Flivver

Due either to odd coincidence or bitter design, there has been a tax fight between wealthy Senator Couzens of Michigan and wealthier Secretary Mellon of the Treasury Department, since 1925. It was a fight over Senator Couzens' profit tax on his shares in the Ford Motor Co., which he sold in 1919. Last week, Senator Couzens won the fight and the Treasury Department lost perhaps $2,000,000 in refunds to Senator Couzens and eight other onetime Ford stockholders.

Senator Couzens, an original Ford incorporator, acquired his stock (2,180 shares) for some $40,000, prior to 1908, and sold it for some 30 millions in 1919. When Henry and Edsel Ford sought to buy him out in 1919, the Internal Revenue Bureau calculated that $9,489.34 per share was a fair price. Senator Couzens ultimately obtained $13,444 per share. He paid the U. S. a profits tax on the difference between the Revenue Bureau's fair price estimate and the price he received. That was in 1919 and the business seemed finished.

Six years later, during an investigation of the Internal Revenue Bureau by a Couzens-headed committee of the Senate, Senator Couzens was notified that his profit-tax payment of 1919 had been far from adequate; please to pay some $10,000,000 more. Senator Couzens charged that some one in the Treasury Department had been told to look up his back tax returns and see if anything could be "gotten on him." But the Treasury Department denied this and said that the 1919 Ford stock profit item had been called to its attention by a letter-writer. The Treasury said that the value of the stock in 1913, when the income tax first operated, should have been made the basis of Senator Couzens' profit tax in 1919.

Last week's ruling in favor of Senator Couzens by the U. S. Board of Tax Appeals not only upheld his 1919 tax payment but found it had been about $500,000 too large. The Couzens case, whether designed by Secretary Mellon or brought out in line of duty, was a backfiring flivver.