CHAPTER I CORPORATIONS DEFINED Revenue Act of 1924. SEC. 2. (a) When used in this act— The term "corporation" includes associations, joint-stock companies, and . The term "domestic" when applied to a corporation or partnership means created or organized in the United States or under the law of the United States or of any State or Territory. The term "foreign" when applied to a corporation or partnership means a corporation or partnership which is not domestic. The term "United States" when used in a geographical sense includes only the states, the territories of Alaska and Hawaii, and the District of Columbia. (b) The terms "includes" and "including" when used in a definition contained in this act shall not be deemed to exclude other things otherwise within the meaning of the term defined. HECHT v. MALLEY (Supreme Court of the United States, 1924. 265 U. S. 144, 44 Sup. Ct. 462, 68 L. Ed. 949, 4 Am. Fed. Tax R. 3976.) (Printed supra, p. 65.) CHAPTER II TAX ON DOMESTIC CORPORATIONS Revenue Act of 1924. SEC. 700. (a) (1) Every domestic corporation shall pay annually a special excise tax with respect to carrying on or doing business, equivalent to $1 for each $1,000 of so much of the fair average value of its capital stock for the preceding year ending June 30 as is in excess of $5,000. In estimating the value of capital stock the surplus and undivided profits shall be included. Regulations 64. ART. 2. Due date of tax.-The act was approved June 2, 1924, and the tax is effective from July 1, 1924. This is a special excise tax with respect to carrying on or doing business and like all special taxes is due and payable annually in advance from July 1 of each year. No portion of the tax so paid is refundable to a corporation which ceases to do business during the year. ART. 11. Basis of the tax: "Carrying on or doing business." -The basis of the tax in the case of a domestic corporation is "carrying on or doing business" in the capacity of a corporation or association. The words "carrying on or doing business" must be given their ordinary and natural signification. "Business" is a very comprehensive term and embraces whatever occupies the time, attention, or labor of men for the purpose of livelihood or profit. In other words, business necessarily involves the idea of gain. The distinction in each case must depend upon the peculiar facts in the case. Corporations will be presumed to be subject to the tax unless they submit proof, satisfactory to the commissioner, that they are not actually carrying on or doing business. (See art. 31.) If a corporation claims exemption on the ground that it was organized for the sole purpose of owning and holding property and distributing its avails, it will be required to file an excerpt from its charter setting forth its corporate powers, together with a full and comprehensive statement showing the nature of the activities in which it is, and has been, actually engaged. If a corporation claims exemption on the ground that it has substantially retired from the business for which it was organized and has reduced its activities to the mere ownership and holding of property, distributing its avails, and doing only the acts necessary to the maintenance of its corporate existence and the private management of its purely internal affairs, it will be required to furnish evidence, such as a copy of any amendment of its charter, lease agreements, or contracts, if any have been entered into, detailed statement of receipts and disbursements for the year immediately preceding the taxable period, or other evidence satisfactory to the commissioner, to show that it has substantially retired from business. A corporation that has "substantially retired from business" is one that has changed its status, as, for instance, by divesting itself of all control over and management of the property formerly employed by it in the doing of business, and has reduced its activities accordingly. The leasing of all the property of a corporation, whereby it divests itself of control and management thereof, or the sale of all the property of a corporation and the reduction of its activities to the collection of the proceeds of the sale on an installment plan, are instances of a corporation substantially retiring from business. ART. 12. "Carrying on or doing business" illustrated.Corporations organized for the purpose of and actually engaged in such activities as buying, selling, or dealing in mineral or timber land or other real estate; leasing property, collecting rents, managing office buildings, making investments of profits; leasing lands and collecting royalties, managing wharves, dividing profits; and in some cases investing the surplus, are engaged in "carrying on or doing business" within the meaning of the statute. A corporation may complete its organization and sell its capital stock for cash without incurring liability, but other activities, such as entering into contracts for the purchase of property or construction of a plant are corporate business acts, and constitute doing business. In other words, it is not necessary that a company be actually engaged in the manufacture |