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Page:United States Statutes at Large Volume 45 Part 1.djvu/869

 818 SEVENTIETH CONGRESS. Suss. I. C$. 852 . 1928 . rxcoal>a TAX (g) Dist ribution of stock on reorga nization .- If th ere i s d ist ri but ed, No gain recognized if in pursuance of a plan of reorganization, to a shareholder in a add iti on al st ock re- ceived on reorganiza- corporation a party to the reorganization, stock or securities in tion, and holding not surr ender ed. such corpo ration or in anoth er cor poratio n a pa rty to the r eorgan i- zation, without the surrender by such shareholder of stock or securi- ties in such a corporation, no gain to the distributee from the receipt Stock distr ibuted on of such stock or securities shall be recognized. reorganization not eon- (h) Same-effect on future distributions .-The distribution, in pur- strued as earnings, etc. suance of a plan of reorganization, by or on behalf of a corpora- tion a party to the reorganization, of its stock or securities or stock or securities in a corporation a party to the reorganization, shall not b e cons idered a dis tribut ion of earnin gs or profit s with in the meaning of section 115(b) for the purpose of determining the taxability of subsequent distributions by the corporation. (i) Definition of reorganization .-As used in this section and sections 113 and 115- (1) The term "reorganization" means (A) a merger or con- solidation (including the acquisition by one corporation of at least a majority of the voting stock and at least a majority of the total number of shares of all other classes of stock of another corporation, or substantially all the properties of another cor- poration), or (B) a transfer by a corporation of all or a part of its a ssets to another c orporatio n if imme diately after the transfer the transferor or its stockholders or both are in control of the corporation to which the assets are transferred, or (C) a recap- italization, or (D) a mere change in identity, form, or place of orga nizati on, ho wever effect ed. (2) The term " a party to a reorganization " includes a cor- poration resulting from a reorganization and includes both cor- porations in the case of an acquisition by one corporation of at least a majority of the voting stock and at least a majority of the to tal numbe r of shar es of all other cl asses of stock of another corporation. (j) Definition of control.-As used in this section the term "control" means the ownership of at least 80 per centuin of the voting stock and at least 80 per centum of the total number of shares of all other classes of stock of the corporation. Reorganization. Corp orati on a cts c on- stituting. Corporation included as "a party to a reor- ganization ." Owner ship of stock constituting -control ." Basis for determining gain or loss . On cost va lue on sales acquired after February 28, 1913 . Excep tion s . Inventory value. Gifts after December 31, 1920. Ascertainment . Or fair market value wh en acquired by do- nor, etc. SEC . 113 . BASIS FOR DETERMINING GAIN OR LOSS . (a) Property acquired after February 28, 1913 .-The basis for deter- mining the gain or loss from the sale or other disposition of property acquired after February 28, 1913, shall be the cost of such pro erty ; except that-- (1) INVENTORY VALUE .-If the property should have been included in the last inventory, the basis shall be the last inven- tory value thereo f ; (2) GIFT AFT ER DEC EMB ER 31, 1020 .-If the property was acquired by gift after December 31, 1920, the basis shall be the same as it would be in the hands of the donor or the last pre- ceding owner by whom it was not acquired by gift . If the facts necessary to determine such basis are unknown to the donee, the Com missi oner shal l, if pos sible, obt ain such facts from suc h donor or last preceding owner, or any other person cognizant thereof. If the Commissioner finds it impossible to obtain such facts, the basi s shall b e the fai r market value of such prop erty as fou nd by the Comm issio ner as of the date or a pprox imate dat e at which, according to the best information that the Commis- sioner is able to obtain, such property was acquired by such donor or last preceding owner ;

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Page:United States Statutes at Large Volume 45 Part 1.djvu/870

 SEVENTIETH CONGRESS. SESS. I. CH. 852 . 1928 . (3) TR ANS FER IN TRU ST AFT ER DEC EMBE R 31, 1920 .-If the property was acquired after December 31, 1920, by a transfer in trust (other than by a transfer in trust by a bequest or devise) the basis shall be the same as it would be in the hands of the gran tor, increa sed i n the amoun t of gain or dec rease d in the amount of loss recognized to the grantor upon such transfer under the law applicable to the year in which the transfer was made ; (4) GIFT OR TRANSFER IN TRUST BEFORE JAN UA RY 1, 1921 .-If the prope rty wa s acq uired by gift or transfer in trust on or befo re De cember 31, 1920, the b asis shall be the fair market valu e of such p roper ty at the time of such acquisition. The provisions of this paragraph shall apply to the acquisition of such property interests as are specified in section 402(e) of the Revenue Act of 1921, or in section 302(f) of the Revenue Act of 1924 or the Revenue Act of 1926 (relating to property passing under power of appointment) regardless of the time of acquisition ; (5) PROPERTY TRANSMITTED AT DEATH .-If personal property was acquired by specific bequest, or if real property was acquired by general or specific devise or by intestacy, the basis shall be the fair market value of the property at the time of the death of the decedent. If the property was acquired by the decedent's estate from the decedent, the basis in the hands of the estate shall be the fair market value of the property at the time of the death of the decedent. In all other cases if the property was acquired either by will or by intestacy, the basis shall be the fair market value of the property at the time of the distribution to the taxpayer. In the case of property transferred in trust to pay the income for life to or u pon the order or directi on of th e grantor, with the right reserved to the grantor at all times prior to his death to revoke the trust, the basis of such property in the hands of the persons entitled under the terms of the trust instrument to the property after the grantor's death shall, after such death, be the same as if the trust instrument had been a will executed on the day of the grantor's death (6) TAX-F REE EXCHAN GES GENERALLY .-If the property was acquired upon an exchange described in section 112(b) to (e), inc lu siv e, the bas is shall be the s ame as in the c ase of the property exchanged, decreased in the amount of any money recei ved b y the taxpa yer a nd inc rease d in the am ount of gain or decreased in the amount of loss to the taxpayer that was recognized upon such exchange under the law applicable to the yea r in wh ich the e xch ange was made. If the property so acquired consisted in part of the type of property permitted by section 112(b) to be received without the recognition of gain or loss, and in part of other property, the basis provided in this paragraph shall be allocated between the properties (other than money) received, and for the purpose of the allocation there shall be assigned to such other property an amount equival ent to i ts fair market v alue at the date of the exchange. This paragraph shall not apply to property acquired by a corporation by the issuance of its stock or securities as the con side rati on in wh ole or in pa rt for the t rans fer of the property to it ; (7) TRANSFERS TO CO RPORATION WHERE CONTROL OF PROPERTY REMAINS IN SAME PERS ONS .-If t he pr opert y was acqui red a fter December 31, 1917, by a corporation in connection with a reor- ganization, and immediately after the transfer an interest or control in such pr operty of 80 per centum or more remained 819 INCOME TAX Trust pro pert y ac- quired after December 31, 1920, as in hands of gra ntor. Gifts or trusts before Decem ber 3 1, 1 920, fair market value. Under power of ap- pointment. Vol.42,p.279;V01.43, p. 305; Vol. 44, p.71. Property acquired by bequests, devises, etc . Trans fers in trust with right of revoca- tion. Acquired on ex- change, etc. Partly by exchange, and partly by other property. Stock issued as con- sideration excepted. Property other than stock acquired by same corporation after De- cember 31, 1917.

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license: Creative Commons - Attribution Share-Alike - https://creativecommons.org/licenses/by-sa/4.0/


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Page:United States Statutes at Large Volume 45 Part 1.djvu/871

 820 INCOME TAX Stock i ssues excepted. Acquired after De- ce mber 31, 1920, on re- organization and same party still in control. Sto ck, etc ., dis tri b- uted on reorganiza- tion af ter December 3 1, 1923 . Acquired by involun- tary conversion. Wash sale s, of prop- erty acquired for stock disposed of, on which no loss allowed . Post,p.826. Vol. 44, pp. 26, 42. Property acquired during affiliation. SEVENTIETH CONGRESS. SESS. I. Ca. 852. 1928 . in the same persons or any of them, then the basis shall be the same as it would be in the hands of the transferor, increased in the amount of gain or decreased in the amount of loss recognized to the transferor upon such transfer under the law app lic ab le to the yea r in wh ich the transfer was made. This paragraph shall not apply if the property acquired consists of stock or securities in a corporation a party to the reorganiza- tion, unless acquired by the issuance of stock or securities of the transferee as the consideration in whole or in part for the transfer ; (8) SAME-CORPORATION CONTROLLED BY TRANSFEROR .-If the property was acquired after December 31, 1920, by a corporation by the issuance of its stock or securities in connection with a transaction described in section 112(b) (5) (including, also, cases where part of the consideration for the transfer of such property to the corporation was property or money, in addition to such stock or securities), then the basis shall be the same as it would be in the hands of the transferor, increased in the amo unt of gain or decreased in the amount of los s rec og niz ed to the transferor upon such transfer under the law applicable to the year in which the transfer was made ; (9) TAX-FREE DIS TR IBU TI ONS .-If the property consists of stock or securities distributed after December 31, 1923, to a tax- payer in connection with a transaction described in section 112(g), the basis in the case of the stock in respect of which the distribution was made shall be apportioned, under rules and regula tions presc ribed by the Commiss ioner with the approval of the Secretary, between such stock and the stock or sec urities distribu ted ; ( 10) INVO LUNT ARY CONVERSION .-If the property was acquired as the res ult of a co mpulsory or involunt ary conver sion described in section 112(f), the basis shall be the same as in the case of the property so converted, decreased in the amount of any money received by the taxpayer whi ch was not expended in accordance with the provisions of law (applicable to the ye ar in whic h such con version was made) de termining the taxable status of the g ain or loss upon such conversion, and increased in the amount of gain or decreased in the amount of loss to the taxpayer recognized upon such conversion under the law applicable to the year in which such conversion was made ; (11) WASH SALES OF S TO C K .-I f substa ntially identica l prop- erty was acquired after December 31, 1920, in place of stock or securities which were sold or disposed of and in respect of which loss was not allowed as a deduction under section 118 of this Act, or under section 214 (a) (5) or 234 (a) (4) of the Revenue Act of 1921, the Revenue Act of 1924, or the Rev en ue Act of 1926, the basis in the case of the property so acquired shall be the basis in the case of the stock or securities so sold or disposed of, except that if the repurchase price was in excess of the sal e price such bas is shall be incr eased in the amo unt of the difference, or if the repurchase price was less than the sale price such basis shall be decreased in the amount of the difference ; (12) PROPERTY ACQUIRED DURING AFFILIATION.-In the case of property acquired by a corporation, during a period of affilia- tio n, from a corpor ation wi th which it was affiliat ed, the basis of such property, after su ch period of affiliation, shall be determined, in accordance wi th regulations pre sc rib ed by the Commissioner with the approval of the Secretary, without regard to inter-company transactions in respect of which gain

