Evening star., 1914-02-07
INCOME TAX LAWS
TERMS EXPLAINED
Payment Of Levy on Bonds
Sold Must Be Decided
by Courts.
FATHERS NOT TO REPORT
REVENUES OF CHILDREN
Returns of Corporations Must Show
All Moneys, Incoming and
Outgoing.

No. 46.-Question. "a" in 1910 purchased
a per cent $1,000 bond with the cove
nant written in 1t. that the corporation
from whom he purchased the bond will
pay all taxes on the principal and inter
est no matter by whom or where as
sessed. Some coupons were paid in
April and October. and the full amount
was received (oOo. After finding out
that these interest payments for April
and October were to be included in his
return this year as taxable income. the
owner RENTS to the corporation certh-
cate not claiming exemptions. and asked
that the tax be paid. What ought the
corporation do about interest payments
that were due before the 1st OF No
vember and whose bonds contained this
clause?
Must Go to Courts.
Answer. It is a question of law as to
whether these clauses in bonds include
the income tax. These clauses generally
refer to a tax against the principal and
interest OF the bond, and it has been
maintained by lawyers that the income
tax is not a tax against the principal and
interest Of the bonds, but Is a tax against
the individual and therefore 1t is to the
detriment Of stockholders to pay the
tax. This is a question which will have
to go to the courts for settlement. But
If 1t is a tax against the principal and
interest of the bonds. there is no reason
why the corporations should not pay
the tax for the bondholders on coupons
paid before the LIST of November. If they
fl with them certificate not claiming
exemption. Unless 1t is known that the
corporation has paid the tax the in
dividual will have to enter them in the
personal return as income on which no
tax has been withheld or paid. 1t Is a
covenant between the corporation and
the bondholder to which the government
is not party, and therefore should be
taken up with the corporation.
Return of Father.
No. 47-Questton Should a father in
clude in his return the income Of his
children?
Answer The income of minor should
not be included in tho return Of the
father, because minor Is considered
by the law an Individual, and his re-
turn should be made by his legal
guardian If his income is over $4,000
or $1,000 this year.
No. 4S-Question. Do corporations
have to pay tax on income derived
from dividends Of another corporation
subject to- a like tax?
Answer. The law says that a tax
shall be paid on the entire net income
of the corporation. and does not al
low any exemption for dividends of
other corporations.
Return Of Corporations.
No. 4s-Question. What should the
return OF corporations contain?
Answer. 1. That total amount of Its
paid-up capital stock outstanding, or
II no capital stock, its capital employed
in business at the close of its year.
2. The total amount Of Its bonded
and other Indebtedness at the close of
the year
a The gross amount Of income re-
ceived during the year from all
sources.
4. The total amount of all its ordi-
nary and necessary expenses paid out
Of earnings in the maintenance and
operation of the business and proper
ties.
5. Total amount of all loses actually
sustained during the year and not
compensated for by insurance in other
wise.
Question of Interest.
6. The amount of accrued interest
and paid within the year on its bonded
Indebtedness, and Its paid-up capital
stock outstanding at the close of the
year; If no capital stock the amount
of interest paid within the year not
exceeding amount of capital employed
in the business at the close of the
year.
l. Amount paid by it within the year
for taxes imposed under authority of
the United States
No. 50-Question Is water rent con-
sidered tax?
Answer. No, water rent is not con-
sidered a tax, but is a necessary ex-
pense which should be included under
the heading of necessary expenses, ex-
cept when for ones own home pur-