Great Falls tribune. [volume] (Great Falls, Mont.) 1921-current, 1922-10-16
Recent Stock Dividends
of Standard Oil Are
Made for That Reason.
Corporations Must Dis
pose of Surplus Profits
or Pay Big Tax.
By HARDEN COLFAx

Washington, Oct. 15.-Standard OH y
greatest stock dividend, declared this
week, is appraised here as the first
of many fine melons ripening in the
Wall street hatch, all of which must
be plucked within the next four and
one-half months to escape the heaviest
outstanding penalty the revenue law
imposes 25 per cent tax on undis-
tributed earnings.
Treasury officials expect many more
extra dividends. Whether they will be
in stock or money will be for eacn
Individual corporation to decide. AS
stock dividends are not taxable, how
ever, the opinion is that most of the
distributions will be by this method
Officials here have received definite,
although wholly informal intimations
that scores of other corporations, many
of large capital stock, will begin at
once to declare extra dividends. Inc
melon cutting is expected to reach It's
height soon after the first of the year
and to cease altogether by March I, the
time limit fixed by law for the distrl-
button of 1922 profits.
Have Until March
Failure to distribute the 1922 earn
ings in full, officials point out, within
two months after the first of the year
will bring corporations under the pro-
visions of section 800 of the revenue
law, which provides:
THAT if any corporation =.
availed of for the purpose of prevent
ing the imposition of the surtax upon
it's members of stockholders through
the medium of permitting its gains and
profits to accumulate instead of being
divided or distributed, there shall be
levied, collected and paid for each
taxable year upon the net income of
such corporation, tax equal to % per
centum of the amount thereof, which
shall be in addition to the 10 per cent
corporation tax provided elsewhere In
the law"
The law further provides that ''the
fact that gains or profits are IN such
case permitted to accumulate beyond
reasonable needs of the business shall
be prima facie evidence of q purpose to
escape the surtax.
''The commissioner of internal reve-
nue. is empowered to determine where
an accumulation is reasonable or not.
That provision in the law is inter-
preted here as meaning that all cor
porations with large earnings shall, If
they so desire, submit their cases to
the commissioner of internal revenue
wherever there is doubt in the di-
rectors' minds as to the reasonable
ness of the accumulation of profits
and that he shall be the judge as to
where such earnings are to be dis
tributed or held intact.
C,hrzE&4nd
No corporations as yet have sub
mitted their cases to the commissioner,
so far as is known, but many have
made public financial statements indi-
eating that they come within the class
of taxpayers liable to the penalty.
Among the concerns which are reputed
to have made large profits this year
are numerous corporations IN the
non-union coal, iron and steel, oil,
lumber, building construction and ma
terials industries. The most consplcu-
Gus of these, perhaps, is the United
States Steel corporation, which is
known to have enjoyed an extremely
prosperous year thus far.
The last annual financial statement
of that corporation discloses an ac-
cumulated profit -and-loss surplus of
nearly $500,000,000, the outgrowth of
the policy of building reserves, fol-
lowed consistently since the corpora
ton was organized. The tangible value
of the common stock, on account of
this policy followed for more than 20
years, amounted to more than $3.50 a
share, the statement discloses. In
other words, if the company were to
wind up its affairs and dispose of its
assets at fair price, there would be
$3.50 with which to redeem every out
standing share of common stock,
worth at par S100.
Rail Business Increases
Outstanding developments of the
week also included an approaching
climax to the rail situation, con
tinued increase in the volume of busi-
try. and a measurable growth in the
amount of money lent by banks to busi
ness organizations with which to ex-
their enterprises.
Shortage of railroad cars now totals
more than 10000 and has become
acute and threatens to retard greatly
the expansion of business for the time
being. Car loadings climbed still
higher, almost touching the 100000
car mark.
The federal reserve board weekly
statement shows that fresh loans,
totalling about S64 100000, were made
during the week by banks to business
interests. An increase of more than
$50. .O0O, 900 in the amount of money
on deposit subject to check at the chief
banks also was noted. There are still
ample funds for business needs, but
interests rates are showing a tendency
to harden under the pressure of in