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INDIVIDUAL INCOME TAX TABLE This table shows the tax on ordinary net income, payable, under the Revenue Act of 1924, by a married person with no dependents. For adjustments, because of capital net gains or losses, see Section 208 of the Law, page 61, and questions and answers on page 16.

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.887

1,530

1,770

9.516

14%

166%
176%

TOTAL TAX Percentage NET Rate of Rate of Amount of Amount of Marimum Earned Columns D and E Total Tač to INCOME Normal Tax Surtat Normal Tax Surtax Income Credit Le88 Column F Net Income A

B
с D

E
F

G

H $3,000 2%

$10

$2.50

$7.50

.25% 4,000 207 30

7.50

22.50

.56% 5,000

50

12.50

37.50

.75% 6,000

70

17.50

52.50 8,000

140

35.00

105.00 1.31% 10,000

220

55.00

165.00

1.65% 12,000 1% 330

$20
55.00

295.00 2.46% 14,000 1% 450

40
55.00

435.00

3.11% 16,000 2% 570

80
55.00

595.00

3.72% 18,000

690
140
55.00

775.00

4.29% 20,000

810
220
55.00

975.00 4.88% 22,000

930
320
55.00
1,195.00

5.43% 24,000

1,050
440
55.00

1,435.00 5.98% 26,000

1,170
580
55.00

1,695.00 6.52% 28,000

1,290
740
55.00

1,975.00 7.05% 30,000

1,410
920
55.00

2,275.00 7.58% 32,000 100

1,120
55.00

2,595.00 8.11% 34,000 104 1,650 1,320

55.00
2,915.00

8.5767 36,000 11

1,540
55.00

3,255.00 9.049 38,000 12% 1,890 1,780

55.00

3,615.00 40,000

13%
2,010 2,040

55.00

3,995.00 9.99% 42,000

137
2,130 2,300

55.00

4,375.00 10.42% 44,000

2,250 2,580

55.00

4,775.00 10.85% 46,000

15%
2,370 2,880

55.00

5,195.00 11.29% 48,000

2,490
3,200
55.00

5,635.00 11.74% 50,000

2,610 3,540

55.00

6,095.00 12.19% 152,000

2,730 3,900

55.00
6,575.00

12.74% 54,000

2,850 4,280

55.00

7,075.00 13.10% 56,000 19% 2,970 4,660

55.00

7,575.00 13.53% 58,000

20%
3,090 5,060

55.00

8,095.00 13.966% 60,000 21 3,210

5,480
55.00

8,635.00 14.39% 62,000 21 3,330 5,900

55.00

9,175.00 14.80% 64,000 229

6,340
55.00

9,735.00 15.210 66,000 6% 23%

6,800
55.00

10,315.00 15.639 68,000 6% 24% 3,690

7,280
55.00

10,915.00 70,000 6% 25% 3,810

7,780
55.00

11,535.00 16.47% 72,000 267 3,930 8,300

55.00

12,175.00 16.90% 74,000 267 4,050 8,820

55.00

12,815.00 17.32% 76,000 27% 4,170 9,360

55.00

13,475.00 17.73% 78,000 28 4,290 9,920

55.00

14,155.00 18.15% 80,000 28% 4,410 10,480

55.00

14,835.00 18.54% 82,000 29% 4,530 11,060

55.00

15,535.00 18.95% 84,000 6% 30% 4,650 11,660

55.00

16,255.00 19.35% 86,000 6%

31%
4,770 12,280

55.00

16,995.00 19.76% 88,000

17,735.00 20.15% 90,000 6%

18% 19%

3,450 3,570

16.056

66%

66% 60%

667

31%
4,890 12,900

55.00

5,010
13,540
55.00

18,495.00 20.55% 92,000 69 33%

5,130 14,200

55.00

19,275.00 20.95% 94,000 34% 5,250 14,880

55.00

20.075.00 21.36% 96,000 35% 5,370 15,580

55.00

20,895.00 21.77% 98,000 369 5,490 16,300

55.00

21,735.00 22.18% 100,000

369
5,610 17,020

55.00

22,575.00 22.58% 150,000

8,610 35,520

55.00

44,075.00 29.38% 200,000

11,610 54,020

55.00

65,575.00 32.79% 300,000

To
17,610 92,020

55.00

109,575.00 36.53% 500,000

29,610 170,020

55.00

199,575.00 39.92% 1,000,000 40% 59,610 370,020

55.00 429,575.00 42.96% more than 1,000,000 6% 40%

55.00

32%

37%

37%

3867
396

GAIN OR LOSS FROM SALES AND EXCHANGES

Q. I purchased 100 shares National Bank stock in 1912 at a cost of $12,300. These shares had a market value on March 1, 1913, of $15,000 and in 1924 I sold them for $13,000. Have I gain or loss to report?

A. The basis for determining gain or loss from the sale or other disposition of property acquired before March 1, 1913, is the cost of the property or its fair market value as of March 1, 1913, whichever is greater. Notwithstanding you have realized an actual gain of $700 on your investment, you are permitted to claim a loss of $2,000 in your return, as follows: Selling price of stock in 1924.

$13,000 Cost of stock in 1912.

$12,300 Value on March 1, 1913..

15,000

Deductible Loss..

$2,000 Under the former Law the Treasury Department held that you could claim neither gain nor loss.

Q. How is gain or loss computed where property acquired by gift is sold?

A. If the gift is received after December 31, 1920, the basis for computation is the cost of the property to the donor, or to the last preceding person who did not receive it by gift. For example:

B bought a house in 1915 for $10,000. In 1918 he gave it to C, who, on April 15, 1921, gave it to D. On November 20, 1924, D sold it for $12,000. Under the new Law, D must report as gain the difference between $10,000, the price which B, the last preceding person by whom the property was not acquired by gift, paid for it, and $12,000, the price at which D sold it. If D does not know what B paid, the Law provides that the Commissioner shall obtain the facts from B. (In this example no account is taken of depreciation or other adjustments.)

