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Act of 1921.

SEC. 327. That in the following cases the tax shall be determined as provided in section 328:

SEC. 327. (a) Where the Commissioner is unable to determine the invested capital as provided in section 326;

SEC. 327. (b) In the case of a foreign corporation or of a corporation entitled to the benefits of section 262;

SEC. 327. (c) Where a mixed aggregate of tangible property and intangible property has been paid in for stock or for stock and bonds and the Commissioner is unable satisfactorily to determine the respective values of the several classes of property at the time of payment, or to distinguish the classes of property paid in for stock and for bonds, respectively;

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SEC. 327. (d) Where upon apSEC. 327. (d) Where upon application by the corporation the plication by the corporation the Commissioner finds and so de- Commissioner finds and so declares of record that the tax if clares of record that the tax if determined without benefit of determined without benefit of this section would, owing to ab- this section would, owing to abnormal conditions affecting the normal conditions affecting the capital or income of the corpora- capital or income of the corporation, work upon the corporation tion, work upon the corporation an exceptional hardship evi- an exceptional hardship evidenced by gross disproportion denced by gross disproportion between the tax computed with- between the tax computed without benefit of this section and out benefit of this section and the tax computed by reference the tax computed by reference to to the representative corpora- the representative corporations tions specified in section 328. This subdivision shall not apply to any case (1) in which the tax (computed without benefit of this section) is high merely be

the corporation earned within the taxable year a high rate of profit upon a normal invested capital, nor (2) in which 50 per centum or more of the gross income of the corporation for the taxable year (computed under section 233406 of Title II) consists of gains, profits, com

specified in section 328. This
subdivision shall not apply to
any case (1) in which the tax
(computed without benefit of
this section) is high merely be-
cause the corporation earned
within the taxable year a high
rate of profit upon a normal in-
vested capital, nor (2) in which
50 per centum or more of the
gross income of the corporation.
for the taxable year (computed
under section 233406 of Title II)
consists of gains, profits, com-

405 A mining corporation had a paid-in capital of $25,000, and had paid dividends in excess of that amount prior to 1917. Its taxable net income for 1917 was $21,779.18. The capital was more than a "nominal capital," and under these circumstances the cor

poration was assessible under Sec. 201, and not under Secs. 209 or 210, of the Act of 1917. Alworth-Stephens Co. v. Lynch (Col.), (D. C., D. Minn. 1922) 278 Fed. 959.

406 Sec. 233, p. 190.

Act of 1921.

missions, or other income, derived on a cost-plus basis from a Government contract or contracts made between April 6, 1917, and November 11, 1918, both dates inclusive.

SEC. 328. (a) That in the cases specified in section 327 the tax shall be the amount which bears the same ratio to the net income of the taxpayer (in excess of the specific exemption of $3,000) for the taxable year, as the average tax of representative corporations engaged in a like or similar trade or business, bears to their average net income (in excess of the specific exemption of $3,000) for such year. In the case of a foreign corporation or of a corporation entitled to the benefits of section 262407 the tax shall be computed without deducting the specific exemption of $3,000 either for the taxpayer or the representative corporations.

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SEC. 328. (a) In the cases SEC. 210. [2] the sum of (1) specified in section 327 the tax an amount equal to the same shall be the amount which bears proportion of the net income of the same ratio to the net income the trade or business received of the taxpayer (in excess of the during the taxable year as the specific exemption of $3,000) for proportion which the average dethe taxable year, as the average duction (determined in the same tax of representative corpora- manner as provided in section tions engaged in a like or simi- two hundred and three, without lar trade or business, bears to including the $3,000 or $6,000 their average net income (in ex- therein referred to) for the same cess of the specific exemption of calendar year of representative $3,000) for such year. In the corporations, partnerships, and case of a foreign corporation the individuals, engaged in a like tax shall be computed without or similar trade or business, deducting the specific exemption bears to the total net income of of $3,000 either for the taxpayer the trade or business received by or the representative corpora- such corporations, partnerships, tions. and individuals, plus (2) in the case of a domestic corporation $3,000, and in the case of a domestic partnership or a citizen or resident of the United

