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Page:United States Statutes at Large Volume 45 Part 1.djvu/844

 SEVENTIETH CONGRESS. SEss . I. Cn. 852. 1928. 793 SUP PL EM ENT H-NONRESIDENT AL IEN INDIVIDUALS Sec. 211. Normal tax. See. 212 . Gross incom e. Sec. 213 . Deductions. Sec. 214 . Credits against net income. Sec. 215. Allowance of deductions and credits. Sec. 216 . Credits against tax. Sec. 217 . Returns. Sec. 218. Payment of tax. SUPPLEMENT I-FO REIGN CORPORATI ONS Sec. 231 . Gross incom e. Sec. 232 . Deductions. See. 233. Allowance of deductions and credits. See. 234. Credits against tax. Sec. 235 . Returns. Sec. 236. Pay me nt of tax. Sec. 237. For ei gn insurance companies. Se e. 238 . Affiliation. Possessions of the United States, p. 850 . See. 251. Income fr om so urc es within pos ses si ons of United States. See. 252. Citizens of possessions of United States. SUPPLEMENT K-CHINA TRADE ACT CORPORATIONS China Trade Act cor- porations, p. 851 . See. 261. Credit against net income. Sec. 262. Credits against the tax. Se c. 263 . Affiliation. See. 264. Income of shareholders. SUPPL EMENT J-POSSESS IONS OF THE UNITED STATES SUPPLEMENT L--ASSESSMENT AND COr.T .ECTION o f D i .rrerENCrEs See. 271. Definition of deficiency. See. 272. Procedure in general. See. 273. Jeopardy asse ssme nts. See. 274. Bankruptcy and receiverships. See. 275 . Period of li mitat ion upon asses smen t and coll ecti on. See. 276. Same-Exceptio ns. See. 277. Suspension of running of statute. SUP PLEM ENT M-IN TERE ST AND AD DITI ONS TO TA See. 291. Failure to file return. See. 292. Interest on deficiencies. Se c. 2 93 . Additions to the tax in case of deficiency. See. 294 . Additions to the tax in case of nonpayment. See. 295. Ti me extended for payment of tax shown on return. See. 296. Time extended for p aym ent of deficiency. See. 297. Interest in case of jeopardy assessments. See. 298. Bankruptcy and receiverships. Sec. 299. Removal of property or departure from United States. SUPPLEMENT N--CLAIMS AGAINST TRANS EES AND FIDUCIARIES Sec.311. Transferred assets. Se c .3 12. Notice of fiduciary relationshi p. SUPPLEMENT O-OVERPAYMENTS See. 321 . Overpayment of installment. See .322. Refunds and credits. TITLE II-MISCELLANEOUS TAxEs PA RT I-ESTATE TAX Sec. 401 . Deductions in case of nonresident decedents. Sec. 402 . Suspension of running of statute of limitations. Sec. 403. Same-Trans feree cases. Sec. 404. Credit of gift tax. Sec .411. Admissions tax. Sec .412. Tax on sale of tickets by brokers. See. 413 . Club dues tax. Sec. 414. Returns of ad miss ions and d ues tax. REVE NUE ACT OF 1925 Nonresident aliens, p.847. Foreign corporations, p. 849. Deficiencies, p. 852. Interest and addi. tions to tax, p. 857. Tran sferee s and f idu- ciaries, 1) . 860 . Overpayments,p.891 . Miscellaneous taxes, Estate tax, p . 862 . PART II-TAX ON ADMISSIONS AND DUES Tax on ad missi ons and dues, p .863.

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Page:United States Statutes at Large Volume 45 Part 1.djvu/845

 794 REVENUE ACT OF 1928 Excise taxes, p. 865 . Special taxes, p. 867. Foreign-built boats, p.867. Narcotics, p. 8 67 . Stamp taxes, p. 867. Liquor taxes, p. 868. Amendments to 1926 income tax, p.869. Administrative pro- Visions, p. 871 . General provisions, p. 5. 8. SEVENTIETH CONGRESS. SEss. I. CH. 852 . 1928 . PART III-EXCISE TAXES Sec.421. Automobile tax. See. 422 . Refund of automobile tax to manufacturer, See. 423 . Refund of automobile tax to vendee. See. 424 . Refund of automobile accessories tax. See. 425 . Cigar packages. See. 431. Tax See. 432. Tax PA RT IV-SPECIAL TAXES on use of foreign-b uilt boats. on narcotics. P ART V- STAMP TAXE S Se c. 44 1 . Instruments of agricultural See. 442. Tax on steamship tickets. Sec .443. Sale of stamps at post offices. PA RT VI-LIQUOR TAXES Sec.451. Tax on still wines. See. 452 . Tax on grape brandy used in fortifying. See. 45 3 . Tax on cereal b everages. TITLE III-AMENDMENTS TO 1926 INcoME TAX Sec. 501. Affiliated corporations-Statute of limitations. Sec. 502. Extension of time for payment of deficiencies. See. 503. Request for prompt assessment. Sec. 504 . Suspension of running of statute of limitations. See. 505. Same-Transferee cases. See. 506 . Waivers after expiration of period of limitation. See. 507. Overpayments found by Board of Tax Appeals. TITL E IV- ADMIN ISTRA TIVE PRO VI SIO NS Sec. 601 . Board of Tax Appeals-Procedure. Sec. 602. Board of Tax Appeals-Transferee proceedings. Sec. 603. Board of Tax Appeals-Court review of decision. See. 604. Suits to restrain enforcement of liability of transferee or fiduciary. See. 605. Retroactive regulations. See. 606 . Closing agreements. Sec. 607. Effect of expiration of period of limitation against the United States. Se e. 608 . Effect of e xpiration of period of l imitation aga inst taxpaye r. See. 609 . Erroneous credits. See. 610. Recovery of amounts erroneously refunded. See. 611 . Collections stayed by claim in abatement. Se e. 612 . Repeal of section 1106(a) of 1926 Act. See. 613. Lien for taxes. See. 614. Interest on overpayments. Sec .015. Interest on judgments. See. 616 . Compromises-Concealment of assets. Sec. 617 . Jurisdiction of courts. Sec. 618. Examination of books and witnesses. Sec. 619 . Minor administrative amendments. TITLE V-GENERAL PROVISIONS See. 701 . Definitions. Se c. 702 . Ba sis of property upon sale by estate-Retr oactive. See. 703. Deduction of estate and inheritance taxes-Retroactive. Se c. 704 . Ta xability of trusts a s corporations-Retro active. Se e. 705 . In stallment sales-Retr oactive. Se e. 706 . Co ntributions to chari ty-Retroactive. See. 707. Income tax on sale of vessels built before 1914. Sec. 708. Definition of the term "motor boat". See. 709 . Remission or mitigation of forfeitures. Sec. 710. Refunds and credits to be referred to Joint Committee. See. 711 . Commissioners of Court of Claims. Sec. 712. Bureau of Internal Revenue-Details to Washington. See. 713, Salaries of collectors of internal revenue. Sec. 714. Repeals. Sec. 715 . Separability clause. Sec. 716. Effective date of Act. producer, or importer. cooperative assoc`-ations exempt.

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Page:United States Statutes at Large Volume 45 Part 1.djvu/846

 SEVENTIETH CONGRESS. SESS. I. CH. 852. 1928 . 795 TITLE I-INCOME TAX SUBTITLE A-INTRODUCTORY PROVISIONS INCOME TAX Introductory provi- sions. SEC. 1 . APPLICATION OF TITLE. Application of title . The provisions of this title shall apply only to the taxable year To 1928, and succeed- mg years. 1928 and succeeding taxable years. Income, war-profits, and excess- Previous years not af- profits taxes for taxable years preceding the taxable year 1928 fec ted. shall not be affected by the provisions of this title, but shall remain subject to the applicable provisions of prior revenue Acts, except as such provisions are modified by Titles III, IV, and V of this Act or by legislation enacted subsequent to this Act. SEC. 2. CROSS REFERENCES. Exce ption s. Cros s ref eren ces. The cross refer ences in thi s titl e to o ther po rtions of th e titl e, Merely for conven . where the word "see " is used, are made only for convenience, and fence. shall be given no legal effect. SEC. 3 . CLASSIFICATION OF PROVISIONS. Clas sific atio n of pro . visions. The provisions of this title are herein classified and designated Desi gnati on. as- Subtitle A-Introductory provisions, Subt itle B -Gener al pro vision s, div ided in to Par ts and secti ons, Sub title C-S upple menta l pr ovisi ons, divi ded i nto S upple ment s and sections. SEC. 4. SPECIAL CLASSES OF TAXPAYERS. The application of the General Provisions and of Supplements Appl icati on A to D, inclusive, to each of the following special classes of tax- piements . payers, shall be su bject to the excep tions a nd add itiona l prov isions found in the Supplement applicable to such class, as follows (a) Estates and trusts and the beneficiaries thereof,-Supple- ment E. (b) Members of partnerships,-Supplement F. (c) Insurance companies,-Supplement G. d) Nonresident alien individuals,-Supplement H . (e) Foreign corporations,-Supplement I . (f) Individual citizens of any possession of the United States who are not otherwise citizens of the United States and who are not residents of the United States,-Supplement J . (g) Individual citizens of the United States or domestic cor- porations, satisfying the conditions of section 251 by reason of deriving a large portion of their gross income from sources within a possession of the United States,-Supplement J . (h) China Trade Act corporations,-Supplement K . SUBTITLE B-GENERAL PROVISIONS Part I-Rates of Tax SEC . 11 . NORMAL TAX ON INDIVIDUALS . There shall be levied, collected, and paid for each taxable year upon the net income of every individual a normal tax equal to the sum of the following (a) 1I/2 per centum of the first $4,000 of the amount of the net income in excess of the credits against net income provided in section 25 ; (b) 3 per centum of the next $4,000 of such excess amount ; and (c) 5 per centum of the remainder of such excess amount. 54535°-29-PT 1-54 Spec ial c lasse s of tax- payers. of Sup- Estates and trusts, p. 838 . Partnerships, p . 840. Insurance com panies, p.842. Nonresident aliens,p . 847 . Fore ign c orpo ratio ns, p.849. Citizens of posses- sions, not citizens of United States, p. 850. Citizens deriving large part of inco me fr om United States possessions, p .85 1. China Trade Act corporations, p. 851 . General provisions. Rates of tax. Normal tax on indi- viduals. Rate on net income.

