The Daily Missoulian. [volume] (Missoula, Mont.) 1904-1961, 1918-02-04
Patents and Good Will Not
to Be Figured as Part
of Capital Stock.

under which the excess profits tax
law Is to be administered made public |!
tonight by the bureau of internal
revenue, clear up many questions af-
fecting the determination of the basis
for figuring profits, but leave a num-
Der yet to be threshed out by indivld-
ual rulings, or by amendment of the
law. A new draft of the war tax act
Is now being prepared by the bureau
embodying proposed amendments on
| subjects which officials think can not
properly be passed on by executive
| rulings.
Excess profits return forms will be
| available in few days and return
| must be made by March /, 1918. Some
! extension OF thfs time has been urged
by business interests.
Invested Capital Exempt
! Since deductions based on percent
age of invested capital may be taken
4 from aggregate profits before deter
! mining the taxable amount corpora
/ tons or partnerships are anxious to
figure their invested capital as high
as possible. BY the regulars invested
capital Is defined as the total Of capt
tai surplus and undivided profits as
shown in the books. With certain
adjustments required by law. If any
change In the invested capital has been
made during the year, the monthly
average is to be taken.
| Z ha Il
profits are now shown by the books,
because of failure to provide for de-
pletion. depreciation, obsoescence or
other losses. the regulations make it
mandatory to figure corrections. and
thus reduce the capital figure. This
would prevent corporations from fig
uring their tax exemptions at too high
, a figure by over estimating their CAPT
, tai
. On the other hand. it is permitted to
add to the surplus account expendi-
lures in the past for extension of plant
or equipment which still Is in active
use, II the expenditures have been
charged as current expense.
Trade Marks Not Capital.
. One of the most disputed points has
| =,
; good will, patents or copyrights. most
/, businesses arguing for inclusion of
these at high figure in their capital
, investment The regulations provide.
. however, that only in cases where ac-
, tual payment has been made for these
items can the expense he added to the
Invested capital total. No adjustment
Is allowed, either. for expenditures
So made to develop good will. or other
. intangible assets. by this ruling Tho
plea of Il number of corporations which
I have spent thousands or even millions
|. of dollars developing "A business, is re-
s fused.
Comparative Methods.
:, The excess profits law provides
:. that in cases where it seems impos
sible to determine deductions in tn,
. ordinary way. because business die
not exist in pre-war years. or be-
9 cause of exceptional conditions suct
as extraordinarily low profits there
-, the business of representative concerns
p Is to be taken a basis for figuring
deductions. This provision. the rcgu.
lations provide, may apply to bust,
ncsses having effective accounting
systems. making ii impossible to com.
rute invested capital; foreign taxpay.
I ers. when 1t is deemed Impractical bl,
to investigate invested capital figure.
in another country. long established
Il business concerns. which maintain
n conservative or unusual business or
. gantzat tons; and businesses for which
= THE invested capital is seriously dis
e proportionate to the taxable income
is An example of the last case would he .
: business which made large profits il
Is 1917. but which had had several pre-
n vious unproductive years.
Tax Separately.
"a The s per cent tax on profits owe
$4,000 for taxpayers having only
=, nominal capital, is held to apply L
=. professional men. or to trades or bust
- nesses rendering professional services
~ If a corporation is engaged in tw
kinds of business, one being profes
sional and requiring no capital. tn
regulations provide that its entire in
come is to be considered as of it
principal business.
NJ If an individual is engaged in tw
is or more business, one taking no CAPT
IN tai and one with capital. income frer
s. each Is TO be taxed separately. Fe
ly instance, physician owning hos
S. pital would be taxed at s per Ger
nd on his professional income abo>
he $4,000. And in addition on capital II
O. vested in the hospital at other rates.
The regulations require corporate,