466 MISC. PUBLICATION 218, U. 8. DEPT. OF AGRICULTURE 
in place of the actual cost of production. The owner is also given the 
benefit of the reduced tax rates provided for in section 2 of the same 
regulation. This provision also applies only to those cases where the 
right to use the inventory method is not claimed. 
It was also the practice, prior to 1930, to regard gains from sales of 
agricultural or forest property as exempt from income tax. This 
practice opened the door to tax avoidance on the part of large land- 
owners. A certain number of such owners adopted the plan of not 
cutting or selling timber or other products in the ordinary way, but 
of selling the ground on which such timber stood. In this way the 
product of a forest could be disposed of without realizing any taxable 
gain. This practice also was upset by a decision of ‘the National 
Finance Court dated December 4, 1929, which held that gains from 
sales of agricultural or forest property were subject to income tax 
under the same rules that apply to sales of other business properties. 
This decision appeared to impose undue hardships on agricultural and 
forest owners and to raise troublesome administrative questions in 
connnection with determining the amount of the gain from sales, 
The regulation of the Minister of Finance dated November 16, 1930, 
previously mentioned, was also directed at this situation. It provides 
(sec. 1) that the gain from sales of agricultural or forest property sold 
prior to July 1, 1935, is subject to income tax only to the extent that 
the property sold had been acquired after December 31, 1924. In 
such cases, the basis for calculating the gain is comparison between 
the selling price and the cost. In computing the gain, it is necessary 
to allocate for separate treatment such part as may be attributed 
to the land or soil, since that part is exempt from income tax. There 
is also an additional exemption of 10,000 Reichsmarks ($2,380) if 
an entire property is sold and a proportionate part of 10,000 Reichs- 
marks if only a part of a property is involved. To prevent tax 
avoidance by means of land transfers, this regulation also provides 
that, if the property sold contains a disproportionate quantity of 
mature timber or other materials, the gain is calculated as if these 
had been sold separate from the land and is taxed in the same manner 
as gain from sales of other business properties. This part of the recu- 
lation is not limited to properties acquired since December 31, 1924. 
The tax on the yield from capital (Kapitalertragsteuer, formerly 
called Kapitalrentensteuer) is a part of the national income tax 
collected at the source. Since January 1931, it has not been in force | 
with respect to the income from securities with fixed interest rates 
such as bonds, though still in force with respect to shares of stock. 
The taxpayer claims the benefit of the tax so withheld as a deduction 
from the income tax on his entire income. ‘There is an income tax 
on salaries (Lohnabzug) which is also collected at the source. 
The corporation tax (Korperschaftsteuer) is collateral with the 
national income tax, and is levied on the profits of corporations. The 
rate of this tax is 20 percent, except that certain corporations with a 
capital not exceeding 50,000RM pay on a graduated scale of from 10 
to 30 percent on successive income brackets, but never more than 20 
percent of the total taxable income (159, p. 94). 
The net yield of the personal and corporation income taxes is re- 
tained by the National Government to the extent of only 25 percent, 
the remainder being distributed to the States. Each State distributes 
at least 50 percent ‘of its share to the communes. 