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Page:United States Statutes at Large Volume 45 Part 1.djvu/847

 796 INCOME TAX Surtax on individ- uals. Rates. SEVENTIETH CONGRESS. SESS. I. CIF. 852. 1928 . SEC. 12. SURTAX ON INDIVIDUALS. (a) Rates of surtax .-There shall be levied, collected, and paid for each taxable year upon the net income of every individual a surta x as f ollows Upon a net income of $10,000 there shall be no surtax ; upon net incomes in excess of $10,000 and not in excess of $14,000, 1 per centum of such excess. $40 upon net incomes of $14,000 ; and upon net incomes in excess of $14,000 and not in excess of $16,000, 2 per centum in addition of such excess. $80 upon net incomes of $16,000 ; and upon net incomes in excess of $16,000 and not in excess of $18,000, 3 per centum in addition of such excess. $140 upon net incomes of $18,000 ; and upon net incomes in excess of $18,000 and not in excess of $20,000, 4 per centum in addition of such excess. $220 upon net incomes of $20,000 ; and upon net incomes in excess of $20,000 and not in excess of $22,000, 5 per centum in addition of such excess. $320 upon net incomes of $22,000 ; and upon net incomes in excess of $22,000 and not in excess of $24,000, 6 per centum in addition of such excess. $440 upon net incomes of $24,000 ; and upon net incomes in excess of $24,000 and not in excess of $28,000, 7 per centum in addition of such excess. $720 upon net incomes of $28,000 ; and upon net incomes in excess of $28,000 and not in excess of $32,000, 8 per centum in addition of such excess. $1,040 upon net incomes of $32,000 ; and upon net incomes in excess of $32,000 and not in excess of $36,000, 9 per centum in addition of such excess. $1,400 upon net incomes of $36,000 ; and upon net incomes in excess of $36,000 and not in excess of $40,000, 10 per centum in addition of such excess. $1,800 upon net incomes of $40,000 ; and upon net incomes in exces s of $ 40,000 and n ot in excess of $44 ,000, 11 per centu m in addition of such excess. $2,240 upon net incomes of $44,000 ; and upon net incomes in exces s of $ 44,000 and n ot in excess of $48 ,000, 12 per centu m in addition of such excess. $2,720 upon net incomes of $48,000 ; and upon net incomes in exces s of $ 48,000 and n ot in excess of $52 ,000, 13 per centu m in addition of such excess. $3,240 upon net incomes of $52,000 ; and upon net incomes in exces s of $ 52,000 and n ot in excess of $56 ,000, 14 per centu m in addition of such excess. $3,800 upon net incomes of $56,000 ; and upon net incomes in exces s of $ 56,000 and n ot in excess of $60 ,000, 15 per centu m in addition of such excess. $4,400 upon net incomes of $60,000 ; and upon net incomes in excess of $60,000 and not in excess«of $64,000, 16 per centum in addition of such excess. $5,040 upon net incomes of $64,000 ; and upon net incomes in excess of $64,000 and not in excess of $70,000, 17 per centum in addit ion of such excess. $6,060 upon net incomes of $70,000 ; and upon net incomes in exces s of $ 70,000 and n ot in excess of $80 ,000, 18 per centu m in addition of such excess.

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Page:United States Statutes at Large Volume 45 Part 1.djvu/848

 SEVENTIETH CONGRESS. SESS. I. CH. 852. 1928 . 797 $7,860 upon net incomes of $80,000 ; and upon net incomes in INCOME TAX excess of $80,000 and not in excess of $100,000, 19 per centum in addition of such excess. $11,660 upon net incomes of $100,000 ; and upon net incomes in excess o f $100,0 00, in a ddition 20 per c entum of such exc ess. (b) Sale of mines and oil or gas wells .-For lim it ati on of surtax .P siof mines, etc. attributable to sale of mines and oil or gas wells, see section 102. (c) Capital net gains and losses .-For rate and computation of tax 1° Capi tal netga ins and in lieu of normal and surtax in case of net incomes of not less Pos t,p . 811 . than $30,000, approximately, or in case of net incomes, excluding items of capital gain, capital loss, a nd capital deduc tions, of not le ss tha n $30,00 0, appro ximately, see se ction 10 1. (d) Evasion of surtaxes by incorporation,-For tax on corpora- Evasion by incor- poration . tions which accumulate surplus to evade surtax on stockholders, see Post, p. 814. section 104. SEC. 13. TAX ON CO RPO RATI ONS. Tax on corporat ions . (a) Rate of tax. There shall be levied, collected, and paid for Rate. ea ch taxab le year upon the net inc ome of e very cor poration, a tax of 12 per centum of the amount of the net income in excess of the credits against net income provided in section 26. (b) Exempt corporations .-For corporations exempt from tax Exempt corpora- , tions. see section 103. Post, p .812 . Accumulating su r- e) Improper accumulation of surplus .-For tax on corporations plus to avoid surtax . wh ich accu mula te s urpl us to ev ade surt ax on st ockh olde rs, see Post, p . 814. section - 104 . SEC . 14. TAXABLE PERIOD EMBRACING YEARS WITH DIFFER- Years with ith a different ENT LAWS . laws. If a taxable period embraces portions of two calendar years for Pomal5ting tax . which the laws are different, the tax shall be computed as provided in section 105 . Part II-Computation of Net Income income. of net SEC. 21. NET INCOME . Ne t income . " Net income " means the gross income computed under section 22, Meaning of . less the deductions allowed by section 23 . SEC. 22 . GROSS INCOME . Gross income . (a) General definition .-" Gross income" includes gains, prof its, General definition . and income derived from salaries, wages, or compensation for personal service, of whatever kind and in whatever fo rm pa id, or from pro fessions, vocati ons, tra des, bus inesses, commerce , or sal es, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in such property ; also from interest, rent, dividends, securities, or the transaction of any business carried on for gain or profit, or gains or profits and income derived from any source what ever. Items exemp t from (b ) Exclus ions fro m gross income. -Th e following ite ms shall not taxation. be in clud ed in gr oss inco me and s hall be exem pt f rom taxa tion under this title (1) Li -i INS U .KANCE .-Amounts received under a life insur- Life insurance poli- ties. anc e co ntra ct p aid by reason of the dea th of the in sure d, whether in a single sum or in installments (but if such amounts are held by the in surer under an agreement to pay interest thereon, the interest payments shall be included in gross income) ; (2) ANNUITiEs, ET c .-Amounts received (other than amounts Amounts fr om an. nuities. paid b y reason of the death of the ins ured and interes t paymen ts

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Page:United States Statutes at Large Volume 45 Part 1.djvu/849

 798 INC OME TAX Transfers for value. Value of g ifts, etc. Int erest on Stat e, etc ., bonds. Farm loa n bonds. Federal, etc ., obliga- tions. Statement requi.ed in returns. Limitation on Li b- erty bond s, e tc. Payments for per- sonal injuries or sick- ness. Amounts received as World War c ompensa- tion payments, or pen- sions. Dividends, etc., from domes tic b uild ing a sso- ciation3. Limit. Rent of ministers' dwelling. Miscellaneous items. Post, p. 823. SEVENTIETH CONGRESS. SESS. I. CH. 852. 1928. on such amounts) under a life insurance, endowment, or annuity contract, but if such amounts (when added to amounts received before the taxable year under such contract) exceed the aggre- gate premiums or consideration paid (whether or not paid during the taxable year) then the excess shall be included in gross income. In the case of a transfer for a valuable considera- tion, by assignment or otherwise, of a life insurance, endowment, or annuity contract, or any interest therein, only the actual value of such consideration and the amount of the premiums and other sums subsequently paid by the transferee shall be exempt from taxation under paragraph (1) or this paragraph ; (3) GIFTS, BEQUESTS, AND DEVISES .-The value of property acquired by gift, bequest, devise, or inheritance (but the income from such property shall be included in gross income) (4) TAX-FREE INTEREST .-Interest upon (A) the obligations of a State, Territory, or any political subdivision thereof, or the District of Columbia ; or (B) securities issued under the provisions of the Fed er al Fa rm Lo an Ac t, or under the provi- sions of such Act as amended ; or (C) the obligations of the United States or its possessions . Every person owning any of the obligations or securities enumerated in clause (A), (B), or (C) shall, in the return required by this title, submit a state- ment show ing the number and amount of such obligations and securities owned by him and the income received therefrom, in such form and with such information as the Commissioner may require. In the case of obligations of the United States issued after September 1, 1917 (other than postal savings certificates of deposit), the interest shall be exempt only if and to . the extent pro vided in the res pective Acts aut horizing the iss ue there of as amended and supplemented, and shall bs excluded from gross income only if and to the extent it is wholly exempt to the taxpayer fr om income taxes ; (5) COMPEN SATION FOR I NJURIE S OR SICKNESS .-Amounts received, through accident or health insurance or under work- men's compensation acts, as compensation for personal injuries or sickness, plus the amount of any dam ag es received whether by suit or agreement on account of such injuries or sickness ; (6) PENSIO NS AND WORLD WAR C OMPENS ATION PAYMENT S. - Amounts received as compensation, family allotments and allow- ances under the provisions of the War Ri sk In suran ce and the Vocational Rehabilitation Ac ts or the Wo rld War Veterans' Act, 1924, or as pensions from the United States for service of the beneficiary or another in the military or naval forces of the United States in time of war, or as a State pension for services rendered by the beneficiary or another for which the State is paying a pension ; (7) BUILDING AND LOAN ASSOCIATIONS .-The amount received by a n indivi dual as dividends or inte rest fro m domest ic build ing and loan associations, substantially all the business of which is confined to making loa ns to members, but the amount excluded from gross inc ome under this paragraph in any taxable year shall not exce ed $300 ; (8) MINISTERS .-The rental value of a dwelling house and appurtenances thereof furnished to a minister of the gospel as part of his compensation ; (9) MIS CELLANEOUS ITEMS .-The following items, to the extent provided in section 116 : Earned income from sources without the United States ; Salaries of certain Territorial employees ; The income of foreign governments

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Page:United States Statutes at Large Volume 45 Part 1.djvu/850

