are no longer being formed with a modest capital stock of $5,000 or $25,000, but with a much greater capital stock, so that 25% of the total stock will more nearly represent the actual value of the patent. Another development has been the increasing number of corporations which, instead of purchasing the patent and paying therefor in stock, enter into an exclusive license agreement with the inventor whereby they pay him a specified percentage of the sales price or manufacturing cost by way of royalty.

Chapter VI.

FURTHER FEDERAL TAXES AFFECTING PATENTS, TRADE-MARKS AND COPYRIGHTS.

In addition to the Income Tax and the War and Excess Profits Tax, the principal Federal taxes applicable to patents, copyrights, trade-marks, or to the articles manufactured under such rights, are the following:

ESTATE TAX.

Section 402 of the Estate Tax now in force includes

That value of the gross estate of the decedent shall be determined by including the value at time of death of all property, tangible and INTANGIBLE, wherever situated."

It will be necessary, of course, under this law to place a valuation upon patents, copyrights and similar intangible property whenever the estate of the decedent is apparently sufficient to bring the net estate above the specific exemption of $50,000.00 and the several other exemptions set forth in section 403 of the same Act. The methods to be employed in computing such valuation are essentially the same as those used in valuing patents, copyrights, etc., under the various provisions of the Income Tax and the War and Excess Profits Tax Law. (Note Chapter XI on Valuation of Patents, Copyrights, etc.) However, the Department has written down the following special rules for guidance in these valuations, to-wit:

"Art. 15. (6) PATENTS, TRADE-MARKS AND COPYRIGHTS.-The basis for valuation of intangible assets of this character is the present worth of the estimated future earnings of the exclusive right during the rest of its existence. The return received by the decedent should be considered in estimating future earnings.

"Art. 19. APPRAISERS AND BASIS OF APPRAISALS.-Where expert appraisers are to be employed, care should be taken to see that they are men of recognized competence with respect to the particular class of property involved. In order to facilitate the acceptance of the appraisal, appraisers should be employed whose competence is well established.

The basis to be employed in appraising articles of this character is what they would bring at a bona fide sale to individual purchasers, to dealers, or upon a well advertised auction sale. If there has been an actual bona fide sale, the amount received may be returned as the value of the property. Where property is valued by legatees for purposes of distribution, such value will not necessarily be accepted. The original cost of the articles is not necessarily a proper basis, on account of depreciation or appreciation in value."

The tax percentages to be paid on estates of various net amounts, as well as the procedure for the executor to effect payment, are set forth in Title IV-Estate Tax-of the "Act to Provide Revenue, etc., approved Feb. 24, 1919, and appears at pages 154 to 163 of the Appendix.

TAXES ON MANUFACTURED ARTICLES.

While this class of taxes does not relate directly to intangible property, they are quoted here because they have a bearing on the output of companies doing business under patents, trade-marks, etc. It is to be noted that most of the articles bearing taxes under these laws are proper subject matter for patents or are known to the purchasing public principally by trade-marks and trade names.

EXCISE TAXES.

Title IX of the Revenue Act of February 24, 1919, imposes the following taxes upon manufactured articles:

"SEC. 900. That there shall be levied, assessed, collected, and paid upon the following articles sold or leased by the manufacturer, producer, or importer, a tax equivalent to the following percentages of the price for which so sold or leased

(1) Automobile trucks and automobile wagons (including tires, inner tubes, parts, and accessories therefor, sold on or in connection therewith or with the sale thereof), 3 per centum;

(2) Other automobiles and motorcycles (including tires, inner tubes, parts and accessories therefor, sold on or in connection therewith or with the sale thereof), except tractors, 5 per centum;

(3) Tires, inner tubes, parts, or accessories, for any of the articles enumerated in subdivision (1) or (2), sold to any person other than a manufacturer or producer of any of the articles enumerated in subdivision (1) or (2), 5 per centum;

(4) Pianos, organs (other than pipe organs), piano players, graphophones, phonographs, talking machines, music boxes, and records used in connection with any musical instrument, piano player, graphophone, phonograph, or talking machine, 5 per centum;

(5) Tennis rackets, nets, racket covers and presses, skates, snowshoes, skis, toboggans, canoe paddles and cushions, polo mallets, baseball bats, gloves, masks, protectors, shoes and uniforms, football helmets, harness and goals, basket-ball goals and uniforms, golf bags and clubs, lacrosse sticks, balls of all kinds, including baseballs, footballs, tennis, golf, lacrosse, billiard and pool balls, fishing rods and reels, billiard and pool tables, chess and checker boards and pieces, dice, games and parts of games (except playing cards and children's toys and games), and all similar articles commonly or commercially known as sporting goods, 10 per centum;

(6) Chewing gum or substitutes therefor, 3 per centum ;

(7) Cameras, weighing not more than 100 pounds, 10 per centum ; (8) Photographic films and plates, other than moving picture films, 5 per centum;

(9) Candy, 5 per centum;

