Statement of the Acting Secretary of the Treasury Regarding the Preliminary Report of a Subcommittee of the Committee on Ways and Means: Relative to Methods of Preventing the Avoidance and Evasion of the Internal Revenue Laws...1933 - 21 pages |
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accrued act posed act administration American taxpayer amount basis Board of Tax capacity to pay capital gains capital losses Commissioner of Internal Committee considerable deduction of capital deduction of losses Department believes depreciation and depletion dividends double taxation earned income effect eliminated estate tax evasion exchange exemption filing foreign tax credit gain or loss gains and losses gift taxes holding companies imposed income earned abroad income tax inheritance taxes Internal Revenue lien loss of revenue ment method normal and surtax normal tax ordinary income partnership payers percent posed act posed present law present provisions problem profit progressive rates property held proposed plan rate of tax reason require such returns result Revenue Act revenue laws Revised Statutes separate returns spouse statute of limitations statutory subcommittee plan surtax rates Tax Appeals tax avoidance tax law tax liability tax purposes tax rates taxable tion transactions Treasury believes Treasury Department
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Page 8 - ... (b) SOURCE OF DISTRIBUTIONS. — For the purposes of this Act every distribution is made out of earnings or profits to the extent thereof, and from the most recently accumulated earnings or profits. Any earnings or profits accumulated, or increase in value of property accrued, before March 1, 1913, may be distributed exempt from tax, after the earnings and profits accumulated after February 28, 1913, have been distributed, but any such tax-free distribution shall be applied against and reduce...
Page 11 - ... revenue. On the other hand, there are considerable savings to the Treasury, as well as to taxpayers, in the present arrangement. The administration of the law is simpler since it conforms to established business practice. The Treasury need deal with only one corporation, the parent. On the taxpayer's side, the requirement of separate returns would cause largely increased expense to set up separate sets of books for tax purposes, an undesirable result in itself. The present law permits a return...
Page 7 - The reorganization provisions have been In effect for many years, having been adopted In substantially their present form In 1924. They state In detail how each step of a reorganization should be treated for tax purposes. The policy was adopted of permitting reorganizations to take a wide variety of forms, without Income-tax liability. As a result, astute lawyers frequently attempted, especially during the prosperous years, to take advantage of these provisions by arranging In the technical form...
Page 11 - For these reasons the Department believes that the abolition of consolidated returns might well be a backward step, which would result in little, if any, additional revenue. On the other hand, there are considerable savings to the Treasury, as well as to taxpayers, in the present arrangement. The administration of the law is simpler since it conforms to established business practice. The Treasury need deal with only one corporation, the parent. On the taxpayer's side, the requirement of separate...
Page 10 - If the arrangement is a palpable evasion of the tax law, it can and should be disregarded, but many contracts, which do shift income from one subsidiary to another or to the parent, are perfectly reasonable in themselves and cannot be proved to be evasions.
Page 13 - The Treasury Department therefore recommends that the committee consider whether a husband and wife living together should not be required to file a single joint return, each to pay the tax attributable to his share of the income.
Page 11 - Department believes that the abolition of consolidated returns might well be a backward step, which would result in little, if any, additional revenue. On the other hand, there are considerable savings to the Treasury, as well as to taxpayers, in the present arrangement. The administration of the law is simpler since it conforms to established business practice. The Treasury need deal with only one corporation, the parent. On the taxpayer's side, the requirement of separate returns would cause largely...
Page 7 - The law has provided for 12 years that gain or loss is recognized on exchanges of property having a fair market value, such as stocks, bonds, and negotiable instruments; on exchanges of property held primarily for sale ; or on exchanges of one kind of property for another kind of property; but not on other exchanges of property solely for property of like kind. In other words, profit or loss is recognized in the case of exchanges of notes or securities, which are essentially like money; or in the...
Page 4 - ... realized in equal annual amounts, he pointed out that a taxpayer selling a six-year investment at a $60,000 profit under the plan would be taxed on 20 per cent of the profit or $12,000 at current rates while in fact he had a gain accruing at the average rate of $10,000 per year for six years and might reasonably be subjected to six taxes on an item of $10,000, instead of a single tax on $12,000 as proposed. He also called attention to the fact that a loss on property held one year only, under...
Page 9 - It pointed out that the United States, to avoid burdensome double taxation and to encourage foreign trade, should allow an offsetting credit against its own income tax. The Treasury Department stated that it should be borne in mind that income earned abroad typically represents the sale of American products rather than the purchase and sale of foreign goods.