FISCAL YEAR is the annual period for which a corporation or partnership makes its accounting, usually fixed, respectively, by the by-laws or articles of copartnership. In the case of an individual, with respect to returns under present income tax laws, it can only be the calendar year. FOREIGN CORPORATION is one created under the law of any possession of the United States other than a State, Territory or District thereof, or of any foreign country or government. (Section 200, Excess Profits Tax Law.) GOOD WILL is the value that attaches to a business beyond its tangible property, by reason of reputation or location. Under the Excess Profits Tax good will may, where it was purchased for cash or property, be a part of the "capital invested" with limitation as to amount. GROSS INCOME OR GROSS PROFIT is usually the excess of proceeds of sale of commodities dealt in over the cost of goods sold, plus income from other sources, without any deduction in respect of administration or distribution expenses. HEAD OF FAMILY is held to be "a person who actually supports and maintains one or more individuals who are closely connected with him by blood relationship, relationship by marriage or by adoption and whose right to exercise family control and provide for these dependent individuals is based upon some moral or legal obligation." (T. D. 2427). "INFORMATION AT SOURCE" refers to returns to be made in place of withholding at source as heretofore. Except in respect of payments to nonresident alien individuals and nonresident alien corporations, and payments of interest to citizens and resident aliens on obligations containing a tax free covenant clause, taxes need not now be withheld at the source of payment. "IN TRADE," as defined by the Treasury Department, is synonymous with business, employment, regular occupation. LIABILITY is an obligation or indebtedness. LIMITED PARTNERSHIP is a partnership that has one or more "special partners" whose liability is limited; it is formed by complying with State laws providing therefor. In the application of income tax laws it is treated as a corporation. NET INCOME, NET PROFIT or NET EARNINGS is the excess of gross income or gross profit over and above the sum of deductible expenses and losses allowed by law as deductions. As applied to foreign corporations or partnerships or a non-resident alien individual, it refers only to net income received from sources within the United States. NONRESIDENT ALIEN is a citizen or subject of a country other than the United States whose domicile is without the United States. NORMAL TAXES, in the case of individuals, are the flat rates of taxes computed on the net income, less dividends of corporations whose net income is subject to tax, tax withheld at the source and personal exemptions. In the case of corporations, the normal taxes are those imposed upon the entire net income as determined by provision of law. For the purpose of normal tax no exemption is allowed to corporations. All normal taxes are flat rates-not progressive. OCCUPATION, as used in the Excess Profits Tax, by ruling of the Treasury Department, includes employment, compensated for by a salary. Persons receiving a salary are subject to the flat rate of the Excess Profits Tax. PARTNERSHIP is not defined in either of the present Income Tax Acts. In a liberal sense, it is the relation which exists "between persons carrying on a business in common with a view of profit." (See pages 68 to 71.) PREWAR PERIOD, as used in the Excess Profits Tax, refers to years 1911, 1912 and 1913 or such of these years, during the whole of which, a corporation or copartnership was in existence or an individual was engaged in trade or business. PROFIT AND LOSS ACCOUNT is a statement of the profit or loss of an undertaking for a given period of time. RATES, refer to rates or percentages of taxes. REG. (Treasury Regulation) refers to rules and regulations prescribed by the Treasury Department. REORGANIZATION is "A term applied to the formation of a new corporation by the creditors and shareholders of a corporation which is in financial difficulties, for the purpose of purchasing the company's works and other property, after the foreclosure of a mortgage or judicial sale." (34 Cyc. 1336.) RESERVE denotes an amount set aside from profits for a particular purpose or to meet contingencies. (See Reserve Account and Reserve Fund.) RESERVE ACCOUNT represents an amount charged to Profit and Loss (deducted from profit) in determining the true or net profit. Comparatively, such an account is a fictitious reserve in that it is usually a reduction of the book value of the asset (property account) to which it relates. (See "Reserve for Depreciation.") RESERVE FUND represents an amount set aside from profits and segregated in the assets or set apart from other assets; for example, cash deposited in a separate bank account or invested in outside securities. Comparatively, a reserve fund is a real reserve in that it is actually set apart from other property. RESERVE FOR DEPRECIATION is an account that represents the amount of depreciation of property deducted from profits. It is a fictitious reserve in that it is merely the measures by which the asset account (property account) has been reduced by depreciation charged off. "RESIDENCE" or "PLACE OF RESIDENCE" is one's permanent home or domicile as distinguished from lodging or temporary abode. RESIDENT ALIEN is a citizen or subject of a country other than the United States whose domicile is within the United States. "RETURN" is a report of net income prepared in the form prescribed by law. SALARY refers to compensation paid for services rendered; the amount is fixed in advance, at a sum certain, for a definite period of time. SURPLUS or SURPLUS PROFITS is the excess of assets over and above the sum of liabilities and capital. It may or may not include reserves, according to the nature of them. SURTAXES or SUPERTAXES are the taxes imposed upon individuals under the Acts of September 8, 1916, and Oc tober 3, 1917, in addition to the normal tax. (See "Additional Taxes.") TAX FREE COVENANT CLAUSE is a contract or provision in a bond by which the obligor agrees to pay the tax on the income from such bond or part thereof imposed upon the obligee, whereby the obligor agrees to reimburse the obligee therefor. T. D. (Treasury Decision) designates a ruling under, or interpretation of, the law by the Treasury Department, which has the effect of law. TRADE and BUSINESS, under the Excess Profits Tax, include professions and occupations. UNDIVIDED PROFITS of a corporation refer to the difference between the net earnings and dividends paid or declared therefrom. UNITED STATES "means only the States, the Territories of Alaska and Hawaii and the District of Columbia." (Section 200, Excess Profits Tax.) WITHHOLDING AT SOURCE refers to the deduction of the normal tax by the payer of income and paying the same to the Government officials authorized to receive the same. WITHHOLDING AGENT is one who is required to withhold the normal tax from the income of another of which he has the custody or disposal. |