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A resolution of thanks to the accountants in Illinois who had organized the meeting was adopted by a rising vote.

The meeting adjourned at 5:30.

An informal banquet was held at the Congress hotel at 6:30 P. M. The toastmaster was Edward E. Gore and the speakers were Carl H. Nau, president of the American Institute of Accountants; H. G. P. Deans, vicepresident of the Merchants Loan & Trust Company, Chicago, who chose for his subject Some Problems of Foreign Exchange, and Keene H. Addington, member of the Illinois bar, whose subject was Invested Capital from a Legal Stand point as applied to Excess and War Profits Taxation.

Wisconsin Society of Certified Public Accountants At a meeting of the Wisconsin Society of Certified Public Accountants, held December 10, a revised form of constitution and by-laws was adopted. Officers for the current fiscal year are: President, Carl Penner; vice-president, S. E. Barry; secretary and treasurer, H. D. Sampson.

Marwick, Mitchell & Co. announce the opening of an office in Brussels, Belgium, at 11 rue de Namur, under the management of Leon C. Beukers, and an office in Marseilles, France, at 2 rue Paradis, place de la Bourse, under the management of L. Docquier and P. Woolford.

Arthur Young & Co. announce the opening of branch offices at 192 Market street, Newark, New Jersey, under the management of M. C. Ruggaber and in the Pacific Finance building, Los Angeles, California, under the management of George E. Dell.

Arthur Young & Co. announce the admission to partnership of Charles R. Trobridge and J. Gordon Steele and the retirement of A. J. Baxter as of January 1, 1921.

W. P. Hilton & Co. announce the opening of a branch office at 910 Harris Trust building, Chicago, Illinois, under the management of George Mahon.

James O. Sully & Co. announce the removal of their offices to suite 311, 260 California street, San Francisco, California.

Marwick, Mitchell & Co. announce the removal of their London office to British Columbia House, 1 Regent street, S. W.

Charles H. Steel announces the opening of an office at 320 Stephen Girard building, Philadelphia.

Marwick, Mitchell & Co. announce the admission to partnership of Peter S. Barton and John P. Cash.

Nau, Rusk & Swearingen announce the removal of their Cleveland office to 3334 Prospect avenue.

Income-tax Department

EDITED BY STEPHEN G. RUSK No treasury decisions that had reference to income tax were made during the past month.

There have been many decisions by the board of review, by the solicitor of the department, and by the office, from which have been gleaned the more important that bear upon phases of the law that are met with considerable frequency by accountants.

These opinions and decisions, given below, relate to such questions as income from exchange of property, sale of personal property on the instalment plan, and to such deductions as depreciation of intangible property, valuation of inventory, charitable contributions, life insurance premiums, etc.

As the time is at hand when many returns must be made, the matters discussed in the following paragraphs become vitally interesting. Section 202, article 1563: exchanges of property. (Also section 213 (a), article 52.)

A. R. K. 289 The committee has had under consideration the appeal of A from the action of the unit in proposing an additional assessment of income tax for the years 1916 and 1817.

The additional taxes grow out of the reorganization of the M Company, or rather the formation of the M Company of Delaware, and the exchange of its stock for stock of the M. Company of New Jersey. This exchange was made by giving three shares of the preferred stock of the New Jersey company, not redeemable and carrying dividends at the rate of 7 per cent, for four shares of preferred stock of the Delaware corporation, redeemable at 110 per cent of par and carrying dividends of 6 per cent, and five shares of the common stock of the new company for one share of stock in the old company.

Two questions arise in connection with the pending appeal: one, whether any profit was made, and the other as to the year when the profit, if any, was made. Upon the first question the office has uniformly taken the position that stocks in different companies are essentially different properties, and that a taxable profit is realized if the value of the stock received in exchange is in excess of the cost of the stock so exchanged.

The committee understands that the office has taken a similar stand with respect to other stockholders of the M Company.

The committee therefore recommends that the ruling of the unit, holding the stockholders or the New Jersey company liable for any profit made by exchange of their stock for new stock in the Delaware corporation, be sustained.

