New-York tribune., 1920-11-14
Paying Income Tax at Source

S1ss.on-t would like TO know if nil
ponds are taxable and IL short term notns
are taxed the same AS bonds onh mhos r3,es
me .n" amount OF taxes would be at the
I9"rSo; En,sh;s 8 iSr Sr. instance on the b.. G. r
sinking fund bonds. the company pI, arre"s re.'s
uors TO pay interest without deduction for any
per cent which 1T may be reuuired or
,,,a nea ,ni'.so TO pay Mt the source. Does that
hsa" tha, tha 1nst that il an there is to pay or
,m'sres' nv or diyidend and that you have to
How @ouls rns 4 F'asrs e.s besides.
cent bond and what is your opinion Of
~, y, Is. r. Knight bonds as an Investment?
gov, gov about the Bush Terminal Buildings
At s7so7 Do you consider it a better r'iuS buy
selling at around s65 per share. which has
prior claim on Bush Terminal property,
norma nor are they free from taxation. that U.s.
tax? few more have been brought to to
good. please suggest some that you can
consider safe and reliable Greenfield Tap
preferred stock. Ludlow Associates 10 per
cent selling around SlaS. American Tele-
Snnne Snnatrs Tsssrapn Per cent american
sugar Refining selling around $106 Amer
ican bosch Magncto.-J. A.
Answer-The original normal income
tax was peA cent. Many corporations
agreed to pay this tax. This is known
as payment made at the source. A
per cent bond pays $40 per $1,000 Two
per cent Of this amount is $14o. The
B. B. & R. Knight Company makes this
payment. All taxes in excess of 2 per
cent, however, are payable by the
holder, provided his income is over
$1,000 If single or $4,000 if married.
IN collecting your interest on such a
BOND 1t is necessary to file a certificate
OF ownership. In such a case you
would claim no exemption, because the
2 per cent tax is paid. If corpora
ton does not pay the per cent tax
you could claim exemption, but you
would have to make the whole mafter
your income is over $4,000 you would
have to pay surtax. This is all
clearly set forth in the income tax law,
with which every one should become
familiar. Notes are taxed the same
as bonds. There is no normal tax on
stock dividends. The B. B. & R. Knight
bonds are entitled to a good rating, in
our opinion. The company has beon
good Garner, and interest charges have
been amply earned. The Bush Termi-
nal Building Company has shown good
earnings. For 1919 the surplus after
dividends was $1O2Ol3. In addition.
the dividends are guaranteed by the
Bush Terminal Company. Therefore
the dividends on this stock are paya-
bic before the dividend on the pre-
ferred stock of the Bush Terminal
Company. All the other securities you
mention have merit in varying degrees.
The Greenfield Tap and Die stock is,
we think, we'll secured, but the COM
pany is small and therefore this issue
does not enjoy very good market.
Marketability is factor of great i'm
portance. Ludlow Manufacturing As
sociates, the outcome of very old
established concern, has shown very
large earnings. On sales of SIG lac, 900
in 1919 the net earnings were approx
mately $3,112000 before war taxes.
However, such a stock is highly sensi-
tive to earnings. Dividends are not
stable, like a good preferred stock, but
fluctuate according to the companys
operations. The same is true of Amer
lean Sugar common and American
Bosch Magnetic. We do not recommend
such stocks for investment. American
Telephone and Telegraph stock is
very fair investment for the business
man.