange for stock or securities in such corporation, and immediately after the exchange such person or persons are in control of the corporation: but in the case of an exchange by two or if the amount of the stock and securities received by each is substantially in proportion to his interest in the property prior to the exchange. in (5) If property (as a result of its destruction in whole or in part, theft or seizure, or an exercise of the power of requisition or condemnation, or the threat or imminence thereof) is compulsorily or involuntarily converted into property similar ог related service or use to the property so converted, or into money which is forthwith in good faith, under regulations prescribed by the commissioner with the approval of the secretary. expended in the acquisition of other property similar or related in service or use to the property so converted, or in the aequisition of control of a corporation owning such other property, or in the establishment of a replacement fund, no gain or loss shall be recognized. If any part of the money is not so expended, the gain, if any, shall be recognized. but in an amount not in excess of the money which is not so expended. (c) If there is distributed, in pursuance of a plan of reorganization, to a shareholder in a corporation a party to the reorganization, stock or securities in such corporation or in another corporation a party to the reorganization, without the surrender by such shareholder of stock or securities in such a corporation, no gain to the distributee from the receipt of such stock or securities shall be recognized. (d) (1) If an exchange would be within the provisions of paragraph (1), (2) or (4) of subdivision (b) if it were not for the fact that the property received in exchange consists not only of property permitted by such paragraph to be received without the recognition of gain, but also of other property or money, then the gain, if any, to the re cipient shall be recognized, but in an amount not in excess of the sum of such money and the fair market value of such other property. (2) If a distribution made in pursuance of a plan of reorganization is within the provisions of paragraph (1) but has the effect of the distribution of a taxable dividend, then there shall be taxed as a dividend to each distributee such an amount of the gain recognized under paragraph (1) as is not in excess of his retable share of the undistributed earnings and profits of the corporation accumulated after Feb. 28, 1913. The remainder, if any, of the gain recognized under paragraph (1) shall be taxed as a gain from the exchange of property. (e) If an exchange would be within the provisions of paragraph (3) of subdivision (b) if it were not for the fact that the property received in exchange consists not only of stock or securities permitted by such paragraph to be received without the recognition of gain, but also of other property or money, then (1) If the corporation receiving such other property or money distributes it in pursuance of the plan of reorganization, no gain to the corporation shall be recognized from the exchange. but (2) If the corporation receiving such other property or money does not distribute it in pursuance of the plan of reorganization, the gain, if any, to the corporation shall be reeognized, but in an amount not in excess of the sum of such money and the fair market value of such other property so received, which is not so distributed. (f) If an exchange would be within the provisions of paragraph (1), (2), (3) or (4) of subdivision (b) if it were not for the fact that the property received in exchange consists not only of property permitted by 314 such paragraph to be received without the recognition of gain or loss, but also of other property or money, then no loss from the exchange shall be recognized. a (g) The distribution, in pursuance of plan of reorganization, by or on behalf of a corporation a party to the reorganization, of its stock or securities or stock or securities in a corporation a party to the reorganizanot be considered a distribution tion, shall of earnings or profits within the meaning of subdivision (b) of section 201 for the purpose of determining the taxability of subsequent distributions by the corporation. (h) As used in this section and sections 201 and 204 (1) The term "reorganization" means (A) a merger or consolidation (including the acquisition by one corporation of at least a majority of the voting stock and at least a majority of the total number of shares of all other classes of stock of another corporation, or substantial.y all the properties of another corporation), or (B) a transfer by a corporation of all or a part of its assets to another corporation if immediately after the transfer the transferor or its stockholders, or both are in control of the corporation to which the assets are transferred, or (C) a recapitalization, or (D) a mere change in identity, form, or place of organization, however effected. (2) The term "a party to a reorganization" includes a corporation resulting from a reorganization and includes both corporations in the case of an acquisition by one corporation of at least a majority of the voting stock and at least a majority of the total number of shares of all other classes of stock of another corporation. (i) As used in this section the term "control" means the ownership of at least 80 