If the property had been acquired either by gift before December 31, 1920, or at any time by bequest, devise or inheritance, the basis for determining gain or loss would be the difference between the fair market value of the property when it was received and the selling price.

Q. How do I ascertain the gain or loss from a sale of stock received as a dividend?

A. The receipt of stock issued by a corporation as a dividend does not constitute taxable income to a stockholder, but gain or loss from its sale is computed as is the sale of any property, after the cost (or other basis as explained in the two preceding questions under "Gain or Loss from Sales and Exchanges") of the old and the new shares is determined in accordance with the following Treasury Department rules:

I. Where the stock issued as a dividend is all of substantially the same character or preference as the stock on which the dividend is paid, the basis of each share is the quotient of the cost (or other basis) of the old shares of stock, divided by the total number of the old and new shares.

2. Where the stock issued as a dividend is wholly or in part of a character or preference materially different from the stock on which the dividend is paid, the cost (or other basis of the old shares of stock is divided between the old and the new stock, as nearly as may be, in proportion to the respective values of each class of stock, old and new, at the time the new stock was issued, and the basis of each share is the quotient of the cost (or other basis) of the class to which the share belongs, divided by the total number of shares in that class.

Q. In 1920, I purchased 100 shares of Fraham National Bank stock at $175 a share. On July 1, 1924, the bank issued rights to subscribe to an increase of capital at $100 a share in the proportion of one right for each two shares of stock held. Instead of exercising my privilege, I sold the rights at $55 each. Are the proceeds taxable?

A. Before a profit or loss can be determined, the cost of the original shares and the rights must be determined. This is done by dividing the cost of the old shares plus the subscription price of the new shares, by the sum of the old shares and the new shares covered by the rights. The price for which the rights are sold is considered to be the sum of the subscription price of the new shares and the selling price of the rights. The computation follows:

Original cost of stock (100 shares at $175).... $17,500
Subscription price of new stock (50 shares at $100). 5,000
Total cost for determining gain or loss...

$22,500 Cost of each share ($22,500 divided by 150 shares)... $150

Subscription price of new stock (50 shares at $100). $5,000
Proceeds from sale of rights (50 rights at $55)..... 2,750

Selling price for determining gain or loss...
Cost of rights (50 rights at $150)..

$7,750 7,500

Taxable gain..

$250

Should the gain be more than the proceeds from the sale of the rights, the amount taxable is limited to the selling price.

If the rights relate to stock of a character materially different from the stock on which the rights are issued, the gain is to be computed as in the case of stock dividends where the stock received is of a different character (see preceding answer).

Q. In 1918, John Smith purchased 100 shares of preferred stock and received, as a bonus, 10 shares of common stock. How will his gain be determined if he sells part of the stock?

A. Treasury Regulations provide that when common stock is received as a bonus with the purchase of preferred stock or bonds, the total purchase price must be fairly apportioned between the common stock and the securities purchased to determine the cost attributable to each class of stock or securities; if that should be impracticable, no profit on a sale of any part of the stock or securities is realized until the total cost has been recovered from the proceeds of sales.

Q. On February 6, 1924, I bought 100 shares of Smith ecommon at 135. Shortly thereafter I received a stock dividend of 25 per cent, which I immediately sold at 135. Have I anything to report for tax purposes as a result of this transaction?

A. Yes. You purchased 100 shares which cost you $13,500 and then received 25 shares more, so that your 125 shares cost you $13,500, or $108 a share. When you sold the 25 shares (regardless of whether they were the dividend shares out from the 100 shares originally purchased) at $135 a share, you realized a taxable profit of $27 a share, or $675.

Q. William Morgan purchased $10,000 first mortgage 6 per cent bonds at 95 on April 1, 1915. These bonds had a market valué of $10,500 on October 6, 1924, when he exchanged them for $10,000 Liberty and 474's, then selling at 102, plus $500 cash. Did this transaction result in a taxable profit?

A. When securities held for investment are exchanged for other securities, the fair market value of those received in exchange is considered the equivalent of cash, and the taxable gain or deductible loss is computed as though the sale had been for cash. Accordingly, Mr. Morgan realized a profit for tax purposes amounting to the difference between $9,500 (the cost of the first mortgage bonds) and $10,700 (the market value of the Liberties, plus $500) or $1,200.

Q. A short time ago the X Trust Company and the Y Bank merged under the name of the X-Y Bank. For my stock in the Y Bank, which I had bought after March 1, 1913, for $40,000, I received in exchange stock of a fair market value of $50,000 in the consolidated bank, together with Liberty Bonds of a fair market value of $10,000. Am I taxable for a profit?

A. Yes. You realized from the transaction a taxable gain of $10,000, the amount of the fair market value of the Liberty Bonds received in exchange. Your actual gain, computed in accordance with Section 203 (d) (1) of the Act (page 56), was $20,000, the excess of the sum of the fair market value of the Liberty Bonds and the fair market value of the stock received in exchange, over the cost of the property exchanged, but this Section also limits the taxable gain in a reorganization, merger or consolidation of corporations to the amount of cash (or the fair market value of property other than stock in a corporation a party to or resulting from the merger) received in exchange.

Q. How is the amount of taxable income computed when shares of of a corporation are sold from lots purchased at different times and at different prices and the identity of the lots cannot be determined?

A. In such cases the Department has consistently held that the first stock sold must be charged against the earliest purchases.

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