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Page:United States Statutes at Large Volume 45 Part 1.djvu/872

 SEVENTIETH CONGRESS. SEss. I. Ca. 852. 1928. 821 or loss was not recognized. For the purposes of this paragraph INCOME TAX ' Perio d of a ffil iati on the term " period of affiliation " means the period during which determined. such corporations were affiliated (determined in accordance with the law applicable thereto) but does not include any taxable year beginning on or after January 1, 1922, unless a consolidated return was made, nor any taxable year after the Basis in subsequent taxable year 1928. The basis in case of property acquired by a years. corporation during any period, in the taxable year 1929 or any subsequent taxable year, in respect of which a consolidated return is made by such corporation under section 141 of this Act, shall be determined in accord ance with regulation s prescribed under section 141(b). Property acquired (b) Property acquired before March 1, 1913 .-The basis for before March 1, 1913. determining the gain or loss from the sale or other disposition of Gain or loss. property acquired before March 1, 1913, shall be (1) the cost of such property (or, in the case of such property Based on cost. a s is described in subsection (a) (1), (4), (5), or (12) of this section, the basis as therein provided), or (2) the fair market value of such property as of March 1, Fair market value. 1913, whichever is greater. In determining the fair market value of stock whichever greater. in a corporation as of March 1, 1913, due regard shall be given to the fair market value of the assets of the corporation as of that date. Basis for depreciation SEC. 114 . BASIS FOR DEP RECIATI ON AND DEPLET ION. and depletion. a) Basis for depreciation .-The basis upon which exhaustion, Depreciation . ( Same as upon sale, wear and tear, and obsolescence are to be allowed in respect of any et Anie, p.818. property shall be the same as is provided in section 113 for the purpose of determining the gain or loss upon the sale or other dispos ition of suc h prop erty. (b) Basis for depletion .- Depletion. (1) GENERAL RULE .-The basis upon which depletion is to be Allowance same as for sale, etc. allo wed in respe ct of any pr operty shall be the same as is pro- vided in section 113 for the purpose of determining the gain or loss upon the sale or other disposition of such property, except Exceptions. as provided in paragraphs (2) and (3) of this subsection. Mines discovered by (2) DiscoviRY VALUE IN CASE OF MINES.-In the case of mines tax pa yer after Fe b- discovered by the taxpayer after February 28, 1913, the basis market value. 913, fair for d epletion shall be the fair market v alue of t he proper ty at the date of discovery or within thirty days thereafter, if such mines were not acquired as the result of purchase of a proven tract or lease, and if the fair market value of the property is materially disproportionate to the cost. The depletion allowance based on allowance.

depletion discovery value provided in this paragraph shall not exceed 50 per centum of the net income of the taxpayer (computed without allowance for depletion) from the property upon which the dis- covery was made, except that in no case shall the depletion allow- ance be less than it would be if computed without reference to discovery value. Discoveries shall include minerals in commer- Miner als in cluded. cial quantities contained within a vein or deposit discovered in an existing mine or mining tract by the taxpayer after February 28, 1913, if the vein or deposit thus discovered was not merely the uninterrupted extension of a continuing commercial vein or deposit already known to exist, and if the discovered minerals are of sufficient value and quantity that they could be separately mined and marketed at a profit. (3) PERCENTAGE DEP LETION FOP OIL AND GAS WELLS .-In the Oilandgasallowance case of oil and gas wells the allowance for depletion shall be 271/ 2 per centum of the gross income from the property during the Maximum. taxable year. Such allowance shall not exceed 50 per centum of

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Page:United States Statutes at Large Volume 45 Part 1.djvu/873

 822 SEVENTIETH CONGRESS. SESS. I. CFI. 852 . 1928 . the net income of the taxpayer (computed without allowance for depletion) from the property, except that in no case shall the depletion allowance be less than it would be if computed without reference to this paragraph. SEC. 115 . DISTRIBUTIONS BY CORPORATIONS. (a) Definition of dividend .-The term "dividend" when used in this title (except in section 203 (a) (4) and section 208(c) (1), relating to insurance companies) means any distribution made by a corporation to its shareholders, whether in money or in other property, out of its earnings or profits accumulated after February 28, 1913 . (b) Source of distributions .-For the purposes of this Act every distribution is made out of earnings or profits to the extent thereof, and from t he mos t rece ntly a ccumula ted ea rnings or pr ofits. Any earnings or profits accumulated, or increase in value of prop- erty accrued, before March 1, 1913, may be distributed exempt from tax, after the earnings and profits accumulated after February 28, 1913, have been distributed, but any such tax-free distribution shall be applied against and reduce the basis of the stock provided in section 113. (c) Distributions in liquidation .-Amounts distributed in complete liquidation of a corporation shall be treated as in full payment in exchange for the stock, and amounts distributed in partial liquida- tion of a corporation shall be treated as in part or full payment in Determination of gain or lo ss to dis - exchange for the stock. The gain or loss to the distributes resulting tributes. from such exchange shall be determined under section 111, but shall Pa rti al liquidation b 9 distribution. be recognized only to the extent provided in section 112. In the c ase o f amo unts dist ribut ed in par tial liqui dati on (o ther than a distribution within the provisions of section 112(h) of stock or securities in connection with a reorganization) the part of such distribution which is properly chargeable to capital account shall not be considered a distribution of earnings or profits within the meaning of subsection (b) of this section for the purpose of deter- mining the taxability of subsequent distributions by the corporation. (d) Other distributions from capital .-If any distribution (not in partial or complete liquidation) made by a corporation to its share holder s is n ot out of in crease in val ue of proper ty acc rued before March 1, 1913, and is not out of earnings or profits, then the amount of such distribution shall be applied against and reduce the basis of the stock provided in section 113, and if in excess of such basis, such excess shall be taxable in the same manner as a gain from the sale or exchange of property. The provisions of this sub- section shall also apply to distributions from depletion reserves based on the discovery value of mines. (e) Distributions by personal service corporations .-Any distribu- tion made by a corporation, which was classified as a personal service corporation under the provisions of the Revenue Act of 1918 or the Revenue Act of 1921, out of its earnings or profits which were taxable in accordance with the provisions of section 218 of the Revenue Act of 1918 or section 218 of the Revenue Act of 1921, shall be exempt from tax to the distributees. (f) Stock dividends .-A stock dividend shall not be subject to tax. (g) Redemption of stock. If a corporation cancels or redeems its stock (whether or not such stock was issued as a stock dividend) at such time and in such manner as to make the distribution and cancellation or redemption in whole or in part essentially equiva- lent to the distribution of a taxable dividend, the amount so dis- tributed in redemption or cancellation of the stock, to the extent INC OME TAX Distributions by cor- porations. From earnings, etc ., after February 28, 1913, d eemed div iden ds. To in surance rese rve excepted. Sourc es. Accumulations, etc., before March 1, 1913, tax tree. Condition. Distribution in liqui- dat ion a pa yment for st ock . Distributions not from increase of value before March 1, 1913, nor out of earnings or prof its. Depletion reserves of mines. Exemption of di s- tributees of previously taxable earnings of per- sonal service corpora- tions . Vol. 42, p. 245, Vol . 44, p. 32. Stock dividends not taxable. Redemption of stock. Proceeds of, treated as taxable dividends.

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Page:United States Statutes at Large Volume 45 Part 1.djvu/874

 SEVENTIETH CONGRESS. SEss. I. Cu. 852. 1928. 823 that it rep resent s a di stribu tion o f earni ngs or profi ts acc umulat ed INCOME TAY after February 28, 1913, shall be treated as a taxable dividend. Stock canceled after In the case of the cancellation or redemption of stock not issued Janu ary as a stock dividend this subsection shall apply only if the cancella- tion or redemption is made after January 1, 1926. (h) Definition of partial liquidation .-As used in this section M e a n i n g ° f "amounts distributed the term " amounts distributed in partial liquidation " means a in partial liquidation ." distri bution by a corpor ation in com plete c ancell ation or red emptio n of a par t of its stock, or one of a series of distri butions i n complet e cancellation or redemption of all or a portion of its stock. SEC. 116. EXCLUSIONS FROM GROSS INCOME. income. ionsfr°m gross In addition to the items specified in section 22(b), the following a Pad om t,teon.e items shall not be included in gross income and shall be exempt from t axatio n unde r this title (a) Earned income from sources without United States .-In the Earned income of nonr eside nt citizens, case of an individual citizen of the United States, a bona fide unmea sources. outside nonr eside nt of the Unit ed St ates for more than six month s dur ing the taxable year, amounts received from sources without the United States if such amounts constitute earned income as defined in section 31 from his gross income any deductions properly allocable to or chargeable against amounts excluded from gross income under this subsection. (b) Teachers in Alaska and Hawaii .-In the case of an individual Teachers in Alaska employed by Alaska or Hawaii or any political subdivision thereof and n awaii. as a teacher in any educational institution, the compensation received as such . This subsect ion shall not exempt compensation paid tio n Federal exc ep ted ompensa- directly or indirectly by the Government of the United States. (c) Income of foreign governments .-The income of foreign Inco me of fore ign government s from in- governments received from investments in the United States in vestments in united stocks, bonds, or other domestic securities, owned by such foreign state,, etc. governments, or from interest on deposits in banks in the United States of moneys belonging to such foreign governments, or from any other source within the United States. (d) Income of States, municipalities, etc .-Income derived from Income of states, any publi c uti lity or t he ex ercis e of any essen tial gove rnmen tal ties' from public utfli- function and accruing to any State, Territory, or the District of Columbia, or any political subdivision of a State or Territory, or income accruing to the Government of any possession of the United States, or any po litical s ubdivisio n thereo f. If under prior con- Whenever any State, Territory, or the District of Columbia, or tracts for ope rat ion any political subdivision of a State or Territory, prior to September thereof. 8, 1916, entered in good faith into a contract with any person, the object and purpose of which is to acquire, construct, operate, or maintain a public utility- Tax levi ed on pro - (1) If by the terms of such contract the tax imposed by this coeds prior to division title is to be paid out of the proceeds from the operation of such thereof with State, etc . public utility, prior to any division of such proceeds between the person and the State, Territory, political subdivision, or the District of Columbia, and if, but for the imposition of the tax imposed by this title, a part of such proceeds for the taxable year would accrue directly to or for the use of such State, Terri- tory, political subdivision, or the District of Columbia, then a tax upon the net income from the operation of such public utility shall be levied, assessed, collected, and paid in the manner and at the rates prescribed in this title, but there shall be refunded Refund to Stat es, etc. to suc h State, Territory, politic al subdiv ision, or the Dist rict of Columbia (under rules and regulations to be prescribed by the Commissioner with the approval of the Secretary) an amount
 * but such individual shall not be allowed as a deduction

