become at once the property of the stockholder and are therefore not part of the capital stock and surplus on that date. People ex rel. U. S. Trust Co. v. Com'rs, 86 Hun, 131.

A different question presents itself when dividends have been declared several years back and left in the business. In that case they become taxable. People ex rel. Hawley Box & Lumber Co. v. Barker, 23 App. Div. 532 (1898).

Debts incurred in the purchase of non-taxable property not to be deducted.-No deduction shall be allowed in the assessment of personal property by reason of the indebtedness of the owner contracted or incurred in the purchase of non-taxable property or securities owned by him or held for his benefit, nor for or on account of any indirect liability as surety, guarantor, endorser or otherwise, nor for or on account of any debt or liability contracted or incurred for the purpose of evading taxation. (Sec. 6, Tax Law.)

Source: In substance the same as R. S. ch. XIII, title 2, sec. 9, subd. 4, as am'd by ch. 202, L. 1892.

In assessing personal property for taxation, the provision that no deduction shall be made or allowed for or on account of any debt or liability contracted or incurred in the purchase of non-taxable property applies to debts incurred in the purchase of imported goods not taxable by the state. People ex rel. Bijur v. Barker, 155 N. Y. 330.

Debts incurred in the purchase of good will are not deductible under section 6, General Tax Law, which prohibits deductions of indebtedness incurred in the purchase of non-taxable property. People ex rel. Cornell Steamboat Co. v. Dederick, as Assessor, 161 N. Y. 195 (1900).

And prior to the Special Franchise Tax Law debts of a street railroad incurred in the purchase of franchise could not be deducted. People ex rel. Manhattan R'y Co. v. Barker, 165 N. Y. 305 (1901).

A seat on the New York Stock Exchange may be said to be non-taxable property under section 6, Tax Law, and a debt incurred directly or indirectly in the purchase of this seat cannot

be deducted, because the debt was incurred in the purchase of property which was itself non-taxable. People ex rel. Slade v. Comm'rs, N. Y. L. J., Feb. 13, 1907, Leventritt, J., Sp. Term, I.

Debts due by reason of purchase of stock in another taxable resident corporation.-The provision of the statute that debts contracted in the purchase of non-taxable property or securities are not to be deducted, does not apply to notes given for the purchase of stock in another domestic corporation, but refers to property entirely exempt from taxation, and not to capital and surplus taxable under the statute. People ex rel. Keppler & Swarzman Co. v. Barker, 22 App. Div. 120 (1897); aff'd on opinion below, 155 N. Y. 661.

Value of leased franchise must be deducted from value of lease. Where a railroad company leases the property and franchises of another, the assessors in fixing the value of the lease for the purpose of assessing the capital stock and surplus should deduct therefrom the value of the leased franchise. People ex rel. D. & H. Co. v. Feitner, 61 App. Div. 129 (1901); aff'd 171 N. Y. 641.

Deductions can only be made where the debt is a direct legal one.-Bonds of a railroad sold, and guaranteed as to payment by another, and secured by a mortgage on the property of the former railroad, is not an original obligation and not deductible. D. & H. Case, supra.

Exemptions and limitations.-For that portion of the capital stock not liable to taxation by reason of exemption or constitutional limitation see Chapter II, supra.

CHAPTER VII.

MANNER OF ASSESSING FOREIGN CORPORATIONS.

Foreign corporations taxable on capital invested within state. There is no provision of the statute taxing foreign corporations as such, but under the first paragraph of section 7 of the Tax Law:

"Non-residents of the state doing business in the state, either as principals or partners, shall be taxed on the capital invested in such business, as personal property, at the place where such business is carried on, to the same extent as if they were residents of the state." (Reviser's note, ch. 37, L. 1855, without change of substance.)

And Chapter 37, Laws of 1855, provided:

Sec. 1. All persons and associations doing business in the state of New York, as merchants, bankers, or otherwise, either as principals or partners, whether special or otherwise, and not residents of this state, shall be assessed and taxed on all sums invested in any manner in said business, the same as if they were residents of this state; and said taxes shall be collected from the property of the firms, persons or associations to which they severally belong.

