Evening star. [volume] (Washington, D.C.) 1854-1972, 1956-07-21
etc Stockholders
Told Of Profit Plan
New Company
Would Benefit
From Losses

The Capital Transit Co. is
pointing out to its stockholders
that a new company which is
planned would be able to turn
recent losses into profit from tax
deductions.
The proposal to continue in
business under the name of The
Universal Corporation will be
voted on at a special stock
holders meeting August 8. That
meeting has been called to vote
on the sale of the transit COM
pany's assets to the o. Ray Chalk
group for $13,540,000.
The company in its statement
to the stockholders says that it
will have substantial net operat-
ing losses which should be avail
able to Offset earnings in the
next four or five years, thereby
saving corporation income taxes.
Losses of SIS Million
The company estimates these
losses at $15.581 ,861, which may
be turned into tax benefits. The
offset of losses against earnings
in succeeding years, is a routine
matter permitted by the tax
laws.
1t is not unusual for stock
holders of a company which has
been losing money to be able to
sell their company at an adj
vantageous figure because of the
tax advantage to the purchasing
company.
If the company does not con-
Itinue in business but liquidates
its assets it will have for di-
vision among the stockholders
the purchase price in cash and
notes to be paid by the Chalk
group. These amount to $14.10 a
share.
The advantage of continuing
in business is the possibility of
IoffSetting the losses against pos
Sible future earnings. The COM
pany'S statement puts it this
way:
Although dividends will con-
tinue taxable to the stockholders,
the fund available for dividends
should be greatly enhanced as
the result of freedom of earn
Iings from tax at the corporate
level"
Taxes as High as 81 Per Cent
Corporate income taxes run as
high as Is per cent.
The company said that ace
lcording to the books and tax
records of the company there
was a $4,48l,869 loss for 1855.
This, presumably. was the re-
suit of writing off the value. of
The electric trolly system.
These losses, the company
said, may be available to Offset
earnings through 1860.
The 1856 loss is estimated at
$11.5 million which could be off,
set against earnings through
1860.
1.-The amount of such loss in
cludes cost of franchise on which
agreement must be reached with
the Internal Revenue Service be-
fore the exact amount of loss
available can be known" the
lcompany's statement says.
Franchise Included
The 1856 estimated loss is
said to include between 81 mil
lion and SIS million in writeoffs
of the value of the electric rail-
way property. The remainder
represents the estimated value of
the franchise which the COM
pany loses on August IA.
The company has filed an APP
plication for the new name. Uni
versal Corp, with District au-
thorities. Incorporation would
follow later if that is authorized.
Plans to continue in business
would have to be authorized by
holders of two thirds of the &c.,
900 shares. The same is true Of
the authorization of the sale Of
the present company's assets.
The company's statement to
the stockholders says that direc-
tors own or control 357,704
shares, or 37.3 per cent. Effec-
tive control is believed to exceed
that number of shares.
Broad Authorization
The proposed charter for the
new corporation would, as the
name Universal implies. author
lie the company to do almost
anything except practice den
tistry. Such catch-all provisions
are not unusual.
1t would be able to manufac-
ture, buy, sell. import and ex-
port, engage in the business of
developing and applying atomic
energy produdcts," run q chicken
farm, operate television and ra-
dio stationss etc.