The sun. [volume] (New York [N.Y.]) 1833-1916, 1914-01-26
THE INCOME TAX Law.
Il the Treasury Department Trying to
Make n Over?

Il the Tire asury Department Trying to
Make u over?
To THE EDITOR OF THE SuN--Str: On
January II. 1914, the Treasury Depart
ment issued the following regulation:
TREASURY DEPARTMENT..
OFFICE OF TIE
CoMMissIoNER or INTERNAL REVENUE.
WARRINGTON. DC. Jan. H. 1914.
Section Q, act OF October 9. 1918 provides
that on or before the nrst day OF March.
1914, and the nrst day Of March in each
year thereafter, a true and accurate return.
under oath or animation. shall be made
to tho Collector OF Internal Revenue by each
person of lawful age, who may be subject
to the tax imposed by this section. who has
a net Income Of $4,000 or over for the TAX
able year
II Is further provided that for the year
ending December 81, 1918. the tax shall be
computed on the net income accruing from
March to December ST. 1918. both dates
inclusive. after deducting hve-sixths only OF
tho specific exemption and deductions allow
able for an entire taxable year
Since the return of annual net income for
the year 1918. as applied to individuals 10
for but hxe -sixths OF the calendar year. and
as the law provides that returns shall be
made on the basis Of -sisths Of the year,
II IL held that individuals whose net income
Is 81. 500 or moro for the ten months con-
stitutins the taxable period OF 1913 shall
make returns Of annual net income. in ac-
cordancs with tho general provisions OF the
law. covering the 1913 taxable period.
W. n OSBORN. Commissioner.
Approved: w q. McApoo, Secretary
This rule Ia very far reaching because
returns will now be called for from all
persons having incomes during the ten
months of $500 and over In place Of
$4,000 and over. 1t seems to me that the
Treasury Department Is clearly wrong. 1t
has lost sight of the fact that II Is called
upon to construe a law and not TO make a
law and has again yielded to the tendency
Of deciding all questions so as to produce
the greatest amount of tax. do not think
there is any doubt in this particular sec
ton of the law but If there be doubt the
taxpayer has certainly not received tho
benefit Of IT, The following Is an exact
quotation OF the provision Of the law at
issue:
The said tax shall be computed upon the
remainder of said net income OF each per-
son subject thereto. accruing during each
preceding calendar year ending December 81 {:
Provided. however. that for the year end :
ing December 81, 1919 said tax shall be
computed on the net income accruins from
March /. to December 81, 1918. both dates
inclusive. after deducting five-sixths only of
the specific exemptions and deductions
herein provided for.
On or before the FIRST day Of March. 1914.
and the first day OF March In each year
thereafter. a true and accurate return under
oath or affirmation. shall be made BY each
person of lawful age. except as hereinafter
provided. subject TO the tax Imposed by this
section. and having a net income OF $4,000
or over for the taxable year, 20 the Col
lec;or OF Internal Revenue for the district
in which such person resides or mas his
principal place " business.
1t will be seen that the first two para
graphs OF the regulation are substantially
| correct. with the exception that in the see
ond paragraph the words for an entire
| taxable year have been added. This IL
apt to create confusion because II any
words had been added they should have
been FOR an entire calendar year In
fortunately for the contention OF the
Treasury Department the law refers
specifically TO the report to be put in
March /, 1914. and Immediately after
ward states that unless this specific re-
port shows n net income OF $4,000 1t need
not be made. The law therefore contem-
plated The last ten months of the year
1913 as the taxable year. This is very
apparent. because In the first part of thu,
section the words calendar year" are
used and If that had been the intention
the words calendar year" would have
been used later in the section IL the law
had not meant something different by the
words taxable year The specific de-
ductions referred to in the provision I be =
lieve to be the deductions in relation to
$4,000 and ZOO provided for in Section &
The amount of those deductions having
been fixed. the only way to provide how
much OF those should be allowed was by
stating that five-sixths should be allowed
| The other deductions In relation to eN-
penses, &c. are OF course the actual eX-
penses. SC. during the last ten months OF
| the year. This question was fairly at issue
! when the Treasury Department prepared
the blank upon which individual returns
are to he made. This ruling practically
| changes the instruction contained on the
back OF that blank. There is no state.
\ ment in the law to the effect that IL i'm
poses the tax on any particular fraction OF
| the income for the calendar year. but Il
specifically imposes a tax upon the income
received between two specific dates
| II the Department follows It's argumen,
| TO its logical conclusion II will have tC
| issue n regulation To the effect that for tn,
year 1913 the provisions in relation to re-
tention AZ source where $4,000 is men
| toned shall be deemed changed to So 500
| II will also. in order to hc logical. hav,
to change their return blank so that the
| additional tax will be figured on sl6 600 81
/ instead OF 500. 600 as II has IL NJ present
In issuing these regulations there seems
| a tendency to decide the particular point
| involved without taking into considera-
| tion previous rulings or its effect upon III.
administration of the law as whole.
Il. q, BABBAGE
New YORK, January "a