[Texas Cotton Industries 1944 Return of Capital-Stock Tax] Page: 2 of 2

                                
INSTRUCTIONS

The sections of the law mentioned throughout these instructions
refer to sections of the Internal Revenue Code, as amended.
RETURN
1. (a) Every domestic corporation (including an association,
common-law trust, and any other organization which is required to
file income-tax returns as a corporation) which was in existence
any part of the period July 1, 1943, to June 30, 1944, and every
foreign corporation required to file an income tax return for the
purposes of the normal tax imposed under section 14 (c) (1) must,
unless specifically exempted, file a capital-stock tax return in
triplicate with the collector. The return must be complete in
every respect, including a declared value. So-called parent and
subsidiary corporations must each submit a separate return.
(b) If at the time for filing a return all the property of a corpora-
tion is in custody of a receiver (including a trustee in bankruptcy or
other like representative), the return shall be filed by the receiver.
In such case, if the property of the corporation was under the
control of the receiver during the entire year July 1, 1943, to
June 30, 1944, no value will be required to be shown on the return,
but, in lieu of such value, the receiver should attach a statement
to the return showing the date on which the property came into
his custody and whether his custody was continuous thereafter.
DECLARED VALUE
2. (a) Domestic Corporations.-Every domestic corporation
must declare the value of its capital stock.
(b) Foreign Corporations.-Every foreign corporation must
declare the value of its capital employed in the transaction of its
business in the United States.
(c) In making the declaration of value a corporation is not
bound by any value declared upon a return for a prior year, but
may exercise unrestricted judgment and discretion in determining
the value to be declared. In making such determination, con-
sideration may be given to any and all factors which it may deem
pertinent. The declared value may be any amount which the
corporation in its judgment may elect to declare.
(d) Care should be exercised in making the declared value,
since: (1) The value will be the measure of the capital stock tax;
(2) the value is a prime factor in determining the declared value
excess-profits tax liability under section 600, quoted on page 6;
(3) the value declared is binding unless changed, amended, or
corrected by a subsequent return received by the collector on or
before the last day of the prescribed filing period.
(e) The declared value must be stated as an amount in United
States dollars, or as "Zero," in the event it is intended to make a
declaration of no value. Statements such as "None," "No
value," "Deficit," and similar expressions, or specific amounts
stated as deficits, will be considered as declarations of "Zero."
EXEMPTIONS
3. Corporations Claiming Exemption from the Capital-Stock
Tax.-Three classes of corporations (or organizations) are entitled
to exemption from the capital-stock tax: (1) Corporations enu-
merated in section 101; (2) insurance companies subject to income
tax under section 201, 204, or 207; and (3) corporations not carry-
ing on or doing business at any time during the period July 1,
1943, to June 30, 1944. Evidence in support of a claim for
exemption need not be submitted in duplicate, neither should
the originals of documents such as leases, charters, bylaws, etc.,
be submitted since all evidence becomes a part of the records of
the Bureau and under the rules of the Department may not be
returned.
4. Exemption as a Corporation Enumerated in Section 101.-
A mere claim or contention by a corporation (or other organiza-
tion) that it is exempt from income tax as a corporation enumer-
ated in section 101 will not relieve the corporation from filing a
capital-stock tax return. Unless the Commissioner has determined
that a corporation is exempt, it must prepare and file a capital-
stock tax return, complete in all respects, including a declared value
(see instructions 1 and 2 above), accompanied by complete infor-
mation regarding the corporation as follows: If exemption is
claimed as a corporation enumerated in either subsection (1), (3),
(4), (6), (7), (8), (9), (10), (12), (14), or (16) of section 101 the
form of questionnaire designed for the particular type of corpora-
tion should be obtained from the collector of internal revenue and,
after it has been completely filled in and duly executed and there
has been attached thereto the various statements and documents
specified therein, it should be filed with the capital-stock tax re-
turn on or before the prescribed due date. If the corporation
claims exemption under either subsection (2), (5), (11), (13), (15),
(17), (18), or (19) of section 101 there should be attached to the
capital-stock tax return when filed a statement setting forth (1) the
subsection under which exemption is claimed, (2) the character of

