THE   WAR  EXCESS  PBOriTS  TAX  521

time  of  such  payment  greatly  in  excess  of  the  stock
issued  for  it,  an  amount  equal  to  the  par  value  of  the
stock  will  be  considered  as  capital  paid  in,  and  the  excess
as  surplus  paid  in.  Earned  surplus  is  that  part  of  the
surplus  which  has  been  accumulated  by  retaining  in  the
business  a  part  of  the  earnings  of  any  year.  The  amount
of  such  surplus  is  a  question  of  fact  to  be  determined  in
each  particular  case.  The  amount  of  earned  surplus  of
any  year  since  January  1,  1909,  will  probably  be  held  to
be  the  amount  of  net  income,  shown  by  the  return  of  net
income  of  the  corporation,  which  has  not  been  distributed
in  the  form  of  dividends  to  the  stockholders.  If  in  any
of  those  years  amounts  have  been  charged  to  expense,
which  should  have  been  charged  to  capital,  the  corpora-
tion may  perhaps  be  permitted  to  reopen  its  books,  ma!ie
the  proper  entries  and  file  amended  returns.  With  re-
spect to  the  years  prior  to  January  1,  1909,  it  seems  that
amounts  which  should  actually  have  been  charged  to
capital  may  be  considered  as  earned '  surplus  employed
in  the  business,  provided  proof  of  that  fact  can  be
produced.
Used  or  Employed  in  the  Business.  Surplus  and
undivided  profits  must  be  used  or  employed  in  the
business  in  order  to  be  considered  as  invested  capital.