 SEVENTIETH CONGRESS. SESS. I. Cu. 852. 1928. Inc ome of State s, mun icipal ities and ot her pol itical sub- divisions ; Receipts of ship owners' mutual protection and indemnity associations ; Dividends from China Trade Act corporations. (c) Inventories .-Whenever in the opinion of the Commissioner the use of inventories is necessary in order clearly to determine the income of any taxpayer, inventories shall be taken by such taxpayer upon such basis as the Commissioner, with the approval of the Secretary, may prescribe as conforming as nearly as may be to the best accounting practice in the trade or business and as most clearly reflecting the income. (d) Distributions by corporations .-Distributions by corporations shall be taxable to the shareholders as provided in section 115. (e) Determination of gain or loss .-In the case of a sale or other disposition of property, the gain or loss shall be computed as provided in sections 111, 112, and 113. (f) Gross income from sources within and without United States .- For computation of gross income from sources within and without the Un ited S tates, see s ection 119. SEC. 23 . DEDUCTIONS FROM GROSS INCOME. In computing net income there shall be allowed as deductions ( a) E x p e n s e s .-All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually rendered ; traveling expenses (includ- ing the entire amount expended for meals and lodging) while away from home in the pursuit of a trade or business ; and rentals or other p ayments re quired to be made as a conditi on to the continued use or possession, for purposes of the trade or business, of property to which the taxpayer has not taken or is not taking title or in which he has no equity. ( b) I n t er e s t .-All interest paid or accrued within the taxable year on indebtedness, except on indebtedness incurred or continued to purchase or carry obligations or securities (other than obligations of the Unite d Stat es iss ued af ter Se ptember 24, 1 917, a nd ori ginall y subscribed for by the taxpayer) the interest upon which is wholly exempt from taxation under this title. (c) Taxes generally .-Taxes paid or accrued within the taxable year, except-- (1) income, war-profits, and excess-profits taxes imposed by the authority of the United States ; (2) so m uch of th e inc ome, war- profi ts, and e xcess -prof its taxes imposed by the authority of any foreign country or possession of the United States as is allowed as a credit against the tax under section 131 ; and (3) taxes assessed against local benefits of a kind tending to increase the value of the property assessed ; but this paragraph shall not exclude the allowance as a deduction of so much of such taxes as is properly allocable to maintenance or interest cha rges. For th e purp ose of this subsec tion, estate, inher itance, lega cy, an d succes sion t axes a ccrue on the due d ate the reof, except as ot herwis e provided by the law of the jurisdiction imposing such taxes, and shall be allowed as a deduction only to the estate. (d) Taxes of shareholder paid by corporation .The deduction for taxes allowed by subsection (c) shall be allowed to a corporation in the case of taxes imposed upon a shareholder of the corporation upon his interest as shareholder which are paid by the corporation 799 INCOME TAX Inve ntor ies t c de ter- mine income may be taken. Distribut ions by coo' porations . Post, p. 822. Computation of ga in or loss on sale, etc ., of property. Post, pp. 815-822. Sou rces within and without U nited States . Post, p.828. Deducti ons from gross income. Item s sp ecifi ed. Business expenses . Travel, etc., included. Inte rest on d ebts. Exception. Taxes paid . Exc eptio ns. Post, p. 829. Acc rual of estate, etc. Lim itati ons . Taxes of shareholder pa id by the corpora. tion.

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Page:United States Statutes at Large Volume 45 Part 1.djvu/851

 800 INC OME TAX Losses by individ- ua ls. Business. Not con nect ed wi th trade or business. Casualty losses not connec ted with bus i- ness. Los ses by c orpor a- tions. Basis for determining loss. Post, p. 818. Disallo wance of los s on sale of stock. Post, p. 826 . Losses for prior years. Post, p. 825. Worthless debts . Exhaustion, etc., of bus iness pro perty. Real estate in life tenancy. Property in trust. Mines, oil and gas wells, timber, etc. Re as ona ble allow- ance fo r depletion, e tc. In leases . Held in life tenancy. Property in trust. Oil and gas wells. Post, p. 821. Basis for depletion, etc. SEVENTIETH CONGRESS. SEss. I. C$. 852 . 1928 . without reimbursement from the shareholder, but in such cases no deduc tion shall be allowed the s hareholder fo r the amount of such taxes. (e) Losses by individuals.-In the case of an individual, losses sustained during the taxable year and not compensated for by insur ance or other wise- (1) if incurred in trade or business ; or (2) if incurred in any transaction entered into for profit, though not connected with the trade or business ; or (3) of property not connected with the trade or business, if the loss arises from fires, storms, shipwreck, or other casualty, or from theft. (f) Losses by corporations.-In the case of a corporation, losses sustained during the taxable year and not compensated for by insurance or otherwise. (g) Basis for determining loss .-The basis for determining the am ount o f dedu ction for l osses sustai ned, to be allowe d unde r subsection (e) or (f), shall be the same as is provided in section 113 for determining the gain or loss from the sale or other disposition of property. (h) Loss on sale of stock or securities .-For disallowance of loss deduction in the case of sales of stock or securities where within thirt y days before or after the date of the s ale the taxpa yer has acquired substantially identical property, see section 118. (i) Net losses.-The special deduction for net losses of prio r years, to the extent provided in section 117. (j) Bad debts .-Debts ascertained to be worthless and cha rged off within the taxable year (or, in the discretion of the Commissioner, a reasonable addition to a reserve for bad debts) ; and when satisfied that a debt is recoverable only in part, the Commissioner may allow such debt to be charged off in part. (k) Depreciation .-A reasonable allowance for the exhaustion, wear and tear of property used in the trade or business, including a reasonable allowance for obsolescence. In the case of property held by one person for life with remainder to another person, the deduc- tion shall be computed as if the life tenant were the absolute owner of the property and shall be allowed to the life tenant. In the case of property held in trust the allowable deduction shall be apportioned between the income beneficiaries and the trustee in accordance with the pertinent provisions of the instrument creating the trust, or, in the absence of such provisions, on the basis of the trust income allocable to each. (1) Depletion .-In the case of mines, oil and gas wells, other natural deposits, and timber, a reasonable allowance for depletion and for depreciation of improvements, according to the peculiar conditions in each case made under rules and regulations to be prescribed by the Commis- sioner, with the approval of the Secretary. In the case of leases the deduction shall be equitably apportioned between the lessor and lessee. In the case of property held by one person for life with remainder to another person, the deduction shall be computed as if the life tenant were the absolute owner of the property and shall be allowed to the life tenant. In the case of property held in trust the allowable deduction shall be apportioned between the income bene- ficiaries and the trustee in accordance with the pertinent provisions of the instrument creating the trust, or, in the absence of such pro- visions, on the basis of the trust income allocable to each. (For per - centage depletion in case of oil and gas wells, see section 114(b) (3) .) (in) Basis for depreciation and depletion .-The basis upon which deple tion, exhaust ion, wear and tear, and obs olescence are to. be
 * such reasonable allowance in all cases to be

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Talk:Weird Tales/1940

There is no scanned version connected with this page. How is another editor to verify the content? Thanks, Mattisse (talk) 22:24, 24 September 2010 (UTC)
 * Copied to and answered on the main talk page. - AdamBMorgan (talk) 16:27, 7 October 2010 (UTC)

title: Talk:Weird Tales/1940


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Page:United States Statutes at Large Volume 45 Part 1.djvu/852

 SEVENTIETH CONGRESS. SEss. I. Cii. 852. 1928 . 801 allowed in respect of any property shall be as provided in Pot, p• s21T- section 114. (n) Charitable and other contributions .-In the case of an outs . individual, contributions or gifts made within the taxable year to or for the use of (1 ) the United State s, any State, Terr itory, or any polit ical For public uses. subdivision thereof, or the District of Columbia, for exclusively public purposes ; (2) any corporation, or trust, or communit chest, fund, or corporations, com- p 7 munit che sts, reli- foundation, organized and operated exclusively for religious, gi ou s, scien scientific, etc" charitable, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the . benefit of any private share- ho lder o r indi vidual ; (3 ) the specia l fund for v ocatio nal re habilit ation author ized tain . tional rehabili- by section 7 of the Vocational Rehabilitation Act ; Vol. 41, p. 737. (4) posts or organizations of war veterans, or auxiliary units war veterans' organ- or socie ties o f any such p osts o r orga nizatio ns, if such posts, izations, etc . organizations, units, or societies are organized in the United States or any of its possessions, and if no part of their net earn- ings inures to the benefit of any private shareholder or indi- vidual ; or (5) a fraternal society, order, or association, operating under Condition Frat itio s odg es, etc . . th e lodge s ystem, bu t only if such con tributio ns or gif ts are to be used exclusively for religious, charitable, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals ; to an amount which in all the above cases combined does not exceed Lim it ' 15 per centum of the taxpayer's net income as computed without the benefit of this subsection. Such contributions or gifts shall be allo wable as ded uction s only if ve rified under rules and re gulati ons prescribed by the Commissioner, with the approval of the Secretary. ti Unlimited dedu c. (For unlimited deduction if contributions and gifts exceed 90 per Post,p.828. centum of the net income, see section 120 .) (o) Future expenses in case of casual sales of real property .- On casual sale ofreal property, reserve for In the case of a casual sale or other casual disposition of real future liabilities under prop erty b y an i ndivid ual, a reaso nable a llowan ce for futur e expe nse contract, allowed . liabilities, incurred under the provisions of the contract under which such sale or other disposition was made, under such regulations as the Commissioner, with the approval of the Secretary, may pre- scribe, including the giving of a bond, with such sureties and in such sum (not less than the estimated tax liability computed without the benefit of this subsection) as the Commissioner may require, con- ditioned upon the payment (notwithstanding any statute of limi- tations) of the tax, computed without the benefit of this subsection, in respect of any amounts allowed as a deduction under this sub- section and not actually expended in carrying out the provisions of such contra ct. (p) Div idend s re ceiv ed Dividends received by corporations .-In the case of a cor- by corporations. poration, the amount received as dividends- From a do mestic cor- (1) from a domestic corporation, or poration. ( From a foreign cor- 2) from any foreign corporation when it is shown to the poration, if more than satisfaction of the Commissioner that more than 50 per centum rom erUcent derived of the gross income of such foreign corporation for the three- sources. year period ending with the close of its taxable year preceding the declaration of such dividends (or for such part of such period as the foreign corporation has been in existence) was derived from sources within the United States as determined Post, p. 826. under section 119.

