UNITED STATES V. CENTRAL NATIONAL BANK. 613 �The complaint alleges that in 1866 the defendant made and real- ized in its business, as a bank, certain profits, to-wit, $56,555.69, ■whereof no return was ever made to the assessor; that said profits were liable to a tax of 5 per centnm, none of whieh has ever been paid. Similar averments are made in reference to the years 1867, 1868, and 1870. �Besides certain deniais, the answer sets forth two separate de- fences : �First. That by the law of the state of New York the defendant was re- quired to retain from the divideuds paid to its stockholders the amount-of the municipal tax levied by the state against the stockholders upon the value of their shares of the capital stock, and that the defendant was also lequired by the state law to pay to the state offlcers, out of its f unds, the amount of taxes thus levied upon the par value of the stock, and to deduct said araount rata- bly from dividends to be paid by the defendant to its stockholders ; that, in accordance with the state law, the defendant did so retaiii and pay to the proper state authorities the state taxes so levied for that year upon the capital stock of its stockholders, amouuting to the said sum of $56,555.69, and its returns to the assessor of the district deducted the amount of taxes so paid, as it claims to have the right under the law to do ; and that it paid the duty upon such returns, deducting s*h state taxes. Second, that in 1866 defendant made returns of its profits for that year to the amount of $478,947. :J6, and paid to the collector the duty upon that amount ; that in July, 1869, defendant discovered certain losses by embezzlement during the years 1866, 1867, and 1868, which had been previously concealed and unknown to it; that the amount of such losses during 1866 was at least equal to the amount of the state tax which had been deducted from the returns of that year, so that, aside from the deduction of the state tax, the amount of its returns to the assessor was fully equal to all its profits for that year; and that, i"^ f^ct, the duty paid was greatly in excess of that to which it was liable under the act of con- gress. �The same defences are made to the duties claimed for the years 1867 and 1868. To the claim for the year 1870 the second defence does not apply, but only the first. The plaintifi demurs to each of these defences as insufficient in law. �In behalf of the United States it is claimed that the losses sus- tained by the bank through embezzlements should not be deducted from its returns; that it must pay taxes upon all its profits earned, and that it is immaterial what becomes of these profits after they have been made, whether lost by embezzlement or otherwise ; that it is only legitimate expenses which can be deducted from the profits in making returns to the assessor. No authorities are cited for such a construction, and it seems to me altogether unreasonable. Section ��� �
