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This article informs that the Excess Profits Tax Act of 1950 was enacted to help meet the need for revenue by taxing corporate profits considered attributable to current mobilization spending. All corporation net income is made subject to the normal tax and surtax, and, in addition, profits above "normal" are taxed at the "excess" profits rate of thirty percent. The statute permits corporations which come within standards defining an abnormally low base-period earnings record to calculate the tax on a substitute earnings record derived from the base-period rate of return for the taxpayer's industry. The use of an industry rate of return as a substitute for actual earnings by corporations having a subnormal base-period profits record represents a sharp departure from the World War II method of measuring relief.

In this article we present some empirical evidence which indicates that attempts to represent the probability distribution of the rates of return on common stocks by a member of the stable Paretian family of distributions, with 1 < alpha < 2, may be misleadingand in fact may not produce an adequate fit to observed rates of return. We offer an alternative probability model for describing rates of return based on the hypothesized phenomenon of a changing variance. We test the "goodness of fit" of our model vis-a-vis a stable Paretian model for several series of rates of return, Finally we propose an extension of the stability test of Fama and Roll [6]. [ABSTRACT FROM AUTHOR]