Evening journal., 1922-02-20
TAX FORMS FOR
CORPORATIONS.
Provide Against Avoiding
Tax by Accumulation of
Profits
DUE THREE MONTHS
AFTER FISCAL YEAR

Forms for reporting net incomes
OF corporations. prepared in accord
ance with the Revenue Act of 1921.
are available at the Office OF Harry
T. Graham. Collector of Internal Rev
enue for the District OF Delaware.
The returns are due within three
months after the close of the twelve
month perior which corporations
have established as their accounting
period The period must end on the
last day Of some month, and a cor
poration cannot change its period
without the permission OF the Com
missioner OF International Revenue
Mr.. Graham. in a statement is
sued today, explains the working OF
the new law In so far as II covers
income tax on corporations. He
said:
In ascertaining net income sub
ject to tho income (norma) tax. the
corporation Is allowed certain speci-
nc credits. which include % the
amount OF war and excess profits
tax imposed by the United States for
the same taxable year, and CD in
terest received upon obligations OF
the United States and bonds OF the
War Finance Corporation which has
been Included In gross income. \
specific credit OF $4,000 Is also AL
lowed corporations when net in
come for 1921 was $500 or less.
The excess profits tax is comput-
ed on the basis Of the relation OF net
income to the invested capital OF
the corporation. This tax is in ad-
dition to the normal income tax OF
10 per cent. II is based on the net
income above a specific exemption
Of $4,000 and s per cent OF the in
vested 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 excess profits
credits and not in excess Of 20 per
cent. OF the invested capital OF the
taxable year (known as first
bracket) and 40 per cent. OF the net
income in excess OF 90 per cent Of
the invested capital (second
bracket) invested capital for the
taxable year is the capital actually
paid in for stock outstanding, in.
cluding the paid-in surplus or prohti
earned prior to the taxable year
which have not been distributed. Tn,
term Invested capital does not in.
clude borrowed capital.
Invested capital embraces TIVE
classes of assets, those known a.
admissible assets and those know
as inadmissible assets Admissible
assets are those which produce In
come that is subject to income tax
Inadmissible assets are those (othe
than obligations OF the United States
which produce income that Is ex
empt from income taxation.
~ 1.-THE Revenue Act of 1921 require
that all corporations having inadmis
sible assets must deduct from invest
ed capital a percentage thereo
equal 20 the percentage which tn
amount OF inadmissible assets Is o
the total amounts OF admissible ant
inasmissible assets held during tn,
taxable year.
The payment OF stock dividend
has no effect upon the amount OF in
vested capital Appreciation in good
Will and tangible property deter
mined by an appraisal against which
a stock dividend was issued cannot
be allowed as invested capital.
The revenue act Of 1921 provides
that every corporation. joint stoci,
Company, association and insuranca
company not specifically exempt
shall file a return. new and Inn
portant provision OF the new act Is
that where a corporation is formed
or availed OF 10 prevent the position
OF surtax upon its stockholders by
permitting its profits to accumulat,
Instead Of being distributed as di
dends. Il may be subject 10 a tax o
25 per cent, in addition 10 the nor
NAL tax Of 10 per cent. imposed OF
corporations"