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Page:United States Statutes at Large Volume 45 Part 1.djvu/875

 824 INCOME TAX If no pa rt ac cru ing to State, etc ., the net income of persons tax- able. Bri dge s to be ac- quired by State, etc. Tax levied on opera- tion proceeds, prior to division thereof. Refund to State, etc. Res tri cti on. If no part accruing to State, etc ., the net income from operation taxable. Dividends to Chinese resid ents from China Trade corpora tions. Receipts of shipown- ers ' mutua l ass oci a- tions. SEVENTIETH CONGRESS. SEss. I. Cia. 852. 1928 . which b ears the same relation to t he amount of the tax as the amount which (but for the imposition of the tax imposed by this title) would have accrued directly to or for the use of such State, Territory, political subdivision, or the District of C olumbi a, bears to the amount of the net income from the operation of such public utility for such taxable year. (2) If by the terms of such contract no part of the proceeds from the operation of the public utility for the taxable year would, irrespective of the tax imposed by this title, accrue dir ectly to or f or the use of such S tate, T errito ry, pol itical sub- division, or the District of Columbia, then the tax upon the net income of such person from the operation of such public utility shal l be le vied, assesse d, coll ected, and pa id in t he man ner and at the rates prescribed in this title. (e) Bridges to be acquired by State or political subdivision .-When- ever any State or political subdivision thereof, in pursuance ofa contract to which it is not a party entered into before the enactment of this Act, is to acquire a bridge- (1) If by the terms of such contract the tax imposed by this title is to be paid out of the proceeds from the operation of such bridge prior to any division of such proceeds, and if, but for the imposition of the tax imposed by this title, a part of such pro- ceeds for the taxable year would accrue directly to or for the use of or would be applied for the benefit of such State or political subdivision, then a tax upon the net income from the operation of such bridge shall be levied, assessed, collected, and paid in the manner and at the rates prescribed in this title, but there shall be refunded to such State or political subdivision (under rules and re gulati ons to be pr escri bed by the C ommis sioner with the approval of the Secretary) an amount which bears the same relation to the amount of the tax as the amount which (but for the i mposition of the tax impose d by this tit le) would have accrued directly to or for the use of or would be applied for the ben efit o f such State o r poli tical s ubdivis ion, b ears to the am ount of th e net income from the opera tion of such bridge for su ch taxable year. No such refund shall be made unless the entire amoun t of the refu nd is to be ap plied in part payment for the acquisition of such bridge. (2) If by the terms of such contract no part of the proceeds from the operation of the bridge for the taxable year would, irrespective of the tax imposed by this title, accrue directly to or for t he use of or be applied for the benefit of such State or political subdivision, then the tax upon the net income from the operation of such bridge shall be levied, assessed, collected, and paid in the manner and at the rates prescribed in this title. (f) Dividends from " China Trade Act" corporation. In the case of a person, amounts distributed as dividends to or for his benent by a corporati on organized u nder the Chin a Trade Act, 1922, if, at t he time of such distribution, he is a resident of China, and the equitable right to the income of the shares of stock of the corporation is in good faith vested in him. (g) Sh ipowner s' pro tection and in demnit y assoc iations .-The rec eipts of s hipown ers' m utual protec tion and indemnity as sociat ions not organized for profit, and no part of the net earnings of which inu res to the ben efit of any p rivate shareh older ; but such corporations shall be subject as other persons to the tax upon their net income from interest, dividends, and rents.

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Talk:Ebony and Crystal/Desire of Vastness

Where is the source for this version? We need it so it can be verified. Thanks! Mattisse (talk) 22:28, 24 September 2010 (UTC)


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Page:United States Statutes at Large Volume 45 Part 1.djvu/876

 SEVENTIETH CONGRESS. SESS. I. Cx. 852. 1928 . 825 SEC. 117. NET LOSSES. t loOME TAX Net osses. (a) Definition of " net loss ."-As used in this section the term " net Determined by ex . cess of deductions over loss" means the excess of the deductions allowed by this title g r os s i n co m e. over the ro ss inc ome, w ith th e foll owing e xcepti ons an d limi tation s (1 NON -BU SINE SS D EDUC TION S .-De ducti ons o therw ise allow ed xoep ions . Losses not connected by law not attributable to the operation of a trade or business with business . regularly carried on by the taxpayer shall be allowed only to the extent of the amount of the gross income not derived from such trade or business ; CAPI TAL LOSSES .-In the case of a taxpayer other than a capital losses, of (2) other than a corpora- co rporat ion, d educti ons fo r capi tal lo sses ot herwis e allo wed by tion. law shall be al lowed only t o the extent of the capit al gai ns ; (3) DEPLETioN .-The d educti on for deple tion s hall n ot exce ed Depletion . the amount which would be allowable if computed without refer- ence to discovery value, or to percentage depletion under section Ante, p .821 . 114 (b) (3) ; DIVIDENDS.-The deduction provided for in section 23( On corporation divi- (4) \h) dends not allowed . of amounts received as dividends shall not be allowed ; Ante, p. 801. 5) INTEREST .-There shall be included in computing gross Interest included in ( gross income . income the amount of interest received free from tax under this title, decreased by the amount of interest paid or accrued which Ante, p. 799. is not allow ed as a d eduction by sectio n 23 (b) (6) NET LOSS NOT TO PRODUCE NET LOSS .-In computing the net Net loss for prior year not allowed . loss for any taxable year a net loss for a prior year shall not be allowed as a deduction . Net less to be de. (b) Net loss as a deduction .-If, for any taxable year, it appears ducted from tax for suc- upon the prod uctio n of evid ence satis fact ory t o the Com missi oner seeding taxable years. that any ta xpayer has s ustain ed a n et loss, the amount there of sha ll be allowed as a deduction in computing the net income of the tax- payer for the succeeding taxable year (hereinafter in this section called "second year "), and if such net loss is in excess of such net income (computed without such deduction), the amount of such excess shall be allowed as a deduction in computing the net income for the next succeeding taxable year (hereinafter in this section called "third year ") ; the deduction in all cases to be made under regulations prescribed by the Commissioner with the approval of the Secretary. (e) Capital net gain or loss in second year.- Capital gain or loss. CAPI TAL NET LOSS .-If in t he se cond year the taxpa yer Application if capital (1) loss sustained in second (other than a corporation) sustains a capital net loss, the deduc- ye-- tion allowed by subsection (b) of this section shall first be applied as a deduction in computing the ordinary net income for such year. If the deduction is in excess of the ordinary net income (computed without such deduction) then the amount of such excess shall be allowed as a deduction in computing net income for the third year . Application to capi- (2) CAPITAL NET GAIN .-If in the second year the taxpayer tal gain for second (other than a corporation) has a capital net gain, the deduction Y11- allow ed by sub section ( b) of thi s sectio n shall f irst be a pplied as a de ductio n in c omputi ng the ordin ary net incom e for such y ear, If the deduction is in excess of the ordinary net income (com- puted without such deduction) the amount of such excess shall next be applied against the capital net gain for such year, and if in excess of the capital net gain the amount of that excess shall be allowed as a deduction in computing net income for the third year. Application to third (d) Capital net gain or loss in third year .-If any portion of a net year. loss is allowed as a deduction in computing net income for the third year, under the provisions of either subsection (b) or (c)

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Page:United States Statutes at Large Volume 45 Part 1.djvu/877

