Evening journal., 1909-11-04
HARD PROBLEM
FOR YOUR UNCLE
Levying Of New Corporation
Tax Brings on Many Com
pIexitieS
MANY DOUBTS AS TO
MEANING OF THE LAW

That the government has a complex
problem TO solve IN the lcvying of tho
new corporation tax. which was made an
integral part OF the payne-Aldrich tar
IN bill at the last session Of Congress, is
the opinion, not only OF corporation
managers, lawyers ana public account
ants, but OF the government officials
themselves
The recent arrest in Wilmington OF
Ernest l.. Squire and George w. Dor
sey. OF the Lawyers Title and Trust
Company, for their alleged offers TO
teach various corporations methods to
dodge this tax, has revealed. 20 somo eN-
tent, the many problems the government
will have 20 cope with before theey get
this means OF revenue in working or
der
Commissioner or Internal Revenue
Cabell has been IN almost daily commu-
nicatlon with the Secretary OF the Treas
ury for several weeks. trying to arrive
az the exact method OF procedure for the
collection OF the corporation tax. Mr..
Cabell spent some time at tho summer
home OF Secretary MacVeagh, last SUM
mer where the details we're thoroughly
gone over.
There have been numerous inquiries
from corporations throughout the coun-
try as 10 the procedure, and many de-
clare the government has no time to
lose II II hopes to have corporation ac-
counts filed before December 81, az spc-
ihed " the statute. Accountants On
whom the work viii fall OF preparing
corporation Statements. fixing tho
amounts 10 be taxed under the new law.
say. that n Instructions are not soon
forthcoming there viii scarcely be time
enough 70 prepare tho accounts before
this date. There are still many doubts
as TO the true Interpretation o. the law.
Il Is said. and until the Collector Of In
fernai Revenue makes a definite rul-
ing upon them. the corporation account
ants will not be able 70 make much
progress.
Corporation lawyers say that the Com
missioner Of Internal Revenue rs IN a
quandary. He was asked II tho tax
would be determined by taking tho total
cash received by corporation on ac-
count OF income, and deducting there
from the total cash disburscd on ac-
count OF income. together with the varl
GUS deductions specifically mentioned IN
the corporation tax law. The Commits
sloner was reminded that President Taft
on his Easter trip. had referred 10 th'
corporation tax law as in reality "a,
on the profits Of corporations, while th'
Attorney General referred 20 It as a tal
upon the excess net receipts Of n cor
poraton.
'I regret that the bureau Is not a
this time IN such position as 20 make
specific reply said the Commissioner
"The work OF preparing the regulation
and forms Is progressing satisfactorily
b The Secretary OF the Treasury is givin
% his personal attention even 90 the deta
0 work. but until the result OF this wor
Z Is in a more finished state than at pre-
e ent. Il IS believed that II would be fl
d advisable. 20 give out any rulings ,
IT material points.
"The forms and regulations viii
10 made public as early as possible, and
D. Is believed that all questions viii then
~ satisfactorily answered. II not, tho b
" reau viii then be IN position 20 NAL
l. specific rulings and answers about Il
q points OF difficulty encountered"
= Corporation lawyers are quick
n point out the difference between pro
fits OF a corporation and the net r.
, ceipts Of a corporation. one OF thei
has summed up the situation a7 fo
. lows:
Profits are arrived nj by taking int
. consideration. not merely the increas
Of cash during a given year, but ais
the increase or decrease IN the stock q
merchandise accounts receivable, an
! every other asset or liability accour
which affects the comDany's standing.
"a shrlnkage In the combined asrei
or an increase in the liabilities may "
veal a loss az period when the cas-
funds may have been increased. In th
case the company would be taxed on NJ
i, cash income during the period wheN
\ loss had been incurred. One case o.
I casioning great confusion Is that
which 81 Is impossible 20 distinguish r.
receipts on account of income from r
= ceipts on account OF capital
'For example, a real estate oompai
which develops tract Of land obtat
its income from the sale OF lots. A pa
OF the cash receipts represents capt.
investment. and a part represents pr
fits on operations. The biil. as frNm'
gives no receipts on account Of incon
e and it Is possible that a real estate col
e pany may be able to- use IT'S own jud