New-York tribune., 1918-10-13
Experts to Solve
Tax Problems for
All Bond Buyers
Liberty Loan Committee
Creates Bureau to Aid
Subscribers
BY "A. M. Anderson

Director of Distribution, Liberty
Loan Committee.
TT is clear that the many compli-
l. Gated provisions of law relating to
the position Of Liberty Loan Bonds
with respect to taxation, present and
proposed, are not thoroughly under
stood by investors.
The Liberty Loan Committee has
established bureau of tax experts to
advise subscribers, and is publishing
a series of statements addressed to
bond buyers (individuals and corpo-
rations). The subject is complicated
one, and based on the preliminary in
quiries that have been received by the
tax bureau as result of this morn
ing's advertisement it would seem that
this bureau will be one of the busiest
departments of the Liberty Loan or
ganization until the close of he cam
paign. The services which this bureau
can render will be ofe>material assist
ance to the public, and it is hoped that
in addition it may indicate to many the
advisability of increasing their sub
scriptions to the fourth loan.
Features for Individuals.
So far as individuals are concerned
the more important features are as
follows:
1. The new bonds are not subject to nor
IN x1hs nd bo
law will amount to 12 per cent.
2. Any amount of new bonds not ex-
ceeding in principal $4,000 in the hands
Of each investor is exempt from surtaxes,
excess profits and war profits taxes for
the period Of the war and for two years
thereafter.
3. subscription to Fourth Loan bonds
OF an amount Of principal not exceeding
$4,000 carries with it an exemption from
all income taxes. excess profits and war
profits taxes for the period of the war and
for two years thereafter. on an amount of
all of the preceding issues exclusive of
the 31ss. which by their terms are ex-
empt from all, such taxes) equal to one
and a half times the amount of the sub
scription to the Fourth Loan bonds. pro-
vided the Fourth Loan bonds are retained
at the date of the tax return. This advan-
tage. measured in terms of dollars, is
equivalent to yield on an investment of
corresponding amount in taxable securities
ranging from slightly over per cent to
over Sc per cent. depending upon the high
est rate Of surtax to which the investor is
liable. The above exemptions are in add-
<o tbo ofS
accorded to the 4 and ~ per cent Liberty
bonds.
AS to corporations the situation is
even more complicated. but two impor-
tant points may be summarized, as fol-
lows:
l. In lieu OF the existing 10 per cent un-
distributed profits tax. the proposed law
levies an income tax of 18 per cent. which
is reduced to IL per cent on that part of
the corporations taxable income not In
excess of an amount equal to the sum (a)
distributed in dividends during the taxable
year. (b) paid out of earnings during the
taxable year in discharge of interest bear
Ing Indebtedness outstanding prior to the
taxable year. and (c) invested during the
taxable year in obligations of the United
States government issued after September
l, 1918. (The Fourth Loan is the only
bond issue which comes within this pro.
vision.) In other words. an investment in
the Fourth Loan bonds is absolute insur-
ance to the corporation against the imposi-
tion of the additional per cent tax on
an amount of income equivalent to the
amount Of its subscription to the Fourth
Loan.
2. If 'Inadmssible Assets" is a factor
in the calculation of corporations I'm
vested Capital" the value of the right to
include Liberty bonds (which are classed
as Admissible Assets") as part of in
vested capital may a substantial
saving Of tax. (For example, on an in
vestment of funds equal to 10 per cent of
the amount Of invested capital, the saving
amounts to II per cent of the amount of
Investment in the case of corporation
earning 33 per cent on its invested capital)
New Ruling
The Treasury Department has just
issued very important ruling to the
effect that where Liberty bonds are
owned by trust fund, tie income from
which is regularly or annually distrib-
uted to benehciaries, the exemptions
accrue to the benefciaries. In other
words, each beneficiary is entitled to
his full exemptions explained above,
and for that purpose there may be in
cluded as part of his holdings his por-
tion of the bonds held in trust for his
benefit.
The committee believes that a gen.
eral knowledge Of the matters briefly
discussed above will have stimulating
effect on the subscriptions to the
Fourth Loan, and invites the freest use
of the Tax Bureau.
C..eca