Newspaper Page Text
THE MAUI NEWS, FRIDAY, MARCH 8, 1918.
The Excess Profits Regulations
(The article below, sent 1c tin:
Maui News from Washington for pub
lication, arrived some ten days ago
but was crowded put of last issue. It
is of particular interest 1o men encas
ed in business enterprises of all
The excess profits regulations were
on Saturday finally approved by the
Secretary of the Treasury and sent to
press. The provisions which are of
most general interest to the public
are those which deal with the defini
tion of invested capital of corpora
tions and partnerships and with the
treatment under section 210 of cases
In which capital can pot be satisfac
torily determined and under section
209 of cases of nominal capital.
The provisions of section 210, which
permit the deduction to be computed
by reference to the deduction as de
termined in the ordinary way in the
case of representative concerns en
gaged in the same trade or business,
are held to apply to a number of
classes of exceptional cases, among
which are the following:
. Where on account of defective
accounting it is impossible to accur
ately compute the invested capital.
Case of Foreign Taxpayer
2. In the case of a foreign tax
payer, where the Secretary finds upon
application that the expense of secur
ing the necessary data is unreason
able in view of the amount of tax in
volved or that it is impracticable to
determine either the entire invested
capital or the entire net income.
3. Long-established business con
cerns which by reason of conserva
tive accounting or the form and man
ner of their organization would,
through the operation of section 207,
be placed at a disadvantage in com
petition with representative concerns
doing a similar business.
4. Where the invested capital is
seriously disproportionate to the tax
nble Income, as for example because
of the realization in one year of the
earnings of capital unproductively
Invested through a period of years,
or of the fruits of activities antedat
ing to recognize or properly allow for
amortization obsolescense, or excep
tional depreciation due to the present
Nominal Invested Capital
Section 209, which provides an 8
per cent rate in the case of taxpayers
having only a nominal invested capi
tal, is held to apply primarily to oc
cupations, professions, trades and
business engaged principally in rend
ering personal services and in which
the employment of capital is not ne
cessary, and the earnings of which
are to be ascribed primarily to the
activities of the owner. In such
cases the mere size of capital, form of
organization, etc., are not determin
ing factors if the employment of the
capital used is necessary because of
delay or irregularity in receiving fees,
etc., or if such capital Is mainly used
as a fund to advance salaries or
wages, or to provide office furniture,
In general, nominal capital is defin
ed as a small or negligible capital
whose use in a particular trade or
business is incidental, and does not
Include a business which, because of
conditions arising from the war or
exceptional opportunity for profits,
earns a disproportionately high rate
of profit during the taxable year, if
it belongs to a class which necessari
ly and customarily requires capital
for its operation; nor to corporations
which although their capitalization
Is nominal, employ a substantial
amount of capital in their business;
nor to a business having a substan
tial capital, but whose invested capi
tal within the meaning of section 207
is reduced to a nominal amount by
the operation of the restrictive claus
es of that section.
Single Business Defined
The law provides that all of the ac
tivities of a corporation or partner
ship shall constitute a single busi
ness and that Its Income is deemed
to be derived from that business.
Where a corporation or partnership,
however, is engaged in a business hav
ing no invested capital and is also
engaged in a separate business having
Invested capital it Is provided in the
regulations that Its entire income will
be held to be of the same class as the
income from its principal business
and to take the rate of tax applica
ble to that business.
In the case of an individual engag
ed in ono or more trades or businesses
having invested capital and also hav
ing income of a class taxable at the
8 per cent rate the regulations provide
that all the income of each class
shall be lumped together and the
aggregate of each class taxed sepa
rately at the rates applicable to that
class. The specific exemption of
$6,000 will be allowed as to each
It is also provided that where deal
ers In securities make trading profits
from the sale of investments the in
come from which is exempt from the
excess-profits tax there may be in
cluded in their invested capital the
proportion of the amount invested in
such securities which the trading pro
fit bears to the entire return from
such securities during the taxable
year. In such cases the trading pro
fit is of course subject to the tax.
Time of Making Returns
Returns are to be made and the tax
paid at the same time as the income
The provision which is probably of
the greatest general Interest is that
which lays down the rule for the
computation of tho invested capital
of corporations and partnerships The
law provides that the invested capi
tal shall consist of the actual capital
paid in and of the paid in or earned
surplus and undivided profits, exclu
sive of tho undivided profits of the
taxable year. The law also prescribes
certain limitations upon the valua
tion of assets and other items. The
regulations provide that the total of
the capital, surplus and undivided
profits as shown on the books, ad
justed as required by the limitations
just referred to and as permitted by
certain other provisions of the regula
tions, shall constitute the invested
capital. In the few cases, however,
where this total exceeds the adjusted
value of the admissable assets (the
law expressly excludes assets the in
come from which is taxfree,) the in
vested capital must be reduced bo as
not to exceed the total value of the
admissable assets. If there has been
I any change in the invested capital
during the taxable year the monthly
average shall be taken.
