The Wheeling intelligencer. [volume] (Wheeling, W. Va.) 1903-1961, 1921-01-05
Fraud Prosecutions
Business Men Don't
Act With Fairness
BY DAVID LAWRENCE
ScopJright By the mtslngencsr)

! Washington. Jan. I.-Hus!ncsS nr"'
throughout tho United States are breath
rus easier rs a r'~u'' 81 w" decisions
hy the treasury department. with rSt"r
,.pcc to income. taNrS. huc they sh"u''
bear in mind 4 warning which oU!c'aI'
o: tho government ar" expressing III
formally. ruu.",y tina: unless n" puh'I'
gets the bencn: Of the same prices a:
are put on income blanks. there will b.
prosecutions for fraud.
Tho ruling OF the treasury depart
nlent Is bound 20 relieve business mct
everywhere for thousands ~ them pr"
tested hv ,otter and telegram aga'nS
existing regulations aud argued that II
view OF the abnormal conditions. they
should be permitted IN q way 10 charge
this years losses against last year
business The treasury took the matter
under advisemcHt and has. ruiSI tha
under the law II was permiss!h'e to'
firms 70 adopt as a basis for inventory
the actual market value today ot th'
goods on hand. This means that th'
government will not exact as income
money that is really NOT earned and tht
effect OF the ruling on business in gen
c-al should be exceedingly who'eS"m"
An Illustration
Because The terms OF the ruling are
technical ana rather complicated. Il cat
best DC understood by an Illustration.
II n merchant had on hand $1,000
worth Of goods on December 81. 1919
or. at any rate. .if in his income tan
statement ne told the government tha
H. had S5.noO IN goods in stock, tha'
!tcm is used a. 4 haSiS for the caicula
tion. Thus 'r during tpH year 1890 ht
bought NOR" goods Toy $4,000. IN" TO
tai OF Sli.NOn would represent the value
Of the goods ordinarily hut in view o'
the fact that in most instances tn" sell!
Ing prices haV" fallen below actual cost
a merchant i permitted % estimate
what j. the market value Of his goods
on hand. Surprising IN this :nstanc" tina
nricrs have shrunk so that T." market
value OF tho goods IS only $4,000. The
merchant therefore can deduct sS.e"'
from 81 .Nno and the remainder u 81.
400 becomes the actual cost 90 the goods
sold. Then IL ~ recNiy"d 1000 for his
goods during III" yrar. his actual Pro
III on which taxes w"uld ~ pEid wou>t
mo d9Ner~nc,, between N" cost. $4,000
and the ~1l~S Sl".n"0 or $1,000. Similar
" If MS money receipts were only
S1.000. h. could subtract II from thf
cost Of Sa.h0p and show loss oS 5000
and pay no taN"s whatsoever.
Important Factor
The Important factor. therefore. IN thG
ruling is market price What does The
term mean Epery merchant will have
10 make his own estimate. Naturally "
he thinks the mark"t price iS much low
IT than his oriGiaaI cost. h. ~ abb" tC
show that tho goods have cost him =
great doSi and that his profits from
sales ~. Joss. Huj ~" Gov"rHmcu; Nil
exercise Z, rirptul check uu N" mar
kct prics" and Will Investigate and com
pare all Glasses nt returns SO ~ |" dis
cover juSt what thc prevailing price!
were at any given period. II I, Shoulc
he discovered that merchant or his
income tax return said tn" market va
lue Of 80 many articles was such arC
such a price. the Sovrrhmcnt will see il
N, merchant actually gave the pubii'
the hcn"ft of those prices and did sol
his goods At those figures. Should thrrt
be a discrepancy between what the in
come tax return said was the markc
price md what the puh'ir actually paid
the government Will consider n" diff
ference prlma tact. .~vsidrncc OF fraud
and Will prosecute Offenders.
Actual cost market prize acSordtni
% governments officials means tNC cos
20 amcrrhant "c replacing tho goods
After AL that * tn" price which a com
petitor would hav" /" pay for the came
kind OF goods IL ne had no stock "'
haur and ib"rc Will b. plenty OF in
stances % THIS kind on income tax re
turns whick viii enable the government
20 tell whether the man with the good
on hand properly valued his goods. I
- naturally 70 tho interest OF the m"r
chant 10 show on his income tax return
that his goods have shrunk 20 a spai
price because that helps - deminish th'
size OF IN" profits on which taxes ar
paid but II the government doesn't finC
the merchant selling :" the public a
somewhere near those cost prices. th'
charge or fraud vii, he entered and IN
income tax return will hH hsld up anc
al sorts OF COM rii"ations would follow
Public viii BENEFIT
On ,da other hand government off
clals anticipate that business in genera
will obey the spirit OF the ruling anc
w.Ii BE- moro than anxious 20 give tn,
aub.c the benefit OF reductions becauS,
II taking losses ~ this time the n-r
chants viii not harc TO pay so muci
VihnsS 10 tHe EON tfHlDCnt ia LsNN-S aNI
may indeed In many instances hpv,
more money individually than ,A.y Eat
q year ago but by clearing their shslva.
and siore houses Of last years good:
at low prices. the way VIII be pave,
;or the purchase Of new goods at low
cost prices making possible the carnini
Of reasonable pr"hts during the yea
1921.
The ruling Of the treasury IS no pa
,erualStic II - no sudden outhurst o
generosity but - u strictly legal inter
probation Of tho revenue law. Legal ex
perts figured IL OUT that unless the gov
ernment permitted firms 70 use preSen
market values - \ basis for cost. tin
government would BE- eNact.ng mUns,
that was not actually earned and busi
ness houses could contest the ruling II
the courts and probably win ~. con
tending that the sums taken ay the gov
ernmant we're taxes on capita! which. o
-