Foreign corporations are included within the terms of the act of 1855. Life Ins. Co. v. Com'rs, 1 Keyes, 303 (1864); People ex rel. Bay State Shoe Co. v. McLean, 80 N. Y. 254 (1880).

Until 1906, no property of a non-resident could be taxed in this state, unless it was capital invested in business, and unless such non-resident was at the same time engaged in business here, either as principal, or partner, in person or by agent. Thus, much of the property of non-residents permanently situated here, but not invested in business, escaped taxation. In 1906, the Tax Law of 1896 was amended by adding a new paragraph to Section 7, which reads as follows:

"Sec. 2. The personal property of non-residents of the state having an actual situs in the state, and not forming a part of capital invested in business in the state, shall be assessed in the name of the owner thereof for the purpose of identification and taxed in the tax district where such property is situated, unless exempt by law. This subdivision shall not apply to money, or negotiable collateral securities deposited by, or debts owing to, such non-residents, nor shall it be Construed as in any manner modifying or changing the law, imposing a tax on real estate mortgage securities." (Par. 2, sec. 7, present and former Tax Law, as am'd by ch. 248, L. 1906.)

Facts necessary to tax non-residents engaged in business.— The enforcement of the first paragraph of section 7 (or Chapter 37, Laws of 1855, to which it conforms in substance), has been productive of much litigation, and the interpretation of the courts on this point has not always been clear. The courts, in recent cases, have pointed out the facts which the assessors must establish as jurisdictional, and the evidence necessary to bear out these facts.

The non-resident must (1) be engaged in continuous business within the state, and (2) have capital invested in said business. While one is to a certain extent dependent upon the other both facts must appear.

No single fact can be laid down as controlling in determining these jurisdictional points, but the following points are important in arriving at the question of intent:

1. Has the corporation filed a certificate under section 16 of the Corporation Law?

2. Are the proceeds of sale immediately remitted to the home office?

3. Is any part of the capital invested or reinvested here? 4. Are contracts or sales made from the New York office; Is a bank account carried here?

5. Has it a factory, salesroom, or office, and does it make sales from a stock that is replenished from time to time?

While the bare fact that the proceeds of goods sent here for sale are immediately remitted to the home office may be suffi

cient to exempt a corporation as in the Parker Mills case under the old tax law, and the Sherwin-Williams case (5 App. Div.), under the present statute, and while the courts have held in the Armstrong Cork and Crane cases, infra, that the filing of a certificate under section 16 of the Corporation Law is controlling as to the intention of the corporation to conduct a continuous business in the state, these facts may be rebutted by others more conclusive, and the question of the assessors' jurisdiction must in each case be determined from its own peculiar facts and cir

cumstances.

When foreign corporations are not taxable.-This statute was intended to reach the capital of non-residents employed within this state in continuous trade, and not property sent here for the purpose of sale. So where a foreign corporation engaged in manufacturing in another state transmitted to its agent here its manufactured product for sale, the proceeds being re mitted at once, to the home office of the corporation, it was not doing business in this state within the meaning of the statute. People ex rel. The Parker Mills v. Com'rs of Taxes, 23 N. Y. 242 (1861).

Where a foreign corporation having its principal office and factory in Cleveland, Ohio, sends its manufactured goods to its salesroom in the city of New York for sale, the proceeds of which, except a small amount reserved to pay its office expenses in New York, are remitted to Cleveland, the goods kept on hand in New York City for sale, which average about $15,000 throughout the year, are not taxable. People ex rel. SherwinWilliams Co. v. Barker, 5 App. Div. 246, aff'd 149 N. Y. 623 (1900); see, also, People ex rel. Tower Co. v. Wells, 98 App. Div. 82 (1904), aff'd 182 N. Y. 553 (1905) on opinion below. The last mentioned cases follow the Parker Mills case and overrule the decision in People ex rel. Martin Bros. Co. v. Barker, 14 Misc. 382 (1895), Special Term, where it was held that the