Section 250 provides that where an undue hardship would result from the necessity of making immediate payment on account of assessment of additional taxes due under the Revenue Acts of 1917, 1918 and 1921, the Commissioner may extend the time of payment of such tax for a period not exceeding 18 months from November 23, 1921. Other parts of section 250 provide for the definite closing of tax cases. Provision is also made to relieve taxpayers of the frequent and unnecessary reexaminations of returns which in the past have been permitted.

The Revenue Act of 1918 provided that losses were deductible only for the year in which sustained. The Revenue Act of 1921 continues this provision but further provides that in exceptional circumstances, in order to avoid injustice to the taxpayer and to more clearly reflect his income, the Commissioner may permit a loss to be accounted for as of a year other than the one in which sustained.

The Revenue Act of 1921 provides that in case property is compulsorily or involuntarily converted into cash or its equivalent under certain circumstances, the proceeds of such conversion would not be taxable or would be taxable only in part, even though ordinarily such conversion would be regarded as resulting in a profit. This rule applies where the taxpayer proceeds forthwith in good faith to expend the proceeds of such conversion in the acquisition of property of a character similar or related in service or use to the property so converted or in the establishment of a replacement fund. Under such circumstances, while the entire profit resulting from the conversion is to be reported in gross income, there is allowed as a deduction from gross income an amount equal to that proportion of the gain derived which the portion of the proceeds so expended bears to the entire proceeds.

Section 229 makes provision for the treatment as a corporation from January 1, 1921, of a business then conducted by an individual or a partnership where a corporation is organized within four months after November 23, 1921, to take over the business of such individual or partnership.

3. CHANGES TO PREVENT THE EVASION OF TAXATION.

Where corporations are availed of for the purpose of accumulating profits and thus preventing the imposition of the surtax upon its stockholders, a penalty in the form of a tax equal to 25% of the net income is imposed, in addition to other taxes payable. If, however, the stockholders of such corporation agree thereto, the Commissioner may, in lieu of all income, war-profits and excess-profits taxes that would otherwise be imposed upon the corporation for the taxable year, tax the stockholders of such corporation upon their shares in the net income of the corporation for the taxable year in the same manner as in the case of the members of a partnership.

Another provision of the law takes out of the hands of the taxpayers the possibility of selling stock or securities in order to register losses for tax purposes and immediately buying other or like securities, which action therefore results only in "paper" losses. Under section 214 no deduction for loss is allowed if sustained after November 23, 1921, if within a period of 30 days before or after the date of the sale of the stock or securities the taxpayer acquires substantially identical property and holds the same for any period after the date of acquisition. In other words, "wash sales" will no longer be recognized.

A common method of avoiding taxes prior to the enactment of the Revenue Act of 1921 was by means of gifts. Thus where, for example, an individual held property which had considerably appreciated in value over and above the cost or March 1, 1913, value (depending upon the base to be used in the computation of profit upon sale) a common practice has been to give to a near relative such property as an absolute and irrevocable gift. The donor would realize no profit while the donee would realize very little if any profit upon the sale of the property as the taxable profit would be measured by the difference between the value of the property at the date of acquisition by the donee and the sale price. The Revenue Act of 1921, however, provides that in the case of a gift made after December 31, 1920, and the subsequent sale by the donee

of the property thus received by way of a gift, the profit or loss arising from such sale would be the difference between the sale price and the basic value (for the purpose of computing a profit in the event of a sale) to the donor as if no such gift had been made.

The Revenue Act of 1921 provides that a stock dividend is not subject to tax. If, however, stock is so distributed and is later cancelled or redeemed by the corporation so that the stock dividend in effect becomes a taxable dividend, then the amount received for the stock is treated as a taxable dividend to the extent of earnings or profits accumulated by the corporation after February 28, 1913.

4. MISCELLANEOUS CHANGES.

Under the Revenue Act of 1918 personal-service corporations are not taxable as ordinary corporations. The stockholders of such personal-service corporations are, in this Act, taxable in the same way as partners of a partnership, that is, each stockholder is taxed on the profits accruing to him individually. Under the Revenue Act of 1921, however, the taxation of personal-service corporations in the manner just stated ceases after December 31, 1921, and personal-service corporations are taxed 122% on their net income just as other corporations.

A corporation with a net income of over $25,000 is no longer allowed a specific credit while a corporation whose net income is less than $25,000 is allowed a specific credit of $2,000 in the computation of the income tax. However, if the net income is in excess of $25,000 the tax cannot be greater than the sum of the excess of the net income over $25,000 and a tax computed with an allowance of a specific credit of $2,000.

Individuals are required to file returns if their gross income is $5,000 or more, even though the net income is less than the individual's specific exemption.

Consolidated returns are still required in the case of affiliated corporations for the taxable year 1921 or for any taxable period beginning in 1921 and ending in 1922. However, for any taxable year beginning after December 31, 1921, affili

ated corporations have the option of filing either separate returns or consolidated returns. When such option has been exercised, however, the method elected is required to be followed thereafter unless permission to change is granted by the Commissioner.

A provision of particular interest and perhaps of far-reaching importance is that contained in section 240 wherein the Commissioner is authorized to consolidate the accounts of two or more related trades or businesses (whether unincorporated or incorporated and whether organized in the United States or not) owned or controlled directly or indirectly by the same interests. Such consolidation, however, is not for the purpose of filing a consolidated return but is for the purpose of making an accurate distribution or apportionment of gains, profits, income, deductions, or capital between or among such related trades or businesses.

Under section 250 the time within which taxes due for 1921 and subsequent years under the Revenue Act of 1921 may be assessed is limited to four years from the time of filing the return. Taxes due, however, for any year prior to 1921 on account of returns filed under the Revenue Act of 1921 or under prior Acts may be assessed at any time within five years of the date of filing the return. However, these limitations do not apply in the case of fraudulent returns. Where such returns have been filed the tax may be assessed at any time.

Section 250 also provides that the taxpayer shall be duly notified of any deficiency in tax discovered upon examination of the return and shall be given a period of not less than 30 days within which to file an appeal and show cause or reason why the tax deficiency should not be paid. After the taxpayer has thus had full opportunity to be heard the tax found to be due by the Commissioner, taking into consideration all information on hand, is assessed and must be paid. Seemingly where full opportunity has thus been given the taxpayer to show cause or reason why the tax should not be assessed and he has

failed to do so, he cannot avail himself of the privilege (as heretofore) of filing a claim for abatement.

The Revenue Act of 1921 continues a provision with respect to the allowance of a credit against United States income taxes because of foreign income or profits taxes paid by the taxpayer. The amount of such foreign income and profits taxes, however, is allowable as a credit only to the extent that it does not exceed that proportion of the tax against which credit is claimed which the income from foreign sources bears to the entire net income for the same taxable year.