252 JOURNAL 01^ Forestry • 



"thk timber-holding Function" 



The Federal Trade Commission, the Treasury Department, and Con- 

 gress seem to have decided that for revenue and bookkeeping purposes^ 

 standing timber should be valued upon cost, plus carrying charges,, 

 rather than upon current market value. 



Large owners of stumpage protest against this on the ground that 

 such a practice will work great and unfair discrimination. Tax legisla- 

 tion, which will make heavy levies against earnings over fixed limits, 

 must provide for at least fair interest upon invested capital. The dififi- 

 culty develops over the definition of "invested capital.'' For instance, 

 if A, 20 years ago, invested $100,000 in stumpage and has since incurred, 

 carrying charges of $50,000, his total "invested capital" might be con- 

 sidered to be $150,000. But if A, previous to 191 3, sold to B. and the 

 market value of the stumpage had by then increased to $300,000, B 

 would now have an invested capital of $300,000, and would be allowed, 

 to retain his interest upon that investment. It is the lumberman's con- 

 tention that A. who might have sold out, but who did not do so, should 

 be allowed to enter his "invested capital" as the full current value of 

 the stumpage rather than having the difference between his accumulated 

 cost value and the current sale value considered as excess profit and 

 taxed accordingly. 



The (juestion seems, very plainly, to be as to the disposition of "un- 

 earned increment." and it would appear very possible that the policy 

 and practice finally established would have a prompt bearing upon tim- 

 ber holdings and the development of forestry in this country. This 

 effect might be for better or for worse. 



A good l)rief upon the matter, by Dr. Compton, Secretary of the 

 National Lumber Manufacturers' Association, is to be found in the 

 America}! Luuihcrnuvi for November 16. 1918, page 28. 



In editorial comment, the American LitDtbcnnan says: 



"There is in tliis a lesson for the lumber manufacturer which it will do no- 

 harm to reiterate. The troubles the manufacturers are now having with the- 

 Federal Trade Commission and over the revenue bill are a logical result of the 

 loose accounting methods that many of them have followed in the past. . . . 

 The timber-holding function and the timber-manufacturing function have not 

 been properly distinguished." (Issue of November 11. 1918, page 28.) 



General counsel for the National Lumber Manufacturers' Associa- 

 tion is quoted as saying: 



"The difficulty appears to consist very largely in regarding a body of timber 

 as a mine instead of as a crop. Congressmen cannot be blamed for falling into- 