 826 SEV ENTIE TH CONGRESS. SEss. I. CH. 852 . 1928 . INC OME TAX of this section and the taxpayer (other than a corporation) has in such year a capital net gain or a capital net loss, then the method of allowing such deduction in such third year shall be the same as Application to net pr ovided i n subsec tion (c). lass for 1926 or 1927. (e) Net loss for 1926 or 1927.-If for the taxable year 1926 or 1927 a taxpayer sustained a net loss within the provisions of the Revenue Act of 1926, the amount of such net loss shall be allowed as a deduction in computing net income for the two succeeding tax- able years to the same extent and in the same manner as a net loss sustained for one tax ab le ye ar is, under th is Ac t, al low ed as a Fiscal y ears. de duction for the two succ eeding t axable y ears. Returns, if period (f) Fiscal year returns .-If a taxpayer makes return for a period begins in first calendar year and ends in beginning in one calendar year (hereinafter in this ,subsec- sec ond . tion called "first calendar year") and ending in the following calen- dar year (hereinafter in this subsection called " second calendar year ") and the law applicable to the second calendar year is differ- ent from the law applicable to the first calendar year, then his net Proportion for dif loss for the period ending during the second calendar year shall be the ferentratest sum of : (1) the same proportion of a net loss for the entire period, determined under the law applicable to the first calendar year, which the portion of such period falling within such calendar year is of the entire period ; and (2) the same proportion of a net loss for the entire period, determined under the law appli cable to the second calendar year, which the portion of such period falling within such calendar year is of the entire period. Loss on sale of stock or securit ies. SEC. 118. LO SS ON SALE OF STOCK OR SECURIT IES. Restri ction a claim fo r, if has In the case of any loss claimed to have been sustained in any acquired substantially sale identical property or other disposition of shares of stock or securities where it within 30 day s, appears that within thirty days before or after the date of such sale or other disposition the taxpayer has acquired (otherwise than by bequest or inheritance) or has entered into a contract or option to acquire substantially identical property, and the property so acquired Ante, p.800. is held by the taxpayer for any period after such sale or other dis- Allowance to mar_ position, no deduction for the loss shall be allowed under section porations, etc. 23 (e) (2) of this title ; nor sha ll su ch deduction be allowed under Ante, p .800 . section 23(f) unless the claim is made by a corporation, a dealer Acquisition in part in stocks or securities, and with respect to a transaction made in onl y the ordinary course of its business. If such acquisition or the con- tract or option to acquire is to the extent of part only of substantially identi cal prop erty, th en only a propor tionate part of the loss shall be disallowed. within nIncome from sour ces SEC . 119. INCOME FROM SOURCES WITHIN UNITED STATES. Items treated as such. (a) Gross income from sources in United States .-The following items of gross income shall be treated as income from sources within the Uni ted States : Inter est on b onds , (1) INTEREST .--Interest on bonds, notes, or other interest-bear- etc., of residents. in- obligations of residents, corporate or otherwise, not including- Exceptions. Paid persons not in (A) interest on deposits with persons carrying on the business in United banking business pa id to persons not en ga ged in business states. within the United States and not having an office or place of business therein, or If lessthan20percent (B) interes t receiv ed from a reside nt alien individ ual, a from United states sources. resident fo rei gn corporation, ora domestic corporation, when it is shown to the satis facti on of the C ommis sioner that less than 20 per ce ntum of the gross income of such resident payor or domestic corporation has been derived from sources within the United States, as determined under

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Page:United States Statutes at Large Volume 45 Part 1.djvu/878

 S EVEN TIETH CONGRESS. SEss. I. CH. 852. 1928 . 827 the prov isions of th is section, for the three-year per iod INCO ME TAX endi ncr with the close of the taxable year of such payor preceding the payment of such interest, or for such part of such period as may be applicable, or From f oreign bank (C) inc ome deri ved by a foreign central bank of issue a cceptanc es. from bankers' acceptances ; Dividends. (2) D IVIDENDS .- The amount received as dividen ds- From domestic cor- (A) from a domestic corporation other than a corpora- porations. tion entitled to the benefits of section 251, and other than Exceptions p` 850. a corporation less than 20 per centum of whose gross income is s hown to the sati sfact ion of the Commi ssione r to have bee n de rive d fr om s ourc es within the Un ited States, as dete rmine d unde r the prov isions of this section, for the three-year period ending with the close of the taxable year of such corporation preceding the declaration of such divi- dends (or for such part of such period as the corporation has been in existence), or (B) from a forei gn co rpora tion u nless less than 50 per From foreign cor. porations. centum of the gross income of such foreign corporation for Exception. the three-year period ending with the close of its taxable year prece ding t he de clara tion o f suc h div idends (or for such part of such period as the corporation has been in exi sten ce) was deri ved from sou rces wit hin the United States as determined under the provisions of this section ; (3) PERSONAL SERVICEs .-Compensation for labor or personal Personal services in United States. services performed in the United States ; RENTALS AND ROYAL'rLl;s .-Rentals or royalties from pr0 R entals, roya lties, (4) h- etc ., from united erty located in the United States or from any interest in such States sources . property, including rentals or royalties for the use of or for the privilege of using in the U nited State s, pa tents , copyrights, secret proc esses and f ormul as, go od wi ll, t rade- marks, trade brands, franchises, and other like property ; and (5) SALE OF REAL PROPERTY.-Gains, profits, and income from Real estate sales. the sale of real property located in the United States. De ductions the re- (b) Net income from sources in United States,-From the items from o f designate d ex- of gross income spe cif ied in subsection (a) of this section pe nse s, etc, fr om , ue there shall be deducted the expenses, losses, and other deductions States sources . p roperl y app ortio ned or allo cated there to and a ratable part of any expenses, losses, or other deductions which can not definitely be allocat ed to so me item or class of gros s income. The rem ai nde r, if any, shall be included in full as net income from sources within the United States. (c) Gross i ncome fr om sourc es witho ut Unite d States .-The fol low- wit ho OroutUnit income States. fro m ing items of gross income shall be treated as income from sources without the United States : (1) Interest other than that derived from sources within the Other interest. United States as provided in subsection (a) (1) of this section (2) Dividends other than those derived from sources within Other divide nds. the United States as provided in subsection (a) (2) of this section ; (3) Compensation for labor or personal services performed united Labor, ace States wit hout . without the United States ; Rentals, royalties, (4) Rentals or royalties from property located without the etc ., without United United States or from any interest in such property, including States . rentals or royalties for the use of or for the privilege of using withou t the Un ited Sta tes, pat ents, co pyrights, secret process es and formulas, good will, trade-marks, trade brands, franchises, and other like properties ; and (5) Gains, profits, L and income from the sale of real property Rea l witho ut estate United te e a States. ces. locate d withou t the Un ited Sta tes. 5453.5 °-29-rr 1	56

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Page:United States Statutes at Large Volume 45 Part 1.djvu/879

 828 INC OME TAX Deduct ions there- from of designated ex- penses, etc ., consti- tute n et income fr om sources without United States. Apportionment of items within and with- out United States. Fr om United States sources. Derived partly with- in and pa rtly without. Determi nation of United States in- come. From transportation and other ser vices. Sales of personal property within and without. Purchase an d sale of personal property . Exceptions. Synonymous mean. ing of words. Charitable, etc., con- tributions. Unlimited deduction allowed if, exceed 90 per cent of net income . Ante, p. 801. SEVENTIETH CONGRESS. SESS. I. Ca. 852. 1928 . (d) Net income from sources without United States .-From the items of gross income specified in subsection (c) of this section there shall be deducted the expenses, losses, and other deductions properly apportioned or allocated thereto, and a ratable part of any expenses, losses, or other deductions which can not definitely be allocate d to som e item o r class of gross income. The remainder, if any, shall be treated in full as net income from sources without the United States. (e) Income from sources partly within and partly without United States .-Items of gross income, expenses, losses and deductions, other than those specified in subsections (a) and (c) of this section, shall be allocated or apportioned to sources within or without the United S tates, under rules and regulations prescr ibed by the Commissioner with the approval of the Secretary. Where item s of gro ss incom e are se parately allocate d to sou rces wit hin the United States, there shall be deducted (for the purpose of comput- ing the net income therefrom) the expenses, losses and other deduc- tions properly apportioned or allocated thereto and a ratable part of other expenses, losses or other deductions which can not definitely be a llocated to some item or class of gross i ncome. The remainder, if any, shall be included in full as net income from sources within the United States. In the case of gross income derived from sources partly within and partly without the United States, the net income may first be computed by deducting the expenses, losses or other deductions apportion ed or allocated thereto and a ratable par t of any expenses, losses or other deductions which can not defini tely be allocated to some items or class of gross income ; and the portion of such net income attributable to sources within the United States ma y be det ermi ned by p roce sses or form ulas of gene ral appo rtio n- ment prescribed by the Commissioner with the approval of the Secretary. Gains, profits and income from- (1) transportation or other services rendered partly within and partly without the United States, or (2) from the sale of personal property produced (in whole or in part) by the taxpayer within and sold without the United States, or produced (in whole or in part) by the taxpayer with- out and sold w ithin the United States, shall be treated as derived partly from sources within and pa rtly from sources without the Un ited States. Gains, profits and income derived from the purchase of personal property within and its sale without the United States or from the purchase of personal property without and its sale within the United States, shall be treated as derived entirely from sources within the country in which sold, except that gains, profits and income derived from the purchase of personal property within the United States and its sale within a pos- session of the United States or from the purchase of personal prop- erty within a possession of the United States and its sale within the United States shall be treated as deri ved part ly from sources within and partly from sources without the United States. (f) Definitions .-As used in this section the words "sale" or ` sold " include "exchange " or " exchanged " ; and the word " pro- duced " includes " created," "fabricated," " manu fact ured ," " ex- tracted," " processed," " cured," or " aged ." SEC. 120. UNLIMITED DEDUCTION FOR CHARITABLE AND OTHER CONTRIBUTIONS . In the case of an individual if in the taxable year and in each of the ten preceding taxable years the amount of the contributions or gifts described in section 23(n) plus the amount of income, war- profit s, or ex cess-pro fits tax es paid during s uch year in resp ect of

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Page:United States Statutes at Large Volume 45 Part 1.djvu/880