Upon the other question it appears that A exchanged a portion of her stock in 1916, but did not take advantage of the offer of exchange as to the rest until 1917. Clearly, although the right to make an exchange had been given her in 1916, no profit accrued to her until she actually made the exchange, and the action of the unit in holding the profit made by exchange subsequent to January 1, 1917, as subject to tax under the rates provided for that year is correct and should be approved.

Section 214 (a) 1, article 101: business expenses.

0. D. 711 Office decision 396 (bulletin 6-20), holding that premiums paid on a life insurance policy required as collateral for a loan are deductible as a business expense, is to be strictly construed. The policy must have been taken out for the sole purpose of using it as security for the loan. A taxpayer is not permitted to deduct the premiums paid on a policy taken out prior to the negotiations for a loan and later assigned to the lender as security for such loan. The subsequent assignment of the policy to the lender is merely incidental to the purpose for which the policy was secured, and no additional expense is incurred or loss sustained by virtue of its temporary use as collateral. The increase in the cash surrender value of a policy accruing during the period it is used as collateral is not to be considered in computing the net income of the person who pays the premium.

A corporation which takes out a policy on the life of one of its officers for the purpose of using the policy as collateral may not deduct the premiums paid thereon. Section 214 (a) 11, article 251: charitable contributions.

0. D. 712 Contributions or gifts made within the taxable year to corporations organized and operated exclusively for charitable purposes, which are deductible for income tax purposes from the gross income of individual taxpayers under section 214 (a) 11, revenue act of 1918, have been construed to mean gifts of money or property. The value of services rendered to charitable institutions may not be allowed as a deduction under the aforesaid section. Section 202, article 1567: exchange of stock for other stock of no greater par value.

Sol. Op. 72 INCOME TAX: SECTION 202 (b), REVENUE ACT OF 1918 Article 1567, regulations 45, as amended by T. D. 2870 and further amended

by T. D. 2924, applied The question is raised as to the application of article 1567, regulations 45, as amended by T. D. 2870 and T. D. 2924 in the case of the issue of no-par-value stock under an act of the general assembly of the state of Ohio, approved May 29, 1919. Section 202 (b) of the revenue act of 1918 provides in part:

when in connection with the reorganization, merger, or consolidation of a corporation a person receives in place of stock or securities owned by him new stock or securities of no greater aggregate par or face value, no gain or loss shall be deemed to occur from the exchange, and the new stock or securities received shall be treated as taking the place of the stock securities, or property exchanged.

Article 1567 of regulations 45 as amended by T. D. 2870 provides in part:

So-called “no-par-value stock” issued under a statute or statutes, which require the corporation to fix in a certificate or on its books of account or otherwise an amount of capital or an amount of stock issued which may not be impaired by the distribution of dividends, will for the purpose of this section be deemed to have a par value representing an aliquot part of such amount, proper account being taken of any preferred stock issued with a preference as to principal. *

Although this article was further amended by T. D. 2924 the portion quoted remains unchanged.

The specific question presented is whether, if two existing corporations are consolidated under the act of the general assembly of the state of Ohio, approved May 29, 1919, by the exchange of no-par-value shares of the new

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corporation for the entire assets and obligations of each of the existing corporations, and they each in turn are liquidated, the no-par-value stock of the consolidated corporation will be held under article 1567 of regulations 45, as amended, to have a par value for federal taxation purposes represented by the aliquot part of the total book value of the properties of the corporations which are consolidated and exchanged for the no-par-value shares in view of the provisions of the Ohio statute limiting the declaration of dividends to surplus profits arising from the business of the new corporation.

An act of the general assembly of the state of Ohio, approved May 29, 1919, provides :

SECTION 1. Upon the formation of any corporation for profit under the laws of this state,

the articles of incorporation required by law may provide for the issuance of the shares of common stock of such corporations, without any nominal or par value, by stating in such articles:

(a) The number of shares that may be issued by the corporation,

(b) The amount of capital with which the corporation will carry on business, which amount shall be not less than the amount of the preferred capital, if any, authorized to be issued, and in addition thereto as common capital a sum equivalent to five dollars, or to multiple of five dollars, for each share of common stock to be issued; but in no event shall the amount of common capital be less than five hundred dollars.

Such statements in the articles of incorporation shall be in lieu of any statements prescribed by law as to the amount of the capital stock, and the number of shares into which the same shall be divided, and the par value of such shares.

