Evening star., 1914-02-14
INCOME TAX LAWS
TERMS EXPLAINED
Stock Dividends Generally Not
Regarded as Being
Income.
MERELY NEW EVIDENCE
OF A KNOWN OWNERSHIP
Taxes Enormously Assessed May Be
Recovered From the With
holding Agent.

14-t9uestlon Are stock dividends
included in the personal return as in
come?
1t has been held by the Treasury De-
partment that these stock dividends
are to be included in the personal re-
turns as income, If they are a division
or the earnings of the year for which
the personal return is made. This
seems to be in opposition to the ru1-
ings of most of the courts on the sub
1ect- The leading case on the subject
is Gibbon agt. Mahon. and the court
held there that "a distribution Of earn
ings is made by a corporation among
its stockholders, the question of wheth-
er such distribution is an apportion-
ment Of additional stock representing
capital or division of profits and in
come depends upon the substance and
interest of the action Of the corpora
tion, as manifested by its vote or reso-
luton Ordinarily dividend declared
In stock is to be deemed capital, and
dividend in money is to be deemed
income of each share"
Takes Nothing From Property.
A stock dividend really takes moth
ing from the property of the corpora
tion and adds nothing to the interests
of the shareholders. Its property is;
not diminished and their interests are
not increased. After such a dividend
the corporation, as before, has the title
in all the corporate property. the ag-
gregate interests therein of all the
shareholders are represented by the
whole number of shares, and the pro-
portionate interest OF each sharehold-
er remains the same. The only change
Is in the evidence. which represents
that interest. the new shares, and the
original shares together. representing
the same proportioned interest that
the original shares represented before
the issue Of the new stock.
Connecticut. Rhode Island and Maine
that dividend of new shares repre-
senting accumulated earnings is cap
ital, and not income. After a stock
dividend a corporation has just as
much property as 1t had before, and
certificates of stock are simply the
tion of the interest which the
have in the capital stock
of the corporation-in other words,
new evidence of ownership which al
ready existed. From the holding Of the
case on this subject it may be said that
stock dividends are not in
come.
As to Accumulated Income.
55-Question. AS estate was in con-
troll of a guardian for seven years be-
fore he became of age. and during that
time there had accumulated $4,000 in
income. which was paid to him May 81
How much OF this amount is included
as income for this year?
The Treasury Department has held
that you have to include in your per
oy,I1 hot
of the $4,000 which was earned during
the period-that is, between March
and May 81, 1913.
56-Question. Are professional mems
fees subject to have a tax withheld at
the source?
Fees which are not payable at stated
periods or are not fixed and certain. but
are indefinite and irregular shall not
be subject to have a tax of ] per cent
withheld by the person paying them,
but when they are payable SO much an
nually then the tax Of l per cent is
when they are more than
$1,000.
57-Question. Can banks take as a
deduction taxes assessed against their
because of the ownership
of it's shares?
of a. bank because of the ownership of its
shares are not to be deducted by a bank,
unless banks are specially authorized TO
do so by the laws of the state in which
they are doing business. The shares OF
stock are the property of the stockhold-
ers and as such they are primarily liable
for the tax.
Recovery Of Withheld Taxes.
5s-Question. How can taxes that have
been withheld. and should not have been,
be gotten back7
Where taxes have been erroneously as
sessed or where the amount has been ex-