 SEVENTIETH CONGRESS. SEss. I. CH. 852. 1928 . 829 prec edin g t ax ab le years, exceeds 90 per centum of the taxpayer's net income for each such year, as computed withou t the be nefit of section 23(n), then the 15 per centum l imit imposed by such section shall not be applicable. INCOME TAX Supplement C-Credits Against Tax Credits against tax. [Supplementary to Subtitle B, Part III] Ta'es of foreign coun- SEC. 131. TA XES OF FOR EIGN CO UNT RIES AND POSSESSIONS OF Foes,a United States UNITED STATES. (a) Allo wance of credit. The tax imposed by this title shall be Allowances. credited with : To citizens and do- (1) CITIZEN AND DOMESTIC CORPORATION .-In the case of a citi- mestic corporations, of taxes to foreign coun- zen of the United States and of a domestic corporation, the tries. amount of any income, war-profits, and excess-profits taxes paid or accrued during the taxable year to any foreign country or to any possession of the United States ; and Residents, to United (2) RESIDENT OF UNITED STATES .-In the case of a resident of states possessions. the United States, the amount of any such taxes paid or accrued dur ing the taxable year to any poss ession of the United States ; and Alien residents, to (3) ALIEN RESIDENT OF UNITED STATES.-In the case of an alien foreign countries allow- resident of the United States, the amount of any such taxe s paid ing similar credit . or accrued during the taxable year to any foreign country, if the for eign c ountry of whic h such alien resident is a ci tizen or subject, in imposing such taxes, allows a similar cre dit to ci tiz ens of the United States residing in such country ; and Partnerships, or trust (4) PARTNERSHIPS AND ESTATES .-In the case of any such indi- bene fici aries, to fore ign vidual who is a memb er of a partnership or a beneficiary of an countries . estate or trust, his proportionate share of su ch t ax es of t he p art - nership or the estate or trust paid or accrued during the taxable year to a fore ign country or to any possession of the United States, as the case may be. Limitatio n of credits . (b) Limit on credit .-In no case shall the amount of credit taken under this section exceed the same proportion of the tax (computed on the basis of the taxpayer's net income without the deduction of any inco me, war-p rofi ts, o r ex cess- prof its tax any part of which may be allowed to him as a credit by this section), against which such credit is taken, which the taxpayer's net income (computed without the ded uction o f any su ch incom e, war-p rofits, or excess-profits tax) from sources without the United States bears to his entire net income (computed without such deduction) for the same taxable year. Adjustments if tax (e) Adjustments on payment of accrued taxes .-If accrued taxes Paid differ from credits when paid differ from the amounts claimed as credits by the tax- claimed' payer, or if any tax paid is refunded in whole or in part, the taxpayer shall notify the C ommissioner, who shall redetermine the amount of the tax for the year or years affected, and the amount of tax clue upon such redeterm ination, if any, shall be paid by the taxpayer upon notice and demand by the collector, or the amount of tax overpaid, if any, shall be credited or refunded to the taxpayer If tax accrued but not in accordance with the provisions of section 322. In the case of such paid. a tax accrued but not paid, the Commiss ioner as a cond itio n preced ent to t he allow ance of this cre dit may require the taxpayer Bo nd requ ired. to give a bond with sureties satisfactory to and to be approved by the Commissioner in such sum as the Commi ssioner may r equire, conditioned upon the payment by the taxpayer of any amount of tax found due upon any such redetermination ; and the bond herein prescribed shall contain such further conditions as the Commissioner may require.

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Page:United States Statutes at Large Volume 45 Part 1.djvu/881

 830 INCOME TAX Cre dit s for foreign taxes may be taken in the year accrued. On same b asis for subs equen t ye ars. Evidence requ ired of foreign income. Taxes of foreign sub- sidiary. Propo rtion of forei gn tax on dividends re- ceived deemed to have been been pai d. Proviso. Limit on credit al- lowed . Meaning of "accu- mulated profits ." Determination of, by Commi ssio ner. Accounting period for f oreig n co rpora tions . Corporations treated as foreign. In United States pos- sessions. Post,p. 850. China Trade Act corporations. Post, p. 851 . Payments under 1926 Act. Credit or refund for. Post, p. 861. SEVENTIETH CONGRESS. SEss. I. CH. 852. 1928. (d) Year in which credit taken .-The credits provided for in this section may, at the option of the taxpayer and irrespective of the method of accounting employed in keeping his books, be taken in the year in which the taxes of the foreign country or the possession of the United States accrued, subject, however, to the conditions pre- scribed in subsection (c) of this section. If the taxpayer elects to take such credits in the year in which the taxes of the foreign country or the possession of the United States accrued, the credits for all subsequent years shall be taken upon the same basis. (e) Proof of credits. -The se c redi ts s hall be allo wed only if the taxpayer furnishes evidence satisfactory to the Commissioner show- ing the amount of income derived from sources without the United States, and all other information necessary for the verification and com puta tion of such cre dits. (f) Taxes of foreign subsidiary .-For the purposes of this section a domestic corporation which owns a majority of the voting stock of a foreign corporation from which it receives dividends (not deductible under section 23 (p) ) in any taxable year shall be deemed to have paid the same proportion of any income, war-profits, or excess-profits taxes paid by such foreign corporation to any foreign country or to any possession of the United States, upon or with respect to the accumulated profits of such foreign corporation from which such dividends were paid, which the amount of such dividends bears to the amount of such accumulated profits : Provided, That the credit allowed to any domestic corporation under this subsection shall in no case exceed the same proportion of the taxes against which it is credited, which the amount of such dividends bears to the amount of the entire net income of the domestic corporation in which such dividends are included. The term " accumulated profits " when used in this subsection in reference to a foreign corporation, means the amount of its gains, profits, or income in excess of the income, war- profits, and excess-profits taxes imposed upon or with respect to such profits or income ; and the Commissioner with the approval of the Secretary shall have full power to determine from the accumu- lated profits of what year or years such dividends were paid ; treating dividends paid in the first sixty days of any year as having been paid from the accumulated profits of the preceding year or years (unless to his satisfaction shown otherwise), and in other respects treating dividends as having been paid from the most recently accumulated gains, profits, or earnings. In the case of a foreign corporation, the income, war-profits, and excess-profits taxes of which are determined on the basis of an accounting period of less than one year, the word " year " as used in this subsection shall be construed to mean such accounting period. (g) Corporations treated as foreign .-For the purposes of this section the following corporations shall be treated as foreign corporations (1) A corporation entitled to the benefits of section 251, by reason of receiving a large percentage of its gross income from sources within a possession of the United States ; (2) A corporation organized under the China Trade Act, 1922, and entitled to the credit provided for in section 261. SEC. 132. PAYMENTS UNDER 1926 ACT. Any amount paid before or after the enactment of this Act on account of the tax imposed for a fiscal year beginning in 1927 and ending in 1928 by Title II of the Revenue Act of 1926 shall be credited toward the payment of the tax imposed for such fiscal year by this Act, and if the amount so paid exceeds the amount of such tax imposed by this Act, the excess shall be credited or refunded in accordance with the provisions of section 322.

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Page:United States Statutes at Large Volume 45 Part 1.djvu/882

 SEVENTIETH CONGRESS. Suss. I. CH. 852 . 1928 . Supplement D-Returns and Payment of Tax [Suppleme ntary to Subtitle B, Part V I S EC. 1 41 . CON SOLIDAT ED RET URNS OF CORPOR ATIONS -1929 A ND SUBSEQUENT TAXABLE YEARS. (a) Privilege to file consolidated returns .-An affiliated group of corpor ations shall, subj ect to the p rovisio ns of this s ection , have the privilege of making a consolidated return for the taxable year 1929 or any subsequent taxable year, in lieu of separate returns. The making of a consolidated return shall be upon the condition that all the corporations which have been members of the affiliated group at any time during the taxable year for which the return is made consent to all the regulations under subsection (b) prescribed prior to the making of such return ; and the making of a consolidated return shall be considered as such consent. In the case of a cor- poration which is a member of the affiliated group for a fractional part of the year the consolidated return shall include the income of such corporation for such part of the year as it is a member of the affiliated group. (b) Re gul at ion s .-The Commissi oner, with the appro val of the Secret ary, s hall p rescri be suc h regu lations as he may d eem ne cessar y in order that the tax liability of an affiliated group of corporations making; a consolidated return and of each corporation in the group, both during and after the period of affiliation, may be determined, computed, assessed, collected, and adjusted in such manner as clearly to reflect the income and to prevent avoidance of tax liability. (c) Computation and payment of tax .-In any case in which a consoli- dated return is m ade the tax shall be determined, compute d, assessed, collected, and adjusted in accordance with the, regulations under subsection (b) prescribed prior to the date on which such return is made. Only one specific credit, computed as provided in secti on 26( b), sh all be allow ed in computi ng the tax. (d) Definition of "affiliated group" .-As used in this section an " affiliated group " means one or more chains of corporations con- nected through stock ownership with a common parent corporation if- (1) At least 95 per centum of the stock of each of the corpora- tions (except the common parent corporation) is owned directly by one or more of the other corpo ration s ; a nd (2) The common parent corporation owns directly at least 95 per centum of the stock of at least one of the other corporations. As used in this subsection the term " stock " does not include nonvot- ing stock which is limited and preferred as to dividends. (e) A consolidated return shall be made only for the domestic corporations within the affiliated group. An insurance company subject to the tax imposed by section 201 or 204 shall not be included in the same consolidated return with a corporation subject to the tax impo sed by se ction 13. (f) China Trade Act corporations .-A corporation organized under the China Trade Act, 1922, shall not be deemed to be affiliated with any other corpor ation within the m eaning of thi s sect ion. (g) .Corporations deriving income from possessions of United States .- For the purposes of this section a corporation entitled to the bene- fits of section 251, by reason of receiving a large percentage of its income from possessions of the United States, shall be treated as a fore ign co rporat ion. 831 INCOME TAX Returns and pa y- ment of tax. Consolidated returns, 1929, and su bsequent years. Affiliated corpora- tions may make, in lieu of separate. Consent of all mem- bers. Regu latio ns t o det er- mine tax liability. Com putat ion of as- sessments . Only one specific credit. Ante, p. 803 . Corporations deemed affiliated. Sto ck ow ners hip of members. Of paren t co rpor a- tion. Nonvoting stock not included. Applicable only for domestic corporations . Insurance companies not included . China trade corpora- tions not affiliated. Corporations in United States posses- sions deemed foreign. Post, p. 850.

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Page:EB1911 - Volume 03.djvu/442

 occupied the extensive plain through which the Zambezi passes from 14° 35′ S. to 16° 25′ S. throughout the reigns of twenty-two successive paramount chiefs and therefore approximately since the commencement of the 17th century. Previously, for an indefinite period, they dwelt on the Kabompo river, 200 m. to the N.E. of their present country, and here the descendants of a section of the tribe which did not migrate still remain, under the name Balokwakwa (men of the ambuscade), formerly known as Aälukolui. That the Barotse at a still more remote period emigrated from the far north-east is indicated by vague tradition as well as by a certain similarity in type and language to some tribes living in that direction, though the fact that natives from Mashonaland can understand those at Lialui (the Barotse capital) has led to the assumption by some writers that the Barotse are an offshoot of the Mashona. The variety in type among the Mashona and the homogeneity of the Barotse would rather point to an opposite conclusion.

