Evening star. [volume] (Washington, D.C.) 1854-1972, 1917-12-12
NOVEL PROBLEM AWAITS
AUTHORITATIVE RULING
BY I. A. FLEMING.

The United Railways Company OF St
Louis is a holding corporation, operating
nine street railway companies. The bonds
of six of these subsidiary corporations
contain no tax-free clause to interest
payments, while bonds of three companies
have a tax-free clause. little different,
however. than the usual formula OF cove
rant in this respect. The clause is worded
this way: May be required to pay or
retain and pay to the government.
The officials of the United Rail-
ways Company have passed resolution
10 the effect that the government does not
require that they shall withhold the income
tax at the source. and they will not pay
full interest on the coupons or registered
bonds of these three subsidiary CORPORA
TONS but will withhold per cent the
normal tax. on all coupons not accom-,
will hold the withheld interest. in the
event that the internal revenue bureau
may claim that the corporation should
pay this tax.
coupons and interest on registered bonds
they will not of their own volition pay
the tax as agreed, but will protect
themselves against possibility of be-
ing made to do SO by an overrul1ng OF
their claims.
If the United Railway Company is
upheld in it's position it Will greatly
conplicate the payment of annual in
tcrest millions of dollars worth OF
bonds. Morally the position of the cor
poration would not seem tenable.
The language of the income tax law
certainly contemplates the payment or
the normal taxes on tax-free bonds by
the corporation issuing them.
On all bonds an additional normal
tax of 2 per cent begins at $4,000 in
comes of unmarried persons and $4,000
on the incomes of married persons.
One of the largest local institutions.
handling many coupons each interest
period has announced that it will pay
the 2 per cent normal and the add
tional per cent normal on all tax
free bonds.
Liberty Bond Payments
Third payment on installment sub
scriptions to second liberty loan bonds
started today at most of the banks.
General inquiry developed the fact
that the proportion of payments was
much larger. that the installment was
met much more cheerfu1ly and that
most of the payers expressed deter
mination to go through with the in
stallments to full ownership of the
bonds
Great patience is also being shown by
owners of 31s per cent bonds sent in
for conversion to As. with a disposition
to await the time when the govern
ment can make deliveries None of
these bonds have been received at banks
as yet, although it is announced in New
York that deliveries will begin today.
Successful Bond Sale.
A successful bond sale made in days
like the present is worthy of comment,
the investment market being in such a
chaotic condition as to discourage all
fotations.
But the National City Company, Har-
ris. Forbes & Co. and the Guaranty
Trust Company promise the speedy sale
of 100000 51s per cent bonds Of the
Miami conservancy district of Ohio, and
have already disposed of $S.000.000
The bonds are tax free, except inheri-
lance taxes, and the proceeds of the sale
will be used to protect the Dayton dis
trict from repetition of the disastrous
floods of past years.
On the Stock Exchange.
Today's session of the local Stock
Exchange was rather interesting
Potomac Electric first mortgage per
cent bonds sold at 80 and later on
at loo. The consolidated IS of the
same company brought "a. These
bonds are very largely held in Wash
ington, and that they are giving such
a good account of themselves in these
days OF weakness In all investments is
measure of satisfaction.
Mergenthaler shares were slow at
125M to 125. A sale of 5000 American
Graphophone 6s was recorded at IS.
Stocks generally were entirely NOM
49, tA@