New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1918-09-04
so Per Cent Tax Fixed
Under War Profits Plan.
With Special Allowance.

Under the war profits plan the
amount of the tax is fixed at 80 per
cent OF the excess of current net in
come over average income during the
pre-war period, with a specific add
tion to the latter of $4,000. 1t is pro-
vided that there shall be added or sub
tracted, as the case may be. an allow
ance of 10 per cent on the invested
capital added to or withdrawn from
the business since the close of the pre-
war period. In case a corporation had
no net income in the pre-war period
Or was not in existence for full year
during that period, the amount of the
deduction from net income before COM
putting the so per cent tax shall be 10
per cent of the invested capital for
the taxable year, plus a specific ex-
duction is allowed in the case of a
company whose pre-war net income was
less than 10 per cent. The pre-war
period is described as the years 1911
1918.
Excess Profits Plan
The excess profits plan provides that
in excess of a specific exemption of
$4,000 and 8 per cent on invested CAPT
tai, net income shall be taxed as fol-
lows: Between the amount of the de-
duction and Is per cent. 35 per cent;
between Is per cent and 20 per cent
the rate of taxation shall be so per
cent, and over 20 per cent the rate
shall be 70 per cent.
Invested Capital" Defined
AS the application of the war profits
or the excess profits plan hinges on
the meaning of the phrase Invested
capital" much space is devoted to de-
,,.,, d. l..
fair treatment of exceptional cases. In
general, invested capital is described
as actual cash paid in for stock or
shares. actual cash value Of tangible
property paid in for shares or stock,
paid in or earned, and undivided prof
its (not including those of the tax
able year and not including the in
creased value of any asset above the
original cost until actually realized
by sale).
Intangible property bona fde paid in
for stock prior to March g. 1917, is lin
tied to 20 per cent of the total par
value of the stock or shares outstand-
ing on that date. Invested capital does
not include borrowed money or assets.
the income from which is not included
in computing net income, these being
the non-taXed stocks and bonds other
than obligations Of the United States,
except that so much of them as does
not exceed the average amount Of
standing borrowed capital may be in
Guided. Other sections Of the defini
ton of invested capital ave as follows:
Sec. 1927 a) That in the following cases the
invested capital shall be determined as pro-
vided in subdivision co. of this section: %
Where the Secretary is unable satisfactorily
to determine the invested capital provided
in section 307 or GU where a mixed aggre-
gate of tangible property and intangible
property has been paid in for stock or for
stock and bonds and the Secretary is unable
satisfactorily TO determine the respective
values of the several classes Of property at
the time of payment. to distinguish the
classes OF property paid in for stock and for
bonds. respectively or 90 where capital is
material reproducing factor, but
where. because Of the fact that the capital
employed is in large part borrowed there is
no invested capital or the invested capital is
materially disproportionate to the net income
compared with representative corporations
engaged in a like similar trade bust
ness.
(b) In the cases specified in subdivision (a)
the invested capital shall be the amount which
bears the same ratio to the net income Of the
corporation for the taxable year the aver
age invested capital for the taxable year of
representative corporations engaged in like
or similar trade or business bears to their
average net income for such year.
, Sec. 328 ta) That in cases where invested
capital is to be determined in the manner
provided in section 327, the Commissioner
shall compare the taxpayer only with repre-
can be satisfactorily determined under Sec
ton 326 and which are. nearly as may be
similarly circumstanced with respect to Fl oss
income. net income, profits per unit of bus-
amount and rate of profits and all
other relevant facts and circumstances.