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Page:United States Statutes at Large Volume 45 Part 1.djvu/853

 802 INC OME TAX Dividends from Chi na T rade Act cor- porations , etc ., ex- cepted . Post, p. 850. Amount transferred to a pension trust in excess of contributions. Items not deductible. Objects specified . Personal, etc ., ex- penses . Property improve- ments. Restori ng property . Li fe insu rance for employees, etc . De du cti ons on in- come from life interests, etc ., by gifts, bequests, or inhe ritance. Ante, p. 800. Tax-free covenant bonds. Post, p. 834. Credits allowed indi- viduals. Against net income. Div iden ds. From domestic cor- poration. Foreign corporation, with more than 50 per cent of income f rom United States sources . SEVENTIETH CONGRESS. `SEss. I. Cii. 852 . 1928 . The deduction allowed by this subsection shall not be allowed in re spect of divid ends recei ved from a cor pora tion organ ized unde r the China Trade Act, 1922, or from a corporation which under section 251 is taxable only on its gross income from sources within the United States by reason of its receiving a large percentage of its gross income from sources within a possession of the United States. (q) Pension trusts .-An employer establishing or maintaining a pension trust to provide for the payment of reasonable pensions to. his employees (if such trust is exempt from tax under section 165, rel ating to trusts cr eated for the excl usive ben efit of e mployees) shall be allowed as a deduction (in addition to the contributions to such trust during the taxable year to cover the pension liability accruing dur ing th e year, allo wed as a ded uction under subsec tion ( a) of this se ction ) a reaso nable amou nt t ransf erred or paid into such trus t during the taxable year in excess of such contributions, but only if such amount (1) has not theretofore been allowable as a deduction, and (2) is apportioned in equal parts over a period of ten consecutive years beginning with the year in which the transfer or payment is made. SEC. 24 . ITEMS NOT DEDUCTIBLE. (a) General rule.-In computing net income no deduction shall in any case be allowed in respect of- t Persona l, liv ing, o r fami ly exp enses ; (2) Any amount paid out for new buildings or for permanent improvements or betterments made to increase the value of any property or estate ; (3) Any amount expended in restoring property or in making good the exhaustion thereof for which an allowance is or has been made ; or (4) Premiums paid on any life insurance policy covering the life of any officer or employee, or of any person financially in- terested in any trade or business carried on by the taxpayer, when the taxpayer is directly or indirectly a beneficiary under such po licy. (b) holders of life or terminable interest .-Amounts paid under the laws of any State, Territory, District of Columbia, posses- sion of the United States, or foreign country as income to the holder of a life or terminable interest acquired by gift, bequest, or inheritance shall not be reduced or diminished by any deduction for shrinkage (by whatever name called) in the value of such interest due to the lapse of time, nor by any deduction allowed by this Act (except the deductions provided for in subsections (k) and (1 of section 23) for the purpose of computing the net income o an estate or trust but not allowed under the laws of such State, Terri- tory, District of Columbia, possession of the United States, or foreign country for the purpose of computing the income to which suc h holder is entitl ed . (c) Tax withheld on tax-free covenant bonds .-For tax withheld on tax-free covenant bonds, see section 144(a) (4) . SEC. 25 . CREDITS OF INDIVIDUAL AGAINST NET INCOME . There shall be allowed for the purpose of the normal tax, but not for the surtax, the following credits against the net income (a) Dividends .-The amount received as dividends- (1) from a domestic corporation, or (2 from a foreign corporation when it is shown to the satis- faction of the Commissioner that more than 50 per centum of the gross income of such foreign corporation for the three-year

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Page:United States Statutes at Large Volume 45 Part 1.djvu/854

 SEVENTIETH CONGRESS. SESS. I. C>3. 852. 1928 . 803 period ending with the close of its taxable year preceding the INCOME TAX declaration of such dividends (or for such part of such period as the corporation has been in existence) was derived from sources within the United States as determined under the pro- Pest, p. 826. visions of section 119. The credit allowed by this subsection shall not be allowed in re- A From rpChinaa n, trade spect of dividends received from a corporation organized under the excepted. China Trade Act, 1922, or from a cor porat ion wh ich u nder sectio n Post, p. 110 - 251 is taxable only on its gross income from sources within the United States by reason of its receiving a large percentage of its gross income from sources within a possession of the United States. (b) Interest on U nited States ob ligations .-Th e am ount rec eive d as Interest on Federal interest upon obligations of the United States which is included in securities. gross income under section 22. (c) Personal exemption. In the case of a single person, a per- Personal exemption. sonal exemption of $1,500 ; or in the case of the head of a family or a married person living with husband or wife, a personal exemption of $3,500. A husband and wife living together shall receive but one hus ba nd and w ife per so nal exemption. The amount of such personal exemption shall living t ogether. be $3,500 . If su ch h usba nd and w ife make sep arat e re turn s, the Separate returns . personal exemption may be taken by either or divided between them. (d) Credit for dependents .-$400 for ea ch person (ot her th an entsredit for depend- husband or wife) dependent upon and receiving his chief support from the taxpayer if such dependent person is under eighteen years of age or is incapable of self-support because mentally or physically defective. (e) Change of status .- (1) The credit for dependents shall be determined by the personalcred taxpa yer for status of the taxpayer on the last day of his taxable year. (2) The personal exemption allowed by subsection (c) of this Pers onal exem ptio n on change of taxable section shall, in case the status of the taxpayer changes during year, computed . his taxable year, be the sum of an amount which bears the same ratio to $1,500 as the number of months during which the tax- payer was single bears to twelve months, plus an amount which bears the same ratio to $3,500 as the number of months during which the taxpayer was a married person living with husband or wife or was the head of a family bears to twelve months. For the purposes of this paragraph a fractional part of a month shall be disregard ed unless it amounts to mor e than half a month, in which case it shall be considered as a month. (3) In the case of an individual who dies during the taxable Allowance in case of year, the personal exemption and the credit for dependents shall death in taxab le year. b e determined by his status at the time of his death, and in such case full credits shall be allowed to the surviving spouse, if any, according to his or her status at the close of the taxable year. SEC. 26. CREDITS OF CORPORATION AGAINST NET INCOME. Credits allowed cor- por ati ons. For the purpose only of the tax imposed by section 13 there shall Design t`o of. b e allowe d the fo llowing credits (a) The amount re ceiv ed as in tere st u pon obli gati ons of the obligations. Inter est f rom Feder al United States which is included in gross income under section 22; and (b) In the case of a domestic corporation the net income of which Speci fic m oney cred it is $25,000 or less, a specific credit of $3,000 ; but if the net income is to dom est ic. more tha n $25,00 0 the ta x impose d by sec tion 13 shall not exceed the tax which would be payable if the $3,000 credit were allowed, plus the amount of the net income in excess of $25,000.

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Page:United States Statutes at Large Volume 45 Part 1.djvu/855

 804 INCOME TAX Credi ts against t ax. Earned income. Definitions. "Ear ned incom e" means wages, etc ., for personal services. Allowance for per- sonal services if com- bined with capital in business. " Earne d in come de- ductions" allowed for computing net income . "E arned net in- come," excess over de- ductions. Maximum. I ndivi dual all owed credit for normal tax for earned income. Limitations . Addition to all other credits. Taxes of foreign coun- tries, etc. Extent of credit for . Post,p. 829. Ta xes withhel d at sou rce. Cre dit for . Post, p. 833 . Erroneous payments . Credit allowed. Post, p.861. Credit for year be- ginning in 1927 and end ing in 1928. Post, p. 830. SEVENTIETH CONGRESS. SESS. I. CH. 852. 1928 . Part III-Credits Against Tax SEC. 31 . EARNED INCOME CREDIT. (a) Definitions .-For the purposes of this section- (1 ) " Earn ed inco me " means wa ges, sala ries, pro fessional fees, and other amounts received as compensation for personal services actually rendered, but does not include that part of the com- pensation derived by the taxpayer for personal services rendered by him to a corporation which represents a distribution of earn- ings or profits rather than a reasonable allowance as compensa- tion for the personal services actually rendered. In the case of a taxpayer engaged in a trade or business in which both personal services and capital are material income producing factors, a reasonable allowance as compensation for the personal services actually rendered by the taxpayer, not in excess of 20 per centum of his share of the net profits of such trade or business, shall be con sidere d as e arned income. (2) "Ea rned inc ome dedu ctio ns" mea ns s uch dedu cti ons as are allowed by section 23 for the purpose of computing net income, and are properly allocable to or chargeable against earned income. (3) " Earned net income " means the excess of the amount of the earned income over the sum of the earned income deductions. If the taxpayer's net income is not more than $5,000, his entire net income shall be considered to be earned net income, and if his net income is more than $5,000, his earned net income shall not b e cons idered to be less than $ 5,000. In no case shall the earned net income be considered to be more than $30,000. (b) Allowance of credit .-In the case of an individual the tax shall be credited with 25 per centum of the amount of tax which would be payable if his earned net income constituted his entire net income ; but in no case shall the credit allowed under this subsection exceed 25 per centum of his normal tax plus 25 per centum of the surtax which would be payable if his earned net income constituted his entire net income. This credit shall be in addition to all other credits a gainst th e tax. SEC. 32 . TAXES OF FOREIGN COUNTRIES AND POSSESSIONS OF UNITED STATES. The amount of income, war-profits, and excess-profits taxes impos ed by fore ign count ries or p osses sions of t he U nited Stat es shall be allowed as a credit against the tax, to the extent provided in section 131. SEC. 33 . TAXES WITHHELD AT SOURCE. The amount of tax withheld at the source under section 144 shall be allowed as a credit against the tax. SEC. 34 . ERRONEOUS PAYMENTS. (a) Credit for overpayments .-For credit against the tax of overpay- ments of taxes imposed by this title for other taxable years, see section 322 . (b) Fiscal year ending in 1928 .-For credit against the tax of amounts of tax paid for a fiscal year beginning in 1927 and ending in 1928, see section 132.

