The Chickasha daily express. (Chickasha, Indian Territory [Okla.]) 1899-current, 1922-02-18

Forms 1920 for reporting not In
come Of corporations for the year
1921. now are available at the offices
OF Collectors of Internal Revenue
and Deputy Collectors. A. G. Alex.
ander. district collector. announced
The federal tax on income OF cor.
porations is divided into two parts,
income tax and excess profits tax.
The income tax ON corporations for
1921 is at the rate OF 10 per cent
OF the net income subject TO tax.
For 1929 and subsequent years. as
provided by the Revenue Act of
1921, the income tax is 12h per
cent In ascertaining net income
subject to the income (normaD tax.
the corporation is allowed certain
specific credits, which include "a
the amount of war and excess prof
its tax imposed by the United
States for the same taxable year,
and (2) interest received upon OBJ
legations of the United States and
bonds OF the war finance corpora
tion which has been included in
gross income. A specific credit of
$4,000 is also allowed corporations
whose net income for 1921 was
$4,000 or less. Under the Revenue
Act or 1918. this exemption was al
lowed all corporations regardless of
the amount of net income. The act
provides that If the net income is
more than $4,000, the normal tax
shall not exceed the tax which would
be payable If the $4,000 rredit was
allowed, plus the amount Of the net
income in excess of s25,00O.
Excess Profits Tax
The excess profits tax is comput-
ed on the basis of the relation of
net income to the invested capital
of the corporation, as defined by
Section 326 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
8 per cent of the invested capital
for the taxable year, these amounts
beinng known as excess profits cred
it's The rates are the same as for
1920, 20 per cent of the net income
in excess of the excess profits cred
its and not in excess of 20 per cent
Of the invested capital of the tax
able year (known as first bracket)
and 40 per cent of the net income
in excess of 20. per cent of the in
vested capital (second bracket). In
vested capital for the taxable year
is the capital actually paid in for
stock outstanding, including the paid
in surplus and earned surplus or
profits earned prior to the taxable
year, which have not been distrib-
uted. The term invested capitaP
does not include borrowed capital.
Invested capital embraces two
classes of assets those known as
admissible assets and those known
as inadmissible assets" Admissible
assets are those which produce in
come that is subject to income tax.
Inadmissible assets are those (other
than obligations of the United
States) which produce income that
is exempt from income taxation.
For example, cash, real estate, bills
receivable and other tangible assets,
which produce income that is sub
ject to the income tax are admissi-
BILE assets. Assets such as stocks
and state or municipal bonds which
produce income that is exempt from
income tax are inadmissible assets.
Deductions from Invested Capital
The Revenue Act Of 1921 requires
that ALL corporations having mad
missible assets must deduct from in
vested capital "a percentage thereof
equal to the percentage which the
amount of inadmissible assets is of
the total amount of admissible and
inadmissible assets held during the
taxable year." For example, the to-
tai assets of corporation for 1921
was 100000 of which $15O,000 was
in inadmissible assets and $4,000
is admissible assets. The average
invested capital was $4,000. Apply
ing the above rule, the invested cap
ital must be reduced by rs per cent
(the percentage of the inadmisible
assets, $15O,OO0, to the totatl assets
s2OO,OOO). The reduced invested