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relates, in the value of the property in respect of which such deduction is claimed that arises from exhaustion, wear and tear, or obsolescence out of the uses to which the property is put, and which loss has not been made good by payments for ordinary maintenance and repairs deducted under the heading of expenses of maintenance and operation or in the ascertainment of gross income. This estimate should be formed upon the assumed life of the property, its cost value, and its use. Expenses paid in any one year in making good exhaustion, wear and tear, or obsolescence in respect of which any deduction for depreciation is claimed must not be included in the deduction for expense of maintenance and operation of the property or in the ascertainment of gross income, but must be made out of accumulative allowances deducted for depreciation in current and previous years.

Inventories. It will be noted that an inventory or its equivalent of materials, supplies, and merchandise on hand for use or sale at the close of each calendar year is essential in the case of certain corporations in order to determine the gross income, and in case of other corporations to determine their expenses of operation. Where such inventory or its equivalent was not taken at the close of the year 1908, a supplemental statement showing such inventory approximately must be submitted with the return on the regular form. Such supplemental statement shall be verified under oath by the treasurer or principal financial officer in submitting the same.

Explanatory Note.-Where any item under any of the deductions is of an unusual nature a special explanatory note referring to such item shall be made and attached to the form at the appropriate place and made a part thereof by proper reference.

Contents of Return.-Each return is required to set forth:

(a) The total amount of the paid-up capital stock of such corporations, joint-stock companies or associations, or insurance companies, outstanding at the close of the year;

(b) The total amount of bonded and other indebtedness of such corporation, joint-stock company or association, or insurance company, at the close of the year;

(c) The gross amount of the income of such corporation, joint-stock company or association, or insurance company, received during the year from all sources, and if organized under the laws of a foreign country, the gross amount of its income received within the year from business transacted and capital invested within the United States and any of its territories, Alaska, and the District of Columbia.

Such returns are also required to set forth the items claimed as deductions (Article 4), also the net income after such deductions have been made.

Forms Prescribed.-Under the authority conferred by this act forms of return have been prescribed, in which the various items specified in the law are to be stated.

Blank Forms.-Blank forms of this return will be mailed to collectors and should be furnished to every corporation, not expressly ex

cepted, on or before January 1, 1910, and on or before January 1st of each year thereafter. Failure on the part of any corporation, jointstock company, association, or insurance company liable to this tax, to receive a blank form will not excuse it from making the return required by law, or relieve it from any penalties for failure to make the return in the prescribed time. Corporations not supplied with the proper forms for making the return should make application therefor to the collector of internal revenue in whose district is located its principal place of business. Each corporation should carefully prepare its return so as to fully and clearly set forth the data therein called for.

Bookkeeping. No particular system of bookkeeping or accounting will be required by the Department. However, the business transacted by corporations, joint-stock companies, associations, or insurance companies must be so recorded that each and every item therein set forth may be readily verified by an examination of the books and accounts, where such examination is deemed necessary.

Calendar Year. As the law specifically provides that the tax imposed shall be computed on the net income during each "calendar year," returns of income based on any period other than the calendar year cannot be accepted.

Newly Organized and Liquidating Corporation. Corporations Corporation.-Corporations organized during the year or going into liquidation during the year should nevertheless render a sworn return on the prescribed form.

Record of Returns.-Collectors will see that as soon as each return made by any corporation is received a record on Form 632 is made, setting out the name of the corporation making the return, the nature of the principal business transacted, the location of principal place of business, with net income reported, and the date on which such return was received. The date of receipt in each case will be noted in the last column of that form, in which column the list on which assessment is made will also be noted. For this purpose the column so used may be subdivided, or the date of receipt of such returns may be noted in red ink over the date entered therein as to such assessment list.

Special Agents.-Any collector will, whenever it appears advisable to do so, request that a revenue agent be specially designated to collect and furnish this office with such other data as, in his judgment, is necessary to determine the actual amount of tax to be assessed against any corporation, joint-stock company, or association which under the law set forth in these regulations is required to make return.

Report of Noncompliances. Such returns are required to be made. not later than March 1st of each year, and any failure to comply with the law in this regard should be at once reported by the collector to the Commissioner of Internal Revenue.

Canvass of Districts.-To enable collectors to determine whether all returns due have been received, a careful canvass of each district should be made, and all corporations, joint-stock companies, and associations subject to the tax imposed should be listed as above directed.

Classification. For statistical purposes all such corporations, jointstock companies, and associations will be classified as follows:

Class A: Financial and Commercial.-Including banks, banking associations, trust companies, guaranty and surety companies, title insurance companies, building associations (if for profit), and insurance companies not specifically exempt.

Class B: Public Service.-Such as railroads, steamboat, ferryboat, and stage-line companies; pipe-line, gas, and electric light companies; express, transportation, and storage companies; telegraph and telephone companies.

Class C: Industrial and Manufacturing.-Such as mining, lumber, and coke companies; rolling-mills; foundry and machine-shops; sawmills; flour, woolen, cotton, and other mills; manufacturers of cars, automobiles, elevators, agricultural implements, and all articles manufactured wholly or in part from metal, wood, or other material; manufacturers or refiners of sugar, molasses, syrups, or other products; ice and refrigerating companies; slaughter-house, tannery, packing, or canning companies, etc.

Class D: Mercantile.-Including all dealers (not otherwise classed as producers or manufacturers) in coal, lumber, grain, produce, and all goods, wares, and merchandise.

Class E Miscellaneous.-Such as architects, contractors, hotel, theater, or other companies, or associations, not otherwise classed.

