Evening capital and Maryland gazette. (Annapolis, Md.) 1910-1922, 1922-02-21
More Facts Pertaining To Income
Tax--As To Corporations

that ali corporations having inadmis-
sible assets must deduct from invested
capital "a percentage thereof equal
10 the percentage which the amount
Of lnadmisslhle assets Is OF the total
amount Of admissible and inadmissi-
Die assets held during the taxable
year" For example. the total assets
Of a corporation for 1921 was $500
900. OF which $50. 900 was in inadmis-
sible assets and $50. 900 in admissible
assets The average invested capital
was $4,000 Applying the above
rule, the invested capital must be re-
duced by 20 per cent 1.-THE percentage
OF the inadmIssible assets, sl5O.OOO.
10 the total assets. S200.O0O). The
reduced invested capital. therefore.
will be $50. 900 Uhe invested capital
less $50 900 as per cent of the in
vested capitaD or 5000. Where a
corporations income Is reported on
cash receipts and disbursements
basis. accrued items cannot De taken
into consideration in computing its in
vested capital.
( The payment OF a stock dividend has
no effect upon the amount of invested
capital The capitalization OF current
earnings does not increase the invest
ed capital Appreciation in good will
and tangible property determined by
an appraisal against which a stock
/ dividend was issued cannot be allow
/ ed as invested capital The value of
/ tangible property paid in for stock or
/ shares In an amount as limited by
/ Section 1926 of the revenue ACT of 1921
may be included in invested capital
/ The revenue act of 1921 provides
I that every corporation. joint stock
/ company. association and insurance
/ company not specifically exempt shall
file return. There shall he included
in the return a statement which will
enable the Commissioner OF Internal
Revenue TO determine the portion OF
the earnings or profits taxable or non
taxable) accumulated during the tax
able year for which the return is
made. which have been distributed or
| ordered 10 be distributed To it's stock
! holders during such year.
| A new and important provision OF
/ the revenue act OF 1921 is that where
corporation is formed or availed of
/ TO prevent the imposition of sur
tax upon its stockholders by permit
! ting its profits to accumulate instead
] OF being distributed as dividends, il
Z mo hn .tthf AZ tnv 80
cent in addition TO the normal tax OF
I 10 per cent imposed on corporations
The stockholders. however. may agree
with the Commissioner of Internal
/ Revenue that the profits OF the cor
poration shall be charged TO them in
the same manner as the distributive
/ share OF the partners, and pay the
tax as partners. When the corpora
/ ton is mere holding company or
IFS profits accumulate beyond the nor
NAL needs of its business. this shall
be prima facie evidence of a pur-
pose TO escape the surtax rea-
sonable accumulation of surplus. how
ever, is permitted
Returns must be filed with the col
/ lector OF Internal Revenue for the dis
trict in which the corporations prin-
cipal place of business is located
Corporations must file their returns
on the basis of their existing account
ing period which is established a the
l2-month period ending on December
81 or upon the last day OF some month
other than December. A corporation
cannot change its accounting period
without the permission of the commits
sioner