, 1922-02-23
ING INCOME TAX RETURNS
FOR THR YEAR 100l

Forms 1870 for reporting net in
come Of corporations for the year
1921. now are available at the Offices
OF collectors Of internal venue and
deputy collectors.
The federal tax on income of cor
porations Is divided into two parts,
income tax and excess profits al
The Income tax on corporations for
1921 Ia at the rate o 10 per cent of
the net income subject to tax. For
1892 and subsequent years. as pro-
vided by the revenue act Of 1921. the
income lax Is 12h per cent.
In ascertaining net income sub
ject to the income (normal) tax. the
corporation Is allowed certain spe-
cific credits. which include % the
amount OF war and excess profits tax
imposed by the United States for the
same taxable rear and (2) interest
received upon obligations Of the
United States and bonds of the war
n corporation which has been in
cluded In gross income. A specific
credit of of $4,000 is also allowed
corporations whose net income for
1921 was $685. 900 or less. Under the
revenue act of 1918. this exemption
was allowed all corporations regard
less of the amount of net income.
The act provides that II the net in
come is more than $4,000, the nor
NAL tax shall not exceed the tax
which would be payable IL the $4,000
credit was allowed, plus the amount
Of the net income In excess OF $685.
900.
Excoss Profits Tax
The excess profits tar is computed
on the basis of the relation of net in
come to the Investigated capital of
the corporation. as defined by Section
326 of the revenue act Of 1921. This
tax is in addition to the normal in
come 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 being known as
excess profits credits. The rates are
the same as for 1920, 20 per cent of
the net income in excess Of the ex-
cess profits credits and not in excess
OF 20 per cent Of the invested cap
ital OF the taxable year (known as
first bracket) and 40 per cent Of the
net income in excess of 20 per cent
of he invested capital (second, brack-
Ell. Invested capital for the taxable
yeHr Is the capital actually paid in
for stock outstanding. including the
paii-in surplus and earned surplus or
profits earned prior to- the taxable
yeGr. which have not been distribut-
ed. The term %"inevsted capital"
docs not include borrowed capital.
Invested capital embraces two
classes Of assets: those known as
admissible assets. Admissible
assets are those which produce in
come that Is subject to income tax.
1nadmissible 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 re-
cei"able and other tangible assets,
which produce income that is subject
to the income tax are admissible
assets. Assets such as stocks and
state or municipal bonds which pro-
duceincome that is exempt from in
come 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 in admissible assets Is of
the total amount of admissible and
inadmissihle assets held during the
taxable year. For example. the total
assets OF a corporation for 1921 was
inadmissible assets and $4,000 in
admissible assets. The average in