In computing the tax under In computing the tax under this section the Commissioner this section the Commissioner shall compare the taxpayer only shall compare the taxpayer only with representative corporations with representative corporations States $6,000. whose invested capital can be whose invested capital can be satisfactorily determined under satisfactorily determined under section 326 and which are, as nearly as may be, similarly circumstanced with respect to gross income, net income, profits per unit of business transacted and capital employed, the amount and rate of war profits or excess profits, and all other relevant facts and circumstances.

SEC. 328. (b) For the purposes of subdivision (a) the ratios between the average tax and the average net income of representative corporations shall be determined by the Commissioner in accordance with regulations prescribed by him with the approval of the Secretary.

section 326 and which are as
nearly as may be, similarly cir-
cumstanced with respect to gross
income, net income, profits per
unit of business transacted and
capital employed, the amount
and rate of war profits or excess
profits, and all other relevant
facts and circumstances.

SEC. 328. (b) For the purposes
of subdivision (a) the ratios be-
tween the average tax and the
average net income of repre-
sentative corporations shall be
determined by the Commissioner
in accordance with regulations
prescribed by him with the ap-
proval of the Secretary.

SEC. 210. [3] For the purpose of this section the proportion between the deduction and the net income in each trade or business shall be determined by the Commissioner of Internal Revenue in accordance with regulations prescribed by him, with the approval of the Secretary of the In cases in which the tax is Treasury. In the case of a corto be computed under this sec- poration or partnership which tion, if the tax as computed has fixed its own fiscal year, the without the benefit of this sec- proportion determined for the tion is less than 50 per centum calendar year ending during of the net income of the tax- such fiscal year shall be used. payer, the installments shall in

407 Sec. 262, p. 268.

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the first instance be computed
upon the basis of such tax; but
if the tax so computed is 50
per centum or more of the net
income, the installments shall in
the first instance be computed
upon the basis of a tax equal to
50 per centum of the net income.
In any case, the actual ratio
when ascertained shall be used
in determining the correct
amount of the tax. If the cor-
rect amount of the tax when de-
termined exceeds 50 per centum
of the net income, any excess of
the correct installments over the
amounts actually paid shall on
notice and demand be paid to-
gether with interest at the rate
of 12 of 1 per centum per month
on such excess from the time the
installment was due.

SEC. 328. (c) The Commis- SEC. 328. (c) The Commissioner shall keep a record of all sioner shall keep a record of all cases in which the tax is deter- cases in which the tax is determined in the manner prescribed mined in the manner prescribed in subdivision (a), containing in subdivision (a), containing the name and address of each the name and address of each taxpayer, the business in which taxpayer, the business in which engaged, the amount of invested engaged, the amount of invested capital and net income shown by capital and net income shown by the return, and the amount of the return, and the amount of invested capital as determined invested capital as determined under such subdivision. The under such subdivision. The Commissioner shall furnish a Commissioner shall furnish a copy of such record and other detailed information with respect to such cases when required by resolution of either House of Congress, without regard to the restrictions contained in section 257.408

copy of such record and other
detailed information with re-
spect to such cases when re-
quired by resolution of either
House of Congress, without re-
gard to the restrictions con-
tained in section 257.408

Act of 1917.

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SEC. 330. That in the case of SEC. 204. [2] A trade or busithe reorganization, consolida- ness carried on by a corporation, tion, or change of ownership partnership, or individual, alafter January 1, 1911, of a trade though formally organized or reor business now carried on by organized on or after January a corporation, the corporation second, nineteen hundred and shall for the purposes of this thirteen, which is substantially a title be deemed to have been in continuation of a trade or busiexistence prior to that date, and ness carried on prior to that the net income and invested date, shall, for the purposes of capital of such predecessor trade this title, be deemed to have been

408 Sec. 257, p. 260.

Act of 1921.

