Evening star., 1922-01-06
ARTICLE I,


AFFORD aid to those taxpayers who do
not ordinarily consult an attorney or
an accountant regarding their tax
problems I shall endeavor to make
clear the provisions Of the revenue
act of 1921, which became a law by
signature of the President at 1855
on the afternoon of November 90, 1921.
shall give special attention to those
sections which affect the average
taxpayer rather than to the more
technical features of the law.
In passing, it may be we'll to point
out that the new revenue act follows
closely the wording and structure of
it's predecessor, the revenue act of
1918. The more important changes
may be summarized as follows:
A-Changes which are effective
from January I, 1921:
l. Every person who has a gross
income Of at least $1,000, regardless
of the amount of his net income, must
file return.
2. A married person living with his
wife Cor with her husband) or the
head Of a family having net income
of not over $4,000 is entitled to spe-
cific exemption Of $2,50O, instead of
$4,000. as under the old law.
3. The exemption for dependents
has been increased from 5000 to $500.
4. While the normal tax rates have
remained unchanged, the surtax rates
applicable to the lower levels of in
come have been slightly modified. Full
details will be presented In subse-
quent article of this series.
Net Loss for Any Year.
S. The net loss for any year, includ-
ing the year 1921. may be employed
for the reduction Of net income of the
succeeding year. and If the net loss
of the first year is not thus exhausted
the balance may be applied to the net
income of the second succeeding year
tions. still limited to Is per cent. a
provision has been included whereby
are deductible such donations to the
United States. to states, to municipal
tiles. etc, for public purposes. Con-
gress has again failed to permit such
deductions If made by corporations.
Z. Reserves for bad debts may now
be set up on the books of the tax
PAYER and debts partially uncollectible
| may now be written of for the part
known to be bad.
s. Citizens and domestic corporations
under certain limitations need not in
clude in gross income earnings made
from operations included in United
States possessions unless and until
such earnings have been received
within the United States. thereby
eliminating prior double taxation.
States Supreme Courts decision in
the Goodrich case, and to the solicitors &
statement to the court relating to the
applicability of the old law section
dealing with the basis OF determining
gain or loss on the sale or other dis
tv-AI Slps0 tr,
March 1, 1913 (present act, section
202b).
Exchange Of Property.
The balance of section 202, COM
mencinS with subdivision G. deals
primarily with the exchange Of prop
erty, and provides, much more lib
orally than did the 1918 act, for the
postponefnent of the determination of
taxable income until what has been
received has been converted into cash
or its obvious equivalent. Even If
that which has been received has a
readily realizable marketable value,
no determination is made, provided 1t
is substantially similar property to
that disposed of. And when an in
Idividual or partnership transfers prop
erty to a corporation and Immediately
controls so per cent or more of the
stock OF the vendee corporation no
taxable gain results.
10, Deduction of travelling expenses,
inclusive of the entire amount spent
for meals and lodgings, is a much
more liberal provision than in the 1918
law.
Ii. The arbitrary distinction made
under the 1918 law between so-called
personal service corporations and ordi-
nary corporations has been eliminated.
A safety valve provision has been in
serted isection 1882 providing for the
taxation Of these special corporations
as ordinary corporations for the years
1918 to 1921, inclusive, in case the
United States Supreme Court should
hold section Else Of the 1918 act uncon-
stitutional, and provision is then made