Detroit evening times. (Detroit, Mich) 1921-1958, 1942-05-29

u Delng met WIFI ClOSeSt SCTutiny
BY the internal revenue bureau
staff.
The treasury secretary cited i'm
stances where fragrant" VIOLA
tons of the income tax law were
but he refrained from
names pending approval Of
the House and Senate taxing COM
mittees.
PAID SELF MILLION ~
Specific instances he cited were :
Company A makes IN i'm
portant airplsae part. This
corporation In owned by one
man who hired himself ~ its
sales representative, His com
pensation In 1s41 was l.o6e. 80.
BY consolidating these earnings
with those 81 tho corporatiea,
we have blocked this obvious
attempt to divert prolts and
we have increased The corpora
tioa's income tax by S1,117.0oo.
Company B makes steei. All
stock I'm this corporstaon n held
by three families. Excessive
salaries were paid - sfficers,
who were also stoc1Kholders. The
reveaue agent has recoDmended
disaIlOwance Of 81, 100 In
salaries, and the company has
already agreed to n disaIIew-
ance Of $4,000.
Company G. makes vital
equ1pment for airplane pilets-
This corporstioa paid 81. 1O4 In
reat In one year . the wife Of
the president for using property
which had cost her $46,A12.
"A brother Of the principal
stockholder. without special
training or ability, drew . salary
of $l5,Oo0 . year and . SON and
daughter. just cut Of school, got
$500 . year each
tCompaay ID makes tools asd
dies This company In owned by
two brothers and their wives. It
paid dividends Of S4e, 900 In 1s4e
and 100000 I'm 1941, while
salaries totaling S1zS, 90 were
paid In 194I TO the president,
his wife and his brother"
To prevent success of such prac.
tees. Morgenthau told the com
mittee, the treasury is making
thorough Investigations along six
fronts, namely:
Cal.r,o~ aHl knwnS~~ xnsA
TO officers and employees De-
auctions claimed for greatly in
creased salaries and extraordi-
nary bonuses paid TO officers or
employees viii be disallowed I'M
less the taxpayer proves that
the payments are. in fact, for
services actually rendered. and
are reasonable.
PLUGS LOOPHOLES
2-Rents, royalties and other
payments TO shareholders. De-
ductibility of rents, royalties
and other payments to share
holders depends upon whether
such charges are In fact fair
and reasonable payments
and are not merely a device for
distribution Of profits.
3--Payments to profit shar-
ing or pension trusts. IL pay
ments TO such trusts are reason
able, their deduction will be
allowed If the payments are
unreasonable in amount. or il
the trust is not created exclu-
sively for the benefit Of en-
ployes, or II il Is a device TO
distribute profits to sharehold-
ers, the deductions win be dis
allowed.
Payments for repairs. The
deductibility for income tax pur-
poses of costs of repairs depends
upon whether the expenditure
is actually for repairs, or is in
fact a capital expenditure which
should be added to capital in
vestment or charged against re-
serve for depreciation.
5-Expenses or allowances
paid. to obtain government bust
ness. including fees paid to
Washington representatives or
for other professional services.
II such items are considered ex-
orbitant or unreasonable. they
will be disallowed as DEDUCTIONS
:. particular attention win be,
given to deductions for payments
which are against public policy,
and all such deductions will Be
disallowed.
0-Amounts paid for adver-
Using. The test of whether ex-
penditures for advertising are
deductible Is whether they are
ordinary and necessary and bear
a reasonable relation to the bus
mess activities in which the en-