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Page:United States Statutes at Large Volume 45 Part 1.djvu/856

 SEVENTIETH CONGRESS. SEss. I. Cg. 852. 1928 . Part IV-Accounting Periods and Methods of Accounting SEC. 41. GENERAL RULE. The net income shall be computed upon the basis of the taxpayer's annual accounting period (fiscal year or calendar year, as the case may be) in ac cord ance wit h the me thod of acco unti ng r egul arly emplo yed in keeping the books of such taxpayer ; but if no such me thod of ac counting has been so employed, or if the method employed does not clearly reflect the income, the computation shall be made in accordance with such method as in the opinion of the Commissioner doe s cle ar ly re fle ct the income. If the taxpayer's annual accounting period is other than a fiscal year as defined in section 48 or if the taxpayer has no annual accounting period or does not keep books, the net income shall be computed on the basis of the calendar year. (For use of inventories, see section 22(c) .) SEC. 42. PERIOD IN WHICH ITEMS OF GROSS INCOME INCLUDED. The amount of all items of gross income shall be included in the gr oss inco me for t he taxab le year in which receive d by the taxpaye r, unless, under methods of accounting permitted under section 41, any such amounts are to be properly accounted for as of a different period. SEC. 43. PERIOD FOR WHI CH DEDUCTIONS AND CR EDI TS TAKEN. The deductions and credits provided for in this title shall be taken for the taxa ble year in which "p aid or acc rued" or " paid or incurred", dependent upon the method of accounting upon the basis o f w hic h t he net in com e is computed, unless in order to clea rly reflect the income the deductions or credits should be taken as of a different period. SEC. 44. INSTALLMENT BASIS. (a) De alers in persona l property .-U nde r regulations pre sc rib ed by the Co mmis sion er w ith the appr oval of the Secr etar y, a per son who regularly sells or otherwise disposes of personal property on the installment plan may return as income therefrom in any taxable year that proportion of the installment payments actually received in that year which the gross profit realized or to be realized when payment is completed, bears to the total contract price . (b) Sales of realty and casual sales of personalty .-In the case (1) of a casual sale or other casual disposition of personal prop- ert y (other than pr operty o f a kind which w ould pro perly be include d in the inventory of the taxpayer if on hand at the close of the taxable year), for a price exceeding $1,000, or (2) of a sale or other disposi- tion of real property, if in either case the initial payments do not e xceed 40 per centum of the selling price, the income may, under regulations prescribed by the Commissioner with the approval of the Secretary, be returned on the basis and in the manner above prescribed in this section. As used in this section the term " initial payments " means the payments received in cash or prope rty o ther than evidences of indebtedness of the purchaser during the taxable period in which the sale or other disposition is made. (c) Chang e from accrual to installment b asis .-If a taxpay er entit led to the ben efit s of sub sect ion (a) elec ts for any t axab le y ear to report h is net i ncome on the ins tallment basis, then in computin g his income for the year of change or any subsequent year, amounts actually received during any such year on account of sales or other dispositions of property made in any prior year shall not be excluded. 805 INCOME TAX Ac coun ting peri ods and methods. General rule. Net income co m- puted on basis of an- nual accounting period. If no accounting pe- riod, on calendar year. Inventories. Ante, p. 799. Gro ss income. Item s for taxab le year in which received . Deductions and credits. For taxable year in which "paid or ac- crued" or "paid or in- curre d ." In stall ment basi s. Dealers in personal property may make re- turns on, of payments ac tuall y re ceive d. Retu rns of inco me from casual sale of per- sonalty or of realty. Co mput ation of in- come on change to in stall ment basi s.

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Page:United States Statutes at Large Volume 45 Part 1.djvu/857

 806 INC OME TAX Recognition of g ain or loss on disposition of installmentobligatious. Basis computed. Allocatio n of income and deductions . Provisions if same interests control two or more businesses. Change of accounting period. Net income co m- puted on basis of new period. Returns for less than a year. Basis for determin- ing, when accounting periods change . Income to be bas ed on period of separate return. Computation of ta x- able income. SEVENTIETH CONGRESS. SESS. I. CH. 852. 1928 . (d) Gain or loss upon disposition of installment obligations .-If an installment obligation is satisfied at other than its face value or distributed, transmitted, sold, or otherwise disposed of, gain or loss shall result to the extent of the difference between the basis of the obligation and (1) in the case of satisfaction at other than face value or a sa le or exchange-the amount realized, or (2) in case of a distribution, transmission, or disposition other- wise than by sale or exchange-the fair market value of the obliga- tion at the time of such distribution, transmission, or disposition. The basi s of the obligat ion shall be the excess of the fa ce value of the obligation over an amount equal to the income which would he returnable were the obligation satisfied in full. SEC. 45. ALL OC AT ION OF INCOME AND DEDUCTIONS. In any case of two or more trades or businesses (whether or not in corpor ated, whet her or not organ ized i n the Unit ed Sta tes, and whether or not affiliated) owned or controlled directly or indirectly by t he same interest s, the C ommission er is au thorized to dist ribute, apportion, or allocate gross income or deductions between or among such trades or businesses, if he determines that such distribution, apportionment, or allocation is necessary in order to prevent evasion of taxes or clearly to reflect the income of any of such trades or businesses. SEC. 46. CHANGE OF ACCOUNTING PERIOD. If a taxpayer changes his accounting period from fiscal year to cale ndar yea r, from calendar year to fiscal y ear, or from one fiscal year to another, the net income shall, with the approval of the Co mmiss ione r, be co mput ed on the b asis of such new acc ount ing period, subject to the provisions of section 47. SEC. 47. RETU RNS FOR A PERIO D OF LESS THAN TWELV E MONTHS. (a) Returns for short period resulting from change of accounting period .-If a taxpayer, with the approval of the Commissioner, ch anges the bas is of co mpu ting net inc ome from fis cal year to calendar year a separate return shall be made for the period between the close of the last fiscal year for which return was made and the fol lowi ng D ecem ber 31. If the change is from calendar year to fiscal year, a separate return shall be made for the period be tw een the cl ose of the la st calendar yea r for which return was made and the date designated as the close of the fiscal year. If the change is from one fiscal year to another fiscal year a separate return shall be made for the period between the close of the former fiscal yea r and the date designated as the close of the new fiscal year. (b) Income computed on basis of short period .-Where a separate return is ma de und er subs ect ion (a) on a ccou nt of a change in the accounting period, and in all other cases where a separate return is required or permitted, by regulations prescribed by the Commissioner with the approval of the Secretary, to be made for a fractional part of a year, then the income shall be computed on the basis of the period for which separate return is made. (c) Income placed on annual basis .-If a separate return is made un der s ubse ctio n (a) on ac coun t of a change in the acc ount ing period, the net income, computed on the basis of the period for which separate return is made, shall be placed on an annual basis by multiplying the amount thereof by twelve and dividing by the number of months i ncluded in the period for w hich the separate return is made. The tax shall be such par t of the tax computed

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Page:United States Statutes at Large Volume 45 Part 1.djvu/858

 SEVENTIETH CONGRESS. SEss. I. CH. 852. 1928 . on such annual basis as the number of months in such period is of twelvee months. (d ) Cap ital net gains and loss es-ea rner inco me .-The Commis - sioner with the approval of the Secretary shall by regulations prescribe the method of applying the provisions of subsections (b) and (c) (relating to computing income on the basis of a short period, and placing such income on an annual basis) to cases where the taxpayer makes a separate return under subsection (a) on account of a change in the accounting period, and it appears that for the period for which the return is so made he has derived a capital net gain, or sust ained a c apital ne t loss, o r receive d earned income. (e) Reduction of credits against net income .-In the case of a return made for a fractional part of a year, except a return made under subsection (a ), on account of a change in the accounting period, the personal exemption and credit for dependents, and the specific credit for corporations, shall be reduced respectively to amounts which bear the same ratio to the full credits provided as the number of months in the period for which return is made bears to twelve months. (f) Closing of taxable year in case of jeopardy .-For closing of taxable year in case of jeopardy, see section 147. SEC. 48 . DEFINITIONS. When used in this title- (a) Taxable year .-" Taxable year " means the calendar year, or the fiscal year ending during such calendar year, upon the basis of which the net income is computed under this Part. " Taxable year " includes, in the case of a return made for a fractional part of a year under the provisions of this title or under regulations pre- scribed by th e Comm ission er wit h the approva l of t he Sec retary, the period for which such return is made. The first taxable year, to be called the taxable year 1928, shall be the calendar year 1928 or any fiscal year ending during the calendar year 1928. ( b ) F is ca l y e ar .-" Fiscal year" means an accounting period of twelve months ending on the last day of any month other than December. (c) Paid, incurred, accrued .-The terms "paid or incurred" and "paid or accrued" shall be construed according to the method of accounting upon the basis of which the net income is computed under this Part. Part V-Returns and Payment of Tax SEC. 51 . INDIVIDUAL RETURNS. (a) Requirement .-The following individuals shall each make under oath a return stating specifically the items of his gross income and the deduc tions and cr edits allowe d under this title- (1) Every individual having a net income for the taxable year of $1,500 or over, if single, or if married and not living with husband or wife ; (2) Every individual having a net income for the taxable year of $3,500 or over, if married and living with husband or wife ; and (3) Every individual having a gross income for the taxable year of $5,000 or over, regardless of the amount of his net income. 807 INCOME TAX Application of capital gain or loss, or earned income. Reduction of per- sonal credits for frac- tions of a year. Closing taxable year. Past, p.835. Definitions. Meaning of terms. "Taxable year ." First taxable year, calendar year 1928 . "Fiscal year ." "Paid or inc urred" and "paid or ac crued ." Returns and pay- ment. Individual returns. Sworn sta teme nt of gross income, deduc- tions, and credits. Net income $1,500 or over, if single, etc . Net income $3,500, if married, and living with husband or wife . Gross income $5,000, or over.

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Page:United States Statutes at Large Volume 45 Part 1.djvu/859

 808 SEVENTIETH CONGRESS. SEss. I. CH. 852 . 1928 . (b) Husband and wife .-If a husband and wife living together have an aggre gate n et inc ome fo r the taxable year of $3, 500 or over, or an aggregate gross income for such year of $5,000 or over- (1) Each shall make such a return, or (2 The income of each shall be included in a single joint return, in which case the tax shall be computed on the aggregate income . ( c) Per so ns und er di sab il ity .-If the taxpayer is unable to make his own return, the return shall be made by a duly authorized agent or by the guardian or other person charged with the care of the person or property of such taxpayer . (d) Fiduciaries .-For returns to be made by fiduciaries, see sec- tion 143 . Corpo ration retur ns . SEC . 52 . CORPORATION RETURNS. Sp ecifi c re quire ment s for making . (a) Requirement.-Every corporation subject to taxation under this title shall make a return, stating specifically the items of its gross income and the deductions and credits allowed by this title . The Receive rs, trustees, return shall be sworn to by the president, vice president, or other etc. principal officer and by the treasurer or assistant treasurer. In ca ses where receiver s, truste es in ban kruptcy, or assig nees are operat- in g the pro perty or business of corpor ations, such rece ivers, tr ustees, or assignees shall make returns for such corporations in the same Collection of tae. manner and form as corporations are required to make returns. Any tax due on the basis of such returns made by receivers, trustees, or assignees shall be collected in the same manner as if collected from the corporations of whose business or property they have custody and control. Consolidated returns. Post, pp. 831, 832 . (b ) Consolidated returns .-For provision as to consolidated returns of affiliated corporations, see sections 141 and 142. Time and place for filing returns. SEC. 53 . TIME AND PLACE FOR FILING RETURNS. (a) Time for filing.- Time designated. (1) GENERAL RULE.-Returns made on the basis of the calendar year shall be made on or before the 15th day of March following the close of the calendar year. Returns made on the basis of a fiscal year shall be made on or before the 15th day of the third month following the close of the fiscal year. Eatensoongranted on (2) EXTENSION OF TIME .-The Commissioner may grant a rea- ap pli cat ion .application e sonable extension of time for filing returns, under such rules and regulations as he shall prescribe with the approval of the Limit. Secretary. Except in the case of taxpayers who are abroad, no su ch ext ension shall be fo r more than six mon ths. By individuals to (b) To whom return made .- colleetorofthedistrict. (1) INDrVIDUALs.-Returns (other than corporation returns) sh all be ma de to the collecto r for the distric t in whic h is loca ted the legal residence or principal place of business of the person making the return, or, if he has no legal residence or principal At Baltimore Md . pla ce of busine ss in the Un ited S tates, then t o the collec tor at Baltimore, Maryland. Corporations to here lector of district where (2) CoiroRATIoNs .-Returns of corporations shall be made to principal office located . the collector of the district in which is located the principal place of business or principal office or agency of the corpora- tion, or, if it has no principal place of business or principal At Baltimore Md. office or agency in the United States, then to the collector at Baltimore, Maryland. Records and special returns. SEC. 54 . RECORDS AND SPECIAL RETURNS. . Required of taxpayer. (a) By taxpayer .-Every person liable to any tax imposed by this titl e or f or the colle ction thereo f, shal l keep such record s, ren der INCOME TAX H usb and and wi fe living together. Separate. Joint . By agent, etc. Fiduc iaries. Post, p. 833.

