turns in any legal proceeding in which the United States is a party. 74 RETURNS OF FIDUCIARIES. An executor acts for his principal and not for the beneficiaries of the estate of his principal. Beneficiaries are not entitled, as such, to an inspection of returns of income filed by such executor.75 RETURNS OF CORPORATIONS. Under the 1916 Law the Secretary, at his discretion, upon application to him, setting forth what constituted a proper showing of cause, might permit the inspection of the return of any corporation by any bona fide stockholder thereof. Application for such inspection had to be made in writing to the Secretary, setting forth the reasons why inspection should be permitted. Attached to the application was required a certificate signed by the president or other principal accounting officer of such corporation, countersigned by the secretary, under the corporate seal of the company, that the applicant was a bona fide stockholder in the company. Where such certificate could not be secured, other evidence would be considered to determine the fact whether or not the applicant was a bona fide stockholder. Upon receipt of such application the corporation, whose return it was desired to inspect, was notified of the facts and given opportunity to state whether any legitimate reason existed for refusing permission. The privilege of inspecting the return of any corporation was personal to the stockholders, and the permission granted by the Secretary to make such inspection could not be delegated to any other person." 76 A person who, as trustee or in any other fiduciary relation, had the ownership or possessory right to stock in a corporation, was considered as a stockholder in such corporation.77 By express exception in the Revenue Act of 1918 78 a bona fide stockholder of record, owning one per cent. of the outstanding 74 T. D. 2016. Reg. 45, Art. 1091. 75 Reg. 33 Rev., Art. 26. 76 T. D. 2016. 77 Op. Atty. Gen. Dec. 27, 1910. 78 Revenue Act of 1918, § 257. stock of a corporation, is entitled as of right to examine the returns of income of such corporation and its subsidiaries. A stockholder desiring the privilege of inspection must apply in writing to the Commissioner, specifying his address, the name of the corporation, its outstanding capital stock, the number of shares owned by him, the date of their acquisition, and whether or not he has the beneficial as well as the record title to such shares, and in other respects complying with the requirements of the regulations issued under the law.79 A stockholder who has acquired his shares for the purpose of inspection of the income returns of the corporation is not a bona fide stockholder.80 A stockholder who examines the return of a corporation and reveals without express authority of law any particulars of its income statement is guilty of a misdemeanor and liable to fine and imprisonment.81 Copies of returns on file in the Commissioner's office are not permitted to be sent to any person, except the corporation itself, or its duly authorized attor ney, and in no case may the original returns be removed except under order and by direction of the Secretary or the President. A duly authorized attorney for this purpose is one possessing a properly executed power of attorney in writing by the corporation, which designation must be signed by two officers of the corporation and bear the impress of the seal.82 CORPORATIONS WHICH OFFER THEIR STOCK TO THE PUBLIC FOR SALE. The returns of all corporations, whose stock is advertised in the press or offered for sale to the public by the corporation itself, may be inspected by any person upon written application to the Secretary, which application shall set forth briefly and succinctly all facts necessary to enable the Secretary to act upon the request. In case of doubt as to whether any company falls within this classification, the person desiring to see such return should 79 Reg. 45, Art. 1093. 80 Reg. 45, Art. 1093. 81 Revenue Act of 1918, § 257. 82 Reg. 33 Rev., Art. 226. support his application by advertisements, prospectus or such other evidence as he may deem proper to establish the fact that the stock of the corporation is offered for genera! public sale.83 CORPORATIONS WHOSE STOCK IS LISTED ON A STOCK EXCHANGE. The returns of all companies whose stock is listed upon any duly organized and recognized stock exchange within the United States, for the purpose of having its shares dealt in by the public generally, are open to the inspection of any person upon written application to the Secretary, which application shall set forth briefly and succinctly all facts necessary to enable the Secretary to act upon the request.84 Inspection of Returns by State Officers. By express exception in the Revenue Act of 1918 85 the proper officers of a State imposing an income tax are entitled as of right, upon the request of its governor, to have access to the returns of income of any corporation, or to an abstract thereof, showing its name and income. Upon written application by the governor of a State as prescribed by the regulations, except that the application may be made directly to the Commissioner instead of to the Secretary, the Commissioner will set a convenient time for inspection of the returns (or an abstract thereof as he may determine) of corporations organized or doing business in such State. The authority to inspect returns granted to officers of a State includes authority to inspect lists furnished to supplement and become a part of the returns.86 Inspection of Returns by Government Officers. Returns of corporations (but not of individuals) may be inspected 83 Reg. 45, Art. 1091. 84 Reg. 45, Art. 1091. 85 Revenue Act of 1918, § 257. It is to be noted that the law permits inspection only by officers of states which impose an income tax. This may not necessarily mean a tax on both corporations and individuals, but the privilege to inspect returns applies only to the returns of corporations. 86 Reg. 45, Art. 1092. by an officer or employee of any department of the Government, on application to the Secretary by the head of the executive department in which such officer or employee is employed. If the return of a corporation is desired to be used in any legal proceedings other than those to which the United States is a party, or to be used in a manner by which any information contained in the return could be made public, the application for permission to inspect the return, or to furnish a certified copy, must be referred to the Attorney General for his recommendation before transmission to the Secretary.87 FOR USE IN GOVERNMENT SUITS. All returns whether of individuals or of corporations may be furnished, upon approval of the Secretary, for use in any legal proceedings before any United States grand jury, or in the trial of any cause to which both the United States and the person or corporation rendering the return are parties, provided the return would constitute material evidence in the prosecution, defense or trial of such action or proceeding. In any case arising in the collection of the income tax the Commissioner may furnish for the use of the proper officer either the original or certified copies of returns, without the approval of the Secretary.88 87 Reg. 45, Art. 1091. 88 Reg. 45, Art. 1091; Reg. 33 Rev., Art. 227. CHAPTER 35 ASSESSMENT AND PAYMENT OF THE TAX The Revenue Act of 1918 introduces a number of substantial changes from the former method of assessing the tax and the method formerly provided for paying the same. The 1916 Law expressly provided that all assessments should be made by the Commissioner. The Revenue Act of 1918 seems to contemplate the same rule. As soon as practicable after returns are filed, they are sent to the Treasury Department at Washington for assessment of the tax. When an assessment under the 1916 Law was made the amount thereof was reported to the local collector, who notified the taxpayer on or before June 1 of such amount.3. Under the 1918 Law, the examination of a return by the Commissioner will lead to one of three results: (1) the return will be found to be correct; (2) the correct amount of tax will be greater than that shown in the return, or (3) the correct amount of tax will be less than that shown in the return. In the first case the tax is assessed on the basis of the taxpayer's return. In the second and third cases the four installments in which the tax is to be paid will be re-computed by the Commissioner. Under the 1916 Law, the tax became due on the 15th of June, but an additional period of grace, being at least ten days after June 15, was allowed before the application of penalties or interest. As indicated above, the 1 Revenue Act of 1916, $$ 9 (a) and 14 (a). 2 Revenue Act of 1918, § 250. 3 Revenue Act of 1916, §§ 9 (a) and 14 (a). 4 See Revenue Act of 1916, §§ 9 (a) and 14 (a). |