STATISTICS OF INCOME FOR 1948-PART 2

CORPORATION INCOME TAX RETURNS AND PERSONAL HOLDING COMPANY RETURNS

INTRODUCTION

This report, presenting data for 1948 tabulated from corporation income tax returns, Form 1120; life insurance company income tax returns, Form 1120L; mutual insurance company income tax returns, Form 1120M; and personal holding company returns, Form 1120H, is prepared in accordance with section 63 of the Internal Revenue Code, which provides for the publication annually of statistics with respect to the operation of the income, war-profits, and excess profits tax laws.

The amounts reported as income, deductions, assets, liabilities, exemptions, credits, Federal tax liability, and dividends paid are shown in aggregate and for various classifications of corporations and of income. Facsimiles of the return forms from which the data are tabulated and to which references are made throughout this volume are also shown.

Historical data pertaining to income and profits tax returns for 1909 through 1948 are presented, with a résumé of the information available for 1926-1948 in the Source Book, a volume of data supplementary to the published reports, Statistics of Income. There is also a synopsis of corporation income and profits tax credits, rates, and other provisions of the Federal tax laws affecting the comparability of historical data in this report.

Certain of the more significant data for 1948 contained herein were made public previously in a preliminary report issued as of July 18, 1951, and in two press releases dated June 19, 1951, and September 20, 1951.

CORPORATION INCOME TAX RETURNS (FORMS 1120, 1120L, AND 1120M)

SUMMARY DATA

The number of corporation income tax returns for 1948 is 630,670, of which 395,860 show net income of $36,273,250,000, while 198,383 show deficit of $1,848,226,000 and 36,427 have no income data (inactive corporations).

The income tax liability reported on these returns is $11,920,260,000, representing an increase of 9 percent as compared with the total for 1947. The amount of income tax does not take into account any credit claimed for income and profits taxes paid to a foreign country or United States possession.

A comparison of the 1948 returns with the 1947 returns is provided in the following summary:

Corporation returns,1 1948 and 1947: Summary data

[Money figures in thousands of dollars]

Allowance of the net operating loss deduction reduced the net income for tax computation by $203,835,000 on 36,197 returns filed for 1948 as compared with $183,605,000 on 30,478 returns filed for 1947. See note 27, page 52.

RETURNS INCLUDED

The data presented in this section are from returns for the calendar year ending December 31, 1948, a fiscal year ending within the period July 1948 through June 1949, and a part year with the greater portion of the accounting period in 1948.

The data are tabulated from corporation income tax returns, Form 1120; life insurance company income tax returns, Form 1120L; and mutual insurance company income tax returns, Form 1120M. Included for this purpose in addition to returns filed by domestic corporations are the returns filed by foreign corporations engaged in business within the United States. The statistics are compiled from the returns as filed, prior to revisions that may be made as a result of audit by the Internal Revenue Service and prior to changes which may result from carry-backs after the returns were filed.

There are excluded from this report data pertaining to amended returns, tentative returns, and the returns of nonresident foreign corporations (those not engaged in trade or business within the United States who file on Form 1120NB).

COMPARABILITY OF DATA

The provisions of the Internal Revenue Code as amended by the Revenue Act of 1945 continue in effect for the calendar year 1948 and fiscal years ending in the period July 1948 through June 1949. Accordingly, the data for 1948 are generally comparable with those for 1947.

CLASSIFICATIONS, TEXT TABLES, AND DESCRIPTION OF BASIC TABLES

Data are shown for the 630,670 corporation returns in aggregate,

and inactive corporations; returns with net income and returns with no net income; States and Territories; industrial divisions and groups; returns with balance sheets and returns with no balance sheets; total assets classes; type of tax liability; net income and deficit classes. There are also separate tabulations for consolidated returns, fiscal year returns, and part year returns, all of which are included in the tabulations pertaining to Form 1120 throughout this report.

The classifications are described in the following paragraphs, which also enumerate the items tabulated for returns in each classification: Active and inactive corporations.-Returns for active corporations show income data; those for inactive corporations show no data. The returns for inactive corporations are filed in accordance with the regulation that a corporation having an existence during any portion of a taxable year is required to make a return.

The data presented in this report are tabulated from the 594,243 returns of active corporations, except as indicated in the following paragraph pertaining to the number of returns.

