The times-news. [volume] (Hendersonville, N.C.) 1927-current, 1933-05-29
NEWSPAPERS OPINIONS
LOCKING THE STABLE

The American people are experts in locking the
| stable after the horse has been stolen-n making
investigations after an Akron has fallen into the
sea with it's cargo of naval and aeronautlcal ge-
muses. in holding coroner's inquests after some
body has been shot, and in looking at It's income
tax laws after one of its most illustriously rich
found a hole in it for two years through which
he could slip.
The circumstance that the Morgan firm had as
sets of over $780, OOO 900 at the beginning of 1881
and almost $425, 900 at the end of 1882, and
vet paid no income taxes, has directed attention
to the desrabity of plugging gaps in the tax laws
through which governmental revenue has been e3-
Gaping.
The Bureau of Internal Revenue distinguishes
between escapes from taxation, which are legal
and evasions which are illegal. The escape winch
has cost the most revenue has been the establish
ment of losses by sale of securities in order 20
reduce the net taxable income.
Prior to the 1882 revenue act, the loss from
securities sold might be deducted from net income
even though the sale was for that purpose. Inc
law required only that the transaction be bona
fde one and that the same practically ldentl-
cal securities be not repurchased within 80 days,
if the loss were to be deducted from income. This
SO-day provision still holds.
The 1882 revenue act allows loss from the sale
of securities to be deducted from net income only
to the extent of ofsetting gains from other such
sales, unless the securities have been held more
than two wears In the latter case, they are con-
sdered captal assets and loss from sale of them
NAV be Internationally deducted. Neither of these
provisions applies to dealers in securities-that IS
TO individuals partnerships or corporations who
purchase securities for resale not for speculation
Dealers as thus defined are considered business
men whose merchandise is securities. They are al
lowed to charge off depreciation in the inventory
of such securities even without SALE just as other
business men are allowed annually to charge OIL
depreciation in their particular stock in trade 1t
would seem, therefore, that the Morgan firm could
legally have established a considerable loss in its
holdings in 1881 without the sale of assets caused
bv the change in partnership on January z, 1881.
Another serious escape from taxation has come
from the practice of making gifts to reduce the
amounts of estates subject to inheritance taxation
The revenue act of 1924 taxed gifts at the same
rate as inheritances, but the gift taxes were re-
pealed retroactivey by the act of 1926. Gifts
made in contemplation of death were to be sub
ect to the inheritance levy, but the supreme court
invaldated the provision that gifts made within
two wears of death were to be ipsO facto consld-
cred in contemplation of death.
The most common form of evasion is failure to
file return. Persons bent on evasion may also
fail to include section of income amounting 10
less than 81 900 which need not be reported from
the source thereof There is considered to be little
escape from or vasion of the tobacco import, and
miscellaneous internal revenue taxes, except pos
siby the gasoline tax
The Morgan testimony may create new sent
ment for publicity of income tax returns, IN et-
feet in 1925 and 1926; also, for ending the capt.
tai net gains tax, which reduces the tax that would
otherwise be paid on the higher incOmes.-Char-
lotte Observer.