Evening star., 1918-08-21
LIBERTY BONDS FREE
FROM ALL NORMAL TAX
BY I. A. FLEMING.

First issue liberty bonds. the tax
free 31as, made a new high record
today at 101.60. There is no good
reason why all other issues should
drag as they are doing, and the en-
tire market should show improve
ment In the immediate future.
The third 4As are quoted around
s5.46, the first AVS. or converted 3hs.
at about 94.20. and the second As at
1886.
Very few people other than those
in the banking business and in other
lines where tax problems are dis
cussed ard worked out understand
the purport of the income tax laws.
All liberty issues have an attractive
feature in their provisions, namely.
they are free of the normal tax to
the extent of ones holdings of these
bonds.
And the normal tax extends through
ones entire income above the ex-
emption limit. which, according to
the measure now before the ways
and means committee, will be $4,000
for married persons plus 5000 for
minor children or dependents under
eighteen years of age and $1,000 for
single persons.
Surtaxes. excess profits taxes, etc,
do not begin until after a net taxable
income of $1,000, has been reached, but
The normal tax which will probably
be at least 10 per cent, applies to all
income. no matter how large.
Here is one statement plain enough
for any one: an investment of $780,
900 in any liberty bond issue of the
three floated to date. would not be
subject to one dollar of income taxes.
Investors selling their bonds over
the counter receive practically a dol
lar on the 500 bond. less than mar
ket quotations. AS compared with
municipal bonds, the obligation of a
city. the liberty bonds now have a
large advantage. and their future is
sure to be satisfactory.
The advance in the price of the sns
is likely to be followed by more or
less selling of this issue by investors
who are not holding them for tax
free privileges but rather on the the
ory that they would advance in price
as the necessities of the war caused
the revision Of the income taxes up
ward.
Many of these investors will take
on the low-priced bonds on the same
theory-the increasing ratio of the
normal tax. first 2 per cent. then 4 per
cent and now 10 to II per cent, will
force these issues higher.
moreover, IneTe Is no reason why
holders of the per cent liberty bonds
should not Immediately convert them
into AZ per cents.
In the conversion of liberty bonds
only the rate of interest is changed,
all the other essentials of the issue as
originally put out, date of maturity,
etc, remaining unchanged.
Holders of the unconverted As have
until November to convert. but after
that date all conversion provisions
cease The liberty loan bonds. other
than the third ANS, have until 1947 to
run; the third Az s until 1928.
One Of these days after the war is
over these bonds. running for nearly
1wenty-nine years, will show an ex-
cellent premium, while all through
, the years in which they will be on
the market they will be exempt from
the normal tax, and when war and
excess profits taxes are taken on
they will be absolutely tax free.
There is but one moral to the story
hold on to your liberty bonds.
On today's session of the local stock
exchange stocks were entirely ne
elected. not a transaction being re-
corded.
In the bond section Potomac Con-
soliGated 5s sold at 80 and the 6s at
s3ss to s315. or slightly lower than
yesterday.