Evening star., 1932-11-20
|GAIME OF TRYING
To BEAT INCOME
TAX IS ON AGAIN
Selling to Establish Losses
Expected to Be Smaller
This Year.
GREATER DIFFICULTIES
FACED THAN IN PAST
Many Losses Already Charged Off
as Investors Seek to Reach
Favorable Balance.
Special Dispatch to The Star.

Special Dispatch to The Star.
NEW YORK, November 1e.-The an
nual game of trying to beat the Gov
ernment out of income taxes is again
on. This is the season when Federal
income tax payers begin to make a
close scrutiny of their lists of invest
ments in an effort to balance the profits
from business or services with losses on
securities, real estate or bad debts.
It will be somewhat more difficult to
effect a satisfactory adjustment this
year than in the earlier period of the
depression. A great many losses al
ready have been charged off. In the
taxable years 1880 and 1881 individuals
who had formerly drawn large checks
In favor of the United States Treasury
were able to show statements indicating
that they owed comparatively small
amounts or nothing to the Government.
This had serious consequences in both
years, when there was heavy reduc-
ton in income taxes compared with
1928 and 1929.
In 1928, for instance, the net profits
over losses were given in the report of
the Secretary of the Treasury as $4,-
322 900, 900, compared with $4,000, 900
in 1890. This decrease of about 81, ,230,-
000000 accounted for approximately
two-thirds of the change in the re-
ported net income.
New Schedule Awaited.
In 1880 income tax payments of in
dividuals and corporations were $2,411,-
100000. In 1881 they dropped to ST.
$50, 49,, 1888. In the fiscal year ended
June 80, 1882, they were $1,057, ,335, 1853.
The decrease In the return of 1881 from
that Of 1880 was about SIS per cent and
for 1892 it was AZ per cent less than in
1881. In the first four and one-half
months Of the fiscal year ending June
30, 1888, income tax collections have
amounted to $193,111 1894, against S345,-
627 1858 in the same period of 1882. The
reduction this year Is, therefore, slightly
higher in percentage than for the en-
tire fiscal year 1892. 1t should be men
TONED, however, that this Is not an ac-
curate guide to what may be expected
for the full fiscal year 1888, as the new
income tax schedule does not go into
effect until next January.
Under the revenue act of 1882 It was
ordered that "losses from sales or ex-
change Of stocks and bonds which are
not capital assets shall be allowed only
to the extent Of the gains from such
sales or exchanges" This obviously
limits the practice that had previously
been in vogue of indicating on income
tax statements as large an amount of
losses as was considered good business
Judgment and with these losses bring
ing down the amount of the taxable in
come. The new section of the law, how
ever, only applies to purchases effected
during the last two years, Securities
held prior to that time are understood
to have the same influence on the net
result, II the loss on them is taken, as
prior to the enactment of the 1882 reve-
nue. law.
Wedding Out Lists.
That there has been considerable SELL
ing of securities throughout this year in
order to modify or even to nullify the
effect OF incomes received by individuals
or corporations in 1882 is apparent from
a canvass Of Stock Exchange and in
vestment houses dealing in securities.
They find that their clients have been
going over their lists of stocks and
bonds, wedding out unpromising issues
and replacing these with others that
have better prospects. This process of
switching" has been done quietly and
has at no time had pronounced effect
on markets.
Usually the impact of liquidation Of
securities in order to establish losses
has been received by the market in the
latter part of November and through
out December. 1t has frequently been
the major factor in unsettling markets,
so that December had come to be ac-
cepted as month of low prices. Un-
doubtedly certain amount of selling
of this sort will occur in the next six
weeks. From present indications 1t
will be smaller than in previous years.
During 1880 and 1881 losses were
established primarily on stocks by those
who had bought them at high prices
in 1928 and in 1929. This year they
are concerned more than ever with
bonds, for the big decline in the bond
market has occurred in the last II
months. This is not only true of do
mestic, but Of foreign issues. Many
Of the latter have gone to default and
therefore are looked upon as unaccept-
able to investors, who have been clos
ing them out and taking their losses.
The situation in real estate Is differ
ent than in securities, for, in spite of
the depreciation in real estate values,
markets have been frozen and the num-
ber of actual transactions on which
losses could be registered has been COM
paratively small.
tCopyright. 1922
-s