Provisions of Great Importance
In addition to the express provi
sions of the law relating to invested
capital several of the provisions of
the regulations supplementing those
of the law are of the greatest import
ance. If, because of failure to provide
for depletion, depreciation, obsoles
cence, or other expenses or losses,
the books of the corporation or part
nership do not show its true surplus
or undivided profits the necessary
corrections must be made; but, on
. i. -.11. t,.,i .. . . ... i. :
ueen expenueu in me jiuhi lor iiam,
equipment, or other tangible property
still owned and in active use by the
corporation or partnership and which
have been charged as current ex
pense may, unless such expense has
been claimed as a deduction under
the income tax acts of 1913 or 1916,
be added to the surplus accounts, pro
per allowance being made for deple
tion or obsolescence. Amounts so
expended for good will, trade-marks,
trade brands, franchises, and other
like intangible assets may be added
only if bona fide payments were made
therefor specifically as such in cash
or tangible property. No readjust
ment can be allowed, however, for ex
penditures made for the general de
velopment of intangible assets, but
such cases may, to some extent, be
provided for under section 210, to
which reference has already been
Gifts to Corporations
Another important provision relat
ing to the invested capital of a cor
poration or partnership is that when
it can be shown by satisfactory evi
dence that tangible property has been
conveyed to it by gift or at a value
clearly and substantially in excess of
tho cash or par value of the stock ex
changed therefor, then the amount of
the excess shall be included as paid
Relations With Other Companies
One other important provision re
lating to corporations is that every
corporation must descibe in its return
all it relations with other affiliated
corporations, and that in certain cases
the Commissioner of Internal Revenue
may require such affiliated corpora
tions to make a consolidated return
of net income and invested capital.
Further provision is also made for
the tax on the basis of such consoli
dated returns in certain cases.
While the law expressly provides
that in the case of a corporation or
partnership all of its Income shall be
deemed to be derived from trade or
business, in the case of an individual,
however, only that portion of the in
come which arises from trade or busi
ness is subject to this tax, and the
definition of trade or business be
comes especially important. The reg
ulations provide that all occupations
and professions and all activities for
gain, profit, or livelihood, entered into
with sufficient frequency or occupying
such portion of the individual's time
or attention as to constitute a voca
tion, shall be considered trades or
business, even though not continuous
ly carried on during the whole of the
year, and that all of the income aris
ing therefrom shall be included in
his return for excess profits tax.
Gains or profits from transactions en
tered into for profit but which are
isolated, Incidental, or so infrequent
as not to constitute an occupation
and income from property arising
merely from its ownership, including
interest, rent, and similar income
from investments, are in the case of
an individual not subject to the ex
cess profits tax, except in those cases
where the management of such in
vestments really amounts to a trade
Of Interest to Individuals
Other provisions of interest to In
dividuals are those which provide
that the profits of the taxable year
may, If put back into the business,
be included as invested capital, and
that a member of a partnership who
receives a salary from the partner
ship is also entitled to a deduction of
$6,000 in computing his excess.
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M. S. HENRIQUES
Kealia, Kauai, T. H.
m Elans. Jell
Entered Of Record
SAMUEL K. KAMAIOPU to Lahaina
Agrctl. Co., Ltd., nor. R. P. 411 Kul.
337, Kelwea, Lahaina, Maui, Feb.
28, 1918. $100.
BEN AIKALA & WF. to Mrs. Kahele
Burns, int. in Gr. 1280, Kuls. 3784
Bl & 3784 B2, June 14, 1917. $5.
LEI WAIWAIOLE & WF. to Ah Seu
Jr., int. in R. P. 1706, Waikapu,
Maul, Jan. 22, 1918. $35.
KALA MAHIAI to Antone M. Fires, 5
410 A of Lot 9, Pulehilki, Kula,
Maui, Feb. 26, 1918. $250.
FRANK SOMMERFELD & WF. et als
to Mrs. Yap Tin Yau, L. P. 6824 &
pe. land Keokea, Kula, Maui, Feb.
25, 1918. $728.
KAIHOLUA to ratrlck Cockett et al.
Lot 70 Gr. C633, Waiohuli-Keokea,
Tract, Kula, Maul, Aug. 28, 1916.
Saturday, March 9th.
WALLACE REID In
"Mystery of the Double Cross"
And "A Fox Film Comedy."
Sunday, March 10th.
MARY MILES MINTER In
Official British Government WAR
Pictures and "Voice on the Wire".
Monday, March 11th.
STUART HOLMES in
"A Broadway Sport"
Benefit Laie Temple.. Country Store.
Tuesday, March 12th.
MADAME PETROVA in
"PLAYIN WITH FIRE"
"VOICE ON THE WIRE"
Delinquent Tax List 1917
Second Taxation Division, Territory of Hawaii
In accordance with Section 1294 Revised Laws of Hawaii, the
following list of Delinquent Taxpayers is hereby published, comprising
taxes for the year 1917, remaining unpaid on December 31, 1917, in
cluding 10 per cent penalty and advertising costs. Interest at the rate
of one per cent per month on income tax and 10 per cent per annum cn
al' other taxes, not included.