Early in the 19th century a section of the Basuto tribe known as Makololo trekked from the south of what is now the Orange River Colony and fought their way through Bechuanaland and the Kalahari to the land of the Barotse, whom they ultimately subdued. Their chief, Sebituane, who as an administrator and general was far in advance of his compeers, established the rule of his house for some forty years, until about 1865 an organized rebellion of the Barotse led to the almost complete extinction of this Makololo oligarchy and the reinstatement of the original dynasty. It was the Makololo who gave the Barotse their present name (Rotse, plain—Burotse, country of the plain—Murotse, man of the plain—Marotse, people of the plain, the latter being inaccurately rendered Barotse, Ba being the equivalent of Ma in certain other languages).

The Barotse proper are comparatively few in number, but as is inferred from the fact that for many generations they have held in sway a country two and a half times the size of Great Britain, they are the intellectual and physical superiors of the vast majority of the negro races of Africa. Very black, tall in stature, deep in chest and comparatively speaking refined in feature, a Barotse is readily distinguishable amidst a mixed group of natives. Being numerically small they form an oligarchy in which, with few exceptions, each man holds rank in a chieftainship of which there are three grades. Next to the chiefs rank their descendants who have not themselves acquired chief’s rank and hold an intermediate position as freeborn; all others, whether members of the subject-tribes or prisoners of war, being, up to 1906, mere slaves. This class was also graded. Slaves might own slaves who in their turn might own slaves, the highest grade always being directly responsible to some Barotse chief. As a reward of gallantry or ability the paramount chief occasionally conferred chief’s rank on individuals not of Barotse birth, and these ipso facto assumed the name and privileges of the Barotse. It was a counterpart of the feudal system of Europe in which every grade from king to serf found a place. In 1906 the paramount chief, by proclamation, abolished the state of slavery, an act which, however, left untouched the predominant position of the Barotse and their rights to chieftainship. The paramount chief shares with a queen (Mokwai) his authority and prerogatives. The Mokwai is not the wife but the eldest sister of the ruling chief. With his death her privileges lapse. Theoretically, these co-rulers are equal, neither may promulgate a national decree without the assent of the other, but each has a capital town, councillors and absolute authority in a province, the two having joint authority over all other provinces. In their code of laws the Barotse show an advance on the standard of probably any other African negro state. By right, an accused chief is tried by his peers, each of whom in rotation from junior to senior gives his verdict, after which the president reports the finding of the court to the paramount chief, who passes sentence. As to their religious beliefs the Barotse imagine the sun to be the embodiment of a great god whose sole care is for the amelioration of man. Him they worship, though more pains are taken to appease evil spirits, in whose existence they also believe, to whom every evil to which man is heir is attributed. The spirits of ancestors—especially of deceased chiefs—are also objects of worship. Christianity, of a Protestant evangelical type, was first introduced into the country in 1884 by François Coillard and has made some progress among the people, among the converts being Letia, eldest son and heir of Lewanika, the paramount chief.

2. Barotseland.—This term includes, in the sense of the country in which the authority of the paramount Barotse chief is acknowledged, not only the lands of the Barotse proper, but the territory of fifteen contiguous and subject tribes. This vast territory extends approximately from the Kwito river in the west to the Kafue river in the east, and from the Congo-Zambezi watershed in the north to the Linyante or Kwando river and Zambezi in the south, and may be divided into three groups:—

(a) Central provinces directly administered by the paramount chief from the capital Lialui (a town on the Zambezi), by the Mokwai from Nalolo, and by two chiefs of the blood from Sesheke;

(b) Outlying provinces over which, in the absence of a central local system of government, Barotse chiefs administer districts under the direction of the paramount chief; and

(c) Tribes over which the local chiefs are permitted to retain their position subject to the payment of annual tribute and to their doing homage in person at Lialui when called upon to do so.

With the publication of the king of Italy’s award in 1905 in the Anglo-Portuguese Barotse Boundary dispute (see below), the term Barotseland may be said to have acquired a second meaning. By this award the western and part of the northern section of Barotseland as described above were declared to be outside the dominion of the paramount chief and therefore not in the British sphere of influence, while tribal boundaries were complicated by the introduction of a longitudinal and latitudinal frontier. Though this award altered the political boundaries, ethnologically Barotseland remains much as above described. The area of the country under British protection is about 182,000 sq. m.

Excluding the ridge of high ground running east and west which, culminating at a height of 5000 ft., forms the Congo-Zambezi water-parting, the extreme east (Batoka) and the district in the immediate vicinity of the (q.v.) throughout which, with local variations, a red laterite clay predominates, the main physical features of Barotseland may be described as a series of heavy white sand undulations covered with subtropical forest vegetation. These are intersected by alluvium-charged valleys through which streams and rivers flow inwards towards the central basin of the Upper Zambezi. There is evidence that this has at one time been the site of a large lake. These valleys, which towards the close of the wet season become inundated, afford rich cattle pasture, the succulence of which prevents cattle losing condition towards the end of the dry season, as is the case in many parts of Africa. There seems to be little or no indication of mineral wealth in the white sand area, but in the north and east there is not only every prospect of a great agricultural and pastoral future but also of considerable mining development. Though basalt predominates in the neighbourhood of the Victoria Falls and large fields of granite crop up on the Batoka plateau and elsewhere, there is every indication of the existence of useful minerals in these districts. Gold, copper, tin, lead, zinc and iron have been discovered.

Much of the area of Barotseland is within the healthy zone, the healthiest districts being the Batoka and Mashikolumbwe plateaus in the east with extreme altitudes of 4400 and 4150 ft. respectively, and the line of the Congo-Zambezi watershed which rises to 5000 ft. in many places. The Zambezi valley from the Victoria Falls (3000 ft.) to the Kabompo confluence (3500 ft.), though involving little or no risk to health to the traveller, cannot be considered suitable for white settlement. Taking into consideration the relative value of altitude to latitude, the plateauland of Barotseland compares very favourably with existing conditions elsewhere, being several degrees more temperate than would be expected. Approximately the mean

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 832 SEVENTIETH CONGRESS. SESS. I. CH. 852. 1928 . INCO ME TAX (h) Subsidiary formed to comply with foreign law .-In the c ase of Sub sidi ary of do- mestic corporation a domestic corporation owning or controlling, directly or indi- formed to comply with rectl . 100 pe r centur n of the capital stock ( exclusiv e of dir ectors' for eign, l aw, deemed ydomestic . qualifying shares) of a corporation organized under the laws of a contiguous for ei gn co unt ry and mai nt ain ed solely for the pu rp ose of c omplying with th e laws o f such co untry as to titl e and op eration of property, such foreign corporation may, at the option of the domestic corporation, be treated for the purpose of this title as a domestic corporation. Application of sus- of pension of statute of (i) Suspension of running of statute of limitations .-If a notice under limitatio n. section 272(a) in respect ofa deficiency for any taxable year is Post, pp . 852,857. mailed to a corporation, the suspension of the running of the statute of limitations, provided in section 277, shall apply in the case of corporations with which such corporation made a consolidated return for such taxable year. Allocatio n of income (j) Allocation of income and deductions .-For allocation of income and deductions . Ante, p. 896. and deductions of related trades or businesses, see section 45. Consoli dated re- turn s 1 928 SEC. 142. CONSOLIDATED RETURNS OF CORPORATIONS-TAXABLE , . YEAR 1928 . Affiliated corpora- tio ns or (a) Consolidated returns permitted.--Corporations which are afƒili- tion s may ma ke separate. ated within the meaning of this section may, for the taxable Vol. 44, p . 46. year 1928, make separate returns or, under regulations prescribed by the Commiss ioner with the approval of the Secretary, make a consolidated return of net income for the pu rpo se of t his title, in which case the taxes thereunder shall be computed and determined upon the basis of such return. If return for the taxable year 1927 was ma de upon either o f such b ases,-re turn for the tax able yea r 1928 shall be upon the same basis unless permission to change the basis is gr an ted by the Commissioner. Computation of pro- (b) Computation and payment of tax .-In any case in which a tax portionatea ssessments. is assessed upon the basis of a consolidated return, the total tax sh all be computed in the fi rst instance as a un it and shall th en be ass essed up on the r espectiv e affili ated cor poration s in suc h pro- portions as may be agreed u pon among the m, or, in the absence of any such agree ment, then on the basis of the net income proper ly on ly one specific assignable to each. There shall be allowed in computing the income c=~me p 803 tax only one specific credit computed as provided in section 26(b). Corporations deemed (c) Definition of affiliation .-For the pur po se of th is se ct ion two affiliated. or more domestic corpor ations shall be deemed to be affiliated (1) if one corporation owns at least 95 per centum of the stock of the other or others, or (2) if at least 95 per centum of the stock of two or more corporat ions is owned by the sam e intere sts. As used in this subsection the term "stock " does not include nonvoting stock which is limited and preferred as to dividends. China trade c orpora- d China Trade Act cor orations .-A corporation organized under tions deemed not af- li fili ated . the China Trade Act, 1922, shall not be deemed to be affiliated with any o ther c orpor ation withi n the mean ing of this sect ion. Corporatio ns in (e) Corporations deriving income from possessions of United States .- United States posses- sions, deemed foreign. For the purposes of this se ction a corporation entitle d to the benefits of section 251, by reason of receiving a large percentage of its income from possessions of the United States, shall be treated as a for eign cor poration. A pplic atio n suo f) S uspensio n of run ning of s tatute o f limita tions .- If a notice pension caof s statute of ( limitationsn under section 272(a) in respect of a deficiency for the taxable Post, pp. 852, 857. year 1928 is mailed to a corporation, the suspension of the running of the statute of limitations, provided in section 277, shall apply in the case of corporations with which such corporation made a con- solidated return for such taxable year.

