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Show . INCOME TAX FACTS 1 No. 10. The tax on dividends Is an important impor-tant Item in the returns of many taxpayers. tax-payers. A "dividend" for the purpose of the income-tax law is any distribution In cash or property made by a corpora tion to its stockholders or member , (other than certain dividends of a personal-service corporation) out of Its earnings or profits accumulated sincr February 2S. 1913. Dividends are taxable tax-able and are taxed at the rates for the year In which the cash Is made available, avail-able, regardless of when the earnings or profits out of which they were paid were accumulated. Al thought interest inter-est on state bonds and certain other obligations i-; not taxable, when re-j ceived by a corporation, upon amalga ! tion with other fuuds of the corpora tion and distributed to stockholders in dividends, It is taxable to the same extent as other dividends A dividend is income to the stock-' holder as of the date when the cash' or property is unqualilicdly made subject sub-ject to his demand. Cash dividends. I v.hiie exempt from all normal tax. arc Livable Incomo to the individual rc-( rc-( Iplent at the surtax rates for the year In which received. Accordingly, dividends divi-dends must bo Included a.s gross income, in-come, but they may bo deducted aa a credit in computing normal tax. The revenue act of 1918 provided for tho taxation of stock dividends, but since tho enactment of that law the supremo court of the T'nltcd States has held that slock dividends do not constitute incomo within tho meaning of the sixteenth amendment to tho I constitution, and are accordingly not subject to the income tax. Tbo reve nee act of 1921 speclflcnlly provider that such dividends shall not bo tnxa-blo tnxa-blo when paid in good faith, but that If. after the payment of ouch a dividend, divi-dend, the corporation proceeds to can- I eel or redeem its stock at such time nnd !n such manner as to make the distribution and cancellation or re-, drniptlon esHn'inlly equivalent, to the distribution of a taxahlo dividend, the amount received In redemption or can icellation of the stock shall bo treated 'ns a taxable dividend. If a dividend Is paid In the stock of, some other company, or some other! .form of proper;;., the fair value of the1 property received Im to be taken as the value of the dividend paid, and such 'amount Is taxable to an individual re- celvlng it. A corporation which re-, !celvcs a dividend In the stock of some 'other domestic corporation may de , duct such amount from its gross in-; come. I Section 262. ad entirely new provl- j slon of the Income tax law, placed citizens of the United Stales and dr-jiucstic dr-jiucstic corporations whose chief in-Icome in-Icome is from sources within American pocsessions on a more equitable ba.is In comparison with competing aliens 'and foreign corporations. Special pro-1 visions of the income tax regulations de.il with the taxation and personal exemption of dividends received from such corporations. j Dividends rr Interest received by , individuals during the years 1922 to 11926. inclusive, from domestic build ing and loan associations, operated exclusively ex-clusively for the purpose of making , loans to members, are exempt, from i both normal tax and surtax up to $800. |