Evening star., 1922-02-17

snQuirefs.l
Section 202 contains more than I
succeeded in presenting in the two
preceding articles. 1t also deals with
the very important subject of reor:
ganixations. Under the old act. many
necessary reorganizations were made
impossible: some unfortunate, con-
Germs which acted ON the basis Of
original regulations issued under the
1918 act and did not abide by the ad-
vice of counsel and tax experts found
that the revised regulations laid
heavy tax burdens on reorganiza tions
which. in my opinion. Congress never
intended to impose. Section 202 (c)
(2) is much more liberal ir its phrase
ology than the corresponding section
in the predecessor act. but there are
many Of us who believe that the pres
what Congress intended to enact in
the 1918 act.
Under subdivision two. in case of
reorganizations. consultations. mer-
gers, recapitalization, "or mere change
in identity. form or place Of organi-
holder in one corporation receives in
exchange for his stock or other Sc
curities owned by him stock or securi-
ties in the successor or new corpora
ton, no gain or loss shall be recog-
nized as result Of the transaction.
The foregoing provision does away
with the need for no par value stock
and all the doubt that attended the
issuance of such stocH. Let me not
be misunderstood. There are many
we'll known advantages in connection
with the employment Of no par value
4 lA1x r.
the tax phase OF the situation.) 1t
also does away with the hardship
which attended recapitalization. espe-
cially in connection with the receipt
of stock or other securities having q
par value or market value in excess OF
the stock or securities exchanged
therefor.
The law defines reorganizations as
including a merger. or consolidation
cincluding the acquisition by one cor
poration of at least majority Of the
voting stock and at least a majority
of the total number of shares of all
other classes of stock Of another cor
poration. or substantially Of the prop
critics Of another corporation"0. - A
number of those who have given care
full study to this language are inclined
to believe that it has made an other
wise very liberal and clear paragraph
somewhat ambiguous. The commits
sioner's Interpretation with reference
to the meaning of this language is
awaited with interest.
Questions and Answers.
O. UO1)-Have steady position and
come in on tie tax, but how do l in
clude the following:
Bought home in 1918 ........... s., 400
Made repairs and Improvements before
moving In ..................... 1,OO
$500
Sold in fall, 1921. for. $40 900
Commission for selling ..:............ $50
Net ", t5V
Received cash ................... 1.SOO
Took mortgage for balance .......... s. 80
To pay OF $3.50 every six months. and so far
have received $50. Plus the interest. $3.50.
which equals $400. Now, what Is included As
myAincome?
Salary Observation-Disclosures. s. 900
Cash on house Observation-Disclosures. 1.J0O
Interest and payment Observation-Disclosures. 100
$500
Salary Observation-Disclosures. 81 900
'front.' on house ..........-......... Ss5O
Interest NEUTRALITY-SUSPICIOUS.. -. $50
. $500
Do I only include interest?
i A. Your 1921 income consists Of
salary, interest and profit The profit
amounts to $2,850 ($s,750 less $6.900).
Q. 102)-(a) Can deduct from my