corporation or partnership or other intangible property, but only if the corporation made payment bona fide therefor specifically as such in cash or tangible property, and not to exceed the actual cash or cash value of tangible property given in such payment. Intangible property purchased before March 3, 1917, with interests or shares in a partnership or for and with shares in the capital stock of a corporation, in an amount not to exceed 20 per cent of the total interests or shares outstanding on that date shall be included in invested capital at a value not to exceed the actual cash value at the time of such purchase, or where stock was issued therefor, not to exceed the par value of such stock. (b) In the Case of an Individual: 1. Actual cash paid into the trade or business; 2. Actual cash value of tangible property paid into the trade or business, but in the case of tangible property paid in prior to January 1, 1914, its value as of that date is to be taken; and 3. Actual cash value (if any) of patents, copyrights, good-will, trade-marks, trade brands, franchises or other intangible property at the time such intangible property was acquired, if payment was made in cash or other tangible property, and not to exceed the actual cash or actual cash value of the tangible property bona fide paid therefor at the time of such payment. (c) In the Case of a Foreign Corporation or Partnership or NonResident Alien: Invested capital means that proportion of the entire invested capital (as defined and limited for domestic corporations and resident individuals) which the net income from sources within the United States bears to the entire net income. 7. Administration of Excess Profits Tax. All administrative, special and general provisions of law are extended and made applicable to the provisions of the Excess Profits Tax Act. It is further provided that the provisions of the Income Tax Act of 1916, as amended, relating to returns and payment of the income tax, including penalties, are made applicable to the Excess Profits Tax. The Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury, is given authority to make all necessary regulations for administering the Act, and to require any corporation, partnership or individual subject to the Excess Profits Tax to furnish him with such facts, data and information as in his judgment are necessary in order to collect the tax. IV. THE FEDERAL ESTATE TAX. In addition to the Federal Estate Tax levied by the Act of September 8, 1916, as amended by the Act of March 3, 1917, the War Revenue Act of October 3, 1917, levies a War Estate Tax, the only effect of which is to increase the amount of the tax upon the estates of decedents dying after the passage of the Act. It is provided that the War Estate Tax shall not apply to the estate of any decedent dying while serving in the military or naval forces of the United States during the continuance of the present war. The following is a brief digest of the Estate Tax, including the War Estate Tax: 1. How Imposed and Collected. The Estate Tax (including the War Estate Tax) is a tax imposed upon the transfer of the net estate of every decedent, whether resident or non-resident, owning property of any kind in the United States. The tax is collectible by the Internal Revenue Collector of the district in which the decedent lived, if domiciled in the United States; otherwise by the Collector of the district where the gross estate of decedent is located; or, if located in two or more districts, then by the Collector of Internal Revenue at Baltimore, Maryland. 2. Duties of Executors and Administrators. Within 30 days after qualifying, or after coming into possession of any property of the decedent, the executor or administrator must give written notice to the collector: (a) In all cases where the estate is subject to the tax; (b) In all cases where the gross estate (as defined below) exceeds $60,000; and (c) In the case of non-resident decedents, any part of whose estate is situated in the United States. When required by regulations of the Commissioner of Internal Revenue to do so, the executor or administrator must make a sworn return in duplicate to the collector, setting forth: (a) Value of the gross estate of decedent, if a resident of the United States; if a non-resident, then the value of that portion of the gross estate which is situated in the United States; (b) Deductions allowed under the Act; (c) Value of the net estate (as defined below); and (d) The tax paid or payable thereon. The executor or administrator must pay the tax, which is due one year from the date of decedent's death. If the tax is paid in advance of this date, there may be deducted a discount at the rate of 5 per cent. per annum for the period between the payment of the tax and the due date. If the tax is not paid within 90 days after it is due, interest at the rate of 10 per cent. per annum will be added, running from the date of decedent's death; provided, that when the delay in payment is due to unavoidable litigation, interest at the rate of six per cent. per annum will be added, running from the due date until the cause of the delay is removed, and thereafter at the rate of 10 per cent. per annum until the tax is paid. The Act prescribes as a penalty for knowingly making any false statement or return in connection with the Estate Tax a fine of not exceeding $5,000 or imprisonment for not exceeding one year, or