September Honerable John . Manes, Under Seeretary of the ‘ashington, 0. 0. 22, 1959 Treasury, mays In line regarding with your suggested present our position ing companies: by net adjusted the to of euch income taxpayers present Revenue surtaxzes now holding present their Act, desire we imposed on companies wae upon personal] holding company a eurtax $100,000.00, plus of exeses hoid- — undietributed that in to imposed that the provided not views | personal which Act every income ef amount the personal on 1934 the of 351 Seetion to have in relative ourtax first The | desire changes the of for The reason amount thereof in exeews of $100,000.00 would be levied. Says and the from extract an in contained law, the enactment of thie Heanes Comittee Toliowsi ae quoted 1& report, “Perhaps the moet prevaient practiced by individuals with large of the "ineorperated pocket book”. form of tax avoidance incomes is the echene That ig, an individual forme a corporation and exchanges for ite stock his holdings in etock, bende, or other income-preducing persenai property. By thie meane the income from tax, but no surtax ie paid by i@ not dietributed". the the property paya corporation individual if the income : The adjusted 1936 net A4e¢t income of 301 of 40) changed the rate of tax covering ali saounte in applicable to exeees 62,000.00 of undlatributed with varying rates from 0% te 401. inceme fhe not in exeeas has Revenue Act of 1937 provided in exeess of $2,000.00 would of 62,000.00 that ali be taxed at 75%. undistributed adjusted at 094 and ali amounte : Under ali revenue acte the surtax on personal holding been in addition to the tax impowed on ordinary business “hile the general formed or availed holders incom, purpose of the tax ie te reach corporations which of te prevent the Imposition of @ surtax upon the thereof, poratione coupany. which companies corporations. the law mkee happento eome no exception fer bom within the fide definition business are sharecor- of a serseonai holding holding companies is net : The incense to be distribwted ee defined in 1 Title of the by pereonai variows revenue acts, less certain deductions, arriving at a total termed “adjusted net incom”. There are eertain deductions from adjusted net income which are made before arriving at undietributed adjusted net ineome upon which the tax ie computed.