Honolulu star-bulletin. [volume] (Honolulu [Oahu, Hawaii]) 1912-2010, 1917-10-27
CLAUDE |. PARKER OF Los ANGELES
THROWS LIGHT ON TROUBLOUS POINTS
Latest Rulings on Intricate Questions of
Income and Excess Profits of Import
ance to Hawaiian Corporations and
individuals

| poratiOI e should not be taXaole upoI
the dividends IL received from corpor
alton B.
EXCESS PROFITS TAX
| The principal question / find which
is puzzing the taxpayer is in thu
method of arriving at the tax imposed
/ under the act. The law permits q
| deduction which, while based upor
the average net income for the pre-
| war period, Yet specifies that suct
deduction shall not be less than seven
or more than nine per cent Of theil
! total invested capital for the taxable
year. The rate of taxation upon the
| net income under the excess profit
.. law begins at 90 per cent and ends
with go per cent The point which is
| confusing the average taxpayer is
whether or not the deduction allowed
by law is TO be taken from the 20 pei
cent rate or from the so. The law in
effect provides that 20 per cent tax
will be levied upon that part Of the
net income in excess of the deduction
but not to exceed Is per cent Of the
invested capital for the taxable year
The method of arriving at the an
swer to this puzzle is to first ascer
/ tain the Is per cent of the invested
capital from which will be taken the
deduction allowed by law; the bal
ance will be the amount upon which
the 20 per cent is based. The re-
naming graduated taxes will auto
| maticaIly. follow until the total
amount is equal to the net income as
first shown. ~.-. ~"
Particular attention should be Civ
en- to the amendments of the income
tax law of September s, 1916"
Here Mr.. Parker furnished the
statement already alluded to, which
is as follows:
INCOME TAX AMENDMENTS
(6rlef summary Of amendments 10
income Tax Law of Sept. 8, 1916, az
contained In Title XIII, War Revenue
Act Of October 3rd, 1879
IND I VIDuALS, CORPORATIONS
Partnerships, ETC
Dividends: are defined as disrr;bu
tion of latest surplus, and all surplus
subsequent to March /, 1918: must
first be distributed before. any surplus
prior to March 1, 1913, can be distri'
buted; except that any dividend dis
tributed from surplus of Marcl I,
1913, prior to Aug. 6, 1917, is not tax,
able under this act.
(Section 1211), Sec. 3, Act Sept. 8,
1916. ~
Interest Paid on Indebtedness: In.
terest on Indebtedness incurred for
purchase of securities or obligations,
the interest of which is exempt from
taxation as income. is not deductaole
in compiling taxable income.
(Section 1901. Sub. CD, Sec. 1909,
Sub. /; Sec. 1907, Sub. / and ~
Taxes: Income and excess profits
taxes paid during year not deductible
| in return. q. Il
Proviso: Excess profits tax paid
during year allowed as a credit against
net income in figuring income or war
income tax.
(Section 1901, Sub. /; Sec. 1902,
Sub. /; Sec. 1907, Subs. / and 81.
Withholding At Source: Repealed
except as to bond interest guaran.
teed tax free, and as to nonresident
aliens. 8I#
Retroactive. covering 1917, and au.
thorized refund of any amounts III.
ready withheld from taxpayers.
(Sec. 1905, Subs. and Q. and Sec.
1921
information at Source: All persons,
partnerships, corporations, etc, max.
ing payments to another person, part.
nership or corporation of interest,
rent, wages, salaries, premiums, an,
nuities. compensation, ETC., as fixed
and determinable income, ETC., OF
$500 or more for taxable year, are re-
CURED to report names and addresses
to whom paid and amounts to each,
(Sec. l211, Sec. %, Act Sept. 3,
1850
Life Insurance Premiums: Not de.
ductible as expense, when insurance
carried for benefit of business.
(Sec. 1911, Sec. 80, Act. Sept. 8.
1916. !
Payment OF Taxes: Nay be made
with q. s. certificates Of Indebtedness
/ or uncertified checks. Due date same
as before June 18th. Advance pay.
ments In certain cases discounted.
(Sec. 1010.)
NONRESIDENT ALIENS
Allowed no specific exemption-ot
$4,000 or $4,000.
(Sec. 1908, Sub. % ..
PARTNERSHIPS
Returns: Required made up as to
individual interests aud along same
rules and regulations governing in
diyiduals. H..
fSec. 1904, Sub. 1.
CORPORATIONS 49,
Tax on undistributed Earnings:
Where earnings in excess Of require.
ments for use in business are not dis
tributed within six months from close
Of year tax on such excess Is as.
sessed at 10 per cent; Is per cent as.
sessment made for wilful neglect in
reporting same. (Sec. 1906, Subdi-
vision %
Return on dividends paid: When
requested, list of stockholders with
amount OF dividends paid must be
furnished.
tSection 1900 49,.
INDIVIDUALS -
Deductions: An additional deduc-
ton allowable consists of contribu-
tons or gifts to charitable corpora.
tions, ETC., up to and including Is per
centum of the taxpayers net income
figured without this deduction. (sec.