Music Trade Review

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THE: MUSIC TRADE:
HOW TO COMPLY WITH NEW CORPORATION TAX LAW.
Commissioner of Internal Revenue, R. E. Cabell, Replies to Inquiries as to the Preparation of
Returns by Manufacturing and Mercantile Corporations—Necessary to Have Books Kept in
First Class Manner in Order to Make a Proper Statement Possible—Some Interesting In-
formation That Should Prove of Exceeding Interest to Piano Manufacturing Corporations.
thereby decreasing the gross profit during the
year, the amount of such loss is a proper deduc-
tion in item 5 of the return.
"The making of an accurate return in accord-
ance with the law and the regulations should
present no difficulties to an expert bookkeeper
and accountant who has made a careful study
oi the subject."
(Special to The Review.)
"To make a correct return it is necessary for
Washington, D. C, Jan. 31, 1910.
the accountant to know:
DEATH OF JOSEPH GRAMER.
Piano manufacturers and other concerns in the
"1. The exact resources and liabilities of the
music trade industry doing business as corpora- corporation, both on January 1 and December
The Vice-President of the Emerson Piano Co.
tions will be interested in the following com- 31 of the year covered by the same.
Passed Away at His Home in Roxbury After
munication just sent out by Royal E. Cabell,
"2. A full statement of the business transacted
a Short Illness—Was Skilled Piano Maker.
Commission of Internal Revenue, relative to the during the year.
preparation of returns by manufacturing and
"For example: If a manufacturing corpora-
(Special to The Review.)
mercantile corporations under the new corpora- tion has on hand at the beginning of the year as
Boston, Mass., Jan. 29, 1910.
tion tax law. Mr. Cabell, replying to a letter resources, raw materials, materials in process,
The members of the tfade in this city were
sent him, says:
finished product, cash, bills receivable, accounts
greatly shocked to-day to learn of the death of
"Your letter dated the 19th instant has been
receivable, etc., making up the total assets of
received, in which you ask certain questions the company, a business transaction that results Joseph Gramer, vice-president of the Emerson
Piano Co., a member of the firm since 1879,
relative to making returns under the provisions in exchanging these assets, or any part of them,
of section 38, act of August 5, 1909. You state:
for anything of equal value does not produce which occurred suddenly yesterday at his home
in Roxbury after a short illness from pleuro-
" 'In the first place, relative to a manufac-
income.
pneumonia. It was known that he was unwell,
turing company, in your paragraph 3 on
"Raw materials, being of the capital assets of
but his friends were not aware of the serious-
page 8 of the laws and regulations, you say:
the company, are changed in form by the addi-
ness of the ailment.
"Cost of goods manufactured shall be ascer-
tion of different items of expense to produce an-
Mr. Gramer was born in Germany in 1834,
tained by the addition of a charge to the
other form of asset, the finished product, and
account of the cost of goods as manufactured
hence the method of making up the return is as and came to this country when a very young
man. For a time he worked at the trade of
during the year of the sum in the inventory
follows: The gross income from the manufac-
at the beginning of the year, and a credit to
cabinet making and later piano making, and en-
turing business reported in item 3 consists of
the account of the sum in the inventory at
the difference between the cost of the assets as tered the employ of the Emerson Piano Co. in
the end of the year." Does this mean that
1874 as foreman of their upright piano depart-
material and the selling price of the assets as
the cost must be ascertained from the price
finished product. The selling price of the fin- ment. In 1879 he was taken into the firm, and
of the raw materials and the amount of labor
when the company was incorporated he was
ished product is obtained as follows: The
expended, irrespective of overhead charges,
made vice-president. He was an active force
cost of the raw material plus all expenses shown
or should overhead charges be included in
in the Emerson business up to 1907, when he
in items 4, 5, 6 and 7. plus per cent of profit, and
the cost, and should the addition then be
gave up the superintendency of the factory.
while
all
these
items
of
expense
are
as
surely
a
made to the total net worth of the concern
Mr. Gramer was a thoroughly experienced and
part of the finished product as is the value of
as shown by the inventory of the previous
< ompetent piano maker, and was especially
the
raw
material,
yet
as
such
items
are
expenses
year and that subtracted from the net worth
skilled in the drawing of scales and in cabinet
and not assets they are segregated and reported
of the concern at the end of the year; or in
work; in fact, there was no branch of the busi-
as
deductions
in
items
4,
5,
6
and
7
in
order
to
what way is this section construed?'
ness he was not thoroughly acquainted with.
