Atlanta tri-weekly journal. [volume] (Atlanta, Ga.) 1920-19??, 1924-12-11
GIFT TAX BRINGS
MUCH OPPOSITION;
AMENDMENT LIKELY
ny DAVID LAWRENCE

BY DAVID LAWRENCE
tSpeciai Leased Wire to Tie Journal-Copy'
right, 1870
WASHINGTON, Dec. Nv hhe
tax reform is not one of the adj
ministration proposals for this SEES
sion of congress, there is unquestion,
ably a good deal OF sentiment in con
oress for amendment of the present
revenue act where specific harm is
being done in the application of the
law.
Much has been said about the
publicity provisions of the law, but
there is another phase, namely, the
gift tax, which is coming in for wide
spread criticism. Under the present
act, every gift of more than $500, to
any one person, even to members OF
ones immediate family, must be re
ported and is taxable If there already
has been given away $4,000.
The tax applies to corporations,
too. and the question has arisen
whether companies will be inclined
hereafter to give pensions to the in
iurcd or employees retiring at old age
or to pay bonuses if these gifts are
to be taxed and the total expense
thus increased. If company had
a large number. of employees the to-
tai taxes would be large, even though
the bonus to the individual employe
might be small.
This tax on generosity, if not
philanthropy in some instances, to-
eether with the penalty that it inn
poses on the rightful distribution by
companies of sums their employees
have really earned by faithful SerV-
ice, is all due to an effort to prevent
avoidance of tax payments by the
few who give their money to mem
bers of their family or close friends
so as to escape high surfaces.
Ineuunai;.e Features
Some of the inequitable features
of the present law are to be noted
in the case of a man who gives away
$50 900 a year to another for ten
years. That giver pays no taxes nor
does the recipient. Since the tax is
on an annual basis, only the giving
of $4,000 a year would avoid taxa
ton and yet at the end of ten years
a total of $500 600 would have been
donated. Should a corporation az
tempt to give away 100000 in any
one year in bonuses TO it's employees,
the total tax would be $4,000. Yet
in each case 100000 is the amount
Of the gift.
The sift tax provision was insert
cd in the present law on the floor
Of the senate and was not referred
t. any committee.
"In consequence. says Secretary
Mellon, cit was never thoroughly
studied and not tied up with othtr
provisions of the law AS an eX-
ample, if a donor should give away
a piece of property which cost some
$50, 900 and which at the time OF
the gift was worth 500, coo, he is
taxed on the basis of 100000. If
the donor should then sell this prop
erty for 10000 he would be taxed
or the basis of what the property
cost the donor and be obliged to
report $4,000 profit for income tax
purposes although the property was
sold at the same price which fixed
its value for taxation as a gift.
aside from the grave conStitu
tional question of the right of con
gress to tax gifts at all. the gift
faX is an excellent illustration of
the futility of trying to prevent
avoidance of excessive taxes and still
not penaliZe legitimate transactions.
Under the statute, if property is
sold or exchanged, the difference be-
tween the value of the property and
what is received is considered a gift.
Sc il a seller makes a bad bargain,
he suffers not only his loss on the
bargain but he must pay a Gift tax
on this loss. The more he has lost
the more tax he has to pay. The
duty devolves upon the taxpayer to
report every transaction where he
received less in value than he gave,
and upon the bureau of internal revc-
nue., therefore to pass upon innu-
merable transactions
The secretary Of the treasury says
examples of the "unSOund nature of
this attempt to close loopholes for
the avoidance Of excessive taxes
could wen be multiplied. and that
it is better, to adopt reasonable rates
of taxation which do not compel
avoidance. and to avoid indirect and
artificial restraints upon usual and
proper transactions-sOm is
wrong with our tax policy If legiS-
lation such as this is necessary to
make the collection of revenue eff
fective.'
Consider Amendments
The senate committee which is in.
VeStigatin@ the administration of The,
bureau of internal revenue is head
ed by Senator COuZenS, of Michigan
who has already found many things
wrong with the gift tax and his com
mittee is considering the recommen.
dation in its reports of several
amendments
1t may be n year before the whole
problem of tax reform is tackled in
earnest, but the ineQuties of the
present law are every day demand
ing attention as the new law passed
by congress last spring becomes
more familiar to the tax payers and
the chances are they will learn their
first lessons about its unique pro-
visions from now on as they BEGIN
to prepare for the returns that are
payable next March on transactions
of every sort occurring in the year
ending this month.
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