The Wallace miner. [volume] (Wallace, Idaho) 1907-current, 1917-11-08
Mining Companies and the Excess Profit
Tax; Meaning of the Law Is Confusing
Engineering and Mining JournaD

come from mines includes a portion
that is simply return of capital, fol
which allowance is to be made is un-
certain. The idea in the minds of the
persons who drafted this clause seem
ed to have been something like this
If mine was valued at certain time
as containing 100000 tons of ore
worth 100000 in the ground, anG
100000 tons was extracted during the
taxable year, the proprietor of the
mine is authorized to deduct 100000
from gross income on account of de-
! pletion. This may or may not be
! the exact Interpretation. What is the
correct Interpretation remains for the
commissioner of internal revenue tc
say
| In the matter of capitalization the
manifest intention of the trainers OF
the law waste limit capital to money
actually put into the business, without
allowance for increase in value that
may be connected with the theory OF
'unearned increment" The law fur
Their allows the reckoning of value of
tangible property. like good will, which
is of no particular concern to mining
companies, although it may be to some
metallurgical companies; but on the
theory of cash paid in there are
troubles and inequities. Take, for
example, the case of four companies,
A, B, c and D, operating in the same
district, each with capital. of 81 ,O00,-
600 actually paid in Suppose that
in the course of time each of these
companies had developed orebodies
nd provided plant and equipment for
the extraction thereof, so that each
has a present market value of $780,
100000, with it's shares selling in the
market on that basis and with a large
part of the present stockholders buy
ers on that basis. We might have,
under the war tax law, conditions of
these four similar companies VARYING
s follows:
Company A never altered its origin
al capitalization, and therefore has a
maximum exemption of Q per cent on
100000 or 100000.
Company B, having purchased pro-
perty c for 100000 a few years ago
without, however, writing up its own
original capital, gets an exemption of
3 per cent on $6,OOO,O 600 or $40, 900
Company D, having been resold a
year ago by it's original owners for
s1o,oOO,OOO, and having been recap-
italized at that figure. gets an ex-
emption offs per cent of 100000 900
or 100000.
While the above are imaginary in
stances. closely similar conditions
exist in our industry, Utah Conner
company for example, will get the
benefit only of capital of 1924. 400
shares. at $40 per share, plus cash
premium realized on the sale of some
subsequent securities ($S. 29OS20) n,us
surplus Of s43,153,137, if all of that
surplus be used in the business mr.
invested in Liberty bonds, the tota,
coming to $6I6sS,657. The Kennecott
Copper company. on the other hand
which owns a large interest in Utah
viii get the benefit of it's investment
n Utah on the basis of something
Ike $110 per share.
There will be many perplexing con-
itions: What Of the companv that
ear after year has been putting
money back into its business. and 4
t the present time shows cash value
I excess of it's capitalization. al
nough the latter might be large?
What of the company that has pur-
hased property, paying therefor with
s own shares at a time when the
liter had market value in excess
their par value? These are only a
w of the problems that are now
lgaging the attention of the admin
traitors Of public companies.