"In reply, you are advised that for the purpose assist the government officer in his comparison
He had an especial fondness for mathematics,
and
veriflcaton
of
the
accuracy
of
the
return.
of making a correct return in accordance with
and was a man who endeared himself to those
"In making up the gross income to be reported
the provisions of section 38 of the act of August
who knew him. He is survived by a widow, two
in
item
3,
the
cost
of
the
goods
manufactured
5, 1909, it is necessary to follow closely the well-
sons and five daughters, his sons being actively
established commercial rules for keeping the shall be ascertained by the addition of a charge
connected with the Emerson factory, and, like
to
the
account
of
the
cost
of
the
goods
as
manu-
accounts of the business of manufacturers. In
factured during the year of the sum of the in- their father, both are practical piano makers and
keeping such accounts in a scientific manner it
well skilled in the art.
is well understood by all bookkeepers that if an ventory at the beginning of the year, and a credit
to the account of the sum of the inventory at the
inventory is taken on December 31, the end of
WEAVER ORGANS LOST AT SEA.
the calendar year, the credits entered as balances end of the year. To this amount should be
in the several ledger accounts show the assets added all items of income received during the
that such corporation has on hand, and hence year from other sources, including dividends Music-Loving South African Maidens Mourn
Loss of Instruments That Were Delivered to
received on stock of other corporations subject
the instructions in 'Note A' at the bottom of the
the Mermaids Through Burning of Steam-
printed Form 637 state that 'the cost of the to this tax.
ship—Order Again Filled by Weaver Co.
"In making the inventory on December 31 of
goods manufactured shall be ascertained by an
each year the appreciation or depreciation in the
addition of a charge (debit) to the account of
The steamer Norse Prince, which left New
the cost of the goods as manufactured during value of the raw material on hand should be
the year of the sum of the inventory at the ascertained, as well as that of the finished prod- York December 15 for Cape Town • and other
beginning of the year.' All credit balances uct, and this loss or gain, as the case may be, is South African ports with a general cargo worth
included in the account of the closing calendar $125,000. was totally destroyed by fire on the
above referred to are transferred to the debit
side of such accounts when the same are re- year. These articles, the raw material, material evening of January 3, when about ten miles off
opened on commencing business on the first of
in process of manufacture, and the finished Ascension Island. Being without wireless tele-
the year, and the 'addition of a charge.' as product, constitute at the beginning of the year graph to call for assistance the crew was forced
noted above, is thus made to the several ac-
succeeding the inventory the capital assets of
to abandon the ship and take to the boats. They
counts that are debited with the cost of goods the company, and hence, under the rule in para- were, however, safely picked up afterwards by the
manufactured during «the year. The credit to graph 2, page 9, of Regulations 31, any increase British steamer Giielph from London. It was
the account is then made at the close of the year or decrease in value accruing at a time prior to reported that some of the crew, being strangers
when the inventory is taken. The provisions of
January 1 of the calendar year for which return
in the South Atlantic, were of the opinion that
the law require:
is made cannot be taken as a part of the gross the Ascensionite-s were cannibals, and expressed
income for that year, but, as noted above, such their preference to be eaten by sharks rather
"1. That the return shall show the gross in- increase or decrease in value should be included
than by the natives. Part of the steamer's cargo
come (profit) received during the year, which is
in the account of the prior calendar year.
was a shipment of eight Weaver organs, and
reported in item 3 on Form 637.
"The rules, as hereinbefore stated, relative to
it is said there is not a little jealousy among
"2. All the necessary expenses in the main- manufacturing corporations also apply to mer-
certain music loving South African maidens over
tenance and operation of the business and prop- cantile corporations, and it is not at all material
the fact that their beloved instruments have
erties, which include labor, fuel, rentals, insur- in making a return for the year 1909 if, as you
been delivered to the mermaids, who, perchance,
ance, etc., shown in item 4.
state, the goods were purchased prior to that are already entertaining Davy Jones with
"3. Losses sustained during the year and not
time. On January 1, 1909, the goods referred "Rocked in the Cradle of the Deep."
compensated by insurance or otherwise, includ- to constitute capital assets at the invoiced value,
The Weaver Organ & Piano Co., of York, Pa.,
ing a reasonable allowance for depreciation,
and only the profits on the same, if sold during were advised of the loss of their shipment by
shown in item 5, a and b.
the year, are taken as gross income, or if not their customers, who sent a duplicate order,
"4. Interest on bonded or other indebtedness all sold during the year gross income is found
which has now been forwarded. In this connec-
to an amount not exceeding the paid-up capital
by an addition to the credit side of the account tion they sent the facts above recorded.
stock, shown in item 6.
of the sum of the inventory at the close of the
"5. All sums imposed for taxes during the year.
James Cherry has bought out the piano busi-
"year, shown in item 7.
"When a book account is known to be worth
ness of I. D. Lovett, Canton, O. Mr. Cherry was
"6. All amounts received by it as dividends
less than its face value and the loss is evidenced
connected with Mr. T.ovett as a piano tunor for
upon stock of other corporations, etc., subject to
by an entry on the debit side of the loss and four years, and is highly thought of in the com-
the tax imposed, as shown in item 8.
gain account in the books of the corporation. munity.