Fitzgerald leader enterprise and press. (Fitzgerald, Ben Hill County, Ga.) 1921-1964, 1921-07-01
Capital Stock Tax
Due Next Month
Assessments Are Made on Fair Av-
erage Value of Capital Stock

ATLANTA, June %. = Experts
here today are pointing out interest
ing features OF the Federal Capital
Stock Tax, which corporations will
be called on to pay during next
month, 4 point OF particular inter
est about the tax, to which Joel
Hunter, business counsellor and tax
expert, calls attention, is that while
called a Capital Stock tax, it is not
assessed on the par value OF the cap
ltal stock but upon the fair average
value OF the capital stock, including
the surplus and the undivided profits.
Corporations in Georgia and thru
out the South will be interested in
the explanation concerning the tax,
as furnished by Mr.. Hunter, at the
request OF this news service. Mr..
hunter is recognized authority on
all tax matters, not only in this coun-
try but in some OF the foreign coun-
tries which he has made special
study. He is the author OF number
OF hooks on the subject. Mr.. Hunters
statement is as follows:
This is a special Excise Tax or
Corporations, returns Of which are
% be filed and the tax paid in the
month OF July OF each year; that is
to say on or before July 3lst 1t is
a privilege tax or Federal license.
, payable in advance for the privilege
Of doing business for the twelve
months succeeding June 30th OF each
year. 1t amounts to 500 on the
Thousand Of the fair average yalr4
Of the corporations Capital Stool;
after crcditing an exemption OF s.
600. A point OF interest about this
tax is that while called CAPITAL
Stock tax, it is not assessed on the
par value Of the Capital Stock but
upon the fair average value of the
Capital Stock, including the surplus
and the undivided profits. The tax
payer IS required to fill out three
blanks or exhibits in order that pro-
per consideration may be given the
various factors affecting the fair
value. Exhibit A is condensed
balance sheet OF the corporation as
OF June 30th. Calendar year corpor-
ations are required to use the bal
ance sheet Of the previous December
}lst In this connection il is impor-
tant 10 remember that a liability re-
serve should be set up on the BAL
ance sheet for the federal taxes I'M
paid.
Exhibit B. is statement which
should be prepared showing quota
tons on the value of the corpora
tons stock and outside sales prices
Manufacturing and trading corpora
tons are also required to furnish on
this blank the gross sales for the
previous five years.
Exhibit c. when properly filled
out, shows the corporations annual
income for the last five years, This
income for the five year period is
averaged and then capitalized on
percentaie basis that fairly discloses
what representative enterprises must
earn in order to maintain their stock
at par.
"As an illustration of how this tax
is computed, we will take the case
OF corporation which CAPITAL
Stock of 100000, surplus $4,000 and
undivided profits $4,000. The last
sale of this stock was made at Sis
share. The net profits for the prev
lous FIVE years averaged $4,000 We
! observe from this statement that the
! talr average value as measured bv
the balance sheet Exhibit Al is
100000. The fair average value as
shown by the Sales Price exhibit
b is $l75000; while the fair value
as disclosed by the average Net In
come lEXhibit c. is $250.000. which
sum is arrived at by capita1izing
$4,000 at y per cent. lThc interest
on S250000 for one year at y per
cent is 100000. The tax then would
be assessed on the Exhibit showing
the highest value. This shows $3.50
600, the tax on which would be $245
which is computed at $l.OO a thou
sand after the $1,000 exemption is
taken off"