Art. 78. When affiliated corporations may be required to make consolidated return.-Whenever necessary to more equitably determine the invested capital or taxable income, the Commissioner of Internal Revenue may require corporations classed as affiliated under Art. 77 to furnish a consolidated return of net income and invested capital. Where such consolidated return is required it may be made by any one or more of such corporations or by all of them acting jointly; but if such affiliated corporations, when requested to file such consolidated return, neglect or refuse to do so, the Commissioner of Internal Revenue may cause an examination of the books of all such corporations to be made and a consolidated statement to be made from such examination. In cases where consolidated returns are accepted, the total tax will be computed in the first instance as a unit upon the basis of the consolidated return and will be assessed upon the respective affiliated corporations in such proportions as may be agreed among them. If no such agreement is made the tax will be assessed upon each such corporation in accordance with the net income and invested capital properly assignable to it. ASSESSMENT AND COLLECTION Art. 79. Assessment and collection governed by income tax regulations.-All excess profits taxes to which any taxpayer is subject shall be assessed and collected at the same times and in the same manner as provided with respect to income taxes in the income tax regulations in so far as the same are applicable. CHAPTER 47 THE STAMP TAX The present stamp tax is imposed under the provisions of Title VIII. of the War Revenue Act of October 3, 1917. It is to some extent a re-enactment of the Act of October 22, 1914, but contains several changes, and some of the instruments which were taxed under the former law are omitted, such as bills of lading, express receipts, certificates of profit, certificates of damage, certificates of any description not otherwise specified, brokers' notes or memoranda of sale, insurance policies, and protests. The present law does not contain Schedule B of the Act of October 22, 1914, which provided for a tax on perfumery, cosmetics and similar articles, and chewing gum or substitutes therefor. The present law went into effect on December 1, 1917, except as to the tax on playing cards, which became effective on October 4, 1917. The phrase "incidence of tax" is used in this chapter to mean the time when the tax was first applied under the statute. A list of the several instruments taxable under the present law, together with the rates of tax applicable to each and the rulings which have been made with respect to each are given in the following paragraphs.1 Bonds of Indebtedness. Bonds, debentures or certificates of indebtedness issued on and after December 1, 1917, by any person, corporation, partnership, or association, are taxable at the rate of five cents on each one 1 In this list is also included reference to a number of instruments which are not taxable under the present law. These references are inserted for the convenience of the reader who may be searching for positive assurance that a particular instrument need not be stamped. hundred dollars of face value or fraction thereof. Under the former law 2 the tax was imposed only on bonds issued by corporations or associations. It is to be noted that the present act imposes the tax on bonds issued by persons and partnerships as well. There is no clear distinction between bonds of indebtedness and promissory notes and it is sometimes difficult to determine whether an instrument should be taxed under the higher rate applying to bonds of indebtedness or the lower rate applying to promissory notes. The name on the instrument is not always conclusive. Thus, under the former law it was held that an instrument designated as a "gold note" issued in the amount of $1,000 with interest coupons attached, and containing a promise by a corporation to pay a certain sum of money to the holder thereof under certain terms and conditions prescribed by the indenture of trust was more in the nature of a bond or certificate of indebtedness than a promissory note and was, therefore, held taxable as a bond.3 BONDS GIVEN IN A PENAL SUM. When a bond conditioned for the repayment or payment of money is given in a penal sum greater than the debt secured, the tax is based upon the amount secured and not upon the amount of the bond.4 RENEWAL OF BONDS. Every renewal of a bond, debenture of certificate of indebtedness is taxed as a new issue.5 TRANSFER OF BONDS. No tax is imposed upon the transfer of bonds, debentures or certificates of indebtedness from one holder to another. 2 The expression former law'' is used herein to indicate the Act of October 22, 1914. 3 T. D. 2257. See definition under Promissory Notes, infra. 4 Act of October 3, 1917, Section 807, Schedule A-1. 5 Id. CERTIFICATES OF DEPOSIT. Certificates of deposit issued by banks and trust companies are not taxable under this head. Such certificates were held not to be taxable under the former law. ISSUE OF BONDS. It seems generally that the delivery of the bond establishes the date of issue. Thus, it was held under the former law that bonds certified and delivered by a trustee after the incidence of the tax were taxable although subscribed and paid for prior thereto. Under the stamp tax law of 1898 it seems to have been held that a bond was issued when delivery was made and the corporation received a benefit or a consideration therefor. The date of renewal would be the date of issue for the purpose of the tax on renewal of bonds.8 Bonds issued by a domestic corporation in this country for sale to purchasers in a foreign country were held to be issued here for the purpose of the tax, but bonds issued and sold by a domestic corporation in a foreign country were not required to be stamped on the ground that the Government had no means of enforcing the statute in such case.9 WHERE STAMPS AFFIXED. Under the former law it was held that the stamps denoting the tax should be affixed to the bonds, unless temporary bonds were issued, in which case the stamps could be affixed to the indenture, the temporary bonds and definitive bonds having printed or engraved thereon a notation that the stamps were affixed to the indenture.10 6 T. D. 2054; letter from Treasury Department dated Nov. 16, 1917. 7 Volume 1, Treasury Decisions No. 20156. 8 Every renewal is taxed as a new issue. Act of October 3, 1917, Sec. 807, Schedule A-1. 9 Letter from Treasury Department dated May 15, 1915. 10 T. D. 2164, T. D. 2220. F. I. Tax Supp.-10 Bonds of Indemnity and Surety. Bonds coming within this class are (a) bonds for indemnifying any person, corporation, or partnership, who shall have become bound or engaged as surety, (b) all bonds for the due execution or performance of any contract, obligation, or requirement, or the duties of any office or position, and to account for money received by virtue thereof, and (c) all other bonds of any description not otherwise provided for in the law. There are two express exemptions from the tax imposed by this subdivision: (a) such bonds as may be required in legal proceedings and (b) policies of reinsurance. The rate of tax is fifty cents unless a premium is charged for the execution of such bonds, in which case the tax is one per cent of each dollar or fractional part thereof of the premium charged. BONDS REQUIRED IN LEGAL PROCEEDINGS. Bonds of this class are not subject to tax although they may be bonds of indemnity. A bond filed by order of court to obtain a decree or order for the sale of real estate is a bond given in a legal proceeding and is exempt from tax. Bonds given by court officers under direction or authority of the court, to give proper effect to court proceedings, which bonds are practically a part of the record of a suit or proceeding in court, are not taxable. Bonds given in cases of appeal are not taxable. Bonds given by executors, administrators, guardians and receivers appointed by the court are bonds required in legal proceedings and are not taxable.11 BONDS GIVEN TO STATES AND POLITICAL SUBDIVISIONS THEREOF. Under the former law it was held on the broad ground that the sovereign states and subdivisions 11 T. D. 2091. (Act of October 22, 1914.) |