Evening star. [volume] (Washington, D.C.) 1854-1972, 1926-03-10
ARTICLE III.

The Government. in suppressinc in
come tax frauds practiced by large
corporate enterprises. calls into play
it's highest degree Of detective ability.
together with the best accountin. and
engineering skill on the Government
pay roll. The line of defense thus
este blished by the Government j. put
TO the test. in fight against schemers
among men who use their CONNER
cial "a gacity to cheat the Treasury
out of taxes The Government s
qua rdians, alert to protect the Treas
ury against losses which otherwise
would he sustained, must be on their
toes to catch this variety of tax
dodser, for they are ever resourceful
and backed by ample money and
brains to defeat them at every move.
Rut the old curbstone saying. THE
bigger they come. the harder they
fall" fits aptlN the cases Of many of
these big feIlows-the master minds"
that invent and direct the execution
OF plans and plotting to underestimate
and underpay in tax matters. They
are all powerful! in certain fields of
industrial endea vor Rut they fail
miserably trying 10 heat Uncle Sans
old law Of tax averages. The record
shows an overwhelmingly large ma
iority Of such violators fall into the
laws clutches. After hard battles
sometimes bitterly fought in the
courts. they usually suffer the penal
ties imposed by law.
Specimen Case.
Here's specimen case. revealing
how many of them plot their tax
chea ting. so far as their tax liability
at Washington is concerned:
A large Eastern manufactures.
doing business as an individual d,
sought to escape income tax by incor-
poratin9 his business He retained
80 per cent Of the stock and gave 4
per cent to two employees. Having
elected himself president and treas
urer. with sole authority to sign cor
poration checks. the business went
along swimmingly for three Years
The weak spot in his system was that
he manipulated his hooks so that
when he reached the taxpa wing period
the corporations ledsers showed no
balance in the TREASURY. The business
showed low profits. despite very
large volume of transactions
Experts Of the Internal Revenue
Bureau. In careful audits of the COR
porAtfons tax return. scented trick
cry by the directing head. Other con.
Germs. doing similar business and no
less prosperous, were meeting their
tax obligations honestly But the
suspected corporation genius had not
quite covered mp his tracks. He
almost fooled some of the best men
the Government detailed on the case.
First. investigation seemed to reveal
nothing illegitimate. Wider search
of his records. however. revealed his
system. He had been able TO strike
balance on his books by entries of
checks given to individuals and firms
that were nonresident. He also used
large stock Of fake bllheads. with
names and addresses Of fictitious PEG.
pie and concerns. with which, for
bookkeeping purposes he was sup
posed to have had transa actions. He
prepared bills and mailed them to his
company. Approving the bills. he
would issue checks. crediting the
amounts on the books and deducting
them as part of operating expense.
Withdrawing an equal sum from
bank. he would invest in bonds,
which he secreted. BY failure to de-
stroy his crime.tainted checks, the
man lett Tor the InteHlgence Unit
agents the connecting link in a chain
of damaging evidence that ruined
him. His method had enabled him
to shrink the corporations bank bal
ance by 100000. The Government
assessed him 100000 in back taxes
and penalties, which he promptly
paid.
Double Sets Ut Books.
other corporations have been
caught in attempts to deceive the
Government by keeping double sets
Of books in their accounting offices.
Those who resort to this trick have
secret hiding place for their true"
books. while their juggled books are
kept ready to display to Government
field auditors or others especially as
signed to check up on such concerns.
A recent case was that of a New
York corporation. widely known for
it's manufacture of a much-used COM
modify. The clue in this case reached
the Treasury in roundabout fashion