per centum of the voting stock and at least 80 per centum of the total number of shares of all other classes of stock of the corporation. Basis for Determining Gain or Loss, Depletion and Depreciation. Sec. 204. (a) The basis for determining the gain or loss from the sale or other disposition of property acquired after Feb. 28, 1913, shall be the cost of such property; except that (1) If the property should have been included in the last inventory, the basis shall be the last inventory value thereof; cog. (2) If the property was acquired by gift after Dec. 31, 1920, the basis shall be the same as it would be in the hands of the donor or the last preceding owner by whom it was not acquired by gift. If the facts necessary to determine such basis are unknown to the donee, the commissioner shall, if possible, obtain such facts from such donor or last preceding owner, or any other person nizant thereof. If the commissioner finds it facts, the basis impossible to obtain such shall be the fair market value of such property as found by the commissioner as of the date or approximate date at which, according to the best information that the commissioner was acis able to obtain, such property quired by such donor or last preceding owner: (3) If the property was acquired after Dec. 31, 1920. by a transfer in trust (other than by a transfer in trust by bequest or devise) the basis shall be the same as it would be in the hands of the grantor, increased in the amount of gain or decreased in the amount of loss recognized to the grantor upon such transfer under the law applicable to the year in which the transfer was made. The provisions of this paragraph shall not apply to the acquisition of such property interests as or (e) of are specified in subdivision (c) 402 of the revenue act of 1921 or in subdivision (c), (d) or (f) of section 302 of this act: (4) If the property was acquired by gift or transfer in trust on or before Dec. 31, 1920, the basis shail be the fair market value of such property at the time of such acquisition; (5) If the property was acquired by bequest, devise or inheritance, the basis shall be the fair market value of such property at The provisions the time of such acquisition. of this paragraph shall apply to the acquisition of such property interests as are specified in subdivision (c) or (e) of section 402 of the revenue act of 1921, or in subdivision (c), (d) or (f) of section 302 of this act: (6) If the property was acquired upon an exchange described in subdivision (b), (d). (e) or (f) of section 203, the basis shall be the same as in the case of the property examount of any changed, decreased in the money received by the taxpayer and increased in the amount of gain or decreased in the amount of loss to the taxpayer that was recognized upon such exchange under the law applicable to the year in which the exchange was made. If the property so acquired consisted in part of the type of property permitted by paragraph (1), (2), (3) or (4) of subdivision (b) of section 203 to be received without the recognition of gain or loss, and in part of other property, the basis provided in this paragraph shall be allocated between the properties (other than money) received, and for the purpose of the allocation there shall be assigned to such other property an amount equivalent to its fair market value at the date of the exchange. This paragraph shall not apply to property acquired by a corporation by the issuance of its stock or securities as the consideration in whole or in part for the transfer of the property to it; (7) If the property (other than stock or securities in a corporation a party to the was acquired after Dec. 31, reorganization) 1917. by a corporation in connection with a reorganization, and immediately after transfer an interest or control in such property of 80 per centum or more remained in the same persons or any of them, then the basis shall be the same as it would be in the hands of the transferor, increased in the amount of gain or decreased in the amount of loss recognized to the transferor upon such transfer under the law applicable to the year in which the transfer was made: the (8) If the property (other than stock or securities in a corporation a party to a reorganization) was acquired after Dec. 31, 1920, by a corporation by the issuance of its stock or securities in connection with a transaction described in paragraph (4) of subdivision (b) of section 203 (including, also, cases where part of the consideration for the transfer of such property to the corporation was property or money in addition to such stock or securities), then the basis shall be the same as it would be in the hands of the transferor, increased in the amount of gain or decreased in the amount of loss recognized to the transferor upon such transfer under the law applicable to the year in which the transfer was made; (9) If the property consists of stock or securities distributed after Dec. 31, 1923, to a taxpayer in connection with a transaction described in subdivision (c) of section 203, the basis in the case of the stock in respect of which the distribution was made shall be apthe apportioned, under rules and regulations prescribed by the commissioner with proval of the secretary, between such stock and the stock or securities distributed: (10) If the property was acquired as the result of a compulsory or involuntary con -- |