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 SEVE NTIETH CONGRESS. SESS. I. Cii. 852. 1928. under oath such statements, make such returns, and comply with such rules a nd regul ations, as the C ommissio ner, wit h the ap proval o f the Secretary, may from time to time prescribe. (b) To determine liability to tax .-Whenever in the judgment of the Commissioner necessary he may require any person, by notice served upon him, to make a return, render under oath such state- ments, or keep such rec ords, as the Com missione r deems sufficie nt to show whether or not such person is liable to tax under this title. (c) Information at the source .-For requirement of statements and ret urns by one pers on to as sist in determin ing the tax liab ility of another person, see sections 148 to 151. SEC. 55. PUBLICITY OF RETURNS. Returns made under this title shall be open to inspection in the same manner, to the same extent, and subject to the same provisions of law, including penalties, as returns made under Title II of the Revenue Act of 1926. SEC. 56. PAYMENT OF TAX. (a) Time of payment .-The total amount of tax imposed by this title shall be paid on the fifteenth day of March following the close of the calendar year, or, if the return should be made on the basis of a fiscal year, then on the fifteenth day of the third month follow- ing the close of the fiscal year. (b) Installment payments .-The taxpayer may elect to pay the tax in four equal installments, in which case the first installment shall be paid on the date prescribed for the payment of the tax by the taxpayer, the second installment shall be paid on the fifteenth day of the third month, the third installment on the fifteenth day of the sixth month, and the fourth installment on the fifteenth day of the ninth month, after such date. If any i nstallmen t is not paid on or before the date fixed for its p ayment, the whole amount of the tax unpaid shall be paid upon notice and demand from the collector. (c) Ext ension of time for payment .-A t the request of the ta x- payer, the Commissioner may extend the time for payment of the amount determined as the tax by the taxpayer, or any installment thereof, for a period not to exceed six months from the date pre- scribed for the payment of the tax or an installment thereof. In such case the amount in respect of which the extension is granted shall be paid on or before the date of the expiration of the period of the exte nsion. (d) Voluntary advance payment .-A tax imposed by this title, or any i nstallme nt there of, may be paid, at the election of the t ax- payer, prior to the date prescribed for its payment. (e) Advance payment in case of jeopardy .-For advance pay- ment in case of jeopardy, see section 147. (f) Tax withheld at source .-For requirement of withholding tax at the source in the case of nonresident aliens and foreign corpo- rations, and in the case of so-c alled "t ax-free covenant bonds," see sections 144 and 145. (g) Fractional parts of cent .-In the payment of any tax under this title a fractional part of a cent shall be disregarded unless it amounts to one-half cent or more, in which case it shall be increased to 1 cent. (h) Receipts .-Every collector to whom any payme nt of any income tax is made shall upon request give to the person making such payment a full written or printed receipt, stating the amount paid and the particular account for which such payment was made ; and whenever any debtor pays taxes on ac count of payments made or to be made by him to separate creditors the collector shall, if Vol. 44 p.51. Payment of tax. Time designated. 809 INCOME TAX Special statements. Information at the sou rce. Post, pp. 836, 837 . Publicity of returns. Inspection of, as in Revenue Act of 1926. Allowed in f our in. stallments. Whole amount on de- fault. Extension all owed on request. Payment on expira- tion. Prior to prescribed da te. Jeo par dy payments. Post, p. 836. Tax withheld at sou rce. Pos t, pp. 833-835 . Fractions of a cent disregarded. Receipts on request.

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 810 SEVE NTIETH CONGRESS. SEss. I. CH. 852. 1928 . Evidena oftax paid . requested by such debtor, give a separate receipt for the tax paid on account of each creditor in such form that the debtor can conveniently produce such receipts separately to his several creditors in sati sfaction of thei r respec tive dem ands up to the a mounts s tated in the receipts ; and such receipt shall be sufficient evidence in favor of such debtor to justify him in withholding from his next payment Surrender to creditor to his creditor the amount therein stated ; but the creditor may, upon asa payment on debt. giving to his debtor a full written receipt acknowledging the pay- ment to him of any sum actually paid and accepting the amount of tax paid as aforesaid (specifying the same) as a further satisfaction of the debt to that amount, require the surrender to him of such collector 's receipt. turn and determination SEC. 57. EXAMINATION OF RETURN AND DET ERM INA TIO N OF of tax. TAX. To be ma ee as so on as practicable. As soon as practicable after the return is filed the Commissioner shall examine it and shall determine the correct amount of the tax. Addieis to tax and SEC. 58. A DDITIONS TO TAX AND PENALT IES. penalties b , 860 . Negligences, etc., pp. 857, 860 . (a) For additions to the tax in case of negligence or fraud in the nonpayment of tax or failure to file return there for, see 835riminalpenalties,p, Supp lem ent For criminal penalties for nonpayment of tax or failure to file return therefor, see section 146. Administrative pro- ceedings. SEC. 59. ADMINISTRATIVE PROCEEDINGS. For administrative proceedings in respect of the nonpayment or 85 Deficiencies, pp. 852- O4(a)aSupplement tax elating bto t title, Band f collection of Additions,pp.858,859 deficiencies. . (b) Supplement M, relating to interest and additions to tax. Transferees and fidu- r cia rie s, pp . 860, 861 . (c) Supplement N, relating to claims against transferees and Ove rpa ym ent s, pp. fiduciaries. 861, 862 . (d) Supplement 0, relating to overpayments. Miscellaneous provi- sions . Part VI-Miscellaneous Provisions aws made applica- ble. SEC. 61. LAWS MADE APPLICABLE. Administrative pro- visions, etc., extended All adminis trative, special, or sta mp provi sions of law, in cluding to. the law relating to the assessment of taxes, so far as applicable, are hereby extended to and made a part of this title. Rules and regula- SEC. ti Ru 62. RU LES AND REGULATIONS. To be published. The Commissioner, with the approval of the Secretary, shall prescribe and publish all needful rules and regulations for the enforcement of this title. Act ales in lieu of 1926 SEC. 63. TAXES IN LIEU OF TAXES UN DER 1926 ACT. Table. The taxes imposed by this title shall be in lieu of the correspond- ing taxes imposed by Title II of the Revenue Act of 1926, in accordance with the following table Vol. 44, p. 2L Taxes under this Title Taxes under 1926 Act Secs. 11 and 211 	in lieu of 	Sec. 210 Vol.44, p.39. See. 12	in lieu of 	Sec. 211 Vol.44, pp.47,48. See. 13	in lieu of 	Sec. 230 Vol.44, p.34. Secs. 201 and 204	in lieu of 	Sees. 243 and 246 Vol.44, p.32. Sec. 104 	in lieu of 	Sec. 220 Vol.44, p.19. Supp. E	in lieu of 	Sec. 219 Sec. 101 	in lieu of 	Sec. 208

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 SEVENTIETH CONGRESS. SESS. I. Cu. 852 . 1928. 811 SEC. 64. SHORT TITLE. This title may be cited as the " Income Tax Act of 1928 ." SEC. 65. EFFECTIVE DATE OF TITLE. This title shall take effect as of January 1, 1928, except that sections 146 and 15 1, and thi s sec ti on, shall tak e effect on the enactment of this Act. SUBTITLE SUPP LE MENTAL PROVISIONS Supplement A-Rates of Tax [Supplementary to Subtitle B, Part I] INCOME TAX Snort title. "Income Tax Act of 1928." Effec tive date. January 1, 1928. Ex cept ions. Post, pp. 835, 838. Supplemental provi. sion. Rates of tax . Capital net gains and losse s. Computation of of net gain. SEC. 101. CAPITAL NET GAINS AND LOSSES. (a) Tax in case of capital net gain .-In the case of any tax- payer, other than a corporation, who for any taxable year derives a capital net gain (as hereinafter defined in this section), there shall, at the election of the taxpayer, be le vied, collected, and paid, in li eu of all other taxes imposed by this title, a tax determined as follows a p artial t ax shall first b e comput ed upon the basi s of the ordinar y net income at the rates and in the manner as if this section had not been enacted and the total tax shall be this amount plus 121/2 per centum of the capital net gain. (b) Tax in case of capital net loss .-In the cas e of any tax - payer, other than a corporation, who for any taxable year sustains a capi tal net loss (as hereinafter def ined in this sec tion), there sha ll be levied, collected, and paid, in lieu of all other taxes imposed by this title, a tax determined as follows : a partial tax shall first be computed upon the basis of the ordinary net income at the rates and in the manner as if this section had not been enacted, and the total tax shall be this amount minus 121/2 per centum of the capital net loss ; but in no case shall the tax of a taxpayer who has sustained a capi tal net loss be less tha n the ta x comput ed withou t regard to the provisions of this section. (c) Defi niti ons .-F or the purposes of t his title- (1) "Capital gain" means taxable gain from the sale or e xcha nge of c apit al assets co nsum mate d af ter Dece mber 31, 1921 . (2) " Capital loss " means deductible loss resulting from the sale or exchange of capital assets. (3) "Capital deductions" means such deductions as are "Capital deduc- allowed by section 23 for the purpose of computing net income, tions ." and are properly allocable to or chargeable against capital assets sold or exchanged during the taxable year. (4) "Ordinary deductions" me ans the de duc ti ons allowed by tionOr dinary ded uc- section 23 other than capital losses and capital deductions. (5) "Capital net gain" means the excess of the total amount of capital gain over the sum of (A) the capital deductions and capital losses, plus (B) the amount, if any, by which the ordi- nary deductions exceed the gross income computed without in cluding capital gains. (6) " Capital net loss " means the excess of the sum of the ca pital lo sses plu s the ca pital de ductions over th e total amount of capital gain. (7) " Ordinary net income " means the net inc om e, computed "Ordinary net in accordance with the provisions of this title, after excluding e°me .° all items of capital gain, capital loss, and capital deductions . (8) "Capital assets" means property held by the taxpayer for more than two years (wh ether or not connected with his 54535°-29-PT 1 55 Computation of of net loss. Meaning of terms . "Capita l gain ." "Capital loss ." tax tax "Capital net gain." "Capital net loss ." in- "Capital assets ."

