The Washington times., 1922-02-17


per cent to IS per cent on net
incomes over 5000 for the year
! 1921.
Inc0me-Tax Facts.
| Section 2O2 Of the revenue act OF
1921 deals with the basis Of ascertain.
! ing taxable loss or deductible gain In
the sale or other disposition OF prop
erty. The act provides that cost
shall be the basis with three excep.
tons.
The first Is that In the case OF
property which should be included In
the taxpayers inventory. the last In
ventory value shall be the basis; for
example, II a merchant bought In
1920 certain article. and II was not
sold by him prior to December 81,
1920, but was included in his tnven-
| tory as Of that date and sold In 1921.
the taxable gain or deductible loss
would be the difference between the
selling price and the amount at which
/ the article was carried in his inven-
tory.
The second exception In that In
the case Of property acquired by gift
after December 81, 1920, the basis
! shall be the same as that which II
would have been in the hands of the
donor or last prec eding owner by
whom II was acquired by gift. For
example, man in 1918 acquired
stock in a corporation for 500 a
share, and kept 1t untf 1920, when
! II was worth 1920 a share. and then
gave II to his son, who In January,
| 1921, gave It to his wife. the stock
at that time being worth $3.50 a
share. II subsequently the wife sold
, the stock for 5000 share. her tax
able profit is not $50 but 500. the
gain over the cost to the last preced-
ing owner who did not acquire the
stock by gift.
In the case OF property acuired by
gift on or before December 81, 1920.
tn basis for ascert aiming gain or loss
! from a sale or other disposition
I thereof shall be the fair market price
| or value OF such property at the
time of acquisition. In the case or
property acquired by beQuest, devise
or Inheritance. the fair market price
or value of the property at the time
| OF It's acquisition il the basis for de-
termining gain or loss.
Subdivision c OF section 202 OF the
rev revenue act deals primarily
with the exchange OF property for
property. 1t is much more liberal
than the act OF 1918 in enumerating
| the classes of such exchanges which
do not result in gain or loss TO the
taxpayer. In general, there is no
gain or loss when property (other
than stock in-trade or property held
! primarily for saleI Is exchanged To-
property OF a like kind. When indi-
vidual or partnership transfers
| rropprty 10 a corporation and imme-
diatcly thereafter Is In control or
such corpOration-ownin at least
| so per cent OF the voting stock and
at least so per cent OF the total num-
her Of shares Of all other classes OF
stock Of the corpOration-no taxable
gain or no deductahle loss results.
Sales Prior TO March I, 1918.
In the case Of the sale Of property
acquired prior to March l, 1913, the
basis for determining taxable gain
or deductible loss is cost. but the
fair market price or value as Of that
date IL important. Generally to de-
termine taxable gain, the March I.
1913, value is used il more than cost,
! and to determine deduct hle loss.
| the March | value Is used IL less
| than cost. Taxpayers should read
carefully section ZOE o. of the act
on this point.
Following are concrete examples:
A bond bought In 1919 for $500 had
on March l. 1913, a value OF $3.50
and was sold in 1921 for 81 900. The
taxable gain in $3.50. the excess Of
the selling price over March 1, 1918,
value.
A bond bought in 1912 for 81 900
had a market value on March /,
1918. Of $3.50 and in 1921 was sold
for $500. The deductible loss Is
$3.50. the excess Of the market
value OF March 1. 1918, over the
selling price.
A bond purchased in 1912 for $500
had market value on March 1.
1913. OF 81 900 and was sold in 1891
for $3.50. In this case there Is no
taxable gain and no deduCtible loss.
A bond purchased in 1912 for
81 900 on March 1, 1918. had a
market value Of $500 and in 1921
was sold for $3.50. This transaction.
on a basis Of cost would result in an
actual loss Of $3.50 but owing to
the provisions Of section 202 nh) (3)
of the net the taxpayer can not
deduct such loss from his gross
income because the market value
on March I, 1873 was less than
selling price. Neither does he have
to report a gain on the transaction.