Toledo union journal. [volume] (Toledo, Ohio) 1942-current, 1950-09-29
How Cheat
Uncle Sam
Make Your Son, 3,
A Business Partner
7 ET'S PUT it this way: no.
II hodv Iikae m nov taves

7 ET'S PUT it this way: no.
II body likes to pay taxes.
Throw a five dollar bill on
the counter and you take
something home - a roast of
beef, a couple of shirts, or a
bottle of bonded bourbon. But
pay five dollars in taxes and
what do you have - a tiny
portion of somebody's salary
in Washington, a bit of gov
eminent service or the head
light on a jeep in Korea. What
ever you have it's pretty re-
mote, however necessary.
But we pay our taxes. We
grumble a little and take all
the leeway the Bureau of In
ternal Revenue will give us.
But we pay up and conclude in
the end that we get something
pretty nice for our money.
Consequently we're startled
when we learn that through
elaborate legal tricks m e
people are cheating our gov
eminent out of millions of
dollars a year.
Take the family partnership
trick, for instance.
The Senate just okayed a
provision making this trick le-
gal, y reversing SUI
preme Court decisions out
having it. Senate's action came
despite efforts by Senators
Paul Douglas, Hubert Humph-
rey, Herbert Lehman and Bill
LANCER to block it.
Here's how the trick works,
according to Humphrey.
Just before the last war
started, Congress upped the
surtax on individual incomes
and slapped an excess profits
tax on corporations. Mean
while, lots of individuals and
corporations began making
r amounts OF money
than ever before. Paying all
those taxes, paying their share
of the wars cost, was a little
more than some of these peo-
pie thought they should be
asked to do.
So people who always had
operated their businesses as in
dividuals suddenly decided to
take in their wives and infant
children as partners" Others
who had operated their bust
nesses as corporations dissolv-
ed the corporations and form
ed the same kind of partner
ships" The trick paid off when
the n C e tax man came
around.
The income tax is a gradu-
ated tax. The higher the in
come, the higher the tax rate.
The government takes more
taxes from on $4,000 income
than from two $4,000 incomes,
more from one $50 900 income
than from two $4,000 in
comes. So if a man making
$50 900 a year could assign
part of his income to his wife
and part to his three-year-old
son he could cut his taxes
way down. Paul Douglas says
that if the Senate bill is allow
ed to stand the government
will lose 500 million a year.
That's three times as much
money as Congress gave the
President for Point Four.
During the war, the Bureau
of Internal Revenue and the
courts cracked down on these
family partnerships. The
courts said such deals would
not be recognized for tax pur-
poses unless the partners were
genuine partners. A wife could
not hang around the country
club playing bridge and be a
partner" in a business, the
courts ruled. BY the same tok-
en-, a three-year-old bay play
ing with his blocks on the
floor couldn't be considered
to be a partner in a construc-
ton business. But the Senate
voted to let these deals be
legal. 1t went even farther. 1t
legalized them back in 1889
for anybody who had a law
yer who could keep a case
open that long. That means
that the government may have
to pay back a lot of money.
Good for a three-year-old to
get a taste of business, pro-
ponents of the trick argued.