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 812 SEVE NTIETH CONGRESS. SESS. I. Cu. 852. 1928 . INCOME TAX trade or business), but does not include stock in trade of the Property not in- clu ded, taxpayer or other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year, or property held by the taxpayer primarily for sale in the course of his trade or business . For the purposes of this def inition- Property received on (A) In determining the period for which the taxpayer an exchange . has held property received on an exchange there shall be included the period for which he held the property Post, p. 818. exchanged, if under the provisions of section 113, the prop- erty received has, for the purpose of det ermining gain or loss from a sale or exchange, the same basis in whole or in part in his hands as the property exchanged . Period of property (B) In determining the period for which the taxpayer holding . has held property however acquired there shall be included the period for which such property was held by any other Post, p. 818. person, if under the provisions of section 113, such property has, for the purpose of determining gain or loss from a sale or exchange, the same basis in whole or in part in his hands as it would have in the hands of such other person. Stock received on re- (C) In determining the period for which the taxpayer organization distribu- tion. has held stock or securities received upo n a distribution where no gain is recognized to the distributee under the 81 8. Volt, P. Vol.44,p . 113, h, rovi sions of secti on 112(g) of this title or under the pro- visions of section 203(c) of the Revenue Act of 1924 or 1926, there shall be included the period for which he held the stock or securities in the distributing corporation prior to the receipt of the stock or securities upon such distribu- tion. Collection and pa y- (d) Collection and payment of tax .-The total tax determined ment as other taxes. under subsection (a) or (b) shall be collected and paid in the same mann er, at t he same time, an d subject to the same pro visions of law, including penalties, as other taxes under this title. Sal es of mines and SEC. 102. SA LE OF MINES AND OIL OR GAS WELLS. oil or gas wells. Tax on selling price. (a) In the case of a bona fide sale of mines, oil or gas wells, or any interest therein, where the principal value of the property has been demonstrated by prospecting or exploration and discovery work Ante, p. 797. done by the taxpayer, the portion of the tax imposed by section 12 of this title attributable to such sale shall not exceed 16 per centum of the selling price of such property or interest. Lim itati on. Ante, p. 811 . (b) For limitation to 121/2 per centum rate of tax, see section 101. . Exemptions from tax SEC. 103. EXEMPTIONS FROM TAX ON CORPORATIONS. on corporations. Designate d organiza. The following organizations shall be exempt from taxation under tions. this title- Labor, agricultural, agricultnral, (1) Labor, agricultural, or horticultural organizations ; Mutual sav in gs (2) Mutual savings banks not having a capital stock repre- banks. se nted by shares ; Frat erna l ben efic iary (3) Fraternal beneficiary societies, orders, or associations, societies, lodges, etc. (A) ope rating u nder the lodge s ystem or for the exclusi ve bene- fit of the members of a fraternity itself opera ting under the lodge system ; and (B) providing for the payment of life, sick, accident, or other benefits to the members of such society, order, or association or their dependents ; Domestic building (4 ) Domest ic build ing and loan ass ociation s substa ntially all and loan ass ociat ions ; cooperative banks. the business of which is confined to making loans to members ; and cooperative banks without capital stock organized and oper- ated for mutual purposes and without profit ;

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 SEVENTIETH CONGRESS. SEss. I. Cx. 852. 1928. (5) Cemetery companies owned and operated exclusively for the benefit of their members or which ar e not operated for profit ; and any corporation chartered solely for burial purposes as a cemetery corporation and not permitted by its charter to engage in any business not necessarily incident to that pur- pose, no part of the net earnings of which inures to the benefit of any private shareholder or individual ; (6) Corporations, and any community chest, fund, or founda- tion, organized and operated exclusively for religious, chari- table, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private share- holder or ind ividua l ; (7) Business leagues, chambers of commerce, real estate boards, or boards of trade, not organized for profit and no part of the net earnings of which inures to the benefit of any private shareho lder o r indi vidual ; (8) Civic leagues or organizations not organized for profit but operated exclusively for the promotion of social welfare, or local associations of employees, the membership of which is limited to the employees of a designated person or persons in a particular municipality, and the net earnings of which are devoted exclu sively to ch aritab le, ed ucation al, or recre ationa l purpo ses ; ( 9) Cl ubs o rgan ized and o perat ed e xclus ively for plea sure, recreation, and other nonprofitable purposes, no part of the net earnings of which inures to the benefit of any private share- holder ; (1 0) Ben evolen t life insur ance a ssocia tions o f a pu rely l ocal character, mutual ditch or irrigation companies, mutual or coop- erative telephone companies, or like organizations ; but only if 85 per centum or more of the income consists of amounts col- lected from members for the sole purpose of meeting losses and expenses ; (11) Farmers' or other mutual hail, cyclone, casualty, or fire insur ance compa nies or a ssoci atio ns (i nclud ing i nter insur ers and reciprocal underwriters) the income of which is used or held for the purpose of paying losses or expenses ; (12) Fa rmers', frui t grow ers', or lik e assoc iation s orga nized and operated on a cooperative basis (a) for the purpose of marketing the products of members or other producers, and turning back to them the proceeds of sales, less the necessary marketing expenses, on the basis of either the quantity or the value o f the produc ts fur nished by th em, or (b) fo r the purpos e of purchasing supplies and equipment for the use of members or other persons, and turning over such supplies and equipment to th em at actu al c ost, plus nece ssary expe nses. Exem ption shall n ot be denied any s uch as sociat ion bec ause i t has capita l stock, if the divi dend rate of such stock is fixed at not to ex ceed the legal rate of interest in the State of incorporation or 8 per centum per annum, whichever is greater, on the value of the consideration for which the stock was issued, and if substan- tially all such stock (other than nonvoting preferred stock, the owners of which are not entitled or permitted to participate, directly or indirectly, in the profits of the association, upon dissolution or otherwise, beyond the fixed dividends) is owned by producers who market their products or purchase their supplies and equipment through the association ; nor shall exemption be denied any such association because there is accum ulate d and mai ntain ed by it a res erve requi red by St ate 813 INCOME TAX Mutual cemetery co mpan ies . Corporations, com- munity chests, etc ., for religious, scientific, pur- poses, etc. Business leagues, etc. Civic leagues, em- ployees' associations, etc. Pleasure clubs . Local life insurance, mu tual ditch, etc., co mpan ies . Farmer' mutual casualty insurance co mpan ies . Cooperative associa- tions of farmers, etc ., for marketing their products. Purchasing supplies and equipment for members. Capital stock associa- tions restricted .

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 814 INCOME TAX Lim itat ion on mar- ket ing produ cts of no n- members. Organization by ex- empt associations for financing crop opera- tions of members . Res trict ion as to divi - dend rate of stock, etc. Reserve allowed. As trustees for ex- emp ted organizations. Federal land banks, etc. Vol.39,p.362 . Voluntary employ- ees' beneficiary associa- tions for life, accident, etc., benefits. Teachers' retirement fund associations. Accumulation of sur- plus to evade surtaxes. Tax on income of cor- porations accumulating gains, etc., to avoid sur- tax on its sha reholders. Addition to c orpora- tion tax. Ante, p. 797. SEVENTIETH CONGRESS. SEss. I. Cu. 852. 1928. law or a reasonable reserve for any necessary purpose. Such an association may m arket the products of nonmembers in an amount the value of which does not exceed the value of the products marketed for members, and may purchase supplies and equipment for nonmembers in an amount the value of which does not exceed the value of the supplies and equipment purchased for member s, provided the value of the purchases made for persons who are neither members nor producers does not exceed 15 per centum of the value of all its purchases ; ( 13) C orpor atio ns or ganiz ed by an assoc iatio n ex empt under the provisions of paragraph (12), or members thereof, for the purpose of financing the ordinary crop operations of such mem- bers or other producers, and o perated. in conjunction with such association. Exemption shall not be denied any such corpora- tion because it has capital stock, if the dividend rate of such stock is fixed at not to exceed the legal rate of interest in the State of incorporation or 8 per centum per annum, whichever is greater, on the value of the consideration for which the stock was issued, and if substantially all such stock (other than non- voting preferred stock, the owners of which are not entitled or pe rmitted t o partici pate, dir ectly or indirect ly, in th e profits of the corporation, upon dissolution or otherwise, beyond the fixed dividends) is owned by such association, or members thereof ; nor shall exemption be denied any such corporation because there is accumulated and maintained by it a reserve required by State law or a reasonable reserve for any necessary purpose ; (14) Corporations organized for the exclusive purpose of holding title to property, collecting income therefrom, and turning over the entire amount thereof, less expenses, to an organization which itself is exempt from the tax imposed by this title ; (15 ) Fede ral la nd ban ks, na tional farm- loan as sociat ions, and Federal intermediate credit banks, as provided in the Federal Farm Loan Act, as amended ; (16) Voluntary employees' beneficiary associations providing for the payment of life, sick, accident, or other benefits to the members of such association or their dependents, if (A) no part of their net earnings inures (other than through such pay- ments) to the benefit of any private shareholder or individual, and (B) 85 per centum or mo re of the income con sists of amounts collected from members for the sole purpose of making such payments and meeting expenses ; (17) Teachers' retirement fund associations of a purely local character, if (A) no part of their net earnings inures (other than through payment of retirement benefits) to the benefit of any private shareholder or individual, and (B) the income consists solely of amounts received from public taxation, am ounts rec eived from asse ssme nts u pon t he t eachi ng sa larie s of members, and income in respect of investments. SEC. 104. ACCUMULATION OF SURPLUS TO EVADE SURTAXES. (a) If any corporation, however created or organized, is formed or availed of for the purpose of preventing the imposition of the surtax upon its sh arehol ders t hrough the m edium o f perm itting its g ains a nd profit s to a ccumul ate in stead of bei ng divi ded or distr ibuted, ther e shall be levied, collected, and paid for each taxable year upon the net income of such corporation a tax equal to 50 per centum of the amount thereof, which shall be in addition to the tax imposed by section 13 and shall be computed, collected, and paid upon the same basis and in the same manner and subject to the same provisions of law, inc luding pe nalties, as that t ax.