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 SEVENTIETH CONGRESS. SEss. I. Cii. 852 . 1928. 833 (g) Allocation of income and deductions. -F or a l lo ca ti o n of INC OME TAX Allocatio n of income income and deductions of related trades or businesses, see section 45. and deductions. Ante, p.806. SEC. 143. FIDUCIARY RETURNS. Fiduciary returns. (a) Requirement of return .-Every fiduciary (except a receiver com en sc ., of ben of income, wor n of by authority of law in possession of part only of the prop- manes. erty of an individual) shall make under oath a return for any of the f ollowing individua ls, estat es, or t rusts for which he acts, st ating specifically the items of gross income thereof and the deductions and credits allowed under this title- wi th net income of (1) Every individual having a net income for the taxable $1,500 or over, and sin- year of $1,500 or over, if single, or if married and not living gle, etc• with husband or wife ; Married, etc ., with (2) Every individual having a net income for the taxable $3,500 or over. year of $3,500 or over, if married and living with husband or wife ; Gr oss income of (3) Every individual having a gross income for the taxable $5,000 or over. year of $5,000 or over, regardless of the amount of his net income ; Estates o r trusts of (4) Every estate or trust the net income of which for the tax- $1 .50 0 net inc ome or able year is $1,500 or over ; over. (5) Every estate or trust the gross income of which for the $50ro s Ooncome of taxable year is $5,000 or over, regardless of the amount of the net income ; and 6 Ever estate or tru st of which any be nefici ary is a non- Nonresident alien resident alien. y y beneficiaries. . (b) Joint fiduciaries .-Under such regulations as the Commis- By joint fiduciaries. sioner with the approval of the Secretary may prescribe a return made by one of two or more joint fiduciaries and filed in the office of the collector of the district where such fiduciary resides shall be sufficient compliance with the above requirement. Such fiduciary oath requ ired. shall make oath (1) that he has sufficient knowledge of the affairs of the individual, estate or trust for which the return is made, to enable him to make the return, and (2) that the return is, to the best of his knowledge and belief, true and correct. (c) haw applicable to fiduciaries .-Any fiduciary required to app li cabl e to provisions make a return under this title shall be subject to all the provisions pals. of law which apply to individuals. SEC. 144 . WITHHOLDING OF TAX AT SOURCE. Wit hhold ing tax at sou rce. Tax-free covenant (a) Tax-free covenant bonds .- bonds . (1) REQU IREME NT OF WITHHOLDING.-In any case where bonds By corp orations y agreeing to pay interest mortgages, or deeds of trust, or other similar obligations of a free from tax, etc. corporation contain a contract or provision by which the obligor agrees to pay any portion of the tax imposed by this title upon the obligee, or to reimburse the obligee for any portion of the tax, or to , pay the inte rest wit hou t de duct ion for any tax which the obligor may be required or permitted to pay thereon, or to retain therefrom under any law of the United States, the obligor shall deduct and withhold a tax equal to 2 per centum Tax to be w ithheld. of the interest upon such bonds, mortgages, deeds of trust, or other obligations, whether such interest is payable annually or at shorter or longer periods, if payable to an individual, a partnership, or a foreign corporation not engaged in trade or business within the United States and not having any office or Provisos. place of business therein : Provided, That if the liability assumed Rates to be withheld. b y the obligor does not exceed 2 per centum of the interest, then the deduction and withholding shall, after the date of the enactment of this Act, be at the following rates : (A) 5 per Fro m non re sid ent alien individuals, etc. centum in the case of a nonresident alien individual, or of

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 834 INCOME TAX From foreign corpo- rations. Other individuals, etc. Of unknown owners. Exception on notice of credit withheld by individual. Nonresident alien in- dividual. Post, p. 848. Lower rate on notice of income not exceeding $4,000 . Restriction on obligor and obligee. Normal tax of non- resident aliens payable at source. Exceptions. Ante, p. 802. Post, p. 848. Proviso. Interest of unknown o wners includ ed. Returns, etc., by withholding agent re- q uired. Ante, p. 809. SEVENTIETH CONGRESS. SESS. I. CH. 852 . 1928 . any partnership not engaged in trade or business within the United States and not having any office or place of business therein and composed in whole or in part of nonresident aliens, (B) 12 per centum in the case of such a foreign corporation, and (C) 2 per centum in the case of other individuals and partnerships : Provided further, That if the owners of such obligations are not known to the withholding agent the Com- missioner may authorize such deduction and withholding to be at the rate of 2 per centum, or, if the liability assumed by the obligor does not exceed 2 per centum of the interest, then at the rate of 5 per centum. (2) BENEFIT OF CREDITS AGAINST NET INCOME.-Such deduc- tion and withholding shall not be required in the case of a citizen or resident entitled to receive such interest, if he files with the withholding agent on or before February 1 a signed notice in writing claiming the benefit of the credits provided in section 25(c) and (d) ; nor in the case of a nonresident alien individual if so provided for in regulations prescribed by the Commissioner under section 215. (3) WITHHOLDING AT LOWER RATE .-Such deduction and with- holding shall be at the rate of 11/2 per centum instead of at the rate of 2 per centum in the case of a citizen or resident entitled to receive such interest if he files with the withholding agent on or before February 1 a signed notice in writing that his net income in excess of the credits against net income provided in section 25 does not exceed $4,000. (4) INCOME of OBLIGOR AND OBLIGEE.-The obligor shall not be allowed a deduction for the payment of the tax imposed by this title, or any other tax paid pursuant to the tax-free covenant clause, nor shall such tax be included in the gross income of the obligee. (b) Nonresident aliens .-All person s, in whatever capacity acting, including lessees or mortgagors of real or personal property, fiduci aries, emplo yers, and al l offi cers an d empl oyees of the Unite d States, having the control, receipt, custody, disposal, or payment of interest (except interest on deposits with persons carrying on the banking business paid to persons not engaged in business in the United States and not having an office or place of business therein), rent, sal aries , wag es, premi ums, annu ities , com pens ation s, re mu- nerations, emoluments, or other fixed or determinable annual or periodical gains, profits, and income, of any nonresident alien indi- vidual, or of any partnership not engaged in trade or business within the United States and not having any office or place of business therein and composed in whole or in part of nonresident aliens, (other than income received as dividends of the class allowed as a credit by section 25(a)) shall (except in the cases provided for in subsection (a) of this section and except as otherwise provided in regu lat ions pre scri bed by t he Comm issi oner und er sect ion 215) deduct and withhold from such annual or periodical gains, profits, and income a tax equal to 5 per centum thereof : Provided, That the Commissioner may authorize such tax to be deducted and with- held from the interest upon any securities the owners of which are not known to the withholding agent. (c) Return and payment .-Every person required to deduct and withhold any tax under this section shall make return thereof on or before March 15 of each year and shall on or before dune 15, in lieu of the time prescribed in section 56, pay the tax to the official of the United States Government authorized to receive it. Every such person is hereby made liable for such tax and is hereby indemnified

