Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-10-31
BY CHARLES r. SPEARE.
Special Dispatch to The Star.

special Dispatch TO the star
NEW YORK, October 31.-Facing
the Government in 1882 is a larger per-
centage of loss of revenue from IN
come tax payments than has occurred
this year. This fact presents one of the
many problems In Treasury financing
now imposing themselvesson Secretary
Mellon and his Treasury associates.
When next years income tax pay
ments are mentioned today in Wall
Street there is a shrug of shoulders and
a strong ntimation that minimum
of such taxes will be paid. The presi-
dent of one of the most important
New York banks said yesterday: II know
of few individuals and not many corr
peratiens that have had sufficient earn
ings or income in the past nine months
to bring them into the 1882 income
tax paying list. 1t does not look now
as though there would be enough i'm
provement in conditions in the final
quarter of this year to change this
outlook"
Tax Selling.
In the last three months of 1880
prominent factor in the heavy decline
in stocks was the selling of securities
by individual holders of them to es-
tablish losses for income tax purposes.
These losses were so large that it was
nOb UNCOMMON iUI ECOPkC WIZ A1dA
previously been in the higher income
tax brackets to whittle down their tax
able income to nominal figures. So
far this season little liquidation Of
this sort has appeared, though it was
in evidence in the earlier part of the
year. 1t is expected to develop again
during November and December, as
losses due to the shrinkages in values in
the past six months have again created
a condition to which undoubtedly many
investors will resort in order to avoid
giving the Government any consider
able portion of their capital funds.
The position of the corporations and
of the banks with respect to income
tax payments next year is less favorable
to the Government than it was after
a review of their 1880 statements. Not
many of them have been able to make
a profit. Where they have been fortu-
nate III doing this from their regular
operations, they have had, as an offset,
losses they were compelled to take in
securities to meet obligations that nor
mally would be accommodated by bank
loans. In the case of banks, depre-
citation on securities sold in order to
build up their cash resources took
place. The reduction in the item of
railroad taxes alone will be a substan-
tial one on account of the continuing
of carriers.
What has been taking place of late
is the establishment of tax losses
through the sale of railroad bonds
and foreign dollar obligations The
weight of liquidation ON the bond mar
ket this year has been relatively more
severe than on the market for stocks.
During 1880 the average decline in do
nestle bonds was only about points.
In foreign issues it was less than 8
points. A new low level for domestic
issues has been reached this week at
figure IS points on the average below
that of last January, while foreign
bonds are off an average of about 20
points for the year. Situations have
developed in both American and foreign
issues which have led to a permanent
abandonment of them by longtime
holders and at losses which will play an
important part in their income tax
statements to be filed next March, which
will find in the list of losses more items
covering liquidated bonds than ever be-
fore in their experience.
4 Shifting Investments.
One of the common practices in the
sale of securities to establish tax losses
is to balance this transaction with the
purchase of another issue at about the
same price or the same income return
but of security whose prospects for
appreciation are regarded as superior
to those of the stock or bond that has
been sold Some of this shifting has
been going on in the stock market;
more of it in the bond market, and
particularly, in the department of for
eign dollar obligations. This explains
some of the remarkable advances that
have taken place lately in a number of
the South American issues, where bonds