both. 3. Gross Estate, How Determined. The gross estate of decedent is determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated; including also property conveyed by gift or in trust in contemplation of death, and interests of the decedent in property held jointly or as tenants in the entirety. For the purposes of the tax, "any transfer of a material part of his property in the nature of a final disposition or distribution thereof, made by the decedent within two years prior to his death without such a consideration (i. e., money or money's worth), shall, unless shown to the contrary, be deemed to have been made in contemplation of death." (See Title II, Section 202, of the Act.) For the purposes of the tax, shares of stock in domestic corporations owned and held by non-resident decedents will be deemed property within the United States. 4. Net Estate, How Determined. In the case of a resident decedent, the net estate is determined by deducting from the value of the gross estate the following items: (a) Such amounts for funeral expenses, administration expenses, claims against the estate, unpaid mortgages, losses incurred during the settlement of the estate, when not compensated for by insurance; support during the settlement of the esestate of those dependent upon the decedent, and such other charges against the estate, as are allowed by the laws of the jurisdiction, whether within or without the United States, under which the estate is being administered; and (b) An exemption of $50,000. In the case of a non-resident decedent, the net estate is determined by deducting from the value of the gross estate situated in the United States that proportion of the total deductions enumerated in paragraph (a), above, which the value of the gross estate situated in the United States bears to the entire gross estate of such non-resident decedent; provided, that no deduction in any amount shall be allowed unless the executor or administrator of the estate of such non-resident decedent includes in his return or statement to the collector the value of that part of the gross estate of deceIdent which is located outside of the United States. 5. Rates of Taxes on Estates. The rates of the Estate Tax fixed by the Act of September 8, 1916, were increased by the Act of March 3, 1917, and to these rates are now added these levied by the War Estate Tax. In the following table, the rates in Column A apply to the net estate of every decedent dying between September 8, 1916, and March 3, 1917; those in Column B apply to the net estate of every decedent dying between March 3, 1917, and October 3, 1917 (and to the estates of soldiers and sailors killed in the war); and those in Column C include the War Estate Tax and apply to the net estate of every decedent dying after October 3, 1917 (other than soldiers and sailors of the United States, as above): On first $50,000 of net value or less.. .1% $150,000 .2% 6. Transferees and Trustees Liable. Property conveyed by transfer or in trust in contemplation of death will be deemed part of the estate, for the purposes of the tax, and unless the tax thereon is paid, the transferee or trustee in such a case will be personally liable therefor, and the property itself will be subject to a lien for the amount of the tax; provided, that a bona fide purchaser for value may acquire such property free of the lien, which then falls upon any other property in the possession of the transferee or trustee. WAR INCOME TAX ACT* Being Title I of an Act to Provide Revenue to Defray War Expenses, and for Other Purposes, Approved October 3, 1917. Seven Individuals-Normal Tax. Section 1. That in addition to the normal tax imposed by subdivision (a) of section one of the Act entitled "An Act to increase the revenue, and for other purposes," approved September eighth, nineteen hundred and sixteen, there shall be levied, assessed, collected, and paid a like normal tax of two per centum upon the income of every individual, a citizen or resident of the United States, received in the calendar year nineteen hundred and seventeen and every calendar year thereafter. Individuals-Additional Tax. Sec. 2. That in addition to the additional tax imposed by subdivision (b) of section one of such Act of September eighth, nineteen hundred and sixteen, there shall be levied, assessed, collected, and paid a like additional tax upon the income of every individual received in the calendar year nineteen hundred and seventeen and every calendar year thereafter, as follows: One per centum per annum upon the amount by which the total net income exceeds $5,000 and does not exceed $7,500; Two per centum per annum upon the amount by which the total net income exceeds $7,500 and does not exceed $10,000; Three per centum per annum upon the amount by which the total net income exceeds $10,000 and does not exceed $12,500; Four per centum per annum upon the amount by which the total net income exceeds $12,500 and does not exceed $15,000; Six per centum per annum upon the amount by which the total net income exceeds $15,000 and does not exceed $20,000; Eight per centum per annum upon the amount by which the total net income exceeds $20,000 and does not exceed $40,000; Ten per centum per annum upon the amount by which the total net income exceeds $40,000 and does not exceed $60,000; *See, also, on page 28 hereof text of Pre-War Income Tax Act, as amended by the Act of October 3, 1917. |