Each share of such common stock without nominal or par value shall be equal to every other share of such stock, subject to the preferences given to the preferred stock, if any, authorized to be issued.

SECTION 2. No corporation formed pursuant to this act shall begin to carry on business or shall incur any debts until the amount of common capital stock stated in its articles of incorporation shall have been fully paid to the corporation in money or in property taken at its actual value; *

No such corporation shall declare or pay any dividend out of capital or which shall reduce the amount of its common capital below the amount stated in the articles of incorporation as the amount of such capital with which the corporation will carry on business.

SECTION 3. For the purpose of any rule of law or of any statutory provision (other than as provided for in this act), relating to the amount of the capital stock of a corporation or the amount or par value of its common shares, the aggregate amount of the capital stock of any such corporation formed or reorganized pursuant to this act shall be deemed to be the aggregate amount, preferred and common, respectively, stated in the articles of incorporation or any amendment thereof, * as the amount of capital with which the corporation will carry on business; and for the same purpose the amount or par value of each share of common stock shall be deemed to be an aliquot part of the aggregate common capital so stated in such articles of incorporation or any amendment thereof, or certificates of reorganization.

Section 3 of the act above quoted practically parallels the portion of article 1567, as amended, which is here involved. A careful reading of the portions of the act quoted leaves no room for argument that upon the facts presented the shares of no-par-value stock issued by the consolidated corporation will be deemed to have, for the purposes of federal taxation, a par value representing an aliquot part of the amount of capital with which the corporation is to carry on business as stated in its articles of incorporation.

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Under the provision of section 2, quoted, the net value of the assets of the corporations which are consolidated must be not less than the amount of capital so stated, but it is not required to be in excess of that amount. If, in fact, the net value of the assets exceed the amount of capital specified in the articles of incorporation, it is clear that such excess will constitute paid-in surplus out of which dividends might be paid.

It is accordingly so held. Section 213 (a), article 42: sale of personal property on installment plan.

0. D. 715 In the case of sales of personal property where substantial initial payments are made (more than 25 per cent of sale price), article 42 of regulations 45. provides that obligations of the purchasers are to be regarded as the equivalent of cash. It is recognized that in many sales of this type the obligations of purchasers, even though represented by notes or other paper in negotiable form, cannot be discounted or otherwise converted into cash without material loss because of lack of credit on the part of the buyer and the nature of the property covered by such contracts. The obligations of the purchasers in those cases can scarcely be considered the equivalent of cash in any sense, and it is not contemplated by the regulations that such obligations are required to be so treated. On the other hand, the profits from such sales may be computed in accordance with the rule prescribed in cases of the sale or contract for sale of personal property on the installment plan, provided, of course, the taxpayer chooses to do so as a matter of consistent practice, and provided a statement is attached to the taxpayer's return disclosing the fact and showing conclusively that the obligations of the purchasers are not the equivalent of cash. Section 213 (b), article 80: liberty bond exemption after December 31, 1918.

O. D. 718 In case a taxpayer converts his liberty bonds or victory notes originally subscribed for from one denomination into another, or from registered bonds into coupon bonds, or vice versa, he may be considered the original subscriber to the new bonds or notes for the purpose of the collateral exemptions, if the new bonds or notes are of the same issue as the ones originally subscribed for. Section 214 (a) 8, article 163: depreciation of intangible property.

O. D. 721 The following schedule of the terms of patents and trade-marks in various countries is published for the information of taxpayers: Country Term of patent

Term of trade-mark Great Britain.. 16 years. Extended from 14 years by act of Parliament, 1919....

14 years renewable.
5, 10 or 15 years from filing of ap-
plication

15 years renewable. Germany. 15 years from next day after filing. 10 years renewable. Russia. 5 years

I to 10. Canada.

General unlimited;

special 25 years re

newable. Australia... 14 years

14 years renewable. Austria... 15 years

10 years renewable. Switzerland. 10 years for chemical process. 20 years renewable.

15 years from filing.. Sweden... 15 years from filing.

10 years renewable. Denmark. 15 years

10 years renewable. United States.. 17 years

20 years renewable.

France. ....

18 years

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