Evening journal., 1918-02-04
EXCESS Profit TAX
Regulator ISSUED
Statement Expected to Clear
Many CIouded Points
ConCe ming Law
NEW RULE ALSO ON
DIVIDEND INCOMES

WASHINGTON, Feb. 4.-Regilations
under which the excess profits tax law
4 20 be administered, made public to-
night by the Bureau OF Internal Reve
nue.. clear up many long disputed ques.
tions affecting the detei mnation Of the
basis for figuring p onts. but leave
number yet 10 be threshed out by indi-
yldual rulings. or Dy amendment OF the
law. a new d. at OF the war tax act
h now being prepared by the bureau
embOdying proposed amendments on
subjects which officials think cannot
properly be passed on by executive
rulings
Excess profits return forms will be
available in a few days, and returns
must be made by March / on 1917 busi-
mss. Some extension Of this tine has
been urged by business interests.
Since deductions based on percent
age Of invested capital may be taken
from aggregate profits before deter.
mining the taxable amount corpora
tons or parine ships are anxious TO
figure their invested capital as high as
possible BY the regulations invested
capital Is defined as the total Of the
capital, surplus and undivided profits
as shown on the books, with certain
adjustments required by the law. II
any change in the invested capital has
been made during the year. the month
" average Is TO be taken.
II the true surplus or undivided
profits are not shown by the books
because OF failure 70 provide for de-
pletion. depreciation. obsolescence, or
other losses, the regulations make Il
mandatory 70 figure corrections sno
thus reduce the capital figure. This
would prevent CO po atlons from
figuring their tax exemptions at toe
hlrh a flgLre by oyerestimating thei
capital
0n ihc olher hand. It is permit d
10 sdd TO the surplus account eXpend'-
tures in the past for extension Of the
plant OF equipment which still is ir
active use II the expenditures have
been charged as current expense.
One Of the most disputed plants has
related 10 the valuation Of t-a,le
marks. good will, patents OF copy
rights, most businesses a guing FOR in
cluslol Of these at a high figure in
their capital investment The regu-
lations provide. however, that only In
cases where actual payment has been
made for these items can the expense
be added TO the invested capital total
No adjustment Is allowed either for
expenditures made to develop good
will or other lntang bic assets BY
this ruling the plea Of a number Of
corporations which have spent thou
sands OF even millions OF dollars de-
veloplng a business Is refused.
The excess p-oflts law provides that
in cases where It seems impossible "a
determine deductions In the ordinary
way because q business did not eXisl
in pro-war years or because exceptiona
conditions, such as extraordinarily low
profts then, the business OF represen-
tst'vei concerns Is TO be taken as
basis for figuring deductions.
This provision, the regulations pro
vide. may apply 70 businesses having
defective accounting systems making U
imposs' s'bie 70 compute invested capi'
tsl: foreign taxpayers when it Is deem
ed imp-acticable 10 investigate invest
ed capital figures in another country
ionc-establ'shed business concerns
wbichmaintain conservative or unusua
business organizations, and businesses
for which ''the invested capital is sell
ously disp oportionate 70 the taxable
income An example Of the 'ast cas-
,-o,,Id be business which made larg'
rronts in 1917, but which had ha'
sevo- FL rrevlors unn~Oductive wears
The S per cent tax on profits owe
5000 FOR taxpayers having only
nominal capital is held 70 apply TO p-o
fess'onal men OF TO trades or bus
nesses rendering professional services
II corpo atom is engaged IN wv
l-,~dr NJ business. one being p-otes
elonal and requiring no capital N
regulations provide that its entire IN
come is 20 be considered as OF u
principal business.
II an individual is engaged IN two o
more businesses. however, one takln
no capiial and one with capital. IN
come from each IS 90 be taxed separator
For instance. a physician owning
hosnital would be taxed at per cen
Of his OCCASIONAL income above SOW
and i'm addition on capital investe
in the hosnital at other rates
The regulations require corporation
10 describe in making returns their re
iatlons with other a1iliated corpora
tions This IS expected TO dlsclos
many facts concerning business CON
hrnstlons not now on record.