The Bridgeport times and evening farmer., 1918-02-05

Washington, Feb. 5.-The Treasury Committee on Excess Profits, which has been studying the excess profits section of the War Revenue act for more than four months, has complet- ed it's interpretation of the law and the regulations recommended have been approved by the Secretary of the Treasury. The provisions which deal with the definition of invested capi- tai of corporations and partnerships, also with the treatment under Section 210 of cases in which capital cannot be satisfactorily determined, are of the most general interest.
 A statement issued by the Secretary of the Treasury clears up many ques- tions affecting the determination of the, basis for figuring profits, but leaves a number yet to be thrashed out by individral rulings or by amend ment of the law. A new draft of the War Tax act is now being prepared by the Internal Revenue Bureau, em- bodyin proposed amendments on sub jects which officials think cannot pro- perly be passed on by executive ruI- ings. Excess profits return forms will be available in a few days and returns must be made by March 1 on the 1917 business. Some extension of this time has been urged by busi- ness interests.
 l The statement follows:
 ''The provisions of Section 210, which permit the deduction to be | computed by reference to the deduc- l tions as determined in the ordinary way in the case of representative con- cerns engaged in the same trade or business, are held to apply to a num- Der of classes of exceptional cases, among which are the following: | "G) Where, on account of defec- tive accounting, it is impossible to &C., curately compute the invested capi- tal
 "(2) In the case of a foreign tax payer, where the Secretary finds up On application that the expense of se- curing the necessary data is unreas- enable in viaw of the amount of tax | involved or that it is impra cticable to determine either the entire invest | ed capital or the entire net income.
 "(3) Long established business con- cerns, which, by reason of conserva- tiVs accounting or the form and man. ner of their organization, would. through the operation of Section 2O7, be placed at ' disadvantage in com petition with representative concerns doing a similar business.
 "(4) Where the invested capital is seriously disproportionate to the tax able income as for example because of the realization in one year of the earnings of capital unproductively in vested through a period of years, or of the fruits of activities antedating the taxable year, or because of inability to recognize or properly allow for amortization, obsolescence, or excep- tional depreciation due to the present war.
 Applies to Occupations
 "Section 209, which provides an 8 per cent. rate m the case of taxpayers having only nominal invested capi- tai, is held to apply primarily to occu- pations, professions, trades and busi- resses engaged principally in render ling personal services, and in which the employment of capital is not nec- essary and the earnings of which are to be ascribed primarily to the activi-
 
 mere size of capital, form of organiza- ton, &c., are not determining factors if the employment of the capital used is necessary because of delay or ire gularity in receiving fees, &c., or ii such capital is mainly used as a fund to advance salaries or wages or to provide office fHSniture, equipment sc.
 'FIn general, nominal capital is de fined as small or negligible capita whose use ill 6 particular trade o1 business is incidental, and does not include a business which because ot | conditions arising from the war or ex. ceptiona1 opportunity for profit! 1 earns a disproportionately high ratt of profit during the taxable year if i belongs to class which necessaril! and customarily requires capital fol 5 it's operation; nor to corporationi which, although their capitalization is nominal, employ a substantial amount of capital in their business nor to business having substantial capital, but whose invested capita within the meaning of Section 207 S reduced to a nominal amount by tn, z operation of the restrictive clauses O that section.
 '"The law provides that all of tn U activities of a corporation or partner U ship shall constitute a single bushes
 and that its income is deemed to b derived from that business. Wher
 corporation or partnership, however
 is engaged in a business having no in
 vested capital, it is provided in tn
 regulations that it's entire income vii
 be held to be of the same class as tn
 income from it's principal business an < to take the rate of tax applicable t z that business.
 4 fTn the case of an individual en 4 gagged in one or more trades or busi D nesses having invested capital an z also having income of a class taxabl
 at the 8 per cent. rate, the regulation
 provide that all the income of eac
 class shall be Jumped together and tn
 aggregate of each class, taxed separ Tt ateIy at the rates applicable to tha S class. The specific exemption of s6 lg 900 will be allowed as to each clas
 'It is also provided that wher
 dealers in securities make tradin a profits from, the sale of investment i- the income from which is exemE ps from the excess profits tax, there ma ,n be included in their invested capits ithe proportion of the amount fnEes,