Act of 1918.

Act of 1917.

or business for all or any part in existence prior to that date,
of the prewar period prior to and the net income and invested
the organization of the corpora- capital of its predecessor prior
tion now carrying on such trade to that date shall be deemed to
or business shall be deemed to have been its net income and in-
have been the net income and vested capital.
invested capital of such corpora-

tion.

If such predecessor trade or business was carried on by a partnership or individual the net income for the prewar period shall, under regulations prescribed by the Commissioner with the approval of the Secretary, be ascertained and returned as nearly as may be upon the same basis and in the same manner as provided for corporations in Title II, including a reasonable deduction for salary or compensation to each partner or the individual for personal services actually rendered.

In the case of the organization as a corporation before July 1, 1919, of any trade or business in which capital is a material income-producing factor and which was previously owned by a partnership or individual, the net income of such trade or business from January 1, 1918, to the date of such reorganization may at the option of the individual or partnership be taxed as the net income of a corporation is taxed under Titles II and III; in which event the net income and invested capital of such trade or business shall be computed as if such corporation had been in existence on and after January 1, 1918, and the undistributed profits or earnings of such trade or business shall not be subject to the surtax imposed in section 211, but amounts distributed on or after January 1, 1918, from the earnings of such trade or business shall be taxed to the recipients as dividends, and all the provisions of Titles II and III relating to corporations shall so far as practicable apply to such trade or business: Provided, That this paragraph shall not apply to any trade or business the net income of which for

Act of 1921.

SEC. 331. That in the case of

Act of 1918.

the taxable year 1918 was less
than 20 per centum of its in-
vested capital for such year:
Provided further, That any tax-
payer who takes advantage of
this paragraph shall pay the tax
imposed by section 1000109 of this
Act and by the first subdivision
of section 407409 of the Revenue
Act of 1916, as if such taxpayer
had been a corporation on and
after January 1, 1918, with a
capital stock having no par
value.

If any asset of the trade or
business in existence both dur-
ing the taxable year and any pre-
war year is included in the
invested capital for the taxable
year but is not included in the
invested capital for such prewar
year, or is valued on a different
basis in computing the invested
capital for the taxable year and
such prewar year, respectively,
then under rules and regulations
to be prescribed by the Commis-
sioner with the approval of the
Secretary such readjustments
shall be made as are necessary to
place the computation of the in-
vested capital for such prewar
year on the basis employed in
determining the invested capital
for the taxable year.

SEC. 331. In the case of the re

Act of 1917.

SEC. 208. That in case of the

the reorganization, consolidation, organization, consolidation, or reorganization, consolidation or

or change of ownership of a change of ownership of a trade change of ownership of a trade trade or business, or change of or business, or change of owner- or business after March third, ownership of property, after ship of property, after March 3, nineteen hundred and seventeen, March 3, 1917, if an interest or 1917, if an interest or control in if an interest or control in such control in such trade or business such trade or business or prop- trade or business of fifty per or property of 50 per centum or erty of 50 per centum or more centum or more remains in conmore remains in the same per- remains in the same persons, or trol of the same persons, corporasons, or any of them, then no any of them, then no asset trans- tions, associations, partnerships, asset transferred or received ferred or received from the pre- or any of them, then in asfrom the previous owner shall vious owner shall, for for the certaining the invested capital of for the purpose of determining purpose of determining invested the trade or business no asset invested capital, be allowed a capital, be allowed a greater transferred or received from the greater value than would have value than would have been al- prior trade or business shall be been allowed under this title in lowed under this title in com- allowed a greater value than computing the invested capital puting the invested capital of would have been allowed under of such previous owner if such such previous owner if such as- this title in computing the inasset had not been so transferred set had not been so transferred vested capital of such prior or received: Provided, That if or received: Provided, That if trade or business if such asset such previous owner was not a such previous owner was not a had not been so transferred or corporation, then the value of corporation, then the value of received, unless such asset was

409 Capital Stock Tax.

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