(10) Firearms, shells and cartridges, except those sold for the use of the United States, any State, Territory, or possession of the United States, any political subdivision thereof, the District of Columbia, or any foreign country while engaged against the German Government in the present war, 10 per centum ;

(11) Hunting and bowie knives, 10 per centum;

(12) Dirk knives, daggers, sword canes, stillettos and brass or metallic knuckles, 100 per centum;

(13) Portable electric fans, 5 per centum ;

(14) Thermos and thermostatic bottles, carafes, jugs, or other thermostatic containers, 5 per centum;

(15) Cigar or cigarette holders and pipes, composed wholly or in part of meerchaum or amber, humidors and smoking stands, 10 per centum;

(16) Automatic slot-device vending machines, 5 per centum, and automatic, slot-device weighing machines, 10 per centum; if the manufacturer, producer or importer of any such machine operates it for profit, he shall pay a tax in respect to each such machine put into operation equivalent to 5 per centum of its fair market value in the case of a vending machine, and 10 per centum of its fair market value in the case of a weighing machine;

(17) Liveries and livery boots and hats, 10 per centum;

(18) Hunting and shooting garments and riding habits, 10 per centum; (19) Articles made of fur on the hide or pelt, or of which any such fur is the component material of chief value, 10 per centum;

(20) Yachts and motor boats not designed for trade, fishing, or national defense; and pleasure boats and pleasure canoes if sold for more than $15, 10 per centum; and

(21) Toilet soaps and toilet soap powders, 3 per centum.

SEC. 904. (a) That on and after May 1, 1919, there shall be levied, assessed, collected and paid a tax equivalent to 10 per centum of so much of the amount paid for any of the following articles as is in excess of the price hereinafter specified as to each such article, when such article is sold by or for a dealer or his estate on or after such date for consumption or use

(1) Carpets and rugs, including fibre, except imported and American rugs made principally of wool, on the amount in excess of $5 per square yard;

(2) Picture frames, on the amount in excess of $10 each;

(3) Trunks, on the amount in excess of $50 each;

(4) Valises, traveling bags, suit cases, hat boxes used by travelers and fitted toilet cases, on the amount in excess of $25 each;

(5) Purses, pocketbooks, shopping and handbags, on the amount in excess of $7.50 each;

(6) Portable lighting fixtures, including lamps of all kinds and lamp shades, on the amount in excess of $25 each;

(7) Umbrellas, parasols, and sun shades, on the amount in excess of $4 each;

(8) Fans, on the amount in excess of $1 each;

(9) House or smoking coats or jackets, and bath or lounging robes, on the amount in excess of $7.50 each;

(10) Men's waistcoats, sold separately from suits, on the amount in excess of $5 each;

(11) Women's and misses' hats, bonnets and hoods, on the amount in excess of $15 each;

(12) Men's and boys' hats, on the amount in excess of $5 each; (13) Men's and boys' caps, on the amount in excess of $2 each;

(14) Men's, women's, misses' and boys' boots, shoes, pumps and slippers, not including shoes or appliances made to order for any person having a crippled or deformed foot or ankle, on the amount in excess of $10 per pair;

(15) Men's and boys' neckties and neckwear, on the amount in excess of $2 each;

(16) Men's and boys' silk stockings or hose, on the amount in excess of $1 per pair;

(17) Women's and misses' silk stockings or hose, on the amount in excess of $2 per pair;

(18) Men's shirts, on the amount in excess of $3 each;

(19) Men's, women's, misses' and boys' pajamas, night gowns and underwear, on the amount in excess of $5 each;

(20) Kimonos, petticoats and waists, on the amount in excess of $15 each.

"SEC. 905. That on and after April 1, 1919, there shall be levied, assessed, collected and paid (in lieu of the tax imposed by subdivision (e) of section 600 of the Revenue Act of 1917) upon all articles commonly or commercially known as jewelry, whether real or imitation; pearls, precious and semiprecious stones, and imitations thereof; articles made of, or ornamented, mounted or fitted with, precious metals or imitations thereof or ivory (not including surgical instruments); watches; clocks; opera glasses; lorgnettes; marine glasses; field glasses, and binoculars; upon any of the above when sold by or for a dealer or his estate for consumption or use, a tax equivalent to 5 per centum of the price for which so sold.

"SEC. 907. (a) That on and after May 1, 1919, there shall be levied, assessed, collected and paid (in lieu of the taxes imposed by subdivisions (g) and (h) of section 600 of the Revenue Act of 1917) a tax of 1 cent for each 25 cents or fraction thereof of the amount paid for any of the following articles when sold by or for a dealer or his estate on or after such date for consumption or use;

(1) Perfumes, essences, extracts, toilet waters, cosmetics, petroleum jellies, hair oils, pomades, hair dressings, hair restoratives, hair dyes, tooth and mouth washes, dentifrices, tooth pastes, aromatic cachous. toilet powders (other than soap powders), or any similar substance,