The herald. [microfilm reel] (Los Angeles [Calif.]) 1893-1900, 1898-07-26
MINING COMPANIES WILL RE-
a DUCE THEIR CAPITAL
COAST INSURANCE WAR ENDED
Banks Must Pay Tax on Bond Invest
ments-Increase of Bell Tele-
phone Stock-Notes
OFFICE OF THE HERALD,
LOS ANGELES, July Is, 1895


One good result of the new war revenue
law will be to discourage the over issue
of mining stocks which has been practiced
so long that 1t has become a custom IN
dulged In by people who, in the majority of
cases, had no intention to make fraudulent
representations as to the true value of their
property.
The law requires n tax of q cents on every
800 of such capital, regardless Of the SELL
ing price of the stock. Most of the Comstock
mines are divided into shares Of the par
value Of 800 each. When shares were SELL
ing above their par value. or near their par
value, tax Of cents on par value would
have cut no figure. But now, when these
same shares are selling at one hundredth
or one thousandth part of their par value
\ and even less, a tax of cents on every 800
of par value is a serious item and a positive
restriction of trade. There are some stocks
that are now selling as low as 1 cent
share yet their par value is 800. TO pay
81 for 100 shares and then 50 In stamps to the
government for making the sale is out of
the question. It kills the business.
1t Is not the primary object of the new
law to ruin trade, for that would defeat Its
very purpose of revenue. After great deal
OF backing and filing, decision one day
being reversed on the following day, mine
managers at last think they see way out
of the difficulty. The remedy Is a reduc-
ton in the par value of the shares. This
Is based on the latest decision of the Wash
ington authorities that the tax of cents
on sales applies to an aggregate of 800 of
par value or fraction thereof. For example,
IN ha Of ha ,1, of bo
Is to be taxed the same as 100 shares of
the par value of 800 each. This decision,
says the Bulletin, greatly reduces the tax
burden, as the tax on a certificate for 10, 900
shares at 81 per share will be no greater
than the tax on a. certificate Of 100 shares
of 500 each.
According to the Mining and Scientific
Press, which has an editorial article on the
subject, the business of the issue, sale and
transfer of mining stock, which the first
rigid ruling of the revenue collector threat
ened with extinction, can go on, a more IA
vorable and just construction Of the law
having been authoritatively secured. The
first arbitrary ruling meant prohibition of
nearly all business In ordinary mining cor
poration stock, and, amid a storm of pro-
test, Commissioner of Internal Revenue
Scott has reversed his original rulings
tLicIeOHs He QueSllOH LOT existing mining
interpretations Is now mainly whether to re-
incorporate with par values diminished or
- to reduce the present nominal capital stock
and the par value of shares. The California
Civil Code limits the amount of any one as
sessment TO 10 per cent of the capital stock
after one-fourth has been subscribed. In
accordance Herewith, special meetings of
several of the Comstock companies have
been called for September next to act upon
kindred propositions for instance: the
Con. Cal & Virginia NJ. Co. will hold a
special meeting Of stockholders on Septem-
Der 21st to act upon a proposition to dimin-
lsh the capital stock from $21 600 900, divided
Into $4,000 shares of the par value OF 800
each, to $540 900. divided into $4,000 shares
of the par value of $50 each.
In other states. in the Incorporation of
new mining corporations, the effect Of the
new war revenue Is equally apparent. In
Spokane, Wash. was incorporated this
week the Hecla Mining company, "captal
stock s250000, divided into 100000 shares"
making the par value % cents per share;
other companies are Incorporating there.
par value cents per share" In Salt Lake
City tab. this week, was incorporated the
r. G. ". NJ. Co, "capital stock s2OGO d.
vided into 10000 shares, par value 10 cents
per share"
In connection with this may be cited such
decisions as that Of the supreme court of
Montana in the case of Kelly VS.. the Fourth
of July Mining Co.. which equally with the
war tax will tend to discourage the tendency
to capitalize In excess OF the true value of
the property owned, and, in that way, good
may result.
1t has been the custom In capitalizing
new mining company to put fictitious
value on the property; a company owning
property worth $4,000. would be capitalized
for 100000 with no intent to deceive, or
work fraud, but merely because OF custom
the market price being without reference
TO par value which now becomes Of such
present Importance. The Montana de-
cision was to the effect that the owners of
stock IN an over-capitaized company were
liable for the difference between the real
value Of the property and the total capital
ization.
Capital In Bonds Taxable