When classified as above indicated the names of the various corporations, companies, and associations will be listed alphabetically, and will be numbered consecutively (commencing with No. 1 in each class), and in forwarding returns or papers subsequently rendered or submitted. by such corporations or companies collectors will see that the same have placed thereon the designating class letter and number corresponding with those noted on the lists herein required to be furnished.

Assessment and Notice.-Upon the receipt and verification of the returns rendered, the tax as ascertained to be due will be assessed as above prescribed; and notice of such assessment will be given and subsequent demand made (if necessary) on Forms 17 and 21, respectively. In case of failure to make returns within the time and manner required by the statute, or where the return rendered is found or believed to be incorrect, action in such cases will be taken, as provided in paragraph 4 of the law.

The additional tax imposed by paragraph 5 of the law for failure to make the required return, or for making a false or fraudulent return, will in all cases be assessed as therein provided.

Collection of Tax.-The tax assessed under the provisions of this act will be collected and will be receipted for on Form 1, as in the case of other assessed taxes. Unless paid within the time fixed by the statute, notice and demand should be at once issued, and, in case of nonpayment, distraint proceedings should be instituted without delay.

SYNOPSIS OF DECISIONS OF TREASURY DEPARTMENT RELATING TO SPECIAL EXCISE TAX ON CORPORATIONS.

The Corporation Excise Tax of 1909 is re-enacted and modified by the Income Tax Law of 1913. The following synopsis of decisions of the Treasury Department under the old law is inserted as a guide to the rulings which will probably be made under the new law, in so far as it re-enacts the old:

CLASS OF CORPORATIONS, ETC., SUBJECT TO TAX.

1. Tax Applies to All Corporations.-The tax imposed by the act applies to all corporations, joint-stock companies, and associations, and every insurance company except those specifically exempted, without reference to the kind of business carried on.

2. Return Though Net Income Less Than $5,000.-Every corporation, etc., not specifically enumerated as exempt shall make the return required by law, although its net income during the year may not have exceeded $5,000. (Opin. Atty. Gen., Jan. 24, 1910.)

3. Exempt Corporations to Make Return.-Corporations claiming special exemption should nevertheless make return (in blank, if desired) accompanied by a statement setting forth the ground on which exemption is claimed. Failure to receive blanks upon which to make return is no excuse for delinquency in making return, as there is no duty imposed upon the Government to furnish corporations with such blanks.

4. Charitable Institutions Should File Return.-Charitable institutions supported by voluntary contributions or State appropriations are held to be exempt from the payment of the special excise tax on corporations, but should file a return in blank as provided in paragraph 3 hereof.

5. Corporations Organized or Liquidating Within Year.-Corporations, etc., organized during the year or going into liquidation during the year should nevertheless render a sworn return on the prescribed form. The tax imposed, however, does not apply to corporations. which went out of existence prior to the passage of the act (August 5, 1909).

6. Dissolved Company.-Where company has dissolved and the required return is not made by its officers, such return will be prepared by commissioner. (T. D. 1736.)

7. Bankrupt Corporation.-Where corporation has gone into bankruptcy, returns in such cases to be made by trustee in bankruptcy.

8. Railroad Companies Operating Leased Lines.-Railroad companies operating leased or purchased lines to include all receipts derived therefrom, and if bonded indebtedness has been assumed may deduct interest thereon to an amount not exceeding its own paid-up

capital stock. If such subsidiary companies receive income in the way of rentals, etc., return to be also made by such companies..

9. Income of Domestic Corporations.-Corporations, etc., organized under the authority of the United States or any State or Territory thereof, or Alaska or the District of Columbia, to include in their returns not only the income derived from the business carried on within the confines of the United States, but income received from business transacted in any foreign country as well.

10. Subsidiary Companies.-Corporations having branch or subsidiary companies to include in their returns the income of all such companies when no distinction is made in operating and accounting by reason of the separate incorporation of such subsidiary companies; otherwise a return by each corporation should be made.

11. Foreign Companies Designate Principal Office, etc.-Foreign companies having several branch offices in the United States should each designate one of such branches as its principal office and should also designate the proper offices to make the required return.

12. Separate Returns by Consolidated Corporations.-Where a consolidation of two or more corporations has been effected during the year, and each or any such corporation subsequent to such consolidation collects prior existing debts, each such corporation should make separate return and include therein all such collected debts, as also all income received during the year prior to the date of consolidation.

13. Principal Place of Business-"Principal place of business" is held to mean the principal office where the company keeps its books from which the required return is to be prepared, and not necessarily the place where the operating plant is located.

14. Calendar Year. As the law specifically provides that the tax imposed shall be computed on the net income during each calendar year, returns of income based on any period other than the calendar year cannot be accepted.

15. Paid-up Capital Stock.-Full amount of stock, as represented by the par value of the shares issued, to be regarded as the paid-up capital stock, except when such stock is assessable on account of deferred payments in which case the amount actually paid on such shares will constitute the actual paid-up capital stock of the corporation.

16. Preferred and Common Stock.-Capital stock held to include both preferred and common stock.

17. Surplus and Undivided Profits. Surplus and undivided profits not to be included in capital stock.

18. Voting Trusts.-Holding companies known as "voting trusts," receiving only dividends on stock held, and having no capital stock, etc., not liable.

19. Mutual Savings Banks.-Mutual savings banks having no capital stock not liable to tax imposed. (Opin. Atty. Gen., Feb. 14, 1910.)

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