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 SEVENTIETH CONGRESS. SEss. I. Cii. 852. 1928. 815 (b) The f act th at any corpo ration is a mere ho lding or inv estmen t company, or that the gains or profits are permitted to accumulate beyond the reasonable needs of the business, shall be prima facie evidence of a purpose to escape the surtax. (c) As used in this section the term "net income" means the net income as defined in section 21, increased by the sum of the amount of the dividend deduction allowed under section 23(p) and the amount of the interest on obligations of the United States issued after September 1, 1917, which would be subject to tax in whole or in part in the hands of an indiv idual owner. (d) The tax imposed by this section shall not apply if all the sh arehol ders o f the corpor ation includ e (at t he tim e of f iling their re turns) in their gr oss incom e their e ntire di stributiv e shares, whether distributed or not, of the net income of the corporation for such year. Any amount so included in the gross income of a shareholder shall be treated as a dividend received. Any subsequent distribution made by th e corp oratio n out of the earni ngs or profit s for such t axable year shall, if distributed to any shareholder who has so included in his gross income his distributive share, be exempt from tax in the amount of the share so included. SEC. 105. TAXABLE PERIOD EMBRACING YEARS WITH DIFFER- ENT LAWS. If it is necessary to compute the tax for a period beginning in one calendar year (hereinafter in this section called "first calendar year ") and ending in the following calendar year (hereinafter in this section called " second calendar year ") and the law applicable to the sec ond ca lendar year is dif ferent from t he law appli cable to the first cal endar yea r, then t he tax un der this title for the peri od ending during the second calendar year shall be the sum of : (1) the same proportion of a tax for the entire period, determined under the law applicable to the first calendar year and at the rates for such year, which the portion of such period falling within the first calendar year is of the entire period ; and (2) the same proportion of a tax for the entire period, determined under the law applicable to the second calendar year and at the rates for such year, which the portion of such p eriod fal ling with in the se cond cale ndar year is of th e entire period. Supplement B-Computation of Net Income INCOME TAX Evidence of purpose of ev asion. Meaning of "net in- come" as used. Ante, pp. 797, 801 . A dditi onal tax not a pplic able if d istri bu- tive share included in income of shareholders. Subsequent distribu- tions. Taxable period em- bracing years with dif- fer ent laws. Computation of tax f or pe riod begi nning in one calendar year and end ing in the fo llowing. Compu tati on o f net income. [Supplementary t o Subtitle B, Part II] SEC. 111 . DETERMINATION OF AMOUNT OF GAIN OR LOSS. Gain or loss. (a) Computation of gain or loss .-Except as hereinafter pro- Basis of d eter minin g, vided in this section, the gain from the sale or other disposition of on disposal of property. property shall be the excess of the amount realized therefrom over the basis provided in section 113, and the loss shall be the excess of Post, p. 818. such basis over the amount realized. (b) Adjustment of basis .-In computing the amount of gain or Computation. loss under subsection (a)- (1) Proper adjustment shall be made for any expenditure, of cap- receipt, loss, or other item, properly chargeable to capital account, and The basis shall be diminished by the amount of the de- haustion Deduction en for ex- (2) etc. . of prop- duct ions f or exh austio n, wea r and tear, o bsoles cence, amort iza- er ty tion, and depletion which have since the acquisition of the property been allowable in respect of such property under this Act or prior income tax laws ; but in no case shall the amount of Limitation. the diminution in respect of depletion exceed a depletion deduc-
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 816 SEVENTIETH CONGRESS. SESS. I. CII. 852. 1928. INCOME TAX tion computed without reference to discovery value under section Post, p. 821. 114(b) (2) or to percentage depletion under section 114(b) ni are >a acq ui red before (3) . In addition, if the property was acquired before March 1, 1913, the basis (if other than the fair market value as of March 1, 1913) shall be diminished in the amount of exhaustion, wear and tea r, obs olesce nce, a nd dep letion actual ly sus tained befor e such date, and In case of stock. (3) In the case of stock the basis shall be diminished by the amount of distributions previously made in respect of such stock, to the extent provided under the law applicable to the year in which the distribution was made. From sale, etc., of property. (c) Amount realized .-The amount realized from the sale or. other disposition of property shall be the sum of any money received plus the fair market value of the property (other than money) received. On sale or exchange. (d) Recognition of gain or loss .-In the case of a sale or exchange, the extent to which the gain or loss determined under this section shall be recognized for the purposes of this title, shall be Infra. determined under the provisions of section 112. Installment pay- ments taxable. (e ) I nst al lme nt sa les .-Nothing in this sec tion shall be con- strued to prevent (in the case of property sold under contract providing for payment in installments) the taxation of that portion of any installment payment representing gain or profit in the year in which such payment is received. Gain or loss from SEC. 112 sales exchanges. . RECOGNITIO N OF GAIN O R LOSS. niE nti rea mou ntr eco g- (a) General rule .-Upon the sale or exchange of property the entire amount of the gain or loss, determined under section 111, shall be re cogniz ed, ex cept a s here inafter provi ded in this sectio n. Exceptions. (b) Ex change s sole ly in kind .- No gain or loss. (1) PROPERTY HE LD FOR PR ODU CTIV E USE OR INVESTMENT .-NO On exc han ges for similar uses. gain or loss shall be recognized if property held for productive use in trade or business or for investment (not including stock in trade or ot her pr operty held primar ily for sale, nor s tocks, bo nds, note s, choses in actio n, certif icates o f trust o r benefic ial interest, or other securities or evidences of indebtedness or interest) is exchanged solely for property of a like kind to be held either for productive use in trade or business or for investment. For similar stock in (2) STO CK FOR STOCK OF SAME CORPORATION .-NO gain or loss same corporation. shall be recognized if common stock in a corporation is ex- changed solely for common stock in the same corporation, or if preferred stock in a corporation is exchanged solely for pre- ferred stock in the same corporation. organization. Stock organization. (3) STOCK FOR STOCK QN REORGANIZATION .-NO gain or loss shall be recognized if stock or securities in a corporation a party to a reorganization are, in pursuance of the plan of reorganization, exchanged solely for stock or securities in such corporation or in another corporation a party to the reorganiza- tion. Property for stock of party to reorganization. (4) SAME-GAIN OF CORPORATION .-NO gain or loss shall be recognized if a corporation a party to a reorganization exchanges property, in pursuance of the plan of reorganization, solely for st ock or secur ities in ano ther c orpora tion a party to the reor- ga nizati on. Transfers for stack of corporation under same (5) TRANSFER TO CORPORATION CONTROLLED BY TRANSFEROR .-NO control. gain or loss shall be recognized if property is transferred to a co rporat ion by one o r more perso ns sol ely in exchan ge for stock or securities in such corporation, and immediately after the ex- change such person or persons are in control of the corporation ;

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Page:United States Statutes at Large Volume 45 Part 1.djvu/868

 SEVENTIETH CONGRESS. SEss. I. CH. 852. 1928. 817 bu t in the case of an exchange by two or more persons this para- graph shall apply only if the amount of the stock and securities received by each is substantially in proportion to his interest in the property prior to the exchange. (c) Gain from exchanges not solely in kind .- (1) If an exchange would be within the provisions of sub- section (b) (1), (2), (3), or (5) of this section if it were not for the fact that the property received in exchange consists not only of property permitted by such paragraph to be received without the recognition of gain, but also of other property or money, then the gain, if any, to the recipient shall be recognized, but in an amount not in excess of the sum of such money and the fair market value of such other property. (2) If a distribution made in pursuance of a plan of reorgani- zation is w ithin the provisions of paragraph (1) of this sub- section but has the effect of the distribution of a taxable divi- dend, then there shall be taxed as a dividend to each distributee such an amount of the gain recognized under paragraph (1) as is not in excess of his ratable share of the undistributed earnings and profits of the corporation accumulated after February 28, 1913 . The remainder, if any, of the gain recognized under paragraph (1) shall be taxed as a gain from the exchange of property. (d) Same-gain of corporation .-If an exchange would be within the provisions of subsection (b) (4) of this section if it were not for the fact that the property received in exchange consists not only of stock or securities permitted by such paragraph to be received without the recognition of gain, but also of other property or money, then- (1) If the corporation receiving such other property or money distributes it in pursuance of the plan of reorganization, no gain to the corporation shall be recognized from the exchange, but (2) If the corporation receiving such other property or money does not distribute it in pursuance of the plan of reorganization, the gain, if any, to the corporation shall be recognized, but in an amount not in excess of the sum of such money and the fair market value of such other property so received, which is not so distributed. (e) Loss from exchanges not solely in kind .-If an exchange would be within the provisions of subsection (b) (1) to (5 ), inclu sive , of this section if it were not for the fact that the property received in exchange consists not only of property permitted by such para- graph to be received without the recognition of gain or loss, but also of other property or money, then no loss from the exchange shall be recognized. (f ) Inv olun tary con vers ions .-If property (as a result of its destruc- tion in whole or in part, theft or seizure, or an exercise of the powe r of req uisi tion or cond emna tion, or the thr eat or i mmin ence thereof) is compulsorily or involuntarily converted into property sim- ilar or related in service or use to the property so converted, or into money which is forthwith in good faith, under regulations pre- scribed by the Commissioner with the approval of the Secretary, expended in the acquisition of other property similar or related in service or use to the property so converted, or in the acquisition of control of a corporation owning such other property, or in the establishment of a replacement fund, no gain or loss shall be recog- Gain recognized nized. If any part of the money is not so expended, the gain, if any, part net used. shall be recognized, but in an amount not in excess of the money which is not so expended. INCOME TAX Lim itat ion. Gain from exchanges not solely in kind. Recognized if prop- er ty rec eiv ed ad di- tional to that on which none recognized. Reorganization dis- tribution construed as a taxable dividend. Reorganization with property and other stock received. No gain if distrib- uted on reorganization. Gain recognized if not distributed. No loss if property received oth er than that on which gain or loss recognized, etc. Involuntary sions. No gain or loss, ii in- voluntarily converted into similar property, etc. con vey on

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