get a“ J. M. & M. S. BROWNING CO. OGDEN. UTAH September 22, 1959 Honorable John ¥. Hanee, Under Secretary of the Treasury, fashington, 0. ©. In line with your desire to have taxpayers present their views ing relative our position present to desire hoid- on personal imposed now to surtaxes we act, Revenue present in the changes suggested regerding companies: The firet surtax on personal holding companies wae that imposed by Geetion 351 of the 1934 Act which provided that upon the undistributed adjueted net income of every perwonel holding company a eurtax of 30) of the amount of euch income not in eaxeees amount thereof in exeess of $100,000.00 the enactwent Means of Comittee | this law, report, ise of $100,000.00, plus 40. of the would be levied. The reason for contained in an quoted foliowas ae extract from the "aye and *Perhape the most prevalent form of tax avoidanse practiced by individuals with large incomes is the scheme of the "incerporated pocket book”. That is, an individual forme a corporation and exshanges for ite stock his pereonal holdings or other By thie means the income from tax, but no eurtax ie paid by ie not dietributed’. in stock, bonds, the the income-preducing property. property pays corporation individual if the income The 1936 Act changed the rate of tax applicable to undistributed adjusted net income covering 411 awounte in excess of $2,000.00 with varying rates from 8% to 46%. The Revenue Act of 1937 provided income not in excess of 32,000.00 would in excess of $2,000.60 at 752. Under ell revenue hae been in addition hile general the purpose formed or availed of holders thereef, the porations which acte to the personal holding companies tax imposed on ordinary business corporations. the tax to of the that ali undistributed adjusted be taxed at 69% and all amounts surtax ie on reach corporations which are te prevent the imposition of a surtax upon the shurelaw mikes no exception for bona fide business cor- happen to come within the definition of a personal holding company. The inceme to be distributed by personal holding eertein ing at deductions undistributed from adjusted adjusted net net income income which upon are which companies if net acts, iese certain There are Incomue*. income, as defined in Title 1 of the various revenue deductions, arriving at a total termed “adjueted net made the tax before ie arriv- somputed.