The 36,427 returns of inactive corporations for 1948 are segregated by the nine industrial divisions in the text table on page 5, which shows also the percent of inactive corporations to the division total. The returns of inactive corporations are also included in the_total number of returns, segregated by States and Territories, in basic table 1, pages 82-83; in the total number, by major and minor industrial groups in basic table 2, pages 84-93; and in the total number of returns with no net income in basic table 8, pages 342-343. The total number of fiscal year returns in the text table on page 48 includes 5,669 fiscal year returns of inactive corporations. For the number of returns of inactive corporations for prior years, see note 2, page 417. Returns with net income and returns with no net income.-This classification is based on the existence or nonexistence of an amount of net income for the current year. Net income is the difference between the total income and the total deductions as reported on the return, exclusive of the net operating loss deduction. Returns with total deductions (exclusive of net operating loss deduction) equal to or exceeding total income are included in returns with no net income. The returns of active corporations for 1948 are segregated by returns with net income and returns with no net income for all tabulations in this report except the one on page 7. Of the 594,243 returns of active corporations, 395,860 are returns with net income, and 198,383 are returns with no net income. States and Territories. This geographic distribution covers the 48 States, the District of Columbia, and the Territories of Alaska and Hawaii.

The data, although tabulated by States and Territories in which the returns are filed, do not represent what may be called the geographic distribution of income. Returns filed in a State may not be a complete coverage of all corporations whose principal place of business is located therein. Conversely, a tabulation for a given State may include data from returns of corporations having their principal place of business in another State. A corporation may file an income tax return either in the collection district in which it has its principal place of business or in the collection district in which it has its principal office or agency. There is no way of ascertaining from income tax returns the amount of income originating in a specific

The 630,670 returns of active and inactive corporations are segregated geographically in basic table 1, pages 82-83. This table presents, for the 395,860 returns with net income and the 198,383 returns with no net income, net income or deficit, and dividends paid in cash and assets other than the corporation's own stock. There is also shown, for returns with net income, the income tax. The number of returns of inactive corporations filed in any State or Territory may be obtained by deducting the sum of the returns with net income and the returns with no net income from the total number of returns.

A description of the items will be found in the footnotes as indicated on table 1. The comparability of data distributed geographically is discussed on page 63, and historical data so distributed are presented on pages 387-397.

Industrial divisions and groups. The industrial classification consists of 9 divisions, 65 major groups, and 222 minor groups, based on the Standard Industrial Classification, issued by the Division of Statistical Standards, Bureau of the Budget, Executive Office of the President. Since the Standard Industrial Classification is designed on an establishment basis, it was necessary to reduce greatly the number of groups and to make changes in the contents of the groups in order to adapt the Standard Classification to the corporation income tax returns which are filed on an ownership basis.

There

The industrial classification is based on the business activity reported on the return. When multiple businesses are reported on a return, the classification is determined by the business activity which accounts for the largest percentage of total receipts. fore, the industrial groups do not reflect pure industry classifications. For 1948 changes have been made in the contents of certain industry groups to conform, generally, with recent changes in the Standard Industrial Classification. A comparison of the major industrial groups employed for 1948 with those for 1947 is shown in a chart on pages 428-431. A comparison of the minor industrial groups employed for 1948 with those for 1947 is shown in a chart on pages 438-450.

In the following table, the 630,670 returns are classified by the nine industrial divisions, as are also the 395,860 returns with net income, the 198,383 returns with no net income, and the 36,427 returns of inactive corporations. The number of returns is shown for each division. For returns with net income, there are shown the number of returns, percent of division total, total compiled receipts, net income, and income tax; for returns with no net income, the number, percent of division total, total compiled receipts, and deficit; and for inactive corporations, the number and percent of division total. The items are described in footnotes as indicated on the table.

Corporation returns,1 1948, by industrial divisions, for returns with net income and returns with no net income: Number of returns, percentages, total compiled receipts, net income or deficit; and, for returns with net income, the income tax; also, for inactive corporations: Number of returns and percentages

The 594,243 returns of active corporations are further segregated by major industrial groups in basic table 3, which shows, in Part I for all returns, in Part II for returns with net income, and in Part III for returns with no net income, itemized receipts and deductions, compiled net profit or net loss, net income or deficit, dividends paid in cash and assets other than the corporation's own stock, and dividends paid in the corporation's own stock. There are also shown, for returns in Parts I and II, the net operating loss deduction, income tax, and compiled net profit less income tax.

Basic table 4 presents 536,833 returns of active corporations with balance sheets by major industrial groups and shows, in Part I for all returns, in Part II for the 370,056 returns with net income, and in Part III for the 166,777 returns with no net income, the number of returns, items of assets and liabilities as of December 31, 1948, or