The Pensacola journal. (Pensacola, Fla.) 1898-1985, 1922-02-26

income to the invested capital of the
corporation, as defined by section 1926
of the revenue act of 1921 This tax
is in addition to the normal income tax
Of 10 per cent. 1t is based on the net
| income above a specific exemption Of
$4,000 and per cent Of the invested
capital for the taxable year, these
amounts being known as excess profits
credits. The rates are the same al for
1920, 20 per cent Of the net income in
excess of the excess profits credits
and not in excess of the 20 per cent of
the invested capital of the taxable year
Cknown as first bracket) and 40 per
cent of the net income in excess OF 20
per cent Of the invested capital Csec-
ond bracket). Invested capital for the
taxable year is the capital actually
paid in for stock outstanding, includ-
ing the paid-in surplus and earned
surplus or profit earned prior to the
taxable year, which have not been dis
tributed. The term Invested capitaWI
does not include borrowed capital.
Invested capital embraces two
classes of assets: those known as
admissible assets" and those known
as "Inadmissable assets" admissible
assets are those which produce income
that is subject to the income tax In
admissible assets are those (otherI
than obligations of the United States)
which produce income that Is exempt
from income taxation. For example,
cash. real estate, bills receivable ard
other tangible assets. which produce
income that is subject to the income
tax are admissible assets. Assets
Z
pal bonds which produce income that
is exempt from income tax are admls-
sable assets.
Deductions From Invested Capital.
The revenue act OF 1921 requires that
all corporations having admissible as
sets must deduct from invested capital
"a percentage thereof equal to the per
centage which the amount of mad
n1issable assets is Of the total amount
admissible and inadmissable assets
held during the taxable year" Forl
example, the total assets of a corpora
ton for 1921 was 100000 of which
$4,000 was IN inadmissable assets
and $4,000 in admissible assets. The
average invested capital was $50 600
Applying the above rule, the invested
capital must be reduced by IS per cent
(the percentage OF the inadmissa Bile /
assets. $4,000, to the total assets, !
s2oO, 000). The reduced invested CAPT !
tai, therefore, viii be $4,000 CHE in /
vested capitaD less $50, o0o C75 per cent
of the invested capitaI) or $4,000 !
Where a corporations income is re-
ported on a cash receipts and disburse- !
ments basis accrued items cannot be !
taken into consideration in computing /
its invested capital.
The payment Of = stock dividend has
no effect upon the amount OF invested /!
ca pttal The capitalization 81 current /
earnings does not increase the IN (
vested capital Appreciation in good
VIII and tangible property determined ,
By an appraisal against which 4 stock /.
dividend was issued cannot be allowed /
as invested capital The value OF tangi-i
bic property paid in for stock or shares
in an amount as limited BY section 1926
of the revenue act OF 1921 may be in-i
cludcd as invested capital
The revenue act of 1921 provides
that every corporation joint stock
company. association ana Insurance
company not specifically exempt shall /