Norwich bulletin., 1922-07-22

stock tax return. This applies to ev- cry corporation whether organized for profit or not and whether or not 1t deems itself exempt from the pay n1ent of the tax. Similarly, every for eign corporation, irrespective Of the amount of capital employed in the | United States, is also obligated to
 make return, writes M r. seidnan. 6 P. A., chairman, committee of tax consultants of the committee of Am erican business men.
 Synopsis of the laNf-The capital I stock tax is one of the most import ant corporate special taxes. It is lev 1 Cd on the right to carry on or do busi- 1 ness within the country, and is paya 1 ble one year in advance. The return that is filed on July 34At, therefore, applies to the period from July 1, 1922 to July 1. 1923.
 The tax is at the rate of $1 on each l full 1000 of the fair average value of the outstanding capital stock for the l previous year in excess of s5.o00. In been in existence for less than a year. d report must be made on the average value of it's stock for the time that ] it has been In existence. A corpora ton whose stock has a fair average value of S5 ,000 is not subject to any tax whatsoever.
 The return must be verified by the officers of the corporation and filed on or before July s1st of each year
 where the principal place of business is located. An extension of time will be, granted only when sufficient req son therefor exists and then only for thirty days.
 l The tax is not due at the time of the filing of the return. but rather ten days after assessment by the Gov
 ernment. However. the taxpayer may attach the tax payment to the return
 and thereby avoid the risk of failing to receive the notice of assessment
 sent to it. Severe penalties are pro-
 Mdked for both delay in payments.
 failure to file returns and for the mak- Il ing of false returns.
 The foregoing is a concise synopsis
 of the Capital Stock Tax Law. It will ! be apparent that the two major pro ) blems involved in it's administration
 are CD the interpretation of the phrase Of fair average value of capital [ stock.
 Fl What is meant by "doins business !, - Business is very comprehensive
 terna and embraces everything about ;I which person can be employed. The : test as to when a corporation is do- ing business is whether it was or : ganized solely for the holding of prop . erty, collecting the income therefrom
 and the distribution of its avaiIs, ol . whether it was organized for the pur- pose of doing business, is still active
 and is maintaining it's Organization il
 that connection. Thus, corporation would not be doing business where f
 l divested itself of all control over ana t management of the property original t ly used by it in it's business and hal : Irsduced it's activities accordingly. How ever, the mere closing down of thu e plant for a certain period, or the fac ell that sales were small or that business : is slow does not mean that the cor ? poration has. ceased doing business. Q The regulations issued under the cap e ital stock tax law outline that amonl e others, a corporation will be deeme. ' to be carrying on CT doing bushes g where it is engaged in developing min t eral lands. where a parent corpora r ton manages or operates the plants 0 s it's subsidiaries, or where a. corpora F tiontion is engaged in the buying of SC :. curities or other property, even if fo F a period it makes no sales becaus y of unfavorable market conditions !: Examples are given in the regula h tions Of corporations that are held no j. to be carrying on business and there 0 fore not subject to tax. These in n clu6le:
 hi 1. 4 corporation in the hands of 0 receiver and not doing business as g ] corporation.
 nI PA corporation in process of dis o solution at the beginning of the tax s able year.
 s 3. A corporation that has entirel p abandoned it's business.
 Q 4. A holding company whose onl e activities are the collection of ineom a from the subsidiaries and the distri I button Of such income in dividends | 5. A corporation that merely hold r. title to property subject to long teri n lease or otherwise within it's contro n A new provision is contained in tn IF Regulations with respect to newly or 'o ganized corporations. is now pro s Vided that corporation may complei d it's organization and sell it's capit; "a stock without incurring liability, bt lr other activities such as entering int lo contracts or for the construction - a plant or the purchase of propert h will constitute doing business. Ths r is, corporation need not be engas n ed in the production of its intende . product as long as it has taken ae le tive steps towards. that end.
 "Fair value" expiained-By fla n- value of the capital stock is meal If, neither the book value, nor the ps i- value, nor the market value, nor u IT earning value of the stock Considers Ut ton must be given to all of these fat at tors before the fair value can be d, 2. termined
 of To assist the taxpayer in compu CT ing the fair average value of it's caI he ltal stock, the return provides thrs of exhibits, each of winch must be con of pletely filled out. The first, known or Exhibit A calls for the listing of u $, assets and liabilities of the compan od as shown by the books, as well 1 Id the fair value of those assets and Ii: it 5iIties, and an explanation of the di it. ferenees between the book value ar as Halr value, where such exists TT O. second exhibit Exhibit B1 comput nt the value based upon average sa in prices of the stock during the pr edl eedlng taxable year. The third exh
 a elt (Esxhibit O when properly fill, s. out shows the earnings for the pa dy Eve years as reported on the incon is tax returns to the federal governmer
 as well as deductions and addition
 thereto, in order to arrive at the a = tual income of the corporation. Spa sz, IS then provided for the statement - to the average earnings of this if =, =. year period and their capitalized wa n n- ues.
 er The value Of the stock in Exhft he , A is determined by subtracting t @ Ialr yal1fe of the liabilities and r -. serves from the fair value of the a " sets. Values as of June 30th are r .;- qnlred, since the taxable year for ca ra ltaf stock tax purposes is the peri
 Deginnipg July 1st and ending Ju