Hawaiian Trust Co., Ltd., Executor
under the Will of Polly Kalua,
dee'd $ 118.31
Kahookele, J. K
Keawe, J. .
Breo, Joao do
EmmBley, J. K
Ferguson, T. W
Hinckley, T. R
Hookana, Wm 25.47
Haole, Josiah K 5.01
Ihu, Pala (Mrs.) 2.37
Kahokuoluna, P. N 16.58
Kapaki, Hoopii 8.13
Kahue, Wahinenika 6.59
Kapiioho, D. K. (Gdn.) 3.03
Kailua, Lono 3.14
Kalaukela, Kuau 9.19
Kaia, Hattie 3.25
Kuwabara, Mrs 4.24
Kawakaml, 1 9.79
Keao, Mrs. Pali 1.87
Kuula, Sam 8.20
Kunukau, Geo. K 16.56
Kuchu, Mrs. Kaimi 4.68
Kozuki, Mrs 15.69
Makal, Malaea 4.73
Mattson, Mary 12.05
Maldunado, Frank 2.59
McKaig, Philip 28.33
Niue, Mrs. Kuliana 5.45
Pires, Frank M 10.89
Robello, John 11.94
Venhuizen, D 14.14
Ventura, Antone 7.43
Buchanan, Namahana 11.61
Gohier, Nancy, Trustee 6.05
Kalama, D. M 4.68
Kali, Sela Sherman 11.61
Kanekoa, Sam 3.25
Kaonohi, Abigail 10.18
Kapaku, David 12.05
Kauwenaole, Laikcaloha . . . 24.04
Kealakaa, A 12.87
Makekau, Ano 3.25
Manese, Loika 3.25
I hereby certify that the foregoing is a correct list of the Dclin-vu-nt
taxpayers of the Second Taxation Division, Territory of Hawaii,
for the year 1917, to the best of my knowledge and belief.
J. H. Kunewa,
Assessor, Second Taxation Division.
Wailuku, Maui, T. II. February 16, 1918.
K1KA KAUANUI (w) to Mrs. Lucy
Crane, 2 pes. land Mapulehu etc.,
Molokai, Feb. 16, 1918. $1 and love
ENOS VINCENT & WF. to William
Goo, 17-100 A of R. P. 5327, Kul.
8366, Waihee, Maui, Feb. 25, 1918
KALUNA PUKILA (k) to Helen Ka
hale, int. in. R. P. 6774 Kul. 6429.
Keokea, Kula, Maui, Feb. 26, 1918
MARGARET R. FIELD & HSR. (W.
H.) to D. C. Lindsay Tr. various pes
land lease-holds, bldgs, shares of
stocks, automobiles, furniture &c,
Iao Valley &c. Wailuku, &c, Maui,
Feb. 25, 1918. $10,000.
ACHUNA AKINA by Tr. to Bank of
Maui, Ltd., L. P. 5598, Kamaole,
Kula. Maui, Feb. 27, 1918. $1000.
ACHUNA AKINA to P. J. Goodness,
to secure loan of $1000 on L. P.
5598 Kamaole, Kula, Maul, Feb. 27,
THIS WEEK AT THE
Wednesday, March 14th.
PAULINE FREDERICKS in
"Fighting Trail.". "Pathe News."
Thursday, March 14 th.
Special Kleine Edison Features
Friday, March 15th.
SEENA OWEN In
"A WOMANS AWAKENING."
Book now for ANNETTE KELLER.
MANN In "THE DAUGHTER OF THE
Wailuku Orpheum Tuesday, March
19th. Special Music.
Maschke, Emily . . .
Nott, Mrs. J. S. ...
Buchanan, Chas. A
Cathcart, Emily, Trustee, . . .
Nakuina, Emma M., Trustee..
Nuha, K. (Nauha, K.)
Wilson, J. H
Aene, Mrs. Naholowaa
Baker, Jno. A
Haul, Kalaka (w)
Kahele, Jas. Ben
Kaua, Kauanui (w)
Kauhi, Frank K.
Nishwitz, J. II
Notley, John K
Piimanu, D. K.,
Saunders, R. A.
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Tort and Hotel Streets
LODGE MAUI, NO. 984, A. F. A A. M.
Stated meetings will be held at
Masonic Hall, Kahului, on the first
Saturday night of each month at 7:30
Visiting brethren are cordially In
vited to attend.
F. W. PEACOCK, n. W. M.
W. A. ROBBINS, Secretary.
ALOHA LODGE NO. 3 KNIGHT8
Regular meetings will be held at
the Knights of Pythias Hall, Wailu
ku, on the second and fourth Friday
of each month.
11 visiting members are cordially
Invited to attend.
H. S. TERRY, C. C.
J. C. BLAIR, K. R. & S.
COURT VALLEY ISLAND NO. 9239
ANCIENT ORDER FORESTERS
Regular meetings will be hold at
Moose Hall, Kahului, on the first and
third Thursday of each month, at 7:30
All visiting members are cordially
invited to attend.
CARL F. N. ROSE,
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