Treat v. White

Background

The dispute asked whether a “call” — a contract commonly used in stock trading — counts as an “agreement to sell” under Schedule A of a federal stamp tax law. The question was described as one of statutory construction, and Justice Brewer delivered the Court’s opinion. A Circuit Judge had ruled that calls are sold for value and that sellers receive consideration when they part with the promise.

Reasoning

The Court focused on the statute’s ordinary language. It agreed that a call is more than an advertisement: selling a call transfers a binding promise to deliver the described stock at the time named, and the seller receives value for that promise. The opinion explained that such a promise is, in essence, an agreement to sell, even if unilateral, and so fits the statute’s phrase “sales, or agreements to sell.” The Court acknowledged the rule that doubts about taxation favor exemption, but found the statute clear here and saw no evidence Congress intended to exclude calls or to limit the law to exchange practices. The Court rejected the idea that Congress had to name calls specifically and emphasized that the law applies nationwide, whether a contract is made on an exchange or by an individual in another city.

Real world impact

The Court answered the question affirmatively: calls are agreements to sell and fall within the stamp duty provision. That means people who enter into calls are liable for the stamp duty like other sellers. The decision upholds Congress’s choice to tax agreements to sell even when agreements to buy are not taxed.