Page:Harvard Law Review Volume 32.djvu/651

615 JURISDICTION TO TAX ti$ carried on by a corporation, as such business is usually carried on, this added intangible wealth goes by the name of the corporate excess. Various ways have been tried to establish the amount of this excess; but they may all be reduced to one of two plans. One is the " capitalization-of-income plan," by which the net income of the business is capitalized at a reasonable rate, and the result taken as the value of the capital; and this is a recognized and per- mitted method.^^" The other is the stock-and-bond plan, by which the value of the stock is added to the amount of bonds outstanding, and the result is taken as the value of the capital.^^^ If the latter method is adopted, its correctness must rest upon the theory that the stock represents the interest of the mortgagor corporation above the amount of the mortgage incumbrance represented by the bonds. The importance of the bonds is, there- fore, that they represent the mortgage debt, and the par value of the bonds is the amount that should be added to the market value of the stock in order to get at the true value of the capital. If this course is taken, the result is a fair measure of the market value of the capital, which is in all ordinary cases the true value; a decision, therefore, which holds this method unfair appears to be unsound."^ On the other hand, it would be unfair to add the market price of the bonds to that of the stock, as is sometimes done; "^ for the market value of the stock represents the value of the property over the funded debt, which is not the same thing as the market value of the bonds. No one way can be regarded as essential. All elements of value may properly be considered by the assessing body.^'*^ It may happen in the case of an interstate corporation that the tangible stock in trade, although in reaHty a single aggregate mass, is located in several states. The leading case on this point is Pullman's Palace Car Co. v. Pennsylvania}'^^ In that case it ap- peared that the stock in trade of the corporation consisted chiefly in a considerable number of cars in coAstant use upon railroad '** ■Louisville & Nashville R. R. v. Greene, 244 U. S. 522 (1917). — ^flftate Railroad Tax Cases, 92 U. S. 575 (1875). '•-"Railroad & Telephone Companies v. Board of Equalizers, 85 Fed. 302 (1897). '« E.g., in State Railroad Tax Cases, 92 U. S. 575 (1875). '** Great Northern Ry. v. Okanogan County, 223 Fed. 198 (1915). "» 141 U. S. 18 (iJ