The sun. [volume] (New York [N.Y.]) 1833-1916, 1913-10-13
Claim Of Exemption Will
Rest With Unidentified
Coupon Owners.
RICHEST MEN NAY ESCAPE
Makers Of Trust Deeds Must
Pay the Tax for Them
as Per Contract.

WARRINGTON. Oct. 12.-Representative
,CordeIl Hull of Tennessee. author Of the
Income tax law. has been interested in the
larticIes THE SuN has published recently ,
in regard to the uncertainty and con- /
,fueion among officers of corporations and ,
hther business concerns as to their duties a
under the new law. especially in the mat ,
Ter of'withholding the normal tax of per !
cent at the source.
As shown by THE Suns articles. the
Greatest dif'iculties OF business men, who |
are seeking light on what they must do.
lfelate to the prov ison Of the law which
r~Qures them to withhold the normal tax
'on Income or interest to be paid on cor.
e'orate bonds or similar obligations Sc
cured by mortgage or trust deed The
taX on income of this character is to be
withheld at the source whether or not it
amounts to $4,000 which is the exemption
TO which a taxpayer is entitled.
The chief complaint made by officers OF
corporations and others affected by this
provision is that they will have no means
n many cases OF knowing who the owners
Il the bond coupons are.
Mr. HuIIs Answ3r.
Representative Hull has answered these
criticisms for THE Sun and he shows that
they are based on misrepresentation Of
the law He points out that II will make
no difference whether the corporation on
cers know the name OF the owner OF the
coupon no..
All they are required to do is to with
mold the tax and turn II over to the Gov
.rnment with the name OF the taxpayer II
his identity Is known. It will rest with
the owner Of the, coupon To disclose the
ownership and Claim exemption II he Is
ent,tle0-t0sH ''@s' 'f' .-.fs''e-H '-sfsrF -
with respect to the normal tax Of l per
cent. upon income or interest derived from
corporate bonds or similar obligations
secured by mortgage or trust deed the
new income tax law, said MIR. Hull. will
.equire ,he debtor corporation or its pay
ins or fiscal agent to withhold the per
cent. tax on all nxed annual or periodical
ncome. derived AS above. stated. whether
the same exceeds $4,000 or not.
III the corporation or fiscal agent thus
withholding the tax knows the name and
address Of the bOndholder whose coupon
s paid. the same will be reported in writ
ins to the Commissioner Of Internal Rev
.nue. along with the return OF taxes with
held
IF the name and address are unknown.
the tax will nevertheless be retained and
turned over to the Government with q
statement to that effect. The inability
Of the debtor corporation to know the
name and address Of bondhoider does
not preclude it from retaining the tax and
paying it to the Government.
Should the bondholder have any other
yx,h ich In dlcta n ri m
exemptions or deductions he will either
disclose himself to the debtor corporation
or the Government"
Reason for Some Confssioa.
Part Of the confusion among officers Of
corporations apparently 10 due to the fact
jnat deductions have been drawn from the
senate print OF the income tax provision,
which was changed considerably In con.
ference. For instance. the Manufacturers
Rccord in commenting on the provision
has said:
Many coupon bonds carry the contract
that the interest Is to be paid without any
deduction by reason of any tax imposed.
The obligor in the contract Is freed from
nthholding the payment Of the tax on the
interest from the bond. but II Is compelled
under penalty Of personal liability to the
tax TO notify the collector Of the payment
Of the interest to be made, to the end that
The sum shall be computed as a part OF
n" income OF the person receiving the
interest, but where the obligor does not
know the owner OF the bond to whom the
interest is paid. how Is It possible for the
obliEor to give the tax collector any infor-
nation OF value or how 10 the oblig0r ia
-" held liable for the tax for not giving
the information:'
Mr.. Hull in his statement shows under
. tho law that the obligor 10 not free from
the duty of Withholding the tax. even
when the name Of the owner Of the bond
is unknown
While the Government" said Mr.. Hull
is rot concerned as to any contractual
relations axisting between the corpora.
tons and bondholders relative to the lia.
hllity for tax. the fact 10 well known tina,
most corporate bonds contain . provision
guaranteeing the bondholder against the
payment of such taxes. and II valid the
corporations will pay tho tax themselves
IN such cases. The Senate amendment
freeing the obiiGor from withholding the
paymcnt of tax in case such contract
exists was stricken out In conference.
Mr.. CaPnegis's Case.
In other criticisms Of the law the point
has been made that many wealthy meF
Nno have bonds guaranteeing them against
'he payment OF taxes will escape taxation
altogether, while an additional burden Will
he thrown upon the corporations, notwith'
Standing that they themselves will already
ave paid a per cent. tax on their ne'
'FrLings
Ardrrw Carnegie has been cited as ar
Csstimvsd on TAlv6 PsSA