New-York tribune., 1919-03-03
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ductible to an amount not exceeding
10 per cent OF the taxpayers net in
come as computed without benefit of
sucn deduction, but only if paid to
charitable, religious or educational cor
porations, etc
Assuming that all of the interest re-
ccived from Liberty bonds is exempt
from tax, that the interest which YOU
mention is fully dcductible under the
iaw' and that your children are all
under eighteen years of age, your tax
would be S4,66S.
Question: Our corporation has paid
IN capital of s1,75o, for which it has
issued $4,000 worth of stock, the diff
terence of $3.50 being considered good
viii at the time the business was pur-
chased.
l. What would you consider the
paid capital, 1850 or $4,000?
ii. What would be the income tax
tor the year 1913 on a net profit Of
$4,000.
III. Are stock dividends subject to
tax?
". Would you consider surplus
from the previous year and money
loaned from banks and other sources
part of invested capital?
Answer: The law provides that In
vested capital includes:
!. Actual cash bona-fide paid in for
stock or shares:
u. Actual cash value OF tangible
property, other than cash. bona -iide
paid in for stock or shares, Mt the
time of such payment, but in no case
TO exceed the par value of the original
stock or shares specifically issued
therefor. unless otherwise allowed by
the Commissioner of Internal Reye-
nue.;
III. Paid-in or earned surplus and
undivided profits, not including sur
plus and undivided profits earned dur
the year;
~. Intangible property bonda-fide
paid in. for stock or shares, In an
amount not exceeding in the aggregate
20 per cent of the par value of the
total stock or shares of the corpora
ton outstanding at the beginning of
the taxable year.
The law further provides that in
vested capital does not include bor-
rowcd capital.
a net profit of $4,000 is exempt both
srom income tax and war profits and
excess profits tax.
A stock dividend is considered in
come to the amount of the earnings
or profits distributed.
Question: VIII you kindly inform
me if dividends on railroad and bank
stocks are exempt from the income
tax! They were last year, but | am
uncertain about this year. The tax
was supposed 10 be paid al source.
Answer: Dividends received from
domestic corporations are exempt from
normal income tax, but not from sur
tax.
Question: Ain January, 1913,
turned in an old car, added 81 600 and
bought a new car which is used ex-
clusively for making the professional
calls whereby earn a taXicab income
Am l allowed to deduct this 81 900
from my taxable income?
B-What depreciation am allowed
on such car used for business pur-
poses?
Answer: A-The $1,000 which you
mention IS not an allowable deduction.
B-The law does not set any fixed
rate for depreciation You should
distribute the same ratably over a pc
Rod representing the probable life Of
the car.
Question: What is the amount Of in
come tax for the following? Officer
in active service, salary $1,000. Mar
ried. No dependent Children
Answer: Under the new law. salary
or compensation not in excess of So
500 received from the United states
during the present war for active ser
vice in the military or naval forces of
the United States is exempt from in
come tax. Include the $500 not cx-
cmpt with other taxable income re-
received by YOUR husband and Yourself.
II the amount is $1,000 or more, YOU
inust file a return, and if in excess Of
$4,000 you must pay the income tax on
+ the excess.
Questions: A A corporation having
good year in 1917 made up its annual
/ statement December 81, 1917, without
showing q reserve for taxes, which
amounted to about $1,000 This amount
was paid in 1918, and 1T the end Of
1918 1t was found that the corporation
came out exactly even after paving
these taxes. Is the profit for 1918
nothing, or $4,000 on which 1t must
pay the tax?
B-A closc corporation did not dur
ing several years distribute its profits
to stockholders, but allowed them to &C
cumulate for additional working CAPT
tai. The stockb oldcrs took tho cor
poration's notes for amounts which
they would otherwise have received rs
dividends Do items Of such char
acter 90 under invested or borrowed
capital? Arc the stockholders taxable
under Section 220?
Answer: Al ederaI taxes on 1917
income paid from 1913 earnings are not
deductfble from your 1918 income
therefore. your taxable income for 1918
is $50 600
B--Proiits Of prior years which are
represented by notes issued TO stork-
holders Ak dividends constitute hor-
rowed capital. and are not 10 he i'm
c'adcd m invested capital. Such a cor
poration would not be taxable under
Section 22O, "A the a:nounts distributed
represented tC notes will he taxed 10
the stockholders as dividends.
Question: have several New York
Central Hudson River Railroad Com
pany 35a per cent tax free covenant
bonds. As exemption is not claimed.
the tax IS deducted at the source. in
the case Of the normal tax on .hese
bonds. The revenue act OF October 9.
1917, would compel the New York Cen
'r2l d Hudson River Railroad Com
pahy TO pay one normal tax of . per
cent tor the year 1918 on these bonds.
put my normal tax for 1918 on these
bonds, under the law inst naesad ~,