the organization, (3) the purpose for which it was organized, (4) its
actual activities, (5) the sources of its income and the purposes for
which expended, (6) whether or not any of its income is credited
to surplus or may inure to the benefit of any private shareholder
or individual, and (-7) all other facts deemed material in determin-
ing whether it qualifies for exemption under the law. There must
accompany such a statement a copy of the (1) articles of incorpo-
ration or of association, (2) bylaws, and (3) classified statement of
receipts and expenditures during the last complete year of opera-
tion, and a complete statement of assets and liabilities as of the
end of that year. See sections 29.101-1 to 29.101 (18)-1 of
Regulations 111 relating to the income tax under the Internal
Revenue Code for more detailed information regarding proof of
exemption. If, however, the corporation has received a ruling
from the Commissioner exempting it from filing Federal income-
tax returns, and if the conditions on which such ruling was based
have not changed, the corporation may submit a copy of such
ruling with the capital-stock tax return in lieu of the detailed in-
formation specified herein.
5. Exemption as an Insurance Company.-Exemption from
the capital-stock tax under section 1201 (a) (2) as an insurance
company subject to the tax imposed by section 201, 204, or 207
must be established by an official ruling. For that purpose a
capital-stock tax return, complete in all respects, including a
declared value, must be filed. The return must state the section
under which the corporation is subject to income tax.
6. Exemption as Not Doing Business.-A corporation which
claims exemption on the ground that it was not carrying on or
doing business at any time during the year ended June 30, 1944,
must file a return, complete in all respects, including a declared
value even though exemption was allowed for the previous taxable
year. In every instance the claim for exemption must be sup-
ported by an affidavit of one of the responsible officers having
knowledge of the facts, in which the following information must
be set forth:
In the case of a domestic corporation:
(a) A general statement of the operations prior to July 1, 1943, and a detailed state-
ment of the operations for the period July 1, 1943, to June 30, 1944. The latter statement
must be complete and show all transactions such as purchases, orders, commitments,
sales, agreements, contracts (including contracts of employment), acquisitions of
property for stock of the corporation, etc.
(b) A detailed statement of the receipts and disbursements by or on behalf of the
corporation for the period July 1, 1943, to June 30, 1944.
(c) A comparative detailed statement of the assets and liabilities as of June 30, 1943,
and June 30, 1944, respectively, with a full explanation of the changes reflected by the
comparative statement. The explanation should include the exchange of any assets
not disclosed by this statement.
(d) Copies of the minutes of all meetings of the stockholders and of the board of
directors held during the year ended June 30, 1944, and of all reports made by an execu-
tive or other standing committee, or any governing body.
(e) If exemption is claimed as a new corporation which did not engage in business
activities prior to July 1, 1944, submit the information required under (a), (b), and (d)
for the period between date of incorporation and June 30, 1944, and in addition furnisL
(1) an excerpt from the charter setting forth the corporate powers, and (2) a statement
of assets and liabilities as of June 30, 1944.
In the case of a foreign corporation:
The same information generally as required of domestic corporations under para-
graphs (a) to () above but with respect to its assets, activities and business within
the United States only.
GENERAL
7. Penalties and Interest.-Failure to file a return on or before
July 31, 1944, causes to accrue the following graduated scale of
penalties: 5 percent of the amount of the tax if the failure is for
not more than 30 days, with an additional 5 percent for each addi-
tional 30 days, or fraction thereof, during which failure continued.
Such penalties may not, however, exceed 25 percent in the aggre-
gate. Failure to pay the tax on or before July 31, 1944, causes to
accrue interest at the rate of 6 percent per annum until paid.
Failure to pay within 10 days after the issuance of notice and
demand, based on assessment approved by the Commissioner,
causes to accrue a penalty of 5 percent of the total assessment
and interest at the rate of 6 percent per annum on tiie entire assess-
ment from the date of issuance of notice and demand until date of
payment. Severe penalties for willful failure to pay tax, keep
records, file retUrns, or for false or fraudulent returns are im-
posed by law.
8. Signatures and Verification.-The return raust be, signed
and verified under oath or affirmation by at least one cf the respon-
sible officers of the corporation. Execution by two ofli cers, the
president, vice president, or other executive officer, and the treas-
urer, assistant treasurer, or chief accounting officer, is, however,
preferred. If at the time the return is required to be filed a re-
ceiver or trustee in bankruptcy is operating the property or
business of the corporation, such officer shall execute the return
of such corporation. A duly authorized agent may sign and
verify the return of a foreign corporation.
GE 8                                                      145-39379-1

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