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 SEVENTIETH CONGRESS. SESS. I. Cu. 852. 1928. 835 against the claims and demands of any person for the amount of INCOME TAX any pay ments ma de in ac cordance with th e provis ions of this sec tion. (d) Income of recipient .-Income upon which any tax is Returns by re cipient required to be withheld at the source under this section shall be of tax withheld . included in the return of the recipient of such income, but any amount of tax so withheld shall be credited against the amount of income tax as computed in such return. (e) Tax paid by recipi ent .-If any tax req uired under this not Tax recollectble . cipient section to be deducted and withheld is paid by the recipient of the income, it shall not be re-collected from the withholding agent in cases in which the tax is so paid shall any penalty be imposed upon or collected from the recipient of the income or the withholding agent f or failu re to re turn or pay the same, un less suc h failur e was fraudulent and for the purpose of evading payment. (f) Refunds and credits .-Where there has been an overpayment to withhold g credits of tax under this section any refund or credit made under the pro- visions of section 322 shall be made to the withholding agent unless Post, p. 861. the amount of such tax was actually withheld by the withholding agent. SEC. 145. PAYMENT OF CORPORATION INCOME TAX AT SOURCE. Payment at source. In the cas e of for eign cor poration s subjec t to tax ation un der this By foreign corpora- 3 tions not in business in title not engaged in trade or business within the United States and United States. not having any office or place of business therein, there shall be deducted and withheld at the source in the same manner and upon Ante, p. 834. the same items of income as is provided in section 144 a tax equal to Rates. 131/2 per centum thereof in respect of all payments of income made before the enactment of this Act, and equal to 12 per centum thereof in respect of all payments of income made after the enact- ment of this Act, and such tax s hall be re turned and paid in the same manner and subject to the same conditions as provided in that Proviso. section : Provided, That in the case of interest described in sub- Ra te when interest granted free of tax. section (a) of that section (relating to tax-free covenant bonds) the deduc tion and wi thhol ding shall be at the rate s pecif ied i n such subsecti on. SEC. 146. PENALTIES. (a) Any person re quir ed u nder thi s ti tle to pay any tax, or required by law or regulations made under authority thereof to make a return, keep any records, or supply any information, for the purposes of the computation, assessment, or collection of any tax imposed by this title, who willfully fails to pay such tax, make such return, keep such records, or supply such information, at the time or times required by law or regulations, shall, in addition to other penalties provided by law, be guilty of a misdemeanor an d, up on conviction thereof, be fined not more than $10,000, or imprisoned for not more than one year, or both, together with the costs of prosecut ion. (b) Any person required under this title to collect, account for, and pay over any tax imposed by this title, who willfully fails to colle ct or truth fully acco unt fo r and pay over such tax, and any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof, shall, in addition to other penalties provided by law, be guilty of a felony and, upon convic tion there of, be fine d not more than $10,0 00, or imprisoned for not more than five years, or both, together with the costs of prosecution. (c) The term "pe rson" as used in this se ction inc ludes an officer or employee of a corporation or a member or employee of a partner- Pen alt ies. For willful failure to pay tax, make returns, etc . Punishment for. For willful failure to collect tax, evading pay- ment, etc. Punishment for. "Person" liable for act s.
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 83G SEVENTIETH CONGRESS. SEss. 1. CH. 852 . 1928 . INCOME TAX ship, who as such officer, employee, or member isi under a duty to perform the act in respect of which the violation occurs. Closing of tax abl e year. SEC. 147. CLO SING BY COMM ISSI ONER OF TAXA BLE YEAR. Tax in jeopardy. Immediate payment (a) Tax in jeopardy .-If the Commissioner finds that a taxpayer demanded if Commis- sioner designs quickly to depart from the United States or to remove his finds . payer o prejudice acts of taa- col. property therefrom, or to conceal himself or his property therein, lect ion. or to do any other act tending to prejudice or to render wholly or partly ineffectual proceedings to collect the tax for the taxable year then last past or the taxable year then current unless such proceed- ings be brought without delay, the Commissioner shall declare the taxable period for such taxpayer immediately terminated and shall Notice to be g iven of cause notice of such finding and declaration to be given the taxpayer, finding, demand, etc. together with a demand for immediate payment of the tax for the taxable period so declared terminated and of the tax for the preced- ~ng taxable year or so much of such tax as is unpaid, whether or not the time otherwise allowed by law for filing return and paying the tax has expired ; and such taxes shall thereupon become immediately sion ndin g ofCm s- due and payable. In any proceeding in court brought to enforce , of int ent. payment of taxes made due and payable by virtue of the provisions of this section the finding of the Commissioner, made as herein provided, whether made after notice to the taxpayer or not, shall be for all purposes presumptive evidence of the taxpayer's design. Bond accepted if tax- (b) Security for payment .-A taxpayer who is not in default payer not in default. in making any return or paying income, war-profits, or excess-profits tax under any Act of Congress may furnish to the United States, under regulations to be prescribed by the Commissioner, with the approval of the Secretary, security approved by the Commissioner that he will duly make the return next thereafter required to be filed condition o f accept- and pay the tax next thereafter required to be paid. The Coin- ance s r missioner may approve and accept in like manner security for return and payment of taxes made due and payable by virtue of the pro- visions of this section, provided the taxpayer has paid in full all other income, war-profits, or excess-profits taxes due from him under any Act of Congress. Enforcement p ro- (e) Same-exemption from section .-If security is approved and ceedings suspended on approval of bond. accepted pursuant to the provisions of this section and such fur- ther or other security with respect to the tax or taxes covered thereby is given as the Commissioner shall from time to time find necessary and require, payment of such taxes shall not be enforced by any pro- ceedings under the provisions of this section prior to the expiration of the time otherwise allowed for paying such respective taxes. Discretion ary waiv. (d) Citizens .-In the case of a citizen of the United States or of ing of requirements as to citizens. a possession of the United States about to depart from the United States the Commissioner may, at his discretion, waive any or all of the requirements placed on the taxpayer by this section. Aliens must furnish (e) Departure, of alien .-No alien shall depart from the United tax-paid cer tificate be. fore going abroad. States unless he first procures from the collector or agent in charge a certificate that he has complied with all the obligations imposed upon him by the income, war-profits, and excess-profits tax laws. Additional tax for (f) Addition to tax.-If a taxpayer violates or attempts to vio- violations hereof. late this section there shall, in addition to all other penalties, be added as part of the tax 25 per centum of the total amount of the tax or deficiency in the tax, together with interest at the rate of 1 per centum a month from the time the tax became due. Information at sou rce SEC. 148. INFORMATION AT SOURCE. . Persons making fixed (a) Payments of $1,500 or more .-All persons, in whatever capac- payments to others of $1,500 or more, to ren- ity acting, including lessees or mortgagors of real or personal prop- der returns thereof. erty, fiduciaries, and employers, making payment to another person ,

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 SEVENTIETH CONGRESS. SESS. I. CH. 852. 1928 . 837 of interest, rent, salaries, wages, premiums, annuities, compensations, ExeP ons. TAX remune ratio ns, e molume nts, or other fixed or determinable gains, infra. profits, and income (other than payments described in section 149 (a) or 150), of $1,500 or more in any taxable year, or, in the case of such payments made by the United States, the officers or employees of the United States having information as to such payments and required to mak e ret urns in reg ard t hereto by t he re gulat ions h erein after provided for, shall render a true and accurate return to the Com- missioner, under such regulations and in such form and manner and to such extent as may be prescribed by him with the approval of the Secretary, setting forth the amount of such gains, profits, and income, and the name and address of the recipient of such payment. b Re turns rega rdless of amount of payment .- Su ch returns Regardless of amounts. may be required, regardless of amounts, (1) in the case of payments Interest on corpora- of interest upon bonds, mortgages, deeds of trust, or other similar tion bonds, etc. obligations of corporations, and (2) in the case of collections of c oupon s Collectingforeign , items (not payable in the United States) of interest upon the bonds etc. of foreign countries and interest upon the bonds of and dividends fr om foreign corporations by persons undertaking as a matter of business or for profit the collection of foreign payments of such interest or dividends by means of coupons, checks, or bills of excha nge. Names and addresses (c) R ecip ient to furn ish name and add ress .-W he n necessary of recipients. t o make effective the provisions of this section the name and address of the reci pient of in come shall be furnished upon demand of the person paying the income. Not applicable to (d) Obligations of United States .-The p rovi sion s of thi s se c- Federal securities . tion shall not apply to the payment of interest on obligations of the United Stat es. SEC. 149. INFORMATION BY CORPORATIONS. pInfer ons~tion by cor- SEC. make specific re- (a) Dividend payments.-Every corporation subject to the tax turns of dividend pay- imposed by this title shall, when required by the Commissioner, ments. render a correct return, duly verified under oath, of its payments of dividends, stating the name and address of each shareholder, the num- ber of shares owned by hi m, and the amount of dividends paid to him. Detai led s tate ment of (b) Profits of taxable year declared as dividends .-There shall profits, etc ., declared as be included in the return or appended thereto a statement of div ide nds. such f acts as will enable the Commissioner to de termin e the por- tion of the earn ings or profits of the c orporati on (inclu ding gai ns, profits and income not taxed) accumulated during the taxable year for whic h the re turn is made, wh ich have been di stributed or orde red to be distributed, respectively, to its shareholders during such year. Accumulated gains (c) Accumulated gains and profits .-When requested by the Coin- and profits and names of persons entitled missioner, or any collector, every corporation shall forward to him thereto if distributed . a correct statement of accumulated gains and profits and the names and a ddre sses of the indi vidu als or s hare hold ers who wou ld be entitled to the same if divided or distributed, and of the amounts that would be payable to each. SEC. 150. RETURNS OF BROKERS. Returns of brokers. Every person doing business as a broker shall, when required b sworn returns of all y businesstransactionsto the Commissioner, render a correct return duly verified under oath, be made. under such rules and regulations as the Commissioner, with the approval of the Secretary, may prescribe, showing the names of cus- tome rs for w hom such per son has tran sact ed any b usin ess, wit h such details as to the profits, losses, or other information which the

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Page:United States Statutes at Large Volume 45 Part 1.djvu/889

 838 INCOME TAX Collection of foreign items. Licenses required for collecting foreign cou- pon s, d ivide nds, etc . Punishment for col- lecting, without a li- cense. Estates and trusts. Imposition of tax . Income of, taxed. Trust acc umulations. Peri odic ally dist rib- uted. Received during ad- ministration. For discretionary dis- tribution . Pay ment by fiduci- ary . Exc eptio ns. Post, p . &i0. Ante, p.833. Net incomes Computed as of in- dividuals. Exceptions . Deduction without limitation of gifts, etc ., under will or trust . Additiona l deduc- tions for current distrv butions by fiduciary. SEVENTIETH CONGRESS. SESS. I. CH. 852 . 1928 . Commissioner may require, as to ea ch of such customers , as wi ll enable the Commissioner to determine whether all income tax due on profits or gains of such customers has been paid. SEC. 151. COLLECTION OF FOREIGN ITEMS. All persons undertaking as a matter of business or for profit the collection of foreign payments of interest or dividends by means of coupons, checks, or bills of exchange shall obtain a license from the Commissioner and shall be subject to such regulations enabling the Government to obtain the information required under th is title as the Commissioner, with the approval of the Secretary, shall pre- scribe ; and whoever knowingly undertakes to collect such payments without having obtained a license therefor, or without complying with such regu lations, shall be guilty of a misdemeano r and shall be fined not m ore than $5,000 or imprisoned for not mo re than one year, or both. Supplement E-Estates and Trusts SEC. 161 . IMPOSITION OF TAX. (a) Application of tax .-The taxes imposed by this title upon individuals shall apply to the income of estates or of any kind of property held in tru st, including- (1) Income accumulated in trust for the benefit of unborn or unascertained persons or persons with contingent interests, and income accumulated or held for future distribution under the terms of the will or trust ; (2 ) Inco me whic h is to be di stribut ed curr ently by the fiduciary to the beneficiaries, and income collected by a guardian of an infant which is to be held or distributed as the court may direct ; (3 ) Income receive d by est ates of deceased persons during the period of administration or settlement of the estate ; and (4) Income which, in the discretion of the fiduciary, may be either distributed to the beneficiaries or accumulated. (b) Computation and payment .-The tax shall be computed upon the net income of the estate or trust, and shall be paid by the fiduci- ary, except as provided in section 166 (relating to revocable trusts) and section 167 (relating to income for benefit of the grantor) . For return made by beneficiary, see section 143. SEC. 162 . NET INCOME. The net income of the estate or trust shall be computed in the same manner and on the same basis as in the case of an individual, except that- (a) There shall be allowed as a deduction (in lieu of the deduc- tion for charitable, etc., contributions auth orized by sect ion 23(n)) any part of the gross income, without limitation, which pur- suant to the t erms of the will or deed creatin g the tr ust, is during the taxable year paid or permanently set aside for the purposes and in the manner specified in section 23(n), or is to be used exclusively for religious, charitable, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals, or for the establishment, acquisition, maintenance or operation of a public cemete ry not o perated for prof it ; (b) There shall be allowed as an additional deduction in com- puting the net income of the estate or trust the amount of the income of the estate or trust for its taxable year which is to be distributed currently by the fiduciary to the beneficiaries, and the amount of the income collected by a guardian of an infant which is to be held or

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