stock of other corporations. The tax on corporations organized under the laws of any foreign country is upon the amount of net income over and above five thousand dollars received from business transacted and capital invested within the United States and its territories, Alaska and the District of Columbia, during each year, exclusive of amounts received as dividends upon the stock of other corporations. The law applies only to corporations organized and operated for profit, and does not apply to fraternal societies, or to labor, agricultural or horticultural organizations. The net income must be ascertained by deducting from the gross amount all ordinary necessary expenses of maintenance and operation, all losses actually sustained during the year and not made up by insurance (and in case of insurance companies other than dividends paid within the year on policy and annuity contracts and annual additions made to reserve funds); interest paid on bonded or other indebtedness not exceeding the paid up stock of the corporation, and in the case of a bank, banking association or trust company, interest actually paid on deposits; all sums paid within the year for taxes; all amounts received as dividends on stock of other corporations. Each corporation, by its President, Vice-President, or other principal officer, and its Treasurer or Assistant Treasurer, must make a true statement under oath to the Collector of Internal Revenue on or before the 1st day of March of each year, showing the capital stock, indebtedness, gross amount of income for the year, amount of dividends received, expenses paid out, losses sustained, interest paid, and the net income of the corporation after making the above deductions. The Government may appoint revenue agents to examine any books and papers of any corporation, and to take the testimony of the officers thereof, whenever there is doubt whether a statement made is true and correct. The law provides that if any statement made is false or with fraudulent intent, one hundred per cent must be added to the tax; and in the case of the refusal or neglect to make any statement or to verify the same fifty per cent must be added to the tax. If the officer of the corporation who should make this statement is sick or absent, the Collector may allow further time, not exceeding thirty days. The assessment of the tax must be made, and the corporation notified of the amount due from it, on or before the first day of June of each year, and the tax must be paid on or before the thirtieth day of June. If any tax remains unpaid after the thirtieth day of June in any year, and for ten days after notice and demand by the Collector, there must be added the sum of five per cent on the amount of the tax unpaid, and interest at the rate of one per cent per month from the time the tax becomes due. Every corporation failing to comply with the law requiring a true statement to be made each year, is liable to a penalty of not less than one thousand dollars and not exceeding ten thousand dollars. Any person guilty of making a false or fraudulent statement, with intent to defeat or evade the tax, will be guilty of a misdemeanor and subject to a fine not exceeding one thousand dollars or imprisonment not exceeding one year, or both, at the discretion of the Court, besides the costs of prosecution. Act of Congress, approved August 5, 1909. Section 767.-INCOME TAX AFFIRMED.-The Supreme Court of the United States has affirmed the income tax on corporations, declaring that the law is valid and constitutional. The decision of the Court was unanimous. In the opinion of the Court it is said: "This tax, it is expressly stated, is to be equivalent to 1 per centum of the entire net income over and above $5,000 received from all sources during the year-this is the measure of the tax explicitly adopted by the statute. The income. is not limited to such as is received from property used in the business, strictly speaking, but is expressly declared to be upon the entire net income above $5,000 from all sources, excluding the amounts received as dividends on stock in other corporations, joint stock companies, or associations, or insurance companies also subject to the tax. In other source. words, the tax is imposed upon the doing of business of the character described, and the measure of the tax is to be the income, with the deduction stated, received not only from the property used in business, but from every The thing taxed is not the mere dealing in merchandise, in which the actual transactions may be the same, whether conducted by individuals or corporations, but the tax is laid upon the privileges which exist in conducting business with the advantages which inhere in the corporate capacity of those taxed and which are not enjoyed by private firms or individuals. These advantages are obvious and have led to the formation of such companies in nearly all branches of trade. The continuity of the business, without interruption by death or dissolution, the transfer of property interests by the disposition of shares of stock, the advantages of business controlled and managed by corporate directors, the general absence of individual liability, these and other things inhere in the advantages of business thus conducted, which do not exist when the same business is conducted by private individuals or partnerships. It is this distinctive privilege which is the subject of taxation, and not the mere buying and selling nor handling of goods, which may be the same, whether done by corporations or individuals.” Measurement of the tax by the net income of the corporation or the company received by it from all sources was next defended by Justice Day in his opinion as not being so unequal and so arbitrary and baseless as to fall outside of the authority of the taxing power. In conclusion, the constitutionality and validity of the law is fully sustained and affirmed by the Court. (Decided by the Supreme Court of the United States, March 13, 1911.) Section 768.-DUPLICATE OF LOST CERTIFICATE. Whenever a certificate of stock in a California corporation is lost or destroyed, the owner may bring an action against the corporation, in the Superior Court of the county in which its principal place of business is located, for the purpose of obtaining a new or duplicate certificate. Statutes of 1905, page 500. Section 769.-CORPORATIONS TO LOAN MONEY ON CHATTEL MORTGAGES.-A corporation may be organized for the sole purpose of loaning money upon the pledge of goods and chattels. Such corporation must have a capital stock of $50,000, or over, and all the capital stock must be actually subscribed, and at least 50 per cent actually paid in, before any business is transacted. Statutes of 1905, page 711. Section 770.-CAPITAL STOCK.-The law provides that all corporations for profit in California must issue certificates for stock when fully paid up, signed by the President and Secretary, and may provide, in their By-Laws for issuing certificates prior to the full payment, under such restrictions and for such purposes as their By-Laws may provide. The corporation must keep an account of its stock, by whom owned, and the amount of subscriptions unpaid. It may issue its stock and commence business before subscriptions are all paid up, and even before the stock is all subscribed for. The capital stock is the fund upon which the corporation does business, and is the sole basis of its credit. Therefore, no corporation can issue stock, except for money paid, labor done, or property actually received, and all fictitious increase of stock is declared by the law to be void. Constitution of California, Article 12, Section 11; Section 771.-AMOUNT OF SUBSCRIBED CAPITAL TO BE PAID IN.-It is only in the case of particular corporations that the law requires a certain amount of the subscribed capital stock to be paid in when the corporation is formed. As a general rule there is no requirement on the subject. Any certificate issued prior to full payment must show on its face what amount has been paid thereon. Section 772.-STOCKHOLDERS AND MEMBERS. Certain corporations are not required to have any capital stock, and a person associated with others in such a corporation is called a member. The holder of shares in a corporation having a capital stock is called a stockholder. Section 773.-SHARES OF STOCK.-Whenever the capital stock of a corporation is divided into shares, and certificates have been issued, such shares of stock are personal property. Section 774. PREFERRED AND COMMON STOCK.-A corporation may issue two classes of stockpreferred stock and common stock. If the two kinds are to be issued, the Articles of Incorporation must provide for the classification, and must contain a statement of the number of shares of preferred stock, and the number of shares to which no preference is given. The Articles of Incorporation must also state, clearly and without evasion, the nature and extent of the preference granted to one class of the stock, and except as so declared there shall be no preference; and there can be no distinction between owners of the two classes of stock as to voting power and liability of stockholders. Section 775.—BONDED INDEBTEDNESS.-A corporation may create a bonded indebtedness by a vote of the stockholders representing at least two-thirds of the subscribed or issued capital stock, at a meeting called by the Board of Directors, and after giving the same notice required for increase of capital stock; or, a bonded indebtedness may be created by the unanimous vote of the Board of Directors, approved by the written assent of the stockholders holding two-thirds of the subscribed or issued capital stock, in the same manner as is provided for decreasing capital stock. The law does not limit the amount |